VARIABLE INSURANCE PRODUCTS FUND II, N-30D, 1996-02-15

VARIABLE INSURANCE PRODUCTS FUND II
N-30D, 1996-02-15

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(2_FIDELITY_LOGOS)
VARIABLE INSURANCE PRODUCTS
FUND II
INVESTMENT GRADE BOND PORTFOLIO
ASSET MANAGER PORTFOLIO
INDEX 500 PORTFOLIO
ASSET MANAGER: GROWTH PORTFOLIO
CONTRAFUND PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 1995
CONTENTS

<TABLE>
<CAPTION>
<S> <C> <C>
MARKET ENVIRONMENT VIPFII-3 A REVIEW OF WHAT HAPPENED DURING THE PAST YEAR

INVESTMENT GRADE BOND PORTFOLIO VIPFII-4 PERFORMANCE AND INVESTMENT SUMMARY
VIPFII-5 FUND TALK: THE MANAGER'S OVERVIEW
VIPFII-6 INVESTMENTS
VIPFII-10 FINANCIAL STATEMENTS

ASSET MANAGER PORTFOLIO VIPFII-12 PERFORMANCE AND INVESTMENT SUMMARY
VIPFII-13 FUND TALK: THE MANAGER'S OVERVIEW
VIPFII-14 INVESTMENTS
VIPFII-21 FINANCIAL STATEMENTS

INDEX 500 PORTFOLIO VIPFII-23 PERFORMANCE AND INVESTMENT SUMMARY
VIPFII-24 FUND TALK: THE MANAGER'S OVERVIEW
VIPFII-25 INVESTMENTS
VIPFII-32 FINANCIAL STATEMENTS

ASSET MANAGER: GROWTH PORTFOLIO VIPFII-34 PERFORMANCE AND INVESTMENT SUMMARY
VIPFII-35 FUND TALK: THE MANAGER'S OVERVIEW
VIPFII-36 INVESTMENTS
VIPFII-39 FINANCIAL STATEMENTS

CONTRAFUND PORTFOLIO VIPFII-41 PERFORMANCE AND INVESTMENT SUMMARY
VIPFII-42 FUND TALK: THE MANAGER'S OVERVIEW
VIPFII-43 INVESTMENTS
VIPFII-48 FINANCIAL STATEMENTS

NOTES TO FINANCIAL STATEMENTS VIPFII-50 NOTES TO THE FINANCIAL STATEMENTS

REPORT OF INDEPENDENT ACCOUNTANTS VIPFII-53 THE AUDITORS' OPINION

DISTRIBUTIONS VIPFII-54

</TABLE>

THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS
NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
MARKET ENVIRONMENT

Most stock and bond markets rebounded in 1995, after experiencing
volatility and inconsistent returns in 1994. Returns were fueled by
declining interest rates, moderate economic growth, sustained corporate
earnings growth and a relative absence of inflation. The U.S. stock market
outpaced counterparts in the developed world and those in emerging markets.
Returns from bond markets overseas generally topped those provided by the
U.S., although the U.S. bond market still was quite strong.
U.S. STOCK MARKETS
The Standard & Poor's Composite Index of 500 Stocks - a broad measure of
U.S. stock performance - rose 37.58% for the 12 months ended December 31,
1995, well above the market's long-term average annual return. The NASDAQ
Composite Index - a measure of small stock performance - rose 39.92%
(excluding dividends). The Dow Jones Industrial Average - an index of 30
blue-chip stocks - posted a return of 36.72%, closing above 5000 for the
first time in November.
Strong corporate earnings and a favorable interest rate environment helped
the U.S. stock market post robust returns. With inflation posing little
threat, interest rates fell during much of 1995. The Federal Reserve Board
cut short-term interest rates twice, in July and December. Lower interest
rates helped bolster earnings, as they reduced companies' borrowing costs.
A relatively weak dollar also helped sustain earnings, with American
products and services remaining fairly cheap overseas. Investor sentiment
toward the stock market was extremely positive, evidenced by a flurry of
successful initial public offerings throughout the year.
Market activity was marked by rapid sector rotation, with investors
reacting swiftly to breaking news. Technology was one of the best
performing market sectors until the fourth quarter, fueled by improving
earnings associated with strong growth in personal computers and related
products. Internet-related stocks posted extremely strong share price
gains. Although increases in cellular subscriptions helped semiconductor
stocks earlier in the year, that industry saw share price drops later in
the year due to concerns about over-capacity. Expanding inventories and
evidence of an economic slowdown hurt technology stocks later in the year.
Biotechnology issues saw a resurgence, partly because the sector had
struggled to the point where valuations - stock prices relative to other
measures such as earnings - appeared attractive. Consumer nondurables -
such as food, beverage and tobacco companies - health care and traditional
big-name growth stocks showed strength as investors sought companies that
traditionally have steady earnings growth regardless of the economic
environment.
Cyclical stocks - those that usually rise and fall with the economy -
provided subpar returns during 1995 as a result of over-capacity and
evidence the economy was slowing. Industrial commodities, such as chemicals
and paper, faltered due to decreased demand, despite the prospect for
renewed economic growth - and concurrent future earnings growth - resulting
from interest rate declines. On the other hand, lower interest rates and
continued merger and acquisition activity helped financial stocks perform
well. Regional Bell operating companies - RBOCs or "Baby Bells"-performed
well in the second half of the year, because they offered strong yields,
and because of their potential for growth as they enter new businesses.
FOREIGN STOCK MARKETS
Foreign stock markets showed mixed results in 1995. The Morgan Stanley EAFE
(Europe, Australasia, Far East) index was up 11.21%. Although interest
rates declined in most European countries, economies were generally
stagnant. While equity indexes in some countries posted strong returns, in
some cases these results were due to the strong performance of large
companies that made up a significant portion of the index, such as Nokia in
Finland and Ericsson in Sweden. The Morgan Stanley Europe Index rose 21.62%
in 1995. Japanese companies were hindered by a strong yen - which made
their products expensive overseas - and a weak economy earlier in the year.
However, in the fourth quarter of the year, both the Japanese market and
economy started to rebound. According to Morgan Stanley Capital
International, Japanese stocks rose 0.69% in U.S. dollars for the year.
Emerging markets struggled in 1995, hurt by a lack of capital inflows
caused by Mexico's peso devaluation in December 1994. This negative
sentiment contributed to the -5.21% return of the Morgan Stanley Emerging
Markets Free Index in 1995.
U.S. BOND MARKETS
U.S. bond markets posted strong returns in 1995. The Lehman Brothers
Aggregate Bond Index - a broad measure of U.S. taxable bonds - posted a
total return of 18.47% in 1995. A strong, year-long rally helped bonds
recover from the effects of the sharply rising interest rates seen in 1994.
Indications of a slowing economy and a relative absence of inflation
pressures encouraged bond investors, helping to push interest rates lower.
Prospects for a balanced budget agreement also helped to fuel optimism in
the markets. Monetary policy also played a role in the bond market's
performance. In an effort to thwart the possibility of a recession, the
Federal Reserve Board lowered the fed funds rates twice, in July and
December. Mortgage-backed securities also benefited from this environment,
as illustrated by the performance of the Salomon Brothers Mortgage Index,
which returned 16.77% during the year. The high-yield bond market also
turned in a strong performance in 1995, driven by generally good earnings,
strong demand for high-yield bonds among investors searching for high
current income and declining interest rates. The Merrill Lynch High Yield
Master Index rose 19.91%.
FOREIGN BOND MARKETS
Both developed and emerging fixed-income markets recorded strong returns in
1995. For the 12 months ended December 31, 1995, the Salomon Brothers World
Government Bond Index - a proxy of bond market performance in developed
nations including the U.S. - rose 19.04%. Bond markets in developed
countries benefited from slow economic growth and relatively low inflation
pressures. This led to a more favorable interest rate environment, as the
central banks of the U.S., Germany and Great Britain all lowered their
respective short-term interest rates. Emerging markets shrugged off the
fallout from December 1994's Mexican peso devaluation to record strong
returns. The J.P. Morgan Emerging Markets Bond Index posted a 27.54% return
for the year. The bulk of emerging markets' total return came from a
springtime rally following the announcement of a $50 billion bailout
package for Mexico by the U.S. Treasury and the International Monetary
Fund.
VARIABLE INSURANCE PRODUCTS FUND II: INVESTMENT GRADE BOND PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY

PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. A fund's total return includes
changes in a fund's share price, plus reinvestment of any dividends
(income) and capital gains (the profits the fund earns when it sells
securities that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

Investment Grade Bond 17.32% 9.23% 8.92%

Lehman Brothers Intermediate 15.33% 8.61% n/a
Government-Corporate Bond Index

Lehman Brothers Aggregate Bond Index 18.47% 9.48% n/a

AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.

UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of
how it will do tomorrow. Bond prices, for
example, generally move in the opposite
direction of interest rates. In turn, the share price,
return, and yield of a fund that invests in bonds
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare these figures to the Lehman Brothers Intermediate
Government-Corporate Bond Index - a broad measure of the performance of
intermediate (one- to ten-year) bonds. This benchmark includes reinvested
dividends and capital gains, if any. Consumer Price Index information is
not available from the U.S. Department of Labor. Therefore, the CPI
comparison has not been included in this report.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, December 5, 1988.
If Fidelity had not reimbursed certain fund expenses, the past five years
and life of fund total return figures would have been lower.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, THE TOTAL RETURNS WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER LIFE OF FUND
VIP II: InvesLB Aggreg
12/31/88 10000.00 10000
01/31/89 10086.92 10143.88
02/28/89 10109.25 10070.36
03/31/89 10172.02 10113.9
04/30/89 10285.31 10325.54
05/31/89 10399.91 10596.87
06/30/89 10600.00 10919.52
07/31/89 10765.35 11151.64
08/31/89 10679.56 10986.42
09/30/89 10721.69 11042.65
10/31/89 10887.69 11314.84
11/30/89 10981.36 11422.68
12/31/89 11026.21 11453.25
01/31/90 11001.11 11317.15
02/28/90 11063.52 11353.48
03/31/90 11097.11 11361.84
04/30/90 11101.82 11257.75
05/31/90 11276.11 11591.07
06/30/90 11364.07 11777.05
07/31/90 11476.89 11939.97
08/31/90 11475.79 11780.51
09/30/90 11520.66 11877.97
10/31/90 11521.38 12028.78
11/30/90 11590.77 12287.71
12/31/90 11711.43 12479.17
01/31/91 11735.04 12633.43
02/28/91 11853.10 12741.27
03/31/91 12053.80 12828.93
04/30/91 12230.89 12967.91
05/31/91 12325.33 13043.74
06/30/91 12348.94 13037.11
07/31/91 12455.20 13217.9
08/31/91 12714.93 13503.94
09/30/91 12951.04 13777.57
10/31/91 13092.71 13930.97
11/30/91 13234.39 14058.71
12/31/91 13629.42 14476.23
01/31/92 13494.11 14279.29
02/29/92 13567.97 14372.13
03/31/92 13543.27 14291.11
04/30/92 13642.04 14394.34
05/31/92 13851.92 14665.96
06/30/92 14012.41 14867.8
07/31/92 14296.36 15171.13
08/31/92 14382.78 15324.82
09/30/92 14555.62 15506.47
10/31/92 14370.44 15300.89
11/30/92 14333.40 15304.35
12/31/92 14536.36 15547.71
01/31/93 14841.14 15845.85
02/28/93 15093.07 16123.24
03/31/93 15159.39 16190.42
04/30/93 15252.23 16303.16
05/31/93 15278.75 16323.92
06/30/93 15570.53 16619.76
07/31/93 15676.64 16713.76
08/31/93 15955.15 17006.72
09/30/93 16034.73 17053.43
10/31/93 16114.31 17117.15
11/30/93 16034.73 16971.54
12/31/93 16129.93 17063.52
01/31/94 16312.59 17293.91
02/28/94 16045.19 16993.45
03/31/94 15678.93 16574.49
04/30/94 15538.06 16442.14
05/31/94 15495.80 16439.84
06/30/94 15453.53 16403.51
07/31/94 15707.10 16729.33
08/31/94 15721.19 16750.09
09/30/94 15552.14 16503.56
10/31/94 15566.23 16488.86
11/30/94 15594.40 16452.24
12/31/94 15523.97 16565.84
01/31/95 15749.36 16893.69
02/28/95 16053.30 17295.35
03/31/95 16155.46 17401.46
04/30/95 16374.37 17644.53
05/31/95 17031.09 18327.33
06/30/95 17162.44 18461.69
07/31/95 17104.06 18420.46
08/31/95 17308.38 18642.77
09/30/95 17468.91 18824.14
10/31/95 17702.41 19068.94
11/30/95 17965.10 19354.69
12/29/95 18213.20 19626.31

Let's say you invested $10,000 in Investment Grade Bond Portfolio on
December 31, 1988, shortly after the fund started. By December 31, 1995,
your investment would have grown to $18,213 - an 82.13% increase. With
reinvested dividends and capital gains, if any, a $10,000 investment in the
Lehman Brothers Aggregate Bond Index would have grown to $19,626 over the
same period - a 96.26% increase. Henceforth, the fund will compare its
performance to the Lehman Brothers Aggregate Bond Index rather than the
Lehman Brothers Intermediate Government-Corporate Bond Index. The Lehman
Brothers Aggregate Bond Index average maturity is closer to the range
permitted for the fund, which normally maintains an average maturity of up
to ten years. For comparison purposes, both indexes are shown under the
heading "Average Annual Total Returns."
INVESTMENT SUMMARY
QUALITY DIVERSIFICATION AS OF DECEMBER 31, 1995
(MOODY'S RATINGS) % OF FUND'S
INVESTMENTS

Aaa 69.0

Aa 2.4

A 9.4

Baa 6.8

Ba 1.4

B 0.0

Not rated 2.6

TABLE EXCLUDES SHORT-TERM INVESTMENTS. SECURITIES RATED AS "BA" BY MOODY'S
WERE RATED INVESTMENT GRADE BY OTHER NATIONALLY RECOGNIZED RATING AGENCIES
OR ASSIGNED AN INVESTMENT GRADE RATING AT THE TIME OF ACQUISITION BY
FIDELITY.
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1995
Years 7.5

AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
TOP FIVE MARKET SECTORS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS

Finance 13.3

Technology 1.7

Nondurables 1.6

Utilities 1.1

Retail & Wholesale 0.8

VARIABLE INSURANCE PRODUCTS FUND II: INVESTMENT GRADE BOND PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW

An interview with
Michael Gray, Portfolio Manager of Investment Grade Bond Portfolio
NOTE TO SHAREHOLDERS: On August 24, 1995, Michael Gray became portfolio
manager of Investment Grade Bond Portfolio.
Q. HOW HAS THE FUND PERFORMED OVER THE PAST YEAR, MICHAEL?
A. During the 12 months ended December 31, 1995, the fund performed better
than the 15.33% return of the Lehman Brothers Intermediate
Government-Corporate Bond Index, a broad measure of the performance of
intermediate (one- to 10-year) bonds, but underperformed the 18.47% return
of the Lehman Brothers Aggregate Bond Index, a broad measure of U.S.
taxable bonds.
Q. WHAT INFLUENCED THE FUND'S PERFORMANCE RELATIVE TO THESE TWO INDEXES?
A. The fund's performance used to be compared against the Lehman Brothers
Intermediate Government-Corporate Bond Index. However, earlier in the year
that changed, and performance started to be compared to the Lehman Brothers
Aggregate Bond Index. While this change has effectively broadened the
fund's investment universe to include a larger slice of the domestic bond
market, the fund's relative performance against the two indexes had more to
do with its duration. Duration is a way to estimate how sensitive a bond
fund's share price is to changes in interest rates. The longer the duration
of the fund, the more likely its share price is to move up as interest
rates fall, or down as interest rates rise. During the period, the fund's
duration - which was 4.3 years as of December 31 - started to be managed so
that it is in line with the Lehman Brothers Aggregate Bond Index. The
aggregate bond index has a duration that is longer than that of the
intermediate government-corporate index. As interest rates fell during
1995, the fund's new, longer duration helped it outperform the
government-corporate index. At the same time, the fund didn't have this
longer duration during the whole period, leading it to underperform the
aggregate bond index.
Q. MICHAEL, WHAT MOVES HAVE YOU MADE SINCE TAKING OVER THE FUND IN AUGUST?
A. I've reduced corporate exposure, increased investments in Treasury
securities and moderately reduced mortgage-backed securities. The corporate
market has been very strong over the course of the year. Valuation levels
have become very high and my view on a risk/reward basis is that corporates
have become over-valued. I've used that strength to reduce corporate
exposure. After selling corporates, I've been buying government securities,
mainly Treasuries because they made more sense on a risk/reward basis. I've
reduced mortgage-backed securities moderately because they've lagged
Treasuries.
Q. MICHAEL, THIS IS YOUR FIRST REPORT AS MANAGER OF THE FUND. CAN YOU
DESCRIBE YOUR INVESTMENT APPROACH TO US?
A. First of all, I don't predict the direction of interest rates. Instead,
I structure the fund so that its duration is roughly the same as the
aggregate index. Beyond that, my approach is to add relative value one bond
at a time by buying cheap securities and selling rich ones. I also seek out
value in sectors or in particular parts of the market, trying to overweight
those that will perform well and underweight those where I think there is
risk. The process is one of using Fidelity's resources to analyze
individual securities and valuations, trying to find the best opportunities
for the fund.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. Even though 1995 was a stellar year for bonds, the outlook for the
market is reasonably good. That's because the Fed could continue to lower
short-term interest rates as long as the economy remains fairly weak and
inflation remains low. The corporate area is one where there is potential
risk. If the economy deteriorates, corporate earnings could suffer. With
valuations at their richest levels in quite some time, the upside in the
corporate market is limited while the potential downside is notable.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.

FUND FACTS
GOAL: seeks to provide a high rate of income
consistent with reasonable risk, by investing in
a broad range of investment-grade,
fixed-income securities. In addition, the fund
seeks to protect capital
START DATE: December 5, 1988
SIZE: as of December 31, 1995, more than
$181 million
MANAGER: Michael Gray, since August 1995;
manager, Fidelity Investment Grade Bond
Fund since 1987; Spartan Investment Grade
Bond Fund, since 1992; previously managed
Fidelity Advisor Limited Term Bond Fund (now
Fidelity Advisor Intermediate Bond Fund), Fidelity
Mortgage Securities Fund, Fidelity Ginnie Mae
Fund, Fidelity Government Securities Fund, and
Fidelity Intermediate Bond Fund; joined Fidelity
in 1982
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND II: INVESTMENT GRADE BOND PORTFOLIO
INVESTMENTS DECEMBER 31, 1995

Showing Percentage of Total Value of Investment in Securities

CORPORATE BONDS - 19.7%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
CONVERTIBLE BONDS - 0.3%
RETAIL & WHOLESALE - 0.3%
DRUG STORES - 0.3%
Rite Aid Corp. liquid yield
option notes 0%, 7/24/06 Baa1 $ 1,000,000 $ 558,750
NONCONVERTIBLE BONDS - 19.4%
FINANCE - 13.3%
ASSET BACKED SECURITIES - 3.5%
Concord Leasing, Inc. 5.04%,
7/15/98 (b) AAA 132,632 131,554
Discover Card Master Trust I
6.90%, 2/16/00 A2 260,000 264,956
Discover Card Trust:
7 7/8%, 4/16/98 A2 100,000 100,500
6 1/8%, 5/15/98 A2 200,000 199,936
Ford Credit:
Auto Loan Master Trust
7 3/8%, 4/15/99 Aaa 500,000 510,350
Grantor Trust 5.90%, 10/15/00 Aaa 972,697 977,104
General Motors Acceptance Corp.
Grantor Trust 5.70%, 12/15/96 Aaa 2,623 2,625
KeyCorp Auto Grantor Trust
5.80%, 7/15/00 A3 118,544 118,615
Premier Auto Trust:
4.90%, 12/15/98 Aaa 601,312 598,024
8.05%, 4/4/00 Aaa 1,000,000 1,055,313
Railcar Trust 7 3/4%, 6/1/04 Aaa 857,690 922,821
Sears Credit Account Master
Trust II 7%, 1/15/04 Aaa 1,000,000 1,046,250
Standard Credit Card Master Trust I:
8 1/4%, 10/7/97 A2 285,000 290,299
7.65%, 2/15/00 A2 150,000 155,578
Union Federal Savings 1994-D
8.20%, 1/10/01 Baa2 98,963 101,870
6,475,795
BANKS - 5.5%
Bank of Boston Corp. 9 1/2%,
8/15/97 Baa1 75,000 79,544
Citicorp:
9.47%, 5/22/96 A2 750,000 760,260
euro 5.825%, 1/30/98 (d) A2 500,000 497,000
First Fidelity Bancorporation
8 1/2%, 4/1/98 A3 250,000 264,550
First Hawaiian Bank secured
6.93%, 12/1/03 (b) A1 960,000 969,216
First Maryland Bancorp 10 3/8%,
8/1/99 Baa1 500,000 571,805
Firstar Corp. 7.15%,
9/1/00 A3 640,000 663,898
KeyCorp 8.40%, 4/1/99 A2 310,000 332,128
Korea Development Bank yankee
6 1/2%, 11/15/02 A1 1,000,000 1,012,680
Marine Midland Bank:
euro 5.8125%, 9/27/96 (d) Baa1 1,000,000 997,500
8 5/8%, 3/1/97 Baa1 250,000 257,283

MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
Mellon Financial Co. 6 1/2%,
12/1/97 A2 $ 200,000 $ 203,214
Meridian Bancorp, Inc. 6%,
12/1/96 (d) Baa1 900,000 898,434
National City Corp.
5.8125%, 1/31/97 (d) A2 850,000 850,689
Signet Banking Corp. 6%,
5/15/97 (d) Baa2 350,000 347,687
Sovran Financial Corp. 9 3/4%,
6/15/99 A3 770,000 858,311
Union Planters Corp. 6 3/4%,
11/1/05 Baa3 400,000 407,008
9,971,207
CREDIT & OTHER FINANCE - 3.1%
Beneficial Corp. 9.40%, 2/7/96 A2 150,000 150,453
Chrysler Financial Corp. 6%,
4/15/96 A3 500,000 500,140
Ford Motor Credit Co. euro
9 5/8%, 2/27/96 A1 250,000 252,500
General Motors Acceptance Corp.:
5.65%, 12/15/97 A3 1,000,000 1,001,350
8%, 2/3/97 A3 1,400,000 1,436,274
Greyhound Financial Corp.
8 1/4%, 3/11/97 Baa1 460,000 472,558
Household Finance Corp.:
7.80%, 11/1/96 A2 350,000 355,765
6 3/4%, 6/1/00 A2 520,000 535,600
6 3/8% 6/30/00 A2 300,000 305,625
Westinghouse Credit Corp.:
8 3/4%,11/15/96 Ba1 258,000 261,359
8.93%, 6/30/99 Ba1 400,000 419,632
5,691,256
INSURANCE - 1.0%
Metropolitan Life Insurance Co.
6.30%, 11/1/03 (b) Aa3 770,000 761,992
Nationwide Mutual Insurance Co.
6 1/2%, 2/15/04 (b) Aa3 130,000 129,628
Ohio National Life Insurance Co.
8 7/8%, 7/15/04 (b) A3 830,000 941,801
1,833,421
SAVINGS & LOANS - 0.2%
Golden West Financial Corp.
10 1/4%, 5/15/97 A3 350,000 370,468
TOTAL FINANCE 24,342,147
INDUSTRIAL MACHINERY & EQUIPMENT - 0.4%
ELECTRICAL EQUIPMENT - 0.4%
Westinghouse Electric Corp.:
7 3/4%, 4/15/96 Ba1 300,000 301,263
8.68%, 12/10/97 Ba1 200,000 205,288
9%, 2/6/98 Ba1 200,000 206,728
713,279
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
NONDURABLES - 1.6%
BEVERAGES - 0.3%
Coca-Cola Enterprises, Inc.
7 7/8%, 2/1/02 A3 $ 500,000 $ 548,290
FOODS - 1.2%
Nabisco Inc. 6.70%, 6/15/02 Baa2 1,055,000 1,072,819
Ralcorp Holdings, Inc. 8 3/4%,
9/15/04 Ba1 1,000,000 1,125,000
2,197,819
TOBACCO - 0.1%
Philip Morris Companies, Inc.
8 7/8%, 7/1/96 A2 100,000 101,643
TOTAL NONDURABLES 2,847,752
RETAIL & WHOLESALE - 0.5%
GENERAL MERCHANDISE STORES - 0.5%
Sears Roebuck & Co.:
9%, 9/15/96 A2 475,000 485,393
9.23%, 8/6/98 A2 450,000 486,810
972,203
SERVICES - 0.1%
LEASING & RENTAL - 0.1%
Ryder System, Inc. 9 1/4%,
5/15/01 A3 200,000 227,530
TECHNOLOGY - 1.7%
COMPUTERS & OFFICE EQUIPMENT - 1.7%
Comdisco, Inc.:
9 3/4%, 1/15/97 Baa2 200,000 207,890
7 3/4%, 1/29/97 Baa2 700,000 713,678
7.73%, 2/18/97 Baa2 1,000,000 1,020,220
6 1/2%, 6/15/00 Baa2 1,200,000 1,221,540
3,163,328
TRANSPORTATION - 0.7%
AIR TRANSPORTATION - 0.7%
AMR Corp.:
9.76%, 1/11/96 Baa3 100,000 100,074
7 3/4%, 12/1/97 Baa3 140,000 143,777
9.55%, 3/6/98 Baa3 400,000 428,370
Delta Air Lines, Inc. equipment
trust certificate 8.54%, 1/2/07 Baa2 450,689 495,181
1,167,402
UTILITIES - 1.1%
ELECTRIC UTILITY - 0.2%
British Columbia Hydro & Power
Authority yankee 12 1/2%,
1/15/14 Aa2 290,000 354,073
GAS - 0.9%
Florida Gas 7 3/4%,
11/1/97 (b) Baa2 220,000 227,368
Southwest Gas Co. 9 3/4%,
6/15/02 Baa3 1,000,000 1,174,910

MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
Transcontinental Gas Pipe
Line Corp. extendible
6.21%, 5/15/00 Baa1 $ 300,000 $ 300,282
1,702,560
TOTAL UTILITIES 2,056,633
TOTAL NONCONVERTIBLE BONDS 35,490,274
TOTAL CORPORATE BONDS
(Cost $35,092,425) 36,049,024
U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS - 44.4%
U.S. TREASURY OBLIGATIONS - 39.9%
7 1/4%, 11/15/96 Aaa 930,000 945,401
9%, 5/15/98 Aaa 10,070,000 10,903,897
9 1/4%, 8/15/98 Aaa 6,550,000 7,184,499
5 1/8%, 12/31/98 Aaa 2,365,000 2,356,864
9 1/8%, 5/15/99 Aaa 62,000 69,188
7 3/4%, 12/31/99 Aaa 8,070,000 8,757,241
12 3/8%, 5/15/04 Aaa 5,125,000 7,420,026
11 3/4%, 2/15/10 Aaa 620,000 884,083
12 3/4%, 11/15/10 Aaa 545,000 830,100
13 7/8%, 5/15/11 Aaa 30,000 48,830
9%, 11/15/18 Aaa 8,540,000 11,631,736
8 7/8%, 2/15/19 Aaa 9,260,000 12,482,202
8 1/8%, 8/15/19 Aaa 3,870,000 4,865,906
12%, 8/15/23 Aaa 3,140,000 4,838,049
73,218,022
U.S. GOVERNMENT AGENCY OBLIGATIONS - 4.5%
Federal Home Loan Mortgage
Corp. 4.78%, 2/10/97
(callable) Aaa 170,000 168,679
Government Trust Certificate:
(assets of Trust guaranteed by
U.S. Government through
Defense Security Assistance
Agency):
Class 1-C, 9 1/4%, 11/15/01 Aaa 284,000 315,496
Class 2-E, 9.40%, 5/15/02 Aaa 1,000,000 1,115,670
Class T-2, 9.40%, 11/15/96 Aaa 448,480 457,198
Class T-2, 9 5/8%, 5/15/02 Aaa 80,000 89,325
(assets of Trust guaranteed by
U.S. Government through
Export-Import Bank):
Series 1994-C,
6.61%, 9/15/99 Aaa 94,397 96,102
Series 1994-F,
8.178%, 12/15/04 Aaa 1,333,390 1,450,289
Series 1995-A,
6.28%, 6/15/04 Aaa 510,000 519,450
Private Export Funding Corp.:
9 1/2%, 3/31/99 Aaa 80,000 89,467
8 3/4%, 6/30/03 Aaa 310,000 363,911
5.80%, 2/1/04 Aaa 80,000 80,056
6.86%, 4/30/04 Aaa 166,600 172,101
U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
State of Israel (guaranteed by U.S.
Government through Agency
for International Development):
5 1/4%, 3/15/98 Aaa $ 250,000 $ 249,453
7 3/4%, 4/1/98 Aaa 96,474 98,972
4 7/8%, 9/15/98 Aaa 190,000 187,566
6%, 2/15/99 Aaa 90,000 91,406
7 1/8%, 8/15/99 Aaa 520,000 546,881
7 3/4%, 11/15/99 Aaa 144,000 154,138
5 3/4%, 3/15/00 Aaa 380,000 381,900
8 1/2%, 4/1/06 Aaa 750,000 863,906
Tennessee Valley Authority 4.60%,
12/15/96 Aaa 215,000 213,357
U.S. Housing & Urban
Development 8.27%, 8/1/03 Aaa 415,000 470,636
8,175,959
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $75,939,750) 81,393,981
U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES - 20.6%
FEDERAL HOME LOAN GUARANTY CORPORATION - 1.2%
8 1/2%, 3/1/20 Aaa 2,110,090 2,220,448
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 9.0%
5 1/2%, 5/1/00 to 7/1/01 Aaa 3,242,006 3,186,335
6%, 3/1/01 to 10/1/02 Aaa 10,841,849 10,821,467
6 1/2%, 1/1/26 Aaa 2,500,000 2,469,525
16,477,327
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 10.4%
6%, 8/15/08 to 5/15/09 Aaa 4,266,814 4,236,135
6%, 1/15/11 (c) Aaa 2,050,000 2,035,261
6 1/2%, 10/15/23 to 4/15/24 Aaa 4,535,175 4,498,304
7 1/2%, 10/15/22 to 6/15/24 Aaa 4,765,562 4,903,076
8%, 2/15/17 Aaa 423,450 445,291
10%, 7/15/13 to 11/15/24 Aaa 2,749,852 3,030,208
19,148,275
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $36,935,085) 37,846,050
COMMERCIAL MORTGAGE SECURITIES - 4.3%
CS First Boston Mortgage Securities
Corp. commercial Series:
1994-CFB1 Class A-1,
6.4255%, 1/25/28 (d) Aaa 512,139 511,499
1995-AEWI Class A1,
6.665%, 11/25/27 Aaa 474,745 479,863
FDIC commercial Series 1994-C1
Class II-A1, 6.30%, 9/25/25 Aaa 101,643 101,580

MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
Lennar Central Partner LP
commercial floater Series 1994-1
Class B, 6.1825%,
9/15/01 (b)(d) - $ 733,000 $ 733,687
Meritor Mortgage Security Corp.
commercial Series 1987-1
Class A-3, 9.40%, 6/1/99 Baa3 192,363 193,806
Nomura Asset Securities Corp.
commercial floater Series
1994 MD-II Class A-6,
6.9525%, 7/4/03 (d) - 179,477 178,327
Oregon pass thru certificates
commercial Series 1995
Class 1-A, 7.15%, 6/25/26 (b) AAA 475,092 482,219
Resolution Trust Corp. commercial:
Series 1994-C1 Class A-4,
7 1/4%, 6/25/26 AAA 90,635 90,536
Series 1994-C2 Class A-2,
7 3/4%, 4/25/25 AAA 28,667 28,756
Series 1994-C2 Class A-4,
7 1/2%, 4/25/25 AAA 68,153 68,345
Series 1994-N2 Class 3, 7 1/2%
12/15/04 (b)(e) Baa2 400,000 402,500
Series 1995-C1 Class A-2B,
6.55%, 2/25/27 Aaa 900,000 905,906
Series 1995-C1 Class A-4B,
6.65%, 2/25/27 Aaa 740,000 746,128
Series 1995-C1 Class C,
6.90%, 2/25/27 A2 500,000 496,094
floater (d):
Series 1993-C2 Class A-2,
6.745%, 3/25/25 AAA 550,631 554,072
Series 1994-C1 Class A-3,
6.425%, 6/25/26 AAA 367,236 367,236
SC Finance Corp. commercial
floater 7.2375%, 8/1/04 (b)(d) - 600,000 606,000
SKW Real Estate LP commercial (b):
Class A, 6.45%,
4/15/02 (d) AA 132,990 133,364
Series II Class B, 6.90%,
4/15/02 (e) A 100,000 100,375
Structured Asset Securities Corp.
commercial Series:
1993-C1 Class A-1,
6.60%, 10/25/24 AA+ 158,639 159,086
1995-C1 Class D,
7 3/8%, 9/25/24 BBB 650,000 633,547
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $7,789,886) 7,972,926
FOREIGN GOVERNMENT OBLIGATIONS (F) - 2.6%
Alberta Province yankee
9 1/4%, 4/1/00 Aa2 1,400,000 1,584,464
British Columbia Province
yankee 7%, 1/1/03 Aa2 500,000 532,020
Manitoba Province yankee
6 3/4%, 3/1/03 A1 500,000 518,735
FOREIGN GOVERNMENT OBLIGATIONS (F) - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
Ontario Province yankee
7 3/4%, 6/4/02 Aa3 $ 1,000,000 $ 1,088,670
Quebec Province yankee:
8.24%, 2/28/96 A2 500,000 501,654
7 1/2%, 7/15/02 A2 500,000 530,885
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $4,646,477) 4,756,428
REPURCHASE AGREEMENTS - 8.4%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.91% dated
12/29/95 due 1/2/96 $ 15,398,105 15,388,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $175,791,623) $ 183,406,409
LEGEND
(a) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(b) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $5,619,704 or 3.1% of net
assets.
(c) Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
(d) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(e) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
(f) Some foreign government obligations have not been individually rated by
S&P or Moody's. The ratings listed are assigned to securities by FMR, the
fund's investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $310,380,224 and $245,594,124, respectively, of which U.S.
government and government agency obligations aggregated $258,308,405 and
$200,692,243, respectively.
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 80.8% AAA, AA, A 79.6%
Baa 6.8% BBB 8.2%
Ba 1.4% BB 0.8%
B 0.0% B 0.2%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated by
either S&P or Moody's amounted to 0.8%.
INCOME TAX INFORMATION
At December 31, 1995, the aggregate cost of investment securities for
income tax purposes was $175,807,019. Net unrealized appreciation
aggregated $7,599,390, of which $7,892,920 related to appreciated
investment securities and $293,530 related to depreciated investment
securities.
At December 31, 1995, the fund had a capital loss carryforward of
approximately $229,877, all of which will expire on December 31, 2002.
VARIABLE INSURANCE PRODUCTS FUND II: INVESTMENT GRADE BOND PORTFOLIO
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995

ASSETS

Investment in $ 183,406,409
securities, at
value (including
repurchase
agreements of
$15,388,000)
(cost
$175,791,623)
- - See
accompanying
schedule

Cash 34,004

Receivable for 711,197
fund shares sold

Interest receivable 2,451,500

Other receivables 1,563

TOTAL ASSETS 186,604,673

LIABILITIES

Payable for $ 2,780,849
investments
purchased
Regular delivery

Delayed delivery 2,030,183

Accrued 65,589
management
fee

Payable for fund 122,146
shares
redeemed

Other payables 60,019
and accrued
expenses

TOTAL LIABILITIES 5,058,786

NET ASSETS $ 181,545,887

Net Assets
consist of:

Paid in capital $ 164,573,578

Undistributed net 9,528,238
investment
income

Accumulated (170,715
undistributed net )
realized gain
(loss) on
investments and
foreign currency
transactions

Net unrealized 7,614,786
appreciation
(depreciation)
on investments
and assets and
liabilities in
foreign
currencies

NET ASSETS, for $ 181,545,887
14,551,940
shares
outstanding

NET ASSET VALUE, $12.48
offering price
and redemption
price per share
($181,545,887 (divided by)
14,551,940
shares)

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1995

INVESTMENT INCOME $ 10,413,518
Interest

EXPENSES

Management fee $ 660,058

Transfer agent fees 81,906

Accounting fees and expenses 58,943

Non-interested trustees' compensation 624

Custodian fees and expenses 3,480

Audit 35,732

Legal 793

Miscellaneous 16,559

TOTAL EXPENSES 858,095

NET INVESTMENT INCOME 9,555,423

REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:

Investment securities 2,631,902

Foreign currency transactions 2,543 2,634,445

Change in net unrealized appreciation (depreciation) on:

Investment securities 10,805,444

Assets and liabilities in (5,599 10,799,845
foreign currencies )

NET GAIN (LOSS) 13,434,290

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 22,989,713

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1994

Operations $ 9,555,423 $ 7,413,058
Net investment income

Net realized gain (loss) 2,634,445 (5,607,010)

Change in net unrealized appreciation 10,799,845 (6,305,516)
(depreciation)

NET INCREASE (DECREASE) IN NET ASSETS 22,989,713 (4,499,468)
RESULTING FROM OPERATIONS

Distributions to shareholders (4,480,858) -
From net investment income

From net realized gain - (90,529)

In excess of net realized gain - (226,505)

TOTAL DISTRIBUTIONS (4,480,858) (317,034)

Share transactions 116,054,959 53,245,805
Net proceeds from sales of shares

Reinvestment of distributions 4,480,858 317,034

Cost of shares redeemed (68,879,418) (59,742,109)

NET INCREASE (DECREASE) IN NET ASSETS 51,656,399 (6,179,270)
RESULTING FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 70,165,254 (10,995,772)

NET ASSETS

Beginning of period 111,380,633 122,376,405

End of period (including undistributed net $ 181,545,887 $ 111,380,633
investment income of $9,528,238 and
$7,322,731, respectively)

OTHER INFORMATION
Shares

Sold 9,944,966 4,760,105

Issued in reinvestment of distributions 413,363 27,544

Redeemed (5,910,491) (5,343,262)

Net increase (decrease) 4,447,838 (555,613)

<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

</TABLE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,

SELECTED PER-SHARE DATA 1995 1994 1993 C 1992 1991

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.020 $ 11.480 $ 10.970 $ 11.080 $ 9.920

Income from Investment Operations .320 .733 .641 .672 .455
Net investment income

Net realized and unrealized gain (loss) 1.530 (1.163) .559 .058 1.165

Total from investment operations 1.850 (.430) 1.200 .730 1.620

Less Distributions (.390) - (.628) (.680) (.460)
From net investment income

In excess of net investment income - - (.002) - -

From net realized gain - (.010) (.050) (.160) -

In excess of net realized gain - (.020) (.010) - -

Total distributions (.390) (.030) (.690) (.840) (.460)

Net asset value, end of period $ 12.480 $ 11.020 $ 11.480 $ 10.970 $ 11.080

TOTAL RETURN A, B 17.32% (3.76)% 10.96% 6.65% 16.38%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (000 omitted) $ 181,546 $ 111,381 $ 122,376 $ 73,598 $ 44,835

Ratio of expenses to average net assets .59% .67% .68% .76% .80%
D

Ratio of net investment income to average net 6.53% 6.53% 6.85% 7.11% 7.73%
assets

Portfolio turnover rate 182% 143% 70% 119% 128%

</TABLE>

<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C> <C>
A TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THOSE CHARGES
WOULD REDUCE THE TOTAL RETURNS SHOWN.
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF
NOTES TO FINANCIAL STATEMENTS).
C EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION
93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL
STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN, AND RETURN OF
CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
D FMR VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE
FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER.

</TABLE>

VARIABLE INSURANCE PRODUCTS FUND II: ASSET MANAGER PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY

Asset Manager 16.96% 12.76% 11.24%

S&P 500 37.58% 16.60% 12.58%

AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.

UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for example,
has a history of growth in the long run and volatility
in the short run. In turn, the share price and return
of a fund that invests in stocks will vary. That
means if you sell your shares during a market
downturn, you might lose money. But if you can
ride out the market's ups and downs, you may
have a gain.
(checkmark)
You can compare the fund's returns to those of the Standard & Poor's
Composite Index of 500 Stocks - a common proxy for the U.S. stock market.
This benchmark includes reinvested dividends and capital gains, if any.
Consumer Price Index information is not available from the U.S. Department
of Labor. Therefore, the CPI comparison has not been included in this
report.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, September 6, 1989.
If Fidelity had not reimbursed certain fund expenses, the past five years
and life of fund total return figures would have been lower.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, THE TOTAL RETURNS WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER LIFE OF FUND
VIP II: Asset ManStandard & PoFidelity C
09/30/89 10000 10000.00 10000
10/31/89 10020.02002002 9768.00 10057
11/30/89 10060.0600600601 9967.27 10176.68
12/31/89 10091.0931174089 10206.48 10276.41
01/31/90 9868.42105263158 9521.63 10028.75
02/28/90 9969.63562753036 9644.46 10092.93
03/31/90 10050.6072874494 9900.03 10191.84
04/30/90 9919.02834008097 9652.53 10098.08
05/31/90 10425.1012145749 10593.65 10527.25
06/30/90 10506.0728744939 10521.62 10592.52
07/31/90 10485.8299595142 10487.95 10657.13
08/31/90 10141.7004048583 9539.84 10327.82
09/30/90 9929.14979757085 9075.25 10235.91
10/31/90 9979.75708502024 9036.22 10309.61
11/30/90 10465.5870445344 9619.96 10618.89
12/31/90 10769.2307692308 9888.36 10793.04
01/31/91 11284.5552884615 10319.49 10999.19
02/28/91 11726.2620192308 11057.34 11274.17
03/31/91 11915.5649038462 11324.93 11397.06
04/30/91 12094.3509615385 11352.11 11472.28
05/31/91 12367.7884615385 11842.52 11654.69
06/30/91 12146.9350961538 11300.13 11503.18
07/31/91 12451.9230769231 11826.72 11734.39
08/31/91 12704.3269230769 12107.01 11943.26
09/30/91 12777.9447115385 11904.82 12000.59
10/31/91 12862.0793269231 12064.35 12107.4
11/30/91 12651.7427884615 11578.15 12023.86
12/31/91 13198.6177884615 12902.69 12616.63
01/31/92 13366.8870192308 12662.70 12479.11
02/29/92 13626.4747734306 12827.32 12558.98
03/31/92 13593.2664677277 12577.19 12468.55
04/30/92 13792.5163019452 12946.96 12621.92
05/31/92 13936.4189599912 13010.40 12745.61
06/30/92 13925.3495247569 12816.54 12750.71
07/31/92 14157.8076646773 13340.74 13097.53
08/31/92 14113.5299237401 13067.25 13047.76
09/30/92 14202.0854056145 13221.45 13192.59
10/31/92 14224.2242760831 13267.72 13139.82
11/30/92 14534.1684626437 13720.15 13314.58
12/31/92 14744.4877320955 13888.91 13478.35
01/31/93 15010.1541777188 14005.57 13646.82
02/28/93 15150.9206362925 14196.05 13836.52
03/31/93 15579.8296367078 14495.59 13979.03
04/30/93 15672.5667178787 14144.79 13893.76
05/31/93 15939.185826245 14523.87 14042.42
06/30/93 16066.6993128549 14565.99 14191.27
07/31/93 16263.765610343 14507.73 14209.72
08/31/93 16739.0431513438 15057.57 14559.28
09/30/93 16750.6352864902 14941.63 14544.72
10/31/93 17202.7285571982 15250.92 14694.53
11/30/93 17179.5442869055 15106.04 14581.38
12/31/93 17875.0723956871 15288.82 14682
01/31/94 18443.0870178587 15808.64 14969.76
02/28/94 17857.332330293 15380.23 14685.34
03/31/94 17017.9890531879 14709.65 14306.46
04/30/94 17030.1534485083 14897.93 14343.65
05/31/94 17176.1261923527 15142.26 14439.75
06/30/94 16847.6875187028 14771.27 14295.36
07/31/94 17139.6330063916 15255.77 14596.99
08/31/94 17541.0580519635 15881.26 14848.06
09/30/94 17334.1532847956 15492.17 14629.79
10/31/94 17419.3633079653 15840.74 14770.24
11/30/94 17163.7332384563 15263.82 14556.07
12/31/94 16786.3745644193 15490.18 14691.44
01/31/95 16676.8188203441 15891.84 14966.17
02/28/95 16946.968217498 16511.15 15340.32
03/31/95 17170.7726400328 16998.39 15575.03
04/30/95 17444.3113786865 17498.99 15855.38
05/31/95 17668.1158012213 18198.43 16380.19
06/30/95 17817.3187495779 18621.18 16599.69
07/31/95 18451.4312800932 19238.66 16810.51
08/31/95 18675.235702628 19286.95 16921.45
09/30/95 18911.4737041925 20100.85 17286.96
10/31/95 18662.8021235983 20029.09 17385.49
11/30/95 19147.7117057571 20908.37 17813.18
12/29/95 19632.6212879159 21311.07 18067.91

Let's say you invested $10,000 in Asset Manager Portfolio on September 30,
1989, shortly after the fund started. By December 31, 1995, your investment
would have grown to $19,633 - a 96.33% increase. That compares to $10,000
invested in the S&P 500, which would have grown to $21,311 over the same
period - a 113.11% increase.
You can also look at how the Fidelity Composite Index, a hypothetical
combination of unmanaged indices, did over the same period. Reflecting the
fund's neutral mix of 40% stocks, 40% bonds, and 20% short-term
instruments, this index combines returns from the S&P 500 (113.11%), Lehman
Brothers Treasury Bond Index (76.26%), and the Salomon Brothers 3-month
T-Bill Total Rate of Return Index (36.97%). With reinvested dividends and
capital gains, if any, a $10,000 investment in the index would have grown
to $18,068 - an 80.68% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS

Chrysler Corp. 2.3

Northrop Grumman Corp. 1.6

Aluminum Co. of America 1.4

General Dynamics Corp. 1.3

General Motors Corp. 1.1

TOP FIVE FIXED-INCOME SECURITIES AS OF DECEMBER 31, 1995
(BY ISSUER, EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S
INVESTMENTS

U.S Treasury Obligations 17.5

MBL International Finance Bermuda Trust 2.2

Brazil Federative Republic IDU 1.1

Inco Ltd. 1.1

Chubb Corp. (The) 1.0

ASSET ALLOCATION AS OF DECEMBER 31, 1995*
Row: 1, Col: 1, Value: 12.0
Row: 1, Col: 2, Value: 30.0
Row: 1, Col: 3, Value: 28.0
Row: 1, Col: 4, Value: 30.0
Stock class 58%
Bond class 30%
Short-term class
and other 12%
FOREIGN INVESTMENTS 30.5%
*

ASSET ALLOCATIONS IN THIS PIE CHART REFLECT THE CATEGORIZATION OF ASSETS
AS
DEFINED IN THE FUND'S PROSPECTUS.
FINANCIAL STATEMENT CATEGORIZATIONS CONFORM TO ACCOUNTING STANDARDS
AND WILL DIFFER FROM THE PIE CHART.

VARIABLE INSURANCE PRODUCTS FUND II: ASSET MANAGER PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW

An interview with Andy
Offit, Portfolio Manager of Asset Manager Portfolio
Q. ANDY, HOW DID THE FUND PERFORM?
A. Quite well in absolute terms, reasonably well in relative terms, during
a year in which the performance standard was unusually high. During 1995,
Asset Manager produced a double-digit total return, in line with the
average for all global funds that invest in stocks and bonds. Looking back,
there was both good news and bad news. The good news had to do with asset
allocation. When I took over the fund in early spring, only about 30% of
the fund's assets were invested in stocks. I immediately set about
increasing that allocation, nearly reaching Asset Manager's 60% cap on
stocks by the end of May, and the fund profited as a result. The bad news
had to do with country allocation. Asset Manager included both foreign and
domestic stocks in its mix, and during 1995, foreign markets failed to keep
pace.
Q. HOW WERE THE FUND'S ASSETS DISTRIBUTED AT THE END OF THE PERIOD?
A. About 58% stocks, 30% bonds and 12% cash equivalents. Foreign
investments, mostly stocks, totaled about 31% of the fund's assets. Those
numbers have not changed appreciably during the past six months. Compared
to a year ago, however, the fund has significantly more stocks, fewer bonds
and less cash. Also, the fund had an 18% stake in emerging markets one year
ago, but only 8% at the end of the period.
Q. HOW DID YOU APPROACH INVESTING IN TECHNOLOGY STOCKS?
A. I certainly didn't ignore the sector. At one time, technology stocks
totaled almost 10% of the fund's assets. I look for compelling situations
where the potential for gain exceeds the potential for loss. When I find
those companies, I like to make large commitments. That's evident in the
declining number of individual securities in the fund-about 250 at the end
of the period, down from over 500 six months ago. Using my bottom-up
criteria, I saw opportunities in several technology stocks early in the
year, and staked out big positions in companies such as IBM, Compaq, Intel
and Microsoft. However, as the summer wore on, my outlook shifted. I began
to see more room for technology stocks to fall if things went wrong than to
continue rising if things went well. At that point I began taking profits
and investing the proceeds elsewhere.
Q. WHERE ELSE DID YOU LOOK FOR VALUE IN U.S. STOCKS DURING 1995?
A. Several of the fund's best investments were defense stocks, including
Northrop Grumman and General Dynamics. Both have achieved strong positions
in a consolidating industry by generating cash and using that cash to pay
down debt and make acquisitions. The fund also did well with energy stocks,
including Kerr-McGee, an oil company, and two oil-service companies:
Reading & Bates and Tidewater. Unfortunately, several of the fund's larger
positions, including Chrysler, were flat performers.
Q. WHERE WAS THE FUND'S FOREIGN EXPOSURE?
A. Mainly in Japan, about 18% of total assets. While results so far have
been less than those achieved in the U.S., I see Japan as one of the larger
turnaround opportunities in the world. With its market down 50% from its
peak in 1989, the yen has started to weaken, consumer sentiment is
improving and the economy is beginning to grow for the first time in five
years. I began last spring investing in Japanese electronics companies,
however, lately my focus has shifted to cyclical sectors that could benefit
from an economic rebound, such as retail and steel companies.
Q. WHAT WAS YOUR BOND STRATEGY?
A. Earlier in the year, the fund had fairly large exposure to so-called
junk bonds-those with credit ratings below Baa or BBB from one of the bond
rating agencies. Most did quite well, but as the economy has slowed down,
I've moved increasingly into U.S. Treasuries. As the difference between
long-term and short-term interest rates has narrowed, I've concentrated on
securities in the middle of the yield curve, with maturities between five
and 15 years. They seem to offer the best balance between attractive yield
and the potential for price gains going forward.
Q. WHAT'S THE OUTLOOK?
A. Promising. Moderate growth and benign inflation mean interest rates
could head still lower in the months ahead, providing an attractive
backdrop for both stocks and bonds. Another key in 1996 will be how well
foreign stocks perform, especially the fund's 18% stake in Japan. I believe
Japan, rather than Europe or the United States, has the greatest potential
for gain in the months ahead.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.

FUND FACTS
GOAL: high total return with reduced risk over
the long term by allocating assets among stocks,
bonds and short-term instruments anywhere
in the world
START DATE: September 6, 1989
SIZE: as of December 31, 1995, more than
$3.3 billion
MANAGER: Andy Offit, since February 1995;
joined Fidelity in 1987
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND II: ASSET MANAGER PORTFOLIO
INVESTMENTS DECEMBER 31, 1995

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 52.4%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 3.2%
AEROSPACE & DEFENSE - 1.9%
Northrop Grumman Corp. 811,500 $ 52,029,722
Thiokol Corp. 317,900 10,768,863
62,798,585
SHIP BUILDING & REPAIR - 1.3%
General Dynamics Corp. 703,800 41,612,175
TOTAL AEROSPACE & DEFENSE 104,410,760
BASIC INDUSTRIES - 5.3%
CHEMICALS & PLASTICS - 1.8%
Raychem Corp. 193,600 11,011,000
Sekisui Chemical Co. Ltd. 1,174,000 17,258,027
Synetic, Inc. (a)(m) 1,080,882 31,480,688
59,749,715
IRON & STEEL - 1.0%
Bakrie & Brothers PT Ord. (For. Reg.) 2,812,000 5,103,787
Kobe Steel (a) 4,389,000 13,540,532
NKK Corp. (a) 4,363,000 11,730,309
Sumitomo Metal Industries Ltd. (a) 851,000 2,576,044
32,950,672
METALS & MINING - 2.5%
Aluminum Co. of America 898,300 47,497,613
Falconbridge Ltd. 29,400 624,913
Falconbridge Ltd.
1st installment receipt (h) 1,257,300 10,943,260
Inco Ltd. 372,100 12,306,969
Pechiney SA Class A 320,000 11,074,289
Tongkah Holdings BHD 181,000 307,964
82,755,008
TOTAL BASIC INDUSTRIES 175,455,395
CONGLOMERATES - 1.9%
Figgie International Holdings,
Inc. Class A (a) 161,300 1,673,488
ITT Industries, Inc. 353,300 8,479,200
Koor Industries Ltd. (a) 34,140 3,376,731
Koor Industries Ltd. sponsored ADR 550,900 11,155,725
United Technologies Corp. 390,200 37,020,225
61,705,369
CONSTRUCTION & REAL ESTATE - 1.6%
BUILDING MATERIALS - 0.6%
Hume Industries BHD 56,000 269,082
Masco Corp. 541,900 17,002,113
Mulia Industrindo PT (For. Reg.) 302,000 851,914
Tostem Corp. 90,000 2,985,493
21,108,602
CONSTRUCTION - 0.7%
Daito Trust Construction 215,600 2,543,830
Daiwa House Industry Co. Ltd. 555,000 9,124,758
Higashi Nihon House Co. Ltd. 98,000 1,611,219
Kaufman & Broad Home Corp. 249,600 3,712,800
Nichiei Construction Co. Ltd. 34,000 384,720
Obayashi Corp. 180,000 1,427,466
Taisei Corp. 809,000 5,390,725
24,195,518
REAL ESTATE - 0.3%
Bandar Raya Development BHD 805,000 1,147,735
Ciputra Development PT (For. Reg.) 1,558,000 2,453,009
Country Heights Holdings BHD 1,357,000 2,661,623

SHARES VALUE (NOTE 1)
Guoco Holdings, Inc. Class B 58,000 $ 8,955
Hysan Development Co. Ltd. 1,188,000 3,141,882
Pakuwon Jati PT (For. Reg.) 2,127,500 1,349,170
10,762,374
TOTAL CONSTRUCTION & REAL ESTATE 56,066,494
DURABLES - 6.4%
AUTOS, TIRES, & ACCESSORIES - 3.7%
Chrysler Corp. 1,360,300 75,326,613
Federal-Mogul Corp. 200,000 3,925,000
General Motors Corp. 716,990 37,910,846
Honda Motor Co. Ltd. 340,000 7,003,869
124,166,328
CONSUMER ELECTRONICS - 1.2%
Daiichi Corp. Ord. 358,600 8,462,128
Sony Corp. 515,600 30,866,190
39,328,318
HOME FURNISHINGS - 0.2%
Polyvision Corp. (a) 1,515 3,125
Shimachu 162,000 5,185,880
5,189,005
TEXTILES & APPAREL - 1.3%
APAC Centertex Corp. PT (For. Reg.)(a) 4,973,500 2,827,708
Andayani Megah PT 3,028,500 2,152,337
Aoki International Co. Ltd. 214,000 5,215,474
Benetton Group Spa 263,400 3,119,665
Bossa Ticaret Ve Sanayi
Isletmeleri (a)(f) 4,460,300 325,823
Chiyoda Corp. 307,000 7,125,725
Christian Dior SA 22,500 2,421,278
Coteminas PN 7,197,900 2,406,829
Namyeung Vivien Corp. (a) 1,470 189,494
Onward Kashiyama & Co. Ltd. 424,000 6,888,975
Roda Vivatex PT (For. Reg.) 3,690,500 2,178,954
Tokyo Style Co. Ltd. 426,000 7,292,263
42,144,525
TOTAL DURABLES 210,828,176
ENERGY - 2.6%
ENERGY SERVICES - 1.0%
Baker Hughes, Inc. 355,800 8,672,625
Hornbeck Offshore Services, Inc. (a) 194,300 3,813,138
Reading & Bates Corp. (a) 756,900 11,353,500
Transocean Drilling AS (a) 627,225 10,825,474
34,664,737
OIL & GAS - 1.6%
Amerada Hess Corp. 245,700 13,022,100
British Petroleum PLC ADR 60,131 6,140,878
Kerr-McGee Corp. 323,200 20,523,200
Texaco, Inc. 100,000 7,850,000
Total SA Class B 68,008 4,580,993
52,117,171
TOTAL ENERGY 86,781,908
FINANCE - 4.6%
BANKS - 1.5%
Cho Hung Bank Co. Ltd. 68,002 855,684
First International Bank of Israel:
#1 270 31,538
#5 19,815 2,394,764
Fleet Financial Group, Inc. 414,091 16,874,208
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
Fuji Bank 378,000 $ 8,335,010
HSBC Holdings PLC 155,046 2,345,992
Hong Leong Bank BHD 1,557,000 4,292,635
Hong Leong Bank BHD (rights)(a) 233,550 46,912
Kookmin Bank (a) 12,970 256,300
Mitsubishi Trust & Banking Corp. 84,000 1,397,292
Mitsui Trust and Banking 317,000 3,464,313
Sakura Bank Ltd. 407,000 5,156,383
Sumitomo Trust & Banking Co. Ltd. 236,000 3,332,302
48,783,333
CLOSED END INVESTMENT COMPANY - 0.2%
First NIS Regional Fund, Inc. (a)(h) 200,000 1,100,000
R.O.C. Taiwan Fund (SBI) 516,000 5,418,000
6,518,000
CREDIT & OTHER FINANCE - 0.8%
Acom Co. Ltd. 383,000 16,001,548
American Express Co. 66,691 2,759,340
Benpress Holdings Corp. GDR (a) 492,300 2,338,425
Hong Leong Credit BHD 779,000 3,865,853
24,965,166
FEDERAL SPONSORED CREDIT - 0.6%
Federal National Mortgage Association 98,600 12,238,725
Student Loan Marketing Association 98,400 6,482,100
18,720,825
INSURANCE - 0.7%
Allstate Corp. 95,000 3,906,875
ITT Hartford Group, Inc. 353,300 17,090,888
Malaysian Assurance Alliance BHD 629,000 2,848,956
23,846,719
SECURITIES INDUSTRY - 0.8%
Daiwa Securities Co. Ltd. 713,000 10,894,971
Nomura Securities Co. Ltd. 768,000 16,711,799
27,606,770
TOTAL FINANCE 150,440,813
HEALTH - 3.6%
DRUGS & PHARMACEUTICALS - 2.5%
Barr Laboratories, Inc. (a)(m) 761,200 22,645,700
Genentech, Inc. (a) 634,400 33,623,200
IVAX Corp. 864,800 24,646,800
Kalbe Farma (For. Reg.) 331,000 1,121,912
82,037,612
MEDICAL EQUIPMENT & SUPPLIES - 1.1%
Bausch & Lomb, Inc. 275,900 10,932,538
Benson Eyecare Corp. (a) 57,125 514,125
U.S. Surgical Corp. 1,105,500 23,630,063
35,076,726
TOTAL HEALTH 117,114,338
HOLDING COMPANIES - 0.3%
Berjaya Group BHD 4,625,000 2,987,397
Israel Corp. #1 (a) 12,810 898,208
Malaysian Plantations BHD 233,000 252,363
Perdigao SA Comercio
e Industria PDG (a) 4,124,176 10,608
Transmarco Ltd. 740,000 6,801,951
10,950,527

SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 4.9%
ELECTRICAL EQUIPMENT - 2.2%
General Electric Co. 314,100 $ 22,615,200
Mitsubishi Electric Co. Ord. 3,103,000 22,297,186
Murata Manufacturing Co. Ltd. 10,000 367,505
Omron Corp. 1,221,000 28,104,256
73,384,147
INDUSTRIAL MACHINERY & EQUIPMENT - 0.7%
Komatsu Ltd. Ord. 239,000 1,964,700
NSK Ltd. 1,207,000 8,754,836
Nippon Thompson Co. Ltd. 327,000 2,877,853
Van Der Horst Ltd. 2,022,000 10,222,230
23,819,619
POLLUTION CONTROL - 2.0%
Browning-Ferris Industries, Inc. 1,207,100 35,609,450
WMX Technologies, Inc. 1,029,300 30,750,338
66,359,788
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 163,563,554
MEDIA & LEISURE - 3.8%
ENTERTAINMENT - 0.1%
Multi-Purpose Holdings BHD 1,192,000 1,746,451
LEISURE DURABLES & TOYS - 1.1%
Namco Ltd. 350,200 11,650,754
Nintendo Co. Ltd. Ord. 308,000 23,382,979
35,033,733
LODGING & GAMING - 2.1%
Bally Gaming International,
Inc. (warrants)(a) 38,400 206,400
Circus Circus Enterprises, Inc. 216,000 6,021,000
Fitzgeralds South, Inc.
(warrants) (a)(f) 420 -
ITT Corp. 353,300 18,724,900
Mirage Resorts, Inc. (a) 699,300 24,125,850
Sun International Hotels Ltd. Class B (a) 1,074 35,442
WMS Industries, Inc. (a)(m) 1,301,800 21,316,975
70,430,567
PUBLISHING - 0.2%
Times Mirror Co. Class A 200,000 6,775,000
RESTAURANTS - 0.3%
Denny's Japan Co. Ltd. 170,000 5,672,147
Yoshinoya D&C Co. Ltd. Ord. 193 3,359,768
9,031,915
TOTAL MEDIA & LEISURE 123,017,666
NONDURABLES - 2.1%
BEVERAGES - 0.3%
Brahma (Cia Cervejaria) PN
Class B (Pfd. Reg.) 14,855,200 6,113,718
Chosun Brewery Co. Ltd. 8,000 295,972
Panamerican Beverages, Inc. Class A 70,000 2,240,000
8,649,690
FOODS - 0.1%
Osem Investment Ltd. 157,802 937,671
Weston George Ltd. 37,200 1,370,103
2,307,774
HOUSEHOLD PRODUCTS - 0.6%
Maybelline, Inc. 411,500 14,916,875
Metro Pacific, Inc. Class B 26,668,000 4,930,988
19,847,863
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONDURABLES - CONTINUED
TOBACCO - 1.1%
Philip Morris Companies, Inc. 268,700 $ 24,317,350
RJR Nabisco Holdings Corp. 388,400 11,991,850
Souza Cruz Industria Comerico 22,000 124,039
36,433,239
TOTAL NONDURABLES 67,238,566
PRECIOUS METALS - 0.0%
Agnico Eagle Mines Ltd. 83,100 1,043,052
RETAIL & WHOLESALE - 7.2%
APPAREL STORES - 1.0%
Ross Stores, Inc. 900,000 17,212,500
Shimamura Corp. 127,300 4,912,253
TJX Companies, Inc. 180,900 3,414,488
Talbots, Inc. 211,800 6,089,250
31,628,491
GENERAL MERCHANDISE STORES - 4.0%
Aoyama Trading Co. Ord. 637,300 20,339,362
Carrefour 6,100 3,693,692
Hankyu Department Stores, Inc. 1,326,000 19,620,697
Hanshin Department Store Ltd. 138,000 1,061,025
Isetan Co. Ltd. 186,000 3,058,027
Ito-Yokado Co. Ltd. 323,000 19,867,312
Jusco Co. Ltd. 536,000 13,944,294
Lojas Americanas 28,247,300 662,625
Matahari Putra Prima PT (For. Reg.) 6,956,000 12,244,882
Matsuzakaya Co., Ltd. 722,000 9,147,195
Mitsukoshi Ltd. 742,000 6,960,735
Takashimaya Co. Ltd. 1,110,000 17,712,766
Tokyu Department Stores Co., Ltd. 721,000 4,762,505
133,075,117
GROCERY STORES - 0.3%
Heiwado Co. Ltd. 154,000 3,157,447
Izumi Co. Ord. 231,000 5,093,617
Loblaw Companies Ltd. 35,500 803,359
9,054,423
RETAIL & WHOLESALE, MISCELLANEOUS - 1.7%
Amway Japan Ltd. 552,500 23,296,906
Home Depot, Inc. (The) 282,500 13,524,688
Modern Photo Film PT 99,000 573,694
Tsutsumi Jewelry Co. Ltd. 36,100 1,805,000
Uny Co. Ltd. 933,000 17,505,029
56,705,317
TRADING COMPANIES - 0.2%
Bimantara Citra (For. Reg.) (a) 9,313,500 7,739,193
TOTAL RETAIL & WHOLESALE 238,202,541
SERVICES - 0.1%
ADVERTISING - 0.1%
WPP Group PLC 1,303,200 3,314,337
SERVICES - 0.0%
Christies International PLC 335,200 1,086,406
Sotheby's Holdings, Inc. Class A 34,800 495,900
1,582,306
TOTAL SERVICES 4,896,643

SHARES VALUE (NOTE 1)
TECHNOLOGY - 3.2%
COMPUTERS & OFFICE EQUIPMENT - 1.3%
Canon, Inc. 157,000 $ 2,839,362
Compaq Computer Corp. (a) 359,800 17,270,400
Pitney Bowes, Inc. 510,200 23,979,400
44,089,162
ELECTRONICS - 0.7%
Hitachi Ltd. 1,788,000 17,983,753
Nitto Denko Corp. 366,000 5,663,443
Samsung Electronics Co. Ltd.
GDR representing shares (a)(f) 12 1,148
23,648,344
PHOTOGRAPHIC EQUIPMENT - 1.2%
Fuji Photo Film Co. Ltd. 1,178,000 33,950,097
Konica Corp. 646,000 4,673,192
38,623,289
TOTAL TECHNOLOGY 106,360,795
TRANSPORTATION - 0.4%
AIR TRANSPORTATION - 0.1%
Nippon Express 417,000 4,008,685
SHIPPING - 0.2%
Seacor Holdings, Inc. (a) 200,000 5,400,000
Sembawang Maritime Ltd. 801,000 2,548,611
7,948,611
TRUCKING & FREIGHT - 0.1%
Fukuyama Transporting Co. Ltd. 408,000 3,827,466
TOTAL TRANSPORTATION 15,784,762
UTILITIES - 1.2%
CELLULAR - 0.0%
Korea Mobile Telecommunications Corp. 800 860,954
Netas SA Ord. 492,300 142,609
1,003,563
ELECTRIC UTILITY - 0.1%
Aboitiz Equity Ventures, Inc. (a) 9,791,000 1,866,374
Korea Electric Power Corp. 47,355 2,032,453
Mosenergo AO sponsored
ADR (a)(f) 89,600 705,600
4,604,427
TELEPHONE SERVICES - 1.1%
Bell Atlantic Corp. 206,900 13,836,438
Telebras PN:
(Pfd. Reg.) 58,793,000 2,830,918
sponsored ADR 177,600 8,413,800
Telecomunicacoes de Minas Gerais
SA (Telemig) 1,269,000 65,281
Telefonos de Mexico SA sponsored ADR
representing shares Ord. Class L 207,800 6,623,625
Telepar PN 5,462,000 1,736,466
Telesp PN (Pfd. Reg.) 19,563,700 2,878,347
36,384,875
TOTAL UTILITIES 41,992,865
TOTAL COMMON STOCKS
(Cost $1,564,808,795) 1,735,854,224
PREFERRED STOCKS - 0.9%
SHARES VALUE (NOTE 1)
CONVERTIBLE PREFERRED STOCKS - 0.9%
HEALTH - 0.9%
MEDICAL EQUIPMENT & SUPPLIES - 0.9%
U.S. Surgical Corp. $2.20 (f) 1,159,800 $ 29,284,950
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings Corp.
exchangeable pay-in-kind $3.52 20,000 545,000
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Alpine Group, Inc. 8% cumulative 1,018 45,810
TOTAL CONVERTIBLE PREFERRED STOCKS 29,875,760
NONCONVERTIBLE PREFERRED STOCKS - 0.0%
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd.,
Series 1, adj. rate 178,000 515,337
NONDURABLES - 0.0%
HOUSEHOLD PRODUCTS - 0.0%
Revlon Group, Inc., Series B,
exchangeable $14.875 5,100 504,900
TOTAL NONCONVERTIBLE PREFERRED STOCKS 1,020,237
TOTAL PREFERRED STOCKS
(Cost $31,201,505) 30,895,997
CORPORATE BONDS - 10.4%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) (C) AMOUNT (B)
CONVERTIBLE BONDS - 8.3%
BASIC INDUSTRIES - 1.8%
CHEMICALS & PLASTICS - 0.7%
Valhi, Inc. liquid yield option
notes 0%, 10/20/07 B1 $ 55,465,000 21,631,350
METALS & MINING - 1.1%
Inco Ltd. 5 3/4%, 7/1/04 Baa2 27,870,000 36,788,400
TOTAL BASIC INDUSTRIES 58,419,750
FINANCE - 4.1%
BANKS - 0.2%
Banco De Galicia Y Buenos Aire
7%, 8/01/02 B1 2,360,000 2,171,200
Bangkok Bank PCL euro
3 1/4%, 3/3/04 (f) - 4,185,000 4,436,100
6,607,300
CREDIT & OTHER FINANCE - 2.5%
AC International Finance
3%, 6/8/00 - 5,140,000 5,808,200
Cre Fin (Caymen Islands) Ltd.
3%, 11/24/05 (f) - 5,000,000 5,487,500
MBL International Finance Bermuda
Trust 3%, 11/30/02 Aa3 61,860,000 71,448,300
82,744,000

MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (B) (NOTE 1)
INSURANCE - 1.4%
Chubb Corp. (The) 6%,
5/15/98 Aa3 $ 29,180,000 $ 32,681,600
Fremont General Corp. liquid
yield option notes
0%, 10/12/13 Ba2 8,410,000 4,162,950
Mutual Risk Management Ltd.
exchangeable 0%,
10/30/15 (f) - 20,000,000 8,150,000
44,994,550
TOTAL FINANCE 134,345,850
HEALTH - 0.1%
MEDICAL EQUIPMENT & SUPPLIES - 0.1%
Phoenix Shannon PLC 9 1/2%,
11/1/00 (f) - 3,310,000 3,310,000
MEDIA & LEISURE - 0.8%
BROADCASTING - 0.6%
Time Warner, Inc. liquid yield
option notes 0%, 12/17/12 Ba1 56,280,000 19,768,350
LEISURE DURABLES & TOYS - 0.2%
Hasbro Corp. 6%, 11/15/98 A3 4,720,000 5,168,400
TOTAL MEDIA & LEISURE 24,936,750
RETAIL & WHOLESALE - 0.7%
DRUG STORES - 0.5%
Rite Aid Corp. liquid yield option
notes 0%, 7/24/06 Baa1 30,020,000 16,773,675
GENERAL MERCHANDISE STORES - 0.2%
General Host Corp.
8%, 2/15/02 B3 7,550,000 6,040,000
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Pier 1 Imports, Inc. exchangeable
8 1/2%, 12/1/00 (e) - 1,000,000 835,000
TOTAL RETAIL & WHOLESALE 23,648,675
SERVICES - 0.0%
ADT Operations, Inc. liquid
yield option notes
0%, 7/6/10 Ba3 896,000 427,840
TECHNOLOGY - 0.1%
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Unisys Corp. 8 1/4%, 8/1/00 B2 350,000 309,313
ELECTRONICS - 0.1%
United Microelectronics Corp.
euro 1 1/4%, 6/8/04 - 1,718,000 2,147,500
TOTAL TECHNOLOGY 2,456,813
UTILITIES - 0.7%
TELEPHONE SERVICES - 0.7%
US West, Inc. liquid yield option
notes 0%, 6/25/11 A3 67,770,000 24,227,775
TOTAL CONVERTIBLE BONDS 271,773,453
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - 2.1%
CONSTRUCTION & REAL ESTATE - 0.6%
CONSTRUCTION - 0.0%
U.S. Home Corp.
9 3/4%, 6/15/03 Ba3 $ 1,090,000 $ 1,115,888
REAL ESTATE - 0.6%
Henderson Capital International
Ltd. euro 4%, 10/27/96 - 18,770,000 19,145,400
TOTAL CONSTRUCTION & REAL ESTATE 20,261,288
DURABLES - 0.2%
TEXTILES & APPAREL - 0.2%
Alpargatas SA Industrial y Comercial:
euro 10 1/2%, 10/21/96 - 2,820,000 2,495,700
9%, 11/26/96 - 4,230,000 3,807,000
Hat Brands, Inc., Series B,
12 5/8%, 9/15/02 - 380,000 399,000
6,701,700
ENERGY - 0.1%
ENERGY SERVICES - 0.1%
Global Marine, Inc.
12 3/4%, 12/15/99 B1 2,480,000 2,740,400
INDEPENDENT POWER - 0.0%
Consolidated Hydro, Inc.,
Series B, 0%, 7/15/03 (d) - 1,700,000 680,000
TOTAL ENERGY 3,420,400
FINANCE - 0.0%
BANKS - 0.0%
Signet Banking Corp.
9 5/8%, 6/1/99 Baa2 790,000 872,381
MEDIA & LEISURE - 1.1%
BROADCASTING - 0.9%
Chancellor Broadcasting
12 1/2%, 10/1/04 B3 610,000 652,700
Viacom, Inc. 8%, 7/7/06 B1 29,010,000 29,517,675
30,170,375
LODGING & GAMING - 0.1%
Ballys Grand, Inc. 1st mtg.
10 3/8%, 12/15/03 B1 1,920,000 1,958,400
RESTAURANTS - 0.1%
Host Marriott Travel Plazas, Inc.,
Series B, 9 1/2%, 5/15/05 B1 3,380,000 3,341,975
TOTAL MEDIA & LEISURE 35,470,750
NONDURABLES - 0.0%
BEVERAGES - 0.0%
Dr. Pepper/Seven-Up Companies,
Inc. 0%, 11/1/02 (d) Baa1 870,000 809,100

MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (B) (NOTE 1)
RETAIL & WHOLESALE - 0.0%
APPAREL STORES - 0.0%
Apparel Retailers, Inc.
0%, 8/15/05 (d) Caa $ 1,410,000 $ 817,800
Lamonts Apparel, Inc.
10 1/4%, 11/1/99 (f)(l) - 2,816,000 704,000
1,521,800
TECHNOLOGY - 0.0%
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Unisys Corp.
9 3/4%, 9/15/96 Ba3 695,000 677,625
TRANSPORTATION - 0.1%
TRUCKING & FREIGHT - 0.1%
MC-Cuernavaca Trust
9 1/4%, 7/25/01 (f) BBB 4,308,191 2,951,111
TOTAL NONCONVERTIBLE BONDS 72,686,155
TOTAL CORPORATE BONDS
(Cost $331,361,222) 344,459,608
U.S. TREASURY OBLIGATIONS - 22.2%
7 3/4%, 12/31/99 Aaa 64,935,000 70,464,865
5 1/2%, 12/31/00 Aaa 30,000,000 30,154,800
6 1/4%, 2/15/03 Aaa 91,695,000 95,663,560
11 7/8%, 11/15/03 (g) Aaa 51,950,000 72,575,709
12 3/8%, 5/15/04 Aaa 8,510,000 12,320,863
6 1/2%, 8/15/05 Aaa 57,100,000 60,829,201
5 7/8%, 11/15/05 Aaa 29,500,000 30,163,750
11 3/4%, 2/15/10 Aaa 70,770,000 100,913,774
12 3/4%, 11/15/10 Aaa 22,010,000 33,523,871
13 7/8%, 5/15/11 Aaa 31,340,000 51,010,864
14%, 11/15/11 Aaa 7,730,000 12,820,901
6 7/8%, 8/15/25 Aaa 8,750,000 9,868,338
U.S. Treasury Bills, yield at date of
purchase 5.2187%, 3/21/96 158,000,000 156,214,114
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $719,506,492) 736,524,610
U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES - 0.0%
Government National Mortgage
Association 8 1/2%, 12/15/16
(cost $152,538) Aaa 142,893 151,198
COMMERCIAL MORTGAGE SECURITIES - 0.0%
CS First Boston Mortgage Securities
Corp. commercial Series 1994-CFB1
Class E, 6.4255%, 1/25/28 (i)
(cost $3,232) Ba2 3,993 3,209
FOREIGN GOVERNMENT OBLIGATIONS (K) - 1.6%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (B) (NOTE 1)
Argentina Republic Brady FRB euro
6.8125%, 3/31/05 (i) B2 $ 8,940,000 $ 6,369,750
Brazil Federative Republic IDU euro
6 3/8%, 1/1/01 (i) B1 43,415,000 37,282,608
New Zealand Government
8%, 4/15/04 Aaa NZD 10,500,000 7,161,612
Siderurgica Brasileiras inflation
indexed 6%, 8/15/99 (j) - BRL 18,482,700 2,669,804
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $50,413,473) 53,483,774
REPURCHASE AGREEMENTS - 11.7%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.91% dated
12/29/95 due 1/2/96 $ 386,677,752 386,424,000
PURCHASED OPTIONS - 0.8%
EXPIRATION DATE/ UNDERLYING FACE
STRIKE PRICE AMOUNT AT VALUE
269,266 Merrill Lynch Capital
Markets PLC OTC Put Option
on S&P 500 Apr. 96/577.44 $ 165,849,007 1,190,156
260,000,000 J. Aron and Co.
OTC Put Option on
Japanese Yen Feb. 96/94.03 236,187,808 21,814,000
70,000,000 Swiss Bank Corp.
OTC Put Option on
Japanese Yen Mar. 96/97.56 65,976,234 3,773,000
TOTAL PURCHASED OPTIONS
(Cost $23,525,293) 26,777,156
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $3,107,396,550) $ 3,314,573,776
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
1,586 Nikkei 225 Index
Futures Contracts Mar. 1996 $ 159,075,800 $ 8,457,295
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 4.8%
CURRENCY ABBREVIATIONS
BRL - Brazilian real
CAD - Canadian dollar
NZD - New Zealand dollar
LEGEND
(a) Non-income producing
(b) Principal amount is stated in United States dollars unless otherwise
noted.
(c) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(d) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
(e) Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
Pier 1 Imports, Inc.
exchangeable 8 1/2%,
12/1/00 2/14/95 $ 1,020,000
(f) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $55,356,232 or 1.7% of net
assets.
(g) Security pledged to cover margin requirements for futures contracts. At
the period end, the value of securities pledged amounted to $12,852,676.
(h) Purchased on an installment basis. Market value reflects only those
payments made through December 31, 1995. The remaining installments for
Falconbridge Ltd., aggregating CAD 23,888,700, are due July 31, 1996 and
January 31, 1997. The remaining installment for First NIS Regional Fund,
Inc., amounting to $600,000, is due March 1996.
(i) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(j) Principal amount shown is original face amount and does not reflect the
inflation adjustments.
(k) Some foreign government obligations have not been individually rated by
S&P or Moody's. The ratings listed are assigned to securities by FMR, the
fund's investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
(l) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(m) A company in which the fund has ownership of at least 5% of the voting
securities is an affiliated company. A summary of the transactions during
the period in which the issuers were affiliates is as follows:
PURCHASE SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
Barr Laboratories, Inc. $ - $ - $ - $22,645,700
Daehan Korean Blue-Chip
Investment Trust - 5,027,875 - -
IVF America, Inc. 131,250 406,875 - -
Synetic, Inc. - - - 31,480,688
WMS Industries, Inc. 312,588 - - 21,316,975
$ 443,838 $5,434,750 - $ 75,443,363

OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $6,964,009,493 and $7,132,057,926, respectively, of which U.S.
government and government agency obligations aggregated $1,807,998,151 and
$1,999,754,181, respectively.
The market value of futures contracts opened and closed during the period
amounted to $499,261,361 and $557,177,398, respectively.
The fund placed a portion of its portfolio securities with brokerage firms
which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $2,011,688 for the period
(see Note 4 of Notes to Financial Statements).
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 21.8% AAA, AA, A 21.8%
Baa 1.7% BBB 2.3%
Ba 0.8% BB 1.5%
B 3.4% B 0.8%
Caa 0.0% CCC 0.2%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government.The percentage not rated by
either S&P or Moody's amounted to 1.8%.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 69.5%
Japan 17.5
Bermuda 2.2
Brazil 2.1
Canada 1.8
Indonesia 1.2
Others (individually less than 1%) 5.7
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1995, the aggregate cost of investment securities for
income tax purposes was $3,110,871,403. Net unrealized appreciation
aggregated $203,702,373, of which $237,164,017 related to appreciated
investment securities and $33,461,644 related to depreciated investment
securities.
VARIABLE INSURANCE PRODUCTS FUND II: ASSET MANAGER PORTFOLIO
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995

ASSETS

Investment in $ 3,314,573,776
securities, at
value (including
repurchase
agreements of
$386,424,000)
(cost
$3,107,396,550)
- - See
accompanying
schedule

Receivable for 57,608,395
investments
sold

Receivable for 2,570,742
fund shares sold

Dividends 3,860,516
receivable

Interest receivable 17,483,191

Receivable for 713,700
daily variation
on futures
contracts

Other receivables 69,447

TOTAL ASSETS 3,396,879,767

LIABILITIES

Payable to $ 2,493,280
custodian bank

Payable for 58,215,626
investments
purchased

Payable for fund 944,615
shares
redeemed

Accrued 1,954,094
management
fee

Other payables 427,843
and accrued
expenses

TOTAL LIABILITIES 64,035,458

NET ASSETS $ 3,332,844,309

Net Assets
consist of:

Paid in capital $ 2,914,158,302

Undistributed net 105,158,635
investment
income

Accumulated 97,895,425
undistributed
net realized gain
(loss) on
investments and
foreign
currency
transactions

Net unrealized 215,631,947
appreciation
(depreciation)
on investments
and assets and
liabilities in
foreign
currencies

NET ASSETS, for $ 3,332,844,309
211,045,847
shares
outstanding

NET ASSET VALUE, $15.79
offering price
and redemption
price per
share
($3,332,844,309
(divided by) 211,045,847
shares)

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1995

INVESTMENT INCOME $ 34,063,952
Dividends

Interest 106,493,577

TOTAL INCOME 140,557,529

EXPENSES

Management fee $ 23,174,840

Transfer agent fees 1,545,902

Accounting fees and expenses 758,063

Non-interested trustees' compensation 21,188

Custodian fees and expenses 593,323

Audit 266,026

Legal 8,687

Interest 1,636

Total expenses before reductions 26,369,665

Expense reductions (588,729 25,780,936
)

NET INVESTMENT INCOME 114,776,593

REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:

Investment securities (including realized gain of $4,664,757 114,027,551
on sales of investments in
affiliated issues)

Foreign currency transactions 7,982,127

Futures contracts (13,257,156 108,752,522
)

Change in net unrealized appreciation (depreciation) on:

Investment securities 271,006,736

Assets and liabilities in foreign currencies 2,779,825

Futures contracts 10,958,183 284,744,744

NET GAIN (LOSS) 393,497,266

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 508,273,859

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1994

<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 114,776,593 $ 124,688,325
Net investment income

Net realized gain (loss) 108,752,522 (68,906,291)

Change in net unrealized appreciation 284,744,744 (250,445,476)
(depreciation)

NET INCREASE (DECREASE) IN NET ASSETS 508,273,859 (194,663,442)
RESULTING FROM OPERATIONS

Distributions to shareholders (67,894,650) (50,526,762)
From net investment income

From net realized gain - (79,199,683)

TOTAL DISTRIBUTIONS (67,894,650) (129,726,445)

Share transactions 239,926,948 1,290,034,795
Net proceeds from sales of shares

Reinvestment of distributions 67,894,650 129,726,445

Cost of shares redeemed (705,883,879) (227,536,355)

NET INCREASE (DECREASE) IN NET ASSETS (398,062,281) 1,192,224,885
RESULTING FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 42,316,928 867,834,998

NET ASSETS

Beginning of period 3,290,527,381 2,422,692,383

End of period (including undistributed net $ 3,332,844,309 $ 3,290,527,381
investment income of $105,158,635 and
$117,158,735, respectively)

OTHER INFORMATION
Shares

Sold 16,731,500 88,946,611

Issued in reinvestment of distributions 5,014,376 8,660,857

Redeemed (49,259,550) (16,144,437)

Net increase (decrease) (27,513,674) 81,463,031

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

</TABLE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,

SELECTED PER-SHARE DATA 1995 1994 1993 C 1992 1991

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.79 $ 15.42 $ 13.32 $ 12.55 $ 10.24

Income from Investment Operations

Net investment income .30 .45 .33 .32 .35

Net realized and unrealized gain (loss) 1.99 (1.33) 2.39 1.09 1.96

Total from investment operations 2.29 (.88) 2.72 1.41 2.31

Less Distributions (.29) (.29) (.33) (.31) -
From net investment income

In excess of net investment income - - (.04) - -

From net realized gain - (.46) (.25) (.33) -

Total distributions (.29) (.75) (.62) (.64) -

Net asset value, end of period $ 15.79 $ 13.79 $ 15.42 $ 13.32 $ 12.55

TOTAL RETURN A, B 16.96% (6.09)% 21.23% 11.71% 22.56%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (000 omitted) $ 3,332,844 $ 3,290,527 $ 2,422,692 $ 731,724 $ 193,518

Ratio of expenses to average net assets .81% .81% .88% .91% 1.08%

Ratio of expenses to average net assets after .79% D .80% .88% .91% 1.08%
expense reductions D

Ratio of net investment income to average net 3.54% 4.07% 3.64% 4.89% 5.89%
assets

Portfolio turnover rate 256% 85% 113% 92% 110%

</TABLE>

<TABLE>
<CAPTION>
<S> <C>
<C> <C> <C> <C>
A TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THOSE CHARGES
WOULD REDUCE THE TOTAL RETURNS SHOWN.
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF
NOTES TO FINANCIAL STATEMENTS).
C EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION
93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL
STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN, AND RETURN OF
CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
D FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A
PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF NOTES TO
FINANCIAL STATEMENTS).

</TABLE>

VARIABLE INSURANCE PRODUCTS FUND II: INDEX 500 PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY

INDEX 500 37.19% 15.44%

S&P 500 37.58% 15.79%

AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.

Let's say you invested $10,000 in Index 500 Portfolio on August 27, 1992,
when the fund started. By December 31, 1995, your investment would have
grown to $16,171 - a 61.71% increase. With reinvested dividends and capital
gains, if any, a $10,000 investment in the S&P 500 would have grown to
$16,339 over the same period - a 63.39% increase.
INVESTMENT SUMMARY
TOP TEN STOCKS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS

General Electric Co. 2.4

AT&T Corp. 2.0

Exxon Corp. 2.0

Coca-Cola Co. (The) 1.8

Merck & Co., Inc. 1.6

Philip Morris Companies, Inc. 1.5

Royal Dutch Petroleum Co. 1.5

Procter & Gamble Co. 1.1

Johnson & Johnson 1.1

International Business Machines Corp. 1.0

TOP TEN MARKET SECTORS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS

Utilities 11.8

Finance 11.8

Nondurables 10.4

Health 9.8

Technology 9.6

Energy 8.2

Basic Industries 6.1

Industrial Machinery & Equipment 4.8

Media & Leisure 4.2

Retail & Wholesale 4.2

VARIABLE INSURANCE PRODUCTS FUND II: INDEX 500 PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW

An interview with
Jennifer Farrelly,
Portfolio Manager of
Index 500 Portfolio
Q. HOW DID THE FUND PERFORM, JENNIFER?
A. For the 12-month period ended December 31, 1995, the fund performed in
line with the 37.58% return of the Standard & Poor's Composite Index of 500
Stocks. Of course, the fund's total return is slightly lower than the index
due to management expenses.
Q. PEOPLE HAVE HEARD AND READ SO MANY DIFFERENT OPINIONS ON WHY THE U.S.
STOCK MARKET PERFORMED SO WELL. IN YOUR OPINION, WHAT WERE THE MOST
IMPORTANT FACTORS IN THE 1995 RALLY?
A. Falling interest rates and growing corporate profits played a big part
in this year's rally. The Federal Reserve Board eased short-term interest
rates twice - in July and December. These actions were a confirmation that
the economy was growing at a slow but steady pace with relatively low
inflation. Lower interest rates were important to the equity market because
they indicated corporate borrowing costs would be less of a burden on
profits.
Q. WAS THERE ANYTHING ELSE THAT ADDED TO THE BULLISH SENTIMENT IN THE
MARKET?
A. The flurry of initial public offerings - particularly the eye-popping
leaps in the prices of technology-related issues - helped to confirm the
market's strong demand for equities. It was also a record year for mergers
and acquisitions, as more than $400 billion in deals were announced. I
should point out that much of this year's M&A activity involved S&P 500
companies. These included Walt Disney's agreement to purchase Capital
Cities/ABC, Westinghouse's decision to buy CBS, the proposed merger of
money-center banks Chase and Chemical, regional bank Fleet Financial's
acquisition of rival Shawmut, the announced merger of Bank of Boston with
cross-town retail specialist BayBanks, and Kimberly Clark's agreement to
buy rival Scott Paper.
Q. CORPORATE SPIN-OFFS HAD A BIG IMPACT ON THE S&P 500 AS WELL. . .
A. They certainly did. Like M&A activity, it was also a record year for
corporate spin-offs and restructuring. AT&T broke off into three units
during 1995, while ITT Corp. and Minnesota Mining & Manufacturing made
similar announcements. Additionally, in a long anticipated move, General
Motors announced it would spin off its computer subsidiary, Electronic Data
Systems.
Q. AS YOU NOTED AT THE END OF JUNE, HIGH-TECH COMPANY STOCKS HAVE HAD A
BANNER YEAR. IT CERTAINLY APPEARS, THOUGH, THAT THEY BEGAN TO LOSE SOME OF
THEIR LUSTER IN THE FOURTH QUARTER. . .
A. Stocks of large semiconductor firms held the spotlight for most of the
year and really seemed to drive the performance of other technology-related
stocks. Beginning in the second quarter, some semiconductor and software
firms began reporting earnings below analysts' estimates. Additionally, in
the fourth quarter, some semiconductor companies showed continued weakness
in earnings. I should point out, however, that many software and personal
computer stocks were able to perform well despite weakness in the
technology sector.
Q. ASIDE FROM TECHNOLOGY, WHAT WERE SOME OTHER SECTORS THAT PERFORMED WELL?
A. Demand was high for consumer nondurables - or less economically
sensitive stocks. This benefited health care stocks and pharmaceutical
companies. Following the trend toward consumer nondurables was a resurgence
in biotechnology and medical device companies. These stocks were also
helped by a large number of approvals from the Food and Drug
Administration. Additionally, the financial sector - particularly
money-center banks - was the beneficiary of the increased loan activity and
investing that goes along with lower interest rates.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. Cyclical - or economically sensitive - stocks underperformed as the
economy slowed this year. These stocks generally do well in the first
stages of a recovery. One widely publicized underperforming sector has also
been the retail sector. The combination of several high-profile
bankruptcies, intense competition and a slow Christmas season hurt retail
stocks.
Q. WHAT'S YOUR OUTLOOK?
A. History has shown that the stock market generally has not been able to
sustain this level of growth for two years in a row. That said, however,
should the economy continue to grow at a sustainable pace and corporate
earnings remain fairly strong, the equity markets should show some positive
returns.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 90.0%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 1.7%
AEROSPACE & DEFENSE - 1.3%
Boeing Co. 16,500 $ 1,293,129
Lockheed Martin Corp. 9,693 765,747
McDonnell Douglas Corp. 5,500 506,000
Northrop Grumman Corp. 2,300 147,200
Rockwell International Corp. 10,500 555,188
3,267,264
DEFENSE ELECTRONICS - 0.3%
Loral Corp. 8,300 293,613
Raytheon Co. 11,800 557,550
851,163
SHIP BUILDING & REPAIR - 0.1%
General Dynamics Corp. 3,100 183,288
TOTAL AEROSPACE & DEFENSE 4,301,715
BASIC INDUSTRIES - 6.1%
CHEMICALS & PLASTICS - 3.3%
Air Products & Chemicals, Inc. 5,300 279,575
Avery Dennison Corp. 2,500 125,313
Dow Chemical Co. 13,000 914,875
du Pont (E.I.) de Nemours & Co. 26,600 1,858,675
Eastman Chemical Co. 3,975 248,934
Engelhard Corp. 6,800 147,900
FMC Corp. (a) 1,700 114,963
Goodrich (B.F.) Company 1,300 88,563
Grace (W.R.) & Co. 4,600 271,975
Great Lakes Chemical Corp. 3,200 230,400
Hercules, Inc. 5,300 298,788
Minnesota Mining & Manufacturing Co. 20,100 1,331,625
Monsanto Co. 5,600 686,000
Morton International, Inc. 7,200 258,300
Nalco Chemical Co. 3,300 99,413
PPG Industries, Inc. 9,800 448,350
Praxair, Inc. 6,700 225,288
Raychem Corp. 1,900 108,063
Rohm & Haas Co. 3,300 212,438
Union Carbide Corp. 6,500 243,750
8,193,188
IRON & STEEL - 0.3%
Armco, Inc. (a) 5,100 29,963
Bethlehem Steel Corp. (a) 5,400 75,600
Inland Steel Industries, Inc. 2,400 60,300
Nucor Corp. 4,300 245,638
USX-U.S. Steel Group 4,000 123,000
Worthington Industries, Inc. 4,450 92,616
627,117
METALS & MINING - 0.7%
Alcan Aluminium Ltd. 10,757 334,099
Aluminum Co. of America 8,500 449,438
ASARCO, Inc. 2,100 67,200
Cyprus Amax Minerals Co. 4,550 118,869
Freeport-McMoRan Copper & Gold, Inc.
Class B 9,700 272,813
Inco Ltd. 5,336 176,485
Phelps Dodge Corp. 3,400 211,650
Reynolds Metals Co. 3,100 175,538
1,806,092

SHARES VALUE (NOTE 1)
PACKAGING & CONTAINERS - 0.3%
Ball Corp. 1,500 $ 41,250
Bemis Co., Inc. 2,400 61,500
Corning, Inc. 11,100 355,200
Crown Cork & Seal Co., Inc. (a) 4,400 183,700
641,650
PAPER & FOREST PRODUCTS - 1.5%
Boise Cascade Corp. 2,200 76,175
Champion International Corp. 4,700 197,400
Federal Paper Board Co., Inc. 2,200 114,125
Georgia-Pacific Corp. 4,300 295,088
International Paper Co. 12,300 465,863
James River Corp. 3,900 94,088
Kimberly-Clark Corp. 13,416 1,110,174
Louisiana-Pacific Corp. 5,100 123,675
Mead Corp. 2,500 130,625
Potlatch Corp. 1,500 60,000
Stone Container Corp. 4,600 66,125
Temple-Inland, Inc. 2,600 114,725
Union Camp Corp. 3,300 157,163
Westvaco Corp. 4,950 137,363
Weyerhaeuser Co. 9,700 419,525
Willamette Industries, Inc. 2,700 151,875
3,713,989
TOTAL BASIC INDUSTRIES 14,982,036
CONGLOMERATES - 1.0%
Allied-Signal, Inc. 13,700 650,750
Crane Co. 1,400 51,625
Dial Corp. (The) 4,400 130,350
Harris Corp. 1,800 98,325
ITT Industries, Inc. 5,500 132,000
Teledyne, Inc. 2,600 66,625
Textron, Inc. 4,000 270,000
Tyco International Ltd. 7,400 263,625
United Technologies Corp. 6,000 569,250
Whitman Corp. 5,100 118,575
2,351,125
CONSTRUCTION & REAL ESTATE - 0.4%
BUILDING MATERIALS - 0.2%
Armstrong World Industries, Inc. 1,300 80,600
Masco Corp. 7,700 241,588
Owens-Corning Fiberglas Corp. (a) 2,500 112,188
Sherwin-Williams Co. 4,000 163,000
597,376
CONSTRUCTION - 0.0%
Centex Corp. 1,400 48,650
Kaufman & Broad Home Corp. 1,600 23,800
Morrison-Knudsen Corp. 1,500 6,375
Pulte Corp. 1,200 40,350
119,175
ENGINEERING - 0.2%
EG & G, Inc. 2,600 63,050
Fluor Corp. 3,900 257,400
Foster Wheeler Corp. 2,000 85,000
405,450
TOTAL CONSTRUCTION & REAL ESTATE 1,122,001
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
DURABLES - 3.3%
AUTOS, TIRES, & ACCESSORIES - 2.6%
Chrysler Corp. 18,300 $ 1,013,363
Cooper Tire & Rubber Co. 4,100 100,963
Cummins Engine Co., Inc. 2,000 74,000
Dana Corp. 4,800 140,400
Eaton Corp. 3,800 203,775
Echlin, Inc. 2,800 102,200
Ford Motor Co. 51,700 1,499,300
General Motors Corp. 35,978 1,902,337
Genuine Parts Co. 5,800 237,800
Goodyear Tire & Rubber Co. 7,400 335,775
Johnson Controls, Inc. 1,900 130,625
NACCO Industries, Inc. Class A 500 27,750
Navistar International Corp. (a) 3,670 38,535
PACCAR, Inc. 1,945 81,933
Pep Boys Manny, Moe & Jack 2,900 74,313
Snap-on Tools Corp. 1,700 76,925
TRW, Inc. 3,200 248,000
6,287,994
CONSUMER ELECTRONICS - 0.3%
Black & Decker Corp. 4,200 148,050
Maytag Co. 5,100 103,275
Newell Co. 7,700 199,238
Whirlpool Corp. 3,600 191,700
642,263
TEXTILES & APPAREL - 0.4%
Fruit of the Loom, Inc. Class A (a) 3,700 90,188
Liz Claiborne, Inc. 3,700 102,675
NIKE, Inc. Class B 6,800 473,450
Reebok International Ltd. 3,700 104,525
Russell Corp. 1,800 49,950
Springs Industries, Inc. Class A 900 37,238
Stride Rite Corp. 2,400 18,000
VF Corp. 3,000 158,250
1,034,276
TOTAL DURABLES 7,964,533
ENERGY - 8.2%
COAL - 0.0%
Eastern Enterprises Co. 900 31,725
ENERGY SERVICES - 0.7%
Baker Hughes, Inc. 6,700 163,313
Dresser Industries, Inc. 8,700 212,063
Halliburton Co. 5,400 273,375
Helmerich & Payne, Inc. 1,100 32,725
McDermott International, Inc. 2,700 59,400
Rowan Companies, Inc. (a) 4,100 40,488
Schlumberger Ltd. 11,700 810,225
1,591,589
OIL & GAS - 7.5%
Amerada Hess Corp. 4,400 233,200
Amoco Corp. 23,900 1,717,813
Ashland, Inc. 3,000 105,375
Atlantic Richfield Co. 7,800 863,850
Burlington Resources, Inc. 6,000 235,500
Chevron Corp. 31,400 1,648,500
Coastal Corp. (The) 5,100 189,975
Exxon Corp. 59,600 4,775,450
Kerr-McGee Corp. 2,400 152,400
Louisiana Land & Exploration Co. 1,700 72,888

SHARES VALUE (NOTE 1)
Mobil Corp. 19,100 $ 2,139,200
Occidental Petroleum Corp. 15,200 324,900
Oryx Energy Co. (a) 4,900 65,538
Pennzoil Co. 2,300 97,175
Phillips Petroleum Co. 12,500 426,563
Royal Dutch Petroleum Co. 25,700 3,626,913
Santa Fe Energy Resources, Inc. (a) 4,400 42,350
Sun Company, Inc. 3,700 101,288
Texaco, Inc. 12,400 973,400
USX-Marathon Group 14,200 276,900
Unocal Corp. 11,765 342,656
18,411,834
TOTAL ENERGY 20,035,148
FINANCE - 11.8%
BANKS - 5.5%
Banc One Corp. 18,860 711,965
Bank of Boston Corp. 5,436 251,415
Bank of New York Co., Inc. 9,300 453,375
BankAmerica Corp. 17,900 1,159,025
Bankers Trust New York Corp. 3,700 246,050
Barnett Banks, Inc. 4,600 271,400
Boatmen's Bancshares, Inc. 6,100 249,338
Chase Manhattan Corp. 8,382 508,159
Chemical Banking Corp. 12,200 716,750
Citicorp 20,362 1,369,345
Comerica, Inc. 5,600 224,700
CoreStates Financial Corp. 6,700 253,763
First Bank System, Inc. 6,600 327,525
First Fidelity Bancorporation 3,756 283,109
First Interstate Bancorp 3,600 491,400
First Union Corp. 8,246 458,684
Fleet Financial Group, Inc. 11,374 463,491
KeyCorp. 11,007 399,004
Mellon Bank Corp. 7,100 381,625
Morgan (J.P.) & Co., Inc. 9,100 730,275
National City Corp. 7,159 237,142
NationsBank Corp. 13,117 913,271
Norwest Corp. 16,900 557,700
PNC Financial Corp. 11,100 357,975
Republic New York Corp. 2,600 161,525
SunTrust Banks, Inc. 5,400 369,900
U.S. Bancorp 4,800 161,400
Wachovia Corp. 8,300 379,725
Wells Fargo & Co. 2,400 518,400
13,607,436
CREDIT & OTHER FINANCE - 1.2%
American Express Co. 23,379 967,306
Beneficial Corp. 2,600 121,225
Dean Witter Discover & Co. 8,058 378,726
First Chicago NBD Corp. 15,159 598,781
Household International, Inc. 4,610 272,566
MBNA Corp. 7,200 265,500
Transamerica Corp. 3,229 235,313
2,839,417
FEDERAL SPONSORED CREDIT - 1.0%
Federal Home Loan
Mortgage Corp. 8,600 718,100
Federal National
Mortgage Association 13,200 1,638,450
2,356,550
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
INSURANCE - 3.5%
Aetna Life & Casualty Co. 5,500 $ 380,875
Alexander & Alexander Services, Inc. 2,200 41,800
Allstate Corp. 21,621 889,164
American General Corp. 9,900 345,263
American International Group, Inc. 22,875 2,115,938
CIGNA Corp. 3,400 351,050
Chubb Corp. (The) 4,100 396,675
General Re Corp. 4,000 620,000
ITT Hartford Group, Inc. 5,500 266,063
Jefferson Pilot Corp. 3,300 153,450
Lincoln National Corp. 4,900 263,375
Loews Corp. 5,600 438,900
Marsh & McLennan Companies, Inc. 3,400 301,750
Providian Corp. 4,500 183,375
SAFECO Corp. 6,100 210,450
St. Paul Companies, Inc. (The) 4,000 222,500
Torchmark Corp. 3,500 158,375
Travelers, Inc. (The) 15,417 969,344
UNUM Corp. 3,400 187,000
USF&G Corp. 5,300 89,438
USLIFE Corp. 1,575 47,053
8,631,838
SAVINGS & LOANS - 0.2%
Ahmanson (H.F.) & Co. 5,700 151,050
Golden West Financial Corp. 2,900 160,225
Great Western Financial Corp. 6,650 169,575
480,850
SECURITIES INDUSTRY - 0.4%
Merrill Lynch & Co., Inc. 8,400 428,400
Morgan Stanley Group, Inc. 3,600 290,250
Salomon, Inc. 5,200 184,600
903,250
TOTAL FINANCE 28,819,341
HEALTH - 9.8%
DRUGS & PHARMACEUTICALS - 5.9%
Allergan, Inc. 3,000 97,500
ALZA Corp. Class A (a) 3,900 96,525
American Home Products Corp. 14,800 1,435,600
Amgen, Inc. (a) 12,800 760,000
Bristol-Myers Squibb Co. 24,300 2,086,763
Lilly (Eli) & Co. 26,596 1,496,025
Merck & Co., Inc. 59,500 3,912,125
Pharmacia & Upjohn, Inc. 24,260 940,075
Pfizer, Inc. 30,400 1,915,200
Schering-Plough Corp. 17,800 974,550
Sigma Aldrich Corp. 2,300 113,850
Warner-Lambert Co. 6,400 621,600
14,449,813
MEDICAL EQUIPMENT & SUPPLIES - 2.8%
Abbott Laboratories 38,200 1,594,850
Bard (C.R.), Inc. 2,600 83,850
Bausch & Lomb, Inc. 2,800 110,950
Baxter International, Inc. 13,200 552,750
Becton, Dickinson & Co. 3,100 232,500
Biomet, Inc. (a) 5,600 100,100
Boston Scientific Corp. (a) 7,700 377,300
Johnson & Johnson 31,100 2,662,938
Mallinckrodt Group, Inc. 3,600 130,950

SHARES VALUE (NOTE 1)
Medtronic, Inc. 11,100 $ 620,213
Millipore Corp. 2,200 90,475
Pall Corp. 5,400 145,125
St. Jude Medical, Inc. (a) 3,450 148,350
U.S. Surgical Corp. 2,800 59,850
6,910,201
MEDICAL FACILITIES MANAGEMENT - 1.1%
Beverly Enterprises, Inc. (a) 4,800 51,000
Columbia/HCA Healthcare Corp. 21,375 1,084,781
Community Psychiatric Centers 2,000 24,500
Humana, Inc. 7,700 210,788
Manor Care, Inc. 2,900 101,500
Tenet Healthcare Corp. (a) 9,700 201,275
United HealthCare Corp. 8,400 550,200
U.S. Healthcare, Inc. 7,300 339,450
2,563,494
TOTAL HEALTH 23,923,508
HOLDING COMPANIES - 0.3%
CINergy Corp. 7,413 227,023
Norfolk Southern Corp. 6,200 492,125
719,148
INDUSTRIAL MACHINERY & EQUIPMENT - 4.8%
ELECTRICAL EQUIPMENT - 3.1%
Emerson Electric Co. 10,700 874,725
General Electric Co. 81,300 5,853,600
General Signal Corp. 2,200 71,225
Grainger (W.W.), Inc. 2,500 165,625
Honeywell, Inc. 6,200 301,475
Scientific-Atlanta, Inc. 3,600 54,000
Westinghouse Electric Corp. 18,900 311,850
7,632,500
INDUSTRIAL MACHINERY & EQUIPMENT - 1.2%
Briggs & Stratton Corp. 1,500 65,063
Caterpillar, Inc. 9,500 558,125
Cincinnati Milacron, Inc. 1,700 44,625
Cooper Industries, Inc. 5,246 192,791
Deere & Co. 11,400 401,850
Dover Corp. 5,500 202,813
Giddings & Lewis, Inc. 1,700 28,050
Harnischfeger Industries, Inc. 2,400 79,800
Illinois Tool Works, Inc. 5,700 336,300
Ingersoll-Rand Co. 5,000 175,625
Parker-Hannifin Corp. 3,450 118,163
Stanley Works 2,200 113,300
Tenneco, Inc. 8,600 426,775
Timken Co. 1,400 53,550
TRINOVA Corp. 1,300 37,213
Varity Corp. (a) 1,900 70,538
2,904,581
POLLUTION CONTROL - 0.5%
Browning-Ferris Industries, Inc. 10,300 303,850
Laidlaw, Inc. Class B 14,200 143,108
Ogden Corp. 2,400 51,300
Safety Kleen Corp. 2,700 42,188
WMX Technologies, Inc. 23,200 693,100
Zurn Industries, Inc. 600 12,825
1,246,371
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 11,783,452
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 4.2%
BROADCASTING - 1.3%
Capital Cities/ABC, Inc. 7,300 $ 900,638
Comcast Corp. Class A special 11,450 208,247
TCI Group Class A 31,400 624,075
Time Warner, Inc. 18,517 701,331
Viacom, Inc. Class B (non-vtg.) (a) 17,400 824,325
3,258,616
ENTERTAINMENT - 0.6%
Disney (Walt) Co. 25,100 1,480,900
King World Productions, Inc. (a) 1,700 66,088
1,546,988
LEISURE DURABLES & TOYS - 0.3%
Brunswick Corp. 4,700 112,800
Fleetwood Enterprises, Inc. 1,800 46,350
Hasbro, Inc. 4,300 133,300
Mattel, Inc. 10,581 325,366
Outboard Marine Corp. 900 18,338
636,154
LODGING & GAMING - 0.3%
Bally Entertainment Corp. 2,200 30,800
Harrah's Entertainment, Inc. 5,000 121,250
Hilton Hotels Corp. 2,400 147,600
ITT Corp. 5,500 291,500
Marriott International, Inc. 6,100 233,325
824,475
PUBLISHING - 1.0%
American Greetings Corp. Class A 3,500 96,688
Dow Jones & Co., Inc. 4,700 187,413
Dun & Bradstreet Corp. 8,200 530,950
Gannett Co., Inc. 6,800 417,350
Harcourt General, Inc. 3,400 142,375
Knight-Ridder, Inc. 2,300 143,750
McGraw-Hill, Inc. 2,300 200,388
Meredith Corp. 1,400 58,625
New York Times Co. (The) Class A 4,700 139,238
Times Mirror Co. Class A 5,300 179,538
Tribune Co. 3,200 195,600
2,291,915
RESTAURANTS - 0.7%
Darden Restaurants, Inc. 7,500 89,063
Luby's Cafeterias, Inc. 1,200 26,700
McDonald's Corp. 33,300 1,502,663
Ryan's Family Steak Houses, Inc. (a) 2,600 18,200
Shoney's, Inc. (a) 1,900 19,475
Wendy's International, Inc. 5,000 106,250
1,762,351
TOTAL MEDIA & LEISURE 10,320,499
NONDURABLES - 10.4%
AGRICULTURE - 0.1%
Pioneer Hi-Bred International, Inc. 4,100 228,063
BEVERAGES - 3.3%
Anheuser-Busch Companies, Inc. 12,200 815,875
Brown-Forman Corp. Class B 3,400 124,100
Coca-Cola Company (The) 60,500 4,492,125
Coors (Adolph) Co. Class B 1,900 42,038
PepsiCo, Inc. 37,900 2,117,663
Seagram Co. Ltd. 17,800 613,186
8,204,987

SHARES VALUE (NOTE 1)
FOODS - 2.5%
Archer-Daniels-Midland Co. 25,961 $ 467,298
CPC International, Inc. 7,100 487,238
Campbell Soup Co. 11,900 714,000
ConAgra, Inc. 11,800 486,750
General Mills, Inc. 7,700 444,675
Heinz (H.J.) Co. 17,450 578,031
Hershey Foods Corp. 3,800 247,000
Kellogg Co. 10,600 818,850
Quaker Oats Co. 6,500 224,250
Ralston Purina Co. 5,100 318,113
Sara Lee Corp. 23,100 736,313
Sysco Corp. 8,700 282,750
Wrigley (Wm.) Jr. Co. 5,500 288,750
6,094,018
HOUSEHOLD PRODUCTS - 2.7%
Alberto Culver Co. Class B 1,400 48,125
Avon Products, Inc. 3,200 241,200
Clorox Co. 2,500 179,063
Colgate-Palmolive Co. 6,900 484,725
Gillette Co. 21,400 1,115,475
International Flavors & Fragrances, Inc. 5,400 259,200
Premark International, Inc. 3,100 156,938
Procter & Gamble Co. 33,100 2,747,300
Rubbermaid, Inc. 7,500 191,250
Unilever NV ADR 7,600 1,069,700
6,492,976
TOBACCO - 1.8%
American Brands, Inc. 9,000 401,625
Philip Morris Companies, Inc. 40,300 3,647,150
UST, Inc. 9,300 310,388
4,359,163
TOTAL NONDURABLES 25,379,207
PRECIOUS METALS - 0.5%
Barrick Gold Corp. 16,900 445,927
Echo Bay Mines Ltd. 5,500 57,445
Homestake Mining Co. 6,700 104,688
Newmont Mining Corp. 4,224 191,136
Placer Dome, Inc. 11,400 275,736
Santa Fe Pacific Gold Corp. 6,220 75,418
1,150,350
RETAIL & WHOLESALE - 4.2%
APPAREL STORES - 0.3%
Brown Group, Inc. 800 11,400
Charming Shoppes, Inc. 5,000 14,375
Gap, Inc. 7,000 294,000
Limited, Inc. (The) 17,200 298,850
Melville Corp. 5,100 156,825
TJX Companies, Inc. 3,400 64,175
839,625
DRUG STORES - 0.2%
Long Drug Stores, Inc. 1,000 47,875
Rite Aid Corp. 4,100 140,425
Walgreen Co. 11,900 355,513
543,813
GENERAL MERCHANDISE STORES - 2.3%
Dayton Hudson Corp. 3,500 262,500
Dillard Department Stores, Inc. Class A 5,500 156,750
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES - CONTINUED
Federated Department Stores, Inc. (a) 9,800 $ 269,500
K mart Corp. 22,100 160,225
May Department Stores Co. (The) 12,000 507,000
Mercantile Stores Co., Inc. 1,700 78,625
Nordstrom, Inc. 3,900 157,950
Penney (J.C.) Co., Inc. 11,000 523,875
Price/Costco, Inc. (a) 9,439 143,945
Sears, Roebuck & Co. 18,800 733,200
Wal-Mart Stores, Inc. 110,300 2,467,963
Woolworth Corp. 6,300 81,900
5,543,433
GROCERY STORES - 0.6%
Albertson's, Inc. 12,300 404,363
American Stores Co. 7,200 192,600
Fleming Companies, Inc. 1,729 35,661
Giant Food, Inc. Class A 2,900 91,350
Great Atlantic & Pacific Tea Co., Inc. 1,900 43,700
Kroger Co. (The) (a) 5,800 217,500
Supervalu, Inc. 3,200 100,800
Winn-Dixie Stores, Inc. 7,300 269,188
1,355,162
RETAIL & WHOLESALE, MISCELLANEOUS - 0.8%
Circuit City Stores, Inc. 4,700 129,838
Handleman Co. 1,700 9,775
Home Depot, Inc. (The) 22,800 1,091,550
Lowe's Companies, Inc. 7,600 254,600
Tandy Corp. 3,200 132,800
Toys "R" Us, Inc. (a) 13,200 287,100
1,905,663
TOTAL RETAIL & WHOLESALE 10,187,696
SERVICES - 0.7%
ADVERTISING - 0.1%
Interpublic Group of Companies, Inc. 3,800 164,825
LEASING & RENTAL - 0.0%
Ryder Systems, Inc. 3,700 91,575
PRINTING - 0.3%
Alco Standard Corp. 5,400 246,375
Deluxe Corp. 3,900 113,100
Donnelley (R.R.) & Sons Co. 7,300 287,438
Harland (John H.) Co. 1,400 29,225
Moore Corp. Ltd. 4,700 88,275
764,413
SERVICES - 0.3%
Block (H & R), Inc. 5,100 206,550
Ecolab, Inc. 3,000 90,000
Jostens, Inc. 1,900 46,075
National Service Industries, Inc. 2,400 77,700
Service Corp. International 4,900 215,600
Western Atlas, Inc. (a) 2,600 131,300
767,225
TOTAL SERVICES 1,788,038
TECHNOLOGY - 9.6%
COMMUNICATIONS EQUIPMENT - 0.9%
Andrew Corp. (a) 1,950 74,588
Cabletron Systems, Inc. (a) 3,500 283,500

SHARES VALUE (NOTE 1)
Cisco Systems, Inc. (a) 13,100 $ 977,588
DSC Communications Corp. (a) 5,600 206,500
Northern Telecom Ltd. 12,100 517,710
Tellabs, Inc. (a) 4,300 159,100
2,218,986
COMPUTER SERVICES & SOFTWARE - 2.5%
Autodesk, Inc. 2,300 78,775
Automatic Data Processing, Inc. 14,000 519,750
CUC International, Inc. (a) 8,450 288,356
Ceridian Corp. (a) 2,100 86,625
Computer Associates International, Inc. 11,450 651,219
Computer Sciences Corp. (a) 2,600 182,650
First Data Corp. 10,500 702,188
Microsoft Corp. (a) 28,200 2,474,550
Novell, Inc. (a) 17,800 253,650
Oracle Systems Corp. (a) 20,900 885,638
Shared Medical Systems Corp. 1,200 65,250
6,188,651
COMPUTERS & OFFICE EQUIPMENT - 3.2%
Amdahl Corp. (a) 5,800 49,300
Apple Computer, Inc. 5,900 188,063
Compaq Computer Corp. (a) 12,600 604,800
Cray Research, Inc. (a) 1,300 32,175
Data General Corp. (a) 1,700 23,375
Digital Equipment Corp. (a) 7,100 455,288
Hewlett-Packard Co. 24,500 2,051,875
Intergraph Corp. (a) 2,300 36,225
International Business Machines Corp. 27,400 2,513,950
Pitney Bowes, Inc. 7,200 338,400
Silicon Graphics, Inc. (a) 7,700 211,750
Sun Microsystems, Inc. (a) 9,000 410,625
Tandem Computers, Inc. (a) 5,500 58,438
Unisys Corp. (a) 8,300 46,688
Xerox Corp. 5,100 698,700
7,719,652
ELECTRONIC INSTRUMENTS - 0.2%
Applied Materials, Inc. (a) 8,400 330,750
Perkin-Elmer Corp. 2,100 79,275
Tektronix, Inc. 1,700 83,513
493,538
ELECTRONICS - 2.3%
Advanced Micro Devices, Inc. 4,900 80,850
AMP, Inc. 10,396 398,947
Intel Corp. 39,500 2,241,625
LSI Logic Corp. (a) 6,100 199,775
Micron Technology, Inc. 10,000 396,250
Motorola, Inc. 28,400 1,618,800
National Semiconductor Corp. (a) 6,000 133,500
Texas Instruments, Inc. 9,100 470,925
Thomas & Betts Corp. 1,000 73,750
5,614,422
PHOTOGRAPHIC EQUIPMENT - 0.5%
Eastman Kodak Co. 16,500 1,105,500
Polaroid Corp. 2,100 99,488
1,204,988
TOTAL TECHNOLOGY 23,440,237
TRANSPORTATION - 1.2%
AIR TRANSPORTATION - 0.3%
AMR Corp. (a) 3,600 267,300
Delta Air Lines, Inc. 2,500 184,688
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TRANSPORTATION - CONTINUED
AIR TRANSPORTATION - CONTINUED
Southwest Airlines Co. 6,800 $ 158,100
USAir Group, Inc. (a) 2,900 38,425
648,513
RAILROADS - 0.7%
Burlington Northern Santa Fe Corp. 6,918 539,604
CSX Corp. 8,038 366,734
Conrail, Inc. 3,700 259,000
Union Pacific Corp. 9,800 646,800
1,812,138
TRUCKING & FREIGHT - 0.2%
Consolidated Freightways, Inc. 2,000 53,000
Federal Express Corp. (a) 2,600 192,075
Pittston Co. Services Group 2,100 65,888
Roadway Services, Inc. 1,800 87,975
Yellow Corp. 1,400 17,325
416,263
TOTAL TRANSPORTATION 2,876,914
UTILITIES - 11.8%
CELLULAR - 0.3%
AirTouch Communications, Inc. (a) 23,800 672,350
ELECTRIC UTILITY - 3.3%
American Electric Power Co., Inc. 9,000 364,500
Baltimore Gas & Electric Co. 7,000 199,500
Carolina Power & Light Co. 7,400 255,300
Central & South West Corp. 9,300 259,238
Consolidated Edison Co. of
New York, Inc. 11,200 358,400
Detroit Edison Co. 7,000 241,500
Dominion Resources, Inc. 8,400 346,500
Duke Power Co. 9,900 469,013
Entergy Corp. 11,000 321,750
FPL Group, Inc. 8,800 408,100
General Public Utilities Corp. 5,500 187,000
Houston Industries, Inc. 12,700 307,975
Niagara Mohawk Power Corp. 7,000 67,375
Northern States Power Co. 3,300 162,113
Ohio Edison Co. 7,400 173,900
PP&L Resources, Inc. 7,700 192,500
Pacific Gas & Electric Co. 20,300 576,013
PacifiCorp. 13,600 289,000
Peco Energy Co. 10,600 319,325
Public Service Enterprise Group, Inc. 11,700 358,313
SCEcorp 21,500 381,625
Southern Co. 31,900 785,538
Texas Utilities Co. 10,900 448,263
Unicom Corp. 10,400 340,600
Union Electric Co. 5,000 208,750
8,022,091
GAS - 0.7%
Columbia Gas System, Inc. (The) (a) 2,500 109,688
Consolidated Natural Gas Co. 4,400 199,650
Enron Corp. 12,200 465,125
ENSERCH Corp. 3,200 52,000
NICOR, Inc. 2,500 68,750
Noram Energy Corp. 6,000 53,250
ONEOK, Inc. 1,200 27,450
Pacific Enterprises 4,000 113,000
Panhandle Eastern Corp. 7,100 197,913

SHARES VALUE (NOTE 1)
Peoples Energy Corp. 1,600 $ 50,800
Sonat, Inc. 4,200 149,625
Williams Companies, Inc. 5,000 219,375
1,706,626
TELEPHONE SERVICES - 7.5%
ALLTEL Corp. 9,000 265,500
AT&T Corp. 76,300 4,940,425
Ameritech Corp. 26,700 1,575,300
Bell Atlantic Corp. 20,900 1,397,688
BellSouth Corp. 47,800 2,079,300
GTE Corp. 46,700 2,054,800
MCI Communications Corp. 32,500 849,063
NYNEX Corp. 20,600 1,112,400
Pacific Telesis Group 20,500 689,313
SBC Communications, Inc. 29,200 1,679,000
Sprint Corp. 16,800 669,900
U.S. West, Inc. 22,700 811,525
U.S. West, Inc. (Media Group) 22,700 431,300
18,555,514
TOTAL UTILITIES 28,956,581
TOTAL COMMON STOCKS
(Cost $194,096,879) 220,101,529
U.S. TREASURY OBLIGATIONS - 0.6%
PRINCIPAL
AMOUNT
U.S. Treasury Bill, yields at date
of purchase 5.38% - 5.47%,
3/7/96 (b) (Cost $1,386,126) $ 1,400,000 1,387,666
REPURCHASE AGREEMENTS - 9.4%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a
joint trading account at 5.91%
dated 12/29/95 due 1/2/96 $ 23,113,168 23,098,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $218,581,005) $ 244,587,195
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
80 S&P 500 Stock Index
Futures Contracts Mar. 1996 $ 24,738,000 $ (125,550)
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 10.1%
LEGEND
(a) Non-income producing
(b) Security was pledged to cover margin requirements for futures
contracts. At the period end, the value of securities pledged amounted to
$1,387,666.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $162,711,402 and $18,251,610, respectively, of which U.S.
government and government agency obligations aggregated $0 and $250,000,
respectively.
The market value of futures contracts opened and closed during the period
amounted to $176,769,835 and $161,385,360, respectively.
INCOME TAX INFORMATION
At December 31, 1995, the aggregate cost of investment securities for
income tax purposes was $218,581,005. Net unrealized appreciation
aggregated $26,006,190, of which $30,258,155 related to appreciated
investment securities and $4,251,965 related to depreciated investment
securities.
The fund hereby designates $5,017,474 as a capital gain dividend for the
purpose of the dividend paid deduction.
VARIABLE INSURANCE PRODUCTS FUND II: INDEX 500 PORTFOLIO
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995

ASSETS

Investment in $ 244,587,195
securities, at
value (including
repurchase
agreements of
$23,098,000)
(cost
$218,581,005)
- - See
accompanying
schedule

Cash 762

Receivable for 4,311,497
investments
sold

Receivable for 791,953
fund shares sold

Dividends 432,625
receivable

Receivable for 22,540
daily variation
on futures
contracts

TOTAL ASSETS 250,146,572

LIABILITIES

Payable for $ 4,317,485
investments
purchased

Payable for fund 20,561
shares
redeemed

Accrued 69,545
management
fee

Other payables 39,286
and accrued
expenses

TOTAL LIABILITIES 4,446,877

NET ASSETS $ 245,699,695

Net Assets
consist of:

Paid in capital $ 207,597,570

Undistributed net 3,389,130
investment
income

Accumulated 8,832,338
undistributed net
realized gain
(loss) on
investments and
foreign currency
transactions

Net unrealized 25,880,657
appreciation
(depreciation)
on investments
and assets and
liabilities in
foreign
currencies

NET ASSETS, for $ 245,699,695
3,245,285
shares
outstanding

NET ASSET VALUE, $75.71
offering price
and redemption
price per share
($245,699,695 (divided by)
3,245,285
shares)

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1995

INVESTMENT INCOME $ 2,798,476
Dividends

Interest 940,739

TOTAL INCOME 3,739,215

EXPENSES

Management fee $ 351,136

Transfer agent fees 65,837

Accounting fees and expenses 76,868

Non-interested trustees' compensation 420

Custodian fees and expenses 44,226

Registration fees 4,030

Audit 49,038

Legal 492

Miscellaneous 388

Total expenses before reductions 592,435

Expense reductions (241,437 350,998
)

NET INVESTMENT INCOME 3,388,217

REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:

Investment securities 5,357,375

Foreign currency transactions 34

Futures contracts 3,501,910 8,859,319

Change in net unrealized appreciation (depreciation) on:

Investment securities 24,986,430

Assets and liabilities in 49
foreign currencies

Futures contracts (145,935 24,840,544
)

NET GAIN (LOSS) 33,699,863

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 37,088,080

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1994

Operations $ 3,388,217 $ 1,039,047
Net investment income

Net realized gain (loss) 8,859,319 122,656

Change in net unrealized appreciation 24,840,544 (622,569)
(depreciation)

NET INCREASE (DECREASE) IN NET ASSETS 37,088,080 539,134
RESULTING FROM OPERATIONS

Distributions to shareholders (1,038,071) -
From net investment income

From net realized gain (125,271) (48,645)

In excess of net realized gain (16,781) -

TOTAL DISTRIBUTIONS (1,180,123) (48,645)

Share transactions 176,225,141 33,081,459
Net proceeds from sales of shares

Reinvestment of distributions 1,180,123 48,645

Cost of shares redeemed (18,914,447) (7,472,350)

NET INCREASE (DECREASE) IN NET ASSETS 158,490,817 25,657,754
RESULTING FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 194,398,774 26,148,243

NET ASSETS

Beginning of period 51,300,921 25,152,678

End of period (including undistributed net $ 245,699,695 $ 51,300,921
investment income of $3,389,130 and
$1,040,212, respectively)

OTHER INFORMATION
Shares

Sold 2,593,616 593,458

Issued in reinvestment of distributions 20,470 866

Redeemed (281,351) (133,026)

Net increase (decrease) 2,332,735 461,298

<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

</TABLE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, AUGUST 27, 1992
(COMMENCEMENT
OF
OPERATIONS) TO
DECEMBER 31,

SELECTED PER-SHARE DATA 1995 1994 1993 D 1992

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 56.22 $ 55.74 $ 52.60 $ 50.00

Income from Investment Operations

Net investment income .85 1.14 1.31 .44

Net realized and unrealized gain (loss) 19.72 (.56) 3.80 2.71

Total from investment operations 20.57 .58 5.11 3.15

Less Distributions (.95) - (1.28) (.47)
From net investment income

From net realized gain (.11) (.10) (.60) (.08)

In excess of net realized gain (.02) - (.09) -

Total distributions (1.08) (.10) (1.97) (.55)

Net asset value, end of period $ 75.71 $ 56.22 $ 55.74 $ 52.60

TOTAL RETURN B, C 37.19% 1.04% 9.74% 6.31%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (000 omitted) $ 245,700 $ 51,301 $ 25,153 $ 17,961

Ratio of expenses to average net assets E .28% .28% .28% .28%
A

Ratio of net investment income to average net 2.70% 2.81% 2.65% 2.89%
assets A

Portfolio turnover rate 16% 2% 9% 0%

</TABLE>

<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C>
A ANNUALIZED

B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT.
INCLUSION OF THOSE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO
FINANCIAL STATEMENTS).
D EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION
93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A
RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
E FMR VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE EXPENSE
RATIO WOULD HAVE BEEN HIGHER.

</TABLE>

VARIABLE INSURANCE PRODUCTS FUND II: ASSET MANAGER: GROWTH PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY

PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. A fund's total return includes
changes in a fund's share price, plus reinvestment of any dividends
(income) and capital gains (the profits the fund earns when it sells
securities that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIOD ENDED DECEMBER 31, 1995 LIFE OF
FUND

Asset Manager: Growth 23.02%

S&P 500 37.56%

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, since the fund started on January 3,
1995.

Let's say you invested $10,000 in Asset Manager: Growth Portfolio on
January 31, 1995, shortly after the fund began. By December 31, 1995, your
investment would have grown to $12,278 - a 22.78% increase. That compares
to $10,000 invested in the S&P 500, which would have grown to $13,410 over
the same period - a 34.10% increase.
You can also look at how the Fidelity Aggressive Asset Allocation Composite
Index, a hypothetical combination of unmanaged indices, did over the same
period. Reflecting the fund's neutral mix of 65% stocks, 30% bonds, and 5%
short-term instruments, this index combines returns from the S&P 500
(34.10%), Lehman Brothers Treasury Bond Index (16.20%), and the Salomon
Brothers 3-month T-Bill Total Rate of Return Index (5.25%). With reinvested
dividends and capital gains, if any, a $10,000 investment in the index
would have grown to $12,699 - a 26.99% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS

Chrysler Corp. 3.5

IVF America, Inc. 3.1

Inco Ltd. 2.2

Compaq Computer Corp. 2.1

IVAX Corp. 1.9

TOP FIVE MARKET SECTORS AS OF DECEMBER 31, 1995
(STOCKS ONLY) % OF FUND'S
INVESTMENTS

Durables 11.2

Retail & Wholesale 11.1

Basic Industries 8.4

Media & Leisure 7.6

Health 7.4

ASSET ALLOCATION AS OF DECEMBER 31, 1995*
Row: 1, Col: 1, Value: 20.0
Row: 1, Col: 2, Value: 10.0
Row: 1, Col: 3, Value: 70.0
Stock class 70%
Bond class 10%
Short-term class
and other 20%
FOREIGN INVESTMENTS 37.9%
*
ASSET ALLOCATIONS IN THIS PIE CHART REFLECT THE CATEGORIZATION OF
ASSETS AS DEFINED IN THE FUND'S PROSPECTUS. FINANCIAL STATEMENT
CATEGORIZATIONS CONFORM TO ACCOUNTING STANDARDS AND WILL DIFFER
FROM THE PIE CHART.
VARIABLE INSURANCE PRODUCTS FUND II: ASSET MANAGER: GROWTH PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW

An interview with
Andy Offit, Portfolio Manager of Asset
Manager: Growth Portfolio
Q. ANDY, HOW DID THE FUND PERFORM?
A. Nineteen ninety-five was a terrific year for domestic investments,
including both stocks and bonds, and the fund's double-digit performance
reflects that. By emphasizing stocks all year, especially U.S. stocks,
Asset Manager: Growth achieved returns that compare favorably with those of
most other funds that have a diversified investment strategy. If I was
disappointed by anything during the past 12 months, it was the fund's stake
in foreign stocks, including French aluminum manufacturer Pechiney, which
lagged its domestic counterpart. Long-term, I expect the fund's foreign
investments to contribute more meaningfully to performance, but this was
not their year.
Q. HOW WERE THE FUND'S ASSETS DISTRIBUTED AT THE END OF THE PERIOD?
A. About 70% stocks, 20% cash and 10% bonds. Foreign investments, mostly
stocks, totaled 38% of the fund's assets. The biggest development during
the past six months has been the rise in foreign investments, mainly
Japanese stocks, which totaled 24% at the end of the period. Emerging
market investments represented 9% of total assets.
Q. WHAT PRINCIPLES DID YOU APPLY TO STOCK SELECTION?
A. I use what's called a bottom-up analysis, meaning I focus on individual
companies and their prospects, rather than sector outlooks or macroeconomic
trends. I look for compelling situations where the potential for gain
exceeds the potential for loss. When I find attractive situations, I like
to make bets that are large enough to have an impact on the fund's
performance. That's why there were only 121 securities in the fund at the
end of December.
Q. WHERE DID YOU FIND VALUE IN THE U.S. STOCK MARKET?
A. Because Asset Manager: Growth is a relatively new fund and total assets
under management remain relatively small, I've been able to capitalize on a
number of unique opportunities among small and mid-sized companies. One
example was IVF America, a fast-growing healthcare company whose six
clinics nationwide perform in vitro fertilization. IVF America represented
more than 3% of the fund's assets at the end of the period and its price
tripled during 1995. Another large holding was U.S. Surgical, one of the
world's largest manufacturers of surgical staplers and sutures. The company
is completing a two-year restructuring designed to produce improved
results. Among mid-sized stocks, the fund did well with defense contractor
Northrop Grumman. The company achieved a strong position in a consolidating
industry by generating a lot of cash and using that cash to pay down debt
and make acquisitions.
Q. WHY SUCH A LARGE STAKE IN JAPAN?
A. While results so far have been less than those achieved in the U.S., I
see Japan as one of the larger turnaround opportunities in the world. With
its market down 50% from its peak in 1989, the yen has started to weaken,
consumer sentiment is improving and the economy is beginning to grow for
the first time in five years. I began last spring investing in Japanese
electronics companies, however, lately my focus has shifted to cyclical
sectors that could benefit from an economic rebound. Large holdings at the
end of the period included retailers Takashimaya, Aoyama Trading and Hankyu
Department stores; steel producers Kobe Steel and NKK, and software
developer Nintendo.
Q. WHAT WAS YOUR BOND STRATEGY?
A. Asset Manager: Growth made only limited investments in bonds during the
year, seeking the greater potential return of investing in stocks. That
said, as the difference between long-term and short-term interest rates has
narrowed, I concentrated my small bond holdings on Treasury securities in
the middle of the yield curve, with current maturities between five and 15
years. They seemed to offer the best balance between attractive yield and
the potential for price gains going forward.
Q. WHAT'S THE OUTLOOK?
A. Promising. Moderate growth and benign inflation mean interest rates
could head still lower in the months ahead, providing an attractive
backdrop for both stocks and bonds. Among the fund's larger holdings,
Alcoa, the world's largest producer of aluminum, as well as waste haulers
Browning-Ferris and WMX Technologies and automaker Chrysler remained
attractive values as of December 31. Another key in 1996 will be how well
foreign stocks perform, especially the fund's stake in Japan. I believe
Japan, rather than in the United States and Europe, may have the greatest
potential for gain in the months ahead.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.

FUND FACTS
GOAL: maximum total return over the long term
through investment in stocks, bonds and
short-term instruments anywhere in the world
START DATE: January 3, 1995
SIZE: as of December 31, 1995, more than
$68 million
MANAGER: Andy Offit, since January 1995;
joined Fidelity in 1987
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND II: ASSET MANAGER: GROWTH PORTFOLIO
INVESTMENTS DECEMBER 31, 1995

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 74.4%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.7%
C A E Industries Ltd. 18,700 $ 142,193
Northrop Grumman Corp. 5,200 332,800
474,993
BASIC INDUSTRIES - 8.4%
CHEMICALS & PLASTICS - 1.8%
Raychem Corp. 700 39,813
Sekisui Chemical Co. Ltd. 42,000 617,408
Synetic, Inc. (a) 19,700 573,763
1,230,984
IRON & STEEL - 1.6%
Bakrie & Brothers PT Ord. (For. Reg.) 75,500 137,033
Kobe Steel (a) 143,000 441,170
NKK Corp. (a) 193,000 518,897
1,097,100
METALS & MINING - 5.0%
Aluminum Co. of America 25,000 1,321,875
Falconbridge Ltd. 28,800 250,669
Inco Ltd. 44,800 1,481,731
Pechiney SA Class A 11,000 380,679
3,434,954
TOTAL BASIC INDUSTRIES 5,763,038
CONGLOMERATES - 1.9%
Figgie International Holdings, Inc.
Class A (a) 80,000 830,000
Koor Industries Ltd. sponsored ADR (a) 1,400 28,350
United Technologies Corp. 5,000 474,375
1,332,725
CONSTRUCTION & REAL ESTATE - 2.8%
BUILDING MATERIALS - 0.5%
Tostem Corp. 10,000 331,721
CONSTRUCTION - 1.9%
Daito Trust Construction 4,300 50,735
Daiwa House Industry Co. Ltd. 25,000 411,025
NCI Building Systems, Inc. 13,000 321,750
Nichiei Construction Co. Ltd. 2,000 22,631
Taisei Corp. 78,000 519,749
1,325,890
REAL ESTATE - 0.4%
Ciputra Development PT (For. Reg.) 27,000 42,510
Pakuwon Jati PT (For. Reg.) 33,500 21,244
Sekiwa Real Estate Ltd. 23,000 195,745
259,499
TOTAL CONSTRUCTION & REAL ESTATE 1,917,110
DURABLES - 11.2%
AUTOS, TIRES, & ACCESSORIES - 6.8%
Chrysler Corp. 43,700 2,419,888
Federal-Mogul Corp. 21,000 412,125
General Motors Corp. 10,000 528,750
Honda Motor Co. Ltd. 33,000 679,787
Mirgor Sacifia Class C
sponsored ADR (b) 10,000 22,500
Titan Wheel International, Inc. 36,100 586,625
4,649,675
CONSUMER ELECTRONICS - 1.2%
Sony Corp. 14,100 844,091
HOME FURNISHINGS - 0.6%
Shimachu 13,000 416,151

SHARES VALUE (NOTE 1)
TEXTILES & APPAREL - 2.6%
APAC Centertex Corp. PT (For. Reg.) (a) 225,500 $ 128,209
Alpargatas SA Industrias Y
Comercial (Reg.) (a) 715,000 375,319
Aoki International Co. Ltd. 15,000 365,571
Coteminas PN 112,400 37,584
Fruit of the Loom, Inc. Class A 2,000 48,750
Hartmarx Corp. (a) 86,100 376,688
Onward Kashiyama & Co. Ltd. 20,000 324,952
Roda Vivatex PT (For. Reg.) 237,500 140,225
1,797,298
TOTAL DURABLES 7,707,215
ENERGY - 2.0%
OIL & GAS - 2.0%
Fortune Petroleum Corp. 47,500 231,563
Fortune Petroleum Corp. (warrants) (a) 100,000 337,500
Texaco, Inc. 10,000 785,000
1,354,063
FINANCE - 6.1%
BANKS - 1.0%
Fokus Bank AS (a)(b) 2,000 10,781
Fuji Bank 14,000 308,704
Hong Leong Bank BHD 45,000 124,065
Hong Leong Bank BHD (rights) (a) 6,750 1,356
Kookmin Bank (a) 2,010 39,720
Sakura Bank Ltd. 17,000 215,377
700,003
CLOSED END INVESTMENT COMPANY - 1.9%
First NIS Regional Fund, Inc. (a)(e) 25,000 137,500
Korea Fund, Inc. 6,336 139,392
R.O.C. Taiwan Fund (SBI) 10,000 105,000
Taiwan Fund, Inc. 45,000 922,500
1,304,392
CREDIT & OTHER FINANCE - 0.3%
Acom Co. Ltd. 5,000 208,897
FEDERAL SPONSORED CREDIT - 1.8%
Federal National Mortgage Association 10,000 1,241,250
SECURITIES INDUSTRY - 1.1%
Daiwa Securities Co. Ltd. 31,000 473,694
Nomura Securities Co. Ltd. 11,000 239,362
713,056
TOTAL FINANCE 4,167,598
HEALTH - 7.4%
DRUGS & PHARMACEUTICALS - 2.0%
IVAX Corp. 46,800 1,333,800
MEDICAL EQUIPMENT & SUPPLIES - 2.0%
Advanced Medical, Inc. (a) 121,100 363,300
Cardiac Control Systems, Inc. (d) 85,000 260,313
U.S. Surgical Corp. 36,000 769,500
1,393,113
MEDICAL FACILITIES MANAGEMENT - 3.4%
Huntingdon International Holdings
PLC Ord. 175,000 203,536
IVF America, Inc. (a)(d) 585,500 2,122,438
2,325,974
TOTAL HEALTH 5,052,887
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 5.3%
ELECTRICAL EQUIPMENT - 2.2%
General Electric Co. 15,300 $ 1,101,600
Mitsubishi Electric Co. Ord. 23,000 165,271
Omron Corp. 10,000 230,174
1,497,045
INDUSTRIAL MACHINERY & EQUIPMENT - 1.1%
NSK Ltd. 28,000 203,095
Thermwood Corp. (a) 155,500 359,594
Van Der Horst Ltd. 36,000 181,998
744,687
POLLUTION CONTROL - 2.0%
Browning-Ferris Industries, Inc. 33,300 982,350
WMX Technologies, Inc. 13,000 388,375
1,370,725
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 3,612,457
MEDIA & LEISURE - 7.6%
ENTERTAINMENT - 0.5%
All American Communications (a) 25,900 249,288
Kushner Locke Co. (a) 105,200 62,463
311,751
LEISURE DURABLES & TOYS - 1.9%
Namco Ltd. 9,000 299,420
Nintendo Co. Ltd. Ord. 13,000 986,944
1,286,364
LODGING & GAMING - 4.0%
Circus Circus Enterprises, Inc. 10,900 303,838
Mirage Resorts, Inc. (a) 32,500 1,121,250
Speedway Motorsports (a) 20,200 606,000
WMS Industries, Inc. (a) 45,300 741,788
2,772,876
PUBLISHING - 0.9%
Score Board, Inc. (a) 60,700 265,563
Times Mirror Co. Class A 10,000 338,750
604,313
RESTAURANTS - 0.3%
Family Steak Houses of Florida, Inc. (a) 270,000 210,938
TOTAL MEDIA & LEISURE 5,186,242
NONDURABLES - 2.6%
BEVERAGES - 0.5%
Brahma (Cia Cervejaria) PN
Class B (Pfd. Reg.) 806,400 331,877
FOODS - 1.0%
Chock Full-O-Nuts Corp. 132,500 695,625
HOUSEHOLD PRODUCTS - 0.8%
Maybelline, Inc. 15,000 543,750
TOBACCO - 0.3%
RJR Nabisco Holdings Corp. 7,500 231,563
TOTAL NONDURABLES 1,802,815
PRECIOUS METALS - 0.9%
Naxos Resources Ltd. (a) 174,100 580,610
RETAIL & WHOLESALE - 11.1%
APPAREL STORES - 1.0%
Ross Stores, Inc. 35,500 678,938

SHARES VALUE (NOTE 1)
GENERAL MERCHANDISE STORES - 6.6%
Aoyama Trading Co. Ord. 24,700 $ 788,298
Hankyu Department Stores, Inc. 48,000 710,251
Hanshin Department Store Ltd. 23,000 176,838
Jusco Co. Ltd. 15,000 390,232
Matahari Putra Prima PT (For. Reg.) 77,000 135,546
Matsuzakaya Co. Ltd. 50,000 633,462
Mitsukoshi Ltd. 48,000 450,290
Takashimaya Co. Ltd. 49,000 781,915
Tokyu Department Stores Co. Ltd. 69,000 455,774
4,522,606
RETAIL & WHOLESALE, MISCELLANEOUS - 3.2%
Amway Japan Ltd. 14,700 619,845
Fabri-Centers of America, Inc.
Class B (non-vtg) (a) 71,400 767,550
Home Depot, Inc. (The) 10,000 478,750
Uny Co. Ltd. 17,000 318,956
2,185,101
TRADING COMPANIES - 0.3%
Bimantara Citra (For. Reg.) (a) 268,000 222,699
TOTAL RETAIL & WHOLESALE 7,609,344
SERVICES - 0.6%
LCS Industries, Inc. 1,000 14,000
Sotheby's Holdings, Inc. Class A 25,400 361,950
375,950
TECHNOLOGY - 4.0%
COMPUTERS & OFFICE EQUIPMENT - 2.4%
Canon, Inc. 11,000 198,936
Compaq Computer Corp. (a) 30,000 1,440,000
1,638,936
ELECTRONICS - 0.4%
Hitachi Ltd. 28,000 281,625
PHOTOGRAPHIC EQUIPMENT - 1.2%
Fuji Photo Film Co. Ltd. 29,000 835,783
TOTAL TECHNOLOGY 2,756,344
TRANSPORTATION - 0.4%
SHIPPING - 0.4%
Seacor Holdings, Inc. (a) 10,000 270,000
UTILITIES - 1.4%
ELECTRIC UTILITY - 0.0%
Mosenergo AO sponsored
ADR (a)(b) 1,000 7,875
TELEPHONE SERVICES - 1.4%
Telebras:
PN (Pfd. Reg.) 2,934,000 141,274
sponsored ADR 16,100 762,738
Telesp PN (Pfd. Reg.) 437,000 64,294
968,306
TOTAL UTILITIES 976,181
TOTAL COMMON STOCKS
(Cost $49,498,259) 50,939,572
NONCONVERTIBLE PREFERRED STOCKS - 0.0%
SHARES VALUE (NOTE 1)
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd.,
Series 1, adj. rate (Cost $1,471) 600 $ 1,737
CONVERTIBLE BONDS - 3.5%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
FINANCE - 2.2%
BANKS - 0.5%
Bangkok Bank PCL euro
3 1/4%, 3/3/04 (b) - $ 300,000 318,000
CREDIT & OTHER FINANCE - 1.7%
MBL International Finance Bermuda
Trust 3%, 11/30/02 Aa3 1,000,000 1,155,000
TOTAL FINANCE 1,473,000
INDUSTRIAL MACHINERY & EQUIPMENT - 1.3%
Thermwood Corp. 12%, 2/25/03 - 380,000 902,500
TOTAL CONVERTIBLE BONDS
(Cost $2,318,930) 2,375,500
U.S. TREASURY OBLIGATIONS - 5.1%
7 3/4%, 12/31/99 (c)
(Cost $3,458,420) Aaa 3,205,000 3,477,938
REPURCHASE AGREEMENTS - 16.3%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.91% dated
12/29/95 due 1/2/96 $ 11,192,345 11,185,000
PURCHASED OPTIONS - 0.7%
EXPIRATION DATE/ UNDERLYING FACE
STRIKE PRICE AMOUNT AT VALUE
4,500,000 J. Aron and Co.
OTC Put Options on
Japanese Yen Feb. 96/94.03 $ 4,087,866 377,550
1,650,000 Bank of America
OTC Put Options on
Japanese Yen May 96/96.85 1,543,836 99,165
1,732 Merrill Lynch
Capital Markets
PLC OTC Put Options
on S&P 500 Apr. 96/577.44 1,066,791 7,655
TOTAL PURCHASED OPTIONS
(Cost $375,479) 484,370
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $66,837,559) $ 68,464,117
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
35 Nikkei 225
Index Futures March 1996 $ 3,510,500 $ 160,755
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT
IN SECURITIES - 5.1%
LEGEND
(a) Non-income producing
(b) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $359,156 or 0.5% of net
assets.
(c) A portion of the Security was pledged to cover margin requirements for
futures contracts. At the period end, the value of securities pledged
amounted to $210,000.
(d) A company in which the fund has ownership of at least 5% of the voting
securities is an affiliated company. A summary of the transactions during
the period in which the issuers were affiliates is as follows:

PURCHASE SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
Cardiac Control Systems, Inc. $ 122,031 $ - - $ 260,313
IVF America, Inc. 630,749 643,469 - 2,122,438
TOTAL $ 752,780 $ 643,469 $ - $ 2,382,751
(e) Purchased on an installment basis. Market value reflects only those
payments made through December 31, 1995. The remaining installment of
$75,000, is due March 1996.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $153,113,740 and $102,646,431, respectively, of which U.S.
government and govern- ment agency obligations aggregated $27,299,232 and
$24,353,637, respectively.
The market value of futures contracts opened and closed during the period
amounted to $5,813,544 and $2,444,903, respectively.
The fund placed a portion of its portfolio securities with brokerage firms
which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $44,554 for the period (see
Note 5 of Notes to Financial Statements).
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 62.1%
Japan 23.7
Canada 3.7
Brazil 3.0
Bermuda 1.7
Free China 1.5
Indonesia 1.3
Others (individually less than 1%) 3.0
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1995, the aggregate cost of investment securities for
income tax purposes was $66,968,509. Net unrealized appreciation aggregated
$1,495,608, of which $3,126,666 related to appreciated investment
securities and $1,631,058 related to depreciated investment securities.
The fund hereby designates $69,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
VARIABLE INSURANCE PRODUCTS FUND II: ASSET MANAGER: GROWTH PORTFOLIO
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995

ASSETS

Investment in $ 68,464,117
securities, at
value (including
repurchase
agreements of
$11,185,000)
(cost
$66,837,559) -
See
accompanying
schedule

Cash 688

Receivable for 591,546
investments
sold

Receivable for 188,123
fund shares sold

Dividends 48,156
receivable

Interest receivable 146,058

Receivable for 15,750
daily variation
on futures
contracts

TOTAL ASSETS 69,454,438

LIABILITIES

Payable for $ 1,135,685
investments
purchased

Accrued 47,232
management
fee

Other payables 24,906
and accrued
expenses

TOTAL LIABILITIES 1,207,823

NET ASSETS $ 68,246,615

Net Assets
consist of:

Paid in capital $ 63,916,144

Distributions in (31,082
excess of net )
investment
income

Accumulated 2,574,244
undistributed net
realized gain
(loss) on
investments and
foreign currency
transactions

Net unrealized 1,787,309
appreciation
(depreciation)
on investments
and assets and
liabilities in
foreign
currencies

NET ASSETS, for $ 68,246,615
5,796,430
shares
outstanding

NET ASSET VALUE, $11.77
offering price
and redemption
price per share
($68,246,615 (divided by)
5,796,430
shares)

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
JANUARY 3, 1995 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1995

INVESTMENT INCOME $ 252,825
Dividends

Interest 735,553

TOTAL INCOME 988,378

EXPENSES

Management fee $ 261,324

Transfer agent fees 18,490

Accounting fees and expenses 44,863

Non-interested trustees' compensation 101

Custodian fees and expenses 62,335

Audit 27,233

Legal 99

Miscellaneous 31

Total expenses before reductions 414,476

Expense reductions (47,375 367,101
)

NET INVESTMENT INCOME 621,277

REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:

Investment securities 4,809,779

Foreign currency transactions (17,102
)

Futures contracts (18,896 4,773,781
)

Change in net unrealized appreciation (depreciation) on:

Investment securities 1,493,920

Assets and liabilities in 132,634
foreign currencies

Futures contracts 160,755 1,787,309

NET GAIN (LOSS) 6,561,090

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 7,182,367

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS JANUARY 3, 1995
(COMMENCEMENT
OF
OPERATIONS) TO
DECEMBER 31,
1995

Operations $ 621,277
Net investment income

Net realized gain (loss) 4,773,781

Change in net unrealized appreciation 1,787,309
(depreciation)

NET INCREASE (DECREASE) IN NET ASSETS 7,182,367
RESULTING FROM OPERATIONS

Distributions to shareholders (591,903)
From net investment income

From net realized gain (2,259,995)

TOTAL DISTRIBUTIONS (2,851,898)

Share transactions 68,544,838
Net proceeds from sales of shares

Reinvestment of distributions 2,851,898

Cost of shares redeemed (7,480,590)

NET INCREASE (DECREASE) IN NET ASSETS 63,916,146
RESULTING FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 68,246,615

NET ASSETS

Beginning of period -

End of period (including distributions in $ 68,246,615
excess of net investment income of
$(31,082))

OTHER INFORMATION
Shares

Sold 6,215,852

Issued in reinvestment of distributions 243,336

Redeemed (662,758)

Net increase (decrease) 5,796,430

<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

</TABLE>

FINANCIAL HIGHLIGHTS
JANUARY 3, 1995
(COMMENCEMENT
OF
OPERATIONS) TO
DECEMBER 31,

SELECTED PER-SHARE DATA 1995

Net asset value, beginning of period $ 10.00

Income from Investment Operations

Net investment income .10

Net realized and unrealized gain (loss) 2.20

Total from investment operations 2.30

Less Distributions (.11)
From net investment income

From net realized gain (.42)

Total distributions (.53)

Net asset value, end of period $ 11.77

TOTAL RETURN A, B 23.02%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (000 omitted) $ 68,247

Ratio of expenses to average net assets 1.00%
C

Ratio of net investment income to average net 1.69%
assets

Portfolio turnover rate 343%

A TOTAL RETURN DOES NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THOSE CHARGES WOULD REDUCE THE
TOTAL RETURNS SHOWN.
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
C FMR VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO
WOULD HAVE BEEN HIGHER.
VARIABLE INSURANCE PRODUCTS FUND II: CONTRAFUND PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY

PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. A fund's total return includes
changes in a fund's share price, plus reinvestment of any dividends
(income) and capital gains (the profits the fund earns when it sells
securities that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIOD ENDED DECEMBER 31, 1995 LIFE OF
FUND

CONTRAFUND 39.72%

S&P 500 37.56%

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, since the fund started on January 3,
1995.

Let's say you invested $10,000 in Contrafund Portfolio on January 3, 1995,
when the fund started. By December 31, 1995, your investment would have
grown to $13,972 - a 39.72% increase. With reinvested dividends and capital
gains, if any, a $10,000 investment in the S&P 500 would have grown to
$13,756 over the same period - a 37.56% increase.
INVESTMENT SUMMARY
TOP TEN STOCKS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS

General Motors Corp. 1.7

Burlington Northern Sante Fe Corp. 1.7

Federal National Mortgage Association 1.2

Travelers, Inc. (The) 1.1

Schlumberger Ltd. 1.1

American Express Co. 1.0

Nomura Securities Co. Ltd. 0.9

Boeing Co. 0.9

Cisco Systems, Inc. 0.9

WorldCom, Inc. 0.8

TOP TEN MARKET SECTORS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS

Technology 17.8

Finance 13.3

Energy 5.7

Durables 4.9

Health 4.4

Industrial Machinery & Equipment 4.3

Retail & Wholesale 3.6

Transportation 3.5

Basic Industries 2.9

Aerospace & Defense 2.5

VARIABLE INSURANCE PRODUCTS FUND II: CONTRAFUND PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW

An interview with
Will Danoff, Portfolio
Manager of Contrafund
Portfolio
Q. HOW DID THE FUND PERFORM, WILL?
A. The fund performed well. Since its inception on January 3, 1995 through
the end of the period December 31, 1995, the fund outperformed the S&P 500
Index, which rose 37.56% during the same period.
Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE?
A. The fund beat the average growth fund in 1995 primarily because it
invested heavily in technology stocks in the first three quarters of the
year and took profits earlier than most funds in the fourth quarter. The
fund also de-emphasized sectors sensitive to the consumer and the economy,
such as retailing and transportation, which performed poorly in 1995. The
second half of the year was dominated by the slowing U.S. economy, which
boosted prices of bonds and interest rate-sensitive stocks, but caused many
companies, particularly those sensitive to the economy, to report
disappointing earnings. The major factor influencing results of the fund
and the overall market in the second half of the year was the peaking of
the technology sector. The fund reduced its weighting in technology stocks
from 32% at the end of June to about 18% at the end of the year.
Q. YOU CONTINUED TO INCREASE THE FUND'S HOLDINGS IN THE ENERGY SECTOR
DURING THE PERIOD. WHAT WAS YOUR STRATEGY?
A. Expectations in the sector were low. I recently read an article in THE
WALL STREET JOURNAL entitled, "For Oil Traders, 1996 Is Looking Bad or
Worse." This headline captured the market's pessimistic view of oil prices
and also was indicative of its negative bias toward energy stocks. Most
energy service stocks have traded sideways for the last five years,
performing dramatically worse than the average stock, which has more than
doubled during the same period. But, while oil and gas prices have held
steady, many of the energy service companies have improved their operations
significantly. Many of these companies, including the fund's holdings
Schlumberger and Camco International, have cut costs and capital needs
meaningfully, increased market shares by acquiring smaller competitors or
watching them go out of business, and strengthened their product lines by
introducing or acquiring new, often high tech solutions for their
customers.
Q. WHERE ELSE DID YOU FIND INVESTMENT OPPORTUNITIES?
A. The fund has raised its weightings in Japan during the past six months.
Japanese securities accounted for about 3% of the fund at the end of 1995.
Japan has been in a bear market for the last five years and the average
stock has fallen more than 50% during that time. Expectations for the
market and the economy have been extremely low, with many local investors
having put their savings everywhere but the Japanese stock market despite
near-record low valuations on many stocks. In contrast to the lousy
investor sentiment, corporate fundamentals have been improving. Forced by
the strengthening yen and the weak domestic economy, Japanese companies
have cut costs significantly to stay competitive in the world marketplace
and stabilize their eroding profits.
Q. WHAT INVESTMENTS HAVEN'T WORKED OUT AS YOU WOULD HAVE LIKED?
A. The biggest disappointment during the past six months was not selling
the technology holdings sooner and faster. The investing environment was
characterized by excessive optimism, as seen in the record numbers of
initial public offerings of small technology companies, the media
excitement over Microsoft's Windows 95 and the growing popularity of the
Internet, as well as record asset growth for technology sector mutual funds
and extremely high valuations relative to corporate profits.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. The fund is positioned cautiously for the first half of the year. Last
year's near-record bond market performance, which helped propel the stock
market to new highs throughout the year, is unlikely to repeat itself. The
Federal Reserve Board has already cut interest rates twice in the last six
months so the economy, although weak in spots, will probably not
deteriorate further. A stronger - or better than expected - economy should
push interest rates up and could force the stock market to fall. In
addition, the stock market has been trading at very high historic valuation
levels relative to corporate earnings and dividends. The market has gone
without a 12% correction for over five years - the longest streak ever.
Given the expensive prices of U.S. stocks currently, the fund is positioned
conservatively for opportunities if the market falls this year.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.

FUND FACTS
GOAL: to increase the value of the fund's
shares over the long term by investing in
companies undergoing positive changes and
turnarounds
START DATE: January 3, 1995
SIZE: as of December 31, 1995, more than
$876 million
MANAGER: Will Danoff, since January 1995;
manager, Fidelity Contrafund, since 1990;
assistant Fidelity Magellan Fund, 1990;
manager, Fidelity Select Retailing Portfolio,
1986 -1989; joined Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND II: CONTRAFUND PORTFOLIO
INVESTMENTS DECEMBER 31, 1995

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 71.1%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 2.5%
AEROSPACE & DEFENSE - 1.7%
Alliant Techsystems, Inc. 21,600 $ 1,093,500
Boeing Co. 100,900 7,908,038
C A E Industries Ltd. 216,900 1,649,384
General Motors Corp. Class H 26,800 1,316,550
McDonnell Douglas Corp. 30,000 2,760,000
14,727,472
DEFENSE ELECTRONICS - 0.8%
Logicon, Inc. 43,200 1,188,000
Loral Corp. 150,000 5,306,250
Tracor, Inc. (a) 11,600 168,200
Trimble Navigation Ltd. (a) 30,000 558,750
7,221,200
TOTAL AEROSPACE & DEFENSE 21,948,672
BASIC INDUSTRIES - 2.9%
CHEMICALS & PLASTICS - 1.4%
Cambrex Corp. 55,000 2,275,625
Cytec Industries, Inc. (a) 46,500 2,900,438
Potash Corp. of Saskatchewan 22,500 1,595,540
Raychem Corp. 1,700 96,688
Sealed Air Corp. (a) 180,000 5,062,500
11,930,791
METALS & MINING - 1.2%
Aluminum Co. of America 80,000 4,230,000
Brush Wellman, Inc. 25,000 431,250
Dayton Mining Corp. (a) 176,000 741,745
Inco Ltd. 150,000 4,961,154
10,364,149
PAPER & FOREST PRODUCTS - 0.3%
Kimberly-Clark Corp. 31,200 2,581,800
TOTAL BASIC INDUSTRIES 24,876,740
CONGLOMERATES - 1.0%
Tyco International Ltd. 105,400 3,754,875
United Technologies Corp. 50,000 4,743,750
8,498,625
CONSTRUCTION & REAL ESTATE - 1.5%
BUILDING MATERIALS - 0.2%
Cooper Cameron Corp. 15,700 557,350
USG Corp. (a) 42,000 1,260,000
1,817,350
CONSTRUCTION - 0.6%
Continental Homes Holding Corp. 50,000 1,231,250
Pulte Corp. 45,800 1,540,025
Redman Industries, Inc. (a) 60,000 2,025,000
4,796,275
ENGINEERING - 0.2%
Fluor Corp. 25,000 1,650,000
REAL ESTATE - 0.2%
Metroplex BHD 2,078,000 1,694,155
REAL ESTATE INVESTMENT TRUSTS - 0.3%
Crescent Real Estate Equities, Inc. 30,200 1,030,575
Felcor Suite Hotels, Inc. 20,000 555,000
Public Storage, Inc. 70,000 1,330,000
2,915,575
TOTAL CONSTRUCTION & REAL ESTATE 12,873,355

SHARES VALUE (NOTE 1)
DURABLES - 4.9%
AUTOS, TIRES, & ACCESSORIES - 3.6%
Chrysler Corp. 108,900 $ 6,030,338
Dana Corp. 102,200 2,989,350
General Motors Corp. 275,000 14,540,625
Honda Motor Co. Ltd. 86,000 1,744,875
Lear Seating Corp. (a) 174,800 5,069,200
30,374,388
TEXTILES & APPAREL - 1.3%
Andayani Megah PT 1,000,000 710,694
Intimate Brands, Inc. Class A 65,400 981,000
NIKE, Inc. Class B 80,000 5,570,000
Oshkosh B'Gosh, Inc. Class A 90,000 1,575,000
Warnaco Group, Inc. Class A 75,000 1,875,000
10,711,694
TOTAL DURABLES 41,086,082
ENERGY - 5.7%
ENERGY SERVICES - 3.5%
Diamond Offshore Drilling, Inc. (a) 15,000 506,250
ENSCO International, Inc. (a) 34,000 782,000
Halliburton Co. 113,800 5,761,125
Nabors Industries, Inc. 72,700 808,788
Pride Petroleum Services, Inc. (a) 227,600 2,418,250
Schlumberger Ltd. 129,100 8,940,175
Smith International, Inc. (a) 272,400 6,401,400
Sonat Offshore Drilling, Inc. 19,900 890,525
Tidewater, Inc. 112,600 3,546,900
30,055,413
INDEPENDENT POWER - 0.5%
Thermo Electron Corp. (a) 74,300 3,863,600
OIL & GAS - 1.7%
Anderson Exploration Ltd. (a) 100,000 1,026,130
Blue Range Resource Corp. Class A (a) 132,100 1,161,872
Camco International, Inc. 153,200 4,289,600
Renaissance Energy Ltd. (a) 100,000 2,492,029
Rio Alto Exploration Ltd. (a) 820,900 3,234,022
Rio Alto Exploration Ltd. (a)(b) 237,000 933,686
Union Pacific Resources Group, Inc. 25,000 634,375
Vintage Petroleum, Inc. 43,000 967,500
14,739,214
TOTAL ENERGY 48,658,227
FINANCE - 13.0%
BANKS - 2.7%
Bank of New York Co., Inc. 86,000 4,192,500
Chase Manhattan Corp. 100,000 6,062,500
Chemical Banking Corp. 50,000 2,937,500
First Bank System, Inc. 100,000 4,962,500
First Interstate Bancorp 34,800 4,750,200
Fuji Bank 9,000 197,183
23,102,383
CREDIT & OTHER FINANCE - 2.6%
Aames Financial Corp. 30,100 839,038
American Express Co. 200,000 8,275,000
Bank of Tokyo 11,000 190,827
Beneficial Corp. 31,400 1,464,025
Green Tree Acceptance, Inc. 122,000 3,217,750
Greenpoint Financial Corp. 105,700 2,827,475
Household International, Inc. 65,400 3,866,775
Rockford Industries, Inc. (a) 100,000 950,000
21,630,890
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
FEDERAL SPONSORED CREDIT - 1.9%
Federal Home Loan Mortgage Corp. 70,000 $ 5,845,000
Federal National Mortgage Association 80,000 9,930,000
15,775,000
INSURANCE - 2.2%
Allmerica Financial Corp. 11,200 302,400
Allstate Corp. 100,000 4,112,500
American Financial Group, Inc. 22,000 673,750
American International Group, Inc. 15,000 1,387,500
Enhance Financial Services Group Corp. 9,600 255,600
MGIC Investment Corp. 34,500 1,871,625
Philadelphia Consolidated
Holding Corp. (a) 25,000 406,250
SunAmerica, Inc. 10,200 484,500
Travelers, Inc. (The) 150,000 9,431,250
18,925,375
SAVINGS & LOANS - 1.7%
Astoria Financial Corp. 42,900 1,957,313
California Federal Bank Class A (a) 80,000 1,260,000
Glendale Federal Bank Federal Savings
Bank (a) 100,000 1,750,000
Golden West Financial Corp. 35,180 1,943,695
Great Western Financial Corp. 152,600 3,891,300
Leader Financial Corp. 59,100 2,208,863
Long Island Bancorp, Inc. 55,000 1,450,625
14,461,796
SECURITIES INDUSTRY - 1.9%
Edwards (A.G.), Inc. 50,000 1,193,750
Lehman Brothers Holdings, Inc. 26,600 565,250
Merrill Lynch & Co., Inc. 50,000 2,550,000
Morgan Stanley Group, Inc. 10,000 806,250
Nikko Securities Co. Ltd. 10,000 127,447
Nomura Securities Co. Ltd. 367,000 7,985,977
PaineWebber Group, Inc. 28,800 576,000
Quick & Reilly Group, Inc. (The) 114,075 2,338,538
16,143,212
TOTAL FINANCE 110,038,656
HEALTH - 4.4%
DRUGS & PHARMACEUTICALS - 1.5%
Alliance Pharmaceutical Corp. (a) 100,000 1,362,500
Biovail Corp. International, Inc. 28,200 2,165,097
Dura Pharmaceuticals, Inc. 35,600 1,237,100
Meridian Diagnostics, Inc. 230,000 2,587,500
Neurogen (a) 55,000 1,478,125
Rexall Sundown, Inc. (a) 44,500 979,000
Sepracor, Inc. (a) 82,000 1,506,750
Sequus Pharmaceuticals, Inc. (a) 50,000 712,500
Watson Pharmaceuticals, Inc. (a) 17,200 842,800
12,871,372
MEDICAL EQUIPMENT & SUPPLIES - 1.5%
Baxter International, Inc. 50,000 2,093,750
Becton, Dickinson & Co. 20,000 1,500,000
Cardinal Health, Inc. 24,600 1,346,850
Coherent, Inc. (a) 28,000 1,134,000
Hemasure, Inc. (a) 205,000 2,613,750
Medtronic, Inc. 60,000 3,352,500
Thermedics, Inc. (a) 30,000 832,500
12,873,350

SHARES VALUE (NOTE 1)
MEDICAL FACILITIES MANAGEMENT - 1.4%
ARV Assisted Living, Inc. (a) 8,200 $ 96,350
Columbia/HCA Healthcare Corp. 50,000 2,537,500
Emeritus Corp. (a) 8,100 94,163
HEALTHSOUTH Rehabilitation Corp. (a) 150,000 4,368,750
Health Management Associates, Inc.
Class A (a) 100,000 2,612,500
Medical Resources, Inc. (a) 20,000 112,500
Total Renal Care Holdings, Inc. (a) 23,100 681,450
United Dental Care, Inc. (a) 25,000 1,031,250
11,534,463
TOTAL HEALTH 37,279,185
INDUSTRIAL MACHINERY & EQUIPMENT - 4.3%
ELECTRICAL EQUIPMENT - 1.9%
Adflex Solutions (a) 35,000 936,250
Allen Group, Inc. (The) 20,000 447,500
BMC Industries, Inc. 140,000 3,255,000
Computer Products, Inc. (a) 157,000 1,805,500
Leitch Technology (a) 125,700 3,155,514
Omron Corp. 254,000 5,846,422
Telular Corp. (a) 16,500 142,313
15,588,499
INDUSTRIAL MACHINERY & EQUIPMENT - 2.0%
AGCO Corp. 19,500 994,500
ATS Automation (a) 174,000 2,789,790
Cascade Corp. 37,400 523,600
Case Corp. 25,500 1,166,625
Caterpillar, Inc. 88,900 5,222,875
Deere & Co. 33,000 1,163,250
Kaydon Corp. 11,900 361,463
MTS Systems Corp. 70,000 2,310,000
Toro Co. 20,000 657,500
Tylan General, Inc. (a) 67,700 829,325
Veeco Instruments, Inc. (a) 57,300 830,850
16,849,778
POLLUTION CONTROL - 0.4%
Sanifill, Inc. (a) 40,000 1,335,000
United Waste Systems, Inc. (a) 59,900 2,231,275
3,566,275
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 36,004,552
MEDIA & LEISURE - 1.9%
BROADCASTING - 0.4%
Heritage Media Corp. Class A (a) 9,700 248,563
Infinity Broadcasting Corp. (a) 15,000 558,750
Jacor Communications, Inc. Class A (a) 50,400 882,000
Lin Television Corp. (a) 26,300 782,425
Renaissance Communications Corp. (a) 15,000 331,875
2,803,613
ENTERTAINMENT - 0.1%
IMAX Corp. (a) 50,000 1,137,500
LEISURE DURABLES & TOYS - 0.2%
Champion Enterprises, Inc. (a) 58,400 1,803,100
LODGING & GAMING - 0.8%
Extended Stay America, Inc. (a) 19,000 522,500
HFS, Inc. (a) 66,000 5,395,500
Players International, Inc. (a) 32,100 343,069
WMS Industries, Inc. (a) 31,800 520,725
6,781,794
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - CONTINUED
PUBLISHING - 0.1%
Pulitzer Publishing Co. 18,000 $ 859,500
RESTAURANTS - 0.3%
Dave & Busters, Inc. (a) 21,960 266,265
Outback Steakhouse, Inc. (a) 65,000 2,331,875
2,598,140
TOTAL MEDIA & LEISURE 15,983,647
NONDURABLES - 0.2%
HOUSEHOLD PRODUCTS - 0.2%
Estee Lauder Companies, Inc. (a) 12,000 418,500
Helen of Troy Corp. (a) 71,900 1,509,900
1,928,400
PRECIOUS METALS - 0.7%
Ashanti Goldfields GDR (b) 15,000 300,000
Barrick Gold Corp. 30,000 791,586
Franco Nevada Mining Corp. 5,200 303,954
Free State Consolidated Gold Mines
Ltd. Ord. 129,200 965,766
Kinross Gold Corp. (a) 75,000 584,069
Newmont Mining Corp. 50,000 2,262,500
Pegasus Gold, Inc. (a) 35,000 487,412
5,695,287
RETAIL & WHOLESALE - 3.6%
APPAREL STORES - 0.7%
Cato Corp. Class A 74,700 578,925
Gap, Inc. 101,500 4,263,000
Goody's Family Clothing 52,300 457,625
TJX Companies, Inc. 5,600 105,700
5,405,250
DRUG STORES - 0.4%
General Nutrition Companies, Inc. (a) 50,000 1,150,000
Revco (D.S.), Inc. (a) 58,300 1,646,975
Rite Aid Corp. 25,000 856,250
3,653,225
GENERAL MERCHANDISE STORES - 0.3%
Neiman-Marcus Group, Inc. 90,800 2,133,800
Service Merchandise Co., Inc. (a) 93,700 468,500
2,602,300
GROCERY STORES - 1.1%
Giant Food, Inc. Class A 17,500 551,250
Provigo, Inc. (a) 250,000 1,511,709
Richfood Holdings, Inc. Class A 85,700 2,292,475
Rykoff-Sexton, Inc. 99,200 1,736,000
Safeway, Inc. (a) 45,000 2,317,500
Stop & Shop Companies, Inc. (a) 50,000 1,156,250
9,565,184
RETAIL & WHOLESALE, MISCELLANEOUS - 1.1%
Corporate Express (a) 50,000 1,506,250
Finlay Enterprises, Inc. (a) 44,000 506,000
Gadzooks, Inc. (a) 136,800 3,454,200
Office Depot, Inc. (a) 100,000 1,975,000
Sunglass Hut International, Inc. (a) 71,000 1,686,250
9,127,700
TOTAL RETAIL & WHOLESALE 30,353,659

SHARES VALUE (NOTE 1)
SERVICES - 1.1%
ADVERTISING - 0.1%
HA-LO Industries, Inc. (a) 14,300 $ 439,725
PRINTING - 0.1%
Devon Group, Inc. (a) 32,500 944,531
SERVICES - 0.9%
APAC Teleservices, Inc. (a) 45,500 1,518,563
Career Horizons, Inc. (a) 41,900 1,414,125
HCIA, Inc. (a) 30,000 1,402,500
Medaphis Corp. (a) 50,000 1,850,000
Service Corp. International 25,000 1,100,000
Veterinary Centers of America, Inc. (a) 23,200 391,500
7,676,688
TOTAL SERVICES 9,060,944
TECHNOLOGY - 17.8%
COMMUNICATIONS EQUIPMENT - 2.6%
ADC Telecommunications, Inc. (a) 50,000 1,825,000
Brite Voice Systems, Inc. (a) 60,000 832,500
Cisco Systems, Inc. (a) 97,200 7,253,550
DSC Communications Corp. (a) 25,000 921,875
Jabil Circuit, Inc. (a) 45,000 506,250
Microdyne Corp. (a) 86,500 1,470,500
Network Equipment Technologies (a) 38,300 1,048,463
Octel Communications Corp. (a) 82,700 2,667,075
Perceptron, Inc. 67,000 1,490,750
U.S. Robotics Corp. 45,000 3,948,750
21,964,713
COMPUTER SERVICES & SOFTWARE - 6.5%
ATI Technologies, Inc. (a) 55,000 433,357
Acxiom Corp. (a) 25,000 684,375
American Business Information, Inc. (a) 30,000 581,250
American Management Systems, Inc. (a) 22,100 663,000
Analysts International Corp. 97,500 2,925,000
Ascend Communications, Inc. (a) 63,200 5,127,100
Astea International, Inc. (a) 25,000 571,875
CUC International, Inc. (a) 32,700 1,115,888
Ceridian Corp. (a) 103,416 4,265,910
CompuCom Systems, Inc. (a) 47,000 446,500
Computer Data Systems, Inc. 17,000 221,000
Computer Sciences Corp. (a) 44,200 3,105,050
CyCare Systems, Inc. (a) 20,000 512,500
Datastream Systems, Inc. (a) 29,800 566,200
Electronic Arts, Inc. (a) 39,800 1,039,775
Electronics for Imaging, Inc. (a) 17,000 743,750
First Data Corp. 39,647 2,651,393
General Motors Corp. Class E 50,000 2,600,000
Harris Computer Systems Corp. (a) 51,400 693,900
Lanoptics Ltd. (Reg.) (a) 40,000 780,000
Legato Systems, Inc. (a) 10,000 310,000
MDL Information Systems, Inc. (a) 97,500 2,242,500
Mercury Interactive Group Corp. (a) 14,400 262,800
Metatools, Inc. (a) 10,600 275,600
Microsoft Corp. (a) 48,300 4,238,325
Netstar, Inc. (a) 5,000 91,250
Oracle Systems Corp. (a) 147,300 6,241,838
Paychex, Inc. 58,000 2,892,750
Progress Software Corp. (a) 44,200 1,657,500
Rand A Technology Corp. (a) 50,800 828,453
Reuters Holdings PLC ADR Class B 14,700 810,338
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE - CONTINUED
Softkey International, Inc. (a) 30,000 $ 693,750
SunGard Data Systems, Inc. (a) 40,000 1,140,000
TCSI Corp. (a) 115,000 2,127,500
Technology Solutions, Inc. 58,000 1,131,000
54,671,427
COMPUTERS & OFFICE EQUIPMENT - 3.8%
Compaq Computer Corp. (a) 65,000 3,120,000
Comverse Technology, Inc. (a) 35,000 700,000
Dell Computer Corp. (a) 65,200 2,257,550
Digital Equipment Corp. (a) 100,000 6,412,500
Discreet Logic, Inc. (a) 38,000 950,000
Filenet Corp. (a) 4,900 230,300
Gateway 2000, Inc. (a) 75,000 1,837,500
Hewlett-Packard Co. 50,500 4,229,375
Kronos, Inc. (a) 27,100 1,287,250
MICROS Systems, Inc. (a) 42,000 2,068,500
Sun Microsystems, Inc. (a) 144,500 6,592,813
Western Digital Corp. (a) 50,600 904,475
Xerox Corp. 9,000 1,233,000
31,823,263
ELECTRONIC INSTRUMENTS - 0.6%
Credence Systems Corp. (a) 37,800 864,675
Cubic Corp. 30,000 855,000
Measurex Corp. 52,700 1,488,775
Teradyne, Inc. (a) 45,000 1,125,000
Varian Associates, Inc. 26,300 1,255,825
5,589,275
ELECTRONICS - 4.3%
ARC International Corp. (a) 152,900 324,913
Altera Corp. (a) 53,600 2,666,600
Arrow Electronics, Inc. (a) 35,000 1,509,375
Atmel Corp. (a) 60,000 1,342,500
Burr-Brown Corp. (a) 30,800 785,400
Chips & Technologies, Inc. (a) 36,500 328,500
Continental Circuits Corp. (a) 55,000 893,750
International Rectifier Corp. (a) 81,000 2,025,000
Kemet Corp. (a) 100,000 2,387,500
Kent Electronics Corp. (a) 28,000 1,634,500
Linear Technology Corp. 60,000 2,355,000
Maxim Integrated Products, Inc. (a) 50,000 1,925,000
Percon Acquisition, Inc. (a) 101,700 1,322,100
Pioneer Standard Electronics, Inc. 22,500 298,125
Rohm Co. Ltd. 50,000 2,819,149
SGS Thomson Microelectronics NV (a) 20,000 805,000
Samsung Electronics Co. Ltd. GDS
(vtg.) (b) 41,000 3,925,750
Sanmina Corp. (a) 75,400 3,911,375
Solectron Corp. (a) 50,000 2,206,250
Thomas & Betts Corp. 34,800 2,566,500
Truevision, Inc. (a) 48,700 240,456
36,272,743
PHOTOGRAPHIC EQUIPMENT - 0.0%
Fuji Photo Film Co. Ltd. 2,000 58,279
TOTAL TECHNOLOGY 150,379,700

SHARES VALUE (NOTE 1)
TRANSPORTATION - 3.5%
AIR TRANSPORTATION - 1.5%
Atlantic Coast Airlines, Inc. (a) 14,100 $ 144,525
Atlantic Southeast Airlines, Inc. 50,000 1,075,000
Comair Holdings, Inc. 85,200 2,289,750
Delta Air Lines, Inc. 39,800 2,940,225
Midwest Express Holdings, Inc. (a) 31,800 882,450
Northwest Airlines Corp. Class A (a) 60,000 3,060,000
Southwest Airlines Co. 100,000 2,325,000
12,716,950
RAILROADS - 1.8%
Burlington Northern Santa Fe Corp. 182,819 14,259,882
CSX Corp. 24,400 1,113,250
15,373,132
TRUCKING & FREIGHT - 0.2%
Air Express International Corp. 53,900 1,239,700
TOTAL TRANSPORTATION 29,329,782
UTILITIES - 2.1%
CELLULAR - 0.7%
A Plus Network, Inc. 17,200 202,100
AirTouch Communications, Inc. (a) 100,000 2,825,000
Mobile Telecommunications
Technologies, Inc. (a) 150,000 3,206,250
6,233,350
GAS - 0.2%
Southern Union Company 50,085 1,264,646
TELEPHONE SERVICES - 1.2%
Ameritech Corp 30,000 1,770,000
Frontier Corp. 44,000 1,320,000
WorldCom, Inc. (a) 200,000 7,050,000
10,140,000
TOTAL UTILITIES 17,637,996
TOTAL COMMON STOCKS
(Cost $536,098,938) 601,633,509
CONVERTIBLE PREFERRED STOCKS - 0.3%
FINANCE - 0.3%
SAVINGS & LOANS - 0.3%
California Federal Bank, Series A, $1.94
(Cost $2,022,443) 90,000 $ 2,193,750
U.S. TREASURY OBLIGATIONS - 9.9%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
7 1/4%, 2/15/23 Aaa $ 11,800,000 13,492,592
6 1/4%, 8/15/23 Aaa 6,100,000 6,276,351
7 1/2%, 11/15/24 Aaa 10,740,000 12,909,802
7 5/8%, 2/15/25 Aaa 20,450,000 25,006,465
6 7/8%, 8/15/25 Aaa 23,000,000 25,939,630
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $80,877,649) 83,624,840
REPURCHASE AGREEMENTS - 18.7%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.91% dated
12/29/95 due 1/2/96 $ 157,875,604 $ 157,772,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $776,771,030) $ 845,224,099
LEGEND
(a) Non-income producing
(b) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $5,159,436 or 0.6% of net
assets.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $1,043,025,668 and $440,065,149, respectively, of which U.S.
government and government agency obligations aggregated $152,051,487 and
$72,484,388, respectively.
The fund placed a portion of its portfolio securities with brokerage firms
which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $246,389 for the period
(see Note 5 of Notes to Financial Statements).
INCOME TAX INFORMATION
At December 31, 1995, the aggregate cost of investment securities for
income tax purposes was $777,506,842. Net unrealized appreciation
aggregated $67,717,257, of which $83,570,275 related to appreciated
investment securities and $15,853,018 related to depreciated investment
securities.
VARIABLE INSURANCE PRODUCTS FUND II: CONTRAFUND PORTFOLIO
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995

ASSETS

Investment in $ 845,224,099
securities, at
value (including
repurchase
agreements of
$157,772,000)
(cost
$776,771,030)
- - See
accompanying
schedule

Cash 971

Receivable for 71,837,052
investments
sold

Receivable for 3,832,525
fund shares sold

Dividends 445,224
receivable

Interest receivable 1,737,755

TOTAL ASSETS 923,077,626

LIABILITIES

Payable for $ 45,549,625
investments
purchased

Payable for fund 35,777
shares
redeemed

Accrued 421,996
management
fee

Other payables 70,484
and accrued
expenses

TOTAL LIABILITIES 46,077,882

NET ASSETS $ 876,999,744

Net Assets
consist of:

Paid in capital $ 799,584,178

Undistributed net 275,151
investment
income

Accumulated 8,687,316
undistributed net
realized gain
(loss) on
investments and
foreign currency
transactions

Net unrealized 68,453,099
appreciation
(depreciation)
on investments
and assets and
liabilities in
foreign
currencies

NET ASSETS, for $ 876,999,744
63,593,511
shares
outstanding

NET ASSET VALUE, $13.79
offering price
and redemption
price per share
($876,999,744 (divided by)
63,593,511
shares)

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
JANUARY 3, 1995 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1995

INVESTMENT INCOME $ 2,786,375
Dividends

Interest 4,013,638

TOTAL INCOME 6,800,013

EXPENSES

Management fee $ 2,316,458

Transfer agent fees 185,309

Accounting fees and expenses 210,939

Non-interested trustees' compensation 962

Custodian fees and expenses 39,295

Registration fees 568

Audit 15,700

Legal 893

Miscellaneous 25

Total expenses before reductions 2,770,149

Expense reductions (26,157 2,743,992
)

NET INVESTMENT INCOME 4,056,021

REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:

Investment securities 16,038,511

Foreign currency transactions (766 16,037,745
)

Change in net unrealized appreciation (depreciation) on:

Investment securities 68,453,069

Assets and liabilities in 30 68,453,099
foreign currencies

NET GAIN (LOSS) 84,490,844

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 88,546,865

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS JANUARY 3, 1995
(COMMENCEMENT
OF
OPERATIONS) TO
DECEMBER 31,
1995

Operations $ 4,056,021
Net investment income

Net realized gain (loss) 16,037,745

Change in net unrealized appreciation 68,453,099
(depreciation)

NET INCREASE (DECREASE) IN NET ASSETS 88,546,865
RESULTING FROM OPERATIONS

Distributions to shareholders (3,710,433)
From net investment income

From net realized gain (7,420,866)

TOTAL DISTRIBUTIONS (11,131,299)

Share transactions 806,897,529
Net proceeds from sales of shares

Reinvestment of distributions 11,131,299

Cost of shares redeemed (18,444,650)

NET INCREASE (DECREASE) IN NET ASSETS 799,584,178
RESULTING FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 876,999,744

NET ASSETS

Beginning of period -

End of period (including undistributed net $ 876,999,744
investment income of $275,151)

OTHER INFORMATION
Shares

Sold 64,153,925

Issued in reinvestment of distributions 816,078

Redeemed (1,376,492)

Net increase (decrease) 63,593,511

<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

</TABLE>

FINANCIAL HIGHLIGHTS
JANUARY 3, 1995
(COMMENCEMENT
OF
OPERATIONS) TO
DECEMBER 31,

SELECTED PER-SHARE DATA 1995

Net asset value, beginning of period $ 10.00

Income from Investment Operations

Net investment income .06

Net realized and unrealized gain (loss) 3.91

Total from investment operations 3.97

Less Distributions (.06)
From net investment income

From net realized gain (.12)

Total distributions (.18)

Net asset value, end of period $ 13.79

TOTAL RETURN A 39.72%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (000 omitted) $ 877,000

Ratio of expenses to average net assets .72%

Ratio of net investment income to average net assets 1.07%

Portfolio turnover rate 132%

A TOTAL RETURN DOES NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THOSE CHARGES WOULD REDUCE THE
TOTAL RETURNS SHOWN.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1995

1. SIGNIFICANT ACCOUNTING POLICIES.
Investment Grade Bond Portfolio, Asset Manager Portfolio, Index 500
Portfolio, Asset Manager: Growth Portfolio and Contrafund Portfolio (the
funds) are funds of Variable Insurance Products Fund II (the trust). The
trust is registered under the Investment Company Act of 1940, as amended
(the 1940 Act), as an open-end management investment company organized as a
Massachusetts business trust. Each fund is authorized to issue an unlimited
number of shares. The following summarizes the significant accounting
policies of the funds:
SECURITY VALUATION.
INVESTMENT GRADE BOND FUND. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations. Short-term
securities maturing within sixty days of their purchase date are valued
either at amortized cost or original cost plus accrued interest, both of
which approximate current value. Securities for which quotations are not
readily available through the pricing service are valued at their fair
value as determined in good faith under consistently applied procedures
under the general supervision of the Board of Trustees.
ASSET MANAGER PORTFOLIO, INDEX 500 PORTFOLIO, ASSET MANAGER: GROWTH
PORTFOLIO AND CONTRAFUND PORTFOLIO. Securities for which exchange
quotations are readily available are valued at the last sale price, or if
no sale price, at the closing bid price. Securities (including restricted
securities) for which exchange quotations are not readily available (and in
certain cases debt securities which trade on an exchange) are valued
primarily using dealer-supplied valuations or at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts and foreign currency options, disposition of foreign currencies,
currency gains and losses realized between the trade and settlement dates
on securities transactions, and the difference between the amount of net
investment income accrued and the U.S. dollar amount actually received. The
effects of changes in
foreign currency exchange rates on investments in securities are included
with the net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As qualified regulated investment companies under Subchapter
M of the Internal Revenue Code, Investment Grade Bond, Asset Manager and
Index 500 Portfolios are not subject to income taxes to the extent that
each fund distributes substantially all of its taxable income for the
fiscal year. The Asset Manager: Growth and Contrafund Portfolios intend to
qualify as regulated investment companies under Subchapter M of the
Internal Revenue Code. The Asset Manager and Asset Manager: Growth
Portfolios may be subject to foreign taxes on income, gains on investments
or currency repatriation. The schedules of investments include information
regarding income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the funds are informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for
litigation, paydown gains/losses on certain securities, futures and options
transactions, defaulted bonds, foreign currency transactions, passive
foreign investment companies (PFIC), market discount, partnerships,
non-taxable dividends, capital loss carryforwards and losses deferred due
to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. Each fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. Losses may arise
from changes in the value of the foreign currency or if the counterparties
do not perform under the contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the funds, along with other
affiliated entities of Fidelity Management & Research Company (FMR), may
transfer uninvested cash balances into one or more joint trading accounts.
These balances are invested in one or more repurchase agreements that
mature in 60 days or less from the date of purchase, and are collateralized
by U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The funds, through their custodian, receive delivery
of the underlying U.S. Treasury or Federal Agency securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. FMR, the funds' investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
DELAYED DELIVERY TRANSACTIONS. Each fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The
market value of the securities purchased or sold on a when-issued or
forward commitment basis are identified as such in the fund's schedule of
investments. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under the
contract.
FUTURES CONTRACTS AND OPTIONS. Each fund may use futures and options
contracts to manage its exposure to the stock market. Buying futures,
writing puts, and buying calls tend to increase the fund's exposure to the
underlying instrument. Selling futures, buying puts, and writing calls tend
to decrease the fund's exposure to the underlying instrument, or hedge
other fund investments. Futures contracts involve, to varying degrees, risk
of loss in excess of the futures variation margin reflected in the
Statement of Assets and Liabilities. The underlying face amount at value of
any open futures contracts or purchased options at period end, is shown in
the schedule of investments under the captions "Purchased Options," and
"Futures Contracts," respectively. This amount reflects each contract's
exposure to the underlying instrument at period end. Losses may arise from
changes in the value of the underlying instruments, if there is an illiquid
secondary market for the contracts, or if the counterparties do not perform
under the contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
INDEXED SECURITIES. Each fund may invest in indexed securities whose values
are linked either directly or inversely to changes in foreign currencies,
interest rates, commodities, indices, or other underlying instruments. Each
fund uses these securities to increase or decrease its exposure to
different underlying instruments and to gain exposure to markets that might
be difficult to invest in through conventional securities. Indexed
securities may be more volatile than their underlying instruments, but any
loss is limited to the amount of the original investment.
RESTRICTED SECURITIES. Each fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period,
restricted securities (excluding 144A issues) amounted to $835,000 or 0.0%
of net assets of the Asset Manager Portfolio.
3. PURCHASES AND SALES OF INVESTMENTS
Information regarding purchases and sales of securities (other than
short-term securities) is included under the caption "Other Information" at
the end of each applicable fund's schedule of investments.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE.
INVESTMENT GRADE BOND, ASSET MANAGER, ASSET MANAGER: GROWTH AND CONTRAFUND
PORTFOLIOS. As each fund's investment adviser, FMR receives a monthly fee
that is calculated on the basis of a group fee rate plus a fixed individual
fund fee rate applied to the average net assets of each fund. The group fee
rate is the weighted average of a series of rates and is based on the
monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .2700% to .5200% for the Asset Manager, Asset Manager:
Growth and Contrafund Portfolios, and from .1200% to .3700% for the
Investment Grade Bond Portfolio. The annual individual fund fee rate is
.40% for the Asset Manager and Asset Manager: Growth Portfolios and .30%
for the Investment Grade Bond and Contrafund Portfolios.
4. FEES AND OTHER TRANSACTIONS WITH
AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
In the event that these rates were lower than the contractual rates in
effect during the period, FMR voluntarily implemented the above rates, as
they resulted in the same or a lower management fee. For the period, the
management fees were equivalent to rates of .45%, .71%, .71% and .61%,
respectively of average net assets for the Investment Grade Bond, Asset
Manager, Asset Manager: Growth and Contrafund Portfolios, respectively.
The Board of Trustees has approved a new group fee rate schedule with rates
ranging from .1100% to .3700% for the Investment Grade Bond Portfolio and
from .2500% to .5200% for the Asset Manager, Asset Manager: Growth and
Contrafund Portfolios. Effective January 1, 1996, FMR voluntarily agreed to
implement these new group fee rate schedules as each results in the same or
a lower management fee.
INDEX 500 PORTFOLIO. As the fund's investment adviser, FMR receives a fee
that is computed at an annual rate of .28% of the fund's average net
assets.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the funds' transfer, dividend disbursing
and shareholder servicing agent. Effective January 1, 1995, the Board of
Trustees approved a revised transfer agent contract pursuant to which FIIOC
receives account fees and asset-based fees that vary according to account
size and type of account. FIIOC pays for typesetting, printing and mailing
of all shareholder reports, except proxy statements. For the period,
transfer agent fees were equivalent to an annual rate of .05% of average
net assets for each of the funds.
ACCOUNTING FEES. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the funds' accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. Certain funds placed a portion of their portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms are shown under the caption
"Other Information" at the end of each applicable fund's schedule of
investments.
5. BANK BORROWINGS.
Each fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. Each fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, each fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. For
the Asset Manager Portfolio, the maximum loan and the average daily loan
balance during the period for which the loan was outstanding amounted to
$3,050,000. The weighted average interest rate was 6.4%.
6. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the funds' operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of .80%, 1.25%, .28%, 1.00% and 1.00% of
average net assets for Investment Grade, Asset Manager, Index 500, Asset
Manager: Growth and Contrafund Portfolios, respectively. For the period,
the reimbursement reduced expenses by $241,437 and $46,008 for Index 500
and Asset Manager: Growth, respectively.
FMR has directed certain portfolio trades to brokers who paid a portion of
each fund's expenses. For the period, expenses were reduced by $588,729,
$1,367 and $26,157 for Asset Manager, Asset Manager: Growth and Contrafund
Portfolios, respectively, under this arrangement.
7. TRANSACTIONS WITH AFFILIATED COMPANIES.
Information regarding transactions with affiliated companies is included
under the caption "Other Information" at the end of each applicable fund's
schedule of investments.
8. BENEFICIAL INTEREST.
At the end of the period, Fidelity Investments Life Insurance Company
(FILI) and its subsidiaries, affiliates of FMR, were the record owners of
more than 5% of the outstanding shares of the funds and certain
unaffiliated insurance companies were record owners of more than 10% of the
total outstanding shares of the following funds:
FILI UNAFFILIATED INSURANCE COMPANIES
FUND % OF OWNERSHIP # OF % OF OWNERSHIP
Investment Grade Bond 41 2 25
Asset Manager 24 3 50
Index 500 53 0 0
Asset Manager: Growth 82 0 0
Contrafund 58 1 14
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees and the Shareholders of Variable Insurance Products Fund
II:
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments (except for Moody's and Standard &
Poor's ratings), and the related statements of operations and of changes in
net assets and the financial highlights present fairly, in all material
respects, the financial position of each of the five portfolios
constituting Variable Insurance Products Fund II (the "Trust") at December
31, 1995, the results of their operations for the year then ended, and the
changes in their net assets and the financial highlights for the periods
indicated in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Trust's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities at December 31,
1995 by correspondence with the custodians and brokers and the application
of alternative auditing procedures where confirmations from brokers were
not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 9, 1996
DISTRIBUTIONS

The Board of Trustees of Variable Insurance Products Fund II voted to pay
on February 2, 1996, to shareholders of record at the opening of business
on February 2, 1996, the following distributions derived from capital gains
realized from sales of portfolio securities, and dividends derived from net
investment income:
DIVIDENDS CAPITAL GAINS
Invetsment Grade Bond $.62 -
Asset Manager $.57 $.47
Index 500 $.91 $2.34
Asset Manager: Growth - $.42
Contrafund - $.13
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc.,
London, England
ASSET MANAGER, ASSET MANAGER: GROWTH,
AND CONTRAFUND PORTFOLIOS
Fidelity Management & Research (Far East) Inc.,
Tokyo, Japan
ASSET MANAGER, ASSET MANAGER: GROWTH,
AND CONTRAFUND PORTFOLIOS
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
Andrew Offit, VICE PRESIDENT
William Danoff, VICE PRESIDENT
Michael Gray, VICE PRESIDENT
Arthur S. Loring, SECRETARY
Kenneth A. Rathgeber, TREASURER
Robert H. Morrison, MANAGER, SECURITY TRANSACTIONS
John H. Costello, ASSISTANT TREASURER
Leonard M. Rush, ASSISTANT TREASURER
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox
Phyllis Burke Davis
Richard J. Flynn
Edward C. Johnson 3d
E. Bradley Jones
Donald J. Kirk
Peter S. Lynch
Edward H. Malone
Marvin L. Mann
Gerald C. McDonough
Thomas R. Williams
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Co.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
INVESTMENT GRADE BOND PORTFOLIO
The Chase Manhattan Bank, N.A.
New York, NY
ASSET MANAGER PORTFOLIO AND
ASSET MANAGER: GROWTH PORTFOLIO
Brown Brothers Harriman & Co.
Boston, MA
INDEX 500 PORTFOLIO AND CONTRAFUND PORTFOLIO