<PAGE>
T. ROWE PRICE EQUITY INCOME PORTFOLIO
SEMIANNUAL REPORT [T.ROWE PRICE LOGO]
June 30, 1995
DEAR INVESTOR
The equity market advanced strongly in the second quarter, continuing the trend
established at the beginning of the year. The 20.2% advance over the first half
is the strongest since the first half of 1987 and ranks among the top eight
first half advances of the last 70 years. It has been a perfect environment for
stocks, with expectations of a soft landing for the economy, falling interest
rates, good corporate earnings, and strong demand for equities. It is difficult
to see how the situation can improve.
As has often been the case in powerful markets, your fund's
conservative yield-oriented approach lagged the broad market measured by the
unmanaged Standard & Poor's 500 Stock Index. However, we are pleased by the
fund's strong absolute performance, which exceeded the average for similar
funds during the six months ended June 30, 1995.
PERFORMANCE COMPARISON
<TABLE>
<CAPTION>
-------------------------------------------------------------
Six Months Ended 6/30/95
---------------------------
<S> <C>
Equity Income Portfolio 15.8%
S&P 500 20.2
Lipper Equity Income Fund Average 14.6
-------------------------------------------------------------
</TABLE>
DIVIDEND DISTRIBUTION
On June 27, your Board of Trustees declared a second quarter dividend of $0.11
per share, which brings your 1995 dividend total to $0.48, including the $0.26
per share first quarter capital gains distribution. The second quarter
distribution was paid on June 29 to shareholders of record on June 27.
PORTFOLIO REVIEW
During the second quarter we focused on stocks in several areas. We are always
attracted to out-of-favor stocks with high dividend yields--particularly those
that are high compared with their histories. We made new or additional
investments in ALLTEL, DAYTON HUDSON, MAY DEPARTMENT STORES, and
WARNER-LAMBERT.
All these stocks carry high relative dividend yields and have been, in
varying degrees, recent underperformers. By investing in sound companies with
above-average dividend yields following periods of underperformance, we believe
your fund will benefit from the market's tendency to revalue them upward in the
months ahead. In addition to the above stocks, we increased positions in a
number of real estate investment trusts that have favorable risk and return
characteristics.
Regarding portfolio sales, we continued to reduce exposure to
high-yield bonds, whose yield advantage relative to Treasury bonds no longer
justifies their higher credit risk. We also reduced or eliminated other
positions, including SCHLUMBERGER and UNITED TECHNOLOGIES, fine companies whose
stock prices have risen to a level where their dividend yields no longer meet
our criteria.
In terms of asset allocation, we reduced exposure to stocks and bonds
slightly and increased cash reserves to 15% from 10% since the end of 1994.
SECURITY DIVERSIFICATION
-----------------------------------------------------------------------------
[FIGURE 1]
-----------------------------------------------------------------------------
SUMMARY AND OUTLOOK
In our last report, we said that "the economy should continue to perform
reasonably well in 1995, with good corporate earnings and dividend growth."
While we are happy with the robust performance of the past six months, we are
concerned about signs of overvaluation and troubling investor behavior.
Caution and risk-aversion are now viewed with disdain by many
investors, who are buoyed by recent results. A debate has broken out about
whether dividend yield is still a valid measure of stock market valuation. Our
view is that dividends do matter, and the historically low 2.5% average current
yield of S&P 500 stocks suggests that returns may be somewhat uninspiring over
the intermediate term. Therefore, we have grown increasingly cautious in our
outlook for the rest of the year, and we believe investors should be prepared
for increased volatility such as we experienced after the close of our
reporting period.
As always, we appreciate your confidence and support.
Respectfully submitted,
/s/ BRIAN C. ROGERS
------------------------------
Brian C. Rogers
President and Chairman of the
Investment Advisory Committee
July 19, 1995
1
<PAGE>
<TABLE>
<CAPTION>
MAJOR PORTFOLIO CHANGES
==================================================
Six Months Ended June 30, 1995
TEN LARGEST PURCHASES Cost
--------------------------------------------------
<S> <C>
SmithKline Beecham $49,128
J.C. Penney* 44,298
British Petroleum* 44,182
Anheuser-Busch* 39,798
Honeywell 38,747
Mellon Bank 37,142
American Brands 35,820
American Express 35,513
Atlantic Richfield 34,538
Warner-Lambert 31,719
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST SALES Proceeds
--------------------------------------------------
<S> <C>
Heinz** $25,864
Continental** 24,000
Avery Dennison** 21,432
American General** 19,527
ITT** 19,186
Pet** 15,600
Reader's Digest 11,963
Cooper Industries Cv. Deb.** 11,677
PNCBank 10,653
Cooper Industries Pfd.** 10,442
==================================================
</TABLE>
*Position added
**Position eliminated
<TABLE>
<CAPTION>
TWENTY-FIVE LARGEST HOLDINGS
=====================================================
June 30, 1995
Percent of
Company Net Assets
----------------------------------- ----------
<S> <C>
SmithKline Beecham 2.4%
Philip Morris 2.0
Exxon 1.9
Honeywell 1.7
Upjohn 1.7
Atlantic Richfield 1.6
American Brands 1.6
American Express 1.6
Eli Lilly 1.6
Mellon Bank 1.6
GE 1.5
American Home Products 1.5
Royal Dutch Petroleum 1.5
Warner-Lambert 1.5
Texaco 1.5
J.P. Morgan 1.4
Eastman Kodak 1.4
GTE 1.3
Entergy 1.2
DuPont 1.2
Mobil 1.2
J.C. Penney 1.2
U.S. West 1.2
Dun & Bradstreet 1.2
Sallie Mae 1.2
-----------------------------------------------------
Total 37.7%
=====================================================
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL COMPOUND TOTAL RETURN
=====================================================
Periods Ended June 30, 1995
Since Inception
1 Year 3/31/94
------- ----------------
<S> <C>
22.01% 18.87%
=====================================================
</TABLE>
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
2
<PAGE>
STATEMENT OF NET ASSETS
T. Rowe Price Equity Income Portfolio / June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS -- 78.7%
Value
---------
<S> <C>
FINANCIAL -- 14.8%
----------------------------------------------------------------------------
BANK & TRUST -- 7.6%
500 shs. BANC ONE . . . . . . . $ 16,125
600 Chase Manhattan . . . . 28,200
700 Chemical Banking . . . 33,075
500 First Interstate . . . 40,125
800 J. P. Morgan . . . . . 56,100
1,500 Mellon Bank . . . . . . 62,438
900 National City . . . . . 26,438
450 NationsBank . . . . . . 24,131
400 PNC Bank . . . . . . . 10,550
1,200 S-E-Banken (SEK) . . . 6,238
303,420
INSURANCE -- 2.0%
1,000 Hilb, Rogal and Hamilton 12,500
300 Loews . . . . . . . 36,300
800 Provident Life & Accident
Insurance (Class B) 18,600
1,000 Willis-Corroon ADR . . 12,000
79,400
FINANCIAL SERVICES -- 5.2%
1,800 American Express . . . 63,225
400 Fannie Mae . . . . . . 37,750
600 H&R Block . . . . . . . 24,675
1,000 Sallie Mae . . . . . . 46,875
800 Travelers . . . . . . . 35,000
207,525
TOTAL FINANCIAL 590,345
UTILITIES -- 11.3%
----------------------------------------------------------------------------
TELEPHONE -- 4.9%
600 ALLTEL . . . . . . . . 15,225
250 BCE . . . . . . . . . . 8,031
400 Bell Atlantic . . . . . 22,400
200 BellSouth . . . . . . . 12,700
300 COMSAT. . . . . . . . . 5,888
1,500 GTE . . . . . . . . . . 51,187
400 Pacific Telesis . . . . 10,700
700 Southern New England
Telecommunications. . 24,675
1,150 U. S. WEST . . . . . . 47,869
198,675
ELECTRIC UTILITIES -- 6.4%
1,000 BGE . . . . . . . . . . 25,000
1,700 Centerior Energy . . . 16,362
250 Dominion Resources . . 9,125
412 DQE . . . . . . . . . . 9,682
2,000 Entergy . . . . . . . . 48,250
800 Florida Progress . . . 25,000
600 General Public Utilities 17,850
800 Pacific Gas and Electric 23,200
1,400 PacifiCorp . . . . . . 26,250
900 SCEcorp . . . . . . . 15,413
800 Southern Company . . . 17,900
800 Unicom . . . . . . . . 21,300
255,332
TOTAL UTILITIES 454,007
CONSUMER NONDURABLES -- 21.4%
----------------------------------------------------------------------------
BEVERAGES -- 1.4%
700 Anheuser-Busch . . . . 39,812
500 Brown-Forman (Class B) 16,688
56,500
FOOD PROCESSING -- 2.8%
400 CPC International . . . 24,700
800 General Mills . . . . . 41,100
500 Quaker Oats . . . . . . 16,437
1,100 Sara Lee . . . . . . . 31,350
113,587
HOSPITAL SUPPLIES/HOSPITAL
MANAGEMENT -- 1.3%
300 Bausch & Lomb . . . . . 12,450
1,100 Baxter International . 40,013
52,463
PHARMACEUTICALS -- 9.6%
800 American Home Products 61,900
800 Eli Lilly . . . . . . . 62,800
800 Schering-Plough . . . . 35,300
2,100 SmithKline Beecham
ADR . . . . . . . . 95,025
1,750 Upjohn . . . . . . . 66,281
700 Warner-Lambert . . . . 60,463
381,769
MISCELLANEOUS CONSUMER
PRODUCTS -- 6.3%
1,600 American Brands . . . . 63,600
200 Clorox . . . . . . . 13,050
600 Hanson ADR . . . . . . 10,575
1,100 Philip Morris . . . . . 81,812
700 RJR Nabisco . . . . . . 19,513
900 Tambrands . . . . . . . 38,475
800 UST . . . . . . . . . . 23,800
250,825
TOTAL CONSUMER NONDURABLES 855,144
CONSUMER SERVICES -- 6.2%
----------------------------------------------------------------------------
GENERAL MERCHANDISERS -- 3.3%
200 Dayton Hudson . . . . . 14,350
1,000 J.C. Penney . . . . . . 48,000
800 May Department Stores . 33,300
500 Sears . . . . . . . . . 29,937
400 TJX . . . . . . . . . 5,300
130,887
</TABLE>
3
<PAGE>
T. ROWE PRICE EQUITY INCOME PORTFOLIO / STATEMENT OF NET ASSETS (UNAUDITED)
<TABLE>
<S> <C>
SPECIALTY MERCHANDISERS -- 0.5%
400 shs. Fleming Companies . . . $ 10,600
300 Melville . . . . . . . 10,275
20,875
ENTERTAINMENT & LEISURE -- 0.3%
100 Reader's Digest (Class A),
non-voting . . . . . 4,413
200 Reader's Digest (Class B) 8,175
12,588
MEDIA & COMMUNICATIONS -- 2.1%
900 Dun & Bradstreet . . . 47,250
300 McGraw-Hill . . . . . . 22,762
491 Times Mirror (Class A) 11,723
81,735
TOTAL CONSUMER SERVICES 246,085
CONSUMER CYCLICALS -- 3.0%
----------------------------------------------------------------------------
BUILDING & REAL ESTATE -- 1.4%
500 DeBartolo Realty, REIT 7,313
1,000 General Growth Properties,
REIT . . . . . . . . 20,375
400 Simon Property Group . 10,050
500 Weingarten Realty
Investors, REIT 18,875
56,613
MISCELLANEOUS CONSUMER
DURABLES -- 1.6%
900 Eastman Kodak . . . . . 54,562
600 Maytag . . . . . . . . 9,600
64,162
TOTAL CONSUMER CYCLICALS 120,775
TECHNOLOGY -- 2.2%
----------------------------------------------------------------------------
ELECTRONIC SYSTEMS -- 2.0%
600 EG&G . . . . . . . . . 10,050
1,600 Honeywell . . . . . . . 69,000
79,050
OFFICE AUTOMATION -- 0.2%
200 Pitney Bowes . . . . . 7,675
TOTAL TECHNOLOGY 86,725
CAPITAL EQUIPMENT -- 2.6%
----------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 2.0%
1,100 GE . . . . . . . . . . 62,012
300 Hubbell (Class B) . . . 16,950
78,962
MACHINERY -- 0.6%
409 Cooper Cameron . . . . 7,720
468 Cooper Industries . . . 18,486
26,206
TOTAL CAPITAL EQUIPMENT 105,168
ENERGY -- 11.1%
----------------------------------------------------------------------------
ENERGY SERVICES -- 0.8%
700 shs. Halliburton . . . . . . 25,025
200 Witco . . . . . . . . 6,450
31,475
INTEGRATED PETROLEUM -
DOMESTIC -- 3.9%
600 Atlantic Richfield . . 65,850
500 British Petroleum ADR . 42,812
300 Pennzoil . . . . . . . 14,137
500 Sun Company . . . . . . 13,688
1,000 USX-Marathon . . . . . 19,750
156,237
INTEGRATED PETROLEUM -
INTERNATIONAL -- 6.4%
250 Chevron . . . . . . . . 11,656
1,100 Exxon . . . . . . . . 77,687
500 Mobil . . . . . . . . 48,000
500 Royal Dutch Petroleum
ADR . . . . . . . . . 60,938
900 Texaco . . . . . . . 59,063
257,344
TOTAL ENERGY 445,056
PROCESS INDUSTRIES -- 3.4%
----------------------------------------------------------------------------
DIVERSIFIED CHEMICALS -- 1.9%
700 DuPont . . . . . . . . 48,125
300 Monsanto . . . . . . . 27,038
75,163
SPECIALTY CHEMICALS -- 0.4%
300 3M . . . . . . . . . . 17,175
PAPER & PAPER PRODUCTS -- 1.1%
750 Kimberly-Clark . . . . 44,906
TOTAL PROCESS INDUSTRIES 137,244
BUSINESS SERVICES & TRANSPORTATION -- 2.2%
----------------------------------------------------------------------------
TRANSPORTATION SERVICES -- 1.0%
550 Alexander & Baldwin . . 12,375
600 PHH . . . . . . . . . 26,700
39,075
MISCELLANEOUS BUSINESS
SERVICES -- 0.5%
300 Deluxe Corp. . . . . . 9,938
200 GATX . . . . . . . 9,425
19,363
RAILROADS -- 0.7%
200 Conrail . . . . . . . 11,125
300 Union Pacific . . . . . 16,612
27,737
TOTAL BUSINESS SERVICES & TRANSPORTATION 86,175
4
</TABLE>
<PAGE>
T. ROWE PRICE EQUITY INCOME PORTFOLIO / STATEMENT OF NET ASSETS (UNAUDITED)
<TABLE>
<S> <C>
CONGLOMERATES -- 0.4%
7,000 shs. LONRHO (GBP) . . . . . $ 16,423
TOTAL CONGLOMERATES 16,423
MISCELLANEOUS COMMON STOCKS -- 0.1% 5,399
TOTAL COMMON STOCKS (COST $2,809,419) 3,148,546
CONVERTIBLE PREFERRED STOCKS -- 0.7%
400 Newmont Mining (144a)
$2.75 . . . . . . . . 23,350
209 Times Mirror, Series B,
$1.374 . . . . . . . 4,990
TOTAL CONVERTIBLE PREFERRED STOCKS
(COST $24,716) 28,340
CONVERTIBLE BONDS -- 0.4%
$ 15,000 Time Warner, Sub. Deb.,
8.75%, 1/10/15 15,694
TOTAL CONVERTIBLE BONDS (COST $14,971) 15,694
CORPORATE BONDS -- 3.3%
25,000 Coca-Cola Bottling Group,
Sr. Sub. Notes,
9.00%, 11/15/03 24,625
30,000 Continental Cablevision,
Sr. Deb.,
9.00%, 9/1/08 30,150
30,000 Crown Central Petroleum,
Sr. Notes,
10.875%, 2/1/05 31,350
25,000 Paging Network, Sr. Sub.
Notes, 8.875%, 2/1/06 22,750
25,000 Westpoint Stevens, Sr. Notes,
8.75%, 12/15/01 24,625
TOTAL CORPORATE BONDS (COST $129,027) 133,500
U.S. GOVERNMENT OBLIGATIONS/AGENCIES -- 2.1%
20,000 U.S. Treasury Notes,
6.25%, 8/15/23 18,891
20,000 U.S. Treasury Notes,
5.875%, 2/15/04 19,509
25,000 U.S. Treasury Notes,
6.125%, 7/31/96 25,086
20,000 U.S. Treasury Notes,
7.375%, 11/15/97 20,649
TOTAL U.S. GOVERNMENT OBLIGATIONS/AGENCIES
(COST $81,023) 84,135
SHORT-TERM INVESTMENTS -- 17.2%
COMMERCIAL PAPER -- 17.2%
$143,000 Cargill Financial Services,
6.10%, 7/3/95 142,927
100,000 Delaware Funding,
5.95%, 8/18/95 99,173
150,000 Kellogg Company,
5.94%, 7/31/95 148,986
100,000 New Center Asset Trust,
6.00%, 7/6/95 98,917
100,000 Province of British
Columbia,
6.08%, 7/7/95 98,075
100,000 Province of Quebec,
5.82%, 9/26/95 98,545
TOTAL SHORT-TERM INVESTMENTS (COST $686,623) 686,623
============================================================================
TOTAL INVESTMENTS IN SECURITIES -- 102.4%
OF NET ASSETS (COST $3,745,779) $4,096,838
============================================================================
OTHER ASSETS LESS LIABILITIES (94,610)
--------
</TABLE>
<TABLE>
<CAPTION>
NET ASSETS CONSIST OF: Value
----------
<S> <C> <C>
Accumulated net
investment income -
net of distributions . . . . . . . . . . . $ 1,939
Accumulated net
realized gain/loss -
net of distributions . . . . . . . . . . . 24,388
Net unrealized gain (loss) . . . . . . . . . 351,100
Paid-in-capital applicable
to 346,453 shares of $0.0001
par value capital stock
outstanding; 1,000,000,000
shares authorized . . . . . . . . . . . . . . . 3,624,801
----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . $4,002,228
==========
NET ASSET VALUE PER SHARE . . . . . . . . . . . . . . . . . $ 11.55
=======
============================================================================
</TABLE>
GBP British sterling
SEK Swedish krona
REIT Real Estate Investment Trust
144a Security was purchased pursuant to Rule 144a under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers--total of such securities at period end amounts
to 0.6% of net assets.
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
STATEMENT OF OPERATIONS
T. Rowe Price Equity Income Portfolio / Six Months Ended June 30, 1995
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividend . . . . . . . . . . . . . . . . . . . . . . . $ 45,137
Interest . . . . . . . . . . . . . . . . . . . . . . . 23,092
---------
Total income . . . . . . . . . . . . . . . . . . . . . 68,229
---------
Expenses
Investment management and administrative . . . . . . . 12,240
---------
Net investment income . . . . . . . . . . . . . . . . . . 55,989
---------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities . . . . . . . . . . . . . . . . . . . . . . 24,579
Foreign currency transactions . . . . . . . . . . . . . (26)
---------
Net realized gain (loss) . . . . . . . . . . . . . . . 24,553
---------
Change in net unrealized gain or loss on:
Securities . . . . . . . . . . . . . . . . . . . . . . 325,367
Other assets and liabilities denominated in
foreign currencies . . . . . . . . . . . . . . . . . 41
---------
Change in net unrealized gain or loss . . . . . . . . . 325,408
---------
Net realized and unrealized gain (loss) . . . . . . . . . 349,961
---------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS . . . . $ 405,950
=========
=============================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
T. Rowe Price Equity Income Portfolio (Unaudited)
<TABLE>
<CAPTION>
From March 31, 1994
Six Months (Commencement of
Ended Operations) to
June 30, 1995 Dec. 31, 1994
------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income . . . . . . . . . . . . . . $ 55,989 $ 61,507
Net realized gain (loss) . . . . . . . . . . . . 24,553 55,180
Change in net unrealized gain or loss . . . . . . 325,408 25,692
----------- -----------
Increase (decrease) in net assets from operations 405,950 142,379
----------- -----------
Distributions to shareholders
Net investment income . . . . . . . . . . . . . . (65,269) (59,148)
Net realized gain . . . . . . . . . . . . . . . . (55,345) --
----------- -----------
Decrease in net assets from distributions . . . . (120,614) (59,148)
----------- -----------
Capital share transactions*
Shares sold . . . . . . . . . . . . . . . . . . . 1,537,017 1,998,875
Distributions reinvested . . . . . . . . . . . . 120,404 59,128
Shares redeemed . . . . . . . . . . . . . . . . . (140,745) (168)
----------- -----------
Increase (decrease) in net assets from
capital share transactions . . . . . . . . . . 1,516,676 2,057,835
----------- -----------
Net equalization . . . . . . . . . . . . . . . . . 8,860 290
----------- -----------
Increase (decrease) in net assets . . . . . . . . . 1,810,872 2,141,356
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . 2,191,356 50,000
----------- -----------
End of period . . . . . . . . . . . . . . . . . . . $ 4,002,228 $ 2,191,356
=========== ===========
=====================================================================================================
*Share information
Shares sold . . . . . . . . . . . . . . . . . . . 137,822 199,651
Distributions reinvested . . . . . . . . . . . . 11,027 5,711
Shares redeemed . . . . . . . . . . . . . . . . . (12,742) (16)
----------- -----------
Increase (decrease) in shares outstanding . . . . 136,107 205,346
=========== ===========
=====================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS
T. Rowe Price Equity Income Portfolio / June 30, 1995 (Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Equity Series, Inc. (the Corporation) is registered under the
Investment Company Act of 1940. The Equity Income Portfolio (the fund), a
diversified, open-end management investment company, is one of the portfolios
established by the Corporation. The shares of the fund are currently being
offered only to separate accounts of certain insurance companies as an
investment medium for both variable annuity contracts and variable life
insurance policies.
A) Valuation - Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price at the time the valuations
are made. A security which is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market for
such security. Listed securities that are not traded on a particular day and
securities that are regularly traded in the over-the-counter market are valued
at the mean of the latest bid and asked prices. Other equity securities are
valued at a price within the limits of the latest bid and asked prices deemed
by the Board of Directors, or by persons delegated by the Board, best to
reflect fair value.
Debt securities are generally traded in the over-the-counter market
and are valued at a price deemed best to reflect fair value as quoted by
dealers who make markets in these securities or by an independent pricing
service. Short-term debt securities are valued at their cost which, when
combined with accrued interest, approximates fair value.
For purposes of determining the fund's net asset value per share, the
U.S. dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONT'D)
T. Rowe Price Equity Income Portfolio / June 30, 1995 (Unaudited)
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
B) Currency Translation - Assets and liabilities are translated into U.S.
dollars at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated into
U.S. dollars at the prevailing exchange rate on the dates of such transactions.
The effect of changes in foreign exchange rates on realized and unrealized
security gains and losses is reflected as a component of such gains and losses.
C) Premiums and Discounts - Premiums and discounts on debt securities are
amortized for both financial and tax reporting purposes.
D) Other - Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on an identified cost basis. Dividend income and distributions to
shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with generally
accepted accounting principles. The fund follows the practice of equalization
under which undistributed net investment income per share is unaffected by fund
shares sold or redeemed.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $1,343,004 and $254,076, respectively, for the six months ended
June 30, 1995.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income.
At June 30, 1995, the aggregate cost of investments for federal income
tax and financial reporting purposes was $3,745,779 and net unrealized gain
aggregated $351,059 of which $384,536 related to appreciated investments and
$33,477 to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management and administrative agreement between the fund and
T. Rowe Price Associates, Inc. (the Manager) provides for an all-inclusive
annual fee, computed daily and paid monthly, equal to 0.85% of the fund's
average daily net assets. Pursuant to the agreement, investment management,
shareholder servicing, transfer agency, accounting and custody services are
provided to the fund and interest, taxes, brokerage commissions and
extraordinary expenses are paid directly by the fund.
================================================================================
FINANCIAL HIGHLIGHTS
T. Rowe Price Equity Income Portfolio (Unaudited)
<TABLE>
<CAPTION>
For a share outstanding through each period
-------------------------------------------
From March 31, 1994
Six Months (Commencement of
Ended Operations) to
June 30, 1995 December 31, 1994
------------ ------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . $ 10.42 $ 10.00
------- -------
Investment Activities
Net investment income . . . . . . . . . . . 0.21 0.30
Net realized and unrealized gain (loss) . 1.40 0.41
------- -------
Total from Investment Activities . . . . . . 1.61 0.71
------- -------
Distributions
Net investment income . . . . . . . . . . . (0.22) (0.29)
Net realized gain . . . . . . . . . . . . . (0.26) --
------- -------
Total Distributions . . . . . . . . . . . . . (0.48) (0.29)
------- -------
NET ASSET VALUE, END OF PERIOD . . . . . . . $ 11.55 $ 10.42
======= =======
==========================================================================================
RATIOS/SUPPLEMENTAL DATA
Total Return . . . . . . . . . . . . . . . . 15.8% 7.2%
Ratio of Expenses to Average Net Assets . . . 0.85%+ 0.85%+
Ratio of Net Investment Income to Average
Net Assets . . . . . . . . . . . . . . . . 3.89%+ 3.88%+
Portfolio Turnover Rate . . . . . . . . . . . 20.1%+ 21.3%+
Net Assets, End of Period . . . . . . . . . $4,002,228 $2,191,356
==========================================================================================
</TABLE>
+Annualized.
8
<PAGE>
EDGAR APPENDIX
Insert Security Diversification pie chart showing stocks 79%, bonds 5%,
convertibles 1%, reserves 15%
9
<PAGE>
T. ROWE PRICE NEW AMERICA GROWTH PORTFOLIO
SEMIANNUAL REPORT [T.ROWE PRICE LOGO]
June 30, 1995
DEAR INVESTOR
Stocks rose sharply in the second quarter, paced by technology issues, and all
of the major market indices ended the period at record levels. Your fund's
23.8% gain in the first half exceeded that of the unmanaged Standard & Poor's
500 Stock Index and an average of other growth stock funds.
<TABLE>
<CAPTION>
PERFORMANCE COMPARISON
--------------------------------------------------------------------
Six Months Ended 6/30/95
------------------------
<S> <C>
New America Growth Portfolio 23.8%
S&P 500 20.2
Nasdaq Composite* 24.1
Lipper Growth Fund Average 17.5
--------------------------------------------------------------------
</TABLE>
*Principal only
MARKET ENVIRONMENT
The stock market's superb performance in the first half may seem surprising.
After all, when the economy was growing briskly in 1994 and corporate earnings
gains were the best in several years, stocks meandered and finished virtually
unchanged. However, the market has taken off this year despite abundant
evidence of a pullback in growth and increasing signs of a slowdown in
corporate earnings, particularly in the consumer sector. We believe the market
has been driven by lower interest rates and a changing perception of both the
role and direction of American government.
Slowing growth in the U.S. and abroad has assuaged fears of a pickup in
inflation. Long-term interest rates, whose surge in 1994 precipitated the worst
bond returns in many years, decisively reversed course and have fallen about 2
percentage points from their peaks last year. Investors were further comforted
by hints from the Federal Reserve early in the year that the tightening phase of
monetary policy was over; indeed, in July, the Fed cut rates for the first time
in three years. This action improved prospects for a "soft landing," and the
markets seemed to be expecting the best of all possible worlds -- moderate,
noninflationary growth.
Perhaps the most important, albeit subtle, catalyst for the market's
performance has come from Washington, where a Republican Congress appears to
have transformed the nation's political agenda. In fact, the concept of a
diminished role for government and the movement toward fiscal conservatism have
gained advocates in both parties. Even the Democratic president has proposed
slowing the growth of government services to attain a balanced budget in 10
years.
Technology stocks led the market's advance, while stocks of companies in
cyclical industries such as autos and steel lagged. Investor focus continued to
shift from the cyclicals that led the market through mid-1994 toward companies
whose earnings are expected to grow at rates of 15% to 25%, even in a slowing
economy. These are the types of companies your fund favors.
PORTFOLIO REVIEW
Your fund seeks high-growth companies operating in noncyclical, service
businesses. The service sector of the U.S. economy has grown rapidly since
World War II and is now much larger than the manufacturing sector. Most
manufacturing industries have pronounced cyclical characteristics; in contrast,
service sector gross domestic product has not declined in any year since 1947.
Media reports often misrepresent the service sector as the haven of
burger-flipping teenagers, when, in fact, it has created far more high-paying
jobs than the manufacturing sector. Of greater importance to fund shareholders,
the service sector has spawned many of the fastest-growing, most exciting
companies in America today.
After significantly paring our consumer-related stocks and augmenting our
business services holdings in 1994, we made few changes in the fund's overall
sector diversification so far in 1995, as shown below:
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION
-------------------------------------------------------------------
12/31/94 6/30/95
-------- -------
<S> <C> <C>
Financial Services 12% 9%
Consumer Services 34 36
Business Services 48 41
Reserves 6 14
-------- -------
100% 100%
-------------------------------------------------------------------
</TABLE>
Significant additions in the first half included the purchase of two cable
companies, COMCAST and COX COMMUNICATIONS. We felt that negative investor
sentiment towards the stocks was overdone, and that the growth prospects of
these two operators, in particular, were strong. We also bought significant
positions in OLSTEN, a temporary staffing company which is growing quickly in
the home health care field, and ADT, a company with strong growth prospects in
two attractive businesses, security systems and wholesale used auto auctions. We
also eliminated several significant holdings including PITTSTON SERVICES, which
we believe is vulnerable to a cyclical downturn, FOUNDATION HEALTH, and WAL-MART
STORES, whose growth, we believe, is slowing.
The fund's top contributor in the first half was MONEY STORE, a consumer
finance company that reported surprisingly robust earnings. Other top
contributors included CUC INTERNATIONAL, the nation's largest purveyor of direct
mail, membership-based discount shopping services, which continued to report
outstanding results, and FIRST FINANCIAL MANAGEMENT, a leader in credit card
transaction processing, which agreed to be acquired.
1
<PAGE>
Several of our holdings were unable to withstand the slowdown in the
consumer sector. ANNTAYLOR STORES, a women's apparel retailer, and SBARRO, the
Italian restaurant chain, both reported disappointing earnings results and were
among the worst contributors for the first half. Our holdings in health
maintenance organizations (HMOs) SIERRA HEALTH SERVICES, PACIFICARE HEALTH
SYSTEMS, UNITED HEALTHCARE, and Foundation Health also penalized the fund in the
quarter as investors reacted to a perceived deterioration in the industry's
pricing environment. We have reduced our exposure to the sector, but expect to
continue to hold the premier operators, and may selectively add to our positions
if we believe the selling is overdone.
The characteristics of the portfolio remain vibrant, as shown below. We
continue to search for highly profitable, rapidly growing companies with
excellent management and strong competitive positions in businesses that we
like. We favor companies that generate substantial positive cash flows, have
strong financial positions, and can finance their own growth. We look for
companies we can own for a number of years.
<TABLE>
<CAPTION>
FINANCIAL COMPARISON
-------------------------------------------------------------------
New America
Growth Portfolio S&P 500
---------------- -------
<S> <C> <C>
Earnings Growth Rate
Estimated Next Five Years 21.9% 7.0%
Profitability - Return on
Equity Latest 12 Months 18.0 16.0
Dividend Yield on Stocks 0.5 2.5
P/E Ratio (Based on next
12 months' estimated
earnings) 17.8X 15.2X
-------------------------------------------------------------------
</TABLE>
OUTLOOK
We expect modest economic growth in the second half of the year. Soft landings
are unusual, but we are optimistic the economy will achieve a respectable,
sustainable growth rate. We do worry, however, that this comfortable scenario
could be shattered by an unanticipated event. Nevertheless, most of the
companies in your fund should continue to grow even in difficult economic
times.
Interest rates have already fallen dramatically from their peaks, and we do
not expect them to fall much further. In the absence of strong evidence of a
faltering economy, we think the Federal Reserve will be cautious about lowering
rates again soon and may become increasingly wary of fueling further speculation
in the financial markets.
While speculation has been apparent in some market sectors, particularly
technology (to which your fund has only modest exposure), we continue to believe
that most growth stocks remain reasonably priced relative to the market. Your
fund should be well positioned to achieve attractive returns over the next
several years.
Respectfully submitted,
/S/ JOHN H. LAPORTE
-------------------
John H. Laporte
President and Chairman
of the Investment Advisory Committee
/S/ BRIAN W. H. BERGHUIS
------------------------
Brian W. H. Berghuis
Executive Vice President
July 27, 1995
FOREIGN STOCK AUTHORIZATION INCREASED
The Board of Trustees of the New America Growth Portfolio has increased the
amount of fund assets that can be invested in foreign securities from 10% to
15%. While the fund typically has modest foreign exposure (currently 10.1% of
total assets), the greater flexibility could be advantageous in the future
because of the proliferation of suitable overseas investment opportunities, the
increase in foreign companies with operations in the U.S., and the opening up
of financial markets in areas of the world previously closed to investment.
2
<PAGE>
<TABLE>
<CAPTION>
CONTRIBUTIONS TO THE CHANGE IN
NET ASSET VALUE PER SHARE
-------------------------------------------------------------
Six Months Ended June 30, 1995
Ten Best Contributors
-------------------------------------------------------------
<S> <C>
Money Store 14 cents
First Financial Management 10
CUC International 9
CMAC Investment 9
Starbucks* 8
Corporate Express** 8
Circuit City Stores* 8
Vodafone* 8
Harrah's Entertainment 8
Lone Star Steakhouse & Saloon 7
-------------------------------------------------------------
Total 89 cents
=============================================================
Ten Worst Contributors
-------------------------------------------------------------
Sierra Health Services** - 4 cents
AnnTaylor Stores** 4
PacifiCare Health Systems* 3
Toys "R" Us** 3
Sbarro 2
United HealthCare 2
Enterra** 2
Foundation Health** 2
Pittston Services** 1
OfficeMax** 1
-------------------------------------------------------------
Total - 24 cents
=============================================================
</TABLE>
* Position added
**Position eliminated
<TABLE>
<CAPTION>
AVERAGE ANNUAL COMPOUND TOTAL RETURN
-------------------------------------------------------------
Periods Ended June 30, 1995
Since Inception
1 Year 3/31/94
------- ----------------
<S> <C> <C>
29.31% 19.60%
-------------------------------------------------------------
</TABLE>
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
<TABLE>
<CAPTION>
TWENTY-FIVE LARGEST HOLDINGS
-------------------------------------------------------------
June 30, 1995
Percent of
Company Net Assets
-------------------------- ----------
<S> <C>
Vodafone 3.0%
CUC International 2.8
First Financial Management 2.7
Paging Network 2.7
ADT 2.5
Hospitality Franchise Systems 2.3
Columbia/HCA Healthcare 2.3
United HealthCare 2.2
Olsten 2.2
Catalina Marketing 2.1
Circuit City Stores 2.1
Cox Communications 2.0
Cardinal Health 2.0
Money Store 1.9
Loewen Group 1.9
Starbucks 1.9
Office Depot 1.8
Freddie Mac 1.8
SunGard Data Systems 1.8
Franklin Resources 1.8
Paychex 1.7
PMI Group 1.7
Sanifill 1.6
Ceridian 1.6
Schlumberger 1.6
------------------------------------------------------------
Total 52.0%
============================================================
</TABLE>
3
<PAGE>
STATEMENT OF NET ASSETS
T. Rowe Price New America Growth Portfolio / June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS & RIGHTS -- 86.0%
Value
-----------
<S> <C>
FINANCIAL SERVICES -- 9.3%
------------------------------------------------------------
INSURANCE -- 2.8%
1,000 shs. CMAC Investment . . . . . . . $43,375
1,500 PMI Group . . . . . . . . . . 65,063
108,438
INVESTMENT SERVICES -- 1.8%
1,500 Franklin Resources . . . . . . 66,750
OTHER FINANCIAL SERVICES -- 4.7%
400 Fannie Mae . . . . . . . . . . 37,750
1,000 Freddie Mac . . . . . . . . . 68,750
2,000 Money Store . . . . . . . . . 71,750
178,250
TOTAL FINANCIAL SERVICES 353,438
CONSUMER SERVICES -- 35.4%
------------------------------------------------------------
RETAILING/SPECIALTY MERCHANDISERS -- 10.6%
2,500 Circuit City Stores . . . . . 79,062
5,000 * Cole National (Class A) . . . 51,875
1,500 Dollar General . . . . . . . . 47,438
1,500 * General Nutrition . . . . . . 52,313
2,500 * Office Depot . . . . . . . . . 70,312
2,000 * Revco . . . . . . . . . . . . 48,000
2,000 * Tommy Hilfiger . . . . . . . . 56,000
405,000
ENTERTAINMENT & LEISURE -- 2.0%
400 * Harrah's Entertainment . . . . 11,200
200 * Promus Hotel . . . . . . . . . 4,400
1,212 * Viacom (Class B) . . . . . . . 56,207
2,000 rts. * Viacom . . . . . . . . . . . 3,000
74,807
MEDIA/COMMUNICATION SERVICES -- 12.9%
1,000 shs. * ALC Communications . . . . . . 45,125
1,000 * America Online . . . . . . . . 43,750
3,000 Comcast (Class A Special) . . 55,687
4,000 * Cox Communications
(Class A) . . . . . . . . . 77,500
2,000 * Mobile Telecommunication
Technologies . . . . . . . . 54,625
3,000 * Paging Network . . . . . . . . 102,000
3,000 Vodafone ADR . . . . . . . . . 113,625
492,312
RESTAURANTS/FOOD DISTRIBUTION -- 4.0%
1,500 * Lone Star Steakhouse
& Saloon . . . . . . . . . . 45,375
1,500 Sbarro . . . . . . . . . . . . 34,875
2,000 * Starbucks . . . . . . . . . . 71,000
151,250
PERSONAL SERVICES -- 5.9%
2,500 shs. * CUC International . . . . . . $105,000
1,200 H&R Block . . . . . . . . . . 49,350
2,000 Loewen Group . . . . . . . . . 71,000
225,350
TOTAL CONSUMER SERVICES 1,348,719
BUSINESS SERVICES -- 39.3%
------------------------------------------------------------
HEALTH CARE SERVICES -- 6.7%
2,000 Columbia/HCA Healthcare . . . 86,500
1,200 * Genesis Health Ventures . . . 35,550
1,000 * PacifiCare Health Systems
(Class B) . . . . . . . . . 50,875
2,000 United HealthCare . . . . . . 82,750
255,675
DISTRIBUTION SERVICES -- 6.0%
700 Alco Standard . . . . . . . . 55,912
1,600 Cardinal Health . . . . . . . 75,600
2,000 Danka Business Systems
ADR . . . . . . . . . . . . 48,500
2,000 * Patterson Dental . . . . . . . 47,250
227,262
COMPUTER SERVICES -- 6.1%
1,700 * Ceridian . . . . . . . . . . . 62,687
1,200 First Financial
Management . . . . . . . . . 102,600
1,300 * SunGard Data Systems . . . . . 68,250
233,537
ENVIRONMENTAL SERVICES -- 3.1%
1,500 Browning-Ferris . . . . . . . 54,188
2,000 * Sanifill . . . . . . . . . . . 62,750
116,938
ENERGY SERVICES -- 3.0%
1,000 Schlumberger . . . . . . . . . 62,125
3,000 * Smith International . . . . . 50,250
112,375
OTHER BUSINESS SERVICES -- 14.4%
8,000 * ADT . . . . . . . . . . . . . 94,000
3,000 ADVO . . . . . . . . . . . . . 56,625
1,500 * Catalina Marketing . . . . . . 80,438
2,500 * DIMAC . . . . . . . . . . . . 38,750
2,500 * Hospitality Franchise
Systems . . . . . . . . . . 86,562
1,000 * Micro Warehouse . . . . . . . 46,125
2,500 Olsten . . . . . . . . . . . . 81,875
1,800 Paychex . . . . . . . . . . . 65,700
550,075
TOTAL BUSINESS SERVICES 1,495,862
MISCELLANEOUS COMMON STOCKS -- 2.0% 76,575
TOTAL COMMON STOCKS & RIGHTS
(COST $2,669,322) 3,274,594
</TABLE>
4
<PAGE>
T. ROWE PRICE NEW AMERICA GROWTH PORTFOLIO / STATEMENT OF NET ASSETS
(UNAUDITED)
<TABLE>
<S> <C>
SHORT-TERM INVESTMENTS -- 14.0%
COMMERCIAL PAPER -- 14.0%
$ 100,000 AT&T Capital, 6.01%,
8/4/95 . . . . . . . . . . . $ 98,230
138,000 Cargill Financial Services,
6.10%, 7/3/95 . . . . . . . 137,930
100,000 Kingdom of Sweden,
6.05%, 8/15/95 . . . . . . . 98,101
100,000 New Center Asset Trust,
6.00%, 7/6/95 . . . . . . . 98,917
100,000 Preferred Receivables
Funding, 5.98%, 7/24/95 . . 99,468
TOTAL SHORT-TERM INVESTMENTS (COST $532,646) 532,646
=============================================================
TOTAL INVESTMENTS IN SECURITIES -- 100.0%
OF NET ASSETS (COST $3,201,968) $3,807,240
=============================================================
OTHER ASSETS LESS LIABILITIES . . . . . . . . . . (876)
-----
</TABLE>
<TABLE>
<CAPTION>
NET ASSETS CONSIST OF: Value
----------
<S> <C> <C>
Accumulated net
investment income -
net of distributions . . . . . . $ 1,327
Accumulated net
realized gain/loss -
net of distributions . . . . . . 8,741
Net unrealized gain (loss) . . . 605,272
Paid-in-capital applicable to
305,086 shares of $0.0001
par value capital stock
outstanding; 1,000,000,000
shares authorized . . . . . . . 3,191,024
----------
NET ASSETS . . . . . . . . . . . . . . . . . . . $3,806,364
==========
NET ASSET VALUE PER SHARE . . . . . . . . . . . . $12.48
======
=============================================================
</TABLE>
* Non-income producing
================================================================================
STATEMENT OF OPERATIONS
T. Rowe Price New America Growth Portfolio / Six Months Ended
June 30, 1995 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,371
Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,154
---------
Total income . . . . . . . . . . . . . . . . . . . . . . . . . 14,525
---------
Expenses
Investment management and administrative . . . . . . . . . . . 11,363
---------
Net investment income . . . . . . . . . . . . . . . . . . . . . . 3,162
---------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on securities . . . . . . . . . . . . 25,323
Change in net unrealized gain or loss on securities . . . . . 570,317
---------
Net realized and unrealized gain or loss . . . . . . . . . . . 595,640
---------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS . . . . . . . . $ 598,802
=========
================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
T. Rowe Price New America Growth Portfolio (Unaudited)
<TABLE>
<CAPTION>
From March 31, 1994
Six Months (Commencement of
Ended Operations) to
June 30, 1995 December 31, 1994
------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income . . . . . . . . . . . . . . . . . . . . . . . $ 3,162 $ 2,236
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . 25,323 (16,582)
Change in net unrealized gain or loss . . . . . . . . . . . . . . . . 570,317 34,955
---------- ----------
Increase (decrease) in net assets from operations . . . . . . . . . . 598,802 20,609
---------- ----------
Distributions to shareholders
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . (4,125) --
---------- ----------
Capital share transactions(1)
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,396,176 1,957,764
Distributions reinvested . . . . . . . . . . . . . . . . . . . . . . 4,125 --
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . (217,041) (7)
---------- ----------
Increase (decrease) in net assets from capital share transactions . . 1,183,260 1,957,757
---------- ----------
Net equalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 7
---------- ----------
Increase (decrease) in net assets . . . . . . . . . . . . . . . . . . . . 1,777,991 1,978,373
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . 2,028,373 50,000
---------- ----------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,806,364 $2,028,373
========== ==========
==============================================================================================================================
(1)Share information
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123,292 195,800
Distributions reinvested . . . . . . . . . . . . . . . . . . . . . . 400 --
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,405) (1)
---------- ----------
Increase (decrease) in capital shares outstanding . . . . . . . . . . 104,287 195,799
========== ==========
==============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
T. Rowe Price New America Growth Portfolio / June 30, 1995 (Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Equity Series, Inc., (the Corporation) is registered under the
Investment Company Act of 1940. The New America Growth Portfolio (the fund), a
diversified, open-end management investment company, is one of the portfolios
established by the Corporation. The shares of the fund are currently being
offered only to separate accounts of certain insurance companies as an
investment medium for both variable annuity contracts and variable life
insurance policies.
A) Valuation - Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price at the time the valuations
are made. A security which is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market for
such security. Listed securities that are not traded on a particular day and
securities that are regularly traded in the over-the-counter market are valued
at the mean of the latest bid and asked prices. Other equity securities are
valued at a price within the limits of the latest bid and asked prices deemed
by the Board of Directors, or by persons delegated by the Board, best to
reflect fair value.
Short-term debt securities are valued at their cost which, when combined
with accrued interest, approximates fair value.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
B) Other - Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on an identified cost basis. Dividend income and distributions to
shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with generally
accepted accounting principles. The fund follows the practice of equalization
under which undistributed net investment income per share is unaffected by fund
shares sold or redeemed.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $1,728,733 and $950,907, respectively, for the six months ended June
30, 1995.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income. The fund has unused realized capital loss carryforwards for
federal income tax purposes of $16,583 which expire in 2002.
At June 30, 1995, the aggregate cost of investments for federal income tax
and financial reporting purposes was $3,201,968 and net unrealized gain
aggregated $605,272, of which $624,997 related to appreciated investments and
$19,725 to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management and administrative agreement between the fund and T.
Rowe Price Associates, Inc. (the Manager) provides for an all-inclusive annual
fee, computed daily and paid monthly, equal to 0.85% of the fund's average
daily net assets. Pursuant to the agreement, investment management,
shareholder servicing, transfer agency, accounting and custody services are
provided to the fund and interest, taxes, brokerage commissions and
extraordinary expenses are paid directly by the fund.
7
<PAGE>
FINANCIAL HIGHLIGHTS
T. Rowe Price New America Growth Portfolio (Unaudited)
<TABLE>
<CAPTION>
For a share outstanding throughout each period
----------------------------------------------
From March 31, 1994
Six Months (Commencement of
Ended Operations) to
June 30, 1995 December 31, 1994
------------- -------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . $ 10.10 $ 10.00
------- -------
Investment Activities
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . 0.01 0.01
Net realized and unrealized gain (loss) . . . . . . . . . . . . . . . 2.39 0.09
------- -------
Total from Investment Activities . . . . . . . . . . . . . . . . . . . . 2.40 0.10
------- -------
Distributions
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . (0.02) --
------- -------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . $ 12.48 $ 10.10
======= =======
==============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.8% 1.0%
Ratio of Expenses to Average Net Assets . . . . . . . . . . . . . . . . . 0.85%+ 0.85%+
Ratio of Net Investment Income to Average Net Assets . . . . . . . . . . 0.24%+ 0.15%+
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . . . . . . 78.1%+ 81.0%+
Net Assets, End of Period . . . . . . . . . . . . . . . . . . . . . . . $3,806,364 $2,028,373
==============================================================================================================================
</TABLE>
+Annualized.
8
<PAGE>
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO
SEMIANNUAL REPORT [T. ROWE PRICE LOGO]
June 30, 1995
DEAR INVESTOR
Your fund finished the first six months of 1995 ahead of its benchmark, the
unmanaged Morgan Stanley Capital International Europe, Australia, and Far East
Index (MSCI EAFE), as shown on this page. The fund's 22% underweighting in
Japan accounted for much of the relatively stronger performance, since the
Japanese market was down 8.3% in dollar terms. A far heavier weighting in
Europe, which composed almost half of the portfolio, contributed to positive
returns as many European economies continued their broad-based recoveries.
<TABLE>
<CAPTION>
PERFORMANCE COMPARISON
-----------------------------------------------------------------------
6 Months
Ended 6/30/95
------------
<S> <C>
International Stock Portfolio 3.9%
MSCI EAFE* 2.6
-----------------------------------------------------------------------
</TABLE>
* Net of withholding taxes.
<TABLE>
<CAPTION>
MARKET PERFORMANCE
-----------------------------------------------------------------------
6 Months Ended 6/30/95
---------------------------------------
Local
Currency
Local vs. U.S. In U.S.
Currency* Dollars** Dollars*
--------------------------------------
<S> <C> <C> <C>
Australia 8.3% -8.6% -1.0%
France 2.5 10.1 12.8
Germany 0.3 12.0 12.4
Hong Kong 13.0 0.0 13.0
Italy -0.8 -0.9 -1.6
Japan -22.0 17.5 -8.3
Netherlands 3.3 11.9 15.6
Norway -2.3 9.7 7.1
Singapore -3.6 4.3 0.6
Spain 5.3 8.7 14.5
Sweden 14.0 2.1 16.3
Switzerland 8.1 13.6 22.8
United Kingdom 8.8 1.7 10.7
-----------------------------------------------------------------------
</TABLE>
* Source: MSCI "Perspective," net of withholding taxes.
** Source: NatWest Securities "Quant."
In certain Pacific markets outside Japan, such as Hong Kong, strong
economies combined with declining interest rates led to excellent stock market
returns measured in U.S. dollars, helping fund performance. Latin America was
the major disappointment during the period. However, our small 4% weighting
there enabled us to avoid many of the losses suffered prior to the return of
investor confidence, which sparked a second quarter rebound in these stocks.
MARKET REVIEW
EUROPEAN stock markets generated powerful returns for U.S. investors, largely
because of the weak dollar. In dollar terms, Germany rose 12.4%, Switzerland a
rollicking 22.8%, France 12.8%, the U.K. 10.7%, and the Netherlands 15.6%, all
net of withholding taxes.
Politics played a role in the U.K., where stocks started the second
quarter strongly but gave up much of their gains in late June during a
leadership challenge to Conservative Party head John Major. His high-risk
strategy of threatening to resign because of differences with fellow party
members paid off in the end. The Conservatives still lag in public opinion
polls, but this is counterbalanced to some extent by the opposition Labour
Party's shift from the far left toward the political center. Several U.K.
stocks, including pharmaceutical giant SMITHKLINE BEECHAM and NATIONAL
WESTMINSTER BANK, are among our major holdings.
In GERMANY, despite the wage demands of the metal processing workers,
inflation remains low near 2% per year as the strong mark has reduced the price
of imports. Subdued inflation, coupled with an improvement in government
finances (which will be boosted after the privatization of Deutsche Telecom in
1996), gives the Bundesbank room to lower short-term interest rates further,
creating a more positive environment for stocks.
Less restrictive German monetary policy will be sweet music for the
recently elected president of FRANCE, Jacques Chirac, who was called the French
Ronald Reagan 10 years ago. Chirac will be eager to avoid monetary tightening
as long as unemployment is painfully above 12%, and easing in Germany reduces
pressure on France to tighten. Chirac may tighten fiscal policy instead by
reducing government spending. Our largest positions in France include EAUX CIE
GENERALE and CARREFOUR.
We maintained a heavy weighting in the NETHERLANDS, where WOLTERS
KLUWER, ELSEVIER, and ROYAL DUTCH PETROLEUM were the three largest holdings in
the portfolio as of June 30. We continue to find good stocks at reasonable
valuations in this country. Overall, European stock valuations have improved
over the past few months because of declining bond yields coupled with steady
earnings growth. We forecast earnings growth of more than 25% in France in
1996, 19% in Germany, and 11% in the U.K.
1
<PAGE>
While Europe rallied, JAPAN disappointed international investors once
again. Largely due to the powerful yen and the aftermath of the Kobe
earthquake, the Japanese economy has been in a slump. May industrial production
fell for the third month in a row, although it is up from the previous year,
and inventory buildup has worsened. Deflation is much in the news with the
Consumer Price Index currently in negative territory and wholesale prices
falling 1.8% in May alone. This has had a negative impact on corporate earnings
and caused major problems in the banking system.
GEOGRAPHIC DIVERSIFICATION
------------------------------------------------------------------------
[FIGURE 1]
------------------------------------------------------------------------
However, we do not believe that Japan will plummet into a depression.
The recent cut in the discount rate, high savings rates, government finances,
and increasing liquidity in the financial system should foster economic
expansion from current anemic levels. Stock valuations in selected areas are
also becoming attractive, enhanced by declining yields. Many Japanese
technology stocks now appear cheaper than their U.S. counterparts, and we have
been slowly accumulating shares in this sector. KYOCERA, NIPPON DENSO, TDK, and
CANON are among our major holdings here.
Elsewhere in ASIA, after being pummeled in the aftermath of the Mexican
crisis early in the year, the sounder markets here rebounded smartly when
investors began to view them differently. The strong yen resulted in increased
Japanese investment throughout the region. The markets of HONG KONG and
MALAYSIA were particularly strong, and many Asian currencies appreciated
against the U.S. dollar, fattening returns in dollar terms.
Late in the first half, we trimmed our exposure to Hong Kong because
earnings growth was slowing as real estate prices stagnated. We deployed much
of this cash directly into CHINA, where valuations are extremely attractive.
Our exposure to other markets in the area held steady. Industrial production in
THAILAND is growing at 11% a year, exports are growing at more than 15% a year
in SINGAPORE, and the push to revamp the infrastructure in MALAYSIA has
energized that economy.
Markets in LATIN AMERICA, our lowest regional weighting, turned in the
worst regional performance. Stocks throughout the region nosedived during the
first quarter, then rallied in the second, although they failed to recoup
earlier losses in dollar terms. A degree of stability appears to have returned
to MEXICO, but a sharp recession is likely to linger through the rest of the
year with interest rates high and annual inflation running more than 40%. The
picture in BRAZIL is far brighter as economic reforms continue on track. Stocks
here look cheap to us, and we are also increasing positions in ARGENTINA and
CHILE, whose economic prospects appear promising.
Worldwide, regional stock market returns in dollar terms for the first
six months of 1995 are shown below.
PERFORMANCE BY REGION
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
Six months ended
6/30/95
--------------
<S> <C>
Europe 12.9%
Japan - 8.3
Asia 7.0
Latin America -14.0
-----------------------------------------------------------------------
</TABLE>
Source: MSCI "Perspective," net of withholding taxes.
SUMMARY AND OUTLOOK
Perhaps the main theme for the first half was the strengthening in global fixed
income markets, resulting in rising bond prices and lower yields, which
rendered stock market valuations increasingly attractive. Looking ahead, we see
economic growth continuing apace in many regions, brightening prospects for
international equity investors. Increasing stability in world currency markets
should also provide an underpinning to stock markets. Inflation should remain
under control in most regions, minimizing the possibility of rising interest
rates anytime soon.
The moderate appreciation of the dollar against the Japanese yen may
continue over the short term, but we believe the long-term trend of the dollar
is downward. Therefore, we will continue to keep your portfolio largely
unhedged to take full advantage of the stronger foreign currencies we expect.
Regarding regional weightings, we will proceed with a view toward
implementing relatively large positions in Asia outside of Japan, in Latin
America, and in the smaller markets of Europe where we believe the greater
values lie. We are generally optimistic about the prospects for returns in
international markets and expect them to narrow the performance gap with U.S.
stocks during the balance of the year.
Respectfully submitted,
/s/ MARTIN G. WADE
------------------
Martin G. Wade
President
July 27, 1995
2
<PAGE>
<TABLE>
<CAPTION>
INDUSTRY DIVERSIFICATION
-----------------------------------------------------------------------
June 30, 1995
Percent of
Net Assets
----------
<S> <C>
Services 20.1%
Capital Equipment 16.2
Finance 14.9
Consumer Goods 14.3
Materials 9.5
Energy 9.4
Multi-Industry 2.8
Reserves 12.8
-----------------------------------------------------------------------
Net Assets 100.0%
=======================================================================
</TABLE>
<TABLE>
<CAPTION>
SECURITY CLASSIFICATION
---------------------------------------------------------------------------
June 30, 1995
Percent Market
of Net Cost Value
Percent of Net Assets Assets (000) (000)
--------------------- ------ ----- -----
<S> <C> <C> <C>
Common Stocks, Rights and
Warrants 85.2% $16,711 $17,078
Preferred Stocks and Rights 2.0 387 391
Short-Term Investments 10.5 2,094 2,094
----- ------- -------
Total Investments 97.7 19,192 19,563
Other Assets Less Liabilities 2.3 455 456
---------------------------------------------------------------------------
Net Assets 100.0% $19,647 $20,019
===========================================================================
</TABLE>
<TABLE>
<CAPTION>
TWENTY-FIVE LARGEST HOLDINGS
---------------------------------------------------------------------------
June 30, 1995
Percent of
Net Assets
----------
<S> <C>
Wolters Kluwer, Netherlands 2.3%
Elsevier, Netherlands 1.9
Royal Dutch Petroleum, Netherlands 1.3
Kyocera, Japan 1.2
SmithKline Beecham, United Kingdom 1.2
National Westminster Bank, United Kingdom 1.1
Reed International, United Kingdom 1.1
Eaux Cie Generale, France 1.0
BBCBrown Boveri & Cie, Switzerland 0.8
Roche Holdings, Switzerland 0.8
Polygram, Netherlands 0.8
Nippon Denso, Japan 0.7
Nestle, Switzerland 0.7
United Engineers, Malaysia 0.7
TDK, Japan 0.7
Mitsubishi Heavy Industries, Japan 0.7
Norsk Hydro, Norway 0.7
Sumitomo Electric, Japan 0.7
Canon, Japan 0.7
Astra, Sweden 0.6
Gehe, Germany 0.6
Mitsui Fudosan, Japan 0.6
Matsushita Electric Industrial, Japan 0.6
Carrefour, France 0.6
Glaxo, United Kingdom 0.6
---------------------------------------------------------------------------
Total 22.7%
===========================================================================
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL COMPOUND TOTAL RETURN
---------------------------------------------------------------------------
Periods Ended June 30, 1995
Since Inception
1 Year (3/31/94)
------ ---------
<S> <C>
4.7% 4.6%
===========================================================================
</TABLE>
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
Performance does not reflect insurance company contract and other separate
account charges. If these charges were deducted, performance would be lower.
3
<PAGE>
PORTFOLIO OF INVESTMENTS
T. Rowe Price International Stock Portfolio / June 30, 1995 (Unaudited)
(values in thousands)
<TABLE>
<CAPTION>
Value
-----
<S> <C>
ARGENTINA -- 0.6%
COMMON STOCKS
550 shs. Banco de Galicia Buenos
Aires 'B' ADR (USD) . $ 9
280 Banco Frances del Rio de la
Plata ADR (USD) . . . 5
353 Buenos Aires Embotelladora
'B' ADR (USD) . . . . 9
170 Enron Global Power &
Pipeline (USD) . . . . 4
3,361 Naviera Perez 'B' . . . . . . 14
1,710 Sociedad Comercial del Plata 4
70 * Sociedad Comercial del Plata
ADR (USD) . . . . . . 2
1,020 Telecom Argentina Stet 'B' . 5
1,470 Telefonica de Argentina 'B'
ADR (USD) . . . . . . 36
380 Transportadora de Gas del
Sur 'B' ADS (USD) . . 4
1,270 YPF Sociedad Anonima 'D'
ADR (USD) . . . . . . 24
TOTAL ARGENTINA 116
AUSTRALIA -- 1.8%
COMMON STOCKS & RIGHTS
10,241 Australia Gas & Light . . . . 32
3,244 Broken Hill Proprietary . . . 40
8,153 Burns Philp & Company . . . . 17
3,000 Coca Cola Amatil . . . . . . 18
750 rts. * Coca Cola Amatil . . . . . . 1
1,006 shs. Lend Lease Corporation . . . 13
3,000 MIM . . . . . . . . . . . 4
4,000 Mayne Nickless . . . . . . . 16
7,012 News Corporation . . . . . . 39
7,000 Publishing & Broadcasting . . 21
18,000 * Sydney Harbor Casino 'A' . . . 19
18,000 * TNT . . . . . . . . . . . . . 24
8,000 Tabcorp Holdings . . . . . . 17
5,500 Western Mining . . . . . . . 30
6,000 Woodside Petroleum . . . . . 24
315
PREFERRED STOCKS
3,517 News Corporation . . . . . . 17
13,000 TNT, Cum. Cv., 8.00% . . . . 18
35
TOTAL AUSTRALIA 350
AUSTRIA -- 0.1%
COMMON STOCKS
180 Flughafen Wien . . . . . . . 10
170 Oesterreichische Elektrizitats 12
22
PREFERRED STOCK
100 shs. Creditanstalt - Bankverein . . 6
TOTAL AUSTRIA 28
BELGIUM -- 1.2%
COMMON STOCKS
170 Fortis . . . . . . . . . . . 18
130 Generale Banque . . . . . . . 42
390 Kredietbank . . . . . . . . . 93
91 UCB . . . . . . . . . . . 91
TOTAL BELGIUM 244
BRAZIL -- 1.7%
COMMON STOCKS
1,700 Brazil Fund (USD) . . . . . . 43
330 * Cesp Cia Energetica de
Sao Paulo (USD) . . . 4
360,000 Companhia Siderurgica Nacional 8
80,000 Eletrobras . . . . . . . . . 21
350,000 Telecomunicacoes Brasilias . 10
86
PREFERRED STOCKS & RIGHTS
3,240,000 Banco Bradesco . . . . . . . 28
58,507 rts. * Banco Bradesco . . . . . . . 1
20,000 shs. Banco Itau . . . . . . . . . 6
50,000 Brahma . . . . . . . . . . . 16
918 * Brahma RegD . . . . . . . . . 1
40,000 Brasmotor . . . . . . . . . . 7
40,000 Cia Cimento Portland Itau . . 12
440 * Cia Energetica de Sao Paulo
ADS (USD) . . . . . . 5
511,000 Cia Energetica Minas Gerais . 10
216 * Cia Energetica Minas Gerais
ADR (USD) . . . . . . 4
28,000 Cia Tecidos Norte de Minas . 9
430,000 Lojas American . . . . . . . 9
80,000 Petrol Brasileiros . . . . . 6
490,000 Telecomunicacoes Brasilias . 16
2,887 Telecomunicacoes Brasilias
ADR (USD) . . . . . . 95
100,000 Telecomunicacoes de
Sao Paulo . . . . . . 12
21,970,000 Usiminas . . . . . . . . . . 25
262
TOTAL BRAZIL 348
CANADA -- 0.4%
COMMON STOCKS
1,620 Alcan Aluminium . . . . . . . 49
800 MacMillan Bloedel . . . . . . 11
640 Royal Bank of Canada . . . . 14
TOTAL CANADA 74
</TABLE>
4
<PAGE>
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO / PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<S> <C>
CHILE -- 0.6%
COMMON STOCKS
141 shs. AFP Providia (USD) . . . . . $ 4
800 Chile Fund (USD) . . . . . . 43
280 Chilectra ADR (USD) . . . . . 14
250 Chilgener ADR (USD) . . . . . 8
450 Compania Cervecerias
Unidas ADS (USD) . . . 12
190 Compania de Telefonos de
Chile 'A' ADR (USD) . 15
964 Empresa Nacional de
Electricidad ADS (USD) 26
239 Enersis ADS (USD) . . . . . . 7
TOTAL CHILE 129
CHINA -- 0.4%
COMMON STOCKS
1,800 Huaneng Power International
'N' ADR (USD) . . . . 33
72,000 Shanghai Petrochemical 'H'
(HKD) . . . . . . . . 23
88,000 Yizheng Chemical Fibre 'H'
(HKD) . . . . . . . . 31
TOTAL CHINA 87
DENMARK -- 0.3%
COMMON STOCKS
330 Den Danske Bank . . . . . . . 21
170 Tele Danmark 'B' . . . . . . 9
410 Unidanmark 'A' . . . . . . . 20
TOTAL DENMARK 50
FINLAND -- 0.2%
COMMON STOCK
620 Nokia Oy 'A' . . . . . . . . 36
FRANCE -- 7.6%
COMMON STOCKS & RIGHTS
520 Accor . . . . . . . . . . . . 69
180 Assurances Generales
de France . . . . . . 6
240 Carrefour . . . . . . . . . . 123
270 Chargeurs . . . . . . . . . . 53
100 rts. * Chargeurs . . . . . . . . . . 2
960 shs. Cie de St. Gobain . . . . . . 116
1,870 Eaux Cie Generale . . . . . . 208
465 Ecco . . . . . . . . . . . 73
900 Elf Aquitaine . . . . . . . . 66
300 GTM Entrepose . . . . . . . . 24
515 LVMH . . . . . . . . . . . 93
90 L'Oreal . . . . . . . . . . . 23
740 Lafarge-Coppee . . . . . . . 58
695 Lapeyre . . . . . . . . . . . 46
400 Legrand . . . . . . . . . . . 63
150 Peugeot . . . . . . . . . . . 21
270 shs. Pinault Printemps . . . . . . 58
600 Poliet . . . . . . . . . . . 54
50 Primagaz . . . . . . . . . . 9
150 Rexel . . . . . . . . . . . . 26
150 Societe Generale de France . . 17
130 Sodexho . . . . . . . . . . . 29
1,190 Television Francaise . . . . 117
1,100 Total 'B' . . . . . . . . . . 66
2,100 Valeo . . . . . . . . . . . . 102
TOTAL FRANCE 1,522
GERMANY -- 4.7%
COMMON STOCKS, RIGHTS & WARRANTS
48 Allianz Holdings . . . . . . 86
38 rts. * Allianz Holdings . . . . . . 3
10 wts. * Allianz Holdings, 3/29/96 . . 9
48 shs. Altana . . . . . . . . . . . 26
50 Ava Allgemeine Handels -
Der Verbr . . . . . . 19
270 Bayer . . . . . . . . . . . . 67
40 Bayerische Motoren Werke . . 22
80 Bilfinger & Berger . . . . . 37
32 Buderus . . . . . . . . . . . 15
1,190 Deutsche Bank . . . . . . . . 58
230 Gehe . . . . . . . . . . . 106
50 Gehe, new . . . . . . . . . . 22
180 Hoechst . . . . . . . . . . . 39
30 Hornbach . . . . . . . . . . 20
348 Mannesmann . . . . . . . . . 106
45 Rhon Klinikum . . . . . . . . 53
1,060 Schering . . . . . . . . . . 74
50 Veba . . . . . . . . . . . 20
160 wts. * Veba, 4/6/98 . . . . . . . . 21
130 shs. Volkswagen . . . . . . . . . 38
80 wts. * Volkswagen International
Finance, 10/27/98 . . 6
847
PREFERRED STOCKS
280 shs. Fielmann . . . . . . . . . . 13
32 Hornbach . . . . . . . . . . 43
67 Krones . . . . . . . . . . . 32
88
TOTAL GERMANY 935
HONG KONG -- 2.0%
COMMON STOCKS
11,200 Great Eagle Holdings . . . . 24
36,454 Hong Kong Land Holdings
(USD) . . . . . . . . 66
363 Hopewell Holdings . . . . . . 1
25,000 Hutchison Whampoa . . . . . . 121
9,000 Swire Pacific 'A' . . . . . . 68
36,000 Wharf Holdings . . . . . . . 117
TOTAL HONG KONG 397
</TABLE>
5
<PAGE>
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO / PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<S> <C>
ITALY -- 1.8%
COMMON STOCKS
3,109 shs. Assicurazioni Generali . . . $ 73
15,480 Banca Fideuram . . . . . . . 18
2,000 Danieli & Company,
savings shares . . . . 6
1,700 Imi . . . . . . . . . . . 10
7,500 Istituto Naz Delle
Assicurazioni . . . . 10
6,000 Italgas . . . . . . . . . . . 16
1,000 RAS . . . . . . . . . . . 11
2,000 Rinascente . . . . . . . . . 11
6,000 SME . . . . . . . . . . . 15
6,000 Sasib, savings shares . . . . 16
17,900 Stet . . . . . . . . . . . 49
7,000 Stet, savings shares . . . . 16
24,966 Telecom Italia . . . . . . . 68
12,697 Telecom Italia,
savings shares . . . . 27
740 Unichem . . . . . . . . . . . 4
TOTAL ITALY . . . . . . . . . . . 350
JAPAN -- 22.0%
COMMON STOCKS
1,000 Advantest . . . . . . . . . . 38
4,000 Alps Electric . . . . . . . . 42
8,000 Amada . . . . . . . . . . . . 69
8,000 Canon . . . . . . . . . . . . 130
4,000 Citizen Watch . . . . . . . . 25
6,000 * Dai Nippon Screen
Manufacturing . . . . 40
2,000 Daifuku . . . . . . . . . . . 22
7,000 Daiichi Pharmaceutical . . . 102
7,000 Daiwa House . . . . . . . . . 107
10 East Japan Railway . . . . . 51
2,000 Fanuc . . . . . . . . . . . . 86
12,000 Hitachi . . . . . . . . . . . 120
7,000 Hitachi Zosen . . . . . . . . 28
3,000 Honda Motor . . . . . . . . . 46
4,000 Inax . . . . . . . . . . . 39
4,000 * Ishihara Sangyo Kaisha . . . . 12
2,000 Ito-Yokado . . . . . . . . . 106
1,000 Kawada Industries . . . . . . 8
3,000 Kokuyo . . . . . . . . . . . 67
11,000 Komatsu . . . . . . . . . . . 84
3,000 Komori . . . . . . . . . . . 61
7,000 Kumagai Gumi . . . . . . . . 29
7,000 Kuraray . . . . . . . . . . . 76
3,000 Kyocera . . . . . . . . . . . 247
5,000 Makita . . . . . . . . . . . 69
7,000 Marui . . . . . . . . . . . . 112
8,000 Matsushita Electric
Industrial . . . . . . 125
4,000 Mitsubishi . . . . . . . . . 46
20,000 Mitsubishi Heavy Industries . 136
5,000 Mitsubishi Paper Mills . . . 26
11,000 shs. Mitsui Fudosan . . . . . . . 126
4,000 Mitsui Petrochemical
Industries . . . . . . 30
2,000 Murata Manufacturing . . . . 76
10,000 NEC . . . . . . . . . . . 110
2,000 National House . . . . . . . 37
8,000 Nippon Denso . . . . . . . . 145
2,000 Nippon Hodo . . . . . . . . . 35
35,000 Nippon Steel . . . . . . . . 114
5,000 Nomura Securities . . . . . . 87
4,000 Pioneer Electronic . . . . . 68
1,000 Sangetsu . . . . . . . . . . 27
3,200 Sankyo . . . . . . . . . . . 74
1,000 Sega Enterprises . . . . . . 36
9,000 Sekisui Chemical . . . . . . 106
6,000 Sekisui House . . . . . . . . 74
1,000 Seven-Eleven Japan . . . . . 72
8,000 Sharp . . . . . . . . . . . . 106
4,000 Shinetsu Chemical . . . . . . 70
2,000 Sony . . . . . . . . . . . 96
13,000 Sumitomo . . . . . . . . . . 118
11,000 Sumitomo Electric . . . . . . 131
4,000 Sumitomo Forestry . . . . . . 67
3,000 TDK . . . . . . . . . . . 137
1,000 Taisho Pharmaceutical . . . . 19
13,000 Teijin . . . . . . . . . . . 62
4,000 Tokio Marine & Fire
Insurance . . . . . . 46
2,000 Tokyo Electronics . . . . . . 69
2,000 Tokyo Steel Manufacturing . . 34
3,000 Toppan Printing . . . . . . . 39
2,000 Yurtec . . . . . . . . . . . 44
TOTAL JAPAN 4,404
MALAYSIA -- 2.8%
COMMON STOCKS & WARRANTS
49,000 Affin Holdings . . . . . . . 86
6,200 wts. * Affin Holdings, 8/22/99 . . . 4
12,000 shs. Aokam Perdana . . . . . . . . 30
21,000 Berjaya Sports Toto . . . . . 37
3,000 wts. * Commerce Asset Holdings,
6/27/98 . . . . . . . 8
41,000 shs. Multi-Purpose Holding . . . . 72
40,000 Renong . . . . . . . . . . . 75
39,000 * Technology Resources
Industries . . . . . . 112
22,000 United Engineers . . . . . . 140
TOTAL MALAYSIA 564
MEXICO -- 1.4%
COMMON STOCKS
4,197 Cemex 'B' . . . . . . . . . . 15
44,282 Cifra 'B' ADR (USD) . . . . . 61
3,147 Fomentos Economico
Mexicano 'B' . . . . . 7
3,550 Gruma 'B' . . . . . . . . . . 10
</TABLE>
6
<PAGE>
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO / PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<S> <C>
MEXICO (CONT'D)
3,650 shs. * Grupo Embotellador de
Mexico PC . . . . . . $ 19
670 Grupo Financiero
Banamex 'B' . . . . . 1
33 Grupo Financiero
Banamex 'L' . . . . . 1
820 * Grupo Financiero
Bancomer 'C' GDS (USD). 5
607 Grupo Financiero
Bancomer 'L' . . . . . 1
13,220 Grupo Industrial Maseca 'B' . 8
4,060 * Grupo Sidek 'B' . . . . . . . 3
1,330 Grupo Televisa PC GDS
(USD) . . . . . . . . 27
780 Panamerican Beverages 'A'
(USD) . . . . . . . . 23
2,526 Telefonos de Mexico 'L' ADS
(USD) . . . . . . . . 75
7,540 Tolmex 'B2' . . . . . . . . . 29
TOTAL MEXICO 285
NETHERLANDS -- 9.4%
COMMON STOCKS
1,460 ABN Amro Holdings . . . . . . 56
1,150 Ahold . . . . . . . . . . . . 41
598 Akzo Nobel . . . . . . . . . 72
2,246 CSM . . . . . . . . . . . 99
31,810 Elsevier . . . . . . . . . . 376
970 Fortis AMEV . . . . . . . . . 53
430 Hagemeyer . . . . . . . . . . 19
2,160 Internationale Nederlanden
Groep . . . . . . . . 119
1,190 Koninklijke PTT Nederland . . 43
320 Nutricia . . . . . . . . . . 22
2,566 Polygram . . . . . . . . . . 152
2,190 Royal Dutch Petroleum . . . . 267
830 Unilever . . . . . . . . . . 108
5,198 Wolters Kluwer . . . . . . . 459
TOTAL NETHERLANDS 1,886
NEW ZEALAND -- 0.9%
COMMON STOCKS
14,000 Air New Zealand 'B' . . . . . 41
9,000 Carter Holt Harvey . . . . . 22
4,000 Fernz . . . . . . . . . . . . 11
11,000 Fletcher Challenge . . . . . 31
12,000 Fletcher Challenge, Forests
Division . . . . . . . 16
3,000 Independent Newspapers . . . 9
13,000 Telecom Corporation of
New Zealand . . . . . 49
TOTAL NEW ZEALAND 179
NORWAY -- 1.4%
COMMON STOCKS
500 Bergesen 'A' . . . . . . . . 11
740 shs. Kvaerner 'A' . . . . . . . . 34
3,187 Norsk Hydro . . . . . . . . . 133
2,140 Orkla 'A' . . . . . . . . . . 96
700 Saga Petroleum 'B' . . . . . 9
TOTAL NORWAY 283
PERU -- 0.1%
COMMON STOCK
2,200 Telefonica de Peru 'B' . . . 4
PORTUGAL -- 0.2%
COMMON STOCK
1,020 Jeronimo Martins . . . . . . 52
SINGAPORE -- 2.2%
COMMON STOCKS & WARRANTS
10,000 DBS Land . . . . . . . . . . 31
4,000 Far East Levingston
Shipbuilding . . . . . . 19
4,000 Jurong Shipyard . . . . . . . 29
5,000 Keppel . . . . . . . . . . . 41
11,000 Neptune Orient Lines . . . . 13
3,000 Overseas Union Bank . . . . . 19
5,000 Overseas Union Enterprises . 30
5,000 Sembawang . . . . . . . . . . 30
4,000 Singapore Airlines . . . . . 37
7,000 Singapore Land . . . . . . . 46
3,000 Singapore Press . . . . . . . 45
600 Singapore Press, new . . . . 9
19,000 United Industrial . . . . . . 18
7,480 United Overseas Bank . . . . 71
2,400 wts. * United Overseas Bank,
6/17/97 . . . . . . . 11
TOTAL SINGAPORE 449
SOUTH KOREA -- 0.3%
COMMON STOCK
1,197 shs. Samsung Electronics GDS
(USD) . . . . . . . . . . 63
SPAIN -- 2.1%
COMMON STOCKS
210 Banco Popular Espanol . . . . 31
1,060 Banco Santander . . . . . . . 42
3,205 Centros Comerciales Pryca . . 59
1,960 Empresa Nacional de
Electricidad . . . . . 97
340 Fomento de Construcciones
y Contra . . . . . . . 29
500 Gas Natural . . . . . . . . . 60
5,350 Iberdrola . . . . . . . . . . 40
1,578 Repsol . . . . . . . . . . . 50
90 Repsol ADR (USD) . . . . . . 3
2,704 Sevillana De Electricidad . . 16
TOTAL SPAIN . . . . . . . . . . . 427
</TABLE>
7
<PAGE>
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO / PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<S> <C>
SWEDEN -- 1.9%
COMMON STOCKS
470 shs. Asea 'A' . . . . . . . . . . $ 41
4,280 Astra 'B' . . . . . . . . . . 129
2,660 Atlas Copco 'B' . . . . . . . 37
1,480 Electrolux 'B' . . . . . . . 67
310 Esselte 'B' . . . . . . . . . 4
600 Hennes & Mauritz 'B' . . . . 35
380 Sandvik 'A' . . . . . . . . . 7
2,730 Sandvik 'B' . . . . . . . . . 50
1,500 Stora Kopparberg 'B' . . . . 20
TOTAL SWEDEN 390
SWITZERLAND -- 3.8%
COMMON STOCKS
163 BBC Brown Boveri & Cie . . . 169
470 CS Holding . . . . . . . . . 43
60 Ciba Geigy . . . . . . . . . 44
137 Nestle . . . . . . . . . . . 143
26 Roche Holdings . . . . . . . 167
120 Sandoz . . . . . . . . . . . 83
38 Schweizerische
Bankgesellschaft . . . 39
190 Schweizerischer Bankverein . 67
TOTAL SWITZERLAND 755
THAILAND -- 0.9%
COMMON STOCKS
1,000 Advanced Information
Service . . . . . . . 15
3,400 Bangkok Bank . . . . . . . . . 37
3,900 Bank of Ayudhya . . . . . . . 19
600 Land & House . . . . . . . . 13
500 Siam Cement . . . . . . . . . 32
2,200 Siam Commercial Bank . . . . 21
2,800 Thai Farmers Bank . . . . . . 27
1,200 United Communications . . . . 17
TOTAL THAILAND 181
UNITED KINGDOM -- 14.4%
COMMON STOCKS
16,000 Abbey National . . . . . . . 118
10,000 Argos . . . . . . . . . . . . 68
13,500 Argyll Group . . . . . . . . 72
41,000 Asda Group . . . . . . . . . 62
3,000 BAA . . . . . . . . . . . 23
11,000 British Gas . . . . . . . . . 51
6,000 British Petroleum . . . . . . 43
16,000 Cable & Wireless . . . . . . 109
12,860 Cadbury Schweppes . . . . . . 93
27,000 Caradon . . . . . . . . . . . 101
7,000 Clyde Petroleum . . . . . . . 5
9,000 Coats Viyella . . . . . . . . 27
3,000 Compass Group . . . . . . . . 18
6,000 David S. Smith . . . . . . . 62
6,100 shs. East Midlands Electricity . . 62
2,000 Eastern Group . . . . . . . . 21
4,000 First National Finance . . . 6
10,000 Glaxo . . . . . . . . . . . . 122
18,000 Grand Metropolitan . . . . . 110
15,000 Guinness . . . . . . . . . . 113
2,000 Heath . . . . . . . . . . . . 6
3,000 Heywood Williams Group . . . 11
8,000 Hillsdown Holdings . . . . . 23
7,000 John Laing 'A' . . . . . . . 23
12,000 Kingfisher . . . . . . . . . 81
13,000 Ladbroke Group . . . . . . . 35
9,000 London Electricity . . . . . 91
26,000 National Westminster Bank . . 226
7,000 RTZ . . . . . . . . . . . . . 91
13,000 Rank Organisation . . . . . . 82
16,000 Reed International . . . . . 225
5,480 Rolls Royce . . . . . . . . . 15
7,000 Sears . . . . . . . . . . . . 11
10,000 Shell Transport & Trading . . 119
26,000 SmithKline Beecham,
equity units . . . . . 230
2,000 South Western Electricity . . 21
16,000 T & N . . . . . . . . . . . . 43
12,000 Tesco . . . . . . . . . . . . 55
32,500 Tomkins . . . . . . . . . . . 116
11,000 United Newspapers . . . . . . 91
TOTAL UNITED KINGDOM 2,881
SHORT-TERM INVESTMENTS -- 10.5%
COMMERCIAL PAPER
$ 5,000 Cargill Financial Services,
6.10%, 7/3/95 . . . . 5
350,000 Ciba-Geigy, 6.00%, 7/17/95 . 345
150,000 General Electric Capital,
5.975%, 7/11/95 . . . 149
250,000 Hershey Foods, 6.00%,
7/10/95 . . . . . . . 247
100,000 KFW International Finance,
6.00%, 7/7/95 . . . . 100
750,000 Preferred Receivables
Funding, 6.00%, 7/6/95 749
500,000 Walmart Stores, 6.00%,
7/14/95 . . . . . . . 499
TOTAL SHORT-TERM INVESTMENTS 2,094
================================================================
TOTAL INVESTMENTS IN SECURITIES -- 97.7% OF
NET ASSETS (COST $19,192) . . . . . . . . . . . 19,563
================================================================
Other Assets Less Liabilities . . . . . . . . . . 456
NET ASSETS . . . . . . . . . . . $ 20,019
========
================================================================
</TABLE>
* - Non-income producing
(HKD) - Hong Kong dollar
(USD) - U.S. dollar
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
T. Rowe Price International Stock Portfolio / June 30, 1995 (Unaudited)
(in thousands)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $19,192) . . . . . $ 19,563
Receivable for foreign exchange contracts . . . . . . . . . . 2,415
Other assets . . . . . . . . . . . . . . . . . . . . . . . . 1,383
-----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . 23,361
-----------
LIABILITIES
Payable for investment securities purchased . . . . . . . . . 915
Payable for foreign exchange contracts . . . . . . . . . . . 2,413
Other liabilities . . . . . . . . . . . . . . . . . . . . . . 14
-----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . 3,342
-----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,019
===========
Net Assets Consist of:
Accumulated net investment income - net of distributions . . $ 165
Accumulated realized gains/losses - net of distributions . . (131)
Net unrealized gain (loss) . . . . . . . . . . . . . . . . . 372
Paid-in-capital applicable to 1,903,561 shares
of $0.0001 par value capital stock outstanding,
1,000,000,000 shares of the Corporation authorized . . . . 19,613
-----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,019
===========
NET ASSET VALUE PER SHARE . . . . . . . . . . . . . . . . . . $ 10.52
===========
===============================================================================
</TABLE>
STATEMENT OF OPERATIONS
T. Rowe Price International Stock Portfolio / Six Months Ended June 30, 1995
(Unaudited)
(in thousands)
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividend (net of foreign taxes of $26) . . . . . . . . . . $ 167
Interest . . . . . . . . . . . . . . . . . . . . . . . . . 69
-----------
Total income . . . . . . . . . . . . . . . . . . . . . . . 236
Expenses
Investment management and administrative . . . . . . . . . 71
-----------
Net investment income . . . . . . . . . . . . . . . . . . . . 165
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities . . . . . . . . . . . . . . . . . . . . . . . . (67)
Foreign currency transactions . . . . . . . . . . . . . . (47)
-----------
Net realized gain (loss) . . . . . . . . . . . . . . . . . (114)
-----------
Change in net unrealized gain or loss on:
Securities . . . . . . . . . . . . . . . . . . . . . . . . 581
Other assets and liabilities denominated in foreign currencies 1
-----------
Change in net unrealized gain or loss . . . . . . . . . . 582
-----------
Net realized and unrealized gain (loss) . . . . . . . . . . . 468
-----------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS . . . . . . $ 633
===========
===================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
T. Rowe Price International Stock Portfolio (Unaudited)
<TABLE>
<CAPTION>
(in thousands)
From March 31, 1994
(Commencement of
Six Months Ended Operations) to
June 30, 1995 December 31, 1994
--------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . $ 165 $ 52
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . (114) (17)
Change in net unrealized gain or loss . . . . . . . . . . . . . . . . 582 (210)
--------- ----------
Increase (decrease) in net assets from operations . . . . . . . . . . 633 (175)
--------- ----------
Distributions to shareholders
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . (52) --
Capital share transactions*
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,104 9,293
Distributions reinvested . . . . . . . . . . . . . . . . . . . . . . 52 --
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . (813) (123)
--------- ----------
Increase (decrease) in net assets from capital share transactions . . 10,343 9,170
--------- ----------
Increase (decrease) in net assets . . . . . . . . . . . . . . . . . . . . 10,924 8,995
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,095 100
--------- ----------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,019 $ 29,095
========= ==========
=====================================================================================================================
*Share information
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,085 895
Shares reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . 5 --
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . (79) (12)
--------- ----------
Increase (decrease) in shares outstanding . . . . . . . . . . . . . . . . 1,011 883
========= ==========
=====================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
T. Rowe Price International Stock Portfolio / June 30, 1995 (Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price International Series, Inc. (the Corporation) is registered under
the Investment Company Act of 1940. The International Stock Portfolio (the
fund), a diversified, open-end management investment company, is the sole
portfolio currently established by the Corporation. The shares of the fund are
currently being offered only to separate accounts of certain insurance
companies as an investment medium for both variable annuity contracts and
variable life insurance policies.
A) Valuation - Equity securities listed or regularly traded on a securities
exchange (including NASDAQ) are valued at the last quoted sales price at the
time the valuations are made. A security which is listed or traded on more
than one exchange is valued at the quotation on the exchange determined to be
the primary market for such security. Other equity securities and those listed
securities that are not traded on a particular day are valued at a price within
the limits of the latest bid and asked prices deemed by the Board of Directors,
or by persons delegated by the Board, best to reflect fair value.
Short-term debt securities are valued at their cost which, when combined
with accrued interest, approximates fair value.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
B) Currency Translation - Assets and liabilities are translated into U.S.
dollars at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated into
U.S. dollars at the prevailing exchange rate on the dates of such transactions.
The effect of changes in foreign exchange rates on realized and unrealized
security gains and losses is reflected as a component of such gains and losses.
C) Other - Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on an identified cost basis. Dividend income and distributions to
shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with generally
accepted accounting principles.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks and enhance performance. The
investment objective, policies, program, risk factors, and following practices
of the fund are described more fully in the fund's Prospectus and Statement of
Additional Information.
A) Emerging Markets - At June 30, 1995, the fund held investments in securities
of companies located in emerging markets. Future economic or political
developments could adversely affect the liquidity or value, or both, of such
securities.
B) Other - Purchases and sales of portfolio securities, other than short-term
securities, aggregated $11,883,000 and $1,279,000, respectively, for the six
months ended June 30, 1995.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income. The fund has unused realized capital loss carryforwards for
federal income tax purposes of $1,000, which expire in 2002. The fund intends
to retain gains realized in future periods that may be offset by available
capital loss carryforwards.
At June 30, 1995, the aggregate cost of investments for federal income tax
and financial reporting purposes was $19,192,000 and net unrealized gain
aggregated $371,000, of which $1,123,000 related to appreciated investments and
$752,000 to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The fund is managed by Rowe Price-Fleming International, Inc. (the Manager),
which is owned by T. Rowe Price Associates, Inc., Robert Fleming Holdings
Limited, and Jardine Fleming Holdings Limited under a joint venture agreement.
The investment management and administrative agreement between the fund and
the Manager provides for an all-inclusive annual fee, computed daily and paid
monthly, equal to 1.05% of the fund's average daily net assets. Pursuant to
the agreement, investment management, shareholder servicing, transfer agency,
accounting and custody services are provided to the fund and interest, taxes,
brokerage commissions and extraordinary expenses are paid directly by the fund.
During the six months ended June 30, 1995, the fund, in the ordinary course
of business, paid commissions of $2,000 to, and placed security purchase and
sale orders aggregating $524,000 with, certain affiliates of the Manager in
connection with the execution of various portfolio transactions.
11
<PAGE>
FINANCIAL HIGHLIGHTS
T. Rowe Price International Stock Portfolio (Unaudited)
<TABLE>
<CAPTION>
For a share outstanding throughout each period
----------------------------------------------
From March 31, 1994
Six Months (Commencement of
Ended Operations) to
June 30, 1995 December 31, 1994
------------ -----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . $10.18 $ 10.00
------ -------
Investment Activities
Net investment income . . . . . . . . . . . . . . . . . . 0.09 0.06
Net realized and unrealized gain (loss) . . . . . . . . . 0.30 0.12*
------ ------
Total from Investment Activities . . . . . . . . . . . . 0.39 0.18
------ ------
DISTRIBUTIONS
Net Investment Income . . . . . . . . . . . . . . . . . . (0.05) --
----- ------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . $10.52 $ 10.18
====== =======
======================================================================================================
RATIOS/SUPPLEMENTAL DATA
Total Return . . . . . . . . . . . . . . . . . . . . . . . . 3.9% 1.8%
Ratio of Expenses to Average Net Assets . . . . . . . . . . . 1.05%+ 1.05%+
Ratio of Net Investment Income to Average Net Assets . . . . 2.44%+ 1.50%+
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . 21.8%+ 4.6%+
Net Assets, End of Period (in thousands) . . . . . . . . . . $20,019 $9,095
======================================================================================================
</TABLE>
+ Annualized.
* The amount presented is calculated pursuant to a methodology prescribed by
the Securities and Exchange Commission for a share outstanding throughout the
period. This amount is inconsistent with the Fund's aggregate gains and losses
because of the timing of sales and redemptions of Fund's shares in relation to
fluctuating market values for the investment portfolio.
12
<PAGE>
ISP CHART DESCRIPTION 2
[Edgar description: insert geographic diversification pie chart showing Europe
49%, Japan 22%, Far East 9%, Latin America 4%, Other and Reserves 16%]
13
<PAGE>
[LOGO OF DREYFUS]
DREYFUS VARIABLE
INVESTMENT FUND
200 Park Avenue
New York, NY 10166
INVESTMENT ADVISER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
SUB-INVESTMENT ADVISER
Comstock Partners, Inc.
10 Exchange Place
Jersey City, NJ 07302
SUB-INVESTMENT ADVISER
Fayez Sarofim & Co.
Two Houston Center,
Suite 2907
Houston, TX 77010
SUB-INVESTMENT ADVISER
M & G Investment Management Limited
Three Quays Tower Hill,
London, EC3R 6BQ, England
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
The Shareholder Services Group, Inc.
P.O. Box 9671
Providence, RI 02940
Further information is contained in the Prospectus,
which must precede or accompany this report.
Printed in U.S.A. VIFSA956
[LOGO] DREYFUS
Variable
Investment Fund
Semi-Annual
Report
June 30, 1995
[ART]
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Money Market Portfolio................................. 5 - 7
Managed Assets Portfolio............................... 8 - 14
Zero Coupon 2000 Portfolio............................. 15 - 17
Quality Bond Portfolio................................. 18 - 20
Small Cap Portfolio.................................... 21 - 25
Capital Appreciation Portfolio......................... 26 - 30
Growth and Income Portfolio............................ 31 - 34
International Equity Portfolio......................... 35 - 39
Financial Statements................................... 40 - 62
Report of Independent Accountants...................... 63
</TABLE>
3
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Money Market Portfolio
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
The past six months have seen a slow decline in the rate of economic
activity. This has been accompanied, inevitably, by declining interest rates.
In this environment, we are pleased that the Money Market Portfolio of
the Dreyfus Variable Investment Fund has maintained what we believe is a
highly competitive yield. For the half-year ended June 30, 1995, the
Portfolio produced an annualized yield of 5.71%. The annualized effective
yield was 5.86% after taking into account the effect of compounding.* The
Portfolio's yield does not reflect the deduction of additional charges
imposed in connection with investing in variable annuity contracts and variable
life insurance policies.
In managing your assets, we achieved the yield level by lengthening
maturities gradually during the six-month period. This was done in
anticipation of lower interest rates, which became more and more likely as
the economy gave continued signs of slowing down.
The Federal Reserve Board, which raised interest rates seven times during
1994 and early 1995 to head off inflation, became concerned that the drop in
economic performance might turn into an actual business recession.
Accordingly, in early July the Federal Reserve reversed course and made a
modest cut in the Federal Funds rate.
As this letter is written, the economy has distinctly cooled off from the
frothy activity that prevailed last year. Thus, one could say that the Fed's
policies have been successful. Inflation has been held at bay and few
observers believe that the "soft landing" will turn into a full-blown
economic recession.
However, the Federal Reserve showed laudable caution in the July
reduction of short-term rates. If more of that medicine is needed, we feel
that the Fed will not hesitate to act accordingly. Nonetheless, the central
bank must be ever watchful lest rate-cutting bring on the recurrence of
inflation which the Fed has so strenuously sought to avoid.
In our opinion, the money market has already discounted the possibility
of further Fed moves to lower interest rates. To a certain extent, that is
already built into current market prices. Our strategy under these
circumstances is to remain in the long end of the market as long as
necessary, in an effort to maintain the best possible level of yields.
We appreciate the opportunity to put your cash to work in the money
market, and will continue to exert our best efforts to attempt to obtain
competitive returns on your behalf.
Sincerely,
/s/ Patricia A. Larkin
Patricia A. Larkin
Portfolio Manager
July 12, 1995
New York, N.Y.
* Annualized effective yield is based upon dividends declared daily and
reinvested monthly.
5
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Money Market Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30,1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
NEGOTIABLE BANK CERTIFICATES OF DEPOSIT-20.7% AMOUNT VALUE
----------- -----------
<S> <C> <C>
Bank of Tokyo, Ltd.(Yankee)
6.00%, 7/17/95.......................................................... $ 1,500,000 $ 1,500,000
Commerzbank Ag (Yankee)
6.41%, 12/4/95.......................................................... 1,000,000 999,861
Fuji Bank Ltd. (Yankee)
6.04%, 8/11/95.......................................................... 1,500,000 1,500,000
Sanwa Bank Ltd. (Yankee)
6.04%, 7/18/95.......................................................... 1,000,000 1,000,009
Sumitomo Bank Ltd. (London)
6.06%, 7/3/95........................................................... 1,000,000 1,000,000
Swedbank (Yankee)
5.92%, 7/5/95........................................................... 1,500,000 1,500,000
-----------
TOTAL NEGOTIABLE BANK CERTIFICATES OF DEPOSIT
(cost $ 7,499,870 )..................................................... $ 7,499,870
===========
BANKERS' ACCEPTANCES-2.7%
Dai-Ichi Kangyo Bank Ltd. (Yankee)
6.01%, 7/25/95
(cost $996,027)......................................................... $ 1,000,000 $ 996,027
===========
COMMERCIAL PAPER-61.5%
AT&T Corp.
5.90%, 9/14/95.......................................................... $ 1,400,000 $ 1,383,025
Abbey National North America
5.92%, 9/15/95.......................................................... 1,700,000 1,679,041
Budget Funding Corp.
6.04%, 8/7/95........................................................... 1,500,000 1,490,827
Chrysler Financial Corp.
6.04%, 8/29/95.......................................................... 1,500,000 1,485,373
Ciesco L.P.
5.84%-6.23%, 11/8/95-1/18/96............................................ 1,700,000 1,656,143
Corporate Asset Funding Co.Inc.
6.41%, 12/27/95......................................................... 1,500,000 1,454,318
Den Danske Corp. Inc.
6.22%, 10/30/95......................................................... 1,000,000 979,733
Ford Motor Credit Co.
5.99%-6.33%, 7/14/95-1/9/96............................................. 1,700,000 1,666,229
General Electric Capital Corp.
6.03%, 8/31/95.......................................................... 1,000,000 989,952
</TABLE>
6
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Money Market Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30,1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
COMMERCIAL PAPER (CONTINUED) AMOUNT VALUE
------------ -----------
<S> <C> <C>
General Electric Capital Services Inc.
6.02%, 8/31/95.......................................................... $ 1,000,000 $ 989,968
General Motors Acceptance Corp.
6.29%-6.43%, 10/10/95-10/31/95.......................................... 1,600,000 1,570,118
Lehman Brothers Holdings Inc.
6.04%, 8/2/95........................................................... 1,000,000 994,693
Merrill Lynch & Co. Inc.
6.28%, 7/11/95.......................................................... 1,000,000 998,292
Mitsubishi Motors Credit of America Inc.
6.16%, 7/25/95.......................................................(a) 1,000,000 995,953
Morgan Stanley Group Inc.
6.00%, 7/25/95 ......................................................... 1,500,000 1,494,060
NYNEX Corp.
6.19%, 9/5/95........................................................... 1,000,000 988,890
Spintab AB
6.20%, 9/13/95.......................................................... 1,500,000 1,481,346
-----------
TOTAL COMMERCIAL PAPER (cost $22,297,961)................................... $22,297,961
===========
CORPORATE NOTES-8.3%
Bear Stearns Companies Inc.
5.64%, 8/25/95.......................................................(b) $ 1,000,000 $ 1,000,000
General Electric Capital Corp.
6.35%, 2/9/96........................................................(b) 500,000 500,000
Westdeutsche Landesbank Girozentrale
5.94%, 12/13/95 ........................................................ 1,500,000 1,506,994
-----------
TOTAL CORPORATE NOTES (cost $3,006,994)..................................... $ 3,006,994
===========
U.S. GOVERNMENT AGENCIES-6.7%
Federal Home Loan Mortgage Corp., Discount Notes
6.10%, 7/3/95
(cost $2,449,170)....................................................... $ 2,450,000 $ 2,449,170
===========
TOTAL INVESTMENTS (cost $36,250,022)........................................ 99.9% $36,250,022
===== ===========
CASH AND RECEIVABLES (NET).................................................. .1% $ 31,116
===== ===========
NET ASSETS ............................................................... 100.0% $36,281,138
===== ===========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Backed by an irrevocable letter of credit.
(b) Variable interest rate-subject to periodic change.
See independent accountants' review report and notes to financial statements.
7
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Managed Assets Portfolio
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
Over the past six months, the Dreyfus Variable Investment Fund, Managed
Assets Portfolio has been positioned to generally benefit from market
declines, interest rate increases, stronger gold share prices and a weakening
dollar. As the year unfolded, each of these areas experienced a great deal of
volatility, and each had a differing effect on total return.
As our investment posture indicates, we believe that at some point the
market will adjust to correct what we regard as highly inflated current
values.
The latest fiscal half-year, however, was not the time period for such an
adjustment. For the six months ended June 30, 1995, shares of your Portfolio
posted a total return of -.81%,* while the Standard & Poor's 500 Composite
Stock Price Index provided a total return of 20.19%.** The Portfolio's
performance does not reflect the deduction of additional charges imposed in
connection with investing in variable annuity contracts and variable life
insurance policies.
The primary factor leading to the Portfolio's disappointing performance
was the significant rise in the general stock market, particularly since the
beginning of 1995, which caused the Portfolio's stock index put options to
decline in value. The remainder of the holdings, consisting primarily of
foreign government bonds, gold shares and U.S. Treasuries, produced positive
returns.
At the beginning of 1995, the Portfolio held a gold share position of
approximately 19% of its total assets which we increased to 25% early in the
year. This position appreciated, and we have subsequently used its strength
to reduce the exposure to gold. While we feel that a core position in gold is
warranted, because of our longer-term concerns about financial assets and the
economy, we may from time to time take advantage of short-term volatility in
gold shares to enhance total return.
The Portfolio continues to own S&P 500 put options that would benefit
from a decline in the stock market, which has recently entered uncharted
valuations by reaching an all-time low dividend yield of 2.5%. While this
valuation parameter has been greatly debated, we feel that the rationale that
"it is different this time" will prove to be as inaccurate today as it was at
earlier speculative market peaks in farmland, oil, real estate and Japanese
stocks. We believe that the currently huge inflow, via mutual funds, into
equities priced at record high market valuations represents the greatest risk
to the equity markets. Over 75% of the money invested in equity mutual funds
during the past 70 years has entered the market over the last five years. A
significant market decline could stop and then reverse this flow, and the
resulting market illiquidity could have tumultuous consequences.
For similar reasons, the Portfolio has shorted the Hang Seng Index to an
amount equal to 1% of assets. Our analysis indicates that the Hong Kong stock
market is overvalued due to the euphoria surrounding China's entry into the
world's economy, the attractions of the Hong Kong real estate market and
lower U.S. interest rates. If any or all of these supports were to weaken or
disappear, the overvaluation might correct itself to the Portfolio's benefit.
There now appear to be a number of fixed income securities around the
globe that offer total return opportunities with what we consider an
acceptable level of risk. We have acquired a 2% position in the Brady bonds
issued by Venezuela and Argentina. In addition, the Portfolio continues to
hold a position in
8
<PAGE>
South African bonds, which we believe should benefit from a rise in the price of
gold and increased foreign investment following the transition from apartheid.
The market for mortgage interest-only ("IO") securities has recently
suffered a sharp decline as mortgage prepayment rates have accelerated due to
the recent drop in rates, presenting what we feel is a buying opportunity.
For this reason, the Portfolio has again acquired IOs amounting to 1% of the
total holdings at this time.
In summary, we believe the Portfolio is positioned to realize capital
gains if gold shares rise, the U.S. and/or Hong Kong stock markets decline,
and a number of special situations throughout the global capital markets,
such as Brady bonds, IOs and South African bonds, appreciate.
Comstock's investment style is longer-term in nature. In fact, we
sometimes cite century-long charts to illustrate a point. We feel that our
style should bring our clients out ahead in the long run, after the markets
have completed a full cycle. At the moment, the main tenets of our strategy,
designed to prosper during a projected down cycle, have yet to bear fruit.
While the markets have generally been rising for 21 years, we feel that a
down cycle must eventually occur. Investors should remember that someone who
invested $10,000 in the stocks which comprised the Dow Jones Industrials back
in 1966 would have had to wait over 20 years, until June 1986, to garner
total returns equivalent to those of U.S. Treasury Bills over the same
period. In addition, the stock market took over 25 years to return to the
price levels seen before the 1929 crash. We see many similarities in today's
markets to those preceding the bear markets of 1929, the late 1960s and the
early 1970s, causing us to maintain our cautious stance toward financial
assets, especially for annuity investors with a longer-term horizon.
Sincerely,
Comstock Partners, Inc.
Investment Policy Committee
July 14, 1995
Jersey City, N.J.
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
**Source: Lipper Analytical Services, Inc. - Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The S&P
500 Index is a widely accepted, unmanaged index of domestic stock market
performance.
9
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Managed Assets Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS-35.0% SHARES VALUE
------------------- -------- -----------
<S> <C> <C> <C>
AGRICULTURE-1.5% IMC Global ...................................... 8,400 $ 454,650
-----------
BROADCASTING-.4% Tele-Communications, Cl. A....................(a) 5,000 117,188
-----------
CHEMICALS-.5% P.T. Tri Polyta Indonesia, A.D.R................. 8,000 139,000
-----------
CONGLOMERATES-.7% Teledyne......................................... 8,000 196,000
-----------
CONSUMER
GROWTH STAPLES-.6% Paragon Trade Brands..........................(a) 12,000 172,500
-----------
CONSUMER STAPLES-.1% Kimberly-Clark de Mexico, S.A., Ser. A ......... 3,500 40,144
-----------
ENERGY-.5% Baker Hughes.................................... 7,500 153,750
-----------
FINANCE-.3% Pioneer Group................................... 2,800 75,250
-----------
FOODS & BEVERAGES-.3% Dole Food....................................... 3,400 99,025
-----------
GOLD MINING- 24.0% Amax Gold....................................(a) 43,000 236,500
Ashanti Goldfields, G.D.R. ..................(b) 21,000 472,500
Barrick Gold.................................... 5,200 131,300
Battle Mountain Gold............................ 32,000 308,000
Bema Gold....................................(a) 87,000 174,000
Buffelsfontein Gold Mining, A.D.R. ............. 13,000 81,250
Canyon Resources.............................(a) 68,000 153,000
Crystallex International.....................(a) 16,000 34,740
Dakota Mining................................(a) 25,000 43,750
Driefontein Consolidated, A.D.R. ............... 6,300 87,216
Echo Bay Mines.................................. 3,000 27,000
El Callao Mining.............................(a) 8,000 5,537
Free State Consolidated Gold Mines, A.D.R....... 4,800 59,400
Goldcorp, Cl. A................................. 29,040 335,891
Greenstone Resources.........................(a) 58,200 131,454
Herald Resources................................ 90,200 62,121
Homestake Mining................................ 34,700 572,550
International Gold Resources.................(a) 80,000 279,781
Kloof Gold Mining, A.D.R. ...................... 6,300 68,512
MK Gold......................................(a) 99,000 346,500
Menzies Gold.................................(a) 250,000 115,375
Newmont Mining.................................. 14,871 622,723
Pegasus Gold.................................(a) 37,500 379,688
Placer Dome..................................... 21,400 559,075
Prime Resource Group.........................(a) 26,000 179,964
Randfontein Estates Gold Mining, A.D.R.......... 7,200 48,033
Rio Amarillo Mining........................(a,b) 80,000 26,812
Royal Oak Mines..............................(a) 33,000 103,125
Santa Fe Pacific Gold........................... 60,000 727,500
Southwestern Gold............................(a) 25,000 195,811
TVX Gold.....................................(a) 59,200 427,591
Vaal Reefs Exploration & Mining, A.D.R.......... 7,500 46,406
</TABLE>
10
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Managed Assets Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED) SHARES VALUE
------ -----
<S> <C> <C> <C>
GOLD MINING (CONTINUED) Vengold..................................(a) 82,000 $ 130,909
-----------
7,174,014
-----------
HEALTH CARE-.4% Tenet Healthcare.........................(a) 8,500 122,187
-----------
HOLDING COMPANIES-.8% Horsham..................................... 18,000 243,000
-----------
INDUSTRIAL-1.0% Anglovaal................................... 5,000 178,817
ISCOR....................................... 103,400 117,480
Johnnies Industrial ........................ 1,400 14,732
-----------
311,029
-----------
METALS-.3% Freeport McMoRan Copper & Gold, Cl. A. ..... 3,800 78,375
-----------
MINING-1.4% Anglo American Platinum, A.D.R. .........(a) 1,400 10,014
Eldorado (Warrants)....................(a,b) 57,000 249,180
JCI, A.D.R. .............................(a) 1,400 9,629
Triton Mining (Warrants)...............(a,b) 40,000 135,519
-----------
404,342
-----------
PLATINUM-.9% Impala Platinum Holdings, A.D.R. ........... 11,000 278,404
-----------
RETAIL TRADE-1.3% Hartmarx.................................(a) 43,000 215,000
K mart...................................... 11,000 160,875
-----------
375,875
-----------
TOTAL COMMON STOCKS
(cost $9,989,350)......................... $10,434,733
===========
PREFERRED STOCKS-0.8%
METALS: Freeport McMoRan Copper & Gold, Cl. A,
(cost $291,563)........................... 7,500 $ 250,313
===========
<CAPTION>
CONTRACTS
SUBJECT
PUT OPTIONS-2.1% TO PUT
---------
<S> <C> <C>
Brokerage Basket:
November '95 @ $95.................(m) 21,930 $ 0
Standard & Poor's 500 Index Flex Options:
September '95 @ $450................. 4,500 3,656
December '95 @ $450.................. 11,000 24,062
Standard & Poor's 500 Index:
September '95 @ $450................. 12,000 4,500
September '95 @ $475................. 3,300 2,578
September '95 @ $485................. 3,300 3,713
September '95 @ $550................. 3,500 38,500
December '95 @ $375.................. 3,300 1,031
December '95 @ $400.................. 3,300 1,856
December '95 @ $450.................. 4,000 6,000
December '95 @ $475.................. 3,300 8,663
</TABLE>
11
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Managed Assets Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
CONTRACTS
SUBJECT
PUT OPTIONS (CONTINUED) TO PUT VALUE
---------- ----------
<S> <C> <C>
Standard & Poor's 500 Index (continued):
December '95 @ $485................... 2,200 $ 8,113
December '95 @ $550................... 3,500 55,125
March '96 @ $453...................(m) 4,547 5,274
March '96 @ $500...................... 7,500 60,000
March '96 @ $525...................... 7,000 91,875
June '96 @ $450....................... 1,600 8,200
June '96 @ $475....................... 7,600 55,100
June '96 @ $500....................... 5,000 55,625
<CAPTION>
PRINCIPAL
AMOUNT
SUBJECT
TO PUT
------------
<S> <C> <C>
Japanese Government Bond:
4.60%, 9/20/2004:
May '96 @ $1.288.............(c,d,m) $ 2,416,870 81,690
June '96 @ $1.343............(c,d,m) 1,045,750 78,640
U.S. Treasury Bond;
7.625%, 2/15/2025;
April '96 @ $103.078.............(m) 1,950,000 15,893
----------
TOTAL PUT OPTIONS
(cost $1,906,394)..................... $ 610,094
==========
<CAPTION>
PRINCIPAL
BONDS AND NOTES-24.9% AMOUNT
------------
<S> <C> <C> <C>
BONDS-24.1% Argentinian Securities;
Republic of Argentina,
5.00%, 3/31/2023.............(e,f,g) $ 250,000 $ 119,375
Austrian Securities;
Republic of Austria,
4.50%, 2/12/2000.................(h) 3,918,154 3,979,865
German Securities;
Bundesrepublik Deutschland,
9%, 10/20/2000...................(i) 1,809,627 2,005,248
South African Securities;
Eskom,
11%, 6/1/2008....................(j) 990,371 695,538
Venezuelan Securities;
Republic of Venezuela,
6.75%, 3/31/2020...............(e,f) 750,000 378,750
-----------
7,178,776
-----------
</TABLE>
12
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Managed Assets Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
BONDS AND NOTES (CONTINUED) AMOUNT VALUE
------------- -----------
<S> <C> <C>
NOTES-.8% Federal National Mortgage Association,
Non-Callable Strips, (collateralized by
FNMA Strip, 10/1/2024) Cl.sp 267-2,
8.50%, 10/25/2024 (Interest Only Obligation) $ 1,050,000(k) $ 250,214
-----------
TOTAL BONDS AND NOTES
(cost $6,665,735)........................... 7,428,990
===========
SHORT-TERM INVESTMENTS-34.3%
U.S. TREASURY BILLS: 5.61%, 7/6/95................................. $ 8,894,000 $ 8,887,507
5.57%, 7/20/95................................ 102,000 101,723
5.56%, 7/27/95................................ 657,000 654,536
5.61%, 8/3/95..............................(l) 502,000 499,590
5.32%, 8/17/95................................ 101,000 100,285
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $10,242,844).......................... $10,243,641
===========
TOTAL INVESTMENTS (cost $29,095,886)............................................... 97.1% $28,967,771
====== ===========
CASH AND RECEIVABLES (NET)......................................................... 2.9% $ 873,525
====== ===========
NET ASSETS......................................................................... 100.0% $29,841,296
====== ===========
</TABLE>
13
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Managed Assets Portfolio
--------------------------------------------------------------------------------
NOTES TO STATEMENT OF INVESTMENTS:
----------------------------------
(a) Non-income producing.
(b) Securities 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 June 30,
1995, these securities amounted to $884,011 or 3.0% of net assets.
(c) Strike price converted to U.S. Dollars at the prevailing rate of
exchange.
(d) Denominated in Japanese Yen.
(e) Denominated in U.S. Dollars.
(f) Secured by U.S. Treasury securities.
(g) Scheduled variable interest rate.
(h) Denominated in Swiss Francs.
(i) Denominated in German Marks.
(j) Denominated in South African Rand.
(k) Notional face amount.
(l) Partially held by the custodian in a segregated account as
collateral for open financial futures positions.
(m) Securities restricted as to public resale. Investments in restricted
securities, with an aggregate market value of $181,497, represent
approximately .6% of net assets:
<TABLE>
<CAPTION>
ACQUISITION PURCHASE PERCENTAGE OF
PUT OPTIONS: DATE PRICE NET ASSETS VALUATION*
------------ ------------ ---------- ------------- ----------
<S> <C> <C> <C> <C>
Brokerage Basket**
November '95 at $95 ....................... 11/11/94 $5.70 0.00 fair value
Japanese Government Bond:
4.60%, 9/20/2004, May '96 at 1.288....(c,d) 5/16/95 $.07 0.27 fair value
4.60%, 9/20/2004, June '96 at 1.343...(c,d) 6/21/95 $.08 0.26 fair value
Standard & Poor's 500 Index
March '96 at $453 ......................... 12/14/94 $21.99 0.02 fair value
U.S. Treasury Bond;
7.625%, 2/15/2025, April '96 at $103.078... 4/12/95 $4.72 0.05 fair value
</TABLE>
*The valuation of these securities has been determined in good faith
under the direction of the Board of Directors.
**Consists of Common Stocks of six publicly traded brokerage firms.
STATEMENT OF FINANCIAL FUTURES JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET VALUE UNREALIZED
NUMBER OF COVERED (DEPRECIATION)
FINANCIAL FUTURES SOLD SHORT: CONTRACTS BY CONTRACTS EXPIRATION AT 6/30/95
------------ -------------- ------------- --------------
<S> <C> <C> <C> <C>
ISSUER
Hang Seng.................................... 5 $ (298,850) July '95 $ (323)
Standard & Poor's 500........................ 6 $(1,641,450) September '95 (1,850)
----------
$ (2,173)
==========
</TABLE>
See independent accountants' review report and notes to financial statements.
14
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Zero Coupon 2000 Portfolio
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
As of June 30, 1995, the net asset value of the Dreyfus Variable
Investment Fund - Zero Coupon 2000 Portfolio was $12.44 per share. For the
six-month period ended June 30, 1995, the total return of the Portfolio was
11.88%,* compared with 11.871% for the Merrill Lynch U.S. Treasury Coupon
5-Year Strips Index.** Dividends declared from net investment income amounted
to $.343 per share, which represents an annualized distribution rate of 5.56%
per share based on the closing net asset value. The Portfolio's performance
does not reflect the deduction of additional charges imposed in connection
with investing in variable annuity contracts and variable life insurance
policies.
The calendar year 1994 was one of the worst for the bond market in nearly
70 years. So 1995 has been a welcome relief. Since the beginning of the year
the bond market has rallied substantially. The bond markets rallied right
through the Federal Reserve Board's last tightening in February when the
Federal Funds rate was raised by 50 basis points. The market continued to
rally when the Federal Reserve then loosened the Federal Funds rate in July
by 25 basis points. After seven corrective tightening moves totaling 300
basis points, the Fed has finally started to loosen credit.
With a fund structured primarily with zero coupon securities with a final
maturity date of 2000, the best method of managing the fund is to lengthen or
shorten the fund's duration in anticipation of interest rate moves. We are
currently structured at the longer end of our duration parameters and will
probably remain there over the near term. The Portfolio has received a 5-Star
overall rating from Morningstar, Inc. out of 219 portfolios in the Fixed
Income category.***
We are hopeful that our strategy will result in continued good
performance by the Portfolio. Of course, as economic or market conditions
dictate, the portfolio may be restructured accordingly.
Sincerely,
/s/ Garitt A. Kono
Garitt A. Kono
Portfolio Manager
July 31, 1995
New York, N.Y.
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
** Source: Merrill Lynch Pierce, Fenner and Smith, Inc. - Unlike the
Portfolio, the Merrill Lynch U.S. Treasury Coupon 5-Year Strips Index is an
unmanaged index.
***Source: Morningstar, Inc. - Morningstar proprietary ratings reflect
historical risk-adjusted performance as of June 30, 1995. The ratings are
subject to change every month. Past performance is no guarantee of future
results. Morningstar ratings are calculated from the portfolio's three-year
average annual returns with appropriate fee adjustments and a risk factor
that reflects portfolio performance relative to three-month Treasury bill
monthly returns. Ten percent of the portfolios in an investment category
receive five stars.
15
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Zero Coupon 2000 Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
BONDS AND NOTES-87.2% AMOUNT VALUE
-------------- ------------
<S> <C> <C> <C>
BANKING-2.3% CoreStates Capital,
Sub. Notes, 9 5/8%, 2001...................... $ 200,000 $ 225,659
J.P. Morgan and Co.,
Sub. Notes, Zero Coupon, 1998................. 160,000 134,953
-----------
360,612
-----------
CONSUMER-1.0% News America Holdings (Gtd. by News),
Sr. Notes, 7 1/2%, 2000....................... 150,000 153,200
-----------
INDUSTRIAL-3.2% USX
Deb., 9 1/8%, 2013............................ 450,000 494,757
-----------
INSURANCE-.9% SunAmerica,
Notes, 9%, 1999............................... 130,000 139,268
-----------
FOREIGN-.5% Kingdom of Sweden,
Bonds, Ser. A, Zero Coupon, 1997.............. 40,000 36,050
Montreal Urban Community,
Deb., 9 1/8%, 2001............................ 40,000 44,447
-----------
80,497
-----------
OTHER-10.7% FICO Coupon Strips:
Ser. 17, Zero Coupon, 4/5/2000................ 500,000 373,970
Ser. 3, Zero Coupon, 5/30/2000................ 1,000,000 744,780
Zero Coupon, 10/6/2000........................ 478,000 345,726
Ser. 1, Zero Coupon, 11/11/2000............... 150,000 107,837
Ser. 10, Zero Coupon, 11/30/2000.............. 152,000 108,885
-----------
1,681,198
-----------
U.S. GOVERNMENT
AND AGENCIES-68.6% Chattanooga Valley,
Secured First Mortgage, Zero Coupon, 1/1/2000. 176,000 132,427
Federal National Mortgage Association,
Callable Principal Strips, Ser. 1:
Zero Coupon, 8/21/1996...................(a) 145,000 134,258
Zero Coupon, 10/10/2001 400,000 369,761
Resolution Funding, Coupon Strips:
Ser. A, Zero Coupon, 7/15/1999................ 1,500,000 1,179,024
Zero Coupon, 7/15/2000........................ 260,000 192,864
Zero Coupon, 10/15/2000....................... 2,830,000 2,065,391
U.S. Treasury Coupon Receipts,
Zero Coupon, 11/15/2000....................... 430,355 312,212
U.S. Treasury Notes,
7 3/4%, 12/31/1999............................ 1,000,000 1,067,969
</TABLE>
16
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Zero Coupon 2000 Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
BONDS AND NOTES (CONTINUED) AMOUNT VALUE
------------ -----------
<S> <C> <C> <C>
U.S. GOVERNMENT
AND AGENCIES (CONTINUED) U.S. Treasury Principal Strips:
Zero Coupon, 8/15/2000............... 500,000 369,077
Zero Coupon, 11/15/2000.............. 6,750,000 4,908,485
-----------
10,731,468
-----------
TOTAL BONDS AND NOTES
(cost $13,255,647)................... $13,641,000
===========
SHORT-TERM INVESTMENT-10.9%
AGENCY DISCOUNT NOTE: Federal Home Loan Mortgage Corp.,
6.10%, 7/3/1995
(cost $1,704,422).................... $ 1,705,000 $ 1,704,422
===========
TOTAL INVESTMENTS (cost $14,960,069)........................................ 98.1% $15,345,422
====== ===========
CASH AND RECEIVABLES (NET).................................................. 1.9% $ 297,549
====== ===========
NET ASSETS.................................................................. 100.0% $15,642,971
====== ===========
</TABLE>
NOTE TO STATEMENT OF INVESTMENTS:
---------------------------------
(a) Zero coupon until 8/21/1996, date on which a stated coupon rate of 8.40%
becomes effective; the stated maturity date is 2001.
See independant accountants' review report and notes to financial statements.
17
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Quality Bond Portfolio
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
As of June 30, 1995 the net asset value of the Dreyfus Variable
Investment Fund - Quality Bond Portfolio was $11.58. For the six-month period
ended June 30, 1995, the total return of the Portfolio was 13.01%,* compared
to 12.863% for the Merrill Lynch All Maturities A Rated Index.** Dividends
declared from net investment income amounted to $.355 per share, representing
an annualized distribution rate of 6.18% per share, based on the closing net
asset value. The Portfolio's performance does not reflect the deduction of
additional charges imposed in connection with investing in variable annuity
contracts and variable life insurance policies.
The calendar year 1994 was one of the worst for the bond market in nearly
70 years. So 1995 has been a welcome relief. Since the beginning of the year
the bond markets have rallied substantially. The bond markets rallied right
through the Federal Reserve Board's last tightening in February when the
Federal Funds rate was raised by 50 basis points. The market continued to
rally when the Federal Reserve then loosened the Federal Funds rate in July
by 25 basis points. After seven corrective tightening moves totalling 300
basis points the Fed has finally started to loosen credit.
The main reason for the superior performance during this period was the
fact that our durations were about a year longer than those of the Index. In
an environment where rates are falling, longer duration portfolios often
produce better total returns than portfolios with shorter durations. This
Portfolio has received a 5-Star overall rating from Morningstar, Inc. out of
219 portfolios in the Fixed Income category.***
We made a few minor changes in the Portfolio such as selling our holdings
of USF&G 8 3/8% due 2001, as the security was purchased as a candidate for
upgrading which did not occur. We sold a very small position in Rite Aid 6
7/8% due 2013 for the purpose of improving quality, increasing the coupon
rate and strengthening the size of the position from $100,000 to $1,000,000.
Our last sale was US Steel 9 1/8% due 2013 as the security was not performing
more positively in a falling rate environment.
Our purchases included $1,000,000 Carter Holt Harvey 7 5/8% due 2002,
which has since been upgraded, $1,000,000 Household Finance Corporation 6
3/4% due 2000, $1,000,000 Manufacturers and Traders Trust 7% due 2005 and
$1,500,000 Nabisco 6.85% due 2005. These purchases were made with the
anticipation of potential upgrades and potentially better performance than
the securities sold.
We are hopeful that these strategies will result in higher yields for the
Portfolio along with consistent returns. Of course, as economic or market
conditions dictate, the portfolio may be restructured accordingly.
Sincerely,
/s/ Garitt A. Kono
Garitt A. Kono
Portfolio Manager
July 31, 1995
New York, N.Y.
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
** Source: Merrill Lynch, Pierce, Fenner and Smith, Inc. - Unlike the
Portfolio, the Merrill Lynch All Maturities A Rated Index is an unmanaged
index.
*** Source: Morningstar, Inc. - Morningstar proprietary ratings reflect
historical risk-adjusted performance as of June 30, 1995. The ratings are
subject to change every month. Past performance is no guarantee of future
results. Morningstar ratings are calculated from the portfolio's three-
year average annual returns with appropriate fee adjustments and a risk
factor that reflects portfolio performance relative to three-month
Treasury bill monthly returns. Ten percent of the portfolios in an
investment category receive five stars.
18
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Quality Bond Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
BONDS AND NOTES-73.9% AMOUNT VALUE
------------- ------------
<S> <C> <C> <C>
AEROSPACE-1.9% Boeing,
Deb., 7 1/4%, 2025................... $ 200,000 $ 195,438
McDonnell Douglas,
Notes, 8 1/4%, 2000.................. 200,000 213,883
-----------
409,321
-----------
BANKING-5.9% First Chicago, Sub. Notes:
8 1/4%, 2002......................... 15,000 16,076
6 7/8%, 2003......................... 100,000 99,389
Manufacturers and Traders Trust,
Sub. Notes, 7%, 2005................. 1,000,000 995,000
NationsBank,
Sub. Notes, 6 1/2%, 2003............. 175,000 169,615
-----------
1,280,080
CONSUMER-7.9% Nabisco,
Notes, 6.85%, 2005................... 1,500,000 1,470,614
News America Holdings (Gtd. by News):
Sr. Deb., 8 1/4%, 2018............... 100,000 103,330
Sr. Notes, 9 1/8%, 1999.............. 25,000 27,038
Time Warner,
Deb., 9.15%, 2023.................... 125,000 131,785
-----------
1,732,767
-----------
FINANCE-9.8% Ford Motor Credit,
Notes, 7 1/2%, 2004.................. 1,000,000 1,035,867
Heller Financial,
Floating Rate Notes, 6 7/16%, 1999.(a) 100,000 100,227
Household Finance,
Notes, 6 3/4%, 2000.................. 1,000,000 1,010,854
-----------
2,146,948
-----------
INDUSTRIAL-13.7% American Brands,
Deb., 8 5/8%, 2021................... 400,000 454,876
Archer-Daniels-Midland,
Deb., 10 1/4%, 2006.................. 400,000 508,477
Carter Holt Harvey,
Sr. Notes, 7 5/8%, 2002.............. 1,000,000 1,052,939
Eastman Kodak,
Deb., 9.95%, 2018.................... 400,000 502,439
Ford Motor,
Deb., 8 7/8%, 2022................... 400,000 462,377
-----------
2,981,108
-----------
INSURANCE-.7% SunAmerica:
Deb., 9.95%, 2012.................... 13,000 15,727
Notes, 9%, 1999...................... 130,000 139,268
-----------
154,995
-----------
</TABLE>
19
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Quality Bond Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
BONDS AND NOTES (CONTINUED) AMOUNT VALUE
------------ -----------
<S> <C> <C> <C>
FOREIGN-2.3% Kingdom of Sweden,
Bonds, Ser. A, Zero Coupon, 1997.............. $ 60,000 $ 54,074
Province of Quebec,
Deb., 8.80%, 2003............................. 400,000 443,888
-----------
497,962
-----------
OTHER-.5% City of New York,
General Obligation Bonds, Ser. D, 10%, 2007 25,000 28,375
FICO Coupon Strips,
Ser. 1, Zero Coupon, 5/11/2000............... 95,000 70,979
-----------
99,354
-----------
U.S. GOVERNMENT
AND AGENCIES-31.2% Federal National Mortgage Association,
Callable Principal Strips,
Ser. 1, Zero Coupon, 8/21/1996............(b) 55,000 50,926
U.S. Treasury Bonds:
10 3/4%, 8/15/2005............................ 100,000 132,813
11 1/4%, 2/15/2015............................ 100,000 150,078
7 1/4%, 5/15/2016............................. 1,200,000 1,273,687
U.S. Treasury Notes:
7 1/4%, 8/31/1996............................. 230,000 233,738
7 3/8%, 11/15/1997............................ 1,000,000 1,032,656
8 1/2%, 11/15/2000............................ 600,000 668,156
7 1/2%, 2/15/2005............................. 3,000,000 3,267,657
-----------
6,809,711
-----------
TOTAL BONDS AND NOTES
(cost $15,676,317)............................ $16,112,246
===========
SHORT-TERM INVESTMENTS-24.1%
AGENCY DISCOUNT NOTE; Federal Home Loan Mortgage Corp.,
6.10%, 7/3/1995
(cost $5,268,214)............................. $ 5,270,000 $ 5,268,214
===========
TOTAL INVESTMENTS (cost $20,944,531) ............................................. 98.0% $21,380,460
====== ===========
CASH AND RECEIVABLES (NET)........................................................... 2.0% $ 435,981
===========
NET ASSETS........................................................................... 100.0% $21,816,441
===========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Variable rate security - interest rate subject to periodic change.
(b) Zero coupon until 8/21/96, date on which a stated coupon rate of
8.40% becomes effective; the stated maturity date is 2001.
See independent accountants' review report and notes to financial statements.
20
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Small Cap Portfolio
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
It is a pleasure to report your Dreyfus Variable Investment Fund, Small
Cap Portfolio's results for the six-month period ending June 30, 1995.*
<TABLE>
<CAPTION>
SMALL CAP RUSSELL S&P 500
YEAR-TO-DATE PORTFOLIO 2000 INDEX** INDEX**
------------- --------- ------------ -------
<S> <C> <C> <C>
12/31/94 - 6/30/95........................................... +14.87% +14.42% +20.19%
INCEPTION-TO-DATE
-----------------
8/31/90 - 6/30/95............................................ +846.25% +121.04% +94.92%
</TABLE>
The Portfolio's performance does not reflect the deduction of additional
charges imposed in connection with investing in variable annuity contracts
and variable investment policies.
The Portfolio's average annual total returns were 21.27%, 47.49% and
59.20% for the one-year, three-year, and since-inception periods ended June
30, 1995.*** We are grateful that on the basis of this record, the Portfolio
was awarded Morningstar's Five Star overall ranking out of 556 annuity
portfolios in the equity category.
During the six-month period ended June 30th, the small company universe
represented by the Russell 2000 Index broadly underperformed the large
company gains of the Standard & Poor's 500 Composite Stock Price Index. This
trend actually began in early 1994, and appears related to the strength of
economies on a global basis in 1994, primarily benefiting the large
U.S.-based multinationals whose exports were especially enhanced by the
weakened dollar.
The business of smaller companies, on the contrary, has been generally
perceived as domestic and, therefore, relatively less attractive in such an
environment. As we have mentioned in earlier reports to you, we have
purposely taken and held positions of smaller companies in capital goods,
technology and specialty materials where foreign sales have been strong and,
in a number of cases, where U.S. products actually dominate global markets.
Examples include Bush Boake Allen, in specialized flavors and fragrances;
Albany International Cl. A, in paper machinery clothing; OM Group, in cobalt
refining and metallurgy; Roper Industries, in process controls; and both Rohr
and Precision Castparts, as suppliers to Boeing.
A second important investment theme relates to the dramatic shift away
from consumer stocks. Quietly burdened by the weak local currency, spent out
during the 1980s, and demographically older and more prone to save, the
American consumer has become elusive. Conversely, after years of industrial
restructuring and benefited by the local currency, the capital goods and
technology sectors have been invigorated by a strong export market combined
with American corporate demand for productivity. Coming after 12 years of
consumer stocks' relative strength, the shift toward producer stocks appears
to be in the early stages. This has been led by the large company
performance of such companies as Intel and Microsoft, which now dominate the
NASDAQ Composite Index.
In recent months, small company technology stocks have joined the bull
market with vigor, in many cases with speculative fervor not seen since the
late 1960s. Our largest positions include Integrated Silicon Solution,
Auspex Systems and Glenayre Technologies -- all of which have moved from
relative obscurity into important global product offerings. Although we have
strong positive feelings about each company's management and corporate
prospects, the stocks of these and other technology firms have already
reached price targets we set for 1996 or beyond.
21
<PAGE>
For this reason, you may find our technology sector weighting reduced for a
while and our primary efforts aimed at increasing the consumer holdings, while
they remain out of favor.
We again thank you for your interest and loyalty.
Sincerely,
/s/ Thomas A. Frank
Thomas A. Frank
Portfolio Manager
August 14, 1995
New York, N.Y.
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
** Source: The Russell Company; Lipper Analytical Services, Inc. All
performance figures assume the reinvestment of dividends. The Russell 2000
Index and The Standard & Poor's 500 Composite Stock Price Index are widely
accepted unmanaged indices of stock market performance.
*** Past performance is no guarantee of future results. Share price and
investment return fluctuate so that a shareholder may receive more or less
than original cost upon redemption.
+ Source: Morningstar, Inc. Morningstar proprietary ratings reflect historical
risk-adjusted performance as of 6/30/95. The ratings are subject to change
every month. Past performance is no guarantee of future results. Morningstar
ratings are calculated from the portfolio's three-year average annual
returns with appropriate fee adjustments and a risk factor that reflects
portfolio performance relative to three-month Treasury bill monthly returns.
Ten percent of the portfolios in an investment category receive 5 stars.
22
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Small Cap Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS-89.1% SHARES VALUE
-------- -------------
<S> <C> <C> <C>
CONSUMER-9.9%.. Boise Cascade Office Products................. 135,000 $ 3,003,750
Bush Boake Allen...........................(a) 150,000 4,556,250
Canandaigua Wine, Cl. A....................(a) 70,000 3,132,500
Central Tractor Farm & Country.............(a) 110,000 1,182,500
Eskimo Pie................................... 95,000 1,567,500
Genovese Drug Stores, Cl. A.................. 70,000 796,250
Norton McNaughton..........................(a) 205,000 3,177,500
Sports Authority...........................(a) 205,000 4,176,875
Station Casinos............................(a) 133,000 2,294,250
Talbots...................................... 70,000 2,782,500
Thermedics.................................(a) 190,000 3,705,000
Williams-Sonoma............................(a) 150,000 3,300,000
-------------
33,674,875
-------------
ENERGY-6.7% Cairn Energy USA...........................(a) 243,000 2,673,000
Coda Energy................................(a) 350,000 2,406,250
Devon Energy................................. 100,000 2,150,000
Global Industries..........................(a) 110,000 2,447,500
Helmerich & Payne............................ 47,500 1,401,250
International Colin Energy.................(a) 190,000 997,500
Optima Petroleum...........................(a) 115,000 280,312
Parker & Parsley Petroleum................... 170,000 3,336,250
Pogo Producing............................... 175,000 4,003,125
Tide West Oil..............................(a) 190,000 2,185,000
Unit.......................................(a) 237,500 860,938
-------------
22,741,125
-------------
FINANCIAL SERVICES-17.1% Centerbank 125,000 1,812,500
City National................................ 150,000 1,706,250
Commerce Group............................... 225,000 4,021,875
Dime Bancorp...............................(a) 350,000 3,500,000
Duff & Phelps Credit Rating................(b) 300,000 3,900,000
Executive Risk............................... 170,000 3,230,000
Finova Group................................. 110,000 3,850,000
FirstFed Michigan............................ 150,000 4,200,000
Frontier Insurance Group..................... 150,000 4,031,250
Hibernia, Cl. A.............................. 475,000 4,215,625
National Re.................................. 125,000 4,187,500
Presidential Life............................ 325,000 2,681,250
Reliance Group Holdings...................... 500,000 3,250,000
Standard Federal Bancorporation.............. 135,000 4,539,375
USLIFE....................................... 100,000 4,025,000
Western National............................. 390,000 4,826,250
-------------
57,976,875
-------------
HEALTH CARE-8.4% ATS Medical................................(a) 150,000 1,275,000
ATS Medical (Warrants).....................(a) 150,000 121,875
</TABLE>
23
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Small Cap Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED) SHARES VALUE
--------- -----------
<S> <C> <C> <C>
HEALTH CARE (CONTINUED) AmeriSource Health, Cl. A ...................... 90,000 $ 2,053,125
Apogee.......................................(a) 85,000 1,593,750
Apria Healthcare Group.......................(a) 60,000 1,695,000
Circon.......................................(a) 100,000 1,950,000
CorVel.......................................(a) 130,000 2,795,000
FPA Medical Management......................... 140,000 1,400,000
Mentor......................................... 95,000 2,648,125
Scherer (R.P.)...............................(a) 90,000 3,802,500
Sofamor/Danek Group..........................(a) 100,000 2,262,500
Staff Builders...............................(a) 750,000 3,093,750
Universal Health Services, Cl. B.............(a) 135,000 3,915,000
-----------
28,605,625
-----------
MATERIALS &
PROCESSING-12.4% Albemarle....................................... 150,000 2,343,750
Cleveland-Cliffs................................ 50,000 1,925,000
Ferro........................................... 190,000 5,035,000
IMCO Recycling.................................. 112,500 2,109,375
International Specialty Products................ 250,000 2,125,000
Jacobs Engineering Group.....................(a) 110,000 2,420,000
Longview Fibre.................................. 225,000 3,825,000
Minerals Technologies........................... 160,000 5,760,000
OM Group........................................ 150,000 4,275,000
Schulman (A.)................................... 135,000 3,881,250
Sterling Chemicals...........................(a) 150,000 1,743,750
USA Waste Service............................(a) 210,000 3,255,000
Uniroyal Chemical............................... 300,000 3,412,500
-----------
42,110,625
-----------
PRODUCER DURABLES-12.4% Albany International, Cl. A .................... 150,000 3,581,250
Andros.......................................(a) 100,000 1,750,000
Applied Power, Cl. A............................ 75,000 2,165,625
Greenfield Industries........................... 50,000 1,450,000
ICC Technologies.............................(a) 130,000 1,868,750
Manitowoc....................................... 95,000 2,743,125
Precision Castparts............................. 175,000 6,146,875
Rohr.........................................(a) 350,000 5,031,250
Roper Industries................................ 90,000 3,150,000
Titan Wheel International....................... 150,000 3,862,500
Watts Industries, Cl. A......................... 135,000 3,383,438
Westinghouse Air Brake.......................... 250,000 3,562,500
Whittaker....................................(a) 150,000 3,300,000
-----------
41,995,313
-----------
TECHNOLOGY-21.6% Aspen Technology.............................(a) 75,000 1,912,500
Auspex Systems...............................(a) 390,000 4,875,000
</TABLE>
24
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Small Cap Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED) SHARES VALUE
--------- -------------
TECHNOLOGY (CONTINUED) C.P. Clare...................................... 100,000 $ 2,000,000
Cheyenne Software............................(a) 137,500 2,543,750
DSP Communications.............................. 150,000 3,112,500
Eicon Technology.............................(a) 125,000 1,331,967
Electroglas..................................(a) 25,000 1,431,250
Expert Software..............................(a) 77,500 1,433,750
Glenayre Technologies........................(a) 90,000 4,590,000
Information Storage Devices..................(a) 115,000 2,875,000
Integrated Silicon Solution..................... 150,000 7,837,500
International Rectifier......................(a) 75,000 2,437,500
Learning.....................................(a) 80,000 2,875,000
Noise Cancellation Technologies..............(a) 625,000 371,125
Paradigm Technology............................. 100,000 2,243,750
Plaintree Systems............................(b) 200,000 2,100,000
Platinum Software............................(a) 250,000 3,625,000
Renaissance Solutions........................... 135,000 1,856,250
Sierra On-Line...............................(a) 275,000 6,875,000
SoftKey International........................... 150,000 4,781,250
Software Artistry............................... 105,000 2,336,250
Spectrum Holobyte............................... 130,000 1,860,625
StrataCom....................................(a) 67,500 3,290,625
Veeco Instruments............................(a) 167,500 2,805,625
VideoServer..................................... 50,000 1,950,000
-------------
73,351,217
-------------
TRANSPORT & AUTOS-.6% U.S. Delivery Systems........................(a) 72,500 1,903,125
-------------
TOTAL COMMON STOCKS
(cost $262,310,038)........................... $302,358,780
=============
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS-9.9% AMOUNT
----------
<S> <C> <C> <C>
U.S. TREASURY BILLS: 5.56%, 7/27/95.................................. $ 260,000 $ 259,025
5.57%, 8/3/95................................... 2,747,000 2,733,814
5.34%, 8/17/95.................................. 7,455,000 7,402,219
5.45%, 8/24/95.................................. 15,823,000 15,694,992
5.53%, 8/31/95.................................. 7,554,000 7,484,730
5.39%, 9/7/95................................... 132,000 130,648
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $33,702,468)............................ $ 33,705,428
============
TOTAL INVESTMENTS (cost $296,012,506) .............................................. 99.0% $336,064,208
====== ============
CASH AND RECEIVABLES (NET) ..................................................... 1.0% $ 3,510,335
====== ============
NET ASSETS........................................................................... 100.0% $339,574,543
====== ============
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Non-income producing.
(b) Investment in non-controlled affiliates (cost $6,194,831)-see Note
2(d).
See independent accountants' review report and notes to financial statements.
25
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Capital Appreciation Portfolio
----------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
Equity markets have achieved extremely strong performance to date in
1995, driven by rising bond prices in an environment of moderating economic
growth and contained inflation. However, many broad industry groups have not
benefitted from the upward trend in equity prices. Sector emphasis and
individual issue selection have thus been critical for participation in the
advance.
The total return of the Dreyfus Variable Investment Fund, Capital
Appreciation Portfolio for the first six months of 1995 was 17.11%,* which
compared to 20.19% for the Standard & Poor's 500 Composite Stock Price
Index.** The Portfolio's performance does not reflect the deduction of
additional charges imposed in connection with investing in variable annuity
contracts and variable life insurance policies. Although the Portfolio's
performance lagged the Index, this was due to the concentration in the consume
r nondurables sector which slightly underperformed the Index during the
period, after strong results in 1994. Over the longer term, we believe the
Portfolio should be well positioned to achieve consistently positive results
in somewhat unusual economic and market circumstances.
INVESTMENT CLIMATE AND FUND STRATEGY
The impressive rallies in both bond and stock markets, which began in
November, were predicated on the assumption that the economy's growth would
moderate, that inflation had peaked and that interest rates could be relaxed
in the months ahead. If the economy strengthens in the second half, with
expected Gross Domestic Product higher than the Federal Reserve Board's
target range of 2.0% - 2.5%, markets will be negatively affected. On the
other hand, the possibility of recession, if the economy weakens too quickly,
is also a consideration that has impacted markets. We believe that the
economy will achieve a satisfactory transition between the faster rate of
growth in 1994 and the moderate range that fosters price stability.
We believe the Portfolio's investment strategy may be well tailored to
benefit in an extended slow growth environment, with emphasis on those
industry groups and individual issues that we believe are positioned to
achieve consistent, visible earnings growth even as the economy slows.
Therefore, the Portfolio should be expected to outperform the S&P 500 Index
if a recession did materialize, which we believe is unlikely over the next 18
months. We also expect the Portfolio to outperform the Index if the more
likely slow growth scenario unfolds, because impressive returns should be
realized from rising portfolio earning power translating into high stock
valuations.
FUND STRUCTURE AND PERFORMANCE
The Portfolio had approximately 14.7% in cash and short-term investments
on June 30, 1995. This cash position remains relatively high, reflecting our
conservative approach to making new investments. However, approximately 3.0%
of the cash position was invested during the period, which added to a number
of previous holdings and established new positions in American Home Products,
Ford Motor, General Motors Cl.E, International Flavors & Fragrances and
International Paper. The Portfolio had industry concentrations in consumer
nondurables and health care. After considerably outperforming the
S&P 500 Index in 1994, the consumer nondurables holdings were subject to some
profit-taking in the
26
<PAGE>
overall market in the first half of 1995. The sector slightly underperformed the
Index during this period, which detracted from the Portfolio's overall results.
However, the positive performance of such holdings as Coca-Cola, Philip Morris
Cos., PepsiCo, Proctor & Gamble, Gillette and Kellogg had the greatest effect on
the Portfolio's results.
Health care issues continued to outperform the S&P 500 Index,
particularly in a climate of less government regulation and oversight. This
sector had the second most positive impact on the Portfolio's performance,
led by shares of Merck & Co., Pfizer and Amgen. Financial services and
technology shares were also quite strong and positively affected the return.
Holdings in Citicorp, HSBC Holdings, Federal National Mortgage Association,
Texas Instruments and General Electric led these two groups.
We will continue to exert our best efforts to attempt to achieve the
investment goals of this Portfolio.
Sincerely,
/s/ Fayez Sarofim
Fayez Sarofim
Portfolio Manager
July 12, 1995
Houston, TX
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
** Source: LIPPER ANALYTICAL SERVICES, INC. - Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. Unlike
the portfolio, the Standard & Poor's 500 Composite Stock Price Index is a
widely accepted, unmanaged index of domestic stock market performance.
27
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Capital Appreciation Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS-83.6% SHARES VALUE
------------- -----------
<S> <C> <C> <C>
AEROSPACE &
ELECTRONICS-7.7% Emerson Electric....................... 4,000 $ 286,000
General Electric....................... 22,050 1,243,069
Motorola............................... 6,050 406,106
Texas Instruments...................... 1,600 214,200
-----------
2,149,375
-----------
AUTO RELATED-1.6% Chrysler............................... 5,000 239,375
Ford Motor............................. 6,500 193,375
-----------
432,750
-----------
BANKING-3.4% Banc One............................... 1,800 58,050
Citicorp............................... 13,025 753,822
KeyCorp................................ 1,800 56,475
PNC Bank............................... 3,000 79,125
-----------
947,472
-----------
CAPITAL GOODS-1.7% AlliedSignal........................... 8,000 356,000
Cooper Industries...................... 3,000 118,500
-----------
474,500
-----------
CHEMICALS-4.6% Dow Chemical........................... 8,000 575,000
duPont (E.I.) de Nemours............... 8,000 550,000
Rohm & Haas............................ 3,000 164,625
-----------
1,289,625
-----------
ENERGY-7.1% Chevron................................ 10,000 466,250
Exxon.................................. 8,525 602,078
Mobil.................................. 4,525 434,400
Royal Dutch Petroleum.................. 4,000 487,500
-----------
1,990,228
-----------
FINANCE-MISCELLANEOUS-3.6% American General....................... 3,000 101,250
Federal National Mortgage Association.. 4,500 424,688
HSBC Holdings PLC...................... 2,400 30,785
HSBC Holdings PLC, A.D.R............... 3,500 449,750
-----------
1,006,473
-----------
FOOD, BEVERAGE &
TOBACCO-17.9% Anheuser-Busch Cos 8,000 455,000
Coca-Cola.............................. 22,000 1,402,500
General Mills.......................... 600 30,825
Kellogg................................ 8,000 571,000
Nestle, A.D.R.......................... 10,000 521,250
PepsiCo................................ 12,000 547,500
Philip Morris Cos...................... 15,000 1,115,625
Sara Lee............................... 2,500 71,250
Seagram Co. Ltd. ...................... 8,500 294,312
-----------
5,009,262
-----------
</TABLE>
28
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Capital Appreciation Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED) SHARES VALUE
------ -----
<S> <C> <C> <C>
HEALTH CARE-13.4% Abbott Laboratories.................... 3,000 $ 121,500
American Home Products................. 7,500 580,313
Amgen...............................(a) 2,500 201,094
Johnson & Johnson...................... 11,050 747,256
Merck & Co............................. 20,000 980,000
Pfizer................................. 8,550 789,806
Roche Holdings, A.D.S.................. 5,000 321,875
-----------
3,741,844
-----------
LEISURE TIME-1.3% Darden Restaurants..................... 600 6,525
Eastman Kodak.......................... 6,000 363,750
-----------
370,275
-----------
MEDIA-1.9% McGraw-Hill............................ 3,200 242,800
News Corp., A.D.S...................... 5,000 113,125
Reader's Digest Association, Cl. A..... 4,000 176,500
-----------
532,425
-----------
MULTI INDUSTRY-1.8% Minnesota Mining & Manufacturing....... 9,000 515,250
-----------
OFFICE &
BUSINESS EQUIPMENT-3.0% AT&T................................... 9,000 478,125
Ericsson (LM) Telephone, Cl. B, A.D.R.. 3,200 64,000
General Motors, Cl. E.................. 6,500 282,750
-----------
824,875
-----------
PAPER &
FOREST PRODUCTS-1.2% International Paper.................... 4,000 343,000
-----------
PERSONAL CARE-7.7% Colgate-Palmolive...................... 1,000 73,125
Gillette............................... 16,000 714,000
International Flavors & Fragrances..... 10,000 497,500
Procter & Gamble....................... 11,000 790,625
Unilever, N.V.......................... 500 65,062
-----------
2,140,312
-----------
PROFESSIONAL SERVICES-.4% Block (H & R).......................... 3,000 123,375
-----------
RETAIL-3.1% May Department Stores.................. 6,000 249,750
Wal-Mart Stores........................ 10,000 267,500
Walgreen............................... 7,000 350,875
-----------
868,125
-----------
TRANSPORTATION-2.2% Norfolk Southern....................... 6,000 404,250
Union Pacific.......................... 4,000 221,500
-----------
625,750
-----------
TOTAL COMMON STOCKS
(cost $20,111,524)................... $23,384,916
==========
</TABLE>
29
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Capital Appreciation Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PREFERRED STOCKS-1.7% SHARES VALUE
------ -----
<S> <C> <C> <C>
AUTO RELATED-1.5% Ford Motor, Ser. A, Cum. Conv., $4.20... 4,500 $ 437,063
-----------
MEDIA-.2% News Corp., A.D.S. Cum. $.40............ 2,500 50,000
-----------
TOTAL PREFERRED STOCKS
(cost $485,651)...................... $ 487,063
===========
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS-12.9% AMOUNT
---------
<S> <C> <C> <C>
U.S. TREASURY BILLS: 6.37%, 7/6/1995 $ 74,000 73,946
6.255%, 7/20/1995....................... 807,000 804,805
5.20%, 7/27/1995........................ 2,735,000 2,724,744
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $3,602,542)..................... $ 3,603,495
===========
TOTAL INVESTMENTS (cost $24,199,717)........................................ 98.2% $27,475,474
====== ===========
CASH AND RECEIVABLES (NET).................................................. 1.8% $ 492,364
====== ===========
NET ASSETS.................................................................. 100.0% $27,967,838
====== ===========
</TABLE>
NOTE TO STATEMENT OF INVESTMENTS;
(a) Non-income producing.
See independent accountants' review report and notes to financial statements.
30
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Growth and Income Portfolio
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
For the six months ended June 30, 1995, the first half of the Fund's
fiscal year, the total return for the Growth and Income Portfolio of the
Dreyfus Variable Investment Fund was 34.65%.* This compares with a return of
20.19% for the Standard and Poor's 500 Composite Stock Price Index.** The
portfolio's performance does not reflect the deduction of additional charges
imposed in connection with investing in variable annuity contracts and
variable life insurance policies.
There were several reasons for this total return of the Fund in the first
six months of 1995. First, it was a favorable period for the overall stock
market. Second, the Fund was invested in several dozen holdings. We believe
this degree of concentration provides a combination of portfolio
diversification with a substantial sensitivity to the performance of
individual holdings. Third, the Fund was fortunate to have several individual
investments that performed quite well during the period. With a relatively
concentrated portfolio, the Fund's performance is sensitive to the
performance of the larger individual holdings.
The year 1995 began with the U.S. economy in a boom to which the Federal
Reserve Board had responded by raising interest rates. The Fed tightened for
the seventh time in a year in February 1995, but then fears of further
Federal Reserve tightening eased as the economy weakened. The stock market
rose during these months because of a combination of a high level of earnings
and falling long-term interest rates. The dollar was weak during the period,
which aided the earnings of multinational companies. A currency decline often
drives inflation substantially higher. This did not occur in this instance
because the dollar was not weak against the currencies of our major trading
partners in North America and South America. There were also offsets from
such disinflationary pressures as corporate downsizing, strong productivity
growth and price-sensitive behavior among consumers. Thus the stock market
enjoyed the benefit to earnings of a weak dollar against the yen and the
European currencies without any associated inflation surge that might have
pushed up interest rates and weakened the valuation of the stock market.
There are several long-term positive forces that have provided a
supportive background for the financial markets. First, the trend of
inflation has remained favorable in the last several years. Second, we are in
the early stages of a key demographic shift as the baby boom generation
begins to focus on the need for a permanent program of saving to provide for
future retirement income. Third, U.S. productivity growth in manufacturing
has been favorable. Finally, a broad consensus has begun to emerge on the
importance of limiting the U.S. budget deficit.
We believe that the period of strongest earnings growth in the U.S.
economy is behind us. Corporate cost-cutting is very far advanced in many
companies as are the benefits of refinancing high-cost debt. The rate of
growth of the U.S. economy is decelerating. Many multinational companies have
already reaped a significant portion of the profit benefits of a decline in
the dollar. Thus we believe that strong profit growth will become
increasingly scarce over the next year. Many of the largest positions in the
Portfolio are companies that we believe have a good chance of sustaining
strong earnings growth even in this more challenging environment. While
overall market valuations have risen, we continue to find good companies
available in the stock market at reasonable valuation levels.
31
<PAGE>
We appreciate the willingness of our shareholders to invest in the Growth
and Income Portfolio of the Dreyfus Variable Investment Fund. We will endeavor
to realize a favorable return for shareholders commensurate with a reasonable
level of risk. There is likely to be an alternation of periods where the net
asset value of the Fund declines and periods when the net asset value rises. Our
focus is on achieving a satisfactory return for the shareholders over a longer
period of time.
Very truly yours,
/s/ Richard B. Hoey
Richard B. Hoey
Portfolio Manager
July 26, 1995
New York, N.Y.
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
** SOURCE: LIPPER ANALYTICAL SERVICES, INC. - Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The
Standard & Poor's 500 Composite Stock Price Index is a widely accepted
unmanaged Index of stock market performance.
32
<PAGE>
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND, Growth and Income Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30, 1995 (UNAUDITED)
COMMON STOCKS-74.6% SHARES VALUE
------ -----
<S> <C> <C> <C>
BASIC INDUSTRIES-11.4% Corning................................ 20,000 $ 655,000
Praxair................................ 20,000 500,000
Weyerhaeuser........................... 10,000 471,250
Witco.................................. 20,000 645,000
-----------
2,271,250
-----------
CAPITAL GOODS-11.9% AlliedSignal 10,000 445,000
Coltec Industries...................(a) 20,000 345,000
Litton Industries...................(a) 10,000 368,750
USA Waste Service...................(a) 50,000 775,000
York International..................... 10,000 450,000
-----------
2,383,750
-----------
CONSUMER-8.7% Lowe's Cos 15,000 448,125
OfficeMax...........................(a) 15,000 418,125
Seagram Co. Ltd........................ 25,000 865,625
-----------
1,731,875
-----------
ENERGY-3.5% Sonat Offshore Drilling................ 10,000 287,500
UGI.................................... 20,000 422,500
-----------
710,000
-----------
FINANCIAL-BROKERAGE-8.2% Bank of Boston......................... 20,000 750,000
First Security......................... 10,000 280,000
Midlantic.............................. 15,000 600,000
-----------
1,630,000
-----------
HEALTH CARE-3.5% McKesson............................... 3,000 140,250
Teva Pharmaceutical Industries ADR..... 15,000 562,500
-----------
702,750
-----------
INSURANCE-6.4% Liberty................................ 15,000 408,750
TIG Holdings........................... 20,000 460,000
USF&G.................................. 25,000 406,250
-----------
1,275,000
-----------
MEDIA/ENTERTAINMENT-2.1% Time Warner............................ 10,000 411,250
-----------
MINING & METALS-2.9% TVX Gold............................(a) 80,000 575,592
-----------
OIL & GAS DRILLING-2.3% Occidental Petroleum................... 20,000 457,500
-----------
TECHNOLOGY-9.0% HNC Software........................(a) 7,500 159,375
Integrated Silicon Solution.........(a) 6,000 313,500
Thermo Electron.....................(a) 20,000 805,000
UUNET Technologies..................(a) 19,000 522,500
-----------
1,800,375
-----------
TELECOMMUNICATIONS-2.3% Premisys Communications.............(a) 7,000 451,938
-----------
UTILITIES-ELECTRIC POWER-2.4% Entergy................................ 20,000 482,500
-----------
TOTAL COMMON STOCKS
(cost $13,662,954)................... $14,883,780
===========
</TABLE>
33
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Growth and Income Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCKS-11.8% SHARES VALUE
------ -----
<S> <C> <C> <C>
FINANCIAL-BROKERAGE-3.5% Citicorp, PERCS Cum., $1.22..................... 15,000 $ 303,750
Merryland & Investment, Ser. C., Cum., $2.15.... 15,000 403,125
-----------
706,875
-----------
REAL ESTATE-4.9% Oasis Residential, Ser A., Cum., $2.25.......... 20,000 505,000
Tanger Factory Outlet Centers, Cum., $1.66...... 20,000 465,000
-----------
970,000
-----------
TELECOMMUNICATIONS-3.4% MFS Communications, Cum., $2.68................. 20,000 690,000
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $2,353,831)............................. $ 2,366,875
===========
<CAPTION>
PRINCIPAL
CONVERTIBLE CORPORATE BONDS-2.3% AMOUNT
---------
<S> <C> <C> <C>
CAPITAL GOODS-2.3% Rohr, 7.75%, 5/15/2004
(cost $367,500)............................... $ 300,000 $ 462,750
===========
SHORT-TERM INVESTMENTS-14.2%
U.S. TREASURY BILLS: 6.31%, 8/3/1995................................. $ 100,000 $ 99,520
6.15%, 8/17/1995................................ 1,008,000 1,000,863
5.36%, 8/24/1995................................ 631,000 625,895
5.38%, 9/21/1995................................ 1,115,000 1,101,196
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $2,827,789)............................. $ 2,827,474
===========
TOTAL INVESTMENTS (cost $19,212,074)................................................. 102.9% $20,540,879
====== ===========
LIABILITIES, LESS CASH AND RECEIVABLES............................................... (2.9%) $ (579,645)
====== ===========
NET ASSETS........................................................................... 100.0% $19,961,234
====== ===========
</TABLE>
NOTE TO STATEMENT OF INVESTMENTS;
(a) Non-income producing.
See independent accountants' review report and notes to financial statements.
34
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, International Equity Portfolio
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to report that, due to an infusion of additional investor
capital, the International Equity Portfolio of the Dreyfus Variable
Investment Fund was able to take more significant positions in a number of
equity markets during the six-month fiscal period ended June 30, 1995.
Holdings have been increased in almost every one of the 17 markets in
which your Portfolio holds a stake. Principal areas of added investment were
Australia, France, Japan, the Netherlands, Singapore, Switzerland and the
United Kingdom.
The half-year's results, while on the positive side, were affected by a
series of major events that buffeted stock markets around the world. These
included the aftermaths of the earthquake in Kobe, Japan and of the Mexican
peso devaluation, the inordinate strength of the yen against the U.S. dollar
and the French elections.
Fortunately, a number of these developments turned out to have their
constructive side for equity investors. The economic effects of the Japanese
earthquake were not as devastating as first seemed likely. Mexico began to
recover from its economic earthquake more swiftly than anticipated, with
beneficial effects on many Latin American markets. The Southeast Asian
markets, after steep declines, began to rally. And the French Presidential
election put an end to the Socialist regime.
For the six months ended June 30, the Portfolio produced a total return
of 1.42%.* This compares with 2.60% for the Morgan Stanley Capital
International Europe, Australasia and Far East Index (EAFE/(R)/).**
The Portfolio's performance does not reflect the deduction of additional
charges imposed in connection with investing in variable annuity contracts
and variable life insurance policies.
In view of continuing uncertainties on the international scene, we were
cautious in investing the additional funds received during the past six
months. As part of this stance, a hedge transaction of yen against U.S.
dollars was held by the Portfolio but expired on April 12 and was not rolled
over.
More recently, the international markets have been supported by lower
levels of interest rates. Recent actions by the U.S. Federal Reserve Board to
lower short-term rates should accentuate this trend.
The Hong Kong market remained generally depressed during the period by
the slack real estate market and by speculation over succession to power in
China in the event of the death of the long-time "paramount leader." Yet
toward the end of the period, Hong Kong began to improve. Malaysia followed a
roughly similar course, but strengthened after the general election that
confirmed the incumbent government. Also, in both markets, international
capital began to return on a modest scale.
Australia has been a strong market for some time now, with impressive
rates of economic growth and corporate profits. While such ebullience carries
risk, we have high hopes for our Australian investments, which now represent
nearly 5% of the overall portfolio.
35
<PAGE>
The European markets continue to be disappointing. This is due to the
continuing high rates of unemployment in Western
Europe, plus the weakness of the U.S. dollar. However, with the new
conservative government in Paris, prospects have improved. In addition, on
the corporate level there has been earnings growth, paydown of debt,
restructuring of base costs and expansion of investment.
The U.K. market, where we have placed over 18% of the portfolio, has been
stable, and pulled upwards by the strong performance of the U.S. stock
market.
The troublesome events that affected international markets earlier in the
year appear to be subsiding. In our opinion, the long-term rationale for
holding international equities remains fully valid.
Sincerely,
/s/ Sir William Vincent
Sir William Vincent
Portfolio Manager
International Equity Portfolio
M&G Investment Management Ltd.
July 12, 1995
London, U.K.
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
**Source: Lipper Analytical Services, Inc. - The Morgan Stanley Capital
International, Europe, Australasia, Far East Index (EAFERegistration Mark) is
an unmanaged index composed of a sample of companies representative of the
market structure of European and Pacific Basin countries. The return indicated
includes net dividends reinvested. The Index is the property of Morgan Stanley
& Co., Incorporated.
36
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, International Equity Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS-81.1% SHARES VALUE
------ -----
<S> <C> <C> <C>
AUSTRALIA-5.1% Boral..................................... 25,000 $ 61,770
Broken Hill Proprietary................... 4,000 49,189
Great Central Mines N.L. ..............(a) 30,000 66,882
Mayne Nickless............................ 6,000 24,750
------------
202,591
------------
AUSTRIA-.3% Burgenland Holding........................ 400 13,757
------------
FRANCE-4.5% BUT S.A................................... 260 58,017
Roussel-Uclaf............................. 210 32,845
Sanofi S.A................................ 800 44,380
Vallourec Usines a Tubes de Lorraine Escaut
et Vallourec Reunies.................(a) 850 42,658
------------
177,900
------------
GERMANY-2.6% BASF AG................................... 125 26,728
Deutsche Bank AG....................... 800 38,914
VEBA AG................................ 100 39,342
------------
104,984
------------
HONG KONG-4.9% China Light & Power....................... 6,000 30,863
Consolidated Electric Power Asia.......... 20,000 46,397
HSBC Holdings PLC......................... 1,600 20,523
Shun Tak Holdings......................... 70,000 55,638
Swire Pacific, Cl. A...................... 5,500 41,939
------------
195,360
------------
INDONESIA-.7% PT Indofood Sukses Makmur..............(a) 7,000 30,175
------------
ITALY-1.5% Caffaro S.P.A............................. 25,000 27,097
Edison S.P.A. ............................ 7,200 32,186
------------
59,283
------------
JAPAN-22.0% Amway Japan............................ 1,000 36,600
DDI.................................... 9 72,255
East Japan Railway..................... 7 35,950
Hokkaido Electric Power................ 2,000 53,837
Kinden................................. 2,000 37,308
Kurimoto............................... 6,000 63,329
Mitsubishi Bank........................ 2,000 43,211
Mitsui Fudosan......................... 4,000 45,856
NEC.................................... 4,000 43,873
NGK Spark Plug......................... 2,000 22,196
Nippon Express......................... 4,000 36,836
Nippon Steel........................... 7,000 22,810
Nippon Telegraph & Telephone........... 6 50,295
P.S.................................... 2,200 39,740
Seven Eleven Japan..................... 1,000 71,665
</TABLE>
37
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, International Equity Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED) SHARES VALUE
------ -----
<S> <C> <C> <C>
JAPAN (CONTINUED) Sharp..................................... 5,000 $ 66,116
Sumitomo Bank............................. 2,000 34,711
Tokio Marine & Fire Insurance............. 4,000 45,903
Toshoku................................... 4,000 19,126
Ushio..................................... 3,000 34,215
--------
875,832
--------
MALAYSIA-1.8% Hong Leong Credit Berhad.................. 3,000 15,135
Leader Universal Holdings Berhad.......... 4,666 16,651
Renong Berhad............................. 22,000 40,968
--------
72,754
--------
NETHERLANDS-3.1% Akzo Nobel................................ 400 47,855
OCE-Van Der Grinten N.V................... 700 39,522
Philips Electronics N.V................... 850 36,021
--------
123,398
--------
PORTUGAL-.7% Sumolis Companhia Industrial de Frutas
e Bebidas S.A. ......................... 2,400 27,834
--------
SINGAPORE-2.6% Fraser & Neave............................ 2,000 23,049
Oversea-Chinese Banking................... 4,000 44,381
Singapore Press Holdings.................. 2,400 35,906
--------
103,336
--------
SPAIN-3.4% Banco Bilbao Vizcaya S.A.................. 870 25,150
Compania Sevillana de Electricidad........ 5,600 34,508
Iberdrola S.A. ........................... 6,000 45,260
Repsol S.A. .............................. 1,000 31,514
--------
136,432
--------
SWITZERLAND-9.5% Alusuisse-Lonza Holding AG................ 90 56,813
Baloise Holdings.......................... 20 45,712
Compagnie Financiere Michelin..........(a) 175 77,710
Elektrowatt AG............................ 120 34,584
Landis & Gyr AG........................... 125 80,540
Zellweger Luwa AG......................(a) 95 81,890
--------
377,249
--------
UNITED KINGDOM-18.4% B.A.T. Industries PLC..................... 4,500 34,481
Booker PLC................................ 12,500 82,836
British Steel PLC......................... 26,000 71,135
British Telecommunications PLC............ 15,000 93,668
Cookson Group PLC......................... 11,000 42,581
Glaxo Wellcome PLC........................ 6,000 73,740
Hammerson PLC............................. 7,000 38,638
Harrisons & Crosfield PLC................. 30,000 67,623
Lucas Industries PLC...................... 24,000 72,067
RTZ PLC................................... 5,500 71,801
Royal Doulton PLC......................... 8,000 33,134
</TABLE>
38
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, International Equity Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED) SHARES VALUE
------------ ------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED) Smith (W.H.) Group PLC................... 10,000 $ 51,932
-----------
733,636
-----------
TOTAL COMMON STOCKS
(cost $ 3,176,874)...................... $3,234,521
===========
PREFERRED STOCKS-3.3%
GERMANY-2.4% Fresenius AG.............................. 125 $ 84,419
Herlitz AG................................ 65 12,704
-----------
97,123
-----------
SWITZERLAND-.9% Merck AG.................................. 45 34,676
-----------
TOTAL PREFERRED STOCKS
(cost $ 127,151)........................ $ 131,799
===========
PRINCIPAL
CONVERTIBLE BONDS-.1% AMOUNT
------------
FRANCE; Sanofi S.A., 4.00%, 1/1/2000
(cost $ 3,939).......................(b) $5,398 $ 4,070
===========
SHORT-TERM INVESTMENTS-12.9%
UNITED STATES; U.S. Treasury Bills:
5.54%, 7/6/95........................... $77,000 $ 76,944
5.57%, 7/20/95.......................... 246,000 245,331
5.56%, 7/27/95.......................... 89,000 88,666
5.33%, 8/24/95.......................... 102,000 101,175
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $ 512,044)........................ $ 512,116
===========
TOTAL INVESTMENTS (cost $3,820,008)............................................ 97.4% $3,882,506
============ ===========
CASH AND RECEIVABLES (NET)..................................................... 2.6% $ 104,866
============ ===========
NET ASSETS..................................................................... 100.0% $3,987,372
============ ===========
</TABLE>
NOTE TO STATEMENT OF INVESTMENTS;
(a) Non-income producing.
(b) Denominated in French Francs.
See independent accountants' review report and notes to financial statements.
39
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
MONEY MANAGED ZERO COUPON QUALITY
MARKET ASSETS 2000 BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value
[cost-Note 4(b)]-see statement.................. $36,250,022 $28,967,771 $15,345,422 $21,380,460
Cash.............................................. 398,835 908,246 308,416 383,436
Dividends and interest receivable................. 69,225 211,991 36,584 250,981
Receivable for investment securities sold......... --- --- --- 858,086
Receivable for futures variation
margin-Note 4(a)................................ --- 5,813 --- ---
Prepaid expenses and other assets................. 174 1,978 3,842 2,040
----------- ----------- ----------- -----------
36,718,256 30,095,799 15,694,264 22,875,003
----------- ----------- ----------- -----------
LIABILITIES:
Due to The Dreyfus Corporation.................... $ 14,373 $ 18,563 $ 5,594 $ 11,269
Payable for investment securities purchased....... --- --- --- 1,000,000
Net unrealized depreciation on
forward currency exchange
contracts-Note 4(a)............................. --- 218,347 --- ---
Payable for shares of
Beneficial Interest redeemed.................... 393,561 --- 24,794 24,560
Accrued expenses and other liabilities............ 29,184 17,593 20,905 22,733
----------- ----------- ----------- -----------
437,118 254,503 51,293 1,058,562
----------- ----------- ----------- -----------
NET ASSETS............................................ $36,281,138 $29,841,296 $15,642,971 $21,816,441
=========== =========== =========== ===========
REPRESENTED BY:
Paid-in capital................................... $36,280,507 $30,373,816 $15,202,070 $21,033,821
Accumulated undistributed
investment income-net........................... --- 520,823 71,391 106,206
Accumulated undistributed net realized gain
(loss) on investments and foreign
currency transactions........................... 631 (711,862) (15,843) 240,485
Accumulated net unrealized appreciation
(depreciation) on investments and translation
of assets and liabilities denominated in
foreign currencies [including $(2,173) net
unrealized (depreciation) on financial futures
for Managed Assets Portfolio]-Note 4(b)............... --- (341,481) 385,353 435,929
----------- ----------- ----------- -----------
NET ASSETS at value, applicable to outstanding
shares of Beneficial Interest................... $36,281,138 $29,841,296 $15,642,971 $21,816,441
=========== =========== =========== ===========
SHARES OUTSTANDING (unlimited number of
$.001 par value shares authorized
for each series).................................. 36,280,507 2,432,515 1,257,833 1,884,476
=========== =========== =========== ===========
NET ASSET VALUE per share
(Net Assets / Shares Outstanding)................. $ 1.00 $12.27 $12.44 $11.58
======= ====== ====== ======
</TABLE>
See independent accountants' review report and notes to financial statements.
40
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
CAPITAL GROWTH AND INTERNATIONAL
SMALL CAP APPRECIATION INCOME EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value
[cost-Note 4(b)]-see statement.................. $336,064,208 $ 27,475,474 $ 20,540,879 $ 3,882,506
Cash.............................................. 1,254,903 477,236 392,312 228,300
Receivable for investment securities sold......... 9,810,914 --- 994,303 30,746
Dividends and interest receivable................. 175,996 53,947 11,504 10,948
Prepaid expenses and other assets................. 3,363 262 39 40
Due from The Dreyfus Corporation.................. --- --- --- 2,173
------------ ------------- ------------- -------------
347,309,384 28,006,919 21,939,037 4,154,713
------------ ------------- ------------- -------------
LIABILITIES:
Due to The Dreyfus Corporation.................... $ 198,752 $ 17,201 $ 11,151 $ ---
Payable for investment securities purchased....... 7,437,473 --- 1,952,011 154,274
Payable for shares of Beneficial Interest redeemed --- --- 239 ---
Accrued expenses and other liabilities............ 98,616 21,880 14,402 13,067
------------ ------------- ------------- -------------
7,734,841 39,081 1,977,803 167,341
------------ ------------- ------------- -------------
NET ASSETS............................................ $339,574,543 $ 27,967,838 $ 19,961,234 $ 3,987,372
============ ============= ============= =============
REPRESENTED BY:
Paid-in capital................................... $296,268,315 $ 24,444,422 $ 18,034,275 $ 3,941,288
Accumulated undistributed investment
income-net...................................... 970,495 287,474 --- 23,311
Accumulated distributions in excess of investment
income-net...................................... --- --- (293) ---
Accumulated undistributed net realized gain
(loss) on investments and foreign
currency transactions........................... 2,284,031 (39,815) 598,447 (39,860)
Accumulated net unrealized appreciation on
investments and translation of assets and
liabilities denominated in foreign
currencies-Note 4(b)............................ 40,051,702 3,275,757 1,328,805 62,633
------------ ------------- ------------- -------------
NET ASSETS at value, applicable to outstanding
shares of Beneficial Interest..................... $339,574,543 $ 27,967,838 $ 19,961,234 $ 3,987,372
============ ============= ============= ============
SHARES OUTSTANDING (unlimited number of
$.001 par value shares authorized for
each series)...................................... 8,095,288 1,776,799 1,249,497 327,066
============ ============= ============= ============
NET ASSET VALUE per share
(Net Assets / Shares Outstanding)................. $41.95 $15.74 $15.98 $12.19
============ ============= ============= ============
</TABLE>
See independent accountants' review report and notes to financial statements.
41
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
MONEY MANAGED ZERO COUPON QUALITY
MARKET ASSETS 2000 BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Interest........................................ $1,066,490 $ 657,208 $ 423,876 $ 630,490
Cash dividends (net of $2,739 foreign
taxes withheld at source for the
Managed Assets Portfolio)................... --- 46,766 --- ---
---------- ---------- ---------- ----------
TOTAL INCOME.............................. 1,066,490 703,974 423,876 630,490
---------- ---------- ---------- ----------
EXPENSES-NOTE 2(e):
Investment advisory fee--Note 3(a).............. $ 84,576 $ 56,517 $ 28,797 $ 55,382
Sub-investment advisory fee--Note 3(a).......... --- 56,517 --- ---
Prospectus and shareholders' reports............ 11,962 5,116 2,006 1,737
Custodian fees.................................. 7,604 7,802 5,068 5,638
Auditing fees................................... 2,877 2,282 7,003 6,224
Organization expenses........................... 2,232 3,195 3,608 3,771
Trustees' fees and expenses--Note 3(b).......... 1,328 1,363 580 575
Shareholder servicing costs..................... 386 214 211 153
Registration fees............................... 203 100 1,137 2,235
Legal fees...................................... --- --- 300 ---
Miscellaneous................................... 882 1,064 1,717 2,278
---------- ---------- ---------- ----------
112,050 134,170 50,427 77,993
Less--expense reimbursement from
The Dreyfus Corporation due to
undertakings--Note 3(a)................... 10,251 --- 4,371 10,017
---------- ---------- ---------- ----------
TOTAL EXPENSES............................ 101,799 134,170 46,056 67,976
---------- ---------- ---------- ----------
INVESTMENT INCOME--NET.................... 964,691 569,804 377,820 562,514
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on investments (includ-
ing foreign currency transactions)--Note 4(a)... $ 562 $ (483,625) $ (15,424) $ 341,701
Net realized (loss) on financial
futures--Note 4(a).............................. --- (425,692) --- ---
---------- ---------- ---------- ----------
NET REALIZED GAIN (LOSS)........................ 562 (909,317) (15,424) 341,701
Net unrealized appreciation on investments and
translation of assets and liabilities
denominated in foreign currencies
(including $31,927 net unrealized
appreciation on financial futures for
the Managed Assets Portfolio)................... --- 105,683 1,066,720 1,187,536
---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS................ 562 (803,634) 1,051,296 1,529,237
---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS......................... $ 965,253 $ (233,830) $ 1,429,116 $2,091,751
========== ========== =========== ==========
</TABLE>
See independent accountants' review report and notes to financial statements.
42
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (CONTINUED) SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
CAPITAL GROWTH AND INTERNATIONAL
SMALL CAP APPRECIATION INCOME EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Interest.............................................. $ 1,237,139 $ 108,016 $ 79,865 $ 15,617
------------ ------------- -------------- --------------
Cash dividends (net of $6,820, $30 and $3,862
foreign taxes withheld at source for the Capital
Appreciation, Growth and Income and
International Equity Portfolios, respectively)
Unaffiliated issuers............................ 747,216 265,176 90,185 28,527
Affiliated issuers.............................. 9,000 --- --- ---
------------ ------------- -------------- --------------
TOTAL CASH DIVIDENDS........................ 756,216 265,176 90,185 28,527
------------ ------------- -------------- --------------
TOTAL INCOME.................................... 1,993,355 373,192 170,050 44,144
------------ ------------- -------------- --------------
EXPENSES-NOTE 2(e):
Investment advisory fee-Note 3(a)..................... $ 943,006 $ 57,076 $ 28,844 $ 8,007
Sub-investment advisory fee-Note 3(a)................. --- 20,755 --- ---
Registration fees..................................... 27,841 2,932 5,799 866
Custodian fees........................................ 30,406 2,629 2,708 11,010
Prospectus and shareholders' reports.................. 29,778 2,782 1,924 1,156
Trustees' fees and expenses-Note 3(b)................. 12,278 878 375 8
Shareholder servicing costs........................... 471 83 163 56
Auditing fees......................................... 10,538 5,309 5,019 4,966
Legal fees............................................ --- 791 307 ---
Miscellaneous......................................... 3,946 283 384 263
------------ ------------- -------------- --------------
1,058,264 93,518 45,523 26,332
Less-expense reimbursement from The Dreyfus
Corporation due to undertakings-Note 3(a) --- 6,445 8,655 12,746
------------ ------------- -------------- --------------
TOTAL EXPENSES.................................. 1,058,264 87,073 36,868 13,586
------------ ------------- -------------- --------------
INVESTMENT INCOME-NET........................... 935,091 286,119 133,182 30,558
------------ ------------- -------------- --------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain (loss) on investments-Note 4(a):
Long transactions (including foreign
currency transactions)............................ $ 3,844,934 $ (40,487) $ 611,300 $ (27,381)
Short sale transactions............................... (262,249) --- (13,375) ---
------------ ------------- -------------- --------------
NET REALIZED GAIN (LOSS).............................. 3,582,685 (40,487) 597,925 (27,381)
------------ ------------- -------------- --------------
Net unrealized appreciation (depreciation) on
investments and translation of assets and liabilities
denominated in foreign currencies:
Unaffiliated issuers............................ 34,503,759 3,101,291 1,371,822 80,950
Affiliated issuers.............................. (194,831) --- --- ---
------------ ------------- -------------- --------------
34,308,928 3,101,291 1,371,822 80,950
------------ ------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS.............................. 37,891,613 3,060,804 1,969,747 53,569
------------ ------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS............................... $38,826,704 $ 3,346,923 $ 2,102,929 $ 84,127
============= ============= ============== ==============
</TABLE>
See independent accountants' review report and notes to financial statements.
43
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO MANAGED ASSETS PORTFOLIO
------------------------------------ ------------------------------------
YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1995 DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED) 1994 (UNAUDITED)
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income-net..................... $ 1,006,418 $ 964,691 $ 745,232 $ 569,804
Net realized gain (loss) on investments,
foreign currency transactions and
financial futures....................... 40 562 146,575 (909,317)
Net unrealized appreciation (depreciation)
on investments and translation of assets
and liabilities denominated in foreign
currencies for the period............... --- --- (1,091,304) 105,683
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS........... 1,006,458 965,253 (199,497) (233,830)
-------------- -------------- -------------- --------------
DIVIDENDS TO SHAREHOLDERS:
From investment income-net................ (1,000,523) (970,586) (769,916) ---
In excess of investment income-net........ --- --- (48,981) ---
-------------- -------------- -------------- --------------
TOTAL DIVIDENDS......................... (1,000,523) (970,586) (818,897) ---
-------------- -------------- -------------- --------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold............. 141,994,565 (1) 58,742,510 (1) 26,699,972 4,541,886
Dividends reinvested...................... 1,000,523 (1) 970,586 (1) 818,897 ---
Cost of shares redeemed................... (115,923,303)(1) (58,155,028)(1) (3,947,678) (4,976,282)
-------------- -------------- -------------- --------------
INCREASE (DECREASE) IN NET
ASSETS FROM BENEFICIAL
INTEREST TRANSACTIONS............... 27,071,785 1,558,068 23,571,191 (434,396)
-------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN
NET ASSETS........................ 27,077,720 1,552,735 22,552,797 (668,226)
NET ASSETS:
Beginning of period....................... 7,650,683 34,728,403 7,956,725 30,509,522
-------------- -------------- -------------- --------------
End of period............................. $ 34,728,403 (2) $ 36,281,138 $ 30,509,522 (3) $ 29,841,296 (3)
============== ============== ============== ==============
SHARES SHARES
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Shares sold.......................................................... 2,094,088 371,833
Shares issued for dividends reinvested............................... 67,318 ---
Shares redeemed...................................................... (310,779) (405,665)
-------------- --------------
NET INCREASE (DECREASE) IN SHARES OUTSTANDING...................... 1,850,627 (33,832)
============== ==============
</TABLE>
---------------
(1) $1.00 per share.
(2) Includes undistributed investment income-net; $5,895 in 1994.
(3) Includes distribution in excess of investment income-net; $(48,981) in
1994 and undistributed investment income-net; $520,823 in 1995.
See independent accountants' review report and notes to financial statements.
44
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
ZERO COUPON 2000 PORTFOLIO QUALITY BOND PORTFOLIO
---------------------------------- ------------------------------------
YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1995 DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED) 1994 (UNAUDITED)
------------ ---------------- ------------ ----------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income-net....................... $ 522,791 $ 377,820 $ 649,784 $ 562,514
Net realized gain (loss) on investments..... --- (15,424) (101,063) 341,701
Net unrealized appreciation
(depreciation) on investments for
the period................................ (791,423) 1,066,720 (776,871) 1,187,536
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................. (268,632) 1,429,116 (228,150) 2,091,751
----------- ----------- ----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net....................... (519,948) (309,215) (645,868) (461,105)
Net realized gain on investments............ (7,541) --- (11,191) ---
----------- ----------- ----------- -----------
TOTAL DIVIDENDS........................... (527,489) (309,215) (657,059) (461,105)
----------- ----------- ----------- -----------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold............... 8,129,045 5,428,373 10,900,540 8,709,026
Dividends reinvested........................ 479,850 311,756 657,134 461,105
Cost of shares redeemed..................... (2,595,464) (2,130,508) (2,134,797) (2,228,475)
----------- ----------- ----------- -----------
INCREASE IN NET ASSETS
FROM BENEFICIAL
INTEREST TRANSACTIONS................. 6,013,431 3,609,621 9,422,877 6,941,656
----------- ----------- ----------- -----------
TOTAL INCREASE IN NET ASSETS.......... 5,217,310 4,729,522 8,537,668 8,572,302
NET ASSETS:
Beginning of period......................... 5,696,139 10,913,449 4,706,471 13,244,139
----------- ----------- ----------- -----------
End of period............................... $10,913,449 (1) $15,642,971 (1) $13,244,139 (2) 21,816,441 (2)
=========== =========== ============ ===========
<CAPTION>
SHARES SHARES SHARES SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold................................. 683,960 452,990 991,178 789,318
Shares issued for dividends reinvested...... 40,904 26,201 61,022 41,975
Shares redeemed............................. (220,025) (179,180) (193,286) (204,251)
-------- -------- -------- --------
NET INCREASE IN
SHARES OUTSTANDING.................... 504,839 300,011 858,914 627,042
======== ======== ======== ========
</TABLE>
(1) Includes undistributed investment income-net; $2,786 in 1994 and $71,391
in 1995.
(2) Includes undistributed investment income-net; $4,797 in 1994 and $106,206
in 1995.
See independent accountants' review report and notes to financial statements.
45
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
SMALL CAP PORTFOLIO CAPITAL APPRECIATION PORTFOLIO
------------------------------------ ------------------------------------
YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1995 DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED) 1994 (UNAUDITED)
-------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income-net........................ $ 765,642 $ 935,091 $ 269,727 $ 286,119
Net realized gain (loss) on investments...... (812,026) 3,582,685 588 (40,487)
Net unrealized appreciation on
investments for the period................. 3,743,892 34,308,928 93,162 3,101,291
-------------- -------------- ------------- ----------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.............. 3,697,508 38,826,704 363,477 3,346,923
-------------- -------------- ------------- ----------------
DIVIDENDS TO SHAREHOLDERS:
From investment income-net................... (727,613) --- (269,734) ---
From net realized gain on investments........ (720,564) --- --- ---
In excess of net realized gain
on investments............................. (481,344) --- --- ---
-------------- -------------- ------------- ----------------
TOTAL DIVIDENDS............................ (1,929,521) --- (269,734) ---
-------------- -------------- ------------- ----------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold................ 158,015,337 135,104,058 13,455,892 10,178,623
Dividends reinvested......................... 1,929,521 --- 269,733 ---
Cost of shares redeemed...................... (6,835,267) (7,571,220) (1,471,097) (1,676,005)
-------------- -------------- ------------- ----------------
INCREASE IN NET ASSETS
FROM BENEFICIAL
INTEREST TRANSACTIONS.................. 153,109,591 127,532,838 12,254,528 8,502,618
-------------- -------------- ------------- ----------------
TOTAL INCREASE IN NET ASSETS........... 154,877,578 166,359,542 12,348,271 11,849,541
NET ASSETS:
Beginning of period.......................... 18,337,423 173,215,001 3,770,026 16,118,297
-------------- -------------- ------------- ----------------
End of period................................ $173,215,001(1) $339,574,543(1) $16,118,297(2) $27,967,838(2)
============== ============== ============= ================
<CAPTION>
SHARES SHARES SHARES SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold.................................. 4,347,955 3,548,409 1,004,793 693,794
Shares issued for dividends reinvested....... 52,997 --- 20,097 ---
Shares redeemed.............................. (190,260) (196,179) (110,009) (115,921)
--------- --------- --------- --------
NET INCREASE IN
SHARES OUTSTANDING..................... 4,210,692 3,352,230 914,881 577,873
========= ========= ========= ========
</TABLE>
-------------------
(1) Includes undistributed investment income-net; $35,405 in 1994 and $970,495
in 1995.
(2) Includes undistributed investment income-net; $1,355 in 1994 and $287,474
in 1995.
See independent accountants' review report and notes to financial statements.
46
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
GROWTH AND INCOME PORTFOLIO INTERNATIONAL EQUITY PORTFOLIO
------------------------------ --------------------------------
YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1995 DECEMBER 31, JUNE 30, 1995
1994(1) (UNAUDITED) 1994(1) (UNAUDITED)
----------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income-net....................... $ 22,787 $ 133,182 $ 11,219 $ 30,558
Net realized gain (loss) on investments
and foreign currency transactions......... 7,824 597,925 (12,479) (27,381)
Net unrealized appreciation (depreciation)
on investments and translation of assets
and liabilities denominated in foreign
currencies for the period................. (43,017) 1,371,822 (18,317) 80,950
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS................................. (12,406) 2,102,929 (19,577) 84,127
----------- ----------- ----------- -----------
DIVIDENDS TO SHAREHOLDERS:
From investment income-net.................. (22,729) (133,533) (11,219) ---
In excess of investment income-net.......... --- --- (7,247) ---
From net realized gain on investments
and foreign currency transactions......... (7,302) --- --- ---
----------- ----------- ----------- -----------
TOTAL DIVIDENDS........................... (30,031) (133,533) (18,466) ---
----------- ----------- ----------- -----------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold............... 1,053,630 20,356,799 1,120,503 3,102,292
Dividends reinvested........................ 30,031 133,533 18,466 ---
Cost of shares redeemed..................... (1,330) (3,538,388) (12,347) (287,626)
----------- ----------- ----------- -----------
INCREASE IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS...... 1,082,331 16,951,944 1,126,622 2,814,666
----------- ----------- ----------- -----------
TOTAL INCREASE IN NET ASSETS.......... 1,039,894 18,921,340 1,088,579 2,898,793
NET ASSETS:
Beginning of period......................... --- 1,039,894 --- 1,088,579
----------- ----------- ----------- -----------
End of period............................... $ 1,039,894 (2) $19,961,234 (2) $ 1,088,579 (3) $ 3,987,372 (3)
=========== =========== =========== ===========
<CAPTION>
SHARES SHARES SHARES SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold................................. 84,474 1,385,652 90,002 260,892
Shares issued for dividends reinvested...... 2,457 8,573 1,536 --
Shares redeemed............................. (109) (231,550) (1,006) (24,358)
------- --------- ------- -------
NET INCREASE IN
SHARES OUTSTANDING.................... 86,822 1,162,675 90,532 236,534
======= ========== ======= ========
</TABLE>
(1) From May 2, 1994 (commencement of operations) to December 31, 1994.
(2) Includes undistributed investment income-net; $58 in 1994 and
distributions in excess of investment income-net; $(293) in 1995.
(3) Includes distributions in excess of investment income-net $(7,247) in
1994 and undistributed investment income-net $23,311 in 1995.
See independent accountants' review report and notes to financial statements.
47
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------------------------------------ JUNE 30, 1995
PER SHARE DATA: 1990(1) 1991 1992 1993 1994 (UNAUDITED)
------- ------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $1.0000 $1.0000 $1.0002 $1.0002 $1.0000 $1.0002
------- ------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net.................... .0244 .0583 .0407 .0323 .0431 .0283
Net realized gain on investments......... - .0002 - - - -
------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS....... .0244 .0585 .0407 .0323 .0431 .0283
------- ------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net..... (.0244) (.0583) (.0407) (.0323) (.0429) (.0285)
Dividends from net realized gain
on investments......................... - - - (.0002) - -
------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS.................... (.0244) (.0583) (.0407) (.0325) (.0429) (.0285)
------- ------- ------- ------- ------- -------
Net asset value, end of period........... $1.0000 $1.0002 $1.0002 $1.0000 $1.0002 $1.0000
======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN...................... 7.27%(2) 5.99% 4.14% 3.29% 4.37% 5.81%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.. .03%(2) - - - - .60%(2)
Ratio of net investment income to
average net assets..................... 7.18%(2) 5.78% 4.10% 3.23% 4.62% 5.70%(2)
Decrease reflected in above expense
ratios due to undertakings by
The Dreyfus Corporation................ 30.51%(2) 3.94% 4.25% 2.81% .88% .06%(2)
Net assets, end of period (000's Omitted) $ 741 $ 1,619 $ 790 $ 7,651 $34,728 $36,281
</TABLE>
(1) From August 31, 1990 (commencement of operations) to December 31, 1990.
(2) Annualized.
See independent accountants' review report and notes to financial statements.
48
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
MANAGED ASSETS PORTFOLIO
-------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------------------------------------ JUNE 30, 1995
PER SHARE DATA: 1990(1) 1991 1992 1993 1994 (UNAUDITED)
-------- -------- -------- -------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.11 $10.76 $10.14 $12.92 $12.37
------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net............... .08 .41 .22 .20 .35 .23
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions............. .11 .66 (.11) 2.71 (.56) (.33)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS.. .19 1.07 .11 2.91 (.21) (.10)
------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment income-net (.08) (.42) (.31) (.13) (.32) -
Dividends in excess of
investment income-net............. - - - - (.02) -
Dividends from net realized gain
on investments.................... - - (.42) - - -
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS............... (.08) (.42) (.73) (.13) (.34) -
------ ------ ------ ------ ------ ------
Net asset value, end of period...... $10.11 $10.76 $10.14 $12.92 $12.37 $12.27
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN................. 1.85%(2) 10.60% 1.07% 28.59% (1.56%) (.81)%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net
assets............................ 34%(2) 1.00% .97% .27% .25% .44% (2)
Ratio of net investment income to
average net assets................ 2.11%(2) 4.46% 1.88% 1.87% 3.54% 1.87% (2)
Decrease reflected in above expense
ratios due to undertakings
by The Dreyfus Corporation
and Comstock Partners............. 8.82%(2) 2.83% 1.70% 2.25% .88% -
Portfolio Turnover Rate............. - 91.97% 118.78% 99.08% 25.96% 11.32%(2)
Net assets, end of period
(000's Omitted)................... $ 716 $ 2,179 $1,865 $7,957 $30,510 $29,841
</TABLE>
(1) From August 31, 1990 (commencement of operations) to December 31, 1990.
(2) Not annualized.
See independent accountants' review report and notes to financial statements.
49
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
ZERO COUPON 2000 PORTFOLIO
-------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------------------------------------ JUNE 30, 1995
PER SHARE DATA: 1990(1) 1991 1992 1993 1994 (UNAUDITED)
------ ------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.45 $11.64 $11.77 $12.57 $11.39
------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income--net.............. .22 .76 .83 .79 .69 .40
Net realized and unrealized gain
(loss) on investments............. .45 1.25 .15 .96 (1.18) .99
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS.. .67 2.01 .98 1.75 (.49) 1.39
------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income--net....................... (.22) (.76) (.84) (.78) (.68) (.34)
Dividends from net realized gain
on investments.................... - (.06) (.01) (.17) (.01) -
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS............... (.22) (.82) (.85) (.95) (.69) (.34)
------ ------ ------ ------ ------ ------
Net asset value, end of period...... $10.45 $11.64 $11.77 $12.57 $11.39 $12.44
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN................. 20.09%(2) 20.09% 8.87% 15.19% (3.91%) 23.96%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets................ .70%(2) .72% .64% - - .72%(2)
Ratio of net investment income to
average net assets................ 8.03%(2) 7.41% 7.15% 6.21% 6.04% 5.90%(2)
Decrease reflected in above
expense ratios due to undertakings
by The Dreyfus Corporation........ 81.13%(2) 5.04% 2.28% 2.43% 1.05% .07%(2)
Portfolio Turnover Rate............. - 42.82% 3.08% 106.35% - 28.84%(3)
Net assets, end of period
(000's Omitted)................... $ 155 $1,296 $1,362 $5,696 $10,913 $15,643
</TABLE>
(1) From August 31, 1990 (commencement of operations) to December 31, 1990.
(2) Annualized.
(3) Not annualized.
See independent accountants' review report and notes to financial statements.
50
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
QUALITY BOND PORTFOLIO
--------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------------------------------- JUNE 30, 1995
PER SHARE DATA: 1990(1) 1991 1992 1993 1994 (UNAUDITED)
-------- -------- -------- -------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.01 $10.67 $10.94 $11.81 $10.53
-------- -------- -------- -------- --------- --------
INVESTMENT OPERATIONS:
Investment income-net............... .23 .70 .92 .76 .73 .35
Net realized and unrealized gain
(loss) on investments............. .01 .66 .30 .88 (1.27) 1.00
-------- -------- -------- -------- --------- --------
TOTAL FROM INVESTMENT OPERATIONS.. .24 1.36 1.22 1.64 (.54) 1.35
-------- -------- -------- -------- --------- --------
DISTRIBUTIONS:
Dividends from investment income-net (.23) (.70) (.92) (.76) (.73) (.30)
Dividends from net realized gain
on investments.................... - - (.03) (.01) (.01) -
-------- -------- -------- -------- --------- --------
TOTAL DISTRIBUTIONS............... (.23) (.70) (.95) (.77) (.74) (.30)
-------- -------- -------- -------- --------- --------
Net asset value, end of period...... $10.01 $10.67 $10.94 $11.81 $10.53 $11.58
======== ======== ======== ======== ========= ========
TOTAL INVESTMENT RETURN................. 7.12%(2) 14.12% 12.09% 15.33% (4.59%) 26.24%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net
assets............................. .15%(2) - - - - .80%(2)
Ratio of net investment income to
average net assets................ 7.20%(2) 7.52% 8.54% 6.51% 7.03% 6.60%(2)
Decrease reflected in above
expense ratios due to undertakings
by The Dreyfus Corporation........ 137.05%(2) 13.13% 5.33% 3.51% 1.20% .12%(2)
Portfolio Turnover Rate............. - - 9.39% 110.62% 64.80% 140.78%(3)
Net assets, end of period
(000's Omitted).................... $59 $ 410 $ 405 $4,706 $13,244 $21,816
</TABLE>
(1) From August 31, 1990 (commencement of operations) to December 31, 1990.
(2) Annualized.
(3) Not annualized.
See independent accountants' review report and notes to financial statements.
51
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
SMALL CAP PORTFOLIO
----------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
----------------------------------------------------------------- JUNE 30, 1995
PER SHARE DATA: 1990(1) 1991 1992 1993 1994 (UNAUDITED)
------ ------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.21 $20.60 $ 22.71 $ 34.45 $ 36.52
------ ------ ------ ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............... .21(2) .14(2) .18(2) .14 .17 .11
Net realized and unrealized gain
on investments.................... - 15.85(2) 13.10(2) 14.93 2.50 5.32
------ ------ ------ ------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS.. .21(2) 15.99(2) 13.28(2) 15.07 2.67 5.43
------ ------ ------ ------- -------- --------
DISTRIBUTIONS:
Dividends from investment income-net - (.15) (.15) (.14) (.16) -
Dividends in excess of investment
income-net........................ - - - (.01) - -
Dividends from net realized
gain on investments............... - (5.45) (11.02) (3.18) (.33) -
Dividends in excess of net realized
gain on investments............... - - - - (.11) -
------ ------ ------ ------- -------- --------
TOTAL DISTRIBUTIONS............... - (5.60) (11.17) (3.33) (.60) -
------ ------ ------ ------- -------- --------
Net asset value, end of period...... $10.21 $20.60 $22.71 $ 34.45 $ 36.52 $ 41.95
====== ====== ====== ======= ======== ========
TOTAL INVESTMENT RETURN................. 2.10%(3) 159.73% 71.28% 68.31% 7.75% 14.87%(3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net
assets............................ .34%(3) 1.16% .94% .25% .55% .42%(3)
Ratio of net investment income to
average net assets................ 2.10%(3) .77% .76% .89% 1.18% .37%(3)
Decrease reflected in above expense
ratios due to undertakings by
The Dreyfus Corporation........... 84.84%(3) 3.64% 2.29% 1.79% .52% -
Portfolio Turnover Rate............. - 388.70% 358.27% 244.59% 106.00% 49.06%(3)
Net assets, end of period (000's
Omitted).......................... $ 36 $1,554 $2,679 $18,337 $173,215 $339,575
</TABLE>
------------
(1) From August 31, 1990 (commencement of operations) to December 31, 1990.
(2) Based on average shares outstanding.
(3) Not annualized.
See independent accountants' review report and notes to financial statements.
52
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO
-------------------------------------------
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30, 1995
-----------------------
PER SHARE DATA: 1993(1) 1994 (UNAUDITED)
------- ------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period....................... $12.50 $13.27 $13.44
------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net...................................... .08 .23 .16
Net realized and unrealized gain on investments............ .76 .17 2.14
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS......................... .84 .40 2.30
------ ------ ------
DISTRIBUTIONS;
Dividends from investment income-net....................... (.07) (.23) -
------ ------ ------
Net asset value, end of period............................. $13.27 $13.44 $15.74
====== ====== ======
TOTAL INVESTMENT RETURN........................................ 6.74%(2) 3.04% 17.11%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.................... .28%(2) .25% .42%(2)
Ratio of net investment income to average net assets....... 1.89%(2) 2.99% 1.37%(2)
Decrease reflected in above expense ratios due to undertakings
by The Dreyfus Corporation............................... 3.67%(2) .86% .03%(2)
Portfolio Turnover Rate.................................... .01%(2) .12% 1.13%(2)
Net assets, end of period (000's Omitted).................. $3,770 $16,118 $27,968
</TABLE>
(1) From April 5, 1993 (commencement of operations) to December 31, 1993.
(2) Not annualized.
See independent accountants' review report and notes to financial statements.
53
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
GROWTH AND INCOME PORTFOLIO
-------------------------------
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1995
PER SHARE DATA: 1994(1) (UNAUDITED)
----------- ----------------
<S> <C> <C>
Net asset value, beginning of period.................................. $12.50 $11.98
------ ------
INVESTMENT OPERATIONS:
Investment income-net................................................. .28 .14
Net realized and unrealized gain (loss) on investments ............... (.43) 4.00
------ ------
TOTAL FROM INVESTMENT OPERATIONS.................................... (.15) 4.14
------ ------
DISTRIBUTIONS:
Dividends from investment income-net.................................. (.28) (.14)
Dividends from net realized gain on investments....................... (.09) -
------ ------
TOTAL DISTRIBUTIONS................................................. (.37) (.14)
------ ------
Net asset value, end of period........................................ $11.98 $15.98
====== ======
TOTAL INVESTMENT RETURN................................................... (1.22)%(2) 34.65%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets............................... .22%(2) .47%(2)
Ratio of net investment income to average net assets.................. 2.25%(2) 1.72%(2)
Decrease reflected in above expense ratios due to undertakings
by The Dreyfus Corporation.......................................... 1.28%(2) .11%(2)
Portfolio Turnover Rate............................................... 237.09%(2) 194.28%(2)
Net assets, end of period (000's Omitted)............................. $1,040 $19,961
</TABLE>
---------------
(1) From May 2, 1994 (commencement of operations) to December 31, 1994.
(2) Not annualized.
See independent accountants' review report and notes to financial statements.
54
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO
--------------------------------
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1995
PER SHARE DATA: 1994(1) (UNAUDITED)
------- ----------------
<S> <C> <C>
Net asset value, beginning of period.................................. $12.50 $12.02
------ ------
INVESTMENT OPERATIONS:
Investment income-net................................................. .15 .15
Net realized and unrealized gain (loss) on investments and foreign
currency transactions............................................... (.40) .02
------ ------
TOTAL FROM INVESTMENT OPERATIONS.................................... (.25) .17
------ ------
DISTRIBUTIONS:
Dividends from investment income-net.................................. (.14) -
Dividends in excess of investment income-net.......................... (.09) -
------ ------
TOTAL DISTRIBUTIONS................................................. (.23) -
------ ------
Net asset value, end of period........................................ $12.02 $12.19
====== ======
TOTAL INVESTMENT RETURN................................................... (2.00)%(2) 1.42%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets............................... .23%(2) .63%(2)
Ratio of net investment income to average net assets.................. 1.11%(2) 1.42%(2)
Decrease reflected in above expense ratios due to undertakings
by The Dreyfus Corporation.......................................... 1.70%(2) .59%(2)
Portfolio Turnover Rate............................................... 16.75%(2) 28.13%(2)
Net assets, end of period (000's Omitted)............................. $1,089 $3,987
</TABLE>
(1) From May 2, 1994 (commencement of operations) to December 31, 1994.
(2) Not annualized.
See independent accountants' review report and notes to financial statements.
55
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1-GENERAL:
The Fund is registered under the Investment Company Act of 1940 ("Act")
as an open-end management investment company and is intended to be a funding
vehicle for variable annuity contracts and variable life insurance policies
to be offered by the separate accounts of life insurance companies. The Fund
issues eight classes of shares of Beneficial Interest: the Money Market,
Managed Assets, Zero Coupon 2000, Quality Bond, Small Cap and Capital
Appreciation Portfolios are diversified portfolios. The Growth and Income and
International Equity Portfolios are non-diversified portfolios. The Dreyfus
Corporation ("Dreyfus") serves as the Fund's investment adviser. Dreyfus is a
direct subsidiary of Mellon Bank, N.A. With respect to the Managed Assets,
Capital Appreciation and International Equity Portfolios, Comstock Partners,
Inc. ("Comstock Partners"), Fayez Sarofim & Co. ("Sarofim") and M&G
Investment Management Limited ("M&G") serve as the Series' sub-investment
adviser, respectively. Premier Mutual Fund Services, Inc. (the
"Distributor") acts as the distributor of the Fund's shares, which are sold
without a sales charge. The Distributor, located at One Exchange Place,
Boston, Massachusetts 02109, is a wholly-owned subsidiary of FDI Distribution
Services, Inc., a provider of mutual fund administration services, which in
turn is a wholly-owned subsidiary of FDI Holdings, Inc., the parent company
of which is Boston Institutional Group, Inc.
It is the Fund's policy, with respect to the Money Market Portfolio, to
maintain a continuous net asset value per share of $1.00; the Fund has
adopted certain investment, portfolio valuation and dividend and distribution
policies to enable it to do so. There is no assurance, however, that the Fund
will be able to maintain a stable net asset value of $1.00 per share, with
respect to the Money Market Portfolio.
The Fund currently functions as the funding vehicle for the Dreyfus
Series 2000 Variable Annuity Contract (the "Account") issued by Mutual
Benefit Life Insurance Company ("Mutual Benefit Life"). On July 16, 1991, the
Superior Court of New Jersey entered an Order (the "Order") appointing the
New Jersey Insurance Commissioner as Rehabilitator of Mutual Benefit Life.
The Commissioner was granted immediate exclusive possession and control of,
and title to, the business and assets of Mutual Benefit Life, including the
assets and liabilities of the Account.
The Commissioner was empowered by the Order to take such steps as he
deemed appropriate toward removing the cause and conditions that made
rehabilitation necessary. On January 15, 1993, the Commissioner filed the
First Amended Plan of Rehabilitation ("Plan") with the Court. The Plan
stipulated that the assets and liabilities of the Account would be
transferred to a separate account of MBL Life Assurance Corporation
("MBLLAC"), a wholly-owned subsidiary of Mutual Benefit Life. The Plan also
provided for the transfer of the ownership of the stock of MBLLAC to a Trust.
The Commissioner was designated as the sole Trustee of the Trust. On August
12, 1993, the Court rendered an opinion approving the Plan with certain
modifications. Two subsequent amendments to the Plan were filed and approved
by the Court. None of the modifications or amendments affected the status of
the Account. On November 10, 1993, the Court issued an Order of Confirmation
permitting the implementation of the Plan.
An order was also issued by the Court on January 28, 1994, approving the
form of the Third Amended Plan of Rehabilitation, the Election Materials and
related documents. On April 29, 1994, the Plan was implemented. Substantially
all of the assets of Mutual Benefit Life were transferred to MBLLAC and
MBLLAC assumed and reinsured Mutual Benefit Life's restructured insurance
liabilities. The stock of MBLLAC was assigned to the Stock Trust and the
Commissioner was designated as Trustee.
56
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
In view of the terms and conditions of both the Order and the Plan,
applications for new contracts and additional purchase payments under
existing contracts are currently not being accepted by the Account. The terms
of the Order and the Plan permit redemptions from the Account to continue as
requested.
The proceedings of the New Jersey Insurance Commissioner with respect to
Mutual Benefit Life or the Account do not apply to the separate accounts of
other life insurance companies that may use the Fund as a funding vehicle for
contracts or policies issued by them.
As of June 30, 1995, Dreyfus held the following shares:
<TABLE>
<CAPTION>
<S> <C>
Money Market Portfolio........... 26,188 Quality Bond Portfolio........... 2,813
Managed Assets Portfolio......... 2,332 Small Cap Portfolio.............. 4,511
Zero Coupon 2000 Portfolio....... 2,780 International Equity Portfolio... 81,530
</TABLE>
NOTE 2-SIGNIFICANT ACCOUNTING POLICIES:
(a) PORTFOLIO VALUATION:
Money Market Portfolio:
Investments are valued at amortized cost, which has been determined by
the Fund's Board of Trustees to represent the fair value of the Series'
investments.
Managed Assets, Capital Appreciation, Small Cap, Growth and Income and
International Equity Portfolios:
Investments in securities (including options and financial futures) are
valued at the last sales price on the securities exchange on which such
securities are primarily traded or at the last sales price on the national
securities market. Securities not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices, except for
open short positions, where the asked price is used for valuation purposes.
Bid price is used when no asked price is available. Investments denominated
in foreign currencies are translated to U.S. dollars at the prevailing rates
of exchange. Forward currency exchange contracts are valued at the offsetting
rate.
Zero Coupon 2000 and Quality Bond Portfolios:
Investments (excluding short-term investments and U.S. Government
obligations) are valued each business day by an independent pricing service
("Service") approved by the Board of Trustees. Investments for which quoted
bid prices are readily available and are representative of the bid side of
the market in the judgement of the Service are valued at the mean between the
quoted bid prices (as obtained by the Service from dealers in such
securities) and asked prices (as calculated by the Service based upon its
evaluation of the market for such securities). Other investments (which
constitute a majority of the Portfolios' securities) are carried at fair
value as determined by the Service, based on methods which include
consideration of: yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers; and general
market conditions. Investments in U.S. Government obligations are valued at
the mean between quoted bid and asked prices. Short-term investments are
carried at amortized cost, which approximates value.
57
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(b) FOREIGN CURRENCY TRANSACTIONS: The Fund does not isolate that portion
of the results of operations resulting from changes in foreign exchange rates
on investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales
and maturities of short-term securities, sales of foreign currencies,
currency gains or losses realized on securities transactions, the difference
between the amounts of dividends, interest and foreign withholding taxes
recorded on the Fund's books, and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains or losses
arise from changes in the value of assets and liabilities other than
investments in securities at fiscal year end, resulting from changes in
exchange rates.
(c) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(d) AFFILIATED ISSUERS: Issuers in which the Fund held 5% or more of the
outstanding voting securities are defined as "affiliated" in the Act.
(e) EXPENSES: Expenses directly attributable to each series are charged
to that series' operations; expenses which are applicable to all series, are
allocated among them.
(f) DIVIDENDS TO SHAREHOLDERS: Dividends payable to shareholders are
recorded by the Fund on the ex-dividend date.
The Money Market Portfolio declares dividends daily from investment
income-net; such dividends are paid monthly. The Managed Assets, Capital
Appreciation, Small Cap and International Equity Portfolios declare and pay
dividends from investment income-net annually. The Zero Coupon 2000 and
Quality Bond Portfolios declare and pay dividends from investment income-net
monthly. The Growth and Income Portfolio declares and pays dividends from
investment income-net quarterly. Dividends from net realized capital gains
for each series are normally declared and paid annually.
Each series may make distributions from capital gains and with respect to
the Managed Assets, Capital Appreciation, Small Cap and International Equity
series may make distributions from investment income-net on a more frequent
basis to comply with the distribution requirements of the Internal Revenue
Code. This may result in distributions that are in excess of investment
income-net and net realized capital gains on a fiscal year basis. However, to
the extent that a net realized capital gain of any series can be reduced by a
capital loss carryover, if any, of that series, such gain will not be
distributed.
(g) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes. For Federal income tax purposes, each series is treated as a
single entity for the purpose of determining such qualification.
58
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The Managed Assets Portfolio has an unused capital loss carryover of
approximately $369,600 available for Federal income tax purposes to be
applied against future net securities profits, if any, realized subsequent to
December 31, 1994. If not applied, $5,500 of the carryover expires in fiscal
2001 and $364,100 expires in fiscal 2002.
The Quality Bond Portfolio has an unused capital loss carryover of
approximately $31,100 available for Federal income tax purposes to be applied
against future net securities profits, if any, realized subsequent to
December 31, 1994. The carryover does not include net realized securities
losses from November 1, 1994 through December 31, 1994, which are treated,
for Federal income tax purposes, as arising in fiscal 1995. If not applied,
the carryover expires in fiscal 2002.
The International Equity Portfolio has an unused capital loss carryover
of approximately $8,300 available for Federal income tax purposes to be
applied against future net securities profits, if any, realized subsequent to
December 31, 1994. The carryover does not include net realized securities
losses from November 1, 1994 through December 31, 1994, which are treated,
for Federal income tax purposes, as arising in fiscal 1995. If not applied,
the carryover expires in fiscal 2002.
NOTE 3-INVESTMENT ADVISORY FEE, SUB-INVESTMENT ADVISORY FEES AND OTHER
TRANSACTIONS WITH AFFILIATES:
(a) Fees payable by the Fund pursuant to the provisions of an Investment
Advisory Agreement with Dreyfus are payable monthly, computed on the average
daily value of each series' net assets at the following annual rates: .50 of
1% of the Money Market Portfolio; .375 of 1% of the Managed Assets Portfolio;
.45 of 1% of the Zero Coupon 2000 Portfolio; .65 of 1% of the Quality Bond
Portfolio; .75 of 1% of the Small Cap Portfolio; .55 of 1% of the first $150
million, .50 of 1% of the next $150 million, and .375 of 1% over $300 million
of the Capital Appreciation Portfolio; .75 of 1% of the Growth and Income
Portfolio; and .75 of 1% of the International Equity Portfolio. With respect
to the Managed Assets Portfolio, pursuant to a Sub-Investment Advisory
Agreement with Comstock Partners, the sub-investment advisory fee is computed
at an annual rate of .375 of 1% of the average daily value of the series' net
assets and is payable monthly. With respect to the Capital Appreciation
Portfolio, pursuant to a Sub-Investment Advisory Agreement with Sarofim, the
sub-investment advisory fee is computed at an annual rate of .20 of 1% of the
first $150 million; .25 of 1% of the next $150 million; and .375 of 1% over
$300 million of the average daily value of the series' net assets and is
payable monthly. With respect to the International Equity Portfolio, pursuant
to a Sub-Investment Advisory Agreement between Dreyfus and M&G, the
sub-investment advisory fee is computed at an annual rate of .30 of 1% of the
average daily value of the series' net assets and is payable monthly by
Dreyfus.
The agreements further provide that if in any full year the aggregate
expenses of any series, exclusive of taxes, brokerage, interest on borrowings
and extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Fund, that series may deduct from the payments to be
made to Dreyfus (and Comstock Partners, Sarofim or M&G, with respect to the
Managed Assets, Capital Appreciation and International Equity Portfolios,
respectively), or Dreyfus (and Comstock Partners, Sarofim or M&G, with
respect to the Managed Assets, Capital Appreciation and International Equity
Portfolios, respectively) will bear the amount of such excess to the extent
required by state law.
59
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DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
However, Dreyfus has undertaken, with respect to the Money Market
Portfolio, from January 1, 1995 through February 1, 1995,
to reduce the investment advisory fee paid by the series, to the extent that
the series' aggregate expenses (excluding certain expenses as described
above) exceeded specified annual percentages of the series' average daily net
assets. With respect to the Managed Assets, Capital Appreciation and Zero
Coupon 2000 Portfolios, Dreyfus has undertaken from January 1, 1995 through
June 30, 1995 to reduce the investment advisory fee paid by the series, to
the extent that the series' aggregate expenses (excluding certain expenses as
described above) exceeded specified annual percentages of the series' average
daily net assets. With respect to the Quality Bond and Growth and Income
Portfolios, Dreyfus has undertaken from January 1, 1995 through June 30,
1995, to reduce the investment advisory fee paid by the series, to the extent
that the series' aggregate expenses (excluding certain expenses as described
above) exceeded specified annual percentages of the series' average daily net
assets. With respect to the International Equity Portfolio, Dreyfus had
undertaken from January 1, 1995 through July 11, 1995 to reimburse expenses
(excluding certain expenses as described above) to the extent that such
expenses exceeded specified annual percentages of the series' average daily
net assets. Dreyfus has currently undertaken from July 11, 1995 through
September 30, 1995, to reimburse expenses (excluding certain expenses as
described above) in excess of an annual rate of 1.50% of the series' average
daily net assets.
The expense reimbursements, pursuant to the undertakings, amounted to the
following for the six months ended June 30, 1995:
<TABLE>
<S> <C> <C> <C>
Money Market Portfolio........... $10,251 Small Cap Portfolio................. $ -
Managed Assets Portfolio......... - Capital Appreciation Portfolio...... 6,445
Zero Coupon 2000 Portfolio....... 4,371 Growth and Income Portfolio......... 8,655
Quality Bond Portfolio........... 10,017 International Equity Portfolio...... 12,746
</TABLE>
The undertakings may be modified by Dreyfus from time to time, provided
that the resulting expense reimbursement would not be less than the amount
required pursuant to the agreements.
(b) Each trustee who is not an "affiliated person," as defined in the
Act, of Dreyfus, Comstock Partners, Sarofim, M&G and/or Dreyfus Service
Corporation receives from the Fund an annual fee of $2,500 and an attendance
fee of $250 per meeting. The Chairman of the Board receives an additional 25%
of such compensation.
60
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 4-SECURITIES TRANSACTIONS:
(a) The following summarizes the aggregate amount of purchases and sales
of investment securities and securities sold short by the Fund, excluding
short-term securities, options and forward currency exchange contracts, for
the six months ended June 30, 1995:
<TABLE>
<CAPTION>
LONG TRANSACTIONS:
PURCHASES SALES
-------------- --------------
<S> <C> <C>
Managed Assets Portfolio...................................................... $ 5,637,934 $ 1,764,395
Zero Coupon 2000 Portfolio.................................................... 6,244,490 3,231,619
Quality Bond Portfolio........................................................ 22,023,551 19,650,500
Small Cap Portfolio
Unaffiliated issuers................................ $246,031,870
Affiliated issuers.................................. 867,700
------------
246,899,570 104,292,931
Capital Appreciation Portfolio................................................ 9,128,608 194,955
Growth and Income Portfolio................................................... 26,929,010 11,896,960
International Equity Portfolio................................................ 2,867,115 482,842
SHORT SALE TRANSACTIONS:
PURCHASES SALES
-------------- --------------
Small Cap Portfolio........................................................... $ 3,288,374 $ 3,026,125
Growth and Income Portfolio................................................... 142,000 128,625
</TABLE>
With respect to the Small Cap and Growth and Income Portfolios, each
series is engaged in short-selling which obligates each
series to replace the security borrowed by purchasing the security at current
market value. Each series would incur a loss if the price of the security
increases between the date of the short sale and the date on which each
series replaces the borrowed security. Each series would realize a gain if
the price of the security declines between those dates. Until each series
replaces the borrowed security, each series will maintain daily, a segregated
account with a broker and custodian of cash and/or U.S. Government securities
sufficient to cover its short position. At June 30, 1995, there were no
securities sold short outstanding.
In addition, the following summarizes open forward currency exchange
contracts for the Managed Assets Portfolio at June 30, 1995:
<TABLE>
<CAPTION>
U.S. DOLLAR UNREALIZED
FORWARD CURRENCY SALE CONTRACTS PROCEEDS VALUE (DEPRECIATION)
------------------------------- ------------- -------------- -------------
<S> <C> <C> <C>
German Deutschemarks, expiring 8/15/95 $ 1,887,980 $ 1,957,657 $ (69,677)
Hong Kong Dollars, expiring 7/5/95 5,980 5,980 ---
Swiss Francs, expiring 8/15/95 3,782,148 3,930,818 (148,670)
------------- -------------- --------------
$ 5,676,108 $ 5,894,455 $ (218,347)
============= ============== ==============
</TABLE>
With respect to the Managed Assets and International Equity Portfolios,
each series enters into forward currency exchange contracts. When executing
forward currency exchange contracts, each series is obligated to buy or sell
a foreign currency at a specified rate on a certain date in the future. With
respect to sales of forward currency exchange contracts, each series would
incur a loss if
61
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
the value of the contract increases between the date the forward contract is
opened and the date the forward contract is closed. Each series realizes a
gain if the value of the contract decreases between those dates. With
respect to purchases of forward currency exchange contracts, each series
would incur a loss if the value of the contract decreases between the date
the forward contract is opened and the date the forward contract is closed.
Each series realizes a gain if the value of the contract increases between
those dates. Each series' exposure to credit risk associated with counter
party nonperformance on these investments is typically limited to the
unrealized gains in such contracts that are recognized in the Statement of
Assets and Liabilities.
With respect to the Managed Assets Portfolio, the series is engaged in
trading financial futures contracts. The series is exposed to market risk as
a result of changes in the value of the underlying financial instruments (see
the Statement of Financial Futures). Investments in financial futures require
the series to "mark to market" on a daily basis, which reflects the change in
the market value of the contract at the close of each day's trading.
Typically, variation margin payments are made or received to reflect daily
unrealized gains or losses. When the contracts are closed, the series
recognizes a realized gain or loss. These investments require initial margin
deposits with a custodian, which consist of cash or cash equivalents, up to
approximately 10% of the contract amount. The amount of these deposits is
determined by the exchange or Board of Trade on which the contract is traded
and is subject to change. Contracts open at June 30, 1995, and their related
unrealized market depreciation are set forth in the Statement of Financial
Futures.
With respect to the Managed Assets Portfolio, the series is also engaged
in trading restricted options, which are not exchange traded. The series'
exposure to credit risk associated with counter party nonperformance on these
investments is typically limited to the market value of such investments that
are disclosed in the Statement of Investments.
(b) The following summarizes the accumulated net unrealized appreciation
(depreciation) on investments and financial futures for each series at June
30, 1995, excluding foreign currency transactions for the Managed Assets and
International Equity Portfolios:
<TABLE>
<CAPTION>
GROSS GROSS
APPRECIATION (DEPRECIATION) NET
------------ -------------- ------------
<S> <C> <C> <C>
Money Market Portfolio.......................... $ - $ - $ -
Managed Assets Portfolio........................ 2,242,324 (2,372,611) (130,287)
Zero Coupon 2000 Portfolio...................... 431,653 (46,300) 385,353
Quality Bond Portfolio.......................... 594,204 (158,275) 435,929
Small Cap Portfolio............................. 45,313,700 (5,261,998) 40,051,702
Capital Appreciation Portfolio.................. 3,318,826 (43,069) 3,275,757
Growth and Income Portfolio..................... 1,457,106 (128,301) 1,328,805
International Equity Portfolio.................. 162,863 (100,364) 62,499
</TABLE>
At June 30, 1995, the cost of investments of each series for Federal
income tax purposes was substantially the same as the cost for financial
reporting purposes. The cost of investments for each series for financial
reporting purposes as of June 30, 1995, was as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Money Market Portfolio................... $36,250,022 Small Cap Portfolio.................... $296,012,506
Managed Assets Portfolio................. 29,095,886 Capital Appreciation Portfolio......... 24,199,717
Zero Coupon 2000 Portfolio............... 14,960,069 Growth and Income Portfolio............ 19,212,074
Quality Bond Portfolio................... 20,944,531 International Equity Portfolio......... 3,820,008
</TABLE>
62
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
REVIEW REPORT OF ERNST & YOUNG LLP, INDEPENDENT ACCOUNTANTS
SHAREHOLDERS AND BOARD OF TRUSTEES
DREYFUS VARIABLE INVESTMENT FUND
We have reviewed the accompanying statements of assets and liabilities,
including the statements of investments and financial futures of Dreyfus
Variable Investment Fund (comprising, respectively, the Money Market, Managed
Assets, Zero Coupon 2000, Quality Bond, Small Cap, Capital Appreciation,
Growth and Income and International Equity Portfolios), as of June 30, 1995,
and the related statements of operations and changes in net assets and
financial highlights for the six month period ended June 30, 1995. These
financial statements and financial highlights are the responsibility of the
Fund's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which
will be performed for the full year with the objective of expressing an
opinion regarding the financial statements and financial highlights taken as
a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the interim financial statements and financial highlights
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the statement of changes in net assets for the year ended
December 31, 1994 and financial highlights for each of the indicated periods
ended December 31, 1994 and in our report dated February 13, 1995, we
expressed an unqualified opinion on such statement of changes in net assets
and financial highlights.
/s/ Ernst & Young LLP
New York, New York
August 7, 1995
63
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
We are pleased to report on the investment activities and results of the
portfolios in the Quest for Value Accumulation Trust for the six months ended
June 30, 1995. Both the stock and bond markets rose steadily during the period
in response to declining interest rates, low inflation and a softening economy.
The results of the portfolios in the Quest for Value Accumulation Trust were
generally favorable, with several ranking in the upper echelon of their
respective Lipper categories.
QUEST FOR VALUE ACCUMULATION TRUST
EQUITY PORTFOLIO
As with our other portfolios of the Quest for Value Accumulation Trust, the
Equity Portfolio is designed for the long-term investor who seeks to preserve
capital and make it grow. The Equity Portfolio continued its excellent
performance in the 1995 first half, delivering a 23.4% total return, exceeding
the return of 20.2% with dividends included for the Standard & Poor's 500 Index
(S&P 500 Index), an unmanaged index of 500 of the largest corporations weighted
by market capitalization. This performance ranked fifth among the 39 capital
appreciation funds in Lipper's Variable Insurance Products Performance Analysis
Service Report.
The Portfolio has been a consistently strong performer over time. For
instance, for the five years ended June 30, 1995, its average annual total
return of 15.1%* exceeded the 12.1% average annual return of the S&P 500 Index.
The Portfolio's five-year performance was eighth best among the 22 portfolios in
the Lipper capital appreciation category. The average annual total return since
the Portfolio's inception on August 1, 1988 was 14.9%*, compared with 14.1% for
the S&P 500. Returns for the Portfolio take into account expenses incurred by
the Portfolio but do not take into account charges imposed by the Variable
Accounts.
In managing the Portfolio, we seek to control risk and achieve growth in two
ways: by purchasing superior companies that are less vulnerable to market
declines, and by purchasing these superior companies inexpensively. During the
six months, the Portfolio's performance was driven primarily by its substantial
holdings of financial service companies, such as EXEL Ltd., Federal Home Loan
Mortgage Corp. (Freddie Mac), Mellon Bank Corp. and American International
Group, Inc. Such stocks were one of the market's strongest groups in the period.
As prices rose, we took profits in a number of our financial service holdings,
reducing somewhat the Portfolio's investments in this sector. We increased the
Portfolio's investments in retailing companies, including May Department Stores
Co. and J.C. Penney Co., Inc. These high-quality companies earn attractive
returns on investment, and we believe the stocks are reasonably priced.
As of June 30, 1995, 82.0% of the Portfolio's net assets were invested in
common stocks with the remainder in cash and cash equivalents. Major industry
positions were in the insurance, financial services, aerospace and defense, and
retail sectors. The Portfolio's five largest equity holdings were EXEL, Ltd., a
strongly capitalized specialty insurance company; May Department Stores Co., a
leading retailer; Citicorp, a major banking and financial services company;
Federal Home Loan Mortgage Corp. (Freddie Mac), the second largest insurer of
home mortgages in the United States; and Intel Corp., a leading producer of
computer chips.
------------
* On September 16, 1994, an investment company which had commenced operations on
August 1, 1988, then called Quest for Value Accumulation Trust (the "Old
Trust"), was effectively divided into two investment funds--the Old Trust and
the present Quest for Value Accumulation Trust (the "Present Trust")--at which
time the Present Trust commenced operations. The total net assets of the
Equity Portfolio immediately after the transaction were $86,789,755 in the Old
Trust and $3,764,598 in the Present Trust. For the period prior to September
16, 1994, the performance figures for the Equity Portfolio of the Present
Trust reflect the performance of the Equity Portfolio of the Old Trust.
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
SMALL CAP PORTFOLIO
Common stocks of smaller companies have historically provided high returns
over time, but sometimes with short-term price volatility. The Small Cap
Portfolio provides a conservative way to participate in this dynamic sector. Our
strategy is to capture the market's returns and control risk by investing in
established smaller companies with sound financial positions and strong market
shares.
For the six months ended June 30, 1995, the Portfolio's total return of 5.9%
compared with the 14.4% return of the Russell 2000 Index, a widely followed
benchmark which includes smaller capitalization stocks. One of the main reasons
the Portfolio lagged the index was our underweighting in the technology sector,
which delivered some of the small cap market's highest returns in the period.
Our underweighting in technology is a result of our approach to selecting
stocks and our emphasis on preserving capital. As you know, we invest in quality
companies with sustainable business franchises. Over time, these companies
generate capital in excess of their business needs and use this excess capital
to increase shareholder value. These companies also have strong competitive
positions that allow them to defend their high returns on capital. Very few
technology companies, with the exception of some large competitors such as Intel
and Microsoft, meet these criteria. Most small technology companies rely instead
on only a few products which are vulnerable to being supplanted in today's
environment of technological innovation. Also, many small technology companies
have only a short history of business performance, rather than the longer-term
record which indicates an ability to prosper and grow through a variety of
economic conditions. Some of these companies will continue to succeed, but many
are likely to falter and disappear. For these reasons, and given the high
valuations of many small technology stocks, we have very few investments in this
sector. We prefer to invest in proven companies which are available at
reasonable valuations and are likely to produce superior returns over many
years. Like the tortoise and the hare, we believe that steady and sure wins the
race in the long run, even if we forgo some exciting higher-risk opportunities
in the short run.
The Small Cap Portfolio has performed well in relation to the Russell 2000
Index over longer periods. Its average annual total return of 15.1%* in the five
years ended June 30, 1995 exceeded the average annual return of 12.9% for the
Russell Index. Since August 1, 1988, the Portfolio has produced an average
annual total return of 13.9%*, well above the 11.7% return for the index.
Returns for the Portfolio take into account expenses incurred by the Portfolio
but do not take into account any of the charges imposed by the Variable
Accounts.
As of June 30, 1995, 76.7% of the Portfolio's net assets were invested in
common stocks and securities convertible into common stocks, 0.2% in corporate
notes, and 23.1% in cash and equivalents. Major industry positions were in the
manufacturing, energy, real estate, and building and construction sectors. The
Portfolio's largest equity holdings were Marshall Industries, which distributes
electronic components; True North Communications, Inc. (formerly Foote, Cone &
Belding), a prominent advertising agency; Mohawk Industries, Inc., a leading
carpet manufacturer; Martin Marietta Materials, Inc., which produces
construction aggregates; and Belden & Blake Corp., an oil and gas exploration
company. We continue to perform the rigorous, in-depth research to identify
quality smaller companies that are underpriced in the market.
------------
* On September 16, 1994, an investment company which had commenced operations on
August 1, 1988, then called Quest for Value Accumulation Trust (the "Old
Trust"), was effectively divided into two investment funds--the Old Trust and
the present Quest for Value Accumulation Trust (the "Present Trust")--at which
time the Present Trust commenced operations. The total net assets of the Small
Cap Portfolio immediately after the transaction were $139,812,573 in the Old
Trust and $8,129,274 in the Present Trust. For the period prior to September
16, 1994, the performance figures for the Small Cap Portfolio of the Present
Trust reflect the performance of the Small Cap Portfolio of the Old Trust.
2
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
MANAGED PORTFOLIO
The Managed Portfolio continued its noteworthy performance as one of the
top-rated funds in its category. The Portfolio seeks capital appreciation by
investing in equities and fixed income securities. It provided a total return of
29.7% in the 1995 first half, exceeding by a wide margin the return of 20.2%
with dividends included for the Standard & Poor's 500 Index (S&P 500 Index), an
unmanaged index of 500 of the largest corporations weighted by market
capitalization. This performance was second best among the 64 flexible portfolio
funds in Lipper's Variable Insurance Products Performance Analysis Service
Report.
The Portfolio has also performed extremely well over longer periods. In the
five years ended June 30, 1995, the Portfolio's average annual total return of
19.0%* easily outpaced the average annual return of 12.1% for the S&P 500 Index.
This five-year performance ranked second among the 49 flexible portfolio funds
monitored by Lipper. Since August 1, 1988, the Portfolio has delivered an
average annual total return of 19.3%*, compared with a 14.1% return for the S&P
500. Returns for the Portfolio take into account expenses incurred by the
Portfolio. Other charges are imposed by the Variable Accounts.
The Portfolio's philosophy is based on the premise that common stocks
provide the best returns over time, so there is a bias towards owning stocks.
The Portfolio also invests in bonds and cash equivalents, which can be valuable
tools for preserving capital. At June 30, 1995, the Portfolio's asset mix was
94.6% common stocks and securities convertible into common stocks, 2.2% Treasury
notes and bonds and 3.2% cash and cash equivalents. This reflected an increase
in holdings of common stocks during the six months and a reduction in cash
reserves.
The Portfolio's performance during the half was driven in large measure by
its significant investments in financial service stocks, one of the market's
strongest sectors. Investments in banking and miscellaneous financial service
companies accounted for 29.2% of the Portfolio's net assets as of June 30, 1995.
Also contributing to performance were McDonnell Douglas Corp., up more than 60%
in price during the six months, and Intel Corp., up more than 95%.
Major industry positions as of June 30, 1995 were in the banking, financial
services, technology and consumer products sectors. The Portfolio's five largest
equity holdings were Intel Corp., a leading producer of computer chips;
McDonnell Douglas Corp., the nation's largest manufacturer of military aircraft
and an important competitor in commercial aircraft; Citicorp, a major banking
and financial services company; Mellon Bank Corp., a major money center bank
headquartered in Pittsburgh; and Federal Home Loan Mortgage Corp. (Freddie Mac),
the second largest insurer of home mortgages in the United States.
------------
* On September 16, 1994, an investment company which had commenced operations on
August 1, 1988, then called Quest for Value Accumulation Trust (the "Old
Trust"), was effectively divided into two investment funds--the Old Trust and
the present Quest for Value Accumulation Trust (the "Present Trust")--at which
time the Present Trust commenced operations. The total net assets of the
Managed Portfolio immediately after the transaction were $682,601,380 in the
Old Trust and $51,345,102 in the Present Trust. For the period prior to
September 16, 1994, the performance figures for the Managed Portfolio of the
Present Trust reflect the performance of the Managed Portfolio of the Old
Trust.
3
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
GLOBAL EQUITY PORTFOLIO
We introduced the Global Equity Portfolio on March 1, 1995, in recognition that
investors' horizons are no longer limited to the United States. We view global
diversification as a prudent tool for controlling risk and capitalizing on
investment opportunity wherever it may exist. The Global Equity Portfolio
seeks long-term growth by investing in a diversified portfolio of high-quality
foreign and domestic stocks.
The Portfolio has gotten off to a strong start, providing a total return of
9.4% in the four months from its inception through June 30, 1995. This
exceeded the total return on Morgan Stanley International's World Stock Index
in both local currencies and U.S. dollars. While the index was up only 4.4% in
local currencies, because of currency adjustments the index provided a total
return of 9.1% in dollars. The return of the Portfolio takes into account the
expenses incurred by the Portfolio but does not include other charges imposed
by the Variable Accounts.
As with our domestic portfolios, we are value investors internationally. In
managing the Global Portfolio, we seek to buy companies that generate high cash
flow and use it to increase shareholder value -- and we want to buy these
companies at reasonable prices. This combination of high returns and reasonable
market valuations provides opportunity for investment profit. Because of our
disciplined approach, we believe the Portfolio offers a relatively low-risk way
to participate in global markets.
We moved quickly to invest the Portfolio's assets in common stocks. As of June
30, 1995, the Portfolio owned the stocks of 46 companies in 15 countries. Of
the total Portfolio, 54.9% was invested in international stocks and warrants
convertible into such stocks, 34.6% in U.S. stocks and 10.5% in foreign and
domestic cash and cash equivalents. The largest holdings outside the United
States were in European stocks, which accounted for 42.6% of the Portfolio.
Within Europe, the biggest positions were in Germany, France, the United
Kingdom and the Netherlands.
Among individual stocks, the largest international holdings were Oy Nokia AB, a
Finnish manufacturer of equipment for cellular telephones; SAP AG, a German
software design and development company; Flughaffen Wien AG, an Austrian-based
airport management company; ASTRA AB, a Swedish pharmaceuticals company; and
Argyll Group PLC, a British food retailer. The Portfolio's largest U.S. equity
holdings were McDonnell Douglas Corp., the largest U.S. manufacturer of
military aircraft and an important competitor in commercial aircraft; Federal
Home Loan Mortgage Corp. (Freddie Mac), the second largest insurer of home
mortgages; Intel Corp., a major producer of computer chips; Mellon Bank Corp.,
a major money center bank; and American Express Co., a leading financial
services company.
We did not invest significantly in Japan, the world's second largest equity
market after the United States, because we could not find value there at a time
of high Japanese price-earnings ratios and declining corporate profits. This
decision proved well founded, given the Japanese stock market's sharp decline
in the 1995 first half.
QUEST FOR VALUE ACCUMULATION TRUST
U.S. GOVERNMENT INCOME PORTFOLIO
We introduced the U.S. Government Income Portfolio on January 3, 1995, for
investors seeking favorable returns from investments in government securities.
The Portfolio, which seeks to provide a combination of high current income and
protection of capital, invests in debt obligations issued or guaranteed by the
U.S. Government and its agencies or intermediaries. These issues are considered
to carry the least credit risk. The Portfolio invests primarily in
intermediate- term securities and places a priority on maintaining a relatively
stable net asset value (NAV) per share.
From inception through June 30, 1995, the Portfolio's total return of 8.3%
compared with a 9.0% return for the Lehman Brothers Intermediate Government
Bond Index. Returns take into account expenses incurred by the Portfolio.
Other charges are imposed by the Variable Accounts.
We have invested the Portfolio in a diversified group of government securities,
as we seek to generate above-average returns with below-average risk. At the
end of June, the Portfolio's assets were allocated 47.3% to Treasuries, 50.4%
to U.S. Government agency securities and 2.3% to net cash and short-term
securities. The average maturity of the Portfolio's investments was 3.5 years.
4
<PAGE>
BOND PORTFOLIO
The Bond Portfolio provides a convenient way to invest in a diversified
group of quality corporate and government debt securities. It seeks to provide a
high level of current income consistent with moderate risk of capital and
maintenance of liquidity. It offers the potential for higher returns than the
U.S. Government Income Portfolio and is intended for investors willing to accept
greater price volatility through investments in longer term securities in return
for greater profit potential.
The Portfolio's total return of 9.9% in the six months ended June 30, 1995
compared with a total return of 11.4% for the Lehman Brothers Aggregate Bond
Index, a widely followed benchmark. In the five years ended June 30, 1995, the
Portfolio produced a 8.2%* average annual total return, compared with 9.4% for
the index. Since August 1, 1988, the Portfolio has generated an average annual
total return of 7.8%.* These returns take into account expenses incurred by the
Portfolio and not any of the charges imposed by the Variable Accounts.
In managing the Portfolio, we look for sector, maturity and quality groups
of the bond market that provide the highest yield at the lowest price with the
least amount of risk. As of June 30, 1995, the Portfolio was invested 41.0% in
Treasury notes and bonds, 30.6% in corporate notes and bonds, 26.7% in U.S.
Government agency securities and 1.7% in cash and cash equivalents. Because
corporates offer virtually no yield advantage over governments at this time, the
Portfolio is currently invested heavily in government securities.
The effective average maturity of the Portfolio was 13.1 years as of June
30, 1995.
QUEST FOR VALUE ACCUMULATION TRUST
MONEY MARKET PORTFOLIO
The Money Market Portfolio seeks maximum current income consistent with
stability of principal and liquidity. The seven-day compounded distribution
yield of the Portfolio was 5.20% as of June 30, 1995, up from 5.06% six months
earlier. The average dollar-weighted portfolio maturity was 30 days as of June
30, 1995.
Our philosophy is to manage the Portfolio conservatively, recognizing that
shareholders of money market funds view liquidity and safety of principal as
their most important objectives. Rather than subjecting the Money Market
Portfolio to additional risk to achieve a higher return, we maintain a rigorous
approach to analyzing and investing in quality credits. These include the
short-term securities of leading financial institutions and industrial companies
in the United States and abroad, as well as marketable obligations of the United
States Government, its agencies and instrumentalities. As of June 30, 1995,
94.6% of the Portfolio's assets were allocated to the commercial paper of
companies such as American Home Products Corp., Beneficial Corp. and Deere &
Co., with the remaining assets invested in U.S. Government agency securities. We
continued to avoid all investments in derivative securities.
Investments in the Money Market Portfolio are not insured or guaranteed by
the U.S. Government. There is no assurance that the Portfolio will maintain a
stable net asset value.
------------
* On September 16, 1994, an investment company which had commenced operations on
August 1, 1988, then called Quest for Value Accumulation Trust (the "Old
Trust"), was effectively divided into two investment funds--the Old Trust and
the present Quest for Value Accumulation Trust (the "Present Trust")--at which
time the Present Trust commenced operations. The total net assets of the Bond
Portfolio immediately after the transaction were $3,756,161. For the period
prior to September 16, 1994, the performance figures for the Bond Portfolio of
the Present Trust reflect the performance of the Bond Portfolio of the Old
Trust.
5
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- ----------
<S> <C> <C>
SHORT-TERM CORPORATE NOTES--18.2%
AUTOMOTIVE--2.0%
$ 130,000 Ford Motor Credit Co., 5.95%, 7/17/95............................... $ 129,656
----------
INSURANCE--4.8%
Prudential Funding Corp.
100,000 5.93%, 7/3/95..................................................... 99,967
210,000 5.93%, 7/19/95.................................................... 209,377
----------
309,344
----------
MACHINERY/ENGINEERING--3.3%
Deere & Co.
100,000 5.93%, 7/12/95.................................................... 99,819
110,000 5.95%, 7/26/95.................................................... 109,546
----------
209,365
----------
MISCELLANEOUS FINANCIAL SERVICES--8.1%
200,000 Avco Financial Services, Inc., 5.96%, 7/26/95....................... 199,172
120,000 CIT Group Holdings, Inc., 5.94%, 7/31/95............................ 119,406
200,000 Household Finance Corp., 5.95%, 7/24/95............................. 199,240
----------
517,818
----------
Total Short-Term Corporate Notes (amortized cost--$1,166,183)... $1,166,183
----------
SHARES
---------
COMMON STOCKS--82.0%
AEROSPACE/DEFENSE--7.9%
4,380 AlliedSignal, Inc. ................................................. $ 194,910
8,000 Coltec Industries, Inc. ............................................ 138,000
2,247 McDonnell Douglas Corp. ............................................ 172,457
----------
505,367
----------
BANKING--5.8%
4,656 Citicorp............................................................ 269,466
2,344 Mellon Bank Corp. .................................................. 97,569
----------
367,035
----------
CHEMICALS--3.8%
3,198 Hercules, Inc. ..................................................... 155,902
982 Monsanto Co. ....................................................... 88,503
----------
244,405
----------
</TABLE>
6
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1995
<TABLE>
<CAPTION>
SHARES VALUE
--------- ----------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
CONGLOMERATES--1.9%
2,156 General Electric Co. ............................................... $ 121,544
----------
CONSUMER PRODUCTS--7.0%
1,422 Avon Products, Inc. ................................................ 95,274
3,370 Hasbro, Inc. ....................................................... 106,997
5,475 Mattel, Inc. ....................................................... 142,350
2,000 Premark International, Inc. ........................................ 103,750
----------
448,371
----------
CONTAINERS--2.8%
3,698 Temple-Inland, Inc. ................................................ 176,117
----------
DRUGS & MEDICAL PRODUCTS--3.9%
3,021 Becton, Dickinson & Co. ............................................ 175,973
874 Warner-Lambert Co. ................................................. 75,492
----------
251,465
----------
ELECTRONICS--2.8%
3,538 Arrow Electronics, Inc.*............................................ 176,016
----------
ENERGY--2.2%
2,996 Triton Energy Corp.*................................................ 138,940
----------
HEALTH & HOSPITALS--1.7%
2,500 Columbia/HCA Healthcare Corp. ...................................... 108,125
----------
INSURANCE--12.9%
1,248 AFLAC, Inc. ........................................................ 54,600
1,175 American International Group, Inc. ................................. 133,950
6,226 EXEL Ltd. .......................................................... 323,752
4,579 Progressive Corp. (Ohio)............................................ 175,719
874 Transamerica Corp. ................................................. 50,910
2,000 Travelers, Inc. .................................................... 87,500
----------
826,431
----------
METALS & MINING--0.9%
70 Freeport McMoRan Copper & Gold (Class A)............................ 1,444
3,057 Freeport McMoRan, Inc. ............................................. 53,880
----------
55,324
----------
MISCELLANEOUS FINANCIAL SERVICES--8.1%
3,245 American Express Co. ............................................... 113,981
4,912 Countrywide Credit Industries, Inc. ................................ 103,152
2,955 Federal Home Loan Mortgage Corp. ................................... 203,156
1,165 Morgan Stanley Group, Inc. ......................................... 94,365
----------
514,654
----------
PAPER PRODUCTS--2.2%
2,700 Champion International Corp. ....................................... 140,738
----------
</TABLE>
7
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1995
<TABLE>
<CAPTION>
SHARES VALUE
--------- ----------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
RAILROADS--2.2%
2,100 Norfolk Southern Corp. ............................................. $ 141,488
----------
RETAIL--7.1%
7,388 May Department Stores Co. .......................................... 307,526
3,000 Penney (J.C.) Co., Inc. ............................................ 144,000
----------
451,526
----------
TECHNOLOGY--3.1%
3,146 Intel Corp. ........................................................ 199,181
----------
TEXTILES/APPAREL--2.1%
6,726 Warnaco Group, Inc. (Class A)*...................................... 134,520
----------
TOBACCO/BEVERAGES/FOOD PRODUCTS--1.5%
3,445 Sara Lee Corp. ..................................................... 98,182
----------
TRANSPORTATION--2.1%
1,800 CSX Corp. .......................................................... 135,225
----------
Total Common Stocks (cost--$4,348,262).......................... $5,234,654
----------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments (A) (cost--$5,514,445)................ 100.2% $6,400,837
Other Liabilities in Excess of Other Assets............. (0.2) (13,283)
----- ----------
Total Net Assets........................................ 100.0% $6,387,554
===== ==========
</TABLE>
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
* Non-income producing security.
(A) Aggregate gross unrealized appreciation for securities in which there is
an excess of value over tax cost is $891,771, aggregate gross unrealized
depreciation for securities in which there is an excess of tax cost over
value is $5,379 and net unrealized appreciation for Federal income tax
purpose is $886,392. Federal income tax basis of portfolio securities is
substantially the same as for financial reporting purposes.
8
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost--$5,514,445)....................................... $6,400,837
Cash........................................................................... 23,261
Receivable from fund shares sold............................................... 1,100
Dividends receivable........................................................... 5,738
Receivable from adviser........................................................ 276
Other assets................................................................... 1,477
----------
Total Assets........................................................... 6,432,689
----------
LIABILITIES
Payable for fund shares redeemed............................................... 27,838
Other payables and accrued expenses............................................ 17,297
----------
Total Liabilities...................................................... 45,135
----------
NET ASSETS
Par value ($.01 per share)..................................................... 2,868
Paid-in-surplus................................................................ 5,410,048
Accumulated undistributed net investment income................................ 47,588
Accumulated undistributed net realized gain on investments..................... 40,658
Net unrealized appreciation on investments..................................... 886,392
----------
Total Net Assets....................................................... $6,387,554
==========
Fund shares outstanding........................................................ 286,822
----------
Net asset value per share...................................................... $22.27
======
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
EQUITY PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Dividends.................................................................. $ 40,062
Interest................................................................... 25,958
----------
Total investment income................................................ 66,020
----------
OPERATING EXPENSES
Investment advisory fee (note 2a).......................................... 15,364
Custodian fees............................................................. 7,602
Reports and notices to shareholders........................................ 5,425
Auditing, consulting and tax return preparation fees....................... 5,103
Transfer and dividend disbursing agent fees................................ 4,539
Legal fees................................................................. 3,182
Registration fees.......................................................... 351
Miscellaneous.............................................................. 1,686
----------
Total operating expenses............................................... 43,252
Less: Investment advisory fee waived and expenses reimbursed
(note 2a)...................................................... (24,820)
----------
Net operating expenses............................................. 18,432
----------
Net investment income.............................................. 47,588
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NET
Net realized gain on investments........................................... 49,990
Net change in unrealized appreciation (depreciation) on investments........ 991,420
----------
Net realized gain and change in unrealized appreciation (depreciation)
on investments....................................................... 1,041,410
----------
Net increase in net assets resulting from operations................... $1,088,998
----------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 16, 1994 (2)
JUNE 30, 1995 (1) TO DECEMBER 31, 1994
----------------------------- ----------------------------------
<S> <C> <C>
OPERATIONS
Net investment income................................. $ 47,588 $ 20,888
Net realized gain (loss) on investments............... 49,990 (9,332)
Net change in unrealized appreciation (depreciation)
on investments...................................... 991,420 (105,028)
----------- -----------
Net increase (decrease) in net assets resulting
from operations................................. 1,088,998 (93,472)
----------- -----------
DIVIDENDS TO SHAREHOLDERS
Net investment income................................. (20,888) --
----------- -----------
FUND SHARE TRANSACTIONS
Net proceeds from sales............................... 1,439,730 677,749
Net value of securities received (note 1)............. -- 3,764,598
Reinvestment of dividends............................. 20,888 --
Cost of shares redeemed............................... (422,430) (67,619)
----------- -----------
Net increase in net assets from fund share
transactions.................................... 1,038,188 4,374,728
----------- -----------
Total increase in net assets.................... 2,106,298 4,281,256
NET ASSETS
Beginning of period................................... 4,281,256 0
----------- -----------
End of period (including undistributed net investment
income of $47,588 and $20,888, respectively)........ $ 6,387,554 $4,281,256
=========== ===========
SHARES ISSUED AND REDEEMED
Issued................................................ 70,029 37,272
Issued in exchange for securities (note 1)............ -- 202,725
Issued in reinvestment of dividends................... 1,074 --
Redeemed.............................................. (20,562) (3,716)
----------- -----------
Net increase...................................... 50,541 236,281
=========== ===========
</TABLE>
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
(1) Unaudited.
(2) Commencement of operations.
11
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1995
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Quest for Value Accumulation Trust (the "Trust") was organized on May 12,
1994 as a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Trust is authorized to issue an unlimited number of
seven classes of shares of beneficial interest at $.01 par value: the Equity
Portfolio, the Small Cap Portfolio, the Global Equity Portfolio, the Managed
Portfolio, the Bond Portfolio, the U. S. Government Income Portfolio and the
Money Market Portfolio. Quest for Value Advisors, (the "Adviser"), a
majority-owned (99%) subsidiary of Oppenheimer Capital, serves as the Trust's
investment adviser. The Equity Portfolio, (the "Portfolio"), one of the seven
portfolios, had no operations until September 16, 1994, when the Enterprise
Accumulation Trust Equity Portfolio (formerly known as Quest for Value
Accumulation Trust Equity Portfolio), distributed cash and securities with an
aggregate market value of $3,764,598 in exchange for 202,725 shares of the
Portfolio. The following is a summary of significant accounting policies
consistently followed by the Portfolio in the preparation of its financial
statements:
(A) Valuation of Investments
Investment securities, other than debt securities, listed on a national
exchange or traded in the over-the-counter National Market System are valued
each business day at the last reported sale price; if there are no such reported
sales, the securities are valued at their last quoted bid price. Other
securities traded over-the-counter and not part of the National Market System
are valued at the last quoted bid price. Investment debt securities (other than
short-term obligations) are valued each business day by an independent pricing
service approved by the Board of Trustees. Investments are valued by the pricing
service using methods which include current market quotations from a major
market maker in the securities and trader-reviewed "matrix" prices. Short-term
debt securities having a remaining maturity of more than sixty days are valued
on a "marked-to-market" basis, that is, at prices based upon market quotations
for securities of similar type, yield, quality and maturity. Short-term debt
securities having a remaining maturity of sixty days or less are valued at
amortized cost, which approximates market value. Any securities or other assets
for which market quotations are not readily available are valued at their fair
value as determined in good faith by the Board of Trustees. The ability of
issuers of debt instruments to meet their obligations may be affected by
economic developments in a specific industry or region.
(B) Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders; accordingly, no Federal
income tax provision is required.
(C) Security Transactions and Other Income
Security transactions are accounted for on the trade date. In determining
the gain or loss from the sale of securities, the cost of securities sold has
been determined on the basis of identified cost. Dividend income is recorded on
the ex-dividend date and interest income is accrued as earned. Discounts or
premiums on debt securities purchased are accreted or amortized to interest
income over the lives of the respective securities.
12
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1995
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(D) Dividends and Distributions
Dividends and distributions to shareholders from net investment income and
net realized capital gains, if any, are declared and paid at least annually.
The Portfolio records dividends and distributions to its shareholders on the
ex-dividend date. The amount of dividends and distributions from net investment
income and net realized capital gains are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. These "book-tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their federal
tax-basis treatment: temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net realized
capital gains for financial reporting purposes but not for tax purposes are
reported as dividends in excess of net investment income or distributions in
excess of net realized capital gains, respectively. To the extent distributions
exceed current and accumulated earnings and profits for federal income tax
purposes, they are reported as distributions of paid-in-surplus or tax return of
capital.
(E) Allocation of Expenses
Expenses specifically identifiable to a particular portfolio are borne by
that portfolio. Other expenses are allocated to each portfolio based on its net
assets in relation to the total net assets of all the applicable portfolios of
the Trust or another reasonable basis.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
(a) The investment advisory fee is accrued daily and payable monthly to the
Adviser, and is computed as a percentage of the Portfolio's net assets as of the
close of business each day at the annual rate of .60%.
The Adviser has agreed to waive that portion of the advisory fee and to
reimburse any necessary expenses to limit operating expenses of the Portfolio to
.72% of average daily net assets on an annual basis through at least December
31, 1995.
(b) Total brokerage commissions paid by the Portfolio for the six months
ended June 30, 1995, amounted to $3,345, of which Oppenheimer & Co., Inc., an
affiliate of the Adviser, received $1,644.
(3) PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 1995, purchases and sales of investment
securities, other than short-term securities were $1,596,742 and $907,578,
respectively.
13
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 16, 1994 (2)
JUNE 30, 1995 (1) TO DECEMBER 31, 1994
----------------- ----------------------
<S> <C> <C>
Net asset value, beginning of period..................... $ 18.12 $ 18.57
Income from investment operations:
Net investment income.................................... 0.16 0.09
Net realized and unrealized gain (loss) on investments... 4.08 (0.54)
----------------- -----------
Total from investment operations................... 4.24 (0.45)
----------------- -----------
Dividends to shareholders:
Dividends to shareholders from net investment income..... (0.09) --
----------------- -----------
Net asset value, end of period........................... $ 22.27 $ 18.12
================= ===========
Total return (3)......................................... 23.4% (2.4%)
================= ===========
Net assets, end of period................................ $ 6,387,554 $4,281,256
----------------- -----------
Ratio of net operating expenses to average net assets
(4,6).................................................. 0.72%(5) 0.72%
----------------- -----------
Ratio of net investment income to average net assets
(4,6).................................................. 1.86%(5) 1.80%
----------------- -----------
Portfolio turnover....................................... 21% 6%
----------------- -----------
</TABLE>
--------------------------------------------------------------------------------
(1) Unaudited.
(2) Commencement of operations.
(3) Assumes reinvestment of all dividends and distributions.
(4) Annualized.
(5) Average net assets for the six months ended June 30, 1995 were $5,163,811.
(6) During the periods presented above, the Adviser waived its fees and
reimbursed the Portfolio for a portion of its operating expenses. If such
waivers and reimbursements had not been in effect, the ratio of net
operating expenses to average net assets and the ratio of net investment
income to average net assets would have been 1.69% and 0.89% and 2.09% and
0.43%, respectively.
14
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
SMALL CAP PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- -----------
<S> <C> <C>
SHORT-TERM CORPORATE NOTES--23.7%
AUTOMOTIVE--4.8%
$ 585,000 Ford Motor Credit Co., 5.85%, 7/10/95.............................. $ 584,144
-----------
CONGLOMERATES--2.8%
340,000 General Electric Capital Corp., 5.86%, 7/10/95..................... 339,502
-----------
INSURANCE--4.6%
Prudential Funding Corp.
460,000 5.93%, 7/3/95...................................................... 459,848
100,000 5.94%, 7/24/95..................................................... 99,621
-----------
559,469
-----------
MACHINERY--2.5%
100,000 Deere & Co., 5.95%, 7/17/95........................................ 99,735
200,000 Deere (John) Capital Corp., 5.94%, 7/31/95......................... 199,010
-----------
298,745
-----------
MISCELLANEOUS FINANCIAL SERVICES--9.0%
590,000 American Express Credit Corp., 5.90%, 7/26/95...................... 587,583
200,000 CIT Group Holdings, Inc., 5.94%, 7/13/95........................... 199,010
Household Finance Corp.
100,000 5.95%, 7/3/95...................................................... 99,967
200,000 5.95%, 7/26/95..................................................... 199,174
-----------
1,085,734
-----------
Total Short-Term Corporate Notes (amortized
cost--$2,867,594)............................................ $ 2,867,594
-----------
CORPORATE NOTES--0.2%
AUTOMOTIVE--0.0%
$ 2,148 Collins Industries, Inc., 8.75%, 1/11/00........................... $ 1,954
-----------
ENERGY--0.2%
15,125 Global Marine, Inc., 12.75%, 12/15/99.............................. 16,637
-----------
Total Corporate Notes (cost--$18,473).......................... $ 18,591
-----------
CONVERTIBLE CORPORATE BONDS--1.0%
REAL ESTATE--0.4%
$ 50,767 Security Capital Realty, Inc., 12.00%, 6/30/14 (A) (B)............. $ 50,767
-----------
TRANSPORTATION--0.6%
82,500 Interpool, Inc., 5.25%, 12/15/18................................... 66,000
-----------
Total Convertible Corporate Bonds (cost--$108,840)............. $ 116,767
-----------
SHARES
---------
CONVERTIBLE PREFERRED STOCK--0.1%
RETAIL--0.1%
2,200 Family Bargain Corp. $.95 Conv. Pfd. (cost--$18,975)............... $ 9,075
-----------
</TABLE>
15
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
SMALL CAP PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1995
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
COMMON STOCKS--75.6%
ADVERTISING--4.2%
7,800 Katz Media Group, Inc.*............................................ $ 123,825
20,264 True North Communications, Inc. ................................... 382,483
-----------
506,308
-----------
AEROSPACE--0.5%
6,138 BE Aerospace, Inc.*................................................ 54,475
-----------
AUTOMOTIVE--1.7%
4,400 Collins Industries, Inc.*.......................................... 9,350
15,100 Masland Corp. ..................................................... 194,413
-----------
203,763
-----------
BUILDING & CONSTRUCTION--5.3%
10,028 D.R. Horton, Inc. ................................................. 134,125
11,300 Engle Homes, Inc. ................................................. 103,112
8,000 Insituform Technologies (Class A)*................................. 106,000
15,000 Martin Marietta Materials, Inc. ................................... 300,000
-----------
643,237
-----------
CHEMICALS--1.5%
6,500 OM Group, Inc. .................................................... 185,250
-----------
COMPUTER SERVICES--2.5%
15,867 BancTec, Inc.*..................................................... 247,922
1,694 Globalink, Inc.*................................................... 24,986
4,158 Sudbury, Inc.*..................................................... 31,185
-----------
304,093
-----------
CONGLOMERATES--1.3%
12,000 IDEON Group, Inc. ................................................. 118,500
1,500 Ralcorp Holdings, Inc.*............................................ 34,313
-----------
152,813
-----------
DRUGS & MEDICAL PRODUCTS--3.0%
5,000 Spacelabs, Inc. ................................................... 126,875
6,053 Sybron International Corp.*........................................ 241,363
-----------
368,238
-----------
ELECTRICAL EQUIPMENT--3.9%
14,100 Marshall Industries*............................................... 472,350
-----------
</TABLE>
16
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
SMALL CAP PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1995
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
ENERGY--10.8%
7,948 Aquila Gas Pipeline Corp. ......................................... $ 70,539
18,300 Belden & Blake Corp.*.............................................. 297,375
17,352 Global Natural Resources, Inc.*.................................... 186,534
4,213 Nahama & Weagant Energy Co. *...................................... 42
13,000 Noble Drilling Corp.*.............................................. 95,875
10,000 Petroleum Heat & Power Company, Inc. (Class A)..................... 82,500
10,000 St. Mary Land & Exploration Co. ................................... 125,000
10,942 Sithe Energies, Inc. *............................................. 106,684
16,600 Tesoro Petroleum Corp. ............................................ 166,000
2,000 Triton Energy Corp.*............................................... 92,750
3,400 UGI Corp. ......................................................... 71,825
-----------
1,295,124
-----------
ENTERTAINMENT--0.3%
3,000 Hollywood Park, Inc. .............................................. 38,250
15,983 Spectravision, Inc. (Class B)*..................................... 3,996
-----------
42,246
-----------
FOOD SERVICES--0.3%
1,500 IHOP Corp.*........................................................ 38,625
-----------
INSURANCE--4.9%
15,000 Capsure Holding Corp.*............................................. 210,000
9,453 Guaranty National Corp. ........................................... 174,881
21,800 Penn America Group, Inc.*.......................................... 207,100
-----------
591,981
-----------
LEISURE--0.1%
550 Supertel Hospitality, Inc.*........................................ 7,425
-----------
MANUFACTURING--11.5%
7,000 Baldwin Technology Co. (Class A)................................... 35,438
4,500 Carlisle Companies, Inc. .......................................... 172,125
7,068 Collins & Aikman Corp.*............................................ 63,612
7,800 Crane Co. ......................................................... 282,750
4,186 Ekco Group, Inc.*.................................................. 25,116
9,700 Exabyte Corp.*..................................................... 134,588
6,000 Foamex International, Inc.*........................................ 43,875
15,000 Harmon Industries, Inc. ........................................... 251,250
16,500 Interlake Corp.*................................................... 47,437
9,048 North American Watch Co. .......................................... 127,803
8,200 Singer Co. N.V. ................................................... 212,175
-----------
1,396,169
-----------
MEDIA/BROADCASTING--0.2%
500 Pulitzer Publishing Co. ........................................... 21,312
-----------
</TABLE>
17
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
SMALL CAP PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1995
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
PAPER PRODUCTS--1.2%
4,000 Repap Enterprises, Inc. ........................................... $ 31,000
8,000 Shorewood Packaging Corp. ......................................... 117,000
-----------
148,000
-----------
PRINTING & PUBLISHING--2.7%
2,811 Commerce Clearing House, Inc. (Class B)............................ 61,139
2,600 International Imaging Materials, Inc.*............................. 66,300
6,400 Nu-Kote Holdings, Inc. (Class A)*.................................. 203,200
-----------
330,639
-----------
REAL ESTATE--6.5%
11,291 Cousins Properties, Inc. .......................................... 200,415
6,161 Post Properties, Inc. ............................................. 186,370
7,500 Security Capital Industrial Trust, Inc. ........................... 121,875
12,752 Security Capital Pacific Trust..................................... 221,566
66 Security Capital Realty, Inc. (A).................................. 58,212
-----------
788,438
-----------
RETAIL--3.8%
12,000 AmeriCredit Corp.*................................................. 133,500
24,306 Cash America International, Inc. .................................. 179,257
7,500 Freds, Inc. ....................................................... 75,000
7,000 Maxim Group, Inc.*................................................. 75,250
-----------
463,007
-----------
SECURITY/INVESTIGATION SERVICES--0.1%
10,801 Automated Security (Holdings) PLC ADS*............................. 16,202
-----------
TECHNOLOGY--0.5%
2,000 Unitrode Corp.*.................................................... 56,250
-----------
TELECOMMUNICATION--0.5%
4,200 ECI Telecommunications Limited Designs............................. 57,487
-----------
TEXTILES/APPAREL--4.4%
2,426 Fab Industries, Inc. .............................................. 73,993
25,200 Mohawk Industries, Inc.*........................................... 371,700
4,400 Warnaco Group, Inc. (Class A)*..................................... 88,000
-----------
533,693
-----------
TOBACCO/BEVERAGES/FOOD PRODUCTS--1.4%
12,900 Morningstar Group, Inc. ........................................... 93,525
6,000 Sylvan Foods Holdings, Inc.*....................................... 70,500
-----------
164,025
-----------
TRANSPORTATION--0.9%
8,300 Interpool, Inc. *.................................................. 113,088
-----------
</TABLE>
18
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
SMALL CAP PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1995
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
OTHER--1.6%
8,250 McGrath RentCorp. ................................................. $ 144,375
4,970 Olympic Steel, Inc.*............................................... 45,972
-----------
190,347
-----------
Total Common Stocks (cost--$8,665,488)......................... $ 9,144,585
-----------
Total Investments (C) (cost--$11,679,370).............. 100.6% $12,156,612
Other Liabilities in Excess of Other Assets............ (0.6) (68,484)
----- -----------
Total Net Assets....................................... 100.0% $12,088,128
===== ===========
</TABLE>
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
* Non-income producing security.
(A) Restricted securities (the Portfolio will not bear any costs, including
those involved in registration under the Securities Act of 1933, in
connection with the disposition of these securities):
<TABLE>
<CAPTION>
Valuation
as of
Date of Par Unit June 30,
Description Acquisition Amount Shares Cost 1995
------------------------------ ----------- ------- ------ ------- ----------
<S> <C> <C> <C> <C> <C>
Security Capital Realty, Inc.
12.00%, 6/30/14 9/16/94 $50,767 -- $ 90.74 $ 100.00
Security Capital Realty, Inc.
Common Stock 9/16/94 -- 66 $949.18 $ 882.00
</TABLE>
(B) Security Capital at its discretion may defer interest payments.
(C) Aggregate gross unrealized appreciation for securities in which there is
an excess of value over tax cost is $943,155, aggregate gross unrealized
depreciation for securities in which there is an excess of tax cost over
value is $465,913, and net unrealized appreciation for Federal income tax
purposes is $477,242. Federal income tax basis of portfolio securities is
substantially the same as for financial reporting purposes.
19
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
SMALL CAP PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost--$11,679,370)..................................... $12,156,612
Cash.......................................................................... 42,426
Receivable from investments sold.............................................. 127,553
Receivable from fund shares sold.............................................. 33,366
Dividends receivable.......................................................... 13,750
Interest receivable........................................................... 3,430
Other assets.................................................................. 2,283
-----------
Total Assets.......................................................... 12,379,420
-----------
LIABILITIES
Payable for investments purchased............................................. 270,399
Payable for fund shares redeemed.............................................. 356
Investment advisory fee payable............................................... 340
Other payables and accrued expenses........................................... 20,197
-----------
Total Liabilities..................................................... 291,292
-----------
NET ASSETS
Par value ($.01 per share).................................................... 6,604
Paid-in-surplus............................................................... 11,468,095
Accumulated undistributed net investment income............................... 91,579
Accumulated undistributed net realized gain on investments.................... 44,608
Net unrealized appreciation on investments.................................... 477,242
-----------
Total Net Assets...................................................... $12,088,128
===========
Fund shares outstanding....................................................... 660,382
-----------
Net asset value per share..................................................... $18.30
======
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
SMALL CAP PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Dividends.................................................................... $ 65,379
Interest..................................................................... 64,215
--------
Total investment income.................................................. 129,594
--------
OPERATING EXPENSES
Investment advisory fee (note 2a)............................................ 30,924
Reports and notices to shareholders.......................................... 6,367
Auditing, consulting and tax return preparation fees......................... 5,026
Custodian fees............................................................... 4,840
Transfer and dividend disbursing agent fees.................................. 4,581
Legal fees................................................................... 3,096
Registration fees............................................................ 754
Miscellaneous................................................................ 2,401
--------
Total operating expenses................................................. 57,989
Less: Investment advisory fee waived (note 2a)........................... (19,974)
--------
Net operating expenses............................................... 38,015
--------
Net investment income................................................ 91,579
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NET
Net realized gain on investments............................................. 44,608
Net change in unrealized appreciation (depreciation) on investments.......... 554,543
--------
Net realized gain and change in unrealized appreciation (depreciation) on
investments............................................................ 599,151
--------
Net increase in net assets resulting from operations..................... $690,730
========
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
SMALL CAP PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 16, 1994 (2)
JUNE 30, 1995 (1) TO DECEMBER 31, 1994
----------------------------- ----------------------------------
<S> <C> <C>
OPERATIONS
Net investment income................................. $ 91,579 $ 29,623
Net realized gain on investments...................... 44,608 26,352
Net change in unrealized appreciation (depreciation)
on investments...................................... 554,543 (77,301)
------------ -----------
Net increase (decrease) in net assets resulting
from operations................................. 690,730 (21,326)
------------ -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income................................. (29,623) --
Net realized gains.................................... (26,352) --
------------ -----------
Total dividends and distributions to
shareholders.................................... (55,975) --
------------ -----------
FUND SHARE TRANSACTIONS
Net proceeds from sales............................... 3,573,527 1,287,020
Net value of securities received (note 1)............. -- 8,129,274
Reinvestment of dividends and distributions........... 55,975 --
Cost of shares redeemed............................... (1,386,572) (184,525)
------------ -----------
Net increase in net assets from fund share
transactions.................................... 2,242,930 9,231,769
------------ -----------
Total increase in net assets.................. 2,877,685 9,210,443
NET ASSETS
Beginning of period................................... 9,210,443 0
------------ -----------
End of period (including undistributed net investment
income of $91,579 and $29,623, respectively)........ $12,088,128 $9,210,443
============ ===========
SHARES ISSUED AND REDEEMED
Issued................................................ 206,336 75,859
Issued in exchange for securities (note 1)............ -- 464,795
Issued in reinvestment of dividends and
distributions....................................... 3,289 --
Redeemed.............................................. (79,087) (10,810)
------------ -----------
Net increase...................................... 130,538 529,844
============ ===========
</TABLE>
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
(1) Unaudited.
(2) Commencement of operations.
22
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
SMALL CAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1995
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Quest for Value Accumulation Trust (the "Trust") was organized on May 12,
1994 as a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Trust is authorized to issue an unlimited number of
seven classes of shares of beneficial interest at $.01 par value: the Equity
Portfolio, the Small Cap Portfolio, the Global Equity Portfolio, the Managed
Portfolio, the Bond Portfolio, the U. S. Government Income Portfolio and the
Money Market Portfolio. Quest for Value Advisors, (the "Adviser"), a
majority-owned (99%) subsidiary of Oppenheimer Capital, serves as the Trust's
investment adviser. The Small Cap Portfolio, (the "Portfolio"), one of the seven
portfolios, had no operations until September 16, 1994, when the Enterprise
Accumulation Trust Small Cap Portfolio (formerly known as Quest for Value
Accumulation Trust Small Cap Portfolio), distributed cash and securities with an
aggregate market value of $8,129,274 in exchange for 464,795 shares of the
Portfolio. The following is a summary of significant accounting policies
consistently followed by the Portfolio in the preparation of its financial
statements:
(A) Valuation of Investments
Investment securities, other than debt securities, listed on a national
exchange or traded in the over-the-counter National Market System are valued
each business day at the last reported sale price; if there are no such reported
sales, the securities are valued at their last quoted bid price. Other
securities traded over-the-counter and not part of the National Market System
are valued at the last quoted bid price. Investment debt securities (other than
short-term obligations) are valued each business day by an independent pricing
service approved by the Board of Trustees. Investments are valued by the pricing
service using methods which include current market quotations from a major
market maker in the securities and trader-reviewed "matrix" prices. Short-term
debt securities having a remaining maturity of more than sixty days are valued
on a "marked-to-market" basis, that is, at prices based upon market quotations
for securities of similar type, yield, quality and maturity. Short-term debt
securities having a remaining maturity of sixty days or less are valued at
amortized cost, which approximates market value. Any securities or other assets
for which market quotations are not readily available are valued at their fair
value as determined in good faith by the Board of Trustees. The ability of
issuers of debt instruments to meet their obligations may be affected by
economic developments in a specific industry or region.
(B) Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders; accordingly, no Federal
income tax provision is required.
(C) Security Transactions and Other Income
Security transactions are accounted for on the trade date. In determining
the gain or loss from the sale of securities, the cost of securities sold has
been determined on the basis of identified cost. Dividend income is recorded on
the ex-dividend date and interest income is accrued as earned. Discounts or
premiums on debt securities purchased are accreted or amortized to interest
income over the lives of the respective securities.
23
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
SMALL CAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1995
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(D) Dividends and Distributions
Dividends and distributions to shareholders from net investment income and
net realized capital gains, if any, are declared and paid at least annually.
The Portfolio records dividends and distributions to its shareholders on the
ex-dividend date. The amount of dividends and distributions from net investment
income and net realized capital gains are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. These "book-tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their federal
tax-basis treatment: temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net realized
capital gains for financial reporting purposes but not for tax purposes are
reported as dividends in excess of net investment income or distributions in
excess of net realized capital gains, respectively. To the extent distributions
exceed current and accumulated earnings and profits for federal income tax
purposes, they are reported as distributions of paid-in-surplus or tax return of
capital.
(E) Allocation of Expenses
Expenses specifically identifiable to a particular portfolio are borne by
that portfolio. Other expenses are allocated to each portfolio based on its net
assets in relation to the total net assets of all the applicable portfolios of
the Trust or another reasonable basis.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
(a) The investment advisory fee is accrued daily and payable monthly to the
Adviser, and is computed as a percentage of the Portfolio's net assets as of the
close of business each day at the annual rate of .60%.
The Adviser has agreed to waive that portion of the advisory fee and to
reimburse any necessary expenses to limit operating expenses of the Portfolio to
.74% of average daily net assets on an annual basis through at least December
31, 1995.
(b) Total brokerage commissions paid by the Portfolio for the six months
ended June 30, 1995, amounted to $16,666, of which Oppenheimer & Co., Inc., an
affiliate of the Adviser, received $8,006.
(3) PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 1995, purchases and sales of investment
securities, other than short-term securities were $4,064,293 and $3,140,632,
respectively.
24
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
SMALL CAP PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 16, 1994 (2)
JUNE 30, 1995 (1) TO DECEMBER 31, 1994
----------------------------- ----------------------------------
<S> <C> <C>
Net asset value, beginning of period...................... $ 17.38 $ 17.49
------------ -----------
Income from investment operations:
Net investment income..................................... 0.14 0.06
Net realized and unrealized gain (loss) on investments.... 0.88 (0.17)
------------ -----------
Total from investment operations...................... 1.02 (0.11)
------------ -----------
Dividends and distributions to shareholders:
Dividends to shareholders from net investment income...... (0.05) --
Distributions to shareholders from net realized capital
gains................................................... (0.05) --
------------ -----------
Total dividends and distributions..................... (0.10) --
------------ -----------
Net asset value, end of period............................ $ 18.30 $ 17.38
============ ===========
Total return (3).......................................... 5.9% (.6%)
============ ===========
Net assets, end of period................................. $12,088,128 $9,210,443
------------ -----------
Ratio of net operating expenses to average net assets
(4,6)................................................... 0.74%(5) 0.74%
------------ -----------
Ratio of net investment income to average net assets
(4,6)................................................... 1.78%(5) 1.22%
------------ -----------
Portfolio turnover........................................ 38% 32%
------------ -----------
</TABLE>
--------------------------------------------------------------------------------
(1) Unaudited.
(2) Commencement of operations.
(3) Assumes reinvestment of all dividends and distributions.
(4) Annualized.
(5) Average net assets for the six months ended June 30, 1995 were $10,393,360.
(6) During the periods presented above, the Adviser waived a portion or all of
its fees and reimbursed the Portfolio for a portion of its operating
expenses. If such waivers and reimbursements had not been in effect, the
ratio of net operating expenses to average net assets and the ratio of net
investment income to average net assets would have been 1.13% and 1.39% and
1.64% and 0.32%, respectively.
25
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
MANAGED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
SHORT-TERM CORPORATE NOTES--3.0%
AUTOMOTIVE--0.3%
$ 200,000 Ford Motor Credit Co., 5.97%, 7/5/95.............................. $ 199,868
-----------
INSURANCE--0.5%
374,000 Prudential Funding Corp., 5.93%, 7/12/95.......................... 373,322
-----------
MACHINERY/ENGINEERING--1.5%
1,100,000 Deere (John) Capital Corp., 5.93%, 7/13/95........................ 1,097,826
-----------
MISCELLANEOUS FINANCIAL SERVICES--0.7%
510,000 Household Finance Corp., 5.95%, 7/17/95........................... 508,651
-----------
Total Short-Term Corporate Notes (amortized
cost--$2,179,667)........................................... $ 2,179,667
-----------
U.S. TREASURY NOTES AND BONDS--2.2%
$ 700,000 6.25%, 8/15/23.................................................... $ 661,171
630,000 7.875%, 4/15/98................................................... 661,695
297,500 7.875%, 8/15/01................................................... 324,787
-----------
Total U.S. Treasury Notes and Bonds (cost--$1,522,546)........ $ 1,647,653
-----------
CONVERTIBLE CORPORATE BONDS--0.9%
REAL ESTATE--0.9%
$ 623,858 Security Capital Realty, Inc., 12.00%, 6/30/14 (A) (B)
(cost--$566,995).................................................. $ 623,858
-----------
SHARES
----------
CONVERTIBLE PREFERRED STOCKS--0.1%
RETAIL--0.1%
2,478 Venture Stores, Inc., $3.25 Conv. Pfd. (cost--$102,527)........... $ 76,198
-----------
COMMON STOCKS--93.6%
AEROSPACE/DEFENSE--9.6%
20,000 Lockheed Martin Corp. ............................................ $ 1,262,500
63,000 McDonnell Douglas Corp. .......................................... 4,835,250
15,600 Sundstrand Corp. ................................................. 932,100
-----------
7,029,850
-----------
AUTOMOTIVE--2.0%
31,300 General Motors Corp. ............................................. 1,467,187
-----------
BANKING--18.0%
74,100 Citicorp.......................................................... 4,288,537
7,000 First Empire State Corp. ......................................... 1,200,500
5,000 First Interstate Bancorp.......................................... 401,250
102,209 Mellon Bank Corp. ................................................ 4,254,450
16,800 Wells Fargo & Co. ................................................ 3,028,200
-----------
13,172,937
-----------
CHEMICALS--4.1%
42,500 Hercules, Inc. ................................................... 2,071,875
10,000 Monsanto Co. ..................................................... 901,250
-----------
2,973,125
-----------
</TABLE>
26
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
MANAGED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1995
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
CONSUMER PRODUCTS--9.7%
20,350 Avon Products, Inc. .............................................. $ 1,363,450
42,330 Hasbro, Inc. ..................................................... 1,343,977
88,200 Mattel, Inc. ..................................................... 2,293,200
61,000 Reebok International Ltd. ........................................ 2,074,000
-----------
7,074,627
-----------
DRUGS & MEDICAL PRODUCTS--2.9%
24,000 Becton, Dickinson & Co. .......................................... 1,398,000
8,000 Warner-Lambert Co. ............................................... 691,000
-----------
2,089,000
-----------
ENERGY--6.2%
26,000 MAPCO, Inc. ...................................................... 1,508,000
40,000 Tenneco, Inc. .................................................... 1,840,000
25,700 Triton Energy Corp.*.............................................. 1,191,837
-----------
4,539,837
-----------
INSURANCE--7.0%
51,400 EXEL Ltd. ........................................................ 2,672,800
15,400 Transamerica Corp. ............................................... 897,050
36,100 Travelers, Inc. .................................................. 1,579,375
-----------
5,149,225
-----------
MANUFACTURING--3.1%
35,000 Collins & Aikman Corp.*........................................... 315,000
116,000 Shaw Industries, Inc. ............................................ 1,972,000
-----------
2,287,000
-----------
METALS & MINING--2.2%
30,297 Freeport McMoRan Copper & Gold (Class A).......................... 624,876
56,335 Freeport McMoRan, Inc. ........................................... 992,904
-----------
1,617,780
-----------
MISCELLANEOUS FINANCIAL SERVICES--11.2%
70,000 American Express Co. ............................................. 2,458,750
40,000 Countrywide Credit Industries, Inc. .............................. 840,000
51,300 Federal Home Loan Mortgage Corp. ................................. 3,526,875
14,700 Federal National Mortgage Association............................. 1,387,313
-----------
8,212,938
-----------
PAPER PRODUCTS--4.3%
60,800 Champion International Corp. ..................................... 3,169,200
-----------
REAL ESTATE--1.0%
811 Security Capital Realty, Inc. (A)................................. 715,302
-----------
</TABLE>
27
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
MANAGED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1995
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
TECHNOLOGY--9.8%
11,200 Alliant Techsystems, Inc.*........................................ $ 467,600
78,000 Intel Corp. ...................................................... 4,938,375
62,918 Unitrode Corp.*................................................... 1,769,569
-----------
7,175,544
-----------
TELECOMMUNICATIONS--2.5%
54,900 Sprint Corp. ..................................................... 1,846,013
-----------
Total Common Stocks (cost--$55,227,406)....................... $68,519,565
-----------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments (C) (cost--$59,599,141)............. 99.8% $73,046,941
Other Assets in Excess of Other Liabilities........... 0.2 175,965
----- -----------
Total Net Assets...................................... 100.0% $73,222,906
===== ===========
</TABLE>
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
* Non-income producing security.
(A) Restricted Securities (the Portfolio will not bear any costs, including
those involved in registration under the Securities Act of 1933 in
connection with the disposition of these securities):
<TABLE>
<CAPTION>
Valuation
Date of Par Unit As Of
Description Acquisition Amount Shares Cost June 30, 1995
-------------------------------- ----------- -------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Security Capital Realty, Inc.
12.00%, 6/30/14............... 9/16/94 $623,858 -- $ 90.74 $100.00
Security Capital Realty, Inc.
Common Stock.................. 9/16/94 -- 811 $949.19 $882.00
</TABLE>
(B) Security Capital at its discretion may defer interest payments.
(C) Aggregate gross unrealized appreciation for securities in which there is an
excess of value over tax cost is $13,670,342, aggregate gross unrealized
depreciation for securities in which there is an excess of tax cost over
value is $222,542 and net unrealized appreciation for Federal income tax
purpose is $13,447,800. Federal income tax basis of portfolio securities is
substantially the same as for financial reporting purposes.
28
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
MANAGED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments, at value (cost--$59,599,141)..................................... $73,046,941
Cash.......................................................................... 16,564
Receivable from fund shares sold.............................................. 59,912
Dividends receivable.......................................................... 81,642
Interest receivable........................................................... 73,315
Other assets.................................................................. 9,727
-----------
Total Assets.......................................................... 73,288,101
-----------
LIABILITIES
Payable for fund shares redeemed.............................................. 13,799
Investment advisory fee payable............................................... 3,408
Other payables and accrued expenses........................................... 47,988
-----------
Total Liabilities..................................................... 65,195
-----------
NET ASSETS
Par value ($.01 per share).................................................... 27,261
Paid-in-surplus............................................................... 59,316,419
Accumulated undistributed net investment income............................... 673,151
Accumulated undistributed net realized loss on investments.................... (241,725)
Net unrealized appreciation on investments.................................... 13,447,800
-----------
Total Net Assets...................................................... $73,222,906
===========
Fund shares outstanding....................................................... 2,726,062
-----------
Net asset value per share..................................................... $26.86
======
</TABLE>
See accompanying notes to financial statements.
29
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
MANAGED PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Dividends................................................................. $ 617,367
Interest.................................................................. 264,914
-----------
Total investment income............................................... 882,281
-----------
OPERATING EXPENSES
Investment advisory fee (note 2a)......................................... 190,124
Reports and notices to shareholders....................................... 21,017
Trustee's fees and expenses............................................... 8,901
Auditing, consulting and tax return preparation fees...................... 7,965
Custodian fees............................................................ 6,309
Transfer and dividend disbursing agent fees............................... 5,159
Legal fees................................................................ 4,707
Registration fees......................................................... 579
Miscellaneous............................................................. 8,934
-----------
Total operating expenses.............................................. 253,695
Less: Investment advisory fee waived (note 2a)........................ (44,565)
-----------
Net operating expenses............................................ 209,130
-----------
Net investment income............................................. 673,151
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NET
Net realized loss on investments.......................................... (96,685)
Net change in unrealized appreciation (depreciation) on investments....... 16,022,907
-----------
Net realized loss and change in unrealized appreciation (depreciation)
on investments...................................................... 15,926,222
-----------
Net increase in net assets resulting from operations.................. $16,599,373
===========
</TABLE>
See accompanying notes to financial statements.
30
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
MANAGED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 16, 1994 (2)
JUNE 30, 1995 (1) TO DECEMBER 31, 1994
----------------- ----------------------
<S> <C> <C>
OPERATIONS
Net investment income................................ $ 673,151 $ 360,801
Net realized loss on investments..................... (96,685) (145,040)
Net change in unrealized appreciation (depreciation)
on investments..................................... 16,022,907 (2,575,107)
----------------- ------------
Net increase (decrease) in net assets resulting
from operations................................ 16,599,373 (2,359,346)
----------------- ------------
DIVIDENDS TO SHAREHOLDERS
Net investment income................................ (360,801) --
----------------- ------------
FUND SHARE TRANSACTIONS
Net proceeds from sales.............................. 7,414,618 6,980,338
Net value of securities received (note 1)............ -- 51,354,102
Reinvestment of dividends............................ 360,801 --
Cost of shares redeemed.............................. (5,734,456) (1,031,723)
----------------- ------------
Net increase in net assets from fund share
transactions................................... 2,040,963 57,302,717
----------------- ------------
Total increase in net assets................. 18,279,535 54,943,371
NET ASSETS
Beginning of period.................................. 54,943,371 0
----------------- ------------
End of period (including undistributed net investment
income of $673,151 and $360,801, respectively)..... $73,222,906 $ 54,943,371
================= ============
SHARES ISSUED AND REDEEMED
Issued............................................... 304,613 330,594
Issued in exchange for securities (note 1)........... -- 2,355,693
Issued in reinvestment of dividends.................. 15,866 --
Redeemed............................................. (231,782) (48,922)
----------------- ------------
Net increase..................................... 88,697 2,637,365
================= ============
</TABLE>
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
(1) Unaudited.
(2) Commencement of operations.
31
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
MANAGED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1995
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Quest for Value Accumulation Trust (the "Trust") was organized on May 12,
1994 as a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Trust is authorized to issue an unlimited number of
seven classes of shares of beneficial interest at $.01 par value: the Equity
Portfolio, the Small Cap Portfolio, the Global Equity Portfolio, the Managed
Portfolio, the Bond Portfolio, the U. S. Government Income Portfolio and the
Money Market Portfolio. Quest for Value Advisors, (the "Adviser"), a
majority-owned (99%) subsidiary of Oppenheimer Capital, serves as the Trust's
investment adviser. The Managed Portfolio, (the "Portfolio"), one of the seven
portfolios, had no operations until September 16, 1994, when the Enterprise
Accumulation Trust Managed Portfolio (formerly known as Quest for Value
Accumulation Trust Managed Portfolio), distributed cash and securities with an
aggregate market value of $51,354,102 in exchange for 2,355,693 shares of the
Portfolio. The following is a summary of significant accounting policies
consistently followed by the Portfolio in the preparation of its financial
statements:
(A) Valuation of Investments
Investment securities, other than debt securities, listed on a national
exchange or traded in the over-the-counter National Market System are valued
each business day at the last reported sale price; if there are no such reported
sales, the securities are valued at their last quoted bid price. Other
securities traded over-the-counter and not part of the National Market System
are valued at the last quoted bid price. Investment debt securities (other than
short-term obligations) are valued each business day by an independent pricing
service approved by the Board of Trustees. Investments are valued by the pricing
service using methods which include current market quotations from a major
market maker in the securities and trader-reviewed "matrix" prices. Short-term
debt securities having a remaining maturity of more than sixty days are valued
on a "marked-to-market" basis, that is, at prices based upon market quotations
for securities of similar type, yield, quality and maturity. Short-term debt
securities having a remaining maturity of sixty days or less are valued at
amortized cost, which approximates market value. Any securities or other assets
for which market quotations are not readily available are valued at their fair
value as determined in good faith by the Board of Trustees. The ability of
issuers of debt instruments to meet their obligations may be affected by
economic developments in a specific industry or region.
(B) Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders; accordingly, no Federal
income tax provision is required.
(C) Security Transactions and Other Income
Security transactions are accounted for on the trade date. In determining
the gain or loss from the sale of securities, the cost of securities sold has
been determined on the basis of identified cost. Dividend income is recorded on
the ex-dividend date and interest income is accrued as earned. Discounts or
premiums on debt securities purchased are accreted or amortized to interest
income over the lives of the respective securities.
32
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
MANAGED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1995
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(D) Dividends and Distributions
Dividends and distributions to shareholders from net investment income and
net realized capital gains, if any, are declared and paid at least annually.
The Portfolio records dividends and distributions to its shareholders on the
ex-dividend date. The amount of dividends and distributions from net investment
income and net realized capital gains are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. These "book-tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their federal
tax-basis treatment: temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net realized
capital gains for financial reporting purposes but not for tax purposes are
reported as dividends in excess of net investment income or distributions in
excess of net realized capital gains, respectively. To the extent distributions
exceed current and accumulated earnings and profits for federal income tax
purposes, they are reported as distributions of paid-in-surplus or tax return of
capital.
(E) Allocation of Expenses
Expenses specifically identifiable to a particular portfolio are borne by
that portfolio. Other expenses are allocated to each portfolio based on its net
assets in relation to the total net assets of all the applicable portfolios of
the Trust or another reasonable basis.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
(a) The investment advisory fee is accrued daily and payable monthly to the
Adviser, and is computed as a percentage of the Portfolio's net assets as of the
close of business each day at the annual rate of .60%.
The Adviser has agreed to waive that portion of the advisory fee and to
reimburse any necessary expenses to limit operating expenses of the Portfolio to
.66% of average daily net assets on an annual basis through at least December
31, 1995.
(b) Total brokerage commissions paid by the Portfolio for the six months
ended June 30, 1995, amounted to $35,094, of which Oppenheimer & Co., Inc., an
affiliate of the Adviser, received $14,663.
(3) PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 1995, purchases and sales of investment
securities, other than short-term securities were $16,641,100 and $6,224,885,
respectively.
33
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
MANAGED PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 16, 1994 (2)
JUNE 30, 1995 (1) TO DECEMBER 31, 1994
----------------------------- ----------------------------------
<S> <C> <C>
Net asset value, beginning of period................... $ 20.83 $ 21.80
------------ ------------
Income from investment operations:
Net investment income.................................. 0.24 0.14
Net realized and unrealized gain (loss) on
investments............................................ 5.92 (1.11)
------------ ------------
Total from investment operations................... 6.16 (0.97)
------------ ------------
Dividends to shareholders:
Dividends to shareholders from net investment income... (0.13) --
------------ ------------
Net asset value, end of period......................... $ 26.86 $ 20.83
============ ============
Total return (3)....................................... 29.7% (4.4%)
============ ============
Net assets, end of period.............................. $73,222,906 $ 54,943,371
------------ ------------
Ratio of net operating expenses to average net
assets(4,6).......................................... 0.66%(5) 0.66%
------------ ------------
Ratio of net investment income to average net
assets(4,6).......................................... 2.12%(5) 2.34%
------------ ------------
Portfolio turnover..................................... 11% 8%
------------ ------------
</TABLE>
--------------------------------------------------------------------------------
(1) Unaudited.
(2) Commencement of operations.
(3) Assumes reinvestment of all dividends and distributions.
(4) Annualized.
(5) Average net assets for the six months ended June 30, 1995 were $63,899,708.
(6) During the periods presented above, the Adviser waived a portion of its
fees. If such waivers had not been in effect, the ratio of net operating
expenses to average net assets and the ratio of net investment income to
average net assets would have been 0.80% and 1.98% and 0.96% and 2.04%,
respectively.
34
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
GLOBAL EQUITY FUND
SCHEDULES OF INVESTMENTS (unaudited)
June 30, 1995
<TABLE>
<CAPTION>
Shares Value
-------- ------
<S> <C> <C>
COMMON STOCKS--89.4%
AUSTRIA--2.9%
Airport Management
600 Flughafen Wien AG................................ $31,910
-------
FINLAND--3.3%
Manufacturing
600 Oy Nokia AB...................................... 35,683
-------
FRANCE--7.0%
Energy--2.5%
450 Total SA......................................... 27,086
-------
Rubber Products--2.5%
620 Michelin (CGDE).................................. 27,464
-------
Utilities--2.0%
200 Compagnie Generale des Eaux...................... 22,262
-------
Total French Common Stocks....................... 76,812
-------
GERMANY--7.9%
Computer Services--3.0%
25 SAP AG........................................... 33,173
-------
Drugs and Medical Products--4.9%
59 GEHE AG.......................................... 26,350
400 Shering AG....................................... 27,941
-------
54,291
-------
Total German Common Stocks....................... 87,464
-------
HONG KONG--1.1%
Building and Construction
35,000 China Resources EN............................... 11,534
-------
Total Hong Kong Stocks........................... 11,534
-------
ITALY--2.2%
Telecommunications
11,500 Telecom Italia................................... 24,318
-------
JAPAN--4.8%
Drugs & Medical Products--2.1%
1,000 Yamanouchi Pharmaceutical ....................... 22,536
-------
Healthcare Services--2.7%
2,000 SRL, Inc. ....................................... 29,733
-------
Total Japanese Common Stocks..................... 52,269
-------
</TABLE>
35
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
GLOBAL EQUITY FUND
SCHEDULES OF INVESTMENTS (unaudited)(continued)
June 30, 1995
<TABLE>
<CAPTION>
Shares Value
-------- ------
<S> <C> <C>
COMMON STOCKS(continued)
MALAYSIA--1.3%
Conglomerates
5,000 Technology Resources Industries Bhd.............. $14,356
-------
NETHERLANDS--5.9%
Importing/Exporting--2.7%
662 Hagemeyer NV..................................... 29,522
-------
Publishing--2.4%
300 Wolters Kluwer................................... 26,467
-------
Telecommunications--0.8%
75 VER NED Uitgevers................................ 8,979
-------
Total Netherlands Common Stocks.................. 64,968
-------
SINGAPORE--2.3%
Conglomerates
7000 Jardine Strategic Holdings Ltd. ................. 22,540
875 Jardine Strategic Holdings Ltd. (New) ........... 2,818
-------
25,358
-------
Total Singapore Common Stocks.................... 25,358
-------
SOUTH KOREA--2.7%
Metals/Mining
1,000 Pohang Iron & Steel Co., Ltd. ADR................ 29,500
-------
SWEDEN--5.4%
Drugs & Medical Products--2.8%
1,000 ASTRA AB......................................... 30,876
-------
Machinery & Engineering--2.6%
2,000 Atlas Copco AB................................... 28,056
-------
Total Swedish Common Stocks...................... 58,932
-------
SWITZERLAND--1.1%
Manufacturing
5 Sig Schweizerische Industrie - Gesellschaft
Holding AG .................................... 11,680
-------
UNITED KINGDOM--6.9%
Capital Equipment--1.8%
5,000 Amstrad PLC...................................... 19,723
-------
Retail--2.7%
5,600 Argyll Group PLC................................. 29,884
-------
Tobacco/Beverages/Food Products--2.4%
3,500 Guinness PLC..................................... 26,332
-------
Total United Kingdom Common Stocks............... 75,939
-------
UNITED STATES--34.6%
Aerospace/Defense--5.3%
100 Lockheed Martin Corp. ........................... 6,313
600 McDonnell Douglas Corp. ......................... 46,050
100 Sundstrand Corp. ................................ 5,975
-------
58,338
-------
</TABLE>
36
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
GLOBAL EQUITY FUND
SCHEDULES OF INVESTMENTS (unaudited)(continued)
June 30, 1995
<TABLE>
<CAPTION>
Shares Value
-------- ------
<S> <C> <C>
COMMON STOCKS(continued)
UNITED STATES (continued)
Banking--6.0%
400 Citicorp......................................... $23,150
600 Mellon Bank Corp. ............................... 24,975
100 Wells Fargo & Co. ............................... 18,025
-------
66,150
-------
Chemicals--3.4%
400 Hercules, Inc. .................................. 19,500
200 Monsanto Co. .................................... 18,025
-------
37,525
-------
Drugs & Medical Products--1.3%
100 Becton, Dickinson & Co. ......................... 5,825
100 Warner-Lambert Co. .............................. 8,637
-------
14,462
-------
Energy--1.4%
100 MAPCO, Inc. ..................................... 5,800
200 Tenneco, Inc. ................................... 9,200
-------
15,000
-------
Insurance--1.9%
400 EXEL Ltd. ....................................... 20,800
-------
Manufacturing--1.2%
800 Shaw Industries, Inc............................. 13,600
-------
Metals/Mining--2.1%
500 Freeport McMoRan Copper & Gold (Class A)......... 10,312
700 Freeport McMoRan, Inc. .......................... 12,337
-------
22,649
-------
Miscellaneous Financial Services--7.1%
700 American Express Co. ............................ 24,587
600 Federal Home Loan Mortgage Corp. ................ 41,250
100 ITT Corp. ....................................... 11,750
-------
77,587
-------
Paper Products--1.4%
300 Champion International, Inc. .................... 15,637
-------
Technology--2.3%
400 Intel Corp. ..................................... 25,325
-------
Telecommunications--1.2%
400 Sprint Corp. .................................... 13,450
-------
Total United States Common Stocks................ 380,523
-------
Total Common Stocks
(cost--$879,270)............................... $981,246
--------
</TABLE>
37
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
GLOBAL EQUITY FUND
SCHEDULES OF INVESTMENTS (unaudited)(continued)
June 30, 1995
<TABLE>
<CAPTION>
Warrants Value
-------- ------
<S> <C> <C>
WARRANTS---0.1%
SINGAPORE
Conglomerates
875 Jardine Strategic Holdings Ltd. 5/02/98, strike
@ HKD 3.57*................................................ $385
--------
Total Investments (A) (cost--$879,270)............ 89.5% $981,631
Other Assets in Excess of Other Liabilities ...... 10.5 115,370
------- --------
Total Net Assets ................................. 100.0% $1,097,001
======= ==========
</TABLE>
See accompanying notes to financial statements.
------------------------------------------------------------------------------
* Non-income producing security.
(A) Aggregate gross unrealized appreciation for securities in which
there is an excess of value over tax cost is $115,933, aggregate
gross unrealized depreciation for securities in which there
is an excess of tax cost over value is $13,572, and net unrealized
appreciated for Federal income tax purposes is $102,361. Federal
income tax basis of portfolio securities is substantially the same
as for financial reporting purposes.
38
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
GLOBAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (unaudited)
June 30, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost - $879,270)......................................... $981,631
Cash............................................................................ 127,084
Receivable from investments sold................................................ 33,358
Dividends receivable............................................................ 2,947
Withholding taxes reclaimable................................................... 590
Receivable from adviser......................................................... 2,197
Other assets.................................................................... 466
-----------
Total Assets................................................................ 1,148,273
-----------
LIABILITIES
Payable for investments purchased............................................... 36,596
Withholding taxes payable....................................................... 319
Other payables and accrued expenses............................................. 14,357
-----------
Total Liabilities........................................................... 51,272
-----------
NET ASSETS
Par value ($.01 per share)...................................................... 1,002
Paid-in-surplus................................................................. 1,001,498
Undistributed net investment income............................................. 9,157
Net realized loss on investments................................................ (17,234)
Net unrealized appreciation on investments and translation of other assets and
liabilties denominated in foreign currencies................................. 102,578
-----------
Total Net Assets............................................................ $1,097,001
===========
Fund shares outstanding......................................................... 100,249
-----------
Net asset value per share....................................................... $10.94
===========
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
GLOBAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS (unaudited)
For the period March 1, 1995 (commencement of operations) to June 30, 1995
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Dividends (net of foreign withholding taxes of $868).............................................. $9,040
Interest.......................................................................................... 4,421
-------
Total investment income..................................................................... 13,461
-------
Operating Expenses
Investment advisory fee (note 2a)................................................................. 2,582
Custodian fees.................................................................................... 9,559
Auditing, consulting and tax return preparation fees.............................................. 3,560
Transfer and dividend disbursing agent fees....................................................... 3,008
Legal fees........................................................................................ 2,165
Reports and notices to shareholders............................................................... 396
Registration fees................................................................................. 346
Miscellaneous..................................................................................... 1,079
-------
Total operating expenses........................................................................ 22,695
Less: Investment advisory fee waived and expenses reimbursed (note 2a)......................... (18,391)
-------
Net operating expenses............................................................... 4,304
-------
Net investment income................................................................ 9,157
-------
Realized and Unrealized Gain (Loss)
on Investments- Net
Net realized loss on investments.................................................................... (17,234)
Net unrealized appreciation on investments and translation of other assets and
liabilities denominated in foreign currencies................................................ 102,578
-------
Net realized loss and unrealized appreciation on investments and translation
of other assets and liabilities denominated in foreign currencies.............. 85,344
-------
Net increase in net assets resulting from operations................................. $94,501
=======
</TABLE>
See accompanying notes to financial statements.
40
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
GLOBAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS (unaudited)
<TABLE>
<CAPTION>
March 1, 1995(1)
to June 30, 1995
----------------
<S> <C>
Operations
Net investment income............................................................ $9,157
Net realized loss on investments................................................. (17,234)
Net unrealized appreciation on investments and translation of other assets
and liabilities denominated in foreign currencies............................. 102,578
----------------
Net increase in net assets resulting from operations......................... 94,501
----------------
Fund Share Transactions
Net proceeds from sales.......................................................... 1,002,500
Cost of shares redeemed.......................................................... 0
----------------
Net increase in net assets from fund share transactions...................... 1,002,500
----------------
Total increase in net assets........................................ 1,097,001
Net Assets
Beginning of period.............................................................. 0
----------------
End of period (including undistributed net investment income of $9,157)........... $1,097,001
================
Shares Issued and Redeemed
Issued.......................................................................... 100,249
Redeemed........................................................................ ---
----------------
Net increase ................................................................ 100,249
================
</TABLE>
------------------------------------------------------------------------------
(1) Commencement of operations.
See accompanying notes to financial statements.
41
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
GLOBAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (unaudited)
June 30, 1995
(1) Organization and Significant Accounting Policies
Quest for Value Accumulation Trust (the "Trust") was organized on
May 12, 1994 as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Trust is authorized to issue an unlimited
number of seven classes of shares of beneficial interest at $.01 par value:
the Equity Portfolio, the Small Cap Portfolio, the Global Equity Portfolio,
the Managed Portfolio, the Bond Portfolio, the U. S. Government Income
Portfolio and the Money Market Portfolio. Quest for Value Advisors, (the
"Adviser"), a majority-owned (99%) subsidiary of Oppenheimer Capital, serves
as the Trust's investment adviser. The Global Equity Portfolio, (the
"Portfolio"), one of the seven portfolios, commenced operations on
March 1, 1995. The following is a summary of significant accounting policies
followed by the Portfolio in the preparation of its financial statements:
(A) Valuation of Investments
Investment securities listed on a U.S or foreign stock exchange or traded
in the over-the-counter National Market System are valued each business day at
the last reported sale price; if there are no such reported sales, the
securities are valued at their last quoted bid price. Other securities traded
over-the-counter and not part of the National Market System are valued at the
last quoted bid price. Short-term debt securities having a remaining maturity
of more than sixty days are valued on a "marked-to-market" basis, that is, at
prices based upon market quotations for securities of similar type, yield,
quality and maturity. Short-term debt securities having a remaining maturity
of sixty days or less are valued at amortized cost, which approximates market
value. Any securities or other assets for which market quotations are not
readily available are valued at their fair value as determined in good faith
by the Board of Trustees. Investments in countries in which the Portfolio may
invest may involve certain considerations and risks not typically associated
with domestic investments as a result of, among others, the possibility of
future political and economic developments and the level of governmental
supervision and regulation of foreign securities markets.
(B) Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to shareholders; accordingly,
no Federal income tax provision is required.
(C) Security Transactions and Other Income
Security transactions are accounted for on the trade date. In determining
the gain or loss from the sale of securities, the cost of securities sold has
been determined on the basis of identified cost. Dividend income and other
distributions are recorded on the ex-dividend date, except certain dividends
or other distributions from foreign securities which are recorded as soon as
the information is available after the ex-dividend date. Interest income is
accrued as earned.
42
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
GLOBAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (unaudited)(continued)
June 30, 1995
(1) Organization and Significant Accounting Policies (continued)
(D) Foreign Currency Translation
The books and records of the Portfolio are maintained in U.S. dollars as
follows: (1) the foreign currency market value of investment securities, other
assets and liabilities stated in foreign currencies are translated at the
exchange rate at the end of the period; and (2) purchases, sales, income and
expenses are translated at the rate of exchange prevailing on the respective
dates of such transactions. The resultant exchange gains and losses are
included in the Portfolio's Statement of Operations. Since the net assets of
the Portfolio are presented at the foreign exchange rates and market prices at
the close of the period, the Portfolio does not isolate that portion of the
results of operations arising as a result of changes in the exchange rates
from fluctuations arising from changes in the market price of securities.
(E) Dividends and Distributions
Dividends and distributions to shareholders from net investment income and
net realized capital gains, if any, are declared and paid at least annually.
The Portfolio records dividends and distributions to its shareholders on
the ex-dividend date. The amount of dividends and distributions from net
investment income and net realized capital gains are determined in accordance
with federal income tax regulations, which may differ from generally accepted
accounting principles. These "book-tax" differences are either considered
temporary or permanent in nature. To the extent these differences are permanent
in nature, such amounts are reclassified within the capital accounts based on
their federal tax-basis treatment: temporary differences do not require
reclassification. Dividends and distributions which exceed net investment
income and net realized capital gains for financial reporting purposes but not
for tax purposes are reported as dividends in excess of net investment income
or distributions in excess of net realized capital gains, respectively. To the
extent distributions exceed current and accumulated earnings and profits for
federal income tax purposes, they are reported as distributions of
paid-in-surplus or tax return of capital.
(F) Allocation of Expenses
Expenses specifically identifiable to a particular portfolio are borne by
that portfolio. Other expenses are allocated to each portfolio based on its net
assets in relation to the total net assets of all the applicable portfolios of
the Trust or another reasonable basis.
(2) Investment Advisory Fee and Other Transactions with Affiliates
(a) The investment advisory fee is accrued daily and payable monthly to
the Adviser, and is computed as a percentage of the Portfolio's net assets as
of the close of business each day at the annual rate of .75%.
The Adviser has agreed to waive that portion of the advisory fee and to
reimburse any necessary expenses to limit operating expenses of the Portfolio
to 1.25% of average daily net assets on an annual basis through at least
December 31, 1995.
(b) Total brokerage commissions paid by the Portfolio for the period
March 1, 1995 (commencement of operations) to June 30, 1995, amounted to
$3,305, of which Oppenheimer & Co., Inc., an affiliate of the Adviser, received
$275.
(3) Purchases and Sales of Securities
For the period March 1, 1995 (commencement of operations) to June 30,
1995, purchases and sales of investment securities other than short-term
securities were $1,154,386 and $261,194, respectively.
43
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
GLOBAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS (unaudited)
For a share outstanding throughout the period:
<TABLE>
<CAPTION>
March 1, 1995 (1)
to June 30, 1995
----------------
<S> <C>
Net asset value, beginning of period................................................... $10.00
Income from investment operations:
Net investment income.................................................................. 0.09
Net realized loss and unrealized appreciation on investments and
translation of other assets and liabilities denominated in foreign currencies........ 0.85
----------------
Total from investment operations..................................................... 0.94
----------------
Net asset value, end of period......................................................... $10.94
================
Total return .......................................................................... 9.4%
================
Net assets, end of period.............................................................. $1,097,001
----------------
Ratio of net operating expenses to average net assets.................................. 1.25%(2,3,4)
----------------
Ratio of net investment income to average net assets................................... 2.66%(2,3,4)
----------------
Portfolio turnover..................................................................... 37%
----------------
</TABLE>
------------------------------------------------------------------------------
(1) Commencement of operations.
(2) Annualized.
(3) Average net assets for the period March 1, 1995 (commencement of operations)
to June 30, 1995 were $1,030,127.
(4) During the period presented above, the Adviser waived its fees and
reimbursed the Portfolio for a portion of its operating expenses. If such
waivers and reimbursements had not been in effect, the ratio of net
operating expenses to average net assets and the ratio of net investment
income (loss) to average net assets would have been 6.59% and (2.68%),
respectively.
44
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
U.S. GOVERNMENT INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (unaudited)
June 30, 1995
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----------
<S> <C> <C>
U.S. TREASURY NOTES- 47.3%
$25,000 5.75%, 8/15/03 .......................................... $24,238
125,000 7.25%, 2/15/98 .......................................... 129,101
85,000 7.375%, 11/15/97 ........................................ 87,763
100,000 7.75%, 12/31/99 ......................................... 106,766
------------
Total U.S. Treasury Notes (cost-$334,725) ......... $347,868
------------
U.S. GOVERNMENT AGENCY NOTES - 50.4%
Federal Farm Credit Bank
$35,000 5.08%, 1/15/96 ........................................ $34,831
40,000 6.50%, 4/1/96 ......................................... 40,162
60,000 Federal Home Loan Bank, 6.94%, 3/14/97 .................. 61,022
100,000 Federal Home Loan Mortgage Corp., 6.22%, 3/24/03 ........ 98,516
60,000 Federal National Mortgage Association, 5.375%, 6/10/98 .. 58,865
75,000 Student Loan Marketing Association, 7.00%, 3/3/98 ....... 76,805
------------
Total U.S. Government Agency Notes (cost-$361,634) . $370,201
------------
Total Investments (A) (cost-$696,359) ...... 97.7% $718,069
Other Assets in Excess of Other Liabilities 2.3 16,555
------ ------------
Total Net Assets ........................... 100.0% $734,624
====== ============
</TABLE>
See accompanying notes to financial statements.
-------------------------------------------------------------------------------
(A) Aggregate gross unrealized appreciation for securities in which
there is an excess of value over tax cost is $21,710, aggregate
gross unrealized depreciation for securities in which there is an
excess of tax cost over value is $0, and net unrealized
appreciation for Federal income tax purposes is $21,710. Federal
income tax basis of portfolio securities is substantially the
same as for financial reporting purposes.
45
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
U.S. GOVERNMENT INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITY (unaudited)
June 30, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost - $696,359).................... $718,069
Cash....................................................... 18,559
Receivable from fund shares sold........................... 2,861
Interest receivable........................................ 10,980
Receivable from adviser.................................... 614
Other assets............................................... 466
--------
Total Assets........................................... 751,549
--------
LIABILITIES
Payable for fund shares redeemed........................... 2,281
Dividends payable.......................................... 1,188
Other payables and accrued expenses........................ 13,456
--------
Total Liabilities...................................... 16,925
--------
NET ASSETS
Par value ($.01 per share)................................. 699
Paid-in-surplus............................................ 704,420
Net realized gain on investments........................... 7,795
Net unrealized appreciation on investments................. 21,710
--------
Total Net Assets....................................... $734,624
========
Fund shares outstanding.................................... 69,880
--------
Net asset value per share.................................. $10.51
========
</TABLE>
See accompanying notes to financial statements.
46
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
U.S. GOVERNMENT INCOME PORTFOLIO
STATEMENT OF OPERATIONS (unaudited)
For the period January 3, 1995 (commencement of operations) to June 30, 1995
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Interest........................................................................ $20,210
-------
Operating Expenses
Investment advisory fee (note 2a)............................................... 1,761
Custodian fees.................................................................. 5,200
Transfer and dividend disbursing agent fees..................................... 4,515
Reports and notices to shareholders............................................. 4,223
Auditing, consulting and tax return preparation fees............................ 3,942
Legal fees...................................................................... 852
Registration fees............................................................... 237
Miscellaneous................................................................... 1,224
-------
Total operating expenses...................................................... 21,954
Less: Investment advisory fee waived and expenses reimbursed (note 2a)........ (19,753)
-------
Net operating expenses............................................. 2,201
-------
Net investment income.............................................. 18,009
-------
Realized and Unrealized Gain (Loss)
on Investments- Net
Net realized gain on investments.................................................. 7,795
Net unrealized appreciation on investments........................................ 21,710
-------
Net realized gain and unrealized appreciation on investments....... 29,505
-------
Net increase in net assets resulting from operations............... $47,514
=======
</TABLE>
See accompanying notes to financial statements.
47
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
U.S. GOVERNMENT INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS (unaudited)
<TABLE>
<CAPTION>
January 3, 1995(1)
to June 30, 1995
------------------
<S> <C>
Operations
Net investment income.................................................. $18,009
Net realized gain on investments....................................... 7,795
Net unrealized appreciation on investments............................. 21,710
----------------
Net increase in net assets resulting from operations............... 47,514
Dividends to Shareholders
Net investment income................................................. (18,009)
----------------
Fund Share Transactions
Net proceeds from sales................................................ 694,767
Reinvestment of dividends.............................................. 16,821
Cost of shares redeemed................................................ (6,469)
----------------
Net increase in net assets from fund share transactions............ 705,119
----------------
Total increase in net assets....................................... 734,624
Net Assets
Beginning of period ................................................... 0
----------------
End of period ......................................................... $734,624
================
Shares Issued and Redeemed
Issued................................................................ 68,880
Issued in reinvestment of dividends................................... 1,629
Redeemed.............................................................. (629)
----------------
Net increase ..................................................... 69,880
================
</TABLE>
------------------------------------------------------------------------------
(1) Commencement of operations.
See accompanying notes to financial statements.
48
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
U.S GOVERNMENT INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (unaudited)
June 30, 1995
(1) Organization and Significant Accounting Policies
Quest for Value Accumulation Trust (the "Trust") was organized on May 12,
1994 as a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Trust is authorized to issue an unlimited number of
seven classes of shares of beneficial interest at $.01 par value; the Equity
Portfolio, the Small Cap Portfolio, the Global Equity Portfolio, the Managed
Portfolio, the Bond Portfolio, the U. S. Government Income Portfolio and the
Money Market Portfolio. Quest for Value Advisors, (the "Adviser"), a
majority-owned (99%) subsidiary of Oppenheimer Capital, serves as the Trust's
investment adviser. The U.S. Government Income Portfolio, (the "Portfolio"),
one of the seven portfolios, commenced operations on January 3, 1995. The
following is a summary of significant accounting policies followed by the
Portfolio in the preparation of its financial statements:
(A) Valuation of Investments
Investment debt securities (other than short-term obligations) are valued
each business day by an independent pricing service approved by the Board of
Trustees. Investments are valued by the pricing service using methods which
include current market quotations from a major market maker in the securities
and trader-reviewed "matrix" prices. Short-term debt securities having a
remaining maturity of more than sixty days are valued on a "marked-to-market"
basis, that is, at prices based upon market quotations for securities of
similar type, yield, quality and maturity. Short-term debt securities having a
remaining maturity of sixty days or less are valued at amortized cost, which
approximates market value. Any securities or other assets for which market
quotations are not readily available are valued at their fair value as
determined in good faith by the Board of Trustees. The ability of issuers of
debt instruments to meet their obligations may be affected by economic
developments in a specific industry or region.
(B) Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to shareholders;
accordingly, no Federal income tax provision is required.
(C) Security Transactions and Other Income
Security transactions are accounted for on the trade date. In determining
the gain or loss from the sale of securities, the cost of securities sold has
been determined on the basis of identified cost. Interest income is accrued
as earned. Discounts or premiums on debt securities purchased are accreted or
amortized to interest income over the lives of the respective securities.
(D) Dividends and Distributions
Dividends from net investment income are declared daily and paid monthly.
Distributions from net realized capital gains, if any, are declared and paid at
least annually.
49
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
U.S GOVERNMENT INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 1995
(1) Organization and Significant Accounting Policies (continued)
(E) Allocation of Expenses
Expenses specifically identifiable to a particular portfolio are borne by
that portfolio. Other expenses are allocated to each portfolio based on its net
assets in relation to the total net assets of all the applicable portfolios or
another reasonable basis.
(2) Investment Advisory Fee and Other Transactions with Affiliates
(a) The investment advisory fee is payable monthly to the Adviser, and is
computed as a percentage of the Portfolio's net assets as of the close of
business each day at the annual rate of .60%.
The Adviser has agreed to waive that portion of the advisory fee and
to reimburse any necessary expenses to limit operating expenses of the
Portfolio to .75% of average daily net assets on an annual basis through at
least December 31, 1995.
(3) Purchases and Sales of Securities
For the period January 3, 1995 (commencement of operations) to
June 30, 1995, purchases and sales of investment securities, other than
short-term securities, were $1,153,443 and $465,316, respectively.
50
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
U.S. GOVERNMENT INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS (unaudited)
For a share outstanding throughout the period:
<TABLE>
<CAPTION>
January 3, 1995 (1)
to June 30, 1995
--------------------
<S> <C>
Net asset value, beginning of period...................... $10.00
Income from investment operations:
Net investment income..................................... 0.31
Net realized and unrealized gain
on investments....................................... 0.51
--------------------
Total from investment operations..................... 0.82
--------------------
Dividends to shareholders:
Dividends to shareholders from
net investment income................................... (0.31)
--------------------
Net asset value, end of period............................ $10.51
====================
Total return ............................................. 8.3%(2)
====================
Net assets, end of period................................. $734,624
--------------------
Ratio of net operating expenses to average net assets..... 0.75%(3,4,5)
--------------------
Ratio of net investment income to average net assets...... 6.14%(3,4,5)
--------------------
Portfolio turnover........................................ 93%
--------------------
</TABLE>
------------------------------------------------------------------------------
(1) Commencement of operations.
(2) Assumes reinvestment of all dividends and distributions.
(3) Annualized.
(4) Average net assets for the period January 3, 1995 (commencement of
operations) to June 30, 1995 were $598,333.
(5) During the period presented above, the Adviser waived its fees and
reimbursed the Portfolio for a portion of its operating expenses. If such
waivers and reimbursements had not been in effect, the ratio of net
operating expenses to average net assets and the ratio of net investment
income (loss) to average net assets would have been 7.48% and (0.59%),
respectively.
51
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- ----------
<S> <C> <C>
U.S. TREASURY NOTES AND BONDS--37.9%
$ 175,000 4.625%, 2/29/96...................................................... $ 173,796
50,000 5.875%, 5/31/96...................................................... 50,070
650,000 6.125%, 7/31/96...................................................... 652,236
150,000 7.25%, 8/15/04....................................................... 160,289
125,000 8.00%, 1/15/97....................................................... 128,906
175,000 8.125%, 8/15/19...................................................... 203,602
175,000 10.375%, 11/15/12.................................................... 231,466
----------
Total U.S. Treasury Notes and Bonds (cost--$1,552,909)........... $1,600,365
----------
U.S. TREASURY SECURITY, STRIPPED INTEREST PAYMENT--3.1%
$ 725,000 (zero coupon), due 5/15/20 (cost--$111,464).......................... $ 130,536
----------
U.S. GOVERNMENT AGENCY NOTES AND BONDS--26.7%
$ 199,751 Federal Home Loan Mortgage Corp., 8.50%, 10/15/19.................... $ 204,868
Federal National Mortgage Association
240,907 7.00%, 1/1/10...................................................... 241,509
297,001 8.00%, 8/1/24...................................................... 302,475
14,914 9.00%, 8/1/02...................................................... 15,571
33,666 9.50%, 12/1/06..................................................... 35,244
94,231 9.50%, 12/1/19..................................................... 98,942
222,334 Government National Mortgage Association, 8.50%, 3/15/25............. 230,809
----------
Total U.S. Government Agency Notes and Bonds (cost--$1,107,274).. $1,129,418
----------
CORPORATE NOTES--30.6%
AUTOMOTIVE--3.8%
$ 150,000 General Motors Acceptance Corp., 8.25%, 2/24/04...................... $ 162,044
----------
CONGLOMERATES--5.2%
200,000 General Electric Capital Corp., 8.375%, 3/1/01....................... 217,536
----------
INSURANCE--2.5%
100,000 St. Paul Companies, Inc., 9.375%, 6/15/97............................ 105,496
----------
MISCELLANEOUS FINANCIAL SERVICES--14.3%
175,000 Associates Corp., N.A., 5.25%, 3/30/00............................... 166,059
100,000 BarclaysAmerican Corp., 7.875%, 8/15/98.............................. 104,386
175,000 Chrysler Financal Corp., 8.42%, 2/1/99............................... 185,299
150,000 Household Finance Corp., 6.875%, 3/1/03.............................. 150,154
----------
605,898
----------
RETAIL--4.8%
200,000 Sears Roebuck & Co., 8.55%, 8/1/96................................... 204,736
----------
Total Corporate Notes (cost--$1,250,760)......................... $1,295,710
----------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments (A) (cost--$4,022,407)................ 98.3% $4,156,029
Other Assets in Excess of Other Liabilities............. 1.7 73,867
----- ----------
Total Net Assets........................................ 100.0% $4,229,896
===== ==========
See accompanying notes to financial statements.
</TABLE>
--------------------------------------------------------------------------------
(A) Aggregate gross unrealized appreciation for securities in which there is an
excess of value over tax cost is $134,250, aggregate gross unrealized
depreciation for securities in which there is an excess of tax cost over
value is $628, and net unrealized appreciation for Federal income tax
purposes is $133,622. Federal income tax basis of portfolio securities is
substantially the same as for financial reporting purposes.
52
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost--$4,022,407)....................................... $4,156,029
Cash........................................................................... 20,460
Interest receivable............................................................ 72,712
Receivable from adviser........................................................ 206
Other assets................................................................... 619
----------
Total Assets........................................................... 4,250,026
----------
LIABILITIES
Dividends payable.............................................................. 6,883
Other payables and accrued expenses............................................ 13,247
----------
Total Liabilities...................................................... 20,130
----------
NET ASSETS
Par value ($.01 per share)..................................................... 4,313
Paid-in-surplus................................................................ 4,035,000
Accumulated undistributed net realized gain on investments..................... 56,961
Net unrealized appreciation on investments..................................... 133,622
----------
Total Net Assets....................................................... $4,229,896
==========
Fund shares outstanding........................................................ 431,271
----------
Net asset value per share...................................................... $9.81
=====
</TABLE>
See accompanying notes to financial statements.
53
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
BOND PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Interest..................................................................... $140,440
--------
OPERATING EXPENSES
Investment advisory fee (note 2a)............................................ 9,839
Custodian fees............................................................... 7,450
Auditing, consulting and tax return preparation fees......................... 5,223
Transfer and dividend disbursing agent fees.................................. 4,541
Reports and notices to shareholders.......................................... 4,173
Legal fees................................................................... 2,277
Registration fees............................................................ 66
Miscellaneous................................................................ 844
--------
Total operating expenses................................................. 34,413
Less: Investment advisory fee waived and expenses reimbursed (note 2a)... (14,794)
--------
Net operating expenses............................................... 19,619
--------
Net investment income................................................ 120,821
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NET
Net realized gain on investments............................................. 61,220
Net change in unrealized appreciation (depreciation) on investments.......... 207,792
--------
Net realized gain and change in unrealized appreciation (depreciation) on
investments............................................................ 269,012
--------
Net increase in net assets resulting from operations..................... $389,833
========
</TABLE>
See accompanying notes to financial statements.
54
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 16, 1994 (2)
JUNE 30, 1995 (1) TO DECEMBER 31, 1994
----------------- ----------------------
<S> <C> <C>
OPERATIONS
Net investment income................................ $ 120,821 $ 66,718
Net realized gain (loss) on investments.............. 61,220 (4,259)
Net change in unrealized appreciation (depreciation)
on investments....................................... 207,792 (74,170)
----------------- -----------
Net increase (decrease) in net assets resulting
from operations................................ 389,833 (11,711)
----------------- -----------
DIVIDENDS TO SHAREHOLDERS
Net investment income................................ (120,821) (66,718)
----------------- -----------
FUND SHARE TRANSACTIONS
Net proceeds from sales.............................. 1,479,147 84,253
Net value of securities received (note 1)............ -- 3,756,161
Reinvestment of dividends............................ 113,938 66,718
Cost of shares redeemed.............................. (1,287,555) (173,349)
----------------- -----------
Net increase in net assets from fund share
transactions................................... 305,530 3,733,783
----------------- -----------
Total increase in net assets................. 574,542 3,655,354
NET ASSETS
Beginning of period.................................. 3,655,354 0
----------------- -----------
End of period........................................ $ 4,229,896 $3,655,354
================= ===========
SHARES ISSUED AND REDEEMED
Issued............................................... 155,312 8,985
Issued in exchange for securities (note 1)........... -- 399,756
Issued in reinvestment of dividends.................. 11,921 7,214
Redeemed............................................. (133,329) (18,588)
----------------- -----------
Net increase..................................... 33,904 397,367
================= ===========
</TABLE>
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
(1) Unaudited.
(2) Commencement of operations.
55
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1995
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Quest for Value Accumulation Trust (the "Trust") was organized on May 12,
1994 as a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Trust is authorized to issue an unlimited number of
seven classes of shares of beneficial interest at $.01 par value; the Equity
Portfolio, the Small Cap Portfolio, the Global Equity Portfolio, the Managed
Portfolio, the Bond Portfolio, the U. S. Government Income Portfolio and the
Money Market Portfolio. Quest for Value Advisors, (the "Adviser"), a
majority-owned (99%) subsidiary of Oppenheimer Capital, serves as the Trust's
investment adviser. The Bond Portfolio, (the "Portfolio"), one of the seven
portfolios had no operations until September 16, 1994, when the Enterprise
Accumulation Trust Bond Portfolio (formerly known as Quest for Value
Accumulation Trust Bond Portfolio), distributed cash and securities with an
aggregate market value of $3,756,161 in exchange for 399,756 shares of the
Portfolio. The following is a summary of significant accounting policies
followed by the Portfolio in the preparation of its financial statements:
(A) ]Valuation of Investments
Investment debt securities (other than short-term obligations) are valued
each business day by an independent pricing service approved by the Board of
Trustees. Investments are valued by the pricing service using methods which
include current market quotations from a major market maker in the securities
and trader-reviewed "matrix" prices. Short-term debt securities having a
remaining maturity of more than sixty days are valued on a "marked-to-market"
basis, that is, at prices based upon market quotations for securities of similar
type, yield, quality and maturity. Short-term debt securities having a remaining
maturity of sixty days or less are valued at amortized cost, which approximates
market value. Any securities or other assets for which market quotations are not
readily available are valued at their fair value as determined in good faith by
the Board of Trustees. The ability of issuers of debt instruments to meet their
obligations may be affected by economic developments in a specific industry or
region.
(B) Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders; accordingly, no Federal
income tax provision is required.
(C) Security Transactions and Other Income
Security transactions are accounted for on the trade date. In determining
the gain or loss from the sale of securities, the cost of securities sold has
been determined on the basis of identified cost. Interest income is accrued as
earned. Discounts or premiums on debt securities purchased are accreted or
amortized to interest income over the lives of the respective securities.
(D) Dividends and Distributions
Dividends from net investment income are declared daily and paid monthly.
Distributions from net realized capital gains, if any, are declared and paid at
least annually.
56
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1995
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(E) Allocation of Expenses
Expenses specifically identifiable to a particular portfolio are borne by
that portfolio. Other expenses are allocated to each portfolio based on its net
assets in relation to the total net assets of all the applicable portfolios or
another reasonable basis.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
(a) The investment advisory fee is payable monthly to the Adviser, and is
computed as a percentage of the Portfolio's net assets as of the close of
business each day at the annual rate of .50%.
The Adviser has agreed to waive that portion of the advisory fee and to
reimburse any necessary expenses to limit operating expenses of the Portfolio to
1.00% of average daily net assets on an annual basis through at least December
31, 1995.
(3) PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 1995, purchases and sales of investment
securities, other than short-term were $5,023,959 and $4,579,655, respectively.
57
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 16, 1994 (2)
JUNE 30, 1995 (1) TO DECEMBER 31, 1994
----------------- ----------------------
<S> <C> <C>
Net asset value, beginning of period..................... $ 9.20 $ 9.40
Income from investment operations:
Net investment income.................................... 0.29 0.17
Net realized and unrealized gain (loss) on investments... 0.61 (0.20)
----------------- -----------
Total from investment operations..................... 0.90 (0.03)
----------------- -----------
Dividends to shareholders:
Dividends to shareholders from net investment income..... (0.29) (0.17)
----------------- -----------
Net asset value, end of period........................... $ 9.81 $ 9.20
================= ===========
Total return (3)......................................... 9.9% (0.3%)
================= ===========
Net assets, end of period................................ $ 4,229,896 $3,655,354
----------------- -----------
Ratio of net operating expenses to average net assets
(4,6).................................................. 1.00%(5) 1.00%
----------------- -----------
Ratio of net investment income to average net assets
(4,6,)................................................. 6.14%(5) 6.26%
----------------- -----------
Portfolio turnover....................................... 121% 7%
----------------- -----------
</TABLE>
-----------------------------------------------------------------------------
(1) Unaudited.
(2) Commencement of operations.
(3) Assumes reinvestment of all dividends and distributions.
(4) Annualized.
(5) Average net assets for the six months ended June 30, 1995 were $3,968,351.
(6) During the periods presented above, the Adviser waived its fees and
reimbursed the Portfolio for a portion of its operating expenses. If such
waivers and reimbursements had not been in effect, the ratio of net
operating expenses to average net assets and the ratio of net investment
income to average net assets would have been 1.75% and 5.39% and 2.05% and
5.21%, respectively.
58
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- ----------
<S> <C> <C>
U.S. GOVERNMENT AGENCY NOTES--4.3%
$ 170,000 Federal Home Loan Bank, 5.84%, 7/18/95 (amortized cost--$169,531).... $ 169,531
----------
SHORT-TERM CORPORATE NOTES--94.6%
AUTOMOTIVE--9.9%
$ 200,000 Ford Motor Credit Co., 5.95%, 7/12/95................................ $ 199,636
190,000 General Motors Acceptance Corp., 6.00%, 7/31/95...................... 189,050
----------
388,686
----------
BANKING--13.8%
200,000 Dresdner U.S. Finance, Inc., 5.85%, 9/25/95.......................... 197,205
208,000 Societe Generale Bank (Canada), 5.92%, 8/9/95........................ 206,666
138,000 Svenska Handelsbanken, Inc., 5.92%, 8/17/95.......................... 136,934
----------
540,805
----------
DRUGS/MEDICAL PRODUCTS--5.3%
210,000 American Home Products Corp., 5.95%, 8/7/95.......................... 208,716
----------
ELECTRONICS--4.8%
190,000 General Electric Co., 5.94%, 8/4/95.................................. 188,934
----------
ENERGY--10.1%
200,000 Chevron Oil Finance Co., 5.93%, 7/12/95.............................. 199,638
200,000 Texaco, Inc., 5.92%, 7/14/95......................................... 199,573
----------
399,211
----------
INSURANCE--7.3%
100,000 Prudential Funding Corp., 5.94%, 8/3/95.............................. 99,456
190,000 Safeco Credit Company, Inc., 5.97%, 7/14/95.......................... 189,590
----------
289,046
----------
MACHINERY--5.1%
200,000 Deere & Co., 5.92%, 7/10/95.......................................... 199,704
----------
MISCELLANEOUS FINANCIAL SERVICES--21.4%
170,000 Avco Financial Services, Inc., 6.00%, 7/24/95........................ 169,348
210,000 Beneficial Corp., 5.90%, 8/22/95..................................... 208,210
170,000 Compagnie Bancaire U.S.A. Finance Corp., 6.05%, 7/18/95.............. 169,514
125,000 CIT Group Holdings, Inc., 5.85%, 7/10/95............................. 124,817
170,000 Halifax Building Society, 6.05%, 8/21/95............................. 168,543
----------
840,432
----------
TECHNOLOGY--4.1%
160,000 IBM Credit Corp., 5.94%, 7/14/95..................................... 159,657
----------
</TABLE>
59
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- ----------
<S> <C> <C>
SHORT-TERM CORPORATE NOTES (CONTINUED)
TELECOMMUNICATIONS--8.2%
$ 175,000 American Telephone & Telegraph Co., 5.80%, 7/21/95................... $ 174,436
150,000 Ameritech Corp., 5.90%, 8/10/95...................................... 149,017
----------
323,453
----------
TOBACCO, BEVERAGE/FOOD PRODUCTS--4.6%
180,000 Coca Cola Co., 5.90%, 7/21/95........................................ 179,410
----------
Total Short-Term Corporate Notes (amortized cost--$3,718,054).... $3,718,054
----------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments (A) (amortized cost--$3,887,585)...... 98.9% $3,887,585
Other Assets in Excess of Other Liabilities............. 1.1 43,774
----- ----------
Total Net Assets........................................ 100.0% $3,931,359
===== ==========
</TABLE>
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
(A) Federal income tax basis of portfolio securities is the same for financial
reporting purposes.
60
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (amortized cost--$3,887,585)............................. $3,887,585
Cash........................................................................... 13,666
Receivable from fund shares sold............................................... 47,538
Receivable from adviser........................................................ 266
Other assets................................................................... 618
----------
Total Assets........................................................... 3,949,673
----------
LIABILITIES
Dividends payable.............................................................. 5,588
Other payables and accrued expenses............................................ 12,726
----------
Total Liabilities...................................................... 18,314
----------
NET ASSETS
Par value ($.01 per share)..................................................... 39,313
Paid-in-surplus................................................................ 3,891,988
Net realized gain on investments............................................... 58
----------
Total Net Assets....................................................... $3,931,359
==========
Fund shares outstanding........................................................ 3,931,301
----------
Net asset value per share...................................................... $1.00
=====
</TABLE>
See accompanying notes to financial statements.
61
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Interest..................................................................... $111,221
--------
OPERATING EXPENSES
Investment advisory fee (note 2a)............................................ 7,311
Auditing, consulting and tax return preparation fees......................... 5,036
Transfer and dividend disbursing agent fees.................................. 4,536
Reports and notices to shareholders.......................................... 4,227
Legal fees................................................................... 2,283
Custodian fees............................................................... 1,563
Registration fees............................................................ 112
Miscellaneous................................................................ 844
--------
Total operating expenses................................................. 25,912
Less: Investment advisory fee waived and expenses reimbursed (note 2a)... (7,570)
--------
Net operating expenses............................................... 18,342
--------
Net investment income................................................ 92,879
--------
REALIZED GAIN ON INVESTMENTS--NET
Net realized gain on investments............................................. 58
--------
Net increase in net assets resulting from operations..................... $ 92,937
========
</TABLE>
See accompanying notes to financial statements.
62
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 16, 1994 (2)
JUNE 30, 1995 (1) TO DECEMBER 31, 1994
----------------- ----------------------
<S> <C> <C>
OPERATIONS
Net investment income................................ $ 92,879 $ 42,375
Net realized gain on investments..................... 58 --
----------------- -----------
Net increase in net assets resulting from
operations............................................... 92,937 42,375
----------------- -----------
DIVIDENDS TO SHAREHOLDERS
Net investment income................................ (92,879) (42,375)
----------------- -----------
FUND SHARE TRANSACTIONS
Net proceeds from sales.............................. 2,393,705 469,215
Net value of securities received (note 1)............ -- 3,407,191
Reinvestment of dividends............................ 87,291 42,375
Cost of shares redeemed.............................. (2,069,221) (499,255)
----------------- -----------
Net increase in net assets from fund share
transactions................................... 411,775 3,419,526
----------------- -----------
Total increase in net assets................. 411,833 3,419,526
NET ASSETS
Beginning of period (note 1)......................... 3,519,526 100,000
----------------- -----------
End of period........................................ $ 3,931,359 $3,519,526
================= ===========
SHARES ISSUED AND REDEEMED
Issued............................................... 2,393,705 469,215
Issued in exchange for securities (note 1)........... -- 3,407,191
Issued in reinvestment of dividends.................. 87,291 42,375
Redeemed............................................. (2,069,221) (499,255)
----------------- -----------
Net increase..................................... 411,775 3,419,526
================= ===========
</TABLE>
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
(1) Unaudited.
(2) Commencement of operations.
63
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1995
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Quest for Value Accumulation Trust (the "Trust") was organized May 12, 1994
as a Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end management investment
company. The Trust is authorized to issue an unlimited number of seven classes
of shares of beneficial interest at $.01 par value; the Equity Portfolio, the
Small Cap Portfolio, the Global Equity Portfolio, the Managed Portfolio, the
Bond Portfolio, the U. S. Government Income Portfolio and the Money Market
Portfolio. Quest for Value Advisors, (the "Adviser"), a majority-owned (99%)
subsidiary of Oppenheimer Capital, serves as the Trust's investment adviser. The
Money Market Portfolio (the "Portfolio"), one of the seven portfolios, had no
operations until September 7, 1994 other than the sale and issuance of 100,000
shares of the Portfolio to the Adviser at an aggregate purchase price of
$100,000 to provide the initial capital of the Trust. On September 16, 1994 ,
Enterprise Accumulation Trust Money Market Portfolio, (formerly known as Quest
for Value Accumulation Trust Money Market Portfolio), distributed cash and
securities aggregating $3,407,191 in exchange for 3,407,191 shares issued from a
taxable reorganization. The following is a summary of significant accounting
policies consistently followed by the Portfolio in the preparation of its
financial statements:
(A) Valuation of Investments
Portfolio securities are valued at amortized cost, which approximates market
value.
(B) Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders; accordingly, no Federal
income tax provision is required.
(C) Security Transactions and Other Income
Security transactions are accounted for on the trade date. In determining
the gain or loss from the sale of securities, the cost of securities sold has
been determined on the basis of identified cost. Interest income is accrued as
earned. Discounts or premiums on debt securities purchased are accreted or
amortized to interest income over the lives of the respective securities.
(D) Dividends and Distributions
Dividends from net investment income are declared daily and paid monthly.
Distributions from net realized capital gains, if any, are declared and paid at
least annually.
(E) Allocation of Expenses
Expenses specifically identifiable to a particular portfolio are borne by
that portfolio. Other expenses are allocated to each portfolio based on its net
assets in relation to the total net assets of all the applicable portfolios or
another reasonable basis.
64
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1995
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
(a) The investment advisory fee is payable monthly to the Adviser, and is
computed as a percentage of the Portfolio's net assets as of the close of
business each day at the annual rate of .40%.
The Adviser has agreed to waive that portion of the advisory fee and to
reimburse any necessary expenses to limit operating expenses of the Portfolio to
1.00% of average daily net assets on an annual basis through at least December
31, 1995.
(3) PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 1995, purchases, sales and maturities of
investment securities, were $15,916,116 and $15,646,078, respectively.
65
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 16, 1994 (2)
JUNE 30, 1995 (1) TO DECEMBER 31, 1994
----------------------------- ----------------------------------
<S> <C> <C>
Net asset value, beginning of period...................... $ 1.00 $ 1.00
Income from investment operations:
Net investment income..................................... 0.03 0.01
Net realized gain on investments.......................... 0.00(3) --
----------- -----------
Total from investment operations...................... 0.03 0.01
----------- -----------
Dividends to shareholders:
Dividends to shareholders from net investment income...... (0.03) (0.01)
----------- -----------
Net asset value, end of period............................ $ 1.00 $ 1.00
=========== ===========
Total return (4,5)........................................ 5.2% 4.2%
=========== ===========
Net assets, end of period................................. $ 3,931,359 $3,519,526
----------- -----------
Ratio of net operating expenses to average net assets
(5,7)................................................... 1.00%(6) 1.00%
----------- -----------
Ratio of net investment income to average net assets
(5,7)................................................... 5.08%(6) 4.13%
----------- -----------
</TABLE>
--------------------------------------------------------------------------------
(1) Unaudited.
(2) Commencement of operations.
(3) Less than $.005 per share.
(4) Assumes reinvestment of all dividends and distributions.
(5) Annualized.
(6) Average net assets for the six months ended June 30, 1995 were $3,685,823.
(7) During the periods presented above, the Adviser waived its fees and
reimbursed the Portfolio for a portion of its operating expenses. If such
waivers and reimbursements had not been in effect, the ratio of net
operating expenses to average net assets and the ratio of net investment
income to average net assets would have been 1.42% and 4.66% and 2.03% and
3.10%, respectively.
66
<PAGE>
QUEST FOR VALUE ACCUMULATION TRUST
ONE WORLD FINANCIAL CENTER
NEW YORK, NY 10281
TRUSTEES AND PRINCIPAL OFFICERS
Joseph M. La Motta Trustee, President
Paul Y. Clinton Trustee
Thomas W. Courtney Trustee
Lacy B. Herrmann Trustee
George Loft Trustee
Bernard H. Garil Vice President
Robert J. Bluestone Vice President
Pierre Daviron Vice President
John C. Giusio, Jr. Vice President
Richard J. Glasebrook, II Vice President
Louis Goldstein Vice President
Vikki Hanges Vice President
Jenny Beth Jones Vice President
Catherine Puc Vice President
Eileen P. Rominger Vice President
Sheldon M. Siegel Treasurer
Deborah Kaback Secretary
Leslie Klein Assistant Treasurer
Ilana R. Marcus Assistant Secretary
INVESTMENT ADVISER
Quest for Value Advisors
One World Financial Center
New York, NY 10281
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
P.O. Box 1713
Boston, MA 02105
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
This report is authorized for distribution only
to shareholders and to others who have received
a copy of this Trust's prospectus.
67
(2_FIDELITY_LOGOS)
VARIABLE INSURANCE PRODUCTS
FUND
MONEY MARKET PORTFOLIO
HIGH INCOME PORTFOLIO
EQUITY-INCOME PORTFOLIO
GROWTH PORTFOLIO
OVERSEAS PORTFOLIO
SEMIANNUAL REPORT
JUNE 30, 1995
CONTENTS
MONEY MARKET PORTFOLIO VIPF-3 PERFORMANCE
VIPF-4 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-5 INVESTMENTS
VIPF-9 FINANCIAL STATEMENTS
HIGH INCOME PORTFOLIO VIPF-11 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-12 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-13 INVESTMENTS
VIPF-19 FINANCIAL STATEMENTS
EQUITY-INCOME PORTFOLIO VIPF-21 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-22 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-23 INVESTMENTS
VIPF-27 FINANCIAL STATEMENTS
GROWTH PORTFOLIO VIPF-29 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-30 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-31 INVESTMENTS
VIPF-35 FINANCIAL STATEMENTS
OVERSEAS PORTFOLIO VIPF-37 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-38 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-39 INVESTMENTS
VIPF-44 FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS VIPF-46 NOTES TO THE FINANCIAL STATEMENTS
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS
NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
PERFORMANCE
To measure a money market fund's performance, you can look at either total
return or yield. Total return reflects both the change
in a fund's share price over a given period, and reinvestment of its
dividends (or income). Yield measures the income paid by a fund. Since a
money market fund tries to maintain a $1 share price, yield is an important
measure of performance.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 PAST 10
JUNE 30, 1995 YEAR YEARS YEARS
Money Market 5.44% 4.88% 6.19%
Consumer Price Index 3.04% 3.26% 3.55%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had achieved that return
by performing at a constant rate each year.
Comparing the fund's performance to the Consumer Price Index (CPI) helps
show how your investment did compared to inflation. (The periods covered by
the CPI numbers are the closest available match to those covered by the
fund.)
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
If the advisor had not reimbursed certain fund expenses, the past five
years and life of fund total returns would have been lower. Yield
will vary.
YIELD
Row: 1, Col: 1, Value: 4.21
Row: 1, Col: 2, Value: 2.41
Row: 2, Col: 1, Value: 4.7
Row: 2, Col: 2, Value: 2.5
Row: 3, Col: 1, Value: 5.609999999999999
Row: 3, Col: 2, Value: 2.74
Row: 4, Col: 1, Value: 5.91
Row: 4, Col: 2, Value: 2.89
Row: 5, Col: 1, Value: 5.85
Row: 5, Col: 2, Value: 2.87
Money Market
MMDA
6% -
5% -
4% -
3% -
2% -
1% -
0%
6/28/94 10/2/94 12/28/94 3/29/95 6/28/95
Money Market 4.21% 4.70% 5.61% 5.91% 5.85%
MMDA 2.41% 2.50% 2.74% 2.89% 2.87%
YIELD refers to the income paid by the fund over a given period. Yields for
money market funds are usually for seven-day periods,
expressed as annual percentage rates. A yield that assumes income earned is
reinvested or compounded is called an effective yield. The chart above
shows the fund's current seven-day yield at quarterly intervals over the
past year. This is compared to similar yields for the average bank money
market deposit account (MMDA). The MMDA average is supplied by BANK RATE
MONITOR.(Trademark)
COMPARING PERFORMANCE
There are some important differences between
a bank money market deposit account (MMDA)
and a money market fund. First, the U.S.
government neither insures nor guarantees a
money market fund. In fact, there is no
assurance that a money fund will maintain a $1
share price. Second, a money market fund
returns to its shareholders income earned by the
fund's investments after expenses. This is in
contrast to banks, which set their MMDA rates
periodically based on current interest rates,
competitors' rates, and internal criteria.
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with
Bob Litterst, Portfolio
Manager of Money
Market Portfolio
Q. BOB, CAN YOU BRING US UP TO DATE ON MARKET CONDITIONS?
A. Sure. The economic growth rate has slowed dramatically during the past
six months. During the fourth quarter of 1994, the gross domestic product
expanded at a rate of 5.1%, a very strong showing. Moreover, final sales
rose 5.7%, meaning sales exceeded production and depleted inventories.
Those signs of growth, along with disturbing trends in such leading
indicators of inflation as unemployment and capacity utilization, prompted
the Federal Reserve to raise the federal funds rate, the rate banks charge
each other for overnight loans, another one-half percentage point in
February.
Q. HOW HAS THE INTEREST RATE ENVIRONMENT CHANGED SINCE THEN?
A. Even as the Fed was tightening credit for the seventh time in a little
more than a year, there were signs that the economy was beginning to lose
steam. Led by softening consumer activity and weakness in
interest-sensitive sectors such as housing and autos, the growth rate
during the first quarter of 1995 slowed to 2.7%. Currently, most economists
have long since stopped worrying about the economy overheating. Now they
have an altogether different concern: that we might be headed for another
recession. By the end of June, it was clear to all that the latest cycle of
interest rate increases was over. Instead, speculation centered on when the
Fed might feel compelled to lower rates.
Q. HOW DID YOU RESPOND TO CHANGING CONDITIONS?
A. The fund's average maturity six months ago, when the period began, was
39 days. That was a defensive number. It reflected my view at the time that
further rate increases were likely. As it became apparent that the economy
was slowing more rapidly than initially expected, my expectations regarding
Fed policy changed, and I gradually extended the fund's average maturity. I
moved cautiously at first because conditions were unsettled and it seemed
prudent to maintain flexibility. But as signs of weakness accumulated, I
began to prepare for a shift in Fed policy, including the possibility of an
eventual rate cut. By the end of June, the fund's average maturity was more
aggressive than that of most other taxable money market funds-around 60
days, compared to about 50 days for most competitors.
Q. HOW DID YOU ACHIEVE THAT LONGER AVERAGE MATURITY?
A. Mainly by focusing on three-month and six-month securities, rather than
moving further out the yield curve. That's because by the end of the
period, expectations for declining short-term rates caused longer-term
yields on some money market securities to fall below shorter-term yields, a
situation known as an inverted yield curve.
Q. WHAT ABOUT ASSET SELECTION?
A. I've reduced the fund's stake in U.S. Treasury and agency securities.
Normally the fund averages about 10% in government securities, although
it's been as high as 20% at times during the past year or two. But in
recent months, technical factors affecting supply and demand have priced
government securities unusually high. The main cause seems to be heavy
buying on the part of foreign central banks with funds accumulated in
support of the U.S. dollar. With so many other creditworthy alternatives
available, I've looked elsewhere for value, adding higher-yielding
commercial paper and bank certificates of deposit. At the end of June,
government securities totaled less than 3% of the fund's assets.
Q. WHAT'S THE OUTLOOK?
A. The next few months should be interesting. We know that on July 6,
shortly after the period ended, the Fed lowered the federal funds rate
one-quarter percentage point, but as we look ahead, much uncertainty
remains. Some market participants believe that we're in the early stages of
an extended downturn. Others believe that what's happening is merely a
brief but severe inventory correction, and that the economy will resume
growing at its long-term trend rate of around 2.5% once the temporary
buildup in inventories sells off.
Q. WHAT'S YOUR VIEW?
A. I tend to side with those in the latter camp. The typical prerequisites
for a recession, including high inflation and tight bank lending standards,
simply don't exist. That said, I'm concerned that if this Spring's weakness
in the labor market persists, it could evolve into a self-reinforcing
slowdown, forcing the Fed to continue lowering rates. While I don't think
that will happen, I have to respect the possibility of such a development.
Accordingly, I'll probably maintain a neutral to aggressive average
maturity of between 60 and 65 days for the foreseeable future.
FUND FACTS
GOAL: Income and share price stability by
investing in high quality, short-term instruments
START DATE: April 1, 1982
SIZE: As of June 30, 1995, more than $768
million
MANAGER: Robert Litterst, since 1992; manager,
Capital Reserves Money Market, Fidelity Cash
Reserves, Fidelity Money Market Trust:
Retirement Money Market, since 1992; joined
Fidelity in 1991
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
BANKERS' ACCEPTANCES - 4.2%
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
DOMESTIC BANKERS' ACCEPTANCES - 2.8%
CHASE MANHATTAN BANK
11/1/95 6.09% $ 4,500,000 $ 4,408,980
CHEMICAL BANK
9/28/95 6.02 5,723,026 5,639,549
MELLON BANK, N.A.
11/24/95 5.81 7,500,000 7,325,700
NBD BANK, N.A.
12/11/95 5.87 4,000,000 3,896,767
21,270,996
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 1.4%
BANK OF TOKYO
8/14/95 6.39 6,000,000 5,954,533
RABOBANK NEDERLAND, N.V.
8/3/95 6.22 1,000,000 994,408
SANWA BANK, LTD.
7/31/95 6.08 4,000,000 3,980,033
10,928,974
TOTAL BANKERS' ACCEPTANCES 32,199,970
CERTIFICATES OF DEPOSIT - 20.3%
CHICAGO BRANCH, YANKEE DOLLAR, FOREIGN BRANCH - 3.9%
ABN-AMRO BANK
8/3/95 6.25 5,000,000 5,000,045
9/20/95 6.19 5,000,000 5,000,000
9/25/95 6.00 5,000,000 5,000,000
10/19/95 6.25 10,000,000 10,000,000
SANWA BANK, LTD.
8/15/95 6.04 5,000,000 5,000,062
30,000,107
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 9.4%
BANQUE NATIONALE DE PARIS
11/13/95 6.05 5,000,000 5,000,000
CANADIAN IMPERIAL BANK OF COMMERCE
11/1/95 6.25 4,000,000 3,998,110
COMMERZBANK, GERMANY
8/24/95 6.35 5,000,000 4,999,596
DRESDNER BANK, A.G.
3/15/96 6.44 1,000,000 1,000,875
FUJI BANK, LTD.
7/19/95 6.18 5,000,000 5,000,000
HYPO U.S. FINANCE
11/8/95 6.03 5,000,000 5,000,823
INDUSTRIAL BANK OF JAPAN, LTD.
7/31/95 6.30 5,000,000 5,000,000
ROYAL BANK OF CANADA
10/5/95 6.25 1,000,000 1,000,294
SANWA BANK, LTD.
7/7/95 6.21 3,000,000 3,000,000
SOCIETE GENERALE
8/14/95 6.02 14,000,000 14,000,000
8/21/95 6.00 10,000,000 10,000,000
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - CONTINUED
SUMITOMO BANK, LTD.
8/7/95 6.01% $ 5,000,000 $ 5,000,000
8/21/95 6.41 5,000,000 5,000,465
8/22/95 6.03 5,000,000 5,000,000
73,000,163
LONDON BRANCH, EURODOLLAR, DOMESTIC BANKS - 2.6%
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOC.
9/29/95 5.91 5,000,000 5,000,000
11/27/95 6.00 5,000,000 5,000,000
BANK OF NEW YORK
7/17/95 6.15 10,000,000 10,000,000
20,000,000
LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - 3.8%
BANK OF SCOTLAND
7/5/95 6.15 4,000,000 4,000,015
MITSUBISHI BANK, LTD.
8/10/95 6.04 5,000,000 5,000,377
NORDDEUTSCHE LANDESBANK
12/8/95 5.75 5,000,000 4,998,563
SANWA BANK, LTD.
8/7/95 6.02 5,000,000 4,998,917
TORONTO-DOMINION BANK
12/11/95 5.74 10,000,000 10,013,064
29,010,936
PORTLAND BRANCH, EURODOLLAR, FOREIGN BANKS - 0.6%
BANK OF NOVA SCOTIA
7/11/95 6.13 5,000,000 5,000,008
TOTAL CERTIFICATES OF DEPOSIT 157,011,214
COMMERCIAL PAPER - 52.0%
ANZ (DE), INC.
7/7/95 6.52 1,273,000 1,271,653
8/8/95 6.03 220,000 218,611
ABBEY NATIONAL TREASURY SERVICES
8/21/95 6.04 5,000,000 4,957,854
AMERICAN EXPRESS CREDIT CORP.
8/9/95 6.21 5,000,000 4,967,067
8/14/95 6.20 5,000,000 4,962,875
11/9/95 5.89 5,000,000 4,895,382
AMERICAN HOME FOOD PRODUCTS, INC.
7/10/95 6.17 11,000,000 10,983,280
AMERICAN HOME PRODUCTS
8/29/95 6.00 6,000,000 5,941,688
AMERICAN TELEPHONE & TELEGRAPH CO.
9/27/95 6.09 5,000,000 4,927,400
ASSOCIATES CORP. OF NORTH AMERICA
9/1/95 5.98 6,000,000 5,938,930
9/28/95 6.10 5,000,000 4,926,451
BANC ONE CORP.
9/22/95 5.99 5,000,000 4,931,986
BEAR STEARNS COS., INC.
7/12/95 6.14 5,000,000 4,990,757
8/1/95 6.06 6,000,000 5,969,155
8/1/95 6.13 5,000,000 4,974,016
COMMERCIAL PAPER - CONTINUED
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
BENEFICIAL CORP.
9/18/95 5.99% $ 5,000,000 $ 4,935,264
9/29/95 5.81 5,000,000 4,928,750
CIT GROUP HOLDINGS, INC.
9/21/95 6.20 5,000,000 4,931,211
CHRYSLER FINANCIAL CORPORATION
7/6/95 6.05 5,000,000 4,995,826
7/12/95 6.05 5,000,000 4,990,803
7/13/95 6.04 2,000,000 1,996,000
7/17/95 6.05 3,000,000 2,991,973
COMMERZBANK U.S. FINANCE, INC.
9/25/95 5.89 5,000,000 4,930,722
9/29/95 5.91 140,000 137,977
9/29/95 6.30 600,000 590,820
10/20/95 6.23 4,000,000 3,925,507
12/15/95 5.76 1,120,000 1,090,905
COMPAGNIE BANCAIRE
7/6/95 6.20 5,000,000 4,995,764
7/12/95 6.15 5,000,000 4,990,742
CORESTATES CAPITAL CORP.
7/8/95 6.01 (a) 5,000,000 5,000,000
7/15/95 6.09 (a) 5,000,000 5,000,000
DEN DANSKE CORP., INC.
7/12/95 6.15 3,000,000 2,994,445
DU PONT (E.I.) DE NEMOURS & CO.
9/19/95 6.09 2,500,000 2,466,833
FORD MOTOR CREDIT CORP.
7/21/95 6.23 5,000,000 4,983,056
8/30/95 6.23 15,000,000 14,848,000
9/11/95 6.25 5,000,000 4,939,100
10/27/95 5.86 6,000,000 5,887,507
FORD MOTOR CREDIT, PLC
8/1/95 6.10 4,500,000 4,476,711
GENERALE BANK
10/17/95 6.07 5,000,000 4,911,200
GENERAL ELECTRIC CAPITAL CORP.
7/3/95 5.97 (a) 5,000,000 5,000,000
7/5/95 6.19 5,000,000 4,996,628
8/1/95 5.94 170,000 169,139
9/15/95 6.68 4,000,000 3,945,787
10/5/95 6.79 2,400,000 2,358,400
10/12/95 6.80 1,000,000 981,403
11/1/95 6.13 10,000,000 9,796,708
GENERAL ELECTRIC CORP.
9/27/95 6.25 10,000,000 9,851,622
GENERAL MOTORS ACCEPTANCE CORP.
7/31/95 6.22 5,000,000 4,974,500
8/2/95 6.19 11,000,000 10,940,453
8/16/95 6.12 6,000,000 5,953,770
8/16/95 6.15 5,000,000 4,961,347
8/22/95 6.10 1,000,000 991,319
9/15/95 6.05 5,000,000 4,936,983
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
GEORGIA POWER CO.
7/5/95 6.20% $ 5,000,000 $ 4,996,611
GOLDMAN SACHS GROUP, L.P. (THE)
9/7/95 6.01 10,000,000 9,888,367
9/18/95 6.02 6,000,000 5,922,185
HANSON FINANCE (UK), PLC
8/7/95 6.03 10,000,000 9,938,950
8/22/95 6.04 6,000,000 5,948,477
IBM CORP.
9/1/95 5.97 5,000,000 4,949,194
INTERNATIONAL NEDERLANDEN U.S. FUNDING CORP.
8/28/95 6.35 4,000,000 3,960,367
MERRILL LYNCH & CO., INC.
9/28/95 6.00 5,000,000 4,927,317
MONSANTO CO.
8/14/95 6.19 2,500,000 2,481,453
9/12/95 6.17 1,525,000 1,506,353
12/21/95 5.90 10,000,000 9,724,642
MORGAN STANLEY GROUP, INC.
10/6/95 5.91 5,000,000 4,921,592
NATIONAL & PROVINCIAL BUILDING SOCIETY
10/16/95 5.89 5,350,000 5,258,249
NATIONWIDE BUILDING SOCIETY
8/11/95 6.06 5,000,000 4,966,004
NEW CENTER ASSET TRUST
7/12/95 6.16 5,000,000 4,990,726
7/17/95 6.15 10,000,000 9,973,067
NORWEST CORP.
9/19/95 5.99 400,000 394,773
NORWEST FINANCIAL
7/10/95 6.14 5,000,000 4,992,438
PENNSYLVANIA LIGHT & POWER COMPANY
7/5/95 6.06 1,650,000 1,648,895
7/10/95 6.05 3,200,000 2,196,689
PHILIP MORRIS COS., INC.
9/5/95 6.07 4,500,000 4,450,913
PRUDENTIAL FUNDING CORP.
7/3/95 6.30 10,000,000 9,996,500
SEARS ROEBUCK ACCEPTANCE CORP.
9/18/95 6.00 5,000,000 4,935,154
SHERWOOD MEDICAL COMPANY
8/21/95 5.99 5,000,000 4,957,925
TEXTRON, INC.
7/14/95 6.06 3,500,000 3,492,391
TORONTO DOMINION HOLDINGS USA, INC.
9/11/95 6.11 5,000,000 4,940,200
9/29/95 5.90 10,000,000 9,854,750
TRANSAMERICA FINANCE CORP.
8/7/95 6.03 220,000 218,648
WOOLWICH EQUITABLE BUILDING SOCIETY
10/16/95 5.94 5,000,000 4,913,508
TOTAL COMMERCIAL PAPER 402,000,618
FEDERAL AGENCIES - 3.2%
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
FEDERAL FARM CREDIT BANK - AGENCY COUPONS - 0.6%
7/3/95 6.17% (a) $ 5,000,000 $ 4,997,271
FEDERAL NATIONAL MORTGAGE ASSOC. - DISCOUNT NOTES - 2.6%
7/17/95 6.27 5,000,000 4,986,422
9/11/95 6.32 10,000,000 9,877,600
10/20/95 6.04 5,000,000 4,909,350
19,773,372
TOTAL FEDERAL AGENCIES 24,770,643
BANK NOTES - 7.2%
BANK OF NEW YORK
8/28/95 6.35 5,000,000 4,999,748
BOATMEN'S NATIONAL BANK OF ST. LOUIS
9/22/95 6.04 (a) 5,000,000 4,995,859
COMERICA BANK - DETROIT
5/28/96 5.83 5,000,000 5,014,775
FIFTH THIRD BANK - CINCINNATI
10/27/95 6.07 5,000,000 5,001,981
HOUSEHOLD BANK, N.A.
9/21/95 5.93 1,000,000 1,000,000
KEY BANK OF NEW YORK
7/3/95 6.11 (a) 5,000,000 4,999,374
MELLON BANK, N.A.
11/1/95 6.24 5,000,000 5,000,000
NBD BANK, N.A.
10/16/95 6.27 5,000,000 5,000,000
NATIONSBANK OF TEXAS
9/26/95 6.38 5,000,000 5,000,000
10/27/95 6.25 5,000,000 5,000,000
PNC BANK, N.A.
7/4/95 6.15 (a) 5,000,000 4,999,589
U.S. NATIONAL BANK OF OREGON
8/22/95 6.37 5,000,000 5,000,070
TOTAL BANK NOTES 56,011,396
MASTER NOTES (A) - 1.2%
J.P. MORGAN SECURITIES
7/3/95 6.58 9,000,000 9,000,000
MEDIUM-TERM NOTES (A) - 5.9%
ABBEY NATIONAL, NORTH AMERICA
7/3/95 5.97 5,000,000 4,999,151
ABBEY NATIONAL TREASURY SERVICES (C)
9/30/95 6.00 10,000,000 10,000,000
BENEFICIAL CORP.
7/15/95 6.09 5,000,000 4,999,453
DEAN WITTER, DISCOVER & CO.
7/15/95 6.10 5,000,000 5,004,526
GENERAL ELECTRIC CAPITAL CORP.
7/3/95 6.27 5,000,000 4,998,997
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
GENERAL MOTORS ACCEPTANCE CORP.
8/7/95 6.25% $ 3,000,000 $ 3,000,000
GOLDMAN SACHS GROUP, L.P. (THE) (C)
9/1/95 6.03 3,000,000 3,000,000
9/16/95 5.95 4,000,000 4,000,000
NORWEST CORP.
9/15/95 6.06 6,000,000 6,000,000
TOTAL MEDIUM-TERM NOTES 46,002,127
SHORT-TERM NOTES (A) - 3.2%
CAPITAL ONE FUNDING CORP.
7/10/95 6.07 4,072,000 4,072,000
SMM TRUST COMPANY (1994-D) (B)
7/28/95 6.17 4,000,000 4,000,000
SMM TRUST COMPANY (1995-I) (B)
7/5/95 6.16 6,000,000 5,998,411
SMM TRUST COMPANY (1995-J) (B)
7/15/95 6.06 11,000,000 11,000,000
TOTAL SHORT-TERM NOTES 25,070,411
MUNICIPAL SECURITIES (A) - 1.1%
GARDENA CALIFORNIA CERTIFICATES OF PARTNERSHIP
7/10/95 6.35 6,550,000 6,550,000
NEW ORLEANS AVIATION BOARD
7/10/95 6.26 1,800,000 1,800,000
TOTAL MUNICIPAL SECURITIES 8,350,000
REPURCHASE AGREEMENTS - 1.7%
MATURITY
AMOUNT
In a joint trading account
(U.S. Government Obligations)
dated 6/30/95 due 7/3/95:
At 6.28% $ 12,806,699 12,800,000
TOTAL INVESTMENTS - 100% $ 773,216,379
Total Cost for Income Tax Purposes - $773,216,379
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end. The due date on these types of
securities reflects the next interest rate reset date or, when applicable,
the final maturity date.
(b) Restricted securities - Investment in securities not registered under
the Securities Act of 1933.
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
SMM Trust Company:
(1994-D) 10/28/94 $ 4,000,000
(1995-I)) 5/25/95 $ 6,000,000
(1995-J) 5/15/95 $ 11,000,000
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $17,000,000 or 2.2% of net
assets.
INCOME TAX INFORMATION
At December 31, 1994, the fund had a capital loss carryforward of
approximately $94,600 of which $4,100, $500, $4,900, $4,300 and $80,800
will expire on December 31, 1995, 1996, 1997, 2000 and 2002, respectively.
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $12,800,000) - See accompanying $ 773,216,379
schedule
Cash 673,210
Receivable for investments sold 104,000
Interest receivable 2,641,686
TOTAL ASSETS 776,635,275
LIABILITIES
Payable for investments purchased $ 7,463,678
Accrued management fee 157,028
Other payables and accrued expenses 64,485
TOTAL LIABILITIES 7,685,191
NET ASSETS $ 768,950,084
Net Assets consist of:
Paid in capital $ 769,022,085
Accumulated net realized gain (72,001
(loss) on investments )
NET ASSETS, for 769,022,085 $ 768,950,084
shares outstanding
NET ASSET VALUE, offering price and redemption price per share ($768,950,084 (divided by) 769,022,085 shares) $1.00
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INTEREST INCOME $ 22,651,404
EXPENSES
Management fee $ 934,903
Transfer agent fees 176,682
Accounting fees and expenses 52,708
Non-interested trustees' 2,520
compensation
Custodian fees and expenses 36,594
Audit 11,536
Legal 1,454
Miscellaneous 2,459
TOTAL EXPENSES 1,218,856
NET INTEREST INCOME 21,432,548
NET REALIZED GAIN (LOSS) ON 7,601
INVESTMENTS
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 21,440,149
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS END YEAR ENDED
ED DECEMBER 31,
JUNE 30, 1995 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 21,432,548 $ 25,859,424
Net interest income
Net realized gain (loss) 7,601 (80,853
)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 21,440,149 25,778,571
Distributions to shareholders from net interest income (21,432,548 (25,859,424
) )
Share transactions at net asset value of $1.00 per share 512,023,023 1,187,546,448
Proceeds from sales of shares
Reinvestment of distributions from net interest income 21,432,548 25,859,424
Cost of shares redeemed (513,118,899 (817,822,836
) )
NET INCREASE (DECREASE) IN NET ASSETS AND SHARES RESULTING FROM SHARE TRANSACTIONS 20,336,672 395,583,036
TOTAL INCREASE (DECREASE) IN NET ASSETS 20,344,273 395,502,183
NET ASSETS
Beginning of period 748,605,811 353,103,628
End of period $ 768,950,084 $ 748,605,811
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1995
(UNAUDITED) 1994 1993 1992 1991 1990
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Income from Investment Operations .029 .042 .032 .038 .059 .078
Net interest income
Less Distributions (.029) (.042) (.032) (.038) (.059) (.078)
From net interest income
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
TOTAL RETURN B C 2.95% 4.25% 3.23% 3.90% 6.09% 8.04%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 768,950 $ 748,606 $ 353,104 $ 301,002 $ 271,123 $ 254,585
Ratio of expenses to average net assets .33% A .27% .22% .24% .38% .56%
Ratio of expenses to average net assets before .33% A .27% .23% .24% .38% .56%
expense reductions
Ratio of net interest income to average net assets 5.84% A 4.32% 3.16% 3.85% 5.93% 7.76%
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE ACCOUNT.
INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
C TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
HIGH INCOME 11.89% 16.87% 11.60%
Merrill Lynch High Yield Master 14.88% 14.23% n/a
Consumer Price Index 3.04% 3.26% 3.57%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of
how it will do tomorrow. Bond prices, for
example, generally move in the opposite
direction of interest rates. In turn, the share price,
return, and yield of a fund that invests in bonds
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare the fund's returns to those of the Merrill Lynch High Yield
Master Index - a broad measure of the high yield bond market. This
benchmark includes reinvested dividends and capital gains, if any.
Comparing the fund's performance to the consumer price index (CPI) helps
show how your fund did compared to inflation. (The CPI returns begin on the
month end closest to the fund's start date).
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, September 19, 1985.
If the adviser had not reimbursed certain fund expenses during the periods
shown, the total returns would have been lower.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money. The fund includes high yielding, lower-rated
securities which are subject to greater price volatility and may involve
greater risk of default. The market for these securities may be less
liquid.
$10,000 OVER LIFE OF FUND
VIP High Income (4High Yield Maste
09/30/85 10000.00 10000.00
10/31/85 10124.78 10113.02
11/30/85 10270.82 10303.28
12/31/85 10614.12 10604.47
01/31/86 10745.58 10676.44
02/28/86 11109.08 11130.10
03/31/86 11383.10 11373.65
04/30/86 11576.24 11551.26
05/31/86 11753.01 11685.98
06/30/86 11900.72 11804.36
07/31/86 11864.53 11648.95
08/31/86 11912.43 11863.93
09/30/86 12013.59 11962.11
10/31/86 12372.53 12172.57
11/30/86 12412.20 12271.68
12/31/86 12490.69 12337.95
01/31/87 12946.06 12686.81
02/28/87 13170.08 12896.26
03/31/87 13290.04 13038.85
04/30/87 12874.71 12754.50
05/31/87 12755.02 12697.03
06/30/87 13030.49 12872.55
07/31/87 13044.43 12942.59
08/31/87 13152.49 13072.28
09/30/87 12694.49 12771.51
10/31/87 12087.43 12430.27
11/30/87 12443.44 12744.62
12/31/87 12642.60 12913.85
01/31/88 13058.25 13267.23
02/29/88 13449.21 13627.23
03/31/88 13352.58 13604.70
04/30/88 13456.66 13643.99
05/31/88 13436.65 13715.20
06/30/88 13718.27 13977.43
07/31/88 13861.07 14125.13
08/31/88 13794.86 14171.55
09/30/88 13905.45 14314.39
10/31/88 14056.82 14537.41
11/30/88 14003.15 14591.87
12/31/88 14114.42 14653.61
01/31/89 14453.60 14873.37
02/28/89 14524.70 14973.32
03/31/89 14338.06 14960.00
04/30/89 14179.27 15004.15
05/31/89 14441.26 15280.37
06/30/89 14854.88 15496.85
07/31/89 14757.08 15570.24
08/31/89 14671.49 15647.15
09/30/89 14158.14 15498.19
10/31/89 13551.16 15253.06
11/30/89 13562.58 15287.24
12/31/89 13525.40 15273.41
01/31/90 13226.43 14974.91
02/28/90 13022.77 14756.83
03/31/90 12885.36 14956.31
04/30/90 12923.54 15032.30
05/31/90 13189.08 15303.83
06/30/90 13396.83 15600.32
07/31/90 13603.76 15929.99
08/31/90 13376.19 15320.16
09/30/90 13059.02 14653.87
10/31/90 12742.13 14280.96
11/30/90 13041.01 14401.94
12/31/90 13223.36 14609.46
01/31/91 13503.92 14815.98
02/28/91 14252.06 15915.67
03/31/91 14757.05 16599.98
04/30/91 15280.75 17191.13
05/31/91 15505.19 17275.07
06/30/91 15841.85 17622.59
07/31/91 16440.36 18044.84
08/31/91 16664.81 18424.11
09/30/91 17038.88 18658.77
10/31/91 17618.68 19213.23
11/30/91 17768.31 19435.16
12/31/91 17861.83 19660.94
01/31/92 18815.71 20348.35
02/29/92 19498.87 20853.71
03/31/92 20129.17 21144.68
04/30/92 20271.50 21298.58
05/31/92 20515.49 21638.31
06/30/92 20739.15 21907.16
07/31/92 21145.80 22351.02
08/31/92 21593.11 22646.93
09/30/92 21816.77 22904.97
10/31/92 21491.45 22615.68
11/30/92 21755.77 22935.97
12/31/92 21999.76 23231.29
01/31/93 22589.41 23803.34
02/28/93 22974.74 24253.90
03/31/93 23504.92 24674.39
04/30/93 23659.56 24851.50
05/31/93 24013.02 25186.03
06/30/93 24631.57 25659.22
07/31/93 24874.57 25935.02
08/31/93 25139.66 26182.25
09/30/93 25228.03 26311.44
10/31/93 25824.49 26807.08
11/30/93 26067.49 26953.70
12/31/93 26487.22 27223.21
01/31/94 27370.86 27819.81
02/28/94 27338.05 27619.74
03/31/94 26417.09 26719.70
04/30/94 26150.49 26407.45
05/31/94 26198.96 26313.37
06/30/94 26102.02 26893.29
07/31/94 26198.96 27082.30
08/31/94 26198.96 27270.47
09/30/94 26392.85 27260.08
10/31/94 26150.49 27329.36
11/30/94 25932.37 27096.87
12/31/94 26053.55 26906.19
01/31/95 26344.38 27286.38
02/28/95 27248.56 28137.75
03/31/95 27587.86 28529.34
04/30/95 28396.97 29197.31
05/31/95 29127.77 30109.50
06/30/95 29206.07 30339.47
Let's say you invested $10,000 in High Income Portfolio on September 30,
1985, shortly after the fund started. By June 30, 1995, your investment
would have grown to $29,206 - a 192.06% increase. That compares to $10,000
invested in the Merrill Lynch High Yield Master Index, which would have
grown to $30,339 over the same period - a 203.39% increase.
INVESTMENT SUMMARY
TOP FIVE HOLDINGS AS OF JUNE 30, 1995
(BY ISSUER, EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S
INVESTMENTS
PanAmSat Corp. 12 3/4% 4.2
TransTexas Gas Corp. (various issues) 3.5
Revlon Worldwide Corp. secured 0%, 3/15/98 2.6
Flagstar Corp. 11 1/4%, 11/1/04 2.3
American Financial Corp. (various issues) 2.3
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Media & Leisure 29.9
Finance 9.5
Energy 8.8
Services 6.6
Basic Industries 6.4
QUALITY DIVERSIFICATION AS OF JUNE 30, 1995
(MOODY'S RATINGS) % OF FUND'S
INVESTMENTS
Aaa, Aa, A 0.0
Baa 0.0
Ba 6.4
B 41.9
Caa, Ca, C 16.6
Nonrated 10.4
TABLE EXCLUDES SHORT-TERM INVESTMENTS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT JUNE 30, 1995, ACCOUNT FOR 7.9% OF THE FUND'S
INVESTMENTS.
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Barry Coffman, Portfolio Manager of High Income Portfolio
Q. HOW HAS THE FUND PERFORMED, BARRY?
A. Although the fund did well relative to its peers, it trailed the
performance of the Merrill Lynch High Yield Master Index, which returned
12.76% and 14.88%, respectively, for the six and 12-month periods ended
June 30, 1995. The index has a larger percentage of Ba-rated bonds than
most high-yield mutual funds, which tend to be more concentrated in B-rated
bonds. Generally speaking, Ba-rated bonds are more sensitive to changing
interest rates, and therefore, benefited more from the recent decline in
interest rates than B-rated bonds. As a result, very few high yield funds
outperformed the index.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. The fund's relatively low weighting in Ba-rated securities was the
primary reason for its underperformance relative to its benchmark during
the most recent period. On the positive side, we have maintained a high
weighting, compared to the benchmark, in deferred coupon securities. These
bonds sell at a deep discount because they do not pay current interest for
some period, usually three to five years. They generally have longer
durations - which measures how sensitive their price is to changes in
interest rates - and therefore, their prices are more volatile. We also
avoided most of the credit disasters that occurred in the market.
Q. WHAT INVESTMENTS HAVE DONE WELL IN THE PAST SIX MONTHS?
A. Revlon continued to benefit from an operational restructuring and the
very successful launch of two key new products: Color Stay Lipstick and Age
Defying Makeup. Our Revlon position is concentrated in the most junior
securities that are most sensitive to changes in credit quality, which has
been a recent plus. Another strong performer was Big Flower Press, a large
commercial printer of advertising inserts, comics and television guides.
The company was helped by the strong growth in advertising and the
synergies it gained from some recent acquisitions. Finally, our
concentration in casinos and hotels did relatively well during the period.
Q. GIVEN THE MARKET'S STRENGTH SO FAR IN 1995, WAS IT DIFFICULT TO FIND
OPPORTUNITIES?
A. Not particularly. The new issues market was active and provided ample
opportunity to selectively add new names to the fund. One example was
PanAmSat Corp., which operates an international satellite communications
system and provides satellite services to the broadcasting and business
communications markets. It currently has two satellites operating and also
has a large backlog of contracted time from companies including ESPN and
Viacom for two new satellites it will be launching later this year. The
company is participating in a joint venture to provide Direct to Home (DTH)
television broadcasting service to Latin America, similar to the Direct TV
service in the United States. Another new issue we purchased was
Stratosphere Corp., a Las Vegas-based casino owned by industry-leader Grand
Casino. These bonds are attractive, in part, because in addition to their
14.25% coupon, they pay additional interest based on a percentage of the
company's cash flow.
Q. WHAT INVESTMENTS DIDN'T FARE AS WELL?
A. The high-yield restaurant sector, in general, did not perform well
during the period due to competitive pressures and a slowing economy. One
of our largest holdings is Flagstar, the parent of Denny's and the largest
franchisee of Hardees. Although Denny's has benefited from an aggressive
remodeling program, Hardees has suffered due to aggressive price promotions
from the major burger chains. Another restaurant chain, American Restaurant
Group, also underperformed partly due to the concentration of its chains in
California, where the economy continues to be weaker than the rest of the
country.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. The probability of the soft landing scenario is increasing, which could
provide a favorable backdrop for the high-yield bond market. Slow economic
growth and low inflation could allow many companies in the high-yield
market to improve their credit quality. Absolute yields remain attractive,
and absent a sharp drop in interest rates from current levels, high-yield
bonds could perform well relative to other fixed-income investments. In my
view, the key is to be selective. I'm focusing on companies that are less
cyclical, or sensitive to the economy, and choosing companies that I think
can perform well in a slow-growth environment.
FUND FACTS
GOAL: seeks high current income by investing
in high yielding, lower-rated fixed-income
securities
START DATE: September 19, 1985
SIZE: as of June 30, 1995, more than $813 million
MANAGER: Barry Coffman, since 1990; joined
Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
CORPORATE BONDS - 74.8%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CONVERTIBLE BONDS - 0.2%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Ampex Corp., 0%, 6/30/97 - $ 469,000 $ 328,685
MEDIA & LEISURE - 0.2%
LODGING & GAMING - 0.2%
Argosy Gaming Co.
12%, 6/1/01 B3 1,290,000 1,290,000
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Farm Fresh, Inc.
7 1/2%, 3/1/10 B3 186,000 112,264
TOTAL CONVERTIBLE BONDS 1,730,949
NONCONVERTIBLE BONDS - 74.6%
AEROSPACE & DEFENSE - 0.3%
RHI Holdings, Inc.:
11 7/8%, 3/1/99 B2 2,160,000 2,062,800
11 7/8%, 3/1/99 (e) - 550,000 525,250
2,588,050
BASIC INDUSTRIES - 6.3%
CHEMICALS & PLASTICS - 2.1%
American Pacific Corp.
11%, 12/15/02 (f) - 850,000 765,000
Foamex LP 11 7/8%, 10/1/04 B3 5,000,000 4,725,000
Pioneer Americas Acquisition
Corp. 13 3/8%, 4/1/05 (f) B2 10,000,000 10,325,000
Trans Resources, Inc.
14 1/2%, 9/1/96 B2 580,000 585,800
16,400,800
IRON & STEEL - 0.9%
Republic Engineered Steels, Inc.
9 7/8%, 12/15/01 B2 5,230,000 4,772,375
WCI Steel, Inc.
10 1/2%, 3/1/02 B1 2,420,000 2,359,500
7,131,875
METALS & MINING - 0.7%
International Wire Group, Inc.
11 3/4%, 6/1/05 (f) B3 5,850,000 5,886,563
PACKAGING & CONTAINERS - 0.8%
Crown Packaging Holdings Ltd.
0%, 11/1/03 (d) Caa 6,840,000 3,129,300
Grupo Industrial Durango euro
9.6367%, 11/18/96 (g) 4,000,000 3,380,000
6,509,300
PAPER & FOREST PRODUCTS - 1.8%
Indah Kiat International Finance
Co. 11 3/8%, 6/15/99 Ba3 9,000,000 9,022,500
Mail-Well Holdings, Inc.
0%, 2/15/06 (d) - 1,190,000 511,700
Tjiwi Kimia International Finance
Co. 13 1/4%, 8/1/01 B1 4,130,000 4,377,800
13,912,000
TOTAL BASIC INDUSTRIES 49,840,538
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CONGLOMERATES - 0.6%
Jordan Industries, Inc.:
10 3/8%, 8/1/03 B3 $ 3,155,000 $ 2,902,600
0%, 8/1/05 (d) Caa 3,135,000 1,849,650
4,752,250
CONSTRUCTION & REAL ESTATE - 1.6%
BUILDING MATERIALS - 1.3%
Adience, Inc.
11%, 6/15/02 - 745,921 540,793
Building Materials Corp.,
America 0%, 7/1/04 (d) B1 12,610,000 7,502,950
DAL Tile International, Inc. secured
coupon, 0%, 7/15/98 Caa 3,435,000 2,279,981
10,323,724
REAL ESTATE - 0.3%
Littlefield Co.
10%, 12/31/95 (e) - 2,750,000 2,491,913
TOTAL CONSTRUCTION & REAL ESTATE 12,815,637
DURABLES - 2.9%
AUTOS, TIRES, & ACCESSORIES - 1.9%
Harvard Industries, Inc.
12%, 7/15/04 B2 5,000,000 5,137,500
Poindexter (JB), Inc.
12 1/2%, 5/15/04 B2 10,000,000 9,700,000
14,837,500
TEXTILES & APPAREL - 1.0%
Hat Brands, Inc.
12 5/8%, 9/15/02:
Series B - 1,520,000 1,599,800
Series D - 680,000 715,700
Leslie Fay Cos., Inc. (b)(e):
9.53%, 1/15/00 - 676,319 399,028
10.54%, 1/15/02 - 611,353 299,563
United States Leather, Inc.
10 1/4%, 7/31/03 B2 6,010,000 5,153,575
8,167,666
TOTAL DURABLES 23,005,166
ENERGY - 7.2%
ENERGY SERVICES - 1.0%
Falcon Drilling, Inc.:
9 3/4%, 1/15/01 B2 3,512,000 3,441,760
12 1/2%, 3/15/05 B3 4,000,000 4,160,000
7,601,760
OIL & GAS - 6.2%
Chesapeake Energy Corp.
10 1/2%, 6/1/02 (f) B1 6,000,000 5,910,000
Deeptech International, Inc.
12%, 12/15/00 B3 4,660,000 3,168,800
Mesa Capital Corp.
secured 0%, 6/30/98 (d) Caa 5,710,000 5,181,825
TransTexas Gas Corp.
11 1/2%, 6/15/02 B2 20,000,000 20,450,000
Transamerican Refining
Corp. (g):
0%, 2/15/02 Caa 6,746,000 4,435,495
16 1/2%, 2/15/02 Caa 9,620,000 10,173,150
49,319,270
TOTAL ENERGY 56,921,030
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - 6.0%
INSURANCE - 5.1%
American Annuity Group, Inc.
11 1/8%, 2/1/03 Ba3 $ 3,500,000 $ 3,640,000
American Financial Corp.:
10%, 10/20/99 Ba3 5,000,000 5,037,500
9 3/4%, 4/20/04 Ba3 6,570,000 6,504,300
9 3/4%, 4/20/04 (e) Ba3 6,770,000 6,702,300
American Life Holdings
11 1/4%, 9/15/04 B1 13,350,000 13,884,000
Americo Life, Inc.
9 1/4%, 6/1/05 Ba2 4,900,000 4,557,000
40,325,100
SAVINGS & LOANS - 0.8%
First Nationwide Holdings, Inc.
12 1/4%, 5/15/01 Ba3 5,790,000 6,166,350
SECURITIES INDUSTRY - 0.1%
ECM Corp. extendible
14%, 6/1/02 (f) - 570,198 627,218
TOTAL FINANCE 47,118,668
HEALTH - 0.6%
MEDICAL EQUIPMENT & SUPPLIES - 0.6%
Wright Medical Technology, Inc.,
Series B, 10 3/4%, 7/1/00 B3 5,200,000 5,083,000
HOLDING COMPANIES - 0.1%
New Street Capital Corp.
pay-in-kind (e):
12%, 2/28/98 - 67,416 64,697
Unit 12%, 2/28/98 - 1,123,600 1,078,285
1,142,982
INDUSTRIAL MACHINERY & EQUIPMENT - 3.4%
MVE, Inc. Unit
12 1/2%, 2/15/02 B3 8,545,000 8,886,800
Specialty Equipment Cos., Inc.
11 3/8%, 12/1/03 B3 10,640,000 10,932,600
Thermadyne Holdings Corp.:
10 1/4%, 5/1/02 B3 1,484,000 1,417,220
10 3/4%, 11/1/03 Caa 5,756,000 5,583,320
26,819,940
MEDIA & LEISURE - 24.5%
BROADCASTING - 8.0%
Chancellor Broadcasting
12 1/2%, 10/1/04 B3 6,560,000 6,543,600
Citicasters, Inc.
9 3/4%, 2/15/04 B- 7,812,000 7,792,470
Cooke Media Group, Inc.
11 5/8%, 4/1/99 - 350,000 334,250
Marcus Cable Capital Corp.
0%, 12/15/05 (d)(f) Caa 26,580,000 14,054,175
NWCG Holdings Corp.
0%, 6/15/99 Caa 26,925,000 16,693,500
Peoples Choice TV Corp. Unit
0%, 6/1/04 (d) Caa 11,340,000 5,485,725
Robin Media Group, Inc.
11 1/8%, 4/1/97 - 12,340,000 12,525,100
63,428,820
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
LEISURE DURABLES & TOYS - 1.5%
ICON Health And Fitness, Inc.
13%, 7/15/02 B3 $ 5,890,000 $ 5,948,900
IHF Holdings, Inc.
0%, 11/15/04 (d) Caa 10,250,000 5,637,500
11,586,400
LODGING & GAMING - 9.9%
Bally's Casino Holdings, Inc.
10 1/2%, 6/15/98 B3 12,630,000 8,841,000
Bally Gaming International, Inc.
10 3/8%, 7/15/98 - 3,000,000 3,090,000
Boyd Gaming Corp.
10 3/4%, 9/3/03 B2 7,350,000 7,570,500
GNF Corp., Series B,
10 5/8%, 4/1/03 B2 19,730,000 16,375,900
Grand Casino Resorts, Inc. gtd.
12 1/2%, 2/1/00 Ba3 2,200,000 2,464,000
HMH Properties, Inc.
9 1/2%, 5/15/05 (f) B1 10,000,000 9,700,000
Maritime Group Ltd. pay-in-
kind 14%, 2/15/97 (b) - 1,648,399 741,780
Players International, Inc.
10 7/8%, 4/15/05 (f) Ba3 7,050,000 6,944,250
President Riverboat Casinos
13%, 9/15/01 B 7,000,000 5,950,000
Stratosphere Corp.
14 1/4%, 5/15/02 B2 12,740,000 12,994,800
Trump Plaza Funding, Inc. gtd.
mtg. 10 7/8%, 6/15/01 B3 4,713,000 4,335,960
79,008,190
RESTAURANTS - 5.1%
American Restaurant Group, Inc.:
12%, 9/15/98 B2 3,930,000 3,144,000
12%, 9/15/98 (New) B2 3,580,000 2,864,000
Cafeteria Operators LP
11%, 6/30/98 (b)(e) - 7,000,000 1,750,000
Flagstar Corp.
11 1/4%, 11/1/04 Caa 23,555,000 18,372,900
Host Marriott Travel Plazas, Inc.
9 1/2%, 5/15/05 (f) B1 15,000,000 14,325,000
40,455,900
TOTAL MEDIA & LEISURE 194,479,310
NONDURABLES - 4.2%
BEVERAGES - 0.5%
Heileman Acquisition Corp.
9 5/8%, 1/31/04 B3 6,500,000 4,095,000
HOUSEHOLD PRODUCTS - 3.7%
McAndrews & Forbes Group,
Inc. 12 1/4%, 7/1/96 - 1,360,000 1,360,000
Revlon Consumer Products Corp.
10 1/2%, 2/15/03 B3 7,230,000 7,103,475
Revlon Worldwide Corp. secured
0%, 3/15/98 B3 30,342,000 20,860,125
29,323,600
TOTAL NONDURABLES 33,418,600
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - 5.5%
APPAREL STORES - 2.8%
Apparel Retailers, Inc.
12 3/4%, 8/15/05 Caa $ 11,230,000 $ 6,625,700
Lamonts Apparel Corp.
10 1/4%, 11/1/99 (b)(f) - 2,201,000 1,078,490
Specialty Retailers, Inc.:
10%, 8/15/00 B1 2,890,000 2,759,950
11%, 8/15/03 B3 12,220,000 11,364,600
21,828,740
GENERAL MERCHANDISE STORES - 1.4%
Parisian, Inc.
9 7/8%, 7/15/03 Caa 14,322,000 11,027,940
RETAIL & WHOLESALE, MISCELLANEOUS - 1.3%
Barrys Jewelers, Inc.
11%, 12/22/00 - 1,595,000 1,563,100
Finlay Fine Jewelry Corp.
10 5/8%, 5/1/03 B1 4,960,000 4,786,400
Florists Transworld Delivery, Inc.
14%, 12/15/01 B3 4,500,000 4,297,500
10,647,000
TOTAL RETAIL & WHOLESALE 43,503,680
SERVICES - 5.7%
ADVERTISING - 0.8%
Outdoor Systems, Inc.
10 3/4%, 8/15/03 B2 7,000,000 6,720,000
LEASING & RENTAL - 1.7%
Acme Holdings, Inc.
11 3/4%, 6/1/00 (b) Ca 2,930,000 1,465,000
GPA Delaware, Inc.:
8 1/2%, 3/3/97 Ca 3,500,000 3,176,250
gtd. 8 3/4%, 12/15/98 Caa 990,000 831,600
8 5/8%, 1/15/99 - 2,600,000 2,067,000
Scotsman Group, Inc.
9 1/2%, 12/15/00 B1 3,950,000 3,821,625
Scotsman Holdings, Inc.
pay-in-kind 11%, 3/1/04 - 2,080,752 1,712,521
13,073,996
PRINTING - 1.7%
BFP Holdings Corp.
0%, 4/15/04 (d) Caa 5,000,000 3,300,000
Big Flower Press:
10 3/4%, 8/1/03 B3 3,555,000 3,546,113
Class A, 10 3/4%, 8/1/03 B3 4,910,000 4,897,725
Class B, 10 3/4%, 8/1/03 B3 1,480,000 1,476,300
13,220,138
SERVICES - 1.5%
Protection One Alarm
Monitoring, Inc. Unit
0%, 6/30/05 (d)(f) Caa 1,860,000 12,136,500
TOTAL SERVICES 45,150,634
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Alpine Group, Inc.
13 1/2%, 1/5/96 (e) Caa $ 130,000 $ 130,000
TRANSPORTATION - 2.6%
AIR TRANSPORTATION - 1.7%
US Air, Inc.:
Series 1993-A1 Pass Thru
Trust 8 5/8%, 9/1/98 B1 5,000,000 4,725,000
9 5/8%, 2/1/01 B3 930,000 804,450
9 5/8%, 9/1/03 B1 2,550,000 2,422,500
10 3/8%, 3/1/13 B1 5,470,000 5,169,150
13,121,100
RAILROADS - 0.9%
Transtar Holdings L.P./Transtar
Cap. Corp., Series B,
0%, 12/15/03 (d) B- 12,270,000 7,239,300
TOTAL TRANSPORTATION 20,360,400
UTILITIES - 3.1%
CELLULAR - 2.5%
Dial Call Communications,
Inc. 0%, 12/15/05 (d) Caa 2,800,000 1,288,000
Dial Page, Inc.
12 1/4%, 2/15/00 Caa 950,000 985,625
Pagemart Nationwide, Inc. Unit
0%, 2/1/05 (d)(f) - 29,020,000 17,629,650
19,903,275
ELECTRIC UTILITY - 0.1%
El Paso Funding Corp.
lease oblig. (b):
9 3/8%, 10/1/96 Ca 790,000 422,650
9.20%, 7/2/97 Ca 380,000 203,300
625,950
GAS - 0.1%
Columbia Gas Systems, Inc.
9%, 8/1/95 (b) B3 670,000 938,000
TELEPHONE SERVICES - 0.4%
Call-Net Enterprises, Inc.
yankee 0%, 12/1/04 (d) B2 330,000 198,000
Pagemart, Inc.
0%, 11/1/03 (d) - 4,820,000 3,048,650
3,246,650
TOTAL UTILITIES 24,713,875
TOTAL NONCONVERTIBLE BONDS 591,843,760
TOTAL CORPORATE BONDS
(Cost $594,159,103) 593,574,709
COMMERCIAL MORTGAGE SECURITIES - 0.4%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CS First Boston Mortgage
Securities Corp. Commercial
Series 1994-CFB1 Class E,
7.8751%, 1/25/28 (f) Ba2 $ 7,355 $ 5,784
Meritor Mortgage Security Corp.
commercial Series 1987-1
Class B, 9.40%, 2/1/00 (f) - 1,350,000 272,016
SKW Real Estate LP commercial
Series II Class E, 11%,
4/15/05 (f) B 1,500,000 1,500,469
SML, Inc. commercial Series
1994-C1 Class B-3, 11.69%,
9/18/99 - 1,500,000 1,413,750
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $3,126,994) 3,192,019
COMMON STOCKS - 5.5%
SHARES
AEROSPACE & DEFENSE - 0.0%
DEFENSE ELECTRONICS - 0.0%
Tracor, Inc. (a) 18,900 257,513
BASIC INDUSTRIES - 0.1%
IRON & STEEL - 0.1%
WCI Steel, Inc. (a) 67,700 423,125
PAPER & FOREST PRODUCTS - 0.0%
Mail-Well Holdings, Inc. (a) 9,250 55,500
TOTAL BASIC INDUSTRIES 478,625
DURABLES - 0.1%
TEXTILES & APPAREL - 0.1%
Hat Brands, Inc. (warrants) (a)(e) 27,466 302,121
HM/Hat Brands Trust Class I Units (a)(e) 340,000 340,000
642,121
ENERGY - 1.1%
OIL & GAS - 1.1%
Flores & Rucks, Inc. (a) 125,900 1,542,275
TransTexas Gas Corp. (a) 479,600 7,253,950
TOTAL ENERGY 8,796,225
FINANCE - 1.7%
INSURANCE - 1.7%
American Financial Group, Inc. 519,600 13,509,600
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (f) 3,000 300,000
TOTAL FINANCE 13,809,600
HEALTH - 0.0%
MEDICAL EQUIPMENT & SUPPLIES - 0.0%
Wright Medical Technology, Inc.
(warrants) (a) 1,729 285,334
HOLDING COMPANIES - 0.2%
SDW Holdings Corp. (a):
Unit (f) 4,450 1,203,369
(warrants) 3,720 22,320
1,225,689
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
ELECTRICAL EQUIPMENT - 0.1%
Ampex Corp.(a):
Class A 20,681 $ 46,532
Class A (warrants) 57,599 129,598
Class C 230,212 517,977
694,107
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Terex Corp. (rights) (a) 3,150 788
Thermadyne Holdings Corp. (a) 65,419 924,043
924,831
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,618,938
MEDIA & LEISURE - 1.0%
ENTERTAINMENT - 0.0%
Live Entertainment, Inc. (warrants) (a)(e):
$2.00 232,000 58,000
$2.72 221,765 55,441
113,441
LEISURE & DURABLES - 0.1%
IHF Capital, Inc. (a)(f):
Series H (warrants) 10,250 820,000
Series I (warrants) 5,890 147,250
967,250
LODGING & GAMING - 0.9%
Bally Gaming International, Inc.
(warrants) (a) 90,000 618,750
Hollywood Casino Corp. Class A (a) 139,000 1,233,625
Host Marriott Corp. (a) 383,000 4,069,375
Maritime Group Ltd. (warrants) (a) 17,880 179
Motels of America, Inc. (a) 3,000 225,000
Sun International Hotels Ltd. (a) 15,285 687,825
Sun International Hotels Ltd. Class B (a) 3,209 139,592
6,974,346
PUBLISHING - 0.0%
General Media, Inc. (warrant) (a) 1,310 13,100
TOTAL MEDIA & LEISURE 8,068,137
NONDURABLES - 0.6%
TOBACCO - 0.6%
RJR Nabisco Holdings Corp. 161,400 4,499,025
RETAIL & WHOLESALE - 0.1%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc. (a):
(New) 35,870 13,452
(warrants) 66,214 -
13,452
GROCERY STORES - 0.1%
FF Holdings Corp. (a)(e) 33,900 67,800
Food 4 Less Holdings, Inc.
(warrants) (a) 9,348 283,712
MAFCO (warrants) (a) 59 -
351,512
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Barrys Jewelers, Inc. (a) 45,576 148,122
Barrys Jewelers, Inc. (warrants) (a) 5,697 1,424
Finlay Enterprises, Inc. (a) 2,500 35,000
184,546
TOTAL RETAIL & WHOLESALE 549,510
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
SERVICES - 0.4%
LEASING & RENTAL - 0.0%
Scotsman Holdings, Inc. (a) 15,281 $ 199,875
PRINTING - 0.4%
BFP Holdings Class D (a) 160,744 3,214,880
SERVICES - 0.0%
Perry Capital Corp. (warrants) (a)(f) 4,500 22,500
Vestar/LPA Investment Corp. (a) 5,177 129,425
151,925
TOTAL SERVICES 3,566,680
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Berg Electronics Holdings Corp. (a)(f) 20,853 104,265
UTILITIES - 0.0%
CELLULAR - 0.0%
Dial Page, Inc. (warrants) (a) 4,321 5,401
ELECTRIC UTILITY - 0.0%
Eastern Utilities Associates 3 68
Northeast Utilities Associates
(warrants) (a) 21,789 27,236
27,304
GAS - 0.0%
UGI Corp. (warrants) (a) 14,033 2,105
TOTAL UTILITIES 34,810
TOTAL COMMON STOCKS
(Cost $38,165,942) 43,936,472
PREFERRED STOCKS - 7.9%
CONVERTIBLE PREFERRED STOCKS - 0.7%
RETAIL & WHOLESALE - 0.2%
GROCERY STORES - 0.2%
Supermarkets General Holdings Corp.
exchangeable pay-in-kind $3.52 (a) 39,189 1,058,103
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Town & Country Corp. (a) 4,000 3,000
TOTAL RETAIL & WHOLESALE 1,061,103
SERVICES - 0.5%
La Petite Holdings Corp. exchangeable (a) 160,800 4,020,000
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Alpine Group, Inc. cumulative 8% (a) 835 37,575
TOTAL CONVERTIBLE PREFERRED STOCKS 5,118,678
NONCONVERTIBLE PREFERRED STOCKS - 7.2%
BASIC INDUSTRIES - 0.0%
IRON & STEEL - 0.0%
Stelco, Inc. cumulative, Series B, 7.76% 7,207 115,518
PAPER & FOREST PRODUCTS - 0.0%
SD Warren Co. exchangeable
pay-in-kind (a) 3,720 104,160
TOTAL BASIC INDUSTRIES 219,678
SHARES VALUE (NOTE 1)
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Harvard Industries, Inc.
pay-in-kind $14.25 (a) 22,739 $ 625,323
ENERGY - 0.5%
OIL & GAS - 0.5%
Gulf Canada Resources Ltd. (a)(e) 31,009 89,151
Gulf Canada Resources Ltd., Series 1,
adj. rate 1,321,942 3,717,962
3,807,113
FINANCE - 1.8%
SAVINGS & LOANS - 1.8%
First Nationwide Bank 11 1/2% 112,852 12,188,016
Greater New York Savings Bank,
Series B, perpetual 12% 78,751 2,165,653
14,353,669
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Ampex Corp. 8% (a)(e) 1,589 911,927
MEDIA & LEISURE - 4.2%
BROADCASTING - 4.2%
PanAmSat Corp. 12 3/4% 32,700 33,190,500
TECHNOLOGY - 0.5%
ELECTRONICS - 0.5%
Berg Electronics Holding Corp.,
Series E, $3.4687 157,433 4,250,691
TOTAL NONCONVERTIBLE PREFERRED STOCKS 57,358,901
TOTAL PREFERRED STOCKS
(Cost $60,943,714) 62,477,579
PURCHASED BANK DEBT - 0.1%
PRINCIPAL
AMOUNT
Leslie Fay Cos., Inc.:
revolving loan $ 685,856 404,655
term loan 777,600 458,784
TOTAL PURCHASED BANK DEBT
(Cost $1,190,771) 863,439
REPURCHASE AGREEMENTS - 11.3%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 6.22%
dated 6/30/95 due 7/3/95 $ 89,902,575 $ 89,856,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $787,442,524) $ 793,900,218
LEGEND
(a) Non-income producing
(b) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
(e) Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
ACQUISITION ACQUISITION
SECURITY DATE COST
Alpine Group, Inc.
13 1/2%, 1/5/96 1/4/95 $ 128,339
American Financial Corp.
9 3/4%, 4/20/04 5/24/95 $ 6,634,600
Ampex Corp. 8% 2/16/95 $ 834,225
Cafeteria Operators LP
11%, 6/30/98 6/24/93 $ 5,600,000
FF Holdings Corp. 10/2/92 to 1/14/94 $ 135,753
Gulf Canada Resources
Ltd. 10/15/93 $ 76,940
Hat Brands,
Inc. (warrants) 9/2/92 to 2/23/94 $ -
HM/Hat Brands Trust
Class I Units 2/22/94 $ 340,000
Leslie Fay Cos., Inc.:
9.53%, 1/15/00 7/19/93 $ 512,312
10.54%, 1/15/02 7/19/93 to 11/11/93 $ 404,156
Littlefield Co.
10%, 12/31/95 2/28/94 $ 2,750,000
Live Entertainment, Inc.
(warrants):
$2.00 3/23/93 $ 220,717
$2.72 3/23/93 $ 131,863
New Street Capital Corp.
pay-in-kind:
12%, 2/28/98 2/15/95 $ 67,416
Unit 12%, 2/28/98 2/25/94 to 9/1/94 $ 1,123,600
RHI Holdings, Inc.
11 7/8%, 3/1/99 10/15/92 $ 495,000
(f) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $103,757,499 or 12.8% of net
assets.
(g) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $643,634,101 and $467,491,408, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $21,896 for the period (see
Note 3 of Notes to the Financial Statements).
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 0.0% AAA, AA, A 0.0%
Baa 0.0% BBB 0.0%
Ba 6.4% BB 17.3%
B 41.9% B 41.6%
Caa 16.3% CCC 4.8%
Ca, C 0.3% CC, C 0.0%
D 0.4%
The percentage not rated by either S&P or Moody's amounted to 7.9%
including long-term debt categorized as other securities. FMR has
determined that unrated debt securities that are lower quality account for
7.9% of the total value of investment in securities.
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $787,696,044. Net unrealized appreciation aggregated
$6,204,174, of which $27,367,484 related to appreciated investment
securities and $21,163,310 related to depreciated investment securities.
At December 31, 1994, the fund had a capital loss carryforward of
approximately $1,148,000 all of which will expire on December 31, 2002.
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $89,856,000) (cost $787,442,524) - $ 793,900,218
See accompanying schedule
Cash 506,521
Receivable for investments sold 10,050,335
Receivable for fund shares sold 5,462,661
Dividends receivable 1,104,845
Interest receivable 12,928,622
TOTAL ASSETS 823,953,202
LIABILITIES
Payable for investments purchased $ 9,912,131
Payable for fund shares redeemed 178,315
Accrued management fee 405,377
Other payables and accrued expenses 77,305
TOTAL LIABILITIES 10,573,128
NET ASSETS $ 813,380,074
Net Assets consist of:
Paid in capital $ 767,990,586
Undistributed net investment income 33,139,910
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 5,795,848
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 6,453,730
NET ASSETS, for 72,678,030 shares outstanding $ 813,380,074
NET ASSET VALUE, offering price and redemption price per share ($813,380,074 (divided by) 72,678,030 shares) $11.19
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 2,728,599
Dividends
Interest 33,425,785
TOTAL INCOME 36,154,384
EXPENSES
Management fee $ 2,138,740
Transfer agent fees 183,111
Accounting fees and expenses 121,670
Non-interested trustees' compensation 1,780
Custodian fees and expenses 6,018
Audit 17,965
Interest 2,621
Total expenses before reductions 2,471,905
Expense reductions (5,422 2,466,483
)
NET INVESTMENT INCOME 33,687,901
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 7,181,679
Foreign currency transactions (978 7,180,701
)
Change in net unrealized appreciation (depreciation) on:
Investment securities 39,872,106
Assets and liabilities in foreign currencies (150 39,871,956
)
NET GAIN (LOSS) 47,052,657
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 80,740,558
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1995 1994
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 33,687,901 $ 43,091,356
Net investment income
Net realized gain (loss) 7,180,701 (726,075
)
Change in net unrealized appreciation (depreciation) 39,871,956 (49,793,238
)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 80,740,558 (7,427,957
)
Distributions to shareholders (43,871,918 (30,631,598
From net investment income ) )
From net realized gain - (15,525,605
)
TOTAL DISTRIBUTIONS (43,871,918 (46,157,203
) )
Share transactions 333,374,520 498,543,147
Net proceeds from sales of shares
Reinvestment of distributions 43,871,918 46,157,203
Cost of shares redeemed (170,151,760 (385,629,739
) )
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 207,094,678 159,070,611
TOTAL INCREASE (DECREASE) IN NET ASSETS 243,963,318 105,485,451
NET ASSETS
Beginning of period 569,416,756 463,931,305
End of period (including undistributed net investment income of $33,139,910 and $42,834,969,
respectively) $ 813,380,074 $ 569,416,756
OTHER INFORMATION
Shares
Sold 31,093,586 45,102,882
Issued in reinvestment of distributions 4,326,619 4,073,892
Redeemed (15,728,132 (34,899,979
) )
Net increase (decrease) 19,692,073 14,276,795
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 D 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.750 $ 11.990 $ 10.820 $ 9.550 $ 7.070 $ 8.110
Income from Investment Operations .428 .770 .728 .790 .890 .858
Net investment income
Net realized and unrealized gain (loss) .792 (.910) 1.332 1.290 1.590 (1.040)
Total from investment operations 1.220 (.140) 2.060 2.080 2.480 (.182)
Less Distributions (.780) (.730) (.794) (.810) - (.858)
From net investment income
In excess of net investment income - - (.036) - - -
From net realized gain on investments - (.370) (.060) - - -
Total distributions (.780) (1.100) (.890) (.810) - (.858)
Net asset value, end of period $ 11.190 $ 10.750 $ 11.990 $ 10.820 $ 9.550 $ 7.070
TOTAL RETURN B, C 12.10% (1.64) 20.40% 23.17% 35.08% (2.23)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 813,380 $ 569,417 $ 463,931 $ 200,591 $ 70,060 $ 29,990
Ratio of expenses to average net assets .70% .71% .64% .67% .97% 1.00%
A
Ratio of expenses to average net assets before expense .70% .71% .66% .67% .97% 1.12%
reductions A
Ratio of net investment income to average net assets 9.58% 8.75% 8.69% 10.98% 12.94% 11.36%
A
Portfolio turnover rate 154% 122% 155% 160% 154% 156%
A
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR
INSURANCE COMPANY'S SEPARATE
ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES
TO THE FINANCIAL
STATEMENTS).
D EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT
PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
Equity-Income 24.00% 15.06% 12.30%
S&P 500 26.07% 12.09% 13.58%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for
example, has a history of growth in the long run
and volatility in the short run. In turn, the share
price and return of a fund that invests in stocks
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare these figures to the performance of the Standard & Poor's
Composite Index of 500 stocks - a common proxy for the U.S. stock market.
This benchmark includes reinvested dividends and capital gains, if any.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, October 9, 1986.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER LIFE OF FUND
VIP Equity Income (Standard & Poor's 50
10/09/86 10000.00 10000.00
10/31/86 10110.00 10329.97
11/30/86 10330.00 10580.99
12/31/86 10020.00 10311.18
01/31/87 11170.00 11700.09
02/28/87 11430.00 12162.25
03/31/87 11720.18 12513.74
04/30/87 11428.43 12402.36
05/31/87 11498.86 12510.26
06/30/87 11738.55 13142.03
07/31/87 12185.73 13808.33
08/31/87 12521.12 14323.38
09/30/87 12258.32 14009.70
10/31/87 9866.20 10992.01
11/30/87 9424.74 10086.27
12/31/87 9906.52 10853.84
01/31/88 10611.13 11310.78
02/29/88 11136.95 11837.86
03/31/88 10943.07 11472.07
04/30/88 11124.21 11599.41
05/31/88 11273.39 11700.33
06/30/88 11914.76 12237.37
07/31/88 11893.18 12190.87
08/31/88 11688.12 11776.38
09/30/88 12035.42 12278.06
10/31/88 12243.12 12619.39
11/30/88 12046.36 12438.93
12/31/88 12156.33 12656.61
01/31/89 12907.13 13583.07
02/28/89 12840.88 13244.86
03/31/89 13119.01 13553.46
04/30/89 13625.32 14256.89
05/31/89 14030.37 14834.29
06/30/89 14039.98 14749.73
07/31/89 14858.50 16081.64
08/31/89 15097.24 16396.84
09/30/89 14927.51 16329.61
10/31/89 14066.31 15950.76
11/30/89 14146.69 16276.16
12/31/89 14264.74 16666.78
01/31/90 13301.38 15548.44
02/28/90 13380.20 15749.02
03/31/90 13402.27 16166.37
04/30/90 12937.59 15762.21
05/31/90 13793.57 17299.02
06/30/90 13656.23 17181.39
07/31/90 13322.25 17126.41
08/31/90 12258.45 15578.18
09/30/90 11307.54 14819.52
10/31/90 11019.21 14755.80
11/30/90 11808.98 15709.03
12/31/90 12083.75 16147.31
01/31/91 12731.78 16851.33
02/28/91 13608.52 18056.20
03/31/91 13890.81 18493.16
04/30/91 13955.72 18537.54
05/31/91 14721.66 19338.37
06/30/91 14119.72 18452.67
07/31/91 14920.19 19312.56
08/31/91 15235.12 19770.27
09/30/91 15130.56 19440.11
10/31/91 15382.51 19700.60
11/30/91 14719.47 18906.67
12/31/91 15882.70 21069.59
01/31/92 16097.15 20677.70
02/29/92 16619.87 20946.51
03/31/92 16416.22 20538.05
04/30/92 16930.49 21141.87
05/31/92 17065.83 21245.47
06/30/92 16916.41 20928.91
07/31/92 17434.82 21784.90
08/31/92 17052.84 21338.31
09/30/92 17229.86 21590.10
10/31/92 17436.12 21665.67
11/30/92 18068.66 22404.47
12/31/92 18564.83 22680.04
01/31/93 19119.01 22870.55
02/28/93 19548.49 23181.59
03/31/93 20131.05 23670.73
04/30/93 20047.35 23097.89
05/31/93 20410.07 23716.92
06/30/93 20650.14 23785.70
07/31/93 20931.09 23690.55
08/31/93 21731.81 24588.43
09/30/93 21648.73 24399.09
10/31/93 21846.69 24904.16
11/30/93 21464.91 24667.57
12/31/93 21961.06 24966.04
01/31/94 22928.26 25814.89
02/28/94 22337.82 25115.31
03/31/94 21403.32 24020.28
04/30/94 22140.85 24327.74
05/31/94 22351.57 24726.71
06/30/94 22213.48 24120.91
07/31/94 22955.44 24912.07
08/31/94 24136.53 25933.47
09/30/94 23741.11 25298.10
10/31/94 24228.42 25867.31
11/30/94 23436.54 24925.22
12/31/94 23512.77 25294.86
01/31/95 23880.40 25950.76
02/28/95 24790.97 26962.06
03/31/95 25646.99 27757.71
04/30/95 26360.31 28575.17
05/31/95 27154.68 29717.32
06/30/95 27544.83 30407.65
Let's say you invested $10,000 in Equity-Income Portfolio on October 9,
1986, when the fund started. By June 30, 1995, your investment would have
grown to $27,545 - a 175.45% increase. That compares to $10,000 invested in
the S&P 500, which would have grown to $30,408 over the same period - a
204.08% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Philip Morris Companies, Inc. 4.2
Federal National Mortgage Association 2.8
International Business Machines Corp. 2.1
American Express Co. 2.1
British Petroleum PLC ADR 2.0
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Finance 18.0
Energy 10.1
Nondurables 8.8
Basic Industries 7.7
Industrial Machinery & Equipment 7.3
ASSET ALLOCATION AS OF JUNE 30, 1995*
Row: 1, Col: 1, Value: 7.3
Row: 1, Col: 2, Value: 6.2
Row: 1, Col: 3, Value: 86.5
Stocks 86.5%
Bonds 6.2%
Short-term investments 7.3%
FOREIGN INVESTMENTS 6.2%
*
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Bettina Doulton, Portfolio Manager of Equity-Income
Portfolio
Q. BETTINA, HOW DID THE FUND PERFORM?
A. Although the fund did well relative to its peers, it slightly trailed
the performance of the Standard & Poor's 500 stock index for the six- and
12-month periods ended June 30, 1995. The index had total returns of 20.21%
and 26.07% for those periods, respectively. Because this recent stock
market rally was quite narrow - led by a few sectors, namely technology,
financials and the large-cap and blue-chip stocks - the average stock
mutual fund has not topped the performance of the index thus far in 1995.
Q. THE STOCK MARKET SHOWED A RENEWED VIGOR OVER THE PAST SIX MONTHS. WHAT
ACCOUNTED FOR THIS?
A. The market's strength was driven by investors' belief that the Federal
Reserve Board would manage the economy to a soft landing - steady, albeit
slower, economic growth and continued low inflation. If achieved, those
conditions are ideal for Corporate America to sustain strong profit growth.
During the six-month period, corporate earnings reports were excellent,
which provided the fuel for stock prices to move higher. Excluding the
consistently outstanding performance of the technology and financial
sectors, the market has been characterized by rapid industry rotation.
Investors have spent the past six months racing from one industry to the
next, trying to stay one step ahead of the crowd. Sometimes, the fund was
in the right place at the right time, and sometimes it wasn't.
Q. WHAT CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. Several of the fund's largest holdings have driven returns recently.
Highlights include Philip Morris. The stock has been rewarded for the
company's strong profit growth and free cash flow; both are attributable to
terrific results in the company's domestic and international tobacco
businesses, which more than offset mediocre results in its food division.
Second in line is the Federal National Mortgage Association (Fannie Mae).
Although its stock price suffered a significant setback last fall, it has
since recovered as conditions in the secondary mortgage market have turned
more favorable. IBM was another strong performer. The company has done an
excellent job cutting costs and cleaning up its balance sheet. In addition,
global economic growth and wide acceptance of the company's new products
have contributed to accelerating revenue growth. Finally, in the energy
sector, the energy service company Schlumberger performed well. It
benefited from improving worldwide supply/demand dynamics for oil and
corporate restructuring efforts. Elsewhere in the energy sector, however,
British Petroleum (BP) and Amerada Hess have been somewhat disappointing in
terms of stock performance. Both are restructuring stories; BP's stock may
just be taking a breather after making significant gains, while Amerada
Hess' turnaround may be just taking a bit longer than investors had
expected.
Q. YOU MORE THAN DOUBLED THE FUND'S STAKE IN FINANCIAL STOCKS; THEY WENT
FROM 7.1% OF THE FUND SIX MONTHS AGO TO 18.0% ON JUNE 30 . . .
A. Recent purchases of bank stocks made up most of that increase. Along
with the diversified financial services companies such as American Express
and Fannie Mae, banks had a strong, if volatile, run. My only regret is not
owning more of them early in the period, when they began to outperform.
Prices did fall in the spring, however, which allowed me to buy stocks such
as Chemical Banking and BankAmerica off their highs. In the coming months,
I expect the market to drive bank stock valuations - prices relative to
earnings - higher. That's because earnings are becoming more consistent,
the industry is consolidating, and companies are using excess capital to
repurchase shares of their own stocks.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. When interest rates fall, as they've done over the past few months, the
market usually rewards stocks with higher valuations. However, we have to
keep in mind that the economy has slowed, which could negatively affect
corporate earnings going forward. The 64-thousand-dollar question then
becomes: will the market's willingness to drive up valuations and look
toward an economic resurgence be enough to offset the negative effects of
potential short-term earnings disappointments? I'm afraid not. Companies
that report less-than-expected earnings growth in the coming months will
most likely pay dearly with falling stock prices. In light of this, I plan
to focus intensely on owning companies that trade at attractive valuations,
offer good prospects for higher earnings through 1996, and are working to
enhance shareholder value.
FUND FACTS
GOAL: to provide current income and increase
the value of the fund's shares
START DATE: October 9, 1986
SIZE: as of June 30, 1995, more than $3.4 billion
MANAGER: Bettina Doulton, since 1993;
manager, Fidelity Value Fund, since March
1995; Fidelity Advisor Equity-Income Fund,
since 1993; joined Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 85.3%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 5.7%
AEROSPACE & DEFENSE - 3.8%
Alliant Techsystems, Inc. (a) 421,700 $ 17,605,959
Boeing Co. 353,800 22,156,725
General Motors Corp. Class H 426,200 16,834,900
Lockheed Martin Corp. 434,803 27,446,939
McDonnell Douglas Corp. 131,000 10,054,250
Rockwell International Corp. 429,600 19,654,200
Sundstrand Corp. 183,000 10,934,250
Thiokol Corp. 186,400 5,638,600
130,325,823
DEFENSE ELECTRONICS - 1.4%
Litton Industries, Inc. (a) 268,700 9,908,313
Loral Corp. 214,700 11,110,725
Raytheon Co. 342,300 26,571,038
47,590,076
SHIP BUILDING & REPAIR - 0.5%
General Dynamics Corp. 420,400 18,655,250
TOTAL AEROSPACE & DEFENSE 196,571,149
BASIC INDUSTRIES - 7.5%
CHEMICALS & PLASTICS - 4.7%
du Pont (E.I.) de Nemours & Co. 571,100 39,263,125
Grace (W.R.) & Co. 503,600 30,908,450
Hercules, Inc. 810,900 39,531,375
Nalco Chemical Co. 462,300 16,816,163
Raychem Corp. 284,300 10,910,013
Union Carbide Corp. 713,100 23,799,713
161,228,839
IRON & STEEL - 0.1%
Nucor Corp. 38,600 2,065,100
METALS & MINING - 1.3%
Alcan Aluminium Ltd. 746,183 22,562,179
Aluminum Co. of America 467,200 23,418,400
45,980,579
PAPER & FOREST PRODUCTS - 1.4%
Scott Paper Co. 966,600 47,846,700
TOTAL BASIC INDUSTRIES 257,121,218
CONGLOMERATES - 2.8%
Allied-Signal, Inc. 382,600 17,025,700
GenCorp, Inc. 33,600 361,200
Tyco International Ltd. 857,071 46,281,834
United Technologies Corp. 398,900 31,164,063
94,832,797
CONSTRUCTION & REAL ESTATE - 0.2%
REAL ESTATE INVESTMENT TRUSTS - 0.2%
Starwood Lodging Trust combined
certificate (SBI) 125,900 2,909,045
Storage Equities, Inc. 145,800 2,387,475
5,296,520
DURABLES - 2.6%
AUTOS, TIRES, & ACCESSORIES - 1.6%
Chrysler Corp. 140,600 6,731,225
Dana Corp. 438,200 12,543,475
General Motors Corp. 269,800 12,646,875
Johnson Controls, Inc. 61,100 3,452,150
PACCAR, Inc. 93,500 4,371,125
Snap-on Tools Corp. 374,000 14,492,500
54,237,350
SHARES VALUE (NOTE 1)
DURABLES - CONTINUED
CONSUMER ELECTRONICS - 0.7%
Black & Decker Corp. 222,600 $ 6,872,775
Whirlpool Corp. 341,200 18,766,000
25,638,775
HOME FURNISHINGS - 0.1%
Heilig-Meyers Co. 104,700 2,669,850
TEXTILES & APPAREL - 0.2%
Westpoint Stevens, Inc. Class A (a) 397,100 7,098,163
TOTAL DURABLES 89,644,138
ENERGY - 9.7%
ENERGY SERVICES - 3.1%
Baker Hughes, Inc. 521,800 10,696,900
Halliburton Co. 959,000 34,284,250
Helmerich & Payne, Inc. 130,400 3,846,800
McDermott International, Inc. 575,000 13,871,875
Schlumberger Ltd. 691,300 42,947,013
105,646,838
OIL & GAS - 6.6%
Amerada Hess Corp. 929,700 45,439,088
British Petroleum PLC ADR 823,528 70,514,585
Canada Occidental Petroleum Ltd. 239,500 7,438,025
Coastal Corp. (The) 459,800 13,966,425
Kerr-McGee Corp. 157,400 8,440,575
Mobil Corp. 353,700 33,955,200
Occidental Petroleum Corp. 1,047,000 23,950,125
Tosco Corp. 279,100 8,896,313
Total SA:
Class B 210,425 12,691,129
sponsored ADR 129,500 3,917,375
229,208,840
TOTAL ENERGY 334,855,678
FINANCE - 18.0%
BANKS - 6.6%
Bank of Boston Corp. 482,800 18,105,000
Bank of New York Co., Inc. 163,000 6,581,125
BankAmerica Corp. 511,100 26,896,638
Bankers Trust New York Corp. 430,400 26,684,800
Chase Manhattan Corp. 480,041 22,561,927
Chemical Banking Corp. 670,100 31,662,225
Citicorp 647,300 37,462,488
First Chicago Corp. 119,100 7,131,113
First Union Corp. 192,700 8,719,675
Fleet Financial Group, Inc. 328,900 12,210,413
Mellon Bank Corp. 59,600 2,480,850
NationsBank Corp. 35,400 1,898,325
Republic New York Corp. 230,700 12,919,200
Shawmut National Corp. 345,200 11,003,250
226,317,029
CREDIT & OTHER FINANCE - 2.8%
American Express Co. 2,012,672 70,695,104
Countrywide Credit Industries, Inc. 886,700 18,620,700
Greenpoint Financial Corp. 362,900 8,573,513
97,889,317
FEDERAL SPONSORED CREDIT - 4.1%
Federal Home Loan Mortgage
Corporation 625,400 42,996,250
Federal National Mortgage Association 1,023,900 96,630,563
139,626,813
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
INSURANCE - 3.4%
Allstate Corp. 182,900 $ 5,418,413
American International Group, Inc. 197,200 22,480,800
American Reinsurance Corp. 11,300 420,925
General Re Corp. 193,700 25,931,588
Loews Corp. 266,500 32,246,500
PMI Group, Inc. 100,600 4,363,525
Reliastar Financial Corp. 252,100 9,642,825
Travelers, Inc. (The) 359,233 15,716,458
116,221,034
SAVINGS & LOANS - 0.3%
Ahmanson (H.F.) & Co. 273,900 6,025,800
Charter One Financial Corp. 162,000 3,969,000
9,994,800
SECURITIES INDUSTRY - 0.8%
Merrill Lynch & Co., Inc. 522,600 27,436,500
TOTAL FINANCE 617,485,493
HEALTH - 4.3%
DRUGS & PHARMACEUTICALS - 1.8%
Allergan, Inc. 340,100 9,225,213
American Home Products Corp. 360,000 27,855,000
Pfizer, Inc. 297,800 13,754,638
SmithKline Beecham PLC ADR 266,000 12,036,500
62,871,351
MEDICAL EQUIPMENT & SUPPLIES - 1.7%
Baxter International, Inc. 971,300 35,331,038
Beckman Instruments, Inc. 800 22,300
I-Stat Corp. (a) 173,100 6,318,150
Puritan Bennett Corp. 257,500 9,945,938
St. Jude Medical, Inc. 105,400 5,283,175
56,900,601
MEDICAL FACILITIES MANAGEMENT - 0.8%
Columbia/HCA Healthcare Corp. 621,800 26,892,850
TOTAL HEALTH 146,664,802
INDUSTRIAL MACHINERY & EQUIPMENT - 7.2%
ELECTRICAL EQUIPMENT - 1.0%
Emerson Electric Co. 211,700 15,136,550
General Electric Co. 175,500 9,893,813
Philips Electronics NV 196,600 8,404,650
Philips Electronics NV (Bearer) 45,200 1,915,824
35,350,837
INDUSTRIAL MACHINERY & EQUIPMENT - 3.5%
Caterpillar, Inc. 415,100 26,670,175
Cooper Industries, Inc. 467,000 18,446,500
Deere & Co. 474,400 40,620,500
Dover Corp. 145,100 10,556,025
Ingersoll-Rand Co. 574,300 21,966,975
Varity Corp. (a) 62,800 2,763,200
121,023,375
POLLUTION CONTROL - 2.7%
Browning-Ferris Industries, Inc. 870,700 31,454,038
Safety Kleen Corp. 583,600 9,410,550
WMX Technologies, Inc. 1,537,600 43,629,400
Wheelabrator Technologies, Inc. 453,200 6,967,950
91,461,938
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 247,836,150
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 2.1%
BROADCASTING - 1.2%
Viacom, Inc. Class B (non-vtg.) (a) 851,614 $ 39,493,599
PUBLISHING - 0.9%
Meredith Corp. 102,000 2,588,250
News Corp. Ltd.:
ADR 741,700 16,780,963
(vtg.) pfd. sponsored ADR 74,900 1,498,000
Times Mirror Co. Class A 461,800 11,025,475
31,892,688
TOTAL MEDIA & LEISURE 71,386,287
NONDURABLES - 8.6%
BEVERAGES - 0.9%
PepsiCo, Inc. 647,100 29,523,938
FOODS - 0.6%
ConAgra, Inc. 483,700 16,869,038
Dole Food, Inc. 157,600 4,590,100
21,459,138
HOUSEHOLD PRODUCTS - 1.3%
Avon Products, Inc. 285,480 19,127,160
First Brands Corp. 329,800 14,140,175
Rubbermaid, Inc. 168,800 4,684,200
Tambrands, Inc. 172,300 7,365,825
45,317,360
TOBACCO - 5.8%
Imasco Ltd. 1,453,600 25,815,296
Philip Morris Companies, Inc. 1,927,300 143,342,938
RJR Nabisco Holdings Corp. 1,054,639 29,398,062
198,556,296
TOTAL NONDURABLES 294,856,732
RETAIL & WHOLESALE - 3.2%
APPAREL STORES - 0.4%
Limited, Inc. (The) 618,400 13,604,800
GENERAL MERCHANDISE STORES - 2.1%
Dayton Hudson Corp. 293,400 21,051,450
May Department Stores Co. (The) 95,700 3,983,513
Wal-Mart Stores, Inc. 1,604,500 42,920,375
Woolworth Corp. 322,200 4,873,275
72,828,613
GROCERY STORES - 0.7%
Fleming Companies, Inc. 230,445 6,106,793
Great Atlantic & Pacific Tea Co., Inc. 397,600 10,486,700
Vons Companies, Inc. (a) 384,200 7,732,025
24,325,518
TOTAL RETAIL & WHOLESALE 110,758,931
SERVICES - 0.4%
PRINTING - 0.2%
Wallace Computer Services, Inc. 168,200 6,454,675
SERVICES - 0.2%
ADT Ltd. (a) 640,900 7,530,575
TOTAL SERVICES 13,985,250
TECHNOLOGY - 4.9%
COMPUTERS & OFFICE EQUIPMENT - 3.9%
Hewlett-Packard Co. 405,000 30,172,500
International Business Machines Corp. 755,700 72,547,200
Pitney Bowes, Inc. 792,200 30,400,675
133,120,375
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONIC INSTRUMENTS - 0.2%
Perkin-Elmer Corp. 226,200 $ 8,030,100
ELECTRONICS - 0.8%
AMP, Inc. 385,600 16,291,600
Kemet Corp. 46,700 2,451,750
Thomas & Betts Corp. 143,700 9,825,488
28,568,838
TOTAL TECHNOLOGY 169,719,313
TRANSPORTATION - 1.8%
RAILROADS - 1.8%
Burlington Northern, Inc. 534,200 33,854,925
CSX Corp. 195,300 14,671,913
Southern Pacific Rail Corp. (a) 919,300 14,478,975
TOTAL TRANSPORTATION 63,005,813
UTILITIES - 6.3%
GAS - 0.5%
Williams Companies, Inc. 489,200 17,060,850
TELEPHONE SERVICES - 5.8%
Ameritech Corp. 1,067,900 46,987,600
Bell Atlantic Corp. 210,100 11,765,600
BellSouth Corp. 576,200 36,588,700
Koninklijke PPT Nederland 165,600 5,959,760
Koninklijke PPT Nederland (a)(d) 104,400 3,757,240
NYNEX Corp. 1,200,400 48,316,100
SBC Communications, Inc. 871,300 41,495,663
Southern New England
Telecommunications Corp. 175,700 6,193,425
201,064,088
TOTAL UTILITIES 218,124,938
TOTAL COMMON STOCKS
(Cost $2,563,116,541) 2,932,145,209
PREFERRED STOCKS - 1.2%
CONVERTIBLE PREFERRED STOCKS - 0.8%
DURABLES - 0.3%
AUTOS, TIRES, & ACCESSORIES - 0.3%
Chrysler Corp., Series A, $4.625 (d) 85,200 11,374,200
ENERGY - 0.4%
ENERGY SERVICES - 0.1%
Noble Drilling Corp. $1.50 119,100 2,828,625
OIL & GAS - 0.3%
Atlantic Richfield Co.
exchangeable $.5575 431,300 11,213,800
TOTAL ENERGY 14,042,425
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Westinghouse Electric Corp. $1.30 (d) 351,500 5,140,688
TOTAL CONVERTIBLE PREFERRED STOCKS 30,557,313
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONCONVERTIBLE PREFERRED STOCKS - 0.4%
MEDIA & LEISURE - 0.4%
PUBLISHING - 0.4%
News Corp. Ltd. (ltd. vtg.) 2,510,505 $ 12,393,685
UTILITIES - 0.0%
ELECTRIC UTILITY - 0.0%
Gulf States Utilities Co., Series B,
adj. rate 586 28,348
TOTAL NONCONVERTIBLE PREFERRED STOCKS 12,422,033
TOTAL PREFERRED STOCKS
(Cost $39,195,081) 42,979,346
CORPORATE BONDS - 2.4%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (C)
CONVERTIBLE BONDS - 0.8%
CONSTRUCTION & REAL ESTATE - 0.1%
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Centerpoint Properties 8.22%,
1/15/04 - $ 1,510,000 1,683,650
Liberty Property LP 8%, 7/1/01 - 750,000 735,000
Sizeler Property Investors, Inc.
8%, 7/15/03 - 1,500,000 1,312,500
TOTAL CONSTRUCTION & REAL ESTATE 3,731,150
HEALTH - 0.6%
DRUGS & PHARMACEUTICALS - 0.6%
Roche Holdings, Inc. liquid
yield option notes
0%, 4/20/10 (d) - 48,340,000 19,336,000
PRECIOUS METALS - 0.1%
Pegasus Gold, Inc. euro
6 1/4%, 4/30/02 (d) Baa3 1,860,000 1,755,375
SERVICES - 0.0%
SERVICES - 0.0%
ADT Operations, Inc. liquid
yield option notes
0%, 7/6/10 Ba3 3,670,000 1,405,940
UTILITIES - 0.0%
GAS - 0.0%
SFP Pipeline Holdings, Inc.
exchangeable
0%, 8/15/10 (e) Baa3 470,000 606,300
TOTAL CONVERTIBLE BONDS 26,834,765
NONCONVERTIBLE BONDS - 1.6%
AEROSPACE & DEFENSE - 0.1%
DEFENSE ELECTRONICS - 0.1%
Tracor, Inc. 10 7/8%, 8/15/01 B2 1,220,000 1,250,500
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - 0.2%
PACKAGING & CONTAINERS - 0.0%
Owens Illinois, Inc. 10 1/4%,
4/1/99 B2 $ 350,000 $ 357,000
PAPER & FOREST PRODUCTS - 0.2%
Stone Container Corp. 9 7/8%,
2/1/01 B1 7,760,000 7,682,400
TOTAL BASIC INDUSTRIES 8,039,400
CONGLOMERATES - 0.0%
Coltec Industries, Inc. 10 1/4%,
4/1/02 B1 910,000 941,850
DURABLES - 0.3%
TEXTILES & APPAREL - 0.3%
Westpoint Stevens, Inc.:
8 3/4%, 12/15/01 B1 2,660,000 2,620,100
9 3/8%, 12/15/05 B3 7,850,000 7,575,250
TOTAL DURABLES 10,195,350
FINANCE - 0.0%
BANKS - 0.0%
Signet Banking Corp.:
6 1/4%, 5/15/97 (e) Baa2 340,000 337,025
6.4375%, 4/15/98 (e) Baa2 190,000 187,150
TOTAL FINANCE 524,175
MEDIA & LEISURE - 0.8%
BROADCASTING - 0.8%
Viacom, Inc. 8%, 7/7/06 B1 28,240,000 27,463,400
NONDURABLES - 0.2%
BEVERAGES - 0.2%
Canandaigua Wine, Inc.
8 3/4%, 12/15/03 (b) B1 5,700,000 5,586,000
UTILITIES - 0.0%
GAS - 0.0%
Columbia Gas Systems Inc.
9.91%, 5/28/20 (b) - 170,000 250,325
TOTAL NONCONVERTIBLE BONDS 54,251,000
TOTAL CORPORATE BONDS
(Cost $76,398,754) 81,085,765
U.S. TREASURY OBLIGATIONS - 3.8%
6 1/4%, 2/15/03 Aaa 17,860,000 17,907,508
5 3/4%, 8/15/03 Aaa 81,220,000 78,745,227
7 1/4%, 5/15/04 Aaa 24,291,000 25,934,529
11 5/8%, 11/15/04 Aaa 6,810,000 9,361,639
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $118,810,332) 131,948,903
REPURCHASE AGREEMENTS - 7.3%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 6.22% dated
6/30/95 due 7/3/95 $ 252,910,024 $ 252,779,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $3,050,299,708) $ 3,440,938,223
LEGEND
(a) Non-income producing
(b) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $41,363,503 or 1.2% of net
assets.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $2,163,942,745 and $1,281,174,381, respectively, of which U.S.
government and government agency obligations aggregated $42,997,272 and
$41,828,379, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $1,153,411 for the period
(see Note 3 of Notes to Financial Statements).
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 3.8% AAA, AA, A 3.8%
Baa 0.1% BBB 0.0%
Ba 0.0% BB 0.9%
B 1.6% B 0.7%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 0.7%.
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $3,052,199,640. Net unrealized appreciation aggregated
$388,738,583, of which $407,074,046 related to appreciated investment
securities and $18,335,463 related to depreciated investment securities.
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $252,779,000) (cost $ 3,440,938,223
$3,050,299,708) -
See accompanying schedule
Cash 864
Receivable for investments sold 66,280,607
Receivable for fund shares sold 5,980,486
Dividends receivable 8,213,745
Interest receivable 4,230,266
Other receivables 42,410
TOTAL ASSETS 3,525,686,601
LIABILITIES
Payable for investments purchased $ 63,785,673
Payable for fund shares redeemed 629,290
Accrued management fee 1,452,585
Other payables and accrued expenses 513,611
TOTAL LIABILITIES 66,381,159
NET ASSETS $ 3,459,305,442
Net Assets consist of:
Paid in capital $ 2,994,274,835
Undistributed net investment income 5,530,661
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 68,857,443
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 390,642,503
NET ASSETS, for 204,803,927 shares outstanding $ 3,459,305,442
NET ASSET VALUE, offering price and redemption price per share ($3,459,305,442 (divided by) 204,803,927 shares) $16.89
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 31,571,004
Dividends
Interest 16,392,102
TOTAL INCOME 47,963,106
EXPENSES
Management fee $ 7,399,646
Transfer agent fees 727,522
Accounting fees and expenses 378,208
Non-interested trustees' compensation 5,452
Custodian fees and expenses 39,578
Registration fees 251,928
Audit 24,512
Legal 4,441
Interest 9,801
Miscellaneous 7,582
TOTAL EXPENSES 8,848,670
NET INVESTMENT INCOME 39,114,436
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 72,417,571
Foreign currency transactions (3,308 72,414,263
)
Change in net unrealized appreciation (depreciation) on:
Investment securities 336,113,775
Assets and liabilities in foreign currencies (8,788 336,104,987
)
NET GAIN (LOSS) 408,519,250
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 447,633,686
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 39,114,436 $ 49,846,224
Net investment income
Net realized gain (loss) 72,414,263 121,898,471
Change in net unrealized appreciation (depreciation) 336,104,987 (61,690,963)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 447,633,686 110,053,732
Distributions to shareholders (37,713,247) (44,739,784)
From net investment income
From net realized gain (121,254,353) (68,533,800)
TOTAL DISTRIBUTIONS (158,967,600) (113,273,584)
Share transactions 802,500,637 1,048,772,904
Net proceeds from sales of shares
Reinvestment of distributions 158,967,516 113,273,584
Cost of shares redeemed (75,240,890) (192,914,992)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 886,227,263 969,131,496
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,174,893,349 965,911,644
NET ASSETS
Beginning of period 2,284,412,093 1,318,500,449
End of period (including undistributed net investment income of $5,530,661 and $4,150,957,
respectively) $ 3,459,305,442 $ 2,284,412,093
OTHER INFORMATION
Shares
Sold 50,281,447 68,815,564
Issued in reinvestment of distributions 10,351,678 7,484,681
Redeemed (4,656,990) (12,882,315)
Net increase (decrease) 55,976,135 63,417,930
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 D 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.35 $ 15.44 $ 13.40 $ 11.85 $ 9.51 $ 12.29
Income from Investment Operations
Net investment income .20 .41 .37 .40 .50 .58
Net realized and unrealized gain (loss) 2.32 .64 2.06 1.57 2.43 (2.38)
Total from investment operations 2.52 1.05 2.43 1.97 2.93 (1.80)
Less Distributions (.20) (.37) (.35) (.42) (.59) (.59)
From net investment income
In excess of net investment income - - (.04) - - -
From net realized gain (.78) (.77) - - - (.39)
Total distributions (.98) (1.14) (.39) (.42) (.59) (.98)
Net asset value, end of period $ 16.89 $ 15.35 $ 15.44 $ 13.40 $ 11.85 $ 9.51
TOTAL RETURN B, C 17.15% 7.07% 18.29% 16.89% 31.44% (15.29)
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,459,305 $ 2,284,412 $ 1,318,500 $ 592,880 $ 282,171 $ 154,080
Ratio of expenses to average net assets .62% A .58% .62% .65% .74% .78%
Ratio of expenses to average net assets before .62% A .60% .62% .65% .74% .78%
expense reductions
Ratio of net investment income to average net assets 2.72% A 2.83% 2.87% 3.52% 4.83% 6.01%
Portfolio turnover rate 100% A 134% 120% 74% 107% 94%
A ANNUALIZED
B TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
THE FINANCIAL STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
D EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT
PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
Growth 36.97% 14.84% 14.56%
S&P 500 26.07% 12.09% 13.58%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for
example, has a history of growth in the long run
and volatility in the short run. In turn, the share
price and return of a fund that invests in stocks
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare these figures to the performance of the Standard & Poor's
Composite Index of 500 Stocks- a common proxy for the U.S. stock market.
This benchmark includes reinvested dividends and capital gains, if any, and
excludes the effects of sales charges.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, October 9, 1986.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER LIFE OF FUND
VIP Growth (212) Standard & Poor's 500
10/09/86 10000.00 10000.00
10/31/86 10000.00 10329.97
11/30/86 10220.00 10580.99
12/31/86 10030.00 10311.18
01/31/87 11100.00 11700.09
02/28/87 11650.00 12162.25
03/31/87 11839.97 12513.74
04/30/87 11839.97 12402.36
05/31/87 11920.10 12510.26
06/30/87 12270.69 13142.03
07/31/87 12761.52 13808.33
08/31/87 13142.16 14323.38
09/30/87 12991.91 14009.70
10/31/87 10137.09 10992.01
11/30/87 9425.90 10086.27
12/31/87 10397.53 10853.84
01/31/88 10623.12 11310.78
02/29/88 11484.46 11837.86
03/31/88 11381.92 11472.07
04/30/88 11525.47 11599.41
05/31/88 11422.93 11700.33
06/30/88 11997.15 12237.37
07/31/88 11935.63 12190.87
08/31/88 11648.52 11776.38
09/30/88 11976.65 12278.06
10/31/88 12007.41 12619.39
11/30/88 11894.61 12438.93
12/31/88 12017.66 12656.61
01/31/89 12879.00 13583.07
02/28/89 12612.39 13244.86
03/31/89 12993.68 13553.46
04/30/89 13680.85 14256.89
05/31/89 14170.19 14834.29
06/30/89 13982.78 14749.73
07/31/89 15232.18 16081.64
08/31/89 15492.47 16396.84
09/30/89 15627.82 16329.61
10/31/89 15190.53 15950.76
11/30/89 15440.41 16276.16
12/31/89 15804.81 16666.78
01/31/90 14888.59 15548.44
02/28/90 15030.81 15749.02
03/31/90 15214.51 16166.37
04/30/90 14771.47 15762.21
05/31/90 16078.97 17299.02
06/30/90 16413.95 17181.39
07/31/90 16154.61 17126.41
08/31/90 14490.52 15578.18
09/30/90 12999.33 14819.52
10/31/90 12534.68 14755.80
11/30/90 13550.42 15709.03
12/31/90 13950.23 16147.31
01/31/91 14879.53 16851.33
02/28/91 15989.61 18056.20
03/31/91 16472.15 18493.16
04/30/91 16318.61 18537.54
05/31/91 17283.69 19338.37
06/30/91 16000.57 18452.67
07/31/91 17524.96 19312.56
08/31/91 18303.60 19770.27
09/30/91 18446.17 19440.11
10/31/91 19016.45 19700.60
11/30/91 17930.73 18906.67
12/31/91 20299.56 21069.59
01/31/92 21538.81 20677.70
02/29/92 21989.40 20946.51
03/31/92 20641.73 20538.05
04/30/92 19833.13 21141.87
05/31/92 19664.67 21245.47
06/30/92 18901.00 20928.91
07/31/92 19630.98 21784.90
08/31/92 19091.92 21338.31
09/30/92 19428.83 21590.10
10/31/92 20181.28 21665.67
11/30/92 21528.94 22404.47
12/31/92 22191.55 22680.04
01/31/93 22629.54 22870.55
02/28/93 22163.03 23181.59
03/31/93 23046.80 23670.73
04/30/93 22805.77 23097.89
05/31/93 24504.44 23716.92
06/30/93 24756.94 23785.70
07/31/93 24688.08 23690.55
08/31/93 25927.65 24588.43
09/30/93 26409.70 24399.09
10/31/93 26662.20 24904.16
11/30/93 25583.32 24667.57
12/31/93 26490.04 24966.04
01/31/94 27155.74 25814.89
02/28/94 26875.65 25115.31
03/31/94 25654.59 24020.28
04/30/94 25813.32 24327.74
05/31/94 25215.00 24726.71
06/30/94 23932.88 24120.91
07/31/94 24763.21 24912.07
08/31/94 26167.43 25933.47
09/30/94 25849.96 25298.10
10/31/94 26900.07 25867.31
11/30/94 25825.53 24925.22
12/31/94 26484.91 25294.86
01/31/95 25984.27 25950.76
02/28/95 27060.36 26962.06
03/31/95 28042.58 27757.71
04/30/95 28987.98 28575.17
05/31/95 30117.54 29717.32
06/30/95 32781.83 30407.65
Let's say you invested $10,000 in Growth Portfolio on October 9, 1986, when
the fund started. By June 30, 1995, your investment would have grown to
$32,782 - a 227.82% increase. That compares to $10,000 invested in the S&P
500, which would have grown to $30,408 over the same period - a 204.08%
increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Oracle Systems Corp. 3.6
Intel Corp. 3.1
DSC Communications Corp. 2.7
Applied Materials, Inc. 2.3
Compaq Computer Corp. 2.3
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Technology 52.6
Utilities 9.4
Retail & Wholesale 8.7
Media & Leisure 4.5
Industrial Machinery & Equipment 4.1
ASSET ALLOCATION AS OF JUNE 30, 1995*
Row: 1, Col: 1, Value: 3.4
Row: 1, Col: 2, Value: 96.59999999999999
Stocks 96.6%
Short-term investment 3.4%
FOREIGN INVESTMENTS 6.3%
*
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Lawrence Greenberg, Portfolio
Manager of Growth Portfolio
Q. LARRY, HOW HAS THE FUND DONE OVER THE PAST SIX MONTHS?
A. Quite well. From December 31, 1994, through June 30, 1995, the fund beat
the Standard & Poor's 500 index, which returned 20.21%.
Q. WHAT MADE THE DIFFERENCE?
A. In the second half of 1994, growth stocks began outperforming cyclicals
- stocks in sectors like autos and steel that tend to rise or fall with the
economy. Since then, the economy has slowed and interest rates have been
flat or falling - a perfect environment for growth stocks. My strategy was
to concentrate on those companies with the fastest earnings growth
opportunities for `95 and `96. This aggressive position, especially in
technology, paid off handsomely when growth stocks rebounded.
Q. IN FACT, OVER 50% OF THE FUND WAS IN TECHNOLOGY AT THE END OF JUNE. WHY
SUCH A HUGE BET?
A. Because on a stock-by-stock basis that's where I'm still finding what I
believe are the best growth opportunities. Technology stocks are benefiting
from strong corporate and consumer demand. Business is booming across all
segments - from PCs and software to semiconductors and networking. Plus,
unlike a retailer, which can only grow as fast as it can build bricks and
mortar, a technology company can grow at any rate. The fund has dozens of
companies that are growing sales well over 100% per year. Finally, despite
the fastest sales and earnings growth of any stocks in the market, many of
these companies still have attractive prices compared to other measures
like earnings.
Q. WHERE DID YOU FIND THE BEST OPPORTUNITIES?
A. Across the board. I added new technology names, but I also made bigger
investments in the companies I have the most confidence in. For example, I
significantly boosted the fund's stake in both Intel, which makes
microprocessors like the Pentium chip that are the brains of PCs, and
Micron Technology, one of the few manufacturers of memory chips called
DRAMs that go inside PCs and other electronic equipment. Both stocks posted
sizable gains for the period. I also added to our stake in Applied
Materials, the leading supplier of semiconductor manufacturing equipment,
whose sales grew more than 60% this year. Our biggest investment is still
Oracle, the leading provider of software for client-server set-ups; it
continued to benefit as more companies moved away from mainframes toward
PCs linked through networks.
Q. WERE THERE DISAPPOINTMENTS?
A. Sure. The stock price of Sybase, a competitor to Oracle, fell nearly 50%
in the last six months as it ran into problems launching a new product. One
of our biggest positions six months ago was Motorola; it started having
some near-term problems related to oversupply on its cellular handsets, so
I cut back even though the stock's long-term outlook remained attractive.
Finally, some retailers like Home Depot and Lowe's turned in disappointing
short-term results as heavy rains in California and the Southeast hurt
business. But many of the "hard good category killers" (or superstores) I
focused on continued to grow despite the slowdown in overall retail sales
that we saw this spring.
Q. WHY DID YOU CUT BACK IN HEALTH CARE?
A. The fund's health care stake was around 3% at the end of June, down from
7.7% six months earlier. During the first half of 1994, uncertainty
surrounding President Clinton's plans for health care reform had hurt the
sector. Then, last fall, the stocks rallied as it became apparent that
health care legislation wouldn't pass anytime soon. But once the
Republicans took charge in January, they cast another cloud over the sector
as they promised to re-examine programs like Medicare. So I decided to
watch from the sidelines.
Q. LOOKING AHEAD, WHAT SHOULD SHAREHOLDERS EXPECT?
A. In the past, technology stocks haven't done as well over the summer, as
European demand dries up and new product launches disappear. But this year,
since demand has been so strong, we may see no summer slowdown or one
that's much less pronounced. Nevertheless, shareholders should expect
volatility because the fund is aggressively invested in the fastest-growing
companies. If either the technology sector or the market declines, the fund
will suffer more than other stock funds. But it's also in a good position
to benefit more than its peers from a long-term up market, which I believe
is more likely.
FUND FACTS
GOAL: to increase the value of the fund's
shares over the long term by investing in
stocks with above-average growth potential
START DATE: October 9, 1986
SIZE: as of June 30, 1995, more than $3.1 billion
MANAGER: Lawrence Greenberg, since 1991;
manager, Fidelity Emerging Growth Portfolio,
since 1993; Fidelity Select Environmental
Services Portfolio, October 1986 - April 1991;
Fidelity Select Medical Delivery Portfolio July
1989 - April 1991; joined Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 96.0%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.4%
AEROSPACE & DEFENSE - 0.3%
Rockwell International Corp. 125,000 $ 5,718,750
Special Devices, Inc. (a) 173,900 3,869,263
9,588,013
DEFENSE ELECTRONICS - 0.1%
Trimble Navigation Ltd. (a) 100,000 2,837,500
TOTAL AEROSPACE & DEFENSE 12,425,513
BASIC INDUSTRIES - 1.1%
CHEMICALS & PLASTICS - 0.5%
Airgas, Inc. (a) 445,000 11,959,375
du Pont (E.I.) de Nemours & Co. 75,000 5,156,250
17,115,625
METALS & MINING - 0.6%
Alcan Aluminium Ltd. 100,000 3,023,679
Aluminum Co. of America 175,000 8,771,875
IMCO Recycling, Inc. 299,000 5,606,250
Reynolds Metals Co. 40,000 2,070,000
19,471,804
TOTAL BASIC INDUSTRIES 36,587,429
CONGLOMERATES - 0.2%
Tyco International Ltd. 125,000 6,750,000
CONSTRUCTION & REAL ESTATE - 0.8%
BUILDING MATERIALS - 0.1%
Elcor Corp. (a) 36,700 816,575
Sherwin-Williams Co. 85,000 3,028,125
3,844,700
CONSTRUCTION - 0.3%
Oakwood Homes Corp. 271,700 6,962,313
Standard Pacific Corp. 300,000 2,062,500
9,024,813
ENGINEERING - 0.4%
Fluor Corp. 65,000 3,380,000
Glenayre Technologies, Inc. (a) 172,575 8,801,325
12,181,325
TOTAL CONSTRUCTION & REAL ESTATE 25,050,838
DURABLES - 3.2%
AUTOS, TIRES, & ACCESSORIES - 2.6%
Chrysler Corp. 400,000 19,150,000
Ford Motor Co. 400,000 11,900,000
General Motors Corp. 877,634 41,139,094
Safety Components International, Inc. 220,000 3,630,000
Smith (A.O.) Corp. Class B 127,600 2,998,600
TRW, Inc. 34,100 2,723,738
81,541,432
CONSUMER ELECTRONICS - 0.1%
Whirlpool Corp. 60,000 3,300,000
HOME FURNISHINGS - 0.2%
Heilig-Meyers Co. 100,000 2,550,000
Leggett & Platt, Inc. 75,000 3,300,000
5,850,000
TEXTILES & APPAREL - 0.3%
Shaw Industries, Inc. 112,500 1,912,500
Tommy Hilfiger (a) 300,500 8,414,000
10,326,500
TOTAL DURABLES 101,017,932
SHARES VALUE (NOTE 1)
ENERGY - 0.7%
ENERGY SERVICES - 0.1%
Baker Hughes, Inc. 175,000 $ 3,587,500
INDEPENDENT POWER - 0.2%
Thermo Electron Corp. (a) 111,100 4,471,775
OIL & GAS - 0.4%
British Petroleum PLC ADR 75,030 6,424,444
Chesapeake Energy Corp. (a) 75,000 1,931,250
Kerr-McGee Corp. 76,000 4,075,500
12,431,194
TOTAL ENERGY 20,490,469
FINANCE - 3.5%
BANKS - 0.7%
Banc One Corp. 200,000 6,450,000
Bank of New York Co., Inc. 100,000 4,037,500
Bankers Trust New York Corp. 105,000 6,510,000
Chemical Banking Corp. 135,000 6,378,750
23,376,250
CREDIT & OTHER FINANCE - 0.5%
American Express Co. 400,000 14,050,000
FEDERAL SPONSORED CREDIT - 1.3%
Federal National Mortgage Association 425,000 40,109,375
INSURANCE - 0.5%
American International Group, Inc. 65,000 7,410,000
Travelers, Inc. (The) 200,000 8,750,000
16,160,000
SECURITIES INDUSTRY - 0.5%
Alliance Entertainment Corp. (a) 525,000 4,921,875
Edwards (A.G.), Inc. 111,100 2,499,750
Merrill Lynch & Co., Inc. 156,500 8,216,250
15,637,875
TOTAL FINANCE 109,333,500
HEALTH - 2.9%
DRUGS & PHARMACEUTICALS - 0.7%
Biogen, Inc. (a) 95,000 4,227,500
Dura Pharmaceuticals, Inc. (a) 160,000 3,010,000
Elan Corp. PLC ADR (a) 100,000 4,075,000
North American Biologicals, Inc. (a) 165,000 1,546,875
Pfizer, Inc. 200,000 9,237,500
US Bioscience, Inc. (a) 190 819
US Bioscience, Inc. (warrants) (a) 569 676
22,098,370
MEDICAL EQUIPMENT & SUPPLIES - 0.7%
Cardinal Health, Inc. 236,100 11,155,725
Millipore Corp. 800 53,698
St. Jude Medical, Inc. 60,000 3,007,500
Thermedics, Inc. (a) 175,000 3,412,500
Thermo Cardiosystems, Inc. (a) 100,000 3,662,500
21,291,923
MEDICAL FACILITIES MANAGEMENT - 1.5%
American Medical Response (a) 195,000 5,460,000
Apria Healthcare Group, Inc. (a) 126,000 3,559,500
Columbia/HCA Healthcare Corp. 375,025 16,219,831
HEALTHSOUTH Rehabilitation Corp. 950,000 16,506,250
Rotech Medical Corp. (a) 40,000 1,110,000
United HealthCare Corp. 75,000 3,103,125
Vivra, Inc. (a) 44,000 1,193,500
47,152,206
TOTAL HEALTH 90,542,499
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 4.1%
ELECTRICAL EQUIPMENT - 2.2%
Avid Technology, Inc. (a) 70,050 $ 2,626,875
General Electric Co. 875,000 49,328,125
General Signal Corp. 100,000 3,975,000
Oak Industries, Inc. (a) 105,300 2,711,475
Scientific-Atlanta, Inc. 370,000 8,140,000
United Communication Industry PCL
(For. Reg.) 154,000 2,245,899
69,027,374
INDUSTRIAL MACHINERY & EQUIPMENT - 1.4%
AGCO Corp. 298,300 11,186,250
Case Corp. 200,000 5,950,000
Caterpillar, Inc. 350,000 22,487,500
Ingersoll-Rand Co. 125,000 4,781,250
Semitool, Inc. 22,700 726,400
45,131,400
POLLUTION CONTROL - 0.5%
Browning-Ferris Industries, Inc. 210,000 7,586,250
TETRA Technologies, Inc. (a) 185,000 2,243,125
WMX Technologies, Inc. 175,000 4,965,625
14,795,000
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 128,953,774
MEDIA & LEISURE - 4.5%
BROADCASTING - 1.1%
Capital Cities/ABC, Inc. 65,000 6,816,875
Citicasters, Inc. 65,000 1,787,500
Clear Channel Communications, Inc. 25,000 1,609,375
EZ Communications, Inc. 44,400 821,400
Infinity Broadcasting Corp. (a) 50,000 1,668,750
Jacor Communications, Inc. Class A 73,400 1,174,400
Lin Television Corp. 50,000 1,681,250
Renaissance Communications Corp. (a) 65,000 2,177,500
Tele-Communications, Inc. Class A 225,000 5,273,438
Viacom, Inc. Class B (non-vtg.) (a) 250,084 11,597,646
34,608,134
ENTERTAINMENT - 0.4%
Casino America, Inc. (a) 100,000 1,512,500
Disney (Walt) Co. 110,000 6,118,750
Players International, Inc. (a) 217,500 4,350,000
11,981,250
LEISURE DURABLES & TOYS - 0.3%
Cobra Golf, Inc. (a) 204,900 6,479,963
Hasbro, Inc. 84,000 2,667,000
9,146,963
LODGING & GAMING - 0.7%
Doubletree Corp. (a) 300,000 6,468,750
Hospitality Franchise Systems, Inc. 453,600 15,705,900
22,174,650
PUBLISHING - 0.1%
Houghton Mifflin Co. 50,000 2,637,500
RESTAURANTS - 1.9%
Apple South, Inc. 500,000 9,750,000
Applebee's International, Inc. 275,000 7,081,250
Landry's Seafood Restaurants, Inc. (a) 334,200 6,684,000
Lone Star Steakhouse Saloon (a) 375,000 11,367,188
Outback Steakhouse, Inc. (a) 385,000 11,116,875
Papa John's International, Inc. (a) 161,800 5,663,000
Starbucks Corp. (a) 180,000 6,412,500
Uno Restaurant Corp. (a) 226,625 2,351,234
60,426,047
TOTAL MEDIA & LEISURE 140,974,544
SHARES VALUE (NOTE 1)
NONDURABLES - 1.3%
BEVERAGES - 0.3%
PepsiCo, Inc. 225,000 $ 10,265,625
HOUSEHOLD PRODUCTS - 0.3%
Colgate-Palmolive Co. 50,000 3,656,250
Gillette Co. 130,000 5,801,250
9,457,500
TOBACCO - 0.7%
Philip Morris Companies, Inc. 225,000 16,734,375
RJR Nabisco Holdings Corp. 200,000 5,575,000
22,309,375
TOTAL NONDURABLES 42,032,500
RETAIL & WHOLESALE - 8.7%
APPAREL STORES - 0.7%
Baby Superstore, Inc. (a) 65,000 3,063,125
Gymboree Corp. (a) 135,000 3,923,438
Just For Feet, Inc. (a)(c) 402,000 16,029,750
23,016,313
APPLIANCE STORES - 0.1%
Cellstar Corp. (a) 165,700 3,873,238
DRUG STORES - 0.4%
General Nutrition Companies, Inc. (a) 365,000 12,820,625
GENERAL MERCHANDISE STORES - 1.5%
Dollar General Corp. 150,050 4,745,331
Wal-Mart Stores, Inc. 1,600,000 42,800,000
47,545,331
RETAIL & WHOLESALE, MISCELLANEOUS - 6.0%
Barnes & Noble, Inc. (a) 153,100 5,205,400
Bed Bath & Beyond, Inc. (a) 700,000 16,975,000
Borders Group, Inc. (a) 80,000 1,150,000
Circuit City Stores, Inc. 150,000 4,743,750
Corporate Express (a) 275,000 5,878,125
Home Depot, Inc. (The) 345,066 14,018,306
Lowe's Companies, Inc. 1,175,000 35,103,125
Officemax, Inc. (a) 525,000 14,634,375
Office Depot, Inc. (a) 320,000 9,000,000
Petco Animal Supplies, Inc. (a) 378,700 8,804,775
Petsmart, Inc. (a) 600,000 17,250,000
Sport Supply Group, Inc. 309,550 3,869,375
Staples, Inc. (a) 550,000 15,881,250
Sunglass Hut International, Inc. (a) 886,500 31,027,500
Viking Office Products, Inc. (a) 150,000 5,493,750
189,034,731
TOTAL RETAIL & WHOLESALE 276,290,238
SERVICES - 2.3%
LEASING & RENTAL - 0.9%
Hollywood Entertainment Corp. (a) 605,000 27,225,000
SERVICES - 1.4%
Adia SA (Bearer) (a) 25,000 5,202,438
Block (H & R), Inc. 100,000 4,112,500
Children's Discovery Centers of
America, Inc. (a) 135,000 2,261,250
First Financial Management Corp. 75,000 6,412,500
Medaphis Corp. (a) 950,000 20,662,500
Zebra Technologies Corp. Class A (a) 100,000 5,325,000
43,976,188
TOTAL SERVICES 71,201,188
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - 52.0%
COMMUNICATIONS EQUIPMENT - 10.9%
Apertus Technologies, Inc. (a) 57,000 $ 498,750
Cabletron Systems, Inc. (a) 85,000 4,526,250
Cisco Systems, Inc. (a) 1,215,000 61,433,438
DSC Communications Corp. (a) 1,850,000 86,025,000
Dialogic Corp. (a) 34,800 617,700
Ericsson (L.M.) Telephone Co.
Class B ADR 900,000 18,000,000
General Instrument Corp. (a) 350,000 13,431,250
Global Village Communication (a) 573,800 8,965,625
Inter-Tel, Inc. (a) 62,300 942,288
InterVoice, Inc. (a) 250,000 4,375,000
Lo Jack Corp. (a) 240,000 2,655,000
Microtest, Inc. (a) 125,000 2,781,250
Newbridge Networks Corp. (a) 525,000 18,506,250
Nokia Corp. AB :
Series A 160,000 9,377,565
sponsored ADR 915,000 54,556,875
Tellabs, Inc. (a) 147,800 7,112,875
3Com Corp. (a) 600,000 40,200,000
U.S. Robotics Corp. 74,600 8,131,400
342,136,516
COMPUTER SERVICES & SOFTWARE - 12.9%
Adobe Systems, Inc. 60,000 3,480,000
Alantec Corp. 65,000 2,226,250
America Online, Inc. (a) 240,500 10,582,000
American Business Information, Inc. (a) 140,800 3,801,600
Ascend Communications, Inc. (a) 60,000 3,030,000
Automatic Data Processing, Inc. 125,000 7,859,375
Broderbund Software, Inc. (a) 72,800 4,641,000
CUC International, Inc. (a) 502,500 14,070,000
Cambridge Technology Partners
Mass., Inc. (a) 90,000 2,970,000
Ceridian Corp. (a) 140,000 5,162,500
Cerner Corp. (a) 40,000 2,450,000
CompUSA, Inc. (a) 290,000 9,642,500
Computer Sciences Corp. (a) 160,000 9,100,000
Davidson & Associates, Inc. (a) 65,000 2,583,750
GMIS, Inc. (a) 212,600 4,849,938
Hyperion Software, Inc. (a) 60,000 2,715,000
Informix Corp. (a) 800,000 20,300,000
Inso Corp. (a) 30,000 1,792,500
Integrated Silicon Systems, Inc. (a) 108,400 4,092,100
Intersolv, Inc. (a) 315,000 7,323,750
Mercury Interactive Group Corp. (a) 252,500 5,081,563
Microsoft Corp. (a) 740,000 66,877,500
Network Peripherals, Inc. (a) 260,000 5,671,250
Novell, Inc. (a) 524,200 10,451,238
Oracle Systems Corp. (a) 2,900,000 112,012,500
Parametric Technology Corp. (a) 296,900 14,770,775
Paychex, Inc. 85,000 3,081,250
Peoplesoft, Inc. (a) 375,000 20,343,750
Platinum Technology, Inc. (a) 100,000 1,812,500
Reuters Holdings PLC ADR Class B 65,000 3,258,125
SAP AG sponsored ADR (a)(b) 35,000 1,461,250
Softkey International, Inc. (a) 150,000 4,781,250
Stratacom, Inc. (a) 490,400 23,907,000
SunGard Data Systems, Inc. (a) 110,000 5,747,500
Systems & Computer Technology Corp. (a) 125,000 2,500,000
Wonderware Corp. (a) 77,600 3,123,400
407,553,114
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - 10.5%
ADAPTEC, Inc. (a) 375,000 $ 13,875,000
Apple Computer, Inc. 165,000 7,662,188
Bay Networks, Inc. (a) 800,000 33,100,000
Compaq Computer Corp. (a) 1,579,800 71,683,425
Comverse Technology, Inc. (a) 75,000 1,331,250
Dell Computer Corp. (a) 125,000 7,515,625
Digital Equipment Corp. (a) 200,000 8,150,000
Fore Systems, Inc. (a) 65,000 1,966,250
Gateway 2000, Inc. (a) 200,000 4,550,000
General Motors Corp. Class E (a) 505,600 21,993,600
Hewlett-Packard Co. 315,000 23,467,500
International Business Machines Corp. 635,000 60,960,000
Micom Communication Corp. (a) 146,100 949,650
Pitney Bowes, Inc. 110,000 4,221,250
Radius, Inc. (a) 290,000 3,190,000
Read Rite Corp. (a) 225,026 6,019,446
Seagate Technology (a) 214,900 8,434,825
Silicon Graphics, Inc. (a) 888,100 35,412,988
Sun Microsystems, Inc. (a) 224,000 10,864,000
Xerox Corp. (a) 45,000 5,276,250
330,623,247
ELECTRONIC INSTRUMENTS - 2.8%
Applied Materials, Inc. (a) 835,000 72,331,875
Electro Scientific Industries, Inc. (a) 117,500 3,906,875
Kulicke & Soffa Industries, Inc. 40,000 2,652,500
Novellus System, Inc. (a) 143,000 9,688,250
88,579,500
ELECTRONICS - 14.7%
AMP, Inc. 150,000 6,337,500
Advanced Micro Devices, Inc. 400,000 14,550,000
Alliance Semiconductor Corp. (a) 160,000 7,840,000
Altera Corp. (a) 387,400 16,755,050
Analog Devices, Inc. (a) 275,000 9,350,000
Atmel Corp. (a) 160,000 8,860,000
Avnet, Inc. 282,800 13,680,450
C-Cube Microsystems, Inc. (a) 75,000 2,043,750
Cascade Communications Corp. (a) 75,000 3,243,750
Chips & Technologies, Inc. (a) 201,300 2,642,063
Cirrus Logic, Inc. (a) 80,000 5,015,000
Cypress Semiconductor Corp. (a) 275,000 11,137,500
Hitachi Ltd. ADR 35,000 3,508,750
Integrated Device Technology, Inc. (a) 72,900 3,371,625
Integrated Silicon Solution (a) 147,800 7,722,550
Intel Corp. 1,530,000 96,868,125
Kemet Corp. (a) 135,000 7,087,500
LSI Logic Corp. (a) 758,930 29,693,136
Linear Technology Corp. 225,000 14,850,000
Marshall Industries (a) 102,700 3,440,450
Maxim Integrated Products, Inc. (a) 90,000 4,590,000
Microchip Technology, Inc. (a) 275,050 10,004,944
Micron Technology, Inc. 1,300,000 71,337,500
Motorola, Inc. 235,000 15,774,375
National Semiconductor Corp. (a) 225,000 6,243,750
SGS-Thomson Microelectronic NV (a) 275,000 11,171,875
S-3, Inc. (a) 81,700 2,941,200
Samsung Electronics Co. Ltd.:
GDR (b) 55,000 5,280,000
GDS (non-vtg.) (Reg.) (a) 102,800 5,345,600
Tencor Instruments (a) 80,000 3,280,000
Texas Instruments, Inc. 235,000 31,460,625
Thomas & Betts Corp. 34,600 2,365,775
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
VLSI Technology, Inc. (a) 135,000 $ 4,066,875
Wholesale Cellular USA, Inc. (a) 150,000 3,225,000
Wyle Laboratories 74,800 2,103,750
Xilinx, Inc. (a) 175,000 16,450,000
463,638,468
PHOTOGRAPHIC EQUIPMENT - 0.2%
3D Systems Corp. 375,000 6,937,500
TOTAL TECHNOLOGY 1,639,468,345
TRANSPORTATION - 0.9%
AIR TRANSPORTATION - 0.4%
AMR Corp. (a) 110,000 8,208,750
Atlantic Southeast Airlines, Inc. 59,700 1,798,463
Comair Holdings, Inc. 25,000 946,875
Southwest Airlines Co. 137,700 3,287,588
14,241,676
RAILROADS - 0.5%
ABC Rail Products Corp. (a) 150,000 3,450,000
CSX Corp. 151,200 11,358,900
14,808,900
TOTAL TRANSPORTATION 29,050,576
UTILITIES - 9.4%
CELLULAR - 5.9%
AirTouch Communications, Inc. (a) 2,300,000 65,550,000
Arch Communications Group, Inc. (a) 150,000 3,337,500
BCE Mobile Communications, Inc. (a) 275,000 9,166,666
Cellular Communications, Inc.,
Series A (redeemable) (a) 200,000 9,100,000
Metrocall, Inc. (a) 150,000 2,737,500
Mobile Telecommunications
Technologies, Inc. (a) 75,000 2,053,125
Mobilemedia Corp. (a) 13,000 240,500
Palmer Wireless, Inc. (a) 575,300 9,420,538
USA Mobile Communications (a) 116,600 2,040,500
United States Cellular Corp. (a) 315,000 9,528,750
Vanguard Cellular Systems, Inc.
Class A (a)(c) 2,176,000 52,224,000
Vodafone Group PLC sponsored ADR 548,700 20,782,013
186,181,092
TELEPHONE SERVICES - 3.5%
ALC Communications Corp. (a) 215,000 9,701,875
AT&T Corp. 425,000 22,578,125
Ameritech Corp. 493,700 21,722,800
Bell Atlantic Corp. 375,000 21,000,000
BellSouth Corp. 150,000 9,525,000
LCI International, Inc. (a) 125,000 3,828,125
SBC Communications, Inc. 475,000 22,621,875
110,977,800
TOTAL UTILITIES 297,158,892
TOTAL COMMON STOCKS
(Cost $2,234,010,970) 3,027,328,237
NONCONVERTIBLE PREFERRED STOCKS - 0.6%
SHARES VALUE (NOTE 1)
TECHNOLOGY - 0.6%
COMPUTER SERVICES & SOFTWARE - 0.2%
SAP AG (a) 5,250 $ 6,622,118
COMPUTERS & OFFICE EQUIPMENT - 0.4%
Silicon Graphics CDA Ltd.
exchangeable (non-vtg.) (a) 280,080 11,132,774
TOTAL NONCONVERTIBLE PREFERRED STOCKS
(Cost $15,178,912) 17,754,892
REPURCHASE AGREEMENTS - 3.4%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 6.22% dated
6/30/95 due 7/3/95 $ 106,155,996 106,101,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $2,355,290,882) $ 3,151,184,129
LEGEND
(a) Non-income producing
(b) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $6,741,250 or 0.2% of net
assets.
(c) A company in which the fund has ownership of at least 5% of the voting
securities is an affiliated company. Transactions during the period with
companies that are or were affiliates are as follows:
PURCHASES SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
Just For Feet, Inc. (a) $ 2,342,009 - - $ 16,029,750
Vanguard Cellular Systems, Inc.
Class A (a) 1,588,387 - - 52,224,000
TOTAL $ 3,930,396 $ - $ - $ 68,253,750
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $1,556,970,263 and $967,373,548, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $555,941 for the period
(see Note 3 of Notes to Financial Statements).
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $2,361,955,662. Net unrealized appreciation aggregated
$789,228,467, of which $809,605,722 related to appreciated investment
securities and $20,377,255 related to depreciated investment securities.
At December 31, 1994, the fund had a capital loss carryforward of
approximately $68,037,000 all of which will expire on December 31, 2002.
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $106,101,000) (cost $2,355,290,882) $ 3,151,184,129
- See accompanying schedule
Receivable for investments sold 15,240,448
Receivable for fund shares sold 4,631,877
Dividends receivable 1,976,933
Other receivables 241,989
TOTAL ASSETS 3,173,275,376
LIABILITIES
Payable for investments purchased $ 31,104,827
Payable for fund shares redeemed 2,527,529
Accrued management fee 1,523,671
Other payables and accrued expenses 374,992
TOTAL LIABILITIES 35,531,019
NET ASSETS $ 3,137,744,357
Net Assets consist of:
Paid in capital $ 2,373,300,032
Undistributed net investment income 3,900,899
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (35,349,821)
Net unrealized appreciation (depreciation) on investments 795,893,247
NET ASSETS, for 117,514,234 shares outstanding $ 3,137,744,357
NET ASSET VALUE, offering price and redemption price per share ($3,137,744,357 (divided by) 117,514,234 shares) $26.70
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 8,244,859
Dividends
Interest 5,551,271
TOTAL INCOME 13,796,130
EXPENSES
Management fee $ 7,756,500
Transfer agent fees 627,931
Accounting fees and expenses 378,173
Non-interested trustees' compensation 4,869
Custodian fees and expenses 69,955
Registration fees 147,294
Audit 14,797
Legal 4,080
Miscellaneous 7,349
TOTAL EXPENSES 9,010,948
NET INVESTMENT INCOME 4,785,182
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 46,674,141
Foreign currency transactions 395 46,674,536
Change in net unrealized appreciation (depreciation) on investment securities 517,371,258
NET GAIN (LOSS) 564,045,794
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 568,830,976
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 4,785,182 $ 11,810,184
Net investment income
Net realized gain (loss) 46,674,536 (74,102,658)
Change in net unrealized appreciation (depreciation) 517,371,258 80,193,945
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 568,830,976 17,901,471
Distributions to shareholders (12,404,421) (7,589,523)
From net investment income
From net realized gain - (80,320,550)
TOTAL DISTRIBUTIONS (12,404,421) (87,910,073)
Share transactions 750,772,650 1,289,938,019
Net proceeds from sales of shares
Reinvestment of distributions 12,404,421 87,909,946
Cost of shares redeemed (323,728,603) (549,819,377)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 439,448,468 828,028,588
TOTAL INCREASE (DECREASE) IN NET ASSETS 995,875,023 758,019,986
NET ASSETS
Beginning of period 2,141,869,334 1,383,849,348
End of period (including undistributed net investment income of $3,900,899 and $11,472,202, $ 3,137,744,357 $ 2,141,869,334
respectively)
OTHER INFORMATION
Shares 32,171,873 60,676,019
Sold
Issued in reinvestment of distributions 568,749 4,039,985
Redeemed (13,969,564) (25,920,211)
Net increase (decrease) 18,771,058 38,795,793
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 F 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.69 $ 23.08 $ 19.76 $ 18.51 $ 12.91 $ 15.18
Income from Investment Operations
Net investment income .04 .12 .12 .09 D .09 D .24
Net realized and unrealized gain (loss) 5.09 (.12) E 3.64 1.64 5.72 (1.98)
Total from investment operations 5.13 - 3.76 1.73 5.81 (1.74)
Less Distributions (.12) (.12) (.11) (.05) (.21) (.21)
From net investment income
From net realized gain - (1.27) (.21) (.43) - (.32)
In excess of net realized gain - - (.12) - - -
Total distributions (.12) (1.39) (.44) (.48) (.21) (.53)
Net asset value, end of period $ 26.70 $ 21.69 $ 23.08 $ 19.76 $ 18.51 $ 12.91
TOTAL RETURN B, C 23.78% (.02) 19.37% 9.32% 45.51% (11.73)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,137,744 $ 2,141,869 $ 1,383,849 $ 749,837 $ 371,462 $ 135,487
Ratio of expenses to average net assets .72% A .69% .71% .75% .84% .88%
Ratio of expenses to average net assets before
expense .72% A .70% .71% .75% .84% .88%
reductions
Ratio of net investment income to average net assets .38% A .69% .72% .83% .56% 2.69%
Portfolio turnover rate 82% A 122% 159% 262% 261% 88%
A ANNUALIZED
B TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
THE FINANCIAL STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET GAIN ON INVESTMENTS FOR THE PERIOD
ENDED DUE TO THE TIMING OF SALES
AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
F EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL
STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT
CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
OVERSEAS 2.96% 4.76% 7.12%
Morgan Stanley EAFE Index 1.65% 4.69% 6.97%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
Many markets around the globe offer the potential
for significant growth over time; however,
investing in foreign markets means assuming
greater risks than investing in the United States.
Factors like changes in a country's financial
markets, its local political and economic
climate, and the fluctuating value of its currency
create these risks. For these reasons an
international fund's performance may be more
volatile than a fund that invests exclusively in the
United States.
(checkmark)
You can compare the fund's figures to the performance of the Morgan Stanley
EAFE index - a broad measure of the performance of stocks in Europe,
Australia, and the Far East. This benchmark includes reinvested dividends
and capital gains, if any, and excludes the effects of sales charges.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of operations
January 28, 1987.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money. Foreign investments involve greater risks and
potential rewards than U.S. investments. These risks include political and
economic uncertainties of foreign countries, as well as the risk of
currency fluctuations.
$10,000 OVER LIFE OF FUND
VIP Overseas (22Europe, Australia,
01/28/87 10000.00 10000.00
01/31/87 10000.00 9997.46
02/28/87 10010.00 10296.66
03/31/87 10460.00 11140.41
04/30/87 11220.00 12319.18
05/31/87 11060.00 12319.14
06/30/87 10520.00 11926.66
07/31/87 10400.00 11905.82
08/31/87 11320.00 12798.54
09/30/87 11070.00 12597.05
10/31/87 8760.00 10777.00
11/30/87 8840.00 10938.65
12/31/87 9462.16 11263.46
01/31/88 9138.32 11464.55
02/29/88 9381.20 12228.75
03/31/88 9806.24 12980.64
04/30/88 9968.16 13169.27
05/31/88 9786.00 12747.12
06/30/88 9613.96 12411.13
07/31/88 9543.12 12800.51
08/31/88 9209.16 11968.24
09/30/88 9603.84 12491.19
10/31/88 10028.88 13559.96
11/30/88 10211.04 14367.68
12/31/88 10231.28 14447.79
01/31/89 10534.87 14701.99
02/28/89 10717.03 14777.56
03/31/89 10707.38 14487.53
04/30/89 11023.50 14621.89
05/31/89 10615.60 13826.42
06/30/89 10574.81 13593.67
07/31/89 11563.97 15300.67
08/31/89 11482.39 14612.54
09/30/89 12196.21 15278.16
10/31/89 11533.38 14664.33
11/30/89 12155.42 15401.50
12/31/89 12920.24 15969.77
01/31/90 12746.88 15375.56
02/28/90 12449.36 14302.43
03/31/90 12919.92 12812.46
04/30/90 12991.52 12710.78
05/31/90 13840.58 14161.09
06/30/90 14147.46 14036.37
07/31/90 14863.53 14234.08
08/31/90 13349.56 12851.83
09/30/90 12081.09 11060.74
10/31/90 13206.34 12784.21
11/30/90 12797.16 12030.10
12/31/90 12705.10 12224.98
01/31/91 12827.85 12620.40
02/28/91 13260.02 13973.29
03/31/91 12872.18 13134.44
04/30/91 13155.20 13263.42
05/31/91 13186.64 13401.82
06/30/91 12463.37 12417.04
07/31/91 13081.82 13027.11
08/31/91 13123.75 12762.56
09/30/91 13658.34 13481.84
10/31/91 13752.68 13672.96
11/30/91 13260.02 13034.64
12/31/91 13721.24 13707.79
01/31/92 13888.95 13415.00
02/29/92 13599.52 12934.85
03/31/92 13323.28 12080.93
04/30/92 14152.01 12138.36
05/31/92 14768.23 12950.85
06/30/92 14491.99 12336.56
07/31/92 13567.65 12020.83
08/31/92 13450.78 12774.79
09/30/92 12908.92 12522.52
10/31/92 12027.08 11865.66
11/30/92 11963.33 11977.32
12/31/92 12250.20 12039.27
01/31/93 12600.81 12037.79
02/28/93 12847.62 12401.41
03/31/93 13738.91 13482.39
04/30/93 14651.94 14761.90
05/31/93 14967.16 15073.67
06/30/93 14597.60 14838.49
07/31/93 15173.67 15357.91
08/31/93 15988.88 16186.97
09/30/93 15901.92 15822.62
10/31/93 16478.00 16310.23
11/30/93 15782.36 14884.55
12/31/93 16825.82 15959.32
01/31/94 17923.63 17308.60
02/28/94 17607.51 17260.66
03/31/94 17170.60 16517.22
04/30/94 17738.58 17218.03
05/31/94 17520.13 17119.18
06/30/94 17334.44 17361.11
07/31/94 17793.20 17528.07
08/31/94 18000.73 17943.05
09/30/94 17531.05 17377.92
10/31/94 17891.50 17956.61
11/30/94 17214.29 17093.61
12/31/94 17115.99 17200.65
01/31/95 16406.01 16539.88
02/28/95 16449.17 16492.41
03/31/95 16955.64 17521.06
04/30/95 17440.09 18180.00
05/31/95 17682.31 17963.28
06/30/95 17847.46 17648.27
Let's say you invested $10,000 in Overseas Portfolio on January 28, 1987,
when the fund started. By June 30, 1995, your investment would have grown
to $17,847 - a 78.47% increase. That compares to $10,000 invested in the
Morgan Stanley EAFE Index, which would have grown to $17,648 over the same
period - a 76.48% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1995
(BY ISSUER, EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S
INVESTMENTS
C. S. Holdings (Reg.) 1.8
Nestle SA (Reg.) 1.5
Deutsche Bank AG 1.3
Unilever NV Ord. 1.2
Swiss Bank Corp. (Bearer) 1.2
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Finance 26.4
Utilities 8.8
Nondurables 8.4
Durables 8.1
Basic Industries 6.2
GEOGRAPHIC DIVERSIFICATION AS OF JUNE 30, 1995
(BY LOCATION OF ISSUER) % OF FUND'S
INVESTMENTS
Japan 18.5
United Kingdom 12.4
Switzerland 9.8
France 7.5
Netherlands 6.9
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with John Hickling, Portfolio Manager of Overseas Portfolio
Q. JOHN, HOW HAS THE FUND PERFORMED?
A. For the six months and one year ended June 30, 1995, the fund's
performance topped that of the Morgan Stanley EAFE index - a broad measure
of stocks in Europe, Australia and the Far East. The index had total
returns of 2.60% and 1.65% for the six- and 12-month periods, respectively.
Q. WHAT WERE THE KEYS TO THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
A. First, I kept the fund fully invested through much of the period.
Second, some of the stocks I picked in Japan and Europe fared well. And
finally, the fund was able to benefit from new investments in emerging
markets.
Q. WHY DID THE EAFE INDEX OFFER RELATIVELY LOW RETURNS?
A. While European markets have performed relatively well - though not as
well as the U.S. market - emerging markets and Japan have not. Japan was
affected by a number of factors that dampened investor enthusiasm: the
Barings debacle, the Kobe earthquake and the subway gas attack. The
Japanese market also was hurt by the strength of the yen versus the dollar.
On the heels of Mexico's devaluation of the peso in late 1994, emerging
markets also struggled, although they appear to have pretty much bottomed
out.
Q. WHAT'S THE STORY BEHIND THE FUND'S INVESTMENTS IN JAPAN?
A. Even though Japan has the highest country representation in the fund,
I've kept the fund underweighted there, relative to the index. I've focused
much of the fund's Japanese investments in technology, including consumer
electronics companies Toshiba and Hitachi, and other manufacturers and
exporters that are poised to take advantage of economic activity both in
Japan and globally. While the technology sector has done well in the U.S.,
it has been weak in Japan, so I found valuations to be attractive. The
sector recently has shown some strong gains. In addition, I've targeted
some financial stocks. The Japanese market has started to pick up a bit
lately, and brokerage house Nomura Securities is poised to take advantage
because it has been cutting costs aggressively. In addition, it appears
trust banks such as Sumitomo Trust will be able to improve interest margins
- the difference between what they charge for loans and what they pay to
depositors - because of changing regulations.
Q. THE FUND IS OVERWEIGHTED IN EUROPE, RELATIVE TO THE INDEX. WHERE HAVE
YOU FOUND OPPORTUNITIES THERE?
A. Mainly in financial and consumer nondurable stocks, as well as interest
rate-sensitive issues - because European bond markets have been rallying -
and cyclicals - those that tend to rise and fall with the economy. European
stocks have rallied lately, mainly on the strength of the technology
sector. In the short run, I've missed some opportunity there, because I
found the tech stocks to be too expensive and risky. Some of the appealing
consumer nondurable names have been Guinness, Cadbury-Schweppes, Bass and
Nestle. Barclays, National Westminster, Swiss Bank and C.S. Holdings were
among the fund's financial stock investments. I've added investments in
cyclical stocks because they became cheap. Those include paper companies Mo
Och Domsjoe and Svenska Cellulosa; auto stocks Volvo and Peugeot; and tire
companies such as Michelin.
Q. WHAT ABOUT THE FUND'S EMERGING MARKET INVESTMENTS?
A. I've been more active there because, as I said, I felt they had hit
bottom, and there were a lot of very interesting stocks. Among the stocks
that have caught my eye have been Hong Kong/Shanghai Bank (HSBC) and Hong
Kong Land Holdings; Philippine Long Distance Telephone; the department
store Matahari and cigarette manufacturer Gudang Garam in Indonesia; Krung
Thai Bank; Telecom Argentina; and Mexican companies Bancomer, Telmex, Cemex
and Grupo Carso.
Q. WHAT'S YOUR OUTLOOK GOING FORWARD?
A. Several factors are important to consider. First of all, it seems most
stock markets reflect the sentiment that any worldwide recession will stay
pretty shallow and that growth will resume. Of course, this is the best
possible scenario. At the same time, if the U.S. market stumbles, one would
expect there to be a drop in foreign markets. In such a scenario, I believe
overseas markets wouldn't drop as far as the U.S, because they haven't
gained as much recently, but it's impossible to say for sure. How the
dollar does also will be important. Going forward, I'll stay with my usual
game plan, looking for opportunities in any markets that appear to have
excellent value.
FUND FACTS
GOAL: to increase the value of the fund's
shares by investing mainly in stocks in
Europe, the Far East, and the Pacific Basin
START DATE: January 28, 1987
SIZE: as of June 30, 1995, more than $1.2 billion
MANAGER: John Hickling, since 1993; manager
Fidelity Overseas Fund, since 1993; Fidelity
Advisor Overseas Fund, since 1993; Fidelity
Advisor Annuity Overseas Portfolio, since
January 1995; previously managed several
Fidelity international funds; joined Fidelity in
1982
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 89.2%
SHARES VALUE (NOTE 1)
ARGENTINA - 0.8%
Buenos Aires Embotelladora SA
sponsored ADR 41,800 $ 1,050,301
Perez Companc Class B 308,452 1,295,822
Telecom Argentina sponsored
ADR Class B 83,400 3,794,700
Telecom Argentina Stet France
Telecom SA 263,600 1,199,681
YPF Sociedad Anonima sponsored
ADR representing Class D shares 150,500 2,840,688
10,181,192
AUSTRALIA - 1.4%
Brambles Industries Ltd. 276,500 2,616,260
FAI Insurance Ltd. Ord. 2,037,900 809,474
Lend Lease Corp. Ltd. 81,000 1,033,010
Pioneer International Ltd. 493,300 1,224,642
TNT Ltd. (a) 1,658,800 2,176,694
Westpac Banking Corp. 2,912,700 10,536,488
18,396,568
AUSTRIA - 0.9%
Mayr Melnhof Karton AG 24,200 1,398,830
OEMV AG 62,400 7,194,579
VA Technologie AG 6,800 851,047
VA Technologie AG (d) 15,000 1,877,310
11,321,766
BELGIUM - 1.6%
Bekaert SA 4,005 3,197,654
Delhaize Freres & Cie Le Lion SA 135,300 6,183,782
Petrofina SA 11,900 3,590,951
Petrofina SA (warrants) (a) 595 8,380
Solvay & Cie SA 14,062 7,724,197
20,704,964
BERMUDA - 0.2%
Consolidated Electric Power Asia Ltd.
sponsored ADR (d) 30,000 682,500
Jardine Strategic Holdings Ltd. Ord. 529,500 1,704,990
2,387,490
BRAZIL - 0.2%
Coteminas PN 2,500,000 788,675
Telebras PN (Pfd. Reg.) 60,298,770 1,987,447
2,776,122
CANADA - 0.5%
Midland Walwyn, Inc. 269,000 2,106,921
Noranda, Inc. 245,400 4,827,541
6,934,462
CHILE - 0.1%
Vina Concha Stet y Toro SA
sponsored ADR 51,100 990,063
FINLAND - 0.8%
Kymmene Corp. 53,900 1,680,624
Pohjola Class B 291,000 4,570,859
Valmet Corp. OY Ord. 167,700 3,793,939
10,045,422
FRANCE - 7.2%
Accor SA 65,158 8,694,014
Axa SA 91,718 4,963,362
BQE National Paris Ord. 222,840 10,770,332
Club Mediterranee SA Ord. 42,500 4,340,855
Compagnie Bancaire Ord. 65,670 7,867,107
Credit Lyonnais 24,500 1,413,880
SHARES VALUE (NOTE 1)
FRANCE - CONTINUED
Elf Aquitaine 112,128 $ 8,302,776
Generale des Eaux 90,600 10,105,133
Havas SA 53,300 4,227,450
IMETAL SA Ord. 9,200 1,083,135
L'Oreal Co. Ord. 10,200 2,563,957
Lafarge Coppee SA 63,900 4,978,432
Lyonnaise des Eaux Dumez SA 30,700 2,909,255
Michelin SA Cie Generale des
Etablissements, Class B (a) 76,900 3,413,366
Peugeot SA Ord. 19,500 2,710,627
Total SA Class B 190,600 11,495,446
Vallourec SA (a) 60,000 3,010,224
92,849,351
GERMANY - 6.0%
Allianz Versich Holdings Ord. (Reg.) 1,450 2,590,467
Asko 2,900 1,813,746
BMW AG 9,918 5,463,533
Bayerische Vereinsbank AG Ord. 11,000 3,340,331
Continental Gummi-Werke AG 25,600 3,721,076
Deutsche Bank AG 352,000 17,122,878
Duerr Beteiligungs AG (RFD) 8,777 3,119,553
Gildemeister AG (a) 28,620 2,372,138
Hoechst AG Ord. 38,900 8,413,855
Karstadt AG 17,800 7,821,202
Kaufhof Holding AG 20,000 7,151,906
Metallgesellschaft AG (a)(d) 86,700 1,587,832
SGL Carbon AG (a)(d) 28,000 1,250,570
Schmalbach-Lubeca AG 4,250 855,261
Veba AG Ord. 27,400 10,779,905
77,404,253
HONG KONG - 2.1%
Amoy Properties Ltd. 2,084,000 1,831,440
Consolidated Electric Power Asia Ltd. 604,000 1,401,165
Dickson Concepts International Ltd. 2,108,000 1,259,994
HSBC Holdings PLC 834,000 10,697,560
Hong Kong Land Holdings Ltd. 2,337,000 4,253,340
Hopewell Holdings Ltd. 3,944,000 3,338,596
Hysan Development Co. Ltd. 643,000 1,470,863
Peregrine Investments Holdings Ltd. 832,000 1,182,780
Semi-Tech (Global) Ltd. 100,000 160,901
Sun Hung Kai Properties Ltd. 153,000 1,132,023
26,728,662
INDIA - 0.1%
Reliance Industries Ltd. GDS (a) 106,400 1,902,432
INDONESIA - 1.0%
Astra International PT (For. Reg.) 160,000 283,790
Bank International Indonesia PT Ord. 921,000 2,843,238
Gudang Garam PT Perusahaan 42,500 326,336
Jakarta International Hotels &
Development Ord. 1,541,000 1,937,499
Matahari Putra Prima PT:
(For. Reg.) 552,000 879,927
(For. Reg.) (rights) (a) 276,000 266,459
Sampoerna Hanjaya Mandala (For. Reg.) 735,750 5,781,604
12,318,853
IRELAND - 1.0%
Bank of Ireland U.S. Holdings, Inc. 1,009,200 5,793,010
Fyffes PLC 1,358,000 2,479,301
Independent Newspapers PLC 521,050 2,866,312
Waterford Wedgwood PLC Unit 1,751,400 1,494,049
12,632,672
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ITALY - 1.3%
Alitalia Linee Aeree Italiane Class A (a) 136,400 $ 65,201
Assicurazioni Generali Spa 218,570 5,128,878
Fiat Spa 1,121,000 3,965,325
Istituto Mobiliare Italiano 301,400 1,848,206
Italgas Spa 512,200 1,334,373
Montedison Spa Ord. (a) 2,962,700 2,120,701
SAI Sta Assieuratrice Industriale Spa 189,000 2,017,120
16,479,804
JAPAN - 18.5%
ADO Electronic Industrial Co. Ltd. 19,000 410,750
Advantest Corp. 74,000 2,797,401
Aida Engineering Ltd. Ord. 176,000 1,199,669
Akita Bank Ltd. 76,650 656,483
Amada Metrecs Co. Ltd. 86,000 1,107,383
Amadasonoike Co. Ltd. 282,000 1,632,368
Autobacs Seven Co. Ltd. 20,600 2,007,679
Bridgestone Corp. 339,000 5,005,908
Canon, Inc. 526,000 8,575,073
Daicel Chemical Industries Ltd. 397,000 2,035,415
East Japan Railway Co. Ord. 700 3,597,165
Fanuc Ltd. 98,200 4,245,860
Fujitsu Ltd. 726,000 7,247,135
Futaba Industrial Co. Ltd. 126,000 2,054,105
Hachijuni Bank Ltd. 92,000 1,141,170
Hanshin Department Store Ltd. 29,000 205,210
Higo Bank Ltd. Ord. 96,000 941,288
Hitachi Ltd. 1,126,000 11,240,047
Honda Motor Co. Ltd. 432,000 6,634,375
Ishihara Sangyo Kaisha Ltd. (a) 343,000 1,021,097
Japan Airlines Co. Ltd. 302,000 2,008,578
Komatsu Ltd. Ord. 410,000 3,133,728
Marubeni Corp. 339,000 1,726,035
Matsushita Electric Industrial Co. Ltd. 303,000 4,724,867
Marukyo Corp. 16,000 255,168
Minebea Co. Ltd. 546,000 3,508,847
Mitsubishi Chemical Industries Ltd. 89,000 381,654
Mitsubishi Estate Co. Ltd. 264,000 2,978,382
Mitsubishi Heavy Industries Ltd. 492,000 3,347,809
Mitsubishi Trust & Banking Corp. 486,000 6,889,546
Mitsui OSK Lines Ltd. 457,000 1,268,696
Murata Mfg. Co. Ltd. 171,000 6,484,465
Nichido Fire & Marine
Insurance Co. Ltd. 502,000 4,062,254
Nikko Securities Co. Ltd. 373,000 3,031,587
Nippon Telegraph &
Telephone Corp. Ord. 400 3,354,991
Nippon Yusen Kabushiki Kaisha 354,000 1,986,414
Nissan Motor Co. Ltd. Ord. 388,000 2,484,302
Nisshinbo Industries 154,000 1,217,082
Nitto Denko Corp. 97,000 1,512,581
Nomura Securities Co. Ltd. 664,000 11,609,217
Omron Corp. 139,000 2,660,131
Orix Corp. 242,000 8,061,901
Pioneer Electronic Corp. 241,000 4,099,704
Rohm Co. Ltd. 120,000 6,209,096
Sankyo Co. Ltd. 258,300 6,011,235
Sanwa Bank Ltd. 95,000 1,795,629
Seino Transpotation Co. Ltd. 144,000 2,432,605
Sony Corp. 209,700 10,082,445
Sumitomo Marine and Fire
Insurance Co. Ltd. 420,000 3,339,160
Sumitomo Realty &
Development Co. Ltd. 648,000 3,873,452
Sumitomo Rubber Industries Ltd. 185,000 1,376,846
Sumitomo Trust & Banking Co. Ltd. 363,000 4,416,893
Suzuki Motor Corp. 228,000 2,545,303
SHARES VALUE (NOTE 1)
JAPAN - CONTINUED
TDK Corp. 88,000 $ 4,012,759
Takashimaya Co. Ltd. 198,000 2,666,510
Takeda Chemical Industries Ltd. 397,000 5,252,687
Tokio Marine & Fire
Insurance Co. Ltd. (The) 1,065,000 12,228,948
Toshiba Corp. 1,626,000 10,314,970
Toyota Motor Corp. 474,000 9,407,208
Tsugami Corp. 253,000 911,577
Yamanouchi Pharmaceutical Co. Ltd. 302,000 6,814,177
238,235,020
KOREA (SOUTH) - 0.8%
Cho Hung Bank Co. Ltd. 191,504 2,273,043
Korea Electric Power Corp. (a) 147,470 5,647,716
Korea First Securities Co. Ltd. 14,218 187,136
Kyungki Bank (a) 171,523 1,628,705
Seoul Securities Co. 74,592 924,714
10,661,314
MEXICO - 1.2%
Banacci SA de CV:
Class B 352,200 540,979
Class L 17,610 26,767
Cemex SA, Series B 1,071,800 3,875,630
Cifra SA Class C 1,559,100 2,055,517
Consorcio G Grupo Dina SA ADR 34,800 108,750
Empresas Ica Sociedad Controladora
SA de CV sponsored ADR
representing Ord. (part. cert.) 208,700 2,139,175
Grupo Carso SA de CV Class A-1 (a) 287,800 1,574,842
Grupo Dina sponsored ADR, Series L 12,543 25,086
Grupo Financiero Bancomer SA de CV:
Class B (a) 4,451,800 1,303,487
Series L (a) 216,878 57,256
sponsored ADR, Series C (a) (d) 70,200 412,425
Telefonos de Mexico SA sponsored ADR
representing shares Ord. Class L 93,200 2,761,050
14,880,964
MALAYSIA - 0.9%
Kuala Lumpur Industries Holdings BHD (a) 290,000 394,913
Magnum Corp. BHD 567,500 1,326,804
Malaysian Banking BHD 133,000 1,052,871
Resorts World BHD 443,000 2,598,399
Telekom Malaysia BHD 614,000 4,659,149
Tenega Nasional BHD 251,000 1,024,384
Time Engineering BHD 161,000 541,509
11,598,029
NETHERLANDS - 6.9%
ABN-AMRO Holdings NV 46,500 1,796,666
Aegon NV Ord. 68,250 2,363,636
AKZO NV Ord. 103,800 12,420,856
Heineken NV 24,200 3,666,667
IHC Caland NV 48,300 1,373,134
International Nederlanden Groep NV 249,108 13,793,730
KLM Royal Dutch Airlines Ord. (a) 198,200 6,441,468
Koninklijke PPT Nederland 221,500 7,971,539
Koninklijke PPT Nederland (a) (d) 80,600 2,900,705
Oce Van der Grinten NV 136,700 7,719,571
Pirelli Tyre Holdings NV Ord. (a) 633,700 4,258,242
Royal Dutch Petroleum Co. Ord. 50,900 6,222,317
Unilever NV Ord. 122,000 15,891,452
Vendex International Bearer (a) (d) 81,400 2,156,361
88,976,344
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NETHERLANDS ANTILLES - 0.3%
Schlumberger Ltd. 68,200 $ 4,236,925
NORWAY - 2.4%
Bergesen Group:
Class A 35,500 807,408
Class B 301,600 6,859,557
Christiania Bank Free shares Ord. 1,475,000 3,426,617
Den Norske Bank Class A Free shares 1,146,800 3,111,291
Norsk Hydro AS 100,850 4,218,809
Orkla AS:
Class A Free shares 93,250 4,173,564
Class B (non-vtg.) 47,800 2,026,773
Saga Petroleum AS Class B 261,600 3,463,634
Unitor AS 192,300 3,358,339
31,445,992
PAKISTAN - 0.1%
Pakistan Telecommunications Voucher
GDR (a) (d) 8,630 837,110
PHILLIPINES - 0.1%
Philippine Long Distance Telephone Co.
sponsored ADR 21,500 1,542,625
SINGAPORE - 1.0%
Jardine Matheson Holdings Ltd. Ord. 506,659 3,723,944
Kim Engineering Holdings Ltd. 2,455,000 2,565,721
Neptune Orient Lines Ltd. 3,377,000 3,916,071
Overseas Union Bank Ltd. (For.) 265,000 1,669,291
Van Der Horst Ltd. 156,000 748,174
12,623,201
SOUTH AFRICA - 0.0%
De Beers Consolidated Mines Ltd. ADR 24,000 621,000
SPAIN - 4.2%
Banco Bilbao Vizcaya SA Ord. (Reg.) 349,100 10,102,294
Banco Intercontinental Espanol 59,550 5,374,415
Corporacion Mapfrecia International
de Reaseguros SA (Reg.) 183,400 9,035,230
EL Aguila SA (a) 56,540 423,669
Repsol SA Ord. 172,500 5,441,730
Tabacalera SA, Series A 205,200 7,696,592
Telefonica de Espana SA Ord. 845,150 10,916,448
Union Electrica Fenosa SA 1,216,100 5,719,270
54,709,648
SWEDEN - 3.5%
Electrolux AB 117,600 5,358,737
Investor AB Class B Free shares 314,700 9,097,942
Mo Och Domsjoe (MoDo) Class B
Free shares 83,100 4,799,104
SKF AB Ord. 75,800 1,533,959
Skandia International Holding 35,400 687,147
Svenska Cellulosa Aktiebolaget SCA
Class B Ord. 362,700 6,740,754
Skandinaviska Enskilda Banken
Class A Free shares 948,300 4,934,745
Volvo AB Class B 637,400 12,153,153
45,305,541
SWITZERLAND - 9.8%
Adia SA (Bearer) (a) 54,800 11,403,744
Alusuisse-Lonza Holding AG (Reg.) 15,939 10,019,990
Baloise Holding (Reg.) 5,635 12,879,299
CIBA-GEIGY AG (Reg.) 14,380 10,567,453
C. S. Holdings (Reg.) 258,405 23,736,812
Fischer (Georg) AG (Reg.) 12,400 3,228,211
Holderbank Financiere Glarus
AG (Bearer) 2,825 2,324,445
SHARES VALUE (NOTE 1)
SWITZERLAND - CONTINUED
Holderbank Financial Glarus
(warrants) (a) 14,125 $ 19,678
Nestle SA (Reg.) 18,800 19,626,644
Roche Holdings Ltd. (part. certs.) 1,700 10,990,422
Surveillance, Societe Generale (Bearer) 1,010 1,758,816
Swiss Bank Corp. (Bearer) 43,450 15,435,437
Zurich Versicherung (Reg.) 3,405 4,289,973
126,280,924
THAILAND - 1.6%
Bank of Asia PCL (For. Reg.) 354,310 1,004,727
Krung Thai Bank (For. Reg.) 1,698,840 6,882,069
Ruam Pattana Fund II (For. Reg.) (a) 1,117,000 712,691
Ruang Khao Unit Trust (For. Reg.) (a) 836,800 601,709
Siam City Bank PCL (For. Reg.) 6,828,500 9,405,234
Telecomasia Corp. PCL (For. Reg.) (a) 394,000 1,460,440
20,066,870
TURKEY - 0.3%
Aksigorta (a) 280,000 54,463
Aksigoria (a) (d) 952,000 185,174
Cimentas AS (a) 500,000 322,290
Tofas Turk Otomobil Fabrikasi
AS ADR (a) (d) 165,600 712,080
Tofas Turk Otomobil Fabrikasi AS (a) 2,400,600 2,117,473
3,391,480
UNITED KINGDOM - 12.4%
Argyll Group PLC Ord. 626,900 3,353,633
Avon Rubber 81,900 666,007
BTR PLC Ord. 625,100 3,184,528
Barclays PLC Ord. 980,300 10,558,664
Bass PLC Ord. 763,700 7,324,586
Berkeley Group PLC 159,600 904,685
Booker PLC 364,200 2,415,782
Boots Co. PLC 287,600 2,334,164
British Land Ord. 289,500 1,844,124
Burmah Oil 190,700 2,768,567
Cadbury-Schweppes PLC Ord. 955,700 6,994,539
Commercial Union PLC (a) 225,100 2,099,695
De La Rue PLC 488,300 7,287,643
Dixons Group PLC 937,500 3,826,800
Forte PLC 1,806,100 6,551,610
Glaxo Holdings PLC Ord. 378,100 4,651,224
Great Universal Stores PLC Ord Class A 381,600 3,574,711
Guinness PLC Ord. 1,154,300 8,705,719
Hanson Trust PLC Ord. 674,000 2,358,953
Iceland Group PLC 637,600 1,829,976
Lasmo PLC 858,400 2,347,355
Ladbroke Group PLC Ord. 1,032,400 2,782,019
Lloyds Abbey Life PLC 549,600 3,426,481
London International Group PLC 2,561,200 4,492,217
National Westminster Bank PLC Ord. 1,097,920 9,567,209
Nurdin & Peacock PLC Ord. 375,000 1,046,393
North West Water Group PLC Ord. 337,700 2,988,469
Redland PLC Ord. 147,800 969,770
Rolls Royce PLC Ord. 874,433 2,433,022
Royal Insurance Holdings PLC 992,600 4,890,550
Sainsbury (J.) PLC Ord. 566,367 3,987,065
Scottish Hydro-Electric PLC Ord. 723,700 3,681,071
Scottish Power PLC ADR 960,500 4,954,461
Shell Transport & Trading PLC 581,900 6,972,716
TSB Group PLC 300 1,155
Tesco PLC Ord. 1,425,100 6,589,734
Unigate Ltd. Ord. 312,800 2,022,471
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UNITED KINGDOM - CONTINUED
Vodafone Group PLC 1,890,600 $ 7,039,006
Whitbread Co. PLC Class A 715,700 6,847,100
160,273,874
TOTAL COMMON STOCKS
(Cost $1,041,443,013) 1,149,740,937
NONCONVERTIBLE PREFERRED STOCKS - 2.5%
AUSTRIA - 0.5%
Creditanstalt Bankverein 105,900 6,099,579
GERMANY - 0.5%
Henkel KGAA 10,300 3,974,013
Porsche AG Ord. (a) 6,050 2,638,622
6,612,635
ITALY - 1.5%
Banco Ambro Veneto 1,197,000 1,627,788
Fiat Spa 1,350,600 2,937,514
SAI Sta Assicuratrice Industriale Spa 650,500 2,800,526
Stet (Societa Finanziaria Telefonica) Spa 5,075,300 11,278,078
18,643,906
KOREA (SOUTH) - 0.0%
Korea First Securities Co. Ltd. 68,124 575,898
TOTAL NONCONVERTIBLE PREFERRED STOCKS
(Cost $29,697,172) 31,932,018
FOREIGN GOVERNMENT OBLIGATIONS (F) - 1.1%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
ARGENTINA - 0.3%
Argentina Republic BOCON
6.0625%, 4/1/01 (e) B1 $ 5,993,570 3,738,969
BRAZIL - 0.2%
Brazil Federative Republic IDU
euro 6.6875%, 1/1/01 (e) B1 2,570,500 2,069,253
DENMARK - 0.3%
Danish Government Bullet
7%, 12/15/04 Aa1 DKK 25,000,000 4,181,735
FRANCE - 0.3%
French Government Strips
4/25/23 Aaa FRF 168,000,000 3,508,764
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS
(Cost $14,123,089) 13,498,721
REPURCHASE AGREEMENTS - 7.2%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 6.22% dated
6/30/95 due 7/3/95 $ 92,390,864 92,343,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,177,606,274) $ 1,287,514,676
FORWARD FOREIGN CURRENCY CONTRACTS
SETTLEMENT UNREALIZED
DATE(S) VALUE GAIN/(LOSS)
CONTRACTS TO SELL
810,720,000 ESP 7/12/95 $ 6,704,431 $ (278,432)
228,920,092 FRF 8/16/95 47,220,286 (1,965,746)
2,043,255,600 JPY 7/11/95 24,176,080 411,833
TOTAL CONTRACTS TO SELL-
(Receivable amount $76,268,452) $ 78,100,797 $ (1,832,345)
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 6.1%
CURRENCY ABBREVIATIONS
DKK - Danish krone
ESP - Spanish peseta
FRF - French franc
JPY - Japanese yen
LEGEND
(a) Non-income producing
(b) Principal amount is stated in United States dollars unless otherwise
noted.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $12,602,067 or 1.0% of net
assets.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) Some foreign government obligations have not been individually rated
by S&P or Moody's. The ratings listed are assigned to securities by FMR,
the fund's investment adviser, based principally on S&P and Moody's ratings
of the sovereign credit of the issuing government.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $307,494,270 and $257,850,752, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $152,215 for the period
(see Note 3 of Notes to Financial Statements).
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $1,177,807,984. Net unrealized appreciation aggregated
$109,706,692, of which $162,739,035 related to appreciated investment
securities and $53,032,343 related to depreciated investment securities.
INDUSTRY DIVERSIFICATION
As a Percentage of Total Value of Investments
Basic Industries 6.2
Construction & Real Estate 3.2
Durables 8.1
Energy 5.1
Finance 26.4
Government Obligations 1.1
Health 3.4
Holding Companies 1.0
Industrial Machinery & Equipment 2.8
Media & Leisure 2.4
Nondurables 8.4
Retail & Wholesale 4.8
Services 3.0
Repurchase Agreements 7.2
Technology 4.9
Transportation 2.8
Utilities 8.8
Others (individually less than 1%) 0.4
Total 100.0%
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $92,343,000) (cost $1,177,606,274) - $ 1,287,514,676
See accompanying schedule
Cash 655
Receivable for investments sold 20,207,922
Unrealized appreciation on foreign currency contracts 411,833
Dividends receivable 7,490,524
Interest receivable 304,815
TOTAL ASSETS 1,315,930,425
LIABILITIES
Payable for investments purchased $ 10,265,923
Unrealized depreciation on foreign currency contracts 2,244,178
Payable for fund shares redeemed 5,303,385
Accrued management fee 832,243
Other payables and accrued expenses 336,394
TOTAL LIABILITIES 18,982,123
NET ASSETS $ 1,296,948,302
Net Assets consist of:
Paid in capital $ 1,177,330,987
Undistributed net investment income 11,730,370
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (279,038)
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 108,165,983
NET ASSETS, for 80,033,348 shares outstanding $ 1,296,948,302
NET ASSET VALUE, offering price and redemption price per share ($1,296,948,302 (divided by) 80,033,348 shares) $16.21
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 21,509,202
Dividends
Interest 4,660,220
26,169,422
Less foreign taxes withheld (2,979,305)
TOTAL INCOME 23,190,117
EXPENSES
Management fee $ 4,861,229
Transfer agent fees 316,317
Accounting fees and expenses 267,409
Non-interested trustees' compensation 3,447
Custodian fees and expenses 311,947
Registration fees 24
Audit 22,683
Legal 2,524
Miscellaneous 2,230
TOTAL EXPENSES 5,787,810
NET INVESTMENT INCOME 17,402,307
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 6,935,354
Foreign currency transactions (6,677,005) 258,349
Change in net unrealized appreciation (depreciation) on:
Investment securities 37,408,823
Assets and liabilities in foreign currencies (2,727,346) 34,681,477
NET GAIN (LOSS) 34,939,826
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 52,342,133
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
Operations $ 17,402,307 $ 14,354,948
Net investment income
Net realized gain (loss) 258,349 1,588,422
Change in net unrealized appreciation (depreciation) 34,681,477 (19,420,073)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 52,342,133 (3,476,703)
Distributions to shareholders (4,893,543) (4,465,195)
From net investment income
From net realized gain (1,797,170) -
In excess of net realized gain (3,096,373) -
TOTAL DISTRIBUTIONS (9,787,086) (4,465,195)
Share transactions 235,046,856 1,000,905,405
Net proceeds from sales of shares
Reinvestment of distributions 9,787,086 4,465,195
Cost of shares redeemed (288,141,738) (477,688,222)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (43,307,796) 527,682,378
TOTAL INCREASE (DECREASE) IN NET ASSETS (752,749) 519,740,480
NET ASSETS
Beginning of period 1,297,701,051 777,960,571
End of period (including undistributed net investment income of $11,730,370 and $10,987,509, $ 1,296,948,302 $ 1,297,701,051
respectively)
OTHER INFORMATION
Shares 15,188,474 62,240,900
Sold
Issued in reinvestment of distributions 652,472 274,107
Redeemed (18,619,209) (29,967,241)
Net increase (decrease) (2,778,263) 32,547,766
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 E 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.67 $ 15.48 $ 11.53 $ 13.09 $ 12.42 $ 12.67
Income from Investment Operations
Net investment income .07 .19 .06 .16 .24 .18
Net realized and unrealized gain (loss) .59 .08 C 4.16 (1.54) .74 (.39)
Total from investment operations .66 .27 4.22 (1.38) .98 (.21)
Less Distributions (.06) (.08) (.18) (.18) (.17) (.04)
From net investment income
In excess of net investment income - - (.04) - - -
From net realized gain (.02) - - - (.14) D -
In excess of net realized gain (.04) - (.05) - - -
Total distributions (.12) (.08) (.27) (.18) (.31) (.04)
Net asset value, end of period $ 16.21 $ 15.67 $ 15.48 $ 11.53 $ 13.09 $ 12.42
TOTAL RETURN B 4.27% 1.72% 37.35% (10.72) 8.00% (1.67)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,296,948 $ 1,297,701 $ 777,961 $ 180,837 $ 126,490 $ 80,554
Ratio of expenses to average net assets .91% A .92% 1.03% 1.14% 1.26% 1.41%
Ratio of net investment income to average net assets 2.74% A 1.28% 1.21% 1.86% 2.33% 1.89%
Portfolio turnover rate 46% A 42% 42% 61% 168% 100%
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE ACCOUNT.
INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
C THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD
ENDED DUE TO THE TIMING OF SALES AND
REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
D INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN CURRENCY RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME.
E EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL
STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1995 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
The Money Market Portfolio, High Income Portfolio, Equity-Income Portfolio,
Growth Portfolio and Overseas Portfolio (the funds) are funds of Variable
Insurance Products Fund (the trust). The trust is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an open-end
management investment company organized as a Massachusetts business trust.
Each fund is authorized to issue an unlimited number of shares. Shares of
each fund may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts. The
following summarizes the significant accounting policies of the funds:
SECURITY VALUATION:
MONEY MARKET PORTFOLIO. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
HIGH INCOME PORTFOLIO. Securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market (sales
prices if the principal market is an exchange) in which such securities are
normally traded. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value
as determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus interest, both of which approximate current
value.
EQUITY-INCOME AND GROWTH PORTFOLIOS. Securities for which exchange
quotations are readily available are valued at the last sale price, or if
no sale price, at the closing bid price. Securities for which exchange
quotations are not readily available (and in certain cases debt securities
which trade on an exchange), are valued primarily using dealer-supplied
valuations or at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees. Short-term securities maturing within sixty days of their
purchase date are valued at amortized cost or original cost plus accrued
interest, both of which approximate current value.
OVERSEAS PORTFOLIO. Securities for which quotations are readily available
are valued at the last sales price, or if no sale price, at the closing bid
prices in the principal market in which such securities are normally
traded. Securities for which market quotations are not readily available
are valued
primarily using dealer-supplied valuations or at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the funds are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
the fiscal year. The schedules of investments include information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME:
MONEY MARKET PORTFOLIO. Interest income, which includes amortization of
premium and accretion of original issue discount, is accrued as earned.
HIGH INCOME, EQUITY-INCOME, GROWTH AND OVERSEAS PORTFOLIOS. Dividend income
is recorded on the ex-dividend date, except certain dividends from foreign
securities where the ex-dividend date may have passed, are recorded as soon
as the funds are informed of the ex-dividend date. Interest income, which
includes accretion of original issue discount, is accrued as earned.
Investment income is recorded net of foreign taxes withheld where recovery
of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income for the Money Market Portfolio.
Distributions are recorded on the ex-dividend date for all other funds.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for foreign
currency transactions, passive foreign investment companies (PFIC), market
discount, partnerships, non-taxable dividends and losses deferred due to
wash sales and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The funds, except for the Money Market
Portfolio, may use foreign currency contracts to facilitate transactions in
foreign securities and to manage the funds' currency exposure. Contracts to
buy generally are used to acquire exposure to foreign currencies, while
contracts to sell are used to hedge the funds' investments against currency
fluctuations. Also, a contract to buy or sell can offset a previous
contract. These contracts involve market risk in excess of the unrealized
gain or loss reflected in the funds' Statement of Assets and Liabilities.
The U.S. dollar value of the currencies each applicable fund has committed
to buy or sell is shown in the schedule of investments under the caption
"Forward Foreign Currency Contracts." This amount represents the aggregate
exposure to each currency acquired or hedged through currency contracts at
period end. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
Contracts that have been offset with different counterparties are reflected
as both a contract to buy and a contract to sell in each applicable fund's
schedule of investments under the caption "Forward Foreign Currency
Contracts."
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the funds, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The funds, through their custodian, receive delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. FMR, the funds'
investment adviser, is responsible for determining that the value of these
underlying securities remains at least equal to the resale price.
INDEXED SECURITIES. The funds, (excluding the Money Market Portfolio) may
invest in indexed securities whose values are linked either directly or
inversely to changes in foreign currencies, interest rates, commodities,
indices, or other underlying instruments. The funds use these securities to
increase or decrease their exposure to different underlying instruments and
to gain exposure to markets that might be difficult to invest in through
conventional securities. Indexed securities may be more volatile than their
underlying instruments, but any loss is limited to the amount of the
original investment.
RESTRICTED SECURITIES. The funds are permitted to invest in privately
placed restricted securities. These securities may be resold in
transactions exempt from registration or to the public if the securities
are registered. Disposal of these securities may involve time-consuming
negotiations and expense, and prompt sale at an acceptable price may be
difficult. At the end of the period, restricted securities (excluding 144A
issues) amounted to $20,998,411 or 2.7% of net assets for the Money Market
Portfolio and $15,265,476 or 1.9% of net assets for the High Income
Portfolio.
3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, FMR receives a monthly
fee.
For the Money Market Portfolio, FMR receives a monthly fee that is
calculated on the basis of a basic fund fee rate of .03% of the fund's
average net assets, plus a fixed income group fee rate and an income-based
fee. The group fee rate is the weighted average of a series of rates
ranging from .1200% to .3700% and is based on the monthly average net
assets of all the mutual funds advised by FMR. The income-based fee is
added only when the fund's gross yield exceeds 5%. At that time the
income-based fee would equal 6% of that portion of the fund's gross income
that represents a gross yield of more than 5% per year. The maximum
3. FEES AND OTHER TRANSACTIONS
WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
income-based component is .24% of average net assets. For the period, the
management fee was equivalent to an annualized rate of .25% of average net
assets.
For all other funds, FMR receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1200% to
.3700% for the High Income Portfolio and .2700% to .5200% for the
Equity-Income, Growth and Overseas Portfolios for the period. In the event
that these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted in
the same or a lower management fee. The annual individual fund fee rates
are .20%, .30%, .45% and .45% for the Equity-Income, Growth, Overseas, and
High Income Portfolios, respectively. For the period, the management fees
were equivalent to annualized rates of .60%, .52%, .62%, and .77% of
average net assets for the High Income, Equity-Income, Growth, and Overseas
Portfolios, respectively.
SUB-ADVISER FEE. As the Money Market Portfolio's investment sub-adviser,
FMR Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR
of 50% of the management fee payable to FMR. The fees are paid prior to any
voluntary expense reimbursements which may be in effect, and after reducing
the fee for any payments by FMR pursuant to the fund's Distribution and
Service Plan.
FMR, on behalf of the High Income and Overseas Portfolios, entered into
sub-advisory agreements with affiliates of FMR. In addition, one of the
sub-advisers of the Overseas Portfolio, Fidelity International Investment
Advisors (FIIA), entered into a sub-advisory agreement with its subsidiary,
Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.).
Under the sub-advisory arrangements, FMR may receive investment advice and
research services and may grant the sub-advisers investment management
authority to buy and sell securities. FMR pays its sub-advisers either a
portion of its management fee or a fee based on costs incurred for these
services. FIIA pays FIIAL U.K. a fee based on costs incurred for either
service.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the funds' transfer, dividend disbursing
and shareholder servicing agent. Effective January 1, 1995, the Board of
Trustees approved a revised transfer agent contract pursuant to which FIIOC
receives account fees and asset-based fees that vary according to account
size and type of account. Under the prior transfer agent contract, FIIOC
received fees based on the type, size, number of accounts, and number of
transactions made by shareholders. FIIOC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements.
ACCOUNTING FEES. Fidelity Service Co.(FSC) an affiliate of FMR, maintains
the funds' accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. Certain funds placed a portion of their portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms are shown under the caption
"Other Information" at the end of each applicable fund's schedule of
investments.
4. BANK BORROWINGS.
Each fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. Each fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, each fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. For
the High Income and Equity-Income portfolios, the maximum loans during the
periods for which loans were outstanding amounted to $4,885,000 and
$18,269,000 respectively, and the average daily loan balances were
$4,885,000 and $18,269,000, respectively. The weighted average interest
rate was 6.4% for both the High Income Portfolio and for the Equity-Income
Portfolio.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the funds' operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of 1.00% of average net assets for the High
Income Portfolio and 1.50% of average net assets for the Equity-Income,
Growth, and Overseas Portfolios. For the period, there was no reimbursement
under this arrangement.
FMR has directed certain portfolio trades of the High Income Portfolio to
brokers who paid a portion of the fund's expenses. For the period, the High
Income Portfolio's expenses were reduced by $5,422 under this agreement.
6. BENEFICIAL INTEREST.
At the end of the period, Fidelity Investments Life Insurance Company
(FILI), an affiliate of FMR, was the record owner of more than 5% of the
outstanding shares and certain unaffiliated insurance companies were record
owners of approximately 10% of the total outstanding shares of the
following funds:
FILI UNAFFILIATED INSURANCE COMPANIES
FUND % OF OWNERSHIP # OF % OF OWNERSHIP
Money Market 48 1 16
High Income 17 1 41
Equity-Income 26 1 30
Growth 17 1 31
Overseas 15 1 40
7. PURCHASES AND SALES OF INVESTMENTS.
Information regarding purchases and sales of securities (other than
short-term securities) is included under the caption "Other Information" at
the end of each applicable fund's schedule of investments.
8. TRANSACTIONS WITH AFFILIATED COMPANIES.
Information regarding transactions with affiliated companies is included
under the caption "Other Information" at the end of each applicable fund's
schedule of investments.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
William J. Hayes, VICE PRESIDENT
Fred L. Henning, Jr., VICE PRESIDENT, MONEY MARKET PORTFOLIO
Robert A. Lawrence, VICE PRESIDENT
Lawrence Greenberg, VICE PRESIDENT
Barry J. Coffman, VICE PRESIDENT
Robert Litterst, VICE PRESIDENT
John R. Hickling, VICE PRESIDENT
Bettina Doulton, VICE PRESIDENT
Arthur S. Loring, SECRETARY
Stephen P. Jonas, TREASURER
Robert H. Morrison, MANAGER, SECURITY TRANSACTIONS
Michael D. Conway, ASSISTANT TREASURER, MONEY MARKET PORTFOLIO
John H. Costello, ASSISTANT TREASURER
Leonard M. Rush, ASSISTANT TREASURER
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox
Phyllis Burke Davis
Richard J. Flynn
Edward C. Johnson 3d
E. Bradley Jones
Donald J. Kirk
Peter S. Lynch
Edward H. Malone
Marvin L. Mann
Gerald C. McDonough
Thomas R. Williams
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Co.
Boston, MA
CUSTODIAN
Morgan Guaranty Trust Company of New York,
New York, NY
MONEY MARKET PORTFOLIO
The Bank of New York, New York, NY
HIGH INCOME PORTFOLIO
The Chase Manhattan Bank, N.A., New York, NY
EQUITY-INCOME AND OVERSEAS PORTFOLIOS
Brown Brothers Harriman & Co., Boston, MA
GROWTH PORTFOLIO
(2_FIDELITY_LOGOS)
VARIABLE INSURANCE PRODUCTS
FUND
MONEY MARKET PORTFOLIO
HIGH INCOME PORTFOLIO
EQUITY-INCOME PORTFOLIO
GROWTH PORTFOLIO
OVERSEAS PORTFOLIO
SEMIANNUAL REPORT
JUNE 30, 1995
CONTENTS
MONEY MARKET PORTFOLIO VIPF-3 PERFORMANCE
VIPF-4 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-5 INVESTMENTS
VIPF-9 FINANCIAL STATEMENTS
HIGH INCOME PORTFOLIO VIPF-11 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-12 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-13 INVESTMENTS
VIPF-19 FINANCIAL STATEMENTS
EQUITY-INCOME PORTFOLIO VIPF-21 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-22 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-23 INVESTMENTS
VIPF-27 FINANCIAL STATEMENTS
GROWTH PORTFOLIO VIPF-29 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-30 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-31 INVESTMENTS
VIPF-35 FINANCIAL STATEMENTS
OVERSEAS PORTFOLIO VIPF-37 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-38 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-39 INVESTMENTS
VIPF-44 FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS VIPF-46 NOTES TO THE FINANCIAL STATEMENTS
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS
NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
PERFORMANCE
To measure a money market fund's performance, you can look at either total
return or yield. Total return reflects both the change
in a fund's share price over a given period, and reinvestment of its
dividends (or income). Yield measures the income paid by a fund. Since a
money market fund tries to maintain a $1 share price, yield is an important
measure of performance.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 PAST 10
JUNE 30, 1995 YEAR YEARS YEARS
Money Market 5.44% 4.88% 6.19%
Consumer Price Index 3.04% 3.26% 3.55%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had achieved that return
by performing at a constant rate each year.
Comparing the fund's performance to the Consumer Price Index (CPI) helps
show how your investment did compared to inflation. (The periods covered by
the CPI numbers are the closest available match to those covered by the
fund.)
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
If the advisor had not reimbursed certain fund expenses, the past five
years and life of fund total returns would have been lower. Yield
will vary.
YIELD
Row: 1, Col: 1, Value: 4.21
Row: 1, Col: 2, Value: 2.41
Row: 2, Col: 1, Value: 4.7
Row: 2, Col: 2, Value: 2.5
Row: 3, Col: 1, Value: 5.609999999999999
Row: 3, Col: 2, Value: 2.74
Row: 4, Col: 1, Value: 5.91
Row: 4, Col: 2, Value: 2.89
Row: 5, Col: 1, Value: 5.85
Row: 5, Col: 2, Value: 2.87
Money Market
MMDA
6% -
5% -
4% -
3% -
2% -
1% -
0%
6/28/94 10/2/94 12/28/94 3/29/95 6/28/95
Money Market 4.21% 4.70% 5.61% 5.91% 5.85%
MMDA 2.41% 2.50% 2.74% 2.89% 2.87%
YIELD refers to the income paid by the fund over a given period. Yields for
money market funds are usually for seven-day periods,
expressed as annual percentage rates. A yield that assumes income earned is
reinvested or compounded is called an effective yield. The chart above
shows the fund's current seven-day yield at quarterly intervals over the
past year. This is compared to similar yields for the average bank money
market deposit account (MMDA). The MMDA average is supplied by BANK RATE
MONITOR.(Trademark)
COMPARING PERFORMANCE
There are some important differences between
a bank money market deposit account (MMDA)
and a money market fund. First, the U.S.
government neither insures nor guarantees a
money market fund. In fact, there is no
assurance that a money fund will maintain a $1
share price. Second, a money market fund
returns to its shareholders income earned by the
fund's investments after expenses. This is in
contrast to banks, which set their MMDA rates
periodically based on current interest rates,
competitors' rates, and internal criteria.
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with
Bob Litterst, Portfolio
Manager of Money
Market Portfolio
Q. BOB, CAN YOU BRING US UP TO DATE ON MARKET CONDITIONS?
A. Sure. The economic growth rate has slowed dramatically during the past
six months. During the fourth quarter of 1994, the gross domestic product
expanded at a rate of 5.1%, a very strong showing. Moreover, final sales
rose 5.7%, meaning sales exceeded production and depleted inventories.
Those signs of growth, along with disturbing trends in such leading
indicators of inflation as unemployment and capacity utilization, prompted
the Federal Reserve to raise the federal funds rate, the rate banks charge
each other for overnight loans, another one-half percentage point in
February.
Q. HOW HAS THE INTEREST RATE ENVIRONMENT CHANGED SINCE THEN?
A. Even as the Fed was tightening credit for the seventh time in a little
more than a year, there were signs that the economy was beginning to lose
steam. Led by softening consumer activity and weakness in
interest-sensitive sectors such as housing and autos, the growth rate
during the first quarter of 1995 slowed to 2.7%. Currently, most economists
have long since stopped worrying about the economy overheating. Now they
have an altogether different concern: that we might be headed for another
recession. By the end of June, it was clear to all that the latest cycle of
interest rate increases was over. Instead, speculation centered on when the
Fed might feel compelled to lower rates.
Q. HOW DID YOU RESPOND TO CHANGING CONDITIONS?
A. The fund's average maturity six months ago, when the period began, was
39 days. That was a defensive number. It reflected my view at the time that
further rate increases were likely. As it became apparent that the economy
was slowing more rapidly than initially expected, my expectations regarding
Fed policy changed, and I gradually extended the fund's average maturity. I
moved cautiously at first because conditions were unsettled and it seemed
prudent to maintain flexibility. But as signs of weakness accumulated, I
began to prepare for a shift in Fed policy, including the possibility of an
eventual rate cut. By the end of June, the fund's average maturity was more
aggressive than that of most other taxable money market funds-around 60
days, compared to about 50 days for most competitors.
Q. HOW DID YOU ACHIEVE THAT LONGER AVERAGE MATURITY?
A. Mainly by focusing on three-month and six-month securities, rather than
moving further out the yield curve. That's because by the end of the
period, expectations for declining short-term rates caused longer-term
yields on some money market securities to fall below shorter-term yields, a
situation known as an inverted yield curve.
Q. WHAT ABOUT ASSET SELECTION?
A. I've reduced the fund's stake in U.S. Treasury and agency securities.
Normally the fund averages about 10% in government securities, although
it's been as high as 20% at times during the past year or two. But in
recent months, technical factors affecting supply and demand have priced
government securities unusually high. The main cause seems to be heavy
buying on the part of foreign central banks with funds accumulated in
support of the U.S. dollar. With so many other creditworthy alternatives
available, I've looked elsewhere for value, adding higher-yielding
commercial paper and bank certificates of deposit. At the end of June,
government securities totaled less than 3% of the fund's assets.
Q. WHAT'S THE OUTLOOK?
A. The next few months should be interesting. We know that on July 6,
shortly after the period ended, the Fed lowered the federal funds rate
one-quarter percentage point, but as we look ahead, much uncertainty
remains. Some market participants believe that we're in the early stages of
an extended downturn. Others believe that what's happening is merely a
brief but severe inventory correction, and that the economy will resume
growing at its long-term trend rate of around 2.5% once the temporary
buildup in inventories sells off.
Q. WHAT'S YOUR VIEW?
A. I tend to side with those in the latter camp. The typical prerequisites
for a recession, including high inflation and tight bank lending standards,
simply don't exist. That said, I'm concerned that if this Spring's weakness
in the labor market persists, it could evolve into a self-reinforcing
slowdown, forcing the Fed to continue lowering rates. While I don't think
that will happen, I have to respect the possibility of such a development.
Accordingly, I'll probably maintain a neutral to aggressive average
maturity of between 60 and 65 days for the foreseeable future.
FUND FACTS
GOAL: Income and share price stability by
investing in high quality, short-term instruments
START DATE: April 1, 1982
SIZE: As of June 30, 1995, more than $768
million
MANAGER: Robert Litterst, since 1992; manager,
Capital Reserves Money Market, Fidelity Cash
Reserves, Fidelity Money Market Trust:
Retirement Money Market, since 1992; joined
Fidelity in 1991
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
BANKERS' ACCEPTANCES - 4.2%
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
DOMESTIC BANKERS' ACCEPTANCES - 2.8%
CHASE MANHATTAN BANK
11/1/95 6.09% $ 4,500,000 $ 4,408,980
CHEMICAL BANK
9/28/95 6.02 5,723,026 5,639,549
MELLON BANK, N.A.
11/24/95 5.81 7,500,000 7,325,700
NBD BANK, N.A.
12/11/95 5.87 4,000,000 3,896,767
21,270,996
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 1.4%
BANK OF TOKYO
8/14/95 6.39 6,000,000 5,954,533
RABOBANK NEDERLAND, N.V.
8/3/95 6.22 1,000,000 994,408
SANWA BANK, LTD.
7/31/95 6.08 4,000,000 3,980,033
10,928,974
TOTAL BANKERS' ACCEPTANCES 32,199,970
CERTIFICATES OF DEPOSIT - 20.3%
CHICAGO BRANCH, YANKEE DOLLAR, FOREIGN BRANCH - 3.9%
ABN-AMRO BANK
8/3/95 6.25 5,000,000 5,000,045
9/20/95 6.19 5,000,000 5,000,000
9/25/95 6.00 5,000,000 5,000,000
10/19/95 6.25 10,000,000 10,000,000
SANWA BANK, LTD.
8/15/95 6.04 5,000,000 5,000,062
30,000,107
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 9.4%
BANQUE NATIONALE DE PARIS
11/13/95 6.05 5,000,000 5,000,000
CANADIAN IMPERIAL BANK OF COMMERCE
11/1/95 6.25 4,000,000 3,998,110
COMMERZBANK, GERMANY
8/24/95 6.35 5,000,000 4,999,596
DRESDNER BANK, A.G.
3/15/96 6.44 1,000,000 1,000,875
FUJI BANK, LTD.
7/19/95 6.18 5,000,000 5,000,000
HYPO U.S. FINANCE
11/8/95 6.03 5,000,000 5,000,823
INDUSTRIAL BANK OF JAPAN, LTD.
7/31/95 6.30 5,000,000 5,000,000
ROYAL BANK OF CANADA
10/5/95 6.25 1,000,000 1,000,294
SANWA BANK, LTD.
7/7/95 6.21 3,000,000 3,000,000
SOCIETE GENERALE
8/14/95 6.02 14,000,000 14,000,000
8/21/95 6.00 10,000,000 10,000,000
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - CONTINUED
SUMITOMO BANK, LTD.
8/7/95 6.01% $ 5,000,000 $ 5,000,000
8/21/95 6.41 5,000,000 5,000,465
8/22/95 6.03 5,000,000 5,000,000
73,000,163
LONDON BRANCH, EURODOLLAR, DOMESTIC BANKS - 2.6%
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOC.
9/29/95 5.91 5,000,000 5,000,000
11/27/95 6.00 5,000,000 5,000,000
BANK OF NEW YORK
7/17/95 6.15 10,000,000 10,000,000
20,000,000
LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - 3.8%
BANK OF SCOTLAND
7/5/95 6.15 4,000,000 4,000,015
MITSUBISHI BANK, LTD.
8/10/95 6.04 5,000,000 5,000,377
NORDDEUTSCHE LANDESBANK
12/8/95 5.75 5,000,000 4,998,563
SANWA BANK, LTD.
8/7/95 6.02 5,000,000 4,998,917
TORONTO-DOMINION BANK
12/11/95 5.74 10,000,000 10,013,064
29,010,936
PORTLAND BRANCH, EURODOLLAR, FOREIGN BANKS - 0.6%
BANK OF NOVA SCOTIA
7/11/95 6.13 5,000,000 5,000,008
TOTAL CERTIFICATES OF DEPOSIT 157,011,214
COMMERCIAL PAPER - 52.0%
ANZ (DE), INC.
7/7/95 6.52 1,273,000 1,271,653
8/8/95 6.03 220,000 218,611
ABBEY NATIONAL TREASURY SERVICES
8/21/95 6.04 5,000,000 4,957,854
AMERICAN EXPRESS CREDIT CORP.
8/9/95 6.21 5,000,000 4,967,067
8/14/95 6.20 5,000,000 4,962,875
11/9/95 5.89 5,000,000 4,895,382
AMERICAN HOME FOOD PRODUCTS, INC.
7/10/95 6.17 11,000,000 10,983,280
AMERICAN HOME PRODUCTS
8/29/95 6.00 6,000,000 5,941,688
AMERICAN TELEPHONE & TELEGRAPH CO.
9/27/95 6.09 5,000,000 4,927,400
ASSOCIATES CORP. OF NORTH AMERICA
9/1/95 5.98 6,000,000 5,938,930
9/28/95 6.10 5,000,000 4,926,451
BANC ONE CORP.
9/22/95 5.99 5,000,000 4,931,986
BEAR STEARNS COS., INC.
7/12/95 6.14 5,000,000 4,990,757
8/1/95 6.06 6,000,000 5,969,155
8/1/95 6.13 5,000,000 4,974,016
COMMERCIAL PAPER - CONTINUED
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
BENEFICIAL CORP.
9/18/95 5.99% $ 5,000,000 $ 4,935,264
9/29/95 5.81 5,000,000 4,928,750
CIT GROUP HOLDINGS, INC.
9/21/95 6.20 5,000,000 4,931,211
CHRYSLER FINANCIAL CORPORATION
7/6/95 6.05 5,000,000 4,995,826
7/12/95 6.05 5,000,000 4,990,803
7/13/95 6.04 2,000,000 1,996,000
7/17/95 6.05 3,000,000 2,991,973
COMMERZBANK U.S. FINANCE, INC.
9/25/95 5.89 5,000,000 4,930,722
9/29/95 5.91 140,000 137,977
9/29/95 6.30 600,000 590,820
10/20/95 6.23 4,000,000 3,925,507
12/15/95 5.76 1,120,000 1,090,905
COMPAGNIE BANCAIRE
7/6/95 6.20 5,000,000 4,995,764
7/12/95 6.15 5,000,000 4,990,742
CORESTATES CAPITAL CORP.
7/8/95 6.01 (a) 5,000,000 5,000,000
7/15/95 6.09 (a) 5,000,000 5,000,000
DEN DANSKE CORP., INC.
7/12/95 6.15 3,000,000 2,994,445
DU PONT (E.I.) DE NEMOURS & CO.
9/19/95 6.09 2,500,000 2,466,833
FORD MOTOR CREDIT CORP.
7/21/95 6.23 5,000,000 4,983,056
8/30/95 6.23 15,000,000 14,848,000
9/11/95 6.25 5,000,000 4,939,100
10/27/95 5.86 6,000,000 5,887,507
FORD MOTOR CREDIT, PLC
8/1/95 6.10 4,500,000 4,476,711
GENERALE BANK
10/17/95 6.07 5,000,000 4,911,200
GENERAL ELECTRIC CAPITAL CORP.
7/3/95 5.97 (a) 5,000,000 5,000,000
7/5/95 6.19 5,000,000 4,996,628
8/1/95 5.94 170,000 169,139
9/15/95 6.68 4,000,000 3,945,787
10/5/95 6.79 2,400,000 2,358,400
10/12/95 6.80 1,000,000 981,403
11/1/95 6.13 10,000,000 9,796,708
GENERAL ELECTRIC CORP.
9/27/95 6.25 10,000,000 9,851,622
GENERAL MOTORS ACCEPTANCE CORP.
7/31/95 6.22 5,000,000 4,974,500
8/2/95 6.19 11,000,000 10,940,453
8/16/95 6.12 6,000,000 5,953,770
8/16/95 6.15 5,000,000 4,961,347
8/22/95 6.10 1,000,000 991,319
9/15/95 6.05 5,000,000 4,936,983
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
GEORGIA POWER CO.
7/5/95 6.20% $ 5,000,000 $ 4,996,611
GOLDMAN SACHS GROUP, L.P. (THE)
9/7/95 6.01 10,000,000 9,888,367
9/18/95 6.02 6,000,000 5,922,185
HANSON FINANCE (UK), PLC
8/7/95 6.03 10,000,000 9,938,950
8/22/95 6.04 6,000,000 5,948,477
IBM CORP.
9/1/95 5.97 5,000,000 4,949,194
INTERNATIONAL NEDERLANDEN U.S. FUNDING CORP.
8/28/95 6.35 4,000,000 3,960,367
MERRILL LYNCH & CO., INC.
9/28/95 6.00 5,000,000 4,927,317
MONSANTO CO.
8/14/95 6.19 2,500,000 2,481,453
9/12/95 6.17 1,525,000 1,506,353
12/21/95 5.90 10,000,000 9,724,642
MORGAN STANLEY GROUP, INC.
10/6/95 5.91 5,000,000 4,921,592
NATIONAL & PROVINCIAL BUILDING SOCIETY
10/16/95 5.89 5,350,000 5,258,249
NATIONWIDE BUILDING SOCIETY
8/11/95 6.06 5,000,000 4,966,004
NEW CENTER ASSET TRUST
7/12/95 6.16 5,000,000 4,990,726
7/17/95 6.15 10,000,000 9,973,067
NORWEST CORP.
9/19/95 5.99 400,000 394,773
NORWEST FINANCIAL
7/10/95 6.14 5,000,000 4,992,438
PENNSYLVANIA LIGHT & POWER COMPANY
7/5/95 6.06 1,650,000 1,648,895
7/10/95 6.05 3,200,000 2,196,689
PHILIP MORRIS COS., INC.
9/5/95 6.07 4,500,000 4,450,913
PRUDENTIAL FUNDING CORP.
7/3/95 6.30 10,000,000 9,996,500
SEARS ROEBUCK ACCEPTANCE CORP.
9/18/95 6.00 5,000,000 4,935,154
SHERWOOD MEDICAL COMPANY
8/21/95 5.99 5,000,000 4,957,925
TEXTRON, INC.
7/14/95 6.06 3,500,000 3,492,391
TORONTO DOMINION HOLDINGS USA, INC.
9/11/95 6.11 5,000,000 4,940,200
9/29/95 5.90 10,000,000 9,854,750
TRANSAMERICA FINANCE CORP.
8/7/95 6.03 220,000 218,648
WOOLWICH EQUITABLE BUILDING SOCIETY
10/16/95 5.94 5,000,000 4,913,508
TOTAL COMMERCIAL PAPER 402,000,618
FEDERAL AGENCIES - 3.2%
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
FEDERAL FARM CREDIT BANK - AGENCY COUPONS - 0.6%
7/3/95 6.17% (a) $ 5,000,000 $ 4,997,271
FEDERAL NATIONAL MORTGAGE ASSOC. - DISCOUNT NOTES - 2.6%
7/17/95 6.27 5,000,000 4,986,422
9/11/95 6.32 10,000,000 9,877,600
10/20/95 6.04 5,000,000 4,909,350
19,773,372
TOTAL FEDERAL AGENCIES 24,770,643
BANK NOTES - 7.2%
BANK OF NEW YORK
8/28/95 6.35 5,000,000 4,999,748
BOATMEN'S NATIONAL BANK OF ST. LOUIS
9/22/95 6.04 (a) 5,000,000 4,995,859
COMERICA BANK - DETROIT
5/28/96 5.83 5,000,000 5,014,775
FIFTH THIRD BANK - CINCINNATI
10/27/95 6.07 5,000,000 5,001,981
HOUSEHOLD BANK, N.A.
9/21/95 5.93 1,000,000 1,000,000
KEY BANK OF NEW YORK
7/3/95 6.11 (a) 5,000,000 4,999,374
MELLON BANK, N.A.
11/1/95 6.24 5,000,000 5,000,000
NBD BANK, N.A.
10/16/95 6.27 5,000,000 5,000,000
NATIONSBANK OF TEXAS
9/26/95 6.38 5,000,000 5,000,000
10/27/95 6.25 5,000,000 5,000,000
PNC BANK, N.A.
7/4/95 6.15 (a) 5,000,000 4,999,589
U.S. NATIONAL BANK OF OREGON
8/22/95 6.37 5,000,000 5,000,070
TOTAL BANK NOTES 56,011,396
MASTER NOTES (A) - 1.2%
J.P. MORGAN SECURITIES
7/3/95 6.58 9,000,000 9,000,000
MEDIUM-TERM NOTES (A) - 5.9%
ABBEY NATIONAL, NORTH AMERICA
7/3/95 5.97 5,000,000 4,999,151
ABBEY NATIONAL TREASURY SERVICES (C)
9/30/95 6.00 10,000,000 10,000,000
BENEFICIAL CORP.
7/15/95 6.09 5,000,000 4,999,453
DEAN WITTER, DISCOVER & CO.
7/15/95 6.10 5,000,000 5,004,526
GENERAL ELECTRIC CAPITAL CORP.
7/3/95 6.27 5,000,000 4,998,997
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
GENERAL MOTORS ACCEPTANCE CORP.
8/7/95 6.25% $ 3,000,000 $ 3,000,000
GOLDMAN SACHS GROUP, L.P. (THE) (C)
9/1/95 6.03 3,000,000 3,000,000
9/16/95 5.95 4,000,000 4,000,000
NORWEST CORP.
9/15/95 6.06 6,000,000 6,000,000
TOTAL MEDIUM-TERM NOTES 46,002,127
SHORT-TERM NOTES (A) - 3.2%
CAPITAL ONE FUNDING CORP.
7/10/95 6.07 4,072,000 4,072,000
SMM TRUST COMPANY (1994-D) (B)
7/28/95 6.17 4,000,000 4,000,000
SMM TRUST COMPANY (1995-I) (B)
7/5/95 6.16 6,000,000 5,998,411
SMM TRUST COMPANY (1995-J) (B)
7/15/95 6.06 11,000,000 11,000,000
TOTAL SHORT-TERM NOTES 25,070,411
MUNICIPAL SECURITIES (A) - 1.1%
GARDENA CALIFORNIA CERTIFICATES OF PARTNERSHIP
7/10/95 6.35 6,550,000 6,550,000
NEW ORLEANS AVIATION BOARD
7/10/95 6.26 1,800,000 1,800,000
TOTAL MUNICIPAL SECURITIES 8,350,000
REPURCHASE AGREEMENTS - 1.7%
MATURITY
AMOUNT
In a joint trading account
(U.S. Government Obligations)
dated 6/30/95 due 7/3/95:
At 6.28% $ 12,806,699 12,800,000
TOTAL INVESTMENTS - 100% $ 773,216,379
Total Cost for Income Tax Purposes - $773,216,379
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end. The due date on these types of
securities reflects the next interest rate reset date or, when applicable,
the final maturity date.
(b) Restricted securities - Investment in securities not registered under
the Securities Act of 1933.
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
SMM Trust Company:
(1994-D) 10/28/94 $ 4,000,000
(1995-I)) 5/25/95 $ 6,000,000
(1995-J) 5/15/95 $ 11,000,000
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $17,000,000 or 2.2% of net
assets.
INCOME TAX INFORMATION
At December 31, 1994, the fund had a capital loss carryforward of
approximately $94,600 of which $4,100, $500, $4,900, $4,300 and $80,800
will expire on December 31, 1995, 1996, 1997, 2000 and 2002, respectively.
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $12,800,000) - See accompanying $ 773,216,379
schedule
Cash 673,210
Receivable for investments sold 104,000
Interest receivable 2,641,686
TOTAL ASSETS 776,635,275
LIABILITIES
Payable for investments purchased $ 7,463,678
Accrued management fee 157,028
Other payables and accrued expenses 64,485
TOTAL LIABILITIES 7,685,191
NET ASSETS $ 768,950,084
Net Assets consist of:
Paid in capital $ 769,022,085
Accumulated net realized gain (72,001
(loss) on investments )
NET ASSETS, for 769,022,085 $ 768,950,084
shares outstanding
NET ASSET VALUE, offering price and redemption price per share ($768,950,084 (divided by) 769,022,085 shares) $1.00
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INTEREST INCOME $ 22,651,404
EXPENSES
Management fee $ 934,903
Transfer agent fees 176,682
Accounting fees and expenses 52,708
Non-interested trustees' 2,520
compensation
Custodian fees and expenses 36,594
Audit 11,536
Legal 1,454
Miscellaneous 2,459
TOTAL EXPENSES 1,218,856
NET INTEREST INCOME 21,432,548
NET REALIZED GAIN (LOSS) ON 7,601
INVESTMENTS
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 21,440,149
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS END YEAR ENDED
ED DECEMBER 31,
JUNE 30, 1995 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 21,432,548 $ 25,859,424
Net interest income
Net realized gain (loss) 7,601 (80,853
)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 21,440,149 25,778,571
Distributions to shareholders from net interest income (21,432,548 (25,859,424
) )
Share transactions at net asset value of $1.00 per share 512,023,023 1,187,546,448
Proceeds from sales of shares
Reinvestment of distributions from net interest income 21,432,548 25,859,424
Cost of shares redeemed (513,118,899 (817,822,836
) )
NET INCREASE (DECREASE) IN NET ASSETS AND SHARES RESULTING FROM SHARE TRANSACTIONS 20,336,672 395,583,036
TOTAL INCREASE (DECREASE) IN NET ASSETS 20,344,273 395,502,183
NET ASSETS
Beginning of period 748,605,811 353,103,628
End of period $ 768,950,084 $ 748,605,811
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1995
(UNAUDITED) 1994 1993 1992 1991 1990
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Income from Investment Operations .029 .042 .032 .038 .059 .078
Net interest income
Less Distributions (.029) (.042) (.032) (.038) (.059) (.078)
From net interest income
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
TOTAL RETURN B C 2.95% 4.25% 3.23% 3.90% 6.09% 8.04%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $ 768,950 $ 748,606 $ 353,104 $ 301,002 $ 271,123 $ 254,585
Ratio of expenses to average net
assets .33% A .27% .22% .24% .38% .56%
Ratio of expenses to average net
assets before .33% A .27% .23% .24% .38% .56%
expense reductions
Ratio of net interest income to
average net assets 5.84% A 4.32% 3.16% 3.85% 5.93% 7.76%
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES
ATTRIBUTABLE TO YOUR INSURANCE COMPANY'S SEPARATE ACCOUNT.
INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
C TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
HIGH INCOME 11.89% 16.87% 11.60%
Merrill Lynch High Yield Master 14.88% 14.23% n/a
Consumer Price Index 3.04% 3.26% 3.57%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of
how it will do tomorrow. Bond prices, for
example, generally move in the opposite
direction of interest rates. In turn, the share price,
return, and yield of a fund that invests in bonds
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare the fund's returns to those of the Merrill Lynch High Yield
Master Index - a broad measure of the high yield bond market. This
benchmark includes reinvested dividends and capital gains, if any.
Comparing the fund's performance to the consumer price index (CPI) helps
show how your fund did compared to inflation. (The CPI returns begin on the
month end closest to the fund's start date).
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, September 19, 1985.
If the adviser had not reimbursed certain fund expenses during the periods
shown, the total returns would have been lower.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money. The fund includes high yielding, lower-rated
securities which are subject to greater price volatility and may involve
greater risk of default. The market for these securities may be less
liquid.
$10,000 OVER LIFE OF FUND
VIP High Income (4High Yield Maste
09/30/85 10000.00 10000.00
10/31/85 10124.78 10113.02
11/30/85 10270.82 10303.28
12/31/85 10614.12 10604.47
01/31/86 10745.58 10676.44
02/28/86 11109.08 11130.10
03/31/86 11383.10 11373.65
04/30/86 11576.24 11551.26
05/31/86 11753.01 11685.98
06/30/86 11900.72 11804.36
07/31/86 11864.53 11648.95
08/31/86 11912.43 11863.93
09/30/86 12013.59 11962.11
10/31/86 12372.53 12172.57
11/30/86 12412.20 12271.68
12/31/86 12490.69 12337.95
01/31/87 12946.06 12686.81
02/28/87 13170.08 12896.26
03/31/87 13290.04 13038.85
04/30/87 12874.71 12754.50
05/31/87 12755.02 12697.03
06/30/87 13030.49 12872.55
07/31/87 13044.43 12942.59
08/31/87 13152.49 13072.28
09/30/87 12694.49 12771.51
10/31/87 12087.43 12430.27
11/30/87 12443.44 12744.62
12/31/87 12642.60 12913.85
01/31/88 13058.25 13267.23
02/29/88 13449.21 13627.23
03/31/88 13352.58 13604.70
04/30/88 13456.66 13643.99
05/31/88 13436.65 13715.20
06/30/88 13718.27 13977.43
07/31/88 13861.07 14125.13
08/31/88 13794.86 14171.55
09/30/88 13905.45 14314.39
10/31/88 14056.82 14537.41
11/30/88 14003.15 14591.87
12/31/88 14114.42 14653.61
01/31/89 14453.60 14873.37
02/28/89 14524.70 14973.32
03/31/89 14338.06 14960.00
04/30/89 14179.27 15004.15
05/31/89 14441.26 15280.37
06/30/89 14854.88 15496.85
07/31/89 14757.08 15570.24
08/31/89 14671.49 15647.15
09/30/89 14158.14 15498.19
10/31/89 13551.16 15253.06
11/30/89 13562.58 15287.24
12/31/89 13525.40 15273.41
01/31/90 13226.43 14974.91
02/28/90 13022.77 14756.83
03/31/90 12885.36 14956.31
04/30/90 12923.54 15032.30
05/31/90 13189.08 15303.83
06/30/90 13396.83 15600.32
07/31/90 13603.76 15929.99
08/31/90 13376.19 15320.16
09/30/90 13059.02 14653.87
10/31/90 12742.13 14280.96
11/30/90 13041.01 14401.94
12/31/90 13223.36 14609.46
01/31/91 13503.92 14815.98
02/28/91 14252.06 15915.67
03/31/91 14757.05 16599.98
04/30/91 15280.75 17191.13
05/31/91 15505.19 17275.07
06/30/91 15841.85 17622.59
07/31/91 16440.36 18044.84
08/31/91 16664.81 18424.11
09/30/91 17038.88 18658.77
10/31/91 17618.68 19213.23
11/30/91 17768.31 19435.16
12/31/91 17861.83 19660.94
01/31/92 18815.71 20348.35
02/29/92 19498.87 20853.71
03/31/92 20129.17 21144.68
04/30/92 20271.50 21298.58
05/31/92 20515.49 21638.31
06/30/92 20739.15 21907.16
07/31/92 21145.80 22351.02
08/31/92 21593.11 22646.93
09/30/92 21816.77 22904.97
10/31/92 21491.45 22615.68
11/30/92 21755.77 22935.97
12/31/92 21999.76 23231.29
01/31/93 22589.41 23803.34
02/28/93 22974.74 24253.90
03/31/93 23504.92 24674.39
04/30/93 23659.56 24851.50
05/31/93 24013.02 25186.03
06/30/93 24631.57 25659.22
07/31/93 24874.57 25935.02
08/31/93 25139.66 26182.25
09/30/93 25228.03 26311.44
10/31/93 25824.49 26807.08
11/30/93 26067.49 26953.70
12/31/93 26487.22 27223.21
01/31/94 27370.86 27819.81
02/28/94 27338.05 27619.74
03/31/94 26417.09 26719.70
04/30/94 26150.49 26407.45
05/31/94 26198.96 26313.37
06/30/94 26102.02 26893.29
07/31/94 26198.96 27082.30
08/31/94 26198.96 27270.47
09/30/94 26392.85 27260.08
10/31/94 26150.49 27329.36
11/30/94 25932.37 27096.87
12/31/94 26053.55 26906.19
01/31/95 26344.38 27286.38
02/28/95 27248.56 28137.75
03/31/95 27587.86 28529.34
04/30/95 28396.97 29197.31
05/31/95 29127.77 30109.50
06/30/95 29206.07 30339.47
Let's say you invested $10,000 in High Income Portfolio on September 30,
1985, shortly after the fund started. By June 30, 1995, your investment
would have grown to $29,206 - a 192.06% increase. That compares to $10,000
invested in the Merrill Lynch High Yield Master Index, which would have
grown to $30,339 over the same period - a 203.39% increase.
INVESTMENT SUMMARY
TOP FIVE HOLDINGS AS OF JUNE 30, 1995
(BY ISSUER, EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S
INVESTMENTS
PanAmSat Corp. 12 3/4% 4.2
TransTexas Gas Corp. (various issues) 3.5
Revlon Worldwide Corp. secured 0%, 3/15/98 2.6
Flagstar Corp. 11 1/4%, 11/1/04 2.3
American Financial Corp. (various issues) 2.3
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Media & Leisure 29.9
Finance 9.5
Energy 8.8
Services 6.6
Basic Industries 6.4
QUALITY DIVERSIFICATION AS OF JUNE 30, 1995
(MOODY'S RATINGS) % OF FUND'S
INVESTMENTS
Aaa, Aa, A 0.0
Baa 0.0
Ba 6.4
B 41.9
Caa, Ca, C 16.6
Nonrated 10.4
TABLE EXCLUDES SHORT-TERM INVESTMENTS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT JUNE 30, 1995, ACCOUNT FOR 7.9% OF THE FUND'S
INVESTMENTS.
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Barry Coffman, Portfolio Manager of High Income Portfolio
Q. HOW HAS THE FUND PERFORMED, BARRY?
A. Although the fund did well relative to its peers, it trailed the
performance of the Merrill Lynch High Yield Master Index, which returned
12.76% and 14.88%, respectively, for the six and 12-month periods ended
June 30, 1995. The index has a larger percentage of Ba-rated bonds than
most high-yield mutual funds, which tend to be more concentrated in B-rated
bonds. Generally speaking, Ba-rated bonds are more sensitive to changing
interest rates, and therefore, benefited more from the recent decline in
interest rates than B-rated bonds. As a result, very few high yield funds
outperformed the index.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. The fund's relatively low weighting in Ba-rated securities was the
primary reason for its underperformance relative to its benchmark during
the most recent period. On the positive side, we have maintained a high
weighting, compared to the benchmark, in deferred coupon securities. These
bonds sell at a deep discount because they do not pay current interest for
some period, usually three to five years. They generally have longer
durations - which measures how sensitive their price is to changes in
interest rates - and therefore, their prices are more volatile. We also
avoided most of the credit disasters that occurred in the market.
Q. WHAT INVESTMENTS HAVE DONE WELL IN THE PAST SIX MONTHS?
A. Revlon continued to benefit from an operational restructuring and the
very successful launch of two key new products: Color Stay Lipstick and Age
Defying Makeup. Our Revlon position is concentrated in the most junior
securities that are most sensitive to changes in credit quality, which has
been a recent plus. Another strong performer was Big Flower Press, a large
commercial printer of advertising inserts, comics and television guides.
The company was helped by the strong growth in advertising and the
synergies it gained from some recent acquisitions. Finally, our
concentration in casinos and hotels did relatively well during the period.
Q. GIVEN THE MARKET'S STRENGTH SO FAR IN 1995, WAS IT DIFFICULT TO FIND
OPPORTUNITIES?
A. Not particularly. The new issues market was active and provided ample
opportunity to selectively add new names to the fund. One example was
PanAmSat Corp., which operates an international satellite communications
system and provides satellite services to the broadcasting and business
communications markets. It currently has two satellites operating and also
has a large backlog of contracted time from companies including ESPN and
Viacom for two new satellites it will be launching later this year. The
company is participating in a joint venture to provide Direct to Home (DTH)
television broadcasting service to Latin America, similar to the Direct TV
service in the United States. Another new issue we purchased was
Stratosphere Corp., a Las Vegas-based casino owned by industry-leader Grand
Casino. These bonds are attractive, in part, because in addition to their
14.25% coupon, they pay additional interest based on a percentage of the
company's cash flow.
Q. WHAT INVESTMENTS DIDN'T FARE AS WELL?
A. The high-yield restaurant sector, in general, did not perform well
during the period due to competitive pressures and a slowing economy. One
of our largest holdings is Flagstar, the parent of Denny's and the largest
franchisee of Hardees. Although Denny's has benefited from an aggressive
remodeling program, Hardees has suffered due to aggressive price promotions
from the major burger chains. Another restaurant chain, American Restaurant
Group, also underperformed partly due to the concentration of its chains in
California, where the economy continues to be weaker than the rest of the
country.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. The probability of the soft landing scenario is increasing, which could
provide a favorable backdrop for the high-yield bond market. Slow economic
growth and low inflation could allow many companies in the high-yield
market to improve their credit quality. Absolute yields remain attractive,
and absent a sharp drop in interest rates from current levels, high-yield
bonds could perform well relative to other fixed-income investments. In my
view, the key is to be selective. I'm focusing on companies that are less
cyclical, or sensitive to the economy, and choosing companies that I think
can perform well in a slow-growth environment.
FUND FACTS
GOAL: seeks high current income by investing
in high yielding, lower-rated fixed-income
securities
START DATE: September 19, 1985
SIZE: as of June 30, 1995, more than $813 million
MANAGER: Barry Coffman, since 1990; joined
Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
CORPORATE BONDS - 74.8%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CONVERTIBLE BONDS - 0.2%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Ampex Corp., 0%, 6/30/97 - $ 469,000 $ 328,685
MEDIA & LEISURE - 0.2%
LODGING & GAMING - 0.2%
Argosy Gaming Co.
12%, 6/1/01 B3 1,290,000 1,290,000
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Farm Fresh, Inc.
7 1/2%, 3/1/10 B3 186,000 112,264
TOTAL CONVERTIBLE BONDS 1,730,949
NONCONVERTIBLE BONDS - 74.6%
AEROSPACE & DEFENSE - 0.3%
RHI Holdings, Inc.:
11 7/8%, 3/1/99 B2 2,160,000 2,062,800
11 7/8%, 3/1/99 (e) - 550,000 525,250
2,588,050
BASIC INDUSTRIES - 6.3%
CHEMICALS & PLASTICS - 2.1%
American Pacific Corp.
11%, 12/15/02 (f) - 850,000 765,000
Foamex LP 11 7/8%, 10/1/04 B3 5,000,000 4,725,000
Pioneer Americas Acquisition
Corp. 13 3/8%, 4/1/05 (f) B2 10,000,000 10,325,000
Trans Resources, Inc.
14 1/2%, 9/1/96 B2 580,000 585,800
16,400,800
IRON & STEEL - 0.9%
Republic Engineered Steels, Inc.
9 7/8%, 12/15/01 B2 5,230,000 4,772,375
WCI Steel, Inc.
10 1/2%, 3/1/02 B1 2,420,000 2,359,500
7,131,875
METALS & MINING - 0.7%
International Wire Group, Inc.
11 3/4%, 6/1/05 (f) B3 5,850,000 5,886,563
PACKAGING & CONTAINERS - 0.8%
Crown Packaging Holdings Ltd.
0%, 11/1/03 (d) Caa 6,840,000 3,129,300
Grupo Industrial Durango euro
9.6367%, 11/18/96 (g) 4,000,000 3,380,000
6,509,300
PAPER & FOREST PRODUCTS - 1.8%
Indah Kiat International Finance
Co. 11 3/8%, 6/15/99 Ba3 9,000,000 9,022,500
Mail-Well Holdings, Inc.
0%, 2/15/06 (d) - 1,190,000 511,700
Tjiwi Kimia International Finance
Co. 13 1/4%, 8/1/01 B1 4,130,000 4,377,800
13,912,000
TOTAL BASIC INDUSTRIES 49,840,538
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CONGLOMERATES - 0.6%
Jordan Industries, Inc.:
10 3/8%, 8/1/03 B3 $ 3,155,000 $ 2,902,600
0%, 8/1/05 (d) Caa 3,135,000 1,849,650
4,752,250
CONSTRUCTION & REAL ESTATE - 1.6%
BUILDING MATERIALS - 1.3%
Adience, Inc.
11%, 6/15/02 - 745,921 540,793
Building Materials Corp.,
America 0%, 7/1/04 (d) B1 12,610,000 7,502,950
DAL Tile International, Inc. secured
coupon, 0%, 7/15/98 Caa 3,435,000 2,279,981
10,323,724
REAL ESTATE - 0.3%
Littlefield Co.
10%, 12/31/95 (e) - 2,750,000 2,491,913
TOTAL CONSTRUCTION & REAL ESTATE 12,815,637
DURABLES - 2.9%
AUTOS, TIRES, & ACCESSORIES - 1.9%
Harvard Industries, Inc.
12%, 7/15/04 B2 5,000,000 5,137,500
Poindexter (JB), Inc.
12 1/2%, 5/15/04 B2 10,000,000 9,700,000
14,837,500
TEXTILES & APPAREL - 1.0%
Hat Brands, Inc.
12 5/8%, 9/15/02:
Series B - 1,520,000 1,599,800
Series D - 680,000 715,700
Leslie Fay Cos., Inc. (b)(e):
9.53%, 1/15/00 - 676,319 399,028
10.54%, 1/15/02 - 611,353 299,563
United States Leather, Inc.
10 1/4%, 7/31/03 B2 6,010,000 5,153,575
8,167,666
TOTAL DURABLES 23,005,166
ENERGY - 7.2%
ENERGY SERVICES - 1.0%
Falcon Drilling, Inc.:
9 3/4%, 1/15/01 B2 3,512,000 3,441,760
12 1/2%, 3/15/05 B3 4,000,000 4,160,000
7,601,760
OIL & GAS - 6.2%
Chesapeake Energy Corp.
10 1/2%, 6/1/02 (f) B1 6,000,000 5,910,000
Deeptech International, Inc.
12%, 12/15/00 B3 4,660,000 3,168,800
Mesa Capital Corp.
secured 0%, 6/30/98 (d) Caa 5,710,000 5,181,825
TransTexas Gas Corp.
11 1/2%, 6/15/02 B2 20,000,000 20,450,000
Transamerican Refining
Corp. (g):
0%, 2/15/02 Caa 6,746,000 4,435,495
16 1/2%, 2/15/02 Caa 9,620,000 10,173,150
49,319,270
TOTAL ENERGY 56,921,030
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - 6.0%
INSURANCE - 5.1%
American Annuity Group, Inc.
11 1/8%, 2/1/03 Ba3 $ 3,500,000 $ 3,640,000
American Financial Corp.:
10%, 10/20/99 Ba3 5,000,000 5,037,500
9 3/4%, 4/20/04 Ba3 6,570,000 6,504,300
9 3/4%, 4/20/04 (e) Ba3 6,770,000 6,702,300
American Life Holdings
11 1/4%, 9/15/04 B1 13,350,000 13,884,000
Americo Life, Inc.
9 1/4%, 6/1/05 Ba2 4,900,000 4,557,000
40,325,100
SAVINGS & LOANS - 0.8%
First Nationwide Holdings, Inc.
12 1/4%, 5/15/01 Ba3 5,790,000 6,166,350
SECURITIES INDUSTRY - 0.1%
ECM Corp. extendible
14%, 6/1/02 (f) - 570,198 627,218
TOTAL FINANCE 47,118,668
HEALTH - 0.6%
MEDICAL EQUIPMENT & SUPPLIES - 0.6%
Wright Medical Technology, Inc.,
Series B, 10 3/4%, 7/1/00 B3 5,200,000 5,083,000
HOLDING COMPANIES - 0.1%
New Street Capital Corp.
pay-in-kind (e):
12%, 2/28/98 - 67,416 64,697
Unit 12%, 2/28/98 - 1,123,600 1,078,285
1,142,982
INDUSTRIAL MACHINERY & EQUIPMENT - 3.4%
MVE, Inc. Unit
12 1/2%, 2/15/02 B3 8,545,000 8,886,800
Specialty Equipment Cos., Inc.
11 3/8%, 12/1/03 B3 10,640,000 10,932,600
Thermadyne Holdings Corp.:
10 1/4%, 5/1/02 B3 1,484,000 1,417,220
10 3/4%, 11/1/03 Caa 5,756,000 5,583,320
26,819,940
MEDIA & LEISURE - 24.5%
BROADCASTING - 8.0%
Chancellor Broadcasting
12 1/2%, 10/1/04 B3 6,560,000 6,543,600
Citicasters, Inc.
9 3/4%, 2/15/04 B- 7,812,000 7,792,470
Cooke Media Group, Inc.
11 5/8%, 4/1/99 - 350,000 334,250
Marcus Cable Capital Corp.
0%, 12/15/05 (d)(f) Caa 26,580,000 14,054,175
NWCG Holdings Corp.
0%, 6/15/99 Caa 26,925,000 16,693,500
Peoples Choice TV Corp. Unit
0%, 6/1/04 (d) Caa 11,340,000 5,485,725
Robin Media Group, Inc.
11 1/8%, 4/1/97 - 12,340,000 12,525,100
63,428,820
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
LEISURE DURABLES & TOYS - 1.5%
ICON Health And Fitness, Inc.
13%, 7/15/02 B3 $ 5,890,000 $ 5,948,900
IHF Holdings, Inc.
0%, 11/15/04 (d) Caa 10,250,000 5,637,500
11,586,400
LODGING & GAMING - 9.9%
Bally's Casino Holdings, Inc.
10 1/2%, 6/15/98 B3 12,630,000 8,841,000
Bally Gaming International, Inc.
10 3/8%, 7/15/98 - 3,000,000 3,090,000
Boyd Gaming Corp.
10 3/4%, 9/3/03 B2 7,350,000 7,570,500
GNF Corp., Series B,
10 5/8%, 4/1/03 B2 19,730,000 16,375,900
Grand Casino Resorts, Inc. gtd.
12 1/2%, 2/1/00 Ba3 2,200,000 2,464,000
HMH Properties, Inc.
9 1/2%, 5/15/05 (f) B1 10,000,000 9,700,000
Maritime Group Ltd. pay-in-
kind 14%, 2/15/97 (b) - 1,648,399 741,780
Players International, Inc.
10 7/8%, 4/15/05 (f) Ba3 7,050,000 6,944,250
President Riverboat Casinos
13%, 9/15/01 B 7,000,000 5,950,000
Stratosphere Corp.
14 1/4%, 5/15/02 B2 12,740,000 12,994,800
Trump Plaza Funding, Inc. gtd.
mtg. 10 7/8%, 6/15/01 B3 4,713,000 4,335,960
79,008,190
RESTAURANTS - 5.1%
American Restaurant Group, Inc.:
12%, 9/15/98 B2 3,930,000 3,144,000
12%, 9/15/98 (New) B2 3,580,000 2,864,000
Cafeteria Operators LP
11%, 6/30/98 (b)(e) - 7,000,000 1,750,000
Flagstar Corp.
11 1/4%, 11/1/04 Caa 23,555,000 18,372,900
Host Marriott Travel Plazas, Inc.
9 1/2%, 5/15/05 (f) B1 15,000,000 14,325,000
40,455,900
TOTAL MEDIA & LEISURE 194,479,310
NONDURABLES - 4.2%
BEVERAGES - 0.5%
Heileman Acquisition Corp.
9 5/8%, 1/31/04 B3 6,500,000 4,095,000
HOUSEHOLD PRODUCTS - 3.7%
McAndrews & Forbes Group,
Inc. 12 1/4%, 7/1/96 - 1,360,000 1,360,000
Revlon Consumer Products Corp.
10 1/2%, 2/15/03 B3 7,230,000 7,103,475
Revlon Worldwide Corp. secured
0%, 3/15/98 B3 30,342,000 20,860,125
29,323,600
TOTAL NONDURABLES 33,418,600
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - 5.5%
APPAREL STORES - 2.8%
Apparel Retailers, Inc.
12 3/4%, 8/15/05 Caa $ 11,230,000 $ 6,625,700
Lamonts Apparel Corp.
10 1/4%, 11/1/99 (b)(f) - 2,201,000 1,078,490
Specialty Retailers, Inc.:
10%, 8/15/00 B1 2,890,000 2,759,950
11%, 8/15/03 B3 12,220,000 11,364,600
21,828,740
GENERAL MERCHANDISE STORES - 1.4%
Parisian, Inc.
9 7/8%, 7/15/03 Caa 14,322,000 11,027,940
RETAIL & WHOLESALE, MISCELLANEOUS - 1.3%
Barrys Jewelers, Inc.
11%, 12/22/00 - 1,595,000 1,563,100
Finlay Fine Jewelry Corp.
10 5/8%, 5/1/03 B1 4,960,000 4,786,400
Florists Transworld Delivery, Inc.
14%, 12/15/01 B3 4,500,000 4,297,500
10,647,000
TOTAL RETAIL & WHOLESALE 43,503,680
SERVICES - 5.7%
ADVERTISING - 0.8%
Outdoor Systems, Inc.
10 3/4%, 8/15/03 B2 7,000,000 6,720,000
LEASING & RENTAL - 1.7%
Acme Holdings, Inc.
11 3/4%, 6/1/00 (b) Ca 2,930,000 1,465,000
GPA Delaware, Inc.:
8 1/2%, 3/3/97 Ca 3,500,000 3,176,250
gtd. 8 3/4%, 12/15/98 Caa 990,000 831,600
8 5/8%, 1/15/99 - 2,600,000 2,067,000
Scotsman Group, Inc.
9 1/2%, 12/15/00 B1 3,950,000 3,821,625
Scotsman Holdings, Inc.
pay-in-kind 11%, 3/1/04 - 2,080,752 1,712,521
13,073,996
PRINTING - 1.7%
BFP Holdings Corp.
0%, 4/15/04 (d) Caa 5,000,000 3,300,000
Big Flower Press:
10 3/4%, 8/1/03 B3 3,555,000 3,546,113
Class A, 10 3/4%, 8/1/03 B3 4,910,000 4,897,725
Class B, 10 3/4%, 8/1/03 B3 1,480,000 1,476,300
13,220,138
SERVICES - 1.5%
Protection One Alarm
Monitoring, Inc. Unit
0%, 6/30/05 (d)(f) Caa 1,860,000 12,136,500
TOTAL SERVICES 45,150,634
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Alpine Group, Inc.
13 1/2%, 1/5/96 (e) Caa $ 130,000 $ 130,000
TRANSPORTATION - 2.6%
AIR TRANSPORTATION - 1.7%
US Air, Inc.:
Series 1993-A1 Pass Thru
Trust 8 5/8%, 9/1/98 B1 5,000,000 4,725,000
9 5/8%, 2/1/01 B3 930,000 804,450
9 5/8%, 9/1/03 B1 2,550,000 2,422,500
10 3/8%, 3/1/13 B1 5,470,000 5,169,150
13,121,100
RAILROADS - 0.9%
Transtar Holdings L.P./Transtar
Cap. Corp., Series B,
0%, 12/15/03 (d) B- 12,270,000 7,239,300
TOTAL TRANSPORTATION 20,360,400
UTILITIES - 3.1%
CELLULAR - 2.5%
Dial Call Communications,
Inc. 0%, 12/15/05 (d) Caa 2,800,000 1,288,000
Dial Page, Inc.
12 1/4%, 2/15/00 Caa 950,000 985,625
Pagemart Nationwide, Inc. Unit
0%, 2/1/05 (d)(f) - 29,020,000 17,629,650
19,903,275
ELECTRIC UTILITY - 0.1%
El Paso Funding Corp.
lease oblig. (b):
9 3/8%, 10/1/96 Ca 790,000 422,650
9.20%, 7/2/97 Ca 380,000 203,300
625,950
GAS - 0.1%
Columbia Gas Systems, Inc.
9%, 8/1/95 (b) B3 670,000 938,000
TELEPHONE SERVICES - 0.4%
Call-Net Enterprises, Inc.
yankee 0%, 12/1/04 (d) B2 330,000 198,000
Pagemart, Inc.
0%, 11/1/03 (d) - 4,820,000 3,048,650
3,246,650
TOTAL UTILITIES 24,713,875
TOTAL NONCONVERTIBLE BONDS 591,843,760
TOTAL CORPORATE BONDS
(Cost $594,159,103) 593,574,709
COMMERCIAL MORTGAGE SECURITIES - 0.4%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CS First Boston Mortgage
Securities Corp. Commercial
Series 1994-CFB1 Class E,
7.8751%, 1/25/28 (f) Ba2 $ 7,355 $ 5,784
Meritor Mortgage Security Corp.
commercial Series 1987-1
Class B, 9.40%, 2/1/00 (f) - 1,350,000 272,016
SKW Real Estate LP commercial
Series II Class E, 11%,
4/15/05 (f) B 1,500,000 1,500,469
SML, Inc. commercial Series
1994-C1 Class B-3, 11.69%,
9/18/99 - 1,500,000 1,413,750
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $3,126,994) 3,192,019
COMMON STOCKS - 5.5%
SHARES
AEROSPACE & DEFENSE - 0.0%
DEFENSE ELECTRONICS - 0.0%
Tracor, Inc. (a) 18,900 257,513
BASIC INDUSTRIES - 0.1%
IRON & STEEL - 0.1%
WCI Steel, Inc. (a) 67,700 423,125
PAPER & FOREST PRODUCTS - 0.0%
Mail-Well Holdings, Inc. (a) 9,250 55,500
TOTAL BASIC INDUSTRIES 478,625
DURABLES - 0.1%
TEXTILES & APPAREL - 0.1%
Hat Brands, Inc. (warrants) (a)(e) 27,466 302,121
HM/Hat Brands Trust Class I Units (a)(e) 340,000 340,000
642,121
ENERGY - 1.1%
OIL & GAS - 1.1%
Flores & Rucks, Inc. (a) 125,900 1,542,275
TransTexas Gas Corp. (a) 479,600 7,253,950
TOTAL ENERGY 8,796,225
FINANCE - 1.7%
INSURANCE - 1.7%
American Financial Group, Inc. 519,600 13,509,600
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (f) 3,000 300,000
TOTAL FINANCE 13,809,600
HEALTH - 0.0%
MEDICAL EQUIPMENT & SUPPLIES - 0.0%
Wright Medical Technology, Inc.
(warrants) (a) 1,729 285,334
HOLDING COMPANIES - 0.2%
SDW Holdings Corp. (a):
Unit (f) 4,450 1,203,369
(warrants) 3,720 22,320
1,225,689
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
ELECTRICAL EQUIPMENT - 0.1%
Ampex Corp.(a):
Class A 20,681 $ 46,532
Class A (warrants) 57,599 129,598
Class C 230,212 517,977
694,107
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Terex Corp. (rights) (a) 3,150 788
Thermadyne Holdings Corp. (a) 65,419 924,043
924,831
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,618,938
MEDIA & LEISURE - 1.0%
ENTERTAINMENT - 0.0%
Live Entertainment, Inc. (warrants) (a)(e):
$2.00 232,000 58,000
$2.72 221,765 55,441
113,441
LEISURE & DURABLES - 0.1%
IHF Capital, Inc. (a)(f):
Series H (warrants) 10,250 820,000
Series I (warrants) 5,890 147,250
967,250
LODGING & GAMING - 0.9%
Bally Gaming International, Inc.
(warrants) (a) 90,000 618,750
Hollywood Casino Corp. Class A (a) 139,000 1,233,625
Host Marriott Corp. (a) 383,000 4,069,375
Maritime Group Ltd. (warrants) (a) 17,880 179
Motels of America, Inc. (a) 3,000 225,000
Sun International Hotels Ltd. (a) 15,285 687,825
Sun International Hotels Ltd. Class B (a) 3,209 139,592
6,974,346
PUBLISHING - 0.0%
General Media, Inc. (warrant) (a) 1,310 13,100
TOTAL MEDIA & LEISURE 8,068,137
NONDURABLES - 0.6%
TOBACCO - 0.6%
RJR Nabisco Holdings Corp. 161,400 4,499,025
RETAIL & WHOLESALE - 0.1%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc. (a):
(New) 35,870 13,452
(warrants) 66,214 -
13,452
GROCERY STORES - 0.1%
FF Holdings Corp. (a)(e) 33,900 67,800
Food 4 Less Holdings, Inc.
(warrants) (a) 9,348 283,712
MAFCO (warrants) (a) 59 -
351,512
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Barrys Jewelers, Inc. (a) 45,576 148,122
Barrys Jewelers, Inc. (warrants) (a) 5,697 1,424
Finlay Enterprises, Inc. (a) 2,500 35,000
184,546
TOTAL RETAIL & WHOLESALE 549,510
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
SERVICES - 0.4%
LEASING & RENTAL - 0.0%
Scotsman Holdings, Inc. (a) 15,281 $ 199,875
PRINTING - 0.4%
BFP Holdings Class D (a) 160,744 3,214,880
SERVICES - 0.0%
Perry Capital Corp. (warrants) (a)(f) 4,500 22,500
Vestar/LPA Investment Corp. (a) 5,177 129,425
151,925
TOTAL SERVICES 3,566,680
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Berg Electronics Holdings Corp. (a)(f) 20,853 104,265
UTILITIES - 0.0%
CELLULAR - 0.0%
Dial Page, Inc. (warrants) (a) 4,321 5,401
ELECTRIC UTILITY - 0.0%
Eastern Utilities Associates 3 68
Northeast Utilities Associates
(warrants) (a) 21,789 27,236
27,304
GAS - 0.0%
UGI Corp. (warrants) (a) 14,033 2,105
TOTAL UTILITIES 34,810
TOTAL COMMON STOCKS
(Cost $38,165,942) 43,936,472
PREFERRED STOCKS - 7.9%
CONVERTIBLE PREFERRED STOCKS - 0.7%
RETAIL & WHOLESALE - 0.2%
GROCERY STORES - 0.2%
Supermarkets General Holdings Corp.
exchangeable pay-in-kind $3.52 (a) 39,189 1,058,103
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Town & Country Corp. (a) 4,000 3,000
TOTAL RETAIL & WHOLESALE 1,061,103
SERVICES - 0.5%
La Petite Holdings Corp. exchangeable (a) 160,800 4,020,000
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Alpine Group, Inc. cumulative 8% (a) 835 37,575
TOTAL CONVERTIBLE PREFERRED STOCKS 5,118,678
NONCONVERTIBLE PREFERRED STOCKS - 7.2%
BASIC INDUSTRIES - 0.0%
IRON & STEEL - 0.0%
Stelco, Inc. cumulative, Series B, 7.76% 7,207 115,518
PAPER & FOREST PRODUCTS - 0.0%
SD Warren Co. exchangeable
pay-in-kind (a) 3,720 104,160
TOTAL BASIC INDUSTRIES 219,678
SHARES VALUE (NOTE 1)
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Harvard Industries, Inc.
pay-in-kind $14.25 (a) 22,739 $ 625,323
ENERGY - 0.5%
OIL & GAS - 0.5%
Gulf Canada Resources Ltd. (a)(e) 31,009 89,151
Gulf Canada Resources Ltd., Series 1,
adj. rate 1,321,942 3,717,962
3,807,113
FINANCE - 1.8%
SAVINGS & LOANS - 1.8%
First Nationwide Bank 11 1/2% 112,852 12,188,016
Greater New York Savings Bank,
Series B, perpetual 12% 78,751 2,165,653
14,353,669
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Ampex Corp. 8% (a)(e) 1,589 911,927
MEDIA & LEISURE - 4.2%
BROADCASTING - 4.2%
PanAmSat Corp. 12 3/4% 32,700 33,190,500
TECHNOLOGY - 0.5%
ELECTRONICS - 0.5%
Berg Electronics Holding Corp.,
Series E, $3.4687 157,433 4,250,691
TOTAL NONCONVERTIBLE PREFERRED STOCKS 57,358,901
TOTAL PREFERRED STOCKS
(Cost $60,943,714) 62,477,579
PURCHASED BANK DEBT - 0.1%
PRINCIPAL
AMOUNT
Leslie Fay Cos., Inc.:
revolving loan $ 685,856 404,655
term loan 777,600 458,784
TOTAL PURCHASED BANK DEBT
(Cost $1,190,771) 863,439
REPURCHASE AGREEMENTS - 11.3%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 6.22%
dated 6/30/95 due 7/3/95 $ 89,902,575 $ 89,856,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $787,442,524) $ 793,900,218
LEGEND
(a) Non-income producing
(b) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
(e) Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
ACQUISITION ACQUISITION
SECURITY DATE COST
Alpine Group, Inc.
13 1/2%, 1/5/96 1/4/95 $ 128,339
American Financial Corp.
9 3/4%, 4/20/04 5/24/95 $ 6,634,600
Ampex Corp. 8% 2/16/95 $ 834,225
Cafeteria Operators LP
11%, 6/30/98 6/24/93 $ 5,600,000
FF Holdings Corp. 10/2/92 to 1/14/94 $ 135,753
Gulf Canada Resources
Ltd. 10/15/93 $ 76,940
Hat Brands,
Inc. (warrants) 9/2/92 to 2/23/94 $ -
HM/Hat Brands Trust
Class I Units 2/22/94 $ 340,000
Leslie Fay Cos., Inc.:
9.53%, 1/15/00 7/19/93 $ 512,312
10.54%, 1/15/02 7/19/93 to 11/11/93 $ 404,156
Littlefield Co.
10%, 12/31/95 2/28/94 $ 2,750,000
Live Entertainment, Inc.
(warrants):
$2.00 3/23/93 $ 220,717
$2.72 3/23/93 $ 131,863
New Street Capital Corp.
pay-in-kind:
12%, 2/28/98 2/15/95 $ 67,416
Unit 12%, 2/28/98 2/25/94 to 9/1/94 $ 1,123,600
RHI Holdings, Inc.
11 7/8%, 3/1/99 10/15/92 $ 495,000
(f) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $103,757,499 or 12.8% of net
assets.
(g) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $643,634,101 and $467,491,408, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $21,896 for the period (see
Note 3 of Notes to the Financial Statements).
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 0.0% AAA, AA, A 0.0%
Baa 0.0% BBB 0.0%
Ba 6.4% BB 17.3%
B 41.9% B 41.6%
Caa 16.3% CCC 4.8%
Ca, C 0.3% CC, C 0.0%
D 0.4%
The percentage not rated by either S&P or Moody's amounted to 7.9%
including long-term debt categorized as other securities. FMR has
determined that unrated debt securities that are lower quality account for
7.9% of the total value of investment in securities.
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $787,696,044. Net unrealized appreciation aggregated
$6,204,174, of which $27,367,484 related to appreciated investment
securities and $21,163,310 related to depreciated investment securities.
At December 31, 1994, the fund had a capital loss carryforward of
approximately $1,148,000 all of which will expire on December 31, 2002.
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $89,856,000) (cost $787,442,524) - $ 793,900,218
See accompanying schedule
Cash 506,521
Receivable for investments sold 10,050,335
Receivable for fund shares sold 5,462,661
Dividends receivable 1,104,845
Interest receivable 12,928,622
TOTAL ASSETS 823,953,202
LIABILITIES
Payable for investments purchased $ 9,912,131
Payable for fund shares redeemed 178,315
Accrued management fee 405,377
Other payables and accrued expenses 77,305
TOTAL LIABILITIES 10,573,128
NET ASSETS $ 813,380,074
Net Assets consist of:
Paid in capital $ 767,990,586
Undistributed net investment income 33,139,910
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 5,795,848
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 6,453,730
NET ASSETS, for 72,678,030 shares outstanding $ 813,380,074
NET ASSET VALUE, offering price and redemption price per share ($813,380,074 (divided by) 72,678,030 shares) $11.19
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 2,728,599
Dividends
Interest 33,425,785
TOTAL INCOME 36,154,384
EXPENSES
Management fee $ 2,138,740
Transfer agent fees 183,111
Accounting fees and expenses 121,670
Non-interested trustees' compensation 1,780
Custodian fees and expenses 6,018
Audit 17,965
Interest 2,621
Total expenses before reductions 2,471,905
Expense reductions (5,422 2,466,483
)
NET INVESTMENT INCOME 33,687,901
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 7,181,679
Foreign currency transactions (978 7,180,701
)
Change in net unrealized appreciation (depreciation) on:
Investment securities 39,872,106
Assets and liabilities in foreign currencies (150 39,871,956
)
NET GAIN (LOSS) 47,052,657
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 80,740,558
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1995 1994
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 33,687,901 $ 43,091,356
Net investment income
Net realized gain (loss) 7,180,701 (726,075
)
Change in net unrealized appreciation (depreciation) 39,871,956 (49,793,238
)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 80,740,558 (7,427,957
)
Distributions to shareholders (43,871,918 (30,631,598
From net investment income ) )
From net realized gain - (15,525,605
)
TOTAL DISTRIBUTIONS (43,871,918 (46,157,203
) )
Share transactions 333,374,520 498,543,147
Net proceeds from sales of shares
Reinvestment of distributions 43,871,918 46,157,203
Cost of shares redeemed (170,151,760 (385,629,739
) )
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 207,094,678 159,070,611
TOTAL INCREASE (DECREASE) IN NET ASSETS 243,963,318 105,485,451
NET ASSETS
Beginning of period 569,416,756 463,931,305
End of period (including undistributed net investment income of $33,139,910 and $42,834,969,
respectively) $ 813,380,074 $ 569,416,756
OTHER INFORMATION
Shares
Sold 31,093,586 45,102,882
Issued in reinvestment of distributions 4,326,619 4,073,892
Redeemed (15,728,132 (34,899,979
) )
Net increase (decrease) 19,692,073 14,276,795
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 D 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.750 $ 11.990 $ 10.820 $ 9.550 $ 7.070 $ 8.110
Income from Investment Operations .428 .770 .728 .790 .890 .858
Net investment income
Net realized and unrealized gain (loss) .792 (.910) 1.332 1.290 1.590 (1.040)
Total from investment operations 1.220 (.140) 2.060 2.080 2.480 (.182)
Less Distributions (.780) (.730) (.794) (.810) - (.858)
From net investment income
In excess of net investment income - - (.036) - - -
From net realized gain on investments - (.370) (.060) - - -
Total distributions (.780) (1.100) (.890) (.810) - (.858)
Net asset value, end of period $ 11.190 $ 10.750 $ 11.990 $ 10.820 $ 9.550 $ 7.070
TOTAL RETURN B, C 12.10% (1.64) 20.40% 23.17% 35.08% (2.23)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 813,380 $ 569,417 $ 463,931 $ 200,591 $ 70,060 $ 29,990
Ratio of expenses to average net assets .70% .71% .64% .67% .97% 1.00%
A
Ratio of expenses to average net assets before expense .70% .71% .66% .67% .97% 1.12%
reductions A
Ratio of net investment income to average net assets 9.58% 8.75% 8.69% 10.98% 12.94% 11.36%
A
Portfolio turnover rate 154% 122% 155% 160% 154% 156%
A
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF
NOTES TO THE FINANCIAL
STATEMENTS).
D EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT
PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
Equity-Income 24.00% 15.06% 12.30%
S&P 500 26.07% 12.09% 13.58%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for
example, has a history of growth in the long run
and volatility in the short run. In turn, the share
price and return of a fund that invests in stocks
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare these figures to the performance of the Standard & Poor's
Composite Index of 500 stocks - a common proxy for the U.S. stock market.
This benchmark includes reinvested dividends and capital gains, if any.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, October 9, 1986.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER LIFE OF FUND
VIP Equity Income (Standard & Poor's 50
10/09/86 10000.00 10000.00
10/31/86 10110.00 10329.97
11/30/86 10330.00 10580.99
12/31/86 10020.00 10311.18
01/31/87 11170.00 11700.09
02/28/87 11430.00 12162.25
03/31/87 11720.18 12513.74
04/30/87 11428.43 12402.36
05/31/87 11498.86 12510.26
06/30/87 11738.55 13142.03
07/31/87 12185.73 13808.33
08/31/87 12521.12 14323.38
09/30/87 12258.32 14009.70
10/31/87 9866.20 10992.01
11/30/87 9424.74 10086.27
12/31/87 9906.52 10853.84
01/31/88 10611.13 11310.78
02/29/88 11136.95 11837.86
03/31/88 10943.07 11472.07
04/30/88 11124.21 11599.41
05/31/88 11273.39 11700.33
06/30/88 11914.76 12237.37
07/31/88 11893.18 12190.87
08/31/88 11688.12 11776.38
09/30/88 12035.42 12278.06
10/31/88 12243.12 12619.39
11/30/88 12046.36 12438.93
12/31/88 12156.33 12656.61
01/31/89 12907.13 13583.07
02/28/89 12840.88 13244.86
03/31/89 13119.01 13553.46
04/30/89 13625.32 14256.89
05/31/89 14030.37 14834.29
06/30/89 14039.98 14749.73
07/31/89 14858.50 16081.64
08/31/89 15097.24 16396.84
09/30/89 14927.51 16329.61
10/31/89 14066.31 15950.76
11/30/89 14146.69 16276.16
12/31/89 14264.74 16666.78
01/31/90 13301.38 15548.44
02/28/90 13380.20 15749.02
03/31/90 13402.27 16166.37
04/30/90 12937.59 15762.21
05/31/90 13793.57 17299.02
06/30/90 13656.23 17181.39
07/31/90 13322.25 17126.41
08/31/90 12258.45 15578.18
09/30/90 11307.54 14819.52
10/31/90 11019.21 14755.80
11/30/90 11808.98 15709.03
12/31/90 12083.75 16147.31
01/31/91 12731.78 16851.33
02/28/91 13608.52 18056.20
03/31/91 13890.81 18493.16
04/30/91 13955.72 18537.54
05/31/91 14721.66 19338.37
06/30/91 14119.72 18452.67
07/31/91 14920.19 19312.56
08/31/91 15235.12 19770.27
09/30/91 15130.56 19440.11
10/31/91 15382.51 19700.60
11/30/91 14719.47 18906.67
12/31/91 15882.70 21069.59
01/31/92 16097.15 20677.70
02/29/92 16619.87 20946.51
03/31/92 16416.22 20538.05
04/30/92 16930.49 21141.87
05/31/92 17065.83 21245.47
06/30/92 16916.41 20928.91
07/31/92 17434.82 21784.90
08/31/92 17052.84 21338.31
09/30/92 17229.86 21590.10
10/31/92 17436.12 21665.67
11/30/92 18068.66 22404.47
12/31/92 18564.83 22680.04
01/31/93 19119.01 22870.55
02/28/93 19548.49 23181.59
03/31/93 20131.05 23670.73
04/30/93 20047.35 23097.89
05/31/93 20410.07 23716.92
06/30/93 20650.14 23785.70
07/31/93 20931.09 23690.55
08/31/93 21731.81 24588.43
09/30/93 21648.73 24399.09
10/31/93 21846.69 24904.16
11/30/93 21464.91 24667.57
12/31/93 21961.06 24966.04
01/31/94 22928.26 25814.89
02/28/94 22337.82 25115.31
03/31/94 21403.32 24020.28
04/30/94 22140.85 24327.74
05/31/94 22351.57 24726.71
06/30/94 22213.48 24120.91
07/31/94 22955.44 24912.07
08/31/94 24136.53 25933.47
09/30/94 23741.11 25298.10
10/31/94 24228.42 25867.31
11/30/94 23436.54 24925.22
12/31/94 23512.77 25294.86
01/31/95 23880.40 25950.76
02/28/95 24790.97 26962.06
03/31/95 25646.99 27757.71
04/30/95 26360.31 28575.17
05/31/95 27154.68 29717.32
06/30/95 27544.83 30407.65
Let's say you invested $10,000 in Equity-Income Portfolio on October 9,
1986, when the fund started. By June 30, 1995, your investment would have
grown to $27,545 - a 175.45% increase. That compares to $10,000 invested in
the S&P 500, which would have grown to $30,408 over the same period - a
204.08% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Philip Morris Companies, Inc. 4.2
Federal National Mortgage Association 2.8
International Business Machines Corp. 2.1
American Express Co. 2.1
British Petroleum PLC ADR 2.0
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Finance 18.0
Energy 10.1
Nondurables 8.8
Basic Industries 7.7
Industrial Machinery & Equipment 7.3
ASSET ALLOCATION AS OF JUNE 30, 1995*
Row: 1, Col: 1, Value: 7.3
Row: 1, Col: 2, Value: 6.2
Row: 1, Col: 3, Value: 86.5
Stocks 86.5%
Bonds 6.2%
Short-term investments 7.3%
FOREIGN INVESTMENTS 6.2%
*
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Bettina Doulton, Portfolio Manager of Equity-Income
Portfolio
Q. BETTINA, HOW DID THE FUND PERFORM?
A. Although the fund did well relative to its peers, it slightly trailed
the performance of the Standard & Poor's 500 stock index for the six- and
12-month periods ended June 30, 1995. The index had total returns of 20.21%
and 26.07% for those periods, respectively. Because this recent stock
market rally was quite narrow - led by a few sectors, namely technology,
financials and the large-cap and blue-chip stocks - the average stock
mutual fund has not topped the performance of the index thus far in 1995.
Q. THE STOCK MARKET SHOWED A RENEWED VIGOR OVER THE PAST SIX MONTHS. WHAT
ACCOUNTED FOR THIS?
A. The market's strength was driven by investors' belief that the Federal
Reserve Board would manage the economy to a soft landing - steady, albeit
slower, economic growth and continued low inflation. If achieved, those
conditions are ideal for Corporate America to sustain strong profit growth.
During the six-month period, corporate earnings reports were excellent,
which provided the fuel for stock prices to move higher. Excluding the
consistently outstanding performance of the technology and financial
sectors, the market has been characterized by rapid industry rotation.
Investors have spent the past six months racing from one industry to the
next, trying to stay one step ahead of the crowd. Sometimes, the fund was
in the right place at the right time, and sometimes it wasn't.
Q. WHAT CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. Several of the fund's largest holdings have driven returns recently.
Highlights include Philip Morris. The stock has been rewarded for the
company's strong profit growth and free cash flow; both are attributable to
terrific results in the company's domestic and international tobacco
businesses, which more than offset mediocre results in its food division.
Second in line is the Federal National Mortgage Association (Fannie Mae).
Although its stock price suffered a significant setback last fall, it has
since recovered as conditions in the secondary mortgage market have turned
more favorable. IBM was another strong performer. The company has done an
excellent job cutting costs and cleaning up its balance sheet. In addition,
global economic growth and wide acceptance of the company's new products
have contributed to accelerating revenue growth. Finally, in the energy
sector, the energy service company Schlumberger performed well. It
benefited from improving worldwide supply/demand dynamics for oil and
corporate restructuring efforts. Elsewhere in the energy sector, however,
British Petroleum (BP) and Amerada Hess have been somewhat disappointing in
terms of stock performance. Both are restructuring stories; BP's stock may
just be taking a breather after making significant gains, while Amerada
Hess' turnaround may be just taking a bit longer than investors had
expected.
Q. YOU MORE THAN DOUBLED THE FUND'S STAKE IN FINANCIAL STOCKS; THEY WENT
FROM 7.1% OF THE FUND SIX MONTHS AGO TO 18.0% ON JUNE 30 . . .
A. Recent purchases of bank stocks made up most of that increase. Along
with the diversified financial services companies such as American Express
and Fannie Mae, banks had a strong, if volatile, run. My only regret is not
owning more of them early in the period, when they began to outperform.
Prices did fall in the spring, however, which allowed me to buy stocks such
as Chemical Banking and BankAmerica off their highs. In the coming months,
I expect the market to drive bank stock valuations - prices relative to
earnings - higher. That's because earnings are becoming more consistent,
the industry is consolidating, and companies are using excess capital to
repurchase shares of their own stocks.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. When interest rates fall, as they've done over the past few months, the
market usually rewards stocks with higher valuations. However, we have to
keep in mind that the economy has slowed, which could negatively affect
corporate earnings going forward. The 64-thousand-dollar question then
becomes: will the market's willingness to drive up valuations and look
toward an economic resurgence be enough to offset the negative effects of
potential short-term earnings disappointments? I'm afraid not. Companies
that report less-than-expected earnings growth in the coming months will
most likely pay dearly with falling stock prices. In light of this, I plan
to focus intensely on owning companies that trade at attractive valuations,
offer good prospects for higher earnings through 1996, and are working to
enhance shareholder value.
FUND FACTS
GOAL: to provide current income and increase
the value of the fund's shares
START DATE: October 9, 1986
SIZE: as of June 30, 1995, more than $3.4 billion
MANAGER: Bettina Doulton, since 1993;
manager, Fidelity Value Fund, since March
1995; Fidelity Advisor Equity-Income Fund,
since 1993; joined Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 85.3%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 5.7%
AEROSPACE & DEFENSE - 3.8%
Alliant Techsystems, Inc. (a) 421,700 $ 17,605,959
Boeing Co. 353,800 22,156,725
General Motors Corp. Class H 426,200 16,834,900
Lockheed Martin Corp. 434,803 27,446,939
McDonnell Douglas Corp. 131,000 10,054,250
Rockwell International Corp. 429,600 19,654,200
Sundstrand Corp. 183,000 10,934,250
Thiokol Corp. 186,400 5,638,600
130,325,823
DEFENSE ELECTRONICS - 1.4%
Litton Industries, Inc. (a) 268,700 9,908,313
Loral Corp. 214,700 11,110,725
Raytheon Co. 342,300 26,571,038
47,590,076
SHIP BUILDING & REPAIR - 0.5%
General Dynamics Corp. 420,400 18,655,250
TOTAL AEROSPACE & DEFENSE 196,571,149
BASIC INDUSTRIES - 7.5%
CHEMICALS & PLASTICS - 4.7%
du Pont (E.I.) de Nemours & Co. 571,100 39,263,125
Grace (W.R.) & Co. 503,600 30,908,450
Hercules, Inc. 810,900 39,531,375
Nalco Chemical Co. 462,300 16,816,163
Raychem Corp. 284,300 10,910,013
Union Carbide Corp. 713,100 23,799,713
161,228,839
IRON & STEEL - 0.1%
Nucor Corp. 38,600 2,065,100
METALS & MINING - 1.3%
Alcan Aluminium Ltd. 746,183 22,562,179
Aluminum Co. of America 467,200 23,418,400
45,980,579
PAPER & FOREST PRODUCTS - 1.4%
Scott Paper Co. 966,600 47,846,700
TOTAL BASIC INDUSTRIES 257,121,218
CONGLOMERATES - 2.8%
Allied-Signal, Inc. 382,600 17,025,700
GenCorp, Inc. 33,600 361,200
Tyco International Ltd. 857,071 46,281,834
United Technologies Corp. 398,900 31,164,063
94,832,797
CONSTRUCTION & REAL ESTATE - 0.2%
REAL ESTATE INVESTMENT TRUSTS - 0.2%
Starwood Lodging Trust combined
certificate (SBI) 125,900 2,909,045
Storage Equities, Inc. 145,800 2,387,475
5,296,520
DURABLES - 2.6%
AUTOS, TIRES, & ACCESSORIES - 1.6%
Chrysler Corp. 140,600 6,731,225
Dana Corp. 438,200 12,543,475
General Motors Corp. 269,800 12,646,875
Johnson Controls, Inc. 61,100 3,452,150
PACCAR, Inc. 93,500 4,371,125
Snap-on Tools Corp. 374,000 14,492,500
54,237,350
SHARES VALUE (NOTE 1)
DURABLES - CONTINUED
CONSUMER ELECTRONICS - 0.7%
Black & Decker Corp. 222,600 $ 6,872,775
Whirlpool Corp. 341,200 18,766,000
25,638,775
HOME FURNISHINGS - 0.1%
Heilig-Meyers Co. 104,700 2,669,850
TEXTILES & APPAREL - 0.2%
Westpoint Stevens, Inc. Class A (a) 397,100 7,098,163
TOTAL DURABLES 89,644,138
ENERGY - 9.7%
ENERGY SERVICES - 3.1%
Baker Hughes, Inc. 521,800 10,696,900
Halliburton Co. 959,000 34,284,250
Helmerich & Payne, Inc. 130,400 3,846,800
McDermott International, Inc. 575,000 13,871,875
Schlumberger Ltd. 691,300 42,947,013
105,646,838
OIL & GAS - 6.6%
Amerada Hess Corp. 929,700 45,439,088
British Petroleum PLC ADR 823,528 70,514,585
Canada Occidental Petroleum Ltd. 239,500 7,438,025
Coastal Corp. (The) 459,800 13,966,425
Kerr-McGee Corp. 157,400 8,440,575
Mobil Corp. 353,700 33,955,200
Occidental Petroleum Corp. 1,047,000 23,950,125
Tosco Corp. 279,100 8,896,313
Total SA:
Class B 210,425 12,691,129
sponsored ADR 129,500 3,917,375
229,208,840
TOTAL ENERGY 334,855,678
FINANCE - 18.0%
BANKS - 6.6%
Bank of Boston Corp. 482,800 18,105,000
Bank of New York Co., Inc. 163,000 6,581,125
BankAmerica Corp. 511,100 26,896,638
Bankers Trust New York Corp. 430,400 26,684,800
Chase Manhattan Corp. 480,041 22,561,927
Chemical Banking Corp. 670,100 31,662,225
Citicorp 647,300 37,462,488
First Chicago Corp. 119,100 7,131,113
First Union Corp. 192,700 8,719,675
Fleet Financial Group, Inc. 328,900 12,210,413
Mellon Bank Corp. 59,600 2,480,850
NationsBank Corp. 35,400 1,898,325
Republic New York Corp. 230,700 12,919,200
Shawmut National Corp. 345,200 11,003,250
226,317,029
CREDIT & OTHER FINANCE - 2.8%
American Express Co. 2,012,672 70,695,104
Countrywide Credit Industries, Inc. 886,700 18,620,700
Greenpoint Financial Corp. 362,900 8,573,513
97,889,317
FEDERAL SPONSORED CREDIT - 4.1%
Federal Home Loan Mortgage
Corporation 625,400 42,996,250
Federal National Mortgage Association 1,023,900 96,630,563
139,626,813
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
INSURANCE - 3.4%
Allstate Corp. 182,900 $ 5,418,413
American International Group, Inc. 197,200 22,480,800
American Reinsurance Corp. 11,300 420,925
General Re Corp. 193,700 25,931,588
Loews Corp. 266,500 32,246,500
PMI Group, Inc. 100,600 4,363,525
Reliastar Financial Corp. 252,100 9,642,825
Travelers, Inc. (The) 359,233 15,716,458
116,221,034
SAVINGS & LOANS - 0.3%
Ahmanson (H.F.) & Co. 273,900 6,025,800
Charter One Financial Corp. 162,000 3,969,000
9,994,800
SECURITIES INDUSTRY - 0.8%
Merrill Lynch & Co., Inc. 522,600 27,436,500
TOTAL FINANCE 617,485,493
HEALTH - 4.3%
DRUGS & PHARMACEUTICALS - 1.8%
Allergan, Inc. 340,100 9,225,213
American Home Products Corp. 360,000 27,855,000
Pfizer, Inc. 297,800 13,754,638
SmithKline Beecham PLC ADR 266,000 12,036,500
62,871,351
MEDICAL EQUIPMENT & SUPPLIES - 1.7%
Baxter International, Inc. 971,300 35,331,038
Beckman Instruments, Inc. 800 22,300
I-Stat Corp. (a) 173,100 6,318,150
Puritan Bennett Corp. 257,500 9,945,938
St. Jude Medical, Inc. 105,400 5,283,175
56,900,601
MEDICAL FACILITIES MANAGEMENT - 0.8%
Columbia/HCA Healthcare Corp. 621,800 26,892,850
TOTAL HEALTH 146,664,802
INDUSTRIAL MACHINERY & EQUIPMENT - 7.2%
ELECTRICAL EQUIPMENT - 1.0%
Emerson Electric Co. 211,700 15,136,550
General Electric Co. 175,500 9,893,813
Philips Electronics NV 196,600 8,404,650
Philips Electronics NV (Bearer) 45,200 1,915,824
35,350,837
INDUSTRIAL MACHINERY & EQUIPMENT - 3.5%
Caterpillar, Inc. 415,100 26,670,175
Cooper Industries, Inc. 467,000 18,446,500
Deere & Co. 474,400 40,620,500
Dover Corp. 145,100 10,556,025
Ingersoll-Rand Co. 574,300 21,966,975
Varity Corp. (a) 62,800 2,763,200
121,023,375
POLLUTION CONTROL - 2.7%
Browning-Ferris Industries, Inc. 870,700 31,454,038
Safety Kleen Corp. 583,600 9,410,550
WMX Technologies, Inc. 1,537,600 43,629,400
Wheelabrator Technologies, Inc. 453,200 6,967,950
91,461,938
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 247,836,150
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 2.1%
BROADCASTING - 1.2%
Viacom, Inc. Class B (non-vtg.) (a) 851,614 $ 39,493,599
PUBLISHING - 0.9%
Meredith Corp. 102,000 2,588,250
News Corp. Ltd.:
ADR 741,700 16,780,963
(vtg.) pfd. sponsored ADR 74,900 1,498,000
Times Mirror Co. Class A 461,800 11,025,475
31,892,688
TOTAL MEDIA & LEISURE 71,386,287
NONDURABLES - 8.6%
BEVERAGES - 0.9%
PepsiCo, Inc. 647,100 29,523,938
FOODS - 0.6%
ConAgra, Inc. 483,700 16,869,038
Dole Food, Inc. 157,600 4,590,100
21,459,138
HOUSEHOLD PRODUCTS - 1.3%
Avon Products, Inc. 285,480 19,127,160
First Brands Corp. 329,800 14,140,175
Rubbermaid, Inc. 168,800 4,684,200
Tambrands, Inc. 172,300 7,365,825
45,317,360
TOBACCO - 5.8%
Imasco Ltd. 1,453,600 25,815,296
Philip Morris Companies, Inc. 1,927,300 143,342,938
RJR Nabisco Holdings Corp. 1,054,639 29,398,062
198,556,296
TOTAL NONDURABLES 294,856,732
RETAIL & WHOLESALE - 3.2%
APPAREL STORES - 0.4%
Limited, Inc. (The) 618,400 13,604,800
GENERAL MERCHANDISE STORES - 2.1%
Dayton Hudson Corp. 293,400 21,051,450
May Department Stores Co. (The) 95,700 3,983,513
Wal-Mart Stores, Inc. 1,604,500 42,920,375
Woolworth Corp. 322,200 4,873,275
72,828,613
GROCERY STORES - 0.7%
Fleming Companies, Inc. 230,445 6,106,793
Great Atlantic & Pacific Tea Co., Inc. 397,600 10,486,700
Vons Companies, Inc. (a) 384,200 7,732,025
24,325,518
TOTAL RETAIL & WHOLESALE 110,758,931
SERVICES - 0.4%
PRINTING - 0.2%
Wallace Computer Services, Inc. 168,200 6,454,675
SERVICES - 0.2%
ADT Ltd. (a) 640,900 7,530,575
TOTAL SERVICES 13,985,250
TECHNOLOGY - 4.9%
COMPUTERS & OFFICE EQUIPMENT - 3.9%
Hewlett-Packard Co. 405,000 30,172,500
International Business Machines Corp. 755,700 72,547,200
Pitney Bowes, Inc. 792,200 30,400,675
133,120,375
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONIC INSTRUMENTS - 0.2%
Perkin-Elmer Corp. 226,200 $ 8,030,100
ELECTRONICS - 0.8%
AMP, Inc. 385,600 16,291,600
Kemet Corp. 46,700 2,451,750
Thomas & Betts Corp. 143,700 9,825,488
28,568,838
TOTAL TECHNOLOGY 169,719,313
TRANSPORTATION - 1.8%
RAILROADS - 1.8%
Burlington Northern, Inc. 534,200 33,854,925
CSX Corp. 195,300 14,671,913
Southern Pacific Rail Corp. (a) 919,300 14,478,975
TOTAL TRANSPORTATION 63,005,813
UTILITIES - 6.3%
GAS - 0.5%
Williams Companies, Inc. 489,200 17,060,850
TELEPHONE SERVICES - 5.8%
Ameritech Corp. 1,067,900 46,987,600
Bell Atlantic Corp. 210,100 11,765,600
BellSouth Corp. 576,200 36,588,700
Koninklijke PPT Nederland 165,600 5,959,760
Koninklijke PPT Nederland (a)(d) 104,400 3,757,240
NYNEX Corp. 1,200,400 48,316,100
SBC Communications, Inc. 871,300 41,495,663
Southern New England
Telecommunications Corp. 175,700 6,193,425
201,064,088
TOTAL UTILITIES 218,124,938
TOTAL COMMON STOCKS
(Cost $2,563,116,541) 2,932,145,209
PREFERRED STOCKS - 1.2%
CONVERTIBLE PREFERRED STOCKS - 0.8%
DURABLES - 0.3%
AUTOS, TIRES, & ACCESSORIES - 0.3%
Chrysler Corp., Series A, $4.625 (d) 85,200 11,374,200
ENERGY - 0.4%
ENERGY SERVICES - 0.1%
Noble Drilling Corp. $1.50 119,100 2,828,625
OIL & GAS - 0.3%
Atlantic Richfield Co.
exchangeable $.5575 431,300 11,213,800
TOTAL ENERGY 14,042,425
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Westinghouse Electric Corp. $1.30 (d) 351,500 5,140,688
TOTAL CONVERTIBLE PREFERRED STOCKS 30,557,313
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONCONVERTIBLE PREFERRED STOCKS - 0.4%
MEDIA & LEISURE - 0.4%
PUBLISHING - 0.4%
News Corp. Ltd. (ltd. vtg.) 2,510,505 $ 12,393,685
UTILITIES - 0.0%
ELECTRIC UTILITY - 0.0%
Gulf States Utilities Co., Series B,
adj. rate 586 28,348
TOTAL NONCONVERTIBLE PREFERRED STOCKS 12,422,033
TOTAL PREFERRED STOCKS
(Cost $39,195,081) 42,979,346
CORPORATE BONDS - 2.4%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (C)
CONVERTIBLE BONDS - 0.8%
CONSTRUCTION & REAL ESTATE - 0.1%
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Centerpoint Properties 8.22%,
1/15/04 - $ 1,510,000 1,683,650
Liberty Property LP 8%, 7/1/01 - 750,000 735,000
Sizeler Property Investors, Inc.
8%, 7/15/03 - 1,500,000 1,312,500
TOTAL CONSTRUCTION & REAL ESTATE 3,731,150
HEALTH - 0.6%
DRUGS & PHARMACEUTICALS - 0.6%
Roche Holdings, Inc. liquid
yield option notes
0%, 4/20/10 (d) - 48,340,000 19,336,000
PRECIOUS METALS - 0.1%
Pegasus Gold, Inc. euro
6 1/4%, 4/30/02 (d) Baa3 1,860,000 1,755,375
SERVICES - 0.0%
SERVICES - 0.0%
ADT Operations, Inc. liquid
yield option notes
0%, 7/6/10 Ba3 3,670,000 1,405,940
UTILITIES - 0.0%
GAS - 0.0%
SFP Pipeline Holdings, Inc.
exchangeable
0%, 8/15/10 (e) Baa3 470,000 606,300
TOTAL CONVERTIBLE BONDS 26,834,765
NONCONVERTIBLE BONDS - 1.6%
AEROSPACE & DEFENSE - 0.1%
DEFENSE ELECTRONICS - 0.1%
Tracor, Inc. 10 7/8%, 8/15/01 B2 1,220,000 1,250,500
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - 0.2%
PACKAGING & CONTAINERS - 0.0%
Owens Illinois, Inc. 10 1/4%,
4/1/99 B2 $ 350,000 $ 357,000
PAPER & FOREST PRODUCTS - 0.2%
Stone Container Corp. 9 7/8%,
2/1/01 B1 7,760,000 7,682,400
TOTAL BASIC INDUSTRIES 8,039,400
CONGLOMERATES - 0.0%
Coltec Industries, Inc. 10 1/4%,
4/1/02 B1 910,000 941,850
DURABLES - 0.3%
TEXTILES & APPAREL - 0.3%
Westpoint Stevens, Inc.:
8 3/4%, 12/15/01 B1 2,660,000 2,620,100
9 3/8%, 12/15/05 B3 7,850,000 7,575,250
TOTAL DURABLES 10,195,350
FINANCE - 0.0%
BANKS - 0.0%
Signet Banking Corp.:
6 1/4%, 5/15/97 (e) Baa2 340,000 337,025
6.4375%, 4/15/98 (e) Baa2 190,000 187,150
TOTAL FINANCE 524,175
MEDIA & LEISURE - 0.8%
BROADCASTING - 0.8%
Viacom, Inc. 8%, 7/7/06 B1 28,240,000 27,463,400
NONDURABLES - 0.2%
BEVERAGES - 0.2%
Canandaigua Wine, Inc.
8 3/4%, 12/15/03 (b) B1 5,700,000 5,586,000
UTILITIES - 0.0%
GAS - 0.0%
Columbia Gas Systems Inc.
9.91%, 5/28/20 (b) - 170,000 250,325
TOTAL NONCONVERTIBLE BONDS 54,251,000
TOTAL CORPORATE BONDS
(Cost $76,398,754) 81,085,765
U.S. TREASURY OBLIGATIONS - 3.8%
6 1/4%, 2/15/03 Aaa 17,860,000 17,907,508
5 3/4%, 8/15/03 Aaa 81,220,000 78,745,227
7 1/4%, 5/15/04 Aaa 24,291,000 25,934,529
11 5/8%, 11/15/04 Aaa 6,810,000 9,361,639
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $118,810,332) 131,948,903
REPURCHASE AGREEMENTS - 7.3%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 6.22% dated
6/30/95 due 7/3/95 $ 252,910,024 $ 252,779,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $3,050,299,708) $ 3,440,938,223
LEGEND
(a) Non-income producing
(b) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $41,363,503 or 1.2% of net
assets.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $2,163,942,745 and $1,281,174,381, respectively, of which U.S.
government and government agency obligations aggregated $42,997,272 and
$41,828,379, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $1,153,411 for the period
(see Note 3 of Notes to Financial Statements).
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 3.8% AAA, AA, A 3.8%
Baa 0.1% BBB 0.0%
Ba 0.0% BB 0.9%
B 1.6% B 0.7%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 0.7%.
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $3,052,199,640. Net unrealized appreciation aggregated
$388,738,583, of which $407,074,046 related to appreciated investment
securities and $18,335,463 related to depreciated investment securities.
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $252,779,000) (cost $ 3,440,938,223
$3,050,299,708) -
See accompanying schedule
Cash 864
Receivable for investments sold 66,280,607
Receivable for fund shares sold 5,980,486
Dividends receivable 8,213,745
Interest receivable 4,230,266
Other receivables 42,410
TOTAL ASSETS 3,525,686,601
LIABILITIES
Payable for investments purchased $ 63,785,673
Payable for fund shares redeemed 629,290
Accrued management fee 1,452,585
Other payables and accrued expenses 513,611
TOTAL LIABILITIES 66,381,159
NET ASSETS $ 3,459,305,442
Net Assets consist of:
Paid in capital $ 2,994,274,835
Undistributed net investment income 5,530,661
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 68,857,443
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 390,642,503
NET ASSETS, for 204,803,927 shares outstanding $ 3,459,305,442
NET ASSET VALUE, offering price and redemption price per share ($3,459,305,442 (divided by) 204,803,927 shares) $16.89
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 31,571,004
Dividends
Interest 16,392,102
TOTAL INCOME 47,963,106
EXPENSES
Management fee $ 7,399,646
Transfer agent fees 727,522
Accounting fees and expenses 378,208
Non-interested trustees' compensation 5,452
Custodian fees and expenses 39,578
Registration fees 251,928
Audit 24,512
Legal 4,441
Interest 9,801
Miscellaneous 7,582
TOTAL EXPENSES 8,848,670
NET INVESTMENT INCOME 39,114,436
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 72,417,571
Foreign currency transactions (3,308 72,414,263
)
Change in net unrealized appreciation (depreciation) on:
Investment securities 336,113,775
Assets and liabilities in foreign currencies (8,788 336,104,987
)
NET GAIN (LOSS) 408,519,250
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 447,633,686
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 39,114,436 $ 49,846,224
Net investment income
Net realized gain (loss) 72,414,263 121,898,471
Change in net unrealized appreciation (depreciation) 336,104,987 (61,690,963)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 447,633,686 110,053,732
Distributions to shareholders (37,713,247) (44,739,784)
From net investment income
From net realized gain (121,254,353) (68,533,800)
TOTAL DISTRIBUTIONS (158,967,600) (113,273,584)
Share transactions 802,500,637 1,048,772,904
Net proceeds from sales of shares
Reinvestment of distributions 158,967,516 113,273,584
Cost of shares redeemed (75,240,890) (192,914,992)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 886,227,263 969,131,496
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,174,893,349 965,911,644
NET ASSETS
Beginning of period 2,284,412,093 1,318,500,449
End of period (including undistributed net investment income of $5,530,661 and $4,150,957,
respectively) $ 3,459,305,442 $ 2,284,412,093
OTHER INFORMATION
Shares
Sold 50,281,447 68,815,564
Issued in reinvestment of distributions 10,351,678 7,484,681
Redeemed (4,656,990) (12,882,315)
Net increase (decrease) 55,976,135 63,417,930
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 D 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.35 $ 15.44 $ 13.40 $ 11.85 $ 9.51 $ 12.29
Income from Investment Operations
Net investment income .20 .41 .37 .40 .50 .58
Net realized and unrealized gain (loss) 2.32 .64 2.06 1.57 2.43 (2.38)
Total from investment operations 2.52 1.05 2.43 1.97 2.93 (1.80)
Less Distributions (.20) (.37) (.35) (.42) (.59) (.59)
From net investment income
In excess of net investment income - - (.04) - - -
From net realized gain (.78) (.77) - - - (.39)
Total distributions (.98) (1.14) (.39) (.42) (.59) (.98)
Net asset value, end of period $ 16.89 $ 15.35 $ 15.44 $ 13.40 $ 11.85 $ 9.51
TOTAL RETURN B, C 17.15% 7.07% 18.29% 16.89% 31.44% (15.29)
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,459,305 $ 2,284,412 $ 1,318,500 $ 592,880 $ 282,171 $ 154,080
Ratio of expenses to average net assets .62% A .58% .62% .65% .74% .78%
Ratio of expenses to average net assets before .62% A .60% .62% .65% .74% .78%
expense reductions
Ratio of net investment income to average net assets 2.72% A 2.83% 2.87% 3.52% 4.83% 6.01%
Portfolio turnover rate 100% A 134% 120% 74% 107% 94%
A ANNUALIZED
B TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
THE FINANCIAL STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
D EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL
STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT
CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
Growth 36.97% 14.84% 14.56%
S&P 500 26.07% 12.09% 13.58%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for
example, has a history of growth in the long run
and volatility in the short run. In turn, the share
price and return of a fund that invests in stocks
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare these figures to the performance of the Standard & Poor's
Composite Index of 500 Stocks- a common proxy for the U.S. stock market.
This benchmark includes reinvested dividends and capital gains, if any, and
excludes the effects of sales charges.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, October 9, 1986.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER LIFE OF FUND
VIP Growth (212) Standard & Poor's 500
10/09/86 10000.00 10000.00
10/31/86 10000.00 10329.97
11/30/86 10220.00 10580.99
12/31/86 10030.00 10311.18
01/31/87 11100.00 11700.09
02/28/87 11650.00 12162.25
03/31/87 11839.97 12513.74
04/30/87 11839.97 12402.36
05/31/87 11920.10 12510.26
06/30/87 12270.69 13142.03
07/31/87 12761.52 13808.33
08/31/87 13142.16 14323.38
09/30/87 12991.91 14009.70
10/31/87 10137.09 10992.01
11/30/87 9425.90 10086.27
12/31/87 10397.53 10853.84
01/31/88 10623.12 11310.78
02/29/88 11484.46 11837.86
03/31/88 11381.92 11472.07
04/30/88 11525.47 11599.41
05/31/88 11422.93 11700.33
06/30/88 11997.15 12237.37
07/31/88 11935.63 12190.87
08/31/88 11648.52 11776.38
09/30/88 11976.65 12278.06
10/31/88 12007.41 12619.39
11/30/88 11894.61 12438.93
12/31/88 12017.66 12656.61
01/31/89 12879.00 13583.07
02/28/89 12612.39 13244.86
03/31/89 12993.68 13553.46
04/30/89 13680.85 14256.89
05/31/89 14170.19 14834.29
06/30/89 13982.78 14749.73
07/31/89 15232.18 16081.64
08/31/89 15492.47 16396.84
09/30/89 15627.82 16329.61
10/31/89 15190.53 15950.76
11/30/89 15440.41 16276.16
12/31/89 15804.81 16666.78
01/31/90 14888.59 15548.44
02/28/90 15030.81 15749.02
03/31/90 15214.51 16166.37
04/30/90 14771.47 15762.21
05/31/90 16078.97 17299.02
06/30/90 16413.95 17181.39
07/31/90 16154.61 17126.41
08/31/90 14490.52 15578.18
09/30/90 12999.33 14819.52
10/31/90 12534.68 14755.80
11/30/90 13550.42 15709.03
12/31/90 13950.23 16147.31
01/31/91 14879.53 16851.33
02/28/91 15989.61 18056.20
03/31/91 16472.15 18493.16
04/30/91 16318.61 18537.54
05/31/91 17283.69 19338.37
06/30/91 16000.57 18452.67
07/31/91 17524.96 19312.56
08/31/91 18303.60 19770.27
09/30/91 18446.17 19440.11
10/31/91 19016.45 19700.60
11/30/91 17930.73 18906.67
12/31/91 20299.56 21069.59
01/31/92 21538.81 20677.70
02/29/92 21989.40 20946.51
03/31/92 20641.73 20538.05
04/30/92 19833.13 21141.87
05/31/92 19664.67 21245.47
06/30/92 18901.00 20928.91
07/31/92 19630.98 21784.90
08/31/92 19091.92 21338.31
09/30/92 19428.83 21590.10
10/31/92 20181.28 21665.67
11/30/92 21528.94 22404.47
12/31/92 22191.55 22680.04
01/31/93 22629.54 22870.55
02/28/93 22163.03 23181.59
03/31/93 23046.80 23670.73
04/30/93 22805.77 23097.89
05/31/93 24504.44 23716.92
06/30/93 24756.94 23785.70
07/31/93 24688.08 23690.55
08/31/93 25927.65 24588.43
09/30/93 26409.70 24399.09
10/31/93 26662.20 24904.16
11/30/93 25583.32 24667.57
12/31/93 26490.04 24966.04
01/31/94 27155.74 25814.89
02/28/94 26875.65 25115.31
03/31/94 25654.59 24020.28
04/30/94 25813.32 24327.74
05/31/94 25215.00 24726.71
06/30/94 23932.88 24120.91
07/31/94 24763.21 24912.07
08/31/94 26167.43 25933.47
09/30/94 25849.96 25298.10
10/31/94 26900.07 25867.31
11/30/94 25825.53 24925.22
12/31/94 26484.91 25294.86
01/31/95 25984.27 25950.76
02/28/95 27060.36 26962.06
03/31/95 28042.58 27757.71
04/30/95 28987.98 28575.17
05/31/95 30117.54 29717.32
06/30/95 32781.83 30407.65
Let's say you invested $10,000 in Growth Portfolio on October 9, 1986, when
the fund started. By June 30, 1995, your investment would have grown to
$32,782 - a 227.82% increase. That compares to $10,000 invested in the S&P
500, which would have grown to $30,408 over the same period - a 204.08%
increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Oracle Systems Corp. 3.6
Intel Corp. 3.1
DSC Communications Corp. 2.7
Applied Materials, Inc. 2.3
Compaq Computer Corp. 2.3
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Technology 52.6
Utilities 9.4
Retail & Wholesale 8.7
Media & Leisure 4.5
Industrial Machinery & Equipment 4.1
ASSET ALLOCATION AS OF JUNE 30, 1995*
Row: 1, Col: 1, Value: 3.4
Row: 1, Col: 2, Value: 96.59999999999999
Stocks 96.6%
Short-term investment 3.4%
FOREIGN INVESTMENTS 6.3%
*
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Lawrence Greenberg, Portfolio
Manager of Growth Portfolio
Q. LARRY, HOW HAS THE FUND DONE OVER THE PAST SIX MONTHS?
A. Quite well. From December 31, 1994, through June 30, 1995, the fund beat
the Standard & Poor's 500 index, which returned 20.21%.
Q. WHAT MADE THE DIFFERENCE?
A. In the second half of 1994, growth stocks began outperforming cyclicals
- stocks in sectors like autos and steel that tend to rise or fall with the
economy. Since then, the economy has slowed and interest rates have been
flat or falling - a perfect environment for growth stocks. My strategy was
to concentrate on those companies with the fastest earnings growth
opportunities for `95 and `96. This aggressive position, especially in
technology, paid off handsomely when growth stocks rebounded.
Q. IN FACT, OVER 50% OF THE FUND WAS IN TECHNOLOGY AT THE END OF JUNE. WHY
SUCH A HUGE BET?
A. Because on a stock-by-stock basis that's where I'm still finding what I
believe are the best growth opportunities. Technology stocks are benefiting
from strong corporate and consumer demand. Business is booming across all
segments - from PCs and software to semiconductors and networking. Plus,
unlike a retailer, which can only grow as fast as it can build bricks and
mortar, a technology company can grow at any rate. The fund has dozens of
companies that are growing sales well over 100% per year. Finally, despite
the fastest sales and earnings growth of any stocks in the market, many of
these companies still have attractive prices compared to other measures
like earnings.
Q. WHERE DID YOU FIND THE BEST OPPORTUNITIES?
A. Across the board. I added new technology names, but I also made bigger
investments in the companies I have the most confidence in. For example, I
significantly boosted the fund's stake in both Intel, which makes
microprocessors like the Pentium chip that are the brains of PCs, and
Micron Technology, one of the few manufacturers of memory chips called
DRAMs that go inside PCs and other electronic equipment. Both stocks posted
sizable gains for the period. I also added to our stake in Applied
Materials, the leading supplier of semiconductor manufacturing equipment,
whose sales grew more than 60% this year. Our biggest investment is still
Oracle, the leading provider of software for client-server set-ups; it
continued to benefit as more companies moved away from mainframes toward
PCs linked through networks.
Q. WERE THERE DISAPPOINTMENTS?
A. Sure. The stock price of Sybase, a competitor to Oracle, fell nearly 50%
in the last six months as it ran into problems launching a new product. One
of our biggest positions six months ago was Motorola; it started having
some near-term problems related to oversupply on its cellular handsets, so
I cut back even though the stock's long-term outlook remained attractive.
Finally, some retailers like Home Depot and Lowe's turned in disappointing
short-term results as heavy rains in California and the Southeast hurt
business. But many of the "hard good category killers" (or superstores) I
focused on continued to grow despite the slowdown in overall retail sales
that we saw this spring.
Q. WHY DID YOU CUT BACK IN HEALTH CARE?
A. The fund's health care stake was around 3% at the end of June, down from
7.7% six months earlier. During the first half of 1994, uncertainty
surrounding President Clinton's plans for health care reform had hurt the
sector. Then, last fall, the stocks rallied as it became apparent that
health care legislation wouldn't pass anytime soon. But once the
Republicans took charge in January, they cast another cloud over the sector
as they promised to re-examine programs like Medicare. So I decided to
watch from the sidelines.
Q. LOOKING AHEAD, WHAT SHOULD SHAREHOLDERS EXPECT?
A. In the past, technology stocks haven't done as well over the summer, as
European demand dries up and new product launches disappear. But this year,
since demand has been so strong, we may see no summer slowdown or one
that's much less pronounced. Nevertheless, shareholders should expect
volatility because the fund is aggressively invested in the fastest-growing
companies. If either the technology sector or the market declines, the fund
will suffer more than other stock funds. But it's also in a good position
to benefit more than its peers from a long-term up market, which I believe
is more likely.
FUND FACTS
GOAL: to increase the value of the fund's
shares over the long term by investing in
stocks with above-average growth potential
START DATE: October 9, 1986
SIZE: as of June 30, 1995, more than $3.1 billion
MANAGER: Lawrence Greenberg, since 1991;
manager, Fidelity Emerging Growth Portfolio,
since 1993; Fidelity Select Environmental
Services Portfolio, October 1986 - April 1991;
Fidelity Select Medical Delivery Portfolio July
1989 - April 1991; joined Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 96.0%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.4%
AEROSPACE & DEFENSE - 0.3%
Rockwell International Corp. 125,000 $ 5,718,750
Special Devices, Inc. (a) 173,900 3,869,263
9,588,013
DEFENSE ELECTRONICS - 0.1%
Trimble Navigation Ltd. (a) 100,000 2,837,500
TOTAL AEROSPACE & DEFENSE 12,425,513
BASIC INDUSTRIES - 1.1%
CHEMICALS & PLASTICS - 0.5%
Airgas, Inc. (a) 445,000 11,959,375
du Pont (E.I.) de Nemours & Co. 75,000 5,156,250
17,115,625
METALS & MINING - 0.6%
Alcan Aluminium Ltd. 100,000 3,023,679
Aluminum Co. of America 175,000 8,771,875
IMCO Recycling, Inc. 299,000 5,606,250
Reynolds Metals Co. 40,000 2,070,000
19,471,804
TOTAL BASIC INDUSTRIES 36,587,429
CONGLOMERATES - 0.2%
Tyco International Ltd. 125,000 6,750,000
CONSTRUCTION & REAL ESTATE - 0.8%
BUILDING MATERIALS - 0.1%
Elcor Corp. (a) 36,700 816,575
Sherwin-Williams Co. 85,000 3,028,125
3,844,700
CONSTRUCTION - 0.3%
Oakwood Homes Corp. 271,700 6,962,313
Standard Pacific Corp. 300,000 2,062,500
9,024,813
ENGINEERING - 0.4%
Fluor Corp. 65,000 3,380,000
Glenayre Technologies, Inc. (a) 172,575 8,801,325
12,181,325
TOTAL CONSTRUCTION & REAL ESTATE 25,050,838
DURABLES - 3.2%
AUTOS, TIRES, & ACCESSORIES - 2.6%
Chrysler Corp. 400,000 19,150,000
Ford Motor Co. 400,000 11,900,000
General Motors Corp. 877,634 41,139,094
Safety Components International, Inc. 220,000 3,630,000
Smith (A.O.) Corp. Class B 127,600 2,998,600
TRW, Inc. 34,100 2,723,738
81,541,432
CONSUMER ELECTRONICS - 0.1%
Whirlpool Corp. 60,000 3,300,000
HOME FURNISHINGS - 0.2%
Heilig-Meyers Co. 100,000 2,550,000
Leggett & Platt, Inc. 75,000 3,300,000
5,850,000
TEXTILES & APPAREL - 0.3%
Shaw Industries, Inc. 112,500 1,912,500
Tommy Hilfiger (a) 300,500 8,414,000
10,326,500
TOTAL DURABLES 101,017,932
SHARES VALUE (NOTE 1)
ENERGY - 0.7%
ENERGY SERVICES - 0.1%
Baker Hughes, Inc. 175,000 $ 3,587,500
INDEPENDENT POWER - 0.2%
Thermo Electron Corp. (a) 111,100 4,471,775
OIL & GAS - 0.4%
British Petroleum PLC ADR 75,030 6,424,444
Chesapeake Energy Corp. (a) 75,000 1,931,250
Kerr-McGee Corp. 76,000 4,075,500
12,431,194
TOTAL ENERGY 20,490,469
FINANCE - 3.5%
BANKS - 0.7%
Banc One Corp. 200,000 6,450,000
Bank of New York Co., Inc. 100,000 4,037,500
Bankers Trust New York Corp. 105,000 6,510,000
Chemical Banking Corp. 135,000 6,378,750
23,376,250
CREDIT & OTHER FINANCE - 0.5%
American Express Co. 400,000 14,050,000
FEDERAL SPONSORED CREDIT - 1.3%
Federal National Mortgage Association 425,000 40,109,375
INSURANCE - 0.5%
American International Group, Inc. 65,000 7,410,000
Travelers, Inc. (The) 200,000 8,750,000
16,160,000
SECURITIES INDUSTRY - 0.5%
Alliance Entertainment Corp. (a) 525,000 4,921,875
Edwards (A.G.), Inc. 111,100 2,499,750
Merrill Lynch & Co., Inc. 156,500 8,216,250
15,637,875
TOTAL FINANCE 109,333,500
HEALTH - 2.9%
DRUGS & PHARMACEUTICALS - 0.7%
Biogen, Inc. (a) 95,000 4,227,500
Dura Pharmaceuticals, Inc. (a) 160,000 3,010,000
Elan Corp. PLC ADR (a) 100,000 4,075,000
North American Biologicals, Inc. (a) 165,000 1,546,875
Pfizer, Inc. 200,000 9,237,500
US Bioscience, Inc. (a) 190 819
US Bioscience, Inc. (warrants) (a) 569 676
22,098,370
MEDICAL EQUIPMENT & SUPPLIES - 0.7%
Cardinal Health, Inc. 236,100 11,155,725
Millipore Corp. 800 53,698
St. Jude Medical, Inc. 60,000 3,007,500
Thermedics, Inc. (a) 175,000 3,412,500
Thermo Cardiosystems, Inc. (a) 100,000 3,662,500
21,291,923
MEDICAL FACILITIES MANAGEMENT - 1.5%
American Medical Response (a) 195,000 5,460,000
Apria Healthcare Group, Inc. (a) 126,000 3,559,500
Columbia/HCA Healthcare Corp. 375,025 16,219,831
HEALTHSOUTH Rehabilitation Corp. 950,000 16,506,250
Rotech Medical Corp. (a) 40,000 1,110,000
United HealthCare Corp. 75,000 3,103,125
Vivra, Inc. (a) 44,000 1,193,500
47,152,206
TOTAL HEALTH 90,542,499
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 4.1%
ELECTRICAL EQUIPMENT - 2.2%
Avid Technology, Inc. (a) 70,050 $ 2,626,875
General Electric Co. 875,000 49,328,125
General Signal Corp. 100,000 3,975,000
Oak Industries, Inc. (a) 105,300 2,711,475
Scientific-Atlanta, Inc. 370,000 8,140,000
United Communication Industry PCL
(For. Reg.) 154,000 2,245,899
69,027,374
INDUSTRIAL MACHINERY & EQUIPMENT - 1.4%
AGCO Corp. 298,300 11,186,250
Case Corp. 200,000 5,950,000
Caterpillar, Inc. 350,000 22,487,500
Ingersoll-Rand Co. 125,000 4,781,250
Semitool, Inc. 22,700 726,400
45,131,400
POLLUTION CONTROL - 0.5%
Browning-Ferris Industries, Inc. 210,000 7,586,250
TETRA Technologies, Inc. (a) 185,000 2,243,125
WMX Technologies, Inc. 175,000 4,965,625
14,795,000
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 128,953,774
MEDIA & LEISURE - 4.5%
BROADCASTING - 1.1%
Capital Cities/ABC, Inc. 65,000 6,816,875
Citicasters, Inc. 65,000 1,787,500
Clear Channel Communications, Inc. 25,000 1,609,375
EZ Communications, Inc. 44,400 821,400
Infinity Broadcasting Corp. (a) 50,000 1,668,750
Jacor Communications, Inc. Class A 73,400 1,174,400
Lin Television Corp. 50,000 1,681,250
Renaissance Communications Corp. (a) 65,000 2,177,500
Tele-Communications, Inc. Class A 225,000 5,273,438
Viacom, Inc. Class B (non-vtg.) (a) 250,084 11,597,646
34,608,134
ENTERTAINMENT - 0.4%
Casino America, Inc. (a) 100,000 1,512,500
Disney (Walt) Co. 110,000 6,118,750
Players International, Inc. (a) 217,500 4,350,000
11,981,250
LEISURE DURABLES & TOYS - 0.3%
Cobra Golf, Inc. (a) 204,900 6,479,963
Hasbro, Inc. 84,000 2,667,000
9,146,963
LODGING & GAMING - 0.7%
Doubletree Corp. (a) 300,000 6,468,750
Hospitality Franchise Systems, Inc. 453,600 15,705,900
22,174,650
PUBLISHING - 0.1%
Houghton Mifflin Co. 50,000 2,637,500
RESTAURANTS - 1.9%
Apple South, Inc. 500,000 9,750,000
Applebee's International, Inc. 275,000 7,081,250
Landry's Seafood Restaurants, Inc. (a) 334,200 6,684,000
Lone Star Steakhouse Saloon (a) 375,000 11,367,188
Outback Steakhouse, Inc. (a) 385,000 11,116,875
Papa John's International, Inc. (a) 161,800 5,663,000
Starbucks Corp. (a) 180,000 6,412,500
Uno Restaurant Corp. (a) 226,625 2,351,234
60,426,047
TOTAL MEDIA & LEISURE 140,974,544
SHARES VALUE (NOTE 1)
NONDURABLES - 1.3%
BEVERAGES - 0.3%
PepsiCo, Inc. 225,000 $ 10,265,625
HOUSEHOLD PRODUCTS - 0.3%
Colgate-Palmolive Co. 50,000 3,656,250
Gillette Co. 130,000 5,801,250
9,457,500
TOBACCO - 0.7%
Philip Morris Companies, Inc. 225,000 16,734,375
RJR Nabisco Holdings Corp. 200,000 5,575,000
22,309,375
TOTAL NONDURABLES 42,032,500
RETAIL & WHOLESALE - 8.7%
APPAREL STORES - 0.7%
Baby Superstore, Inc. (a) 65,000 3,063,125
Gymboree Corp. (a) 135,000 3,923,438
Just For Feet, Inc. (a)(c) 402,000 16,029,750
23,016,313
APPLIANCE STORES - 0.1%
Cellstar Corp. (a) 165,700 3,873,238
DRUG STORES - 0.4%
General Nutrition Companies, Inc. (a) 365,000 12,820,625
GENERAL MERCHANDISE STORES - 1.5%
Dollar General Corp. 150,050 4,745,331
Wal-Mart Stores, Inc. 1,600,000 42,800,000
47,545,331
RETAIL & WHOLESALE, MISCELLANEOUS - 6.0%
Barnes & Noble, Inc. (a) 153,100 5,205,400
Bed Bath & Beyond, Inc. (a) 700,000 16,975,000
Borders Group, Inc. (a) 80,000 1,150,000
Circuit City Stores, Inc. 150,000 4,743,750
Corporate Express (a) 275,000 5,878,125
Home Depot, Inc. (The) 345,066 14,018,306
Lowe's Companies, Inc. 1,175,000 35,103,125
Officemax, Inc. (a) 525,000 14,634,375
Office Depot, Inc. (a) 320,000 9,000,000
Petco Animal Supplies, Inc. (a) 378,700 8,804,775
Petsmart, Inc. (a) 600,000 17,250,000
Sport Supply Group, Inc. 309,550 3,869,375
Staples, Inc. (a) 550,000 15,881,250
Sunglass Hut International, Inc. (a) 886,500 31,027,500
Viking Office Products, Inc. (a) 150,000 5,493,750
189,034,731
TOTAL RETAIL & WHOLESALE 276,290,238
SERVICES - 2.3%
LEASING & RENTAL - 0.9%
Hollywood Entertainment Corp. (a) 605,000 27,225,000
SERVICES - 1.4%
Adia SA (Bearer) (a) 25,000 5,202,438
Block (H & R), Inc. 100,000 4,112,500
Children's Discovery Centers of
America, Inc. (a) 135,000 2,261,250
First Financial Management Corp. 75,000 6,412,500
Medaphis Corp. (a) 950,000 20,662,500
Zebra Technologies Corp. Class A (a) 100,000 5,325,000
43,976,188
TOTAL SERVICES 71,201,188
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - 52.0%
COMMUNICATIONS EQUIPMENT - 10.9%
Apertus Technologies, Inc. (a) 57,000 $ 498,750
Cabletron Systems, Inc. (a) 85,000 4,526,250
Cisco Systems, Inc. (a) 1,215,000 61,433,438
DSC Communications Corp. (a) 1,850,000 86,025,000
Dialogic Corp. (a) 34,800 617,700
Ericsson (L.M.) Telephone Co.
Class B ADR 900,000 18,000,000
General Instrument Corp. (a) 350,000 13,431,250
Global Village Communication (a) 573,800 8,965,625
Inter-Tel, Inc. (a) 62,300 942,288
InterVoice, Inc. (a) 250,000 4,375,000
Lo Jack Corp. (a) 240,000 2,655,000
Microtest, Inc. (a) 125,000 2,781,250
Newbridge Networks Corp. (a) 525,000 18,506,250
Nokia Corp. AB :
Series A 160,000 9,377,565
sponsored ADR 915,000 54,556,875
Tellabs, Inc. (a) 147,800 7,112,875
3Com Corp. (a) 600,000 40,200,000
U.S. Robotics Corp. 74,600 8,131,400
342,136,516
COMPUTER SERVICES & SOFTWARE - 12.9%
Adobe Systems, Inc. 60,000 3,480,000
Alantec Corp. 65,000 2,226,250
America Online, Inc. (a) 240,500 10,582,000
American Business Information, Inc. (a) 140,800 3,801,600
Ascend Communications, Inc. (a) 60,000 3,030,000
Automatic Data Processing, Inc. 125,000 7,859,375
Broderbund Software, Inc. (a) 72,800 4,641,000
CUC International, Inc. (a) 502,500 14,070,000
Cambridge Technology Partners
Mass., Inc. (a) 90,000 2,970,000
Ceridian Corp. (a) 140,000 5,162,500
Cerner Corp. (a) 40,000 2,450,000
CompUSA, Inc. (a) 290,000 9,642,500
Computer Sciences Corp. (a) 160,000 9,100,000
Davidson & Associates, Inc. (a) 65,000 2,583,750
GMIS, Inc. (a) 212,600 4,849,938
Hyperion Software, Inc. (a) 60,000 2,715,000
Informix Corp. (a) 800,000 20,300,000
Inso Corp. (a) 30,000 1,792,500
Integrated Silicon Systems, Inc. (a) 108,400 4,092,100
Intersolv, Inc. (a) 315,000 7,323,750
Mercury Interactive Group Corp. (a) 252,500 5,081,563
Microsoft Corp. (a) 740,000 66,877,500
Network Peripherals, Inc. (a) 260,000 5,671,250
Novell, Inc. (a) 524,200 10,451,238
Oracle Systems Corp. (a) 2,900,000 112,012,500
Parametric Technology Corp. (a) 296,900 14,770,775
Paychex, Inc. 85,000 3,081,250
Peoplesoft, Inc. (a) 375,000 20,343,750
Platinum Technology, Inc. (a) 100,000 1,812,500
Reuters Holdings PLC ADR Class B 65,000 3,258,125
SAP AG sponsored ADR (a)(b) 35,000 1,461,250
Softkey International, Inc. (a) 150,000 4,781,250
Stratacom, Inc. (a) 490,400 23,907,000
SunGard Data Systems, Inc. (a) 110,000 5,747,500
Systems & Computer Technology Corp. (a) 125,000 2,500,000
Wonderware Corp. (a) 77,600 3,123,400
407,553,114
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - 10.5%
ADAPTEC, Inc. (a) 375,000 $ 13,875,000
Apple Computer, Inc. 165,000 7,662,188
Bay Networks, Inc. (a) 800,000 33,100,000
Compaq Computer Corp. (a) 1,579,800 71,683,425
Comverse Technology, Inc. (a) 75,000 1,331,250
Dell Computer Corp. (a) 125,000 7,515,625
Digital Equipment Corp. (a) 200,000 8,150,000
Fore Systems, Inc. (a) 65,000 1,966,250
Gateway 2000, Inc. (a) 200,000 4,550,000
General Motors Corp. Class E (a) 505,600 21,993,600
Hewlett-Packard Co. 315,000 23,467,500
International Business Machines Corp. 635,000 60,960,000
Micom Communication Corp. (a) 146,100 949,650
Pitney Bowes, Inc. 110,000 4,221,250
Radius, Inc. (a) 290,000 3,190,000
Read Rite Corp. (a) 225,026 6,019,446
Seagate Technology (a) 214,900 8,434,825
Silicon Graphics, Inc. (a) 888,100 35,412,988
Sun Microsystems, Inc. (a) 224,000 10,864,000
Xerox Corp. (a) 45,000 5,276,250
330,623,247
ELECTRONIC INSTRUMENTS - 2.8%
Applied Materials, Inc. (a) 835,000 72,331,875
Electro Scientific Industries, Inc. (a) 117,500 3,906,875
Kulicke & Soffa Industries, Inc. 40,000 2,652,500
Novellus System, Inc. (a) 143,000 9,688,250
88,579,500
ELECTRONICS - 14.7%
AMP, Inc. 150,000 6,337,500
Advanced Micro Devices, Inc. 400,000 14,550,000
Alliance Semiconductor Corp. (a) 160,000 7,840,000
Altera Corp. (a) 387,400 16,755,050
Analog Devices, Inc. (a) 275,000 9,350,000
Atmel Corp. (a) 160,000 8,860,000
Avnet, Inc. 282,800 13,680,450
C-Cube Microsystems, Inc. (a) 75,000 2,043,750
Cascade Communications Corp. (a) 75,000 3,243,750
Chips & Technologies, Inc. (a) 201,300 2,642,063
Cirrus Logic, Inc. (a) 80,000 5,015,000
Cypress Semiconductor Corp. (a) 275,000 11,137,500
Hitachi Ltd. ADR 35,000 3,508,750
Integrated Device Technology, Inc. (a) 72,900 3,371,625
Integrated Silicon Solution (a) 147,800 7,722,550
Intel Corp. 1,530,000 96,868,125
Kemet Corp. (a) 135,000 7,087,500
LSI Logic Corp. (a) 758,930 29,693,136
Linear Technology Corp. 225,000 14,850,000
Marshall Industries (a) 102,700 3,440,450
Maxim Integrated Products, Inc. (a) 90,000 4,590,000
Microchip Technology, Inc. (a) 275,050 10,004,944
Micron Technology, Inc. 1,300,000 71,337,500
Motorola, Inc. 235,000 15,774,375
National Semiconductor Corp. (a) 225,000 6,243,750
SGS-Thomson Microelectronic NV (a) 275,000 11,171,875
S-3, Inc. (a) 81,700 2,941,200
Samsung Electronics Co. Ltd.:
GDR (b) 55,000 5,280,000
GDS (non-vtg.) (Reg.) (a) 102,800 5,345,600
Tencor Instruments (a) 80,000 3,280,000
Texas Instruments, Inc. 235,000 31,460,625
Thomas & Betts Corp. 34,600 2,365,775
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
VLSI Technology, Inc. (a) 135,000 $ 4,066,875
Wholesale Cellular USA, Inc. (a) 150,000 3,225,000
Wyle Laboratories 74,800 2,103,750
Xilinx, Inc. (a) 175,000 16,450,000
463,638,468
PHOTOGRAPHIC EQUIPMENT - 0.2%
3D Systems Corp. 375,000 6,937,500
TOTAL TECHNOLOGY 1,639,468,345
TRANSPORTATION - 0.9%
AIR TRANSPORTATION - 0.4%
AMR Corp. (a) 110,000 8,208,750
Atlantic Southeast Airlines, Inc. 59,700 1,798,463
Comair Holdings, Inc. 25,000 946,875
Southwest Airlines Co. 137,700 3,287,588
14,241,676
RAILROADS - 0.5%
ABC Rail Products Corp. (a) 150,000 3,450,000
CSX Corp. 151,200 11,358,900
14,808,900
TOTAL TRANSPORTATION 29,050,576
UTILITIES - 9.4%
CELLULAR - 5.9%
AirTouch Communications, Inc. (a) 2,300,000 65,550,000
Arch Communications Group, Inc. (a) 150,000 3,337,500
BCE Mobile Communications, Inc. (a) 275,000 9,166,666
Cellular Communications, Inc.,
Series A (redeemable) (a) 200,000 9,100,000
Metrocall, Inc. (a) 150,000 2,737,500
Mobile Telecommunications
Technologies, Inc. (a) 75,000 2,053,125
Mobilemedia Corp. (a) 13,000 240,500
Palmer Wireless, Inc. (a) 575,300 9,420,538
USA Mobile Communications (a) 116,600 2,040,500
United States Cellular Corp. (a) 315,000 9,528,750
Vanguard Cellular Systems, Inc.
Class A (a)(c) 2,176,000 52,224,000
Vodafone Group PLC sponsored ADR 548,700 20,782,013
186,181,092
TELEPHONE SERVICES - 3.5%
ALC Communications Corp. (a) 215,000 9,701,875
AT&T Corp. 425,000 22,578,125
Ameritech Corp. 493,700 21,722,800
Bell Atlantic Corp. 375,000 21,000,000
BellSouth Corp. 150,000 9,525,000
LCI International, Inc. (a) 125,000 3,828,125
SBC Communications, Inc. 475,000 22,621,875
110,977,800
TOTAL UTILITIES 297,158,892
TOTAL COMMON STOCKS
(Cost $2,234,010,970) 3,027,328,237
NONCONVERTIBLE PREFERRED STOCKS - 0.6%
SHARES VALUE (NOTE 1)
TECHNOLOGY - 0.6%
COMPUTER SERVICES & SOFTWARE - 0.2%
SAP AG (a) 5,250 $ 6,622,118
COMPUTERS & OFFICE EQUIPMENT - 0.4%
Silicon Graphics CDA Ltd.
exchangeable (non-vtg.) (a) 280,080 11,132,774
TOTAL NONCONVERTIBLE PREFERRED STOCKS
(Cost $15,178,912) 17,754,892
REPURCHASE AGREEMENTS - 3.4%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 6.22% dated
6/30/95 due 7/3/95 $ 106,155,996 106,101,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $2,355,290,882) $ 3,151,184,129
LEGEND
(a) Non-income producing
(b) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $6,741,250 or 0.2% of net
assets.
(c) A company in which the fund has ownership of at least 5% of the voting
securities is an affiliated company. Transactions during the period with
companies that are or were affiliates are as follows:
PURCHASES SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
Just For Feet, Inc. (a) $ 2,342,009 - - $ 16,029,750
Vanguard Cellular Systems, Inc.
Class A (a) 1,588,387 - - 52,224,000
TOTAL $ 3,930,396 $ - $ - $ 68,253,750
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $1,556,970,263 and $967,373,548, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $555,941 for the period
(see Note 3 of Notes to Financial Statements).
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $2,361,955,662. Net unrealized appreciation aggregated
$789,228,467, of which $809,605,722 related to appreciated investment
securities and $20,377,255 related to depreciated investment securities.
At December 31, 1994, the fund had a capital loss carryforward of
approximately $68,037,000 all of which will expire on December 31, 2002.
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $106,101,000) (cost $2,355,290,882) $ 3,151,184,129
- See accompanying schedule
Receivable for investments sold 15,240,448
Receivable for fund shares sold 4,631,877
Dividends receivable 1,976,933
Other receivables 241,989
TOTAL ASSETS 3,173,275,376
LIABILITIES
Payable for investments purchased $ 31,104,827
Payable for fund shares redeemed 2,527,529
Accrued management fee 1,523,671
Other payables and accrued expenses 374,992
TOTAL LIABILITIES 35,531,019
NET ASSETS $ 3,137,744,357
Net Assets consist of:
Paid in capital $ 2,373,300,032
Undistributed net investment income 3,900,899
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (35,349,821)
Net unrealized appreciation (depreciation) on investments 795,893,247
NET ASSETS, for 117,514,234 shares outstanding $ 3,137,744,357
NET ASSET VALUE, offering price and redemption price per share ($3,137,744,357 (divided by) 117,514,234 shares) $26.70
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 8,244,859
Dividends
Interest 5,551,271
TOTAL INCOME 13,796,130
EXPENSES
Management fee $ 7,756,500
Transfer agent fees 627,931
Accounting fees and expenses 378,173
Non-interested trustees' compensation 4,869
Custodian fees and expenses 69,955
Registration fees 147,294
Audit 14,797
Legal 4,080
Miscellaneous 7,349
TOTAL EXPENSES 9,010,948
NET INVESTMENT INCOME 4,785,182
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 46,674,141
Foreign currency transactions 395 46,674,536
Change in net unrealized appreciation (depreciation) on investment securities 517,371,258
NET GAIN (LOSS) 564,045,794
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 568,830,976
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 4,785,182 $ 11,810,184
Net investment income
Net realized gain (loss) 46,674,536 (74,102,658)
Change in net unrealized appreciation (depreciation) 517,371,258 80,193,945
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 568,830,976 17,901,471
Distributions to shareholders (12,404,421) (7,589,523)
From net investment income
From net realized gain - (80,320,550)
TOTAL DISTRIBUTIONS (12,404,421) (87,910,073)
Share transactions 750,772,650 1,289,938,019
Net proceeds from sales of shares
Reinvestment of distributions 12,404,421 87,909,946
Cost of shares redeemed (323,728,603) (549,819,377)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 439,448,468 828,028,588
TOTAL INCREASE (DECREASE) IN NET ASSETS 995,875,023 758,019,986
NET ASSETS
Beginning of period 2,141,869,334 1,383,849,348
End of period (including undistributed net investment income of $3,900,899 and $11,472,202, $ 3,137,744,357 $ 2,141,869,334
respectively)
OTHER INFORMATION
Shares 32,171,873 60,676,019
Sold
Issued in reinvestment of distributions 568,749 4,039,985
Redeemed (13,969,564) (25,920,211)
Net increase (decrease) 18,771,058 38,795,793
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 F 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.69 $ 23.08 $ 19.76 $ 18.51 $ 12.91 $ 15.18
Income from Investment Operations
Net investment income .04 .12 .12 .09 D .09 D .24
Net realized and unrealized gain (loss) 5.09 (.12) E 3.64 1.64 5.72 (1.98)
Total from investment operations 5.13 - 3.76 1.73 5.81 (1.74)
Less Distributions (.12) (.12) (.11) (.05) (.21) (.21)
From net investment income
From net realized gain - (1.27) (.21) (.43) - (.32)
In excess of net realized gain - - (.12) - - -
Total distributions (.12) (1.39) (.44) (.48) (.21) (.53)
Net asset value, end of period $ 26.70 $ 21.69 $ 23.08 $ 19.76 $ 18.51 $ 12.91
TOTAL RETURN B, C 23.78% (.02) 19.37% 9.32% 45.51% (11.73)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,137,744 $ 2,141,869 $ 1,383,849 $ 749,837 $ 371,462 $ 135,487
Ratio of expenses to average net assets .72% A .69% .71% .75% .84% .88%
Ratio of expenses to average net assets
before expense .72% A .70% .71% .75% .84% .88%
reductions
Ratio of net investment income to average net
assets .38% A .69% .72% .83% .56% 2.69%
Portfolio turnover rate 82% A 122% 159% 262% 261% 88%
A ANNUALIZED
B TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
THE FINANCIAL STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET GAIN ON INVESTMENTS FOR THE PERIOD
ENDED DUE TO THE TIMING OF SALES
AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
F EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL
STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT
CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
OVERSEAS 2.96% 4.76% 7.12%
Morgan Stanley EAFE Index 1.65% 4.69% 6.97%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
Many markets around the globe offer the potential
for significant growth over time; however,
investing in foreign markets means assuming
greater risks than investing in the United States.
Factors like changes in a country's financial
markets, its local political and economic
climate, and the fluctuating value of its currency
create these risks. For these reasons an
international fund's performance may be more
volatile than a fund that invests exclusively in the
United States.
(checkmark)
You can compare the fund's figures to the performance of the Morgan Stanley
EAFE index - a broad measure of the performance of stocks in Europe,
Australia, and the Far East. This benchmark includes reinvested dividends
and capital gains, if any, and excludes the effects of sales charges.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of operations
January 28, 1987.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money. Foreign investments involve greater risks and
potential rewards than U.S. investments. These risks include political and
economic uncertainties of foreign countries, as well as the risk of
currency fluctuations.
$10,000 OVER LIFE OF FUND
VIP Overseas (22Europe, Australia,
01/28/87 10000.00 10000.00
01/31/87 10000.00 9997.46
02/28/87 10010.00 10296.66
03/31/87 10460.00 11140.41
04/30/87 11220.00 12319.18
05/31/87 11060.00 12319.14
06/30/87 10520.00 11926.66
07/31/87 10400.00 11905.82
08/31/87 11320.00 12798.54
09/30/87 11070.00 12597.05
10/31/87 8760.00 10777.00
11/30/87 8840.00 10938.65
12/31/87 9462.16 11263.46
01/31/88 9138.32 11464.55
02/29/88 9381.20 12228.75
03/31/88 9806.24 12980.64
04/30/88 9968.16 13169.27
05/31/88 9786.00 12747.12
06/30/88 9613.96 12411.13
07/31/88 9543.12 12800.51
08/31/88 9209.16 11968.24
09/30/88 9603.84 12491.19
10/31/88 10028.88 13559.96
11/30/88 10211.04 14367.68
12/31/88 10231.28 14447.79
01/31/89 10534.87 14701.99
02/28/89 10717.03 14777.56
03/31/89 10707.38 14487.53
04/30/89 11023.50 14621.89
05/31/89 10615.60 13826.42
06/30/89 10574.81 13593.67
07/31/89 11563.97 15300.67
08/31/89 11482.39 14612.54
09/30/89 12196.21 15278.16
10/31/89 11533.38 14664.33
11/30/89 12155.42 15401.50
12/31/89 12920.24 15969.77
01/31/90 12746.88 15375.56
02/28/90 12449.36 14302.43
03/31/90 12919.92 12812.46
04/30/90 12991.52 12710.78
05/31/90 13840.58 14161.09
06/30/90 14147.46 14036.37
07/31/90 14863.53 14234.08
08/31/90 13349.56 12851.83
09/30/90 12081.09 11060.74
10/31/90 13206.34 12784.21
11/30/90 12797.16 12030.10
12/31/90 12705.10 12224.98
01/31/91 12827.85 12620.40
02/28/91 13260.02 13973.29
03/31/91 12872.18 13134.44
04/30/91 13155.20 13263.42
05/31/91 13186.64 13401.82
06/30/91 12463.37 12417.04
07/31/91 13081.82 13027.11
08/31/91 13123.75 12762.56
09/30/91 13658.34 13481.84
10/31/91 13752.68 13672.96
11/30/91 13260.02 13034.64
12/31/91 13721.24 13707.79
01/31/92 13888.95 13415.00
02/29/92 13599.52 12934.85
03/31/92 13323.28 12080.93
04/30/92 14152.01 12138.36
05/31/92 14768.23 12950.85
06/30/92 14491.99 12336.56
07/31/92 13567.65 12020.83
08/31/92 13450.78 12774.79
09/30/92 12908.92 12522.52
10/31/92 12027.08 11865.66
11/30/92 11963.33 11977.32
12/31/92 12250.20 12039.27
01/31/93 12600.81 12037.79
02/28/93 12847.62 12401.41
03/31/93 13738.91 13482.39
04/30/93 14651.94 14761.90
05/31/93 14967.16 15073.67
06/30/93 14597.60 14838.49
07/31/93 15173.67 15357.91
08/31/93 15988.88 16186.97
09/30/93 15901.92 15822.62
10/31/93 16478.00 16310.23
11/30/93 15782.36 14884.55
12/31/93 16825.82 15959.32
01/31/94 17923.63 17308.60
02/28/94 17607.51 17260.66
03/31/94 17170.60 16517.22
04/30/94 17738.58 17218.03
05/31/94 17520.13 17119.18
06/30/94 17334.44 17361.11
07/31/94 17793.20 17528.07
08/31/94 18000.73 17943.05
09/30/94 17531.05 17377.92
10/31/94 17891.50 17956.61
11/30/94 17214.29 17093.61
12/31/94 17115.99 17200.65
01/31/95 16406.01 16539.88
02/28/95 16449.17 16492.41
03/31/95 16955.64 17521.06
04/30/95 17440.09 18180.00
05/31/95 17682.31 17963.28
06/30/95 17847.46 17648.27
Let's say you invested $10,000 in Overseas Portfolio on January 28, 1987,
when the fund started. By June 30, 1995, your investment would have grown
to $17,847 - a 78.47% increase. That compares to $10,000 invested in the
Morgan Stanley EAFE Index, which would have grown to $17,648 over the same
period - a 76.48% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1995
(BY ISSUER, EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S
INVESTMENTS
C. S. Holdings (Reg.) 1.8
Nestle SA (Reg.) 1.5
Deutsche Bank AG 1.3
Unilever NV Ord. 1.2
Swiss Bank Corp. (Bearer) 1.2
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Finance 26.4
Utilities 8.8
Nondurables 8.4
Durables 8.1
Basic Industries 6.2
GEOGRAPHIC DIVERSIFICATION AS OF JUNE 30, 1995
(BY LOCATION OF ISSUER) % OF FUND'S
INVESTMENTS
Japan 18.5
United Kingdom 12.4
Switzerland 9.8
France 7.5
Netherlands 6.9
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with John Hickling, Portfolio Manager of Overseas Portfolio
Q. JOHN, HOW HAS THE FUND PERFORMED?
A. For the six months and one year ended June 30, 1995, the fund's
performance topped that of the Morgan Stanley EAFE index - a broad measure
of stocks in Europe, Australia and the Far East. The index had total
returns of 2.60% and 1.65% for the six- and 12-month periods, respectively.
Q. WHAT WERE THE KEYS TO THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
A. First, I kept the fund fully invested through much of the period.
Second, some of the stocks I picked in Japan and Europe fared well. And
finally, the fund was able to benefit from new investments in emerging
markets.
Q. WHY DID THE EAFE INDEX OFFER RELATIVELY LOW RETURNS?
A. While European markets have performed relatively well - though not as
well as the U.S. market - emerging markets and Japan have not. Japan was
affected by a number of factors that dampened investor enthusiasm: the
Barings debacle, the Kobe earthquake and the subway gas attack. The
Japanese market also was hurt by the strength of the yen versus the dollar.
On the heels of Mexico's devaluation of the peso in late 1994, emerging
markets also struggled, although they appear to have pretty much bottomed
out.
Q. WHAT'S THE STORY BEHIND THE FUND'S INVESTMENTS IN JAPAN?
A. Even though Japan has the highest country representation in the fund,
I've kept the fund underweighted there, relative to the index. I've focused
much of the fund's Japanese investments in technology, including consumer
electronics companies Toshiba and Hitachi, and other manufacturers and
exporters that are poised to take advantage of economic activity both in
Japan and globally. While the technology sector has done well in the U.S.,
it has been weak in Japan, so I found valuations to be attractive. The
sector recently has shown some strong gains. In addition, I've targeted
some financial stocks. The Japanese market has started to pick up a bit
lately, and brokerage house Nomura Securities is poised to take advantage
because it has been cutting costs aggressively. In addition, it appears
trust banks such as Sumitomo Trust will be able to improve interest margins
- the difference between what they charge for loans and what they pay to
depositors - because of changing regulations.
Q. THE FUND IS OVERWEIGHTED IN EUROPE, RELATIVE TO THE INDEX. WHERE HAVE
YOU FOUND OPPORTUNITIES THERE?
A. Mainly in financial and consumer nondurable stocks, as well as interest
rate-sensitive issues - because European bond markets have been rallying -
and cyclicals - those that tend to rise and fall with the economy. European
stocks have rallied lately, mainly on the strength of the technology
sector. In the short run, I've missed some opportunity there, because I
found the tech stocks to be too expensive and risky. Some of the appealing
consumer nondurable names have been Guinness, Cadbury-Schweppes, Bass and
Nestle. Barclays, National Westminster, Swiss Bank and C.S. Holdings were
among the fund's financial stock investments. I've added investments in
cyclical stocks because they became cheap. Those include paper companies Mo
Och Domsjoe and Svenska Cellulosa; auto stocks Volvo and Peugeot; and tire
companies such as Michelin.
Q. WHAT ABOUT THE FUND'S EMERGING MARKET INVESTMENTS?
A. I've been more active there because, as I said, I felt they had hit
bottom, and there were a lot of very interesting stocks. Among the stocks
that have caught my eye have been Hong Kong/Shanghai Bank (HSBC) and Hong
Kong Land Holdings; Philippine Long Distance Telephone; the department
store Matahari and cigarette manufacturer Gudang Garam in Indonesia; Krung
Thai Bank; Telecom Argentina; and Mexican companies Bancomer, Telmex, Cemex
and Grupo Carso.
Q. WHAT'S YOUR OUTLOOK GOING FORWARD?
A. Several factors are important to consider. First of all, it seems most
stock markets reflect the sentiment that any worldwide recession will stay
pretty shallow and that growth will resume. Of course, this is the best
possible scenario. At the same time, if the U.S. market stumbles, one would
expect there to be a drop in foreign markets. In such a scenario, I believe
overseas markets wouldn't drop as far as the U.S, because they haven't
gained as much recently, but it's impossible to say for sure. How the
dollar does also will be important. Going forward, I'll stay with my usual
game plan, looking for opportunities in any markets that appear to have
excellent value.
FUND FACTS
GOAL: to increase the value of the fund's
shares by investing mainly in stocks in
Europe, the Far East, and the Pacific Basin
START DATE: January 28, 1987
SIZE: as of June 30, 1995, more than $1.2 billion
MANAGER: John Hickling, since 1993; manager
Fidelity Overseas Fund, since 1993; Fidelity
Advisor Overseas Fund, since 1993; Fidelity
Advisor Annuity Overseas Portfolio, since
January 1995; previously managed several
Fidelity international funds; joined Fidelity in
1982
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 89.2%
SHARES VALUE (NOTE 1)
ARGENTINA - 0.8%
Buenos Aires Embotelladora SA
sponsored ADR 41,800 $ 1,050,301
Perez Companc Class B 308,452 1,295,822
Telecom Argentina sponsored
ADR Class B 83,400 3,794,700
Telecom Argentina Stet France
Telecom SA 263,600 1,199,681
YPF Sociedad Anonima sponsored
ADR representing Class D shares 150,500 2,840,688
10,181,192
AUSTRALIA - 1.4%
Brambles Industries Ltd. 276,500 2,616,260
FAI Insurance Ltd. Ord. 2,037,900 809,474
Lend Lease Corp. Ltd. 81,000 1,033,010
Pioneer International Ltd. 493,300 1,224,642
TNT Ltd. (a) 1,658,800 2,176,694
Westpac Banking Corp. 2,912,700 10,536,488
18,396,568
AUSTRIA - 0.9%
Mayr Melnhof Karton AG 24,200 1,398,830
OEMV AG 62,400 7,194,579
VA Technologie AG 6,800 851,047
VA Technologie AG (d) 15,000 1,877,310
11,321,766
BELGIUM - 1.6%
Bekaert SA 4,005 3,197,654
Delhaize Freres & Cie Le Lion SA 135,300 6,183,782
Petrofina SA 11,900 3,590,951
Petrofina SA (warrants) (a) 595 8,380
Solvay & Cie SA 14,062 7,724,197
20,704,964
BERMUDA - 0.2%
Consolidated Electric Power Asia Ltd.
sponsored ADR (d) 30,000 682,500
Jardine Strategic Holdings Ltd. Ord. 529,500 1,704,990
2,387,490
BRAZIL - 0.2%
Coteminas PN 2,500,000 788,675
Telebras PN (Pfd. Reg.) 60,298,770 1,987,447
2,776,122
CANADA - 0.5%
Midland Walwyn, Inc. 269,000 2,106,921
Noranda, Inc. 245,400 4,827,541
6,934,462
CHILE - 0.1%
Vina Concha Stet y Toro SA
sponsored ADR 51,100 990,063
FINLAND - 0.8%
Kymmene Corp. 53,900 1,680,624
Pohjola Class B 291,000 4,570,859
Valmet Corp. OY Ord. 167,700 3,793,939
10,045,422
FRANCE - 7.2%
Accor SA 65,158 8,694,014
Axa SA 91,718 4,963,362
BQE National Paris Ord. 222,840 10,770,332
Club Mediterranee SA Ord. 42,500 4,340,855
Compagnie Bancaire Ord. 65,670 7,867,107
Credit Lyonnais 24,500 1,413,880
SHARES VALUE (NOTE 1)
FRANCE - CONTINUED
Elf Aquitaine 112,128 $ 8,302,776
Generale des Eaux 90,600 10,105,133
Havas SA 53,300 4,227,450
IMETAL SA Ord. 9,200 1,083,135
L'Oreal Co. Ord. 10,200 2,563,957
Lafarge Coppee SA 63,900 4,978,432
Lyonnaise des Eaux Dumez SA 30,700 2,909,255
Michelin SA Cie Generale des
Etablissements, Class B (a) 76,900 3,413,366
Peugeot SA Ord. 19,500 2,710,627
Total SA Class B 190,600 11,495,446
Vallourec SA (a) 60,000 3,010,224
92,849,351
GERMANY - 6.0%
Allianz Versich Holdings Ord. (Reg.) 1,450 2,590,467
Asko 2,900 1,813,746
BMW AG 9,918 5,463,533
Bayerische Vereinsbank AG Ord. 11,000 3,340,331
Continental Gummi-Werke AG 25,600 3,721,076
Deutsche Bank AG 352,000 17,122,878
Duerr Beteiligungs AG (RFD) 8,777 3,119,553
Gildemeister AG (a) 28,620 2,372,138
Hoechst AG Ord. 38,900 8,413,855
Karstadt AG 17,800 7,821,202
Kaufhof Holding AG 20,000 7,151,906
Metallgesellschaft AG (a)(d) 86,700 1,587,832
SGL Carbon AG (a)(d) 28,000 1,250,570
Schmalbach-Lubeca AG 4,250 855,261
Veba AG Ord. 27,400 10,779,905
77,404,253
HONG KONG - 2.1%
Amoy Properties Ltd. 2,084,000 1,831,440
Consolidated Electric Power Asia Ltd. 604,000 1,401,165
Dickson Concepts International Ltd. 2,108,000 1,259,994
HSBC Holdings PLC 834,000 10,697,560
Hong Kong Land Holdings Ltd. 2,337,000 4,253,340
Hopewell Holdings Ltd. 3,944,000 3,338,596
Hysan Development Co. Ltd. 643,000 1,470,863
Peregrine Investments Holdings Ltd. 832,000 1,182,780
Semi-Tech (Global) Ltd. 100,000 160,901
Sun Hung Kai Properties Ltd. 153,000 1,132,023
26,728,662
INDIA - 0.1%
Reliance Industries Ltd. GDS (a) 106,400 1,902,432
INDONESIA - 1.0%
Astra International PT (For. Reg.) 160,000 283,790
Bank International Indonesia PT Ord. 921,000 2,843,238
Gudang Garam PT Perusahaan 42,500 326,336
Jakarta International Hotels &
Development Ord. 1,541,000 1,937,499
Matahari Putra Prima PT:
(For. Reg.) 552,000 879,927
(For. Reg.) (rights) (a) 276,000 266,459
Sampoerna Hanjaya Mandala (For. Reg.) 735,750 5,781,604
12,318,853
IRELAND - 1.0%
Bank of Ireland U.S. Holdings, Inc. 1,009,200 5,793,010
Fyffes PLC 1,358,000 2,479,301
Independent Newspapers PLC 521,050 2,866,312
Waterford Wedgwood PLC Unit 1,751,400 1,494,049
12,632,672
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ITALY - 1.3%
Alitalia Linee Aeree Italiane Class A (a) 136,400 $ 65,201
Assicurazioni Generali Spa 218,570 5,128,878
Fiat Spa 1,121,000 3,965,325
Istituto Mobiliare Italiano 301,400 1,848,206
Italgas Spa 512,200 1,334,373
Montedison Spa Ord. (a) 2,962,700 2,120,701
SAI Sta Assieuratrice Industriale Spa 189,000 2,017,120
16,479,804
JAPAN - 18.5%
ADO Electronic Industrial Co. Ltd. 19,000 410,750
Advantest Corp. 74,000 2,797,401
Aida Engineering Ltd. Ord. 176,000 1,199,669
Akita Bank Ltd. 76,650 656,483
Amada Metrecs Co. Ltd. 86,000 1,107,383
Amadasonoike Co. Ltd. 282,000 1,632,368
Autobacs Seven Co. Ltd. 20,600 2,007,679
Bridgestone Corp. 339,000 5,005,908
Canon, Inc. 526,000 8,575,073
Daicel Chemical Industries Ltd. 397,000 2,035,415
East Japan Railway Co. Ord. 700 3,597,165
Fanuc Ltd. 98,200 4,245,860
Fujitsu Ltd. 726,000 7,247,135
Futaba Industrial Co. Ltd. 126,000 2,054,105
Hachijuni Bank Ltd. 92,000 1,141,170
Hanshin Department Store Ltd. 29,000 205,210
Higo Bank Ltd. Ord. 96,000 941,288
Hitachi Ltd. 1,126,000 11,240,047
Honda Motor Co. Ltd. 432,000 6,634,375
Ishihara Sangyo Kaisha Ltd. (a) 343,000 1,021,097
Japan Airlines Co. Ltd. 302,000 2,008,578
Komatsu Ltd. Ord. 410,000 3,133,728
Marubeni Corp. 339,000 1,726,035
Matsushita Electric Industrial Co. Ltd. 303,000 4,724,867
Marukyo Corp. 16,000 255,168
Minebea Co. Ltd. 546,000 3,508,847
Mitsubishi Chemical Industries Ltd. 89,000 381,654
Mitsubishi Estate Co. Ltd. 264,000 2,978,382
Mitsubishi Heavy Industries Ltd. 492,000 3,347,809
Mitsubishi Trust & Banking Corp. 486,000 6,889,546
Mitsui OSK Lines Ltd. 457,000 1,268,696
Murata Mfg. Co. Ltd. 171,000 6,484,465
Nichido Fire & Marine
Insurance Co. Ltd. 502,000 4,062,254
Nikko Securities Co. Ltd. 373,000 3,031,587
Nippon Telegraph &
Telephone Corp. Ord. 400 3,354,991
Nippon Yusen Kabushiki Kaisha 354,000 1,986,414
Nissan Motor Co. Ltd. Ord. 388,000 2,484,302
Nisshinbo Industries 154,000 1,217,082
Nitto Denko Corp. 97,000 1,512,581
Nomura Securities Co. Ltd. 664,000 11,609,217
Omron Corp. 139,000 2,660,131
Orix Corp. 242,000 8,061,901
Pioneer Electronic Corp. 241,000 4,099,704
Rohm Co. Ltd. 120,000 6,209,096
Sankyo Co. Ltd. 258,300 6,011,235
Sanwa Bank Ltd. 95,000 1,795,629
Seino Transpotation Co. Ltd. 144,000 2,432,605
Sony Corp. 209,700 10,082,445
Sumitomo Marine and Fire
Insurance Co. Ltd. 420,000 3,339,160
Sumitomo Realty &
Development Co. Ltd. 648,000 3,873,452
Sumitomo Rubber Industries Ltd. 185,000 1,376,846
Sumitomo Trust & Banking Co. Ltd. 363,000 4,416,893
Suzuki Motor Corp. 228,000 2,545,303
SHARES VALUE (NOTE 1)
JAPAN - CONTINUED
TDK Corp. 88,000 $ 4,012,759
Takashimaya Co. Ltd. 198,000 2,666,510
Takeda Chemical Industries Ltd. 397,000 5,252,687
Tokio Marine & Fire
Insurance Co. Ltd. (The) 1,065,000 12,228,948
Toshiba Corp. 1,626,000 10,314,970
Toyota Motor Corp. 474,000 9,407,208
Tsugami Corp. 253,000 911,577
Yamanouchi Pharmaceutical Co. Ltd. 302,000 6,814,177
238,235,020
KOREA (SOUTH) - 0.8%
Cho Hung Bank Co. Ltd. 191,504 2,273,043
Korea Electric Power Corp. (a) 147,470 5,647,716
Korea First Securities Co. Ltd. 14,218 187,136
Kyungki Bank (a) 171,523 1,628,705
Seoul Securities Co. 74,592 924,714
10,661,314
MEXICO - 1.2%
Banacci SA de CV:
Class B 352,200 540,979
Class L 17,610 26,767
Cemex SA, Series B 1,071,800 3,875,630
Cifra SA Class C 1,559,100 2,055,517
Consorcio G Grupo Dina SA ADR 34,800 108,750
Empresas Ica Sociedad Controladora
SA de CV sponsored ADR
representing Ord. (part. cert.) 208,700 2,139,175
Grupo Carso SA de CV Class A-1 (a) 287,800 1,574,842
Grupo Dina sponsored ADR, Series L 12,543 25,086
Grupo Financiero Bancomer SA de CV:
Class B (a) 4,451,800 1,303,487
Series L (a) 216,878 57,256
sponsored ADR, Series C (a) (d) 70,200 412,425
Telefonos de Mexico SA sponsored ADR
representing shares Ord. Class L 93,200 2,761,050
14,880,964
MALAYSIA - 0.9%
Kuala Lumpur Industries Holdings BHD (a) 290,000 394,913
Magnum Corp. BHD 567,500 1,326,804
Malaysian Banking BHD 133,000 1,052,871
Resorts World BHD 443,000 2,598,399
Telekom Malaysia BHD 614,000 4,659,149
Tenega Nasional BHD 251,000 1,024,384
Time Engineering BHD 161,000 541,509
11,598,029
NETHERLANDS - 6.9%
ABN-AMRO Holdings NV 46,500 1,796,666
Aegon NV Ord. 68,250 2,363,636
AKZO NV Ord. 103,800 12,420,856
Heineken NV 24,200 3,666,667
IHC Caland NV 48,300 1,373,134
International Nederlanden Groep NV 249,108 13,793,730
KLM Royal Dutch Airlines Ord. (a) 198,200 6,441,468
Koninklijke PPT Nederland 221,500 7,971,539
Koninklijke PPT Nederland (a) (d) 80,600 2,900,705
Oce Van der Grinten NV 136,700 7,719,571
Pirelli Tyre Holdings NV Ord. (a) 633,700 4,258,242
Royal Dutch Petroleum Co. Ord. 50,900 6,222,317
Unilever NV Ord. 122,000 15,891,452
Vendex International Bearer (a) (d) 81,400 2,156,361
88,976,344
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NETHERLANDS ANTILLES - 0.3%
Schlumberger Ltd. 68,200 $ 4,236,925
NORWAY - 2.4%
Bergesen Group:
Class A 35,500 807,408
Class B 301,600 6,859,557
Christiania Bank Free shares Ord. 1,475,000 3,426,617
Den Norske Bank Class A Free shares 1,146,800 3,111,291
Norsk Hydro AS 100,850 4,218,809
Orkla AS:
Class A Free shares 93,250 4,173,564
Class B (non-vtg.) 47,800 2,026,773
Saga Petroleum AS Class B 261,600 3,463,634
Unitor AS 192,300 3,358,339
31,445,992
PAKISTAN - 0.1%
Pakistan Telecommunications Voucher
GDR (a) (d) 8,630 837,110
PHILLIPINES - 0.1%
Philippine Long Distance Telephone Co.
sponsored ADR 21,500 1,542,625
SINGAPORE - 1.0%
Jardine Matheson Holdings Ltd. Ord. 506,659 3,723,944
Kim Engineering Holdings Ltd. 2,455,000 2,565,721
Neptune Orient Lines Ltd. 3,377,000 3,916,071
Overseas Union Bank Ltd. (For.) 265,000 1,669,291
Van Der Horst Ltd. 156,000 748,174
12,623,201
SOUTH AFRICA - 0.0%
De Beers Consolidated Mines Ltd. ADR 24,000 621,000
SPAIN - 4.2%
Banco Bilbao Vizcaya SA Ord. (Reg.) 349,100 10,102,294
Banco Intercontinental Espanol 59,550 5,374,415
Corporacion Mapfrecia International
de Reaseguros SA (Reg.) 183,400 9,035,230
EL Aguila SA (a) 56,540 423,669
Repsol SA Ord. 172,500 5,441,730
Tabacalera SA, Series A 205,200 7,696,592
Telefonica de Espana SA Ord. 845,150 10,916,448
Union Electrica Fenosa SA 1,216,100 5,719,270
54,709,648
SWEDEN - 3.5%
Electrolux AB 117,600 5,358,737
Investor AB Class B Free shares 314,700 9,097,942
Mo Och Domsjoe (MoDo) Class B
Free shares 83,100 4,799,104
SKF AB Ord. 75,800 1,533,959
Skandia International Holding 35,400 687,147
Svenska Cellulosa Aktiebolaget SCA
Class B Ord. 362,700 6,740,754
Skandinaviska Enskilda Banken
Class A Free shares 948,300 4,934,745
Volvo AB Class B 637,400 12,153,153
45,305,541
SWITZERLAND - 9.8%
Adia SA (Bearer) (a) 54,800 11,403,744
Alusuisse-Lonza Holding AG (Reg.) 15,939 10,019,990
Baloise Holding (Reg.) 5,635 12,879,299
CIBA-GEIGY AG (Reg.) 14,380 10,567,453
C. S. Holdings (Reg.) 258,405 23,736,812
Fischer (Georg) AG (Reg.) 12,400 3,228,211
Holderbank Financiere Glarus
AG (Bearer) 2,825 2,324,445
SHARES VALUE (NOTE 1)
SWITZERLAND - CONTINUED
Holderbank Financial Glarus
(warrants) (a) 14,125 $ 19,678
Nestle SA (Reg.) 18,800 19,626,644
Roche Holdings Ltd. (part. certs.) 1,700 10,990,422
Surveillance, Societe Generale (Bearer) 1,010 1,758,816
Swiss Bank Corp. (Bearer) 43,450 15,435,437
Zurich Versicherung (Reg.) 3,405 4,289,973
126,280,924
THAILAND - 1.6%
Bank of Asia PCL (For. Reg.) 354,310 1,004,727
Krung Thai Bank (For. Reg.) 1,698,840 6,882,069
Ruam Pattana Fund II (For. Reg.) (a) 1,117,000 712,691
Ruang Khao Unit Trust (For. Reg.) (a) 836,800 601,709
Siam City Bank PCL (For. Reg.) 6,828,500 9,405,234
Telecomasia Corp. PCL (For. Reg.) (a) 394,000 1,460,440
20,066,870
TURKEY - 0.3%
Aksigorta (a) 280,000 54,463
Aksigoria (a) (d) 952,000 185,174
Cimentas AS (a) 500,000 322,290
Tofas Turk Otomobil Fabrikasi
AS ADR (a) (d) 165,600 712,080
Tofas Turk Otomobil Fabrikasi AS (a) 2,400,600 2,117,473
3,391,480
UNITED KINGDOM - 12.4%
Argyll Group PLC Ord. 626,900 3,353,633
Avon Rubber 81,900 666,007
BTR PLC Ord. 625,100 3,184,528
Barclays PLC Ord. 980,300 10,558,664
Bass PLC Ord. 763,700 7,324,586
Berkeley Group PLC 159,600 904,685
Booker PLC 364,200 2,415,782
Boots Co. PLC 287,600 2,334,164
British Land Ord. 289,500 1,844,124
Burmah Oil 190,700 2,768,567
Cadbury-Schweppes PLC Ord. 955,700 6,994,539
Commercial Union PLC (a) 225,100 2,099,695
De La Rue PLC 488,300 7,287,643
Dixons Group PLC 937,500 3,826,800
Forte PLC 1,806,100 6,551,610
Glaxo Holdings PLC Ord. 378,100 4,651,224
Great Universal Stores PLC Ord Class A 381,600 3,574,711
Guinness PLC Ord. 1,154,300 8,705,719
Hanson Trust PLC Ord. 674,000 2,358,953
Iceland Group PLC 637,600 1,829,976
Lasmo PLC 858,400 2,347,355
Ladbroke Group PLC Ord. 1,032,400 2,782,019
Lloyds Abbey Life PLC 549,600 3,426,481
London International Group PLC 2,561,200 4,492,217
National Westminster Bank PLC Ord. 1,097,920 9,567,209
Nurdin & Peacock PLC Ord. 375,000 1,046,393
North West Water Group PLC Ord. 337,700 2,988,469
Redland PLC Ord. 147,800 969,770
Rolls Royce PLC Ord. 874,433 2,433,022
Royal Insurance Holdings PLC 992,600 4,890,550
Sainsbury (J.) PLC Ord. 566,367 3,987,065
Scottish Hydro-Electric PLC Ord. 723,700 3,681,071
Scottish Power PLC ADR 960,500 4,954,461
Shell Transport & Trading PLC 581,900 6,972,716
TSB Group PLC 300 1,155
Tesco PLC Ord. 1,425,100 6,589,734
Unigate Ltd. Ord. 312,800 2,022,471
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UNITED KINGDOM - CONTINUED
Vodafone Group PLC 1,890,600 $ 7,039,006
Whitbread Co. PLC Class A 715,700 6,847,100
160,273,874
TOTAL COMMON STOCKS
(Cost $1,041,443,013) 1,149,740,937
NONCONVERTIBLE PREFERRED STOCKS - 2.5%
AUSTRIA - 0.5%
Creditanstalt Bankverein 105,900 6,099,579
GERMANY - 0.5%
Henkel KGAA 10,300 3,974,013
Porsche AG Ord. (a) 6,050 2,638,622
6,612,635
ITALY - 1.5%
Banco Ambro Veneto 1,197,000 1,627,788
Fiat Spa 1,350,600 2,937,514
SAI Sta Assicuratrice Industriale Spa 650,500 2,800,526
Stet (Societa Finanziaria Telefonica) Spa 5,075,300 11,278,078
18,643,906
KOREA (SOUTH) - 0.0%
Korea First Securities Co. Ltd. 68,124 575,898
TOTAL NONCONVERTIBLE PREFERRED STOCKS
(Cost $29,697,172) 31,932,018
FOREIGN GOVERNMENT OBLIGATIONS (F) - 1.1%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
ARGENTINA - 0.3%
Argentina Republic BOCON
6.0625%, 4/1/01 (e) B1 $ 5,993,570 3,738,969
BRAZIL - 0.2%
Brazil Federative Republic IDU
euro 6.6875%, 1/1/01 (e) B1 2,570,500 2,069,253
DENMARK - 0.3%
Danish Government Bullet
7%, 12/15/04 Aa1 DKK 25,000,000 4,181,735
FRANCE - 0.3%
French Government Strips
4/25/23 Aaa FRF 168,000,000 3,508,764
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS
(Cost $14,123,089) 13,498,721
REPURCHASE AGREEMENTS - 7.2%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 6.22% dated
6/30/95 due 7/3/95 $ 92,390,864 92,343,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,177,606,274) $ 1,287,514,676
FORWARD FOREIGN CURRENCY CONTRACTS
SETTLEMENT UNREALIZED
DATE(S) VALUE GAIN/(LOSS)
CONTRACTS TO SELL
810,720,000 ESP 7/12/95 $ 6,704,431 $ (278,432)
228,920,092 FRF 8/16/95 47,220,286 (1,965,746)
2,043,255,600 JPY 7/11/95 24,176,080 411,833
TOTAL CONTRACTS TO SELL-
(Receivable amount $76,268,452) $ 78,100,797 $ (1,832,345)
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 6.1%
CURRENCY ABBREVIATIONS
DKK - Danish krone
ESP - Spanish peseta
FRF - French franc
JPY - Japanese yen
LEGEND
(a) Non-income producing
(b) Principal amount is stated in United States dollars unless otherwise
noted.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $12,602,067 or 1.0% of net
assets.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) Some foreign government obligations have not been individually rated
by S&P or Moody's. The ratings listed are assigned to securities by FMR,
the fund's investment adviser, based principally on S&P and Moody's ratings
of the sovereign credit of the issuing government.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $307,494,270 and $257,850,752, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $152,215 for the period
(see Note 3 of Notes to Financial Statements).
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $1,177,807,984. Net unrealized appreciation aggregated
$109,706,692, of which $162,739,035 related to appreciated investment
securities and $53,032,343 related to depreciated investment securities.
INDUSTRY DIVERSIFICATION
As a Percentage of Total Value of Investments
Basic Industries 6.2
Construction & Real Estate 3.2
Durables 8.1
Energy 5.1
Finance 26.4
Government Obligations 1.1
Health 3.4
Holding Companies 1.0
Industrial Machinery & Equipment 2.8
Media & Leisure 2.4
Nondurables 8.4
Retail & Wholesale 4.8
Services 3.0
Repurchase Agreements 7.2
Technology 4.9
Transportation 2.8
Utilities 8.8
Others (individually less than 1%) 0.4
Total 100.0%
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $92,343,000) (cost $1,177,606,274) - $ 1,287,514,676
See accompanying schedule
Cash 655
Receivable for investments sold 20,207,922
Unrealized appreciation on foreign currency contracts 411,833
Dividends receivable 7,490,524
Interest receivable 304,815
TOTAL ASSETS 1,315,930,425
LIABILITIES
Payable for investments purchased $ 10,265,923
Unrealized depreciation on foreign currency contracts 2,244,178
Payable for fund shares redeemed 5,303,385
Accrued management fee 832,243
Other payables and accrued expenses 336,394
TOTAL LIABILITIES 18,982,123
NET ASSETS $ 1,296,948,302
Net Assets consist of:
Paid in capital $ 1,177,330,987
Undistributed net investment income 11,730,370
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (279,038)
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 108,165,983
NET ASSETS, for 80,033,348 shares outstanding $ 1,296,948,302
NET ASSET VALUE, offering price and redemption price per share ($1,296,948,302 (divided by) 80,033,348 shares) $16.21
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 21,509,202
Dividends
Interest 4,660,220
26,169,422
Less foreign taxes withheld (2,979,305)
TOTAL INCOME 23,190,117
EXPENSES
Management fee $ 4,861,229
Transfer agent fees 316,317
Accounting fees and expenses 267,409
Non-interested trustees' compensation 3,447
Custodian fees and expenses 311,947
Registration fees 24
Audit 22,683
Legal 2,524
Miscellaneous 2,230
TOTAL EXPENSES 5,787,810
NET INVESTMENT INCOME 17,402,307
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 6,935,354
Foreign currency transactions (6,677,005) 258,349
Change in net unrealized appreciation (depreciation) on:
Investment securities 37,408,823
Assets and liabilities in foreign currencies (2,727,346) 34,681,477
NET GAIN (LOSS) 34,939,826
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 52,342,133
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
Operations $ 17,402,307 $ 14,354,948
Net investment income
Net realized gain (loss) 258,349 1,588,422
Change in net unrealized appreciation (depreciation) 34,681,477 (19,420,073)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 52,342,133 (3,476,703)
Distributions to shareholders (4,893,543) (4,465,195)
From net investment income
From net realized gain (1,797,170) -
In excess of net realized gain (3,096,373) -
TOTAL DISTRIBUTIONS (9,787,086) (4,465,195)
Share transactions 235,046,856 1,000,905,405
Net proceeds from sales of shares
Reinvestment of distributions 9,787,086 4,465,195
Cost of shares redeemed (288,141,738) (477,688,222)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (43,307,796) 527,682,378
TOTAL INCREASE (DECREASE) IN NET ASSETS (752,749) 519,740,480
NET ASSETS
Beginning of period 1,297,701,051 777,960,571
End of period (including undistributed net investment income of $11,730,370 and $10,987,509,$ 1,296,948,302 $ 1,297,701,051
respectively)
OTHER INFORMATION
Shares 15,188,474 62,240,900
Sold
Issued in reinvestment of distributions 652,472 274,107
Redeemed (18,619,209) (29,967,241)
Net increase (decrease) (2,778,263) 32,547,766
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 E 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.67 $ 15.48 $ 11.53 $ 13.09 $ 12.42 $ 12.67
Income from Investment Operations
Net investment income .07 .19 .06 .16 .24 .18
Net realized and unrealized gain (loss) .59 .08 C 4.16 (1.54) .74 (.39)
Total from investment operations .66 .27 4.22 (1.38) .98 (.21)
Less Distributions (.06) (.08) (.18) (.18) (.17) (.04)
From net investment income
In excess of net investment income - - (.04) - - -
From net realized gain (.02) - - - (.14) D -
In excess of net realized gain (.04) - (.05) - - -
Total distributions (.12) (.08) (.27) (.18) (.31) (.04)
Net asset value, end of period $ 16.21 $ 15.67 $ 15.48 $ 11.53 $ 13.09 $ 12.42
TOTAL RETURN B 4.27% 1.72% 37.35% (10.72) 8.00% (1.67)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,296,948 $ 1,297,701 $ 777,961 $ 180,837 $ 126,490 $ 80,554
Ratio of expenses to average net assets .91% A .92% 1.03% 1.14% 1.26% 1.41%
Ratio of net investment income to average net assets 2.74% A 1.28% 1.21% 1.86% 2.33% 1.89%
Portfolio turnover rate 46% A 42% 42% 61% 168% 100%
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE ACCOUNT.
INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
C THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD
ENDED DUE TO THE TIMING OF SALES AND
REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
D INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN CURRENCY RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME.
E EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL
STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1995 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
The Money Market Portfolio, High Income Portfolio, Equity-Income Portfolio,
Growth Portfolio and Overseas Portfolio (the funds) are funds of Variable
Insurance Products Fund (the trust). The trust is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an open-end
management investment company organized as a Massachusetts business trust.
Each fund is authorized to issue an unlimited number of shares. Shares of
each fund may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts. The
following summarizes the significant accounting policies of the funds:
SECURITY VALUATION:
MONEY MARKET PORTFOLIO. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
HIGH INCOME PORTFOLIO. Securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market (sales
prices if the principal market is an exchange) in which such securities are
normally traded. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value
as determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus interest, both of which approximate current
value.
EQUITY-INCOME AND GROWTH PORTFOLIOS. Securities for which exchange
quotations are readily available are valued at the last sale price, or if
no sale price, at the closing bid price. Securities for which exchange
quotations are not readily available (and in certain cases debt securities
which trade on an exchange), are valued primarily using dealer-supplied
valuations or at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees. Short-term securities maturing within sixty days of their
purchase date are valued at amortized cost or original cost plus accrued
interest, both of which approximate current value.
OVERSEAS PORTFOLIO. Securities for which quotations are readily available
are valued at the last sales price, or if no sale price, at the closing bid
prices in the principal market in which such securities are normally
traded. Securities for which market quotations are not readily available
are valued
primarily using dealer-supplied valuations or at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the funds are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
the fiscal year. The schedules of investments include information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME:
MONEY MARKET PORTFOLIO. Interest income, which includes amortization of
premium and accretion of original issue discount, is accrued as earned.
HIGH INCOME, EQUITY-INCOME, GROWTH AND OVERSEAS PORTFOLIOS. Dividend income
is recorded on the ex-dividend date, except certain dividends from foreign
securities where the ex-dividend date may have passed, are recorded as soon
as the funds are informed of the ex-dividend date. Interest income, which
includes accretion of original issue discount, is accrued as earned.
Investment income is recorded net of foreign taxes withheld where recovery
of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income for the Money Market Portfolio.
Distributions are recorded on the ex-dividend date for all other funds.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for foreign
currency transactions, passive foreign investment companies (PFIC), market
discount, partnerships, non-taxable dividends and losses deferred due to
wash sales and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The funds, except for the Money Market
Portfolio, may use foreign currency contracts to facilitate transactions in
foreign securities and to manage the funds' currency exposure. Contracts to
buy generally are used to acquire exposure to foreign currencies, while
contracts to sell are used to hedge the funds' investments against currency
fluctuations. Also, a contract to buy or sell can offset a previous
contract. These contracts involve market risk in excess of the unrealized
gain or loss reflected in the funds' Statement of Assets and Liabilities.
The U.S. dollar value of the currencies each applicable fund has committed
to buy or sell is shown in the schedule of investments under the caption
"Forward Foreign Currency Contracts." This amount represents the aggregate
exposure to each currency acquired or hedged through currency contracts at
period end. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
Contracts that have been offset with different counterparties are reflected
as both a contract to buy and a contract to sell in each applicable fund's
schedule of investments under the caption "Forward Foreign Currency
Contracts."
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the funds, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The funds, through their custodian, receive delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. FMR, the funds'
investment adviser, is responsible for determining that the value of these
underlying securities remains at least equal to the resale price.
INDEXED SECURITIES. The funds, (excluding the Money Market Portfolio) may
invest in indexed securities whose values are linked either directly or
inversely to changes in foreign currencies, interest rates, commodities,
indices, or other underlying instruments. The funds use these securities to
increase or decrease their exposure to different underlying instruments and
to gain exposure to markets that might be difficult to invest in through
conventional securities. Indexed securities may be more volatile than their
underlying instruments, but any loss is limited to the amount of the
original investment.
RESTRICTED SECURITIES. The funds are permitted to invest in privately
placed restricted securities. These securities may be resold in
transactions exempt from registration or to the public if the securities
are registered. Disposal of these securities may involve time-consuming
negotiations and expense, and prompt sale at an acceptable price may be
difficult. At the end of the period, restricted securities (excluding 144A
issues) amounted to $20,998,411 or 2.7% of net assets for the Money Market
Portfolio and $15,265,476 or 1.9% of net assets for the High Income
Portfolio.
3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, FMR receives a monthly
fee.
For the Money Market Portfolio, FMR receives a monthly fee that is
calculated on the basis of a basic fund fee rate of .03% of the fund's
average net assets, plus a fixed income group fee rate and an income-based
fee. The group fee rate is the weighted average of a series of rates
ranging from .1200% to .3700% and is based on the monthly average net
assets of all the mutual funds advised by FMR. The income-based fee is
added only when the fund's gross yield exceeds 5%. At that time the
income-based fee would equal 6% of that portion of the fund's gross income
that represents a gross yield of more than 5% per year. The maximum
3. FEES AND OTHER TRANSACTIONS
WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
income-based component is .24% of average net assets. For the period, the
management fee was equivalent to an annualized rate of .25% of average net
assets.
For all other funds, FMR receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1200% to
.3700% for the High Income Portfolio and .2700% to .5200% for the
Equity-Income, Growth and Overseas Portfolios for the period. In the event
that these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted in
the same or a lower management fee. The annual individual fund fee rates
are .20%, .30%, .45% and .45% for the Equity-Income, Growth, Overseas, and
High Income Portfolios, respectively. For the period, the management fees
were equivalent to annualized rates of .60%, .52%, .62%, and .77% of
average net assets for the High Income, Equity-Income, Growth, and Overseas
Portfolios, respectively.
SUB-ADVISER FEE. As the Money Market Portfolio's investment sub-adviser,
FMR Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR
of 50% of the management fee payable to FMR. The fees are paid prior to any
voluntary expense reimbursements which may be in effect, and after reducing
the fee for any payments by FMR pursuant to the fund's Distribution and
Service Plan.
FMR, on behalf of the High Income and Overseas Portfolios, entered into
sub-advisory agreements with affiliates of FMR. In addition, one of the
sub-advisers of the Overseas Portfolio, Fidelity International Investment
Advisors (FIIA), entered into a sub-advisory agreement with its subsidiary,
Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.).
Under the sub-advisory arrangements, FMR may receive investment advice and
research services and may grant the sub-advisers investment management
authority to buy and sell securities. FMR pays its sub-advisers either a
portion of its management fee or a fee based on costs incurred for these
services. FIIA pays FIIAL U.K. a fee based on costs incurred for either
service.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the funds' transfer, dividend disbursing
and shareholder servicing agent. Effective January 1, 1995, the Board of
Trustees approved a revised transfer agent contract pursuant to which FIIOC
receives account fees and asset-based fees that vary according to account
size and type of account. Under the prior transfer agent contract, FIIOC
received fees based on the type, size, number of accounts, and number of
transactions made by shareholders. FIIOC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements.
ACCOUNTING FEES. Fidelity Service Co.(FSC) an affiliate of FMR, maintains
the funds' accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. Certain funds placed a portion of their portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms are shown under the caption
"Other Information" at the end of each applicable fund's schedule of
investments.
4. BANK BORROWINGS.
Each fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. Each fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, each fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. For
the High Income and Equity-Income portfolios, the maximum loans during the
periods for which loans were outstanding amounted to $4,885,000 and
$18,269,000 respectively, and the average daily loan balances were
$4,885,000 and $18,269,000, respectively. The weighted average interest
rate was 6.4% for both the High Income Portfolio and for the Equity-Income
Portfolio.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the funds' operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of 1.00% of average net assets for the High
Income Portfolio and 1.50% of average net assets for the Equity-Income,
Growth, and Overseas Portfolios. For the period, there was no reimbursement
under this arrangement.
FMR has directed certain portfolio trades of the High Income Portfolio to
brokers who paid a portion of the fund's expenses. For the period, the High
Income Portfolio's expenses were reduced by $5,422 under this agreement.
6. BENEFICIAL INTEREST.
At the end of the period, Fidelity Investments Life Insurance Company
(FILI), an affiliate of FMR, was the record owner of more than 5% of the
outstanding shares and certain unaffiliated insurance companies were record
owners of approximately 10% of the total outstanding shares of the
following funds:
FILI UNAFFILIATED INSURANCE COMPANIES
FUND % OF OWNERSHIP # OF % OF OWNERSHIP
Money Market 48 1 16
High Income 17 1 41
Equity-Income 26 1 30
Growth 17 1 31
Overseas 15 1 40
7. PURCHASES AND SALES OF INVESTMENTS.
Information regarding purchases and sales of securities (other than
short-term securities) is included under the caption "Other Information" at
the end of each applicable fund's schedule of investments.
8. TRANSACTIONS WITH AFFILIATED COMPANIES.
Information regarding transactions with affiliated companies is included
under the caption "Other Information" at the end of each applicable fund's
schedule of investments.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
William J. Hayes, VICE PRESIDENT
Fred L. Henning, Jr., VICE PRESIDENT, MONEY MARKET PORTFOLIO
Robert A. Lawrence, VICE PRESIDENT
Lawrence Greenberg, VICE PRESIDENT
Barry J. Coffman, VICE PRESIDENT
Robert Litterst, VICE PRESIDENT
John R. Hickling, VICE PRESIDENT
Bettina Doulton, VICE PRESIDENT
Arthur S. Loring, SECRETARY
Stephen P. Jonas, TREASURER
Robert H. Morrison, MANAGER, SECURITY TRANSACTIONS
Michael D. Conway, ASSISTANT TREASURER, MONEY MARKET PORTFOLIO
John H. Costello, ASSISTANT TREASURER
Leonard M. Rush, ASSISTANT TREASURER
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox
Phyllis Burke Davis
Richard J. Flynn
Edward C. Johnson 3d
E. Bradley Jones
Donald J. Kirk
Peter S. Lynch
Edward H. Malone
Marvin L. Mann
Gerald C. McDonough
Thomas R. Williams
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Co.
Boston, MA
CUSTODIAN
Morgan Guaranty Trust Company of New York,
New York, NY
MONEY MARKET PORTFOLIO
The Bank of New York, New York, NY
HIGH INCOME PORTFOLIO
The Chase Manhattan Bank, N.A., New York, NY
EQUITY-INCOME AND OVERSEAS PORTFOLIOS
Brown Brothers Harriman & Co., Boston, MA
GROWTH PORTFOLIO
<PAGE>
-------------------------------------------------------
INSURANCE
INVESTMENT
PRODUCTS TRUST
-------------------------------------------------------
SEMI-ANNUAL REPORT
-------------------------------------------------------
June 30, 1995
<PAGE>
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
Insurance Investment Products Trust--June 30, 1995 (Unaudited)
INTERNATIONAL GROWTH FUND
<TABLE>
<CAPTION>
-----------------------------------------------------
Market
Description Shares Value
-----------------------------------------------------
<S> <C> <C>
FOREIGN COMMON STOCKS -- 94.7%
AUSTRALIA -- 4.9%
Australia & New Zealand Bank 3,000 $ 10,650
Boral 4,200 10,496
Caltex Australia 2,500 7,153
National Australia Bank 1,900 15,000
Westpac Banking 3,600 13,010
----------
56,309
----------
BELGIUM -- 0.6%
D'Ieteren Trading 100 7,420
----------
CANADA -- 2.9%
Bank of Montreal 300 6,281
Canadian Imperial Bank of Commerce 400 9,613
Imasco Holdings 600 10,650
Royal Bank of Canada 300 6,718
----------
33,262
----------
FRANCE -- 13.2%
Alcatel Alsthom 150 13,508
CGIP 50 11,659
Christian Dior 150 13,211
Cie de Saint Gobain 100 12,081
Elf Gabon 50 9,432
Interbail 100 6,711
Lafarge 150 11,665
LVMH Moet Hennesy 50 8,999
Nord Est 400 10,160
Peugeot* 100 13,875
Poliet ex Lambert 100 9,082
Saint Louis Bouchon 50 15,462
Total "B" 250 15,050
----------
150,895
----------
GERMANY -- 1.9%
BASF 50 10,675
Hoechst 50 10,795
----------
21,470
----------
HONG KONG -- 2.6%
HSBC Holdings 800 10,262
Jardine International Motor 8,000 7,858
Lai Sun Garment 11,000 11,445
----------
29,565
----------
ITALY -- 1.6%
Comau Finanziaria 3,100 4,504
STET 2,000 5,534
STET Di Risp 3,800 8,447
----------
18,485
----------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------
Market
Description Shares Value
-----------------------------------------------------
<S> <C> <C>
JAPAN -- 28.9%
Aoyama Trading 1,000 $ 16,757
Chiyoda Fire & Marine 2,000 11,258
Cosmo Oil 2,000 11,305
Daikyo 1,000 7,080
Daito Trust Construction 1,000 9,441
Daiwa Securities 1,000 10,550
Fuji Photo Film 1,000 23,720
Hitachi 2,000 19,943
Hokkaido Takushoku Bank 3,000 8,213
Honda Motor 1,000 15,341
Jaccs 1,000 9,323
Kirin Brewery 1,000 10,621
Long Term Credit Bank 2,000 17,347
Matsushita Electric 1,000 15,577
Mitsui Trust & Banking 1,000 9,205
Nippon Shinpan 2,000 12,839
Nippondenso 1,000 18,173
Nissan Fire & Marine Insurance 2,000 13,217
Nissan Motors 2,000 12,792
Sakura Bank 2,000 20,887
Tohoku Electric Power 500 13,866
Tokai Bank 1,000 11,093
Toshiba 1,000 6,337
Toyota Motor 1,000 19,825
Toyota Tsusho 1,000 6,278
----------
330,988
----------
MALAYSIA -- 6.5%
Arab-Malaysian Merchant Bank 1,000 11,897
Edaran Otomobil 1,000 9,764
Malaysian Airline System 3,000 10,154
MBF Capital 11,000 12,816
Oriental Holdings 2,000 10,667
Perusahaan Otomobil 3,000 10,831
Sime Darby 3,000 8,369
----------
74,498
----------
NETHERLANDS -- 7.1%
ABN-Amro Holdings 411 15,867
Aegon 513 17,734
Hoogovens & Staalf 300 11,930
International Nederlanden 307 16,985
KPN 513 18,447
----------
80,963
----------
NEW ZEALAND -- 0.7%
Lion Nathan 4,100 8,111
----------
NORWAY -- 0.9%
Den Norske Bank 3,700 10,031
----------
</TABLE>
<PAGE>
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
Insurance Investment Products Trust--June 30, 1995 (Unaudited)
INTERNATIONAL GROWTH FUND
<TABLE>
<CAPTION>
-------------------------------------------------
Market
Description Shares Value
-------------------------------------------------
<S> <C> <C>
SPAIN -- 2.6%
Banco Popular 100 $ 14,870
Telefonica Nacional 1,200 15,465
----------
30,335
----------
SWEDEN -- 2.6%
Stora Kopparberg "B" 1,000 13,532
SSAB "B" 800 9,342
Sydkraft "C"* 500 6,766
----------
29,640
----------
SWITZERLAND -- 6.2%
Ciba Geigy 20 14,665
Companie Financiere Richemont 10 12,337
CS Holdings 150 13,749
Elektrowatt "B" 40 11,503
Roche Holding 3 19,340
----------
71,594
----------
UNITED KINGDOM -- 11.5%
Anglian Water 1,400 11,149
Bass 1,400 13,386
British Steel 4,600 12,558
Guardian Royal Exchange* 3,900 12,833
Hanson 3,700 12,939
Lloyds Bank 900 8,927
National Westminster Bank 700 6,075
Norweb* 500 5,405
Royal Insurance 2,400 11,788
Sun Alliance Group* 2,000 10,650
Tesco 3,000 13,829
Yorkshire Water 1,300 11,903
----------
131,442
----------
UNITED STATES -- 0.0%
U.S. Industries* 37 504
----------
Total Foreign Common Stocks
(Cost $1,047,269) 1,085,512
----------
FOREIGN PREFERRED STOCKS -- 1.3%
AUSTRALIA -- 1.3%
Newscorp 3,000 14,846
----------
Total Foreign Preferred Stocks
(Cost $11,284) 14,846
----------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------
Face Market
Description Amount Value
-------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 1.2%
Lehman Brothers
5.87%, dated 06/30/95,
matures 07/03/95, repurchase
price $13,906 (collateral-
ized by a U.S. Treasury Note,
due 01/31/97, par value
$13,878, market value
$14,293) $13,899 $ 13,899
----------
Total Repurchase Agreement
(Cost $13,899) 13,899
----------
Total Investments -- 97.2%
(Cost $1,072,452) 1,114,257
----------
OTHER ASSETS AND LIABILITIES
-- 2.8% Other Assets and
Liabilities, Net 32,585
----------
NET ASSETS:
Portfolio shares (unlimited
authorization -- no par
value) based on 110,961
outstanding shares of
beneficial interest 1,108,634
Accumulated net realized
gain on investments 10,162
Accumulated net realized
loss on forward foreign
currency contracts and
foreign currency transactions (35,345)
Net unrealized appreciation
on investments 41,805
Net unrealized appreciation
on forward foreign currency
contracts, foreign currency
and translation of other
assets and liabilities
denominated in foreign
currencies 5,658
Undistributed net investment
income 15,928
----------
Total Net Assets -- 100.0% $1,146,842
==========
Net Asset Value, Offering Price
and Redemption Price Per Share $ 10.34
==========
</TABLE>
* Non-income producing security
<PAGE>
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
Insurance Investment Products Trust--June 30, 1995 (Unaudited)
GROWTH FUND
<TABLE>
<CAPTION>
------------------------------------------------------
Market
Description Shares Value
------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 94.8%
AIRCRAFT -- 2.0%
Allied Signal 580 $ 25,810
----------
AUTOMOTIVE -- 1.1%
Magna International, Class A 330 14,561
----------
BANKS -- 0.4%
Citicorp 100 5,788
----------
BEAUTY PRODUCTS -- 2.4%
Avon Products 300 20,100
Gillette 260 11,603
----------
31,703
----------
BROADCASTING, NEWSPAPERS
& ADVERTISING -- 3.1%
Comcast Special, Class A 1,000 18,563
Tele-Communications, Class A* 940 22,031
----------
40,594
----------
CABLE AND OTHER PAY TELEVISION
SERVICES -- 0.6%
Cox Communications* 400 7,750
----------
CHEMICALS -- 5.2%
E.I. du Pont de Nemours 140 9,625
Monsanto 260 23,433
Rohm & Haas 510 27,986
Union Carbide 180 6,008
----------
67,052
----------
COMMUNICATIONS EQUIPMENT -- 2.2%
Motorola 420 28,193
----------
COMPUTERS & SERVICES -- 4.6%
Cisco Systems* 650 32,866
Compaq Computer* 385 17,469
Silicon Graphics* 240 9,570
----------
59,905
----------
DRUGS -- 9.3%
Abbott Laboratories 570 23,085
Forest Laboratories* 190 8,431
Merck 1,240 60,760
Pfizer 310 28,636
----------
120,912
----------
ENTERTAINMENT -- 3.1%
Carnival, Class A 200 4,675
Walt Disney 650 36,156
----------
40,831
----------
FINANCIAL SERVICES -- 2.2%
Federal Home Loan Mortgage 280 19,250
Federal National Mortgage 100 9,438
----------
28,688
----------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------
Market
Description Shares Value
------------------------------------------------------
<S> <C> <C>
FOOD, BEVERAGE & TOBACCO -- 11.9%
Coca Cola 720 $ 45,900
Pepsico 1,020 46,538
Philip Morris 830 61,725
----------
154,163
----------
GAS/NATURAL GAS -- 1.4%
Enron 510 17,914
----------
HOUSEHOLD PRODUCTS -- 4.8%
Colgate Palmolive 320 23,400
Procter & Gamble 540 38,813
----------
62,213
----------
INSURANCE -- 8.7%
American International 280 31,920
General Re 125 16,734
MGIC Investment 100 4,688
NAC Re 185 5,758
The PMI Group 200 8,675
Travelers 430 18,813
United Healthcare 635 26,273
----------
112,861
----------
MACHINERY -- 7.0%
General Electric 1,090 61,449
General Instrument* 750 28,781
----------
90,230
----------
MEDICAL PRODUCTS & SERVICES -- 2.1%
Columbia/HCA Healthcare 640 27,680
----------
MISCELLANEOUS BUSINESS SERVICES -- 3.8%
Informix* 640 16,240
Oracle* 865 33,411
----------
49,651
----------
PAPER & PAPER PRODUCTS -- 0.7%
Scott Paper 180 8,910
----------
PETROLEUM & FUEL PRODUCTS -- 1.3%
Apache 200 5,475
Western Atlas* 265 11,759
----------
17,234
----------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 2.7%
Eastman Kodak 430 26,069
Xerox 75 8,794
----------
34,863
----------
RAILROADS -- 1.4%
Burlington Northern 190 12,041
Conrail 100 5,563
----------
17,604
----------
</TABLE>
<PAGE>
SCHEDULE OF INVESTMENTS/STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
Insurance Investment Products Trust--June 30, 1995 (Unaudited)
GROWTH FUND
<TABLE>
<CAPTION>
-----------------------------------------------------------
Market
Description Shares Value
-----------------------------------------------------------
<S> <C> <C>
RETAIL -- 4.3%
Autozone* 190 $ 4,774
Home Depot 500 20,313
Kohls* 140 6,388
McDonald's 610 23,866
----------
55,341
----------
SEMI-CONDUCTORS/INSTRUMENTS -- 4.1%
Intel 840 53,183
----------
TELEPHONES & TELECOMMUNICATION -- 4.4%
Airtouch Communications* 940 26,790
AT&T 580 30,813
----------
57,603
----------
Total Common Stock
(Cost $1,082,678) 1,231,237
----------
Total Investments -- 94.8% of Net Assets
(Cost $1,082,678) $1,231,237
==========
* Non-income producing security
AGGRESSIVE GROWTH FUND
COMMON STOCK -- 92.7%
APPAREL/TEXTILES -- 2.0%
Tommy Hilfiger* 500 $ 14,000
----------
BROADCASTING, NEWSPAPERS
& ADVERTISING -- 0.9%
Clear Channel Communications* 100 6,438
----------
COMMUNICATIONS EQUIPMENT -- 9.9%
Glenayre Technologies* 300 15,300
Integrated Silicon Solutions* 200 10,450
Itron* 100 3,125
Kemet* 100 5,250
Stratacom* 400 19,500
Ultratech Stepper* 400 14,100
----------
67,725
----------
COMPUTER PERIPHERAL EQUIPMENT -- 1.7%
Electroglas* 200 11,450
----------
COMPUTERS & SERVICES -- 4.1%
Atria Software* 100 4,850
FTP Software* 200 6,000
Hyperion Software* 300 13,575
S3* 100 3,600
----------
28,025
----------
DRUGS -- 1.8%
Circa Pharmaceuticals* 100 3,188
Idexx Laboratories* 200 5,200
Watson Pharmaceuticals* 100 3,900
----------
12,288
----------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------
Market
Description Shares Value
-----------------------------------------------------------
<S> <C> <C>
ENTERTAINMENT -- 1.4%
Regal Cinemas* 200 $ 6,400
Station Casinos* 200 3,450
----------
9,850
----------
ENVIRONMENTAL SERVICES -- 2.1%
United Waste Systems* 400 14,400
----------
FINANCIAL SERVICES -- 1.3%
Credit Acceptance* 300 6,150
National Auto Credit* 200 2,675
----------
8,825
----------
HOTELS & LODGING -- 0.6%
Doubletree* 200 4,313
----------
INSURANCE -- 4.0%
Healthsource* 300 10,500
Phycor* 200 7,025
Value Health* 300 9,675
----------
27,200
----------
MACHINERY -- 7.1%
FSI International* 400 9,325
Gasonics International* 200 5,700
Input/Output* 200 7,200
Kulicke & Soffa Industries* 100 6,631
Lam Research* 100 6,400
Photronics* 100 3,075
Zebra Technology* 200 10,650
----------
48,981
----------
MEASURING DEVICES -- 5.3%
Cognex* 400 16,100
Credence Systems* 300 9,075
Digital Link* 100 2,825
Tencor Instrument* 200 8,200
----------
36,200
----------
MEDICAL PRODUCTS & SERVICES -- 3.4%
Community Health Systems* 200 6,775
Ren* 300 4,763
Theratx* 200 2,675
Vencor* 300 9,450
----------
23,663
----------
MISCELLANEOUS BUSINESS SERVICES -- 19.8%
Acxiom* 400 9,550
Alantec* 100 3,425
Alternative Resources* 200 5,300
Cambridge Technology Partners* 400 13,200
Electronics For Imaging* 300 15,675
Fair Isaac 200 5,950
Frame Technology* 400 11,700
Macro Media* 200 8,650
McAfee Associates* 200 6,063
</TABLE>
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Market
Description Shares Value
----------------------------------------------------------------------------
<S> <C> <C>
Medic Computer Systems* 200 $ 7,700
National Data 300 6,938
Netmanage* 400 6,800
Network Peripherals* 300 6,544
Synopsys* 200 12,519
Systems & Computers Technology* 200 4,000
Wonderware* 300 12,075
--------
136,089
--------
MISCELLANEOUS CONSUMER SERVICES -- 1.0%
Corrections of America* 200 6,875
--------
MISCELLANEOUS MANUFACTURING -- 2.4%
Blyth Industries* 200 8,525
Department 56* 200 7,650
--------
16,175
--------
PRINTING & PUBLISHING -- 0.8%
Gartner, Class A* 200 5,800
--------
PROFESSIONAL SERVICES -- 1.3%
Tetra Tech* 500 8,875
--------
RAILROADS -- 1.4%
Railtex* 200 4,750
Wisconsin Central* 100 4,900
--------
9,650
--------
RETAIL -- 10.5%
Apple South 400 7,800
Corporate Express* 450 9,619
Discount Auto Parts* 200 5,075
General Nutrition* 400 14,050
Micro Warehouse* 300 13,800
Omnicare 400 10,850
Sunglass Hut International* 200 7,000
Viking Office Products* 100 3,663
--------
71,857
--------
SEMI-CONDUCTORS/INSTRUMENTS -- 5.8%
Altera* 200 8,650
Integrated Process Equipment* 100 3,531
Mattson Technology* 100 4,700
Sanmina* 100 3,800
Sierra Semiconductor* 100 3,175
Silicon Valley* 100 3,625
Vicor* 200 8,988
VLSI Technology* 100 3,013
--------
39,482
--------
TELEPHONES & TELECOMMUNICATION -- 2.1%
Ascend Communications* 100 5,050
Cidco* 200 6,275
LCI International* 100 3,063
--------
14,388
--------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
Shares/Face Market
Description Amount Value
-----------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION SERVICES -- 1.7%
Fritz* 200 $ 11,738
--------
WHOLESALE -- 0.3%
Cellstar* 100 2,338
--------
Total Common Stock
(Cost $541,044) 636,625
--------
REPURCHASE AGREEMENT -- 8.6%
Lehman Brothers
5.87%, dated 06/30/95, matures 07/03/95, repurchase
price $59,263 (collateralized by U.S. Treasury
Note, due 01/31/97
par value $57,859, market
value $61,005) $59,234 59,234
--------
Total Repurchase Agreement
(Cost $59,234) 59,234
--------
Total Investments -- 101.3%
(Cost $600,278) 695,859
--------
OTHER ASSETS AND LIABILITIES -- (1.3)%
Other Assets and Liabilities, Net (8,909)
--------
NET ASSETS:
Portfolio shares (unlimited authorization--no par
value) based on 59,479 outstanding shares of
beneficial interest 600,776
Accumulated net realized loss on investments (8,693)
Net unrealized appreciation on investments 95,581
Distributions in excess of net investment income (714)
--------
Total Net Assets -- 100.0% $686,950
========
Net Asset Value, Offering Price and Redemption Price
Per Share $11.55
========
* Non-income producing security
INCOME EQUITY FUND
COMMON STOCK -- 98.2%
AEROSPACE & DEFENSE -- 1.3%
Loral 100 $ 5,175
Raytheon 50 3,881
Rockwell International 150 6,863
--------
15,919
--------
AIR TRANSPORTATION -- 0.6%
AMR* 50 3,731
Delta Air Lines 50 3,688
--------
7,419
--------
</TABLE>
<PAGE>
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
Insurance Investment Products Trust--June 30, 1995 (Unaudited)
INCOME EQUITY FUND
<TABLE>
<CAPTION>
-------------------------------------------------
Market
Description Shares Value
-------------------------------------------------
<S> <C> <C>
AIRCRAFT -- 2.2%
Lockheed Martin 150 $ 9,469
McDonnell Douglas 250 19,188
--------
28,657
--------
APPAREL/TEXTILES -- 0.5%
Springs Industries, Class A 100 3,725
V F 50 2,688
--------
6,413
--------
AUTOMOTIVE -- 5.0%
Chrysler 200 9,575
Dana 150 4,294
Eaton 200 11,625
Ford Motor 650 19,338
General Motors 350 16,406
Paccar 50 2,338
--------
63,576
--------
BANKS -- 14.3%
Ahmanson H F 250 5,500
Bank of Boston 150 5,625
BankAmerica 350 18,419
Chemical Banking 450 21,263
Citicorp 350 20,256
Corestates Financial 500 17,438
First Interstate Bancorp 150 12,038
First Union 300 13,575
Nationsbank 300 16,088
NBD Bancorp 500 16,000
Republic New York 150 8,400
Southtrust 450 10,406
Wells Fargo 100 18,025
--------
183,033
--------
BEAUTY PRODUCTS -- 0.4%
Alberto Culver, Class B 150 4,538
--------
CHEMICALS -- 6.7%
Dow Chemical 225 16,172
E.I. du Pont de Nemours 400 27,500
Eastman Chemical 50 2,975
Eli Lilly 200 15,700
First Mississippi 300 10,238
Union Carbide 400 13,350
--------
85,935
--------
COMMUNICATIONS EQUIPMENT -- 0.7%
ITT 75 8,813
--------
COMPUTERS & SERVICES -- 4.1%
International Business Machines 400 38,400
Seagate Technology* 100 3,925
Tandy 200 10,375
--------
52,700
--------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------
Market
Description Shares Value
-------------------------------------------------
<S> <C> <C>
DRUGS -- 1.7%
Baxter International 125 $ 4,547
Bristol-Myers Squibb 250 17,031
--------
21,578
--------
ELECTRICAL UTILITIES -- 10.5%
Baltimore Gas and Electric 200 5,000
Centerior Energy 500 4,813
Central and South West 250 6,563
Consolidated Edison of New York 400 11,800
Detroit Edison 350 10,238
DQE 250 5,875
Duke Power 200 8,300
Entergy 150 3,619
General Public Utilities 400 11,900
Peco Energy 350 9,669
Pinnacle West Capital 500 12,250
Public Service Enterprise 500 13,875
SCE 650 11,131
Southern 250 5,594
Unicom 500 13,313
--------
133,940
--------
FINANCIAL SERVICES -- 4.7%
Allstate 400 11,850
American Express 250 8,781
Dean Witter Discover 250 11,750
Household International 200 9,900
Travelers 400 17,500
--------
59,781
--------
FOOD, BEVERAGE & TOBACCO -- 1.4%
Adolph Coors, Class B 100 1,638
Archer Daniels Midland 400 7,450
IBP 200 8,700
--------
17,788
--------
GAS/NATURAL GAS -- 2.4%
Coastal 100 3,038
Eastern Enterprises 200 5,975
Oneok 100 2,138
Panhandle Eastern 450 10,969
Williams 250 8,719
--------
30,839
--------
</TABLE>
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------
Market
Description Shares Value
------------------------------------------------------
<S> <C> <C>
INSURANCE -- 3.6%
American General 250 $ 8,438
Cigna 250 19,406
Old Republic International 200 5,225
Providian 100 3,625
Saint Paul 100 4,925
U.S. Life 100 4,025
----------
45,644
----------
MACHINERY -- 2.7%
Black & Decker 150 4,631
Cummins Engine 175 7,634
Deere 100 8,563
Outboard Marine 200 3,925
Parker-Hannifin 150 5,438
Timken 100 4,613
----------
34,804
----------
MEASURING DEVICES -- 0.2%
Johnson Controls 50 2,825
----------
MEDICAL PRODUCTS & SERVICES -- 0.9%
Becton Dickinson 200 11,650
----------
MISCELLANEOUS BUSINESS SERVICES -- 0.4%
Sun Microsystems* 100 4,850
----------
PAPER & PAPER PRODUCTS -- 3.5%
Bowater 50 2,244
Champion International 250 13,031
Federal Paper Board 200 7,075
International Paper 150 12,863
Temple-Inland 100 4,763
Weyerhaeuser 100 4,713
----------
44,689
----------
PETROLEUM REFINING -- 11.0%
Amoco 300 19,988
Atlantic Richfield 150 16,463
Exxon 800 56,500
Mobil 450 43,200
Royal Dutch Petroleum ADR 50 6,094
----------
142,245
----------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 1.9%
Eastman Kodak 250 15,156
Xerox 75 8,794
----------
23,950
----------
PRINTING & PUBLISHING -- 0.7%
American Greetings, Class A 100 2,938
Meredith 100 2,538
Wallace Computer Services 75 2,878
----------
8,354
----------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------
Market
Description Shares Value
------------------------------------------------------
<S> <C> <C>
RAILROADS -- 1.6%
Conrail 250 $ 13,906
Norfolk Southern 100 6,738
----------
20,644
----------
RETAIL -- 2.6%
Jostens 100 2,125
Rite Aid 150 3,844
Sears Roebuck 400 23,950
Wendy's International 150 2,681
----------
32,600
----------
RUBBER & PLASTIC -- 0.3%
Goodyear Tire & Rubber 100 4,125
----------
SEMI-CONDUCTORS/INSTRUMENTS -- 0.3%
Advanced Micro Devices* 100 3,638
----------
STEEL & STEEL WORKS -- 1.4%
Alcan Aluminum 200 6,050
Asarco 200 6,100
Reynolds Metals 50 2,588
USX-U.S. Steel 100 3,438
----------
18,176
----------
TELEPHONES & TELECOMMUNICATION -- 9.4%
Ameritech 600 26,400
Bellsouth 400 25,400
Cincinnati Bell 200 5,050
GTE 700 23,870
NYNEX 100 4,025
Pacific Telesis 450 12,038
Southern New England 300 10,575
United States Cellular* 400 12,100
----------
119,458
----------
TRUCKING -- 0.7%
Consolidated Freightways 100 2,213
Pittston Services 300 7,200
----------
9,413
----------
WHOLESALE -- 0.5%
Fleming 250 6,625
----------
Total Common Stock
(Cost $1,147,955) 1,254,619
----------
</TABLE>
<PAGE>
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
Insurance Investment Products Trust--June 30, 1995 (Unaudited)
INCOME EQUITY FUND
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Face Market
Description Amount Value
-------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 2.0%
Lehman Brothers
5.80%, dated 06/30/95, matures 07/03/95, repurchase price
$24,995 (collateralized by U.S. Treasury Bill, due
07/03/95 par value $27,218, market value $25,735) $24,983 $ 24,983
----------
Total Repurchase Agreement
(Cost $24,983) 24,983
----------
Total Investments -- 100.2%
(Cost $1,172,938) 1,279,602
----------
OTHER ASSETS AND LIABILITIES -- (0.2)%
Other Assets and Liabilities, Net ( 2,149)
----------
NET ASSETS:
Portfolio shares (unlimited authorization--no par value)
based on 115,934 outstanding shares of beneficial
interest 1,164,688
Accumulated net realized gain on investments 6,099
Net unrealized appreciation on investments 106,664
Undistributed net investment income 2
----------
Total Net Assets -- 100.0% $1,277,453
==========
Net Asset Value, Offering Price and Redemption Price Per
Share $ 11.02
==========
</TABLE>
* Non-income producing security
ADR American Depository Receipt
INTERMEDIATE FIXED INCOME FUND
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Face Market
Description Amount Value
------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 88.5%
U.S. Treasury Bill
5.480%, 07/20/95 $250,000 $ 249,253
U.S. Treasury Bond
7.500%, 11/15/24 56,000 61,990
U.S. Treasury Note
7.500%, 02/15/05 650,000 708,070
----------
Total U.S. Treasury Obligations
(Cost $960,315) 1,019,313
----------
REPURCHASE AGREEMENT -- 10.6%
Lehman Brothers
5.82%, dated 06/30/95, matures 07/03/95, repurchase
price $121,918 (collateralized by U.S. Treasury Note,
due 01/31/97 par value $119,030, market value $125,503) 121,860 121,860
----------
Total Repurchase Agreement
(Cost $121,860) 121,860
----------
Total Investments--99.1%
(Cost $1,082,175) 1,141,173
----------
OTHER ASSETS AND LIABILITIES -- 0.9%
Other Assets and Liabilities, Net 10,192
----------
NET ASSETS:
Portfolio shares (unlimited authorization--no par value)
based on 107,920 outstanding shares of beneficial
interest 1,083,696
Accumulated net realized gain on investments 8,671
Net unrealized appreciation on investments 58,998
----------
Total Net Assets -- 100.0% $1,151,365
==========
Net Asset Value, Offering Price and Redemption Price Per
Share $ 10.67
==========
</TABLE>
<PAGE>
--------------------------------------------------------------------------------
MONEY MARKET FUND
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Face
Description Amount Value
------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT BONDS -- 84.6%
FFCB Discount Note
5.991%, 07/05/95 $ 80,000 $ 79,948
FHLB Discount Note
5.996%, 07/10/95 100,000 99,853
FHLMC Discount Notes
5.954%, 07/05/95 60,000 59,961
5.993%, 07/07/95 25,000 24,975
FNMA Discount Note
5.966%, 07/07/95 275,000 274,731
--------
Total Government Bonds
(Cost $539,468) 539,468
--------
U.S. TREASURY OBLIGATIONS -- 15.6%
U.S. Treasury Bill
5.265%, 08/17/95 75,000 74,484
5.400%, 08/17/95 25,000 24,824
--------
Total U.S. Treasury Obligations
(Cost $99,308) 99,308
--------
Total Investments -- 100.2%
(Cost $638,776) 638,776
--------
OTHER ASSETS AND LIABILITIES -- (0.2)%
Other Assets and Liabilities, Net (1,412)
--------
NET ASSETS:
Portfolio shares (unlimited
authorization--no par value) based on 637,365 outstanding
shares of beneficial interest 637,365
Accumulated net realized loss on investments (1)
--------
Total Net Assets -- 100.0% $637,364
========
Net Asset Value, Offering Price and Redemption Price Per
Share $ 1.00
========
</TABLE>
FFCB Federal Farm Credit Bank
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
The accompanying notes are an integral part of the financial statements.
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
Insurance Investment Products Trust--as of June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
----------
GROWTH
FUND
----------
<S> <C>
ASSETS:
Investments at market value (cost $1,082,678) $1,231,237
Cash 46,492
Receivable for investment securities sold 23,399
Accrued interest receivable 2,303
Other assets 317
----------
Total assets 1,303,748
----------
LIABILITIES:
Distribution payable 1,365
Accrued expenses payable 4,128
----------
Total liabilities 5,493
----------
NET ASSETS:
Portfolio shares (unlimited authorization -- no par value) based on
113,777 outstanding shares of beneficial interest 1,144,110
Accumulated net realized gain on investments 5,580
Net unrealized appreciation on investments 148,559
Undistributed net investment income 6
----------
TOTAL NET ASSETS $1,298,255
==========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE $ 11.41
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENTS OF OPERATIONS
------------------------------------------------------------------------
Insurance Investment Products Trust--For the period ended June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
------------- --------
INTERNATIONAL
GROWTH GROWTH
FUND (1) FUND (1)
------------- --------
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 2,036 $ 1,635
Dividends 21,111 7,625
Less: Foreign taxes withheld (1,563) --
-------- --------
Total investment income 21,584 9,260
-------- --------
EXPENSES:
Management fees 2,256 1,967
Less management fees waived (2,256) (1,967)
Reimbursement from management (21,454) (9,464)
Investment advisory fees 1,802 1,749
Less advisory fees waived -- (518)
Custody fees 12,322 823
Professional fees 3,747 6,040
Printing fees 3,215 4,731
Wire agent fees 932 306
Registration fees 382 148
Trustees fees 1,192 52
Pricing fees 3,454 494
Miscellaneous fees 64 10
-------- --------
Total expenses 5,656 4,371
-------- --------
NET INVESTMENT INCOME (LOSS) 15,928 4,889
-------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) from security transactions 10,162 5,580
Net realized loss on forward foreign currency
contracts and foreign currency transactions (35,345) --
Net change in unrealized appreciation on investments 41,805 148,559
Net change in unrealized appreciation on forward
foreign currency contracts, foreign currency and
translation of other assets and liabilities in
foreign currencies 5,658 --
-------- --------
Total net realized and unrealized gain (loss) on in-
vestments 22,280 154,139
-------- --------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 38,208 $159,028
======== ========
</TABLE>
(1) Commenced operations on February 10, 1995.
The accompanying notes are an integral part of the financial statements.
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------- -------- ------------ --------
INTERMEDIATE
AGGRESSIVE INCOME FIXED MONEY
GROWTH EQUITY INCOME MARKET
FUND (1) FUND (1) FUND (1) FUND (1)
---------- -------- ------------ --------
<S> <C> <C> <C>
$ 2,412 $ 2,782 $26,854 $14,539
30 13,808 -- --
-- -- -- --
------- -------- ------- -------
2,442 16,590 26,854 14,539
------- -------- ------- -------
982 1,945 1,537 1,022
(982) (1,945) (1,537) (1,022)
(5,072) (8,982) (8,959) (5,161)
1,418 1,512 1,113 182
(327) (454) (568) --
412 813 741 420
3,064 5,911 5,484 3,008
2,388 4,638 4,277 2,352
153 302 283 170
74 148 139 86
26 52 49 29
478 370 263 124
5 11 10 6
------- -------- ------- -------
2,619 4,321 2,832 1,216
------- -------- ------- -------
(177) 12,269 24,022 13,323
------- -------- ------- -------
(8,693) 6,099 8,671 (1)
-- -- -- --
95,581 106,664 58,998 --
-- -- -- --
------- -------- ------- -------
86,888 112,763 67,669 (1)
------- -------- ------- -------
$86,711 $125,032 $91,691 $13,322
======= ======== ======= =======
</TABLE>
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------------------------------------
Insurance Investment Products Trust--For the period ended June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
------------- -----------
INTERNATIONAL
GROWTH GROWTH
FUND FUND
2/10/95 (1) 2/10/95 (1)
TO 6/30/95 TO 6/30/95
------------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ 15,928 $ 4,889
Net realized gain (loss) from security and foreign
currency transactions (25,183) 5,580
Net change in unrealized appreciation on investments
and foreign currency transactions 47,463 148,559
---------- ----------
Net increase in net assets resulting from operations 38,208 159,028
---------- ----------
DIVIDENDS DISTRIBUTED FROM:
Net investment income -- (4,883)
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 1,112,670 1,142,197
Reinvestment of cash distributions -- 3,518
Cost of shares repurchased (4,136) (1,705)
---------- ----------
Increase in net assets derived from capital share
transactions 1,108,534 1,144,010
---------- ----------
Net increase in net assets 1,146,742 1,298,155
NET ASSETS:
Beginning of period 100 100
---------- ----------
End of period (2) $1,146,842 $1,298,255
========== ==========
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding at beginning of period 10 10
---------- ----------
Shares issued 111,357 113,580
Shares issued in lieu of cash distributions -- 342
Shares repurchased (406) (155)
---------- ----------
Net increase in capital shares 110,951 113,767
---------- ----------
Capital shares outstanding at end of period 110,961 113,777
========== ==========
</TABLE>
(1) Commenced operations on February 10, 1995.
(2) Including undistributed (distributions in excess of) net investment
income of $15,928 for International Growth, $6 for Growth, $(714) for
Aggressive Growth, $2 for Income Equity, $0 for Intermediate Fixed Income
and $0 for Money Market at June 30, 1995.
The accompanying notes are an integral part of the financial statements.
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------- ----------- ------------ -----------
AGGRESSIVE INCOME INTERMEDIATE MONEY
GROWTH EQUITY FIXED INCOME MARKET
FUND FUND FUND FUND
2/10/95 (1) 2/10/95 (1) 2/10/95 (1) 2/10/95 (1)
TO 6/30/95 TO 6/30/95 TO 6/30/95 TO 6/30/95
----------- ----------- ------------ -----------
<S> <C> <C> <C>
$ (177) $ 12,269 $ 24,022 $ 13,323
(8,693) 6,099 8,671 (1)
95,581 106,664 58,998 --
-------- ---------- ---------- --------
86,711 125,032 91,691 13,322
-------- ---------- ---------- --------
(537) (12,267) (24,022) (13,323)
-------- ---------- ---------- --------
618,993 1,156,695 1,065,040 896,224
62 10,574 18,583 793
(18,379) (2,681) (27) (359,152)
-------- ---------- ---------- --------
600,676 1,164,588 1,083,596 537,865
-------- ---------- ---------- --------
686,850 1,277,353 1,151,265 537,864
100 100 100 99,500
-------- ---------- ---------- --------
$686,950 $1,277,453 $1,151,365 $637,364
======== ========== ========== ========
10 10 10 99,500
-------- ---------- ---------- --------
61,214 115,164 106,106 896,224
6 1,005 1,807 793
(1,751) (245) (3) (359,152)
-------- ---------- ---------- --------
59,469 115,924 107,910 537,865
-------- ---------- ---------- --------
59,479 115,934 107,920 637,365
======== ========== ========== ========
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Insurance Investment Products Trust--for the period ended June 30, 1995
(Unaudited)
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
Ratio of Net
Distributions Distributions Investment
Net Asset Net Realized and From From Ratio of Income
Value Net Unrealized Net Realized Net Asset Net Assets Expenses (Loss) to
Beginning Investment Gain on Investment Capital Value End Total End of to Average Average
of Period Income Investments Income Gains of Period Return+ Period Net Assets Net Assets
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL GROWTH FUND (1)
-----------------------------
1995 $10.00 $0.14 $0.20 -- -- $10.34 3.40% $1,146,842 1.40% 3.88 %
GROWTH FUND (1)
---------------
1995 $10.00 $0.05 $1.41 $(0.05) -- $11.41 14.59% $1,298,255 1.00% 1.12 %
AGGRESSIVE GROWTH FUND (1)
--------------------------
1995 $10.00 -- $1.56 $(0.01) -- $11.55 15.60% $ 686,950 1.20% (0.08)%
INCOME EQUITY FUND (1)
----------------------
1995 $10.00 $0.11 $1.02 $(0.11) -- $11.02 11.38% $1,277,453 1.00% 2.84 %
INTERMEDIATE FIXED INCOME FUND (1)
----------------------------------
1995 $10.00 $0.23 $0.67 $(0.23) -- $10.67 9.12% $1,151,365 0.70% 5.94 %
MONEY MARKET FUND (1)
---------------------
1995 $1.00 $0.02 -- $(0.02) -- $1.00 2.09% $ 637,364 0.50% 5.48 %
<CAPTION>
Ratio of
Ratio of Net Investment
Expenses Income (Loss)
to Average to Average
Net Assets Net Assets Portfolio
(Excluding (Excluding Turnover
Waivers) Waivers) Rate
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTERNATIONAL GROWTH FUND (1)
-----------------------------
1995 7.18% (1.90)% 19%
GROWTH FUND (1)
---------------
1995 3.73% (1.61)% 20%
AGGRESSIVE GROWTH FUND (1)
--------------------------
1995 4.12% (3.00)% 50%
INCOME EQUITY FUND (1)
----------------------
1995 3.63% 0.21 % 15%
INTERMEDIATE FIXED INCOME FUND (1)
----------------------------------
1995 3.43% 3.21 % 37%
MONEY MARKET FUND (1)
---------------------
1995 3.04% 2.94 % N/A
</TABLE>
(1)Commenced operations on February 10, 1995. All ratios for the period have
been annualized.
+ Total Return is for the period indicated and has not been annualized.
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Insurance Investment Products Trust--June 30, 1995 (Unaudited)
1. ORGANIZATION:
Insurance Investment Products Trust, (the "Trust") was organized as a Massa-
chusetts business trust under a Declaration of Trust dated June 3, 1994. The
Trust is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company with six funds: International Growth
Fund, Growth Fund, Aggressive Growth Fund, Income Equity Fund and Intermediate
Fixed Income Fund (the "Non-Money Market Funds"), and the Money Market Fund.
The assets of each Fund are segregated, and a shareholder's interest is limited
to the Fund in which shares are held. Shares of the Trust are currently offered
only to National Home Life Assurance Company Separate Account V and Connecticut
Mutual Life Insurance Company, through the C.M. Multi-Account A.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by the
Trust.
Security Valuation--Investment securities of the " Non-Money Market Funds"
which are listed on a securities exchange for which market quotations are
available are valued by an independent pricing service at the last quoted sales
price for such securities on each business day. If there is no such reported
sale, these securities and unlisted securities for which market quotations are
readily available are valued at the most recent quoted bid price. Foreign secu-
rities in the International Growth Fund are valued based upon quotations from
the primary market in which they are traded.
Investment securities of the Money Market Fund are stated at amortized cost
which approximates market value. Under this valuation method, purchase dis-
counts and premiums are accreted and amortized ratably to maturity and are in-
cluded in interest income.
Security Transactions and Investment Income--Security transactions are ac-
counted for on the trade date of the security purchase or sale. Cost used in
determining net realized capital gains and losses on the sale of securities are
those of the specific securities sold, adjusted for the accretion and amortiza-
tion of purchase discounts and premiums during the respective holding period
which is calculated using the effective interest method. Interest income is re-
corded on the accrual basis. Dividend income is recorded on ex-dividend date.
Repurchase Agreements--Securities pledged as collateral for repurchase agree-
ments are held by each Fund's custodian bank until maturity of the repurchase
agreements. Provisions of the agreements ensure that the market value of the
collateral, including interest thereon, is sufficient in the event of default
by the counterparty. If the counterparty defaults and the value of the collat-
eral declines or if the counterparty enters an insolvency proceeding, realiza-
tion of the collateral by the Fund may be delayed or limited.
Foreign Currency Translation--The books and records of the International
Growth Fund are maintained in U.S. dollars on the following basis:
(I) market value of investment securities, assets and liabilities at the
current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of such
transactions.
The International Growth Fund does not isolate that portion of gains and
losses on investments in equity securities which is due to changes in the for-
eign exchange rates from that which is due to change in market prices of equity
securities.
The International Growth Fund reports certain foreign currency related trans-
actions as components of realized gains for financial reporting purposes,
whereas such components are treated as ordinary income for Federal income tax
purposes.
Forward Foreign Currency Contracts--The International Growth Fund enters into
forward foreign currency contracts as hedges against either specific transac-
tions or fund positions. The aggregate principal amount of the contracts are
not recorded as the International Growth Fund intends to settle the contracts
prior to delivery. All commitments are "marked-to-market" daily at the applica-
ble foreign exchange rate and any resulting unrealized gains or losses are re-
corded currently. The International Growth Fund realizes gains or losses at the
time the
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
------------------------------------------------------------------------
Insurance Investment Products Trust--June 30, 1995 (Unaudited)
forward contracts are extinguished. Unrealized gains or losses on outstanding
positions in forward foreign currency contracts held at the close of the year
will be recognized as ordinary income or loss for Federal income tax purposes.
Expenses--Expenses that are directly related to one of the Funds are charged
directly to that Fund. Other operating expenses of the Trust are prorated to
the Funds on the basis of relative net assets.
Distributions to Shareholders--The International Growth Fund declares and
pays dividends from net investment income periodically. The Growth, Income Eq-
uity and Intermediate Fixed Income Funds declare and pay dividends from net in-
vestment income monthly. The Aggressive Growth Fund declares and pays dividends
from net investment income quarterly. The Money Market Fund's distributions
from net investment income are declared on a daily basis. Any net realized cap-
ital gains on sales of securities from the Funds are distributed to its share-
holders at least annually.
Federal Income Taxes--It is the Trust's intention to qualify as a regulated
investment company for Federal income tax purposes and distribute all of its
taxable income and net capital gains. Accordingly, no provision for Federal in-
come taxes is required.
3. ORGANIZATION COSTS AND TRANSACTIONS WITH AFFILIATES:
The Trust incurred costs of approximately $59,000 in connection with its or-
ganization. These costs have been capitalized by the Trust and are being amor-
tized over sixty months commencing with operations. In the event any of the
initial shares of the Trust are redeemed by any holder thereof during the pe-
riod that the Trust is amortizing its organizational costs, the redemption pro-
ceeds payable to the holder thereof by the Trust will be reduced by the unamor-
tized organizational costs in the same ratio as the number of initial shares
being redeemed bears to the number of initial shares outstanding at the time of
redemption. These costs include legal fees of approximately $1,400 for organi-
zational work performed by a law firm of which an officer and trustee of the
Trust is a partner.
The Trust and SEI Financial Management Corporation ("SFM") are parties to a
Management Agreement dated December 30, 1994, under which SFM provides manage-
ment, administrative and shareholder services to the Funds for a fee calculated
as a percentage of each Fund's average daily net assets at an annual rate of
0.55% for the International Growth Fund, 0.45% for the Growth, Aggressive
Growth and Income Equity Funds, 0.38% for the Intermediate Fixed Income Fund
and 0.42% for the Money Market Fund.
SFM also serves as Adviser to certain funds of the Trust pursuant to an In-
vestment Advisory Agreement dated December 30, 1994, under which SFM receives a
fee calculated as a percentage of each Fund's average daily net assets at an
annual rate of 0.475% for the International Growth Fund, 0.40% for the Growth
Fund, 0.65% for the Aggressive Growth Fund, 0.35% for the Income Equity Fund
and 0.275% for the Intermediate Fixed Income Fund.
Wellington Management Company ("WMC") serves as Adviser to the Money Market
Fund pursuant to an agreement dated March 7, 1995, under which WMC receives a
fee calculated as a percentage of the Money Market Fund's average daily net as-
sets at an annual rate of 0.075% up to $500 million and 0.020% over $500 mil-
lion.
SFM may voluntarily waive a portion of its fee and reimburse the Trust, if
necessary, in order to limit the total operating expenses of each Fund.
LSV Asset Management ("LSV"), Sub-Adviser to a portion of the assets of the
Income Equity Fund is organized as a Delaware general partnership in which an
affiliate of SFM owns a majority interest.
Certain officers of the Trust are also officers of the Manager, Adviser
and/or Distributor. Such officers are paid no fees by the Trust for serving as
officers of the Trust.
4. SUB-ADVISORY AGREEMENTS:
Sub-Advisory services are provided to the Adviser for the International
Growth Fund by Acadian Asset Management, Inc. and WorldInvest Limited, for the
Growth Fund by Alliance Capital Management L.P. and IDS Advisory Group Inc.,
for the Ag-
<PAGE>
--------------------------------------------------------------------------------
gressive Growth Fund by Pilgrim Baxter & Associates, LTD., for the Income Eq-
uity Fund by LSV, Mellon Equity Associates and Merus Capital Management, and
for the Intermediate Fixed Income Fund by Western Asset Management Company. Un-
der the terms of such agreements, the Sub-Advisers are entitled to receive a
fee from the Adviser. The Adviser is responsible for the supervision of, and
payment of fees to, the Sub-Advisers in connection with their services.
5. INVESTMENT TRANSACTIONS:
During the period ended June 30, 1995, purchases of securities and proceeds
from sales of securities, other than temporary investments in short-term secu-
rities, were as follows:
<TABLE>
<CAPTION>
Intermediate
International Aggressive Income Fixed
Growth Growth Growth Equity Income
------------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Purchases
U.S. Government $ -- $ -- $ -- $ -- $995,434
Other 1,244,633 1,324,914 807,431 1,302,982 --
Sales
U.S. Government $ -- $ -- $ -- $ -- $292,886
Other 197,057 229,178 257,694 161,126 --
</TABLE>
At June 30, 1995, the total cost of securities and net realized gains or
losses on securities sold for Federal income tax purposes was not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation on securities held by the "Non-
Money Market Funds" at June 30, 1995 is as follows :
<TABLE>
<CAPTION>
Intermediate
International Aggressive Income Fixed
Growth Growth Growth Equity Income
------------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C>
Aggregate gross
unrealized appreciation $ 67,366 $157,470 $103,447 $113,391 $59,022
Aggregate gross
unrealized depreciation (25,561) (8,911) (7,866) (6,727) (24)
-------- -------- -------- -------- -------
Net unrealized
appreciation $ 41,805 $148,559 $ 95,581 $106,664 $58,998
======== ======== ======== ======== =======
</TABLE>
6. FORWARD FOREIGN CURRENCY CONTRACTS:
The International Growth Fund enters into forward foreign currency exchange
contracts as hedges against fund positions. Such contracts, which protect the
value of the Fund's investment securities against the decline in the value of
currency, do not eliminate fluctuations in the underlying prices of the securi-
ties. They simply establish an exchange rate at a future date. Also, although
such contracts tend to minimize the risk of loss due to a decline in the value
of a hedged currency, at the same time they tend to limit any potential gain
that might be realized should the value of such foreign currency increase.
The following forward foreign currency contract in the International Growth
Fund was outstanding at June 30, 1995:
<TABLE>
<CAPTION>
In Net
Settlement Contract Exchange Unrealized
Date to Deliver For Appreciation
---------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Foreign Currency Sale............. 7/20/95 JY 9,655,000 $119,811 $5,539
-------- ------
</TABLE>
Currency Legend:
JY Japanese Yen
<PAGE>
--------------------
INSURANCE INVESTMENT
--------------------
PRODUCTS TRUST
--------------------
SEMI-ANNUAL REPORT
--------------------
June 30, 1995 (Unaudited)
Robert A. Nesher
Chairman
TRUSTEES
Richard F. Blanchard
William M. Doran
F. Wendell Gooch
Frank E. Morris
James M. Storey
OFFICERS
David G. Lee
President and Chief Executive Officer
Carmen V. Romeo
Treasurer, Assistant Secretary
Todd Lipperman
Vice President, Assistant Secretary
Robert B. Carroll
Vice President, Assistant Secretary
Kathryn L. Stanton
Vice President, Assistant Secretary
Joseph M. Lydon
Vice President, Assistant Secretary
Jeffrey A. Cohen
Controller, Assistant Secretary
Sandra K. Orlow
Vice President, Assistant Secretary
Kevin P. Robins
Vice President, Assistant Secretary
Richard W. Grant
Secretary
INVESTMENT ADVISER
SEI Financial Management Corporation
Wellington Management Company
MANAGER AND SHAREHOLDER SERVICING AGENT
SEI Financial Management Corporation
DISTRIBUTOR
SEI Financial Services Company
LEGAL COUNSEL
Sutherland Asbill & Breman
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
This semi-annual report and the financial statements contained herein are
submitted for the general information of the contractholders and annuitants and
must be preceded or accompanied by a current prospectus. The variable annuity
is distributed by SEI Financial Services Company, 680 East Swedesford Road,
Wayne, PA 19087 and issued by C.M. Life Insurance Company, 140 Garden Street,
Hartford, CT 06154.
Variable annuity units are not deposits or obligations of, or guaranteed or
endorsed by, any financial institution. Variable annuity units are not
federally insured by the Federal Deposit Insurance Corporation (FDIC), the
Federal Reserve Board, or any other government agency. Investment in variable
annuity units involves risk, including the possible loss of the principal
amount invested. Distributions made prior to age 59 1/2 may be subject to a tax
penalty.
For more information call 1.800.DIAL.SEI/1.800.342.5734
<PAGE>
PRESIDENT'S MESSAGE
--------------------------------------------------------------------------------
Dear Shareholder:
I'm pleased to present your Semi-Annual Report to Shareholders for Equity Growth
and Income Fund, a portfolio of Insurance Management Series, which covers the
six-month period ended June 30, 1995. The Report begins with an investment
review by the portfolio manager, which is followed by a complete listing of the
fund's holdings as well as its financial statements.
As of June 30, 1995, the fund's portfolio of high-quality stocks included such
industrial giants as Ford, Mattel, Reebok, IBM, Chevron, Texaco, American
Express, Citicorp, Bristol-Myers Squibb, Du Pont, Caterpillar, General Electric,
Sears, and AT&T.
You'll be pleased to know that the fund recorded extremely strong performance
over the reporting period. Dividends paid to shareholders totaled $0.10 per
share. In addition, the fund's net asset value increased substantially--from
$9.74 on the first day of the reporting period to $11.28 on the last day of the
reporting period. As a result, the fund's total return for the reporting period
was 16.89%.* On June 30, 1995, its net assets stood at $14.5 million.
Thank you for participating in the growth and income-earning potential of
high-quality American companies. We'll continue to keep you up to date on your
progress. Your comments and suggestions are always welcome.
Sincerely,
/s/ J. Christopher Donahue
-----------------------------
J. Christopher Donahue
President
August 15, 1995
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
Performance information does not reflect the charges and expenses of a
variable annuity or variable life insurance contract.
1
<PAGE>
INVESTMENT REVIEW
--------------------------------------------------------------------------------
Certain recent economic and market conditions have influenced our management of
Equity Growth and Income Fund. The economy is slowing, as predicted by most
economists and strategists. First quarter real gross domestic product ("GDP")
growth was about 2.7% (annual rate). That's down substantially from the last two
quarters of 1994, when GDP grew at a rate of over 4%--which was just too fast.
The question now is: Will growth slow further and will earnings be impacted? The
market has been concerned about this, and over the past few months less cyclical
companies have been doing somewhat better than cyclicals. We still see good
value in selected cyclicals because we don't think the economy shows any signs
of going into a recession in the near future. Aggregate corporate profits were
strong in the first quarter of 1995, and we expect that to continue, although
some cyclical areas will be affected by a sluggish economy.
Interest rates have had an effect on the stock market during the reporting
period. The long bond is now trading under 7.00%. It was as high as 8.15% in
late 1994. Certainly this decline in long-term interest rates has been an
important factor in the strength of the stock market over the past six months,
along with strong earnings growth. The debate among economists currently is
whether the Federal Reserve Board will ease or maintain short rates at current
levels over the next several months, but this will depend on how much the
economy slows.
Many U.S. companies, such as those which are large exporters or have substantial
international operations, have benefited from the weak dollar. This has been a
factor in our fundamental analysis of companies over the past year or so. We
have several holdings in companies which have substantial international
revenues. For example, Hewlett-Packard is very big overseas, with nearly $10
billion in sales in Europe alone last year. IBM is still getting more than half
their income from outside the U.S., and General Electric is also a very big
player internationally. These companies can actually benefit from the weakness
of the dollar.
Current investment themes in the portfolio include technology, the largest
sector in the fund. We're overweighted in this area relative to the S&P 500
Index ("S&P 500"). About 19% of the portfolio consists of technology stocks. The
S&P 500 has a weighting of about 12% in technology.
Hewlett Packard is still our biggest holding. The stock has performed well
recently, after the company reported excellent first quarter earnings.
Lockheed Martin, in which we have a sizable holding, is the result of the recent
merger of two large defense companies. This is indicative of what's going on in
aerospace and defense, and we've played this sector reasonably well. The
Department of Defense has allowed consolidation to take place among its
contractors in order to preserve the defense industrial base. Several companies
have been able to benefit by this because they can cut costs and enhance
profitability and cash flow.
Other technology stocks in the portfolio include some well-managed "defense
conglomerates" such as Raytheon and Rockwell. Both have substantial nondefense
businesses, which are doing very well.
One turnaround situation we have in information technology is IBM. The stock
declined substantially from 1990-1993, but, about a year ago, actions taken by
new management began to pay off. For the last four quarters, IBM's earnings have
exceeded expectations.
2
<PAGE>
Finance is our second area of overweight. The portfolio has a 15% weighting in
financial stocks versus 11% for the S&P 500. We own several bank stocks such as
Citicorp and Bank of Boston. We also own Dean Witter Discover, which has a
strong position in the credit card business. Travelers Corporation, a financial
services conglomerate, which we have held for over three years, continues to do
well. The financial sector has been doing well recently since these stocks are
somewhat interest rate sensitive.
In manufacturing, we're overweighted. We own Caterpillar and Deere, both of
which experienced a good first quarter. FMC Corporation is our largest holding
in this sector, and we also have a position in Textron, a conglomerate that's
restructuring to enhance shareholder value.
Another area that looks attractive is natural gas, and the recent purchase of
Burlington Resources in the fund is a natural gas play. Natural gas prices have
been under pressure, but, on an asset value basis, the stock is very cheap.
Enron, another holding, is also a play in natural gas.
In the consumer services sector, we purchased Gannett, which owns USA Today, a
daily publication that has finally turned profitable. USA Today is leveraging
their consumer franchise, entering the international arena and adding services.
The company features substantial leverage with continued growth, good cash flow
and an excellent newspaper operation that's national in scope.
Eastman Chemical is another recent purchase. A specialty chemical company, it is
the world's leading manufacturer of PET (polyethylene terephthalate), a plastic
used to make soda bottles and other packaging. It's capacity--constrained, and
there is limited capacity coming on line. So, we don't think that the earnings
have peaked on a cyclical or secular basis.
Regarding the outlook for various market sectors over the next six months,
consumer-related stocks continue to be a difficult place to find attractive
values. Manufacturing, technology, and finance stocks will probably be more
rewarding, assuming a slowing economy doesn't eventually turn into a recession.
We're still looking for companies that are well run and shareholder oriented,
with a strategy for enhancing shareholder value. We want to buy these stocks
when our quantitative disciplines indicate that they are attractively priced,
i.e., undervalued.
One of the things that we're doing that management believes is significant is
the fact that we're now able to do more fundamental research and company
contact. We have added a number of analysts to our equity research group over
the past year. Since fundamental analysis is an important pact of our process,
we can look at more companies in greater detail than ever before.
3
<PAGE>
EQUITY GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN EQUITY GROWTH AND INCOME FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Equity Growth and Income Fund (the "Fund") from February 10, 1994 (start of
performance) to June 30, 1995, compared to the Standard and Poor's 500 Index
(S&P 500)+ and the Lipper Growth and Income Funds Average (LGIFA)++.
[INSERT GRAPH HERE]
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED JUNE 30, 1995
One Year Ending 6/30/95.................................................20.33%
Start of Performance (2/10/94)..........................................11.33%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK, AND ARE NOT FEDERALLY INSURED.
*The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 and the LGIFA have been adjusted to reflect
reinvestment of dividends on securities in the index and average.
+The S&P 500 is not adjusted to reflect sales loads, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. The index is
unmanaged.
++The LGIFA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into
the category, and is not adjusted to reflect any sales loads. However, total
return is reported net of expenses or other fees that the SEC requires to be
reflected in a fund's performance.
4
<PAGE>
EQUITY GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------------------------------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS--84.3%
---------------------------------------------------------------------------------------------------
CONSUMER DURABLES--4.9%
-------------------------------------------------------------------------------------
5,100 Eastman Kodak Co. $ 309,187
-------------------------------------------------------------------------------------
6,400 Ford Motor Co. 190,400
-------------------------------------------------------------------------------------
8,000 Mattel, Inc. 208,000
------------------------------------------------------------------------------------- -------------
Total 707,587
------------------------------------------------------------------------------------- -------------
CONSUMER NON-DURABLES--7.9%
-------------------------------------------------------------------------------------
3,300 Avon Products, Inc. 221,100
-------------------------------------------------------------------------------------
5,000 IBP, Inc. 217,500
-------------------------------------------------------------------------------------
5,200 Philip Morris Cos., Inc. 386,750
-------------------------------------------------------------------------------------
3,800 RJR Nabisco Holdings Corp. 105,925
-------------------------------------------------------------------------------------
6,300 Reebok International Ltd. 214,200
------------------------------------------------------------------------------------- -------------
Total 1,145,475
------------------------------------------------------------------------------------- -------------
CONSUMER SERVICES--0.9%
-------------------------------------------------------------------------------------
2,400 Gannett Co., Inc. 130,200
------------------------------------------------------------------------------------- -------------
ELECTRONIC TECHNOLOGY--13.7%
-------------------------------------------------------------------------------------
6,300 Hewlett-Packard Co. 469,350
-------------------------------------------------------------------------------------
3,800 Intel Corp. 240,587
-------------------------------------------------------------------------------------
1,900 International Business Machines Corp. 182,400
-------------------------------------------------------------------------------------
4,100 Litton Industries, Inc. 151,188
-------------------------------------------------------------------------------------
6,800 Lockheed Martin Corp. 429,250
-------------------------------------------------------------------------------------
3,200 Raytheon Co. 248,400
-------------------------------------------------------------------------------------
5,800 Rockwell International Corp. 265,350
------------------------------------------------------------------------------------- -------------
Total 1,986,525
------------------------------------------------------------------------------------- -------------
ENERGY MINERALS--7.2%
-------------------------------------------------------------------------------------
3,300 Burlington Resources, Inc. 121,687
-------------------------------------------------------------------------------------
5,000 Chevron Corp. 233,125
-------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
EQUITY GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------------------------------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
---------------------------------------------------------------------------------------------------
ENERGY MINERALS--CONTINUED
-------------------------------------------------------------------------------------
3,600 Mapco, Inc. $ 208,800
-------------------------------------------------------------------------------------
3,800 Texaco, Inc. 249,375
-------------------------------------------------------------------------------------
11,800 USX Corp. 233,050
------------------------------------------------------------------------------------- -------------
Total 1,046,037
------------------------------------------------------------------------------------- -------------
FINANCE--12.4%
-------------------------------------------------------------------------------------
700 Allstate Corp. 30,363
-------------------------------------------------------------------------------------
3,500 American Express Co. 122,937
-------------------------------------------------------------------------------------
5,900 Bank of Boston Corp. 221,250
-------------------------------------------------------------------------------------
5,422 Citicorp 313,802
-------------------------------------------------------------------------------------
4,300 Dean Witter, Discover & Co. 202,100
-------------------------------------------------------------------------------------
1,900 First Interstate Bancorp 152,475
-------------------------------------------------------------------------------------
4,600 Mellon Bank Corp. 191,475
-------------------------------------------------------------------------------------
3,500 NationsBank Corp. 187,688
-------------------------------------------------------------------------------------
4,100 Providian Corp. 148,625
-------------------------------------------------------------------------------------
5,150 Travelers Group, Inc. 225,313
------------------------------------------------------------------------------------- -------------
Total 1,796,028
------------------------------------------------------------------------------------- -------------
HEALTH TECHNOLOGY--5.3%
-------------------------------------------------------------------------------------
2,700 American Home Products Corp. 208,912
-------------------------------------------------------------------------------------
4,600 Becton, Dickinson & Co. 267,950
-------------------------------------------------------------------------------------
4,300 Bristol-Myers Squibb Co. 292,937
------------------------------------------------------------------------------------- -------------
Total 769,799
------------------------------------------------------------------------------------- -------------
INDUSTRIAL SERVICES--2.2%
-------------------------------------------------------------------------------------
6,300 Baker Hughes, Inc. 129,150
-------------------------------------------------------------------------------------
4,100 Western Atlas, Inc. 181,938
------------------------------------------------------------------------------------- -------------
Total 311,088
------------------------------------------------------------------------------------- -------------
NON-ENERGY MINERALS--1.8%
-------------------------------------------------------------------------------------
4,400 Phelps Dodge Corp. 259,600
------------------------------------------------------------------------------------- -------------
</TABLE>
6
<PAGE>
EQUITY GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------------------------------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
---------------------------------------------------------------------------------------------------
PROCESS INDUSTRIES--5.0%
-------------------------------------------------------------------------------------
4,000 Du Pont (E.I.) de Nemours & Co. $ 275,000
-------------------------------------------------------------------------------------
2,900 Eastman Chemical Co. 172,550
-------------------------------------------------------------------------------------
11,000 Praxair, Inc. 275,000
------------------------------------------------------------------------------------- -------------
Total 722,550
------------------------------------------------------------------------------------- -------------
PRODUCER MANUFACTURING--11.6%
-------------------------------------------------------------------------------------
2,800 Caterpillar, Inc. 179,900
-------------------------------------------------------------------------------------
1,900 Deere & Co. 162,687
-------------------------------------------------------------------------------------
4,700 FMC Corp. 316,075
-------------------------------------------------------------------------------------
5,200 General Electric Co. 293,150
-------------------------------------------------------------------------------------
1,700 ITT Corp. 199,750
-------------------------------------------------------------------------------------
1,900 Loews Corp. 229,900
-------------------------------------------------------------------------------------
5,100 Textron, Inc. 296,438
------------------------------------------------------------------------------------- -------------
Total 1,677,900
------------------------------------------------------------------------------------- -------------
RETAIL TRADE--4.7%
-------------------------------------------------------------------------------------
8,500 American Stores Co. 239,063
-------------------------------------------------------------------------------------
7,300 Sears, Roebuck & Co. 437,088
------------------------------------------------------------------------------------- -------------
Total 676,151
------------------------------------------------------------------------------------- -------------
TECHNOLOGY SERVICES--2.3%
-------------------------------------------------------------------------------------
7,700 General Motors Corp., Class E 334,950
------------------------------------------------------------------------------------- -------------
UTILITIES--4.4%
-------------------------------------------------------------------------------------
6,300 AT&T Corp. 334,687
-------------------------------------------------------------------------------------
3,500 Enron Corp. 122,938
-------------------------------------------------------------------------------------
8,100 MCI Communications Corp. 178,200
------------------------------------------------------------------------------------- -------------
Total 635,825
------------------------------------------------------------------------------------- -------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $11,238,841) 12,199,715
------------------------------------------------------------------------------------- -------------
</TABLE>
7
<PAGE>
EQUITY GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
---------- ------------------------------------------------------------------------------------- -----------
<C> <S> <C>
PREFERRED STOCKS--0.9%
---------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES--0.8%
-------------------------------------------------------------------------------------
19,500 RJR Nabisco Holdings Corp., Conv. Pfd., Series C, $.60 $ 119,438
------------------------------------------------------------------------------------- -----------
FINANCE--0.1%
-------------------------------------------------------------------------------------
793 Citicorp, PERCS, Series 15, $1.22 16,058
------------------------------------------------------------------------------------- -----------
TOTAL PREFERRED STOCKS (IDENTIFIED COST, $135,384) 135,496
------------------------------------------------------------------------------------- -----------
*REPURCHASE AGREEMENTS--13.8%
---------------------------------------------------------------------------------------------------
$2,000,000 J.P. Morgan Securities, Inc., 6.125%, dated 6/30/1995, due 7/3/1995 (at amortized
cost) 2,000,000
------------------------------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST, $13,374,225)(A) $14,335,211
------------------------------------------------------------------------------------- ===========
</TABLE>
* The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(a) The cost of investments for federal tax purposes amounts to $13,374,225. The
net unrealized appreciation on a federal tax cost basis amounts to $960,986,
and is comprised of $982,995 appreciation and $22,009 depreciation at June
30, 1995.
The following acronym is used throughout this portfolio:
PERCS--Preferred Equity Redemption Cumulative Stock
Note: The categories of investments are shown as a percentage of net assets
($14,456,703) at June 30, 1995.
(See Notes which are an integral part of the Financial Statements)
8
<PAGE>
EQUITY GROWTH AND INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
--------------------------------------------------------------------------------------------------
Investments in repurchase agreements $ 2,000,000
-----------------------------------------------------------------------------------
Investments in securities 12,335,211
----------------------------------------------------------------------------------- -------------
Total investments in securities, at value
(identified and tax cost $13,374,225) $ 14,335,211
--------------------------------------------------------------------------------------------------
Cash 2,083
--------------------------------------------------------------------------------------------------
Income receivable 23,207
--------------------------------------------------------------------------------------------------
Receivable for shares sold 91,100
--------------------------------------------------------------------------------------------------
Prepaid Expenses 5,102
-------------------------------------------------------------------------------------------------- -------------
Total assets 14,456,703
--------------------------------------------------------------------------------------------------
LIABILITIES: --
-------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 1,281,341 shares outstanding $ 14,456,703
-------------------------------------------------------------------------------------------------- =============
NET ASSETS CONSIST OF:
--------------------------------------------------------------------------------------------------
Paid-in capital $ 13,526,665
--------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments 960,986
--------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (33,734)
--------------------------------------------------------------------------------------------------
Undistributed net investment income 2,786
-------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 14,456,703
-------------------------------------------------------------------------------------------------- =============
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
($14,456,703 / 1,281,341 shares outstanding) $11.28
-------------------------------------------------------------------------------------------------- =============
</TABLE>
(See Notes which are an integral part of the Financial Statements)
9
<PAGE>
EQUITY GROWTH AND INCOME FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
----------------------------------------------------------------------------------------------------
Interest $ 40,590
----------------------------------------------------------------------------------------------------
Dividends 73,302
---------------------------------------------------------------------------------------------------- ------------
Total Income 113,892
----------------------------------------------------------------------------------------------------
EXPENSES:
----------------------------------------------------------------------------------------------------
Investment advisory fee $ 25,097
----------------------------------------------------------------------------------------
Administrative personnel and services fee 61,987
----------------------------------------------------------------------------------------
Custodian fees 21,946
----------------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 7,059
----------------------------------------------------------------------------------------
Directors'/Trustees' fees 991
----------------------------------------------------------------------------------------
Auditing fees 3,878
----------------------------------------------------------------------------------------
Legal fees 1,001
----------------------------------------------------------------------------------------
Portfolio accounting fees 10,667
----------------------------------------------------------------------------------------
Share registration costs 1,267
----------------------------------------------------------------------------------------
Printing and postage 4,525
----------------------------------------------------------------------------------------
Insurance premiums 1,991
----------------------------------------------------------------------------------------
Miscellaneous 4,801
---------------------------------------------------------------------------------------- ----------
Total expenses 145,210
----------------------------------------------------------------------------------------
Deduct--
----------------------------------------------------------------------------------------
Waiver of investment advisory fee $ 25,097
-----------------------------------------------------------------------------
Reimbursement of other operating expenses 91,627 116,724
----------------------------------------------------------------------------- --------- ----------
Net expenses 28,486
---------------------------------------------------------------------------------------------------- ------------
Net investment income 85,406
---------------------------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (19,546)
----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 962,337
---------------------------------------------------------------------------------------------------- ------------
Net realized and unrealized gain (loss) on investments 942,791
---------------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ 1,028,197
---------------------------------------------------------------------------------------------------- ============
</TABLE>
(See Notes which are an integral part of the Financial Statements)
10
<PAGE>
EQUITY GROWTH AND INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995 PERIOD ENDED
(UNAUDITED) DECEMBER 31, 1994*
---------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
-----------------------------------------------------------------
OPERATIONS--
-----------------------------------------------------------------
Net investment income $ 85,406 $ 15,142
-----------------------------------------------------------------
Net realized gain (loss) on investment ($19,546 net loss and
$11,469 net loss, respectively, as computed for
federal income tax purposes) (19,546) (14,187)
-----------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 962,337 (1,351)
----------------------------------------------------------------- -------------- -------------
Change in assets resulting from operations 1,028,197 (396)
----------------------------------------------------------------- -------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
-----------------------------------------------------------------
Distributions from net investment income (83,117) (14,647)
----------------------------------------------------------------- -------------- -------------
SHARE TRANSACTIONS--
-----------------------------------------------------------------
Proceeds from sale of Shares 13,078,375 3,287,097
-----------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of
distributions declared 83,117 7,346
-----------------------------------------------------------------
Cost of Shares redeemed (2,049,899) (879,370)
----------------------------------------------------------------- -------------- -------------
Change in net assets resulting from share
transactions 11,111,593 2,415,073
----------------------------------------------------------------- -------------- -------------
Change in net assets 12,056,673 2,400,030
-----------------------------------------------------------------
NET ASSETS:
-----------------------------------------------------------------
Beginning of period 2,400,030 --
----------------------------------------------------------------- -------------- -------------
End of period (including undistributed net investment income of
$2,786 and $495, respectively) $ 14,456,703 $ 2,400,030
----------------------------------------------------------------- ============== =============
</TABLE>
*For the period from December 9, 1993 (start of business) to December 31, 1994.
(See Notes which are an integral part of the Financial Statements)
11
<PAGE>
EQUITY GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995 PERIOD ENDED
(UNAUDITED) DECEMBER 31, 1994(A)
---------------- --------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.74 $ 10.00
--------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
--------------------------------------------------------------
Net investment income 0.10 0.19
--------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.54 (0.26)
-------------------------------------------------------------- ------- -------
Total from investment operations 1.64 (0.07)
--------------------------------------------------------------
LESS DISTRIBUTIONS
--------------------------------------------------------------
Distributions from net investment income (0.10) (0.19)
-------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 11.28 $ 9.74
-------------------------------------------------------------- ======= =======
TOTAL RETURN (B) 16.89% (0.70%)
--------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
--------------------------------------------------------------
Expenses 0.85%(c) 0.54%(c)
--------------------------------------------------------------
Net investment income 2.55%(c) 2.58%(c)
--------------------------------------------------------------
Expense waiver/reimbursement (d) 3.49%(c) 25.42%(c)
--------------------------------------------------------------
SUPPLEMENTAL DATA
--------------------------------------------------------------
Net assets, end of period (000 omitted) $14,457 $2,400
--------------------------------------------------------------
Portfolio turnover 13% 32%
--------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from February 1, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 9,
1993 (start of business) to January 31, 1994, the Fund had no investment
activity.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
12
<PAGE>
EQUITY GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
1. ORGANIZATION
Insurance Management Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end management investment
company. The Trust consists of six diversified portfolios. The financial
statements included herein present only those of Equity Growth and Income Fund
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Listed equity securities are valued at the last sale
price reported on national securities exchanges. Unlisted securities and
short-term securities are generally valued at the prices provided by an
independent pricing service. Short-term securities with remaining
maturities of sixty days or less at the time of purchase may be stated at
amortized cost, which approximates fair market value.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Fund could
receive less than the repurchase price on the sale of collateral
securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and expenses are accrued daily. Bond premium and discount,
if applicable, are amortized as required by the Internal Revenue Code, as
amended (the "Code").
13
<PAGE>
EQUITY GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. At December 31,
1994, the Fund, for federal tax purposes, had a capital loss carryforward
of $11,469, which will reduce the Fund's taxable income arising from future
net realized gain on investments, if any, to the extent permitted by the
Code, and thus will reduce the amount of the distributions to shareholders
which would otherwise be necessary to relieve the Fund of any liability for
federal tax. Pursuant to the Code, such capital loss carryforward will
expire in 2002.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
OTHER--Investment transactions are accounted for on the trade date.
3. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
JUNE 30, 1995 DECEMBER 31, 1994*
---------------------------------------------------------------- ---------------- ------------------
<S> <C> <C>
Shares sold 1,225,431 334,265
----------------------------------------------------------------
Shares issued to shareholders in payment
of distributions declared 7,566 752
----------------------------------------------------------------
Shares redeemed (198,046) (88,626)
---------------------------------------------------------------- ------------ ----------
Net change resulting from Fund
share transactions 1,034,951 246,391
---------------------------------------------------------------- ============ ==========
</TABLE>
* For the period from December 9, 1993, (start of business) to December 31,
1994.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.75 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive a portion of its fee and reimburse certain operating expenses of
the Fund. The Adviser can modify or terminate this voluntary waiver and
reimbursement at any time at its sole discretion.
14
<PAGE>
EQUITY GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The FAS fee is based on the level of average aggregate
daily net assets of all funds advised by subsidiaries of Federated Investors for
the period. The administrative fee received during the period of the
Administrative Services Agreement shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period plus, out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses ($16,348) and start-up
administrative service expenses ($31,507) were borne initially by the Adviser.
The Fund has agreed to reimburse the Adviser for the organizational and start-up
administrative expenses during the five year period following December 15, 1993
(date the Fund became effective). For the period ended June 30, 1995, the Fund
paid $2,180 and $4,201, respectively, pursuant to this agreement.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six
months ended June 30, 1995, were as follows:
<TABLE>
<S> <C>
------------------------------------------------------------------
PURCHASES $ 9,995,788
------------------------------------------------------------------ ------------
SALES $ 769,735
------------------------------------------------------------------ ------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
TRUSTEES OFFICERS
--------------------------------------------------------------------------------
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. J. Christopher Donahue
William J. Copeland President
J. Christopher Donahue Edward C. Gonzales
James E. Dowd Executive Vice President
Lawrence D. Ellis, M.D. John W. McGonigle
Edward L. Flaherty, Jr. Executive Vice President and Secretary
Peter E. Madden Richard B. Fisher
Gregor F. Meyer Vice President
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Treasurer
Marjorie P. Smuts G. Andrew Bonnewell
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
16
<PAGE>
--------------------------------------------------------------------------------
EQUITY
--------------------------------------------------------------------------------
GROWTH
--------------------------------------------------------------------------------
AND INCOME
--------------------------------------------------------------------------------
FUND
--------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1995
Insurance Management Series
[LOGO]Federated Securities Corp.
-------------------------- ---------------------------
Distributor
A subsidiary of Federated Investors ---------------------------
Federated Investors Tower
Pittsburgh, PA 15222-3779 ---------------------------
Cusip 458043502 [LOGO OF RECYCLED PAPER]
G00433-04 (8/95) ---------------------------
<PAGE>
PRESIDENT'S MESSAGE
--------------------------------------------------------------------------------
Dear Shareholder:
I'm pleased to present your Semi-Annual Report to Shareholders for Utility Fund,
a portfolio of Insurance Management Series, which covers the six-month period
ended June 30, 1995. The Report begins with an investment review by the
portfolio manager, which is followed by a complete listing of the fund's
holdings as well as its financial statements.
The fund invests primarily in a portfolio of utility stocks to help your money
earn income--and pursue a moderate level of growth. The fund may also invest a
portion of its assets in stocks from other types of companies selected for their
ability to pay regular dividends.
During the period covered by this report, the fund paid dividends of $0.22 per
share, and recorded a total return of 9.50%*. On June 30, 1995, net assets stood
at $10.3 million.
Thank you for selecting this fund to participate in the earning power of utility
stocks. We'll continue to keep you up to date on your progress. As always, we
welcome your comments and suggestions.
Sincerely,
/s/ J. Christopher Donahue
--------------------------------
J. Christopher Donahue
President
August 15, 1995
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Performance information
does not reflect the charges and expenses of a variable annuity or variable
life insurance contract.
1
<PAGE>
INVESTMENT REVIEW
--------------------------------------------------------------------------------
Utilities have continued their recovery from the depths of 1994's correction.
The Standard & Poor's Utility Index is now up 14.28% in the first half of 1995,
and the Dow Jones Utility average is up 14.15%.* This rally corresponds with the
fact that long-term interest rates have declined from 7.87% to 6.62%. The reason
for this rally in interest rates is the belief that the Federal Reserve Board
has successfully engineered a "soft landing" in which the economy slows (but
continues growing), interest rates stabilize, and inflation remains low.
Within the utility sector, natural gas stocks were the best performers gaining
19.43%, while telecommunication stocks and electric stocks were up 13.62% and
14.07%, respectively. The Utility Fund lagged these strong advances and was up
only 9.50%** in total return during the first half of 1995. Meanwhile, the
average utility fund was up 11.11% according to Lipper Analytical Services. For
the one year period ended June 30, 1995, the Utility Fund was up 13.34%,** while
the average utility fund according to Lipper Analytical Services was up 12.11%.
The reason for our lagging such a strong market rally is the same reason we
outperformed so admirably on the downside in 1994 . . . lower interest rate
sensitivity. Our goal is to provide defensive/conservative investors with equity
market exposure at the lowest possible level of risk. This means lowering the
largest utility risk factor which is interest rate risk. Over the years we have
lowered interest rate risk through our holdings in non-utility securities,
namely convertibles and natural resource companies. In the first half of 1995,
our approximately 25% weighting in non-utilities made it very difficult for us
to keep up with the strong advances in the interest rate sensitive utility
stocks. After such a strong first half rally in interest rates, we believe that
our defensive positioning is more warranted than ever.
In the utility sectors, we are still overweighted in natural gas stocks, but are
in the process of taking some of our gains and lowering our exposure. In
telecommunications, we are continuing to underweight the baby bells while
overweighting long-distance and international telecoms. In electrics, we have
begun to increase our exposure in some of the higher yielding electrics which
appear to be oversold due to fears of competition. Two new additions in the
electric group are Public Service Enterprises and Texas Utilities.
Overall, 1995 is off to a great start, and we believe that the fund will
continue to keep pace with any further advances while still providing superior
downside protection during the inevitable correction.
* These indices are unmanaged.
** Performance quoted represents past performance. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Performance information
does not reflect the charges and expenses of a variable annuity or variable
life insurance contract.
2
<PAGE>
UTILITY FUND
--------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN UTILITY FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Utility Fund (the "Fund") from February 10, 1994 (start of performance) to
June 30, 1995, compared to the Standard and Poor's 500 Index (S&P 500)+, and the
Standard and Poor's Utility Index (SPUX).+
[INSERT GRAPH HERE]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK, AND ARE NOT FEDERALLY INSURED.
*The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 and the SPUX have been adjusted to
reflect reinvestment of dividends on securities in the indices.
+The S&P 500 and the SPUX are not adjusted to reflect sales loads,
expenses, or other fees that the SEC requires to be reflected in the
Fund's performance. The indices are unmanaged.
3
<PAGE>
UTILITY FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------------------------------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS--67.7%
-------------------------------------------------------------------------------------
UTILITIES--37.7%
-------------------------------------------------------------------------------------
6,000 Baltimore Gas & Electric Co. $ 150,000
-------------------------------------------------------------------------------------
8,600 CMS Energy Corp. 211,775
-------------------------------------------------------------------------------------
7,500 Cinergy Corp. 196,875
-------------------------------------------------------------------------------------
7,400 DPL, Inc. 163,725
-------------------------------------------------------------------------------------
8,500 DQE, Inc. 199,750
-------------------------------------------------------------------------------------
3,500 Duke Power Co. 145,250
-------------------------------------------------------------------------------------
5,500 FPL Group, Inc. 212,437
-------------------------------------------------------------------------------------
4,100 Florida Progress Corp. 128,125
-------------------------------------------------------------------------------------
6,300 General Public Utilities 187,425
-------------------------------------------------------------------------------------
500 Hong Kong Telecommunications Ltd., ADR 9,937
-------------------------------------------------------------------------------------
7,700 Illinova Corp. 195,387
-------------------------------------------------------------------------------------
5,700 NIPSCO Industries, Inc. 193,800
-------------------------------------------------------------------------------------
6,400 National Power Co. PLC, ADR 79,200
-------------------------------------------------------------------------------------
8,800 Pacificorp 165,000
-------------------------------------------------------------------------------------
15,000 Peco Energy Co. 414,375
-------------------------------------------------------------------------------------
8,500 Pinnacle West Capital Corp. 208,250
-------------------------------------------------------------------------------------
4,400 Public Service Enterprises Group, Inc. 122,100
-------------------------------------------------------------------------------------
8,500 Southern Co. 190,188
-------------------------------------------------------------------------------------
2,700 Telefonic de Espana, ADR 104,625
-------------------------------------------------------------------------------------
2,500 Texas Utilities Co. 85,938
-------------------------------------------------------------------------------------
6,400 Utilicorp United, Inc. 180,000
-------------------------------------------------------------------------------------
8,400 Westcoast Energy, Inc. 123,900
-------------------------------------------------------------------------------------
6,300 Western Resources, Inc. 194,513
------------------------------------------------------------------------------------- -------------
Total 3,862,575
------------------------------------------------------------------------------------- -------------
</TABLE>
4
<PAGE>
UTILITY FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------------------------------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
---------------------------------------------------------------------------------------------------
ENERGY MINERALS--1.4%
-------------------------------------------------------------------------------------
2,000 Exxon Corp. $ 141,250
------------------------------------------------------------------------------------- -------------
FINANCE--3.2%
-------------------------------------------------------------------------------------
5,700 Meditrust, REIT 194,512
-------------------------------------------------------------------------------------
4,600 Simon Property Group, Inc., REIT 115,575
-------------------------------------------------------------------------------------
1,500 South West Property Trust, Inc., REIT 17,250
------------------------------------------------------------------------------------- -------------
Total 327,337
------------------------------------------------------------------------------------- -------------
MAJOR U.S. TELECOMMUNICATIONS--10.9%
-------------------------------------------------------------------------------------
4,600 AT&T Corp. 244,375
-------------------------------------------------------------------------------------
2,500 BellSouth Corp. 158,750
-------------------------------------------------------------------------------------
5,200 GTE Corp. 177,450
-------------------------------------------------------------------------------------
5,200 Pacific Telesis Group 139,100
-------------------------------------------------------------------------------------
4,600 SBC Communications, Inc. 219,075
-------------------------------------------------------------------------------------
4,100 U.S. West, Inc. 170,663
------------------------------------------------------------------------------------- -------------
Total 1,109,413
------------------------------------------------------------------------------------- -------------
NATURAL GAS DISTRIBUTION--5.2%
-------------------------------------------------------------------------------------
2,700 Consolidated Natural Gas Co. 101,925
-------------------------------------------------------------------------------------
8,000 MCN Corp. 158,000
-------------------------------------------------------------------------------------
8,900 Pacific Enterprises 218,050
-------------------------------------------------------------------------------------
2,800 UGI Corp. 59,150
------------------------------------------------------------------------------------- -------------
Total 537,125
------------------------------------------------------------------------------------- -------------
OIL/GAS TRANSMISSION--6.9%
-------------------------------------------------------------------------------------
5,100 Enron Corp. 179,137
-------------------------------------------------------------------------------------
4,000 Enron Global Power & Pipelines, L.L.C. 95,000
-------------------------------------------------------------------------------------
2,600 Panhandle Eastern Corp. 63,375
-------------------------------------------------------------------------------------
8,500 Sonat, Inc. 259,250
-------------------------------------------------------------------------------------
3,500 Williams Companies, Inc. (The) 122,063
------------------------------------------------------------------------------------- -------------
Total 718,825
------------------------------------------------------------------------------------- -------------
</TABLE>
5
<PAGE>
UTILITY FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------------------------------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
---------------------------------------------------------------------------------------------------
OTHER TELEPHONE/COMMUNICATIONS--1.2%
-------------------------------------------------------------------------------------
3,600 Southern New England Telecommunications $ 126,900
------------------------------------------------------------------------------------- -------------
PRODUCER MANUFACTURING--1.2%
-------------------------------------------------------------------------------------
6,800 Hanson PLC, ADR 119,850
------------------------------------------------------------------------------------- -------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $6,716,658) 6,943,275
------------------------------------------------------------------------------------- -------------
PREFERRED STOCKS--16.7%
---------------------------------------------------------------------------------------------------
CONSUMER DURABLES--0.8%
-------------------------------------------------------------------------------------
5,300 Kaufman & Broad Homes Corp., Conv. Pfd., Series B 82,150
------------------------------------------------------------------------------------- -------------
CONSUMER NON-DURABLES--1.8%
-------------------------------------------------------------------------------------
29,800 RJR Nabisco Holdings Corp., Conv. Pfd., Series C 182,525
------------------------------------------------------------------------------------- -------------
ELECTRIC UTILITIES--1.2%
-------------------------------------------------------------------------------------
2,750 Niagara Mohawk Power Corp., ARPS, Series C 64,625
-------------------------------------------------------------------------------------
400 Texas Utilities Electric Co., ARPS, Series A 35,200
-------------------------------------------------------------------------------------
330 Texas Utilities Electric Co., ARPS, Series B 31,103
------------------------------------------------------------------------------------- -------------
Total 130,928
------------------------------------------------------------------------------------- -------------
ENERGY MINERALS--1.3%
-------------------------------------------------------------------------------------
1,800 Occidental Petroleum Corp., Conv. Pfd. 102,825
-------------------------------------------------------------------------------------
600 USX Corp., ARPS 29,775
------------------------------------------------------------------------------------- -------------
Total 132,600
------------------------------------------------------------------------------------- -------------
FINANCE--2.8%
-------------------------------------------------------------------------------------
1,300 Allstate Corp., Conv. Pfd. 52,975
-------------------------------------------------------------------------------------
200 Sunamerica, Inc., ARPS, Series C 20,200
-------------------------------------------------------------------------------------
4,700 Sunamerica, Inc., Conv. Pfd., Series D 216,200
------------------------------------------------------------------------------------- -------------
Total 289,375
------------------------------------------------------------------------------------- -------------
NON-ENERGY MINERALS--1.5%
-------------------------------------------------------------------------------------
3,100 Reynolds Metals Co., PRIDES 149,575
------------------------------------------------------------------------------------- -------------
</TABLE>
6
<PAGE>
UTILITY FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
---------- ------------------------------------------------------------------------------------- -------------
<C> <S> <C>
PREFERRED STOCKS--CONTINUED
---------------------------------------------------------------------------------------------------
NON-U.S. UTILITIES--2.0%
-------------------------------------------------------------------------------------
4,000 Cointel, Telefonica de Argentina SA, PRIDES $ 209,000
------------------------------------------------------------------------------------- -------------
OIL/GAS TRANSMISSION--1.5%
-------------------------------------------------------------------------------------
750 Enserch Corp., ARPS, Series E 69,375
-------------------------------------------------------------------------------------
1,250 Williams Companies, Inc. (The), Conv. Pfd. 78,906
------------------------------------------------------------------------------------- -------------
Total 148,281
------------------------------------------------------------------------------------- -------------
PROCESS INDUSTRIES--1.7%
-------------------------------------------------------------------------------------
7,100 James River Corp. of Virginia, DECS, Series P 175,725
------------------------------------------------------------------------------------- -------------
PRODUCER MANUFACTURING--2.1%
-------------------------------------------------------------------------------------
13,800 Westinghouse Electric Corp., PEPS, Series C 209,967
------------------------------------------------------------------------------------- -------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST, $1,654,753) 1,710,126
------------------------------------------------------------------------------------- -------------
CORPORATE BONDS--5.0%
---------------------------------------------------------------------------------------------------
CONSUMER SERVICES--1.6%
-------------------------------------------------------------------------------------
$ 325,000 Rogers Communications, Inc., Conv. Deb., 2.00%, 11/26/2005 168,188
------------------------------------------------------------------------------------- -------------
ENERGY MINERALS--0.6%
-------------------------------------------------------------------------------------
50,000 Pennzoil Co., Conv. Deb., 6.50%, 1/15/2003 59,415
------------------------------------------------------------------------------------- -------------
FINANCE--0.2%
-------------------------------------------------------------------------------------
15,000 Equitable Cos., Inc., Conv. Sub. Deb., 6.125%, 12/15/2024 15,506
------------------------------------------------------------------------------------- -------------
HEALTH TECHNOLOGY--1.3%
-------------------------------------------------------------------------------------
350,000 Roche Holdings, Inc., Conv. LYON, 7.00% accrual, 4/20/2010 139,125
------------------------------------------------------------------------------------- -------------
NON-U.S. UTILITIES--1.3%
-------------------------------------------------------------------------------------
140,000 Telekom Malaysia Berhad, Conv. Bond, 4.00%, 10/3/2004 134,400
------------------------------------------------------------------------------------- -------------
TOTAL CORPORATE BONDS (IDENTIFIED COST, $507,630) 516,634
------------------------------------------------------------------------------------- -------------
</TABLE>
7
<PAGE>
<TABLE>
<S> <S> <C>
CORPORATE BONDS--CONTINUED
---------------------------------------------------------------------------------------------------
(A)REPURCHASE AGREEMENTS--9.8%
---------------------------------------------------------------------------------------------------
1,005,000 J.P. Morgan & Co., Inc., 6.125%, dated 6/30/1995, due 7/3/1995
(AT AMORTIZED COST) $ 1,005,000
------------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST, $9,884,041)(B) 10,175,035
------------------------------------------------------------------------------------- -------------
</TABLE>
(a) Repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreements are through participation in joint
accounts with other Federated funds.
(b) The cost for federal tax purposes amounts to $9,884,041. The net unrealized
appreciation on federal tax cost basis amounts to $290,994 which is
comprised of $329,817 appreciation and $38,823 depreciation at June 30,
1995.
Note: The categories of investments are shown as a percentage of net assets
($10,256,077) at June 30, 1995.
The following acronyms are used throughout this portfolio:
ADR--American Depository Receipt
ARPS--Adjustable Rate Preferred Stock
DECS--Dividend Enhanced Convertible Stock
LYON--Liquid Yield Option Note
PEPS--Participating Equity Preferred Stock
PLC--Public Limited Company
PRIDES--Preferred Redeemable Increased Dividend Equity Securities
REIT--Real Estate Investment Trust
(See Notes which are an integral part of the Financial Statements)
8
<PAGE>
UTILITY FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
--------------------------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost $9,884,041) $ 10,175,035
--------------------------------------------------------------------------------------------------
Cash 4,027
--------------------------------------------------------------------------------------------------
Income receivable 32,691
--------------------------------------------------------------------------------------------------
Receivable for investments sold 127,477
--------------------------------------------------------------------------------------------------
Receivable for shares sold 18,232
--------------------------------------------------------------------------------------------------
Prepaid expenses 1,516
-------------------------------------------------------------------------------------------------- -------------
Total assets 10,358,978
--------------------------------------------------------------------------------------------------
LIABILITIES:
--------------------------------------------------------------------------------------------------
Payable for investments purchased 102,901
-------------------------------------------------------------------------------------------------- -------------
Net Assets for 1,031,686 shares outstanding $ 10,256,077
-------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
--------------------------------------------------------------------------------------------------
Paid-in capital $ 9,963,294
--------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments 290,994
--------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments 1,789
-------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 10,256,077
-------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
($10,256,077 / 1,031,686 shares outstanding) $9.94
-------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
9
<PAGE>
UTILITY FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
-----------------------------------------------------------------------------------------------------
Interest $ 34,494
-----------------------------------------------------------------------------------------------------
Dividends (net of foreign tax withheld $212) 103,786
----------------------------------------------------------------------------------------------------- ----------
Total income 138,280
-----------------------------------------------------------------------------------------------------
EXPENSES:
-----------------------------------------------------------------------------------------------------
Investment advisory fee $ 18,496
-----------------------------------------------------------------------------------------
Administrative personnel and services fee 61,987
-----------------------------------------------------------------------------------------
Custodian fees 11,222
-----------------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 7,602
-----------------------------------------------------------------------------------------
Directors'/Trustees' fees 1,991
-----------------------------------------------------------------------------------------
Auditing fees 3,559
-----------------------------------------------------------------------------------------
Legal fees 2,801
-----------------------------------------------------------------------------------------
Portfolio accounting fees 19,367
-----------------------------------------------------------------------------------------
Share registration costs 1,267
-----------------------------------------------------------------------------------------
Printing and postage 7,930
-----------------------------------------------------------------------------------------
Insurance premiums 2,353
-----------------------------------------------------------------------------------------
Miscellaneous 5,982
----------------------------------------------------------------------------------------- ----------
Total expenses 144,557
-----------------------------------------------------------------------------------------
Deduct--
-----------------------------------------------------------------------------------------
Waiver of investment advisory fee $ 18,496
-----------------------------------------------------------------------------
Reimbursement of other operating expenses 105,065 123,561
----------------------------------------------------------------------------- ---------- ----------
Net expenses 20,996
----------------------------------------------------------------------------------------------------- ----------
Net investment income 117,284
----------------------------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
-----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 12,670
-----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 299,012
----------------------------------------------------------------------------------------------------- ----------
Net realized and unrealized gain (loss) on investments 311,682
----------------------------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $ 428,966
----------------------------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
10
<PAGE>
UTILITY FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995 PERIOD ENDED
(UNAUDITED) DECEMBER 31, 1994*
---------------------------------------------------------------- ---------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
----------------------------------------------------------------
OPERATIONS--
----------------------------------------------------------------
Net investment income $ 117,284 $ 13,207
----------------------------------------------------------------
Net realized gain (loss) on investments ($12,670 net gain and
$9,887 net loss, respectively, as computed for federal tax
purposes) 12,670 (10,881)
----------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on
investments 299,012 (8,018)
---------------------------------------------------------------- --------------- ------------------
Change in net assets resulting from operations 428,966 (5,692)
---------------------------------------------------------------- --------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS--
----------------------------------------------------------------
Distributions from net investment income (117,596) (13,191)
---------------------------------------------------------------- --------------- ------------------
SHARE TRANSACTIONS--
----------------------------------------------------------------
Proceeds from sale of Shares 9,341,475 1,195,580
----------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of
distributions declared 115,374 9,439
----------------------------------------------------------------
Cost of Shares redeemed (486,312) (211,966)
---------------------------------------------------------------- --------------- ------------------
Change in net assets resulting from share
transactions 8,970,537 993,053
---------------------------------------------------------------- --------------- ------------------
Change in net assets 9,281,907 974,170
----------------------------------------------------------------
NET ASSETS:
----------------------------------------------------------------
Beginning of period 974,170 --
---------------------------------------------------------------- --------------- ------------------
End of period (including undistributed net investment income of
$0 and $16, respectively) $ 10,256,077 $ 974,170
---------------------------------------------------------------- --------------- ------------------
</TABLE>
*For the period from December 9, 1993 (start of business) to December 31, 1994.
(See Notes which are an integral part of the Financial Statements)
11
<PAGE>
UTILITY FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1995 PERIOD ENDED
(UNAUDITED) DECEMBER 31, 1994(A)
--------------------------------------------------------------------- ------------- --------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.29 $ 9.48
---------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------------------------------------
Net investment income 0.22 0.34
---------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.65 (0.19)
--------------------------------------------------------------------- ------- -------
Total from investment operations 0.87 0.15
---------------------------------------------------------------------
LESS DISTRIBUTIONS
---------------------------------------------------------------------
Distribuitons from net investment income (0.22) (0.34)
--------------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.94 $ 9.29
--------------------------------------------------------------------- ------- -------
TOTAL RETURN (B) 9.50% 1.12%
---------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------
Expenses 0.85%(c) 0.60%(c)
---------------------------------------------------------------------
Net investment income 4.76%(c) 4.77%(c)
---------------------------------------------------------------------
Expense waiver/reimbursement (d) 5.01%(c) 54.83%(c)
---------------------------------------------------------------------
SUPPLEMENTAL DATA
---------------------------------------------------------------------
Net assets, end of period (000 omitted) $10,256 $ 974
---------------------------------------------------------------------
Portfolio turnover 20% 73%
---------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from April 14, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 9,
1993 (the start of business) to April 13, 1994, the net investment income
was distributed to the Fund's Adviser.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
12
<PAGE>
UTILITY FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
(1) ORGANIZATION
Insurance Management Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company. The Trust consists of six diversified portfolios. The
financial statements included herein are only those of Utility Fund (the
"Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Listed equity securities are valued at the last sale
price reported on national securities exchanges. Unlisted securities and
short-term obligations (and private placement securities) are generally
valued at the prices provided by an independent pricing service. Short-term
securities with remaining maturities of sixty days or less at the time of
purchase may be stated at amortized cost, which approximates fair market
value.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement investments. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and or
standards reviewed or established by the Board of Trustees (the
"Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less
than the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and expenses are accrued
13
<PAGE>
UTILITY FUND
--------------------------------------------------------------------------------
daily. Bond premium and discount, if applicable, are amortized as required
by the Internal Revenue Code, as amended (the "Code").
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary. At December 31, 1994, the Fund,
for federal tax purposes, had a capital loss carryforward of $9,887, which
will reduce the Fund's taxable income arising from future net realized gain
on investments, if any, to the extent permitted by the Code, and thus will
reduce the amount of the distributions to shareholders which would
otherwise be necessary to relieve the Fund of any liability for federal
tax. Pursuant to the Code, such capital loss carryforward will expire in
2002.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD ENDED
JUNE 30, 1995 DECEMBER 31, 1994*
----------------------------------------------------------------------- ------------- ------------------
<S> <C> <C>
Shares sold 964,845 126,510
-----------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 11,925 1,007
-----------------------------------------------------------------------
Shares redeemed (49,990) (22,611)
----------------------------------------------------------------------- ------------- ------------------
Net change resulting from share transactions 926,780 104,906
----------------------------------------------------------------------- ------------- ------------------
</TABLE>
*For the period from December 9, 1993, (start of business) to December 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisors, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.75 of 1% of the Fund's average
14
<PAGE>
UTILITY FUND
--------------------------------------------------------------------------------
daily net assets. The Adviser may voluntarily choose to waive its fee and
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and reimbursement at any time at its sole
discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with administrative personnel and services. The FAS fee is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Fund. The
FServ fee is based on the size, type, and number of accounts and transactions
made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of each Fund's
average daily net assets for the period plus, out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses ($17,759) and start-up
administrative service expenses ($31,507) were borne initially by the Adviser.
The Fund has agreed to reimburse the Adviser for the organizational expenses and
start-up administrative expenses during the five year period following December
15, 1993 (the date the Fund became effective). For the six months ended June 30,
1995, the Fund paid $2,368 and $4,201, respectively, pursuant to this agreement.
Certain of the Officers and Trustees of the Fund are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six
months ended June 30, 1995, were as follows:
<TABLE>
<S> <C>
--------------------------------------------------------------------
PURCHASES $8,835,492
-------------------------------------------------------------------- ----------
SALES $ 740,841
-------------------------------------------------------------------- ----------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
TRUSTEES OFFICERS
--------------------------------------------------------------------------------
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. J. Christopher Donahue
William J. Copeland President
J. Christopher Donahue Edward C. Gonzales
James E. Dowd Executive Vice President
Lawrence D. Ellis, M.D. John W. McGonigle
Edward L. Flaherty, Jr. Executive Vice President and Secretary
Peter E. Madden Richard B. Fisher
Gregor F. Meyer Vice President
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Treasurer
Marjorie P. Smuts G. Andrew Bonnewell
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
16
<PAGE>
UTILITY
FUND
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1995
Insurance Management Series
[LOGO]Federated Securities Corp.
-------------------------- ---------------------------
Distributor
A subsidiary of Federated Investors ---------------------------
Federated Investors Tower
Pittsburgh, PA 15222-3779 ---------------------------
Cusip 458043205
G00433-03 (8/95) [Logo of Recycled Paper] ---------------------------
<PAGE>
President's Message
--------------------------------------------------------------------------------
Dear Shareholder:
I'm pleased to present your Semi-Annual Report to Shareholders for Prime Money
Fund, a portfolio of Insurance Management Series, which covers the six-month
period ended June 30, 1995. The Report begins with an investment review by the
fund's portfolio manager, which is followed by a complete listing of the fund's
holdings and its financial statements.
As a shareholder in this high-quality money market mutual fund, you're putting
your cash to work pursuing daily income while seeking to keep your principal
stable.* In addition, you have convenient, daily access to your money.
In order to give you opportunities for a competitive daily yield, the fund
invests in a portfolio of high-quality money market securities. During the
reporting period, the fund paid a total of $0.03 per share in dividends to
shareholders. On June 30, 1995, net assets stood at $6.6 million.
Thank you for choosing Prime Money Fund to put your cash to work earning income
every day. We'll continue to keep you up to date on your investment, and welcome
your comments and suggestions.
Sincerely,
/s/ J. Christopher Donahue
----------------------------
J. Christopher Donahue
President
August 15, 1995
* No money market mutual fund can guarantee that a stable net asset value will
be maintained. An investment in this fund is neither insured nor guaranteed by
the U.S. government.
1
<PAGE>
Investment Review
--------------------------------------------------------------------------------
The fund invests exclusively in money market instruments maturing in thirteen
months or less. The average maturity of these securities, computed on a dollar
weighted basis, is restricted to 90 days or less. Portfolio securities must be
rated in one of the two highest short-term rating categories by one or more of
the nationally recognized statistical rating organizations or be of comparable
quality to securities having such ratings. Typical security types include, but
are not limited to, commercial paper, certificates of deposit, time deposits,
variable rate instruments and repurchase agreements.
During the six-month reporting period, the Federal Reserve Board (the "Fed")
initially continued its restrictive interest rate stance but gradually moved to
a more neutral stance. The Fed tightened monetary policy by increasing the Fed
Funds target rate from 5.50% to 6.00% in early February, 1995, but has held
steady since that time. Given the current scenario of a contained inflationary
environment as well as an economic growth slowdown, it is likely that the Fed
has achieved its "soft landing." Recent steep declines in employment statistics,
however, may make the landing seem a bit bumpy. In this regard, the market is
assuming an easing of Fed policy in the summer months.
Reflecting this change in sentiment, the money market yield curve changed its
shape drastically during the reporting period. One month commercial paper rates
declined 29 basis points while six month rates dropped 48 basis points resulting
in a very flat money market curve.
The target average maturity range for Prime Money Fund began the reporting
period at 30-40 days but was subsequently lengthened to a 35-45 day range,
reflecting the changing economic and monetary sentiment. In structuring the
fund, there is continued emphasis placed on positioning 30-35% of the fund's
assets in variable rate demand notes and accomplishing a modest barbell
structure.
During the six months ended June 30, 1995, the net assets of Prime Money Fund
increased from $0.6 to $6.6 million while the 7-day net yield increased from
4.16% to 5.32%*. The effective average maturity of the fund on June 30, 1995,
was 39 days.
* Performance quoted represents past performance and is not indicative of future
results. Yield will vary. Performance information does not reflect the charges
and expenses of a variable annuity or variable life insurance contract.
<PAGE>
Prime Money Fund
Portfolio of Investments
June 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------------ -------------------------------------------------------------------------------------- ------------
<S> <C> <C>
Certificate of Deposit--3.0%
----------------------------------------------------------------------------------------------------
Banking--3.0%
--------------------------------------------------------------------------------------
$ 200,000 MBNA America Bank, N.A., 6.20% - 6.25%, 9/11/1995 - 11/8/1995 $ 200,000
-------------------------------------------------------------------------------------- ------------
(a) Commercial Paper--34.3%
----------------------------------------------------------------------------------------------------
Banking--4.5%
--------------------------------------------------------------------------------------
100,000 Abbey National N.A. Corp., 6.02%, (Guaranteed by Abbey National Banc PLC), 8/9/1995 99,356
--------------------------------------------------------------------------------------
200,000 Queensland Alumina Ltd., (Credit Suisse LOC), 5.94%, 9/7/1995 197,790
-------------------------------------------------------------------------------------- ------------
Total 297,146
-------------------------------------------------------------------------------------- ------------
Finance-Commercial--14.9%
--------------------------------------------------------------------------------------
200,000 Beta Finance, Inc., 5.98%, 8/31/1995 198,004
--------------------------------------------------------------------------------------
300,000 CIT Group Holdings, Inc., 5.76% - 5.85%, 9/20/1995 - 12/22/1995 293,290
--------------------------------------------------------------------------------------
300,000 General Electric Capital Corp., 5.80% - 6.21%, 10/25/1995 - 12/5/1995 293,656
--------------------------------------------------------------------------------------
200,000 Sheffield Receivables Corp., 6.10%, 8/9/1995 198,700
-------------------------------------------------------------------------------------- ------------
Total 983,650
-------------------------------------------------------------------------------------- ------------
Finance-Retail--8.9%
--------------------------------------------------------------------------------------
200,000 Associates Corp. of North America, 6.04% - 6.05%, 8/4/1995 - 10/13/1995 197,734
--------------------------------------------------------------------------------------
200,000 Ford Credit Receivables Funding, Inc., 6.09%, 7/27/1995 199,133
--------------------------------------------------------------------------------------
200,000 New Center Asset Trust (Series A1+P1), 6.21%, 10/30/1995 195,953
-------------------------------------------------------------------------------------- ------------
Total 592,820
-------------------------------------------------------------------------------------- ------------
Telecommunications--3.0%
--------------------------------------------------------------------------------------
200,000 AT&T Corp., 5.89%, 9/5/1995 197,866
-------------------------------------------------------------------------------------- ------------
</TABLE>
3
<PAGE>
Prime Money Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------------ -------------------------------------------------------------------------------------- ------------
<C> <S> <C>
(a) Commercial Paper--continued
----------------------------------------------------------------------------------------------------
Tobacco--3.0%
--------------------------------------------------------------------------------------
$ 200,000 Philip Morris Capital Corp., 6.12%, 8/25/1995 $ 198,167
-------------------------------------------------------------------------------------- ------------
Total Commercial Paper 2,269,649
-------------------------------------------------------------------------------------- ------------
Corporate Notes--1.6%
----------------------------------------------------------------------------------------------------
Banking--1.6%
--------------------------------------------------------------------------------------
103,794 Banc One Auto Trust, 6.36%, 4/15/1996 103,794
-------------------------------------------------------------------------------------- ------------
(b) Notes-Variable--15.0%
----------------------------------------------------------------------------------------------------
Banking--15.0%
--------------------------------------------------------------------------------------
200,000 Alabama Industrial Development Authority, 6.20%, (Wellborn Cabinet, Inc.)/(Amsouth
Bank N.A. LOC), 7/5/1995 200,000
--------------------------------------------------------------------------------------
200,000 Capital One Funding Corp., 6.12% (Series 1995-A)/(Banc One LOC),
7/6/1995 200,000
--------------------------------------------------------------------------------------
200,000 Denver Urban Renewal Authority, 6.40%, (Series 1992-B)/(Banque Paribas LOC), 7/6/1995 200,000
--------------------------------------------------------------------------------------
200,000 Franklin County, OH, 6.25% (Series 1995)/(Edison Welding)/(Huntington National Bank
LOC), 7/6/1995 200,000
--------------------------------------------------------------------------------------
190,000 Southeast Regional Holding, 6.32%, (Series 1995-A)/(Columbus Bank and Trust Co. LOC),
7/6/1995 190,000
-------------------------------------------------------------------------------------- ------------
Total Notes-Variable 990,000
-------------------------------------------------------------------------------------- ------------
(c) Repurchase Agreements--23.7%
----------------------------------------------------------------------------------------------------
310,000 Daiwa Securities America, Inc., 6.16%, dated 6/30/1995, due 7/3/1995 310,000
--------------------------------------------------------------------------------------
200,000 First Chicago Capital Markets, Inc., 6.15%, dated 6/30/1995, due 7/3/1995 200,000
--------------------------------------------------------------------------------------
128,000 HSBC Securities, Inc., 6.35%, dated 6/30/1995, due 7/3/1995 128,000
--------------------------------------------------------------------------------------
310,000 PaineWebber, Inc., 6.18%, dated 6/30/1995, due 7/3/1995 310,000
--------------------------------------------------------------------------------------
310,000 S.G. Warburg & Co., Inc., 6.20%, dated 6/30/1995, due 7/3/1995 310,000
--------------------------------------------------------------------------------------
310,000 UBS Securities, Inc., 6.15%, dated 6/30/1995, due 7/3/1995 310,000
-------------------------------------------------------------------------------------- ------------
Total Repurchase Agreements 1,568,000
-------------------------------------------------------------------------------------- ------------
</TABLE>
4
<PAGE>
Prime Money Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------------ -------------------------------------------------------------------------------------- ------------
<C> <S> <C>
(a) U.S. Treasury Obligations--22.6%
----------------------------------------------------------------------------------------------------
U.S. Treasury Bills--22.6%
--------------------------------------------------------------------------------------
$ 1,500,000 5.10%, 7/6/1995 $ 1,498,938
-------------------------------------------------------------------------------------- ------------
Total Investments, at amortized cost (d) $ 6,630,381
-------------------------------------------------------------------------------------- ------------
</TABLE>
(a) Each issue shows the rate of discount at the time of purchase for discount
issues.
(b) Current rate and next reset date shown.
(c) The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investments in the repurchase agreements are through participation in joint
accounts with other Federated funds.
(d) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($6,621,268) at June 30, 1995.
The following acronym(s) are used throughout this portfolio:
CP--Commercial Paper
LOC--Letter of Credit
PLC--Public Limited Company
(See Notes which are an integral part of the Financial Statements)
5
<PAGE>
Prime Money Fund
Statement of Assets and Liabilities
June 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
----------------------------------------------------------------------------------------------------
Investments, at amortized cost and value $ 6,630,381
----------------------------------------------------------------------------------------------------
Cash 739
----------------------------------------------------------------------------------------------------
Interest receivable 7,354
---------------------------------------------------------------------------------------------------- ------------
Total assets 6,638,474
----------------------------------------------------------------------------------------------------
Liabilities:
----------------------------------------------------------------------------------------------------
Payable for shares redeemed $ 791
-----------------------------------------------------------------------------------------
Accrued expenses 16,415
----------------------------------------------------------------------------------------- ---------
Total liabilities 17,206
---------------------------------------------------------------------------------------------------- ------------
Net Assets for 6,621,268 shares outstanding $ 6,621,268
---------------------------------------------------------------------------------------------------- ------------
Net Asset Value, Offering Price, and Redemption Proceeds Per Share:
($6,621,268 / 6,621,268 shares outstanding) $1.00
---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
6
<PAGE>
Prime Money Fund
Statement of Operations
Six Months Ended June 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
-------------------------------------------------------------------------------------------------------
Interest $ 97,368
-------------------------------------------------------------------------------------------------------
Expenses:
-------------------------------------------------------------------------------------------------------
Investment advisory fee $ 7,987
-------------------------------------------------------------------------------------------
Administrative personnel and services fees 61,987
-------------------------------------------------------------------------------------------
Custodian fees 18,507
-------------------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 6,421
-------------------------------------------------------------------------------------------
Directors'/Trustees' fees 991
-------------------------------------------------------------------------------------------
Auditing fees 2,059
-------------------------------------------------------------------------------------------
Legal fees 801
-------------------------------------------------------------------------------------------
Portfolio accounting fees 10,000
-------------------------------------------------------------------------------------------
Share registration costs 1,267
-------------------------------------------------------------------------------------------
Printing and postage 3,982
-------------------------------------------------------------------------------------------
Insurance premiums 1,991
-------------------------------------------------------------------------------------------
Miscellaneous 3,801
------------------------------------------------------------------------------------------- ----------
Total expenses 119,794
-------------------------------------------------------------------------------------------
Deduct--
-------------------------------------------------------------------------------------------
Waiver of investment advisory fee $ 7,987
--------------------------------------------------------------------------------
Reimbursement of other operating expenses 99,028 107,015
-------------------------------------------------------------------------------- --------- ----------
Net expenses 12,779
------------------------------------------------------------------------------------------------------- ---------
Net investment income $ 84,589
------------------------------------------------------------------------------------------------------- ---------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
7
<PAGE>
Prime Money Fund
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1995 Period Ended
(unaudited) December 31, 1994*
----------------------------------------------------------------------- ---------------- ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
-----------------------------------------------------------------------
Operations--
-----------------------------------------------------------------------
Net investment income $ 84,589 $ 2,449
----------------------------------------------------------------------- ------------ ---------
Distributions to Shareholders--
-----------------------------------------------------------------------
Distributions from net investment income (84,589) (2,449)
----------------------------------------------------------------------- ------------ ---------
Share Transactions--
-----------------------------------------------------------------------
Proceeds from sale of Shares 10,483,613 1,276,510
-----------------------------------------------------------------------
Net asset value of Shares issued to shareholders in
payment of distributions declared 83,174 2,491
-----------------------------------------------------------------------
Cost of Shares redeemed (4,497,787) (726,733)
----------------------------------------------------------------------- ------------ ---------
Change in net assets resulting from share
transactions 6,069,000 552,268
----------------------------------------------------------------------- ------------ ---------
Change in net assets 6,069,000 552,268
-----------------------------------------------------------------------
Net Assets:
-----------------------------------------------------------------------
Beginning of period 552,268 --
----------------------------------------------------------------------- ------------ ---------
End of period $ 6,621,268 $ 552,268
----------------------------------------------------------------------- ------------ ---------
</TABLE>
*For the period from December 10, 1993 (start of business) to December 31, 1994.
(See Notes which are an integral part of the Financial Statements)
8
<PAGE>
Prime Money Fund
Financial Highlights
--------------------------------------------------------------------------------
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1995 Period Ended
(unaudited) December 31, 1994(a)
--------------------------------------------------------------------- ------------- --------------------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
---------------------------------------------------------------------
Income from investment operations
---------------------------------------------------------------------
Net investment income 0.03 0.01
---------------------------------------------------------------------
Less distributions
---------------------------------------------------------------------
Distributions from net investment income (0.03) (0.01)
--------------------------------------------------------------------- ------- ------
Net asset value, end of period $ 1.00 $ 1.00
--------------------------------------------------------------------- ------- ------
Total return (b) 2.55% 0.50%
---------------------------------------------------------------------
Ratios to Average Net Assets
---------------------------------------------------------------------
Expenses 0.81%(c) 0.80%(c)
---------------------------------------------------------------------
Net investment income 5.35%(c) 4.26%(c)
---------------------------------------------------------------------
Expense waiver/reimbursement (d) 6.77%(c) 71.84%(c)
---------------------------------------------------------------------
Supplemental Data
---------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 6,621 $ 552
---------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from November 18, 1994, (date of initial
public investment) to December 31, 1994. For the period from December 10,
1993, (start of business) to November 17, 1994 the Fund had no public
investment.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
9
<PAGE>
PRIME MONEY FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
--------------------------------------------------------------------------------
(1) ORGANIZATION
Insurance Management Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end, diversified
management investment company. The Trust consists of six diversified portfolios.
The financial statements presented herein are only those of Prime Money Fund
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
Investment Valuations--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
Repurchase Agreements--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less
than the repurchase price on the sale of collateral securities.
Investment Income, Expenses and Distributions--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by The Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
10
<PAGE>
PRIME MONEY FUND
--------------------------------------------------------------------------------
Federal Taxes--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
When-Issued and Delayed Delivery Transactions--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
Other--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At June
30, 1995, capital paid-in aggregated $6,621,268. Transactions in Fund shares
were as follows:
<TABLE>
<CAPTION>
Six Months
Ended Period Ended
June 30, December 31,
1995 1994*
------------------------------------------------------ ---------- ------------
<S> <C> <C>
Shares sold 10,483,613 1,276,510
------------------------------------------------------
Shares issued to shareholders in payment
of distributions declared 83,174 2,491
------------------------------------------------------
Shares redeemed (4,497,787) (726,733)
------------------------------------------------------ ---------- ---------
Net change resulting from share transactions 6,069,000 552,268
------------------------------------------------------ ========== =========
</TABLE>
*For the period from December 10, 1993, (start of business) to December 31,
1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Advisory Fee--Federated Advisers, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.50 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive any portion of its fee and reimburse certain operating expenses
of the Fund. The Adviser can modify or terminate this voluntary waiver and
reimbursement at any time at its sole discretion.
Administrative Fee--Federated Administrative Services ("FAS") provides the Fund
with administrative personnel and services. The FAS fee is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
11
<PAGE>
PRIME MONEY FUND
--------------------------------------------------------------------------------
Transfer and Dividend Disbursing Agent Fees--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Trust. This
fee is based on the size, type, and number of accounts, and transactions made by
shareholders.
Portfolio Accounting Fees--FServ also maintains the Fund's accounting records.
The fee is based on the level of the Fund's average daily net assets for the
period, plus out-of-pocket expenses.
Organizational Expenses--Organizational expenses ($22,431) were borne initially
by the Adviser. The Fund has agreed to reimburse the Adviser for the
organizational expenses during the five year period following December 15, 1993
(the date the Fund became effective). For the six months ended June 30, 1995,
the Fund paid $2,991 pursuant to this agreement.
Certain of the Officers and Trustees of the Trust are Officers and Trustees of
the above companies.
12
<PAGE>
TRUSTEES OFFICERS
--------------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. J. Christopher Donahue
William J. Copeland President
J. Christopher Donahue Edward C. Gonzales
James E. Dowd Executive Vice President
Lawrence D. Ellis, M.D. John W. McGonigle
Edward L. Flaherty, Jr. Executive Vice President and Secretary
Peter E. Madden Richard B. Fisher
Gregor F. Meyer Vice President
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Treasurer
Marjorie P. Smuts G. Andrew Bonnewell
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
13
<PAGE>
PRIME
MONEY
FUND
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1995
INSURANCE MANAGEMENT SERIES
[LOGO] Federated Securities Corp.
-------------------------- -------------------------------
Distributor
A subsidiary of Federated Investors -------------------------------
Federated Investors Tower
Pittsburgh, PA 15222-3779 -------------------------------
Cusip 458043106 [LOGO]
G00433-05 (8/95) -------------------------------
<PAGE>
President's Message
--------------------------------------------------------------------------------
Dear Shareholder:
I'm pleased to present your Semi-Annual Report to Shareholders for U.S.
Government Bond Fund, a portfolio of Insurance Management Series, which covers
the six-month period ended June 30, 1995. The Report begins with an investment
review by the fund's portfolio manager, which is followed by a complete listing
of the fund's holdings and its financial statements.
The fund invests in a portfolio of U.S. government securities to help your money
earn income. These securities are among the safest available, because the
government, agency, or instrumentality that issues these securities provides a
guarantee that the fund will receive the prompt payment of principal and
interest. Of course, the actual shares of the fund is not guaranteed.
As of June 30, 1995, fund assets were invested primarily in U.S. Treasury Bills.
Remaining fund assets were invested in a repurchase agreement backed by U.S.
government securities.
During the period covered by this report, the fund paid dividends of $0.24 per
share. On both the first and last days of the reporting period, the fund's net
asset value stood at $9.99. On June 30, 1995, its net assets stood at $4
million.
Thank you for selecting this fund to participate in the income-earning potential
of U.S. government securities. We'll continue to keep you up to date on your
progress. As always, we welcome your comments and suggestions.
Sincerely,
/s/ J. Christopher Donahue
------------------------------
J. Christopher Donahue
President
August 15, 1995
1
<PAGE>
Investment Review
--------------------------------------------------------------------------------
U.S. Government Bond Fund, a portfolio of Insurance Management Series, provides
shareholders with a professionally managed portfolio of U.S. government
securities. The fund is managed for specific maturity levels according to
management's assumptions on market risk and volatility.
The U.S. fixed income markets have experienced some major changes in the first
six months of 1995. The yield on the 10-year U.S. Treasury Bill has declined
over 160 basis points, which in turn has pushed rates on 30-year fixed mortgages
down to 7.75% from year-end levels of 9.25%. The yield curve continued its
flattening bias with the yield spread between the one and ten year U.S. Treasury
notes at 58 basis points versus a ten year average of 104 basis points.
The rally in the U.S. Treasury market sparked investors concerns over increased
prepayment activity in combination with a sharp rise in interest rate
volatility. These two events helped to widen spread levels on all mortgage
securities as investors moved into the U.S. Treasury market in search of
positively convex securities.
At this point in time, management believes that the underperformance of
mortgages has been exaggerated, and that the mortgage market will offer
competitive total rates of return versus U.S. Treasury securities during the
third quarter of 1995.
Current portfolio structure emphasizes short U.S. Treasury securities. At this
point in time, U.S. Treasuries are favored for their liquidity characteristics.
Management anticipates that as the second half of 1995 progresses, and the fund
continues to experience asset growth, portfolio selection will stress the
mortgage-backed securities market.
2
<PAGE>
U.S. Government Bond Fund
--------------------------------------------------------------------------------
Growth of $10,000 Invested in U.S. Government Bond Fund
The graph below illustrates the hypothetical investment of $10,000 in the
U.S. Government Bond Fund (the "Fund") from March 28, 1994, (start of
performance) to June 30, 1995, compared to the Lehman Brothers 5 Year Treasury
Bellwether Index (LB5TB)+, and the Lipper U.S. Mortgage Funds Average (LUSMFA).
[INSERT GRAPH HERE]
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate so when shares are redeemed, they may be
worth more or less than original cost. Mutual funds are not obligations of or
guaranteed by any bank, and are not federally insured.
*The Fund's performance assumes the reinvestment of all dividends and
distributions. The LB5TB and the LUSMFA have been adjusted to reflect
reinvestment of dividends on securities in the index and average.
+The LB5TB is not adjusted to reflect sales loads, expenses, or other fees that
the SEC requires to be reflected in the Fund's performance. The index is
unmanaged.
++The LUSMFA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into
the category, and is not adjusted to reflect any sales loads. However, total
return is reported net of expenses or other fees that the SEC requires to be
reflected in a fund's performance.
3
<PAGE>
U.S. Government Bond Fund
Portfolio of Investments
June 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
---------- -------------------------------------------------------------------------------------- ------------
<C> <S> <C>
U.S. Treasury Bills--96.6%
--------------------------------------------------------------------------------------
$3,900,000 4.11%, 7/6/1995 $ 3,897,238
-------------------------------------------------------------------------------------- ------------
(a)Repurchase Agreement--2.1%
--------------------------------------------------------------------------------------
85,000 J.P. Morgan Securities, Inc., 6.125%, dated 6/30/1995, due 7/3/1995 85,000
-------------------------------------------------------------------------------------- ------------
Total Investments, at amortized cost (b) $ 3,982,238
-------------------------------------------------------------------------------------- ============
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations, based on market prices as of the date of the portfolio.
The investment in the repurchase agreement is through participation in a
joint account with other Federated funds.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($4,034,150) at June 30, 1995.
(See Notes which are an integral part of the Financial Statements)
4
<PAGE>
U.S. Government Bond Fund
Statement of Assets and Liabilities
June 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
--------------------------------------------------------------------------------
Investments in securities, at amortized cost and value $ 3,982,238
--------------------------------------------------------------------------------
Cash 4,056
--------------------------------------------------------------------------------
Income receivable 14
--------------------------------------------------------------------------------
Receivable for shares sold 48,147
-------------------------------------------------------------------------------- ------------
Total assets 4,034,455
--------------------------------------------------------------------------------
Liabilities:
--------------------------------------------------------------------------------
Payable for shares redeemed $ 305
--------------------------------------------------------------------- ---------
Total liabilities 305
-------------------------------------------------------------------------------- ------------
Net Assets for 403,629 shares outstanding $ 4,034,150
-------------------------------------------------------------------------------- ============
Net Assets Consist of:
--------------------------------------------------------------------------------
Paid-in capital $ 4,033,423
--------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (6)
--------------------------------------------------------------------------------
Undistributed net investment income 733
-------------------------------------------------------------------------------- ------------
Total Net Assets $ 4,034,150
-------------------------------------------------------------------------------- ============
Net Asset Value, Offering Price, and Redemption Proceeds Per Share:
Net Asset Value Per Share ($4,034,150 / 403,629 shares outstanding) $9.99
-------------------------------------------------------------------------------- ============
</TABLE>
(See Notes which are an integral part of the Financial Statements)
5
<PAGE>
U.S. Government Bond Fund
Statement of Operations
Six Months Ended June 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
------------------------------------------------------------------------------------------------
Interest $ 68,682
------------------------------------------------------------------------------------------------
Expenses:
------------------------------------------------------------------------------------------------
Investment advisory fee $ 6,979
------------------------------------------------------------------------------------
Administrative personnel and services fee 61,987
------------------------------------------------------------------------------------
Custodian fees 28,655
------------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 7,059
------------------------------------------------------------------------------------
Directors'/Trustees' fees 991
------------------------------------------------------------------------------------
Auditing fees 6,878
------------------------------------------------------------------------------------
Legal fees 1,801
------------------------------------------------------------------------------------
Portfolio accounting fees 10,164
------------------------------------------------------------------------------------
Share registration costs 1,086
------------------------------------------------------------------------------------
Printing and postage 5,792
------------------------------------------------------------------------------------
Insurance premiums 1,991
------------------------------------------------------------------------------------
Miscellaneous 3,982
------------------------------------------------------------------------------------ ----------
Total expenses 137,365
------------------------------------------------------------------------------------
Deduct--
------------------------------------------------------------------------------------
Waiver of investment advisory fee $ 6,979
------------------------------------------------------------------------
Reimbursement of other operating expenses 121,067 128,046
------------------------------------------------------------------------ ---------- ----------
Net expenses 9,319
------------------------------------------------------------------------------------------------ ---------
Net investment income 59,363
------------------------------------------------------------------------------------------------ ---------
Change in net assets resulting from operations $ 59,363
------------------------------------------------------------------------------------------------ =========
</TABLE>
(See Notes which are an integral part of the Financial Statements)
6
<PAGE>
U.S. Government Bond Fund
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1995 Year Ended
(unaudited) December 31, 1994(a)
--------------------------------------------------------------------- ---------------- --------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
---------------------------------------------------------------------
Operations--
---------------------------------------------------------------------
Net investment income $ 59,363 $ 18,762
---------------------------------------------------------------------
Net realized gain (loss) on investments ($0 net loss and $6 net loss,
respectively, as computed for federal income tax purposes) -- (6)
--------------------------------------------------------------------- ---------------- -------------
Change in net assets resulting from operations 59,363 18,756
--------------------------------------------------------------------- ---------------- -------------
Distributions to Shareholders--
---------------------------------------------------------------------
Dividends from net investment income (58,630) (18,762)
--------------------------------------------------------------------- ---------------- -------------
Share Transactions--
---------------------------------------------------------------------
Proceeds from sale of Shares 3,537,448 1,519,262
---------------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of
distributions declared 53,911 11,969
---------------------------------------------------------------------
Cost of Shares redeemed (801,706) (387,461)
--------------------------------------------------------------------- ---------------- -------------
Change in net assets resulting from share
transactions 2,789,653 1,143,770
--------------------------------------------------------------------- ---------------- -------------
Change in net assets 2,790,386 1,143,764
---------------------------------------------------------------------
Net Assets:
---------------------------------------------------------------------
Beginning of period 1,243,764 100,000
--------------------------------------------------------------------- ---------------- -------------
End of period (including undistributed net investment income of $733
and $0, respectively) $ 4,034,150 $ 1,243,764
--------------------------------------------------------------------- =============== =============
</TABLE>
(a) For the period from December 8, 1993 (start of business) to December 31,
1994.
(See Notes which are an integral part of the Financial Statements)
7
<PAGE>
U.S. Government Bond Fund
Financial Highlights
--------------------------------------------------------------------------------
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1995 Year Ended
(unaudited) December 31, 1994(a)
--------------------------------------------------------------------- ---------------- --------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.99 $ 9.99
---------------------------------------------------------------------
Income from investment operations
---------------------------------------------------------------------
Net investment income 0.24 0.27
---------------------------------------------------------------------
Less distributions
---------------------------------------------------------------------
Distributions from net investment income (0.24) (0.27)
--------------------------------------------------------------------- ------- -------
Net asset value, end of period $ 9.99 $ 9.99
--------------------------------------------------------------------- ======= =======
Total return (b) 2.49% 2.62%
---------------------------------------------------------------------
Ratios to Average Net Assets
---------------------------------------------------------------------
Expenses 0.80%(c) 0.48%(c)
---------------------------------------------------------------------
Net investment income 5.10%(c) 3.99%(c)
---------------------------------------------------------------------
Expense waiver/reimbursement (d) 11.01%(c) 32.83%(c)
---------------------------------------------------------------------
Supplemental Data
---------------------------------------------------------------------
Net assets, end of period (000 omitted) $4,034 $1,244
---------------------------------------------------------------------
Portfolio turnover -- --
---------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from March 29, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 8,
1993 (start of business) to March 28, 1994 net investment income was
distributed to the Fund's adviser.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
8
<PAGE>
U.S. Government Bond Fund
Notes to Financial Statements
June 30, 1995 (unaudited)
--------------------------------------------------------------------------------
(1) Organization
Insurance Management Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company. The Trust consists of six diversified portfolios. The
financial statements included herein present only those of U.S. Government Bond
Fund (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
(2) Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
Investment Valuations--Short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. All other securities are valued at
prices provided by an independent pricing service.
Repurchase Agreements--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Fund could
receive less than the repurchase price on the sale of collateral
securities.
Investment Income, Expenses, and Distributions--Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the
"Code"). Distributions to shareholders are recorded on the ex-dividend
date.
Federal Taxes--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of
9
<PAGE>
U.S. Government Bond Fund
--------------------------------------------------------------------------------
its income. Accordingly, no provisions for federal tax are necessary. At
December 31, 1994, the Fund, for federal tax purposes, had a capital loss
carryforward of $6, which will reduce the Fund's income arising from future
net realized gain on investments, if any, to the extent permitted by the
Code, and thus will reduce the amount of the distributions to shareholders
which would otherwise be necessary to relieve the Fund of any liability for
federal tax. Pursuant to the Code, such capital loss carryforward will
expire in 2002.
When-Issued and Delayed Delivery Transactions--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
Other--Investment transactions are accounted for on the trade date.
(3) Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1995 December 31, 1994(a)
--------------------------------------------------------------------- ---------------- --------------------
<S> <C> <C>
Shares sold 353,954 152,142
---------------------------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 5,403 1,200
---------------------------------------------------------------------
Shares redeemed (80,280) (38,790)
--------------------------------------------------------------------- ---------------- ----------
Net change resulting from Fund share transactions 279,077 114,552
--------------------------------------------------------------------- ================ ==========
</TABLE>
(a) For the period from December 8, 1993, (start of business) to December 31,
1994.
(4) Investment Advisory Fee and Other Transactions with Affiliates
Investment Advisory Fee--Federated Advisers, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.60 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive its fee and reimburse certain operating expenses of the Fund.
The Adviser can modify or terminate this voluntary waiver and reimbursement at
any time at its sole discretion.
Administrative Fee--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The FAS fee is based on the level of average aggregate
daily net assets of all funds advised by subsidiaries of
10
<PAGE>
U.S. Government Bond Fund
--------------------------------------------------------------------------------
Federated Investors for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
Transfer Agent and Dividend Disbursing Agent Fees and Expenses--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The fee is based on the size, type, and number of accounts and
transactions made by shareholders.
Portfolio Accounting Fees--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period plus, out-of-pocket expenses.
Organizational Expenses--Organizational expenses ($20,065) and start-up
administrative service expenses ($31,507) were borne initially by the Adviser.
The Fund has agreed to reimburse the Adviser for the organizational expenses and
start-up administrative expenses during the five year period following December
15, 1993 (date the Fund became effective). For the six months ended June 30,
1995, the Fund paid $2,675 and $4,201, respectively, to this agreement.
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
11
<PAGE>
Trustees Officers
--------------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. J. Christopher Donahue
William J. Copeland President
J. Christopher Donahue Edward C. Gonzales
James E. Dowd Executive Vice President
Lawrence D. Ellis, M.D. John W. McGonigle
Edward L. Flaherty, Jr. Executive Vice President and Secretary
Peter E. Madden Richard B. Fisher
Gregor F. Meyer Vice President
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Treasurer
Marjorie P. Smuts G. Andrew Bonnewell
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
12
<PAGE>
--------------------------------------------------------------------------------
U.S.
--------------------------------------------------------------------------------
GOVERNMENT
--------------------------------------------------------------------------------
BOND
--------------------------------------------------------------------------------
FUND
--------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1995
Insurance Management Series
[LOGO]Federated Securities Corp.
-------------------------- ---------------------------
Distributor
A subsidiary of Federated Investors ---------------------------
Federated Investors Tower
Pittsburgh, PA 15222-3779 ---------------------------
Cusip 458043106 [LOGO OF RECYCLED PAPER]
G00433-05 (8/95) ---------------------------
<PAGE>
PRESIDENT'S MESSAGE
--------------------------------------------------------------------------------
Dear Shareholder:
I'm pleased to present your Semi-Annual Report to Shareholders for Corporate
Bond Fund, a portfolio of Insurance Management Series, which covers the
six-month period ended June 30, 1995. The Report begins with an investment
review by the fund's portfolio manager, which is followed by a complete listing
of the fund's holdings as well as its financial statements.
As a shareholder in this mutual fund, you're putting your money to work pursuing
a high level of income through a diversified portfolio of corporate bonds. These
bonds are issued by American companies across the entire business spectrum--from
broadcast radio and television to chemicals and plastics, through food products,
steel, retail, and telecommunications.
During the reporting period, dividends paid to shareholders totaled $0.40 per
share. In addition, the fund's net asset value increased from $8.87 on the first
day of the reporting period to $9.47 on the last day of the reporting period. As
a result, the fund's total return for the reporting period was 11.54%.* On June
30, 1995, its net assets stood at $6.0 million.
Thank you for participating in the income-earning potential of high-quality
American companies. We'll continue to keep you up to date on your progress. Your
comments and suggestions are always welcome.
Sincerely,
/s/ J. Christopher Donahue
J. Christopher Donahue
President
August 15, 1995
*Performance quoted represents past performance. Investment return and principal
value will fluctuate, so that an investor's shares, when redeemed, may be worth
more or less than their original cost. Performance information does not reflect
the charges and expenses of a variable annuity or variable life insurance
contract.
1
<PAGE>
INVESTMENT REVIEW
--------------------------------------------------------------------------------
The major factor in the performance of fixed-income securities for the six month
period ended June 30, 1995, was the substantial decline in interest rates. For
example, the yield on a 10 year U.S. Treasury security declined by over 160
basis points during the period. The interest rate decline was in response to
evidence that the domestic economy was slowing from the rapid pace experienced
in the fourth quarter of 1994. High-yield bonds participated in this rally
especially early in the period when the consensus favored a soft landing
consisting of slow growth with modest inflation. However, towards the end of the
second quarter, the economic commentary switched from the likelihood of a soft
landing to the possibility of a hard landing or a recession. As this shift in
thinking occurred, the high-yield market continued to move modestly higher but
substantially underperformed higher quality bonds as yield spreads (or the risk
premium for high-yield bonds) widened. Also negatively impacting the high-yield
market was a relatively large new issue calendar towards the end of the period
that increased supply at a time of uncertainty, from a fundamental viewpoint.
For the six months as a whole, high-yield bonds showed attractive absolute
returns but lagged the total returns achieved by high-quality fixed income
assets of similar duration.
The Corporate Bond Fund has experienced a large percentage growth in assets
during the period increasing from $1.5 million on December 31, 1994, to
approximately $6.0 million on June 30, 1995. Despite this large asset increase
the fund has outperformed the Lipper High Current Yield average. For the period,
the fund had a total return of 11.54%* versus 9.86% for the Lipper average.
Several factors benefited the fund. First, the fund maintained a modestly higher
quality bias during the period. As spreads widened, higher quality high-yield
bonds outperformed lower quality high-yield bonds. Second, the fund was
overweighted in the cable television and broadcast television industries which
performed strongly in the period due to a strong advertising environment and
potentially positive regulatory changes. The fund was also underweighted in the
general retail area, which substantially underperformed the overall market.
Finally, several specific positions performed above average. These included
Nextel, California Energy, American Standard, Doskocil, and PanAmSat. Offsetting
some of the positives were the fund's underweighting in the gaming industry and
its continuing exposure to cyclical issuers which underperformed as the
possibility of economic weakness increased. While the cyclical exposure has been
substantially reduced it still represented an overweight for much of the period.
The fund's management continues to be cautious about the outlook for the balance
of 1995. Economic growth is expected to trail the strong second half of 1994.
However, management does not expect the slower economic growth to result in a
recession given high employment levels, lower interest rates and strong export
demand. From a portfolio perspective, we continue to be comfortable with a
modestly higher quality bias. However, the spread widening that occurred in the
latter half of the period has presented the fund's management with some
attractive opportunities in the new issue market. For example, new positions
established in Six Flags, Monarch Marking, Cabot Safety, and Australis Media
were all purchased at yields in excess of 12%. While it is still too early to
employ a wholesale downgrading, selective opportunities do exist to enhance
long-term total return. The fund's cyclical exposure, which has been reduced
from peak levels, will be maintained given the spread widening which has
occurred and several specific situations that we believe represent outstanding
long-term value.
*Performance quoted represents past performance. Investment return and principal
value will fluctuate, so that an investor's shares, when redeemed, may be worth
more or less than their original cost. Performance information does not reflect
the charges and expenses of a variable annuity or variable life insurance
contract.
2
<PAGE>
CORPORATE BOND FUND
--------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN CORPORATE BOND FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Corporate Bond Fund (the "Fund") from March 1, 1994, (start of performance) to
June 30, 1995, compared to the Lehman Brothers Single B Rated Index (LBSBRI)+
and the Lipper High Current Yield Fund Average (LHCYFA)++.
[INSERT GRAPH HERE]
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate so when shares are redeemed, they may be
worth more or less than original cost. Mutual funds are not obligations of or
guaranteed by any bank, and are not federally insured.
*The Fund's performance assumes the reinvestment of all dividends and
distributions. The LBSBRI and the LHCYFA have been adjusted to reflect
reinvestment of dividends on securities in the index and average.
+The LBSBRI is not adjusted to reflect sales loads, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. The index is
unmanaged.
++The LHCYFA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into
the category, and is not adjusted to reflect any sales loads. However, these
total returns are reported net of expenses or other fees that the SEC requires
to be reflected in a fund's performance.
3
<PAGE>
CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
----------- -------------------------------------------------------------------------------------- ------------
<S> <C> <C>
Corporate Bonds--88.8%
---------------------------------------------------------------------------------------------------
AUTOMOTIVE--3.4%
--------------------------------------------------------------------------------------
$ 100,000 Aftermarket Technology Co., Sr. Sub. Note, 12.00%, 8/1/2004 $ 106,500
--------------------------------------------------------------------------------------
50,000 Exide Corp., Sr. Note, 10.00%, 4/15/2005 51,625
--------------------------------------------------------------------------------------
50,000 Lear Seating Corp., Sub. Note, 8.25%, 2/1/2002 47,500
-------------------------------------------------------------------------------------- ------------
Total 205,625
-------------------------------------------------------------------------------------- ------------
BANKING--1.8%
--------------------------------------------------------------------------------------
50,000 Dime Bancorp Inc., Sr. Note, 10.50%, 11/15/2005 53,750
--------------------------------------------------------------------------------------
50,000 First Nationwide Holdings, Inc., Sr. Note, 12.25%, 5/15/2001 53,750
-------------------------------------------------------------------------------------- ------------
Total 107,500
-------------------------------------------------------------------------------------- ============
Beverage & Tobacco--1.7%
--------------------------------------------------------------------------------------
100,000 Cott Corp., Sr. Note, 9.375%, 7/1/2005 100,750
-------------------------------------------------------------------------------------- ------------
BROADCAST RADIO & TV--7.3%
--------------------------------------------------------------------------------------
50,000 Allbritton Communication Co., Sr. Sub. Note, 11.50%, 8/15/2004 53,000
--------------------------------------------------------------------------------------
70,000 Chancellor Broadcasting Co., Sr. Sub. Note, 12.50%, 10/1/2004 70,350
--------------------------------------------------------------------------------------
100,000 NWCG Holding Corp., Sr. Disc. Note, 13.50% accrual, 6/15/1999 62,750
--------------------------------------------------------------------------------------
100,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 104,750
--------------------------------------------------------------------------------------
50,000 Sinclair Broadcast Group, Sr. Sub. Note, 10.00%, 12/15/2003 50,500
--------------------------------------------------------------------------------------
100,000 Young Broadcasting Inc., Sr. Sub. Note, 10.125%, 2/15/2005 101,000
-------------------------------------------------------------------------------------- ------------
Total 442,350
-------------------------------------------------------------------------------------- ------------
BUSINESS EQUIPMENT & SERVICES--2.5%
--------------------------------------------------------------------------------------
100,000 *Monarch Acquisition Corp., Sr. Note, 12.50%, 7/1/2003 100,750
--------------------------------------------------------------------------------------
50,000 United Stationers Supply Co., Sr. Sub. Note, 12.75%, 5/1/2005 51,000
-------------------------------------------------------------------------------------- ------------
Total 151,750
-------------------------------------------------------------------------------------- ============
</TABLE>
4
<PAGE>
CORPORATE BOND FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
----------- -------------------------------------------------------------------------------------- ------------
<S> <C> <C>
Corporate Bonds--continued
---------------------------------------------------------------------------------------------------
CABLE TELEVISION--6.1%
--------------------------------------------------------------------------------------
$ 50,000 Australis Media Limited, Unit, 0/14.00%, 5/15/2003 $ 26,375
--------------------------------------------------------------------------------------
50,000 CF Cable TV, Inc., Sr. Secd. 2nd Priority Note, 11.625%, 2/15/2005 53,125
--------------------------------------------------------------------------------------
50,000 Continental Cablevision, Sr. Deb., 9.50%, 8/1/2013 51,875
--------------------------------------------------------------------------------------
100,000 *International Cabletel, Inc., Sr. Defd. Cpn. Note, 0/12.75%, 4/15/2005 59,250
--------------------------------------------------------------------------------------
50,000 Le Groupe Videotron Ltee, Sr. Note, 10.625%, 2/15/2005 53,000
--------------------------------------------------------------------------------------
50,000 Peoples Choice TV Corp., Unit, 0/13.125%, 6/1/2004 23,875
--------------------------------------------------------------------------------------
100,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority Note, 10.00%, 3/15/2005 103,500
-------------------------------------------------------------------------------------- ------------
Total 371,000
-------------------------------------------------------------------------------------- ------------
CHEMICALS & PLASTICS--8.4%
--------------------------------------------------------------------------------------
100,000 Arcadian Partners L.P., Sr. Note, Series B, 10.75%, 5/1/2005 101,750
--------------------------------------------------------------------------------------
100,000 Foamex L.P., Sr. Sub. Deb., 11.875%, 10/1/2004 96,500
--------------------------------------------------------------------------------------
100,000 G-I Holdings, Inc., Sr. Disc. Note, 11.375% accrual, 10/1/1998 67,750
--------------------------------------------------------------------------------------
100,000 Harris Chemical North America, Inc., Sr. Secd. Disc. Note,
0/10.25%, 7/15/2001 92,000
--------------------------------------------------------------------------------------
100,000 *Polymer Group, Inc., Sr. Note, 12.75%, 7/15/2002 101,500
--------------------------------------------------------------------------------------
50,000 UCC Investors Holdings, Inc., Sr. Sub. Note, 11.00%, 5/1/2003 50,250
-------------------------------------------------------------------------------------- ------------
Total 509,750
-------------------------------------------------------------------------------------- ------------
CLOTHING & TEXTILES--2.4%
--------------------------------------------------------------------------------------
50,000 Dan River Inc., Sr. Sub. Note, 10.125%, 12/15/2003 49,750
--------------------------------------------------------------------------------------
100,000 WestPoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 97,250
-------------------------------------------------------------------------------------- ------------
Total 147,000
-------------------------------------------------------------------------------------- ------------
CONGLOMERATES--3.3%
--------------------------------------------------------------------------------------
100,000 Fairchild Industries, Sr. Secd. Note, 12.25%, 2/1/1999 101,750
--------------------------------------------------------------------------------------
100,000 Sherritt Gordon Ltd., Sr. Note, 9.75%, 4/1/2003 96,750
-------------------------------------------------------------------------------------- ------------
Total 198,500
-------------------------------------------------------------------------------------- ------------
</TABLE>
5
<PAGE>
CORPORATE BOND FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
----------- -------------------------------------------------------------------------------------- ------------
<S> <C> <C>
Corporate Bonds--continued
---------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS--1.6%
--------------------------------------------------------------------------------------
$ 100,000 Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 12/15/2003 $ 94,500
-------------------------------------------------------------------------------------- ------------
CONTAINER & GLASS PRODUCTS--2.7%
--------------------------------------------------------------------------------------
50,000 Owens-Illinois, Inc., Sr. Amort. Deb., 11.00%, 12/1/2003 55,313
--------------------------------------------------------------------------------------
50,000 Owens-Illinois, Inc., Sr. Sub. Note, 9.95%, 10/15/2004 51,500
--------------------------------------------------------------------------------------
50,000 Silgan Corp., Sr. Sub. Note, 11.75%, 6/15/2002 53,250
-------------------------------------------------------------------------------------- ------------
Total 160,063
-------------------------------------------------------------------------------------- ------------
COSMETICS & TOILETRIES--0.8%
--------------------------------------------------------------------------------------
50,000 Revlon Consumer Products Corp., Note, 9.375%, 4/1/2001 48,375
-------------------------------------------------------------------------------------- ------------
ECOLOGICAL SERVICES & EQUIPMENT--2.6%
--------------------------------------------------------------------------------------
50,000 Allied Waste Industries, Inc., Sr. Sub. Note, 12.00%, 2/1/2004 52,750
--------------------------------------------------------------------------------------
100,000 Mid-American Waste Systems, Inc., Sr. Sub. Note, 12.25%, 2/15/2003 102,500
-------------------------------------------------------------------------------------- ------------
Total 155,250
-------------------------------------------------------------------------------------- ------------
FOOD & DRUG RETAILERS--3.3%
--------------------------------------------------------------------------------------
150,000 Pathmark Stores, Inc., Sr. Sub. Note, 9.625%, 5/1/2003 147,188
--------------------------------------------------------------------------------------
50,000 Ralph's Grocery Co., Sr. Note, 10.45%, 6/15/2004 50,000
-------------------------------------------------------------------------------------- ------------
Total 197,188
-------------------------------------------------------------------------------------- ------------
FOOD PRODUCTS--2.5%
--------------------------------------------------------------------------------------
50,000 Curtice-Burns Foods, Inc., Sr. Sub. Note, 12.25%, 2/1/2005 53,250
--------------------------------------------------------------------------------------
50,000 Doskocil Cos., Inc., Sr. Sub. Note, 9.75%, 7/15/2000 48,750
--------------------------------------------------------------------------------------
50,000 PMI Acquisition Corp., Sr. Sub. Note, 10.25%, 9/1/2003 51,250
-------------------------------------------------------------------------------------- ------------
Total 153,250
-------------------------------------------------------------------------------------- ------------
FOOD SERVICES--1.5%
--------------------------------------------------------------------------------------
100,000 Flagstar Corp., Sr. Note, 10.875%, 12/1/2002 93,250
-------------------------------------------------------------------------------------- ------------
FOREST PRODUCTS--2.6%
--------------------------------------------------------------------------------------
50,000 Repap New Brunswick, 1st Priority Sr. Secd. Note, 9.875%, 7/15/2000 50,750
--------------------------------------------------------------------------------------
50,000 Riverwood International Corp., Sr. Sub. Note, 11.25%, 6/15/2002 54,625
--------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
CORPORATE BOND FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
----------- -------------------------------------------------------------------------------------- ------------
<S> <C> <C>
Corporate Bonds--continued
---------------------------------------------------------------------------------------------------
FOREST PRODUCTS--CONTINUED
--------------------------------------------------------------------------------------
$ 50,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 $ 49,875
-------------------------------------------------------------------------------------- ------------
Total 155,250
-------------------------------------------------------------------------------------- ------------
HEALTHCARE--1.8%
--------------------------------------------------------------------------------------
100,000 National Medical Enterprises, Inc., Sr. Sub. Note, 10.125%, 3/1/2005 106,250
-------------------------------------------------------------------------------------- ------------
HOME PRODUCTS & FURNISHINGS--1.5%
--------------------------------------------------------------------------------------
50,000 American Standard, Inc., Sr. Sub. Disc. Deb., 0/10.50%, 6/1/2005 38,250
--------------------------------------------------------------------------------------
50,000 Triangle Pacific Corp., Sr. Note, 10.50%, 8/1/2003 51,250
-------------------------------------------------------------------------------------- ------------
Total 89,500
-------------------------------------------------------------------------------------- ------------
INDUSTRIAL PRODUCTS & EQUIPMENT--4.3%
--------------------------------------------------------------------------------------
100,000 *Cabot Safety Acquisition Corp., Sr. Sub. Note, 12.50%, 7/15/2005 101,250
--------------------------------------------------------------------------------------
50,000 Fairfield Manufacturing Co., Inc., Sr. Sub. Note, 11.375%, 7/1/2001 47,500
--------------------------------------------------------------------------------------
100,000 Truck Components, Inc., Sr. Note, 12.25%, 6/30/2001 110,500
-------------------------------------------------------------------------------------- ------------
Total 259,250
-------------------------------------------------------------------------------------- ------------
LEISURE & ENTERTAINMENT--2.6%
--------------------------------------------------------------------------------------
150,000 *Six Flags Theme Parks, Sr. Sub. Disc. Note, 0/12.25%, 6/15/2005 108,750
--------------------------------------------------------------------------------------
50,000 Viacom, Inc., Sub. Deb., 8.00%, 7/7/2006 49,000
-------------------------------------------------------------------------------------- ------------
Total 157,750
-------------------------------------------------------------------------------------- ------------
MACHINERY & EQUIPMENT--2.6%
--------------------------------------------------------------------------------------
100,000 Primeco Inc., Sr. Sub. Note, 12.75%, 3/1/2005 102,250
--------------------------------------------------------------------------------------
50,000 Waters Corp., Sr. Sub. Note, 12.75%, 9/30/2004 52,625
-------------------------------------------------------------------------------------- ------------
Total 154,875
-------------------------------------------------------------------------------------- ------------
OIL & GAS--5.6%
--------------------------------------------------------------------------------------
150,000 Clark USA, Inc., Sr. Note, 11.00% accrual, 2/15/2000 94,125
--------------------------------------------------------------------------------------
100,000 Falcon Drilling Co., Inc., Sr. Note, 9.75%, 1/15/2001 99,000
--------------------------------------------------------------------------------------
50,000 Giant Industries, Inc., Sr. Sub. Note, 9.75%, 11/15/2003 48,875
--------------------------------------------------------------------------------------
50,000 H.S. Resources, Inc., Sr. Sub. Note, 9.875%, 12/1/2003 48,750
--------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
CORPORATE BOND FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
----------- -------------------------------------------------------------------------------------- ------------
<S> <C>
Corporate Bonds--continued
---------------------------------------------------------------------------------------------------
OIL & GAS--CONTINUED
--------------------------------------------------------------------------------------
$ 50,000 WRT Energy Corp., Unit, 13.875%, 3/1/2002 $ 49,750
-------------------------------------------------------------------------------------- ------------
Total 340,500
-------------------------------------------------------------------------------------- ------------
PRINTING & PUBLISHING--1.5%
--------------------------------------------------------------------------------------
50,000 Garden State Newspapers, Inc., Sr. Sub. Note, 12.00%, 7/1/2004 49,750
--------------------------------------------------------------------------------------
50,000 Webcraft Technologies, Inc., Sr. Sub. Note, 9.375%, 2/15/2002 44,000
-------------------------------------------------------------------------------------- ------------
Total 93,750
-------------------------------------------------------------------------------------- ------------
RETAILERS--0.8%
--------------------------------------------------------------------------------------
50,000 Brylane Capital Corp., Sr. Sub. Note, 10.00%, 9/1/2003 47,500
-------------------------------------------------------------------------------------- ------------
STEEL--4.8%
--------------------------------------------------------------------------------------
50,000 Carbide/Graphite Group, Sr. Note, 11.50%, 9/1/2003 52,750
--------------------------------------------------------------------------------------
100,000 EnviroSource, Inc., Sr. Note, 9.75%, 6/15/2003 89,750
--------------------------------------------------------------------------------------
100,000 GS Technologies Operating Co., Inc., Sr. Note, 12.00%, 9/1/2004 99,250
--------------------------------------------------------------------------------------
50,000 Northwestern Steel & Wire Co., Sr. Note, 9.50%, 6/15/2001 47,000
-------------------------------------------------------------------------------------- ------------
Total 288,750
-------------------------------------------------------------------------------------- ------------
SURFACE TRANSPORTATION--4.2%
--------------------------------------------------------------------------------------
100,000 Gearbulk Holding Limited, Sr. Note, 11.25%, 12/1/2004 106,500
--------------------------------------------------------------------------------------
50,000 Sea Containers Ltd., Sr. Note, 9.50%, 7/1/2003 49,000
--------------------------------------------------------------------------------------
50,000 Trans Ocean Container Corp., Sr. Sub. Note, 12.25%, 7/1/2004 50,750
--------------------------------------------------------------------------------------
50,000 Trism, Inc., Sr. Sub. Note, 10.75%, 12/15/2000 49,000
-------------------------------------------------------------------------------------- ------------
Total 255,250
-------------------------------------------------------------------------------------- ------------
TELECOMMUNICATIONS & CELLULAR--3.2%
--------------------------------------------------------------------------------------
50,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/9.75%, 8/15/2004 24,750
--------------------------------------------------------------------------------------
100,000 PanAmSat Corp., Sr. Sub. Disc. Note, 0/11.375%, 8/1/2003 71,500
--------------------------------------------------------------------------------------
50,000 ProNet, Inc., Sr. Sub. Note, 11.875%, 6/15/2005 50,500
--------------------------------------------------------------------------------------
50,000 USA Mobile Communications, Inc., Sr. Note, 9.50%, 2/1/2004 43,750
-------------------------------------------------------------------------------------- ------------
Total 190,500
-------------------------------------------------------------------------------------- ------------
</TABLE>
8
<PAGE>
CORPORATE BOND FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares or
Principal
Amount Value
----------- -------------------------------------------------------------------------------------- ------------
<S> <C> <C>
Corporate Bonds--continued
---------------------------------------------------------------------------------------------------
UTILITIES--1.4%
--------------------------------------------------------------------------------------
$ 100,000 California Energy Co., Inc., Sr. Disc. Note, 0/10.25%, 1/15/2004 $ 85,750
-------------------------------------------------------------------------------------- ------------
Total Corporate Bonds (identified cost, $5,358,426) 5,360,976
-------------------------------------------------------------------------------------- ------------
Common Stocks--0.2%
---------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS--0.2%
--------------------------------------------------------------------------------------
883 Grand Union Co. (identified cost, $53,125) 11,920
-------------------------------------------------------------------------------------- ------------
(a)Repurchase Agreement--13.1%
---------------------------------------------------------------------------------------------------
$ 790,000 J.P. Morgan & Co., Inc., 6.125%, dated 6/30/1995, due 7/3/1995 $ 790,000
-------------------------------------------------------------------------------------- ------------
Total Investments (identified cost, $6,201,551)(b) $ 6,162,896
-------------------------------------------------------------------------------------- ============
</TABLE>
Note: The categories of investments are shown as a percentage of net assets
($6,038,104) at June 30, 1995.
*Restricted Securities--Investment in securities not registered under the
Securities Act of 1933. At the end of the period, these securities amounted to
7.8% of net assets.
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(b) The cost of investments for federal tax purposes amounts to $6,201,551. The
unrealized depreciation on a federal tax cost basis amounts to $38,655,
which is comprised of $76,428 appreciation and $115,083 depreciation at June
30, 1995.
(See Notes which are an integral part of the Financial Statements)
9
<PAGE>
CORPORATE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets:
--------------------------------------------------------------------------------------
<S> <C> <C>
Investments in repurchase agreements $ 790,000
--------------------------------------------------------------------------------------
Investments in securities 5,372,896
-------------------------------------------------------------------------------------- ------------
Total investments in securities, at value (identified and tax cost $6,201,551) $ 6,162,896
----------------------------------------------------------------------------------------------------
Cash 1,727
----------------------------------------------------------------------------------------------------
Income receivable 122,682
----------------------------------------------------------------------------------------------------
Receivable for shares sold 33,974
----------------------------------------------------------------------------------------------------
Prepaid expenses 17,856
---------------------------------------------------------------------------------------------------- ------------
Total assets 6,339,135
----------------------------------------------------------------------------------------------------
Liabilities:
----------------------------------------------------------------------------------------------------
Payable for investments purchased 301,031
---------------------------------------------------------------------------------------------------- ------------
Net Assets for 637,856 shares outstanding $ 6,038,104
---------------------------------------------------------------------------------------------------- ============
Net Assets Consist of:
----------------------------------------------------------------------------------------------------
Paid in capital $ 6,077,503
----------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (38,655)
----------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (1,128)
----------------------------------------------------------------------------------------------------
Undistributed net investment income 384
---------------------------------------------------------------------------------------------------- ------------
Total Net Assets $ 6,038,104
---------------------------------------------------------------------------------------------------- ============
Net Asset Value, Offering Price, and Redemption Proceeds Per Share:
($6,038,104 / 637,856 shares outstanding) $9.47
---------------------------------------------------------------------------------------------------- ============
</TABLE>
(See Notes which are an integral part of the Financial Statements)
10
<PAGE>
CORPORATE BOND FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Income:
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest $ 141,456
-----------------------------------------------------------------------------------------------------
Expenses:
-----------------------------------------------------------------------------------------------------
Investment advisory fee $ 8,236
-----------------------------------------------------------------------------------------
Administrative personnel and services fee 61,987
-----------------------------------------------------------------------------------------
Custodian fees 21,946
-----------------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 6,421
-----------------------------------------------------------------------------------------
Directors'/Trustees' fees 991
-----------------------------------------------------------------------------------------
Auditing fees 3,878
-----------------------------------------------------------------------------------------
Legal fees 1,801
-----------------------------------------------------------------------------------------
Portfolio accounting fees 10,000
-----------------------------------------------------------------------------------------
Share registration costs 1,267
-----------------------------------------------------------------------------------------
Printing and postage 4,525
-----------------------------------------------------------------------------------------
Insurance premiums 1,991
-----------------------------------------------------------------------------------------
Miscellaneous 3,982
----------------------------------------------------------------------------------------- ----------
Total expenses 127,025
-----------------------------------------------------------------------------------------
Deduct--
-----------------------------------------------------------------------------------------
Waiver of investment advisory fee $ 8,236
-----------------------------------------------------------------------------
Reimbursement of other operating expenses 107,791 116,027
----------------------------------------------------------------------------- ---------- ----------
Net expenses 10,998
----------------------------------------------------------------------------------------------------- ----------
Net investment income 130,458
----------------------------------------------------------------------------------------------------- ----------
Realized and Unrealized Gain (Loss) on Investments:
-----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 11,220
-----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 126,493
----------------------------------------------------------------------------------------------------- ----------
Net realized and unrealized gain (loss) on investments 137,713
----------------------------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $ 268,171
----------------------------------------------------------------------------------------------------- ==========
</TABLE>
(See Notes which are an integral part of the Financial Statements)
11
<PAGE>
CORPORATE BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1995 Year Ended
(unaudited) December 31, 1994*
----------------------------------------------------------------------- ------------- ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
-----------------------------------------------------------------------
Operations--
-----------------------------------------------------------------------
Net investment income $ 130,458 $ 121,011
-----------------------------------------------------------------------
Net realized gain (loss) on investments
($11,220 net gain and $12,348 net loss, respectively, as
computed for federal income tax purposes) 11,220 (12,348)
-----------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 126,493 (165,148)
----------------------------------------------------------------------- ---------------- -------------
Change in assets resulting from operations 268,171 (56,485)
----------------------------------------------------------------------- ---------------- -------------
Distributions to Shareholders--
-----------------------------------------------------------------------
Distributions from net investment income (128,010) (121,011)
-----------------------------------------------------------------------
Distributions in excess of net investment income 0 (2,064)
----------------------------------------------------------------------- ---------------- -------------
Change in net assets resulting from distributions to shareholders (128,010) (123,075)
----------------------------------------------------------------------- ---------------- -------------
Share Transactions
-----------------------------------------------------------------------
Proceeds from sale of Shares 5,419,735 2,484,492
-----------------------------------------------------------------------
Net asset value of Shares issued to shareholders in
payment of distributions declared 125,873 20,705
-----------------------------------------------------------------------
Cost of Shares redeemed (1,104,608) (868,694)
----------------------------------------------------------------------- ---------------- -------------
Change in net assets resulting from share
transactions 4,441,000 1,636,503
----------------------------------------------------------------------- ---------------- -------------
Change in net assets 4,581,161 1,456,943
-----------------------------------------------------------------------
Net Assets:
-----------------------------------------------------------------------
Beginning of period 1,456,943 0
----------------------------------------------------------------------- ---------------- -------------
End of period (including undistributed net investment income of $384
and $0, respectively) $ 6,038,104 $ 1,456,943
----------------------------------------------------------------------- ================ =============
</TABLE>
*For the period from December 9, 1993 (start of business) to December 31, 1994.
(See Notes which are an integral part of the Financial Statements)
12
<PAGE>
CORPORATE BOND FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1995 Year Ended
(unaudited) December 31, 1994(a)
-------------------------------------------------------------- ---------------- --------------------
<S> <C> <C>
Net asset value, beginning of period $ 8.87 $ 10.00
--------------------------------------------------------------
Income from investment operations
--------------------------------------------------------------
Net investment income 0.40 0.75
--------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 0.60 (1.12)
-------------------------------------------------------------- ------- -------
Total from investment operations 1.00 (0.37)
--------------------------------------------------------------
Less distributions
--------------------------------------------------------------
Distributions from net investment income (0.40) (0.75)
--------------------------------------------------------------
Distributions in excess of net investment income 0.00 (0.01)
-------------------------------------------------------------- ------- -------
Total distributions (0.40) (0.76)
-------------------------------------------------------------- ------- -------
Net asset value, end of period $ 9.47 $ 8.87
-------------------------------------------------------------- ======= =======
Total return (b) 11.54% (3.73%)
--------------------------------------------------------------
Ratios to Average Net Assets
--------------------------------------------------------------
Expenses 0.80%(c) 0.41%(c)
--------------------------------------------------------------
Net investment income 9.50%(c) 9.11%(c)
--------------------------------------------------------------
Expense waiver/reimbursement (d) 8.45%(c) 10.01%(c)
--------------------------------------------------------------
Supplemental Data
--------------------------------------------------------------
Net assets, end of period (000 omitted) $6,038 $1,457
--------------------------------------------------------------
Portfolio turnover 24% 18%
--------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from February 2, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 9,
1993 (start of business) to February 1, 1994, the Fund had no public
investment.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
13
<PAGE>
CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
(1) ORGANIZATION
Insurance Management Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company. The Trust consists of six diversified portfolios. The
financial statements included herein present only those of Corporate Bond Fund
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
Investment Valuations--Listed corporate bonds and other fixed-income and
asset backed securities are valued at the last sale price reported on
national securities exchanges. Unlisted bonds and securities and short-term
obligations are valued at the prices provided by an independent pricing
service. Short-term securities with remaining maturities of sixty days or
less may be stated at amortized cost, which approximates value.
Repurchase Agreements--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Fund could
receive less than the repurchase price on the sale of collateral
securities.
Investment Income, Expenses, and Distributions--Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the
"Code"). Distributions to shareholders are recorded
14
<PAGE>
CORPORATE BOND FUND
--------------------------------------------------------------------------------
on the ex-dividend date. Distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These distributions do not represent a return of capital for
federal income tax purposes.
Federal Taxes--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. At December 31,
1994, the Fund, for federal tax purposes, had a capital loss carryforward
of $12,348, which will reduce the Fund's taxable income arising from future
net realized gain on investments, if any, to the extent permitted by the
Code, and thus will reduce the amount of the distributions to shareholders
which would otherwise be necessary to relieve the Fund of any liability for
federal tax. Pursuant to the Code, such capital loss carryforward will
expire in 2002.
When-Issued and Delayed Delivery Transactions--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
Restricted Securities--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the issuer of
restricted securities has agreed to register such securities for resale, at
the issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Board of Trustees. The Fund will not
incur any registration costs upon such resales. The Fund's restricted
securities are valued at the price provided by an independent pricing
service, or, if no market prices are available, at the fair value as
determined by the Fund's pricing committee.
Additional information on each restricted security held at June 30, 1995,
is as follows:
<TABLE>
<CAPTION>
Security Acquisition Date Acquisition cost
----------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Monarch Acquisition Corp., Sr. Note 6/23/1995 $ 100,000
International Cabletel, Inc., Sr. Defd. Cpn. Note 4/13/1995 53,995
Polymer Group, Inc., Sr. Note 5/12/1995 106,211
Cabot Safety Acquisition Corp., Sr. Sub. Note 6/29/1995 100,000
Six Flags Theme Parks, Sr. Sub. Disc. Note 6/16/1995 105,276
</TABLE>
Other--Investment transactions are accounted for on the trade date.
15
<PAGE>
CORPORATE BOND FUND
--------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1995 December 31, 1994*
---------------------------------------------------------------- ---------------- ------------------
<S> <C> <C>
Shares sold 581,704 257,641
----------------------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 13,573 2,295
----------------------------------------------------------------
Shares redeemed (121,691) (95,666)
---------------------------------------------------------------- ---------- ----------
Net change resulting from Fund share transactions 473,586 164,270
---------------------------------------------------------------- ========== ==========
</TABLE>
*For the period from December 9, 1993, (start of business) to December 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Advisory Fee--Federated Advisers, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.60 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive its fee and reimburse certain operating expenses of the Fund.
The Adviser can modify or terminate this voluntary reimbursement at any time at
its sole discretion.
Administrative Fee--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The FAS fee is based on the level of average aggregate
daily net assets of all funds advised by subsidiaries of Federated Investors for
the period. The administrative fee received during the period of the
Administrative Services Agreement shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
Transfer Agent and Dividend Disbursing Agent Fees and Expenses--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The FServ fee is based on the size, type, and number of accounts and
transactions made by shareholders.
Portfolio Accounting Fees--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period plus, out-of-pocket expenses.
Organizational Expenses--Organizational expenses ($16,313) and start-up
administrative service expenses ($31,507) were borne initially by the Adviser.
The Fund has agreed to reimburse the Adviser for the organizational expenses and
start-up administrative expenses during the five year period following December
15, 1993 (date the Fund became effective). For the six months ended June 30,
1995, the Fund paid $2,175 and $4,201, respectively, pursuant to this agreement.
16
<PAGE>
CORPORATE BOND FUND
--------------------------------------------------------------------------------
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six
months ended June 30, 1995, were as follows:
<TABLE>
<CAPTION>
<S> <C>
Purchases $ 4,497,969
------------------------------------------------------------- ============
Sales $ 657,156
------------------------------------------------------------- ============
</TABLE>
17
<PAGE>
TRUSTEES OFFICERS
--------------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. J. Christopher Donahue
William J. Copeland President
J. Christopher Donahue Edward C. Gonzales
James E. Dowd Executive Vice President
Lawrence D. Ellis, M.D. John W. McGonigle
Edward L. Flaherty, Jr. Executive Vice President and Secretary
Peter E. Madden Richard B. Fisher
Gregor F. Meyer Vice President
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Treasurer
Marjorie P. Smuts G. Andrew Bonnewell
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus, which contains facts
concerning its objective and policies, management fees, expenses and other
information.
18
<PAGE>
CORPORATE
BOND
FUND
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1995
INSURANCE MANAGEMENT SERIES
[LOGO] Federated Securities Corp.
-------------------------- -------------------------------
Distributor
A subsidiary of Federated Investors -------------------------------
Federated Investors Tower
Pittsburgh, PA 15222-3779 -------------------------------
Cusip 458043403 [LOGO]
G00433-02 (8/95) -------------------------------
<PAGE>
Semi-Annual Report--June 30, 1995
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
(formerly "Calvert Socially Responsible Series")
Acacia Capital Corporation
Dear Investor:
Both stocks and bonds rallied during the six months ended June 30, 1995, as
measured by broad market indicators.
The markets advanced as investors realized that the slowing pace of economic
growth made further interest rate hikes unlikely and a cut even possible. In
general, U.S. companies continued to post strong earnings, which also worked to
drive stock prices higher. Large-capitalization growth stocks led the rally. The
best performing stock market sectors included technology, health care and
financial services.
Shortly after the close of this reporting period, the Federal Reserve moved to
lower rates by reducing its target for the federal funds rate (the rate banks
charge each other) from 6% to 5.75%.
PORTFOLIO PERFORMANCE AND STRATEGY
In seeking to provide investors with consistently competitive returns, the
Board of Directors selected a different investment manager. In February, NCM
Capital assumed responsibility for managing the equity portion of the Portfolio
and Calvert Asset Management Company assumed responsibility for managing the
Portfolio's fixed-income assets. U.S. Trust Company of Boston was the previous
investment manager.
The CRI Balanced Portfolio returned 17.35% for the six months ended June 30,
1995. This return compares favorably to the 13.72% return of the Lipper Balanced
Funds Average.
The Portfolio's above-average gain was due to substantial equity investments
in the better performing market sectors, including technology, financials,
consumer staples and capital goods. In addition, our holdings of major foreign
growth stocks, such as Ericsson and Philips, also contributed positive returns.
The fixed-income portion also made a strong
CRI BALANCED PORTFOLIO
Comparison of change in value of a
hypothetical $10,000 investment.
[GRAPH APPEARS HERE]
Average Annual Total Return
Periods Ended 6/30/95
1 Year 19.21% 5 Year 9.38%
Life of Fund 9.50% (9/86)
Performance information is for the Portfolio only and does not
reflect charges and expenses of the variable annuity.
Past performance does not indicate future results.
1
<PAGE>
contribution as we quickly brought the Portfolio's duration out to a position
longer than that of the benchmarks. In addition, we added positions in corporate
bonds, which enhanced Portfolio diversification and boosted yields.
We are now adding to our exposure to cyclical stocks, as this area of the
market looks to be gathering momentum. As prices of technology stocks have
enjoyed an extended rally, the risk of a slowdown in this sector is high. We
will remain market-weighted in this sector. Financial and capital goods stocks
continue to show promise.
As of this writing, the stock market is giving back a little of the ground it
had gained during its long, previously uninterrupted rally. Bond markets have
corrected to a greater extent. This degree of volatility is to be expected, and
serves to remind investors that the markets typically don't go up in a straight
line. Despite such corrections, our outlook for the remainder of 1995 is one of
cautious optimism.
On April 20, 1995, a special meeting of the Portfolio's shareholders was held
to approve NCM as a new sub-advisor, and certain other changes. Voting results
were:
Item 1: To approve a new investment advisory agreement for the Portfolio with
Calvert Asset Management, including an incentive performance fee.
For: 25,564,024.55 Against: 1,300,418.787 Abstain: 1,941,926.908
Item: 2: To approve a new investment subadvisory agreement for the Portfolio
with NCM Capital Management Group, Inc., including an incentive performance fee.
For: 22,531,258.61 Against: 3,556,424.404 Abstain: 2,767,777.917
Item 3: To approve a change in the Portfolio from diversified to
nondiversified.
For: 21,332,836.64 Against: 5,025,714.753 Abstain: 2,497,188.581
Item 4: To allow the investment objective to be nonfundamental.
For: 20,851,389.57 Against: 5,385,187.787 Abstain: 2,509,063.236
We appreciate your investment in the Calvert Responsibly Invested Balanced
Portfolio.
Sincerely,
/s/ Clifton S. Sorrell
--------------------------
Clifton S. Sorrell
President
July 19, 1995
2
<PAGE>
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE RATINGS (1)
------ ----- -----------
<C> <C> <C>
CORPORATE DEBT (10.7%)
--------------------------------------------------------------------------------------------------------------
AMR Corp., 9.82%, 3/7/01....................................... $ 525,000 $ 586,084 Baa3/BB+
BellSouth Savings, 9.19%, 7/1/03............................... 404,118 445,257 Aa1/AAA
BellSouth Telecommunications, 6.25%, 5/15/03................... 500,000 491,425 Aaa/AAA
Chugach Elec Assn., Inc., 9.14%, 3/15/22....................... 1,000,000 1,122,530 A3/A
CIT Group Hldgs, Inc., 6.11%, 5/11/98.......................... 3,000,000 2,976,243 AA3/A+
Liberty Mutual Capital Corp., 7.90%, 3/14/03................... 500,000 520,033 A1/AA
Nationsbank Corp., 5.375%, 12/1/95............................. 1,000,000 997,500 A2/A
Payless Cashways, Inc., 9.125%, 4/15/03........................ 250,000 193,750 Ba3/B+
Polaroid Corp., 8.00%, 3/15/99................................. 250,000 260,663 Baa3/BBB+
Potomac Electric Power Co., 6.70%, 5/28/97..................... 500,000 503,465 A2/A-
United Dominion Realty Trust, Inc., 8.50%, 9/15/24............. 1,200,000 1,302,180 Baa1/BBB+
-----------
Total Corporate Debt (Cost $9,282,079)........................ 9,399,130
-----------
MUNICIPAL OBLIGATIONS (6.8%)
--------------------------------------------------------------------------------------------------------------
Conneaut, Pennsylvania School District, 6.55%, 11/1/03,
Ambac Insured................................................. 350,000 345,548 Aaa/AAA
Georgia State, 3.25%, 7/1/14................................... 2,000,000 1,413,640 Aaa/AA+
Illinois Housing Development Authority, 8.35%, 8/1/26.......... 1,000,000 1,036,250 Aa/AA
New York State Environmental General Obligation Bonds,
7.65%, 5/1/99................................................. 550,000 559,735 A/A-
New York State, Job Development Authority, 7.70%, 3/1/03....... 500,000 516,525 A/NR
Richmond County, Georgia Development Authority, Zero Coupon,
12/1/21....................................................... 4,810,000 790,956 AAA
San Diego County, General Obligation Bonds,
Series A, 6.38%, 8/15/03...................................... 750,000 692,933 A/A+
University of Maryland Systems Facility & Tuition Revenue
Bonds, Series B, 6.95, 4/1/11................................. 670,000 642,108 Aa/AA+
-----------
Total Municipal Obligations (Cost $6,073,760)................. 5,997,695
-----------
REPURCHASE AGREEMENTS, FOR DEPOSIT AT COST,
COLLATERALIZED BY SECURITIES ISSUED OR GUARANTEED
BY THE U.S. GOVERNMENT (8.8%)
--------------------------------------------------------------------------------------------------------------
Prudential Securities, Inc., 6.08%, dated 6/30/95, due 7/5/95
($7,911,171, FHLMC Bond, 9.00%, 6/1/25)....................... 7,700,000 7,700,000
-----------
Total Repurchase Agreements (Cost $7,700,000)................. 7,700,000
-----------
U.S. GOVERNMENT AGENCIES AND INSTRUMENTALITIES (20.1%)
--------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5.87%, 7/7/95................ 2,000,000 1,998,696
Federal Home Loan Mortgage Corp., 6.00%, 12/15/19.............. 1,000,000 968,450
Federal Home Loan Mortgage Corp., 6.50%, 8/15/21............... 1,000,000 983,750
Federal National Mortgage Assn., 6.00%, 9/5/95................. 2,700,000 2,671,200
Federal National Mortgage Assn., 5.90%, 9/11/95................ 1,000,000 988,508
Federal National Mortgage Assn., 8.00%, 3/15/00................ 1,000,000 1,011,980
Federal National Mortgage Assn., 5.49%, 10/2/03................ 1,000,000 932,870
Federal National Mortgage Assn., 7.00%, 12/25/19............... 1,000,000 982,810
Federal National Mortgage Assn., 6.50%, 12/25/23............... 1,000,000 954,290
Federal National Mortgage Assn., 7.93%, 2/14/25................ 3,000,000 3,340,380
Small Business Administration, 8.05%, 6/1/12................... 885,761 931,776
U.S. Department of Veteran Affairs, 8.00%, 7/15/18............. 1,000,000 1,077,700
WNH Ltd Partnership, 9.40%, 10/1/99............................ 705,000 753,955
-----------
Total U.S. Government Agencies and Instrumentalities
(Cost $16,911,002)............................................ 17,596,365
-----------
</TABLE>
See notes to portfolio of investments.
3
<PAGE>
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (continued)
JUNE 30, 1995 (Unaudited)
----------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE RATINGS (1)
------ ----- -----------
<C> <C> <C>
OTHER DEBT (1.4%)
----------------------------------------------------------------------------------------------
Puget Power Consv., 6.45%, 4/11/05................ $1,000,000 $ 995,051 Aa2/AAA
South Africa Republic, 9.625%, 12/15/99........... 250,000 259,375 Baa3/BB
-----------
Total Other Debt (Cost $1,244,588)............... 1,254,426
-----------
EQUITY SECURITIES (53.3%)......................... SHARES
----------------------------------------------------------------------------------------------
BEVERAGE HOTEL AND LEISURE (0.9%)
Delta Corp...................................... 550,000 804,094
-----------
804,094
-----------
BIOTECHNOLOGY (0.9%)
Amgen, Inc. (2).................................. 9,380 754,504
-----------
754,504
-----------
BUSINESS EQUIPMENT AND SERVICES (1.8%)
Hewlett Packard Co.............................. 10,000 745,000
Xerox Corp...................................... 7,350 861,788
-----------
1,606,788
-----------
CAPITAL GOODS (0.5%)
Grainger (W.W.), Inc............................ 6,900 405,375
-----------
405,375
-----------
COMMUNICATIONS (2.0%)
Ameritech Corp.................................. 27,500 1,210,000
DSC Communications Corp. (2).................... 12,425 577,763
-----------
1,787,763
-----------
COMPUTERS - EQUIPMENT AND SERVICES (1.4%)
Sun Microsystems, Inc. (2)...................... 25,400 1,231,900
-----------
1,231,900
-----------
COMPUTERS - SOFTWARE (0.6%)
Computer Associates International, Inc.......... 6,900 467,475
-----------
467,475
-----------
CONSUMER PRODUCTS (4.7%)
American Greetings Corp......................... 42,100 1,236,688
Colgate Palmolive Co............................ 6,500 475,312
Gillette Co..................................... 28,200 1,258,425
Polygram N.V.................................... 20,000 1,182,500
-----------
4,152,925
-----------
DELIVERY (1.1%)
Federal Express Corp. (2)....................... 16,400 996,300
-----------
996,300
-----------
ELECTRONICS (4.9%)
E M C Corp. (2)................................. 53,300 1,292,525
Intel Corp...................................... 10,600 671,113
Linear Technology Corp.......................... 7,900 521,400
Philips Electrs N.V............................. 24,300 1,038,825
Teradyne, Inc. (2).............................. 11,500 751,812
-----------
4,275,675
-----------
</TABLE>
See notes to portfolio of investments.
4
<PAGE>
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (continued)
JUNE 30, 1995 (Unaudited)
----------------
SHARES VALUE
------ -----
EQUITY SECURITIES (Continued)
-------------------------------------------------------------------------------
ENERGY (0.5%)
Northern Borders Partners Limited Partnership....... 19,200 $ 468,000
----------
468,000
----------
FINANCIAL SERVICES (6.3%)
Advanta Corp., Class A.............................. 13,400 558,613
Bank New York, Inc. ................................ 22,800 920,550
Bank of Boston Corp. ............................... 20,000 750,000
Baybanks, Inc. ..................................... 7,000 554,750
Federal National Mortgage Assn. .................... 10,600 1,000,375
Green Tree Finl Corp. .............................. 22,400 994,000
UJB Finl Corp. ..................................... 24,200 735,075
----------
5,513,363
----------
FOOD SERVICES (2.6%)
Kellogg Co. ........................................ 17,250 1,231,219
Sysco Corp. ........................................ 34,500 1,017,750
----------
2,248,969
----------
HEALTH CARE (1.1%)
Johnson & Johnson................................... 14,800 1,000,850
----------
1,000,850
----------
INDUSTRIAL PRODUCTS (4.3%)
Applied Materials, Inc. (2)......................... 8,300 718,988
Briggs & Stratton Corp. ............................ 17,500 603,750
Modine Manufacturing Co. ........................... 15,000 551,250
Sealed Air Corp. (2)................................ 20,800 915,200
Sigma Aldrich Corp. ................................ 20,625 1,013,203
----------
3,802,391
----------
INSURANCE (1.1%)
AFLAC, Inc. ........................................ 11,100 485,625
American International Group, Inc. ................. 4,200 478,800
----------
964,425
----------
MACHINERY (1.7%)
AGCO Corp. ......................................... 20,000 750,000
Deere & Co. ........................................ 8,200 702,125
----------
1,452,125
----------
MANUFACTURING (0.6%)
Dover Corp. ........................................ 6,950 505,613
----------
505,613
----------
MEDIA AND PUBLISHING (0.8%)
Houghton Mifflin Co. ............................... 13,000 685,750
----------
685,750
----------
See notes to portfolio of investments.
5
<PAGE>
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (continued)
JUNE 30, 1995 (Unaudited)
----------------
SHARES VALUE
------ -----
EQUITY SECURITIES (Continued)
--------------------------------------------------------------------------------
MEDICAL DEVICES AND SUPPLIES (4.5%)
Becton Dickinson & Co. ........................... 20,000 $ 1,165,000
Boston Scientific Corp. (2)....................... 21,400 682,125
Cordis Corp. (2).................................. 15,600 1,041,300
Medtronic, Inc. .................................. 13,800 1,064,325
-----------
3,952,750
-----------
MERCHANDISING (1.4%)
Albertson's, Inc. ................................ 42,180 1,254,855
-----------
1,254,855
-----------
OIL & GAS (0.5%)
Plains Petroleum Co. ............................. 15,000 444,375
-----------
444,375
-----------
PAPER AND PACKAGING (2.1%)
Chesapeake Corp. ................................. 10 311
Consolidated Papers, Inc. ........................ 17,500 1,008,438
Nampak............................................ 190,000 851,690
-----------
1,860,439
-----------
PHARMACEUTICAL (1.7%)
Merck & Co., Inc. ................................ 30,500 1,494,500
-----------
1,494,500
-----------
RETAIL (1.5%)
Consolidated Stores Corp. (2)..................... 61,300 1,279,638
-----------
1,279,638
-----------
TELECOMMUNICATIONS (1.2%)
Ericsson L M Tel, Co., Class B.................... 52,400 1,048,000
-----------
1,048,000
-----------
UTILITIES (2.6%)
Cinergy Corp. .................................... 45,400 1,191,750
Equitable Resources, Inc. ........................ 38,900 1,123,233
-----------
2,314,983
-----------
Total Equity Securities (Cost $39,309,360)........ 46,773,825
-----------
TOTAL INVESTMENTS (101.1%) (4) (Cost $80,520,789) (3) $88,721,441
===========
Notes to Portfolio of Investments:
(1) Ratings: Moody's Investors Service, Inc.'s ratings of long-term corporate
debt obligations in descending order of quality are: Aaa, Aa, A, Baa, and Ba.
Standard & Poor's Corporation's ratings of long-term corporate debt are: AAA,
AA, A, BBB, BB, and B. Numerical modifiers and plus or minus indicate the
ranking of a security within its generic rating category. Moody's ratings are
indicated before Standard & Poor's ratings in the portfolio of investments. NR:
Obligation is not rated by a commercial rating service. Obligation has been
determined to be of appropriate quality for the Portfolio by Calvert Asset
Management Company, Inc., the Investment Advisor.
(2) These equity securities have not declared dividends in the past twelve
months.
(3) Cost of investments is substantially the same for federal income tax
purposes.
(4) The percentages shown represent the percentage of the investments to net
assets.
6
<PAGE>
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995 (Unaudited)
----------------
<TABLE>
ASSETS
---------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value, see accompanying portfolio............... $88,721,441
Cash.......................................................................... 359
Interest and dividends receivable............................................. 469,460
Receivable for shares sold.................................................... 39,368
Other assets.................................................................. 3,687
-----------
Total assets................................................................ 89,234,315
LIABILITIES
---------------------------------------------------------------------------------------------
Payable to Calvert Asset Management, Inc. - Note B............................ 69,569
Payable for securities purchased.............................................. 1,431,283
Payable for shares redeemed................................................... 5,483
Accrued expenses and other liabilities........................................ 8,852
-----------
Total liabilities........................................................... 1,515,187
-----------
Net assets................................................................. $87,719,128
===========
NET ASSETS
---------------------------------------------------------------------------------------------
Net assets consisting of:
Paid-in capital applicable to 51,873,106 outstanding shares of common
stock, $1.00 par value (70,000,000 shares authorized)........................ 75,589,690
Accumulated net investment income - net of distributions...................... 1,214,651
Accumulated realized gains/(losses) on investments - net of distributions..... 2,729,060
Accumulated realized gains/(losses) on foreign currency transactions - net of
distributions................................................................. (14,982)
Net unrealized appreciation (depreciation) on investments..................... 8,200,652
Net unrealized appreciation (depreciation) on foreign currency................ 57
-----------
Net assets................................................................. $87,719,128
===========
NET ASSET VALUE
---------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per share
($87,719,128 / 51,873,106)................................................... $ 1.691
===========
</TABLE>
See notes to financial statements.
7
<PAGE>
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 (Unaudited)
----------------
<TABLE>
INVESTMENT INCOME
------------------------------------------------------------------------------------------------------------
<S> <C>
Interest income............................................................................. $ 1,159,038
-----------
Dividend income............................................................................. 403,033
Total investment income.................................................................... 1,562,071
-----------
Expenses - Note B
Investment advisory fee..................................................................... 261,386
Directors' fees and expenses................................................................ 16,366
Federal and state registration fees......................................................... 2,804
Insurance................................................................................... 778
Postage and delivery........................................................................ 469
Printing and stationery..................................................................... 53,035
Professional fees........................................................................... 11,179
Miscellaneous expenses...................................................................... 1,381
-----------
Total expenses............................................................................. 347,398
-----------
NET INVESTMENT INCOME..................................................................... 1,214,673
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments..................................................... 3,520,511
Net realized gain (loss) on foreign currency................................................ (14,982)
Change in unrealized appreciation or depreciation of investments............................ 7,431,304
Change in unrealized appreciation or depreciation of foreign currency....................... 57
-----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY................................................ 10,936,890
-----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................................................................. $12,151,563
===========
</TABLE>
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
----------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 1995 December 31,
(Unaudited) 1994
INCREASE (DECREASE) IN NET ASSETS
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income...................................................... $ 1,214,673 $ 2,063,409
Net realized gain (loss) on investments.................................... 3,520,511 (604,541)
Net realized gain (loss) on foreign currency............................... (14,982) -
Change in unrealized appreciation or depreciation of investments........... 7,431,304 (3,394,657)
Change in unrealized appreciation or depreciation of foreign currency...... 57 -
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................................................ 12,151,563 (1,935,789)
----------- -----------
Distributions to shareholders
Net investment income...................................................... - (2,067,159)
----------- -----------
Capital share transactions - Note C......................................... 8,974,885 16,595,869
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................................... 21,126,448 12,592,921
NET ASSETS
------------------------------------------------------------------------------------------------------------
Beginning of period........................................................ 66,592,680 53,999,759
----------- -----------
End of period (including accumulated net investment income - net of
distributions of $1,214,651 and ($22) for 1995 and 1994, respectively.).... $87,719,128 $66,592,680
=========== ===========
</TABLE>
See notes to financial statements.
8
<PAGE>
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
JUNE 30, 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL: The Calvert Responsibly Invested Balanced Portfolio is a series of
Acacia Capital Corporation ("Fund"). The Fund is a Maryland corporation and is
registered under the Investment Company Act of 1940, as amended ("Act"), as a
diversified, open-end management investment company. The Fund operates as a
series fund, each series issuing a separate class of common stock. Shares in
the series are offered only to separate accounts of insurance companies at a
price equal to the net asset value per share, without a sales charge.
PORTFOLIO VALUATION: Investments in the Portfolio are valued as follows: (a)
securities for which market quotations are readily available are valued at the
most recent closing price, mean between bid and asked price, or yield equivalent
as obtained from one or more market makers for such securities; (b) securities
maturing within 60 days are valued at cost, plus or minus any amortized discount
or premium, unless the Board of Directors determines such method not to be
appropriate under the circumstances; and (c) fair values for all other
securities and assets for which market quotations are not readily available are
determined by the Advisor in good faith under the supervision of the Board of
Directors.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade-date basis. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Dividend income is
recorded on the ex-dividend date and interest income, including, where
applicable, amortization of premium, and is recorded on the accrual basis.
FOREIGN CURRENCY TRANSACTIONS: The records of the Fund are maintained in U.S.
dollars. Foreign currency amounts are translated into U.S. dollars at the
current rate of exchange of such currency against the U.S. dollar to determine
the value of investments, assets and liabilities on the date of any
determination of net asset value of the Fund. Purchases and sales of securities
and income and expenses are converted at the prevailing rate of exchange on the
respective dates of such transactions.
SHARE VALUATION, DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The net asset
value per share, the price at which shares are issued and redeemed, is computed
by dividing the value of the Portfolio's total assets, less its liabilities, by
the total number of shares outstanding each business day. The net asset value
per share fluctuates daily in response to changes in the market value of
investments. Dividends and distributions for the Series are paid annually.
FEDERAL INCOME TAXES: It is the policy of the Fund to continue to qualify as a
regulated investment company by complying with the provisions of the Internal
Revenue Code available to certain investment companies, and to make
distributions of taxable income sufficient to relieve it from all, or
substantially all, federal income and excise taxes.
The Fund has unused realized capital loss carryforwards for federal income tax
purposes of $791,451 at June 30, 1995, which expire in 2002.
NOTE B - INVESTMENT ADVISORY FEE
The Fund's investment advisor is Calvert Asset Management Company, Inc.
("Advisor"), a wholly-owned subsidiary of Calvert Group, Ltd., which itself is
an indirect, wholly-owned subsidiary of Acacia Mutual Life Insurance Company.
Under the Advisory Contract, the Advisor manages the investment and reinvestment
of the Fund's assets, and subject to the direction and control of the Directors,
provides office space, facilities and equipment to the Fund, pays the salaries
and fees of the affiliated
9
<PAGE>
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (continued)
JUNE 30, 1995
----------------
Directors, and pays all Fund advertising and promotional expenses. For its
services, the Advisor receives a fee of 0.70% of the first $500 million of
average daily net assets of the Portfolio, 0.65% of the next $500 million of
such assets, and 0.60% of such assets in excess of $1 billion. Such fee is
payable monthly.
The Advisory Contract provides for an expense reimbursement from the Advisor
should the Portfolio' aggregate expenses, exclusive of interest, taxes,
brokerage and extraordinary expenses, exceed, on an annual basis, the lowest
state expense limitation in effect. In addition, Portfolio's expenses reimbursed
by the Advisor may include operating expenses voluntarily assumed by the
Advisor. There was no reimbursement of expenses for the Portfolio for the six
months ended June 30, 1995.
Certain officers and directors of the Fund are "affiliated persons," as defined
in the Act, of the Advisor. Each director of the Fund who is not affiliated
with the Advisor receives a meeting fee of $500 for each Board meeting attended.
NOTE C - NET ASSETS
The change in net assets resulting from capital share transactions for 1995 and
1994 is indicated below:
Six Months
Ended Year Ended
June 30, 1995 December 31,
(Unaudited) 1994
-----------------------------------------------------------------------------
In dollars
Shares sold................................... $11,875,276 $21,821,042
Reinvestment of dividends..................... - 2,067,159
Shares redeemed............................... (2,900,391) (7,292,332)
----------- -----------
$ 8,974,885 $16,595,869
=========== ===========
In shares
Shares sold................................... 7,521,851 14,565,450
Reinvestment of dividends..................... - 1,425,675
Shares redeemed............................... (1,892,312) (4,889,932)
----------- -----------
5,629,539 11,101,193
=========== ===========
NOTE D - INVESTMENT TRANSACTIONS
For the six months ended June 30, 1995, the Portfolio made purchases and sales
of investment securities, other than short-term securities, of $66,805,397 and
$54,650,807, respectively.
NOTE E - TAX BASIS OF INVESTMENT SECURITIES
At June 30, 1995, the Portfolio's cost of investment securities for federal
income tax purposes was $80,520,789. Net unrealized appreciation aggregated
$8,200,652 of which $8,810,995 related to appreciated securities and $610,343
related to depreciated securities.
10
<PAGE>
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
----------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended Year Ended
June 30, 1995 December 31, December 31,
(Unaudited) 1994 1993
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period.......................... $1.440 $1.537 $1.465
=========== =========== ===========
Income from investment operations
Net investment income ..................................... .025 .046 .045
Net realized and unrealized gain (loss) on investments....... .226 (.097) .072
----------- ----------- -----------
Total from investment operations............................ .251 (.051) .117
----------- ----------- -----------
Distributions to shareholders
Dividends from net investment income......................... - (.046) (.045)
----------- ----------- -----------
Total increase (decrease) in net asset value.................. .251 (.097) .072
----------- ----------- -----------
Net asset value, end of period................................ 1.691 $1.440 $1.537
=========== =========== ===========
Total return.................................................. 17.43% (3.30%) 8.00%
=========== =========== ===========
Ratio of expenses to average net assets....................... .93%(a) .80% .81%
=========== =========== ===========
Ratio of net investment income to average net assets.......... 3.25%(a) 3.39% 3.69%
=========== =========== ===========
Portfolio turnover............................................ 83% 43% 14%
=========== =========== ===========
Net assets, end of period..................................... $87,719,128 $66,592,680 $53,999,759
=========== =========== ===========
Number of shares outstanding at end
of period (in thousands)..................................... 51,873 46,244 35,142
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1992 1991
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.......................... $1.403 $1.249
=========== ===========
Income from investment operations
Net investment income ..................................... .044 .050
Net realized and unrealized gain (loss) on investments....... .062 .154
----------- -----------
Total from investment operations............................ .106 .204
----------- -----------
Distributions to shareholders
Dividends from net investment income......................... (.044) (.050)
----------- -----------
Total increase (decrease) in net asset value.................. .062 .154
----------- -----------
Net asset value, end of period................................ $1.465 $1.403
=========== ===========
Total return.................................................. 7.61% 16.40%
=========== ===========
Ratio of expenses to average net assets....................... .85% .85%
=========== ===========
Ratio of net investment income to average net assets.......... 4.05% 4.49%
=========== ===========
Portfolio turnover............................................ 15% 12%
=========== ===========
Net assets, end of period..................................... $28,471,358 $14,945,973
=========== ===========
Number of shares outstanding at end
of period (in thousands)..................................... 19,433 10,656
=========== ===========
</TABLE>
11
<PAGE>
===================================
Principal
Underwriter:
...............................
Calvert Distributors, Inc.
...............................
4550 Montgomery Avenue
...............................
Suite 1000N
...............................
Bethesda, Maryland 20814
...............................
===================================
This report is intended to provide fund information to shareholders.
It is not authorized for distribution to prospective investors unless preceded
or accompanied by a prospectus.
<PAGE>
[DREYFUS LOGO]
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.
200 Park Avenue
New York, NY 10166
INVESTMENT ADVISER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
SUB-INVESTMENT ADVISER
NCM Capital Management Group, Inc.
103 West Main Street
Durham, NC 27701
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
The Shareholder Services Group, Inc.
P.O. Box 9671
Providence, RI 02940
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A. 111SA956
[DREYFUS LOGO]
Socially Responsible
Growth Fund, Inc.
Semi-Annual
Report
June 30, 1995
<PAGE>
LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
-------------------------------------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30, 1995 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------
COMMON STOCKS-86.2% SHARES VALUE
-------------------------------------------------------------------------- ------ -----------
<S> <C> <C> <C>
CONSUMER DURABLES-1.4% American Greetings, Cl. A................. 8,000 $ 235,000
-------------
CONSUMER
NON-DURABLES-10.9% Campbell Soup............................. 5,200 254,800
Coca-Cola................................. 6,100 388,875
Colgate-Palmolive......................... 3,800 277,875
Gillette.................................. 7,200 321,300
IBP....................................... 4,400 191,400
NIKE, Cl. B............................... 2,200 184,800
PepsiCo................................... 4,900 223,563
-------------
1,842,613
-------------
CONSUMER SERVICES-3.6% Capital Cities/ABC........................ 3,000 324,000
Disney (Walt)............................. 5,000 278,125
-------------
602,125
-------------
ENERGY-4.0% Imperial Oil.............................. 9,500 352,688
Schlumberger.............................. 5,300 329,262
-------------
681,950
-------------
FINANCE-12.5% ADVANTA, Cl. A............................ 3,700 154,244
AFLAC 3,200 140,000
American International Group.............. 2,440 278,160
Bank of New York.......................... 4,000 161,500
BayBanks.................................. 3,700 293,225
Citicorp.................................. 5,800 335,675
Federal National Mortgage Association..... 2,300 217,063
Green Tree Financial...................... 6,500 288,437
Midlantic................................. 6,400 256,000
-------------
2,124,304
-------------
HEALTH CARE-13.6% Amgen..................................(a) 4,000 321,750
Becton, Dickinson......................... 5,500 320,375
Bristol-Myers Squibb...................... 5,300 361,063
Cordis.................................(a) 4,000 267,000
HealthCare COMPARE.....................(a) 5,500 165,000
Johnson & Johnson......................... 2,400 162,300
Medtronic................................. 4,250 327,781
Merck & Co................................ 7,700 377,300
-------------
2,302,569
-------------
INDUSTRIAL SERVICES-1.1% Empresas ICA Sociedad, A.D.S.............. 18,000 184,500
-------------
NON-ENERGY MINERALS-2.7% British Steel, A.D.S...................... 4,700 130,425
Santa Fe Pacific Gold..................... 7,080 85,845
Terra Industries.......................... 19,600 237,650
-------------
453,920
-------------
PROCESS INDUSTRIES-.8% Scott Paper............................... 2,800 138,600
-------------
PRODUCER
MANUFACTURING-9.0% AGCO...................................... 3,700 138,750
Briggs & Stratton......................... 7,000 241,500
Dover..................................... 3,900 283,725
Eaton..................................... 4,900 284,813
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
--------------------------------------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
COMMON STOCKS (CONTINUED) SHARES VALUE
------------------------------------------------------------------------------- --------- -----------
<S> <C> <C> <C>
PRODUCER
MANUFACTURING (CONTINUED) Parker-Hannifin....................... 6,450 $ 233,812
Philips Electronics, N.V. ............ 8,000 342,000
-----------
1,524,600
-----------
RETAIL TRADE-2.7% Consolidated Stores................(a) 12,500 260,937
Sears, Roebuck & Co................... 3,200 191,600
-----------
452,537
-----------
TECHNOLOGY-17.9% Apple Computer........................ 7,200 334,350
Applied Materials..................(a) 2,400 207,900
Computer Associates International..... 4,400 298,100
DSC Communications.................(a) 6,900 320,850
EMC................................(a) 15,700 380,725
Hewlett-Packard....................... 3,200 238,400
Linear Technology..................... 5,100 336,600
Oracle.............................(a) 10,400 401,700
Sun Microsystems...................(a) 7,200 349,200
3Com...............................(a) 2,300 154,100
-----------
3,021,925
-----------
TRANSPORTATION-.7% Federal Express....................(a) 2,000 121,500
-----------
UTILITIES-5.3%. Century Telephone Enterprises......... 5,100 144,713
Duke Power............................ 5,700 236,550
GTE................................... 9,300 317,362
Public Service Enterprise Group....... 7,200 199,800
-----------
898,425
-----------
TOTAL COMMON STOCKS
(cost $12,543,258)..................... $14,584,568
===========
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS-6.3% AMOUNT
------------------------------------------------------------------------------- ----------
<S> <C> <C> <C>
U.S. TREASURY BILLS: 5.54%, 7/6/95......................... $ 197,000 $ 196,856
5.57%, 7/20/95........................ 72,000 71,804
5.56%, 7/27/95........................ 119,000 118,554
5.60%, 8/3/95......................... 146,000 145,299
5.36%, 8/24/95........................ 408,000 404,699
5.53%, 8/31/95........................ 42,000 41,615
5.39%, 9/7/95......................... 85,000 84,130
===========
TOTAL SHORT-TERM INVESTMENTS
(cost $1,062,870)...................... $ 1,062,957
===========
TOTAL INVESTMENTS (cost $13,606,128)........................................... 92.5% $15,647,525
========= ===========
CASH AND RECEIVABLES (NET)..................................................... 7.5% $ 1,269,469
========= ===========
NET ASSETS..................................................................... 100.0% $16,916,994
========= ===========
NOTE TO STATEMENT OF INVESTMENTS;
--------------------------------------------------------------------------------------------------------------
(a) Non-income producing.
See independent accountants' review report and notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1995 (UNAUDITED)
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $13,606,128)--see statement............. $15,647,525
Cash............................................ 1,248,617
Dividends and interest receivable............... 19,349
Prepaid expenses................................ 45,722
-----------
16,961,213
LIABILITIES
Due to The Dreyfus Corporation.................. $10,688
Accrued expenses................................ 33,531 44,219
------- -----------
NET ASSETS ........................................ $16,916,994
===========
REPRESENTED BY:
Paid-in capital................................. $14,866,011
Accumulated undistributed investment income--net 76,775
Accumulated net realized (loss) on investments.. (67,189)
Accumulated net unrealized appreciation on
investments--Note 3............................ 2,041,397
-----------
NET ASSETS at value applicable to 1,085,565
outstanding shares of Common Stock,
equivalent to $15.58 per share (150 million
shares of $.001 par value authorized)........... $16,916,994
===========
</TABLE>
See independent accountants' review report and notes to financial statements.
<PAGE>
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
INCOME:
Cash dividends (net of $2,538 foreign taxes
withheld at source).................................. $ 83,586
Interest.............................................. 79,653
----------
TOTAL INCOME........................................ $ 163,239
EXPENSES:
Investment advisory fee--Note 2(a)..................... 48,772
Auditing fees......................................... 22,134
Directors' fees and expenses--Note 2(c)................ 7,025
Shareholder servicing costs--Note 2(b)................. 4,230
Legal fees............................................ 4,149
Custodian fees........................................ 3,248
Registration fees..................................... 1,565
Miscellaneous......................................... 4,777
----------
95,900
Less--reduction in management fee due to
undertakings--Note 2(a).............................. 11,445
----------
TOTAL EXPENSES...................................... 84,455
----------
INVESTMENT INCOME--NET.............................. 78,784
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized (loss) on investments--Note 3............. $ (5,493)
Net unrealized appreciation on investments............. 2,158,980
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS..... 2,153,487
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS......................................... $2,232,271
==========
</TABLE>
See independent accountants' review report and notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
-----------------------------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
------------ ----------------
<S> <C> <C>
OPERATIONS:
Investment income--net........................................................ $ 264,288 $ 78,784
Net realized (loss) on investments............................................ (61,713) (5,493)
Net unrealized appreciation (depreciation) on investments for the period...... (146,700) 2,158,980
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ 55,875 2,232,271
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net........................................................ (265,951) ---
----------- -----------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold................................................. 10,922,467 5,774,540
Dividends reinvested.......................................................... 265,951 ---
Cost of shares redeemed....................................................... (1,943,759) (1,496,098)
----------- -----------
INCREASE IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS...................... 9,244,659 4,278,442
----------- -----------
TOTAL INCREASE IN NET ASSETS............................................ 9,034,583 6,510,713
NET ASSETS:
Beginning of period........................................................... 1,371,698 10,406,281
----------- -----------
End of period [including distributions in excess of investment
income--net; ($2,009) in 1994 and undistributed investment
income--net; $76,775 in 1995]............................................... $10,406,281 $16,916,994
=========== ===========
SHARES SHARES
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................................................... 808,182 404,328
Shares issued for dividends reinvested........................................ 20,087 ---
Shares redeemed............................................................... (144,061) (105,474)
----------- -----------
NET INCREASE IN SHARES OUTSTANDING.......................................... 684,208 298,854
=========== ===========
See independent accountants' review report and notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Common Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each period indicated. This
information has been derived from the Fund's financial statements.
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------ JUNE 30, 1995
PER SHARE DATA: 1993(1) 1994 (UNAUDITED)
------- ------ -----------
<S> <C> <C> <C>
Net asset value, beginning of period................................... $12.50 $13.38 $13.23
------ ------ ------
INVESTMENT OPERATIONS:
Investment income--net................................................. .04 .35 .07
Net realized and unrealized gain (loss) on investments .88 (.15) 2.28
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS..................................... .92 .20 2.35
------ ------ ------
DISTRIBUTIONS:
Dividends from investment income--net.................................. (.04) (.35) ---
------ ------ ------
Net asset value, end of period......................................... $13.38 $13.23 $15.58
====== ====== ======
TOTAL INVESTMENT RETURN.................................................... 7.35%(2) 1.49% 17.76%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets................................ .06%(2) .25% .64%(2)
Ratio of net investment income to average net assets................... .64%(2) 4.58% .60%(2)
Decrease reflected in above expense ratios due to undertakings
by Dreyfus and sub-investment adviser................................ 6.19%(2) 2.60% .09%(2)
Portfolio Turnover Rate................................................ --- 373.68% 69.19%(2)
Net Assets, end of period (000's Omitted).............................. $1,372 $10,406 $16,917
------------------------
(1) From October 7, 1993 (commencement of operations) to December 31, 1993.
(2) Not annualized.
See independent accountants' review report and notes to financial statements.
</TABLE>
<PAGE>
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
-------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 ("Act")
as a diversified open-end management investment company. The Fund is intended
to be a funding vehicle for variable annuity contracts and variable life
insurance policies to be offered by the separate accounts of life insurance
companies. Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares which are sold without a sales charge. The
Distributor, located at One Exchange Place, Boston, Massachusetts 02109, is a
wholly-owned subsidiary of FDI Distribution Services, Inc., a provider of
mutual fund administration services, which in turn is a wholly-owned
subsidiary of FDI Holdings, Inc., the parent company of which is Boston
Institutional Group, Inc. The Dreyfus Corporation ("Dreyfus") serves as the
Fund's investment adviser. NCM Capital Management Group, Inc. serves as the
Fund's sub-investment adviser. Dreyfus is a direct subsidiary of Mellon Bank,
N.A.
(A) PORTFOLIO VALUATION: Investments in securities are valued at the last
sales price on the securities exchange on which such securities are primarily
traded or at the last sales price on the national securities market.
Securities not listed on an exchange or the national securities market, or
securities for which there were no transactions, are valued at the average of
the most recent bid and asked prices. Bid price is used when no asked price
is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(C) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net and dividends from net realized
capital gain, if any, are normally declared and paid annually, but the Fund
may make distributions on a more frequent basis to comply with the
distribution requirements of the Internal Revenue Code. This may result in
distributions that are in excess of investment income-net on a fiscal year
basis. To the extent that net realized capital gain can be offset by capital
loss carryovers, it is the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
The Fund has an unused capital loss carryover of approximately $51,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to December 31, 1994. If not
applied, the carryover expires in 2002.
<PAGE>
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 2--INVESTMENT ADVISORY FEE, SUB-INVESTMENT ADVISORY FEE AND OTHER
TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to an Investment Advisory Agreement with Dreyfus, the
investment advisory fee is computed at the annual rate of .75 of 1% of the
average daily value of the Fund's net assets and is payable monthly. The
Investment Advisory Agreement further provides that if in any full year the
aggregate expenses of the Fund, excluding taxes, brokerage, interest on
borrowings and extraordinary expenses, exceed the expense limitation of any
state having jurisdiction over the Fund, the Fund may deduct from the fee to
be paid to Dreyfus, or Dreyfus will bear, such excess expense to the extent
required by state law. However, Dreyfus had undertaken from January 1, 1995
through July 11, 1995 to reduce the investment advisory fee paid by the Fund,
to the extent that the Fund's aggregate expenses (excluding certain expenses
as described above) exceeded specified annual percentages of the Fund's
average daily net assets. The reduction in management fee, pursuant to the
undertakings, amounted to $11,445 for the six months ended June 30, 1995.
Pursuant to a Sub-Investment Advisory Agreement with NCM Capital
Management Group, Inc., the sub-investment advisory fee is computed at an
annual rate of .10 of 1% on the first $500 million and .20 of 1% on the
excess of the average daily value of the Fund's net assets and is payable
monthly by Dreyfus.
(B) Pursuant to the Fund's Shareholder Services Plan, the Fund reimburses
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager, an
amount not to exceed an annual rate of .25 of 1% of the value of the Fund's
average daily net assets for certain allocated expenses with respect to
servicing and/or maintaining shareholder accounts. During the six months
ended June 30, 1995, $1,560 was charged to the Fund pursuant to the
Shareholder Services Plan.
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500. The Chairman of the Board
receives an additional 25% of such compensation.
NOTE 3--SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
other than short-term securities, during the six months ended June 30, 1995,
amounted to $13,695,246 and $7,067,186, respectively.
At June 30, 1995, accumulated net unrealized appreciation on investments
was $2,041,397, consisting of $2,081,918 gross unrealized appreciation and
$40,521 gross unrealized depreciation.
At June 30, 1995, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see
the Statement of Investments).
<PAGE>
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
--------------------------------------------------------------------------------
REVIEW REPORT OF ERNST & YOUNG LLP, INDEPENDENT ACCOUNTANTS
SHAREHOLDERS AND BOARD OF DIRECTORS
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
We have reviewed the accompanying statement of assets and liabilities of
The Dreyfus Socially Responsible Growth Fund, Inc., including the statement
of investments, as of June 30, 1995, and the related statements of operations
and changes in net assets and financial highlights for the six month period
ended June 30, 1995. These financial statements and financial highlights are
the responsibility of the Fund's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which
will be performed for the full year with the objective of expressing an
opinion regarding the financial statements and financial highlights taken as
a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the interim financial statements and financial highlights
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the statement of changes in net assets for the year ended
December 31, 1994 and financial highlights for each of the two years in the
period ended December 31, 1994 and in our report dated February 1, 1995, we
expressed an unqualified opinion on such statement of changes in net assets
and financial highlights.
(Ernst & Young LLP Signature Logo)
New York, New York
August 1, 1995
(2_FIDELITY_LOGOS)
VARIABLE INSURANCE PRODUCTS
FUND
MONEY MARKET PORTFOLIO
HIGH INCOME PORTFOLIO
EQUITY-INCOME PORTFOLIO
GROWTH PORTFOLIO
OVERSEAS PORTFOLIO
SEMIANNUAL REPORT
JUNE 30, 1995
CONTENTS
MONEY MARKET PORTFOLIO VIPF-3 PERFORMANCE
VIPF-4 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-5 INVESTMENTS
VIPF-9 FINANCIAL STATEMENTS
HIGH INCOME PORTFOLIO VIPF-11 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-12 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-13 INVESTMENTS
VIPF-19 FINANCIAL STATEMENTS
EQUITY-INCOME PORTFOLIO VIPF-21 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-22 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-23 INVESTMENTS
VIPF-27 FINANCIAL STATEMENTS
GROWTH PORTFOLIO VIPF-29 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-30 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-31 INVESTMENTS
VIPF-35 FINANCIAL STATEMENTS
OVERSEAS PORTFOLIO VIPF-37 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-38 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-39 INVESTMENTS
VIPF-44 FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS VIPF-46 NOTES TO THE FINANCIAL STATEMENTS
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS
NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
PERFORMANCE
To measure a money market fund's performance, you can look at either total
return or yield. Total return reflects both the change
in a fund's share price over a given period, and reinvestment of its
dividends (or income). Yield measures the income paid by a fund. Since a
money market fund tries to maintain a $1 share price, yield is an important
measure of performance.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 PAST 10
JUNE 30, 1995 YEAR YEARS YEARS
Money Market 5.44% 4.88% 6.19%
Consumer Price Index 3.04% 3.26% 3.55%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had achieved that return
by performing at a constant rate each year.
Comparing the fund's performance to the Consumer Price Index (CPI) helps
show how your investment did compared to inflation. (The periods covered by
the CPI numbers are the closest available match to those covered by the
fund.)
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
If the advisor had not reimbursed certain fund expenses, the past five
years and life of fund total returns would have been lower. Yield
will vary.
YIELD
Row: 1, Col: 1, Value: 4.21
Row: 1, Col: 2, Value: 2.41
Row: 2, Col: 1, Value: 4.7
Row: 2, Col: 2, Value: 2.5
Row: 3, Col: 1, Value: 5.609999999999999
Row: 3, Col: 2, Value: 2.74
Row: 4, Col: 1, Value: 5.91
Row: 4, Col: 2, Value: 2.89
Row: 5, Col: 1, Value: 5.85
Row: 5, Col: 2, Value: 2.87
Money Market
MMDA
6% -
5% -
4% -
3% -
2% -
1% -
0%
6/28/94 10/2/94 12/28/94 3/29/95 6/28/95
Money Market 4.21% 4.70% 5.61% 5.91% 5.85%
MMDA 2.41% 2.50% 2.74% 2.89% 2.87%
YIELD refers to the income paid by the fund over a given period. Yields for
money market funds are usually for seven-day periods,
expressed as annual percentage rates. A yield that assumes income earned is
reinvested or compounded is called an effective yield. The chart above
shows the fund's current seven-day yield at quarterly intervals over the
past year. This is compared to similar yields for the average bank money
market deposit account (MMDA). The MMDA average is supplied by BANK RATE
MONITOR.(Trademark)
COMPARING PERFORMANCE
There are some important differences between
a bank money market deposit account (MMDA)
and a money market fund. First, the U.S.
government neither insures nor guarantees a
money market fund. In fact, there is no
assurance that a money fund will maintain a $1
share price. Second, a money market fund
returns to its shareholders income earned by the
fund's investments after expenses. This is in
contrast to banks, which set their MMDA rates
periodically based on current interest rates,
competitors' rates, and internal criteria.
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with
Bob Litterst, Portfolio
Manager of Money
Market Portfolio
Q. BOB, CAN YOU BRING US UP TO DATE ON MARKET CONDITIONS?
A. Sure. The economic growth rate has slowed dramatically during the past
six months. During the fourth quarter of 1994, the gross domestic product
expanded at a rate of 5.1%, a very strong showing. Moreover, final sales
rose 5.7%, meaning sales exceeded production and depleted inventories.
Those signs of growth, along with disturbing trends in such leading
indicators of inflation as unemployment and capacity utilization, prompted
the Federal Reserve to raise the federal funds rate, the rate banks charge
each other for overnight loans, another one-half percentage point in
February.
Q. HOW HAS THE INTEREST RATE ENVIRONMENT CHANGED SINCE THEN?
A. Even as the Fed was tightening credit for the seventh time in a little
more than a year, there were signs that the economy was beginning to lose
steam. Led by softening consumer activity and weakness in
interest-sensitive sectors such as housing and autos, the growth rate
during the first quarter of 1995 slowed to 2.7%. Currently, most economists
have long since stopped worrying about the economy overheating. Now they
have an altogether different concern: that we might be headed for another
recession. By the end of June, it was clear to all that the latest cycle of
interest rate increases was over. Instead, speculation centered on when the
Fed might feel compelled to lower rates.
Q. HOW DID YOU RESPOND TO CHANGING CONDITIONS?
A. The fund's average maturity six months ago, when the period began, was
39 days. That was a defensive number. It reflected my view at the time that
further rate increases were likely. As it became apparent that the economy
was slowing more rapidly than initially expected, my expectations regarding
Fed policy changed, and I gradually extended the fund's average maturity. I
moved cautiously at first because conditions were unsettled and it seemed
prudent to maintain flexibility. But as signs of weakness accumulated, I
began to prepare for a shift in Fed policy, including the possibility of an
eventual rate cut. By the end of June, the fund's average maturity was more
aggressive than that of most other taxable money market funds-around 60
days, compared to about 50 days for most competitors.
Q. HOW DID YOU ACHIEVE THAT LONGER AVERAGE MATURITY?
A. Mainly by focusing on three-month and six-month securities, rather than
moving further out the yield curve. That's because by the end of the
period, expectations for declining short-term rates caused longer-term
yields on some money market securities to fall below shorter-term yields, a
situation known as an inverted yield curve.
Q. WHAT ABOUT ASSET SELECTION?
A. I've reduced the fund's stake in U.S. Treasury and agency securities.
Normally the fund averages about 10% in government securities, although
it's been as high as 20% at times during the past year or two. But in
recent months, technical factors affecting supply and demand have priced
government securities unusually high. The main cause seems to be heavy
buying on the part of foreign central banks with funds accumulated in
support of the U.S. dollar. With so many other creditworthy alternatives
available, I've looked elsewhere for value, adding higher-yielding
commercial paper and bank certificates of deposit. At the end of June,
government securities totaled less than 3% of the fund's assets.
Q. WHAT'S THE OUTLOOK?
A. The next few months should be interesting. We know that on July 6,
shortly after the period ended, the Fed lowered the federal funds rate
one-quarter percentage point, but as we look ahead, much uncertainty
remains. Some market participants believe that we're in the early stages of
an extended downturn. Others believe that what's happening is merely a
brief but severe inventory correction, and that the economy will resume
growing at its long-term trend rate of around 2.5% once the temporary
buildup in inventories sells off.
Q. WHAT'S YOUR VIEW?
A. I tend to side with those in the latter camp. The typical prerequisites
for a recession, including high inflation and tight bank lending standards,
simply don't exist. That said, I'm concerned that if this Spring's weakness
in the labor market persists, it could evolve into a self-reinforcing
slowdown, forcing the Fed to continue lowering rates. While I don't think
that will happen, I have to respect the possibility of such a development.
Accordingly, I'll probably maintain a neutral to aggressive average
maturity of between 60 and 65 days for the foreseeable future.
FUND FACTS
GOAL: Income and share price stability by
investing in high quality, short-term instruments
START DATE: April 1, 1982
SIZE: As of June 30, 1995, more than $768
million
MANAGER: Robert Litterst, since 1992; manager,
Capital Reserves Money Market, Fidelity Cash
Reserves, Fidelity Money Market Trust:
Retirement Money Market, since 1992; joined
Fidelity in 1991
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
BANKERS' ACCEPTANCES - 4.2%
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
DOMESTIC BANKERS' ACCEPTANCES - 2.8%
CHASE MANHATTAN BANK
11/1/95 6.09% $ 4,500,000 $ 4,408,980
CHEMICAL BANK
9/28/95 6.02 5,723,026 5,639,549
MELLON BANK, N.A.
11/24/95 5.81 7,500,000 7,325,700
NBD BANK, N.A.
12/11/95 5.87 4,000,000 3,896,767
21,270,996
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 1.4%
BANK OF TOKYO
8/14/95 6.39 6,000,000 5,954,533
RABOBANK NEDERLAND, N.V.
8/3/95 6.22 1,000,000 994,408
SANWA BANK, LTD.
7/31/95 6.08 4,000,000 3,980,033
10,928,974
TOTAL BANKERS' ACCEPTANCES 32,199,970
CERTIFICATES OF DEPOSIT - 20.3%
CHICAGO BRANCH, YANKEE DOLLAR, FOREIGN BRANCH - 3.9%
ABN-AMRO BANK
8/3/95 6.25 5,000,000 5,000,045
9/20/95 6.19 5,000,000 5,000,000
9/25/95 6.00 5,000,000 5,000,000
10/19/95 6.25 10,000,000 10,000,000
SANWA BANK, LTD.
8/15/95 6.04 5,000,000 5,000,062
30,000,107
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 9.4%
BANQUE NATIONALE DE PARIS
11/13/95 6.05 5,000,000 5,000,000
CANADIAN IMPERIAL BANK OF COMMERCE
11/1/95 6.25 4,000,000 3,998,110
COMMERZBANK, GERMANY
8/24/95 6.35 5,000,000 4,999,596
DRESDNER BANK, A.G.
3/15/96 6.44 1,000,000 1,000,875
FUJI BANK, LTD.
7/19/95 6.18 5,000,000 5,000,000
HYPO U.S. FINANCE
11/8/95 6.03 5,000,000 5,000,823
INDUSTRIAL BANK OF JAPAN, LTD.
7/31/95 6.30 5,000,000 5,000,000
ROYAL BANK OF CANADA
10/5/95 6.25 1,000,000 1,000,294
SANWA BANK, LTD.
7/7/95 6.21 3,000,000 3,000,000
SOCIETE GENERALE
8/14/95 6.02 14,000,000 14,000,000
8/21/95 6.00 10,000,000 10,000,000
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - CONTINUED
SUMITOMO BANK, LTD.
8/7/95 6.01% $ 5,000,000 $ 5,000,000
8/21/95 6.41 5,000,000 5,000,465
8/22/95 6.03 5,000,000 5,000,000
73,000,163
LONDON BRANCH, EURODOLLAR, DOMESTIC BANKS - 2.6%
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOC.
9/29/95 5.91 5,000,000 5,000,000
11/27/95 6.00 5,000,000 5,000,000
BANK OF NEW YORK
7/17/95 6.15 10,000,000 10,000,000
20,000,000
LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - 3.8%
BANK OF SCOTLAND
7/5/95 6.15 4,000,000 4,000,015
MITSUBISHI BANK, LTD.
8/10/95 6.04 5,000,000 5,000,377
NORDDEUTSCHE LANDESBANK
12/8/95 5.75 5,000,000 4,998,563
SANWA BANK, LTD.
8/7/95 6.02 5,000,000 4,998,917
TORONTO-DOMINION BANK
12/11/95 5.74 10,000,000 10,013,064
29,010,936
PORTLAND BRANCH, EURODOLLAR, FOREIGN BANKS - 0.6%
BANK OF NOVA SCOTIA
7/11/95 6.13 5,000,000 5,000,008
TOTAL CERTIFICATES OF DEPOSIT 157,011,214
COMMERCIAL PAPER - 52.0%
ANZ (DE), INC.
7/7/95 6.52 1,273,000 1,271,653
8/8/95 6.03 220,000 218,611
ABBEY NATIONAL TREASURY SERVICES
8/21/95 6.04 5,000,000 4,957,854
AMERICAN EXPRESS CREDIT CORP.
8/9/95 6.21 5,000,000 4,967,067
8/14/95 6.20 5,000,000 4,962,875
11/9/95 5.89 5,000,000 4,895,382
AMERICAN HOME FOOD PRODUCTS, INC.
7/10/95 6.17 11,000,000 10,983,280
AMERICAN HOME PRODUCTS
8/29/95 6.00 6,000,000 5,941,688
AMERICAN TELEPHONE & TELEGRAPH CO.
9/27/95 6.09 5,000,000 4,927,400
ASSOCIATES CORP. OF NORTH AMERICA
9/1/95 5.98 6,000,000 5,938,930
9/28/95 6.10 5,000,000 4,926,451
BANC ONE CORP.
9/22/95 5.99 5,000,000 4,931,986
BEAR STEARNS COS., INC.
7/12/95 6.14 5,000,000 4,990,757
8/1/95 6.06 6,000,000 5,969,155
8/1/95 6.13 5,000,000 4,974,016
COMMERCIAL PAPER - CONTINUED
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
BENEFICIAL CORP.
9/18/95 5.99% $ 5,000,000 $ 4,935,264
9/29/95 5.81 5,000,000 4,928,750
CIT GROUP HOLDINGS, INC.
9/21/95 6.20 5,000,000 4,931,211
CHRYSLER FINANCIAL CORPORATION
7/6/95 6.05 5,000,000 4,995,826
7/12/95 6.05 5,000,000 4,990,803
7/13/95 6.04 2,000,000 1,996,000
7/17/95 6.05 3,000,000 2,991,973
COMMERZBANK U.S. FINANCE, INC.
9/25/95 5.89 5,000,000 4,930,722
9/29/95 5.91 140,000 137,977
9/29/95 6.30 600,000 590,820
10/20/95 6.23 4,000,000 3,925,507
12/15/95 5.76 1,120,000 1,090,905
COMPAGNIE BANCAIRE
7/6/95 6.20 5,000,000 4,995,764
7/12/95 6.15 5,000,000 4,990,742
CORESTATES CAPITAL CORP.
7/8/95 6.01 (a) 5,000,000 5,000,000
7/15/95 6.09 (a) 5,000,000 5,000,000
DEN DANSKE CORP., INC.
7/12/95 6.15 3,000,000 2,994,445
DU PONT (E.I.) DE NEMOURS & CO.
9/19/95 6.09 2,500,000 2,466,833
FORD MOTOR CREDIT CORP.
7/21/95 6.23 5,000,000 4,983,056
8/30/95 6.23 15,000,000 14,848,000
9/11/95 6.25 5,000,000 4,939,100
10/27/95 5.86 6,000,000 5,887,507
FORD MOTOR CREDIT, PLC
8/1/95 6.10 4,500,000 4,476,711
GENERALE BANK
10/17/95 6.07 5,000,000 4,911,200
GENERAL ELECTRIC CAPITAL CORP.
7/3/95 5.97 (a) 5,000,000 5,000,000
7/5/95 6.19 5,000,000 4,996,628
8/1/95 5.94 170,000 169,139
9/15/95 6.68 4,000,000 3,945,787
10/5/95 6.79 2,400,000 2,358,400
10/12/95 6.80 1,000,000 981,403
11/1/95 6.13 10,000,000 9,796,708
GENERAL ELECTRIC CORP.
9/27/95 6.25 10,000,000 9,851,622
GENERAL MOTORS ACCEPTANCE CORP.
7/31/95 6.22 5,000,000 4,974,500
8/2/95 6.19 11,000,000 10,940,453
8/16/95 6.12 6,000,000 5,953,770
8/16/95 6.15 5,000,000 4,961,347
8/22/95 6.10 1,000,000 991,319
9/15/95 6.05 5,000,000 4,936,983
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
GEORGIA POWER CO.
7/5/95 6.20% $ 5,000,000 $ 4,996,611
GOLDMAN SACHS GROUP, L.P. (THE)
9/7/95 6.01 10,000,000 9,888,367
9/18/95 6.02 6,000,000 5,922,185
HANSON FINANCE (UK), PLC
8/7/95 6.03 10,000,000 9,938,950
8/22/95 6.04 6,000,000 5,948,477
IBM CORP.
9/1/95 5.97 5,000,000 4,949,194
INTERNATIONAL NEDERLANDEN U.S. FUNDING CORP.
8/28/95 6.35 4,000,000 3,960,367
MERRILL LYNCH & CO., INC.
9/28/95 6.00 5,000,000 4,927,317
MONSANTO CO.
8/14/95 6.19 2,500,000 2,481,453
9/12/95 6.17 1,525,000 1,506,353
12/21/95 5.90 10,000,000 9,724,642
MORGAN STANLEY GROUP, INC.
10/6/95 5.91 5,000,000 4,921,592
NATIONAL & PROVINCIAL BUILDING SOCIETY
10/16/95 5.89 5,350,000 5,258,249
NATIONWIDE BUILDING SOCIETY
8/11/95 6.06 5,000,000 4,966,004
NEW CENTER ASSET TRUST
7/12/95 6.16 5,000,000 4,990,726
7/17/95 6.15 10,000,000 9,973,067
NORWEST CORP.
9/19/95 5.99 400,000 394,773
NORWEST FINANCIAL
7/10/95 6.14 5,000,000 4,992,438
PENNSYLVANIA LIGHT & POWER COMPANY
7/5/95 6.06 1,650,000 1,648,895
7/10/95 6.05 3,200,000 2,196,689
PHILIP MORRIS COS., INC.
9/5/95 6.07 4,500,000 4,450,913
PRUDENTIAL FUNDING CORP.
7/3/95 6.30 10,000,000 9,996,500
SEARS ROEBUCK ACCEPTANCE CORP.
9/18/95 6.00 5,000,000 4,935,154
SHERWOOD MEDICAL COMPANY
8/21/95 5.99 5,000,000 4,957,925
TEXTRON, INC.
7/14/95 6.06 3,500,000 3,492,391
TORONTO DOMINION HOLDINGS USA, INC.
9/11/95 6.11 5,000,000 4,940,200
9/29/95 5.90 10,000,000 9,854,750
TRANSAMERICA FINANCE CORP.
8/7/95 6.03 220,000 218,648
WOOLWICH EQUITABLE BUILDING SOCIETY
10/16/95 5.94 5,000,000 4,913,508
TOTAL COMMERCIAL PAPER 402,000,618
FEDERAL AGENCIES - 3.2%
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
FEDERAL FARM CREDIT BANK - AGENCY COUPONS - 0.6%
7/3/95 6.17% (a) $ 5,000,000 $ 4,997,271
FEDERAL NATIONAL MORTGAGE ASSOC. - DISCOUNT NOTES - 2.6%
7/17/95 6.27 5,000,000 4,986,422
9/11/95 6.32 10,000,000 9,877,600
10/20/95 6.04 5,000,000 4,909,350
19,773,372
TOTAL FEDERAL AGENCIES 24,770,643
BANK NOTES - 7.2%
BANK OF NEW YORK
8/28/95 6.35 5,000,000 4,999,748
BOATMEN'S NATIONAL BANK OF ST. LOUIS
9/22/95 6.04 (a) 5,000,000 4,995,859
COMERICA BANK - DETROIT
5/28/96 5.83 5,000,000 5,014,775
FIFTH THIRD BANK - CINCINNATI
10/27/95 6.07 5,000,000 5,001,981
HOUSEHOLD BANK, N.A.
9/21/95 5.93 1,000,000 1,000,000
KEY BANK OF NEW YORK
7/3/95 6.11 (a) 5,000,000 4,999,374
MELLON BANK, N.A.
11/1/95 6.24 5,000,000 5,000,000
NBD BANK, N.A.
10/16/95 6.27 5,000,000 5,000,000
NATIONSBANK OF TEXAS
9/26/95 6.38 5,000,000 5,000,000
10/27/95 6.25 5,000,000 5,000,000
PNC BANK, N.A.
7/4/95 6.15 (a) 5,000,000 4,999,589
U.S. NATIONAL BANK OF OREGON
8/22/95 6.37 5,000,000 5,000,070
TOTAL BANK NOTES 56,011,396
MASTER NOTES (A) - 1.2%
J.P. MORGAN SECURITIES
7/3/95 6.58 9,000,000 9,000,000
MEDIUM-TERM NOTES (A) - 5.9%
ABBEY NATIONAL, NORTH AMERICA
7/3/95 5.97 5,000,000 4,999,151
ABBEY NATIONAL TREASURY SERVICES (C)
9/30/95 6.00 10,000,000 10,000,000
BENEFICIAL CORP.
7/15/95 6.09 5,000,000 4,999,453
DEAN WITTER, DISCOVER & CO.
7/15/95 6.10 5,000,000 5,004,526
GENERAL ELECTRIC CAPITAL CORP.
7/3/95 6.27 5,000,000 4,998,997
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
GENERAL MOTORS ACCEPTANCE CORP.
8/7/95 6.25% $ 3,000,000 $ 3,000,000
GOLDMAN SACHS GROUP, L.P. (THE) (C)
9/1/95 6.03 3,000,000 3,000,000
9/16/95 5.95 4,000,000 4,000,000
NORWEST CORP.
9/15/95 6.06 6,000,000 6,000,000
TOTAL MEDIUM-TERM NOTES 46,002,127
SHORT-TERM NOTES (A) - 3.2%
CAPITAL ONE FUNDING CORP.
7/10/95 6.07 4,072,000 4,072,000
SMM TRUST COMPANY (1994-D) (B)
7/28/95 6.17 4,000,000 4,000,000
SMM TRUST COMPANY (1995-I) (B)
7/5/95 6.16 6,000,000 5,998,411
SMM TRUST COMPANY (1995-J) (B)
7/15/95 6.06 11,000,000 11,000,000
TOTAL SHORT-TERM NOTES 25,070,411
MUNICIPAL SECURITIES (A) - 1.1%
GARDENA CALIFORNIA CERTIFICATES OF PARTNERSHIP
7/10/95 6.35 6,550,000 6,550,000
NEW ORLEANS AVIATION BOARD
7/10/95 6.26 1,800,000 1,800,000
TOTAL MUNICIPAL SECURITIES 8,350,000
REPURCHASE AGREEMENTS - 1.7%
MATURITY
AMOUNT
In a joint trading account
(U.S. Government Obligations)
dated 6/30/95 due 7/3/95:
At 6.28% $ 12,806,699 12,800,000
TOTAL INVESTMENTS - 100% $ 773,216,379
Total Cost for Income Tax Purposes - $773,216,379
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end. The due date on these types of
securities reflects the next interest rate reset date or, when applicable,
the final maturity date.
(b) Restricted securities - Investment in securities not registered under
the Securities Act of 1933.
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
SMM Trust Company:
(1994-D) 10/28/94 $ 4,000,000
(1995-I)) 5/25/95 $ 6,000,000
(1995-J) 5/15/95 $ 11,000,000
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $17,000,000 or 2.2% of net
assets.
INCOME TAX INFORMATION
At December 31, 1994, the fund had a capital loss carryforward of
approximately $94,600 of which $4,100, $500, $4,900, $4,300 and $80,800
will expire on December 31, 1995, 1996, 1997, 2000 and 2002, respectively.
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $12,800,000) - See accompanying $ 773,216,379
schedule
Cash 673,210
Receivable for investments sold 104,000
Interest receivable 2,641,686
TOTAL ASSETS 776,635,275
LIABILITIES
Payable for investments purchased $ 7,463,678
Accrued management fee 157,028
Other payables and accrued expenses 64,485
TOTAL LIABILITIES 7,685,191
NET ASSETS $ 768,950,084
Net Assets consist of:
Paid in capital $ 769,022,085
Accumulated net realized gain (72,001
(loss) on investments )
NET ASSETS, for 769,022,085 $ 768,950,084
shares outstanding
NET ASSET VALUE, offering price and redemption price per share ($768,950,084 (divided by) 769,022,085 shares) $1.00
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INTEREST INCOME $ 22,651,404
EXPENSES
Management fee $ 934,903
Transfer agent fees 176,682
Accounting fees and expenses 52,708
Non-interested trustees' 2,520
compensation
Custodian fees and expenses 36,594
Audit 11,536
Legal 1,454
Miscellaneous 2,459
TOTAL EXPENSES 1,218,856
NET INTEREST INCOME 21,432,548
NET REALIZED GAIN (LOSS) ON 7,601
INVESTMENTS
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 21,440,149
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS END YEAR ENDED
ED DECEMBER 31,
JUNE 30, 1995 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 21,432,548 $ 25,859,424
Net interest income
Net realized gain (loss) 7,601 (80,853
)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 21,440,149 25,778,571
Distributions to shareholders from net interest income (21,432,548 (25,859,424
) )
Share transactions at net asset value of $1.00 per share 512,023,023 1,187,546,448
Proceeds from sales of shares
Reinvestment of distributions from net interest income 21,432,548 25,859,424
Cost of shares redeemed (513,118,899 (817,822,836
) )
NET INCREASE (DECREASE) IN NET ASSETS AND SHARES RESULTING FROM SHARE TRANSACTIONS 20,336,672 395,583,036
TOTAL INCREASE (DECREASE) IN NET ASSETS 20,344,273 395,502,183
NET ASSETS
Beginning of period 748,605,811 353,103,628
End of period $ 768,950,084 $ 748,605,811
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1995
(UNAUDITED) 1994 1993 1992 1991 1990
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Income from Investment Operations .029 .042 .032 .038 .059 .078
Net interest income
Less Distributions (.029) (.042) (.032) (.038) (.059) (.078)
From net interest income
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
TOTAL RETURN B C 2.95% 4.25% 3.23% 3.90% 6.09% 8.04%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 768,950 $ 748,606 $ 353,104 $ 301,002 $ 271,123 $ 254,585
Ratio of expenses to average net assets .33% A .27% .22% .24% .38% .56%
Ratio of expenses to average net assets before .33% A .27% .23% .24% .38% .56%
expense reductions
Ratio of net interest income to average net assets 5.84% A 4.32% 3.16% 3.85% 5.93% 7.76%
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE ACCOUNT.
INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
C TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
HIGH INCOME 11.89% 16.87% 11.60%
Merrill Lynch High Yield Master 14.88% 14.23% n/a
Consumer Price Index 3.04% 3.26% 3.57%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of
how it will do tomorrow. Bond prices, for
example, generally move in the opposite
direction of interest rates. In turn, the share price,
return, and yield of a fund that invests in bonds
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare the fund's returns to those of the Merrill Lynch High Yield
Master Index - a broad measure of the high yield bond market. This
benchmark includes reinvested dividends and capital gains, if any.
Comparing the fund's performance to the consumer price index (CPI) helps
show how your fund did compared to inflation. (The CPI returns begin on the
month end closest to the fund's start date).
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, September 19, 1985.
If the adviser had not reimbursed certain fund expenses during the periods
shown, the total returns would have been lower.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money. The fund includes high yielding, lower-rated
securities which are subject to greater price volatility and may involve
greater risk of default. The market for these securities may be less
liquid.
$10,000 OVER LIFE OF FUND
VIP High Income (4High Yield Maste
09/30/85 10000.00 10000.00
10/31/85 10124.78 10113.02
11/30/85 10270.82 10303.28
12/31/85 10614.12 10604.47
01/31/86 10745.58 10676.44
02/28/86 11109.08 11130.10
03/31/86 11383.10 11373.65
04/30/86 11576.24 11551.26
05/31/86 11753.01 11685.98
06/30/86 11900.72 11804.36
07/31/86 11864.53 11648.95
08/31/86 11912.43 11863.93
09/30/86 12013.59 11962.11
10/31/86 12372.53 12172.57
11/30/86 12412.20 12271.68
12/31/86 12490.69 12337.95
01/31/87 12946.06 12686.81
02/28/87 13170.08 12896.26
03/31/87 13290.04 13038.85
04/30/87 12874.71 12754.50
05/31/87 12755.02 12697.03
06/30/87 13030.49 12872.55
07/31/87 13044.43 12942.59
08/31/87 13152.49 13072.28
09/30/87 12694.49 12771.51
10/31/87 12087.43 12430.27
11/30/87 12443.44 12744.62
12/31/87 12642.60 12913.85
01/31/88 13058.25 13267.23
02/29/88 13449.21 13627.23
03/31/88 13352.58 13604.70
04/30/88 13456.66 13643.99
05/31/88 13436.65 13715.20
06/30/88 13718.27 13977.43
07/31/88 13861.07 14125.13
08/31/88 13794.86 14171.55
09/30/88 13905.45 14314.39
10/31/88 14056.82 14537.41
11/30/88 14003.15 14591.87
12/31/88 14114.42 14653.61
01/31/89 14453.60 14873.37
02/28/89 14524.70 14973.32
03/31/89 14338.06 14960.00
04/30/89 14179.27 15004.15
05/31/89 14441.26 15280.37
06/30/89 14854.88 15496.85
07/31/89 14757.08 15570.24
08/31/89 14671.49 15647.15
09/30/89 14158.14 15498.19
10/31/89 13551.16 15253.06
11/30/89 13562.58 15287.24
12/31/89 13525.40 15273.41
01/31/90 13226.43 14974.91
02/28/90 13022.77 14756.83
03/31/90 12885.36 14956.31
04/30/90 12923.54 15032.30
05/31/90 13189.08 15303.83
06/30/90 13396.83 15600.32
07/31/90 13603.76 15929.99
08/31/90 13376.19 15320.16
09/30/90 13059.02 14653.87
10/31/90 12742.13 14280.96
11/30/90 13041.01 14401.94
12/31/90 13223.36 14609.46
01/31/91 13503.92 14815.98
02/28/91 14252.06 15915.67
03/31/91 14757.05 16599.98
04/30/91 15280.75 17191.13
05/31/91 15505.19 17275.07
06/30/91 15841.85 17622.59
07/31/91 16440.36 18044.84
08/31/91 16664.81 18424.11
09/30/91 17038.88 18658.77
10/31/91 17618.68 19213.23
11/30/91 17768.31 19435.16
12/31/91 17861.83 19660.94
01/31/92 18815.71 20348.35
02/29/92 19498.87 20853.71
03/31/92 20129.17 21144.68
04/30/92 20271.50 21298.58
05/31/92 20515.49 21638.31
06/30/92 20739.15 21907.16
07/31/92 21145.80 22351.02
08/31/92 21593.11 22646.93
09/30/92 21816.77 22904.97
10/31/92 21491.45 22615.68
11/30/92 21755.77 22935.97
12/31/92 21999.76 23231.29
01/31/93 22589.41 23803.34
02/28/93 22974.74 24253.90
03/31/93 23504.92 24674.39
04/30/93 23659.56 24851.50
05/31/93 24013.02 25186.03
06/30/93 24631.57 25659.22
07/31/93 24874.57 25935.02
08/31/93 25139.66 26182.25
09/30/93 25228.03 26311.44
10/31/93 25824.49 26807.08
11/30/93 26067.49 26953.70
12/31/93 26487.22 27223.21
01/31/94 27370.86 27819.81
02/28/94 27338.05 27619.74
03/31/94 26417.09 26719.70
04/30/94 26150.49 26407.45
05/31/94 26198.96 26313.37
06/30/94 26102.02 26893.29
07/31/94 26198.96 27082.30
08/31/94 26198.96 27270.47
09/30/94 26392.85 27260.08
10/31/94 26150.49 27329.36
11/30/94 25932.37 27096.87
12/31/94 26053.55 26906.19
01/31/95 26344.38 27286.38
02/28/95 27248.56 28137.75
03/31/95 27587.86 28529.34
04/30/95 28396.97 29197.31
05/31/95 29127.77 30109.50
06/30/95 29206.07 30339.47
Let's say you invested $10,000 in High Income Portfolio on September 30,
1985, shortly after the fund started. By June 30, 1995, your investment
would have grown to $29,206 - a 192.06% increase. That compares to $10,000
invested in the Merrill Lynch High Yield Master Index, which would have
grown to $30,339 over the same period - a 203.39% increase.
INVESTMENT SUMMARY
TOP FIVE HOLDINGS AS OF JUNE 30, 1995
(BY ISSUER, EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S
INVESTMENTS
PanAmSat Corp. 12 3/4% 4.2
TransTexas Gas Corp. (various issues) 3.5
Revlon Worldwide Corp. secured 0%, 3/15/98 2.6
Flagstar Corp. 11 1/4%, 11/1/04 2.3
American Financial Corp. (various issues) 2.3
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Media & Leisure 29.9
Finance 9.5
Energy 8.8
Services 6.6
Basic Industries 6.4
QUALITY DIVERSIFICATION AS OF JUNE 30, 1995
(MOODY'S RATINGS) % OF FUND'S
INVESTMENTS
Aaa, Aa, A 0.0
Baa 0.0
Ba 6.4
B 41.9
Caa, Ca, C 16.6
Nonrated 10.4
TABLE EXCLUDES SHORT-TERM INVESTMENTS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT JUNE 30, 1995, ACCOUNT FOR 7.9% OF THE FUND'S
INVESTMENTS.
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Barry Coffman, Portfolio Manager of High Income Portfolio
Q. HOW HAS THE FUND PERFORMED, BARRY?
A. Although the fund did well relative to its peers, it trailed the
performance of the Merrill Lynch High Yield Master Index, which returned
12.76% and 14.88%, respectively, for the six and 12-month periods ended
June 30, 1995. The index has a larger percentage of Ba-rated bonds than
most high-yield mutual funds, which tend to be more concentrated in B-rated
bonds. Generally speaking, Ba-rated bonds are more sensitive to changing
interest rates, and therefore, benefited more from the recent decline in
interest rates than B-rated bonds. As a result, very few high yield funds
outperformed the index.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. The fund's relatively low weighting in Ba-rated securities was the
primary reason for its underperformance relative to its benchmark during
the most recent period. On the positive side, we have maintained a high
weighting, compared to the benchmark, in deferred coupon securities. These
bonds sell at a deep discount because they do not pay current interest for
some period, usually three to five years. They generally have longer
durations - which measures how sensitive their price is to changes in
interest rates - and therefore, their prices are more volatile. We also
avoided most of the credit disasters that occurred in the market.
Q. WHAT INVESTMENTS HAVE DONE WELL IN THE PAST SIX MONTHS?
A. Revlon continued to benefit from an operational restructuring and the
very successful launch of two key new products: Color Stay Lipstick and Age
Defying Makeup. Our Revlon position is concentrated in the most junior
securities that are most sensitive to changes in credit quality, which has
been a recent plus. Another strong performer was Big Flower Press, a large
commercial printer of advertising inserts, comics and television guides.
The company was helped by the strong growth in advertising and the
synergies it gained from some recent acquisitions. Finally, our
concentration in casinos and hotels did relatively well during the period.
Q. GIVEN THE MARKET'S STRENGTH SO FAR IN 1995, WAS IT DIFFICULT TO FIND
OPPORTUNITIES?
A. Not particularly. The new issues market was active and provided ample
opportunity to selectively add new names to the fund. One example was
PanAmSat Corp., which operates an international satellite communications
system and provides satellite services to the broadcasting and business
communications markets. It currently has two satellites operating and also
has a large backlog of contracted time from companies including ESPN and
Viacom for two new satellites it will be launching later this year. The
company is participating in a joint venture to provide Direct to Home (DTH)
television broadcasting service to Latin America, similar to the Direct TV
service in the United States. Another new issue we purchased was
Stratosphere Corp., a Las Vegas-based casino owned by industry-leader Grand
Casino. These bonds are attractive, in part, because in addition to their
14.25% coupon, they pay additional interest based on a percentage of the
company's cash flow.
Q. WHAT INVESTMENTS DIDN'T FARE AS WELL?
A. The high-yield restaurant sector, in general, did not perform well
during the period due to competitive pressures and a slowing economy. One
of our largest holdings is Flagstar, the parent of Denny's and the largest
franchisee of Hardees. Although Denny's has benefited from an aggressive
remodeling program, Hardees has suffered due to aggressive price promotions
from the major burger chains. Another restaurant chain, American Restaurant
Group, also underperformed partly due to the concentration of its chains in
California, where the economy continues to be weaker than the rest of the
country.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. The probability of the soft landing scenario is increasing, which could
provide a favorable backdrop for the high-yield bond market. Slow economic
growth and low inflation could allow many companies in the high-yield
market to improve their credit quality. Absolute yields remain attractive,
and absent a sharp drop in interest rates from current levels, high-yield
bonds could perform well relative to other fixed-income investments. In my
view, the key is to be selective. I'm focusing on companies that are less
cyclical, or sensitive to the economy, and choosing companies that I think
can perform well in a slow-growth environment.
FUND FACTS
GOAL: seeks high current income by investing
in high yielding, lower-rated fixed-income
securities
START DATE: September 19, 1985
SIZE: as of June 30, 1995, more than $813 million
MANAGER: Barry Coffman, since 1990; joined
Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
CORPORATE BONDS - 74.8%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CONVERTIBLE BONDS - 0.2%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Ampex Corp., 0%, 6/30/97 - $ 469,000 $ 328,685
MEDIA & LEISURE - 0.2%
LODGING & GAMING - 0.2%
Argosy Gaming Co.
12%, 6/1/01 B3 1,290,000 1,290,000
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Farm Fresh, Inc.
7 1/2%, 3/1/10 B3 186,000 112,264
TOTAL CONVERTIBLE BONDS 1,730,949
NONCONVERTIBLE BONDS - 74.6%
AEROSPACE & DEFENSE - 0.3%
RHI Holdings, Inc.:
11 7/8%, 3/1/99 B2 2,160,000 2,062,800
11 7/8%, 3/1/99 (e) - 550,000 525,250
2,588,050
BASIC INDUSTRIES - 6.3%
CHEMICALS & PLASTICS - 2.1%
American Pacific Corp.
11%, 12/15/02 (f) - 850,000 765,000
Foamex LP 11 7/8%, 10/1/04 B3 5,000,000 4,725,000
Pioneer Americas Acquisition
Corp. 13 3/8%, 4/1/05 (f) B2 10,000,000 10,325,000
Trans Resources, Inc.
14 1/2%, 9/1/96 B2 580,000 585,800
16,400,800
IRON & STEEL - 0.9%
Republic Engineered Steels, Inc.
9 7/8%, 12/15/01 B2 5,230,000 4,772,375
WCI Steel, Inc.
10 1/2%, 3/1/02 B1 2,420,000 2,359,500
7,131,875
METALS & MINING - 0.7%
International Wire Group, Inc.
11 3/4%, 6/1/05 (f) B3 5,850,000 5,886,563
PACKAGING & CONTAINERS - 0.8%
Crown Packaging Holdings Ltd.
0%, 11/1/03 (d) Caa 6,840,000 3,129,300
Grupo Industrial Durango euro
9.6367%, 11/18/96 (g) 4,000,000 3,380,000
6,509,300
PAPER & FOREST PRODUCTS - 1.8%
Indah Kiat International Finance
Co. 11 3/8%, 6/15/99 Ba3 9,000,000 9,022,500
Mail-Well Holdings, Inc.
0%, 2/15/06 (d) - 1,190,000 511,700
Tjiwi Kimia International Finance
Co. 13 1/4%, 8/1/01 B1 4,130,000 4,377,800
13,912,000
TOTAL BASIC INDUSTRIES 49,840,538
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CONGLOMERATES - 0.6%
Jordan Industries, Inc.:
10 3/8%, 8/1/03 B3 $ 3,155,000 $ 2,902,600
0%, 8/1/05 (d) Caa 3,135,000 1,849,650
4,752,250
CONSTRUCTION & REAL ESTATE - 1.6%
BUILDING MATERIALS - 1.3%
Adience, Inc.
11%, 6/15/02 - 745,921 540,793
Building Materials Corp.,
America 0%, 7/1/04 (d) B1 12,610,000 7,502,950
DAL Tile International, Inc. secured
coupon, 0%, 7/15/98 Caa 3,435,000 2,279,981
10,323,724
REAL ESTATE - 0.3%
Littlefield Co.
10%, 12/31/95 (e) - 2,750,000 2,491,913
TOTAL CONSTRUCTION & REAL ESTATE 12,815,637
DURABLES - 2.9%
AUTOS, TIRES, & ACCESSORIES - 1.9%
Harvard Industries, Inc.
12%, 7/15/04 B2 5,000,000 5,137,500
Poindexter (JB), Inc.
12 1/2%, 5/15/04 B2 10,000,000 9,700,000
14,837,500
TEXTILES & APPAREL - 1.0%
Hat Brands, Inc.
12 5/8%, 9/15/02:
Series B - 1,520,000 1,599,800
Series D - 680,000 715,700
Leslie Fay Cos., Inc. (b)(e):
9.53%, 1/15/00 - 676,319 399,028
10.54%, 1/15/02 - 611,353 299,563
United States Leather, Inc.
10 1/4%, 7/31/03 B2 6,010,000 5,153,575
8,167,666
TOTAL DURABLES 23,005,166
ENERGY - 7.2%
ENERGY SERVICES - 1.0%
Falcon Drilling, Inc.:
9 3/4%, 1/15/01 B2 3,512,000 3,441,760
12 1/2%, 3/15/05 B3 4,000,000 4,160,000
7,601,760
OIL & GAS - 6.2%
Chesapeake Energy Corp.
10 1/2%, 6/1/02 (f) B1 6,000,000 5,910,000
Deeptech International, Inc.
12%, 12/15/00 B3 4,660,000 3,168,800
Mesa Capital Corp.
secured 0%, 6/30/98 (d) Caa 5,710,000 5,181,825
TransTexas Gas Corp.
11 1/2%, 6/15/02 B2 20,000,000 20,450,000
Transamerican Refining
Corp. (g):
0%, 2/15/02 Caa 6,746,000 4,435,495
16 1/2%, 2/15/02 Caa 9,620,000 10,173,150
49,319,270
TOTAL ENERGY 56,921,030
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - 6.0%
INSURANCE - 5.1%
American Annuity Group, Inc.
11 1/8%, 2/1/03 Ba3 $ 3,500,000 $ 3,640,000
American Financial Corp.:
10%, 10/20/99 Ba3 5,000,000 5,037,500
9 3/4%, 4/20/04 Ba3 6,570,000 6,504,300
9 3/4%, 4/20/04 (e) Ba3 6,770,000 6,702,300
American Life Holdings
11 1/4%, 9/15/04 B1 13,350,000 13,884,000
Americo Life, Inc.
9 1/4%, 6/1/05 Ba2 4,900,000 4,557,000
40,325,100
SAVINGS & LOANS - 0.8%
First Nationwide Holdings, Inc.
12 1/4%, 5/15/01 Ba3 5,790,000 6,166,350
SECURITIES INDUSTRY - 0.1%
ECM Corp. extendible
14%, 6/1/02 (f) - 570,198 627,218
TOTAL FINANCE 47,118,668
HEALTH - 0.6%
MEDICAL EQUIPMENT & SUPPLIES - 0.6%
Wright Medical Technology, Inc.,
Series B, 10 3/4%, 7/1/00 B3 5,200,000 5,083,000
HOLDING COMPANIES - 0.1%
New Street Capital Corp.
pay-in-kind (e):
12%, 2/28/98 - 67,416 64,697
Unit 12%, 2/28/98 - 1,123,600 1,078,285
1,142,982
INDUSTRIAL MACHINERY & EQUIPMENT - 3.4%
MVE, Inc. Unit
12 1/2%, 2/15/02 B3 8,545,000 8,886,800
Specialty Equipment Cos., Inc.
11 3/8%, 12/1/03 B3 10,640,000 10,932,600
Thermadyne Holdings Corp.:
10 1/4%, 5/1/02 B3 1,484,000 1,417,220
10 3/4%, 11/1/03 Caa 5,756,000 5,583,320
26,819,940
MEDIA & LEISURE - 24.5%
BROADCASTING - 8.0%
Chancellor Broadcasting
12 1/2%, 10/1/04 B3 6,560,000 6,543,600
Citicasters, Inc.
9 3/4%, 2/15/04 B- 7,812,000 7,792,470
Cooke Media Group, Inc.
11 5/8%, 4/1/99 - 350,000 334,250
Marcus Cable Capital Corp.
0%, 12/15/05 (d)(f) Caa 26,580,000 14,054,175
NWCG Holdings Corp.
0%, 6/15/99 Caa 26,925,000 16,693,500
Peoples Choice TV Corp. Unit
0%, 6/1/04 (d) Caa 11,340,000 5,485,725
Robin Media Group, Inc.
11 1/8%, 4/1/97 - 12,340,000 12,525,100
63,428,820
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
LEISURE DURABLES & TOYS - 1.5%
ICON Health And Fitness, Inc.
13%, 7/15/02 B3 $ 5,890,000 $ 5,948,900
IHF Holdings, Inc.
0%, 11/15/04 (d) Caa 10,250,000 5,637,500
11,586,400
LODGING & GAMING - 9.9%
Bally's Casino Holdings, Inc.
10 1/2%, 6/15/98 B3 12,630,000 8,841,000
Bally Gaming International, Inc.
10 3/8%, 7/15/98 - 3,000,000 3,090,000
Boyd Gaming Corp.
10 3/4%, 9/3/03 B2 7,350,000 7,570,500
GNF Corp., Series B,
10 5/8%, 4/1/03 B2 19,730,000 16,375,900
Grand Casino Resorts, Inc. gtd.
12 1/2%, 2/1/00 Ba3 2,200,000 2,464,000
HMH Properties, Inc.
9 1/2%, 5/15/05 (f) B1 10,000,000 9,700,000
Maritime Group Ltd. pay-in-
kind 14%, 2/15/97 (b) - 1,648,399 741,780
Players International, Inc.
10 7/8%, 4/15/05 (f) Ba3 7,050,000 6,944,250
President Riverboat Casinos
13%, 9/15/01 B 7,000,000 5,950,000
Stratosphere Corp.
14 1/4%, 5/15/02 B2 12,740,000 12,994,800
Trump Plaza Funding, Inc. gtd.
mtg. 10 7/8%, 6/15/01 B3 4,713,000 4,335,960
79,008,190
RESTAURANTS - 5.1%
American Restaurant Group, Inc.:
12%, 9/15/98 B2 3,930,000 3,144,000
12%, 9/15/98 (New) B2 3,580,000 2,864,000
Cafeteria Operators LP
11%, 6/30/98 (b)(e) - 7,000,000 1,750,000
Flagstar Corp.
11 1/4%, 11/1/04 Caa 23,555,000 18,372,900
Host Marriott Travel Plazas, Inc.
9 1/2%, 5/15/05 (f) B1 15,000,000 14,325,000
40,455,900
TOTAL MEDIA & LEISURE 194,479,310
NONDURABLES - 4.2%
BEVERAGES - 0.5%
Heileman Acquisition Corp.
9 5/8%, 1/31/04 B3 6,500,000 4,095,000
HOUSEHOLD PRODUCTS - 3.7%
McAndrews & Forbes Group,
Inc. 12 1/4%, 7/1/96 - 1,360,000 1,360,000
Revlon Consumer Products Corp.
10 1/2%, 2/15/03 B3 7,230,000 7,103,475
Revlon Worldwide Corp. secured
0%, 3/15/98 B3 30,342,000 20,860,125
29,323,600
TOTAL NONDURABLES 33,418,600
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - 5.5%
APPAREL STORES - 2.8%
Apparel Retailers, Inc.
12 3/4%, 8/15/05 Caa $ 11,230,000 $ 6,625,700
Lamonts Apparel Corp.
10 1/4%, 11/1/99 (b)(f) - 2,201,000 1,078,490
Specialty Retailers, Inc.:
10%, 8/15/00 B1 2,890,000 2,759,950
11%, 8/15/03 B3 12,220,000 11,364,600
21,828,740
GENERAL MERCHANDISE STORES - 1.4%
Parisian, Inc.
9 7/8%, 7/15/03 Caa 14,322,000 11,027,940
RETAIL & WHOLESALE, MISCELLANEOUS - 1.3%
Barrys Jewelers, Inc.
11%, 12/22/00 - 1,595,000 1,563,100
Finlay Fine Jewelry Corp.
10 5/8%, 5/1/03 B1 4,960,000 4,786,400
Florists Transworld Delivery, Inc.
14%, 12/15/01 B3 4,500,000 4,297,500
10,647,000
TOTAL RETAIL & WHOLESALE 43,503,680
SERVICES - 5.7%
ADVERTISING - 0.8%
Outdoor Systems, Inc.
10 3/4%, 8/15/03 B2 7,000,000 6,720,000
LEASING & RENTAL - 1.7%
Acme Holdings, Inc.
11 3/4%, 6/1/00 (b) Ca 2,930,000 1,465,000
GPA Delaware, Inc.:
8 1/2%, 3/3/97 Ca 3,500,000 3,176,250
gtd. 8 3/4%, 12/15/98 Caa 990,000 831,600
8 5/8%, 1/15/99 - 2,600,000 2,067,000
Scotsman Group, Inc.
9 1/2%, 12/15/00 B1 3,950,000 3,821,625
Scotsman Holdings, Inc.
pay-in-kind 11%, 3/1/04 - 2,080,752 1,712,521
13,073,996
PRINTING - 1.7%
BFP Holdings Corp.
0%, 4/15/04 (d) Caa 5,000,000 3,300,000
Big Flower Press:
10 3/4%, 8/1/03 B3 3,555,000 3,546,113
Class A, 10 3/4%, 8/1/03 B3 4,910,000 4,897,725
Class B, 10 3/4%, 8/1/03 B3 1,480,000 1,476,300
13,220,138
SERVICES - 1.5%
Protection One Alarm
Monitoring, Inc. Unit
0%, 6/30/05 (d)(f) Caa 1,860,000 12,136,500
TOTAL SERVICES 45,150,634
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Alpine Group, Inc.
13 1/2%, 1/5/96 (e) Caa $ 130,000 $ 130,000
TRANSPORTATION - 2.6%
AIR TRANSPORTATION - 1.7%
US Air, Inc.:
Series 1993-A1 Pass Thru
Trust 8 5/8%, 9/1/98 B1 5,000,000 4,725,000
9 5/8%, 2/1/01 B3 930,000 804,450
9 5/8%, 9/1/03 B1 2,550,000 2,422,500
10 3/8%, 3/1/13 B1 5,470,000 5,169,150
13,121,100
RAILROADS - 0.9%
Transtar Holdings L.P./Transtar
Cap. Corp., Series B,
0%, 12/15/03 (d) B- 12,270,000 7,239,300
TOTAL TRANSPORTATION 20,360,400
UTILITIES - 3.1%
CELLULAR - 2.5%
Dial Call Communications,
Inc. 0%, 12/15/05 (d) Caa 2,800,000 1,288,000
Dial Page, Inc.
12 1/4%, 2/15/00 Caa 950,000 985,625
Pagemart Nationwide, Inc. Unit
0%, 2/1/05 (d)(f) - 29,020,000 17,629,650
19,903,275
ELECTRIC UTILITY - 0.1%
El Paso Funding Corp.
lease oblig. (b):
9 3/8%, 10/1/96 Ca 790,000 422,650
9.20%, 7/2/97 Ca 380,000 203,300
625,950
GAS - 0.1%
Columbia Gas Systems, Inc.
9%, 8/1/95 (b) B3 670,000 938,000
TELEPHONE SERVICES - 0.4%
Call-Net Enterprises, Inc.
yankee 0%, 12/1/04 (d) B2 330,000 198,000
Pagemart, Inc.
0%, 11/1/03 (d) - 4,820,000 3,048,650
3,246,650
TOTAL UTILITIES 24,713,875
TOTAL NONCONVERTIBLE BONDS 591,843,760
TOTAL CORPORATE BONDS
(Cost $594,159,103) 593,574,709
COMMERCIAL MORTGAGE SECURITIES - 0.4%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CS First Boston Mortgage
Securities Corp. Commercial
Series 1994-CFB1 Class E,
7.8751%, 1/25/28 (f) Ba2 $ 7,355 $ 5,784
Meritor Mortgage Security Corp.
commercial Series 1987-1
Class B, 9.40%, 2/1/00 (f) - 1,350,000 272,016
SKW Real Estate LP commercial
Series II Class E, 11%,
4/15/05 (f) B 1,500,000 1,500,469
SML, Inc. commercial Series
1994-C1 Class B-3, 11.69%,
9/18/99 - 1,500,000 1,413,750
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $3,126,994) 3,192,019
COMMON STOCKS - 5.5%
SHARES
AEROSPACE & DEFENSE - 0.0%
DEFENSE ELECTRONICS - 0.0%
Tracor, Inc. (a) 18,900 257,513
BASIC INDUSTRIES - 0.1%
IRON & STEEL - 0.1%
WCI Steel, Inc. (a) 67,700 423,125
PAPER & FOREST PRODUCTS - 0.0%
Mail-Well Holdings, Inc. (a) 9,250 55,500
TOTAL BASIC INDUSTRIES 478,625
DURABLES - 0.1%
TEXTILES & APPAREL - 0.1%
Hat Brands, Inc. (warrants) (a)(e) 27,466 302,121
HM/Hat Brands Trust Class I Units (a)(e) 340,000 340,000
642,121
ENERGY - 1.1%
OIL & GAS - 1.1%
Flores & Rucks, Inc. (a) 125,900 1,542,275
TransTexas Gas Corp. (a) 479,600 7,253,950
TOTAL ENERGY 8,796,225
FINANCE - 1.7%
INSURANCE - 1.7%
American Financial Group, Inc. 519,600 13,509,600
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (f) 3,000 300,000
TOTAL FINANCE 13,809,600
HEALTH - 0.0%
MEDICAL EQUIPMENT & SUPPLIES - 0.0%
Wright Medical Technology, Inc.
(warrants) (a) 1,729 285,334
HOLDING COMPANIES - 0.2%
SDW Holdings Corp. (a):
Unit (f) 4,450 1,203,369
(warrants) 3,720 22,320
1,225,689
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
ELECTRICAL EQUIPMENT - 0.1%
Ampex Corp.(a):
Class A 20,681 $ 46,532
Class A (warrants) 57,599 129,598
Class C 230,212 517,977
694,107
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Terex Corp. (rights) (a) 3,150 788
Thermadyne Holdings Corp. (a) 65,419 924,043
924,831
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,618,938
MEDIA & LEISURE - 1.0%
ENTERTAINMENT - 0.0%
Live Entertainment, Inc. (warrants) (a)(e):
$2.00 232,000 58,000
$2.72 221,765 55,441
113,441
LEISURE & DURABLES - 0.1%
IHF Capital, Inc. (a)(f):
Series H (warrants) 10,250 820,000
Series I (warrants) 5,890 147,250
967,250
LODGING & GAMING - 0.9%
Bally Gaming International, Inc.
(warrants) (a) 90,000 618,750
Hollywood Casino Corp. Class A (a) 139,000 1,233,625
Host Marriott Corp. (a) 383,000 4,069,375
Maritime Group Ltd. (warrants) (a) 17,880 179
Motels of America, Inc. (a) 3,000 225,000
Sun International Hotels Ltd. (a) 15,285 687,825
Sun International Hotels Ltd. Class B (a) 3,209 139,592
6,974,346
PUBLISHING - 0.0%
General Media, Inc. (warrant) (a) 1,310 13,100
TOTAL MEDIA & LEISURE 8,068,137
NONDURABLES - 0.6%
TOBACCO - 0.6%
RJR Nabisco Holdings Corp. 161,400 4,499,025
RETAIL & WHOLESALE - 0.1%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc. (a):
(New) 35,870 13,452
(warrants) 66,214 -
13,452
GROCERY STORES - 0.1%
FF Holdings Corp. (a)(e) 33,900 67,800
Food 4 Less Holdings, Inc.
(warrants) (a) 9,348 283,712
MAFCO (warrants) (a) 59 -
351,512
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Barrys Jewelers, Inc. (a) 45,576 148,122
Barrys Jewelers, Inc. (warrants) (a) 5,697 1,424
Finlay Enterprises, Inc. (a) 2,500 35,000
184,546
TOTAL RETAIL & WHOLESALE 549,510
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
SERVICES - 0.4%
LEASING & RENTAL - 0.0%
Scotsman Holdings, Inc. (a) 15,281 $ 199,875
PRINTING - 0.4%
BFP Holdings Class D (a) 160,744 3,214,880
SERVICES - 0.0%
Perry Capital Corp. (warrants) (a)(f) 4,500 22,500
Vestar/LPA Investment Corp. (a) 5,177 129,425
151,925
TOTAL SERVICES 3,566,680
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Berg Electronics Holdings Corp. (a)(f) 20,853 104,265
UTILITIES - 0.0%
CELLULAR - 0.0%
Dial Page, Inc. (warrants) (a) 4,321 5,401
ELECTRIC UTILITY - 0.0%
Eastern Utilities Associates 3 68
Northeast Utilities Associates
(warrants) (a) 21,789 27,236
27,304
GAS - 0.0%
UGI Corp. (warrants) (a) 14,033 2,105
TOTAL UTILITIES 34,810
TOTAL COMMON STOCKS
(Cost $38,165,942) 43,936,472
PREFERRED STOCKS - 7.9%
CONVERTIBLE PREFERRED STOCKS - 0.7%
RETAIL & WHOLESALE - 0.2%
GROCERY STORES - 0.2%
Supermarkets General Holdings Corp.
exchangeable pay-in-kind $3.52 (a) 39,189 1,058,103
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Town & Country Corp. (a) 4,000 3,000
TOTAL RETAIL & WHOLESALE 1,061,103
SERVICES - 0.5%
La Petite Holdings Corp. exchangeable (a) 160,800 4,020,000
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Alpine Group, Inc. cumulative 8% (a) 835 37,575
TOTAL CONVERTIBLE PREFERRED STOCKS 5,118,678
NONCONVERTIBLE PREFERRED STOCKS - 7.2%
BASIC INDUSTRIES - 0.0%
IRON & STEEL - 0.0%
Stelco, Inc. cumulative, Series B, 7.76% 7,207 115,518
PAPER & FOREST PRODUCTS - 0.0%
SD Warren Co. exchangeable
pay-in-kind (a) 3,720 104,160
TOTAL BASIC INDUSTRIES 219,678
SHARES VALUE (NOTE 1)
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Harvard Industries, Inc.
pay-in-kind $14.25 (a) 22,739 $ 625,323
ENERGY - 0.5%
OIL & GAS - 0.5%
Gulf Canada Resources Ltd. (a)(e) 31,009 89,151
Gulf Canada Resources Ltd., Series 1,
adj. rate 1,321,942 3,717,962
3,807,113
FINANCE - 1.8%
SAVINGS & LOANS - 1.8%
First Nationwide Bank 11 1/2% 112,852 12,188,016
Greater New York Savings Bank,
Series B, perpetual 12% 78,751 2,165,653
14,353,669
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Ampex Corp. 8% (a)(e) 1,589 911,927
MEDIA & LEISURE - 4.2%
BROADCASTING - 4.2%
PanAmSat Corp. 12 3/4% 32,700 33,190,500
TECHNOLOGY - 0.5%
ELECTRONICS - 0.5%
Berg Electronics Holding Corp.,
Series E, $3.4687 157,433 4,250,691
TOTAL NONCONVERTIBLE PREFERRED STOCKS 57,358,901
TOTAL PREFERRED STOCKS
(Cost $60,943,714) 62,477,579
PURCHASED BANK DEBT - 0.1%
PRINCIPAL
AMOUNT
Leslie Fay Cos., Inc.:
revolving loan $ 685,856 404,655
term loan 777,600 458,784
TOTAL PURCHASED BANK DEBT
(Cost $1,190,771) 863,439
REPURCHASE AGREEMENTS - 11.3%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 6.22%
dated 6/30/95 due 7/3/95 $ 89,902,575 $ 89,856,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $787,442,524) $ 793,900,218
LEGEND
(a) Non-income producing
(b) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
(e) Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
ACQUISITION ACQUISITION
SECURITY DATE COST
Alpine Group, Inc.
13 1/2%, 1/5/96 1/4/95 $ 128,339
American Financial Corp.
9 3/4%, 4/20/04 5/24/95 $ 6,634,600
Ampex Corp. 8% 2/16/95 $ 834,225
Cafeteria Operators LP
11%, 6/30/98 6/24/93 $ 5,600,000
FF Holdings Corp. 10/2/92 to 1/14/94 $ 135,753
Gulf Canada Resources
Ltd. 10/15/93 $ 76,940
Hat Brands,
Inc. (warrants) 9/2/92 to 2/23/94 $ -
HM/Hat Brands Trust
Class I Units 2/22/94 $ 340,000
Leslie Fay Cos., Inc.:
9.53%, 1/15/00 7/19/93 $ 512,312
10.54%, 1/15/02 7/19/93 to 11/11/93 $ 404,156
Littlefield Co.
10%, 12/31/95 2/28/94 $ 2,750,000
Live Entertainment, Inc.
(warrants):
$2.00 3/23/93 $ 220,717
$2.72 3/23/93 $ 131,863
New Street Capital Corp.
pay-in-kind:
12%, 2/28/98 2/15/95 $ 67,416
Unit 12%, 2/28/98 2/25/94 to 9/1/94 $ 1,123,600
RHI Holdings, Inc.
11 7/8%, 3/1/99 10/15/92 $ 495,000
(f) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $103,757,499 or 12.8% of net
assets.
(g) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $643,634,101 and $467,491,408, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $21,896 for the period (see
Note 3 of Notes to the Financial Statements).
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 0.0% AAA, AA, A 0.0%
Baa 0.0% BBB 0.0%
Ba 6.4% BB 17.3%
B 41.9% B 41.6%
Caa 16.3% CCC 4.8%
Ca, C 0.3% CC, C 0.0%
D 0.4%
The percentage not rated by either S&P or Moody's amounted to 7.9%
including long-term debt categorized as other securities. FMR has
determined that unrated debt securities that are lower quality account for
7.9% of the total value of investment in securities.
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $787,696,044. Net unrealized appreciation aggregated
$6,204,174, of which $27,367,484 related to appreciated investment
securities and $21,163,310 related to depreciated investment securities.
At December 31, 1994, the fund had a capital loss carryforward of
approximately $1,148,000 all of which will expire on December 31, 2002.
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $89,856,000) (cost $787,442,524) - $ 793,900,218
See accompanying schedule
Cash 506,521
Receivable for investments sold 10,050,335
Receivable for fund shares sold 5,462,661
Dividends receivable 1,104,845
Interest receivable 12,928,622
TOTAL ASSETS 823,953,202
LIABILITIES
Payable for investments purchased $ 9,912,131
Payable for fund shares redeemed 178,315
Accrued management fee 405,377
Other payables and accrued expenses 77,305
TOTAL LIABILITIES 10,573,128
NET ASSETS $ 813,380,074
Net Assets consist of:
Paid in capital $ 767,990,586
Undistributed net investment income 33,139,910
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 5,795,848
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 6,453,730
NET ASSETS, for 72,678,030 shares outstanding $ 813,380,074
NET ASSET VALUE, offering price and redemption price per share ($813,380,074 (divided by) 72,678,030 shares) $11.19
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 2,728,599
Dividends
Interest 33,425,785
TOTAL INCOME 36,154,384
EXPENSES
Management fee $ 2,138,740
Transfer agent fees 183,111
Accounting fees and expenses 121,670
Non-interested trustees' compensation 1,780
Custodian fees and expenses 6,018
Audit 17,965
Interest 2,621
Total expenses before reductions 2,471,905
Expense reductions (5,422 2,466,483
)
NET INVESTMENT INCOME 33,687,901
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 7,181,679
Foreign currency transactions (978 7,180,701
)
Change in net unrealized appreciation (depreciation) on:
Investment securities 39,872,106
Assets and liabilities in foreign currencies (150 39,871,956
)
NET GAIN (LOSS) 47,052,657
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 80,740,558
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1995 1994
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 33,687,901 $ 43,091,356
Net investment income
Net realized gain (loss) 7,180,701 (726,075
)
Change in net unrealized appreciation (depreciation) 39,871,956 (49,793,238
)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 80,740,558 (7,427,957
)
Distributions to shareholders (43,871,918 (30,631,598
From net investment income ) )
From net realized gain - (15,525,605
)
TOTAL DISTRIBUTIONS (43,871,918 (46,157,203
) )
Share transactions 333,374,520 498,543,147
Net proceeds from sales of shares
Reinvestment of distributions 43,871,918 46,157,203
Cost of shares redeemed (170,151,760 (385,629,739
) )
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 207,094,678 159,070,611
TOTAL INCREASE (DECREASE) IN NET ASSETS 243,963,318 105,485,451
NET ASSETS
Beginning of period 569,416,756 463,931,305
End of period (including undistributed net investment income of $33,139,910 and $42,834,969,
respectively) $ 813,380,074 $ 569,416,756
OTHER INFORMATION
Shares
Sold 31,093,586 45,102,882
Issued in reinvestment of distributions 4,326,619 4,073,892
Redeemed (15,728,132 (34,899,979
) )
Net increase (decrease) 19,692,073 14,276,795
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 D 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.750 $ 11.990 $ 10.820 $ 9.550 $ 7.070 $ 8.110
Income from Investment Operations .428 .770 .728 .790 .890 .858
Net investment income
Net realized and unrealized gain (loss) .792 (.910) 1.332 1.290 1.590 (1.040)
Total from investment operations 1.220 (.140) 2.060 2.080 2.480 (.182)
Less Distributions (.780) (.730) (.794) (.810) - (.858)
From net investment income
In excess of net investment income - - (.036) - - -
From net realized gain on investments - (.370) (.060) - - -
Total distributions (.780) (1.100) (.890) (.810) - (.858)
Net asset value, end of period $ 11.190 $ 10.750 $ 11.990 $ 10.820 $ 9.550 $ 7.070
TOTAL RETURN B, C 12.10% (1.64) 20.40% 23.17% 35.08% (2.23)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 813,380 $ 569,417 $ 463,931 $ 200,591 $ 70,060 $ 29,990
Ratio of expenses to average net assets .70% .71% .64% .67% .97% 1.00%
A
Ratio of expenses to average net assets before expense .70% .71% .66% .67% .97% 1.12%
reductions A
Ratio of net investment income to average net assets 9.58% 8.75% 8.69% 10.98% 12.94% 11.36%
A
Portfolio turnover rate 154% 122% 155% 160% 154% 156%
A
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR
INSURANCE COMPANY'S SEPARATE
ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES
TO THE FINANCIAL
STATEMENTS).
D EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT
PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
Equity-Income 24.00% 15.06% 12.30%
S&P 500 26.07% 12.09% 13.58%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for
example, has a history of growth in the long run
and volatility in the short run. In turn, the share
price and return of a fund that invests in stocks
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare these figures to the performance of the Standard & Poor's
Composite Index of 500 stocks - a common proxy for the U.S. stock market.
This benchmark includes reinvested dividends and capital gains, if any.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, October 9, 1986.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER LIFE OF FUND
VIP Equity Income (Standard & Poor's 50
10/09/86 10000.00 10000.00
10/31/86 10110.00 10329.97
11/30/86 10330.00 10580.99
12/31/86 10020.00 10311.18
01/31/87 11170.00 11700.09
02/28/87 11430.00 12162.25
03/31/87 11720.18 12513.74
04/30/87 11428.43 12402.36
05/31/87 11498.86 12510.26
06/30/87 11738.55 13142.03
07/31/87 12185.73 13808.33
08/31/87 12521.12 14323.38
09/30/87 12258.32 14009.70
10/31/87 9866.20 10992.01
11/30/87 9424.74 10086.27
12/31/87 9906.52 10853.84
01/31/88 10611.13 11310.78
02/29/88 11136.95 11837.86
03/31/88 10943.07 11472.07
04/30/88 11124.21 11599.41
05/31/88 11273.39 11700.33
06/30/88 11914.76 12237.37
07/31/88 11893.18 12190.87
08/31/88 11688.12 11776.38
09/30/88 12035.42 12278.06
10/31/88 12243.12 12619.39
11/30/88 12046.36 12438.93
12/31/88 12156.33 12656.61
01/31/89 12907.13 13583.07
02/28/89 12840.88 13244.86
03/31/89 13119.01 13553.46
04/30/89 13625.32 14256.89
05/31/89 14030.37 14834.29
06/30/89 14039.98 14749.73
07/31/89 14858.50 16081.64
08/31/89 15097.24 16396.84
09/30/89 14927.51 16329.61
10/31/89 14066.31 15950.76
11/30/89 14146.69 16276.16
12/31/89 14264.74 16666.78
01/31/90 13301.38 15548.44
02/28/90 13380.20 15749.02
03/31/90 13402.27 16166.37
04/30/90 12937.59 15762.21
05/31/90 13793.57 17299.02
06/30/90 13656.23 17181.39
07/31/90 13322.25 17126.41
08/31/90 12258.45 15578.18
09/30/90 11307.54 14819.52
10/31/90 11019.21 14755.80
11/30/90 11808.98 15709.03
12/31/90 12083.75 16147.31
01/31/91 12731.78 16851.33
02/28/91 13608.52 18056.20
03/31/91 13890.81 18493.16
04/30/91 13955.72 18537.54
05/31/91 14721.66 19338.37
06/30/91 14119.72 18452.67
07/31/91 14920.19 19312.56
08/31/91 15235.12 19770.27
09/30/91 15130.56 19440.11
10/31/91 15382.51 19700.60
11/30/91 14719.47 18906.67
12/31/91 15882.70 21069.59
01/31/92 16097.15 20677.70
02/29/92 16619.87 20946.51
03/31/92 16416.22 20538.05
04/30/92 16930.49 21141.87
05/31/92 17065.83 21245.47
06/30/92 16916.41 20928.91
07/31/92 17434.82 21784.90
08/31/92 17052.84 21338.31
09/30/92 17229.86 21590.10
10/31/92 17436.12 21665.67
11/30/92 18068.66 22404.47
12/31/92 18564.83 22680.04
01/31/93 19119.01 22870.55
02/28/93 19548.49 23181.59
03/31/93 20131.05 23670.73
04/30/93 20047.35 23097.89
05/31/93 20410.07 23716.92
06/30/93 20650.14 23785.70
07/31/93 20931.09 23690.55
08/31/93 21731.81 24588.43
09/30/93 21648.73 24399.09
10/31/93 21846.69 24904.16
11/30/93 21464.91 24667.57
12/31/93 21961.06 24966.04
01/31/94 22928.26 25814.89
02/28/94 22337.82 25115.31
03/31/94 21403.32 24020.28
04/30/94 22140.85 24327.74
05/31/94 22351.57 24726.71
06/30/94 22213.48 24120.91
07/31/94 22955.44 24912.07
08/31/94 24136.53 25933.47
09/30/94 23741.11 25298.10
10/31/94 24228.42 25867.31
11/30/94 23436.54 24925.22
12/31/94 23512.77 25294.86
01/31/95 23880.40 25950.76
02/28/95 24790.97 26962.06
03/31/95 25646.99 27757.71
04/30/95 26360.31 28575.17
05/31/95 27154.68 29717.32
06/30/95 27544.83 30407.65
Let's say you invested $10,000 in Equity-Income Portfolio on October 9,
1986, when the fund started. By June 30, 1995, your investment would have
grown to $27,545 - a 175.45% increase. That compares to $10,000 invested in
the S&P 500, which would have grown to $30,408 over the same period - a
204.08% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Philip Morris Companies, Inc. 4.2
Federal National Mortgage Association 2.8
International Business Machines Corp. 2.1
American Express Co. 2.1
British Petroleum PLC ADR 2.0
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Finance 18.0
Energy 10.1
Nondurables 8.8
Basic Industries 7.7
Industrial Machinery & Equipment 7.3
ASSET ALLOCATION AS OF JUNE 30, 1995*
Row: 1, Col: 1, Value: 7.3
Row: 1, Col: 2, Value: 6.2
Row: 1, Col: 3, Value: 86.5
Stocks 86.5%
Bonds 6.2%
Short-term investments 7.3%
FOREIGN INVESTMENTS 6.2%
*
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Bettina Doulton, Portfolio Manager of Equity-Income
Portfolio
Q. BETTINA, HOW DID THE FUND PERFORM?
A. Although the fund did well relative to its peers, it slightly trailed
the performance of the Standard & Poor's 500 stock index for the six- and
12-month periods ended June 30, 1995. The index had total returns of 20.21%
and 26.07% for those periods, respectively. Because this recent stock
market rally was quite narrow - led by a few sectors, namely technology,
financials and the large-cap and blue-chip stocks - the average stock
mutual fund has not topped the performance of the index thus far in 1995.
Q. THE STOCK MARKET SHOWED A RENEWED VIGOR OVER THE PAST SIX MONTHS. WHAT
ACCOUNTED FOR THIS?
A. The market's strength was driven by investors' belief that the Federal
Reserve Board would manage the economy to a soft landing - steady, albeit
slower, economic growth and continued low inflation. If achieved, those
conditions are ideal for Corporate America to sustain strong profit growth.
During the six-month period, corporate earnings reports were excellent,
which provided the fuel for stock prices to move higher. Excluding the
consistently outstanding performance of the technology and financial
sectors, the market has been characterized by rapid industry rotation.
Investors have spent the past six months racing from one industry to the
next, trying to stay one step ahead of the crowd. Sometimes, the fund was
in the right place at the right time, and sometimes it wasn't.
Q. WHAT CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. Several of the fund's largest holdings have driven returns recently.
Highlights include Philip Morris. The stock has been rewarded for the
company's strong profit growth and free cash flow; both are attributable to
terrific results in the company's domestic and international tobacco
businesses, which more than offset mediocre results in its food division.
Second in line is the Federal National Mortgage Association (Fannie Mae).
Although its stock price suffered a significant setback last fall, it has
since recovered as conditions in the secondary mortgage market have turned
more favorable. IBM was another strong performer. The company has done an
excellent job cutting costs and cleaning up its balance sheet. In addition,
global economic growth and wide acceptance of the company's new products
have contributed to accelerating revenue growth. Finally, in the energy
sector, the energy service company Schlumberger performed well. It
benefited from improving worldwide supply/demand dynamics for oil and
corporate restructuring efforts. Elsewhere in the energy sector, however,
British Petroleum (BP) and Amerada Hess have been somewhat disappointing in
terms of stock performance. Both are restructuring stories; BP's stock may
just be taking a breather after making significant gains, while Amerada
Hess' turnaround may be just taking a bit longer than investors had
expected.
Q. YOU MORE THAN DOUBLED THE FUND'S STAKE IN FINANCIAL STOCKS; THEY WENT
FROM 7.1% OF THE FUND SIX MONTHS AGO TO 18.0% ON JUNE 30 . . .
A. Recent purchases of bank stocks made up most of that increase. Along
with the diversified financial services companies such as American Express
and Fannie Mae, banks had a strong, if volatile, run. My only regret is not
owning more of them early in the period, when they began to outperform.
Prices did fall in the spring, however, which allowed me to buy stocks such
as Chemical Banking and BankAmerica off their highs. In the coming months,
I expect the market to drive bank stock valuations - prices relative to
earnings - higher. That's because earnings are becoming more consistent,
the industry is consolidating, and companies are using excess capital to
repurchase shares of their own stocks.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. When interest rates fall, as they've done over the past few months, the
market usually rewards stocks with higher valuations. However, we have to
keep in mind that the economy has slowed, which could negatively affect
corporate earnings going forward. The 64-thousand-dollar question then
becomes: will the market's willingness to drive up valuations and look
toward an economic resurgence be enough to offset the negative effects of
potential short-term earnings disappointments? I'm afraid not. Companies
that report less-than-expected earnings growth in the coming months will
most likely pay dearly with falling stock prices. In light of this, I plan
to focus intensely on owning companies that trade at attractive valuations,
offer good prospects for higher earnings through 1996, and are working to
enhance shareholder value.
FUND FACTS
GOAL: to provide current income and increase
the value of the fund's shares
START DATE: October 9, 1986
SIZE: as of June 30, 1995, more than $3.4 billion
MANAGER: Bettina Doulton, since 1993;
manager, Fidelity Value Fund, since March
1995; Fidelity Advisor Equity-Income Fund,
since 1993; joined Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 85.3%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 5.7%
AEROSPACE & DEFENSE - 3.8%
Alliant Techsystems, Inc. (a) 421,700 $ 17,605,959
Boeing Co. 353,800 22,156,725
General Motors Corp. Class H 426,200 16,834,900
Lockheed Martin Corp. 434,803 27,446,939
McDonnell Douglas Corp. 131,000 10,054,250
Rockwell International Corp. 429,600 19,654,200
Sundstrand Corp. 183,000 10,934,250
Thiokol Corp. 186,400 5,638,600
130,325,823
DEFENSE ELECTRONICS - 1.4%
Litton Industries, Inc. (a) 268,700 9,908,313
Loral Corp. 214,700 11,110,725
Raytheon Co. 342,300 26,571,038
47,590,076
SHIP BUILDING & REPAIR - 0.5%
General Dynamics Corp. 420,400 18,655,250
TOTAL AEROSPACE & DEFENSE 196,571,149
BASIC INDUSTRIES - 7.5%
CHEMICALS & PLASTICS - 4.7%
du Pont (E.I.) de Nemours & Co. 571,100 39,263,125
Grace (W.R.) & Co. 503,600 30,908,450
Hercules, Inc. 810,900 39,531,375
Nalco Chemical Co. 462,300 16,816,163
Raychem Corp. 284,300 10,910,013
Union Carbide Corp. 713,100 23,799,713
161,228,839
IRON & STEEL - 0.1%
Nucor Corp. 38,600 2,065,100
METALS & MINING - 1.3%
Alcan Aluminium Ltd. 746,183 22,562,179
Aluminum Co. of America 467,200 23,418,400
45,980,579
PAPER & FOREST PRODUCTS - 1.4%
Scott Paper Co. 966,600 47,846,700
TOTAL BASIC INDUSTRIES 257,121,218
CONGLOMERATES - 2.8%
Allied-Signal, Inc. 382,600 17,025,700
GenCorp, Inc. 33,600 361,200
Tyco International Ltd. 857,071 46,281,834
United Technologies Corp. 398,900 31,164,063
94,832,797
CONSTRUCTION & REAL ESTATE - 0.2%
REAL ESTATE INVESTMENT TRUSTS - 0.2%
Starwood Lodging Trust combined
certificate (SBI) 125,900 2,909,045
Storage Equities, Inc. 145,800 2,387,475
5,296,520
DURABLES - 2.6%
AUTOS, TIRES, & ACCESSORIES - 1.6%
Chrysler Corp. 140,600 6,731,225
Dana Corp. 438,200 12,543,475
General Motors Corp. 269,800 12,646,875
Johnson Controls, Inc. 61,100 3,452,150
PACCAR, Inc. 93,500 4,371,125
Snap-on Tools Corp. 374,000 14,492,500
54,237,350
SHARES VALUE (NOTE 1)
DURABLES - CONTINUED
CONSUMER ELECTRONICS - 0.7%
Black & Decker Corp. 222,600 $ 6,872,775
Whirlpool Corp. 341,200 18,766,000
25,638,775
HOME FURNISHINGS - 0.1%
Heilig-Meyers Co. 104,700 2,669,850
TEXTILES & APPAREL - 0.2%
Westpoint Stevens, Inc. Class A (a) 397,100 7,098,163
TOTAL DURABLES 89,644,138
ENERGY - 9.7%
ENERGY SERVICES - 3.1%
Baker Hughes, Inc. 521,800 10,696,900
Halliburton Co. 959,000 34,284,250
Helmerich & Payne, Inc. 130,400 3,846,800
McDermott International, Inc. 575,000 13,871,875
Schlumberger Ltd. 691,300 42,947,013
105,646,838
OIL & GAS - 6.6%
Amerada Hess Corp. 929,700 45,439,088
British Petroleum PLC ADR 823,528 70,514,585
Canada Occidental Petroleum Ltd. 239,500 7,438,025
Coastal Corp. (The) 459,800 13,966,425
Kerr-McGee Corp. 157,400 8,440,575
Mobil Corp. 353,700 33,955,200
Occidental Petroleum Corp. 1,047,000 23,950,125
Tosco Corp. 279,100 8,896,313
Total SA:
Class B 210,425 12,691,129
sponsored ADR 129,500 3,917,375
229,208,840
TOTAL ENERGY 334,855,678
FINANCE - 18.0%
BANKS - 6.6%
Bank of Boston Corp. 482,800 18,105,000
Bank of New York Co., Inc. 163,000 6,581,125
BankAmerica Corp. 511,100 26,896,638
Bankers Trust New York Corp. 430,400 26,684,800
Chase Manhattan Corp. 480,041 22,561,927
Chemical Banking Corp. 670,100 31,662,225
Citicorp 647,300 37,462,488
First Chicago Corp. 119,100 7,131,113
First Union Corp. 192,700 8,719,675
Fleet Financial Group, Inc. 328,900 12,210,413
Mellon Bank Corp. 59,600 2,480,850
NationsBank Corp. 35,400 1,898,325
Republic New York Corp. 230,700 12,919,200
Shawmut National Corp. 345,200 11,003,250
226,317,029
CREDIT & OTHER FINANCE - 2.8%
American Express Co. 2,012,672 70,695,104
Countrywide Credit Industries, Inc. 886,700 18,620,700
Greenpoint Financial Corp. 362,900 8,573,513
97,889,317
FEDERAL SPONSORED CREDIT - 4.1%
Federal Home Loan Mortgage
Corporation 625,400 42,996,250
Federal National Mortgage Association 1,023,900 96,630,563
139,626,813
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
INSURANCE - 3.4%
Allstate Corp. 182,900 $ 5,418,413
American International Group, Inc. 197,200 22,480,800
American Reinsurance Corp. 11,300 420,925
General Re Corp. 193,700 25,931,588
Loews Corp. 266,500 32,246,500
PMI Group, Inc. 100,600 4,363,525
Reliastar Financial Corp. 252,100 9,642,825
Travelers, Inc. (The) 359,233 15,716,458
116,221,034
SAVINGS & LOANS - 0.3%
Ahmanson (H.F.) & Co. 273,900 6,025,800
Charter One Financial Corp. 162,000 3,969,000
9,994,800
SECURITIES INDUSTRY - 0.8%
Merrill Lynch & Co., Inc. 522,600 27,436,500
TOTAL FINANCE 617,485,493
HEALTH - 4.3%
DRUGS & PHARMACEUTICALS - 1.8%
Allergan, Inc. 340,100 9,225,213
American Home Products Corp. 360,000 27,855,000
Pfizer, Inc. 297,800 13,754,638
SmithKline Beecham PLC ADR 266,000 12,036,500
62,871,351
MEDICAL EQUIPMENT & SUPPLIES - 1.7%
Baxter International, Inc. 971,300 35,331,038
Beckman Instruments, Inc. 800 22,300
I-Stat Corp. (a) 173,100 6,318,150
Puritan Bennett Corp. 257,500 9,945,938
St. Jude Medical, Inc. 105,400 5,283,175
56,900,601
MEDICAL FACILITIES MANAGEMENT - 0.8%
Columbia/HCA Healthcare Corp. 621,800 26,892,850
TOTAL HEALTH 146,664,802
INDUSTRIAL MACHINERY & EQUIPMENT - 7.2%
ELECTRICAL EQUIPMENT - 1.0%
Emerson Electric Co. 211,700 15,136,550
General Electric Co. 175,500 9,893,813
Philips Electronics NV 196,600 8,404,650
Philips Electronics NV (Bearer) 45,200 1,915,824
35,350,837
INDUSTRIAL MACHINERY & EQUIPMENT - 3.5%
Caterpillar, Inc. 415,100 26,670,175
Cooper Industries, Inc. 467,000 18,446,500
Deere & Co. 474,400 40,620,500
Dover Corp. 145,100 10,556,025
Ingersoll-Rand Co. 574,300 21,966,975
Varity Corp. (a) 62,800 2,763,200
121,023,375
POLLUTION CONTROL - 2.7%
Browning-Ferris Industries, Inc. 870,700 31,454,038
Safety Kleen Corp. 583,600 9,410,550
WMX Technologies, Inc. 1,537,600 43,629,400
Wheelabrator Technologies, Inc. 453,200 6,967,950
91,461,938
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 247,836,150
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 2.1%
BROADCASTING - 1.2%
Viacom, Inc. Class B (non-vtg.) (a) 851,614 $ 39,493,599
PUBLISHING - 0.9%
Meredith Corp. 102,000 2,588,250
News Corp. Ltd.:
ADR 741,700 16,780,963
(vtg.) pfd. sponsored ADR 74,900 1,498,000
Times Mirror Co. Class A 461,800 11,025,475
31,892,688
TOTAL MEDIA & LEISURE 71,386,287
NONDURABLES - 8.6%
BEVERAGES - 0.9%
PepsiCo, Inc. 647,100 29,523,938
FOODS - 0.6%
ConAgra, Inc. 483,700 16,869,038
Dole Food, Inc. 157,600 4,590,100
21,459,138
HOUSEHOLD PRODUCTS - 1.3%
Avon Products, Inc. 285,480 19,127,160
First Brands Corp. 329,800 14,140,175
Rubbermaid, Inc. 168,800 4,684,200
Tambrands, Inc. 172,300 7,365,825
45,317,360
TOBACCO - 5.8%
Imasco Ltd. 1,453,600 25,815,296
Philip Morris Companies, Inc. 1,927,300 143,342,938
RJR Nabisco Holdings Corp. 1,054,639 29,398,062
198,556,296
TOTAL NONDURABLES 294,856,732
RETAIL & WHOLESALE - 3.2%
APPAREL STORES - 0.4%
Limited, Inc. (The) 618,400 13,604,800
GENERAL MERCHANDISE STORES - 2.1%
Dayton Hudson Corp. 293,400 21,051,450
May Department Stores Co. (The) 95,700 3,983,513
Wal-Mart Stores, Inc. 1,604,500 42,920,375
Woolworth Corp. 322,200 4,873,275
72,828,613
GROCERY STORES - 0.7%
Fleming Companies, Inc. 230,445 6,106,793
Great Atlantic & Pacific Tea Co., Inc. 397,600 10,486,700
Vons Companies, Inc. (a) 384,200 7,732,025
24,325,518
TOTAL RETAIL & WHOLESALE 110,758,931
SERVICES - 0.4%
PRINTING - 0.2%
Wallace Computer Services, Inc. 168,200 6,454,675
SERVICES - 0.2%
ADT Ltd. (a) 640,900 7,530,575
TOTAL SERVICES 13,985,250
TECHNOLOGY - 4.9%
COMPUTERS & OFFICE EQUIPMENT - 3.9%
Hewlett-Packard Co. 405,000 30,172,500
International Business Machines Corp. 755,700 72,547,200
Pitney Bowes, Inc. 792,200 30,400,675
133,120,375
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONIC INSTRUMENTS - 0.2%
Perkin-Elmer Corp. 226,200 $ 8,030,100
ELECTRONICS - 0.8%
AMP, Inc. 385,600 16,291,600
Kemet Corp. 46,700 2,451,750
Thomas & Betts Corp. 143,700 9,825,488
28,568,838
TOTAL TECHNOLOGY 169,719,313
TRANSPORTATION - 1.8%
RAILROADS - 1.8%
Burlington Northern, Inc. 534,200 33,854,925
CSX Corp. 195,300 14,671,913
Southern Pacific Rail Corp. (a) 919,300 14,478,975
TOTAL TRANSPORTATION 63,005,813
UTILITIES - 6.3%
GAS - 0.5%
Williams Companies, Inc. 489,200 17,060,850
TELEPHONE SERVICES - 5.8%
Ameritech Corp. 1,067,900 46,987,600
Bell Atlantic Corp. 210,100 11,765,600
BellSouth Corp. 576,200 36,588,700
Koninklijke PPT Nederland 165,600 5,959,760
Koninklijke PPT Nederland (a)(d) 104,400 3,757,240
NYNEX Corp. 1,200,400 48,316,100
SBC Communications, Inc. 871,300 41,495,663
Southern New England
Telecommunications Corp. 175,700 6,193,425
201,064,088
TOTAL UTILITIES 218,124,938
TOTAL COMMON STOCKS
(Cost $2,563,116,541) 2,932,145,209
PREFERRED STOCKS - 1.2%
CONVERTIBLE PREFERRED STOCKS - 0.8%
DURABLES - 0.3%
AUTOS, TIRES, & ACCESSORIES - 0.3%
Chrysler Corp., Series A, $4.625 (d) 85,200 11,374,200
ENERGY - 0.4%
ENERGY SERVICES - 0.1%
Noble Drilling Corp. $1.50 119,100 2,828,625
OIL & GAS - 0.3%
Atlantic Richfield Co.
exchangeable $.5575 431,300 11,213,800
TOTAL ENERGY 14,042,425
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Westinghouse Electric Corp. $1.30 (d) 351,500 5,140,688
TOTAL CONVERTIBLE PREFERRED STOCKS 30,557,313
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONCONVERTIBLE PREFERRED STOCKS - 0.4%
MEDIA & LEISURE - 0.4%
PUBLISHING - 0.4%
News Corp. Ltd. (ltd. vtg.) 2,510,505 $ 12,393,685
UTILITIES - 0.0%
ELECTRIC UTILITY - 0.0%
Gulf States Utilities Co., Series B,
adj. rate 586 28,348
TOTAL NONCONVERTIBLE PREFERRED STOCKS 12,422,033
TOTAL PREFERRED STOCKS
(Cost $39,195,081) 42,979,346
CORPORATE BONDS - 2.4%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (C)
CONVERTIBLE BONDS - 0.8%
CONSTRUCTION & REAL ESTATE - 0.1%
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Centerpoint Properties 8.22%,
1/15/04 - $ 1,510,000 1,683,650
Liberty Property LP 8%, 7/1/01 - 750,000 735,000
Sizeler Property Investors, Inc.
8%, 7/15/03 - 1,500,000 1,312,500
TOTAL CONSTRUCTION & REAL ESTATE 3,731,150
HEALTH - 0.6%
DRUGS & PHARMACEUTICALS - 0.6%
Roche Holdings, Inc. liquid
yield option notes
0%, 4/20/10 (d) - 48,340,000 19,336,000
PRECIOUS METALS - 0.1%
Pegasus Gold, Inc. euro
6 1/4%, 4/30/02 (d) Baa3 1,860,000 1,755,375
SERVICES - 0.0%
SERVICES - 0.0%
ADT Operations, Inc. liquid
yield option notes
0%, 7/6/10 Ba3 3,670,000 1,405,940
UTILITIES - 0.0%
GAS - 0.0%
SFP Pipeline Holdings, Inc.
exchangeable
0%, 8/15/10 (e) Baa3 470,000 606,300
TOTAL CONVERTIBLE BONDS 26,834,765
NONCONVERTIBLE BONDS - 1.6%
AEROSPACE & DEFENSE - 0.1%
DEFENSE ELECTRONICS - 0.1%
Tracor, Inc. 10 7/8%, 8/15/01 B2 1,220,000 1,250,500
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - 0.2%
PACKAGING & CONTAINERS - 0.0%
Owens Illinois, Inc. 10 1/4%,
4/1/99 B2 $ 350,000 $ 357,000
PAPER & FOREST PRODUCTS - 0.2%
Stone Container Corp. 9 7/8%,
2/1/01 B1 7,760,000 7,682,400
TOTAL BASIC INDUSTRIES 8,039,400
CONGLOMERATES - 0.0%
Coltec Industries, Inc. 10 1/4%,
4/1/02 B1 910,000 941,850
DURABLES - 0.3%
TEXTILES & APPAREL - 0.3%
Westpoint Stevens, Inc.:
8 3/4%, 12/15/01 B1 2,660,000 2,620,100
9 3/8%, 12/15/05 B3 7,850,000 7,575,250
TOTAL DURABLES 10,195,350
FINANCE - 0.0%
BANKS - 0.0%
Signet Banking Corp.:
6 1/4%, 5/15/97 (e) Baa2 340,000 337,025
6.4375%, 4/15/98 (e) Baa2 190,000 187,150
TOTAL FINANCE 524,175
MEDIA & LEISURE - 0.8%
BROADCASTING - 0.8%
Viacom, Inc. 8%, 7/7/06 B1 28,240,000 27,463,400
NONDURABLES - 0.2%
BEVERAGES - 0.2%
Canandaigua Wine, Inc.
8 3/4%, 12/15/03 (b) B1 5,700,000 5,586,000
UTILITIES - 0.0%
GAS - 0.0%
Columbia Gas Systems Inc.
9.91%, 5/28/20 (b) - 170,000 250,325
TOTAL NONCONVERTIBLE BONDS 54,251,000
TOTAL CORPORATE BONDS
(Cost $76,398,754) 81,085,765
U.S. TREASURY OBLIGATIONS - 3.8%
6 1/4%, 2/15/03 Aaa 17,860,000 17,907,508
5 3/4%, 8/15/03 Aaa 81,220,000 78,745,227
7 1/4%, 5/15/04 Aaa 24,291,000 25,934,529
11 5/8%, 11/15/04 Aaa 6,810,000 9,361,639
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $118,810,332) 131,948,903
REPURCHASE AGREEMENTS - 7.3%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 6.22% dated
6/30/95 due 7/3/95 $ 252,910,024 $ 252,779,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $3,050,299,708) $ 3,440,938,223
LEGEND
(a) Non-income producing
(b) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $41,363,503 or 1.2% of net
assets.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $2,163,942,745 and $1,281,174,381, respectively, of which U.S.
government and government agency obligations aggregated $42,997,272 and
$41,828,379, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $1,153,411 for the period
(see Note 3 of Notes to Financial Statements).
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 3.8% AAA, AA, A 3.8%
Baa 0.1% BBB 0.0%
Ba 0.0% BB 0.9%
B 1.6% B 0.7%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 0.7%.
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $3,052,199,640. Net unrealized appreciation aggregated
$388,738,583, of which $407,074,046 related to appreciated investment
securities and $18,335,463 related to depreciated investment securities.
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $252,779,000) (cost $ 3,440,938,223
$3,050,299,708) -
See accompanying schedule
Cash 864
Receivable for investments sold 66,280,607
Receivable for fund shares sold 5,980,486
Dividends receivable 8,213,745
Interest receivable 4,230,266
Other receivables 42,410
TOTAL ASSETS 3,525,686,601
LIABILITIES
Payable for investments purchased $ 63,785,673
Payable for fund shares redeemed 629,290
Accrued management fee 1,452,585
Other payables and accrued expenses 513,611
TOTAL LIABILITIES 66,381,159
NET ASSETS $ 3,459,305,442
Net Assets consist of:
Paid in capital $ 2,994,274,835
Undistributed net investment income 5,530,661
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 68,857,443
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 390,642,503
NET ASSETS, for 204,803,927 shares outstanding $ 3,459,305,442
NET ASSET VALUE, offering price and redemption price per share ($3,459,305,442 (divided by) 204,803,927 shares) $16.89
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 31,571,004
Dividends
Interest 16,392,102
TOTAL INCOME 47,963,106
EXPENSES
Management fee $ 7,399,646
Transfer agent fees 727,522
Accounting fees and expenses 378,208
Non-interested trustees' compensation 5,452
Custodian fees and expenses 39,578
Registration fees 251,928
Audit 24,512
Legal 4,441
Interest 9,801
Miscellaneous 7,582
TOTAL EXPENSES 8,848,670
NET INVESTMENT INCOME 39,114,436
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 72,417,571
Foreign currency transactions (3,308 72,414,263
)
Change in net unrealized appreciation (depreciation) on:
Investment securities 336,113,775
Assets and liabilities in foreign currencies (8,788 336,104,987
)
NET GAIN (LOSS) 408,519,250
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 447,633,686
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 39,114,436 $ 49,846,224
Net investment income
Net realized gain (loss) 72,414,263 121,898,471
Change in net unrealized appreciation (depreciation) 336,104,987 (61,690,963)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 447,633,686 110,053,732
Distributions to shareholders (37,713,247) (44,739,784)
From net investment income
From net realized gain (121,254,353) (68,533,800)
TOTAL DISTRIBUTIONS (158,967,600) (113,273,584)
Share transactions 802,500,637 1,048,772,904
Net proceeds from sales of shares
Reinvestment of distributions 158,967,516 113,273,584
Cost of shares redeemed (75,240,890) (192,914,992)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 886,227,263 969,131,496
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,174,893,349 965,911,644
NET ASSETS
Beginning of period 2,284,412,093 1,318,500,449
End of period (including undistributed net investment income of $5,530,661 and $4,150,957,
respectively) $ 3,459,305,442 $ 2,284,412,093
OTHER INFORMATION
Shares
Sold 50,281,447 68,815,564
Issued in reinvestment of distributions 10,351,678 7,484,681
Redeemed (4,656,990) (12,882,315)
Net increase (decrease) 55,976,135 63,417,930
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 D 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.35 $ 15.44 $ 13.40 $ 11.85 $ 9.51 $ 12.29
Income from Investment Operations
Net investment income .20 .41 .37 .40 .50 .58
Net realized and unrealized gain (loss) 2.32 .64 2.06 1.57 2.43 (2.38)
Total from investment operations 2.52 1.05 2.43 1.97 2.93 (1.80)
Less Distributions (.20) (.37) (.35) (.42) (.59) (.59)
From net investment income
In excess of net investment income - - (.04) - - -
From net realized gain (.78) (.77) - - - (.39)
Total distributions (.98) (1.14) (.39) (.42) (.59) (.98)
Net asset value, end of period $ 16.89 $ 15.35 $ 15.44 $ 13.40 $ 11.85 $ 9.51
TOTAL RETURN B, C 17.15% 7.07% 18.29% 16.89% 31.44% (15.29)
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,459,305 $ 2,284,412 $ 1,318,500 $ 592,880 $ 282,171 $ 154,080
Ratio of expenses to average net assets .62% A .58% .62% .65% .74% .78%
Ratio of expenses to average net assets before .62% A .60% .62% .65% .74% .78%
expense reductions
Ratio of net investment income to average net assets 2.72% A 2.83% 2.87% 3.52% 4.83% 6.01%
Portfolio turnover rate 100% A 134% 120% 74% 107% 94%
A ANNUALIZED
B TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
THE FINANCIAL STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
D EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT
PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
Growth 36.97% 14.84% 14.56%
S&P 500 26.07% 12.09% 13.58%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for
example, has a history of growth in the long run
and volatility in the short run. In turn, the share
price and return of a fund that invests in stocks
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare these figures to the performance of the Standard & Poor's
Composite Index of 500 Stocks- a common proxy for the U.S. stock market.
This benchmark includes reinvested dividends and capital gains, if any, and
excludes the effects of sales charges.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, October 9, 1986.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER LIFE OF FUND
VIP Growth (212) Standard & Poor's 500
10/09/86 10000.00 10000.00
10/31/86 10000.00 10329.97
11/30/86 10220.00 10580.99
12/31/86 10030.00 10311.18
01/31/87 11100.00 11700.09
02/28/87 11650.00 12162.25
03/31/87 11839.97 12513.74
04/30/87 11839.97 12402.36
05/31/87 11920.10 12510.26
06/30/87 12270.69 13142.03
07/31/87 12761.52 13808.33
08/31/87 13142.16 14323.38
09/30/87 12991.91 14009.70
10/31/87 10137.09 10992.01
11/30/87 9425.90 10086.27
12/31/87 10397.53 10853.84
01/31/88 10623.12 11310.78
02/29/88 11484.46 11837.86
03/31/88 11381.92 11472.07
04/30/88 11525.47 11599.41
05/31/88 11422.93 11700.33
06/30/88 11997.15 12237.37
07/31/88 11935.63 12190.87
08/31/88 11648.52 11776.38
09/30/88 11976.65 12278.06
10/31/88 12007.41 12619.39
11/30/88 11894.61 12438.93
12/31/88 12017.66 12656.61
01/31/89 12879.00 13583.07
02/28/89 12612.39 13244.86
03/31/89 12993.68 13553.46
04/30/89 13680.85 14256.89
05/31/89 14170.19 14834.29
06/30/89 13982.78 14749.73
07/31/89 15232.18 16081.64
08/31/89 15492.47 16396.84
09/30/89 15627.82 16329.61
10/31/89 15190.53 15950.76
11/30/89 15440.41 16276.16
12/31/89 15804.81 16666.78
01/31/90 14888.59 15548.44
02/28/90 15030.81 15749.02
03/31/90 15214.51 16166.37
04/30/90 14771.47 15762.21
05/31/90 16078.97 17299.02
06/30/90 16413.95 17181.39
07/31/90 16154.61 17126.41
08/31/90 14490.52 15578.18
09/30/90 12999.33 14819.52
10/31/90 12534.68 14755.80
11/30/90 13550.42 15709.03
12/31/90 13950.23 16147.31
01/31/91 14879.53 16851.33
02/28/91 15989.61 18056.20
03/31/91 16472.15 18493.16
04/30/91 16318.61 18537.54
05/31/91 17283.69 19338.37
06/30/91 16000.57 18452.67
07/31/91 17524.96 19312.56
08/31/91 18303.60 19770.27
09/30/91 18446.17 19440.11
10/31/91 19016.45 19700.60
11/30/91 17930.73 18906.67
12/31/91 20299.56 21069.59
01/31/92 21538.81 20677.70
02/29/92 21989.40 20946.51
03/31/92 20641.73 20538.05
04/30/92 19833.13 21141.87
05/31/92 19664.67 21245.47
06/30/92 18901.00 20928.91
07/31/92 19630.98 21784.90
08/31/92 19091.92 21338.31
09/30/92 19428.83 21590.10
10/31/92 20181.28 21665.67
11/30/92 21528.94 22404.47
12/31/92 22191.55 22680.04
01/31/93 22629.54 22870.55
02/28/93 22163.03 23181.59
03/31/93 23046.80 23670.73
04/30/93 22805.77 23097.89
05/31/93 24504.44 23716.92
06/30/93 24756.94 23785.70
07/31/93 24688.08 23690.55
08/31/93 25927.65 24588.43
09/30/93 26409.70 24399.09
10/31/93 26662.20 24904.16
11/30/93 25583.32 24667.57
12/31/93 26490.04 24966.04
01/31/94 27155.74 25814.89
02/28/94 26875.65 25115.31
03/31/94 25654.59 24020.28
04/30/94 25813.32 24327.74
05/31/94 25215.00 24726.71
06/30/94 23932.88 24120.91
07/31/94 24763.21 24912.07
08/31/94 26167.43 25933.47
09/30/94 25849.96 25298.10
10/31/94 26900.07 25867.31
11/30/94 25825.53 24925.22
12/31/94 26484.91 25294.86
01/31/95 25984.27 25950.76
02/28/95 27060.36 26962.06
03/31/95 28042.58 27757.71
04/30/95 28987.98 28575.17
05/31/95 30117.54 29717.32
06/30/95 32781.83 30407.65
Let's say you invested $10,000 in Growth Portfolio on October 9, 1986, when
the fund started. By June 30, 1995, your investment would have grown to
$32,782 - a 227.82% increase. That compares to $10,000 invested in the S&P
500, which would have grown to $30,408 over the same period - a 204.08%
increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Oracle Systems Corp. 3.6
Intel Corp. 3.1
DSC Communications Corp. 2.7
Applied Materials, Inc. 2.3
Compaq Computer Corp. 2.3
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Technology 52.6
Utilities 9.4
Retail & Wholesale 8.7
Media & Leisure 4.5
Industrial Machinery & Equipment 4.1
ASSET ALLOCATION AS OF JUNE 30, 1995*
Row: 1, Col: 1, Value: 3.4
Row: 1, Col: 2, Value: 96.59999999999999
Stocks 96.6%
Short-term investment 3.4%
FOREIGN INVESTMENTS 6.3%
*
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Lawrence Greenberg, Portfolio
Manager of Growth Portfolio
Q. LARRY, HOW HAS THE FUND DONE OVER THE PAST SIX MONTHS?
A. Quite well. From December 31, 1994, through June 30, 1995, the fund beat
the Standard & Poor's 500 index, which returned 20.21%.
Q. WHAT MADE THE DIFFERENCE?
A. In the second half of 1994, growth stocks began outperforming cyclicals
- stocks in sectors like autos and steel that tend to rise or fall with the
economy. Since then, the economy has slowed and interest rates have been
flat or falling - a perfect environment for growth stocks. My strategy was
to concentrate on those companies with the fastest earnings growth
opportunities for `95 and `96. This aggressive position, especially in
technology, paid off handsomely when growth stocks rebounded.
Q. IN FACT, OVER 50% OF THE FUND WAS IN TECHNOLOGY AT THE END OF JUNE. WHY
SUCH A HUGE BET?
A. Because on a stock-by-stock basis that's where I'm still finding what I
believe are the best growth opportunities. Technology stocks are benefiting
from strong corporate and consumer demand. Business is booming across all
segments - from PCs and software to semiconductors and networking. Plus,
unlike a retailer, which can only grow as fast as it can build bricks and
mortar, a technology company can grow at any rate. The fund has dozens of
companies that are growing sales well over 100% per year. Finally, despite
the fastest sales and earnings growth of any stocks in the market, many of
these companies still have attractive prices compared to other measures
like earnings.
Q. WHERE DID YOU FIND THE BEST OPPORTUNITIES?
A. Across the board. I added new technology names, but I also made bigger
investments in the companies I have the most confidence in. For example, I
significantly boosted the fund's stake in both Intel, which makes
microprocessors like the Pentium chip that are the brains of PCs, and
Micron Technology, one of the few manufacturers of memory chips called
DRAMs that go inside PCs and other electronic equipment. Both stocks posted
sizable gains for the period. I also added to our stake in Applied
Materials, the leading supplier of semiconductor manufacturing equipment,
whose sales grew more than 60% this year. Our biggest investment is still
Oracle, the leading provider of software for client-server set-ups; it
continued to benefit as more companies moved away from mainframes toward
PCs linked through networks.
Q. WERE THERE DISAPPOINTMENTS?
A. Sure. The stock price of Sybase, a competitor to Oracle, fell nearly 50%
in the last six months as it ran into problems launching a new product. One
of our biggest positions six months ago was Motorola; it started having
some near-term problems related to oversupply on its cellular handsets, so
I cut back even though the stock's long-term outlook remained attractive.
Finally, some retailers like Home Depot and Lowe's turned in disappointing
short-term results as heavy rains in California and the Southeast hurt
business. But many of the "hard good category killers" (or superstores) I
focused on continued to grow despite the slowdown in overall retail sales
that we saw this spring.
Q. WHY DID YOU CUT BACK IN HEALTH CARE?
A. The fund's health care stake was around 3% at the end of June, down from
7.7% six months earlier. During the first half of 1994, uncertainty
surrounding President Clinton's plans for health care reform had hurt the
sector. Then, last fall, the stocks rallied as it became apparent that
health care legislation wouldn't pass anytime soon. But once the
Republicans took charge in January, they cast another cloud over the sector
as they promised to re-examine programs like Medicare. So I decided to
watch from the sidelines.
Q. LOOKING AHEAD, WHAT SHOULD SHAREHOLDERS EXPECT?
A. In the past, technology stocks haven't done as well over the summer, as
European demand dries up and new product launches disappear. But this year,
since demand has been so strong, we may see no summer slowdown or one
that's much less pronounced. Nevertheless, shareholders should expect
volatility because the fund is aggressively invested in the fastest-growing
companies. If either the technology sector or the market declines, the fund
will suffer more than other stock funds. But it's also in a good position
to benefit more than its peers from a long-term up market, which I believe
is more likely.
FUND FACTS
GOAL: to increase the value of the fund's
shares over the long term by investing in
stocks with above-average growth potential
START DATE: October 9, 1986
SIZE: as of June 30, 1995, more than $3.1 billion
MANAGER: Lawrence Greenberg, since 1991;
manager, Fidelity Emerging Growth Portfolio,
since 1993; Fidelity Select Environmental
Services Portfolio, October 1986 - April 1991;
Fidelity Select Medical Delivery Portfolio July
1989 - April 1991; joined Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 96.0%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.4%
AEROSPACE & DEFENSE - 0.3%
Rockwell International Corp. 125,000 $ 5,718,750
Special Devices, Inc. (a) 173,900 3,869,263
9,588,013
DEFENSE ELECTRONICS - 0.1%
Trimble Navigation Ltd. (a) 100,000 2,837,500
TOTAL AEROSPACE & DEFENSE 12,425,513
BASIC INDUSTRIES - 1.1%
CHEMICALS & PLASTICS - 0.5%
Airgas, Inc. (a) 445,000 11,959,375
du Pont (E.I.) de Nemours & Co. 75,000 5,156,250
17,115,625
METALS & MINING - 0.6%
Alcan Aluminium Ltd. 100,000 3,023,679
Aluminum Co. of America 175,000 8,771,875
IMCO Recycling, Inc. 299,000 5,606,250
Reynolds Metals Co. 40,000 2,070,000
19,471,804
TOTAL BASIC INDUSTRIES 36,587,429
CONGLOMERATES - 0.2%
Tyco International Ltd. 125,000 6,750,000
CONSTRUCTION & REAL ESTATE - 0.8%
BUILDING MATERIALS - 0.1%
Elcor Corp. (a) 36,700 816,575
Sherwin-Williams Co. 85,000 3,028,125
3,844,700
CONSTRUCTION - 0.3%
Oakwood Homes Corp. 271,700 6,962,313
Standard Pacific Corp. 300,000 2,062,500
9,024,813
ENGINEERING - 0.4%
Fluor Corp. 65,000 3,380,000
Glenayre Technologies, Inc. (a) 172,575 8,801,325
12,181,325
TOTAL CONSTRUCTION & REAL ESTATE 25,050,838
DURABLES - 3.2%
AUTOS, TIRES, & ACCESSORIES - 2.6%
Chrysler Corp. 400,000 19,150,000
Ford Motor Co. 400,000 11,900,000
General Motors Corp. 877,634 41,139,094
Safety Components International, Inc. 220,000 3,630,000
Smith (A.O.) Corp. Class B 127,600 2,998,600
TRW, Inc. 34,100 2,723,738
81,541,432
CONSUMER ELECTRONICS - 0.1%
Whirlpool Corp. 60,000 3,300,000
HOME FURNISHINGS - 0.2%
Heilig-Meyers Co. 100,000 2,550,000
Leggett & Platt, Inc. 75,000 3,300,000
5,850,000
TEXTILES & APPAREL - 0.3%
Shaw Industries, Inc. 112,500 1,912,500
Tommy Hilfiger (a) 300,500 8,414,000
10,326,500
TOTAL DURABLES 101,017,932
SHARES VALUE (NOTE 1)
ENERGY - 0.7%
ENERGY SERVICES - 0.1%
Baker Hughes, Inc. 175,000 $ 3,587,500
INDEPENDENT POWER - 0.2%
Thermo Electron Corp. (a) 111,100 4,471,775
OIL & GAS - 0.4%
British Petroleum PLC ADR 75,030 6,424,444
Chesapeake Energy Corp. (a) 75,000 1,931,250
Kerr-McGee Corp. 76,000 4,075,500
12,431,194
TOTAL ENERGY 20,490,469
FINANCE - 3.5%
BANKS - 0.7%
Banc One Corp. 200,000 6,450,000
Bank of New York Co., Inc. 100,000 4,037,500
Bankers Trust New York Corp. 105,000 6,510,000
Chemical Banking Corp. 135,000 6,378,750
23,376,250
CREDIT & OTHER FINANCE - 0.5%
American Express Co. 400,000 14,050,000
FEDERAL SPONSORED CREDIT - 1.3%
Federal National Mortgage Association 425,000 40,109,375
INSURANCE - 0.5%
American International Group, Inc. 65,000 7,410,000
Travelers, Inc. (The) 200,000 8,750,000
16,160,000
SECURITIES INDUSTRY - 0.5%
Alliance Entertainment Corp. (a) 525,000 4,921,875
Edwards (A.G.), Inc. 111,100 2,499,750
Merrill Lynch & Co., Inc. 156,500 8,216,250
15,637,875
TOTAL FINANCE 109,333,500
HEALTH - 2.9%
DRUGS & PHARMACEUTICALS - 0.7%
Biogen, Inc. (a) 95,000 4,227,500
Dura Pharmaceuticals, Inc. (a) 160,000 3,010,000
Elan Corp. PLC ADR (a) 100,000 4,075,000
North American Biologicals, Inc. (a) 165,000 1,546,875
Pfizer, Inc. 200,000 9,237,500
US Bioscience, Inc. (a) 190 819
US Bioscience, Inc. (warrants) (a) 569 676
22,098,370
MEDICAL EQUIPMENT & SUPPLIES - 0.7%
Cardinal Health, Inc. 236,100 11,155,725
Millipore Corp. 800 53,698
St. Jude Medical, Inc. 60,000 3,007,500
Thermedics, Inc. (a) 175,000 3,412,500
Thermo Cardiosystems, Inc. (a) 100,000 3,662,500
21,291,923
MEDICAL FACILITIES MANAGEMENT - 1.5%
American Medical Response (a) 195,000 5,460,000
Apria Healthcare Group, Inc. (a) 126,000 3,559,500
Columbia/HCA Healthcare Corp. 375,025 16,219,831
HEALTHSOUTH Rehabilitation Corp. 950,000 16,506,250
Rotech Medical Corp. (a) 40,000 1,110,000
United HealthCare Corp. 75,000 3,103,125
Vivra, Inc. (a) 44,000 1,193,500
47,152,206
TOTAL HEALTH 90,542,499
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 4.1%
ELECTRICAL EQUIPMENT - 2.2%
Avid Technology, Inc. (a) 70,050 $ 2,626,875
General Electric Co. 875,000 49,328,125
General Signal Corp. 100,000 3,975,000
Oak Industries, Inc. (a) 105,300 2,711,475
Scientific-Atlanta, Inc. 370,000 8,140,000
United Communication Industry PCL
(For. Reg.) 154,000 2,245,899
69,027,374
INDUSTRIAL MACHINERY & EQUIPMENT - 1.4%
AGCO Corp. 298,300 11,186,250
Case Corp. 200,000 5,950,000
Caterpillar, Inc. 350,000 22,487,500
Ingersoll-Rand Co. 125,000 4,781,250
Semitool, Inc. 22,700 726,400
45,131,400
POLLUTION CONTROL - 0.5%
Browning-Ferris Industries, Inc. 210,000 7,586,250
TETRA Technologies, Inc. (a) 185,000 2,243,125
WMX Technologies, Inc. 175,000 4,965,625
14,795,000
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 128,953,774
MEDIA & LEISURE - 4.5%
BROADCASTING - 1.1%
Capital Cities/ABC, Inc. 65,000 6,816,875
Citicasters, Inc. 65,000 1,787,500
Clear Channel Communications, Inc. 25,000 1,609,375
EZ Communications, Inc. 44,400 821,400
Infinity Broadcasting Corp. (a) 50,000 1,668,750
Jacor Communications, Inc. Class A 73,400 1,174,400
Lin Television Corp. 50,000 1,681,250
Renaissance Communications Corp. (a) 65,000 2,177,500
Tele-Communications, Inc. Class A 225,000 5,273,438
Viacom, Inc. Class B (non-vtg.) (a) 250,084 11,597,646
34,608,134
ENTERTAINMENT - 0.4%
Casino America, Inc. (a) 100,000 1,512,500
Disney (Walt) Co. 110,000 6,118,750
Players International, Inc. (a) 217,500 4,350,000
11,981,250
LEISURE DURABLES & TOYS - 0.3%
Cobra Golf, Inc. (a) 204,900 6,479,963
Hasbro, Inc. 84,000 2,667,000
9,146,963
LODGING & GAMING - 0.7%
Doubletree Corp. (a) 300,000 6,468,750
Hospitality Franchise Systems, Inc. 453,600 15,705,900
22,174,650
PUBLISHING - 0.1%
Houghton Mifflin Co. 50,000 2,637,500
RESTAURANTS - 1.9%
Apple South, Inc. 500,000 9,750,000
Applebee's International, Inc. 275,000 7,081,250
Landry's Seafood Restaurants, Inc. (a) 334,200 6,684,000
Lone Star Steakhouse Saloon (a) 375,000 11,367,188
Outback Steakhouse, Inc. (a) 385,000 11,116,875
Papa John's International, Inc. (a) 161,800 5,663,000
Starbucks Corp. (a) 180,000 6,412,500
Uno Restaurant Corp. (a) 226,625 2,351,234
60,426,047
TOTAL MEDIA & LEISURE 140,974,544
SHARES VALUE (NOTE 1)
NONDURABLES - 1.3%
BEVERAGES - 0.3%
PepsiCo, Inc. 225,000 $ 10,265,625
HOUSEHOLD PRODUCTS - 0.3%
Colgate-Palmolive Co. 50,000 3,656,250
Gillette Co. 130,000 5,801,250
9,457,500
TOBACCO - 0.7%
Philip Morris Companies, Inc. 225,000 16,734,375
RJR Nabisco Holdings Corp. 200,000 5,575,000
22,309,375
TOTAL NONDURABLES 42,032,500
RETAIL & WHOLESALE - 8.7%
APPAREL STORES - 0.7%
Baby Superstore, Inc. (a) 65,000 3,063,125
Gymboree Corp. (a) 135,000 3,923,438
Just For Feet, Inc. (a)(c) 402,000 16,029,750
23,016,313
APPLIANCE STORES - 0.1%
Cellstar Corp. (a) 165,700 3,873,238
DRUG STORES - 0.4%
General Nutrition Companies, Inc. (a) 365,000 12,820,625
GENERAL MERCHANDISE STORES - 1.5%
Dollar General Corp. 150,050 4,745,331
Wal-Mart Stores, Inc. 1,600,000 42,800,000
47,545,331
RETAIL & WHOLESALE, MISCELLANEOUS - 6.0%
Barnes & Noble, Inc. (a) 153,100 5,205,400
Bed Bath & Beyond, Inc. (a) 700,000 16,975,000
Borders Group, Inc. (a) 80,000 1,150,000
Circuit City Stores, Inc. 150,000 4,743,750
Corporate Express (a) 275,000 5,878,125
Home Depot, Inc. (The) 345,066 14,018,306
Lowe's Companies, Inc. 1,175,000 35,103,125
Officemax, Inc. (a) 525,000 14,634,375
Office Depot, Inc. (a) 320,000 9,000,000
Petco Animal Supplies, Inc. (a) 378,700 8,804,775
Petsmart, Inc. (a) 600,000 17,250,000
Sport Supply Group, Inc. 309,550 3,869,375
Staples, Inc. (a) 550,000 15,881,250
Sunglass Hut International, Inc. (a) 886,500 31,027,500
Viking Office Products, Inc. (a) 150,000 5,493,750
189,034,731
TOTAL RETAIL & WHOLESALE 276,290,238
SERVICES - 2.3%
LEASING & RENTAL - 0.9%
Hollywood Entertainment Corp. (a) 605,000 27,225,000
SERVICES - 1.4%
Adia SA (Bearer) (a) 25,000 5,202,438
Block (H & R), Inc. 100,000 4,112,500
Children's Discovery Centers of
America, Inc. (a) 135,000 2,261,250
First Financial Management Corp. 75,000 6,412,500
Medaphis Corp. (a) 950,000 20,662,500
Zebra Technologies Corp. Class A (a) 100,000 5,325,000
43,976,188
TOTAL SERVICES 71,201,188
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - 52.0%
COMMUNICATIONS EQUIPMENT - 10.9%
Apertus Technologies, Inc. (a) 57,000 $ 498,750
Cabletron Systems, Inc. (a) 85,000 4,526,250
Cisco Systems, Inc. (a) 1,215,000 61,433,438
DSC Communications Corp. (a) 1,850,000 86,025,000
Dialogic Corp. (a) 34,800 617,700
Ericsson (L.M.) Telephone Co.
Class B ADR 900,000 18,000,000
General Instrument Corp. (a) 350,000 13,431,250
Global Village Communication (a) 573,800 8,965,625
Inter-Tel, Inc. (a) 62,300 942,288
InterVoice, Inc. (a) 250,000 4,375,000
Lo Jack Corp. (a) 240,000 2,655,000
Microtest, Inc. (a) 125,000 2,781,250
Newbridge Networks Corp. (a) 525,000 18,506,250
Nokia Corp. AB :
Series A 160,000 9,377,565
sponsored ADR 915,000 54,556,875
Tellabs, Inc. (a) 147,800 7,112,875
3Com Corp. (a) 600,000 40,200,000
U.S. Robotics Corp. 74,600 8,131,400
342,136,516
COMPUTER SERVICES & SOFTWARE - 12.9%
Adobe Systems, Inc. 60,000 3,480,000
Alantec Corp. 65,000 2,226,250
America Online, Inc. (a) 240,500 10,582,000
American Business Information, Inc. (a) 140,800 3,801,600
Ascend Communications, Inc. (a) 60,000 3,030,000
Automatic Data Processing, Inc. 125,000 7,859,375
Broderbund Software, Inc. (a) 72,800 4,641,000
CUC International, Inc. (a) 502,500 14,070,000
Cambridge Technology Partners
Mass., Inc. (a) 90,000 2,970,000
Ceridian Corp. (a) 140,000 5,162,500
Cerner Corp. (a) 40,000 2,450,000
CompUSA, Inc. (a) 290,000 9,642,500
Computer Sciences Corp. (a) 160,000 9,100,000
Davidson & Associates, Inc. (a) 65,000 2,583,750
GMIS, Inc. (a) 212,600 4,849,938
Hyperion Software, Inc. (a) 60,000 2,715,000
Informix Corp. (a) 800,000 20,300,000
Inso Corp. (a) 30,000 1,792,500
Integrated Silicon Systems, Inc. (a) 108,400 4,092,100
Intersolv, Inc. (a) 315,000 7,323,750
Mercury Interactive Group Corp. (a) 252,500 5,081,563
Microsoft Corp. (a) 740,000 66,877,500
Network Peripherals, Inc. (a) 260,000 5,671,250
Novell, Inc. (a) 524,200 10,451,238
Oracle Systems Corp. (a) 2,900,000 112,012,500
Parametric Technology Corp. (a) 296,900 14,770,775
Paychex, Inc. 85,000 3,081,250
Peoplesoft, Inc. (a) 375,000 20,343,750
Platinum Technology, Inc. (a) 100,000 1,812,500
Reuters Holdings PLC ADR Class B 65,000 3,258,125
SAP AG sponsored ADR (a)(b) 35,000 1,461,250
Softkey International, Inc. (a) 150,000 4,781,250
Stratacom, Inc. (a) 490,400 23,907,000
SunGard Data Systems, Inc. (a) 110,000 5,747,500
Systems & Computer Technology Corp. (a) 125,000 2,500,000
Wonderware Corp. (a) 77,600 3,123,400
407,553,114
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - 10.5%
ADAPTEC, Inc. (a) 375,000 $ 13,875,000
Apple Computer, Inc. 165,000 7,662,188
Bay Networks, Inc. (a) 800,000 33,100,000
Compaq Computer Corp. (a) 1,579,800 71,683,425
Comverse Technology, Inc. (a) 75,000 1,331,250
Dell Computer Corp. (a) 125,000 7,515,625
Digital Equipment Corp. (a) 200,000 8,150,000
Fore Systems, Inc. (a) 65,000 1,966,250
Gateway 2000, Inc. (a) 200,000 4,550,000
General Motors Corp. Class E (a) 505,600 21,993,600
Hewlett-Packard Co. 315,000 23,467,500
International Business Machines Corp. 635,000 60,960,000
Micom Communication Corp. (a) 146,100 949,650
Pitney Bowes, Inc. 110,000 4,221,250
Radius, Inc. (a) 290,000 3,190,000
Read Rite Corp. (a) 225,026 6,019,446
Seagate Technology (a) 214,900 8,434,825
Silicon Graphics, Inc. (a) 888,100 35,412,988
Sun Microsystems, Inc. (a) 224,000 10,864,000
Xerox Corp. (a) 45,000 5,276,250
330,623,247
ELECTRONIC INSTRUMENTS - 2.8%
Applied Materials, Inc. (a) 835,000 72,331,875
Electro Scientific Industries, Inc. (a) 117,500 3,906,875
Kulicke & Soffa Industries, Inc. 40,000 2,652,500
Novellus System, Inc. (a) 143,000 9,688,250
88,579,500
ELECTRONICS - 14.7%
AMP, Inc. 150,000 6,337,500
Advanced Micro Devices, Inc. 400,000 14,550,000
Alliance Semiconductor Corp. (a) 160,000 7,840,000
Altera Corp. (a) 387,400 16,755,050
Analog Devices, Inc. (a) 275,000 9,350,000
Atmel Corp. (a) 160,000 8,860,000
Avnet, Inc. 282,800 13,680,450
C-Cube Microsystems, Inc. (a) 75,000 2,043,750
Cascade Communications Corp. (a) 75,000 3,243,750
Chips & Technologies, Inc. (a) 201,300 2,642,063
Cirrus Logic, Inc. (a) 80,000 5,015,000
Cypress Semiconductor Corp. (a) 275,000 11,137,500
Hitachi Ltd. ADR 35,000 3,508,750
Integrated Device Technology, Inc. (a) 72,900 3,371,625
Integrated Silicon Solution (a) 147,800 7,722,550
Intel Corp. 1,530,000 96,868,125
Kemet Corp. (a) 135,000 7,087,500
LSI Logic Corp. (a) 758,930 29,693,136
Linear Technology Corp. 225,000 14,850,000
Marshall Industries (a) 102,700 3,440,450
Maxim Integrated Products, Inc. (a) 90,000 4,590,000
Microchip Technology, Inc. (a) 275,050 10,004,944
Micron Technology, Inc. 1,300,000 71,337,500
Motorola, Inc. 235,000 15,774,375
National Semiconductor Corp. (a) 225,000 6,243,750
SGS-Thomson Microelectronic NV (a) 275,000 11,171,875
S-3, Inc. (a) 81,700 2,941,200
Samsung Electronics Co. Ltd.:
GDR (b) 55,000 5,280,000
GDS (non-vtg.) (Reg.) (a) 102,800 5,345,600
Tencor Instruments (a) 80,000 3,280,000
Texas Instruments, Inc. 235,000 31,460,625
Thomas & Betts Corp. 34,600 2,365,775
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
VLSI Technology, Inc. (a) 135,000 $ 4,066,875
Wholesale Cellular USA, Inc. (a) 150,000 3,225,000
Wyle Laboratories 74,800 2,103,750
Xilinx, Inc. (a) 175,000 16,450,000
463,638,468
PHOTOGRAPHIC EQUIPMENT - 0.2%
3D Systems Corp. 375,000 6,937,500
TOTAL TECHNOLOGY 1,639,468,345
TRANSPORTATION - 0.9%
AIR TRANSPORTATION - 0.4%
AMR Corp. (a) 110,000 8,208,750
Atlantic Southeast Airlines, Inc. 59,700 1,798,463
Comair Holdings, Inc. 25,000 946,875
Southwest Airlines Co. 137,700 3,287,588
14,241,676
RAILROADS - 0.5%
ABC Rail Products Corp. (a) 150,000 3,450,000
CSX Corp. 151,200 11,358,900
14,808,900
TOTAL TRANSPORTATION 29,050,576
UTILITIES - 9.4%
CELLULAR - 5.9%
AirTouch Communications, Inc. (a) 2,300,000 65,550,000
Arch Communications Group, Inc. (a) 150,000 3,337,500
BCE Mobile Communications, Inc. (a) 275,000 9,166,666
Cellular Communications, Inc.,
Series A (redeemable) (a) 200,000 9,100,000
Metrocall, Inc. (a) 150,000 2,737,500
Mobile Telecommunications
Technologies, Inc. (a) 75,000 2,053,125
Mobilemedia Corp. (a) 13,000 240,500
Palmer Wireless, Inc. (a) 575,300 9,420,538
USA Mobile Communications (a) 116,600 2,040,500
United States Cellular Corp. (a) 315,000 9,528,750
Vanguard Cellular Systems, Inc.
Class A (a)(c) 2,176,000 52,224,000
Vodafone Group PLC sponsored ADR 548,700 20,782,013
186,181,092
TELEPHONE SERVICES - 3.5%
ALC Communications Corp. (a) 215,000 9,701,875
AT&T Corp. 425,000 22,578,125
Ameritech Corp. 493,700 21,722,800
Bell Atlantic Corp. 375,000 21,000,000
BellSouth Corp. 150,000 9,525,000
LCI International, Inc. (a) 125,000 3,828,125
SBC Communications, Inc. 475,000 22,621,875
110,977,800
TOTAL UTILITIES 297,158,892
TOTAL COMMON STOCKS
(Cost $2,234,010,970) 3,027,328,237
NONCONVERTIBLE PREFERRED STOCKS - 0.6%
SHARES VALUE (NOTE 1)
TECHNOLOGY - 0.6%
COMPUTER SERVICES & SOFTWARE - 0.2%
SAP AG (a) 5,250 $ 6,622,118
COMPUTERS & OFFICE EQUIPMENT - 0.4%
Silicon Graphics CDA Ltd.
exchangeable (non-vtg.) (a) 280,080 11,132,774
TOTAL NONCONVERTIBLE PREFERRED STOCKS
(Cost $15,178,912) 17,754,892
REPURCHASE AGREEMENTS - 3.4%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 6.22% dated
6/30/95 due 7/3/95 $ 106,155,996 106,101,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $2,355,290,882) $ 3,151,184,129
LEGEND
(a) Non-income producing
(b) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $6,741,250 or 0.2% of net
assets.
(c) A company in which the fund has ownership of at least 5% of the voting
securities is an affiliated company. Transactions during the period with
companies that are or were affiliates are as follows:
PURCHASES SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
Just For Feet, Inc. (a) $ 2,342,009 - - $ 16,029,750
Vanguard Cellular Systems, Inc.
Class A (a) 1,588,387 - - 52,224,000
TOTAL $ 3,930,396 $ - $ - $ 68,253,750
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $1,556,970,263 and $967,373,548, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $555,941 for the period
(see Note 3 of Notes to Financial Statements).
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $2,361,955,662. Net unrealized appreciation aggregated
$789,228,467, of which $809,605,722 related to appreciated investment
securities and $20,377,255 related to depreciated investment securities.
At December 31, 1994, the fund had a capital loss carryforward of
approximately $68,037,000 all of which will expire on December 31, 2002.
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $106,101,000) (cost $2,355,290,882) $ 3,151,184,129
- See accompanying schedule
Receivable for investments sold 15,240,448
Receivable for fund shares sold 4,631,877
Dividends receivable 1,976,933
Other receivables 241,989
TOTAL ASSETS 3,173,275,376
LIABILITIES
Payable for investments purchased $ 31,104,827
Payable for fund shares redeemed 2,527,529
Accrued management fee 1,523,671
Other payables and accrued expenses 374,992
TOTAL LIABILITIES 35,531,019
NET ASSETS $ 3,137,744,357
Net Assets consist of:
Paid in capital $ 2,373,300,032
Undistributed net investment income 3,900,899
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (35,349,821)
Net unrealized appreciation (depreciation) on investments 795,893,247
NET ASSETS, for 117,514,234 shares outstanding $ 3,137,744,357
NET ASSET VALUE, offering price and redemption price per share ($3,137,744,357 (divided by) 117,514,234 shares) $26.70
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 8,244,859
Dividends
Interest 5,551,271
TOTAL INCOME 13,796,130
EXPENSES
Management fee $ 7,756,500
Transfer agent fees 627,931
Accounting fees and expenses 378,173
Non-interested trustees' compensation 4,869
Custodian fees and expenses 69,955
Registration fees 147,294
Audit 14,797
Legal 4,080
Miscellaneous 7,349
TOTAL EXPENSES 9,010,948
NET INVESTMENT INCOME 4,785,182
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 46,674,141
Foreign currency transactions 395 46,674,536
Change in net unrealized appreciation (depreciation) on investment securities 517,371,258
NET GAIN (LOSS) 564,045,794
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 568,830,976
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 4,785,182 $ 11,810,184
Net investment income
Net realized gain (loss) 46,674,536 (74,102,658)
Change in net unrealized appreciation (depreciation) 517,371,258 80,193,945
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 568,830,976 17,901,471
Distributions to shareholders (12,404,421) (7,589,523)
From net investment income
From net realized gain - (80,320,550)
TOTAL DISTRIBUTIONS (12,404,421) (87,910,073)
Share transactions 750,772,650 1,289,938,019
Net proceeds from sales of shares
Reinvestment of distributions 12,404,421 87,909,946
Cost of shares redeemed (323,728,603) (549,819,377)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 439,448,468 828,028,588
TOTAL INCREASE (DECREASE) IN NET ASSETS 995,875,023 758,019,986
NET ASSETS
Beginning of period 2,141,869,334 1,383,849,348
End of period (including undistributed net investment income of $3,900,899 and $11,472,202, $ 3,137,744,357 $ 2,141,869,334
respectively)
OTHER INFORMATION
Shares 32,171,873 60,676,019
Sold
Issued in reinvestment of distributions 568,749 4,039,985
Redeemed (13,969,564) (25,920,211)
Net increase (decrease) 18,771,058 38,795,793
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 F 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.69 $ 23.08 $ 19.76 $ 18.51 $ 12.91 $ 15.18
Income from Investment Operations
Net investment income .04 .12 .12 .09 D .09 D .24
Net realized and unrealized gain (loss) 5.09 (.12) E 3.64 1.64 5.72 (1.98)
Total from investment operations 5.13 - 3.76 1.73 5.81 (1.74)
Less Distributions (.12) (.12) (.11) (.05) (.21) (.21)
From net investment income
From net realized gain - (1.27) (.21) (.43) - (.32)
In excess of net realized gain - - (.12) - - -
Total distributions (.12) (1.39) (.44) (.48) (.21) (.53)
Net asset value, end of period $ 26.70 $ 21.69 $ 23.08 $ 19.76 $ 18.51 $ 12.91
TOTAL RETURN B, C 23.78% (.02) 19.37% 9.32% 45.51% (11.73)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,137,744 $ 2,141,869 $ 1,383,849 $ 749,837 $ 371,462 $ 135,487
Ratio of expenses to average net assets .72% A .69% .71% .75% .84% .88%
Ratio of expenses to average net assets before
expense .72% A .70% .71% .75% .84% .88%
reductions
Ratio of net investment income to average net assets .38% A .69% .72% .83% .56% 2.69%
Portfolio turnover rate 82% A 122% 159% 262% 261% 88%
A ANNUALIZED
B TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
THE FINANCIAL STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET GAIN ON INVESTMENTS FOR THE PERIOD
ENDED DUE TO THE TIMING OF SALES
AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
F EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL
STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT
CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
OVERSEAS 2.96% 4.76% 7.12%
Morgan Stanley EAFE Index 1.65% 4.69% 6.97%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
Many markets around the globe offer the potential
for significant growth over time; however,
investing in foreign markets means assuming
greater risks than investing in the United States.
Factors like changes in a country's financial
markets, its local political and economic
climate, and the fluctuating value of its currency
create these risks. For these reasons an
international fund's performance may be more
volatile than a fund that invests exclusively in the
United States.
(checkmark)
You can compare the fund's figures to the performance of the Morgan Stanley
EAFE index - a broad measure of the performance of stocks in Europe,
Australia, and the Far East. This benchmark includes reinvested dividends
and capital gains, if any, and excludes the effects of sales charges.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of operations
January 28, 1987.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money. Foreign investments involve greater risks and
potential rewards than U.S. investments. These risks include political and
economic uncertainties of foreign countries, as well as the risk of
currency fluctuations.
$10,000 OVER LIFE OF FUND
VIP Overseas (22Europe, Australia,
01/28/87 10000.00 10000.00
01/31/87 10000.00 9997.46
02/28/87 10010.00 10296.66
03/31/87 10460.00 11140.41
04/30/87 11220.00 12319.18
05/31/87 11060.00 12319.14
06/30/87 10520.00 11926.66
07/31/87 10400.00 11905.82
08/31/87 11320.00 12798.54
09/30/87 11070.00 12597.05
10/31/87 8760.00 10777.00
11/30/87 8840.00 10938.65
12/31/87 9462.16 11263.46
01/31/88 9138.32 11464.55
02/29/88 9381.20 12228.75
03/31/88 9806.24 12980.64
04/30/88 9968.16 13169.27
05/31/88 9786.00 12747.12
06/30/88 9613.96 12411.13
07/31/88 9543.12 12800.51
08/31/88 9209.16 11968.24
09/30/88 9603.84 12491.19
10/31/88 10028.88 13559.96
11/30/88 10211.04 14367.68
12/31/88 10231.28 14447.79
01/31/89 10534.87 14701.99
02/28/89 10717.03 14777.56
03/31/89 10707.38 14487.53
04/30/89 11023.50 14621.89
05/31/89 10615.60 13826.42
06/30/89 10574.81 13593.67
07/31/89 11563.97 15300.67
08/31/89 11482.39 14612.54
09/30/89 12196.21 15278.16
10/31/89 11533.38 14664.33
11/30/89 12155.42 15401.50
12/31/89 12920.24 15969.77
01/31/90 12746.88 15375.56
02/28/90 12449.36 14302.43
03/31/90 12919.92 12812.46
04/30/90 12991.52 12710.78
05/31/90 13840.58 14161.09
06/30/90 14147.46 14036.37
07/31/90 14863.53 14234.08
08/31/90 13349.56 12851.83
09/30/90 12081.09 11060.74
10/31/90 13206.34 12784.21
11/30/90 12797.16 12030.10
12/31/90 12705.10 12224.98
01/31/91 12827.85 12620.40
02/28/91 13260.02 13973.29
03/31/91 12872.18 13134.44
04/30/91 13155.20 13263.42
05/31/91 13186.64 13401.82
06/30/91 12463.37 12417.04
07/31/91 13081.82 13027.11
08/31/91 13123.75 12762.56
09/30/91 13658.34 13481.84
10/31/91 13752.68 13672.96
11/30/91 13260.02 13034.64
12/31/91 13721.24 13707.79
01/31/92 13888.95 13415.00
02/29/92 13599.52 12934.85
03/31/92 13323.28 12080.93
04/30/92 14152.01 12138.36
05/31/92 14768.23 12950.85
06/30/92 14491.99 12336.56
07/31/92 13567.65 12020.83
08/31/92 13450.78 12774.79
09/30/92 12908.92 12522.52
10/31/92 12027.08 11865.66
11/30/92 11963.33 11977.32
12/31/92 12250.20 12039.27
01/31/93 12600.81 12037.79
02/28/93 12847.62 12401.41
03/31/93 13738.91 13482.39
04/30/93 14651.94 14761.90
05/31/93 14967.16 15073.67
06/30/93 14597.60 14838.49
07/31/93 15173.67 15357.91
08/31/93 15988.88 16186.97
09/30/93 15901.92 15822.62
10/31/93 16478.00 16310.23
11/30/93 15782.36 14884.55
12/31/93 16825.82 15959.32
01/31/94 17923.63 17308.60
02/28/94 17607.51 17260.66
03/31/94 17170.60 16517.22
04/30/94 17738.58 17218.03
05/31/94 17520.13 17119.18
06/30/94 17334.44 17361.11
07/31/94 17793.20 17528.07
08/31/94 18000.73 17943.05
09/30/94 17531.05 17377.92
10/31/94 17891.50 17956.61
11/30/94 17214.29 17093.61
12/31/94 17115.99 17200.65
01/31/95 16406.01 16539.88
02/28/95 16449.17 16492.41
03/31/95 16955.64 17521.06
04/30/95 17440.09 18180.00
05/31/95 17682.31 17963.28
06/30/95 17847.46 17648.27
Let's say you invested $10,000 in Overseas Portfolio on January 28, 1987,
when the fund started. By June 30, 1995, your investment would have grown
to $17,847 - a 78.47% increase. That compares to $10,000 invested in the
Morgan Stanley EAFE Index, which would have grown to $17,648 over the same
period - a 76.48% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1995
(BY ISSUER, EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S
INVESTMENTS
C. S. Holdings (Reg.) 1.8
Nestle SA (Reg.) 1.5
Deutsche Bank AG 1.3
Unilever NV Ord. 1.2
Swiss Bank Corp. (Bearer) 1.2
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Finance 26.4
Utilities 8.8
Nondurables 8.4
Durables 8.1
Basic Industries 6.2
GEOGRAPHIC DIVERSIFICATION AS OF JUNE 30, 1995
(BY LOCATION OF ISSUER) % OF FUND'S
INVESTMENTS
Japan 18.5
United Kingdom 12.4
Switzerland 9.8
France 7.5
Netherlands 6.9
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with John Hickling, Portfolio Manager of Overseas Portfolio
Q. JOHN, HOW HAS THE FUND PERFORMED?
A. For the six months and one year ended June 30, 1995, the fund's
performance topped that of the Morgan Stanley EAFE index - a broad measure
of stocks in Europe, Australia and the Far East. The index had total
returns of 2.60% and 1.65% for the six- and 12-month periods, respectively.
Q. WHAT WERE THE KEYS TO THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
A. First, I kept the fund fully invested through much of the period.
Second, some of the stocks I picked in Japan and Europe fared well. And
finally, the fund was able to benefit from new investments in emerging
markets.
Q. WHY DID THE EAFE INDEX OFFER RELATIVELY LOW RETURNS?
A. While European markets have performed relatively well - though not as
well as the U.S. market - emerging markets and Japan have not. Japan was
affected by a number of factors that dampened investor enthusiasm: the
Barings debacle, the Kobe earthquake and the subway gas attack. The
Japanese market also was hurt by the strength of the yen versus the dollar.
On the heels of Mexico's devaluation of the peso in late 1994, emerging
markets also struggled, although they appear to have pretty much bottomed
out.
Q. WHAT'S THE STORY BEHIND THE FUND'S INVESTMENTS IN JAPAN?
A. Even though Japan has the highest country representation in the fund,
I've kept the fund underweighted there, relative to the index. I've focused
much of the fund's Japanese investments in technology, including consumer
electronics companies Toshiba and Hitachi, and other manufacturers and
exporters that are poised to take advantage of economic activity both in
Japan and globally. While the technology sector has done well in the U.S.,
it has been weak in Japan, so I found valuations to be attractive. The
sector recently has shown some strong gains. In addition, I've targeted
some financial stocks. The Japanese market has started to pick up a bit
lately, and brokerage house Nomura Securities is poised to take advantage
because it has been cutting costs aggressively. In addition, it appears
trust banks such as Sumitomo Trust will be able to improve interest margins
- the difference between what they charge for loans and what they pay to
depositors - because of changing regulations.
Q. THE FUND IS OVERWEIGHTED IN EUROPE, RELATIVE TO THE INDEX. WHERE HAVE
YOU FOUND OPPORTUNITIES THERE?
A. Mainly in financial and consumer nondurable stocks, as well as interest
rate-sensitive issues - because European bond markets have been rallying -
and cyclicals - those that tend to rise and fall with the economy. European
stocks have rallied lately, mainly on the strength of the technology
sector. In the short run, I've missed some opportunity there, because I
found the tech stocks to be too expensive and risky. Some of the appealing
consumer nondurable names have been Guinness, Cadbury-Schweppes, Bass and
Nestle. Barclays, National Westminster, Swiss Bank and C.S. Holdings were
among the fund's financial stock investments. I've added investments in
cyclical stocks because they became cheap. Those include paper companies Mo
Och Domsjoe and Svenska Cellulosa; auto stocks Volvo and Peugeot; and tire
companies such as Michelin.
Q. WHAT ABOUT THE FUND'S EMERGING MARKET INVESTMENTS?
A. I've been more active there because, as I said, I felt they had hit
bottom, and there were a lot of very interesting stocks. Among the stocks
that have caught my eye have been Hong Kong/Shanghai Bank (HSBC) and Hong
Kong Land Holdings; Philippine Long Distance Telephone; the department
store Matahari and cigarette manufacturer Gudang Garam in Indonesia; Krung
Thai Bank; Telecom Argentina; and Mexican companies Bancomer, Telmex, Cemex
and Grupo Carso.
Q. WHAT'S YOUR OUTLOOK GOING FORWARD?
A. Several factors are important to consider. First of all, it seems most
stock markets reflect the sentiment that any worldwide recession will stay
pretty shallow and that growth will resume. Of course, this is the best
possible scenario. At the same time, if the U.S. market stumbles, one would
expect there to be a drop in foreign markets. In such a scenario, I believe
overseas markets wouldn't drop as far as the U.S, because they haven't
gained as much recently, but it's impossible to say for sure. How the
dollar does also will be important. Going forward, I'll stay with my usual
game plan, looking for opportunities in any markets that appear to have
excellent value.
FUND FACTS
GOAL: to increase the value of the fund's
shares by investing mainly in stocks in
Europe, the Far East, and the Pacific Basin
START DATE: January 28, 1987
SIZE: as of June 30, 1995, more than $1.2 billion
MANAGER: John Hickling, since 1993; manager
Fidelity Overseas Fund, since 1993; Fidelity
Advisor Overseas Fund, since 1993; Fidelity
Advisor Annuity Overseas Portfolio, since
January 1995; previously managed several
Fidelity international funds; joined Fidelity in
1982
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 89.2%
SHARES VALUE (NOTE 1)
ARGENTINA - 0.8%
Buenos Aires Embotelladora SA
sponsored ADR 41,800 $ 1,050,301
Perez Companc Class B 308,452 1,295,822
Telecom Argentina sponsored
ADR Class B 83,400 3,794,700
Telecom Argentina Stet France
Telecom SA 263,600 1,199,681
YPF Sociedad Anonima sponsored
ADR representing Class D shares 150,500 2,840,688
10,181,192
AUSTRALIA - 1.4%
Brambles Industries Ltd. 276,500 2,616,260
FAI Insurance Ltd. Ord. 2,037,900 809,474
Lend Lease Corp. Ltd. 81,000 1,033,010
Pioneer International Ltd. 493,300 1,224,642
TNT Ltd. (a) 1,658,800 2,176,694
Westpac Banking Corp. 2,912,700 10,536,488
18,396,568
AUSTRIA - 0.9%
Mayr Melnhof Karton AG 24,200 1,398,830
OEMV AG 62,400 7,194,579
VA Technologie AG 6,800 851,047
VA Technologie AG (d) 15,000 1,877,310
11,321,766
BELGIUM - 1.6%
Bekaert SA 4,005 3,197,654
Delhaize Freres & Cie Le Lion SA 135,300 6,183,782
Petrofina SA 11,900 3,590,951
Petrofina SA (warrants) (a) 595 8,380
Solvay & Cie SA 14,062 7,724,197
20,704,964
BERMUDA - 0.2%
Consolidated Electric Power Asia Ltd.
sponsored ADR (d) 30,000 682,500
Jardine Strategic Holdings Ltd. Ord. 529,500 1,704,990
2,387,490
BRAZIL - 0.2%
Coteminas PN 2,500,000 788,675
Telebras PN (Pfd. Reg.) 60,298,770 1,987,447
2,776,122
CANADA - 0.5%
Midland Walwyn, Inc. 269,000 2,106,921
Noranda, Inc. 245,400 4,827,541
6,934,462
CHILE - 0.1%
Vina Concha Stet y Toro SA
sponsored ADR 51,100 990,063
FINLAND - 0.8%
Kymmene Corp. 53,900 1,680,624
Pohjola Class B 291,000 4,570,859
Valmet Corp. OY Ord. 167,700 3,793,939
10,045,422
FRANCE - 7.2%
Accor SA 65,158 8,694,014
Axa SA 91,718 4,963,362
BQE National Paris Ord. 222,840 10,770,332
Club Mediterranee SA Ord. 42,500 4,340,855
Compagnie Bancaire Ord. 65,670 7,867,107
Credit Lyonnais 24,500 1,413,880
SHARES VALUE (NOTE 1)
FRANCE - CONTINUED
Elf Aquitaine 112,128 $ 8,302,776
Generale des Eaux 90,600 10,105,133
Havas SA 53,300 4,227,450
IMETAL SA Ord. 9,200 1,083,135
L'Oreal Co. Ord. 10,200 2,563,957
Lafarge Coppee SA 63,900 4,978,432
Lyonnaise des Eaux Dumez SA 30,700 2,909,255
Michelin SA Cie Generale des
Etablissements, Class B (a) 76,900 3,413,366
Peugeot SA Ord. 19,500 2,710,627
Total SA Class B 190,600 11,495,446
Vallourec SA (a) 60,000 3,010,224
92,849,351
GERMANY - 6.0%
Allianz Versich Holdings Ord. (Reg.) 1,450 2,590,467
Asko 2,900 1,813,746
BMW AG 9,918 5,463,533
Bayerische Vereinsbank AG Ord. 11,000 3,340,331
Continental Gummi-Werke AG 25,600 3,721,076
Deutsche Bank AG 352,000 17,122,878
Duerr Beteiligungs AG (RFD) 8,777 3,119,553
Gildemeister AG (a) 28,620 2,372,138
Hoechst AG Ord. 38,900 8,413,855
Karstadt AG 17,800 7,821,202
Kaufhof Holding AG 20,000 7,151,906
Metallgesellschaft AG (a)(d) 86,700 1,587,832
SGL Carbon AG (a)(d) 28,000 1,250,570
Schmalbach-Lubeca AG 4,250 855,261
Veba AG Ord. 27,400 10,779,905
77,404,253
HONG KONG - 2.1%
Amoy Properties Ltd. 2,084,000 1,831,440
Consolidated Electric Power Asia Ltd. 604,000 1,401,165
Dickson Concepts International Ltd. 2,108,000 1,259,994
HSBC Holdings PLC 834,000 10,697,560
Hong Kong Land Holdings Ltd. 2,337,000 4,253,340
Hopewell Holdings Ltd. 3,944,000 3,338,596
Hysan Development Co. Ltd. 643,000 1,470,863
Peregrine Investments Holdings Ltd. 832,000 1,182,780
Semi-Tech (Global) Ltd. 100,000 160,901
Sun Hung Kai Properties Ltd. 153,000 1,132,023
26,728,662
INDIA - 0.1%
Reliance Industries Ltd. GDS (a) 106,400 1,902,432
INDONESIA - 1.0%
Astra International PT (For. Reg.) 160,000 283,790
Bank International Indonesia PT Ord. 921,000 2,843,238
Gudang Garam PT Perusahaan 42,500 326,336
Jakarta International Hotels &
Development Ord. 1,541,000 1,937,499
Matahari Putra Prima PT:
(For. Reg.) 552,000 879,927
(For. Reg.) (rights) (a) 276,000 266,459
Sampoerna Hanjaya Mandala (For. Reg.) 735,750 5,781,604
12,318,853
IRELAND - 1.0%
Bank of Ireland U.S. Holdings, Inc. 1,009,200 5,793,010
Fyffes PLC 1,358,000 2,479,301
Independent Newspapers PLC 521,050 2,866,312
Waterford Wedgwood PLC Unit 1,751,400 1,494,049
12,632,672
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ITALY - 1.3%
Alitalia Linee Aeree Italiane Class A (a) 136,400 $ 65,201
Assicurazioni Generali Spa 218,570 5,128,878
Fiat Spa 1,121,000 3,965,325
Istituto Mobiliare Italiano 301,400 1,848,206
Italgas Spa 512,200 1,334,373
Montedison Spa Ord. (a) 2,962,700 2,120,701
SAI Sta Assieuratrice Industriale Spa 189,000 2,017,120
16,479,804
JAPAN - 18.5%
ADO Electronic Industrial Co. Ltd. 19,000 410,750
Advantest Corp. 74,000 2,797,401
Aida Engineering Ltd. Ord. 176,000 1,199,669
Akita Bank Ltd. 76,650 656,483
Amada Metrecs Co. Ltd. 86,000 1,107,383
Amadasonoike Co. Ltd. 282,000 1,632,368
Autobacs Seven Co. Ltd. 20,600 2,007,679
Bridgestone Corp. 339,000 5,005,908
Canon, Inc. 526,000 8,575,073
Daicel Chemical Industries Ltd. 397,000 2,035,415
East Japan Railway Co. Ord. 700 3,597,165
Fanuc Ltd. 98,200 4,245,860
Fujitsu Ltd. 726,000 7,247,135
Futaba Industrial Co. Ltd. 126,000 2,054,105
Hachijuni Bank Ltd. 92,000 1,141,170
Hanshin Department Store Ltd. 29,000 205,210
Higo Bank Ltd. Ord. 96,000 941,288
Hitachi Ltd. 1,126,000 11,240,047
Honda Motor Co. Ltd. 432,000 6,634,375
Ishihara Sangyo Kaisha Ltd. (a) 343,000 1,021,097
Japan Airlines Co. Ltd. 302,000 2,008,578
Komatsu Ltd. Ord. 410,000 3,133,728
Marubeni Corp. 339,000 1,726,035
Matsushita Electric Industrial Co. Ltd. 303,000 4,724,867
Marukyo Corp. 16,000 255,168
Minebea Co. Ltd. 546,000 3,508,847
Mitsubishi Chemical Industries Ltd. 89,000 381,654
Mitsubishi Estate Co. Ltd. 264,000 2,978,382
Mitsubishi Heavy Industries Ltd. 492,000 3,347,809
Mitsubishi Trust & Banking Corp. 486,000 6,889,546
Mitsui OSK Lines Ltd. 457,000 1,268,696
Murata Mfg. Co. Ltd. 171,000 6,484,465
Nichido Fire & Marine
Insurance Co. Ltd. 502,000 4,062,254
Nikko Securities Co. Ltd. 373,000 3,031,587
Nippon Telegraph &
Telephone Corp. Ord. 400 3,354,991
Nippon Yusen Kabushiki Kaisha 354,000 1,986,414
Nissan Motor Co. Ltd. Ord. 388,000 2,484,302
Nisshinbo Industries 154,000 1,217,082
Nitto Denko Corp. 97,000 1,512,581
Nomura Securities Co. Ltd. 664,000 11,609,217
Omron Corp. 139,000 2,660,131
Orix Corp. 242,000 8,061,901
Pioneer Electronic Corp. 241,000 4,099,704
Rohm Co. Ltd. 120,000 6,209,096
Sankyo Co. Ltd. 258,300 6,011,235
Sanwa Bank Ltd. 95,000 1,795,629
Seino Transpotation Co. Ltd. 144,000 2,432,605
Sony Corp. 209,700 10,082,445
Sumitomo Marine and Fire
Insurance Co. Ltd. 420,000 3,339,160
Sumitomo Realty &
Development Co. Ltd. 648,000 3,873,452
Sumitomo Rubber Industries Ltd. 185,000 1,376,846
Sumitomo Trust & Banking Co. Ltd. 363,000 4,416,893
Suzuki Motor Corp. 228,000 2,545,303
SHARES VALUE (NOTE 1)
JAPAN - CONTINUED
TDK Corp. 88,000 $ 4,012,759
Takashimaya Co. Ltd. 198,000 2,666,510
Takeda Chemical Industries Ltd. 397,000 5,252,687
Tokio Marine & Fire
Insurance Co. Ltd. (The) 1,065,000 12,228,948
Toshiba Corp. 1,626,000 10,314,970
Toyota Motor Corp. 474,000 9,407,208
Tsugami Corp. 253,000 911,577
Yamanouchi Pharmaceutical Co. Ltd. 302,000 6,814,177
238,235,020
KOREA (SOUTH) - 0.8%
Cho Hung Bank Co. Ltd. 191,504 2,273,043
Korea Electric Power Corp. (a) 147,470 5,647,716
Korea First Securities Co. Ltd. 14,218 187,136
Kyungki Bank (a) 171,523 1,628,705
Seoul Securities Co. 74,592 924,714
10,661,314
MEXICO - 1.2%
Banacci SA de CV:
Class B 352,200 540,979
Class L 17,610 26,767
Cemex SA, Series B 1,071,800 3,875,630
Cifra SA Class C 1,559,100 2,055,517
Consorcio G Grupo Dina SA ADR 34,800 108,750
Empresas Ica Sociedad Controladora
SA de CV sponsored ADR
representing Ord. (part. cert.) 208,700 2,139,175
Grupo Carso SA de CV Class A-1 (a) 287,800 1,574,842
Grupo Dina sponsored ADR, Series L 12,543 25,086
Grupo Financiero Bancomer SA de CV:
Class B (a) 4,451,800 1,303,487
Series L (a) 216,878 57,256
sponsored ADR, Series C (a) (d) 70,200 412,425
Telefonos de Mexico SA sponsored ADR
representing shares Ord. Class L 93,200 2,761,050
14,880,964
MALAYSIA - 0.9%
Kuala Lumpur Industries Holdings BHD (a) 290,000 394,913
Magnum Corp. BHD 567,500 1,326,804
Malaysian Banking BHD 133,000 1,052,871
Resorts World BHD 443,000 2,598,399
Telekom Malaysia BHD 614,000 4,659,149
Tenega Nasional BHD 251,000 1,024,384
Time Engineering BHD 161,000 541,509
11,598,029
NETHERLANDS - 6.9%
ABN-AMRO Holdings NV 46,500 1,796,666
Aegon NV Ord. 68,250 2,363,636
AKZO NV Ord. 103,800 12,420,856
Heineken NV 24,200 3,666,667
IHC Caland NV 48,300 1,373,134
International Nederlanden Groep NV 249,108 13,793,730
KLM Royal Dutch Airlines Ord. (a) 198,200 6,441,468
Koninklijke PPT Nederland 221,500 7,971,539
Koninklijke PPT Nederland (a) (d) 80,600 2,900,705
Oce Van der Grinten NV 136,700 7,719,571
Pirelli Tyre Holdings NV Ord. (a) 633,700 4,258,242
Royal Dutch Petroleum Co. Ord. 50,900 6,222,317
Unilever NV Ord. 122,000 15,891,452
Vendex International Bearer (a) (d) 81,400 2,156,361
88,976,344
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NETHERLANDS ANTILLES - 0.3%
Schlumberger Ltd. 68,200 $ 4,236,925
NORWAY - 2.4%
Bergesen Group:
Class A 35,500 807,408
Class B 301,600 6,859,557
Christiania Bank Free shares Ord. 1,475,000 3,426,617
Den Norske Bank Class A Free shares 1,146,800 3,111,291
Norsk Hydro AS 100,850 4,218,809
Orkla AS:
Class A Free shares 93,250 4,173,564
Class B (non-vtg.) 47,800 2,026,773
Saga Petroleum AS Class B 261,600 3,463,634
Unitor AS 192,300 3,358,339
31,445,992
PAKISTAN - 0.1%
Pakistan Telecommunications Voucher
GDR (a) (d) 8,630 837,110
PHILLIPINES - 0.1%
Philippine Long Distance Telephone Co.
sponsored ADR 21,500 1,542,625
SINGAPORE - 1.0%
Jardine Matheson Holdings Ltd. Ord. 506,659 3,723,944
Kim Engineering Holdings Ltd. 2,455,000 2,565,721
Neptune Orient Lines Ltd. 3,377,000 3,916,071
Overseas Union Bank Ltd. (For.) 265,000 1,669,291
Van Der Horst Ltd. 156,000 748,174
12,623,201
SOUTH AFRICA - 0.0%
De Beers Consolidated Mines Ltd. ADR 24,000 621,000
SPAIN - 4.2%
Banco Bilbao Vizcaya SA Ord. (Reg.) 349,100 10,102,294
Banco Intercontinental Espanol 59,550 5,374,415
Corporacion Mapfrecia International
de Reaseguros SA (Reg.) 183,400 9,035,230
EL Aguila SA (a) 56,540 423,669
Repsol SA Ord. 172,500 5,441,730
Tabacalera SA, Series A 205,200 7,696,592
Telefonica de Espana SA Ord. 845,150 10,916,448
Union Electrica Fenosa SA 1,216,100 5,719,270
54,709,648
SWEDEN - 3.5%
Electrolux AB 117,600 5,358,737
Investor AB Class B Free shares 314,700 9,097,942
Mo Och Domsjoe (MoDo) Class B
Free shares 83,100 4,799,104
SKF AB Ord. 75,800 1,533,959
Skandia International Holding 35,400 687,147
Svenska Cellulosa Aktiebolaget SCA
Class B Ord. 362,700 6,740,754
Skandinaviska Enskilda Banken
Class A Free shares 948,300 4,934,745
Volvo AB Class B 637,400 12,153,153
45,305,541
SWITZERLAND - 9.8%
Adia SA (Bearer) (a) 54,800 11,403,744
Alusuisse-Lonza Holding AG (Reg.) 15,939 10,019,990
Baloise Holding (Reg.) 5,635 12,879,299
CIBA-GEIGY AG (Reg.) 14,380 10,567,453
C. S. Holdings (Reg.) 258,405 23,736,812
Fischer (Georg) AG (Reg.) 12,400 3,228,211
Holderbank Financiere Glarus
AG (Bearer) 2,825 2,324,445
SHARES VALUE (NOTE 1)
SWITZERLAND - CONTINUED
Holderbank Financial Glarus
(warrants) (a) 14,125 $ 19,678
Nestle SA (Reg.) 18,800 19,626,644
Roche Holdings Ltd. (part. certs.) 1,700 10,990,422
Surveillance, Societe Generale (Bearer) 1,010 1,758,816
Swiss Bank Corp. (Bearer) 43,450 15,435,437
Zurich Versicherung (Reg.) 3,405 4,289,973
126,280,924
THAILAND - 1.6%
Bank of Asia PCL (For. Reg.) 354,310 1,004,727
Krung Thai Bank (For. Reg.) 1,698,840 6,882,069
Ruam Pattana Fund II (For. Reg.) (a) 1,117,000 712,691
Ruang Khao Unit Trust (For. Reg.) (a) 836,800 601,709
Siam City Bank PCL (For. Reg.) 6,828,500 9,405,234
Telecomasia Corp. PCL (For. Reg.) (a) 394,000 1,460,440
20,066,870
TURKEY - 0.3%
Aksigorta (a) 280,000 54,463
Aksigoria (a) (d) 952,000 185,174
Cimentas AS (a) 500,000 322,290
Tofas Turk Otomobil Fabrikasi
AS ADR (a) (d) 165,600 712,080
Tofas Turk Otomobil Fabrikasi AS (a) 2,400,600 2,117,473
3,391,480
UNITED KINGDOM - 12.4%
Argyll Group PLC Ord. 626,900 3,353,633
Avon Rubber 81,900 666,007
BTR PLC Ord. 625,100 3,184,528
Barclays PLC Ord. 980,300 10,558,664
Bass PLC Ord. 763,700 7,324,586
Berkeley Group PLC 159,600 904,685
Booker PLC 364,200 2,415,782
Boots Co. PLC 287,600 2,334,164
British Land Ord. 289,500 1,844,124
Burmah Oil 190,700 2,768,567
Cadbury-Schweppes PLC Ord. 955,700 6,994,539
Commercial Union PLC (a) 225,100 2,099,695
De La Rue PLC 488,300 7,287,643
Dixons Group PLC 937,500 3,826,800
Forte PLC 1,806,100 6,551,610
Glaxo Holdings PLC Ord. 378,100 4,651,224
Great Universal Stores PLC Ord Class A 381,600 3,574,711
Guinness PLC Ord. 1,154,300 8,705,719
Hanson Trust PLC Ord. 674,000 2,358,953
Iceland Group PLC 637,600 1,829,976
Lasmo PLC 858,400 2,347,355
Ladbroke Group PLC Ord. 1,032,400 2,782,019
Lloyds Abbey Life PLC 549,600 3,426,481
London International Group PLC 2,561,200 4,492,217
National Westminster Bank PLC Ord. 1,097,920 9,567,209
Nurdin & Peacock PLC Ord. 375,000 1,046,393
North West Water Group PLC Ord. 337,700 2,988,469
Redland PLC Ord. 147,800 969,770
Rolls Royce PLC Ord. 874,433 2,433,022
Royal Insurance Holdings PLC 992,600 4,890,550
Sainsbury (J.) PLC Ord. 566,367 3,987,065
Scottish Hydro-Electric PLC Ord. 723,700 3,681,071
Scottish Power PLC ADR 960,500 4,954,461
Shell Transport & Trading PLC 581,900 6,972,716
TSB Group PLC 300 1,155
Tesco PLC Ord. 1,425,100 6,589,734
Unigate Ltd. Ord. 312,800 2,022,471
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UNITED KINGDOM - CONTINUED
Vodafone Group PLC 1,890,600 $ 7,039,006
Whitbread Co. PLC Class A 715,700 6,847,100
160,273,874
TOTAL COMMON STOCKS
(Cost $1,041,443,013) 1,149,740,937
NONCONVERTIBLE PREFERRED STOCKS - 2.5%
AUSTRIA - 0.5%
Creditanstalt Bankverein 105,900 6,099,579
GERMANY - 0.5%
Henkel KGAA 10,300 3,974,013
Porsche AG Ord. (a) 6,050 2,638,622
6,612,635
ITALY - 1.5%
Banco Ambro Veneto 1,197,000 1,627,788
Fiat Spa 1,350,600 2,937,514
SAI Sta Assicuratrice Industriale Spa 650,500 2,800,526
Stet (Societa Finanziaria Telefonica) Spa 5,075,300 11,278,078
18,643,906
KOREA (SOUTH) - 0.0%
Korea First Securities Co. Ltd. 68,124 575,898
TOTAL NONCONVERTIBLE PREFERRED STOCKS
(Cost $29,697,172) 31,932,018
FOREIGN GOVERNMENT OBLIGATIONS (F) - 1.1%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
ARGENTINA - 0.3%
Argentina Republic BOCON
6.0625%, 4/1/01 (e) B1 $ 5,993,570 3,738,969
BRAZIL - 0.2%
Brazil Federative Republic IDU
euro 6.6875%, 1/1/01 (e) B1 2,570,500 2,069,253
DENMARK - 0.3%
Danish Government Bullet
7%, 12/15/04 Aa1 DKK 25,000,000 4,181,735
FRANCE - 0.3%
French Government Strips
4/25/23 Aaa FRF 168,000,000 3,508,764
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS
(Cost $14,123,089) 13,498,721
REPURCHASE AGREEMENTS - 7.2%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 6.22% dated
6/30/95 due 7/3/95 $ 92,390,864 92,343,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,177,606,274) $ 1,287,514,676
FORWARD FOREIGN CURRENCY CONTRACTS
SETTLEMENT UNREALIZED
DATE(S) VALUE GAIN/(LOSS)
CONTRACTS TO SELL
810,720,000 ESP 7/12/95 $ 6,704,431 $ (278,432)
228,920,092 FRF 8/16/95 47,220,286 (1,965,746)
2,043,255,600 JPY 7/11/95 24,176,080 411,833
TOTAL CONTRACTS TO SELL-
(Receivable amount $76,268,452) $ 78,100,797 $ (1,832,345)
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 6.1%
CURRENCY ABBREVIATIONS
DKK - Danish krone
ESP - Spanish peseta
FRF - French franc
JPY - Japanese yen
LEGEND
(a) Non-income producing
(b) Principal amount is stated in United States dollars unless otherwise
noted.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $12,602,067 or 1.0% of net
assets.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) Some foreign government obligations have not been individually rated
by S&P or Moody's. The ratings listed are assigned to securities by FMR,
the fund's investment adviser, based principally on S&P and Moody's ratings
of the sovereign credit of the issuing government.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $307,494,270 and $257,850,752, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $152,215 for the period
(see Note 3 of Notes to Financial Statements).
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $1,177,807,984. Net unrealized appreciation aggregated
$109,706,692, of which $162,739,035 related to appreciated investment
securities and $53,032,343 related to depreciated investment securities.
INDUSTRY DIVERSIFICATION
As a Percentage of Total Value of Investments
Basic Industries 6.2
Construction & Real Estate 3.2
Durables 8.1
Energy 5.1
Finance 26.4
Government Obligations 1.1
Health 3.4
Holding Companies 1.0
Industrial Machinery & Equipment 2.8
Media & Leisure 2.4
Nondurables 8.4
Retail & Wholesale 4.8
Services 3.0
Repurchase Agreements 7.2
Technology 4.9
Transportation 2.8
Utilities 8.8
Others (individually less than 1%) 0.4
Total 100.0%
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $92,343,000) (cost $1,177,606,274) - $ 1,287,514,676
See accompanying schedule
Cash 655
Receivable for investments sold 20,207,922
Unrealized appreciation on foreign currency contracts 411,833
Dividends receivable 7,490,524
Interest receivable 304,815
TOTAL ASSETS 1,315,930,425
LIABILITIES
Payable for investments purchased $ 10,265,923
Unrealized depreciation on foreign currency contracts 2,244,178
Payable for fund shares redeemed 5,303,385
Accrued management fee 832,243
Other payables and accrued expenses 336,394
TOTAL LIABILITIES 18,982,123
NET ASSETS $ 1,296,948,302
Net Assets consist of:
Paid in capital $ 1,177,330,987
Undistributed net investment income 11,730,370
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (279,038)
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 108,165,983
NET ASSETS, for 80,033,348 shares outstanding $ 1,296,948,302
NET ASSET VALUE, offering price and redemption price per share ($1,296,948,302 (divided by) 80,033,348 shares) $16.21
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 21,509,202
Dividends
Interest 4,660,220
26,169,422
Less foreign taxes withheld (2,979,305)
TOTAL INCOME 23,190,117
EXPENSES
Management fee $ 4,861,229
Transfer agent fees 316,317
Accounting fees and expenses 267,409
Non-interested trustees' compensation 3,447
Custodian fees and expenses 311,947
Registration fees 24
Audit 22,683
Legal 2,524
Miscellaneous 2,230
TOTAL EXPENSES 5,787,810
NET INVESTMENT INCOME 17,402,307
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 6,935,354
Foreign currency transactions (6,677,005) 258,349
Change in net unrealized appreciation (depreciation) on:
Investment securities 37,408,823
Assets and liabilities in foreign currencies (2,727,346) 34,681,477
NET GAIN (LOSS) 34,939,826
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 52,342,133
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
Operations $ 17,402,307 $ 14,354,948
Net investment income
Net realized gain (loss) 258,349 1,588,422
Change in net unrealized appreciation (depreciation) 34,681,477 (19,420,073)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 52,342,133 (3,476,703)
Distributions to shareholders (4,893,543) (4,465,195)
From net investment income
From net realized gain (1,797,170) -
In excess of net realized gain (3,096,373) -
TOTAL DISTRIBUTIONS (9,787,086) (4,465,195)
Share transactions 235,046,856 1,000,905,405
Net proceeds from sales of shares
Reinvestment of distributions 9,787,086 4,465,195
Cost of shares redeemed (288,141,738) (477,688,222)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (43,307,796) 527,682,378
TOTAL INCREASE (DECREASE) IN NET ASSETS (752,749) 519,740,480
NET ASSETS
Beginning of period 1,297,701,051 777,960,571
End of period (including undistributed net investment income of $11,730,370 and $10,987,509, $ 1,296,948,302 $ 1,297,701,051
respectively)
OTHER INFORMATION
Shares 15,188,474 62,240,900
Sold
Issued in reinvestment of distributions 652,472 274,107
Redeemed (18,619,209) (29,967,241)
Net increase (decrease) (2,778,263) 32,547,766
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 E 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.67 $ 15.48 $ 11.53 $ 13.09 $ 12.42 $ 12.67
Income from Investment Operations
Net investment income .07 .19 .06 .16 .24 .18
Net realized and unrealized gain (loss) .59 .08 C 4.16 (1.54) .74 (.39)
Total from investment operations .66 .27 4.22 (1.38) .98 (.21)
Less Distributions (.06) (.08) (.18) (.18) (.17) (.04)
From net investment income
In excess of net investment income - - (.04) - - -
From net realized gain (.02) - - - (.14) D -
In excess of net realized gain (.04) - (.05) - - -
Total distributions (.12) (.08) (.27) (.18) (.31) (.04)
Net asset value, end of period $ 16.21 $ 15.67 $ 15.48 $ 11.53 $ 13.09 $ 12.42
TOTAL RETURN B 4.27% 1.72% 37.35% (10.72) 8.00% (1.67)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,296,948 $ 1,297,701 $ 777,961 $ 180,837 $ 126,490 $ 80,554
Ratio of expenses to average net assets .91% A .92% 1.03% 1.14% 1.26% 1.41%
Ratio of net investment income to average net assets 2.74% A 1.28% 1.21% 1.86% 2.33% 1.89%
Portfolio turnover rate 46% A 42% 42% 61% 168% 100%
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE ACCOUNT.
INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
C THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD
ENDED DUE TO THE TIMING OF SALES AND
REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
D INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN CURRENCY RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME.
E EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL
STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1995 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
The Money Market Portfolio, High Income Portfolio, Equity-Income Portfolio,
Growth Portfolio and Overseas Portfolio (the funds) are funds of Variable
Insurance Products Fund (the trust). The trust is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an open-end
management investment company organized as a Massachusetts business trust.
Each fund is authorized to issue an unlimited number of shares. Shares of
each fund may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts. The
following summarizes the significant accounting policies of the funds:
SECURITY VALUATION:
MONEY MARKET PORTFOLIO. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
HIGH INCOME PORTFOLIO. Securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market (sales
prices if the principal market is an exchange) in which such securities are
normally traded. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value
as determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus interest, both of which approximate current
value.
EQUITY-INCOME AND GROWTH PORTFOLIOS. Securities for which exchange
quotations are readily available are valued at the last sale price, or if
no sale price, at the closing bid price. Securities for which exchange
quotations are not readily available (and in certain cases debt securities
which trade on an exchange), are valued primarily using dealer-supplied
valuations or at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees. Short-term securities maturing within sixty days of their
purchase date are valued at amortized cost or original cost plus accrued
interest, both of which approximate current value.
OVERSEAS PORTFOLIO. Securities for which quotations are readily available
are valued at the last sales price, or if no sale price, at the closing bid
prices in the principal market in which such securities are normally
traded. Securities for which market quotations are not readily available
are valued
primarily using dealer-supplied valuations or at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the funds are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
the fiscal year. The schedules of investments include information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME:
MONEY MARKET PORTFOLIO. Interest income, which includes amortization of
premium and accretion of original issue discount, is accrued as earned.
HIGH INCOME, EQUITY-INCOME, GROWTH AND OVERSEAS PORTFOLIOS. Dividend income
is recorded on the ex-dividend date, except certain dividends from foreign
securities where the ex-dividend date may have passed, are recorded as soon
as the funds are informed of the ex-dividend date. Interest income, which
includes accretion of original issue discount, is accrued as earned.
Investment income is recorded net of foreign taxes withheld where recovery
of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income for the Money Market Portfolio.
Distributions are recorded on the ex-dividend date for all other funds.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for foreign
currency transactions, passive foreign investment companies (PFIC), market
discount, partnerships, non-taxable dividends and losses deferred due to
wash sales and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The funds, except for the Money Market
Portfolio, may use foreign currency contracts to facilitate transactions in
foreign securities and to manage the funds' currency exposure. Contracts to
buy generally are used to acquire exposure to foreign currencies, while
contracts to sell are used to hedge the funds' investments against currency
fluctuations. Also, a contract to buy or sell can offset a previous
contract. These contracts involve market risk in excess of the unrealized
gain or loss reflected in the funds' Statement of Assets and Liabilities.
The U.S. dollar value of the currencies each applicable fund has committed
to buy or sell is shown in the schedule of investments under the caption
"Forward Foreign Currency Contracts." This amount represents the aggregate
exposure to each currency acquired or hedged through currency contracts at
period end. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
Contracts that have been offset with different counterparties are reflected
as both a contract to buy and a contract to sell in each applicable fund's
schedule of investments under the caption "Forward Foreign Currency
Contracts."
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the funds, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The funds, through their custodian, receive delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. FMR, the funds'
investment adviser, is responsible for determining that the value of these
underlying securities remains at least equal to the resale price.
INDEXED SECURITIES. The funds, (excluding the Money Market Portfolio) may
invest in indexed securities whose values are linked either directly or
inversely to changes in foreign currencies, interest rates, commodities,
indices, or other underlying instruments. The funds use these securities to
increase or decrease their exposure to different underlying instruments and
to gain exposure to markets that might be difficult to invest in through
conventional securities. Indexed securities may be more volatile than their
underlying instruments, but any loss is limited to the amount of the
original investment.
RESTRICTED SECURITIES. The funds are permitted to invest in privately
placed restricted securities. These securities may be resold in
transactions exempt from registration or to the public if the securities
are registered. Disposal of these securities may involve time-consuming
negotiations and expense, and prompt sale at an acceptable price may be
difficult. At the end of the period, restricted securities (excluding 144A
issues) amounted to $20,998,411 or 2.7% of net assets for the Money Market
Portfolio and $15,265,476 or 1.9% of net assets for the High Income
Portfolio.
3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, FMR receives a monthly
fee.
For the Money Market Portfolio, FMR receives a monthly fee that is
calculated on the basis of a basic fund fee rate of .03% of the fund's
average net assets, plus a fixed income group fee rate and an income-based
fee. The group fee rate is the weighted average of a series of rates
ranging from .1200% to .3700% and is based on the monthly average net
assets of all the mutual funds advised by FMR. The income-based fee is
added only when the fund's gross yield exceeds 5%. At that time the
income-based fee would equal 6% of that portion of the fund's gross income
that represents a gross yield of more than 5% per year. The maximum
3. FEES AND OTHER TRANSACTIONS
WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
income-based component is .24% of average net assets. For the period, the
management fee was equivalent to an annualized rate of .25% of average net
assets.
For all other funds, FMR receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1200% to
.3700% for the High Income Portfolio and .2700% to .5200% for the
Equity-Income, Growth and Overseas Portfolios for the period. In the event
that these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted in
the same or a lower management fee. The annual individual fund fee rates
are .20%, .30%, .45% and .45% for the Equity-Income, Growth, Overseas, and
High Income Portfolios, respectively. For the period, the management fees
were equivalent to annualized rates of .60%, .52%, .62%, and .77% of
average net assets for the High Income, Equity-Income, Growth, and Overseas
Portfolios, respectively.
SUB-ADVISER FEE. As the Money Market Portfolio's investment sub-adviser,
FMR Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR
of 50% of the management fee payable to FMR. The fees are paid prior to any
voluntary expense reimbursements which may be in effect, and after reducing
the fee for any payments by FMR pursuant to the fund's Distribution and
Service Plan.
FMR, on behalf of the High Income and Overseas Portfolios, entered into
sub-advisory agreements with affiliates of FMR. In addition, one of the
sub-advisers of the Overseas Portfolio, Fidelity International Investment
Advisors (FIIA), entered into a sub-advisory agreement with its subsidiary,
Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.).
Under the sub-advisory arrangements, FMR may receive investment advice and
research services and may grant the sub-advisers investment management
authority to buy and sell securities. FMR pays its sub-advisers either a
portion of its management fee or a fee based on costs incurred for these
services. FIIA pays FIIAL U.K. a fee based on costs incurred for either
service.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the funds' transfer, dividend disbursing
and shareholder servicing agent. Effective January 1, 1995, the Board of
Trustees approved a revised transfer agent contract pursuant to which FIIOC
receives account fees and asset-based fees that vary according to account
size and type of account. Under the prior transfer agent contract, FIIOC
received fees based on the type, size, number of accounts, and number of
transactions made by shareholders. FIIOC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements.
ACCOUNTING FEES. Fidelity Service Co.(FSC) an affiliate of FMR, maintains
the funds' accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. Certain funds placed a portion of their portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms are shown under the caption
"Other Information" at the end of each applicable fund's schedule of
investments.
4. BANK BORROWINGS.
Each fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. Each fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, each fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. For
the High Income and Equity-Income portfolios, the maximum loans during the
periods for which loans were outstanding amounted to $4,885,000 and
$18,269,000 respectively, and the average daily loan balances were
$4,885,000 and $18,269,000, respectively. The weighted average interest
rate was 6.4% for both the High Income Portfolio and for the Equity-Income
Portfolio.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the funds' operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of 1.00% of average net assets for the High
Income Portfolio and 1.50% of average net assets for the Equity-Income,
Growth, and Overseas Portfolios. For the period, there was no reimbursement
under this arrangement.
FMR has directed certain portfolio trades of the High Income Portfolio to
brokers who paid a portion of the fund's expenses. For the period, the High
Income Portfolio's expenses were reduced by $5,422 under this agreement.
6. BENEFICIAL INTEREST.
At the end of the period, Fidelity Investments Life Insurance Company
(FILI), an affiliate of FMR, was the record owner of more than 5% of the
outstanding shares and certain unaffiliated insurance companies were record
owners of approximately 10% of the total outstanding shares of the
following funds:
FILI UNAFFILIATED INSURANCE COMPANIES
FUND % OF OWNERSHIP # OF % OF OWNERSHIP
Money Market 48 1 16
High Income 17 1 41
Equity-Income 26 1 30
Growth 17 1 31
Overseas 15 1 40
7. PURCHASES AND SALES OF INVESTMENTS.
Information regarding purchases and sales of securities (other than
short-term securities) is included under the caption "Other Information" at
the end of each applicable fund's schedule of investments.
8. TRANSACTIONS WITH AFFILIATED COMPANIES.
Information regarding transactions with affiliated companies is included
under the caption "Other Information" at the end of each applicable fund's
schedule of investments.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
William J. Hayes, VICE PRESIDENT
Fred L. Henning, Jr., VICE PRESIDENT, MONEY MARKET PORTFOLIO
Robert A. Lawrence, VICE PRESIDENT
Lawrence Greenberg, VICE PRESIDENT
Barry J. Coffman, VICE PRESIDENT
Robert Litterst, VICE PRESIDENT
John R. Hickling, VICE PRESIDENT
Bettina Doulton, VICE PRESIDENT
Arthur S. Loring, SECRETARY
Stephen P. Jonas, TREASURER
Robert H. Morrison, MANAGER, SECURITY TRANSACTIONS
Michael D. Conway, ASSISTANT TREASURER, MONEY MARKET PORTFOLIO
John H. Costello, ASSISTANT TREASURER
Leonard M. Rush, ASSISTANT TREASURER
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox
Phyllis Burke Davis
Richard J. Flynn
Edward C. Johnson 3d
E. Bradley Jones
Donald J. Kirk
Peter S. Lynch
Edward H. Malone
Marvin L. Mann
Gerald C. McDonough
Thomas R. Williams
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Co.
Boston, MA
CUSTODIAN
Morgan Guaranty Trust Company of New York,
New York, NY
MONEY MARKET PORTFOLIO
The Bank of New York, New York, NY
HIGH INCOME PORTFOLIO
The Chase Manhattan Bank, N.A., New York, NY
EQUITY-INCOME AND OVERSEAS PORTFOLIOS
Brown Brothers Harriman & Co., Boston, MA
GROWTH PORTFOLIO
(2_FIDELITY_LOGOS)
VARIABLE INSURANCE PRODUCTS
FUND
MONEY MARKET PORTFOLIO
HIGH INCOME PORTFOLIO
EQUITY-INCOME PORTFOLIO
GROWTH PORTFOLIO
OVERSEAS PORTFOLIO
SEMIANNUAL REPORT
JUNE 30, 1995
CONTENTS
MONEY MARKET PORTFOLIO VIPF-3 PERFORMANCE
VIPF-4 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-5 INVESTMENTS
VIPF-9 FINANCIAL STATEMENTS
HIGH INCOME PORTFOLIO VIPF-11 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-12 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-13 INVESTMENTS
VIPF-19 FINANCIAL STATEMENTS
EQUITY-INCOME PORTFOLIO VIPF-21 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-22 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-23 INVESTMENTS
VIPF-27 FINANCIAL STATEMENTS
GROWTH PORTFOLIO VIPF-29 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-30 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-31 INVESTMENTS
VIPF-35 FINANCIAL STATEMENTS
OVERSEAS PORTFOLIO VIPF-37 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-38 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-39 INVESTMENTS
VIPF-44 FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS VIPF-46 NOTES TO THE FINANCIAL STATEMENTS
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS
NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
PERFORMANCE
To measure a money market fund's performance, you can look at either total
return or yield. Total return reflects both the change
in a fund's share price over a given period, and reinvestment of its
dividends (or income). Yield measures the income paid by a fund. Since a
money market fund tries to maintain a $1 share price, yield is an important
measure of performance.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 PAST 10
JUNE 30, 1995 YEAR YEARS YEARS
Money Market 5.44% 4.88% 6.19%
Consumer Price Index 3.04% 3.26% 3.55%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had achieved that return
by performing at a constant rate each year.
Comparing the fund's performance to the Consumer Price Index (CPI) helps
show how your investment did compared to inflation. (The periods covered by
the CPI numbers are the closest available match to those covered by the
fund.)
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
If the advisor had not reimbursed certain fund expenses, the past five
years and life of fund total returns would have been lower. Yield
will vary.
YIELD
Row: 1, Col: 1, Value: 4.21
Row: 1, Col: 2, Value: 2.41
Row: 2, Col: 1, Value: 4.7
Row: 2, Col: 2, Value: 2.5
Row: 3, Col: 1, Value: 5.609999999999999
Row: 3, Col: 2, Value: 2.74
Row: 4, Col: 1, Value: 5.91
Row: 4, Col: 2, Value: 2.89
Row: 5, Col: 1, Value: 5.85
Row: 5, Col: 2, Value: 2.87
Money Market
MMDA
6% -
5% -
4% -
3% -
2% -
1% -
0%
6/28/94 10/2/94 12/28/94 3/29/95 6/28/95
Money Market 4.21% 4.70% 5.61% 5.91% 5.85%
MMDA 2.41% 2.50% 2.74% 2.89% 2.87%
YIELD refers to the income paid by the fund over a given period. Yields for
money market funds are usually for seven-day periods,
expressed as annual percentage rates. A yield that assumes income earned is
reinvested or compounded is called an effective yield. The chart above
shows the fund's current seven-day yield at quarterly intervals over the
past year. This is compared to similar yields for the average bank money
market deposit account (MMDA). The MMDA average is supplied by BANK RATE
MONITOR.(Trademark)
COMPARING PERFORMANCE
There are some important differences between
a bank money market deposit account (MMDA)
and a money market fund. First, the U.S.
government neither insures nor guarantees a
money market fund. In fact, there is no
assurance that a money fund will maintain a $1
share price. Second, a money market fund
returns to its shareholders income earned by the
fund's investments after expenses. This is in
contrast to banks, which set their MMDA rates
periodically based on current interest rates,
competitors' rates, and internal criteria.
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with
Bob Litterst, Portfolio
Manager of Money
Market Portfolio
Q. BOB, CAN YOU BRING US UP TO DATE ON MARKET CONDITIONS?
A. Sure. The economic growth rate has slowed dramatically during the past
six months. During the fourth quarter of 1994, the gross domestic product
expanded at a rate of 5.1%, a very strong showing. Moreover, final sales
rose 5.7%, meaning sales exceeded production and depleted inventories.
Those signs of growth, along with disturbing trends in such leading
indicators of inflation as unemployment and capacity utilization, prompted
the Federal Reserve to raise the federal funds rate, the rate banks charge
each other for overnight loans, another one-half percentage point in
February.
Q. HOW HAS THE INTEREST RATE ENVIRONMENT CHANGED SINCE THEN?
A. Even as the Fed was tightening credit for the seventh time in a little
more than a year, there were signs that the economy was beginning to lose
steam. Led by softening consumer activity and weakness in
interest-sensitive sectors such as housing and autos, the growth rate
during the first quarter of 1995 slowed to 2.7%. Currently, most economists
have long since stopped worrying about the economy overheating. Now they
have an altogether different concern: that we might be headed for another
recession. By the end of June, it was clear to all that the latest cycle of
interest rate increases was over. Instead, speculation centered on when the
Fed might feel compelled to lower rates.
Q. HOW DID YOU RESPOND TO CHANGING CONDITIONS?
A. The fund's average maturity six months ago, when the period began, was
39 days. That was a defensive number. It reflected my view at the time that
further rate increases were likely. As it became apparent that the economy
was slowing more rapidly than initially expected, my expectations regarding
Fed policy changed, and I gradually extended the fund's average maturity. I
moved cautiously at first because conditions were unsettled and it seemed
prudent to maintain flexibility. But as signs of weakness accumulated, I
began to prepare for a shift in Fed policy, including the possibility of an
eventual rate cut. By the end of June, the fund's average maturity was more
aggressive than that of most other taxable money market funds-around 60
days, compared to about 50 days for most competitors.
Q. HOW DID YOU ACHIEVE THAT LONGER AVERAGE MATURITY?
A. Mainly by focusing on three-month and six-month securities, rather than
moving further out the yield curve. That's because by the end of the
period, expectations for declining short-term rates caused longer-term
yields on some money market securities to fall below shorter-term yields, a
situation known as an inverted yield curve.
Q. WHAT ABOUT ASSET SELECTION?
A. I've reduced the fund's stake in U.S. Treasury and agency securities.
Normally the fund averages about 10% in government securities, although
it's been as high as 20% at times during the past year or two. But in
recent months, technical factors affecting supply and demand have priced
government securities unusually high. The main cause seems to be heavy
buying on the part of foreign central banks with funds accumulated in
support of the U.S. dollar. With so many other creditworthy alternatives
available, I've looked elsewhere for value, adding higher-yielding
commercial paper and bank certificates of deposit. At the end of June,
government securities totaled less than 3% of the fund's assets.
Q. WHAT'S THE OUTLOOK?
A. The next few months should be interesting. We know that on July 6,
shortly after the period ended, the Fed lowered the federal funds rate
one-quarter percentage point, but as we look ahead, much uncertainty
remains. Some market participants believe that we're in the early stages of
an extended downturn. Others believe that what's happening is merely a
brief but severe inventory correction, and that the economy will resume
growing at its long-term trend rate of around 2.5% once the temporary
buildup in inventories sells off.
Q. WHAT'S YOUR VIEW?
A. I tend to side with those in the latter camp. The typical prerequisites
for a recession, including high inflation and tight bank lending standards,
simply don't exist. That said, I'm concerned that if this Spring's weakness
in the labor market persists, it could evolve into a self-reinforcing
slowdown, forcing the Fed to continue lowering rates. While I don't think
that will happen, I have to respect the possibility of such a development.
Accordingly, I'll probably maintain a neutral to aggressive average
maturity of between 60 and 65 days for the foreseeable future.
FUND FACTS
GOAL: Income and share price stability by
investing in high quality, short-term instruments
START DATE: April 1, 1982
SIZE: As of June 30, 1995, more than $768
million
MANAGER: Robert Litterst, since 1992; manager,
Capital Reserves Money Market, Fidelity Cash
Reserves, Fidelity Money Market Trust:
Retirement Money Market, since 1992; joined
Fidelity in 1991
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
BANKERS' ACCEPTANCES - 4.2%
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
DOMESTIC BANKERS' ACCEPTANCES - 2.8%
CHASE MANHATTAN BANK
11/1/95 6.09% $ 4,500,000 $ 4,408,980
CHEMICAL BANK
9/28/95 6.02 5,723,026 5,639,549
MELLON BANK, N.A.
11/24/95 5.81 7,500,000 7,325,700
NBD BANK, N.A.
12/11/95 5.87 4,000,000 3,896,767
21,270,996
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 1.4%
BANK OF TOKYO
8/14/95 6.39 6,000,000 5,954,533
RABOBANK NEDERLAND, N.V.
8/3/95 6.22 1,000,000 994,408
SANWA BANK, LTD.
7/31/95 6.08 4,000,000 3,980,033
10,928,974
TOTAL BANKERS' ACCEPTANCES 32,199,970
CERTIFICATES OF DEPOSIT - 20.3%
CHICAGO BRANCH, YANKEE DOLLAR, FOREIGN BRANCH - 3.9%
ABN-AMRO BANK
8/3/95 6.25 5,000,000 5,000,045
9/20/95 6.19 5,000,000 5,000,000
9/25/95 6.00 5,000,000 5,000,000
10/19/95 6.25 10,000,000 10,000,000
SANWA BANK, LTD.
8/15/95 6.04 5,000,000 5,000,062
30,000,107
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 9.4%
BANQUE NATIONALE DE PARIS
11/13/95 6.05 5,000,000 5,000,000
CANADIAN IMPERIAL BANK OF COMMERCE
11/1/95 6.25 4,000,000 3,998,110
COMMERZBANK, GERMANY
8/24/95 6.35 5,000,000 4,999,596
DRESDNER BANK, A.G.
3/15/96 6.44 1,000,000 1,000,875
FUJI BANK, LTD.
7/19/95 6.18 5,000,000 5,000,000
HYPO U.S. FINANCE
11/8/95 6.03 5,000,000 5,000,823
INDUSTRIAL BANK OF JAPAN, LTD.
7/31/95 6.30 5,000,000 5,000,000
ROYAL BANK OF CANADA
10/5/95 6.25 1,000,000 1,000,294
SANWA BANK, LTD.
7/7/95 6.21 3,000,000 3,000,000
SOCIETE GENERALE
8/14/95 6.02 14,000,000 14,000,000
8/21/95 6.00 10,000,000 10,000,000
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - CONTINUED
SUMITOMO BANK, LTD.
8/7/95 6.01% $ 5,000,000 $ 5,000,000
8/21/95 6.41 5,000,000 5,000,465
8/22/95 6.03 5,000,000 5,000,000
73,000,163
LONDON BRANCH, EURODOLLAR, DOMESTIC BANKS - 2.6%
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOC.
9/29/95 5.91 5,000,000 5,000,000
11/27/95 6.00 5,000,000 5,000,000
BANK OF NEW YORK
7/17/95 6.15 10,000,000 10,000,000
20,000,000
LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - 3.8%
BANK OF SCOTLAND
7/5/95 6.15 4,000,000 4,000,015
MITSUBISHI BANK, LTD.
8/10/95 6.04 5,000,000 5,000,377
NORDDEUTSCHE LANDESBANK
12/8/95 5.75 5,000,000 4,998,563
SANWA BANK, LTD.
8/7/95 6.02 5,000,000 4,998,917
TORONTO-DOMINION BANK
12/11/95 5.74 10,000,000 10,013,064
29,010,936
PORTLAND BRANCH, EURODOLLAR, FOREIGN BANKS - 0.6%
BANK OF NOVA SCOTIA
7/11/95 6.13 5,000,000 5,000,008
TOTAL CERTIFICATES OF DEPOSIT 157,011,214
COMMERCIAL PAPER - 52.0%
ANZ (DE), INC.
7/7/95 6.52 1,273,000 1,271,653
8/8/95 6.03 220,000 218,611
ABBEY NATIONAL TREASURY SERVICES
8/21/95 6.04 5,000,000 4,957,854
AMERICAN EXPRESS CREDIT CORP.
8/9/95 6.21 5,000,000 4,967,067
8/14/95 6.20 5,000,000 4,962,875
11/9/95 5.89 5,000,000 4,895,382
AMERICAN HOME FOOD PRODUCTS, INC.
7/10/95 6.17 11,000,000 10,983,280
AMERICAN HOME PRODUCTS
8/29/95 6.00 6,000,000 5,941,688
AMERICAN TELEPHONE & TELEGRAPH CO.
9/27/95 6.09 5,000,000 4,927,400
ASSOCIATES CORP. OF NORTH AMERICA
9/1/95 5.98 6,000,000 5,938,930
9/28/95 6.10 5,000,000 4,926,451
BANC ONE CORP.
9/22/95 5.99 5,000,000 4,931,986
BEAR STEARNS COS., INC.
7/12/95 6.14 5,000,000 4,990,757
8/1/95 6.06 6,000,000 5,969,155
8/1/95 6.13 5,000,000 4,974,016
COMMERCIAL PAPER - CONTINUED
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
BENEFICIAL CORP.
9/18/95 5.99% $ 5,000,000 $ 4,935,264
9/29/95 5.81 5,000,000 4,928,750
CIT GROUP HOLDINGS, INC.
9/21/95 6.20 5,000,000 4,931,211
CHRYSLER FINANCIAL CORPORATION
7/6/95 6.05 5,000,000 4,995,826
7/12/95 6.05 5,000,000 4,990,803
7/13/95 6.04 2,000,000 1,996,000
7/17/95 6.05 3,000,000 2,991,973
COMMERZBANK U.S. FINANCE, INC.
9/25/95 5.89 5,000,000 4,930,722
9/29/95 5.91 140,000 137,977
9/29/95 6.30 600,000 590,820
10/20/95 6.23 4,000,000 3,925,507
12/15/95 5.76 1,120,000 1,090,905
COMPAGNIE BANCAIRE
7/6/95 6.20 5,000,000 4,995,764
7/12/95 6.15 5,000,000 4,990,742
CORESTATES CAPITAL CORP.
7/8/95 6.01 (a) 5,000,000 5,000,000
7/15/95 6.09 (a) 5,000,000 5,000,000
DEN DANSKE CORP., INC.
7/12/95 6.15 3,000,000 2,994,445
DU PONT (E.I.) DE NEMOURS & CO.
9/19/95 6.09 2,500,000 2,466,833
FORD MOTOR CREDIT CORP.
7/21/95 6.23 5,000,000 4,983,056
8/30/95 6.23 15,000,000 14,848,000
9/11/95 6.25 5,000,000 4,939,100
10/27/95 5.86 6,000,000 5,887,507
FORD MOTOR CREDIT, PLC
8/1/95 6.10 4,500,000 4,476,711
GENERALE BANK
10/17/95 6.07 5,000,000 4,911,200
GENERAL ELECTRIC CAPITAL CORP.
7/3/95 5.97 (a) 5,000,000 5,000,000
7/5/95 6.19 5,000,000 4,996,628
8/1/95 5.94 170,000 169,139
9/15/95 6.68 4,000,000 3,945,787
10/5/95 6.79 2,400,000 2,358,400
10/12/95 6.80 1,000,000 981,403
11/1/95 6.13 10,000,000 9,796,708
GENERAL ELECTRIC CORP.
9/27/95 6.25 10,000,000 9,851,622
GENERAL MOTORS ACCEPTANCE CORP.
7/31/95 6.22 5,000,000 4,974,500
8/2/95 6.19 11,000,000 10,940,453
8/16/95 6.12 6,000,000 5,953,770
8/16/95 6.15 5,000,000 4,961,347
8/22/95 6.10 1,000,000 991,319
9/15/95 6.05 5,000,000 4,936,983
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
GEORGIA POWER CO.
7/5/95 6.20% $ 5,000,000 $ 4,996,611
GOLDMAN SACHS GROUP, L.P. (THE)
9/7/95 6.01 10,000,000 9,888,367
9/18/95 6.02 6,000,000 5,922,185
HANSON FINANCE (UK), PLC
8/7/95 6.03 10,000,000 9,938,950
8/22/95 6.04 6,000,000 5,948,477
IBM CORP.
9/1/95 5.97 5,000,000 4,949,194
INTERNATIONAL NEDERLANDEN U.S. FUNDING CORP.
8/28/95 6.35 4,000,000 3,960,367
MERRILL LYNCH & CO., INC.
9/28/95 6.00 5,000,000 4,927,317
MONSANTO CO.
8/14/95 6.19 2,500,000 2,481,453
9/12/95 6.17 1,525,000 1,506,353
12/21/95 5.90 10,000,000 9,724,642
MORGAN STANLEY GROUP, INC.
10/6/95 5.91 5,000,000 4,921,592
NATIONAL & PROVINCIAL BUILDING SOCIETY
10/16/95 5.89 5,350,000 5,258,249
NATIONWIDE BUILDING SOCIETY
8/11/95 6.06 5,000,000 4,966,004
NEW CENTER ASSET TRUST
7/12/95 6.16 5,000,000 4,990,726
7/17/95 6.15 10,000,000 9,973,067
NORWEST CORP.
9/19/95 5.99 400,000 394,773
NORWEST FINANCIAL
7/10/95 6.14 5,000,000 4,992,438
PENNSYLVANIA LIGHT & POWER COMPANY
7/5/95 6.06 1,650,000 1,648,895
7/10/95 6.05 3,200,000 2,196,689
PHILIP MORRIS COS., INC.
9/5/95 6.07 4,500,000 4,450,913
PRUDENTIAL FUNDING CORP.
7/3/95 6.30 10,000,000 9,996,500
SEARS ROEBUCK ACCEPTANCE CORP.
9/18/95 6.00 5,000,000 4,935,154
SHERWOOD MEDICAL COMPANY
8/21/95 5.99 5,000,000 4,957,925
TEXTRON, INC.
7/14/95 6.06 3,500,000 3,492,391
TORONTO DOMINION HOLDINGS USA, INC.
9/11/95 6.11 5,000,000 4,940,200
9/29/95 5.90 10,000,000 9,854,750
TRANSAMERICA FINANCE CORP.
8/7/95 6.03 220,000 218,648
WOOLWICH EQUITABLE BUILDING SOCIETY
10/16/95 5.94 5,000,000 4,913,508
TOTAL COMMERCIAL PAPER 402,000,618
FEDERAL AGENCIES - 3.2%
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
FEDERAL FARM CREDIT BANK - AGENCY COUPONS - 0.6%
7/3/95 6.17% (a) $ 5,000,000 $ 4,997,271
FEDERAL NATIONAL MORTGAGE ASSOC. - DISCOUNT NOTES - 2.6%
7/17/95 6.27 5,000,000 4,986,422
9/11/95 6.32 10,000,000 9,877,600
10/20/95 6.04 5,000,000 4,909,350
19,773,372
TOTAL FEDERAL AGENCIES 24,770,643
BANK NOTES - 7.2%
BANK OF NEW YORK
8/28/95 6.35 5,000,000 4,999,748
BOATMEN'S NATIONAL BANK OF ST. LOUIS
9/22/95 6.04 (a) 5,000,000 4,995,859
COMERICA BANK - DETROIT
5/28/96 5.83 5,000,000 5,014,775
FIFTH THIRD BANK - CINCINNATI
10/27/95 6.07 5,000,000 5,001,981
HOUSEHOLD BANK, N.A.
9/21/95 5.93 1,000,000 1,000,000
KEY BANK OF NEW YORK
7/3/95 6.11 (a) 5,000,000 4,999,374
MELLON BANK, N.A.
11/1/95 6.24 5,000,000 5,000,000
NBD BANK, N.A.
10/16/95 6.27 5,000,000 5,000,000
NATIONSBANK OF TEXAS
9/26/95 6.38 5,000,000 5,000,000
10/27/95 6.25 5,000,000 5,000,000
PNC BANK, N.A.
7/4/95 6.15 (a) 5,000,000 4,999,589
U.S. NATIONAL BANK OF OREGON
8/22/95 6.37 5,000,000 5,000,070
TOTAL BANK NOTES 56,011,396
MASTER NOTES (A) - 1.2%
J.P. MORGAN SECURITIES
7/3/95 6.58 9,000,000 9,000,000
MEDIUM-TERM NOTES (A) - 5.9%
ABBEY NATIONAL, NORTH AMERICA
7/3/95 5.97 5,000,000 4,999,151
ABBEY NATIONAL TREASURY SERVICES (C)
9/30/95 6.00 10,000,000 10,000,000
BENEFICIAL CORP.
7/15/95 6.09 5,000,000 4,999,453
DEAN WITTER, DISCOVER & CO.
7/15/95 6.10 5,000,000 5,004,526
GENERAL ELECTRIC CAPITAL CORP.
7/3/95 6.27 5,000,000 4,998,997
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
GENERAL MOTORS ACCEPTANCE CORP.
8/7/95 6.25% $ 3,000,000 $ 3,000,000
GOLDMAN SACHS GROUP, L.P. (THE) (C)
9/1/95 6.03 3,000,000 3,000,000
9/16/95 5.95 4,000,000 4,000,000
NORWEST CORP.
9/15/95 6.06 6,000,000 6,000,000
TOTAL MEDIUM-TERM NOTES 46,002,127
SHORT-TERM NOTES (A) - 3.2%
CAPITAL ONE FUNDING CORP.
7/10/95 6.07 4,072,000 4,072,000
SMM TRUST COMPANY (1994-D) (B)
7/28/95 6.17 4,000,000 4,000,000
SMM TRUST COMPANY (1995-I) (B)
7/5/95 6.16 6,000,000 5,998,411
SMM TRUST COMPANY (1995-J) (B)
7/15/95 6.06 11,000,000 11,000,000
TOTAL SHORT-TERM NOTES 25,070,411
MUNICIPAL SECURITIES (A) - 1.1%
GARDENA CALIFORNIA CERTIFICATES OF PARTNERSHIP
7/10/95 6.35 6,550,000 6,550,000
NEW ORLEANS AVIATION BOARD
7/10/95 6.26 1,800,000 1,800,000
TOTAL MUNICIPAL SECURITIES 8,350,000
REPURCHASE AGREEMENTS - 1.7%
MATURITY
AMOUNT
In a joint trading account
(U.S. Government Obligations)
dated 6/30/95 due 7/3/95:
At 6.28% $ 12,806,699 12,800,000
TOTAL INVESTMENTS - 100% $ 773,216,379
Total Cost for Income Tax Purposes - $773,216,379
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end. The due date on these types of
securities reflects the next interest rate reset date or, when applicable,
the final maturity date.
(b) Restricted securities - Investment in securities not registered under
the Securities Act of 1933.
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
SMM Trust Company:
(1994-D) 10/28/94 $ 4,000,000
(1995-I)) 5/25/95 $ 6,000,000
(1995-J) 5/15/95 $ 11,000,000
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $17,000,000 or 2.2% of net
assets.
INCOME TAX INFORMATION
At December 31, 1994, the fund had a capital loss carryforward of
approximately $94,600 of which $4,100, $500, $4,900, $4,300 and $80,800
will expire on December 31, 1995, 1996, 1997, 2000 and 2002, respectively.
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $12,800,000) - See accompanying $ 773,216,379
schedule
Cash 673,210
Receivable for investments sold 104,000
Interest receivable 2,641,686
TOTAL ASSETS 776,635,275
LIABILITIES
Payable for investments purchased $ 7,463,678
Accrued management fee 157,028
Other payables and accrued expenses 64,485
TOTAL LIABILITIES 7,685,191
NET ASSETS $ 768,950,084
Net Assets consist of:
Paid in capital $ 769,022,085
Accumulated net realized gain (72,001
(loss) on investments )
NET ASSETS, for 769,022,085 $ 768,950,084
shares outstanding
NET ASSET VALUE, offering price and redemption price per share ($768,950,084 (divided by) 769,022,085 shares) $1.00
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INTEREST INCOME $ 22,651,404
EXPENSES
Management fee $ 934,903
Transfer agent fees 176,682
Accounting fees and expenses 52,708
Non-interested trustees' 2,520
compensation
Custodian fees and expenses 36,594
Audit 11,536
Legal 1,454
Miscellaneous 2,459
TOTAL EXPENSES 1,218,856
NET INTEREST INCOME 21,432,548
NET REALIZED GAIN (LOSS) ON 7,601
INVESTMENTS
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 21,440,149
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS END YEAR ENDED
ED DECEMBER 31,
JUNE 30, 1995 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 21,432,548 $ 25,859,424
Net interest income
Net realized gain (loss) 7,601 (80,853
)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 21,440,149 25,778,571
Distributions to shareholders from net interest income (21,432,548 (25,859,424
) )
Share transactions at net asset value of $1.00 per share 512,023,023 1,187,546,448
Proceeds from sales of shares
Reinvestment of distributions from net interest income 21,432,548 25,859,424
Cost of shares redeemed (513,118,899 (817,822,836
) )
NET INCREASE (DECREASE) IN NET ASSETS AND SHARES RESULTING FROM SHARE TRANSACTIONS 20,336,672 395,583,036
TOTAL INCREASE (DECREASE) IN NET ASSETS 20,344,273 395,502,183
NET ASSETS
Beginning of period 748,605,811 353,103,628
End of period $ 768,950,084 $ 748,605,811
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1995
(UNAUDITED) 1994 1993 1992 1991 1990
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Income from Investment Operations .029 .042 .032 .038 .059 .078
Net interest income
Less Distributions (.029) (.042) (.032) (.038) (.059) (.078)
From net interest income
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
TOTAL RETURN B C 2.95% 4.25% 3.23% 3.90% 6.09% 8.04%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $ 768,950 $ 748,606 $ 353,104 $ 301,002 $ 271,123 $ 254,585
Ratio of expenses to average net
assets .33% A .27% .22% .24% .38% .56%
Ratio of expenses to average net
assets before .33% A .27% .23% .24% .38% .56%
expense reductions
Ratio of net interest income to
average net assets 5.84% A 4.32% 3.16% 3.85% 5.93% 7.76%
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES
ATTRIBUTABLE TO YOUR INSURANCE COMPANY'S SEPARATE ACCOUNT.
INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
C TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
HIGH INCOME 11.89% 16.87% 11.60%
Merrill Lynch High Yield Master 14.88% 14.23% n/a
Consumer Price Index 3.04% 3.26% 3.57%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of
how it will do tomorrow. Bond prices, for
example, generally move in the opposite
direction of interest rates. In turn, the share price,
return, and yield of a fund that invests in bonds
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare the fund's returns to those of the Merrill Lynch High Yield
Master Index - a broad measure of the high yield bond market. This
benchmark includes reinvested dividends and capital gains, if any.
Comparing the fund's performance to the consumer price index (CPI) helps
show how your fund did compared to inflation. (The CPI returns begin on the
month end closest to the fund's start date).
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, September 19, 1985.
If the adviser had not reimbursed certain fund expenses during the periods
shown, the total returns would have been lower.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money. The fund includes high yielding, lower-rated
securities which are subject to greater price volatility and may involve
greater risk of default. The market for these securities may be less
liquid.
$10,000 OVER LIFE OF FUND
VIP High Income (4High Yield Maste
09/30/85 10000.00 10000.00
10/31/85 10124.78 10113.02
11/30/85 10270.82 10303.28
12/31/85 10614.12 10604.47
01/31/86 10745.58 10676.44
02/28/86 11109.08 11130.10
03/31/86 11383.10 11373.65
04/30/86 11576.24 11551.26
05/31/86 11753.01 11685.98
06/30/86 11900.72 11804.36
07/31/86 11864.53 11648.95
08/31/86 11912.43 11863.93
09/30/86 12013.59 11962.11
10/31/86 12372.53 12172.57
11/30/86 12412.20 12271.68
12/31/86 12490.69 12337.95
01/31/87 12946.06 12686.81
02/28/87 13170.08 12896.26
03/31/87 13290.04 13038.85
04/30/87 12874.71 12754.50
05/31/87 12755.02 12697.03
06/30/87 13030.49 12872.55
07/31/87 13044.43 12942.59
08/31/87 13152.49 13072.28
09/30/87 12694.49 12771.51
10/31/87 12087.43 12430.27
11/30/87 12443.44 12744.62
12/31/87 12642.60 12913.85
01/31/88 13058.25 13267.23
02/29/88 13449.21 13627.23
03/31/88 13352.58 13604.70
04/30/88 13456.66 13643.99
05/31/88 13436.65 13715.20
06/30/88 13718.27 13977.43
07/31/88 13861.07 14125.13
08/31/88 13794.86 14171.55
09/30/88 13905.45 14314.39
10/31/88 14056.82 14537.41
11/30/88 14003.15 14591.87
12/31/88 14114.42 14653.61
01/31/89 14453.60 14873.37
02/28/89 14524.70 14973.32
03/31/89 14338.06 14960.00
04/30/89 14179.27 15004.15
05/31/89 14441.26 15280.37
06/30/89 14854.88 15496.85
07/31/89 14757.08 15570.24
08/31/89 14671.49 15647.15
09/30/89 14158.14 15498.19
10/31/89 13551.16 15253.06
11/30/89 13562.58 15287.24
12/31/89 13525.40 15273.41
01/31/90 13226.43 14974.91
02/28/90 13022.77 14756.83
03/31/90 12885.36 14956.31
04/30/90 12923.54 15032.30
05/31/90 13189.08 15303.83
06/30/90 13396.83 15600.32
07/31/90 13603.76 15929.99
08/31/90 13376.19 15320.16
09/30/90 13059.02 14653.87
10/31/90 12742.13 14280.96
11/30/90 13041.01 14401.94
12/31/90 13223.36 14609.46
01/31/91 13503.92 14815.98
02/28/91 14252.06 15915.67
03/31/91 14757.05 16599.98
04/30/91 15280.75 17191.13
05/31/91 15505.19 17275.07
06/30/91 15841.85 17622.59
07/31/91 16440.36 18044.84
08/31/91 16664.81 18424.11
09/30/91 17038.88 18658.77
10/31/91 17618.68 19213.23
11/30/91 17768.31 19435.16
12/31/91 17861.83 19660.94
01/31/92 18815.71 20348.35
02/29/92 19498.87 20853.71
03/31/92 20129.17 21144.68
04/30/92 20271.50 21298.58
05/31/92 20515.49 21638.31
06/30/92 20739.15 21907.16
07/31/92 21145.80 22351.02
08/31/92 21593.11 22646.93
09/30/92 21816.77 22904.97
10/31/92 21491.45 22615.68
11/30/92 21755.77 22935.97
12/31/92 21999.76 23231.29
01/31/93 22589.41 23803.34
02/28/93 22974.74 24253.90
03/31/93 23504.92 24674.39
04/30/93 23659.56 24851.50
05/31/93 24013.02 25186.03
06/30/93 24631.57 25659.22
07/31/93 24874.57 25935.02
08/31/93 25139.66 26182.25
09/30/93 25228.03 26311.44
10/31/93 25824.49 26807.08
11/30/93 26067.49 26953.70
12/31/93 26487.22 27223.21
01/31/94 27370.86 27819.81
02/28/94 27338.05 27619.74
03/31/94 26417.09 26719.70
04/30/94 26150.49 26407.45
05/31/94 26198.96 26313.37
06/30/94 26102.02 26893.29
07/31/94 26198.96 27082.30
08/31/94 26198.96 27270.47
09/30/94 26392.85 27260.08
10/31/94 26150.49 27329.36
11/30/94 25932.37 27096.87
12/31/94 26053.55 26906.19
01/31/95 26344.38 27286.38
02/28/95 27248.56 28137.75
03/31/95 27587.86 28529.34
04/30/95 28396.97 29197.31
05/31/95 29127.77 30109.50
06/30/95 29206.07 30339.47
Let's say you invested $10,000 in High Income Portfolio on September 30,
1985, shortly after the fund started. By June 30, 1995, your investment
would have grown to $29,206 - a 192.06% increase. That compares to $10,000
invested in the Merrill Lynch High Yield Master Index, which would have
grown to $30,339 over the same period - a 203.39% increase.
INVESTMENT SUMMARY
TOP FIVE HOLDINGS AS OF JUNE 30, 1995
(BY ISSUER, EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S
INVESTMENTS
PanAmSat Corp. 12 3/4% 4.2
TransTexas Gas Corp. (various issues) 3.5
Revlon Worldwide Corp. secured 0%, 3/15/98 2.6
Flagstar Corp. 11 1/4%, 11/1/04 2.3
American Financial Corp. (various issues) 2.3
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Media & Leisure 29.9
Finance 9.5
Energy 8.8
Services 6.6
Basic Industries 6.4
QUALITY DIVERSIFICATION AS OF JUNE 30, 1995
(MOODY'S RATINGS) % OF FUND'S
INVESTMENTS
Aaa, Aa, A 0.0
Baa 0.0
Ba 6.4
B 41.9
Caa, Ca, C 16.6
Nonrated 10.4
TABLE EXCLUDES SHORT-TERM INVESTMENTS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT JUNE 30, 1995, ACCOUNT FOR 7.9% OF THE FUND'S
INVESTMENTS.
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Barry Coffman, Portfolio Manager of High Income Portfolio
Q. HOW HAS THE FUND PERFORMED, BARRY?
A. Although the fund did well relative to its peers, it trailed the
performance of the Merrill Lynch High Yield Master Index, which returned
12.76% and 14.88%, respectively, for the six and 12-month periods ended
June 30, 1995. The index has a larger percentage of Ba-rated bonds than
most high-yield mutual funds, which tend to be more concentrated in B-rated
bonds. Generally speaking, Ba-rated bonds are more sensitive to changing
interest rates, and therefore, benefited more from the recent decline in
interest rates than B-rated bonds. As a result, very few high yield funds
outperformed the index.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. The fund's relatively low weighting in Ba-rated securities was the
primary reason for its underperformance relative to its benchmark during
the most recent period. On the positive side, we have maintained a high
weighting, compared to the benchmark, in deferred coupon securities. These
bonds sell at a deep discount because they do not pay current interest for
some period, usually three to five years. They generally have longer
durations - which measures how sensitive their price is to changes in
interest rates - and therefore, their prices are more volatile. We also
avoided most of the credit disasters that occurred in the market.
Q. WHAT INVESTMENTS HAVE DONE WELL IN THE PAST SIX MONTHS?
A. Revlon continued to benefit from an operational restructuring and the
very successful launch of two key new products: Color Stay Lipstick and Age
Defying Makeup. Our Revlon position is concentrated in the most junior
securities that are most sensitive to changes in credit quality, which has
been a recent plus. Another strong performer was Big Flower Press, a large
commercial printer of advertising inserts, comics and television guides.
The company was helped by the strong growth in advertising and the
synergies it gained from some recent acquisitions. Finally, our
concentration in casinos and hotels did relatively well during the period.
Q. GIVEN THE MARKET'S STRENGTH SO FAR IN 1995, WAS IT DIFFICULT TO FIND
OPPORTUNITIES?
A. Not particularly. The new issues market was active and provided ample
opportunity to selectively add new names to the fund. One example was
PanAmSat Corp., which operates an international satellite communications
system and provides satellite services to the broadcasting and business
communications markets. It currently has two satellites operating and also
has a large backlog of contracted time from companies including ESPN and
Viacom for two new satellites it will be launching later this year. The
company is participating in a joint venture to provide Direct to Home (DTH)
television broadcasting service to Latin America, similar to the Direct TV
service in the United States. Another new issue we purchased was
Stratosphere Corp., a Las Vegas-based casino owned by industry-leader Grand
Casino. These bonds are attractive, in part, because in addition to their
14.25% coupon, they pay additional interest based on a percentage of the
company's cash flow.
Q. WHAT INVESTMENTS DIDN'T FARE AS WELL?
A. The high-yield restaurant sector, in general, did not perform well
during the period due to competitive pressures and a slowing economy. One
of our largest holdings is Flagstar, the parent of Denny's and the largest
franchisee of Hardees. Although Denny's has benefited from an aggressive
remodeling program, Hardees has suffered due to aggressive price promotions
from the major burger chains. Another restaurant chain, American Restaurant
Group, also underperformed partly due to the concentration of its chains in
California, where the economy continues to be weaker than the rest of the
country.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. The probability of the soft landing scenario is increasing, which could
provide a favorable backdrop for the high-yield bond market. Slow economic
growth and low inflation could allow many companies in the high-yield
market to improve their credit quality. Absolute yields remain attractive,
and absent a sharp drop in interest rates from current levels, high-yield
bonds could perform well relative to other fixed-income investments. In my
view, the key is to be selective. I'm focusing on companies that are less
cyclical, or sensitive to the economy, and choosing companies that I think
can perform well in a slow-growth environment.
FUND FACTS
GOAL: seeks high current income by investing
in high yielding, lower-rated fixed-income
securities
START DATE: September 19, 1985
SIZE: as of June 30, 1995, more than $813 million
MANAGER: Barry Coffman, since 1990; joined
Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
CORPORATE BONDS - 74.8%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CONVERTIBLE BONDS - 0.2%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Ampex Corp., 0%, 6/30/97 - $ 469,000 $ 328,685
MEDIA & LEISURE - 0.2%
LODGING & GAMING - 0.2%
Argosy Gaming Co.
12%, 6/1/01 B3 1,290,000 1,290,000
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Farm Fresh, Inc.
7 1/2%, 3/1/10 B3 186,000 112,264
TOTAL CONVERTIBLE BONDS 1,730,949
NONCONVERTIBLE BONDS - 74.6%
AEROSPACE & DEFENSE - 0.3%
RHI Holdings, Inc.:
11 7/8%, 3/1/99 B2 2,160,000 2,062,800
11 7/8%, 3/1/99 (e) - 550,000 525,250
2,588,050
BASIC INDUSTRIES - 6.3%
CHEMICALS & PLASTICS - 2.1%
American Pacific Corp.
11%, 12/15/02 (f) - 850,000 765,000
Foamex LP 11 7/8%, 10/1/04 B3 5,000,000 4,725,000
Pioneer Americas Acquisition
Corp. 13 3/8%, 4/1/05 (f) B2 10,000,000 10,325,000
Trans Resources, Inc.
14 1/2%, 9/1/96 B2 580,000 585,800
16,400,800
IRON & STEEL - 0.9%
Republic Engineered Steels, Inc.
9 7/8%, 12/15/01 B2 5,230,000 4,772,375
WCI Steel, Inc.
10 1/2%, 3/1/02 B1 2,420,000 2,359,500
7,131,875
METALS & MINING - 0.7%
International Wire Group, Inc.
11 3/4%, 6/1/05 (f) B3 5,850,000 5,886,563
PACKAGING & CONTAINERS - 0.8%
Crown Packaging Holdings Ltd.
0%, 11/1/03 (d) Caa 6,840,000 3,129,300
Grupo Industrial Durango euro
9.6367%, 11/18/96 (g) 4,000,000 3,380,000
6,509,300
PAPER & FOREST PRODUCTS - 1.8%
Indah Kiat International Finance
Co. 11 3/8%, 6/15/99 Ba3 9,000,000 9,022,500
Mail-Well Holdings, Inc.
0%, 2/15/06 (d) - 1,190,000 511,700
Tjiwi Kimia International Finance
Co. 13 1/4%, 8/1/01 B1 4,130,000 4,377,800
13,912,000
TOTAL BASIC INDUSTRIES 49,840,538
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CONGLOMERATES - 0.6%
Jordan Industries, Inc.:
10 3/8%, 8/1/03 B3 $ 3,155,000 $ 2,902,600
0%, 8/1/05 (d) Caa 3,135,000 1,849,650
4,752,250
CONSTRUCTION & REAL ESTATE - 1.6%
BUILDING MATERIALS - 1.3%
Adience, Inc.
11%, 6/15/02 - 745,921 540,793
Building Materials Corp.,
America 0%, 7/1/04 (d) B1 12,610,000 7,502,950
DAL Tile International, Inc. secured
coupon, 0%, 7/15/98 Caa 3,435,000 2,279,981
10,323,724
REAL ESTATE - 0.3%
Littlefield Co.
10%, 12/31/95 (e) - 2,750,000 2,491,913
TOTAL CONSTRUCTION & REAL ESTATE 12,815,637
DURABLES - 2.9%
AUTOS, TIRES, & ACCESSORIES - 1.9%
Harvard Industries, Inc.
12%, 7/15/04 B2 5,000,000 5,137,500
Poindexter (JB), Inc.
12 1/2%, 5/15/04 B2 10,000,000 9,700,000
14,837,500
TEXTILES & APPAREL - 1.0%
Hat Brands, Inc.
12 5/8%, 9/15/02:
Series B - 1,520,000 1,599,800
Series D - 680,000 715,700
Leslie Fay Cos., Inc. (b)(e):
9.53%, 1/15/00 - 676,319 399,028
10.54%, 1/15/02 - 611,353 299,563
United States Leather, Inc.
10 1/4%, 7/31/03 B2 6,010,000 5,153,575
8,167,666
TOTAL DURABLES 23,005,166
ENERGY - 7.2%
ENERGY SERVICES - 1.0%
Falcon Drilling, Inc.:
9 3/4%, 1/15/01 B2 3,512,000 3,441,760
12 1/2%, 3/15/05 B3 4,000,000 4,160,000
7,601,760
OIL & GAS - 6.2%
Chesapeake Energy Corp.
10 1/2%, 6/1/02 (f) B1 6,000,000 5,910,000
Deeptech International, Inc.
12%, 12/15/00 B3 4,660,000 3,168,800
Mesa Capital Corp.
secured 0%, 6/30/98 (d) Caa 5,710,000 5,181,825
TransTexas Gas Corp.
11 1/2%, 6/15/02 B2 20,000,000 20,450,000
Transamerican Refining
Corp. (g):
0%, 2/15/02 Caa 6,746,000 4,435,495
16 1/2%, 2/15/02 Caa 9,620,000 10,173,150
49,319,270
TOTAL ENERGY 56,921,030
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - 6.0%
INSURANCE - 5.1%
American Annuity Group, Inc.
11 1/8%, 2/1/03 Ba3 $ 3,500,000 $ 3,640,000
American Financial Corp.:
10%, 10/20/99 Ba3 5,000,000 5,037,500
9 3/4%, 4/20/04 Ba3 6,570,000 6,504,300
9 3/4%, 4/20/04 (e) Ba3 6,770,000 6,702,300
American Life Holdings
11 1/4%, 9/15/04 B1 13,350,000 13,884,000
Americo Life, Inc.
9 1/4%, 6/1/05 Ba2 4,900,000 4,557,000
40,325,100
SAVINGS & LOANS - 0.8%
First Nationwide Holdings, Inc.
12 1/4%, 5/15/01 Ba3 5,790,000 6,166,350
SECURITIES INDUSTRY - 0.1%
ECM Corp. extendible
14%, 6/1/02 (f) - 570,198 627,218
TOTAL FINANCE 47,118,668
HEALTH - 0.6%
MEDICAL EQUIPMENT & SUPPLIES - 0.6%
Wright Medical Technology, Inc.,
Series B, 10 3/4%, 7/1/00 B3 5,200,000 5,083,000
HOLDING COMPANIES - 0.1%
New Street Capital Corp.
pay-in-kind (e):
12%, 2/28/98 - 67,416 64,697
Unit 12%, 2/28/98 - 1,123,600 1,078,285
1,142,982
INDUSTRIAL MACHINERY & EQUIPMENT - 3.4%
MVE, Inc. Unit
12 1/2%, 2/15/02 B3 8,545,000 8,886,800
Specialty Equipment Cos., Inc.
11 3/8%, 12/1/03 B3 10,640,000 10,932,600
Thermadyne Holdings Corp.:
10 1/4%, 5/1/02 B3 1,484,000 1,417,220
10 3/4%, 11/1/03 Caa 5,756,000 5,583,320
26,819,940
MEDIA & LEISURE - 24.5%
BROADCASTING - 8.0%
Chancellor Broadcasting
12 1/2%, 10/1/04 B3 6,560,000 6,543,600
Citicasters, Inc.
9 3/4%, 2/15/04 B- 7,812,000 7,792,470
Cooke Media Group, Inc.
11 5/8%, 4/1/99 - 350,000 334,250
Marcus Cable Capital Corp.
0%, 12/15/05 (d)(f) Caa 26,580,000 14,054,175
NWCG Holdings Corp.
0%, 6/15/99 Caa 26,925,000 16,693,500
Peoples Choice TV Corp. Unit
0%, 6/1/04 (d) Caa 11,340,000 5,485,725
Robin Media Group, Inc.
11 1/8%, 4/1/97 - 12,340,000 12,525,100
63,428,820
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
LEISURE DURABLES & TOYS - 1.5%
ICON Health And Fitness, Inc.
13%, 7/15/02 B3 $ 5,890,000 $ 5,948,900
IHF Holdings, Inc.
0%, 11/15/04 (d) Caa 10,250,000 5,637,500
11,586,400
LODGING & GAMING - 9.9%
Bally's Casino Holdings, Inc.
10 1/2%, 6/15/98 B3 12,630,000 8,841,000
Bally Gaming International, Inc.
10 3/8%, 7/15/98 - 3,000,000 3,090,000
Boyd Gaming Corp.
10 3/4%, 9/3/03 B2 7,350,000 7,570,500
GNF Corp., Series B,
10 5/8%, 4/1/03 B2 19,730,000 16,375,900
Grand Casino Resorts, Inc. gtd.
12 1/2%, 2/1/00 Ba3 2,200,000 2,464,000
HMH Properties, Inc.
9 1/2%, 5/15/05 (f) B1 10,000,000 9,700,000
Maritime Group Ltd. pay-in-
kind 14%, 2/15/97 (b) - 1,648,399 741,780
Players International, Inc.
10 7/8%, 4/15/05 (f) Ba3 7,050,000 6,944,250
President Riverboat Casinos
13%, 9/15/01 B 7,000,000 5,950,000
Stratosphere Corp.
14 1/4%, 5/15/02 B2 12,740,000 12,994,800
Trump Plaza Funding, Inc. gtd.
mtg. 10 7/8%, 6/15/01 B3 4,713,000 4,335,960
79,008,190
RESTAURANTS - 5.1%
American Restaurant Group, Inc.:
12%, 9/15/98 B2 3,930,000 3,144,000
12%, 9/15/98 (New) B2 3,580,000 2,864,000
Cafeteria Operators LP
11%, 6/30/98 (b)(e) - 7,000,000 1,750,000
Flagstar Corp.
11 1/4%, 11/1/04 Caa 23,555,000 18,372,900
Host Marriott Travel Plazas, Inc.
9 1/2%, 5/15/05 (f) B1 15,000,000 14,325,000
40,455,900
TOTAL MEDIA & LEISURE 194,479,310
NONDURABLES - 4.2%
BEVERAGES - 0.5%
Heileman Acquisition Corp.
9 5/8%, 1/31/04 B3 6,500,000 4,095,000
HOUSEHOLD PRODUCTS - 3.7%
McAndrews & Forbes Group,
Inc. 12 1/4%, 7/1/96 - 1,360,000 1,360,000
Revlon Consumer Products Corp.
10 1/2%, 2/15/03 B3 7,230,000 7,103,475
Revlon Worldwide Corp. secured
0%, 3/15/98 B3 30,342,000 20,860,125
29,323,600
TOTAL NONDURABLES 33,418,600
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - 5.5%
APPAREL STORES - 2.8%
Apparel Retailers, Inc.
12 3/4%, 8/15/05 Caa $ 11,230,000 $ 6,625,700
Lamonts Apparel Corp.
10 1/4%, 11/1/99 (b)(f) - 2,201,000 1,078,490
Specialty Retailers, Inc.:
10%, 8/15/00 B1 2,890,000 2,759,950
11%, 8/15/03 B3 12,220,000 11,364,600
21,828,740
GENERAL MERCHANDISE STORES - 1.4%
Parisian, Inc.
9 7/8%, 7/15/03 Caa 14,322,000 11,027,940
RETAIL & WHOLESALE, MISCELLANEOUS - 1.3%
Barrys Jewelers, Inc.
11%, 12/22/00 - 1,595,000 1,563,100
Finlay Fine Jewelry Corp.
10 5/8%, 5/1/03 B1 4,960,000 4,786,400
Florists Transworld Delivery, Inc.
14%, 12/15/01 B3 4,500,000 4,297,500
10,647,000
TOTAL RETAIL & WHOLESALE 43,503,680
SERVICES - 5.7%
ADVERTISING - 0.8%
Outdoor Systems, Inc.
10 3/4%, 8/15/03 B2 7,000,000 6,720,000
LEASING & RENTAL - 1.7%
Acme Holdings, Inc.
11 3/4%, 6/1/00 (b) Ca 2,930,000 1,465,000
GPA Delaware, Inc.:
8 1/2%, 3/3/97 Ca 3,500,000 3,176,250
gtd. 8 3/4%, 12/15/98 Caa 990,000 831,600
8 5/8%, 1/15/99 - 2,600,000 2,067,000
Scotsman Group, Inc.
9 1/2%, 12/15/00 B1 3,950,000 3,821,625
Scotsman Holdings, Inc.
pay-in-kind 11%, 3/1/04 - 2,080,752 1,712,521
13,073,996
PRINTING - 1.7%
BFP Holdings Corp.
0%, 4/15/04 (d) Caa 5,000,000 3,300,000
Big Flower Press:
10 3/4%, 8/1/03 B3 3,555,000 3,546,113
Class A, 10 3/4%, 8/1/03 B3 4,910,000 4,897,725
Class B, 10 3/4%, 8/1/03 B3 1,480,000 1,476,300
13,220,138
SERVICES - 1.5%
Protection One Alarm
Monitoring, Inc. Unit
0%, 6/30/05 (d)(f) Caa 1,860,000 12,136,500
TOTAL SERVICES 45,150,634
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Alpine Group, Inc.
13 1/2%, 1/5/96 (e) Caa $ 130,000 $ 130,000
TRANSPORTATION - 2.6%
AIR TRANSPORTATION - 1.7%
US Air, Inc.:
Series 1993-A1 Pass Thru
Trust 8 5/8%, 9/1/98 B1 5,000,000 4,725,000
9 5/8%, 2/1/01 B3 930,000 804,450
9 5/8%, 9/1/03 B1 2,550,000 2,422,500
10 3/8%, 3/1/13 B1 5,470,000 5,169,150
13,121,100
RAILROADS - 0.9%
Transtar Holdings L.P./Transtar
Cap. Corp., Series B,
0%, 12/15/03 (d) B- 12,270,000 7,239,300
TOTAL TRANSPORTATION 20,360,400
UTILITIES - 3.1%
CELLULAR - 2.5%
Dial Call Communications,
Inc. 0%, 12/15/05 (d) Caa 2,800,000 1,288,000
Dial Page, Inc.
12 1/4%, 2/15/00 Caa 950,000 985,625
Pagemart Nationwide, Inc. Unit
0%, 2/1/05 (d)(f) - 29,020,000 17,629,650
19,903,275
ELECTRIC UTILITY - 0.1%
El Paso Funding Corp.
lease oblig. (b):
9 3/8%, 10/1/96 Ca 790,000 422,650
9.20%, 7/2/97 Ca 380,000 203,300
625,950
GAS - 0.1%
Columbia Gas Systems, Inc.
9%, 8/1/95 (b) B3 670,000 938,000
TELEPHONE SERVICES - 0.4%
Call-Net Enterprises, Inc.
yankee 0%, 12/1/04 (d) B2 330,000 198,000
Pagemart, Inc.
0%, 11/1/03 (d) - 4,820,000 3,048,650
3,246,650
TOTAL UTILITIES 24,713,875
TOTAL NONCONVERTIBLE BONDS 591,843,760
TOTAL CORPORATE BONDS
(Cost $594,159,103) 593,574,709
COMMERCIAL MORTGAGE SECURITIES - 0.4%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CS First Boston Mortgage
Securities Corp. Commercial
Series 1994-CFB1 Class E,
7.8751%, 1/25/28 (f) Ba2 $ 7,355 $ 5,784
Meritor Mortgage Security Corp.
commercial Series 1987-1
Class B, 9.40%, 2/1/00 (f) - 1,350,000 272,016
SKW Real Estate LP commercial
Series II Class E, 11%,
4/15/05 (f) B 1,500,000 1,500,469
SML, Inc. commercial Series
1994-C1 Class B-3, 11.69%,
9/18/99 - 1,500,000 1,413,750
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $3,126,994) 3,192,019
COMMON STOCKS - 5.5%
SHARES
AEROSPACE & DEFENSE - 0.0%
DEFENSE ELECTRONICS - 0.0%
Tracor, Inc. (a) 18,900 257,513
BASIC INDUSTRIES - 0.1%
IRON & STEEL - 0.1%
WCI Steel, Inc. (a) 67,700 423,125
PAPER & FOREST PRODUCTS - 0.0%
Mail-Well Holdings, Inc. (a) 9,250 55,500
TOTAL BASIC INDUSTRIES 478,625
DURABLES - 0.1%
TEXTILES & APPAREL - 0.1%
Hat Brands, Inc. (warrants) (a)(e) 27,466 302,121
HM/Hat Brands Trust Class I Units (a)(e) 340,000 340,000
642,121
ENERGY - 1.1%
OIL & GAS - 1.1%
Flores & Rucks, Inc. (a) 125,900 1,542,275
TransTexas Gas Corp. (a) 479,600 7,253,950
TOTAL ENERGY 8,796,225
FINANCE - 1.7%
INSURANCE - 1.7%
American Financial Group, Inc. 519,600 13,509,600
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (f) 3,000 300,000
TOTAL FINANCE 13,809,600
HEALTH - 0.0%
MEDICAL EQUIPMENT & SUPPLIES - 0.0%
Wright Medical Technology, Inc.
(warrants) (a) 1,729 285,334
HOLDING COMPANIES - 0.2%
SDW Holdings Corp. (a):
Unit (f) 4,450 1,203,369
(warrants) 3,720 22,320
1,225,689
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
ELECTRICAL EQUIPMENT - 0.1%
Ampex Corp.(a):
Class A 20,681 $ 46,532
Class A (warrants) 57,599 129,598
Class C 230,212 517,977
694,107
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Terex Corp. (rights) (a) 3,150 788
Thermadyne Holdings Corp. (a) 65,419 924,043
924,831
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,618,938
MEDIA & LEISURE - 1.0%
ENTERTAINMENT - 0.0%
Live Entertainment, Inc. (warrants) (a)(e):
$2.00 232,000 58,000
$2.72 221,765 55,441
113,441
LEISURE & DURABLES - 0.1%
IHF Capital, Inc. (a)(f):
Series H (warrants) 10,250 820,000
Series I (warrants) 5,890 147,250
967,250
LODGING & GAMING - 0.9%
Bally Gaming International, Inc.
(warrants) (a) 90,000 618,750
Hollywood Casino Corp. Class A (a) 139,000 1,233,625
Host Marriott Corp. (a) 383,000 4,069,375
Maritime Group Ltd. (warrants) (a) 17,880 179
Motels of America, Inc. (a) 3,000 225,000
Sun International Hotels Ltd. (a) 15,285 687,825
Sun International Hotels Ltd. Class B (a) 3,209 139,592
6,974,346
PUBLISHING - 0.0%
General Media, Inc. (warrant) (a) 1,310 13,100
TOTAL MEDIA & LEISURE 8,068,137
NONDURABLES - 0.6%
TOBACCO - 0.6%
RJR Nabisco Holdings Corp. 161,400 4,499,025
RETAIL & WHOLESALE - 0.1%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc. (a):
(New) 35,870 13,452
(warrants) 66,214 -
13,452
GROCERY STORES - 0.1%
FF Holdings Corp. (a)(e) 33,900 67,800
Food 4 Less Holdings, Inc.
(warrants) (a) 9,348 283,712
MAFCO (warrants) (a) 59 -
351,512
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Barrys Jewelers, Inc. (a) 45,576 148,122
Barrys Jewelers, Inc. (warrants) (a) 5,697 1,424
Finlay Enterprises, Inc. (a) 2,500 35,000
184,546
TOTAL RETAIL & WHOLESALE 549,510
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
SERVICES - 0.4%
LEASING & RENTAL - 0.0%
Scotsman Holdings, Inc. (a) 15,281 $ 199,875
PRINTING - 0.4%
BFP Holdings Class D (a) 160,744 3,214,880
SERVICES - 0.0%
Perry Capital Corp. (warrants) (a)(f) 4,500 22,500
Vestar/LPA Investment Corp. (a) 5,177 129,425
151,925
TOTAL SERVICES 3,566,680
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Berg Electronics Holdings Corp. (a)(f) 20,853 104,265
UTILITIES - 0.0%
CELLULAR - 0.0%
Dial Page, Inc. (warrants) (a) 4,321 5,401
ELECTRIC UTILITY - 0.0%
Eastern Utilities Associates 3 68
Northeast Utilities Associates
(warrants) (a) 21,789 27,236
27,304
GAS - 0.0%
UGI Corp. (warrants) (a) 14,033 2,105
TOTAL UTILITIES 34,810
TOTAL COMMON STOCKS
(Cost $38,165,942) 43,936,472
PREFERRED STOCKS - 7.9%
CONVERTIBLE PREFERRED STOCKS - 0.7%
RETAIL & WHOLESALE - 0.2%
GROCERY STORES - 0.2%
Supermarkets General Holdings Corp.
exchangeable pay-in-kind $3.52 (a) 39,189 1,058,103
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Town & Country Corp. (a) 4,000 3,000
TOTAL RETAIL & WHOLESALE 1,061,103
SERVICES - 0.5%
La Petite Holdings Corp. exchangeable (a) 160,800 4,020,000
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Alpine Group, Inc. cumulative 8% (a) 835 37,575
TOTAL CONVERTIBLE PREFERRED STOCKS 5,118,678
NONCONVERTIBLE PREFERRED STOCKS - 7.2%
BASIC INDUSTRIES - 0.0%
IRON & STEEL - 0.0%
Stelco, Inc. cumulative, Series B, 7.76% 7,207 115,518
PAPER & FOREST PRODUCTS - 0.0%
SD Warren Co. exchangeable
pay-in-kind (a) 3,720 104,160
TOTAL BASIC INDUSTRIES 219,678
SHARES VALUE (NOTE 1)
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Harvard Industries, Inc.
pay-in-kind $14.25 (a) 22,739 $ 625,323
ENERGY - 0.5%
OIL & GAS - 0.5%
Gulf Canada Resources Ltd. (a)(e) 31,009 89,151
Gulf Canada Resources Ltd., Series 1,
adj. rate 1,321,942 3,717,962
3,807,113
FINANCE - 1.8%
SAVINGS & LOANS - 1.8%
First Nationwide Bank 11 1/2% 112,852 12,188,016
Greater New York Savings Bank,
Series B, perpetual 12% 78,751 2,165,653
14,353,669
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Ampex Corp. 8% (a)(e) 1,589 911,927
MEDIA & LEISURE - 4.2%
BROADCASTING - 4.2%
PanAmSat Corp. 12 3/4% 32,700 33,190,500
TECHNOLOGY - 0.5%
ELECTRONICS - 0.5%
Berg Electronics Holding Corp.,
Series E, $3.4687 157,433 4,250,691
TOTAL NONCONVERTIBLE PREFERRED STOCKS 57,358,901
TOTAL PREFERRED STOCKS
(Cost $60,943,714) 62,477,579
PURCHASED BANK DEBT - 0.1%
PRINCIPAL
AMOUNT
Leslie Fay Cos., Inc.:
revolving loan $ 685,856 404,655
term loan 777,600 458,784
TOTAL PURCHASED BANK DEBT
(Cost $1,190,771) 863,439
REPURCHASE AGREEMENTS - 11.3%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 6.22%
dated 6/30/95 due 7/3/95 $ 89,902,575 $ 89,856,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $787,442,524) $ 793,900,218
LEGEND
(a) Non-income producing
(b) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
(e) Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
ACQUISITION ACQUISITION
SECURITY DATE COST
Alpine Group, Inc.
13 1/2%, 1/5/96 1/4/95 $ 128,339
American Financial Corp.
9 3/4%, 4/20/04 5/24/95 $ 6,634,600
Ampex Corp. 8% 2/16/95 $ 834,225
Cafeteria Operators LP
11%, 6/30/98 6/24/93 $ 5,600,000
FF Holdings Corp. 10/2/92 to 1/14/94 $ 135,753
Gulf Canada Resources
Ltd. 10/15/93 $ 76,940
Hat Brands,
Inc. (warrants) 9/2/92 to 2/23/94 $ -
HM/Hat Brands Trust
Class I Units 2/22/94 $ 340,000
Leslie Fay Cos., Inc.:
9.53%, 1/15/00 7/19/93 $ 512,312
10.54%, 1/15/02 7/19/93 to 11/11/93 $ 404,156
Littlefield Co.
10%, 12/31/95 2/28/94 $ 2,750,000
Live Entertainment, Inc.
(warrants):
$2.00 3/23/93 $ 220,717
$2.72 3/23/93 $ 131,863
New Street Capital Corp.
pay-in-kind:
12%, 2/28/98 2/15/95 $ 67,416
Unit 12%, 2/28/98 2/25/94 to 9/1/94 $ 1,123,600
RHI Holdings, Inc.
11 7/8%, 3/1/99 10/15/92 $ 495,000
(f) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $103,757,499 or 12.8% of net
assets.
(g) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $643,634,101 and $467,491,408, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $21,896 for the period (see
Note 3 of Notes to the Financial Statements).
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 0.0% AAA, AA, A 0.0%
Baa 0.0% BBB 0.0%
Ba 6.4% BB 17.3%
B 41.9% B 41.6%
Caa 16.3% CCC 4.8%
Ca, C 0.3% CC, C 0.0%
D 0.4%
The percentage not rated by either S&P or Moody's amounted to 7.9%
including long-term debt categorized as other securities. FMR has
determined that unrated debt securities that are lower quality account for
7.9% of the total value of investment in securities.
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $787,696,044. Net unrealized appreciation aggregated
$6,204,174, of which $27,367,484 related to appreciated investment
securities and $21,163,310 related to depreciated investment securities.
At December 31, 1994, the fund had a capital loss carryforward of
approximately $1,148,000 all of which will expire on December 31, 2002.
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $89,856,000) (cost $787,442,524) - $ 793,900,218
See accompanying schedule
Cash 506,521
Receivable for investments sold 10,050,335
Receivable for fund shares sold 5,462,661
Dividends receivable 1,104,845
Interest receivable 12,928,622
TOTAL ASSETS 823,953,202
LIABILITIES
Payable for investments purchased $ 9,912,131
Payable for fund shares redeemed 178,315
Accrued management fee 405,377
Other payables and accrued expenses 77,305
TOTAL LIABILITIES 10,573,128
NET ASSETS $ 813,380,074
Net Assets consist of:
Paid in capital $ 767,990,586
Undistributed net investment income 33,139,910
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 5,795,848
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 6,453,730
NET ASSETS, for 72,678,030 shares outstanding $ 813,380,074
NET ASSET VALUE, offering price and redemption price per share ($813,380,074 (divided by) 72,678,030 shares) $11.19
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 2,728,599
Dividends
Interest 33,425,785
TOTAL INCOME 36,154,384
EXPENSES
Management fee $ 2,138,740
Transfer agent fees 183,111
Accounting fees and expenses 121,670
Non-interested trustees' compensation 1,780
Custodian fees and expenses 6,018
Audit 17,965
Interest 2,621
Total expenses before reductions 2,471,905
Expense reductions (5,422 2,466,483
)
NET INVESTMENT INCOME 33,687,901
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 7,181,679
Foreign currency transactions (978 7,180,701
)
Change in net unrealized appreciation (depreciation) on:
Investment securities 39,872,106
Assets and liabilities in foreign currencies (150 39,871,956
)
NET GAIN (LOSS) 47,052,657
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 80,740,558
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1995 1994
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 33,687,901 $ 43,091,356
Net investment income
Net realized gain (loss) 7,180,701 (726,075
)
Change in net unrealized appreciation (depreciation) 39,871,956 (49,793,238
)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 80,740,558 (7,427,957
)
Distributions to shareholders (43,871,918 (30,631,598
From net investment income ) )
From net realized gain - (15,525,605
)
TOTAL DISTRIBUTIONS (43,871,918 (46,157,203
) )
Share transactions 333,374,520 498,543,147
Net proceeds from sales of shares
Reinvestment of distributions 43,871,918 46,157,203
Cost of shares redeemed (170,151,760 (385,629,739
) )
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 207,094,678 159,070,611
TOTAL INCREASE (DECREASE) IN NET ASSETS 243,963,318 105,485,451
NET ASSETS
Beginning of period 569,416,756 463,931,305
End of period (including undistributed net investment income of $33,139,910 and $42,834,969,
respectively) $ 813,380,074 $ 569,416,756
OTHER INFORMATION
Shares
Sold 31,093,586 45,102,882
Issued in reinvestment of distributions 4,326,619 4,073,892
Redeemed (15,728,132 (34,899,979
) )
Net increase (decrease) 19,692,073 14,276,795
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 D 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.750 $ 11.990 $ 10.820 $ 9.550 $ 7.070 $ 8.110
Income from Investment Operations .428 .770 .728 .790 .890 .858
Net investment income
Net realized and unrealized gain (loss) .792 (.910) 1.332 1.290 1.590 (1.040)
Total from investment operations 1.220 (.140) 2.060 2.080 2.480 (.182)
Less Distributions (.780) (.730) (.794) (.810) - (.858)
From net investment income
In excess of net investment income - - (.036) - - -
From net realized gain on investments - (.370) (.060) - - -
Total distributions (.780) (1.100) (.890) (.810) - (.858)
Net asset value, end of period $ 11.190 $ 10.750 $ 11.990 $ 10.820 $ 9.550 $ 7.070
TOTAL RETURN B, C 12.10% (1.64) 20.40% 23.17% 35.08% (2.23)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 813,380 $ 569,417 $ 463,931 $ 200,591 $ 70,060 $ 29,990
Ratio of expenses to average net assets .70% .71% .64% .67% .97% 1.00%
A
Ratio of expenses to average net assets before expense .70% .71% .66% .67% .97% 1.12%
reductions A
Ratio of net investment income to average net assets 9.58% 8.75% 8.69% 10.98% 12.94% 11.36%
A
Portfolio turnover rate 154% 122% 155% 160% 154% 156%
A
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF
NOTES TO THE FINANCIAL
STATEMENTS).
D EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT
PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
Equity-Income 24.00% 15.06% 12.30%
S&P 500 26.07% 12.09% 13.58%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for
example, has a history of growth in the long run
and volatility in the short run. In turn, the share
price and return of a fund that invests in stocks
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare these figures to the performance of the Standard & Poor's
Composite Index of 500 stocks - a common proxy for the U.S. stock market.
This benchmark includes reinvested dividends and capital gains, if any.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, October 9, 1986.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER LIFE OF FUND
VIP Equity Income (Standard & Poor's 50
10/09/86 10000.00 10000.00
10/31/86 10110.00 10329.97
11/30/86 10330.00 10580.99
12/31/86 10020.00 10311.18
01/31/87 11170.00 11700.09
02/28/87 11430.00 12162.25
03/31/87 11720.18 12513.74
04/30/87 11428.43 12402.36
05/31/87 11498.86 12510.26
06/30/87 11738.55 13142.03
07/31/87 12185.73 13808.33
08/31/87 12521.12 14323.38
09/30/87 12258.32 14009.70
10/31/87 9866.20 10992.01
11/30/87 9424.74 10086.27
12/31/87 9906.52 10853.84
01/31/88 10611.13 11310.78
02/29/88 11136.95 11837.86
03/31/88 10943.07 11472.07
04/30/88 11124.21 11599.41
05/31/88 11273.39 11700.33
06/30/88 11914.76 12237.37
07/31/88 11893.18 12190.87
08/31/88 11688.12 11776.38
09/30/88 12035.42 12278.06
10/31/88 12243.12 12619.39
11/30/88 12046.36 12438.93
12/31/88 12156.33 12656.61
01/31/89 12907.13 13583.07
02/28/89 12840.88 13244.86
03/31/89 13119.01 13553.46
04/30/89 13625.32 14256.89
05/31/89 14030.37 14834.29
06/30/89 14039.98 14749.73
07/31/89 14858.50 16081.64
08/31/89 15097.24 16396.84
09/30/89 14927.51 16329.61
10/31/89 14066.31 15950.76
11/30/89 14146.69 16276.16
12/31/89 14264.74 16666.78
01/31/90 13301.38 15548.44
02/28/90 13380.20 15749.02
03/31/90 13402.27 16166.37
04/30/90 12937.59 15762.21
05/31/90 13793.57 17299.02
06/30/90 13656.23 17181.39
07/31/90 13322.25 17126.41
08/31/90 12258.45 15578.18
09/30/90 11307.54 14819.52
10/31/90 11019.21 14755.80
11/30/90 11808.98 15709.03
12/31/90 12083.75 16147.31
01/31/91 12731.78 16851.33
02/28/91 13608.52 18056.20
03/31/91 13890.81 18493.16
04/30/91 13955.72 18537.54
05/31/91 14721.66 19338.37
06/30/91 14119.72 18452.67
07/31/91 14920.19 19312.56
08/31/91 15235.12 19770.27
09/30/91 15130.56 19440.11
10/31/91 15382.51 19700.60
11/30/91 14719.47 18906.67
12/31/91 15882.70 21069.59
01/31/92 16097.15 20677.70
02/29/92 16619.87 20946.51
03/31/92 16416.22 20538.05
04/30/92 16930.49 21141.87
05/31/92 17065.83 21245.47
06/30/92 16916.41 20928.91
07/31/92 17434.82 21784.90
08/31/92 17052.84 21338.31
09/30/92 17229.86 21590.10
10/31/92 17436.12 21665.67
11/30/92 18068.66 22404.47
12/31/92 18564.83 22680.04
01/31/93 19119.01 22870.55
02/28/93 19548.49 23181.59
03/31/93 20131.05 23670.73
04/30/93 20047.35 23097.89
05/31/93 20410.07 23716.92
06/30/93 20650.14 23785.70
07/31/93 20931.09 23690.55
08/31/93 21731.81 24588.43
09/30/93 21648.73 24399.09
10/31/93 21846.69 24904.16
11/30/93 21464.91 24667.57
12/31/93 21961.06 24966.04
01/31/94 22928.26 25814.89
02/28/94 22337.82 25115.31
03/31/94 21403.32 24020.28
04/30/94 22140.85 24327.74
05/31/94 22351.57 24726.71
06/30/94 22213.48 24120.91
07/31/94 22955.44 24912.07
08/31/94 24136.53 25933.47
09/30/94 23741.11 25298.10
10/31/94 24228.42 25867.31
11/30/94 23436.54 24925.22
12/31/94 23512.77 25294.86
01/31/95 23880.40 25950.76
02/28/95 24790.97 26962.06
03/31/95 25646.99 27757.71
04/30/95 26360.31 28575.17
05/31/95 27154.68 29717.32
06/30/95 27544.83 30407.65
Let's say you invested $10,000 in Equity-Income Portfolio on October 9,
1986, when the fund started. By June 30, 1995, your investment would have
grown to $27,545 - a 175.45% increase. That compares to $10,000 invested in
the S&P 500, which would have grown to $30,408 over the same period - a
204.08% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Philip Morris Companies, Inc. 4.2
Federal National Mortgage Association 2.8
International Business Machines Corp. 2.1
American Express Co. 2.1
British Petroleum PLC ADR 2.0
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Finance 18.0
Energy 10.1
Nondurables 8.8
Basic Industries 7.7
Industrial Machinery & Equipment 7.3
ASSET ALLOCATION AS OF JUNE 30, 1995*
Row: 1, Col: 1, Value: 7.3
Row: 1, Col: 2, Value: 6.2
Row: 1, Col: 3, Value: 86.5
Stocks 86.5%
Bonds 6.2%
Short-term investments 7.3%
FOREIGN INVESTMENTS 6.2%
*
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Bettina Doulton, Portfolio Manager of Equity-Income
Portfolio
Q. BETTINA, HOW DID THE FUND PERFORM?
A. Although the fund did well relative to its peers, it slightly trailed
the performance of the Standard & Poor's 500 stock index for the six- and
12-month periods ended June 30, 1995. The index had total returns of 20.21%
and 26.07% for those periods, respectively. Because this recent stock
market rally was quite narrow - led by a few sectors, namely technology,
financials and the large-cap and blue-chip stocks - the average stock
mutual fund has not topped the performance of the index thus far in 1995.
Q. THE STOCK MARKET SHOWED A RENEWED VIGOR OVER THE PAST SIX MONTHS. WHAT
ACCOUNTED FOR THIS?
A. The market's strength was driven by investors' belief that the Federal
Reserve Board would manage the economy to a soft landing - steady, albeit
slower, economic growth and continued low inflation. If achieved, those
conditions are ideal for Corporate America to sustain strong profit growth.
During the six-month period, corporate earnings reports were excellent,
which provided the fuel for stock prices to move higher. Excluding the
consistently outstanding performance of the technology and financial
sectors, the market has been characterized by rapid industry rotation.
Investors have spent the past six months racing from one industry to the
next, trying to stay one step ahead of the crowd. Sometimes, the fund was
in the right place at the right time, and sometimes it wasn't.
Q. WHAT CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. Several of the fund's largest holdings have driven returns recently.
Highlights include Philip Morris. The stock has been rewarded for the
company's strong profit growth and free cash flow; both are attributable to
terrific results in the company's domestic and international tobacco
businesses, which more than offset mediocre results in its food division.
Second in line is the Federal National Mortgage Association (Fannie Mae).
Although its stock price suffered a significant setback last fall, it has
since recovered as conditions in the secondary mortgage market have turned
more favorable. IBM was another strong performer. The company has done an
excellent job cutting costs and cleaning up its balance sheet. In addition,
global economic growth and wide acceptance of the company's new products
have contributed to accelerating revenue growth. Finally, in the energy
sector, the energy service company Schlumberger performed well. It
benefited from improving worldwide supply/demand dynamics for oil and
corporate restructuring efforts. Elsewhere in the energy sector, however,
British Petroleum (BP) and Amerada Hess have been somewhat disappointing in
terms of stock performance. Both are restructuring stories; BP's stock may
just be taking a breather after making significant gains, while Amerada
Hess' turnaround may be just taking a bit longer than investors had
expected.
Q. YOU MORE THAN DOUBLED THE FUND'S STAKE IN FINANCIAL STOCKS; THEY WENT
FROM 7.1% OF THE FUND SIX MONTHS AGO TO 18.0% ON JUNE 30 . . .
A. Recent purchases of bank stocks made up most of that increase. Along
with the diversified financial services companies such as American Express
and Fannie Mae, banks had a strong, if volatile, run. My only regret is not
owning more of them early in the period, when they began to outperform.
Prices did fall in the spring, however, which allowed me to buy stocks such
as Chemical Banking and BankAmerica off their highs. In the coming months,
I expect the market to drive bank stock valuations - prices relative to
earnings - higher. That's because earnings are becoming more consistent,
the industry is consolidating, and companies are using excess capital to
repurchase shares of their own stocks.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. When interest rates fall, as they've done over the past few months, the
market usually rewards stocks with higher valuations. However, we have to
keep in mind that the economy has slowed, which could negatively affect
corporate earnings going forward. The 64-thousand-dollar question then
becomes: will the market's willingness to drive up valuations and look
toward an economic resurgence be enough to offset the negative effects of
potential short-term earnings disappointments? I'm afraid not. Companies
that report less-than-expected earnings growth in the coming months will
most likely pay dearly with falling stock prices. In light of this, I plan
to focus intensely on owning companies that trade at attractive valuations,
offer good prospects for higher earnings through 1996, and are working to
enhance shareholder value.
FUND FACTS
GOAL: to provide current income and increase
the value of the fund's shares
START DATE: October 9, 1986
SIZE: as of June 30, 1995, more than $3.4 billion
MANAGER: Bettina Doulton, since 1993;
manager, Fidelity Value Fund, since March
1995; Fidelity Advisor Equity-Income Fund,
since 1993; joined Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 85.3%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 5.7%
AEROSPACE & DEFENSE - 3.8%
Alliant Techsystems, Inc. (a) 421,700 $ 17,605,959
Boeing Co. 353,800 22,156,725
General Motors Corp. Class H 426,200 16,834,900
Lockheed Martin Corp. 434,803 27,446,939
McDonnell Douglas Corp. 131,000 10,054,250
Rockwell International Corp. 429,600 19,654,200
Sundstrand Corp. 183,000 10,934,250
Thiokol Corp. 186,400 5,638,600
130,325,823
DEFENSE ELECTRONICS - 1.4%
Litton Industries, Inc. (a) 268,700 9,908,313
Loral Corp. 214,700 11,110,725
Raytheon Co. 342,300 26,571,038
47,590,076
SHIP BUILDING & REPAIR - 0.5%
General Dynamics Corp. 420,400 18,655,250
TOTAL AEROSPACE & DEFENSE 196,571,149
BASIC INDUSTRIES - 7.5%
CHEMICALS & PLASTICS - 4.7%
du Pont (E.I.) de Nemours & Co. 571,100 39,263,125
Grace (W.R.) & Co. 503,600 30,908,450
Hercules, Inc. 810,900 39,531,375
Nalco Chemical Co. 462,300 16,816,163
Raychem Corp. 284,300 10,910,013
Union Carbide Corp. 713,100 23,799,713
161,228,839
IRON & STEEL - 0.1%
Nucor Corp. 38,600 2,065,100
METALS & MINING - 1.3%
Alcan Aluminium Ltd. 746,183 22,562,179
Aluminum Co. of America 467,200 23,418,400
45,980,579
PAPER & FOREST PRODUCTS - 1.4%
Scott Paper Co. 966,600 47,846,700
TOTAL BASIC INDUSTRIES 257,121,218
CONGLOMERATES - 2.8%
Allied-Signal, Inc. 382,600 17,025,700
GenCorp, Inc. 33,600 361,200
Tyco International Ltd. 857,071 46,281,834
United Technologies Corp. 398,900 31,164,063
94,832,797
CONSTRUCTION & REAL ESTATE - 0.2%
REAL ESTATE INVESTMENT TRUSTS - 0.2%
Starwood Lodging Trust combined
certificate (SBI) 125,900 2,909,045
Storage Equities, Inc. 145,800 2,387,475
5,296,520
DURABLES - 2.6%
AUTOS, TIRES, & ACCESSORIES - 1.6%
Chrysler Corp. 140,600 6,731,225
Dana Corp. 438,200 12,543,475
General Motors Corp. 269,800 12,646,875
Johnson Controls, Inc. 61,100 3,452,150
PACCAR, Inc. 93,500 4,371,125
Snap-on Tools Corp. 374,000 14,492,500
54,237,350
SHARES VALUE (NOTE 1)
DURABLES - CONTINUED
CONSUMER ELECTRONICS - 0.7%
Black & Decker Corp. 222,600 $ 6,872,775
Whirlpool Corp. 341,200 18,766,000
25,638,775
HOME FURNISHINGS - 0.1%
Heilig-Meyers Co. 104,700 2,669,850
TEXTILES & APPAREL - 0.2%
Westpoint Stevens, Inc. Class A (a) 397,100 7,098,163
TOTAL DURABLES 89,644,138
ENERGY - 9.7%
ENERGY SERVICES - 3.1%
Baker Hughes, Inc. 521,800 10,696,900
Halliburton Co. 959,000 34,284,250
Helmerich & Payne, Inc. 130,400 3,846,800
McDermott International, Inc. 575,000 13,871,875
Schlumberger Ltd. 691,300 42,947,013
105,646,838
OIL & GAS - 6.6%
Amerada Hess Corp. 929,700 45,439,088
British Petroleum PLC ADR 823,528 70,514,585
Canada Occidental Petroleum Ltd. 239,500 7,438,025
Coastal Corp. (The) 459,800 13,966,425
Kerr-McGee Corp. 157,400 8,440,575
Mobil Corp. 353,700 33,955,200
Occidental Petroleum Corp. 1,047,000 23,950,125
Tosco Corp. 279,100 8,896,313
Total SA:
Class B 210,425 12,691,129
sponsored ADR 129,500 3,917,375
229,208,840
TOTAL ENERGY 334,855,678
FINANCE - 18.0%
BANKS - 6.6%
Bank of Boston Corp. 482,800 18,105,000
Bank of New York Co., Inc. 163,000 6,581,125
BankAmerica Corp. 511,100 26,896,638
Bankers Trust New York Corp. 430,400 26,684,800
Chase Manhattan Corp. 480,041 22,561,927
Chemical Banking Corp. 670,100 31,662,225
Citicorp 647,300 37,462,488
First Chicago Corp. 119,100 7,131,113
First Union Corp. 192,700 8,719,675
Fleet Financial Group, Inc. 328,900 12,210,413
Mellon Bank Corp. 59,600 2,480,850
NationsBank Corp. 35,400 1,898,325
Republic New York Corp. 230,700 12,919,200
Shawmut National Corp. 345,200 11,003,250
226,317,029
CREDIT & OTHER FINANCE - 2.8%
American Express Co. 2,012,672 70,695,104
Countrywide Credit Industries, Inc. 886,700 18,620,700
Greenpoint Financial Corp. 362,900 8,573,513
97,889,317
FEDERAL SPONSORED CREDIT - 4.1%
Federal Home Loan Mortgage
Corporation 625,400 42,996,250
Federal National Mortgage Association 1,023,900 96,630,563
139,626,813
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
INSURANCE - 3.4%
Allstate Corp. 182,900 $ 5,418,413
American International Group, Inc. 197,200 22,480,800
American Reinsurance Corp. 11,300 420,925
General Re Corp. 193,700 25,931,588
Loews Corp. 266,500 32,246,500
PMI Group, Inc. 100,600 4,363,525
Reliastar Financial Corp. 252,100 9,642,825
Travelers, Inc. (The) 359,233 15,716,458
116,221,034
SAVINGS & LOANS - 0.3%
Ahmanson (H.F.) & Co. 273,900 6,025,800
Charter One Financial Corp. 162,000 3,969,000
9,994,800
SECURITIES INDUSTRY - 0.8%
Merrill Lynch & Co., Inc. 522,600 27,436,500
TOTAL FINANCE 617,485,493
HEALTH - 4.3%
DRUGS & PHARMACEUTICALS - 1.8%
Allergan, Inc. 340,100 9,225,213
American Home Products Corp. 360,000 27,855,000
Pfizer, Inc. 297,800 13,754,638
SmithKline Beecham PLC ADR 266,000 12,036,500
62,871,351
MEDICAL EQUIPMENT & SUPPLIES - 1.7%
Baxter International, Inc. 971,300 35,331,038
Beckman Instruments, Inc. 800 22,300
I-Stat Corp. (a) 173,100 6,318,150
Puritan Bennett Corp. 257,500 9,945,938
St. Jude Medical, Inc. 105,400 5,283,175
56,900,601
MEDICAL FACILITIES MANAGEMENT - 0.8%
Columbia/HCA Healthcare Corp. 621,800 26,892,850
TOTAL HEALTH 146,664,802
INDUSTRIAL MACHINERY & EQUIPMENT - 7.2%
ELECTRICAL EQUIPMENT - 1.0%
Emerson Electric Co. 211,700 15,136,550
General Electric Co. 175,500 9,893,813
Philips Electronics NV 196,600 8,404,650
Philips Electronics NV (Bearer) 45,200 1,915,824
35,350,837
INDUSTRIAL MACHINERY & EQUIPMENT - 3.5%
Caterpillar, Inc. 415,100 26,670,175
Cooper Industries, Inc. 467,000 18,446,500
Deere & Co. 474,400 40,620,500
Dover Corp. 145,100 10,556,025
Ingersoll-Rand Co. 574,300 21,966,975
Varity Corp. (a) 62,800 2,763,200
121,023,375
POLLUTION CONTROL - 2.7%
Browning-Ferris Industries, Inc. 870,700 31,454,038
Safety Kleen Corp. 583,600 9,410,550
WMX Technologies, Inc. 1,537,600 43,629,400
Wheelabrator Technologies, Inc. 453,200 6,967,950
91,461,938
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 247,836,150
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 2.1%
BROADCASTING - 1.2%
Viacom, Inc. Class B (non-vtg.) (a) 851,614 $ 39,493,599
PUBLISHING - 0.9%
Meredith Corp. 102,000 2,588,250
News Corp. Ltd.:
ADR 741,700 16,780,963
(vtg.) pfd. sponsored ADR 74,900 1,498,000
Times Mirror Co. Class A 461,800 11,025,475
31,892,688
TOTAL MEDIA & LEISURE 71,386,287
NONDURABLES - 8.6%
BEVERAGES - 0.9%
PepsiCo, Inc. 647,100 29,523,938
FOODS - 0.6%
ConAgra, Inc. 483,700 16,869,038
Dole Food, Inc. 157,600 4,590,100
21,459,138
HOUSEHOLD PRODUCTS - 1.3%
Avon Products, Inc. 285,480 19,127,160
First Brands Corp. 329,800 14,140,175
Rubbermaid, Inc. 168,800 4,684,200
Tambrands, Inc. 172,300 7,365,825
45,317,360
TOBACCO - 5.8%
Imasco Ltd. 1,453,600 25,815,296
Philip Morris Companies, Inc. 1,927,300 143,342,938
RJR Nabisco Holdings Corp. 1,054,639 29,398,062
198,556,296
TOTAL NONDURABLES 294,856,732
RETAIL & WHOLESALE - 3.2%
APPAREL STORES - 0.4%
Limited, Inc. (The) 618,400 13,604,800
GENERAL MERCHANDISE STORES - 2.1%
Dayton Hudson Corp. 293,400 21,051,450
May Department Stores Co. (The) 95,700 3,983,513
Wal-Mart Stores, Inc. 1,604,500 42,920,375
Woolworth Corp. 322,200 4,873,275
72,828,613
GROCERY STORES - 0.7%
Fleming Companies, Inc. 230,445 6,106,793
Great Atlantic & Pacific Tea Co., Inc. 397,600 10,486,700
Vons Companies, Inc. (a) 384,200 7,732,025
24,325,518
TOTAL RETAIL & WHOLESALE 110,758,931
SERVICES - 0.4%
PRINTING - 0.2%
Wallace Computer Services, Inc. 168,200 6,454,675
SERVICES - 0.2%
ADT Ltd. (a) 640,900 7,530,575
TOTAL SERVICES 13,985,250
TECHNOLOGY - 4.9%
COMPUTERS & OFFICE EQUIPMENT - 3.9%
Hewlett-Packard Co. 405,000 30,172,500
International Business Machines Corp. 755,700 72,547,200
Pitney Bowes, Inc. 792,200 30,400,675
133,120,375
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONIC INSTRUMENTS - 0.2%
Perkin-Elmer Corp. 226,200 $ 8,030,100
ELECTRONICS - 0.8%
AMP, Inc. 385,600 16,291,600
Kemet Corp. 46,700 2,451,750
Thomas & Betts Corp. 143,700 9,825,488
28,568,838
TOTAL TECHNOLOGY 169,719,313
TRANSPORTATION - 1.8%
RAILROADS - 1.8%
Burlington Northern, Inc. 534,200 33,854,925
CSX Corp. 195,300 14,671,913
Southern Pacific Rail Corp. (a) 919,300 14,478,975
TOTAL TRANSPORTATION 63,005,813
UTILITIES - 6.3%
GAS - 0.5%
Williams Companies, Inc. 489,200 17,060,850
TELEPHONE SERVICES - 5.8%
Ameritech Corp. 1,067,900 46,987,600
Bell Atlantic Corp. 210,100 11,765,600
BellSouth Corp. 576,200 36,588,700
Koninklijke PPT Nederland 165,600 5,959,760
Koninklijke PPT Nederland (a)(d) 104,400 3,757,240
NYNEX Corp. 1,200,400 48,316,100
SBC Communications, Inc. 871,300 41,495,663
Southern New England
Telecommunications Corp. 175,700 6,193,425
201,064,088
TOTAL UTILITIES 218,124,938
TOTAL COMMON STOCKS
(Cost $2,563,116,541) 2,932,145,209
PREFERRED STOCKS - 1.2%
CONVERTIBLE PREFERRED STOCKS - 0.8%
DURABLES - 0.3%
AUTOS, TIRES, & ACCESSORIES - 0.3%
Chrysler Corp., Series A, $4.625 (d) 85,200 11,374,200
ENERGY - 0.4%
ENERGY SERVICES - 0.1%
Noble Drilling Corp. $1.50 119,100 2,828,625
OIL & GAS - 0.3%
Atlantic Richfield Co.
exchangeable $.5575 431,300 11,213,800
TOTAL ENERGY 14,042,425
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Westinghouse Electric Corp. $1.30 (d) 351,500 5,140,688
TOTAL CONVERTIBLE PREFERRED STOCKS 30,557,313
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONCONVERTIBLE PREFERRED STOCKS - 0.4%
MEDIA & LEISURE - 0.4%
PUBLISHING - 0.4%
News Corp. Ltd. (ltd. vtg.) 2,510,505 $ 12,393,685
UTILITIES - 0.0%
ELECTRIC UTILITY - 0.0%
Gulf States Utilities Co., Series B,
adj. rate 586 28,348
TOTAL NONCONVERTIBLE PREFERRED STOCKS 12,422,033
TOTAL PREFERRED STOCKS
(Cost $39,195,081) 42,979,346
CORPORATE BONDS - 2.4%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (C)
CONVERTIBLE BONDS - 0.8%
CONSTRUCTION & REAL ESTATE - 0.1%
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Centerpoint Properties 8.22%,
1/15/04 - $ 1,510,000 1,683,650
Liberty Property LP 8%, 7/1/01 - 750,000 735,000
Sizeler Property Investors, Inc.
8%, 7/15/03 - 1,500,000 1,312,500
TOTAL CONSTRUCTION & REAL ESTATE 3,731,150
HEALTH - 0.6%
DRUGS & PHARMACEUTICALS - 0.6%
Roche Holdings, Inc. liquid
yield option notes
0%, 4/20/10 (d) - 48,340,000 19,336,000
PRECIOUS METALS - 0.1%
Pegasus Gold, Inc. euro
6 1/4%, 4/30/02 (d) Baa3 1,860,000 1,755,375
SERVICES - 0.0%
SERVICES - 0.0%
ADT Operations, Inc. liquid
yield option notes
0%, 7/6/10 Ba3 3,670,000 1,405,940
UTILITIES - 0.0%
GAS - 0.0%
SFP Pipeline Holdings, Inc.
exchangeable
0%, 8/15/10 (e) Baa3 470,000 606,300
TOTAL CONVERTIBLE BONDS 26,834,765
NONCONVERTIBLE BONDS - 1.6%
AEROSPACE & DEFENSE - 0.1%
DEFENSE ELECTRONICS - 0.1%
Tracor, Inc. 10 7/8%, 8/15/01 B2 1,220,000 1,250,500
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - 0.2%
PACKAGING & CONTAINERS - 0.0%
Owens Illinois, Inc. 10 1/4%,
4/1/99 B2 $ 350,000 $ 357,000
PAPER & FOREST PRODUCTS - 0.2%
Stone Container Corp. 9 7/8%,
2/1/01 B1 7,760,000 7,682,400
TOTAL BASIC INDUSTRIES 8,039,400
CONGLOMERATES - 0.0%
Coltec Industries, Inc. 10 1/4%,
4/1/02 B1 910,000 941,850
DURABLES - 0.3%
TEXTILES & APPAREL - 0.3%
Westpoint Stevens, Inc.:
8 3/4%, 12/15/01 B1 2,660,000 2,620,100
9 3/8%, 12/15/05 B3 7,850,000 7,575,250
TOTAL DURABLES 10,195,350
FINANCE - 0.0%
BANKS - 0.0%
Signet Banking Corp.:
6 1/4%, 5/15/97 (e) Baa2 340,000 337,025
6.4375%, 4/15/98 (e) Baa2 190,000 187,150
TOTAL FINANCE 524,175
MEDIA & LEISURE - 0.8%
BROADCASTING - 0.8%
Viacom, Inc. 8%, 7/7/06 B1 28,240,000 27,463,400
NONDURABLES - 0.2%
BEVERAGES - 0.2%
Canandaigua Wine, Inc.
8 3/4%, 12/15/03 (b) B1 5,700,000 5,586,000
UTILITIES - 0.0%
GAS - 0.0%
Columbia Gas Systems Inc.
9.91%, 5/28/20 (b) - 170,000 250,325
TOTAL NONCONVERTIBLE BONDS 54,251,000
TOTAL CORPORATE BONDS
(Cost $76,398,754) 81,085,765
U.S. TREASURY OBLIGATIONS - 3.8%
6 1/4%, 2/15/03 Aaa 17,860,000 17,907,508
5 3/4%, 8/15/03 Aaa 81,220,000 78,745,227
7 1/4%, 5/15/04 Aaa 24,291,000 25,934,529
11 5/8%, 11/15/04 Aaa 6,810,000 9,361,639
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $118,810,332) 131,948,903
REPURCHASE AGREEMENTS - 7.3%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 6.22% dated
6/30/95 due 7/3/95 $ 252,910,024 $ 252,779,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $3,050,299,708) $ 3,440,938,223
LEGEND
(a) Non-income producing
(b) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $41,363,503 or 1.2% of net
assets.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $2,163,942,745 and $1,281,174,381, respectively, of which U.S.
government and government agency obligations aggregated $42,997,272 and
$41,828,379, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $1,153,411 for the period
(see Note 3 of Notes to Financial Statements).
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 3.8% AAA, AA, A 3.8%
Baa 0.1% BBB 0.0%
Ba 0.0% BB 0.9%
B 1.6% B 0.7%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 0.7%.
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $3,052,199,640. Net unrealized appreciation aggregated
$388,738,583, of which $407,074,046 related to appreciated investment
securities and $18,335,463 related to depreciated investment securities.
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $252,779,000) (cost $ 3,440,938,223
$3,050,299,708) -
See accompanying schedule
Cash 864
Receivable for investments sold 66,280,607
Receivable for fund shares sold 5,980,486
Dividends receivable 8,213,745
Interest receivable 4,230,266
Other receivables 42,410
TOTAL ASSETS 3,525,686,601
LIABILITIES
Payable for investments purchased $ 63,785,673
Payable for fund shares redeemed 629,290
Accrued management fee 1,452,585
Other payables and accrued expenses 513,611
TOTAL LIABILITIES 66,381,159
NET ASSETS $ 3,459,305,442
Net Assets consist of:
Paid in capital $ 2,994,274,835
Undistributed net investment income 5,530,661
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 68,857,443
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 390,642,503
NET ASSETS, for 204,803,927 shares outstanding $ 3,459,305,442
NET ASSET VALUE, offering price and redemption price per share ($3,459,305,442 (divided by) 204,803,927 shares) $16.89
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 31,571,004
Dividends
Interest 16,392,102
TOTAL INCOME 47,963,106
EXPENSES
Management fee $ 7,399,646
Transfer agent fees 727,522
Accounting fees and expenses 378,208
Non-interested trustees' compensation 5,452
Custodian fees and expenses 39,578
Registration fees 251,928
Audit 24,512
Legal 4,441
Interest 9,801
Miscellaneous 7,582
TOTAL EXPENSES 8,848,670
NET INVESTMENT INCOME 39,114,436
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 72,417,571
Foreign currency transactions (3,308 72,414,263
)
Change in net unrealized appreciation (depreciation) on:
Investment securities 336,113,775
Assets and liabilities in foreign currencies (8,788 336,104,987
)
NET GAIN (LOSS) 408,519,250
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 447,633,686
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 39,114,436 $ 49,846,224
Net investment income
Net realized gain (loss) 72,414,263 121,898,471
Change in net unrealized appreciation (depreciation) 336,104,987 (61,690,963)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 447,633,686 110,053,732
Distributions to shareholders (37,713,247) (44,739,784)
From net investment income
From net realized gain (121,254,353) (68,533,800)
TOTAL DISTRIBUTIONS (158,967,600) (113,273,584)
Share transactions 802,500,637 1,048,772,904
Net proceeds from sales of shares
Reinvestment of distributions 158,967,516 113,273,584
Cost of shares redeemed (75,240,890) (192,914,992)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 886,227,263 969,131,496
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,174,893,349 965,911,644
NET ASSETS
Beginning of period 2,284,412,093 1,318,500,449
End of period (including undistributed net investment income of $5,530,661 and $4,150,957,
respectively) $ 3,459,305,442 $ 2,284,412,093
OTHER INFORMATION
Shares
Sold 50,281,447 68,815,564
Issued in reinvestment of distributions 10,351,678 7,484,681
Redeemed (4,656,990) (12,882,315)
Net increase (decrease) 55,976,135 63,417,930
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 D 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.35 $ 15.44 $ 13.40 $ 11.85 $ 9.51 $ 12.29
Income from Investment Operations
Net investment income .20 .41 .37 .40 .50 .58
Net realized and unrealized gain (loss) 2.32 .64 2.06 1.57 2.43 (2.38)
Total from investment operations 2.52 1.05 2.43 1.97 2.93 (1.80)
Less Distributions (.20) (.37) (.35) (.42) (.59) (.59)
From net investment income
In excess of net investment income - - (.04) - - -
From net realized gain (.78) (.77) - - - (.39)
Total distributions (.98) (1.14) (.39) (.42) (.59) (.98)
Net asset value, end of period $ 16.89 $ 15.35 $ 15.44 $ 13.40 $ 11.85 $ 9.51
TOTAL RETURN B, C 17.15% 7.07% 18.29% 16.89% 31.44% (15.29)
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,459,305 $ 2,284,412 $ 1,318,500 $ 592,880 $ 282,171 $ 154,080
Ratio of expenses to average net assets .62% A .58% .62% .65% .74% .78%
Ratio of expenses to average net assets before .62% A .60% .62% .65% .74% .78%
expense reductions
Ratio of net investment income to average net assets 2.72% A 2.83% 2.87% 3.52% 4.83% 6.01%
Portfolio turnover rate 100% A 134% 120% 74% 107% 94%
A ANNUALIZED
B TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
THE FINANCIAL STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
D EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL
STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT
CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
Growth 36.97% 14.84% 14.56%
S&P 500 26.07% 12.09% 13.58%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for
example, has a history of growth in the long run
and volatility in the short run. In turn, the share
price and return of a fund that invests in stocks
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare these figures to the performance of the Standard & Poor's
Composite Index of 500 Stocks- a common proxy for the U.S. stock market.
This benchmark includes reinvested dividends and capital gains, if any, and
excludes the effects of sales charges.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, October 9, 1986.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER LIFE OF FUND
VIP Growth (212) Standard & Poor's 500
10/09/86 10000.00 10000.00
10/31/86 10000.00 10329.97
11/30/86 10220.00 10580.99
12/31/86 10030.00 10311.18
01/31/87 11100.00 11700.09
02/28/87 11650.00 12162.25
03/31/87 11839.97 12513.74
04/30/87 11839.97 12402.36
05/31/87 11920.10 12510.26
06/30/87 12270.69 13142.03
07/31/87 12761.52 13808.33
08/31/87 13142.16 14323.38
09/30/87 12991.91 14009.70
10/31/87 10137.09 10992.01
11/30/87 9425.90 10086.27
12/31/87 10397.53 10853.84
01/31/88 10623.12 11310.78
02/29/88 11484.46 11837.86
03/31/88 11381.92 11472.07
04/30/88 11525.47 11599.41
05/31/88 11422.93 11700.33
06/30/88 11997.15 12237.37
07/31/88 11935.63 12190.87
08/31/88 11648.52 11776.38
09/30/88 11976.65 12278.06
10/31/88 12007.41 12619.39
11/30/88 11894.61 12438.93
12/31/88 12017.66 12656.61
01/31/89 12879.00 13583.07
02/28/89 12612.39 13244.86
03/31/89 12993.68 13553.46
04/30/89 13680.85 14256.89
05/31/89 14170.19 14834.29
06/30/89 13982.78 14749.73
07/31/89 15232.18 16081.64
08/31/89 15492.47 16396.84
09/30/89 15627.82 16329.61
10/31/89 15190.53 15950.76
11/30/89 15440.41 16276.16
12/31/89 15804.81 16666.78
01/31/90 14888.59 15548.44
02/28/90 15030.81 15749.02
03/31/90 15214.51 16166.37
04/30/90 14771.47 15762.21
05/31/90 16078.97 17299.02
06/30/90 16413.95 17181.39
07/31/90 16154.61 17126.41
08/31/90 14490.52 15578.18
09/30/90 12999.33 14819.52
10/31/90 12534.68 14755.80
11/30/90 13550.42 15709.03
12/31/90 13950.23 16147.31
01/31/91 14879.53 16851.33
02/28/91 15989.61 18056.20
03/31/91 16472.15 18493.16
04/30/91 16318.61 18537.54
05/31/91 17283.69 19338.37
06/30/91 16000.57 18452.67
07/31/91 17524.96 19312.56
08/31/91 18303.60 19770.27
09/30/91 18446.17 19440.11
10/31/91 19016.45 19700.60
11/30/91 17930.73 18906.67
12/31/91 20299.56 21069.59
01/31/92 21538.81 20677.70
02/29/92 21989.40 20946.51
03/31/92 20641.73 20538.05
04/30/92 19833.13 21141.87
05/31/92 19664.67 21245.47
06/30/92 18901.00 20928.91
07/31/92 19630.98 21784.90
08/31/92 19091.92 21338.31
09/30/92 19428.83 21590.10
10/31/92 20181.28 21665.67
11/30/92 21528.94 22404.47
12/31/92 22191.55 22680.04
01/31/93 22629.54 22870.55
02/28/93 22163.03 23181.59
03/31/93 23046.80 23670.73
04/30/93 22805.77 23097.89
05/31/93 24504.44 23716.92
06/30/93 24756.94 23785.70
07/31/93 24688.08 23690.55
08/31/93 25927.65 24588.43
09/30/93 26409.70 24399.09
10/31/93 26662.20 24904.16
11/30/93 25583.32 24667.57
12/31/93 26490.04 24966.04
01/31/94 27155.74 25814.89
02/28/94 26875.65 25115.31
03/31/94 25654.59 24020.28
04/30/94 25813.32 24327.74
05/31/94 25215.00 24726.71
06/30/94 23932.88 24120.91
07/31/94 24763.21 24912.07
08/31/94 26167.43 25933.47
09/30/94 25849.96 25298.10
10/31/94 26900.07 25867.31
11/30/94 25825.53 24925.22
12/31/94 26484.91 25294.86
01/31/95 25984.27 25950.76
02/28/95 27060.36 26962.06
03/31/95 28042.58 27757.71
04/30/95 28987.98 28575.17
05/31/95 30117.54 29717.32
06/30/95 32781.83 30407.65
Let's say you invested $10,000 in Growth Portfolio on October 9, 1986, when
the fund started. By June 30, 1995, your investment would have grown to
$32,782 - a 227.82% increase. That compares to $10,000 invested in the S&P
500, which would have grown to $30,408 over the same period - a 204.08%
increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Oracle Systems Corp. 3.6
Intel Corp. 3.1
DSC Communications Corp. 2.7
Applied Materials, Inc. 2.3
Compaq Computer Corp. 2.3
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Technology 52.6
Utilities 9.4
Retail & Wholesale 8.7
Media & Leisure 4.5
Industrial Machinery & Equipment 4.1
ASSET ALLOCATION AS OF JUNE 30, 1995*
Row: 1, Col: 1, Value: 3.4
Row: 1, Col: 2, Value: 96.59999999999999
Stocks 96.6%
Short-term investment 3.4%
FOREIGN INVESTMENTS 6.3%
*
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Lawrence Greenberg, Portfolio
Manager of Growth Portfolio
Q. LARRY, HOW HAS THE FUND DONE OVER THE PAST SIX MONTHS?
A. Quite well. From December 31, 1994, through June 30, 1995, the fund beat
the Standard & Poor's 500 index, which returned 20.21%.
Q. WHAT MADE THE DIFFERENCE?
A. In the second half of 1994, growth stocks began outperforming cyclicals
- stocks in sectors like autos and steel that tend to rise or fall with the
economy. Since then, the economy has slowed and interest rates have been
flat or falling - a perfect environment for growth stocks. My strategy was
to concentrate on those companies with the fastest earnings growth
opportunities for `95 and `96. This aggressive position, especially in
technology, paid off handsomely when growth stocks rebounded.
Q. IN FACT, OVER 50% OF THE FUND WAS IN TECHNOLOGY AT THE END OF JUNE. WHY
SUCH A HUGE BET?
A. Because on a stock-by-stock basis that's where I'm still finding what I
believe are the best growth opportunities. Technology stocks are benefiting
from strong corporate and consumer demand. Business is booming across all
segments - from PCs and software to semiconductors and networking. Plus,
unlike a retailer, which can only grow as fast as it can build bricks and
mortar, a technology company can grow at any rate. The fund has dozens of
companies that are growing sales well over 100% per year. Finally, despite
the fastest sales and earnings growth of any stocks in the market, many of
these companies still have attractive prices compared to other measures
like earnings.
Q. WHERE DID YOU FIND THE BEST OPPORTUNITIES?
A. Across the board. I added new technology names, but I also made bigger
investments in the companies I have the most confidence in. For example, I
significantly boosted the fund's stake in both Intel, which makes
microprocessors like the Pentium chip that are the brains of PCs, and
Micron Technology, one of the few manufacturers of memory chips called
DRAMs that go inside PCs and other electronic equipment. Both stocks posted
sizable gains for the period. I also added to our stake in Applied
Materials, the leading supplier of semiconductor manufacturing equipment,
whose sales grew more than 60% this year. Our biggest investment is still
Oracle, the leading provider of software for client-server set-ups; it
continued to benefit as more companies moved away from mainframes toward
PCs linked through networks.
Q. WERE THERE DISAPPOINTMENTS?
A. Sure. The stock price of Sybase, a competitor to Oracle, fell nearly 50%
in the last six months as it ran into problems launching a new product. One
of our biggest positions six months ago was Motorola; it started having
some near-term problems related to oversupply on its cellular handsets, so
I cut back even though the stock's long-term outlook remained attractive.
Finally, some retailers like Home Depot and Lowe's turned in disappointing
short-term results as heavy rains in California and the Southeast hurt
business. But many of the "hard good category killers" (or superstores) I
focused on continued to grow despite the slowdown in overall retail sales
that we saw this spring.
Q. WHY DID YOU CUT BACK IN HEALTH CARE?
A. The fund's health care stake was around 3% at the end of June, down from
7.7% six months earlier. During the first half of 1994, uncertainty
surrounding President Clinton's plans for health care reform had hurt the
sector. Then, last fall, the stocks rallied as it became apparent that
health care legislation wouldn't pass anytime soon. But once the
Republicans took charge in January, they cast another cloud over the sector
as they promised to re-examine programs like Medicare. So I decided to
watch from the sidelines.
Q. LOOKING AHEAD, WHAT SHOULD SHAREHOLDERS EXPECT?
A. In the past, technology stocks haven't done as well over the summer, as
European demand dries up and new product launches disappear. But this year,
since demand has been so strong, we may see no summer slowdown or one
that's much less pronounced. Nevertheless, shareholders should expect
volatility because the fund is aggressively invested in the fastest-growing
companies. If either the technology sector or the market declines, the fund
will suffer more than other stock funds. But it's also in a good position
to benefit more than its peers from a long-term up market, which I believe
is more likely.
FUND FACTS
GOAL: to increase the value of the fund's
shares over the long term by investing in
stocks with above-average growth potential
START DATE: October 9, 1986
SIZE: as of June 30, 1995, more than $3.1 billion
MANAGER: Lawrence Greenberg, since 1991;
manager, Fidelity Emerging Growth Portfolio,
since 1993; Fidelity Select Environmental
Services Portfolio, October 1986 - April 1991;
Fidelity Select Medical Delivery Portfolio July
1989 - April 1991; joined Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 96.0%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.4%
AEROSPACE & DEFENSE - 0.3%
Rockwell International Corp. 125,000 $ 5,718,750
Special Devices, Inc. (a) 173,900 3,869,263
9,588,013
DEFENSE ELECTRONICS - 0.1%
Trimble Navigation Ltd. (a) 100,000 2,837,500
TOTAL AEROSPACE & DEFENSE 12,425,513
BASIC INDUSTRIES - 1.1%
CHEMICALS & PLASTICS - 0.5%
Airgas, Inc. (a) 445,000 11,959,375
du Pont (E.I.) de Nemours & Co. 75,000 5,156,250
17,115,625
METALS & MINING - 0.6%
Alcan Aluminium Ltd. 100,000 3,023,679
Aluminum Co. of America 175,000 8,771,875
IMCO Recycling, Inc. 299,000 5,606,250
Reynolds Metals Co. 40,000 2,070,000
19,471,804
TOTAL BASIC INDUSTRIES 36,587,429
CONGLOMERATES - 0.2%
Tyco International Ltd. 125,000 6,750,000
CONSTRUCTION & REAL ESTATE - 0.8%
BUILDING MATERIALS - 0.1%
Elcor Corp. (a) 36,700 816,575
Sherwin-Williams Co. 85,000 3,028,125
3,844,700
CONSTRUCTION - 0.3%
Oakwood Homes Corp. 271,700 6,962,313
Standard Pacific Corp. 300,000 2,062,500
9,024,813
ENGINEERING - 0.4%
Fluor Corp. 65,000 3,380,000
Glenayre Technologies, Inc. (a) 172,575 8,801,325
12,181,325
TOTAL CONSTRUCTION & REAL ESTATE 25,050,838
DURABLES - 3.2%
AUTOS, TIRES, & ACCESSORIES - 2.6%
Chrysler Corp. 400,000 19,150,000
Ford Motor Co. 400,000 11,900,000
General Motors Corp. 877,634 41,139,094
Safety Components International, Inc. 220,000 3,630,000
Smith (A.O.) Corp. Class B 127,600 2,998,600
TRW, Inc. 34,100 2,723,738
81,541,432
CONSUMER ELECTRONICS - 0.1%
Whirlpool Corp. 60,000 3,300,000
HOME FURNISHINGS - 0.2%
Heilig-Meyers Co. 100,000 2,550,000
Leggett & Platt, Inc. 75,000 3,300,000
5,850,000
TEXTILES & APPAREL - 0.3%
Shaw Industries, Inc. 112,500 1,912,500
Tommy Hilfiger (a) 300,500 8,414,000
10,326,500
TOTAL DURABLES 101,017,932
SHARES VALUE (NOTE 1)
ENERGY - 0.7%
ENERGY SERVICES - 0.1%
Baker Hughes, Inc. 175,000 $ 3,587,500
INDEPENDENT POWER - 0.2%
Thermo Electron Corp. (a) 111,100 4,471,775
OIL & GAS - 0.4%
British Petroleum PLC ADR 75,030 6,424,444
Chesapeake Energy Corp. (a) 75,000 1,931,250
Kerr-McGee Corp. 76,000 4,075,500
12,431,194
TOTAL ENERGY 20,490,469
FINANCE - 3.5%
BANKS - 0.7%
Banc One Corp. 200,000 6,450,000
Bank of New York Co., Inc. 100,000 4,037,500
Bankers Trust New York Corp. 105,000 6,510,000
Chemical Banking Corp. 135,000 6,378,750
23,376,250
CREDIT & OTHER FINANCE - 0.5%
American Express Co. 400,000 14,050,000
FEDERAL SPONSORED CREDIT - 1.3%
Federal National Mortgage Association 425,000 40,109,375
INSURANCE - 0.5%
American International Group, Inc. 65,000 7,410,000
Travelers, Inc. (The) 200,000 8,750,000
16,160,000
SECURITIES INDUSTRY - 0.5%
Alliance Entertainment Corp. (a) 525,000 4,921,875
Edwards (A.G.), Inc. 111,100 2,499,750
Merrill Lynch & Co., Inc. 156,500 8,216,250
15,637,875
TOTAL FINANCE 109,333,500
HEALTH - 2.9%
DRUGS & PHARMACEUTICALS - 0.7%
Biogen, Inc. (a) 95,000 4,227,500
Dura Pharmaceuticals, Inc. (a) 160,000 3,010,000
Elan Corp. PLC ADR (a) 100,000 4,075,000
North American Biologicals, Inc. (a) 165,000 1,546,875
Pfizer, Inc. 200,000 9,237,500
US Bioscience, Inc. (a) 190 819
US Bioscience, Inc. (warrants) (a) 569 676
22,098,370
MEDICAL EQUIPMENT & SUPPLIES - 0.7%
Cardinal Health, Inc. 236,100 11,155,725
Millipore Corp. 800 53,698
St. Jude Medical, Inc. 60,000 3,007,500
Thermedics, Inc. (a) 175,000 3,412,500
Thermo Cardiosystems, Inc. (a) 100,000 3,662,500
21,291,923
MEDICAL FACILITIES MANAGEMENT - 1.5%
American Medical Response (a) 195,000 5,460,000
Apria Healthcare Group, Inc. (a) 126,000 3,559,500
Columbia/HCA Healthcare Corp. 375,025 16,219,831
HEALTHSOUTH Rehabilitation Corp. 950,000 16,506,250
Rotech Medical Corp. (a) 40,000 1,110,000
United HealthCare Corp. 75,000 3,103,125
Vivra, Inc. (a) 44,000 1,193,500
47,152,206
TOTAL HEALTH 90,542,499
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 4.1%
ELECTRICAL EQUIPMENT - 2.2%
Avid Technology, Inc. (a) 70,050 $ 2,626,875
General Electric Co. 875,000 49,328,125
General Signal Corp. 100,000 3,975,000
Oak Industries, Inc. (a) 105,300 2,711,475
Scientific-Atlanta, Inc. 370,000 8,140,000
United Communication Industry PCL
(For. Reg.) 154,000 2,245,899
69,027,374
INDUSTRIAL MACHINERY & EQUIPMENT - 1.4%
AGCO Corp. 298,300 11,186,250
Case Corp. 200,000 5,950,000
Caterpillar, Inc. 350,000 22,487,500
Ingersoll-Rand Co. 125,000 4,781,250
Semitool, Inc. 22,700 726,400
45,131,400
POLLUTION CONTROL - 0.5%
Browning-Ferris Industries, Inc. 210,000 7,586,250
TETRA Technologies, Inc. (a) 185,000 2,243,125
WMX Technologies, Inc. 175,000 4,965,625
14,795,000
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 128,953,774
MEDIA & LEISURE - 4.5%
BROADCASTING - 1.1%
Capital Cities/ABC, Inc. 65,000 6,816,875
Citicasters, Inc. 65,000 1,787,500
Clear Channel Communications, Inc. 25,000 1,609,375
EZ Communications, Inc. 44,400 821,400
Infinity Broadcasting Corp. (a) 50,000 1,668,750
Jacor Communications, Inc. Class A 73,400 1,174,400
Lin Television Corp. 50,000 1,681,250
Renaissance Communications Corp. (a) 65,000 2,177,500
Tele-Communications, Inc. Class A 225,000 5,273,438
Viacom, Inc. Class B (non-vtg.) (a) 250,084 11,597,646
34,608,134
ENTERTAINMENT - 0.4%
Casino America, Inc. (a) 100,000 1,512,500
Disney (Walt) Co. 110,000 6,118,750
Players International, Inc. (a) 217,500 4,350,000
11,981,250
LEISURE DURABLES & TOYS - 0.3%
Cobra Golf, Inc. (a) 204,900 6,479,963
Hasbro, Inc. 84,000 2,667,000
9,146,963
LODGING & GAMING - 0.7%
Doubletree Corp. (a) 300,000 6,468,750
Hospitality Franchise Systems, Inc. 453,600 15,705,900
22,174,650
PUBLISHING - 0.1%
Houghton Mifflin Co. 50,000 2,637,500
RESTAURANTS - 1.9%
Apple South, Inc. 500,000 9,750,000
Applebee's International, Inc. 275,000 7,081,250
Landry's Seafood Restaurants, Inc. (a) 334,200 6,684,000
Lone Star Steakhouse Saloon (a) 375,000 11,367,188
Outback Steakhouse, Inc. (a) 385,000 11,116,875
Papa John's International, Inc. (a) 161,800 5,663,000
Starbucks Corp. (a) 180,000 6,412,500
Uno Restaurant Corp. (a) 226,625 2,351,234
60,426,047
TOTAL MEDIA & LEISURE 140,974,544
SHARES VALUE (NOTE 1)
NONDURABLES - 1.3%
BEVERAGES - 0.3%
PepsiCo, Inc. 225,000 $ 10,265,625
HOUSEHOLD PRODUCTS - 0.3%
Colgate-Palmolive Co. 50,000 3,656,250
Gillette Co. 130,000 5,801,250
9,457,500
TOBACCO - 0.7%
Philip Morris Companies, Inc. 225,000 16,734,375
RJR Nabisco Holdings Corp. 200,000 5,575,000
22,309,375
TOTAL NONDURABLES 42,032,500
RETAIL & WHOLESALE - 8.7%
APPAREL STORES - 0.7%
Baby Superstore, Inc. (a) 65,000 3,063,125
Gymboree Corp. (a) 135,000 3,923,438
Just For Feet, Inc. (a)(c) 402,000 16,029,750
23,016,313
APPLIANCE STORES - 0.1%
Cellstar Corp. (a) 165,700 3,873,238
DRUG STORES - 0.4%
General Nutrition Companies, Inc. (a) 365,000 12,820,625
GENERAL MERCHANDISE STORES - 1.5%
Dollar General Corp. 150,050 4,745,331
Wal-Mart Stores, Inc. 1,600,000 42,800,000
47,545,331
RETAIL & WHOLESALE, MISCELLANEOUS - 6.0%
Barnes & Noble, Inc. (a) 153,100 5,205,400
Bed Bath & Beyond, Inc. (a) 700,000 16,975,000
Borders Group, Inc. (a) 80,000 1,150,000
Circuit City Stores, Inc. 150,000 4,743,750
Corporate Express (a) 275,000 5,878,125
Home Depot, Inc. (The) 345,066 14,018,306
Lowe's Companies, Inc. 1,175,000 35,103,125
Officemax, Inc. (a) 525,000 14,634,375
Office Depot, Inc. (a) 320,000 9,000,000
Petco Animal Supplies, Inc. (a) 378,700 8,804,775
Petsmart, Inc. (a) 600,000 17,250,000
Sport Supply Group, Inc. 309,550 3,869,375
Staples, Inc. (a) 550,000 15,881,250
Sunglass Hut International, Inc. (a) 886,500 31,027,500
Viking Office Products, Inc. (a) 150,000 5,493,750
189,034,731
TOTAL RETAIL & WHOLESALE 276,290,238
SERVICES - 2.3%
LEASING & RENTAL - 0.9%
Hollywood Entertainment Corp. (a) 605,000 27,225,000
SERVICES - 1.4%
Adia SA (Bearer) (a) 25,000 5,202,438
Block (H & R), Inc. 100,000 4,112,500
Children's Discovery Centers of
America, Inc. (a) 135,000 2,261,250
First Financial Management Corp. 75,000 6,412,500
Medaphis Corp. (a) 950,000 20,662,500
Zebra Technologies Corp. Class A (a) 100,000 5,325,000
43,976,188
TOTAL SERVICES 71,201,188
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - 52.0%
COMMUNICATIONS EQUIPMENT - 10.9%
Apertus Technologies, Inc. (a) 57,000 $ 498,750
Cabletron Systems, Inc. (a) 85,000 4,526,250
Cisco Systems, Inc. (a) 1,215,000 61,433,438
DSC Communications Corp. (a) 1,850,000 86,025,000
Dialogic Corp. (a) 34,800 617,700
Ericsson (L.M.) Telephone Co.
Class B ADR 900,000 18,000,000
General Instrument Corp. (a) 350,000 13,431,250
Global Village Communication (a) 573,800 8,965,625
Inter-Tel, Inc. (a) 62,300 942,288
InterVoice, Inc. (a) 250,000 4,375,000
Lo Jack Corp. (a) 240,000 2,655,000
Microtest, Inc. (a) 125,000 2,781,250
Newbridge Networks Corp. (a) 525,000 18,506,250
Nokia Corp. AB :
Series A 160,000 9,377,565
sponsored ADR 915,000 54,556,875
Tellabs, Inc. (a) 147,800 7,112,875
3Com Corp. (a) 600,000 40,200,000
U.S. Robotics Corp. 74,600 8,131,400
342,136,516
COMPUTER SERVICES & SOFTWARE - 12.9%
Adobe Systems, Inc. 60,000 3,480,000
Alantec Corp. 65,000 2,226,250
America Online, Inc. (a) 240,500 10,582,000
American Business Information, Inc. (a) 140,800 3,801,600
Ascend Communications, Inc. (a) 60,000 3,030,000
Automatic Data Processing, Inc. 125,000 7,859,375
Broderbund Software, Inc. (a) 72,800 4,641,000
CUC International, Inc. (a) 502,500 14,070,000
Cambridge Technology Partners
Mass., Inc. (a) 90,000 2,970,000
Ceridian Corp. (a) 140,000 5,162,500
Cerner Corp. (a) 40,000 2,450,000
CompUSA, Inc. (a) 290,000 9,642,500
Computer Sciences Corp. (a) 160,000 9,100,000
Davidson & Associates, Inc. (a) 65,000 2,583,750
GMIS, Inc. (a) 212,600 4,849,938
Hyperion Software, Inc. (a) 60,000 2,715,000
Informix Corp. (a) 800,000 20,300,000
Inso Corp. (a) 30,000 1,792,500
Integrated Silicon Systems, Inc. (a) 108,400 4,092,100
Intersolv, Inc. (a) 315,000 7,323,750
Mercury Interactive Group Corp. (a) 252,500 5,081,563
Microsoft Corp. (a) 740,000 66,877,500
Network Peripherals, Inc. (a) 260,000 5,671,250
Novell, Inc. (a) 524,200 10,451,238
Oracle Systems Corp. (a) 2,900,000 112,012,500
Parametric Technology Corp. (a) 296,900 14,770,775
Paychex, Inc. 85,000 3,081,250
Peoplesoft, Inc. (a) 375,000 20,343,750
Platinum Technology, Inc. (a) 100,000 1,812,500
Reuters Holdings PLC ADR Class B 65,000 3,258,125
SAP AG sponsored ADR (a)(b) 35,000 1,461,250
Softkey International, Inc. (a) 150,000 4,781,250
Stratacom, Inc. (a) 490,400 23,907,000
SunGard Data Systems, Inc. (a) 110,000 5,747,500
Systems & Computer Technology Corp. (a) 125,000 2,500,000
Wonderware Corp. (a) 77,600 3,123,400
407,553,114
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - 10.5%
ADAPTEC, Inc. (a) 375,000 $ 13,875,000
Apple Computer, Inc. 165,000 7,662,188
Bay Networks, Inc. (a) 800,000 33,100,000
Compaq Computer Corp. (a) 1,579,800 71,683,425
Comverse Technology, Inc. (a) 75,000 1,331,250
Dell Computer Corp. (a) 125,000 7,515,625
Digital Equipment Corp. (a) 200,000 8,150,000
Fore Systems, Inc. (a) 65,000 1,966,250
Gateway 2000, Inc. (a) 200,000 4,550,000
General Motors Corp. Class E (a) 505,600 21,993,600
Hewlett-Packard Co. 315,000 23,467,500
International Business Machines Corp. 635,000 60,960,000
Micom Communication Corp. (a) 146,100 949,650
Pitney Bowes, Inc. 110,000 4,221,250
Radius, Inc. (a) 290,000 3,190,000
Read Rite Corp. (a) 225,026 6,019,446
Seagate Technology (a) 214,900 8,434,825
Silicon Graphics, Inc. (a) 888,100 35,412,988
Sun Microsystems, Inc. (a) 224,000 10,864,000
Xerox Corp. (a) 45,000 5,276,250
330,623,247
ELECTRONIC INSTRUMENTS - 2.8%
Applied Materials, Inc. (a) 835,000 72,331,875
Electro Scientific Industries, Inc. (a) 117,500 3,906,875
Kulicke & Soffa Industries, Inc. 40,000 2,652,500
Novellus System, Inc. (a) 143,000 9,688,250
88,579,500
ELECTRONICS - 14.7%
AMP, Inc. 150,000 6,337,500
Advanced Micro Devices, Inc. 400,000 14,550,000
Alliance Semiconductor Corp. (a) 160,000 7,840,000
Altera Corp. (a) 387,400 16,755,050
Analog Devices, Inc. (a) 275,000 9,350,000
Atmel Corp. (a) 160,000 8,860,000
Avnet, Inc. 282,800 13,680,450
C-Cube Microsystems, Inc. (a) 75,000 2,043,750
Cascade Communications Corp. (a) 75,000 3,243,750
Chips & Technologies, Inc. (a) 201,300 2,642,063
Cirrus Logic, Inc. (a) 80,000 5,015,000
Cypress Semiconductor Corp. (a) 275,000 11,137,500
Hitachi Ltd. ADR 35,000 3,508,750
Integrated Device Technology, Inc. (a) 72,900 3,371,625
Integrated Silicon Solution (a) 147,800 7,722,550
Intel Corp. 1,530,000 96,868,125
Kemet Corp. (a) 135,000 7,087,500
LSI Logic Corp. (a) 758,930 29,693,136
Linear Technology Corp. 225,000 14,850,000
Marshall Industries (a) 102,700 3,440,450
Maxim Integrated Products, Inc. (a) 90,000 4,590,000
Microchip Technology, Inc. (a) 275,050 10,004,944
Micron Technology, Inc. 1,300,000 71,337,500
Motorola, Inc. 235,000 15,774,375
National Semiconductor Corp. (a) 225,000 6,243,750
SGS-Thomson Microelectronic NV (a) 275,000 11,171,875
S-3, Inc. (a) 81,700 2,941,200
Samsung Electronics Co. Ltd.:
GDR (b) 55,000 5,280,000
GDS (non-vtg.) (Reg.) (a) 102,800 5,345,600
Tencor Instruments (a) 80,000 3,280,000
Texas Instruments, Inc. 235,000 31,460,625
Thomas & Betts Corp. 34,600 2,365,775
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
VLSI Technology, Inc. (a) 135,000 $ 4,066,875
Wholesale Cellular USA, Inc. (a) 150,000 3,225,000
Wyle Laboratories 74,800 2,103,750
Xilinx, Inc. (a) 175,000 16,450,000
463,638,468
PHOTOGRAPHIC EQUIPMENT - 0.2%
3D Systems Corp. 375,000 6,937,500
TOTAL TECHNOLOGY 1,639,468,345
TRANSPORTATION - 0.9%
AIR TRANSPORTATION - 0.4%
AMR Corp. (a) 110,000 8,208,750
Atlantic Southeast Airlines, Inc. 59,700 1,798,463
Comair Holdings, Inc. 25,000 946,875
Southwest Airlines Co. 137,700 3,287,588
14,241,676
RAILROADS - 0.5%
ABC Rail Products Corp. (a) 150,000 3,450,000
CSX Corp. 151,200 11,358,900
14,808,900
TOTAL TRANSPORTATION 29,050,576
UTILITIES - 9.4%
CELLULAR - 5.9%
AirTouch Communications, Inc. (a) 2,300,000 65,550,000
Arch Communications Group, Inc. (a) 150,000 3,337,500
BCE Mobile Communications, Inc. (a) 275,000 9,166,666
Cellular Communications, Inc.,
Series A (redeemable) (a) 200,000 9,100,000
Metrocall, Inc. (a) 150,000 2,737,500
Mobile Telecommunications
Technologies, Inc. (a) 75,000 2,053,125
Mobilemedia Corp. (a) 13,000 240,500
Palmer Wireless, Inc. (a) 575,300 9,420,538
USA Mobile Communications (a) 116,600 2,040,500
United States Cellular Corp. (a) 315,000 9,528,750
Vanguard Cellular Systems, Inc.
Class A (a)(c) 2,176,000 52,224,000
Vodafone Group PLC sponsored ADR 548,700 20,782,013
186,181,092
TELEPHONE SERVICES - 3.5%
ALC Communications Corp. (a) 215,000 9,701,875
AT&T Corp. 425,000 22,578,125
Ameritech Corp. 493,700 21,722,800
Bell Atlantic Corp. 375,000 21,000,000
BellSouth Corp. 150,000 9,525,000
LCI International, Inc. (a) 125,000 3,828,125
SBC Communications, Inc. 475,000 22,621,875
110,977,800
TOTAL UTILITIES 297,158,892
TOTAL COMMON STOCKS
(Cost $2,234,010,970) 3,027,328,237
NONCONVERTIBLE PREFERRED STOCKS - 0.6%
SHARES VALUE (NOTE 1)
TECHNOLOGY - 0.6%
COMPUTER SERVICES & SOFTWARE - 0.2%
SAP AG (a) 5,250 $ 6,622,118
COMPUTERS & OFFICE EQUIPMENT - 0.4%
Silicon Graphics CDA Ltd.
exchangeable (non-vtg.) (a) 280,080 11,132,774
TOTAL NONCONVERTIBLE PREFERRED STOCKS
(Cost $15,178,912) 17,754,892
REPURCHASE AGREEMENTS - 3.4%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 6.22% dated
6/30/95 due 7/3/95 $ 106,155,996 106,101,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $2,355,290,882) $ 3,151,184,129
LEGEND
(a) Non-income producing
(b) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $6,741,250 or 0.2% of net
assets.
(c) A company in which the fund has ownership of at least 5% of the voting
securities is an affiliated company. Transactions during the period with
companies that are or were affiliates are as follows:
PURCHASES SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
Just For Feet, Inc. (a) $ 2,342,009 - - $ 16,029,750
Vanguard Cellular Systems, Inc.
Class A (a) 1,588,387 - - 52,224,000
TOTAL $ 3,930,396 $ - $ - $ 68,253,750
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $1,556,970,263 and $967,373,548, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $555,941 for the period
(see Note 3 of Notes to Financial Statements).
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $2,361,955,662. Net unrealized appreciation aggregated
$789,228,467, of which $809,605,722 related to appreciated investment
securities and $20,377,255 related to depreciated investment securities.
At December 31, 1994, the fund had a capital loss carryforward of
approximately $68,037,000 all of which will expire on December 31, 2002.
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $106,101,000) (cost $2,355,290,882) $ 3,151,184,129
- See accompanying schedule
Receivable for investments sold 15,240,448
Receivable for fund shares sold 4,631,877
Dividends receivable 1,976,933
Other receivables 241,989
TOTAL ASSETS 3,173,275,376
LIABILITIES
Payable for investments purchased $ 31,104,827
Payable for fund shares redeemed 2,527,529
Accrued management fee 1,523,671
Other payables and accrued expenses 374,992
TOTAL LIABILITIES 35,531,019
NET ASSETS $ 3,137,744,357
Net Assets consist of:
Paid in capital $ 2,373,300,032
Undistributed net investment income 3,900,899
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (35,349,821)
Net unrealized appreciation (depreciation) on investments 795,893,247
NET ASSETS, for 117,514,234 shares outstanding $ 3,137,744,357
NET ASSET VALUE, offering price and redemption price per share ($3,137,744,357 (divided by) 117,514,234 shares) $26.70
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 8,244,859
Dividends
Interest 5,551,271
TOTAL INCOME 13,796,130
EXPENSES
Management fee $ 7,756,500
Transfer agent fees 627,931
Accounting fees and expenses 378,173
Non-interested trustees' compensation 4,869
Custodian fees and expenses 69,955
Registration fees 147,294
Audit 14,797
Legal 4,080
Miscellaneous 7,349
TOTAL EXPENSES 9,010,948
NET INVESTMENT INCOME 4,785,182
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 46,674,141
Foreign currency transactions 395 46,674,536
Change in net unrealized appreciation (depreciation) on investment securities 517,371,258
NET GAIN (LOSS) 564,045,794
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 568,830,976
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 4,785,182 $ 11,810,184
Net investment income
Net realized gain (loss) 46,674,536 (74,102,658)
Change in net unrealized appreciation (depreciation) 517,371,258 80,193,945
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 568,830,976 17,901,471
Distributions to shareholders (12,404,421) (7,589,523)
From net investment income
From net realized gain - (80,320,550)
TOTAL DISTRIBUTIONS (12,404,421) (87,910,073)
Share transactions 750,772,650 1,289,938,019
Net proceeds from sales of shares
Reinvestment of distributions 12,404,421 87,909,946
Cost of shares redeemed (323,728,603) (549,819,377)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 439,448,468 828,028,588
TOTAL INCREASE (DECREASE) IN NET ASSETS 995,875,023 758,019,986
NET ASSETS
Beginning of period 2,141,869,334 1,383,849,348
End of period (including undistributed net investment income of $3,900,899 and $11,472,202, $ 3,137,744,357 $ 2,141,869,334
respectively)
OTHER INFORMATION
Shares 32,171,873 60,676,019
Sold
Issued in reinvestment of distributions 568,749 4,039,985
Redeemed (13,969,564) (25,920,211)
Net increase (decrease) 18,771,058 38,795,793
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 F 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.69 $ 23.08 $ 19.76 $ 18.51 $ 12.91 $ 15.18
Income from Investment Operations
Net investment income .04 .12 .12 .09 D .09 D .24
Net realized and unrealized gain (loss) 5.09 (.12) E 3.64 1.64 5.72 (1.98)
Total from investment operations 5.13 - 3.76 1.73 5.81 (1.74)
Less Distributions (.12) (.12) (.11) (.05) (.21) (.21)
From net investment income
From net realized gain - (1.27) (.21) (.43) - (.32)
In excess of net realized gain - - (.12) - - -
Total distributions (.12) (1.39) (.44) (.48) (.21) (.53)
Net asset value, end of period $ 26.70 $ 21.69 $ 23.08 $ 19.76 $ 18.51 $ 12.91
TOTAL RETURN B, C 23.78% (.02) 19.37% 9.32% 45.51% (11.73)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,137,744 $ 2,141,869 $ 1,383,849 $ 749,837 $ 371,462 $ 135,487
Ratio of expenses to average net assets .72% A .69% .71% .75% .84% .88%
Ratio of expenses to average net assets
before expense .72% A .70% .71% .75% .84% .88%
reductions
Ratio of net investment income to average net
assets .38% A .69% .72% .83% .56% 2.69%
Portfolio turnover rate 82% A 122% 159% 262% 261% 88%
A ANNUALIZED
B TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
THE FINANCIAL STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET GAIN ON INVESTMENTS FOR THE PERIOD
ENDED DUE TO THE TIMING OF SALES
AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
F EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL
STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT
CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
OVERSEAS 2.96% 4.76% 7.12%
Morgan Stanley EAFE Index 1.65% 4.69% 6.97%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
Many markets around the globe offer the potential
for significant growth over time; however,
investing in foreign markets means assuming
greater risks than investing in the United States.
Factors like changes in a country's financial
markets, its local political and economic
climate, and the fluctuating value of its currency
create these risks. For these reasons an
international fund's performance may be more
volatile than a fund that invests exclusively in the
United States.
(checkmark)
You can compare the fund's figures to the performance of the Morgan Stanley
EAFE index - a broad measure of the performance of stocks in Europe,
Australia, and the Far East. This benchmark includes reinvested dividends
and capital gains, if any, and excludes the effects of sales charges.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of operations
January 28, 1987.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money. Foreign investments involve greater risks and
potential rewards than U.S. investments. These risks include political and
economic uncertainties of foreign countries, as well as the risk of
currency fluctuations.
$10,000 OVER LIFE OF FUND
VIP Overseas (22Europe, Australia,
01/28/87 10000.00 10000.00
01/31/87 10000.00 9997.46
02/28/87 10010.00 10296.66
03/31/87 10460.00 11140.41
04/30/87 11220.00 12319.18
05/31/87 11060.00 12319.14
06/30/87 10520.00 11926.66
07/31/87 10400.00 11905.82
08/31/87 11320.00 12798.54
09/30/87 11070.00 12597.05
10/31/87 8760.00 10777.00
11/30/87 8840.00 10938.65
12/31/87 9462.16 11263.46
01/31/88 9138.32 11464.55
02/29/88 9381.20 12228.75
03/31/88 9806.24 12980.64
04/30/88 9968.16 13169.27
05/31/88 9786.00 12747.12
06/30/88 9613.96 12411.13
07/31/88 9543.12 12800.51
08/31/88 9209.16 11968.24
09/30/88 9603.84 12491.19
10/31/88 10028.88 13559.96
11/30/88 10211.04 14367.68
12/31/88 10231.28 14447.79
01/31/89 10534.87 14701.99
02/28/89 10717.03 14777.56
03/31/89 10707.38 14487.53
04/30/89 11023.50 14621.89
05/31/89 10615.60 13826.42
06/30/89 10574.81 13593.67
07/31/89 11563.97 15300.67
08/31/89 11482.39 14612.54
09/30/89 12196.21 15278.16
10/31/89 11533.38 14664.33
11/30/89 12155.42 15401.50
12/31/89 12920.24 15969.77
01/31/90 12746.88 15375.56
02/28/90 12449.36 14302.43
03/31/90 12919.92 12812.46
04/30/90 12991.52 12710.78
05/31/90 13840.58 14161.09
06/30/90 14147.46 14036.37
07/31/90 14863.53 14234.08
08/31/90 13349.56 12851.83
09/30/90 12081.09 11060.74
10/31/90 13206.34 12784.21
11/30/90 12797.16 12030.10
12/31/90 12705.10 12224.98
01/31/91 12827.85 12620.40
02/28/91 13260.02 13973.29
03/31/91 12872.18 13134.44
04/30/91 13155.20 13263.42
05/31/91 13186.64 13401.82
06/30/91 12463.37 12417.04
07/31/91 13081.82 13027.11
08/31/91 13123.75 12762.56
09/30/91 13658.34 13481.84
10/31/91 13752.68 13672.96
11/30/91 13260.02 13034.64
12/31/91 13721.24 13707.79
01/31/92 13888.95 13415.00
02/29/92 13599.52 12934.85
03/31/92 13323.28 12080.93
04/30/92 14152.01 12138.36
05/31/92 14768.23 12950.85
06/30/92 14491.99 12336.56
07/31/92 13567.65 12020.83
08/31/92 13450.78 12774.79
09/30/92 12908.92 12522.52
10/31/92 12027.08 11865.66
11/30/92 11963.33 11977.32
12/31/92 12250.20 12039.27
01/31/93 12600.81 12037.79
02/28/93 12847.62 12401.41
03/31/93 13738.91 13482.39
04/30/93 14651.94 14761.90
05/31/93 14967.16 15073.67
06/30/93 14597.60 14838.49
07/31/93 15173.67 15357.91
08/31/93 15988.88 16186.97
09/30/93 15901.92 15822.62
10/31/93 16478.00 16310.23
11/30/93 15782.36 14884.55
12/31/93 16825.82 15959.32
01/31/94 17923.63 17308.60
02/28/94 17607.51 17260.66
03/31/94 17170.60 16517.22
04/30/94 17738.58 17218.03
05/31/94 17520.13 17119.18
06/30/94 17334.44 17361.11
07/31/94 17793.20 17528.07
08/31/94 18000.73 17943.05
09/30/94 17531.05 17377.92
10/31/94 17891.50 17956.61
11/30/94 17214.29 17093.61
12/31/94 17115.99 17200.65
01/31/95 16406.01 16539.88
02/28/95 16449.17 16492.41
03/31/95 16955.64 17521.06
04/30/95 17440.09 18180.00
05/31/95 17682.31 17963.28
06/30/95 17847.46 17648.27
Let's say you invested $10,000 in Overseas Portfolio on January 28, 1987,
when the fund started. By June 30, 1995, your investment would have grown
to $17,847 - a 78.47% increase. That compares to $10,000 invested in the
Morgan Stanley EAFE Index, which would have grown to $17,648 over the same
period - a 76.48% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1995
(BY ISSUER, EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S
INVESTMENTS
C. S. Holdings (Reg.) 1.8
Nestle SA (Reg.) 1.5
Deutsche Bank AG 1.3
Unilever NV Ord. 1.2
Swiss Bank Corp. (Bearer) 1.2
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Finance 26.4
Utilities 8.8
Nondurables 8.4
Durables 8.1
Basic Industries 6.2
GEOGRAPHIC DIVERSIFICATION AS OF JUNE 30, 1995
(BY LOCATION OF ISSUER) % OF FUND'S
INVESTMENTS
Japan 18.5
United Kingdom 12.4
Switzerland 9.8
France 7.5
Netherlands 6.9
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with John Hickling, Portfolio Manager of Overseas Portfolio
Q. JOHN, HOW HAS THE FUND PERFORMED?
A. For the six months and one year ended June 30, 1995, the fund's
performance topped that of the Morgan Stanley EAFE index - a broad measure
of stocks in Europe, Australia and the Far East. The index had total
returns of 2.60% and 1.65% for the six- and 12-month periods, respectively.
Q. WHAT WERE THE KEYS TO THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
A. First, I kept the fund fully invested through much of the period.
Second, some of the stocks I picked in Japan and Europe fared well. And
finally, the fund was able to benefit from new investments in emerging
markets.
Q. WHY DID THE EAFE INDEX OFFER RELATIVELY LOW RETURNS?
A. While European markets have performed relatively well - though not as
well as the U.S. market - emerging markets and Japan have not. Japan was
affected by a number of factors that dampened investor enthusiasm: the
Barings debacle, the Kobe earthquake and the subway gas attack. The
Japanese market also was hurt by the strength of the yen versus the dollar.
On the heels of Mexico's devaluation of the peso in late 1994, emerging
markets also struggled, although they appear to have pretty much bottomed
out.
Q. WHAT'S THE STORY BEHIND THE FUND'S INVESTMENTS IN JAPAN?
A. Even though Japan has the highest country representation in the fund,
I've kept the fund underweighted there, relative to the index. I've focused
much of the fund's Japanese investments in technology, including consumer
electronics companies Toshiba and Hitachi, and other manufacturers and
exporters that are poised to take advantage of economic activity both in
Japan and globally. While the technology sector has done well in the U.S.,
it has been weak in Japan, so I found valuations to be attractive. The
sector recently has shown some strong gains. In addition, I've targeted
some financial stocks. The Japanese market has started to pick up a bit
lately, and brokerage house Nomura Securities is poised to take advantage
because it has been cutting costs aggressively. In addition, it appears
trust banks such as Sumitomo Trust will be able to improve interest margins
- the difference between what they charge for loans and what they pay to
depositors - because of changing regulations.
Q. THE FUND IS OVERWEIGHTED IN EUROPE, RELATIVE TO THE INDEX. WHERE HAVE
YOU FOUND OPPORTUNITIES THERE?
A. Mainly in financial and consumer nondurable stocks, as well as interest
rate-sensitive issues - because European bond markets have been rallying -
and cyclicals - those that tend to rise and fall with the economy. European
stocks have rallied lately, mainly on the strength of the technology
sector. In the short run, I've missed some opportunity there, because I
found the tech stocks to be too expensive and risky. Some of the appealing
consumer nondurable names have been Guinness, Cadbury-Schweppes, Bass and
Nestle. Barclays, National Westminster, Swiss Bank and C.S. Holdings were
among the fund's financial stock investments. I've added investments in
cyclical stocks because they became cheap. Those include paper companies Mo
Och Domsjoe and Svenska Cellulosa; auto stocks Volvo and Peugeot; and tire
companies such as Michelin.
Q. WHAT ABOUT THE FUND'S EMERGING MARKET INVESTMENTS?
A. I've been more active there because, as I said, I felt they had hit
bottom, and there were a lot of very interesting stocks. Among the stocks
that have caught my eye have been Hong Kong/Shanghai Bank (HSBC) and Hong
Kong Land Holdings; Philippine Long Distance Telephone; the department
store Matahari and cigarette manufacturer Gudang Garam in Indonesia; Krung
Thai Bank; Telecom Argentina; and Mexican companies Bancomer, Telmex, Cemex
and Grupo Carso.
Q. WHAT'S YOUR OUTLOOK GOING FORWARD?
A. Several factors are important to consider. First of all, it seems most
stock markets reflect the sentiment that any worldwide recession will stay
pretty shallow and that growth will resume. Of course, this is the best
possible scenario. At the same time, if the U.S. market stumbles, one would
expect there to be a drop in foreign markets. In such a scenario, I believe
overseas markets wouldn't drop as far as the U.S, because they haven't
gained as much recently, but it's impossible to say for sure. How the
dollar does also will be important. Going forward, I'll stay with my usual
game plan, looking for opportunities in any markets that appear to have
excellent value.
FUND FACTS
GOAL: to increase the value of the fund's
shares by investing mainly in stocks in
Europe, the Far East, and the Pacific Basin
START DATE: January 28, 1987
SIZE: as of June 30, 1995, more than $1.2 billion
MANAGER: John Hickling, since 1993; manager
Fidelity Overseas Fund, since 1993; Fidelity
Advisor Overseas Fund, since 1993; Fidelity
Advisor Annuity Overseas Portfolio, since
January 1995; previously managed several
Fidelity international funds; joined Fidelity in
1982
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 89.2%
SHARES VALUE (NOTE 1)
ARGENTINA - 0.8%
Buenos Aires Embotelladora SA
sponsored ADR 41,800 $ 1,050,301
Perez Companc Class B 308,452 1,295,822
Telecom Argentina sponsored
ADR Class B 83,400 3,794,700
Telecom Argentina Stet France
Telecom SA 263,600 1,199,681
YPF Sociedad Anonima sponsored
ADR representing Class D shares 150,500 2,840,688
10,181,192
AUSTRALIA - 1.4%
Brambles Industries Ltd. 276,500 2,616,260
FAI Insurance Ltd. Ord. 2,037,900 809,474
Lend Lease Corp. Ltd. 81,000 1,033,010
Pioneer International Ltd. 493,300 1,224,642
TNT Ltd. (a) 1,658,800 2,176,694
Westpac Banking Corp. 2,912,700 10,536,488
18,396,568
AUSTRIA - 0.9%
Mayr Melnhof Karton AG 24,200 1,398,830
OEMV AG 62,400 7,194,579
VA Technologie AG 6,800 851,047
VA Technologie AG (d) 15,000 1,877,310
11,321,766
BELGIUM - 1.6%
Bekaert SA 4,005 3,197,654
Delhaize Freres & Cie Le Lion SA 135,300 6,183,782
Petrofina SA 11,900 3,590,951
Petrofina SA (warrants) (a) 595 8,380
Solvay & Cie SA 14,062 7,724,197
20,704,964
BERMUDA - 0.2%
Consolidated Electric Power Asia Ltd.
sponsored ADR (d) 30,000 682,500
Jardine Strategic Holdings Ltd. Ord. 529,500 1,704,990
2,387,490
BRAZIL - 0.2%
Coteminas PN 2,500,000 788,675
Telebras PN (Pfd. Reg.) 60,298,770 1,987,447
2,776,122
CANADA - 0.5%
Midland Walwyn, Inc. 269,000 2,106,921
Noranda, Inc. 245,400 4,827,541
6,934,462
CHILE - 0.1%
Vina Concha Stet y Toro SA
sponsored ADR 51,100 990,063
FINLAND - 0.8%
Kymmene Corp. 53,900 1,680,624
Pohjola Class B 291,000 4,570,859
Valmet Corp. OY Ord. 167,700 3,793,939
10,045,422
FRANCE - 7.2%
Accor SA 65,158 8,694,014
Axa SA 91,718 4,963,362
BQE National Paris Ord. 222,840 10,770,332
Club Mediterranee SA Ord. 42,500 4,340,855
Compagnie Bancaire Ord. 65,670 7,867,107
Credit Lyonnais 24,500 1,413,880
SHARES VALUE (NOTE 1)
FRANCE - CONTINUED
Elf Aquitaine 112,128 $ 8,302,776
Generale des Eaux 90,600 10,105,133
Havas SA 53,300 4,227,450
IMETAL SA Ord. 9,200 1,083,135
L'Oreal Co. Ord. 10,200 2,563,957
Lafarge Coppee SA 63,900 4,978,432
Lyonnaise des Eaux Dumez SA 30,700 2,909,255
Michelin SA Cie Generale des
Etablissements, Class B (a) 76,900 3,413,366
Peugeot SA Ord. 19,500 2,710,627
Total SA Class B 190,600 11,495,446
Vallourec SA (a) 60,000 3,010,224
92,849,351
GERMANY - 6.0%
Allianz Versich Holdings Ord. (Reg.) 1,450 2,590,467
Asko 2,900 1,813,746
BMW AG 9,918 5,463,533
Bayerische Vereinsbank AG Ord. 11,000 3,340,331
Continental Gummi-Werke AG 25,600 3,721,076
Deutsche Bank AG 352,000 17,122,878
Duerr Beteiligungs AG (RFD) 8,777 3,119,553
Gildemeister AG (a) 28,620 2,372,138
Hoechst AG Ord. 38,900 8,413,855
Karstadt AG 17,800 7,821,202
Kaufhof Holding AG 20,000 7,151,906
Metallgesellschaft AG (a)(d) 86,700 1,587,832
SGL Carbon AG (a)(d) 28,000 1,250,570
Schmalbach-Lubeca AG 4,250 855,261
Veba AG Ord. 27,400 10,779,905
77,404,253
HONG KONG - 2.1%
Amoy Properties Ltd. 2,084,000 1,831,440
Consolidated Electric Power Asia Ltd. 604,000 1,401,165
Dickson Concepts International Ltd. 2,108,000 1,259,994
HSBC Holdings PLC 834,000 10,697,560
Hong Kong Land Holdings Ltd. 2,337,000 4,253,340
Hopewell Holdings Ltd. 3,944,000 3,338,596
Hysan Development Co. Ltd. 643,000 1,470,863
Peregrine Investments Holdings Ltd. 832,000 1,182,780
Semi-Tech (Global) Ltd. 100,000 160,901
Sun Hung Kai Properties Ltd. 153,000 1,132,023
26,728,662
INDIA - 0.1%
Reliance Industries Ltd. GDS (a) 106,400 1,902,432
INDONESIA - 1.0%
Astra International PT (For. Reg.) 160,000 283,790
Bank International Indonesia PT Ord. 921,000 2,843,238
Gudang Garam PT Perusahaan 42,500 326,336
Jakarta International Hotels &
Development Ord. 1,541,000 1,937,499
Matahari Putra Prima PT:
(For. Reg.) 552,000 879,927
(For. Reg.) (rights) (a) 276,000 266,459
Sampoerna Hanjaya Mandala (For. Reg.) 735,750 5,781,604
12,318,853
IRELAND - 1.0%
Bank of Ireland U.S. Holdings, Inc. 1,009,200 5,793,010
Fyffes PLC 1,358,000 2,479,301
Independent Newspapers PLC 521,050 2,866,312
Waterford Wedgwood PLC Unit 1,751,400 1,494,049
12,632,672
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ITALY - 1.3%
Alitalia Linee Aeree Italiane Class A (a) 136,400 $ 65,201
Assicurazioni Generali Spa 218,570 5,128,878
Fiat Spa 1,121,000 3,965,325
Istituto Mobiliare Italiano 301,400 1,848,206
Italgas Spa 512,200 1,334,373
Montedison Spa Ord. (a) 2,962,700 2,120,701
SAI Sta Assieuratrice Industriale Spa 189,000 2,017,120
16,479,804
JAPAN - 18.5%
ADO Electronic Industrial Co. Ltd. 19,000 410,750
Advantest Corp. 74,000 2,797,401
Aida Engineering Ltd. Ord. 176,000 1,199,669
Akita Bank Ltd. 76,650 656,483
Amada Metrecs Co. Ltd. 86,000 1,107,383
Amadasonoike Co. Ltd. 282,000 1,632,368
Autobacs Seven Co. Ltd. 20,600 2,007,679
Bridgestone Corp. 339,000 5,005,908
Canon, Inc. 526,000 8,575,073
Daicel Chemical Industries Ltd. 397,000 2,035,415
East Japan Railway Co. Ord. 700 3,597,165
Fanuc Ltd. 98,200 4,245,860
Fujitsu Ltd. 726,000 7,247,135
Futaba Industrial Co. Ltd. 126,000 2,054,105
Hachijuni Bank Ltd. 92,000 1,141,170
Hanshin Department Store Ltd. 29,000 205,210
Higo Bank Ltd. Ord. 96,000 941,288
Hitachi Ltd. 1,126,000 11,240,047
Honda Motor Co. Ltd. 432,000 6,634,375
Ishihara Sangyo Kaisha Ltd. (a) 343,000 1,021,097
Japan Airlines Co. Ltd. 302,000 2,008,578
Komatsu Ltd. Ord. 410,000 3,133,728
Marubeni Corp. 339,000 1,726,035
Matsushita Electric Industrial Co. Ltd. 303,000 4,724,867
Marukyo Corp. 16,000 255,168
Minebea Co. Ltd. 546,000 3,508,847
Mitsubishi Chemical Industries Ltd. 89,000 381,654
Mitsubishi Estate Co. Ltd. 264,000 2,978,382
Mitsubishi Heavy Industries Ltd. 492,000 3,347,809
Mitsubishi Trust & Banking Corp. 486,000 6,889,546
Mitsui OSK Lines Ltd. 457,000 1,268,696
Murata Mfg. Co. Ltd. 171,000 6,484,465
Nichido Fire & Marine
Insurance Co. Ltd. 502,000 4,062,254
Nikko Securities Co. Ltd. 373,000 3,031,587
Nippon Telegraph &
Telephone Corp. Ord. 400 3,354,991
Nippon Yusen Kabushiki Kaisha 354,000 1,986,414
Nissan Motor Co. Ltd. Ord. 388,000 2,484,302
Nisshinbo Industries 154,000 1,217,082
Nitto Denko Corp. 97,000 1,512,581
Nomura Securities Co. Ltd. 664,000 11,609,217
Omron Corp. 139,000 2,660,131
Orix Corp. 242,000 8,061,901
Pioneer Electronic Corp. 241,000 4,099,704
Rohm Co. Ltd. 120,000 6,209,096
Sankyo Co. Ltd. 258,300 6,011,235
Sanwa Bank Ltd. 95,000 1,795,629
Seino Transpotation Co. Ltd. 144,000 2,432,605
Sony Corp. 209,700 10,082,445
Sumitomo Marine and Fire
Insurance Co. Ltd. 420,000 3,339,160
Sumitomo Realty &
Development Co. Ltd. 648,000 3,873,452
Sumitomo Rubber Industries Ltd. 185,000 1,376,846
Sumitomo Trust & Banking Co. Ltd. 363,000 4,416,893
Suzuki Motor Corp. 228,000 2,545,303
SHARES VALUE (NOTE 1)
JAPAN - CONTINUED
TDK Corp. 88,000 $ 4,012,759
Takashimaya Co. Ltd. 198,000 2,666,510
Takeda Chemical Industries Ltd. 397,000 5,252,687
Tokio Marine & Fire
Insurance Co. Ltd. (The) 1,065,000 12,228,948
Toshiba Corp. 1,626,000 10,314,970
Toyota Motor Corp. 474,000 9,407,208
Tsugami Corp. 253,000 911,577
Yamanouchi Pharmaceutical Co. Ltd. 302,000 6,814,177
238,235,020
KOREA (SOUTH) - 0.8%
Cho Hung Bank Co. Ltd. 191,504 2,273,043
Korea Electric Power Corp. (a) 147,470 5,647,716
Korea First Securities Co. Ltd. 14,218 187,136
Kyungki Bank (a) 171,523 1,628,705
Seoul Securities Co. 74,592 924,714
10,661,314
MEXICO - 1.2%
Banacci SA de CV:
Class B 352,200 540,979
Class L 17,610 26,767
Cemex SA, Series B 1,071,800 3,875,630
Cifra SA Class C 1,559,100 2,055,517
Consorcio G Grupo Dina SA ADR 34,800 108,750
Empresas Ica Sociedad Controladora
SA de CV sponsored ADR
representing Ord. (part. cert.) 208,700 2,139,175
Grupo Carso SA de CV Class A-1 (a) 287,800 1,574,842
Grupo Dina sponsored ADR, Series L 12,543 25,086
Grupo Financiero Bancomer SA de CV:
Class B (a) 4,451,800 1,303,487
Series L (a) 216,878 57,256
sponsored ADR, Series C (a) (d) 70,200 412,425
Telefonos de Mexico SA sponsored ADR
representing shares Ord. Class L 93,200 2,761,050
14,880,964
MALAYSIA - 0.9%
Kuala Lumpur Industries Holdings BHD (a) 290,000 394,913
Magnum Corp. BHD 567,500 1,326,804
Malaysian Banking BHD 133,000 1,052,871
Resorts World BHD 443,000 2,598,399
Telekom Malaysia BHD 614,000 4,659,149
Tenega Nasional BHD 251,000 1,024,384
Time Engineering BHD 161,000 541,509
11,598,029
NETHERLANDS - 6.9%
ABN-AMRO Holdings NV 46,500 1,796,666
Aegon NV Ord. 68,250 2,363,636
AKZO NV Ord. 103,800 12,420,856
Heineken NV 24,200 3,666,667
IHC Caland NV 48,300 1,373,134
International Nederlanden Groep NV 249,108 13,793,730
KLM Royal Dutch Airlines Ord. (a) 198,200 6,441,468
Koninklijke PPT Nederland 221,500 7,971,539
Koninklijke PPT Nederland (a) (d) 80,600 2,900,705
Oce Van der Grinten NV 136,700 7,719,571
Pirelli Tyre Holdings NV Ord. (a) 633,700 4,258,242
Royal Dutch Petroleum Co. Ord. 50,900 6,222,317
Unilever NV Ord. 122,000 15,891,452
Vendex International Bearer (a) (d) 81,400 2,156,361
88,976,344
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NETHERLANDS ANTILLES - 0.3%
Schlumberger Ltd. 68,200 $ 4,236,925
NORWAY - 2.4%
Bergesen Group:
Class A 35,500 807,408
Class B 301,600 6,859,557
Christiania Bank Free shares Ord. 1,475,000 3,426,617
Den Norske Bank Class A Free shares 1,146,800 3,111,291
Norsk Hydro AS 100,850 4,218,809
Orkla AS:
Class A Free shares 93,250 4,173,564
Class B (non-vtg.) 47,800 2,026,773
Saga Petroleum AS Class B 261,600 3,463,634
Unitor AS 192,300 3,358,339
31,445,992
PAKISTAN - 0.1%
Pakistan Telecommunications Voucher
GDR (a) (d) 8,630 837,110
PHILLIPINES - 0.1%
Philippine Long Distance Telephone Co.
sponsored ADR 21,500 1,542,625
SINGAPORE - 1.0%
Jardine Matheson Holdings Ltd. Ord. 506,659 3,723,944
Kim Engineering Holdings Ltd. 2,455,000 2,565,721
Neptune Orient Lines Ltd. 3,377,000 3,916,071
Overseas Union Bank Ltd. (For.) 265,000 1,669,291
Van Der Horst Ltd. 156,000 748,174
12,623,201
SOUTH AFRICA - 0.0%
De Beers Consolidated Mines Ltd. ADR 24,000 621,000
SPAIN - 4.2%
Banco Bilbao Vizcaya SA Ord. (Reg.) 349,100 10,102,294
Banco Intercontinental Espanol 59,550 5,374,415
Corporacion Mapfrecia International
de Reaseguros SA (Reg.) 183,400 9,035,230
EL Aguila SA (a) 56,540 423,669
Repsol SA Ord. 172,500 5,441,730
Tabacalera SA, Series A 205,200 7,696,592
Telefonica de Espana SA Ord. 845,150 10,916,448
Union Electrica Fenosa SA 1,216,100 5,719,270
54,709,648
SWEDEN - 3.5%
Electrolux AB 117,600 5,358,737
Investor AB Class B Free shares 314,700 9,097,942
Mo Och Domsjoe (MoDo) Class B
Free shares 83,100 4,799,104
SKF AB Ord. 75,800 1,533,959
Skandia International Holding 35,400 687,147
Svenska Cellulosa Aktiebolaget SCA
Class B Ord. 362,700 6,740,754
Skandinaviska Enskilda Banken
Class A Free shares 948,300 4,934,745
Volvo AB Class B 637,400 12,153,153
45,305,541
SWITZERLAND - 9.8%
Adia SA (Bearer) (a) 54,800 11,403,744
Alusuisse-Lonza Holding AG (Reg.) 15,939 10,019,990
Baloise Holding (Reg.) 5,635 12,879,299
CIBA-GEIGY AG (Reg.) 14,380 10,567,453
C. S. Holdings (Reg.) 258,405 23,736,812
Fischer (Georg) AG (Reg.) 12,400 3,228,211
Holderbank Financiere Glarus
AG (Bearer) 2,825 2,324,445
SHARES VALUE (NOTE 1)
SWITZERLAND - CONTINUED
Holderbank Financial Glarus
(warrants) (a) 14,125 $ 19,678
Nestle SA (Reg.) 18,800 19,626,644
Roche Holdings Ltd. (part. certs.) 1,700 10,990,422
Surveillance, Societe Generale (Bearer) 1,010 1,758,816
Swiss Bank Corp. (Bearer) 43,450 15,435,437
Zurich Versicherung (Reg.) 3,405 4,289,973
126,280,924
THAILAND - 1.6%
Bank of Asia PCL (For. Reg.) 354,310 1,004,727
Krung Thai Bank (For. Reg.) 1,698,840 6,882,069
Ruam Pattana Fund II (For. Reg.) (a) 1,117,000 712,691
Ruang Khao Unit Trust (For. Reg.) (a) 836,800 601,709
Siam City Bank PCL (For. Reg.) 6,828,500 9,405,234
Telecomasia Corp. PCL (For. Reg.) (a) 394,000 1,460,440
20,066,870
TURKEY - 0.3%
Aksigorta (a) 280,000 54,463
Aksigoria (a) (d) 952,000 185,174
Cimentas AS (a) 500,000 322,290
Tofas Turk Otomobil Fabrikasi
AS ADR (a) (d) 165,600 712,080
Tofas Turk Otomobil Fabrikasi AS (a) 2,400,600 2,117,473
3,391,480
UNITED KINGDOM - 12.4%
Argyll Group PLC Ord. 626,900 3,353,633
Avon Rubber 81,900 666,007
BTR PLC Ord. 625,100 3,184,528
Barclays PLC Ord. 980,300 10,558,664
Bass PLC Ord. 763,700 7,324,586
Berkeley Group PLC 159,600 904,685
Booker PLC 364,200 2,415,782
Boots Co. PLC 287,600 2,334,164
British Land Ord. 289,500 1,844,124
Burmah Oil 190,700 2,768,567
Cadbury-Schweppes PLC Ord. 955,700 6,994,539
Commercial Union PLC (a) 225,100 2,099,695
De La Rue PLC 488,300 7,287,643
Dixons Group PLC 937,500 3,826,800
Forte PLC 1,806,100 6,551,610
Glaxo Holdings PLC Ord. 378,100 4,651,224
Great Universal Stores PLC Ord Class A 381,600 3,574,711
Guinness PLC Ord. 1,154,300 8,705,719
Hanson Trust PLC Ord. 674,000 2,358,953
Iceland Group PLC 637,600 1,829,976
Lasmo PLC 858,400 2,347,355
Ladbroke Group PLC Ord. 1,032,400 2,782,019
Lloyds Abbey Life PLC 549,600 3,426,481
London International Group PLC 2,561,200 4,492,217
National Westminster Bank PLC Ord. 1,097,920 9,567,209
Nurdin & Peacock PLC Ord. 375,000 1,046,393
North West Water Group PLC Ord. 337,700 2,988,469
Redland PLC Ord. 147,800 969,770
Rolls Royce PLC Ord. 874,433 2,433,022
Royal Insurance Holdings PLC 992,600 4,890,550
Sainsbury (J.) PLC Ord. 566,367 3,987,065
Scottish Hydro-Electric PLC Ord. 723,700 3,681,071
Scottish Power PLC ADR 960,500 4,954,461
Shell Transport & Trading PLC 581,900 6,972,716
TSB Group PLC 300 1,155
Tesco PLC Ord. 1,425,100 6,589,734
Unigate Ltd. Ord. 312,800 2,022,471
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UNITED KINGDOM - CONTINUED
Vodafone Group PLC 1,890,600 $ 7,039,006
Whitbread Co. PLC Class A 715,700 6,847,100
160,273,874
TOTAL COMMON STOCKS
(Cost $1,041,443,013) 1,149,740,937
NONCONVERTIBLE PREFERRED STOCKS - 2.5%
AUSTRIA - 0.5%
Creditanstalt Bankverein 105,900 6,099,579
GERMANY - 0.5%
Henkel KGAA 10,300 3,974,013
Porsche AG Ord. (a) 6,050 2,638,622
6,612,635
ITALY - 1.5%
Banco Ambro Veneto 1,197,000 1,627,788
Fiat Spa 1,350,600 2,937,514
SAI Sta Assicuratrice Industriale Spa 650,500 2,800,526
Stet (Societa Finanziaria Telefonica) Spa 5,075,300 11,278,078
18,643,906
KOREA (SOUTH) - 0.0%
Korea First Securities Co. Ltd. 68,124 575,898
TOTAL NONCONVERTIBLE PREFERRED STOCKS
(Cost $29,697,172) 31,932,018
FOREIGN GOVERNMENT OBLIGATIONS (F) - 1.1%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
ARGENTINA - 0.3%
Argentina Republic BOCON
6.0625%, 4/1/01 (e) B1 $ 5,993,570 3,738,969
BRAZIL - 0.2%
Brazil Federative Republic IDU
euro 6.6875%, 1/1/01 (e) B1 2,570,500 2,069,253
DENMARK - 0.3%
Danish Government Bullet
7%, 12/15/04 Aa1 DKK 25,000,000 4,181,735
FRANCE - 0.3%
French Government Strips
4/25/23 Aaa FRF 168,000,000 3,508,764
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS
(Cost $14,123,089) 13,498,721
REPURCHASE AGREEMENTS - 7.2%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 6.22% dated
6/30/95 due 7/3/95 $ 92,390,864 92,343,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,177,606,274) $ 1,287,514,676
FORWARD FOREIGN CURRENCY CONTRACTS
SETTLEMENT UNREALIZED
DATE(S) VALUE GAIN/(LOSS)
CONTRACTS TO SELL
810,720,000 ESP 7/12/95 $ 6,704,431 $ (278,432)
228,920,092 FRF 8/16/95 47,220,286 (1,965,746)
2,043,255,600 JPY 7/11/95 24,176,080 411,833
TOTAL CONTRACTS TO SELL-
(Receivable amount $76,268,452) $ 78,100,797 $ (1,832,345)
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 6.1%
CURRENCY ABBREVIATIONS
DKK - Danish krone
ESP - Spanish peseta
FRF - French franc
JPY - Japanese yen
LEGEND
(a) Non-income producing
(b) Principal amount is stated in United States dollars unless otherwise
noted.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $12,602,067 or 1.0% of net
assets.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) Some foreign government obligations have not been individually rated
by S&P or Moody's. The ratings listed are assigned to securities by FMR,
the fund's investment adviser, based principally on S&P and Moody's ratings
of the sovereign credit of the issuing government.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $307,494,270 and $257,850,752, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $152,215 for the period
(see Note 3 of Notes to Financial Statements).
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $1,177,807,984. Net unrealized appreciation aggregated
$109,706,692, of which $162,739,035 related to appreciated investment
securities and $53,032,343 related to depreciated investment securities.
INDUSTRY DIVERSIFICATION
As a Percentage of Total Value of Investments
Basic Industries 6.2
Construction & Real Estate 3.2
Durables 8.1
Energy 5.1
Finance 26.4
Government Obligations 1.1
Health 3.4
Holding Companies 1.0
Industrial Machinery & Equipment 2.8
Media & Leisure 2.4
Nondurables 8.4
Retail & Wholesale 4.8
Services 3.0
Repurchase Agreements 7.2
Technology 4.9
Transportation 2.8
Utilities 8.8
Others (individually less than 1%) 0.4
Total 100.0%
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $92,343,000) (cost $1,177,606,274) - $ 1,287,514,676
See accompanying schedule
Cash 655
Receivable for investments sold 20,207,922
Unrealized appreciation on foreign currency contracts 411,833
Dividends receivable 7,490,524
Interest receivable 304,815
TOTAL ASSETS 1,315,930,425
LIABILITIES
Payable for investments purchased $ 10,265,923
Unrealized depreciation on foreign currency contracts 2,244,178
Payable for fund shares redeemed 5,303,385
Accrued management fee 832,243
Other payables and accrued expenses 336,394
TOTAL LIABILITIES 18,982,123
NET ASSETS $ 1,296,948,302
Net Assets consist of:
Paid in capital $ 1,177,330,987
Undistributed net investment income 11,730,370
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (279,038)
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 108,165,983
NET ASSETS, for 80,033,348 shares outstanding $ 1,296,948,302
NET ASSET VALUE, offering price and redemption price per share ($1,296,948,302 (divided by) 80,033,348 shares) $16.21
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 21,509,202
Dividends
Interest 4,660,220
26,169,422
Less foreign taxes withheld (2,979,305)
TOTAL INCOME 23,190,117
EXPENSES
Management fee $ 4,861,229
Transfer agent fees 316,317
Accounting fees and expenses 267,409
Non-interested trustees' compensation 3,447
Custodian fees and expenses 311,947
Registration fees 24
Audit 22,683
Legal 2,524
Miscellaneous 2,230
TOTAL EXPENSES 5,787,810
NET INVESTMENT INCOME 17,402,307
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 6,935,354
Foreign currency transactions (6,677,005) 258,349
Change in net unrealized appreciation (depreciation) on:
Investment securities 37,408,823
Assets and liabilities in foreign currencies (2,727,346) 34,681,477
NET GAIN (LOSS) 34,939,826
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 52,342,133
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
Operations $ 17,402,307 $ 14,354,948
Net investment income
Net realized gain (loss) 258,349 1,588,422
Change in net unrealized appreciation (depreciation) 34,681,477 (19,420,073)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 52,342,133 (3,476,703)
Distributions to shareholders (4,893,543) (4,465,195)
From net investment income
From net realized gain (1,797,170) -
In excess of net realized gain (3,096,373) -
TOTAL DISTRIBUTIONS (9,787,086) (4,465,195)
Share transactions 235,046,856 1,000,905,405
Net proceeds from sales of shares
Reinvestment of distributions 9,787,086 4,465,195
Cost of shares redeemed (288,141,738) (477,688,222)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (43,307,796) 527,682,378
TOTAL INCREASE (DECREASE) IN NET ASSETS (752,749) 519,740,480
NET ASSETS
Beginning of period 1,297,701,051 777,960,571
End of period (including undistributed net investment income of $11,730,370 and $10,987,509,$ 1,296,948,302 $ 1,297,701,051
respectively)
OTHER INFORMATION
Shares 15,188,474 62,240,900
Sold
Issued in reinvestment of distributions 652,472 274,107
Redeemed (18,619,209) (29,967,241)
Net increase (decrease) (2,778,263) 32,547,766
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 E 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.67 $ 15.48 $ 11.53 $ 13.09 $ 12.42 $ 12.67
Income from Investment Operations
Net investment income .07 .19 .06 .16 .24 .18
Net realized and unrealized gain (loss) .59 .08 C 4.16 (1.54) .74 (.39)
Total from investment operations .66 .27 4.22 (1.38) .98 (.21)
Less Distributions (.06) (.08) (.18) (.18) (.17) (.04)
From net investment income
In excess of net investment income - - (.04) - - -
From net realized gain (.02) - - - (.14) D -
In excess of net realized gain (.04) - (.05) - - -
Total distributions (.12) (.08) (.27) (.18) (.31) (.04)
Net asset value, end of period $ 16.21 $ 15.67 $ 15.48 $ 11.53 $ 13.09 $ 12.42
TOTAL RETURN B 4.27% 1.72% 37.35% (10.72) 8.00% (1.67)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,296,948 $ 1,297,701 $ 777,961 $ 180,837 $ 126,490 $ 80,554
Ratio of expenses to average net assets .91% A .92% 1.03% 1.14% 1.26% 1.41%
Ratio of net investment income to average net assets 2.74% A 1.28% 1.21% 1.86% 2.33% 1.89%
Portfolio turnover rate 46% A 42% 42% 61% 168% 100%
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE ACCOUNT.
INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
C THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD
ENDED DUE TO THE TIMING OF SALES AND
REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
D INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN CURRENCY RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME.
E EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL
STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1995 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
The Money Market Portfolio, High Income Portfolio, Equity-Income Portfolio,
Growth Portfolio and Overseas Portfolio (the funds) are funds of Variable
Insurance Products Fund (the trust). The trust is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an open-end
management investment company organized as a Massachusetts business trust.
Each fund is authorized to issue an unlimited number of shares. Shares of
each fund may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts. The
following summarizes the significant accounting policies of the funds:
SECURITY VALUATION:
MONEY MARKET PORTFOLIO. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
HIGH INCOME PORTFOLIO. Securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market (sales
prices if the principal market is an exchange) in which such securities are
normally traded. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value
as determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus interest, both of which approximate current
value.
EQUITY-INCOME AND GROWTH PORTFOLIOS. Securities for which exchange
quotations are readily available are valued at the last sale price, or if
no sale price, at the closing bid price. Securities for which exchange
quotations are not readily available (and in certain cases debt securities
which trade on an exchange), are valued primarily using dealer-supplied
valuations or at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees. Short-term securities maturing within sixty days of their
purchase date are valued at amortized cost or original cost plus accrued
interest, both of which approximate current value.
OVERSEAS PORTFOLIO. Securities for which quotations are readily available
are valued at the last sales price, or if no sale price, at the closing bid
prices in the principal market in which such securities are normally
traded. Securities for which market quotations are not readily available
are valued
primarily using dealer-supplied valuations or at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the funds are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
the fiscal year. The schedules of investments include information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME:
MONEY MARKET PORTFOLIO. Interest income, which includes amortization of
premium and accretion of original issue discount, is accrued as earned.
HIGH INCOME, EQUITY-INCOME, GROWTH AND OVERSEAS PORTFOLIOS. Dividend income
is recorded on the ex-dividend date, except certain dividends from foreign
securities where the ex-dividend date may have passed, are recorded as soon
as the funds are informed of the ex-dividend date. Interest income, which
includes accretion of original issue discount, is accrued as earned.
Investment income is recorded net of foreign taxes withheld where recovery
of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income for the Money Market Portfolio.
Distributions are recorded on the ex-dividend date for all other funds.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for foreign
currency transactions, passive foreign investment companies (PFIC), market
discount, partnerships, non-taxable dividends and losses deferred due to
wash sales and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The funds, except for the Money Market
Portfolio, may use foreign currency contracts to facilitate transactions in
foreign securities and to manage the funds' currency exposure. Contracts to
buy generally are used to acquire exposure to foreign currencies, while
contracts to sell are used to hedge the funds' investments against currency
fluctuations. Also, a contract to buy or sell can offset a previous
contract. These contracts involve market risk in excess of the unrealized
gain or loss reflected in the funds' Statement of Assets and Liabilities.
The U.S. dollar value of the currencies each applicable fund has committed
to buy or sell is shown in the schedule of investments under the caption
"Forward Foreign Currency Contracts." This amount represents the aggregate
exposure to each currency acquired or hedged through currency contracts at
period end. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
Contracts that have been offset with different counterparties are reflected
as both a contract to buy and a contract to sell in each applicable fund's
schedule of investments under the caption "Forward Foreign Currency
Contracts."
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the funds, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The funds, through their custodian, receive delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. FMR, the funds'
investment adviser, is responsible for determining that the value of these
underlying securities remains at least equal to the resale price.
INDEXED SECURITIES. The funds, (excluding the Money Market Portfolio) may
invest in indexed securities whose values are linked either directly or
inversely to changes in foreign currencies, interest rates, commodities,
indices, or other underlying instruments. The funds use these securities to
increase or decrease their exposure to different underlying instruments and
to gain exposure to markets that might be difficult to invest in through
conventional securities. Indexed securities may be more volatile than their
underlying instruments, but any loss is limited to the amount of the
original investment.
RESTRICTED SECURITIES. The funds are permitted to invest in privately
placed restricted securities. These securities may be resold in
transactions exempt from registration or to the public if the securities
are registered. Disposal of these securities may involve time-consuming
negotiations and expense, and prompt sale at an acceptable price may be
difficult. At the end of the period, restricted securities (excluding 144A
issues) amounted to $20,998,411 or 2.7% of net assets for the Money Market
Portfolio and $15,265,476 or 1.9% of net assets for the High Income
Portfolio.
3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, FMR receives a monthly
fee.
For the Money Market Portfolio, FMR receives a monthly fee that is
calculated on the basis of a basic fund fee rate of .03% of the fund's
average net assets, plus a fixed income group fee rate and an income-based
fee. The group fee rate is the weighted average of a series of rates
ranging from .1200% to .3700% and is based on the monthly average net
assets of all the mutual funds advised by FMR. The income-based fee is
added only when the fund's gross yield exceeds 5%. At that time the
income-based fee would equal 6% of that portion of the fund's gross income
that represents a gross yield of more than 5% per year. The maximum
3. FEES AND OTHER TRANSACTIONS
WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
income-based component is .24% of average net assets. For the period, the
management fee was equivalent to an annualized rate of .25% of average net
assets.
For all other funds, FMR receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1200% to
.3700% for the High Income Portfolio and .2700% to .5200% for the
Equity-Income, Growth and Overseas Portfolios for the period. In the event
that these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted in
the same or a lower management fee. The annual individual fund fee rates
are .20%, .30%, .45% and .45% for the Equity-Income, Growth, Overseas, and
High Income Portfolios, respectively. For the period, the management fees
were equivalent to annualized rates of .60%, .52%, .62%, and .77% of
average net assets for the High Income, Equity-Income, Growth, and Overseas
Portfolios, respectively.
SUB-ADVISER FEE. As the Money Market Portfolio's investment sub-adviser,
FMR Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR
of 50% of the management fee payable to FMR. The fees are paid prior to any
voluntary expense reimbursements which may be in effect, and after reducing
the fee for any payments by FMR pursuant to the fund's Distribution and
Service Plan.
FMR, on behalf of the High Income and Overseas Portfolios, entered into
sub-advisory agreements with affiliates of FMR. In addition, one of the
sub-advisers of the Overseas Portfolio, Fidelity International Investment
Advisors (FIIA), entered into a sub-advisory agreement with its subsidiary,
Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.).
Under the sub-advisory arrangements, FMR may receive investment advice and
research services and may grant the sub-advisers investment management
authority to buy and sell securities. FMR pays its sub-advisers either a
portion of its management fee or a fee based on costs incurred for these
services. FIIA pays FIIAL U.K. a fee based on costs incurred for either
service.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the funds' transfer, dividend disbursing
and shareholder servicing agent. Effective January 1, 1995, the Board of
Trustees approved a revised transfer agent contract pursuant to which FIIOC
receives account fees and asset-based fees that vary according to account
size and type of account. Under the prior transfer agent contract, FIIOC
received fees based on the type, size, number of accounts, and number of
transactions made by shareholders. FIIOC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements.
ACCOUNTING FEES. Fidelity Service Co.(FSC) an affiliate of FMR, maintains
the funds' accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. Certain funds placed a portion of their portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms are shown under the caption
"Other Information" at the end of each applicable fund's schedule of
investments.
4. BANK BORROWINGS.
Each fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. Each fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, each fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. For
the High Income and Equity-Income portfolios, the maximum loans during the
periods for which loans were outstanding amounted to $4,885,000 and
$18,269,000 respectively, and the average daily loan balances were
$4,885,000 and $18,269,000, respectively. The weighted average interest
rate was 6.4% for both the High Income Portfolio and for the Equity-Income
Portfolio.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the funds' operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of 1.00% of average net assets for the High
Income Portfolio and 1.50% of average net assets for the Equity-Income,
Growth, and Overseas Portfolios. For the period, there was no reimbursement
under this arrangement.
FMR has directed certain portfolio trades of the High Income Portfolio to
brokers who paid a portion of the fund's expenses. For the period, the High
Income Portfolio's expenses were reduced by $5,422 under this agreement.
6. BENEFICIAL INTEREST.
At the end of the period, Fidelity Investments Life Insurance Company
(FILI), an affiliate of FMR, was the record owner of more than 5% of the
outstanding shares and certain unaffiliated insurance companies were record
owners of approximately 10% of the total outstanding shares of the
following funds:
FILI UNAFFILIATED INSURANCE COMPANIES
FUND % OF OWNERSHIP # OF % OF OWNERSHIP
Money Market 48 1 16
High Income 17 1 41
Equity-Income 26 1 30
Growth 17 1 31
Overseas 15 1 40
7. PURCHASES AND SALES OF INVESTMENTS.
Information regarding purchases and sales of securities (other than
short-term securities) is included under the caption "Other Information" at
the end of each applicable fund's schedule of investments.
8. TRANSACTIONS WITH AFFILIATED COMPANIES.
Information regarding transactions with affiliated companies is included
under the caption "Other Information" at the end of each applicable fund's
schedule of investments.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
William J. Hayes, VICE PRESIDENT
Fred L. Henning, Jr., VICE PRESIDENT, MONEY MARKET PORTFOLIO
Robert A. Lawrence, VICE PRESIDENT
Lawrence Greenberg, VICE PRESIDENT
Barry J. Coffman, VICE PRESIDENT
Robert Litterst, VICE PRESIDENT
John R. Hickling, VICE PRESIDENT
Bettina Doulton, VICE PRESIDENT
Arthur S. Loring, SECRETARY
Stephen P. Jonas, TREASURER
Robert H. Morrison, MANAGER, SECURITY TRANSACTIONS
Michael D. Conway, ASSISTANT TREASURER, MONEY MARKET PORTFOLIO
John H. Costello, ASSISTANT TREASURER
Leonard M. Rush, ASSISTANT TREASURER
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox
Phyllis Burke Davis
Richard J. Flynn
Edward C. Johnson 3d
E. Bradley Jones
Donald J. Kirk
Peter S. Lynch
Edward H. Malone
Marvin L. Mann
Gerald C. McDonough
Thomas R. Williams
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Co.
Boston, MA
CUSTODIAN
Morgan Guaranty Trust Company of New York,
New York, NY
MONEY MARKET PORTFOLIO
The Bank of New York, New York, NY
HIGH INCOME PORTFOLIO
The Chase Manhattan Bank, N.A., New York, NY
EQUITY-INCOME AND OVERSEAS PORTFOLIOS
Brown Brothers Harriman & Co., Boston, MA
GROWTH PORTFOLIO
<PAGE>
[LOGO OF DREYFUS]
DREYFUS VARIABLE
INVESTMENT FUND
200 Park Avenue
New York, NY 10166
INVESTMENT ADVISER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
SUB-INVESTMENT ADVISER
Comstock Partners, Inc.
10 Exchange Place
Jersey City, NJ 07302
SUB-INVESTMENT ADVISER
Fayez Sarofim & Co.
Two Houston Center,
Suite 2907
Houston, TX 77010
SUB-INVESTMENT ADVISER
M & G Investment Management Limited
Three Quays Tower Hill,
London, EC3R 6BQ, England
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
The Shareholder Services Group, Inc.
P.O. Box 9671
Providence, RI 02940
Further information is contained in the Prospectus,
which must precede or accompany this report.
Printed in U.S.A. VIFSA956
[LOGO] DREYFUS
Variable
Investment Fund
Semi-Annual
Report
June 30, 1995
[ART]
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Money Market Portfolio................................. 5 - 7
Managed Assets Portfolio............................... 8 - 14
Zero Coupon 2000 Portfolio............................. 15 - 17
Quality Bond Portfolio................................. 18 - 20
Small Cap Portfolio.................................... 21 - 25
Capital Appreciation Portfolio......................... 26 - 30
Growth and Income Portfolio............................ 31 - 34
International Equity Portfolio......................... 35 - 39
Financial Statements................................... 40 - 62
Report of Independent Accountants...................... 63
</TABLE>
3
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Money Market Portfolio
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
The past six months have seen a slow decline in the rate of economic
activity. This has been accompanied, inevitably, by declining interest rates.
In this environment, we are pleased that the Money Market Portfolio of
the Dreyfus Variable Investment Fund has maintained what we believe is a
highly competitive yield. For the half-year ended June 30, 1995, the
Portfolio produced an annualized yield of 5.71%. The annualized effective
yield was 5.86% after taking into account the effect of compounding.* The
Portfolio's yield does not reflect the deduction of additional charges
imposed in connection with investing in variable annuity contracts and variable
life insurance policies.
In managing your assets, we achieved the yield level by lengthening
maturities gradually during the six-month period. This was done in
anticipation of lower interest rates, which became more and more likely as
the economy gave continued signs of slowing down.
The Federal Reserve Board, which raised interest rates seven times during
1994 and early 1995 to head off inflation, became concerned that the drop in
economic performance might turn into an actual business recession.
Accordingly, in early July the Federal Reserve reversed course and made a
modest cut in the Federal Funds rate.
As this letter is written, the economy has distinctly cooled off from the
frothy activity that prevailed last year. Thus, one could say that the Fed's
policies have been successful. Inflation has been held at bay and few
observers believe that the "soft landing" will turn into a full-blown
economic recession.
However, the Federal Reserve showed laudable caution in the July
reduction of short-term rates. If more of that medicine is needed, we feel
that the Fed will not hesitate to act accordingly. Nonetheless, the central
bank must be ever watchful lest rate-cutting bring on the recurrence of
inflation which the Fed has so strenuously sought to avoid.
In our opinion, the money market has already discounted the possibility
of further Fed moves to lower interest rates. To a certain extent, that is
already built into current market prices. Our strategy under these
circumstances is to remain in the long end of the market as long as
necessary, in an effort to maintain the best possible level of yields.
We appreciate the opportunity to put your cash to work in the money
market, and will continue to exert our best efforts to attempt to obtain
competitive returns on your behalf.
Sincerely,
/s/ Patricia A. Larkin
Patricia A. Larkin
Portfolio Manager
July 12, 1995
New York, N.Y.
* Annualized effective yield is based upon dividends declared daily and
reinvested monthly.
5
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Money Market Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30,1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
NEGOTIABLE BANK CERTIFICATES OF DEPOSIT-20.7% AMOUNT VALUE
----------- -----------
<S> <C> <C>
Bank of Tokyo, Ltd.(Yankee)
6.00%, 7/17/95.......................................................... $ 1,500,000 $ 1,500,000
Commerzbank Ag (Yankee)
6.41%, 12/4/95.......................................................... 1,000,000 999,861
Fuji Bank Ltd. (Yankee)
6.04%, 8/11/95.......................................................... 1,500,000 1,500,000
Sanwa Bank Ltd. (Yankee)
6.04%, 7/18/95.......................................................... 1,000,000 1,000,009
Sumitomo Bank Ltd. (London)
6.06%, 7/3/95........................................................... 1,000,000 1,000,000
Swedbank (Yankee)
5.92%, 7/5/95........................................................... 1,500,000 1,500,000
-----------
TOTAL NEGOTIABLE BANK CERTIFICATES OF DEPOSIT
(cost $ 7,499,870 )..................................................... $ 7,499,870
===========
BANKERS' ACCEPTANCES-2.7%
Dai-Ichi Kangyo Bank Ltd. (Yankee)
6.01%, 7/25/95
(cost $996,027)......................................................... $ 1,000,000 $ 996,027
===========
COMMERCIAL PAPER-61.5%
AT&T Corp.
5.90%, 9/14/95.......................................................... $ 1,400,000 $ 1,383,025
Abbey National North America
5.92%, 9/15/95.......................................................... 1,700,000 1,679,041
Budget Funding Corp.
6.04%, 8/7/95........................................................... 1,500,000 1,490,827
Chrysler Financial Corp.
6.04%, 8/29/95.......................................................... 1,500,000 1,485,373
Ciesco L.P.
5.84%-6.23%, 11/8/95-1/18/96............................................ 1,700,000 1,656,143
Corporate Asset Funding Co.Inc.
6.41%, 12/27/95......................................................... 1,500,000 1,454,318
Den Danske Corp. Inc.
6.22%, 10/30/95......................................................... 1,000,000 979,733
Ford Motor Credit Co.
5.99%-6.33%, 7/14/95-1/9/96............................................. 1,700,000 1,666,229
General Electric Capital Corp.
6.03%, 8/31/95.......................................................... 1,000,000 989,952
</TABLE>
6
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Money Market Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30,1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
COMMERCIAL PAPER (CONTINUED) AMOUNT VALUE
------------ -----------
<S> <C> <C>
General Electric Capital Services Inc.
6.02%, 8/31/95.......................................................... $ 1,000,000 $ 989,968
General Motors Acceptance Corp.
6.29%-6.43%, 10/10/95-10/31/95.......................................... 1,600,000 1,570,118
Lehman Brothers Holdings Inc.
6.04%, 8/2/95........................................................... 1,000,000 994,693
Merrill Lynch & Co. Inc.
6.28%, 7/11/95.......................................................... 1,000,000 998,292
Mitsubishi Motors Credit of America Inc.
6.16%, 7/25/95.......................................................(a) 1,000,000 995,953
Morgan Stanley Group Inc.
6.00%, 7/25/95 ......................................................... 1,500,000 1,494,060
NYNEX Corp.
6.19%, 9/5/95........................................................... 1,000,000 988,890
Spintab AB
6.20%, 9/13/95.......................................................... 1,500,000 1,481,346
-----------
TOTAL COMMERCIAL PAPER (cost $22,297,961)................................... $22,297,961
===========
CORPORATE NOTES-8.3%
Bear Stearns Companies Inc.
5.64%, 8/25/95.......................................................(b) $ 1,000,000 $ 1,000,000
General Electric Capital Corp.
6.35%, 2/9/96........................................................(b) 500,000 500,000
Westdeutsche Landesbank Girozentrale
5.94%, 12/13/95 ........................................................ 1,500,000 1,506,994
-----------
TOTAL CORPORATE NOTES (cost $3,006,994)..................................... $ 3,006,994
===========
U.S. GOVERNMENT AGENCIES-6.7%
Federal Home Loan Mortgage Corp., Discount Notes
6.10%, 7/3/95
(cost $2,449,170)....................................................... $ 2,450,000 $ 2,449,170
===========
TOTAL INVESTMENTS (cost $36,250,022)........................................ 99.9% $36,250,022
===== ===========
CASH AND RECEIVABLES (NET).................................................. .1% $ 31,116
===== ===========
NET ASSETS ............................................................... 100.0% $36,281,138
===== ===========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Backed by an irrevocable letter of credit.
(b) Variable interest rate-subject to periodic change.
See independent accountants' review report and notes to financial statements.
7
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Managed Assets Portfolio
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
Over the past six months, the Dreyfus Variable Investment Fund, Managed
Assets Portfolio has been positioned to generally benefit from market
declines, interest rate increases, stronger gold share prices and a weakening
dollar. As the year unfolded, each of these areas experienced a great deal of
volatility, and each had a differing effect on total return.
As our investment posture indicates, we believe that at some point the
market will adjust to correct what we regard as highly inflated current
values.
The latest fiscal half-year, however, was not the time period for such an
adjustment. For the six months ended June 30, 1995, shares of your Portfolio
posted a total return of -.81%,* while the Standard & Poor's 500 Composite
Stock Price Index provided a total return of 20.19%.** The Portfolio's
performance does not reflect the deduction of additional charges imposed in
connection with investing in variable annuity contracts and variable life
insurance policies.
The primary factor leading to the Portfolio's disappointing performance
was the significant rise in the general stock market, particularly since the
beginning of 1995, which caused the Portfolio's stock index put options to
decline in value. The remainder of the holdings, consisting primarily of
foreign government bonds, gold shares and U.S. Treasuries, produced positive
returns.
At the beginning of 1995, the Portfolio held a gold share position of
approximately 19% of its total assets which we increased to 25% early in the
year. This position appreciated, and we have subsequently used its strength
to reduce the exposure to gold. While we feel that a core position in gold is
warranted, because of our longer-term concerns about financial assets and the
economy, we may from time to time take advantage of short-term volatility in
gold shares to enhance total return.
The Portfolio continues to own S&P 500 put options that would benefit
from a decline in the stock market, which has recently entered uncharted
valuations by reaching an all-time low dividend yield of 2.5%. While this
valuation parameter has been greatly debated, we feel that the rationale that
"it is different this time" will prove to be as inaccurate today as it was at
earlier speculative market peaks in farmland, oil, real estate and Japanese
stocks. We believe that the currently huge inflow, via mutual funds, into
equities priced at record high market valuations represents the greatest risk
to the equity markets. Over 75% of the money invested in equity mutual funds
during the past 70 years has entered the market over the last five years. A
significant market decline could stop and then reverse this flow, and the
resulting market illiquidity could have tumultuous consequences.
For similar reasons, the Portfolio has shorted the Hang Seng Index to an
amount equal to 1% of assets. Our analysis indicates that the Hong Kong stock
market is overvalued due to the euphoria surrounding China's entry into the
world's economy, the attractions of the Hong Kong real estate market and
lower U.S. interest rates. If any or all of these supports were to weaken or
disappear, the overvaluation might correct itself to the Portfolio's benefit.
There now appear to be a number of fixed income securities around the
globe that offer total return opportunities with what we consider an
acceptable level of risk. We have acquired a 2% position in the Brady bonds
issued by Venezuela and Argentina. In addition, the Portfolio continues to
hold a position in
8
<PAGE>
South African bonds, which we believe should benefit from a rise in the price of
gold and increased foreign investment following the transition from apartheid.
The market for mortgage interest-only ("IO") securities has recently
suffered a sharp decline as mortgage prepayment rates have accelerated due to
the recent drop in rates, presenting what we feel is a buying opportunity.
For this reason, the Portfolio has again acquired IOs amounting to 1% of the
total holdings at this time.
In summary, we believe the Portfolio is positioned to realize capital
gains if gold shares rise, the U.S. and/or Hong Kong stock markets decline,
and a number of special situations throughout the global capital markets,
such as Brady bonds, IOs and South African bonds, appreciate.
Comstock's investment style is longer-term in nature. In fact, we
sometimes cite century-long charts to illustrate a point. We feel that our
style should bring our clients out ahead in the long run, after the markets
have completed a full cycle. At the moment, the main tenets of our strategy,
designed to prosper during a projected down cycle, have yet to bear fruit.
While the markets have generally been rising for 21 years, we feel that a
down cycle must eventually occur. Investors should remember that someone who
invested $10,000 in the stocks which comprised the Dow Jones Industrials back
in 1966 would have had to wait over 20 years, until June 1986, to garner
total returns equivalent to those of U.S. Treasury Bills over the same
period. In addition, the stock market took over 25 years to return to the
price levels seen before the 1929 crash. We see many similarities in today's
markets to those preceding the bear markets of 1929, the late 1960s and the
early 1970s, causing us to maintain our cautious stance toward financial
assets, especially for annuity investors with a longer-term horizon.
Sincerely,
Comstock Partners, Inc.
Investment Policy Committee
July 14, 1995
Jersey City, N.J.
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
**Source: Lipper Analytical Services, Inc. - Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The S&P
500 Index is a widely accepted, unmanaged index of domestic stock market
performance.
9
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Managed Assets Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS-35.0% SHARES VALUE
------------------- -------- -----------
<S> <C> <C> <C>
AGRICULTURE-1.5% IMC Global ...................................... 8,400 $ 454,650
-----------
BROADCASTING-.4% Tele-Communications, Cl. A....................(a) 5,000 117,188
-----------
CHEMICALS-.5% P.T. Tri Polyta Indonesia, A.D.R................. 8,000 139,000
-----------
CONGLOMERATES-.7% Teledyne......................................... 8,000 196,000
-----------
CONSUMER
GROWTH STAPLES-.6% Paragon Trade Brands..........................(a) 12,000 172,500
-----------
CONSUMER STAPLES-.1% Kimberly-Clark de Mexico, S.A., Ser. A ......... 3,500 40,144
-----------
ENERGY-.5% Baker Hughes.................................... 7,500 153,750
-----------
FINANCE-.3% Pioneer Group................................... 2,800 75,250
-----------
FOODS & BEVERAGES-.3% Dole Food....................................... 3,400 99,025
-----------
GOLD MINING- 24.0% Amax Gold....................................(a) 43,000 236,500
Ashanti Goldfields, G.D.R. ..................(b) 21,000 472,500
Barrick Gold.................................... 5,200 131,300
Battle Mountain Gold............................ 32,000 308,000
Bema Gold....................................(a) 87,000 174,000
Buffelsfontein Gold Mining, A.D.R. ............. 13,000 81,250
Canyon Resources.............................(a) 68,000 153,000
Crystallex International.....................(a) 16,000 34,740
Dakota Mining................................(a) 25,000 43,750
Driefontein Consolidated, A.D.R. ............... 6,300 87,216
Echo Bay Mines.................................. 3,000 27,000
El Callao Mining.............................(a) 8,000 5,537
Free State Consolidated Gold Mines, A.D.R....... 4,800 59,400
Goldcorp, Cl. A................................. 29,040 335,891
Greenstone Resources.........................(a) 58,200 131,454
Herald Resources................................ 90,200 62,121
Homestake Mining................................ 34,700 572,550
International Gold Resources.................(a) 80,000 279,781
Kloof Gold Mining, A.D.R. ...................... 6,300 68,512
MK Gold......................................(a) 99,000 346,500
Menzies Gold.................................(a) 250,000 115,375
Newmont Mining.................................. 14,871 622,723
Pegasus Gold.................................(a) 37,500 379,688
Placer Dome..................................... 21,400 559,075
Prime Resource Group.........................(a) 26,000 179,964
Randfontein Estates Gold Mining, A.D.R.......... 7,200 48,033
Rio Amarillo Mining........................(a,b) 80,000 26,812
Royal Oak Mines..............................(a) 33,000 103,125
Santa Fe Pacific Gold........................... 60,000 727,500
Southwestern Gold............................(a) 25,000 195,811
TVX Gold.....................................(a) 59,200 427,591
Vaal Reefs Exploration & Mining, A.D.R.......... 7,500 46,406
</TABLE>
10
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Managed Assets Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED) SHARES VALUE
------ -----
<S> <C> <C> <C>
GOLD MINING (CONTINUED) Vengold..................................(a) 82,000 $ 130,909
-----------
7,174,014
-----------
HEALTH CARE-.4% Tenet Healthcare.........................(a) 8,500 122,187
-----------
HOLDING COMPANIES-.8% Horsham..................................... 18,000 243,000
-----------
INDUSTRIAL-1.0% Anglovaal................................... 5,000 178,817
ISCOR....................................... 103,400 117,480
Johnnies Industrial ........................ 1,400 14,732
-----------
311,029
-----------
METALS-.3% Freeport McMoRan Copper & Gold, Cl. A. ..... 3,800 78,375
-----------
MINING-1.4% Anglo American Platinum, A.D.R. .........(a) 1,400 10,014
Eldorado (Warrants)....................(a,b) 57,000 249,180
JCI, A.D.R. .............................(a) 1,400 9,629
Triton Mining (Warrants)...............(a,b) 40,000 135,519
-----------
404,342
-----------
PLATINUM-.9% Impala Platinum Holdings, A.D.R. ........... 11,000 278,404
-----------
RETAIL TRADE-1.3% Hartmarx.................................(a) 43,000 215,000
K mart...................................... 11,000 160,875
-----------
375,875
-----------
TOTAL COMMON STOCKS
(cost $9,989,350)......................... $10,434,733
===========
PREFERRED STOCKS-0.8%
METALS: Freeport McMoRan Copper & Gold, Cl. A,
(cost $291,563)........................... 7,500 $ 250,313
===========
<CAPTION>
CONTRACTS
SUBJECT
PUT OPTIONS-2.1% TO PUT
---------
<S> <C> <C>
Brokerage Basket:
November '95 @ $95.................(m) 21,930 $ 0
Standard & Poor's 500 Index Flex Options:
September '95 @ $450................. 4,500 3,656
December '95 @ $450.................. 11,000 24,062
Standard & Poor's 500 Index:
September '95 @ $450................. 12,000 4,500
September '95 @ $475................. 3,300 2,578
September '95 @ $485................. 3,300 3,713
September '95 @ $550................. 3,500 38,500
December '95 @ $375.................. 3,300 1,031
December '95 @ $400.................. 3,300 1,856
December '95 @ $450.................. 4,000 6,000
December '95 @ $475.................. 3,300 8,663
</TABLE>
11
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Managed Assets Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
CONTRACTS
SUBJECT
PUT OPTIONS (CONTINUED) TO PUT VALUE
---------- ----------
<S> <C> <C>
Standard & Poor's 500 Index (continued):
December '95 @ $485................... 2,200 $ 8,113
December '95 @ $550................... 3,500 55,125
March '96 @ $453...................(m) 4,547 5,274
March '96 @ $500...................... 7,500 60,000
March '96 @ $525...................... 7,000 91,875
June '96 @ $450....................... 1,600 8,200
June '96 @ $475....................... 7,600 55,100
June '96 @ $500....................... 5,000 55,625
<CAPTION>
PRINCIPAL
AMOUNT
SUBJECT
TO PUT
------------
<S> <C> <C>
Japanese Government Bond:
4.60%, 9/20/2004:
May '96 @ $1.288.............(c,d,m) $ 2,416,870 81,690
June '96 @ $1.343............(c,d,m) 1,045,750 78,640
U.S. Treasury Bond;
7.625%, 2/15/2025;
April '96 @ $103.078.............(m) 1,950,000 15,893
----------
TOTAL PUT OPTIONS
(cost $1,906,394)..................... $ 610,094
==========
<CAPTION>
PRINCIPAL
BONDS AND NOTES-24.9% AMOUNT
------------
<S> <C> <C> <C>
BONDS-24.1% Argentinian Securities;
Republic of Argentina,
5.00%, 3/31/2023.............(e,f,g) $ 250,000 $ 119,375
Austrian Securities;
Republic of Austria,
4.50%, 2/12/2000.................(h) 3,918,154 3,979,865
German Securities;
Bundesrepublik Deutschland,
9%, 10/20/2000...................(i) 1,809,627 2,005,248
South African Securities;
Eskom,
11%, 6/1/2008....................(j) 990,371 695,538
Venezuelan Securities;
Republic of Venezuela,
6.75%, 3/31/2020...............(e,f) 750,000 378,750
-----------
7,178,776
-----------
</TABLE>
12
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Managed Assets Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
BONDS AND NOTES (CONTINUED) AMOUNT VALUE
------------- -----------
<S> <C> <C>
NOTES-.8% Federal National Mortgage Association,
Non-Callable Strips, (collateralized by
FNMA Strip, 10/1/2024) Cl.sp 267-2,
8.50%, 10/25/2024 (Interest Only Obligation) $ 1,050,000(k) $ 250,214
-----------
TOTAL BONDS AND NOTES
(cost $6,665,735)........................... 7,428,990
===========
SHORT-TERM INVESTMENTS-34.3%
U.S. TREASURY BILLS: 5.61%, 7/6/95................................. $ 8,894,000 $ 8,887,507
5.57%, 7/20/95................................ 102,000 101,723
5.56%, 7/27/95................................ 657,000 654,536
5.61%, 8/3/95..............................(l) 502,000 499,590
5.32%, 8/17/95................................ 101,000 100,285
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $10,242,844).......................... $10,243,641
===========
TOTAL INVESTMENTS (cost $29,095,886)............................................... 97.1% $28,967,771
====== ===========
CASH AND RECEIVABLES (NET)......................................................... 2.9% $ 873,525
====== ===========
NET ASSETS......................................................................... 100.0% $29,841,296
====== ===========
</TABLE>
13
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Managed Assets Portfolio
--------------------------------------------------------------------------------
NOTES TO STATEMENT OF INVESTMENTS:
----------------------------------
(a) Non-income producing.
(b) Securities 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 June 30,
1995, these securities amounted to $884,011 or 3.0% of net assets.
(c) Strike price converted to U.S. Dollars at the prevailing rate of
exchange.
(d) Denominated in Japanese Yen.
(e) Denominated in U.S. Dollars.
(f) Secured by U.S. Treasury securities.
(g) Scheduled variable interest rate.
(h) Denominated in Swiss Francs.
(i) Denominated in German Marks.
(j) Denominated in South African Rand.
(k) Notional face amount.
(l) Partially held by the custodian in a segregated account as
collateral for open financial futures positions.
(m) Securities restricted as to public resale. Investments in restricted
securities, with an aggregate market value of $181,497, represent
approximately .6% of net assets:
<TABLE>
<CAPTION>
ACQUISITION PURCHASE PERCENTAGE OF
PUT OPTIONS: DATE PRICE NET ASSETS VALUATION*
------------ ------------ ---------- ------------- ----------
<S> <C> <C> <C> <C>
Brokerage Basket**
November '95 at $95 ....................... 11/11/94 $5.70 0.00 fair value
Japanese Government Bond:
4.60%, 9/20/2004, May '96 at 1.288....(c,d) 5/16/95 $.07 0.27 fair value
4.60%, 9/20/2004, June '96 at 1.343...(c,d) 6/21/95 $.08 0.26 fair value
Standard & Poor's 500 Index
March '96 at $453 ......................... 12/14/94 $21.99 0.02 fair value
U.S. Treasury Bond;
7.625%, 2/15/2025, April '96 at $103.078... 4/12/95 $4.72 0.05 fair value
</TABLE>
*The valuation of these securities has been determined in good faith
under the direction of the Board of Directors.
**Consists of Common Stocks of six publicly traded brokerage firms.
STATEMENT OF FINANCIAL FUTURES JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET VALUE UNREALIZED
NUMBER OF COVERED (DEPRECIATION)
FINANCIAL FUTURES SOLD SHORT: CONTRACTS BY CONTRACTS EXPIRATION AT 6/30/95
------------ -------------- ------------- --------------
<S> <C> <C> <C> <C>
ISSUER
Hang Seng.................................... 5 $ (298,850) July '95 $ (323)
Standard & Poor's 500........................ 6 $(1,641,450) September '95 (1,850)
----------
$ (2,173)
==========
</TABLE>
See independent accountants' review report and notes to financial statements.
14
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Zero Coupon 2000 Portfolio
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
As of June 30, 1995, the net asset value of the Dreyfus Variable
Investment Fund - Zero Coupon 2000 Portfolio was $12.44 per share. For the
six-month period ended June 30, 1995, the total return of the Portfolio was
11.88%,* compared with 11.871% for the Merrill Lynch U.S. Treasury Coupon
5-Year Strips Index.** Dividends declared from net investment income amounted
to $.343 per share, which represents an annualized distribution rate of 5.56%
per share based on the closing net asset value. The Portfolio's performance
does not reflect the deduction of additional charges imposed in connection
with investing in variable annuity contracts and variable life insurance
policies.
The calendar year 1994 was one of the worst for the bond market in nearly
70 years. So 1995 has been a welcome relief. Since the beginning of the year
the bond market has rallied substantially. The bond markets rallied right
through the Federal Reserve Board's last tightening in February when the
Federal Funds rate was raised by 50 basis points. The market continued to
rally when the Federal Reserve then loosened the Federal Funds rate in July
by 25 basis points. After seven corrective tightening moves totaling 300
basis points, the Fed has finally started to loosen credit.
With a fund structured primarily with zero coupon securities with a final
maturity date of 2000, the best method of managing the fund is to lengthen or
shorten the fund's duration in anticipation of interest rate moves. We are
currently structured at the longer end of our duration parameters and will
probably remain there over the near term. The Portfolio has received a 5-Star
overall rating from Morningstar, Inc. out of 219 portfolios in the Fixed
Income category.***
We are hopeful that our strategy will result in continued good
performance by the Portfolio. Of course, as economic or market conditions
dictate, the portfolio may be restructured accordingly.
Sincerely,
/s/ Garitt A. Kono
Garitt A. Kono
Portfolio Manager
July 31, 1995
New York, N.Y.
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
** Source: Merrill Lynch Pierce, Fenner and Smith, Inc. - Unlike the
Portfolio, the Merrill Lynch U.S. Treasury Coupon 5-Year Strips Index is an
unmanaged index.
***Source: Morningstar, Inc. - Morningstar proprietary ratings reflect
historical risk-adjusted performance as of June 30, 1995. The ratings are
subject to change every month. Past performance is no guarantee of future
results. Morningstar ratings are calculated from the portfolio's three-year
average annual returns with appropriate fee adjustments and a risk factor
that reflects portfolio performance relative to three-month Treasury bill
monthly returns. Ten percent of the portfolios in an investment category
receive five stars.
15
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Zero Coupon 2000 Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
BONDS AND NOTES-87.2% AMOUNT VALUE
-------------- ------------
<S> <C> <C> <C>
BANKING-2.3% CoreStates Capital,
Sub. Notes, 9 5/8%, 2001...................... $ 200,000 $ 225,659
J.P. Morgan and Co.,
Sub. Notes, Zero Coupon, 1998................. 160,000 134,953
-----------
360,612
-----------
CONSUMER-1.0% News America Holdings (Gtd. by News),
Sr. Notes, 7 1/2%, 2000....................... 150,000 153,200
-----------
INDUSTRIAL-3.2% USX
Deb., 9 1/8%, 2013............................ 450,000 494,757
-----------
INSURANCE-.9% SunAmerica,
Notes, 9%, 1999............................... 130,000 139,268
-----------
FOREIGN-.5% Kingdom of Sweden,
Bonds, Ser. A, Zero Coupon, 1997.............. 40,000 36,050
Montreal Urban Community,
Deb., 9 1/8%, 2001............................ 40,000 44,447
-----------
80,497
-----------
OTHER-10.7% FICO Coupon Strips:
Ser. 17, Zero Coupon, 4/5/2000................ 500,000 373,970
Ser. 3, Zero Coupon, 5/30/2000................ 1,000,000 744,780
Zero Coupon, 10/6/2000........................ 478,000 345,726
Ser. 1, Zero Coupon, 11/11/2000............... 150,000 107,837
Ser. 10, Zero Coupon, 11/30/2000.............. 152,000 108,885
-----------
1,681,198
-----------
U.S. GOVERNMENT
AND AGENCIES-68.6% Chattanooga Valley,
Secured First Mortgage, Zero Coupon, 1/1/2000. 176,000 132,427
Federal National Mortgage Association,
Callable Principal Strips, Ser. 1:
Zero Coupon, 8/21/1996...................(a) 145,000 134,258
Zero Coupon, 10/10/2001 400,000 369,761
Resolution Funding, Coupon Strips:
Ser. A, Zero Coupon, 7/15/1999................ 1,500,000 1,179,024
Zero Coupon, 7/15/2000........................ 260,000 192,864
Zero Coupon, 10/15/2000....................... 2,830,000 2,065,391
U.S. Treasury Coupon Receipts,
Zero Coupon, 11/15/2000....................... 430,355 312,212
U.S. Treasury Notes,
7 3/4%, 12/31/1999............................ 1,000,000 1,067,969
</TABLE>
16
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Zero Coupon 2000 Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
BONDS AND NOTES (CONTINUED) AMOUNT VALUE
------------ -----------
<S> <C> <C> <C>
U.S. GOVERNMENT
AND AGENCIES (CONTINUED) U.S. Treasury Principal Strips:
Zero Coupon, 8/15/2000............... 500,000 369,077
Zero Coupon, 11/15/2000.............. 6,750,000 4,908,485
-----------
10,731,468
-----------
TOTAL BONDS AND NOTES
(cost $13,255,647)................... $13,641,000
===========
SHORT-TERM INVESTMENT-10.9%
AGENCY DISCOUNT NOTE: Federal Home Loan Mortgage Corp.,
6.10%, 7/3/1995
(cost $1,704,422).................... $ 1,705,000 $ 1,704,422
===========
TOTAL INVESTMENTS (cost $14,960,069)........................................ 98.1% $15,345,422
====== ===========
CASH AND RECEIVABLES (NET).................................................. 1.9% $ 297,549
====== ===========
NET ASSETS.................................................................. 100.0% $15,642,971
====== ===========
</TABLE>
NOTE TO STATEMENT OF INVESTMENTS:
---------------------------------
(a) Zero coupon until 8/21/1996, date on which a stated coupon rate of 8.40%
becomes effective; the stated maturity date is 2001.
See independant accountants' review report and notes to financial statements.
17
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Quality Bond Portfolio
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
As of June 30, 1995 the net asset value of the Dreyfus Variable
Investment Fund - Quality Bond Portfolio was $11.58. For the six-month period
ended June 30, 1995, the total return of the Portfolio was 13.01%,* compared
to 12.863% for the Merrill Lynch All Maturities A Rated Index.** Dividends
declared from net investment income amounted to $.355 per share, representing
an annualized distribution rate of 6.18% per share, based on the closing net
asset value. The Portfolio's performance does not reflect the deduction of
additional charges imposed in connection with investing in variable annuity
contracts and variable life insurance policies.
The calendar year 1994 was one of the worst for the bond market in nearly
70 years. So 1995 has been a welcome relief. Since the beginning of the year
the bond markets have rallied substantially. The bond markets rallied right
through the Federal Reserve Board's last tightening in February when the
Federal Funds rate was raised by 50 basis points. The market continued to
rally when the Federal Reserve then loosened the Federal Funds rate in July
by 25 basis points. After seven corrective tightening moves totalling 300
basis points the Fed has finally started to loosen credit.
The main reason for the superior performance during this period was the
fact that our durations were about a year longer than those of the Index. In
an environment where rates are falling, longer duration portfolios often
produce better total returns than portfolios with shorter durations. This
Portfolio has received a 5-Star overall rating from Morningstar, Inc. out of
219 portfolios in the Fixed Income category.***
We made a few minor changes in the Portfolio such as selling our holdings
of USF&G 8 3/8% due 2001, as the security was purchased as a candidate for
upgrading which did not occur. We sold a very small position in Rite Aid 6
7/8% due 2013 for the purpose of improving quality, increasing the coupon
rate and strengthening the size of the position from $100,000 to $1,000,000.
Our last sale was US Steel 9 1/8% due 2013 as the security was not performing
more positively in a falling rate environment.
Our purchases included $1,000,000 Carter Holt Harvey 7 5/8% due 2002,
which has since been upgraded, $1,000,000 Household Finance Corporation 6
3/4% due 2000, $1,000,000 Manufacturers and Traders Trust 7% due 2005 and
$1,500,000 Nabisco 6.85% due 2005. These purchases were made with the
anticipation of potential upgrades and potentially better performance than
the securities sold.
We are hopeful that these strategies will result in higher yields for the
Portfolio along with consistent returns. Of course, as economic or market
conditions dictate, the portfolio may be restructured accordingly.
Sincerely,
/s/ Garitt A. Kono
Garitt A. Kono
Portfolio Manager
July 31, 1995
New York, N.Y.
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
** Source: Merrill Lynch, Pierce, Fenner and Smith, Inc. - Unlike the
Portfolio, the Merrill Lynch All Maturities A Rated Index is an unmanaged
index.
*** Source: Morningstar, Inc. - Morningstar proprietary ratings reflect
historical risk-adjusted performance as of June 30, 1995. The ratings are
subject to change every month. Past performance is no guarantee of future
results. Morningstar ratings are calculated from the portfolio's three-
year average annual returns with appropriate fee adjustments and a risk
factor that reflects portfolio performance relative to three-month
Treasury bill monthly returns. Ten percent of the portfolios in an
investment category receive five stars.
18
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Quality Bond Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
BONDS AND NOTES-73.9% AMOUNT VALUE
------------- ------------
<S> <C> <C> <C>
AEROSPACE-1.9% Boeing,
Deb., 7 1/4%, 2025................... $ 200,000 $ 195,438
McDonnell Douglas,
Notes, 8 1/4%, 2000.................. 200,000 213,883
-----------
409,321
-----------
BANKING-5.9% First Chicago, Sub. Notes:
8 1/4%, 2002......................... 15,000 16,076
6 7/8%, 2003......................... 100,000 99,389
Manufacturers and Traders Trust,
Sub. Notes, 7%, 2005................. 1,000,000 995,000
NationsBank,
Sub. Notes, 6 1/2%, 2003............. 175,000 169,615
-----------
1,280,080
CONSUMER-7.9% Nabisco,
Notes, 6.85%, 2005................... 1,500,000 1,470,614
News America Holdings (Gtd. by News):
Sr. Deb., 8 1/4%, 2018............... 100,000 103,330
Sr. Notes, 9 1/8%, 1999.............. 25,000 27,038
Time Warner,
Deb., 9.15%, 2023.................... 125,000 131,785
-----------
1,732,767
-----------
FINANCE-9.8% Ford Motor Credit,
Notes, 7 1/2%, 2004.................. 1,000,000 1,035,867
Heller Financial,
Floating Rate Notes, 6 7/16%, 1999.(a) 100,000 100,227
Household Finance,
Notes, 6 3/4%, 2000.................. 1,000,000 1,010,854
-----------
2,146,948
-----------
INDUSTRIAL-13.7% American Brands,
Deb., 8 5/8%, 2021................... 400,000 454,876
Archer-Daniels-Midland,
Deb., 10 1/4%, 2006.................. 400,000 508,477
Carter Holt Harvey,
Sr. Notes, 7 5/8%, 2002.............. 1,000,000 1,052,939
Eastman Kodak,
Deb., 9.95%, 2018.................... 400,000 502,439
Ford Motor,
Deb., 8 7/8%, 2022................... 400,000 462,377
-----------
2,981,108
-----------
INSURANCE-.7% SunAmerica:
Deb., 9.95%, 2012.................... 13,000 15,727
Notes, 9%, 1999...................... 130,000 139,268
-----------
154,995
-----------
</TABLE>
19
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Quality Bond Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
BONDS AND NOTES (CONTINUED) AMOUNT VALUE
------------ -----------
<S> <C> <C> <C>
FOREIGN-2.3% Kingdom of Sweden,
Bonds, Ser. A, Zero Coupon, 1997.............. $ 60,000 $ 54,074
Province of Quebec,
Deb., 8.80%, 2003............................. 400,000 443,888
-----------
497,962
-----------
OTHER-.5% City of New York,
General Obligation Bonds, Ser. D, 10%, 2007 25,000 28,375
FICO Coupon Strips,
Ser. 1, Zero Coupon, 5/11/2000............... 95,000 70,979
-----------
99,354
-----------
U.S. GOVERNMENT
AND AGENCIES-31.2% Federal National Mortgage Association,
Callable Principal Strips,
Ser. 1, Zero Coupon, 8/21/1996............(b) 55,000 50,926
U.S. Treasury Bonds:
10 3/4%, 8/15/2005............................ 100,000 132,813
11 1/4%, 2/15/2015............................ 100,000 150,078
7 1/4%, 5/15/2016............................. 1,200,000 1,273,687
U.S. Treasury Notes:
7 1/4%, 8/31/1996............................. 230,000 233,738
7 3/8%, 11/15/1997............................ 1,000,000 1,032,656
8 1/2%, 11/15/2000............................ 600,000 668,156
7 1/2%, 2/15/2005............................. 3,000,000 3,267,657
-----------
6,809,711
-----------
TOTAL BONDS AND NOTES
(cost $15,676,317)............................ $16,112,246
===========
SHORT-TERM INVESTMENTS-24.1%
AGENCY DISCOUNT NOTE; Federal Home Loan Mortgage Corp.,
6.10%, 7/3/1995
(cost $5,268,214)............................. $ 5,270,000 $ 5,268,214
===========
TOTAL INVESTMENTS (cost $20,944,531) ............................................. 98.0% $21,380,460
====== ===========
CASH AND RECEIVABLES (NET)........................................................... 2.0% $ 435,981
===========
NET ASSETS........................................................................... 100.0% $21,816,441
===========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Variable rate security - interest rate subject to periodic change.
(b) Zero coupon until 8/21/96, date on which a stated coupon rate of
8.40% becomes effective; the stated maturity date is 2001.
See independent accountants' review report and notes to financial statements.
20
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Small Cap Portfolio
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
It is a pleasure to report your Dreyfus Variable Investment Fund, Small
Cap Portfolio's results for the six-month period ending June 30, 1995.*
<TABLE>
<CAPTION>
SMALL CAP RUSSELL S&P 500
YEAR-TO-DATE PORTFOLIO 2000 INDEX** INDEX**
------------- --------- ------------ -------
<S> <C> <C> <C>
12/31/94 - 6/30/95........................................... +14.87% +14.42% +20.19%
INCEPTION-TO-DATE
-----------------
8/31/90 - 6/30/95............................................ +846.25% +121.04% +94.92%
</TABLE>
The Portfolio's performance does not reflect the deduction of additional
charges imposed in connection with investing in variable annuity contracts
and variable investment policies.
The Portfolio's average annual total returns were 21.27%, 47.49% and
59.20% for the one-year, three-year, and since-inception periods ended June
30, 1995.*** We are grateful that on the basis of this record, the Portfolio
was awarded Morningstar's Five Star overall ranking out of 556 annuity
portfolios in the equity category.
During the six-month period ended June 30th, the small company universe
represented by the Russell 2000 Index broadly underperformed the large
company gains of the Standard & Poor's 500 Composite Stock Price Index. This
trend actually began in early 1994, and appears related to the strength of
economies on a global basis in 1994, primarily benefiting the large
U.S.-based multinationals whose exports were especially enhanced by the
weakened dollar.
The business of smaller companies, on the contrary, has been generally
perceived as domestic and, therefore, relatively less attractive in such an
environment. As we have mentioned in earlier reports to you, we have
purposely taken and held positions of smaller companies in capital goods,
technology and specialty materials where foreign sales have been strong and,
in a number of cases, where U.S. products actually dominate global markets.
Examples include Bush Boake Allen, in specialized flavors and fragrances;
Albany International Cl. A, in paper machinery clothing; OM Group, in cobalt
refining and metallurgy; Roper Industries, in process controls; and both Rohr
and Precision Castparts, as suppliers to Boeing.
A second important investment theme relates to the dramatic shift away
from consumer stocks. Quietly burdened by the weak local currency, spent out
during the 1980s, and demographically older and more prone to save, the
American consumer has become elusive. Conversely, after years of industrial
restructuring and benefited by the local currency, the capital goods and
technology sectors have been invigorated by a strong export market combined
with American corporate demand for productivity. Coming after 12 years of
consumer stocks' relative strength, the shift toward producer stocks appears
to be in the early stages. This has been led by the large company
performance of such companies as Intel and Microsoft, which now dominate the
NASDAQ Composite Index.
In recent months, small company technology stocks have joined the bull
market with vigor, in many cases with speculative fervor not seen since the
late 1960s. Our largest positions include Integrated Silicon Solution,
Auspex Systems and Glenayre Technologies -- all of which have moved from
relative obscurity into important global product offerings. Although we have
strong positive feelings about each company's management and corporate
prospects, the stocks of these and other technology firms have already
reached price targets we set for 1996 or beyond.
21
<PAGE>
For this reason, you may find our technology sector weighting reduced for a
while and our primary efforts aimed at increasing the consumer holdings, while
they remain out of favor.
We again thank you for your interest and loyalty.
Sincerely,
/s/ Thomas A. Frank
Thomas A. Frank
Portfolio Manager
August 14, 1995
New York, N.Y.
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
** Source: The Russell Company; Lipper Analytical Services, Inc. All
performance figures assume the reinvestment of dividends. The Russell 2000
Index and The Standard & Poor's 500 Composite Stock Price Index are widely
accepted unmanaged indices of stock market performance.
*** Past performance is no guarantee of future results. Share price and
investment return fluctuate so that a shareholder may receive more or less
than original cost upon redemption.
+ Source: Morningstar, Inc. Morningstar proprietary ratings reflect historical
risk-adjusted performance as of 6/30/95. The ratings are subject to change
every month. Past performance is no guarantee of future results. Morningstar
ratings are calculated from the portfolio's three-year average annual
returns with appropriate fee adjustments and a risk factor that reflects
portfolio performance relative to three-month Treasury bill monthly returns.
Ten percent of the portfolios in an investment category receive 5 stars.
22
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Small Cap Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS-89.1% SHARES VALUE
-------- -------------
<S> <C> <C> <C>
CONSUMER-9.9%.. Boise Cascade Office Products................. 135,000 $ 3,003,750
Bush Boake Allen...........................(a) 150,000 4,556,250
Canandaigua Wine, Cl. A....................(a) 70,000 3,132,500
Central Tractor Farm & Country.............(a) 110,000 1,182,500
Eskimo Pie................................... 95,000 1,567,500
Genovese Drug Stores, Cl. A.................. 70,000 796,250
Norton McNaughton..........................(a) 205,000 3,177,500
Sports Authority...........................(a) 205,000 4,176,875
Station Casinos............................(a) 133,000 2,294,250
Talbots...................................... 70,000 2,782,500
Thermedics.................................(a) 190,000 3,705,000
Williams-Sonoma............................(a) 150,000 3,300,000
-------------
33,674,875
-------------
ENERGY-6.7% Cairn Energy USA...........................(a) 243,000 2,673,000
Coda Energy................................(a) 350,000 2,406,250
Devon Energy................................. 100,000 2,150,000
Global Industries..........................(a) 110,000 2,447,500
Helmerich & Payne............................ 47,500 1,401,250
International Colin Energy.................(a) 190,000 997,500
Optima Petroleum...........................(a) 115,000 280,312
Parker & Parsley Petroleum................... 170,000 3,336,250
Pogo Producing............................... 175,000 4,003,125
Tide West Oil..............................(a) 190,000 2,185,000
Unit.......................................(a) 237,500 860,938
-------------
22,741,125
-------------
FINANCIAL SERVICES-17.1% Centerbank 125,000 1,812,500
City National................................ 150,000 1,706,250
Commerce Group............................... 225,000 4,021,875
Dime Bancorp...............................(a) 350,000 3,500,000
Duff & Phelps Credit Rating................(b) 300,000 3,900,000
Executive Risk............................... 170,000 3,230,000
Finova Group................................. 110,000 3,850,000
FirstFed Michigan............................ 150,000 4,200,000
Frontier Insurance Group..................... 150,000 4,031,250
Hibernia, Cl. A.............................. 475,000 4,215,625
National Re.................................. 125,000 4,187,500
Presidential Life............................ 325,000 2,681,250
Reliance Group Holdings...................... 500,000 3,250,000
Standard Federal Bancorporation.............. 135,000 4,539,375
USLIFE....................................... 100,000 4,025,000
Western National............................. 390,000 4,826,250
-------------
57,976,875
-------------
HEALTH CARE-8.4% ATS Medical................................(a) 150,000 1,275,000
ATS Medical (Warrants).....................(a) 150,000 121,875
</TABLE>
23
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Small Cap Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED) SHARES VALUE
--------- -----------
<S> <C> <C> <C>
HEALTH CARE (CONTINUED) AmeriSource Health, Cl. A ...................... 90,000 $ 2,053,125
Apogee.......................................(a) 85,000 1,593,750
Apria Healthcare Group.......................(a) 60,000 1,695,000
Circon.......................................(a) 100,000 1,950,000
CorVel.......................................(a) 130,000 2,795,000
FPA Medical Management......................... 140,000 1,400,000
Mentor......................................... 95,000 2,648,125
Scherer (R.P.)...............................(a) 90,000 3,802,500
Sofamor/Danek Group..........................(a) 100,000 2,262,500
Staff Builders...............................(a) 750,000 3,093,750
Universal Health Services, Cl. B.............(a) 135,000 3,915,000
-----------
28,605,625
-----------
MATERIALS &
PROCESSING-12.4% Albemarle....................................... 150,000 2,343,750
Cleveland-Cliffs................................ 50,000 1,925,000
Ferro........................................... 190,000 5,035,000
IMCO Recycling.................................. 112,500 2,109,375
International Specialty Products................ 250,000 2,125,000
Jacobs Engineering Group.....................(a) 110,000 2,420,000
Longview Fibre.................................. 225,000 3,825,000
Minerals Technologies........................... 160,000 5,760,000
OM Group........................................ 150,000 4,275,000
Schulman (A.)................................... 135,000 3,881,250
Sterling Chemicals...........................(a) 150,000 1,743,750
USA Waste Service............................(a) 210,000 3,255,000
Uniroyal Chemical............................... 300,000 3,412,500
-----------
42,110,625
-----------
PRODUCER DURABLES-12.4% Albany International, Cl. A .................... 150,000 3,581,250
Andros.......................................(a) 100,000 1,750,000
Applied Power, Cl. A............................ 75,000 2,165,625
Greenfield Industries........................... 50,000 1,450,000
ICC Technologies.............................(a) 130,000 1,868,750
Manitowoc....................................... 95,000 2,743,125
Precision Castparts............................. 175,000 6,146,875
Rohr.........................................(a) 350,000 5,031,250
Roper Industries................................ 90,000 3,150,000
Titan Wheel International....................... 150,000 3,862,500
Watts Industries, Cl. A......................... 135,000 3,383,438
Westinghouse Air Brake.......................... 250,000 3,562,500
Whittaker....................................(a) 150,000 3,300,000
-----------
41,995,313
-----------
TECHNOLOGY-21.6% Aspen Technology.............................(a) 75,000 1,912,500
Auspex Systems...............................(a) 390,000 4,875,000
</TABLE>
24
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Small Cap Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED) SHARES VALUE
--------- -------------
TECHNOLOGY (CONTINUED) C.P. Clare...................................... 100,000 $ 2,000,000
Cheyenne Software............................(a) 137,500 2,543,750
DSP Communications.............................. 150,000 3,112,500
Eicon Technology.............................(a) 125,000 1,331,967
Electroglas..................................(a) 25,000 1,431,250
Expert Software..............................(a) 77,500 1,433,750
Glenayre Technologies........................(a) 90,000 4,590,000
Information Storage Devices..................(a) 115,000 2,875,000
Integrated Silicon Solution..................... 150,000 7,837,500
International Rectifier......................(a) 75,000 2,437,500
Learning.....................................(a) 80,000 2,875,000
Noise Cancellation Technologies..............(a) 625,000 371,125
Paradigm Technology............................. 100,000 2,243,750
Plaintree Systems............................(b) 200,000 2,100,000
Platinum Software............................(a) 250,000 3,625,000
Renaissance Solutions........................... 135,000 1,856,250
Sierra On-Line...............................(a) 275,000 6,875,000
SoftKey International........................... 150,000 4,781,250
Software Artistry............................... 105,000 2,336,250
Spectrum Holobyte............................... 130,000 1,860,625
StrataCom....................................(a) 67,500 3,290,625
Veeco Instruments............................(a) 167,500 2,805,625
VideoServer..................................... 50,000 1,950,000
-------------
73,351,217
-------------
TRANSPORT & AUTOS-.6% U.S. Delivery Systems........................(a) 72,500 1,903,125
-------------
TOTAL COMMON STOCKS
(cost $262,310,038)........................... $302,358,780
=============
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS-9.9% AMOUNT
----------
<S> <C> <C> <C>
U.S. TREASURY BILLS: 5.56%, 7/27/95.................................. $ 260,000 $ 259,025
5.57%, 8/3/95................................... 2,747,000 2,733,814
5.34%, 8/17/95.................................. 7,455,000 7,402,219
5.45%, 8/24/95.................................. 15,823,000 15,694,992
5.53%, 8/31/95.................................. 7,554,000 7,484,730
5.39%, 9/7/95................................... 132,000 130,648
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $33,702,468)............................ $ 33,705,428
============
TOTAL INVESTMENTS (cost $296,012,506) .............................................. 99.0% $336,064,208
====== ============
CASH AND RECEIVABLES (NET) ..................................................... 1.0% $ 3,510,335
====== ============
NET ASSETS........................................................................... 100.0% $339,574,543
====== ============
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Non-income producing.
(b) Investment in non-controlled affiliates (cost $6,194,831)-see Note
2(d).
See independent accountants' review report and notes to financial statements.
25
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Capital Appreciation Portfolio
----------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
Equity markets have achieved extremely strong performance to date in
1995, driven by rising bond prices in an environment of moderating economic
growth and contained inflation. However, many broad industry groups have not
benefitted from the upward trend in equity prices. Sector emphasis and
individual issue selection have thus been critical for participation in the
advance.
The total return of the Dreyfus Variable Investment Fund, Capital
Appreciation Portfolio for the first six months of 1995 was 17.11%,* which
compared to 20.19% for the Standard & Poor's 500 Composite Stock Price
Index.** The Portfolio's performance does not reflect the deduction of
additional charges imposed in connection with investing in variable annuity
contracts and variable life insurance policies. Although the Portfolio's
performance lagged the Index, this was due to the concentration in the consume
r nondurables sector which slightly underperformed the Index during the
period, after strong results in 1994. Over the longer term, we believe the
Portfolio should be well positioned to achieve consistently positive results
in somewhat unusual economic and market circumstances.
INVESTMENT CLIMATE AND FUND STRATEGY
The impressive rallies in both bond and stock markets, which began in
November, were predicated on the assumption that the economy's growth would
moderate, that inflation had peaked and that interest rates could be relaxed
in the months ahead. If the economy strengthens in the second half, with
expected Gross Domestic Product higher than the Federal Reserve Board's
target range of 2.0% - 2.5%, markets will be negatively affected. On the
other hand, the possibility of recession, if the economy weakens too quickly,
is also a consideration that has impacted markets. We believe that the
economy will achieve a satisfactory transition between the faster rate of
growth in 1994 and the moderate range that fosters price stability.
We believe the Portfolio's investment strategy may be well tailored to
benefit in an extended slow growth environment, with emphasis on those
industry groups and individual issues that we believe are positioned to
achieve consistent, visible earnings growth even as the economy slows.
Therefore, the Portfolio should be expected to outperform the S&P 500 Index
if a recession did materialize, which we believe is unlikely over the next 18
months. We also expect the Portfolio to outperform the Index if the more
likely slow growth scenario unfolds, because impressive returns should be
realized from rising portfolio earning power translating into high stock
valuations.
FUND STRUCTURE AND PERFORMANCE
The Portfolio had approximately 14.7% in cash and short-term investments
on June 30, 1995. This cash position remains relatively high, reflecting our
conservative approach to making new investments. However, approximately 3.0%
of the cash position was invested during the period, which added to a number
of previous holdings and established new positions in American Home Products,
Ford Motor, General Motors Cl.E, International Flavors & Fragrances and
International Paper. The Portfolio had industry concentrations in consumer
nondurables and health care. After considerably outperforming the
S&P 500 Index in 1994, the consumer nondurables holdings were subject to some
profit-taking in the
26
<PAGE>
overall market in the first half of 1995. The sector slightly underperformed the
Index during this period, which detracted from the Portfolio's overall results.
However, the positive performance of such holdings as Coca-Cola, Philip Morris
Cos., PepsiCo, Proctor & Gamble, Gillette and Kellogg had the greatest effect on
the Portfolio's results.
Health care issues continued to outperform the S&P 500 Index,
particularly in a climate of less government regulation and oversight. This
sector had the second most positive impact on the Portfolio's performance,
led by shares of Merck & Co., Pfizer and Amgen. Financial services and
technology shares were also quite strong and positively affected the return.
Holdings in Citicorp, HSBC Holdings, Federal National Mortgage Association,
Texas Instruments and General Electric led these two groups.
We will continue to exert our best efforts to attempt to achieve the
investment goals of this Portfolio.
Sincerely,
/s/ Fayez Sarofim
Fayez Sarofim
Portfolio Manager
July 12, 1995
Houston, TX
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
** Source: LIPPER ANALYTICAL SERVICES, INC. - Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. Unlike
the portfolio, the Standard & Poor's 500 Composite Stock Price Index is a
widely accepted, unmanaged index of domestic stock market performance.
27
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Capital Appreciation Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS-83.6% SHARES VALUE
------------- -----------
<S> <C> <C> <C>
AEROSPACE &
ELECTRONICS-7.7% Emerson Electric....................... 4,000 $ 286,000
General Electric....................... 22,050 1,243,069
Motorola............................... 6,050 406,106
Texas Instruments...................... 1,600 214,200
-----------
2,149,375
-----------
AUTO RELATED-1.6% Chrysler............................... 5,000 239,375
Ford Motor............................. 6,500 193,375
-----------
432,750
-----------
BANKING-3.4% Banc One............................... 1,800 58,050
Citicorp............................... 13,025 753,822
KeyCorp................................ 1,800 56,475
PNC Bank............................... 3,000 79,125
-----------
947,472
-----------
CAPITAL GOODS-1.7% AlliedSignal........................... 8,000 356,000
Cooper Industries...................... 3,000 118,500
-----------
474,500
-----------
CHEMICALS-4.6% Dow Chemical........................... 8,000 575,000
duPont (E.I.) de Nemours............... 8,000 550,000
Rohm & Haas............................ 3,000 164,625
-----------
1,289,625
-----------
ENERGY-7.1% Chevron................................ 10,000 466,250
Exxon.................................. 8,525 602,078
Mobil.................................. 4,525 434,400
Royal Dutch Petroleum.................. 4,000 487,500
-----------
1,990,228
-----------
FINANCE-MISCELLANEOUS-3.6% American General....................... 3,000 101,250
Federal National Mortgage Association.. 4,500 424,688
HSBC Holdings PLC...................... 2,400 30,785
HSBC Holdings PLC, A.D.R............... 3,500 449,750
-----------
1,006,473
-----------
FOOD, BEVERAGE &
TOBACCO-17.9% Anheuser-Busch Cos 8,000 455,000
Coca-Cola.............................. 22,000 1,402,500
General Mills.......................... 600 30,825
Kellogg................................ 8,000 571,000
Nestle, A.D.R.......................... 10,000 521,250
PepsiCo................................ 12,000 547,500
Philip Morris Cos...................... 15,000 1,115,625
Sara Lee............................... 2,500 71,250
Seagram Co. Ltd. ...................... 8,500 294,312
-----------
5,009,262
-----------
</TABLE>
28
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Capital Appreciation Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED) SHARES VALUE
------ -----
<S> <C> <C> <C>
HEALTH CARE-13.4% Abbott Laboratories.................... 3,000 $ 121,500
American Home Products................. 7,500 580,313
Amgen...............................(a) 2,500 201,094
Johnson & Johnson...................... 11,050 747,256
Merck & Co............................. 20,000 980,000
Pfizer................................. 8,550 789,806
Roche Holdings, A.D.S.................. 5,000 321,875
-----------
3,741,844
-----------
LEISURE TIME-1.3% Darden Restaurants..................... 600 6,525
Eastman Kodak.......................... 6,000 363,750
-----------
370,275
-----------
MEDIA-1.9% McGraw-Hill............................ 3,200 242,800
News Corp., A.D.S...................... 5,000 113,125
Reader's Digest Association, Cl. A..... 4,000 176,500
-----------
532,425
-----------
MULTI INDUSTRY-1.8% Minnesota Mining & Manufacturing....... 9,000 515,250
-----------
OFFICE &
BUSINESS EQUIPMENT-3.0% AT&T................................... 9,000 478,125
Ericsson (LM) Telephone, Cl. B, A.D.R.. 3,200 64,000
General Motors, Cl. E.................. 6,500 282,750
-----------
824,875
-----------
PAPER &
FOREST PRODUCTS-1.2% International Paper.................... 4,000 343,000
-----------
PERSONAL CARE-7.7% Colgate-Palmolive...................... 1,000 73,125
Gillette............................... 16,000 714,000
International Flavors & Fragrances..... 10,000 497,500
Procter & Gamble....................... 11,000 790,625
Unilever, N.V.......................... 500 65,062
-----------
2,140,312
-----------
PROFESSIONAL SERVICES-.4% Block (H & R).......................... 3,000 123,375
-----------
RETAIL-3.1% May Department Stores.................. 6,000 249,750
Wal-Mart Stores........................ 10,000 267,500
Walgreen............................... 7,000 350,875
-----------
868,125
-----------
TRANSPORTATION-2.2% Norfolk Southern....................... 6,000 404,250
Union Pacific.......................... 4,000 221,500
-----------
625,750
-----------
TOTAL COMMON STOCKS
(cost $20,111,524)................... $23,384,916
==========
</TABLE>
29
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Capital Appreciation Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PREFERRED STOCKS-1.7% SHARES VALUE
------ -----
<S> <C> <C> <C>
AUTO RELATED-1.5% Ford Motor, Ser. A, Cum. Conv., $4.20... 4,500 $ 437,063
-----------
MEDIA-.2% News Corp., A.D.S. Cum. $.40............ 2,500 50,000
-----------
TOTAL PREFERRED STOCKS
(cost $485,651)...................... $ 487,063
===========
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS-12.9% AMOUNT
---------
<S> <C> <C> <C>
U.S. TREASURY BILLS: 6.37%, 7/6/1995 $ 74,000 73,946
6.255%, 7/20/1995....................... 807,000 804,805
5.20%, 7/27/1995........................ 2,735,000 2,724,744
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $3,602,542)..................... $ 3,603,495
===========
TOTAL INVESTMENTS (cost $24,199,717)........................................ 98.2% $27,475,474
====== ===========
CASH AND RECEIVABLES (NET).................................................. 1.8% $ 492,364
====== ===========
NET ASSETS.................................................................. 100.0% $27,967,838
====== ===========
</TABLE>
NOTE TO STATEMENT OF INVESTMENTS;
(a) Non-income producing.
See independent accountants' review report and notes to financial statements.
30
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Growth and Income Portfolio
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
For the six months ended June 30, 1995, the first half of the Fund's
fiscal year, the total return for the Growth and Income Portfolio of the
Dreyfus Variable Investment Fund was 34.65%.* This compares with a return of
20.19% for the Standard and Poor's 500 Composite Stock Price Index.** The
portfolio's performance does not reflect the deduction of additional charges
imposed in connection with investing in variable annuity contracts and
variable life insurance policies.
There were several reasons for this total return of the Fund in the first
six months of 1995. First, it was a favorable period for the overall stock
market. Second, the Fund was invested in several dozen holdings. We believe
this degree of concentration provides a combination of portfolio
diversification with a substantial sensitivity to the performance of
individual holdings. Third, the Fund was fortunate to have several individual
investments that performed quite well during the period. With a relatively
concentrated portfolio, the Fund's performance is sensitive to the
performance of the larger individual holdings.
The year 1995 began with the U.S. economy in a boom to which the Federal
Reserve Board had responded by raising interest rates. The Fed tightened for
the seventh time in a year in February 1995, but then fears of further
Federal Reserve tightening eased as the economy weakened. The stock market
rose during these months because of a combination of a high level of earnings
and falling long-term interest rates. The dollar was weak during the period,
which aided the earnings of multinational companies. A currency decline often
drives inflation substantially higher. This did not occur in this instance
because the dollar was not weak against the currencies of our major trading
partners in North America and South America. There were also offsets from
such disinflationary pressures as corporate downsizing, strong productivity
growth and price-sensitive behavior among consumers. Thus the stock market
enjoyed the benefit to earnings of a weak dollar against the yen and the
European currencies without any associated inflation surge that might have
pushed up interest rates and weakened the valuation of the stock market.
There are several long-term positive forces that have provided a
supportive background for the financial markets. First, the trend of
inflation has remained favorable in the last several years. Second, we are in
the early stages of a key demographic shift as the baby boom generation
begins to focus on the need for a permanent program of saving to provide for
future retirement income. Third, U.S. productivity growth in manufacturing
has been favorable. Finally, a broad consensus has begun to emerge on the
importance of limiting the U.S. budget deficit.
We believe that the period of strongest earnings growth in the U.S.
economy is behind us. Corporate cost-cutting is very far advanced in many
companies as are the benefits of refinancing high-cost debt. The rate of
growth of the U.S. economy is decelerating. Many multinational companies have
already reaped a significant portion of the profit benefits of a decline in
the dollar. Thus we believe that strong profit growth will become
increasingly scarce over the next year. Many of the largest positions in the
Portfolio are companies that we believe have a good chance of sustaining
strong earnings growth even in this more challenging environment. While
overall market valuations have risen, we continue to find good companies
available in the stock market at reasonable valuation levels.
31
<PAGE>
We appreciate the willingness of our shareholders to invest in the Growth
and Income Portfolio of the Dreyfus Variable Investment Fund. We will endeavor
to realize a favorable return for shareholders commensurate with a reasonable
level of risk. There is likely to be an alternation of periods where the net
asset value of the Fund declines and periods when the net asset value rises. Our
focus is on achieving a satisfactory return for the shareholders over a longer
period of time.
Very truly yours,
/s/ Richard B. Hoey
Richard B. Hoey
Portfolio Manager
July 26, 1995
New York, N.Y.
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
** SOURCE: LIPPER ANALYTICAL SERVICES, INC. - Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The
Standard & Poor's 500 Composite Stock Price Index is a widely accepted
unmanaged Index of stock market performance.
32
<PAGE>
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND, Growth and Income Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30, 1995 (UNAUDITED)
COMMON STOCKS-74.6% SHARES VALUE
------ -----
<S> <C> <C> <C>
BASIC INDUSTRIES-11.4% Corning................................ 20,000 $ 655,000
Praxair................................ 20,000 500,000
Weyerhaeuser........................... 10,000 471,250
Witco.................................. 20,000 645,000
-----------
2,271,250
-----------
CAPITAL GOODS-11.9% AlliedSignal 10,000 445,000
Coltec Industries...................(a) 20,000 345,000
Litton Industries...................(a) 10,000 368,750
USA Waste Service...................(a) 50,000 775,000
York International..................... 10,000 450,000
-----------
2,383,750
-----------
CONSUMER-8.7% Lowe's Cos 15,000 448,125
OfficeMax...........................(a) 15,000 418,125
Seagram Co. Ltd........................ 25,000 865,625
-----------
1,731,875
-----------
ENERGY-3.5% Sonat Offshore Drilling................ 10,000 287,500
UGI.................................... 20,000 422,500
-----------
710,000
-----------
FINANCIAL-BROKERAGE-8.2% Bank of Boston......................... 20,000 750,000
First Security......................... 10,000 280,000
Midlantic.............................. 15,000 600,000
-----------
1,630,000
-----------
HEALTH CARE-3.5% McKesson............................... 3,000 140,250
Teva Pharmaceutical Industries ADR..... 15,000 562,500
-----------
702,750
-----------
INSURANCE-6.4% Liberty................................ 15,000 408,750
TIG Holdings........................... 20,000 460,000
USF&G.................................. 25,000 406,250
-----------
1,275,000
-----------
MEDIA/ENTERTAINMENT-2.1% Time Warner............................ 10,000 411,250
-----------
MINING & METALS-2.9% TVX Gold............................(a) 80,000 575,592
-----------
OIL & GAS DRILLING-2.3% Occidental Petroleum................... 20,000 457,500
-----------
TECHNOLOGY-9.0% HNC Software........................(a) 7,500 159,375
Integrated Silicon Solution.........(a) 6,000 313,500
Thermo Electron.....................(a) 20,000 805,000
UUNET Technologies..................(a) 19,000 522,500
-----------
1,800,375
-----------
TELECOMMUNICATIONS-2.3% Premisys Communications.............(a) 7,000 451,938
-----------
UTILITIES-ELECTRIC POWER-2.4% Entergy................................ 20,000 482,500
-----------
TOTAL COMMON STOCKS
(cost $13,662,954)................... $14,883,780
===========
</TABLE>
33
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, Growth and Income Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCKS-11.8% SHARES VALUE
------ -----
<S> <C> <C> <C>
FINANCIAL-BROKERAGE-3.5% Citicorp, PERCS Cum., $1.22..................... 15,000 $ 303,750
Merryland & Investment, Ser. C., Cum., $2.15.... 15,000 403,125
-----------
706,875
-----------
REAL ESTATE-4.9% Oasis Residential, Ser A., Cum., $2.25.......... 20,000 505,000
Tanger Factory Outlet Centers, Cum., $1.66...... 20,000 465,000
-----------
970,000
-----------
TELECOMMUNICATIONS-3.4% MFS Communications, Cum., $2.68................. 20,000 690,000
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $2,353,831)............................. $ 2,366,875
===========
<CAPTION>
PRINCIPAL
CONVERTIBLE CORPORATE BONDS-2.3% AMOUNT
---------
<S> <C> <C> <C>
CAPITAL GOODS-2.3% Rohr, 7.75%, 5/15/2004
(cost $367,500)............................... $ 300,000 $ 462,750
===========
SHORT-TERM INVESTMENTS-14.2%
U.S. TREASURY BILLS: 6.31%, 8/3/1995................................. $ 100,000 $ 99,520
6.15%, 8/17/1995................................ 1,008,000 1,000,863
5.36%, 8/24/1995................................ 631,000 625,895
5.38%, 9/21/1995................................ 1,115,000 1,101,196
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $2,827,789)............................. $ 2,827,474
===========
TOTAL INVESTMENTS (cost $19,212,074)................................................. 102.9% $20,540,879
====== ===========
LIABILITIES, LESS CASH AND RECEIVABLES............................................... (2.9%) $ (579,645)
====== ===========
NET ASSETS........................................................................... 100.0% $19,961,234
====== ===========
</TABLE>
NOTE TO STATEMENT OF INVESTMENTS;
(a) Non-income producing.
See independent accountants' review report and notes to financial statements.
34
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, International Equity Portfolio
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to report that, due to an infusion of additional investor
capital, the International Equity Portfolio of the Dreyfus Variable
Investment Fund was able to take more significant positions in a number of
equity markets during the six-month fiscal period ended June 30, 1995.
Holdings have been increased in almost every one of the 17 markets in
which your Portfolio holds a stake. Principal areas of added investment were
Australia, France, Japan, the Netherlands, Singapore, Switzerland and the
United Kingdom.
The half-year's results, while on the positive side, were affected by a
series of major events that buffeted stock markets around the world. These
included the aftermaths of the earthquake in Kobe, Japan and of the Mexican
peso devaluation, the inordinate strength of the yen against the U.S. dollar
and the French elections.
Fortunately, a number of these developments turned out to have their
constructive side for equity investors. The economic effects of the Japanese
earthquake were not as devastating as first seemed likely. Mexico began to
recover from its economic earthquake more swiftly than anticipated, with
beneficial effects on many Latin American markets. The Southeast Asian
markets, after steep declines, began to rally. And the French Presidential
election put an end to the Socialist regime.
For the six months ended June 30, the Portfolio produced a total return
of 1.42%.* This compares with 2.60% for the Morgan Stanley Capital
International Europe, Australasia and Far East Index (EAFE/(R)/).**
The Portfolio's performance does not reflect the deduction of additional
charges imposed in connection with investing in variable annuity contracts
and variable life insurance policies.
In view of continuing uncertainties on the international scene, we were
cautious in investing the additional funds received during the past six
months. As part of this stance, a hedge transaction of yen against U.S.
dollars was held by the Portfolio but expired on April 12 and was not rolled
over.
More recently, the international markets have been supported by lower
levels of interest rates. Recent actions by the U.S. Federal Reserve Board to
lower short-term rates should accentuate this trend.
The Hong Kong market remained generally depressed during the period by
the slack real estate market and by speculation over succession to power in
China in the event of the death of the long-time "paramount leader." Yet
toward the end of the period, Hong Kong began to improve. Malaysia followed a
roughly similar course, but strengthened after the general election that
confirmed the incumbent government. Also, in both markets, international
capital began to return on a modest scale.
Australia has been a strong market for some time now, with impressive
rates of economic growth and corporate profits. While such ebullience carries
risk, we have high hopes for our Australian investments, which now represent
nearly 5% of the overall portfolio.
35
<PAGE>
The European markets continue to be disappointing. This is due to the
continuing high rates of unemployment in Western
Europe, plus the weakness of the U.S. dollar. However, with the new
conservative government in Paris, prospects have improved. In addition, on
the corporate level there has been earnings growth, paydown of debt,
restructuring of base costs and expansion of investment.
The U.K. market, where we have placed over 18% of the portfolio, has been
stable, and pulled upwards by the strong performance of the U.S. stock
market.
The troublesome events that affected international markets earlier in the
year appear to be subsiding. In our opinion, the long-term rationale for
holding international equities remains fully valid.
Sincerely,
/s/ Sir William Vincent
Sir William Vincent
Portfolio Manager
International Equity Portfolio
M&G Investment Management Ltd.
July 12, 1995
London, U.K.
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
**Source: Lipper Analytical Services, Inc. - The Morgan Stanley Capital
International, Europe, Australasia, Far East Index (EAFERegistration Mark) is
an unmanaged index composed of a sample of companies representative of the
market structure of European and Pacific Basin countries. The return indicated
includes net dividends reinvested. The Index is the property of Morgan Stanley
& Co., Incorporated.
36
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, International Equity Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS-81.1% SHARES VALUE
------ -----
<S> <C> <C> <C>
AUSTRALIA-5.1% Boral..................................... 25,000 $ 61,770
Broken Hill Proprietary................... 4,000 49,189
Great Central Mines N.L. ..............(a) 30,000 66,882
Mayne Nickless............................ 6,000 24,750
------------
202,591
------------
AUSTRIA-.3% Burgenland Holding........................ 400 13,757
------------
FRANCE-4.5% BUT S.A................................... 260 58,017
Roussel-Uclaf............................. 210 32,845
Sanofi S.A................................ 800 44,380
Vallourec Usines a Tubes de Lorraine Escaut
et Vallourec Reunies.................(a) 850 42,658
------------
177,900
------------
GERMANY-2.6% BASF AG................................... 125 26,728
Deutsche Bank AG....................... 800 38,914
VEBA AG................................ 100 39,342
------------
104,984
------------
HONG KONG-4.9% China Light & Power....................... 6,000 30,863
Consolidated Electric Power Asia.......... 20,000 46,397
HSBC Holdings PLC......................... 1,600 20,523
Shun Tak Holdings......................... 70,000 55,638
Swire Pacific, Cl. A...................... 5,500 41,939
------------
195,360
------------
INDONESIA-.7% PT Indofood Sukses Makmur..............(a) 7,000 30,175
------------
ITALY-1.5% Caffaro S.P.A............................. 25,000 27,097
Edison S.P.A. ............................ 7,200 32,186
------------
59,283
------------
JAPAN-22.0% Amway Japan............................ 1,000 36,600
DDI.................................... 9 72,255
East Japan Railway..................... 7 35,950
Hokkaido Electric Power................ 2,000 53,837
Kinden................................. 2,000 37,308
Kurimoto............................... 6,000 63,329
Mitsubishi Bank........................ 2,000 43,211
Mitsui Fudosan......................... 4,000 45,856
NEC.................................... 4,000 43,873
NGK Spark Plug......................... 2,000 22,196
Nippon Express......................... 4,000 36,836
Nippon Steel........................... 7,000 22,810
Nippon Telegraph & Telephone........... 6 50,295
P.S.................................... 2,200 39,740
Seven Eleven Japan..................... 1,000 71,665
</TABLE>
37
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, International Equity Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED) SHARES VALUE
------ -----
<S> <C> <C> <C>
JAPAN (CONTINUED) Sharp..................................... 5,000 $ 66,116
Sumitomo Bank............................. 2,000 34,711
Tokio Marine & Fire Insurance............. 4,000 45,903
Toshoku................................... 4,000 19,126
Ushio..................................... 3,000 34,215
--------
875,832
--------
MALAYSIA-1.8% Hong Leong Credit Berhad.................. 3,000 15,135
Leader Universal Holdings Berhad.......... 4,666 16,651
Renong Berhad............................. 22,000 40,968
--------
72,754
--------
NETHERLANDS-3.1% Akzo Nobel................................ 400 47,855
OCE-Van Der Grinten N.V................... 700 39,522
Philips Electronics N.V................... 850 36,021
--------
123,398
--------
PORTUGAL-.7% Sumolis Companhia Industrial de Frutas
e Bebidas S.A. ......................... 2,400 27,834
--------
SINGAPORE-2.6% Fraser & Neave............................ 2,000 23,049
Oversea-Chinese Banking................... 4,000 44,381
Singapore Press Holdings.................. 2,400 35,906
--------
103,336
--------
SPAIN-3.4% Banco Bilbao Vizcaya S.A.................. 870 25,150
Compania Sevillana de Electricidad........ 5,600 34,508
Iberdrola S.A. ........................... 6,000 45,260
Repsol S.A. .............................. 1,000 31,514
--------
136,432
--------
SWITZERLAND-9.5% Alusuisse-Lonza Holding AG................ 90 56,813
Baloise Holdings.......................... 20 45,712
Compagnie Financiere Michelin..........(a) 175 77,710
Elektrowatt AG............................ 120 34,584
Landis & Gyr AG........................... 125 80,540
Zellweger Luwa AG......................(a) 95 81,890
--------
377,249
--------
UNITED KINGDOM-18.4% B.A.T. Industries PLC..................... 4,500 34,481
Booker PLC................................ 12,500 82,836
British Steel PLC......................... 26,000 71,135
British Telecommunications PLC............ 15,000 93,668
Cookson Group PLC......................... 11,000 42,581
Glaxo Wellcome PLC........................ 6,000 73,740
Hammerson PLC............................. 7,000 38,638
Harrisons & Crosfield PLC................. 30,000 67,623
Lucas Industries PLC...................... 24,000 72,067
RTZ PLC................................... 5,500 71,801
Royal Doulton PLC......................... 8,000 33,134
</TABLE>
38
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND, International Equity Portfolio
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED) SHARES VALUE
------------ ------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED) Smith (W.H.) Group PLC................... 10,000 $ 51,932
-----------
733,636
-----------
TOTAL COMMON STOCKS
(cost $ 3,176,874)...................... $3,234,521
===========
PREFERRED STOCKS-3.3%
GERMANY-2.4% Fresenius AG.............................. 125 $ 84,419
Herlitz AG................................ 65 12,704
-----------
97,123
-----------
SWITZERLAND-.9% Merck AG.................................. 45 34,676
-----------
TOTAL PREFERRED STOCKS
(cost $ 127,151)........................ $ 131,799
===========
PRINCIPAL
CONVERTIBLE BONDS-.1% AMOUNT
------------
FRANCE; Sanofi S.A., 4.00%, 1/1/2000
(cost $ 3,939).......................(b) $5,398 $ 4,070
===========
SHORT-TERM INVESTMENTS-12.9%
UNITED STATES; U.S. Treasury Bills:
5.54%, 7/6/95........................... $77,000 $ 76,944
5.57%, 7/20/95.......................... 246,000 245,331
5.56%, 7/27/95.......................... 89,000 88,666
5.33%, 8/24/95.......................... 102,000 101,175
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $ 512,044)........................ $ 512,116
===========
TOTAL INVESTMENTS (cost $3,820,008)............................................ 97.4% $3,882,506
============ ===========
CASH AND RECEIVABLES (NET)..................................................... 2.6% $ 104,866
============ ===========
NET ASSETS..................................................................... 100.0% $3,987,372
============ ===========
</TABLE>
NOTE TO STATEMENT OF INVESTMENTS;
(a) Non-income producing.
(b) Denominated in French Francs.
See independent accountants' review report and notes to financial statements.
39
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
MONEY MANAGED ZERO COUPON QUALITY
MARKET ASSETS 2000 BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value
[cost-Note 4(b)]-see statement.................. $36,250,022 $28,967,771 $15,345,422 $21,380,460
Cash.............................................. 398,835 908,246 308,416 383,436
Dividends and interest receivable................. 69,225 211,991 36,584 250,981
Receivable for investment securities sold......... --- --- --- 858,086
Receivable for futures variation
margin-Note 4(a)................................ --- 5,813 --- ---
Prepaid expenses and other assets................. 174 1,978 3,842 2,040
----------- ----------- ----------- -----------
36,718,256 30,095,799 15,694,264 22,875,003
----------- ----------- ----------- -----------
LIABILITIES:
Due to The Dreyfus Corporation.................... $ 14,373 $ 18,563 $ 5,594 $ 11,269
Payable for investment securities purchased....... --- --- --- 1,000,000
Net unrealized depreciation on
forward currency exchange
contracts-Note 4(a)............................. --- 218,347 --- ---
Payable for shares of
Beneficial Interest redeemed.................... 393,561 --- 24,794 24,560
Accrued expenses and other liabilities............ 29,184 17,593 20,905 22,733
----------- ----------- ----------- -----------
437,118 254,503 51,293 1,058,562
----------- ----------- ----------- -----------
NET ASSETS............................................ $36,281,138 $29,841,296 $15,642,971 $21,816,441
=========== =========== =========== ===========
REPRESENTED BY:
Paid-in capital................................... $36,280,507 $30,373,816 $15,202,070 $21,033,821
Accumulated undistributed
investment income-net........................... --- 520,823 71,391 106,206
Accumulated undistributed net realized gain
(loss) on investments and foreign
currency transactions........................... 631 (711,862) (15,843) 240,485
Accumulated net unrealized appreciation
(depreciation) on investments and translation
of assets and liabilities denominated in
foreign currencies [including $(2,173) net
unrealized (depreciation) on financial futures
for Managed Assets Portfolio]-Note 4(b)............... --- (341,481) 385,353 435,929
----------- ----------- ----------- -----------
NET ASSETS at value, applicable to outstanding
shares of Beneficial Interest................... $36,281,138 $29,841,296 $15,642,971 $21,816,441
=========== =========== =========== ===========
SHARES OUTSTANDING (unlimited number of
$.001 par value shares authorized
for each series).................................. 36,280,507 2,432,515 1,257,833 1,884,476
=========== =========== =========== ===========
NET ASSET VALUE per share
(Net Assets / Shares Outstanding)................. $ 1.00 $12.27 $12.44 $11.58
======= ====== ====== ======
</TABLE>
See independent accountants' review report and notes to financial statements.
40
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
CAPITAL GROWTH AND INTERNATIONAL
SMALL CAP APPRECIATION INCOME EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value
[cost-Note 4(b)]-see statement.................. $336,064,208 $ 27,475,474 $ 20,540,879 $ 3,882,506
Cash.............................................. 1,254,903 477,236 392,312 228,300
Receivable for investment securities sold......... 9,810,914 --- 994,303 30,746
Dividends and interest receivable................. 175,996 53,947 11,504 10,948
Prepaid expenses and other assets................. 3,363 262 39 40
Due from The Dreyfus Corporation.................. --- --- --- 2,173
------------ ------------- ------------- -------------
347,309,384 28,006,919 21,939,037 4,154,713
------------ ------------- ------------- -------------
LIABILITIES:
Due to The Dreyfus Corporation.................... $ 198,752 $ 17,201 $ 11,151 $ ---
Payable for investment securities purchased....... 7,437,473 --- 1,952,011 154,274
Payable for shares of Beneficial Interest redeemed --- --- 239 ---
Accrued expenses and other liabilities............ 98,616 21,880 14,402 13,067
------------ ------------- ------------- -------------
7,734,841 39,081 1,977,803 167,341
------------ ------------- ------------- -------------
NET ASSETS............................................ $339,574,543 $ 27,967,838 $ 19,961,234 $ 3,987,372
============ ============= ============= =============
REPRESENTED BY:
Paid-in capital................................... $296,268,315 $ 24,444,422 $ 18,034,275 $ 3,941,288
Accumulated undistributed investment
income-net...................................... 970,495 287,474 --- 23,311
Accumulated distributions in excess of investment
income-net...................................... --- --- (293) ---
Accumulated undistributed net realized gain
(loss) on investments and foreign
currency transactions........................... 2,284,031 (39,815) 598,447 (39,860)
Accumulated net unrealized appreciation on
investments and translation of assets and
liabilities denominated in foreign
currencies-Note 4(b)............................ 40,051,702 3,275,757 1,328,805 62,633
------------ ------------- ------------- -------------
NET ASSETS at value, applicable to outstanding
shares of Beneficial Interest..................... $339,574,543 $ 27,967,838 $ 19,961,234 $ 3,987,372
============ ============= ============= ============
SHARES OUTSTANDING (unlimited number of
$.001 par value shares authorized for
each series)...................................... 8,095,288 1,776,799 1,249,497 327,066
============ ============= ============= ============
NET ASSET VALUE per share
(Net Assets / Shares Outstanding)................. $41.95 $15.74 $15.98 $12.19
============ ============= ============= ============
</TABLE>
See independent accountants' review report and notes to financial statements.
41
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
MONEY MANAGED ZERO COUPON QUALITY
MARKET ASSETS 2000 BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Interest........................................ $1,066,490 $ 657,208 $ 423,876 $ 630,490
Cash dividends (net of $2,739 foreign
taxes withheld at source for the
Managed Assets Portfolio)................... --- 46,766 --- ---
---------- ---------- ---------- ----------
TOTAL INCOME.............................. 1,066,490 703,974 423,876 630,490
---------- ---------- ---------- ----------
EXPENSES-NOTE 2(e):
Investment advisory fee--Note 3(a).............. $ 84,576 $ 56,517 $ 28,797 $ 55,382
Sub-investment advisory fee--Note 3(a).......... --- 56,517 --- ---
Prospectus and shareholders' reports............ 11,962 5,116 2,006 1,737
Custodian fees.................................. 7,604 7,802 5,068 5,638
Auditing fees................................... 2,877 2,282 7,003 6,224
Organization expenses........................... 2,232 3,195 3,608 3,771
Trustees' fees and expenses--Note 3(b).......... 1,328 1,363 580 575
Shareholder servicing costs..................... 386 214 211 153
Registration fees............................... 203 100 1,137 2,235
Legal fees...................................... --- --- 300 ---
Miscellaneous................................... 882 1,064 1,717 2,278
---------- ---------- ---------- ----------
112,050 134,170 50,427 77,993
Less--expense reimbursement from
The Dreyfus Corporation due to
undertakings--Note 3(a)................... 10,251 --- 4,371 10,017
---------- ---------- ---------- ----------
TOTAL EXPENSES............................ 101,799 134,170 46,056 67,976
---------- ---------- ---------- ----------
INVESTMENT INCOME--NET.................... 964,691 569,804 377,820 562,514
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on investments (includ-
ing foreign currency transactions)--Note 4(a)... $ 562 $ (483,625) $ (15,424) $ 341,701
Net realized (loss) on financial
futures--Note 4(a).............................. --- (425,692) --- ---
---------- ---------- ---------- ----------
NET REALIZED GAIN (LOSS)........................ 562 (909,317) (15,424) 341,701
Net unrealized appreciation on investments and
translation of assets and liabilities
denominated in foreign currencies
(including $31,927 net unrealized
appreciation on financial futures for
the Managed Assets Portfolio)................... --- 105,683 1,066,720 1,187,536
---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS................ 562 (803,634) 1,051,296 1,529,237
---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS......................... $ 965,253 $ (233,830) $ 1,429,116 $2,091,751
========== ========== =========== ==========
</TABLE>
See independent accountants' review report and notes to financial statements.
42
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (CONTINUED) SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
CAPITAL GROWTH AND INTERNATIONAL
SMALL CAP APPRECIATION INCOME EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Interest.............................................. $ 1,237,139 $ 108,016 $ 79,865 $ 15,617
------------ ------------- -------------- --------------
Cash dividends (net of $6,820, $30 and $3,862
foreign taxes withheld at source for the Capital
Appreciation, Growth and Income and
International Equity Portfolios, respectively)
Unaffiliated issuers............................ 747,216 265,176 90,185 28,527
Affiliated issuers.............................. 9,000 --- --- ---
------------ ------------- -------------- --------------
TOTAL CASH DIVIDENDS........................ 756,216 265,176 90,185 28,527
------------ ------------- -------------- --------------
TOTAL INCOME.................................... 1,993,355 373,192 170,050 44,144
------------ ------------- -------------- --------------
EXPENSES-NOTE 2(e):
Investment advisory fee-Note 3(a)..................... $ 943,006 $ 57,076 $ 28,844 $ 8,007
Sub-investment advisory fee-Note 3(a)................. --- 20,755 --- ---
Registration fees..................................... 27,841 2,932 5,799 866
Custodian fees........................................ 30,406 2,629 2,708 11,010
Prospectus and shareholders' reports.................. 29,778 2,782 1,924 1,156
Trustees' fees and expenses-Note 3(b)................. 12,278 878 375 8
Shareholder servicing costs........................... 471 83 163 56
Auditing fees......................................... 10,538 5,309 5,019 4,966
Legal fees............................................ --- 791 307 ---
Miscellaneous......................................... 3,946 283 384 263
------------ ------------- -------------- --------------
1,058,264 93,518 45,523 26,332
Less-expense reimbursement from The Dreyfus
Corporation due to undertakings-Note 3(a) --- 6,445 8,655 12,746
------------ ------------- -------------- --------------
TOTAL EXPENSES.................................. 1,058,264 87,073 36,868 13,586
------------ ------------- -------------- --------------
INVESTMENT INCOME-NET........................... 935,091 286,119 133,182 30,558
------------ ------------- -------------- --------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain (loss) on investments-Note 4(a):
Long transactions (including foreign
currency transactions)............................ $ 3,844,934 $ (40,487) $ 611,300 $ (27,381)
Short sale transactions............................... (262,249) --- (13,375) ---
------------ ------------- -------------- --------------
NET REALIZED GAIN (LOSS).............................. 3,582,685 (40,487) 597,925 (27,381)
------------ ------------- -------------- --------------
Net unrealized appreciation (depreciation) on
investments and translation of assets and liabilities
denominated in foreign currencies:
Unaffiliated issuers............................ 34,503,759 3,101,291 1,371,822 80,950
Affiliated issuers.............................. (194,831) --- --- ---
------------ ------------- -------------- --------------
34,308,928 3,101,291 1,371,822 80,950
------------ ------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS.............................. 37,891,613 3,060,804 1,969,747 53,569
------------ ------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS............................... $38,826,704 $ 3,346,923 $ 2,102,929 $ 84,127
============= ============= ============== ==============
</TABLE>
See independent accountants' review report and notes to financial statements.
43
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO MANAGED ASSETS PORTFOLIO
------------------------------------ ------------------------------------
YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1995 DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED) 1994 (UNAUDITED)
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income-net..................... $ 1,006,418 $ 964,691 $ 745,232 $ 569,804
Net realized gain (loss) on investments,
foreign currency transactions and
financial futures....................... 40 562 146,575 (909,317)
Net unrealized appreciation (depreciation)
on investments and translation of assets
and liabilities denominated in foreign
currencies for the period............... --- --- (1,091,304) 105,683
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS........... 1,006,458 965,253 (199,497) (233,830)
-------------- -------------- -------------- --------------
DIVIDENDS TO SHAREHOLDERS:
From investment income-net................ (1,000,523) (970,586) (769,916) ---
In excess of investment income-net........ --- --- (48,981) ---
-------------- -------------- -------------- --------------
TOTAL DIVIDENDS......................... (1,000,523) (970,586) (818,897) ---
-------------- -------------- -------------- --------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold............. 141,994,565 (1) 58,742,510 (1) 26,699,972 4,541,886
Dividends reinvested...................... 1,000,523 (1) 970,586 (1) 818,897 ---
Cost of shares redeemed................... (115,923,303)(1) (58,155,028)(1) (3,947,678) (4,976,282)
-------------- -------------- -------------- --------------
INCREASE (DECREASE) IN NET
ASSETS FROM BENEFICIAL
INTEREST TRANSACTIONS............... 27,071,785 1,558,068 23,571,191 (434,396)
-------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN
NET ASSETS........................ 27,077,720 1,552,735 22,552,797 (668,226)
NET ASSETS:
Beginning of period....................... 7,650,683 34,728,403 7,956,725 30,509,522
-------------- -------------- -------------- --------------
End of period............................. $ 34,728,403 (2) $ 36,281,138 $ 30,509,522 (3) $ 29,841,296 (3)
============== ============== ============== ==============
SHARES SHARES
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Shares sold.......................................................... 2,094,088 371,833
Shares issued for dividends reinvested............................... 67,318 ---
Shares redeemed...................................................... (310,779) (405,665)
-------------- --------------
NET INCREASE (DECREASE) IN SHARES OUTSTANDING...................... 1,850,627 (33,832)
============== ==============
</TABLE>
---------------
(1) $1.00 per share.
(2) Includes undistributed investment income-net; $5,895 in 1994.
(3) Includes distribution in excess of investment income-net; $(48,981) in
1994 and undistributed investment income-net; $520,823 in 1995.
See independent accountants' review report and notes to financial statements.
44
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
ZERO COUPON 2000 PORTFOLIO QUALITY BOND PORTFOLIO
---------------------------------- ------------------------------------
YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1995 DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED) 1994 (UNAUDITED)
------------ ---------------- ------------ ----------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income-net....................... $ 522,791 $ 377,820 $ 649,784 $ 562,514
Net realized gain (loss) on investments..... --- (15,424) (101,063) 341,701
Net unrealized appreciation
(depreciation) on investments for
the period................................ (791,423) 1,066,720 (776,871) 1,187,536
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................. (268,632) 1,429,116 (228,150) 2,091,751
----------- ----------- ----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net....................... (519,948) (309,215) (645,868) (461,105)
Net realized gain on investments............ (7,541) --- (11,191) ---
----------- ----------- ----------- -----------
TOTAL DIVIDENDS........................... (527,489) (309,215) (657,059) (461,105)
----------- ----------- ----------- -----------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold............... 8,129,045 5,428,373 10,900,540 8,709,026
Dividends reinvested........................ 479,850 311,756 657,134 461,105
Cost of shares redeemed..................... (2,595,464) (2,130,508) (2,134,797) (2,228,475)
----------- ----------- ----------- -----------
INCREASE IN NET ASSETS
FROM BENEFICIAL
INTEREST TRANSACTIONS................. 6,013,431 3,609,621 9,422,877 6,941,656
----------- ----------- ----------- -----------
TOTAL INCREASE IN NET ASSETS.......... 5,217,310 4,729,522 8,537,668 8,572,302
NET ASSETS:
Beginning of period......................... 5,696,139 10,913,449 4,706,471 13,244,139
----------- ----------- ----------- -----------
End of period............................... $10,913,449 (1) $15,642,971 (1) $13,244,139 (2) 21,816,441 (2)
=========== =========== ============ ===========
<CAPTION>
SHARES SHARES SHARES SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold................................. 683,960 452,990 991,178 789,318
Shares issued for dividends reinvested...... 40,904 26,201 61,022 41,975
Shares redeemed............................. (220,025) (179,180) (193,286) (204,251)
-------- -------- -------- --------
NET INCREASE IN
SHARES OUTSTANDING.................... 504,839 300,011 858,914 627,042
======== ======== ======== ========
</TABLE>
(1) Includes undistributed investment income-net; $2,786 in 1994 and $71,391
in 1995.
(2) Includes undistributed investment income-net; $4,797 in 1994 and $106,206
in 1995.
See independent accountants' review report and notes to financial statements.
45
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
SMALL CAP PORTFOLIO CAPITAL APPRECIATION PORTFOLIO
------------------------------------ ------------------------------------
YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1995 DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED) 1994 (UNAUDITED)
-------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income-net........................ $ 765,642 $ 935,091 $ 269,727 $ 286,119
Net realized gain (loss) on investments...... (812,026) 3,582,685 588 (40,487)
Net unrealized appreciation on
investments for the period................. 3,743,892 34,308,928 93,162 3,101,291
-------------- -------------- ------------- ----------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.............. 3,697,508 38,826,704 363,477 3,346,923
-------------- -------------- ------------- ----------------
DIVIDENDS TO SHAREHOLDERS:
From investment income-net................... (727,613) --- (269,734) ---
From net realized gain on investments........ (720,564) --- --- ---
In excess of net realized gain
on investments............................. (481,344) --- --- ---
-------------- -------------- ------------- ----------------
TOTAL DIVIDENDS............................ (1,929,521) --- (269,734) ---
-------------- -------------- ------------- ----------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold................ 158,015,337 135,104,058 13,455,892 10,178,623
Dividends reinvested......................... 1,929,521 --- 269,733 ---
Cost of shares redeemed...................... (6,835,267) (7,571,220) (1,471,097) (1,676,005)
-------------- -------------- ------------- ----------------
INCREASE IN NET ASSETS
FROM BENEFICIAL
INTEREST TRANSACTIONS.................. 153,109,591 127,532,838 12,254,528 8,502,618
-------------- -------------- ------------- ----------------
TOTAL INCREASE IN NET ASSETS........... 154,877,578 166,359,542 12,348,271 11,849,541
NET ASSETS:
Beginning of period.......................... 18,337,423 173,215,001 3,770,026 16,118,297
-------------- -------------- ------------- ----------------
End of period................................ $173,215,001(1) $339,574,543(1) $16,118,297(2) $27,967,838(2)
============== ============== ============= ================
<CAPTION>
SHARES SHARES SHARES SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold.................................. 4,347,955 3,548,409 1,004,793 693,794
Shares issued for dividends reinvested....... 52,997 --- 20,097 ---
Shares redeemed.............................. (190,260) (196,179) (110,009) (115,921)
--------- --------- --------- --------
NET INCREASE IN
SHARES OUTSTANDING..................... 4,210,692 3,352,230 914,881 577,873
========= ========= ========= ========
</TABLE>
-------------------
(1) Includes undistributed investment income-net; $35,405 in 1994 and $970,495
in 1995.
(2) Includes undistributed investment income-net; $1,355 in 1994 and $287,474
in 1995.
See independent accountants' review report and notes to financial statements.
46
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
GROWTH AND INCOME PORTFOLIO INTERNATIONAL EQUITY PORTFOLIO
------------------------------ --------------------------------
YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1995 DECEMBER 31, JUNE 30, 1995
1994(1) (UNAUDITED) 1994(1) (UNAUDITED)
----------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income-net....................... $ 22,787 $ 133,182 $ 11,219 $ 30,558
Net realized gain (loss) on investments
and foreign currency transactions......... 7,824 597,925 (12,479) (27,381)
Net unrealized appreciation (depreciation)
on investments and translation of assets
and liabilities denominated in foreign
currencies for the period................. (43,017) 1,371,822 (18,317) 80,950
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS................................. (12,406) 2,102,929 (19,577) 84,127
----------- ----------- ----------- -----------
DIVIDENDS TO SHAREHOLDERS:
From investment income-net.................. (22,729) (133,533) (11,219) ---
In excess of investment income-net.......... --- --- (7,247) ---
From net realized gain on investments
and foreign currency transactions......... (7,302) --- --- ---
----------- ----------- ----------- -----------
TOTAL DIVIDENDS........................... (30,031) (133,533) (18,466) ---
----------- ----------- ----------- -----------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold............... 1,053,630 20,356,799 1,120,503 3,102,292
Dividends reinvested........................ 30,031 133,533 18,466 ---
Cost of shares redeemed..................... (1,330) (3,538,388) (12,347) (287,626)
----------- ----------- ----------- -----------
INCREASE IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS...... 1,082,331 16,951,944 1,126,622 2,814,666
----------- ----------- ----------- -----------
TOTAL INCREASE IN NET ASSETS.......... 1,039,894 18,921,340 1,088,579 2,898,793
NET ASSETS:
Beginning of period......................... --- 1,039,894 --- 1,088,579
----------- ----------- ----------- -----------
End of period............................... $ 1,039,894 (2) $19,961,234 (2) $ 1,088,579 (3) $ 3,987,372 (3)
=========== =========== =========== ===========
<CAPTION>
SHARES SHARES SHARES SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold................................. 84,474 1,385,652 90,002 260,892
Shares issued for dividends reinvested...... 2,457 8,573 1,536 --
Shares redeemed............................. (109) (231,550) (1,006) (24,358)
------- --------- ------- -------
NET INCREASE IN
SHARES OUTSTANDING.................... 86,822 1,162,675 90,532 236,534
======= ========== ======= ========
</TABLE>
(1) From May 2, 1994 (commencement of operations) to December 31, 1994.
(2) Includes undistributed investment income-net; $58 in 1994 and
distributions in excess of investment income-net; $(293) in 1995.
(3) Includes distributions in excess of investment income-net $(7,247) in
1994 and undistributed investment income-net $23,311 in 1995.
See independent accountants' review report and notes to financial statements.
47
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------------------------------------ JUNE 30, 1995
PER SHARE DATA: 1990(1) 1991 1992 1993 1994 (UNAUDITED)
------- ------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $1.0000 $1.0000 $1.0002 $1.0002 $1.0000 $1.0002
------- ------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net.................... .0244 .0583 .0407 .0323 .0431 .0283
Net realized gain on investments......... - .0002 - - - -
------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS....... .0244 .0585 .0407 .0323 .0431 .0283
------- ------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net..... (.0244) (.0583) (.0407) (.0323) (.0429) (.0285)
Dividends from net realized gain
on investments......................... - - - (.0002) - -
------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS.................... (.0244) (.0583) (.0407) (.0325) (.0429) (.0285)
------- ------- ------- ------- ------- -------
Net asset value, end of period........... $1.0000 $1.0002 $1.0002 $1.0000 $1.0002 $1.0000
======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN...................... 7.27%(2) 5.99% 4.14% 3.29% 4.37% 5.81%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.. .03%(2) - - - - .60%(2)
Ratio of net investment income to
average net assets..................... 7.18%(2) 5.78% 4.10% 3.23% 4.62% 5.70%(2)
Decrease reflected in above expense
ratios due to undertakings by
The Dreyfus Corporation................ 30.51%(2) 3.94% 4.25% 2.81% .88% .06%(2)
Net assets, end of period (000's Omitted) $ 741 $ 1,619 $ 790 $ 7,651 $34,728 $36,281
</TABLE>
(1) From August 31, 1990 (commencement of operations) to December 31, 1990.
(2) Annualized.
See independent accountants' review report and notes to financial statements.
48
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
MANAGED ASSETS PORTFOLIO
-------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------------------------------------ JUNE 30, 1995
PER SHARE DATA: 1990(1) 1991 1992 1993 1994 (UNAUDITED)
-------- -------- -------- -------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.11 $10.76 $10.14 $12.92 $12.37
------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net............... .08 .41 .22 .20 .35 .23
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions............. .11 .66 (.11) 2.71 (.56) (.33)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS.. .19 1.07 .11 2.91 (.21) (.10)
------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment income-net (.08) (.42) (.31) (.13) (.32) -
Dividends in excess of
investment income-net............. - - - - (.02) -
Dividends from net realized gain
on investments.................... - - (.42) - - -
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS............... (.08) (.42) (.73) (.13) (.34) -
------ ------ ------ ------ ------ ------
Net asset value, end of period...... $10.11 $10.76 $10.14 $12.92 $12.37 $12.27
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN................. 1.85%(2) 10.60% 1.07% 28.59% (1.56%) (.81)%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net
assets............................ 34%(2) 1.00% .97% .27% .25% .44% (2)
Ratio of net investment income to
average net assets................ 2.11%(2) 4.46% 1.88% 1.87% 3.54% 1.87% (2)
Decrease reflected in above expense
ratios due to undertakings
by The Dreyfus Corporation
and Comstock Partners............. 8.82%(2) 2.83% 1.70% 2.25% .88% -
Portfolio Turnover Rate............. - 91.97% 118.78% 99.08% 25.96% 11.32%(2)
Net assets, end of period
(000's Omitted)................... $ 716 $ 2,179 $1,865 $7,957 $30,510 $29,841
</TABLE>
(1) From August 31, 1990 (commencement of operations) to December 31, 1990.
(2) Not annualized.
See independent accountants' review report and notes to financial statements.
49
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
ZERO COUPON 2000 PORTFOLIO
-------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------------------------------------ JUNE 30, 1995
PER SHARE DATA: 1990(1) 1991 1992 1993 1994 (UNAUDITED)
------ ------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.45 $11.64 $11.77 $12.57 $11.39
------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income--net.............. .22 .76 .83 .79 .69 .40
Net realized and unrealized gain
(loss) on investments............. .45 1.25 .15 .96 (1.18) .99
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS.. .67 2.01 .98 1.75 (.49) 1.39
------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income--net....................... (.22) (.76) (.84) (.78) (.68) (.34)
Dividends from net realized gain
on investments.................... - (.06) (.01) (.17) (.01) -
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS............... (.22) (.82) (.85) (.95) (.69) (.34)
------ ------ ------ ------ ------ ------
Net asset value, end of period...... $10.45 $11.64 $11.77 $12.57 $11.39 $12.44
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN................. 20.09%(2) 20.09% 8.87% 15.19% (3.91%) 23.96%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets................ .70%(2) .72% .64% - - .72%(2)
Ratio of net investment income to
average net assets................ 8.03%(2) 7.41% 7.15% 6.21% 6.04% 5.90%(2)
Decrease reflected in above
expense ratios due to undertakings
by The Dreyfus Corporation........ 81.13%(2) 5.04% 2.28% 2.43% 1.05% .07%(2)
Portfolio Turnover Rate............. - 42.82% 3.08% 106.35% - 28.84%(3)
Net assets, end of period
(000's Omitted)................... $ 155 $1,296 $1,362 $5,696 $10,913 $15,643
</TABLE>
(1) From August 31, 1990 (commencement of operations) to December 31, 1990.
(2) Annualized.
(3) Not annualized.
See independent accountants' review report and notes to financial statements.
50
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
QUALITY BOND PORTFOLIO
--------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------------------------------- JUNE 30, 1995
PER SHARE DATA: 1990(1) 1991 1992 1993 1994 (UNAUDITED)
-------- -------- -------- -------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.01 $10.67 $10.94 $11.81 $10.53
-------- -------- -------- -------- --------- --------
INVESTMENT OPERATIONS:
Investment income-net............... .23 .70 .92 .76 .73 .35
Net realized and unrealized gain
(loss) on investments............. .01 .66 .30 .88 (1.27) 1.00
-------- -------- -------- -------- --------- --------
TOTAL FROM INVESTMENT OPERATIONS.. .24 1.36 1.22 1.64 (.54) 1.35
-------- -------- -------- -------- --------- --------
DISTRIBUTIONS:
Dividends from investment income-net (.23) (.70) (.92) (.76) (.73) (.30)
Dividends from net realized gain
on investments.................... - - (.03) (.01) (.01) -
-------- -------- -------- -------- --------- --------
TOTAL DISTRIBUTIONS............... (.23) (.70) (.95) (.77) (.74) (.30)
-------- -------- -------- -------- --------- --------
Net asset value, end of period...... $10.01 $10.67 $10.94 $11.81 $10.53 $11.58
======== ======== ======== ======== ========= ========
TOTAL INVESTMENT RETURN................. 7.12%(2) 14.12% 12.09% 15.33% (4.59%) 26.24%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net
assets............................. .15%(2) - - - - .80%(2)
Ratio of net investment income to
average net assets................ 7.20%(2) 7.52% 8.54% 6.51% 7.03% 6.60%(2)
Decrease reflected in above
expense ratios due to undertakings
by The Dreyfus Corporation........ 137.05%(2) 13.13% 5.33% 3.51% 1.20% .12%(2)
Portfolio Turnover Rate............. - - 9.39% 110.62% 64.80% 140.78%(3)
Net assets, end of period
(000's Omitted).................... $59 $ 410 $ 405 $4,706 $13,244 $21,816
</TABLE>
(1) From August 31, 1990 (commencement of operations) to December 31, 1990.
(2) Annualized.
(3) Not annualized.
See independent accountants' review report and notes to financial statements.
51
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
SMALL CAP PORTFOLIO
----------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
----------------------------------------------------------------- JUNE 30, 1995
PER SHARE DATA: 1990(1) 1991 1992 1993 1994 (UNAUDITED)
------ ------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.21 $20.60 $ 22.71 $ 34.45 $ 36.52
------ ------ ------ ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............... .21(2) .14(2) .18(2) .14 .17 .11
Net realized and unrealized gain
on investments.................... - 15.85(2) 13.10(2) 14.93 2.50 5.32
------ ------ ------ ------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS.. .21(2) 15.99(2) 13.28(2) 15.07 2.67 5.43
------ ------ ------ ------- -------- --------
DISTRIBUTIONS:
Dividends from investment income-net - (.15) (.15) (.14) (.16) -
Dividends in excess of investment
income-net........................ - - - (.01) - -
Dividends from net realized
gain on investments............... - (5.45) (11.02) (3.18) (.33) -
Dividends in excess of net realized
gain on investments............... - - - - (.11) -
------ ------ ------ ------- -------- --------
TOTAL DISTRIBUTIONS............... - (5.60) (11.17) (3.33) (.60) -
------ ------ ------ ------- -------- --------
Net asset value, end of period...... $10.21 $20.60 $22.71 $ 34.45 $ 36.52 $ 41.95
====== ====== ====== ======= ======== ========
TOTAL INVESTMENT RETURN................. 2.10%(3) 159.73% 71.28% 68.31% 7.75% 14.87%(3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net
assets............................ .34%(3) 1.16% .94% .25% .55% .42%(3)
Ratio of net investment income to
average net assets................ 2.10%(3) .77% .76% .89% 1.18% .37%(3)
Decrease reflected in above expense
ratios due to undertakings by
The Dreyfus Corporation........... 84.84%(3) 3.64% 2.29% 1.79% .52% -
Portfolio Turnover Rate............. - 388.70% 358.27% 244.59% 106.00% 49.06%(3)
Net assets, end of period (000's
Omitted).......................... $ 36 $1,554 $2,679 $18,337 $173,215 $339,575
</TABLE>
------------
(1) From August 31, 1990 (commencement of operations) to December 31, 1990.
(2) Based on average shares outstanding.
(3) Not annualized.
See independent accountants' review report and notes to financial statements.
52
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO
-------------------------------------------
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30, 1995
-----------------------
PER SHARE DATA: 1993(1) 1994 (UNAUDITED)
------- ------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period....................... $12.50 $13.27 $13.44
------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net...................................... .08 .23 .16
Net realized and unrealized gain on investments............ .76 .17 2.14
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS......................... .84 .40 2.30
------ ------ ------
DISTRIBUTIONS;
Dividends from investment income-net....................... (.07) (.23) -
------ ------ ------
Net asset value, end of period............................. $13.27 $13.44 $15.74
====== ====== ======
TOTAL INVESTMENT RETURN........................................ 6.74%(2) 3.04% 17.11%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.................... .28%(2) .25% .42%(2)
Ratio of net investment income to average net assets....... 1.89%(2) 2.99% 1.37%(2)
Decrease reflected in above expense ratios due to undertakings
by The Dreyfus Corporation............................... 3.67%(2) .86% .03%(2)
Portfolio Turnover Rate.................................... .01%(2) .12% 1.13%(2)
Net assets, end of period (000's Omitted).................. $3,770 $16,118 $27,968
</TABLE>
(1) From April 5, 1993 (commencement of operations) to December 31, 1993.
(2) Not annualized.
See independent accountants' review report and notes to financial statements.
53
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
GROWTH AND INCOME PORTFOLIO
-------------------------------
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1995
PER SHARE DATA: 1994(1) (UNAUDITED)
----------- ----------------
<S> <C> <C>
Net asset value, beginning of period.................................. $12.50 $11.98
------ ------
INVESTMENT OPERATIONS:
Investment income-net................................................. .28 .14
Net realized and unrealized gain (loss) on investments ............... (.43) 4.00
------ ------
TOTAL FROM INVESTMENT OPERATIONS.................................... (.15) 4.14
------ ------
DISTRIBUTIONS:
Dividends from investment income-net.................................. (.28) (.14)
Dividends from net realized gain on investments....................... (.09) -
------ ------
TOTAL DISTRIBUTIONS................................................. (.37) (.14)
------ ------
Net asset value, end of period........................................ $11.98 $15.98
====== ======
TOTAL INVESTMENT RETURN................................................... (1.22)%(2) 34.65%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets............................... .22%(2) .47%(2)
Ratio of net investment income to average net assets.................. 2.25%(2) 1.72%(2)
Decrease reflected in above expense ratios due to undertakings
by The Dreyfus Corporation.......................................... 1.28%(2) .11%(2)
Portfolio Turnover Rate............................................... 237.09%(2) 194.28%(2)
Net assets, end of period (000's Omitted)............................. $1,040 $19,961
</TABLE>
---------------
(1) From May 2, 1994 (commencement of operations) to December 31, 1994.
(2) Not annualized.
See independent accountants' review report and notes to financial statements.
54
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO
--------------------------------
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1995
PER SHARE DATA: 1994(1) (UNAUDITED)
------- ----------------
<S> <C> <C>
Net asset value, beginning of period.................................. $12.50 $12.02
------ ------
INVESTMENT OPERATIONS:
Investment income-net................................................. .15 .15
Net realized and unrealized gain (loss) on investments and foreign
currency transactions............................................... (.40) .02
------ ------
TOTAL FROM INVESTMENT OPERATIONS.................................... (.25) .17
------ ------
DISTRIBUTIONS:
Dividends from investment income-net.................................. (.14) -
Dividends in excess of investment income-net.......................... (.09) -
------ ------
TOTAL DISTRIBUTIONS................................................. (.23) -
------ ------
Net asset value, end of period........................................ $12.02 $12.19
====== ======
TOTAL INVESTMENT RETURN................................................... (2.00)%(2) 1.42%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets............................... .23%(2) .63%(2)
Ratio of net investment income to average net assets.................. 1.11%(2) 1.42%(2)
Decrease reflected in above expense ratios due to undertakings
by The Dreyfus Corporation.......................................... 1.70%(2) .59%(2)
Portfolio Turnover Rate............................................... 16.75%(2) 28.13%(2)
Net assets, end of period (000's Omitted)............................. $1,089 $3,987
</TABLE>
(1) From May 2, 1994 (commencement of operations) to December 31, 1994.
(2) Not annualized.
See independent accountants' review report and notes to financial statements.
55
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1-GENERAL:
The Fund is registered under the Investment Company Act of 1940 ("Act")
as an open-end management investment company and is intended to be a funding
vehicle for variable annuity contracts and variable life insurance policies
to be offered by the separate accounts of life insurance companies. The Fund
issues eight classes of shares of Beneficial Interest: the Money Market,
Managed Assets, Zero Coupon 2000, Quality Bond, Small Cap and Capital
Appreciation Portfolios are diversified portfolios. The Growth and Income and
International Equity Portfolios are non-diversified portfolios. The Dreyfus
Corporation ("Dreyfus") serves as the Fund's investment adviser. Dreyfus is a
direct subsidiary of Mellon Bank, N.A. With respect to the Managed Assets,
Capital Appreciation and International Equity Portfolios, Comstock Partners,
Inc. ("Comstock Partners"), Fayez Sarofim & Co. ("Sarofim") and M&G
Investment Management Limited ("M&G") serve as the Series' sub-investment
adviser, respectively. Premier Mutual Fund Services, Inc. (the
"Distributor") acts as the distributor of the Fund's shares, which are sold
without a sales charge. The Distributor, located at One Exchange Place,
Boston, Massachusetts 02109, is a wholly-owned subsidiary of FDI Distribution
Services, Inc., a provider of mutual fund administration services, which in
turn is a wholly-owned subsidiary of FDI Holdings, Inc., the parent company
of which is Boston Institutional Group, Inc.
It is the Fund's policy, with respect to the Money Market Portfolio, to
maintain a continuous net asset value per share of $1.00; the Fund has
adopted certain investment, portfolio valuation and dividend and distribution
policies to enable it to do so. There is no assurance, however, that the Fund
will be able to maintain a stable net asset value of $1.00 per share, with
respect to the Money Market Portfolio.
The Fund currently functions as the funding vehicle for the Dreyfus
Series 2000 Variable Annuity Contract (the "Account") issued by Mutual
Benefit Life Insurance Company ("Mutual Benefit Life"). On July 16, 1991, the
Superior Court of New Jersey entered an Order (the "Order") appointing the
New Jersey Insurance Commissioner as Rehabilitator of Mutual Benefit Life.
The Commissioner was granted immediate exclusive possession and control of,
and title to, the business and assets of Mutual Benefit Life, including the
assets and liabilities of the Account.
The Commissioner was empowered by the Order to take such steps as he
deemed appropriate toward removing the cause and conditions that made
rehabilitation necessary. On January 15, 1993, the Commissioner filed the
First Amended Plan of Rehabilitation ("Plan") with the Court. The Plan
stipulated that the assets and liabilities of the Account would be
transferred to a separate account of MBL Life Assurance Corporation
("MBLLAC"), a wholly-owned subsidiary of Mutual Benefit Life. The Plan also
provided for the transfer of the ownership of the stock of MBLLAC to a Trust.
The Commissioner was designated as the sole Trustee of the Trust. On August
12, 1993, the Court rendered an opinion approving the Plan with certain
modifications. Two subsequent amendments to the Plan were filed and approved
by the Court. None of the modifications or amendments affected the status of
the Account. On November 10, 1993, the Court issued an Order of Confirmation
permitting the implementation of the Plan.
An order was also issued by the Court on January 28, 1994, approving the
form of the Third Amended Plan of Rehabilitation, the Election Materials and
related documents. On April 29, 1994, the Plan was implemented. Substantially
all of the assets of Mutual Benefit Life were transferred to MBLLAC and
MBLLAC assumed and reinsured Mutual Benefit Life's restructured insurance
liabilities. The stock of MBLLAC was assigned to the Stock Trust and the
Commissioner was designated as Trustee.
56
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
In view of the terms and conditions of both the Order and the Plan,
applications for new contracts and additional purchase payments under
existing contracts are currently not being accepted by the Account. The terms
of the Order and the Plan permit redemptions from the Account to continue as
requested.
The proceedings of the New Jersey Insurance Commissioner with respect to
Mutual Benefit Life or the Account do not apply to the separate accounts of
other life insurance companies that may use the Fund as a funding vehicle for
contracts or policies issued by them.
As of June 30, 1995, Dreyfus held the following shares:
<TABLE>
<CAPTION>
<S> <C>
Money Market Portfolio........... 26,188 Quality Bond Portfolio........... 2,813
Managed Assets Portfolio......... 2,332 Small Cap Portfolio.............. 4,511
Zero Coupon 2000 Portfolio....... 2,780 International Equity Portfolio... 81,530
</TABLE>
NOTE 2-SIGNIFICANT ACCOUNTING POLICIES:
(a) PORTFOLIO VALUATION:
Money Market Portfolio:
Investments are valued at amortized cost, which has been determined by
the Fund's Board of Trustees to represent the fair value of the Series'
investments.
Managed Assets, Capital Appreciation, Small Cap, Growth and Income and
International Equity Portfolios:
Investments in securities (including options and financial futures) are
valued at the last sales price on the securities exchange on which such
securities are primarily traded or at the last sales price on the national
securities market. Securities not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices, except for
open short positions, where the asked price is used for valuation purposes.
Bid price is used when no asked price is available. Investments denominated
in foreign currencies are translated to U.S. dollars at the prevailing rates
of exchange. Forward currency exchange contracts are valued at the offsetting
rate.
Zero Coupon 2000 and Quality Bond Portfolios:
Investments (excluding short-term investments and U.S. Government
obligations) are valued each business day by an independent pricing service
("Service") approved by the Board of Trustees. Investments for which quoted
bid prices are readily available and are representative of the bid side of
the market in the judgement of the Service are valued at the mean between the
quoted bid prices (as obtained by the Service from dealers in such
securities) and asked prices (as calculated by the Service based upon its
evaluation of the market for such securities). Other investments (which
constitute a majority of the Portfolios' securities) are carried at fair
value as determined by the Service, based on methods which include
consideration of: yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers; and general
market conditions. Investments in U.S. Government obligations are valued at
the mean between quoted bid and asked prices. Short-term investments are
carried at amortized cost, which approximates value.
57
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(b) FOREIGN CURRENCY TRANSACTIONS: The Fund does not isolate that portion
of the results of operations resulting from changes in foreign exchange rates
on investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales
and maturities of short-term securities, sales of foreign currencies,
currency gains or losses realized on securities transactions, the difference
between the amounts of dividends, interest and foreign withholding taxes
recorded on the Fund's books, and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains or losses
arise from changes in the value of assets and liabilities other than
investments in securities at fiscal year end, resulting from changes in
exchange rates.
(c) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(d) AFFILIATED ISSUERS: Issuers in which the Fund held 5% or more of the
outstanding voting securities are defined as "affiliated" in the Act.
(e) EXPENSES: Expenses directly attributable to each series are charged
to that series' operations; expenses which are applicable to all series, are
allocated among them.
(f) DIVIDENDS TO SHAREHOLDERS: Dividends payable to shareholders are
recorded by the Fund on the ex-dividend date.
The Money Market Portfolio declares dividends daily from investment
income-net; such dividends are paid monthly. The Managed Assets, Capital
Appreciation, Small Cap and International Equity Portfolios declare and pay
dividends from investment income-net annually. The Zero Coupon 2000 and
Quality Bond Portfolios declare and pay dividends from investment income-net
monthly. The Growth and Income Portfolio declares and pays dividends from
investment income-net quarterly. Dividends from net realized capital gains
for each series are normally declared and paid annually.
Each series may make distributions from capital gains and with respect to
the Managed Assets, Capital Appreciation, Small Cap and International Equity
series may make distributions from investment income-net on a more frequent
basis to comply with the distribution requirements of the Internal Revenue
Code. This may result in distributions that are in excess of investment
income-net and net realized capital gains on a fiscal year basis. However, to
the extent that a net realized capital gain of any series can be reduced by a
capital loss carryover, if any, of that series, such gain will not be
distributed.
(g) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes. For Federal income tax purposes, each series is treated as a
single entity for the purpose of determining such qualification.
58
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The Managed Assets Portfolio has an unused capital loss carryover of
approximately $369,600 available for Federal income tax purposes to be
applied against future net securities profits, if any, realized subsequent to
December 31, 1994. If not applied, $5,500 of the carryover expires in fiscal
2001 and $364,100 expires in fiscal 2002.
The Quality Bond Portfolio has an unused capital loss carryover of
approximately $31,100 available for Federal income tax purposes to be applied
against future net securities profits, if any, realized subsequent to
December 31, 1994. The carryover does not include net realized securities
losses from November 1, 1994 through December 31, 1994, which are treated,
for Federal income tax purposes, as arising in fiscal 1995. If not applied,
the carryover expires in fiscal 2002.
The International Equity Portfolio has an unused capital loss carryover
of approximately $8,300 available for Federal income tax purposes to be
applied against future net securities profits, if any, realized subsequent to
December 31, 1994. The carryover does not include net realized securities
losses from November 1, 1994 through December 31, 1994, which are treated,
for Federal income tax purposes, as arising in fiscal 1995. If not applied,
the carryover expires in fiscal 2002.
NOTE 3-INVESTMENT ADVISORY FEE, SUB-INVESTMENT ADVISORY FEES AND OTHER
TRANSACTIONS WITH AFFILIATES:
(a) Fees payable by the Fund pursuant to the provisions of an Investment
Advisory Agreement with Dreyfus are payable monthly, computed on the average
daily value of each series' net assets at the following annual rates: .50 of
1% of the Money Market Portfolio; .375 of 1% of the Managed Assets Portfolio;
.45 of 1% of the Zero Coupon 2000 Portfolio; .65 of 1% of the Quality Bond
Portfolio; .75 of 1% of the Small Cap Portfolio; .55 of 1% of the first $150
million, .50 of 1% of the next $150 million, and .375 of 1% over $300 million
of the Capital Appreciation Portfolio; .75 of 1% of the Growth and Income
Portfolio; and .75 of 1% of the International Equity Portfolio. With respect
to the Managed Assets Portfolio, pursuant to a Sub-Investment Advisory
Agreement with Comstock Partners, the sub-investment advisory fee is computed
at an annual rate of .375 of 1% of the average daily value of the series' net
assets and is payable monthly. With respect to the Capital Appreciation
Portfolio, pursuant to a Sub-Investment Advisory Agreement with Sarofim, the
sub-investment advisory fee is computed at an annual rate of .20 of 1% of the
first $150 million; .25 of 1% of the next $150 million; and .375 of 1% over
$300 million of the average daily value of the series' net assets and is
payable monthly. With respect to the International Equity Portfolio, pursuant
to a Sub-Investment Advisory Agreement between Dreyfus and M&G, the
sub-investment advisory fee is computed at an annual rate of .30 of 1% of the
average daily value of the series' net assets and is payable monthly by
Dreyfus.
The agreements further provide that if in any full year the aggregate
expenses of any series, exclusive of taxes, brokerage, interest on borrowings
and extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Fund, that series may deduct from the payments to be
made to Dreyfus (and Comstock Partners, Sarofim or M&G, with respect to the
Managed Assets, Capital Appreciation and International Equity Portfolios,
respectively), or Dreyfus (and Comstock Partners, Sarofim or M&G, with
respect to the Managed Assets, Capital Appreciation and International Equity
Portfolios, respectively) will bear the amount of such excess to the extent
required by state law.
59
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
However, Dreyfus has undertaken, with respect to the Money Market
Portfolio, from January 1, 1995 through February 1, 1995,
to reduce the investment advisory fee paid by the series, to the extent that
the series' aggregate expenses (excluding certain expenses as described
above) exceeded specified annual percentages of the series' average daily net
assets. With respect to the Managed Assets, Capital Appreciation and Zero
Coupon 2000 Portfolios, Dreyfus has undertaken from January 1, 1995 through
June 30, 1995 to reduce the investment advisory fee paid by the series, to
the extent that the series' aggregate expenses (excluding certain expenses as
described above) exceeded specified annual percentages of the series' average
daily net assets. With respect to the Quality Bond and Growth and Income
Portfolios, Dreyfus has undertaken from January 1, 1995 through June 30,
1995, to reduce the investment advisory fee paid by the series, to the extent
that the series' aggregate expenses (excluding certain expenses as described
above) exceeded specified annual percentages of the series' average daily net
assets. With respect to the International Equity Portfolio, Dreyfus had
undertaken from January 1, 1995 through July 11, 1995 to reimburse expenses
(excluding certain expenses as described above) to the extent that such
expenses exceeded specified annual percentages of the series' average daily
net assets. Dreyfus has currently undertaken from July 11, 1995 through
September 30, 1995, to reimburse expenses (excluding certain expenses as
described above) in excess of an annual rate of 1.50% of the series' average
daily net assets.
The expense reimbursements, pursuant to the undertakings, amounted to the
following for the six months ended June 30, 1995:
<TABLE>
<S> <C> <C> <C>
Money Market Portfolio........... $10,251 Small Cap Portfolio................. $ -
Managed Assets Portfolio......... - Capital Appreciation Portfolio...... 6,445
Zero Coupon 2000 Portfolio....... 4,371 Growth and Income Portfolio......... 8,655
Quality Bond Portfolio........... 10,017 International Equity Portfolio...... 12,746
</TABLE>
The undertakings may be modified by Dreyfus from time to time, provided
that the resulting expense reimbursement would not be less than the amount
required pursuant to the agreements.
(b) Each trustee who is not an "affiliated person," as defined in the
Act, of Dreyfus, Comstock Partners, Sarofim, M&G and/or Dreyfus Service
Corporation receives from the Fund an annual fee of $2,500 and an attendance
fee of $250 per meeting. The Chairman of the Board receives an additional 25%
of such compensation.
60
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 4-SECURITIES TRANSACTIONS:
(a) The following summarizes the aggregate amount of purchases and sales
of investment securities and securities sold short by the Fund, excluding
short-term securities, options and forward currency exchange contracts, for
the six months ended June 30, 1995:
<TABLE>
<CAPTION>
LONG TRANSACTIONS:
PURCHASES SALES
-------------- --------------
<S> <C> <C>
Managed Assets Portfolio...................................................... $ 5,637,934 $ 1,764,395
Zero Coupon 2000 Portfolio.................................................... 6,244,490 3,231,619
Quality Bond Portfolio........................................................ 22,023,551 19,650,500
Small Cap Portfolio
Unaffiliated issuers................................ $246,031,870
Affiliated issuers.................................. 867,700
------------
246,899,570 104,292,931
Capital Appreciation Portfolio................................................ 9,128,608 194,955
Growth and Income Portfolio................................................... 26,929,010 11,896,960
International Equity Portfolio................................................ 2,867,115 482,842
SHORT SALE TRANSACTIONS:
PURCHASES SALES
-------------- --------------
Small Cap Portfolio........................................................... $ 3,288,374 $ 3,026,125
Growth and Income Portfolio................................................... 142,000 128,625
</TABLE>
With respect to the Small Cap and Growth and Income Portfolios, each
series is engaged in short-selling which obligates each
series to replace the security borrowed by purchasing the security at current
market value. Each series would incur a loss if the price of the security
increases between the date of the short sale and the date on which each
series replaces the borrowed security. Each series would realize a gain if
the price of the security declines between those dates. Until each series
replaces the borrowed security, each series will maintain daily, a segregated
account with a broker and custodian of cash and/or U.S. Government securities
sufficient to cover its short position. At June 30, 1995, there were no
securities sold short outstanding.
In addition, the following summarizes open forward currency exchange
contracts for the Managed Assets Portfolio at June 30, 1995:
<TABLE>
<CAPTION>
U.S. DOLLAR UNREALIZED
FORWARD CURRENCY SALE CONTRACTS PROCEEDS VALUE (DEPRECIATION)
------------------------------- ------------- -------------- -------------
<S> <C> <C> <C>
German Deutschemarks, expiring 8/15/95 $ 1,887,980 $ 1,957,657 $ (69,677)
Hong Kong Dollars, expiring 7/5/95 5,980 5,980 ---
Swiss Francs, expiring 8/15/95 3,782,148 3,930,818 (148,670)
------------- -------------- --------------
$ 5,676,108 $ 5,894,455 $ (218,347)
============= ============== ==============
</TABLE>
With respect to the Managed Assets and International Equity Portfolios,
each series enters into forward currency exchange contracts. When executing
forward currency exchange contracts, each series is obligated to buy or sell
a foreign currency at a specified rate on a certain date in the future. With
respect to sales of forward currency exchange contracts, each series would
incur a loss if
61
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
the value of the contract increases between the date the forward contract is
opened and the date the forward contract is closed. Each series realizes a
gain if the value of the contract decreases between those dates. With
respect to purchases of forward currency exchange contracts, each series
would incur a loss if the value of the contract decreases between the date
the forward contract is opened and the date the forward contract is closed.
Each series realizes a gain if the value of the contract increases between
those dates. Each series' exposure to credit risk associated with counter
party nonperformance on these investments is typically limited to the
unrealized gains in such contracts that are recognized in the Statement of
Assets and Liabilities.
With respect to the Managed Assets Portfolio, the series is engaged in
trading financial futures contracts. The series is exposed to market risk as
a result of changes in the value of the underlying financial instruments (see
the Statement of Financial Futures). Investments in financial futures require
the series to "mark to market" on a daily basis, which reflects the change in
the market value of the contract at the close of each day's trading.
Typically, variation margin payments are made or received to reflect daily
unrealized gains or losses. When the contracts are closed, the series
recognizes a realized gain or loss. These investments require initial margin
deposits with a custodian, which consist of cash or cash equivalents, up to
approximately 10% of the contract amount. The amount of these deposits is
determined by the exchange or Board of Trade on which the contract is traded
and is subject to change. Contracts open at June 30, 1995, and their related
unrealized market depreciation are set forth in the Statement of Financial
Futures.
With respect to the Managed Assets Portfolio, the series is also engaged
in trading restricted options, which are not exchange traded. The series'
exposure to credit risk associated with counter party nonperformance on these
investments is typically limited to the market value of such investments that
are disclosed in the Statement of Investments.
(b) The following summarizes the accumulated net unrealized appreciation
(depreciation) on investments and financial futures for each series at June
30, 1995, excluding foreign currency transactions for the Managed Assets and
International Equity Portfolios:
<TABLE>
<CAPTION>
GROSS GROSS
APPRECIATION (DEPRECIATION) NET
------------ -------------- ------------
<S> <C> <C> <C>
Money Market Portfolio.......................... $ - $ - $ -
Managed Assets Portfolio........................ 2,242,324 (2,372,611) (130,287)
Zero Coupon 2000 Portfolio...................... 431,653 (46,300) 385,353
Quality Bond Portfolio.......................... 594,204 (158,275) 435,929
Small Cap Portfolio............................. 45,313,700 (5,261,998) 40,051,702
Capital Appreciation Portfolio.................. 3,318,826 (43,069) 3,275,757
Growth and Income Portfolio..................... 1,457,106 (128,301) 1,328,805
International Equity Portfolio.................. 162,863 (100,364) 62,499
</TABLE>
At June 30, 1995, the cost of investments of each series for Federal
income tax purposes was substantially the same as the cost for financial
reporting purposes. The cost of investments for each series for financial
reporting purposes as of June 30, 1995, was as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Money Market Portfolio................... $36,250,022 Small Cap Portfolio.................... $296,012,506
Managed Assets Portfolio................. 29,095,886 Capital Appreciation Portfolio......... 24,199,717
Zero Coupon 2000 Portfolio............... 14,960,069 Growth and Income Portfolio............ 19,212,074
Quality Bond Portfolio................... 20,944,531 International Equity Portfolio......... 3,820,008
</TABLE>
62
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
REVIEW REPORT OF ERNST & YOUNG LLP, INDEPENDENT ACCOUNTANTS
SHAREHOLDERS AND BOARD OF TRUSTEES
DREYFUS VARIABLE INVESTMENT FUND
We have reviewed the accompanying statements of assets and liabilities,
including the statements of investments and financial futures of Dreyfus
Variable Investment Fund (comprising, respectively, the Money Market, Managed
Assets, Zero Coupon 2000, Quality Bond, Small Cap, Capital Appreciation,
Growth and Income and International Equity Portfolios), as of June 30, 1995,
and the related statements of operations and changes in net assets and
financial highlights for the six month period ended June 30, 1995. These
financial statements and financial highlights are the responsibility of the
Fund's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which
will be performed for the full year with the objective of expressing an
opinion regarding the financial statements and financial highlights taken as
a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the interim financial statements and financial highlights
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the statement of changes in net assets for the year ended
December 31, 1994 and financial highlights for each of the indicated periods
ended December 31, 1994 and in our report dated February 13, 1995, we
expressed an unqualified opinion on such statement of changes in net assets
and financial highlights.
/s/ Ernst & Young LLP
New York, New York
August 7, 1995
63
<PAGE>
President's Letter
August 15, 1995
Security
Funds
Dear Shareholder:
The generally positive investment environment that marked the first half
of 1995 was cheered by fixed-income investors, especially following 1994 - the
worst year for bonds since the Great Depression. Fixed-income investors who
remained in the market had the opportunity in the first half of 1995 to make up
for last year's losses and then some! History shows that market fluctuations are
inevitable. However, investors who remain committed and continue to invest
regardless of the overall level of the market stand to benefit over time.*
A gradual slowdown in economic growth and continued subdued inflation
produced a strong bond market rally in the first half of 1995. It appears the
Federal Reserve Board's five short-term interest rate increases in 1994 and
early 1995 were successful in cooling the economy and keeping inflation under
control. Early concern about whether the economy could have a soft landing gave
way to the belief by many that the economy had a "perfect" landing.
Triggering the bond market rally was a dramatic decline in interest rates
across all maturity sectors. Investors in taxable long-term bonds benefited from
substantial price appreciation. Tax-exempt bonds also experienced a remarkable
recovery in the second quarter thanks to declining interest rates. Only short-
term money funds saw yields decline.
Globally, the European bond market underperformed the U.S. market during
the six-month period. However, attractive buys are available on a country-by-
country basis. We anticipate that our new Global Aggressive Bond Fund's exposure
to the U.S. bond market will decrease as Treasury bills are sold and the
proceeds invested in European bonds. The portfolio will also maintain its
significant weighting in southern European countries. With the exception of
Turkey, all these countries are showing progress in reducing inflation and
government deficits.
Looking forward through the rest of 1995, we expect interest rates will
moderate slightly, providing continuing attractive returns for fixed-income
investors. We believe conditions should remain generally favorable for owners of
all types of financial assets for the remainder of the year.
Over the next several pages, we review the factors influencing the performance
of Security Tax-Exempt Fund, Security Cash Fund and each Series of Security
Income Fund for the six-month period ended June 30, 1995. As always, our goal is
to provide you with positive investment results over time along with the
highest-quality service in the industry. We invite your questions and comments.
Please call our customer service center at 1-800-888-2461, extension 3127.
Sincerely,
John D. Cleland
President - Security Funds
*Programs of regular investing do not assure profits or protect against loss in
a declining market.
<PAGE>
SECURITY FUNDS
AUGUST 15, 1995
SECURITY
FUNDS
THE SECURITY MANAGEMENT FIXED-INCOME TEAM:
ELAINE MILLER, JANE TEDDER, GREG HAMILTON, JOHN CLELAND, TOM SWANK, STEVE BOWSER
CORPORATE BOND SERIES
AVERAGE ANNUAL TOTAL RETURN
AS OF JUNE 30, 1995
CLASS A SHARES CLASS B SHARES
1 Year 5.26% 1 Year 4.82%
5 Years 7.33% Since Inception 4.12%
10 Years 8.21% 10-19-93
AAA
1.6%
AA
26.4%
A
64.9%
BBB
4.9%
CASH AND EQUIVALENTS
2.2%
SECURITY INCOME FUND
CORPORATE BOND SERIES
U.S. GOVERNMENT SERIES
LIMITED MATURITY BOND SERIES
SECURITY TAX-EXEMPT FUND
SECURITY CASH FUND
The bond markets were much kinder to fixed-income investors in the first six
months of 1995 than they were in 1994. We were pleased with the actions taken by
the Federal Reserve Open Market Committee last year to keep inflation under
control. As economic activity slowed, fears of rampant inflation disappeared and
bond prices moved upward, producing attractive total returns for shareholders.
When bond prices rise, a portfolio can benefit most by being on the long end of
the yield curve as was the Corporate Bond Series; that is, by holding securities
that are longer than average in maturity and duration. By the same token, a
portfolio which is on the long end of the yield curve will be at a disadvantage
when bond prices fall.
Being on the long end of the yield curve also allowed the U.S. Government Series
to perform very well for the period. The decision was made early in 1995 to
extend the maturities of many of the portfolio holdings out beyond 20 years,
thereby maximizing performance in the strong bond market. The bonds held in this
fund are of the highest credit quality, as all are issued by the U.S.
Government, its agencies or instrumentalities.* This high credit standard did
not constrain performance, however, as the total return for the six-month period
was 12.07%.**
<PAGE>
U.S. GOVERNMENT SERIES
AVERAGE ANNUAL TOTAL RETURN
AS OF JUNE 30, 1995
CLASS A SHARES CLASS B SHARES
1 Year 6.29% 1 Year 5.71%
5 Years 7.20% Since Inception -1.84%
10 Years 8.04% 10-19-93
AAA
30.3%
AA
12.9%
A
38.0
BBB
11.3%
BB
4.1%
CASH AND EQUIVALENTS
3.4%
LIMITED MATURITY BOND SERIES
AVERAGE ANNUAL TOTAL RETURN
AS OF JUNE 30, 1995
CLASS A SHARES
Since Inception 1-17-95 3.60%*
CLASS B SHARES
Since Inception 1-17-95 3.34%*
*The percentage amounts are from inception and not annualized.
FNMAS
39.6%
GNMAS
22.0%
TREASURY
36.4%
CASH AND EQUIVALENTS
2.0%
A new addition to the Security Income Fund family in 1995, the Limited Maturity
Bond Series, also performed well with a total return of 8.7% since its inception
on January 17, 1995.** This series is designed for investors who seek a higher
dividend yield than offered by money market funds, but who do not want the
additional risk that generally accompanies a long-maturity bond fund. However,
as with all bond funds, the share price of the Series will fluctuate inversely
with changes in interest rates. The weighted average maturity of the securities
in the Limited Maturity Bond Series will not exceed 10 years. While this
maturity restriction may dampen total return performance in periods of rapidly
rising bond prices, it will also reduce potential losses in periods of declining
prices.
Investors' concerns about possible tax reform legislation and its impact on
municipal bonds held back performance in the tax exempt sector of the fixed-
income markets. Although performance in municipal bond funds was not as
spectacular as that of the taxable arena, the Security Tax Exempt Fund still
provided an attractive 7.81%** total return for the six-month period.*** As in
our other bond funds, the longer maturities of the securities in the portfolio
contributed to the strong results. At Security Management Company, we are
closely monitoring the numerous tax proposals submitted to Congress for
consideration. We believe, however, that it will be at least two years before
any kind of change can be effected in the tax structure. Any final legislation
will almost
<PAGE>
certainly differ a great deal from the proposals being discussed at this time.
Meanwhile, the municipal market seems undervalued at today's prices, and may
present an appealing investment option.
Interest rate increases initiated by the Federal Reserve Open Market Committee
in 1994 allowed dividend yields on the Security Cash Fund to rise along with
other short-term investment instruments.+ The seven-day yield at June 30, 1995,
was 5.14%, compared with a rate of 3.42% on the same date in 1994. This fund
invests only in high-quality money market instruments, providing an excellent
option for short-term investments.
The Fixed-Income Management Team continually monitors economic changes and
developments, and is prepared to make adjustments accordingly. We are confident
that the Federal Reserve Board remains determined to keep inflation under
control, which should prove to be positive for the bond markets. We anticipate
interest rates will continue to decline in the second half of 1995, providing
continued attractive returns for shareholders.
TAX-EXEMPT FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF JUNE 30, 1995
CLASS A SHARES CLASS B SHARES
1 Year 0.78% 1 Year -0.46%
5 Years 5.65% Since Inception -4.55%
10 Years 6.58% 10-19-93
AAA
8.3%
AA
61.9%
A
17.2%
BBB
10.4%
CASH AND EQUIVALENTS
2.2%
*Although the securities purchased by the U.S. Government Series are guaranteed
as to the timely payment of principal and interest by the U.S. Government, its
agencies or instrumentalities, the shares of the Series itself are not so
guaranteed.
**These performance figures are based on Class A share prices and do not reflect
deduction of the sales charge.
***Income from the Security Tax-Exempt Fund may be subject to the alternative
minimum tax.
+The Security Cash Fund is neither insured nor guaranteed by the U.S. Government
and there is no assurance that the fund will be able to maintain a stable net
asset value of $1.00 per share.
The performance data given here represents past performance, which is not
predictive of future results. For Class A shares these figures reflect deduction
of the maximum sales charge of 4.75%. For Class B shares the total return
includes deduction of the maximum contingent deferred sales charge. The
investment return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
<PAGE>
SECURITY FUNDS
AUGUST 15, 1995
SECURITY
FUNDS
GLOBAL AGGRESSIVE BOND SERIES
SUBADVISORS - MFR ADVISORS, INC., AND LEXINGTON MANAGEMENT CORPORATION
PORTFOLIO MANAGERS, MARIA FIORINI RAMIREZ AND DENIS JAMISON
Introduced June 1, 1995, our new Global Aggressive Bond Series' seeks to provide
shareholders a high level of current income with capital appreciation as a
secondary objective. No single bond market has consistently provided the best
returns, and the opportunity for maximum yield shifts from country to country.
The Series offers income oriented investors the opportunity to globally
diversify their portfolios with exposure to potentially the most attractive
fixed-income investments worldwide. To accomplish its goal, the Series purchases
fixed-income investments based upon positive outlooks for individual countries:
their economies, currencies and interest rates.
As of June 30, 1995, the Series portfolio was invested 54% in non-dollar
denominated bonds and 46% in dollar denominated bonds. We believe the
combination of a slowing domestic economy and declining short-term interest
rates limits the U.S. dollar's appreciation potential. As a result, the
portfolio's U.S. dollar exposure will likely decline to around 30% over the next
several months.
One of the portfolio's largest concentrations is in Southern European countries,
which are all showing progress on reducing inflation and government deficits.
Their currencies are tightening relative to those in the core European countries
of Switzerland, Germany and France. However, the portfolio's small position in
Turkey, whose currency is depreciating, is designed to boost the portfolio's
nominal yield.
As of June 30, 1995, the average maturity of the portfolio was 9.7 years.
However, some of the positions in the portfolio have variable interest rates
which are likely to reset sooner than the average maturity would indicate.
Because of their relatively stable economic environments, the bulk of the longer
term assets are in the U.S. dollar block - U.S., Canada and Australia - and core
European countries.
Investing in foreign countries may involve risks, such as currency fluctuations
and political instability, not associated with investing exclusively in the U.S.
<PAGE>
STATEMENTS OF NET ASSETS
JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- -----------
<C> <S> <C>
CORPORATE BONDS
AEROSPACE & DEFENSE - 5.1%
$4,900,000 Lockheed Corporation, 7.875% - 2023 ....................... $ 5,028,625
ALUMINUM - 1.1%
1,000,000 Alcan Aluminum Ltd., 9.625% - 2019 ........................ 1,146,250
BANKS - 8.2%
3,640,000 Citicorp, 9.375% - 2016 ................................... 3,844,750
4,000,000 Bank of Montreal, 7.80% - 2007 ............................ 4,225,000
-----------
8,069,750
BROKERS, DEALERS & SERVICES - 5.4%
1,000,000 Bear Stearns, 8.75% - 2004 ................................ 1,101,250
4,000,000 Lehman Brothers Holdings, Inc., 8.50% - 2007 .............. 4,230,000
-----------
5,331,250
DISCOUNT STORES - 4.5%
4,500,000 Wal-Mart Stores, Inc., 7.25% - 2013 ....................... 4,483,125
DRUGS - 4.5%
4,500,000 Eli Lilly & Company, 7.125% - 2025 ........................ 4,449,375
DRUG STORES - 5.1%
4,800,000 Rite Aid Corporation, 7.625% - 2005 ....................... 5,064,000
FOOD & BEVERAGE TRADE - 4.5%
4,300,000 Super Valu Stores, 8.875% - 2016 .......................... 4,504,250
INSURANCE - 4.5%
4,000,000 GEICO Corporation, 9.15% - 2021 ........................... 4,490,000
LUMBER & WOOD PRODUCTS - 4.9%
4,500,000 Georgia Pacific Company, 9.125% - 2022 .................... 4,826,250
MACHINERY - 3.5%
3,500,000 Ingersoll-Rand Company, 7.20% - 2025 ...................... 3,430,000
PAPER PRODUCTS - 9.7%
4,600,000 International Paper Products, 7.625% - 2007 ............... 4,887,500
5,000,000 Scott Paper Company, 7.00% - 2023 ......................... 4,650,000
-----------
9,537,500
PETROLEUM REFINING & PRODUCTS - 9.6%
BPAmerica, Inc.,
3,500,000 8.75% debs. - 2003 ........................................ 3,906,875
1,000,000 10.00% debs. - 2018 ....................................... 1,116,250
4,500,000 Texaco Capital, Inc., 7.50% - 2043 ........................ 4,471,875
-----------
9,495,000
SANITARY SERVICES - 5.0%
4,500,000 Waste Management Inc., 8.75% - 2018 ....................... 4,978,125
SPECIALTY CHEMICALS & PLASTICS - 4.6%
4,000,000 Rohm & Haas Company, 9.50% - 2021 ......................... 4,525,000
TELECOMMUNICATION EQUIPMENT - 3.3%
3,000,000 Comsat Corporation, 8.125% - 2004 ......................... 3,240,000
UTILITIES - ELECTRIC - 4.5%
4,500,000 Potomac Edison Company, 7.625% - 2025 ..................... 4,421,250
UTILITIES - ELECTRIC & GAS - 8.2%
5,000,000 Public Service Electric & Gas Company, 8.75% - 2021 ....... 5,362,500
2,500,000 Washington Gas & Light Company, 8.625% - 2017 ............. 2,700,000
-----------
8,062,500
-----------
Total corporate bonds - (cost $92,018,283) - 96.2% ........ 95,082,250
GOVERNMENT & GOVERNMENT AGENCY SECURITIES
U.S. GOVERNMENT AGENCIES - 1.6%
1,500,000 Federal Home Loan Mortgage Corporation, 7.974% - 2005 ..... 1,539,240
-----------
Total government & government agency securities -
(cost $1,500,000) - 1.6% .................................. 1,539,240
-----------
Total investments - (cost $93,518,283) - 97.8% ............ 96,621,490
Cash and other assets, less liabilities - 2.2% ............ 2,199,79
-----------
Total net assets - Corporate Bond Series - 100.0% ......... $98,821,286
===========
</TABLE>
___________
See accompanying notes.
<PAGE>
STATEMENTS OF NET ASSETS
JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- ----------
<C> <S> <C>
U.S. GOVERNMENT AND GOVERNMENT AGENCY SECURITIES
FEDERAL NATIONAL MORTGAGE CORPORATION - 39.6%
$ 500,000 8.20% - 2016 .............................................. $ 560,805
1,000,000 8.10% - 2019 .............................................. 1,115,770
1,000,000 9.05% - 2021 .............................................. 1,055,730
500,000 7.93% - 2025 .............................................. 552,360
----------
3,284,665
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 22.0%
987,063 8.50%, due 8-20-24 ........................................ 1,016,945
760,861 9.50%, due 8-15-09 ........................................ 803,766
6,313 11.00%, due 10-15-15 ...................................... 6,942
----------
1,827,653
U.S. TREASURY BONDS - 35.2%
1,100,000 8.75% - 2008 .............................................. 1,266,166
1,050,000 7.25% - 2016 .............................................. 1,114,837
500,000 7.50% - 2016 .............................................. 544,720
----------
2,925,723
U.S. TREASURY NOTES - 1.2%
100,000 5.125% - 1995 ............................................. 99,804
----------
Total investments - (cost $7,712,181) - 98.0% ............. 8,137,845
Cash and other assets, less liabilities - 2.0% ............ 162,077
----------
Total net assets - U.S. Government Series - 100.0% ........ $8,299,922
==========
CORPORATE BONDS
ALUMINUM - 4.4%
148,000 Alcan Aluminum, 9.20% - 2001 .............................. $ 165,390
BANKS - 3.9%
150,000 Nationsbank, 6.50% - 2003 ................................. 146,250
ELECTRIC COMPANIES - 8.1%
150,000 Consolidated Edison Company, 6.625% - 2002 ................ 149,250
150,000 Texas Utilities Electric Company, 7.375% - 2001 ........... 154,125
----------
303,375
ELECTRIC & GAS COMPANIES - 4.3%
150,000 Public Service Electric & Gas Company, 8.75% - 1999 ....... 161,813
FINANCE - 12.8%
150,000 Ford Motor Credit Company, 8.375% - 2000 .................. 160,313
150,000 Household Finance Corporation, 8.00% - 2004 ............... 161,063
150,000 International Lease Finance Corporation, 8.25% - 2000 ..... 159,375
----------
480,751
GROCERY STORES - 4.1%
150,000 Penn Traffic Company, 10.65% - 2004 ....................... 155,813
NATURAL GAS EXPLORATION & PRODUCTION - 4.4%
150,000 Vastar Resources, Inc., 8.75% - 2005 ...................... 164,438
PETROLEUM REFINING & PRODUCTS - 4.5%
150,000 BP America, 8.75% - 2003 .................................. 167,438
RETAIL TRADE - 7.0%
100,000 Kmart Corporation, 8.125% - 2006 .......................... 104,125
150,000 Wal-Mart Stores, Inc., 7.50% - 2004 ....................... 158,438
----------
262,563
SANITARY SERVICES - 4.2%
150,000 WMX Technologies, Inc., 8.25% - 1999 ...................... 159,750
TOBACCO PRODUCTS - 4.2%
150,000 Philip Morris Companies, Inc., 7.625% - 2002 .............. 156,750
----------
Total corporate bonds - (cost $2,178,942) - 61.9% ......... 2,324,331
GOVERNMENT & GOVERNMENT AGENCY SECURITIES
CANADIAN PROVINCES - 4.4%
150,000 Province of Quebec, 8.625% - 2005 ......................... 166,125
U.S. GOVERNMENT AGENCIES - 18.0%
Federal Home Loan Bank,
150,000 7.69% - 1996 .............................................. 153,386
100,000 7.17% - 2000 .............................................. 103,750
100,000 Federal Home Loan Mortgage Corporation, 7.69% - 1996 ...... 102,285
Federal National Mortgage Association,
150,000 7.05% - 1998 .............................................. 153,556
150,000 8.50% - 2005 .............................................. 160,977
----------
673,954
U.S. TREASURY - 12.3%
U.S. Treasury Notes,
150,000 7.375% - 1997 ............................................. 154,872
150,000 7.50% - 1997 .............................................. 153,713
150,000 7.25% - 1998 .............................................. 154,866
----------
463,451
----------
Total government & government agency securities -
(cost $1,254,116) - 34.7% ................................. 1,303,530
----------
Total investments - (cost $3,433,058) - 96.6% ............. 3,627,861
Cash and other assets, less liabilities - 3.4% ............ 125,907
----------
Total net assets - Limited Maturity Bond Series - 100.0% .. $3,753,768
==========
</TABLE>
See accompanying notes.
<PAGE>
STATEMENTS OF NET ASSETS
JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
-------------- ----------
<C> <S> <C>
GOVERNMENT OBLIGATIONS
ARGENTINA - 4.5%
350,000 Republic of Argentina, 5.00% - 2023 ......................... $ 168,000
AUSTRALIA - 3.9%
200,000 Treasury Corporation of Victoria, 10.25% - 2006/2/ ........ 147,756
BRAZIL - 5.3%
350,000 Republic of Brazil, 7.25% - 2024 ............................ 200,375
CANADA - 3.8%
200,000 Republic of Canada, 8.00% - 2023/2/ ......................... 140,546
ECUADOR - 4.3%
500,000 Republic of Ecuador, 3.00% - 2025 ........................... 160,000
GERMANY - 3.8%
200,000 Bundesrepublic Deutschland, 6.875% - 2005/2/ ................ 144,243
GREECE - 8.4%
70,000,000 Hellenic Treasury Note, 17.75% - 2002/2/ .................... 313,130
IRELAND - 4.3%
100,000 Republic of Ireland, 8.00% - 2000/2/ ........................ 160,651
ITALY - 3.7%
250,000,000 Buoni Poliennali Del Tes, 8.50% - 1999/2/ ................... 138,135
PHILIPPINES - 4.8%
250,000 Central Bank of Philippines, 5.75% - 2017 ................... 180,938
PORTUGAL - 4.0%
22,500,000 Obrig Do Tes Medio Prazo, 8.875% - 1997/2/ .................. 149,045
SOUTH AFRICA - 3.1%
500,000 Republic of South Africa, 11.50% - 2000/2/ .................. 114,727
----------
Total government obligations - (cost $2,048,251) - 53.9% .... 2,017,546
CORPORATE BONDS
BRAZIL - 3.7%
150,000 Aracruz Celulose S.A., 10.375% - 2002 ....................... 139,875
CZECHOSLOVAKIA - 3.9%
3,750,000 Skofin S.R.O., 11.625% - 2008/2/ ............................ 146,430
DENMARK - 4.0%
900,000 Nykredit, 8.00% - 2026/2/ ................................... 148,051
INDONESIA - 4.1%
150,000 Indah Kiat International Finance, 11.875% - 2002 ............ 152,250
MEXICO - 3.5%
150,000 Cemex S.A., 8.875% - 1998 ................................... 129,844
SOUTH AFRICA - 3.6%
500,000 Electricity Supply Commission, 15.00% - 1998/2/ ............. 133,882
UNITED STATES - 4.1%
150,000 Chiquita Brands International, Inc., 11.50% - 2001 .......... 153,750
----------
Total corporate bonds - (cost $1,010,864) - 26.9% ........... 1,004,082
POLAND - 4.3%
380,000 Government of Poland Treasury Bill, 0% - 07/26/95/2/ ........ 159,655
TURKEY - 2.8%
5,000,000,000 Government of Turkey Treasury Bill, 0% - 08/10/95/2/ ........ 104,648
UNITED STATES - 10.6%
200,000 U.S. Treasury Bill, 5.33% - 08/31/95......................... 198,194
200,000 U.S. Treasury Bill, 5.34% - 08/31/95......................... 198,190
----------
396,384
----------
Total short-term investments - (cost $663,749) - 17.7% ...... 660,687
----------
Total investments - (cost $3,722,864) - 98.5% ............... 3,682,315
Cash and other assets, less liabilities - 1.5% .............. 57,874
----------
Total net assets - Global Aggressive Bond Series - 100.0% ... $3,740,189
==========
</TABLE>
___________
See accompanying notes.
<PAGE>
STATEMENTS OF NET ASSETS
JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- -----------
<C> <S> <C>
MUNICIPAL BONDS
EDUCATION REVENUE - 16.5%
$1,000,000 Clark County, Nevada School District, Series A, 5.50% - 2016 ....................... $ 932,500
1,250,000 Florida State Board of Education Capital Outlay Refunding, Series A, 5.50% - 2014 .. 1,182,813
1,000,000 Illinois Educational Facility Authority (Northwestern University), 6.90% - 2021 .... 1,128,750
1,000,000 North Brunswick Township, N.J. Board of Education, 6.30% - 2013 .................... 1,028,750
-----------
4,272,813
ELECTRIC UTILITY REVENUE - 19.0%
1,300,000 Intermountain Power Agency (Utah) Power Supply, Series C, 5.25% - 2014 ............. 1,196,000
1,200,000 Massachusetts Muncipal Wholesale Electric Company Power Supply System, Series B,
6.625% - 2004 ...................................................................... 1,291,500
1,000,000 Puerto Rico Electric Power Authority, 7.00% - 2021 ................................. 1,096,250
1,300,000 Washington Public Power Supply System, Nuclear Project #2, 6.30% - 2012 ............ 1,314,625
-----------
4,898,375
GENERAL OBLIGATION - 23.2%
1,000,000 Chicago, Illinois Metropolitan Water Reclamation District G.O., 6.25% - 2014 ....... 1,023,750
1,000,000 Houston, Texas G.O., 6.25% - 2012 .................................................. 1,021,250
1,400,000 State of Illinois G.O., 6.25% - 2011 ............................................... 1,424,500
1,250,000 Commonwealth of Massachusetts G.O., Series A, 6.50% - 2011 ......................... 1,298,438
1,250,000 State of Washington G.O., 5.80% - 2020 ............................................. 1,201,563
-----------
5,969,501
HIGHWAY REVENUE - 5.5%
1,400,000 Harris County, Texas, Series A, Toll Road & Tax, 6.125% - 2020 ..................... 1,414,000
SEWER REVENUE - 3.9%
1,000,000 King County, Washington Sewer Revenue, Series A, 6.25% - 2034 ...................... 998,750
TRANSPORTATION - 5.4%
1,300,000 Metropolitan Transit Authority of New York Service Contract Refunding Series 5,
7.00% - 2012 ....................................................................... 1,387,750
VARIOUS PURPOSE REVENUE - 16.6%
1,250,000 Austin Texas Utility System, 5.75% - 2024 .......................................... 1,200,000
1,000,000 Indianapolis, Indiana Local Public Improvement Bond Bank, Series A, 6.00% - 2018 ... 988,750
1,000,000 New York State Local Government Assistance Corporation, Series A, 6.50% - 2020 ..... 1,031,250
1,000,000 Salt River Project, Arizona Agriculture Improvement & Power District Electric
System, 6.625% - 2012 .............................................................. 1,052,500
-----------
4,272,500
WASTE MANAGEMENT - 3.9%
1,000,000 Kentucky Infrastructure Authority, Solid Waste Revolving Fund, PG-A, 6.30% - 2012 .. 1,015,000
WATER SUPPLY REVENUE - 3.8%
1,000,000 Metropolitan Water District, Southern California Water Works, 6.00% - 2021 ......... 981,250
-----------
Total investments - (cost $25,023,340) - 97.8% ..................................... 25,209,939
Cash and other assets - less liabilities - 2.2% .................................... 560,151
-----------
Total net assets - Tax-Exempt Fund - 100.0% ........................................ $25,770,090
===========
</TABLE>
See accompanying notes.
<PAGE>
STATEMENTS OF NET ASSETS
JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT RATING VALUE
---------- ------ -----------
<C> <S> <C> <C>
COMMERCIAL PAPER
AIR TRANSPORTATION - 1.8%
$1,000,000 Harper Group, Inc., (The), 5.90% - 9-12-95 ................ A1 $ 988,036
ALCOHOLIC & MALT BEVERAGES - 3.5%
2,000,000 Anheuser-Busch Companies, Inc., A1+
5.87% - 7-10-95 ........................................... 998,532
5.90% - 7-21-95 ........................................... 996,722
-----------
1,995,254
AUTOMOBILES - 3.5%
2,000,000 Toyota Motor Credit Corporation, 5.84% - 7-12-95 .......... A1+ 1,996,431
BEVERAGES - 3.5%
2,000,000 Coca-Cola Company, (The), 5.80% - 9-15-95 ................. A1+ 1,975,511
BUSINESS SERVICES - 8.8%
2,000,000 AICredit Corporation, 5.91% - 7-19-95 ..................... A1+ 1,994,090
1,000,000 General Electric Capital Corporation, 5.80% - 9-14-95 ..... A1+ 987,917
1,000,000 Nordstrom Credit, Inc., 5.985% - 7-12-95 .................. A1 998,171
1,000,000 Penney (J.C.) Funding Corporation, 5.90% - 7-24-95 ........ A1 996,230
-----------
4,976,408
COMPUTERS - 1.8%
1,000,000 Hewlett-Packard Company, 5.83% - 8-29-95 .................. A1+ 990,445
CONSTRUCTION - 6.1%
1,500,000 Stanley Works, 5.975% - 7-26-95 ........................... A1 1,493,776
2,000,000 Vulcan Materials Company, 5.75% - 8-1-95 .................. A1+ 1,990,097
-----------
3,483,873
DISCOUNT STORES - 3.5%
2,000,000 Wal-Mart Stores, Inc., 5.965% - 7-14-95 ................... A1+ 1,995,692
DRUGS & TOILETRIES - 1.8%
1,000,000 Allergan, Inc., 5.91% - 8-01-95 ........................... A1 994,911
ELECTRIAL EQUIPMENT - 3.5%
2,000,000 General Electric Company, 5.98% - 7-12-95 ................. A1+ 1,996,345
ELECTRIC COMPANIES & SYSTEMS - 15.8%
2,000,000 Alabama Power Company, A1
5.89% - 7-31-95 ........................................... 497,546
5.965% - 7-31-95 .......................................... 1,492,544
2,200,000 Central & South West Corporation, P1
5.91% - 7-14-95 ........................................... 1,995,732
5.88% - 7-18-95 ........................................... 199,445
2,500,000 New England Power Company, A1
5.92% - 8-18-95 ........................................... 1,488,160
5.80% - 9-15-95 ........................................... 97,756
2,000,000 South Carolina Electric & Gas Company, 5.93% - 8-07-95 .... A1 1,987,810
300,000 Tampa Electric Company, 5.86% - 7-10-95 ................... A1+ 299,560
-----------
8,948,553
ELECTRONICS - 4.4%
2,500,000 TDKU.S.A. Corporation, 5.94% - 7-17-95 .................... A1+ 2,493,400
GAS & ELECTRIC COMPANIES - 3.8%
2,175,000 Baltimore Gas & Electric Company, A1
5.91% - 7-27-95 ........................................... 995,732
5.91% - 8-08-95 ........................................... 1,167,670
-----------
2,163,402
GROCERY STORES - 4.4%
2,500,000 Winn Dixie Stores, Inc., 5.86% - 9-14-95 .................. A1 2,469,479
INSURANCE - 3.5%
2,000,000 American General Corporation, 6.00% - 7-19-95 ............. A1+ 1,994,000
LEASING COMPANIES - 7.9%
2,000,000 International Lease Finance Corporation, 6.00% - 7-13-95 .. A1 1,996,000
2,500,000 P.H.H. Corporation, A1
5.935% - 7-05-95 .......................................... 499,670
5.93% - 7-13-95 ........................................... 1,996,047
-----------
4,491,717
PRINTING - 3.5%
2,000,000 Houghton Mifflin Company, 5.985% - 7-10-95 ................ A1 1,997,007
TELEPHONE & TELEGRAPH - 5.4%
2,000,000 AT&T Corporation, 5.81% - 8-18-95 ......................... A1+ 1,984,507
1,100,000 GTE Northwest, Inc., 6.03% - 7-05-95 ...................... A1 1,099,263
-----------
3,083,770
TOBACCO PRODUCTS - 7.0%
2,000,000 B.A.T. Capital Corporation, 5.95% - 7-26-95 ............... A1 1,991,778
2,000,000 Philip Morris Companies, Inc., A1
5.90% - 7-07-95 ........................................... 999,017
5.83% - 8-04-95 ........................................... 994,494
-----------
3,985,289
TOYS & SPORTING GOODS - 4.9%
800,000 Hasbro, Inc., 5.88% - 8-14-95 ............................. A1 794,251
2,000,000 Toys "R" Us, Inc., 5.91% - 7-28-95 ........................ A1+ 1,991,135
-----------
2,785,386
-----------
Total commercial paper - (cost $55,804,909) - 98.4% ....... 55,804,909
FEDERAL FARM CREDIT BANKS - 5.3%
1,000,000 6.15% - 10-02-95 .......................................... 1,000,000
2,000,000 5.70% - 01-02-96 .......................................... 2,000,000
-----------
3,000,000
SBAPOOLS - 3.4%
1,913,991 SBAPool GCS# 501 927, 7.25%, due 7-25-17/1/ ............... 1,932,224
-----------
Total U.S. government and government agency securities -
(cost $4,932,224) - 8.7% .................................. 4,932,224
-----------
Total investments - (cost $60,737,133) - 107.1% ........... 60,737,133
Cash and other assets, less liabilities - (7.1%) .......... (4,007,638)
-----------
Total net assets - Cash Fund 100.0% ....................... $56,729,495
===========
</TABLE>
The identified cost of investments owned at June 30, 1995 was the same for
Federal income tax and book purposes.
Ratings were provided by Moody's Investor Services and Standard & Poor's
Corporation.
/1/Variable rate security which may be reset the first of each month.
/2/Principal amount on foreign bond is reflected in local currency (i.e.
Japanese yen, Canadian dollar or deutsche mark) while market value is reflected
in base U.S. dollars.
See accompanying notes.
<PAGE>
SEMIANNUAL REPORT
JUNE 30, 1995
THE STRONG
DISCOVERY FUND II
[PHOTO OF LITTLE BOY BY A LAKE]
[STRONG FUNDS LOGO]
<PAGE>
TABLE OF CONTENTS
INVESTMENT REVIEW
The Strong Discovery Fund II............................................ 2
FINANCIAL INFORMATION
Schedule of Investments in Securities................................... 4
Statement of Operations................................................. 8
Statement of Assets and Liabilities..................................... 9
Statement of Changes in Net Assets...................................... 10
Notes to Financial Statements........................................... 11
FINANCIAL HIGHLIGHTS....................................................... 15
The Strong Discovery Fund II
The Strong Discovery Fund II is all about growth. We believe that investing in
the common stock of companies that are growing considerably faster than the
overall economy--companies with a special product, run by enlightened and
dedicated management--will produce superior investment returns over time for our
shareholders.
Our task is to find those growth companies and own their stock at the most
opportune time. That, in a nutshell, is what drives our investment decisions.
MARKET SUMMARY
The first half of 1995 was a good period for equity investors. The benchmark
S&P 500 Index rose a robust 20.21%, while Strong Discovery Fund II increased by
16.62%. While our Fund was a little slow out of the blocks--finishing the first
quarter up a modest 4.60%--the second quarter saw a much more attractive gain of
11.49%.1
Since its inception in May 1992 through June 30 of this year, Strong Discovery
Fund II has generated a cumulative total return of 46.58%.
As of June 30, 1995, the Fund was "fully invested." Of the Fund's $156.5
million in net assets, nearly all were invested in stocks. The Fund was
aggressively positioned to take advantage of the bull market. At mid-year, the
Fund's diversified portfolio owned stock in a wide variety of domestic and
foreign concerns, from computer software (SAP AG) to copier dealers (Danka
Business Systems) to motorcycles (Harley-Davidson).
PREVAILING THEMES
While our team of investment professionals monitors economic trends across the
nation and world, four investment themes dominated our portfolio during the
first half of 1995: technology, consolidation, the continued deregulation of
radio and television, and financial services.
TECHNOLOGY. The worldwide technological revolution is having a dramatic effect
on the productivity and efficiency of business and industry. Consequently,
technology stocks were the biggest winners in the market's stellar performance
through the first half of 1995. We believe the advance of technology and its
positive impact on industry will persist. In our portfolio, computer software
manufacturers like the German firm SAP AG and McAfee Associates, a Santa Clara,
California firm that specializes in computer virus software, have positioned
their companies and products for prosperity.
CONSOLIDATION. Across a variety of individual industries, companies are
consolidating to increase efficiency and market share. This is a trend we see
in businesses as diverse as medical services and video rental. In the former
category, we particularly like Medpartners, of Birmingham, Alabama, and Phy
Cor, of Nashville, Tennessee, operators of multi-specialty medical clinics.
In the latter category, the Movie Gallery, based in Dothan, Alabama, has been
strategically acquiring video stores from Texas to Illinois at a steady and
impressive clip.
DEREGULATION OF RADIO AND TELEVISION. Thanks to the continuing pro-deregulation
mood in Washington, some well-positioned and ambitious media companies have
been expanding their operations and growing their earnings at a convincing
rate. Evergreen Media, an Irving, Texas, radio-station complex, and SFX
Broadcasting are two such properties that have made contributions to the Fund's
performance.
FINANCIAL SERVICES. Lower interest rates--a concept that the Federal Reserve has
now embraced--have benefited a number of our holdings in the financial services
sector. A good example of a company poised to capitalize on this trend is
Mercury Finance Company, of Northbrook, Illinois,
2
<PAGE>
which, among other credit operations, purchases installment contracts from
automobile dealers and retail vendors.
OUR OUTLOOK
As the second half of the year began, the Federal Reserve, inspired by a
general slowdown in the nation's economy, cut short-term rates by one-quarter
of a percentage point (0.25%). The market responded favorably.
Our portfolio management team believes that inflation will remain under
control, that the Federal Reserve will likely continue to ratchet down interest
rates through the second half of 1995, and that the financial climate-allowing
for an occasional correction-will continue to be hospitable to investors.
And one final, personal note: I think U.S. industry, pretty much across the
board, is in the best shape I've seen in the nearly 30 years since I graduated
from business school. Overall, American companies are more efficient, more
productive, and more competitive than at any moment in my professional
lifetime.
Which, at the risk of sounding repetitious, is good news for growth stocks.
Thank you for your continued confidence in the Strong Discovery Fund II. We
look forward to making your investment grow.
Sincerely,
Richard S. Strong
Portfolio Manager
ASSET ALLOCATION
(as of 6/30/95)
Cash Equivalents 4.6%
Common & Preferred Stocks 95.4%
The Fund's allocation is presented as a percentage of net assets. Please see
the Schedule of Investments in Securities for a complete listing of the Fund's
portfolio.
Growth of an assumed $10,000 investment
from 5/8/92 to 6/30/95
The Strong Discovery Fund II
5/92 10000
6/92 9591
12/92 10887
6/93 11392
12/93 13285
6/94 11885
12/94 12569
6/95 14658
S&P 500 Stock Index
5/92 10000
6/92 9857
12/92 10680
6/93 11201
12/93 11756
6/94 11358
12/94 11912
6/95 14319
Average annual total returns
through 6/30/95
Since inception 12.92%
on 5/8/92
3-year 15.19%
1-year 23.34%
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with a similar investment in the
Standard & Poor's 500 Stock Index, an unmanaged index generally representative
of the U.S. stock market. Results include the reinvestment of all dividends
and capital gains distributions. Source for the index data is Micropal.
Performance is historical and does not represent future results. Investment
returns and principal value vary, and you may have a gain or loss when you sell
shares.
1 Source of index information: Micropal
2 The Fund's returns include the effect of deducting the Fund's expenses,
but do not include charges and expenses attributable to any particular
insurance product. Excluding such fees and expenses from the Fund's
return quotations has the effect of increasing the performance quoted.
3
<PAGE>
SCHEDULE OF INVESTMENTS IN SECURITIES June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL AMOUNT (NOTE 2)
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 90.0%*
DOMESTIC STOCKS 80.7%*
AIRLINE 0.8%*
46,500 America West Airlines, Inc. Class B+ $ 563,812
19,600 Southwest Airlines Company 467,950
4,500 ValuJet Airlines, Inc.+ 147,937
------------
1,179,699
AUTO & TRUCK PARTS 1.6%*
14,000 Bandag, Inc. Class A 801,500
11,300 Exide Corporation 485,900
22,450 The Goodyear Tire & Rubber Company 926,062
21,900 Thompson PBE, Inc.+ 361,350
------------
2,574,812
AUTOMOBILE 3.4%*
63,200 Chrysler Corporation 3,025,700
37,600 Ford Motor Company 1,118,600
23,500 General Motors Corporation 1,101,562
------------
5,245,862
BANK -- MONEY CENTER 0.3%*
7,300 Citicorp 422,487
BROKERAGE & INVESTMENT MANAGEMENT 2.1%*
8,800 Associated Estates Realty Corporation 185,900
3,900 Equity Inns, Inc. 41,925
7,900 Franklin Resources, Inc. 351,550
9,000 Merry Land & Investment Company, Inc. 183,375
9,150 The Quick & Reilly Group, Inc. 331,687
4,200 RFS Hotel Investors, Inc. 64,050
35,100 ROC Communities, Inc. 776,587
35,600 Salomon, Inc. 1,428,450
------------
3,363,524
CHEMICAL -- SPECIALTY 1.2%*
30,500 W.R. Grace & Company 1,871,937
COMMERCIAL SERVICE 3.2%*
37,400 Career Horizons Corporation+ 710,600
67,100 Consolidated Graphic, Inc.+ 922,625
5,000 Diebold, Inc. 217,500
99,675 Education Alternatives, Inc.+ 1,221,019
15,000 Insurance Auto Auctions, Inc.+ 438,750
40,200 Sensormatic Electronics Corporation 1,427,100
------------
4,937,594
COMPUTER -- MAINFRAME 0.5%*
1,700 International Business Machines Corporation 163,200
62,900 Unisys Corporation+ 684,037
------------
847,237
COMPUTER -- PERIPHERAL EQUIPMENT 1.7%*
8,500 American Power Conversion+ 194,437
14,100 Digi International, Inc.+ 320,775
30,300 EMC Communications Corporation+ 734,775
3,900 FileNet Corporation+ 157,462
14,950 Komag, Inc.+ 777,400
3,700 U.S. Robotics, Inc.+ 403,300
3,600 Western Digital Corporation 62,550
------------
2,650,699
COMPUTER -- PERSONAL & WORKSTATION 2.4%*
40,900 Apple Computer, Inc. $ 1,899,294
36,650 Compaq Computer Corporation+ 1,662,994
3,650 Sun Microsystems, Inc.+ 177,025
------------
3,739,313
COMPUTER SERVICE 1.3%*
4,250 Cycare Systems, Inc.+ 115,812
40,500 Datalogix International, Inc.+ 987,187
44,600 Pyxis Corporation+ 1,009,075
------------
2,112,074
COMPUTER SOFTWARE 13.1%*
47,500 Acclaim Entertainment, Inc.+ 875,781
14,200 Adobe Systems, Inc. 823,600
3,700 Ascend Communications, Inc.+ 186,850
7,000 Aspen Technology, Inc.+ 178,500
15,425 Autodesk, Inc. 663,275
10,500 BMC Software, Inc.+ 811,125
33,000 Cabletron Systems, Inc.+ 1,757,250
31,800 Computer Associates International, Inc. 2,154,450
51,900 Computer Network Technology Corporation+ 531,975
17,200 Concentra Corporation+ 167,700
22,400 Electronic Arts, Inc.+ 607,600
5,850 Expert Software, Inc.+ 108,225
17,400 Hyperion Software Corporation+ 787,350
64,200 Informix Corporation+ 1,629,075
150,000 McAfee Associates, Inc.+ 4,546,875
11,100 Medic Computer Systems, Inc.+ 427,350
8,850 Microsoft Corporation+ 799,819
46,500 NetManage, Inc.+ 790,500
49,000 Novell, Inc.+ 976,937
13,900 Platinum Technology, Inc.+ 251,937
93,300 Saber Software Corporation+ 810,544
12,000 Spyglass, Inc.+ 343,500
1,950 Sterling Software, Inc.+ 75,075
9,000 Symantec Corporation+ 259,875
------------
20,565,168
COMPUTER SYSTEMS 1.0%*
33,800 Oracle Systems Corporation+ 1,305,525
10,600 System Software Associates, Inc. 212,000
------------
1,517,525
CONSUMER -- MISCELLANEOUS 0.2%*
16,400 Equity Corporation International+ 332,100
DIVERSIFIED OPERATIONS 1.3%*
11,300 Alco Standard Corporation 902,587
26,125 Jason, Inc. (Acquired 1/21/94; Cost $229,900) (r)+ 224,152
4,050 Lockheed Martin Corporation 255,656
11,700 Tyco International, Ltd. 631,800
------------
2,014,195
ELECTRONIC PART DISTRIBUTION 0.1%*
2,450 Kent Electronics Corporation+ 92,794
22,000 Richey Electronics, Inc.+ 132,000
------------
224,794
ELECTRONIC PRODUCTS -- MISCELLANEOUS 0.4%*
30,900 Teltrend, Inc.+ 610,275
</TABLE>
See notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL AMOUNT (NOTE 2)
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ELECTRONICS -- SEMICONDUCTOR/COMPONENT 8.5%*
4,100 Advanced Micro Devices, Inc.+ $ 149,137
13,500 Altera Corporation 583,875
7,650 Applied Materials, Inc.+ 662,681
30,700 Atmel Corporation+ 1,700,012
12,300 The Cherry Corporation+ 162,975
30,725 Cypress Semiconductor, Inc.+ 1,244,362
4,350 Dallas Semiconductor Corporation 89,175
3,100 Integrated Device Technology, Inc.+ 143,375
3,400 Integrated Silicon Solution, Inc.+ 177,650
18,200 Intel Corporation 1,152,287
2,400 Kulicke & Soffa Industries, Inc.+ 159,150
3,200 Linear Technology Corporation 211,200
7,400 LSI Logic Corporation+ 289,525
24,050 Maxim Integrated Products, Inc.+ 1,226,550
17,400 Micron Technology, Inc. 954,825
34,000 Motorola, Inc. 2,282,250
2,550 Sierra Semiconductor Corporation+ 80,962
4,600 Texas Instruments, Inc. 615,825
35,000 VLSI Technology, Inc.+ 1,054,375
3,400 Xilinx, Inc.+ 319,600
------------
13,259,791
FINANCE -- MISCELLANEOUS 1.4%*
14,500 Advanta Corporation Class B 547,375
7,400 American Express Company 259,925
9,250 Dean Witter, Discover & Company 434,750
11,700 MBNA Corporation 394,875
25,100 Mercury Finance Company 483,175
------------
2,120,100
FOOD 0.2%*
9,100 Lancaster Colony Corporation 325,325
HEALTHCARE -- DRUG/DIVERSIFIED 0.5%*
38,000 Barr Laboratories, Inc.+ 821,750
HEALTHCARE -- MEDICAL SUPPLY 2.5%*
8,200 Bausch & Lomb, Inc. 340,300
12,900 Dentsply International, Inc. 464,400
54,672 Laboratory Corporation of America Holdings+ 724,404
9,801 Laboratory Corporation of America Holdings
Warrants, Expire 4/28/00+ 14,702
12,200 McKesson Corporation 570,350
51,600 Omnicare, Inc. 1,399,650
6,550 Patterson Dental Company+ 155,562
4,900 Sybron International Corporation+ 195,388
------------
3,864,756
HEALTHCARE -- PATIENT CARE 2.7%*
16,900 American Oncology Resources, Inc.+ 468,975
14,400 Apria Healthcare Group+ 406,800
12,500 FPA Medical Management, Inc.+ 125,000
4,350 Manor Care, Inc. 126,694
25,250 Medpartners, Inc.+ 486,062
48,300 Phy Cor, Inc.+ 1,696,538
29,600 Physician Reliance Network, Inc.+ 577,200
34,200 Professional Sports Care Management, Inc.+ 348,413
------------
4,235,682
HOUSEHOLD APPLIANCES & FURNISHINGS 0.3%*
25,500 SHAW Industries, Inc. $ 433,500
HOUSING RELATED 0.1%*
4,850 Danaher Corporation 146,713
INSURANCE -- MULTI-LINE 0.1%*
2,250 MGIC Investment Corporation 105,469
INSURANCE -- PROPERTY & CASUALTY 0.4%*
16,700 Vesta Insurance Group, Inc. 574,063
LEISURE PRODUCT 3.4%*
23,500 Custom Chrome, Inc.+ 470,000
197,825 Harley-Davidson, Inc. 4,821,984
------------
5,291,984
LEISURE SERVICE 1.3%*
12,800 Bally Entertainment Corporation+ 156,800
14,550 GTECH Holdings Corporation+ 425,588
37,450 Promus Companies, Inc.+ 1,460,550
------------
2,042,938
MACHINE TOOL 1.0%*
54,900 Applied Power, Inc. 1,585,238
MACHINERY -- MISCELLANEOUS 0.2%*
8,550 PRI Automation, Inc.+ 280,013
MACHINERY -- TRANSPORTATION & EQUIPMENT PARTS 0.5%*
23,550 Trinity Industries, Inc. 783,038
MANUFACTURING 0.0%*
1,600 Matthews International Corporation Class A 30,000
MEDIA -- PUBLISHING 0.5%*
20,800 Time Warner, Inc. 855,400
MEDIA -- RADIO/TV 1.1%*
20,000 Comcast Corporation Class A 371,250
36,586 Evergreen Media Corporation Class A+ 951,236
7,500 SFX Broadcasting, Inc.+ 200,625
9,400 Tele-Communications, Inc. Class A+ 220,313
------------
1,743,424
MORTGAGE & RELATED SERVICE 1.9%*
92,150 Countrywide Credit Industries, Inc. 1,935,150
7,800 Finova Group, Inc. 273,000
8,350 Green Tree Financial Corporation 370,531
5,850 North American Mortgage Company 135,281
8,800 Pulte Corporation 246,400
------------
2,960,362
OFFICE AUTOMATION 2.2%*
35,850 Corporate Express, Inc.+ 766,294
52,850 Nu-Kote Holding, Inc.+ 1,677,988
1,600 Pitney Bowes, Inc. 61,400
8,500 Xerox Corporation 996,625
------------
3,502,307
</TABLE>
See notes to financial statements.
5
<PAGE>
SCHEDULE OF INVESTMENTS IN SECURITIES (continued) June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL AMOUNT (NOTE 2)
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OIL -- NORTH AMERICAN EXPLORATION &
PRODUCTION 0.8%*
8,100 Cross Timber Oil Company $ 128,588
92,300 Flores & Rucks, Inc.+ 1,130,675
------------
1,259,263
PAPER & FOREST PRODUCTS 0.0%*
2,350 Specialty Paperboard, Inc.+ 31,138
PERSONAL & COMMERCIAL LENDING 0.6%*
20,400 First USA, Inc. 905,250
POLLUTION CONTROL 0.0%*
2,000 Asyst Technologies, Inc.+ 74,250
PRECIOUS METAL/GEM/STONE 1.1%*
39,850 Barrick Gold Corporation 1,006,213
8,700 Newmont Mining Company 364,313
26,800 Santa Fe Pacific Gold Corporation 324,950
------------
1,695,476
RAILROAD 1.0%*
3,750 Kansas City Southern Industries, Inc. 139,688
27,994 Santa Fe Pacific Corporation 713,847
15,600 Wisconsin Central Transportation Corporation+ 764,400
------------
1,617,935
RETAIL -- DEPARTMENT STORE 0.8%*
8,200 Dillard Department Stores, Inc. Class A 240,875
33,800 Federated Department Stores, Inc.+ 870,350
4,000 May Department Stores Company 166,500
900 Mercantile Stores Company, Inc. 41,850
------------
1,319,575
RETAIL -- DISCOUNT & VARIETY 0.4%*
39,600 Price/Costco, Inc.+ 643,500
RETAIL -- RESTAURANT 1.0%*
7,700 Apple South, Inc. 150,150
29,600 DF & R Restaurants, Inc.+ 654,900
20,400 Quality Dining, Inc.+ 331,500
21,000 Wendy's International, Inc. 375,375
------------
1,511,925
RETAIL -- SPECIALTY 6.0%*
600 Borders Group, Inc. 8,625
45,700 CUC International, Inc.+ 1,919,400
22,500 Friedman's, Inc. Class A+ 427,500
1,500 The Gap, Inc. 52,313
47,200 The Home Depot, Inc. 1,917,500
3,650 Just For Feet, Inc.+ 145,544
29,400 The Limited, Inc. 646,800
3,000 Michaels Stores, Inc.+ 63,750
59,800 Movie Gallery, Inc.+ 2,096,738
25,700 Neostar Retail Group, Inc.+ 398,350
45,700 Office Depot, Inc.+ 1,285,313
3,400 OfficeMax, Inc.+ 94,775
1,600 Tandy Corporation 83,000
4,800 Viking Office Products, Inc.+ 175,800
------------
9,315,408
TELECOMMUNICATION EQUIPMENT 5.1%*
$11,000 ADC Telecommunications, Inc.+ $ 393,250
14,500 The Allen Group, Inc. 429,563
35,600 Boston Technology, Inc.+ 663,050
19,300 C-Cor Electronics, Inc.+ 530,750
48,500 Comverse Technology, Inc.+ 860,875
3,500 DSC Communications Corporation+ 162,750
29,200 General Instrument Corporation 1,120,550
10,200 Global Village Communication+ 159,375
11,000 Newbridge Networks Corporation+ 387,750
112,250 Scientific-Atlanta, Inc. 2,469,500
4,050 Spectrian Corporation+ 160,988
14,750 Tellabs, Inc.+ 709,844
------------
8,048,245
TELECOMMUNICATION SERVICE 0.2%*
3,500 Comsat Corporation 68,688
13,600 EqualNet Holding Corporation+ 204,000
2,000 Sprint Corporation 67,250
------------
339,938
TRANSPORTATION SERVICE 0.2%*
4,700 Fritz Companies, Inc.+ 275,831
TRUCKING 0.1%*
9,050 Knight Transportation, Inc.+ 122,175
------------
Total Domestic Stocks 126,331,057
FOREIGN STOCKS 9.3%*
CANADA 0.8%*
CONSUMER -- MISCELLANEOUS 0.2%*
9,400 The Loewen Group, Inc. (USD) 334,875
LEISURE SERVICE 0.1%*
17,000 CINAR Films, Inc. (USD)+ 166,813
PRECIOUS METAL/GEM/STONE 0.5%*
28,800 Placer Dome, Inc. (USD) 752,400
------------
1,254,088
FINLAND 0.8%*
TELECOMMUNICATION EQUIPMENT
21,150 Nokia Corporation ADR (USD) 1,261,069
HONG KONG 3.7%*
BANK -- MONEY CENTER 1.1%*
13,700 HSBC Holdings PLC ADR (USD) 1,757,315
CONGLOMERATE 1.5%*
315,000 Citic Pacific, Ltd. 791,856
56,000 Guangdong Investment, Ltd. 30,580
21,300 Hutchison Whampoa, Ltd. ADR (USD) 514,776
23,500 Swire Pacific, Ltd. 'A' 179,199
102,500 Swire Pacific, Ltd. ADR (USD) 781,573
------------
2,297,984
ELECTRIC POWER 0.5%*
338,000 Consolidated Electric Power Asia, Ltd. 784,147
FINANCE -- MISCELLANEOUS 0.0%*
16,000 Guoco Group, Ltd. 74,652
</TABLE>
See notes to financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL AMOUNT (NOTE 2)
---------------------------------------------------------------------------------------------------------------
<S> <C>
REAL ESTATE 0.4%*
56,000 Cheung Kong Holdings, Ltd. $ 277,206
60,000 New World Development Company, Ltd. 199,685
21,300 Sun Hung Kai Properties, Ltd. 157,605
------------
634,496
TELECOMMUNICATION SERVICE 0.2%*
96,000 Hong Kong Telecommunications, Ltd. 189,836
3,700 Hong Kong Telecommunications, Ltd. ADR (USD) 73,538
------------
263,374
------------
5,811,968
IRELAND 0.6%*
COMPUTER SOFTWARE 0.4%*
13,950 CBT Group PLC ADR (USD)+ 591,131
HEALTHCARE -- DRUG/DIVERSIFIED 0.2%*
5,600 Elan Corporation PLC ADR (USD)+ 228,900
------------
820,031
ISRAEL 0.6%*
HEALTHCARE -- DRUG/DIVERSIFIED
25,750 Teva Pharmaceutical Industries, Ltd. ADR (USD) 965,625
SWEDEN 0.1%*
TELECOMMUNICATION EQUIPMENT
5,200 Ericsson (LM) Telephone Company ADR (USD) 104,000
THAILAND 0.3%*
BANK -- MONEY CENTER
50,000 Bangkok Bank Public Company, Ltd. (Fgn Reg) 551,165
UNITED KINGDOM 2.4%*
OFFICE AUTOMATION
157,575 Danka Business Systems PLC ADR (USD) 3,811,345
------------
Total Foreign Stocks 14,579,291
------------
TOTAL COMMON STOCKS
(COST $129,052,460) 140,910,348
FOREIGN PREFERRED STOCK 5.4%*
GERMANY
6,600 SAP AG (Cost $6,711,899) 8,377,842
CASH EQUIVALENTS 3.8%*
COMMERCIAL PAPER 3.8%*
DISCOUNTED 3.6%*
$5,700,000 Burlington Northern Railroad Company
Due 7/03/95 $ 5,700,000
INTEREST BEARING, DUE UPON DEMAND 0.2%*
100 Eli Lilly & Company, 5.55% 100
119,500 General Mills, Inc., 5.72% 119,500
2,000 Pitney Bowes Credit Corporation, 5.73% 2,000
134,800 Southwestern Bell Telephone Company, 5.71% 134,800
------------
256,400
------------
Total Cash Equivalents (Cost $5,956,400) 5,956,400
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $141,720,759) 99.2%* 155,244,590
Other Assets and Liabilities, Net 0.8%* 1,262,368
------------
NET ASSETS 100.0%* $156,506,958
============
* Percentages are calculated as a percentage of net assets.
(USD) U.S. Dollar-denominated.
(r) Restricted Security.
+ Non-income producing.
See notes to financial statements.
</TABLE>
7
<PAGE>
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1995 (Unaudited)
<TABLE>
<S> <C>
INCOME:
Dividends $ 697,501
Interest 168,044
-----------
Total Income 865,545
EXPENSES:
Investment Advisory Fees 659,273
Custodian Fees 52,621
Shareholder Servicing Costs 2,493
Reports to Shareholders 11,520
Federal and State Registration Fees 10,409
Other 24,337
-----------
Total Expenses 760,653
-----------
NET INVESTMENT INCOME 104,892
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments 5,503,025
Futures Contracts, Options, and Forward Foreign
Currency Contracts (247,895)
Foreign Currencies 61
Change in Unrealized Appreciation/Depreciation on:
Investments 16,206,842
Futures Contracts, Options, and Forward Foreign
Currency Contracts (95,171)
-----------
NET GAIN 21,366,862
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $21,471,754
===========
</TABLE>
See notes to financial statements.
8
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in Securities, at Value (Cost of $141,720,759) $ 155,244,590
Receivable from Brokers for Securities and Forward Foreign
Currency Contracts Sold 3,150,421
Dividends and Interest Receivable 123,328
Other 26,275
---------------
Total Assets 158,544,614
LIABILITIES:
Payable to Brokers for Securities and Forward Foreign Currency
Contracts Purchased 1,851,831
Accrued Operating Expenses and Other Liabilities 185,825
---------------
Total Liabilities 2,037,656
---------------
NET ASSETS $ 156,506,958
===============
Capital Shares
Authorized 10,000,000,000
Outstanding 13,330,128
NET ASSET VALUE PER SHARE $ 11.74
===============
</TABLE>
See notes to financial statements.
9
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1995 (Unaudited) and the Year Ended December
31, 1994
<TABLE>
<CAPTION>
June 30, 1995 Dec. 31, 1994
------------- -------------
<S> <C> <C>
OPERATIONS:
Net Investment Income $ 104,892 $ 1,047,186
Net Realized Gain 5,255,191 2,742,107
Change in Unrealized Appreciation/Depreciation 16,111,671 (8,202,698)
------------ ------------
Increase (Decrease) in Net Assets Resulting from Operations 21,471,754 (4,413,405)
CAPITAL SHARE TRANSACTIONS 16,149,397 60,217,692
DISTRIBUTIONS:
From Net Investment Income (41,510) (1,047,186)
In Excess of Net Investment Income -- (4,473,221)
From Net Realized Gains -- (3,294,825)
------------ ------------
TOTAL INCREASE IN NET ASSETS 37,579,641 46,989,055
NET ASSETS:
Beginning of Period 118,927,317 71,938,262
------------ ------------
End of Period $156,506,958 $118,927,317
============ ============
</TABLE>
See notes to financial statements.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1995 (Unaudited)
1. ORGANIZATION
The Strong Discovery Fund II is a diversified series of the Strong
Variable Insurance Funds, Inc., an open-end management investment
company registered with the Securities and Exchange Commission under the
Investment Company Act of 1940.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
by the Fund in the preparation of its financial statements.
(A) Security Valuation -- Investments in securities for which market
quotations are readily available are valued at fair value as
determined by a pricing service on the basis of the average of
the most recent bid and asked prices in the principal market
(closing sales prices if the principal market is an exchange) in
which such securities are normally traded. Securities for which
quotations are not readily available are valued at fair value as
determined in good faith under consistently applied procedures
established by and under the general supervision of the Directors
of the Fund. Debt securities which are purchased within 60 days
of their stated maturity are valued at amortized cost, which
approximates current value.
The Fund owns certain investment securities which are
restricted as to resale. These securities are valued after giving
due consideration to pertinent factors including recent private
sales, market conditions, and the issuer's financial performance.
The Fund bears the costs, if any, associated with the disposition
of restricted securities. Where such disposition depends on a
security's registration under the Securities Act of 1933, the
Fund will bear such registration costs unless the Fund has
registration rights, in which case the issuer will bear such
costs. Aggregate cost and fair value of these restricted
securities held at June 30, 1995 were $229,900 and $224,152
respectively, representing 0.1% of net assets of the Fund.
(B) Federal Income Taxes and Distributions to Shareholders -- It is
the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its
shareholders in a manner which results in no tax cost to the
Fund. Therefore, no Federal income tax provision is required.
The character of distributions made during the year from net
investment income or net realized gains may differ from the
characterization for Federal tax purposes due to differences in
the recognition of income and expense items for financial
statement and tax purposes.
(C) Realized Gains and Losses On Investment Transactions -- The Fund
determines the gain or loss realized on investment transactions
by comparing the identified cost of the security lot sold with
the net sales proceeds.
(D) Futures -- The Fund may enter into futures contracts for any
lawful purpose, including hedging, risk management, or enhancing
returns, but not for speculation. Upon entering into a futures
contract, the Fund deposits cash, U.S. government securities or
other liquid, high-grade debt obligations in a segregated account
with its custodian, in the name of the futures broker through
whom the transaction was effected, equal to the minimum "initial
margin" requirements of the applicable futures exchange.
Additionally, the Fund receives from or pays to the broker an
amount of cash equal to the daily fluctuation in the value of the
contract. Such receipts or payments are known as "variation
margin," and are recorded by the Fund as unrealized gains or
losses. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it
was closed.
The use of futures contracts may involve, to varying degrees,
elements of market risk in excess of the amount recognized in the
statement of assets and liabilities. The successful use of
futures contracts by the Fund is dependent upon the ability of
Strong Capital Management, Inc. (the "Advisor") to correctly
anticipate trends in the underlying assets of the futures
contracts. To the extent that the Fund is engaging in futures
contracts other than for hedging purposes, the Fund's successful
use of such transactions is more dependent upon the Advisor's
ability to correctly anticipate such trends, since losses in
these transactions may not be offset in gains in the Fund's
portfolio or in lower purchase prices for assets it intends to
acquire. The Advisor's prediction of trends in underlying assets
may prove to be inaccurate, which could result in substantial
losses to the Fund. Hedging transactions are also subject to
risks. If the Advisor incorrectly anticipates trends in the
underlying asset, the Fund may be in a worse position than if no
hedging had occurred. In addition, there may be imperfect
correlation between the Fund's use of futures contracts and the
assets being hedged.
(E) Options -- The Fund may engage in options transactions for any
lawful purpose, including hedging, risk management, or enhancing
returns, but not for speculation. The Fund may purchase or write
put and call options on securities, futures contracts, indices,
and foreign currency, and enter into closing transactions with
respect to such options to terminate an existing position.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1995 (Unaudited)
Premiums received by the Fund upon writing put or call options
are recorded in the Fund's statement of assets and liabilities as
an asset with a corresponding liability which is subsequently
adjusted to the current market value of the option. When an
option that is written by the Fund expires, is exercised, or is
closed, the Fund realizes a gain or loss, and the liability is
eliminated. The Fund continues to bear the risk of adverse
movements in the price of the underlying asset during the period
of the option, although any potential loss during the period
would be reduced by the amount of the option premium received.
The use of written option contracts may involve elements of
market risk in excess of the amount recognized in the statement
of assets and liabilities. The contract value represents the
Fund's involvement in these financial instruments. When required
by SEC guidelines, the Fund will set aside permissible liquid
assets in a segregated account to secure its potential
obligations under its written options positions.
The successful use of option contracts by the Fund is dependent
upon the ability of the Advisor to correctly anticipate trends in
the underlying assets of the option contracts. To the extent that
the Fund is engaging in option contracts other than for hedging
purposes, the Fund's successful use of such transactions is more
dependent upon the Advisor's ability to correctly anticipate such
trends, since losses in these transactions may not be offset in
gains in the Fund's portfolio or in lower purchase prices for
assets it intends to acquire. The Advisor's prediction of trends
in underlying assets may prove to be inaccurate, which could
result in substantial losses to the Fund. Hedging transactions
are also subject to risks. If the Advisor incorrectly anticipates
trends in the underlying asset, the Fund may be in a worse
position than if no hedging had occurred. In addition, there may
be imperfect correlation between the Fund's use of option
contracts and the assets being hedged.
(F) Foreign Currency Translation -- Investment securities and other
assets and liabilities denominated in foreign currencies are
converted to U.S. dollars based upon current exchange rates.
Purchases and sales of foreign investment securities and income
are converted to U.S. dollars based upon currency exchange rates
prevailing on the respective dates of such transactions. The
effect of changes in foreign exchange rates on realized and
unrealized security gains or losses is reflected as a component
of such gains or losses.
(G) When-Issued Securities -- The Fund may purchase securities on a
when-issued or delayed delivery basis. Although the payment and
interest terms of these securities are established at the time
the purchaser enters into the agreement, these securities may be
delivered and paid for at a future date, generally within 45
days. The Fund records purchases of when-issued securities and
reflects the values of such securities in determining net asset
value in the same manner as other portfolio securities. The Fund
segregates and maintains at all times permissible liquid assets
in an amount at least equal to the amount of outstanding
commitments for when-issued securities.
(H) Other -- Portfolio transactions are recorded on the trade date.
Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Interest income is recorded on the accrual
basis.
3. NET ASSETS
Net assets as of June 30, 1995 were as follows:
<TABLE>
<S> <C>
Capital Stock $139,978,516
Undistributed Net Investment Income 63,327
Undistributed Net Realized Gain 3,036,455
Net Unrealized Appreciation 13,428,660
------------
Net Assets $156,506,958
============
</TABLE>
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Fund for the six months ended June 30,
1995 and the year ended December 31, 1994 were as follows:
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
------------------------------- ------------------------------
Shares Dollars Shares Dollars
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares Sold 3,756,836 $ 39,652,194 9,271,840 $101,330,716
Shares Issued in Reinvestment of Dividends 3,924 41,477 851,339 8,806,683
Shares Redeemed (2,245,025) (23,544,274) (4,541,890) (49,919,707)
---------- ------------ ---------- -----------
Net Increase 1,515,735 $ 16,149,397 5,581,289 $ 60,217,692
========== ============ ========== ============
</TABLE>
12
<PAGE>
5. RELATED PARTY TRANSACTIONS
Strong Capital Management, Inc. (the "Advisor"), with whom certain
officers and directors of the Fund are affiliated, provides investment
advisory services and shareholder recordkeeping and related services to
the Fund. Investment advisory fees, which are established by terms of an
Advisory Agreement, are based on an annualized rate of 1.00% of the
average daily net assets of the Fund. Advisory fees are subject to
reimbursement by the Advisor if the Fund's operating expenses exceed
certain levels. Shareholder recordkeeping and related service fees are
based on contractually established rates for each open and closed
shareholder account. In addition, the Advisor is compensated for certain
other services related to costs incurred for reports to shareholders.
Certain information regarding these transactions for the six months
ended June 30, 1995 is as follows:
<TABLE>
<S> <C>
Payable to Advisor at June 30, 1995 $142,930
Other Shareholder Servicing Expenses Paid to Advisor 92
Unaffiliated Directors' Fees 1,588
</TABLE>
6. INVESTMENT TRANSACTIONS
Aggregate purchases and sales of long-term securities for the six months
ended June 30, 1995 were $287,333,907 and $258,057,681, respectively.
7. INCOME TAX INFORMATION
At June 30, 1995, based on investment cost for Federal income tax
purposes of $142,209,995.21, net unrealized appreciation was
$12,939,497.65, consisting of $15,585,414.78 in aggregate gross
unrealized appreciation and $2,645,917.13 in aggregate gross unrealized
depreciation.
8. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency exchange contracts for
any lawful purpose, including hedging, risk management, or enhancing
returns, but not for speculation.
Forward foreign currency exchange contracts are typically used by the
Fund to hedge currency exposure related to receivables from securities
sold and payables for securities purchased. Forward foreign currency
exchange contracts are valued at the forward rate, and are
marked-to-market daily. The change in market value is recorded by the
Fund as an unrealized gain or loss. When the contract is closed, the
Fund records an exchange gain or loss equal to the difference between
the value of the contract at the time it was opened and the value at the
time it was closed.
The use of forward foreign currency exchange contracts does not
eliminate fluctuations in the underlying prices of the Fund's portfolio
securities, but it does establish a rate of exchange that can be
achieved in the future. Although forward foreign currency exchange
contracts limit the risk of loss due to a decline in the value of the
hedged currency, they also limit any potential gain that might result
should the value of the currency increase. In addition, the Fund could
be exposed to risks if the counterparties to the contracts are unable to
meet the terms of their contracts.
At June 30, 1995, the Fund had entered into forward foreign currency
exchange contracts as follows:
<TABLE>
<CAPTION>
Currency Settlement Currency Value Unrealized
Sold Date in USD Depreciation
------------------------- ---------- -------------- ------------
<S> <C> <C> <C> <C>
9,572,734 German Marks 7/19/95 $6,942,303 $89,952
1,297,466 German Marks 7/26/95 940,843 4,450
165,000 German Marks 7/31/95 119,645 769
</TABLE>
9. FOREIGN INVESTMENTS
Investments in foreign markets can pose more risks than U.S.
investments, and to the extent that the Fund invests in foreign
securities, the Fund's share price is expected to be more volatile than
that of a U.S. securities-only fund. The value of the Fund's foreign
securities will fluctuate with changes in stock market conditions,
currency values, interest rates, foreign government regulations, and
economic and political conditions in countries in which the Fund
invests. These risks are generally intensified for investments in
emerging markets.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1995 (Unaudited)
10. ANNUAL MEETING
A shareholder meeting was held on April 13, 1995 in Milwaukee,
Wisconsin. Results of the shareholder vote, calculated as a percentage
of total shares voted, are as follows:
<TABLE>
<CAPTION>
SHARES VOTED 11,784,081.469
---------------------------------------------------
PROPOSALS AFFIRMATIVE WITHHOLD
--------- ----------- --------
<S> <C> <C>
1 Election of Directors
Richard S. Strong 97.69% 2.31%
John Dragisic 97.56 2.44
Marvin E. Nevins 96.90 3.10
Willie D. Davis 97.47 2.53
William F. Vogt 97.67 2.33
Stanley Kritzik 97.47 2.53
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
----------- ------- -------
<S> <C> <C> <C>
2 Ratify Selection of Auditors 96.64% 0.61% 2.75%
3 Adopt Advisory Agreement 93.51 2.42 4.07
4 Adopt Revised Articles 92.92 2.76 4.32
5 Amend Investment Objective 92.86 2.60 4.54
6 Amend or Adopt a Fundamental
Investment Limitation Concerning:
6A Diversification 93.21 1.27 5.52
6B Concentration 93.14 1.31 5.55
6C Lending 92.41 2.06 5.53
6D Purchasing and Selling Real Estate 92.27 2.19 5.54
6E Borrowing 90.92 3.54 5.54
6F Underwriting Securities 92.40 2.07 5.53
6G Purchasing or Selling Financial
Commodities 91.62 2.86 5.52
6H Issuing Senior Securities 93.04 1.43 5.53
6I Pooled Fund Structures 92.27 2.20 5.53
7 Eliminate a Fundamental
Investment Limitation Concerning:
7A Use of Margin 87.82 4.04 8.14
7B Purchase of Investment Company
Securities 89.64 2.18 8.18
7C Investment in Oil and Gas Interests 89.72 2.12 8.16
7D Pledging Assets 88.27 3.57 8.16
7E Securities Investments of
Directors and Officers 88.83 3.03 8.14
7F Fund Portfolio Transactions with
Directors and Officers 88.29 3.52 8.19
7G Investing in Securities for the
Purpose of Management
or Control 89.53 2.29 8.18
</TABLE>
14
<PAGE>
FINANCIAL HIGHLIGHTS
The following presents information relating to a share of capital stock
outstanding for the entire period.
<TABLE>
<CAPTION>
1995*** 1994 1993 1992**
------- ---- ---- ------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.07 $11.54 $10.15 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.01 0.10 0.05 0.04
Net Realized and Unrealized Gains
(Losses) on Investments 1.66 (0.71) 2.09 0.78
------ ------ ------- ------
TOTAL FROM INVESTMENT OPERATIONS 1.67 (0.61) 2.14 0.82
LESS DISTRIBUTIONS
From Net Investment Income (0.00) (0.10) (0.05) (0.04)
In Excess of Net Investment Income -- (0.43) (0.70) --
From Net Realized Gains -- (0.33) -- (0.63)(1)
------ ------ ------- ------
TOTAL DISTRIBUTIONS (0.00) (0.86) (0.75) (0.67)
------ ------ ------- ------
NET ASSET VALUE, END OF PERIOD $11.74 $10.07 $ 11.54 $10.15
====== ====== ======= ======
Total Return +16.6% -5.4% +22.0% +8.9%
Net Assets, End of Period (In Thousands) $156,507 $118,927 $71,938 $26,739
Ratio of Expenses to Average Net Assets 1.2%* 1.2% 1.3% 1.7%*
Ratio of Net Investment Income to Average Net Assets 0.2%* 1.1% 0.5% 0.5%*
Portfolio Turnover Rate 204.9% 662.5% 976.5% 1,767.9%*
</TABLE>
* Calculated on an annualized basis.
** Inception date is May 8, 1992. Total return is not annualized.
*** For the six months ended June 30, 1995 (Unaudited). Total return and
portfolio turnover rate are not annualized.
(1) Ordinary income distribution for tax purposes.
15
<PAGE>
DIRECTORS OF THE FUND
Richard S. Strong John Dragisic
Marvin E. Nevins Stanley Kritzik
Willie D. Davis William F. Vogt
OFFICERS OF THE FUND
Richard S. Strong
Chairman of the Board
John Dragisic
Vice Chairman
Lawrence A. Totsky
Vice President
Thomas P. Lemke
Vice President
Ann E. Oglanian
Secretary
Ronald A. Neville
Treasurer
Investment Advisor
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
Distributor
Strong Funds Distributors, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
Custodian
Firstar Trust Company
P.O. Box 701, Milwaukee, Wisconsin 53201
Transfer Agent and Dividend-Disbursing Agent
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
Auditors
Coopers & Lybrand L.L.P.
411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
Legal Counsel
Godfrey & Kahn, S.C.
780 North Water Street, Milwaukee, Wisconsin 53202
This report must be preceded or accompanied by the prospectus for
the Strong Discovery Fund II.
[STRONG FUNDS LOGO]
STRONG FUNDS DISTRIBUTORS, INC.
P.O. Box 2936
Milwaukee, Wisconsin 53201
