VARIABLE INSURANCE PRODUCTS FUND, 485APOS, 1999-11-12

VARIABLE INSURANCE PRODUCTS FUND
485APOS, 1999-11-12

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT (No. 2-75010)
UNDER THE SECURITIES ACT OF 1933 [X]

Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. 41 [X]

and

REGISTRATION STATEMENT (No. 811-3329)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

Amendment No. [X]

Variable Insurance Products Fund
(Exact Name of Registrant as Specified in Charter)

82 Devonshire St., Boston, Massachusetts 02109
(Address Of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number: 617-563-7000

Eric D. Roiter, Secretary
82 Devonshire Street
Boston, Massachusetts 02109
(Name and Address of Agent for Service)

It is proposed that this filing will become effective

( ) immediately upon filing pursuant to paragraph (b).
( ) on ( ) pursuant to paragraph (b).
( ) 60 days after filing pursuant to paragraph (a)(1).
( ) on ( ) pursuant to paragraph (a)(1) of Rule 485
( ) 75 days after filing pursuant to paragraph (a)(2).
(X) on ( January 11, 2000 ) pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:

( ) this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.

SHARES OF THE FUNDS ARE OFFERED ONLY TO THE SEPARATE ACCOUNTS OF
INSURANCE COMPANIES, FOR THE PURPOSE OF FUNDING VARIABLE ANNUITY AND
VARIABLE LIFE INSURANCE CONTRACTS. PARTICULAR FUNDS MAY NOT BE
AVAILABLE IN YOUR STATE DUE TO VARIOUS INSURANCE REGULATIONS. PLEASE
CHECK WITH YOUR INSURANCE COMPANY FOR AVAILABLE FUNDS. IF A FUND IN
THIS PROSPECTUS IS NOT AVAILABLE IN YOUR STATE, THIS PROSPECTUS IS NOT
TO BE CONSIDERED A SOLICITATION. PLEASE READ THIS PROSPECTUS TOGETHER
WITH THE VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE CONTRACT
PROSPECTUS THAT ACCOMPANIES IT.

Like securities of all mutual funds, these securities have
not been approved or disapproved by the Securities
and Exchange Commission, and the Securities and
Exchange Commission has not determined if this
prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.

VARIABLE
INSURANCE PRODUCTS
FUNDS
SERVICE CLASS 2

GROWTH AND GROWTH & INCOME FUNDS:

Index 500 Portfolio
Mid Cap Portfolio
Growth Opportunities Portfolio
Contrafund Portfolio
Growth Portfolio
Overseas Portfolio
Balanced Portfolio
Equity-Income Portfolio
Growth & Income Portfolio

ASSET ALLOCATION FUNDS:

Asset Manager Portfolio
Asset Manager: Growth Portfolio

INCOME FUNDS:

Investment Grade Bond Portfolio
High Income Portfolio

MONEY MARKET FUND:

Money Market Portfolio

PROSPECTUS

JANUARY 11, 2000

(FIDELITY_LOGO_GRAPHIC)(registered trademark)
82 DEVONSHIRE STREET, BOSTON, MA 02109

CONTENTS

FUND SUMMARY 2 INVESTMENT SUMMARY

8 PERFORMANCE

FUND BASICS 18 INVESTMENT DETAILS

25 VALUING SHARES

SHAREHOLDER INFORMATION 25 BUYING AND SELLING SHARES

26 DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS

26 TAX CONSEQUENCES

FUND SERVICES 26 FUND MANAGEMENT

29 FUND DISTRIBUTION

APPENDIX ADDITIONAL INFORMATION ABOUT
THE STANDARD & POOR'S 500
INDEX

FUND SUMMARY

INVESTMENT SUMMARY

INVESTMENT OBJECTIVE

INDEX 500 PORTFOLIO seeks investment results that correspond to the
total return of common stocks publicly traded in the United States, as
represented by the S&P 500.

PRINCIPAL INVESTMENT STRATEGIES

Bankers Trust Company (BT)'s principal investment strategies include:

(small solid bullet) Investing at least 80% of assets in common stocks
included in the S&P 500.

(small solid bullet) Lending securities to earn income for the fund.

PRINCIPAL INVESTMENT RISKS

The fund is subject to the following principal investment risks:

(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.

An investment in the fund is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.

When you sell your shares of the fund, they could be worth more or
less than what you paid for them.

INVESTMENT OBJECTIVE

MID CAP PORTFOLIO seeks long-term growth of capital.

PRINCIPAL INVESTMENT STRATEGIES

Fidelity Management & Research Company (FMR)'s principal investment
strategies include:

(small solid bullet) Investing primarily in common stocks.

(small solid bullet) Investing at least 65% of total assets in
securities of companies with medium market capitalizations (those with
market capitalizations similar to companies in the S&P MidCap 400).

(small solid bullet) Potentially investing in companies with smaller
or larger market capitalizations.

(small solid bullet) Investing in domestic and foreign issuers.

(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.

(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.

PRINCIPAL INVESTMENT RISKS

The fund is subject to the following principal investment risks:

(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently than the U.S. market.

(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently than
the value of the market as a whole. The value of securities of smaller
issuers can be more volatile than that of larger issuers.

When you sell your shares of the fund, they could be worth more or
less than what you paid for them.

INVESTMENT OBJECTIVE

GROWTH OPPORTUNITIES PORTFOLIO seeks to provide capital growth.

PRINCIPAL INVESTMENT STRATEGIES

FMR's principal investment strategies include:

(small solid bullet) Investing primarily in common stocks.

(small solid bullet) Potentially investing in other types of
securities, including bonds which may be lower-quality debt
securities.

(small solid bullet) Investing in domestic and foreign issuers.

(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.

(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.

PRINCIPAL INVESTMENT RISKS

The fund is subject to the following principal investment risks:

(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.

(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently than
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.

When you sell your shares of the fund, they could be worth more or
less than what you paid for them.

INVESTMENT OBJECTIVE

CONTRAFUND PORTFOLIO seeks long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

FMR's principal investment strategies include:

(small solid bullet) Investing primarily in common stocks.

(small solid bullet) Investing in securities of companies whose value
it believes is not fully recognized by the public.

(small solid bullet) Investing in domestic and foreign issuers.

(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.

(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.

PRINCIPAL INVESTMENT RISKS

The fund is subject to the following principal investment risks:

When you sell your shares of the fund, they could be worth more or
less than what you paid for them.

INVESTMENT OBJECTIVE

GROWTH PORTFOLIO seeks to achieve capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

FMR's principal investment strategies include:

(small solid bullet) Investing primarily in common stocks.

(small solid bullet) Investing in companies that it believes have
above-average growth potential (stocks of these companies are often
called "growth" stocks).

(small solid bullet) Investing in domestic and foreign issuers.

(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.

PRINCIPAL INVESTMENT RISKS

The fund is subject to the following principal investment risks:

(small solid bullet) "GROWTH" INVESTING. "Growth" stocks can perform
differently than the market as a whole and other types of stocks and
can be more volatile than other types of stocks.

When you sell your shares of the fund, they could be worth more or
less than what you paid for them.

INVESTMENT OBJECTIVE

OVERSEAS PORTFOLIO seeks long-term growth of capital.

PRINCIPAL INVESTMENT STRATEGIES

FMR's principal investment strategies include:

(small solid bullet) Investing at least 65% of total assets in foreign
securities.

(small solid bullet) Investing primarily in common stocks.

(small solid bullet) Allocating investments across countries and
regions considering the size of the market in each country and region
relative to the size of the international market as a whole.

(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.

PRINCIPAL INVESTMENT RISKS

The fund is subject to the following principal investment risks:

(small solid bullet) FOREIGN EXPOSURE. Foreign markets, particularly
emerging markets, can be more volatile than the U.S. market due to
increased risks of adverse issuer, political, regulatory, market or
economic developments and can perform differently than the U.S.
market.

When you sell your shares of the fund, they could be worth more or
less than what you paid for them.

INVESTMENT OBJECTIVE

BALANCED PORTFOLIO seeks both income and growth of capital.

PRINCIPAL INVESTMENT STRATEGIES

FMR's principal investment strategies include:

(small solid bullet) Investing approximately 60% of assets in stocks
and other equity securities and the remainder in bonds and other debt
securities, including lower-quality debt securities, when its outlook
is neutral.

(small solid bullet) Investing at least 25% of total assets in
fixed-income senior securities (including debt securities and
preferred stock).

(small solid bullet) Investing in domestic and foreign issuers.

(small solid bullet) With respect to equity investments, emphasizing
above-average income-producing equity securities, which tends to lead
to investments in stocks that have more "value" characteristics than
"growth" characteristics.

(small solid bullet) Analyzing a security's issuer using fundamental
factors and evaluating each security's current price relative to
estimated long-term value to select investments.

PRINCIPAL INVESTMENT RISKS

The fund is subject to the following principal investment risks:

(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause prices of debt securities to decrease.

(small solid bullet) PREPAYMENT. The ability of an issuer of a debt
security to repay principal prior to a security's maturity can cause
greater price volatility if interest rates change.

(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently than
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.

When you sell your shares of the fund, they could be worth more or
less than what you paid for them.

INVESTMENT OBJECTIVE

EQUITY-INCOME PORTFOLIO seeks reasonable income. The fund will also
consider the potential for capital appreciation. The fund's goal is to
achieve a yield which exceeds the composite yield on the securities
comprising the S&P 500.

PRINCIPAL INVESTMENT STRATEGIES

FMR's principal investment strategies include:

(small solid bullet) Investing at least 65% of total assets in
income-producing equity securities, which tends to lead to investments
in large cap "value" stocks.

(small solid bullet) Potentially investing in other types of equity
securities and debt securities, including lower-quality debt
securities.

(small solid bullet) Investing in domestic and foreign issuers.

(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.

PRINCIPAL INVESTMENT RISKS

The fund is subject to the following principal investment risks:

(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.

(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently than
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.

(small solid bullet) "VALUE" INVESTING. "Value" stocks can perform
differently than the market as a whole and other types of stocks and
can continue to be undervalued by the market for long periods of time.

When you sell your shares of the fund, they could be worth more or
less than what you paid for them.

INVESTMENT OBJECTIVE

GROWTH & INCOME PORTFOLIO seeks high total return through a
combination of current income and capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

FMR's principal investment strategies include:

(small solid bullet) Investing a majority of assets in common stocks
with a focus on those that pay current dividends and show potential
for capital appreciation.

(small solid bullet) Potentially investing in bonds, including
lower-quality debt securities, as well as stocks that are not
currently paying dividends, but offer prospects for future income or
capital appreciation.

(small solid bullet) Investing in domestic and foreign issuers.

(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.

(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.

PRINCIPAL INVESTMENT RISKS

The fund is subject to the following principal investment risks:

(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of debt securities to decrease.

(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently than
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.

When you sell your shares of the fund, they could be worth more or
less than what you paid for them.

INVESTMENT OBJECTIVE

ASSET MANAGER PORTFOLIO seeks to obtain high total return with reduced
risk over the long term by allocating its assets among stocks, bonds,
and short-term instruments.

PRINCIPAL INVESTMENT STRATEGIES

FMR's principal investment strategies include:

(small solid bullet) Allocating the fund's assets among stocks, bonds,
and short-term and money market instruments.

(small solid bullet) Maintaining a neutral mix over time of 50% of
assets in stocks, 40% of assets in bonds, and 10% of assets in
short-term and money market instruments.

(small solid bullet) Adjusting allocation among asset classes
gradually within the following ranges: stock class (30%-70%), bond
class (20%-60%), and short-term/money market class (0%-50%).

(small solid bullet) Investing in domestic and foreign issuers.

(small solid bullet) Analyzing an issuer using fundamental and/or
quantitative factors and evaluating each security's current price
relative to estimated long-term value to select investments.

PRINCIPAL INVESTMENT RISKS

The fund is subject to the following principal investment risks:

(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.

(small solid bullet) PREPAYMENT. The ability of an issuer of a debt
security to repay principal prior to a security's maturity can cause
greater price volatility if interest rates change.

(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently than
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.

When you sell your shares of the fund, they could be worth more or
less than what you paid for them.

INVESTMENT OBJECTIVE

ASSET MANAGER: GROWTH PORTFOLIO seeks to maximize total return by
allocating its assets among stocks, bonds, short-term instruments, and
other investments.

PRINCIPAL INVESTMENT STRATEGIES

FMR's principal investment strategies include:

(small solid bullet) Allocating the fund's assets among stocks, bonds,
and short-term and money market instruments.

(small solid bullet) Maintaining a neutral mix over time of 70% of
assets in stocks, 25% of assets in bonds, and 5% of assets in
short-term and money market instruments.

(small solid bullet) Adjusting allocation among asset classes
gradually within the following ranges: stock class (50%-100%), bond
class (0%-50%), and short-term/money market class (0%-50%).

(small solid bullet) Investing in domestic and foreign issuers.

(small solid bullet) Analyzing an issuer using fundamental and/or
quantitative factors and evaluating each security's current price
relative to estimated long-term value to select investments.

PRINCIPAL INVESTMENT RISKS

The fund is subject to the following principal investment risks:

(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.

(small solid bullet) PREPAYMENT. The ability of an issuer of a debt
security to repay principal prior to a security's maturity can cause
greater price volatility if interest rates change.

(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently than
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.

When you sell your shares of the fund, they could be worth more or
less than what you paid for them.

INVESTMENT OBJECTIVE

INVESTMENT GRADE BOND PORTFOLIO seeks as high a level of current
income as is consistent with the preservation of capital.

PRINCIPAL INVESTMENT STRATEGIES

FMR's principal investment strategies include:

(small solid bullet) Investing in U.S. dollar-denominated
investment-grade bonds.

(small solid bullet) Managing the fund to have similar overall
interest rate risk to the Lehman Brothers Aggregate Bond Index.

(small solid bullet) Allocating assets across different market sectors
and maturities.

(small solid bullet) Analyzing a security's structural features,
current pricing and trading opportunities, and the credit quality of
its issuer to select investments.

PRINCIPAL INVESTMENT RISKS

The fund is subject to the following principal investment risks:

(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.

(small solid bullet) FOREIGN EXPOSURE. Entities located in foreign
countries can be affected by adverse political, regulatory, market or
economic developments in those countries.

(small solid bullet) PREPAYMENT. The ability of an issuer of a debt
security to repay principal prior to a security's maturity can cause
greater price volatility if interest rates change.

When you sell your shares of the fund, they could be worth more or
less than what you paid for them.

INVESTMENT OBJECTIVE

HIGH INCOME PORTFOLIO seeks a high level of current income while also
considering growth of capital.

PRINCIPAL INVESTMENT STRATEGIES

FMR's principal investment strategies include:

(small solid bullet) Investing at least 65% of total assets in
income-producing debt securities, preferred stocks and convertible
securities, with an emphasis on lower-quality debt securities.

(small solid bullet) Potentially investing in non-income producing
securities, including defaulted securities and common stocks.

(small solid bullet) Investing in companies in troubled or uncertain
financial condition.

(small solid bullet) Investing in domestic and foreign issuers.

(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.

PRINCIPAL INVESTMENT RISKS

The fund is subject to the following principal investment risks:

(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.

(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently than
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.

When you sell your shares of the fund, they could be worth more or
less than what you paid for them.

INVESTMENT OBJECTIVE

MONEY MARKET PORTFOLIO seeks as high a level of current income as is
consistent with preservation of capital and liquidity.

PRINCIPAL INVESTMENT STRATEGIES

FMR's principal investment strategies include:

(small solid bullet) Investing in U.S. dollar-denominated money market
securities, including U.S. Government securities and repurchase
agreements, and entering into reverse repurchase agreements.

(small solid bullet) Investing more than 25% of total assets in the
financial services industry.

(small solid bullet) Investing in compliance with industry-standard
requirements for money market funds for the quality, maturity and
diversification of investments.

PRINCIPAL INVESTMENT RISKS

The fund is subject to the following principal investment risks:

(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a money market security to decrease.

(small solid bullet) FOREIGN EXPOSURE. Entities located in foreign
countries can be affected by adverse political, regulatory, market or
economic developments in those countries.

(small solid bullet) FINANCIAL SERVICES EXPOSURE. Changes in
government regulation or economic downturns can have a significant
negative affect on issuers in the financial services sector.

(small solid bullet) ISSUER-SPECIFIC CHANGES. A decline in the credit
quality of an issuer or the provider of credit support or a
maturity-shortening structure for a security can cause the price of a
money market security to decrease.

An investment in the fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although
the fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the fund.

PERFORMANCE

A fund's total return and/or yield may be quoted in advertising in
accordance with current law and interpretations thereof.

Total returns and yields quoted for a class include the class's
expenses, but do not include charges and expenses attributable to any
particular insurance product. Because shares of the funds may be
purchased only through variable annuity and variable life insurance
contracts, you should carefully review the prospectus of the insurance
product you have chosen for information on relevant charges and
expenses. Excluding these charges from quotations of a class's
performance has the effect of increasing the performance quoted. You
should bear in mind the effect of these charges when comparing a
fund's performance to that of other mutual funds.

The following information illustrates each fund's performance from
year to year, compares the performance of each fund (other than Money
Market) to the performance of a market index, and compares the
performance of each fund (other than Money Market, Asset Manager and
Asset Manager: Growth) to an average of the performance of similar
funds over various periods of time. Each of Asset Manager, Asset
Manager: Growth and Balanced also compares its performance to the
performance of a combination of market indexes over various periods of
time. Each of Growth and Equity-Income also compares its performance
to the performance of an additional index over various periods of
time. Returns are based on past results and are not an indication of
future performance.

YEAR-BY-YEAR RETURNS

The returns in the chart do not include the effect of charges and
expenses attributable to any particular insurance product. If the
effect of the charges and expenses was reflected, returns would be
lower than those shown.

INDEX 500 PORTFOLIO - INITIAL
CLASS

Calendar Year

___% ___% ___% ___% ___% ___%

Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil

THE RETURNS SHOWN IN THE CHART ARE FOR INITIAL CLASS SHARES OF INDEX
500 PORTFOLIO WHICH ARE NOT OFFERED IN THIS PROSPECTUS. IF SERVICE
CLASS 2'S 0.25% 12B-1 FEE HAD BEEN REFLECTED, RETURNS WOULD HAVE BEEN
LOWER THAN THOSE SHOWN.

DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF INDEX 500
PORTFOLIO, THE HIGHEST RETURN FOR A QUARTER WAS ___% (QUARTER ENDING
[MONTH] [DAY], [YEAR]) AND THE LOWEST RETURN FOR A QUARTER WAS ___%
(QUARTER ENDING [MONTH] [DAY], [YEAR]).

MID CAP PORTFOLIO - INITIAL
CLASS

Calendar Year

___% ___% ___% ___% ___% ___%

THE RETURNS SHOWN IN THE CHART ARE FOR INITIAL CLASS SHARES OF MID CAP
PORTFOLIO WHICH ARE NOT OFFERED IN THIS PROSPECTUS. IF SERVICE CLASS
2'S 0.25% 12B-1 FEE HAD BEEN REFLECTED, RETURNS WOULD HAVE BEEN LOWER
THAN THOSE SHOWN.

DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF MID CAP
PORTFOLIO, THE HIGHEST RETURN FOR A QUARTER WAS ___% (QUARTER ENDING
[MONTH] [DAY], [YEAR]) AND THE LOWEST RETURN FOR A QUARTER WAS ___%
(QUARTER ENDING [MONTH] [DAY], [YEAR]).

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH OPPORTUNITIES
PORTFOLIO - INITIAL CLASS

Calendar Year

___% ___% ___% ___% ___% ___%

</TABLE>

THE RETURNS SHOWN IN THE CHART ARE FOR INITIAL CLASS SHARES OF GROWTH
OPPORTUNITIES PORTFOLIO WHICH ARE NOT OFFERED IN THIS PROSPECTUS. IF
SERVICE CLASS 2'S 0.25% 12B-1 FEE HAD BEEN REFLECTED, RETURNS WOULD
HAVE BEEN LOWER THAN THOSE SHOWN.

DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF GROWTH
OPPORTUNITIES PORTFOLIO, THE HIGHEST RETURN FOR A QUARTER WAS ___%
(QUARTER ENDING [MONTH] [DAY], [YEAR]) AND THE LOWEST RETURN FOR A
QUARTER WAS ___% (QUARTER ENDING [MONTH] [DAY], [YEAR]).

CONTRAFUND PORTFOLIO -
INITIAL CLASS

Calendar Year

___% ___% ___% ___% ___% ___%

THE RETURNS SHOWN IN THE CHART ARE FOR INITIAL CLASS SHARES OF
CONTRAFUND PORTFOLIO WHICH ARE NOT OFFERED IN THIS PROSPECTUS. IF
SERVICE CLASS 2'S 0.25% 12B-1 FEE HAD BEEN REFLECTED, RETURNS WOULD
HAVE BEEN LOWER THAN THOSE SHOWN.

DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF CONTRAFUND
PORTFOLIO, THE HIGHEST RETURN FOR A QUARTER WAS ___% (QUARTER ENDING
[MONTH] [DAY], [YEAR]) AND THE LOWEST RETURN FOR A QUARTER WAS ___%
(QUARTER ENDING [MONTH] [DAY], [YEAR]).

GROWTH PORTFOLIO - INITIAL
CLASS

Calendar Year

___% ___% ___% ___% ___% ___% ___%

THE RETURNS SHOWN IN THE CHART ARE FOR INITIAL CLASS SHARES OF GROWTH
PORTFOLIO WHICH ARE NOT OFFERED IN THIS PROSPECTUS. IF SERVICE CLASS
2'S 0.25% 12B-1 FEE HAD BEEN REFLECTED, RETURNS WOULD HAVE BEEN LOWER
THAN THOSE SHOWN.

DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF GROWTH
PORTFOLIO, THE HIGHEST RETURN FOR A QUARTER WAS ___% (QUARTER ENDING
[MONTH] [DAY], [YEAR]) AND THE LOWEST RETURN FOR A QUARTER WAS ___%
(QUARTER ENDING [MONTH] [DAY], [YEAR]).

OVERSEAS PORTFOLIO - INITIAL
CLASS

Calendar Year

___% ___% ___% ___% ___% ___% ___%

THE RETURNS SHOWN IN THE CHART ARE FOR INITIAL CLASS SHARES OF
OVERSEAS PORTFOLIO WHICH ARE NOT OFFERED IN THIS PROSPECTUS. IF
SERVICE CLASS 2'S 0.25% 12B-1 FEE HAD BEEN REFLECTED, RETURNS WOULD
HAVE BEEN LOWER THAN THOSE SHOWN.

DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF OVERSEAS
PORTFOLIO, THE HIGHEST RETURN FOR A QUARTER WAS ___% (QUARTER ENDING
[MONTH] [DAY], [YEAR]) AND THE LOWEST RETURN FOR A QUARTER WAS ___%
(QUARTER ENDING [MONTH] [DAY], [YEAR]).

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCED PORTFOLIO - INITIAL
CLASS

Calendar Year

___% ___% ___% ___% ___% ___% ___%

</TABLE>

THE RETURNS SHOWN IN THE CHART ARE FOR INITIAL CLASS SHARES OF
BALANCED PORTFOLIO WHICH ARE NOT OFFERED IN THIS PROSPECTUS. IF
SERVICE CLASS 2'S 0.25% 12B-1 FEE HAD BEEN REFLECTED, RETURNS WOULD
HAVE BEEN LOWER THAN THOSE SHOWN.

DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF BALANCED
PORTFOLIO, THE HIGHEST RETURN FOR A QUARTER WAS ___% (QUARTER ENDING
[MONTH] [DAY], [YEAR]) AND THE LOWEST RETURN FOR A QUARTER WAS ___%
(QUARTER ENDING [MONTH] [DAY], [YEAR]).

EQUITY-INCOME PORTFOLIO -
INITIAL CLASS

Calendar Year

___% ___% ___% ___% ___% ___% ___%

THE RETURNS SHOWN IN THE CHART ARE FOR INITIAL CLASS SHARES OF
EQUITY-INCOME PORTFOLIO WHICH ARE NOT OFFERED IN THIS PROSPECTUS. IF
SERVICE CLASS 2'S 0.25% 12B-1 FEE HAD BEEN REFLECTED, RETURNS WOULD
HAVE BEEN LOWER THAN THOSE SHOWN.

DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF
EQUITY-INCOME PORTFOLIO, THE HIGHEST RETURN FOR A QUARTER WAS ___%
(QUARTER ENDING [MONTH] [DAY], [YEAR]) AND THE LOWEST RETURN FOR A
QUARTER WAS ___% (QUARTER ENDING [MONTH] [DAY], [YEAR]).

GROWTH & INCOME PORTFOLIO -
INITIAL CLASS

Calendar Year

___% ___% ___% ___% ___% ___% ____%

THE RETURNS SHOWN IN THE CHART ARE FOR INITIAL CLASS SHARES OF GROWTH
& INCOME PORTFOLIO WHICH ARE NOT OFFERED IN THIS PROSPECTUS. IF
SERVICE CLASS 2'S 0.25% 12B-1 FEE HAD BEEN REFLECTED, RETURNS WOULD
HAVE BEEN LOWER THAN THOSE SHOWN.

DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF GROWTH &
INCOME PORTFOLIO, THE HIGHEST RETURN FOR A QUARTER WAS ___% (QUARTER
ENDING [MONTH] [DAY], [YEAR]) AND THE LOWEST RETURN FOR A QUARTER WAS
___% (QUARTER ENDING [MONTH] [DAY], [YEAR]).

ASSET MANAGER PORTFOLIO -
INITIAL CLASS

Calendar Year

___% ___% ___% ___% ___% ___% ___%

THE RETURNS SHOWN IN THE CHART ARE FOR INITIAL CLASS SHARES OF ASSET
MANAGER PORTFOLIO WHICH ARE NOT OFFERED IN THIS PROSPECTUS. IF SERVICE
CLASS 2'S 0.25% 12B-1 FEE HAD BEEN REFLECTED, RETURNS WOULD HAVE BEEN
LOWER THAN THOSE SHOWN.

DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF ASSET
MANAGER PORTFOLIO, THE HIGHEST RETURN FOR A QUARTER WAS ___% (QUARTER
ENDING [MONTH] [DAY], [YEAR]) AND THE LOWEST RETURN FOR A QUARTER WAS
___% (QUARTER ENDING [MONTH] [DAY], [YEAR]).

ASSET MANAGER: GROWTH
PORTFOLIO - INITIAL CLASS

Calendar Year

___%

THE RETURNS SHOWN IN THE CHART ARE FOR INITIAL CLASS SHARES OF ASSET
MANAGER: GROWTH PORTFOLIO WHICH ARE NOT OFFERED IN THIS PROSPECTUS. IF
SERVICE CLASS 2'S 0.25% 12B-1 FEE HAD BEEN REFLECTED, RETURNS WOULD
HAVE BEEN LOWER THAN THOSE SHOWN.

DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF ASSET
MANAGER: GROWTH PORTFOLIO, THE HIGHEST RETURN FOR A QUARTER WAS ___%
(QUARTER ENDING [MONTH] [DAY], [YEAR]) AND THE LOWEST RETURN FOR A
QUARTER WAS ___% (QUARTER ENDING [MONTH] [DAY], [YEAR]).

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT GRADE BOND
PORTFOLIO - INITIAL CLASS

Calendar Year

___% ___% ___% ___% ___% ___% ___% ___% ___% ___%

</TABLE>

THE RETURNS SHOWN IN THE CHART ARE FOR INITIAL CLASS SHARES OF
INVESTMENT GRADE BOND PORTFOLIO WHICH ARE NOT OFFERED IN THIS
PROSPECTUS. IF SERVICE CLASS 2'S 0.25% 12B-1 FEE HAD BEEN REFLECTED,
RETURNS WOULD HAVE BEEN LOWER THAN THOSE SHOWN.

DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF INVESTMENT
GRADE BOND PORTFOLIO, THE HIGHEST RETURN FOR A QUARTER WAS ___%
(QUARTER ENDING [MONTH] [DAY], [YEAR]) AND THE LOWEST RETURN FOR A
QUARTER WAS ___% (QUARTER ENDING [MONTH] [DAY], [YEAR]).

HIGH INCOME PORTFOLIO -
INITIAL CLASS

Calendar Year

___% ___% ___% ___% ___% ___% ___%

THE RETURNS SHOWN IN THE CHART ARE FOR INITIAL CLASS SHARES OF HIGH
INCOME PORTFOLIO WHICH ARE NOT OFFERED IN THIS PROSPECTUS. IF SERVICE
CLASS 2'S 0.25% 12B-1 FEE HAD BEEN REFLECTED, RETURNS WOULD HAVE BEEN
LOWER THAN THOSE SHOWN.

DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF HIGH INCOME
PORTFOLIO, THE HIGHEST RETURN FOR A QUARTER WAS ___% (QUARTER ENDING
[MONTH] [DAY], [YEAR]) AND THE LOWEST RETURN FOR A QUARTER WAS ___%
(QUARTER ENDING [MONTH] [DAY], [YEAR]).

MONEY MARKET PORTFOLIO -
INITIAL CLASS

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar Year

___% ___% ___% ___% ___% ___% ___% ___% ___% ___%

</TABLE>

THE RETURNS SHOWN IN THE CHART ARE FOR INITIAL CLASS SHARES OF MONEY
MARKET PORTFOLIO WHICH ARE NOT OFFERED IN THIS PROSPECTUS. IF SERVICE
CLASS 2'S 0.25% 12B-1 FEE HAD BEEN REFLECTED, RETURNS WOULD HAVE BEEN
LOWER THAN THOSE SHOWN.

DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF MONEY
MARKET PORTFOLIO, THE HIGHEST RETURN FOR A QUARTER WAS ___% (QUARTER
ENDING [MONTH] [DAY], [YEAR]) AND THE LOWEST RETURN FOR A QUARTER WAS
___% (QUARTER ENDING [MONTH] [DAY], [YEAR]).

AVERAGE ANNUAL RETURNS

The returns in the following table do not include the effect of
charges and expenses attributable to any particular insurance product.
If the effect of the charges and expenses was reflected, returns would
be lower than those shown.

GROWTH AND GROWTH & INCOME
FUNDS

<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the periods ended Past 1 year Past 5 years Past 10 Years/Life of class
December 31, ____

INDEX 500 PORTFOLIO - INITIAL % % %A
CLASS

S&P 500 % % %A

Lipper S&P 500 Index % % %A
Objective Funds Average

MID CAP PORTFOLIO - INITIAL % % %B
CLASS

S&P Midcap 400 % % %B

Lipper Mid Cap Funds Average % % %B

GROWTH OPPORTUNITIES % % %C
PORTFOLIO - INITIAL CLASS

S&P 500 % % %C

Lipper Growth Funds Average % % %C

CONTRAFUND PORTFOLIO - % % %C
INITIAL CLASS

S&P 500 % % %C

Lipper Growth Funds Average % % %C

GROWTH PORTFOLIO - INITIAL % % %
CLASS

Russell 3000 Growth Index % % %

Lipper Capital Appreciation % % %
Funds Average

S&P 500 % % %

OVERSEAS PORTFOLIO - INITIAL % % %
CLASS

Morgan Stanley Capital % % %
International Europe,
Australasia, Far East Index

Lipper International Funds % % %
Average

BALANCED PORTFOLIO - INITIAL % % %C
CLASS

S&P 500 % % %C

Lipper Balanced Funds Average % % %C

Fidelity Balanced Composite % % %C
Index

EQUITY-INCOME PORTFOLIO - % % %
INITIAL CLASS

Russell 3000 Value Index % % %

Lipper Equity Income Funds % % %
Average

S&P 500 % % %

GROWTH & INCOME PORTFOLIO - % % %D
INITIAL CLASS

S&P 500 % % %D

Lipper Growth and Income % % %D
Funds Average

</TABLE>

THE RETURNS IN THE TABLE ARE FOR INITIAL CLASS SHARES OF EACH FUND
WHICH ARE NOT OFFERED IN THIS PROSPECTUS. IF SERVICE CLASS 2'S 0.25%
12B-1 FEE HAD BEEN REFLECTED, RETURNS WOULD HAVE BEEN LOWER THAN THOSE
SHOWN.

A FROM AUGUST 27, 1992.

B FROM DECEMBER 28, 1998.

C FROM JANUARY 3, 1995.

D FROM DECEMBER 31, 1996.

ASSET ALLOCATION FUNDS

<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the periods ended Past 1 year Past 5 years Past 10 years/Life of class
December 31, ____

ASSET MANAGER PORTFOLIO - % % %
INITIAL CLASS

S&P 500 % % %

Fidelity Asset Allocation % % %
Composite Index

ASSET MANAGER: GROWTH % % %A
PORTFOLIO - INITIAL CLASS

S&P 500 % % %A

Fidelity Aggressive Asset % % %A
Allocation Composite Index

</TABLE>

A FROM JANUARY 3, 1995.

INCOME FUNDS

For the periods ended Past 1 year Past 5 years Past 10 years
December 31, ____

INVESTMENT GRADE BOND % % %
PORTFOLIO - INITIAL CLASS

Lehman Brothers Aggregate % % %
Bond Index

Lipper Intermediate % % %
Investment Grade Debt Funds
Average

HIGH INCOME PORTFOLIO - % % %
INITIAL CLASS

Merrill Lynch High Yield % % %
Master Index

Merrill Lynch High Yield % % %
Master II Index

Lipper High Current Yield % % %
Funds Average

MONEY MARKET FUND

For the periods ended Past 1 year Past 5 years Past 10 years
December 31, ____

MONEY MARKET PORTFOLIO - % % %
INITIAL CLASS

THE RETURNS IN THE TABLE ARE FOR INITIAL CLASS SHARES OF THE FUND
WHICH ARE NOT OFFERED IN THIS PROSPECTUS. IF SERVICE CLASS 2'S 0.25%
12B-1 FEE HAD BEEN REFLECTED, RETURNS WOULD HAVE BEEN LOWER THAN THOSE
SHOWN.

[If FMR had not reimbursed certain class expenses during these
periods, Index 500's, Growth Opportunities', Overseas', Balanced's,
Growth & Income's, Asset Manager's, Asset Manager: Growth's,
Investment Grade Bond's, High Income's, and Money Market's returns
would have been lower.]

Fidelity Balanced Composite Index is a hypothetical representation of
the performance of Balanced's general investment categories using a
weighting of 60% equity and 40% bond. The following indexes are used
to calculate the Composite Index: equity - the Standard & Poor's 500
Index (S&P 500(registered trademark)), and bond - the Lehman Brothers
Aggregate Bond Index. The index weightings of the Composite Index are
rebalanced monthly.

Fidelity Asset Allocation Composite Index is a hypothetical
representation of the performance of Asset Manager's three asset
classes according to their respective weightings in the fund's neutral
mix (50% stocks, 40% bonds and 10% short term/money market). The
following indexes are used to calculate the Composite Index: stocks -
the S&P 500, bonds - the Lehman Brothers Aggregate Bond Index, and
short term/money market - the Lehman Brothers 3-Month Treasury Bill
Index. Prior to January 1, 1997, the Lehman Brothers U.S. Treasury
Index was used for the bond class. The index weightings of the
Composite Index are rebalanced monthly.

Fidelity Aggressive Asset Allocation Composite Index is a hypothetical
representation of the performance of Asset Manager: Growth's three
asset classes according to their respective weightings in the fund's
neutral mix (70% stocks, 25% bonds and 5% short term/money market).
The following indexes are used to calculate the Composite Index:
stocks - the S&P 500, bonds - the Lehman Brothers Aggregate Bond
Index, and short term/money market - the Lehman Brothers 3-Month
Treasury Bill Index. Prior to January 1, 1997, the Lehman Brothers
U.S. Treasury Index was used for the bond class. The index weightings
of the Composite Index are rebalanced monthly.

S&P 500 is a market capitalization-weighted index of common stocks.

Standard & Poor's MidCap 400(registered trademark) Index is a market
capitalization-weighted index of 400 medium-capitalization stocks.

Russell 3000(registered trademark) Growth Index is a market
capitalization-weighted index of U.S. domiciled growth oriented
stocks.

Russell 3000(registered trademark) Value Index is a market
capitalization-weighted index of U.S. domiciled value oriented stocks.

Morgan Stanley Capital International Europe, Australasia, Far East
(EAFE) Index is an index that is designed to represent the performance
of developed stock markets outside the United States and Canada. The
index may be compiled in two ways: a market capitalization-weighted
(cap-weighted) and a gross domestic product-weighted (GDP-weighted)
version. As of December 31, 1998, the cap-weighted index included over
1,000 equity securities of companies domiciled in 20 countries, and
the GDP-weighted index included over 1,000 equity securities of
companies domiciled in 20 countries.

The Lehman Brothers 3-Month Treasury Bill Index represents the average
of Treasury Bill rates for each of the prior three months, adjusted to
a bond equivalent yield basis (short-term and money market
instruments).

The Lehman Brothers Aggregate Bond Index is a market value-weighted
index of investment-grade fixed-rate debt issues, including
government, corporate, asset-backed, and mortgage-backed securities,
with maturities of one year or more.

The Lehman Brothers U.S. Treasury Index is a market value-weighted
index of public obligations of the U.S. Treasury with maturities of
one year or more.

Merrill Lynch High Yield Master Index is a market value-weighted index
of all domestic and yankee high-yield bonds. 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.

Going forward, High Income Portfolio's performance will be compared to
the Merrill Lynch High Yield Master II Index rather than the Merrill
Lynch High Yield Master Index because the Merrill Lynch High Yield
Master II Index contains deferred interest bonds and payment-in-kind
securities and is therefore a better representation of the high yield
bond universe.

Merrill Lynch High Yield Master II Index is 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.

Each Lipper Funds Average reflects the performance (excluding sales
charges) of mutual funds with similar objectives.

FUND BASICS

INVESTMENT DETAILS

THE GROWTH AND GROWTH & INCOME FUNDS

INVESTMENT OBJECTIVE

INDEX 500 PORTFOLIO seeks investment results that correspond to the
total return of common stocks publicly traded in the United States, as
represented by the S&P 500.

PRINCIPAL INVESTMENT STRATEGIES

BT normally invests at least 80% of the fund's assets in common stocks
included in the S&P 500. The S&P 500 is a widely recognized, unmanaged
index of common stock prices.

The fund may not always hold all of the same securities as the S&P
500. BT may choose, if extraordinary circumstances warrant, to exclude
an index stock from the fund and substitute a similar stock if doing
so will help the fund achieve its objective.

The fund seeks to achieve a 98% or better correlation between its
total return and the total return of the index. The fund may not track
the index perfectly because differences between the index and the
fund's portfolio can cause differences in performance. In addition,
expenses and transaction costs, the size and frequency of cash flow
into and out of the fund, and differences between how and when the
fund and the index are valued can cause differences in performance.

BT may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.

BT may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If BT's
strategies do not work as intended, the fund may not achieve its
objective.

INVESTMENT OBJECTIVE

MID CAP PORTFOLIO seeks long-term growth of capital.

PRINCIPAL INVESTMENT STRATEGIES

FMR normally invests the fund's assets primarily in common stocks.

FMR normally invests at least 65% of the fund's total assets in
securities of companies with medium market capitalizations. Medium
market capitalization companies are those whose market capitalization
is similar to the capitalization of companies in the S&P MidCap 400 at
the time of the fund's investment. Companies whose capitalization no
longer meets this definition after purchase continue to be considered
to have a medium market capitalization for purposes of the 65% policy.
As of December 31, 1998, the S&P MidCap 400 included companies with
capitalizations between $141 million and $73 billion. The size of
companies in the S&P MidCap 400 changes with market conditions and the
composition of the index. FMR may also invest the fund's assets in
companies with smaller or larger market capitalizations.

FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.

FMR is not constrained by any particular investment style. At any
given time, FMR may tend to buy "growth" stocks or "value" stocks, or
a combination of both types. In buying and selling securities for the
fund, FMR relies on fundamental analysis of each issuer and its
potential for success in light of its current financial condition, its
industry position, and economic and market conditions. Factors
considered include growth potential, earnings estimates and
management.

FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.

FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.

INVESTMENT OBJECTIVE

GROWTH OPPORTUNITIES PORTFOLIO seeks to provide capital growth.

PRINCIPAL INVESTMENT STRATEGIES

FMR normally invests the fund's assets primarily in common stocks. FMR
may also invest the fund's assets in other types of securities,
including bonds which may be lower-quality debt securities.

FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.

FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.

INVESTMENT OBJECTIVE

CONTRAFUND PORTFOLIO seeks long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

FMR normally invests the fund's assets primarily in common stocks.

FMR invests the fund's assets in securities of companies whose value
FMR believes is not fully recognized by the public. The types of
companies in which the fund may invest include companies experiencing
positive fundamental change such as a new management team or product
launch, a significant cost-cutting initiative, a merger or
acquisition, or a reduction in industry capacity that should lead to
improved pricing; companies whose earnings potential has increased or
is expected to increase more than generally perceived; companies that
have enjoyed recent market popularity but which appear to have
temporarily fallen out of favor for reasons that are considered
non-recurring or short-term; and companies that are undervalued in
relation to securities of other companies in the same industry.

FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.

FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.

INVESTMENT OBJECTIVE

GROWTH PORTFOLIO seeks to achieve capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

FMR normally invests the fund's assets primarily in common stocks.

FMR invests the fund's assets in companies FMR believes have
above-average growth potential. Growth may be measured by factors such
as earnings or revenue.

Companies with high growth potential tend to be companies with higher
than average price/earnings (P/E) ratios. Companies with strong growth
potential often have new products, technologies, distribution channels
or other opportunities or have a strong industry or market position.
The stocks of these companies are often called "growth" stocks.

FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.

In buying and selling securities for the fund, FMR relies on
fundamental analysis of each issuer and its potential for success in
light of its current financial condition, its industry position, and
economic and market conditions. Factors considered include growth
potential, earnings estimates and management.

FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.

INVESTMENT OBJECTIVE

OVERSEAS PORTFOLIO seeks long-term growth of capital.

PRINCIPAL INVESTMENT STRATEGIES

FMR normally invests at least 65% of the fund's total assets in
foreign securities. FMR normally invests the fund's assets primarily
in common stocks.

FMR normally diversifies the fund's investments across different
countries and regions. In allocating the fund's investments across
countries and regions, FMR will consider the size of the market in
each country and region relative to the size of the international
market as a whole.

FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.

INVESTMENT OBJECTIVE

BALANCED PORTFOLIO seeks both income and growth of capital.

PRINCIPAL INVESTMENT STRATEGIES

FMR manages the fund to maintain a balance between stocks and bonds.
When FMR's outlook is neutral, it will invest approximately 60% of the
fund's assets in stocks and other equity securities and the remainder
in bonds and other debt securities, including lower-quality debt
securities. FMR may vary from this target if it believes stocks or
bonds offer more favorable opportunities, but will always invest at
least 25% of the fund's total assets in fixed-income senior securities
(including debt securities and preferred stock).

FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.

With respect to the fund's equity investments, FMR's emphasis on
above-average income-producing equity securities tends to lead to
investments in stocks that have more "value" characteristics than
"growth" characteristics. However, FMR is not constrained by any
particular investment style. In buying and selling securities for the
fund, FMR generally analyzes the issuer of a security using
fundamental factors (e.g., growth potential, earnings estimates and
management) and evaluates each security's current price relative to
its estimated long-term value.

FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.

FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices, interest rates or other factors that affect security
values. If FMR's strategies do not work as intended, the fund may not
achieve its objective.

INVESTMENT OBJECTIVE

PRINCIPAL INVESTMENT STRATEGIES

FMR normally invests at least 65% of the fund's total assets in
income-producing equity securities. FMR may also invest the fund's
assets in other types of equity securities and debt securities,
including lower-quality debt securities.

FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.

FMR's emphasis on above-average income-producing equity securities
tends to lead to investments in large cap "value" stocks. However, FMR
is not constrained by any particular investment style. In buying and
selling securities for the fund, FMR relies on fundamental analysis of
each issuer and its potential for success in light of its current
financial condition, its industry position, and economic and market
conditions. Factors considered include growth potential, earnings
estimates and management.

FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.

FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices, or other factors that affect security values. If
FMR's strategies do not work as intended, the fund may not achieve its
objective.

INVESTMENT OBJECTIVE

GROWTH & INCOME PORTFOLIO seeks high total return through a
combination of current income and capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

FMR normally invests a majority of the fund's assets in common stocks
with a focus on those that pay current dividends and show potential
for capital appreciation. FMR may also invest the fund's assets in
bonds, including lower-quality debt securities, as well as stocks that
are not currently paying dividends, but offer prospects for future
income or capital appreciation.

FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.

FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.

DESCRIPTION OF PRINCIPAL SECURITY TYPES

EQUITY SECURITIES represent an ownership interest, or the right to
acquire an ownership interest, in an issuer. Different types of equity
securities provide different voting and dividend rights and priority
in the event of the bankruptcy of the issuer. Equity securities
include common stocks, preferred stocks, convertible securities and
warrants.

DEBT SECURITIES are used by issuers to borrow money. The issuer
usually pays a fixed, variable or floating rate of interest, and must
repay the amount borrowed at the maturity of the security. Some debt
securities, such as zero coupon bonds, do not pay current interest,
but are sold at a discount from their face values. Debt securities
include corporate bonds, government securities, and mortgage and other
asset-backed securities.

PRINCIPAL INVESTMENT RISKS

Many factors affect each fund's performance. A fund's share price
changes daily based on changes in market conditions and interest rates
and in response to other economic, political or financial
developments. A fund's reaction to these developments will be affected
by the types of the securities in which the fund invests, the
financial condition, industry and economic sector, and geographic
location of an issuer, and the fund's level of investment in the
securities of that issuer. When you sell your shares of a fund, they
could be worth more or less than what you paid for them.

The following factors may significantly affect a fund's performance:

STOCK MARKET VOLATILITY. The value of equity securities fluctuates in
response to issuer, political, market and economic developments. In
the short term, equity prices can fluctuate dramatically in response
to these developments. Different parts of the market and different
types of equity securities can react differently to these
developments. For example, large cap stocks can react differently than
small cap stocks, and "growth" stocks can react differently than
"value" stocks. Issuer, political or economic developments can affect
a single issuer, issuers within an industry or economic sector or
geographic region, or the market as a whole.

FOREIGN EXPOSURE. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations
can involve additional risks relating to political, economic or
regulatory conditions in foreign countries. These risks include
fluctuations in foreign currencies; withholding or other taxes;
trading, settlement, custodial and other operational risks; and the
less stringent investor protection and disclosure standards of some
foreign markets. For example, many foreign countries are less prepared
than the United States to properly process and calculate information
related to dates from and after January 1, 2000, which could result in
difficulty pricing foreign investments and failure by foreign issuers
to pay timely dividends, interest or principal. All of these factors
can make foreign investments, especially those in emerging markets,
more volatile and potentially less liquid than U.S. investments. In
addition, foreign markets can perform differently than the U.S.
market.

Investing in emerging markets involves risks in addition to and
greater than those generally associated with investing in more
developed foreign markets. The extent of foreign development;
political stability; market depth, infrastructure and capitalization
and regulatory oversight are generally less than in more developed
markets. Emerging market economies can be subject to greater social,
economic, regulatory and political uncertainties. All of these factors
can make emerging market securities more volatile and potentially less
liquid than securities issued in more developed markets.

PREPAYMENT. Many types of debt securities, including mortgage
securities, are subject to prepayment risk. Prepayment occurs when the
issuer of a security can repay principal prior to the security's
maturity. Securities subject to prepayment generally offer less
potential for gains during a declining interest rate environment and
similar or greater potential for loss in a rising interest rate
environment. In addition, the potential impact of prepayment features
on the price of a debt security can be difficult to predict and result
in greater volatility.

ISSUER-SPECIFIC CHANGES. Changes in the financial condition of an
issuer, changes in specific economic or political conditions that
affect a particular type of security or issuer, and changes in general
economic or political conditions can affect the credit quality or
value of an issuer's securities. The value of securities of smaller,
less well-known issuers can be more volatile than that of larger
issuers. Lower-quality debt securities (those of less than
investment-grade quality) tend to be more sensitive to these changes
than higher-quality debt securities.

"GROWTH" INVESTING. "Growth" stocks can react differently to issuer,
political, market and economic developments than the market as a whole
and other types of stocks. "Growth" stocks tend to be more expensive
relative to their earnings or assets compared to other types of
stocks. As a result, "growth" stocks tend to be sensitive to changes
in their earnings and more volatile than other types of stocks.

"VALUE" INVESTING. "Value" stocks can react differently to issuer,
political, market and economic developments than the market as a whole
and other types of stocks. "Value" stocks tend to be inexpensive
relative to their earnings or assets compared to other types of
stocks. However, "value" stocks can continue to be inexpensive for
long periods of time and may not ever realize their full value.

In response to market, economic, political or other conditions, FMR
(BT for Index 500 Portfolio) may temporarily use a different
investment strategy for defensive purposes. If FMR (BT for Index 500
Portfolio) does so, different factors could affect a fund's
performance and the fund may not achieve its investment objective.

THE ASSET ALLOCATION FUNDS

INVESTMENT OBJECTIVE

ASSET MANAGER PORTFOLIO seeks to obtain high total return with reduced
risk over the long term by allocating its assets among stocks, bonds,
and short-term instruments.

PRINCIPAL INVESTMENT STRATEGIES

FMR allocates the fund's assets among the following classes, or types,
of investments. The STOCK CLASS includes equity securities of all
types. The BOND CLASS includes all varieties of fixed-income
securities, including lower-quality debt securities, maturing in more
than one year. The SHORT-TERM/MONEY MARKET CLASS includes all types of
short-term and money market instruments.

FMR may use its judgement to place a security in the most appropriate
class based on its investment characteristics. Fixed-income securities
may be classified in the bond or short-term/money market class
according to interest rate sensitivity as well as maturity. FMR may
also invest the fund's assets in other instruments that do not fall
within these classes.

FMR has the ability to allocate the fund's assets within specified
ranges. The fund's neutral mix represents the benchmark for its
combination of investments in each asset class over time. FMR may
change the neutral mix from time to time. The approximate neutral mix
and range for each asset class are shown below:

Neutral Mix
STOCKS 50%
(can range from 30-70%)
Row: 1, Col: 1, Value: 10.0
Row: 1, Col: 2, Value: 50.0
Row: 1, Col: 3, Value: 40.0
BONDS 40%
(can range from 20-60%)
SHORT-TERM/MONEY
MARKET 10% (can range
from 0-50%)

FMR will not try to pinpoint the precise moment when a major
reallocation should be made. Instead, FMR regularly reviews the fund's
allocation and makes changes gradually to favor investments that it
believes will provide the most favorable outlook for achieving the
fund's objective. Normally, a single reallocation will not involve
more than 10% of the fund's total assets.

FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.

In buying and selling securities for the fund, FMR generally analyzes
the issuer of a security using fundamental factors (e.g., growth
potential, earnings estimates and management) and/or quantitative
factors (e.g., historical earnings, dividend yield and earnings per
share) and evaluates each security's current price relative to its
estimated long-term value.

FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.

INVESTMENT OBJECTIVE

ASSET MANAGER: GROWTH PORTFOLIO seeks to maximize total return by
allocating its assets among stocks, bonds, short-term instruments, and
other investments.

PRINCIPAL INVESTMENT STRATEGIES

Neutral Mix
STOCKS 70%
(can range from
50-100%)
Row: 1, Col: 1, Value: 5.0
Row: 1, Col: 2, Value: 70.0
Row: 1, Col: 3, Value: 25.0
BONDS 25%
(can range from 0-50%)
SHORT-TERM/MONEY
MARKET 5% (can range
from 0-50%)

FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.

FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.

DESCRIPTION OF PRINCIPAL SECURITY TYPES

MONEY MARKET SECURITIES are high-quality, short-term securities that
pay a fixed, variable or floating interest rate. Securities are often
specifically structured so that they are eligible investments for a
money market fund. For example, in order to satisfy the maturity
restrictions for a money market fund, some money market securities
have demand or put features which have the effect of shortening the
security's maturity. Taxable money market securities include bank
certificates of deposit, bank acceptances, bank time deposits, notes,
commercial paper and U.S. Government securities.

PRINCIPAL INVESTMENT RISKS

Many factors affect each fund's performance. A fund's share price and
yield change daily based on changes in market conditions and interest
rates and in response to other economic, political or financial
developments. A fund's reaction to these developments will be affected
by the types and maturities of the securities in which the fund
invests, the financial condition, industry and economic sector, and
geographic location of an issuer, and the fund's level of investment
in the securities of that issuer. When you sell your shares of a fund,
they could be worth more or less than what you paid for them.

The following factors may significantly affect a fund's performance:

INTEREST RATE CHANGES. Debt securities have varying levels of
sensitivity to changes in interest rates. In general, the price of a
debt security can fall when interest rates rise and can rise when
interest rates fall. Securities with longer maturities and mortgage
securities can be more sensitive to interest rate changes. In other
words, the longer the maturity of a security, the greater the impact a
change in interest rates could have on the security's price. In
addition, short-term and long-term interest rates do not necessarily
move in the same amount or the same direction. Short-term securities
tend to react to changes in short-term interest rates, and long-term
securities tend to react to changes in long-term interest rates.

In response to market, economic, political or other conditions, FMR
may temporarily use a different investment strategy for defensive
purposes. If FMR does so, different factors could affect a fund's
performance and the fund may not achieve its investment objective.

THE INCOME FUNDS

INVESTMENT OBJECTIVE

INVESTMENT GRADE BOND PORTFOLIO seeks as high a level of current
income as is consistent with the preservation of capital.

PRINCIPAL INVESTMENT STRATEGIES

FMR normally invests the fund's assets in U.S. dollar-denominated
investment-grade bonds.

FMR uses the Lehman Brothers Aggregate Bond Index as a guide in
structuring the fund and selecting its investments. FMR manages the
fund to have similar overall interest rate risk to the index. As of
December 31, 1998, the dollar-weighted average maturity of the fund
and the index was approximately 8.1 and 8.6 years, respectively. In
determining a security's maturity for purposes of calculating the
fund's average maturity, an estimate of the average time for its
principal to be paid may be used. This can be substantially shorter
than its stated maturity.

FMR allocates the fund's assets among different market sectors (for
example, corporate or government securities) and different maturities
based on its view of the relative value of each sector or maturity.

In buying and selling securities for the fund, FMR analyzes a
security's structural features, current price compared to its
estimated long-term value, and any short-term trading opportunities
resulting from market inefficiencies, and the credit quality of its
issuer.

In order to earn additional income for the fund, FMR may use a trading
strategy that involves selling mortgage securities and simultaneously
agreeing to purchase similar securities on a later date at a set
price. This trading strategy may result in an increased portfolio
turnover rate which increases transaction costs and may increase
taxable gains.

INVESTMENT OBJECTIVE

HIGH INCOME PORTFOLIO seeks a high level of current income while also
considering growth of capital.

PRINCIPAL INVESTMENT STRATEGIES

FMR normally invests at least 65% of the fund's total assets in
income-producing debt securities, preferred stocks and convertible
securities, with an emphasis on lower-quality debt securities. Many
lower-quality debt securities are subject to legal or contractual
restrictions limiting FMR's ability to resell the securities to the
general public. FMR may also invest the fund's assets in non-income
producing securities, including defaulted securities and common
stocks. FMR currently intends to limit common stocks to 10% of the
fund's total assets. FMR may invest in companies whose financial
condition is troubled or uncertain and that may be involved in
bankruptcy proceedings, reorganizations or financial restructurings.

FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.

In buying and selling securities for the fund, FMR relies on
fundamental analysis of each issuer and its potential for success in
light of its current financial condition, its industry position, and
economic and market conditions. Factors considered include a
security's structural features and current price compared to its
long-term value, and the earnings potential, credit standing and
management of the security's issuer.

DESCRIPTION OF PRINCIPAL SECURITY TYPES

PRINCIPAL INVESTMENT RISKS

Many factors affect each fund's performance. A fund's yield and share
price change daily based on changes in interest rates and market
conditions and in response to other economic, political or financial
developments. A fund's reaction to these developments will be affected
by the types and maturities of the securities in which the fund
invests, the financial condition, industry and economic sector, and
geographic location of an issuer, and the fund's level of investment
in the securities of that issuer. When you sell your shares of a fund,
they could be worth more or less than what you paid for them.

The following factors may significantly affect a fund's performance:

Lower-quality debt securities involve greater risk of default or price
changes due to changes in the credit quality of the issuer. The value
of lower-quality debt securities often fluctuates in response to
company, political or economic developments and can decline
significantly over short periods of time or during periods of general
or regional economic difficulty. Lower-quality debt securities can be
thinly traded or have restrictions on resale, making them difficult to
sell at an acceptable price. The default rate for lower-quality debt
securities is likely to be higher during economic recessions or
periods of high interest rates.

In response to market, economic, political or other conditions, FMR
may temporarily use a different investment strategy for defensive
purposes. If FMR does so, different factors could affect the fund's
performance and the fund may not achieve its investment objective.

THE MONEY MARKET FUND

INVESTMENT OBJECTIVE

MONEY MARKET PORTFOLIO seeks as high a level of current income as is
consistent with preservation of capital and liquidity.

PRINCIPAL INVESTMENT STRATEGIES

FMR invests the fund's assets in U.S. dollar-denominated money market
securities of domestic and foreign issuers, including U.S. Government
securities and repurchase agreements. FMR also may enter into reverse
repurchase agreements for the fund.

FMR will invest more than 25% of the fund's total assets in the
financial services industry.

In buying and selling securities for the fund, FMR complies with
industry-standard requirements for money market funds regarding the
quality, maturity and diversification of the fund's investments. FMR
stresses maintaining a stable $1.00 share price, liquidity and income.

DESCRIPTION OF PRINCIPAL SECURITY TYPES

PRINCIPAL INVESTMENT RISKS

Many factors affect the fund's performance. The fund's yield will
change daily based on changes in interest rates and other market
conditions. Although the fund is managed to maintain a stable $1.00
share price, there is no guarantee that the fund will be able to do
so. For example, a major increase in interest rates or a decrease in
the credit quality of the issuer of one of the fund's investments
could cause the fund's share price to decrease. While the fund will be
charged premiums by a mutual insurance company for coverage of
specified types of losses related to default or bankruptcy on certain
securities, the fund may incur losses regardless of the insurance.

The following factors may significantly affect the fund's performance:

INTEREST RATE CHANGES. Money market securities have varying levels of
sensitivity to changes in interest rates. In general, the price of a
money market security can fall when interest rates rise and can rise
when interest rates fall. Securities with longer maturities and the
securities of issuers in the financial services sector can be more
sensitive to interest rate changes. Short-term securities tend to
react to changes in short-term interest rates.

FOREIGN EXPOSURE. Issuers located in foreign countries and entities
located in foreign countries that provide credit support or a
maturity-shortening structure can involve increased risks. Extensive
public information about the issuer or provider may not be available
and unfavorable political, economic or governmental developments could
affect the value of the security.

FINANCIAL SERVICES EXPOSURE. Financial services companies are highly
dependent on the supply of short-term financing. The value of
securities of issuers in the financial services sector can be
sensitive to changes in government regulation and interest rates and
to economic downturns in the United States and abroad.

ISSUER-SPECIFIC CHANGES. Changes in the financial condition of an
issuer, changes in specific economic or political conditions that
affect a particular type of issuer, and changes in general economic or
political conditions can affect the credit quality or value of an
issuer's securities. Entities providing credit support or a
maturity-shortening structure also can be affected by these types of
changes. If the structure of a security fails to function as intended,
the security could decline in value.

FUNDAMENTAL INVESTMENT POLICIES

The policies discussed below are fundamental, that is, subject to
change only by shareholder approval.

INDEX 500 PORTFOLIO seeks investment results that correspond to the
total return of common stocks publicly traded in the United States, as
represented by the S&P 500.

MID CAP PORTFOLIO seeks long-term growth of capital.

GROWTH OPPORTUNITIES PORTFOLIO seeks to provide capital growth by
investing primarily in common stocks and securities convertible into
common stocks.

CONTRAFUND PORTFOLIO seeks long-term capital appreciation.

GROWTH PORTFOLIO seeks to achieve capital appreciation.

OVERSEAS PORTFOLIO seeks long-term growth of capital primarily through
investments in foreign securities.

BALANCED PORTFOLIO seeks both income and growth of capital by
investing in a diversified portfolio of equity and fixed-income
securities with income, growth of income, and capital appreciation
potential.

EQUITY-INCOME PORTFOLIO seeks reasonable income by investing primarily
in income-producing equity securities. In choosing these securities,
the fund will also consider the potential for capital appreciation.
The fund's goal is to achieve a yield which exceeds the composite
yield on the securities comprising the S&P 500.

GROWTH & INCOME PORTFOLIO seeks high total return through a
combination of current income and capital appreciation.

ASSET MANAGER PORTFOLIO seeks to obtain high total return with reduced
risk over the long term by allocating its assets among stocks, bonds,
and short-term instruments.

ASSET MANAGER: GROWTH PORTFOLIO seeks to maximize total return by
allocating its assets among stocks, bonds, short-term instruments, and
other investments.

INVESTMENT GRADE BOND PORTFOLIO seeks as high a level of current
income as is consistent with the preservation of capital.

HIGH INCOME PORTFOLIO seeks a high level of current income by
investing primarily in high yielding, fixed-income securities, while
also considering growth of capital.

MONEY MARKET PORTFOLIO seeks as high a level of current income as is
consistent with preservation of capital and liquidity by investing in
money market instruments.

VALUING SHARES

Each fund is open for business each day the New York Stock Exchange
(NYSE) is open.

A class's net asset value per share (NAV) is the value of a single
share. Fidelity(registered trademark) normally calculates Service
Class 2's NAV as of the close of business of the NYSE, normally 4:00
p.m. Eastern time. However, NAV may be calculated earlier if trading
on the NYSE is restricted or as permitted by the Securities and
Exchange Commission (SEC). Each fund's assets are valued as of this
time for the purpose of computing Service Class 2's NAV.

To the extent that each fund's assets are traded in other markets on
days when the NYSE is closed, the value of the fund's assets may be
affected on days when the fund is not open for business. In addition,
trading in some of a fund's assets may not occur on days when the fund
is open for business.

Money Market's assets are valued on the basis of amortized cost.

Each fund's (except Money Market's) assets are valued primarily on the
basis of market quotations or on the basis of information furnished by
a pricing service. Certain short-term securities are valued on the
basis of amortized cost. If market quotations or information furnished
by a pricing service is not readily available for a security or if a
security's value has been materially affected by events occurring
after the close of the exchange or market on which the security is
principally traded (for example, a foreign exchange or market), that
security may be valued by another method that the Board of Trustees
believes accurately reflects fair value. A security's valuation may
differ depending on the method used for determining value.

SHAREHOLDER INFORMATION

BUYING AND SELLING SHARES

The price to buy one share of Service Class 2 is the class's NAV.

The price to sell one share of Service Class 2 is the class's NAV.

Only "separate accounts" of insurance companies that have executed
certain agreements with the funds can buy or sell shares of the funds.
A separate account is a segregated asset account. Separate accounts
fund variable annuity contracts and variable life insurance policies.
Please refer to your insurance company's separate account prospectus
for investing information.

Each insurance company separate account places a single order to buy
or sell shares of each fund each business day. The insurance company
calculates the amount of the order based on the aggregate instructions
to the insurer from owners of the insurer's variable annuity contracts
and variable life insurance policies. Instructions received from
owners before the close of the NYSE on a given day usually result in
fund share purchases and redemptions at the NAV calculated as of the
close of the NYSE that day. In some cases, the applicable NAV is the
next NAV calculated after the order is received by the fund.

A fund will normally send the proceeds from redemption orders to the
insurance company one business day after the fund receives the
redemption order. A fund must send the proceeds within 7 days after
the fund receives the redemption order.

Redemptions may be suspended or payment dates postponed when the NYSE
is closed (other than weekends or holidays), when trading on the NYSE
is restricted, or as permitted by the SEC.

Agreements executed with insurance companies obligate a fund to sell
and redeem fund shares each day that the NYSE is open for business.
Notwithstanding anything else in the agreements, the Board may refuse
to sell shares of any fund to any separate account, or suspend or
terminate the offering of shares of any fund if such action is
required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the Board acting in good faith and in
light of its fiduciary duties under federal and any applicable state
laws, necessary in the best interests of the shareholders of such
fund.

Each fund sells its shares to separate accounts of insurance companies
that are affiliated with FMR and to separate accounts of insurance
companies that are unaffiliated with FMR. Each fund currently does not
foresee any disadvantages to policyowners arising out of the fact that
each fund offers its shares to separate accounts of various insurance
companies to serve as the investment medium for their variable
products. Nevertheless, the Board of Trustees intends to monitor
events in order to identify any material irreconcilable conflicts
which may possibly arise, and to determine what action, if any, should
be taken in response to such conflicts. If such a conflict were to
arise, one or more insurance companies' separate accounts might be
required to withdraw its investments in one or more funds and shares
of another fund may be substituted. This might force a fund to sell
securities at disadvantageous prices.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

Each fund earns dividends, interest and other income from its
investments, and distributes this income (less expenses) to
shareholders as dividends. Each fund may also realize capital gains
from its investments, and distribute these gains (less any losses), if
any, to shareholders as capital gains distributions.

Money Market Portfolio normally declares dividends daily and pays them
monthly. Index 500, Mid Cap, Growth Opportunities, Contrafund, Growth,
Overseas, Balanced, Equity-Income, Growth & Income, Asset Manager,
Asset Manager: Growth, Investment Grade Bond, and High Income
Portfolios will distribute any dividends at least annually. Normally,
net realized capital gains, if any, are distributed each year for a
fund.

Dividends and capital gains distributions from a fund will be
automatically reinvested in additional shares of the same class of the
fund.

TAX CONSEQUENCES

Please refer to your insurance company's separate account prospectus
for a discussion of the tax status of your variable annuity or
variable life insurance contract. It is suggested you keep all
statements you receive to assist in your personal recordkeeping.

It is expected that shares of the funds will be held by insurance
company separate accounts under the terms of variable annuity and
variable life insurance contracts. Under current tax law, dividends or
capital gains distributions from a fund are not currently taxable to
holders of variable annuity and variable life insurance contracts when
left to accumulate within a variable contract. Depending on the
variable contract, withdrawals from the contract may be subject to
ordinary income tax and, in addition, to a 10% penalty tax on
withdrawals before age 59.

FUND SERVICES

FUND MANAGEMENT

Each fund is a mutual fund, an investment that pools shareholders'
money and invests it toward a specified goal.

FMR is each fund's manager.

As of [month] [day], [year] FMR had approximately [$___] billion in
discretionary assets under management.

As the manager, FMR is responsible for choosing investments for the
funds (except Index 500) and handling the funds' business affairs.

BT serves as sub-adviser and custodian for Index 500. BT chooses the
fund's investments and places orders to buy and sell the fund's
investments.

As of [month] [day], [year], BT had approximately [$___] billion in
discretionary assets under management.

BT's principal offices are at 130 Liberty Street, New York, New York
10006.

Effective June 4, 1999, Bankers Trust Corporation and all of its
subsidiaries, including BT, merged with and into a subsidiary of
Deutsche Bank AG. At a meeting held on March 18, 1999, Index 500's
Board of Trustees approved a new sub-advisory agreement among the
fund, FMR and BT or its successor by merger that became effective June
4, 1999. At a meeting held on September 15, 1999, shareholders
approved this agreement.

On March 11, 1999, BT announced that it had reached an agreement with
the United States Attorney's Office in the Southern District of New
York to resolve an investigation concerning inappropriate transfers of
unclaimed funds and related record keeping problems that occurred
between 1994 and early 1996. Pursuant to its agreement with the U.S.
Attorney's Office, BT pleaded guilty to misstating entries in the
bank's books and records and agreed to pay a $60 million fine to
federal authorities. Separately, BT agreed to pay a $3.5 million fine
to the State of New York. The events leading up to the guilty plea did
not arise out of the investment advisory or mutual fund management
activities of BT or its affiliates.

As a result of the plea, absent an order from the SEC, BT would not be
able to continue to provide investment advisory services to Index 500.
The SEC has granted a temporary order to permit BT and its affiliates
to continue to provide investment advisory services to registered
investment companies. There is no assurance that the SEC will grant a
permanent order.

Affiliates assist FMR with foreign investments:

(small solid bullet) Fidelity Management & Research (U.K.) Inc. (FMR
U.K.), in London, England, serves as a sub-adviser for Mid Cap, Growth
Opportunities, Contrafund, Overseas, Balanced, Growth & Income, Asset
Manager, Asset Manager: Growth, and High Income. FMR U.K. was
organized in 1986 to provide investment research and advice to FMR.
Currently, FMR U.K. provides investment research and advice on issuers
based outside the United States and may also provide investment
advisory services for each fund.

(small solid bullet) Fidelity Management & Research Far East Inc. (FMR
Far East), in Tokyo, Japan, serves as a sub-adviser for Mid Cap,
Growth Opportunities, Contrafund, Overseas, Balanced, Growth & Income,
Asset Manager, Asset Manager: Growth, and High Income. FMR Far East
was organized in 1986 to provide investment research and advice to
FMR. Currently, FMR Far East provides investment research and advice
on issuers based outside the United States and may also provide
investment advisory services for each fund.

(small solid bullet) Fidelity International Investment Advisors
(FIIA), in Pembroke, Bermuda, serves as a sub-adviser for Overseas. As
of [month] [day], [year], FIIA had approximately [$__] in
discretionary assets under management. Currently, FIIA provides
investment research and advice on issuers based outside the United
States and may also provide investment advisory services for Overseas.

(small solid bullet) Fidelity International Investment Advisors (U.K.)
Limited (FIIA(U.K.)L), in London, England, serves as a sub-adviser for
Overseas. As of [month] [day], [year], FIIA(U.K.)L had approximately
[$___] in discretionary assets under management. Currently,
FIIA(U.K.)L provides investment research and advice on issuers based
outside the United States and may also provide investment advisory
services for Overseas.

Fidelity Investments Money Management, Inc. (FIMM), in Merrimack, New
Hampshire, serves as sub-adviser for Investment Grade Bond and Money
Market. FIMM is primarily responsible for choosing investments for
Investment Grade Bond and Money Market. FIMM also serves as a
sub-adviser for Balanced, Asset Manager, and Asset Manager: Growth.
FIMM is responsible for choosing certain types of investments for
Balanced, Asset Manager, and Asset Manager: Growth.

FIMM is an affiliate of FMR. As of [month] [day], [year], FIMM had
approximately [$____] in discretionary assets under management.

A fund could be adversely affected if the computer systems used by
FMR, BT and other service providers do not properly process and
calculate date-related information from and after January 1, 2000. FMR
and BT have advised each fund that they are actively working on
necessary changes to its computer systems and expect that their
systems, and those of other major service providers, will be modified
prior to January 1, 2000. However, there can be no assurance that
there will be no adverse impact on a fund.

David Felman is Vice President and manager of Mid Cap Portfolio. He
also manages other Fidelity funds. Mr. Felman joined Fidelity as an
analyst in 1993.

George Vanderheiden is Vice President and manager of Growth
Opportunities Portfolio, which he has managed since January 1995. He
also manages other Fidelity funds. Mr. Vanderheiden is a member of the
Board of Directors for FMR Corp. He joined Fidelity in 1971.

Charles Mangum will provide assistance in managing Growth
Opportunities Portfolio from time to time. He also manages another
Fidelity fund. Since joining Fidelity in 1990, Mr. Mangum has worked
as an analyst and manager.

Will Danoff is Vice President and manager of Contrafund Portfolio,
which he has managed since January 1995. He also manages another
Fidelity fund. Since joining Fidelity in 1986, Mr. Danoff has worked
as an analyst and manager.

Jason Weiner is associate manager of Contrafund Portfolio, which he
has managed since April 1998. He also manages another Fidelity fund.
Since joining Fidelity in 1991, Mr. Weiner has worked as an analyst
and manager.

Jennifer Uhrig is Vice President and manager of Growth Portfolio,
which she has managed since January 1997. She also manages another
Fidelity fund. Since joining Fidelity in 1987, Ms. Uhrig has worked as
an analyst and manager.

Richard Mace is Vice President and manager of Overseas Portfolio,
which he has managed since March 1996. He also manages several other
Fidelity funds. Since joining Fidelity in 1987, Mr. Mace has worked as
an analyst and manager.

John Avery is manager of Balanced Portfolio, which he has managed
since January 1998; he had been associate manager of the fund since
September 1997. He also manages another Fidelity fund. Mr. Avery
joined Fidelity as an analyst in 1995. Previously, he was an analyst
for Putnam Investments from 1993 to 1994.

Stephen Petersen is Vice President and manager of Equity-Income
Portfolio, which he has managed since January 1997. He also manages
another Fidelity fund. Since joining Fidelity in 1980, Mr. Petersen
has worked as an analyst and manager.

Louis Salemy is manager of Growth & Income Portfolio, which he has
managed since September 1998. Previously, he was associate manager of
Growth & Income Portfolio and managed other Fidelity funds. Since
joining Fidelity in 1992, Mr. Salemy has worked as an analyst,
manager, and portfolio assistant.

Dick Habermann is Vice President and lead manager of Asset Manager
Portfolio and Asset Manager: Growth Portfolio, both of which he has
managed since March 1996. Other Fidelity investment professionals
assist Mr. Habermann in selecting investments within each asset class
for the funds. He also manages several other Fidelity funds. Mr.
Habermann is a Senior Vice President of FMR Co. He joined Fidelity in
1968.

Kevin Grant is Vice President and manager of Investment Grade Bond
Portfolio, which he has managed since February 1997. He also is Vice
President of Balanced Portfolio and manager of its fixed-income
investments since March 1996. He also manages several other Fidelity
funds. Mr. Grant joined Fidelity as a portfolio manager in 1993.

Barry Coffman is Vice President and manager of High Income Portfolio,
which he has managed since August 1990. He also co-manages other
Fidelity funds. Mr. Coffman joined Fidelity as an analyst in 1986.

Each fund has an investment objective similar to that of an existing
Fidelity fund. Index 500 Portfolio is most similar to Spartan Market
Index Fund; Mid Cap Portfolio is most similar to Fidelity Advisor Mid
Cap Fund; Growth Opportunities Portfolio is most similar to Fidelity
Advisor Growth Opportunities Fund; Contrafund Portfolio is most
similar to Fidelity Contrafund; Growth Portfolio is most similar to
Fidelity Growth Company Fund; Overseas Portfolio is most similar to
Fidelity Overseas Fund; Balanced Portfolio is most similar to Fidelity
Advisor Balanced Fund; Equity-Income Portfolio is most similar to
Fidelity Equity-Income Fund; Growth & Income Portfolio is most similar
to Fidelity Growth & Income Portfolio; Asset Manager Portfolio is most
similar to Fidelity Asset Manager; Asset Manager: Growth Portfolio is
most similar to Fidelity Asset Manager: Growth; Investment Grade Bond
Portfolio is most similar to Fidelity Investment Grade Bond Fund; High
Income Portfolio is most similar to Fidelity High Income Fund; and
Money Market Portfolio is most similar to Fidelity Cash Reserves.

The performance of a fund is not expected to be the same as the
performance of the existing Fidelity fund to which it is most similar
due to differences in investments, economies of scale, and other
factors. Various insurance-related costs at the insurance company's
separate account level will also affect performance.

Fidelity and BT investment personnel may invest in securities for
their own investment accounts pursuant to codes of ethics that
establish procedures for personal investing and restrict certain
transactions.

Mid Cap, Growth Opportunities, Contrafund, Growth, Overseas, Balanced,
Equity-Income, Growth & Income, Asset Manager, Asset Manager: Growth,
Investment Grade Bond, High Income, and Money Market each pays a
management fee to FMR. The management fee is calculated and paid to
FMR every month. The fee for each fund (except Money Market) is
calculated by adding a group fee rate to an individual fund fee rate,
dividing by twelve, and multiplying the result by the fund's average
net assets throughout the month.

The fee for Money Market is calculated by adding a group fee rate to
an individual fund fee rate, dividing by twelve and multiplying the
result by the fund's average net assets throughout the month, and then
adding an income-based fee. The income-based fee is 6% of the fund's
monthly gross income in excess of an annualized 5% yield, but it
cannot rise above an annual rate of 0.24% of the fund's average net
assets throughout that month.

The group fee rate is based on the average net assets of all the
mutual funds advised by FMR. This rate cannot rise above 0.52% for Mid
Cap, Growth Opportunities, Contrafund, Growth, Overseas, Balanced,
Equity-Income, Growth & Income, Asset Manager, and Asset Manager:
Growth, or 0.37% for Investment Grade Bond, High Income, and Money
Market, and it drops as total assets under management increase.

For [month] [year], the group fee rate was[__%] for Investment Grade
Bond, High Income, and Money Market, and the group fee rate was [__%]
for Mid Cap, Growth Opportunities, Contrafund, Growth, Overseas,
Balanced, Equity-Income, Growth & Income, Asset Manager, and Asset
Manager: Growth. The individual fund fee rate is 0.03% for Money
Market. The individual fund fee rate is 0.15% for Balanced. The
individual fund fee rate is 0.20% for Equity-Income and Growth &
Income. The individual fund fee rate is 0.25% for Asset Manager. The
individual fund fee rate is 0.30% for Mid Cap, Growth Opportunities,
Contrafund, Growth, and Asset Manager: Growth, and Investment Grade
Bond. The individual fund fee rate is 0.45% for Overseas and High
Income.

Index 500 pays a management fee to FMR. The management fee is
calculated and paid to FMR every month. The fund's annual management
fee rate is 0.24% of its average net assets. FMR pays BT for providing
investment management and custodial services.

Prior to October 1, 1999, Index 500 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 table states the total management (and, for Index 500,
sub-advisory) fee, as a percentage of each fund's average net assets,
for each fund (except Mid Cap) for the fiscal year ended [month]
[day], [year]:

Total Management Fee

Index 500 Portfolio %

Growth Opportunities Portfolio %

Contrafund Portfolio %

Growth Portfolio %

Overseas Portfolio %

Balanced Portfolio %

Equity-Income Portfolio %

Growth & Income Portfolio %

Asset Manager Portfolio %

Asset Manager: Growth Portfolio %

Investment Grade Bond Portfolio %

High Income Portfolio %

Money Market Portfolio %

The following table states the estimated total annual Service Class 2
operating expenses, as a percentage of Service Class 2's estimated
average net assets, for each fund for the fiscal year ended [month]
[day], [year]. The estimated total annual class operating expenses do
not reflect the effect of any expense reimbursements or reduction of
certain expenses during the period.

Total Annual Class Operating
Expenses

Index 500 Portfolio %[A]

Mid Cap Portfolio %

Growth Opportunities Portfolio %B

Contrafund Portfolio %B

Growth Portfolio %B

Overseas Portfolio %B

Balanced Portfolio %B

Equity-Income Portfolio %B

Growth & Income Portfolio %B

Asset Manager Portfolio %B

Asset Manager: Growth Portfolio %B

Investment Grade Bond Portfolio %B

High Income Portfolio %B

Money Market Portfolio %

[A EFFECTIVE [MONTH] [DAY], [YEAR], FMR HAS VOLUNTARILY AGREED TO
REIMBURSE SERVICE CLASS 2 OF INDEX 500 TO THE EXTENT THAT TOTAL
OPERATING EXPENSES (EXCLUDING INTEREST, TAXES, SECURITIES LENDING
COSTS, BROKERAGE COMMISSIONS AND EXTRAORDINARY EXPENSES), AS A
PERCENTAGE OF ITS AVERAGE NET ASSETS, EXCEED ____%. THIS ARRANGEMENT
CAN BE DISCONTINUED BY FMR AT ANY TIME.]

B FMR HAS VOLUNTARILY AGREED TO REIMBURSE SERVICE CLASS 2 OF CERTAIN
FUNDS TO THE EXTENT THAT TOTAL OPERATING EXPENSES (EXCLUDING INTEREST,
TAXES, SECURITIES LENDING FEES, BROKERAGE COMMISSIONS AND
EXTRAORDINARY EXPENSES), AS A PERCENTAGE OF THEIR RESPECTIVE AVERAGE
NET ASSETS, EXCEED THE FOLLOWING RATES:

Service Class 2 Effective Date

Mid Cap Portfolio %

Growth Opportunities Portfolio %

Contrafund Portfolio %

Growth Portfolio %

Overseas Portfolio %

Balanced Portfolio %

Equity-Income Portfolio %

Growth & Income Portfolio %

Asset Manager Portfolio %

Asset Manager: Growth Portfolio %

Investment Grade Bond Portfolio %

High Income Portfolio %

THESE ARRANGEMENTS CAN BE TERMINATED BY FMR AT ANY TIME.

FMR pays FIMM, FMR U.K., FMR Far East, and FIIA for providing
assistance with investment advisory services, and FIIA in turn pays
FIIA(U.K.)L.

FMR may, from time to time, agree to reimburse each class for
management fees and other expenses above a specified limit. FMR
retains the ability to be repaid by a class if expenses fall below the
specified limit prior to the end of the fiscal year. Reimbursement
arrangements, which may be terminated by FMR at any time, can decrease
a class's expenses and boost its performance.

As of [month] [day], [year], approximately __% of Index 500's, __% of
Mid Cap's, __% of Growth Opportunities', __% of Contrafund's, __% of
Balanced's, __% of Growth & Income's, __% of Asset Manager: Growth's,
__% of Investment Grade Bond's, and __% of Money Market's total
outstanding shares were held by FMR or an FMR affiliate.

FUND DISTRIBUTION

Each fund is composed of multiple classes of shares. All classes of a
fund have a common investment objective and investment portfolio.

Fidelity Distributors Corporation, Inc. (FDC) distributes Service
Class 2's shares.

Service Class 2 of each fund has adopted a Distribution and Service
Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940.
Under the plan, Service Class 2 of each fund is authorized to pay FDC
(for remittance quarterly to an insurance company) a 12b-1 fee as
compensation for providing services intended to result in the sale of
Service Class 2 shares and/or shareholder support services. Depending
on an insurance company's corporate structure and applicable state
law, FDC may remit payments to the insurance company's affiliated
broker-dealer or other affiliated company, rather than to the
insurance company itself. Service Class 2 of each fund may pay FDC a
12b-1 fee at an annual rate of 0.25% of its average net assets, or
such lesser amount as the Trustees may determine from time to time.
Service Class 2 of each fund currently pays FDC a 12b-1 fee at an
annual rate of 0.25% of its average net assets throughout the month.

Up to the full amount of the Service Class 2 12b-1 fee may be
reallowed to insurance companies as compensation for providing
services intended to result in the sale of Service Class 2 shares
and/or support services to Variable Product owners, based upon the
level of such services provided. (For purposes of this discussion,
"Variable Product" refers to a variable annuity contract or variable
life insurance policy for which shares of the funds are available as
underlying investment options.) These services may include, without
limitation: answering questions about the funds from Variable Product
owners; receiving and answering correspondence from Variable Product
owners (including requests for prospectuses and statements of
additional information for the funds); performing sub-accounting with
respect to Variable Product values allocated to the funds; preparing,
printing and distributing reports of values to Variable Product owners
who have values allocated to the funds; printing and distributing
prospectuses, statements of additional information, any supplements
thereto, and shareholder reports; preparing, printing and distributing
marketing materials for Variable Products; assisting customers in
completing applications for Variable Products and selecting underlying
mutual fund investment options; preparing, printing and distributing
sub-account performance figures for sub-accounts investing in fund
shares; and providing other reasonable assistance in connection with
the distribution of fund shares to insurers.

In addition, each Service Class 2 plan specifically recognizes that
FMR may make payments from its management fee revenue, past profits,
or other resources to FDC for expenses incurred in connection with
providing services intended to result in the sale of Service Class 2
shares and/or shareholder support services, including payments made to
insurance companies and others that provide those services. Currently,
the Board of Trustees of each fund has authorized such payments for
Service Class 2.

Because 12b-1 fees are paid out of Service Class 2's assets on an
ongoing basis, they will increase the cost of your investment and may
cost you more than paying other types of sales charges.

To receive payments made pursuant to a Distribution and Service Plan
or record keeping fees, intermediaries must sign the appropriate
agreement with FDC in advance.

FMR may allocate brokerage transactions in a manner that takes into
account the sale of shares of the Variable Insurance Product funds,
provided that a fund receives brokerage services and commission rates
comparable to those of other broker-dealers.

BT may allocate brokerage transactions in a manner that takes into
account the sale of shares of Index 500, provided that the fund
receives brokerage services and commission rates comparable to those
of other broker-dealers.

No dealer, sales representative, or any other person has been
authorized to give any information or to make any representations,
other than those contained in this Prospectus and in the related
Statement of Additional Information (SAI), in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the funds or FDC. This Prospectus and the related SAI do
not constitute an offer by the funds or by FDC to sell shares of the
funds to or to buy shares of the funds from any person to whom it is
unlawful to make such offer.

APPENDIX

ADDITIONAL INFORMATION ABOUT THE STANDARD & POOR'S 500 INDEX

S&P does not guarantee the accuracy and/or the completeness of the S&P
500 Index or any data included therein and S&P shall have no liability
for any errors, omissions, or interruptions therein. S&P makes no
warranty, express or implied, as to results to be obtained by
licensee, owners of the product, or any other person or entity from
the use of the S&P 500 Index or any data included therein. S&P makes
no express or implied warranties, and expressly disclaims all
warranties of merchantability or fitness for a particular purpose or
use with respect to the S&P 500 Index or any data included therein.
Without limiting any of the foregoing, in no event shall S&P have any
liability for any special, punitive, indirect, or consequential
damages (including lost profits), even if notified of the possibility
of such damages.

The product is not sponsored, endorsed, sold, or promoted by S&P. S&P
makes no representation or warranty, express or implied, to the owners
of the product or any member of the public regarding the advisability
of investing in securities generally or in the product particularly or
the ability of the S&P 500 Index to track general stock market
performance. S&P's only relationship to the licensee is the licensing
of certain trademarks and trade names of S&P and of the S&P 500 Index
which is determined, composed, and calculated by S&P without regard to
the licensee or the product. S&P has no obligation to take the needs
of the licensee or the owners of the product into consideration in
determining, composing, or calculating the S&P 500 Index. S&P is not
responsible for and has not participated in the determination of the
timing of, prices at, or quantities of the product to be issued or in
the determination or calculation of the equation by which the product
is to be converted into cash. S&P has no obligation or liability in
connection with the administration, marketing, or trading of the
product.

"Standard & Poor's," "S&P," "S&P 500," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed for use by Fidelity Distributors Corporation.

You can obtain additional information about the funds. The funds' SAI
includes more detailed information about each fund and its
investments. The SAI is incorporated herein by reference (legally
forms a part of the prospectus). Each fund's annual and semi-annual
reports include a discussion of the fund's holdings and recent market
conditions and the fund's investment strategies that affected
performance.

For a free copy of any of these documents or to request other
information or ask questions about a fund, call Fidelity at
1-888-622-3175, or your insurance company.

The SAI, the funds' annual and semi-annual reports and other
related materials are available on the SEC's Internet Web site
(http://www.sec.gov). You can obtain copies of this information upon
paying a duplicating fee, by writing the Public Reference Section of
the SEC, Washington, D.C. 20549-6009. You can also review and copy
information about the funds, including the funds' SAI, at the SEC's
Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for
information on the operation of the SEC's Public Reference Room.

INVESTMENT COMPANY ACT OF 1940, FILE NUMBERS 811-3329, 811-5511,
AND 811-7205.

Fidelity Investments & (Pyramid) Design and Fidelity are registered
trademarks of FMR Corp.

The third party marks appearing above are the marks of their
respective owners.

1.730991.100 VIP/VIPII/VIPIIISC2-pro-0100

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

STATEMENT OF ADDITIONAL INFORMATION

APRIL 30, 1999,

REVISED JANUARY 11, 2000

SERVICE CLASS 2

STATEMENT OF ADDITIONAL INFORMATION

JANUA RY 11, 2000

This Statement of Additional Information (SAI) is not a prospectus.
Portions of the funds' Annual Reports are incorporated herein. The
Annual Reports are supplied with this SAI. In addition, portions of
the funds' semi-annual report are incorporated herein. The
semi-annual report is also supplied with this SAI. To obtain a free
additional copy of a prospectus (dated January 11, 2000) or an
Annual Report, please call Fidelity(registered trademark) at
1-888-622-3175, or your insurance company.

TABLE OF CONTENTS PAGE

Investment Policies and 30
Limitations

Special Considerations 39
Regarding Africa

Special Considerations 39
Regarding Canada

Special Considerations 39
Regarding Europe

Special Considerations 42
Regarding Asia

Special Considerations 48
Regarding Latin America

Special Considerations 50
Regarding the Russian
Federation

Portfolio Transactions 51

Valuation 59

Performance 60

Distributions and Taxes 129

Trustees and Officers 129

Control of Investment Advisers 136

Management Contracts 136

Distribution Services 145

Transfer and Service Agent 147
Agreements

Description of the Trusts 149

Financial Statements 150

Appendix 150

For more information on any Fidelity fund, including charges and
expenses, call Fidelity at the number indicated above for a free
prospectus. Read it carefully before you invest or send money.

[VIP/VIPII/VIPIIISC2-ptb-0100]
1.730992.100

(Fidelity logo Graphic)(registered trademark)
82 Devonshire Street, Boston, MA 02109

INVESTMENT POLICIES AND LIMITATIONS

The following policies and limitations supplement those set forth in
the Prospectus. Unless otherwise noted, whenever an investment policy
or limitation states a maximum percentage of a fund's assets that may
be invested in any security or other asset, or sets forth a policy
regarding quality standards, such standard or percentage limitation
will be determined immediately after and as a result of the fund's
acquisition of such security or other asset. Accordingly, any
subsequent change in values, net assets, or other circumstances will
not be considered when determining whether the investment complies
with a fund's investment policies and limitations.

A fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940 (the
1940 Act)) of the fund. However, except for the fundamental investment
limitations listed below, the investment policies and limitations
described in this SAI are not fundamental and may be changed without
shareholder approval.

INVESTMENT LIMITATIONS OF MONEY MARKET PORTFOLIO

THE FOLLOWING ARE MONEY MARKET PORTFOLIO'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:

(1) purchase the securities of any issuer if, as a result, the fund
would not comply with any applicable diversification requirements for
a money market fund under the Investment Company Act of 1940 and the
rules thereunder, as such may be amended from time to time;

(2) issue senior securities, except in connection with the insurance
program established by the fund pursuant to an exemptive order issued
by the Securities and Exchange Commission or as otherwise permitted
under the Investment Company Act of 1940;

(3) borrow money, except that the fund may (i) borrow money for
temporary or emergency purposes (not for leveraging or investment) and
(ii) engage in reverse repurchase agreements for any purpose; provided
that (i) and (ii) in combination do not exceed 33 1/3% of the fund's
total assets (including the amount borrowed) less liabilities (other
than borrowings). Any borrowings that come to exceed this amount will
be reduced within three days (not including Sundays and holidays) to
the extent necessary to comply with the 33 1/3% limitation;

(4) underwrite securities issued by others, except to the extent that
the fund may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities;

(5) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose
principal business activities are in the same industry, except that
the fund will invest more than 25% of its total assets in the
financial services industry;

(6) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments
backed by real estate or securities of companies engaged in the real
estate business);

(7) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments;

(8) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements; or

(9) invest in companies for the purpose of exercising control or
management.

THE FOLLOWING INVESTMENT LIMITATIONS FOR MONEY MARKET PORTFOLIO ARE
NOT FUNDAMENTAL AND MAY BE CHANGED, AS REGULATORY AGENCIES PERMIT,
WITHOUT SHAREHOLDER APPROVAL.

(i) The fund does not currently intend to purchase a security (other
than securities issued or guaranteed by the U.S. Government or any of
its agencies or instrumentalities or securities of other money market
funds) if, as a result, more than 5% of its total assets would be
invested in securities of a single issuer; provided that the fund may
invest up to 10% of its total assets in the first tier securities of a
single issuer for up to three business days.

(ii) The fund does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to
constitute selling securities short.

(iii) The fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.

(iv) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
aff iliate serves as investment adviser or (b) by engaging in
reverse repurchase agreements with any party.

(v) The fund does not currently intend to purchase any security if,
as a result, more than 10% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.

(vi) The fund does not currently intend to purchase or sell futures
contracts or call options. This limitation does not apply to options
attached to, or acquired or traded together with, their underlying
securities, and does not apply to securities that incorporate features
similar to options or futures contracts.

(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. (This limitation does not apply
to purchases of debt securities or to repurchase a greements.)

(viii) The fund does not currently intend to invest in oil, gas, or
other mineral exploration or development programs or leases.

For purposes of limitation (i), certain securities subject to
guarantees (including insurance, letters of credit and demand
features) are not considered securities of their issuer, but are
subject to separate diversification requirements, in accordance with
industry standard requirements for money market funds.

With respect to limitation (v), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.

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

THE FOLLOWING ARE 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' FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH IN THEIR
ENTIRETY. EACH FUND MAY NOT:

(1) (for High Income, Equity-Income, Growth, Overseas, Investment
Grade Bond, Asset Manager, Index 500, Contrafund, Asset Manager:
Growth, and Mid Cap Portfolios) with respect to 75% of the fund's
total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities, or securities of other investment
companies) if, as a result, (a) more than 5% of the fund's total
assets would be invested in the securities of that issuer, or (b) the
fund would hold more than 10% of the outstanding voting securities of
that issuer;

(for Growth & Income, Balanced, and Growth Opportunities Portfolios)
with respect to 75% of the fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities)
if, as a result, (a) more than 5% of the fund's total assets would be
invested in the securities of that issuer, or (b) the fund would hold
more than 10% of the outstanding voting securities of that issuer;

(2) (for High Income, Equity-Income, Growth, Overseas, Growth &
Income, Balanced, Growth Opportunities, Investment Grade Bond, Asset
Manager, Index 500, Contrafund, and Asset Manager: Growth Portfolios)
issue senior securities, except in connection with the insurance
program established by the fund pursuant to an exemptive order issued
by the Securities and Exchange Commission or as otherwise permitted
under the Investment Company Act of 1940;

(for Mid Cap Portfolio) issue senior securities, except as permitted
under the Investment Company Act of 1940;

(3) (for High Income, Equity-Income, Growth, Overseas, Balanced,
Growth Opportunities, and Mid Cap Portfolios) borrow money, except
that the fund (i) may borrow money for temporary or emergency purposes
(not for leveraging or investment) or (ii) engage in reverse
repurchase agreements, provided that (i) and (ii) in combination
(borrowings) do not exceed 33 1/3% of its total assets (including the
amount borrowed) less liabilities (other than borrowings). Any
borrowings that come to exceed 33 1/3% of the value of the fund's
total assets by reason of a decline in net assets will be reduced
within three days (exclusive of Sundays and holidays) to the extent
necessary to comply with the 33 1/3% limitation;

(for Growth & Income, Investment Grade Bond, Asset Manager, Index
500, Contrafund, and Asset Manager: Growth Portfolios) borrow money,
except that the fund may borrow money for temporary or emergency
purposes (not for leveraging or investment) in an amount not exceeding
33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to
exceed this amount will be reduced within three days (not including
Sundays and holidays) to the extent necessary to comply with the 33
1/3% limitation;

(5) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of its total assets
would be invested in the securities of companies whose principal
business activities are in the same industry;

(7) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed
by physical commodities); or

(9) (for Balanced and Growth Opportunities Portfolios) Each fund may,
notwithstanding any other fundamental investment policy or limitation,
invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objective, policies, and limitations as the fund.

(for Mid Cap Portfolio) The fund may, notwithstanding any other
fundamental investment policy or limitation, invest all of its assets
in the securities of a single open-end management investment company
managed by Fidelity Management & Research Company or an affiliate or
successor with substantially the same fundamental investment
objective, policies, and limitations as the fund.

THE FOLLOWING INVESTMENT LIMITATIONS FOR 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 ARE NOT FUNDAMENTAL AND MAY BE
CHANGED, AS REGULATORY AGENCIES PERMIT, WITHOUT SHAREHOLDER APPROVAL.

(i) Each fund does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to
constitute selling securities short.

(ii) Each fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.

(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 treat ed as borrowings for purposes of fundamental
investment limitation (3)).

(iv) Each fund does not currently intend to purchase any security if,
as a result, more than 10% (Equity-Income, Growth, Investment Grade
Bond, Asset Manager, Asset Manager: Growth, Index 500, Contrafund,
Balanced, Growth & Income, Growth Opportunities, and Mid Cap
Portfolios) or more than 15% (High Income and Overseas Portfolios) of
its net assets would be invested in securities that are deemed to be
illiquid because they are subject to legal or contractual restrictions
on resale or because they cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they
are valued.

(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.)

(vi) Each fund does not currently intend to invest in oil, gas, or
other mineral exploration or development programs or leases.

(vii) (for Balanced and Growth Opportunities Portfolios) Each fund
does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.

(for Mid Cap Portfolio) The fund does not currently intend to invest
all of its assets in the securities of a single open-end management
investment company managed by Fidelity Management & Research Company
or an affiliate or successor with substantially the same fundamental
investment objective, policies, and limitations as the fund.

For purposes of investing at least 65% of High Income Portfolio'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.

For purposes of investing at least 65% of Equity-Income Portfolio's
total assets in income-producing equity securities, FMR interprets
"total assets" to exclude collateral received for securities lending
transactions.

For purposes of investing at least 65% of Overseas Portfolio's
total assets in foreign securities, FMR interprets "total assets" to
exclude collateral received for securities lending transactions.

For purposes of investing at least 25% of Balanced Portfolio'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.

For purposes of investing at least 65% of Mid Cap Portfolio's total
assets in securities of companies with medium market capitalization,
FMR interprets "total assets" to exclude collateral received for
securities lending transactions.

With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, a fund were in a position where more
than 10% (Equity-Income, Growth, Investment Grade Bond, Asset Manager,
Asset Manager: Growth, Index 500, Contrafund, Balanced, Growth &
Income, Growth Opportunities, and Mid Cap Portfolios) or more than 15%
(High Income and Overseas Portfolios) of its net assets was invested
in illiquid securities, it would consider appropriate steps to protect
liquidity.

For the funds' limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page 61.

For purposes of Index 500 Portfolio's limitation on concentration in a
single industry, the fund may use the industry categorizations as
defined by BARRA, Inc.

In accordance with the funds' fundamental investment policies, there
are no limitations on the percentage of the funds' assets which may be
invested in any one type of instrument. Nor are there limitations on
the percentage of the funds' assets which may be invested in any
foreign country. However, in order to comply with diversification
requirements under Section 817(h) of the Internal Revenue Code of
1986, as amended, in connection with FMR serving as investment adviser
to each fund (investment manager to Index 500), each fund has agreed
to certain non-fundamental limitations. Please refer to your insurance
company's separate account prospectus for more information.

THE FOLLOWING PAGES CONTAIN MORE DETAILED INFORMATION ABOUT TYPES OF
INSTRUMENTS IN WHICH A FUND MAY INVEST, STRATEGIES FMR (BT FOR INDEX
500) MAY EMPLOY IN PURSUIT OF A FUND'S INVESTMENT OBJECTIVE, AND A
SUMMARY OF RELATED RISKS. FMR (BT FOR INDEX 500) MAY NOT BUY ALL OF
THESE INSTRUMENTS OR USE ALL OF THESE TECHNIQUES UNLESS IT BELIEVES
THAT DOING SO WILL HELP A FUND ACHIEVE ITS GOAL.

AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be,
"affiliated persons" of the fund under the 1940 Act. These
transactions may involve repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50
largest U.S. banks (measured by deposits); municipal securities; U.S.
Government securities with affiliated financial institutions that are
primary dealers in these securities; short-term currency transactions;
and short-term borrowings. In accordance with exemptive orders issued
by the Securities and Exchange Commission (SEC), the Board of Trustees
has established and periodically reviews procedures applicable to
transactions involving affiliated financial institutions.

ASSET ALLOCATION (ASSET MANAGER AND ASSET MANAGER: GROWTH PORTFOLIOS).
The stock class includes domestic and foreign equity securities of all
types (other than adjustable rate preferred stocks, which are included
in the bond class). FMR seeks to maximize total return within this
asset class by actively allocating assets to industry sectors expected
to benefit from major trends, and to individual stocks that FMR
believes to have superior investment potential. When FMR selects
equity securities, it considers both growth and anticipated dividend
income. Securities in the stock class may include common stocks,
fixed-rate preferred stocks (including convertible preferred stocks),
warrants, rights, depositary receipts, securities of closed-end
investment companies, and other equity securities issued by companies
of any size, located anywhere in the world.

The bond class includes all varieties of domestic and foreign
fixed-income securities maturing in more than one year. FMR will seek
to maximize total return within the bond class by adjusting a fund's
investments in securities with different credit qualities, maturities,
and coupon or dividend rates, and by seeking to take advantage of
yield differentials between securities. Securities in this class may
include bonds, notes, adjustable-rate preferred stocks, convertible
bonds, mortgage-related and asset-backed securities, domestic and
foreign government and government agency securities, zero coupon
bonds, and other intermediate and long-term securities. These
securities may be denominated in U.S. dollars or foreign currency.

The short-term/money market class includes all types of domestic and
foreign short-term and money market instruments. FMR will seek to
maximize total return within this asset class by taking advantage of
yield differentials between different instruments, issuers, and
currencies. Short-term and money market instruments may include
corporate debt securities, such as commercial paper and notes;
government securities issued by U.S. or foreign governments or their
agencies or instrumentalities; bank deposits and other financial
institution obligations; repurchase agreements involving any type of
security; and other similar short-term instruments. These instruments
may be denominated in U.S. dollars or foreign currency.

FMR may use its judgment to place a security in the most appropriate
class based on its investment characteristics. Fixed-income securities
may be classified in the bond or short-term/money market class
according to interest rate sensitivity as well as maturity. The funds
may also make other investments that do not fall within these classes.
In making asset allocation decisions, FMR will evaluate projections of
risk, market conditions, economic conditions, volatility, yields, and
returns. FMR's management will use database systems to help analyze
past situations and trends, research specialists in each of the asset
classes to help in securities selection, portfolio management
professionals to determine asset allocation and to select individual
securities, and its own credit analysis as well as credit analyses
provided by rating services.

ASSET-BACKED SECURITIES represent interests in pools of mortgages,
loans, receivables or other assets. Payment of interest and repayment
of principal may be largely dependent upon the cash flows generated by
the assets backing the securities and, in certain cases, supported by
letters of credit, surety bonds, or other credit enhancements.
Asset-backed security values may also be affected by other factors
including changes in interest rates, the availability of information
concerning the pool and its structure, the creditworthiness of the
servicing agent for the pool, the originator of the loans or
receivables, or the entities providing the credit enhancement. In
addition, these securities may be subject to prepayment risk.

BORROWING. Each fund may borrow from banks or from other funds advised
by FMR or its affiliates, or through reverse repurchase agreements. If
a fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is paid off. If a fund makes
additional investments while borrowings are outstanding, this may be
considered a form of leverage.

CASH MANAGEMENT. A fund can hold uninvested cash or can invest it in
cash equivalents such as money market securities, repurchase
agreements or shares of money market funds. Generally, these
securities offer less potential for gains than other types of
securities.

CENTRAL CASH FUNDS are money market funds managed by FMR or its
affiliates that seek to earn a high level of current income while
maintaining a stable $1.00 share price. The funds comply with
industry-standard requirements for money market funds regarding the
quality, maturity and diversification of their investments.

COMMON STOCK represents an equity or ownership interest in an issuer.
In the event an issuer is liquidated or declares bankruptcy, the
claims of owners of bonds and preferred stock take precedence over the
claims of those who own common stock.

CONVERTIBLE SECURITIES are bonds, debentures, notes, preferred stocks
or other securities that may be converted or exchanged (by the holder
or by the issuer) into shares of the underlying common stock (or cash
or securities of equivalent value) at a stated exchange ratio. A
convertible security may also be called for redemption or conversion
by the issuer after a particular date and under certain circumstances
(including a specified price) established upon issue. If a convertible
security held by a fund is called for redemption or conversion, the
fund could be required to tender it for redemption, convert it into
the underlying common stock, or sell it to a third party.

Convertible securities generally have less potential for gain or loss
than common stocks. Convertible securities generally provide yields
higher than the underlying common stocks, but generally lower than
comparable non-convertible securities. Because of this higher yield,
convertible securities generally sell at prices above their
"conversion value," which is the current market value of the stock to
be received upon conversion. The difference between this conversion
value and the price of convertible securities will vary over time
depending on changes in the value of the underlying common stocks and
interest rates. When the underlying common stocks decline in value,
convertible securities will tend not to decline to the same extent
because of the interest or dividend payments and the repayment of
principal at maturity for certain types of convertible securities.
However, securities that are convertible other than at the option of
the holder generally do not limit the potential for loss to the same
extent as securities convertible at the option of the holder. When the
underlying common stocks rise in value, the value of convertible
securities may also be expected to increase. At the same time,
however, the difference between the market value of convertible
securities and their conversion value will narrow, which means that
the value of convertible securities will generally not increase to the
same extent as the value of the underlying common stocks. Because
convertible securities may also be interest-rate sensitive, their
value may increase as interest rates fall and decrease as interest
rates rise. Convertible securities are also subject to credit risk,
and are often lower-quality securities.

DEBT SECURITIES are used by issuers to borrow money. The issuer
usually pays a fixed, variable or floating rate of interest, and must
repay the amount borrowed at the maturity of the security. Some debt
securities, such as zero coupon bonds, do not pay interest but are
sold at a deep discount from their face values. Debt securities
include corporate bonds, government securities, and mortgage and other
asset-backed securities.

DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value
of each investment by the time remaining to its maturity, adding these
calculations, and then dividing the total by the value of the fund's
portfolio. An obligation's maturity is typically determined on a
stated final maturity basis, although there are some exceptions to
this rule.

For example, if it is probable that the issuer of an instrument will
take advantage of a maturity-shortening device, such as a call,
refunding, or redemption provision, the date on which the instrument
will probably be called, refunded, or redeemed may be considered to be
its maturity date. Also, the maturities of mortgage securities,
including collateralized mortgage obligations, and some asset-backed
securities are determined on a weighted average life basis, which is
the average time for principal to be repaid. For a mortgage security,
this average time is calculated by estimating the timing of principal
payments, including unscheduled prepayments, during the life of the
mortgage. The weighted average life of these securities is likely to
be substantially shorter than their stated final maturity.

DOMESTIC AND FOREIGN INVESTMENTS (MONEY MARKET PORTFOLIO) include U.S.
dollar-denominated time deposits, certificates of deposit, and
bankers' acceptances of U.S. banks and their branches located outside
of the United States, U.S. branches and agencies of foreign banks, and
foreign branches of foreign banks. Domestic and foreign investments
may also include U.S. dollar-denominated securities issued or
guaranteed by other U.S. or foreign issuers, including U.S. and
foreign corporations or other business organizations, foreign
governments, foreign government agencies or instrumentalities, and
U.S. and foreign financial institutions, including savings and loan
institutions, insurance companies, mortgage bankers, and real estate
investment trusts, as well as banks.

The obligations of foreign branches of U.S. banks may be general
obligations of the parent bank in addition to the issuing branch, or
may be limited by the terms of a specific obligation and by
governmental regulation. Payment of interest and repayment of
principal on these obligations may also be affected by governmental
action in the country of domicile of the branch (generally referred to
as sovereign risk). In addition, evidence of ownership of portfolio
securities may be held outside of the United States and a fund may be
subject to the risks associated with the holding of such property
overseas. Various provisions of federal law governing the
establishment and operation of U.S. branches do not apply to foreign
branches of U.S. banks.

Obligations of U.S. branches and agencies of foreign banks may be
general obligations of the parent bank in addition to the issuing
branch, or may be limited by the terms of a specific obligation and by
federal and state regulation, as well as by governmental action in the
country in which the foreign bank has its head office.

Obligations of foreign issuers involve certain additional risks. These
risks may include future unfavorable political and economic
developments, withholding taxes, seizures of foreign deposits,
currency controls, interest limitations, or other governmental
restrictions that might affect repayment of principal or payment of
interest, or the ability to honor a credit commitment. Additionally,
there may be less public information available about foreign entities.
Foreign issuers may be subject to less governmental regulation and
supervision than U.S. issuers. Foreign issuers also generally are not
bound by uniform accounting, auditing, and financial reporting
requirements comparable to those applicable to U.S. issuers.

EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies,
and securities issued by U.S. entities with substantial foreign
operations may involve significant risks in addition to the risks
inherent in U.S. investments. FMR limits the amount of each of High
Income, Equity-Income, Growth, Investment Grade Bond, Asset Manager
and Index 500 Portfolios' assets that may be invested in foreign
securities to 50%.

Foreign investments involve risks relating to local political,
economic, regulatory, or social instability, military action or
unrest, or adverse diplomatic developments, and may be affected by
actions of foreign governments adverse to the interests of U.S.
investors. Such actions may include expropriation or nationalization
of assets, confiscatory taxation, restrictions on U.S. investment or
on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. Additionally, governmental
issuers of foreign debt securities may be unwilling to pay interest
and repay principal when due and may require that the conditions for
payment be renegotiated. There is no assurance that FMR (BT for Index
500) will be able to anticipate these potential events or counter
their effects. In addition, the value of securities denominated in
foreign currencies and of dividends and interest paid with respect to
such securities will fluctuate based on the relative strength of the
U.S. dollar.

It is anticipated that in most cases the best available market for
foreign securities will be on an exchange or in over-the-counter (OTC)
markets located outside of the United States. Foreign stock markets,
while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some
foreign issuers may be less liquid and more volatile than securities
of comparable U.S. issuers. Foreign security trading, settlement and
custodial practices (including those involving securities settlement
where fund assets may be released prior to receipt of payment) are
often less developed than those in U.S. markets, and may result in
increased risk or substantial delays in the event of a failed trade or
the insolvency of, or breach of duty by, a foreign broker-dealer,
securities depository or foreign subcustodian. For example, many
foreign countries are less prepared than the United States to properly
process and calculate information related to dates from and after
January 1, 2000. As a result, some foreign markets, brokers, banks, or
securities depositories could experience at least temporary
disruptions, which could result in difficulty buying and selling
securities in certain foreign markets and pricing foreign investments,
and foreign issuers could fail to pay timely dividends, interest or
principal. In addition, the costs associated with foreign investments,
including withholding taxes, brokerage commissions and custodial
costs, are generally higher than with U.S. investments.

Foreign markets may offer less protection to investors than U.S.
markets. Foreign issuers are generally not bound by uniform
accounting, auditing, and financial reporting requirements and
standards of practice comparable to those applicable to U.S. issuers.
Adequate public information on foreign issuers may not be available,
and it may be difficult to secure dividends and information regarding
corporate actions on a timely basis. In general, there is less overall
governmental supervision and regulation of securities exchanges,
brokers, and listed companies than in the United States. OTC markets
tend to be less regulated than stock exchange markets and, in certain
countries, may be totally unregulated. Regulatory enforcement may be
influenced by economic or political concerns, and investors may have
difficulty enforcing their legal rights in foreign countries.

Some foreign securities impose restrictions on transfer within the
United States or to U.S. persons. Although securities subject to such
transfer restrictions may be marketable abroad, they may be less
liquid than foreign securities of the same class that are not subject
to such restrictions.

American Depositary Receipts (ADRs) as well as other "hybrid" forms of
ADRs, including European Depositary Receipts (EDRs) and Global
Depositary Receipts (GDRs), are certificates evidencing ownership of
shares of a foreign issuer. These certificates are issued by
depository banks and generally trade on an established market in the
United States or elsewhere. The underlying shares are held in trust by
a custodian bank or similar financial institution in the issuer's home
country. The depository bank may not have physical custody of the
underlying securities at all times and may charge fees for various
services, including forwarding dividends and interest and corporate
actions. ADRs are alternatives to directly purchasing the underlying
foreign securities in their national markets and currencies. However,
ADRs continue to be subject to many of the risks associated with
investing directly in foreign securities. These risks include foreign
exchange risk as well as the political and economic risks of the
underlying issuer's country.

The risks of foreign investing may be magnified for investments in
emerging markets. Security prices in emerging markets can be
significantly more volatile than those in more developed markets,
reflecting the greater uncertainties of investing in less established
markets and economies. In particular, countries with emerging markets
may have relatively unstable governments, may present the risks of
nationalization of businesses, restrictions on foreign ownership and
prohibitions on the repatriation of assets, and may have less
protection of property rights than more developed countries. The
economies of countries with emerging markets may be based on only a
few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt
burdens or inflation rates. Local securities markets may trade a small
number of securities and may be unable to respond effectively to
increases in trading volume, potentially making prompt liquidation of
holdings difficult or impossible at times.

FOREIGN CURRENCY TRANSACTIONS. A bond or equity fund may conduct
foreign currency transactions on a spot (i.e., cash) or forward basis
(i.e., by entering into forward contracts to purchase or sell foreign
currencies). Although foreign exchange dealers generally do not charge
a fee for such conversions, they do realize a profit based on the
difference between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign
currency at one rate, while offering a lesser rate of exchange should
the counterparty desire to resell that currency to the dealer. Forward
contracts are customized transactions that require a specific amount
of a currency to be delivered at a specific exchange rate on a
specific date or range of dates in the future. Forward contracts are
generally traded in an interbank market directly between currency
traders (usually large commercial banks) and their customers. The
parties to a forward contract may agree to offset or terminate the
contract before its maturity, or may hold the contract to maturity and
complete the contemplated currency exchange.

The following discussion summarizes the principal currency management
strategies involving forward contracts that could be used by a fund. A
fund may also use swap agreements, indexed securities, and options and
futures contracts relating to foreign currencies for the same
purposes.

A "settlement hedge" or "transaction hedge" is designed to protect a
fund against an adverse change in foreign currency values between the
date a security is purchased or sold and the date on which payment is
made or received. Entering into a forward contract for the purchase or
sale of the amount of foreign currency involved in an underlying
security transaction for a fixed amount of U.S. dollars "locks in" the
U.S. dollar price of the security. Forward contracts to purchase or
sell a foreign currency may also be used by a fund in anticipation of
future purchases or sales of securities denominated in foreign
currency, even if the specific investments have not yet been selected
by FMR (BT for Index 500).

A fund may also use forward contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. For
example, if a fund owned securities denominated in pounds sterling, it
could enter into a forward contract to sell pounds sterling in return
for U.S. dollars to hedge against possible declines in the pound's
value. Such a hedge, sometimes referred to as a "position hedge,"
would tend to offset both positive and negative currency fluctuations,
but would not offset changes in security values caused by other
factors. A fund could also hedge the position by selling another
currency expected to perform similarly to the pound sterling. This
type of hedge, sometimes referred to as a "proxy hedge," could offer
advantages in terms of cost, yield, or efficiency, but generally would
not hedge currency exposure as effectively as a direct hedge into U.S.
dollars. Proxy hedges may result in losses if the currency used to
hedge does not perform similarly to the currency in which the hedged
securities are denominated.

A fund may enter into forward contracts to shift its investment
exposure from one currency into another. This may include shifting
exposure from U.S. dollars to a foreign currency, or from one foreign
currency to another foreign currency. This type of strategy, sometimes
known as a "cross-hedge," will tend to reduce or eliminate exposure to
the currency that is sold, and increase exposure to the currency that
is purchased, much as if a fund had sold a security denominated in one
currency and purchased an equivalent security denominated in another.
Cross-hedges protect against losses resulting from a decline in the
hedged currency, but will cause a fund to assume the risk of
fluctuations in the value of the currency it purchases.

Successful use of currency management strategies will depend on FMR's
(BT's for Index 500) skill in analyzing currency values. Currency
management strategies may substantially change a fund's investment
exposure to changes in currency exchange rates and could result in
losses to a fund if currencies do not perform as FMR (BT for Index
500) anticipates. For example, if a currency's value rose at a time
when FMR (BT for Index 500) had hedged a fund by selling that currency
in exchange for dollars, a fund would not participate in the
currency's appreciation. If FMR (BT for Index 500) hedges currency
exposure through proxy hedges, a fund could realize currency losses
from both the hedge and the security position if the two currencies do
not move in tandem. Similarly, if FMR (BT for Index 500) increases a
fund's exposure to a foreign currency and that currency's value
declines, a fund will realize a loss. There is no assurance that FMR's
(BT's for Index 500) use of currency management strategies will be
advantageous to a fund or that it will hedge at appropriate times.

FOREIGN REPURCHASE AGREEMENTS. Foreign repurchase agreements involve
an agreement to purchase a foreign security and to sell that security
back to the original seller at an agreed-upon price in either U.S.
dollars or foreign currency. Unlike typical U.S. repurchase
agreements, foreign repurchase agreements may not be fully
collateralized at all times. However, pursuant to certain state
insurance regulations, any foreign repurchase agreements a fund enters
into will be secured by collateral consisting of liquid assets having
a market value of not less than 102% of the cash or assets transferred
to the other party. The value of a security purchased by a fund may be
more or less than the price at which the counterparty has agreed to
repurchase the security. In the event of default by the counterparty,
the fund may suffer a loss if the value of the security purchased is
less than the agreed-upon repurchase price, or if the fund is unable
to successfully assert a claim to the collateral under foreign laws.
As a result, foreign repurchase agreements may involve higher credit
risks than repurchase agreements in U.S. markets, as well as risks
associated with currency fluctuations. In addition, as with other
emerging market investments, repurchase agreements with counterparties
located in emerging markets or relating to emerging market securities
may involve issuers or counterparties with lower credit ratings than
typical U.S. repurchase agreements.

FUNDS' RIGHTS AS SHAREHOLDERS. The funds do not intend to direct or
administer the day-to-day operations of any company. A fund, however,
may exercise its rights as a shareholder and may communicate its views
on important matters of policy to management, the Board of Directors,
and shareholders of a company when FMR (BT for Index 500) determines
that such matters could have a significant effect on the value of the
fund's investment in the company. The activities in which a fund may
engage, either individually or in conjunction with others, may
include, among others, supporting or opposing proposed changes in a
company's corporate structure or business activities; seeking changes
in a company's directors or management; seeking changes in a company's
direction or policies; seeking the sale or reorganization of the
company or a portion of its assets; or supporting or opposing
third-party takeover efforts. This area of corporate activity is
increasingly prone to litigation and it is possible that a fund could
be involved in lawsuits related to such activities. FMR (BT for Index
500) will monitor such activities with a view to mitigating, to the
extent possible, the risk of litigation against a fund and the risk of
actual liability if a fund is involved in litigation. No guarantee can
be made, however, that litigation against a fund will not be
undertaken or liabilities incurred.

FUTURES AND OPTIONS. The following paragraphs pertain to futures and
options: Combined Positions, Correlation of Price Changes, Futures
Contracts, Futures Margin Payments, Limitations on Futures and Options
Transactions, Liquidity of Options and Futures Contracts, Options and
Futures Relating to Foreign Currencies, OTC Options, Purchasing Put
and Call Options, and Writing Put and Call Options.

COMBINED POSITIONS involve purchasing and writing options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the
overall position. For example, purchasing a put option and writing a
call option on the same underlying instrument would construct a
combined position whose risk and return characteristics are similar to
selling a futures contract. Another possible combined position would
involve writing a call option at one strike price and buying a call
option at a lower price, to reduce the risk of the written call option
in the event of a substantial price increase. Because combined options
positions involve multiple trades, they result in higher transaction
costs and may be more difficult to open and close out.

CORRELATION OF PRICE CHANGES. Because there are a limited number of
types of exchange-traded options and futures contracts, it is likely
that the standardized contracts available will not match a fund's
current or anticipated investments exactly. A fund may invest in
options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in
which the fund typically invests, which involves a risk that the
options or futures position will not track the performance of the
fund's other investments.

Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a
fund's investments well. Options and futures prices are affected by
such factors as current and anticipated short-term interest rates,
changes in volatility of the underlying instrument, and the time
remaining until expiration of the contract, which may not affect
security prices the same way. Imperfect correlation may also result
from differing levels of demand in the options and futures markets and
the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. A fund may purchase or sell
options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to
attempt to compensate for differences in volatility between the
contract and the securities, although this may not be successful in
all cases. If price changes in a fund's options or futures positions
are poorly correlated with its other investments, the positions may
fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.

FUTURES CONTRACTS. In purchasing a futures contract, the buyer agrees
to purchase a specified underlying instrument at a specified future
date. In selling a futures contract, the seller agrees to sell a
specified underlying instrument at a specified future date. The price
at which the purchase and sale will take place is fixed when the buyer
and seller enter into the contract. Some currently available futures
contracts are based on specific securities, such as U.S. Treasury
bonds or notes, and some are based on indices of securities prices,
such as the Standard & Poor's 500 Index (S&P 500). Futures can be held
until their delivery dates, or can be closed out before then if a
liquid secondary market is available.

Overseas Portfolio may invest in futures based on foreign indexes such
as the CAC 40 (France), DAX 30 (Germany), EuroTop 100 (Europe), IBEX
(Spain), FTSE 100 (United Kingdom), All Ordinary (Australia), Hang
Seng (Hong Kong), and Nikkei 225, Nikkei 300 and TOPIX (Japan).

The value of a futures contract tends to increase and decrease in
tandem with the value of its underlying instrument. Therefore,
purchasing futures contracts will tend to increase a fund's exposure
to positive and negative price fluctuations in the underlying
instrument, much as if it had purchased the underlying instrument
directly. When a fund sells a futures contract, by contrast, the value
of its futures position will tend to move in a direction contrary to
the market. Selling futures contracts, therefore, will tend to offset
both positive and negative market price changes, much as if the
underlying instrument had been sold.

FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract
is not required to deliver or pay for the underlying instrument unless
the contract is held until the delivery date. However, both the
purchaser and seller are required to deposit "initial margin" with a
futures broker, known as a futures commission merchant (FCM), when the
contract is entered into. Initial margin deposits are typically equal
to a percentage of the contract's value. If the value of either
party's position declines, that party will be required to make
additional "variation margin" payments to settle the change in value
on a daily basis. The party that has a gain may be entitled to receive
all or a portion of this amount. Initial and variation margin payments
do not constitute purchasing securities on margin for purposes of a
fund's investment limitations. In the event of the bankruptcy of an
FCM that holds margin on behalf of a fund, the fund may be entitled to
return of margin owed to it only in proportion to the amount received
by the FCM's other customers, potentially resulting in losses to the
fund.

Although futures exchanges generally operate similarly in the United
States and abroad, foreign futures exchanges may follow trading,
settlement and margin procedures that are different from those for
U.S. exchanges. Futures contracts traded outside the United States may
involve greater risk of loss than U.S.-traded contracts, including
potentially greater risk of losses due to insolvency of a futures
broker, exchange member or other party that may owe initial or
variation margin to a fund. Because initial and variation margin
payments may be measured in foreign currency, a futures contract
traded outside the United States may also involve the risk of foreign
currency fluctuation.

LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each bond and equity
fund has filed a notice of eligibility for exclusion from the
definition of the term "commodity pool operator" with the Commodity
Futures Trading Commission (CFTC) and the National Futures
Association, which regulate trading in the futures markets. The funds
intend to comply with Rule 4.5 under the Commodity Exchange Act, which
limits the extent to which the funds can commit assets to initial
margin deposits and option premiums.

In addition, each equity fund (excluding Index 500) will not: (a) sell
futures contracts, purchase put options, or write call options if, as
a result, more than 25% of the fund's total assets would be hedged
with futures and options under normal conditions; (b) purchase futures
contracts or write put options if, as a result, the fund's total
obligations upon settlement or exercise of purchased futures contracts
and written put options would exceed 25% of its total assets under
normal conditions; or (c) purchase call options if, as a result, the
current value of option premiums for call options purchased by the
fund would exceed 5% of the fund's total assets. These limitations do
not apply to options attached to or acquired or traded together with
their underlying securities, and do not apply to securities that
incorporate features similar to options.

In addition, each bond fund will not: (a) sell futures contracts,
purchase put options, or write call options if, as a result, more than
25% of the fund's total assets would be hedged with futures and
options under normal conditions; (b) purchase futures contracts or
write put options if, as a result, the fund's total obligations upon
settlement or exercise of purchased futures contracts and written put
options would exceed 25% of its total assets; or (c) purchase call
options if, as a result, the current value of option premiums for call
options purchased by the fund would exceed 5% of the fund's total
assets. These limitations do not apply to options attached to or
acquired or traded together with their underlying securities, and do
not apply to securities that incorporate features similar to options.

BT also intends to follow certain other limitations on Index 500's
futures and options activities. The fund will not purchase any option
if, as a result, more than 5% of its total assets would be invested in
option premiums. Under normal conditions, the fund will not enter into
any futures contract or option if, as a result, the sum of (i) the
current value of the assets hedged in the case of strategies involving
the sale of securities, and (ii) the current value of the indices or
other instruments underlying the fund's other futures or options
positions, would exceed 35% of the fund's total assets. These
limitations do not apply to options attached to, or acquired or traded
together with, their underlying securities, and do not apply to
securities that incorporate features similar to options.

The above limitations on the bond and equity funds' investments in
futures contracts and options, and the funds' policies regarding
futures contracts and options discussed elsewhere in this SAI, may be
changed as regulatory agencies permit.

LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid secondary market will exist for any particular options or
futures contract at any particular time. Options may have relatively
low trading volume and liquidity if their strike prices are not close
to the underlying instrument's current price. In addition, exchanges
may establish daily price fluctuation limits for options and futures
contracts, and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days
when the price fluctuation limit is reached or a trading halt is
imposed, it may be impossible to enter into new positions or close out
existing positions. If the secondary market for a contract is not
liquid because of price fluctuation limits or otherwise, it could
prevent prompt liquidation of unfavorable positions, and potentially
could require a fund to continue to hold a position until delivery or
expiration regardless of changes in its value. As a result, a fund's
access to other assets held to cover its options or futures positions
could also be impaired.

OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except
that they are traded on exchanges (and have margin requirements) and
are standardized as to contract size and delivery date. Most currency
futures contracts call for payment or delivery in U.S. dollars. The
underlying instrument of a currency option may be a foreign currency,
which generally is purchased or delivered in exchange for U.S.
dollars, or may be a futures contract. The purchaser of a currency
call obtains the right to purchase the underlying currency, and the
purchaser of a currency put obtains the right to sell the underlying
currency.

The uses and risks of currency options and futures are similar to
options and futures relating to securities or indices, as discussed
above. A fund may purchase and sell currency futures and may purchase
and write currency options to increase or decrease its exposure to
different foreign currencies. Currency options may also be purchased
and written in conjunction with each other or with currency futures or
forward contracts. Currency futures and options values can be expected
to correlate with exchange rates, but may not reflect other factors
that affect the value of a fund's investments. A currency hedge, for
example, should protect a Yen-denominated security from a decline in
the Yen, but will not protect a fund against a price decline resulting
from deterioration in the issuer's creditworthiness. Because the value
of a fund's foreign-denominated investments changes in response to
many factors other than exchange rates, it may not be possible to
match the amount of currency options and futures to the value of the
fund's investments exactly over time.

OTC OPTIONS. Unlike exchange-traded options, which are standardized
with respect to the underlying instrument, expiration date, contract
size, and strike price, the terms of over-the-counter (OTC) options
(options not traded on exchanges) generally are established through
negotiation with the other party to the option contract. While this
type of arrangement allows the purchaser or writer greater flexibility
to tailor an option to its needs, OTC options generally involve
greater credit risk than exchange-traded options, which are guaranteed
by the clearing organization of the exchanges where they are traded.

PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the
purchaser obtains the right (but not the obligation) to sell the
option's underlying instrument at a fixed strike price. In return for
this right, the purchaser pays the current market price for the option
(known as the option premium). Options have various types of
underlying instruments, including specific securities, indices of
securities prices, and futures contracts. The purchaser may terminate
its position in a put option by allowing it to expire or by exercising
the option. If the option is allowed to expire, the purchaser will
lose the entire premium. If the option is exercised, the purchaser
completes the sale of the underlying instrument at the strike price. A
purchaser may also terminate a put option position by closing it out
in the secondary market at its current price, if a liquid secondary
market exists.

The buyer of a typical put option can expect to realize a gain if
security prices fall substantially. However, if the underlying
instrument's price does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss
(limited to the amount of the premium plus related transaction costs).

The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right
to purchase, rather than sell, the underlying instrument at the
option's strike price. A call buyer typically attempts to participate
in potential price increases of the underlying instrument with risk
limited to the cost of the option if security prices fall. At the same
time, the buyer can expect to suffer a loss if security prices do not
rise sufficiently to offset the cost of the option.

WRITING PUT AND CALL OPTIONS. The writer of a put or call option takes
the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the writer assumes the obligation
to pay the strike price for the option's underlying instrument if the
other party to the option chooses to exercise it. The writer may seek
to terminate a position in a put option before exercise by closing out
the option in the secondary market at its current price. If the
secondary market is not liquid for a put option, however, the writer
must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes. When writing an option on
a futures contract, a fund will be required to make margin payments to
an FCM as described above for futures contracts.

If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it
is likely that the writer will also profit, because it should be able
to close out the option at a lower price. If security prices fall, the
put writer would expect to suffer a loss. This loss should be less
than the loss from purchasing the underlying instrument directly,
however, because the premium received for writing the option should
mitigate the effects of the decline.

Writing a call option obligates the writer to sell or deliver the
option's underlying instrument, in return for the strike price, upon
exercise of the option. The characteristics of writing call options
are similar to those of writing put options, except that writing calls
generally is a profitable strategy if prices remain the same or fall.
Through receipt of the option premium, a call writer mitigates the
effects of a price decline. At the same time, because a call writer
must be prepared to deliver the underlying instrument in return for
the strike price, even if its current value is greater, a call writer
gives up some ability to participate in security price increases.

ILLIQUID SECURITIES cannot be sold or disposed of in the ordinary
course of business at approximately the prices at which they are
valued. Difficulty in selling securities may result in a loss or may
be costly to a fund. Under the supervision of the Board of Trustees,
FMR determines the liquidity of each fund's (except Index 500's)
investments and, through reports from FMR, the Board monitors
investments in illiquid securities. Under the supervision of the Board
of Trustees and FMR, BT determines the liquidity of Index 500's
investments and, through reports from FMR and/or BT, the Board
monitors investments in illiquid securities. In determining the
liquidity of a fund's investments, FMR (BT for Index 500) may consider
various factors, including (1) the frequency and volume of trades and
quotations, (2) the number of dealers and prospective purchasers in
the marketplace, (3) dealer undertakings to make a market and (4) the
nature of the security and the market in which it trades (including
any demand, put, or tender features, the mechanics and other
requirements for transfer, any letters of credit or other credit
enhancement features, any ratings, the number of holders, the method
of soliciting offers, the time required to dispose of the security,
and the ability to assign or offset the rights and obligations of the
security).

INDEXED SECURITIES are instruments whose prices are indexed to the
prices of other securities, securities indices, currencies, or other
financial indicators. Indexed securities typically, but not always,
are debt securities or deposits whose value at maturity or coupon rate
is determined by reference to a specific instrument or statistic.
Mortgage-indexed securities, for example, could be structured to
replicate the performance of mortgage securities and the
characteristics of direct ownership. Currency-indexed securities
typically are short-term to intermediate-term debt securities whose
maturity values or interest rates are determined by reference to the
values of one or more specified foreign currencies, and may offer
higher yields than U.S. dollar-denominated securities.
Currency-indexed securities may be positively or negatively indexed;
that is, their maturity value may increase when the specified currency
value increases, resulting in a security that performs similarly to a
foreign-denominated instrument, or their maturity value may decline
when foreign currencies increase, resulting in a security whose price
characteristics are similar to a put on the underlying currency.
Currency-indexed securities may also have prices that depend on the
values of a number of different foreign currencies relative to each
other.

The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which
they are indexed, and may also be influenced by interest rate changes
in the United States and abroad. Indexed securities may be more
volatile than the underlying instruments. Indexed securities are also
subject to the credit risks associated with the issuer of the
security, and their values may decline substantially if the issuer's
creditworthiness deteriorates. Recent issuers of indexed securities
have included banks, corporations, and certain U.S. Government
agencies.

In addition, for Index 500, indexed securities include commercial
paper, certificates of deposit, and other fixed-income securities
whose values at maturity or coupon interest rates are determined by
reference to the returns of the S&P 500 or comparable stock indices.
Indexed securities can be affected by stock prices as well as changes
in interest rates and the creditworthiness of their issuers and may
not track the S&P 500 as accurately as direct investments in the S&P
500.

INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive
order issued by the SEC, a fund may lend money to, and borrow money
from, other funds advised by FMR or its affiliates. A fund will lend
through the program only when the returns are higher than those
available from an investment in repurchase agreements, and will borrow
through the program only when the costs are equal to or lower than the
cost of bank loans. Interfund loans and borrowings normally extend
overnight, but can have a maximum duration of seven days. Loans may be
called on one day's notice. A fund may have to borrow from a bank at a
higher interest rate if an interfund loan is called or not renewed.
Any delay in repayment to a lending fund could result in a lost
investment opportunity or additional borrowing costs.

INVESTMENT-GRADE DEBT SECURITIES. Investment-grade debt securities are
medium and high-quality securities. Some may possess speculative
characteristics and may be more sensitive to economic changes and to
changes in the financial conditions of issuers. A debt security is
considered to be investment-grade if it is rated investment-grade by
Moody's Investors Service, Standard & Poor's, Duff & Phelps Credit
Rating Co., or Fitch IBCA Inc., or is unrated but considered to be of
equivalent quality by FMR.

ISSUER LOCATION. FMR determines where an issuer is located by looking
at such factors as the issuer's country of organization, the primary
trading market for the issuer's securities, and the location of the
issuer's assets, personnel, sales, and earnings. The issuer of a
security is considered to be located in a particular country if (1)
the security is issued or guaranteed by the government of the country
or any of its agencies, political subdivisions, or instrumentalities;
(2) the security has its primary trading market in that country; or
(3) the issuer is organized under the laws of that country, derives at
least 50% of its revenues or profits from goods sold, investments
made, or services performed in the country, or has at least 50% of its
assets located in the country.

LOANS AND OTHER DIRECT DEBT INSTRUMENTS. Direct debt instruments are
interests in amounts owed by a corporate, governmental, or other
borrower to lenders or lending syndicates (loans and loan
participations), to suppliers of goods or services (trade claims or
other receivables), or to other parties. Direct debt instruments
involve a risk of loss in case of default or insolvency of the
borrower and may offer less legal protection to the purchaser in the
event of fraud or misrepresentation, or there may be a requirement
that a fund supply additional cash to a borrower on demand.

Purchasers of loans and other forms of direct indebtedness depend
primarily upon the creditworthiness of the borrower for payment of
interest and repayment of principal. If scheduled interest or
principal payments are not made, the value of the instrument may be
adversely affected. Loans that are fully secured provide more
protections than an unsecured loan in the event of failure to make
scheduled interest or principal payments. However, there is no
assurance that the liquidation of collateral from a secured loan would
satisfy the borrower's obligation, or that the collateral could be
liquidated. Indebtedness of borrowers whose creditworthiness is poor
involves substantially greater risks and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off
their indebtedness, or may pay only a small fraction of the amount
owed. Direct indebtedness of developing countries also involves a risk
that the governmental entities responsible for the repayment of the
debt may be unable, or unwilling, to pay interest and repay principal
when due.

Investments in loans through direct assignment of a financial
institution's interests with respect to a loan may involve additional
risks. For example, if a loan is foreclosed, the purchaser could
become part owner of any collateral, and would bear the costs and
liabilities associated with owning and disposing of the collateral. In
addition, it is conceivable that under emerging legal theories of
lender liability, a purchaser could be held liable as a co-lender.
Direct debt instruments may also involve a risk of insolvency of the
lending bank or other intermediary.

A loan is often administered by a bank or other financial institution
that acts as agent for all holders. The agent administers the terms of
the loan, as specified in the loan agreement. Unless, under the terms
of the loan or other indebtedness, the purchaser has direct recourse
against the borrower, the purchaser may have to rely on the agent to
apply appropriate credit remedies against a borrower. If assets held
by the agent for the benefit of a purchaser were determined to be
subject to the claims of the agent's general creditors, the purchaser
might incur certain costs and delays in realizing payment on the loan
or loan participation and could suffer a loss of principal or
interest.

Direct indebtedness may include letters of credit, revolving credit
facilities, or other standby financing commitments that obligate
purchasers to make additional cash payments on demand. These
commitments may have the effect of requiring a purchaser to increase
its investment in a borrower at a time when it would not otherwise
have done so, even if the borrower's condition makes it unlikely that
the amount will ever be repaid.

Each fund limits the amount of total assets that it will invest in any
one issuer or in issuers within the same industry (see each fund's
investment limitations). For purposes of these limitations, a fund
generally will treat the borrower as the "issuer" of indebtedness held
by the fund. In the case of loan participations where a bank or other
lending institution serves as financial intermediary between a fund
and the borrower, if the participation does not shift to the fund the
direct debtor-creditor relationship with the borrower, SEC
interpretations require a fund, in appropriate circumstances, to treat
both the lending bank or other lending institution and the borrower as
"issuers" for these purposes. Treating a financial intermediary as an
issuer of indebtedness may restrict a fund's ability to invest in
indebtedness related to a single financial intermediary, or a group of
intermediaries engaged in the same industry, even if the underlying
borrowers represent many different companies and industries.

LOWER-QUALITY DEBT SECURITIES. Lower-quality debt securities have poor
protection with respect to the payment of interest and repayment of
principal, or may be in default. These securities are often considered
to be speculative and involve greater risk of loss or price changes
due to changes in the issuer's capacity to pay. The market prices of
lower-quality debt securities may fluctuate more than those of
higher-quality debt securities and may decline significantly in
periods of general economic difficulty, which may follow periods of
rising interest rates.

The market for lower-quality debt securities may be thinner and less
active than that for higher-quality debt securities, which can
adversely affect the prices at which the former are sold. Adverse
publicity and changing investor perceptions may affect the liquidity
of lower-quality debt securities and the ability of outside pricing
services to value lower-quality debt securities.

Because the risk of default is higher for lower-quality debt
securities, FMR's research and credit analysis are an especially
important part of managing securities of this type. FMR will attempt
to identify those issuers of high-yielding securities whose financial
condition is adequate to meet future obligations, has improved, or is
expected to improve in the future. FMR's analysis focuses on relative
values based on such factors as interest or dividend coverage, asset
coverage, earnings prospects, and the experience and managerial
strength of the issuer.

A fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise to exercise its rights as a security
holder to seek to protect the interests of security holders if it
determines this to be in the best interest of the fund's shareholders.

MONEY MARKET INSURANCE. The money market fund participates in a mutual
insurance company solely with other funds advised by FMR or its
affiliates. This company provides insurance coverage for losses on
certain money market instruments held by a participating fund
(eligible instruments), including losses from nonpayment of principal
or interest or a bankruptcy or insolvency of the issuer or credit
support provider, if any. The insurance does not cover losses
resulting from changes in interest rates or other market developments.
The money market fund is charged an annual premium for the insurance
coverage and may be subject to a special assessment of up to
approximately two and one-half times the fund's annual gross premium
if covered losses exceed certain levels. A participating fund may
recover no more than $100 million annually, including all other claims
of insured funds, and may only recover if the amount of the loss
exceeds 0.30% of its eligible instruments. The money market fund may
incur losses regardless of the insurance.

MONEY MARKET SECURITIES are high-quality, short-term obligations.
Money market securities may be structured to be, or may employ a trust
or other form so that they are, eligible investments for money market
funds. For example, put features can be used to modify the maturity of
a security or interest rate adjustment features can be used to enhance
price stability. If a structure fails to function as intended, adverse
tax or investment consequences may result. Neither the Internal
Revenue Service (IRS) nor any other regulatory authority has ruled
definitively on certain legal issues presented by certain structured
securities. Future tax or other regulatory determinations could
adversely affect the value, liquidity, or tax treatment of the income
received from these securities or the nature and timing of
distributions made by the fund.

MORTGAGE SECURITIES are issued by government and non-government
entities such as banks, mortgage lenders, or other institutions. A
mortgage security is an obligation of the issuer backed by a mortgage
or pool of mortgages or a direct interest in an underlying pool of
mortgages. Some mortgage securities, such as collateralized mortgage
obligations (or "CMOs"), make payments of both principal and interest
at a range of specified intervals; others make semiannual interest
payments at a predetermined rate and repay principal at maturity (like
a typical bond). Mortgage securities are based on different types of
mortgages, including those on commercial real estate or residential
properties. Stripped mortgage securities are created when the interest
and principal components of a mortgage security are separated and sold
as individual securities. In the case of a stripped mortgage security,
the holder of the "principal-only" security (PO) receives the
principal payments made by the underlying mortgage, while the holder
of the "interest-only" security (IO) receives interest payments from
the same underlying mortgage.

Fannie Mae and Freddie Macs are pass-through securities issued by
Fannie Mae and Freddie Mac, respectively. Fannie Mae and Freddie Mac,
which guarantee payment of interest and repayment of principal on
Fannie Maes and Freddie Macs, respectively, are federally chartered
corporations supervised by the U.S. Government that act as
governmental instrumentalities under authority granted by Congress.
Fannie Mae is authorized to borrow from the U.S. Treasury to meet its
obligations. Fannie Maes and Freddie Macs are not backed by the full
faith and credit of the U.S. Government.

The value of mortgage securities may change due to shifts in the
market's perception of issuers and changes in interest rates. In
addition, regulatory or tax changes may adversely affect the mortgage
securities market as a whole. Non-government mortgage securities may
offer higher yields than those issued by government entities, but also
may be subject to greater price changes than government issues.
Mortgage securities are subject to prepayment risk, which is the risk
that early principal payments made on the underlying mortgages,
usually in response to a reduction in interest rates, will result in
the return of principal to the investor, causing it to be invested
subsequently at a lower current interest rate. Alternatively, in a
rising interest rate environment, mortgage security values may be
adversely affected when prepayments on underlying mortgages do not
occur as anticipated, resulting in the extension of the security's
effective maturity and the related increase in interest rate
sensitivity of a longer-term instrument. The prices of stripped
mortgage securities tend to be more volatile in response to changes in
interest rates than those of non-stripped mortgage securities.

In order to earn additional income for a fund, FMR may use a trading
strategy that involves selling mortgage securities and simultaneously
agreeing to purchase similar securities on a later date at a set
price. This trading strategy may result in an increased portfolio
turnover rate which increases costs and may increase taxable gains.

MUNICIPAL SECURITIES are issued to raise money for a variety of public
or private purposes, including general financing for state and local
governments, or financing for specific projects or public facilities.
They may be issued in anticipation of future revenues and may be
backed by the full taxing power of a municipality, the revenues from a
specific project, or the credit of a private organization. The value
of some or all municipal securities may be affected by uncertainties
in the municipal market related to legislation or litigation involving
the taxation of municipal securities or the rights of municipal
securities holders. A municipal security may be owned directly or
through a participation interest.

PREFERRED STOCK is a class of equity or ownership in an issuer that
pays dividends at a specified rate and that has precedence over common
stock in the payment of dividends. In the event an issuer is
liquidated or declares bankruptcy, the claims of owners of bonds take
precedence over the claims of those who own preferred and common
stock.

PUT FEATURES entitle the holder to sell a security back to the issuer
or a third party at any time or at specified intervals. In exchange
for this benefit, a fund may accept a lower interest rate. Securities
with put features are subject to the risk that the put provider is
unable to honor the put feature (purchase the security). Put providers
often support their ability to buy securities on demand by obtaining
letters of credit or other guarantees from other entities. Demand
features, standby commitments, and tender options are types of put
features.

REAL ESTATE INVESTMENT TRUSTS. Equity real estate investment trusts
own real estate properties, while mortgage real estate investment
trusts make construction, development, and long-term mortgage loans.
Their value may be affected by changes in the value of the underlying
property of the trusts, the creditworthiness of the issuer, property
taxes, interest rates, and tax and regulatory requirements, such as
those relating to the environment. Both types of trusts are dependent
upon management skill, are not diversified, and are subject to heavy
cash flow dependency, defaults by borrowers, self-liquidation, and the
possibility of failing to qualify for tax-free status of income under
the Internal Revenue Code and failing to maintain exemption from the
1940 Act.

REPURCHASE AGREEMENTS involve an agreement to purchase a security and
to sell that security back to the original seller at an agreed-upon
price. The resale price reflects the purchase price plus an
agreed-upon incremental amount which is unrelated to the coupon rate
or maturity of the purchased security. As protection against the risk
that the original seller will not fulfill its obligation, the
securities are held in a separate account at a bank, marked-to-market
daily, and maintained at a value at least equal to the sale price plus
the accrued incremental amount. The value of the security purchased
may be more or less than the price at which the counterparty has
agreed to purchase the security. In addition, delays or losses could
result if the other party to the agreement defaults or becomes
insolvent. The funds will engage in repurchase agreement transactions
with parties whose creditworthiness has been reviewed and found
satisfactory by FMR (for Index 500, by BT or, under certain
circumstances, by FMR or an FMR affiliate). Pursuant to certain state
insurance regulations, any repurchase agreements a fund enters into
will be secured by collateral consisting of liquid assets having a
market value of not less than 102% of the cash or assets transferred
to the other party.

RESTRICTED SECURITIES are subject to legal restrictions on their sale.
Difficulty in selling securities may result in a loss or be costly to
a fund. Restricted securities generally can be sold in privately
negotiated transactions, pursuant to an exemption from registration
under the Securities Act of 1933, or in a registered public offering.
Where registration is required, the holder of a registered security
may be obligated to pay all or part of the registration expense and a
considerable period may elapse between the time it decides to seek
registration and the time it may be permitted to sell a security under
an effective registration statement. If, during such a period, adverse
market conditions were to develop, the holder might obtain a less
favorable price than prevailed when it decided to seek registration of
the security.

REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
fund sells a security to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase that
security at an agreed-upon price and time. The funds will enter into
reverse repurchase agreements with parties whose creditworthiness has
been reviewed and found satisfactory by FMR (for Index 500, by BT or,
under certain circumstances, by FMR or an FMR affiliate). Such
transactions may increase fluctuations in the market value of fund
assets and a fund's yield and may be viewed as a form of leverage.

SECURITIES OF OTHER INVESTMENT COMPANIES, including shares of
closed-end investment companies, unit investment trusts, and open-end
investment companies, represent interests in professionally managed
portfolios that may invest in any type of instrument. Investing in
other investment companies involves substantially the same risks as
investing directly in the underlying instruments, but may involve
additional expenses at the investment company-level, such as portfolio
management fees and operating expenses. Certain types of investment
companies, such as closed-end investment companies, issue a fixed
number of shares that trade on a stock exchange or over-the-counter at
a premium or a discount to their net asset value. Others are
continuously offered at net asset value, but may also be traded in the
secondary market.

The extent to which a fund can invest in securities of other
investment companies is limited by federal securities laws. Index 500
may invest in investment companies that seek to track the performance
of indexes other than the indexes that the fund seeks to track.

SECURITIES LENDING. A fund may lend securities to parties such as
broker-dealers or other institutions, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange
and a subsidiary of FMR Corp. Index 500 will not lend securities to BT
or its affiliates. BT receives a portion of the securities lending
income earned by Index 500.

Securities lending allows a fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Because there
may be delays in the recovery of loaned securities, or even a loss of
rights in collateral supplied should the borrower fail financially,
loans will be made only to parties deemed by FMR (for Index 500, by BT
or, under certain circumstances, by FMR or an FMR-affiliate) to be of
good standing. Furthermore, they will only be made if, in FMR's (BT's
for Index 500) judgment, the consideration to be earned from such
loans would justify the risk.

FMR and BT understand that it is the current view of the SEC Staff
that a fund may engage in loan transactions only under the following
conditions: (1) the fund must receive 100% collateral in the form of
cash or cash equivalents (e.g., U.S. Treasury bills or notes) from the
borrower; (2) the borrower must increase the collateral whenever the
market value of the securities loaned (determined on a daily basis)
rises above the value of the collateral; (3) after giving notice, the
fund must be able to terminate the loan at any time; (4) the fund must
receive reasonable interest on the loan or a flat fee from the
borrower, as well as amounts equivalent to any dividends, interest, or
other distributions on the securities loaned and to any increase in
market value; (5) the fund may pay only reasonable custodian fees in
connection with the loan; and (6) the Board of Trustees must be able
to vote proxies on the securities loaned, either by terminating the
loan or by entering into an alternative arrangement with the borrower.

Cash received through loan transactions may be invested in other
eligible securities. Investing this cash subjects that investment, as
well as the security loaned, to market forces (i.e., capital
appreciation or depreciation). If Index 500 cannot recover the loaned
securities on termination, the fund may sell the collateral and
purchase a replacement investment in the market.

SHORT SALES "AGAINST THE BOX" are short sales of securities that a
fund owns or has the right to obtain (equivalent in kind or amount to
the securities sold). If a fund enters into a short sale against the
box, it will be required to set aside securities equivalent in kind
and amount to the securities sold short (or securities convertible or
exchangeable into such securities) and will be required to hold such
securities while the short sale is outstanding.

Short sales against the box could be used to protect the net asset
value per share (NAV) of a money market fund in anticipation of
increased interest rates, without sacrificing the current yield of the
securities sold short. A money market fund will incur transaction
costs in connection with opening and closing short sales against the
box. An equity fund will incur transaction costs, including interest
expenses, in connection with opening, maintaining, and closing short
sales against the box.

SHORT SALES. Stocks underlying a fund's convertible security holdings
can be sold short. For example, if FMR anticipates a decline in the
price of the stock underlying a convertible security held by a fund,
it may sell the stock short. If the stock price subsequently declines,
the proceeds of the short sale could be expected to offset all or a
portion of the effect of the stock's decline on the value of the
convertible security. Each fund currently intends to hedge no more
than 15% of its total assets with short sales on equity securities
underlying its convertible security holdings under normal
circumstances.

A fund will be required to set aside securities equivalent in kind and
amount to those sold short (or securities convertible or exchangeable
into such securities) and will be required to hold them aside while
the short sale is outstanding. A fund will incur transaction costs,
including interest expenses, in connection with opening, maintaining,
and closing short sales.

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
or liquidity 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 effect
the value of the security or a fund's share price.

SOVEREIGN DEBT OBLIGATIONS are issued or guaranteed by foreign
governments or their agencies, including debt of Latin American
nations or other developing countries. Sovereign debt may be in the
form of conventional securities or other types of debt instruments
such as loans or loan participations. Sovereign debt of developing
countries may involve a high degree of risk, and may be in default or
present the risk of default. Governmental entities responsible for
repayment of the debt may be unable or unwilling to repay principal
and pay interest when due, and may require renegotiation or
rescheduling of debt payments. In addition, prospects for repayment of
principal and payment of interest may depend on political as well as
economic factors. Although some sovereign debt, such as Brady Bonds,
is collateralized by U.S. Government securities, repayment of
principal and payment of interest is not guaranteed by the U.S.
Government.

STRIPPED SECURITIES are the separate income or principal components of
a debt security. The risks associated with stripped securities are
similar to those of other debt securities, although stripped
securities may be more volatile, and the value of certain types of
stripped securities may move in the same direction as interest rates.
U.S. Treasury securities that have been stripped by a Federal Reserve
Bank are obligations issued by the U.S. Treasury.

Privately stripped government securities are created when a dealer
deposits a U.S. Treasury security or other U.S. Government security
with a custodian for safekeeping. The custodian issues separate
receipts for the coupon payments and the principal payment, which the
dealer then sells.

Because the SEC does not consider privately stripped government
securities to be U.S. Government securities for purposes of Rule 2a-7,
a money market fund must evaluate them as it would non-government
securities pursuant to regulatory guidelines applicable to money
market funds.

SWAP AGREEMENTS (INDEX 500 PORTFOLIO). Under a typical equity swap
agreement, a counterparty such as a bank or broker-dealer agrees to
pay the fund a return equal to the dividend payments and increase in
value, if any, of an index or group of stocks, and the fund agrees in
return to pay a fixed or floating rate of interest, plus any declines
in value of the index. Swap agreements can also have features
providing for maximum or minimum exposure to a designated index. In
order to track the return of its designated index effectively, Index
500 would generally have to own other assets returning approximately
the same amount as the interest rate payable by the fund under the
swap agreement.

The most significant factor in the performance of swap agreements is
the change in value of the specific index, or other factors that
determine the amounts of payments due to and from a fund. If a swap
agreement calls for payments by the fund, the fund must be prepared to
make such payments when due. In addition, if the counterparty's
creditworthiness declined, the value of a swap agreement would be
likely to decline, potentially resulting in losses and impairing the
fund's correlation with the S&P 500. A fund may be able to eliminate
its exposure under a swap agreement either by assignment or other
disposition, or by entering into an offsetting swap agreement with the
same party or a similarly creditworthy party.

SWAP AGREEMENTS (EXCEPT INDEX 500 PORTFOLIO) can be individually
negotiated and structured to include exposure to a variety of
different types of investments or market factors. Depending on their
structure, swap agreements may increase or decrease a fund's exposure
to long- or short-term interest rates (in the United States or
abroad), foreign currency values, mortgage securities, corporate
borrowing rates, or other factors such as security prices or inflation
rates. Swap agreements can take many different forms and are known by
a variety of names.

In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a
fee by the other party. For example, the buyer of an interest rate cap
obtains the right to receive payments to the extent that a specified
interest rate exceeds an agreed-upon level, while the seller of an
interest rate floor is obligated to make payments to the extent that a
specified interest rate falls below an agreed-upon level. An interest
rate collar combines elements of buying a cap and selling a floor.

Swap agreements will tend to shift a fund's investment exposure from
one type of investment to another. For example, if a fund agreed to
exchange payments in dollars for payments in foreign currency, the
swap agreement would tend to decrease the fund's exposure to U.S.
interest rates and increase its exposure to foreign currency and
interest rates. Caps and floors have an effect similar to buying or
writing options. Depending on how they are used, swap agreements may
increase or decrease the overall volatility of a fund's investments
and its share price and yield.

The most significant factor in the performance of swap agreements is
the change in the specific interest rate, currency, or other factors
that determine the amounts of payments due to and from a fund. If a
swap agreement calls for payments by the fund, the fund must be
prepared to make such payments when due. In addition, if the
counterparty's creditworthiness declined, the value of a swap
agreement would be likely to decline, potentially resulting in losses.
A fund may be able to eliminate its exposure under a swap agreement
either by assignment or other disposition, or by entering into an
offsetting swap agreement with the same party or a similarly
creditworthy party.

TEMPORARY DEFENSIVE POLICIES. Each of Asset Manager, Asset Manager:
Growth, Balanced, Equity-Income, Index 500, Growth & Income, Growth
Opportunities, Contrafund, Growth, Overseas, and Mid Cap Portfolios
reserve the right to invest without limitation in preferred stocks and
investment-grade debt instruments for temporary, defensive purposes.

Investment Grade Bond Portfolio reserves the right to invest without
limitation in investment-grade money market or short-term debt
instruments for temporary, defensive purposes.

High Income Portfolio reserves the right to invest without limitation
in investment-grade securities for temporary, defensive purposes.

VARIABLE AND FLOATING RATE SECURITIES provide for periodic adjustments
in the interest rate paid on the security. Variable rate securities
provide for a specified periodic adjustment in the interest rate,
while floating rate securities have interest rates that change
whenever there is a change in a designated benchmark rate. Some
variable or floating rate securities are structured with put features
that permit holders to demand payment of the unpaid principal balance
plus accrued interest from the issuers or certain financial
intermediaries.

WARRANTS. Warrants are instruments which entitle the holder to buy an
equity security at a specific price for a specific period of time.
Changes in the value of a warrant do not necessarily correspond to
changes in the value of its underlying security. The price of a
warrant may be more volatile than the price of its underlying
security, and a warrant may offer greater potential for capital
appreciation as well as capital loss.

Warrants do not entitle a holder to dividends or voting rights with
respect to the underlying security and do not represent any rights in
the assets of the issuing company. A warrant ceases to have value if
it is not exercised prior to its expiration date. These factors can
make warrants more speculative than other types of investments.

WHEN-ISSUED AND FORWARD PURCHASE OR SALE TRANSACTIONS involve a
commitment to purchase or sell specific securities at a predetermined
price or yield in which payment and delivery take place after the
customary settlement period for that type of security. Typically, no
interest accrues to the purchaser until the security is delivered.

When purchasing securities pursuant to one of these transactions, the
purchaser assumes the rights and risks of ownership, including the
risks of price and yield fluctuations and the risk that the security
will not be issued as anticipated. Because payment for the securities
is not required until the delivery date, these risks are in addition
to the risks associated with a fund's investments. If a fund remains
substantially fully invested at a time when a purchase is outstanding,
the purchases may result in a form of leverage. When a fund has sold a
security pursuant to one of these transactions, the fund does not
participate in further gains or losses with respect to the security.
If the other party to a delayed-delivery transaction fails to deliver
or pay for the securities, a fund could miss a favorable price or
yield opportunity or suffer a loss.

A fund may renegotiate a when-issued or forward transaction and may
sell the underlying securities before delivery, which may result in
capital gains or losses for the fund.

ZERO COUPON BONDS do not make interest payments; instead, they are
sold at a discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be more volatile than other types of
fixed-income securities when interest rates change. In calculating a
fund's dividend, a portion of the difference between a zero coupon
bond's purchase price and its face value is considered income.

SPECIAL CONSIDERATIONS REGARDING AFRICA

Africa is a highly diverse and politically unstable continent of over
50 countries and 720 million people. Civil wars, coups and even
genocidal warfare have beset much of this region in recent years.
Nevertheless, it is home to an abundance of natural resources,
including natural gas, aluminum, crude oil, copper, iron, bauxite,
cotton, diamonds and timber. Wealthier countries generally have strong
connections to European partners, and evidence of these relationships
is seen in the growing market capitalization and foreign investment of
these countries. Economic performance is closely tied to world
commodity markets, particularly oil, and also to weather conditions,
such as drought.

Five African countries are among the 20 fastest growing in the world
(Uganda, Ivory Coast, Botswana, Angola and Zimbabwe), with GDP growth
rates ranging from 5.5% to 6.0%. Two countries, Yemen and Bahrain, are
experiencing growth at or below 2.0%, and one country, Libya, is
experiencing (-4.0%) negative growth.

African economic growth is projected to remain higher than in any
recent year other than 1996. The relatively small effects of the Asian
crisis are attributable to the comparatively low levels of private
capital flows to most countries in the regions. Africa can be
negatively impacted from the slowdown in global growth, and its
effects on commodity prices.

Several African countries in the north have substantial oil reserves
and accordingly their economies react strongly to world oil prices.
They share a regional and sometimes religious identification with the
oil producing nations of the Middle East and can be strongly affected
by political and economic developments in those countries. As in the
south, weather conditions also have a strong impact on many of their
natural resources, and, as was the case in 1995, severe drought can
adversely effect economic growth.

Twelve African countries have active equity markets (Bahrain,
Botswana, Egypt, Ghana, Kenya, Morocco, Nigeria, Oman, South Africa,
Tunisia, Zambia, and Zimbabwe). The oldest market, in Egypt, was
established in 1883, while the youngest, in Zambia, was established in
1994. Four additional markets have been established since 1989, and
the mean age for all equity markets is 40 years old. A total of 1,830
firms are listed on the respective exchanges. Total market
capitalization for these countries in 1996 was $290 billion, an
average increase of 54% over 1995 levels.

The South African market is the largest in Africa and has a
capitalization of more than ten times that of all the other African
markets combined. In 1997, the country's Johannesburg Stock Exchange
fell by 6.8%, due largely to weakening commodity prices and a slowdown
in the South African economy. The market decline extended into 1998 as
the South African rand declined versus the world's major currencies.

SPECIAL CONSIDERATIONS REGARDING CANADA

Canada is a confederation of ten provinces with a parliamentary system
of government. Canada is the world's second largest nation by landmass
and is inhabited by 30.2 million people, most of whom are descendants
of France, the United Kingdom and indigenous peoples. The country has
a workforce of over 15 million people in various industries such as
trade, manufacturing, mining, finance, construction and government.
While the country has many institutions which closely parallel the
United States, such as a transparent stock market and similar
accounting practices, it differs from the United States in that it has
an extensive social welfare system, much more akin to European welfare
states.

The confederated structures combined with recent financial pressure on
the federal government have pushed provinces, Quebec in particular, to
call for a revaluation of the legal and financial relationships
between the federal government in Ottawa and the provinces. Recent
referendums on Quebec sovereignty have been narrowly defeated and the
issue appears far from resolved. However, in August of 1998, the
country's Supreme Court decided that Quebec does not have the right to
secede unilaterally, removing any immediate threat that Canada will
break up. Nevertheless, the Canadian markets could continue to react
to any periodic escalations of separatist calls.

Canada is one of the richest nations in the world in terms of natural
resources. The country is a major producer of such commodities as
forest products, mining, metals, and agricultural products.
Additionally, energy related products such as oil, gas, and
hydroelectricity are important components of their economy.
Accordingly, the Canadian stock market is strongly represented by
basic material stocks, and movements in the supply and demand of
industrial materials, agriculture, and energy, both domestically and
internationally, can have a strong effect on market performance.

The United States is Canada's largest trading partner and
approximately 80% of Canadian merchandise traded in 1997 was with the
United States. Automobiles and auto parts accounted for the largest
export items followed by energy, mining and forest products. Canada is
the largest energy supplier to the United States, while the United
States is Canada's largest foreign investor. United States investment
has been largely focused on financial, energy, metals and mining
businesses. The expanding economic and financial integration of the
United States and Canada will likely make the Canadian economy and
securities markets increasingly sensitive to U.S. economic and market
events.

For United States investors in Canadian markets, currency has become
an important determinant of investment return. Since Canada let its
dollar float in 1970, its value has been in a steady decline against
its United States counterpart. While the decline has enabled Canada to
stay competitive with its more efficient southern neighbor, which buys
four-fifths of its exports, United States investors have seen their
investment returns eroded by the impact of currency conversion.

SPECIAL CONSIDERATIONS REGARDING EUROPE

Europe can be divided into two distinct categories of market
development: the developed economies of Western Europe and the
transition economies of Eastern Europe.

Any discussion of European national economies and securities markets
must be made with an eye to the impact that the European Union (EU)
and European Economic and Monetary Union (EMU) will have upon the
future of these countries as well as the rest of the world. The scope
and magnitude of these economic and political initiatives dwarfs
anything attempted to date. If successful, the EU will change or erase
many political, economic, cultural and market distinctions that define
and differentiate each of the Continent's countries today. The third
and final stage of the EMU was scheduled to be implemented on January
1, 1999.

The EU consists of 15 countries of western Europe: Austria, Belgium,
Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
the Netherlands, Portugal, Spain, Sweden and the United Kingdom. The
six founding countries first formed an economic community in the 1950s
to bring down trade barriers such as taxes and quotas, to eliminate
technical restrictions such as special standards and regulations for
foreigners, and to coordinate various industrial policies, such as
those pertaining to agriculture. Since that time the group has
admitted new members and, in time, may expand its membership to other
nations such as those of Eastern Europe. The EU has as its goal, the
creation of a single, unified market that would be, at over 370
million people, the largest in the developed world and through which
goods, people and capital could move freely.

A second component of the EU is the establishment of a single currency
- - the Euro, to replace each member country's domestic currencies. In
preparation for the creation of the Euro, the Exchange Rate Mechanism
(ERM) was established to keep the various national currencies at a
pre-specified value relative to each other. The year 1997 is
significant for membership in the EU as it is the initial reference
year for evaluating debt levels and deficits within the criteria set
forth by the Maastricht treaty. Specifically, the Maastricht criteria
include, among other indicators, an inflation rate below 3.3%, a
public debt below 60% of GDP, and a deficit of 3% or less of GDP.
Failure to meet the Maastricht levels would disqualify any country
from membership.

On May 3, 1998 the European Council of Ministers formally announced
the "first wave" of EMU participants. They are: Austria, Belgium,
Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands,
Portugal and Spain. On January 1, 1999, the Euro became a currency,
while the bank notes used by EMU's eleven members remain legal tender.
After a three year transition period, the Euro will begin circulating
on January 1, 2002. Six months later, today's currencies will cease to
exist.

Many foreign and domestic businesses are establishing or increasing
their presence in Europe in anticipation of the new unified single
market. Clear, confident visions of a diverse, multi-industrial,
unified market under a single currency have been the impetus for much
of the recent corporate restructuring initiatives as well as for the
increased mergers and acquisitions activity in the region. A
successful EMU could prove to be an engine for sustained growth
throughout Europe.

While the securities markets view the introduction of the Euro as
inevitable, the success of the union is not wholly assured. Europe
must grapple with a number of challenges, any one of which could
threaten the survival of this monumental undertaking. For example,
eleven disparate economies must adjust to a unified monetary system,
the absence of exchange rate flexibility and the loss of economic
sovereignty. The Continent's economies are diverse, its governments
decentralized and its cultures differ widely. Unemployment is
historically high and could pose a political risk that one or more
countries might exit the union placing the currency and banking system
in jeopardy.

For those countries in Western and Eastern Europe that were not
included in the first round of the EU implementation, the prospects
for eventual membership serves as a strong political impetus for many
governments to employ tight fiscal and monetary policies. Particularly
for the Eastern European countries, aspirations to join the EU are
likely to push governments to act decisively. At the same time, there
could become an increasingly widening gap between rich and poor both
within the aspiring countries and also those countries who are close
to meeting membership criteria and those who are not. Realigning
traditional alliances could result in altering trading relationships
and potentially provoking divisive socio-economic splits.

The economies of Eastern Europe are embarking on the transition from
communism at different paces with appropriately different
characteristics. The transition countries also display sharp contrasts
in performance. Those that are most advanced in the transformation
process are now reaping the rewards of comprehensive reform and
stabilization policies pursued with determination over recent years.
These include Poland, the Baltic countries, Croatia, the Czech
Republic, Hungary, the Slovak Republic and Slovenia. Conversely, those
that are less advanced in the transition are struggling with a number
of policy challenges to strengthen their economies. Several countries
have made good progress, and in Armenia, Azerbaijan, Georgia,
Kazakhstan, and the Kyrgyz Republic, inflation has fallen considerably
in recent years. Nevertheless, the East European markets are
particularly vulnerable to weakness in the world's other emerging
countries and are particularly sensitive to events in Russia. For
example, in mid-1998 when economic and political turmoil forced the
Russian government to devalue its currency and restructure its debt
payments, the other markets in Eastern Europe suffered significant
destabilization of which the extent and duration is still unknown.

FRANCE. France is a republic of over 58 million people in the historic
if not the geographic center of Western Europe. The Fifth French
Republic, established in the early postwar period under Charles de
Gaulle, provides for a strong Presidency which can appoint its own
cabinet but must win approval of a parliamentary majority. The
government was founded upon the French cultural values of liberty,
brotherhood and egalitarianism. In France, this latter value often
translates into a government burden of providing job security. The
result is a large, vast bureaucracy in the public sector and strict
employment and labor laws in the private sector. In addition, a
significant portion of government economic policy revolves around
regulating and protecting domestic industries, particularly farming
and manufacturing. Finally, the French government frequently owns high
majority or minority interests in large companies, particularly
utility, transport and communications concerns. While privatization
has been a popular movement in many other European countries, it has
encountered a stalled stop-and-go cycle in France.

The French economy is the world's fourth-largest Western
industrialized economy, with a GDP of $1538 billion in 1996. The
nation has substantial agricultural resources, a diversified modern
industrial system, and a highly skilled labor force. France's economy
boasts a sophisticated industrial manufacturing base, which includes
not only high technology (information technology and
telecommunications, vehicles, aircraft, computer equipment, etc.) but
also a number of very large companies producing consumer goods. The
country's industrial structure is unusual for an industrialized
economy because the state still controls a large proportion of the
heavy strategic goods industries as well as institutions such as banks
and communications companies. The agricultural sector continues to be
important; however, most farms are small by European standards and
require massive government support. Exports are an economic strong
point and the nation has enjoyed trade surpluses in recent years.
Leading exports include chemicals, electronics and automotive and
aircraft machinery, while imports are dominated by petroleum,
industrial machinery and electronics. Their main trading partners are
the United States, Japan, and other EU countries.

The country is one of the largest consumers of nuclear energy,
obtaining nearly 75% of its total electricity needs from reactors.
While it has some small deposits of oil and gas, it remains heavily
dependent on imports for most of its needs.

In recent years, the country's economic growth has been hindered by a
series of general strikes. The government's efforts to reduce spending
to meet the Maastricht criteria have prompted strikes and unrest from
France's powerful trade unions. In addition, striking workers have
pushed their demands for a lower retirement age and a reduction in the
work week. With an unemployment rate above 12%, the country's labor
markets are not functioning efficiently. France's pay-as-you-go
pension program is an additional deterrent to economic growth as
spending on pensions account for a tenth of GDP. While all parties
agree that the system must be replaced, no agreement has been reached
on an alternative.

France went to the polls in May 1997 after a surprise decision to hold
early elections by conservative President Jacques Chirac. Chirac's
calculation was to capitalize on popular support before he was forced
to undertake austere fiscal measures to meet the Maastricht criteria.
Voters responded that they were more concerned about the country's
high level of unemployment and Chirac's party lost enough seats in the
parliament that the president must now share power for the remaining
five years in office with a socialist-led government. This change
could set back the previous government's pledges to continue its
privatization initiatives, restrain spending, support the franc, and
endure fiscal austerity. It also calls into question whether the
French people have the will to adhere to the EMU convergence criteria
over the next few years.

The stock market in France has undergone both gradual and dramatic
changes in recent years, keeping pace with global trends toward
deregulation, privatization, and cross border activities, allowing
Paris to maintain its position as the world's fourth-largest financial
center. Until 1996, the Paris Bourse was the country's sole stock
exchange, providing access to all listed French securities. Since
then, foreign interest has been stimulated by the creation of new
markets, such as the Nouveau Marche, for riskier, growth oriented,
small corporations. While the listings of these combined markets are
fairly diverse, financial companies account for approximately
one-third of the total. The system underwent many regulatory changes
in the late 1980s, taking steps toward combating insider trading and
ensuring market transparency.

GERMANY. Germany is the largest economy in all of Europe and is the
third largest economy in the world behind the United States and Japan.
The country occupies a central position in Western Europe with strong
cultural and economic ties with the countries of Eastern Europe and
borders on no less than six other Western European countries. The
country's size, location and proven industrial ability have
historically thrust it to the center of European economic life, a
position it was able to re-attain in the wake of the post-war period.
More recently, Germany has used this position as a platform to
champion the cause of the EU, and also to absorb and transform the
devastated economy of its former communist eastern half.

The German economy is heavily industrialized, with a strong emphasis
on manufacturing. The manufacturing sector is driven by small and
medium-sized companies, most of which are very efficient and dynamic.
Germany, nevertheless, has many large industries and manufacturing is
dominated by the production of motor vehicles, precision engineering,
brewing, chemicals, pharmaceuticals and heavy metal products.

The economy has benefited from a strong export performance throughout
the decade. Exports, weighted heavily in the industrial machinery,
autos and chemicals sectors, have provided the economy with positive
trade balances. Exports are the main engine of GDP growth,
highlighting Germany's dependence on the prosperity of its trading
partners. Five out of its top six trading partners are fellow EU
members (the sixth is the United States), while very low levels of
trade are conducted with Asian and Latin American countries. Germany
stands very well poised to supply the emerging markets of central
Europe. It is already the largest European foreign investor in the
Czech Republic and the largest trading partner for Poland and Hungary.
Accordingly, any weakness in the emerging market economies might
likely dampen demand for German goods, to the detriment of the German
economy. As most of these emerging markets aspire to join the EU, it
is possible that a larger EU could alter Germany's trading
relationships due to new quotas, tax rates, exchange rates and other
factors which will come with EU membership.

The recent performance of the German economy must be evaluated within
the context of the 1990 reunification of the eastern and western
states. GDP growth dropped markedly during the early years of
reunification. Industry in Eastern Germany is still catching up.
Workers in Eastern Germany earn two-thirds of western wages but
produce only half as much. In addition, one of the byproducts of
assimilating East Germany into the state has been the need to
restructure many of the government services to accommodate the new and
substantially less affluent citizens. Significant tax and welfare
reforms have yet to be undertaken, and pressure is mounting on the
government to address these issues. Unemployment rates have begun to
cause some discontent among German citizens whose culture generally
places strong emphasis on a social compact.

Germany is faced with other significant economic challenges.
Unemployment is currently above 12% as the country experiences its
longest period of slow growth since the Second World War. The
government's ability to deal with the problem is limited by its
efforts to meet the stringent Maastricht criteria for convergence.
There are also growing concerns about the exodus of German companies
relocating abroad in order to avoid the country's high labor costs. In
the longer run, Germany's government must alter the peculiar mix of
capitalism, welfarism and consensus that sets the country apart. Those
decisions will be politically sensitive - especially if they
antagonize the powerful trade unions or the country's many family-run
firms.

Germany's stock market has enjoyed dramatic growth in volume as the
main DAX index has soared over the past two years. Much of the
market's strength has been attributed to the dollar's recovery and
rising corporate earnings. In addition, a number of changes have
occurred recently to support the share-buying explosion and to
establish a German equity culture. A number of initial public
offerings were launched as the government sought to divest itself of
ownership in such businesses as the nation's telephone utility and
post office businesses to ease budgetary pressures. The government
also created a supervisory authority which has outlawed insider
trading and established stiffer company reporting standards intended
to further increase the appeal of Germany's stock market.
Nevertheless, while there has been progress in broadening the investor
base, shares remain overwhelmingly in the hands of institutions and
companies.

The German central bank is one of the world's strongest and most
independent. Their high interest rates have contributed to a
controlled growth of the stock market and a steadily decreasing
inflation rate. Keeping the Deutsche Mark strong in leading up to EMU
was a priority for the bank. Nevertheless, exports have thrived
despite the currency's strong position.

A founding member of the EU and the most ardent proponent of EMU,
Germany is seen as the primary player in Union economics and politics.
Seeking to consolidate this position, recent government policy has put
a strong emphasis on the maintenance of a strong currency and the
achievement of the Maastricht criteria.

NORDIC COUNTRIES. Increasing economic globalization and the expansion
of the EU have forced the Nordic Countries to scale back their
historically liberal welfare spending policies. While public spending
has dropped from average levels, the cutbacks in social programs have
sparked drops in domestic demand and increases in unemployment.
Nevertheless, the Nordic economies are experiencing positive growth
fueled largely by strong exports and low interest rates. The EMU put
pressure on each nation to maintain their economies in line with
requirements of the Maastricht treaty criteria and the fiscal and
political issues remain central in political debates.

Of the Nordic countries, Finland, Denmark and Sweden are all members
of the EU. Only Norway has elected not to join. However, the decision
likely will not isolate the Norwegian economy from those of its Nordic
neighbors. The country maintains a "shadow membership" in the EU, by
which it seeks to stay as closely informed as possible and to make its
voice heard on the issues. This may ensure that it will become more
closely aligned with the rest of Europe as time passes. One
significant aspect of opting out of the EU is that the central bank is
free to pursue its own agenda, such as setting inflation targets as
opposed to exchange rate targets. Inflation patterns and currency
stability could prove to be issues that may separate the policy
decisions of Norway from the other Nordic countries.

Politically, the countries of this region are historically known for
their approach to policy making that emphasizes consensus. The most
common type of government among the Nordic countries is dominated by
long-standing, left-of-center parties which often align themselves
with smaller centrist parties for majority support. The landscape,
however, is so fractured that governing from a minority position is
common. The absence of a clear majority party slows and sometimes
arrests policy making. The strongest opposition comes from traditional
European conservative parties, which have gained support in recent
years with the decline of the welfare state and the need for the
libertarian policies necessary to compete and integrate with free
markets. None of the Nordic countries face any serious risk of any
anti-democratic political change. However, in Sweden, the prospects of
the present government will depend on its ability to create more jobs
and maintain the economy for EMU. A large minority of voters are also
disappointed about the benefits which membership in the EU was
expected to bring and have been increasingly voicing anti-EU
sentiments. However, in May 1998, Finland was formally admitted in the
"first wave" of the EMU.

Industry in the region is heavily resource-oriented. Denmark's
agricultural sector remains the backbone of the economy although other
industries have been developing rapidly in recent years, with
engineering, food processing, pharmaceuticals, brewing and
shipbuilding gaining in importance. Finland's major industry is
forestry which supplies a large paper and timber products sector. It
also produces household goods and telecommunications equipment and has
an extremely important heavy goods sector producing ships, cement,
steel and machine tools. In Sweden, the manufacturing sector dominates
the economy and includes major industries which range from motor
vehicles to aerospace, chemicals, pharmaceuticals, timber, pulp and
paper. Several of the country's export-oriented industries (in
particular forestry, mining and steel) are suffering as the country's
high wages squeeze them out of foreign markets. Norway's oil-driven
economy has provided its citizens with one of the highest standards of
living in the world. However, they must prepare for the time, due to
arrive early in the next century, when their vast reserves run out.
Reliance on exports concentrated in a few sectors tie these countries
closely to one another.

Economically, the Nordic countries are strong export economies that
take advantage of their abundant natural resources. They are also very
closely tied both to each other and to the rest of Europe. Most
countries have witnessed low levels of positive growth in the last six
years. Finland is the exception. As a significant portion of its trade
is with Russia, Finland suffered in the early years of the collapse of
the Soviet Union. However, in the past two years its economy has
recorded some of the highest growth rates in Western Europe while
having the lowest rate of inflation. Similarly, after five years of
recession, the overall outlook for the Swedish economy is also vastly
improved. A stringent package of spending cuts and tax increases has
brought down the budget deficit to a level that is well within the EMU
target. Exports are recovering as other parts of Europe are coming out
of recession and its inflation is among the lowest in Western Europe.
However, the one weak spot in both countries' economies is a
persistently high unemployment rate. Finland's unemployment, at 17%,
is the second highest in Europe after Spain, and Finland's rate
represents only a marginal improvement over the previous year.
Norway's oil driven economy is the envy of many and unemployment is
just a little over five percent.

A portion of the region's unemployment woes can be attributed to the
cultural ethic which was advanced during the years of the welfare
state. Subsequent cuts in public spending, particularly in those
sectors that traditionally rely on large government spending,
exacerbated the problem. Labor market reform will be a critical issue
in these countries as public spending is cut back. Pensions and
structural issues such as union regulations all need to be reformed, a
task which brings both challenges and unpopularity to the government
that accepts it. Not only will labor market reforms give governments a
daunting challenge; they could also cause the public to regret their
participation in the EMU. One positive point is that the countries
boast very high standards of living, which create healthy and highly
educated workforces.

The stock markets in Scandinavia are of medium size, and frequently
are strongly influenced by a small number of large multinational
firms. For example, in Sweden thirty firms constituted 75% of the
market's total capitalization and market turnover in 1997. Weighing
heavily in the equity markets are the electronics, forest products,
mining and manufacturing sectors. Market capitalization is highest in
Sweden at $273 billion, while the others are between $74 and $94
billion. Sweden also leads in numbers of firms (261) listed. Other
countries' listings range from 126 (Finland) to 249 (Denmark).
Performance of Nordic country indexes tend to be skewed owing to the
dominant weightings that a few large companies have in the index. For
example, the market capitalization of Finnish telecommunications
equipment manufacturer Nokia comprises about one-third of the total
market capitalization of the Finnish exchange and has a substantial
impact upon the performance of the companies in the HEX Index.

UNITED KINGDOM. The United Kingdom is the world's sixth largest
economy and is home to one of the oldest, most established, and most
active stock markets. An island nation, it built an empire of
strategically located trading posts such as Hong Kong and India. While
today the empire is largely dissolved, trade remains a very key
component of the U.K. economy. Strong domestic sectors are services,
natural energy resources, and heavy industry, including steel, autos,
and machinery. Imports generally emphasize food and manufacturing
components. The United Kingdom's trading partners are predominately
established market economies, such as the United States, Japan, and
other member countries of the European Union. The United Kingdom, via
the North Sea, also has substantial petroleum resources.

The London Stock Exchange is comprised of six offices scattered
throughout Great Britain and Northern Ireland. It lists over 2900
firms, and trades both foreign and domestic securities as well as
securities issued by the British Government. A vast majority of the
firms listed (80%) are from the United Kingdom. Total market
capitalization in 1997 was over $5,440 billion. Such size prevents the
stock market from being overly sensitive to the performance of
individual firms.

In 1997 the U.K. posted its sixth year of recovery with GDP growth of
3.5%, the third highest in the EU. The labor market also appears to
have improved as pay settlements and wages remain under control
despite the unemployment rate falling from 6.5% to 5% over the year.
The strengthening economy prompted a sharp acceleration in consumer
spending and, in response, the nation's Monetary Policy Committee was
forced to raise base rates. The interest rate rise added fuel to an
already robust sterling which rose 8.6% in 1997 after appreciating by
15.6% in 1996. This proved particularly damaging to the manufacturing
sector and, although exports held up well during the year, there were
early indications that a decline was underway. Inflation is low,
making the country attractive for foreign investment. Investment is
especially attractive to the United States, with which the United
Kingdom shares many market similarities. Each country is the other's
largest foreign investment partner.

Under Conservative Party leadership in the early 1980s, the United
Kingdom privatized many state-run utilities, such as British Gas and
British Telecom. The success of these efforts is evidence both of the
strong entrepreneurial spirit of British society and also a
fundamental rejection of the welfare state policies that dominated the
scene in the early post-war period. Even today, the Labour Party has
shed much of its socialist economic platform, reflecting a strong
break away from policies that continue to be popular in other European
countries. Eager to attract foreign investment the new administration
is not expected to undo any of the major reforms put in place by the
Conservatives during their last 18 years in power. Some changes could
include an increase in spending on social programs, a slowing of
privatization, and an increase in corporate taxes. Tight monetary
policy and interest rate hikes could be used to keep inflation below
the government's self-imposed 2.5% ceiling. In addition, the
government will probably wish to rebuild ties with the rest of the EU
and has already taken steps to get the pound back into the European
system by increasing the independence of the country's central bank.

Nevertheless, there appears to be some nervousness among many
investors who see the U.K. market lagging behind the continental
European stock markets where they see more compelling prospects for
economic growth. In addition, the manufacturing industry is suffering
from the pound's lofty valuation and many fear that an economic
slowdown could spread to the services sector.

The political scene in London is largely shaped by positions regarding
EMU. Pro Europe MPs in the Tory opposition leadership were
marginalized after the 1997 election, further polarizing the positions
of the two parties. Despite this expression of support, the United
Kingdom continues to be overtly less enthusiastic about EMU than other
countries in Europe and has not committed itself to immediately
joining the new currency once it is established. While the new
government has stated that it hopes to meet the Maastricht criteria,
it is less a self-imposed pressure on the U.K. government than it is
for other countries in the Union. Signing on to the EU Social Charter
would neutralize the policies which have set the United Kingdom above
other countries in attracting investment, such as wages and employment
conditions.

SPECIAL CONSIDERATIONS REGARDING ASIA

Asia has undergone an impressive economic transformation in the past
decade. Many developing economies, utilizing substantial foreign
investments, established themselves as inexpensive producers of
manufactured and re-manufactured consumer goods for export. As
household incomes rose, middle classes increased, stimulating domestic
consumption. In recent years, large projects in infrastructure and
energy resource development have been undertaken, and have benefited
from cheap labor, foreign investment, and a business friendly
regulatory environment. During the course of development, democratic
governments fought to maintain the stability and control necessary to
attract investment and provide labor. Subsequently, Asian countries
today are coming under increasing, if inconsistent, pressure from
western governments regarding human rights practices.

Manufacturing exports declined significantly in 1997, due to drops in
demand, increased competition, and strong performance of the U.S.
dollar. This significant decline is particularly true of electronics,
a critical industry for several Asian economies. Declines in exports
reveal how much of the recent growth in these countries is dependent
on their trading partners. Many Asian exports are priced in U.S.
dollars, while the majority of its imports are paid for in local
currencies. A stable exchange rate between the U.S. dollar and Asian
currencies is important to Asian trade balances.

Despite the impressive economic growth experienced by Asia's emerging
economies, currency and economic concerns have recently roiled these
markets. Over the summer of 1997, a plunge in Thailand's currency set
off a wave of currency depreciations throughout South and Southeast
Asia. The Thai crisis was brought on by the country's failure to take
steps to curb its current-account deficit, reduce short-term foreign
borrowing and strengthen its troubled banking industry, which was
burdened by speculative property loans. Most of Southeast Asia's stock
markets tumbled in reaction to these events. Investors were heavy
sellers as they became increasingly concerned that other countries in
the region, faced with similar problems, would have to allow their
currencies to weaken further or take steps that would choke off
economic growth and erode company profits. For U.S. investors, the
impact of the market declines were further exacerbated by the effect
of the decline in the value of local currencies versus the U.S.
dollar.

The same kind of concerns that effected Thailand and other Southeast
Asian countries subsequently spread to North Asia. To widely varying
degrees, Taiwan, South Korea and Hong Kong all faced related currency
and/or equity market declines. Due to continued weakness in the
Japanese economy combined with the reliance of Asian economies on
intra-Asian trade and capital flows, most of the region was mired in
their worst recessions since World War II.

Investors continue to face considerable risk in Asian markets as
political, economic and currency turmoil has continued to undermine
market valuations throughout the first half of 1998. Rising
unemployment, food shortages and declining purchasing power could lead
to social unrest and threaten the orderly functioning of government.
Currency devaluations also increase pressure on both the consumers who
must pay more for imported goods and on many businesses that must deal
with the rising costs of raw materials. For U.S. investors, weakening
local currencies erode their returns in these markets upon currency
translation. Certainly, the resolve of the region's governments to
adhere to International Monetary Fund-mandated benchmarks will be
sorely tested, as their implementation could further exacerbate these
pressures on the nation's populace and businesses. In addition,
Japan's paralysis is fast becoming a problem for Asia. Worsening
Japanese banking problems could lead to a contraction of credit for
all of Asia and slow rehabilitation in the region. Similarly, a
significant portion of both domestic and foreign investors have fled
these markets in favor of safer havens outside of the region and will
not likely return until they see more evidence that these problems are
being effectively addressed. The scope and magnitude of the tasks that
these countries face in resolving their problems could mean that
investors will see a continuation of high market volatility over an
extended period.

JAPAN. A country of 126 million with a labor force of 64 million
people, Japan is renowned as the preeminent economic miracle of the
post-war era. Fueled by public investment, protectionist trade
policies, and innovative management styles, the Japanese economy has
transformed itself since the World War II into the world's second
largest economy. An island nation with limited natural resources,
Japan has developed a strong heavy industrial sector and is highly
dependent on international trade. Strong domestic industries are
automotive, electronics, and metals. Needed imports revolve around raw
materials such as oil, forest products, and iron ore. Subsequently,
Japan is sensitive to fluctuations in commodity prices. With only 19%
of its land suitable for cultivation, the agricultural industry is
small and largely protected. While the United States is Japan's
largest single trading partner, close to half of Japan's trade is
conducted with developing nations, almost all of which are in
southeast Asia. Investment patterns generally mirror these trade
relationships. Japan has over $100 billion of direct investment in the
United States.

The Tokyo Stock Exchange (TSE) is the largest of eight exchanges in
Japan. The exchanges divide the market for domestic stocks into two
sections, with larger companies assigned to the first section and
newly listed or smaller companies assigned to the second. In 1997,
1,805 firms were listed on the TSE, 96% of which were domestic. Some
believe that the TSE has a tendency to be strongly influenced by the
performance of a small circle of large cap firms that dominate the
market. The two key indexes are the Tokyo Stock Price Index (TOPIX)
and the Nikkei. In 1997, TSE performance was disappointing, with the
TOPIX down 28% for the year.

Since Japan's bubble economy collapsed seven years ago, the nation has
drifted between modest growth and recession. By mid-year 1998 the
world's second largest economic power had slipped into its deepest
recession since World War II. Much of the blame can be placed on
government inaction in implementing long-neglected structural reforms
despite strong and persistent proddings from the International
Monetary Fund and the G-7 nations. Steps have been taken to institute
deregulation and liberalization of protected areas of the economy, but
the pace of change has been disappointedly slow.

Unemployment levels, already at record rates when measured by the
broader criteria used in many other countries, have been an area of
increasing concern and a major cause of recent voter dissatisfaction
with recent governments. However, the most pressing need for action is
the daunting task of overhauling the nation's financial institutions
and securing public support for taxpayer-funded bailouts. Banks, in
particular, must dispose of their huge overhang of bad loans and trim
their balance sheets in preparation for greater competition from
foreign financial institutions as more areas of the financial sector
are opened. Successful financial sector reform would allow Japan's
financial institutions to act as a catalyst for economic recovery at
home and across the troubled Asian region. Further steps toward
complete financial liberalization are in the initial stages of
implementation. Proposals under consideration could lower many
barriers allowing foreign firms greater and cheaper access to funds,
and the recent relaxation of restrictions on the insurance market also
promise greater access to foreign companies. A large factor in
determining the pace and scope of recovery is the government's
handling of deregulation programs, a delicate task given the recent
changes in Japanese politics.

Recent political initiatives in Japan have fundamentally transformed
Japanese political life, ushering in a new attitude which is strongly
reverberating in the economy. The Japanese Parliament (the Diet) had
been consistently dominated by the Liberal Democratic Party (LDP)
since 1955. The LDP dynasty, recently fraught with scandal,
corruption, accusations of maintaining a virtual monopoly, effectively
ended in 1994 as a result of electoral reform measures that brought
Diet seats to previously underrepresented areas. The first election
under this new system was held in October 1996. While the LDP remained
as the ruling party, it did so from a minority position. A key result
of the electoral reforms has been a strengthening of ideas of
opposition parties. Indeed, many of the LDP's recent reforms
originated with the leaders of the opposition New Frontier Party. The
LDP's ability to consistently produce bold innovations in a
politically competitive environment is untested. The opposition
parties suffer from structural and organizational weaknesses.
Infighting and defections are common. This inexperience with a true
multi-party system has caused the rise and fall of four coalition
governments in recent years. Between the adjusting of the monolithic
LDP to a more demanding and competitive system and the settling of the
opposition parties, Japan's political environment remains unstable.
The desire for electoral reform arose out of what many see as a basic
change in Japanese public opinion in recent years. Faced with
recurring scandal and corruption, Japanese society has come to demand
more accountability from their leaders, more transparency in their
institutions, and less interference from their intensely bureaucratic
government. This attitude was reflected in the results of the recent
election where candidates of the LDP party were heavily defeated in an
election for the upper house of parliament and prime minister
Hashimoto was forced to resign. The election results were considered
to be a repudiation of the government's failure to come to grips with
the country's economic decline, widening corruption scandals and a
lack of any discernable progress in addressing the nation's banking
problems.

Nevertheless, sustaining reforms and recovery are not guaranteed.
Drops in consumption, increased budget deficits, or halting
deregulation could exacerbate the nation's economic woes. Furthermore,
as a trade-dependent nation long used to high levels of government
protection, it is unclear how the Japanese economy will react to the
potential adoption of the trade liberalization measures which are
constantly promoted by their trading partners. In addition, as the
largest economy in a rapidly changing and often volatile region of the
world, external events such as the Korean conflict could effect Japan.
As many of the governments of Southeast Asia frequently face domestic
discontent, and as many of these countries are Japanese trading
partners and investment recipients, their internal stability and its
impact on regional security are of tremendous importance to Japan.

Also of concern are Japan's trade and current-account surpluses. If
they continue to grow, they could lead to an increase in trade
friction between Japan and the United States. Additionally, with
inflationary pressures largely absent and wholesale prices falling,
Japan may be entering a period of deflation. A deflationary
environment would both hit corporate profits and increase the debt
burden of Japan's most highly leveraged companies.

CHINA AND HONG KONG. China is one of the world's last remaining
communist systems, and the only one that appears poised to endure due
to its measured embrace of capitalist institutions. It is the world's
most populous nation, with 1.22 billion people creating a workforce of
699 million people. Today's Chinese economy, roughly separated between
the largely agricultural interior provinces and the more
industrialized coastal and southern provinces, has its roots in the
reforms of the recently deceased communist leader Deng Xiaoping.
Originally an orthodox communist system, China undertook economic
reforms in 1978 by providing broad autonomy to certain industries and
establishing special economic zones (SEZs) to attract foreign
investment (FDI). Attracted to low labor costs and favorable
government policies, investment flowed from many sources, with Hong
Kong, Taiwan, and the United States leading the way. Most of this
investment has been concentrated in the southern provinces,
establishing manufacturing facilities to process goods for re-export.

The result has been a steadily high level of real GDP growth,
averaging 11.35% per year so far this decade. With this growth has
come a doubling of total consumption, a tripling of real incomes for
many workers, and a reduction in the number of people living in
absolute poverty from 270 to 100 million people. Today there is a
market of more than 80 million people who are now able to afford
middle class western goods.
Such success has not come without negatives. As a communist system in
transition, there still exist high levels of subsidies to state-owned
enterprises (SOE) which are not productive. At the end of 1997, it was
reported that close to half of the SOEs ran losses. In addition, the
inefficiencies endemic to communist systems, with their parallel (thus
redundant) political, economic and governmental policy bodies,
contribute to high levels of inflation. Fighting inflation and
attempting to cool runaway growth has forced the government to
repeatedly implement periods of fiscal and monetary austerity.
Periodic intervention seems to be their chosen method of guarding
against overheating.

Performance in 1997 reflects this dynamic between growth, inflation,
and the government's attempts to control them. Growth slowed to 9.1%,
largely as a result of a tightening of credits to SOEs. Policy was a
mix between a loose monetary stance and some relatively austere fiscal
positions. While growth was a priority, it came at the cost of
double-digit inflation.

China has two stock exchanges that are set up to accommodate foreign
investment, in Shenzhen and in Shanghai. In both cases, foreign
trading is limited to a special class of shares (Class B) which was
created for that purpose. Only foreign investors may own Class B
shares, but the government must approve sales of Class B shares among
foreign investors. As of December 1997, there were 51 companies with
Class B shares on the two exchanges, for a total Class B market
capitalization of $2.1 billion U.S. dollars. In 1997, all of China's
stock market indices finished the year below the level at which they
began it. These markets were buoyed by strong speculative buying in
the year's second quarter. Market valuations peaked in September and
were subsequently hit by a heavy sell off from October onwards.

In Shanghai, all "B" shares are denominated in Chinese renminbi but
all transactions in "B" shares must be settled in U.S. dollars. All
distributions made on "B" shares are also payable in U.S. dollars, the
exchange rate being the weighted average exchange rate for the U.S.
dollar as published by the Shanghai Foreign Exchange Adjustment
Center. In Shenzhen, the purchase and sale prices for "B" shares are
quoted in Hong Kong dollars. Dividends and other lawful revenue
derived from "B" shares are calculated in renminbi but payable in Hong
Kong dollars, the rate of exchange being the average rate published by
the Shenzhen Foreign Exchange Adjustment Center. There are no foreign
exchange restrictions on the repatriation of gains made on or income
derived from "B" shares, subject to the repayment of taxes imposed by
China thereon.

China's proven ability to nurture domestic consumption and expand
export markets leads many to believe that the bulk of its growth has
yet to be seen. Most sources, notably the World Bank, predict future
growth levels through the year 2000 of over 7%. This auspicious
indicator notwithstanding, there are a few special considerations
regarding China's future. While this list is not all-inclusive, it
does highlight some internal and external forces that have a strong
influence on the country's future.

To begin with the internal issues, one matter is that infrastructure
bottlenecks could prove to be a problem, as most FDI has been
concentrated in manufacturing and industry at the expense of badly
needed transportation and power improvements. Secondly, as with all
transition economies, the ability to develop and sustain a credible
legal, regulatory, and tax system could influence the course of
investments. Third, environmentalists warn of the current and looming
problems regarding pollution and resource destruction, a common result
of such industrial growth in developing economies which can't afford
effective environmental protection. This is a particularly noteworthy
issue, given the size of the country's agricultural sector. Lastly,
given China's unique method of transition there exists the possibility
that further economic liberalization could give rise to new social
issues which have heretofore been effectively mitigated. One such
issue is the possible dismantling of inefficient state-owned
enterprises, something which is potentially socially explosive given
the communist policy of providing social welfare through the firm.
Exposing what many economists feel is a high level of open
unemployment and widening the gap between the newly empowered business
class and the disenfranchised could pressure the government to retreat
on the road to reform and continue with massive state spending.

Regarding external issues, China's position in the world economy and
its relationship with the United States also have a strong influence
on it's economic performance. The country has recently enjoyed an
almost uninterrupted positive trade balance. As the largest country
amidst the fastest growing region in the world, China and its
multi-million person ethnic diaspora have a significant role to play
in Asian growth. Should China ascend to become a member of the World
Trade Organization (WTO), as it desires, such movements of capital and
goods will become easier.

Export growth in China has recently been subject to fluctuations
caused by external political events, such as the U.S. elections and
debates over human rights issues. U.S. policy (specifically most
favored nation status) is frequently reconsidered by various elements
of the U.S. government in reaction to a variety of issues, from
nuclear proliferation to Tibetan rights. Significant changes in U.S.
policy could impact China's growth, as close to 9% of their GDP is
trade with the U.S. and the U.S. represents the third biggest investor
in China.

Perhaps the strongest influence on the Chinese economy is the policy
that is set by the political leaders in Beijing and this is somewhat
of an open question as the death of Deng has created a slight vacuum
in Chinese political society. A large part of Deng's strength derived
from a newly empowered business class endeared to him and it is
unclear if any of his successors can harness this loyalty as
effectively as he did. Sustained growth is one possible way to win
over this constituency, leading many to believe that the future
Chinese leadership will respect market forces at least as much as Deng
did. Choosing between double digit growth and reduced inflation could
continue to be a central economic question, with 1997 (Deng
influenced) decisions pointing to an acceptance of lower, albeit still
high, GDP growth.

Another key political player is the Chinese army. With provocative
situations occurring in Taiwan and the Korean peninsula, and with ever
present pressure from internal democrats, the military is in a
position of leverage regarding the shaping of the future political
scene. Finally, there is the communist party, long seen as a loser
amongst the beneficiaries of Deng's reforms. Many view the battle
between the party and the middle class as a zero sum game and as the
leadership settles, respective alliances and constituencies could
determine how much the government pursues its growth strategy.

As with almost all foreign investments, U.S. investors face the
significant risk of currency devaluation by the Chinese government.
Despite assurances from officials reemphasizing China's policy
commitment to maintain the current exchange rate of the renminbi
against the U.S. dollar, many observers believe that this policy will
be soon tested as China monitors the effect of regional devaluations
on exports. Government authorities feel that China has boosted its
international reputation by refraining from devaluing the renminbi at
a time when such a move could further destabilize the currencies of
its neighbors. Nevertheless, Chinese authorities have recently hinted
that a continued slide in the Japanese yen would make it very
difficult for them to maintain their promise not to devalue. If
efforts to prevent the slide in the yen fail, then China may be pushed
into devaluing their currency. For U.S. investors, a devaluation would
erode the investment returns on their investments.

The last significant force in the Chinese economy is the acquisition
on July 1, 1997 of Hong Kong as a Special Autonomous Region (SAR). For
the past 99 years as a British Colony, Hong Kong has established
itself as the world's freest market and more recently as an economic
gateway between China and the west.

A tiny, 814 square mile area adjacent to the coast of southern China
with a population of 6.3 million, Hong Kong has a long established
history as a global trading center. Originally a manufacturing-based
economy, most of these businesses have migrated to southern China. In
their place has emerged a developed, mature service economy which
currently accounts for approximately 80% of its Gross Domestic
Product. Hong Kong trades over $400 billion in goods and services each
year with countries throughout the world, notably China, Japan, and
the U.S. Its leading exports are textiles and electronics while
imports tend to revolve around foodstuffs and raw materials. Hong
Kong's currency, the HK dollar, was pegged to the US dollar at
HK7.7=$1 in 1983 and investors consider it to be a stable mechanism in
enduring confidence lapses and speculator attacks. The operation of a
currency board and accumulation of U.S. dollars in its monetary fund
is partly responsible for this stability.

The stock market (SEHK) listed 658 publicly traded companies by the
end of 1997, with total capitalization at $413 billion U.S. dollars. A
significant portion of SEHK firms are in real estate, and are
sensitive to fluctuations in the property markets. 1997 was a
tumultuous year for the Hong Kong stock market as a speculative attack
on the Hong Kong dollar in October provoked a global sell-off in
equities. Investors were shocked as the Hong Kong market, long
regarded as a safe-haven, plunged 40% in October. The stock market's
decline and the attack on the local currency sent interest rates
soaring, precipitating an erosion in local property values. This in
turn put additional pressure on the banking sector which is heavily
geared to real estate. The Hong Kong market's dramatic downturn
illustrates how vulnerable it is to the Asian region's economic
problems. The structural problems besetting Hong Kong's neighbors in
Southeast and Northeast Asia may not be quickly resolved. Exports to
the Asian region may remain depressed as the process of economic
reform in countries such as Thailand, Malaysia, Indonesia, Japan and
South Korea will likely hold back economic growth in the area.
Accordingly, Hong Kong and China will likely be more dependent upon
demand from the U.S. and Europe for some time to come.

As a trade center, Hong Kong's economy is very closely tied to that of
its trading partners, particularly China and the United States. In the
wake of Deng's reforms, Hong Kong and China have become increasingly
interdependent economically. Currently, China is Hong Kong's largest
trading partner. After Taiwan, Hong Kong is the largest foreign
investor in China, accounting for about 60 percent of overall foreign
direct investment. Hong Kong plays a particularly significant role as
an intermediary in U.S.-China trade. In 1996, it handled 56% of
China's exports to the U.S. and 49% of Chinese imports from the U.S.

The critical question regarding the future of Hong Kong is how the
Chinese leadership will exert its influence now that it has become a
Special Autonomous Region (SAR). This new status is in accordance with
pledges made at the Joint Declaration on the Question of Hong Kong
made by the Chinese and British governments in 1984. Leading up to the
hand over of the colony, the Chinese government has pledged to uphold
the Basic Law of 1990 which states that Hong Kong's status as an
unfettered financial center will remain intact for at least 50 years
after 1997. Part of this status includes retaining the legal,
financial and monetary systems (specifically the HK$/US$ peg) which
guarantee economic freedom and foster market expansion.

Many investors and citizens are closely monitoring Chinese actions in
order to assess their actual commitment to these principles. Already
there is evidence of a clear, if slow, current of political change
coming from Beijing. Certain actions, such as the curbing of media
freedoms, indicate that there is the possibility of significant
interference from communist authorities. More significant was the
clash between the U.K. and Chinese governments over China's abolition
of the elected legislature and subsequent installation of governmental
leaders in both the executive and the legislature who are directly
appointed by Beijing. Mr. Tung Chee-hwa, appointed as the first Chief
Executive of the SAR, has surrounded himself with like-minded
Machiavellian figures who have strong ties to both market successes
and Beijing leaders. They are portrayed as believing in the powers of
capitalism and central authority, if not democracy, leading some to
speculate that the SAR could develop into a South Korean style of
corporatism which preserves the economic status quo without
incorporating further political freedoms.

In assessing the prospects for Hong Kong's future, it must be noted
that China has a very strong interest in a prosperous SAR.
Particularly if Beijing pursues a growth strategy as it has in the
past, Hong Kong can be a key agent in China's economic policy. Desire
for investment and new technologies necessary for modernization is a
strong incentive to send positive signals through the treatment of
Hong Kong. This is reinforced by the respect Hong Kong is due given
its role in China's recent dynamic performance.

To be sure, there are more adamant concerns over the effect of the
acquisition. Many are skeptical of Beijing's ability to leave the
currency alone. Some note the continuous drop in GDP as evidence that
Hong Kong has yet to mature as a service economy and that the
workforce hasn't fully adjusted to the switch out of manufacturing.
Additionally, by tying Hong Kong so closely with China, it now must
weather the ups and downs of Beijing's relationship with the U.S. Most
Favored Nation Status now means just as much, if not more, to the SAR
as it does to Beijing, with some asserting that revoking MFN could
result in substantial losses in trade, income, and jobs.

Hong Kong's competitive advantage has traditionally been a mix of
geography, market freedoms and entrepreneurial spirit. The
preservation of these advantages is now a function of the island's
independence from Beijing. Today's investors will be vigilant in
measuring how much of that independence is retained after July 1,
1997.

AUSTRALIA. Australia is a 3 million square mile continent (about the
size of the 48 continental United States) with a predominantly
European ethnic population of 18.2 million people. A member of the
British Commonwealth, its government is a democratic, federal-state
system.

The country has a western style capitalist economy with a workforce of
9.2 million people that is concentrated in services, mining, and
agriculture. Australia's large agricultural sector specializes in
wheat and sheep rearing and together, these two activities account for
more than half of the country's export revenues. Australia also
possesses abundant natural resources such as bauxite, coal, iron ore,
copper, tin, silver, uranium, nickel, tungsten, mineral sands, lead,
zinc, diamonds, natural gas, and oil. The health of the country's
domestic economy is particularly sensitive to movements in the world
prices of these commodities. Primary trading partners are the United
States, Japan, South Korea, New Zealand, the United Kingdom and
Germany. Imports revolve around machinery and high technology
equipment.

Historically, Australia's strong points were its agricultural and
mining sectors. While this is still true to a large extent, the
government managed to boost its manufacturing sector by undertaking
protective measures in the 1970's and early 1980's. These have
subsequently been liberalized in an effort to spur growth in the
industrial sector. Today's economy is more diverse, as manufacturers'
share of total exports is increasing. Part of the government's effort
to make manufacturing more competitive was a floating of the
Australian dollar in 1984, precipitating an initial depreciation, and
a campaign to reduce taxes. Such reforms have attracted foreign
investment, particularly in the transport and manufacturing sectors.
Restrictions do exist on investment in certain areas as media, mining
and some real estate.

With inflation well under control but unemployment stubbornly high and
signs of cyclical slack in the economy, Australia's monetary policy is
focused on preserving the low inflation environment while keeping
monetary conditions conducive to stronger economic growth. The
government has set a goal of achieving a government budget surplus in
fiscal year 1998/1999.

Australia is fully integrated into the world economy, participating in
GATT and also more regional trade associations such as the Asia and
the Pacific Economic Cooperation (APEC) forum. Future growth could
result from their movement towards regional economic liberalization,
but a countervailing force is the reality that some export markets in
Europe could be lost to continued European economic integration.

After suffering a significant recession in 1990-91, the Australian
economy has enjoyed six years of expansion. The medium-term outlook
appears favorable, with domestic spending supported by low interest
rates, improving consumer confidence and a strengthening labor market.
GDP growth has increased steadily throughout 1997. However, weakness
in commodity prices, particularly metal prices, coupled with an
increase in the nation's current account deficit have placed
significant pressure on the Australian dollar.

Investors should be aware that, while Australia's prospects for strong
economic growth appear favorable over the long-term, many sectors
currently face significant risks arising from the recent turbulence in
Asian countries, which account altogether for almost 60 percent of
Australia's exports. While projections already embody a more subdued
outlook for growth in these countries, there is a risk of this outlook
deteriorating further, especially in Japan and Korea.

Due to the large position that the agriculture and natural resource
sectors have in the nation's export driven economy, any weakness in
commodity prices may negatively impact both the economy and stock
prices. In addition, United States investors face the risk that their
investment returns from investments in Australia could be eroded if
the Australian currency declines relative to the United States dollar.

INDONESIA. Indonesia is a country that encompasses over 17,000 islands
on which live 195 million people. It is a mixed economy that balances
free enterprise with significant government intervention. Deregulation
policies, diversification of strong domestic sectors, and investment
in infrastructure projects have all contributed to high levels of
growth since the late 1980's. Indonesia's economy grew at 7.1% in
1996, the exact average of its performance for the current decade.
Growth in the 1990's had been fairly steady, hovering between 6.5-7.5%
for the most part, peaking at 8.1% in 1995. Moderate growth in
investment, including public investment, and also in import growth,
helped to slowdown GDP growth. Growth has been accompanied by
moderately high levels of inflation.

In recent years, Indonesia had been undergoing a diversification of
the core of its economy. No longer strictly revolving around oil and
textiles, it is now gaining strength in high technology manufactures,
such as electronics. Indonesia consistently runs a positive trade
balance. Strong export performers are oil, gas, and textiles and
apparel. Oil, once responsible for 80% of export revenues, now
accounts for only 25%, an indication of how far other (mostly
manufacturing and apparel) sectors have developed. Main imports are
raw materials and capital goods.

However, as with many of its Asian neighbors, Indonesia's bright
prospects came to a sudden halt in August of 1997 when the plunging
Thai baht began to destabilize the rupiah. By mid-year 1998 the local
currency had fallen more than 80% against the dollar, and hugely
increased the cost of servicing foreign debts; a collapse of the real
economy, and a growing number of bad loans. Various central bank
initiatives, including a doubling of interest rates, failed to halt
the currency's depreciation. The nation's banks, unable to service
their extensive short-term borrowings, were suddenly in danger of
collapse. Of more than 200 local banks, a mere handful were estimated
to be solvent at mid-year 1998.

The social effects of this decline have been devastating. By the end
of 1998 the government expects 47% of the population to be living
below the poverty line and unemployment is expected to surpass 20% of
the workforce. This has led to an increase in social tensions and food
riots and large-scale strikes have broken out sporadically. Rioting
and attacks upon the country's business-oriented ethnic Chinese
population have prompted as many as 80,000 to flee the country. Rising
popular opposition forced President Suharto to resign less than three
months after being appointed to his seventh consecutive five-year term
and was replaced by his vice-president, B. J. Habibie. The political
upheaval and resulting uncertainty has resulted in the further erosion
in public confidence at home and abroad.

The breakdown in public confidence in the Indonesian economy will
likely be difficult to reverse, and will prolong the period of
recovery. Resumption of lending by multilateral institutions under a
rescue package drawn up by the International Monetary Fund (IMF) may
speed up the process of restoring the faith in the government's
efforts to shore up the banking system. Nevertheless, even if the two
critical outstanding issues of restructuring the corporate sector's
external debt and shoring up the banking sector can be resolved this
year, the economy will remain weak in 1999 and recover only slowly in
the following years.

The Indonesian stock market plunged to record lows in 1997 under the
combined impact of the country's economic implosion, political
uncertainty and social unrest. The market's retreat continued into
mid-1998 as domestic and foreign investors fled the market for safer
havens overseas. While many investors believe that the market's steep
decline has brought valuations of a number of Indonesian companies to
very attractive levels, there remains considerable risk particularly
for foreign investors. As with most foreign investments, United States
investors could see their investment returns eroded if the Indonesian
currency declines in value relative to the U.S. dollar. Secondly, any
escalation of rioting and other forms of social unrest could be a
major obstacle in the path of economic recovery. Thirdly, many
question the will of the Indonesian government and its people to
accept the conditions of economic reform as mandated by the IMF.
Fourth, the Indonesian economy, currency and securities markets are
extremely sensitive to events that take place within the Asian region
and their fortunes are somewhat dependent upon how well other Asian
nations resolve their own economic and currency problems.

MALAYSIA. 1997 saw Malaysia's GDP growth slow to 7.4%, down from over
8.2% in 1996 and 9.5% in 1995. Inflation has been kept relatively low
at 3.8%. Performance in 1996 avoided the economy's potential
overheating as export growth, investment, and consumption all slowed.
A large part of Malaysia's recent growth is due to its manufacturing
industries, particularly electronics and semiconductors. This has led
to an increased reliance on imports; thus the economy is sensitive to
shifts in foreign production and demand. This is particularly true
regarding its main trading partners: the United States, Japan, and
Singapore. Such shifts were partly responsible for the slowdown in
1997. In addition, monetary policies to stem the threat of overheating
were evident, but the country still needs massive public and private
investment to finance several large infrastructure projects.
Government industrial policy seeks investment to create more value
added high technology manufacturing and service sectors in order to
decrease the emphasis on low skilled manufacturing. Already U.S.
investors have invested over $9 billion, and most of this is in
electronics and energy projects.

However, like its Asian neighbors, Malaysia has stumbled in its dash
to become a developed nation by 2020. The grandiose ambitions of
Malaysian Prime Minister Mahathir Mohamad have been set back by its
worst-ever currency crisis, which also brought a sharp fall in the
country's stock market. An overheated property market, a growing
current-account deficit and a highly leveraged economy, precipitated
much of the country's problems. Following the sharp decline of
Thailand's currency, the Malaysian ringgit came under severe pressure.
The Malaysian central bank attempted to defend the currency and the
resulting spikes in interbank rates marked the start of a period of
escalating interest rates. Once the central bank ceased using foreign
exchange reserves to slow the ringgit's depreciation in the
region-wide currency slide, the Malaysian currency quickly weakened
versus the United States dollar and by year end had declined by 35%.

By mid-year 1998, the outlook for the Malaysian economy remained bleak
as economists predicted that the economy would shrink by at least 5
percent this year, the first contraction in 13 years. The likelihood
that Malaysia will be forced to seek IMF assistance is increasing.
Although Malaysia does not have the high level of foreign debt that
has overwhelmed its Asian neighbors, domestic lending, at 170 percent
of GDP, was the highest in Southeast Asia when the currency crisis
struck. The nation's banks are now faced with a growing number of
unpaid loans as more businesses are struggling to stay afloat in the
sagging economic environment.

Adding to the bleak outlook is the government's seemingly confused and
erratic response to the nation's serious economic and currency crisis.
The Prime Minister is increasingly at odds with the finance minister
on what policies the country has to institute to remedy the country's
serious problems. Prime Minister Mahathir has abandoned the tight
money, financially conservative recovery policy endorsed by the IMF
and has placed the blame for the nation's troubles on foreign currency
and stock market speculators. The move risks triggering another round
of currency devaluations, inflation and, in the long run, economic
collapse.

Investors should be aware that investing in Malaysia currently entails
a number of potential risks, not the least of which is the
increasingly erratic economic policies of the Malaysian government
that are counter to the advice of the IMF and many of the developed
nations. In addition, the government appears to be escalating its
hostile attitude toward foreign investors. In September of 1998
Malaysian authorities imposed new restrictions on the foreign exchange
and securities markets. Included were limitations in repatriating the
investment proceeds of foreign investors.

While the Malaysian population has been relatively passive during the
first year of the economic meltdown, there could be mounting social
unrest if the crisis is prolonged. Should the country finally adopt
IMF remedies the Malaysian people may be reluctant to accept the
additional sacrifices that they will be called upon to endure. This
could seriously undermine the recovery of Malaysia's economy as well
as its currency and stock market. An increasingly hostile government
towards foreign investors could also lead to additional curbs on the
free access to their funds. As with other Asian markets, currency risk
remains substantial.

SINGAPORE. Since achieving independence from the British in 1965,
Singapore has repeatedly elected the People's Action Party (PAP) as
their government. It is a party that is so consistent it has only
offered up two prime ministers in this 32-year period. Elections in
January 1997 returned the PAP to power, signaling satisfaction with
their policy of close coordination with the private sector to
stimulate investment. Typical policies include selective tax
incentives, subsidies for R&D, and joint ventures with private firms.
While the combination of consistent leadership and interventionist
policies is sometimes seen as impeding civil liberties and
laissez-faire economics, it has produced an attractive investment
environment.

The Singapore economy is almost devoid of agriculture and natural
resources, not surprising given the island nation's geographic size.
Its strongest sector is manufacturing, particularly of electronics,
machinery and petroleum and chemical products. They produce 45% of the
world's computer disk drives. Major trading partners are Japan,
Malaysia and the United States.

The economic situation in Singapore registered a passable year in 1996
but weakened in early 1997, dragged down by the downturn in the global
electronics industry. However, it ended the year on a firmer footing
as real GDP growth rose from 4.1% in the first quarter to 7% by the
fourth quarter. Inflation remained low and the current account balance
maintained its large surplus. Property values have declined recently,
impacted by continuing oversupply.

Although Singapore boasts one of the strongest economies in Asia,
investors in that market face a number of possible risks. Chief among
these is that the country is not immune to the region's economic
troubles, as Singapore's neighbors account for nearly one-quarter of
its trade. Any prolonged regional economic downturn could slow its
growth. In addition, analysts believe that there is considerable
downside risk in the current Singapore dollar exchange rate and any
decline in the Singapore currency versus the U.S. dollar could erode
the investment return of United States investors in that market.

SOUTH KOREA. South Korea has been one of the more spectacular economic
stories of the post-war period. Coming out of a civil war in the
mid-1950's, the country found itself with a destroyed economy and
boundaries that excluded most of the peninsula's mineral and
industrial resources. It proceeded over the next 40 years to create a
society that includes a highly skilled and educated labor force and an
economy that exploited the large amounts of foreign aid given to it by
the United States and other countries. Exports of labor intensive
products such as textiles initially drove the economy and were
eventually replaced by heavy industries such as automobiles.

Hostile relations with North Korea dictate large expenditures on the
military and political uncertainty and potential famine in the north
has put the south on high alert. Any kind of significant military
effort could have multiple effects, both positive and negative, on the
economy. South Korea's lack of natural resources put a premium on
imported energy products, making the economy very sensitive to oil
prices.

Since 1991, GDP growth has fluctuated widely between 5% and 9%,
settling down at 5.6% last year. Currently the labor market is in need
of restructuring, and its rigidity has hurt performance. Relations
between labor and the large conglomerates, or Chaebols, could prove to
be a significant influence on future growth. Inflation in the same
period has been consistently dropping, save a brief rise in 1994 and
finished the year at 4.5%. The country consistently runs trade
deficits, and the current account deficit widened sharply in 1996,
more than doubling to $19.3 billion. South Korea's strong domestic
sectors are electronics, textiles and industrial machinery. Exports
revolve around electronics, textiles, automobiles, steel and footwear,
while imports focus on oil, food, chemicals and metals.

The stock market (Korea Stock Exchange) is currently undergoing
liberalization to include more foreign participation, which was only
first allowed in 1992, but the bond market remains off limits until
1999. Foreign ownership has since been increased to 55% for all listed
stocks except three. The foreign ownership liberalization is in
response to the KSE 1996 performance, which was down 18%. The number
of listed companies totaled 726 in 1997, a decline of 34 from the
previous year, while the market's capitalization plummeted 70 percent
from its 1996 level.

Over the calendar year 1997, the Korean stock market extended its
two-year decline plunging by 42% to its lowest year-end level since
1986. The collapse came as a direct result of the Asian region's
currency crisis and the failure of several Korean conglomerates. In
the summer of 1997, the South Korean won hit record lows against the
U.S. dollar as a series of nationwide labor strikes aggravated the
already escalating trade deficit. Despite aggressive official
intervention to support the local currency, the won had fallen from
860 to 914 to the U.S. dollar by year-end.

The Korean market poses risks for current and prospective investors.
The Korean government will need to maintain public support to
implement the radical and difficult restructuring of the economy
demanded by the IMF under a $58 million loan package. This opposition
could come from the country's major conglomerates that have yet to
institute necessary restructuring initiatives, and from workers
protesting against rising unemployment.

In addition, relations with its long-standing enemy, North Korea have
been worsening as widespread famine could prompt another attack on its
southern neighbor to divert the attention of its people from their
suffering. More importantly, South Korea's heavy reliance on exporting
to the Asian region holds its economy hostage to the economic fortunes
of its neighbors.

THAILAND. The Thai economy has witnessed a fundamental transition in
recent years. Traditionally it was a strong producer of textiles,
minerals and agricultural products, but more recently it has tried to
build high technology export industries. This proved particularly
fortuitous in the mid 1990s when flooding wiped out much of their
traditional exports, but the newer industries remained strong, keeping
the growth rate above 8%. (This level had been achieved through the
1990s, giving the economy a name as one of the fastest growing in the
region.) Successive governments have also taken steps toward reducing
the influence of central planning, opening its market to foreigners
and abandoning five-year plans. This restructuring is still underway,
and the change can cause difficulty at times.

The political situation in Thailand is tenuous. Democracy has a short
history in the country, and power is alternatively obtained by the
military, a non-elected bureaucratic elite, and democratically elected
officials. The frequent transfers of power have generally gone without
divisive, bloody conflicts, but there are bitter differences between
the military and the political parties. Free elections in 1992 and
again in 1995 have produced non-military democratic leaders from
different parties, a healthy sign of party competition. More recently,
the dramatic downturn in the economy generated demands from all
sectors of society for the resignation of Prime Minister Chavalit. The
worsening economic situation threatened social stability of the nation
and the Prime Minister resigned after barely one year in power.

In 1997 GDP contracted by approximately 0.3%, compared with 7.2%
growth in 1996 and 8.6% in 1995. The 1997 current account deficit was
1.9% of GDP as against 7.9% in 1996. Inflation was 5.6%, however, the
government has projected a 16.2% rate for 1998. One cause for
Thailand's economic downturn was a decline in export growth as its
manufacturing industry faces stiff competition from low priced
competitors and its agriculture has suffered a severe drop in
production. In 1996, Thailand's currency, the baht, was linked to a
U.S. dollar dominated basket, and monetary policy had remained tight
to keep that link strong and avoid inflationary pressures.

The situation changed in early 1997, however, with the revelation of
many bad bank loans and a bubbling of property prices due to
over-investment. Many companies, faced with slowing exports, stopped
servicing their debts. Many other firms have stayed alive only with
infusions of public cash, and the government has been slow to let many
property laden financial firms fail. The stock market has reacted
strongly, dropping to new lows for the decade. Reluctant to float the
baht, indeed promising that it wouldn't, the government relented in
early July hoping to revive export and stock market growth. The
subsequent devaluation (approximately 20% against the dollar in the
first month) led to the need for a $16 billion loan coordinated by the
IMF to shore up foreign reserves. Most of the loan came from
neighboring countries led by Japan, indicating their desire to both
protect their own investments in Thailand, and also mitigate the
effect of the devaluation on their home currencies.

The total impact of the entire situation is negative, particularly on
inflation, unemployment and foreign debt. Significant turnover and a
major gamble on the currency has put the government in a precarious
position, especially given the fact that it is a six party coalition.
Dissatisfaction amongst the military, always a political factor, is
high.

The new Thai government has produced mixed results in their efforts to
remedy the country's serious economic woes. Crucial to Thailand's
recovery are both the outcome of newly instituted economic and banking
reforms and the outlook for both China's and Malaysia's economies.
Looking forward, currency risk remains high and the baht will likely
be highly vulnerable to regional contagion.

INDIA. India is the second most populous and seventh largest country
in the world. Although the country occupies only 2.4% of the world's
land area, it supports over 15% of the world's population. Only China
has a larger population. The Indian government is classified as a
federation, or union, and is, under its constitution a "sovereign,
socialist, secular, democratic republic" composed of 25 states and 7
union territories. Like the United States, it has a federal form of
government. However, the central government in India has greater power
in relation to its states, and is patterned after the British
parliamentary system.

India's population was estimated at 952 million in 1997 and has been
projected to double by the year 2028. Religion, caste, and language
are major determinants of social and political organization. Although
83% of the people are Hindu, India also is the home of more than 120
million Muslims - one of the world's largest Muslim populations.
Despite economic modernization and laws countering discrimination
against the lower end of the class structure, the caste system remains
an important factor in Indian society.

India has the world's fifth largest economy in terms of purchasing
power parity. About 62% of the population depends directly on
agriculture. Industry and services sectors are growing in importance
and account for 29% and 42% of GDP, respectively, while agriculture
contributes about 29%. More than 35% of the population lives below the
poverty line, but a large and growing middle class of 150 - 200
million has disposable income for consumer goods. In the industrial
sector, India now manufactures a variety of finished products for
domestic use and export.

India gained independence in 1947 after two centuries of British
colonial rule. Economic policies in the first four decades of
independence were driven by its leaders' deep distrust of foreign
economic interests and admiration for the Soviet model of centrally
planned industrialization. Accordingly, the country has followed a
policy regime that has been characterized by extreme protectionism and
public sector dominance in strategic sectors. Nevertheless, India has
developed a large and diversified private sector, and agriculture has
remained almost entirely in private hands.

India's treatment of foreign investment has been alternatively
encouraging, ambivalent or difficult, depending on the industry sector
involved. Most industries are open to limited investment by
multinational companies while others are closed to foreign investors.
Sectors closed to foreign investment currently number five: mineral
oils; railway transport; war ships and the military-related areas of
aircraft; atomic energy; and associated minerals. Although recent
measures have liberalized the investment limits on a number of major
industries, several political parties, deeply hostile to foreign
investment, have made these issues the subject of pre-election
rhetoric.

India has a large and active stock market which ranks twentieth
globally in market value. There are 23 recognized stock exchanges in
India. The BSE is the premier exchange; accounting for more than
one-third of trading volume, over 70% of listed capital and over 90%
of market capitalization. As of the end of 1997 there were 5,842
listed companies on the BSE with a total market value of US$128.27
billion.

Relations between India and its neighbors have been fraught with
difficulties. India disputes Pakistan's claims to part of Kashmir, and
repeated attempts at mediation have not resolved this conflict. The
dispute has triggered wars between the two countries in 1947, 1965 and
1971. More recently, India's nuclear tests prompted Pakistan to reply
in kind, despite Western efforts to dissuade it. Economic sanctions
imposed by the U.S. and other industrialized countries following the
nuclear tests in May of 1998 have not been without consequences. While
their short-term, direct effect on the economy has been relatively
modest, the indirect and medium-term consequences of sanctions could
become more serious. Relations with Nepal, with Bhutan and with China
are marred by China's two territorial claims in the nation's east and
north. Historical suspicions remain following the 1962 border war
between India and China and the two countries have continued to work
towards expanding their political and economic influence in the South
Asian region.

While India presents many attractions for U.S. investors, there are a
number of factors that could pose considerable risk to those investing
in this market: Contemporary politics have become increasingly
unpredictable since the resounding defeat of Congress in 1996 after
decades at the helm. The alignment of political forces has become
increasingly erratic among factions, parties and interest groups. Some
factions within the current administration have been hostile to
foreign investment and could impose measures that would be detrimental
to the interests and rights of these investors.

India's foreign relations in the region remain fragile and the
possibility of increased tensions or open warfare is an ever-present
danger to the stability of the market. In addition, the monetary cost
of economic sanctions resulting from recent nuclear tests could
substantially impact economic growth and corporate profits. Sanctions
affect India in several ways. Crucially, there will be a deferment or
loss of direct aid and concessional loans, from multilateral agencies
(notably the World Bank) and bilateral donors (the U.S., Japan and
Canada, among others). The loss of export credit and guarantees,
notably from the US Export-Import Bank could delay and increase the
cost of large infrastructure and foreign investment projects. This, in
turn, could have a negative impact upon creditor and investor
confidence in the Indian market.

Relative to the more mature markets of the world, the level of
corporate disclosure in India is very low and companies are generally
less disposed to act in the best interests of their shareholders.
Accordingly, investors face a much more difficult task in ascertaining
the true investment worth of a particular stock.

As with most other emerging markets, the Indian market has been
negatively impacted by recent economic and currency turmoil in the
world's less developed regions and is likely to be similarly impacted
in any future weakness. Currency fluctuation is an additional risk to
U.S. investors as any weakening in the value of the Indian rupee
versus the U.S. dollar could erode the value of their investments upon
currency translation.

TAIWAN. Taiwan is one of the most densely populated countries in the
world, with a population of over 20 million, or 1,504 persons per
square mile. Most Taiwanese are descendants of immigrants who came
from China's Fukien and Kwantung provinces over 100 years ago.
Mandarin is the official language while English is taught to all
students as their first foreign language, beginning in the seventh
grade.

Although settled by Chinese in the seventeenth century, Taiwan (also
called Formosa) was ruled by Japan from 1895-1945 and subsequently
reverted to Chinese administration at the end of World War II. In
1949, nationalist leader Chiang Kai-shek took control of the island
after fleeing mainland China with two million supporters, following
his defeat at the hands of the communists. Since that time, Taiwan has
been governed by the right-wing Kuomintang (KMT) which was founded by
Chiang Kai-shek. In 1996 the island held its first popular
presidential elections in which the KMT retained its control.

Both the Taipei and Beijing governments consider Taiwan an integral
part of China. The KMT has vowed to reconquer the mainland while The
People's Republic of China has urged Taiwan to accept a peaceful
reunification with the mainland. China has proposed that they regain
sovereignty over Taiwan on the basis of a "`one country - two
systems'" arrangement similar to that of the recent reunification of
Hong Kong. Nevertheless, China has periodically threatened to annex
Taiwan through military action.

Under the KMT government, Taiwan achieved a remarkable record of
economic growth with the assistance of massive U.S. aid in the early
years of the post war period. Today, Taiwan has one of the world's
strongest economies and is among the ten leading capital exporters.
Between 1980 and 1990 real GDP expanded at an average annual rate of
7.9%. During 1990-95 an annual GDP growth rate of 6.6% was recorded.
In 1996, compared with the previous year, GDP increased by 5.7% in
real terms, while it was anticipated that growth would exceed 6.0% in
1997 and 1998. Between 1960 and 1973 the island's exports rose 20 fold
and real GDP increased 3.3 times. Even more remarkable, as the shift
of millions of people from villages to cities took place, was the high
level of employment. Between 1964 and 1995 the unemployment rate
rarely exceeded 2% of the work force in any year.

Prior to 1967 foreign sources played a large role in financing capital
formation expansion, but thereafter domestic savings financed the
entire growth of net capital formation. By 1986 the ratio of national
gross savings to GDP had reached 38.5%. Thereafter the ratio declined,
standing at 26.0% in 1996. The expansion of foreign trade was the
major reason for Taiwan's rapid capital growth. Much of the growth in
exports could be attributed to the competitiveness of its exports in
price and quality in world markets.

Since the mid-1990s the island's traditional reliance upon light
industry has gradually given way to high technology activities, as
emphasis shifted from labor-intensive to capital-intensive production.
The electrical and electronic machinery sector continued to show
particularly strong growth in the 1990s as did the chemical sector.
Taiwan also has eleven vehicle manufacturers, all of which have
contracted joint ventures with foreign companies. By the mid-1990s
Taiwan had become one of the world's largest producers of personal
computers and semiconductors.

Taiwan has a large and active stock market ranking twelfth by market
value among the world's markets. The TSE in Taipei is the only
official stock exchange in Taiwan, although there is also a small OTC
market. At the end of 1997 there were 404 companies listed on the TSE
with a market capitalization of US$288.1 billion. The market is
dominated by individual investors, who account for 90.7% of total
turnover in listed shares. Many local institutions, such as banks,
insurance companies or pension funds, are prohibited or restricted
from investing in listed shares. Foreign individuals and institutional
investors meeting certain criteria have been able to invest in the
market directly since 1990 but are subject to certain limits. Foreign
involvement in the market through qualified foreign institutional
investors and mutual funds is small but growing.

Investing in Taiwan entails special risks as well as those risks that
are common to other emerging markets. Taiwan's relations with The
People's Republic of China remain fragile. The conflict between the
entrenched nationalization of China and the nascent nationalism of
Taiwan persists and armed conflict between the two nations remains a
possibility. Beijing continues its policy of attempting to isolate
Taiwan and could use its growing economic power and political
influence to interfere with the nation's trade with the rest of the
world's economies.

In addition, the Taiwan market has been one of the most volatile in
Asia over the past decade. The country did not escape the effects of
the Asian economic and currency crises in 1997 and 1998 and could
continue to be negatively impacted by an extension of the current
regional turmoil. The nation's heavy dependence upon trade and
manufacturing partnerships with foreign companies also leaves it
particularly vulnerable to downturns in the global economies. Currency
fluctuation is an additional risk to U. S. investors as any weakening
in the value of the local currency versus the U.S. dollar could erode
the value of their investments upon currency conversion.

THE PHILIPPINES. The Philippines is a developing democratic republic.
After 300 years of Spanish rule, the United States acquired the
Philippines from Spain in 1898 and ruled for 48 years. The country
subsequently gained its independence from the United States in 1946.
The nation, as provided by the 1987 Constitution, is a democratic
republican state with a presidential form of government. However,
since its independence, the government has been periodically roiled by
military coups, martial law and political assassinations.

The Filipino population consists of approximately 70 million people,
primarily of Indo-Malay, Chinese and Spanish descent. Thirteen percent
of the population lives within the Metro Manila area. Most Filipinos
are bilingual, with English as the basic language in business,
government, schools, and everyday communication. While there are 87
languages spoken throughout the Philippines, the official language is
Filipino, which is spoken mainly in the Metro Manila area and widely
used in the mass media.

The Philippine economy is basically agricultural if food-processing
manufacture is included. Agriculture (including forestry and fishing)
contributed 21.5% of GDP in 1996, and engaged 39.8% of the employed
labor force, while industry (including mining, manufacturing,
construction and power) contributed 31.9% of GDP and engaged 16.5% of
the employed labor force.

Manufacturing accounted for 22.6% of GDP in 1996 and engaged 9.8% of
the labor force. The principal branches of manufacturing are food
products, petroleum refineries, electrical machinery, chemical
products, beverages, metals and textiles.

The services sector contributed 46.6% of GDP in 1996, and engaged
43.7% of the employed labor force. Remittances from Filipino workers
abroad constituted the Government's principal source of foreign
exchange, while tourism remains a significant sector of the economy.

In 1995 the Philippines recorded a trade deficit and a deficit on the
current account of the balance of payments. The principal source of
imports was Japan, which accounted for 22.1% of the total. Other
significant suppliers were the United States, Saudi Arabia, Singapore,
the Republic of Korea and Taiwan. The United States was the principal
market for exports (35.8%), while other purchasers were Japan,
Singapore and the United Kingdom.

Under the regime of General Fidel Ramos, installed in 1992, the
economic performance of the Philippines improved dramatically, owing
to extensive structural reforms, including the dismantling of
protectionist legislation and the liberalization of trade, foreign
investment and foreign exchange controls. However, economic growth was
adversely affected by the regional financial crisis in 1997. The
effective devaluation of the peso in July caused a collapse of the
stock market and led to rising inflation and the depletion of foreign
exchange reserves. The absence of large foreign investment inflows,
which had previously contributed to an overall surplus on the balance
of payments despite a recurrent account deficit, resulted in an
overall deficit in 1997.

The Philippine stock exchange (PSE) is the country's only exchange and
ranks thirty-sixth in total market capitalization among the world's
markets. The total number of companies listed on the exchange was 221
in 1997. Individual domestic investors are the majority participants
while foreign investment is dominated by the Taiwanese, who are
closely followed by the Japanese and Hong Kong Chinese. Foreign
investors are generally allowed to acquire 100% of the equity of a
Philippine listed company, although there are businesses where foreign
ownership is restricted by law.

Foreign investors face special risks when investing in the
Philippines. The country's economy and stock market have historically
been highly sensitive to changes in the Asian region's economies and
this has been amply demonstrated in recent years. After posting
dramatic gains in the four years preceding Asia's financial crisis in
mid-1997, the Philippine stock market plummeted in response to the
spreading economic, political turmoil in Southeast Asia and Japan. The
market's weakness was further exacerbated as foreign investors pulled
out of the market in large numbers.

Weakening conditions in neighboring countries has also negatively
impacted the Philippine peso. Plummeting currencies in Thailand,
Indonesia, Singapore and Malaysia sent the Philippine peso into a
steady decline. Over the 1997 calendar year, the value of the peso
fell by 52 percent versus the U.S. dollar.

For U.S. investors, currency fluctuation presents an additional risk
to investing in the Philippines as a weakening peso can erode the
investment returns on their investments in that country.

Because the Philippines is highly dependent upon the United States,
Japan and the Southeast Asian countries as the primary purchasers of
its exports, its economy is particularly sensitive to changes in the
economic fortunes of these nations.

Although the Philippine political climate appears to have improved
over the past few years, investors should be aware that the country
has periodically been subjected to military coups, martial law, and
widespread political corruption since it gained independence. Several
past administrations have instituted policies that have also been
detrimental to the domestic economy and the rights of its citizens.
Cronyism and corruption have also been rampant in both government and
the business community to the detriment of the interests of corporate
shareholders.

PAKISTAN. The Islamic Republic of Pakistan was founded in 1947, when
the British partitioned the South Asian subcontinent into two states:
India and Pakistan. (East Pakistan broke away to become Bangladesh in
1971). The Pakistan constitution of 1973, amended substantially in
1985, provides for a President (Chief of State) who is elected by an
electoral college consisting of both houses of the federal parliament
and members of the four provincial legislatures. The National Assembly
in a special session elects a Prime Minister. Following the election,
the President invites the Prime Minister to create a government. The
constitution permits a vote of "no confidence" against the Prime
Minister by a majority of the National Assembly. In practice, the army
has a strong voice in the decision-making process and few Presidents
have been able to oppose its interests for long.

Relations between Pakistan and India have been fraught with
difficulties. India disputes Pakistan's claims to part of Kashmir, and
repeated attempts at mediation have not resolved this conflict. The
dispute has triggered wars between the two countries in 1947, 1965 and
1971. India has accused Pakistan of fomenting religious and political
unrest and in 1994 there were frequent disturbances in the region. The
two sides frequently exchange gunfire. More recently, India's nuclear
tests prompted Pakistan to reply in kind, despite Western efforts to
dissuade it. Economic sanctions imposed by the U.S. and other
industrialized countries following the nuclear tests have not been
without consequences. While their short-term, direct effect on the
economy has been relatively modest, the indirect and medium-term
consequences of sanctions could become more serious as the resumption
of IMF funding is currently in jeopardy.

With a per capita GDP of about $470, Pakistan is considered a
low-income country by the World Bank. No more than 39% of adults are
literate and life expectancy at birth is about 62 years. Relatively
few resources have been devoted to socio-economic development or
infrastructure projects. Inadequate provision of social services and
high population growth have contributed to a persistence of poverty
and unequal income distribution.

The country's principal natural resource is arable land (25% of the
total land area is under cultivation). Agriculture accounts for 24% of
GDP and employs about 50% of the labor force. Wheat, cotton, and rice
together account for almost 70% of the value of total crop output and
are among the country's major exports. Pakistan's manufacturing sector
accounts for about 20% of GDP. Cotton textile production and apparel
manufacturing are Pakistan's largest industries, accounting for about
50% of total exports. Other major industries include cement,
fertilizer, sugar, steel, tobacco, chemicals, machinery and food
processing.

Weak world demand for its exports and domestic political uncertainty
have contributed to the nation's widening trade deficit. The nation
continues to rely heavily on imports of such materials as petroleum
products, capital goods, industrial raw materials and consumer
products and the resulting external imbalance has left Pakistan with a
growing foreign debt burden. Annual debt service now exceeds 27% of
export earnings.

Pakistan has three stock exchanges located in Karachi, Lahore and
Islamabad. The Karachi Stock Exchange (KSE) is dominant, accounting
for approximately 80% of equity transactions in Pakistan. The KSE
ranks forty-eighth among the world's markets and had a market
capitalization of $11 billion in 1997. At the end of that year there
were 781 companies listed on the KSE. The combined market
capitalization of the 20 largest companies represented 71.7% of the
market total.

U.S. investors should be aware that there are a number of factors that
could pose special risks to investing in Pakistan securities. Among
these is the country's long history of government instability marked
by military coups, political assassinations and frequent outbreaks of
violent rioting, strikes and ethnic unrest. While recent governments
have made some progress on addressing some of the country's social and
economic ills, the current administration is faced with a number of
serious crises. The country appears to be close to defaulting on its
international commitments. With no debt repayments made since August
of 1998, Pakistan faces the possibility of outright default unless it
can secure a bailout package and debt rescheduling. Recent talks with
the IMF on a debt rescue package broke down and a default could
precipitate declines in the nation's trade and currency. By November
of 1998, foreign investment had slowed dramatically in response to a
rise in investment risk and new restrictions imposed by the central
bank designed to limit the outflow of foreign exchange.

Corruption within the government and business community remains a
problem and corporate managers are generally not focused on improving
shareholder interests.

The threat of war with India over the disputed province of Kashmir
remains a threat to peace in the region and any outbreak of
hostilities would likely plunge the nation's economy into deep
depression and further erode the relative value of its currency versus
the world's major currencies.

SPECIAL CONSIDERATIONS REGARDING LATIN AMERICA

Latin America represents one of the world's more advanced emerging
markets. With a total population of 427 million people and its
abundant natural resources, the area is a prime trading partner for
the United States and Canada. Latin American exports represent, on
average, 16.6% of GDP. Strong export sectors are petroleum,
manufactured goods, agricultural commodities such as coffee and beef,
and metals and mining products. GDP growth in Latin America as a
region was 3.4% in 1996, up from 0.1% in 1995. Recognizing the
important role of international trade as a component of GDP, the
countries of Latin America have formed strong regional trade
organizations, notably Mercado Comun del Sur (MERCOSUR). Talk of
extending the North American Free Trade Agreement (NAFTA) down through
Latin America indicates some desire to tie the economies even closer
to those of the north.

Politically, Latin American countries generally have strong
presidential systems closely modeled after the United States. The
transition to democracy is largely complete in most countries. All
countries enjoy good relations with the United States, with whom they
cooperate on a range of non-economic matters, such as preservation of
the environment and drug control. Monetarist minded governments were
responsible for the successful staving off of contagion from the 1995
currency crisis in Mexico, increasing their stature in the eyes of
most capital market participants.

ARGENTINA. Prior to 1989, Argentine politics were characterized by
populist leaders, sometimes democratically elected and sometimes not,
who ruled with the overt support of the military. Coups and outright
military rule were not uncommon. Economic policies were highly
protectionist, with significant barriers and restrictions on foreign
trade and investment. Markets were highly regulated and the state was
heavily involved in many industries. Inflation was routinely high and
growth stagnant.

President Carlos Menem was first elected to office in 1989 and
undertook a program of deregulation, liberalization and macroeconomic
reform. The results have been positive. GDP growth in 1997 was 8.0%,
up from 4.4% in 1996 and -4.4% in 1995. Argentina's growth, averaging
over 6% from 1991 to 1997, had been driven primarily by domestic
consumption. Immediately after the Mexican crisis, bank liquidity was
restrained. However, deposits have since returned to the system
surpassing the levels that existed prior to the crisis and liquidity
is very much improved. Lending also increased and consumer spending
rebounded although it has slowed somewhat due to the most recent
Brazilian crisis. The positive effect is that inflation, well over
150% at the beginning of the decade, was 0.4% in 1996. Still
troublesome for Argentina is unemployment, quite high at 15%. Menem's
economic liberalization policies have succeeded in attracting foreign
investment. From the U.S. alone, approximately $10 billion was
invested by 1996. Investors have been most attracted to the
telecommunications, finance, and energy sectors.

Argentina enjoys a positive trade balance. The export economy is
heavily weighted toward agriculture, which represents 60% of the total
value of all Argentine exports. Primary products are livestock,
oilseeds, and grain. Argentina's single biggest trading partner is
Brazil, and the United States is the second. Primary imports are
machinery, vehicles and chemicals.

The resignation of Economy Minister Domingo Cavallo in July 1996 was
initially greeted with skepticism from the markets. Cavallo was widely
recognized as the man responsible for ensuring the convertibility of
the peso by pegging it to the dollar, a move which saved Argentina
from the hyperinflation and continuous drops in output which could
have followed from the Mexican crisis in 1994. Confidence was quickly
restored, however, with the appointment of Roque Fernandez, who
promptly reaffirmed commitment to Cavallo's plan and introduced
further measures for fiscal stability.

The next presidential election is due in 1999. In accordance with the
constitution, Menem, a member of the Peronist party, can not seek a
third consecutive term. The next election is likely to present a third
candidate to the voters beyond the traditional contestants from the
Peronist and Radical parties. Frepaso, a center-left alliance, first
emerged in the 1995 elections and by 1999 could build itself up enough
to promote a viable alternative to the older parties. It is uncertain
how policies would be effected by the systemic change from a
predominantly two party system to a three party one.

The Argentine stock market reached an all-time high in October of 1997
in response to rising corporate earnings and strong economic growth.
However, the market underwent a significant correction due largely to
the "contagion effect" of the Asian economic and currency crisis and
the Mervel index ended the year only 5.9% ahead. While there was
little direct impact from the Asian crisis on Argentina's economy,
foreign investors fled the market, as they feared that Asia's currency
problems would spread to Latin America.

The Argentine market may pose special risks for investors. As an
emerging nation, Argentina's stock market may be particularly
vulnerable to widespread economic, currency and market turmoil such as
we have seen recently in Asia. These crises may prompt investors to
become increasingly averse to emerging market exposure on concern that
the impact of these events will spread to other countries. In
addition, mutual funds that invest in emerging markets may be forced
to sell holdings in countries that have little similarity with the
markets in trouble, merely to raise cash to meet redemptions.
Similarly, the Asian crisis has accelerated a growing imbalance
between supply and demand for basic commodities such as oil, metals,
pulp, grains and others. This could impact the Argentinean stock
market where energy stocks (oil, gas and electricity) comprise
approximately 40% of the market's total value. A currency devaluation
by one or more of its Latin American neighbors could precipitate a
recession and political pressure for competitive devaluation to
protect the country's trade competitiveness.

While Argentina's political situation is relatively stable, there is a
high degree of dissatisfaction with the government's inability to
lower the country's high unemployment rate. This could eventually lead
to social unrest and a turnover of the government to the control of
parties less favorable to investors.

BRAZIL. Brazil is the largest country in South America and is home to
vast amounts of natural resources. Its 155 million people are
descendants from indigenous tribes and European immigrants. They live
in diverse socio-economic conditions, from the urban cities of Sao
Paolo to the undeveloped trading posts of the distant regions.
Industrial development has been concentrated in specific areas. The
disenfranchised population is quite large and is a source of many of
Brazil's social problems.

The Brazilian economy is currently undergoing extensive reforms,
stemming from a 1994 effort to stabilize the currency called the Real
Plan. With the aim of curbing inflation, a new currency, the Real, was
introduced and supported via a floating exchange band. The plan has
stabilized the exchange rate and controlled inflation which was at
2,700% in 1994. Inflation in 1995 dropped to 81%, and fell even
further in 1996, settling at 18.7%. Perhaps the most remarkable
achievement for the Brazilian economy in 1997 was the lowest rate of
inflation in the past 40 years, as the National Consumer Price Index
increased just 7.48%. At the same time, however, the Real Plan has
sent the trade and current account balances into a deficit. The
current account deficit is expected to reach $30 billion in 1998,
equivalent to 3.6% of GDP.

Other objectives of the administration of the current President,
Fernando Henrique Cardoso, are trade liberalization and privatization,
but these efforts are sporadic and often stalled by special interests
in the legislature. Some privatization efforts are performing well,
particularly in the utilities sector. Utilities and telecommunications
have been key draws for foreign investment, and foreign direct
investment (FDI) is coming in at record levels. In 1998 the country
received over $20 billion from privatizations. Still, there are
restrictions against investments in certain industries, such as metals
and mining.

Traditionally a primarily agricultural economy, a strong industrial
sector has developed which produces metals, chemicals, and
manufactured consumer goods. Agriculture still plays a significant
role, however, representing 11% of the GDP, 40% of exports and
employing over 35% of the workforce. Primary agricultural products are
grains, coffee, and cattle. Regarding energy and utilities, the
country is a leading producer of hydroelectric power, but is dependent
on imports for oil.

Presidential elections were held in October of 1998 and President
Cardoso won with 53% of the vote. This should insure continuity in
policy, which will be much needed given the difficulties caused by the
recent instability in the global markets and its impact on Brazil.

In 1997 the Brazilian stock market rose to an all-time high in the
first quarter. Over the summer, the speculative attack on the Thai
currency triggered a sharp reversal in the Brazilian market, as
investors feared a raid on the Brazilian real. However, the market
ended the year with a gain of 4.34%. By mid-year 1998 the Brazilian
market plummeted amid growing concern that Brazil, Latin America's
largest economy, might suffer the confidence crisis that had caused
large currency devaluations in Russia and Asia.

Investing in Brazil could entail special risks: High unemployment is
the chief challenge facing Brazil's president Cardoso following his
reelection in October of 1998. Joblessness is at a record high and
social unrest could hinder his progress in subduing inflation and
denationalizing government ownership of many of its businesses. Brazil
could be a likely target for a renewed attack on its currency. The
economy is in a more precarious state: interest rates remain high and,
despite austerity measures, little progress has been made in reducing
the current account deficit. This poses particular risk for U.S.
investors who would see their investment returns eroded if the
Brazilian real were to be devalued.

Overall, Brazil remains vulnerable to both external shocks and
changing sentiment due to worsening domestic indicators or political
risk.

CHILE. Chile is a transition economy which has recently made great
strides toward putting its authoritarian, statist, past behind itself.
In all of Latin America, it is the country with the highest rates of
growth. Averaging 7.3% so far this decade, GDP grew at 6.0% in 1996,
down from 6.6% the previous year. Inflation has been steadily
declining and is down over 15% in the last five years. Inflation in
1997 was 6.0%, a 0.6% drop over 1996. Unemployment in 1996 was 6.2%,
particularly low for the Latin American region. Chile is still
considered to have one of the best performing stock markets in the
region.

Performance of the Chilean stock market was lackluster in 1997 as weak
copper prices and rising interest rates led to a contraction in the
domestic economy. Also contributing to the market's weakness was the
contagion effect of the Asian economic and currency crises, a decline
in pulp and steel prices, and uncertainty about the growth prospects
of its Latin American neighbors. These factors combined to produce a
15% decline in the stock market for the 1997 calendar year. The market
weakness carried through into the first half of the next year.

Eduardo Frei is President and is due for reelection in 1999. President
Frei has been trying to decentralize the government but encounters
stiff opposition from the powerful trade unions; also high on Frei's
agenda is tax reform.

There is a considerable military component to political life in Chile.
Constitutional reforms, currently in progress, are attempting to
further diminish the role and influence of the military. A successful
outcome requires that the military acquiesce as it is stripped of its
political powers.

Investors in the Chilean market face special risks. The Chilean market
is particularly sensitive to the fluctuation in the international
price of copper and pulp on the international markets and they have a
significant impact on the nation's economy and stock market.

As is typical of most emerging markets, much of the Chilean market
equity is firmly held by controlling families and their associates.
Accordingly, these owners may not always act in the interests of
outside shareholders. In addition, any weakness in the Chilean
currency versus the dollar could erode the investment returns to U.S.
investors upon currency conversion.

MEXICO. The Mexican economy has recovered fairly well since the
currency crisis of December 1994 thanks in large part to growth in
exports, peso stabilization, and massive financial assistance from the
United States. GDP growth rose to 7.3%, with consumer spending and
investment leading the way. A major positive factor supporting growth
during 1997 was the strength of the peso, which closed the year little
changed from its 1996 year-end level. In addition, the nation's
inflation rate declined to 15.7% from the 27.7% rate of 1996. This
marked the second straight year of improvement. Inflation is the chief
concern of the central bank, which takes active measures such as the
setting of wage ceilings and the adjustment of interest rates to
control it. Domestic consumption, while improved, has yet to return to
pre-1994 levels, and has also contributed to the containment of
inflation.

The Mexican economy is very strong in manufacturing and natural
resources, specifically oil. Manufacturing alone counts for 22% of the
Mexican GDP and 21% of all urban employment. The economy is also very
closely tied to the United States, which is responsible for 60% of all
foreign investment and with whom it conducts over 75% of all trade.
Trade pacts such as NAFTA further integrate the economies, giving the
United States strong incentives to provide assistance in times of
crisis. NAFTA also enabled the recent recovery, given the ease with
which it allows increases in exports and investment. The Mexican stock
market listed 194 companies with total capitalization of $156 billion
in 1997.

Internally, the various people of the Mexican states have recently
experienced a great deal of dissatisfaction with their relationship to
the federal government. Most notably, in Chiapas there have been armed
uprisings by indigenous groups demanding further autonomy. While the
rebellions have not strongly shaken financial markets, they serve as a
reminder of the diversity of Mexico, of the vast socio-economic gaps
between various peoples, and of the potential for such groups to
demand the attention of both their government and the world.

Politically, the landscape changed fundamentally in July 1997. The
defeat of candidates from the Institutional Revolutionary Party (PRI)
in legislative elections signaled the end of decades of one party
rule. Citizens now have the confidence that their votes count and that
the PRI is no longer invincible. Winning every presidential election
since its founding in 1929, the PRI was the country's monolithic
political machine, maintaining power through rigged elections and
ruling in an environment rife with intrigue and corruption. Internal
pressures including armed rebellion from domestic interest groups,
extensive crises and scandals caused by intra-party rivalries and
corruption, and deteriorating relationships with foreign countries
over financial mismanagement and mutual social problems all
contributed to the establishment of fully free and unfettered
elections. Numerous electoral reforms implemented since 1989 have
aided in the further opening of the Mexican political system and
opposition parties have made historic gains in elections at all
levels. Much of the impetus for establishing a real two party system
in Mexico can be credited to President Zedillo and the PRI majority in
Congress. During 1995-96 the political parties negotiated
constitutional amendments to address electoral campaign fairness
issues, which passed unanimously. The response from the Mexican people
was clear as a record number of registered voters cast ballots. Though
they took the most votes (39%) for the 500-member Lower House of
Congress, the PRI has lost their majority. Mid-term elections held in
July of 1997, also saw large gains for opposition parties and marked a
significant step in Mexico's political transformation. Market reaction
to the new Mexican political world was positive. The IPC index,
consisting of 35 of the most representative stocks on the Mexican
Stock Exchange, rose 3.25% the day after the election. Further
financial implications of the new landscape are as yet uncertain.
Relevant considerations are the effect of the new configurations on
government consensus and policy making, the demands of newly empowered
groups on economic and other resources, the balance of power between
the executive and the legislature, and the ability of the government
to maintain law and order.

Mexico's stock market fell sharply in late 1997 and continued its
descent through mid-1998 as the worsening Asian economic and currency
crises threatened to cause problems for Mexico's trade balance and
raised questions concerning the sustainability of its economic growth.
Foreign investors fled the Mexican market, as they feared that Asia's
currency problems would spread to Latin America.

Investors in Mexico face a number of potential risks. As an emerging
nation, Mexico's stock market may be particularly vulnerable to
widespread economic, currency and stock market turmoil such as that
recently experienced in Asia and Russia. These crises may prompt
investors to become increasingly averse to emerging market exposure on
concern that the impact of these events will spread to other
countries. In addition, mutual funds that invest in emerging markets
may be forced to sell holdings in countries that have little
similarity with the troubled markets, merely to raise cash to meet
redemptions. Similarly, because the United States is Mexico's largest
trading partner, any economic downturn in the U.S. economy can have a
strongly adverse impact upon Mexico's economy and stock market.

While Mexico's political situation is relatively stable, there is a
high degree of dissatisfaction with the government's inability to
effectively address the nation's growing social problems, particularly
in the country's less developed regions. Occasional flair-ups of
strikes and armed rebellion could pose a threat to Mexico's political
and economic stability.

SPECIAL CONSIDERATIONS REGARDING THE RUSSIAN FEDERATION

The Russian Federation is the largest republic of the Commonwealth of
Independent States with a 1995 population of 147,500,000. It is about
one and four fifths of the land area of the United States and occupies
most of Eastern Europe and north Asia.

Russia has had a long history of political and economic turbulence.
The USSR lasted 69 years and for more than half that time it ranked as
a nuclear superpower. In the 1930's tens of millions of its citizens
were collectivized under state agricultural and industrial enterprises
and millions died in political purges and the vast penal and labor
system or in state-created famines. During World War II, as many as 20
million Soviet citizens died. After decades of communist rule, the
Soviet Union was dissolved on December 8, 1991 following a failed coup
attempt against the government of Mikhail Gorbachev. On the day that
the leaders declared that the Soviet Union ceased to exist, the Soviet
republics were invited to join with Russia in the Commonwealth of
Independent States (CIS). At one time or another those that have
agreed to join have included the Ukraine, Belarus, Moldova, Georgia,
Armenia, Azerbaijan, Uzbekistan, Turkmenistan, Tajikistan, Kazakhstan
and Kyrgyzstan, but a number have dropped out since or have only
observer status. Each of the republics is a sovereign state that
controls its own economy and natural resources and collects its own
taxes, providing only minimal support to the CIS.

Boris Yeltsin, President of Russia, inherited the mantle of economic
and political chaos. With the freeing of most prices he staked his
political life on the rapid creation of a free market economy. Since
1991 Yeltsin and his Russian reformers have been faced with the
daunting task of stabilizing the Russian economy while transforming it
into a modern and efficient structure able to compete in international
markets and respond to the needs of the Russian people. To date, their
efforts have yielded widely mixed results. On the one hand, they have
made some impressive progress. Since 1992, they have abolished central
planning, decontrolled prices, unified the foreign exchange market,
made the ruble convertible, and privatized two thirds of the economy.
They have accomplished this in spite of the crushing burdens inherited
from the communist system: huge industrial enterprises that are
unprofitable, an obsolete capital stock, a crumbling energy sector,
huge external debt, and armies that had to be repatriated and
resettled at home.

Russia remains a paradox among the major economies of the world in
that it is a country marked by stagnation in production levels, but
has few constraints on growth. Labor supply is adequate and savings
are high. In addition, there is almost unlimited scope for increasing
productivity through the introduction of improved technologies,
production process and market-oriented managerial development. There
are 147 million consumers who are slowly increasing their buying power
and education standards are high. Russia is also rich in natural
resources. It has 40% of the world's natural gas reserves, 6% of its
oil, 25% of coal, diamonds, gold and nickel, and 30% of timber and
bauxite. Approximately ten million people are engaged in agriculture
and they produce half of the region's grain, meat, milk, and other
dairy products.

The main reason for the continued poor performance of the Russian
economy is the country's failure to mobilize the resources that are
available. While the official unemployment rate was at 10.6% in 1996,
up to half of the working population is, in effect, unemployed or, to
a significant degree, underemployed in inefficient and unproductive
industries. Much of the country's savings have been siphoned off
through capital flight. Russia's technological potential for
assimilating both domestic and foreign technologies is not being
exploited. Industry privatization and restructuring initiatives have
generally failed to mobilize the available factors of production as
the country's privatization program virtually ensures the predominance
of the old management teams that are largely non market-oriented in
their management approach. Approximately 80% of Russian privatized
companies continue to be majority-owned by insiders and only 10% are
owned by investors with large enough stakes to influence the running
of the company.

In July 1996, Boris Yeltsin was re-elected for a second term and it
was hoped that the election would mark the start of a more stable
period of economic growth. However, macroeconomic indicators in 1996
proved contradictory. On the one hand, the Russian government
continued its strict credit policies, and the annual inflation rate
for 1997 dropped to 11%, down from 22% in 1996. Inflation has since
remained below 3% a month through the first half of 1997. In addition,
expenditure cuts trimmed the budget deficit to 7% of GDP for the first
nine months of 1996.

By the end of 1997, GDP was up 0.4% following 1996's 6% fall, and
industrial production was up by 1.9%. Non-payment continues to
represent a serious problem for the economy, particularly in the
energy sector.

While Russia is widely believed to be one of the most risky markets in
Eastern Europe, it is also recognized for its potential for positive
returns. However, the market has been essentially liquidity driven and
concentrated in very few of the country's largest companies. At just
$129 billion, the total capitalization of the stock market accounts
for just 28.7 percent of GDP. The majority of investors in Russian
equities are small and medium-sized United States hedge funds. In
addition, several country specific funds have been established to make
direct and portfolio investments in Russian companies. To facilitate
foreign investment, a number of the larger Russian companies have
issued equity in the form of American depository receipts while six
big firms have issued securities in the form of Russian depository
certificates. These certificates are issued and marketed by the Bank
of New York. Any investment in Russia is risky and deciding which
companies will perform well at this stage of the country's
transformation is far from easy. A combination of poor accounting
standards, inept management, limited shareholder rights and the
criminalization of large sectors of the economy pose a significant
risk, particularly to foreign investors.

In 1996 the Russian market delivered the world's best stock market
performance and was among the top performing markets in the first half
of 1997. However, the market's strength masked a rapidly deteriorating
political and economic picture. Many of the country's economic reform
initiatives have floundered as the proceeds of IMF and other
assistance have been squandered or stolen. Taxes were not being
collected and Russian banks, suffering from a collapsed ruble, could
not meet the demands of either domestic depositors or foreign
creditors. In August of 1998 the Yeltsin government effectively
devalued the Russian ruble by approximately 34% to strengthen the
ailing banking system and stimulate demand for Russian exports. In
addition the government announced a restructuring of its local debt
that would allow a 90-day moratorium on banks' foreign loans and a
rescheduling of $40 billion in domestic debt. These actions were
viewed by investors as being tantamount to default and they fled the
Russian stock and bond markets. President Yeltsin's relations with the
communist dominated Duma worsened and there was talk among the body of
beginning impeachment proceedings against the president. By August of
1998 the ruble had fallen by 70 percent and food prices soared,
heightening fears of social unrest. By early September the Russian
economy appeared to be slipping out of control and the government in a
state of paralysis as the President and the Duma feuded over remedial
initiatives. Many observers fear that country's communist party could
regain control of the government and end free market reforms, which
could further negatively impact stock prices.

PORTFOLIO TRANSACTIONS

All orders for the purchase or sale of portfolio securities are placed
on behalf of each fund by FMR (BT for Index 500) pursuant to authority
contained in the management contract (and, for Index 500, sub-advisory
agreement). FMR (BT for Index 500) is also responsible for the
placement of transaction orders for other investment companies and
investment accounts for which it or its affiliates act as investment
adviser. In selecting broker-dealers, subject to applicable
limitations of the federal securities laws, FMR (BT for Index 500)
considers various relevant factors, including, but not limited to: the
size and type of the transaction; the nature and character of the
markets for the security to be purchased or sold; the execution
efficiency, settlement capability, and financial condition of the
broker-dealer firm; the broker-dealer's execution services rendered on
a continuing basis; the reasonableness of any commissions; and, if
applicable, arrangements for payment of fund expenses.

If FMR grants investment management authority to a sub-adviser (see
the section entitled "Management Contracts"), that sub-adviser is
authorized to place orders for the purchase and sale of portfolio
securities, and will do so in accordance with the policies described
above.

Generally, commissions for investments traded on foreign exchanges
will be higher than for investments traded on U.S. exchanges and may
not be subject to negotiation.

Each fund may execute portfolio transactions with broker-dealers who
provide research and execution services to the fund or other
investment accounts over which FMR or BT or their affiliates exercise
investment discretion. Such services may include advice concerning the
value of securities; the advisability of investing in, purchasing, or
selling securities; and the availability of securities or the
purchasers or sellers of securities. In addition, such broker-dealers
may furnish analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy, and
performance of investment accounts; and effect securities transactions
and perform functions incidental thereto (such as clearance and
settlement).

The selection of such broker-dealers for transactions in equity
securities is generally made by FMR (BT for Index 500) (to the extent
possible consistent with execution considerations) in accordance with
a ranking of broker-dealers determined periodically by FMR's (BT's for
Index 500) investment staff based upon the quality of research and
execution services provided.

For transactions in fixed-income securities, FMR's (BT's for Index
500) selection of broker-dealers is generally based on the
availability of a security and its price and, to a lesser extent, on
the overall quality of execution and other services, including
research, provided by the broker-dealer.

The receipt of research from broker-dealers that execute transactions
on behalf of a fund may be useful to FMR (BT for Index 500) in
rendering investment management services to that fund or its other
clients, and conversely, such research provided by broker-dealers who
have executed transaction orders on behalf of other FMR (BT for Index
500) clients may be useful to FMR (BT for Index 500) in carrying out
its obligations to a fund. The receipt of such research has not
reduced FMR's (BT's for Index 500) normal independent research
activities; however, it enables FMR (BT for Index 500) to avoid the
additional expenses that could be incurred if FMR (BT for Index 500)
tried to develop comparable information through its own efforts.

Fixed-income securities are generally purchased from an issuer or
underwriter acting as principal for the securities, on a net basis
with no brokerage commission paid. However, the dealer is compensated
by a difference between the security's original purchase price and the
selling price, the so-called "bid-asked spread." Securities may also
be purchased from underwriters at prices that include underwriting
fees.

Subject to applicable limitations of the federal securities laws, a
fund may pay a broker-dealer commissions for agency transactions that
are in excess of the amount of commissions charged by other
broker-dealers in recognition of their research and execution
services. In order to cause a fund to pay such higher commissions, FMR
(BT for Index 500) must determine in good faith that such commissions
are reasonable in relation to the value of the brokerage and research
services provided by such executing broker-dealers, viewed in terms of
a particular transaction or FMR's (BT's for Index 500) overall
responsibilities to that fund or its other clients. In reaching this
determination, FMR (BT for Index 500) will not attempt to place a
specific dollar value on the brokerage and research services provided,
or to determine what portion of the compensation should be related to
those services.

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 o f 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.

FMR may allocate brokerage transactions to broker-dealers (including
affiliates of FMR) who have entered into arrangements with FMR under
which the broker-dealer allocates a portion of the commissions paid by
a fund toward reduction of that fund's expenses. The transaction
quality must, however, be comparable to those of other qualified
broker-dealers.

Section 11(a) of the Securities Exchange Act of 1934 prohibits members
of national securities exchanges from executing exchange transactions
for investment accounts which they or their affiliates manage, unless
certain requirements are satisfied. Pursuant to such requirements, the
Board of Trustees has authorized NFSC to execute portfolio
transactions on national securities exchanges in accordance with
approved procedures and applicable SEC rules.

The Trustees of each fund periodically review FMR's or BT's
performance of its responsibilities in connection with the placement
of portfolio transactions on behalf of the fund and review the
commissions paid by the fund over representative periods of time to
determine if they are reasonable in relation to the benefits to the
fund.

For the fiscal periods ended December 31, 1997 and 1998, the portfolio
turnover rates for each fund (except Money Market Portfolio) are
presented in the table below. Variations in turnover rate may be due
to fluctuating volume of shareholder purchase and redemption orders,
market conditions, or changes in FMR's investment outlook.

Fund 1997 1998

High Income Portfolio % %

Equity-Income Portfolio % %

Growth Portfolio % %

Growth Opportunities Portfolio % %

Overseas Portfolio % %

Asset Manager Portfolio % %

Asset Manager: Growth Portfolio % %

Balanced Portfolio % %

Contrafund Portfolio % %

Growth & Income Portfolio % %

Investment Grade Bond Portfolio % %

Index 500 Portfolio % %

Mid Cap Portfolio+ % %

+ Mid Cap commenced operations on December 28, 1998.
.
The following tables show the brokerage commissions paid by the funds
for the fiscal periods ended December 31, 1998, 1997, and 1996.
Significant changes in brokerage commissions paid by a fund from year
to year may result from changing asset levels throughout the year. A
fund may pay both commissions and spreads in connection with the
placement of portfolio transactions. For the fiscal years ended
December 31, 1998, 1997, and 1996, Money Market Portfolio and
Investment Grade Bond Portfolio paid no brokerage commissions.

The following table shows the total amount of brokerage commissions
paid by each fund.

Total Amount Paid

HIGH INCOME PORTFOLIO

1998 $

1997

1996

EQUITY-INCOME PORTFOLIO

1998

1997

1996

GROWTH OPPORTUNITIES PORTFOLIO

1998

1997

1996

GROWTH PORTFOLIO

1998

1997

1996

OVERSEAS PORTFOLIO

1998

1997

1996

BALANCED PORTFOLIO

1998

1997

1996

ASSET MANAGER PORTFOLIO

1998

1997

1996

ASSET MANAGER: GROWTH PORTFOLIO

1998

1997

1996

CONTRAFUND PORTFOLIO

1998

1996

GROWTH & INCOME PORTFOLIO

1998

1997+

MID CAP PORTFOLIO

1998++

INDEX 500 PORTFOLIO

1998

1997

1996

+ Growth & Income commenced operations on December 31, 1996.

++ Mid Cap commenced operations on December 28, 1998.

Of the following tables, the first shows the total amount of brokerage
commissions paid by each fund to NFSC and FBS, as applicable, for the
past three fiscal years. The second table shows the approximate
percentage of aggregate brokerage commissions paid by a fund to NFSC
and FBS for transactions involving the approximate percentage of the
aggregate dollar amount of transactions for which the fund paid
brokerage commissions for the fiscal year ended December 31, 1998.
NFSC and FBS are paid on a commission basis.

Total Amount Paid

To NFSC To FBS

HIGH INCOME PORTFOLIO

1998 $ $

1997

1996

EQUITY-INCOME PORTFOLIO

1998

1997

1996

GROWTH OPPORTUNITIES PORTFOLIO

1998

1997

1996

GROWTH PORTFOLIO

1998

1997

1996

OVERSEAS PORTFOLIO

1998

1997

1996

BALANCED PORTFOLIO

1998

1997

1996

ASSET MANAGER PORTFOLIO

1998

1997

1996

ASSET MANAGER: GROWTH PORTFOLIO

1998

1997

1996

CONTRAFUND PORTFOLIO

1998

1997

1996

GROWTH & INCOME PORTFOLIO

1998

1997+

MID CAP PORTFOLIO

1998++

INDEX 500 PORTFOLIO

1998

1997

1996

+ Growth & Income commenced operations on December 31, 1996.

++ Mid Cap commenced operations on December 28, 1998.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
% of Aggregate Commissions % of Aggregate Dollar % of Aggregate Commissions
Paid to NFSC Amount of Transactions Paid to FBS
Effected through NFSC

High Income Portfolio(dagger) % % %

Equity-Income Portfolio(dagger) % % %

Growth Opportunities % % %
Portfolio(dagger)

Growth Portfolio(dagger) % % %

Overseas Portfolio % % %

Balanced Portfolio(dagger) % % %

Asset Manager Portfolio(dagger) % % %

Asset Manager: Growth % % %
Portfolio(dagger)

Contrafund Portfolio(dagger) % % %

Growth & Income % % %
Portfolio(dagger)

Mid Cap Portfolio+ % % %

Index 500 Portfolio % % %

</TABLE>

<TABLE>
<CAPTION>
<S> <C>
% of Aggregate Dollar Amount
of Transactions Effected
through FBS

High Income Portfolio(dagger) %

Equity-Income Portfolio(dagger) %

Growth Opportunities %
Portfolio(dagger)

Growth Portfolio(dagger) %

Overseas Portfolio %

Balanced Portfolio(dagger) %

Asset Manager Portfolio(dagger) %

Asset Manager: Growth %
Portfolio(dagger)

Contrafund Portfolio(dagger) %

Growth & Income %
Portfolio(dagger)

Mid Cap Portfolio+ %

Index 500 Portfolio %

</TABLE>

(dagger) The difference between the percentage of aggregate brokerage
commissions paid to, and the percentage of the aggregate dollar amount
of transactions effected through, NFSC is a result of the low
commission rates charged by NFSC.

+ Mid Cap commenced operations on December 28, 1998.

The following table shows the dollar amount of brokerage commissions
paid to firms that provided research services and the approximate
dollar amount of the transactions involved for the fiscal year ended
December 31, 1998.

<TABLE>
<CAPTION>
<S> <C> <C>
$ Amount of Commissions Paid $ Amount of Brokerage
to Firms that Provided Transactions Involved*
Research Services*

High Income Portfolio $ $

Equity-Income Portfolio

Growth Opportunities Portfolio

Growth Portfolio

Overseas Portfolio

Balanced Portfolio

Asset Manager Portfolio

Asset Manager: Growth Portfolio

Contrafund Portfolio

Growth & Income Portfolio

Mid Cap Portfolio+

Index 500 Portfolio

</TABLE>

* The provision of research services was not necessarily a factor in
the placement of all this business with such firms.

+ Mid Cap commenced operations on December 28, 1998.

The Trustees of each fund have approved procedures in conformity with
Rule 10f-3 under the 1940 Act whereby a fund may purchase securities
that are offered in underwritings in which an affiliate of FMR
participates. These procedures prohibit the funds from directly or
indirectly benefiting an FMR affiliate in connection with such
underwritings. In addition, for underwritings where an FMR affiliate
participates as a principal underwriter, certain restrictions may
apply that could, among other things, limit the amount of securities
that the funds could purchase in the underwriting.

From time to time the Trustees will review whether the recapture for
the benefit of the funds of some portion of the brokerage commissions
or similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at
present no other recapture arrangements are in effect. The Trustees
intend to continue to review whether recapture opportunities are
available and are legally permissible and, if so, to determine in the
exercise of their business judgment whether it would be advisable for
each fund to seek such recapture.

Although the Trustees and officers of each fund are substantially the
same as those of other funds managed by FMR or its affiliates,
investment decisions for each fund are made independently (and by BT
for Index 500) from those of other funds managed by FMR or BT or
investment accounts managed by FMR or BT affiliates. It sometimes
happens that the same security is held in the portfolio of more than
one of these funds or investment accounts. Simultaneous transactions
are inevitable when several funds and investment accounts are managed
by the same investment adviser, particularly when the same security is
suitable for the investment objective of more than one fund or
investment account.

When two or more funds are simultaneously engaged in the purchase or
sale of the same security, the prices and amounts are allocated in
accordance with procedures believed to be appropriate and equitable
for each fund. In some cases this system could have a detrimental
effect on the price or value of the security as far as each fund is
concerned. In other cases, however, the ability of the funds to
participate in volume transactions will produce better executions and
prices for the funds. It is the current opinion of the Trustees that
the desirability of retaining FMR as investment adviser to each fund
(investment manager to Index 500) and BT as sub-adviser to Index 500
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.

VALUATION

Each class's net asset value per share (NAV) is the value of a single
share. The NAV of each class is computed by adding the class's pro
rata share of the value of the applicable fund's investments, cash,
and other assets, subtracting the class's pro rata share of the
applicable fund's liabilities, subtracting the liabilities allocated
to the class, and dividing the result by the number of shares of that
class that are outstanding.

MONEY MARKET FUND. Portfolio securities and other assets are valued on
the basis of amortized cost. This technique involves initially valuing
an instrument at its cost as adjusted for amortization of premium or
accretion of discount rather than its current market value. The
amortized cost value of an instrument may be higher or lower than the
price the fund would receive if it sold the instrument.

Securities of other open-end investment companies are valued at their
respective NAVs.

At such intervals as they deem appropriate, the Trustees consider the
extent to which NAV calculated by using market valuations would
deviate from the $1.00 per share calculated using amortized cost
valuation. If the Trustees believe that a deviation from the fund's
amortized cost per share may result in material dilution or other
unfair results to shareholders, the Trustees have agreed to take such
corrective action, if any, as they deem appropriate to eliminate or
reduce, to the extent reasonably practicable, the dilution or unfair
results. Such corrective action could include selling portfolio
instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity; withholding dividends; redeeming
shares in kind; establishing NAV by using available market quotations;
and such other measures as the Trustees may deem appropriate.

BOND FUNDS. Portfolio securities are valued by various methods
depending on the primary market or exchange on which they trade.
Fixed-income securities and other assets for which market quotations
are readily available may be valued at market values determined by
such securities' most recent bid prices (sales prices if the principal
market is an exchange) in the principal market in which they normally
are traded, as furnished by recognized dealers in such securities or
assets.

Or, fixed-income securities and convertible securities may be valued
on the basis of information furnished by a pricing service that uses a
valuation matrix which incorporates both dealer-supplied valuations
and electronic data processing techniques. Use of pricing services has
been approved by the Board of Trustees. A number of pricing services
are available, and the funds may use various pricing services or
discontinue the use of any pricing service.

Most equity securities for which the primary market is the United
States are valued at last sale price or, if no sale has occurred, at
the closing bid price. Most equity securities for which the primary
market is outside the United States are valued using the official
closing price or the last sale price in the principal market in which
they are traded. If the last sale price (on the local exchange) is
unavailable, the last evaluated quote or closing bid price normally is
used.

Futures contracts and options are valued on the basis of market
quotations, if available. Securities of other open-end investment
companies are valued at their respective NAVs.

Independent brokers or quotation services provide prices of foreign
securities in their local currency. FSC gathers all exchange rates
daily at the close of the NYSE using the last quoted price on the
local currency and then translates the value of foreign securities
from their local currencies into U.S. dollars. Any changes in the
value of forward contracts due to exchange rate fluctuations and days
to maturity are included in the calculation of NAV. If an event that
is expected to materially affect the value of a portfolio security
occurs after the close of an exchange or market on which that security
is traded, then that security will be valued in good faith by a
committee appointed by the Board of Trustees.

Short-term securities with remaining maturities of sixty days or less
for which market quotations and information furnished by a pricing
service are not readily available are valued either at amortized cost
or at original cost plus accrued interest, both of which approximate
current value.

The procedures set forth above need not be used to determine the value
of the securities owned by a fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method would more
accurately reflect the fair market value of such securities. For
example, securities and other assets for which there is no readily
available market value may be valued in good faith by a committee
appointed by the Board of Trustees. In making a good faith
determination of the value of a security, the committee may review
price movements in futures contracts and American Depository Receipts
(ADRs), market and trading trends, the bid/ask quotes of brokers and
off-exchange institutional trading.

GROWTH, GROWTH & INCOME, AND ASSET ALLOCATION FUNDS. Portfolio
securities are valued by various methods depending on the primary
market or exchange on which they trade. Most equity securities for
which the primary market is the United States are valued at last sale
price or, if no sale has occurred, at the closing bid price. Most
equity securities for which the primary market is outside the United
States are valued using the official closing price or the last sale
price in the principal market in which they are traded. If the last
sale price (on the local exchange) is unavailable, the last evaluated
quote or closing bid price normally is used. Securities of other
open-end investment companies are valued at their respective NAVs.

Fixed-income securities and other assets for which market quotations
are readily available may be valued at market values determined by
such securities' most recent bid prices (sales prices if the principal
market is an exchange) in the principal market in which they normally
are traded, as furnished by recognized dealers in such securities or
assets. Or, fixed-income securities and convertible securities may be
valued on the basis of information furnished by a pricing service that
uses a valuation matrix which incorporates both dealer-supplied
valuations and electronic data processing techniques. Use of pricing
services has been approved by the Board of Trustees. A number of
pricing services are available, and the funds may use various pricing
services or discontinue the use of any pricing service.

Futures contracts and options are valued on the basis of market
quotations, if available.

The procedures set forth above need not be used to determine the value
of the securities owned by a fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method would more
accurately reflect the fair value of such securities. For example,
securities and other assets for which there is no readily available
market value may be valued in good faith by a committee appointed by
the Board of Trustees. In making a good faith determination of the
value of a security, the committee may review price movements in
futures contracts and American Depository Receipts (ADRs), market and
trading trends, the bid/ask quotes of brokers and off-exchange
institutional trading.

PERFORMANCE

A class may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is
not intended to indicate future returns. The share price of each class
of a bond or equity fund, the yield, if applicable, of each class of a
bond, equity or money market fund, and return fluctuate in response to
market conditions and other factors, and the value of a bond or equity
fund's shares when redeemed may be more or less than their original
cost.

YIELD CALCULATIONS (MONEY MARKET PORTFOLIO). To compute the yield for
the money market fund for a period, the net change in value of a
hypothetical account containing one share reflects the value of
additional shares purchased with dividends from the one original share
and dividends declared on both the original share and any additional
shares. The net change is then divided by the value of the account at
the beginning of the period to obtain a base period return. This base
period return is annualized to obtain a current annualized yield. The
money market fund also may calculate an effective yield by compounding
the base period return over a one-year period. In addition to the
current yield, the money market fund may quote yields in advertising
based on any historical seven-day period. Yields for the money market
fund are calculated on the same basis as other money market funds, as
required by applicable regulation.

Yield information may be useful in reviewing the fund's performance
and in providing a basis for comparison with other investment
alternatives. However, the fund's yield fluctuates, unlike investments
that pay a fixed interest rate over a stated period of time. When
comparing investment alternatives, investors should also note the
quality and maturity of the portfolio securities of respective
investment companies they have chosen to consider.

Investors should recognize that in periods of declining interest rates
the fund's yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates the fund's yield
will tend to be somewhat lower. Also, when interest rates are falling,
the inflow of net new money to the fund from the continuous sale of
its shares will likely be invested in instruments producing lower
yields than the balance of the fund's holdings, thereby reducing the
fund's current yield. In periods of rising interest rates, the
opposite can be expected to occur.

YIELD CALCULATIONS (EXCEPT MONEY MARKET PORTFOLIO). Yields for a class
are computed by dividing the class's pro rata share of the fund's
interest and dividend income for a given 30-day or one-month period,
net of expenses, by the average number of shares of that class
entitled to receive distributions during the period, dividing this
figure by the class's NAV at the end of the period, and annualizing
the result (assuming compounding of income) in order to arrive at an
annual percentage rate. Income is calculated for purposes of yield
quotations in accordance with standardized methods applicable to all
stock and bond funds. Dividends from equity investments are treated as
if they were accrued on a daily basis, solely for the purposes of
yield calculations. In general, interest income is reduced with
respect to bonds trading at a premium over their par value by
subtracting a portion of the premium from income on a daily basis, and
is increased with respect to bonds trading at a discount by adding a
portion of the discount to daily income. For a fund's investments
denominated in foreign currencies, income and expenses are calculated
first in their respective currencies, and then are converted to U.S.
dollars, either when they are actually converted or at the end of the
30-day or one month period, whichever is earlier. Income is adjusted
to reflect gains and losses from principal repayments received by a
fund with respect to mortgage-related securities and other
asset-backed securities. Other capital gains and losses generally are
excluded from the calculation as are gains and losses from currency
exchange rate fluctuations.

Income calculated for the purposes of calculating a class's yield
differs from income as determined for other accounting purposes.
Because of the different accounting methods used, and because of the
compounding of income assumed in yield calculations, a class's yield
may not equal its distribution rate, the income paid to your account,
or the income reported in the fund's financial statements.

In calculating a class's yield, a fund may from time to time use a
portfolio security's coupon rate instead of its yield to maturity in
order to reflect the risk premium on that security. This practice will
have the effect of reducing a class's yield.

Yield information may be useful in reviewing a class's performance and
in providing a basis for comparison with other investment
alternatives. However, a class's yield fluctuates, unlike investments
that pay a fixed interest rate over a stated period of time. When
comparing investment alternatives, investors should also note the
quality and maturity of the portfolio securities of respective
investment companies they have chosen to consider.

Investors should recognize that in periods of declining interest rates
a class's yield will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates a class's yield will
tend to be somewhat lower. Also, when interest rates are falling, the
inflow of net new money to a fund from the continuous sale of its
shares will likely be invested in instruments producing lower yields
than the balance of the fund's holdings, thereby reducing a class's
current yield. In periods of rising interest rates, the opposite can
be expected to occur.

RETURN CALCULATIONS. Returns quoted in advertising reflect all aspects
of a class's return, including the effect of reinvesting dividends and
capital gain distributions, and any change in the class's NAV over a
stated period. A class's return may be calculated by using the
performance data of a previously existing class prior to the date that
the new class commenced operations, adjusted to reflect differences in
sales charges but not 12b-1 fees. A cumulative return reflects actual
performance over a stated period of time. Average annual returns are
calculated by determining the growth or decline in value of a
hypothetical historical investment in a class over a stated period,
and then calculating the annually compounded percentage rate that
would have produced the same result if the rate of growth or decline
in value had been constant over the period. For example, a cumulative
return of 100% over ten years would produce an average annual return
of 7.18%, which is the steady annual rate of return that would equal
100% growth on a compounded basis in ten years. Average annual returns
covering periods of less than one year are calculated by determining a
class's return for the period, extending that return for a full year
(assuming that return remains constant over the year), and quoting the
result as an annual return. While average annual returns are a
convenient means of comparing investment alternatives, investors
should realize that a class's performance is not constant over time,
but changes from year to year, and that average annual returns
represent averaged figures as opposed to the actual year-to-year
performance of a class.

In addition to average annual returns, a class may quote unaveraged or
cumulative returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative returns
may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a
series of redemptions, over any time period. Returns may be broken
down into their components of income and capital (including capital
gains and changes in share price) in order to illustrate the
relationship of these factors and their contributions to return.
Returns may be quoted on a before-tax or after-tax basis. Returns,
yields, if applicable, and other performance information may be quoted
numerically or in a table, graph, or similar illustration.

NET ASSET VALUE. Charts and graphs using a class's NAVs, adjusted
NAVs, and benchmark indexes may be used to exhibit performance. An
adjusted NAV includes any distributions paid by a fund and reflects
all elements of a class's return. Unless otherwise indicated, a
class's adjusted NAVs are not adjusted for sales charges, if any.

MOVING AVERAGES. A growth, growth & income, or asset allocation fund
may illustrate performance using moving averages. A long-term moving
average is the average of each week's adjusted closing NAV for a
specified period. A short-term moving average is the average of each
day's adjusted closing NAV for a specified period. Moving Average
Activity Indicators combine adjusted closing NAVs from the last
business day of each week with moving averages for a specified period
to produce indicators showing when an NAV has crossed, stayed above,
or stayed below its moving average. On [______,19__], the 13-week and
39-week long-term moving averages were as follows*:

Fund 13-Week 39-Week

Equity-Income - Initial Class

Equity-Income - Service Class

Growth - Initial Class

Growth - Service Class

Overseas - Initial Class

Overseas - Service Class

Asset Manager - Initial Class

Asset Manager - Service Class

Asset Manager: Growth -
Initial Class

Asset Manager: Growth -
Service Class

Index 500 - Initial Class

Contrafund - Initial Class

Contrafund - Service Class

Balanced - Initial Class

Balanced - Service Class

Growth Opportunities -
Initial Class

Growth Opportunities -
Service Class

Growth & Income - Initial Class

Growth & Income - Service Class

*Moving averages are shown for those classes that had commenced
operations prior to the date of this prospectus.

CALCULATING HISTORICAL MONEY MARKET FUND RESULTS. The following table
shows performance for the fund.

HISTORICAL MONEY MARKET FUND RESULTS. The following table shows the
fund's 7-day yield and return for the period ended [______,19__].

Average Annual Returns1 Cumulative Returns1

Seven-Day Yield One Year Five Years Ten Years One Year Five Years

Money Market Portfolio: % % % % % %
Initial Class

Money Market Portfolio: % % % % % %
Service Class 2

</TABLE>

Cumulative Returns1

Ten Years

Money Market Portfolio: %
Initial Class

Money Market Portfolio: %
Service Class 2

</TABLE>

1The initial offering of Service Class 2 shares of the fund is
expected to take place shortly after the date of this prospectus.
Returns are t hose of Initial Class which has no 12b-1 fee. If
Service Class 2's 12b-1 fee had been reflected returns would have been
lower.

Note: If FMR had not reimbursed certain expenses during these periods,
the fund's returns would have been lower.

CALCULATING HISTORICAL BOND FUND RESULTS. The following table shows
performance for each class of each fund.

HISTORICAL BOND FUND RESULTS. The following table shows each
class's yield and return for the period ended [______, 19__].

Average Annual Returns1 Cumulative Returns1

Thirty-Day Yield One Year Five Years Ten Years One Year Five Years

Investment Grade Bond % % % % % %
Portfolio: Initial Class

Investment Grade Bond % % % % % %
Portfolio: Service Class 2

High Income Portfolio: % % % % % %
Initial Class

High Income Portfolio: % % % % % %
Service Class

High Income Portfolio: % % % % % %
Service Class 2

</TABLE>

Cumulative Returns1

Ten Years

Investment Grade Bond %
Portfolio: Initial Class

Investment Grade Bond %
Portfolio: Service Class 2

High Income Portfolio: %
Initial Class

High Income Portfolio: %
Service Class

High Income Portfolio: %
Service Class 2

</TABLE>

1 The initial offering of Service Class 2 of Investment Grade Bond
Portfolio is expected to take place shortly after the date of this
prospectus. Service Class 2 returns for Investment Grade Bond
Portfolio are those of Initial Class which has no 12b-1 fee. If
Service Class 2's 12b-1 fee of 0.25% had been reflected returns would
have been lower.

The initial offering of Service Class 2 of High Income Portfolio
is expected to take place shortly after the date of this prospectus.
Service Class 2 returns for High Income Portfolio from [____, 19__]
through November 3, 1997 are those of Service Class which reflect a
12b-1 fee of 0.10%. Service Class 2 returns prior to November 3, 1997
are those of Initial Class which has no 12b-1 fee. If S ervice
Class 2's 12b-1 fee of 0.25% had been reflected returns would have
been lower.

Note: If FMR had not reimbursed certain class expenses during these
periods, Investment Grade Bond's and High Income's returns would have
been lower.

CALCULATING HISTORICAL EQUITY FUND RESULTS. The following table
shows performance for each class of each fund.

HISTORICAL EQUITY FUND RESULTS. The following table shows each class's
return for the period ended [_____, 19__].

Average Annual Returns1 Cumulative Returns1

One Year Five Years Ten Years/
Life of Fund* One Year Five Years Ten Years/ Life of Fund*

Index 500 Portfolio: Initial % % % % % %
Class

Index 500 Portfolio: Service % % % % % %
Class 2

Asset Manager Portfolio: % % % % % %
Initial Class

Asset Manager Portfolio: % % % % % %
Service Class

Asset Manager Portfolio: % % % % % %
Service Class 2

Asset Manager: Growth % % % %
Portfolio: Initial Class

Asset Manager: Growth % % % %
Portfolio: Service Class

Asset Manager: Growth % % % %
Portfolio:Service Class 2

Equity-Income Portfolio: % % % % % %
Initial Class

Equity-Income Portfolio: % % % % % %
Service Class

Equity-Income Portfolio: % % % % % %
Service Class 2

Contrafund Portfolio: Initial % % % %
Class

Contrafund Portfolio: Service % % % %
Class

Contrafund Portfolio: Service % % % %
Class 2

Growth Portfolio: Initial Class % % % % % %

Growth Portfolio: Service Class % % % % % %

Growth Portfolio: Service % % % % % %
Class 2

Overseas Portfolio: Initial % % % % % %
Class

Overseas Portfolio: Service % % % % % %
Class

Overseas Portfolio: Service % % % % % %
Class 2

Growth & Income Portfolio: % % % %
Initial Class

Growth & Income Portfolio: % % % %
Service Class

Growth & Income Portfolio: % % % %
Service Class 2

Balanced Portfolio: Initial % % % %
Class

Balanced Portfolio: Service % % % %
Class

Balanced Portfolio: Service % % % %
Class 2

Growth Opportunities % % % %
Portfolio: Initial Class

Growth Opportunities % % % %
Portfolio: Service Class

Growth Opportunities % % % %
Portfolio: Service Class 2

Mid Cap Portfolio: Initial % % % %
Class

Mid Cap Portfolio: Service % % % %
Class

Mid Cap Portfolio: Service % % % %
Class 2

</TABLE>

1 The initial offering of Service Class 2 of Index 500 is expected
to take place shortly after the date of this prospectus. Service
Class 2 returns for Index 500 are those of Initial Class, which has no
12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been
reflected, returns would have been lower.

The initial offering of Service Class 2 of each fund (except Index
500) is expected to take place shortly after the date of this
prospects. Service Class 2 returns for each fund (except Index 500)
from [_____, 19__} through November 3, 1997 are those of Service Class
which has a 12b-1 fee of 0.10%. Service Class 2 returns prior to
November 3, 1997 are those of Initial Class which has no 1 2b-1
fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected
returns would have been lower.

* Life of fund figures are from commencement of operations (September
6, 1989 for Asset Manager; August 27, 1992 for Index 500; January 3,
1995 for Contrafund, Asset Manager: Growth, Balanced, and Growth
Opportunities; December 31, 1996 for Growth & Income); and December
28, 1999 for Mid Cap through [_______, 19__].

Note: If FMR had not reimbursed certain class expenses during these
periods, Index 500's, Asset Manager's, Asset Manager: Growth's,
Overseas', Growth & Income's, Balanced's, and Growth Opportunities'
returns would have been lower.

The following tables show the income and capital elements of each
class's cumulative return. The tables compare each class's return to
the record of the Standard & Poor's 500 Index (S&P 500), the Dow Jones
Industrial Average (DJIA), and the cost of living, as measured by the
Consumer Price Index (CPI), over the same period. The CPI information
is as of the month-end closest to the initial investment date for each
class. The S&P 500 and DJIA comparisons are provided to show how each
class's return compared to the record of a broad unmanaged index of
common stocks and a narrower set of stocks of major industrial
companies, respectively, over the same period. Because each of Money
Market, High Income and Investment Grade Bond invests in fixed-income
securities, common stocks represent a different type of investment
from the funds. Common stocks generally offer greater growth potential
than the funds, but generally experience greater price volatility,
which means greater potential for loss. In addition, common stocks
generally provide lower income than fixed-income investments such as
the funds. Each of Index 500, Asset Manager, Asset Manager: Growth,
Equity-Income, Contrafund, Growth, Overseas, Growth & Income,
Balanced, Growth Opportunities, and Mid Cap has the ability to invest
in securities not included in either index, and its investment
portfolio may or may not be similar in composition to the indexes. The
S&P 500 and DJIA returns are based on the prices of unmanaged groups
of stocks and, unlike each class's returns, do not include the effect
of brokerage commissions or other costs of investing.

The following tables show the growth in value of a hypothetical
$10,000 investment in each class of each fund during the 10-year
period ended [_______, 19__], or life of each fund, as applicable,
assuming all distributions were reinvested. Returns are based on past
results and are not an indication of future performance. Tax
consequences of different investments have not been factored into the
figures below.

MONEY MARKET PORTFOLIO. During the 10-year period ended _____, 19__, a
hypothetical $10,000 investment in Initial Class of Money Market
Portfolio would have grown to $____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MONEY MARKET PORTFOLIO - INDEXES
INITIAL CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995 $ $ $ $ $

1994 $ $ $ $ $

1993 $ $ $ $ $

1992 $ $ $ $ $

1991 $ $ $ $ $

1990 $ $ $ $ $

1989 $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
MONEY MARKET PORTFOLIO - INDEXES
INITIAL CLASS

Fiscal Year Ended DJIA Cost of Living

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995 $ $

1994 $ $

1993 $ $

1992 $ $

1991 $ $

1990 $ $

1989 $ $

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Initial
Class of Money Market Portfolio on January 1, 1989, the net amount
invested in Initial Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends for the period covered (their cash value at the time they
were reinvested) amounted to $___. If distributions had not been
reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would
have amounted to $___ for dividends. The fund did not distribute any
capital gains during the period.

D uring the 10-year period ended [_____,19__], a hypothetical
$10,000 investment in Service Class 2 of Money Market Portfolio
woul d have grown to $______.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MONEY MARKET PORTFOLIO - INDEXES
SERVICE CLASS 2

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ 10,000 $ $ $ $

1998 $ 10,000 $ $ $ $

1997 $ 10,000 $ $ $ $

1996 $ 10,000 $ $ $ $

1995 $ 10,000 $ $ $ $

1994 $ 10,000 $ $ $ $

1993 $ 10,000 $ $ $ $

1992 $ 10,000 $ $ $ $

1991 $ 10,000 $ $ $ $

1990 $ 10,000 $ $ $ $

1989 $ 10,000 $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
MONEY MARKET PORTFOLIO - INDEXES
SERVICE CLASS 2

Fiscal Year Ended DJIA Cost of Living

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995 $ $

1994 $ $

1993 $ $

1992 $ $

1991 $ $

1990 $ $

1989 $ $

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of Money Market Portfolio on January 1, 1989, the net amount
invested in Service Class 2 shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends for the period covered (their cash value at the
time they were reinvested) amounted to $____. If distributions had not
been reinvested, the amount of distributions earned from the class
over time would have been smaller, and cash payments for the period
would have amounted to $_____ for dividends. The fund did not
distribute any capital gains during the period. The initial offering
of Service Class 2 shares of Money Market Portfolio is expected to
take place shortly after the date of this prospectus. Service Class 2
returns are those of Initial Class which has no 12b-1 fee. If Service
Class 2's 12b-1 fee had been reflected returns would have been
lower.

HIGH INCOME PORTFOLIO. During the 10-year period ended [____, 19__], a
hypothetical $10,000 investment in Initial Class of High Income
Portfolio would have grown to $____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
HIGH INCOME PORTFOLIO - INDEXES
INITIAL CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995 $ $ $ $ $

1994 $ $ $ $ $

1993 $ $ $ $ $

1992 $ $ $ $ $

1991 $ $ $ $ $

1990 $ $ $ $ $

1989 $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
HIGH INCOME PORTFOLIO - INDEXES
INITIAL CLASS

Fiscal Year Ended DJIA Cost of Living

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995 $ $

1994 $ $

1993 $ $

1992 $ $

1991 $ $

1990 $ $

1989 $ $

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Initial
Class of High Income Portfolio on January 1, 1989, the net amount
invested in Initial Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions
earned from the class over time would have been smaller, and cash
payments for the period would have amounted to $____ for dividends and
$____ for capital gain distributions.

During the 10-year period ended [____, 19__], a hypothetical $10,000
investment in Service Class of High Income Portfolio would have grown
to $_____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
HIGH INCOME PORTFOLIO - INDEXES
SERVICE CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995 $ $ $ $ $

1994 $ $ $ $ $

1993 $ $ $ $ $

1992 $ $ $ $ $

1991 $ $ $ $ $

1990 $ $ $ $ $

1989 $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
HIGH INCOME PORTFOLIO - INDEXES
SERVICE CLASS

Fiscal Year Ended DJIA Cost of Living

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995 $ $

1994 $ $

1993 $ $

1992 $ $

1991 $ $

1990 $ $

1989 $ $

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Service
Class of High Income Portfolio on January 1, 1989, the net amount
invested in Service Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to $____. If
distributions had not been reinvested, the amount of distributions
earned from the class over time would have been smaller, and cash
payments for the period would have amounted to $___ for dividends and
$___ for capital gain distributions. Initial offering of Service Class
of High Income Portfolio took place on November 3, 1997. Service Class
returns prior to November 3, 1997 are those of Initial Class, which
has no 12b-1 fee. If Service Class's 12b-1 fee had been reflected,
returns prior to November 3, 1997 would have been lower.

During the 10-year period ended [_____, 19__], a hypothetical
$10,000 investment in Service Class 2 of High Income Portfolio
wo uld have grown to $_____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
HIGH INCOME PORTFOLIO - INDEXES
SERVICE CLASS 2

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995 $ $ $ $ $

1994 $ $ $ $ $

1993 $ $ $ $ $

1992 $ $ $ $ $

1991 $ $ $ $ $

1990 $ $ $ $ $

1989 $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
HIGH INCOME PORTFOLIO - INDEXES
SERVICE CLASS 2

Fiscal Year Ended DJIA Cost of Living

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995 $ $

1994 $ $

1993 $ $

1992 $ $

1991 $ $

1990 $ $

1989 $ $

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of High Income Portfolio on January 1, 1989, the net amount
invested in Service Class 2 shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $____ for
dividends and $____for capital gain distributions. The initial
offering of Service Class 2 shares of High Income Portfolio is
expected to take place shortly after the date of this prospectus.
Service Class 2 returns from [_____, 19__] through November 3, 1997
are those of Service Class which reflect a 12b-1 fee of 0.10%.
Service Class 2 returns prior to November 3, 1997 are those of Initial
Class which has no 12b-1 fee. If Service Class 2's 12b-1 fee had been
reflected retu rns would have been lower.

EQUITY-INCOME PORTFOLIO. During the 10-year period ended [_____,
19__], a hypothetical $10,000 investment in Service Class 2 of
Equity-Income Portfolio would have grown to $_____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
EQUITY-INCOME PORTFOLIO - INDEXES
INITIAL CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995 $ $ $ $ $

1994 $ $ $ $ $

1993 $ $ $ $ $

1992 $ $ $ $ $

1991 $ $ $ $ $

1990 $ $ $ $ $

1989 $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
EQUITY-INCOME PORTFOLIO - INDEXES
INITIAL CLASS

Fiscal Year Ended DJIA Cost of Living

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995 $ $

1994 $ $

1993 $ $

1992 $ $

1991 $ $

1990 $ $

1989 $ $

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Initial
Class of Equity-Income Portfolio on January 1, 1989, the net amount
invested in Initial Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to $___. If
distributions had not been reinvested, the amount of distributions
earned from the class over time would have been smaller, and cash
payments for the period would have amounted to $___ for dividends and
$___ for capital gain distributions.

During the 10-year period ended [_____, 19__], a hypothetical $10,000
investment in Service Class of Equity-Income Portfolio would have
grown to $___.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
EQUITY-INCOME PORTFOLIO - INDEXES
SERVICE CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995 $ $ $ $ $

1994 $ $ $ $ $

1993 $ $ $ $ $

1992 $ $ $ $ $

1991 $ $ $ $ $

1990 $ $ $ $ $

1989 $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
EQUITY-INCOME PORTFOLIO - INDEXES
SERVICE CLASS

Fiscal Year Ended DJIA Cost of Living

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995 $ $

1994 $ $

1993 $ $

1992 $ $

1991 $ $

1990 $ $

1989 $ $

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Service
Class of Equity-Income Portfolio on January 1, 1989, the net amount
invested in Service Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions
earned from the class over time would have been smaller, and cash
payments for the period would have amounted to $___ for dividends and
$___ for capital gain distributions. Initial offering of Service Class
of Equity-Income Portfolio took place on November 3, 1997. Service
Class returns prior to November 3, 1997 are those of Initial Class,
which has no 12b-1 fee. If Service Class's 12b-1 fee had been
reflected, returns prior to November 3, 1997 would have been lower.

D uring the 10-year period ended [_____, 19__], a hypothetical
$10,000 investment in Service Class 2 of Equity-Income Portfolio
would have grown to $___.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
EQUITY-INCOME PORTFOLIO - INDEXES
SERVICE 2 CLASS

Period
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500 DJIA
Investment Distributions Gain Distributions

1999 $ $ $ $ $ $

1998 $ $ $ $ $ $

1997 $ $ $ $ $ $

1996 $ $ $ $ $ $

1995 $ $ $ $ $ $

1994 $ $ $ $ $ $

1993 $ $ $ $ $ $

1992 $ $ $ $ $ $

1991 $ $ $ $ $ $

1990 $ $ $ $ $ $

1989 $ $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C>
EQUITY-INCOME PORTFOLIO - INDEXES
SERVICE 2 CLASS

Period Ended Cost of Living

1999 $

1998 $

1997 $

1996 $

1995 $

1994 $

1993 $

1992 $

1991 $

1990 $

1989 $

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of Equity-Income Portfolio on January 1, 1989, the net amount
invested in Service Class 2 shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $_____ for
dividends and $____ for capital gain distributions. Initial
offering of Service Class 2 of Equity-Income Portfolio will take place
shortly after the date of this prospectus. Service Class 2 returns
from [_____, 19__] through November 3, 1997 are those of Service Class
which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to
November 3, 1997 are those of Initial Class which has no 12b-1 fee.
If Service Class 2's 12b-1 fee had been reflected returns would have
been lower.

GROWTH PORTFOLIO. During the 10-year period ended [____, 19__], a
hypothetical $10,000 investment in Initial Class of Growth Portfolio
would have grown to $___.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
GROWTH PORTFOLIO - INITIAL INDEXES
CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995 $ $ $ $ $

1994 $ $ $ $ $

1993 $ $ $ $ $

1992 $ $ $ $ $

1991 $ $ $ $ $

1990 $ $ $ $ $

1989 $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
GROWTH PORTFOLIO - INITIAL INDEXES
CLASS

Fiscal Year Ended DJIA Cost of Living

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995 $ $

1994 $ $

1993 $ $

1992 $ $

1991 $ $

1990 $ $

1989 $ $

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Initial
Class of Growth Portfolio on January 1, 1989, the net amount invested
in Initial Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to $____. If
distributions had not been reinvested, the amount of distributions
earned from the class over time would have been smaller, and cash
payments for the period would have amounted to $____ for dividends and
$____ for capital gain distributions.

During the 10-year period ended ______, 19__, a hypothetical $10,000
investment in Service Class of Growth Portfolio would have grown to
$______.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
GROWTH PORTFOLIO - SERVICE INDEXES
CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995 $ $ $ $ $

1994 $ $ $ $ $

1993 $ $ $ $ $

1992 $ $ $ $ $

1991 $ $ $ $ $

1990 $ $ $ $ $

1989 $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
GROWTH PORTFOLIO - SERVICE INDEXES
CLASS

Fiscal Year Ended DJIA Cost of Living

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995 $ $

1994 $ $

1993 $ $

1992 $ $

1991 $ $

1990 $ $

1989 $ $

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Service
Class of Growth Portfolio on January 1, 1989, the net amount invested
in Service Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to $___. If
distributions had not been reinvested, the amount of distributions
earned from the class over time would have been smaller, and cash
payments for the period would have amounted to $___ for dividends and
$___ for capital gain distributions. Initial offering of Service Class
of Growth Portfolio took place on November 3, 1997. Service Class
returns prior to November 3, 1997 are those of Initial Class, which
has no 12b-1 fee. If Service Class's 12b-1 fee had been reflected,
returns prior to November 3, 1997 would have been lower.

During the 10-year period ended [______, 19__], a hypothetical
$10,000 investment in Service Class 2 of Growth Portfolio would have
grown to $____.

GROWTH PORTFOLIO - SERVICE INDEXES
CLASS 2

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995 $ $ $ $ $

1994 $ $ $ $ $

1993 $ $ $ $ $

1992 $ $ $ $ $

1991 $ $ $ $ $

1990 $ $ $ $ $

1989 $ $ $ $ $

</TABLE>

GROWTH PORTFOLIO - SERVICE INDEXES
CLASS 2

Fiscal Year Ended DJIA Cost of Living

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995 $ $

1994 $ $

1993 $ $

1992 $ $

1991 $ $

1990 $ $

1989 $ $

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of Growth Portfolio on January 1, 1989, the net amount
invested in Service Class 2 shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been
smaller, and cash payments for the period would have amounted to $___
for dividends and $___ for capital gain distributions. Initial
offering of Service Class 2 of Growth Portfolio is expected to take
place shortly after the date of this prospectus. Service Class 2
returns from [_____, 19__] through November 3, 1997 are those of
Service Class which reflect a 12b-1 fee of 0.10%. Service Class 2
returns prior to November 3, 1997 are those of Initial Class which has
no 12b-1 fee. If Service Class 2's 12b-1 fee had been reflected
returns would have been lower.

OVERSEAS PORTFOLIO. During the 10-year period ended _____, 19__, a
hypothetical $10,000 investment in Initial Class of Overseas Portfolio
would have grown to $_____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
OVERSEAS PORTFOLIO - INITIAL INDEXES
CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995 $ $ $ $ $

1994 $ $ $ $ $

1993 $ $ $ $ $

1992 $ $ $ $ $

1991 $ $ $ $ $

1990 $ $ $ $ $

1989 $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
OVERSEAS PORTFOLIO - INITIAL INDEXES
CLASS

Fiscal Year Ended DJIA Cost of Living

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995 $ $

1994 $ $

1993 $ $

1992 $ $

1991 $ $

1990 $ $

1989 $ $

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Initial
Class of Overseas Portfolio on January 1, 1989, the net amount
invested in Initial Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to $___. If
distributions had not been reinvested, the amount of distributions
earned from the class over time would have been smaller, and cash
payments for the period would have amounted to $___ for dividends and
$___ for capital gain distributions.

During the 10-year period ended _____, 19__, a hypothetical $10,000
investment in Service Class of Overseas Portfolio would have grown to
$_____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
OVERSEAS PORTFOLIO - SERVICE INDEXES
CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995 $ $ $ $ $

1994 $ $ $ $ $

1993 $ $ $ $ $

1992 $ $ $ $ $

1991 $ $ $ $ $

1990 $ $ $ $ $

1989 $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
OVERSEAS PORTFOLIO - SERVICE INDEXES
CLASS

Fiscal Year Ended DJIA Cost of Living

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995 $ $

1994 $ $

1993 $ $

1992 $ $

1991 $ $

1990 $ $

1989 $ $

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Service
Class of Overseas Portfolio on January 1, 1989, the net amount
invested in Service Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to $____. If
distributions had not been reinvested, the amount of distributions
earned from the class over time would have been smaller, and cash
payments for the period would have amounted to $___ for dividends and
$____ for capital gain distributions. Initial offering of Service
Class of Overseas Portfolio took place on November 3, 1997. Service
Class returns prior to November 3, 1997 are those of Initial Class,
which has no 12b-1 fee. If Service Class's 12b-1 fee had been
reflected, returns prior to November 3, 1997 would have been lower.

During the 10-year period ended [____, 19__], a hypothetical
$10,000 investment in Service Class 2 of Overseas Portfolio would have
grown to $____.

OVERSEAS PORTFOLIO - SERVICE INDEXES
CLASS 2

Period
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500 DJIA
Investment Distributions Gain Distributions

1999 $ $ $ $ $ $

1998 $ $ $ $ $ $

1997 $ $ $ $ $ $

1996 $ $ $ $ $ $

1995 $ $ $ $ $ $

1994 $ $ $ $ $ $

1993 $ $ $ $ $ $

1992 $ $ $ $ $ $

1991 $ $ $ $ $ $

1990 $ $ $ $ $ $

1989 $ $ $ $ $ $

</TABLE>

OVERSEAS PORTFOLIO - SERVICE INDEXES
CLASS 2

Period Ended Cost of Living

1999 $

1998 $

1997 $

1996 $

1995 $

1994 $

1993 $

1992 $

1991 $

1990 $

1989 $

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of Overseas Portfolio on January 1, 1989, the net amount
invested in Service Class 2 shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have b een
smaller, and cash payments for the period would have amounted to $___
for dividends and $___ for capital gain distributions. Initial
offering of Service Class 2 of Overseas Portfolio is expected to take
place shortly after the date of this prospectus. Service Class 2
returns from [_____, 19__] through November 3, 1997 are those of
Service Class which reflect a 12b-1 fee of 0.10%. Service Class 2
returns prior to November 3, 1997 are those of Initial Class which has
no 12b-1 fee. If Service Class 2's 12b-1 fee had been reflected
returns would have been lower.

INVESTMENT GRADE BOND PORTFOLIO. During the 10-year period ended
[____, 19__], a hypothetical $10,000 investment in Initial Class of
Investment Grade Bond Portfolio would have grown to $____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
INVESTMENT GRADE BOND INDEXES
PORTFOLIO - INITIAL CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995 $ $ $ $ $

1994 $ $ $ $ $

1993 $ $ $ $ $

1992 $ $ $ $ $

1991 $ $ $ $ $

1990 $ $ $ $ $

1989 $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT GRADE BOND INDEXES
PORTFOLIO - INITIAL CLASS

Fiscal Year Ended DJIA Cost of Living

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995 $ $

1994 $ $

1993 $ $

1992 $ $

1991 $ $

1990 $ $

1989 $ $

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Initial
Class of Investment Grade Bond Portfolio on January 1, 1989, the net
amount invested in Initial Class shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $___ for
dividends and $___ for capital gain distributions.

During the 10-year period ended [_____, 19__], a hypothetical
$10,000 investment in Service Class 2 of Investment Grade Bond
Portfolio would have grown to $____.

INVESTMENT GRADE BOND INDEXES
PORTFOLIO - SERVICE CLASS 2

Period
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500 DJIA
Investment Distributions Gain Distributions

1999 $ $ $ $ $ $

1998 $ $ $ $ $ $

1997 $ $ $ $ $ $

1996 $ $ $ $ $ $

1995 $ $ $ $ $ $

1994 $ $ $ $ $ $

1993 $ $ $ $ $ $

1992 $ $ $ $ $ $

1991 $ $ $ $ $ $

1990 $ $ $ $ $ $

1989 $ $ $ $ $ $

</TABLE>

INVESTMENT GRADE BOND INDEXES
PORTFOLIO - SERVICE CLASS 2

Period Ended Cost of Living

1999 $

1998 $

1997 $

1996 $

1995 $

1994 $

1993 $

1992 $

1991 $

1990 $

1989 $

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of Investment Grade Bond Portfolio on January 1, 1989, the net
amount invested in Service Class 2 shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been
smaller, and cash payments for the period would have amounted to $___
for dividends and $___ for capital gain distributions. Initial
offering of Service Class 2 of Investment Grade Bond Portfolio is
expected to take place shortly after the date of this prospectus.
Service Class 2 returns are those of Initial Class which has no 12b-1
fee. If Service Class 2's 12b-1 fee had been reflected returns
would have been lower.

ASSET MANAGER PORTFOLIO. During the period from September 6, 1989
(commencement of operations) to [_____, 19__], a hypothetical $10,000
investment in Initial Class of Asset Manager Portfolio would have
grown to $____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET MANAGER PORTFOLIO - INDEXES
INITIAL CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995 $ $ $ $ $

1994 $ $ $ $ $

1993 $ $ $ $ $

1992 $ $ $ $ $

1991 $ $ $ $ $

1990 $ $ $ $ $

1989* $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
ASSET MANAGER PORTFOLIO - INDEXES
INITIAL CLASS

Fiscal Year Ended DJIA Cost of Living**

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995 $ $

1994 $ $

1993 $ $

1992 $ $

1991 $ $

1990 $ $

1989* $ $

</TABLE>

* From September 6, 1989 (commencement of operations).

** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 in Initial
Class of Asset Manager Portfolio on September 6, 1989, the net amount
invested in Initial Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to $20,567. If
distributions had not been reinvested, the amount of distributions
earned from the class over time would have been smaller, and cash
payments for the period would have amounted to $____ for dividends and
$___ for capital gain distributions.

During the period from September 6, 1989 (commencement of operations)
to [______, 19__], a hypothetical $10,000 investment in Service Class
of Asset Manager Portfolio would have grown to $_____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET MANAGER PORTFOLIO - INDEXES
SERVICE CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995 $ $ $ $ $

1994 $ $ $ $ $

1993 $ $ $ $ $

1992 $ $ $ $ $

1991 $ $ $ $ $

1990 $ $ $ $ $

1989* $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
ASSET MANAGER PORTFOLIO - INDEXES
SERVICE CLASS

Fiscal Year Ended DJIA Cost of Living**

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995 $ $

1994 $ $

1993 $ $

1992 $ $

1991 $ $

1990 $ $

1989* $ $

</TABLE>

* From September 6, 1989 (commencement of operations).

** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 in Service
Class of Asset Manager Portfolio on September 6, 1989, the net amount
invested in Service Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions
earned from the class over time would have been smaller, and cash
payments for the period would have amounted to $____ for dividends and
$____ for capital gain distributions. Initial offering of Service
Class of Asset Manager Portfolio took place on November 3, 1997.
Service Class returns prior to November 3, 1997 are those of Initial
Class, which has no 12b-1 fee. If Service Class's 12b-1 fee had been
reflected, returns prior to November 3, 1997 would have been lower.

During the period from September 6, 1989 (commencement of
operations) to [_____, 19__], a hypothetical $10,000 investment in
Service Class 2 of Asset Manager Portfolio would have grown to
$____.

ASSET MANAGER PORTFOLIO - INDEXES
SERVICE CLASS 2

Period
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500 DJIA
Investment Distributions Gain Distributions

1999 $ $ $ $ $ $

1998 $ $ $ $ $ $

1997 $ $ $ $ $ $

1996 $ $ $ $ $ $

1995 $ $ $ $ $ $

1994 $ $ $ $ $ $

1993 $ $ $ $ $ $

1992 $ $ $ $ $ $

1991 $ $ $ $ $ $

1990 $ $ $ $ $ $

1989 $ $ $ $ $ $

</TABLE>

ASSET MANAGER PORTFOLIO - INDEXES
SERVICE CLASS 2

Period Ended Cost of Living**

1999 $

1998 $

1997 $

1996 $

1995 $

1994 $

1993 $

1992 $

1991 $

1990 $

1989 $

</TABLE>

* From September 6, 1989 (commencement of operations).

** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of Asset Manager Portfolio on September 6, 1989, the net
amount invested in Service Class 2 shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been
smaller, and cash payments for the period would have amounted to $____
for dividends and $____ for capital gain distributions. Initial
offering of Service Class 2 of Asset Manager Portfolio is expected to
take place shortly after the date of this prospectus. Service Class 2
returns from [_____, 19__] through November 3, 1997 are those of
Service Class which reflect a 12b-1 fee of 0.10%. Service Class 2
returns prior to November 3, 1997 are those of Initial Class which has
no 12b-1 fee. If Service Class 2's 1 2b-1 fee had been reflected
returns would have been lower.

ASSET MANAGER: GROWTH PORTFOLIO. During the period from January 3,
1995 (commencement of operations) to [_____, 19__], a hypothetical
$10,000 investment in Initial Class of Asset Manager: Growth Portfolio
would have grown to $_____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET MANAGER: GROWTH INDEXES
PORTFOLIO - INITIAL CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995* $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
ASSET MANAGER: GROWTH INDEXES
PORTFOLIO - INITIAL CLASS

Fiscal Year Ended DJIA Cost of Living**

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995* $ $

</TABLE>

* From January 3, 1995 (commencement of operations).

** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 in Initial
Class of Asset Manager: Growth Portfolio on January 3, 1995, the net
amount invested in Initial Class shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $___ for
dividends and $___ for capital gain distributions.

During the period from January 3, 1995 (commencement of operations) to
[____, 19__], a hypothetical $10,000 investment in Service Class of
Asset Manager: Growth Portfolio would have grown to $____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET MANAGER: GROWTH INDEXES
PORTFOLIO - SERVICE CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995* $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
ASSET MANAGER: GROWTH INDEXES
PORTFOLIO - SERVICE CLASS

Fiscal Year Ended DJIA Cost of Living**

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995* $ $

</TABLE>

* From January 3, 1995 (commencement of operations).

** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 in Service
Class of Asset Manager: Growth Portfolio on January 3, 1995, the net
amount invested in Service Class shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $___. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $___ for
dividends and $____ for capital gain distributions. Initial offering
of Service Class of Asset Manager: Growth Portfolio took place on
November 3, 1997. Service Class returns prior to November 3, 1997 are
those of Initial Class, which has no 12b-1 fee. If Service Class's
12b-1 fee had been reflected, returns prior to November 3, 1997 would
have been lower.

During the period from January 3, 1995 (commencement of
operations) to [______, 19__] a hypothetical $10,000 investment in
Service Class 2 of Asset Manager: Growth Portfolio would have grown to
$_____.

ASSET MANAGER: GROWTH INDEXES
PORTFOLIO - SERVICE CLASS 2

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995* $ $ $ $ $

</TABLE>

ASSET MANAGER: GROWTH INDEXES
PORTFOLIO - SERVICE CLASS 2

Fiscal Year Ended DJIA Cost of Living**

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995* $ $

</TABLE>

* From January 3, 1995 (commencement of operations).

** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of Asset Manager: Growth Portfolio on January 3, 1995, the net
amount invested in Service Class 2 shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have b een
smaller, and cash payments for the period would have amounted to $___
for dividends and $___ for capital gain distributions. Initial
offering of Service Class 2 of Asset Manager: Growth Portfolio is
expected to take place shortly after the date of this prospectus.
Service Class 2 returns from [_____, 19__] through November 3, 1997
are those of Service Class which reflect a 12b-1 fee of 0.10%.
Service Class 2 returns prior to November 3, 1997 are those of Initial
Class which has no 12b-1 fee. If Service Class 2's 1 2b-1 fee had
been reflected returns would have been lower.

INDEX 500 PORTFOLIO. During the period from August 27, 1992
(commencement of operations) to [_____, 19__], a hypothetical $10,000
investment in Initial Class of Index 500 Portfolio would have grown to
$____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
INDEX 500 PORTFOLIO - INITIAL INDEXES
CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995 $ $ $ $ $

1994 $ $ $ $ $

1993 $ $ $ $ $

1992* $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
INDEX 500 PORTFOLIO - INITIAL INDEXES
CLASS

Fiscal Year Ended DJIA Cost of Living**

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995 $ $

1994 $ $

1993 $ $

1992* $ $

</TABLE>

* From August 27, 1992 (commencement of operations).

** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 in Initial
Class of Index 500 Portfolio on August 27, 1992, the net amount
invested in Initial Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions
earned from the class over time would have been smaller, and cash
payments for the period would have amounted to $____ for dividends and
$____ for capital gain distributions.

During the period from August 27, 1992 (commencement of operations)
to [______, 19__], a hypothetical $10,000 investment in Service Class
2 of Index 500 Portfolio would have grown to $____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
INDEX 500 PORTFOLIO - SERVICE INDEXES
CLASS 2

Period
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500 DJIA
Investment Distributions Gain Distributions

1999 $ $ $ $ $ $

1998 $ $ $ $ $ $

1997 $ $ $ $ $ $

1996 $ $ $ $ $ $

1995 $ $ $ $ $ $

1994 $ $ $ $ $ $

1993 $ $ $ $ $ $

1992* $ $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C>
INDEX 500 PORTFOLIO - SERVICE INDEXES
CLASS 2

Period Ended Cost of Living**

1999 $

1998 $

1997 $

1996 $

1995 $

1994 $

1993 $

1992* $

</TABLE>

* From August 27, 1992 (commencement of operations).

** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of Index 500 Portfolio on August 27, 1992, the net amount
invested in Service Class 2 shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $___ for
dividends and $___ for capital gain distributions. Initial offering of
Service Class 2 of Index 500 Portfolio is expected to take place
shortly after the date of this prospectus. Service Class 2 returns
are those of Initial Class which has no 12b-1 fee. If Service Class
2's 12b-1 fee had been reflected returns would have been lower.

CONTRAFUND PORTFOLIO. During the period from January 3, 1995
(commencement of operations) to [_______, 19__], a hypothetical
$10,000 investment in Initial Class of Contrafund Portfolio would have
grown to $_____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CONTRAFUND PORTFOLIO - INDEXES
INITIAL CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995* $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
CONTRAFUND PORTFOLIO - INDEXES
INITIAL CLASS

Fiscal Year Ended DJIA Cost of Living**

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995* $ $

</TABLE>

* From January 3, 1995 (commencement of operations).

** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 in Initial
Class of Contrafund Portfolio on January 3, 1995, the net amount
invested in Initial Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to $____. If
distributions had not been reinvested, the amount of distributions
earned from the class over time would have been smaller, and cash
payments for the period would have amounted to $___ for dividends and
$___ for capital gain distributions.

During the period from January 3, 1995 (commencement of operations) to
[______, 19__], a hypothetical $10,000 investment in Service Class of
Contrafund Portfolio would have grown to $_____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CONTRAFUND PORTFOLIO - INDEXES
SERVICE CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995* $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
CONTRAFUND PORTFOLIO - INDEXES
SERVICE CLASS

Fiscal Year Ended DJIA Cost of Living**

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995* $ $

</TABLE>

* From January 3, 1995 (commencement of operations).

** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 in Service
Class of Contrafund Portfolio on January 3, 1995, the net amount
invested in Service Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to $____. If
distributions had not been reinvested, the amount of distributions
earned from the class over time would have been smaller, and cash
payments for the period would have amounted to $__ for dividends and
$___ for capital gain distributions. Initial offering of Service Class
of Contrafund Portfolio took place on November 3, 1997. Service Class
returns prior to November 3, 1997 are those of Initial Class, which
has no 12b-1 fee. If Service Class's 12b-1 fee had been reflected,
returns prior to November 3, 1997 would have been lower.

During the period from January 3, 1995 (commencement of operations)
to [_____, 19__], a hypothetical $10,000 investment in Service Class 2
of Contrafund Portfolio would have grown to $_____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
CONTRAFUND PORTFOLIO - INDEXES
SERVICE CLASS 2

Period
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500 DJIA
Investment Distributions Gain Distributions

1999 $ $ $ $ $ $

1998 $ $ $ $ $ $

1997 $ $ $ $ $ $

1996 $ $ $ $ $ $

1995* $ $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C>
CONTRAFUND PORTFOLIO - INDEXES
SERVICE CLASS 2

Period Ended Cost of Living**

1999 $

1998 $

1997 $

1996 $

1995* $

</TABLE>

* From January 3, 1995 (commencement of operations).

** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of Contrafund Portfolio on January 3, 1995, the net amount
invested in Service Class 2 shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $___ for
dividends and $___ for capital gain distributions. Initial offering of
Service Class 2 of Contrafund Portfolio is expected to take place
shortly after the date of this prospectus. Service Class 2 returns
from [_____, 19__] through November 3, 1997 are those of Service Class
which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to
November 3, 1997 are those of Initial Class which has no 12b-1 fee.
If Service Class 2's 12b-1 fee had been reflected returns would have
been lower.

BALANCED PORTFOLIO. During the period from January 3, 1995
(commencement of operations) to [______, 19__], a hypothetical $10,000
investment in Initial Class of Balanced Portfolio would have grown to
$_____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
BALANCED PORTFOLIO - INITIAL INDEXES
CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995* $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
BALANCED PORTFOLIO - INITIAL INDEXES
CLASS

Fiscal Year Ended DJIA Cost of Living**

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995* $ $

</TABLE>

* From January 3, 1995 (commencement of operations).

** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 in Initial
Class of Balanced Portfolio on January 3, 1995, the net amount
invested in Initial Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to $____. If
distributions had not been reinvested, the amount of distributions
earned from the class over time would have been smaller, and cash
payments for the period would have amounted to $___ for dividends and
$___ for capital gain distributions.

During the period from January 3, 1995 (commencement of operations) to
[______, 19__], a hypothetical $10,000 investment in Service Class of
Balanced Portfolio would have grown to $_____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
BALANCED PORTFOLIO - SERVICE INDEXES
CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995* $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
BALANCED PORTFOLIO - SERVICE INDEXES
CLASS

Fiscal Year Ended DJIA Cost of Living**

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995* $ $

</TABLE>

* From January 3, 1995 (commencement of operations).

** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 in Service
Class of Balanced Portfolio on January 3, 1995, the net amount
invested in Service Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to $____. If
distributions had not been reinvested, the amount of distributions
earned from the class over time would have been smaller, and cash
payments for the period would have amounted to $___ for dividends and
$__ for capital gain distributions. Initial offering of Service Class
of Balanced Portfolio took place on November 3, 1997. Service Class
returns prior to November 3, 1997 are those of Initial Class, which
has no 12b-1 fee. If Service Class's 12b-1 fee had been reflected,
returns prior to November 3, 1997 would have been lower.

During the period from January 3, 1995 (commencement of operations)
to [_____, 19__], a hypothetical $10,000 investment in Service
Class 2 of Balanced Portfolio would have grown to $_____.

BALANCED PORTFOLIO - SERVICE INDEXES
CLASS 2

Period
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500 DJIA
Investment Distributions Gain Distributions

1999 $ $ $ $ $ $

1998 $ $ $ $ $ $

1997 $ $ $ $ $ $

1996 $ $ $ $ $ $

1995* $ $ $ $ $ $

</TABLE>

BALANCED PORTFOLIO - SERVICE INDEXES
CLASS 2

Period Ended Cost of Living**

1999 $

1998 $

1997 $

1996 $

1995* $

</TABLE>

* From January 3, 1995 (commencement of operations).

** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of Balanced Portfolio on January 3, 1995, the net amount
invested in Service Class 2 shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $___ for
dividends and $___ for capital gain distributions. Initial offering of
Service Class 2 of Balanced Portfolio is expected to take place
shortly after the date of this prospectus. Service Class 2 returns
from [_____, 19__] through November 3, 1997 are those of Service Class
which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to
November 3, 1997 are those of Initial Class which has no 12b-1 fee.
If Service Class 2's 12b-1 fee had been reflected returns w ould
have been lower.

GROWTH & INCOME PORTFOLIO. During the period from December 31, 1996
(commencement of operations) to [______. 19__], a hypothetical $10,000
investment in Initial Class of Growth & Income Portfolio would have
grown to $____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
GROWTH & INCOME PORTFOLIO - INDEXES
INITIAL CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997* $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
GROWTH & INCOME PORTFOLIO - INDEXES
INITIAL CLASS

Fiscal Year Ended DJIA Cost of Living**

1999 $ $

1998 $ $

1997* $ $

</TABLE>

* From December 31, 1996 (commencement of operations).

** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 in Initial
Class of Growth & Income Portfolio on December 31, 1996, the net
amount invested in Initial Class shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $__ for
dividends and $___ for capital gain distributions.

During the period from December 31, 1996 (commencement of operations)
to [_____, 19__], a hypothetical $10,000 investment in Service Class
of Growth & Income Portfolio would have grown to $_____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
GROWTH & INCOME PORTFOLIO - INDEXES
SERVICE CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997* $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
GROWTH & INCOME PORTFOLIO - INDEXES
SERVICE CLASS

Fiscal Year Ended DJIA Cost of Living**

1999 $ $

1998 $ $

1997* $ $

</TABLE>

* From December 31, 1996 (commencement of operations).

** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 in Service
Class of Growth & Income Portfolio on December 31, 1996, the net
amount invested in Service Class shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $__ for
dividends and $__ for capital gain distributions. Initial offering of
Service Class of Growth & Income Portfolio took place on November 3,
1997. Service Class returns prior to November 3, 1997 are those of
Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee
had been reflected, returns prior to November 3, 1997 would have been
lower.

During the period from December 31, 1996 (commencement of
operations) to [____, 19__], a hypothetical $10,000 investment in
Servic e Class 2 of Growth & Income Portfolio would have grown to
$_____.

GROWTH & INCOME PORTFOLIO - INDEXES
SERVICE CLASS 2

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997* $ $ $ $ $

</TABLE>

GROWTH & INCOME PORTFOLIO - INDEXES
SERVICE CLASS 2

Fiscal Year Ended DJIA Cost of Living**

1999 $ $

1998 $ $

1997* $ $

</TABLE>

* From December 31, 1996 (commencement of operations).

** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of Growth & Income Portfolio on December 31, 1996, the net
amount invested in Service Class 2 shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have b een
smaller, and cash payments for the period would have amounted to $__
for dividends and ___ for capital gain distributions. Initial offering
of Service Class 2 of Growth & Income Portfolio is expected to take
place shortly after the date of this prospectus. Service Class 2
returns from [_____, 19__] through November 3, 1997 are those of
Service Class which reflect a 12b-1 fee of 0.10%. Service Class 2
returns prior to November 3, 1997 are those of Initial Class which has
no 12b-1 fee. If Service Class 2's 12b-1 fee ha d been reflected
returns would have been lower.

GROWTH OPPORTUNITIES PORTFOLIO. During the period from January 3, 1995
(commencement of operations) to [______, 19__], a hypothetical $10,000
investment in Initial Class of Growth Opportunities Portfolio would
have grown to $____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
GROWTH OPPORTUNITIES INDEXES
PORTFOLIO - INITIAL CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995* $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
GROWTH OPPORTUNITIES INDEXES
PORTFOLIO - INITIAL CLASS

Fiscal Year Ended DJIA Cost of Living**

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995* $ $

</TABLE>

* From January 3, 1995 (commencement of operations).

** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 in Initial
Class of Growth Opportunities Portfolio on January 3, 1995, the net
amount invested in Initial Class shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $__ for
dividends and $____ for capital gain distributions.

During the period from January 3, 1995 (commencement of operations) to
[_____, 19__], a hypothetical $10,000 investment in Service Class of
Growth Opportunities Portfolio would have grown to $____.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
GROWTH OPPORTUNITIES INDEXES
PORTFOLIO - SERVICE CLASS

Fiscal Year
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500
Investment Distributions Gain Distributions

1999 $ $ $ $ $

1998 $ $ $ $ $

1997 $ $ $ $ $

1996 $ $ $ $ $

1995* $ $ $ $ $

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
GROWTH OPPORTUNITIES INDEXES
PORTFOLIO - SERVICE CLASS

Fiscal Year Ended DJIA Cost of Living**

1999 $ $

1998 $ $

1997 $ $

1996 $ $

1995* $ $

</TABLE>

* From January 3, 1995 (commencement of operations).

** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 in Service
Class of Growth Opportunities Portfolio on January 3, 1995, the net
amount invested in Service Class shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $___ for
dividends and $___ for capital gain distributions. Initial offering of
Service Class of Growth Opportunities Portfolio took place on November
3, 1997. Service Class returns prior to November 3, 1997 are those of
Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee
had been reflected, returns prior to November 3, 1997 would have been
lower.

D uring the period from January 3, 1995 (commencement of operations)
to [_____, 19__] a hypothetical $10,000 investment in Service
Cla ss 2 of Growth Opportunities Portfolio would have grown to
$_____.

GROWTH OPPORTUNITIES INDEXES
PORTFOLIO - SERVICE CLASS 2

Period
Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value S&P 500 DJIA
Investment Distributions Gain Distributions

1999 $ $ $ $ $ $

1998 $ $ $ $ $ $

1997 $ $ $ $ $ $

1996 $ $ $ $ $ $

1995* $ $ $ $ $ $

</TABLE>

GROWTH OPPORTUNITIES INDEXES
PORTFOLIO - SERVICE CLASS 2

Period Ended Cost of Living**

1999 $

1998 $

1997 $

1996 $

1995* $

</TABLE>

* From January 3, 1995 (commencement of operations).

** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of Growth Opportunities Portfolio on January 3, 1995, the net
amount invested in Service Class 2 shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been
smaller, and cash payments for the period would have amounted to $___
for dividends and $___ for capital gain distributions. Initial
offering of Service Class 2 of Growth Opportunities Portfolio is
expected to take place shortly after the date of this prospectus.
Service Class 2 returns from [_____, 19__] through November 3, 1997
are those of Service Class which reflect a 12b-1 fee of 0.10%.
Service Class 2 returns prior to November 3, 1997 are those of Initial
Class which has no 12b-1 fee. If Service Class 2's 12b-1 fee had
been reflected returns would have been lower.

INTERNATIONAL INDICES, MARKET CAPITALIZATION, AND NATIONAL
STOCK MARKET RETURN

The following tables show the total market capitalization of certain
countries according to the Morgan Stanley Capital International
indexes database, the total market capitalization of Latin American
countries according to the International Finance Corporation Emerging
Markets database, and the performance of national stock markets as
measured in U.S. dollars by the Morgan Stanley Capital International
stock market indexes for the twelve months ended December 31, 1998. Of
course, these results are not indicative of future stock market
performance or the funds' performance. Market conditions during the
periods measured fluctuated widely. Brokerage commissions and other
fees are not factored into the values of the indexes.

MARKET CAPITALIZATION. Companies outside the United States now make up
nearly two-thirds of the world's stock market capitalization.
According to Morgan Stanley Capital International, the size of the
markets as measured in U.S. dollars grew from $____ billion in 1997 to
$____ billion in 1998.

The following table measures the total market capitalization of
certain countries according to the Morgan Stanley Capital
International indexes database. The value of the markets are measured
in billions of U.S. dollars as of December 31, 1998.

TOTAL MARKET CAPITALIZATION

Australia $ Japan $

Austria Netherlands

Belgium Norway

Canada Singapore/Malaysia

Denmark Spain

France Sweden

Germany Switzerland

Hong Kong United Kingdom

Italy United States

The following table measures the total market capitalization of Latin
American countries according to the International Finance Corporation
Emerging Markets database. The value of the markets is measured in
billions of U.S. dollars as of December 31, 1998.

TOTAL MARKET CAPITALIZATION - LATIN AMERICA

Argentina $

Brazil $

Chile $

Colombia $

Mexico $

Venezuela $

Total Latin America $

NATIONAL STOCK MARKET PERFORMANCE. Certain national stock markets have
outperformed the U.S. stock market. The first table below represents
the performance of national stock markets as measured in U.S. dollars
by the Morgan Stanley Capital International stock market indexes for
the twelve months ended December 31, 1998. The second table shows the
same performance as measured in local currency. Each table measures
return based on the period's change in price, dividends paid on stocks
in the index, and the effect of reinvesting dividends net of any
applicable foreign taxes. These are unmanaged indexes composed of a
sampling of selected companies representing an approximation of the
market structure of the designated country.

STOCK MARKET PERFORMANCE
MEASURED IN U.S. DOLLARS

Australia % Japan %

Austria .% Netherlands %

Belgium % Norway %

Canada % Singapore/Malaysia %

Denmark % Spain %

France % Sweden %

Germany % Switzerland %

Hong Kong % United Kingdom %

Italy % United States %

STOCK MARKET PERFORMANCE
MEASURED IN LOCAL CURRENCY

Australia % Japan %

Austria % Netherlands %

Belgium % Norway %

Canada % Singapore/Malaysia %

Denmark % Spain %

France % Sweden %

Germany % Switzerland %

Hong Kong % United Kingdom %

Italy % United States %

The following table shows the average annualized stock market returns
measured in U.S. dollars as of December 31, 1998.

STOCK MARKET PERFORMANCE

Five Years Ended December 31, Ten Years Ended December 31,
1998 1998

Germany % %

Hong Kong -% %

Japan -% %

Spain % %

United Kingdom % %

United States % %

PERFORMANCE COMPARISONS. A class's performance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed
as mutual fund rankings prepared by Lipper Analytical Services, Inc.
(Lipper), an independent service located in Summit, New Jersey that
monitors the performance of mutual funds. Generally, Lipper rankings
are based on return, assume reinvestment of distributions, do not take
sales charges or trading fees into consideration, and are prepared
without regard to tax consequences. Lipper may also rank based on
yield. In addition to the mutual fund rankings, a class's performance
may be compared to stock, bond, and money market mutual fund
performance indexes prepared by Lipper or other organizations. When
comparing these indexes, it is important to remember the risk and
return characteristics of each type of investment. For example, while
stock mutual funds may offer higher potential returns, they also carry
the highest degree of share price volatility. Likewise, money market
funds may offer greater stability of principal, but generally do not
offer the higher potential returns available from stock mutual funds.

From time to time, a class's performance may also be compared to other
mutual funds tracked by financial or business publications and
periodicals. For example, a class may quote Morningstar, Inc. in its
advertising materials. Morningstar, Inc. is a mutual fund rating
service that rates mutual funds on the basis of risk-adjusted
performance. Rankings that compare the performance of Fidelity funds
to one another in appropriate categories over specific periods of time
may also be quoted in advertising. A bond fund may advertise risk
ratings, including symbols or numbers, prepared by independent rating
agencies.

A class's performance may also be compared to that of each index
representing the universe of securities in which the fund may invest.
The return of each index reflects reinvestment of all dividends and
capital gains paid by securities included in each index. Unlike a
class's returns, however, each index's returns do not reflect
brokerage commissions, transaction fees, or other costs of investing
directly in the securities included in the index.

The Asset Allocation Composite Indexes (for Asset Manager and Asset
Manager: Growth) are hypothetical representations of the performance
of the funds' three asset classes according to their respective
weighting in each fund's neutral mix. The weightings are rebalanced
monthly. For periods after January 1, 1997, the Asset Allocation
Composite Index represents Asset Manager's three asset classes
according to their respective weightings in the fund's neutral mix
(10% short-term/money market; 40% bonds; and 50% stocks). For periods
after January 1, 1997, the Aggressive Asset Allocation Composite Index
represents Asset Manager: Growth's three asset classes according to
their respective weightings in the fund's neutral mix (5%
short-term/money market; 25% bonds; and 70% stocks). The following
indexes are used to calculate the asset allocation composite indexes:
S&P 500 for the stock class, Lehman Brothers Aggregate Bond Index for
the bond class and the Lehman Brothers 3-Month Treasury Bill Index for
the short-term/money market class. For periods between June 1, 1992
and January 1, 1997, the Asset Allocation Composite Index represented
Asset Manager's three asset classes according to their respective
weightings in the fund's neutral mix (20% short-term instruments; 40%
bonds; and 40% stocks) during that period of time. The following
indexes are used to calculate the Asset Allocation Composite Index
during that period of time: the Lehman Brothers 3-Month Treasury Bill
Index, the Lehman Brothers U.S. Treasury Index and the S&P 500. For
periods prior to June 1, 1992, the Asset Allocation Composite Index
represented Asset Manager's three asset classes according to their
respective weightings in the fund's neutral mix (30% money market
instruments; 40% bonds; and 30% stocks) during that period of time.
The following indexes are used to calculate the Asset Allocation
Composite Index during that period of time: the Lehman Brothers
3-Month Treasury Bill Index, the Lehman Brothers U.S. Treasury Index,
and the S&P 500. For periods prior to January 1, 1997, the Aggressive
Asset Allocation Composite Index represented Asset Manager: Growth's
three asset classes according to their respective weightings in the
fund's neutral mix (5% short-term instruments; 30% bonds; and 65%
stocks) during that period of time. The following indexes are used to
calculate the Aggressive Asset Allocation Composite Index during that
period of time: the Lehman Brothers 3-Month Treasury Bill Index, the
Lehman Brothers U.S. Treasury Index, and the S&P 500.

S&P 500 is a market capitalization-weighted index of common stocks.

LEHMAN BROTHERS AGGREGATE BOND INDEX is a market value-weighted index
for investment-grade fixed-rate debt issues, including government,
corporate, asset-backed, and mortgage-backed securities. Issues
included in the index have an outstanding par value of at least $100
million and maturities of at least one year. Government and corporate
issues include all public obligations of the U.S. Treasury (excluding
flower bonds and foreign-targeted issues) and U.S. Government
agencies, as well as nonconvertible investment-grade, SEC-registered
corporate debt. Mortgage-backed securities include 15- and 30-year
fixed-rate securities backed by mortgage pools of the Government
National Mortgage Association (GNMA), Federal Home Loan Mortgage
Corporation (FHLMC), and Fannie Mae. Asset-backed securities include
credit card, auto, and home equity loans.

LEHMAN BROTHERS U.S. TREASURY INDEX is a market value-weighted index
of public obligations of the U.S. Treasury with maturities of one year
or more. Issues in the index must have at least $100 million par
amount outstanding. Certain special issues, such as flower bonds,
targeted investor notes (TINs), and state and local government series
(SLGs) bonds are excluded.

LEHMAN BROTHERS 3-MONTH TREASURY BILL INDEX represents the average of
Treasury Bill rates for each of the prior three months, adjusted to a
bond equivalent yield basis (short-term and money market instruments).

Asset Manager and Asset Manager: Growth have the ability to invest in
securities that are not included in any of the indexes, and each
fund's actual investment portfolio may not reflect the composition or
the weighting of the indexes used. The Lehman Brothers 3-Month
Treasury Bill Index, the Lehman Brothers U.S. Treasury Index, the
Lehman Brothers Aggregate Bond Index, the S&P 500, and the Asset
Allocation Composite Indexes include reinvestment of income or
dividends, as appropriate, and are based on the prices of unmanaged
groups of U.S. Treasury obligations, other fixed-income obligations or
stocks, as appropriate. Unlike each fund's returns, the indexes do not
include the effect of paying brokerage commissions, spreads, or other
costs of investing. Historical results are used for illustrative
purposes only and do not reflect the past or future performance of the
funds.

The following table represents the comparative indexes' calendar
year-to-year performance:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Lehman Brothers 3-Month Lehman Brothers Aggregate Lehman Brothers U.S. S&P 500
Treasury Bill Index Bond Index Treasury Index

1998 % % % %

1997 % % % %

1996 % % % %

1995 % % % %

1994 % % % %

1993 % % % %

1992 % % % %

1991 % % % %

1990 % % % %

1989 % % % %

</TABLE>

Balanced may compare its performance to that of the Fidelity Balanced
Composite Index which is a hypothetical representation of the
performance of the fund's general investment categories using a
weighting of 60% equity and 40% bond. The following indexes are used
to calculate the Fidelity Balanced Composite Index: Standard & Poor's
500 Index (S&P 500) for the equity category and the Lehman Brothers
Aggregate Bond Index for the bond category. The index weightings of
the Fidelity Balanced Composite Index are rebalanced monthly.

Each of Asset Manager, Asset Manager: Growth, Balanced, Contrafund,
Equity-Income, Growth & Income, Growth, Growth Opportunities, and
Index 500 may compare its performance to that of Standard & Poor's 500
Index, a market capitalization-weighted index of common stocks.

Equity-Income may also compare its performance to that of the Russell
3000(registered trademark) Value Index, a market
capitalization-weighted index of U.S. domiciled value oriented stocks.

Growth may also compare its performance to that of the Russell
3000(registered trademark) Growth Index, a market
capitalization-weighted index of U.S. domiciled growth oriented
stocks.

Mid Cap may compare its performance to that of the Standard & Poor's
Mid Cap 400(registered trademark) Index, a market
capitalization-weighted index of 400 medium-capitalization stocks.

Overseas may compare its performance to that of the Morgan Stanley
Capital International Europe, Australasia, Far East (EAFE) Index, a
market capitalization-weighted index that is designed to represent the
performance of developed stock markets outside of the United States
and Canada. The index returns for periods after January 1, 1997 are
adjusted for tax withholding rates applicable to U.S.-based mutual
funds organized as Massachusetts business trusts. Effective October 1,
1998, the country of Malaysia was removed from this index. The index
returns reflect the inclusion of Malaysia prior to October 1, 1998.
Stocks are selected for the Morgan Stanley Capital International
(MSCI) index on the basis of industry representation, liquidity,
sufficient float, and avoidance of cross-ownership.

Each of Investment Grade Bond and Balanced may also compare its
performance to the Lehman Brothers Aggregate Bond Index, a market
value-weighted index for investment-grade fixed-rate debt issues,
including government, corporate, asset-backed, and mortgage-backed
securities. Issues included in the index have an outstanding par value
of at least $100 million and maturities of at least one year.
Government and corporate issues include all public obligations of the
U.S. Treasury (excluding flower bonds and foreign-targeted issues) and
U.S. Government agencies, as well as nonconvertible investment-grade,
SEC-registered corporate debt. Mortgage-backed securities include 15-
and 30-year fixed-rate securities backed by mortgage pools of the
Government National Mortgage Association (GNMA), Federal Home Loan
Mortgage Corporation (FHLMC), and Fannie Mae. Asset-backed securities
include credit card, auto, and home equity loans.

High Income 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
out standing par value of at least $50million to be included in the
index.

A class may be compared in advertising to Certificates of Deposit
(CDs) or other investments issued by banks or other depository
institutions. Mutual funds differ from bank investments in several
respects. For example, a fund may offer greater liquidity or higher
potential returns than CDs, a fund does not guarantee your principal
or your return, and fund shares are not FDIC insured.

Fidelity may provide information designed to help individuals
understand their investment goals and explore various financial
strategies. Such information may include information about current
economic, market, and political conditions; materials that describe
general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; questionnaires
designed to help create a personal financial profile; worksheets used
to project savings needs based on assumed rates of inflation and
hypothetical rates of return; and action plans offering investment
alternatives. Materials may also include discussions of Fidelity's
asset allocation funds and other Fidelity funds, products, and
services.

Ibbotson Associates of Chicago, Illinois (Ibbotson) provides
historical returns of the capital markets in the United States,
including common stocks, small capitalization stocks, long-term
corporate bonds, intermediate-term government bonds, long-term
government bonds, Treasury bills, the U.S. rate of inflation (based on
the CPI), and combinations of various capital markets. The performance
of these capital markets is based on the returns of different indexes.

Fidelity funds may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with
the security types in any capital market may or may not correspond
directly to those of the funds. Ibbotson calculates returns in the
same method as the funds. The funds may also compare performance to
that of other compilations or indexes that may be developed and made
available in the future.

Money Market Portfolio may compare its performance or the performance
of securities in which it may invest to averages published by IBC
Financial Data, Inc. of Ashland, Massachusetts. These averages assume
reinvestment of distributions. IBC's MONEY FUND REPORT AVERAGESTM/All
Taxable (Money Market), which is reported in IBC's MONEY FUND
REPORTTM, covers over 894 taxable money market funds.

In advertising materials, Fidelity may reference or discuss its
products and services, which may include other Fidelity funds;
retirement investing; brokerage products and services; model
portfolios or allocations; saving for college or other goals; and
charitable giving. In addition, Fidelity may quote or reprint
financial or business publications and periodicals as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the
desirability of owning a particular mutual fund, and Fidelity services
and products. Fidelity may also reprint, and use as advertising and
sales literature, articles from Fidelity Focus(registered trademark),
a quarterly magazine provided free of charge to Fidelity fund
shareholders.

In advertising materials and registration statements, Fidelity and
insurance companies may refer to each portfolio of Variable Insurance
Products Fund, Variable Insurance Products Fund II, and Variable
Insurance Products Fund III either with or without the name
"Fidelity." In either case, however, the trust's name or the acronym
"VIP" will appear before the portfolio's name to distinguish the
portfolio from other Fidelity funds.

Each fund may be advertised as part of certain asset allocation
programs involving other Fidelity or non-Fidelity mutual funds. These
asset allocation programs may advertise a model portfolio and its
performance results.

A class may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote the fund's current portfolio
manager.

VOLATILITY. A class of an equity or bond fund may quote various
measures of volatility and benchmark correlation in advertising. In
addition, the class may compare these measures to those of other
funds. Measures of volatility seek to compare a class's historical
share price fluctuations or returns to those of a benchmark. Measures
of benchmark correlation indicate how valid a comparative benchmark
may be. All measures of volatility and correlation are calculated
using averages of historical data. In advertising, a bond, growth &
income, or asset allocation fund may also discuss or illustrate
examples of interest rate sensitivity.

MOMENTUM INDICATORS indicate price movements over specific periods of
time for each class of an equity or bond fund. Each point on the
momentum indicator represents a class's percentage change in price
movements over that period.

An equity, bond, or asset allocation fund may advertise examples of
the effects of periodic investment plans, including the principle of
dollar cost averaging. In such a program, an investor invests a fixed
dollar amount in a fund at periodic intervals, thereby purchasing
fewer shares when prices are high and more shares when prices are low.
While such a strategy does not assure a profit or guard against loss
in a declining market, the investor's average cost per share can be
lower than if fixed numbers of shares are purchased at the same
intervals. In evaluating such a plan, investors should consider their
ability to continue purchasing shares during periods of low price
levels.

Each fund is available only through the purchase of variable annuity
and variable life insurance contracts offering deferral of income
taxes on earnings, which may produce superior after-tax returns over
time. For example, a $1,000 investment earning a taxable return of 10%
annually would have an after-tax value of $____ after ten years,
assuming tax was deducted from the return each year at a __% rate. An
equivalent tax-deferred investment would have an after-tax value of
$___ after ten years, assuming tax was deducted at a __% rate from the
tax-deferred earnings at the end of the ten-year period. Individuals
holding shares of a fund through a variable annuity or variable life
insurance contract may receive additional tax benefits from the
deferral of income taxes associated with variable contracts.
Individuals should consult their tax advisors to determine the effect
of holding variable contracts on their individual tax situations.

As of [_____,19__], FMR advised over $__ billion in municipal fund
assets, $___ billion in taxable fixed-income fund assets, $___ billion
in money market fund assets, $___ billion in equity fund assets, $13
billion in international fund assets, and $__ billion in Spartan fund
assets. The funds may reference the growth and variety of money market
mutual funds and the adviser's innovation and participation in the
industry. The equity funds under management figure represents the
largest amount of equity fund assets under management by a mutual fund
investment adviser in the United States, making FMR America's leading
equity (stock) fund manager. FMR, its subsidiaries, and affiliates
maintain a worldwide information and communications network for the
purpose of researching and managing investments abroad.

In addition to performance rankings, each class of a bond or money
market fund may compare its total expense ratio to the average total
expense ratio of similar funds tracked by Lipper. A class's total
expense ratio is a significant factor in comparing bond and money
market investments because of its effect on yield.

YIELDS AND RETURNS QUOTED FOR A CLASS INCLUDE THE CLASS'S EXPENSES,
BUT MAY NOT INCLUDE CHARGES AND EXPENSES ATTRIBUTABLE TO ANY
PARTICULAR INSURANCE PRODUCT. BECAUSE YOU CAN PURCHASE SHARES OF EACH
FUND ONLY THROUGH A VARIABLE ANNUITY AND/OR A VARIABLE LIFE INSURANCE
CONTRACT, YOU SHOULD CAREFULLY REVIEW THE PROSPECTUS OF THE INSURANCE
PRODUCT YOU HAVE CHOSEN FOR INFORMATION ON RELEVANT CHARGES AND
EXPENSES. Excluding these charges from quotations of a class's
performance has the effect of increasing the performance quoted.

DISTRIBUTIONS AND TAXES

For a discussion of tax consequences of variable contracts, please
refer to your insurance company's separate account prospectus.

Variable contracts purchased through insurance company separate
accounts provide for the accumulation of all earnings from interest,
dividends, and capital appreciation without current federal income tax
liability to the owner. Depending on the variable contract,
distributions from the contract may be subject to ordinary income tax
and a 10% penalty tax on distributions before age 59. Only the portion
of a distribution attributable to income is subject to federal income
tax. Investors should consult with competent tax advisers for a more
complete discussion of possible tax consequences in a particular
situation.

Section 817(h) of the Internal Revenue Code provides that the
investments of a separate account underlying a variable insurance
contract (or the investments of a mutual fund, the shares of which are
owned by the variable separate account) must be "adequately
diversified" in order for the contract to be treated as an annuity or
life insurance for tax purposes. The Treasury Department has issued
regulations prescribing these diversification requirements. Each fund
intends to comply with these requirements.

TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal
Revenue Code so that it will not be liable for federal tax on income
and capital gains distributed to shareholders. In order to qualify as
a regulated investment company, and avoid being subject to federal
income or excise taxes at the fund level, each fund intends to
distribute substantially all of its net investment income and net
realized capital gains within each calendar year as well as on a
fiscal year basis, and intends to comply with other tax rules
applicable to regulated investment companies. Income and capital gain
distributions are reinvested in additional shares of the same class of
the fund. This is done to preserve the tax-advantaged status of the
variable contracts. Money Market Portfolio may distribute any net
realized short-term capital gains once a year or more often as
necessary to maintain its NAV at $1.00. Money Market Portfolio does
not anticipate distributing long-term capital gains.

[As of December 31, 1998, Money Market Portfolio had a capital loss
carry forward aggregating approximately $____]. [This loss carry
forward, of which $____ and $____ will expire on December 31, 2002 and
2005, respectively, is available to offset future capital gains.]

TRUSTEES AND OFFICERS

The Trustees, Members of the Advisory Board, and executive officers of
the trusts 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 as indicated, each individual
has held the office shown or other offices in the same company for the
last five years. All persons named as Trustees and Members of the
Advisory Board also serve in similar capacities for other funds
advised by FMR or its affiliates. The business address of each
Trustee, Member of the Advisory Board, and officer who is an
"interested person" (as defined in the 1940 Act) is 82 Devonshire
Street, Boston, Massachusetts 02109, which is also the address of FMR.
The business address of all the other Trustees is Fidelity
Investments, P.O. Box 9235, Boston, Massachusetts 02205-9235. Those
Trustees who are "interested persons" by virtue of their affiliation
with the trust, FMR or BT are indicated by an asterisk (*).

*EDWARD C. JOHNSON 3d (68), Trustee and President, is Chairman, Chief
Executive Officer 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 Investments Money Management, Inc. (1998),
Fidelity Management & Research (U.K.) Inc., and Fidelity Management &
Research (Far East) Inc. Abigail Johnson, Vice President of Growth
Portfolio, Contrafund Portfolio, and Growth Opportunities Portfolio,
is Mr. Johnson's daughter.

J. GARY BURKHEAD (57), Member of the Advisory Board (1997), is Vice
Chairman and a Member of the Board of Directors of FMR Corp. (1997)
and President of Fidelity Personal Investments and Brokerage Group
(1997). Previously, Mr. Burkhead served as President of Fidelity
Management & Research Company.

RALPH F. COX (66), Trustee, is President of RABAR Enterprises
(management consulting-engineering industry, 1994). 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 USA Waste Services,
Inc. (non-hazardous waste, 1993), CH2M Hill Companies (engineering),
Rio Grande, Inc. (oil and gas production), and Daniel Industries
(petroleum measurement equipment manufacturer). In addition, he is a
member of advisory boards of Texas A&M University and the University
of Texas at Austin.

PHYLLIS BURKE DAVIS (67), Trustee. Prior to her retirement in
September 1991, Mrs. Davis was the Senior Vice President of Corporate
Affairs of Avon Products, Inc. She is currently a Director of
BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores),
and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she is a member of
the President's Advisory Council of The University of Vermont School
of Business Administration.

ROBERT M. GATES (55), Trustee (1997), is a consultant, author, and
lecturer (1993). Mr. Gates was Director of the Central Intelligence
Agency (CIA) from 1991-1993. From 1989 to 1991, Mr. Gates served as
Assistant to the President of the United States and Deputy National
Security Advisor. Mr. Gates is a Director of LucasVarity PLC
(automotive components and diesel engines), Charles Stark Draper
Laboratory (non-profit), NACCO Industries, Inc. (mining and
manufacturing), and TRW Inc. (original equipment and replacement
products). Mr. Gates also is a Trustee of the Forum for International
Policy and of the Endowment Association of the College of William and
Mary. In addition, he is a member of the National Executive Board of
the Boy Scouts of America.

E. BRADLEY JONES (71), Trustee. Prior to his retirement in 1984, Mr.
Jones was Chairman and Chief Executive Officer of LTV Steel Company.
He is a Director of TRW Inc. (original equipment and replacement
products), Consolidated Rail Corporation, Birmingham Steel
Corporation, and RPM, Inc. (manufacturer of chemical products), and he
previously served as a Director of NACCO Industries, Inc. (mining and
manufacturing, 1985-1995), Hyster-Yale Materials Handling, Inc.
(1985-1995), and Cleveland-Cliffs Inc. (mining), and as a Trustee of
First Union Real Estate Investments. In addition, he serves as a
Trustee of the Cleveland Clinic Foundation, where he has also been a
member of the Executive Committee as well as Chairman of the Board and
President, a Trustee and member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic
Florida.

DONALD J. KIRK (66), Trustee, is Executive-in-Residence (1995) at
Columbia University Graduate School of Business and a financial
consultant. From 1987 to January 1995, Mr. Kirk was a Professor at
Columbia University Graduate School of Business. Prior to 1987, he was
Chairman of the Financial Accounting Standards Board. Mr. Kirk
previously served as a Director of General Re Corporation
(reinsurance, 1987-1998) and Valuation Research Corp. (appraisals and
valuations, 1993-1995). He serves as Chairman of the Board of
Directors of National Arts Stabilization Inc., Chairman of the Board
of Trustees of the Greenwich Hospital Association, Director of the
Yale-New Haven Health Services Corp. (1998), a Member of the Public
Oversight Board of the American Institute of Certified Public
Accountants' SEC Practice Section (1995), and as a Public Governor of
the National Association of Securities Dealers, Inc. (1996).

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).

*PETER S. LYNCH (55), Trustee, is Vice Chairman and Director of FMR.
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 (1991-1992). In addition, he
serves as a Trustee of Boston College, Massachusetts Eye & Ear
Infirmary, Historic Deerfield (1989) and Society for the Preservation
of New England Antiquities, and as an Overseer of the Museum of Fine
Arts of Boston.

WILLIAM O. McCOY (65), Trustee (1997), is the Vice President of
Finance for the University of North Carolina (16-school system, 1995).
Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman
of the Board of BellSouth Corporation (telecommunications, 1984) and
President of BellSouth Enterprises (1986). He is currently a Director
of Liberty Corporation (holding company, 1984), Weeks Corporation of
Atlanta (real estate, 1994), Carolina Power and Light Company
(electric utility, 1996), and the Kenan Transport Co. (1996).
Previously, he was a Director of First American Corporation (bank
holding company, 1979-1996). In addition, Mr. McCoy serves as a member
of the Board of Visitors for the University of North Carolina at
Chapel Hill (1994) and for the Kenan-Flager Business School
(University of North Carolina at Chapel Hill, 1988).

GERALD C. McDONOUGH (70), Trustee and Chairman of the non-interested
Trustees, is Chairman of G.M. Management Group (strategic advisory
services). Mr. McDonough is a Director of York International Corp.
(air conditioning and refrigeration), Commercial Intertech Corp.
(hydraulic systems, building systems, and metal products, 1992), CUNO,
Inc. (liquid and gas filtration products, 1996), and Associated
Estates Realty Corporation (a real estate investment trust, 1993). Mr.
McDonough served as a Director of ACME-Cleveland Corp. (metal working,
telecommunications, and electronic products) from 1987-1996 and
Brush-Wellman Inc. (metal refining) from 1983-1997.

MARVIN L. MANN (65), Trustee (1993), is Chairman of the Board of
Lexmark International, Inc. (office machines, 1991). 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 Director of M.A.
Hanna Company (chemicals, 1993), Imation Corp. (imaging and
information storage, 1997).

*ROBERT C. POZEN (52), Trustee (1997) and Senior Vice President, is
also President and a Director of FMR (1997); and President and a
Director of Fidelity Investments Money Management, Inc. (1998),
Fidelity Management & Research (U.K.) Inc. (1997), and Fidelity
Management & Research (Far East) Inc. (1997). Previously, Mr. Pozen
served as General Counsel, Managing Director, and Senior Vice
President of FMR Corp.

THOMAS R. WILLIAMS (70), Trustee, is President of The Wales Group,
Inc. (management and financial advisory services). Prior to retiring
in 1987, Mr. Williams served as Chairman of the Board of First
Wachovia Corporation (bank holding company), and Chairman and Chief
Executive Officer of The First National Bank of Atlanta and First
Atlanta Corporation (bank holding company). He is currently a Director
of ConAgra, Inc. (agricultural products), Georgia Power Company
(electric utility), National Life Insurance Company of Vermont,
American Software, Inc., and AppleSouth, Inc. (restaurants, 1992).

DWIGHT D. CHURCHILL (45), is Vice President of Bond Funds, Group
Leader of the Bond Group, Senior Vice President of FMR (1997), and
Vice President of FIMM (1998). Mr. Churchill joined Fidelity in 1993
as Vice President and Group Leader of Taxable Fixed-Income
Investments.

BOYCE I. GREER (42), is Vice President of Money Market Funds (1997),
Group Leader of the Money Market Group (1997), Senior Vice President
of FMR (1997), and Vice President of FIMM (1998). Mr. Greer served as
the Leader of the Fixed-Income Group for Fidelity Management Trust
Company (1993-1995) and was Vice President and Group Leader of
Municipal Fixed-Income Investments (1996-1997).

ABIGAIL P. JOHNSON (37), is Vice President of certain Equity Funds
(1997), and is a Director of FMR Corp. (1994). Before assuming her
current responsibilities, Ms. Johnson managed a number of Fidelity
funds. Edward C. Johnson 3d, Trustee and President of the Funds, is
Ms. Johnson's father.

FRED L. HENNING, JR. (59), is Vice President of Fidelity's
Fixed-Income Group (1995), Senior Vice President of FMR (1995), and
Senior Vice President of FIMM (1998). Before assuming his current
responsibilities, Mr. Henning was head of Fidelity's Money Market
Division.

BART A. GRENIER (39), is Vice President of certain High-Income Bond
Funds (1997). Mr. Grenier rejoined Fidelity in August 1997 from DDJ
Capital Management, LLC, where he had served as Managing Director
since April 1997. Mr. Grenier originally joined Fidelity in 1991 as a
senior analyst. Mr. Grenier served as a Director of High-Income Group
Research and as Director of U.S. Equity Research from 1994 to March
1996. He later became Group Leader of the Income-Growth and Asset
Allocation-Income Groups in 1996 and Assistant Equity Division Head in
1997.

ROBERT A. LAWRENCE (46), is Vice President of certain Equity Funds
(1997), Vice President of Fidelity Real Estate High Income Fund (1995)
and Fidelity Real Estate High Income Fund II (1996), and Senior Vice
President of FMR (1993).

RICHARD A. SPILLANE, JR. (47), is Vice President of certain Equity
Funds and Senior Vice President of FMR (1997). Since joining Fidelity,
Mr. Spillane is Chief Investment Officer for Fidelity International,
Limited. Prior to that position, Mr. Spillane served as Director of
Research.

ROBERT DUBY (52), is Vice President of Money Market Portfolio (1997)
and other funds advised by FMR. Prior to his current responsibilities,
Mr. Duby has managed a variety of Fidelity funds.

BARRY J. COFFMAN (39), is Vice President of High Income Portfolio.

STEPHEN R. PETERSEN (42), is Vice President of Equity-Income Portfolio
(1997) and other funds advised by FMR. Prior to his current
responsibilities, Mr. Petersen managed a variety of Fidelity funds.

JENNIFER UHRIG (37), is Vice President of Growth Portfolio (1997) and
other funds advised by FMR. Prior to her current responsibilities, Ms.
Uhrig has managed a variety of Fidelity funds.

RICHARD R. MACE, JR. (37), is Vice President of Overseas Portfolio
(1996) and other funds advised by FMR. Prior to his current
responsibilities, Mr. Mace has managed a variety of Fidelity funds.

KEVIN E. GRANT (38), is Vice President of Investment Grade Bond
Portfolio (1997), Balanced Portfolio (1996), and other funds advised
by FMR. Since joining Fidelity in 1993, Mr. Grant has managed a
variety of Fidelity funds. Prior to joining Fidelity, Mr. Grant was
vice president and chief mortgage strategist at Morgan Stanley for
three years.

RICHARD C. HABERMANN (58), is Vice President of Asset Manager
Portfolio (1996), Asset Manager: Growth Portfolio (1996), and other
funds advised by FMR. He is also Senior Vice President of FMR (1993)
and a managing director of Fidelity Investments. Prior to his current
responsibilities, Mr. Habermann has managed a variety of Fidelity
funds.

CHARLES S. MORRISON II (38), is Vice President of Asset Manager
Portfolio (1997), Asset Manager: Growth Portfolio (1997), and other
funds advised by FMR. Prior to assuming his current responsibilities,
Mr. Morrison managed a variety of Fidelity funds.

JOHN J. TODD (49), is Vice President of Asset Manager Portfolio
(1996), Asset Manager: Growth Portfolio (1996), and other funds
advised by FMR. Prior to his current responsibilities, Mr. Todd has
managed a variety of Fidelity funds.

WILLIAM DANOFF (38), is Vice President of Contrafund Portfolio (1995)
and another fund advised by FMR. Since 1990, Mr. Danoff has managed
another Fidelity fund.

GEORGE A. VANDERHEIDEN (53), is Vice President of Growth Opportunities
Portfolio (1995) and other funds advised by FMR. Prior to his current
responsibilities, Mr. Vanderheiden has managed a variety of Fidelity
funds.

STEVEN J. SNIDER (38), is Vice President and manager of the equity
investments of Asset Manager Portfolio and Asset Manager: Growth
Portfolio, which he has managed since October 1997. He also manages
trust accounts for Fidelity Management Trust Company (FMTC). Since
joining Fidelity in 1992 as a quantitative analyst, Mr. Snider has
worked as a manager and a Vice President for FMTC.

[INSERT Biography of DAVID FELMAN, portfolio manager and Vice
President of Mid Cap Portfolio]

ERIC D. ROITER (50), Secretary (1998), is Vice President (1998) and
General Counsel of FMR (1998). Mr. Roiter was an Adjunct Member,
Faculty of Law, at Columbia University Law School (1996-1997). Prior
to joining Fidelity, Mr. Roiter was a partner at Debevoise & Plimpton
(1981-1997) and served as an Assistant General Counsel of the U.S.
Securities and Exchange Commission (1979-1981).

RICHARD A. SILVER (51), Treasurer (1997), is Treasurer of the Fidelity
funds and is an employee of FMR (1997). Before joining FMR, Mr. Silver
served as Executive Vice President, Fund Accounting & Administration
at First Data Investor Services Group, Inc. (1996-1997). Prior to
1996, Mr. Silver was Senior Vice President and Chief Financial Officer
at The Colonial Group, Inc. Mr. Silver also served as Chairman of the
Accounting/Treasurer's Committee of the Investment Company Institute
(1987-1993).

MATTHEW N. KARSTETTER (37), Deputy Treasurer (1998), is Deputy
Treasurer of the Fidelity funds and is an employee of FMR (1998).
Before joining FMR, Mr. Karstetter served as Vice President of
Investment Accounting and Treasurer of IDS Mutual Funds at American
Express Financial Advisors (1996-1998). Prior to 1996, Mr. Karstetter
was Vice President, Mutual Fund Services at State Street Bank & Trust
(1991-1996).

STANLEY N. GRIFFITH (52), Assistant Vice President (1998), is
Assistant Vice President of Fidelity's Fixed-Income Funds (1998) and
an employee of FMR Corp.

JOHN H. COSTELLO (52), Assistant Treasurer, is an employee of FMR.

THOMAS J. SIMPSON (40), Assistant Treasurer (1996), is Assistant
Treasurer of Fidelity's Fixed-Income Funds (1998) and an employee of
FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and
Fund Controller of Liberty Investment Services (1987-1995).

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.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
COMPENSATION TABLE

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 $ $ $

High IncomeB $ 0 $ 0 $ $ $

Equity-IncomeB,C,G $ 0 $ 0 $ $ $

GrowthB,D,G $ 0 $ 0 $ $ $

OverseasB,E,G $ 0 $ 0 $ $ $

Investment Grade BondB $ 0 $ 0 $ $ $

Asset ManagerB,F,G $ 0 $ 0 $ $ $

Index 500B $ 0 $ 0 $ $ $

ContrafundB $ 0 $ 0 $ $ $

Asset Manager: GrowthB $ 0 $ 0 $ $ $

BalancedB $ 0 $ 0 $ $ $

Growth & IncomeB $ 0 $ 0 $ $ $

Growth OpportunitiesB $ 0 $ 0 $ $ $

Mid Cap+B $ 0 $ 0 $ $ $

TOTAL COMPENSATION
FROM THE $ $ $ $ $
FUND COMPLEX*, A

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
COMPENSATION TABLE

AGGREGATE COMPENSATION FROM A E. Bradley Jones Donald J. Kirk Ned Peter S. Lynch ** William O. McCoy
FUND C. Lautenbach ***

Money MarketB $ $ $ 0 $ 0 $

High IncomeB $ $ $ 0 $ 0 $

Equity-IncomeB,C,G $ $ $ 0 $ 0 $

GrowthB,D,G $ $ $ 0 $ 0 $

OverseasB,E,G $ $ $ 0 $ 0 $

Investment Grade BondB $ $ $ 0 $ 0 $

Asset ManagerB,F,G $ $ $ 0 $ 0 $

Index 500B $ $ $ 0 $ 0 $

ContrafundB $ $ $ 0 $ 0 $

Asset Manager: GrowthB $ $ $ 0 $ 0 $

BalancedB $ $ $ 0 $ 0 $

Growth & IncomeB $ $ $ 0 $ 0 $

Growth OpportunitiesB $ $ $ 0 $ 0 $

Mid Cap+B $ $ $ 0 $ 0 $

TOTAL COMPENSATION FROM THE $ $ $ $ $
FUND COMPLEX*, A

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
COMPENSATION TABLE

AGGREGATE COMPENSATION FROM A Gerald C. McDonough Marvin L. Mann Robert C. Pozen ** Thomas R. Williams
FUND

Money MarketB $ $ $ 0 $

High IncomeB $ $ $ 0 $

Equity-IncomeB,C,G $ $ $ 0 $

GrowthB,D,G $ $ $ 0 $

OverseasB,E,G $ $ $ 0 $

Investment Grade BondB $ $ $ 0 $

Asset ManagerB,F,G $ $ $ 0 $

Index 500B $ $ $ 0 $

ContrafundB $ $ $ 0 $

Asset Manager: GrowthB $ $ $ 0 $

BalancedB $ $ $ 0 $

Growth & IncomeB $ $ $ 0 $

Growth OpportunitiesB $ $ $ 0 $

Mid Cap+B $ $ $ 0 $

TOTAL COMPENSATION FROM THE $ $ $ $
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.

*** Effecti ve 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, $____;
Phyllis Burke Davis, $____; Robert M. Gates, $____; E. Bradley Jones,
$_____; Donald J. Kirk, $___; William O. McCoy, $_____; Gerald C.
McDonough, $____; Marvin L. Mann, $_____; and Thomas R. Williams,
$____. Certain of the non-interested Trustees elected voluntarily to
defer a portion of their compensation: Ralph F. Cox, $_____; William
O. McCoy, $____; Marvin L. Mann, $; and Thomas R. Williams, $____.

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, $_____; Phyllis Burke Davis,
$____; Robert M. Gates, $___; E. Bradley Jones, $____; Donald J. Kirk,
$___; William O. McCoy, $____; Gerald C. McDonough, $___; Marvin L.
Mann, $____; and Thomas R. Williams, $____.

D The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $____; Phyllis Burke Davis,
$____; Robert M. Gates, $____; E. Bradley Jones, $____; Donald J.
Kirk, $____; William O. McCoy, $____; Gerald C. McDonough, $___;
Marvin L. Mann, $____; and Thomas R. Williams, $____.

E The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $___; Phyllis Burke Davis, $___;
Robert M. Gates, $___ E. Bradley Jones, $___; Donald J. Kirk, $___;
William O. McCoy, $___; Gerald C. McDonough, $___; Marvin L. Mann,
$___; and Thomas R. Williams, $___.

F The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $___; Phyllis Burke Davis, $___;
Robert M. Gates, $___; E. Bradley Jones, $___; Donald J. Kirk, $___;
William O. McCoy, $___; Gerald C. McDonough, $___; Marvin L. Mann,
$___; and Thomas R. Williams, $___.

G Certain of the non-interested Trustees' aggregate compensation from
certain funds includes accrued voluntary deferred compensation as
follows: Ralph F. Cox, $___, Equity-Income, $___, Growth, $___,
Overseas, $___, Asset Manager; Marvin L. Mann, $___, Equity-Income,
$___, Growth, $___, Overseas, $___, Asset Manager; William O. McCoy,
$___, Equity-Income, $___, Growth, $___, Overseas, $___, Asset
Manager; and Thomas R. Williams, $___, Equity-Income, $___, Growth,
$___, Overseas, $___, Asset Manager.

Under a deferred compensation plan adopted in September 1995 and
amended in November 1996 (the Plan), non-interested Trustees must
defer receipt of a portion of, and may elect to defer receipt of an
additional portion of, their annual fees. Amounts deferred under the
Plan are subject to vesting and are treated as though equivalent
dollar amounts had been invested in shares of a cross-section of
Fidelity funds including funds in each major investment discipline and
representing a majority of Fidelity's assets under management (the
Reference Funds). The amounts ultimately received by the Trustees
under the Plan will be directly linked to the investment performance
of the Reference Funds. Deferral of fees in accordance with the Plan
will have a negligible effect on a fund's assets, liabilities, and net
income per share, and will not obligate a fund to retain the services
of any Trustee or to pay any particular level of compensation to the
Trustee. A fund may invest in the Reference Funds under the Plan
without shareholder approval.

[As of _____, 19__, approximately __% of Money Market's, __% of
Investment Grade Bond's, __% of Index 500's, __% of High Income's, __%
of Asset Manager's, __% of Asset Manager: Growth's, __% of
Equity-Income's, __% of Contrafund's, __% of Growth's, __% of
Overseas', __% of Growth & Income's, __% of Balanced's, __% of Growth
Opportunities', and __% of Mid Cap's total outstanding shares were
held by FMR or FMR affiliates.] FMR Corp. is the ultimate parent
company of FMR and these FMR affiliates. By virtue of his ownership
interest in FMR Corp., as described in the "Control of Investment
Advisers" section on page 222, Mr. Edward C. Johnson 3d, President and
Trustee of the funds, may be deemed to be a beneficial owner of these
shares. As of the above date, with the exception of Mr. Johnson 3d's
deemed ownership of the funds' shares, the Trustees, Members of the
Advisory Board, and officers of the funds owned, in the aggregate,
less than 1% of each fund's total outstanding shares.

[As of ______, 19__, the following owned of record or beneficially 5%
or more (up to and including 25%) of each class's outstanding shares:

MONEY MARKET PORTFOLIO - INITIAL CLASS: Fidelity Investments Life
Insurance Company, Boston, MA (%); American International Life
Insurance of New York, New York, NY (%); Ameritas Financial Services,
Lincoln, NE (%); ARM Financial, Inc., Louisville, KY (%).

INVESTMENT GRADE BOND PORTFOLIO - INITIAL CLASS: Ameritas Financial
Services, Lincoln, NE (%); CIGNA, Hartford, CT (%); Nationwide
Insurance Group, Columbus, OH (%); ARM Financial, Inc., Louisville, KY
(%); Fidelity Investments Life Insurance Company, Boston, MA (%).

INDEX 500 PORTFOLIO - INITIAL CLASS: Fidelity Investments Life
Insurance Company, Boston, MA (%); American United Life Insurance
Company, Indianapolis, IN (%); Aetna Life & Casualty Co., Hartford, CT
(%); Provident Mutual Life Insurance Company, Philadelphia, PA (%);
Security First Life Insurance Co., Los Angeles, CA (%); ReliaStar Life
Insurance Company, Minneapolis, MN (%).

HIGH INCOME PORTFOLIO - INITIAL CLASS: Nationwide Insurance Group,
Columbus, OH (%); Fidelity Investments Life Insurance Company, Boston,
MA (%); Allmerica Investments, Worcester, MA (%).

HIGH INCOME PORTFOLIO - SERVICE CLASS: Nationwide Insurance Group,
Columbus, OH (%).

ASSET MANAGER PORTFOLIO - INITIAL CLASS: American United Life
Insurance Company, Indianapolis, IN (%); Nationwide Insurance Group,
Columbus, OH (%); Fidelity Investments Life Insurance Company, Boston,
MA (%); Life of Virginia, Richmond, VA (%); The Travelers Companies,
Hartford, CT (%).

ASSET MANAGER PORTFOLIO - SERVICE CLASS: Nationwide Insurance Group,
Columbus, OH (%); Ameritas Financial Services, Lincoln, NE (%).

ASSET MANAGER: GROWTH PORTFOLIO - INITIAL CLASS: Fidelity Investments
Life Insurance Company, Boston, MA (%); Mutual of Omaha Group, Omaha,
NE (%); ARM Financial, Inc., Louisville, KY (%); Empire Fidelity Life
Insurance Company, New York, NY (%).

ASSET MANAGER: GROWTH PORTFOLIO - SERVICE CLASS: Ameritas Financial
Services, Lincoln, NE (%); Nationwide Insurance Group, Columbus, OH
(%).

EQUITY-INCOME PORTFOLIO - INITIAL CLASS: Nationwide Insurance Group,
Columbus, OH (%); Fidelity Investments Life Insurance Company, Boston,
MA (%); Allmerica Investments, Worcester, MA (%); Aetna Life &
Casualty Co., Hartford, CT (%); Life of Virginia, Richmond, VA (%);
The Travelers Companies, Hartford, CT (%).

EQUITY-INCOME PORTFOLIO - SERVICE CLASS: Nationwide Insurance Group,
Columbus, OH (%).

CONTRAFUND PORTFOLIO - INITIAL CLASS: Fidelity Investments Life
Insurance Company, Boston, MA (%); Nationwide Insurance Group,
Columbus, OH (%); Aetna Life & Casualty Co., Hartford, CT (%); Life of
Virginia, Richmond, VA (%); Minnesota Life Insurance Company, St.
Paul, MN (%).

CONTRAFUND PORTFOLIO - SERVICE CLASS: Nationwide Insurance Group,
Columbus, OH (%).

GROWTH PORTFOLIO - INITIAL CLASS: Nationwide Insurance Group,
Columbus, OH (%); Fidelity Investments Life Insurance Company, Boston,
MA (%); The Travelers Companies, Hartford, CT (%); Allmerica
Investments, Worcester, MA (%); Aetna Life & Casualty Co., Hartford,
CT (%).

GROWTH PORTFOLIO - SERVICE CLASS: Nationwide Insurance Group,
Columbus, OH (%).

OVERSEAS PORTFOLIO - INITIAL CLASS: Nationwide Insurance Group,
Columbus, OH (%); Fidelity Investments Life Insurance Company, Boston,
MA (%); New England Financial, Boston, MA (%); Allmerica Investments,
Worcester, MA (%); Life of Virginia, Richmond, VA (%).

OVERSEAS PORTFOLIO - SERVICE CLASS: Nationwide Insurance Group,
Columbus, OH (%).

GROWTH & INCOME PORTFOLIO - INITIAL CLASS: Fidelity Investments Life
Insurance Company, Boston, MA (%); Life of Virginia, Richmond, VA (%);
Minnesota Life Insurance Company, St. Paul, MN (%); Nationwide
Insurance Group, Columbus, OH (%); Empire Fidelity Life Insurance
Company, New York, NY (%).

GROWTH & INCOME PORTFOLIO - SERVICE CLASS: Nationwide Insurance Group,
Columbus, OH (%).

BALANCED PORTFOLIO - INITIAL CLASS: Nationwide Insurance Group,
Columbus, OH (%); Fidelity Investments Life Insurance Company, Boston,
MA (%).

BALANCED PORTFOLIO - SERVICE CLASS: Nationwide Insurance Group,
Columbus, OH (%).

GROWTH OPPORTUNITIES PORTFOLIO - INITIAL CLASS: Nationwide Insurance
Group, Columbus, OH (%); Fidelity Investments Life Insurance Company,
Boston, MA (%).

GROWTH OPPORTUNITIES PORTFOLIO - SERVICE CLASS: Nationwide Insurance
Group, Columbus, OH (%).

MID CAP PORTFOLIO - INITIAL CLASS: Fidelity Management & Research
Company, Boston, MA (%).

MID CAP PORTFOLIO - SERVICE CLASS: Fidelity Management & Research
Company, Boston, MA (%).

A shareholder owning of record or beneficially more than 25% of a
fund's outstanding shares may be considered a controlling person. That
shareholder's vote could have a more significant effect on matters
presented at a shareholders' meeting than votes of other shareholders.

CONTROL OF INVESTMENT ADVISERS

FMR Corp., organized in 1972, is the ultimate parent company of FMR,
FIMM, FMR U.K., and FMR Far East. The voting common stock of FMR Corp.
is divided into two classes. Class B is held predominantly by members
of the Edward C. Johnson 3d family and is entitled to 49% of the vote
on any matter acted upon by the voting common stock. Class A is held
predominantly by non-Johnson family member employees of FMR Corp. and
its affiliates and is entitled to 51% of the vote on any such matter.
The Johnson family group and all other Class B shareholders have
entered into a shareholders' voting agreement under which all Class B
shares will be voted in accordance with the majority vote of Class B
shares. Under the 1940 Act, control of a company is presumed where one
individual or group of individuals owns more than 25% of the voting
stock of that company. Therefore, through their ownership of voting
common stock and the execution of the shareholders' voting agreement,
members of the Johnson family may be deemed, under the 1940 Act, to
form a controlling group with respect to FMR Corp.

At present, the principal operating activities of FMR Corp. are those
conducted by its division, Fidelity Investments Retail Marketing
Company, which provides marketing services to various companies within
the Fidelity organization.

Fidelity International Limited (FIL), a Bermuda company formed in
1968, is the ultimate parent company of FIIA and FIIA(U.K.)L. Edward
C. Johnson 3d, Johnson family members, and various trusts for the
benefit of the Johnson family own, directly or indirectly, more than
25% of the voting common stock of FIL. FIL provides investment
advisory services to non-U.S. investment companies and institutional
investors investing in securities throughout the world.

Fidelity investment personnel may invest in securities for their own
investment accounts pursuant to a code of ethics that sets forth all
employees' fiduciary responsibilities regarding the funds, establishes
procedures for personal investing and restricts certain transactions.
For example, all personal trades in most securities require
pre-clearance, and participation in initial public offerings is
prohibited. In addition, restrictions on the timing of personal
investing in relation to trades by Fidelity funds and on short-term
trading have been adopted.

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 Ge rmany. 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.

MANAGEMENT CONTRACTS

Each fund has entered into a management contract with FMR, pursuant to
which FMR furnishes investment advisory and other services.

MANAGEMENT AND SUB-ADVISORY SERVICES (INDEX 500 PORTFOLIO). FMR
provides Index 500 with all necessary office facilities and personnel
for servicing the fund's investments, compensates all officers of the
fund and all Trustees who are "interested persons" of the trust or of
FMR, and all personnel of the fund or FMR performing services relating
to research, statistical and investment activities.

In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of the fund. These services include
providing facilities for maintaining the fund's organization;
supervising relations with custodians, transfer and pricing agents,
accountants, underwriters, and other persons dealing with the fund;
preparing all general shareholder communications and conducting
shareholder relations; maintaining the fund's records and the
registration of the fund's shares under federal securities laws and
making necessary filings under state securities laws; developing
management and shareholder services for the fund; and furnishing
reports, evaluations, and analyses on a variety of subjects to the
Trustees.

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 fu nd.

BT has been advised by counsel that BT currently may perform the
services for the fund described herein without violation of the
Glass-Steagall Act or other applicable banking laws or regulations.
State laws on this issue may differ from the interpretation of
relevant federal law and banks and financial institutions may be
required to register as dealers pursuant to state securities law.

MANAGEMENT SERVICES (EXCEPT INDEX 500 PORTFOLIO). Under the terms of
its management contract with each fund, FMR acts as investment adviser
and, subject to the supervision of the Board of Trustees, directs the
investments of the fund in accordance with its investment objective,
policies, and limitations. FMR also provides each fund with all
necessary office facilities and personnel for servicing the fund's
investments, compensates all officers of each fund and all Trustees
who are "interested persons" of the trusts or of FMR, and all
personnel of each fund or FMR performing services relating to
research, statistical and investment activities.

In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of each fund. These services include
providing facilities for maintaining each fund's organization;
supervising relations with custodians, transfer and pricing agents,
accountants, underwriters, and other persons dealing with each fund;
preparing all general shareholder communications and conducting
shareholder relations; maintaining each fund's records and the
registration of each fund's shares under federal securities laws and
making necessary filings under state securities laws; developing
management and shareholder services for each fund; and furnishing
reports, evaluations, and analyses on a variety of subjects to the
Trustees.

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.

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 t he fund's average net assets
throughout the month.

MANAGEMENT FEES (EXCEPT INDEX 500 PORTFOLIO). For the services of FMR
under the management contract, High Income, Investment Grade Bond,
Equity-Income, Balanced, Growth, Growth & Income, Growth
Opportunities, Overseas, Asset Manager, Contrafund, Asset Manager:
Growth and Mid Cap each pays FMR a monthly management fee which has
two components: a group fee rate and an individual fund fee rate. The
group fee rate is based on the monthly average net assets of all of
the registered investment companies with which FMR has management
contracts.

For the services of FMR under the management contract, Money Market
pays FMR a monthly management fee which has three components: a group
fee rate, an individual fund fee rate, and an income-based component
of 6% of the fund's monthly gross income in excess of an annualized 5%
yield. For this purpose, gross income includes interest accrued and/or
discount earned (including both original issue discount and market
discount) on portfolio obligations, less amortization of premium on
portfolio obligations. The maximum income-based component is an amount
equal to an annual rate of 0.24% of the fund's average net assets
throughout the month.

The following is the fee schedule for Money Market, Investment Grade
Bond, and High Income Portfolios.

<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 group fee rate is calculated on a cumulative basis pursuant to the
graduated fee rate schedule shown above on the left. The schedule
above on the right shows the effective annual group fee rate at
various asset levels, which is the result of cumulatively applying the
annualized rates on the left. For example, the effective annual fee
rate at $___ billion of group net assets - the approximate level for
[______, 19__] - was ____%, which is the weighted average of the
respective fee rates for each level of group net assets up to $___
billion.

The following is the fee schedule for Equity-Income, Balanced, Growth,
Growth & Income, Growth Opportunities, Overseas, Asset Manager,
Contrafund, Asset Manager: Growth, and Mid Cap Portfolios.

<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 group fee rate is calculated on a cumulative basis pursuant to the
graduated fee rate schedule shown above on the left. The schedule
above on the right shows the effective annual group fee rate at
various asset levels, which is the result of cumulatively applying the
annualized rates on the left. For example, the effective annual fee
rate at $669 billion of group net assets - the approximate level for
[_____, 19__} - was ____%, which is the weighted average of the
respective fee rates for each level of group net assets up to $___
billion.

The individual fund fee rate for each fund (except Money Market
Portfolio) is set forth in the following chart. Based on the average
group net assets of the funds advised by FMR for [______, 19__], each
fund's annual management fee rate would be calculated as follows:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Group Fee Rate Individual Fund Fee Rate Management Fee Rate

Investment Grade Bond ____% + 0.30% = ___%

High Income ____% + 0.45% = ___%

Equity-Income ____% + 0.20% = ___%

Balanced _____% + 0.15% = ____%

Growth _____% + 0.30% = ____%

Growth & Income _____% + 0.20% = ____%

Growth Opportunities _____% + 0.30% = ____%

Overseas _____% + 0.45% = ____%

Asset Manager _____% + 0.25% = ____%

Contrafund _____% + 0.30% = ____%

Asset Manager: Growth _____% + 0.30% = ____%

Mid Cap _____% + 0.30% = ____%

</TABLE>

One-twelfth of the management fee rate is applied to each fund's
average net assets for the month, giving a dollar amount, which is the
fee for that month.

Money Market Portfolio's individual fund fee rate is 0.03%.
One-twelfth of the sum of the group fee rate and the individual fund
fee rate is applied to the fund's average net assets for the month,
giving a dollar amount which is the fee for that month to which the
income-based component is added.

The following table shows the amount of management fees paid by each
fund to FMR for the past three fiscal years.

<TABLE>
<CAPTION>
<S> <C> <C>
Fiscal Period Ended December 31 Management Fees Paid to FMR

Money Market 1998

1997

1996

Investment Grade Bond 1998

1997

1996

High Income 1998

1997

1996

Equity-Income 1998

1997

1996

Balanced 1998

1997

1996

Growth 1998

1997

1996

Growth & Income 1998

1997*

Growth Opportunities 1998

1997

1996

Overseas 1998

1997

1996

Asset Manager 1998

1997

1996

Contrafund 1998

1997

1996

Asset Manager: Growth 1998

1997

1996

Mid Cap 1998

1997**

</TABLE>

* Growth & Income commenced operations on December 31, 1996.

** Mid Cap commenced operations on December 28, 1998.

For each fund (other than Index 500), FMR may, from time to time,
voluntarily reimburse all or a portion of a class's operating expenses
(exclusive of interest, taxes, securities lending fees, 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.

F or 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.

Expense reimbursements by FMR will increase a class's returns and
yield, and repayment of the reimbursement by a class will lower its
returns and yield.

Effective August 27, 1992, FMR voluntarily agreed to reimburse Index
500 if and to the extent that its aggregate operating expenses,
including management fees, were in excess of an annual rate of __% of
____ Class's average net assets. For the fiscal years ended December
31, 1998, 1997, and 1996, management fees incurred under the fund's
contract prior to reimbursement amounted to $______, $______, and
$______, respectively, and management fees reimbursed by FMR amounted
to $_____, $_____, and $_____, respectively.

Effective December 28, 1998, FMR voluntarily agreed to reimburse Mid
Cap Portfolio if and to the extent that its aggregate operating
expenses, including management fees, were in excess of an annual rate
of 1.00% of Initial Class's average net assets and 1.10% of Service
Class's average net assets. For the fiscal year ended December 31,
1998, management fees incurred under the fund's contract prior to
reimbursement amounted to $__, and management fees reimbursed by FMR
amounted to $__.

M ANAGEMENT-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 servic es.

SUB-ADVISERS.

Index 500 Portfolio and FMR have entered into a sub-advisory agreement
with BT. Pursuant to the sub-advisory agreement, FMR has granted BT
investment management authority as well as the authority to buy and
sell securities.

Under th e sub-advisory agreement, for providing investment
management and custodial services to Index 500 Portfolio, FMR pays BT
fees a t an annual rate of 0.006% of the average net assets of the
fund.

For the fiscal years ended Dec ember 31, 1998, 1997, and 1996, Index
500 Portfolio paid FMR management fees of $_____, $____, and $_____,
respectively, and for the fiscal years ended December 31, 1998 and
1997, the fund paid a management fee at an annual rate of ___% of its
average net assets to FMR and a sub-advisory fee (representing 40%
of net income from securities lending) to BT.

For the fiscal year ende d [Decembe r 31, 1998], FMR paid BT fees
of $_____.

On behalf of Money Market and Investment Grade Bond Portfolios, FMR
has entered into a sub-advisory agreement with FIMM pursuant to which
FIMM has primary responsibility for choosing investments for each
fund. On behalf of Asset Manager, Asset Manager: Growth, and Balanced
Portfolios, FMR has entered into a sub-advisory agreement with FIMM
pursuant to which FIMM has responsibility for choosing certain types
of investments for each fund. Prior to January 23, 1998, FMR Texas
Inc. (FMR Texas) had primary responsibility for providing investment
management services to Money Market Portfolio. On January 23, 1998,
FMR Texas was merged into FIMM, which succeeded to the operations of
FMR Texas.

Under the terms of the sub-advisory agreements for Money Market
Portfolio and Investment Grade Bond Portfolio, FMR pays FIMM fees
equal to 50% of the management fee payable to FMR under its management
contract with each fund. The fees paid to FIMM are not reduced by any
voluntary or mandatory expense reimbursements that may be in effect
from time to time. Under the terms of the sub-advisory agreements for
Asset Manager Portfolio, Asset Manager: Growth Portfolio, and Balanced
Portfolio, FMR pays FIMM fees equal to 50% of the management fee
payable to FMR with respect to that portion of the fund's assets that
are managed by FIMM. The fees paid to FIMM are not reduced by any
voluntary or mandatory expense reimbursements that may be in effect
from time to time.

On behalf of Money Market Portfolio, for the fiscal years ended
December 31, 1997 and 1996, FMR paid FMR Texas fees of $______ and
$_______, respectively. On behalf of Money Market Portfolio, for the
fiscal year ended December 31, 1998, FMR paid FIMM a fee of $______.

On behalf of High Income, Balanced, Growth & Income, Growth
Opportunities, Asset Manager, Contrafund, Asset Manager: Growth, and
Mid Cap Portfolios,FMR has entered into sub-advisory agreements with
FMR U.K. and FMR Far East. On behalf of Overseas Portfolio, FMR has
entered into sub-advisory agreements with FMR U.K., FMR Far East, and
FIIA. FIIA, in turn, has entered into a sub-advisory agreement with
FIIA(U.K.)L. Pursuant, to the sub-advisory agreements, FMR may
receive investment advice and research services outside the United
States from the sub-advisers.

On behalf of High Income, Balanced, Growth & Income, Growth
Opportunities, Asset Manager, Contrafund, Asset Manager: Growth, Mid
Cap, and Overseas Portfolios, FMR may also grant FMR U.K., FMR Far
East, FIIA, and FIIA(U.K.)L investment management authority, as well
as the authority to buy and sell securities if FMR believes it would
be beneficial to a fund.

Under the sub-advisory agreements FMR pays the fees of FMR U.K., FMR
Far East, and FIIA. FIIA, in turn, pays the fees of FIIA(U.K.)L. For
providing non-discretionary investment advice and research services,
the sub-advisers are compensated as follows:

(small solid bullet) FMR pays FMR U.K. and FMR Far East fees equal to
110% and 105%, respectively, of FMR U.K.'s and FMR Far East's costs
incurred in connection with providing investment advice and research
services.

(small solid bullet) FMR pays FIIA a fee equal to 30% of FMR's monthly
management fee with respect to the average net assets held by the fund
for which the sub-adviser has provided FMR with investment advice and
research services.

(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 investment
advice and research services.

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) F MR 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.

On behalf of Overseas 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.

(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-advis er 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.

For investment advice and research services, no fees were paid to FMR
U.K. or FMR Far East on behalf of High Income Portfolio and Mid Cap
Portfolio for the past three fiscal years. For investment advice and
research services, no fees were paid to FIIA and FIIA(U.K.)L on behalf
of Overseas Portfolio for the past three fiscal years.

For providing investment advice and research services, fees paid to
FMR U.K. and FMR Far East on behalf of Balanced, Growth & Income,
Growth Opportunities, Asset Manager, Contrafund, Asset Manager:
Growth, and Overseas Portfolios for the past three fiscal years are
shown in the tables below:

BALANCED PORTFOLIO

Fiscal Year Ended December 31 FMR U.K. FMR Far East

1998 $ $

1997 $ $

1996 $ $

GROWTH & INCOME PORTFOLIO

Fiscal Year Ended December 31 FMR U.K. FMR Far East

1998 $ $

1997 $ $

GROWTH OPPORTUNITIES PORTFOLIO

Fiscal Year Ended December 31 FMR U.K. FMR Far East

1998 $ $

1997 $ $

1996 $ $

ASSET MANAGER PORTFOLIO

Fiscal Year Ended December 31 FMR U.K. FMR Far East

1998 $ $

1997 $ $

1996 $ $

CONTRAFUND PORTFOLIO

Fiscal Year Ended December 31 FMR U.K. FMR Far East

1998 $ $

1997 $ $

1996 $ $

ASSET MANAGER: GROWTH PORTFOLIO

Fiscal Year Ended December 31 FMR U.K. FMR Far East

1998 $ $

1997 $ $

1996 $ $

OVERSEAS PORTFOLIO

Fiscal Year Ended December 31 FMR U.K. FMR Far East

1998 $ $

1997 $ $

1996 $ $

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 Manage r: Growth,
Mid Cap, and Overseas Portfolios for the past three fiscal years.

DISTRIBUTION SERVICES

Each fund has entered into a distribution agreement with FDC, an
affiliate of FMR. FDC is a broker-dealer registered under the
Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. The distribution agreements
call for FDC to use all reasonable efforts, consistent with its other
business, to secure purchasers for shares of each fund, which are
continuously offered at NAV. Promotional and administrative expenses
in connection with the offer and sale of shares are paid by FMR.

The Trustees have approved Distribution and Service Plans on behalf of
Service Class 2 of each fund, Service Class of each fund
(except Money Market, Investment Grade Bond, and Index 500), and
Initial Class of each fund (the Plans) pursuant to Rule 12b-1 under
the 1940 Act (the Rule). The Rule provides in substance that a mutual
fund may not engage directly or indirectly in financing any activity
that is primarily intended to result in the sale of shares of the fund
except pursuant to a plan approved on behalf of the fund under the
Rule. The Plans, as approved by the Trustees, allow Service Class
2, Service Class, and Initial Class and FMR to incur certain
expenses that might be considered to constitute direct or indirect
payment by the funds of distribution expenses.

Pursuant to the Service Class Plan for each fund (except Money Market,
Investment Grade Bond, and Index 500), FDC is paid a 12b-1 fee at an
annual rate of up to 0.25% of Service Class 2's average net assets
determined at the close of business on each day throughout the month.
Currently, the Trustees have approved a 12b-1 fee for Service Class of
each fund(except Money Market, Investment Grade Bond, and Index 500)
at an annual rate of upto 0.10% of its average net assets. This fee
rate may be increased only when, in the opinion of the Trustees, it is
in the best interests of Variable Product owners to do so. (For
purposes of this discussion, "Variable Product" refers to a variable
annuity contract or variable life insurance policy for which shares of
the funds are available as underlying investment options.)

Pursuant to the Service Class 2 Plan for each fund, FDC is paid a
12b-1 fee at an annual rate of up to 0.25% of Service Class 2's
average net assets determined at the close of business on each day
throughout the month. Currently, the Trustees have approved a 12b-1
fee for Service Class 2 of each fund at an annual rate of upto 0.25%
of its average net assets. (For purposes of this discussion, "Variable
Product" refers to a variable annuity contract or variable life
insurance policy for which shares of the funds are available as
underlying investment op tions.)

FDC may reallow to insurance companies up to the full amount of 12b-1
fees paid by Service Class for providing services intended to result
in the sale of Service Class shares and/or support services to
Variable Product owners, based upon the level of such services
provided.

For the fiscal year ended December 31, 1998, Service Class of each
fund paid (except Money Market, Investment Grade Bond, and Index 500)
paid FDC the following 12b-1 fees, all of which were reallowed to
insurance companies:

Fund++

High Income $

Equity-Income $

Growth $

Overseas $

Asset Manager $

Asset Manager: Growth $

Contrafund $

Balanced $

Growth Opportunities $

Growth & Income $

Mid Cap+ $

+ Mid Cap commenced operations on December 28, 1998.

Under each Initial Class Plan, if the payment of management fees by
the fund to FMR is deemed to be indirect financing by the fund of the
distribution of its shares, such payment is authorized by the Plan.
Each Initial Class Plan specifically recognizes that FMR may use its
management fee revenue, as well as its past profits or its other
resources, to pay FDC for expenses incurred in connection with
providing services intended to result in the sale of Initial Class
shares and/or shareholder support services. In addition, each Initial
Class Plan provides that FMR, directly or through FDC, may pay
intermediaries, such as banks, broker-dealers and other service
providers, that provide those services. Currently, the Board of
Trustees has authorized such payments for Initial Class shares.

Under each Service Class Plan, if the payment of management fees by
the fund to FMR is deemed to be indirect financing by the fund of the
distribution of its shares, such payment is authorized by the Plan.
Each Service Class Plan specifically recognizes that FMR may use its
management fee revenue, as well as its past profits or its other
resources, to pay FDC for expenses incurred in connection with
providing services intended to result in the sale of Service Class
shares and/or shareholder support services, including payments made to
insurance companies and others that provide those services. Currently,
the Board of Trustees has authorized such payments for Service Class
shares.

Under each Service Class 2 Plan, if the payment of management fees
by the fund to FMR is deemed to be indirect financing by the fund of
the distribution of its shares, such payment is authorized by the
Plan. Each Service Class 2 Plan specifically recognizes that FMR may
use its management fee revenue, as well as its past profits or its
other resources, to pay FDC for expenses incurred in connection with
providing services intended to result in the sale of Service Class 2
shares and/or shareholder support services, including payments made to
insurance companies and others that provide those services. Currently,
the Board of Trustees has authorized such payments for Service Class 2
shares .

Payments made by FMR either directly or through FDC to intermediaries
for the fiscal year ended December 31, 1998 amounted to the following:

Fund++ Initial Class Service Class

Money Market $

High Income $ $

Equity-Income $ $

Growth $ $

Overseas $ $

Investment Grade Bond $

Asset Manager $ $

Asset Manager: Growth $ $

Index 500 $

Contrafund $ $

Balanced $ $

Growth Opportunities $ $

Growth & Income $ $

Mid Cap+ $ $

+ Mid Cap commenced operations on December 28, 1998.

Prior to approving each Initial Class, Service Class, and Service
Class 2 Pla n, the Trustees carefully considered all pertinent
factors relating to the implementation of the Plan and determined that
there is a reasonable likelihood that the Plan will benefit each fund
and Variable Product owners. In particular, the Trustees noted that
each Initial Class Plan does not authorize payments by Initial Class
of a fund other than those made to FMR under its management contract
with the fund. To the extent that each Initial Class, Service Class,
and Service Class 2 Plan gives FMR and FDC greater flexibility
in connection with the distribution of Service Class 2 shares of the
applicable class, additional sales of fund shares or stabilization of
cash flows may result. Furthermore, certain shareholder support
services may be provided more effectively under the Plans by insurance
companies and their affiliates with whom Variable Product owners have
other relationships.

Each Service Class and Service Class 2 Plan does not provide
for specific payments by Service Class 2 of any of the expenses of
FDC, or obligate FDC or FMR to perform any specific type or level of
distribution activities or incur any specific level of expense in
connection with distribution activities.

The Glass-Steagall Act generally prohibits federally and state
chartered or supervised banks from engaging in the business of
underwriting, selling, or distributing securities. Although the scope
of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, FDC believes
that the Glass-Steagall Act should not preclude a bank from performing
shareholder support services, or servicing and recordkeeping
functions. FDC intends to engage banks only to perform such functions.
However, changes in federal or state statutes and regulations
pertaining to the permissible activities of banks and their affiliates
or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions,
if any, would be necessary to continue to provide efficient and
effective shareholder services. In such event, changes in the
operation of the funds might occur, including possible termination of
any automatic investment or redemption or other services then provided
by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these
occurrences. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein, and
banks and other financial institutions may be required to register as
dealers pursuant to state law.

Each fund may execute portfolio transactions with, and purchase
securities issued by, depository institutions that receive payments
under the Plans. No preference for the instruments of such depository
institutions will be shown in the selection of investments.

TRANSFER AND SERVICE AGENT AGREEMENTS

Each class of each fund has entered into a transfer agent agreement
with FIIOC, an affiliate of FMR. Under the terms of the agreements,
FIIOC maintains the master accounts of the participating insurance
companies. For providing transfer agency services, FIIOC receives an
asset-based fee of ___% for each account. For each fund (except Money
Market, Investment Grade Bond, and High Income), the asset-based fees
are subject to adjustment if the year-to-date total return of the S&P
500 exceeds a positive or negative __%. FIIOC pays out-of-pocket
expenses associated with providing transfer agent services. In
addition, FIIOC bears the expense of typesetting, printing and mailing
prospectuses, statements of additional information, and all other
reports, notices, and statements to shareholders allocable to the
master account of participating insurance companies.

Each fund has also entered into a service agent agreement with FSC, an
affiliate of FMR. Under the terms of the agreements, FSC calculates
the NAV and dividends for each class of each fund, maintains each
fund's portfolio and general accounting records, and administers High
Income, Equity-Income, Growth, Overseas, Investment Grade Bond, Asset
Manager, Asset Manager: Growth, Contrafund, Balanced, Growth
Opportunities, Growth & Income, and Mid Cap Portfolios' securities
lending program.

For providing pricing and bookkeeping services, FSC receives a monthly
fee based on each fund's average daily net assets throughout the
month. The annual fee rates for pricing and bookkeeping services are
as follows: for Money Market, ____% of the first $___ million of
average net assets, ____% of average net assets between $___ million
and $__ billion, and ____% of average net assets in excess of $__
billion; for High Income, ____% of the first $___ million of average
net assets, ___% of average net assets between $____ million and $_
billion, and ____% of average net assets in excess of $_ billion; for
Overseas, ____% of the first $___ million of average net assets, ____%
of average net assets between $___ million and $__ billion, and ____%
of average net assets in excess of $__ billion; for Investment Grade
Bond, ____% of the first $____ million of average net assets, ____% of
average net assets between $___ million and $__ billion, and ___% of
average net assets in excess of $__ billion; and for Balanced, Growth
& Income, Growth Opportunities, Equity-Income, Growth, Asset Manager,
Contrafund, Asset Manager: Growth, Index 500, and Mid Cap, ____% of
the first $___ million of average net assets, ____% of average net
assets between $____ million and $__ billion, and _____% of average
net assets in excess of $__ billion. The fee, not including
reimbursement for out-of-pocket expenses, for Money Market is limited
to a minimum of $_______ per year. The fee, not including
reimbursement for out-of-pocket expenses, for each fund (except Money
Market) is limited to a minimum of $________ per year.

Pricing and bookkeeping fees, including reimbursement for
out-of-pocket expenses, paid by the funds to FSC for the past three
fiscal years are shown in the table below.

Fund 1998 1997 1996

Money Market $ $ $

High Income $ $ $

Equity-Income $ $ $

Growth $ $ $

Overseas $ $ $

Investment Grade Bond $ $ $

Asset Manager $ $ $

Asset Manager: Growth $ $ $

Index 500 $ $ $

Contrafund $ $ $

Balanced $ $ $

Growth Opportunities $ $ $

Growth & Income+ $ $

Mid Cap++ $

+ Growth & Income commenced operations on December 31, 1996.

++ Mid Cap commenced operations on December 28, 1998.

For administering High Income, Equity-Income, Growth, Overseas,
Investment Grade Bond, Asset Manager, Asset Manager: Growth,
Contrafund, Balanced, Growth Opportunities, Growth & Income, and Mid
Cap Portfolios' securities lending program, FSC receives fees based on
the number and duration of individual securities loans. For the fiscal
years ended December 31, 1998, 1997, and 1996, the funds paid no
securities lending fees.

DESCRIPTION OF THE TRUSTS

TRUST ORGANIZATION. Money Market Portfolio, High Income Portfolio,
Equity-Income Portfolio, Growth Portfolio, and Overseas Portfolio are
funds of Variable Insurance Products Fund, an open-end management
investment company organized as a Massachusetts business trust on
November 13, 1981. The Trustees are permitted to create additional
funds in the trust and to create additional classes of the funds.

Investment Grade Bond Portfolio, Asset Manager Portfolio, Index 500
Portfolio, Contrafund Portfolio, and Asset Manager: Growth Portfolio
are funds of Variable Insurance Products Fund II, an open-end
management investment company organized as a Massachusetts business
trust on March 21, 1988. The Trustees are permitted to create
additional funds in the trust and to create additional classes of the
funds.

Balanced Portfolio, Growth & Income Portfolio, Growth Opportunities
Portfolio, and Mid Cap Portfolio are funds of Variable Insurance
Products Fund III, an open-end management investment company organized
as a Massachusetts business trust on July 14, 1994. On December 30,
1996, Variable Insurance Products Fund III changed its name from
Fidelity Advisor Annuity Fund to Variable Insurance Products Fund III.
On December 30, 1996, Balanced Portfolio changed its name from Advisor
Annuity Income & Growth Fund to Balanced Portfolio. On December 30,
1996, Growth Opportunities Portfolio changed its name from Advisor
Annuity Growth Opportunities Fund to Growth Opportunities Portfolio.
The Trustees are permitted to create additional funds in the trust and
to create additional classes of the funds.

Investments in each trust may be made only by the separate accounts of
insurance companies for the purpose of funding variable annuity and
variable life insurance contracts issued by insurance companies.

The assets of each trust received for the issue or sale of shares of
each of its funds and all income, earnings, profits, and proceeds
thereof, subject to the rights of creditors, are allocated to such
fund, and constitute the underlying assets of such fund. The
underlying assets of each fund in a trust shall be charged with the
liabilities and expenses attributable to such fund, except that
liabilities and expenses may be allocated to a particular class. Any
general expenses of the respective trusts shall be allocated between
or among any one or more of its funds or classes.

SHAREHOLDER LIABILITY. Each trust is an entity commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders
of such a trust may, under certain circumstances, be held personally
liable for the obligations of the trust.

The Declaration of Trust for Variable Insurance Products Fund III
provides that the trust shall not have any claim against shareholders
except for the payment of the purchase prices of shares and requires
that each agreement, obligation, or instrument entered into or
executed by the trust or the Trustees relating to the trust shall
include a provision limiting the obligations created thereby to the
trust and its assets. The Declaration of Trust for each of Variable
Insurance Products Fund and Variable Insurance Products Fund II
contains an express disclaimer of shareholder liability for debts,
liabilities, obligations, and expenses of the trust or fund. The
Declaration of Trust for each of Variable Insurance Products Fund and
Variable Insurance Products Fund II provides that the trust shall not
have any claim against shareholders except for the payment of the
purchase price of shares and requires that each agreement, obligation,
or instrument entered into or executed by the trust or the Trustees
relating to the trust or to a fund shall include a provision limiting
the obligations created thereby to the trust or to one or more funds
and its or their assets. The Declaration of Trust for each of Variable
Insurance Products Fund and Variable Insurance Products Fund II
further provides that shareholders of a fund shall not have a claim on
or right to any assets belonging to any other fund.

Each Declaration of Trust provides for indemnification out of each
fund's property of any shareholder or former shareholder held
personally liable for the obligations of the fund solely by reason of
his or her being or having been a shareholder and not because of his
or her acts or omissions or for some other reason. Each Declaration of
Trust also provides that each fund shall, upon request, assume the
defense of any claim made against any shareholder for any act or
obligation of the fund and satisfy any judgment thereon. Thus, the
risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a fund
itself would be unable to meet its obligations. FMR believes that, in
view of the above, the risk of personal liability to shareholders is
remote. Claims asserted against one class of shares may subject
holders of another class of shares to certain liabilities.

VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. Shareholders receive one vote for each dollar value of net
asset value they own. The voting rights of shareholders can be changed
only by a shareholder vote. Shares may be voted in the aggregate, by
fund and by class.

The shares have no preemptive or conversion rights. Shares are fully
paid and nonassessable, except as set forth under the heading
"Shareholder Liability" above.

Variable Insurance Products Fund III or any of its funds may be
terminated upon the sale of its assets to another open-end management
investment company, or upon liquidation and distribution of its
assets, if approved by a vote of shareholders of the trust or the
fund. In the event of the dissolution or liquidation of the trust,
shareholders of each of its funds are entitled to receive the
underlying assets of such fund available for distribution. In the
event of the dissolution or liquidation of a fund, shareholders of
that fund are entitled to receive the underlying assets of the fund
available for distribution.

Each of Variable Insurance Products Fund and Variable Insurance
Products Fund II or any of its funds may be terminated upon the sale
of its assets to, or merger with, another open-end management
investment company or series thereof, or upon liquidation and
distribution of its assets. Generally, the merger of a trust or a fund
with another entity or the sale of substantially all of the assets of
a trust or a fund to another entity requires approval by a vote of
shareholders of the trust or the fund. The Trustees may, however,
reorganize or terminate each trust or any of its funds without prior
shareholder approval. In the event of the dissolution or liquidation
of a trust, shareholders of each of its funds are entitled to receive
the underlying assets of such fund available for distribution. In the
event of the dissolution or liquidation of a fund, shareholders of
that fund are entitled to receive the underlying assets of such fund
available for distribution.

CUSTODIANS. The Bank of New York, 110 Washington Street, New York, New
York, is custodian of the assets of Money Market, High Income and
Investment Grade Bond Portfolios; The Chase Manhattan Bank, 1 Chase
Manhattan Plaza, New York, New York, is custodian of the assets of
Equity-Income, Balanced, Growth & Income, Overseas, Asset Manager:
Growth, and Asset Manager Portfolios; and Brown Brothers Harriman &
Co., 40 Water Street, Boston, Massachusetts, is custodian of the
assets of Growth, Growth Opportunities, Contrafund, and Mid Cap
Portfolios. BT is custodian of the assets of Index 500 Portfolio. Each
custodian is responsible for the safekeeping of a fund's assets and
the appointment of any subcustodian banks and clearing agencies. The
Bank of New York and The Chase Manhattan Bank, each headquartered in
New York, also may serve as special purpose custodians of certain
assets in connection with repurchase agreement transactions.

FMR, its officers and directors, its affiliated companies, and the
Board of Trustees may, from time to time, conduct transactions with
various banks, including banks serving as custodians for certain funds
advised by FMR. The Boston branch of Growth, Growth Opportunities,
Contrafund, and Mid Cap Portfolios' custodian leases its office space
from an affiliate of FMR at a lease payment which, when entered into,
was consistent with prevailing market rates. Transactions that have
occurred to date include mortgages and personal and general business
loans. In the judgment of FMR, the terms and conditions of those
transactions were not influenced by existing or potential custodial or
other fund relationships.

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 service s. Effective February 18, 1999,
Deloitte & Touche LLP, 200 Berkeley Street, Bo ston, 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.

FINANCIAL STATEMENTS

Each fund's financial statements and financial highlights for the
fiscal year ended December 31, 1998, and report of the auditor, are
included in the funds' Annual Reports and are incorporated herein by
reference. Unaudited financial statements and financial highlights
for the period ended June 30, 1999 are included in the funds'
semi-annual reports and are incorporated herein by reference.

APPENDIX

ABOUT THE S&P 500. The S&P 500 is a well-known stock market index that
includes common stocks of companies representing a significant portion
of the market value of all common stocks publicly traded in the United
States. Stocks in the S&P 500 are weighted according to their market
capitalization (i.e., the number of shares outstanding multiplied by
the stock's current price) with the 42 largest stocks currently
comprising approximately 50% of the index's value. The composition of
the S&P 500 is determined by Standard & Poor's and is based on such
factors as the market capitalization and trading activity of each
stock and its adequacy as a representation of stocks in a particular
industry group. Standard & Poor's may change the index's composition
from time to time.

The performance of the S&P 500 is a hypothetical number that does not
take into account brokerage commissions and other costs of investing,
which the funds bear.

Although Standard & Poor's obtains information for inclusion in or for
use in the calculation of the S&P 500 from sources which it considers
reliable, Standard & Poor's does not guarantee the accuracy or the
completeness of the S&P 500 or any data included therein. Standard &
Poor's makes no warranty, express or implied, as to results to be
obtained by the licensee, owners of the funds, or any other person or
entity from the use of the S&P 500 or any data included therein in
connection with the rights licensed hereunder or for any other use.
Standard & Poor's makes no express or implied warranties, and hereby
expressly disclaims all warranties of merchantability or fitness for a
particular purpose with respect to the S&P 500 and any data included
therein.

Variable Insurance Products Fund

PART C. OTHER INFORMATION

Item 23. Exhibits

(a) Amended and Restated Declaration of Trust, dated September 16,
1998, is incorporated herein by reference to Exhibit (a) of
Post-Effective Amendment No. 39.

(b) Bylaws of the Trust, as amended and dated May 19, 1994, are
incorporated herein by reference to Exhibit 2(a) of Fidelity
Union Street Trust's (File No. 2-50318) Post-Effective Amendment
No. 87.

(d) (1) Management Contract between Equity-Income Portfolio and
Fidelity Management & Research Company, dated September 16,
1998, is incorporated herein by reference to Exhibit (d)(1)
of Post-Effective Amendment No. 39.

(2) Management Contract between Growth Portfolio and Fidelity
Management & Research Company, dated September 16, 1998, is
incorporated herein by reference to Exhibit (d)(2) of
Post-Effective Amendment No. 39.

(3) Management Contract between Overseas Portfolio and Fidelity
Management & Research Company, dated September 16, 1998, is
incorporated herein by reference to Exhibit (d)(3) of
Post-Effective Amendment No. 39.

(4) Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Investments Money Management, Inc.
(formerly FMR Texas Inc.) on behalf of Money Market
Portfolio, dated January 1, 1990, is incorporated herein by
reference to Exhibit 5(d) of Post-Effective Amendment No. 32.

(5) Sub-Advisory Agreement among Fidelity Management & Research
Company, Fidelity Management & Research (U.K.) Inc. and
Variable Insurance Products Fund on behalf of Overseas
Portfolio, dated April 1, 1992, is incorporated herein by
reference to Exhibit 5(e) of Post-Effective Amendment No. 32.

(6) Sub-Advisory Agreement among Fidelity Management & Research
Company, Fidelity Management & Research (Far East) Inc. and
Variable Insurance Products Fund on behalf of Overseas
Portfolio, dated April 1, 1992, is incorporated herein by
reference to Exhibit 5(f) of Post-Effective Amendment No. 32.

(7) Sub-Advisory Agreement among Fidelity Management & Research
Company, Fidelity International Investment Advisors and
Variable Insurance Products Fund on behalf of Overseas
Portfolio, dated August 1, 1999, is filed herein as Exhibit
d(7).

(8) Sub-Advisory Agreement between Fidelity International
Investment Advisors and Fidelity International Investment
Advisors (U.K.) Limited on behalf of Overseas Portfolio,
dated April 1, 1992, is incorporated herein by reference to
Exhibit 5(h) of Post-Effective Amendment No. 32.

(9) Management Contract between Money Market Portfolio and
Fidelity Management & Research Company, dated September 16,
1998, is incorporated herein by reference to Exhibit (d)(9)
of Post-Effective Amendment No. 39.

(10) Management Contract between High Income Portfolio and
Fidelity Management & Research Company, dated September 16,
1998, is incorporated herein by reference to Exhibit (d)(10)
of Post-Effective Amendment No. 39.

(11) Sub-Advisory Agreement among Fidelity Management & Research
Company, Fidelity Management & Research (U.K.) Inc. and
Variable Insurance Products Fund on behalf of High Income
Portfolio, dated January 1, 1994, is incorporated herein by
reference to Exhibit 5(s) of Post-Effective No. 28.

(12) Sub-Advisory Agreement among Fidelity Management & Research
Company, Fidelity Management & Research (Far East) Inc. and
Variable Insurance Products Fund on behalf of High Income
Portfolio, dated January 1, 1994, is incorporated herein by
reference to Exhibit 5(t) of Post-Effective No. 28.

(e) (1) Amended General Distribution Agreement between Money Market
Portfolio and Fidelity Distributors Corporation, dated April
1, 1987, is incorporated herein by reference to Exhibit 6(a)
of Post-Effective Amendment No. 32.

(2) Amended General Distribution Agreement between High Income
Portfolio and Fidelity Distributors Corporation, dated April
1, 1987, is incorporated herein by reference to Exhibit 6(b)
of Post-Effective Amendment No. 32.

(3) Amended General Distribution Agreement between Equity-Income
Portfolio and Fidelity Distributors Corporation, dated April
1, 1987, is incorporated herein by reference to Exhibit 6(c)
of Post-Effective Amendment No. 32.

(4) Amended General Distribution Agreement between Growth
Portfolio and Fidelity Distributors Corporation, dated April
1, 1987, is incorporated herein by reference to Exhibit 6(d)
of Post-Effective Amendment No. 32.

(5) Amended General Distribution Agreement between Overseas
Portfolio and Fidelity Distributors Corporation, dated April
1, 1987, is incorporated herein by reference to Exhibit 6(e)
of Post-Effective Amendment No. 32.

(6) Amendment, dated January 1, 1988, to General Distribution
Agreement between Money Market, High Income, Equity-Income,
Growth, and Overseas Portfolios and Fidelity Distributors
Corporation, is incorporated herein by reference to Exhibit
6(f) of Post-Effective Amendment No. 32.

(7) Amendments, dated March 14, 1996 and July 15, 1996, to
General Distribution Agreement between Money Market, High
Income, Equity-Income, Growth, and Overseas Portfolios and
Fidelity Distributors Corporation, are incorporated herein by
reference to Exhibit 6(a) of Fidelity Court Street Trust's
(File No. 2-58774) Post-Effective Amendment No. 61.

(8) Form of Service Contract between Fidelity Distributors
Corporation and "Qualified Recipients" with respect to
Initial Class shares of High Income, Equity-Income, Growth,
and Overseas Portfolios is incorporated herein by reference
to Exhibit 6(h) of Post-Effective Amendment 36.

(9) Form of Service Contract between Fidelity Distributors
Corporation and "Qualified Recipients" with respect to
Service Class shares of High Income, Equity-Income, Growth,
and Overseas Portfolios is incorporated herein by reference
to Exhibit 6(i) of Post-Effective Amendment 36.

(f) (1) The Fee Deferral Plan for Non-Interested Person Directors and
Trustees of the Fidelity Funds, effective as of September 14,
1995 and amended through November 14, 1996, is incorporated
herein by reference to Exhibit 7(b) of Fidelity Aberdeen
Street Trust's (File No. 33-43529) Post-Effective Amendment
No. 19.

(g) (1) Custodian Agreement and Appendix C, dated December 1, 1994,
between The Bank of New York and Variable Insurance Products
Fund on behalf of Money Market Portfolio and High Income
Portfolio are incorporated herein by reference to Exhibit
8(a) of Fidelity Hereford Street Trust's (File No. 33-52577)
Post-Effective Amendment No. 4.

(2) Appendix A, dated June 23, 1999, to the Custodian Agreement,
dated December 1, 1994, between The Bank of New York and
Variable Insurance Products Fund on behalf of Money Market
Portfolio and High Income Portfolio is incorporated herein by
reference to Exhibit g(2) of Fidelity Money Market Trust's
(File No. 2-62417) Post-Effective Amendment No. 61.

(3) Appendix B, dated March 18, 1999, to the Custodian Agreement,
dated December 1, 1994, between The Bank of New York and
Variable Insurance Products Fund on behalf of Money Market
Portfolio and High Income Portfolio is incorporated herein by
reference to Exhibit g(3) of Fidelity Hereford Street Trust's
(File No. 33-52577) Post-Effective Amendment No. 12.

(4) Addendum, dated October 21, 1996, to the Custodian Agreement,
dated December 1, 1994, between The Bank of New York and
Variable Insurance Products Fund on behalf of Money Market
Portfolio and High Income Portfolio is incorporated herein by
reference to Exhibit g(4) of Fidelity Hereford Street Trust's
(File No. 33-52577) Post-Effective Amendment No. 12.

(5) Custodian Agreement and Appendix C, dated August 1, 1994,
between The Chase Manhattan Bank, N.A. and Variable Insurance
Products Fund on behalf of Equity-Income Portfolio and
Overseas Portfolio are incorporated herein by reference to
Exhibit 8(a) of Fidelity Investment Trust's (File No.
2-90649) Post-Effective Amendment No. 59.

(6) Appendix A, dated June 16, 1999 to the Custodian Agreement,
dated August 1, 1994, between The Chase Manhattan Bank, N.A.
and Variable Insurance Products Fund on behalf of
Equity-Income Portfolio and Overseas Portfolio is
incorporated herein by reference to Exhibit g(2) of Fidelity
Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 102.

(7) Appendix B, dated June 17, 1999, to the Custodian Agreement,
dated August 1, 1994, between The Chase Manhattan Bank, N.A.
and Variable Insurance Products Fund on behalf of
Equity-Income Portfolio and Overseas Portfolio is
incorporated herein by reference to Exhibit g(3) of Fidelity
Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 102.

(8) Addendum, dated October 21, 1996, to the Custodian Agreement,
dated August 1, 1994, between The Chase Manhattan Bank, N.A.
and Variable Insurance Products Fund on behalf of
Equity-Income Portfolio and Overseas Portfolio is
incorporated herein by reference to Exhibit g(4) of Fidelity
Charles Street Trust's (File No. 2-73133) Post-Effective
Amendment No. 65.

(9) Custodian Agreement and Appendix C, dated September 1, 1994,
between Brown Brothers Harriman & Company and Variable
Insurance Products Fund on behalf of Growth Portfolio are
incorporated herein by reference to Exhibit 8(a) of Fidelity
Commonwealth Trust's (File No. 2-52322) Post-Effective
Amendment No. 56.

(10) Appendix A, dated January 14, 1999, to the Custodian
Agreement, dated September 1, 1994, between Brown Brothers
Harriman & Company and Variable Insurance Products Fund on
behalf of Growth Portfolio is incorporated herein by
reference to Exhibit g(2) of Fidelity Commonwealth Trust's
(File No. 2-52322) Post-Effective Amendment No. 68.

(11) Appendix B, dated June 17, 1999, to the Custodian Agreement,
dated September 1, 1994, between Brown Brothers Harriman &
Company and Variable Insurance Products Fund on behalf of
Growth Portfolio is incorporated herein by reference to
Exhibit g(11) of Fidelity Advisor VIII's (File No. 2-86711)
Post-Effective Amendment No. 54.

(12) Addendum, dated October 21, 1996, to the Custodian Agreement,
dated September 1, 1994, between Brown Brothers Harriman &
Company and Variable Insurance Products Fund on behalf of
Growth Portfolio is incorporated herein by reference to
Exhibit g(4) of Fidelity Commonwealth Trust's (File No.
2-52322) Post-Effective Amendment No. 68.

(13) Fidelity Group Repo Custodian Agreement among The Bank of New
York, J.P. Morgan Securities, Inc., and Variable Insurance
Products Fund on behalf of Equity-Income Portfolio, Growth
Portfolio, High Income Portfolio, and Money Market Portfolio,
dated February 12, 1996, is incorporated herein by reference
to Exhibit 8(d) of Fidelity Institutional Cash Portfolios'
(File No. 2-74808) Post-Effective Amendment No. 31.

(14) Schedule 1 to the Fidelity Group Repo Custodian Agreement
among The Bank of New York, J.P. Morgan Securities, Inc., and
Variable Insurance Products Fund on behalf of Equity-Income
Portfolio, Growth Portfolio, High Income Portfolio, and Money
Market Portfolio, dated February 12, 1996, is incorporated
herein by reference to Exhibit 8(e) of Fidelity Institutional
Cash Portfolios' (File No. 2-74808) Post-Effective Amendment
No. 31.

(15) Fidelity Group Repo Custodian Agreement among Chemical Bank,
Greenwich Capital Markets, Inc., and Variable Insurance
Products Fund on behalf of Equity-Income Portfolio, Growth
Portfolio, High Income Portfolio, and Money Market Portfolio,
dated November 13, 1995, is incorporated herein by reference
to Exhibit 8(f) of Fidelity Institutional Cash Portfolios'
(File No. 2-74808) Post-Effective Amendment No. 31.

(16) Schedule 1 to the Fidelity Group Repo Custodian Agreement
among Chemical Bank and Variable Insurance Products Fund on
behalf of Equity-Income Portfolio, Growth Portfolio, High
Income Portfolio, and Money Market Portfolio, dated November
13, 1995, is incorporated herein by reference to Exhibit 8(g)
of Fidelity Institutional Cash Portfolios' (File No. 2-74808)
Post-Effective Amendment No. 31.

(17) Joint Trading Account Custody Agreement between The Bank of
New York and the Registrant, dated May 11, 1995, is
incorporated herein by reference to Exhibit 8(h) of Fidelity
Institutional Cash Portfolios' (File No. 2-74808)
Post-Effective Amendment No. 31.

(18) First Amendment to Joint Trading Account Custody Agreement
between The Bank of New York and the Registrant, dated July
14, 1995, is incorporated herein by reference to Exhibit 8(i)
of Fidelity Institutional Cash Portfolios' (File No. 2-74808)
Post-Effective Amendment No. 31.

(h) Not applicable.

(i) Not applicable.

(j) Not applicable.

(k) Not applicable.

(l) Not applicable.

(m) (1) Distribution and Service Plan pursuant to Rule 12b-1 for
Money Market Portfolio: Initial Class is filed herein as
Exhibit m(1).

(2) Distribution and Service Plan pursuant to Rule 12b-1 for High
Income Portfolio: Initial Class is filed herein as Exhibit
m(2).

(3) Distribution and Service Plan pursuant to Rule 12b-1 for
Equity-Income Portfolio: Initial Class is filed herein as
Exhibit m(3).

(4) Distribution and Service Plan pursuant to Rule 12b-1 for
Growth Portfolio: Initial Class is filed herein as Exhibit
m(4).

(5) Distribution and Service Plan pursuant to Rule 12b-1 for
Overseas Portfolio: Initial Class is filed herein as Exhibit
m(5).

(6) Distribution and Service Plan pursuant to Rule 12b-1 for High
Income Portfolio: Service Class is filed herein as Exhibit
m(6).

(7) Distribution and Service Plan pursuant to Rule 12b-1 for
Equity-Income Portfolio: Service Class is filed herein as
Exhibit m(7).

(8) Distribution and Service Plan pursuant to Rule 12b-1 for
Growth Portfolio: Service Class is filed herein as Exhibit
m(8).

(9) Distribution and Service Plan pursuant to Rule 12b-1 for
Overseas Portfolio: Service Class is filed herein as Exhibit
m(9).

(10) Form of Distribution and Service Plan pursuant to Rule 12b-1
for Money Market Portfolio: Service Class 2 is filed herein
as Exhibit m(10).

(11) Form of Distribution and Service Plan pursuant to Rule 12b-1
for High Income Portfolio: Service Class 2 is filed herein as
Exhibit m(11).

(12) Form of Distribution and Service Plan pursuant to Rule 12b-1
for Equity-Income Portfolio: Service Class 2 is filed herein
as Exhibit m(12).

(13) Form of Distribution and Service Plan pursuant to Rule 12b-1
for Growth Portfolio: Service Class 2 is filed herein as
Exhibit m(13).

(14) Form of Distribution and Service Plan pursuant to Rule 12b-1
for Overseas Portfolio: Service Class 2 is filed herein as
Exhibit m(14).

(n) Not applicable.

(o) Multiple Class of Shares Plan for VIP Funds dated March 19, 1998
is incorporated herein by reference to Exhibit 18 of
Post-Effective Amendment No. 38.

Item 24. Trusts Controlled by or under Common Control with this Trust

The Board of Trustees of the Trust is the same as the board of other
Fidelity funds, each of which has Fidelity Management & Research
Company, or an affiliate, as its investment adviser. In addition, the
officers of the Trust are substantially identical to those of the
other Fidelity funds. Nonetheless, the Trust takes the position that
it is not under common control with other Fidelity funds because the
power residing in the respective boards and officers arises as the
result of an official position with the respective trusts.

Item 25. Indemnification

Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification
shall be provided to any past or present Trustee or officer. It states
that the Trust shall indemnify any present or past trustee or officer
to the fullest extent permitted by law against liability, and all
expenses reasonably incurred by him or her in connection with any
claim, action, suit or proceeding in which he or she is involved by
virtue of his or her service as a trustee or officer and against any
amount incurred in settlement thereof. Indemnification will not be
provided to a person adjudged by a court or other adjudicatory body to
be liable to the Trust or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of his
or her duties (collectively, "disabling conduct"), or not to have
acted in good faith in the reasonable belief that his or her action
was in the best interest of the Trust. In the event of a settlement,
no indemnification may be provided unless there has been a
determination, as specified in the Declaration of Trust, that the
officer or trustee did not engage in disabling conduct.

Pursuant to Section 11 of the Distribution Agreement, the Trust
agrees to indemnify and hold harmless the Distributor and each of its
directors and officers and each person, if any, who controls the
Distributor within the meaning of Section 15 of the 1933 Act against
any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss,
liability, claim, damages, or expense and reasonable counsel fees
incurred in connection therewith) arising by reason of any person
acquiring any shares, based upon the ground that the registration
statement, Prospectus, Statement of Additional Information,
shareholder reports or other information filed or made public by the
Trust (as from time to time amended) included an untrue statement of a
material fact or omitted to state a material fact required to be
stated or necessary in order to make the statements not misleading
under the 1933 Act, or any other statute or the common law. However,
the Trust does not agree to indemnify the Distributor or hold it
harmless to the extent that the statement or omission was made in
reliance upon, and in conformity with, information furnished to the
Trust by or on behalf of the Distributor. In no case is the indemnity
of the Trust in favor of the Distributor or any person indemnified to
be deemed to protect the Distributor or any person against any
liability to the Issuer or its security holders to which the
Distributor or such person would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.

Pursuant to the agreement by which Fidelity Investments Institutional
Operations Company, Inc. ("FIIOC") is appointed transfer agent, the
Registrant agrees to indemnify and hold FIIOC harmless against any
losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from:

(1) any claim, demand, action or suit brought by any person other
than the Registrant, including by a shareholder, which names FIIOC
and/or the Registrant as a party and is not based on and does not
result from FIIOC's willful misfeasance, bad faith or negligence or
reckless disregard of duties, and arises out of or in connection with
FIIOC's performance under the Transfer Agency Agreement; or

(2) any claim, demand, action or suit (except to the extent
contributed to by FIIOC's willful misfeasance, bad faith or negligence
or reckless disregard of duties) which results from the negligence of
the Registrant, or from FIIOC's acting upon any instruction(s)
reasonably believed by it to have been executed or communicated by any
person duly authorized by the Registrant, or as a result of FIIOC's
acting in reliance upon advice reasonably believed by FIIOC to have
been given by counsel for the Registrant, or as a result of FIIOC's
acting in reliance upon any instrument or stock certificate reasonably
believed by it to have been genuine and signed, countersigned or
executed by the proper person.

Item 26. Business and Other Connections of Investment Advisers

(1) FIDELITY MANAGEMENT & RESEARCH COMPANY (FMR)
82 Devonshire Street, Boston, MA 02109

FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held,
during the past two fiscal years, the following positions of a
substantial nature.

Edward C. Johnson 3d Chairman of the Board and
Director of FMR; President
and Chief Executive Officer
of FMR Corp.; Chairman of
the Board and Director of
FMR Corp., Fidelity
Investments Money
Management, Inc. (FIMM),
Fidelity Management &
Research (U.K.) Inc. (FMR
U.K.), and Fidelity
Management & Research (Far
East) Inc. (FMR Far East);
Chairman of the Executive
Committee of FMR; Chairman
and Reprsentative Director
of Fidelity Investments
Japan Limited (FIJ);
President and Trustee of
funds advised by FMR.

Robert C. Pozen President and Director of
FMR; Senior Vice President
and Trustee of funds advised
by FMR; President and
Director of FIMM, FMR U.K.,
and FMR Far East; Director
of Strategic Advisers, Inc.;
Previously, General Counsel,
Managing Director, and
Senior Vice President of FMR
Corp.

Peter S. Lynch Vice Chairman of the Board
and Director of FMR.

John Avery Vice President of FMR.

Robert Bertelson Vice President of FMR.

John H. Carlson Vice President of FMR and of
funds advised by FMR.

Robert C. Chow Vice President of FMR.

Dwight D. Churchill Senior Vice President of FMR
and Vice President of Bond
Funds advised by FMR; Vice
President of FIMM.

Laura B. Cronin Vice President of FMR and
Treasurer of FMR, FIMM, FMR
U.K., and FMR Far East.

Barry Coffman Vice President of FMR.

Arieh Coll Vice President of FMR.

Catherine Collins Vice President of FMR.

Frederic G. Corneel Tax Counsel of FMR.

William Danoff Senior Vice President of FMR
and Vice President of funds
advised by FMR.

Scott E. DeSano Vice President of FMR.

Penelope Dobkin Vice President of FMR and of
a fund advised by FMR.

Walter C. Donovan Vice President of FMR.

Bettina Doulton Senior Vice President of FMR
and of funds advised by FMR.

Stephen DuFour Vice President of FMR.

Margaret L. Eagle Vice President of FMR and of
a fund advised by FMR.

William R. Ebsworth Vice President of FMR.

David Felman Vice President of FMR.

Richard B. Fentin Senior Vice President of FMR
and Vice President of a fund
advised by FMR.

Karen Firestone Vice President of FMR.

Michael B. Fox Assistant Treasurer of FMR,
FIMM, FMR U.K., and FMR Far
East; Vice President and
Treasurer of FMR Corp. and
Strategic Advisers, Inc.;
Vice President of FMR U.K.,
FMR Far East, and FIMM.

Gregory Fraser Vice President of FMR and of
a fund advised by FMR.

Jay Freedman Assistant Clerk of FMR; Clerk
of FMR Corp., FMR U.K., FMR
Far East, and Strategic
Advisers, Inc.; Secretary of
FIMM; Vice President Deputy
General Counsel FMR Corp.

David L. Glancy Vice President of FMR and of
a fund advised by FMR.

Barry A. Greenfield Vice President of FMR.

Boyce I. Greer Senior Vice President of FMR
and Vice President of Money
Market Funds advised by FMR;
Vice President of FIMM.

Bart A. Grenier Senior Vice President of FMR
and Vice President of
High-Income Funds advised by
FMR.

Robert J. Haber Vice President of FMR.

Richard C. Habermann Senior Vice President of FMR
and Vice President of funds
advised by FMR.

Fred L. Henning Jr. Senior Vice President of FMR;
Senior Vice President of
FIMM; Vice President of
Fixed-Income Funds advised
by FMR.

Bruce T. Herring Vice President of FMR.

Robert F. Hill Vice President of FMR and
Director of Technical
Research.

Frederick Hoff Vice President of FMR.

Abigail P. Johnson Senior Vice President of FMR
and Vice President of funds
advised by FMR; Director of
FMR Corp.; Associate
Director and Senior Vice
President of Equity Funds
advised by FMR.

David B. Jones Vice President of FMR.

Steven Kaye Senior Vice President of FMR
and of a fund advised by FMR.

Francis V. Knox Vice President of FMR;
Compliance Officer of FMR
U.K. and FMR Far East.

Harris Leviton Vice President of FMR.

Bradford E. Lewis Vice President of FMR and of
funds advised by FMR.

Richard R. Mace Jr. Vice President of FMR and of
funds advised by FMR.

Shigeki Makino Vice President of FMR.

Charles A. Mangum Vice President of FMR and of
a fund advised by FMR.

Kevin McCarey Vice President of FMR and of
a fund advised by FMR.

James McDowell Senior Vice President of FMR.

Neal P. Miller Vice President of FMR.

Jacques Perold Vice President of FMR.

Stephen Petersen Senior Vice President of FMR.

Alan Radlo Vice President of FMR.

Eric D. Roiter Vice President, General
Counsel, and Clerk of FMR
and Secretary of funds
advised by FMR.

Lee H. Sandwen Vice President of FMR.

Patricia A. Satterthwaite Vice President of FMR and of
a fund advised by FMR.

Fergus Shiel Vice President of FMR.

Richard A. Silver Vice President of FMR.

Carol A. Smith-Fachetti Vice President of FMR.

Steven J. Snider Vice President of FMR and of
funds advised by FMR.

Thomas T. Soviero Vice President of FMR and of
a fund advised by FMR.

Richard Spillane Senior Vice President of FMR;
Associate Director and
Senior Vice President of
Equity Funds advised by FMR;
Previously, Senior Vice
President and Director of
Operations and Compliance of
FMR U.K.

Thomas M. Sprague Vice President of FMR and of
a fund advised by FMR.

Robert E. Stansky Senior Vice President of FMR
and Vice President of a fund
advised by FMR.

Scott D. Stewart Vice President of FMR.

Beth F. Terrana Senior Vice President of FMR
and Vice President of funds
advised by FMR.

Yoko Tilley Vice President of FMR.

Joel C. Tillinghast Vice President of FMR and of
a fund advised by FMR.

Robert Tuckett Vice President of FMR.

Jennifer Uhrig Vice President of FMR and of
funds advised by FMR.

George A. Vanderheiden Senior Vice President of FMR
and Vice President of funds
advised by FMR; Director of
FMR Corp.

Jason Weiner Vice President of FMR.

Steven S. Wymer Vice President of FMR and of
a fund advised by FMR.

(2) FIDELITY MANAGEMENT & RESEARCH (U.K.) INC. (FMR U.K.)
25 Lovat Lane, London, EC3R 8LL, England

FMR U.K. provides investment advisory services to Fidelity Management
& Research Company and Fidelity Management Trust Company. The
directors and officers of the Sub-Adviser have held the following
positions of a substantial nature during the past two fiscal years.

Edward C. Johnson 3d Chairman of the Board and
Director of FMR U.K., FMR,
FMR Corp., FIMM, and FMR Far
East; President and Chief
Executive Officer of FMR
Corp.; Chairman of the
Executive Committee of FMR;
Chairman and Representative
Director of Fidelity
Investments Japan Limited
(FIJ); President and Trustee
of funds advised by FMR.

Robert C. Pozen President and Director of FMR
U.K.; Senior Vice President
and Trustee of funds advised
by FMR; President and
Director of FIMM, FMR, and
FMR Far East; Director of
Strategic Advisers, Inc.;
Previously, General Counsel,
Managing Director, and
Senior Vice President of FMR
Corp.

Laura B. Cronin Treasurer of FMR U.K., FMR
Far East, FMR, and FIMM and
Vice President of FMR.

Michael B. Fox Assistant Treasurer of FMR
U.K., FMR, FMR Far East, and
FIMM; Vice President of FMR
U.K., FMR Far East, and
FIMM; Vice President and
Treasurer of FMR Corp. and
Strategic Advisers, Inc.

Simon Fraser Senior Vice President of FMR
U.K. and Director and
President of FIIA.

Jay Freedman Clerk of FMR U.K., FMR Far
East, FMR Corp., and
Strategic Advisers, Inc.;
Assistant Clerk of FMR;
Secretary of FIMM; Vice
President Deputy General
Counsel FMR Corp.

Susan Englander Hislop Assistant Clerk of FMR U.K.,
FMR Far East, and Strategic
Advisers, Inc.; Assistant
Secretary of FIMM.

Francis V. Knox Compliance Officer of FMR
U.K. and FMR Far East; Vice
President of FMR.

(3) FIDELITY MANAGEMENT & RESEARCH (Far East) INC. (FMR Far East)
Shiroyama JT Mori Bldg., 4-3-1 Toranomon Minato-ku, Tokyo 105,
Japan

FMR Far East provides investment advisory services to Fidelity
Management & Research Company and Fidelity Management Trust Company.
The directors and officers of the Sub-Adviser have held the following
positions of a substantial nature during the past two fiscal years.

Edward C. Johnson 3d Chairman of the Board and
Director of FMR Far East,
FMR, FMR Corp., FIMM, and
FMR U.K.; Chairman of the
Executive Committee of FMR;
President and Chief
Executive Officer of FMR
Corp.; Chairman and
Representative Director of
Fidelity Investments Japan
Limited (FIJ); President and
Trustee of funds advised by
FMR.

Robert C. Pozen President and Director of FMR
Far East; Senior Vice
President and Trustee of
funds advised by FMR;
President and Director of
FIMM, FMR U.K., and FMR;
Director of Strategic
Advisers, Inc.; Previously,
General Counsel, Managing
Director, and Senior Vice
President of FMR Corp.

Robert H. Auld Senior Vice President of FMR
Far East.

Laura B. Cronin Treasurer of FMR Far East,
FMR U.K., FMR, and FIMM and
Vice President of FMR.

Michael B. Fox Assistant Treasurer of FMR
Far East, FMR, FMR U.K., and
FIMM; Vice President of FMR
Far East and FMR U.K.; Vice
President and Treasurer of
FMR Corp. and Strategic
Advisers, Inc.

Francis V. Knox Compliance Officer of FMR Far
East and FMR U.K.; Vice
President of FMR.

Jay Freedman Clerk of FMR Far East, FMR
U.K., FMR Corp., and
Strategic Advisers, Inc.;
Assistant Clerk of FMR;
Secretary of FIMM; Vice
President Deputy General
Counsel FMR Corp.

Susan Englander Hislop Assistant Clerk of FMR Far
East, FMR U.K., and
Strategic Advisers, Inc.;
Assistant Secretary of FIMM.

Billy Wilder Vice President of FMR Far
East; President and
Representative Director of
FIJ.

(4) FIDELITY INVESTMENTS MONEY MANAGEMENT, INC. (FIMM)
1 Spartan Way, Merrimack, NH 03054

FIMM provides investment advisory services to Fidelity Management &
Research Company. The directors and officers of the Sub-Adviser have
held the following positions of a substantial nature during the past
two fiscal years.

Edward C. Johnson 3d Chairman of the Board and
Director of FIMM, FMR, FMR
Corp., FMR Far East, and FMR
U.K.; Chairman of the
Executive Committee of FMR;
President and Chief
Executive Officer of FMR
Corp.; Chairman and
Representative Director of
Fidelity Investments Japan
Limited (FIJ); President and
Trustee of funds advised by
FMR.

Robert C. Pozen President and Director of
FIMM; Senior Vice President
and Trustee of funds advised
by FMR; President and
Director of FMR, FMR U.K.,
and FMR Far East; Director
of Strategic Advisers, Inc.;
Previously, General Counsel,
Managing Director, and
Senior Vice President of FMR
Corp.

Fred L. Henning Jr. Senior Vice President of
FIMM; Senior Vice President
of FMR and Vice President of
Fixed-Income Funds advised
by FMR.

Boyce I. Greer Vice President of FIMM;
Senior Vice President of FMR
and Vice President of Money
Market Funds advised by FMR.

Dwight D. Churchill Vice President of FIMM;
Senior Vice President of FMR
and Vice President of Bond
Funds advised by FMR.

Laura B. Cronin Treasurer of FIMM, FMR Far
East, FMR U.K., and FMR and
Vice President of FMR.

Michael B. Fox Assistant Treasurer of FIMM,
FMR U.K., FMR Far East, and
FMR; Vice President and
Treasurer of FMR Corp. and
Strategic Advisers, Inc.;
Vice President of FIMM, FMR
U.K., and FMR Far East.

Jay Freedman Secretary of FIMM; Clerk of
FMR U.K., FMR Far East, FMR
Corp., and Strategic
Advisers, Inc.; Assistant
Clerk of FMR; Vice President
Deputy General Counsel FMR
Corp.

Susan Englander Hislop Assistant Secretary of FIMM;
Assistant Clerk of FMR U.K.,
FMR Far East, and Strategic
Advisers, Inc.

Stanley N. Griffith Assistant Secretary of FIMM.

(5) FIDELITY INTERNATIONAL INVESTMENT ADVISORS (FIIA)
Pembroke Hall, 42 Crow Lane, Pembroke HM19, Bermuda

The directors and officers of FIIA have held, during the past two
fiscal years, the following positions of a substantial nature.

Anthony J. Bolton Director of FIIA, Fidelity
International Investment
Advisors (U.K.) Limited
(FIIA(U.K.)L), Fidelity
Investment Management
Limited (FIML (U.K.)),
Fidelity Investment Services
Limited (FISL (U.K.)), and
Fidelity Investments
International (FII).

Simon Fraser Director and President of
FIIA and Senior Vice
President of FMR U.K.

Richard Ford Vice President of FIIA.

Simon Haslam Director and Chief Financial
Officer of FIIA, FISL
(U.K.), and FII; Director
and Secretary of
FIIA(U.K.)L; Previously,
Chief Financial Officer of
FIL; Company Secretary of
Fidelity Investments Group
of Companies (U.K.);
Director of FIJ.

David J. Saul Director of FIIA; Previously,
President of FIIA, Director
of Fidelity International
Limited, and numerous
companies and funds in the
FIL group.

Keith Ferguson Director of FIIA.

Richard Horlick Director of FIIA.

K.C. Lee Director of FIIA and Fidelity
Investments Management (Hong
Kong) Limited.

Frank Mutch Director of FIIA.

Peter Phillips Director of FIIA and Fidelity
Investments Management (Hong
Kong) Limited.

Matthew Heath Secretary of FIIA.

Terrence V. Richards Assistant Secretary of FIIA.

Rosalie Sheppard Assistant Secretary of FIIA.

(6) FIDELITY INTERNATIONAL INVESTMENT ADVISORS (U.K.) LIMITED
(FIIA(U.K.)L)
26 Lovat Lane, London, EC3R 8LL, England

The directors and officers of FIIA(U.K.)L have held, during the past
two fiscal years, the following positions of a substantial nature.

Anthony J. Bolton Director of FIIA(U.K.)L,
Fidelity International
Investment Advisors (FIIA),
Fidelity Investment
Management Limited (FIML
(U.K.)), Fidelity Investment
Services Limited (FISL
(U.K.)), and Fidelity
Investments International
(FII).

Pamela Edwards Director of FIIA(U.K.)L, FISL
(U.K.), and FII; Previously,
Director of Legal Services
for Europe.

Simon Haslam Director and Secretary of
FIIA(U.K.)L; Director and
Chief Financial Officer of
FIIA, FISL (U.K.), and FII;
Previously, Chief Financial
Officer of FIL, Company
Secretary of Fidelity
Investments Group of
Companies (U.K.); Director
of FIJ.

Sally Walden Director of FIIA(U.K.)L and
FISL (U.K.).

Sally Hinchliffe Assistant Secretary of
FIIA(U.K.)L.

Item 27. Principal Underwriters

(a) Fidelity Distributors Corporation (FDC) acts as distributor for
all funds advised by FMR or an affiliate.

(b)

Name and Principal Positions and Offices Positions and Offices

Business Address* with Underwriter with Fund

Edward C. Johnson 3d Director Trustee and President

Michael Mlinac Director None

James Curvey Director None

Martha B. Willis President None

Eric D. Roiter Vice President Secretary

Caron Ketchum Treasurer and Controller None

Gary Greenstein Assistant Treasurer None

Jay Freedman Assistant Clerk None

Linda Holland Compliance Officer None

* 82 Devonshire Street, Boston, MA

Item 28. Location of Accounts and Records

All accounts, books, and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company, Fidelity Service
Company, Inc. or Fidelity Investments Institutional Operations
Company, Inc., 82 Devonshire Street, Boston, MA 02109, or the funds'
respective custodians, The Bank of New York, 110 Washington Street,
New York, NY; The Chase Manhattan Bank, 1 Chase Manhattan Plaza, New
York, NY; and Brown Brothers Harriman & Co., 40 Water Street, Boston,
MA.

Item 29. Management Services

Not applicable.

Item 30. Undertakings

The Registrant on behalf of Money Market Portfolio, High Income
Portfolio, Equity-Income Portfolio, Growth Portfolio and Overseas
Portfolio, undertakes (1) to call a meeting of shareholders for the
purpose of voting upon the questions of removal of a trustee or
trustees, when requested to do so by record holders of not less than
10% of its outstanding shares; and (2) to assist in communications
with other shareholders pursuant to Section 16(c)(1) and (2), whenever
shareholders meeting the qualifications set forth in Section 16(c)
seek the opportunity to communicate with other shareholders with a
view toward requesting a meeting.

The Registrant, on behalf of High Income Portfolio, Equity-Income
Portfolio, Growth Portfolio and Overseas Portfolio, provided the
information required by Item 5A is contained in the annual report,
undertakes to furnish to each person to whom a prospectus has been
delivered, upon their request and without charge, a copy of the
Registrant's latest annual report to shareholders.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 41 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Boston, and Commonwealth of Massachusetts, on the 9th day
of November 1999.

Variable Insurance Products Fund

By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
<S> <C> <C>
(Signature) (Title) (Date)

/s/Edward C. Johnson 3d President and Trustee November 9, 1999
(dagger)

Edward C. Johnson 3d (Principal Executive Officer)

/s/Richard A. Silver Treasurer November 9, 1999

Richard A. Silver

/s/Robert C. Pozen Trustee November 9, 1999

Robert C. Pozen

/s/Ralph F. Cox Trustee November 9, 1999
*

Ralph F. Cox

/s/Phyllis Burke Davis Trustee November 9, 1999
*

Phyllis Burke Davis

/s/Robert M. Gates Trustee November 9, 1999
**

Robert M. Gates

/s/E. Bradley Jones Trustee November 9, 1999
*

E. Bradley Jones

/s/Donald J. Kirk Trustee November 9, 1999
*

Donald J. Kirk

/s/Peter S. Lynch Trustee November 9, 1999
*

Peter S. Lynch

/s/Marvin L. Mann Trustee November 9, 1999
*

Marvin L. Mann

/s/William O. McCoy Trustee November 9, 1999
*

William O. McCoy

/s/Gerald C. McDonough Trustee November 9, 1999
*

Gerald C. McDonough

/s/Thomas R. Williams Trustee November 9, 1999
*

Thomas R. Williams

</TABLE>

(dagger) Signatures affixed by Robert C. Pozen pursuant to a power of
attorney dated July 17, 1997 and filed herewith.

* Signature affixed by Robert C. Hacker pursuant to a power of
attorney dated December 19, 1996 and filed herewith.

** Signature affixed by Robert C. Hacker pursuant to a power of
attorney dated March 6, 1997 and filed herewith.

POWER OF ATTORNEY

I, the undersigned President and Director, Trustee, or General
Partner, as the case may be, of the following investment companies:

Fidelity Aberdeen Street Trust Fidelity Hereford Street Trust
Fidelity Advisor Series I Fidelity Income Fund
Fidelity Advisor Series II Fidelity Institutional Cash
Fidelity Advisor Series III Portfolios
Fidelity Advisor Series IV Fidelity Institutional
Fidelity Advisor Series V Tax-Exempt Cash Portfolios
Fidelity Advisor Series VI Fidelity Investment Trust
Fidelity Advisor Series VII Fidelity Magellan Fund
Fidelity Advisor Series VIII Fidelity Massachusetts
Fidelity Beacon Street Trust Municipal Trust
Fidelity Boston Street Trust Fidelity Money Market Trust
Fidelity California Municipal Fidelity Mt. Vernon Street
Trust Trust
Fidelity California Municipal Fidelity Municipal Trust
Trust II Fidelity Municipal Trust II
Fidelity Capital Trust Fidelity New York Municipal
Fidelity Charles Street Trust Trust
Fidelity Commonwealth Trust Fidelity New York Municipal
Fidelity Concord Street Trust Trust II
Fidelity Congress Street Fund Fidelity Phillips Street Trust
Fidelity Contrafund Fidelity Puritan Trust
Fidelity Corporate Trust Fidelity Revere Street Trust
Fidelity Court Street Trust Fidelity School Street Trust
Fidelity Court Street Trust II Fidelity Securities Fund
Fidelity Covington Trust Fidelity Select Portfolios
Fidelity Daily Money Fund Fidelity Sterling Performance
Fidelity Destiny Portfolios Portfolio, L.P.
Fidelity Deutsche Mark Fidelity Summer Street Trust
Performance Fidelity Trend Fund
Portfolio, L.P. Fidelity U.S.
Fidelity Devonshire Trust Investments-Bond Fund, L.P.
Fidelity Exchange Fund Fidelity U.S.
Fidelity Financial Trust Investments-Government
Fidelity Fixed-Income Trust Securities
Fidelity Government Fund, L.P.
Securities Fund Fidelity Union Street Trust
Fidelity Hastings Street Trust Fidelity Union Street Trust II
Fidelity Yen Performance
Portfolio, L.P.
Newbury Street Trust
Variable Insurance Products
Fund
Variable Insurance Products
Fund II
Variable Insurance Products
Fund III

in addition to any other investment company for which Fidelity
Management & Research Company or an affiliate acts as investment
adviser and for which the undersigned individual serves as President
and Director, Trustee, or General Partner (collectively, the "Funds"),
hereby constitute and appoint Robert C. Pozen my true and lawful
attorney-in-fact, with full power of substitution, and with full power
to him to sign for me and in my name in the appropriate capacity, all
Registration Statements of the Funds on Form N-1A, Form N-8A, or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A, Form N-8A, or any successor thereto, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such
things in my name and on my behalf in connection therewith as said
attorney-in-fact deems necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and the Investment Company
Act of 1940, and all related requirements of the Securities and
Exchange Commission. I hereby ratify and confirm all that said
attorney-in-fact or his substitutes may do or cause to be done by
virtue hereof. This power of attorney is effective for all documents
filed on or after August 1, 1997.

WITNESS my hand on the date set forth below.

/s/Edward C. Johnson 3d July 17, 1997

Edward C. Johnson 3d

POWER OF ATTORNEY

I, the undersigned Director, Trustee, or General Partner, as the case
may be, of the following investment companies:

Fidelity Aberdeen Street Trust Fidelity Government
Fidelity Advisor Annuity Fund Securities Fund
Fidelity Advisor Series I Fidelity Hastings Street Trust
Fidelity Advisor Series II Fidelity Hereford Street Trust
Fidelity Advisor Series III Fidelity Income Fund
Fidelity Advisor Series IV Fidelity Institutional Cash
Fidelity Advisor Series V Portfolios
Fidelity Advisor Series VI Fidelity Institutional
Fidelity Advisor Series VII Tax-Exempt Cash Portfolios
Fidelity Advisor Series VIII Fidelity Institutional Trust
Fidelity Beacon Street Trust Fidelity Investment Trust
Fidelity Boston Street Trust Fidelity Magellan Fund
Fidelity California Municipal Fidelity Massachusetts
Trust Municipal Trust
Fidelity California Municipal Fidelity Money Market Trust
Trust II Fidelity Mt. Vernon Street
Fidelity Capital Trust Trust
Fidelity Charles Street Trust Fidelity Municipal Trust
Fidelity Commonwealth Trust Fidelity Municipal Trust II
Fidelity Congress Street Fund Fidelity New York Municipal
Fidelity Contrafund Trust
Fidelity Corporate Trust Fidelity New York Municipal
Fidelity Court Street Trust Trust II
Fidelity Court Street Trust II Fidelity Phillips Street Trust
Fidelity Covington Trust Fidelity Puritan Trust
Fidelity Daily Money Fund Fidelity Revere Street Trust
Fidelity Daily Tax-Exempt Fund Fidelity School Street Trust
Fidelity Destiny Portfolios Fidelity Securities Fund
Fidelity Deutsche Mark Fidelity Select Portfolios
Performance Fidelity Sterling Performance
Portfolio, L.P. Portfolio, L.P.
Fidelity Devonshire Trust Fidelity Summer Street Trust
Fidelity Exchange Fund Fidelity Trend Fund
Fidelity Financial Trust Fidelity U.S.
Fidelity Fixed-Income Trust Investments-Bond Fund, L.P.
Fidelity U.S.
Investments-Government
Securities
Fund, L.P.
Fidelity Union Street Trust
Fidelity Union Street Trust II
Fidelity Yen Performance
Portfolio, L.P.
Variable Insurance Products
Fund
Variable Insurance Products
Fund II

plus any other investment company for which Fidelity Management &
Research Company or an affiliate acts as investment adviser and for
which the undersigned individual serves as Director, Trustee, or
General Partner (collectively, the "Funds"), hereby constitute and
appoint Arthur J. Brown, Arthur C. Delibert, Stephanie A. Djinis,
Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, and Dana L.
Platt, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to
sign for me and in my name in the appropriate capacities, all
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A or any successor thereto, any Registration
Statements on Form N-14, and any supplements or other instruments in
connection therewith, and generally to do all such things in my name
and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940, and all
related requirements of the Securities and Exchange Commission. I
hereby ratify and confirm all that said attorneys-in-fact or their
substitutes may do or cause to be done by virtue hereof. This power
of attorney is effective for all documents filed on or after March 1,
1997.

WITNESS my hand on the date set forth below.

/s/Robert M. Gates March 6, 1997

Robert M. Gates

POWER OF ATTORNEY

We, the undersigned Directors, Trustees, or General Partners, as the
case may be, of the following investment companies:
Fidelity Aberdeen Street Trust Fidelity Government
Fidelity Advisor Annuity Fund Securities Fund
Fidelity Advisor Series I Fidelity Hastings Street Trust
Fidelity Advisor Series II Fidelity Hereford Street Trust
Fidelity Advisor Series III Fidelity Income Fund
Fidelity Advisor Series IV Fidelity Institutional Cash
Fidelity Advisor Series V Portfolios
Fidelity Advisor Series VI Fidelity Institutional
Fidelity Advisor Series VII Tax-Exempt Cash Portfolios
Fidelity Advisor Series VIII Fidelity Institutional Trust
Fidelity Beacon Street Trust Fidelity Investment Trust
Fidelity Boston Street Trust Fidelity Magellan Fund
Fidelity California Municipal Fidelity Massachusetts
Trust Municipal Trust
Fidelity California Municipal Fidelity Money Market Trust
Trust II Fidelity Mt. Vernon Street
Fidelity Capital Trust Trust
Fidelity Charles Street Trust Fidelity Municipal Trust
Fidelity Commonwealth Trust Fidelity Municipal Trust II
Fidelity Congress Street Fund Fidelity New York Municipal
Fidelity Contrafund Trust
Fidelity Corporate Trust Fidelity New York Municipal
Fidelity Court Street Trust Trust II
Fidelity Court Street Trust II Fidelity Phillips Street Trust
Fidelity Covington Trust Fidelity Puritan Trust
Fidelity Daily Money Fund Fidelity Revere Street Trust
Fidelity Daily Tax-Exempt Fund Fidelity School Street Trust
Fidelity Destiny Portfolios Fidelity Securities Fund
Fidelity Deutsche Mark Fidelity Select Portfolios
Performance Fidelity Sterling Performance
Portfolio, L.P. Portfolio, L.P.
Fidelity Devonshire Trust Fidelity Summer Street Trust
Fidelity Exchange Fund Fidelity Trend Fund
Fidelity Financial Trust Fidelity U.S.
Fidelity Fixed-Income Trust Investments-Bond Fund, L.P.
Fidelity U.S.
Investments-Government
Securities
Fund, L.P.
Fidelity Union Street Trust
Fidelity Union Street Trust II
Fidelity Yen Performance
Portfolio, L.P.
Variable Insurance Products
Fund
Variable Insurance Products
Fund II

plus any other investment company for which Fidelity Management &
Research Company or an affiliate acts as investment adviser and for
which the undersigned individual serves as Directors, Trustees, or
General Partners (collectively, the "Funds"), hereby constitute and
appoint Arthur J. Brown, Arthur C. Delibert, Stephanie A. Djinis,
Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, and Dana L.
Platt, each of them singly, our true and lawful attorneys-in-fact,
with full power of substitution, and with full power to each of them,
to sign for us and in our names in the appropriate capacities, all
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A or any successor thereto, any Registration
Statements on Form N-14, and any supplements or other instruments in
connection therewith, and generally to do all such things in our names
and behalf in connection therewith as said attorneys-in-fact deems
necessary or appropriate, to comply with the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940, and all
related requirements of the Securities and Exchange Commission. I
hereby ratify and confirm all that said attorneys-in-fact or their
substitutes may do or cause to be done by virtue hereof. This power
of attorney is effective for all documents filed on or after January
1, 1997.

WITNESS our hands on this nineteenth day of December, 1996.

/s/Edward C. Johnson /s/Peter S.
3d___________ Lynch________________

Edward C. Johnson 3d Peter S. Lynch

/s/J. Gary /s/William O.
Burkhead_______________ McCoy______________

J. Gary Burkhead William O. McCoy

/s/Ralph F. /s/Gerald C.
Cox___________________ McDonough___________

Ralph F. Cox Gerald C. McDonough

/s/Phyllis Burke /s/Marvin L.
Davis_____________ Mann________________

Phyllis Burke Davis Marvin L. Mann

/s/E. Bradley /s/Thomas R.
Jones________________ Williams_____________

E. Bradley Jones Thomas R. Williams

/s/Donald J. Kirk
__________________

Donald J. Kirk

Exhibit d(7)

SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY INTERNATIONAL INVESTMENT ADVISORS
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
VARIABLE INSURANCE PRODUCTS FUND ON BEHALF OF OVERSEAS PORTFOLIO

AGREEMENT made this 1st day of August, 1999, by Fidelity Management &
Research Company, a Massachusetts corporation with principal offices
at 82 Devonshire Street, Boston, Massachusetts (hereinafter called the
"Advisor"); Fidelity International Investment Advisors, a Bermuda
company with principal offices at Pembroke Hall, Pembroke, Bermuda
(hereinafter called the "Sub-Advisor"); and Variable Insurance
Products Fund, a Massachusetts business trust which may issue one or
more series of shares of beneficial interest (hereinafter called the
"Fund") on behalf of Overseas Portfolio (hereinafter called the
"Portfolio").

WHEREAS the Fund and the Advisor have entered into a Management
Contract on behalf of Portfolio, pursuant to which the Advisor acts as
investment manager of the Portfolio; and

WHEREAS the Sub-Advisor and its subsidiaries and other affiliated
persons have personnel in various locations throughout the world and
have been formed in part for the purpose of researching and compiling
information and recommendations with respect to the economies of
various countries, including securities issued in and issuers located
in such countries, and providing investment advisory services in
connection therewith;

NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the Fund, the Advisor and the
Sub-Advisor agree as follows:

1. Duties: The Advisor may, in its discretion, appoint the
Sub-Advisor to perform one or more of the following services with
respect to all or a portion of the investments of the Portfolio. The
services and the portion of the investments of the Portfolio to be
advised or managed by the Sub-Advisor shall be as agreed upon from
time to time by the Advisor and the Sub-Advisor. The Sub-Advisor shall
pay the salaries and fees of all personnel of the Sub-Advisor
performing services for the Portfolio relating to research,
statistical and investment activities.

(a) INVESTMENT ADVICE: If and to the extent requested by the
Advisor, the Sub-Advisor shall provide investment advice to the
Portfolio and the Advisor with respect to all or a portion of the
investments of the Portfolio, and in connection with such advice shall
furnish the Portfolio and the Advisor such factual information,
research reports and investment recommendations as the Advisor may
reasonably require. Such information may include written and oral
reports and analyses.

(b) INVESTMENT MANAGEMENT: If and to the extent requested by the
Advisor, the Sub-Advisor shall, subject to the supervision of the
Advisor, manage all or a portion of the investments of the Portfolio
in accordance with the investment objective, policies and limitations
provided in the Portfolio's Prospectus or other governing instruments,
as amended from time to time, the Investment Company Act of 1940 (the
"1940 Act") and rules thereunder, as amended from time to time, and
such other limitations as the Fund or Advisor may impose with respect
to the Portfolio by notice to the Sub-Advisor. With respect to the
portion of the investments of the Portfolio under its management, the
Sub-Advisor is authorized to make investment decisions on behalf of
the Portfolio with regard to any stock, bond, other security or
investment instrument, and to place orders for the purchase and sale
of such securities through such broker-dealers as the Sub-Advisor may
select. The Sub-Advisor may also be authorized, but only to the
extent such duties are delegated in writing by the Advisor, to provide
additional investment management services to the Portfolio, including
but not limited to services such as managing foreign currency
investments, purchasing and selling or writing futures and options
contracts, borrowing money, or lending securities on behalf of the
Portfolio. All investment management and any other activities of the
Sub-Advisor shall at all times be subject to the control and direction
of the Advisor and the Fund's Board of Trustees.

(c) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any or
all of the services contemplated by this Agreement directly or through
such of its subsidiaries or other affiliated persons as the
Sub-Advisor shall determine; provided, however, that performance of
such services through such subsidiaries or other affiliated persons
shall have been approved by the Fund to the extent required pursuant
to the 1940 Act and rules thereunder.

2. Information to be Provided to the Fund and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Fund and the Advisor as the Fund's Board of Trustees
or the Advisor may reasonably request from time to time, or as the
Sub-Advisor may deem to be desirable.

3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Advisor, at
its own expense, shall place all orders for the purchase and sale of
portfolio securities for the Portfolio's account with brokers or
dealers selected by the Sub-Advisor, which may include brokers or
dealers affiliated with the Advisor or Sub-Advisor. The Sub-Advisor
shall use its best efforts to seek to execute portfolio transactions
at prices which are advantageous to the Portfolio and at commission
rates which are reasonable in relation to the benefits received. In
selecting brokers or dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Portfolio and to
any other accounts over which the Sub-Advisor or Advisor exercise
investment discretion. The Sub-Advisor is authorized to pay a broker
or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the Portfolio
which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if the
Sub-Advisor determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer. This determination may be
viewed in terms of either that particular transaction or the overall
responsibilities which the Sub-Advisor has with respect to accounts
over which it exercises investment discretion. The Trustees of the
Fund shall periodically review the commissions paid by the Portfolio
to determine if the commissions paid over representative periods of
time were reasonable in relation to the benefits to the Portfolio.

4. Compensation: The Advisor shall compensate the Sub-Advisor on
the following basis for the services to be furnished hereunder.

(a) INVESTMENT ADVISORY FEE: For services provided under
subparagraph (a) of paragraph 1 of this Agreement, the Advisor agrees
to pay the Sub-Advisor a monthly Sub-Advisory Fee. The Sub-Advisory
Fee shall be equal to: (i) 30% of the monthly management fee rate
(including performance adjustments, if any) that the Portfolio is
obligated to pay the Advisor under its Management Contract with the
Advisor, multiplied by (ii) the fraction equal to the net assets of
the Portfolio as to which the Sub-Advisor shall have provided
investment advice divided by the net assets of the Portfolio for that
month. The Sub-Advisory Fee shall not be reduced to reflect expense
reimbursements or fee waivers by the Advisor, if any, in effect from
time to time.

(b) INVESTMENT MANAGEMENT FEE: For services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Advisor agrees
to pay the Sub-Advisor a monthly Investment Management Fee. The
Investment Management Fee shall be equal to: (i) 57% of the monthly
management fee rate (including performance adjustments, if any) that
the Portfolio is obligated to pay the Advisor under its Management
Contract with the Advisor, multiplied by: (ii) the fraction equal to
the net assets of the Portfolio as to which the Sub-Advisor shall have
provided investment management services divided by the net assets of
the Portfolio for that month. If in any fiscal year the aggregate
expenses of the Portfolio exceed any applicable expense limitation
imposed by any state or federal securities laws or regulations, and
the Advisor waives all or a portion of its management fee or
reimburses the Portfolio for expenses to the extent required to
satisfy such limitation, the Investment Management Fee paid to the
Sub-Advisor will be reduced by 57% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements
and the Advisor subsequently recovers all or any portion of such
waivers and reimbursements, then the Sub-Advisor shall be entitled to
receive from the Advisor a proportionate share of the amount
recovered. To the extent that waivers and reimbursements by the
Advisor required by such limitations are in excess of the Advisor's
management fee, the Investment Management Fee paid to the Sub-Advisor
will be reduced to zero for that month, but in no event shall the
Sub-Advisor be required to reimburse the Advisor for all or a portion
of such excess reimbursements.

(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph 1
for the same portion of the investments of the Portfolio for the same
period, the fees paid to the Sub-Advisor with respect to such
investments shall be calculated exclusively under subparagraph (b) of
this paragraph 4.

5. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the
Sub-Advisor hereunder or by the Advisor under the Management Contract
with the Portfolio, which expenses payable by the Portfolio shall
include, without limitation, (i) interest and taxes; (ii) brokerage
commissions and other costs in connection with the purchase or sale of
securities and other investment instruments; (iii) fees and expenses
of the Fund's Trustees other than those who are "interested persons"
of the Fund, the Sub-Advisor or the Advisor; (iv) legal and audit
expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the Fund and the Portfolio's shares for distribution
under state and federal securities laws; (vii) expenses of printing
and mailing reports and notices and proxy material to shareholders of
the Portfolio; (viii) all other expenses incidental to holding
meetings of the Portfolio's shareholders, including proxy
solicitations therefor; (ix) a pro rata share, based on relative net
assets of the Portfolio and other registered investment companies
having Advisory and Service or Management Contracts with the Advisor,
of 50% of insurance premiums for fidelity and other coverage; (x) its
proportionate share of association membership dues; (xi) expenses of
typesetting for printing Prospectuses and Statements of Additional
Information and supplements thereto; (xii) expenses of printing and
mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to
indemnify the Fund's Trustees and officers with respect thereto.

6. Interested Persons: It is understood that Trustees, officers,
and shareholders of the Fund are or may be or become interested in the
Advisor or the Sub-Advisor as directors, officers or otherwise and
that directors, officers and stockholders of the Advisor or the
Sub-Advisor are or may be or become similarly interested in the Fund,
and that the Advisor or the Sub-Advisor may be or become interested in
the Fund as a shareholder or otherwise.

7. Services to Other Companies or Accounts: The services of the
Sub-Advisor to the Advisor are not to be deemed to be exclusive, the
Sub-Advisor being free to render services to others and engage in
other activities, provided, however, that such other services and
activities do not, during the term of this Agreement, interfere, in a
material manner, with the Sub-Advisor's ability to meet all of its
obligations hereunder. The Sub-Advisor shall for all purposes be an
independent contractor and not an agent or employee of the Advisor or
the Fund.

8. Standard of Care: In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Sub-Advisor, the Sub-Advisor shall not be
subject to liability to the Advisor, the Fund or to any shareholder of
the Portfolio for any act or omission in the course of, or connected
with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.

9. Duration and Termination of Agreement; Amendments:

(a) Subject to prior termination as provided in subparagraph (d) of
this paragraph 9, this Agreement shall continue in force until July
31, 2000 and indefinitely thereafter, but only so long as the
continuance after such period shall be specifically approved at least
annually by vote of the Fund's Board of Trustees or by vote of a
majority of the outstanding voting securities of the Portfolio.

(b) This Agreement may be modified by mutual consent of the Advisor,
the Sub-Advisor and the Portfolio, such consent on the part of the
Portfolio to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.

(c) In addition to the requirements of subparagraphs (a) and (b) of
this paragraph 9, the terms of any continuance or modification of this
Agreement must have been approved by the vote of a majority of those
Trustees of the Fund who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval.

(d) Either the Advisor, the Sub-Advisor or the Portfolio may, at any
time on sixty (60) days' prior written notice to the other parties,
terminate this Agreement, without payment of any penalty, by action of
its Board of Trustees or Directors, or with respect to the Portfolio
by vote of a majority of its outstanding voting securities. This
Agreement shall terminate automatically in the event of its
assignment.

10. Limitation of Liability: The Sub-Advisor is hereby expressly
put on notice of the limitation of shareholder liability as set forth
in the Declaration of Trust of the Fund and agrees that any
obligations of the Fund or the Portfolio arising in connection with
this Agreement shall be limited in all cases to the Portfolio and its
assets, and the Sub-Advisor shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Portfolio.
Nor shall the Sub-Advisor seek satisfaction of any such obligation
from the Trustees or any individual Trustee.

11. Governing Law: This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of
Massachusetts.

The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested
persons," when used herein, shall have the respective meanings
specified in the 1940 Act as now in effect or as hereafter amended.

IN WITNESS WHEREOF the parties hereto have caused this instrument to
be signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.

FIDELITY INTERNATIONAL INVESTMENT ADVISORS

BY: __/s/David J. Saul_____________________________
David J. Saul
Director

FIDELITY MANAGEMENT & RESEARCH COMPANY

BY: __/s/Robert C. Pozen __________________________
Robert C. Pozen
President

VARIABLE INSURANCE PRODUCTS FUND ON BEHALF OF
OVERSEAS PORTFOLIO

BY: ___/s/Robert C. Prozen__________________________
Robert C. Pozen
Senior Vice President

Exhibit m(1)

DISTRIBUTION AND SERVICE PLAN
Initial Class Shares

1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Rule 12b-1 under the Investment Company Act of 1940, as amended (the
"Act") for the original class of shares of Money Market Portfolio
("Initial Class"), a class of shares of Money Market Portfolio (the
"Fund"), a series of Variable Insurance Products Fund (the "Trust").

2. The Trust has entered into a General Distribution Agreement on
behalf of the Fund with Fidelity Distributors Corporation (the
"Distributor") under which the Distributor uses all reasonable
efforts, consistent with its other business, to secure purchasers for
the Fund's shares of beneficial interest ("Shares"). Under the
agreement, the Distributor pays the expenses of printing and
distributing any prospectuses, reports and other literature used by
the Distributor, advertising, and other promotional activities in
connection with the offering of Shares of the Fund for sale to the
public. It is recognized that Fidelity Management & Research Company
(the "Adviser") may use its management fee revenues as well as its
past profits or its resources from any other source, to make payments
to the Distributor with respect to any expenses incurred in connection
with the distribution of Initial Class Shares, including the
activities referred to above.

3. The Adviser directly, or through the Distributor, may, subject to
the approval of the Trustees, make payments to securities dealers and
other third parties who engage in the sale of Initial Class Shares or
who render shareholder support services, including but not limited to
providing office space, equipment and telephone facilities, answering
routine inquiries regarding the Fund, processing shareholder
transactions and providing such other shareholder services as the
Trust may reasonably request.

4. The Initial Class will not make separate payments as a result of
this Plan to the Adviser, Distributor or any other party, it being
recognized that the Fund presently pays, and will continue to pay, a
management fee to the Adviser. To the extent that any payments made
by the Fund to the Adviser, including payment of management fees,
should be deemed to be indirect financing of any activity primarily
intended to result in the sale of Initial Class Shares within the
meaning of Rule 12b-1, then such payments shall be deemed to be
authorized by this Plan.

5. This Plan shall become effective upon the first business day of
the month following approval by a vote of at least a "majority of the
outstanding voting securities" (as defined in the Act) of the Initial
Class, this plan having been approved by a vote of a majority of the
Trustees of the Trust, including a majority of the Trustees who are
not "interested persons" of the Trust (as defined in the Act) and who
have no direct or indirect financial interest in the operation of this
Plan or in any agreement related to the Plan (the "Independent
Trustees"), cast in person at a meeting called for the purpose of
voting on this Plan.

6. This Plan shall, unless terminated as hereinafter provided, remain
in effect until April 30, 2000, and from year to year thereafter,
provided, however, that such continuance is subject to approval
annually by a vote of a majority of the Trustees of the Trust,
including a majority of the Independent Trustees, cast in person at a
meeting called for the purpose of voting on this Plan. This Plan may
be amended at any time by the Board of Trustees, provided that (a) any
amendment to authorize direct payments by the Initial Class to finance
any activity primarily intended to result in the sale of Initial Class
Shares, to increase materially the amount spent by the Initial Class
for distribution, shall be effective only upon approval by a vote of a
majority of the outstanding voting securities of the Initial Class and
(b) any material amendments of this Plan shall be effective only upon
approval in the manner provided in the first sentence of this
paragraph 6.

7. This Plan may be terminated at any time, without the payment of
any penalty, by a vote of a majority of the Independent Trustees or by
a vote of a majority of the outstanding voting securities of the
Initial Class.

8. During the existence of this Plan, the Trust shall require the
Adviser and/or Distributor to provide the Trust, for review by the
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any
activity primarily intended to result in the sale of Initial Class
Shares (making estimates of such costs where necessary or desirable)
and the purposes for which such expenditures were made.

9. This Plan does not require the Adviser or Distributor to perform
any specific type or level of distribution activities or to incur any
specific level of expenses for activities primarily intended to result
in the sale of Initial Class Shares.

10. Consistent with the limitation of shareholder liability as set
forth in the Trust's Declaration of Trust, any obligation assumed by
Initial Class pursuant to this Plan and any agreement related to this
Plan shall be limited in all cases to Initial Class and its assets and
shall not constitute an obligation of any shareholder of the Trust or
any other class of the Fund, series of the Trust, or class of such
series.

11. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.

Exhibit m(2)

DISTRIBUTION AND SERVICE PLAN
Initial Class Shares

1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Rule 12b-1 under the Investment Company Act of 1940, as amended (the
"Act") for the original class of shares of High Income Portfolio
("Initial Class"), a class of shares of High Income Portfolio (the
"Fund"), a series of Variable Insurance Products Fund (the "Trust").

11. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.

Exhibit m(3)

DISTRIBUTION AND SERVICE PLAN
Initial Class Shares

1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Rule 12b-1 under the Investment Company Act of 1940, as amended (the
"Act") for the original class of shares of Equity-Income Portfolio
("Initial Class"), a class of shares of Equity-Income Portfolio (the
"Fund"), a series of Variable Insurance Products Fund (the "Trust").

11. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.

Exhibit m(4)

DISTRIBUTION AND SERVICE PLAN
Initial Class Shares

1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Rule 12b-1 under the Investment Company Act of 1940, as amended (the
"Act") for the original class of shares of Growth Portfolio ("Initial
Class"), a class of shares of Growth Portfolio (the "Fund"), a series
of Variable Insurance Products Fund (the "Trust").

11. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.

Exhibit m(5)

DISTRIBUTION AND SERVICE PLAN
Initial Class Shares

1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Rule 12b-1 under the Investment Company Act of 1940, as amended (the
"Act") for the original class of shares of Overseas Portfolio
("Initial Class"), a class of shares of Overseas Portfolio (the
"Fund"), a series of Variable Insurance Products Fund (the "Trust").

6. This Plan shall, unless terminated as hereinafter provided, remain
in effect until April 30, 2000, and from year to year thereafter,
provided, however, that such continuance is subject to approval
annually by a vote of a majority of the Trustees of the Trust,
including a majority of the Independent Trustees, cast in person at a
meeting called for the purpose of voting on this Plan. This Plan may
be amended at any time by the Board of Trustees, provided that (a) any
amendment to authorize direct payments by the Initial Class to finance
any activity primarily intended to result in the sale of Initial Class
Shares, to increase materially the amount spent by the Initial Class
for distribution, shall be effective only upon approval by a vote of a
majority of the outstanding voting securities of the Initial Class,
and (b) any material amendments of this Plan shall be effective only
upon approval in the manner provided in the first sentence of this
paragraph 6.

11. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.

Exhibit m(6)

DISTRIBUTION AND SERVICE PLAN
Service Class Shares

1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Securities and Exchange Commission Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "Act") for the Service Class
shares of High Income Portfolio ("Service Class"), a class of shares
of High Income Portfolio (the "Fund"), a portfolio of Variable
Insurance Products Fund (the "Trust"). The Fund's shares of
beneficial interest ("Shares") may from time to time be offered to
insurance companies for allocation to certain of their separate
accounts established for the purpose of funding variable annuity
contracts and variable life insurance policies ("Variable Products").

2. The Trust has entered into a General Distribution Agreement on
behalf of the Fund with Fidelity Distributors Corporation (the
"Distributor"), under which the Distributor uses all reasonable
efforts, consistent with its other business, to secure purchasers of
the Fund's Shares. Such efforts may include, but neither are required
to include nor are limited to, the following: (1) formulation and
implementation of marketing and promotional activities, such as mail
promotions and television, radio, newspaper, magazine and other mass
media advertising; (2) preparation, printing and distribution of sales
literature; (3) preparation, printing and distribution of prospectuses
of the Fund and reports to recipients other than existing insurance
company shareholders; (4) obtaining such information, analyses and
reports with respect to marketing and promotional activities as the
Distributor may, from time to time, deem advisable; (5) making
payments to insurance companies and others engaged in the sale of
Shares or who engage in shareholder support services; and (6)
providing training, marketing and support to such insurance companies
and others with respect to Shares.

3. In consideration for the services provided and the expenses
incurred by the Distributor pursuant to the General Distribution
Agreement and paragraph 2 hereof, all with respect to Service Class
shares, Service Class shall pay to the Distributor a fee at the annual
rate of 0.25% (or such lesser amount as the Trustees may, from time to
time, determine) of the average daily net assets of Service Class
throughout the month. The determination of daily net assets shall be
made at the close of business each day throughout the month and
computed in the manner specified in the Fund's then current Prospectus
for the determination of the net asset value of the Fund's Service
Class Shares.

4. The Distributor may use all or any portion of the fee received
pursuant to this Plan to compensate insurance companies or others who
have engaged in the sale of Service Class Shares or in shareholder
support services pursuant to agreements with the Distributor, or to
pay any of the expenses associated with other activities authorized
under paragraph 2 hereof. Such services may include, but are not
limited to, the following: (1) answering questions about the Fund
from owners of Variable Products; (2) receiving and answering
correspondence from owners of Variable Products (including requests
for prospectuses and statements of additional information for the
Fund); (3) performing sub-accounting with respect to Variable Product
values allocated to the Fund; (4) preparing, printing and distributing
reports of values to Variable Product owners who have values allocated
to the Fund; (5) printing and distributing prospectuses, statements of
additional information, any supplements thereto, and shareholder
reports; (6) preparing, printing and distributing marketing materials
for Variable Products; (7) assisting customers in completing
applications for Variable Products and selecting underlying mutual
fund investment options; (8) preparing, printing and distributing
sub-account performance figures for sub-accounts investing in Fund
Shares; and (9) providing other reasonable assistance in connection
with the distribution of Fund Shares to insurers.

5. The Fund presently pays, and will continue to pay, a management
fee to Fidelity Management & Research Company (the "Adviser") pursuant
to a management agreement between the Fund and the Adviser (the
"Management Contract"). It is recognized that the Adviser may use its
management fee revenue, as well as its past profits or its resources
from any other source, to make payments to the Distributor with
respect to any expenses incurred in connection with the distribution
of Service Class Shares, including the activities referred to in
paragraph 2 hereof. To the extent that the payment of management fees
by the Fund to the Adviser should be deemed to be indirect financing
of any activity primarily intended to result in the sale of Service
Class Shares within the meaning of Rule 12b-1, then such payment shall
be deemed to be authorized by this Plan.

6. This Plan shall become effective upon approval by a vote of a
majority of the Trustees of the Trust, including a majority of the
Trustees who are not "interested persons" of the Trust (as defined in
the Act) and who have no direct or indirect financial interest in the
operation of this Plan or in any agreement related to the Plan (the
"Independent Trustees"), cast in person at a meeting called for the
purpose of voting on this Plan.

7. This Plan shall, unless terminated as hereinafter provided, remain
in effect until April 30, 2000, and from year to year thereafter;
provided, however, that such continuance is subject to approval
annually by a vote of a majority of the Trustees of the Trust,
including a majority of the Independent Trustees, cast in person at a
meeting called for the purpose of voting on this Plan. This Plan may
be amended at any time by the Board of Trustees, provided that (a) any
amendment to increase materially the fee provided for in paragraph 3
hereof shall be effective only upon approval by a vote of a majority
of the outstanding voting securities of Service Class and (b) any
material amendment of this Plan shall be effective only upon approval
in the manner provided in the first sentence of this paragraph 7.

8. This Plan may be terminated at any time, without the payment of
any penalty, by a vote of a majority of the Independent Trustees or by
a vote of a majority of the outstanding voting securities of Service
Class.

9. During the existence of this Plan, the Trust shall require the
Adviser and/or the Distributor to provide the Trust, for review by the
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any
activity primarily intended to result in the sale of shares of Service
Class (making estimates of such costs where necessary or desirable)
and the purposes for which such expenditures were made.

10. This Plan does not require the Adviser or Distributor to perform
any specific type or level of distribution activities or to incur any
specific level of expenses for activities primarily intended to result
in the sale of Service Class Shares.

11. Consistent with the limitation of shareholder liability as set
forth in the Trust's Declaration of Trust, any obligation assumed by
Service Class pursuant to this Plan and any agreement related to this
Plan shall be limited in all cases to Service Class and its assets and
shall not constitute an obligation of any shareholder of the Trust or
of any other class of the Fund, series of the Trust, or class of such
series.

12. If any provision of the Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.

Exhibit m(7)

DISTRIBUTION AND SERVICE PLAN
Service Class Shares

1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Securities and Exchange Commission Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "Act") for the Service Class
shares of Equity-Income Portfolio ("Service Class"), a class of shares
of Equity-Income Portfolio (the "Fund"), a portfolio of Variable
Insurance Products Fund (the "Trust"). The Fund's shares of
beneficial interest ("Shares") may from time to time be offered to
insurance companies for allocation to certain of their separate
accounts established for the purpose of funding variable annuity
contracts and variable life insurance policies ("Variable Products").

12. If any provision of the Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.

Exhibit m(8)

DISTRIBUTION AND SERVICE PLAN
Service Class Shares

1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Securities and Exchange Commission Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "Act") for the Service Class
shares of Growth Portfolio ("Service Class"), a class of shares of
Growth Portfolio (the "Fund"), a portfolio of Variable Insurance
Products Fund (the "Trust"). The Fund's shares of beneficial interest
("Shares") may from time to time be offered to insurance companies for
allocation to certain of their separate accounts established for the
purpose of funding variable annuity contracts and variable life
insurance policies ("Variable Products").

12. If any provision of the Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.

Exhibit m(9)

DISTRIBUTION AND SERVICE PLAN
Service Class Shares

1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Securities and Exchange Commission Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "Act") for the Service Class
shares of Overseas Portfolio ("Service Class"), a class of shares of
Overseas Portfolio (the "Fund"), a portfolio of Variable Insurance
Products Fund (the "Trust"). The Fund's shares of beneficial interest
("Shares") may from time to time be offered to insurance companies for
allocation to certain of their separate accounts established for the
purpose of funding variable annuity contracts and variable life
insurance policies ("Variable Products").

12. If any provision of the Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.

Exhibit m(10)

FORM OF
DISTRIBUTION AND SERVICE PLAN
VARIABLE INSURANCE PRODUCT FUND: MONEY MARKET PORTFOLIO
Service Class 2 Shares

1. This Distribution and Service Plan (the "Plan"), when effective
in accordance with its terms, shall be the written plan contemplated
by Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "Act") for Service Class 2 Shares of Money Market Portfolio
("Service Class 2"), a class of shares of Money Market Portfolio (the
"Fund"), a series of Variable Insurance Products Fund (the "Trust").

2. The Trust has entered into a General Distribution Agreement on
behalf of the Fund with Fidelity Distributors Corporation (the
"Distributor") under which the Distributor uses all reasonable
efforts, consistent with its other business, to secure purchasers of
the Fund's shares ("Shares"). Such efforts may include, but neither
are required to include nor are limited to, the following: (1)
formulation and implementation of marketing and promotional
activities, such as mail promotions and television, radio, newspaper,
magazine and other mass media advertising; (2) preparation, printing
and distribution of sales literature; (3) preparation, printing and
distribution of prospectuses of the Fund and reports to recipients
other than existing insurance company shareholders; (4) obtaining such
information, analyses and reports with respect to marketing and
promotional activities as the Distributor may, from time to time, deem
advisable; (5) making payments to insurance companies and others
engaged in the sale of Shares or who engage in shareholder support
services; and (6) providing training, marketing and support to such
insurance companies and others with respect to Shares.

3. In accordance with such terms as the Trustees may, from time to
time establish, and in conjunction with its services under the General
Distribution Agreement with respect to Service Class 2 Shares, the
Distributor is hereby expressly authorized to make payments to
insurance companies in connection with the sale of Service Class 2
Shares. Such payments may be paid as a percentage of the dollar
amount of purchases of Service Class 2 Shares attributable to a
particular insurance company, or may take such other form as may be
approved by the Trustees.

4. In consideration of the services provided and the expenses
incurred by the Distributor pursuant to the General Distribution
Agreement and paragraphs 2 and 3 hereof, all with respect to Service
Class 2 Shares:

(a) Service Class 2 shall pay to the Distributor a monthly
distribution fee at the annual rate of [ %] (or such lesser
amount as the Trustees may, from time to time, determine) of the
average daily net assets of Service Class 2 throughout the month. The
determination of daily net assets shall be made at the close of
business each day throughout the month and computed in the manner
specified in the Fund's then current Prospectus for the determination
of the net asset value of Service Class 2 Shares, but shall exclude
assets attributable to any other class of Shares of the Fund. The
Distributor may, but shall not be required to, use all or any portion
of the distribution fee received pursuant to the Plan to compensate
insurance companies who have engaged in the sale of Service Class 2
Shares or in shareholder support services with respect to Service
Class 2 Shares pursuant to agreements with the Distributor, or to pay
any of the expenses associated with other activities authorized under
paragraphs 2 and 3 hereof; and

5. The Fund presently pays, and will continue to pay, a management
fee to Fidelity Management & Research Company (the "Adviser") pursuant
to a management agreement between the Fund and the Adviser (the
"Management Contract"). It is recognized that the Adviser may use its
management fee revenue, as well as its past profits or its resources
from any other source, to make payment to the Distributor with respect
to any expenses incurred in connection with the distribution of
Service Class 2 Shares, including the activities referred to in
paragraphs 2 and 3 hereof. To the extent that the payment of
management fees by the Fund to the Adviser should be deemed to be
indirect financing of any activity primarily intended to result in the
sale of Service Class 2 Shares within the meaning of Rule 12b-1, then
such payment shall be deemed to be authorized by this Plan.

6. This Plan shall become effective upon the approval by a vote of a
majority of the Trustees of the Trust, including a majority of
Trustees who are not "interested persons" of the Trust (as defined in
the Act) and who have no direct or indirect financial interest in the
operation of the Plan or in any agreement related to the Plan (the
"Independent Trustees"), cast in person at a meeting called for the
purpose of voting on this Plan.

7. This Plan shall, unless terminated as hereinafter provided,
remain in effect until April 30, 200_, and from year to year
thereafter; provided, however, that such continuance is subject to
approval annually by a vote of a majority of the Trustees of the
Trust, including a majority of the Independent Trustees, cast in
person at a meeting called for the purpose of voting on this Plan.
This Plan may be amended at any time by the Board of Trustees,
provided that (a) any amendment to increase materially the fees
provided for in paragraph 4 hereof shall be effective only upon
approval by a vote of a majority of the outstanding voting securities
of Service Class 2 and (b) any material amendment of this Plan shall
be effective only upon approval in the manner provided in the first
sentence of this paragraph 7.

8. This Plan may be terminated at any time, without the payment of
any penalty, by vote of a majority of the Independent Trustees or by a
vote of a majority of the outstanding voting securities of Service
Class 2.

9. During the existence of this Plan, the Trust shall require the
Adviser and/or the Distributor to provide the Trust, for review by the
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any
activity primarily intended to result in the sale of Service Class 2
Shares (making estimates of such costs where necessary or desirable)
and the purposes for which such expenditures were made.

11. Consistent with the limitation of shareholder liability as set
forth in the Trust's Declaration of Trust, any obligation assumed by
Service Class 2 pursuant to this Plan and any agreement related to
this Plan shall be limited in all cases to Service Class 2 and its
assets and shall not constitute an obligation of any shareholder of
the Trust or of any other class of the Fund, series of the Trust or
class of such series.

12. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.

Exhibit m(11)

FORM OF
DISTRIBUTION AND SERVICE PLAN
VARIABLE INSURANCE PRODUCT FUND: HIGH INCOME PORTFOLIO
Service Class 2 Shares

1. This Distribution and Service Plan (the "Plan"), when effective
in accordance with its terms, shall be the written plan contemplated
by Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "Act") for Service Class 2 Shares of High Income Portfolio
("Service Class 2"), a class of shares of High Income Portfolio (the
"Fund"), a series of Variable Insurance Products Fund (the "Trust").

2. The Trust has entered into a General Distribution Agreement on
behalf of the Fund with Fidelity Distributors Corporation (the
"Distributor") under which the Distributor uses all reasonable
efforts, consistent with its other business, to secure purchasers of
the Fund's shares ("Shares"). Such efforts may include, but neither
are required to include nor are limited to, the following: (1)
formulation and implementation of marketing and promotional
activities, such as mail promotions and television, radio, newspaper,
magazine and other mass media advertising; (2) preparation, printing
and distribution of sales literature; (3) preparation, printing and
distribution of prospectuses of the Fund and reports to recipients
other than existing insurance company shareholders; (4) obtaining such
information, analyses and reports with respect to marketing and
promotional activities as the Distributor may, from time to time, deem
advisable; (5) making payments to insurance companies and others
engaged in the sale of Shares or who engage in shareholder support
services; and (6) providing training, marketing and support to such
insurance companies and others with respect to Shares.

5. The Fund presently pays, and will continue to pay, a management
fee to Fidelity Management & Research Company (the "Adviser") pursuant
to a management agreement between the Fund and the Adviser (the
"Management Contract"). It is recognized that the Adviser may use its
management fee revenue, as well as its past profits or its resources
from any other source, to make payment to the Distributor with respect
to any expenses incurred in connection with the distribution of
Service Class 2 Shares, including the activities referred to in
paragraphs 2 and 3 hereof. To the extent that the payment of
management fees by the Fund to the Adviser should be deemed to be
indirect financing of any activity primarily intended to result in the
sale of Service Class 2 Shares within the meaning of Rule 12b-1, then
such payment shall be deemed to be authorized by this Plan.

9. During the existence of this Plan, the Trust shall require the
Adviser and/or the Distributor to provide the Trust, for review by the
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any
activity primarily intended to result in the sale of Service Class 2
Shares (making estimates of such costs where necessary or desirable)
and the purposes for which such expenditures were made.

12. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.

Exhibit m(12)

FORM OF
DISTRIBUTION AND SERVICE PLAN
VARIABLE INSURANCE PRODUCT FUND: EQUITY-INCOME PORTFOLIO
Service Class 2 Shares

1. This Distribution and Service Plan (the "Plan"), when effective
in accordance with its terms, shall be the written plan contemplated
by Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "Act") for Service Class 2 Shares of Equity-Income Portfolio
("Service Class 2"), a class of shares of Equity-Income Portfolio (the
"Fund"), a series of Variable Insurance Products Fund (the "Trust").

2. The Trust has entered into a General Distribution Agreement on
behalf of the Fund with Fidelity Distributors Corporation (the
"Distributor") under which the Distributor uses all reasonable
efforts, consistent with its other business, to secure purchasers of
the Fund's shares ("Shares"). Such efforts may include, but neither
are required to include nor are limited to, the following: (1)
formulation and implementation of marketing and promotional
activities, such as mail promotions and television, radio, newspaper,
magazine and other mass media advertising; (2) preparation, printing
and distribution of sales literature; (3) preparation, printing and
distribution of prospectuses of the Fund and reports to recipients
other than existing insurance company shareholders; (4) obtaining such
information, analyses and reports with respect to marketing and
promotional activities as the Distributor may, from time to time, deem
advisable; (5) making payments to insurance companies and others
engaged in the sale of Shares or who engage in shareholder support
services; and (6) providing training, marketing and support to such
insurance companies and others with respect to Shares.

5. The Fund presently pays, and will continue to pay, a management
fee to Fidelity Management & Research Company (the "Adviser") pursuant
to a management agreement between the Fund and the Adviser (the
"Management Contract"). It is recognized that the Adviser may use its
management fee revenue, as well as its past profits or its resources
from any other source, to make payment to the Distributor with respect
to any expenses incurred in connection with the distribution of
Service Class 2 Shares, including the activities referred to in
paragraphs 2 and 3 hereof. To the extent that the payment of
management fees by the Fund to the Adviser should be deemed to be
indirect financing of any activity primarily intended to result in the
sale of Service Class 2 Shares within the meaning of Rule 12b-1, then
such payment shall be deemed to be authorized by this Plan.

9. During the existence of this Plan, the Trust shall require the
Adviser and/or the Distributor to provide the Trust, for review by the
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any
activity primarily intended to result in the sale of Service Class 2
Shares (making estimates of such costs where necessary or desirable)
and the purposes for which such expenditures were made.

12. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.

Exhibit m(13)

FORM OF
DISTRIBUTION AND SERVICE PLAN
VARIABLE INSURANCE PRODUCT FUND: EQUITY-INCOME PORTFOLIO
Service Class 2 Shares

1. This Distribution and Service Plan (the "Plan"), when effective
in accordance with its terms, shall be the written plan contemplated
by Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "Act") for Service Class 2 Shares of Equity-Income Portfolio
("Service Class 2"), a class of shares of Equity-Income Portfolio (the
"Fund"), a series of Variable Insurance Products Fund (the "Trust").

2. The Trust has entered into a General Distribution Agreement on
behalf of the Fund with Fidelity Distributors Corporation (the
"Distributor") under which the Distributor uses all reasonable
efforts, consistent with its other business, to secure purchasers of
the Fund's shares ("Shares"). Such efforts may include, but neither
are required to include nor are limited to, the following: (1)
formulation and implementation of marketing and promotional
activities, such as mail promotions and television, radio, newspaper,
magazine and other mass media advertising; (2) preparation, printing
and distribution of sales literature; (3) preparation, printing and
distribution of prospectuses of the Fund and reports to recipients
other than existing insurance company shareholders; (4) obtaining such
information, analyses and reports with respect to marketing and
promotional activities as the Distributor may, from time to time, deem
advisable; (5) making payments to insurance companies and others
engaged in the sale of Shares or who engage in shareholder support
services; and (6) providing training, marketing and support to such
insurance companies and others with respect to Shares.

5. The Fund presently pays, and will continue to pay, a management
fee to Fidelity Management & Research Company (the "Adviser") pursuant
to a management agreement between the Fund and the Adviser (the
"Management Contract"). It is recognized that the Adviser may use its
management fee revenue, as well as its past profits or its resources
from any other source, to make payment to the Distributor with respect
to any expenses incurred in connection with the distribution of
Service Class 2 Shares, including the activities referred to in
paragraphs 2 and 3 hereof. To the extent that the payment of
management fees by the Fund to the Adviser should be deemed to be
indirect financing of any activity primarily intended to result in the
sale of Service Class 2 Shares within the meaning of Rule 12b-1, then
such payment shall be deemed to be authorized by this Plan.

9. During the existence of this Plan, the Trust shall require the
Adviser and/or the Distributor to provide the Trust, for review by the
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any
activity primarily intended to result in the sale of Service Class 2
Shares (making estimates of such costs where necessary or desirable)
and the purposes for which such expenditures were made.

12. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.

Exhibit m(14)

FORM OF
DISTRIBUTION AND SERVICE PLAN
VARIABLE INSURANCE PRODUCT FUND: OVERSEAS PORTFOLIO
Service Class 2 Shares

1. This Distribution and Service Plan (the "Plan"), when effective
in accordance with its terms, shall be the written plan contemplated
by Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "Act") for Service Class 2 Shares of Overseas Portfolio ("Service
Class 2"), a class of shares of Overseas Portfolio (the "Fund"), a
series of Variable Insurance Products Fund (the "Trust").

2. The Trust has entered into a General Distribution Agreement on
behalf of the Fund with Fidelity Distributors Corporation (the
"Distributor") under which the Distributor uses all reasonable
efforts, consistent with its other business, to secure purchasers of
the Fund's shares ("Shares"). Such efforts may include, but neither
are required to include nor are limited to, the following: (1)
formulation and implementation of marketing and promotional
activities, such as mail promotions and television, radio, newspaper,
magazine and other mass media advertising; (2) preparation, printing
and distribution of sales literature; (3) preparation, printing and
distribution of prospectuses of the Fund and reports to recipients
other than existing insurance company shareholders; (4) obtaining such
information, analyses and reports with respect to marketing and
promotional activities as the Distributor may, from time to time, deem
advisable; (5) making payments to insurance companies and others
engaged in the sale of Shares or who engage in shareholder support
services; and (6) providing training, marketing and support to such
insurance companies and others with respect to Shares.

5. The Fund presently pays, and will continue to pay, a management
fee to Fidelity Management & Research Company (the "Adviser") pursuant
to a management agreement between the Fund and the Adviser (the
"Management Contract"). It is recognized that the Adviser may use its
management fee revenue, as well as its past profits or its resources
from any other source, to make payment to the Distributor with respect
to any expenses incurred in connection with the distribution of
Service Class 2 Shares, including the activities referred to in
paragraphs 2 and 3 hereof. To the extent that the payment of
management fees by the Fund to the Adviser should be deemed to be
indirect financing of any activity primarily intended to result in the
sale of Service Class 2 Shares within the meaning of Rule 12b-1, then
such payment shall be deemed to be authorized by this Plan.

9. During the existence of this Plan, the Trust shall require the
Adviser and/or the Distributor to provide the Trust, for review by the
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any
activity primarily intended to result in the sale of Service Class 2
Shares (making estimates of such costs where necessary or desirable)
and the purposes for which such expenditures were made.

12. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.