SUPPLEMENT TO THE
VARIABLE INSURANCE PRODUCTS FUND:
MONEY MARKET PORTFOLIO, HIGH INCOME PORTFOLIO,
EQUITY-INCOME PORTFOLIO,
GROWTH PORTFOLIO, AND OVERSEAS PORTFOLIO
VARIABLE INSURANCE PRODUCTS FUND II:
INVESTMENT GRADE BOND PORTFOLIO, ASSET MANAGER PORTFOLIO,
ASSET MANAGER: GROWTH PORTFOLIO, INDEX 500 PORTFOLIO,
AND CONTRAFUND PORTFOLIO
VARIABLE INSURANCE PRODUCTS FUND III:
BALANCED PORTFOLIO, GROWTH & INCOME PORTFOLIO,
GROWTH OPPORTUNITIES PORTFOLIO, AND MID CAP PORTFOLIO
INITIAL CLASS AND SERVICE CLASS
APRIL 30, 1999
STATEMENT OF ADDITIONAL INFORMATION
THE ADDITION OF THE FOLLOWING SECTION, "ADDITIONAL PURCHASE,
EXCHANGE AND REDEMPTION INFORMATION," PRECEDES THE "DISTRIBUT IONS
AND TAXES" SECTION UNDER THE HEADING "TABLE OF CONTENTS" ON PAGE 1.
TABLE OF CONTENTS PAGE
Additional Purchase, Exchange 63
And Redemption Information
THE FOLLOWING INFORMATION REPLACES SIMILAR INFORMATION FOUND UNDER THE
HEADING "INVESTMENT LIMITATIONS OF MONEY MARKET PORTFOLIO"IN THE
"INVESTMENT POLICIES AND LIMITATIONS" SECTION BEGINNING ON PAGE 2.
(iv) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party.
(vii) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money up to 15% of
the fund's net assets to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (The limitation does not apply to
purchases of debt securities or to repurchase agreements.)
THE FOLLOWING INFORMATION REPLACES SIMILAR INFORMATION FOUND UNDER THE
HEADING "INVESTMENT LIMITATIONS OF HIGH INCOME, EQUITY-INCOME, GROWTH,
OVERSEAS, GROWTH & INCOME, BALANCED, GROWTH OPPORTUNITIES, INVESTMENT
GRADE BOND, ASSET MANAGER, INDEX 500, CONTRAFUND, ASSET MANAGER:
GROWTH, AND MID CAP PORTFOLIOS'" IN THE "INVESTMENT POLICIES AND
LIMITATIONS" SECTION ON PAGE 4.
(iii) Each fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (3)).
(v) Each fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money up to 15% of
the fund's net assets to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (This limitation does not apply
to purchases of debt securities or to repurchase agreements.)
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION FOR HIGH INCOME
PORTFOLIO FOUND UNDER THE HEADING "INVESTMENT LIMITATIONS OF HIGH
INCOME, EQUITY-INCOME, GROWTH, OVERSEAS, GROWTH & INCOME, BALANCED,
GROWTH OPPORTUNITIES, INVESTMENT GRADE BOND, ASSET MANAGER, INDEX 500,
CONTRAFUND, ASSET MANAGER: GROWTH, AND MID CAP PORTFOLIOS" IN THE
"INVESTMENT POLICIES AND LIMITATIONS" SECTION ON PAGE 4.
For purposes of investing at least 65% of the fund's total assets in
income-producing debt securities, preferred stocks and convertible
securities, FMR interprets "total assets" to exclude collateral
received for securities lending transactions.
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION FOR
EQUITY-INCOME PORTFOLIO FOUND UNDER THE HEADING "INVESTMENT
LIMITATIONS OF HIGH INCOME, EQUITY-INCOME, GROWTH, OVERSEAS, GROWTH &
INCOME, BALANCED, GROWTH OPPORTUNITIES, INVESTMENT GRADE BOND, ASSET
MANAGER, INDEX 500, CONTRAFUND, ASSET MANAGER: GROWTH, AND MID CAP
PORTFOLIOS" IN THE "INVESTMENT POLICIES AND LIMITATIONS" SECTION ON
PAGE 4.
For purposes of investing at least 65% of the fund's total assets in
income-producing equity securities, FMR interprets "total assets" to
exclude collateral received for securities lending transactions.
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION FOR OVERSEAS
PORTFOLIO FOUND UNDER THE HEADING "INVESTMENT LIMITATIONS OF HIGH
INCOME, EQUITY-INCOME, GROWTH, OVERSEAS, GROWTH & INCOME, BALANCED,
GROWTH OPPORTUNITIES, INVESTMENT GRADE BOND, ASSET MANAGER, INDEX 500,
CONTRAFUND, ASSET MANAGER: GROWTH, AND MID CAP PORTFOLIOS" IN THE
"INVESTMENT POLICIES AND LIMITATIONS" SECTION ON PAGE 4.
For purposes of investing at least 65% of the fund's total assets in
foreign securities, FMR interprets "total assets" to exclude
collateral received for securities lending transactions.
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION FOR BALANCED
PORTFOLIO FOUND UNDER THE HEADING "INVESTMENT LIMITATIONS OF HIGH
INCOME, EQUITY-INCOME, GROWTH, OVERSEAS, GROWTH & INCOME, BALANCED,
GROWTH OPPORTUNITIES, INVESTMENT GRADE BOND, ASSET MANAGER, INDEX 500,
CONTRAFUND, ASSET MANAGER: GROWTH, AND MID CAP PORTFOLIOS" IN THE
"INVESTMENT POLICIES AND LIMITATIONS" SECTION ON PAGE 4.
For purposes of investing at least 25% of the fund's total assets in
fixed-income senior securities (including debt securities and
preferred stock), FMR interprets "total assets" to exclude collateral
received for securities lending transactions.
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION FOR MID CAP
PORTFOLIO FOUND UNDER THE HEADING "INVESTMENT LIMITATIONS OF HIGH
INCOME, EQUITY-INCOME, GROWTH, OVERSEAS, GROWTH & INCOME, BALANCED,
GROWTH OPPORTUNITIES, INVESTMENT GRADE BOND, ASSET MANAGER, INDEX 500,
CONTRAFUND, ASSET MANAGER: GROWTH, AND MID CAP PORTFOLIOS" IN THE
"INVESTMENT POLICIES AND LIMITATIONS" SECTION ON PAGE 4.
For purposes of investing at least 65% of the fund's total assets in
securities of companies with medium market capitalization, FMR
interprets "total assets" to exclude collateral received for
securities lending transactions.
THE FOLLOWING INFORMATION REPLACES THE PARAGRAPH FOUND UNDER THE
HEADING "SOURCES OF CREDIT OR LIQUIDITY SUPPORT" IN THE"INVESTMENT
POLICIES AND LIMITATIONS" SECTION ON PAGE 15.
SOURCES OF LIQUIDITY OR CREDIT SUPPORT. Issuers may employ various
forms of credit and liquidity enhancements, including letters of
credit, guarantees, puts, and demand features, and insurance provided
by domestic or foreign entities such as banks and other financial
institutions. FMR may rely on its evaluation of the credit of the
liquidity or credit enhancement provider in determining whether to
purchase a security supported by such enhancement. In evaluating the
credit of a foreign bank or other foreign entities, FMR will consider
whether adequate public information about the entity is available and
whether the entity may be subject to unfavorable political or economic
developments, currency controls, or other government restrictions that
might affect its ability to honor its commitment. Changes in the
credit quality of the entity providing the enhancement could affect
the value of the security or a fund's share price.
THE FOLLOWING INFORMATION REPLACES THE TENTH PARAGRAPH FOUND UNDER THE
HEADING "PORTFOLIO TRANSACTIONS" ON PAGE 38.
To the extent permitted by applicable law, FMR (BT for Index 500) is
authorized to allocate portfolio transactions in a manner that takes
into account assistance received in the distribution of shares of the
funds or other Fidelity funds (Index 500) and to use the research
services of brokerage and other firms that have provided such
assistance. FMR (BT for Index 500) may use research services provided
by and place agency transactions with National Financial Services
Corporation (NFSC) and Fidelity Brokerage Services Japan LLC (FBSJ),
indirect subsidiaries of FMR Corp. (and, for Index 500, BT Brokerage
Corporation and BT Futures Corp., indirect subsidiaries of Deutsche
Bank AG), if the commissions are fair, reasonable, and comparable to
commissions charged by non-affiliated, qualified brokerage firms for
similar services. Prior to December 9, 1997, FMR used research
services provided by and placed agency transactions with Fidelity
Brokerage Services (FBS), an indirect subsidiary of FMR Corp.
THE FOLLOWING INFORMATION REPLACES SIMILAR INFORMATION FOUND UNDER
"PERFORMANCE COMPARISONS" IN THE "PERFORMANCE" SECTION ON PAGE 61.
High Income Portfolio may compare its performance to that of the
Merrill Lynch High Yield Master II Index, a market value-weighted
index of all domestic and yankee high-yield bonds, including deferred
interest bonds and payment-in-kind securities. Issues included in the
index have maturities of one year or more and have a credit rating
lower than BBB-/Baa3, but are not in default. Issues must have an
outstanding par value of at least $50 million to be included in the
index.
THE FOLLOWING INFORMATION FOUND IN THE "TRUSTEES AND OFFICERS" SECTION
BEGINNING ON PAGE 63 HAS BEEN REMOVED.
LEONARD M. RUSH (52), Assistant Treasurer (1994), is an employee of
FMR (1994). Prior to becoming Assistant Treasurer of the Fidelity
funds, Mr. Rush was Chief Compliance Officer of FMR Corp. (1993-1994)
and Chief Financial Officer of Fidelity Brokerage Services, Inc.
(1990-1993).
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION FOUND IN THE
"TRUSTEES AND OFFICERS" SECTION BEGINNING ON PAGE 63.
NED C. LAUTENBACH (55), Member of the Advisory Board (1999), has been
a partner of Clayton, Dubilier & Rice, Inc. (private equity investment
firm) since September 1998. Mr. Lautenbach was Senior Vice President
of IBM Corporation from 1992 until his retirement in July 1998. From
1993 to 1995 he was Chairman of IBM World Trade Corporation. He also
was a member of IBM's Corporate Executive Committee from 1994 to July
1998. He is a Director of PPG Industries Inc. (glass, coating and
chemical manufacturer), Dynatech Corporation (global communications
equipment), Eaton Corporation (global manufacturer of highly
engineered products) and ChoicePoint Inc. (data identification,
retrieval, storage, and analysis).
THE ADDITION OF THE FOLLOWING SECTION, "ADDITIONAL PURCHASE,
EXCHANGE AND REDEMPTION INFORMATION," PRECEDES THE "DISTRIBUT IONS
AND TAXES" SECTION ON PAGE 63.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
Under certain circumstances (for example, at the request of a
shareholder), if FMR determines that it is in the best interests of
the fund, a fund may make redemption payments in whole or in part in
readily marketable securities or other property, valued for this
purpose as they are valued in computing each class's NAV. Index 500
Portfolio may make redemption payments "in kind" to a shareholder that
owns 5% or more of its outstanding voting securities pursuant to an
exemptive order issued by the SEC. Shareholders that receive
securities or other property on redemption may realize a gain or loss
for tax purposes, and will incur any costs of sale, as well as the
asso ciated inconveniences.
THE FOLLOWING INFORMATION REPLACES THE COMPENSATION TABLE FOUND IN THE
"TRUSTEES AND OFFICERS" SECTION BEGINNING ON PAGE 67.
The following table sets forth information describing the compensation
of each Trustee and Member of the Advisory Board of each fund for his
or her services for the fiscal year ended December 31, 1998.
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
AGGREGATE COMPENSATION
FROM A Edward C. Johnson 3d** J. Gary Burkhead** Ralph F. Cox Phyllis Burke Davis Robert M. Gates
FUND
Money MarketB $ 0 $ 0 $ 482 $ 476 $ 482
High IncomeB $ 0 $ 0 $ 891 $ 880 $ 892
Equity-IncomeB,C,G $ 0 $ 0 $ 3,902 $ 3,850 $ 3,903
GrowthB,D,G $ 0 $ 0 $ 3,141 $ 3,096 $ 3,139
OverseasB,E,G $ 0 $ 0 $ 740 $ 730 $ 741
Investment Grade BondB $ 0 $ 0 $ 161 $ 159 $ 161
Asset ManagerB,F,G $ 0 $ 0 $ 1,643 $ 1,622 $ 1,644
Index 500B $ 0 $ 0 $ 975 $ 960 $ 974
ContrafundB $ 0 $ 0 $ 1,732 $ 1,707 $ 1,731
Asset Manager: GrowthB $ 0 $ 0 $ 176 $ 174 $ 176
BalancedB $ 0 $ 0 $ 89 $ 88 $ 89
Growth & IncomeB $ 0 $ 0 $ 228 $ 223 $ 227
Growth OpportunitiesB $ 0 $ 0 $ 465 $ 459 $ 465
Mid Cap+B $ 0 $ 0 $ 25 $ 25 $ 25
TOTAL COMPENSATION
FROM THE $ 0 $ 0 $ 223,500 $ 220,500 $ 223,500
FUND COMPLEX*,A
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
AGGREGATE COMPENSATION FROM A E. Bradley Jones Donald J. Kirk Ned C. Lautenbach*** Peter S. Lynch ** William O. McCoy
FUND
Money MarketB $ 478 $ 489 $ 0 $ 0 $ 482
High IncomeB $ 886 $ 904 $ 0 $ 0 $ 892
Equity-IncomeB,C,G $ 3,878 $ 3,955 $ 0 $ 0 $ 3,903
GrowthB,D,G $ 3,117 $ 3,183 $ 0 $ 0 $ 3,139
OverseasB,E,G $ 736 $ 750 $ 0 $ 0 $ 741
Investment Grade BondB $ 160 $ 163 $ 0 $ 0 $ 161
Asset ManagerB,F,G $ 1,633 $ 1,665 $ 0 $ 0 $ 1,644
Index 500B $ 967 $ 988 $ 0 $ 0 $ 974
ContrafundB $ 1,719 $ 1,757 $ 0 $ 0 $ 1,731
Asset Manager: GrowthB $ 175 $ 178 $ 0 $ 0 $ 176
BalancedB $ 89 $ 91 $ 0 $ 0 $ 89
Growth & IncomeB $ 225 $ 231 $ 0 $ 0 $ 227
Growth OpportunitiesB $ 462 $ 472 $ 0 $ 0 $ 465
Mid Cap+B $ 25 $ 25 $ 0 $ 0 $ 25
TOTAL COMPENSATION FROM THE $ 222,000 $ 226,500 $ 0 $ 0 $ 223,500
FUND COMPLEX*,A
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
AGGREGATE COMPENSATION FROM A Gerald C. McDonough Marvin L. Mann Robert C. Pozen** Thomas R. Williams
FUND
Money MarketB $ 589 $ 476 $ 0 $ 482
High IncomeB $ 1,092 $ 880 $ 0 $ 892
Equity-IncomeB,C,G $ 4,778 $ 3,852 $ 0 $ 3,903
GrowthB,D,G $ 3,842 $ 3,099 $ 0 $ 3,139
OverseasB,E,G $ 907 $ 731 $ 0 $ 741
Investment Grade BondB $ 197 $ 159 $ 0 $ 161
Asset ManagerB,F,G $ 2,011 $ 1,621 $ 0 $ 1,644
Index 500B $ 1,192 $ 963 $ 0 $ 974
ContrafundB $ 2,119 $ 1,710 $ 0 $ 1,731
Asset Manager: GrowthB $ 216 $ 174 $ 0 $ 176
BalancedB $ 109 $ 88 $ 0 $ 89
Growth & IncomeB $ 277 $ 225 $ 0 $ 227
Growth OpportunitiesB $ 569 $ 460 $ 0 $ 465
Mid Cap+B $ 31 $ 25 $ 0 $ 25
TOTAL COMPENSATION FROM THE $ 273,500 $ 220,500 $ 0 $ 223,500
FUND COMPLEX*,A
</TABLE>
* Information is for the calendar year ended December 31, 1998 for 237
funds in the complex.
** Interested Trustees of the funds and Mr. Burkhead are compensated
by FMR.
*** Effective October 14, 1999, Mr. Lautenbach serves as a Member of
the Advisory Board.
+ Estimated.
A Compensation figures include cash, amounts required to be deferred,
and may include amounts deferred at the election of Trustees. For the
calendar year ended December 31, 1998, the Trustees accrued required
deferred compensation from the funds as follows: Ralph F. Cox,
$75,000; Phyllis Burke Davis, $75,000; Robert M. Gates, $75,000; E.
Bradley Jones, $75,000; Donald J. Kirk, $75,000; William O. McCoy,
$75,000; Gerald C. McDonough, $87,500; Marvin L. Mann, $75,000; and
Thomas R. Williams, $75,000. Certain of the non-interested Trustees
elected voluntarily to defer a portion of their compensation: Ralph F.
Cox, $55,039; William O. McCoy, $55,039; Marvin L. Mann, $55,039; and
Thomas R. Williams, $55,039.
B Compensation figures include cash, and may include amounts required
to be deferred and amounts deferred at the election of Trustees.
C The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $1,760; Phyllis Burke Davis,
$1,760; Robert M. Gates, $1,760; E. Bradley Jones, $1,760; Donald J.
Kirk, $1,760; William O. McCoy, $1,760; Gerald C. McDonough, $2,053;
Marvin L. Mann, $1,760; and Thomas R. Williams, $1,760.
D The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $1,414; Phyllis Burke Davis,
$1,414; Robert M. Gates, $1,414; E. Bradley Jones, $1,414; Donald J.
Kirk, $1,414; William O. McCoy, $1,414; Gerald C. McDonough, $1,650;
Marvin L. Mann, $1,414; and Thomas R. Williams, $1,414.
E The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $334; Phyllis Burke Davis, $334;
Robert M. Gates, $334; E. Bradley Jones, $334; Donald J. Kirk, $334;
William O. McCoy, $334; Gerald C. McDonough, $390; Marvin L. Mann,
$334; and Thomas R. Williams, $334.
F The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $740; Phyllis Burke Davis, $740;
Robert M. Gates, $740; E. Bradley Jones, $740; Donald J. Kirk, $740;
William O. McCoy, $740; Gerald C. McDonough, $864; Marvin L. Mann,
$740; and Thomas R. Williams, $740.
G Certain of the non-interested Trustees' aggregate compensation from
certain funds includes accrued voluntary deferred compensation as
follows: Ralph F. Cox, $1,489, Equity-Income, $1,196, Growth, $283,
Overseas, $626, Asset Manager; Marvin L. Mann, $1,489, Equity-Income,
$1,196, Growth, $283, Overseas, $626, Asset Manager; William O. McCoy,
$1,489, Equity-Income, $1,196, Growth, $283, Overseas, $626, Asset
Manager; and Thomas R. Williams, $1,489, Equity-Income, $1,196,
Growth, $283, Overseas, $626, Asset Manager.
THE FOLLOWING INFORMATION REPLACES THE LAST PARAGRAPH FOUND UNDER THE
HEADING "CONTROL OF INVESTMENT ADVISERS" ON PAGE 69.
BT, a New York banking corporation with principal offices at 130
Liberty Street, New York, New York 10006, is a wholly owned subsidiary
of Deutsche Bank AG, whose principal offices are at Taunusanlage 12,
D-60325 Frankfurt am Main, Federal Republic of Germany. Deutsche Bank
AG is a major global banking institution that is engaged in a wide
range of financial services, including investment management, mutual
funds, retail and commercial banking, investment banking and
insurance.
THE FOLLOWING INFORMATION REPLACES THE THIRD PARAGRAPH FOUND UNDER THE
HEADING "MANAGEMENT AND SUB-ADVISORY SERVICES (INDEX 500 PORTFOLIO)"
IN THE "MANAGEMENT CONTRACTS" SECTION ON PAGE 70.
BT is the sub-adviser of the fund and acts as the fund's custodian.
Under its management contract with the fund, FMR acts as investment
adviser. Under the sub-advisory agreement, and subject to the
supervision of the Board of Trustees, BT directs the investments of
the fund in accordance with its investment objective, policies and
limitations, and provides custodial services to the fund.
THE FOLLOWING INFORMATION REPLACES THE PARAGRAPH FOUND UNDER THE
HEADING "MANAGEMENT-RELATED EXPENSES" IN THE "MANAGEMENT CONTRACTS"
SECTION ON PAGE 70.
MANAGEMENT-RELATED EXPENSES. In addition to the management fee payable
to FMR; the fees payable to FSC and FIIOC; and, for Index 500, the
costs associated with securities lending, each fund or each class
thereof, as applicable, pays all of its expenses that are not assumed
by those parties. Each fund pays for typesetting, printing, and
mailing proxy materials to shareholders, legal expenses, and the fees
of the custodian (except Index 500), auditor, and non-interested
Trustees. Each fund's management contract further provides that the
fund will pay for typesetting, printing, and mailing prospectuses,
statements of additional information, notices, and reports to
shareholders; however, under the terms of each fund's transfer agent
agreement, FIIOC bears the costs of providing these services to
existing shareholders of the applicable classes. Other expenses paid
by each fund include interest, taxes, brokerage commissions, the
fund's proportionate share of insurance premiums and Investment
Company Institute dues, and the costs of registering shares under
federal securities laws and making necessary filings under state
securities laws. Each fund is also liable for such non-recurring
expenses as may arise, including costs of any litigation to which the
fund may be a party, and any obligation it may have to indemnify its
officers and Trustees with respect to litigation. Each fund also pays
the costs related to the solicitation of fund proxies from contract
holders.
THE FOLLOWING INFORMATION REPLACES THE PARAGRAPH FOUND UNDER THE
HEADING "MANAGEMENT AND SUB-ADVISORY FEES (INDEX 500 PORTFOLIO)" IN
THE "MANAGEMENT CONTRACTS" SECTION ON PAGE 70.
MANAGEMENT FEE (INDEX 500 PORTFOLIO). For the services of FMR under
the management contract, Index 500 pays FMR a monthly management fee
at the annual rate of 0.24% of the fund's average net assets
throughout the month.
THE FOLLOWING INFORMATION REPLACES THE "GROUP FEE RATE" AND "EFFECTIVE
ANNUAL FEE RATE" SCHEDULES FOR MONEY MARKET, INVESTMENT GRADE BOND,
AND HIGH INCOME PORTFOLIOS FOUND ON PAGE 71.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Assets Annualized Rate Group Net Assets Effective Annual Fee Rate
0 - $3 billion .3700% $ 1 billion .3700%
3 - 6 .3400 50 .2188
6 - 9 .3100 100 .1869
9 - 12 .2800 150 .1736
12 - 15 .2500 200 .1652
15 - 18 .2200 250 .1587
18 - 21 .2000 300 .1536
21 - 24 .1900 350 .1494
24 - 30 .1800 400 .1459
30 - 36 .1750 450 .1427
36 - 42 .1700 500 .1399
42 - 48 .1650 550 .1372
48 - 66 .1600 600 .1349
66 - 84 .1550 650 .1328
84 - 120 .1500 700 .1309
120 - 156 .1450 750 .1291
156 - 192 .1400 800 .1275
192 - 228 .1350 850 .1260
228 - 264 .1300 900 .1246
264 - 300 .1275 950 .1233
300 - 336 .1250 1,000 .1220
336 - 372 .1225 1,050 .1209
372 - 408 .1200 1,100 .1197
408 - 444 .1175 1,150 .1187
444 - 480 .1150 1,200 .1177
480 - 516 .1125 1,250 .1167
516 - 587 .1100 1,300 .1158
587 - 646 .1080 1,350 .1149
646 - 711 .1060 1,400 .1141
711 - 782 .1040
782 - 860 .1020
860 - 946 .1000
946 - 1,041 .0980
1,041 - 1,145 .0960
1,145 - 1,260 .0940
over - 1,260 .0920
</TABLE>
THE FOLLOWING INFORMATION REPLACES THE "GROUP FEE RATE" AND "EFFECTIVE
ANNUAL FEE RATE" SCHEDULES FOR EQUITY-INCOME, BALANCED, GROWTH, GROWTH
& INCOME, GROWTH OPPORTUNITIES, OVERSEAS, ASSET MANAGER, CONTRAFUND,
ASSET MANAGER: GROWTH, AND MID CAP PORTFOLIOS FOUND ON PAGE 72.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Assets Annualized Rate Group Net Assets Effective Annual Fee Rate
0 - $3 billion .5200% $ 1 billion .5200%
3 - 6 .4900 50 .3823
6 - 9 .4600 100 .3512
9 - 12 .4300 150 .3371
12 - 15 .4000 200 .3284
15 - 18 .3850 250 .3219
18 - 21 .3700 300 .3163
21 - 24 .3600 350 .3113
24 - 30 .3500 400 .3067
30 - 36 .3450 450 .3024
36 - 42 .3400 500 .2982
42 - 48 .3350 550 .2942
48 - 66 .3250 600 .2904
66 - 84 .3200 650 .2870
84 - 102 .3150 700 .2838
102 - 138 .3100 750 .2809
138 - 174 .3050 800 .2782
174 - 210 .3000 850 .2756
210 - 246 .2950 900 .2732
246 - 282 .2900 950 .2710
282 - 318 .2850 1,000 .2689
318 - 354 .2800 1,050 .2669
354 - 390 .2750 1,100 .2649
390 - 426 .2700 1,150 .2631
426 - 462 .2650 1,200 .2614
462 - 498 .2600 1,250 .2597
498 - 534 .2550 1,300 .2581
534 - 587 .2500 1,350 .2566
587 - 646 .2463 1,400 .2551
646 - 711 .2426
711 - 782 .2389
782 - 860 .2352
860 - 946 .2315
946 - 1,041 .2278
1,041 - 1,145 .2241
1,145 - 1,260 .2204
over - 1,260 .2167
</TABLE>
THE FOLLOWING INFORMATION REPLACES THE SIMILAR INFORMATION FOUND IN
THE "MANAGEMENT CONTRACTS" SECTION ON PAGE 74.
For Index 500, FMR may, from time to time, voluntarily reimburse all
or a portion of the fund's operating expenses (exclusive of interest,
taxes, securities lending costs, brokerage commissions, and
extraordinary expenses), which is subject to revision or termination.
FMR retains the ability to be repaid for these expense reimbursements
in the amount that expenses fall below the limit prior to the end of
the fiscal year.
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION FOUND IN THE
"MANAGEMENT CONTRACTS" SECTION ON PAGE 74.
MANAGEMENT-RELATED SERVICES (INDEX 500 PORTFOLIO). Index 500 has also
entered into a securities lending agreement with BT. Under the terms
of the agreement, BT retains up to 30% of aggregate annual lending
revenues for providing securities lending services.
THE FOLLOWING INFORMATION REPLACES THE SECOND AND THIRD PARAGRAPHS
FOUND UNDER THE HEADING "SUB-ADVISERS" IN THE "MANAGEMENT CONTRACTS"
SECTION ON PAGE 74.
Under the sub-advisory agreement, for providing investment management
and custodial services to Index 500 Portfolio, FMR pays BT fees at an
annual rate of 0.006% of the average net assets of the fund.
For the fiscal years ended December 31, 1998, 1997, and 1996, Index
500 Portfolio paid FMR management fees of $6,919,949, $4,102,533, and
$1,346,765, respectively, and for the fiscal years ended December 31,
1998 and 1997, the fund paid BT sub-advisory fees of $42,017 and $54,
respectively. Prior to October 1, 1999, the fund paid a management fee
at an annual rate of 0.24% of its average net assets to FMR and a
sub-advisory fee (representing 40% of net income from securities
lending) to BT.
THE FOLLOWING INFORMATION SUPPLEMENTS THE SIMILAR INFORMATION FOUND
UNDER THE HEADING "SUB-ADVISERS" IN THE "MANAGEMENT CONTRACTS" SECTION
ON PAGE 74.
For the fiscal year ended December 31, 1998, FMR paid BT fees of
$149,981.
THE FOLLOWING INFORMATION REPLACES THE SIMILAR INFORMATION FOUND IN
THE "MANAGEMENT CONTRACTS" SECTION ON PAGE 75.
On behalf of High Income, Balanced, Growth & Income, Growth
Opportunities, Asset Manager, Contrafund, Asset Manager: Growth, and
Mid Cap Portfolios, for providing discretionary investment management
and executing portfolio transactions, the sub-advisers are compensated
as follows:
(small solid bullet) FMR pays FMR U.K. and FMR Far East, a fee equal
to 50% of its monthly management fee with respect to the fund's
average net assets managed by the sub-adviser on a discretionary
basis.
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION FOUND IN THE
"MANAGEMENT CONTRACTS" SECTION ON PAGE 75.
On behalf of Overseas Portfolio, for providing discretionary
investment management and executing portfolio transactions, the
sub-advisers are compensated as follows:
(small solid bullet) FMR pays FMR U.K. and FMR Far East, a fee equal
to 50% of its monthly management fee with respect to the fund's
average net assets managed by the sub-adviser on a discretionary
basis.
(small solid bullet) FMR pays FIIA a fee equal to 57% of its monthly
management fee with respect to the fund's average net assets managed
by the sub-adviser on a discretionary basis.
(small solid bullet) FIIA pays FIIA(U.K.)L a fee equal to 110% of
FIIA(U.K.)L's costs incurred in connection with providing
discretionary investment management services.
THE FOLLOWING INFORMATION REPLACES THE SIMILAR INFORMATION FOUND UNDER
THE HEADING "SUB-ADVISERS" IN THE "MANAGEMENT CONTRACTS" SECTION ON
PAGE 76.
For discretionary investment management and execution of portfolio
transactions, no fees were paid to FMR U.K., FMR Far East or FIIA on
behalf of High Income, Balanced, Growth & Income, Growth
Opportunities, Asset Manager, Contrafund, Asset Manager: Growth, Mid
Cap, and Overseas Portfolios for the past three fiscal years.
THE FOLLOWING INFORMATION REPLACES THE SIMILAR INFORMATION FOUND IN
THE "DESCRIPTION OF THE TRUSTS" SECTION BEGINNING ON PAGE 79.
AUDITORS. PricewaterhouseCoopers LLP, One Post Office Square, Boston,
Massachusetts serves as independent accountant for Equity-Income
Portfolio, Growth Portfolio, High Income Portfolio, Money Market
Portfolio, and Overseas Portfolio. The auditor examines financial
statements for the funds and provides other audit, tax, and related
services. PricewaterhouseCoopers LLP, 160 Federal Street, Boston,
Massachusetts serves as independent accountant for Mid Cap Portfolio.
The auditor examines financial statements for the fund and provides
other audit, tax, and related services. PricewaterhouseCoopers LLP,
160 Federal Street, Boston, Massachusetts served as independent
accountant for Asset Manager Portfolio, Asset Manager: Growth
Portfolio, Contrafund Portfolio, Index 500 Portfolio, Investment Grade
Bond Portfolio, Balanced Portfolio, Growth & Income Portfolio, and
Growth Opportunities Portfolio for the most recent fiscal period. The
auditor examined financial statements for the funds and provided other
audit, tax, and related services. Effective February 18, 1999,
Deloitte & Touche LLP, 200 Berkeley Street, Boston, Massachusetts
serves as independent accountant for Asset Manager Portfolio, Asset
Manager: Growth Portfolio, Contrafund Portfolio, Index 500 Portfolio,
Investment Grade Bond Portfolio, Balanced Portfolio, Growth & Income
Portfolio, and Growth Opportunities Portfolio for the next fiscal
period. The auditor examines financial statements for the funds and
provides other audit, tax, and related services.
