UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-3329
Variable Insurance Products Fund
(Exact name of registrant as specified in charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address of principal executive offices) (Zip code)
Eric D. Roiter, Secretary
82 Devonshire St.
Boston, Massachusetts 02109
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-563-7000
Date of fiscal year end: | December 31 |
| |
Date of reporting period: | June 30, 2006 |
Item 1. Reports to Stockholders
Fidelity® Variable Insurance Products:
Equity-Income Portfolio
Semiannual Report
June 30, 2006
(2_fidelity_logos) (Registered_Trademark)
Contents
Shareholder Expense Example | <Click Here> | An example of shareholder expenses. |
Investment Changes | <Click Here> | A summary of major shifts in the fund's investments over the past six months. |
Investments | <Click Here> | A complete list of the fund's investments with their
market values. |
Financial Statements | <Click Here> | Statements of assets and liabilities, operations, and
changes in net assets, as well as financial highlights. |
Notes | <Click Here> | Notes to the financial statements. |
Board Approval of Investment Advisory Contracts and Management Fees | <Click Here> | |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at www.sec.gov. You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
Fidelity Variable Insurance Products are separate account options which are purchased through a variable insurance contract.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.advisor.fidelity.com.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Semiannual Report
VIP Equity-Income Portfolio
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2006 to June 30, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning
Account Value
January 1, 2006 | Ending
Account Value
June 30, 2006 | Expenses Paid
During Period*
January 1, 2006
to June 30, 2006 |
Initial Class | | | |
Actual | $ 1,000.00 | $ 1,051.20 | $ 2.85 |
HypotheticalA | $ 1,000.00 | $ 1,022.02 | $ 2.81 |
Service Class | | | |
Actual | $ 1,000.00 | $ 1,050.70 | $ 3.36 |
HypotheticalA | $ 1,000.00 | $ 1,021.52 | $ 3.31 |
Service Class 2 | | | |
Actual | $ 1,000.00 | $ 1,050.00 | $ 4.12 |
HypotheticalA | $ 1,000.00 | $ 1,020.78 | $ 4.06 |
Service Class 2R | | | |
Actual | $ 1,000.00 | $ 1,049.90 | $ 4.12 |
HypotheticalA | $ 1,000.00 | $ 1,020.78 | $ 4.06 |
Investor Class | | | |
Actual | $ 1,000.00 | $ 1,050.50 | $ 3.51 |
HypotheticalA | $ 1,000.00 | $ 1,021.37 | $ 3.46 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
| Annualized
Expense Ratio |
Initial Class | .56% |
Service Class | .66% |
Service Class 2 | .81% |
Service Class 2R | .81% |
Investor Class | .69% |
Semiannual Report
VIP Equity-Income Portfolio
Investment Changes
Top Ten Stocks as of June 30, 2006 |
| % of fund's
net assets | % of fund's net assets
6 months ago |
Exxon Mobil Corp. | 4.1 | 3.1 |
Bank of America Corp. | 3.3 | 3.0 |
Citigroup, Inc. | 2.6 | 2.7 |
American International Group, Inc. | 2.5 | 2.7 |
JPMorgan Chase & Co. | 2.3 | 2.3 |
AT&T, Inc. | 1.9 | 1.7 |
Total SA sponsored ADR | 1.6 | 2.1 |
Schlumberger Ltd. (NY Shares) | 1.5 | 1.3 |
BellSouth Corp. | 1.5 | 1.2 |
Wachovia Corp. | 1.5 | 1.5 |
| 22.8 | |
Top Five Market Sectors as of June 30, 2006 |
| % of fund's
net assets | % of fund's net assets
6 months ago |
Financials | 27.8 | 28.9 |
Energy | 13.1 | 11.8 |
Consumer Discretionary | 12.1 | 11.9 |
Industrials | 11.3 | 11.0 |
Information Technology | 8.2 | 9.0 |
Asset Allocation (% of fund's net assets) |
As of June 30, 2006* | As of December 31, 2005** |
 | Stocks 99.1% | | | Stocks 98.8% | |
 | Bonds 0.6% | | | Bonds 0.7% | |
 | Short-Term Investments
and Net Other Assets 0.3% | | | Short-Term Investments
and Net Other Assets 0.5% | |
* Foreign investments | 10.9% | | ** Foreign investments | 11.8% | |
Semiannual Report
VIP Equity-Income Portfolio
Investments June 30, 2006 (Unaudited)
Showing Percentage of Net Assets
Common Stocks - 98.3% |
| Shares | | Value (Note 1) |
CONSUMER DISCRETIONARY - 11.6% |
Auto Components - 0.2% |
American Axle & Manufacturing Holdings, Inc. | 336,400 | | $ 5,755,804 |
Johnson Controls, Inc. | 203,425 | | 16,725,604 |
| | 22,481,408 |
Automobiles - 1.3% |
General Motors Corp. (d) | 976,400 | | 29,086,956 |
Harley-Davidson, Inc. | 249,400 | | 13,689,566 |
Hyundai Motor Co. | 187,710 | | 15,947,535 |
Monaco Coach Corp. | 188,200 | | 2,390,140 |
Renault SA | 229,101 | | 24,617,544 |
Toyota Motor Corp. sponsored ADR | 430,700 | | 45,046,913 |
Winnebago Industries, Inc. (d) | 374,700 | | 11,630,688 |
| | 142,409,342 |
Diversified Consumer Services - 0.1% |
Service Corp. International (SCI) | 1,580,000 | | 12,861,200 |
Hotels, Restaurants & Leisure - 0.3% |
Gaylord Entertainment Co. (a) | 207,165 | | 9,040,681 |
McDonald's Corp. | 373,000 | | 12,532,800 |
WMS Industries, Inc. (a) | 217,600 | | 5,960,064 |
| | 27,533,545 |
Household Durables - 1.2% |
Newell Rubbermaid, Inc. | 2,509,600 | | 64,822,968 |
Sony Corp. sponsored ADR | 289,900 | | 12,767,196 |
Whirlpool Corp. | 624,534 | | 51,617,735 |
| | 129,207,899 |
Internet & Catalog Retail - 0.2% |
Liberty Media Holding Corp. - Interactive Series A (a) | 899,869 | | 15,531,739 |
Leisure Equipment & Products - 0.3% |
Eastman Kodak Co. (d) | 1,464,000 | | 34,813,920 |
Media - 5.5% |
CBS Corp. Class B | 1,667,943 | | 45,117,858 |
Clear Channel Communications, Inc. | 2,831,900 | | 87,647,305 |
Comcast Corp. Class A (a) | 2,427,891 | | 79,489,151 |
Discovery Holding Co. Class A (a) | 368,167 | | 5,386,283 |
Gannett Co., Inc. | 289,800 | | 16,208,514 |
Liberty Media Holding Corp. - Capital Series A (a) | 179,973 | | 15,076,338 |
Live Nation, Inc. (a) | 434,225 | | 8,840,821 |
McGraw-Hill Companies, Inc. | 41,500 | | 2,084,545 |
News Corp. Class A | 1,140,016 | | 21,865,507 |
NTL, Inc. | 812,888 | | 20,240,899 |
The McClatchy Co. Class A (d) | 153,591 | | 6,162,071 |
The New York Times Co. Class A (d) | 929,525 | | 22,810,544 |
The Reader's Digest Association, Inc. (non-vtg.) | 1,481,965 | | 20,688,231 |
The Walt Disney Co. | 1,800,000 | | 54,000,000 |
Time Warner, Inc. | 5,798,350 | | 100,311,455 |
|
| Shares | | Value (Note 1) |
Viacom, Inc. Class B (non-vtg.) (a) | 1,503,743 | | $ 53,894,149 |
Vivendi Universal SA sponsored ADR | 708,000 | | 24,716,280 |
| | 584,539,951 |
Multiline Retail - 1.3% |
Big Lots, Inc. (a)(d) | 1,704,756 | | 29,117,237 |
Dollar Tree Stores, Inc. (a) | 1,349,400 | | 35,759,100 |
Family Dollar Stores, Inc. | 1,072,100 | | 26,191,403 |
Federated Department Stores, Inc. | 1,100,800 | | 40,289,280 |
Sears Holdings Corp. (a) | 67,387 | | 10,434,203 |
| | 141,791,223 |
Specialty Retail - 0.9% |
AnnTaylor Stores Corp. (a) | 1,019,650 | | 44,232,417 |
Home Depot, Inc. | 549,700 | | 19,673,763 |
OfficeMax, Inc. | 146,000 | | 5,949,500 |
RadioShack Corp. | 1,425,700 | | 19,959,800 |
Tiffany & Co., Inc. | 229,800 | | 7,587,996 |
| | 97,403,476 |
Textiles, Apparel & Luxury Goods - 0.3% |
Liz Claiborne, Inc. | 553,040 | | 20,495,662 |
VF Corp. | 229,300 | | 15,574,056 |
| | 36,069,718 |
TOTAL CONSUMER DISCRETIONARY | | 1,244,643,421 |
CONSUMER STAPLES - 5.6% |
Beverages - 0.5% |
Anheuser-Busch Companies, Inc. (d) | 1,222,900 | | 55,752,011 |
Food & Staples Retailing - 1.2% |
Wal-Mart Stores, Inc. | 2,665,800 | | 128,411,586 |
Food Products - 0.5% |
Corn Products International, Inc. | 620,700 | | 18,993,420 |
Kraft Foods, Inc. Class A | 1,170,900 | | 36,180,810 |
| | 55,174,230 |
Household Products - 1.6% |
Colgate-Palmolive Co. | 1,855,400 | | 111,138,460 |
Kimberly-Clark Corp. | 763,600 | | 47,114,120 |
Procter & Gamble Co. | 265,442 | | 14,758,575 |
| | 173,011,155 |
Personal Products - 0.6% |
Avon Products, Inc. | 1,950,070 | | 60,452,170 |
Tobacco - 1.2% |
Altria Group, Inc. | 1,684,600 | | 123,700,178 |
TOTAL CONSUMER STAPLES | | 596,501,330 |
ENERGY - 13.1% |
Energy Equipment & Services - 3.4% |
Baker Hughes, Inc. | 1,109,100 | | 90,779,835 |
BJ Services Co. | 726,890 | | 27,083,921 |
Halliburton Co. | 475,800 | | 35,309,118 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
ENERGY - continued |
Energy Equipment & Services - continued |
Noble Corp. | 639,300 | | $ 47,576,706 |
Schlumberger Ltd. (NY Shares) | 2,496,120 | | 162,522,373 |
| | 363,271,953 |
Oil, Gas & Consumable Fuels - 9.7% |
Apache Corp. | 589,980 | | 40,266,135 |
BP PLC sponsored ADR | 1,406,942 | | 97,937,233 |
Chevron Corp. | 2,076,142 | | 128,845,373 |
ConocoPhillips | 893,000 | | 58,518,290 |
Double Hull Tankers, Inc. | 409,300 | | 5,513,271 |
El Paso Corp. | 1,042,900 | | 15,643,500 |
EOG Resources, Inc. | 393,300 | | 27,271,422 |
Exxon Mobil Corp. | 7,122,636 | | 436,973,712 |
Hess Corp. | 186,200 | | 9,840,670 |
Kerr-McGee Corp. | 290,000 | | 20,111,500 |
Lukoil Oil Co. sponsored ADR | 208,400 | | 17,505,600 |
Total SA sponsored ADR | 2,570,392 | | 168,412,084 |
Williams Companies, Inc. | 558,100 | | 13,037,216 |
| | 1,039,876,006 |
TOTAL ENERGY | | 1,403,147,959 |
FINANCIALS - 27.6% |
Capital Markets - 3.9% |
Ameriprise Financial, Inc. | 604,702 | | 27,012,038 |
Bank of New York Co., Inc. | 2,702,300 | | 87,014,060 |
KKR Private Equity Investors, L.P. Restricted Depositary Units (f) | 624,500 | | 13,895,125 |
Mellon Financial Corp. | 1,543,000 | | 53,125,490 |
Merrill Lynch & Co., Inc. | 1,213,600 | | 84,418,016 |
Morgan Stanley | 1,781,500 | | 112,608,615 |
Nomura Holdings, Inc. | 935,000 | | 17,578,000 |
State Street Corp. | 462,153 | | 26,846,468 |
| | 422,497,812 |
Commercial Banks - 4.3% |
Bank of China Ltd. (H Shares) | 9,754,000 | | 4,427,214 |
Comerica, Inc. | 187,900 | | 9,768,921 |
KeyCorp | 728,500 | | 25,992,880 |
Kookmin Bank sponsored ADR | 389,000 | | 32,310,340 |
Lloyds TSB Group PLC | 2,118,800 | | 20,828,563 |
Marshall & Ilsley Corp. | 416,300 | | 19,041,562 |
Royal Bank of Scotland Group PLC | 592,888 | | 19,497,121 |
U.S. Bancorp, Delaware | 1,479,938 | | 45,700,485 |
Wachovia Corp. | 2,890,461 | | 156,316,131 |
Wells Fargo & Co. | 1,832,200 | | 122,903,976 |
| | 456,787,193 |
Consumer Finance - 0.5% |
American Express Co. | 1,045,196 | | 55,625,331 |
|
| Shares | | Value (Note 1) |
Diversified Financial Services - 8.3% |
Bank of America Corp. | 7,302,777 | | $ 351,263,574 |
Citigroup, Inc. | 5,713,019 | | 275,596,037 |
FirstRand Ltd. | 6,223,429 | | 14,668,891 |
JPMorgan Chase & Co. | 5,797,712 | | 243,503,904 |
| | 885,032,406 |
Insurance - 7.6% |
ACE Ltd. | 2,159,796 | | 109,264,080 |
Allianz AG sponsored ADR | 1,071,900 | | 16,936,020 |
Allstate Corp. | 1,134,400 | | 62,085,712 |
American International Group, Inc. | 4,414,350 | | 260,667,368 |
Genworth Financial, Inc. Class A (non-vtg.) | 993,700 | | 34,620,508 |
Hartford Financial Services Group, Inc. | 912,800 | | 77,222,880 |
MetLife, Inc. unit | 835,300 | | 23,029,221 |
Montpelier Re Holdings Ltd. | 1,063,700 | | 18,391,373 |
PartnerRe Ltd. | 486,620 | | 31,168,011 |
Swiss Reinsurance Co. (Reg.) | 321,551 | | 22,475,692 |
The St. Paul Travelers Companies, Inc. | 2,315,126 | | 103,208,317 |
Willis Group Holdings Ltd. | 766,600 | | 24,607,860 |
XL Capital Ltd. Class A | 415,820 | | 25,489,766 |
| | 809,166,808 |
Real Estate Investment Trusts - 0.6% |
Developers Diversified Realty Corp. | 336,800 | | 17,574,224 |
Equity Office Properties Trust | 557,200 | | 20,343,372 |
Equity Residential (SBI) | 545,000 | | 24,377,850 |
| | 62,295,446 |
Thrifts & Mortgage Finance - 2.4% |
Countrywide Financial Corp. | 292,310 | | 11,131,165 |
Fannie Mae | 2,881,010 | | 138,576,581 |
Freddie Mac | 1,081,300 | | 61,644,913 |
Golden West Financial Corp., Delaware | 248,700 | | 18,453,540 |
Sovereign Bancorp, Inc. | 1,457,558 | | 29,602,993 |
| | 259,409,192 |
TOTAL FINANCIALS | | 2,950,814,188 |
HEALTH CARE - 7.1% |
Health Care Equipment & Supplies - 1.2% |
Baxter International, Inc. | 2,517,732 | | 92,551,828 |
Becton, Dickinson & Co. | 113,800 | | 6,956,594 |
Boston Scientific Corp. (a) | 1,856,400 | | 31,261,776 |
| | 130,770,198 |
Health Care Providers & Services - 0.3% |
HCA, Inc. | 289,700 | | 12,500,555 |
Omnicare, Inc. | 155,700 | | 7,383,294 |
UnitedHealth Group, Inc. | 221,247 | | 9,907,441 |
| | 29,791,290 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
HEALTH CARE - continued |
Pharmaceuticals - 5.6% |
Bristol-Myers Squibb Co. (d) | 2,213,300 | | $ 57,235,938 |
Eli Lilly & Co. | 289,500 | | 16,000,665 |
Johnson & Johnson | 2,162,000 | | 129,547,040 |
Merck & Co., Inc. | 2,146,800 | | 78,207,924 |
Novartis AG sponsored ADR | 485,100 | | 26,156,592 |
Pfizer, Inc. | 5,852,100 | | 137,348,787 |
Schering-Plough Corp. | 3,318,530 | | 63,151,626 |
Wyeth | 2,044,900 | | 90,814,009 |
| | 598,462,581 |
TOTAL HEALTH CARE | | 759,024,069 |
INDUSTRIALS - 11.2% |
Aerospace & Defense - 2.6% |
EADS NV | 769,667 | | 22,113,173 |
Honeywell International, Inc. | 2,549,025 | | 102,725,708 |
Lockheed Martin Corp. | 1,057,000 | | 75,829,180 |
The Boeing Co. | 293,100 | | 24,007,821 |
United Technologies Corp. | 853,340 | | 54,118,823 |
| | 278,794,705 |
Airlines - 0.1% |
UAL Corp. (a) | 282,011 | | 8,747,981 |
Building Products - 0.3% |
Masco Corp. | 950,200 | | 28,163,928 |
Commercial Services & Supplies - 0.7% |
Cendant Corp. | 1,938,100 | | 31,571,649 |
Waste Management, Inc. | 1,082,800 | | 38,850,864 |
| | 70,422,513 |
Electrical Equipment - 0.4% |
Emerson Electric Co. | 498,700 | | 41,796,047 |
Industrial Conglomerates - 3.1% |
3M Co. | 491,800 | | 39,722,686 |
General Electric Co. | 4,716,490 | | 155,455,510 |
Textron, Inc. | 306,000 | | 28,207,080 |
Tyco International Ltd. | 4,141,146 | | 113,881,515 |
| | 337,266,791 |
Machinery - 3.0% |
Briggs & Stratton Corp. | 755,888 | | 23,515,676 |
Caterpillar, Inc. | 630,700 | | 46,974,536 |
Deere & Co. | 206,800 | | 17,265,732 |
Dover Corp. | 1,153,700 | | 57,027,391 |
Eaton Corp. | 165,700 | | 12,493,780 |
Illinois Tool Works, Inc. | 303,800 | | 14,430,500 |
Ingersoll-Rand Co. Ltd. Class A | 1,354,588 | | 57,949,275 |
Navistar International Corp. (a) | 483,595 | | 11,901,273 |
SPX Corp. | 1,359,200 | | 76,047,240 |
| | 317,605,403 |
Road & Rail - 1.0% |
Burlington Northern Santa Fe Corp. | 947,000 | | 75,049,750 |
|
| Shares | | Value (Note 1) |
Laidlaw International, Inc. | 268,000 | | $ 6,753,600 |
Union Pacific Corp. | 287,100 | | 26,688,816 |
| | 108,492,166 |
TOTAL INDUSTRIALS | | 1,191,289,534 |
INFORMATION TECHNOLOGY - 8.0% |
Communications Equipment - 1.0% |
Cisco Systems, Inc. (a) | 2,414,600 | | 47,157,138 |
Lucent Technologies, Inc. (a) | 5,077,300 | | 12,287,066 |
Lucent Technologies, Inc. warrants 12/10/07 (a) | 8,328 | | 2,249 |
Motorola, Inc. | 2,254,312 | | 45,424,387 |
Nortel Networks Corp. (a) | 621,100 | | 1,389,270 |
| | 106,260,110 |
Computers & Peripherals - 2.2% |
Dell, Inc. (a) | 726,800 | | 17,741,188 |
EMC Corp. (a) | 2,323,400 | | 25,487,698 |
Hewlett-Packard Co. | 3,024,811 | | 95,826,012 |
Imation Corp. | 59,500 | | 2,442,475 |
International Business Machines Corp. | 978,900 | | 75,199,098 |
Sun Microsystems, Inc. (a) | 3,725,375 | | 15,460,306 |
| | 232,156,777 |
Electronic Equipment & Instruments - 0.8% |
Agilent Technologies, Inc. (a) | 289,900 | | 9,149,244 |
Arrow Electronics, Inc. (a) | 775,900 | | 24,983,980 |
Avnet, Inc. (a) | 1,481,530 | | 29,660,231 |
Solectron Corp. (a) | 5,630,400 | | 19,255,968 |
| | 83,049,423 |
IT Services - 0.3% |
MoneyGram International, Inc. | 912,900 | | 30,992,955 |
Office Electronics - 0.3% |
Xerox Corp. (a) | 2,842,900 | | 39,544,739 |
Semiconductors & Semiconductor Equipment - 2.4% |
Analog Devices, Inc. | 1,151,900 | | 37,022,066 |
Applied Materials, Inc. | 2,108,200 | | 34,321,496 |
Freescale Semiconductor, Inc.: | | | |
Class A (a) | 17,710 | | 513,590 |
Class B (a) | 1,557,377 | | 45,786,884 |
Intel Corp. | 4,269,800 | | 80,912,710 |
Micron Technology, Inc. (a) | 1,694,200 | | 25,514,652 |
Novellus Systems, Inc. (a) | 103,500 | | 2,556,450 |
Samsung Electronics Co. Ltd. | 30,180 | | 19,182,608 |
Teradyne, Inc. (a) | 715,400 | | 9,965,522 |
| | 255,775,978 |
Software - 1.0% |
Microsoft Corp. | 3,352,800 | | 78,120,240 |
Oracle Corp. (a) | 731,200 | | 10,595,088 |
Symantec Corp. (a) | 1,496,133 | | 23,249,907 |
| | 111,965,235 |
TOTAL INFORMATION TECHNOLOGY | | 859,745,217 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
MATERIALS - 4.5% |
Chemicals - 2.3% |
Air Products & Chemicals, Inc. | 621,300 | | $ 39,713,496 |
Arkema (a) | 12,180 | | 475,366 |
Arkema sponsored ADR (a) | 69,005 | | 2,667,036 |
Ashland, Inc. | 353,500 | | 23,578,450 |
Bayer AG sponsored ADR | 270,700 | | 12,427,837 |
Celanese Corp. Class A | 774,100 | | 15,807,122 |
Chemtura Corp. | 2,044,164 | | 19,092,493 |
Dow Chemical Co. | 742,300 | | 28,971,969 |
E.I. du Pont de Nemours & Co. | 755,000 | | 31,408,000 |
Georgia Gulf Corp. | 700,700 | | 17,531,514 |
Lyondell Chemical Co. (d) | 1,336,593 | | 30,287,186 |
PolyOne Corp. (a) | 1,126,200 | | 9,888,036 |
Rohm & Haas Co. | 206,600 | | 10,354,792 |
Tronox, Inc. Class B | 153,376 | | 2,019,962 |
| | 244,223,259 |
Containers & Packaging - 0.3% |
Amcor Ltd. | 1,784,800 | | 8,860,179 |
Smurfit-Stone Container Corp. (a) | 2,320,072 | | 25,381,588 |
| | 34,241,767 |
Metals & Mining - 1.3% |
Alcan, Inc. | 642,100 | | 30,077,407 |
Alcoa, Inc. | 2,399,116 | | 77,635,394 |
Freeport-McMoRan Copper & Gold, Inc. Class B | 195,004 | | 10,805,172 |
Phelps Dodge Corp. | 188,000 | | 15,446,080 |
| | 133,964,053 |
Paper & Forest Products - 0.6% |
International Paper Co. | 1,105,400 | | 35,704,420 |
Weyerhaeuser Co. | 519,600 | | 32,345,100 |
| | 68,049,520 |
TOTAL MATERIALS | | 480,478,599 |
TELECOMMUNICATION SERVICES - 6.4% |
Diversified Telecommunication Services - 5.6% |
AT&T, Inc. | 7,380,893 | | 205,853,106 |
BellSouth Corp. | 4,481,099 | | 162,215,784 |
Consolidated Communications Holdings, Inc. | 364,300 | | 6,058,309 |
Embarq Corp. (a) | 127,955 | | 5,244,875 |
Philippine Long Distance Telephone Co. sponsored ADR (d) | 633,500 | | 21,868,420 |
Qwest Communications International, Inc. (a) | 5,870,900 | | 47,495,581 |
|
| Shares | | Value (Note 1) |
Telkom SA Ltd. sponsored ADR | 249,575 | | $ 18,468,550 |
Verizon Communications, Inc. | 3,793,702 | | 127,051,080 |
| | 594,255,705 |
Wireless Telecommunication Services - 0.8% |
Sprint Nextel Corp. | 2,738,100 | | 54,734,619 |
Vodafone Group PLC sponsored ADR | 1,426,500 | | 30,384,450 |
| | 85,119,069 |
TOTAL TELECOMMUNICATION SERVICES | | 679,374,774 |
UTILITIES - 3.2% |
Electric Utilities - 0.4% |
Entergy Corp. | 599,000 | | 42,379,250 |
Independent Power Producers & Energy Traders - 0.7% |
AES Corp. (a) | 1,644,400 | | 30,339,180 |
TXU Corp. | 788,840 | | 47,164,744 |
| | 77,503,924 |
Multi-Utilities - 2.1% |
Dominion Resources, Inc. | 985,400 | | 73,698,066 |
Duke Energy Corp. | 921,000 | | 27,049,770 |
NorthWestern Energy Corp. | 124,800 | | 4,286,880 |
Public Service Enterprise Group, Inc. | 955,500 | | 63,177,660 |
Wisconsin Energy Corp. | 1,309,400 | | 52,768,820 |
| | 220,981,196 |
TOTAL UTILITIES | | 340,864,370 |
TOTAL COMMON STOCKS (Cost $7,842,844,796) | 10,505,883,461 |
Convertible Preferred Stocks - 0.8% |
| | | |
CONSUMER DISCRETIONARY - 0.3% |
Automobiles - 0.2% |
Ford Motor Co. Capital Trust II 6.50% | 402,500 | | 11,165,350 |
General Motors Corp.: | | | |
Series B, 5.25% | 359,600 | | 6,584,276 |
Series C, 6.25% | 253,100 | | 5,097,434 |
| | 22,847,060 |
Hotels, Restaurants & Leisure - 0.1% |
Six Flags, Inc. 7.25% PIERS | 384,900 | | 8,279,199 |
TOTAL CONSUMER DISCRETIONARY | | 31,126,259 |
FINANCIALS - 0.2% |
Insurance - 0.2% |
Conseco, Inc. Series B, 5.50% | 143,400 | | 3,972,180 |
The Chubb Corp. Series B, 7.00% | 120,100 | | 4,235,567 |
Travelers Property Casualty Corp. 4.50% | 208,200 | | 5,059,260 |
XL Capital Ltd. 6.50% | 475,300 | | 9,976,547 |
| | 23,243,554 |
Convertible Preferred Stocks - continued |
| Shares | | Value (Note 1) |
HEALTH CARE - 0.1% |
Pharmaceuticals - 0.1% |
Schering-Plough Corp. 6.00% | 176,300 | | $ 8,832,630 |
INFORMATION TECHNOLOGY - 0.2% |
Office Electronics - 0.2% |
Xerox Corp. Series C, 6.25% | 135,550 | | 15,190,682 |
MATERIALS - 0.0% |
Chemicals - 0.0% |
Celanese Corp. 4.25% | 67,100 | | 2,042,524 |
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $95,898,028) | 80,435,649 |
Corporate Bonds - 0.6% |
| Principal
Amount | | |
Convertible Bonds - 0.5% |
CONSUMER DISCRETIONARY - 0.2% |
Hotels, Restaurants & Leisure - 0.0% |
Six Flags, Inc. 4.5% 5/15/15 | $ 3,640,000 | | 3,863,132 |
Media - 0.2% |
Liberty Media Corp.3.5% 1/15/31 (e) | 11,400,000 | | 10,801,500 |
News America, Inc. liquid yield option note 0% 2/28/21 (e) | 22,670,000 | | 13,431,975 |
| | 24,233,475 |
TOTAL CONSUMER DISCRETIONARY | | 28,096,607 |
INDUSTRIALS - 0.1% |
Industrial Conglomerates - 0.1% |
Tyco International Group SA yankee 3.125% 1/15/23 | 5,220,000 | | 6,770,340 |
TELECOMMUNICATION SERVICES - 0.2% |
Diversified Telecommunication Services - 0.2% |
Level 3 Communications, Inc.: | | | |
3.5% 6/15/12 | 6,220,000 | | 6,091,868 |
5.25% 12/15/11 (e) | 11,850,000 | | 14,492,550 |
| | 20,584,418 |
TOTAL CONVERTIBLE BONDS | | 55,451,365 |
Nonconvertible Bonds - 0.1% |
MATERIALS - 0.1% |
Chemicals - 0.1% |
Hercules, Inc. 6.5% 6/30/29 unit | 15,700,000 | | 12,743,690 |
TOTAL CORPORATE BONDS (Cost $69,151,063) | 68,195,055 |
Money Market Funds - 2.1% |
| Shares | | Value (Note 1) |
Fidelity Cash Central Fund, 5.11% (b) | 49,268,505 | | $ 49,268,505 |
Fidelity Securities Lending Cash Central Fund, 5.14% (b)(c) | 175,543,038 | | 175,543,038 |
TOTAL MONEY MARKET FUNDS (Cost $224,811,543) | 224,811,543 |
TOTAL INVESTMENT
PORTFOLIO - 101.8% (Cost $8,232,705,430) | | 10,879,325,708 |
NET OTHER ASSETS - (1.8)% | | (189,512,616) |
NET ASSETS - 100% | $ 10,689,813,092 |
Security Type Abbreviation |
PIERS | - | Preferred Income Equity Redeemable Securities |
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
(e) 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 $38,726,025 or 0.4% of net assets. |
(f) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $13,895,125 or 0.1% of net assets. |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost |
KKR Private Equity Investors, L.P. Restricted Depositary Units | 5/3/06 | $ 15,612,500 |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 413,865 |
Fidelity Securities Lending Cash Central Fund | 1,063,479 |
Total | $ 1,477,344 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 89.1% |
France | 2.0% |
United Kingdom | 1.7% |
Cayman Islands | 1.5% |
Netherlands Antilles | 1.5% |
Others (individually less than 1%) | 4.2% |
| 100.0% |
See accompanying notes which are an integral part of the financial statements.
VIP Equity-Income Portfolio
VIP Equity-Income Portfolio
Financial Statements
Statement of Assets and Liabilities
| June 30, 2006 (Unaudited) |
| | |
Assets | | |
Investment in securities, at value (including securities loaned of $174,191,840) - See accompanying schedule: Unaffiliated issuers (cost $8,007,893,887) | $ 10,654,514,165 | |
Affiliated Central Funds (cost $224,811,543) | 224,811,543 | |
Total Investments (cost $8,232,705,430) | | $ 10,879,325,708 |
Cash | | 254,868 |
Foreign currency held at value
(cost $449,779) | | 449,878 |
Receivable for investments sold | | 64,314,375 |
Receivable for fund shares sold | | 3,637,215 |
Dividends receivable | | 14,172,693 |
Interest receivable | | 364,026 |
Prepaid expenses | | 21,632 |
Other receivables | | 273,402 |
Total assets | | 10,962,813,797 |
| | |
Liabilities | | |
Payable for investments purchased | $ 85,935,380 | |
Payable for fund shares redeemed | 5,689,951 | |
Accrued management fee | 4,086,264 | |
Distribution fees payable | 474,139 | |
Other affiliated payables | 983,598 | |
Other payables and accrued expenses | 288,335 | |
Collateral on securities loaned, at value | 175,543,038 | |
Total liabilities | | 273,000,705 |
| | |
Net Assets | | $ 10,689,813,092 |
Net Assets consist of: | | |
Paid in capital | | $ 7,613,401,865 |
Undistributed net investment income | | 91,019,752 |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | | 338,775,261 |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | | 2,646,616,214 |
Net Assets | | $ 10,689,813,092 |
Statement of Assets and Liabilities - continued
| June 30, 2006 (Unaudited) |
| | |
Initial Class:
Net Asset Value, offering price
and redemption price
per share ($7,643,976,176 ÷ 306,303,303 shares) | | $ 24.96 |
| | |
Service Class:
Net Asset Value, offering price
and redemption price
per share ($1,055,819,533 ÷ 42,459,366 shares) | | $ 24.87 |
| | |
Service Class 2:
Net Asset Value, offering price
and redemption price
per share ($1,891,981,006 ÷ 76,762,891 shares) | | $ 24.65 |
| | |
Service Class 2R:
Net Asset Value, offering price
and redemption price
per share ($10,592,657 ÷ 431,654 shares) | | $ 24.54 |
| | |
Investor Class:
Net Asset Value, offering price
and redemption price
per share ($87,443,720 ÷ 3,509,435 shares) | | $ 24.92 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
VIP Equity-Income Portfolio
Financial Statements - continued
Statement of Operations
| Six months ended June 30, 2006 (Unaudited) |
| | |
Investment Income | | |
Dividends | | $ 121,002,787 |
Interest | | 1,764,495 |
Income from affiliated Central Funds (including $1,063,479 from security lending) | | 1,477,344 |
Total income | | 124,244,626 |
| | |
Expenses | | |
Management fee | $ 25,337,022 | |
Transfer agent fees | 3,666,883 | |
Distribution fees | 2,849,221 | |
Accounting and security lending fees | 716,683 | |
Independent trustees' compensation | 20,876 | |
Appreciation in deferred trustee compensation account | 12,410 | |
Custodian fees and expenses | 129,522 | |
Audit | 61,999 | |
Legal | 68,946 | |
Interest | 58,940 | |
Miscellaneous | 268,106 | |
Total expenses before reductions | 33,190,608 | |
Expense reductions | (194,725) | 32,995,883 |
Net investment income (loss) | | 91,248,743 |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | | |
Investment securities: | | |
Unaffiliated issuers | 362,304,464 | |
Foreign currency transactions | 7,684 | |
Total net realized gain (loss) | | 362,312,148 |
Change in net unrealized appreciation (depreciation) on: Investment securities | 87,089,117 | |
Assets and liabilities in foreign currencies | (952) | |
Total change in net unrealized appreciation (depreciation) | | 87,088,165 |
Net gain (loss) | | 449,400,313 |
Net increase (decrease) in net assets resulting from operations | | $ 540,649,056 |
Statement of Changes in Net Assets
| Six months ended
June 30, 2006
(Unaudited) | Year ended
December 31,
2005 |
Increase (Decrease) in Net Assets | | |
Operations | | |
Net investment income (loss) | $ 91,248,743 | $ 180,286,741 |
Net realized gain (loss) | 362,312,148 | 551,406,495 |
Change in net unrealized appreciation (depreciation) | 87,088,165 | (133,326,683) |
Net increase (decrease) in net assets resulting from operations | 540,649,056 | 598,366,553 |
Distributions to shareholders from net investment income | (180,405,824) | (175,959,121) |
Distributions to shareholders from net realized gain | (556,239,405) | (394,382,958) |
Total distributions | (736,645,229) | (570,342,079) |
Share transactions - net increase (decrease) | 159,472,265 | (588,913,583) |
Redemption fees | 662 | 2,560 |
Total increase (decrease) in net assets | (36,523,246) | (560,886,549) |
| | |
Net Assets | | |
Beginning of period | 10,726,336,338 | 11,287,222,887 |
End of period (including undistributed net investment income of $91,019,752 and undistributed net investment income of $180,172,674, respectively) | $ 10,689,813,092 | $ 10,726,336,338 |
See accompanying notes which are an integral part of the financial statements.
VIP Equity-Income Portfolio
Financial Highlights - Initial Class
| Six months ended
June 30, 2006 | Years ended December 31, |
Selected Per-Share Data | (Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 |
Net asset value, beginning of period | $ 25.49 | $ 25.37 | $ 23.18 | $ 18.16 | $ 22.75 | $ 25.52 |
Income from Investment Operations | | | | | | |
Net investment income (loss) E | .22 | .42 | .40 | .36 | .34 | .34 |
Net realized and unrealized gain (loss) | 1.04 | 1.00 | 2.24 | 5.01 | (4.08) | (1.51) |
Total from investment operations | 1.26 | 1.42 | 2.64 | 5.37 | (3.74) | (1.17) |
Distributions from net investment income | (.45) | (.41) | (.36) | (.35) | (.36) | (.42) |
Distributions from net realized gain | (1.34) | (.89) | (.09) | - | (.49) | (1.18) |
Total distributions | (1.79) | (1.30) | (.45) | (.35) | (.85) | (1.60) |
Redemption fees added to paid in capital | - E, G | - E, G | - E, G | - E, G | - E, G | - |
Net asset value, end of period | $ 24.96 | $ 25.49 | $ 25.37 | $ 23.18 | $ 18.16 | $ 22.75 |
Total Return B, C, D | 5.12% | 5.87% | 11.53% | 30.33% | (16.95)% | (4.96)% |
Ratios to Average Net Assets F | | | | | | |
Expenses before reductions | .56% A | .56% | .58% | .57% | .57% | .58% |
Expenses net of fee waivers, if any | .56% A | .56% | .58% | .57% | .57% | .58% |
Expenses net of all reductions | .55% A | .55% | .57% | .56% | .56% | .57% |
Net investment income (loss) | 1.73% A | 1.71% | 1.71% | 1.83% | 1.70% | 1.47% |
Supplemental Data | | | | | | |
Net assets, end of period (000 omitted) | $ 7,643,976 | $ 7,875,801 | $ 8,689,829 | $ 8,402,963 | $ 6,895,940 | $ 9,256,205 |
Portfolio turnover rate | 20% A | 19% | 22% | 26% | 25% | 24% |
A Annualized B Total returns for periods of less than one year are not annualized. C 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 Total returns would have been lower had certain expenses not been reduced during the periods shown. E Calculated based on average shares outstanding during the period. F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. G Amount represents less than $.01 per share. |
Financial Highlights - Service Class
| Six months ended
June 30, 2006 | Years ended December 31, |
Selected Per-Share Data | (Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 |
Net asset value, beginning of period | $ 25.39 | $ 25.28 | $ 23.11 | $ 18.10 | $ 22.67 | $ 25.45 |
Income from Investment Operations | | | | | | |
Net investment income (loss) E | .20 | .39 | .38 | .34 | .32 | .31 |
Net realized and unrealized gain (loss) | 1.04 | 1.00 | 2.22 | 5.00 | (4.06) | (1.51) |
Total from investment operations | 1.24 | 1.39 | 2.60 | 5.34 | (3.74) | (1.20) |
Distributions from net investment income | (.42) | (.39) | (.34) | (.33) | (.34) | (.40) |
Distributions from net realized gain | (1.34) | (.89) | (.09) | - | (.49) | (1.18) |
Total distributions | (1.76) | (1.28) | (.43) | (.33) | (.83) | (1.58) |
Redemption fees added to paid in capital | - E, G | - E, G | - E, G | - E, G | - E, G | - |
Net asset value, end of period | $ 24.87 | $ 25.39 | $ 25.28 | $ 23.11 | $ 18.10 | $ 22.67 |
Total Return B, C, D | 5.07% | 5.76% | 11.38% | 30.22% | (17.00)% | (5.09)% |
Ratios to Average Net Assets F | | | | | | |
Expenses before reductions | .66% A | .66% | .68% | .67% | .67% | .68% |
Expenses net of fee waivers, if any | .66% A | .66% | .68% | .67% | .67% | .68% |
Expenses net of all reductions | .65% A | .65% | .67% | .66% | .66% | .67% |
Net investment income (loss) | 1.63% A | 1.61% | 1.61% | 1.73% | 1.60% | 1.37% |
Supplemental Data | | | | | | |
Net assets, end of period (000 omitted) | $ 1,055,820 | $ 1,079,838 | $ 1,170,778 | $ 1,071,483 | $ 771,516 | $ 836,017 |
Portfolio turnover rate | 20% A | 19% | 22% | 26% | 25% | 24% |
A Annualized B Total returns for periods of less than one year are not annualized. C 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 Total returns would have been lower had certain expenses not been reduced during the periods shown. E Calculated based on average shares outstanding during the period. F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. G Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Service Class 2
| Six months ended
June 30, 2006 | Years ended December 31, |
Selected Per-Share Data | (Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 |
Net asset value, beginning of period | $ 25.17 | $ 25.09 | $ 22.96 | $ 18.00 | $ 22.59 | $ 25.41 |
Income from Investment Operations | | | | | | |
Net investment income (loss) E | .18 | .35 | .34 | .31 | .28 | .27 |
Net realized and unrealized gain (loss) | 1.03 | .98 | 2.21 | 4.97 | (4.04) | (1.50) |
Total from investment operations | 1.21 | 1.33 | 2.55 | 5.28 | (3.76) | (1.23) |
Distributions from net investment income | (.39) | (.36) | (.33) | (.32) | (.34) | (.41) |
Distributions from net realized gain | (1.34) | (.89) | (.09) | - | (.49) | (1.18) |
Total distributions | (1.73) | (1.25) | (.42) | (.32) | (.83) | (1.59) |
Redemption fees added to paid in capital | - E, G | - E, G | - E, G | - E, G | - E, G | - |
Net asset value, end of period | $ 24.65 | $ 25.17 | $ 25.09 | $ 22.96 | $ 18.00 | $ 22.59 |
Total Return B, C, D | 5.00% | 5.57% | 11.23% | 30.03% | (17.15)% | (5.23)% |
Ratios to Average Net Assets F | | | | | | |
Expenses before reductions | .81% A | .81% | .83% | .82% | .83% | .84% |
Expenses net of fee waivers, if any | .81% A | .81% | .83% | .82% | .83% | .84% |
Expenses net of all reductions | .80% A | .80% | .82% | .81% | .82% | .83% |
Net investment income (loss) | 1.48% A | 1.46% | 1.46% | 1.58% | 1.44% | 1.21% |
Supplemental Data | | | | | | |
Net assets, end of period (000 omitted) | $ 1,891,981 | $ 1,723,546 | $ 1,420,999 | $ 916,679 | $ 403,632 | $ 226,078 |
Portfolio turnover rate | 20% A | 19% | 22% | 26% | 25% | 24% |
A Annualized B Total returns for periods of less than one year are not annualized. C 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 Total returns would have been lower had certain expenses not been reduced during the periods shown. E Calculated based on average shares outstanding during the period. F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. G Amount represents less than $.01 per share. |
Financial Highlights - Service Class 2R
| Six months ended
June 30, 2006 | Years ended December 31, |
Selected Per-Share Data | (Unaudited) | 2005 | 2004 | 2003 | 2002 F |
Net asset value, beginning of period | $ 25.08 | $ 25.01 | $ 22.91 | $ 17.99 | $ 21.82 |
Income from Investment Operations | | | | | |
Net investment income (loss) E | .18 | .35 | .34 | .31 | .18 |
Net realized and unrealized gain (loss) | 1.02 | .99 | 2.20 | 4.96 | (4.01) |
Total from investment operations | 1.20 | 1.34 | 2.54 | 5.27 | (3.83) |
Distributions from net investment income | (.40) | (.38) | (.35) | (.35) | - |
Distributions from net realized gain | (1.34) | (.89) | (.09) | - | - |
Total distributions | (1.74) | (1.27) | (.44) | (.35) | - |
Redemption fees added to paid in capital E, H | - | - | - | - | - |
Net asset value, end of period | $ 24.54 | $ 25.08 | $ 25.01 | $ 22.91 | $ 17.99 |
Total Return B, C, D | 4.99% | 5.61% | 11.22% | 30.05% | (17.55)% |
Ratios to Average Net Assets G | | | | | |
Expenses before reductions | .81% A | .81% | .83% | .82% | .85% A |
Expenses net of fee waivers, if any | .81% A | .81% | .83% | .82% | .85% A |
Expenses net of all reductions | .80% A | .80% | .82% | .81% | .84% A |
Net investment income (loss) | 1.48% A | 1.46% | 1.46% | 1.57% | 1.45% A |
Supplemental Data | | | | | |
Net assets, end of period (000 omitted) | $ 10,593 | $ 9,651 | $ 5,617 | $ 1,891 | $ 471 |
Portfolio turnover rate | 20% A | 19% | 22% | 26% | 25% |
A Annualized B Total returns for periods of less than one year are not annualized. C 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 Total returns would have been lower had certain expenses not been reduced during the periods shown. E Calculated based on average shares outstanding during the period. F For the period April 24, 2002 (commencement of sale of shares) to December 31, 2002. G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. H Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
VIP Equity-Income Portfolio
Financial Highlights - Investor Class
| Six months ended
June 30, 2006 | Year ended December 31, |
Selected Per-Share Data | (Unaudited) | 2005 F |
Net asset value, beginning of period | $ 25.48 | $ 24.46 |
Income from Investment Operations | | |
Net investment income (loss) E | .20 | .17 |
Net realized and unrealized gain (loss) | 1.04 | .85 |
Total from investment operations | 1.24 | 1.02 |
Distributions from net investment income | (.46) | - |
Distributions from net realized gain | (1.34) | - |
Total distributions | (1.80) | - |
Redemption fees added to paid in capital E, H | - | - |
Net asset value, end of period | $ 24.92 | $ 25.48 |
Total Return B, C, D | 5.05% | 4.17% |
Ratios to Average Net Assets G | | |
Expenses before reductions | .69% A | .74% A |
Expenses net of fee waivers, if any | .69% A | .74% A |
Expenses net of all reductions | .68% A | .73% A |
Net investment income (loss) | 1.60% A | 1.54% A |
Supplemental Data | | |
Net assets, end of period (000 omitted) | $ 87,444 | $ 37,500 |
Portfolio turnover rate | 20% A | 19% |
A Annualized B Total returns for periods of less than one year are not annualized. C 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 Total returns would have been lower had certain expenses not been reduced during the periods shown. E Calculated based on average shares outstanding during the period. F For the period July 21, 2005 (commencement of sale of shares) to December 31, 2005. G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. H Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Notes to Financial Statements
For the period ended June 30, 2006 (Unaudited)
1. Significant Accounting Policies.
VIP Equity-Income Portfolio (the Fund) is a fund of Variable Insurance Products Fund, (the trust) (referred to in this report as VIP Equity-Income Portfolio) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. Shares of the Fund may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts. The Fund offers the following classes of shares: Initial Class shares, Service Class shares, Service Class 2 shares, Service Class 2R shares, and Investor Class shares. All classes have equal rights and voting privileges, except for matters affecting a single class. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by FMR and its affiliates.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Debt securities, including restricted securities, for which quotations are readily available, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
1. Significant Accounting Policies - continued
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust.
Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan), independent Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, their annual compensation. Prior to July 1, 2006, deferred amounts were treated as though equivalent dollar amounts had been invested in a cross-section of other Fidelity funds, and were marked-to-market. Effective July 1, 2006, deferred amounts will be directly invested in a cross-section of Fidelity funds. Deferred amounts remain in the Fund until distributed in accordance with the Plan.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, passive foreign investment companies (PFIC), market discount, deferred trustees compensation, and losses deferred due to wash sales.
The federal tax cost of investments and unrealized appreciation (depreciation) as of period end were as follows:
Unrealized appreciation | $ 3,111,279,174 | |
Unrealized depreciation | (474,927,088) | |
Net unrealized appreciation (depreciation) | $ 2,636,352,086 | |
Cost for federal income tax purposes | $ 8,242,973,622 | |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Trading (Redemption) Fees. Service Class 2R shares held less than 60 days are subject to a redemption fee equal to 1% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by Fidelity Management & Research Company (FMR), are retained by the Fund and accounted for as an addition to paid in capital.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
Restricted Securities. The Fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the Fund's Schedule of Investments.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $1,056,452,346 and $1,527,484,468, respectively.
VIP Equity-Income Portfolio
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .20% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annualized management fee rate was .47% of the Fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate 12b-1 Plans for each Service Class of shares. Each Service Class pays Fidelity Distributors Corporation (FDC), an affiliate of FMR, a service fee. For the period, the service fee is based on an annual rate of .10% of Service Class' average net assets and .25% of Service Class 2's and Service Class 2R's average net assets.
For the period, each class paid FDC the following amounts, all of which were re-allowed to insurance companies for the distribution of shares and providing shareholder support services:
Service Class | $ 541,167 | |
Service Class 2 | 2,295,018 | |
Service Class 2R | 13,036 | |
| $ 2,849,221 | |
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the fund's transfer, dividend disbursing, and shareholder servicing agent. FIIOC receives an asset-based fee with respect to each class. Each class with the exception of Investor Class pays a transfer agent fee, excluding out of pocket expenses, equal to an annual rate of .07% of their month end net assets. Investor Class pays a monthly asset-based transfer agent fee of .18% of its month end net assets. The total transfer agent fees paid by each class to FIIOC, including out of pocket expenses, were as follows:
Initial Class | $ 2,619,352 | |
Service Class | 358,646 | |
Service Class 2 | 622,319 | |
Service Class 2R | 3,474 | |
Investor Class | 63,092 | |
| $ 3,666,883 | |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $4,476 for the period.
Interfund Lending Program. Pursuant to an Exemptive Order issued by the SEC, the Fund, along with other registered investment companies having management contracts with FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Funds to borrow from, or lend money to, other participating affiliated funds. At period end, there were no interfund loans outstanding. The Fund's activity in this program during the period for which loans were outstanding was as follows:
Borrower or Lender | Average Daily
Loan Balance | Weighted Average
Interest Rate | Interest
Expense |
Borrower | $ 9,834,902 | 4.77% | $ 53,408 |
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $16,111 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds.
7. Bank Borrowings.
The Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The Fund has established borrowing arrangements with certain banks. The interest rate on the borrowings is the bank's base rate, as revised from time to time. The average daily loan balance during the period for which loans were outstanding amounted to $6,306,333. The weighted average interest rate was 5.27%. At period end, there were no bank borrowings outstanding.
8. Expense Reductions.
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $193,508 for the period. In addition, through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's custody expenses by $1,217.
9. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
At the end of the period, FMR or its affiliates were the owners of record of 12% of the total outstanding shares of the Fund and two otherwise unaffiliated shareholders were the owners of record of 36% of the total outstanding shares of the Fund.
10. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| Six months ended
June 30, 2006 | Year ended
December 31, 2005 A |
From net investment income | | |
Initial Class | $ 134,846,596 | $ 137,602,640 |
Service Class | 17,470,661 | 17,563,270 |
Service Class 2 | 27,087,115 | 20,698,826 |
Service Class 2R | 157,721 | 94,385 |
Investor Class | 843,731 | - |
Total | $ 180,405,824 | $ 175,959,121 |
From net realized gain | | |
Initial Class | $ 405,144,480 | $ 302,386,049 |
Service Class | 55,739,729 | 40,600,805 |
Service Class 2 | 92,358,102 | 51,172,097 |
Service Class 2R | 523,133 | 224,007 |
Investor Class | 2,473,961 | - |
Total | $ 556,239,405 | $ 394,382,958 |
A Distributions for Investor Class are for the period July 21, 2005 (commencement of sale of shares) to December 31, 2005.
VIP Equity-Income Portfolio
11. Share Transactions.
Transactions for each class of shares were as follows:
| Shares | Dollars |
| Six months ended
June 30,
2006 | Year ended
December 31,
2005 A | Six months ended
June 30,
2006 | Year ended
December 31,
2005 A |
Initial Class | | | | |
Shares sold | 3,839,226 | 9,995,592 | $ 96,843,423 | $ 243,588,116 |
Reinvestment of distributions | 22,240,160 | 18,234,094 | 539,991,076 | 439,988,689 |
Shares redeemed | (28,768,916) | (61,778,854) | (726,539,912) | (1,504,207,375) |
Net increase (decrease) | (2,689,530) | (33,549,168) | $ (89,705,413) | $ (820,630,570) |
Service Class | | | | |
Shares sold | 971,404 | 1,664,065 | $ 24,253,794 | $ 40,334,290 |
Reinvestment of distributions | 3,023,973 | 2,417,459 | 73,210,390 | 58,164,074 |
Shares redeemed | (4,066,015) | (7,864,758) | (102,209,268) | (190,937,287) |
Net increase (decrease) | (70,638) | (3,783,234) | $ (4,745,084) | $ (92,438,923) |
Service Class 2 | | | | |
Shares sold | 7,622,309 | 15,407,445 | $ 189,522,765 | $ 370,175,387 |
Reinvestment of distributions | 4,974,811 | 3,009,670 | 119,445,217 | 71,870,922 |
Shares redeemed | (4,302,833) | (6,593,873) | (107,259,782) | (158,371,244) |
Net increase (decrease) | 8,294,287 | 11,823,242 | $ 201,708,200 | $ 283,675,065 |
Service Class 2R | | | | |
Shares sold | 102,796 | 229,939 | $ 2,550,417 | $ 5,501,232 |
Reinvestment of distributions | 28,488 | 13,378 | 680,853 | 318,391 |
Shares redeemed | (84,414) | (83,085) | (2,095,562) | (1,983,529) |
Net increase (decrease) | 46,870 | 160,232 | $ 1,135,708 | $ 3,836,094 |
Investor Class | | | | |
Shares sold | 2,051,820 | 1,480,945 | $ 51,613,559 | $ 36,874,007 |
Reinvestment of distributions | 136,756 | - | 3,317,692 | - |
Shares redeemed | (150,995) | (9,091) | (3,852,397) | (229,256) |
Net increase (decrease) | 2,037,581 | 1,471,854 | $ 51,078,854 | $ 36,644,751 |
A Share transactions for Investor Class are for the period July 21, 2005 (commencement of sale of shares) to December 31, 2005.
Semiannual Report
Board Approval of Investment Advisory Contracts and Management Fees
VIP Equity-Income Portfolio
On January 19, 2006, the Board of Trustees, including the Independent Trustees (together, the Board), voted to approve a general research services agreement (the Agreement) between FMR, FMR Co., Inc. (FMRC), Fidelity Investments Money Management, Inc. (FIMM), and Fidelity Research & Analysis Company (FRAC) (together, the Investment Advisers) for the fund, effective January 20, 2006, pursuant to which FRAC may provide general research and investment advisory support services to FMRC and FIMM. The Board considered that it has approved previously various sub-advisory agreements for the fund with affiliates of FMR that allow FMR to obtain research, non-discretionary advice, or discretionary portfolio management at no additional expense to the fund. The Board, assisted by the advice of fund counsel and independent Trustees' counsel, considered a broad range of information and determined that it would be beneficial for the fund to access the research and investment advisory support services supplied by FRAC at no additional expense to the fund.
The Board reached this determination in part because the new arrangement will involve no changes in (i) the contractual terms of and fees payable under the fund's management contract or sub-advisory agreements; (ii) the investment process or strategies employed in the management of the fund's assets; (iii) the nature or level of services provided under the fund's management contract or sub-advisory agreements; (iv) the day-to-day management of the fund or the persons primarily responsible for such management; or (v) the ultimate control or beneficial ownership of FMR, FMRC, or FIMM. The Board also considered that the establishment of the Agreement would not necessitate prior shareholder approval of the Agreement or result in an assignment and termination of the fund's management contract or sub-advisory agreements under the Investment Company Act of 1940.
Because the Board was approving an arrangement with FRAC under which the fund will not bear any additional management fees or expenses and under which the fund's portfolio manager would not change, it did not consider the fund's investment performance, competitiveness of management fee and total expenses, costs of services and profitability, or economies of scale to be significant factors in its decision.
In connection with its future renewal of the fund's management contract and sub-advisory agreements, the Board will consider: (i) the nature, extent, and quality of services provided to the fund, including shareholder and administrative services and investment performance; (ii) the competitiveness of the fund's management fee and total expenses; (iii) the costs of the services and profitability, including the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering, and servicing the fund and its shareholders; and (iv) whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the fund's Agreement is fair and reasonable, and that the fund's Agreement should be approved.
Semiannual Report
Semiannual Report
VIP Equity-Income Portfolio
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research (U.K.) Inc.
Fidelity Research & Analysis Company
(formerly Fidelity Management &
Research (Far East) Inc.)
Fidelity Investments Japan Limited
Fidelity International Investment Advisors
Fidelity International Investment Advisors (U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Service Agents
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Fidelity Service Company, Inc.
Boston, MA
Custodian
The Northern Trust Company
Chicago, IL
VIPEI-SANN-0806
1.705693.108
Fidelity® Variable Insurance Products:
Equity-Income Portfolio - Service Class 2R
Semiannual Report
June 30, 2006
(2_fidelity_logos) (Registered_Trademark)
Contents
Shareholder Expense Example | <Click Here> | An example of shareholder expenses. |
Investment Changes | <Click Here> | A summary of major shifts in the fund's investments over the past six months. |
Investments | <Click Here> | A complete list of the fund's investments with their
market values. |
Financial Statements | <Click Here> | Statements of assets and liabilities, operations, and
changes in net assets, as well as financial highlights. |
Notes | <Click Here> | Notes to the financial statements. |
Board Approval of Investment Advisory Contracts and Management Fees | <Click Here> | |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at www.sec.gov. You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
Fidelity Variable Insurance Products are separate account options which are purchased through a variable insurance contract.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.advisor.fidelity.com.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Semiannual Report
VIP Equity-Income Portfolio
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2006 to June 30, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning
Account Value
January 1, 2006 | Ending
Account Value
June 30, 2006 | Expenses Paid
During Period*
January 1, 2006
to June 30, 2006 |
Initial Class | | | |
Actual | $ 1,000.00 | $ 1,051.20 | $ 2.85 |
HypotheticalA | $ 1,000.00 | $ 1,022.02 | $ 2.81 |
Service Class | | | |
Actual | $ 1,000.00 | $ 1,050.70 | $ 3.36 |
HypotheticalA | $ 1,000.00 | $ 1,021.52 | $ 3.31 |
Service Class 2 | | | |
Actual | $ 1,000.00 | $ 1,050.00 | $ 4.12 |
HypotheticalA | $ 1,000.00 | $ 1,020.78 | $ 4.06 |
Service Class 2R | | | |
Actual | $ 1,000.00 | $ 1,049.90 | $ 4.12 |
HypotheticalA | $ 1,000.00 | $ 1,020.78 | $ 4.06 |
Investor Class | | | |
Actual | $ 1,000.00 | $ 1,050.50 | $ 3.51 |
HypotheticalA | $ 1,000.00 | $ 1,021.37 | $ 3.46 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
| Annualized
Expense Ratio |
Initial Class | .56% |
Service Class | .66% |
Service Class 2 | .81% |
Service Class 2R | .81% |
Investor Class | .69% |
Semiannual Report
VIP Equity-Income Portfolio
Investment Changes
Top Ten Stocks as of June 30, 2006 |
| % of fund's
net assets | % of fund's net assets
6 months ago |
Exxon Mobil Corp. | 4.1 | 3.1 |
Bank of America Corp. | 3.3 | 3.0 |
Citigroup, Inc. | 2.6 | 2.7 |
American International Group, Inc. | 2.5 | 2.7 |
JPMorgan Chase & Co. | 2.3 | 2.3 |
AT&T, Inc. | 1.9 | 1.7 |
Total SA sponsored ADR | 1.6 | 2.1 |
Schlumberger Ltd. (NY Shares) | 1.5 | 1.3 |
BellSouth Corp. | 1.5 | 1.2 |
Wachovia Corp. | 1.5 | 1.5 |
| 22.8 | |
Top Five Market Sectors as of June 30, 2006 |
| % of fund's
net assets | % of fund's net assets
6 months ago |
Financials | 27.8 | 28.9 |
Energy | 13.1 | 11.8 |
Consumer Discretionary | 12.1 | 11.9 |
Industrials | 11.3 | 11.0 |
Information Technology | 8.2 | 9.0 |
Asset Allocation (% of fund's net assets) |
As of June 30, 2006* | As of December 31, 2005** |
| Stocks 99.1% | | | Stocks 98.8% | |
| Bonds 0.6% | | | Bonds 0.7% | |
| Short-Term Investments
and Net Other Assets 0.3% | | | Short-Term Investments
and Net Other Assets 0.5% | |
* Foreign investments | 10.9% | | ** Foreign investments | 11.8% | |
Semiannual Report
VIP Equity-Income Portfolio
Investments June 30, 2006 (Unaudited)
Showing Percentage of Net Assets
Common Stocks - 98.3% |
| Shares | | Value (Note 1) |
CONSUMER DISCRETIONARY - 11.6% |
Auto Components - 0.2% |
American Axle & Manufacturing Holdings, Inc. | 336,400 | | $ 5,755,804 |
Johnson Controls, Inc. | 203,425 | | 16,725,604 |
| | 22,481,408 |
Automobiles - 1.3% |
General Motors Corp. (d) | 976,400 | | 29,086,956 |
Harley-Davidson, Inc. | 249,400 | | 13,689,566 |
Hyundai Motor Co. | 187,710 | | 15,947,535 |
Monaco Coach Corp. | 188,200 | | 2,390,140 |
Renault SA | 229,101 | | 24,617,544 |
Toyota Motor Corp. sponsored ADR | 430,700 | | 45,046,913 |
Winnebago Industries, Inc. (d) | 374,700 | | 11,630,688 |
| | 142,409,342 |
Diversified Consumer Services - 0.1% |
Service Corp. International (SCI) | 1,580,000 | | 12,861,200 |
Hotels, Restaurants & Leisure - 0.3% |
Gaylord Entertainment Co. (a) | 207,165 | | 9,040,681 |
McDonald's Corp. | 373,000 | | 12,532,800 |
WMS Industries, Inc. (a) | 217,600 | | 5,960,064 |
| | 27,533,545 |
Household Durables - 1.2% |
Newell Rubbermaid, Inc. | 2,509,600 | | 64,822,968 |
Sony Corp. sponsored ADR | 289,900 | | 12,767,196 |
Whirlpool Corp. | 624,534 | | 51,617,735 |
| | 129,207,899 |
Internet & Catalog Retail - 0.2% |
Liberty Media Holding Corp. - Interactive Series A (a) | 899,869 | | 15,531,739 |
Leisure Equipment & Products - 0.3% |
Eastman Kodak Co. (d) | 1,464,000 | | 34,813,920 |
Media - 5.5% |
CBS Corp. Class B | 1,667,943 | | 45,117,858 |
Clear Channel Communications, Inc. | 2,831,900 | | 87,647,305 |
Comcast Corp. Class A (a) | 2,427,891 | | 79,489,151 |
Discovery Holding Co. Class A (a) | 368,167 | | 5,386,283 |
Gannett Co., Inc. | 289,800 | | 16,208,514 |
Liberty Media Holding Corp. - Capital Series A (a) | 179,973 | | 15,076,338 |
Live Nation, Inc. (a) | 434,225 | | 8,840,821 |
McGraw-Hill Companies, Inc. | 41,500 | | 2,084,545 |
News Corp. Class A | 1,140,016 | | 21,865,507 |
NTL, Inc. | 812,888 | | 20,240,899 |
The McClatchy Co. Class A (d) | 153,591 | | 6,162,071 |
The New York Times Co. Class A (d) | 929,525 | | 22,810,544 |
The Reader's Digest Association, Inc. (non-vtg.) | 1,481,965 | | 20,688,231 |
The Walt Disney Co. | 1,800,000 | | 54,000,000 |
Time Warner, Inc. | 5,798,350 | | 100,311,455 |
|
| Shares | | Value (Note 1) |
Viacom, Inc. Class B (non-vtg.) (a) | 1,503,743 | | $ 53,894,149 |
Vivendi Universal SA sponsored ADR | 708,000 | | 24,716,280 |
| | 584,539,951 |
Multiline Retail - 1.3% |
Big Lots, Inc. (a)(d) | 1,704,756 | | 29,117,237 |
Dollar Tree Stores, Inc. (a) | 1,349,400 | | 35,759,100 |
Family Dollar Stores, Inc. | 1,072,100 | | 26,191,403 |
Federated Department Stores, Inc. | 1,100,800 | | 40,289,280 |
Sears Holdings Corp. (a) | 67,387 | | 10,434,203 |
| | 141,791,223 |
Specialty Retail - 0.9% |
AnnTaylor Stores Corp. (a) | 1,019,650 | | 44,232,417 |
Home Depot, Inc. | 549,700 | | 19,673,763 |
OfficeMax, Inc. | 146,000 | | 5,949,500 |
RadioShack Corp. | 1,425,700 | | 19,959,800 |
Tiffany & Co., Inc. | 229,800 | | 7,587,996 |
| | 97,403,476 |
Textiles, Apparel & Luxury Goods - 0.3% |
Liz Claiborne, Inc. | 553,040 | | 20,495,662 |
VF Corp. | 229,300 | | 15,574,056 |
| | 36,069,718 |
TOTAL CONSUMER DISCRETIONARY | | 1,244,643,421 |
CONSUMER STAPLES - 5.6% |
Beverages - 0.5% |
Anheuser-Busch Companies, Inc. (d) | 1,222,900 | | 55,752,011 |
Food & Staples Retailing - 1.2% |
Wal-Mart Stores, Inc. | 2,665,800 | | 128,411,586 |
Food Products - 0.5% |
Corn Products International, Inc. | 620,700 | | 18,993,420 |
Kraft Foods, Inc. Class A | 1,170,900 | | 36,180,810 |
| | 55,174,230 |
Household Products - 1.6% |
Colgate-Palmolive Co. | 1,855,400 | | 111,138,460 |
Kimberly-Clark Corp. | 763,600 | | 47,114,120 |
Procter & Gamble Co. | 265,442 | | 14,758,575 |
| | 173,011,155 |
Personal Products - 0.6% |
Avon Products, Inc. | 1,950,070 | | 60,452,170 |
Tobacco - 1.2% |
Altria Group, Inc. | 1,684,600 | | 123,700,178 |
TOTAL CONSUMER STAPLES | | 596,501,330 |
ENERGY - 13.1% |
Energy Equipment & Services - 3.4% |
Baker Hughes, Inc. | 1,109,100 | | 90,779,835 |
BJ Services Co. | 726,890 | | 27,083,921 |
Halliburton Co. | 475,800 | | 35,309,118 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
ENERGY - continued |
Energy Equipment & Services - continued |
Noble Corp. | 639,300 | | $ 47,576,706 |
Schlumberger Ltd. (NY Shares) | 2,496,120 | | 162,522,373 |
| | 363,271,953 |
Oil, Gas & Consumable Fuels - 9.7% |
Apache Corp. | 589,980 | | 40,266,135 |
BP PLC sponsored ADR | 1,406,942 | | 97,937,233 |
Chevron Corp. | 2,076,142 | | 128,845,373 |
ConocoPhillips | 893,000 | | 58,518,290 |
Double Hull Tankers, Inc. | 409,300 | | 5,513,271 |
El Paso Corp. | 1,042,900 | | 15,643,500 |
EOG Resources, Inc. | 393,300 | | 27,271,422 |
Exxon Mobil Corp. | 7,122,636 | | 436,973,712 |
Hess Corp. | 186,200 | | 9,840,670 |
Kerr-McGee Corp. | 290,000 | | 20,111,500 |
Lukoil Oil Co. sponsored ADR | 208,400 | | 17,505,600 |
Total SA sponsored ADR | 2,570,392 | | 168,412,084 |
Williams Companies, Inc. | 558,100 | | 13,037,216 |
| | 1,039,876,006 |
TOTAL ENERGY | | 1,403,147,959 |
FINANCIALS - 27.6% |
Capital Markets - 3.9% |
Ameriprise Financial, Inc. | 604,702 | | 27,012,038 |
Bank of New York Co., Inc. | 2,702,300 | | 87,014,060 |
KKR Private Equity Investors, L.P. Restricted Depositary Units (f) | 624,500 | | 13,895,125 |
Mellon Financial Corp. | 1,543,000 | | 53,125,490 |
Merrill Lynch & Co., Inc. | 1,213,600 | | 84,418,016 |
Morgan Stanley | 1,781,500 | | 112,608,615 |
Nomura Holdings, Inc. | 935,000 | | 17,578,000 |
State Street Corp. | 462,153 | | 26,846,468 |
| | 422,497,812 |
Commercial Banks - 4.3% |
Bank of China Ltd. (H Shares) | 9,754,000 | | 4,427,214 |
Comerica, Inc. | 187,900 | | 9,768,921 |
KeyCorp | 728,500 | | 25,992,880 |
Kookmin Bank sponsored ADR | 389,000 | | 32,310,340 |
Lloyds TSB Group PLC | 2,118,800 | | 20,828,563 |
Marshall & Ilsley Corp. | 416,300 | | 19,041,562 |
Royal Bank of Scotland Group PLC | 592,888 | | 19,497,121 |
U.S. Bancorp, Delaware | 1,479,938 | | 45,700,485 |
Wachovia Corp. | 2,890,461 | | 156,316,131 |
Wells Fargo & Co. | 1,832,200 | | 122,903,976 |
| | 456,787,193 |
Consumer Finance - 0.5% |
American Express Co. | 1,045,196 | | 55,625,331 |
|
| Shares | | Value (Note 1) |
Diversified Financial Services - 8.3% |
Bank of America Corp. | 7,302,777 | | $ 351,263,574 |
Citigroup, Inc. | 5,713,019 | | 275,596,037 |
FirstRand Ltd. | 6,223,429 | | 14,668,891 |
JPMorgan Chase & Co. | 5,797,712 | | 243,503,904 |
| | 885,032,406 |
Insurance - 7.6% |
ACE Ltd. | 2,159,796 | | 109,264,080 |
Allianz AG sponsored ADR | 1,071,900 | | 16,936,020 |
Allstate Corp. | 1,134,400 | | 62,085,712 |
American International Group, Inc. | 4,414,350 | | 260,667,368 |
Genworth Financial, Inc. Class A (non-vtg.) | 993,700 | | 34,620,508 |
Hartford Financial Services Group, Inc. | 912,800 | | 77,222,880 |
MetLife, Inc. unit | 835,300 | | 23,029,221 |
Montpelier Re Holdings Ltd. | 1,063,700 | | 18,391,373 |
PartnerRe Ltd. | 486,620 | | 31,168,011 |
Swiss Reinsurance Co. (Reg.) | 321,551 | | 22,475,692 |
The St. Paul Travelers Companies, Inc. | 2,315,126 | | 103,208,317 |
Willis Group Holdings Ltd. | 766,600 | | 24,607,860 |
XL Capital Ltd. Class A | 415,820 | | 25,489,766 |
| | 809,166,808 |
Real Estate Investment Trusts - 0.6% |
Developers Diversified Realty Corp. | 336,800 | | 17,574,224 |
Equity Office Properties Trust | 557,200 | | 20,343,372 |
Equity Residential (SBI) | 545,000 | | 24,377,850 |
| | 62,295,446 |
Thrifts & Mortgage Finance - 2.4% |
Countrywide Financial Corp. | 292,310 | | 11,131,165 |
Fannie Mae | 2,881,010 | | 138,576,581 |
Freddie Mac | 1,081,300 | | 61,644,913 |
Golden West Financial Corp., Delaware | 248,700 | | 18,453,540 |
Sovereign Bancorp, Inc. | 1,457,558 | | 29,602,993 |
| | 259,409,192 |
TOTAL FINANCIALS | | 2,950,814,188 |
HEALTH CARE - 7.1% |
Health Care Equipment & Supplies - 1.2% |
Baxter International, Inc. | 2,517,732 | | 92,551,828 |
Becton, Dickinson & Co. | 113,800 | | 6,956,594 |
Boston Scientific Corp. (a) | 1,856,400 | | 31,261,776 |
| | 130,770,198 |
Health Care Providers & Services - 0.3% |
HCA, Inc. | 289,700 | | 12,500,555 |
Omnicare, Inc. | 155,700 | | 7,383,294 |
UnitedHealth Group, Inc. | 221,247 | | 9,907,441 |
| | 29,791,290 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
HEALTH CARE - continued |
Pharmaceuticals - 5.6% |
Bristol-Myers Squibb Co. (d) | 2,213,300 | | $ 57,235,938 |
Eli Lilly & Co. | 289,500 | | 16,000,665 |
Johnson & Johnson | 2,162,000 | | 129,547,040 |
Merck & Co., Inc. | 2,146,800 | | 78,207,924 |
Novartis AG sponsored ADR | 485,100 | | 26,156,592 |
Pfizer, Inc. | 5,852,100 | | 137,348,787 |
Schering-Plough Corp. | 3,318,530 | | 63,151,626 |
Wyeth | 2,044,900 | | 90,814,009 |
| | 598,462,581 |
TOTAL HEALTH CARE | | 759,024,069 |
INDUSTRIALS - 11.2% |
Aerospace & Defense - 2.6% |
EADS NV | 769,667 | | 22,113,173 |
Honeywell International, Inc. | 2,549,025 | | 102,725,708 |
Lockheed Martin Corp. | 1,057,000 | | 75,829,180 |
The Boeing Co. | 293,100 | | 24,007,821 |
United Technologies Corp. | 853,340 | | 54,118,823 |
| | 278,794,705 |
Airlines - 0.1% |
UAL Corp. (a) | 282,011 | | 8,747,981 |
Building Products - 0.3% |
Masco Corp. | 950,200 | | 28,163,928 |
Commercial Services & Supplies - 0.7% |
Cendant Corp. | 1,938,100 | | 31,571,649 |
Waste Management, Inc. | 1,082,800 | | 38,850,864 |
| | 70,422,513 |
Electrical Equipment - 0.4% |
Emerson Electric Co. | 498,700 | | 41,796,047 |
Industrial Conglomerates - 3.1% |
3M Co. | 491,800 | | 39,722,686 |
General Electric Co. | 4,716,490 | | 155,455,510 |
Textron, Inc. | 306,000 | | 28,207,080 |
Tyco International Ltd. | 4,141,146 | | 113,881,515 |
| | 337,266,791 |
Machinery - 3.0% |
Briggs & Stratton Corp. | 755,888 | | 23,515,676 |
Caterpillar, Inc. | 630,700 | | 46,974,536 |
Deere & Co. | 206,800 | | 17,265,732 |
Dover Corp. | 1,153,700 | | 57,027,391 |
Eaton Corp. | 165,700 | | 12,493,780 |
Illinois Tool Works, Inc. | 303,800 | | 14,430,500 |
Ingersoll-Rand Co. Ltd. Class A | 1,354,588 | | 57,949,275 |
Navistar International Corp. (a) | 483,595 | | 11,901,273 |
SPX Corp. | 1,359,200 | | 76,047,240 |
| | 317,605,403 |
Road & Rail - 1.0% |
Burlington Northern Santa Fe Corp. | 947,000 | | 75,049,750 |
|
| Shares | | Value (Note 1) |
Laidlaw International, Inc. | 268,000 | | $ 6,753,600 |
Union Pacific Corp. | 287,100 | | 26,688,816 |
| | 108,492,166 |
TOTAL INDUSTRIALS | | 1,191,289,534 |
INFORMATION TECHNOLOGY - 8.0% |
Communications Equipment - 1.0% |
Cisco Systems, Inc. (a) | 2,414,600 | | 47,157,138 |
Lucent Technologies, Inc. (a) | 5,077,300 | | 12,287,066 |
Lucent Technologies, Inc. warrants 12/10/07 (a) | 8,328 | | 2,249 |
Motorola, Inc. | 2,254,312 | | 45,424,387 |
Nortel Networks Corp. (a) | 621,100 | | 1,389,270 |
| | 106,260,110 |
Computers & Peripherals - 2.2% |
Dell, Inc. (a) | 726,800 | | 17,741,188 |
EMC Corp. (a) | 2,323,400 | | 25,487,698 |
Hewlett-Packard Co. | 3,024,811 | | 95,826,012 |
Imation Corp. | 59,500 | | 2,442,475 |
International Business Machines Corp. | 978,900 | | 75,199,098 |
Sun Microsystems, Inc. (a) | 3,725,375 | | 15,460,306 |
| | 232,156,777 |
Electronic Equipment & Instruments - 0.8% |
Agilent Technologies, Inc. (a) | 289,900 | | 9,149,244 |
Arrow Electronics, Inc. (a) | 775,900 | | 24,983,980 |
Avnet, Inc. (a) | 1,481,530 | | 29,660,231 |
Solectron Corp. (a) | 5,630,400 | | 19,255,968 |
| | 83,049,423 |
IT Services - 0.3% |
MoneyGram International, Inc. | 912,900 | | 30,992,955 |
Office Electronics - 0.3% |
Xerox Corp. (a) | 2,842,900 | | 39,544,739 |
Semiconductors & Semiconductor Equipment - 2.4% |
Analog Devices, Inc. | 1,151,900 | | 37,022,066 |
Applied Materials, Inc. | 2,108,200 | | 34,321,496 |
Freescale Semiconductor, Inc.: | | | |
Class A (a) | 17,710 | | 513,590 |
Class B (a) | 1,557,377 | | 45,786,884 |
Intel Corp. | 4,269,800 | | 80,912,710 |
Micron Technology, Inc. (a) | 1,694,200 | | 25,514,652 |
Novellus Systems, Inc. (a) | 103,500 | | 2,556,450 |
Samsung Electronics Co. Ltd. | 30,180 | | 19,182,608 |
Teradyne, Inc. (a) | 715,400 | | 9,965,522 |
| | 255,775,978 |
Software - 1.0% |
Microsoft Corp. | 3,352,800 | | 78,120,240 |
Oracle Corp. (a) | 731,200 | | 10,595,088 |
Symantec Corp. (a) | 1,496,133 | | 23,249,907 |
| | 111,965,235 |
TOTAL INFORMATION TECHNOLOGY | | 859,745,217 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
MATERIALS - 4.5% |
Chemicals - 2.3% |
Air Products & Chemicals, Inc. | 621,300 | | $ 39,713,496 |
Arkema (a) | 12,180 | | 475,366 |
Arkema sponsored ADR (a) | 69,005 | | 2,667,036 |
Ashland, Inc. | 353,500 | | 23,578,450 |
Bayer AG sponsored ADR | 270,700 | | 12,427,837 |
Celanese Corp. Class A | 774,100 | | 15,807,122 |
Chemtura Corp. | 2,044,164 | | 19,092,493 |
Dow Chemical Co. | 742,300 | | 28,971,969 |
E.I. du Pont de Nemours & Co. | 755,000 | | 31,408,000 |
Georgia Gulf Corp. | 700,700 | | 17,531,514 |
Lyondell Chemical Co. (d) | 1,336,593 | | 30,287,186 |
PolyOne Corp. (a) | 1,126,200 | | 9,888,036 |
Rohm & Haas Co. | 206,600 | | 10,354,792 |
Tronox, Inc. Class B | 153,376 | | 2,019,962 |
| | 244,223,259 |
Containers & Packaging - 0.3% |
Amcor Ltd. | 1,784,800 | | 8,860,179 |
Smurfit-Stone Container Corp. (a) | 2,320,072 | | 25,381,588 |
| | 34,241,767 |
Metals & Mining - 1.3% |
Alcan, Inc. | 642,100 | | 30,077,407 |
Alcoa, Inc. | 2,399,116 | | 77,635,394 |
Freeport-McMoRan Copper & Gold, Inc. Class B | 195,004 | | 10,805,172 |
Phelps Dodge Corp. | 188,000 | | 15,446,080 |
| | 133,964,053 |
Paper & Forest Products - 0.6% |
International Paper Co. | 1,105,400 | | 35,704,420 |
Weyerhaeuser Co. | 519,600 | | 32,345,100 |
| | 68,049,520 |
TOTAL MATERIALS | | 480,478,599 |
TELECOMMUNICATION SERVICES - 6.4% |
Diversified Telecommunication Services - 5.6% |
AT&T, Inc. | 7,380,893 | | 205,853,106 |
BellSouth Corp. | 4,481,099 | | 162,215,784 |
Consolidated Communications Holdings, Inc. | 364,300 | | 6,058,309 |
Embarq Corp. (a) | 127,955 | | 5,244,875 |
Philippine Long Distance Telephone Co. sponsored ADR (d) | 633,500 | | 21,868,420 |
Qwest Communications International, Inc. (a) | 5,870,900 | | 47,495,581 |
|
| Shares | | Value (Note 1) |
Telkom SA Ltd. sponsored ADR | 249,575 | | $ 18,468,550 |
Verizon Communications, Inc. | 3,793,702 | | 127,051,080 |
| | 594,255,705 |
Wireless Telecommunication Services - 0.8% |
Sprint Nextel Corp. | 2,738,100 | | 54,734,619 |
Vodafone Group PLC sponsored ADR | 1,426,500 | | 30,384,450 |
| | 85,119,069 |
TOTAL TELECOMMUNICATION SERVICES | | 679,374,774 |
UTILITIES - 3.2% |
Electric Utilities - 0.4% |
Entergy Corp. | 599,000 | | 42,379,250 |
Independent Power Producers & Energy Traders - 0.7% |
AES Corp. (a) | 1,644,400 | | 30,339,180 |
TXU Corp. | 788,840 | | 47,164,744 |
| | 77,503,924 |
Multi-Utilities - 2.1% |
Dominion Resources, Inc. | 985,400 | | 73,698,066 |
Duke Energy Corp. | 921,000 | | 27,049,770 |
NorthWestern Energy Corp. | 124,800 | | 4,286,880 |
Public Service Enterprise Group, Inc. | 955,500 | | 63,177,660 |
Wisconsin Energy Corp. | 1,309,400 | | 52,768,820 |
| | 220,981,196 |
TOTAL UTILITIES | | 340,864,370 |
TOTAL COMMON STOCKS (Cost $7,842,844,796) | 10,505,883,461 |
Convertible Preferred Stocks - 0.8% |
| | | |
CONSUMER DISCRETIONARY - 0.3% |
Automobiles - 0.2% |
Ford Motor Co. Capital Trust II 6.50% | 402,500 | | 11,165,350 |
General Motors Corp.: | | | |
Series B, 5.25% | 359,600 | | 6,584,276 |
Series C, 6.25% | 253,100 | | 5,097,434 |
| | 22,847,060 |
Hotels, Restaurants & Leisure - 0.1% |
Six Flags, Inc. 7.25% PIERS | 384,900 | | 8,279,199 |
TOTAL CONSUMER DISCRETIONARY | | 31,126,259 |
FINANCIALS - 0.2% |
Insurance - 0.2% |
Conseco, Inc. Series B, 5.50% | 143,400 | | 3,972,180 |
The Chubb Corp. Series B, 7.00% | 120,100 | | 4,235,567 |
Travelers Property Casualty Corp. 4.50% | 208,200 | | 5,059,260 |
XL Capital Ltd. 6.50% | 475,300 | | 9,976,547 |
| | 23,243,554 |
Convertible Preferred Stocks - continued |
| Shares | | Value (Note 1) |
HEALTH CARE - 0.1% |
Pharmaceuticals - 0.1% |
Schering-Plough Corp. 6.00% | 176,300 | | $ 8,832,630 |
INFORMATION TECHNOLOGY - 0.2% |
Office Electronics - 0.2% |
Xerox Corp. Series C, 6.25% | 135,550 | | 15,190,682 |
MATERIALS - 0.0% |
Chemicals - 0.0% |
Celanese Corp. 4.25% | 67,100 | | 2,042,524 |
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $95,898,028) | 80,435,649 |
Corporate Bonds - 0.6% |
| Principal
Amount | | |
Convertible Bonds - 0.5% |
CONSUMER DISCRETIONARY - 0.2% |
Hotels, Restaurants & Leisure - 0.0% |
Six Flags, Inc. 4.5% 5/15/15 | $ 3,640,000 | | 3,863,132 |
Media - 0.2% |
Liberty Media Corp.3.5% 1/15/31 (e) | 11,400,000 | | 10,801,500 |
News America, Inc. liquid yield option note 0% 2/28/21 (e) | 22,670,000 | | 13,431,975 |
| | 24,233,475 |
TOTAL CONSUMER DISCRETIONARY | | 28,096,607 |
INDUSTRIALS - 0.1% |
Industrial Conglomerates - 0.1% |
Tyco International Group SA yankee 3.125% 1/15/23 | 5,220,000 | | 6,770,340 |
TELECOMMUNICATION SERVICES - 0.2% |
Diversified Telecommunication Services - 0.2% |
Level 3 Communications, Inc.: | | | |
3.5% 6/15/12 | 6,220,000 | | 6,091,868 |
5.25% 12/15/11 (e) | 11,850,000 | | 14,492,550 |
| | 20,584,418 |
TOTAL CONVERTIBLE BONDS | | 55,451,365 |
Nonconvertible Bonds - 0.1% |
MATERIALS - 0.1% |
Chemicals - 0.1% |
Hercules, Inc. 6.5% 6/30/29 unit | 15,700,000 | | 12,743,690 |
TOTAL CORPORATE BONDS (Cost $69,151,063) | 68,195,055 |
Money Market Funds - 2.1% |
| Shares | | Value (Note 1) |
Fidelity Cash Central Fund, 5.11% (b) | 49,268,505 | | $ 49,268,505 |
Fidelity Securities Lending Cash Central Fund, 5.14% (b)(c) | 175,543,038 | | 175,543,038 |
TOTAL MONEY MARKET FUNDS (Cost $224,811,543) | 224,811,543 |
TOTAL INVESTMENT
PORTFOLIO - 101.8% (Cost $8,232,705,430) | | 10,879,325,708 |
NET OTHER ASSETS - (1.8)% | | (189,512,616) |
NET ASSETS - 100% | $ 10,689,813,092 |
Security Type Abbreviation |
PIERS | - | Preferred Income Equity Redeemable Securities |
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
(e) 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 $38,726,025 or 0.4% of net assets. |
(f) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $13,895,125 or 0.1% of net assets. |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost |
KKR Private Equity Investors, L.P. Restricted Depositary Units | 5/3/06 | $ 15,612,500 |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 413,865 |
Fidelity Securities Lending Cash Central Fund | 1,063,479 |
Total | $ 1,477,344 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 89.1% |
France | 2.0% |
United Kingdom | 1.7% |
Cayman Islands | 1.5% |
Netherlands Antilles | 1.5% |
Others (individually less than 1%) | 4.2% |
| 100.0% |
See accompanying notes which are an integral part of the financial statements.
VIP Equity-Income Portfolio
VIP Equity-Income Portfolio
Financial Statements
Statement of Assets and Liabilities
| June 30, 2006 (Unaudited) |
| | |
Assets | | |
Investment in securities, at value (including securities loaned of $174,191,840) - See accompanying schedule: Unaffiliated issuers (cost $8,007,893,887) | $ 10,654,514,165 | |
Affiliated Central Funds (cost $224,811,543) | 224,811,543 | |
Total Investments (cost $8,232,705,430) | | $ 10,879,325,708 |
Cash | | 254,868 |
Foreign currency held at value
(cost $449,779) | | 449,878 |
Receivable for investments sold | | 64,314,375 |
Receivable for fund shares sold | | 3,637,215 |
Dividends receivable | | 14,172,693 |
Interest receivable | | 364,026 |
Prepaid expenses | | 21,632 |
Other receivables | | 273,402 |
Total assets | | 10,962,813,797 |
| | |
Liabilities | | |
Payable for investments purchased | $ 85,935,380 | |
Payable for fund shares redeemed | 5,689,951 | |
Accrued management fee | 4,086,264 | |
Distribution fees payable | 474,139 | |
Other affiliated payables | 983,598 | |
Other payables and accrued expenses | 288,335 | |
Collateral on securities loaned, at value | 175,543,038 | |
Total liabilities | | 273,000,705 |
| | |
Net Assets | | $ 10,689,813,092 |
Net Assets consist of: | | |
Paid in capital | | $ 7,613,401,865 |
Undistributed net investment income | | 91,019,752 |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | | 338,775,261 |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | | 2,646,616,214 |
Net Assets | | $ 10,689,813,092 |
Statement of Assets and Liabilities - continued
| June 30, 2006 (Unaudited) |
| | |
Initial Class:
Net Asset Value, offering price
and redemption price
per share ($7,643,976,176 ÷ 306,303,303 shares) | | $ 24.96 |
| | |
Service Class:
Net Asset Value, offering price
and redemption price
per share ($1,055,819,533 ÷ 42,459,366 shares) | | $ 24.87 |
| | |
Service Class 2:
Net Asset Value, offering price
and redemption price
per share ($1,891,981,006 ÷ 76,762,891 shares) | | $ 24.65 |
| | |
Service Class 2R:
Net Asset Value, offering price
and redemption price
per share ($10,592,657 ÷ 431,654 shares) | | $ 24.54 |
| | |
Investor Class:
Net Asset Value, offering price
and redemption price
per share ($87,443,720 ÷ 3,509,435 shares) | | $ 24.92 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
VIP Equity-Income Portfolio
Financial Statements - continued
Statement of Operations
| Six months ended June 30, 2006 (Unaudited) |
| | |
Investment Income | | |
Dividends | | $ 121,002,787 |
Interest | | 1,764,495 |
Income from affiliated Central Funds (including $1,063,479 from security lending) | | 1,477,344 |
Total income | | 124,244,626 |
| | |
Expenses | | |
Management fee | $ 25,337,022 | |
Transfer agent fees | 3,666,883 | |
Distribution fees | 2,849,221 | |
Accounting and security lending fees | 716,683 | |
Independent trustees' compensation | 20,876 | |
Appreciation in deferred trustee compensation account | 12,410 | |
Custodian fees and expenses | 129,522 | |
Audit | 61,999 | |
Legal | 68,946 | |
Interest | 58,940 | |
Miscellaneous | 268,106 | |
Total expenses before reductions | 33,190,608 | |
Expense reductions | (194,725) | 32,995,883 |
Net investment income (loss) | | 91,248,743 |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | | |
Investment securities: | | |
Unaffiliated issuers | 362,304,464 | |
Foreign currency transactions | 7,684 | |
Total net realized gain (loss) | | 362,312,148 |
Change in net unrealized appreciation (depreciation) on: Investment securities | 87,089,117 | |
Assets and liabilities in foreign currencies | (952) | |
Total change in net unrealized appreciation (depreciation) | | 87,088,165 |
Net gain (loss) | | 449,400,313 |
Net increase (decrease) in net assets resulting from operations | | $ 540,649,056 |
Statement of Changes in Net Assets
| Six months ended
June 30, 2006
(Unaudited) | Year ended
December 31,
2005 |
Increase (Decrease) in Net Assets | | |
Operations | | |
Net investment income (loss) | $ 91,248,743 | $ 180,286,741 |
Net realized gain (loss) | 362,312,148 | 551,406,495 |
Change in net unrealized appreciation (depreciation) | 87,088,165 | (133,326,683) |
Net increase (decrease) in net assets resulting from operations | 540,649,056 | 598,366,553 |
Distributions to shareholders from net investment income | (180,405,824) | (175,959,121) |
Distributions to shareholders from net realized gain | (556,239,405) | (394,382,958) |
Total distributions | (736,645,229) | (570,342,079) |
Share transactions - net increase (decrease) | 159,472,265 | (588,913,583) |
Redemption fees | 662 | 2,560 |
Total increase (decrease) in net assets | (36,523,246) | (560,886,549) |
| | |
Net Assets | | |
Beginning of period | 10,726,336,338 | 11,287,222,887 |
End of period (including undistributed net investment income of $91,019,752 and undistributed net investment income of $180,172,674, respectively) | $ 10,689,813,092 | $ 10,726,336,338 |
See accompanying notes which are an integral part of the financial statements.
VIP Equity-Income Portfolio
Financial Highlights - Initial Class
| Six months ended
June 30, 2006 | Years ended December 31, |
Selected Per-Share Data | (Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 |
Net asset value, beginning of period | $ 25.49 | $ 25.37 | $ 23.18 | $ 18.16 | $ 22.75 | $ 25.52 |
Income from Investment Operations | | | | | | |
Net investment income (loss) E | .22 | .42 | .40 | .36 | .34 | .34 |
Net realized and unrealized gain (loss) | 1.04 | 1.00 | 2.24 | 5.01 | (4.08) | (1.51) |
Total from investment operations | 1.26 | 1.42 | 2.64 | 5.37 | (3.74) | (1.17) |
Distributions from net investment income | (.45) | (.41) | (.36) | (.35) | (.36) | (.42) |
Distributions from net realized gain | (1.34) | (.89) | (.09) | - | (.49) | (1.18) |
Total distributions | (1.79) | (1.30) | (.45) | (.35) | (.85) | (1.60) |
Redemption fees added to paid in capital | - E, G | - E, G | - E, G | - E, G | - E, G | - |
Net asset value, end of period | $ 24.96 | $ 25.49 | $ 25.37 | $ 23.18 | $ 18.16 | $ 22.75 |
Total Return B, C, D | 5.12% | 5.87% | 11.53% | 30.33% | (16.95)% | (4.96)% |
Ratios to Average Net Assets F | | | | | | |
Expenses before reductions | .56% A | .56% | .58% | .57% | .57% | .58% |
Expenses net of fee waivers, if any | .56% A | .56% | .58% | .57% | .57% | .58% |
Expenses net of all reductions | .55% A | .55% | .57% | .56% | .56% | .57% |
Net investment income (loss) | 1.73% A | 1.71% | 1.71% | 1.83% | 1.70% | 1.47% |
Supplemental Data | | | | | | |
Net assets, end of period (000 omitted) | $ 7,643,976 | $ 7,875,801 | $ 8,689,829 | $ 8,402,963 | $ 6,895,940 | $ 9,256,205 |
Portfolio turnover rate | 20% A | 19% | 22% | 26% | 25% | 24% |
A Annualized B Total returns for periods of less than one year are not annualized. C 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 Total returns would have been lower had certain expenses not been reduced during the periods shown. E Calculated based on average shares outstanding during the period. F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. G Amount represents less than $.01 per share. |
Financial Highlights - Service Class
| Six months ended
June 30, 2006 | Years ended December 31, |
Selected Per-Share Data | (Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 |
Net asset value, beginning of period | $ 25.39 | $ 25.28 | $ 23.11 | $ 18.10 | $ 22.67 | $ 25.45 |
Income from Investment Operations | | | | | | |
Net investment income (loss) E | .20 | .39 | .38 | .34 | .32 | .31 |
Net realized and unrealized gain (loss) | 1.04 | 1.00 | 2.22 | 5.00 | (4.06) | (1.51) |
Total from investment operations | 1.24 | 1.39 | 2.60 | 5.34 | (3.74) | (1.20) |
Distributions from net investment income | (.42) | (.39) | (.34) | (.33) | (.34) | (.40) |
Distributions from net realized gain | (1.34) | (.89) | (.09) | - | (.49) | (1.18) |
Total distributions | (1.76) | (1.28) | (.43) | (.33) | (.83) | (1.58) |
Redemption fees added to paid in capital | - E, G | - E, G | - E, G | - E, G | - E, G | - |
Net asset value, end of period | $ 24.87 | $ 25.39 | $ 25.28 | $ 23.11 | $ 18.10 | $ 22.67 |
Total Return B, C, D | 5.07% | 5.76% | 11.38% | 30.22% | (17.00)% | (5.09)% |
Ratios to Average Net Assets F | | | | | | |
Expenses before reductions | .66% A | .66% | .68% | .67% | .67% | .68% |
Expenses net of fee waivers, if any | .66% A | .66% | .68% | .67% | .67% | .68% |
Expenses net of all reductions | .65% A | .65% | .67% | .66% | .66% | .67% |
Net investment income (loss) | 1.63% A | 1.61% | 1.61% | 1.73% | 1.60% | 1.37% |
Supplemental Data | | | | | | |
Net assets, end of period (000 omitted) | $ 1,055,820 | $ 1,079,838 | $ 1,170,778 | $ 1,071,483 | $ 771,516 | $ 836,017 |
Portfolio turnover rate | 20% A | 19% | 22% | 26% | 25% | 24% |
A Annualized B Total returns for periods of less than one year are not annualized. C 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 Total returns would have been lower had certain expenses not been reduced during the periods shown. E Calculated based on average shares outstanding during the period. F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. G Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Service Class 2
| Six months ended
June 30, 2006 | Years ended December 31, |
Selected Per-Share Data | (Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 |
Net asset value, beginning of period | $ 25.17 | $ 25.09 | $ 22.96 | $ 18.00 | $ 22.59 | $ 25.41 |
Income from Investment Operations | | | | | | |
Net investment income (loss) E | .18 | .35 | .34 | .31 | .28 | .27 |
Net realized and unrealized gain (loss) | 1.03 | .98 | 2.21 | 4.97 | (4.04) | (1.50) |
Total from investment operations | 1.21 | 1.33 | 2.55 | 5.28 | (3.76) | (1.23) |
Distributions from net investment income | (.39) | (.36) | (.33) | (.32) | (.34) | (.41) |
Distributions from net realized gain | (1.34) | (.89) | (.09) | - | (.49) | (1.18) |
Total distributions | (1.73) | (1.25) | (.42) | (.32) | (.83) | (1.59) |
Redemption fees added to paid in capital | - E, G | - E, G | - E, G | - E, G | - E, G | - |
Net asset value, end of period | $ 24.65 | $ 25.17 | $ 25.09 | $ 22.96 | $ 18.00 | $ 22.59 |
Total Return B, C, D | 5.00% | 5.57% | 11.23% | 30.03% | (17.15)% | (5.23)% |
Ratios to Average Net Assets F | | | | | | |
Expenses before reductions | .81% A | .81% | .83% | .82% | .83% | .84% |
Expenses net of fee waivers, if any | .81% A | .81% | .83% | .82% | .83% | .84% |
Expenses net of all reductions | .80% A | .80% | .82% | .81% | .82% | .83% |
Net investment income (loss) | 1.48% A | 1.46% | 1.46% | 1.58% | 1.44% | 1.21% |
Supplemental Data | | | | | | |
Net assets, end of period (000 omitted) | $ 1,891,981 | $ 1,723,546 | $ 1,420,999 | $ 916,679 | $ 403,632 | $ 226,078 |
Portfolio turnover rate | 20% A | 19% | 22% | 26% | 25% | 24% |
A Annualized B Total returns for periods of less than one year are not annualized. C 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 Total returns would have been lower had certain expenses not been reduced during the periods shown. E Calculated based on average shares outstanding during the period. F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. G Amount represents less than $.01 per share. |
Financial Highlights - Service Class 2R
| Six months ended
June 30, 2006 | Years ended December 31, |
Selected Per-Share Data | (Unaudited) | 2005 | 2004 | 2003 | 2002 F |
Net asset value, beginning of period | $ 25.08 | $ 25.01 | $ 22.91 | $ 17.99 | $ 21.82 |
Income from Investment Operations | | | | | |
Net investment income (loss) E | .18 | .35 | .34 | .31 | .18 |
Net realized and unrealized gain (loss) | 1.02 | .99 | 2.20 | 4.96 | (4.01) |
Total from investment operations | 1.20 | 1.34 | 2.54 | 5.27 | (3.83) |
Distributions from net investment income | (.40) | (.38) | (.35) | (.35) | - |
Distributions from net realized gain | (1.34) | (.89) | (.09) | - | - |
Total distributions | (1.74) | (1.27) | (.44) | (.35) | - |
Redemption fees added to paid in capital E, H | - | - | - | - | - |
Net asset value, end of period | $ 24.54 | $ 25.08 | $ 25.01 | $ 22.91 | $ 17.99 |
Total Return B, C, D | 4.99% | 5.61% | 11.22% | 30.05% | (17.55)% |
Ratios to Average Net Assets G | | | | | |
Expenses before reductions | .81% A | .81% | .83% | .82% | .85% A |
Expenses net of fee waivers, if any | .81% A | .81% | .83% | .82% | .85% A |
Expenses net of all reductions | .80% A | .80% | .82% | .81% | .84% A |
Net investment income (loss) | 1.48% A | 1.46% | 1.46% | 1.57% | 1.45% A |
Supplemental Data | | | | | |
Net assets, end of period (000 omitted) | $ 10,593 | $ 9,651 | $ 5,617 | $ 1,891 | $ 471 |
Portfolio turnover rate | 20% A | 19% | 22% | 26% | 25% |
A Annualized B Total returns for periods of less than one year are not annualized. C 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 Total returns would have been lower had certain expenses not been reduced during the periods shown. E Calculated based on average shares outstanding during the period. F For the period April 24, 2002 (commencement of sale of shares) to December 31, 2002. G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. H Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
VIP Equity-Income Portfolio
Financial Highlights - Investor Class
| Six months ended
June 30, 2006 | Year ended December 31, |
Selected Per-Share Data | (Unaudited) | 2005 F |
Net asset value, beginning of period | $ 25.48 | $ 24.46 |
Income from Investment Operations | | |
Net investment income (loss) E | .20 | .17 |
Net realized and unrealized gain (loss) | 1.04 | .85 |
Total from investment operations | 1.24 | 1.02 |
Distributions from net investment income | (.46) | - |
Distributions from net realized gain | (1.34) | - |
Total distributions | (1.80) | - |
Redemption fees added to paid in capital E, H | - | - |
Net asset value, end of period | $ 24.92 | $ 25.48 |
Total Return B, C, D | 5.05% | 4.17% |
Ratios to Average Net Assets G | | |
Expenses before reductions | .69% A | .74% A |
Expenses net of fee waivers, if any | .69% A | .74% A |
Expenses net of all reductions | .68% A | .73% A |
Net investment income (loss) | 1.60% A | 1.54% A |
Supplemental Data | | |
Net assets, end of period (000 omitted) | $ 87,444 | $ 37,500 |
Portfolio turnover rate | 20% A | 19% |
A Annualized B Total returns for periods of less than one year are not annualized. C 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 Total returns would have been lower had certain expenses not been reduced during the periods shown. E Calculated based on average shares outstanding during the period. F For the period July 21, 2005 (commencement of sale of shares) to December 31, 2005. G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. H Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Notes to Financial Statements
For the period ended June 30, 2006 (Unaudited)
1. Significant Accounting Policies.
VIP Equity-Income Portfolio (the Fund) is a fund of Variable Insurance Products Fund, (the trust) (referred to in this report as VIP Equity-Income Portfolio) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. Shares of the Fund may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts. The Fund offers the following classes of shares: Initial Class shares, Service Class shares, Service Class 2 shares, Service Class 2R shares, and Investor Class shares. All classes have equal rights and voting privileges, except for matters affecting a single class. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by FMR and its affiliates.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Debt securities, including restricted securities, for which quotations are readily available, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
1. Significant Accounting Policies - continued
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust.
Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan), independent Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, their annual compensation. Prior to July 1, 2006, deferred amounts were treated as though equivalent dollar amounts had been invested in a cross-section of other Fidelity funds, and were marked-to-market. Effective July 1, 2006, deferred amounts will be directly invested in a cross-section of Fidelity funds. Deferred amounts remain in the Fund until distributed in accordance with the Plan.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, passive foreign investment companies (PFIC), market discount, deferred trustees compensation, and losses deferred due to wash sales.
The federal tax cost of investments and unrealized appreciation (depreciation) as of period end were as follows:
Unrealized appreciation | $ 3,111,279,174 | |
Unrealized depreciation | (474,927,088) | |
Net unrealized appreciation (depreciation) | $ 2,636,352,086 | |
Cost for federal income tax purposes | $ 8,242,973,622 | |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Trading (Redemption) Fees. Service Class 2R shares held less than 60 days are subject to a redemption fee equal to 1% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by Fidelity Management & Research Company (FMR), are retained by the Fund and accounted for as an addition to paid in capital.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
Restricted Securities. The Fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the Fund's Schedule of Investments.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $1,056,452,346 and $1,527,484,468, respectively.
VIP Equity-Income Portfolio
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .20% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annualized management fee rate was .47% of the Fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate 12b-1 Plans for each Service Class of shares. Each Service Class pays Fidelity Distributors Corporation (FDC), an affiliate of FMR, a service fee. For the period, the service fee is based on an annual rate of .10% of Service Class' average net assets and .25% of Service Class 2's and Service Class 2R's average net assets.
For the period, each class paid FDC the following amounts, all of which were re-allowed to insurance companies for the distribution of shares and providing shareholder support services:
Service Class | $ 541,167 | |
Service Class 2 | 2,295,018 | |
Service Class 2R | 13,036 | |
| $ 2,849,221 | |
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the fund's transfer, dividend disbursing, and shareholder servicing agent. FIIOC receives an asset-based fee with respect to each class. Each class with the exception of Investor Class pays a transfer agent fee, excluding out of pocket expenses, equal to an annual rate of .07% of their month end net assets. Investor Class pays a monthly asset-based transfer agent fee of .18% of its month end net assets. The total transfer agent fees paid by each class to FIIOC, including out of pocket expenses, were as follows:
Initial Class | $ 2,619,352 | |
Service Class | 358,646 | |
Service Class 2 | 622,319 | |
Service Class 2R | 3,474 | |
Investor Class | 63,092 | |
| $ 3,666,883 | |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $4,476 for the period.
Interfund Lending Program. Pursuant to an Exemptive Order issued by the SEC, the Fund, along with other registered investment companies having management contracts with FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Funds to borrow from, or lend money to, other participating affiliated funds. At period end, there were no interfund loans outstanding. The Fund's activity in this program during the period for which loans were outstanding was as follows:
Borrower or Lender | Average Daily
Loan Balance | Weighted Average
Interest Rate | Interest
Expense |
Borrower | $ 9,834,902 | 4.77% | $ 53,408 |
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $16,111 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds.
7. Bank Borrowings.
The Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The Fund has established borrowing arrangements with certain banks. The interest rate on the borrowings is the bank's base rate, as revised from time to time. The average daily loan balance during the period for which loans were outstanding amounted to $6,306,333. The weighted average interest rate was 5.27%. At period end, there were no bank borrowings outstanding.
8. Expense Reductions.
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $193,508 for the period. In addition, through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's custody expenses by $1,217.
9. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
At the end of the period, FMR or its affiliates were the owners of record of 12% of the total outstanding shares of the Fund and two otherwise unaffiliated shareholders were the owners of record of 36% of the total outstanding shares of the Fund.
10. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| Six months ended
June 30, 2006 | Year ended
December 31, 2005 A |
From net investment income | | |
Initial Class | $ 134,846,596 | $ 137,602,640 |
Service Class | 17,470,661 | 17,563,270 |
Service Class 2 | 27,087,115 | 20,698,826 |
Service Class 2R | 157,721 | 94,385 |
Investor Class | 843,731 | - |
Total | $ 180,405,824 | $ 175,959,121 |
From net realized gain | | |
Initial Class | $ 405,144,480 | $ 302,386,049 |
Service Class | 55,739,729 | 40,600,805 |
Service Class 2 | 92,358,102 | 51,172,097 |
Service Class 2R | 523,133 | 224,007 |
Investor Class | 2,473,961 | - |
Total | $ 556,239,405 | $ 394,382,958 |
A Distributions for Investor Class are for the period July 21, 2005 (commencement of sale of shares) to December 31, 2005.
VIP Equity-Income Portfolio
11. Share Transactions.
Transactions for each class of shares were as follows:
| Shares | Dollars |
| Six months ended
June 30,
2006 | Year ended
December 31,
2005 A | Six months ended
June 30,
2006 | Year ended
December 31,
2005 A |
Initial Class | | | | |
Shares sold | 3,839,226 | 9,995,592 | $ 96,843,423 | $ 243,588,116 |
Reinvestment of distributions | 22,240,160 | 18,234,094 | 539,991,076 | 439,988,689 |
Shares redeemed | (28,768,916) | (61,778,854) | (726,539,912) | (1,504,207,375) |
Net increase (decrease) | (2,689,530) | (33,549,168) | $ (89,705,413) | $ (820,630,570) |
Service Class | | | | |
Shares sold | 971,404 | 1,664,065 | $ 24,253,794 | $ 40,334,290 |
Reinvestment of distributions | 3,023,973 | 2,417,459 | 73,210,390 | 58,164,074 |
Shares redeemed | (4,066,015) | (7,864,758) | (102,209,268) | (190,937,287) |
Net increase (decrease) | (70,638) | (3,783,234) | $ (4,745,084) | $ (92,438,923) |
Service Class 2 | | | | |
Shares sold | 7,622,309 | 15,407,445 | $ 189,522,765 | $ 370,175,387 |
Reinvestment of distributions | 4,974,811 | 3,009,670 | 119,445,217 | 71,870,922 |
Shares redeemed | (4,302,833) | (6,593,873) | (107,259,782) | (158,371,244) |
Net increase (decrease) | 8,294,287 | 11,823,242 | $ 201,708,200 | $ 283,675,065 |
Service Class 2R | | | | |
Shares sold | 102,796 | 229,939 | $ 2,550,417 | $ 5,501,232 |
Reinvestment of distributions | 28,488 | 13,378 | 680,853 | 318,391 |
Shares redeemed | (84,414) | (83,085) | (2,095,562) | (1,983,529) |
Net increase (decrease) | 46,870 | 160,232 | $ 1,135,708 | $ 3,836,094 |
Investor Class | | | | |
Shares sold | 2,051,820 | 1,480,945 | $ 51,613,559 | $ 36,874,007 |
Reinvestment of distributions | 136,756 | - | 3,317,692 | - |
Shares redeemed | (150,995) | (9,091) | (3,852,397) | (229,256) |
Net increase (decrease) | 2,037,581 | 1,471,854 | $ 51,078,854 | $ 36,644,751 |
A Share transactions for Investor Class are for the period July 21, 2005 (commencement of sale of shares) to December 31, 2005.
Semiannual Report
Board Approval of Investment Advisory Contracts and Management Fees
VIP Equity-Income Portfolio
On January 19, 2006, the Board of Trustees, including the Independent Trustees (together, the Board), voted to approve a general research services agreement (the Agreement) between FMR, FMR Co., Inc. (FMRC), Fidelity Investments Money Management, Inc. (FIMM), and Fidelity Research & Analysis Company (FRAC) (together, the Investment Advisers) for the fund, effective January 20, 2006, pursuant to which FRAC may provide general research and investment advisory support services to FMRC and FIMM. The Board considered that it has approved previously various sub-advisory agreements for the fund with affiliates of FMR that allow FMR to obtain research, non-discretionary advice, or discretionary portfolio management at no additional expense to the fund. The Board, assisted by the advice of fund counsel and independent Trustees' counsel, considered a broad range of information and determined that it would be beneficial for the fund to access the research and investment advisory support services supplied by FRAC at no additional expense to the fund.
The Board reached this determination in part because the new arrangement will involve no changes in (i) the contractual terms of and fees payable under the fund's management contract or sub-advisory agreements; (ii) the investment process or strategies employed in the management of the fund's assets; (iii) the nature or level of services provided under the fund's management contract or sub-advisory agreements; (iv) the day-to-day management of the fund or the persons primarily responsible for such management; or (v) the ultimate control or beneficial ownership of FMR, FMRC, or FIMM. The Board also considered that the establishment of the Agreement would not necessitate prior shareholder approval of the Agreement or result in an assignment and termination of the fund's management contract or sub-advisory agreements under the Investment Company Act of 1940.
Because the Board was approving an arrangement with FRAC under which the fund will not bear any additional management fees or expenses and under which the fund's portfolio manager would not change, it did not consider the fund's investment performance, competitiveness of management fee and total expenses, costs of services and profitability, or economies of scale to be significant factors in its decision.
In connection with its future renewal of the fund's management contract and sub-advisory agreements, the Board will consider: (i) the nature, extent, and quality of services provided to the fund, including shareholder and administrative services and investment performance; (ii) the competitiveness of the fund's management fee and total expenses; (iii) the costs of the services and profitability, including the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering, and servicing the fund and its shareholders; and (iv) whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the fund's Agreement is fair and reasonable, and that the fund's Agreement should be approved.
Semiannual Report
Semiannual Report
VIP Equity-Income Portfolio
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Adviser
FMR Co., Inc.
Fidelity Management & Research (U.K.) Inc.
Fidelity Research & Analysis Company
(formerly Fidelity Management &
Research (Far East) Inc.)
Fidelity Investments Japan Limited
Fidelity International Investment Advisors
Fidelity International Investment Advisors (U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Service Agents
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Fidelity Service Company, Inc.
Boston, MA
Custodian
The Northern Trust Company
Chicago, IL
VIPEI2R-SANN-0806
1.833447.100
Item 2. Code of Ethics
Not applicable.
Item 3. Audit Committee Financial Expert
Not applicable.
Item 4. Principal Accountant Fees and Services
Not applicable.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Schedule of Investments
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
There were no material changes to the procedures by which shareholders may recommend nominees to the Variable Insurance Products Fund: Equity-Income Portfolio's Board of Trustees.
Item 11. Controls and Procedures
(a)(i) The President and Treasurer and the Chief Financial Officer have concluded that the Variable Insurance Products Fund: Equity-Income Portfolio's (the "Fund") disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act) provide reasonable assurances that material information relating to the Fund is made known to them by the appropriate persons, based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report.
(a)(ii) There was no change in the Fund's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Fund's internal control over financial reporting.
Item 12. Exhibits
(a) | (1) | Not applicable. |
(a) | (2) | Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT. |
(a) | (3) | Not applicable. |
(b) | | Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Variable Insurance Products Fund
By: | /s/Christine Reynolds |
| Christine Reynolds |
| President and Treasurer |
| |
Date: | August 17, 2006 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/Christine Reynolds |
| Christine Reynolds |
| President and Treasurer |
| |
Date: | August 17, 2006 |
By: | /s/Joseph B. Hollis |
| Joseph B. Hollis |
| Chief Financial Officer |
| |
Date: | August 17, 2006 |
