SUPPLEMENT TO THE
VARIABLE INSURANCE PRODUCTS FUND:
MONEY MARKET PORTFOLIO, HIGH INCOME PORTFOLIO,
EQUITY-INCOME PORTFOLIO,GROWTH PORTFOLIO, AND OVERSEAS PORTFOLIO
VARIABLE INSURANCE PRODUCTS FUND II: INVESTMENT GRADE BOND PORTFOLIO,
ASSET MANAGER PORTFOLIO, ASSET MANAGER: GROWTH PORTFOLIO, INDEX 500
PORTFOLIO, AND CONTRAFUND PORTFOLIO
VARIABLE INSURANCE PRODUCTS FUND III: BALANCED PORTFOLIO, GROWTH &
INCOME PORTFOLIO, GROWTH OPPORTUNITIES PORTFOLIO, AND MID CAP
PORTFOLIO
INITIAL CLASS AND SERVICE CLASS
APRIL 30, 1999
STATEMENT OF ADDITIONAL INFORMATION
THE FOLLOWING INFORMATION REPLACES SIMILAR INFORMATION FOUND UNDER
THE HEADING "INVESTMENT LIMITATIONS OF MONEY MARKET PORTFOLIO"IN THE
"INVESTMENT POLICIES AND LIMITATIONS" SECTION BEGINNING ON PAGE 2.
(iv) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party.
(vii) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money up to 15% of
the fund's net assets to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (The limitation does not apply to
purchases of debt securities or to repurchase agreements.)
THE FOLLOWING INFORMATION REPLACES SIMILAR INFORMATION FOUND UNDER
THE HEADING "INVESTMENT LIMITATIONS OF HIGH INCOME,
EQUITY-INCOME, GROWTH, OVERSEAS, GROWTH & INCOME, BALANCED, GROWTH
OPPORTUNITIES, INVESTMENT GRADE BOND, ASSET MANAGER, INDEX 500,
CONTRAFUND, ASSET MANAGER: GROWTH, AND MID CAP PORTFOLIOS'" IN THE
"INVE STMENT POLICIES AND LIMITATIONS" SECTION ON PAGE 4.
(iii) Each fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purpos es of fundamental investment
limitation (3)).
( v) Each fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money up to 15% of
the fund's net assets to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (This limitation does not apply
to purchases of debt securities or to repurchase agreements.)
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION FOR HIGH
INCOME PORTFOLIO FOUND UNDER THE HEADING "INVESTMENT LIMITATIONS OF
HIGH INCOME, EQUITY-INCOME, GROWTH, OVERSEAS, GROWTH & INCOME,
BALANCED, GROWTH OPPORTUNITIES, INVESTMENT GRADE BOND, ASSET MANAGER,
INDEX 500, CONTRAFUND, ASSET MANAGER: GROWTH, AND MID CAP PORTFOLIOS"
IN THE "INVE STMENT POLICIES AND LIMITATIONS" SECTION ON PAGE 4.
For purposes of investing at least 65% of the fund's total assets
in income-producing debt securities, preferred stocks and convertible
securities, FMR interprets "total assets" to exclude collateral
received for securities le nding transactions.
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION FOR
EQUITY-INCOME PORTFOLIO FOUND UNDER THE HEADING "INVESTMENT
LIMITATIONS OF HIGH INCOME, EQUITY-INCOME, GROWTH, OVERSEAS,
GROWTH & INCOME, BALANCED, GROWTH OPPORTUNITIES, INVESTMENT GRADE
BOND, ASSET MANAGER, INDEX 500, CONTRAFUND, ASSET MANAGER: GROWTH, AND
MID CAP PORTFOLIOS" IN THE "INVE STMENT POLICIES AND LIMITATIONS"
SECTION ON PAGE 4.
For purposes of investing at least 65% of the fund's total assets
in income-producing equity securities, FMR interprets "total assets"
to exclude collateral received for securities le nding
transactions.
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION FOR
OVERSEAS PORTFOLIO FOUND UNDER THE HEADING "INVESTMENT
LIMITATIONS OF HIGH INCOME, EQUITY-INCOME, GROWTH, OVERSEAS,
GROWTH & INCOME, BALANCED, GROWTH OPPORTUNITIES, INVESTMENT GRADE
BOND, ASSET MANAGER, INDEX 500, CONTRAFUND, ASSET MANAGER: GROWTH, AND
MID CAP PORTFOLIOS" IN THE "INVE STMENT POLICIES AND LIMITATIONS"
SECTION ON PAGE 4.
For purposes of investing at least 65% of the fund's total assets
in foreign securities, FMR interprets "total assets" to exclude
collateral received for securities le nding transactions.
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION FOR
BALANCED PORTFOLIO FOUND UNDER THE HEADING "INVESTMENT
LIMITATIONS OF HIGH INCOME, EQUITY-INCOME, GROWTH, OVERSEAS,
GROWTH & INCOME, BALANCED, GROWTH OPPORTUNITIES, INVESTMENT GRADE
BOND, ASSET MANAGER, INDEX 500, CONTRAFUND, ASSET MANAGER: GROWTH, AND
MID CAP PORTFOLIOS" IN THE "INVE STMENT POLICIES AND LIMITATIONS"
SECTION ON PAGE 4.
For purposes of investing at least 25% of the fund's total assets
in fixed-income senior securities (including debt securities and
preferred stock), FMR interprets "total assets" to exclude collateral
received for securities le nding transactions.
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION FOR MID
CAP PORTFOLIO FOUND UNDER THE HEADING "INVESTMENT LIMITATIONS OF
HIGH INCOME, EQUITY-INCOME, GROWTH, OVERSEAS, GROWTH & INCOME,
BALANCED, GROWTH OPPORTUNITIES, INVESTMENT GRADE BOND, ASSET MANAGER,
INDEX 500, CONTRAFUND, ASSET MANAGER: GROWTH, AND MID CAP PORTFOLIOS"
IN THE "INVE STMENT POLICIES AND LIMITATIONS" SECTION ON PAGE 4.
For purposes of investing at least 65% of the fund's total assets
in securities of companies with medium market capitalization, FMR
interprets "total assets" to exclude collateral received for
securities le nding transactions.
THE FOLLOWING INFORMATION REPLACES THE SIMILAR INFORMATION IN
THE"INV ESTMENT POLICIES AND LIMITATIONS" SECTION ON PAGE 15.
SOURCES OF LIQUIDITY OR CREDIT SUPPORT. Issuers may employ
various forms of credit and liquidity enhancements, including letters
of credit, guarantees, puts, and demand features, and insurance
provided by domestic or foreign entities such as banks and other
financial institutions. FMR may rely on its evaluation of the credit
of the liquidity or credit enhancement provider in determining whether
to purchase a security supported by such enhancement. In evaluating
the credit of a foreign bank or other foreign entities, FMR will
consider whether adequate public information about the entity is
available and whether the entity may be subject to unfavorable
political or economic developments, currency controls, or other
government restrictions that might affect its ability to honor its
commitment. Changes in the credit quality of the entity providing the
enhancement could affect the value of the security or a fund's share
price.
THE FOLLOWING INFORMATION REPLACES THE 10TH PARAGRAPH FOUND UNDER THE
HEADING "PORTFOLIO TRANSACTIONS" ON PAGE 38.
To the extent permitted by applicable law, FMR (BT for Index 500) is
authorized to allocate portfolio transactions in a manner that takes
into account assistance received in the distribution of shares of the
funds or other Fidelity funds (Index 500) and to use the research
services of brokerage and other firms that have provided such
assistance. FMR (BT for Index 500) may use research services provided
by and place agency transactions with National Financial Services
Corporation (NFSC) and Fidelity Brokerage Services Japan LLC (FBSJ),
indirect subsidiaries of FMR Corp. (and, for Index 500, BT Brokerage
Corporation and BT Futures Corp., indirect subsidiaries of Deutsche
Bank AG), if the commissions are fair, reasonable, and comparable to
commissions charged by non-affiliated, qualified brokerage firms for
similar services. Prior to December 9, 1997, FMR used research
services provided by and placed agency transactions with Fidelity
Brokerage Services (FBS), an indirect subsidiary of FMR Corp.
THE FOLLOWING INFORMATION REPLACES THE LAST PARAGRAPH FOUND UNDER THE
HEADING "CONTROL OF INVESTMENT ADVISERS" ON PAGE 69.
BT, a New York banking corporation with principal offices at 130
Liberty Street, New York, New York 10006, is a wholly owned subsidiary
of Deutsche Bank AG, whose principal offices are at Taunusanlage 12,
D-60325 Frankfurt am Main, Federal Republic of Germany. Deutsche Bank
AG is a major global banking institution that is engaged in a wide
range of financial services, including investment management, mutual
funds, retail and commercial banking, investment banking and
insurance.
THE FOLLOWING INFORMATION SUPPLEMENTS THE SIMILAR INFORMATION FOUND
UNDER THE HEADING "SUB-ADVISERS" IN THE "MANAGEMENT CONTRACTS" SECTION
ON PAGE 74.
For the fiscal year ended December 31, 1998, FMR paid BT fees of
$149,981.
THE FOLLOWING INFORMATION REPLACES THE SIMILAR INFORMATION FOUND IN
THE "MANAGEMENT CONTRACTS" SECTION ON PAGE 75.
On behalf of High Income, Balanced, Growth & Income, Growth
Opportunities, Asset Manager, Cont rafund, Asset Manager: Growth,
and Mid Cap Portfolios, for providing discretionary investment
management and executing portfolio transactions, the sub-advisers are
compensated as follows:
(small solid bullet) FMR pays FMR U.K. and FMR Far East, a fee
equal to 50% of its monthly management fee with respect to the fund's
average net assets managed by the sub-adviser on a discretionary
basis.
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION FOUND IN THE
"MANAGEMENT CONTRACTS" SECTION ON PAGE 75.
On behalf of Overseas Portfolio, for providing discretionary
investment management and executing portfolio transactions, the
sub-advisers are compensated as follows:
(small solid bullet) FMR pays FMR U.K. and FMR Far East, a fee
equal to 50% of its monthly management fee with respect to the fund's
average net assets managed by the sub-adviser on a discretionary
basis.
(small solid bullet) FMR pays FIIA a fee equal to 57% of its
monthly management fee with respect to the fund's average net assets
managed by the sub-adviser on a discretionary basis.
(small solid bullet) FIIA pays FIIA(U.K.)L a fee equal to 110% of
FIIA(U.K.)L's costs incurred in connection with providing
discretionary investment manageme nt services.
THE FOLLOWING INFORMATION REPLACES THE SIMILAR INFORMATION FOUND
UNDER THE HEADING "SUB-ADVISERS" IN THE "MANAGEMENT CONTRACTS" SECTION
ON PAGE 76.
For discretionary investment management and execution of portfolio
transactions, no fees were paid to FMR U.K., FMR Far East or FIIA on
behalf of High Income, Balanced, Growth & Income, Growth
Opportunities, Asset Manager, Contrafund, Asset Manager: Growth, Mid
Cap, and Overseas Portfolio s for the past three fiscal years.
THE FOLLOWING INFORMATION REPLACES THE SIMILAR INFORMATION FOUND IN
THE "DESCRIPTION OF THE TRUSTS" SECTION BEGINNING ON PAGE 79.
AUDITORS. PricewaterhouseCoopers LLP, One Post Office
Square, Boston, Massachusetts serves as independent accountant for
Equity-Income Portfolio, Growth Portfolio, High Income Portfolio,
Money Market Portfolio, and Overseas Portfolio. The auditor examines
financial statements for the funds and provides other audit, tax, and
related services. PricewaterhouseCoopers LLP, 160 Federal Street,
Boston, Massachusetts serves as independent accountant for Mid Cap
Portfolio. The auditor examines financial statements for the fund and
provides other audit, tax, and related services.
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, Massachusetts
served as independent accountant for Asset Manager Portfolio, Asset
Manager: Growth Portfolio, Contrafund Portfolio, Index 500 Portfolio,
Investment Grade Bond Portfolio, Balanced Portfolio, Growth & Income
Portfolio, and Growth Opportunities Portfolio for the most recent
fiscal period. The auditor examined financial statements for the funds
and provided other audit, tax, and related services. Effective
February 18, 1999, Deloitte & Touche LLP, 200 Berkeley Street, Boston,
Massachusetts serves as independent accountant for Asset Manager
Portfolio, Asset Manager: Growth Portfolio, Contrafund Portfolio,
Index 500 Portfolio, Investment Grade Bond Portfolio, Balanced
Portfolio, Growth & Income Portfolio, and Growth Opportunities
Portfolio for the next fiscal period. The auditor examines financial
statements for the funds and provides other audit, tax, and related
services.
