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 811-3759
Variable Insurance Products Fund IV
(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: | December 31, 2003 |
Item 1. Reports to Stockholders
Fidelity® Variable Insurance Products:
Growth Stock Portfolio
Annual Report
December 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Performance | <Click Here> | How the fund has done over time. |
Management's Discussion | <Click Here> | The manager's review of fund performance, strategy and outlook. |
Investment Summary | <Click Here> | A summary of the fund's investments at period end. |
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. |
Auditors' Opinion | <Click Here> | |
Trustees and Officers | <Click Here> | |
Distributions | <Click Here> | |
Fidelity Variable Insurance Products are separate account options which are purchased through a variable insurance contract.
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.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
Growth Stock Portfolio
Fidelity Variable Insurance Products: Growth Stock Portfolio
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. Performance numbers are net of all fund operating expenses, but do not include any insurance charges imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total returns would have been lower. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended December 31, 2003 | | Past 1
year | Life of fund A |
Fidelity® VIP: Growth Stock - Initial Class | | 29.05% | 23.48% |
Fidelity VIP: Growth Stock - Service Class B | | 28.85% | 23.30% |
Fidelity VIP: Growth Stock - Service Class 2 C | | 28.64% | 23.11% |
A From December 11, 2002
B Performance for Service Class shares reflects an asset-based service fee (12b-1 fee).
C Performance for Service Class 2 shares reflects an asset-based service fee (12b-1 fee).
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity ® Variable Insurance Products: Growth Stock Portfolio - Initial Class on December 11, 2002, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the Russell 1000® Growth Index did over the same period.
Annual Report
Fidelity Variable Insurance Products: Growth Stock Portfolio
Management's Discussion of Fund Performance
Comments from Brian Hanson, Portfolio Manager of Fidelity® Variable Insurance Products: Growth Stock Portfolio
U.S. equity markets snapped a three-year losing streak in 2003, rebounding on the strength of the lowest interest rates in decades, improved corporate profits and a resurgent economy. For the year overall, the Standard & Poor's 500SM Index gained 28.69%, the Dow Jones Industrial Average SM rose 28.14% and the NASDAQ Composite® Index advanced 50.77%. Small-cap stocks led the charge, particularly lower-quality issues in cyclical industries such as biotechnology and the Internet. As a result, the Russell 2000® Index had its best calendar year ever, climbing 47.25%. The start of the year gave little indication of the strong performance to come, as the hangover of corporate governance scandals and an impending war with Iraq clouded the outlook for 2003. However, investors were encouraged by solid gross domestic product (GDP) growth in the first two quarters of 2003, and what seemed to be a quick resolution to the Iraqi conflict. Federal tax cuts and a boom in mortgage refinancing further boosted the markets and put more discretionary income in consumers' pockets. In the third quarter, GDP growth grew 8.2%, its highest level since 1984.
For the 12-month period that ended December 31, 2003, the fund narrowly lagged both of its benchmarks: the Russell 1000® Growth Index, which had a total return of 29.75%, and the Lipper SM Variable Annuity Growth Funds Average, which returned 30.23%. An overweighting in the pharmaceutical industry detracted from performance - particularly in such drug stocks as Schering-Plough and Merck, which had new drugs fail in late-stage trials and also experienced competitive pressures from generic drug makers. Around mid-year, the fund shifted away from its somewhat defensive positioning and more toward sectors oriented to economic recovery, notably semiconductors and media, a move that helped lift performance as forward economic momentum took firmer root. Individual stocks such as chip maker National Semiconductor, which is no longer held, as well as electronics contract manufacturer Sanmina-SCI and surgical device maker St. Jude Medical were among the fund's top 10 contributors.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund
Annual Report
Fidelity Variable Insurance Products: Growth Stock Portfolio
Investment Summary
Top Five Stocks as of December 31, 2003 |
| % of fund's
net assets |
Microsoft Corp. | 5.0 |
Pfizer, Inc. | 4.5 |
General Electric Co. | 4.0 |
Johnson & Johnson | 3.6 |
Viacom, Inc. Class B (non-vtg.) | 2.5 |
| 19.6 |
Top Five Market Sectors as of December 31, 2003 |
| % of fund's
net assets |
Information Technology | 29.5 |
Health Care | 25.3 |
Consumer Discretionary | 12.4 |
Financials | 9.6 |
Materials | 6.2 |
Asset Allocation as of December 31, 2003 |
% of fund's net assets * |
 | Stocks | 99.4% | |
 | Short-Term Investments and Net Other Assets | 0.6% | |
* Foreign investments 5.3% | |
Annual Report
Fidelity Variable Insurance Products: Growth Stock Portfolio
Investments December 31, 2003
Showing Percentage of Net Assets
Common Stocks - 99.4% |
| Shares | | Value (Note 1) |
CONSUMER DISCRETIONARY - 12.4% |
Automobiles - 0.5% |
Harley-Davidson, Inc. | 700 | | $ 33,271 |
Hotels, Restaurants & Leisure - 1.5% |
Brinker International, Inc. (a) | 1,000 | | 33,160 |
Kerzner International Ltd. (a) | 200 | | 7,792 |
Krispy Kreme Doughnuts, Inc. (a) | 400 | | 14,640 |
Wendy's International, Inc. | 900 | | 35,316 |
| | 90,908 |
Household Durables - 0.3% |
Jarden Corp. (a) | 600 | | 16,404 |
Media - 6.6% |
Clear Channel Communications, Inc. | 1,100 | | 51,513 |
EchoStar Communications Corp.
Class A (a) | 1,400 | | 47,600 |
Emmis Communications Corp.
Class A (a) | 700 | | 18,935 |
Fox Entertainment Group, Inc. Class A (a) | 1,700 | | 49,555 |
Lamar Advertising Co. Class A (a) | 800 | | 29,856 |
News Corp. Ltd. sponsored ADR | 156 | | 4,719 |
Time Warner, Inc. (a) | 3,000 | | 53,970 |
Viacom, Inc. Class B (non-vtg.) | 3,550 | | 157,549 |
| | 413,697 |
Multiline Retail - 0.5% |
Kohl's Corp. (a) | 700 | | 31,458 |
Specialty Retail - 2.7% |
Best Buy Co., Inc. | 1,600 | | 83,584 |
Home Depot, Inc. | 1,500 | | 53,235 |
Weight Watchers International, Inc. (a) | 800 | | 30,696 |
| | 167,515 |
Textiles Apparel & Luxury Goods - 0.3% |
NIKE, Inc. Class B | 300 | | 20,538 |
TOTAL CONSUMER DISCRETIONARY | | 773,791 |
CONSUMER STAPLES - 5.9% |
Beverages - 2.3% |
Anheuser-Busch Companies, Inc. | 600 | | 31,608 |
The Coca-Cola Co. | 2,160 | | 109,620 |
| | 141,228 |
Food & Staples Retailing - 1.2% |
Wal-Mart Stores, Inc. | 900 | | 47,745 |
Walgreen Co. | 800 | | 29,104 |
| | 76,849 |
Household Products - 2.0% |
Colgate-Palmolive Co. | 700 | | 35,035 |
Procter & Gamble Co. | 900 | | 89,892 |
| | 124,927 |
|
| Shares | | Value (Note 1) |
Personal Products - 0.4% |
Gillette Co. | 700 | | $ 25,711 |
TOTAL CONSUMER STAPLES | | 368,715 |
ENERGY - 4.6% |
Energy Equipment & Services - 4.3% |
BJ Services Co. (a) | 2,700 | | 96,930 |
Grant Prideco, Inc. (a) | 2,400 | | 31,248 |
Nabors Industries Ltd. (a) | 2,100 | | 87,150 |
Pride International, Inc. (a) | 2,800 | | 52,192 |
| | 267,520 |
Oil & Gas - 0.3% |
Murphy Oil Corp. | 300 | | 19,593 |
TOTAL ENERGY | | 287,113 |
FINANCIALS - 9.6% |
Capital Markets - 1.6% |
Bank of New York Co., Inc. | 1,400 | | 46,368 |
Morgan Stanley | 1,000 | | 57,870 |
| | 104,238 |
Commercial Banks - 0.3% |
Fifth Third Bancorp | 300 | | 17,730 |
Diversified Financial Services - 1.8% |
Citigroup, Inc. | 2,300 | | 111,642 |
Insurance - 1.8% |
American International Group, Inc. | 1,700 | | 112,676 |
Thrifts & Mortgage Finance - 4.1% |
Fannie Mae | 900 | | 67,554 |
Golden West Financial Corp., Delaware | 500 | | 51,595 |
New York Community Bancorp, Inc. | 1,400 | | 53,270 |
Sovereign Bancorp, Inc. | 3,500 | | 83,125 |
| | 255,544 |
TOTAL FINANCIALS | | 601,830 |
HEALTH CARE - 25.3% |
Biotechnology - 6.5% |
Alkermes, Inc. (a) | 4,500 | | 60,750 |
Amgen, Inc. (a) | 1,300 | | 80,340 |
Celgene Corp. (a) | 800 | | 36,016 |
Cephalon, Inc. (a) | 1,500 | | 72,615 |
Charles River Laboratories International, Inc. (a) | 900 | | 30,897 |
Genentech, Inc. (a) | 600 | | 56,142 |
Harvard Bioscience, Inc. (a) | 2,800 | | 24,920 |
Millennium Pharmaceuticals, Inc. (a) | 400 | | 7,468 |
Protein Design Labs, Inc. (a) | 1,200 | | 21,480 |
Regeneron Pharmaceuticals, Inc. (a) | 1,200 | | 17,652 |
| | 408,280 |
Health Care Equipment & Supplies - 2.6% |
Baxter International, Inc. | 700 | | 21,364 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
HEALTH CARE - continued |
Health Care Equipment & Supplies - continued |
Fisher Scientific International, Inc. (a) | 600 | | $ 24,822 |
Medtronic, Inc. | 1,500 | | 72,915 |
St. Jude Medical, Inc. (a) | 700 | | 42,945 |
| | 162,046 |
Health Care Providers & Services - 0.8% |
Cardinal Health, Inc. | 300 | | 18,348 |
UnitedHealth Group, Inc. | 600 | | 34,908 |
| | 53,256 |
Pharmaceuticals - 15.4% |
Abbott Laboratories | 1,700 | | 79,220 |
Eli Lilly & Co. | 1,100 | | 77,363 |
Forest Laboratories, Inc. (a) | 800 | | 49,440 |
IVAX Corp. (a) | 800 | | 19,104 |
Johnson & Johnson | 4,400 | | 227,304 |
Merck & Co., Inc. | 1,700 | | 78,540 |
Novartis AG sponsored ADR | 700 | | 32,123 |
Pfizer, Inc. | 7,900 | | 279,107 |
Schering-Plough Corp. | 2,100 | | 36,519 |
Wyeth | 1,900 | | 80,655 |
| | 959,375 |
TOTAL HEALTH CARE | | 1,582,957 |
INDUSTRIALS - 5.9% |
Commercial Services & Supplies - 0.8% |
Central Parking Corp. | 1,000 | | 14,930 |
Monster Worldwide, Inc. (a) | 700 | | 15,372 |
Republic Services, Inc. | 700 | | 17,941 |
| | 48,243 |
Construction & Engineering - 0.2% |
Granite Construction, Inc. | 600 | | 14,094 |
Electrical Equipment - 0.4% |
Byd Co. Ltd. (H Shares) | 10,500 | | 27,658 |
Industrial Conglomerates - 4.5% |
3M Co. | 340 | | 28,910 |
General Electric Co. | 8,100 | | 250,938 |
| | 279,848 |
TOTAL INDUSTRIALS | | 369,843 |
INFORMATION TECHNOLOGY - 29.5% |
Communications Equipment - 1.4% |
Aspect Communications Corp. (a) | 900 | | 14,184 |
Comverse Technology, Inc. (a) | 1,000 | | 17,590 |
Telefonaktiebolaget LM Ericsson ADR (a) | 3,200 | | 56,640 |
| | 88,414 |
Computers & Peripherals - 2.2% |
Applied Films Corp. (a) | 900 | | 29,718 |
|
| Shares | | Value (Note 1) |
Dell, Inc. (a) | 2,200 | | $ 74,712 |
UNOVA, Inc. (a) | 1,300 | | 29,835 |
| | 134,265 |
Electronic Equipment & Instruments - 7.0% |
AU Optronics Corp. sponsored ADR | 1,300 | | 15,496 |
Checkpoint Systems, Inc. (a) | 1,000 | | 18,910 |
Flextronics International Ltd. (a) | 3,300 | | 48,972 |
Ingram Micro, Inc. Class A (a) | 1,000 | | 15,900 |
Jabil Circuit, Inc. (a) | 1,100 | | 31,130 |
Photon Dynamics, Inc. (a) | 1,100 | | 44,264 |
Sanmina-SCI Corp. (a) | 8,600 | | 108,446 |
Solectron Corp. (a) | 21,800 | | 128,838 |
Veeco Instruments, Inc. (a) | 800 | | 22,560 |
| | 434,516 |
Internet Software & Services - 0.2% |
Blue Coat Systems, Inc. (a) | 600 | | 13,386 |
IT Services - 1.0% |
First Data Corp. | 840 | | 34,516 |
National Processing, Inc. (a) | 600 | | 14,130 |
The BISYS Group, Inc. (a) | 1,000 | | 14,880 |
| | 63,526 |
Semiconductors & Semiconductor Equipment - 10.5% |
Advanced Energy Industries, Inc. (a) | 1,600 | | 41,680 |
Applied Materials, Inc. (a) | 4,300 | | 96,535 |
ASML Holding NV (NY Shares) (a) | 2,900 | | 58,145 |
Asyst Technologies, Inc. (a) | 1,800 | | 31,230 |
Integrated Circuit Systems, Inc. (a) | 900 | | 25,641 |
Intersil Corp. Class A | 3,600 | | 89,460 |
KLA-Tencor Corp. (a) | 800 | | 46,936 |
Lam Research Corp. (a) | 1,200 | | 38,760 |
LTX Corp. (a) | 3,600 | | 54,108 |
Novellus Systems, Inc. (a) | 300 | | 12,615 |
Silicon Image, Inc. (a) | 10,001 | | 72,307 |
Teradyne, Inc. (a) | 3,400 | | 86,530 |
| | 653,947 |
Software - 7.2% |
BEA Systems, Inc. (a) | 2,100 | | 25,830 |
Manhattan Associates, Inc. (a) | 600 | | 16,584 |
Microsoft Corp. | 11,400 | | 313,956 |
Network Associates, Inc. (a) | 3,600 | | 54,144 |
SAP AG sponsored ADR | 300 | | 12,468 |
Siebel Systems, Inc. (a) | 900 | | 12,483 |
Sonic Solutions, Inc. (a) | 1,100 | | 16,830 |
| | 452,295 |
TOTAL INFORMATION TECHNOLOGY | | 1,840,349 |
MATERIALS - 6.2% |
Chemicals - 2.9% |
Dow Chemical Co. | 1,700 | | 70,669 |
Ferro Corp. | 1,100 | | 29,931 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
MATERIALS - continued |
Chemicals - continued |
Nitto Denko Corp. | 900 | | $ 48,113 |
Olin Corp. | 1,600 | | 32,096 |
| | 180,809 |
Containers & Packaging - 1.5% |
Pactiv Corp. (a) | 3,900 | | 93,210 |
Metals & Mining - 1.0% |
Alcan, Inc. | 500 | | 23,346 |
Alcoa, Inc. | 1,000 | | 38,000 |
| | 61,346 |
Paper & Forest Products - 0.8% |
Bowater, Inc. | 1,100 | | 50,941 |
TOTAL MATERIALS | | 386,306 |
TOTAL COMMON STOCKS (Cost $5,489,213) | 6,210,904 |
Cash Equivalents - 0.7% |
| Maturity
Amount | | |
Investments in repurchase agreements (Collateralized by U.S. Treasury Obligations, in a joint trading account at 0.81%, dated 12/31/03 due 1/2/04)
(Cost $43,000) | $ 43,002 | | $ 43,000 |
TOTAL INVESTMENT PORTFOLIO - 100.1% (Cost $5,532,213) | 6,253,904 |
NET OTHER ASSETS - (0.1)% | (6,248) |
NET ASSETS - 100% | $ 6,247,656 |
Legend |
(a) Non-income producing |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $7,885,996 and $7,882,786, respectively. |
The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment advisor. The commissions paid to these affiliated firms were $2,803 for the period. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Variable Insurance Products: Growth Stock Portfolio
Financial Statements
Statement of Assets and Liabilities
| December 31, 2003 |
| | |
Assets | | |
Investment in securities, at value (including repurchase agreements of $43,000) (cost $ 5,532,213) - See accompanying schedule | | $ 6,253,904 |
Cash | | 825 |
Foreign currency held at value (cost $186) | | 188 |
Receivable for investments sold | | 38,733 |
Receivable for fund shares sold | | 15 |
Dividends receivable | | 4,242 |
Prepaid expenses | | 34 |
Receivable from investment adviser for expense reductions | | 22,312 |
Other receivables | | 544 |
Total assets | | 6,320,797 |
| | |
Liabilities | | |
Payable for investments purchased | $ 40,652 | |
Accrued management fee | 2,918 | |
Distribution fees payable | 654 | |
Other affiliated payables | 5,349 | |
Other payables and accrued expenses | 23,568 | |
Total liabilities | | 73,141 |
| | |
Net Assets | | $ 6,247,656 |
Net Assets consist of: | | |
Paid in capital | | $ 5,355,506 |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | | 170,457 |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | | 721,693 |
Net Assets | | $ 6,247,656 |
| | |
Initial Class:
Net Asset Value, offering price and redemption price per
share ($1,885,245 ÷
159,952 shares) | | $ 11.79 |
| | |
Service Class:
Net Asset Value, offering price
and redemption price per
share ($1,871,302 ÷
158,952 shares) | | $ 11.77 |
| | |
Service Class 2:
Net Asset Value, offering price
and redemption price per
share ($2,491,109 ÷
211,957 shares) | | $ 11.75 |
Statement of Operations
| Year ended December 31, 2003 |
| | |
Investment Income | | |
Dividends | | $ 53,725 |
Interest | | 1,450 |
Total income | | 55,175 |
| | |
Expenses | | |
Management fee | $ 31,412 | |
Transfer agent fees | 4,247 | |
Distribution fees | 7,011 | |
Accounting fees and expenses | 60,011 | |
Non-interested trustees' compensation | 22 | |
Custodian fees and expenses | 6,759 | |
Audit | 39,528 | |
Legal | 1,146 | |
Miscellaneous | 541 | |
Total expenses before reductions | 150,677 | |
Expense reductions | (84,408) | 66,269 |
Net investment income (loss) | | (11,094) |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | | |
Investment securities | 536,624 | |
Foreign currency transactions | 19 | |
Total net realized gain (loss) | | 536,643 |
Change in net unrealized appreciation (depreciation) on: Investment securities | 872,199 | |
Assets and liabilities in foreign currencies | 2 | |
Total change in net unrealized appreciation (depreciation) | | 872,201 |
Net gain (loss) | | 1,408,844 |
Net increase (decrease) in net assets resulting from operations | | $ 1,397,750 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Variable Insurance Products: Growth Stock Portfolio
Financial Statements - continued
Statement of Changes in Net Assets
| Year ended
December 31,
2003 | For the period
December 11, 2002 (commencement of operations) to
December 31, 2002 |
Increase (Decrease) in Net Assets | | |
Operations | | |
Net investment income (loss) | $ (11,094) | $ 599 |
Net realized gain (loss) | 536,643 | (10,022) |
Change in net unrealized appreciation (depreciation) | 872,201 | (150,508) |
Net increase (decrease) in net assets resulting
from operations | 1,397,750 | (159,931) |
Distributions to shareholders from net investment income | (5,000) | - |
Distributions to shareholders from net realized gain | (341,023) | - |
Total distributions | (346,023) | - |
Share transactions - net increase (decrease) | 355,850 | 5,000,010 |
Total increase (decrease) in net assets | 1,407,577 | 4,840,079 |
| | |
Net Assets | | |
Beginning of period | 4,840,079 | - |
End of period (including undistributed net investment income of $0 and undistributed
net investment income of $599, respectively) | $ 6,247,656 | $ 4,840,079 |
Other Information: | | | |
Share Transactions | Year ended December 31, 2003 |
Shares | Initial Class | Service Class | Service Class 2 |
Sold | 2,425 | - | - |
Reinvested | 8,994 | 8,952 | 11,957 |
Redeemed | (1,468) | - | - |
Net increase (decrease) | 9,951 | 8,952 | 11,957 |
| | | |
Dollars Sold | $ 27,406 | $ - | $ - |
Reinvested | 104,262 | 103,612 | 138,149 |
Redeemed | (17,579) | - | - |
Net increase (decrease) | $ 114,089 | $ 103,612 | $ 138,149 |
| | | |
Share Transactions | Year ended December 31, 2002 A |
Shares | Initial Class | Service Class | Service Class 2 |
Sold | 150,001 | 150,000 | 200,000 |
Reinvested | - | - | - |
Redeemed | - | - | - |
Net increase (decrease) | 150,001 | 150,000 | 200,000 |
| | | |
Dollars Sold | $ 1,500,010 | $ 1,500,000 | $ 2,000,000 |
Reinvested | - | - | - |
Redeemed | - | - | - |
Net increase (decrease) | $ 1,500,010 | $ 1,500,000 | $ 2,000,000 |
| | | |
Distributions | Year ended December 31, 2003 |
| Initial Class | Service Class | Service Class 2 |
From net investment income | $ 1,500 | $ 1,500 | $ 2,000 |
From net realized gain | 102,762 | 102,112 | 136,149 |
Total | $ 104,262 | $ 103,612 | $ 138,149 |
| Year ended December 31, 2002 A |
From net investment income | $ - | $ - | $ - |
From net realized gain | - | - | - |
Total | $ - | $ - | $ - |
A For the period December 11, 2002 (commencement of operations) to December 31, 2002.
See accompanying notes which are an integral part of the financial statements.
Growth Stock Portfolio
Financial Highlights - Initial Class
Years ended December 31, | 2003 | 2002 F |
Selected Per-Share Data | | |
Net asset value, beginning of period | $ 9.68 | $ 10.00 |
Income from Investment Operations | | |
Net investment income (loss) E | (.01) | - H |
Net realized and unrealized gain (loss) | 2.81 | (.32) |
Total from investment operations | 2.80 | (.32) |
Distributions from net investment income | (.01) | - |
Distributions from net realized gain | (.68) | - |
Total distributions | (.69) | - |
Net asset value, end of period | $ 11.79 | $ 9.68 |
Total Return B,C,D | 29.05% | (3.20)% |
Ratios to Average Net Assets G | | |
Expenses before expense reductions | 2.68% | 9.76% A |
Expenses net of voluntary waivers, if any | 1.14% | 1.25% A |
Expenses net of all reductions | 1.09% | 1.22% A |
Net investment income (loss) | (.07)% | .35% A |
Supplemental Data | | |
Net assets, end of period (000 omitted) | $ 1,885 | $ 1,452 |
Portfolio turnover rate | 149% | 108% A |
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 December 11, 2002 (commencement of operations) 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 any voluntary 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.
Financial Highlights - Service Class
Years ended December 31, | 2003 | 2002 F |
Selected Per-Share Data | | |
Net asset value, beginning of period | $ 9.68 | $ 10.00 |
Income from Investment Operations | | |
Net investment income (loss) E | (.02) | - H |
Net realized and unrealized gain (loss) | 2.80 | (.32) |
Total from investment operations | 2.78 | (.32) |
Distributions from net investment income | (.01) | - |
Distributions from net realized gain | (.68) | - |
Total distributions | (.69) | - |
Net asset value, end of period | $ 11.77 | $ 9.68 |
Total Return B,C,D | 28.85% | (3.20)% |
Ratios to Average Net Assets G | | |
Expenses before expense reductions | 2.74% | 9.86% A |
Expenses net of voluntary waivers, if any | 1.24% | 1.35% A |
Expenses net of all reductions | 1.19% | 1.32% A |
Net investment income (loss) | (.17)% | .25% A |
Supplemental Data | | |
Net assets, end of period (000 omitted) | $ 1,871 | $ 1,452 |
Portfolio turnover rate | 149% | 108% A |
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 December 11, 2002 (commencement of operations) 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 any voluntary 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.
Annual Report
Financial Highlights - Service Class 2
Years ended December 31, | 2003 | 2002 F |
Selected Per-Share Data | | |
Net asset value, beginning of period | $ 9.68 | $ 10.00 |
Income from Investment Operations | | |
Net investment income (loss) E | (.04) | - H |
Net realized and unrealized gain (loss) | 2.80 | (.32) |
Total from investment operations | 2.76 | (.32) |
Distributions from net investment income | (.01) | - |
Distributions from net realized gain | (.68) | - |
Total distributions | (.69) | - |
Net asset value, end of period | $ 11.75 | $ 9.68 |
Total Return B,C,D | 28.64% | (3.20)% |
Ratios to Average Net Assets G | | |
Expenses before expense reductions | 2.89% | 10.01% A |
Expenses net of voluntary waivers, if any | 1.39% | 1.50% A |
Expenses net of all reductions | 1.34% | 1.47% A |
Net investment income (loss) | (.33)% | .10% A |
Supplemental Data | | |
Net assets, end of period (000 omitted) | $ 2,491 | $ 1,936 |
Portfolio turnover rate | 149% | 108% A |
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 December 11, 2002 (commencement of operations) 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 any voluntary 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.
Growth Stock Portfolio
Notes to Financial Statements
For the period ended December 31, 2003
1. Significant Accounting Policies.
Growth Stock Portfolio (the fund) is a fund of Variable Insurance Products Fund IV, (the trust) (referred to in this report as Fidelity Variable Insurance Products: Growth Stock 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 and Service Class 2 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 distribution and service plan fees incurred. Certain expense reductions also differ by class.
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. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
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. 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. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
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 each fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests. Income dividends and capital gain distributions are declared separately for each class. Distributions are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to losses deferred due to wash sales and excise tax regulations.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 790,750 | |
Unrealized depreciation | (74,467) | |
Net unrealized appreciation (depreciation) | 716,283 | |
Undistributed ordinary income | 172,942 | |
Undistributed long-term capital gain | 2,925 | |
| | |
Cost for federal income tax purposes | $ 5,537,621 | |
The tax character of distributions paid was as follows:
| December 31,
2003 | December 31,
2002 |
Ordinary Income | $ 346,023 | $ - |
2. Operating Policies.
Repurchase Agreements. Fidelity Management & Research Company (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. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
3. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
4. Fees and Other Transactions with Affiliates.
Management Fee. 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 .30% of the fund's average net assets and a group fee rate that averaged .28% 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 annual management fee rate was .58% 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 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 | $ 1,618 | |
Service Class 2 | 5,393 | |
| $ 7,011 | |
Growth Stock Portfolio
4. Fees and Other Transactions with Affiliates - continued
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 account. FIIOC pays a portion of the expenses related to the typesetting, printing and mailing of all shareholder reports, except proxy statements. Each class pays a transfer agent fee excluding out of pocket expenses, equal to an annual rate of .07% of their month end net assets.
For the period, the total transfer agent fees paid by each class to FIIOC, including out-of-pocket expenses, were as follows:
Initial Class | $ 1,642 | |
Service Class | 1,117 | |
Service Class 2 | 1,488 | |
| $ 4,247 | |
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Brokerage Commissions. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms are shown under the caption "Other Information" at the end of the fund's Schedule of Investments.
5. Committed Line of Credit.
The fund participates with other funds managed by FMR in a $3.5 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. During the period, there were no borrowings on this line of credit.
6. Expense Reductions.
FMR agreed to reimburse each class to the extent operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
| Expense
Limitations | Reimbursement
from adviser |
| | |
Initial Class | 1.25-1.00% * | $ 25,044 |
Service Class | 1.35-1.10% * | 24,405 |
Service Class 2 | 1.50-1.25% * | 32,497 |
| | $ 81,946 |
* Expense limitation in effect at period end.
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 $2,450 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 $12.
7. Other Information.
At the end of the period, FMR or its affiliates were the owners of record of 100% of the total outstanding shares of the fund.
Annual Report
Report of Independent Auditors
To the Trustees of Variable Insurance Products Fund IV and the Shareholders of Growth Stock Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Growth Stock Portfolio (a fund of Variable Insurance Products Fund IV) at December 31, 2003 and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Growth Stock Portfolio's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 13, 2004
Growth Stock Portfolio
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 292 funds advised by FMR or an affiliate. Mr. McCoy oversees 294 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-221-5207.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation |
Edward C. Johnson 3d (73)** |
| Year of Election or Appointment: 1983 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. |
Abigail P. Johnson (42)** |
| Year of Election or Appointment: 2001 Senior Vice President of VIP Growth Stock (2002). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. |
Laura B. Cronin (49) |
| Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). |
Robert L. Reynolds (51) |
| Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trusts or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation |
J. Michael Cook (61) |
| Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP
(accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000) and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. |
Ralph F. Cox (71) |
| Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. |
Robert M. Gates (60) |
| Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. |
George H. Heilmeier (67) |
| Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). |
Donald J. Kirk (71) |
| Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). |
Marie L. Knowles (57) |
| Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. |
Ned C. Lautenbach (59) |
| Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. |
Marvin L. Mann (70) |
| Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. |
William O. McCoy (70) |
| Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). |
William S. Stavropoulos (64) |
| Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Ms. Small may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation |
Peter S. Lynch (60) |
| Year of Election or Appointment: 2003 Member of the Advisory Board of Variable Insurance Products Fund IV. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity Magellan Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. |
Cornelia M. Small (59) |
| Year of Election or Appointment: 2004 Member of the Advisory Board of Variable Insurance Products Fund IV. Ms. Small is a member (2000) and Chairperson (2002) of the Investment Committee, and a member (2002) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors (1998-1999) of Scudder Kemper Investments. In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. |
John B. McDowell (45) |
| Year of Election or Appointment: 2002 Vice President of VIP Growth Stock. Mr. McDowell also serves as Vice President of certain Equity Funds (2002). He is Senior Vice President of FMR (1999), FMR Co., Inc. (2001), and Fidelity Management Trust Company (FMTC). Since joining Fidelity Investments in 1985, Mr. McDowell has worked as a research analyst and manager. |
Eric D. Roiter (55) |
| Year of Election or Appointment: 2002 Secretary of VIP Growth Stock. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). |
Stuart Fross (44) |
| Year of Election or Appointment: 2003 Assistant Secretary of VIP Growth Stock. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. |
Maria F. Dwyer (45) |
| Year of Election or Appointment: 2002 President and Treasurer of VIP Growth Stock. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. |
Timothy F. Hayes (53) |
| Year of Election or Appointment: 2002 Chief Financial Officer of VIP Growth Stock. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). |
John R. Hebble (45) |
| Year of Election or Appointment: 2003 Deputy Treasurer of VIP Growth Stock. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). |
John H. Costello (57) |
| Year of Election or Appointment: 2002 Assistant Treasurer of VIP Growth Stock. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. |
Francis V. Knox, Jr. (56) |
| Year of Election or Appointment: 2002 Assistant Treasurer of VIP Growth Stock. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). |
Mark Osterheld (48) |
| Year of Election or Appointment: 2002 Assistant Treasurer of VIP Growth Stock. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. |
Thomas J. Simpson (45) |
| Year of Election or Appointment: 2002 Assistant Treasurer of VIP Growth Stock. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). |
Annual Report
Distributions
The Board of Trustees of Growth Stock Portfolio voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities:
Fund | Pay Date | Record Date | Capital Gains |
Initial Class | 2/13/04 | 2/13/04 | $.333 |
Service Class | 2/13/04 | 2/13/04 | $.333 |
Service Class 2 | 2/13/04 | 2/13/04 | $.333 |
A percentage of the dividends distributed during the fiscal year for the following classes qualifies for the dividends-received deduction for corporate shareholders:
Initial Class | .64% |
Service Class | .64% |
Service Class 2 | .64% |
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
Growth Stock Portfolio
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research (U.K.) Inc.
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 Shareholder Servicing Agent
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
Mellon Bank, N.A.
Pittsburgh, PA
VIPGR-ANN-0204
1.781993.101
Fidelity® Variable Insurance Products:
Real Estate Portfolio
Annual Report
December 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Performance | <Click Here> | How the fund has done over time. |
Management's Discussion | <Click Here> | The manager's review of fund performance, strategy and outlook. |
Investment Summary | <Click Here> | A summary of the fund's investments at period end. |
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. |
Auditors' Opinion | <Click Here> | |
Trustees and Officers | <Click Here> | |
Distributions | <Click Here> | |
Fidelity Variable Insurance Products are separate account options which are purchased through a variable insurance contract.
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.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
Real Estate Portfolio
Fidelity® Variable Insurance Products: Real Estate Portfolio
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. Performance numbers are net of all fund operating expenses, but do not include any insurance charges imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total returns would have been lower. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended December 31, 2003 | | Past 1
year | Life of fund A |
Fidelity VIP: Real Estate - Initial Class | | 33.21% | 31.19% |
Fidelity VIP: Real Estate - Service Class B | | 33.01% | 31.02% |
Fidelity VIP: Real Estate - Service Class 2 C | | 32.81% | 30.86% |
A From November 6, 2002.
B Performance for Service Class shares reflects an asset-based service fee (12b-1 fee).
C Performance for Service Class 2 shares reflects an asset-based service fee (12b-1 fee).
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity® Real Estate Portfolio- Initial Class on November 6, 2002. The chart shows how the value of your investment would have changed, and also shows how the S&P 500® Index did over the same period.
Annual Report
Fidelity Variable Insurance Products: Real Estate Portfolio
Management's Discussion of Fund Performance
Comments from Steve Buller, Portfolio Manager of Fidelity® Variable Insurance Products: Real Estate Portfolio
U.S. equity markets snapped a three-year losing streak in 2003, rebounding on the strength of the lowest interest rates in decades, improved corporate profits and a resurgent economy. For the year overall, the Standard & Poor's 500SM Index gained 28.69%, the Dow Jones Industrial AverageSM rose 28.14% and the NASDAQ Composite® Index advanced 50.77%. Small-cap stocks led the charge, particularly lower-quality issues in cyclical industries such as biotechnology and the Internet. As a result, the Russell 2000® Index had its best calendar year ever, climbing 47.25%. The start of the year gave little indication of the strong performance to come, as the hangover of corporate governance scandals and an impending war with Iraq clouded the outlook for 2003. However, investors were encouraged by solid gross domestic product (GDP) growth in the first two quarters of 2003, and what seemed to be a quick resolution to the Iraqi conflict. Federal tax cuts and a boom in mortgage refinancing further boosted the markets and put more discretionary income in consumers' pockets. In the third quarter, GDP growth grew 8.2%, its highest level since 1984.
For the 12-month period that ended December 31, 2003, the fund's performance trailed that of the Wilshire® Real Estate Securities Index, which returned 37.08%. However, the fund did outpace the 28.69% return of the Standard & Poor's 500SM Index. The fund's peer group, the LipperSM Variable Annuity Real Estate Average, returned 36.44% during the same time frame. Investors continued to appreciate the benefits offered by real estate securities, including a generous income stream and historical lack of correlation to the stock market. Both of these factors helped drive real estate investment trusts' (REITs) outperformance of the S&P 500® in 2003. Compared to the Wilshire index, however, there were several reasons for the fund's underperformance. First was my defensive portfolio management approach beginning in late spring. My decision to position the fund conservatively ended up dragging down relative performance. Second, the fund had more cash than was ideal, which hurt performance in a rising market. I had sold stocks that reached my price targets but was too slow in reinvesting the proceeds. Also, Apartment Investment and Management was an especially poor relative performer. This significant fund holding had essentially flat performance, while the Wilshire index rose more than 37%. Apartment Investment and Management was forced to cut its dividend, and this weighed on the stock price. A large stake in Prologis, the largest distribution warehouse owner in the United States, also detracted. The stock performed only slightly worse than the benchmark, but owning so much of it on average magnified its impact. The fund's best-performing security was mortgage REIT Newcastle Investment, which investors appreciated for its high dividend yield and excellent execution of its management strategy. The fund also benefited from owning two retail mall stocks, CBL & Associates and General Growth Properties. Both holdings were representative of the entire mall industry, which recently has enjoyed some of the highest growth rates in the real estate world.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Fidelity Variable Insurance Products: Real Estate Portfolio
Investment Summary
Top Ten Stocks as of December 31, 2003 |
| % of fund's
net assets |
Apartment Investment & Management Co. Class A | 5.3 |
CenterPoint Properties Trust (SBI) | 5.2 |
Vornado Realty Trust | 4.9 |
Simon Property Group, Inc. | 4.6 |
ProLogis | 4.4 |
Duke Realty Corp. | 4.0 |
Equity Residential (SBI) | 3.7 |
Equity Office Properties Trust | 3.7 |
General Growth Properties, Inc. | 3.7 |
CBL & Associates Properties, Inc. | 3.6 |
| 43.1 |
Top Five REIT Sectors as of December 31, 2003 |
| % of fund's
net assets |
REITs - Industrial Buildings | 19.0 |
REITs - Malls | 15.1 |
REITs - Shopping Centers | 14.2 |
REITs - Office Buildings | 13.9 |
REITs - Apartments | 13.3 |
Asset Allocation (% of fund's net assets) |
As of December 31, 2003 * |
 | Stocks 94.3% | |
 | Short-Term
Investments and
Net Other Assets 5.7% | |
* Foreign investments | 1.4% | |
Annual Report
Fidelity Variable Insurance Products: Real Estate Portfolio
Investments December 31, 2003
Showing Percentage of Net Assets
Common Stocks - 94.3% |
| Shares | | Value (Note 1) |
HOTELS, RESTAURANTS & LEISURE - 3.2% |
Hotels, Resorts & Cruise Lines - 3.2% |
Starwood Hotels & Resorts
Worldwide, Inc. unit | 43,500 | | $ 1,564,695 |
MARINE - 0.1% |
Marine - 0.1% |
Alexander & Baldwin, Inc. | 1,200 | | 40,428 |
REAL ESTATE - 91.0% |
Real Estate Investment Trusts - 0.3% |
U.S. Restaurant Properties, Inc. | 8,100 | | 138,024 |
Real Estate Management & Development - 7.6% |
Boardwalk Equities, Inc. | 50,700 | | 700,389 |
Catellus Development Corp. | 61,052 | | 1,472,574 |
Forest City Enterprises, Inc. Class A | 6,300 | | 299,313 |
The St. Joe Co. | 34,150 | | 1,273,454 |
TOTAL REAL ESTATE MANAGEMENT & DEVELOPMENT | | 3,745,730 |
REITs - Apartments - 13.3% |
Apartment Investment & Management Co. Class A | 76,220 | | 2,629,588 |
Archstone-Smith Trust | 29,400 | | 822,612 |
AvalonBay Communities, Inc. | 12,600 | | 602,280 |
Equity Residential (SBI) | 62,000 | | 1,829,620 |
Home Properties of New York, Inc. | 15,400 | | 622,006 |
Post Properties, Inc. | 1,800 | | 50,256 |
TOTAL REITS - APARTMENTS | | 6,556,362 |
REITs - Health Care Facilities - 1.6% |
Health Care Property Investors, Inc. | 8,400 | | 426,720 |
Ventas, Inc. | 15,900 | | 349,800 |
TOTAL REITS - HEALTH CARE FACILITIES | | 776,520 |
REITs - Hotels - 0.0% |
MeriStar Hospitality Corp. (a) | 4,000 | | 26,040 |
REITs - Industrial Buildings - 19.0% |
CenterPoint Properties Trust (SBI) | 34,400 | | 2,576,560 |
Duke Realty Corp. | 64,200 | | 1,990,200 |
Liberty Property Trust (SBI) | 30,500 | | 1,186,450 |
|
| Shares | | Value (Note 1) |
ProLogis | 67,200 | | $ 2,156,448 |
Public Storage, Inc. | 34,240 | | 1,485,674 |
TOTAL REITS - INDUSTRIAL BUILDINGS | | 9,395,332 |
REITs - Malls - 15.1% |
CBL & Associates Properties, Inc. | 31,700 | | 1,791,050 |
General Growth Properties, Inc. | 65,360 | | 1,813,740 |
Simon Property Group, Inc. | 49,140 | | 2,277,148 |
The Mills Corp. | 11,600 | | 510,400 |
The Rouse Co. | 23,300 | | 1,095,100 |
TOTAL REITS - MALLS | | 7,487,438 |
REITs - Management/Investment - 3.7% |
Capital Automotive (SBI) | 13,710 | | 438,720 |
iStar Financial, Inc. | 14,900 | | 579,610 |
Newcastle Investment Corp. | 29,800 | | 807,580 |
TOTAL REITS - MANAGEMENT/INVESTMENT | | 1,825,910 |
REITs - Mobile Home Parks - 1.4% |
Manufactured Home Communities, Inc. | 18,900 | | 711,585 |
REITs - Office Buildings - 13.9% |
Alexandria Real Estate Equities, Inc. | 8,800 | | 509,520 |
Boston Properties, Inc. | 28,900 | | 1,392,691 |
Corporate Office Properties Trust (SBI) | 3,800 | | 79,800 |
Cousins Properties, Inc. | 16,100 | | 492,660 |
Equity Office Properties Trust | 63,400 | | 1,816,410 |
Highwoods Properties, Inc. (SBI) | 1,000 | | 25,400 |
Maguire Properties, Inc. | 20,100 | | 488,430 |
Reckson Associates Realty Corp. | 65,700 | | 1,596,510 |
Shurgard Storage Centers, Inc. Class A | 11,900 | | 448,035 |
TOTAL REITS - OFFICE BUILDINGS | | 6,849,456 |
REITs - Prison - 0.9% |
Correctional Properties Trust | 15,700 | | 452,160 |
REITs - Shopping Centers - 14.2% |
Cedar Shopping Centers, Inc. (a) | 15,800 | | 196,236 |
Commercial Net Lease Realty, Inc. | 1,300 | | 23,140 |
Developers Diversified Realty Corp. | 33,200 | | 1,114,524 |
Federal Realty Investment Trust (SBI) | 20,240 | | 777,014 |
Heritage Property Investment Trust, Inc. | 1,000 | | 28,450 |
Pan Pacific Retail Properties, Inc. | 19,700 | | 938,705 |
Price Legacy Corp. (a) | 47,000 | | 179,070 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
REAL ESTATE - CONTINUED |
REITs - Shopping Centers - continued |
Regency Centers Corp. | 34,300 | | $ 1,366,855 |
Vornado Realty Trust | 44,000 | | 2,409,000 |
TOTAL REITS - SHOPPING CENTERS | | 7,032,994 |
TOTAL REAL ESTATE | | 44,997,551 |
TOTAL COMMON STOCKS (Cost $43,942,057) | 46,602,674 |
Cash Equivalents - 8.7% |
| Maturity Amount | | |
Investments in repurchase agreements (Collateralized by U.S. Treasury Obligations, in a joint trading account at 0.81%, dated 12/31/03 due 1/2/04)
(Cost $4,313,000) | 4,313,193 | | 4,313,000 |
TOTAL INVESTMENT PORTFOLIO -
103.0% (Cost $48,255,057) | | 50,915,674 |
NET OTHER ASSETS - (3.0)% | | (1,503,589) |
NET ASSETS - 100% | $ 49,412,085 |
Legend |
(a) Non-income producing |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $44,475,487 and $5,576,686, respectively. |
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 $4,012 for the period. |
Income Tax Information |
The fund hereby designates approximately $34,243 as a capital gain dividend for the purpose of the dividend paid deduction. |
See accompanying notes which are an integral part of the financial statements.
Real Estate Portfolio
Fidelity Variable Insurance Products: Real Estate Portfolio
Financial Statements
Statement of Assets and Liabilities
| December 31, 2003 |
| | |
Assets | | |
Investment in securities, at value (including repurchase agreements of $4,313,000) (cost $48,255,057) - See accompanying schedule | | $ 50,915,674 |
Cash | | 341,861 |
Receivable for investments sold | | 117,475 |
Receivable for fund shares sold | | 586,098 |
Dividends receivable | | 208,534 |
Prepaid expenses | | 72 |
Other receivables | | 1,376 |
Total assets | | 52,171,090 |
| | |
Liabilities | | |
Payable for investments purchased | $ 2,702,056 | |
Accrued management fee | 20,522 | |
Distribution fees payable | 589 | |
Other affiliated payables | 7,701 | |
Other payables and accrued expenses | 28,137 | |
Total liabilities | | 2,759,005 |
| | |
Net Assets | | $ 49,412,085 |
Net Assets consist of: | | |
Paid in capital | | $ 46,687,882 |
Undistributed net investment income | | 7,211 |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | | 56,357 |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | | 2,660,635 |
Net Assets | | $ 49,412,085 |
| | |
Initial Class:
Net Asset Value, offering price and redemption price per share ($45,319,853 ÷ 3,407,703 shares) | | $ 13.30 |
| | |
Service Class:
Net Asset Value, offering price and redemption price per share ($2,047,893 ÷ 154,158 shares) | | $ 13.28 |
| | |
Service Class 2:
Net Asset Value, offering price and redemption price per share ($2,044,339 ÷ 154,164 shares) | | $ 13.26 |
Statement of Operations
| Year ended December 31, 2003 |
| | |
Investment Income | | |
Dividends | | $ 516,786 |
Special Dividends | | 117,964 |
Interest | | 8,873 |
Total income | | 643,623 |
| | |
Expenses | | |
Management fee | $ 68,040 | |
Transfer agent fees | 9,522 | |
Distribution fees | 6,083 | |
Accounting fees and expenses | 60,016 | |
Non-interested trustees' compensation | 35 | |
Custodian fees and expenses | 17,690 | |
Audit | 44,494 | |
Legal | 667 | |
Miscellaneous | 1,722 | |
Total expenses before reductions | 208,269 | |
Expense reductions | (79,521) | 128,748 |
Net investment income (loss) | | 514,875 |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | | |
Investment securities | 304,281 | |
Foreign currency transactions | (194) | |
Total net realized gain (loss) | | 304,087 |
Change in net unrealized appreciation (depreciation) on: Investment securities | 2,580,740 | |
Assets and liabilities in foreign currencies | 18 | |
Total change in net unrealized appreciation (depreciation) | | 2,580,758 |
Net gain (loss) | | 2,884,845 |
Net increase (decrease) in net assets resulting from operations | | $ 3,399,720 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Variable Insurance Products: Real Estate Portfolio
Financial Statements - continued
Statement of Changes in Net Assets
| Year ended
December 31,
2003 | November 6, 2002
(commencement of
operations) to
December 31,
2002 |
Increase (Decrease) in Net Assets | | |
Operations | | |
Net investment income (loss) | $ 514,875 | $ 40,968 |
Net realized gain (loss) | 304,087 | 9,220 |
Change in net unrealized appreciation (depreciation) | 2,580,758 | 79,877 |
Net increase (decrease) in net assets resulting
from operations | 3,399,720 | 130,065 |
Distributions to shareholders from net investment income | (513,643) | (55,000) |
Distributions to shareholders from net realized gain | (239,700) | - |
Total distributions | (753,343) | (55,000) |
Share transactions - net increase (decrease) | 41,635,633 | 5,055,010 |
Total increase (decrease) in net assets | 44,282,010 | 5,130,075 |
| | |
Net Assets | | |
Beginning of period | 5,130,075 | - |
End of period (including undistributed net investment income of $7,211 and $0, respectively) | $ 49,412,085 | $ 5,130,075 |
Other Information: | | | |
Share Transactions | Year ended December 31, 2003 |
Shares | Initial Class | Service Class | Service Class 2 |
Sold | 3,172,692 | - | - |
Reinvested | 51,781 | 2,518 | 2,524 |
Redeemed | (18,958) | - | - |
Net increase (decrease) | 3,205,515 | 2,518 | 2,524 |
| | | |
Dollars Sold | $ 41,129,487 | $ - | $ - |
Reinvested | 686,621 | 33,361 | 33,361 |
Redeemed | (247,197) | - | - |
Net increase (decrease) | $ 41,568,911 | $ 33,361 | $ 33,361 |
| | | |
Share Transactions | Year ended December 31, 2002A |
Shares | Initial Class | Service Class | Service Class 2 |
Sold | 200,001 | 150,000 | 150,000 |
Reinvested | 2,187 | 1,640 | 1,640 |
Redeemed | - | - | - |
Net increase (decrease) | 202,188 | 151,640 | 151,640 |
| | | |
Dollars Sold | $ 2,000,010 | $ 1,500,000 | $ 1,500,000 |
Reinvested | 22,000 | 16,500 | 16,500 |
Redeemed | - | - | - |
Net increase (decrease) | $ 2,022,010 | $ 1,516,500 | $ 1,516,500 |
| | | |
Distributions | Year ended December 31, 2003 |
| Initial Class | Service Class | Service Class 2 |
From net investment income | $ 468,151 | $ 22,746 | $ 22,746 |
From net realized gain | 218,470 | 10,615 | 10,615 |
Total | $ 686,621 | $ 33,361 | $ 33,361 |
| Year ended December 31, 2002A |
| Initial Class | Service Class | Service Class 2 |
From net investment income | $ 22,000 | $ 16,500 | $ 16,500 |
From net realized gain | - | - | - |
Total | $ 22,000 | $ 16,500 | $ 16,500 |
A For the period November 6, 2002 (commencement of operations) to December 31, 2002.
See accompanying notes which are an integral part of the financial statements.
Real Estate Portfolio
Financial Highlights - Initial Class
Years ended December 31, | 2003 | 2002 F |
Selected Per-Share Data | | |
Net asset value, beginning of period | $ 10.15 | $ 10.00 |
Income from Investment Operations | | |
Net investment income (loss) E | .48 H | .08 |
Net realized and unrealized gain (loss) | 2.89 | .18 |
Total from investment operations | 3.37 | .26 |
Distributions from net investment income | (.15) | (.11) |
Distributions from net realized gain | (.07) | - |
Total distributions | (.22) | (.11) |
Net asset value, end of period | $ 13.30 | $ 10.15 |
Total Return B,C,D | 33.21% | 2.61% |
Ratios to Average Net Assets G | | |
Expenses before expense reductions | 1.72% | 4.89% A |
Expenses net of voluntary waivers, if any | 1.03% | 1.25% A |
Expenses net of all reductions | 1.00% | 1.22% A |
Net investment income (loss) | 4.44% | 5.38% A |
Supplemental Data | | |
Net assets, end of period (000 omitted) | $ 45,320 | $ 2,052 |
Portfolio turnover rate | 46% | 44% A |
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 November 6, 2002 (commencement of operations) 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 any voluntary 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 Investment income per share reflects a special dividend which amounted to $.11 per share.
Financial Highlights - Service Class
Years ended December 31, | 2003 | 2002 F |
Selected Per-Share Data | | |
Net asset value, beginning of period | $ 10.15 | $ 10.00 |
Income from Investment Operations | | |
Net investment income (loss) E | .49 H | .08 |
Net realized and unrealized gain (loss) | 2.86 | .18 |
Total from investment operations | 3.35 | .26 |
Distributions from net investment income | (.15) | (.11) |
Distributions from net realized gain | (.07) | - |
Total distributions | (.22) | (.11) |
Net asset value, end of period | $ 13.28 | $ 10.15 |
Total Return B,C,D | 33.01% | 2.61% |
Ratios to Average Net Assets G | | |
Expenses before expense reductions | 1.80% | 4.99% A |
Expenses net of voluntary waivers, if any | 1.24% | 1.35% A |
Expenses net of all reductions | 1.22% | 1.31% A |
Net investment income (loss) | 4.23% | 5.28% A |
Supplemental Data | | |
Net assets, end of period (000 omitted) | $ 2,048 | $ 1,539 |
Portfolio turnover rate | 46% | 44% A |
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 November 6, 2002 (commencement of operations) 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 any voluntary 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 Investment income per share reflects a special dividend which amounted to $.11 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Service Class 2
Years ended December 31, | 2003 | 2002 F |
Selected Per-Share Data | | |
Net asset value, beginning of period | $ 10.15 | $ 10.00 |
Income from Investment Operations | | |
Net investment income (loss) E | .47 H | .08 |
Net realized and unrealized gain (loss) | 2.86 | .18 |
Total from investment operations | 3.33 | .26 |
Distributions from net investment income | (.15) | (.11) |
Distributions from net realized gain | (.07) | - |
Total distributions | (.22) | (.11) |
Net asset value, end of period | $ 13.26 | $ 10.15 |
Total Return B,C,D | 32.81% | 2.61% |
Ratios to Average Net Assets G | | |
Expenses before expense reductions | 1.95% | 5.14% A |
Expenses net of voluntary waivers, if any | 1.39% | 1.50% A |
Expenses net of all reductions | 1.37% | 1.46% A |
Net investment income (loss) | 4.08% | 5.13% A |
Supplemental Data | | |
Net assets, end of period (000 omitted) | $ 2,044 | $ 1,539 |
Portfolio turnover rate | 46% | 44% A |
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 November 6, 2002 (commencement of operations) 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 any voluntary 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 Investment income per share reflects a special dividend which amounted to $.11 per share.
See accompanying notes which are an integral part of the financial statements.
Real Estate Portfolio
Notes to Financial Statements
For the period ended December 31, 2003
1. Significant Accounting Policies.
Real Estate Portfolio (the fund) is a fund of Variable Insurance Products Fund IV (the trust) (referred to in this report as Fidelity Variable Insurance Products: Real Estate 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 and Service Class 2 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 distribution and service plan fees incurred. Certain expense reductions also differ by class.
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. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
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. 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. The fund estimates the components of distributions received from Real Estate Investment Trusts (REITs). Distributions received in excess of income are recorded as a reduction of cost of investments and/or as a realized gain. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
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 each fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests. Income dividends and capital gain distributions are declared separately for each class. Distributions are recorded on the ex-dividend date.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
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 and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to foreign currency transactions, passive foreign investment companies (PFIC) and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 2,998,741 | | |
Unrealized depreciation | (345,694) | |
Net unrealized appreciation (depreciation) | 2,653,047 | |
Undistributed ordinary income | 26,616 | |
Undistributed long-term capital gain | 44,538 | |
| | |
Cost for federal income tax purposes | $ 48,262,627 | |
The tax character of distributions paid was as follows:
| December 31,
2003 | December 31,
2002 |
Ordinary Income | $ 719,100 | $ 46,706 |
Long-term Capital Gains | 34,243 | 8,294 |
Total | $ 753,343 | $ 55,000 |
2. Operating Policies.
Repurchase Agreements. Fidelity Management & Research Company (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. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
3. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
4. Fees and Other Transactions with Affiliates.
Management Fee. 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 .30% of the fund's average net assets and a group fee rate that averaged .28% 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 annual management fee rate was .58% 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 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 | $ 1,740 | | |
Service Class 2 | 4,343 | |
| $ 6,083 | |
Real Estate Portfolio
4. Fees and Other Transactions with Affiliates - continued
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 account. FIIOC pays a portion of the expenses related to the typesetting, printing and mailing of all shareholder reports, except proxy statements. Each class pays a transfer agent fee excluding out of pocket expenses, equal to an annual rate of .07% of their month end net assets.
For the period, the total transfer agent fees paid by each class to FIIOC, including out of pocket expenses, were as follows:
Initial Class | $ 7,109 | | |
Service Class | 1,207 | |
Service Class 2 | 1,206 | |
| $ 9,522 | |
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Brokerage Commissions. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms are shown under the caption "Other Information" at the end of the fund's Schedule of Investments.
5. Expense Reductions.
FMR agreed to reimburse each class to the extent operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
| Expense
Limitations | Reimbursement
from adviser |
Initial Class | 1.25-1.00%* | $ 57,522 |
Service Class | 1.35-1.10%* | 9,768 |
Service Class 2 | 1.50-1.25%* | 9,743 |
| | $ 77,033 |
* Expense limitation in effect at period end.
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 $2,482 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 $6.
6. Other Information.
At the end of the period, FMR or its affiliates were the owners of record of 100% of the total outstanding shares of the fund.
Annual Report
Report of Independent Auditors
To the Trustees of Variable Insurance Products Fund IV and the Shareholders of Real Estate Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Real Estate Portfolio (a fund of Variable Insurance Products Fund IV) at December 31, 2003 and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Real Estate Portfolio's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 13, 2004
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 292 funds advised by FMR or an affiliate. Mr. McCoy oversees 294 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-221-5207.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation |
Edward C. Johnson 3d (73)** |
| Year of Election or Appointment: 1983 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. |
Abigail P. Johnson (42)** |
| Year of Election or Appointment: 2001 Senior Vice President of VIP Real Estate(2002). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. |
Laura B. Cronin (49) |
| Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). |
Robert L. Reynolds (51) |
| Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation |
J. Michael Cook (61) |
| Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000), and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. |
Ralph F. Cox (71) |
| Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. |
Robert M. Gates (60) |
| Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. |
George H. Heilmeier (67) |
| Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). |
Donald J. Kirk (71) |
| Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). |
Marie L. Knowles (57) |
| Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. |
Ned C. Lautenbach (59) |
| Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. |
Marvin L. Mann (70) |
| Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. |
William O. McCoy (70) |
| Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). |
William S. Stavropoulos (64) |
| Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Ms. Small may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation |
Peter S. Lynch (60) |
| Year of Election or Appointment: 2003 Member of the Advisory Board of Variable Insurance Products Fund IV. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. |
Cornelia M. Small (59) |
| Year of Election or Appointment: 2004 Member of the Advisory Board of Variable Insurance Products Fund IV. Ms. Small is a member (2000) and Chairperson (2002) of the Investment Committee, and a member (2002) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors (1998-1999) of Scudder Kemper Investments. In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. |
Bart A. Grenier (44) |
| Year of Election or Appointment: 2002 Vice President of VIP Real Estate. Mr. Grenier also serves as Vice President of certain Equity Funds (2001), a position he previously held from 1999 to 2000, and Vice President of certain High Income Funds (2002). He is Senior Vice President of FMR (1999) and FMR Co., Inc. (2001), and President and Director of Strategic Advisers, Inc. (2002). He also heads Fidelity's Asset Allocation Group (2000), Fidelity's Growth and Income Group (2001), Fidelity's Value Group (2001), and Fidelity's High Income Division (2001). Previously, Mr. Grenier served as President of Fidelity Ventures (2000), Vice President of certain High Income Funds (1997-2000), High Income Division Head (1997-2000), Group Leader of the Income-Growth and Asset Allocation-Income Groups (1996-2000), and Assistant Equity Division Head (1997-2000). |
Steve J. Buller (36) |
| Year of Election or Appointment: 2002 Vice President of VIP Real Estate. Mr. Buller also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Buller managed a variety of Fidelity funds.
|
Eric D. Roiter (55) |
| Year of Election or Appointment: 2002 Secretary of VIP Real Estate. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). |
Stuart Fross (44) |
| Year of Election or Appointment: 2003 Assistant Secretary of VIP Real Estate. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. |
Maria F. Dwyer (45) |
| Year of Election or Appointment: 2002 President and Treasurer of VIP Real Estate. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. |
Timothy F. Hayes (53) |
| Year of Election or Appointment: 2002 Chief Financial Officer of VIP Real Estate. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). |
John R. Hebble (45) |
| Year of Election or Appointment: 2003 Deputy Treasurer of VIP Real Estate. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). |
John H. Costello (57) |
| Year of Election or Appointment: 2002 Assistant Treasurer of VIP Real Estate. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. |
Francis V. Knox, Jr. (56) |
| Year of Election or Appointment: 2002 Assistant Treasurer of VIP Real Estate. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). |
Mark Osterheld (48) |
| Year of Election or Appointment: 2002 Assistant Treasurer of VIP Real Estate. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. |
Thomas J. Simpson (45) |
| Year of Election or Appointment: 2002 Assistant Treasurer of VIP Real Estate. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). |
Annual Report
Distributions
The Board of Trustees of Variable Insurance Products Real Estate Portfolio voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities, and dividends derived from net investment income:
Fund | Pay Date | Record Date | Dividends | Capital Gains |
Initial Class | 2/13/04 | 2/13/04 | $.01 | $.02 |
Service Class | 2/13/04 | 2/13/04 | $.01 | $.02 |
Service Class 2 | 2/13/04 | 2/13/04 | $.01 | $.02 |
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
Annual Report
Annual Report
Real Estate Portfolio
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research (U.K.) Inc.
Fidelity Management & Research (Far East) Inc.
Fidelity Investments Japan Limited
Fidelity International Investment Advisors
Fidelity International Investment Advisors (U.K.) Ltd.
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder Servicing Agent
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
Mellon Bank, N.A.
Pittsburgh, PA
VIPRE-ANN-0204
1.781992.101
Fidelity® Variable Insurance Products:
Strategic Income Portfolio
Annual Report
December 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Performance | <Click Here> | How the fund has done over time. |
Investment Summary | <Click Here> | A summary of the fund's investments at period end. |
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. |
Auditors' Opinion | <Click Here> | |
Trustees and Officers | <Click Here> | |
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.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
Strategic Income Portfolio
Fidelity Variable Insurance Products: Strategic Income Portfolio
Performance: The Bottom Line
Performance
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average annual total returns take Fidelity® Variable Insurance Products: Strategic Income Portfolio's cumulative total return and show you what would have happened if Fidelity Variable Insurance Products: Strategic Income Portfolio shares had performed at a constant rate each year. These numbers will be reported once the fund is a year old. In addition, the growth of the hypothetical $10,000 investment in the fund will appear in the fund's next annual report.
Annual Report
Fidelity Variable Insurance Products: Strategic Income Portfolio
Investment Summary
Top Five Holdings as of December 31, 2003 |
(by issuer, excluding cash equivalents) | % of fund's
net assets |
U.S. Treasury Obligations | 14.0 |
German Federal Republic | 7.5 |
Fannie Mae | 6.0 |
Brazilian Federative Republic | 2.7 |
United Kingdom, Great Britain & Northern Ireland | 2.5 |
| 32.7 |
Top Five Market Sectors as of December 31, 2003 |
| % of fund's
net assets |
Financials | 10.2 |
Consumer Discretionary | 9.1 |
Telecommunication Services | 8.3 |
Materials | 5.1 |
Utilities | 5.0 |
Quality Diversification (% of fund's net assets) as of December 31, 2003 |
 | U.S.Government and U.S.Government Agency Obligations | 20.0% | |
 | AAA,AA,A | 14.9% | |
 | BBB | 5.0% | |
 | BB | 8.7% | |
 | B | 28.2% | |
 | CCC,CC,C | 12.1% | |
 | D | 0.2% | |
 | Not Rated | 0.4% | |
 | Equities | 0.0% | |
 | Short-Term Investments and Net Other Assets | 10.5% | |
We have used ratings from Moody's® Investors Services, Inc. Where Moody's ratings are not available, we have used S&P ® ratings. |
Asset Allocation as of December 31, 2003 |
% of fund's net assets * |
| Corporate Bonds | 47.9% | |
| U.S. Government and U.S. Government Agency Obligations | 20.0% | |
| Foreign Government & Government Agency Obligations | 21.6% | |
| Short-Term Investments and Net Other Assets | 10.5% | |
* Foreign
investments 34.0% |
Annual Report
Fidelity Variable Insurance Products: Strategic Income Portfolio
Investments December 31, 2003
Showing Percentage of Net Assets
Nonconvertible Bonds - 47.9% |
| Principal Amount (e) | | Value
(Note 1) |
CONSUMER DISCRETIONARY - 9.1% |
Auto Components - 0.2% |
Tenneco Automotive, Inc. 11.625% 10/15/09 | | $ 20,000 | | $ 21,600 |
Hotels, Restaurants & Leisure - 2.8% |
Domino's, Inc. 8.25% 7/1/11 (d) | | 20,000 | | 21,600 |
Gaylord Entertainment Co. 8% 11/15/13 (d) | | 20,000 | | 21,000 |
Hilton Hotels Corp. 8.25% 2/15/11 | | 40,000 | | 46,100 |
Mandalay Resort Group 6.5% 7/31/09 | | 20,000 | | 20,700 |
Penn National Gaming, Inc. 6.875% 12/1/11 (d) | | 40,000 | | 39,700 |
Royal Caribbean Cruises Ltd. 6.875% 12/1/13 | | 20,000 | | 20,100 |
Sun International Hotels Ltd./Sun International North America, Inc. 8.875% 8/15/11 | | 40,000 | | 43,600 |
Town Sports International, Inc. 9.625% 4/15/11 | | 20,000 | | 21,550 |
Wynn Las Vegas LLC/ Wynn Las Vegas Capital Corp. 12% 11/1/10 | | 40,000 | | 47,200 |
| | 281,550 |
Household Durables - 0.4% |
Beazer Homes USA, Inc. 8.625% 5/15/11 | | 20,000 | | 22,050 |
Simmons Co. 7.875% 1/15/14 (d) | | 20,000 | | 20,100 |
| | 42,150 |
Media - 5.7% |
Charter Communications Holdings LLC/Charter Communications Holdings Capital Corp. 10% 4/1/09 | | 50,000 | | 44,500 |
CSC Holdings, Inc.: | | | | |
7.625% 4/1/11 | | 40,000 | | 41,600 |
9.875% 2/15/13 | | 90,000 | | 93,600 |
EchoStar DBS Corp. 6.375% 10/1/11 (d) | | 40,000 | | 41,000 |
Granite Broadcasting Corp. 9.75% 12/1/10 (d) | | 40,000 | | 39,600 |
Haights Cross Operating Co. 11.75% 8/15/11 (d) | | 40,000 | | 41,200 |
Houghton Mifflin Co.: | | | | |
0% 10/15/13 (b)(d) | | 75,000 | | 47,063 |
8.25% 2/1/11 | | 20,000 | | 21,300 |
IMAX Corp. 9.625% 12/1/10 (d) | | 45,000 | | 47,475 |
Innova S. de R.L. 9.375% 9/19/13 (d) | | 75,000 | | 77,250 |
Pegasus Satellite Communications, Inc. 11.25% 1/15/10 (d) | | 25,000 | | 21,500 |
Radio One, Inc. 8.875% 7/1/11 | | 20,000 | | 22,000 |
TV Azteca SA de CV yankee 10.5% 2/15/07 | | 30,000 | | 30,750 |
| | 568,838 |
TOTAL CONSUMER DISCRETIONARY | | 914,138 |
|
| Principal Amount (e) | | Value
(Note 1) |
CONSUMER STAPLES - 1.0% |
Household Products - 0.5% |
Johnsondiversey Holdings, Inc. 0% 5/15/13 (b)(d) | | $ 60,000 | | $ 45,900 |
Personal Products - 0.5% |
Revlon Consumer Products Corp. 12% 12/1/05 | | 50,000 | | 50,250 |
TOTAL CONSUMER STAPLES | | 96,150 |
ENERGY - 3.2% |
Energy Equipment & Services - 0.4% |
Hanover Compressor Co. 8.625% 12/15/10 | | 20,000 | | 20,850 |
Seabulk International, Inc. 9.5% 8/15/13 | | 20,000 | | 20,800 |
| | 41,650 |
Oil & Gas - 2.8% |
Encore Acquisition Co. 8.375% 6/15/12 | | 40,000 | | 43,400 |
Energy Partners Ltd. 8.75% 8/1/10 | | 40,000 | | 41,600 |
General Maritime Corp. 10% 3/15/13 | | 40,000 | | 45,200 |
OAO Gazprom 10.5% 10/21/09 | | 30,000 | | 35,175 |
Pecom Energia SA 8.125% 7/15/10 (Reg. S) | | 30,000 | | 29,850 |
The Coastal Corp. 7.75% 6/15/10 | | 50,000 | | 47,188 |
YPF SA yankee 9.125% 2/24/09 | | 30,000 | | 32,925 |
| | 275,338 |
TOTAL ENERGY | | 316,988 |
FINANCIALS - 10.2% |
Diversified Financial Services - 9.8% |
Ahold Finance USA, Inc. 8.25% 7/15/10 | | 23,000 | | 24,581 |
Arch Western Finance LLC 6.75% 7/1/13 (d) | | 40,000 | | 40,800 |
CCO Holdings LLC/CCO Holdings Capital Corp. 8.75% 11/15/13 (d) | | 50,000 | | 50,750 |
Charter Communications Holding II LLC/Charter Communications Holdings II Capital Corp. 10.25% 9/15/10 (d) | | 70,000 | | 73,150 |
Continental Airlines, Inc. pass thru trust certificates 6.9% 1/2/17 | | 23,773 | | 19,732 |
Delta Air Lines, Inc. pass thru trust certificates 7.92% 5/18/12 | | 50,000 | | 45,271 |
Huntsman Advanced Materials LLC 11% 7/15/10 (d) | | 20,000 | | 21,950 |
Japan Finance Corp. for Municipal Enterprises 1.55% 2/21/12 | JPY | 26,000,000 | | 248,376 |
Jostens Holding Corp. 0% 12/1/13 (b)(d) | | 40,000 | | 25,400 |
Level 3 Financing, Inc. 10.75% 10/15/11 (d) | | 40,000 | | 42,400 |
Mobile Telesystems Finance SA 9.75% 1/30/08 (Reg. S) | | 35,000 | | 38,019 |
Nonconvertible Bonds - continued |
| Principal Amount (e) | | Value
(Note 1) |
FINANCIALS - continued |
Diversified Financial Services - continued |
MSW Energy Holdings II LLC/MSW Finance Co. II, Inc. 7.375% 9/1/10 (d) | | $ 20,000 | | $ 20,900 |
National Beef Packing Co. LLC/National Beef Finance Corp. 10.5% 8/1/11 (d) | | 25,000 | | 25,750 |
Northwest Airlines, Inc. pass thru trust certificates 8.304% 9/1/10 | | 19,756 | | 16,990 |
PDVSA Finance Ltd. 9.75% 2/15/10 | | 50,000 | | 52,750 |
Petronas Capital Ltd. 7.875% 5/22/22 (Reg. S) | | 100,000 | | 118,063 |
Ship Finance International Ltd. 8.5% 12/15/13 (d) | | 45,000 | | 45,000 |
TRW Automotive Acquisition Corp. 11% 2/15/13 | | 20,000 | | 23,600 |
Universal City Development Partners Ltd./UCDP Finance, Inc. 11.75% 4/1/10 (d) | | 40,000 | | 46,700 |
| | 980,182 |
Real Estate - 0.4% |
Senior Housing Properties Trust 8.625% 1/15/12 | | 40,000 | | 43,600 |
TOTAL FINANCIALS | | 1,023,782 |
HEALTH CARE - 0.8% |
Health Care Providers & Services - 0.8% |
HCA, Inc. 6.95% 5/1/12 | | 60,000 | | 64,050 |
HealthSouth Corp. 6.875% 6/15/05 | | 20,000 | | 19,100 |
| | 83,150 |
INDUSTRIALS - 2.2% |
Aerospace & Defense - 0.2% |
BE Aerospace, Inc. 8.875% 5/1/11 | | 20,000 | | 18,500 |
Building Products - 0.4% |
Jacuzzi Brands, Inc. 9.625% 7/1/10 (d) | | 40,000 | | 44,000 |
Commercial Services & Supplies - 1.3% |
Allied Waste North America, Inc. 8.5% 12/1/08 | | 40,000 | | 44,400 |
American Color Graphics, Inc. 10% 6/15/10 | | 20,000 | | 20,350 |
Danka Business Systems PLC 11% 6/15/10 | | 20,000 | | 19,700 |
Worldspan LP 9.625% 6/15/11 (d) | | 40,000 | | 41,400 |
| | 125,850 |
Road & Rail - 0.3% |
TFM SA de CV yankee 11.75% 6/15/09 | | 30,000 | | 30,675 |
TOTAL INDUSTRIALS | | 219,025 |
INFORMATION TECHNOLOGY - 3.0% |
Communications Equipment - 0.5% |
Lucent Technologies, Inc. 6.45% 3/15/29 | | 65,000 | | 51,025 |
|
| Principal Amount (e) | | Value
(Note 1) |
Computers & Peripherals - 0.2% |
Seagate Technology HDD Holdings 8% 5/15/09 | | $ 20,000 | | $ 21,800 |
IT Services - 1.1% |
Dex Media, Inc. 8% 11/15/13 (d) | | 65,000 | | 68,250 |
Iron Mountain, Inc. 6.625% 1/1/16 | | 40,000 | | 39,000 |
| | 107,250 |
Office Electronics - 0.8% |
Xerox Corp. 7.625% 6/15/13 | | 75,000 | | 80,250 |
Semiconductors & Semiconductor Equipment - 0.4% |
Viasystems, Inc. 10.5% 1/15/11 (d) | | 40,000 | | 42,800 |
TOTAL INFORMATION TECHNOLOGY | | 303,125 |
MATERIALS - 5.1% |
Chemicals - 1.6% |
Avecia Group PLC 11% 7/1/09 | | 25,000 | | 22,875 |
Equistar Chemicals LP/Equistar Funding Corp. 10.625% 5/1/11 | | 20,000 | | 21,850 |
Huntsman ICI Chemicals LLC 10.125% 7/1/09 | | 45,000 | | 46,350 |
Huntsman ICI Holdings LLC 0% 12/31/09 | | 45,000 | | 21,600 |
Lyondell Chemical Co. 11.125% 7/15/12 | | 40,000 | | 43,600 |
| | 156,275 |
Containers & Packaging - 1.5% |
Crown Cork & Seal, Inc. 8% 4/15/23 | | 50,000 | | 46,500 |
Owens-Brockway Glass Container, Inc. 8.875% 2/15/09 | | 80,000 | | 87,200 |
Sweetheart Cup Co., Inc. 9.5% 1/15/07 (d) | | 20,000 | | 20,400 |
| | 154,100 |
Metals & Mining - 0.9% |
CSN Islands VIII Corp. 9.75% 12/16/13 (d) | | 40,000 | | 41,100 |
Luscar Coal Ltd. 9.75% 10/15/11 | | 40,000 | | 45,200 |
| | 86,300 |
Paper & Forest Products - 1.1% |
Georgia-Pacific Corp. 7.375% 12/1/25 | | 72,000 | | 69,930 |
Stone Container Corp. 9.75% 2/1/11 | | 40,000 | | 44,000 |
| | 113,930 |
TOTAL MATERIALS | | 510,605 |
TELECOMMUNICATION SERVICES - 8.3% |
Diversified Telecommunication Services - 4.7% |
ACC Escrow Corp. 10% 8/1/11 (d) | | 25,000 | | 27,625 |
Empresa Brasil de Telecomm SA 11% 12/15/08 (d) | | 30,000 | | 30,825 |
Mobifon Holdings BV 12.5% 7/31/10 | | 40,000 | | 46,400 |
Qwest Corp. 9.125% 3/15/12 (c)(d) | | 90,000 | | 103,275 |
Qwest Services Corp. 13.5% 12/15/10 (d) | | 50,000 | | 60,500 |
Nonconvertible Bonds - continued |
| Principal Amount (e) | | Value
(Note 1) |
TELECOMMUNICATION SERVICES - continued |
Diversified Telecommunication Services - continued |
Telenet Group Holding NV 0% 6/15/14 (b)(d) | | $ 70,000 | | $ 44,450 |
Telewest Communications PLC yankee 11.25% 11/1/08 (a) | | 140,000 | | 87,850 |
U.S. West Communications: | | | | |
6.875% 9/15/33 | | 60,000 | | 56,400 |
7.25% 10/15/35 | | 5,000 | | 4,950 |
8.875% 6/1/31 | | 5,000 | | 5,263 |
| | 467,538 |
Wireless Telecommunication Services - 3.6% |
Centennial Cellular Operating Co./Centennial Communications Corp. 10.125% 6/15/13 | | 80,000 | | 88,000 |
Crown Castle International Corp. 7.5% 12/1/13 (d) | | 50,000 | | 50,500 |
DirecTV Holdings LLC/DirecTV Financing, Inc. 8.375% 3/15/13 | | 40,000 | | 46,100 |
Dobson Communications Corp. 8.875% 10/1/13 | | 40,000 | | 40,800 |
Millicom International Cellular SA 10% 12/1/13 (d) | | 40,000 | | 42,000 |
Nextel Communications, Inc. 7.375% 8/1/15 | | 65,000 | | 69,550 |
Western Wireless Corp. 9.25% 7/15/13 | | 20,000 | | 21,200 |
| | 358,150 |
TOTAL TELECOMMUNICATION SERVICES | | 825,688 |
UTILITIES - 5.0% |
Electric Utilities - 0.9% |
Allegheny Energy Supply Co. LLC 8.75% 4/15/12 (d) | | 25,000 | | 23,750 |
CMS Energy Corp. 8.5% 4/15/11 | | 60,000 | | 64,425 |
| | 88,175 |
Gas Utilities - 1.3% |
ANR Pipeline, Inc. 9.625% 11/1/21 | | 40,000 | | 47,350 |
Southern Natural Gas Co. 7.35% 2/15/31 | | 40,000 | | 39,250 |
Tennessee Gas Pipeline Co. 8.375% 6/15/32 | | 40,000 | | 42,450 |
| | 129,050 |
Multi-Utilities & Unregulated Power - 2.8% |
AES Corp. 8.75% 5/15/13 (d) | | 40,000 | | 44,700 |
Calpine Corp. 8.75% 7/15/13 (d) | | 70,000 | | 67,900 |
|
| Principal Amount (e) | | Value
(Note 1) |
El Paso Corp. 7.875% 6/15/12 | | $ 70,000 | | $ 66,150 |
Williams Companies, Inc. 7.625% 7/15/19 | | 100,000 | | 105,000 |
| | 283,750 |
TOTAL UTILITIES | | 500,975 |
TOTAL NONCONVERTIBLE BONDS (Cost $4,809,435) | 4,793,626 |
U.S. Government and Government Agency Obligations - 20.0% |
|
U.S. Government Agency Obligations - 6.0% |
Fannie Mae 3.375% 12/15/08 | | 600,000 | | 594,971 |
U.S. Treasury Inflation Protected Obligations - 1.4% |
U.S. Treasury Inflation-Indexed Bonds 3.625% 4/15/28 | | 114,385 | | 141,730 |
U.S. Treasury Obligations - 12.6% |
U.S. Treasury Bonds 5.375% 2/15/31 | | 200,000 | | 208,570 |
U.S. Treasury Notes: | | | | |
1.875% 11/30/05 | | 800,000 | | 801,498 |
4.25% 11/15/13 | | 250,000 | | 249,727 |
TOTAL U.S. TREASURY OBLIGATIONS | | 1,259,795 |
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $1,997,628) | 1,996,496 |
Foreign Government and Government Agency Obligations - 21.6% |
|
Argentinian Republic 1.162% 8/3/12 (f) | | 25,000 | | 15,688 |
Brazilian Federative Republic: | | | | |
Brady capitalization bond 8% 4/15/14 | | 184,712 | | 181,941 |
11% 8/17/40 | | 80,000 | | 87,800 |
Canadian Government 5.25% 6/1/13 | CAD | 300,000 | | 241,512 |
Colombian Republic 11.75% 2/25/20 | | 25,000 | | 30,063 |
Dominican Republic 9.5% 9/27/06 (Reg. S) | | 20,000 | | 16,300 |
Ecuador Republic 7% 8/15/30
(Reg. S) (c) | | 40,000 | | 31,040 |
German Federal Republic 4.25% 1/4/14 | EUR | 600,000 | | 752,098 |
Panamanian Republic 10.75% 5/15/20 | | 10,000 | | 12,000 |
Peruvian Republic 9.125% 2/21/12 | | 15,000 | | 16,725 |
Philippine Republic 9.875% 1/15/19 | | 40,000 | | 42,400 |
Russian Federation 5% 3/31/30 (Reg. S) (c) | | 200,000 | | 192,500 |
Turkish Republic 11% 1/14/13 | | 60,000 | | 75,300 |
Foreign Government and Government Agency Obligations - continued |
| Principal Amount (e) | | Value
(Note 1) |
United Kingdom, Great Britain & Northern Ireland 5% 9/7/14 | GBP | 140,000 | | $ 254,009 |
United Mexican States: | | | | |
7.5% 4/8/33 | | $ 70,000 | | 72,345 |
11.5% 5/15/26 | | 50,000 | | 72,375 |
Uruguay Republic 7.25% 2/15/11 | | 20,000 | | 17,500 |
Venezuelan Republic 10.75% 9/19/13 (d) | | 50,000 | | 53,125 |
TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $2,149,147) | 2,164,721 |
Nonconvertible Preferred Stocks - 0.0% |
| Shares | | |
CONSUMER DISCRETIONARY - 0.0% |
Media - 0.0% |
Spanish Broadcasting System, Inc. 10.75% (d) | 4 | | 4,170 |
TOTAL NONCONVERTIBLE PREFERRED STOCKS (Cost $4,170) | 4,170 |
Cash Equivalents - 26.7% |
| Maturity Amount | |
Investments in repurchase agreements (Collateralized by U.S. Treasury Obligations, in a joint trading account at 0.81%, dated 12/31/03 due 1/2/04)
(Cost $2,665,000) | $ 2,665,119 | 2,665,000 |
TOTAL INVESTMENT PORTFOLIO - 116.2% (Cost $11,625,380) | 11,624,013 |
NET OTHER ASSETS - (16.2)% | (1,622,431) |
NET ASSETS - 100% | $ 10,001,582 |
Currency Abbreviations |
CAD | - | Canadian dollar |
EUR | - | European Monetary Unit |
GBP | - | British pound |
JPY | - | Japanese yen |
Legend |
(a) Non-income producing - issuer filed for bankruptcy or is in default of interest payments. |
(b) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. The rate shown is the rate at period end. |
(c) Debt obligation initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end. |
(d) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $1,666,958 or 16.7% of net assets. |
(e) Principal amount is stated in United States dollars unless otherwise noted. |
(f) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 66.0% |
Germany | 7.5% |
United Kingdom | 3.8% |
Canada | 3.4% |
Brazil | 3.0% |
Mexico | 2.8% |
Russia | 2.7% |
Japan | 2.5% |
Malaysia | 1.2% |
Others (individually less than 1%) | 7.1% |
| 100.0% |
Purchases and sales of securities, other than short-term securities, aggregated $8,960,507 and $0, respectively, of which long-term U.S. government and government agency obligations aggregated $1,997,692 and $0, respectively. |
See accompanying notes which are an integral part of the financial statements.
Strategic Income Portfolio
Fidelity Variable Insurance Products: Strategic Income Portfolio
Financial Statements
Statement of Assets and Liabilities
| December 31, 2003 |
| | |
Assets | | |
Investment in securities, at value (including repurchase agreements of $2,665,000) (cost $11,625,380) - See accompanying schedule | | $ 11,624,013 |
Cash | | 601,891 |
Interest receivable | | 130,542 |
Receivable from investment adviser for expense reductions | | 22,187 |
Total assets | | 12,378,633 |
| | |
Liabilities | | |
Payable for investments purchased | $ 2,352,094 | |
Accrued management fee | 1,397 | |
Distribution fees payable | 296 | |
Other affiliated payables | 283 | |
Other payables and accrued expenses | 22,981 | |
Total liabilities | | 2,377,051 |
| | |
Net Assets | | $ 10,001,582 |
Net Assets consist of: | | |
Paid in capital | | $ 10,000,030 |
Undistributed net investment income | | 3,059 |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | | (290) |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | | (1,217) |
Net Assets | | $ 10,001,582 |
| | |
Initial Class:
Net Asset Value, offering price and redemption price per share ($3,000,566 ÷ 300,001 shares) | | $ 10.00 |
| | |
Service Class:
Net Asset Value, offering price and redemption price per share ($3,500,573 ÷ 350,001 shares) | | $ 10.00 |
| | |
Service Class 2:
Net Asset Value, offering price and redemption price per share ($3,500,443 ÷ 350,001 shares) | | $ 10.00 |
Statement of Operations
| December 23, 2003 (commencement of operations) to December 31, 2003 |
| | |
Investment Income | | |
Interest | | 5,828 |
| | |
Expenses | | |
Management fee | $ 1,397 | |
Transfer agent fees | 163 | |
Distribution fees | 297 | |
Accounting fees and expenses | 121 | |
Custodian fees and expenses | 550 | |
Audit | 22,428 | |
Total expenses before reductions | 24,956 | |
Expense reductions | (22,187) | 2,769 |
Net investment income (loss) | | 3,059 |
Realized and Unrealized Gain (Loss) | |
Net realized gain (loss) on
foreign currency transactions | | (290) |
Change in net unrealized appreciation (depreciation) on: Investment securities | (1,367) | |
Assets and liabilities in foreign currencies | 150 | |
Total change in net unrealized appreciation (depreciation) | | (1,217) |
Net gain (loss) | | (1,507) |
Net increase (decrease) in net assets resulting from operations | | $ 1,552 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Variable Insurance Products: Strategic Income Portfolio
Financial Statements - continued
Statement of Changes in Net Assets
| December 23, 2003 (commencement
of operations) to
December 31, 2003 |
Increase (Decrease) in Net Assets | |
Operations | |
Net investment income (loss) | $ 3,059 |
Net realized gain (loss) | (290) |
Change in net unrealized appreciation (depreciation) | (1,217) |
Net increase (decrease) in net assets resulting from operations | 1,552 |
Share transactions - net increase (decrease) | 10,000,030 |
Total increase (decrease) in net assets | 10,001,582 |
| |
Net Assets | |
Beginning of period | - |
End of period (including undistributed net investment income of $3,059) | $ 10,001,582 |
Other Information: | |
Share Transactions | December 23, 2003 (commencement of operations)
to December 31, 2003 |
| Initial Class | Service Class | Service Class 2 |
Shares Sold | 300,001 | 350,001 | 350,001 |
Redeemed | - | - | - |
Net increase (decrease) | 300,001 | 350,001 | 350,001 |
| | | |
Dollars Sold | $ 3,000,010 | $ 3,500,010 | $ 3,500,010 |
Redeemed | - | - | - |
Net increase (decrease) | $ 3,000,010 | $ 3,500,010 | $ 3,500,010 |
| | | |
See accompanying notes which are an integral part of the financial statements.
Strategic Income Portfolio
Financial Highlights - Initial Class
Years ended December 31, | 2003 F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.00 |
Income from Investment Operations | |
Net investment income (loss) E | .003 |
Net realized and unrealized gain (loss) | (.003) |
Total from investment operations | .000 |
Net asset value, end of period | $ 10.00 |
Total ReturnB,C,D | .00% |
Ratios to Average Net AssetsG | |
Expenses before expense reductions | 10.00%A |
Expenses net of voluntary waivers, if any | 1.00%A |
Expenses net of all reductions | 1.00%A |
Net investment income (loss) | 1.36%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 3,001 |
Portfolio turnover rate | 0% |
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 December 23, 2003 (commencement of operations) to December 31, 2003.
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 any voluntary 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.
Financial Highlights - Service Class
Years ended December 31, | 2003 F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.00 |
Income from Investment Operations | |
Net investment income (loss) E | .003 |
Net realized and unrealized gain (loss) | (.003) |
Total from investment operations | .000 |
Net asset value, end of period | $ 10.00 |
Total ReturnB,C,D | .00% |
Ratios to Average Net AssetsG | |
Expenses before expense reductions | 10.10%A |
Expenses net of voluntary waivers, if any | 1.10%A |
Expenses net of all reductions | 1.10%A |
Net investment income (loss) | 1.26%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 3,501 |
Portfolio turnover rate | 0% |
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 December 23, 2003 (commencement of operations) to December 31, 2003.
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 any voluntary 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.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Service Class 2
Years ended December 31, | 2003F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.00 |
Income from Investment Operations | |
Net investment income (loss)E | .003 |
Net realized and unrealized gain (loss) | (.003) |
Total from investment operations | .000 |
Net asset value, end of period | $ 10.00 |
Total ReturnB,C,D | .00% |
Ratios to Average Net AssetsG | |
Expenses before expense reductions | 10.25%A |
Expenses net of voluntary waivers, if any | 1.25%A |
Expenses net of all reductions | 1.25%A |
Net investment income (loss) | 1.11%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 3,500 |
Portfolio turnover rate | 0% |
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 December 23, 2003 (commencement of operations) to December 31, 2003.
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 any voluntary 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.
See accompanying notes which are an integral part of the financial statements.
Strategic Income Portfolio
Notes to Financial Statements
For the period ended December 31, 2003
1. Significant Accounting Policies.
Strategic Income Portfolio (the fund) is a fund of Variable Insurance Products Fund IV (the trust) (referred to in this report as Fidelity Variable Insurance Products: Strategic 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 and Service Class 2 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 distribution and service plan fees incurred. Certain expense reductions also differ by class.
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. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade. Debt securities for which quotations are readily available are valued at their most recent bid prices (sales prices if the principal market is an exchange) in the principal market in which such securities are normally traded, as determined by recognized dealers in such securities, or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and valuation models. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
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. 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. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted according to the rate of inflation. Interest is accrued based on the principal value which is adjusted for inflation. Any increase in the principal amount of an inflation-indexed bond is recorded as interest income, even though the principal is not received until maturity. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
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 each fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests. Income dividends and capital gain distributions are declared separately for each class. Distributions are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to foreign currency transactions and market discount.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 25,909 | | |
Unrealized depreciation | (27,063) | |
Net unrealized appreciation (depreciation) | (1,154) | |
Undistributed ordinary income | 2,709 | |
Cost for federal income tax purposes | $ 11,625,167 | |
2. Operating Policies.
Repurchase Agreements. Fidelity Management & Research Company (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. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
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.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
4. Fees and Other Transactions with Affiliates.
Management Fee. 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 .45% of the fund's average net assets and a group fee rate that averaged .13% 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 .57% 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 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 | $ 85 | | |
Service Class 2 | 212 | |
| $ 297 | |
Strategic Income Portfolio
4. Fees and Other Transactions with Affiliates - continued
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 account. FIIOC pays a portion of the expenses related to the typesetting, printing and mailing of all shareholder reports, except proxy statements. Each class pays a transfer agent fee excluding out of pocket expenses, equal to an annual rate of .07% of their month end net assets.
For the period, the total transfer agent fees paid by each class to FIIOC, including out of pocket expenses, were as follows:
Initial Class | $ 49 | | |
Service Class | 57 | |
Service Class 2 | 57 | |
| $ 163 | |
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses.
5. Expense Reductions.
Effective December 23, 2003, FMR agreed to reimburse each class to the extent operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
| Expense
Limitations | Reimbursement
from adviser |
Initial Class | 1.00% | $ 6,658 |
Service Class | 1.10% | 7,766 |
Service Class 2 | 1.25% | 7,763 |
| | $ 22,187 |
6. Other Information.
At the end of the period, FMR or its affiliates were the owners of record of 100% of the total outstanding shares of the fund.
Annual Report
Report of Independent Auditors
To the Trustees of Variable Insurance Products Fund IV and the Shareholders of Strategic Income Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Strategic Income Portfolio (a fund of Variable Insurance Products Fund IV) at December 31, 2003 and the results of its operations, the changes in its net assets and the financial highlights for the period indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Strategic Income Portfolio's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 13, 2004
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 292 funds advised by FMR or an affiliate. Mr. McCoy oversees 294 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-221-5207.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation |
Edward C. Johnson 3d (73)** |
| Year of Election or Appointment: 1983 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. |
Abigail P. Johnson (42)** |
| Year of Election or Appointment: 2001 Senior Vice President of VIP Strategic Income (2003). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. |
Laura B. Cronin (49) |
| Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). |
Robert L. Reynolds (51) |
| Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation |
J. Michael Cook (61) |
| Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000), and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. |
Ralph F. Cox (71) |
| Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. |
Robert M. Gates (60) |
| Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. |
George H. Heilmeier (67) |
| Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). |
Donald J. Kirk (71) |
| Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). |
Marie L. Knowles (57) |
| Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. |
Ned C. Lautenbach (59) |
| Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. |
Marvin L. Mann (70) |
| Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. |
William O. McCoy (70) |
| Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). |
William S. Stavropoulos (64) |
| Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Ms. Small may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation |
Peter S. Lynch (60) |
| Year of Election or Appointment: 2003 Member of the Advisory Board of Variable Insurance Products Fund IV. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. |
Cornelia M. Small (59) |
| Year of Election or Appointment: 2004 Member of the Advisory Board of Variable Insurance Products Fund IV. Ms. Small is a member (2000) and Chairperson (2002) of the Investment Committee, and a member (2002) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors (1998-1999) of Scudder Kemper Investments. In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. |
Bart A. Grenier (44) |
| Year of Election or Appointment: 2003 Vice President of VIP Strategic Income. Mr. Grenier also serves as Vice President of certain Equity Funds (2001), a position he previously held from 1999 to 2000, and Vice President of certain High Income Funds (2002). He is Senior Vice President of FMR (1999) and FMR Co., Inc. (2001), and President and Director of Strategic Advisers, Inc. (2002). He also heads Fidelity's Asset Allocation Group (2000), Fidelity's Growth and Income Group (2001), Fidelity's Value Group (2001), and Fidelity's High Income Division (2001). Previously, Mr. Grenier served as President of Fidelity Ventures (2000), Vice President of certain High Income Funds (1997-2000), High Income Division Head (1997-2000), Group Leader of the Income-Growth and Asset Allocation-Income Groups (1996-2000), and Assistant Equity Division Head (1997-2000). |
Charles S. Morrison (43) |
| Year of Election or Appointment: 2003 Vice President of VIP Strategic Income. Mr. Morrison also serves as Vice President of Fidelity's Bond Funds (2002), and Vice President of certain Asset Allocation and Balanced Funds (2002). He serves as Vice President (2002) and Bond Group Leader (2002) of Fidelity Investments Fixed Income Division. Mr. Morrison is also Vice President of FIMM (2002) and FMR (2002). Mr. Morrison joined Fidelity in 1987 as a Corporate Bond Analyst in the Fixed Income Research Division. |
William Eigen (35) |
| Year of Election or Appointment: 2003 Vice President of VIP Strategic Income. Mr. Eigen also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Eigen worked as a director, strategist, and portfolio manager. |
George Fischer (42) |
| Year of Election or Appointment: 2003 Vice President of VIP Strategic Income. Mr. Fischer also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Fischer managed a variety of Fidelity funds. |
Mark J. Notkin (39) |
| Year of Election or Appointment: 2003 Vice President of VIP Strategic Income. Mr. Notkin also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Notkin managed a variety of Fidelity funds. |
Eric D. Roiter (55) |
| Year of Election or Appointment: 2003 Secretary of VIP Strategic Income. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). |
Stuart Fross (44) |
| Year of Election or Appointment: 2003 Assistant Secretary of VIP Strategic Income. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. |
Maria F. Dwyer (45) |
| Year of Election or Appointment: 2003 President and Treasurer of VIP Strategic Income. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. |
Timothy F. Hayes (53) |
| Year of Election or Appointment: 2003 Chief Financial Officer of VIP Strategic Income. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). |
John R. Hebble (45) |
| Year of Election or Appointment: 2003 Deputy Treasurer of VIP Strategic Income. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). |
John H. Costello (57) |
| Year of Election or Appointment: 2003 Assistant Treasurer of VIP Strategic Income. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. |
Francis V. Knox, Jr. (56) |
| Year of Election or Appointment: 2003 Assistant Treasurer of VIP Strategic Income. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). |
Mark Osterheld (48) |
| Year of Election or Appointment: 2003 Assistant Treasurer of VIP Strategic Income. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. |
Thomas J. Simpson (45) |
| Year of Election or Appointment: 2003 Assistant Treasurer of VIP Strategic Income. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). |
Annual Report
Annual Report
Strategic Income Portfolio
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research (U.K.) Inc.
Fidelity Management & Research (Far East) Inc.
Fidelity Investments Money Management, Inc.
Fidelity Investments Japan Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder Servicing Agent
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
Mellon Bank, N.A.
Pittsburgh, PA
VIPSI-ANN-0204-01
1.796350.101
Fidelity® Variable Insurance Products:
Value Leaders Portfolio
Annual Report
December 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Performance | <Click Here> | How the fund has done over time. |
Management's Discussion | <Click Here> | The manager's review of fund performance, strategy and outlook. |
Investment Summary | <Click Here> | A summary of the fund's investments at period end. |
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. |
Auditors' Opinion | <Click Here> | |
Trustees and Officers | <Click Here> | |
Distributions | <Click Here> | |
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.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
Value Leaders Portfolio
Fidelity Variable Insurance Products: Value Leaders Portfolio
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. Performance numbers are net of all fund operating expenses, but do not include any insurance charges imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total returns would have been lower. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Average annual total returns take Fidelity® Variable Insurance Products: Value Leaders Portfolio's cumulative total return and show you what would have happened if Fidelity Variable Insurance Products: Value Leaders Portfolio shares had performed at a constant rate each year. These numbers will be reported once the fund is a year old.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Variable Insurance Products: Value Leaders Portfolio on June 17, 2003, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the Russell 1000® Value Index did over the same period.
Annual Report
Fidelity Variable Insurance Products: Value Leaders Portfolio
Management's Discussion of Fund Performance
Comments from Brian Hogan, Portfolio Manager of Fidelity® Variable Insurance Products: Value Leaders Portfolio
U.S. equity markets snapped a three-year losing streak in 2003, rebounding on the strength of the lowest interest rates in decades, improved corporate profits and a resurgent economy. For the year overall, the Standard & Poor's 500SM Index gained 28.69%, the Dow Jones Industrial AverageSM rose 28.14% and the NASDAQ Composite® Index advanced 50.77%. Small-cap stocks led the charge, particularly lower-quality issues in cyclical industries such as biotechnology and the Internet. As a result, the Russell 2000® Index had its best calendar year ever, climbing 47.25%. The start of the year gave little indication of the strong performance to come, as the hangover of corporate governance scandals and an impending war with Iraq clouded the outlook for 2003. However, investors were encouraged by solid gross domestic product (GDP) growth in the first two quarters of 2003, and what seemed to be a quick resolution to the Iraqi conflict. Federal tax cuts and a boom in mortgage refinancing further boosted the markets and put more discretionary income in consumers' pockets. In the third quarter, GDP growth grew 8.2%, its highest level since 1984.
Since its inception on June 17, 2003, through December 31, 2003, the fund performed in line with the Russell 1000® Value Index, which returned 12.59%. Covad Communications was the top contributor to fund performance. Covad, a national broadband service provider, successfully partnered with large long-distance telephone companies to offer bundled telephone, data, broadband and DSL services. Tyco International also added to performance. The company's new management team exceeded expectations in terms of generating cash flow and began to execute its plan to reduce debt. NTL, a cable company based in the United Kingdom, was another key contributor as its stock's value increased after the company emerged from bankruptcy and began implementing a new business plan. On the negative side, pharmaceutical giant Merck was the largest detractor from fund performance after announcing disappointing earnings results in the third quarter of 2003, due in part to excess inventory. Another detractor was energy services company Weatherford International, which did not achieve its projected financial results due to lower-than-expected drilling activity in the Gulf of Mexico.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Fidelity Variable Insurance Products: Value Leaders Portfolio
Investment Summary
Top Five Stocks as of December 31, 2003 |
| % of fund's
net assets |
Citigroup, Inc. | 2.9 |
American International Group, Inc. | 2.7 |
Tyco International Ltd. | 2.5 |
Bank of America Corp. | 2.3 |
Verizon Communications, Inc. | 2.1 |
| 12.5 |
Top Five Market Sectors as of December 31, 2003 |
| % of fund's
net assets |
Financials | 26.5 |
Consumer Discretionary | 12.9 |
Industrials | 12.4 |
Energy | 10.9 |
Information Technology | 10.7 |
Asset Allocation as of December 31, 2003 |
% of fund's net assets * |
| Stocks | 100.2% | |
| Short-Term Investments and Net Other Assets | (0.2)% | |
 | | |
* Foreign investments 3.6% Short-term investments and net other assets are not included in the pie chart. |
Annual Report
Fidelity Variable Insurance Products: Value Leaders Portfolio
Investments December 31, 2003
Showing Percentage of Net Assets
Common Stocks - 100.2% |
| Shares | | Value (Note 1) |
CONSUMER DISCRETIONARY - 12.9% |
Auto Components - 0.0% |
LKQ Corp. | 100 | | $ 1,795 |
Automobiles - 0.1% |
Harley-Davidson, Inc. | 100 | | 4,753 |
Hotels, Restaurants & Leisure - 2.1% |
Darden Restaurants, Inc. | 300 | | 6,312 |
Hilton Hotels Corp. | 600 | | 10,278 |
McDonald's Corp. | 2,800 | | 69,524 |
Outback Steakhouse, Inc. | 200 | | 8,842 |
Royal Caribbean Cruises Ltd. | 200 | | 6,958 |
Six Flags, Inc. (a) | 2,100 | | 15,792 |
| | 117,706 |
Household Durables - 0.7% |
Leggett & Platt, Inc. | 400 | | 8,652 |
Sony Corp. sponsored ADR | 500 | | 17,335 |
Techtronic Industries Co. | 4,000 | | 11,103 |
| | 37,090 |
Leisure Equipment & Products - 0.1% |
MarineMax, Inc. (a) | 250 | | 4,858 |
Media - 7.1% |
Cablevision Systems Corp. - NY Group Class A (a) | 600 | | 14,034 |
Clear Channel Communications, Inc. | 1,580 | | 73,991 |
Emmis Communications Corp.
Class A (a) | 750 | | 20,288 |
Fox Entertainment Group, Inc. Class A (a) | 500 | | 14,575 |
Hughes Electronics Corp. (a) | 1,070 | | 17,709 |
Liberty Media Corp. Class A (a) | 2,500 | | 29,725 |
News Corp. Ltd. sponsored ADR | 119 | | 3,600 |
Reader's Digest Association, Inc. (non-vtg.) | 600 | | 8,796 |
Time Warner, Inc. (a) | 5,250 | | 94,448 |
Viacom, Inc. Class B (non-vtg.) | 1,340 | | 59,469 |
Walt Disney Co. | 2,600 | | 60,658 |
| | 397,293 |
Multiline Retail - 0.8% |
99 Cents Only Stores (a) | 300 | | 8,169 |
Nordstrom, Inc. | 450 | | 15,435 |
Saks, Inc. (a) | 1,450 | | 21,808 |
| | 45,412 |
Specialty Retail - 1.8% |
AnnTaylor Stores Corp. (a) | 100 | | 3,900 |
AutoNation, Inc. (a) | 300 | | 5,511 |
CarMax, Inc. (a) | 380 | | 11,753 |
Gap, Inc. | 400 | | 9,284 |
Home Depot, Inc. | 1,400 | | 49,686 |
Select Comfort Corp. (a) | 200 | | 4,952 |
|
| Shares | | Value (Note 1) |
Sonic Automotive, Inc. Class A | 500 | | $ 11,460 |
Toys 'R' Us, Inc. (a) | 500 | | 6,320 |
| | 102,866 |
Textiles Apparel & Luxury Goods - 0.2% |
Reebok International Ltd. | 300 | | 11,796 |
TOTAL CONSUMER DISCRETIONARY | | 723,569 |
CONSUMER STAPLES - 4.2% |
Beverages - 0.4% |
The Coca-Cola Co. | 460 | | 23,345 |
Food & Staples Retailing - 0.5% |
CVS Corp. | 300 | | 10,836 |
Safeway, Inc. (a) | 900 | | 19,719 |
| | 30,555 |
Food Products - 0.4% |
Del Monte Foods Co. (a) | 500 | | 5,200 |
Interstate Bakeries Corp. | 1,000 | | 14,230 |
| | 19,430 |
Household Products - 1.6% |
Clorox Co. | 240 | | 11,654 |
Colgate-Palmolive Co. | 170 | | 8,509 |
Procter & Gamble Co. | 700 | | 69,916 |
| | 90,079 |
Personal Products - 0.8% |
Avon Products, Inc. | 200 | | 13,498 |
Gillette Co. | 900 | | 33,057 |
| | 46,555 |
Tobacco - 0.5% |
Altria Group, Inc. | 470 | | 25,577 |
TOTAL CONSUMER STAPLES | | 235,541 |
ENERGY - 10.9% |
Energy Equipment & Services - 3.6% |
Baker Hughes, Inc. | 900 | | 28,944 |
ENSCO International, Inc. | 1,610 | | 43,744 |
National-Oilwell, Inc. (a) | 400 | | 8,944 |
Pride International, Inc. (a) | 1,000 | | 18,640 |
Smith International, Inc. (a) | 600 | | 24,912 |
Transocean, Inc. (a) | 500 | | 12,005 |
Varco International, Inc. (a) | 560 | | 11,553 |
Weatherford International Ltd. (a) | 1,420 | | 51,120 |
| | 199,862 |
Oil & Gas - 7.3% |
Amerada Hess Corp. | 200 | | 10,634 |
Apache Corp. | 440 | | 35,684 |
BP PLC sponsored ADR | 200 | | 9,870 |
Burlington Resources, Inc. | 900 | | 49,842 |
ChevronTexaco Corp. | 1,000 | | 86,390 |
ConocoPhillips | 600 | | 39,342 |
EnCana Corp. | 200 | | 7,863 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
ENERGY - continued |
Oil & Gas - continued |
Exxon Mobil Corp. | 2,830 | | $ 116,030 |
Murphy Oil Corp. | 300 | | 19,593 |
Occidental Petroleum Corp. | 400 | | 16,896 |
Pioneer Natural Resources Co. (a) | 200 | | 6,386 |
Valero Energy Corp. | 300 | | 13,902 |
| | 412,432 |
TOTAL ENERGY | | 612,294 |
FINANCIALS - 26.5% |
Capital Markets - 6.2% |
Bank of New York Co., Inc. | 1,500 | | 49,680 |
Bear Stearns Companies, Inc. | 300 | | 23,985 |
E*TRADE Group, Inc. (a) | 500 | | 6,325 |
J.P. Morgan Chase & Co. | 580 | | 21,303 |
Lehman Brothers Holdings, Inc. | 500 | | 38,610 |
Merrill Lynch & Co., Inc. | 1,600 | | 93,840 |
Morgan Stanley | 1,900 | | 109,953 |
National Financial Partners Corp. | 100 | | 2,755 |
| | 346,451 |
Commercial Banks - 7.8% |
Bank of America Corp. | 1,600 | | 128,688 |
Bank One Corp. | 2,500 | | 113,975 |
Banknorth Group, Inc. | 400 | | 13,012 |
Fifth Third Bancorp | 450 | | 26,595 |
FleetBoston Financial Corp. | 980 | | 42,777 |
Valley National Bancorp | 500 | | 14,600 |
Wachovia Corp. | 400 | | 18,636 |
Wells Fargo & Co. | 1,400 | | 82,446 |
| | 440,729 |
Consumer Finance - 0.3% |
MBNA Corp. | 600 | | 14,910 |
Diversified Financial Services - 3.2% |
CIT Group, Inc. | 470 | | 16,897 |
Citigroup, Inc. | 3,350 | | 162,605 |
| | 179,502 |
Insurance - 6.8% |
ACE Ltd. | 720 | | 29,822 |
AFLAC, Inc. | 300 | | 10,854 |
Allianz AG sponsored ADR | 600 | | 7,632 |
Allstate Corp. | 360 | | 15,487 |
AMBAC Financial Group, Inc. | 290 | | 20,123 |
American Financial Group, Inc., Ohio | 200 | | 5,292 |
American International Group, Inc. | 2,310 | | 153,107 |
China Life Insurance Co. Ltd. ADR (a) | 400 | | 13,188 |
Conseco, Inc. (a) | 500 | | 10,900 |
Hartford Financial Services Group, Inc. | 400 | | 23,612 |
Marsh & McLennan Companies, Inc. | 100 | | 4,789 |
|
| Shares | | Value (Note 1) |
MetLife, Inc. | 700 | | $ 23,569 |
The Chubb Corp. | 200 | | 13,620 |
Travelers Property Casualty Corp. Class B | 1,300 | | 22,061 |
UnumProvident Corp. | 900 | | 14,193 |
XL Capital Ltd. Class A | 160 | | 12,408 |
| | 380,657 |
Real Estate - 0.6% |
Apartment Investment & Management Co. Class A | 400 | | 13,800 |
iStar Financial, Inc. | 400 | | 15,560 |
Manufactured Home Communities, Inc. | 150 | | 5,648 |
Spirit Finance Corp. (b) | 200 | | 2,000 |
| | 37,008 |
Thrifts & Mortgage Finance - 1.6% |
Fannie Mae | 340 | | 25,520 |
Freddie Mac | 300 | | 17,496 |
Golden West Financial Corp., Delaware | 120 | | 12,383 |
New York Community Bancorp, Inc. | 400 | | 15,220 |
Sovereign Bancorp, Inc. | 900 | | 21,375 |
| | 91,994 |
TOTAL FINANCIALS | | 1,491,251 |
HEALTH CARE - 6.9% |
Biotechnology - 0.6% |
Alkermes, Inc. (a) | 600 | | 8,100 |
Cephalon, Inc. (a) | 100 | | 4,841 |
MedImmune, Inc. (a) | 200 | | 5,080 |
Millennium Pharmaceuticals, Inc. (a) | 250 | | 4,668 |
Neurocrine Biosciences, Inc. (a) | 140 | | 7,636 |
| | 30,325 |
Health Care Equipment & Supplies - 1.5% |
Bausch & Lomb, Inc. | 200 | | 10,380 |
Baxter International, Inc. | 1,470 | | 44,864 |
Dade Behring Holdings, Inc. (a) | 300 | | 10,722 |
Edwards Lifesciences Corp. (a) | 200 | | 6,016 |
St. Jude Medical, Inc. (a) | 200 | | 12,270 |
| | 84,252 |
Health Care Providers & Services - 1.2% |
HealthSouth Corp. (a) | 3,300 | | 15,147 |
IMS Health, Inc. | 300 | | 7,458 |
Lincare Holdings, Inc. (a) | 200 | | 6,006 |
Medco Health Solutions, Inc. (a) | 100 | | 3,399 |
PacifiCare Health Systems, Inc. (a) | 170 | | 11,492 |
ProxyMed, Inc. (a) | 200 | | 3,498 |
UnitedHealth Group, Inc. | 300 | | 17,454 |
WebMD Corp. (a) | 500 | | 4,495 |
| | 68,949 |
Pharmaceuticals - 3.6% |
Bristol-Myers Squibb Co. | 400 | | 11,440 |
Forest Laboratories, Inc. (a) | 340 | | 21,012 |
Johnson & Johnson | 60 | | 3,100 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
HEALTH CARE - continued |
Pharmaceuticals - continued |
Merck & Co., Inc. | 1,960 | | $ 90,552 |
Pfizer, Inc. | 500 | | 17,665 |
Schering-Plough Corp. | 2,750 | | 47,823 |
Wyeth | 300 | | 12,735 |
| | 204,327 |
TOTAL HEALTH CARE | | 387,853 |
INDUSTRIALS - 12.4% |
Aerospace & Defense - 3.1% |
BE Aerospace, Inc. (a) | 1,000 | | 5,400 |
Boeing Co. | 600 | | 25,284 |
Bombardier, Inc. Class B (sub. vtg.) | 2,500 | | 10,542 |
Embraer - Empresa Brasileira de Aeronautica SA sponsored ADR | 200 | | 7,006 |
Goodrich Corp. | 300 | | 8,907 |
Honeywell International, Inc. | 1,300 | | 43,459 |
Lockheed Martin Corp. | 780 | | 40,092 |
Northrop Grumman Corp. | 200 | | 19,120 |
Precision Castparts Corp. | 50 | | 2,271 |
United Technologies Corp. | 110 | | 10,425 |
| | 172,506 |
Air Freight & Logistics - 0.1% |
Expeditors International of Washington, Inc. | 140 | | 5,272 |
Airlines - 0.4% |
Ryanair Holdings PLC sponsored ADR (a) | 200 | | 10,128 |
Southwest Airlines Co. | 700 | | 11,298 |
| | 21,426 |
Building Products - 0.6% |
Masco Corp. | 1,000 | | 27,410 |
Trex Co., Inc. (a) | 200 | | 7,596 |
| | 35,006 |
Commercial Services & Supplies - 1.6% |
Cendant Corp. (a) | 600 | | 13,362 |
Cintas Corp. | 400 | | 20,052 |
IKON Office Solutions, Inc. | 800 | | 9,488 |
Monster Worldwide, Inc. (a) | 400 | | 8,784 |
Republic Services, Inc. | 200 | | 5,126 |
Robert Half International, Inc. (a) | 700 | | 16,338 |
Waste Management, Inc. | 540 | | 15,984 |
| | 89,134 |
Construction & Engineering - 0.3% |
Chicago Bridge & Iron Co. NV | 200 | | 5,780 |
EMCOR Group, Inc. (a) | 100 | | 4,390 |
Granite Construction, Inc. | 400 | | 9,396 |
| | 19,566 |
|
| Shares | | Value (Note 1) |
Electrical Equipment - 0.3% |
A.O. Smith Corp. | 250 | | $ 8,763 |
Emerson Electric Co. | 100 | | 6,475 |
| | 15,238 |
Industrial Conglomerates - 4.1% |
3M Co. | 280 | | 23,808 |
General Electric Co. | 1,770 | | 54,835 |
Textron, Inc. | 150 | | 8,559 |
Tyco International Ltd. | 5,360 | | 142,040 |
| | 229,242 |
Machinery - 1.2% |
AGCO Corp. (a) | 200 | | 4,028 |
Caterpillar, Inc. | 140 | | 11,623 |
Cummins, Inc. | 100 | | 4,894 |
Manitowoc Co., Inc. | 600 | | 18,720 |
Parker Hannifin Corp. | 350 | | 20,825 |
Timken Co. | 500 | | 10,030 |
| | 70,120 |
Road & Rail - 0.5% |
Union Pacific Corp. | 400 | | 27,792 |
Trading Companies & Distributors - 0.2% |
W.W. Grainger, Inc. | 230 | | 10,900 |
TOTAL INDUSTRIALS | | 696,202 |
INFORMATION TECHNOLOGY - 10.7% |
Communications Equipment - 1.3% |
Cisco Systems, Inc. (a) | 500 | | 12,145 |
McDATA Corp. Class A (a) | 500 | | 4,765 |
Motorola, Inc. | 1,970 | | 27,718 |
Scientific-Atlanta, Inc. | 200 | | 5,460 |
Sonus Networks, Inc. (a) | 200 | | 1,512 |
Telefonaktiebolaget LM Ericsson ADR (a) | 1,200 | | 21,240 |
| | 72,840 |
Computers & Peripherals - 2.3% |
Hewlett-Packard Co. | 3,700 | | 84,989 |
International Business Machines Corp. | 170 | | 15,756 |
Seagate Technology | 250 | | 4,725 |
Sun Microsystems, Inc. (a) | 4,200 | | 18,858 |
Western Digital Corp. (a) | 500 | | 5,895 |
| | 130,223 |
Electronic Equipment & Instruments - 1.7% |
Agilent Technologies, Inc. (a) | 900 | | 26,316 |
Amphenol Corp. Class A (a) | 100 | | 6,393 |
Celestica, Inc. (sub. vtg.) (a) | 500 | | 7,539 |
PerkinElmer, Inc. | 600 | | 10,242 |
Tech Data Corp. (a) | 200 | | 7,938 |
Thermo Electron Corp. (a) | 400 | | 10,080 |
Waters Corp. (a) | 800 | | 26,528 |
| | 95,036 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
INFORMATION TECHNOLOGY - continued |
Internet Software & Services - 0.3% |
Akamai Technologies, Inc. (a) | 500 | | $ 5,375 |
Yahoo!, Inc. (a) | 300 | | 13,551 |
| | 18,926 |
IT Services - 1.0% |
Affiliated Computer Services, Inc.
Class A (a) | 210 | | 11,437 |
Computer Sciences Corp. (a) | 400 | | 17,692 |
First Data Corp. | 400 | | 16,436 |
The BISYS Group, Inc. (a) | 700 | | 10,416 |
| | 55,981 |
Office Electronics - 0.4% |
Xerox Corp. (a) | 1,500 | | 20,700 |
Semiconductors & Semiconductor Equipment - 2.3% |
Agere Systems, Inc. Class B (a) | 2,900 | | 8,410 |
Cabot Microelectronics Corp. (a) | 260 | | 12,740 |
DSP Group, Inc. (a) | 200 | | 4,982 |
FormFactor, Inc. | 400 | | 7,920 |
Intel Corp. | 80 | | 2,576 |
LTX Corp. (a) | 500 | | 7,515 |
National Semiconductor Corp. (a) | 540 | | 21,281 |
NPTest Holding Corp. (a) | 400 | | 4,416 |
NVIDIA Corp. (a) | 300 | | 6,975 |
Samsung Electronics Co. Ltd. | 25 | | 9,455 |
Teradyne, Inc. (a) | 500 | | 12,725 |
Texas Instruments, Inc. | 1,000 | | 29,380 |
| | 128,375 |
Software - 1.4% |
Autodesk, Inc. | 400 | | 9,832 |
BEA Systems, Inc. (a) | 300 | | 3,690 |
Microsoft Corp. | 1,430 | | 39,382 |
Oracle Corp. (a) | 1,100 | | 14,520 |
Symantec Corp. (a) | 200 | | 6,930 |
Vastera, Inc. (a) | 1,200 | | 4,800 |
| | 79,154 |
TOTAL INFORMATION TECHNOLOGY | | 601,235 |
MATERIALS - 6.3% |
Chemicals - 2.8% |
Dow Chemical Co. | 1,900 | | 78,983 |
E.I. du Pont de Nemours & Co. | 400 | | 18,356 |
Lyondell Chemical Co. | 1,100 | | 18,645 |
Millennium Chemicals, Inc. | 300 | | 3,804 |
Olin Corp. | 600 | | 12,036 |
Praxair, Inc. | 600 | | 22,920 |
| | 154,744 |
Containers & Packaging - 0.4% |
Ball Corp. | 100 | | 5,957 |
|
| Shares | | Value (Note 1) |
Owens-Illinois, Inc. (a) | 800 | | $ 9,512 |
Smurfit-Stone Container Corp. (a) | 400 | | 7,428 |
| | 22,897 |
Metals & Mining - 1.9% |
Alcoa, Inc. | 800 | | 30,400 |
Companhia Vale do Rio Doce
sponsored ADR | 240 | | 14,040 |
Freeport-McMoRan Copper & Gold, Inc. Class B | 100 | | 4,213 |
Massey Energy Co. | 1,000 | | 20,800 |
Newmont Mining Corp. | 250 | | 12,153 |
Nucor Corp. | 490 | | 27,440 |
| | 109,046 |
Paper & Forest Products - 1.2% |
Bowater, Inc. | 600 | | 27,786 |
Georgia-Pacific Corp. | 200 | | 6,134 |
International Paper Co. | 800 | | 34,488 |
| | 68,408 |
TOTAL MATERIALS | | 355,095 |
TELECOMMUNICATION SERVICES - 6.3% |
Diversified Telecommunication Services - 5.7% |
Citizens Communications Co. (a) | 1,900 | | 23,598 |
Covad Communications Group, Inc. (a) | 900 | | 3,240 |
NTL, Inc. (a) | 805 | | 56,149 |
Qwest Communications International, Inc. (a) | 1,200 | | 5,184 |
SBC Communications, Inc. | 3,800 | | 99,066 |
TELUS Corp. (non-vtg.) | 760 | | 14,178 |
Verizon Communications, Inc. | 3,400 | | 119,272 |
| | 320,687 |
Wireless Telecommunication Services - 0.6% |
At Road, Inc. (a) | 500 | | 6,650 |
Crown Castle International Corp. (a) | 1,200 | | 13,236 |
Nextel Communications, Inc. Class A (a) | 550 | | 15,433 |
| | 35,319 |
TOTAL TELECOMMUNICATION SERVICES | | 356,006 |
UTILITIES - 3.1% |
Electric Utilities - 2.7% |
Allegheny Energy, Inc. (a) | 500 | | 6,380 |
Cinergy Corp. | 320 | | 12,419 |
Entergy Corp. | 400 | | 22,852 |
FirstEnergy Corp. | 800 | | 28,160 |
FPL Group, Inc. | 120 | | 7,850 |
PG&E Corp. (a) | 900 | | 24,993 |
PPL Corp. | 100 | | 4,375 |
Southern Co. | 340 | | 10,285 |
TXU Corp. | 1,000 | | 23,720 |
Xcel Energy, Inc. | 500 | | 8,490 |
| | 149,524 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
UTILITIES - continued |
Multi-Utilities & Unregulated Power - 0.4% |
AES Corp. (a) | 1,700 | | $ 16,048 |
Reliant Resources, Inc. (a) | 1,050 | | 7,728 |
| | 23,776 |
TOTAL UTILITIES | | 173,300 |
TOTAL COMMON STOCKS (Cost $5,067,206) | 5,632,346 |
Cash Equivalents - 0.5% |
| Maturity
Amount | | |
Investments in repurchase agreements (Collateralized by U.S. Treasury Obligations, in a joint trading account at 0.81%, dated 12/31/03 due 1/2/04)
(Cost $27,000) | $ 27,001 | | 27,000 |
TOTAL INVESTMENT PORTFOLIO - 100.7% (Cost $5,094,206) | 5,659,346 |
NET OTHER ASSETS - (0.7)% | (38,399) |
NET ASSETS - 100% | $ 5,620,947 |
Legend |
(a) Non-income producing |
(b) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $2,000 or 0.0% of net assets. |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $8,295,988 and $3,266,601, respectively. |
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 $563 for the period. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Variable Insurance Products: Value Leaders Portfolio
Financial Statements
Statement of Assets and Liabilities
| December 31, 2003 |
| | |
Assets | | |
Investment in securities, at value (including repurchase agreements of $27,000) (cost $5,094,206) - See accompanying schedule | | $ 5,659,346 |
Cash | | 199 |
Receivable for investments sold | | 55,284 |
Dividends receivable | | 7,687 |
Prepaid expenses | | 30 |
Receivable from investment adviser for expense reductions | | 17,348 |
Other receivables | | 372 |
Total assets | | 5,740,266 |
| | |
Liabilities | | |
Payable for investments purchased | $ 86,072 | |
Accrued management fee | 2,610 | |
Distribution fees payable | 587 | |
Other affiliated payables | 5,314 | |
Other payables and accrued expenses | 24,736 | |
Total liabilities | | 119,319 |
| | |
Net Assets | | $ 5,620,947 |
Net Assets consist of: | | |
Paid in capital | | $ 5,025,031 |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | | 30,738 |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | | 565,178 |
Net Assets | | $ 5,620,947 |
Initial Class:
Net Asset Value, offering price and redemption price per share ($1,687,478 ÷ 150,680 shares) | | $ 11.20 |
| | |
Service Class:
Net Asset Value, offering price and redemption price per share ($1,686,560 ÷ 150,681 shares) | | $ 11.19 |
| | |
Service Class 2:
Net Asset Value, offering price and redemption price per share ($2,246,909 ÷ 200,908 shares) | | $ 11.18 |
Statement of Operations
| For the period June 17, 2003 (commencement of operations) to December 31, 2003 |
| | |
Investment Income | | |
Dividends | | $ 49,098 |
Interest | | 670 |
Total income | | 49,768 |
| | |
Expenses | | |
Management fee | $ 15,889 | |
Transfer agent fees | 1,976 | |
Distribution fees | 3,562 | |
Accounting fees and expenses | 32,384 | |
Non-interested trustees' compensation | 10 | |
Custodian fees and expenses | 10,656 | |
Audit | 38,482 | |
Legal | 173 | |
Miscellaneous | 4 | |
Total expenses before reductions | 103,136 | |
Expense reductions | (71,071) | 32,065 |
Net investment income (loss) | | 17,703 |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | |
Investment securities | 38,078 | |
Foreign currency transactions | (42) | |
Total net realized gain (loss) | | 38,036 |
Change in net unrealized appreciation (depreciation) on: Investment securities | 565,140 | |
Assets and liabilities in foreign currencies | 38 | |
Total change in net unrealized appreciation (depreciation) | | 565,178 |
Net gain (loss) | | 603,214 |
Net increase (decrease) in net assets resulting from operations | | $ 620,917 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Variable Insurance Products: Value Leaders Portfolio
Financial Statements - continued
Statement of Changes in Net Assets
| For the period
June 17, 2003
(commencement
of operations) to
December 31, 2003 |
Increase (Decrease) in Net Assets | |
Operations | |
Net investment income (loss) | $ 17,703 |
Net realized gain (loss) | 38,036 |
Change in net unrealized appreciation (depreciation) | 565,178 |
Net increase (decrease) in net assets resulting from operations | 620,917 |
Distributions to shareholders from net investment income | (20,000) |
Distributions to shareholders from net realized gain | (5,000) |
Total distributions | (25,000) |
Share transactions - net increase (decrease) | 5,025,030 |
Total increase (decrease) in net assets | 5,620,947 |
| |
Net Assets | |
Beginning of period | - |
End of period | $ 5,620,947 |
Other Information: |
Share Transactions | Year ended December 31, 2003 A |
| Initial Class | Service Class | Service Class 2 |
Shares Sold | 150,001 | 150,001 | 200,001 |
Reinvested | 679 | 680 | 907 |
Redeemed | - | - | - |
Net increase (decrease) | 150,680 | 150,681 | 200,908 |
| | | |
Dollars Sold | $ 1,500,010 | $ 1,500,010 | $ 2,000,010 |
Reinvested | 7,500 | 7,500 | 10,000 |
Redeemed | - | - | - |
Net increase (decrease) | $ 1,507,510 | $ 1,507,510 | $ 2,010,010 |
| | | |
Distributions | Year ended December 31, 2003 A |
| Initial Class | Service Class | Service Class 2 |
From net investment income | $ 6,000 | $ 6,000 | $ 8,000 |
From net realized gain | 1,500 | 1,500 | 2,000 |
Total | $ 7,500 | $ 7,500 | $ 10,000 |
A For the period June 17, 2003 (commencement of operations) to December 31, 2003.
See accompanying notes which are an integral part of the financial statements.
Value Leaders Portfolio
Financial Highlights - Initial Class
Year ended December 31, | 2003 F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.00 |
Income from Investment Operations | |
Net investment income (loss)E | .04 |
Net realized and unrealized gain (loss) | 1.21 |
Total from investment operations | 1.25 |
Distributions from net investment income | (.04) |
Distributions from net realized gain | (.01) |
Total distributions | (.05) |
Net asset value, end of period | $ 11.20 |
Total ReturnB,C,D | 12.51% |
Ratios to Average Net AssetsG | |
Expenses before expense reductions | 3.63%A |
Expenses net of voluntary waivers, if any | 1.06%A |
Expenses net of all reductions | 1.04%A |
Net investment income (loss) | .78%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 1,687 |
Portfolio turnover rate | 119%A |
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 June 17, 2003 (commencement of operations) to December 31, 2003.
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 any voluntary 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.
Financial Highlights - Service Class
Year ended December 31, | 2003 F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.00 |
Income from Investment Operations | |
Net investment income (loss)E | .04 |
Net realized and unrealized gain (loss) | 1.20 |
Total from investment operations | 1.24 |
Distributions from net investment income | (.04) |
Distributions from net realized gain | (.01) |
Total distributions | (.05) |
Net asset value, end of period | $ 11.19 |
Total ReturnB,C,D | 12.41% |
Ratios to Average Net AssetsG | |
Expenses before expense reductions | 3.73%A |
Expenses net of voluntary waivers, if any | 1.16%A |
Expenses net of all reductions | 1.14%A |
Net investment income (loss) | .68%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 1,687 |
Portfolio turnover rate | 119%A |
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 June 17, 2003 (commencement of operations) to December 31, 2003.
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 any voluntary 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.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Service Class 2
Year ended December 31, | 2003 F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.00 |
Income from Investment Operations | |
Net investment income (loss)E | .03 |
Net realized and unrealized gain (loss) | 1.20 |
Total from investment operations | 1.23 |
Distributions from net investment income | (.04) |
Distributions from net realized gain | (.01) |
Total distributions | (.05) |
Net asset value, end of period | $ 11.18 |
Total ReturnB,C,D | 12.31% |
Ratios to Average Net AssetsG | |
Expenses before expense reductions | 3.88%A |
Expenses net of voluntary waivers, if any | 1.32%A |
Expenses net of all reductions | 1.29%A |
Net investment income (loss) | .52%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 2,247 |
Portfolio turnover rate | 119%A |
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 June 17, 2003 (commencement of operations) to December 31, 2003.
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 any voluntary 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.
See accompanying notes which are an integral part of the financial statements.
Value Leaders Portfolio
Notes to Financial Statements
For the period ended December 31, 2003
1. Significant Accounting Policies.
Value Leaders Portfolio (the fund) is a fund of Variable Insurance Products Fund IV (the trust) (referred to in this report as Fidelity Variable Insurance Products: Value Leaders 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 and Service Class 2 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 distribution and service plan fees incurred. Certain expense reductions also differ by class.
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. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
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. 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. The fund estimates the components of distributions received from Real Estate Investment Trusts (REITs). Distributions received in excess of income are recorded as a reduction of cost of investments and/or as a realized gain. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
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 each fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests. Income dividends and capital gain distributions are declared separately for each class. Distributions are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to foreign currency transactions and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 629,308 | |
Unrealized depreciation | (83,542) | |
Net unrealized appreciation (depreciation) | 545,766 | |
Undistributed ordinary income | 50,048 | |
Undistributed long-term capital gain | 99 | |
| | |
Cost for federal income tax purposes | $ 5,113,580 | |
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The tax character of distributions paid was as follows:
| December 31,
2003 |
| |
Ordinary Income | $ 25,000 |
2. Operating Policies.
Repurchase Agreements. Fidelity Management & Research Company (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. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
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.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
4. Fees and Other Transactions with Affiliates.
Management Fee. 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 .30% of the fund's average net assets and a group fee rate that averaged .28% 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 .58% 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 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 | $ 822 | | |
Service Class 2 | 2,740 | |
| $ 3,562 | |
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 account. FIIOC pays a portion of the expenses related to the typesetting, printing and mailing of all shareholder reports, except proxy statements. Each class pays a transfer agent fee excluding out of pocket expenses, equal to an annual rate of .07% of their month end net assets.
For the period, the total transfer agent fees paid by each class to FIIOC, including out-of-pocket expenses, were as follows:
Initial Class | $ 593 | | |
Service Class | 592 | |
Service Class 2 | 791 | |
| $ 1,976 | |
Value Leaders Portfolio
4. Fees and Other Transactions with Affiliates - continued
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Brokerage Commissions. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms are shown under the caption "Other Information" at the end of the fund's Schedule of Investments.
5. Committed Line of Credit.
The fund participates with other funds managed by FMR in a $3.5 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. During the period, there were no borrowings on this line of credit.
6. Expense Reductions.
FMR agreed to reimburse each class to the extent operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
| Expense
Limitations | Reimbursement
from adviser |
| | |
Initial Class | 1.25-1.00% * | $ 21,123 |
Service Class | 1.35-1.10%* | 21,109 |
Service Class 2 | 1.50-1.25%* | 28,117 |
| | $ 70,349 |
* Expense limitation in effect at period end.
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 $675 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 $47.
7. Other Information.
At the end of the period, FMR or its affiliates were the owners of record of 100% of the total outstanding shares of the fund.
Annual Report
Report of Independent Auditors
To the Trustees of Variable Insurance Products Fund IV and the Shareholders of Value Leaders Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Value Leaders Portfolio (a fund of Variable Insurance Products Fund IV) at December 31, 2003 and the results of its operations, the changes in its net assets and the financial highlights for the period indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Value Leaders Portfolio's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 13, 2004
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 292 funds advised by FMR or an affiliate. Mr. McCoy oversees 294 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-221-5207.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation |
Edward C. Johnson 3d (73)** |
| Year of Election or Appointment: 1983 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. |
Abigail P. Johnson (42)** |
| Year of Election or Appointment: 2001 Senior Vice President of VIP Value Leaders (2003). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. |
Laura B. Cronin (49) |
| Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). |
Robert L. Reynolds (51) |
| Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation |
J. Michael Cook (61) |
| Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000), and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. |
Ralph F. Cox (71) |
| Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. |
Robert M. Gates (60) |
| Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. |
George H. Heilmeier (67) |
| Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). |
Donald J. Kirk (71) |
| Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). |
Marie L. Knowles (57) |
| Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. |
Ned C. Lautenbach (59) |
| Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. |
Marvin L. Mann (70) |
| Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. |
William O. McCoy (70) |
| Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). |
William S. Stavropoulos (64) |
| Year of Election or Appointment: 2002 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Ms. Small may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation |
Peter S. Lynch (60) |
| Year of Election or Appointment: 2003 Member of the Advisory Board of Variable Insurance Products Fund IV. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. |
Cornelia M. Small (59) |
| Year of Election or Appointment: 2004 Member of the Advisory Board of Variable Insurance Products Fund IV. Ms. Small is a member (2000) and Chairperson (2002) of the Investment Committee, and a member (2002) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors (1998-1999) of Scudder Kemper Investments. In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. |
Bart A. Grenier (44) |
| Year of Election or Appointment: 2003 Vice President of VIP Value Leaders. Mr. Grenier also serves as Vice President of certain Equity Funds (2001), a position he previously held from 1999 to 2000, and Vice President of certain High Income Funds (2002). He is Senior Vice President of FMR (1999) and FMR Co., Inc. (2001), and President and Director of Strategic Advisers, Inc. (2002). He also heads Fidelity's Asset Allocation Group (2000), Fidelity's Growth and Income Group (2001), Fidelity's Value Group (2001), and Fidelity's High Income Division (2001). Previously, Mr. Grenier served as President of Fidelity Ventures (2000), Vice President of certain High Income Funds (1997-2000), High Income Division Head (1997-2000), Group Leader of the Income-Growth and Asset Allocation-Income Groups (1996-2000), and Assistant Equity Division Head (1997-2000). |
Eric D. Roiter (55) |
| Year of Election or Appointment: 2003 Secretary of VIP Value Leaders. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). |
Stuart Fross (44) |
| Year of Election or Appointment: 2003 Assistant Secretary of VIP Value Leaders. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. |
Maria F. Dwyer (45) |
| Year of Election or Appointment: 2003 President and Treasurer of VIP Value Leaders. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. |
Timothy F. Hayes (53) |
| Year of Election or Appointment: 2003 Chief Financial Officer of VIP Value Leaders. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). |
John R. Hebble (45) |
| Year of Election or Appointment: 2003 Deputy Treasurer of VIP Value Leaders. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). |
John H. Costello (57) |
| Year of Election or Appointment: 2003 Assistant Treasurer of VIP Value Leaders. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. |
Francis V. Knox, Jr. (56) |
| Year of Election or Appointment: 2003 Assistant Treasurer of VIP Value Leaders. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). |
Mark Osterheld (48) |
| Year of Election or Appointment: 2003 Assistant Treasurer of VIP Value Leaders. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. |
Thomas J. Simpson (45) |
| Year of Election or Appointment: 2003 Assistant Treasurer of VIP Value Leaders. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). |
Annual Report
Distributions
The Board of Trustees of (VIP IV Value Leaders Portfolio) voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities.
Fund | Pay Date | Record Date | Capital Gains |
Initial Class | 02/13/04 | 02/13/04 | $0.105 |
Service Class | 02/13/04 | 02/13/04 | $0.105 |
Service Class 2 | 02/13/04 | 02/13/04 | $0.105 |
Annual Report
Annual Report
Value Leaders Portfolio
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research (U.K.) Inc.
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 Shareholder Servicing Agent
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
Brown Brothers Harriman & Co.
Boston, MA
VVL-ANN-0204
1.796594.100
Fidelity® Variable Insurance Products
Sector Funds
Consumer Industries Portfolio
Cyclical Industries Portfolio
Financial Services Portfolio
Health Care Portfolio
Natural Resources Portfolio
Technology Portfolio
Telecommunications & Utilities Growth Portfolio
Annual Report
December 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Consumer Industries Portfolio | 3 4 5 6 9 | Performance Management's Discussion Investment Summary Investments Financial Statements |
Cyclical Industries Portfolio | 11 12 13 14 17 | Performance Management's Discussion Investment Summary Investments Financial Statements |
Financial Services Portfolio | 19 20 21 22 24 | Performance Management's Discussion Investment Summary Investments Financial Statements |
Health Care Portfolio | 26 27 28 29 31 | Performance Management's Discussion Investment Summary Investments Financial Statements |
Natural Resources Portfolio | 33 34 35 36 38 | Performance Management's Discussion Investment Summary Investments Financial Statements |
Technology Portfolio | 40 41 42 43 47 | Performance Management's Discussion Investment Summary Investments Financial Statements |
Telecommunications &
Utilities Growth Portfolio | 49 50 51 52 53 | Performance Management's Discussion Investment Summary Investments Financial Statements |
Notes to Financial Statements | 55 | Notes to the Financial Statements |
Auditors' Opinion | 59 | |
Trustees and Officers | 60 | |
Distributions | 65 | |
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.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the funds. This report is not
authorized for distribution to prospective investors in the funds unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC,
Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the funds nor Fidelity Distributors Corporation is a bank.
Annual Report
Fidelity Variable Insurance Products: Consumer Industries Portfolio
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of a fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. Performance numbers are net of all fund operating expenses, but do not include any insurance charges imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total returns would be lower. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended December 31, 2003 | Past 1
year | Life of fund |
Fidelity® VIP: Consumer Industries | 25.09% | 0.73% |
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity® Variable Insurance Products: Consumer Industries Portfolio on July 18, 2001, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the S&P 500® Index did over the same period.
Annual Report
Fidelity Variable Insurance Products: Consumer Industries Portfolio
Management's Discussion of Fund Performance
Comments from Joshua Spencer, Portfolio Manager of Fidelity® Variable Insurance Products: Consumer Industries Portfolio
U.S. equity markets snapped a three-year losing streak in 2003, rebounding on the strength of the lowest interest rates in decades, improved corporate profits and a resurgent economy. For the year overall, the Standard & Poor's 500SM Index gained 28.69%, the Dow Jones Industrial AverageSM rose 28.14% and the NASDAQ Composite® Index advanced 50.77%. Small-cap stocks led the charge, particularly lower-quality issues in cyclical industries such as biotechnology and the Internet. As a result, the Russell 2000® Index had its best calendar year ever, climbing 47.25%. The start of the year gave little indication of the strong performance to come, as the hangover of corporate governance scandals and an impending war with Iraq clouded the outlook for 2003. However, investors were encouraged by solid gross domestic product (GDP) growth in the first two quarters of 2003, and what seemed to be a quick resolution to the Iraqi conflict. Federal tax cuts and a boom in mortgage refinancing further boosted the markets and put more discretionary income in consumers' pockets. In the third quarter, GDP growth grew 8.2%, its highest level since 1984.
For the 12 months that ended December 31, 2003, the fund lagged the Standard & Poor's 500 Index, which returned 28.69% during the period, while performing virtually in line with the Goldman Sachs® Consumer Industries Index, which gained 25.16%. The fund's conservative positioning in the early part of the year - holding too much cash and not owning enough of consumer products giant Altria Group - prevented it from benefiting fully in the strength of the market rally. Company-specific difficulties at Tropical Sportswear also hurt performance. However, astute stock picking in several of the retail industries - particularly those related to the Internet, as well as certain apparel stores and specialty retailers - was a key factor in helping the fund achieve solid positive gains during the period. Internet stocks such as Amazon.com and Yahoo! provided strong contributions to relative performance, as did Christopher & Banks, a women's wear retailer, and pet supply chain PETsMART. The fund no longer held Amazon or Christopher & Banks at the end of the period.
Note to shareholders: Josh Spencer became Portfolio Manager of Consumer Industries Portfolio on January 12, 2004.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Fidelity Variable Insurance Products: Consumer Industries Portfolio
Investment Summary
Top Five Stocks as of December 31, 2003 |
| % of fund's
net assets |
The Coca-Cola Co. | 9.4 |
Procter & Gamble Co. | 6.3 |
Clear Channel Communications, Inc. | 5.4 |
Walt Disney Co. | 3.9 |
Anheuser-Busch Companies, Inc. | 3.8 |
| 28.8 |
Top Industries as of December 31, 2003 |
% of fund's net assets |
 | Media | 27.2% | |
 | Beverages | 13.7% | |
 | Household Products | 8.5% | |
 | Specialty Retail | 6.7% | |
 | Food & Staples Retailing | 6.6% | |
 | All Others* | 37.3% | |
* Includes short-term investments and net other assets. |
Annual Report
Fidelity Variable Insurance Products: Consumer Industries Portfolio
Investments December 31, 2003
Showing Percentage of Net Assets
Common Stocks - 94.0% |
| Shares | | Value (Note 1) |
AUTOMOBILES - 0.5% |
Motorcycle Manufacturers - 0.5% |
Harley-Davidson, Inc. | 1,100 | | $ 52,283 |
BEVERAGES - 13.7% |
Brewers - 3.8% |
Anheuser-Busch Companies, Inc. | 7,900 | | 416,172 |
Soft Drinks - 9.9% |
Cott Corp. (a) | 2,100 | | 58,862 |
The Coca-Cola Co. | 20,180 | | 1,024,134 |
| | 1,082,996 |
TOTAL BEVERAGES | | 1,499,168 |
COMMERCIAL SERVICES & SUPPLIES - 1.9% |
Diversified Commercial Services - 1.5% |
Aramark Corp. Class B | 1,520 | | 41,678 |
Cintas Corp. | 2,480 | | 124,322 |
| | 166,000 |
Employment Services - 0.4% |
Manpower, Inc. | 1,030 | | 48,492 |
TOTAL COMMERCIAL SERVICES & SUPPLIES | | 214,492 |
FOOD & STAPLES RETAILING - 6.6% |
Drug Retail - 1.2% |
CVS Corp. | 3,600 | | 130,032 |
Food Distributors - 0.4% |
Sysco Corp. | 1,200 | | 44,676 |
Food Retail - 1.8% |
Safeway, Inc. (a) | 8,400 | | 184,044 |
Whole Foods Market, Inc. | 200 | | 13,426 |
| | 197,470 |
Hypermarkets & Super Centers - 3.2% |
Wal-Mart Stores, Inc. | 6,580 | | 349,069 |
TOTAL FOOD & STAPLES RETAILING | | 721,247 |
FOOD PRODUCTS - 5.7% |
Agricultural Products - 0.9% |
Bunge Ltd. | 1,600 | | 52,672 |
Fresh Del Monte Produce, Inc. | 1,900 | | 45,277 |
| | 97,949 |
Packaged Foods & Meats - 4.8% |
ConAgra Foods, Inc. | 1,800 | | 47,502 |
Dean Foods Co. (a) | 3,140 | | 103,212 |
Green Mountain Coffee Roasters, Inc. (a) | 2,700 | | 62,154 |
Hershey Foods Corp. | 600 | | 46,194 |
Smithfield Foods, Inc. (a) | 5,100 | | 105,570 |
|
| Shares | | Value (Note 1) |
SunOpta, Inc. (a) | 1,800 | | $ 16,512 |
Unilever NV (NY Shares) | 2,200 | | 142,780 |
| | 523,924 |
TOTAL FOOD PRODUCTS | | 621,873 |
HOTELS, RESTAURANTS & LEISURE - 5.4% |
Casinos & Gaming - 0.5% |
Aztar Corp. (a) | 2,300 | | 51,750 |
Hotels, Resorts & Cruise Lines - 1.0% |
Royal Caribbean Cruises Ltd. | 3,300 | | 114,807 |
Restaurants - 3.9% |
Brinker International, Inc. (a) | 1,630 | | 54,051 |
McDonald's Corp. | 7,810 | | 193,922 |
Outback Steakhouse, Inc. | 3,180 | | 140,588 |
Wendy's International, Inc. | 850 | | 33,354 |
| | 421,915 |
TOTAL HOTELS, RESTAURANTS & LEISURE | | 588,472 |
HOUSEHOLD DURABLES - 2.0% |
Housewares & Specialties - 2.0% |
American Greetings Corp. Class A (a) | 5,000 | | 109,350 |
Newell Rubbermaid, Inc. | 4,800 | | 109,296 |
| | 218,646 |
HOUSEHOLD PRODUCTS - 8.5% |
Household Products - 8.5% |
Colgate-Palmolive Co. | 3,900 | | 195,195 |
Kimberly-Clark Corp. | 740 | | 43,727 |
Procter & Gamble Co. | 6,970 | | 696,164 |
| | 935,086 |
INTERNET & CATALOG RETAIL - 2.0% |
Internet Retail - 2.0% |
InterActiveCorp (a) | 6,400 | | 217,152 |
INTERNET SOFTWARE & SERVICES - 1.6% |
Internet Software & Services - 1.6% |
Yahoo!, Inc. (a) | 3,882 | | 175,350 |
LEISURE EQUIPMENT & PRODUCTS - 0.5% |
Leisure Products - 0.5% |
Mattel, Inc. | 2,840 | | 54,727 |
MEDIA - 27.2% |
Advertising - 2.6% |
JC Decaux SA (a) | 3,700 | | 60,319 |
Lamar Advertising Co. Class A (a) | 1,600 | | 59,712 |
Omnicom Group, Inc. | 800 | | 69,864 |
R.H. Donnelley Corp. (a) | 2,400 | | 95,616 |
| | 285,511 |
Broadcasting & Cable TV - 10.7% |
Clear Channel Communications, Inc. | 12,540 | | 587,248 |
Comcast Corp. Class A (special) (a) | 2,270 | | 71,006 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
MEDIA - CONTINUED |
Broadcasting & Cable TV - continued |
Cox Communications, Inc. Class A (a) | 1,710 | | $ 58,910 |
Cumulus Media, Inc. Class A (a) | 5,900 | | 129,800 |
E.W. Scripps Co. Class A | 700 | | 65,898 |
EchoStar Communications Corp. Class A (a) | 3,000 | | 102,000 |
Liberty Media Corp. Class A (a) | 4,910 | | 58,380 |
TiVo, Inc. (a) | 10,200 | | 75,480 |
Univision Communications, Inc. Class A (a) | 600 | | 23,814 |
| | 1,172,536 |
Movies & Entertainment - 12.0% |
AMC Entertainment, Inc. (a) | 4,200 | | 63,882 |
Fox Entertainment Group, Inc. Class A (a) | 4,340 | | 126,511 |
Time Warner, Inc. (a) | 6,700 | | 120,533 |
Viacom, Inc.: | | | |
Class A | 4,300 | | 190,361 |
Class B (non-vtg.) | 8,770 | | 389,213 |
Walt Disney Co. | 18,300 | | 426,939 |
| | 1,317,439 |
Publishing - 1.9% |
Dow Jones & Co., Inc. | 2,000 | | 99,700 |
Gannett Co., Inc. | 880 | | 78,461 |
Meredith Corp. | 600 | | 29,286 |
| | 207,447 |
TOTAL MEDIA | | 2,982,933 |
MULTILINE RETAIL - 2.3% |
Department Stores - 0.9% |
JCPenney Co., Inc. | 2,100 | | 55,188 |
Nordstrom, Inc. | 1,000 | | 34,300 |
Saks, Inc. (a) | 600 | | 9,024 |
| | 98,512 |
General Merchandise Stores - 1.4% |
Big Lots, Inc. (a) | 2,200 | | 31,262 |
Dollar General Corp. | 1,600 | | 33,584 |
Family Dollar Stores, Inc. | 2,060 | | 73,913 |
Tuesday Morning Corp. (a) | 600 | | 18,150 |
| | 156,909 |
TOTAL MULTILINE RETAIL | | 255,421 |
PERSONAL PRODUCTS - 2.6% |
Personal Products - 2.6% |
Avon Products, Inc. | 2,260 | | 152,527 |
Gillette Co. | 3,590 | | 131,861 |
| | 284,388 |
|
| Shares | | Value (Note 1) |
SPECIALTY RETAIL - 6.7% |
Apparel Retail - 1.3% |
Finish Line, Inc. Class A (a) | 3,100 | | $ 92,907 |
Foot Locker, Inc. | 500 | | 11,725 |
Limited Brands, Inc. | 1,830 | | 32,995 |
| | 137,627 |
Computer & Electronics Retail - 0.9% |
Best Buy Co., Inc. | 1,950 | | 101,868 |
Home Improvement Retail - 2.6% |
Home Depot, Inc. | 8,010 | | 284,275 |
Specialty Stores - 1.9% |
Borders Group, Inc. | 4,400 | | 96,448 |
PETsMART, Inc. | 1,000 | | 23,800 |
Select Comfort Corp. (a) | 2,300 | | 56,948 |
West Marine, Inc. (a) | 1,300 | | 36,153 |
| | 213,349 |
TOTAL SPECIALTY RETAIL | | 737,119 |
TEXTILES APPAREL & LUXURY GOODS - 3.9% |
Apparel, Accessories & Luxury Goods - 1.2% |
Kellwood Co. | 1,500 | | 61,500 |
Liz Claiborne, Inc. | 1,800 | | 63,828 |
| | 125,328 |
Footwear - 2.7% |
NIKE, Inc. Class B | 3,300 | | 225,918 |
Reebok International Ltd. | 1,900 | | 74,708 |
| | 300,626 |
TOTAL TEXTILES APPAREL & LUXURY GOODS | | 425,954 |
TOBACCO - 2.9% |
Tobacco - 2.9% |
Altria Group, Inc. | 3,020 | | 164,348 |
UST, Inc. | 4,200 | | 149,898 |
| | 314,246 |
TOTAL COMMON STOCKS (Cost $8,829,264) | 10,298,557 |
Money Market Funds - 5.9% |
| | | |
Fidelity Cash Central Fund, 1.07% (b)
(Cost $653,036) | 653,036 | | 653,036 |
TOTAL INVESTMENT PORTFOLIO - 99.9% (Cost $9,482,300) | | 10,951,593 |
NET OTHER ASSETS - 0.1% | | 7,124 |
NET ASSETS - 100% | $ 10,958,717 |
Legend |
(a) Non-income producing |
(b) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $10,889,968 and $14,660,368, respectively. |
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 $1,098 for the period. |
Income Tax Information |
At December 31, 2003, the fund had a capital loss carryforward of approximately $2,871,000 of which $127,000, $2,062,000 and $682,000 will expire on December 31, 2009, 2010 and 2011, respectively. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Variable Insurance Products: Consumer Industries Portfolio
Financial Statements
Statement of Assets and Liabilities
| December 31, 2003 |
| | |
Assets | | |
Investment in securities, at value (cost $9,482,300) - See accompanying schedule | | $ 10,951,593 |
Receivable for fund shares sold | | 26,201 |
Dividends receivable | | 10,343 |
Interest receivable | | 429 |
Prepaid expenses | | 63 |
Receivable from investment adviser for expense reductions | | 1,570 |
Other receivables | | 861 |
Total assets | | 10,991,060 |
| | |
Liabilities | | |
Payable for fund shares redeemed | $ 14 | |
Accrued management fee | 5,087 | |
Other affiliated payables | 5,606 | |
Other payables and accrued expenses | 21,636 | |
Total liabilities | | 32,343 |
| | |
Net Assets | | $ 10,958,717 |
Net Assets consist of: | | |
Paid in capital | | $ 12,411,133 |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | | (2,921,709) |
Net unrealized appreciation (depreciation) on investments | | 1,469,293 |
Net Assets, for 1,077,594 shares outstanding | | $ 10,958,717 |
Net Asset Value, offering price
and redemption price per
share ($10,958,717 ÷ 1,077,594 shares) | | $ 10.17 |
Statement of Operations
| Year ended December 31, 2003 |
| | |
Investment Income | | |
Dividends | | $ 111,879 |
Interest | | 4,899 |
Total income | | 116,778 |
| | |
Expenses | | |
Management fee | $ 60,461 | |
Transfer agent fees | 9,782 | |
Accounting fees and expenses | 60,023 | |
Non-interested trustees' compensation | 43 | |
Custodian fees and expenses | 4,936 | |
Audit | 42,922 | |
Legal | 506 | |
Miscellaneous | 473 | |
Total expenses before reductions | 179,146 | |
Expense reductions | (27,379) | 151,767 |
Net investment income (loss) | | (34,989) |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | | |
Investment securities | (424,421) | |
Foreign currency transactions | (54) | |
Total net realized gain (loss) | | (424,475) |
Change in net unrealized appreciation (depreciation) on investment securities | | 2,652,701 |
Net gain (loss) | | 2,228,226 |
Net increase (decrease) in net assets resulting from operations | | $ 2,193,237 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Variable Insurance Products: Consumer Industries Portfolio
Financial Statements - continued
Statement of Changes in Net Assets
| Year ended
December 31,
2003 | Year ended
December 31,
2002 |
Increase (Decrease) in Net Assets | | |
Operations | | |
Net investment income (loss) | $ (34,989) | $ (41,226) |
Net realized gain (loss) | (424,475) | (2,141,367) |
Change in net unrealized appreciation (depreciation) | 2,652,701 | (1,505,659) |
Net increase (decrease) in net assets resulting from operations | 2,193,237 | (3,688,252) |
Distributions to shareholders from net investment income | - | (9,222) |
Share transactions
Net proceeds from sales of shares | 2,064,591 | 16,246,603 |
Reinvestment of distributions | - | 9,222 |
Cost of shares redeemed | (5,477,315) | (8,391,237) |
Net increase (decrease) in net assets resulting from share transactions | (3,412,724) | 7,864,588 |
Redemption fees | 1,846 | 20,183 |
Total increase (decrease) in net assets | (1,217,641) | 4,187,297 |
| | |
Net Assets | | |
Beginning of period | 12,176,358 | 7,989,061 |
End of period | $ 10,958,717 | $ 12,176,358 |
Other Information Shares | | |
Sold | 223,933 | 1,650,679 |
Issued in reinvestment of distributions | - | 967 |
Redeemed | (643,510) | (976,049) |
Net increase (decrease) | (419,577) | 675,597 |
Financial Highlights
Years ended December 31, | 2003 | 2002 | 2001 F |
Selected Per-Share Data | | | |
Net asset value, beginning of period | $ 8.13 | $ 9.72 | $ 10.00 |
Income from Investment Operations | | | |
Net investment income (loss) E | (.03) | (.03) | .01 |
Net realized and unrealized gain (loss) | 2.07 | (1.56) | (.29) |
Total from investment operations | 2.04 | (1.59) | (.28) |
Distributions from net investment income | - | (.01) | - |
Redemption fees added to paid in capital E | - H | .01 | - H |
Net asset value, end of period | $ 10.17 | $ 8.13 | $ 9.72 |
Total Return B, C, D | 25.09% | (16.27)% | (2.80)% |
Ratios to Average Net Assets G | | | |
Expenses before expense reductions | 1.72% | 1.30% | 2.61% A |
Expenses net of voluntary waivers, if any | 1.50% | 1.30% | 1.50% A |
Expenses net of all reductions | 1.46% | 1.27% | 1.48% A |
Net investment income (loss) | (.34)% | (.29)% | .17% A |
Supplemental Data | | | |
Net assets, end of period (000 omitted) | $ 10,959 | $ 12,176 | $ 7,989 |
Portfolio turnover rate | 108% | 129% | 162% A |
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 18, 2001 (commencement of operations) to December 31, 2001.
G Expense ratios reflect operating expenses of the fund. 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 fund 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 any voluntary 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 fund.
H Amount represents less than $.01 per share.
Consumer Industries Portfolio
See accompanying notes which are an integral part of the financial statements.
Fidelity Variable Insurance Products: Cyclical Industries Portfolio
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of a fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. Performance numbers are net of all fund operating expenses, but do not include any insurance charges imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total returns would be lower. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended December 31, 2003 | Past 1
year | Life of fund |
Fidelity VIP: Cyclical Industries | 38.37% | 4.69% |
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity® Variable Insurance Products: Cyclical Industries Portfolio on July 18, 2001, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index did over the same period.
Annual Report
Fidelity Variable Insurance Products: Cyclical Industries Portfolio
Management's Discussion of Fund Performance
Comments from Matthew Fruhan, Portfolio Manager of Fidelity® Variable Insurance Products: Cyclical Industries Portfolio
U.S. equity markets snapped a three-year losing streak in 2003, rebounding on the strength of the lowest interest rates in decades, improved corporate profits and a resurgent economy. For the year overall, the Standard & Poor's 500SM Index gained 28.69%, the Dow Jones Industrial AverageSM rose 28.14% and the NASDAQ Composite® Index advanced 50.77%. Small-cap stocks led the charge, particularly lower-quality issues in cyclical industries such as biotechnology and the Internet. As a result, the Russell 2000® Index had its best calendar year ever, climbing 47.25%. The start of the year gave little indication of the strong performance to come, as the hangover of corporate governance scandals and an impending war with Iraq clouded the outlook for 2003. However, investors were encouraged by solid gross domestic product (GDP) growth in the first two quarters of 2003, and what seemed to be a quick resolution to the Iraqi conflict. Federal tax cuts and a boom in mortgage refinancing further boosted the markets and put more discretionary income in consumers' pockets. In the third quarter, GDP growth grew 8.2%, its highest level since 1984.
For the 12 months ending December 31, 2003, the fund outperformed both the S&P 500® index and the Goldman Sachs® Cyclical Industries Index, which rose 35.48%. I positioned the fund aggressively throughout the year and cyclical stocks started rising in February, even before the overall market, and continued their ascent for the remainder of the year. Tyco International, the conglomerate whose stock price had plunged amid controversies over its previous management and accounting practices, was the biggest contributor in 2003. Investors recognized the stock was undervalued as Tyco's new management team instituted reforms and repaired the corporate balance sheet. AMR, the parent company of American Airlines, also was a big contributor, as fears of a bankruptcy filing receded. Other stocks that helped performance included Embraer, a manufacturer of jets for the corporate and regional airline industries, and Terex, which produces heavy construction equipment. Detractors included Solutia, a chemical company hurt by environmental problems that forced a bankruptcy filing, and Northrop Grumman and Lockheed Martin, both of which underperformed because of investor concerns that growth in the defense industry might begin to slow.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Fidelity Variable Insurance Products: Cyclical Industries Portfolio
Investment Summary
Top Five Stocks as of December 31, 2003 |
| % of fund's
net assets |
Tyco International Ltd. | 7.2 |
General Electric Co. | 6.5 |
3M Co. | 4.5 |
Honeywell International, Inc. | 4.2 |
Boeing Co. | 3.3 |
| 25.7 |
Top Industries as of December 31, 2003 |
% of fund's net assets |
| Aerospace & Defense | 19.6% | |
| Industrial Conglomerates | 18.6% | |
| Machinery | 17.4% | |
| Chemicals | 12.8% | |
| Road & Rail | 4.5% | |
| All Others* | 27.1% | |
* Includes short-term investments and net other assets. |
Annual Report
Fidelity Variable Insurance Products: Cyclical Industries Portfolio
Investments December 31, 2003
Showing Percentage of Net Assets
Common Stocks - 97.6% |
| Shares | | Value (Note 1) |
AEROSPACE & DEFENSE - 19.6% |
Aerospace & Defense - 19.6% |
BE Aerospace, Inc. (a) | 8,500 | | $ 45,900 |
Boeing Co. | 15,310 | | 645,163 |
Bombardier, Inc. Class B (sub. vtg.) | 59,500 | | 250,898 |
EADS NV | 8,500 | | 201,547 |
Embraer - Empresa Brasileira de Aeronautica SA sponsored ADR | 8,400 | | 294,252 |
Goodrich Corp. | 4,100 | | 121,729 |
Honeywell International, Inc. | 24,400 | | 815,692 |
Lockheed Martin Corp. | 8,370 | | 430,218 |
Northrop Grumman Corp. | 3,929 | | 375,612 |
Precision Castparts Corp. | 2,000 | | 90,820 |
United Defense Industries, Inc. (a) | 900 | | 28,692 |
United Technologies Corp. | 5,850 | | 554,405 |
| | 3,854,928 |
AIR FREIGHT & LOGISTICS - 2.3% |
Air Freight & Logistics - 2.3% |
C.H. Robinson Worldwide, Inc. | 950 | | 36,015 |
CNF, Inc. | 4,900 | | 166,110 |
FedEx Corp. | 3,200 | | 216,000 |
Ryder System, Inc. | 700 | | 23,905 |
UTI Worldwide, Inc. | 140 | | 5,310 |
| | 447,340 |
AIRLINES - 2.1% |
Airlines - 2.1% |
Alaska Air Group, Inc. (a) | 900 | | 24,561 |
AMR Corp. (a) | 300 | | 3,885 |
Continental Airlines, Inc. Class B (a) | 5,700 | | 92,739 |
JetBlue Airways Corp. (a) | 3,300 | | 87,516 |
Northwest Airlines Corp. (a) | 7,400 | | 93,388 |
Ryanair Holdings PLC sponsored ADR (a) | 2,000 | | 101,280 |
| | 403,369 |
AUTO COMPONENTS - 2.2% |
Auto Parts & Equipment - 2.2% |
American Axle & Manufacturing Holdings, Inc. (a) | 2,330 | | 94,179 |
BorgWarner, Inc. | 500 | | 42,535 |
Delphi Corp. | 5,600 | | 57,176 |
Dura Automotive Systems, Inc. Class A (a) | 1,100 | | 14,047 |
Gentex Corp. | 1,700 | | 75,072 |
Johnson Controls, Inc. | 400 | | 46,448 |
Lear Corp. | 1,200 | | 73,596 |
Visteon Corp. | 2,800 | | 29,148 |
| | 432,201 |
AUTOMOBILES - 1.6% |
Automobile Manufacturers - 1.6% |
Ford Motor Co. | 19,300 | | 308,800 |
|
| Shares | | Value (Note 1) |
BUILDING PRODUCTS - 2.3% |
Building Products - 2.3% |
American Standard Companies, Inc. (a) | 2,270 | | $ 228,589 |
Masco Corp. | 5,420 | | 148,562 |
Trex Co., Inc. (a) | 2,000 | | 75,960 |
| | 453,111 |
CHEMICALS - 12.8% |
Commodity Chemicals - 3.3% |
Georgia Gulf Corp. | 1,890 | | 54,583 |
Lyondell Chemical Co. | 16,997 | | 288,099 |
Millennium Chemicals, Inc. | 24,020 | | 304,574 |
| | 647,256 |
Diversified Chemicals - 7.5% |
Dow Chemical Co. | 14,800 | | 615,236 |
E.I. du Pont de Nemours & Co. | 11,600 | | 532,324 |
Eastman Chemical Co. | 200 | | 7,906 |
Hercules, Inc. (a) | 3,000 | | 36,600 |
Olin Corp. | 3,900 | | 78,234 |
PPG Industries, Inc. | 3,000 | | 192,060 |
| | 1,462,360 |
Industrial Gases - 0.4% |
Airgas, Inc. | 4,100 | | 88,068 |
Specialty Chemicals - 1.6% |
Arch Chemicals, Inc. | 630 | | 16,166 |
Ferro Corp. | 2,230 | | 60,678 |
Minerals Technologies, Inc. | 200 | | 11,850 |
PolyOne Corp. | 18,930 | | 120,963 |
Rohm & Haas Co. | 2,300 | | 98,233 |
| | 307,890 |
TOTAL CHEMICALS | | 2,505,574 |
COMMERCIAL SERVICES & SUPPLIES - 2.2% |
Diversified Commercial Services - 0.3% |
Copart, Inc. (a) | 4,000 | | 66,000 |
Environmental Services - 1.5% |
Allied Waste Industries, Inc. (a) | 2,700 | | 37,476 |
Republic Services, Inc. | 5,950 | | 152,499 |
Waste Connections, Inc. (a) | 1,800 | | 67,986 |
Waste Management, Inc. | 1,500 | | 44,400 |
| | 302,361 |
Office Services & Supplies - 0.4% |
Herman Miller, Inc. | 1,600 | | 38,832 |
HON Industries, Inc. | 800 | | 34,656 |
| | 73,488 |
TOTAL COMMERCIAL SERVICES & SUPPLIES | | 441,849 |
CONSTRUCTION & ENGINEERING - 2.3% |
Construction & Engineering - 2.3% |
Dycom Industries, Inc. (a) | 3,700 | | 99,234 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
CONSTRUCTION & ENGINEERING - CONTINUED |
Construction & Engineering - continued |
EMCOR Group, Inc. (a) | 2,200 | | $ 96,580 |
Granite Construction, Inc. | 3,400 | | 79,866 |
Jacobs Engineering Group, Inc. (a) | 740 | | 35,527 |
URS Corp. (a) | 5,600 | | 140,056 |
| | 451,263 |
CONSTRUCTION MATERIALS - 0.8% |
Construction Materials - 0.8% |
Martin Marietta Materials, Inc. | 720 | | 33,818 |
Texas Industries, Inc. | 2,600 | | 96,200 |
Vulcan Materials Co. | 500 | | 23,785 |
| | 153,803 |
CONTAINERS & PACKAGING - 0.4% |
Metal & Glass Containers - 0.4% |
Owens-Illinois, Inc. (a) | 350 | | 4,162 |
Pactiv Corp. (a) | 3,110 | | 74,329 |
| | 78,491 |
DIVERSIFIED FINANCIAL SERVICES - 0.2% |
Specialized Finance - 0.2% |
GATX Corp. | 1,200 | | 33,576 |
ELECTRICAL EQUIPMENT - 0.8% |
Electrical Components & Equipment - 0.8% |
A.O. Smith Corp. | 2,100 | | 73,605 |
Baldor Electric Co. | 400 | | 9,140 |
Cooper Industries Ltd. Class A | 700 | | 40,551 |
Roper Industries, Inc. | 770 | | 37,930 |
| | 161,226 |
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.9% |
Electronic Equipment & Instruments - 0.6% |
Cognex Corp. | 1,400 | | 39,536 |
Mettler-Toledo International, Inc. (a) | 600 | | 25,326 |
Thermo Electron Corp. (a) | 1,710 | | 43,092 |
| | 107,954 |
Electronic Manufacturing Svcs. - 0.2% |
Molex, Inc. | 1,100 | | 38,379 |
Technology Distributors - 0.1% |
Tech Data Corp. (a) | 700 | | 27,783 |
TOTAL ELECTRONIC EQUIPMENT & INSTRUMENTS | | 174,116 |
ENERGY EQUIPMENT & SERVICES - 0.2% |
Oil & Gas Equipment & Services - 0.2% |
Cooper Cameron Corp. (a) | 1,000 | | 46,600 |
HEALTH CARE EQUIPMENT & SUPPLIES - 0.1% |
Health Care Supplies - 0.1% |
Millipore Corp. (a) | 640 | | 27,552 |
|
| Shares | | Value (Note 1) |
HOUSEHOLD DURABLES - 2.7% |
Home Furnishings - 0.3% |
Leggett & Platt, Inc. | 2,400 | | $ 51,912 |
Homebuilding - 2.2% |
Beazer Homes USA, Inc. | 100 | | 9,766 |
D.R. Horton, Inc. | 3,100 | | 134,106 |
KB Home | 500 | | 36,260 |
Lennar Corp.: | | | |
Class A | 800 | | 76,800 |
Class B | 210 | | 19,194 |
Ryland Group, Inc. | 740 | | 65,594 |
Standard Pacific Corp. | 2,000 | | 97,100 |
| | 438,820 |
Household Appliances - 0.2% |
Black & Decker Corp. | 700 | | 34,524 |
TOTAL HOUSEHOLD DURABLES | | 525,256 |
INDUSTRIAL CONGLOMERATES - 18.6% |
Industrial Conglomerates - 18.6% |
3M Co. | 10,260 | | 872,408 |
Carlisle Companies, Inc. | 400 | | 24,344 |
General Electric Co. | 41,060 | | 1,272,039 |
Teleflex, Inc. | 400 | | 19,332 |
Textron, Inc. | 800 | | 45,648 |
Tyco International Ltd. | 53,140 | | 1,408,207 |
| | 3,641,978 |
MACHINERY - 17.4% |
Construction & Farm Machinery & Heavy Trucks - 6.8% |
AGCO Corp. (a) | 8,510 | | 171,391 |
Astec Industries, Inc. (a) | 7,500 | | 92,025 |
Caterpillar, Inc. | 5,600 | | 464,912 |
Cummins, Inc. | 1,500 | | 73,410 |
Navistar International Corp. (a) | 1,480 | | 70,877 |
Oshkosh Truck Co. | 320 | | 16,330 |
PACCAR, Inc. | 560 | | 47,667 |
Terex Corp. (a) | 12,400 | | 353,152 |
Toro Co. | 500 | | 23,200 |
Wabash National Corp. (a) | 300 | | 8,790 |
| | 1,321,754 |
Industrial Machinery - 10.6% |
Dover Corp. | 2,400 | | 95,400 |
Eaton Corp. | 340 | | 36,713 |
IDEX Corp. | 520 | | 21,627 |
Ingersoll-Rand Co. Ltd. Class A | 5,410 | | 367,231 |
ITT Industries, Inc. | 5,800 | | 430,418 |
Kennametal, Inc. | 534 | | 21,227 |
Manitowoc Co., Inc. | 15,200 | | 474,240 |
Parker Hannifin Corp. | 2,400 | | 142,800 |
Pentair, Inc. | 1,740 | | 79,518 |
SPX Corp. (a) | 2,600 | | 152,906 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
MACHINERY - CONTINUED |
Industrial Machinery - continued |
Timken Co. | 11,500 | | $ 230,690 |
Watts Water Technologies, Inc. Class A | 1,400 | | 31,080 |
| | 2,083,850 |
TOTAL MACHINERY | | 3,405,604 |
METALS & MINING - 1.3% |
Diversified Metals & Mining - 0.5% |
Companhia Vale do Rio Doce sponsored ADR | 900 | | 52,650 |
Phelps Dodge Corp. (a) | 700 | | 53,263 |
| | 105,913 |
Steel - 0.8% |
AK Steel Holding Corp. (a) | 2,900 | | 14,790 |
Nucor Corp. | 2,330 | | 130,480 |
| | 145,270 |
TOTAL METALS & MINING | | 251,183 |
OIL & GAS - 0.4% |
Oil & Gas Refining & Marketing & Transportation - 0.4% |
Overseas Shipholding Group, Inc. | 600 | | 20,430 |
Tsakos Energy Navigation Ltd. | 3,240 | | 59,778 |
| | 80,208 |
PAPER & FOREST PRODUCTS - 0.3% |
Paper Products - 0.3% |
Bowater, Inc. | 1,400 | | 64,834 |
ROAD & RAIL - 4.5% |
Railroads - 3.9% |
Canadian National Railway Co. | 3,490 | | 220,614 |
CSX Corp. | 6,420 | | 230,735 |
Norfolk Southern Corp. | 3,060 | | 72,369 |
Union Pacific Corp. | 3,560 | | 247,349 |
| | 771,067 |
Trucking - 0.6% |
Boyd Brothers Transportation, Inc. (a) | 3,648 | | 22,472 |
Marten Transport Ltd. (a) | 300 | | 4,614 |
P.A.M. Transportation Services, Inc. (a) | 950 | | 20,264 |
Quality Distribution, Inc. (a) | 1,800 | | 35,190 |
USF Corp. | 800 | | 27,352 |
| | 109,892 |
TOTAL ROAD & RAIL | | 880,959 |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.2% |
Semiconductor Equipment - 0.2% |
Cabot Microelectronics Corp. (a) | 1,000 | | 49,000 |
|
| Shares | | Value (Note 1) |
SPECIALTY RETAIL - 0.9% |
Specialty Stores - 0.9% |
AutoZone, Inc. (a) | 400 | | $ 34,084 |
Sonic Automotive, Inc. Class A | 4,000 | | 91,680 |
United Auto Group, Inc. | 1,500 | | 46,950 |
| | 172,714 |
TRADING COMPANIES & DISTRIBUTORS - 0.5% |
Trading Companies & Distributors - 0.5% |
W.W. Grainger, Inc. | 2,040 | | 96,676 |
TOTAL COMMON STOCKS (Cost $16,459,627) | 19,142,211 |
Money Market Funds - 9.3% |
| | | |
Fidelity Cash Central Fund, 1.07% (b)
(Cost $1,827,127) | 1,827,127 | | 1,827,127 |
TOTAL INVESTMENT PORTFOLIO - 106.9% (Cost $18,286,754) | | 20,969,338 |
NET OTHER ASSETS - (6.9)% | | (1,351,341) |
NET ASSETS - 100% | $ 19,617,997 |
Legend |
(a) Non-income producing |
(b) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $19,390,584 and $11,206,696, respectively. |
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 $2,803 for the period. |
Income Tax Information |
At December 31, 2003, the fund had a capital loss carryforward of approximately $1,949,000 of which $47,000, $1,537,000 and $365,000 will expire on December 31, 2009, 2010 and 2011, respectively. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Variable Insurance Products: Cyclical Industries Portfolio
Financial Statements
Statement of Assets and Liabilities
| December 31, 2003 |
| | |
Assets | | |
Investment in securities, at value (cost $18,286,754) - See accompanying schedule | | $ 20,969,338 |
Receivable for fund shares sold | | 224,858 |
Dividends receivable | | 20,238 |
Interest receivable | | 1,212 |
Prepaid expenses | | 55 |
Other affiliated receivables | | 72 |
Other receivables | | 769 |
Total assets | | 21,216,542 |
| | |
Liabilities | | |
Payable for investments purchased | $ 1,562,932 | |
Accrued management fee | 7,367 | |
Other affiliated payables | 6,074 | |
Other payables and accrued expenses | 22,172 | |
Total liabilities | | 1,598,545 |
| | |
Net Assets | | $ 19,617,997 |
Net Assets consist of: | | |
Paid in capital | | $ 19,110,280 |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | | (2,174,850) |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | | 2,682,567 |
Net Assets, for 1,757,220 shares outstanding | | $ 19,617,997 |
Net Asset Value, offering price and redemption price per
share ($19,617,997 ÷ 1,757,220 shares) | | $ 11.16 |
Statement of Operations
| Year ended December 31, 2003 |
| | |
Investment Income | | |
Dividends | | $ 166,939 |
Interest | | 4,370 |
Total income | | 171,309 |
| | |
Expenses | | |
Management fee | $ 54,576 | |
Transfer agent fees | 9,431 | |
Accounting fees and expenses | 60,019 | |
Non-interested trustees' compensation | 36 | |
Custodian fees and expenses | 8,273 | |
Audit | 41,478 | |
Legal | 404 | |
Miscellaneous | 401 | |
Total expenses before reductions | 174,618 | |
Expense reductions | (36,200) | 138,418 |
Net investment income (loss) | | 32,891 |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | | |
Investment securities | 274,140 | |
Foreign currency transactions | (198) | |
Total net realized gain (loss) | | 273,942 |
Change in net unrealized appreciation (depreciation) on: Investment securities | 3,052,035 | |
Assets and liabilities in foreign currencies | (25) | |
Total change in net unrealized appreciation (depreciation) | | 3,052,010 |
Net gain (loss) | | 3,325,952 |
Net increase (decrease) in net assets resulting from operations | | $ 3,358,843 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Variable Insurance Products: Cyclical Industries Portfolio
Financial Statements - continued
Statement of Changes in Net Assets
| Year ended
December 31,
2003 | Year ended
December 31,
2002 |
Increase (Decrease) in Net Assets | | |
Operations | | |
Net investment income (loss) | $ 32,891 | $ (7,543) |
Net realized gain (loss) | 273,942 | (2,382,990) |
Change in net unrealized appreciation (depreciation) | 3,052,010 | (800,828) |
Net increase (decrease) in net assets resulting from operations | 3,358,843 | (3,191,361) |
Distributions to shareholders from net investment income | (33,211) | (12,250) |
Share transactions
Net proceeds from sales of shares | 11,594,535 | 11,798,494 |
Reinvestment of distributions | 33,211 | 12,250 |
Cost of shares redeemed | (3,630,929) | (10,645,444) |
Net increase (decrease) in net assets resulting from share transactions | 7,996,817 | 1,165,300 |
Redemption fees | 11,897 | 31,585 |
Total increase (decrease) in net assets | 11,334,346 | (2,006,726) |
Net Assets | | |
Beginning of period | 8,283,651 | 10,290,377 |
End of period | $ 19,617,997 | $ 8,283,651 |
Other Information Shares | | |
Sold | 1,144,472 | 1,198,576 |
Issued in reinvestment of distributions | 2,995 | 1,303 |
Redeemed | (415,929) | (1,196,776) |
Net increase (decrease) | 731,538 | 3,103 |
Financial Highlights
Years ended December 31, | 2003 | 2002 | 2001 F |
Selected Per-Share Data | | | |
Net asset value, beginning of period | $ 8.08 | $ 10.06 | $ 10.00 |
Income from Investment Operations | | | |
Net investment income (loss) E | .03 | (.01) | .01 |
Net realized and unrealized gain (loss) | 3.06 | (1.98) | .04 |
Total from investment operations | 3.09 | (1.99) | .05 |
Distributions from net investment income | (.02) | (.01) | - |
Redemption fees added to paid in capital E | .01 | .02 | .01 |
Net asset value, end of period | $ 11.16 | $ 8.08 | $ 10.06 |
Total Return B, C, D | 38.37% | (19.60)% | .60% |
Ratios to Average Net Assets G | | | |
Expenses before expense reductions | 1.85% | 1.44% | 2.70% A |
Expenses net of voluntary waivers, if any | 1.50% | 1.44% | 1.50% A |
Expenses net of all reductions | 1.47% | 1.42% | 1.50% A |
Net investment income (loss) | .35% | (.06)% | .18% A |
Supplemental Data | | | |
Net assets, end of period (000 omitted) | $ 19,618 | $ 8,284 | $ 10,290 |
Portfolio turnover rate | 117% | 143% | 29% A |
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 18, 2001 (commencement of operations) to December 31, 2001.
G Expense ratios reflect operating expenses of the fund. 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 fund 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 any voluntary 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 fund.
See accompanying notes which are an integral part of the financial statements.
Cyclical Industries Portfolio
Fidelity Variable Insurance Products: Financial Services Portfolio
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of a fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. Performance numbers are net of all fund operating expenses, but do not include any insurance charges imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total returns would be lower. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended December 31, 2003 | Past 1
year | Life of fund |
Fidelity VIP: Financial Services | 30.59% | 4.63% |
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity® Variable Insurance Products: Financial Services Portfolio on July 18, 2001, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index did over the same period.
Annual Report
Fidelity Variable Insurance Products: Financial Services Portfolio
Management's Discussion of Fund Performance
Comments from Jeffrey Feingold, Portfolio Manager of Fidelity® Variable Insurance Products: Financial Services Portfolio
U.S. equity markets snapped a three-year losing streak in 2003, rebounding on the strength of the lowest interest rates in decades, improved corporate profits and a resurgent economy. For the year overall, the Standard & Poor's 500SM Index gained 28.69%, the Dow Jones Industrial AverageSM rose 28.14% and the NASDAQ Composite® Index advanced 50.77%. Small-cap stocks led the charge, particularly lower-quality issues in cyclical industries such as biotechnology and the Internet. As a result, the Russell 2000® Index had its best calendar year ever, climbing 47.25%. The start of the year gave little indication of the strong performance to come, as the hangover of corporate governance scandals and an impending war with Iraq clouded the outlook for 2003. However, investors were encouraged by solid gross domestic product (GDP) growth in the first two quarters of 2003, and what seemed to be a quick resolution to the Iraqi conflict. Federal tax cuts and a boom in mortgage refinancing further boosted the markets and put more discretionary income in consumers' pockets. In the third quarter, GDP growth grew 8.2%, its highest level since 1984.
For the 12 months ending December 31, 2003, the fund outdistanced the S&P 500® index but slightly trailed the Goldman Sachs® Financial Services Index, which rose 32.40%. While banks continued to outperform the broader market during 2003, other areas of the financial services industry also began recovering as the economic outlook improved. These areas included investments banks, whose businesses were fueled by significant fixed-income revenues as well as signs of life in the equity underwriting business, and economically sensitive specialty finance companies. Performance leaders included Citigroup and J.P. Morgan Chase, both of which lagged in 2002 but outperformed nicely in 2003 due to improvements in credit quality of loans, reduced regulatory pressures and better earnings outlooks. Other turnarounds included credit card company MBNA and CIT, a commercial and consumer finance company. Detractors included Fifth Third Bancorp, which underperformed despite reporting decent earnings, and Apartment Investment & Management, a real estate investment trust that suffered as demand for apartments slackened.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Fidelity Variable Insurance Products: Financial Services Portfolio
Investment Summary
Top Five Stocks as of December 31, 2003 |
| % of fund's
net assets |
American International Group, Inc. | 5.0 |
Fannie Mae | 4.7 |
Citigroup, Inc. | 4.3 |
Sovereign Bancorp, Inc. | 4.2 |
Wells Fargo & Co. | 3.7 |
| 21.9 |
Top Industries as of December 31, 2003 |
% of fund's net assets |
| Commercial Banks | 24.0% | |
| Insurance | 23.5% | |
| Capital Markets | 17.9% | |
| Thrifts & Mortgage Finance | 17.3% | |
| Consumer Finance | 5.9% | |
| All Others* | 11.4% | |
* Includes short-term investments and net other assets. |
Annual Report
Fidelity Variable Insurance Products: Financial Services Portfolio
Investments December 31, 2003
Showing Percentage of Net Assets
Common Stocks - 98.3% |
| Shares | | Value (Note 1) |
CAPITAL MARKETS - 17.9% |
Asset Management & Custody Banks - 6.4% |
Bank of New York Co., Inc. | 43,950 | | $ 1,455,624 |
Federated Investors, Inc. Class B (non-vtg.) | 6,780 | | 199,061 |
Franklin Resources, Inc. | 4,400 | | 229,064 |
Investors Financial Services Corp. | 3,870 | | 148,647 |
Mellon Financial Corp. | 11,440 | | 367,338 |
National Financial Partners Corp. | 100 | | 2,755 |
Northern Trust Corp. | 2,550 | | 118,371 |
Waddell & Reed Financial, Inc. Class A | 3,710 | | 87,037 |
| | 2,607,897 |
Diversified Capital Markets - 2.0% |
J.P. Morgan Chase & Co. | 22,740 | | 835,240 |
Investment Banking & Brokerage - 9.5% |
A.G. Edwards, Inc. | 1,960 | | 71,011 |
Ameritrade Holding Corp. (a) | 20,900 | | 294,063 |
Bear Stearns Companies, Inc. | 2,680 | | 214,266 |
Charles Schwab Corp. | 7,510 | | 88,918 |
E*TRADE Group, Inc. (a) | 8,200 | | 103,730 |
Goldman Sachs Group, Inc. | 7,340 | | 724,678 |
LaBranche & Co., Inc. | 2,230 | | 26,024 |
Lehman Brothers Holdings, Inc. | 5,280 | | 407,722 |
Merrill Lynch & Co., Inc. | 15,400 | | 903,210 |
Morgan Stanley | 18,010 | | 1,042,239 |
| | 3,875,861 |
TOTAL CAPITAL MARKETS | | 7,318,998 |
COMMERCIAL BANKS - 24.0% |
Diversified Banks - 18.6% |
Banco Popolare di Verona e Novara | 8,000 | | 135,078 |
Bank of America Corp. | 17,380 | | 1,397,873 |
Bank One Corp. | 23,520 | | 1,072,277 |
Comerica, Inc. | 2,500 | | 140,150 |
FleetBoston Financial Corp. | 12,330 | | 538,205 |
Mitsubishi Tokyo Financial Group, Inc. (MTFG) sponsored ADR | 15,000 | | 117,450 |
National Bank of Canada | 16,200 | | 538,751 |
Royal Bank of Canada | 12,860 | | 612,664 |
U.S. Bancorp, Delaware | 18,300 | | 544,974 |
Wachovia Corp. | 21,172 | | 986,403 |
Wells Fargo & Co. | 25,700 | | 1,513,473 |
| | 7,597,298 |
Regional Banks - 5.4% |
Bank of Hawaii Corp. | 3,960 | | 167,112 |
Bank of the Ozarks, Inc. | 1,508 | | 33,945 |
Banknorth Group, Inc. | 6,400 | | 208,192 |
Commerce Bancorp, Inc., New Jersey | 808 | | 42,565 |
East West Bancorp, Inc. | 2,500 | | 134,200 |
Fifth Third Bancorp | 5,550 | | 328,005 |
KeyCorp | 7,300 | | 214,036 |
|
| Shares | | Value (Note 1) |
SouthTrust Corp. | 7,700 | | $ 252,021 |
SunTrust Banks, Inc. | 3,100 | | 221,650 |
Synovus Financial Corp. | 4,400 | | 127,248 |
UCBH Holdings, Inc. | 10,400 | | 405,288 |
UnionBanCal Corp. | 900 | | 51,786 |
Valley National Bancorp | 1,260 | | 36,792 |
| | 2,222,840 |
TOTAL COMMERCIAL BANKS | | 9,820,138 |
CONSUMER FINANCE - 5.9% |
Consumer Finance - 5.9% |
American Express Co. | 23,540 | | 1,135,334 |
Asta Funding, Inc. | 3,100 | | 106,175 |
MBNA Corp. | 33,705 | | 837,569 |
SLM Corp. | 9,040 | | 340,627 |
| | 2,419,705 |
DIVERSIFIED FINANCIAL SERVICES - 5.4% |
Other Diversifed Financial Services - 4.5% |
Citigroup, Inc. | 36,012 | | 1,748,022 |
Principal Financial Group, Inc. | 2,400 | | 79,368 |
| | 1,827,390 |
Specialized Finance - 0.9% |
CIT Group, Inc. | 6,700 | | 240,865 |
Encore Capital Group, Inc. (a) | 4,900 | | 72,765 |
Euronext NV | 3,200 | | 80,787 |
| | 394,417 |
TOTAL DIVERSIFIED FINANCIAL SERVICES | | 2,221,807 |
INSURANCE - 23.5% |
Insurance Brokers - 1.0% |
Aon Corp. | 4,500 | | 107,730 |
Marsh & McLennan Companies, Inc. | 6,000 | | 287,340 |
| | 395,070 |
Life & Health Insurance - 4.3% |
AFLAC, Inc. | 10,000 | | 361,800 |
American Equity Investment Life Holding Co. | 4,300 | | 42,871 |
Lincoln National Corp. | 2,800 | | 113,036 |
MetLife, Inc. | 17,510 | | 589,562 |
Nationwide Financial Services, Inc.
Class A | 2,600 | | 85,956 |
Protective Life Corp. | 1,200 | | 40,608 |
StanCorp Financial Group, Inc. | 1,600 | | 100,608 |
Sun Life Financial, Inc. | 11,890 | | 296,058 |
Torchmark Corp. | 1,400 | | 63,756 |
UICI (a) | 3,500 | | 46,480 |
| | 1,740,735 |
Multi-Line Insurance - 6.7% |
Allmerica Financial Corp. (a) | 3,460 | | 106,464 |
American International Group, Inc. | 31,010 | | 2,055,343 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
INSURANCE - CONTINUED |
Multi-Line Insurance - continued |
Hartford Financial Services Group, Inc. | 8,760 | | $ 517,103 |
HCC Insurance Holdings, Inc. | 2,220 | | 70,596 |
| | 2,749,506 |
Property & Casualty Insurance - 9.7% |
ACE Ltd. | 13,250 | | 548,815 |
Allstate Corp. | 15,840 | | 681,437 |
AMBAC Financial Group, Inc. | 4,510 | | 312,949 |
Berkshire Hathaway, Inc. Class B (a) | 421 | | 1,185,115 |
Cincinnati Financial Corp. | 2,410 | | 100,931 |
Fidelity National Financial, Inc. | 5,675 | | 220,077 |
MBIA, Inc. | 3,760 | | 222,705 |
Old Republic International Corp. | 6,390 | | 162,050 |
St. Paul Companies, Inc. | 3,000 | | 118,950 |
Travelers Property Casualty Corp.: | | | |
Class A | 19,855 | | 333,167 |
Class B | 4,717 | | 80,047 |
| | 3,966,243 |
Reinsurance - 1.8% |
Arch Capital Group Ltd. (a) | 1,300 | | 51,818 |
Everest Re Group Ltd. | 3,000 | | 253,800 |
Montpelier Re Holdings Ltd. | 1,800 | | 66,060 |
PartnerRe Ltd. | 2,200 | | 127,710 |
RenaissanceRe Holdings Ltd. | 4,930 | | 241,817 |
| | 741,205 |
TOTAL INSURANCE | | 9,592,759 |
REAL ESTATE - 4.3% |
Real Estate Investment Trusts - 4.3% |
Apartment Investment & Management Co. Class A | 10,630 | | 366,735 |
AvalonBay Communities, Inc. | 1,500 | | 71,700 |
CBL & Associates Properties, Inc. | 900 | | 50,850 |
Duke Realty Corp. | 4,630 | | 143,530 |
Equity Residential (SBI) | 13,990 | | 412,845 |
Highwoods Properties, Inc. (SBI) | 3,200 | | 81,280 |
Manufactured Home Communities, Inc. | 1,000 | | 37,650 |
Pan Pacific Retail Properties, Inc. | 2,600 | | 123,890 |
Reckson Associates Realty Corp. | 1,800 | | 43,740 |
Shurgard Storage Centers, Inc. Class A | 1,100 | | 41,415 |
Simon Property Group, Inc. | 4,500 | | 208,530 |
The Mills Corp. | 1,100 | | 48,400 |
Vornado Realty Trust | 2,460 | | 134,685 |
| | 1,765,250 |
THRIFTS & MORTGAGE FINANCE - 17.3% |
Thrifts & Mortgage Finance - 17.3% |
Astoria Financial Corp. | 2,500 | | 93,000 |
Countrywide Financial Corp. | 4,308 | | 326,762 |
Doral Financial Corp. | 11,850 | | 382,518 |
|
| Shares | | Value (Note 1) |
Fannie Mae | 25,450 | | $ 1,910,277 |
FirstFed Financial Corp., Delaware (a) | 3,500 | | 152,250 |
Golden West Financial Corp., Delaware | 13,300 | | 1,372,427 |
Hudson City Bancorp, Inc. | 4,300 | | 164,174 |
MGIC Investment Corp. | 3,000 | | 170,820 |
NetBank, Inc. | 21,200 | | 283,020 |
New York Community Bancorp, Inc. | 5,500 | | 209,275 |
Northwest Bancorp, Inc. | 3,100 | | 66,216 |
Radian Group, Inc. | 825 | | 40,219 |
Sovereign Bancorp, Inc. | 73,190 | | 1,738,263 |
Washington Federal, Inc. | 5,200 | | 147,680 |
| | 7,056,901 |
TOTAL COMMON STOCKS (Cost $32,011,978) | 40,195,558 |
Money Market Funds - 5.3% |
| | | |
Fidelity Cash Central Fund, 1.07% (b) | 738,734 | | 738,734 |
Fidelity Securities Lending Cash Central Fund, 1.09% (b) | 1,424,650 | | 1,424,650 |
TOTAL MONEY MARKET FUNDS (Cost $2,163,384) | 2,163,384 |
TOTAL INVESTMENT PORTFOLIO - 103.6% (Cost $34,175,362) | | 42,358,942 |
NET OTHER ASSETS - (3.6)% | | (1,458,477) |
NET ASSETS - 100% | $ 40,900,465 |
Legend |
(a) Non-income producing |
(b) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $23,244,277 and $26,437,209, respectively. |
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 $1,624 for the period. |
Income Tax Information |
At December 31, 2003, the fund had a capital loss carryforward of approximately $4,746,000 of which $209,000, $2,644,000 and $1,893,000 will expire on December 31, 2009, 2010 and 2011, respectively. |
See accompanying notes which are an integral part of the financial statements.
Financial Services Portfolio
Fidelity Variable Insurance Products: Financial Services Portfolio
Financial Statements
Statement of Assets and Liabilities
| December 31, 2003 |
| | |
Assets | | |
Investment in securities, at value (including securities loaned of $1,392,984) (cost $34,175,362) - See accompanying schedule | | $ 42,358,942 |
Receivable for fund shares sold | | 99,332 |
Dividends receivable | | 55,307 |
Interest receivable | | 621 |
Prepaid expenses | | 229 |
Other affiliated receivables | | 24 |
Other receivables | | 2,007 |
Total assets | | 42,516,462 |
| | |
Liabilities | | |
Payable to custodian bank | $ 27,788 | |
Payable for investments purchased | 61,526 | |
Payable for fund shares redeemed | 53,533 | |
Accrued management fee | 18,718 | |
Other affiliated payables | 7,280 | |
Other payables and accrued expenses | 22,502 | |
Collateral on securities loaned, at value | 1,424,650 | |
Total liabilities | | 1,615,997 |
| | |
Net Assets | | $ 40,900,465 |
Net Assets consist of: | | |
Paid in capital | | $ 37,634,541 |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | | (4,917,747) |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | | 8,183,671 |
Net Assets, for 3,747,183 shares outstanding | | $ 40,900,465 |
Net Asset Value, offering price
and redemption price per
share ($40,900,465 ÷ 3,747,183 shares) | | $ 10.91 |
Statement of Operations
| Year ended December 31, 2003 |
| | |
Investment Income | | |
Dividends | | $ 714,223 |
Interest | | 4,444 |
Security lending | | 5,206 |
Total income | | 723,873 |
| | |
Expenses | | |
Management fee | $ 208,337 | |
Transfer agent fees | 26,718 | |
Accounting and security lending fees | 60,204 | |
Non-interested trustees' compensation | 145 | |
Custodian fees and expenses | 8,192 | |
Audit | 41,641 | |
Legal | 1,472 | |
Miscellaneous | 2,276 | |
Total expenses before reductions | 348,985 | |
Expense reductions | (5,702) | 343,283 |
Net investment income (loss) | | 380,590 |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | | |
Investment securities | (625,510) | |
Investments not meeting investment restrictions | 775 | |
Foreign currency transactions | 1,192 | |
Total net realized gain (loss) | | (623,543) |
Change in net unrealized appreciation (depreciation) on: Investment securities | 9,630,494 | |
Assets and liabilities in foreign currencies | 189 | |
Total change in net unrealized appreciation (depreciation) | | 9,630,683 |
Net gain (loss) | | 9,007,140 |
Net increase (decrease) in net assets resulting from operations | | $ 9,387,730 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Variable Insurance Products: Financial Services Portfolio
Financial Statements - continued
Statement of Changes in Net Assets
| Year ended
December 31,
2003 | Year ended
December 31,
2002 |
Increase (Decrease) in Net Assets | | |
Operations | | |
Net investment income (loss) | $ 380,590 | $ 397,466 |
Net realized gain (loss) | (623,543) | (3,631,572) |
Change in net unrealized appreciation (depreciation) | 9,630,683 | (2,554,687) |
Net increase (decrease) in net assets resulting from operations | 9,387,730 | (5,788,793) |
Distributions to shareholders from net investment income | (403,705) | (408,632) |
Share transactions
Net proceeds from sales of shares | 13,759,235 | 25,828,772 |
Reinvestment of distributions | 403,705 | 408,632 |
Cost of shares redeemed | (17,000,774) | (14,435,823) |
Net increase (decrease) in net assets resulting from share transactions | (2,837,834) | 11,801,581 |
Redemption fees | 30,113 | 51,277 |
Total increase (decrease) in net assets | 6,176,304 | 5,655,433 |
| | |
Net Assets | | |
Beginning of period | 34,724,161 | 29,068,728 |
End of period (including undistributed net investment income of $0 and undistributed net investment income of $133, respectively) | $ 40,900,465 | $ 34,724,161 |
Other Information Shares | | |
Sold | 1,431,706 | 2,716,013 |
Issued in reinvestment of distributions | 37,554 | 48,589 |
Redeemed | (1,836,791) | (1,664,667) |
Net increase (decrease) | (367,531) | 1,099,935 |
Financial Highlights
Years ended December 31, | 2003 | 2002 | 2001 F |
Selected Per-Share Data | | | |
Net asset value, beginning of period | $ 8.44 | $ 9.64 | $ 10.00 |
Income from Investment Operations | | | |
Net investment income (loss) E | .10 | .10 | .03 |
Net realized and unrealized gain (loss) | 2.47 | (1.21) | (.38) |
Total from investment operations | 2.57 | (1.11) | (.35) |
Distributions from net investment income | (.11) | (.10) | (.02) |
Redemption fees added to paid in capital E | .01 | .01 | .01 |
Net asset value, end of period | $ 10.91 | $ 8.44 | $ 9.64 |
Total Return B, C, D | 30.59% | (11.41)% | (3.40)% |
Ratios to Average Net Assets G | | | |
Expenses before expense reductions | .97% | .92% | 1.40% A |
Expenses net of voluntary waivers, if any | .97% | .92% | 1.40% A |
Expenses net of all reductions | .96% | .89% | 1.37% A |
Net investment income (loss) | 1.06% | 1.07% | .79% A |
Supplemental Data | | | |
Net assets, end of period (000 omitted) | $ 40,900 | $ 34,724 | $ 29,069 |
Portfolio turnover rate | 66% | 107% | 114% A |
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 18, 2001 (commencement of operations) to December 31, 2001.
G Expense ratios reflect operating expenses of the fund. 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 fund 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 any voluntary 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 fund.
See accompanying notes which are an integral part of the financial statements.
Financial Services Portfolio
Fidelity Variable Insurance Products: Health Care Portfolio
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of a fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. Performance numbers are net of all fund operating expenses, but do not include any insurance charges imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total returns would be lower. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended December 31, 2003 | Past 1
year | Life of fund |
Fidelity VIP: Health Care | 16.17% | -0.68% |
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity® Variable Insurance Products: Health Care Portfolio on July 18, 2001, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index did over the same period.
Annual Report
Fidelity Variable Insurance Products: Health Care Portfolio
Management's Discussion of Fund Performance
Comments from Steven Calhoun, Portfolio Manager of Fidelity® Variable Insurance Products: Health Care Portfolio
U.S. equity markets snapped a three-year losing streak in 2003, rebounding on the strength of the lowest interest rates in decades, improved corporate profits and a resurgent economy. For the year overall, the Standard & Poor's 500SM Index gained 28.69%, the Dow Jones Industrial AverageSM rose 28.14% and the NASDAQ Composite® Index advanced 50.77%. Small-cap stocks led the charge, particularly lower-quality issues in cyclical industries such as biotechnology and the Internet. As a result, the Russell 2000® Index had its best calendar year ever, climbing 47.25%. The start of the year gave little indication of the strong performance to come, as the hangover of corporate governance scandals and an impending war with Iraq clouded the outlook for 2003. However, investors were encouraged by solid gross domestic product (GDP) growth in the first two quarters of 2003, and what seemed to be a quick resolution to the Iraqi conflict. Federal tax cuts and a boom in mortgage refinancing further boosted the markets and put more discretionary income in consumers' pockets. In the third quarter, GDP growth grew 8.2%, its highest level since 1984.
For the 12-month period that ended December 31, 2003, the fund posted strong absolute returns but lagged the Goldman Sachs® Health Care Index, which gained 23.22%. The fund also lagged the broader S&P 500® index, which returned 28.69% for the same period. Health care stocks did not fare as well as the broad market. Pharmaceutical stocks, in particular, were troubled by concerns about product pipelines and increased competition from generic drug manufacturers as patents for brand name drugs expired, as well as by the uncertainty surrounding passage of the Medicare prescription drug bill. These factors combined to drag down performance for the pharmaceutical company Schering-Plough. Also hurting relative performance was an underweighted position in biotech stocks Genentech and Amgen. Each company received unexpected product-specific positive results from new drug trials, which boosted their stock prices. St. Jude Medical was the top contributor to fund performance. Its stock continued to benefit from its Implantable Cardioverter Defibrillators product launch. Boston Scientific also added to performance, helped by the market's anticipation of its coming drug-coated stent product launch.
Note to shareholders: Sam Peters became Portfolio Manager of Health Care Portfolio on February 1, 2004.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Fidelity Variable Insurance Products: Health Care Portfolio
Investment Summary
Top Five Stocks as of December 31, 2003 |
| % of fund's
net assets |
Johnson & Johnson | 9.9 |
Pfizer, Inc. | 7.9 |
Medtronic, Inc. | 6.3 |
Amgen, Inc. | 5.9 |
Eli Lilly & Co. | 5.5 |
| 35.5 |
Top Industries as of December 31, 2003 |
% of fund's net assets |
| Pharmaceuticals | 46.9% | |
 | Health Care Equipment & Supplies | 20.6% | |
 | Health Care Providers & Services | 15.5% | |
| Biotechnology | 15.4% | |
| All Others* | 1.6% | |
* Includes short-term investments and net other assets. |
Annual Report
Fidelity Variable Insurance Products: Health Care Portfolio
Investments December 31, 2003
Showing Percentage of Net Assets
Common Stocks - 98.4% |
| Shares | | Value (Note 1) |
BIOTECHNOLOGY - 15.4% |
Biotechnology - 15.4% |
Alkermes, Inc. (a) | 30,200 | | $ 407,700 |
Amgen, Inc. (a) | 50,300 | | 3,108,540 |
Biogen Idec, Inc. (a) | 7,300 | | 268,494 |
Celgene Corp. (a) | 3,300 | | 148,566 |
Genentech, Inc. (a) | 24,500 | | 2,292,465 |
Genzyme Corp. - General Division (a) | 8,000 | | 394,720 |
Gilead Sciences, Inc. (a) | 4,680 | | 272,095 |
ImClone Systems, Inc. (a) | 3,200 | | 126,912 |
MedImmune, Inc. (a) | 14,730 | | 374,142 |
Millennium Pharmaceuticals, Inc. (a) | 19,500 | | 364,065 |
Neurocrine Biosciences, Inc. (a) | 5,300 | | 289,062 |
Protein Design Labs, Inc. (a) | 3,900 | | 69,810 |
| | 8,116,571 |
HEALTH CARE EQUIPMENT & SUPPLIES - 20.6% |
Health Care Equipment - 18.4% |
Baxter International, Inc. | 80,550 | | 2,458,386 |
Biomet, Inc. | 24,265 | | 883,489 |
Boston Scientific Corp. (a) | 51,420 | | 1,890,199 |
Medtronic, Inc. | 68,460 | | 3,327,841 |
St. Jude Medical, Inc. (a) | 18,210 | | 1,117,184 |
| | 9,677,099 |
Health Care Supplies - 2.2% |
Alcon, Inc. | 9,700 | | 587,238 |
Edwards Lifesciences Corp. (a) | 19,600 | | 589,568 |
| | 1,176,806 |
TOTAL HEALTH CARE EQUIPMENT & SUPPLIES | | 10,853,905 |
HEALTH CARE PROVIDERS & SERVICES - 15.5% |
Health Care Distributors & Services - 1.5% |
AmerisourceBergen Corp. | 1,900 | | 106,685 |
Henry Schein, Inc. (a) | 3,700 | | 250,046 |
Omnicare, Inc. | 10,500 | | 424,095 |
| | 780,826 |
Health Care Facilities - 1.7% |
HCA, Inc. | 13,500 | | 579,960 |
Health Management Associates, Inc. Class A | 13,300 | | 319,200 |
| | 899,160 |
Health Care Services - 6.7% |
Caremark Rx, Inc. (a) | 38,370 | | 971,912 |
Covance, Inc. (a) | 3,600 | | 96,480 |
Express Scripts, Inc. (a) | 15,000 | | 996,450 |
IMS Health, Inc. | 12,200 | | 303,292 |
Laboratory Corp. of America Holdings (a) | 8,200 | | 302,990 |
|
| Shares | | Value (Note 1) |
Quest Diagnostics, Inc. | 5,600 | | $ 409,416 |
WebMD Corp. (a) | 51,800 | | 465,682 |
| | 3,546,222 |
Managed Health Care - 5.6% |
Aetna, Inc. | 4,400 | | 297,352 |
Coventry Health Care, Inc. (a) | 4,600 | | 296,654 |
Humana, Inc. (a) | 5,900 | | 134,815 |
PacifiCare Health Systems, Inc. (a) | 8,700 | | 588,120 |
UnitedHealth Group, Inc. | 27,500 | | 1,599,950 |
| | 2,916,891 |
TOTAL HEALTH CARE PROVIDERS & SERVICES | | 8,143,099 |
PHARMACEUTICALS - 46.9% |
Pharmaceuticals - 46.9% |
Abbott Laboratories | 57,620 | | 2,685,092 |
Allergan, Inc. | 6,600 | | 506,946 |
Barr Laboratories, Inc. (a) | 3,700 | | 284,715 |
Biovail Corp. (a) | 13,600 | | 292,612 |
Eli Lilly & Co. | 41,200 | | 2,897,596 |
Endo Pharmaceuticals Holdings, Inc. (a) | 5,500 | | 105,930 |
Forest Laboratories, Inc. (a) | 23,000 | | 1,421,400 |
Hollis-Eden Pharmaceutcals, Inc. (a) | 17,600 | | 193,776 |
IVAX Corp. (a) | 14,500 | | 346,260 |
Johnson & Johnson | 100,440 | | 5,188,729 |
King Pharmaceuticals, Inc. (a) | 10,500 | | 160,230 |
Merck & Co., Inc. | 61,180 | | 2,826,516 |
Novartis AG sponsored ADR | 13,700 | | 628,693 |
Perrigo Co. | 9,200 | | 144,624 |
Pfizer, Inc. | 117,340 | | 4,145,622 |
Schering-Plough Corp. | 48,250 | | 839,068 |
Sepracor, Inc. (a) | 3,900 | | 93,327 |
Watson Pharmaceuticals, Inc. (a) | 6,300 | | 289,800 |
Wyeth | 37,620 | | 1,596,969 |
| | 24,647,905 |
TOTAL COMMON STOCKS (Cost $46,141,802) | 51,761,480 |
Money Market Funds - 1.9% |
Fidelity Cash Central Fund, 1.07% (b) | 442,384 | | 442,384 |
Fidelity Securities Lending Cash Central Fund, 1.09% (b) | 553,700 | | 553,700 |
TOTAL MONEY MARKET FUNDS (Cost $996,084) | 996,084 |
TOTAL INVESTMENT PORTFOLIO - 100.3% (Cost $47,137,886) | | 52,757,564 |
NET OTHER ASSETS - (0.3)% | | (154,366) |
NET ASSETS - 100% | $ 52,603,198 |
Legend |
(a) Non-income producing |
(b) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $60,848,290 and $62,941,840, respectively. |
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 $1,448 for the period. |
Income Tax Information |
At December 31, 2003, the fund had a capital loss carryforward of approximately $9,086,000 of which $5,750,000 and $3,336,000 will expire on December 31, 2010 and 2011, respectively. |
See accompanying notes which are an integral part of the financial statements.
Health Care Portfolio
Fidelity Variable Insurance Products: Health Care Portfolio
Financial Statements
Statement of Assets and Liabilities
| December 31, 2003 |
| | |
Assets | | |
Investment in securities, at value (including securities loaned of $539,958) (cost $47,137,886) - See accompanying schedule | | $ 52,757,564 |
Receivable for investments sold | | 342,696 |
Receivable for fund shares sold | | 79,358 |
Dividends receivable | | 75,997 |
Interest receivable | | 669 |
Prepaid expenses | | 326 |
Other receivables | | 3,511 |
Total assets | | 53,260,121 |
| | |
Liabilities | | |
Payable for investments purchased | $ 45,658 | |
Accrued management fee | 24,709 | |
Other affiliated payables | 7,925 | |
Other payables and accrued expenses | 24,931 | |
Collateral on securities loaned, at value | 553,700 | |
Total liabilities | | 656,923 |
| | |
Net Assets | | $ 52,603,198 |
Net Assets consist of: | | |
Paid in capital | | $ 56,501,374 |
Undistributed net investment income | | 162,579 |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | | (9,680,433) |
Net unrealized appreciation (depreciation) on investments | | 5,619,678 |
Net Assets, for 5,384,732 shares outstanding | | $ 52,603,198 |
Net Asset Value, offering price
and redemption price per
share ($52,603,198 ÷ 5,384,732 shares) | | $ 9.77 |
Statement of Operations
| Year ended December 31, 2003 |
| | |
Investment Income | | |
Dividends | | $ 577,808 |
Interest | | 12,644 |
Security lending | | 3,821 |
Total income | | 594,273 |
| | |
Expenses | | |
Management fee | $ 293,251 | |
Transfer agent fees | 36,577 | |
Accounting and security lending fees | 60,271 | |
Non-interested trustees' compensation | 206 | |
Custodian fees and expenses | 10,321 | |
Audit | 43,124 | |
Legal | 1,948 | |
Miscellaneous | 3,790 | |
Total expenses before reductions | 449,488 | |
Expense reductions | (17,794) | 431,694 |
Net investment income (loss) | | 162,579 |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | | |
Investment securities | 198,241 | |
Foreign currency transactions | 1,408 | |
Total net realized gain (loss) | | 199,649 |
Change in net unrealized appreciation (depreciation) on investment securities | | 6,634,464 |
Net gain (loss) | | 6,834,113 |
Net increase (decrease) in net assets resulting from operations | | $ 6,996,692 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Variable Insurance Products: Health Care Portfolio
Financial Statements - continued
Statement of Changes in Net Assets
| Year ended
December 31,
2003 | Year ended
December 31,
2002 |
Increase (Decrease) in Net Assets | | |
Operations | | |
Net investment income (loss) | $ 162,579 | $ 214,100 |
Net realized gain (loss) | 199,649 | (9,059,439) |
Change in net unrealized appreciation (depreciation) | 6,634,464 | (2,344,265) |
Net increase (decrease) in net assets resulting from operations | 6,996,692 | (11,189,604) |
Distributions to shareholders from net investment income | - | (169,436) |
Distributions to shareholders from net realized gain | - | (66,399) |
Total distributions | - | (235,835) |
Share transactions
Net proceeds from sales of shares | 15,153,175 | 19,472,845 |
Reinvestment of distributions | - | 235,835 |
Cost of shares redeemed | (17,043,080) | (22,085,216) |
Net increase (decrease) in net assets resulting from share transactions | (1,889,905) | (2,376,536) |
Redemption fees | 25,765 | 43,628 |
Total increase (decrease) in net assets | 5,132,552 | (13,758,347) |
Net Assets | | |
Beginning of period | 47,470,646 | 61,228,993 |
End of period (including undistributed net investment income of $162,579 and undistributed net investment income of $0, respectively) | $ 52,603,198 | $ 47,470,646 |
Other Information Shares | | |
Sold | 1,655,710 | 2,104,080 |
Issued in reinvestment of distributions | - | 27,301 |
Redeemed | (1,914,631) | (2,497,855) |
Net increase (decrease) | (258,921) | (366,474) |
Financial Highlights
Years ended December 31, | 2003 | 2002 | 2001 F |
Selected Per-Share Data | | | |
Net asset value, beginning of period | $ 8.41 | $ 10.19 | $ 10.00 |
Income from Investment Operations | | | |
Net investment income (loss) E | .03 | .04 | .01 |
Net realized and unrealized gain (loss) | 1.33 | (1.79) | .16 |
Total from investment operations | 1.36 | (1.75) | .17 |
Distributions from net investment income | - | (.03) | - |
Distributions from net realized gain | - | (.01) | (.02) |
Total distributions | - | (.04) | (.02) |
Redemption fees added to paid in capital E | - H | .01 | .04 |
Net asset value, end of period | $ 9.77 | $ 8.41 | $ 10.19 |
Total Return B, C, D | 16.17% | (17.08)% | 2.10% |
Ratios to Average Net Assets G | | | |
Expenses before expense reductions | .89% | .84% | 1.01% A |
Expenses net of voluntary waivers, if any | .89% | .84% | 1.01% A |
Expenses net of all reductions | .85% | .79% | 1.00% A |
Net investment income (loss) | .32% | .39% | .13% A |
Supplemental Data | | | |
Net assets, end of period (000 omitted) | $ 52,603 | $ 47,471 | $ 61,229 |
Portfolio turnover rate | 124% | 166% | 82% A |
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 18, 2001 (commencement of operations) to December 31, 2001.
G Expense ratios reflect operating expenses of the fund. 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 fund 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 any voluntary 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 fund.
H Amount represents less than $.01 per share.
See accompanying notes which are an integral part of the financial statements.
Health Care Portfolio
Fidelity Variable Insurance Products: Natural Resources Portfolio
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of a fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. Performance numbers are net of all fund operating expenses, but do not include any insurance charges imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total returns would be lower. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended December 31, 2003 | Past 1
year | Life of fund |
Fidelity VIP: Natural Resources | 30.61% | 4.70% |
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity® Variable Insurance Products: Natural Resources Portfolio on July 19, 2001, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index did over the same period.
Annual Report
Fidelity Variable Insurance Products: Natural Resources Portfolio
Management's Discussion of Fund Performance
Comments from Pratima Abichandani, Portfolio Manager of Fidelity® Variable Insurance Products: Natural Resources Portfolio
U.S. equity markets snapped a three-year losing streak in 2003, rebounding on the strength of the lowest interest rates in decades, improved corporate profits and a resurgent economy. For the year overall, the Standard & Poor's 500SM Index gained 28.69%, the Dow Jones Industrial AverageSM rose 28.14% and the NASDAQ Composite® Index advanced 50.77%. Small-cap stocks led the charge, particularly lower-quality issues in cyclical industries such as biotechnology and the Internet. As a result, the Russell 2000® Index had its best calendar year ever, climbing 47.25%. The start of the year gave little indication of the strong performance to come, as the hangover of corporate governance scandals and an impending war with Iraq clouded the outlook for 2003. However, investors were encouraged by solid gross domestic product (GDP) growth in the first two quarters of 2003, and what seemed to be a quick resolution to the Iraqi conflict. Federal tax cuts and a boom in mortgage refinancing further boosted the markets and put more discretionary income in consumers' pockets. In the third quarter, GDP growth grew 8.2%, its highest level since 1984.
For the 12 months ending December 31, 2003, the fund beat the 28.69% return of the S&P 500®, while lagging the 34.40% return of the Goldman Sachs® Natural Resources Index. Compared with the Goldman Sachs index, performance was aided by favorable stock selection in the integrated oil and gas, diversified metals and mining, and gold industries. Detracting influences included unfavorable stock picking in energy services and overweightings in energy services and drillers. Freeport-McMoRan Copper & Gold was by far the largest contributor versus the Goldman Sachs index, as the price of copper soared in response to strong demand from China. Integrated energy stock ConocoPhillips was another contributor. Management appeared to be successfully integrating Conoco and Phillips Petroleum after their recent merger. Services provider Weatherford International was the largest detractor both in absolute terms and relative to the Goldman Sachs index. The stock was a victim of the delayed capital-spending recovery in North America, and the fund's large overweighting exacerbated the situation. Driller ENSCO International also hurt performance due to sluggish offshore exploration activity in the Gulf of Mexico.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Fidelity Variable Insurance Products: Natural Resources Portfolio
Investment Summary
Top Five Stocks as of December 31, 2003 |
| % of fund's
net assets |
BP PLC sponsored ADR | 7.7 |
ChevronTexaco Corp. | 6.1 |
Exxon Mobil Corp. | 5.3 |
ConocoPhillips | 5.1 |
Schlumberger Ltd. (NY Shares) | 4.1 |
| 28.3 |
Top Industries as of December 31, 2003 |
% of fund's net assets |
| Oil & Gas | 52.7% | |
| Energy Equipment & Services | 18.1% | |
| Metals & Mining | 14.4% | |
| Paper & Forest Products | 6.2% | |
| Containers & Packaging | 1.8% | |
| All Others* | 6.8% | |
* Includes short-term investments and net other assets. |
Annual Report
Fidelity Variable Insurance Products: Natural Resources Portfolio
Investments December 31, 2003
Showing Percentage of Net Assets
Common Stocks - 94.8% |
| Shares | | Value (Note 1) |
CHEMICALS - 0.1% |
Diversified Chemicals - 0.1% |
Olin Corp. | 2,100 | | $ 42,126 |
CONTAINERS & PACKAGING - 1.8% |
Metal & Glass Containers - 0.2% |
Pactiv Corp. (a) | 2,000 | | 47,800 |
Paper Packaging - 1.6% |
Packaging Corp. of America | 6,990 | | 152,801 |
Smurfit-Stone Container Corp. (a) | 18,810 | | 349,302 |
| | 502,103 |
TOTAL CONTAINERS & PACKAGING | | 549,903 |
ENERGY EQUIPMENT & SERVICES - 18.1% |
Oil & Gas Drilling - 5.8% |
Diamond Offshore Drilling, Inc. | 5,560 | | 114,036 |
ENSCO International, Inc. | 11,700 | | 317,889 |
GlobalSantaFe Corp. | 11,806 | | 293,143 |
Grey Wolf, Inc. (a) | 10,500 | | 39,270 |
Nabors Industries Ltd. (a) | 7,000 | | 290,500 |
Noble Corp. (a) | 4,330 | | 154,927 |
Patterson-UTI Energy, Inc. (a) | 1,600 | | 52,672 |
Precision Drilling Corp. (a) | 2,900 | | 126,869 |
Pride International, Inc. (a) | 9,000 | | 167,760 |
Rowan Companies, Inc. (a) | 8,400 | | 194,628 |
Transocean, Inc. (a) | 3,700 | | 88,837 |
| | 1,840,531 |
Oil & Gas Equipment & Services - 12.3% |
Baker Hughes, Inc. | 15,980 | | 513,917 |
BJ Services Co. (a) | 9,000 | | 323,100 |
Cal Dive International, Inc. (a) | 1,410 | | 33,995 |
Cooper Cameron Corp. (a) | 1,200 | | 55,920 |
Grant Prideco, Inc. (a) | 13,600 | | 177,072 |
Halliburton Co. | 8,700 | | 226,200 |
Maverick Tube Corp. (a) | 1,200 | | 23,100 |
National-Oilwell, Inc. (a) | 5,550 | | 124,098 |
Pason Systems, Inc. | 1,600 | | 31,082 |
Schlumberger Ltd. (NY Shares) | 23,760 | | 1,300,147 |
Smith International, Inc. (a) | 9,740 | | 404,405 |
Tidewater, Inc. | 2,430 | | 72,608 |
Varco International, Inc. (a) | 7,700 | | 158,851 |
Weatherford International Ltd. (a) | 10,800 | | 388,800 |
Willbros Group, Inc. (a) | 4,000 | | 48,080 |
| | 3,881,375 |
TOTAL ENERGY EQUIPMENT & SERVICES | | 5,721,906 |
GAS UTILITIES - 0.8% |
Gas Utilities - 0.8% |
Kinder Morgan, Inc. | 1,870 | | 110,517 |
|
| Shares | | Value (Note 1) |
Southwestern Energy Co. (a) | 2,400 | | $ 57,360 |
TransCanada Corp. | 4,400 | | 94,567 |
| | 262,444 |
METALS & MINING - 14.4% |
Aluminum - 5.8% |
Alcan, Inc. | 12,520 | | 584,595 |
Alcoa, Inc. | 32,790 | | 1,246,020 |
| | 1,830,615 |
Diversified Metals & Mining - 4.1% |
Anglo American PLC ADR | 1,300 | | 28,756 |
Freeport-McMoRan Copper & Gold, Inc. Class B | 15,680 | | 660,598 |
Inco Ltd. (a) | 5,700 | | 226,954 |
Inmet Mining Corp. (a) | 3,300 | | 44,392 |
Phelps Dodge Corp. (a) | 3,600 | | 273,924 |
Rio Tinto PLC sponsored ADR | 600 | | 66,786 |
| | 1,301,410 |
Gold - 4.1% |
Goldcorp, Inc. | 14,000 | | 222,541 |
Kinross Gold Corp. (a) | 6,600 | | 52,507 |
Meridian Gold, Inc. (a) | 3,300 | | 48,157 |
Newmont Mining Corp. | 20,200 | | 981,922 |
| | 1,305,127 |
Precious Metals & Minerals - 0.2% |
Aber Diamond Corp. (a) | 900 | | 32,616 |
Apex Silver Mines Ltd. (a) | 1,700 | | 35,530 |
| | 68,146 |
Steel - 0.2% |
Nucor Corp. | 1,000 | | 56,000 |
TOTAL METALS & MINING | | 4,561,298 |
MULTI-UTILITIES & UNREGULATED POWER - 0.6% |
Multi-Utilities & Unregulated Power - 0.6% |
AES Corp. (a) | 19,600 | | 185,024 |
OIL & GAS - 52.7% |
Integrated Oil & Gas - 33.2% |
BP PLC sponsored ADR | 49,340 | | 2,434,928 |
ChevronTexaco Corp. | 22,200 | | 1,917,858 |
ConocoPhillips | 24,681 | | 1,618,333 |
Exxon Mobil Corp. | 40,700 | | 1,668,700 |
Murphy Oil Corp. | 2,300 | | 150,213 |
Occidental Petroleum Corp. | 24,700 | | 1,043,328 |
Petro-Canada | 11,900 | | 586,285 |
Royal Dutch Petroleum Co. (NY Shares) | 14,550 | | 762,275 |
Total SA sponsored ADR | 2,610 | | 241,451 |
YUKOS Corp. sponsored ADR | 1,988 | | 83,496 |
| | 10,506,867 |
Oil & Gas Exploration & Production - 17.0% |
Anadarko Petroleum Corp. | 6,300 | | 321,363 |
Apache Corp. | 9,470 | | 768,017 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
OIL & GAS - CONTINUED |
Oil & Gas Exploration & Production - continued |
Burlington Resources, Inc. | 12,900 | | $ 714,402 |
Chesapeake Energy Corp. | 19,070 | | 258,971 |
Cross Timbers Royalty Trust | 33 | | 941 |
Devon Energy Corp. | 12,505 | | 716,036 |
EnCana Corp. | 19,918 | | 783,085 |
EOG Resources, Inc. | 8,500 | | 392,445 |
Kerr-McGee Corp. | 10 | | 465 |
Noble Energy, Inc. | 1,500 | | 66,645 |
Pioneer Natural Resources Co. (a) | 10,530 | | 336,223 |
Pogo Producing Co. | 4,200 | | 202,860 |
Talisman Energy, Inc. | 10,060 | | 570,160 |
Tom Brown, Inc. (a) | 1,530 | | 49,343 |
XTO Energy, Inc. | 7,233 | | 204,694 |
| | 5,385,650 |
Oil & Gas Refining & Marketing & Transportation - 2.5% |
Premcor, Inc. (a) | 4,400 | | 114,400 |
Sunoco, Inc. | 6,400 | | 327,360 |
Valero Energy Corp. | 7,200 | | 333,648 |
| | 775,408 |
TOTAL OIL & GAS | | 16,667,925 |
PAPER & FOREST PRODUCTS - 6.2% |
Forest Products - 1.2% |
Slocan Forest Products Ltd. (a) | 140 | | 1,589 |
Weyerhaeuser Co. | 6,200 | | 396,800 |
| | 398,389 |
Paper Products - 5.0% |
Bowater, Inc. | 2,900 | | 134,299 |
Domtar, Inc. | 5,900 | | 73,909 |
Georgia-Pacific Corp. | 9,900 | | 303,633 |
International Paper Co. | 19,300 | | 832,023 |
MeadWestvaco Corp. | 7,617 | | 226,606 |
| | 1,570,470 |
TOTAL PAPER & FOREST PRODUCTS | | 1,968,859 |
SPECIALTY RETAIL - 0.1% |
Specialty Stores - 0.1% |
Boise Cascade Corp. | 1,000 | | 32,860 |
TOTAL COMMON STOCKS (Cost $25,517,124) | 29,992,345 |
Money Market Funds - 8.5% |
| Shares | | Value (Note 1) |
Fidelity Cash Central Fund, 1.07% (b)
(Cost $2,681,459) | 2,681,459 | | $ 2,681,459 |
TOTAL INVESTMENT PORTFOLIO - 103.3% (Cost $28,198,583) | | 32,673,804 |
NET OTHER ASSETS - (3.3)% | | (1,050,039) |
NET ASSETS - 100% | $ 31,623,765 |
Legend |
(a) Non-income producing |
(b) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $18,496,070 and $13,927,725, respectively. |
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 $512 for the period. |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 71.8% |
Canada | 11.0 |
United Kingdom | 8.0 |
Netherlands Antilles | 4.1 |
Netherlands | 2.4 |
Cayman Islands | 1.5 |
Others (individually less than 1%) | 1.2 |
| 100.0% |
Income Tax Information |
At December 31, 2003, the fund had a capital loss carryforward of approximately $4,287,000 of which $97,000, $2,264,000 and $1,926,000 will expire on December 31, 2009, 2010 and 2011, respectively. |
See accompanying notes which are an integral part of the financial statements.
Natural Resources Portfolio
Fidelity Variable Insurance Products: Natural Resources Portfolio
Financial Statements
Statement of Assets and Liabilities
| December 31, 2003 |
| | |
Assets | | |
Investment in securities, at value (cost $28,198,583) - See accompanying schedule | | $ 32,673,804 |
Receivable for fund shares sold | | 119,071 |
Dividends receivable | | 22,482 |
Interest receivable | | 1,516 |
Prepaid expenses | | 103 |
Other affiliated receivables | | 53 |
Other receivables | | 202 |
Total assets | | 32,817,231 |
| | |
Liabilities | | |
Payable for investments purchased | $ 1,152,341 | |
Accrued management fee | 12,204 | |
Other affiliated payables | 6,744 | |
Other payables and accrued expenses | 22,177 | |
Total liabilities | | 1,193,466 |
| | |
Net Assets | | $ 31,623,765 |
Net Assets consist of: | | |
Paid in capital | | $ 31,700,458 |
Distributions in excess of net investment income | | (11,132) |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | | (4,541,215) |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | | 4,475,654 |
Net Assets, for 2,864,765 shares outstanding | | $ 31,623,765 |
Net Asset Value, offering price
and redemption price per
share ($31,623,765 ÷ 2,864,765 shares) | | $ 11.04 |
Statement of Operations
| Year ended December 31, 2003 |
| | |
Investment Income | | |
Dividends | | $ 338,448 |
Interest | | 5,510 |
Total income | | 343,958 |
| | |
Expenses | | |
Management fee | $ 110,449 | |
Transfer agent fees | 15,726 | |
Accounting fees and expenses | 60,041 | |
Non-interested trustees' compensation | 76 | |
Custodian fees and expenses | 8,437 | |
Audit | 42,961 | |
Legal | 736 | |
Miscellaneous | 826 | |
Total expenses before reductions | 239,252 | |
Expense reductions | (2,337) | 236,915 |
Net investment income (loss) | | 107,043 |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | | |
Investment securities | (1,558,712) | |
Foreign currency transactions | (1,047) | |
Total net realized gain (loss) | | (1,559,759) |
Change in net unrealized appreciation (depreciation) on: Investment securities | 6,751,335 | |
Assets and liabilities in foreign currencies | 460 | |
Total change in net unrealized appreciation (depreciation) | | 6,751,795 |
Net gain (loss) | | 5,192,036 |
Net increase (decrease) in net assets resulting from operations | | $ 5,299,079 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Variable Insurance Products: Natural Resources Portfolio
Financial Statements - continued
Statement of Changes in Net Assets
| Year ended
December 31,
2003 | Year ended
December 31,
2002 |
Increase (Decrease) in Net Assets | | |
Operations | | |
Net investment income (loss) | $ 107,043 | $ 154,286 |
Net realized gain (loss) | (1,559,759) | (2,356,754) |
Change in net unrealized appreciation (depreciation) | 6,751,795 | (2,623,772) |
Net increase (decrease) in net assets resulting from operations | 5,299,079 | (4,826,240) |
Distributions to shareholders from net investment income | (118,735) | (158,232) |
Share transactions
Net proceeds from sales of shares | 17,445,260 | 25,890,586 |
Reinvestment of distributions | 118,735 | 158,232 |
Cost of shares redeemed | (11,686,648) | (12,908,987) |
Net increase (decrease) in net assets resulting from share transactions | 5,877,347 | 13,139,831 |
Redemption fees | 29,307 | 55,652 |
Total increase (decrease) in net assets | 11,086,998 | 8,211,011 |
Net Assets | | |
Beginning of period | 20,536,767 | 12,325,756 |
End of period (including distributions in excess of net investment income of $11,132 and undistributed net investment income of $1,259, respectively) | $ 31,623,765 | $ 20,536,767 |
Other Information Shares | | |
Sold | 1,760,481 | 2,616,343 |
Issued in reinvestment of distributions | 11,565 | 18,544 |
Redeemed | (1,325,092) | (1,490,179) |
Net increase (decrease) | 446,954 | 1,144,708 |
Financial Highlights
Years ended December 31, | 2003 | 2002 | 2001 F |
Selected Per-Share Data | | | |
Net asset value, beginning of period | $ 8.49 | $ 9.68 | $ 10.00 |
Income from Investment Operations | | | |
Net investment income (loss) E | .05 | .06 | .02 |
Net realized and unrealized gain (loss) | 2.54 | (1.20) | (.35) |
Total from investment operations | 2.59 | (1.14) | (.33) |
Distributions from net investment income | (.05) | (.07) | (.01) |
Redemption fees added to paid in capital E | .01 | .02 | .02 |
Net asset value, end of period | $ 11.04 | $ 8.49 | $ 9.68 |
Total Return B, C, D | 30.61% | (11.58)% | (3.10)% |
Ratios to Average Net Assets G | | | |
Expenses before expense reductions | 1.26% | 1.10% | 2.11% A |
Expenses net of voluntary waivers, if any | 1.26% | 1.10% | 1.50% A |
Expenses net of all reductions | 1.25% | 1.08% | 1.44% A |
Net investment income (loss) | .56% | .70% | .49% A |
Supplemental Data | | | |
Net assets, end of period (000 omitted) | $ 31,624 | $ 20,537 | $ 12,326 |
Portfolio turnover rate | 73% | 83% | 129% A |
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 19, 2001 (commencement of operations) to December 31, 2001.
G Expense ratios reflect operating expenses of the fund. 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 fund 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 any voluntary 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 fund.
See accompanying notes which are an integral part of the financial statements.
Natural Resources Portfolio
Fidelity Variable Insurance Products: Technology Portfolio
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of a fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. Performance numbers are net of all fund operating expenses, but do not include any insurance charges imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total returns would be lower. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended December 31, 2003 | Past 1
year | Life of fund |
Fidelity VIP: Technology | 59.22% | -2.79% |
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity® Variable Insurance Products: Technology Portfolio on July 19, 2001, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index did over the same period.
Annual Report
Fidelity Variable Insurance Products: Technology Portfolio
Management's Discussion of Fund Performance
Comments from Sonu Kalra, Portfolio Manager of Fidelity® Variable Insurance Products: Technology Portfolio
U.S. equity markets snapped a three-year losing streak in 2003, rebounding on the strength of the lowest interest rates in decades, improved corporate profits and a resurgent economy. For the year overall, the Standard & Poor's 500SM Index gained 28.69%, the Dow Jones Industrial AverageSM rose 28.14% and the NASDAQ Composite® Index advanced 50.77%. Small-cap stocks led the charge, particularly lower-quality issues in cyclical industries such as biotechnology and the Internet. As a result, the Russell 2000® Index had its best calendar year ever, climbing 47.25%. The start of the year gave little indication of the strong performance to come, as the hangover of corporate governance scandals and an impending war with Iraq clouded the outlook for 2003. However, investors were encouraged by solid gross domestic product (GDP) growth in the first two quarters of 2003, and what seemed to be a quick resolution to the Iraqi conflict. Federal tax cuts and a boom in mortgage refinancing further boosted the markets and put more discretionary income in consumers' pockets. In the third quarter, GDP growth grew 8.2%, its highest level since 1984.
For the 12 months ending December 31, 2003, the fund finished well ahead of the 54.18% return posted by the Goldman Sachs® Technology Index, while more than doubling the return of the S&P 500®. Underweighting the relatively weak data processing services and computer hardware groups was a positive factor. Furthermore, the fund benefited from favorable stock selection in the semiconductor, computer hardware, and software and systems groups. Conversely, the fund was hurt by stock selection in movies and entertainment, and by an underweighting in Internet retail stocks. IBM was the top contributor compared with the Goldman Sachs index, as my decision to underweight the stock significantly was timely. Legato Systems - a stock I sold because I thought it had become fully valued - was a storage software holding that did well due to more stringent government regulations on document storage. Microsoft was the fund's largest detractor relative to the index, left behind amid the search for more rapid earnings growth. Media conglomerate Time Warner also detracted from performance, mainly due to continued poor results at the company's AOL subsidiary.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Fidelity Variable Insurance Products: Technology Portfolio
Investment Summary
Top Five Stocks as of December 31, 2003 |
| % of fund's
net assets |
Microsoft Corp. | 8.3 |
Cisco Systems, Inc. | 5.2 |
Intel Corp. | 4.7 |
Dell, Inc. | 4.6 |
Hewlett-Packard Co. | 2.7 |
| 25.5 |
Top Industries as of December 31, 2003 |
% of fund's net assets |
| Semiconductors & Semiconductor Equipment | 26.6% | |
| Computers & Peripherals | 19.7% | |
| Software | 17.4% | |
| Communications Equipment | 16.3% | |
| Electronic Equipment & Instruments | 5.1% | |
| All Others* | 14.9% | |
* Includes short-term investments and net other assets. |
Annual Report
Fidelity Variable Insurance Products: Technology Portfolio
Investments December 31, 2003
Showing Percentage of Net Assets
Common Stocks - 96.9% |
| Shares | | Value (Note 1) |
COMMERCIAL SERVICES & SUPPLIES - 0.3% |
Employment Services - 0.3% |
Monster Worldwide, Inc. (a) | 22,500 | | $ 494,100 |
COMMUNICATIONS EQUIPMENT - 16.3% |
Communications Equipment - 16.3% |
3Com Corp. (a) | 24,100 | | 196,897 |
ADC Telecommunications, Inc. (a) | 238,600 | | 708,642 |
Alcatel SA sponsored ADR (a) | 53,400 | | 686,190 |
Andrew Corp. (a) | 15,100 | | 173,801 |
Arris Group, Inc. (a) | 29,300 | | 212,132 |
Avaya, Inc. (a) | 160,500 | | 2,076,870 |
CIENA Corp. (a) | 120,400 | | 799,456 |
Cisco Systems, Inc. (a) | 356,300 | | 8,654,527 |
Comverse Technology, Inc. (a) | 74,470 | | 1,309,927 |
Corning, Inc. (a) | 55,400 | | 577,822 |
Emulex Corp. (a) | 13,800 | | 368,184 |
Enterasys Networks, Inc. (a) | 157,600 | | 591,000 |
Extreme Networks, Inc. (a) | 28,200 | | 203,322 |
F5 Networks, Inc. (a) | 7,100 | | 178,210 |
Finisar Corp. (a) | 127,600 | | 399,388 |
Foundry Networks, Inc. (a) | 2,800 | | 76,608 |
JDS Uniphase Corp. (a) | 20,700 | | 75,555 |
Juniper Networks, Inc. (a) | 20,000 | | 373,600 |
Marconi Corp. PLC (a) | 54,154 | | 572,449 |
McDATA Corp. Class A (a) | 44,200 | | 421,226 |
Motorola, Inc. | 277,130 | | 3,899,219 |
NetScreen Technologies, Inc. (a) | 15,200 | | 376,200 |
Nortel Networks Corp. (a) | 16,700 | | 70,641 |
Oplink Communications, Inc. (a) | 58,800 | | 140,532 |
Powerwave Technologies, Inc. (a) | 64,000 | | 489,600 |
QLogic Corp. (a) | 5,200 | | 268,320 |
QUALCOMM, Inc. | 14,700 | | 792,771 |
Research in Motion Ltd. (a) | 3,500 | | 233,981 |
Scientific-Atlanta, Inc. | 30,300 | | 827,190 |
Sonus Networks, Inc. (a) | 4,800 | | 36,288 |
Telefonaktiebolaget LM Ericsson ADR (a) | 81,400 | | 1,440,780 |
| | 27,231,328 |
COMPUTERS & PERIPHERALS - 19.7% |
Computer Hardware - 11.0% |
Apple Computer, Inc. (a) | 38,900 | | 831,293 |
Cray, Inc. (a) | 40,100 | | 398,193 |
Dell, Inc. (a) | 224,330 | | 7,618,247 |
Hewlett-Packard Co. | 194,908 | | 4,477,037 |
International Business Machines Corp. | 21,310 | | 1,975,011 |
PalmOne, Inc. (a) | 49,656 | | 583,458 |
Pinnacle Systems, Inc. (a) | 1,150 | | 9,810 |
Quanta Computer, Inc. | 191,100 | | 469,872 |
Sun Microsystems, Inc. (a) | 458,700 | | 2,059,563 |
| | 18,422,484 |
|
| Shares | | Value (Note 1) |
Computer Storage & Peripherals - 8.7% |
Ambit Microsystems Corp. | 100,100 | | $ 263,809 |
Avid Technology, Inc. (a) | 4,200 | | 201,600 |
Dot Hill Systems Corp. (a) | 56,700 | | 859,005 |
EMC Corp. (a) | 169,440 | | 2,189,165 |
Hutchinson Technology, Inc. (a) | 18,700 | | 574,838 |
Komag, Inc. (a) | 8,100 | | 118,503 |
Lexmark International, Inc. Class A (a) | 43,400 | | 3,412,976 |
Maxtor Corp. (a) | 122,300 | | 1,357,530 |
Seagate Technology | 162,100 | | 3,063,690 |
Storage Technology Corp. (a) | 29,100 | | 749,325 |
Western Digital Corp. (a) | 142,900 | | 1,684,791 |
| | 14,475,232 |
TOTAL COMPUTERS & PERIPHERALS | | 32,897,716 |
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.1% |
Integrated Telecommunication Services - 0.1% |
Primus Telecommunications Group, Inc. (a) | 16,000 | | 162,880 |
ELECTRICAL EQUIPMENT - 0.1% |
Electrical Components & Equipment - 0.1% |
Byd Co. Ltd. (H Shares) | 76,000 | | 200,191 |
ELECTRONIC EQUIPMENT & INSTRUMENTS - 5.1% |
Electronic Equipment & Instruments - 3.1% |
Agilent Technologies, Inc. (a) | 34,440 | | 1,007,026 |
Amphenol Corp. Class A (a) | 5,200 | | 332,436 |
AU Optronics Corp. sponsored ADR | 49,300 | | 587,656 |
Hon Hai Precision Industries Co. Ltd. | 89,000 | | 349,868 |
National Instruments Corp. | 3,500 | | 159,145 |
Symbol Technologies, Inc. | 28,900 | | 488,121 |
Veeco Instruments, Inc. (a) | 21,000 | | 592,200 |
Vishay Intertechnology, Inc. (a) | 74,200 | | 1,699,180 |
| | 5,215,632 |
Electronic Manufacturing Svcs. - 0.9% |
Photon Dynamics, Inc. (a) | 12,759 | | 513,422 |
Solectron Corp. (a) | 161,400 | | 953,874 |
| | 1,467,296 |
Technology Distributors - 1.1% |
Arrow Electronics, Inc. (a) | 37,400 | | 865,436 |
Avnet, Inc. (a) | 16,600 | | 359,556 |
CDW Corp. | 5,700 | | 329,232 |
Ingram Micro, Inc. Class A (a) | 20,300 | | 322,770 |
| | 1,876,994 |
TOTAL ELECTRONIC EQUIPMENT & INSTRUMENTS | | 8,559,922 |
HOUSEHOLD DURABLES - 1.2% |
Consumer Electronics - 1.2% |
Garmin Ltd. | 6,026 | | 328,296 |
Harman International Industries, Inc. | 14,000 | | 1,035,720 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
HOUSEHOLD DURABLES - CONTINUED |
Consumer Electronics - continued |
Koninklijke Philips Electronics NV (NY Shares) | 13,700 | | $ 398,533 |
Sony Corp. sponsored ADR | 9,100 | | 315,497 |
| | 2,078,046 |
INTERNET & CATALOG RETAIL - 2.3% |
Internet Retail - 2.3% |
Amazon.com, Inc. (a) | 29,300 | | 1,542,352 |
eBay, Inc. (a) | 18,500 | | 1,194,915 |
InterActiveCorp (a) | 30,100 | | 1,021,293 |
| | 3,758,560 |
INTERNET SOFTWARE & SERVICES - 3.3% |
Internet Software & Services - 3.3% |
Akamai Technologies, Inc. (a) | 24,700 | | 265,525 |
Ariba, Inc. (a) | 101,355 | | 304,065 |
EarthLink, Inc. (a) | 54,700 | | 547,000 |
Internet Security Systems, Inc. (a) | 4,406 | | 82,965 |
Interwoven, Inc. (a) | 7,950 | | 100,488 |
iPass, Inc. | 9,500 | | 152,285 |
Openwave Systems, Inc. (a) | 27,333 | | 300,663 |
RADWARE Ltd. (a) | 10,900 | | 297,025 |
SonicWALL, Inc. (a) | 21,623 | | 168,659 |
Supportsoft, Inc. (a) | 1,800 | | 23,670 |
United Online, Inc. (a) | 63,097 | | 1,059,399 |
VeriSign, Inc. (a) | 37,991 | | 619,253 |
Yahoo!, Inc. (a) | 33,620 | | 1,518,615 |
| | 5,439,612 |
IT SERVICES - 1.5% |
Data Processing & Outsourced Services - 1.1% |
CSG Systems International, Inc. (a) | 8,600 | | 107,414 |
First Data Corp. | 19,580 | | 804,542 |
Paychex, Inc. | 22,140 | | 823,608 |
| | 1,735,564 |
IT Consulting & Other Services - 0.4% |
Cognizant Technology Solutions Corp. Class A (a) | 10,000 | | 456,400 |
CompuCom Systems, Inc. (a) | 2,200 | | 11,528 |
Infosys Technologies Ltd. sponsored ADR | 2,700 | | 258,390 |
| | 726,318 |
TOTAL IT SERVICES | | 2,461,882 |
LEISURE EQUIPMENT & PRODUCTS - 0.4% |
Photographic Products - 0.4% |
Largan Precision Co. Ltd. | 45,700 | | 444,081 |
Premier Image Technology Corp. | 168,000 | | 281,979 |
| | 726,060 |
|
| Shares | | Value (Note 1) |
MACHINERY - 0.1% |
Industrial Machinery - 0.1% |
MMI Holdings Ltd. | 965,000 | | $ 227,320 |
MEDIA - 0.4% |
Broadcasting & Cable TV - 0.2% |
TiVo, Inc. (a) | 55,100 | | 407,740 |
Movies & Entertainment - 0.2% |
Pixar (a) | 3,800 | | 263,302 |
TOTAL MEDIA | | 671,042 |
OFFICE ELECTRONICS - 0.4% |
Office Electronics - 0.4% |
Canon, Inc. | 6,000 | | 285,840 |
Konica Minolta Holdings, Inc. (c) | 21,500 | | 290,569 |
| | 576,409 |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 26.6% |
Semiconductor Equipment - 4.6% |
Applied Materials, Inc. (a) | 56,840 | | 1,276,058 |
ASM Pacific Technology Ltd. | 58,000 | | 254,006 |
ASML Holding NV (NY Shares) (a) | 72,000 | | 1,443,600 |
ATMI, Inc. (a) | 19,500 | | 451,230 |
Axcelis Technologies, Inc. (a) | 24,800 | | 253,456 |
Cymer, Inc. (a) | 7,500 | | 346,425 |
KLA-Tencor Corp. (a) | 15,000 | | 880,050 |
Lam Research Corp. (a) | 2,900 | | 93,670 |
MEMC Electronic Materials, Inc. (a) | 19,800 | | 190,476 |
Teradyne, Inc. (a) | 56,400 | | 1,435,380 |
Tokyo Electron Ltd. | 8,300 | | 633,649 |
Varian Semiconductor Equipment Associates, Inc. (a) | 8,200 | | 358,258 |
| | 7,616,258 |
Semiconductors - 22.0% |
Agere Systems, Inc.: | | | |
Class A (a) | 494,010 | | 1,506,731 |
Class B (a) | 389,300 | | 1,128,970 |
Altera Corp. (a) | 31,200 | | 708,240 |
AMIS Holdings, Inc. | 2,100 | | 38,388 |
Analog Devices, Inc. | 52,900 | | 2,414,885 |
ARM Holdings PLC sponsored ADR (a) | 68,400 | | 471,960 |
Broadcom Corp. Class A (a) | 5,900 | | 201,131 |
Conexant Systems, Inc. (a) | 214,700 | | 1,067,059 |
Cree, Inc. (a) | 7,600 | | 134,444 |
Cypress Semiconductor Corp. (a) | 20,700 | | 442,152 |
GlobespanVirata, Inc. (a) | 49,100 | | 288,708 |
Integrated Circuit Systems, Inc. (a) | 64,500 | | 1,837,605 |
Integrated Device Technology, Inc. (a) | 51,800 | | 889,406 |
Intel Corp. | 242,941 | | 7,822,700 |
International Rectifier Corp. (a) | 12,900 | | 637,389 |
Intersil Corp. Class A | 48,100 | | 1,195,285 |
Lattice Semiconductor Corp. (a) | 39,100 | | 378,488 |
Linear Technology Corp. | 19,400 | | 816,158 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - CONTINUED |
Semiconductors - continued |
Marvell Technology Group Ltd. (a) | 26,700 | | $ 1,012,731 |
Maxim Integrated Products, Inc. | 4,600 | | 229,080 |
Microchip Technology, Inc. | 10,000 | | 333,600 |
Micron Technology, Inc. (a) | 34,860 | | 469,564 |
Mindspeed Technologies, Inc. (a) | 13,700 | | 93,845 |
National Semiconductor Corp. (a) | 101,000 | | 3,980,410 |
NVIDIA Corp. (a) | 63,100 | | 1,467,075 |
Omnivision Technologies, Inc. (a) | 1,100 | | 60,775 |
PMC-Sierra, Inc. (a) | 8,900 | | 179,335 |
Power Integrations, Inc. (a) | 900 | | 30,114 |
Rohm Co. Ltd. | 2,600 | | 306,274 |
Samsung Electronics Co. Ltd. | 2,990 | | 1,130,809 |
Sigmatel, Inc. | 19,100 | | 471,388 |
Silicon Image, Inc. (a) | 114,280 | | 826,244 |
Siliconware Precision Industries Co. Ltd. ADR (a) | 31,400 | | 161,710 |
STMicroelectronics NV (NY Shares) | 29,000 | | 783,290 |
Taiwan Semiconductor Manufacturing Co. Ltd. (a) | 81,000 | | 151,458 |
Taiwan Semiconductor Manufacturing Co. Ltd. sponsored ADR (a) | 36,108 | | 369,746 |
Texas Instruments, Inc. | 29,900 | | 878,462 |
United Microelectronics Corp. sponsored ADR (a) | 162,731 | | 805,518 |
Xilinx, Inc. (a) | 29,300 | | 1,135,082 |
| | 36,856,209 |
TOTAL SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT | | 44,472,467 |
SOFTWARE - 17.4% |
Application Software - 4.6% |
Amdocs Ltd. (a) | 37,100 | | 834,008 |
Autodesk, Inc. | 21,396 | | 525,914 |
BEA Systems, Inc. (a) | 87,000 | | 1,070,100 |
Cadence Design Systems, Inc. (a) | 55,800 | | 1,003,284 |
FileNET Corp. (a) | 15,503 | | 419,821 |
Intuit, Inc. (a) | 5,800 | | 306,878 |
Lawson Software, Inc. (a) | 20,396 | | 167,859 |
Mercury Interactive Corp. (a) | 2,600 | | 126,464 |
Quest Software, Inc. (a) | 89,449 | | 1,270,176 |
SAP AG sponsored ADR | 9,000 | | 374,040 |
Siebel Systems, Inc. (a) | 53,200 | | 737,884 |
Synopsys, Inc. (a) | 24,427 | | 824,656 |
| | 7,661,084 |
Home Entertainment Software - 0.3% |
Nintendo Co. Ltd. | 5,800 | | 543,970 |
Systems Software - 12.5% |
Adobe Systems, Inc. | 17,220 | | 676,746 |
Computer Associates International, Inc. | 10,000 | | 273,400 |
|
| Shares | | Value (Note 1) |
Microsoft Corp. | 507,600 | | $ 13,979,300 |
Oracle Corp. (a) | 251,900 | | 3,325,080 |
PalmSource, Inc. (a) | 7,249 | | 157,956 |
Red Hat, Inc. (a) | 35,960 | | 674,969 |
Secure Computing Corp. (a) | 6,300 | | 112,833 |
Symantec Corp. (a) | 12,300 | | 426,195 |
VERITAS Software Corp. (a) | 35,100 | | 1,304,316 |
| | 20,930,795 |
TOTAL SOFTWARE | | 29,135,849 |
SPECIALTY RETAIL - 0.8% |
Computer & Electronics Retail - 0.8% |
Best Buy Co., Inc. | 15,100 | | 788,824 |
Circuit City Stores, Inc. | 57,200 | | 579,436 |
| | 1,368,260 |
WIRELESS TELECOMMUNICATION SERVICES - 0.9% |
Wireless Telecommunication Services - 0.9% |
American Tower Corp. Class A (a) | 75,100 | | 812,582 |
China Unicom Ltd. sponsored ADR | 20,900 | | 195,206 |
LCC International, Inc. (a) | 1,300 | | 6,971 |
Nextel Communications, Inc. Class A (a) | 18,800 | | 527,528 |
Sprint Corp. - PCS Group Series 1 (a) | 900 | | 5,058 |
| | 1,547,345 |
TOTAL COMMON STOCKS (Cost $136,467,777) | 162,008,989 |
Money Market Funds - 9.6% |
| | | |
Fidelity Cash Central Fund, 1.07% (b) | 12,184,437 | | 12,184,437 |
Fidelity Securities Lending Cash Central Fund, 1.09% (b) | 3,939,738 | | 3,939,738 |
TOTAL MONEY MARKET FUNDS (Cost $16,124,175) | 16,124,175 |
TOTAL INVESTMENT PORTFOLIO - 106.5% (Cost $152,591,952) | | 178,133,164 |
NET OTHER ASSETS - (6.5)% | | (10,858,796) |
NET ASSETS - 100% | $ 167,274,368 |
Legend |
(a) Non-income producing |
(b) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(c) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $203,306,446 and $107,004,329, respectively. |
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 $50,101 for the period. |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 87.9% |
Taiwan | 2.3 |
Cayman Islands | 2.0 |
Netherlands | 1.6 |
Japan | 1.5 |
United Kingdom | 1.1 |
Others (individually less than 1%) | 3.6 |
| 100.0% |
Income Tax Information |
At December 31, 2003, the fund had a capital loss carryforward of approximately $6,961,000 all of which will expire on December 31, 2010. |
See accompanying notes which are an integral part of the financial statements.
Technology Portfolio
Fidelity Variable Insurance Products: Technology Portfolio
Financial Statements
Statement of Assets and Liabilities
| December 31, 2003 |
| | |
Assets | | |
Investment in securities, at value (including securities loaned of $3,788,931) (cost $152,591,952) - See accompanying schedule | | $ 178,133,164 |
Foreign currency held at value
(cost $238,917) | | 239,124 |
Receivable for investments sold | | 969,885 |
Receivable for fund shares sold | | 886,889 |
Dividends receivable | | 40,536 |
Interest receivable | | 4,595 |
Prepaid expenses | | 631 |
Other affiliated receivables | | 55 |
Other receivables | | 25,494 |
Total assets | | 180,300,373 |
| | |
Liabilities | | |
Payable for investments purchased
Regular delivery | $ 6,140,565 | |
Delayed delivery | 20,081 | |
Payable for fund shares redeemed | 2,799,009 | |
Accrued management fee | 78,473 | |
Other affiliated payables | 14,417 | |
Other payables and accrued expenses | 33,722 | |
Collateral on securities loaned, at value | 3,939,738 | |
Total liabilities | | 13,026,005 |
| | |
Net Assets | | $ 167,274,368 |
Net Assets consist of: | | |
Paid in capital | | $ 150,017,784 |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | | (8,284,638) |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | | 25,541,222 |
Net Assets, for 17,930,759 shares outstanding | | $ 167,274,368 |
Net Asset Value, offering price and redemption price per share ($167,274,368 ÷ 17,930,759 shares) | | $ 9.33 |
Statement of Operations
| Year ended December 31, 2003 |
| | |
Investment Income | | |
Dividends | | $ 286,607 |
Interest | | 56,729 |
Security lending | | 20,558 |
Total income | | 363,894 |
| | |
Expenses | | |
Management fee | $ 503,452 | |
Transfer agent fees | 63,445 | |
Accounting and security lending fees | 60,335 | |
Non-interested trustees' compensation | 309 | |
Custodian fees and expenses | 40,100 | |
Audit | 43,131 | |
Legal | 4,795 | |
Miscellaneous | 5,592 | |
Total expenses before reductions | 721,159 | |
Expense reductions | (62,185) | 658,974 |
Net investment income (loss) | | (295,080) |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | | |
Investment securities | 5,394,930 | |
Foreign currency transactions | (1,024) | |
Total net realized gain (loss) | | 5,393,906 |
Change in net unrealized appreciation (depreciation) on: Investment securities | 28,895,488 | |
Assets and liabilities in foreign currencies | 2,370 | |
Total change in net unrealized appreciation (depreciation) | | 28,897,858 |
Net gain (loss) | | 34,291,764 |
Net increase (decrease) in net assets resulting from operations | | $ 33,996,684 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Variable Insurance Products: Technology Portfolio
Financial Statements - continued
Statement of Changes in Net Assets
| Year ended
December 31,
2003 | Year ended
December 31,
2002 |
Increase (Decrease) in Net Assets | | |
Operations | | |
Net investment income (loss) | $ (295,080) | $ (166,554) |
Net realized gain (loss) | 5,393,906 | (12,923,943) |
Change in net unrealized appreciation (depreciation) | 28,897,858 | (5,435,213) |
Net increase (decrease) in net assets resulting from operations | 33,996,684 | (18,525,710) |
Share transactions
Net proceeds from sales of shares | 123,143,044 | 29,305,438 |
Cost of shares redeemed | (22,975,915) | (21,346,736) |
Net increase (decrease) in net assets resulting from share transactions | 100,167,129 | 7,958,702 |
Redemption fees | 155,596 | 92,175 |
Total increase (decrease) in net assets | 134,319,409 | (10,474,833) |
| | |
Net Assets | | |
Beginning of period | 32,954,959 | 43,429,792 |
End of period | $ 167,274,368 | $ 32,954,959 |
Other Information Shares | | |
Sold | 15,303,104 | 4,031,537 |
Redeemed | (2,993,567) | (3,018,612) |
Net increase (decrease) | 12,309,537 | 1,012,925 |
Financial Highlights
Years ended December 31, | 2003 | 2002 | 2001F |
Selected Per-Share Data | | | |
Net asset value, beginning of period | $ 5.86 | $ 9.42 | $ 10.00 |
Income from Investment Operations | | | |
Net investment income (loss)E | (.03) | (.04) | (.03) |
Net realized and unrealized gain (loss) | 3.49 | (3.54) | (.57) |
Total from investment operations | 3.46 | (3.58) | (.60) |
Redemption fees added to paid in capitalE | .01 | .02 | .02 |
Net asset value, end of period | $ 9.33 | $ 5.86 | $ 9.42 |
Total ReturnB,C,D | 59.22% | (37.79)% | (5.80)% |
Ratios to Average Net AssetsG | | | |
Expenses before expense reductions | .83% | .99% | 1.31%A |
Expenses net of voluntary waivers, if any | .83% | .99% | 1.31%A |
Expenses net of all reductions | .75% | .86% | 1.29%A |
Net investment income (loss) | (.34)% | (.52)% | (.70)%A |
Supplemental Data | | | |
Net assets, end of period (000 omitted) | $ 167,274 | $ 32,955 | $ 43,430 |
Portfolio turnover rate | 129% | 217% | 129%A |
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 19, 2001 (commencement of operations) to December 31, 2001.
G Expense ratios reflect operating expenses of the fund. 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 fund 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 any voluntary 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 fund.
See accompanying notes which are an integral part of the financial statements.
Technology Portfolio
Fidelity Variable Insurance Products: Telecommunications & Utilities Growth Portfolio
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of a fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. Performance numbers are net of all fund operating expenses, but do not include any insurance charges imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total returns would be lower. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended December 31, 2003 | Past 1
year | Life of fund |
Fidelity VIP: Telecommunications & Utilities Growth | 26.17% | -10.52% |
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity® Variable Insurance Products: Telecommunications & Utilities Growth Portfolio on July 19, 2001, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index did over the same period.
Annual Report
Fidelity Variable Insurance Products: Telecommunications & Utilities Growth Portfolio
Management's Discussion of Fund Performance
Comments from Brian Younger, Portfolio Manager of Fidelity® Variable Insurance Products: Telecommunications & Utilities
Growth Portfolio:
U.S. equity markets snapped a three-year losing streak in 2003, rebounding on the strength of the lowest interest rates in decades, improved corporate profits and a resurgent economy. For the year overall, the Standard & Poor's 500SM Index gained 28.69%, the Dow Jones Industrial AverageSM rose 28.14% and the NASDAQ Composite® Index advanced 50.77%. Small-cap stocks led the charge, particularly lower-quality issues in cyclical industries such as biotechnology and the Internet. As a result, the Russell 2000® Index had its best calendar year ever, climbing 47.25%. The start of the year gave little indication of the strong performance to come, as the hangover of corporate governance scandals and an impending war with Iraq clouded the outlook for 2003. However, investors were encouraged by solid gross domestic product (GDP) growth in the first two quarters of 2003, and what seemed to be a quick resolution to the Iraqi conflict. Federal tax cuts and a boom in mortgage refinancing further boosted the markets and put more discretionary income in consumers' pockets. In the third quarter, GDP growth grew 8.2%, its highest level since 1984.
For the 12 months ending December 31, 2003, the fund outperformed the 21.81% return for the Goldman Sachs® Utilities Index, and modestly trailed the 28.69% return of the S&P 500®. Strong stock selection, particularly in the electric utilities, telecommunications equipment and wireless telecommunications areas, helped the fund beat its sector benchmark. As the economy improved, the fund's biggest gains came from turnaround names - companies with improved balance sheets and stabilized business prospects. Top performers included turnarounds such as AES, which provides wholesale and regulated electric services, and American Tower, which sells tower services to the wireless companies. The fund lagged the broad market rally, however, as investors moved away from utilities stocks and toward sectors tied more closely to an improving economy. The biggest detractor from performance relative to the index was FirstEnergy, a large regulated Midwest utility whose stock price tumbled in the wake of last summer's Northeast blackout, but later began a comeback. Verizon Communications faltered from an unfavorable regulatory environment and a recent contract settlement with employees.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Fidelity Variable Insurance Products: Telecommunications & Utilities Growth Portfolio
Investment Summary
Top Five Stocks as of December 31, 2003 |
| % of fund's
net assets |
SBC Communications, Inc. | 10.5 |
Verizon Communications, Inc. | 9.8 |
BellSouth Corp. | 9.8 |
Nextel Communications, Inc. Class A | 7.0 |
TXU Corp. | 5.5 |
| 42.6 |
Top Industries as of December 31, 2003 |
% of fund's net assets |
| Diversified Telecommunication Services | 39.0% | |
| Electric Utilities | 33.2% | |
| Wireless Telecommunication Services | 12.8% | |
| Multi-Utilities & Unregulated Power | 8.8% | |
| Gas Utilities | 3.1% | |
| All Others* | 3.1% | |
* Includes short-term investments and net other assets. |
Annual Report
Fidelity Variable Insurance Products: Telecommunications & Utilities Growth Portfolio
Investments December 31, 2003
Showing Percentage of Net Assets
Common Stocks - 99.4% |
| Shares | | Value (Note 1) |
CONSTRUCTION & ENGINEERING - 0.5% |
Construction & Engineering - 0.5% |
Dycom Industries, Inc. (a) | 1,980 | | $ 53,104 |
DIVERSIFIED TELECOMMUNICATION SERVICES - 39.0% |
Integrated Telecommunication Services - 39.0% |
ALLTEL Corp. | 1,210 | | 56,362 |
BellSouth Corp. | 40,430 | | 1,144,169 |
CenturyTel, Inc. | 6,350 | | 207,137 |
Citizens Communications Co. (a) | 41,130 | | 510,835 |
Qwest Communications International, Inc. (a) | 63,770 | | 275,486 |
SBC Communications, Inc. | 47,010 | | 1,225,549 |
Verizon Communications, Inc. | 32,660 | | 1,145,713 |
| | 4,565,251 |
ELECTRIC UTILITIES - 33.2% |
Electric Utilities - 33.2% |
Allegheny Energy, Inc. (a) | 7,900 | | 100,804 |
Ameren Corp. | 6,770 | | 311,420 |
Dominion Resources, Inc. | 7,370 | | 470,427 |
Edison International | 8,520 | | 186,844 |
Entergy Corp. | 4,100 | | 234,233 |
Exelon Corp. | 2,570 | | 170,545 |
FirstEnergy Corp. | 16,320 | | 574,464 |
FPL Group, Inc. | 600 | | 39,252 |
PG&E Corp. (a) | 17,300 | | 480,421 |
PPL Corp. | 4,400 | | 192,500 |
TXU Corp. | 27,240 | | 646,133 |
Wisconsin Energy Corp. | 10,720 | | 358,584 |
Xcel Energy, Inc. | 6,600 | | 112,068 |
| | 3,877,695 |
GAS UTILITIES - 3.1% |
Gas Utilities - 3.1% |
KeySpan Corp. | 7,240 | | 266,432 |
NiSource, Inc. | 2,900 | | 63,626 |
Sempra Energy | 140 | | 4,208 |
Southern Union Co. | 1,630 | | 29,992 |
| | 364,258 |
MEDIA - 1.5% |
Broadcasting & Cable TV - 1.5% |
Hughes Electronics Corp. (a) | 10,883 | | 180,114 |
MULTI-UTILITIES & UNREGULATED POWER - 8.8% |
Multi-Utilities & Unregulated Power - 8.8% |
AES Corp. (a) | 18,150 | | 171,336 |
Constellation Energy Group, Inc. | 4,390 | | 171,912 |
Energen Corp. | 820 | | 33,645 |
Equitable Resources, Inc. | 3,000 | | 128,760 |
MDU Resources Group, Inc. | 2,710 | | 64,525 |
|
| Shares | | Value (Note 1) |
SCANA Corp. | 10,030 | | $ 343,528 |
Sierra Pacific Resources (a) | 16,150 | | 118,541 |
| | 1,032,247 |
WATER UTILITIES - 0.5% |
Water Utilities - 0.5% |
Philadelphia Suburban Corp. | 2,587 | | 57,173 |
WIRELESS TELECOMMUNICATION SERVICES - 12.8% |
Wireless Telecommunication Services - 12.8% |
American Tower Corp. Class A (a) | 39,310 | | 425,334 |
Crown Castle International Corp. (a) | 11,090 | | 122,323 |
Nextel Communications, Inc. Class A (a) | 29,220 | | 819,913 |
SpectraSite, Inc. (a) | 3,500 | | 121,625 |
Vodafone Group PLC sponsored ADR | 500 | | 12,520 |
| | 1,501,715 |
TOTAL COMMON STOCKS (Cost $9,872,541) | 11,631,557 |
Money Market Funds - 0.8% |
| | | |
Fidelity Cash Central Fund, 1.07% (b)
(Cost $87,666) | 87,666 | | 87,666 |
TOTAL INVESTMENT PORTFOLIO - 100.2% (Cost $9,960,207) | | 11,719,223 |
NET OTHER ASSETS - (0.2)% | | (19,230) |
NET ASSETS - 100% | $ 11,699,993 |
Legend |
(a) Non-income producing |
(b) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $14,624,830 and $12,950,001, respectively. |
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 $860 for the period. |
Income Tax Information |
At December 31, 2003, the fund had a capital loss carryforward of approximately $3,435,000 of which $167,000, $2,939,000 and $329,000 will expire on December 31, 2009, 2010 and 2011, respectively. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Variable Insurance Products: Telecommunications & Utilities Growth Portfolio
Financial Statements
Statement of Assets and Liabilities
| December 31, 2003 |
| | |
Assets | | |
Investment in securities, at value (cost $9,960,207) - See accompanying schedule | | $ 11,719,223 |
Receivable for investments sold | | 310,453 |
Receivable for fund shares sold | | 27,002 |
Dividends receivable | | 10,659 |
Interest receivable | | 336 |
Prepaid expenses | | 79 |
Receivable from investment adviser for expense reductions | | 8,915 |
Other receivables | | 1,826 |
Total assets | | 12,078,493 |
| | |
Liabilities | | |
Payable for investments purchased | $ 345,102 | |
Payable for fund shares redeemed | 272 | |
Accrued management fee | 5,535 | |
Other affiliated payables | 5,663 | |
Other payables and accrued expenses | 21,928 | |
Total liabilities | | 378,500 |
| | |
Net Assets | | $ 11,699,993 |
Net Assets consist of: | | |
Paid in capital | | $ 13,531,820 |
Undistributed net investment income | | 855 |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | | (3,591,698) |
Net unrealized appreciation (depreciation) on investments | | 1,759,016 |
Net Assets, for 1,577,220 shares outstanding | | $ 11,699,993 |
Net Asset Value, offering price and redemption price per share ($11,699,993 ÷ 1,577,220 shares) | | $ 7.42 |
Statement of Operations
| Year ended December 31, 2003 |
| | |
Investment Income | | |
Dividends | | $ 282,078 |
Interest | | 3,617 |
Total income | | 285,695 |
| | |
Expenses | | |
Management fee | $ 62,560 | |
Transfer agent fees | 10,049 | |
Accounting fees and expenses | 60,021 | |
Non-interested trustees' compensation | 43 | |
Custodian fees and expenses | 9,130 | |
Audit | 41,515 | |
Legal | 435 | |
Miscellaneous | 1,007 | |
Total expenses before reductions | 184,760 | |
Expense reductions | (27,387) | 157,373 |
Net investment income (loss) | | 128,322 |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | | |
Investment securities | (15,293) | |
Foreign currency transactions | (486) | |
Total net realized gain (loss) | | (15,779) |
Change in net unrealized appreciation (depreciation) on: Investment securities | 2,009,224 | |
Assets and liabilities in foreign currencies | 3 | |
Total change in net unrealized appreciation (depreciation) | | 2,009,227 |
Net gain (loss) | | 1,993,448 |
Net increase (decrease) in net assets resulting from operations | | $ 2,121,770 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Variable Insurance Products: Telecommunications & Utilities Growth Portfolio
Financial Statements - continued
Statement of Changes in Net Assets
| Year ended
December 31,
2003 | Year ended
December 31,
2002 |
Increase (Decrease) in Net Assets | | |
Operations | | |
Net investment income (loss) | $ 128,322 | $ 104,744 |
Net realized gain (loss) | (15,779) | (3,175,222) |
Change in net unrealized appreciation (depreciation) | 2,009,227 | 42,739 |
Net increase (decrease) in net assets resulting from operations | 2,121,770 | (3,027,739) |
Distributions to shareholders from net investment income | (127,557) | (106,814) |
Share transactions
Net proceeds from sales of shares | 8,094,462 | 5,259,678 |
Reinvestment of distributions | 127,557 | 106,814 |
Cost of shares redeemed | (6,820,171) | (3,811,465) |
Net increase (decrease) in net assets resulting from share transactions | 1,401,848 | 1,555,027 |
Redemption fees | 34,040 | 16,809 |
Total increase (decrease) in net assets | 3,430,101 | (1,562,717) |
| | |
Net Assets | | |
Beginning of period | 8,269,892 | 9,832,609 |
End of period (including undistributed net investment income of $855 and undistributed net investment income of $474, respectively) | $ 11,699,993 | $ 8,269,892 |
Other Information Shares | | |
Sold | 1,219,470 | 802,804 |
Issued in reinvestment of distributions | 18,115 | 17,555 |
Redeemed | (1,050,360) | (574,286) |
Net increase (decrease) | 187,225 | 246,073 |
Financial Highlights
Years ended December 31, | 2003 | 2002 | 2001F |
Selected Per-Share Data | | | |
Net asset value, beginning of period | $ 5.95 | $ 8.60 | $ 10.00 |
Income from Investment Operations | | | |
Net investment income (loss)E | .08 | .09 | .02 |
Net realized and unrealized gain (loss) | 1.45 | (2.67) | (1.42) |
Total from investment operations | 1.53 | (2.58) | (1.40) |
Distributions from net investment income | (.08) | (.08) | (.01) |
Redemption fees added to paid in capitalE | .02 | .01 | .01 |
Net asset value, end of period | $ 7.42 | $ 5.95 | $ 8.60 |
Total ReturnB,C,D | 26.17% | (29.91)% | (13.90)% |
Ratios to Average Net AssetsG | | | |
Expenses before expense reductions | 1.71% | 1.82% | 2.35%A |
Expenses net of voluntary waivers, if any | 1.50% | 1.50% | 1.50%A |
Expenses net of all reductions | 1.46% | 1.39% | 1.49%A |
Net investment income (loss) | 1.19% | 1.30% | .45%A |
Supplemental Data | | | |
Net assets, end of period (000 omitted) | $ 11,700 | $ 8,270 | $ 9,833 |
Portfolio turnover rate | 123% | 154% | 85%A |
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 19, 2001 (commencement of operations) to December 31, 2001.
G Expense ratios reflect operating expenses of the fund. 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 fund 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 any voluntary 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 fund.
See accompanying notes which are an integral part of the financial statements.
Telecommunications & Utilities Growth Portfolio
Notes to Financial Statements
For the period ended December 31, 2003
1. Significant Accounting Policies.
Consumer Industries Portfolio, Cyclical Industries Portfolio, Financial Services Portfolio, Health Care Portfolio, Natural Resources Portfolio, Technology Portfolio, and Telecommunications & Utilities Growth Portfolio (the funds) are funds of Variable Insurance Products Fund IV (the trust) and are registered under the Investment Company Act of 1940, as amended (the 1940 Act), as open-end management investment companies organized as a Massachusetts business trust. Each fund is authorized to issue an unlimited number of shares. Shares of each fund may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts. Each fund offers Initial Class shares.
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 funds:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Foreign Currency. Certain funds may use 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. 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 funds are informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Financial Services Portfolio estimates the components of distributions received from Real Estate Investment Trusts (REITs). Distributions received in excess of income are recorded as a reduction of cost of investments and/or as a realized gain. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of each trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Income Tax Information and Distributions to Shareholders. Each year, each fund intends to qualify as a regulated investment company by distributing all of their 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 each 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 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 and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to short-term capital gains, foreign currency transactions, passive foreign investment companies (PFIC), partnerships, non-taxable dividends, net operating losses, capital loss carryforwards and losses deferred due to wash sales and excise tax regulations.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows for each fund:
| Cost for Federal
Income Tax
Purposes | Unrealized
Appreciation | Unrealized
Depreciation | Net Unrealized
Appreciation/
(Depreciation) |
Consumer Industries | $ 9,533,256 | $ 1,512,934 | $ (94,597) | $ 1,418,337 |
Cyclical Industries | 18,512,721 | 2,896,512 | (439,895) | 2,456,617 |
Financial Services | 34,346,606 | 8,257,941 | (245,605) | 8,012,336 |
Health Care | 47,733,568 | 6,670,633 | (1,646,637) | 5,023,996 |
Natural Resources | 28,463,567 | 4,501,002 | (290,765) | 4,210,237 |
Technology | 153,915,386 | 27,451,798 | (3,234,020) | 24,217,778 |
Telecommunications & Utilities Growth | 10,117,099 | 1,968,838 | (366,714) | 1,602,124 |
| Undistributed
Ordinary Income | Capital Loss
Carryforward |
Consumer Industries | $ - | $ (2,870,751) |
Cyclical Industries | - | (1,948,895) |
Financial Services | - | (4,746,413) |
Health Care | 163,987 | (9,086,158) |
Natural Resources | - | (4,286,929) |
Technology | - | (6,961,194) |
Telecommunications & Utilities Growth | 855 | (3,434,805) |
The tax character of distributions paid was as follows:
| December 31, 2003 | |
| Ordinary Income | |
Cyclical Industries | $ 33,211 | |
Financial Services | 403,705 | |
Natural Resources | 118,735 | |
Telecommunications & Utilities Growth | 127,557 | |
| December 31, 2002 | |
| Ordinary Income | |
Consumer Industries | $ 9,222 | |
Cyclical Industries | 12,250 | |
Financial Services | 408,632 | |
Health Care | 235,835 | |
Natural Resources | 158,232 | |
Telecommunications & Utilities Growth | 106,814 | |
Short-Term Trading (Redemption) Fees. Shares held in the funds less than 60 days are subject to a short-term trading fee equal to 1.00% of the proceeds of the redeemed shares. These fees, which are retained by the funds, are accounted for as an addition to paid in capital.
2. Operating Policies.
Repurchase Agreements. Fidelity Management & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the funds and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. Certain funds may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
Annual Report
2. Operating Policies - continued
Delayed Delivery Transactions and When-Issued Securities. Each fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in each applicable fund's Schedule of Investments. Each fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, each fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract's terms, or if the issuer does not issue the securities due to political, economic, or other factors.
3. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of each applicable fund's Schedule of Investments. Financial Services Portfolio realized a gain on the sale of an investment not meeting the investment restrictions of the fund.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the funds with investment management related services for which the funds pay a monthly management fee. The management fee is the sum of an individual fund fee rate and a group fee rate. The individual fund fee rate is applied to each fund's average net assets. 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, each fund's annual management fee rate expressed as a percentage of each fund's average net assets was as follows:
| Individual Rate | Group Rate | Total |
Consumer Industries | .30% | .28% | .58% |
Cyclical Industries | .30% | .28% | .58% |
Financial Services | .30% | .28% | .58% |
Health Care | .30% | .28% | .58% |
Natural Resources | .30% | .28% | .58% |
Technology | .30% | .28% | .58% |
Telecommunications & Utilities Growth | .30% | .28% | .58% |
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 asset-based fees with respect to each account. FIIOC pays a portion of the expenses related to the typesetting, printing and mailing of all shareholder reports, except proxy statements. Each fund pays a transfer agent fee, excluding out-of-pocket expenses, equal to an annual rate of .07% of their month end net assets.
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains each fund's accounting records and administers the security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Central Funds. The funds may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the funds are recorded as income in the accompanying financial statements. Distributions from the Central Funds are noted in the table below:
| Income
Distributions | |
Consumer Industries | $ 4,832 | |
Cyclical Industries | 4,339 | |
Financial Services | 4,427 | |
Health Care | 12,625 | |
Natural Resources | 5,478 | |
Technology | 56,705 | |
Telecommunications & Utilities Growth | 3,582 | |
Annual Report
Notes to Financial Statements - continued
Brokerage Commissions. Certain funds placed a portion of their portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms are shown under the caption "Other Information" at the end of each applicable fund's Schedule of Investments.
5. Committed Line of Credit.
Certain funds participate with other funds managed by FMR in a $3.5 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 funds have agreed to pay commitment fees on their pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.
6. Security Lending.
Certain funds lend portfolio securities from time to time in order to earn additional income. Each applicable fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the funds and any additional required collateral is delivered to the funds on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Cash collateral is invested in cash equivalents. The value of loaned securities and cash collateral at period end are disclosed on each applicable fund's Statement of Assets and Liabilities.
7. Expense Reductions.
FMR agreed to reimburse certain funds to the extent operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
| Expense
Limitations | Reimbursement
from adviser |
| | |
Consumer Industries | 1.50% | $ 23,095 |
Cyclical Industries | 1.50% | 33,410 |
Telecommunications & Utilities Growth | 1.50% | 22,603 |
Many of the brokers with whom FMR places trades on behalf of certain funds provided services to these funds in addition to trade execution. These services included payments of expenses on behalf of each applicable fund.
| Brokerage Service
Arrangements | |
| | |
Consumer Industries | $ 4,284 | |
Cyclical Industries | 2,790 | |
Financial Services | 5,702 | |
Health Care | 17,794 | |
Natural Resources | 2,337 | |
Technology | 62,185 | |
Telecommunications & Utilities Growth | 4,784 | |
8. Other Information.
At the end of the period, FMR or its affiliates were owners of record of more than 10% of the outstanding shares of the following funds:
| Affiliated % | |
Consumer Industries | 100% | |
Cyclical Industries | 100% | |
Financial Services | 100% | |
Health Care | 100% | |
Natural Resources | 100% | |
Technology | 100% | |
Telecommunications & Utilities Growth | 100% | |
Annual Report
Report of Independent Auditors
To the Trustees of Variable Insurance Products Fund IV and the Shareholders of Consumer Industries Portfolio, Cyclical Industries Portfolio, Financial Services Portfolio, Health Care Portfolio, Natural Resources Portfolio, Technology Portfolio and Telecommunications & Utilities Growth Portfolio:
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Consumer Industries Portfolio, Cyclical Industries Portfolio, Financial Services Portfolio, Health Care Portfolio, Natural Resources Portfolio, Technology Portfolio and Telecommunications & Utilities Growth Portfolio (funds of Variable Insurance Products Fund IV) at December 31, 2003 and the results of their operations, the changes in their net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Variable Insurance Product Fund IV's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 13, 2004
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and funds, as applicable, are listed below. The Board of Trustees governs each fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee each fund's activities, review contractual arrangements with companies that provide services to each fund, and review each fund's performance. Except for William O. McCoy, each of the Trustees oversees 292 funds advised by FMR or an affiliate. Mr. McCoy oversees 294 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The funds' Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-221-5207.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation |
Edward C. Johnson 3d (73)** |
| Year of Election or Appointment: 1983 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. |
Abigail P. Johnson (42)** |
| Year of Election or Appointment: 2001 Senior Vice President of VIP Consumer Industries (2001), VIP Cyclical Industries (2001), VIP Financial Services (2001), VIP Health Care (2001), VIP Natural Resources (2001), VIP Technology (2001), and VIP Telecommunications & Utilities Growth (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. |
Laura B. Cronin (49) |
| Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). |
Robert L. Reynolds (51) |
| Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation |
J. Michael Cook (61) |
| Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000), and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. |
Ralph F. Cox (71) |
| Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. |
Robert M. Gates (60) |
| Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. |
George H. Heilmeier (67) |
| Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). |
Donald J. Kirk (71) |
| Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). |
Marie L. Knowles (57) |
| Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. |
Ned C. Lautenbach (59) |
| Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. |
Marvin L. Mann (70) |
| Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. |
William O. McCoy (70) |
| Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). |
William S. Stavropoulos (64) |
| Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Ms. Small may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation |
Peter S. Lynch (60) |
| Year of Election or Appointment: 2003 Member of the Advisory Board of Variable Insurance Products Fund IV. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. |
Cornelia M. Small (59) |
| Year of Election or Appointment: 2004 Member of the Advisory Board of Variable Insurance Products Fund IV. Ms. Small is a member (2000) and Chairperson (2002) of the Investment Committee, and a member (2002) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors (1998-1999) of Scudder Kemper Investments. In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. |
Eric D. Roiter (55) |
| Year of Election or Appointment: 2001 Secretary of VIP Consumer Industries, VIP Cyclical Industries, VIP Financial Services, VIP Health Care, VIP Natural Resources, VIP Technology, and VIP Telecommunications & Utilities Growth. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). |
Stuart Fross (44) |
| Year of Election or Appointment: 2003 Assistant Secretary of VIP Consumer Industries, VIP Cyclical Industries, VIP Financial Services, VIP Health Care, VIP Natural Resources, VIP Technology, and VIP Telecommunications & Utilities Growth. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. |
Maria F. Dwyer (45) |
| Year of Election or Appointment: 2002 President and Treasurer of VIP Consumer Industries, VIP Cyclical Industries, VIP Financial Services, VIP Health Care, VIP Natural Resources, VIP Technology, and VIP Telecommunications & Utilities Growth. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. |
Timothy F. Hayes (53) |
| Year of Election or Appointment: 2002 Chief Financial Officer of VIP Consumer Industries, VIP Cyclical Industries, VIP Financial Services, VIP Health Care, VIP Natural Resources, VIP Technology, and VIP Telecommunications & Utilities Growth. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). |
John R. Hebble (45) |
| Year of Election or Appointment: 2003 Deputy Treasurer of VIP Consumer Industries, VIP Cyclical Industries, VIP Financial Services, VIP Health Care, VIP Natural Resources, VIP Technology, and VIP Telecommunications & Utilities Growth. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). |
John H. Costello (57) |
| Year of Election or Appointment: 2001 Assistant Treasurer of VIP Consumer Industries, VIP Cyclical Industries, VIP Financial Services, VIP Health Care, VIP Natural Resources, VIP Technology, and VIP Telecommunications & Utilities Growth. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. |
Francis V. Knox, Jr. (56) |
| Year of Election or Appointment: 2002 Assistant Treasurer of VIP Consumer Industries, VIP Cyclical Industries, VIP Financial Services, VIP Health Care, VIP Natural Resources, VIP Technology, and VIP Telecommunications & Utilities Growth. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). |
Mark Osterheld (48) |
| Year of Election or Appointment: 2002 Assistant Treasurer of VIP Consumer Industries, VIP Cyclical Industries, VIP Financial Services, VIP Health Care, VIP Natural Resources, VIP Technology, and VIP Telecommunications & Utilities Growth. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. |
Thomas J. Simpson (45) |
| Year of Election or Appointment: 2001 Assistant Treasurer of VIP Consumer Industries, VIP Cyclical Industries, VIP Financial Services, VIP Health Care, VIP Natural Resources, VIP Technology, and VIP Telecommunications & Utilities Growth. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). |
Annual Report
Distributions
A percentage of the dividends distributed during the fiscal year for the following funds qualifies for the dividends-received deduction for corporate shareholders:
Natural Resources | 100% |
Telecommunications & Utilities Growth | 100% |
The funds will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
Annual Report
Annual Report
Annual Report
Annual Report
Annual Report
Annual Report
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research (U.K.) Inc.
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 Shareholder Servicing Agent
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodians
JPMorgan Chase Bank
New York, NY
State Street Bank & Trust Co.
Quincy, MA
VIPFCI-ANN-0204
1.768901.102
Item 2. Code of Ethics
As of the end of the period, December 31, 2003, Variable Insurance Products Fund IV (the trust) has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its President and Treasurer and its Chief Financial Officer. A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
Item 3. Audit Committee Financial Expert
The Board of Trustees of the trust has determined that Marie L. Knowles and Donald J. Kirk are each audit committee financial experts, as defined in Item 3 of Form N-CSR. Ms. Knowles and Mr. Kirk are each independent for purposes of Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services
a) Audit Fees.
For the fiscal years ended December 31, 2003 and December 31, 2002, the aggregate Audit Fees billed by PricewaterhouseCoopers LLP (PwC) for professional services rendered for the audits of the financial statements, or services that are normally provided in connection with statutory and regulatory filings or engagements for those fiscal years, for Consumer Industries Portfolio, Cyclical Industries Portfolio, Financial Services Portfolio, Growth Stock Portfolio, Health Care Portfolio, Natural Resources Portfolio, Real Estate Portfolio, Strategic Income Portfolio, Technology Portfolio, Telecommunications & Utilities Growth Portfolio, and Value Leaders Portfolio (the funds) and for all funds in the Fidelity Group of Funds are shown in the table below.
Fund | 2003A | 2002A |
Consumer Industries Portfolio | $36,000 | $18,000 |
Cyclical Industries Portfolio | $36,000 | $18,000 |
Financial Services Portfolio | $36,000 | $18,000 |
Growth Stock Portfolio | $39,000 | $15,000 |
Health Care Portfolio | $36,000 | $18,000 |
Natural Resources Portfolio | $36,000 | $18,000 |
Real Estate Portfolio | $39,000 | $15,000 |
Strategic Income Portfolio | $20,000 | $0 |
Technology Portfolio | $36,000 | $18,000 |
Telecommunications & Utilities Growth Portfolio | $36,000 | $18,000 |
Value Leaders Portfolio | $37,000 | $0 |
All funds in the Fidelity Group of Funds audited by PwC | $10,600,000 | $7,900,000 |
A | Aggregate amounts may reflect rounding. |
(b) Audit-Related Fees.
In each of the fiscal years ended December 31, 2003 and December 31, 2002, the aggregate Audit-Related Fees billed by PwC for services rendered for assurance and related services to each fund that are reasonably related to the performance of the audit or review of the fund's financial statements, but not reported as Audit Fees, are shown in the table below.
Fund | 2003A, B | 2002 A, B |
Consumer Industries Portfolio | $0 | $0 |
Cyclical Industries Portfolio | $0 | $0 |
Financial Services Portfolio | $0 | $0 |
Growth Stock Portfolio | $0 | $0 |
Health Care Portfolio | $0 | $0 |
Natural Resources Portfolio | $0 | $0 |
Real Estate Portfolio | $0 | $0 |
Strategic Income Portfolio | $0 | $0 |
Technology Portfolio | $0 | $0 |
Telecommunications & Utilities Growth Portfolio | $0 | $0 |
Value Leaders Portfolio | $0 | $0 |
A | Aggregate amounts may reflect rounding. |
B | Includes amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time. |
In each of the fiscal years ended December 31, 2003 and December 31, 2002, the aggregate Audit-Related Fees that were billed by PwC that were required to be approved by the Audit Committee for services rendered on behalf of Fidelity Management & Research Company (FMR) and entities controlling, controlled by, or under common control with FMR (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the funds ("Fund Service Providers") for assurance and related services that relate directly to the operations and financial reporting of each fund that are reasonably related to the performance of the audit or review of the fund's financial statements, but not reported as Audit Fees, are shown in the table below.
Billed By | 2003 A, B | 2002A, B |
PwC | $50,000 | $0 |
A | Aggregate amounts may reflect rounding. |
B | Includes amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time. |
Fees included in the audit-related category comprise assurance and related services (e.g., due diligence services) that are traditionally performed by the independent accountant. These audit-related services include due diligence related to mergers and acquisitions, accounting consultations and audits in connection with acquisitions, internal control reviews, attest services that are not required by statute or regulation and consultation concerning financial accounting and reporting standards.
(c) Tax Fees.
In each of the fiscal years ended December 31, 2003 and December 31, 2002, the aggregate Tax Fees billed by PwC for professional services rendered for tax compliance, tax advice, and tax planning for each fund is shown in the table below.
Fund | 2003A, B | 2002A, B |
Consumer Industries Portfolio | $1,600 | $1,500 |
Cyclical Industries Portfolio | $1,600 | $1,500 |
Financial Services Portfolio | $1,600 | $1,500 |
Growth Stock Portfolio | $2,000 | $2,000 |
Health Care Portfolio | $1,600 | $1,500 |
Natural Resources Portfolio | $1,600 | $1,500 |
Real Estate Portfolio | $2,000 | $2,000 |
Strategic Income Portfolio | $2,200 | $0 |
Technology Portfolio | $1,600 | $1,500 |
Telecommunications & Utilities Growth Portfolio | $1,600 | $1,500 |
Value Leaders Portfolio | $2,000 | $0 |
A | Aggregate amounts may reflect rounding. |
B | Includes amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time. |
In each of the fiscal years ended December 31, 2003 and December 31, 2002, the aggregate Tax Fees billed by PwC that were required to be approved by the Audit Committee for professional services rendered on behalf of the Fund Service Providers for tax compliance, tax advice, and tax planning that relate directly to the operations and financial reporting of each fund is shown in the table below.
Billed By | 2003A, B | 2002A, B |
PwC | $0 | $0 |
A | Aggregate amounts may reflect rounding. |
B | Includes amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time. |
Fees included in the Tax Fees category comprise all services performed by professional staff in the independent accountant's tax division except those services related to the audit. Typically, this category would include fees for tax compliance, tax planning, and tax advice. Tax compliance, tax advice, and tax planning services include preparation of original and amended tax returns, claims for refund and tax payment-planning services, assistance with tax audits and appeals, tax advice related to mergers and acquisitions and requests for rulings or technical advice from taxing authorities.
(d) All Other Fees.
In each of the fiscal years ended December 31, 2003 and December 31, 2002, the aggregate Other Fees billed by PwC for all other non-audit services rendered to the funds is shown in the table below.
Fund | 2003A, B | 2002A, B |
Consumer Industries Portfolio | $1,200 | $1,000 |
Cyclical Industries Portfolio | $1,200 | $1,000 |
Financial Services Portfolio | $1,200 | $1,100 |
Growth Stock Portfolio | $1,200 | $0 |
Health Care Portfolio | $1,200 | $1,100 |
Natural Resources Portfolio | $1,200 | $1,000 |
Real Estate Portfolio | $1,200 | $0 |
Strategic Income Portfolio | $0 | $0 |
Technology Portfolio | $1,200 | $1,100 |
Telecommunications & Utilities Growth Portfolio | $1,200 | $1,000 |
Value Leaders Portfolio | $500 | $0 |
A | Aggregate amounts may reflect rounding. |
B | Includes amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time. |
In each of the fiscal years ended December 31, 2003 and December 31, 2002, the aggregate Other Fees billed by PwC that were required to be approved by the Audit Committee for all other non-audit services rendered on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each fund is shown in the table below.
Billed By | 2003A, B | 2002A, B |
PwC | $190,000 | $150,000 |
A | Aggregate amounts may reflect rounding. |
B | Includes amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time. |
Fees included in the All Other Fees category include services related to internal control reviews, strategy and other consulting, financial information systems design and implementation, consulting on other information systems, and other tax services unrelated to the fund.
(e) (1) | Audit Committee Pre-Approval Policies and Procedures: |
The trust's Audit Committee must pre-approve all audit and non-audit services provided by the independent accountant relating to the operations or financial reporting of the funds. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.
The trust's Audit Committee has adopted policies and procedures to, among other purposes, provide a framework for the Committee's consideration of non-audit services by the audit firms that audit the Fidelity funds. The policies and procedures require that any non-audit service provided by a fund audit firm to a Fidelity Fund and any non-audit service provided by a fund auditor to a Fund Service Provider that relates directly to the operations and financial reporting of a Fidelity fund (Covered Service) are subject to approval by the Audit Committee before such service is provided. Non-audit services provided by a fund audit firm for a Fund Service Provider that do not relate directly to the operations and financial reporting of a Fidelity fund (Non-Covered Service) but that are expected to exceed $50,000 are also subject to pre-approval by the Audit Committee.
All Covered Services, as well as Non-Covered Services that are expected to exceed $50,000, must be approved in advance of provision of the service either: (i) by formal resolution of the Audit Committee, or (ii) by oral or written approval of the service by the Chair of the Audit Committee (or if the Chair is unavailable, such other member of the Audit Committee as may be designated by the Audit Committee to act in the Chair's absence). The approval contemplated by (ii) above is permitted where the Treasurer determines that action on such an engagement is necessary before the next meeting of the Audit Committee. Neither pre-approval nor advance notice of Non-Covered Service engagements for which fees are not expected to exceed $50,000 is required; such engagements are to be reported to the Audit Committee monthly.
(e) (2) | Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X: |
Audit-Related Fees:
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended December 31, 2003 and December 31, 2002 on behalf of each fund. These percentages include amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time.
There were no amounts that were required to be approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended December 31, 2003 and December 31, 2002 on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each fund. These percentages include amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time.
Tax Fees:
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended December 31, 2003 and December 31, 2002 on behalf of each fund. These percentages include amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time.
There were no amounts that were required to be approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended December 31, 2003 and December 31, 2002 on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each fund. These percentages include amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time.
All Other Fees:
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended December 31, 2003 and December 31, 2002 on behalf of each fund. These percentages include amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time.
There were no amounts that were required to be approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended December 31, 2003 and December 31, 2002 on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each fund. These percentages include amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time.
(f) According to PwC for the fiscal year ended December 31, 2003, the percentage of hours spent on the audit of each fund's financial statements for the most recent fiscal year that were attributed to work performed by persons who are not full-time, permanent employees of PwC is as follows:
Fund | 2003 |
Consumer Industries Portfolio | 0% |
Cyclical Industries Portfolio | 0% |
Financial Services Portfolio | 0% |
Growth Stock Portfolio | 0% |
Health Care Portfolio | 0% |
Natural Resources Portfolio | 0% |
Real Estate Portfolio | 0% |
Strategic Income Portfolio | 0% |
Technology Portfolio | 0% |
Telecommunications & Utilities Growth Portfolio | 0% |
Value Leaders Portfolio | 0% |
(g) For the fiscal years ended December 31, 2003 and December 31, 2002, the aggregate fees billed by PwC of $1,950,000A and $1,600,000A for non-audit services rendered on behalf of the funds, FMR (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and Fund Service Providers relating to Covered Services and Non-Covered Services are shown in the table below.
| 2003A | 2002A |
Covered Services | $300,000 | $200,000 |
Non-Covered Services | $1,650,000 | $1,400,000 |
A | Aggregate amounts may reflect rounding. |
(h) The trust's Audit Committee has considered Non-Covered Services that were not pre-approved that were provided by PwC to Fund Service Providers to be compatible with maintaining the independence of PwC in its audit of the funds, taking into account representations from PwC, in accordance with Independence Standards Board Standard No.1, regarding its independence from the funds and their related entities.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Reserved
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Reserved
Item 9. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 10. Controls and Procedures
(a)(i) The President and Treasurer and the Chief Financial Officer have concluded that the trust's 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 trust 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 trust's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the trust's second fiscal half-year that has materially affected, or is reasonably likely to materially affect, the trust's internal control over financial reporting.
Item 11. Exhibits
(a) | (1) | Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. |
(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. |
(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 IV
By: | /s/Maria Dwyer |
| Maria Dwyer |
| President and Treasurer |
| |
Date: | February 23, 2004 |
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/Maria Dwyer |
| Maria Dwyer |
| President and Treasurer |
| |
Date: | February 23, 2004 |
By: | /s/Timothy F. Hayes |
| Timothy F. Hayes |
| Chief Financial Officer |
| |
Date: | February 23, 2004 |
