VARIABLE INSURANCE PRODUCTS FUND II, 485APOS, 1996-02-15

VARIABLE INSURANCE PRODUCTS FUND II
485APOS, 1996-02-15

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File No. 33-20773
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (NO 33-20773)
UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 19 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT [x]
COMPANY ACT OF 1940
Amendment No. [ ]
Variable Insurance Products Fund II
(Exact Name of Registrant as Specified in Declaration of Trust)
82 Devonshire St., Boston, MA 02109
(Address of Principal Executive Office)
Registrant's Telephone Number (617) 570-7000
Arthur S. Loring, Esq.
82 Devonshire Street,
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) Immediately upon filing pursuant to paragraph (b)
( ) On August 25, 1995, pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(i)
(x) On April 30, 1996, pursuant to paragraph (a)(i) of Rule 485
( ) 75 days after filing pursuant to paragraph (a)(ii)
( ) On [date] pursuant to paragraph (a)(ii) of Rule 485
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and intends to file the Notice required by
such Rule before February 29, 1996.
VARIABLE INSURANCE PRODUCTS FUND II
Investment Grade Bond Portfolio
CROSS REFERENCE SHEET
Form N-1A Item Number
Part A Prospectus Caption

1 a,b Cover Page
2 a,b,c *
3 a **
3 b *
c Performance
d Cover Page and Performance
4 a(i) Charter
a(ii) The Funds at a Glance; Investment Principals and Risks
b,c Who May Want to Invest; Investment Principals and Risks
5 a Charter
5 b(i) FMR and Its Affiliates
b(ii)(iii),c Cover Page; The Funds at a Glance; FMR and Its
Affiliates; Breakdown of Expenses
d FMR and Its Affiliates; Breakdown of Expenses
e Breakdown of Expenses; Other Expenses
f, g Breakdown of Expenses
5A Performance
6 a(i) (ii) Charter; FMR and Its Affiliates; Transaction Details
a(iii) *
b FMR and Its Affiliates
c,d *
e Cover Page, Transaction Details
f,g Distributions and Taxes
7 a Cover Page; Charter
b(i),(ii) Financial Highlights; Transaction Details
b(iii,iv,v) *
c,d,e *
f Other Expenses
8 a Transaction Details
b,c *
d Transaction Details
9 *
_______________
* Not Applicable
** To be filed by amendment
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information to help you decide if
the fund's goal matches your own.
To learn more about the fund and its investments, you can obtain a copy of
the fund's most recent financial report and portfolio listing or a copy of
the Statement of Additional Information (SAI) dated April 30, 199 6 .
The SAI has been filed with the Securities and Exchange Commission (SEC)
and is incorporated herein by reference (legally forms a part of the
prospectus). For a free copy of either document, contact your insurance
company.
Shares of the fund may only be purchased by the separate accounts of
insurance companies, for the purpose of funding variable annuity and
variable life insurance contracts. The fund may not be available in your
state due to various insurance regulations. Please check with your
insurance company for availability. If the fund in this Prospectus is not
available in your state, this Prospectus is not to be considered a
solicitation. This Prospectus should be read in conjunction with the
prospectus of the separate account of the specific insurance product which
accompanies this 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.

THESE SECURITIES
HAVE NOT BEEN
APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
VIPII-IGB-pro-0496

DOCUMENT NAME PREFIX
INSURANCE PRODUCTS
FUND II
Variable Insurance Products Fund II (the Trust) is designed to provide
investment vehicles for variable annuity and variable life insurance
contracts of various insurance companies. Investment Grade Bond Portfolio
is a fund of the Trust.
INVESTMENT GRADE BOND PORTFOLIO seeks high current income by investing in
investment-grade debt securities.
PROSPECTUS
APRIL 30, 1996(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
CONTENTS

KEY FACTS THE FUND AT A GLANCE

WHO MAY WANT TO INVEST

FINANCIAL HIGHLIGHTS A summary
of the fund's financial data.

THE FUND IN DETAIL CHARTER How the fund is
organized.

INVESTMENT PRINCIPLES AND RISKS
The fund's overall approach to
investing .

BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.

ACCOUNT POLICIES DISTRIBUTIONS AND TAXES

TRANSACTION DETAILS Share price
calculations and how to invest and
redeem.

KEY FACTS

THE FUND AT A GLANCE
Investment Grade Bond Portfolio is designed to provide an investment
vehicle for variable annuity and variable life insurance contracts of
various insurance companies.
MANAGEMENT: Fidelity Management & Research Company (FMR) is the management
arm of Fidelity Investments, which was established in 1946 and is now
America's largest mutual fund manager.
GOAL: High current income. As with any mutual fund, there is no assurance
that the fund will achieve its goal.
STRATEGY: Invests mainly in investment-grade debt securities .
SIZE: As of December 31, 199 5 , the fund had over $__ million in
assets.

CHARTER
INVESTMENT GRADE BOND PORTFOLIO IS A MUTUAL FUND: an investment that pools
shareholders' money and invests it toward a specified goal. The fund is a
diversified fund of Variable Insurance Products Fund II (VIPII). VIPII is
an open-end management investment company organized as a Massachusetts
business trust on March 21, 1988.
THE FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the fund's activities,
review contractual arrangements with companies that provide services to the
fund, and review the fund's performance. The majority of trustees are not
otherwise affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings
may be called to elect or remove trustees, change fundamental policies,
approve a management contract, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. An insurance
company issuing a variable contract that participates in the fund will vote
shares held in its separate account as required by law and interpretations
thereof, as may be amended or changed from time to time. In accordance with
current law and interpretations thereof, a participating insurance company
is required to request voting instructions from policyowners and must vote
shares in the separate account in proportion to the voting instructions
received. Your insurance company is entitled to one vote for each share it
owns. For a further discussion, please refer to your insurance company's
separate account prospectus.
FMR AND ITS AFFILIATES
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, Massachusetts 02109. It includes a number
of different subsidiaries and divisions which provide a variety of
financial services and products. The fund employs various Fidelity
companies to perform activities required for its operation.
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs.

FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over ___
(solid bullet) Assets in Fidelity mutual
funds: over $___ billion
(solid bullet) Number of shareholder
accounts: over __ million
(solid bullet) Number of investment
analysts and portfolio
managers: over ___

(checkmark)
Michael Gray is manager and vice president of Investment Grade Bond
Portfolio, which he has managed since August 1995. Mr. Gray also manages
Advisor Limited Term Bond, Intermediate Bond, Investment Grade Bond, and
Spartan Investment Grade Bond. Mr. Gray joined Fidelity in 1982.
The fund has an investment objective similar to that of an existing
Fidelity fund. The fund's objective is most similar to Fidelity
Intermediate Bond Fund. Performance of a separate account investing in
the fund is not expected to be the same as the performance of the
corresponding fund due in part to dissimilarities in their investments.
Various insurance related costs at the insurance company's separate account
will also affect performance.
The fund sells its shares to separate accounts of insurance companies which
are both affiliated and unaffiliated with FMR. The fund currently does not
foresee any disadvantages to policyowners arising out of the fact that the
fund offers its shares to separate accounts of various insurance companies
to serve as the investment medium for their variable products.
Nevertheless, the Board of Trustees intends to monitor events in order to
identify any material irreconcilable conflicts which may possibly arise,
and to determine what action, if any, should be taken in response to such
conflicts. If such a conflict were to occur, one or more insurance
companies' separate accounts might be required to withdraw its investments
in the fund and shares of another fund may be substituted. This might force
the fund to sell securities at disadvantageous prices. In addition, the
Board of Trustees may refuse to sell shares of the fund to any separate
account or may suspend or terminate the offering of shares of the fund if
such action is required by law or regulatory authority or is in the best
interests of the shareholders of the fund.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets Fidelity's
funds and services. Fidelity Investments Institutional Operations Company
(FIIOC), 82 Devonshire Street, Boston, Massachusetts, performs transfer
agent servicing functions for the fund.
FMR Corp. is the ultimate parent company of FMR. Members of the Edward
C. Johnson 3d family are the predominant owners of a class of shares of
common stock representing approximately 49% of the voting power of FMR
Corp. Under the Investment Company Act of 1940 (the 1940 Act), control of a
company is presumed where one individual or group of individuals owns more
than 25% of the voting stock of that company; therefore, the Johnson family
may be deemed under the 1940 Act to form a controlling group with respect
to FMR Corp.
To carry out the fund's transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that the fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
The fund seeks as high a level of current income as is consistent with
the preservation of capital by investing primarily in a broad range of
fixed-income securities . FMR normally invests at least 65% of
the fund's total assets in investment-grade, fixed-income securities such
as bonds, notes and debentures. Although the fund can invest in
securities of any maturity, FMR seeks to manage the fund so that it
generally reacts to changes in interest rates similarly to bonds with
maturities between five and ten years. As of December 31, 1995, the fund's
dollar-weighted average maturity was approximately __ years.

INTEREST RATE
RISK
In general, bond prices rise
when interest rates fall, and
vice versa. Funds that hold
short-term bonds are usually
less affected by changes in
interest rates than long-term
bond funds. For that reason,
long-term bond funds typically
offer higher yields and carry
more risk than short-term
bond funds.
(checkmark)

The total return from a bond is a combination of income and price gains
or losses. While income is the most important component of bond returns
over time, the fund's emphasis on income does not mean that the fund
invests only in the highest-yielding bonds available, or that it can avoid
risks to principal. In selecting investments for the fund, FMR considers a
bond's income potential together with its potential for price gains or
losses. FMR focuses on assembling a portfolio of income-producing
securities that it believes will provide the best tradeoff between risk and
return within the range of securities that are eligible investments for the
fund.
The fund's yield and share price change daily and are based on changes in
interest rates, market conditions, other economic and political news, and
on the quality and maturity of its investments. In general, bond prices
rise when interest rates fall, and vice versa. This effect is usually more
pronounced for longer-term securities. Lower-quality securities offer
higher yields, but also carry more risk. FMR may use various investment
techniques to hedge a portion of the fund's risks, but there is no
guarantee that these strategies will work as intended. When fund shares are
redeemed, they may be worth more or less than their original cost.
FMR normally invests the fund's assets according to its investment
strategy. The fund also reserves the right to invest without limitation in
investment-grade money market or short-term debt instruments for temporary,
defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, strategies FMR may employ in
pursuit of the fund's investment objective, and a summary of related
risks. Any restrictions listed supplement those discussed earlier in this
section . A complete listing of the fund's limitations and more detailed
information about the fund's investments are contained in the fund's SAI.
Policies and limitations are considered at the time of purchase; the sale
of instruments is not required in the event of a subsequent change in
circumstances.
FMR may not buy all of these instruments or use all of these techniques
unless it believes that they are consistent with the fund's investment
objective and policies and that doing so will help the fund achieve its
goal. Current holdings and recent investment strategies are described in
the fund's financial reports, which are sent to shareholders twice a year.
For a free SAI or financial report, contact your insurance company.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. In
general, bond prices rise when interest rates fall, and vice versa. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Lower-quality debt securities
are sometimes called "junk bonds." Longer-term bonds are generally more
sensitive to interest rate changes than short-term bonds.
Investment-grade debt securities are medium- and high-quality securities.
Some, however, may possess speculative characteristics, and may be more
sensitive to economic changes and to changes in the financial condition of
issuer s.
RESTRICTIONS: Purchase of a debt security is consistent with the fund's
debt quality policy if it is rated at or above the stated level by Moody's
or rated in the equivalent categories by S&P , Fitch Investor Services
L.P. or Duff and Phelps , or is unrated but judged to be of equivalent
quality by FMR. The fund currently intends to limit its investments in
securities rated lower than Baa-quality debt securities to 5% of its
assets.
MONEY MARKET SECURITIES are high-quality, short-term obligations issued
by the U.S. government, corporations, financial institutions, and other
entities. These obligations may carry fixed, variable, or floating interest
rates.
U.S. GOVERNMENT SECURITIES are high-quality debt securities issued
or guaranteed by the U.S. Treasury or by an agency or instrumentality of
the U.S. government. Not all U.S. government securities are backed by the
full faith and credit of the United States. For example, securities issued
by the Federal Farm Credit Bank or by the Federal National Mortgage
Association are supported by the instrumentality's right to borrow money
from the U.S. Treasury under certain circumstances. However, securities
issued by the Financing Corporation are supported only by the credit of the
entity that issued them.
EXPOSURE TO FOREIGN MARKETS . Foreign securities, foreign currencies,
and securities issued by U.S. entities with substantial foreign operations
may involve additional risks and considerations. These include risks
relating to political or economic conditions in foreign countries,
fluctuations in foreign currencies, withholding or other taxes, operational
risks, increased regulatory burdens, and the potentially less stringent
investor protection and disclosure standards of foreign markets.
Additionally, governmental issuers of foreign securities may be unwilling
to repay principal and interest when due, and may require that the
conditions for payment be renegotiated. All of these factors can make
foreign investments, especially those in developing countries, more
volatile.
RESTRICTIONS: FMR limits the amount of the fund's assets that may be
invested in foreign securities to 50%. Howeve r, pursuant to certain
state insurance regulations , the fund may not invest more than 20% of
its assets in any one foreign country. The fund may have an
additional 15% invested in securities of issuers located in any one (but
only one) of the following countries: Australia, Canada, France, Japan, the
United Kingdom or Germany.
ASSET-BACKED SECURITIES include interests in pools of lower-rated
debt securities, or consumer loans. The value of these securities may be
significantly affected by changes in the market's perception of the issuers
and the creditworthiness of the parties involved .
MORTGAGE SECURITIES are interests in pools of commercial or
residential mortgages, and may include complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed
securities. Mortgage securities may be issued by the U.S. Government or by
private entities. For example, Ginnie Maes are interests in pools of
mortgage loans insured or guaranteed by a U.S. Government agency. Because
mortgage securities pay both interest and principal as their underlying
mortgages are paid off, they are subject to prepayment risk. This is
especially true for stripped securities. Also, the value of a mortgage
security may be significantly affected by changes in interest rates. Some
mortgage securities may have a structure that makes their reaction to
interest rates and other factors difficult to predict, making their value
highly volatile.
STRIPPED SECURITIES are the separate income or principal components of a
debt security. T heir risks are similar to those of other debt
securities, although they may be more volatile and the value of
certain types o f stripped securities may move in the same
direction as interest rates.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund buys a security
at one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, currency exchange rates, commodity prices, or other factors that
affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts,
entering into currency exchange contracts or swap agreements, and
purchasing indexed securities.
FMR can use these practices to adjust the risk and return characteristics
of the fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other borrower.
They have additional risks beyond conventional debt securities because they
may entail less legal protection for the fund, or there may be a
requirement that the fund supply additional cash to a borrower on demand.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some illiquid securities, and some other securities , may
be subject to legal restrictions. Difficulty in selling securities may
result in a loss or may be costly to the fund.
RESTRICTIONS. The fund may not purchase a security if, as a result, more
than 10% of its assets would be invested in illiquid securities.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect the fund's yield.
OTHER INSTRUMENTS may include convertible securities and
preferred stocks.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry.
RESTRICTIONS: With respect to 75% of its total assets, the fund may not
purchase a security if, as a result, more than 5% would be invested in the
securities of any one issuer. The fund also may not invest more than 25% of
its total assets in any one industry. These limitations do not apply to
U.S. government securities.
BORROWING. The fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If the fund borrows money,
its share price may be subject to greater fluctuation until the borrowing
is paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 25% of its assets.
LENDING s ecurities to broker-dealers and institutions, including
Fidelity Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a means
of earning income. This practice could result in a loss or a delay in
recovering the fund's securities. The fund may also lend money to other
funds advised by FMR .
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of the fund's
total assets.
INTERNAL REVENUE SERVICE (IRS) LIMITATIONS. In addition to the above, the
fund also follows certain limitations imposed by the IRS on separate
accounts of insurance companies relating to the tax-deferred status of
variable contracts. More specific information may be contained in your
insurance company's separate account prospectus.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraph restates all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraph, can be changed without shareholder approval.
THE FUND seeks as high a level of current income as is consistent
with the preservation of capital. W ith respect to 75% of total
assets, the fund may not invest more than 5% of its total assets in
any one issue r. The fund may not invest more than 25% of its total
assets in any one industry. Loans, in the aggregate, may not exceed 33% of
the fund's total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily operations.
Expenses paid out of the fund's assets are reflected in its share price.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. The fund also pays OTHER EXPENSES, which are explained on
page .
FMR may, from time to time, agree to reimburse the fund for management fees
and other expenses above a specified limit. FMR retains the ability to be
repaid by the fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease the fund's expenses and boost its
performance.
MANAGEMENT FEE
The fund's MANAGEMENT FEE is calculated and paid to FMR every month. The
fee for the fund is calculated by adding a group fee rate to an individual
fee rate, and multiplying the result by the fund's average net assets.
THE GROUP FEE RATE is based on the average net assets of all the mutual
funds advised by FMR. This rate cannot rise above 0.37%, and it drops as
total assets under management increase.
For December 31, 199 5 , the group fee rate was 0.__%. The fund's
individual fund fee rate is 0.30%. For fiscal year 199 5 , the total
management fee was 0.__%.
OTHER EXPENSES
While the management fee is a significant component of the fund's annual
operating costs, the fund has other expenses as well.
FIIOC, 82 Devonshire Street, Boston, Massachusetts, performs transfer
agency, dividend disbursing and shareholder servicing functions for the
fund. Fidelity Service Co. (FSC), 82 Devonshire Street, Boston,
Massachusetts, calculates the net asset value (NAV) and dividends,
maintains the general accounting records and administers the securities
lending program for the fund.
In fiscal 1995, the fund paid FIIOC fees equal to 0.__% of the fund's
average net assets for transfer agency and related services, and the fund
paid FSC fees equal to 0.__% of its average net assets for pricing and
bookkeeping services. [IF IN REIMBURSEMENT: These amounts are prior to
applying any expense reimbursements from FMR, as discussed below.]
For fiscal year 199 5 , the fund's total expenses amounted to 0.__% of
the fund's average net assets. FMR has voluntarily agreed to temporarily
limit the fund's total operating expenses (excluding interest, taxes,
brokerage commissions, and extraordinary expenses) (as a percentage of
the fund's average net assets) to 0.80%. [INCLUDE THE FOLLOWING IF THE YOUR
FUND'S TOTAL EXPENSE RATIO IS ONE BASIS POINT OR MORE LOWER AS A RESULT OF
SOFT DOLLAR/DIRECTED BROKERAGE ARRANGEMENTS. IF A-FILING AND DON'T KNOW
WHAT THE NUMBERS ARE, INCLUDE THE DISCLOSURE: A portion of the brokerage
commissions that the fund paid was used to reduce fund expenses. Including
this reduction, the total operating expenses would have been 0.__%.]
The fund also pays other expenses, such as legal, audit, and custodian
fees; proxy solicitation costs; and the compensation of trustees who are
not affiliated with Fidelity.
The fund's portfolio turnover rate for fiscal 199 5 was __%. This
rate varies from year to year. High turnover rates increase transaction
costs. FMR considers these effects when evaluating the anticipated benefits
of short-term investing.
The fund has adopted a Distribution and Service Plan. The plan recognizes
that FMR may use its resources, including management fees, to pay expenses
associated with the sale of fund shares. This may include payments to third
parties, such as banks or broker-dealers, that provide shareholder support
services or engage in the sale of the fund's shares. The Board of Trustees
has not authorized such payments.
PERFORMANCE
The fund's total return and yield may be quoted in advertising in
accordance with current law and interpretations thereof. Performance is
based on historical results and is not intended to indicate future
performance. For additional performance information, contact your insurance
company for a free annual report.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in the fund over a
given period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
YIELD refers to the income generated by an investment in the fund over a
given period of time, expressed as an annual percentage rate.
The fund's recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders.
TOTAL RETURNS AND YIELDS QUOTED FOR THE FUND INCLUDE THE FUND'S EXPENSES,
BUT MAY NOT INCLUDE CHARGES AND EXPENSES ATTRIBUTABLE TO ANY PARTICULAR
INSURANCE PRODUCT. BECAUSE SHARES OF THE FUND MAY BE PURCHASED
ONLY THROUGH VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS,
YOU SHOULD CAREFULLY REVIEW THE PROSPECTUS OF THE INSURANCE PRODUCT YOU
HAVE CHOSEN FOR INFORMATION ON RELEVANT CHARGES AND EXPENSES. Excluding
these charges from quotations of the fund's performance has the effect of
increasing the performance quoted. You should bear in mind the effect of
these charges when comparing the fund's performance to that of other mutual
funds.
ACCOUNT POLICIES

DISTRIBUTIONS AND TAXES
For a discussion of the tax status of your variable insurance contract,
refer to the prospectus of your insurance company's separate account. It is
suggested you keep all statements you receive to assist in your personal
recordkeeping.
It is expected that shares of the fund will be held under the terms of
variable annuity and variable life insurance contracts. Under current tax
law, dividends or capital gain distributions from the fund are not
currently taxable when left to accumulate within a variable annuity or
variable life insurance contract. Depending on the variable contract,
withdrawals from the contracts may be subject to ordinary income tax and,
in addition to a 10% penalty tax on withdrawals before age 59.
The fund is treated as a separate entity for federal income tax purposes.
The fund intends to pay out all of its net investment income and net
realized capital gains for each year. Dividends from the fund will be
distributed at least annually. The fund makes dividend and capital gain
distributions on a per-share basis. After distribution from the fund, the
fund's share price drops by the amount of the distribution. Because
dividends and capital gain distributions are reinvested, the total value of
an account will not be affected because, although the shares will have a
lower price, there will be correspondingly more of them. Normally, net
realized capital gains, if any, are distributed each year for the fund.
Such income and capital gain distributions are automatically reinvested in
additional shares of the fund.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. The fund's NAV is calculated as of the close of business of
the NYSE, normally 4 p.m. Eastern time.
THE FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
The fund's assets are valued primarily on the basis of market
quotations. Foreign securities are valued on the basis of quotations from
the primary market in which they are traded, and are translated from the
local currency into U.S. dollars using current exchange rates. If
quotations are not readily available or if the values have been materially
affected by events occurring after the closing of a foreign market, assets
are valued by a method that the Board of Trustees believes accurately
reflects fair value.
THE FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. The fund also reserves the right to reject any specific purchase
order. Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of the fund.
INVESTMENTS AND REDEMPTIONS. Investments may be made only by separate
accounts established and maintained by insurance companies for the purpose
of funding variable insurance contracts. Please refer to the prospectus of
your insurance company's separate account for information on how to invest
in and redeem from the fund.
Each participating insurance company receives orders from its variable
contract owners to purchase or redeem shares of the fund each business day.
That night, all orders received by that insurance company on that business
day are aggregated, and the insurance company places a net purchase or
redemption order for shares of the fund the morning of the next business
day. These orders are generally executed at the NAV that was computed at
the close of the previous business day in order to provide a match between
the variable contract owners' orders to the insurance companies and the
insurance companies' orders to the fund. In some cases, an insurance
company's orders for fund shares may be executed at the NAV next computed
after the order is actually transmitted to the fund.
Redemption proceeds will normally be wired to the insurance company on the
next business day after receipt of the redemption instructions by the fund
but in no event later than 7 days following receipt of instructions. The
fund may suspend redemptions or postpone payment dates on days when the
NYSE is closed (other than weekends or holidays), when trading on the NYSE
is restricted, or as permitted by the SEC.
APPENDIX

VARIABLE INSURANCE PRODUCTS FUND II
Investment Grade Bond Portfolio
CROSS REFERENCE SHEET
Form N-1A Item Number
Part A Prospectus Caption

10,11 Cover Page

12 Description of the Trust

13 a,b,c Investment Policies and Limitations

d Portfolio Transactions

14 a - c Trustees and Officers

15 a - c Trustees and Officers

16 a(i) FMR, Portfolio Transactions

a(ii) Trustees and Officers

a(iii),b Management Contracts, Contracts with
FMR affiliates

c *

d Contracts with FMR affiliates

e *

f Distribution and Service Plans

g *

h Description of the Trust

i Contracts with FMR affiliates; Description
of the Trust

17 a, b, c Portfolio Transactions

d, e *

18 a Description of the Trust

b *

19 a Additional Purchase and Redemption
Information

b Valuation of Portfolio Securities;
Additional Purchase and

Redemption Information

c *

20 Distributions and Taxes

21 a (i), (ii) Contracts with FMR affiliates

a(iii),b,c *

22 Performance

23 *

_________
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information to help you decide if
the goal of one or more of the funds matches your own.
To learn more about each fund and its investments, you can obtain a copy of
the funds' most recent financial report and portfolio listing or a copy of
the Statement of Additional Information (SAI) dated April 30, 199 6 .
The SAI has been filed with the Securities and Exchange Commission (SEC)
and is incorporated herein by reference (legally forms a part of the
prospectus). For a free copy of either document, contact your insurance
company.
Shares of each fund may only be purchased by the separate accounts of
insurance companies, for the purpose of funding variable annuity and
variable life insurance contracts. Particular funds may not be available in
your state due to various insurance regulations. Please check with your
insurance company for available funds. Inclusion of a fund in this
Prospectus which is not available in your state is not to be considered a
solicitation. This Prospectus should be read in conjunction with the
prospectus of the separate account of the specific insurance product which
accompanies this Prospectus.
AN INVESTMENT IN ANY FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT MONEY MARKET PORTFOLIO WILL
MAINTAIN A STABLE $1.00 SHARE PRICE.
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.
[HIGH INCOME PORTFOLIO OR HIGH YIELD F MAY INVEST WITHOUT LIMITATION IN
LOWER-QUALITY DEBT SECURITIES, SOMETIMES CALLED "JUNK BONDS." INVESTORS
SHOULD CONSIDER THAT THESE SECURITIES CARRY GREATER RISKS, SUCH AS THE RISK
OF DEFAULT, THAN OTHER DEBT SECURITIES. REFER TO "INVESTMENT PRINCIPLES AND
RISKS" ON PAGE FOR FURTHER INFORMATION.

DOCUMENT NAME PREFIX
INSURANCE PRODUCTS
FUNDS
Variable Insurance Products Fund and Variable Insurance Products Fund II
(the Trusts) are designed to provide investment vehicles for variable
annuity and variable life insurance contracts of various insurance
companies. The Trusts currently offer the following funds:
MONEY MARKET FUND
Money Market Portfolio
INCOME FUNDS
Investment Grade Bond Portfolio
High Income Portfolio
ASSET ALLOCATION FUNDS
Asset Manager Portfolio
Asset Manager: Growth Portfolio
GROWTH & INCOME AND GROWTH FUNDS
Equity-Income Portfolio
Index 500 Portfolio
Contrafund Portfolio
Growth Portfolio
Overseas Portfolio
PROSPECTUS
APRIL 30, 1996(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
CONTENTS

KEY FACTS THE FUNDS AT A GLANCE

WHO MAY WANT TO INVEST

FINANCIAL HIGHLIGHTS A summary
of each fund's financial data.

THE FUNDS IN DETAIL CHARTER How each fund is
organized.

INVESTMENT PRINCIPLES AND RISKS
Each fund's overall approach to
investing.

BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.

PERFORMANCE

ACCOUNT POLICIES DISTRIBUTIONS AND TAXES

TRANSACTION DETAILS Share price
calculations and how to invest and
redeem.

APPENDIX Description of Moody's and S&P's
Corporate Bond Ratings and
additional information about the
S&P 500(registered trademark).

KEY FACTS

THE FUNDS AT A GLANCE
The funds contained in this prospectus are designed to provide investment
vehicles for variable annuity and variable life insurance contracts of
various insurance companies .
MANAGEMENT: Fidelity Management & Research Company (FMR) is the management
arm of Fidelity Investments, which was established in 1946 and is now
America's largest mutual fund manager. Affiliates of FMR may choose
investments for some of the funds.
MONEY MARKET FUND
MONEY MARKET PORTFOLIO
GOAL: Income while maintaining a stable $1.00 share price.
STRATEGY: Invests in high-quality, short-term money market securities of
all types.
SIZE: As of December 31, 199 5 , the fund had over $__ [million -
billion] in assets.
INCOME FUNDS
INVESTMENT GRADE BOND PORTFOLIO
GOAL: High current income.
STRATEGY: Invests mainly in investment-grade debt securities .
SIZE: As of December 31, 199 5, the fund had over $__ [million -
billion] in assets.
HIGH INCOME PORTFOLIO
GOAL: High current income.
STRATEGY: Invests mainly in high-yielding debt securities, with an emphasis
on lower-quality securities.
SIZE: As of December 31, 199 5 , the fund had over $__ [million -
billion] in assets.
ASSET ALLOCATION FUNDS
ASSET MANAGER PORTFOLIO
GOAL: High total return with reduced risk over the long-term.
STRATEGY: The fund diversifies across stocks, bonds, and short-term
instruments, both here and abroad, to pursue its goal. The fund has a
neutral mix which represents the way the fund's investments will generally
be allocated over the long term. This mix will vary over short-term periods
as fund management gradually adjusts the fund's holdings - within defined
ranges - based on the current outlook for the different markets.
Neutral Mix
Stocks 40%
(can range
from
10-60%)
Row: 1, Col: 1, Value: 20.0
Row: 1, Col: 2, Value: 40.0
Row: 1, Col: 3, Value: 40.0
Bonds 40%
(can range
from
20-60%)
Short-term
20%
(can range
from
0-70%)
SIZE: As of December 31, 199 5 , the fund had over $__ [million -
billion] in assets.
ASSET MANAGER: GROWTH PORTFOLIO
GOAL: Maximum total return over the long term.
STRATEGY: The fund diversifies across stocks, bonds, and short-term
instruments, both here and abroad, to pursue its goal. The fund has a
neutral mix which represents the way the fund's investments will generally
be allocated over the long term. This mix will vary over short-term periods
as fund management gradually adjusts the fund's holdings - within defined
ranges - based on the current outlook for the different markets.
Neutral Mix
Stocks 65%
(can range
from
0-100%)
Row: 1, Col: 1, Value: 5.0
Row: 1, Col: 2, Value: 65.0
Row: 1, Col: 3, Value: 30.0
Bonds 30%
(can range
from
0-100%)
Short-Term
5%
(can range
from
0-100%)
SIZE: As of December 31, 1995, the fund had over $__ [million -
billion] in assets.
GROWTH & INCOME AND GROWTH FUNDS
EQUITY-INCOME PORTFOLIO
GOAL: Reasonable income. The fund also considers the potential for capital
appreciation.
STRATEGY: Invests mainly in income-producing equity securities.
SIZE: As of December 31, 199 5 , the fund had over $__ [million -
billion] in assets.
INDEX 500 PORTFOLIO
GOAL: Total return that corresponds to that of the Standard & Poor's
Composite Index of 500 Stocks (S&P 500(registered trademark)).
STRATEGY: Invests in equity securities of companies that compose the S&P
500 and in other instruments that are based on the value of the index.
SIZE: As of December 31, 199 5 , the fund had over $__ million in
assets.
CONTRAFUND PORTFOLIO
GOAL: C apital appreciation (increase in the value of the fund's
shares).
STRATEGY: Invests mainly in equity securities of companies that are
undervalued or out-of-favor.
SIZE: As of December 31, 1995, the fund had over $__ [million -
billion] in assets.
GROWTH PORTFOLIO
GOAL: Capital appreciation (increase in the value of the fund's shares).
STRATEGY: Invests mainly in common stocks, although its investments are not
restricted to any one type of security.
SIZE: As of December 31, 199 5 , the fund had over $__ billion in
assets.
OVERSEAS PORTFOLIO
GOAL: Long-term growth of capital.
STRATEGY: Invests mainly in equity securities outside of the U.S.
SIZE: As of December 31, 199 5 , the fund had over $__ billion in
assets.
WHO MAY WANT TO INVEST
The value of each fund's (except Money Market's) investments and, as
applicable, the income they generate will vary from day to day, and
generally reflect changes in market conditions, interest rates, and other
company, political, or economic news both here and abroad. In the
short-term, stock prices can fluctuate dramatically in response to these
factors. The securities of small, less well-known companies may be more
volatile than those of larger companies. Over time, however, stocks
have shown greater growth potential than other types of securities. Bond
prices generally move in the opposite direction from interest rates.
Investments in foreign securities may involve risks in addition to those of
U.S. investments, including increased political and economic risk, as well
as exposure to currency fluctuations. When fund shares are redeemed, they
may be worth more or less than their original cost. An investment in any
one fund is not in itself a balanced investment plan. As with any mutual
fund, there is no assurance that a fund will achieve its goal.
MONEY MARKET PORTFOLIO
The fund may be appropriate for investors who would like to earn income at
current money market rates while preserving the value of their investment.
The fund is managed to keep its share price stable at $1.00. The rate of
income will vary from day to day, generally reflecting short-term interest
rates.
INVESTMENT GRADE BOND PORTFOLIO
The fund may be appropriate for investors who want high current income from
a portfolio of investment-grade debt securities. A fund's level of risk and
potential reward depend on the quality and maturity of its investments.
With its focus on medium- to high-quality investments , the fund has
a moderate risk level and yield potential.
HIGH INCOME PORTFOLIO
The fund is designed for investors who want high current income with some
potential for capital growth from a portfolio of lower-quality debt
securities and income-producing equity securities. The fund may be
appropriate for long-term, aggressive investors who understand the
potential risks and rewards of investing in lower-quality debt ,
including defaulted securities. Investors must be willing to accept
the fund's greater price movements and credit risks.

THE SPECTRUM OF
FIDELITY FUNDS
Broad categories of Fidelity
funds are presented here in
order of ascending risk.
Generally, investors seeking
to maximize return must
assume greater risk. The
funds in this prospectus fall
under one of the following
categories.
(solid bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(solid bullet) INCOME Seeks income by
investing in bonds.
(solid bullet) ASSET ALLOCATION Seeks
high total return with reduced
risk through a mix of stocks,
bonds, and short-term
instruments.
(solid bullet) GROWTH AND INCOME
Seeks long-term growth and
income by investing in stocks
and bonds.
(solid bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
ASSET MANAGER AND ASSET MANAGER: GROWTH PORTFOLIOS
The funds may be appropriate for investors who want to diversify
among domestic and foreign stocks, bonds, and short-term instruments and
other types of securities, in one fund. Asset Manager Portfolio spreads its
assets among all three asset classes moderating both its risk and return
potential. On the other hand, Asset Manager: Growth, while spreading its
assets among all three asset classes, uses a more aggressive approach by
focusing on stocks for a higher potential return. Performance depends on
FMR's skill in allocating assets. Because each fund can invest in bonds
and short-term instruments, their returns may not be as high as a fund that
invests only in stocks.
EQUITY-INCOME PORTFOLIO
The fund may be appropriate for investors who are willing to ride out stock
market fluctuations in pursuit of potentially high long-term returns. The
fund is designed for those who want some income from equity and bond
investments, but also want to be invested in the stock market for its
long-term growth potential.
INDEX 500 PORTFOLIO
The fund may be appropriate for investors who are willing to ride out stock
market fluctuations in pursuit of potentially high long-term returns. The
fund is designed for those who want to pursue growth of capital and
current income through a portfolio of securities that broadly represents
the U.S. stock market, as measured by the S&P 500. The fund seeks to
keep expenses low as it attempts to match the return of the S&P 500.
Because the fund seeks to track, rather than beat, the performance of the
S&P 500, it is not managed in the same manner as other mutual funds. In
this fund, FMR generally will not judge the merits of any particular
stock as an investment. Therefore, you should not expect to achieve the
potentially greater results that could be obtained by a fund that
aggressively seeks growth.
CONTRAFUND PORTFOLIO
The fund may be appropriate for investors who are willing to ride out stock
market fluctuations in pursuit of potentially high long-term returns. The
fund is designed for those who are looking for an investment approach that
follows a contrarian philosophy. This approach focuses on companies that
FMR believes are currently out of public favor but show potential for
capital appreciation.
GROWTH PORTFOLIO
The fund may be appropriate for investors who are willing to ride out stock
market fluctuations in pursuit of potentially high long-term returns. The
fund is designed for those who want to pursue growth wherever it may arise,
and who understands that this strategy often leads to investments in
smaller, less well-known companies. The fund invests for growth and does
not pursue an income strategy.
OVERSEAS PORTFOLIO
The fund may be appropriate for investors who want to pursue their
investment goals in markets outside the United States. By including
international investments in your portfolio, you can achieve additional
diversification and participate in growth opportunities around the world.
However, it is important to note that investments in foreign securities
involve risks in addition to those of U.S. investments.
In addition to general risks, international investing involves different or
increased risks. The performance of international funds depends upon
currency values, the political and regulatory environment, and overall
economic factors in the countries in which the fund invests. See
"INVESTMENT PRINCIPLES AND RISKS."
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow are included in each fund's
Annual Report and have been audited by either _________ (Money Market, High
Income, Equity-Income, Growth and Overseas) or _________, (Investment Grade
Bond, Asset Manager, Index 500, Asset Manager: Growth and Contrafund)
independent accountants. Their reports on the financial statements and
financial highlights are included in the Annual Reports. The financial
statements, the financial highlights, and the reports are incorporated by
reference into the funds' SAI's, which may be obtained free of charge from
your insurance company. [INCLUDE A FOOTNOTE UNDER EACH TABLE THAT THE
PERFORMANCE QUOTED FOR THE FUND DOES NOT REFLECT EXPENSES THAT APPLY TO
YOUR INSURANCE COMPANY'S SEPARATE ACCOUNT OR ANY RELATED INSURANCE POLICY
CHARGES. IF THE PERFORMANCE QUOTED INCLUDED THE EFFECT OF THESE CHARGES,
THE RETURNS WOULD BE LOWER.]
[insert Per-Share data table[s]]
THE FUNDS IN DETAIL

CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders' money
and invests it toward a specified goal. Money Market Portfolio, High Income
Portfolio, Equity-Income Portfolio, Growth Portfolio and Overseas Portfolio
are diversified funds of Variable Insurance Products Fund (VIP) and
Investment Grade Bond Portfolio, Asset Manager Portfolio, Index 500
Portfolio, Asset Manager: Growth Portfolio and Contrafund Portfolio are
diversified funds of Variable Insurance Products Fund II (VIPII). VIP and
VIPII are open-end management investment companies organized as
Massachusetts business trusts on November 13, 1981, and March 21, 1988,
respectively. There is a remote possibility that one fund might become
liable for a misstatement in the prospectus about another fund.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the funds' activities,
review contractual arrangements with companies that provide services to the
funds, and review the funds' performance. The majority of trustees are not
otherwise affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These
meetings may be called to elect or remove trustees, change fundamental
policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
An insurance company issuing a variable contract that participates in the
funds will vote shares held in its separate account as required by law and
interpretations thereof, as may be amended or changed from time to time. In
accordance with current law and interpretations thereof, a participating
insurance company is required to request voting instructions from
policyowners and must vote shares in the separate account in proportion to
the voting instructions received. Your insurance company is entitled to one
vote for each share it owns. For a further discussion, please refer to your
insurance company's separate account prospectus.
FMR AND ITS AFFILIATES
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, Massachusetts 02109. It includes a number
of different subsidiaries and divisions which provide a variety of
financial services and products. The funds employ various Fidelity
companies to perform activities required for their operation.
The funds are managed by FMR, which handles each fund's business affairs
and, with the assistance of affiliates for certain funds, chooses the
fund's investments.
(small solid bullet) FMR Texas Inc. (FMR Texas), in Irving, Texas, serves
as a sub-adviser for Money Market Portfolio.
(small solid bullet) Fidelity Management & Research (U.K.) Inc. (FMR U.K.),
in London, England, serves as a sub-adviser for High Income, Asset Manager,
Asset Manager: Growth, Contrafund and Overseas Portfolios.
(small solid bullet) Fidelity Management & Research (Far East) Inc. (FMR
Far East), in Tokyo, Japan, serves as a sub-adviser for High Income, Asset
Manager, Asset Manager: Growth, Contrafund and Overseas Portfolios.
(small solid bullet) Fidelity International Investment Advisors (FIIA), in
Pembroke, Bermuda, serves as a sub-adviser for Overseas Portfolio.
(small solid bullet) Fidelity International Investment Advisors (U.K.)
Limited (FIIAL U.K.), in Kent, England, serves as a sub-adviser for
Overseas Portfolio.

(checkmark)
Barry Jay Coffman is manager and vice president of High Income
Portfolio, which he has managed since August 1990. Mr. Coffman also assists
on Fidelity Puritan Fund. Previously, he served as an assistant manager and
analyst for the high yield bond group. Before joining Fidelity in 1986, Mr.
Coffman was an analyst for Equitable Capital Management and was a senior
auditor at Arthur Anderson & Company.
Bettina Doulton i s manager and vice president of Equity-Income
Portfolio, which she has managed since July 1993. Ms. Doulton is also
manager of Fidelity Advisor Equity Portfolio Income. Previously, she
managed Fidelity Select Automotive Portfolio and assisted on Fidelity
Magellan Fund and Fidelity Equity-Income Fund. Ms. Doulton also served as
an analyst following the domestic and European automotive and tire
manufacturing industry as well as the gaming and lodging industry. She
joined Fidelity in 1986.
Lawrence Greenberg is manager and vice presiden t of Growth
Portfolio, which he has managed since April 1991. He also manages Emerging
Growth. Previously, Mr. Greenberg managed Select Environmental Services and
Select Medical Delivery. He also assisted on Fidelity Magellan Fund. Mr.
Greenberg joined Fidelity in 1986.
John R. Hickling is manager and vice president of Overseas Portfolio, which
he has managed since 1993. Mr. Hickling also manages Advisor Overseas,
Overseas, and Advisor Annuity Overseas. Previously, he managed Emerging
Markets, Europe, Pacific Basin, Japan, and International Growth & Income.
Mr. Hickling joined Fidelity in 1982.
Michael Gray is manager and vice president of Investment Grade Bond
Portfolio, which he has managed since August 1995. Mr. Gray also manages
Advisor Limited Term Bond, Intermediate Bond, Investment Grade Bond, and
Spartan Investment Grade Bond. Mr. Gray joined Fidelity in 1982.
Andrew Offit is manager and vice president of Asset Manager
Portfolio and Asset Manager: Growth Portfolio, which he has managed since
February 1995. Mr. Offit also manages Fidelity Canada Asset Manager. He
managed Fidelity Convertible Securities Fund from 1992 to February 1995.
Mr. Offit joined Fidelity in 1987 as a research analyst for the hospital
supply, medical technology, drug distribution and retail drug sectors. He
subsequently managed the Fidelity Select Biotechnology and Fidelity Select
Health Care Portfolios. He also was assistant fund manager for Fidelity
Growth & Income Fund and Fidelity Magellan Fund.
William Danoff is manager and vice president of Contrafund Portfolio, which
he has managed since January 1995. Mr. Danoff also manages Fidelity
Contrafund, which he has managed since October 1990. Previously, he managed
Select Retailing and assisted on Magellan. Mr. Danoff joined Fidelity in
1986 as an equity analyst.
Each fund has an investment objective similar to that of an existing
Fidelit y fund. Money Market Portfolio is most similar to Fidelity
Cash Reserves, High Income Portfolio is most similar to Spartan High Income
Fund, Equity-Income Portfolio is most similar to Fidelity Equity-Income
Fund, Growth Portfolio is most similar to Fidelity Growth Company Fund,
Overseas Portfolio is most similar to Fidelity Overseas Fund, Investment
Grade Bond Portfolio is most similar to Fidelity Intermediate Bond
Fund, Asset Manager Portfolio is most similar to Fidelity Asset Manager,
Index 500 Portfolio is most similar to Fidelity Market Index Fund,
Contrafund Portfolio is most similar to Fidelity Contrafund and Asset
Manager: Growth Portfolio is most similar to Fidelity Asset Manager:
Growth. Performance of a separate account investing in these funds is not
expected to be the same as the performance of the correspondin g fund
due in part to dissimilarities in their investments. Various insurance
related costs at the insurance company's separate account will also affect
performance.
Each fund sells its shares to separate accounts of insurance companies
which are both affiliated and unaffiliated with FMR. Each fund currently
does not foresee any disadvantages to policyowners arising out of the fact
that each fund offers its shares to separate accounts of various insurance
companies to serve as the investment medium for their variable products.
Nevertheless, the Board of Trustees intends to monitor events in order to
identify any material irreconcilable conflicts which may possibly arise,
and to determine what action, if any, should be taken in response to such
conflicts. If such a conflict were to occur, one or more insurance
companies' separate accounts might be required to withdraw its investments
in one or more funds and shares of another fund may be substituted. This
might force a fund to sell securities at disadvantageous prices. In
addition, the Board of Trustees may refuse to sell shares of any fund to
any separate account or may suspend or terminate the offering of shares of
any fund if such action is required by law or regulatory authority or is in
the best interests of the shareholders of the fund.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets Fidelity's
funds and services. Fidelity Investments Institutional Operations Company
(FIIOC), 82 Devonshire Street, Boston, Massachusetts, performs transfer
agent servicing functions for the funds.
FMR Corp. is the ultimate parent company of FMR, FMR Texas, FMR U.K.,
and FMR Far East. Members of the Edward C. Johnson 3d family are the
predominant owners of a class of shares of common stock representing
approximately 49% of the voting power of FMR Corp. Under the Investment
Company Act of 1940 (the 1940 Act), control of a company is presumed where
one individual or group of individuals owns more than 25% of the voting
stock of that company; therefore, the Johnson family may be deemed under
the 1940 Act to form a controlling group with respect to FMR Corp.
Fidelity International Limited (FIL), is the parent company of FIIA and
FIIAL U.K. The Johnson family group also owns, directly or indirectly, more
than 25% of the voting common stock of FIL.
[ USE ONLY IF AT LEAST ONE FUND IN COMBO IS. NOT IN REIMBURSEMENT: A
broker-dealer may use a portion of the commissions paid by [Names of
Fund(s) NOT in reimbursement] the fund to reduce custodian or transfer
agent fees for [the/those] [fund/funds].] FMR may use its broker-dealer
affiliates and other firms that sell fund shares to carry out a fund's
transactions, provided that the fund receives brokerage services and
commission rates comparable to those of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
The value of each fund's domestic and foreign investments varies in
response to many factors. Stock values fluctuate in response to the
activities of individual companies and general market and economic
conditions.
The value of bonds fluctuates based on changes in interest rates,
market conditions, other economic and political news, and on their quality
and maturity. In general, bond prices rise when interest rates fall, and
vice versa. This effect is usually more pronounced for longer-term
securities. Lower-quality securities offer higher yields, but also carry
more risk.
The total return from a bond is a combination of income and price gains
or losses. While income is the most important component of bond returns
over time, a fund's emphasis on income does not mean that the fund invests
only in the highest-yielding bonds available, or that it can avoid risks to
principal. In selecting investments for a fund, FMR considers a bond's
income potential together with its potential for price gains or losses. FMR
focuses on assembling a portfolio of income-producing securities that it
believes will provide the best tradeoff between risk and return within the
range of securities that are eligible investments for a fund.
International funds have increased economic and political risks as they are
exposed to events and factors in the various world markets. This is
especially true for funds that invest in emerging markets. Also, because
many of the funds' investments are denominated in foreign currencies,
changes in the value of foreign currencies can significantly affect a
fund's share price. FMR may use a variety of investment techniques to
either increase or decrease a fund's investment exposure to any currency.
FMR may use various investment techniques to hedge a portion of a fund's
risks, but there is no guarantee that these strategies will work as FMR
intends. As mutual funds, the fund seek to spread investment risk by
diversifying their holdings among many companies and industries.
FMR normally invests each fund's assets according to its investment
strategy. High Income, Equity-Income, Growth, Overseas, Asset Manager,
Asset Manager: Growth, Index 500 and Contrafund Portfolios also reserve the
right to invest without limitation in preferred stocks and investment-grade
debt instruments for temporary, defensive purposes. Investment Grade Bond
Portfolio reserves the right to invest without limitation in
investment-grade money market or short-term debt instruments for temporary,
defensive purposes.
MONEY MARKET PORTFOLIO
The fund seeks to obtain as high a level of current income as is
consistent with preserving capital and providing liquidity. The fund seeks
to obtain its objective by investing in high-quality, short-term money
market securities while seeking to maintain a stable $1.00 share price.
The fund will invest only in U.S. dollar-denominated securities of
domestic and foreign issuers, including banks and other financial
institutions, governments and their agencies or instrumentalities, and
corporations.
When fund shares are redeemed, they should be worth the same amount as when
they were purchased. Of course, there is no guarantee that the fund will
maintain a stable $1.00 share price. The fund follows industry-standard
guidelines on the quality and maturity of its investments, which are
designed to help maintain a stable $1.00 share price. The fund will
purchase only high-quality securities that FMR believes present minimal
credit risks and will observe maturity restrictions on securities it buys.
In general, securities with longer maturities are more vulnerable to price
changes, although they may provide higher yields. It is possible that a
major change in interest rates or a default on the fund's investments could
cause its share price (and the value of your investment) to change.
The fund earns income at current money market rates. It stresses
preservation of capital, liquidity, and income and does not seek the
higher yields or capital appreciation that more aggressive investments may
provide. The fund's yield will vary from day to day and generally reflects
current short-term interest rates and other market conditions. The fund
will only invest in instruments that are consistent with its objective.
INVESTMENT GRADE BOND PORTFOLIO
The fund seeks as high a level of current income as is consistent with
the preservation of capital by investing primarily in a broad range of
fixed-income securities. FMR normally invests at least 65% of
the fund's total assets in investment-grade, fixed-income securities such
as bonds, notes and debentures. Although the fund can invest in
securities of any maturity, FMR seeks to manage the fund so that it
generally reacts to changes in interest rates similarly to bonds with
maturities between five and ten years. As of December 31, 1995, the fund's
dollar-weighted average maturity was approximately __ years.
The fund's yield and share price change daily based on changes in interest
rates, market conditions, and other political and economic news, and on the
quality and maturity of its investment s.

HIGH INCOME PORTFOLIO
The fund seeks high current income by investing primarily in all types of
income-producing debt securities, preferred stocks, and convertible
securities. FMR normally invests at least 65% of the fund's total assets in
these securities .
Although the fund has no limits on the quality and maturity of its
investments, its strategy typically leads to longer-term, lower-quality,
fixed-income securities. These domestic and foreign investments may present
the risk of default or may be in default. If consistent with its investment
objective, however, the fund can also invest in common stocks, other equity
securities, and debt securities not currently paying interest but which are
expected to do so in the future. Performance is also affected by
individual company news. The success of the fund's investment strategy
depends on FMR's analysis of a company's relative values and its potential
for success in light of its current financial situation, its industry
position, economic conditions, and interest rate trends.
ASSET MANAGER AND ASSET MANAGER: GROWTH PORTFOLIOS
Each fund seeks to achieve its investment objective by allocating its
assets among stocks, bonds, short-term and other instruments of U.S. and
foreign issuers. Each fund however, has a different objective and pursues
its objective by investing within different asset allocation ranges.
ASSET MANAGER seeks high total return with reduced risk over the long term.
ASSET MANAGER: GROWTH seeks to maximize total return over the long term.
Each fund allocates its assets among the following classes, or types, of
investments. The STOCK CLASS includes equity securities of all types. The
BOND CLASS includes all varieties of fixed-income instruments with
maturities of more than three years (including adjustable-rate preferred
stocks). The SHORT-TERM CLASS includes all types of short-term instruments
with remaining maturities of three years or less. Some types of
investments, such as indexed securities, can fall into more than one asset
class. The funds may also make other investments that do not fall within
these classes.
FMR has the ability to allocate each fund's assets within specified ranges.
Each fund's NEUTRAL MIX indicates the benchmark for its combination of
investments in each asset class over time. FMR may change the neutral mix
from time to time. The following chart illustrates the range and
approximate neutral mix for each asset class.
ASSET MANAGER
Range Neutral mix
STOCK CLASS 10-60% 40%
BOND CLASS 20-60% 40%
SHORT-TERM CLASS 0-70% 20%
Asset Manager's approach spreads the fund's assets among all three classes,
moderating both the risk and return potential of stocks, bonds, and
short-term instruments.
ASSET MANAGER: GROWTH
Range Neutral mix
STOCK CLASS 0-100% 65%
BOND CLASS 0-100% 30%
SHORT-TERM CLASS 0-100% 5%
Asset Manager: Growth's more aggressive approach focuses on stocks for high
potential returns. However, because the fund can invest in bonds and
short-term instruments, its return may not be as high as a fund that
invests only in stocks.
Although the funds seek to reduce their overall risk by diversifying among
different types of investments, the funds aggressively invest in a
wide variety of security types, including stocks and bonds issued in
developed and developing countries and derivative transactions. Since the
funds are subject to the risks of each investment type, the funds and their
performance are affected by many factors.
In pursuit of each fund's objective, FMR will not try to pinpoint the
precise moment when a major reallocation should be made. Instead, FMR
regularly reviews each fund's allocation and makes changes gradually to
favor investments that it believes will provide the most favorable outlook
for achieving each fund's objective. Under normal circumstances, a single
reallocation will not involve more than 10% of Asset Manager's total
assets, or 20% of Asset Manager: Growth's total assets. Although FMR uses
its expertise and resources in allocating assets, FMR's decisions may not
be advantageous to a fund.
Each fund diversifies across investment types more than most mutual
funds . No one mutual fund, however, can provide an appropriate
balanced investment plan for all investors.
EQUITY-INCOME PORTFOLIO
The fund seeks reasonable income by investing primarily in income-producing
equity securities. When choosing the fund's investments, FMR also
considers the potential for capital appreciation. The fund seeks to achieve
a yield that beats that of the S&P 500 . FMR normally invests at least
65% of the fund's total assets in income-producing common or preferred
stock . The remainder of the fund's assets will tend to be invested in
debt obligations, many of which are expected to be convertible into common
stock (if convertible securities present favorable investment
opportunities). The fund has the flexibility, however, to invest the
balance in all types of domestic and foreign securities, including bonds of
varying quality. The fund does not expect to invest in debt
securities of companies that do not have proven earnings or credit .
INDEX 500 PORTFOLIO
The fund seeks to match the total return of the S&P 500 while keeping
expenses low. FMR normally invests at least 80% (65% if fund assets are
below $20 million) of the fund's assets in equity securities of companies
that compose the S&P 500.
The S&P 500 is an index of 500 common stocks, most of which trade on
the New York Stock Exchange. It is generally acknowledged that the
S&P 500 broadly represents the performance of publicly traded common stocks
in the U.S.
In seeking a 98% or better long-term correlation of the fund's total return
to that of the S&P 500, the fund utilizes a "passive" or "indexing"
approach and tries to allocate its assets similarly to those of the index.
The fund's composition may not always be identical to that of the S&P 500.
FMR may choose, if extraordinary circumstances warrant, to exclude a stock
held in the S&P 500 and include a similar stock in its place if doing so
will help the fund achieve its objective. FMR monitors the correlation
between the performance of the fund and the S&P 500 on a regular basis. In
the unlikely event that the fund cannot achieve a long-term correlation of
98% or better, the trustees will consider alternative arrangements.
Although the fund focuses on common stocks, it may also invest in other
equity securities and in other types of instruments. The fund purchases
short-term debt securities for cash management purposes and uses various
investment techniques, such as futures contracts, to adjust its exposure to
the S&P 500.
Standard & Poor's Corporation is neither an affiliate nor a sponsor of
the fund, and inclusion of a stock in the index does not imply that it is a
good investment. Please refer to the Appendix for more information on
the S&P 500.
CONTRAFUND PORTFOLIO
The fund seeks capital appreciation by investing mainly in equity
securities of companies that FMR believes to be undervalued due to an
overly pessimistic appraisal by the public. The fund usually invests
primarily in common stock and securities convertible into common stock, but
it has the flexibility to invest in any type of security that may produce
capital appreciation.
The fund's strategy can lead to investments i n small and
medium-sized companies, which carry more risk than larger ones. Generally,
these companies, especially small sized ones, rely on limited product lines
and markets, financial resources, or other factors. This may make them more
susceptible to setbacks or downturns.
In pursuit of the fund's goal, FMR looks for companies with the following
characteristics:
(small solid bullet) unpopular, but improvements seem possible due to
developments such as a change in management, a new product line, or an
improved balance sheet,
(small solid bullet) recently popular, but temporarily out of favor due to
short-term or one-time factors, or
(small solid bullet) undervalued compared to other companies in the same
industry.
GROWTH PORTFOLIO
The fund seeks capital appreciation by investing primarily in common
stocks . The fund however, is not restricted to any one type of
security and may pursue capital appreciation through the purchase of bonds
and preferred stocks. The fund does not place any emphasis on dividend
income from its investments except when FMR believes this income will have
a favorable influence on the market value of the security.
Growth may be measured by factors such as earnings or gross sales. FMR
tends to focus on smaller, lesser known companies in new and emerging areas
of the economy. However, FMR may also pursue growth in larger or
revitalized companies that hold a strong position in the market. These may
be found in mature or declining industries.
Companies with strong growth potential often have new products,
technologies, distribution channels, or other opportunities. As a general
rule, these domestic and foreign companies tend to be small and mid-sized
companies that have higher than average price/earnings (P/E) ratios. A high
P/E ratio means that the stock is more expensive than average relative to
the company's earnings. The market prices of these stocks may be
particularly sensitive to economic, market, or company news.
OVERSEAS PORTFOLIO
The fund seeks long-term growth of capital by investing primarily in
securities of issuers whose principal activities are outside of the U.S.
FMR normally invests at least 65% of the fund's total assets in securities
of issuers from at least three different countries outside of North America
(the U.S., Canada, Mexico, and Central America). The fund expects to invest
a majority of its assets in equity securities, but may also invest in debt
securities of any quality. The fund invests in securities of both
developed and emerging markets.
The fund may invest in the securities of any issuer, including companies
and other business organizations as well as governments and government
agencies. The fund, however, will tend to focus on the equity securities of
both large and small companies. The fund may invest in short-term debt
securities and money market instruments for cash management purposes.
The fund's focus on international investing involves increased or
additional risks compared to funds which invest primarily in domestic
equity securities. International funds have increased economic and
political risks as they are exposed to events and factors in the various
world markets. This is especially true for emerging markets. Also,
because many of the fund's investments are denominated in foreign
currencies, changes in the value of foreign currencies can significantly
affect the fund's share price. FMR may use a variety of techniques to
either increase or decrease the fund's exposure to any currency.
FMR determines where an issuer or its principal business is located by
looking at such factors as its country of organization, the primary trading
market for its securities, and the location of its assets, personnel,
sales, and earnings. When allocating the fund's investments among countries
and regions, FMR considers such factors as the potential for economic
growth, expected levels of inflation, governmental policies, and the
outlook for currency relationships.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective , and a summary of related
risks. Any restrictions listed supplement those discussed earlier in this
section . A complete listing of each fund's limitations and more
detailed information about each fund's investments are contained in the
funds' SAI. Policies and limitations are considered at the time of
purchase; the sale of instruments is not required in the event of a
subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques
unless it believes that they are consistent with a fund's investment
objective and policies and that doing so will help a fund achieve its goal.
Current holdings and recent investment strategies are described in each
fund's financial reports, which are sent to shareholders twice a
year. For a free SAI or financial report, contact your insurance company.
EQUITY SECURITIES may include common stocks, preferred stocks, convertible
securities, and warrants. For Asset Manager and Asset Manager: Growth,
some preferred stocks and convertible securities may be included in the
bond class. Common stocks, the most familiar type, represent an equity
(ownership) interest in a corporation. Although equity securities have a
history of long-term growth in value, their prices fluctuate based on
changes in a company's financial condition and on overall market and
economic conditions. Smaller companies are especially sensitive to these
factors.
RESTRICTIONS: With respect to 75% of total assets, each fund (excluding
Money Market) may not purchase more than 10% of the outstanding voting
securities of any issuer.
High Income may consider the potential for growth of capital by
investing up to 20% of its total assets in common stocks and other equity
securities when consistent with the fund's primary objective or when
acquired as part of a unit combining fixed-income and equity
securities.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. In
general, bond prices rise when interest rates fall, and vice versa. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rate s. Longer-term bonds are
generally more sensitive to interest rate changes than short-term bonds.
Investment-grade debt securities are medium- and high-quality securities.
Some, however, may possess speculative characteristics, and may be more
sensitive to economic changes and to changes in the financial condition of
issuers.
Lower-quality debt securities (sometimes called "junk bonds") are
considered to have speculative characteristics and involve greater
risk of default or price changes due to changes in interest rates, economic
conditions, and the issuer's creditworthiness, or they may already be in
default. As a result, their market prices tend to fluctuate more than
higher-quality securities .
The default rate of lower-quality debt securities is likely to be higher
when issuers have difficulty meeting projected goals or obtaining
additional financing. This could occur during economic recessions or
periods of high interest rates. If an issuer defaults, a fund may
try to protect the interests of security holders if it determines such
action to be in the interest of its shareholders.
Lower-quality securities may be thinly traded, making them difficult to
sell promptly at an acceptable price. If market quotations are unavailable,
lower-quality securities are valued under guidelines established by the
Board of Trustees, including the use of outside pricing services.
Adverse publicity and changing investor perceptions may
affect the ability of outside pricing services to value lower-quality
debt securities, and the fund's ability to dispose of these securities.
RESTRICTIONS: Purchase of a debt security is consistent with a fund's debt
quality policy if it is rated at or above the stated level by Moody's or
rated in the equivalent categories by S&P (and for Investment Grade
Bond, Fitch Investor Services L.P. or Duff and Phelps) , or is unrated
but judged to be of equivalent quality by FMR. Investment Grade Bond,
Growth and Contrafund Portfolios each currently limit investment in lower
than Baa-quality debt securities to 5% of its assets ; Equity-Income,
Asset Manager: Growth, and Overseas Portfolios currently limit investment
in lower than Baa-quality debt securities to less than 35% of each
fund's assets; and Asset Manager currently intends to limit its investment
in lower than Baa-quality debt securities to less than 35% of its
assets and currently intends to limit its investment in lower than
Baa-quality debt securities as determined by FMR, to 20% of its total
assets.
The following table provides a summary of ratings assigned to debt holdings
(not including money market instruments) in certain of the funds'
portfolios. These figures are dollar-weighted averages of month-end
portfolio holdings during fiscal 199 5 , and are presented as a
percentage of total security investments. These percentages are historical
and do not necessarily indicate a fund's current or future debt holdings.
FISCAL 1995 DEBT HOLDINGS, BY RATING
Fiscal 1994 Debt Holdings, by Rating MOODY'S STANDARD & POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average [A] Rating Average[A]
High Equity Asset Investment High Equity Asset Investm
ent
INVESTMENT GRADE Income Income Manager Grade Bond Income Income Manag
er Grade Bond
Highest quality Aaa % % % % AAA % % % %
High quality Aa % % % % AA % % % %
Upper-medium grade A % % % % A % % %
%
Medium grade Baa % % % % BBB % % % %
LOWER QUALITY
Moderately speculative Ba % % % % BB % % %
%
Speculative B % % % % B % % % %
Highly speculative Caa % % % % CCC % % % %
Poor quality Ca % % % % CC % % % %
Lowest quality, no interest C C
In default, in arrears --- D % % %
%
% % % % % % % %
[A] FOR SOME FOREIGN GOVERNMENT OBLIGATIONS, FMR ASSIGNS THE RATINGS OF THE
SOVEREIGN CREDIT OF THE ISSUING GOVERNMENT. THE DOLLAR-WEIGHTED AVERAGE OF
DEBT SECURITIES NOT RATED DIRECTLY OR INDIRECTLY BY MOODY'S OR S&P AMOUNTED
TO __% FOR ASSET MANAGER: GROWTH, __% FOR EQUITY-INCOME, __% FOR ASSET
MANAGER AND __% FOR INVESTMENT GRADE BOND. THIS MAY INCLUDE SECURITIES
RATED BY OTHER NATIONALLY RECOGNIZED RATING SERVICES, AS WELL AS UNRATED
SECURITIES. FMR HAS DETERMINED THAT UNRATED SECURITIES THAT ARE LOWER
QUALITY ACCOUNT FOR __% OF HIGH INCOME'S TOTAL SECURITY INVESTMENTS. REFER
TO THE APPENDIX FOR A MORE COMPLETE DISCUSSION OF THESE RATINGS.
MONEY MARKET SECURITIES are high-quality, short-term obligations
issued by the U.S. government, corporations, financial institutions, and
other entities. These obligations may carry fixed, variable, or
floating interest rates. Some money market securities employ
a trust or other similar structure to modify the maturity, price
characteristics, or quality of financial assets so that they are eligible
investments for money market funds. If the structure does not perform as
intended, adverse tax or investment consequences may result.
OTHER MONEY MARKET SECURITIES may include commercial paper,
certificates of deposit, bankers' acceptances, and time deposits.
U.S. GOVERNMENT SECURITIES are high-quality debt securities issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. government. Not all U.S. government securities are backed by the full
faith and credit of the United States. For example, securities issued by
the Federal Farm Credit Bank or by the Federal National Mortgage
Association are supported by the instrumentality's right to borrow money
from the U.S. Treasury under certain circumstances. However, securities
issued by the Financing Corporation are supported only by the credit of the
entity that issued them.
CREDIT SUPPORT. Issuers may employ various forms of credit
enhancement, including letters of credit, guarantees, or insurance from a
bank, insurance company, or other entity. These arrangements expose the
fund to the credit risk of the entity. In the case of foreign entities,
extensive public information about the entity may not be available and the
entity may be subject to unfavorable political, economic, or governmental
developments which might affect its ability to honor its commitment.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations may
involve additional risks and considerations. These include risks relating
to political or economic conditions in foreign countries, fluctuations in
foreign currencies, withholding or other taxes, operational risks,
increased regulatory burdens, and the potentially less stringent investor
protection and disclosure standards of foreign markets. Additionally,
governmental issuers of foreign securities may be unwilling to repay
principal and interest when due, and may require that the conditions for
payment be renegotiated. All of these factors can make foreign investments,
especially those in developing countries, more volatile.
RESTRICTIONS: FMR limits the amount of High Income, Equity-Income, Growth,
Investment Grade Bond, Asset Manager and Index 500 Portfolios' assets that
may be invested in foreign securities to 50%. However, pursuant to
certain state insurance regulations , each fund, including Money
Market , Overseas, Asset Manager: Growth and Contrafund Portfolios, may
not invest more than 20% of its assets in any one foreign country.
Each fund may have an additional 15% invested in securities of issuers
located in any one (but only one) of the following countries: Australia,
Canada, France, Japan, the United Kingdom or Germany.
EXPOSURE TO EMERGING MARKETS. Investments in emerging market
securities include additional risks to those generally associated with
foreign investing. The extent of economic development, political stability,
and market depth varies widely in comparison to more developed nations. The
economies of these countries may be subject to greater social, economic,
and political uncertainties or may be based on only a few industries. All
of these factors can make emerging market securities more volatile than
U.S. investments.
AMERICAN DEPOSITARY RECEIPTS AND EUROPEAN DEPOSITARY RECEIPTS (ADRS AND
EDRS) are certificates evidencing ownership of shares of a foreign-based
issuer held in trust by a bank or similar financial institution. Designed
for use in U.S. and European securities markets, respectively, ADRs and
EDRs are alternatives to the purchase of the underlying securities in their
national markets and currencies.
ASSET-BACKED SECURITIES include interests in pools of lower-rated
debt securities, or consumer loans. The value of these securities may be
significantly affected by changes in the market's perception of the issuers
and the creditworthiness of the parties involved.
MORTGAGE SECURITIES are interests in pools of commercial or
residential mortgages, and may include complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed
securities. Mortgage securities may be issued by the U.S. Government or by
private entities. For example, Ginnie Maes are interests in pools of
mortgage loans insured or guaranteed by a U.S. Government agency. Because
mortgage securities pay both interest and principal as their underlying
mortgages are paid off, they are subject to prepayment risk. This is
especially true for stripped securities. Also, the value of a mortgage
security may be significantly affected by changes in interest rates. Some
mortgage securities may have a structure that makes their reaction to
interest rates and other factors difficult to predict, making their value
highly volatile.
VARIABLE AND FLOATING RATE SECURITIES have interest rates that are
periodically adjusted either at specific intervals or whenever a benchmark
rate changes. These interest rate adjustments are designed to help
stabilize the security's price.
STRIPPED SECURITIES are the separate income or principal components of a
debt security. Their risks are similar to those of other debt
securities, although they may be more volatile, and the value of
certain types of stripped securities may move in the same direction
as interest rates.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a security at
one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
FOREIGN REPURCHASE AGREEMENTS may be less well secured than U.S. repurchase
agreements, and may be denominated in foreign currencies. They also may
involve greater risk of loss if the counterparty defaults. Some
counterparties in these transactions may be less creditworthy than those in
U.S. markets .
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
temporarily transfers possession of a portfolio instrument to another party
in return for cash. This could increase the risk of fluctuation in the
fund's yield or in the market value of its assets.
PUT FEATURES entitle the holder to put (sell back) a security to
the issuer or a financial intermediary. In exchange for this benefit, a
fund may pay periodic fees or accept a lower interest rate. The credit
quality of the investment may be affected by the creditworthiness of the
put provider. Demand features, standby commitments, and tender options are
types of put features.
REAL ESTATE-RELATED INSTRUMENTS include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors such
as changes in real estate values and property taxes, interest rates, cash
flow of underlying real estate assets, overbuilding, and the management
skill and creditworthiness of the issuer. Real estate-related instruments
may also be affected by tax and regulatory requirements, such as those
relating to the environment.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, currency exchange rates, commodity prices, or other factors that
affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts,
entering into currency exchange contracts or swap agreements, purchasing
indexed securities, and selling securities short.
FMR can use these practices to adjust the risk and return characteristics
of a fund's portfolio of investments and for Index 500, in its effort to
achieve the fund's objective of tracking the S&P 500 . If FMR judges
market conditions incorrectly or employs a strategy that does not correlate
well with a fund's investments, these techniques could result in a loss,
regardless of whether the intent was to reduce risk or increase return.
These techniques may increase the volatility of a fund and may involve a
small investment of cash relative to the magnitude of the risk assumed. In
addition, these techniques could result in a loss if the counterparty to
the transaction does not perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other borrower.
They have additional risks beyond conventional debt securities because they
may entail less legal protection for a fund, or there may be a requirement
that the fund supply additional cash to a borrower on demand .
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some illiquid securities and some other securities may
be subject to legal restrictions. Difficulty in selling securities may
result in a loss or may be costly to a fund.
RESTRICTIONS. Money Market , Equity-Income, Growth, Investment Grade
Bond, Index 500, Contrafund, Asset Manager and Asset Manager: Growth
Portfolios each may not purchase a security if, as a result, more than 10%
of its assets would be invested in illiquid securities. High Income and
Overseas Portfolios each may not purchase a security if, as a result, more
than 15% of its assets would be invested in illiquid securities .
WARRANTS are instruments which entitle the holder to buy underlying equity
securities at a specific price for a specific period of time. A warrant
tends to be more volatile than its underlying securities and ceases to have
value if it is not exercised prior to its expiration date. In addition,
changes in the value of a warrant do not necessarily correspond to changes
in the value of its underlying securities.
FINANCIAL SERVICES INDUSTRY. Companies in the financial services industry
are subject to various risks related to that industry, such as government
regulation, changes in interest rates, and exposure on loans, including
loans to foreign borrowers. If a fund invests substantially in this
industry, its performance may be affected by conditions affecting the
industry.
RESTRICTIONS. Money Market will invest more than 25% of its total assets in
the financial services industry .
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect a fund's yield or the market value of a fund's assets.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry.
RESTRICTIONS: Money Market may not invest more than 5% of its total assets
i n any one issuer, except that the fund may invest up to 10% of its
total assets in the highest quality securities of a single issuer for up to
three business days. These limitations do not apply to U.S. government
securities.
With respect to 75% of total assets, each of High Income,
Equity-Income, Growth, Overseas, Investment Grade Bond, Index 500, Asset
Manager, Asset Manager: Growth and Contrafund Portfolios may not
purchase a security if, as a result , more than 5% would be invested
in the securities of any one issuer. Each fund also may not invest
more than 25% of its total assets in any one industry. These limitations do
not apply to U.S. government securities.
BORROWING. Each fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If a fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If a fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: Each fund, other than Money Market, may borrow only
for temporary or emergency purposes but not in an amount exceeding 25% of
its assets. Money Market may borrow only for temporary or emergency
purposes, or engage in reverse repurchase agreements, but not in an amount
exceeding 25% of its assets.
LENDING securities to broker-dealers and institutions, including Fidelity
Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a means of earning
income. This practice could result in a loss or a delay in recovering a
fund's securities. A fund may also lend money to other funds advised by
FMR .
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of a fund's
total assets.
OTHER INSTRUMENTS m ay include depositary receipts, rights, and
securities of closed-end investment companies.
INTERNAL REVENUE SERVICE (IRS) LIMITATIONS. In addition to the above, each
fund also follows certain limitations imposed by the IRS on separate
accounts of insurance companies relating to the tax-deferred status of
variable contracts. More specific information may be contained in your
insurance company's separate account prospectus.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraphs restate all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraphs, can be changed without shareholder approval.
MONEY MARKET PORTFOLIO seeks as high a level of current income as is
consistent with preservation of capital and liquidity by investing in money
market instruments .
INVESTMENT GRADE BOND PORTFOLIO seeks as high a level of current income as
is consistent with the preservation of capital.
HIGH INCOME PORTFOLIO seeks a high level of current income by investing
primarily in high yielding , fixed-income securities, while also
considering growth of capital.
ASSET MANAGER PORTFOLIO seeks to obtain high total return with reduced risk
over the long-term by allocating its assets among stocks, bonds, and
short-term instruments.
ASSET MANAGER: GROWTH PORTFOLIO seeks to maximize total return by
allocating its assets among stocks, bonds, short-term instruments, and
other investments.
EQUITY-INCOME PORTFOLIO seeks reasonable income by investing primarily in
income-producing equity securities. In choosing these securities, the
fund will also consider the potential for capital appreciation. The fund's
goal is to achieve a yield which exceeds the composite yield on the
securities comprising the Standard & Poor's Composite Index of 500
Stocks.
INDEX 500 PORTFOLIO seeks investment results that correspond to the total
return of common stocks publicly traded in the United States, as
represented by the S&P 500.
CONTRAFUND PORTFOLIO seeks long-term capital appreciation.
GROWTH PORTFOLIO seeks to achieve capital appreciation.
OVERSEAS PORTFOLIO seeks long-term growth of capital primarily through
investments in foreign securities.
EACH FUND (excluding Money Market), with respect to 75% of total assets,
may not invest more than 5% of its total assets in any one issuer and may
not own more than 10% of the outstanding voting securities of a single
issuer. Each fund may not invest more than 25% of its total assets
in any one industry , except Money Market will invest more than 25% of
its total assets in the financial services industry.
Loans, in the aggregate, may not exceed 33% of each fund's total
assets .
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of a fund's assets are reflected in its share
price.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn, on behalf of Money Market, High Income,
Asset Manager, Asset Manager: Growth, Contrafund and Overseas Portfolios,
pays fees to affiliates who provide assistance with these services. Each
fund also pays OTHER EXPENSES, which are explained on page .
FMR may, from time to time, agree to reimburse a fund for management fees
and other expenses above a specified limit. FMR retains the ability to be
repaid by a fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease a fund's expenses and boost its
performance.
MANAGEMENT FEE
EACH FUND'S MANAGEMENT FEE is calculated and paid to FMR every month. The
fee for each fund (excluding Money Market and Index 500 Portfolios) is
calculated by adding a GROUP FEE rate to an INDIVIDUAL FUND FEE rate, and
multiplying the result by the fund's average net assets.
INDEX 500 PORTFOLIO'S m anagement fee is calculated and paid to FMR every
month. The fund pays the fee at the annual rate of 0.28% of its average
net assets.
MONEY MARKET'S management fee is calculated by multiplying the sum
of two components by the fund's average net assets and adding an
income-based fee . One component, the group fee rate, is discussed
below. The other component , the individual fund fee rate, is 0.03%. The
income -based fee is 6% of the fund's gross income in excess of a 5%
yield and cannot rise above 0.24% of the fund's average net assets.
THE GROUP FEE RATE is based on the average net assets of all the mutual
funds advised by FMR. This rate cannot rise above 0.52% for Equity-Income,
Growth, Overseas, Asset Manager, Asset Manager: Growth and Contrafund
Portfolios and 0.37% for Money Market, High Income and Investment Grade
Bond Portfolios, and it drops as total assets under management increase.
For December 31, 199 5 , the group fee rate was 0.__% for
Equity-Income, Growth, Overseas, Asset Manager, Asset Manager: Growth and
Contrafund Portfolios and 0.__% for Money Market, High Income and
Investment Grade Bond Portfolios.
Each fund's individual fund fee rate and total management fee for fiscal
year 199 5 is outlined in the chart below.
Fund Individual Managem
fund ent
fee rate fee

Money Market Portfolio .03 .%
%

Equity-Income Portfolio .20 .%
%

Growth Portfolio .30 .%
%

Contrafund Portfolio .30 .%
%

Investment Grade Bond Portfolio .30 .%
%

Asset Manager Portfolio .40 .%
%

Asset Manager: Growth Portfolio .40 .%
%

High Income Portfolio .45 .%
%

Overseas Portfolio .45 .%
%

For Overseas, this rate was higher than that of most other mutual funds,
but not necessarily higher than those of a typical international fund, due
to the greater complexity, expense and commitment of resources involved in
international investing.
SUB-ADVISORY AGREEMENTS. On behalf of High Income, Asset Manager, Asset
Manager: Growth and Contrafund Portfolios, FMR has sub-advisory agreements
with two affiliates, FMR U.K. and FMR Far East. On behalf of Overseas
Portfolio, FMR has sub-advisory agreements with three affiliates: FMR U.K.,
FMR Far East, and FIIA. FIIA in turn has a sub-advisory agreement with
FIIAL U.K. FMR U.K. focuses on issuers based in Europe. FMR Far East
focuses on issuers based in Asia and the Pacific Basin. FIIA focuses on
issuers based in Hong Kong, Australia, New Zealand, and Southeast Asia
(other than Japan). FIIAL U.K. focuses on issuers based in the United
Kingdom and Europe.
These sub-advisers are compensated for providing FMR with investment
research and advice on issuers based outside the United States. FMR pays
FMR U.K. and FMR Far East fees equal to 110% and 105%, respectively, of the
costs of providing these services. FMR pays FIIA a fee equal to 30% of its
management fee rate associated with investments for which the sub-adviser
provided investment advice . FIIA pays FIIAL U.K. a fee equal to 110% of
the cost of providing these services.
On behalf of High Income, Asset Manager: Growth, Contrafund and Overseas
Portfolios, the sub-advisers may also provide investment management
services. In return, FMR pays FMR U.K., FMR Far East, and FIIA a fee equal
to 50% of its management fee rate with respect to the fund's investments
that the sub-adviser manages on a discretionary basis. FIIA pays FIIAL U.K.
a fee equal to 110% of the cost of providing these services.
The following chart details the fees paid by FMR to FMR U.K. and FMR Far
East, on behalf of the funds (as a percentage of each fund's average net
assets) for fiscal 1995:
[insert chart for fees paid to sub-advisors]
On behalf of Money Market Portfolio, FMR has a sub-advisory
agreement with FMR Texas, which has primary responsibility for providing
investment management for the fund, while FMR retains responsibility for
providing the fund with othe r management services. FMR pays FMR Texas
50% of its management fee (before any expense reimbursement) for these
services. FMR paid FMR Texas 0.__% of Money Market's average net assets for
fiscal 199 5 .
OTHER EXPENSES
While the management fee is a significant component of each fund's annual
operating costs, the funds have other expenses as well.
FIIOC, 82 Devonshire Street, Boston, Massachusetts, performs transfer
agency, dividend disbursing and shareholder servicing functions for each
fund. Fidelity Service Co. (FSC), 82 Devonshire Street, Boston,
Massachusetts, calculates the net asset value (NAV) and dividends,
maintains the general accounting records and (except for Money
Market) administers the securities lending program for each fund.
The following chart details the fees paid to FIIOC and FSC and each fund's
total expenses (as a percentage of each fund's average net assets) for
fiscal 199 5 :
Fund Fee Fee Total
to to Expen
FIIO FSC ses
C

Money Market 0.% 0.% 0.%
Portfolio

Index 500 Portfolio 0.% 0.% 0.%*

Equity-Income Portfolio 0.% 0.% 0.%

Growth Portfolio 0.% 0.% 0.%

Investment Grade Bond Portfolio 0.% 0.% 0.%

Asset Manager 0.% 0.% 0.%
Portfolio

High Income Portfolio 0.% 0.% 0.%

Overseas Portfolio 0.% 0.% 0.%

FMR has voluntarily agreed to temporarily limit total operating expenses
(excluding interest, taxes, brokerage commissions, and extraordinary
expenses) (as a percentage of the fund's average net assets) for Index 500
to 0.28%, Investment Grade Bond to 0.80%, High Income, Contrafund and Asset
Manager: Growth each to 1.00%, Asset Manager to 1.25% and Equity-Income,
Growth, and Overseas to 1.50%. [IF ANY FUND WAS IN REIMBURSEMENT,
RESTATE ITS MANAGEMENT FEE, EXPENSES AND TOTAL EXPENSE RATIO BEFORE THE
REIMBURSEMENT.] [A portion of the brokerage commissions that certain of the
funds paid was used to reduce fund expenses. Including this reduction, the
total operating expenses would have been 0.__%. for Equity-Income, 0.__%
for Growth, and 0.__% for Asset Manager Portfolios.]
Each fund also pays other expenses, such as legal, audit, and custodian
fees; proxy solicitation costs; and the compensation of trustees who are
not affiliated with Fidelity.
For fiscal 1995, each fund's portfolio turnover rate is outlined in the
table below. These rates vary from year to year. High turnover rates
increase transaction costs. FMR considers these effects when evaluating the
anticipated benefits of short-term investing.
Fund Portfolio
Turnover
Rate

Index 500 Portfolio %

Equity-Income Portfolio %

Growth Portfolio %

Investment Grade Bond Portfolio %

Asset Manager Portfolio %

High Income Portfolio %

Overseas Portfolio %

Contrafund Portfolio %

Asset Manager: Growth Portfolio %

[IF A RATE EXCEEDS 100%: High turnover rates increase transaction costs.
FMR considers these effects when evaluating the anticipated benefits of
short-term investing.
Each fund has adopted a Distribution and Service Plan. Each plan recognizes
that FMR may use its resources, including management fees, to pay expenses
associated with the sale of fund shares. This may include payments to third
parties, such as banks or broker-dealers, that provide shareholder support
services or engage in the sale of the funds' shares. The Board of Trustees
has not authorized such payments.
PERFORMANCE
Each fund's total return and yield may be quoted in advertising
in accordance with current law and interpretations thereof .
Performance is based on historical results and is not intended to indicate
future performance. For additional performance information, contact your
insurance company for a free annual report.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. When a yield
assumes that income earned is reinvested, it is called an EFFECTIVE YIELD.
Seven-day yield illustrates the income earned by an investment in a money
market fund over a recent seven-day period. Since money market funds
maintain a stable $1.00 share price, current seven-day yields are the most
common illustration of money market fund performance.
In calculating yield, a fund may from time to time use a security's
coupon rate instead of its yield to maturity in order to reflect the risk
premium on that security. This practice will have the effect of reducing
the fund's yield.
A fund may quote its adjusted net asset value(NAV), including all
distributions paid. This value may be averaged over specified periods and
may be used to calculate a fund's moving average.
The funds' recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders.
TOTAL RETURNS AND YIELDS QUOTED FOR A FUND INCLUDE THE FUND'S
EXPENSES, BUT MAY NOT INCLUDE CHARGES AND EXPENSES ATTRIBUTABLE TO ANY
PARTICULAR INSURANCE PRODUCT. BECAUSE SHARES OF THE FUNDS MAY BE
PURCHASED ONLY THROUGH VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE
CONTRACTS, YOU SHOULD CAREFULLY REVIEW THE PROSPECTUS OF THE INSURANCE
PRODUCT YOU HAVE CHOSEN FOR INFORMATION ON RELEVANT CHARGES AND EXPENSES.
Excluding these charges from quotations of a fund's performance has
the effect of increasing the performance quoted. You should bear in mind
the effect of these charges when comparing a fund's performance to that of
other mutual funds.
ACCOUNT POLICIES

DISTRIBUTIONS AND TAXES
For a discussion of the tax status of your variable insurance contract,
refer to the prospectus of your insurance company's separate account. It is
suggested you keep all statements you receive to assist in your personal
recordkeeping.
It is expected that shares of the funds will be held under the terms of
variable annuity and variable life insurance contracts. Under current tax
law, dividends or capital gain distributions from any fund are not
currently taxable when left to accumulate within a variable annuity or
variable life insurance contract. Depending on the variable contract,
withdrawals from the contracts may be subject to ordinary income tax and,
in addition to a 10% penalty tax on withdrawals before age 59.
Each fund is treated as a separate entity for federal income tax purposes.
Each fund intends to pay out all of its net investment income and net
realized capital gains for each year. Dividends from Money Market Portfolio
are declared daily and paid monthly. High Income, Equity-Income ,
Investment Grade Bond, Growth, Overseas, Asset Manager, Asset Manager:
Growth, Index 500, and Contrafund Portfolios will distribute any dividends
at least annually. Each fund (except Money Market) makes dividend and
capital gain distributions on a per-share basis. After each
distribution from a fund, the fund's share price drops by the amount of the
distribution. Because dividends and capital gain distributions are
reinvested, the total value of an account will not be affected because,
although the shares will have a lower price, there will be correspondingly
more of them. Normally, net realized capital gains, if any, are distributed
each year for each fund. Such income and capital gain distributions are
automatically reinvested in additional shares of the funds.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Each fund's NAV is calculated as of the close of business
of the NYSE, normally 4 p.m. Eastern time.
EACH FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
Money Market and a fund's investments with remaining maturities of 60
days or less values its portfolio securities on the basis of amortized
cost. This method minimizes the effect of changes in a security's market
value and helps Money Market Portfolio maintain a stable $1.00 share
price.
Other than Money Market, each of the fund's assets are valued primarily on
the basis of market quotations. Foreign securities are valued on the basis
of quotations from the primary market in which they are traded, and are
translated from the local currency into U.S. dollars using current exchange
rates. If quotations are not readily available or if the values have been
materially affected by events occurring after the closing of a foreign
market, assets are valued by a method that the Board of Trustees believes
accurately reflects fair value.
EACH FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order. Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of a fund.
INVESTMENTS AND REDEMPTIONS. Investments may be made only by separate
accounts established and maintained by insurance companies for the purpose
of funding variable insurance contracts. Please refer to the prospectus of
your insurance company's separate account for information on how to invest
in and redeem from each fund.
Each participating insurance company receives orders from its variable
contract owners to purchase or redeem shares of the funds each business
day. That night, all orders received by that insurance company on that
business day are aggregated, and the insurance company places a net
purchase or redemption order for shares of one or more funds the morning of
the next business day. These orders are generally executed at the NAV that
was computed at the close of the previous business day in order to provide
a match between the variable contract owners' orders to the insurance
companies and the insurance companies' orders to a fund. In some cases, an
insurance company's orders for fund shares may be executed at the NAV next
computed after the order is actually transmitted to a fund.
Redemption proceeds will normally be wired to the insurance company on the
next business day after receipt of the redemption instructions by a fund
but in no event later than 7 days following receipt of instructions. Each
fund may suspend redemptions or postpone payment dates on days when the
NYSE is closed (other than weekends or holidays), when trading on the NYSE
is restricted, or as permitted by the SEC.
APPENDIX

APPENDIX
DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
CA - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked
short-comings.
C - Bonds rated C are the lowest-rated class of bonds and issued so rated
can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
DESCRIPTION OF S&P'S CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rate BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal.
CC - The rating CC is typically applied to debt subordinated to
senior debt which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed but
debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating will also
be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
(INDEX 500 PORTFOLIO) S&P does not guarantee the accuracy and/or the
completeness of the S&P 500 Index or any data included therein and S&P
shall have no liability for any errors, omissions, or interruptions
therein. S&P makes no warranty, express or implied, as to results to be
obtained by licensee, owners of the product, or any other person or entity
from the use of the S&P 500 Index or any data included therein. S&P makes
no express or implied warranties, and expressly disclaims all warranties or
merchantability or fitness for a particular purpose or use with respect to
the S&P 500 Index or any data included therein. Without limiting any of the
foregoing, in no event shall S&P have any liability for any special,
punitive, indirect, or consequential damages (including lost profits), even
if notified of the possibility of such damages.
Index 500 Portfolio is not sponsored, endorsed, sold or promoted by
Standard & Poor's ("S&P"). S&P makes no representation or warranty, express
or implied, to participants of the fund or any member of the public
regarding the advisability of investing in securities generally or in the
fund particularly or the ability of the S&P 500 Index to track general
stock market performance. S&P's only relationship to the Licensee is the
licensing of certain trademarks and trade names of S&P and of the S&P 500
Index which is determined, composed and calculated by S&P without regard to
the Licensee or the fund. S&P has no obligation to take the needs of the
Licensee or the participants of the fund into consideration in determining,
composing or calculating the S&P 500 Index. S&P is not responsible for and
has not participated in the determination of the timing of, prices at, or
quantities of the fund to be issued or in the determination or calculation
of the equation by which the fund is to be converted into cash. S&P has no
obligation or liability in connection with the administration, marketing or
trading of the fund.
"Standard & Poor's(registered trademark)," "S&P(registered trademark),"
"S&P 500(registered trademark)," "Standard & Poor's 500," and "500" are
trademarks of McGraw-Hill, Inc. and have been licensed for use by Fidelity
Distributors Corporation.

VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO, HIGH INCOME
PORTFOLIO, EQUITY-INCOME PORTFOLIO, GROWTH PORTFOLIO, AND OVERSEAS
PORTFOLIO
VARIABLE INSURANCE PRODUCTS FUND II: INVESTMENT GRADE BOND PORTFOLIO, ASSET
MANAGER PORTFOLIO,
INDEX 500 PORTFOLIO, CONTRAFUND PORTFOLIO, AND ASSET MANAGER: GROWTH
PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
APRIL 30, 1996
This Statement is not a prospectus but should be read in conjunction with
the funds' current Prospectus (dated April 30, 1996). Please retain this
document for future reference. The funds' financial statements and
financial highlights, included in the Annual Reports for the fiscal year
ended December 31, 199 5 , are incorporated herein by reference. To
obtain an additional copy of the Prospectus or Annual Reports, please call
your insurance company or Fidelity Distributors Corporation at
1-800-544-8888.
TABLE OF CONTENTS PAGE

Investment Policies and Limitations

Portfolio Transactions

Valuation of Portfolio Securities

Performance

Additional Purchase and Redemption Information

Distributions and Taxes

FMR

Trustees and Officers

Management Contracts

Distribution and Service Plans

Contracts with FMR Affiliates

Description of the Trust

Financial Statements

Appendix

INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISERS
Money Market Portfolio:
FMR Texas Inc. (FMR Texas)
High Income, Asset Manager, Contrafund and Asset Manager: Growth
Portfolios:
Fidelity Management & Research (U.K.) Inc. (FMR U.K.)
Fidelity Management & Research (Far East) Inc. (FMR Far East)
Overseas Portfolio:
FMR U.K.
FMR Far East
Fidelity International Investment Advisors (FIIA)
Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Investments Institutional Operations Company (FIIOC)
VIP/VIPII-ptb-04/96
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets, or other circumstances will not be considered when determining
whether the investment complies with the fund's investment policies and
limitations.
Each fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940) of each
fund. However, except for the fundamental investment limitations
listed below, the investment policies and limitations described in
this Statement of Additional Information are not fundamental and may be
changed without shareholder approval.
MONEY MARKET PORTFOLIO
THE FOLLOWING ARE MONEY MARKET PORTFOLIO'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY . THE FUND MAY NOT:
(1) purchase the securities of any issuer (other than obligations issued or
guaranteed as to principal and interest by the United States, its agencies
or instrumentalities) if, as a result, more than 5% of its total assets
would be invested in the securities of such issuer, provided, however, that
with respect to 25% of its total assets, 10% of its assets may be invested
in the securities of any single issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may (i) borrow money for temporary
or emergency purposes (not for leveraging or investment) and (ii) engage in
reverse repurchase agreements for any purpose; provided that (i) and (ii)
in combination do not exceed 33 1/3% of the fund's total assets (including
the amount borrowed) less liabilities (other than borrowings). Any
borrowings that come to exceed this amount will be reduced within three
days (not including Sundays and holidays) to the extent necessary to comply
with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry, except that the fund will
invest more than 25% of its total assets in the financial services
industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments;
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements; or
(9) invest in companies for the purpose of exercising control or
management.
THE FOLLOWING INVESTMENT LIMITATIONS FOR MONEY MARKET PORTFOLIO ARE NOT
FUNDAMENTAL AND MAY BE CHANGED, AS REGULATORY AGENCIES PERMIT,
WITHOUT SHAREHOLDER NOTIFICATION.
(i) The fund does not currently intend to purchase a security (other than a
security issued or guaranteed by the U.S. government or any of its agencies
or instrumentalities) if, as a result, more than 5% of its total assets
would be invested in the securities of a single issuer; provided that the
fund may invest up to 10% of its total assets in the first tier securities
of a single issuer for up to three business days.
(ii) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment advisor or (b) by engaging in reverse repurchase agreements with
any party. The fund will not borrow money in excess of 25% of net assets so
long as this limitation is required for certification by certain state
insurance departments. The fund will not purchase any security while
borrowings (excluding reverse repurchase agreements) representing more than
5% of its total assets are outstanding. The fund will not borrow from other
funds advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to purchase or sell futures
contracts or call options. This limitation does not apply to options
attached to, or acquired or traded together with, their underlying
securities, and does not apply to securities that incorporate features
similar to options or futures contracts.
(vii) The fund does not currently intend to lend assets other than
securities to other parties, except by lending money (up to 10% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment advisor. (This limit does
not apply to purchases of debt securities or to repurchase agreements.)
(viii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(ix) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
QUALITY AND MATURITY Pursuant to procedures adopted by the Board of
Trustees, the fund may purchase only high-quality securities that FMR
believes present minimal credit risks. To be considered high-quality, a
security must be rated in accordance with applicable rules in one of the
two highest categories for short-term securities by at least two nationally
recognized rating services (or by one, if only one rating service has rated
the security); or, if unrated, judged to be of equivalent quality by FMR.
High-quality securities are divided into "first tier" and "second tier"
securities. First tier securities are those deemed to be in the highest
rating category (e.g., Standard & Poor's A-1), and second tier securities
are those deemed to be in the second highest rating category (e.g.,
Standard & Poor's A-2). Split-rated securities may be determined to be
either first tier or second tier based on applicable regulations.
The fund may not invest more than 5% of its total assets in second tier
securities. In addition, the fund may not invest more than 1% of its total
assets or $1 million (whichever is greater) in the second tier securities
of a single issuer.
The fund currently intends to limit its investments to securities with
remaining maturities of 397 days or less, and to maintain a dollar-weighted
average maturity of 90 days or less. When determining the maturity of a
security, the fund may look to an interest rate reset or demand feature.
DOMESTIC AND FOREIGN ISSUERS. Investments may be made in U.S.
dollar-denominated time deposits, certificates of deposit, and bankers'
acceptances of U.S. banks and their branches located outside of the United
States, U.S. branches and agencies of foreign banks, and foreign branches
of foreign banks. The fund may also invest in U.S.
dollar-denominated securities issued or guaranteed by other U.S. or foreign
issuers, including U.S. and foreign corporations or other business
organizations, foreign governments, foreign government agencies or
instrumentalities, and U.S. and foreign financial institutions, including
savings and loan institutions, insurance companies, mortgage bankers, and
real estate investment trusts, as well as banks.
The obligations of foreign branches of U.S. banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by governmental
regulation. Payment of interest and principal on these obligations may also
be affected by governmental action in the country of domicile of the branch
(generally referred to as sovereign risk). In addition, evidence of
ownership of portfolio securities may be held outside of the United States
and a fund may be subject to the risks associated with the holding of such
property overseas. Various provisions of federal law governing the
establishment and operation of U.S. branches do not apply to foreign
branches of U.S. banks.
Obligations of U.S. branches and agencies of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal and state
regulation, as well as by governmental action in the country in which the
foreign bank has its head office.
Obligations of foreign issuers involve certain additional risks. These
risks may include future unfavorable political and economic developments,
withholding taxes, seizures of foreign deposits, currency controls,
interest limitations, or other governmental restrictions that might affect
payment of principal or interest, or the ability to honor a credit
commitment. Additionally, there may be less public information available
about foreign entities . Foreign issuers may be subject to less
governmental regulation and supervision than U.S. issuers. Foreign issuers
also generally are not bound by uniform accounting, auditing, and financial
reporting requirements comparable to those applicable to U.S. issuers.
HIGH INCOME, EQUITY-INCOME, GROWTH, OVERSEAS, INVESTMENT GRADE BOND, ASSET
MANAGER, INDEX 500, CONTRAFUND, AND ASSET MANAGER: GROWTH PORTFOLIOS
THE FOLLOWING ARE HIGH INCOME, EQUITY-INCOME, GROWTH, OVERSEAS, INVESTMENT
GRADE BOND, ASSET MANAGER, INDEX 500, CONTRAFUND, AND ASSET MANAGER: GROWTH
PORTFOLIOS' FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH IN THEIR
ENTIRETY . EACH FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) (for High Income, Equity-Income, Growth and Overseas Portfolios) borrow
money, except that the fund (i) may borrow money for temporary or emergency
purposes (not for leveraging or investment) or (ii) engage in reverse
repurchase agreements, provided that (i) and (ii) in combination
(borrowings) do not exceed 33 1/3% of its total assets (including the
amount borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed 33 1/3% of the value of the fund's total assets by
reason of a decline in net assets will be reduced within three days
(exclusive of Sundays and holidays) to the extent necessary to comply with
the 33 1/3% limitation;
(for Investment Grade Bond, Asset Manager, Index 500, Contrafund and Asset
Manager: Growth Portfolios) borrow money, except that the fund may borrow
money for temporary or emergency purposes (not for leveraging or
investment) in an amount not exceeding 33 1/3% of its total assets
(including the amount borrowed) less liabilities (other than borrowings).
Any borrowings that come to exceed this amount will be reduced within three
days (not including Sundays and holidays) to the extent necessary to comply
with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of its total assets would
be invested in the securities of companies whose principal business
activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
THE FOLLOWING INVESTMENT LIMITATIONS FOR HIGH INCOME, EQUITY-INCOME,
GROWTH, OVERSEAS, INVESTMENT GRADE BOND, ASSET MANAGER, INDEX 500,
CONTRAFUND, AND ASSET MANAGER: GROWTH PORTFOLIOS ARE NOT FUNDAMENTAL AND
MAY BE CHANGED, AS REGULATORY AGENCIES PERMIT , WITHOUT SHAREHOLDER
NOTIFICATION.
(i) Each fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) Each fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) Each fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment advisor or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). Each fund will not
borrow money in excess of 25% of net assets so long as this limitation is
required for certification by certain state insurance departments. Any
borrowings that come to exceed this amount will be reduced within seven
days (not including Sundays and holidays) to the extent necessary to comply
with the 25% limitation. Each fund will not purchase any security while
borrowings representing more than 5% of its total assets are outstanding.
Each fund will not borrow from other funds advised by FMR or its affiliates
if total outstanding borrowings immediately after such borrowing would
exceed 15% of the fund's total assets.
(iv) Each fund does not currently intend to purchase any security if, as a
result, more than 10% of Equity-Income, Growth, Investment Grade Bond,
Asset Manager, Index 500, Contrafund and Asset Manager: Growth Portfolios'
net assets and 15% of High Income and Overseas Portfolio's net assets would
be invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) Each fund does not currently intend to lend assets other than
securities to other parties, except by: (a) lending money (up to 5% of net
assets for Equity-Income, Growth, Overseas, Asset Manager, Index 500,
Contrafund and Asset Manager: Growth Portfolios and 7.5% of net assets for
High Income and Investment Grade Bond Portfolios) to a registered
investment company or portfolio for which FMR or an affiliate serves as
investment advisor or (b) acquiring loans, loan participations, or other
forms of direct debt instruments and, in connection therewith, assuming any
associated unfunded commitments of the sellers. (This limitation does not
apply to purchases of debt securities or to repurchase agreements.)
(vi) Each fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(vii) Each fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
For each fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions." For
limitations on short sales, see the section s entitled "Short Sales" and
"Short Sales Against The Box".
For the funds' policies on foreign investments, see the section entitled
" Exposure to Foreign Markets ."
Higher yielding, fixed-income securities of the type in which High Income
Portfolio invests will at times be purchased at a discount from or a
premium over par value. The total return on such securities includes the
potential for a capital gain or loss. High Income Portfolio generally does
not intend to hold securities for the purpose of achieving capital gains,
however, unless current yields on these securities remain attractive.
Capital gain or loss may also be realized upon the sale of portfolio
securities.
The U.S. government has from time to time in the past imposed restrictions,
through taxation and otherwise, on foreign investments by U.S. investors
such as the funds. If such restrictions should be reinstituted, it might
become necessary for Overseas Portfolio to invest all or substantially all
of its assets in U.S. securities. In such event, the Board of Trustees
would reevaluate the fund's investment objective and policies.
In accordance with the funds' fundamental investment policies, there are no
limitations on the percentage of the funds' assets which may be invested in
any one type of instrument. Nor are there limitations (except those imposed
by certain state insurance regulations) on the percentage of the funds'
assets which may be invested in any foreign country. However, in order to
comply with diversification requirements under Section 817(h) of the
Internal Revenue Code of 1986, as amended, in connection with FMR serving
as investment advisor, each fund has agreed to certain non-fundamental
limitations. Please refer to your insurance company's separate account
prospectus for more information.
EACH FUND'S INVESTMENTS MUST BE CONSISTENT WITH ITS INVESTMENT OBJECTIVE
AND POLICIES. ACCORDINGLY, NOT ALL OF THE SECURITY TYPES AND INVESTMENT
TECHNIQUES DISCUSSED BELOW ARE ELIGIBLE INVESTMENTS FOR EACH OF THE FUNDS.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940. These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S. government
securities with affiliated financial institutions that are primary dealers
in these securities; short-term currency transactions; and short-term
borrowings. In accordance with exemptive orders issued by the Securities
and Exchange Commission (SEC), the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
ASSET ALLOCATION (ASSET MANAGER AND ASSET MANAGER: GROWTH). The short-term
class includes all types of domestic and foreign securities and short-term
instruments with remaining maturities of three years or less. FMR seeks to
maximize total return within this asset class by taking advantage of yield
differentials between different instruments, issuers, and currencies.
Short-term instruments may include corporate debt securities, such as
commercial paper and notes; government securities issued by U.S. or foreign
governments or their agencies or instrumentalities; bank deposits and other
financial institution obligations; repurchase agreements involving any type
of security; and other similar short-term instruments. These instruments
may be denominated in U.S. dollars or foreign currency.
The bond class includes all varieties of domestic and foreign fixed-income
securities with maturities greater than three years. FMR seeks to maximize
total return within the bond class by adjusting the fund's investments in
securities with different credit qualities, maturities, and coupon or
dividend rates, and by seeking to take advantage of yield differentials
between securities. Securities in this class may include bonds, notes,
adjustable-rate preferred stocks, convertible bonds, mortgage-related and
asset-backed securities, domestic and foreign government and government
agency securities, zero coupon bonds, and other intermediate-term and
long-term securities. As with the short-term class, these securities may be
denominated in U.S. dollars or foreign currency. The funds may also invest
in lower quality, high-yielding debt securities (commonly referred to as
"junk bonds").
The stock class includes domestic and foreign equity securities of all
types (other than adjustable-rate preferred stocks which are included in
the bond class). FMR seeks to maximize total return within this asset class
by actively allocating assets to industry sectors expected to benefit from
major trends, and to individual stocks that FMR believes to have superior
investment potential. When FMR selects equity securities, it considers both
growth and anticipated dividend income. Securities in the stock class may
include common stocks, fixed-rate preferred stocks (including convertible
preferred stocks), warrants, rights, depositary receipts, securities of
closed-end investment companies, and other equity securities issued by
companies of any size, located anywhere in the world.
In making asset allocation decisions, FMR will evaluate projections of
risk, market conditions, economic conditions, volatility, yields, and
returns. FMR's management will use database systems to help analyze past
situations and trends, research specialists in each of the asset classes to
help in securities selection, portfolio management professionals to
determine asset allocation and to select individual securities, and its own
credit analysis as well as credit analyses provided by rating services.
INVESTMENT DETAILS FOR INDEX 500 PORTFOLIO. Index 500 Portfolio is not
managed according to traditional methods of "active" investment management,
which involve the buying and selling of securities based upon economic,
financial, and market analyses and investment judgment. Instead, the fund,
utilizing a "passive" or "indexing" investment approach, attempts to
duplicate the performance of the S&P 500. The fund may omit or remove an
S&P 500 stock from its portfolio if, following objective criteria, FMR
judges the stock to be insufficiently liquid or believes the merit of the
investment has been substantially impaired by extraordinary events or
financial conditions. FMR may purchase stocks that are not included in the
S&P 500 to compensate for these differences if it believes that their
prices will move together with the prices of S&P 500 stocks omitted from
the portfolio.
The ability of the fund to meet its objective depends in part on its cash
flow because investments and redemptions by shareholders generally will
require the fund to purchase or sell portfolio securities. A low level of
shareholder transactions will keep cash flow manageable and enhance the
fund's ability to track the S&P 500. FMR will make investment changes to
accommodate cash flow in an attempt to maintain the similarity of the
fund's portfolio to the composition of the S&P 500. In addition, the fund
will maintain a reasonable position in high-quality, short-term debt
securities and money market instruments to meet redemption requests.
S&P 500. The S&P 500 is a well-known stock market index that includes
common stocks of companies representing a significant portion of the market
value of all common stocks publicly traded in the United States. Stocks in
the S&P 500 are weighted according to their market capitalization (i.e. the
number of shares outstanding multiplied by the stock's current price), with
the 62 largest stocks currently comprised approximately 50% of the index's
value. The composition of the S&P 500 is determined by Standard & Poor's
Corporation and is based on such factors as the market capitalization and
trading activity of each stock and its adequacy as a representation of
stocks in a particular industry group. Standard and Poor's Corporation may
change the index's composition from time to time.
The performance of the S&P 500 is a hypothetical number which does not take
into account brokerage commissions and other costs of investing, which the
fund bears.
ASSET-BACKED SECURITIES include pools of mortgages, loans, receivables or
other assets. Payment of principal and interest may be largely dependent
upon the cash flows generated by the assets backing the securities and, in
certain cases, supported by letters of credit, surety bonds, or other
credit enhancements. The value of asset-backed securities may also be
affected by the creditworthiness of the servicing agent for the pool, the
originator of the loans or receivables, or the entities providing
the credit support.
DELAYED-DELIVERY TRANSACTIONS. Each fund may buy and sell
securities on a delayed-delivery or when-issued basis. These transactions
involve a commitment by a fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security. Typically, no
interest accrues to the purchaser until the security is delivered. The
funds (excluding Money Market) may receive fees for entering into
delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, each fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because a fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the fund's other investments. If a fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, the fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a fund has sold a security on a delayed-delivery
basis, the fund does not participate in further gains or losses with
respect to the security. If the other party to a delayed-delivery
transaction fails to deliver or pay for the securities, the fund could miss
a favorable price or yield opportunity, or could suffer a loss.
Each fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations may
involve significant risks in addition to the risks inherent in U.S.
investments. The value of securities denominated in foreign currencies and
of dividends and interest paid with respect to such securities will
fluctuate based on the relative strength of the U.S. dollar.
Foreign investments involve a risk of local political, economic, or social
instability, military action or unrest, or adverse diplomatic developments,
and may be affected by actions of foreign governments adverse to the
interests of U.S. investors. Such actions may include the possibility of
expropriation or nationalization of assets, confiscatory taxation,
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency into U.S. dollars, or other government intervention. There
is no assurance that FMR will be able to anticipate these potential events
or counter their effects. These risks are magnified for investments in
developing countries, which may have relatively unstable governments,
economies based on only a few industries, and securities markets that trade
a small number of securities.
Economies of particular countries or areas of the world may differ
favorably or unfavorably from the economy of the United States. Foreign
markets may offer less protection to investors than U.S. markets. It is
anticipated that in most cases the best available market for foreign
securities will be on an exchange or in over-the-counter markets located
outside of the United States. Foreign stock markets, while growing in
volume and sophistication, are generally not as developed as those in the
United States, and securities of some foreign issuers (particularly those
located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. issuers. Foreign security trading practices,
including those involving securities settlement where fund assets may be
released prior to receipt of payment, may result in increased risk in the
event of a failed trade or the insolvency of a foreign broker-dealer, and
may involve substantial delays. In addition, the costs of foreign
investing, including withholding taxes, brokerage commissions and custodial
costs, are generally higher than for U.S. investors. In general, there is
less overall governmental supervision and regulation of securities
exchanges, brokers, and listed companies than in the United States. It may
also be difficult to enforce legal rights in foreign countries. Foreign
issuers are generally not bound by uniform accounting, auditing, and
financial reporting requirements and standards of practice comparable to
those applicable to U.S. issuers.
Some foreign securities impose restrictions on transfer within the United
States or to U.S. persons. Although securities subject to such transfer
restrictions may be marketable abroad, they may be less liquid than foreign
securities of the same class that are not subject to such restrictions.
American Depository Receipts (ADR's) as well as other "hybrid" forms of
ADRs including European Depository Receipts (EDRs) and Global Depository
Receipts (GDRs), are certificates evidencing ownership of shares of a
foreign issuer. These certificates are issued by depository banks and
generally trade on an established market in the United States or elsewhere.
The underlying shares are held in trust by a custodian bank or similar
financial institution in the issuer's home country. The depository bank may
not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and
interest and corporate actions. ADRs are an alternative to directly
purchasing the underlying foreign securities in their national markets and
currencies. However, ADRs continue to be subject to many of the risks
associated with investing directly in foreign securities. These risks
include foreign exchange risk as well as the political and economic risks
of the underlying issuer's country.
FOREIGN CURRENCY TRANSACTIONS. The funds (excluding Money Market) may
conduct foreign currency transactions on a spot (i.e., cash) basis or by
entering into forward contracts to purchase or sell foreign currencies at a
future date and price. The funds will convert currency on a spot basis from
time to time, and investors should be aware of the costs of currency
conversion. Although foreign exchange dealers generally do not charge a fee
for conversion, they do realize a profit based on the difference between
the prices at which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to the fund at one rate, while
offering a lesser rate of exchange should the fund desire to resell that
currency to the dealer. Forward contracts are generally traded in an
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. The parties to a forward contract
may agree to offset or terminate the contract before its maturity, or may
hold the contract to maturity and complete the contemplated currency
exchange.
Each fund may use currency forward contracts for any purpose consistent
with its investment objective. The following discussion summarizes the
principal currency management strategies involving forward contracts that
could be used by each fund. The funds may also use swap agreements, indexed
securities, and options and futures contracts relating to foreign
currencies for the same purposes.
When a fund agrees to buy or sell a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security.
By entering into a forward contract for the purchase or sale, for a fixed
amount of U.S. dollars, of the amount of foreign currency involved in the
underlying security transaction, the fund will be able to protect itself
against an adverse change in foreign currency values between the date the
security is purchased or sold and the date on which payment is made or
received. This technique is sometimes referred to as a "settlement hedge"
or "transaction hedge." The funds may also enter into forward contracts to
purchase or sell a foreign currency in anticipation of future purchases or
sales of securities denominated in foreign currency, even if the specific
investments have not yet been selected by FMR.
The funds may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For example,
if a fund owned securities denominated in pounds sterling, it could enter
into a forward contract to sell pounds sterling in return for U.S. dollars
to hedge against possible declines in the pound's value. Such a hedge,
sometimes referred to as a "position hedge," would tend to offset both
positive and negative currency fluctuations, but would not offset changes
in security values caused by other factors. A fund could also hedge the
position by selling another currency expected to perform similarly to the
pound sterling - for example, by entering into a forward contract to sell
Deutschemarks or European Currency Units in return for U.S. dollars. This
type of hedge, sometimes referred to as a "proxy hedge," could offer
advantages in terms of cost, yield, or efficiency, but generally would not
hedge currency exposure as effectively as a simple hedge into U.S. dollars.
Proxy hedges may result in losses if the currency used to hedge does not
perform similarly to the currency in which the hedged securities are
denominated.
Each fund may enter into forward contracts to shift its investment exposure
from one currency into another. This may include shifting exposure from
U.S. dollars to a foreign currency, or from one foreign currency to another
foreign currency. For example, if a fund held investments denominated in
Deutschemarks, the fund could enter into forward contracts to sell
Deutschemarks and purchase Swiss Francs. This type of strategy, sometimes
known as a "cross-hedge," will tend to reduce or eliminate exposure to the
currency that is sold, and increase exposure to the currency that is
purchased, much as if the fund had sold a security denominated in one
currency and purchased an equivalent security denominated in another.
Cross-hedges protect against losses resulting from a decline in the hedged
currency, but will cause the fund to assume the risk of fluctuations in the
value of the currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to set aside
appropriate liquid assets in a segregated custodial account to cover
currency forward contracts. As required by SEC guidelines, the funds will
segregate assets to cover currency forward contracts, if any, whose purpose
is essentially speculative. The funds will not segregate assets to cover
forward contracts entered into for hedging purposes, including settlement
hedges, position hedges, and proxy hedges.
Successful use of currency management strategies will depend on FMR's skill
in analyzing and predicting currency values. Currency management strategies
may substantially change a fund's investment exposure to changes in
currency exchange rates, and could result in losses to the fund if
currencies do not perform as FMR anticipates. For example, if a currency's
value rose at a time when FMR had hedged a fund by selling that currency in
exchange for dollars, the fund would be unable to participate in the
currency's appreciation. If FMR hedges currency exposure through proxy
hedges, a fund could realize currency losses from the hedge and the
security position at the same time if the two currencies do not move in
tandem. Similarly, if FMR increases a fund's exposure to a foreign
currency, and that currency's value declines, the fund will realize a loss.
There is no assurance that FMR's use of currency management strategies will
be advantageous to the funds or that it will hedge at an appropriate time.
FOREIGN REPURCHASE AGREEMENTS. Foreign repurchase agreements may
include agreements to purchase and sell foreign securities in exchange for
fixed U.S. dollar amounts, or in exchange for specified amounts of foreign
currency. Unlike typical U.S. repurchase agreements, foreign repurchase
agreements may not be fully collateralized at all times. However, pursuant
to certain state insurance regulations, any foreign repurchase agreements a
fund enters into will be secured by collateral consisting of liquid assets
having a market value of not less than 102% of the cash or assets
transferred to the other party. The value of a security purchased by a fund
may be more or less than the price at which the counterparty has agreed to
repurchase the security. In the event of default by the counterparty, the
fund may suffer a loss if the value of the security purchased is less than
the agreed-upon repurchase price, or if the fund is unable to successfully
assert a claim to the collateral under foreign laws. As a result, foreign
repurchase agreements may involve higher credit risks than repurchase
agreements in U.S. markets, as well as risks associated with currency
fluctuations. In addition, as with other emerging market investments,
repurchase agreements with counterparties located in emerging markets or
relating to emerging markets may involve issuers or counterparties with
lower credit ratings than typical U.S. repurchase agreements.
FUNDS' RIGHTS AS A SHAREHOLDER. The funds do not intend to direct or
administer the day-to-day operations of any company. Each fund, however,
may exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the Board of Directors, and
shareholders of a company when FMR determines that such matters could have
a significant effect on the value of the fund's investment in the company.
The activities that a fund may engage in, either individually or in
conjunction with others, may include, among others, supporting or opposing
proposed changes in a company's corporate structure or business activities;
seeking changes in a company's directors or management; seeking changes in
a company's direction or policies; seeking the sale or reorganization of
the company or a portion of its assets; or supporting or opposing third
party takeover efforts. This area of corporate activity is increasingly
prone to litigation and it is possible that a fund could be involved in
lawsuits related to such activities. FMR will monitor such activities with
a view to mitigating, to the extent possible, the risk of litigation
against a fund and the risk of actual liability if a fund is involved in
litigation. No guarantee can be made, however, that litigation against a
fund will not be undertaken or liabilities incurred.
FUTURES AND OPTIONS. The following sections pertain to futures
and options: Asset Coverage for Futures and Options Positions, Combined
Positions, Correlation of Price Changes, Futures Contracts, Futures Margin
Payments, Limitations on Futures and Options Transactions, Liquidity of
Options and Futures Contracts, Options and Futures Relating to Foreign
Currencies, OTC Options, Purchasing Put and Call Options, and Writing Put
and Call Options.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The funds will comply
with guidelines established by the Securities and Exchange Commission with
respect to coverage of options and futures strategies by mutual funds, and
if the guidelines so require will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with other suitable assets. As a
result, there is a possibility that segregation of a large percentage of a
fund's assets could impede portfolio management or the fund's ability to
meet redemption requests or other current obligations.
COMBINED POSITIONS. A fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, a fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match a fund's current or
anticipated investments exactly. The funds may invest in options and
futures contracts based on securities with different issuers, maturities,
or other characteristics from the securities in which they typically
invest, which involves a risk that the options or futures position will not
track the performance of a fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. A fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in a fund's options or futures positions are poorly correlated with
its other investments, the positions may fail to produce anticipated gains
or result in losses that are not offset by gains in other investments.
FUTURES CONTRACTS. When a fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
a fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Standard & Poor's Composite Index of 500
Stocks (S&P 500) and the Bond Buyer Municipal Bond Index . Futures
can be held until their delivery dates, or can be closed out before then if
a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase a fund's exposure to positive and negative
price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When a fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of a fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of a fund, the fund may be
entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each fund (excluding Money
Market) has filed a notice of eligibility for exclusion from the definition
of the term "commodity pool operator" with the Commodity Futures Trading
Commission (CFTC) and the National Futures Association, which regulate
trading in the futures markets. The funds intend to comply with Rule 4.5
under the Commodity Exchange Act, which limits the extent to which a fund
can commit assets to initial margin deposits and option premiums.
In addition, each fund (excluding Index 500 Portfolio) will not: (a) sell
futures contracts, purchase put options, or write call options if, as a
result, more than 25% of the fund's total assets would be hedged with
futures and options under normal conditions; (b) purchase futures contracts
or write put options if, as a result, the fund's total obligations upon
settlement or exercise of purchased futures contracts and written put
options would exceed 25% of its total assets; or (c) purchase call options
if, as a result, the current value of option premiums for call options
purchased by the fund would exceed 5% of the fund's total assets. These
limitations do not apply to options attached to or acquired or traded
together with their underlying securities, and do not apply to securities
that incorporate features similar to options.
For Index 500 Portfolio, FMR also intends to follow certain other
limitations on the fund's futures and option activities. The fund will
not purchase any option if, as a result, more than 5% of its total assets
would be invested in option premiums . Under normal conditions, the fund
will not inter into any futures contract or option if, as a result, the sum
of (i) the current value of assets hedged in the case of strategies
involving the sale of securities, and (ii) the current value of the indices
or other instruments underlying the fund's other futures or options
positions, would exceed 35% of the fund's total assets. These limitations
do not apply to options attached to, or acquired or traded together with
their underlying securities, and do not apply to securities that
incorporate features similar to options.
The above limitations on the funds' investments in futures contracts and
options, and the funds' policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information may be
changed as regulatory agencies permit.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for a fund to
enter into new positions or close out existing positions. If the secondary
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions,
and potentially could require a fund to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, a
fund's access to other assets held to cover its options or futures
positions could also be impaired.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except that
they are traded on exchanges (and have margin requirements) and are
standardized as to contract size and delivery date. Most currency futures
contracts call for payment or delivery in U.S. dollars. The underlying
instrument of a currency option may be a foreign currency, which generally
is purchased or delivered in exchange for U.S. dollars, or may be a futures
contract. The purchaser of a currency call obtains the right to purchase
the underlying currency, and the purchaser of a currency put obtains the
right to sell the underlying currency.
The uses and risks of currency options and futures are similar to
options and futures relating to securities or indices, as discussed above.
The funds may purchase and sell currency futures and may purchase and write
currency options to increase or decrease their exposure to different
foreign currencies. A fund may also purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with
exchange rates, but may not reflect other factors that affect the value of
a fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect a
fund against a price decline resulting from deterioration in the issuer's
creditworthiness. Because the value of a fund's foreign-denominated
investments changes in response to many factors other than exchange rates,
it may not be possible to match the amount of currency options and futures
to the value of the fund's investments exactly over time.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter (OTC) options (options not
traded on exchanges) generally are established through negotiation with the
other party to the option contract. While this type of arrangement allows
the funds greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a fund obtains
the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. A fund may also terminate a put option position by closing it out in
the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When a fund writes a put option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the fund assumes the obligation to pay the strike
price for the option's underlying instrument if the other party to the
option chooses to exercise it. When writing an option on a futures
contract, the fund will be required to make margin payments to an FCM as
described above for futures contracts. A fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates a fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of a fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of a fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment).
Investments currently considered by a fund to be illiquid include
repurchase agreements not entitling the holder to payment of principal and
interest within seven days, non-government stripped fixed-rate
mortgage-backed securities, and over-the-counter options. Also, FMR may
determine some restricted securities, government-stripped fixed-rate
mortgage-backed securities, loans and other direct debt instruments,
emerging market securities, and swap agreements to be illiquid. However,
with respect to over-the-counter options a fund writes, all or a portion of
the value of the underlying instrument may be illiquid depending on the
assets held to cover the option and the nature and terms of any agreement
the fund may have to close out the option before expiration. With
respect to Money Market, FMR may also determine some time deposits to be
illiquid.
In the absence of market quotations, illiquid investments are priced at
fair value as determined in good faith by a committee appointed by the
Board of Trustees (for Money Market Portfolio, illiquid investments are
valued for purposes of monitoring amortized cost valuation). If through a
change in values, net assets, or other circumstances, each fund were in
a position where more than 10% of Money Market, Equity-Income, Growth,
Investment Grade Bond, Asset Manager, Index 500, Contrafund and Asset
Manager: Growth Portfolios' net assets and more than 15% of High Income and
Overseas Portfolios' net assets were invested in illiquid securities,
the fund would seek to take appropriate steps to protect
liquidity .
INDEXED SECURITIES. A fund may purchase securities whose prices are indexed
to the prices of other securities, securities indices, currencies, precious
metals or other commodities, or other financial indicators. Indexed
securities typically, but not always, are debt securities or deposits whose
value at maturity or coupon rate is determined by reference to a specific
instrument or statistic. Gold-indexed securities, for example, typically
provide for a maturity value that depends on the price of gold, resulting
in a security whose price tends to rise and fall together with gold prices.
Currency-indexed securities typically are short-term to intermediate-term
debt securities whose maturity values or interest rates are determined by
reference to the values of one or more specified foreign currencies, and
may offer higher yields than U.S. dollar-denominated securities of
equivalent issuers. Currency-indexed securities may be positively or
negatively indexed; that is, their maturity value may increase when the
specified currency value increases, resulting in a security that performs
similarly to a foreign-denominated instrument, or their maturity value may
decline when foreign currencies increase, resulting in a security whose
price characteristics are similar to a put on the underlying currency.
Currency-indexed securities may also have prices that depend on the values
of a number of different foreign currencies relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they
are indexed, and may also be influenced by interest rate changes in the
United States and abroad. At the same time, indexed securities are subject
to the credit risks associated with the issuer of the security, and their
values may decline substantially if the issuer's creditworthiness
deteriorates. Recent issuers of indexed securities have included banks,
corporations, and certain U.S. government agencies. FMR will use its
judgment in determining whether indexed securities should be treated as
short-term instruments, bonds, stocks, or as a separate asset class for
purposes of Asset Manager and Asset Manager: Growth Portfolios' investment
allocations, depending on the individual characteristics of the securities.
Indexed securities may be more volatile than the underlying instruments.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive
order issued by the SEC, each fund has received permission to lend money
to, and borrow money from, other funds advised by FMR or its affiliates.
Interfund loans and borrowings normally extend overnight, but can have a
maximum duration of seven days. Loans may be called on one day's notice. A
fund will lend through the program only when the returns are higher than
those available from other short-term instruments (such as repurchase
agreements), and will borrow through the program only when the costs are
equal to or lower than the cost of bank loans. A fund may have to borrow
from a bank at a higher interest rate if an interfund loan is called or not
renewed. Any delay in repayment to a lending fund could result in a lost
investment opportunity or additional borrowing costs.
ISSUER LOCATION. FMR determines where an issuer is located by
looking at such factors as its country of organization, the primary trading
market for its securities, and the location of its assets, personnel,
sales, and earnings. The issuer of a security is located in a particular
country if: 1) the security is issued or guaranteed by the government of
the country; or 2) the issuer is organized under the laws of the country,
derives at least 50% of its revenues or profits from goods sold,
investments made or services performed in the country, or has at least 50%
of its assets located in the country.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. Direct debt instruments are
interests in amounts owed by a corporate, governmental, or other borrower
to lenders or lending syndicates (loans and loan participations), to
suppliers of goods or services (trade claims or other receivables), or to
other parties. Direct debt instruments are subject to each fund's policies
regarding the quality of debt securities.
Purchasers of loans and other forms of direct indebtedness depend primarily
upon the creditworthiness of the borrower for payment of principal and
interest. Direct debt instruments may not be rated by any nationally
recognized rating service. If a fund does not receive scheduled interest or
principal payments on such indebtedness, the fund's share price and yield
could be adversely affected. Loans that are fully secured offer a fund more
protections than an unsecured loan in the event of non-payment of scheduled
interest or principal. However, there is no assurance that the liquidation
of collateral from a secured loan would satisfy the borrower's obligation,
or that the collateral could be liquidated. Indebtedness of borrowers whose
creditworthiness is poor involves substantially greater risks and may be
highly speculative. Borrowers that are in bankruptcy or restructuring may
never pay off their indebtedness, or may pay only a small fraction of the
amount owed. Direct indebtedness of developing countries also involves a
risk that the governmental entities responsible for the repayment of the
debt may be unable, or unwilling, to pay interest and repay principal when
due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to a fund.
For example, if a loan is foreclosed, the fund could become part owner of
any collateral, and would bear the costs and liabilities associated with
owning and disposing of the collateral. In addition, it is conceivable that
under emerging legal theories of lender liability, the fund could be held
liable as a co-lender. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary. Direct debt
instruments that are not in the form of securities may offer less legal
protection to a fund in the event of fraud or misrepresentation. In the
absence of definitive regulatory guidance, each fund relies on FMR's
research in an attempt to avoid situations where fraud or misrepresentation
could adversely affect the fund.
A loan is often administered by a bank or other financial institution that
acts as agent for all holders. The agent administers the terms of the loan,
as specified in the loan agreement. Unless, under the terms of the loan or
other indebtedness, each fund has direct recourse against the borrower, it
may have to rely on the agent to apply appropriate credit remedies against
a borrower. If assets held by the agent for the benefit of a fund were
determined to be subject to the claims of the agent's general creditors,
the fund might incur certain costs and delays in realizing payment on the
loan or loan participation and could suffer a loss of principal or
interest.
Direct indebtedness purchased by each fund may include letters of credit,
revolving credit facilities, or other standby financing commitments
obligating the fund to pay additional cash on demand. These commitments may
have the effect of requiring the fund to increase its investment in a
borrower at a time when it would not otherwise have done so, even if the
borrower's condition makes it unlikely that the amount will ever be repaid.
Each fund will set aside appropriate liquid assets in a segregated
custodial account to cover its potential obligations under standby
financing commitments.
Each fund limits the amount of total assets that it will invest in any one
issuer or in issuers within the same industry (see limitations 1 and 5).
For purposes of these limitations, each fund generally will treat the
borrower as the "issuer" of indebtedness held by the fund. In the case of
loan participations where a bank or other lending institution serves as
financial intermediary between each fund and the borrower, if the
participation does not shift to the fund the direct debtor-creditor
relationship with the borrower, SEC interpretations require the fund, in
appropriate circumstances, to treat both the lending bank or other lending
institution and the borrower as "issuers" for these purposes. Treating a
financial intermediary as an issuer of indebtedness may restrict a fund's
ability to invest in indebtedness related to a single financial
intermediary, or a group of intermediaries engaged in the same industry,
even if the underlying borrowers represent many different companies and
industries.
LOWER-QUALITY DEBT SECURITIES. While the market for high-yield corporate
debt securities has been in existence for many years and has weathered
previous economic downturns, the 1980s brought a dramatic increase in the
use of such securities to fund highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication of
the future performance of the high-yield bond market, especially during
periods of economic recession .
The market for lower-quality debt securities may be thinner and less active
than that for higher-quality debt securities, which can adversely affect
the prices at which the former are sold. If market quotations are not
available, lower-quality debt securities will be valued in accordance with
procedures established by the Board of Trustees, including the use of
outside pricing services. Judgment plays a greater role in valuing
high-yield corporate debt securities than is the case for securities for
which more external sources for quotations and last-sale information are
available. Adverse publicity and changing investor perceptions may affect
the ability of outside pricing services to value lower-quality debt
securities and a fund's ability to dispose of these securities.
Since the risk of default is higher for lower-quality debt securities,
FMR's research and credit analysis are an especially important part of
managing securities of this type held by a fund. In considering investments
for the fund, FMR will attempt to identify those issuers of high-yielding
securities whose financial condition is adequate to meet future
obligations, has improved, or is expected to improve in the future. FMR's
analysis focuses on relative values based on such factors as interest or
dividend coverage, asset coverage, earnings prospects, and the experience
and managerial strength of the issuer.
Each fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise to exercise its rights as a security holder
to seek to protect the interests of security holders if it determines this
to be in the best interest of the fund's shareholders.
MONEY MARKET SECURITIES are high-quality, short-term obligations.
Some money market securities employ a trust or other similar structure to
modify the maturity, price characteristics, or quality of financial assets.
For example, put features can be used to modify the maturity of a security
or interest rate adjustment features can be used to enhance price
stability. If the structure does not perform as intended, adverse tax or
investment consequences may result. Neither the Internal Revenue Service
(IRS) nor any other regulatory authority has ruled definitively on certain
legal issues presented by structured securities. Future tax or other
regulatory determinations could adversely affect the value, liquidity, or
tax treatment of the income received from these securities or the nature
and timing of distributions made by the funds.
MORTGAGE-BACKED SECURITIES. The funds may purchase mortgage-backed
securities issued by government and non-government entities such as banks,
mortgage lenders, or other financial institutions. A mortgage-backed
security is an obligation of the issuer backed by a mortgage or pool of
mortgages or a direct interest in an underlying pool of mortgages. Some
mortgage-backed securities, such as collateralized mortgage obligations or
CMOs, make payments of both principal and interest at a variety of
intervals; others make semiannual interest payments at a predetermined rate
and repay principal at maturity (like a typical bond). Mortgage-backed
securities are based on different types of mortgages including those on
commercial real estate or residential properties. Other types of
mortgage-backed securities will likely be developed in the future, and the
funds may invest in them if FMR determines they are consistent with the
funds' investment objective and policies.
The value of mortgage-backed securities may change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
government issues. Mortgage-backed securities are subject to prepayment
risk. Prepayment, which occurs when unscheduled or early payments are made
on the underlying mortgages, may shorten the effective maturities of these
securities and may lower their total returns.
MUNICIPAL SECURITIES are issued to raise money for a variety of
public or private purposes, including general financing for state and local
governments, or financing for specific projects or public facilities. They
may be issued in anticipation of future revenues and may be backed by the
full taxing power of a municipality, the revenues from a specific project,
or the credit of a private organization. The value of some or all municipal
securities may be affected by uncertainties in the municipal market related
to legislation or litigation involving the taxation of municipal securities
or the rights of municipal securities holders. A fund may own a municipal
security directly or through a participation interest.
PUT FEATURES entitle the holder to sell a security back to the
issuer or a third party at any time or at specified intervals. They are
subject to the risk that the put provider is unable to honor the put
feature (purchase the security). Put providers often support their ability
to buy securities on demand by obtaining letters of credit or other
guarantees from other entities. Demand features, standby commitments, and
tender options are types of put features.
REAL ESTATE-RELATED INSTRUMENTS include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors such
as real estate values and property taxes, interest rates, cash flow of
underlying real estate assets, overbuilding, and the management skill and
creditworthiness of the issuer. Real estate-related instruments may also be
affected by tax and regulatory requirements, such as those relating to the
environment.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is unrelated to
the coupon rate or maturity of the purchased security. To protect the fund
from the risk that the original seller will not fulfill its obligation, the
securities are held in an account of the fund at a bank, marked-to-market
daily, and maintained at a value at least equal to the sale price plus the
accrued incremental amount. While it does not presently appear possible to
eliminate all risks from these transactions (particularly the possibility
that the value of the underlying security will be less than the resale
price, as well as delays and costs to a fund in connection with bankruptcy
proceedings), it is each fund's current policy to engage in repurchase
agreement transactions with parties whose creditworthiness has been
reviewed and found satisfactory by FMR. Pursuant to certain state
insurance regulations, any repurchase agreements a fund enters into will be
secured by collateral consisting of liquid assets having a market value of
not less than 102% of the cash or assets transferred to the other
party.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part of the
registration expense and a considerable period may elapse between the time
it decides to seek registration and the time it may be permitted to sell a
security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, a fund might obtain a
less favorable price than prevailed when it decided to seek registration of
the security. However, in general, Money Market anticipates holding
restricted securities to maturity or selling them in an exempt transaction.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement. A
fund will enter into reverse repurchase agreements only with parties whose
creditworthiness has been found satisfactory by FMR. Such transactions may
increase fluctuations in the market value of the fund's assets and may be
viewed as a form of leverage.
SECURITIES LENDING. A fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange and
a subsidiary of FMR Corp.
Securities lending allows a fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there may be
delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be
made only to parties deemed by FMR to be of good standing. Furthermore,
they will only be made if, in FMR's judgment, the consideration to be
earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that a fund
may engage in loan transactions only under the following conditions: (1)
the fund must receive 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of
the collateral; (3) after giving notice, the fund must be able to terminate
the loan at any time; (4) the fund must receive reasonable interest on the
loan or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) the fund may pay only reasonable
custodian fees in connection with the loan; and (6) the Board of Trustees
must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with
the borrower.
Cash received through loan transactions may be invested in any security in
which a fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
SHORT SALES "AGAINST THE BOX." Money Market may sell securities short when
it owns or has the right to obtain securities equivalent in kind or amount
to the securities sold short. Short sales could be used to protect the net
asset value per share of the fund in anticipation of increased interest
rates, without sacrificing the current yield of the securities sold
short .
SHORT SALES. A fund may enter into short sales with respect to stocks
underlying its convertible security holdings. For example, if FMR
anticipates a decline in the price of the stock underlying a convertible
security a fund holds, it may sell the stock short. If the stock price
subsequently declines, the proceeds of the short sale could be expected to
offset all or a portion of the effect of the stock's decline on the value
of the convertible security. A fund currently intends to hedge no
more than 15% of its total assets with short sales on equity securities
underlying its convertible security holdings under normal circumstances.
When a fund enters into a short sale or a short sale "against the
box" , it will be required to set aside securities equivalent in kind
and amount to those sold short (or securities convertible or exchangeable
into such securities) and will be required to hold them aside while the
short sale is outstanding. A fund will incur transaction costs, including
interest expense, in connection with opening, maintaining, and closing
short sales and short sales "against the box" .
SOURCES OF CREDIT OR LIQUIDITY SUPPORT. FMR may rely on its
evaluation of the credit of a bank or another entity in determining whether
to purchase a security supported by a letter of credit guarantee, insurance
or other source of credit or liquidity. In evaluating the credit of a
foreign bank or other foreign entities, FMR will consider whether adequate
public information about the entity is available and whether the entity may
be subject to unfavorable political or economic developments, currency
controls, or other government restrictions that might affect its ability to
honor its commitment.
SOVEREIGN DEBT OBLIGATIONS. Overseas Portfolio may purchase sovereign debt
instruments issued or guaranteed by foreign governments or their agencies,
including debt of Latin American nations or other developing countries.
Sovereign debt may be in the form of conventional securities or other types
of debt instruments such as loans or loan participations. Sovereign debt of
developing countries may involve a high degree of risk, and my be in
default or present the risk of default. Governmental entities responsible
for repayment of the debt may be unable or unwilling to repay principal and
interest when due, and may require renegotiation or rescheduling of debt
payments. In addition, prospects for repayment of principal and interest
may depend on political as well as economic factors.
STRIPPED GOVERNMENT SECURITIES. Stripped securities are created
by separating the income and principal components of a debt instrument and
selling them separately. U.S. Treasury STRIPS (Separate Trading of
Registered Interest and Principal of Securities) are created when the
coupon payments and the principal payment are stripped from an outstanding
Treasury bond by the Federal Reserve Bank. Bonds issued by the government
agencies also may be stripped in this fashion.
Privately stripped government securities are created when a dealer deposits
a Treasury security or federal agency security with a custodian for
safekeeping and then sells the coupon payments and principal payment that
will be generated by this security. Proprietary receipts, such as
Certificates of Accrual on Treasury Securities (CATS), Treasury Investment
Growth Receipts (TIGRS), and generic Treasury Receipts (TRs), are stripped
U.S. Treasury securities that are separated into their component parts
through trusts created by their broker sponsors. Bonds issued by the
government agencies also may be stripped in this fashion.
Because of the SEC's views on privately stripped government securities,
Money Market must evaluate them as it would non-government securities
pursuant to regulatory guidelines applicable to all money market funds.
Money Market currently intends to purchase only those privately stripped
government securities that have either received the highest rating from two
nationally recognized rating services (or one, if only one has rated the
security) or, if unrated, have been judged to be of equivalent quality by
FMR pursuant to procedures adopted by the Board of Trustees.
STRIPPED MORTGAGE-BACKED SECURITIES are created when a U.S. government
agency or a financial institution separates the interest and principal
components of a mortgage-backed security and sells them as individual
securities. The holder of the "principal-only" security (PO) receives the
principal payments made by the underlying mortgage-backed security, while
the holder of the "interest-only" security (IO) receives interest payments
from the same underlying security.
The prices of stripped mortgage-backed securities may be particularly
affected by changes in interest rates. As interest rates fall, prepayment
rates tend to increase, which tends to reduce prices of IOs and increase
prices of POs. Rising interest rates can have the opposite effect.
SWAP AGREEMENTS. Swap agreements can be individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on their structure, swap
agreements may increase or decrease a fund's exposure to long- or
short-term interest rates (in the United States or abroad), foreign
currency values, mortgage securities, corporate borrowing rates, or other
factors such as security prices or inflation rates. Swap agreements can
take many different forms and are known by a variety of names. A fund is
not limited to any particular form of swap agreement if FMR determines it
is consistent with the fund's investment objective and policies.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains the
right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines elements
of buying a cap and selling a floor.
Swap agreements will tend to shift a fund's investment exposure from one
type of investment to another. For example, if the fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement
would tend to decrease the fund's exposure to U.S. interest rates and
increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on
how they are used, swap agreements may increase or decrease the overall
volatility of a fund's investments and its share price and yield.
The most significant factor in the performance of swap agreements is the
change in the specific interest rate, currency, or other factors that
determine the amounts of payments due to and from a fund. If a swap
agreement calls for payments by the fund, the fund must be prepared to make
such payments when due. In addition, if the counterparty's creditworthiness
declined, the value of a swap agreement would be likely to decline,
potentially resulting in losses. A fund expects to be able to eliminate its
exposure under swap agreements either by assignment or other disposition,
or by entering into an offsetting swap agreement with the same party or a
similarly creditworthy party.
A fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If a fund
enters into a swap agreement on a net basis, it will segregate assets with
a daily value at least equal to the excess, if any, of the fund's accrued
obligations under the swap agreement over the accrued amount the fund is
entitled to receive under the agreement. If a fund enters into a swap
agreement on other than a net basis, it will segregate assets with a value
equal to the full amount of the fund's accrued obligations under the
agreement.
VARIABLE AND FLOATING RATE SECURITIES provide for periodic
adjustments of the interest rate paid on the security. Variable rate
securities provide for a specified periodic adjustment in the interest
rate, while floating rate securities have interest rates that change
whenever there is a change in a designated benchmark rate. Some variable or
floating rate securities have put features.
WARRANTS. Warrants are securities that give a fund the right to purchase
equity securities from the issuer at a specific price (the strike price)
for a limited period of time. The strike price of warrants typically is
much lower than the current market price of the underlying securities, yet
they are subject to similar price fluctuations. As a result, warrants may
be more volatile investments than the underlying securities and may offer
greater potential for capital appreciation as well as capital loss.
Warrants do not entitle a holder to dividends or voting rights with respect
to the underlying securities and do not represent any rights in the assets
of the issuing company. Also, the value of the warrant does not necessarily
change with the value of the underlying securities and a warrant ceases to
have value if it is not exercised prior to expiration date. These factors
can make warrants more speculative than other types of investments.
ZERO COUPON BONDS. Zero coupon bonds do not make interest payments;
instead, they are sold at a deep discount from their face value and are
redeemed at face value when they mature. Because zero coupon bonds do not
pay current income, their prices can be very volatile when interest rates
change. In calculating its dividends, a fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and
its face valu e.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of each fund by FMR pursuant to authority contained in the
management contract. If FMR grants investment management authority to the
sub-advisers (see the section entitled "Management Contract"), the
sub-advisers are authorized to place orders for the purchase and sale of
portfolio securities, and will do so in accordance with the policies
described below. FMR is also responsible for the placement of transaction
orders for other investment companies and accounts for which it or its
affiliates act as investment adviser. Securities purchased and sold by
Money Market generally will be traded on a net basis (i.e., without
commission). In selecting broker-dealers, subject to applicable
limitations of the federal securities laws, FMR considers various relevant
factors, including, but not limited to: the size and type of the
transaction; the nature and character of the markets for the security to be
purchased or sold; the execution efficiency, settlement capability, and
financial condition of the broker-dealer firm; the broker-dealer's
execution services rendered on a continuing basis; the reasonableness of
any commissions; and arrangements for payment of fund expenses.
Generally, commissions for investments traded on foreign exchanges will be
higher than for investments traded on U.S. exchanges and may not be subject
to negotiation.
The funds may execute portfolio transactions with broker-dealers who
provide research and execution services to the funds or other accounts over
which FMR or its affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; and the availability of
securities or the purchasers or sellers of securities. In addition, such
broker-dealers may furnish analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy,
and performance of accounts; effect securities transactions, and perform
functions incidental thereto (such as clearance and settlement). For Money
Market, FMR maintains a listing of broker-dealers who provide such services
on a regular basis. However, as many transactions on behalf of Money Market
are placed with broker-dealers (including broker-dealers on the list)
without regard to the furnishing of such services, it is not possible to
estimate the proportion of such transactions directed to such
broker-dealers solely because such services were provided. The
selection of such broker-dealers generally is made by FMR (to the extent
possible consistent with execution considerations) in accordance with a
ranking of broker-dealers determined periodically by FMR's investment staff
based upon the quality of research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the funds may be useful to FMR in rendering investment management
services to the funds or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the funds. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
each fund to pay such higher commissions, FMR must determine in good faith
that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers,
viewed in terms of a particular transaction or FMR's overall
responsibilities to the funds and its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value on the
brokerage and research services provided, or to determine what portion of
the compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the funds or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI) and Fidelity Brokerage Services (FBS), subsidiaries of FMR
Corp., if the commissions are fair, reasonable, and comparable to
commissions charged by non-affiliated, qualified brokerage firms for
similar services. From September 1992 through December 1994, FBS operated
under the name Fidelity Brokerage Services Limited, Inc. (FBSL). As of
January 1995, FBSL was converted to an unlimited liability company and
assumed the name FBS. Prior to September 4, 1992, FBSL operated under the
name Fidelity Portfolio Services, Ltd. (FPSL) as a wholly owned subsidiary
of Fidelity International Limited (FIL). Edward C. Johnson 3d is Chairman
of FIL. Mr. Johnson 3d, Johnson family members, and various trusts for the
benefit of the Johnson family own, directly or indirectly, more than 25% of
the voting common stock of FIL.
FMR may allocate brokerage transactions to broker-dealers who have
entered into arrangements with FMR under which the broker-dealer allocates
a portion of the commissions paid by each fund toward payment of the fund's
expenses, such as transfer agent fees or custodian fees. The transaction
quality must, however, be comparable to those of other qualified
broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute portfolio transactions on national securities
exchanges in accordance with approved procedures and applicable SEC rules.
Each fund's Trustees periodically review FMR's performance of its
responsibilities in connection with the placement of portfolio transactions
on behalf of the funds and review the commissions paid by each fund over
representative periods of time to determine if they are reasonable in
relation to the benefits to the fund.
Because a high turnover rate increases transaction costs and may
increase capital gains, FMR carefully weighs the anticipated benefits of
short-term investing against these consequences . An increased turnover
rate is due to a greater volume of shareholder purchase orders, short-term
interest rate volatility and other special market conditions. For fiscal
years ended December 31, 1995 and 1994,each fund had the following turnover
rates:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSET
YEAR HIGH EQUITY- OVERSEA INVESTMENT ASSET MANAGER: INDEX
INCOME INCOME GROWTH S GRADE BOND MANAGER GROWTH CONTRAFUND 500

1995 % % % % % % % % %

1994 122% 134% 122% 42% 143% 85% NA NA 2%

</TABLE>

BROKERAGE COMMISSIONS. The following lists the total brokerage
commissions paid; the percentage of the brokerage commissions paid to
brokerage firms that provided research services ; the commissions
paid to FBSI and FBSL in dollars and as a percentage of the dollar value of
all transactions in which brokerage commissions were paid for the fiscal
periods ended December 31, 1995, 1994 and 1993 for each of the funds. No
commissions were paid by Money Market or Investment Grade Bond
Portfolios. The funds pay both commissions and spreads in connection with
the placement of portfolio transactions. The difference in the percentage
of brokerage commissions paid to and the percentage of the dollar amount of
transactions effected through FBSI and FBSL is a result of the low
commission rates charged by FBSI and FBSL.
HIGH INCOME PORTFOLIO

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
% Paid to % %
Firms Transactions Transactions

Period Providing To To % to through through

Ended TOTAL Research FBSI FBSL % to FBSI FBSL FBSI FBSL

</TABLE>

1995 $ %

1994 135,013 98 24,140 0 18 0 29 0

1993 25,198 99 0 0 0 0 0 0

EQUITY-INCOME PORTFOLIO

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
% Paid to % %
Firms Transactions Transactions

Period Providing To To % to % to through through

Ended TOTAL Research FBSI FBSL FBSI FBSL FBSI FBSL

</TABLE>

1995 $ % $ $ % % % %

1994 4,893,684 95 1,717,630 116,658 35 2 46 1

1993 2,658,979 68 712,270 51,049 27 2 42 0

GROWTH PORTFOLIO

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
% Paid to % %
Firms Transactions Transactio
ns

Period Providing To To % to through through

Ended TOTAL Research To FBSI FBSL % to FBSI FBSL FBSI FBSL

</TABLE>

1995 $ % $ $ % % % %

1994 $3,120,411 97% $956,332 $0 31% 0% 44% 0%

1993 2,137,399 49 750,137 0 35 0 48 0

OVERSEAS PORTFOLIO

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
% Paid to % %
Firms Transactions Transactions

Period Providing To % to through through

Ended TOTAL Research To FBSI FBSL % to FBSI FBSL FBSI FBSL

</TABLE>

1995 $ % $ $ % % % %

1994 $2,985,961 90% $1,605 $255,413 0% 9% 0% 11%

1993 1,541,385 92 3,119 13,077 0 1 1 0

ASSET MANAGER PORTFOLIO

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
% Paid to % %
Firms Transactions Transactions

Period Providing To To % to through through

Ended TOTAL Research FBSI FBSL % to FBSI FBSL FBSI FBSL

</TABLE>

1995 $ % $ $ % % % %

1994 $3,316,118 92% $583,097 $107,280 18% 3% 32% 3%

1993 2,839,401 73 398,687 43,172 14 2 29 0

INDEX 500 PORTFOLIO

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
% Paid to % %
Firms Transactions Transactions

Period Providing To To % to through through

Ended TOTAL Research FBSI FBSL % to FBSI FBSL FBSI FBSL

</TABLE>

1995 $ % $ $ % % % %

1994 $10,286 1% $17 $0 0% 0% 0% 0%

1993 3,870 4 123 0 3 0 3 0

ASSET MANAGER: GROWTH PORTFOLIO

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
% Paid to % %
Firms Transactions Transactions

Period Providing To To % to through through

Ended TOTAL Research FBSI FBSL % to FBSI FBSL FBSI FBSL

</TABLE>

1995 $ % $ $ % % % %

CONTRAFUND PORTFOLIO

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
% Paid to % %
Firms Transactions Transactions

Period Providing To To % to through through

Ended TOTAL Research FBSI FBSL % to FBSI FBSL FBSI FBSL

</TABLE>

1995 $ % $ $ % % % %

________
From time to time the Trustees will review whether the recapture for the
benefit of the funds of some portion of the brokerage commissions or
similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to continue
to review whether recapture opportunities are available and are legally
permissible and, if so, to determine in the exercise of their business
judgment whether it would be advisable for each fund to seek such
recapture.
Although the Trustees and officers of each fund are substantially the same
as those of other funds managed by FMR, investment decisions for each fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund. In
some cases this system could have a detrimental effect on the price or
value of the security as far as each fund is concerned. In other cases,
however, the ability of the funds to participate in volume transactions
will produce better executions and prices for the funds. It is the current
opinion of the Trustees that the desirability of retaining FMR as
investment adviser to each fund outweighs any disadvantages that may be
said to exist from exposure to simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
MONEY MARKET PORTFOLIO
The fund values its investments on the basis of amortized cost. This
technique involves valuing an instrument at its cost as adjusted for
amortization of premium or accretion of discount rather than its value
based on current market quotations or appropriate substitutes which reflect
current market conditions. The amortized cost value of an instrument may be
higher or lower than the price the fund would receive if it sold the
instrument.
Valuing the fund's instruments on the basis of amortized cost and use of
the term "money market fund" are permitted by Rule 2a-7 under the 1940 Act.
The fund must adhere to certain conditions under Rule 2a-7.
The Board of Trustees of the trust oversees FMR's adherence to SEC rules
concerning money market funds, and has established procedures designed to
stabilize the fund's net asset value (NAV) at $1.00. At such intervals as
they deem appropriate, the Trustees consider the extent to which NAV
calculated by using market valuations would deviate from $1.00 per share.
If the Trustees believe that a deviation from the fund's amortized cost per
share may result in material dilution or other unfair results to
shareholders, the Trustees have agreed to take such corrective action, if
any, as they deem appropriate to eliminate or reduce, to the extent
reasonably practicable, the dilution or unfair results. Such corrective
action could include selling portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio maturity;
withholding dividends; redeeming shares in kind; establishing NAV by using
available market quotations; and such other measures as the Trustees may
deem appropriate.
During periods of declining interest rates, the fund's yield based on
amortized cost may be higher than the yield based on market valuations.
Under these circumstances, a shareholder of the fund would be able to
obtain a somewhat higher yield than would result if the fund utilized
market valuations to determine its NAV. The converse would apply in a
period of rising interest rates.
INVESTMENT GRADE BOND AND HIGH INCOME PORTFOLIOS
Securities and other assets for which market quotations are readily
available may be valued at market values determined by their most recent
bid prices (sales prices if the principal market is an exchange) in the
principal market in which such securities normally are traded. Securities
and other assets for which market quotations are not readily available
(including restricted securities, if any) are appraised at their fair value
as determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees.
Securities may also be valued on the basis of valuations furnished by a
pricing service that uses both dealer-supplied valuations and evaluations
based on expert analysis of market data and other factors if such
valuations are believed to reflect more accurately the fair value of such
securities. Use of a pricing service has been approved by the Board of
Trustees. There are a number of pricing services available, and the
Trustees, or officers acting on behalf of the Trustees, on the basis of
ongoing evaluation of these pricing services, may use other pricing
services or may discontinue the use of any pricing service in whole or in
part.
Securities not valued by the pricing service, and for which quotations are
readily available, are valued at market values determined on the basis of
their latest available bid prices as furnished by recognized dealers in
such securities. Futures contracts and options are valued on the basis of
market quotations, if available.
EQUITY-INCOME, GROWTH, OVERSEAS, ASSET MANAGER, CONTRAFUND, ASSET MANAGER:
GROWTH, AND INDEX 500 PORTFOLIOS
Portfolio securities are valued by various methods depending on the primary
market or exchange on which they trade. Most equity securities for which
the primary market is the U.S. are valued at last sale price or, if no sale
has occurred, at the closing bid price. Most equity securities for which
the primary market is outside the U.S. are valued using the official
closing price or the last sale price in the principal market where they are
traded. If the last sale price (on the local exchange) is unavailable, the
last evaluated quote or last bid price is normally used. Short-term
securities are valued either at amortized cost or at original cost plus
accrued interest, both of which approximate current value. Convertible
securities and fixed-income securities are valued primarily by a pricing
service that uses a vendor security valuation matrix which incorporates
both dealer-supplied valuations and electronic data processing techniques.
This two-fold approach is believed to more accurately reflect fair value
because it takes into account appropriate factors such as institutional
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics, and other market data,
without exclusive reliance upon quoted, exchange, or over-the counter
prices. Use of pricing services has been approved by the Board of Trustees.
Securities and other assets for which there is no readily available market
are valued in good faith by a committee appointed by the Board of Trustees.
The procedures set forth above need not be used to determine the value of
the securities owned by a fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method (e.g., closing
over-the-counter bid prices in the case of debt instruments traded on an
exchange) would more accurately reflect the fair market value of such
securities.
Generally, the valuation of foreign and domestic equity securities, as well
as corporate bonds, U.S. government securities, money market instruments,
and repurchase agreements, is substantially completed each day at the close
of the NYSE. The values of any such securities held by a fund are
determined as of such time for the purpose of computing the fund's net
asset value. Foreign security prices are furnished by independent brokers
or quotation services which express the value of securities in their local
currency. Fidelity Service Company (FSC) gathers all exchange rates daily
at the close of the NYSE using the last quoted price on the local currency
and then translates the value of foreign securities from their local
currency into U.S. dollars. Any changes in the value of forward contracts
due to exchange rate fluctuations and days to maturity are included in the
calculation of net asset value. If an extraordinary event that is expected
to materially affect the value of a portfolio security occurs after the
close of an exchange on which that security is traded, then the security
will be valued as determined in good faith by a committee appointed by the
Board of Trustees.
PERFORMANCE
A fund may quote performance in various ways. All performance information
supplied by a fund in advertising is historical and is not intended to
indicate future returns. Each fund's share price, and each fund's total
return and yield fluctuate in response to market conditions and other
factors, and the value of non-money market fund shares when redeemed may be
more or less than their original cost.
YIELD CALCULATION (MONEY MARKET PORTFOLIO). To compute the fund's yield for
a period, the net change in value of a hypothetical account containing one
share reflects the value of additional shares purchased with dividends from
the one original share and dividends declared on both the original share
and any additional shares. The net change is then divided by the value of
the account at the beginning of the period to obtain a base period return.
This base period return is annualized to obtain a current annualized yield.
The fund also may calculate an effective yield by compounding the base
period return over a one-year period. In addition to the current yield, the
fund may quote yields in advertising based on any historical seven-day
period. Yields for the fund are calculated on the same basis as other money
market funds, as required by applicable regulations.
YIELD CALCULATIONS (EXCLUDING MONEY MARKET PORTFOLIO). Yields for a fund
are computed by dividing the fund's interest and dividend income for a
given 30-day or one-month period, net of expenses, by the average number of
shares entitled to receive distributions during the period, dividing this
figure by the fund's net asset value (NAV) at the end of the period, and
annualizing the result (assuming compounding of income) in order to arrive
at an annual percentage rate. Income is calculated for purposes of yield
quotations in accordance with standardized methods applicable to all stock
and bond funds. Dividends from equity investments are treated as if they
were accrued on a daily basis, solely for the purposes of yield
calculations. In general, interest income is reduced with respect to bonds
trading at a premium over their par value by subtracting a portion of the
premium from income on a daily basis, and is increased with respect to
bonds trading at a discount by adding a portion of the discount to daily
income. For a fund's investments denominated in foreign currencies, income
and expenses are calculated first in their respective currencies, and are
then converted to U.S. dollars, either when they are actually converted or
at the end of the 30-day or one month period, whichever is earlier. Capital
gains and losses generally are excluded from the calculation as are gains
and losses from currency exchange rate fluctuations.
Income calculated for the purposes of calculating a fund's yield differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding of income
assumed in yield calculations, a fund's yield may not equal its
distribution rate or the income reported in the fund's financial
statements. In calculating yield, a fund may from time to time use a
portfolio security's coupon rate instead of its yield to maturity in order
to reflect the risk premium on that security. This practice will have the
effect of reducing the fund's yield.
Yield information may be useful in reviewing a fund's performance and in
providing a basis for comparison with other investment alternatives.
However, each fund's yield fluctuates, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of respective investment companies they have chosen to
consider.
Investors should recognize that in periods of declining interest rates a
fund's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the fund's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net
new money to a fund from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the
fund's holdings, thereby reducing the fund's current yield. In periods of
rising interest rates, the opposite can be expected to occur.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of a fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the fund's NAV over a
stated period. Average annual total returns are calculated by determining
the growth or decline in value of a hypothetical historical investment in a
fund over a stated period, and then calculating the annually compounded
percentage rate that would have produced the same result if the rate of
growth or decline in value had been constant over the period. For example,
a cumulative total return of 100% over ten years would produce an average
annual total return of 7.18%, which is the steady annual rate of return
that would equal 100% growth on a compounded basis in ten years.
W hile average annual total returns are a convenient means of
comparing investment alternatives, investors should realize that a fund's
performance is not constant over time, but changes from year to year, and
that average annual total returns represent averaged figures as opposed to
the actual year-to-year performance of the fund.
In addition to average annual total returns, a fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted on a
before-tax or after-tax basis. Total returns, yields, and other performance
information may be quoted numerically or in a table, graph, or similar
illustration.
NET ASSET VALUE. Charts and graphs using a fund's net asset values,
adjusted net asset values, and benchmark indices may be used to exhibit
performance. An adjusted NAV includes any distributions paid by a fund and
reflects all elements of its return. Unless otherwise indicated, a fund's
adjusted NAVs are not adjusted for sales charges, if any.
MOVING AVERAGES. A fund may illustrate performance using moving averages. A
long-term moving average is the average of each week's adjusted closing NAV
for a specified period. A short-term moving average is the average of each
day's adjusted closing NAV for a specified period. Moving Average Activity
Indicators combine adjusted closing NAVs from the last business day of each
week with moving averages for a specified period to produce indicators
showing when an NAV has crossed, stayed above, or stayed below its moving
average. On December 29, 1995, the 13-week and 39-week long-term moving
averages were $___ and $___, for Equity-Income; $___ and $___ for Growth;
$___ and $___ for Overseas; $___ and $___ for Asset Manager; $___ and $___
for Index 500; $___ and $___ for Asset Manager: Growth; and $___ and $___
for Contrafund, respectively.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Historical Fund Results Average Annual Total Returns Cumulative Total Returns

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
AS OF 12/31/95 Yields One Five Life of One Five Life of
Year Years Fund* Year Years Fund*

Money Market Portfolio 7-day % % % % % %
%

High Income Portfolio 30-day % % % % % %
%

Equity-Income Portfolio N.A. % % % % % %

Growth Portfolio N.A. % % % % % %

</TABLE>

Overseas Portfolio N.A. % % % % % %

Investment Grade Bond 30-day % % % % % %
Portfolio %

Asset Manager Portfolio N.A. % % % % % %

Index 500 Portfolio N.A. % N.A. % % N.A. %

Asset Manager: Growth N.A. % N.A. % % N.A. %
Portfolio

Contrafund Portfolio N.A. % N.A. % % N.A. %

If FMR had not reimbursed certain fund expenses during certain of these
periods, the total returns would have been lower.
* 10-year return for Money Market Portfolio; High Income Portfolio
commenced operations September 19, 1985; Equity-Income and Growth
Portfolios commenced operations October 9, 1986; Overseas Portfolio
commenced operations January 28, 1987; Investment Grade Bond Portfolio
commenced operations December 5, 1988; Asset Manager Portfolio commenced
operations September 6, 1989; Index 500 Portfolio commenced operations
August 27, 1992; and Contrafund and Asset Manager: Growth Portfolios
commenced operations January 3, 1995
The following charts show the income and capital elements of each fund's
total return from the date it commenced operations through the year ended
December 31, 1995. The charts compare the funds' returns to the record of
the S&P, the Dow Jones Industrial Average (DJIA), the cost of living
(measured by the Consumer Price Index, or CPI), and for Overseas,
Morgan Stanley Capital International Europe, Australia, Far East Index
(EAFE), an unmanaged index of 900 foreign common stocks . The S&P and
DJIA comparisons are provided to show how the funds' total returns compared
to the record of a broad average of U.S. common stock prices and a narrower
set of stocks of major U.S. industrial companies. Each fund has the ability
to invest in securities not included in either index, and its investment
portfolio may or may not be similar in composition to the indices. Of
course, since Money Market, High Income, and Investment Grade Bond
Portfolios invest in fixed-income securities, common stocks represent a
different type of investment from the funds. Common stocks generally offer
potential greater growth than a money market or bond fund, but generally
experience greater price volatility, which means greater potential for
loss. In addition, common stocks generally provide lower income than a
fixed-income investment such as a money market or bond fund. Figures
for S&P, DJIA, and EAFE are based on the prices of unmanaged groups of
stocks and, unlike the funds' returns, their returns do not include the
effect of paying brokerage commissions and other costs of investing.
MONEY MARKET PORTFOLIO During the ten year period ended December 31, 1995,
a hypothetical $10,000 investment in Contrafund would have grown to
$______, assuming all distributions were reinvested. This was a period of
fluctuating interest rates and the figures below should not be considered
representative of the dividend income or capital gain or loss that could be
realized from an investment in the fund today.
MONEY MARKET PORTFOLIO INDICES

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Year Value of Value of Value of Total S&P 500 DJIA Cost of
Ended Initial Reinvested Reinvested Value Living
$10,000 Dividend Capital Gain
Investment Distributions Distributions

1995 $10,000 $ $0 $ $ $ $

1994 $10,000 $8,438 $0 $18,438 $38,358 $44,527 $14,217

1993 $10,000 $7,687 $0 $17,687 $37,859 $42,418 $13,846

1992 $10,000 $7,133 $0 $17,133 $34,393 $36,257 $13,476

1991 $10,000 $6,490 $0 $16,490 $31,951 $33,791 $13,096

1990 $10,000 $5,543 $0 $15,543 $24,486 $27,176 $12,707

1989 $10,000 $4,387 $0 $14,387 $25,274 $27,323 $11,975

1988 $10,000 $3,185 $0 $13,185 $19,193 $20,737 $11,443

1987 $10,000 $2,278 $0 $12,278 $16,459 $17,889 $10,959

1986 $10,000 $1,535 $0 $11,535 $15,636 $16,967 $10,494

</TABLE>

Explanatory Notes: With an initial investment of $10,000 made on January 1,
1985, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of
reinvested dividends for the period covered (their cash value at the time
they were reinvested), amounted to $_____. If distributions had not been
reinvested, the amount of distributions earned from the fund over time
would have been smaller, and cash payments (dividends) for the period would
have amounted to $____. The fund did not distribute any capital gains
during the period. Tax consequences of different investments have not been
factored into the above figures.
HIGH INCOME PORTFOLIO During the ten-year period ended December 31,
1995, a hypothetical $10,000 investment in High Income Portfolio would have
grown to $26,112, assuming all distributions were reinvested. This was a
period of fluctuating interest rates and bond prices and the figures below
should not be considered representative of the dividend income or capital
gain or loss that could be realized from an investment in the fund today.
HIGH INCOME PORTFOLIO INDICES

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Year Value of Value of Value of Total S&P 500 DJIA Cost of
Ended Initial Reinvested Reinvested Value Living*
$10,000 Dividend Capital Gain
Investment Distributions Distributions

1995 $ $ $ $ $ $ $

1994 $10,750 $14,286 $1,076 $26,112 $34,242 $40,111 $13,823

1993 $11,990 $14,223 $333 $26,546 $33,797 $38,211 $13,463

1992 $10,820 $11,057 $172 $22,049 $30,702 $32,661 $13,102

1991 $9,550 $8,200 $152 $17,902 $28,522 $30,440 $12,733

1990 $7,070 $6,071 $112 $13,253 $21,859 $24,481 $12,355

1989 $8,110 $5,317 $129 $13,556 $22,562 $24,613 $11,644

1988 $9,660 $4,332 $154 $14,146 $17,133 $18,680 $11,127

1987 $9,680 $2,837 $154 $12,671 $14,693 $16,114 $10,656

1986 $10,830 $1,689 $0 $12,519 $13,958 $15,284 $10,203

</TABLE>

* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on January 1,
1986, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the fund over time would have been smaller, and cash payments for the
period would have amounted to $_____ for dividends and $___ for capital
gains distributions. Tax consequences of different investments have not
been factored into the above figures.
EQUITY-INCOME PORTFOLIO During the period from October 9, 1986
(commencement of operations) to December 31, 1995, a hypothetical $10,000
investment in Equity-Income Portfolio would have grown to $_____, assuming
all distributions were reinvested. This was a period of fluctuating
interest rates, bond prices, and stock prices and the figures below should
not be considered representative of the dividend income or capital gain or
loss that could be realized from an investment in the fund today.
EQUITY-INCOME PORTFOLIO INDICES

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Year Value of Value of Value of Total S&P 500 DJIA Cost of
Ended Initial Reinvested Reinvested Value Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions

1995 $ $ $ $ $ $ $

1994 $15,350 $6,059 $2,104 $23,513 $25,295 $27,809 $13,584

1993 $15,440 $5,529 $992 $21,961 $24,966 $26,491 $13,230

1992 $13,400 $4,304 $861 $18,565 $22,680 $22,644 $12,877

1991 $11,850 $3,272 $761 $15,883 $21,070 $21,104 $12,514

1990 $9,510 $1,963 $611 $12,084 $16,147 $16,972 $12,142

1989 $12,290 $1,682 $293 $14,265 $16,667 $17,064 $11,443

1988 $11,010 $979 $167 $12,156 $12,657 $12,951 $10,935

1987 $9,420 $344 $143 $9,907 $10,854 $11,172 $10,472

1986* $10,020 $0 $0 $10,020 $10,311 $10,596 $10,027

</TABLE>

* From October 9, 1986 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on October 9,
1986, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to $____. If
distributions had not been reinvested, the amount of distributions earned
from the fund over time would have been smaller, and cash payments for the
period would have amounted to $____ for dividends and $____ for capital
gains distributions. Tax consequences of different investments have not
been factored into the above figures.
GROWTH PORTFOLIO. During the period from October 9, 1986 (commencement of
operations) to December 31, 1995, a hypothetical $10,000 investment in
Growth Portfolio would have grown to $_____, assuming all distributions
were reinvested. This was a period of fluctuating stock prices and the
figures below should not be considered representative of the dividend
income or capital gain or loss that could be realized from an investment in
the fund today.
GROWTH PORTFOLIO INDICES

1995 $ $ $ $ $ $ $

1994 $21,690 $1,590 $3,205 $26,485 $25,295 $27,809 $13,584

1993 $23,080 $1,546 $1,864 $26,490 $24,966 $26,491 $13,230

1992 $19,760 $1,202 $1,230 $22,192 $22,680 $22,644 $12,877

1991 $18,510 $1,075 $715 $20,300 $21,070 $21,104 $12,514

1990 $12,910 $541 $499 $13,950 $16,147 $16,972 $12,142

1989 $15,180 $400 $225 $15,805 $16,667 $17,064 $11,443

1988 $11,720 $124 $174 $12,018 $12,657 $12,951 $10,935

1987 $10,140 $108 $150 $10,398 $10,854 $11,172 $10,472

1986* $10,030 $0 $0 $10,030 $10,311 $10,596 $10,027

</TABLE>

* From October 9, 1986 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on October 9,
1986, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to $____. If
distributions had not been reinvested, the amount of distributions earned
from the fund over time would have been smaller, and cash payments for the
period would have amounted to $____ for dividends and $_____ for capital
gains distributions. Tax consequences of different investments have not
been factored into the above figures.
OVERSEAS PORTFOLIO During the period from January 28, 1987 (commencement of
operations) to December 31, 199 5 , a hypothetical $10,000 investment
in Overseas Portfolio would have grown to $____, assuming all distributions
were reinvested. This was a period of fluctuating stock prices and the
figures below should not be considered representative of the dividend
income or capital gain or loss that could be realized from an investment in
the fund today.
OVERSEAS PORTFOLIO INDICES

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Value of Value of Value of Total S&P 500 DJIA EAFE Cost of
Ended Initial Reinvested Reinvested Value Index Living**
$10,000 Dividend Capital
Investment Distribution Gain
s Distribution
s

1995 $ $ $ $ $ $ $ $

1994 $15,670 $1,375 $71 $17,116 $21,653 $23,089 $17,201 $13,462

1993 $15,480 $1,276 $70 $16,826 $21,371 $21,996 $15,959 $13,112

1992 $11,530 $720 $0 $12,250 $19,414 $18,801 $12,039 $12,761

1991 $13,090 $631 $0 $13,721 $18,036 $17,522 $13,708 $12,401

1990 $12,420 $285 $0 $12,705 $13,822 $14,092 $12,225 $12,032

1989 $12,670 $250 $0 $12,920 $14,267 $14,168 $15,970 $11,340

1988 $10,110 $121 $0 $10,231 $10,834 $10,753 $14,448 $10,836

1987* $9,350 $112 $0 $9,462 $9,291 $9,276 $11,263 $10,378

</TABLE>

* From January 28, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on January
28, 1987, the net amount invested in fund shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to $____. If
distributions had not been reinvested, the amount of distributions earned
from the fund over time would have been smaller, and cash payments for the
period would have amounted to $____ for dividends and $__ for capital gains
distributions. Tax consequences of different investments (with the
exception of foreign tax withholdings) have not been factored into the
above figures.
INVESTMENT GRADE BOND PORTFOLIO During the period from December 5, 1988
(commencement of operations) to December 31, 1995, a hypothetical $10,000
investment in Investment Grade Bond Portfolio would have grown to $_____,
assuming all distributions were reinvested. This was a period of
fluctuating interest rates and bond prices and the figures below should not
be considered representative of the dividend income or capital gain or loss
that could be realized from an investment in the fund today.
INVESTMENT GRADE BOND PORTFOLIO INDICES

1995 $ $ $ $ $ $ $

1994 $11,020 $4,243 $341 $15,604 $20,469 $22,314 $12,444

1993 $11,480 $4,420 $313 $16,213 $20,203 $21,257 $12,120

1992 $10,970 $3,418 $223 $14,611 $18,353 $18,170 $11,796

1991 $11,080 $2,596 $24 $13,700 $17,050 $16,934 $11,463

1990 $9,920 $1,831 $21 $11,772 $13,067 $13,619 $11,122

1989 $10,140 $921 $22 $11,083 $13,487 $13,692 $10,482

1988* $10,000 $52 $0 $10,052 $10,242 $10,392 $10,017

</TABLE>

* From December 5, 1988 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on December
5, 1988, the net amount invested in fund shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to $____. If
distributions had not been reinvested, the amount of distributions earned
from the fund over time would have been smaller, and cash payments for the
period would have amounted to $____ for dividends and $___ for capital
gains distributions. Tax consequences of different investments have not
been factored into the above figures.
ASSET MANAGER PORTFOLIO During the period from September 6, 1989
(commencement of operations) to December 31, 1995, a hypothetical $10,000
investment in Asset Manager Portfolio would have grown to $_____, assuming
all distributions were reinvested. This was a period of fluctuating
interest rates, bond prices, and stock prices and the figures below
should not be considered representative of the dividend income or capital
gain or loss that could be realized from an investment in the fund today.
ASSET MANAGER PORTFOLIO INDICES

1995 $ $ $ $ $ $ $

1994 $13,790 $1,779 $1,201 $16,770 $15,372 $16,542 $12,014

1993 $15,420 $1,642 $795 $17,857 $15,172 $15,758 $11,701

1992 $13,320 $1,004 $406 $14,730 $13,783 $13,470 $11,388

1991 $12,550 $610 $25 $13,185 $12,804 $12,554 $11,067

1990 $10,240 $497 $21 $10,758 $9,813 $10,096 $10,738

1989* $9,970 $91 $20 $10,081 $10,128 $10,151 $10,120

</TABLE>

* From September 6, 1989 (commencement of operations).
** From month-end closest to initial investment date.

Explanatory Notes: With an initial investment of $10,000 made on September
6, 1989, the net amount invested in fund shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the fund over time would have been smaller, and cash payments for the
period would have amounted to $_____ for dividends and $_____ for capital
gains distributions. Tax consequences of different investments have not
been factored into the above figures.
INDEX 500 PORTFOLIO During the period from August 27, 1992 (commencement of
operations) to December 31, 199 5 , a hypothetical $10,000 investment
in Index 500 Portfolio would have grown to $_____, assuming all
distributions were reinvested. This was a period of fluctuating stock
prices and the figures below should not be considered representative of the
dividend income or capital gain or loss that could be realized from an
investment in the fund today.
INDEX 500 PORTFOLIO INDICES

1995 $ $ $ $ $ $ $

1994 $11,244 $363 $180 $11,787 $11,876 $12,618 $10,625

1993 $11,148 $360 $158 $11,666 $11,722 $12,021 $10,348

1992* $10,520 $95 $16 $10,631 $10,648 $10,275 $10,071

</TABLE>

* From August 27, 1992 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on August 27,
1992, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to $____. If
distributions had not been reinvested, the amount of distributions earned
from the fund over time would have been smaller, and cash payments for the
period would have amounted to $___ for dividends and $___ for capital gains
distributions. Tax consequences of different investments have not been
factored into the above figures.
CONTRAFUND PORTFOLIO During the period from January 3, 1995 (commencement
of operations) to December 31, 1995, a hypo thetical $10,000 investment
in Contrafund would have grown to $_____, assuming all distributions were
reinvested. This was a period of fluctuating stock prices and the figures
below should not be considered representative of the dividend income or
capital gain or loss that could be realized from an investment in the fund
today.
CONTRAFUND PORTFOLIO INDICES

1995* $ $ $ $ $ $ $

</TABLE>

1995* $ $ $ $ $ $ $

</TABLE>

* From January 3, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on January 3,
1995, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the fund over time would have been smaller, and cash payments for the
period would have amounted to $_____ for dividends and $___ for capital
gains distributions. Tax consequences of different investments have not
been factored into the above figures.
INTERNATIONAL INDICES, MARKET CAPITALIZATION, AND NATIONAL
STOCK MARKET RETURN
The following tables show the total market capitalization of certain
countries according to the Morgan Stanley Capital International Indices
database, the total market capitalization of Latin American countries
according to the International Finance Corporation Emerging Markets
database, and the performance of national stock markets as measured in U.S.
dollars by the Morgan Stanley Capital International stock market indices
for the twelve months ended October 31, 1993. Of course, these results are
not indicative of future stock market performance or the funds'
performance. Market conditions during the periods measured fluctuated
widely. Brokerage commissions and other fees are not factored into the
values of the indices.
MARKET CAPITALIZATION. Companies outside the U.S. now make up nearly
two-thirds of the world's stock market capitalization. According to Morgan
Stanley Capital International, the size of the markets as measured in U.S.
dollars grew from $2,011 billion in 1982 to $8,512 billion in 1995.
The following table measures the total market capitalization of certain
countries according to the Morgan Stanley Capital International Indices'
database. The value of the markets are measured in billions of U.S. dollars
as of ________, 199 .
TOTAL MARKET CAPITALIZATION
Australia $ Japan $

Austria Netherlands

Belgium Norway

Canada Singapore/Malaysia

Denmark Spain

France Sweden

Germany Switzerland

Hong Kong United Kingdom

Italy United States

The following table measures the total market capitalization of Latin
American countries according to the International Finance Corporation
Emerging Markets database. The value of the markets is measured in billions
of U.S. dollars as of ______, 1996.
TOTAL MARKET CAPITALIZATION - LATIN AMERICA
Argentina $

Brazil

Chile

Colombia

Mexico

Venezuela

NATIONAL STOCK MARKET PERFORMANCE. Certain national stock markets
have outperformed the U.S. stock market. The first table below represents
the performance of national stock markets as measured in U.S. dollars by
the Morgan Stanley Capital International Stock Market Indices for the
twelve months ended _________, 1996. The second table shows the same
performance as measured in local currency. Each table measures total return
based on the period's change in price, dividends paid on stocks in the
index, and the effect of reinvesting dividends net of any applicable
foreign taxes. These are unmanaged indices composed of a sampling of
selected companies representing an approximation of the market structure of
the designated country.
STOCK MARKET PERFORMANCE (CUMULATIVE TOTAL RETURNS)
MEASURED IN U.S. DOLLARS (INCLUDES NET DIVIDENDS REINVESTED MONTHLY)
12 MONTHS ENDED ________, 1996
Australia $ Japan $

Austria Netherlands

Belgium Norway

Canada Singapore/Malaysia

Denmark Spain

France Sweden

Germany Switzerland

Hong Kong United Kingdom

Italy United States

The following table shows average annualized stock market returns
measured in U.S. dollars as of ________, 1996.
STOCK MARKET PERFORMANCE
Five Years Ended Ten Years Ended
________, 1996 _________, 1996

Germany $ $

Hong Kong

Japan

Spain

United Kingdom

United States

The results are not indicative of future stock market performance or of
any fund's performance. Market conditions during the periods measured
fluctuated widely. Brokerage commissions and other fees are not factored
into the values of the indices.
PERFORMANCE COMPARISONS. A fund's performance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed as
mutual fund rankings prepared by Lipper Analytical Services, Inc. (Lipper),
an independent service located in Summit, New Jersey that monitors the
performance of mutual funds. Lipper generally ranks funds on the basis of
total return, assuming reinvestment of distributions, but does not take
sales charges or redemption fees into consideration, and is prepared
without regard to tax consequences. Lipper may also rank funds based on
yield. In addition to the mutual fund rankings, a fund's performance may be
compared to stock, bond, and money market mutual fund performance indices
prepared by Lipper or other organizations. When comparing these indices, it
is important to remember the risk and return characteristics of each type
of investment. For example, while stock mutual funds may offer higher
potential returns, they also carry the highest degree of share price
volatility. Likewise, money market funds may offer greater stability of
principal, but generally do not offer the higher potential returns
available from stock mutual funds.
(Asset Manager and Asset Manager: Growth Portfolios) The Asset
Allocation Composite Index is a hypothetical representation of the
performance of the combination of Asset Manager's three asset classes
according to their respective weighting in the fund's neutral mix (20% -
short-term instruments; 40% - bonds; and 40% - stocks). The Aggressive
Asset Allocation Composite Index is a hypothetical representation of the
performance of the combination of Asset Manager: Growth's three asset
classes according to their respective weighting in the fund's neutral mix
(5% - short-term instruments; 30% - bonds; and 65% - stocks). The following
indices are used to calculate the three asset allocation composite indices:
the Solomon Brothers 3-Month T-Bill Total Rate of Return Index,
representing the average of T-Bill rates for each of the prior three
months, adjusted to a bond equivalent yield basis (short-term instruments);
the Lehman Brothers Treasury Bond Index, a widely utilized benchmark of
bond market performance that includes virtually all long-term public
obligations of the U.S. Treasury (bonds); and the S&P 500, which represents
common stocks (stocks).
Each fund has the ability to invest in securities that are not included in
any of the indices, and each fund's actual investment portfolio may not
reflect the composition or the weighting of the indices used. The S&P 500
and the asset allocation composite indices include reinvestment of income
or dividends and are based on the prices of unmanaged groups of stocks or
U.S. Treasury obligations. Unlike the funds' returns, the indices do not
include the effect of paying brokerage commissions, spreads, or other costs
of investing. Historical results are used for illustrative purposes only
and do not reflect the past or future performance of the funds.
The following table represents the comparative calendar year-to-year
performance of the funds' asset classes:
SHORT-TERM INSTRUMENTS BONDS STOCKS

1995 % % %

1994 4.24% -3.38% 1.32%

1993 3.09 10.68 10.08

1992 3.61 7.21 7.62

1991 5.75 15.29 30.47

1990 7.90 8.54 -3.10

1989 8.64 14.38 31.69

1988 6.76 6.99 16.61

1987 5.91 2.00 5.10

1986 6.23 15.61 18.56

From time to time, a fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
A fund may be compared in advertising to Certificates of Deposit (CDs) or
other investments issued by banks or other depository institutions. Mutual
funds differ from bank investments in several respects. For example, a fund
may offer greater liquidity or higher potential returns than CDs, a fund
does not guarantee your principal or your return, and fund shares are not
FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
Each fixed-income fund may compare its performance or the performance of
securities in which that fixed-income fund may invest to averages published
by IBC USA (Publications), Inc. of Ashland, Massachusetts. These averages
assume reinvestment of distributions. The Bond Fund Report AverageSTM/All
Taxable (High Income and Investment Grade Bond) which is reported in the
BOND FUND REPORT(Registered trademark), covers over 488 taxable bond funds.
The IBC/Donoghue's MONEY FUND AVERAGES(trademark)/All Taxable (Money
Market), which is reported in the MONEY FUND REPORT(registered trademark),
covers over 766 taxable money market funds. When evaluating comparisons
to money market funds, investors should consider the relevant differences
in investment objectives and policies. Specifically, a money market fund
invests in short-term, high-quality instruments and seek to maintain a
stable $1.00 share price. A bond fund, however, invests in longer-term
instruments and its share price changes daily in response to a variety of
factors.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include the following: other Fidelity funds;
retirement investing; model portfolios or allocations; and saving
for college or other goals. In addition, Fidelity may quote or reprint
financial or business publications and periodicals, as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the desirability
of owning a particular mutual fund, and Fidelity services and products.
A fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
VOLATILITY. A fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, the fund may compare these
measures to those of other funds. Measures of volatility seek to compare
the fund's historical share price fluctuations or total returns to those of
a benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data. In advertising, a fund
may also discuss or illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate a fund's price movements over specific periods
of time. Each point on the momentum indicator represents the fund's
percentage change in price movements over that period.
The funds may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program,
a policyowner invests at periodic intervals a fixed dollar amount in
an insurance company's sub-account, which in turn invests in a fund,
thereby purchasing fewer units when prices are high and more units when
prices are low. While such a strategy does not assure a profit or guard
against loss in a declining market, the policyowner's average cost per unit
can be lower than if fixed numbers of units had been purchased at the
same intervals. In evaluating such a plan, policyowners should consider
their ability to continue purchasing units through periods of low price
levels.
As of December 31, 1995, FMR advised over $__ billion in tax-free fund
assets, $__ billion in money market fund assets, $___ billion in equity
fund assets, $__ billion in international fund assets, and $___ billion in
Spartan fund assets. The funds may reference the growth and variety of
money market mutual funds and the adviser's innovation and participation in
the industry. The equity funds under management figure represents the
largest amount of equity fund assets under management by a mutual fund
investment adviser in the United States, making FMR America's leading
equity (stock) fund manager. FMR, its subsidiaries, and affiliates maintain
a worldwide information and communications network for the purpose of
researching and managing investments abroad.
Each fund is available only through the purchase of variable annuity and
variable life insurance contracts offering deferral of income taxes on
earnings, which may produce superior after-tax returns over time. For
example, a $1,000 investment earning a taxable return of 10% annually would
have an after-tax value of $1,949 after ten years, assuming tax was
deducted from the return each year at a 31% rate. An equivalent
tax-deferred investment would have an after-tax value of $2,100 after ten
years, assuming tax was deducted at a 31% rate from the tax-deferred
earnings at the end of the ten-year period. Individuals holding shares of a
fund through a variable annuity or variable life insurance contract may
receive additional tax benefits from the deferral of income taxes
associated with variable contracts. Individuals should consult their tax
advisors to determine the effect of holding variable contracts on their
individual tax situations.
YIELDS AND TOTAL RETURNS QUOTED FOR A FUND INCLUDE THE FUND'S
EXPENSES, BUT MAY NOT INCLUDE CHARGES AND EXPENSES ATTRIBUTABLE TO ANY
PARTICULAR INSURANCE PRODUCT. SINCE YOU CAN PURCHASE SHARES OF EACH FUND
ONLY THROUGH A VARIABLE ANNUITY AND/OR A VARIABLE LIFE INSURANCE
CONTRACT, YOU SHOULD CAREFULLY REVIEW THE PROSPECTUS OF THE INSURANCE
PRODUCT YOU HAVE CHOSEN FOR INFORMATION ON RELEVANT CHARGES AND EXPENSES.
Excluding these charges from quotations of a fund's performance has the
effect of increasing the performance quoted.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each fund is open for business and its net asset value per share (NAV) is
calculated each day the New York Stock Exchange (NYSE) is open for trading.
The NYSE has designated the following holiday closings for 1996: New
Year's Day, Presidents' Day (observed), Good Friday, Memorial Day
(observed), Independence Day, Labor Day, Thanksgiving Day, and Christmas
Day. Although FMR expects the same holiday schedule to be observed in
the future, the NYSE may modify its holiday schedule at any time. In
addition, the funds will not process wire purchases and redemptions on days
when the Federal Reserve Wire System is closed.
FSC normally determines each fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the Securities and
Exchange Commission (SEC). To the extent that portfolio securities are
traded in other markets on days when the NYSE is closed, a fund's NAV may
be affected on days when investors do not have access to the fund to
purchase or redeem shares. In addition, trading in some of a fund's
portfolio securities may not occur on days when the fund is open for
business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing a fund's NAV. Shareholders receiving securities or other property
on redemption may realize a gain or loss for tax purposes, and will incur
any costs of sale, as well as the associated inconveniences.
In the Prospectus, each fund has notified shareholders that it reserves
the right at any time, without prior notice, to refuse purchases if, in
FMR's judgment, the fund would be unable to invest effectively in
accordance with its investment objective and policies, or would otherwise
potentially be adversely affected.
D ISTRIBUTIONS AND TAXES
For a discussion of tax consequences of variable contracts, please refer to
your insurance company's separate account prospectus.
Variable contracts purchased through insurance company separate accounts
provide for the accumulation of all earnings from interest, dividends, and
capital appreciation without current federal income tax liability to the
owner. Depending on the variable contract, distributions from the contract
may be subject to ordinary income tax and a 10% penalty tax on
distributions before age 59 1/2. Only the portion of a distribution
attributable to income is subject to federal income tax. Investors should
consult with competent tax advisors for a more complete discussion of
possible tax consequences in a particular situation.
Section 817(h) of the Internal Revenue Code provides that the investments
of a separate account underlying a variable insurance contract (or the
investments of a mutual fund, the shares of which are owned by the variable
separate account) must be "adequately diversified" in order for the
contract to be treated as an annuity or life insurance for tax purposes.
The Treasury Department has issued regulations prescribing these
diversification requirements. Each fund intends to comply with these
requirements.
Each fund intends to qualify each year as a "regulated investment company"
for tax purposes, so that it will not be liable for federal tax on income
and capital gains distributed to shareholders. In order to qualify as a
regulated investment company and avoid being subject to federal income or
excise taxes, each fund intends to distribute substantially all its net
taxable income and net realized capital gains within each calendar year as
well as on a fiscal year basis. Each fund also intends to comply with other
tax rules applicable to regulated investment companies including a
requirement that gross capital gains from selling securities held less than
three months must constitute less than 30% of a fund's gross income for
each fiscal year. Gains from some forward currency contracts, futures
contracts, and options are included in this 30% calculation, which may
limit a fund's investments in such instruments. Income and capital gain
distributions are reinvested in additional shares of the fund. This is done
to preserve the tax advantaged status of the variable contracts. Each fund
is treated as a separate entity from the other funds of its
respective trust for tax purposes. Money Market Portfolio may
distribute any net realized short-term gains once each year, or more
frequently if necessary, in order to maintain the fund's NAV at $1.00 per
share and to comply with tax regulations.
If a fund purchases shares in certain foreign investment entities,
defined as passive foreign investment companies (PFICs) in the Internal
Revenue Code, it may be subject to U.S. federal income tax on a portion of
any excess distribution or gain from the disposition of such shares.
Interest charges may also be imposed on the fund with respect to deferred
taxes arising from such distributions or gains. Generally, a fund will
elect to mark-to-market any PFIC shares. Unrealized gains will be
recognized as income for tax purposes and must be distributed to
shareholders as dividends.
MONEY MARKET PORTFOLIO - As of December 31, 1995, the fund had a capital
loss carryforward of approximately $_____ of which $_____, $4,100, $500,
$4,900, $4,300 and $80,800 will expire on December 31, 1996, 1995, 1996,
1997, 2000 and 2002, respectively.
HIGH INCOME PORTFOLIO - As of December 31, 1995, the fund had a capital
loss carryforward of approximately $______, all of which will expire on
December 31, 2002.
GROWTH PORTFOLIO - As of December 31, 1995, the fund had a capital loss
carryforward of approximately $______, all of which will expire on December
31, 2002.
INVESTMENT GRADE BOND PORTFOLIO - As of December 31, 1995, the fund had a
capital loss carryforward of approximately $______, all of which will
expire on December 31, 2002.
ASSET MANAGER PORTFOLIO - As of December 31, 1995, the fund had a capital
loss carryforward of approximately $______, all of which will expire on
December 31, 2002.
EQUITY-INCOME, OVERSEAS AND INDEX 500 PORTFOLIOS - As of December 31, 1995,
no fund had a capital loss carryforward.
FMR
All of the stock of FMR is owned by FMR Corp., its parent organized in
1972. The voting common stock of FMR Corp. is divided into two classes.
Class B is held predominantly by members of the Edward C. Johnson 3d family
and is entitled to 49% of the vote on any matter acted upon by the voting
common stock. Class A is held predominantly by non-Johnson family member
employees of FMR Corp. and its affiliates and is entitled to 51% of the
vote on any such matter. The Johnson family group and all other Class B
shareholders have entered into a shareholders' voting agreement under which
all Class B shares will be voted in accordance with the majority vote of
Class B shares. Under the Investment Company Act of 1940 (1940 Act),
control of a company is presumed where one individual or group of
individuals owns more than 25% of the voting stock of that company.
Therefore, through their ownership of voting common stock and the execution
of the shareholders' voting agreement, members of the Johnson family may be
deemed, under the 1940 Act, to form a controlling group with respect to FMR
Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
Fidelity Investments Institutional Operations Company, which performs
shareholder servicing functions for institutional customers and funds sold
through intermediaries; and Fidelity Investments Retail Marketing Company,
which provides marketing services to various companies within the Fidelity
organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades in most securities require pre-clearance, and participation
in initial public offerings is prohibited. In addition, restrictions on the
timing of personal investing in relation to trades by Fidelity funds and on
short-term trading have been adopted.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the trust are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
also serve in similar capacities for other funds advised by FMR. The
business address of each Trustee and officer who is an "interested person"
(as defined in the Investment Company Act of 1940) is 82 Devonshire Street,
Boston, Massachusetts 02109, which is also the address of FMR. The business
address of all the other Trustees is Fidelity Investments, P.O. Box 9235,
Boston, Massachusetts 02205-9235. Those Trustees who are "interested
persons" by virtue of their affiliation with either the trust or FMR are
indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d (_), Trustee and President, is Chairman, Chief
Executive Officer and a Director of FMR Corp.; a Director and Chairman of
the Board and of the Executive Committee of FMR; Chairman and a Director of
FMR Texas Inc., Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD (_), Trustee and Senior Vice President, is President of
FMR; and President and a Director of FMR Texas Inc., Fidelity Management &
Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc.
RALPH F. COX (_), Trustee (1991), is a consultant to Western Mining
Corporation (1994). Prior to February 1994, he was President of Greenhill
Petroleum Corporation (petroleum exploration and production, 1990). Until
March 1990, Mr. Cox was President and Chief Operating Officer of Union
Pacific Resources Company (exploration and production). He is a Director of
Sanifill Corporation (non-hazardous waste, 1993) and CH2M Hill Companies
(engineering). In addition, he served on the Board of Directors of the
Norton Company (manufacturer of industrial devices, 1983-1990) and
continues to serve on the Board of Directors of the Texas State Chamber of
Commerce, and is a member of advisory boards of Texas A&M University and
the University of Texas at Austin.
PHYLLIS BURKE DAVIS (_), Trustee (1992). Prior to her retirement in
September 1991, Mrs. Davis was the Senior Vice President of Corporate
Affairs of Avon Products, Inc. She is currently a Director of BellSouth
Corporation (telecommunications), Eaton Corporation (manufacturing, 1991),
and the TJX Companies, Inc. (retail stores, 1990), and previously served as
a Director of Hallmark Cards, Inc. (1985-1991) and Nabisco Brands, Inc. In
addition, she is a member of the President's Advisory Council of The
University of Vermont School of Business Administration.
RICHARD J. FLYNN (_), Trustee, is a financial consultant. Prior to
September 1986, Mr. Flynn was Vice Chairman and a Director of the Norton
Company (manufacturer of industrial devices). He is currently a Trustee of
College of the Holy Cross and Old Sturbridge Village, Inc., and he
previously served as a Director of Mechanics Bank (1971-1995).
E. BRADLEY JONES (_), Trustee (1990). Prior to his retirement in 1984, Mr.
Jones was Chairman and Chief Executive Officer of LTV Steel Company. He is
a Director of TRW Inc. (original equipment and replacement products),
Cleveland-Cliffs Inc (mining), Consolidated Rail Corporation, Birmingham
Steel Corporation, and RPM, Inc. (manufacturer of chemical products, 1990),
and he previously served as a Director of NACCO Industries, Inc. (mining
and marketing, 1985-1995) and Hyster-Yale Materials Handling, Inc.
(1985-1995). In addition, he serves as a Trustee of First Union Real Estate
Investments, a Trustee and member of the Executive Committee of the
Cleveland Clinic Foundation, a Trustee and member of the Executive
Committee of University School (Cleveland), and a Trustee of Cleveland
Clinic Florida.
DONALD J. KIRK (_), Trustee, is Executive-in-Residence (1995) at Columbia
University Graduate School of Business and a financial consultant. From
1987 to January 1995, Mr. Kirk was a Professor at Columbia University
Graduate School of Business. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance), and he previously served as a Director of
Valuation Research Corp. (appraisals and valuations, 1993-1995). In
addition, he serves as Chairman of the Board of Directors of the National
Arts Stabilization Fund, Vice Chairman of the Board of Trustees of the
Greenwich Hospital Association, and as a Member of the Public Oversight
Board of the American Institute of Certified Public Accountants' SEC
Practice Section (1995).
*PETER S. LYNCH (_), Trustee (1990) is Vice Chairman and Director of FMR
(1992). Prior to May 31, 1990, he was a Director of FMR and Executive Vice
President of FMR (a position he held until March 31, 1991); Vice President
of Fidelity Magellan Fund and FMR Growth Group Leader; and Managing
Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity
Investments Corporate Services (1991-1992). He is a Director of W.R. Grace
& Co. (chemicals) and Morrison Knudsen Corporation (engineering and
construction). In addition, he serves as a Trustee of Boston College,
Massachusetts Eye & Ear Infirmary, Historic Deerfield (1989) and Society
for the Preservation of New England Antiquities, and as an Overseer of the
Museum of Fine Arts of Boston (1990).
GERALD C. McDONOUGH (_), Trustee, is Chairman of G.M. Management Group
(strategic advisory services). Prior to his retirement in July 1988, he was
Chairman and Chief Executive Officer of Leaseway Transportation Corp.
(physical distribution services). Mr. McDonough is a Director of
ACME-Cleveland Corp. (metal working, telecommunications and electronic
products), Brush-Wellman Inc. (metal refining), York International Corp.
(air conditioning and refrigeration), Commercial Intertech Corp. (water
treatment equipment, 1992), and Associated Estates Realty Corporation (a
real estate investment trust, 1993).
EDWARD H. MALONE (_), Trustee. Prior to his retirement in 1985, Mr. Malone
was Chairman, General Electric Investment Corporation and a Vice President
of General Electric Company. He is a Director of Allegheny Power Systems,
Inc. (electric utility), General Re Corporation (reinsurance) and Mattel
Inc. (toy manufacturer). In addition, he serves as a Trustee of the Naples
Philharmonic Center for the Arts and Rensselaer Polytechnic Institute, and
he is a member of the Advisory Boards of Butler Capital Corporation Funds
and Warburg, Pincus Partnership Funds.
MARVIN L. MANN (_), Trustee (1993) is Chairman of the Board, President, and
Chief Executive Officer of Lexmark International, Inc. (office machines,
1991). Prior to 1991, he held the positions of Vice President of
International Business Machines Corporation ("IBM") and President and
General Manager of various IBM divisions and subsidiaries. Mr. Mann is a
Director of M.A. Hanna Company (chemicals, 1993) and Infomart (marketing
services, 1991), a Trammell Crow Co. In addition, he serves as the Campaign
Vice Chairman of the Tri-State United Way (1993) and is a member of the
University of Alabama President's Cabinet (1990).
THOMAS R. WILLIAMS (_), Trustee, is President of The Wales Group, Inc.
(management and financial advisory services). Prior to retiring in 1987,
Mr. Williams served as Chairman of the Board of First Wachovia Corporation
(bank holding company), and Chairman and Chief Executive Officer of The
First National Bank of Atlanta and First Atlanta Corporation (bank holding
company). He is currently a Director of BellSouth Corporation
(telecommunications), ConAgra, Inc. (agricultural products), Fisher
Business Systems, Inc. (computer software), Georgia Power Company (electric
utility), Gerber Alley & Associates, Inc. (computer software), National
Life Insurance Company of Vermont, American Software, Inc., and AppleSouth,
Inc. (restaurants, 1992).
WILLIAM J. HAYES (_), Vice President (1994), is Vice President of
Fidelity's equity funds; Senior Vice President of FMR; and Managing
Director of FMR Corp.
ROBERT H. MORRISON (_), Manager of Security Transactions of Fidelity's
equity funds is Vice President of FMR.
ROBERT A. LAWRENCE (_), Vice President (1994), is Vice President of
Fidelity's high income funds and Senior Vice President of FMR (1993). Prior
to joining FMR, Mr. Lawrence was Managing Director of the High Yield
Department for Citicorp (1984-1991).]
FRED L. HENNING, JR. (_), Vice President, is Vice President of Fidelity's
money market (1994) and fixed-income (1995) funds and Senior Vice President
of FMR Texas Inc.
ROBERT LITTERST (_), Vice President of Money Market Portfolio (1992), is an
employee of FMR.
BARRY COFFMAN (_), Vice President of High Income Portfolio (1992), is an
employee of FMR.
BETTINA DOULTON (_), Vice President of Equity-Income Portfolio (1995), is
an employee of FMR.
LAWRENCE GREENBERG (_), Vice President of Growth Portfolio (1994), is an
employee of FMR.
JOHN R. HICKLING (_), Vice President of Overseas Portfolio (1993), is an
employee of FMR.
MICHAEL GRAY (_), Vice President of Investment Grade Bond Portfolio (1995),
is an employee of FMR.
WILLIAM DANOFF (_), Vice President of Contrafund Portfolio (1995), is an
employee of FMR.
ANDREW OFFIT (_), Vice President of Asset Manager Portfolio and Asset
Manager: Growth Portfolio (1995), is an employee of FMR.
ARTHUR S. LORING (_), Secretary, is Senior Vice President (1993) and
General Counsel of FMR, Vice President-Legal of FMR Corp., and Vice
President and Clerk of FDC.
KENNETH A. RATHGEBER (__), Treasurer (1995), is Treasurer of the Fidelity
funds and is an employee of FMR (1995). Before joining FMR, Mr. Rathgeber
was a Vice President of Goldman Sachs & Co. (1978-1995), where he served in
various positions, including Vice President of Proprietary Accounting
(1988-1992), Global Co-Controller (1992-1994), and Chief Operations Officer
of Goldman Sachs (Asia) LLC (1994-1995)
THOMAS D. MAHER (_), Assistant Vice President (1990), is Assistant Vice
President of Fidelity's money market funds and Vice President and Associate
General Counsel of FMR Texas Inc. (1990). Prior to 1990, Mr. Maher was an
employee of FMR.
JOHN H. COSTELLO (_), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH (_), Assistant Treasurer (1994), is an employee of FMR
(1994). Prior to becoming Assistant Treasurer of the Fidelity funds, Mr.
Rush was Chief Compliance Officer of FMR Corp. (1993-1994); Chief Financial
Officer of Fidelity Brokerage Services, Inc. (1990-1993); and Vice
President, Assistant Controller, and Director of the Accounting Department
- - First Boston Corp. (1986-1990).
The following table sets forth information describing the compensation of
each current trustee of each fund for his or her services as trustee for
the fiscal year ended December 31, 1995.
COMPENSATION TABLE
Aggregate Compensation

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
J. Gary Ralph Phyllis Richard Edward C. E. Donald Peter S. Gerald C. Edward Marvin Thomas
Burkhead** F. Cox Burke J. Flynn Johnson Bradley J. Kirk Lynch** McDonough H. L. Mann R.
Davis 3d** Jones Malone Williams

Money Market $ $ $ $ $ $ $ $ $ $ $ $

High Income $ $ $ $ $ $ $ $ $ $ $ $

Equity-Income $ $ $ $ $ $ $ $ $ $ $ $

Growth $ $ $ $ $ $ $ $ $ $ $ $

Overseas $ $ $ $ $ $ $ $ $ $ $ $

Investment $ $ $ $ $ $ $ $ $ $ $ $
Grade Bond

Asset Manager $ $ $ $ $ $ $ $ $ $ $ $

Index 500 $ $ $ $ $ $ $ $ $ $ $ $

Contrafund[+] $ $ $ $ $ $ $ $ $ $ $ $

Asset Manager:
Growth[+]

</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Trustees Pension or Estimated Annual Total
Retirement Benefits Upon Compensation
Benefits Accrued Retirement from from the Fund
as Part of Fund the Fund Complex*
Expenses from the Complex*
Fund Complex*

J. Gary Burkhead** $ 0 $ 0 $ 0

Ralph F. Cox 5,200 52,000 128,000

Phyllis Burke Davis 5,200 52,000 125,000

Richard J. Flynn 0 52,000 160,500

Edward C. Johnson 3d** 0 0 0

E. Bradley Jones 5,200 49,400 128,000

Donald J. Kirk 5,200 52,000 129,500

Peter S. Lynch** 0 0 0

Gerald C. McDonough 5,200 52,000 128,000

Edward H. Malone 5,200 44,200 128,000

Marvin L. Mann 5,200 52,000 128,000

Thomas R. Williams 5,200 52,000 125,000
</TABLE>
* Information is as of December 31, 1995 for 219 funds in the complex.
** Interested trustees of the fund are compensated by FMR.
+ Estimated, the fund commenced operations January 3, 1995.
The non-interested Trustees may elect to defer receipt of all or a
percentage of their annual fees in accordance with the terms of a Deferred
Compensation Plan (the Plan). Under the Plan, compensation deferred by a
Trustee is periodically adjusted as though an equivalent amount had been
invested and reinvested in shares of one or more funds in the complex
designated by such Trustee (designated securities). The amount paid to the
Trustee under the Plan will be determined based upon the performance of
such investments. Deferral of Trustees' fees in accordance with the Plan
will have a negligible effect on a fund's assets, liabilities, and net
income per share, and will not obligate the fund to retain the services of
any Trustee or to pay any particular level of compensation to the Trustee.
Each fund may invest in such designated securities under the Plan without
shareholder approval.
Under a retirement program adopted in July 1988, the non-interested
Trustees, upon reaching age 72, become eligible to participate in a
retirement program under which they receive payments during their lifetime
from a fund based on their basic trustee fees and length of service. The
obligation of a fund to make such payments is not secured or funded.
Trustees become eligible if, at the time of retirement, they have served on
the Board for at least five years. Currently, Messrs. Ralph S. Saul,
William R. Spaulding, Bertram H. Witham, and David L. Yunich, all former
non-interested Trustees, receive retirement benefits under the program.
On December 31, 1995, the Trustees and officers of each fund owned, in the
aggregate, less than 1% of each fund's total outstanding shares.
A shareholder owning of record or beneficially more than 25% of a fund's
outstanding shares may be considered a controlling person. That
shareholder's vote could have a more significant effect on matters
presented at a shareholders' meeting than votes of other shareholders. As
of December 31, 1995, significant shares of the funds were held by the
following companies with the figures beneath each fund representing that
company's holdings as a percentage of that fund's total outstanding
shares.

Asset
Invest Asset Manag
Money High Equity- Overse ment Manag er: Contra Index
Market Income Income Growth as Grade er Growth fund 500

American United Life -- -- -- -- -- -- -- -- % %
Insurance Company
(Indianapolis, IN)

Ameritas Variable Life % -- -- -- -- % -- -- -- --
Insurance Company
(Lincoln, NE)

Empire Fidelity -- -- -- -- -- -- -- -- % %
Investments Life Insurance
Company
(New York, NY)

Fidelity Investments Life % % % % % % % % % %
Insurance Company
(Boston, MA)

Integrity Life Insurance -- -- -- -- -- 6% -- -- -- --
Company
(Louisville, KY)

The Life Insurance % -- % % % -- % % -- --
Company of Virginia
(Richmond, VA)

Northwestern National -- -- -- -- -- % -- -- % %
Life Insurance Company
(Minneapolis, MN)

PFL Life Insurance % % % -- -- % -- -- -- --
Company
(Cedar Rapids, IA)

Provident Mutual Life -- -- -- -- -- -- -- -- % %
Insurance Company
(Philadelphia, PA)

Nationwide Life Insurance -- % % % % -- % % -- --
Company
(Columbus, OH)

The New England Life -- -- -- -- % -- -- -- -- --
Insurance Company
(Boston, MA)

State Mutual Life -- % % % % -- -- -- -- --
Assurance Company
(Worcester, MA)

The Travelers Insurance -- % -- % -- -- % % -- --
Company
(Hartford, CT)

</TABLE>

MANAGEMENT CONTRACTS
Each fund employs FMR to furnish investment advisory and other services.
Under its management contract with each fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of each fund in accordance with its investment objective,
policies, and limitations. FMR also provides each fund with all necessary
office facilities and personnel for servicing each fund's investments,
compensates all officers of each fund and all Trustees who are "interested
persons" of the trusts or of FMR, and all personnel of each fund or FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of each fund. These services include providing facilities
for maintaining each fund's organization; supervising relations with
custodians, transfer and pricing agents, accountants, underwriters, and
other persons dealing with each fund; preparing all general shareholder
communications and conducting shareholder relations; maintaining each
fund's records and the registration of each fund's shares under federal and
state laws; developing management and shareholder services for each fund;
and furnishing reports, evaluations, and analyses on a variety of subjects
to the Trustees.
In addition to the management fee payable to FMR and the fees payable to
FSC and FIIOC, each fund pays all of its expenses, without limitation, that
are not assumed by those parties. Each fund pays for typesetting, printing,
and mailing proxy material to shareholders, legal expenses, and the fees of
the custodian, auditor, and non-interested Trustees. Although each fund's
current management contract provides that it will pay for typesetting,
printing, and mailing prospectuses, statements of additional information,
notices, and reports to existing shareholders, each trust on behalf of each
fund has entered into a revised transfer agent agreement with FIIOC,
pursuant to which FIIOC bears the cost of providing these services to
existing shareholders. Other expenses paid by each fund include interest,
taxes, brokerage commissions, each fund's proportionate share of insurance
premiums and Investment Company Institute dues, and the costs of
registering shares under federal and state securities laws. Each fund is
also liable for such non-recurring expenses as may arise, including costs
of any litigation to which each fund may be a party, and any obligation it
may have to indemnify its officers and Trustees with respect to litigation.
FMR is each fund's manager pursuant to management contracts dated as
follows:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investme Asset
nt Grade Manager
Money High Equity-I Bond Asset Index Contrafu : Growth
Market Income ncome Growth Overseas Manager 500 nd

Contract January January January January January January January January Novemb Novemb
Dated 1, 1994 1, 1994 1, 1993 1, 1993 1, 1993 1, 1993 1, 1993 1, 1993 er 1, er 1,
1994 1994

Date Decembe Decembe Decembe Decembe Decembe Decembe Decembe Decembe Novemb Novemb
Approved r 15, r 15, r 16, r 16, r 16, r 16, r 16, r 16, er 9, er 9,
by 1993 1993 1992 1992 1992 1992 1992 1992 1994 1994
Sharehold
ers

</TABLE>

The management fee paid to FMR by Index 500 Portfolio is reduced by an
amount equal to the fees and expenses of the non-interested Trustees.
MONEY MARKET PORTFOLIO: For the services of FMR under the contract, the
fund pays FMR a monthly management fee composed of a group fee rate and an
individual fund fee rate (.03%), and an income-based component of 6% of the
fund's gross income in excess of a 5% yield. The maximum income-based
component is .24% of average net assets.
The group fee rate is based on the monthly average net assets of all of the
registered investment companies with which FMR has management contracts and
is calculated on a cumulative basis pursuant to the graduated fee rate
schedule shown below on the left. The schedule below on the right
shows the effective annual group fee rate at various asset levels, which is
the result of cumulatively applying the annualized rates on the left. For
example, the effective annual fee rate at $___ billion of group net assets
- - their approximate level for December 1995 - was .___%, which is the
weighted average of the respective fee rates for each level of group net
assets up to $___ billion.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES

Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate

$ 0 - 3 billion .3700% $ 0.5 billion .3700%

3 - 6 .3400 25 .2664

6 - 9 .3100 50 .2188

9 - 12 .2800 75 .1986

12 - 15 .2500 100 .1869

15 - 18 .2200 125 .1793

18 - 21 .2000 150 .1736

21 - 24 .1900 175 .1695

24 - 30 .1800 200 .1658

30 - 36 .1750 225 .1629

36 - 42 .1700 250 .1604

42 - 48 .1650 275 .1583

48 - 66 .1600 300 .1565

66 - 84 .1550 325 .1548

84 - 120 .1500 350 .1533

120 - 174 .1450 400 .1507

174 - 228 .1400

228 - 282 .1375

282 - 336 .1350

Over 336 .1325

On August 1, 1994, FMR voluntarily revised the group fee rate schedule
by adding new breakpoints for average group assets in excess of $156
billion and under $372 billion as shown in the schedule below. The revised
group fee rate schedule was identical to the above schedule for average
group assets under $156 billion.
On January 1, 1996, FMR voluntarily added new breakpoints to the revised
schedule for average group assets in excess of $372 billion, pending
shareholder approval of a new management contract reflecting the revised
schedule and additional breakpoints. The revised group fee rate schedule
and its extensions provide for lower management fee rates as FMR's assets
under management increase. For average group assets in excess of $156
billion, the revised group fee rate schedule with additional breakpoints
voluntarily adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES

Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate

$ 120 - 156 billion .1450% $150 billion .1736%

156 - 192 .1400 175 .1690

192 - 228 .1350 200 .1652

228 - 264 .1300 225 .1618

264 - 300 .1275 250 .1587

300 - 336 .1250 275 .1560

336 - 372 .1225 300 .1536

372 - 408 .1200 325 .1514

408 - 444 .1175 350 .1494

444 - 480 .1150 375 .1476

480 - 516 .1125 400 .1459

Over 516 .1100 425 .1443

450 .1427

475 .1413

500 .1399

525 .1385

550 .1372

The individual fund fee rate for Money Market Portfolio is .03%.
One twelfth of the sum of the group fee rate and the individual fund fee
rate is applied to the fund's average net assets for the current month,
giving a dollar amount which is the fee for that month.
If the fund's monthly gross yield is 5% or less, the total management fee
is the sum of the group fee and the individual fund fee. If the fund's
monthly gross yield is greater than 5%, the management fee that FMR
receives includes an income-based component. The income-based component
equals 6% of that portion of the fund's gross income that represents a
gross yield of more than 5% per year. The maximum income-based component is
.24% (annualized) of average net assets, at a fund gross yield of 9%. Gross
income for this purpose, includes interest accrued and/or discount earned
(including both original issue discount and market discount) on portfolio
obligations, less amortization of premium. Realized and unrealized gains
and losses, if any, are not included in gross income.
For the fiscal years ended December 31, 1995, 1994, and 1993, FMR received
$_____, $1,178,543, and $415,213, respectively, for its services as
investment adviser to Money Market Portfolio . These fees were
equivalent to __%, .20%, and .14%, respectively, of the fund's average net
assets for those years.
Prior to January 1, 1994, for the services of FMR under the contract, the
fund paid FMR a monthly management fee computed on the basis of the fund's
gross income. To the extent that the monthly gross income of the fund was
equivalent to an annualized yield of 5% or less, FMR received 4% of that
amount of the fund's gross income. In addition, to the extent that the
fund's monthly income exceeded an annualized yield of 5%, FMR received 6%
of that excess. For this purpose, gross income included interest accrued or
discount earned (including both original issue and market discount), less
amortization of premium. The amount of discount or premium on portfolio
instruments was fixed at the time of purchase. Realized and unrealized
gains and losses, if any, were not included in gross income.
Pursuant to the terms of the contract, limitations were imposed on the
compensation FMR could receive under the above formula. These limitations
were based on the fund's average monthly net assets as follows:

AVERAGE MONTHLY NET ASSETS ANNUALIZED RATE
On the first $1.5 billion .50%
On the portion in excess of $1.5 to $3.0 billion .45%
On the portion in excess of $3.0 billion to $4.5 billion .43%
On the portion in excess of $4.5 billion to $6.0 billion .41%
On the portion in excess of $6.0 billion .40%

HIGH INCOME AND INVESTMENT GRADE BOND PORTFOLIOS. For the services of FMR
under the contracts, each fund pays FMR a monthly management fee composed
of the sum of two elements: a group fee rate and an individual fund fee
rate.
The group fee rate is based on the monthly average net assets of all of the
registered investment companies with which FMR has management contracts and
is calculated on a cumulative basis pursuant to the graduated fee rate
schedule shown below on the left. The schedule below on the right shows the
effective annual group fee rate at various asset levels, which is the
result of cumulatively applying the annualized rates on the left. For
example, the effective annual fee rate at $___ billion of group net assets
- - the approximate level for December 1995 was .___%, which is the weighted
average of the respective fee rates for each level of group net assets up
to $___ billion.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES

Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate

$ 0 - 3 billion .3700% $ 0.5 billion .3700%

3 - 6 .3400 25 .2664

6 - 9 .3100 50 .2188

9 - 12 .2800 75 .1986

12 - 15 .2500 100 .1869

15 - 18 .2200 125 .1793

18 - 21 .2000 150 .1736

21 - 24 .1900 175 .1695

24 - 30 .1800 200 .1658

30 - 36 .1750 225 .1629

36 - 42 .1700 250 .1604

42 - 48 .1650 275 .1583

48 - 66 .1600 300 .1565

66 - 84 .1550 325 .1548

84 - 120 .1500 350 .1533

120 - 174 .1450 400 .1507

174 - 228 .1400

228 - 282 .1375

282 - 336 .1350

Over 336 .1325

Under Investment Grade Bond's current management contract with FMR, the
group fee rate is based on a schedule with breakpoints ending at .1400% for
average group assets in excess of $174 billion. Prior to January 1, 1993,
the group fee rate breakpoints shown above for average group assets in
excess of $120 billion and under $228 billion were voluntarily adopted by
FMR, and went into effect on January 1, 1992. The additional breakpoints
shown above for average group assets in excess of $228 billion were
voluntarily adopted by FMR on November 1, 1993.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints for each fund. The
revised group fee rate schedule is identical to the above schedule for
average group assets under $156 billion. For average group assets in excess
of $156 billion, the group fee rate schedule voluntarily adopted by FMR is
as follows:
On January 1, 1996, FMR voluntarily added new breakpoints to the revised
schedule for average group assets in excess of $372 billion, pending
shareholder approval of a new management contract reflecting the revised
schedule and additional breakpoints. The revised group fee rate schedule
and its extensions provide for lower management fee rates as FMR's assets
under management increase. For average group assets in excess of $156
billion, the revised group fee rate schedule with additional breakpoints
voluntarily adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES

Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate

$ 120 - 156 billion .1450% $150 billion .1736%

156 - 192 .1400 175 .1690

192 - 228 .1350 200 .1652

228 - 264 .1300 225 .1618

264 - 300 .1275 250 .1587

300 - 336 .1250 275 .1560

336 - 372 .1225 300 .1536

372 - 408 .1200 325 .1514

408 - 444 .1175 350 .1494

444 - 480 .1150 375 .1476

480 - 516 .1125 400 .1459

Over 516 .1100 425 .1443

450 .1427

475 .1413

500 .1399

525 .1385

550 .1372

The individual fund fee rate for Investment Grade Bond Portfolio is .30%,
and the individual fund fee rate for High Income Portfolio is .45%. Based
on the average group net assets of the funds advised by FMR for December
1995, the annual management fee rate for each fund would be calculated as
follows:
INVESTMENT GRADE BOND PORTFOLIO
Group Fee Rate Individual Fund Fee Rate Management Fee Rate

.____% + .30% = .____%

HIGH INCOME PORTFOLIO
Group Fee Rate Individual Fund Fee Rate Management Fee Rate

.____% + .45% = .____%

One-twelfth of this annual management fee rate is applied to each fund's
net assets averaged for the most recent month, giving a dollar amount,
which is the fee for that month.
During the fiscal years ended December 31, 1995, 1994, and 1993, FMR
received $_____, $520,469, and $460,983, respectively, for its services as
investment adviser to INVESTMENT GRADE BOND PORTFOLIO. These fees were
equivalent to __%, .46%, and .47%, respectively, of the average net assets
of the fund for each of those years.
During the fiscal years ended December 31, 1995, 1994, and 1993, FMR
received $_______, $2,999,205, and $1,764,257, respectively, for its
services as investment adviser to HIGH INCOME PORTFOLIO. These fees were
equivalent to __%, .61%, and .51%, respectively, of the average net assets
of the fund for those years. On December 15, 1993, shareholders voted to
increase the fund's individual fund fee rate from 0.35% to 0.45%.
EQUITY-INCOME, GROWTH, OVERSEAS, ASSET MANAGER, CONTRAFUND, AND ASSET
MANAGER: GROWTH PORTFOLIOS. For the services of FMR under the
contract s , each fund pays FMR a monthly management fee composed of
the sum of two elements: a group fee rate and an individual fund fee rate.
The group fee rate is based on the monthly average net assets of all of the
registered investment companies with which FMR has management contracts and
is calculated on a cumulative basis pursuant to the graduated fee rate
schedule shown below on the left. The schedule below on the right shows the
effective annual group fee rate at various asset levels, which is the
result of cumulatively applying the annualized rates on the left. For
example, the effective annual fee rate at $___ billion of group net assets
- - the approximate level for December 1995 - was .___%, which is the
weighted average of the respective fee rates for each level of group net
assets up to $___ billion.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES

Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate

$ 0 - 3 billion .5200% $ 0.5 billion .5200%

3 - 6 .4900 25 .4238

6 - 9 .4600 50 .3823

9 - 12 .4300 75 .3626

12 - 15 .4000 100 .3512

15 - 18 .3850 125 .3430

18 - 21 .3700 150 .3371

21 - 24 .3600 175 .3325

24 - 30 .3500 200 .3284

30 - 36 .3450 225 .3253

36 - 42 .3400 250 .3223

42 - 48 .3350 275 .3198

48 - 66 .3250 300 .3175

66 - 84 .3200 325 .3153

84 - 102 .3150 350 .3133

102 - 138 .3100

138 - 174 .3050

174 - 228 .3000

228 - 282 .2950

282 - 336 .2900

Over 336 .2850

Under Equity-Income, Growth, Overseas and Asset Manager Portfolios' current
management contract with FMR, the group fee rate is based on a schedule
with breakpoints ending at .3000% for average group assets in excess of
$174 billion. Prior to January 1, 1993, the group fee rate breakpoints
shown above for average group assets in excess of $138 billion and under
$228 billion were voluntarily adopted by FMR, and went into effect on
January 1, 1992. The additional breakpoints shown above for average group
assets in excess of $228 billion were voluntarily adopted by FMR on
November 1, 1993.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints (Asset Manager: Growth
and Contrafund Portfolios' management contracts are each dated November 1,
1994 and therefore, include the following additional breakpoint schedules
in their fee schedules) for average group assets in excess of $210 billion
and under $390 billion. The revised group fee rate schedule was identical
to the above schedule for average group assets under $210 billion. For
average group assets in excess of $210 billion, the group fee rate schedule
voluntarily adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES

Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate

$ 138 - 174 billion .3050% $150 billion .3371%

174 - 210 .3000 175 .3325

210 - 246 .2950 200 .3284

246 - 282 .2900 225 .3249

282 - 318 .2850 250 .3219

318 - 354 .2800 275 .3190

354 - 390 .2750 300 .3163

Over 390 .2700 325 .3137

350 .3113

375 .3090

400 .3067

On January 1, 1996, FMR voluntarily added new breakpoints to the revised
schedule for average group assets in excess of $390 billion, pending
shareholder approval of a new management contract reflecting the revised
schedule and additional breakpoints. The revised group fee rate schedule
and its extensions provide for lower management fee rates as FMR's assets
under management increase. For average group assets in excess of $210
billion, the revised group fee rate schedule with additional breakpoints
voluntarily adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES

Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate

$174 - 210 billion .3000 $ 150 billion .3371

210 - 246 .2950 175 .3325

246 - 282 .2900 200 .3284

282 - 318 .2850 225 .3249

318 - 354 .2800 250 .3219

354 - 390 .2750 275 .3190

390 - 426 .2700 300 .3163

426 - 462 .2650 325 .3137

462 - 498 .2600 350 .3113

498 - 534 .2550 375 .3090

Over 534 .2500 400 .3067

425 .3046

450 .3024

475 .3003

500 .2982

525 .2962

550 .2942

The individual fund fee rate for the funds are as follows: .20% for
Equity-Income Portfolio; .30% for Growth and Contrafund Portfolios; .40%
for Asset Manager and Asset Manager: Growth Portfolios; and .45% for
Overseas Portfolio. Based on the average group net assets of the funds
advised by FMR for December 1995, the annual management fee rate for each
fund would be calculated as follows:
EQUITY-INCOME PORTFOLIO
Group Fee Rate Individual Fund Fee Rate Management Fee Rate

.___% + .20% = .___%

GROWTH AND CONTRAFUND PORTFOLIOS
Group Fee Rate Individual Fund Fee Rate Management Fee Rate

.___% + .30% = .___%

ASSET MANAGER AND ASSET MANAGER: GROWTH PORTFOLIOS
Group Fee Rate Individual Fund Fee Rate Management Fee Rate

.___% + .40% = .___%

OVERSEAS PORTFOLIO
Group Fee Rate Individual Fund Fee Rate Management Fee Rate

.___% + .45% = .___%

One-twelfth of the annual management fee rate is applied to each fund's net
assets averaged for the most recent month, giving a dollar amount, which is
the fee for that month.
During the fiscal years ended December 31, 1995, 1994, and 1993, FMR
received $_____, $9,165,293, and $5,004,191, respectively, for its services
as investment adviser to EQUITY-INCOME PORTFOLIO. These fees were
equivalent to __%, .52%, and .53%, respectively, of the average net assets
of the fund for each of those years.
During the fiscal years ended December 31, 1995, 1994, and 1993, FMR
received $_______, $10,585,482, and $6,358,701, respectively, for its
services as investment adviser to GROWTH PORTFOLIO. These fees were
equivalent to __%, .62%, and .63%, respectively, of the average net assets
of the fund for each of those years.
During the fiscal years ended December 31, 1995, 1994, and 1993, FMR
received $_______, $8,646,616, and $3,078,432, respectively, for its
services as investment adviser to OVERSEAS PORTFOLIO. These fees were
equivalent to __%, .77%, and .77%, respectively, of the average net assets
of the fund for each of those years.
During the fiscal years ended December 31, 1995, 1994, and 1993, FMR
received $_______, $22,080,801, and $10,365,454, respectively, for its
services as investment adviser to ASSET MANAGER PORTFOLIO. These fees were
equivalent to __%, .72%, and .72%, respectively, of the average net assets
of the fund for each of those years.
During the fiscal year ended December 31, 1995 FMR received $_______, and
$_______, respectively, for its services as investment adviser, to ASSET
MANAGER: GROWTH AND CONTRAFUND PORTFOLIOS. These fees were equivalent to
__%, and __%, respectively, of the average net assets of each fund for the
fiscal year ended 1995.
INDEX 500 PORTFOLIO. F or the services of FMR under the contract,
the fund pays FMR a monthly management fee at the annual rate of
.28% of the average net assets of the fund throughout the month. For the
fiscal years ended December 31, 199 5, 1994 and 1993, FMR received
$_____, $103,136, and $58,243, respectively, before any reimbursement
of expenses by FMR.
FMR may, from time to time, voluntarily reimburse all or a portion of a
fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to be
repaid for these expense reimbursements in the amount that expenses fall
below the limit prior to the end of the fiscal year. Expense reimbursements
by FMR will increase a fund's total returns and yield and repayment of the
reimbursement by a fund will lower its total returns and yield.
FMR has voluntarily agreed, subject to revision or termination, to
reimburse a fund if, and to the extent that, its aggregate operating
expenses, including management fees, exceed of a specified annual
rate for the fund. The following provides the expense cap and the date the
cap was imposed: September 19, 1985 (1.00%) for High Income Portfolio;
October 9, 1986 (1.50%) for Equity-Income and Growth Portfolios; January
28, 1987 (1.50%) for Overseas Portfolio; December 5, 1988 (.80%) for
Investment Grade Bond Portfolio; January 1, 1990 (1.25%) for Asset Manager
Portfolio; August 27, 1992 (.28%) for Index 500 Portfolio; and January 3,
1995 (1.00%) for Asset Manager: Growth and Contrafund Portfolios. Under
this arrangement, FMR reimbursed Index 500 $_______, $195,500, and
$138,597, respectively for fiscal years ended December 31, 1995, 1994 and
1993.
SUB-ADVISERS. On behalf of HIGH INCOME , A SSET MANAGER, CONTRAFUND
AND ASSET MANAGER: GROWTH PORTFOLIOS, FMR has entered into sub-advisory
agreements with FMR U.K. and FMR Far East. On behalf of OVERSEAS PORTFOLIO,
FMR has entered into sub-advisory agreements with FMR U.K., FMR Far East,
and FIIA. FIIA, in turn, has entered into a sub-advisory agreement with
FIIAL U.K. Pursuant to the sub-advisory agreements, FMR may receive
investment advice and research services outside the United States from the
sub-advisers. On behalf of High Income, Contrafund, Asset Manager: Growth
and Overseas Portfolios, FMR may also grant the sub-advisers investment
management authority, as well as the authority to buy and sell securities
if FMR believes it would be beneficial to a fund.
Currently, FMR U.K., FMR Far East, FIIA, and FIIAL U.K. each focus on
issuers in countries other than the United States such as those in Europe,
Asia, and the Pacific Basin.
FMR U.K. and FMR Far East, which were organized in 1986, are wholly owned
subsidiaries of FMR. FIIA is a wholly owned subsidiary of Fidelity
International Limited (FIL), a Bermuda company formed in 1968 which
primarily provides investment advisory services to non-U.S. investment
companies and institutional investors investing in securities throughout
the world. Edward C. Johnson 3d, Johnson family members, and various trusts
for the benefit of the Johnson family owns, directly or indirectly, more
than 25% of the voting common stock of FIL. FIIA was organized in Bermuda
in 1983. FIIAL U.K. was organized in the United Kingdom in 1984, and is a
wholly owned subsidiary of Fidelity International Management Holdings
Limited, an indirect wholly owned subsidiary of FIL.
Under the sub-advisory agreements FMR pays the fees of FMR U.K., FMR Far
East, and FIIA. FIIA, in turn, pays the fees of FIIAL U.K. For providing
non-discretionary investment advice and research services the sub-advisers
are compensated as follows:
(small solid bullet)FMR pays FMR U.K. and FMR Far East fees equal to 110%
and 105%, respectively, of FMR U.K.'s and FMR Far East's costs incurred in
connection with providing investment advice and research services.
(small solid bullet)FMR pays FIIA a fee equal to 30% of FMR's monthly
management fee with respect to the average net assets held by the fund for
which FIIA has provided FMR with investment advice and research services.
(small solid bullet)FIIA pays FIIAL U.K. a fee equal to 110% of FIIAL
U.K.'s costs incurred in connection with providing investment advice and
research services.
For providing discretionary investment management and executing portfolio
transactions, the sub-advisers are compensated as follows:
(small solid bullet)FMR pays FMR U.K., FMR Far East, and FIIA a fee equal
to 50% of its monthly management fee with respect to the fund's average net
assets managed by the sub-adviser on a discretionary basis.
(small solid bullet)FIIA pays FIIAL U.K. a fee equal to 110% of FIIAL
U.K.'s costs incurred in connection with providing discretionary investment
management services.
For providing investment advice and research services, the fees paid to the
sub-advisers for fiscal 1995, 1994, and 1993 were as follows:
Asset Manager Portfolio
Fiscal Year FMR U.K. FMR Far East

1995 $ $

1994 $147,227 $190,254

1993 $139,893 $227,112

Overseas Portfolio
Fiscal Year FMR U.K. FMR Far East FIIA FIIAL U.K.

1995 $ $ - - - -

1994 $387,086 $425,049 - - - -

1993 $94,517 $138,059 - - - -

For providing discretionary investment management and executing portfolio
transactions, FMR, on behalf of Overseas Portfolio paid FMR U.K. fees
totaling $376,357 for fiscal 1992. For providing discretionary investment
management and executing portfolio transactions, no fees were paid by FMR
on behalf of Overseas Portfolio to the sub-advisors during fiscal years
ended 1993 and 1994.
FMR entered into the sub-advisory agreements described above as follows:
April 1, 1992 for Overseas; January 1, 1994 for High Income; and November
1, 1994 for Contrafund and Asset Manager: Growth Portfolios. The agreements
were approved by shareholders as follows: March 25, 1992 for Overseas,
December 15, 1993 for High Income; and November 9, 1994 for Contrafund and
Asset Manager: Growth.
On behalf of MONEY MARKET PORTFOLIO, FMR has entered into a sub-advisory
agreement with FMR Texas pursuant to which FMR Texas has primary
responsibility for providing portfolio investment management services to
the fund.
Under the sub-advisory agreement , dated January 1, 1990, which was
approved by the fund's shareholders, December 13, 1989, FMR pays FMR
Texas fees equal to 50% of the management fee payable to FMR under its
management contract with the fund. The fees paid to FMR Texas are not
reduced by any voluntary or mandatory expense reimbursements that may be in
effect from time to time. On behalf of the fund , for the fiscal
years ended December 31, 1995, 1994, and 1993, FMR paid FMR Texas
f ees of $_______, $589,272, and $207,606, respectively.
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved Distribution and Service Plans on behalf of the
funds (the Plans) pursuant to Rule 12b-1 under the Investment Company Act
of 1940 (the Rule). The Rule provides in substance that a mutual fund may
not engage directly or indirectly in financing any activity that is
primarily intended to result in the sale of shares of a fund except
pursuant to a plan approved on behalf of the fund under the Rule. The
Plans, as approved by the Trustees, allow the funds and FMR to incur
certain expenses that might be considered to constitute indirect payment by
the funds of distribution expenses.
Under each Plan, if the payment of management fees by the funds to FMR is
deemed to be indirect financing by the funds of the distribution of their
shares, such payment is authorized by the Plans. Each Plan also
specifically recognizes that FMR, either directly or through FDC, may use
its management fee revenue, past profits, or other resources, without
limitation, to pay promotional and administrative expenses in connection
with the offer and sale of shares of each fund. In addition, each Plan
provides that FMR may use its resources, including its management fee
revenues, to make payments to third parties that assist in selling shares
of each fund, or to third parties, including banks, that render shareholder
support services. The Trustees have not authorized such payments to date.
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of each Plan, and have
determined that there is a reasonable likelihood that the Plan will benefit
each fund and its shareholders. In particular, the Trustees noted that each
Plan does not authorize payments by each fund other than those made to FMR
under its management contract with the fund. To the extent that each Plan
gives FMR and FDC greater flexibility in connection with the distribution
of shares of each fund, additional sales of fund shares may result.
Furthermore, certain shareholder support services may be provided more
effectively under the Plans by local entities with whom shareholders have
other relationships. Money Market, High Income, Equity-Income and Growth
Portfolios' Plans were approved by shareholders of their respective fund on
December 11, 1986. Overseas Portfolio's Plan was approved by shareholders
on November 18, 1987. The Plans for Investment Grade Bond Portfolio and
Asset Manager Portfolio were approved by the funds' shareholders on
December 13, 1989. Index 500 Portfolio's Plan was approved by the
Portfolio's shareholders on December 16, 1992. Contrafund and Asset
Manager: Growth Portfolios' Plans were approved by FMR as the then
sole shareholder on November 9, 1994.
Each fund may execute portfolio transactions with, and purchase securities
issued by, depository institutions that receive payments under the Plans.
No preference for the instruments of such depository institutions will be
shown in the selection of investments.
CONTRACTS WITH FMR AFFILIATES
Each fund has an agreement with FSC, an affiliate of FMR Corp., under which
FSC determines the NAV per share and dividends of each fund and maintains
the portfolio and general accounting records of each fund. The fee rates in
effect as of January 1, 1996, are based on each fund's average net
assets as follows: for Money Market , 0.0175% for the first $500
million of average net assets and 0.0075% for average net assets in excess
of $500 million. The fee is limited to a minimum of $40,000 and a maximum
of $800,000 per year; for High Income and Overseas, 0.075% for the first
$500 million of average net assets and 0.0375% for average net assets in
excess of $500 million; for Investment Grade Bond Portfolio, 0.04% for the
first $500 million of average net assets and .02% for average net assets in
excess of $500 million; and for Equity-Income, Growth, Asset Manager,
Contrafund, Asset Manager: Growth and Index 500 Portfolios, 0.06% for the
first $500 million of average net assets and 0.03% for average net assets
in excess of $500 million. The fee for High Income, Equity Income, Growth,
Overseas, Asset Manager, Investment Grade Bond, Index 500, Contrafund and
Asset Manager: Growth Portfolios is limited to a minimum of $60,000 and a
maximum of $800,000 per year.
The following are the fees paid by each fund to FSC for the last three
fiscal years:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money High Equity- Investme Asset Asset Contrafu
Market Income Income Growth Overseas nt Grade Manager Manager: nd Index
Bond Growth 500

1995 $ $ $ $ $ $ $ $ $ $

1994 $92,003 $197,109 $669,962 $664,914 $491,242 $46,617 $751,546 -- -- $45,097

1993 $53,769 $138,642 $439,891 $456,795 $230,456 $46,426 $583,404 -- -- $45,074

</TABLE>

Each fund utilizes FIIOC, an affiliate of FMR Corp., to maintain the master
accounts of the participating insurance companies. Under the contract, each
fund pays an account fee of $125 and an asset based fee of 0.050% for
each account. The asset-based fees of the growth and growth and income
funds are subject to adjustment if the year-to-date total return of the S&P
500 is greater than positive or negative 15%. In addition to providing
transfer agent and shareholder servicing functions, FIIOC pays all transfer
agent out-of-pocket expenses and also pays for typesetting, printing and
mailing Prospectuses, Statements of Additional Information, reports,
notices and statements to shareholders allocable to the master account of
participating insurance companies.
The following are the fees paid by each fund to FIIOC (including
reimbursement for out-of-pocket expenses) for the last three fiscal years:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money High Equity- Investme Asset Asset Contrafu
Market Income Income Growth Overseas nt Grade Manager Manager: nd Index
Bond Growth 500

1995 $ $ $ $ $ $ $ $ $ $

1994 $115,83 $163,05 $0 $7,612 $173,15 $90,382 $50,231 -- -- $84,940
7 5 7

1993 $87,208 $108,43 $51,596 $51,825 $143,22 $71,119 $62,281 -- -- $33,911
2 2

</TABLE>

If a portion of each applicable fund's brokerage commissions had not been
allocated toward payment of these fees, the transfer agent fees for the
last three fiscal years would have been as follows (not applicable for
Money Market, High Income, Overseas, Index 500 and Investment Grade Bond
Portfolios):
Equity- Asset Asset
Income Growth Manager Manager:
Portfolio Portfolio Portfolio Growth
Portfolio

1995 $ $ $ $

1994 192,500 212,064 181,816 --

1993 111,756 140,122 115,600 --

FSC also receives fees for administering a fund's securities lending
program. Securities lending fees are based on the number and duration of
individual securities loans. For fiscal 1995, 1994, and 1993, [insert any
fees paid] no lending fees were incurred by the funds .
Each fund has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. The distribution agreements call
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of each fund, which are continuously
offered at net asset value. Promotional and administrative expenses in
connection with the offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUSTS
TRUST ORGANIZATION. Money Market Portfolio, High Income Portfolio,
Equity-Income Portfolio, Growth Portfolio, and Overseas Portfolio are funds
of Variable Insurance Products Fund, an open-end management investment
company organized as a Massachusetts business trust on November 13, 1981.
In July 1985, pursuant to shareholder approval, the Declaration of Trust
was amended to change the name of the Trust from Fidelity Cash Reserves II
to Variable Insurance Products Fund. The Declaration of Trust permits the
Trustees to create additional funds.
Investment Grade Bond Portfolio, Asset Manager Portfolio, Index 500
Portfolio, Contrafund Portfolio, and Asset Manager: Growth Portfolio are
funds of Variable Insurance Products Fund II, an open-end management
investment company organized as a Massachusetts business trust on March 21,
1988. The Declaration of Trust permits the Trustees to create additional
funds.
Investments in each trust may be made only by the separate accounts of
insurance companies for the purpose of funding variable annuity and
variable life insurance contracts issued by insurance companies.
In the event that FMR ceases to be the investment adviser to a trust or a
fund, the right of the trust or fund to use the identifying name "Fidelity"
may be withdrawn. There is a remote possibility that one fund might become
liable for any misstatement in its prospectus or statement of additional
information about another fund.
The assets of each trust received for the issue or sale of shares of each
fund and all income, earnings, profits, and proceeds thereof, subject only
to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of
each fund are segregated on the books of account, and are to be charged
with the liabilities with respect to such fund and with a share of the
general expenses of the trust. Expenses with respect to the trust are to be
allocated in proportion to the asset value of the respective funds, except
where allocations of direct expense can otherwise be fairly made. The
officers of the trust, subject to the general supervision of the Board of
Trustees, have the power to determine which expenses are allocable to a
given fund, or which are general or allocable to all of the funds. In the
event of the dissolution or liquidation of the trust, shareholders of each
fund are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. Each trust is an entity of the type
commonly known as a "Massachusetts business trust." Under
Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable for the obligations of the trust.
Each Declaration of Trust provides that the trust shall not have any claim
against shareholders except for the payment of the purchase price of shares
and requires that each agreement, obligation, or instrument entered into or
executed by the trust or the Trustees shall include a provision limiting
the obligations created thereby to the trust and its assets. Each
Declaration of Trust provides for indemnification out of each fund's
property of any shareholders held personally liable for the obligations of
the fund. Each Declaration of Trust also provides that each fund shall,
upon request, assume the defense of any claim made against any shareholder
for any act or obligation of the fund and satisfy any judgment thereon.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the fund itself
would be unable to meet its obligations. FMR believes that, in view of the
above, the risk of personal liability to shareholders is remote.
Each Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. The shares have no preemptive or conversion rights; the voting
and dividend rights, the right of redemption , are described in the
Prospectus. Shares are fully paid and nonassessable, except as set forth
under the heading "Shareholder and Trustee Liability" above. Shareholders
representing 10% or more of a trust or a fund may, as set forth in the
Declaration of Trust, call meetings of a trust or a fund for any purpose
related to the trust or fund, as the case may be, including, in the case of
a meeting of an entire trust, the purpose of voting on removal of one or
more Trustees. Each trust or any fund may be terminated upon the sale of
its assets to another open-end management investment company, or upon
liquidation and distribution of its assets, if approved by vote of the
holders of a majority of the outstanding shares of a trust or a fund. If
not so terminated, each trust and its funds will continue indefinitely.
CUSTODIAN. The Bank of New York, 110 Washington Street, New York New York,
is custodian of Money Market, High Income and Investment Grade Bond
Portfolios' assets; The Chase Manhattan Bank, N.A., 1211 Avenue of the
Americas, New York, New York 10036, is custodian of Equity-Income,
Overseas, Asset Manager: Growth, and Asset Manager Portfolios' assets; and
Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts, is
custodian of Growth, Contrafund, and Index 500 Portfolios' assets. The
custodians take no part in determining the investment policies of the funds
or in deciding which securities are purchased or sold by the funds. The
funds, however, may invest in obligations of the custodians and may
purchase or sell securities from or to the custodians. The Bank of New
York and Chemical Bank, each headquartered in New York, also may serve as a
special purpose custodian of certain assets in connection with pooled
repurchase agreement transactions. Investors should understand that the
expense ratio for the Overseas Portfolio may be higher than that of
investment companies which invest exclusively in domestic securities since
the cost of maintaining the custody of foreign securities is higher.
FMR, its officers and directors, its affiliated companies, and the Board of
Trustees may, from time to time, conduct transactions with various banks,
including banks serving as custodians for certain funds advised by FMR. The
Boston branch of Brown Brothers Harriman & Co. leases its office space from
an affiliate of FMR at a lease payment which, when entered into, was
consistent with prevailing market rates. Transactions that have occurred to
date include mortgages and personal and general business loans. In the
judgment of FMR, the terms and conditions of those transactions were not
influenced by existing or potential custodial or other fund relationships.
AUDITOR. ___________________, serves as independent accountant of
Variable Insurance Products Fund and _________________________ serves as
independent accountant of Variable Insurance Products Fund II. Each auditor
examines financial statements for the funds and provides other audit, tax,
and related services.
FINANCIAL STATEMENTS
Each fund's financial statements and financial highlights for the fiscal
year ended December 31, 199 5 are included in the fund's Annual
Report, which is a separate report supplied with this Statement of
Additional Information. Each fund's financial statements and financial
highlights are incorporated herein by reference.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of
each investment by the number of days remaining to its maturity, adding
these calculations, and then dividing the total by the value of the fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
Also, the maturities of mortgage-backed securities and some asset-backed
securities, such as collateralized mortgage obligations, are determined on
a weighted average life basis, which is the average time for principal to
be repaid. For a mortgage security, this average time is calculated by
estimating the timing of principal payments, including unscheduled
prepayments, during the life of the mortgage. The weighted average life of
these securities is likely to be substantially shorter than their stated
final maturity.
The descriptions that follow are examples of eligible ratings for the
funds. A fund may, however, consider the ratings for other types of
investments and the ratings assigned by other rating organizations when
determining the eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S COMMERCIAL PAPER RATINGS:
Issuers rated PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following
characteristics:
Leading market positions in well established industries.
High rates of return on funds employed.
Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
Broad margins in earning coverage of fixed financial charges and with high
internal cash generation.
Well established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earning trends and coverage ratios, while sound, will be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Issuers rated PRIME-3 (or related supporting institutions) have
an acceptable capacity for repayment of short-term promissory obligations.
The effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes
in the level of debt protection measurements and the requirement for
relatively high financial leverage. Adequate alternate liquidity is
maintained.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S COMMERCIAL PAPER RATINGS:
A - Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with
the numbers 1, 2, and 3 to indicate the relative degree of safety.
A-1 - This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+)
sign designation.
A-2 - Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
A-3 - This designation indicates that the capacity for timely
payment is satisfactory. These issues are, however, somewhat more
vulnerable to the adverse effects of changes in circumstances than
obligations carrying the higher designations.
B - Issues rated B are regarded as having only adequate capacity for
timely payment. However, such capacity may be damaged by changing or
short-term adversities.
C - This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D - Debt rated D is in payment default. The D rating category is
used when interest or principal payments are not made on the date due even
if the applicable period has not expired, unless S&P believes that such
payments will be made during such grace period.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND
RATINGS:
AAA - Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong position
of such issues.
AA - Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than the Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations.
Factors giving security to principal and interest are considered adequate
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
BAA - Bonds which are rated Baa are considered as medium-grade
obligations, (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
BA - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
CAA - Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with respect
to principal or interest.
CA - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked short-comings.
C - Bonds which are rated C are the lowest-rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
DESCRIPTION OF STANDARD & POOR'S CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal
is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher-rated issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rate BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating.
B - Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will likely
impair capacity or willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal. The
CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC - The rating CC is typically applied to debt subordinated to
senior debt which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating
may be used to cover a situation where a bankruptcy petition has been filed
but debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest
is being paid.
D - Debt rated D is in payment default. The D rating category is
used when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The D
rating will also be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
(INDEX 500 PORTFOLIO) The S&P 500 Composite Stock Price Index (S&P 500) is
a well-known stock market index that includes common stocks of companies
representing a significant portion of the market value of all common stocks
publicly traded in the United States. FMR believes that the performance of
the S&P 500 is representative of the performance of publicly traded common
stocks in general. The composition of the S&P 500 is determined by Standard
& Poor's Corporation, and is based on such factors as the market
capitalization and trading activity of each stock and its adequacy as
representative of stocks in a particular industry group; Standard & Poor's
may change the composition of the Index from time to time. Stocks in the
S&P 500 Index are weighted according to their market capitalization (i.e.,
the number of shares outstanding multiplied by the stock's current price),
with the 59 largest stocks currently composing 50% of the S&P 500's value.
Although Standard & Poor's obtains information for inclusion in or for use
in the calculation of the S&P 500 from sources which considers reliable,
Standard & Poor's does not guarantee the accuracy or the completeness of
the S&P 500 or any data included therein. Standard & Poor's makes no
warranty, express or implied, as to results to be obtained by the licensee,
owners of the fund, or any other person or entity from the use of the S&P
500 or any data included therein in connection with the rights licensed
hereunder or for any other use. Standard & Poor's makes no express or
implied warranties, and hereby expressly disclaims all warranties of
merchantability or fitness for a particular purpose with respect to the S&P
500 any data included therein.
THE 500 STOCKS IN THE S&P 500 INDEX. The following is a list of the 500
Stocks in the S&P 500 Index as of December 30, 1995 [update list for 1995].
Abbott Labs
Advanced Micro Devices
Aetna Life & Casualty
Ahmanson (H.F.) & Co.
Air Products & Chemicals
AirTouch Communications
Alberto-Culver
Albertson's
Alcan Aluminum Ltd.
Alco Standard
Alexander & Alexander
Allergan, Inc.
AlliedSignal
ALLTEL Corp.
Aluminum Co. of America
ALZA Corp. CI.A
Amdahl Corp.
Amerada Hess
American Barrick Res.
American Brands Inc.
American Electric Power
American Express
American General
American Greetings CI A
American Home Products
American Int'l. Group
American Stores
Ameritech
Amgen
Amoco
AMP Inc.
AMR Corp.
Andrew Corp.
Anheuser-Busch
Apple Computer
Archer-Daniels-Midland
Armco Inc.
Armstrong World
ASARCO Inc.
Ashland Oil
AT&T Corp.
Atlantic Richfield
Autodesk, Inc.
Automatic Data Processing Inc.
Avery Dennison Corp.
Avon Products
Baker Hughes
Ball Corp.
Bally Entertainment Corp.
Baltimore Gas & Electric
Banc One Corp.
Bank of Boston
BankAmerica Corp.
Bankers Trust N.Y.
Bard (C.R.) Inc.
Barnett Banks Inc.
Bassett Furniture
Bausch & Lomb
Baxter International Inc.
Becton, Dickinson
Bell Atlantic
BellSouth
Bemis Company
Beneficial Corp.
Bethlehem Steel
Beverly Enterprises
Biomet, Inc.
Black & Decker Corp.
Block H&R
Boatmen's Bancshares
Boeing Company
Boise Cascade
Briggs & Stratton
Bristol-Myers Squibb
Brown Group
Browning-Ferris Ind.
Brown-Forman Corp.
Bruno's Inc.
Brunswick Corp.
Burlington Northern
Burlington Resources
Campbell Soup
Capital Cities/ABC
Carolina Power & Light
Caterpillar Inc.
CBS Inc.
Centex Corp.
Central & South West
Ceridian Corp.
Champion International
Charming Shoppes
Chase Manhattan
Chemical Banking Corp.
Chevron Corp.
Chrysler Corp.
Chubb Corp.
CIGNA Corp.
Cincinnati Milacron
Cinergy Corp.
Circuity City Stores
cicso Systems
Citicorp
Clark Equipment
Clorox Co.
Coastal Corp.
Coca Cola Co.
Colgate-Palmolive
Columbia Gas System
Columbia/HCA Healthcare Corp.
Comcast Class A Special
Community Psych Centers
COMPAQ Computer
Computer Associates Intl.
Computer Sciences Corp.
ConAgra Inc.
Consolidated Edison
Consolidated Freightways
Consolidated Natural Gas
Conrail Inc.
Continental Corp.
Cooper Industries
Cooper Tire & Rubber
Coors (Adolph)
CoreStates Financial
Corning Inc.
CPC International
Crane Company
Cray Research
Crown Cork & Seal
CSX Corp.
Cummins Engine Co., Inc.
Cyprus Amax Minerals Co.
Dana Corp.
Data General
Dayton Hudson
Dean Witter, Discover & Co.
Deere & Co.
Delta Air Lines
Deluxe Corp.
Detroit Edison
Dial Corp.
Digital Equipment
Dillard Department Stores
Dominion Resources
Donnelley (R.R.) & Sons
Dover Corp.
Dow Chemical
Dow Jones & Co.
Dresser Industries
DSC Communications
Du Pont (E.I.)
Duke Power
Dun & Bradstreet
E G & G Inc.
E-Systems
Eastern Enterprises
Eastman Chemical
Eastman Kodak
Eaton Corp.
Echlin Inc.
Echo Bay Mines Ltd.
Ecolab Inc.
Emerson Electric
Engelhard Corp.
Enron Corp.
ENSERCH Corp.
Entergy Corp.
Exxon Corp.
Federal Express
Federal Home Loan Mtg.
Federal Natl. Mtge.
Federal Paper Board
First Chicago Corp.
First Data
First Fidelity Bancorp
First Interstate Bancorp
First Mississippi Corp.
First Union Corp.
Fleet Financial Group
Fleetwood Enterprises
Fleming Cos. Inc.
Fluor Corp.
FMC Corp.
Ford Motor
Foster Wheeler
FPL Group
Gannett Co.
Gap (The)
General Dynamics
General Electric
General Mills
General Motors
General Re Corp.
General Signal
Genuine Parts
Georgia-Pacific
Giant Food CI. A
Giddings & Lewis
Gillette Co.
Golden West Financial
Goodrich (B.F.)
Goodyear Tire & Rubber
Grace (W.R.) & Co.
Grainger (W.W.) Inc.
Great A & P
Great Lakes Chemical
Great Western Financial
GTE Corp.
Halliburton Co.
Handleman Co.
Harcourt General Inc.
Harland (J.H.)
Harnischfeger Indus.
Harris Corp.
Hartmarx Corp.
Hasbro Inc.
Heinz (H.J.)
Helmerich & Payne
Hercules, Inc.
Hershey Foods
Hewlett-Packard
Hilton Hotels
Home Depot
Homestake Mining
Honeywell
Household International
Houston Industries
Illinois Tool Works
Inco, Ltd.
Ingersoll-Rand
Inland Steel Ind. Inc.
Intel Corp.
Intergraph Corp.
International Bus. Machines
International Flav/Frag
International Paper
Interpublic Group
ITT Corp.
James River
Jefferson-Pilot
Johnson Controls
Johnson & Johnson
Jostens Inc.
K Mart
Kaufman & Broad Home Corp.
Kellogg Co.
Kerr-McGee
KeyCorp
Kimberly-Clark
King World Productions
Knight-Ridder Inc.
Kroger Co.
Lilly (Eli) & Co.
Limited, The
Lincoln National
Liz Claiborne, Inc.
Lockheed Corp.
Longs Drug Stores
Loral Corp.
Lotus Development
Louisiana Land & Exploration
Louisiana Pacific
Lowe's Cos.
Luby's Cafeterias
M/A-Com, Inc.
Maillinckrodt Group Inc.
Manor Care
Marriott Int'l
Marsh & McLennan
Martin Marietta
Masco Corp.
Mattel, Inc.
Maxus Energy
May Dept. Stores
Maytag Corp.
MBNA Corp.
McDermott International
McDonald's Corp.
McDonnell Douglas
McGraw-Hill
MCI Communications
Mead Corp.
Medtronic Inc.
Mellon Bank Corp.
Melville Corp.
Mercantile Stores
Merck & Co.
Meredith Corp.
Merrill Lynch
Micron Technology
Microsoft Corp.
Millipore Corp.
Minn. Mining & Mfg.
Mobil Corp.
Monsanto Company
Moore Corp. Ltd.
Morgan (J.P.) & Co.
Morrison Knudsen
Morton International
Motorola Inc.
NACCO Ind. CI. A
Nalco Chemical
National City Corp.
National Education
National Medical Enterprise
National Semiconductor
National Service Ind.
NationsBank
Navistar International Corp.
NBD Bancorp Inc.
New York Times CI. A
Newell Co.
Newmont Mining
Niagara Mohawk Power
NICOR Inc.
NIKE Inc.
NorAm Energy Corp.
Nordstrom
Norfolk Southern Corp.
Northern States Power
Northern Telecom
Northrop Grumman Corp.
Norwest Corp.
Novell Inc.
Nucor Corp.
Nynex
Occidental Petroleum
Ogden Corp.
Ohio Edison
ONEOK Inc.
Oracle Systems
Oryx Energy Co.
Oshkosh B'Gosh
Outboard Marine
Owens-Corning Fiberglas
PACCAR Inc.
Pacific Enterprises
Pacific Gas & Electric
Pacific Telesis
PacifiCorp
Pall Corp.
Panhandle Eastern
Parker-Hannifin
PECO Energy Co.
Penney (J.C.)
Pennzoil Co.
Peoples Energy
Pep Boys
PepsiCo Inc.
Perkin-Elmer
Pet Inc.
Pfizer, Inc.
Phelps Dodge
Philip Morris
Phillips Petroleum
Pioneer Hi-Bred Int'l
Pitney-Bowes
Pittston Services Group
Placer Dome Inc.
PNC Bank Corp.
Polaroid Corp.
Potlatch Corp.
PPG Industries
Praxair, Inc.
Premark International
Price/Costco Inc.
Procter & Gamble
Promus Inc.
Providian Corp.
Public Serv. Enterprise Inc.
Pulte Corp.
Quaker Oats
Ralston-Ralston Purina Gp
Raychem Corp.
Raytheon Co.
Reebok International
Reynolds Metals
Rite Aid
Roadway Services
Rockwell International
Rohm & Haas
Rollins Environmental
Rowan Cos.
Royal Dutch Petroleum
Rubbermaid Inc.
Russell Corp.
Ryan's Family Steak House
Ryder System
SAFECO Corp.
Safety-Kleen
Salomon Inc.
Santa Fe Energy Resources
Santa Fe Pacific Gold Corp.
Santa Fe Pacific Corp.
Sara Lee Corp.
SBC Communications Inc.
SCEcorp.
Schering-Plough
Schlumberger Ltd.
Scientific-Atlanta
Scott Paper
Seagram Co. Ltd.
Sears, Roebuck & Co.
Service Corp. International
Shared Medical Systems
Shawmut National
Sherwin-Williams
Shoney's Inc.
Sigma-Aldrich
Skyline Corp.
Snap-On Tools
Sonat Inc.
Southern Co.
Southwest Airlines
Springs Industries Inc.
Sprint Corp.
SPX Corp.
St. Jude Medical
St. Paul Cos.
Stanley Works
Stone Container
Stride Rite
Sun Co., Inc.
Sun Microsystems
SunTrust Banks
Supervalu Inc.
Sysco Corp.
Tandem Computers Inc.
Tandy Corp.
Tektronix Inc.
Teledyne Inc.
Tele-Communications
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) 1. Financial Statements for Variable Insurance Products Fund II to be
filed by subsequent amendment.
2. Financial Statements for Variable Insurance Products Fund to be filed
by subsequent amendment.
(b) Exhibits:
(1) (a) Declaration of Trust dated as of March 21, 1988 is incorporated
herein by reference to Exhibit 1(a) of Post-Effective Amendment No. 17.
(b) Supplement to the Declaration of Trust dated January 1, 1990 is
incorporated herein by reference to Exhibit 1(b) of Post-Effective
Amendment No. 17.
(2) By-Laws of Variable Insurance Products Fund II, as amended, are
incorporated herein by reference to Exhibit 2(a) to Fidelity Union Street
Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(3) None.
(4) None.
(5) (a) Management Contract between Index 500 Portfolio and Fidelity
Management & Research Company dated January 1, 1993, is incorporated herein
by reference to Exhibit 5(a) of Post-Effective Amendment No. 17.
(b) Management Contract between Investment Grade Bond Portfolio and
Fidelity Management & Research Company dated January 1, 1993, is
incorporated herein by reference to Exhibit 5(b) of Post-Effective
Amendment No. 17.
(c) Sub-Advisory Agreement between Fidelity Management & Research Company
and Fidelity Management & Research (U.K.) Inc. on behalf of Asset Manager
Portfolio dated January 1, 1990 is incorporated herein by reference to
Exhibit 5(c) of Post-Effective Amendment No. 17.
(d) Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (Far East) Inc. on behalf of
Asset Manager Portfolio dated January 1, 1990 is incorporated herein by
reference to Exhibit 5(d) of Post-Effective Amendment No. 17.
(e) Management Contract between Asset Manager Portfolio and Fidelity
Management & Research Company dated January 1, 1993, is incorporated herein
by reference to Exhibit 5(e) of Post-Effective Amendment No. 17.
(f) Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (U.K.) Inc. on behalf of Asset
Manager: Growth Portfolio, dated December 1, 1994, is incorporated herein
by reference to Exhibit 5(f) of Post-Effective Amendment No. 17.
(g) Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (Far East) Inc. on behalf of
Asset Manager: Growth Portfolio, dated December 1, 1994, is incorporated
herein by reference to Exhibit 5(g) of Post-Effective Amendment No. 17.
(h) Management Contract between Asset Manager: Growth Portfolio and
Fidelity Management & Research Company dated November 1, 1994, is
incorporated herein by reference as Exhibit 5(h) of Post-Effective
Amendment No. 16.
(i) Management Contract between Contrafund Portfolio and Fidelity
Management & Research Company dated November 1, 1994, is incorporated
herein by reference as Exhibit 5(i) of Post-Effective Amendment No. 16.
(j) Sub-Advisory Agreement between Fidelity Management & Research Company
and Fidelity Management & Research (U.K.) Inc. on behalf of Contrafund
Portfolio, dated December 1, 1994, is incorporated herein by reference to
Exhibit 5(j) of Post-Effective Amendment No. 17.
(k) Sub-Advisory Agreement between Fidelity Management & Research Company
and Fidelity Management & Research (Far East) Inc. on behalf of Contrafund
Portfolio, dated December 1. 1994, is incorporated herein by reference to
Exhibit 5(k) of Post-Effective Amendment No. 17.
(6) (a) General Distribution Agreement between Short-Term Portfolio and
Fidelity Distributors Corporation dated November 11, 1988, is incorporated
herein by reference to Exhibit 6(a) of Post-Effective Amendment No. 17.
(b) General Distribution Agreement between Asset Manager Portfolio and
Fidelity Distributors Corporation dated August 31, 1989, is incorporated
herein by reference to Exhibit 6(b) of Post-Effective Amendment No. 17.
(c) General Distribution Agreement between Index 500 Portfolio and
Fidelity Distributors Corporation dated August 27, 1992, is incorporated
herein by reference to Exhibit 6(c) of Post-Effective Amendment No. 17.
(d) General Distribution Agreement between Asset Manager: Growth Portfolio
and Fidelity Distributors Corporation dated December 1, 1994, is
incorporated herein by reference to Exhibit 6(d) of Post-Effective
Amendment No. 17.
(e) General Distribution Agreement between Contrafund Portfolio and
Fidelity Distributors Corporation dated December 1, 1994, is incorporated
herein by reference to Exhibit 6(e) of Post-Effective Amendment No. 17.
(7) Retirement Plan for Non-Interested Person Trustees, Directors or
General Partners, effective August 1, 1993, is incorporated herein by
reference to Exhibit 7 to Fidelity Union Street Trust's Post-Effective
Amendment No. 87 (File No. 2-50318).
(8) (a) Custodian Agreement and Appendix C, dated December 1, 1994, between
The Bank of New York and Variable Insurance Products Fund II on behalf of
Investment Grade Bond Portfolio is incorporated herein by reference to
Exhibit 8(a) of Fidelity Hereford Street Trust's Post-Effective Amendment
No. 4 (File No. 33-52577).
(b) Appendix A, dated September 14, 1995, to the Custodian Agreement,
dated December 1, 1994, between The Bank of New York and Variable Insurance
Products Fund II on behalf of Investment Grade Bond Portfolio is
incorporated herein by reference to Exhibit 8(d) of Fidelity Charles Street
Trust's Post-Effective Amendment No. 54 (File No. 2-73133).
(c) Appendix B, dated September 14, 1995, to the Custodian Agreement, dated
December 1, 1994, between The Bank of New York and Variable Insurance
Products Fund II on behalf of Investment Grade Bond Portfolio is
incorporated herein by reference to Exhibit 8(e) of Fidelity Charles Street
Trust's Post-Effective Amendment No. 54 (File No. 2-73133).
(d) Custodian Agreement, Appendix A, and Appendix C, dated August 1, 1994,
between The Chase Manhattan Bank, N.A. and Variable Insurance Products Fund
II on behalf of Asset Manager Portfolio and Asset Manager: Growth Portfolio
is incorporated herein by reference to Exhibit 8(a) of Fidelity Investment
Trust's Post-Effective Amendment No. 59 (File No. 2-90649).
(e) Appendix B, dated September 14, 1995, to the Custodian Agreement,
dated August 1, 1994, between The Chase Manhattan Bank, N.A. and Variable
Insurance Products Fund II on behalf of Asset Manager Portfolio and Asset
Manager: Growth Portfolio is incorporated herein by reference to Exhibit
8(b) of Fidelity Charles Street Trust's Post-Effective Amendment No. 54
(File No. 2-73133).
(f) Custodian Agreement and Appendix C, dated September 1, 1994, between
Brown Brothers Harriman & Company and Variable Insurance Products Fund II
on behalf of Index 500 Portfolio and Contrafund Portfolio is incorporated
herein by reference to Exhibit 8(a) of Fidelity Commonwealth Trust's
Post-Effective Amendment No. 56 (File No. 2-52322).
(g) Appendix A, dated September 14, 1995, to the Custodian Agreement,
dated September 1, 1994, between Brown Brothers Harriman & Company and
Variable Insurance Products Fund II on behalf of Index 500 Portfolio and
Contrafund Portfolio is incorporated herein by reference to Exhibit 8(b) of
Fidelity Mt. Vernon Street Trust's Post-Effective Amendment No. 33 (File
No. 2-79755).
(h) Appendix B, dated September 14, 1995, to the Custodian Agreement,
dated September 1, 1994, between Brown Brothers Harriman & Company and
Variable Insurance Products Fund II on behalf of Index 500 Portfolio and
Contrafund Portfolio is incorporated herein by reference to Exhibit 8(b) of
Fidelity Capital Trust's Post-Effective Amendment No. 63 (File No.
2-61760).
(9) None.
(10) None.
(11)(a) Not applicable.
(11)(b) Not applicable.
(12) None.
(13) None.
(14) None.
(15) (a) Distribution and Service Plan pursuant to Rule 12b-1 for
Short-Term Portfolio is filed herein as Exhibit 15(a).
(b) Distribution and Service Plan pursuant to Rule 12b-1 for Asset Manager
Portfolio is filed herein as Exhibit 15(b).
(c) Distribution and Service Plan pursuant to Rule 12b-1 for Index 500
Portfolio is filed herein as Exhibit 15(c).
(d) Distribution and Service Plan pursuant to Rule 12b-1 for Asset
Manager: Growth Portfolio is incorporated herein by reference to Exhibit
15(d) of Post-Effective Amendment No. 14.
(e) Distribution and Service Plan pursuant to Rule 12b-1 for Contrafund
Portfolio is incorporated herein by reference to Exhibit 15(e) of
Post-Effective Amendment No. 14.
(16) Schedule for Computation of performance quotations (for a 30-day
yield, using Investment Grade Bond Portfolio and for total return, using
Asset Manager Portfolio as an example) is filed herein as Exhibit 16.
(a) A schedule for the computation of a moving average (using Asset
Manager Portfolio as an example) is incorporated herein by reference and
was filed as Exhibit 16(a) to Post Effective Amendment No. 14.
(17) Financial Data Schedules to be filed by subsequent amendment.
(18) Not Applicable.
Item 25. Persons Controlled by or Under Common Control with Registrant
The Board of Trustees of Registrant is the same as the Board of Trustees
of other funds advised by Fidelity Management & Research Company ("FMR").
In addition, the officers of these funds are substantially identical.
Registrant takes the position that it is not under common control with any
of the above funds since the power residing in the respective companies,
boards and officers arises in each instance as the result of an official
position with the respective funds.
Item 26. Number of Holders of Securities
January 31, 1996
Title of Class Number of Record Holders
Investment Grade Bond Portfolio 40

Asset Manager Portfolio 100

Index 500 Portfolio 51

Asset Manager: Growth Portfolio 16

Contrafund Portfolio 41

Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification shall be
provided to any past or present Trustee or officer. It states that the
Registrant shall indemnify any present or past Trustee or officer to the
fullest extent permitted by law against liability and all expenses
reasonably incurred by him in connection with any claim, action, suit, or
proceeding in which he is involved by virtue of his service as a Trustee,
an officer, or both. Additionally, amounts paid or incurred in settlement
of such matters are covered by this indemnification. Indemnification will
not be provided in certain circumstances, however. These include instances
of willful misfeasance, bad faith, gross negligence, and reckless disregard
of the duties involved in the conduct of the particular office involved.
Pursuant to Section 11 of the Distribution Agreement, the Registrant
agrees to indemnify and hold harmless the Distributor and each of its
directors and officers and each person, if any, who controls the
Distributor within the meaning of Section 15 of the 1933 Act against any
loss, liability, claim, damages or expense arising by reason of any person
acquiring any shares, based upon the ground that the registration
statement, Prospectus, Statement of Additional Information, shareholder
reports or other information filed or made public by the Registrant
included a materially misleading statement or omission. However, the
Registrant does not agree to indemnify the Distributor or hold it harmless
to the extent that the statement or omission was made in reliance upon, and
in conformity with, information furnished to the Registrant by or on behalf
of the Distributor. The Registrant does not agree to indemnify the parties
against any liability to which they would be subject by reason of willful
misfeasance, bad faith, gross negligence, and reckless disregard of the
obligations and duties under the Distribution Agreement.
Pursuant to the agreement by which Fidelity Service Company ("Service") is
appointed sub-transfer agent, the Transfer Agent agrees to indemnify
Service for its losses, claims, damages, liabilities and expenses to the
extent the Transfer Agent is entitled to and receives indemnification from
the Registrant for the same events. Under the Transfer Agency Agreement,
the Registrant agrees to indemnify and hold the Transfer Agent harmless
against any losses, claims, damages, liabilities, or expenses resulting
from:
(1) any claim, demand, action or suit brought by any person other than the
Registrant, which names the Transfer Agent and/or the Registrant as a party
and is not based on and does not result from the Transfer Agent's willful
misfeasance, bad faith, negligence or reckless disregard of its duties, and
arises out of or in connection with the Transfer Agent's performance under
the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent contributed to
by the Transfer Agent's willful misfeasance, bad faith, negligence or
reckless disregard of its duties) which results from the negligence of the
Registrant, or from the Transfer Agent's acting upon any instruction(s)
reasonably believed by it to have been executed or communicated by any
person duly authorized by the Registrant, or as a result of the Transfer
Agent's acting in reliance upon advice reasonably believed by the Transfer
Agent to have been given by counsel for the Registrant, or as a result of
the Transfer Agent's acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine and signed,
countersigned or executed by the proper person.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held, during the
past two fiscal years, the following positions of a substantial nature.

<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Executive Committee of FMR; President
and Chief Executive Officer of FMR Corp.; Chairman of
the Board and a Director of FMR, FMR Corp., FMR Texas
Inc., Fidelity Management & Research (U.K.) Inc., and
Fidelity Management & Research (Far East) Inc.; President
and Trustee of funds advised by FMR.

J. Gary Burkhead President of FMR; Managing Director of FMR Corp.;
President and a Director of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.; Senior Vice
President and Trustee of funds advised by FMR.

Peter S. Lynch Vice Chairman and Director of FMR.

Robert Beckwitt Vice President of FMR and of funds advised by FMR.

David Breazzano Vice President of FMR (1993) and of a fund advised by
FMR.

Stephan Campbell Vice President of FMR (1993).

Dwight Churchill Vice President of FMR (1993).

William Danoff Vice President of FMR (1993) and of a fund advised by
FMR.

Scott DeSano Vice President of FMR (1993).

Penelope Dobkin Vice President of FMR and of a fund advised by FMR.

Larry Domash Vice President of FMR (1993).

George Domolky Vice President of FMR (1993) and of a fund advised by
FMR.

Robert K. Duby Vice President of FMR.

Margaret L. Eagle Vice President of FMR and of a fund advised by FMR.

Kathryn L. Eklund Vice President of FMR.

Richard B. Fentin Senior Vice President of FMR (1993) and of a fund advised
by FMR.

Daniel R. Frank Vice President of FMR and of funds advised by FMR.

Michael S. Gray Vice President of FMR and of funds advised by FMR.

Lawrence Greenberg Vice President of FMR (1993).

Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.

William J. Hayes Senior Vice President of FMR; Equity Division Leader.

Robert Haber Vice President of FMR and of funds advised by FMR.

Richard C. Habermann Senior Vice President of FMR (1993).

Daniel Harmetz Vice President of FMR and of a fund advised by FMR.

Ellen S. Heller Vice President of FMR.

</TABLE>

John Hickling Vice President of FMR (1993) and of funds advised by
FMR.

Robert F. Hill Vice President of FMR; Director of Technical Research.

Curtis Hollingsworth Vice President of FMR (1993).

Stephen P. Jonas Treasurer and Vice President of FMR (1993)); Treasurer of
FMR Texas Inc. (1993), Fidelity Management & Research
(U.K.) Inc. (1993), and Fidelity Management & Research
(Far East) Inc. (1993).

David B. Jones Vice President of FMR (1993).

Steven Kaye Vice President of FMR (1993) and of a fund advised by
FMR.

Frank Knox Vice President of FMR (1993).

Robert A. Lawrence Senior Vice President of FMR (1993); High Income
Division Leader.

Alan Leifer Vice President of FMR and of a fund advised by FMR.

Harris Leviton Vice President of FMR (1993) and of a fund advised by
FMR.

Bradford E. Lewis Vice President of FMR and of funds advised by FMR.

Malcolm W. MacNaught III Vice President of FMR (1993).

Robert H. Morrison Vice President of FMR; Director of Equity Trading.

David Murphy Vice President of FMR and of funds advised by FMR.

Andrew Offit Vice President of FMR (1993).

Judy Pagliuca Vice President of FMR (1993).

Jacques Perold Vice President of FMR.

Anne Punzak Vice President of FMR and of funds advised by FMR.

Lee Sandwen Vice President of FMR (1993).

Patricia A. Satterthwaite Vice President of FMR (1993) and of a fund advised by
FMR.

Thomas T. Soviero Vice President of FMR (1993).

Richard Spillane Vice President of FMR; Senior Vice President and Director
of Operations and Compliance of FMR U.K. (1993).

Robert E. Stansky Senior Vice President of FMR (1993) and of funds advised
by FMR.

Gary L. Swayze Vice President of FMR and of funds advised by FMR;
Tax-Free Fixed-Income Group Leader.

Thomas Sweeney Vice President of FMR (1993).

Beth F. Terrana Senior Vice President of FMR (1993) and of funds advised
by FMR.

Joel Tillinghast Vice President of FMR (1993) and of a fund advised by
FMR.

Robert Tucket Vice President of FMR (1993).

George A. Vanderheiden Senior Vice President of FMR; Vice President of funds
advised by FMR; Growth Group Leader.

Jeffrey Vinik Senior Vice President of FMR (1993) and of a fund advised
by FMR.

Arthur S. Loring Senior Vice President (1993), Clerk, and General Counsel
of FMR; Vice President, Legal of FMR Corp.; Secretary of
funds advised by FMR.

</TABLE>

(2) FIDELITY MANAGEMENT & RESEARCH (U.K.) INC. (FMR U.K.)
FMR U.K. provides investment advisory services to Fidelity Management &
Research Company and Fidelity Management Trust Company. The directors and
officers of the Sub-Adviser have held the following positions of a
substantial nature during the past two fiscal years.

<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR U.K.; Chairman of the
Executive Committee of FMR; Chief Executive Officer of FMR
Corp.; Chairman of the Board and a Director of FMR, FMR
Corp., FMR Texas Inc., and Fidelity Management & Research
(Far East) Inc.; President and Trustee of funds advised by FMR.

J. Gary Burkhead President and Director of FMR U.K.; President of FMR;
Managing Director of FMR Corp.; President and a Director of
FMR Texas Inc. and Fidelity Management & Research (Far
East) Inc.; Senior Vice President and Trustee of funds advised
by FMR.

Richard C. Habermann Senior Vice President of FMR U.K.; Senior Vice President of
Fidelity Management & Research (Far East) Inc.; Director of
Worldwide Research of FMR.

Richard Spillane Senior Vice President and Director of Operations and
Compliance of FMR U.K. (1993).

Stephen P. Jonas Treasurer of FMR U.K. (1993), Fidelity Management &
Research (Far East) Inc. (1993), and FMR Texas Inc. (1993);
Treasurer and Vice President of FMR (1993).

David Weinstein Clerk of FMR U.K.; Clerk of Fidelity Management & Research
(Far East) Inc.; Secretary of FMR Texas Inc.

</TABLE>

(3) FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC. (FMR Far East)
FMR Far East provides investment advisory services to Fidelity Management
& Research Company and Fidelity Management Trust Company. The directors
and officers of the Sub-Adviser have held the following positions of a
substantial nature during the past two fiscal years.

<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR Far East; Chairman of the
Executive Committee of FMR; Chief Executive Officer of
FMR Corp.; Chairman of the Board and a Director of
FMR, FMR Corp., FMR Texas Inc. and Fidelity
Management & Research (U.K.) Inc.; President and
Trustee of funds advised by FMR.

J. Gary Burkhead President and Director of FMR Far East; President of
FMR; Managing Director of FMR Corp.; President and a
Director of FMR Texas Inc. and Fidelity Management &
Research (U.K.) Inc.; Senior Vice President and Trustee
of funds advised by FMR.

Richard C. Habermann Senior Vice President of FMR Far East; Senior Vice
President of Fidelity Management & Research (U.K.)
Inc.; Director of Worldwide Research of FMR.

William R. Ebsworth Vice President of FMR Far East.

Bill Wilder Vice President of FMR Far East (1993).

Stephen P. Jonas Treasurer of FMR Far East (1993), Fidelity Management
& Research (U.K.) Inc. (1993), and FMR Texas Inc.
(1993); Treasurer and Vice President of FMR (1993).

David C. Weinstein Clerk of FMR Far East; Clerk of Fidelity Management &
Research (U.K.) Inc.; Secretary of FMR Texas Inc.

</TABLE>

Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR.
(b)

Name and Principal Positions and Offices Positions and Offices

Business Address* With Underwriter With Registrant

Edward C. Johnson 3d Director Trustee and President

W. Humphrey Bogart Director None

Kurt A. Lange President and Treasurer None

Thomas W. Littauer Senior Vice President None

Arthur S. Loring Vice President and Clerk Secretary

* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity Service
Co., 82 Devonshire Street, Boston, MA 02109, or the funds' respective
custodian: The Bank of New York, 110 Washington Street, New York, N.Y.;
The Chase Manhattan Bank, 1211 Avenue of the Americas, New York, N.Y.; and
Brown Brothers Harriman & Co., 40 Water Street, Boston, MA.
Item 31. Management Services - Not applicable.
Item 32. Undertakings
The Registrant on behalf of Investment Grade Bond Portfolio, Asset Manager
Portfolio, Index 500 Portfolio, Asset Manager: Growth Portfolio, and
Contrafund Portfolio, undertakes (1) to call a meeting of shareholders for
the purpose of voting upon the questions of removal of a trustee or
trustees, when requested to do so by record holders of not less than 10% of
its outstanding shares; and (2) to assist in communications with other
shareholders pursuant to Section 16(c)(1) and (2), whenever shareholders
meeting the qualifications set forth in Section 16(c) seek the opportunity
to communicate with other shareholders with a view toward requesting a
meeting.
The Registrant,on behalf of Investment Grade Bond Portfolio, Asset Manager
Portfolio, Index 500 Portfolio, Asset Manager: Growth Portfolio, and
Contrafund Portfolio, provided the information required by Item 5A is
contained in the annual report, undertakes to furnish to each person to
whom a prospectus has been delivered, upon their request and without
charge, a copy of the Registrant's latest annual report to shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 19 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Boston, and Commonwealth of Massachusetts, on the 15th day of February
1996.

VARIABLE INSURANCE PRODUCTS FUND II
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.

(Signature) (Title) (Date)

<TABLE>
<CAPTION>
<S> <C> <C>
/s/Edward C. Johnson 3d(dagger) President and Trustee February 15 , 1996

Edward C. Johnson 3d (Principal Executive Officer)

</TABLE>

/s/Kenneth A. Rathgeber Treasurer February 15, 1996

Kenneth A. Rathgeber

/s/J. Gary Burkhead Trustee February 15, 1996

J. Gary Burkhead

/s/Ralph F. Cox * Trustee February 15, 1996

Ralph F. Cox

/s/Phyllis Burke Davis * Trustee February 15, 1996

Phyllis Burke Davis

/s/Richard J. Flynn * Trustee February 15, 1996

Richard J. Flynn

/s/E. Bradley Jones * Trustee February 15, 1996

E. Bradley Jones

/s/Donald J. Kirk * Trustee February 15, 1996

Donald J. Kirk

/s/Peter S. Lynch * Trustee February 15, 1996

Peter S. Lynch

/s/Edward H. Malone * Trustee February 15, 1996

Edward H. Malone

/s/Marvin L. Mann * Trustee February 15, 1996

Marvin L. Mann

/s/Gerald C. McDonough* Trustee February 15, 1996

Gerald C. McDonough

/s/Thomas R. Williams * Trustee February 15, 1996

Thomas R. Williams

(dagger) Signatures affixed by J. Gary Burkhead pursuant to a power of
attorney dated December 15, 1994 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated December 15, 1994 and filed herewith.
POWER OF ATTORNEY
We, the undersigned Directors, Trustees or General Partners, as the case
may be, of the following investment companies:

<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Annuity Fund Fidelity Income Fund
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VI Fidelity Municipal Trust
Fidelity Advisor Series VII Fidelity New York Municipal Trust
Fidelity Advisor Series VIII Fidelity Puritan Trust
Fidelity California Municipal Trust Fidelity School Street Trust
Fidelity Capital Trust Fidelity Securities Fund
Fidelity Charles Street Trust Fidelity Select Portfolios
Fidelity Commonwealth Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Congress Street Fund Fidelity Summer Street Trust
Fidelity Contrafund Fidelity Trend Fund
Fidelity Corporate Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Court Street Trust Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust

</TABLE>

plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned
individuals serve as Board Members (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Djinis, each of them singly, our true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for us and in our names in the appropriate capacities, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
our names and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS our hands on this fifteenth day of December, 1994.
/s/Edward C. Johnson 3d /s/Donald J. Kirk

Edward C. Johnson 3d Donald J. Kirk

/s/J. Gary Burkhead /s/Peter S. Lynch

J. Gary Burkhead Peter S. Lynch

/s/Ralph F. Cox /s/Marvin L. Mann

Ralph F. Cox Marvin L. Mann

/s/Phyllis Burke Davis /s/Edward H. Malone

Phyllis Burke Davis Edward H. Malone

/s/Richard J. Flynn /s/Gerald C. McDonough

Richard J. Flynn Gerald C. McDonough

/s/E. Bradley Jones /s/Thomas R. Williams

E. Bradley Jones Thomas R. Williams

POWER OF ATTORNEY
I, the undersigned President and Director, Trustee or General Partner, as
the case may be, of the following investment companies:

<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Annuity Fund Fidelity Institutional Trust
Fidelity Advisor Series I Fidelity Investment Trust
Fidelity Advisor Series II Fidelity Magellan Fund
Fidelity Advisor Series III Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series IV Fidelity Money Market Trust
Fidelity Advisor Series V Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VI Fidelity Municipal Trust
Fidelity Advisor Series VII Fidelity New York Municipal Trust
Fidelity Advisor Series VIII Fidelity Puritan Trust
Fidelity California Municipal Trust Fidelity School Street Trust
Fidelity Capital Trust Fidelity Securities Fund
Fidelity Charles Street Trust Fidelity Select Portfolios
Fidelity Commonwealth Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Congress Street Fund Fidelity Summer Street Trust
Fidelity Contrafund Fidelity Trend Fund
Fidelity Corporate Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Court Street Trust Fidelity U.S. Investments-Government Securities
Fidelity Destiny Portfolios Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity Yen Performance Portfolio, L.P.
Fidelity Devonshire Trust Spartan U.S. Treasury Money Market
Fidelity Exchange Fund Fund
Fidelity Financial Trust Variable Insurance Products Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund II
Fidelity Government Securities Fund
Fidelity Hastings Street Trust
Fidelity Income Fund

</TABLE>

plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned individual
serves as President and Board Member (collectively, the "Funds"), hereby
severally constitute and appoint J. Gary Burkhead, my true and lawful
attorney-in-fact, with full power of substitution, and with full power to
sign for me and in my name in the appropriate capacity, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and behalf in connection therewith as said attorney-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission. I hereby ratify
and confirm all that said attorneys-in-fact or their substitutes may do or
cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d December 15, 1994

Edward C. Johnson 3d

EXHIBIT 15(a)
DISTRIBUTION AND SERVICE PLAN
of Variable Insurance Products Fund II:
Short-Term Portfolio
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by Rule
12b-1 under the Investment Company Act of 1940 (the "Act") of the
Short-Term Portfolio (the "Portfolio"), a series of shares of Variable
Insurance Products Fund II (the "Fund").
2. The Fund has entered into a General Distribution Agreement with respect
to the Portfolio with Fidelity Distributors Corporation (the
"Distributor"), a wholly-owned subsidiary of Fidelity Management & Research
Company (the "Adviser"), under which the Distributor uses all reasonable
efforts, consistent with its other business, to secure purchasers for the
Portfolio's shares of beneficial interest ("shares"). Under the agreement,
the Distributor pays the expenses of printing and distributing any
prospectuses, reports and other literature used by the Distributor,
advertising, and other promotional activities in connection with the
offering of shares of the Portfolio for sale to the public. It is
understood that the Adviser may reimburse the Distributor for these
expenses from any source available to it, including management fees paid to
it by the Portfolio.
3. The Adviser directly, or through the Distributor, may, subject to the
approval of the Trustees, make payments to securities dealers and other
third parties who engage in the sale of shares or who render shareholder
support services, including but not limited to providing office space,
equipment and telephone facilities, answering routine inquiries regarding
the Portfolio, processing shareholder transactions and providing such other
shareholder services as the Fund may reasonably request.
4. The Portfolio will not make separate payments as a result of this Plan
to the Adviser, Distributor or any other party, it being recognized that
the Portfolio presently pays, and will continue to pay, a management fee to
the Adviser. To the extent that any payments made by the Portfolio to the
Adviser, including payment of management fees, should be deemed to be
indirect financing of any activity primarily intended to result in the sale
of shares of the Portfolio within the context of Rule 12b-1 under the Act,
then such payments shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities of the Portfolio" (as defined in the Act),
the plan having been approved by a vote of a majority of the Trustees of
the Fund, including a majority of Trustees who are not "interested persons"
of the Fund (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any agreements
related to this Plan (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect from the date specified above until July 31, 1987, and from year to
year thereafter, provided, however, that such continuance is subject to
approval annually by a vote of a majority of the Trustees of the Fund,
including a majority of the Independent Trustees, cast in person at a
meeting called for the purpose of voting on this Plan. This Plan may be
amended at any time by the Board of Trustees, provided that (a) any
amendment to authorize direct payments by the Portfolio to finance any
activity primarily intended to result in the sale of shares of the
Portfolio, to increase materially the amount spent by the Portfolio for
distribution, or any amendment of the Management Contract to increase the
amount to be paid by the Portfolio thereunder shall be effective only upon
approval by a vote of a majority of the outstanding voting securities of
the Portfolio, and (b) any material amendments of this Plan shall be
effective only upon approval in the manner provided in the first sentence
in this paragraph.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of the Portfolio.
8. During the existence of this Plan, the Fund shall require the Adviser
and/or Distributor to provide the Fund, for review by the Fund's Board of
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any activity
primarily intended to result in the sale of shares of the Portfolio (making
estimates of such costs where necessary or desirable) and the purposes for
which such expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of shares of the Portfolio.
10. Consistent with the limitation of shareholder liability as set forth
in the Fund's Declaration of Trust, any obligations assumed by the
Portfolio pursuant to this Plan and any agreements related to this Plan
shall be limited in all cases to the Portfolio and its assets, and shall
not constitute obligations of any other series of shares of the Fund.
11. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
d&svipf2/dl

EXHIBIT 15(b)
DISTRIBUTION AND SERVICE PLAN
of Variable Insurance Products Fund II:
Asset Manager Portfolio
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by Rule
12b-1 under the Investment Company Act of 1940 (the "Act") of the Asset
Manager Portfolio (the "Portfolio"), a series of shares of Variable
Insurance Products Fund II (the "Fund").
2. The Fund has entered into a General Distribution Agreement with respect
to the Portfolio with Fidelity Distributors Corporation (the
"Distributor"), a wholly-owned subsidiary of Fidelity Management & Research
Company (the "Adviser"), under which the Distributor uses all reasonable
efforts, consistent with its other business, to secure purchasers for the
Portfolio's shares of beneficial interest ("shares"). Under the agreement,
the Distributor pays the expenses of printing and distributing any
prospectuses, reports and other literature used by the Distributor,
advertising, and other promotional activities in connection with the
offering of shares of the Portfolio for sale to the public. It is
understood that the Adviser may reimburse the Distributor for these
expenses from any source available to it, including management fees paid to
it by the Portfolio.
3. The Adviser directly, or through the Distributor, may, subject to the
approval of the Trustees, make payments to securities dealers and other
third parties who engage in the sale of shares or who render shareholder
support services, including but not limited to providing office space,
equipment and telephone facilities, answering routine inquiries regarding
the Portfolio, processing shareholder transactions and providing such other
shareholder services as the Fund may reasonably request.
4. The Portfolio will not make separate payments as a result of this Plan
to the Adviser, Distributor or any other party, it being recognized that
the Portfolio presently pays, and will continue to pay, a management fee to
the Adviser. To the extent that any payments made by the Portfolio to the
Adviser, including payment of management fees, should be deemed to be
indirect financing of any activity primarily intended to result in the sale
of shares of the Portfolio within the context of Rule 12b-1 under the Act,
then such payments shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities of the Portfolio" (as defined in the Act),
the plan having been approved by a vote of a majority of the Trustees of
the Fund, including a majority of Trustees who are not "interested persons"
of the Fund (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any agreements
related to this Plan (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect from the date specified above until July 31, 1990, and from year to
year thereafter, provided, however, that such continuance is subject to
approval annually by a vote of a majority of the Trustees of the Fund,
including a majority of the Independent Trustees, cast in person at a
meeting called for the purpose of voting on this Plan. This Plan may be
amended at any time by the Board of Trustees, provided that (a) any
amendment to authorize direct payments by the Portfolio to finance any
activity primarily intended to result in the sale of shares of the
Portfolio, to increase materially the amount spent by the Portfolio for
distribution, or any amendment of the Management Contract to increase the
amount to be paid by the Portfolio thereunder shall be effective only upon
approval by a vote of a majority of the outstanding voting securities of
the Portfolio, and (b) any material amendments of this Plan shall be
effective only upon approval in the manner provided in the first sentence
in this paragraph.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of the Portfolio.
8. During the existence of this Plan, the Fund shall require the Adviser
and/or Distributor to provide the Fund, for review by the Fund's Board of
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any activity
primarily intended to result in the sale of shares of the Portfolio (making
estimates of such costs where necessary or desirable) and the purposes for
which such expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of shares of the Portfolio.
10. Consistent with the limitation of shareholder liability as set forth
in the Fund's Declaration of Trust, any obligations assumed by the
Portfolio pursuant to this Plan and any agreements related to this Plan
shall be limited in all cases to the Portfolio and its assets, and shall
not constitute obligations of any other series of shares of the Fund.
11. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
d&svipf2/dl

EXHIBIT 15(c)
DISTRIBUTION AND SERVICE PLAN
of Variable Insurance Products Fund II:
Index 500 Portfolio
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by Rule
12b-1 under the Investment Company Act of 1940 (the "Act") of Index 500
Portfolio (the "Portfolio"), a series of shares of Variable Insurance
Products Fund II (the "Fund").
2. The Fund has entered into a General Distribution Agreement with respect
to the Portfolio with Fidelity Distributors Corporation (the
"Distributor"), a wholly-owned subsidiary of Fidelity Management & Research
Company (the "Adviser"), under which the Distributor uses all reasonable
efforts, consistent with its other business, to secure purchasers for the
Portfolio's shares of beneficial interest ("shares"). Under the agreement,
the Distributor pays the expenses of printing and distributing any
prospectuses, reports and other literature used by the Distributor,
advertising, and other promotional activities in connection with the
offering of shares of the Portfolio for sale to the public. It is
understood that the Adviser may reimburse the Distributor for these
expenses from any source available to it, including management fees paid to
it by the Portfolio.
3. The Adviser directly, or through the Distributor, may, subject to the
approval of the Trustees, make payments to securities dealers and other
third parties who engage in the sale of shares or who render shareholder
support services, including but not limited to providing office space,
equipment and telephone facilities, answering routine inquiries regarding
the Portfolio, processing shareholder transactions and providing such other
shareholder services as the Fund may reasonably request.
4. The Portfolio will not make separate payments as a result of this Plan
to the Adviser, Distributor or any other party, it being recognized that
the Portfolio presently pays, and will continue to pay, a management fee to
the Adviser. To the extent that any payments made by the Portfolio to the
Adviser, including payment of management fees, should be deemed to be
indirect financing of any activity primarily intended to result in the sale
of shares of the Portfolio within the context of Rule 12b-1 under the Act,
then such payments shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities of the Portfolio" (as defined in the Act),
the plan having been approved by a vote of a majority of the Trustees of
the Fund, including a majority of Trustees who are not "interested persons"
of the Fund (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any agreements
related to this Plan (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect from the date specified above until May 1, 1993, and from year to
year thereafter, provided, however, that such continuance is subject to
approval annually by a vote of a majority of the Trustees of the Fund,
including a majority of the Independent Trustees, cast in person at a
meeting called for the purpose of voting on this Plan. This Plan may be
amended at any time by the Board of Trustees, provided that (a) any
amendment to authorize direct payments by the Portfolio to finance any
activity primarily intended to result in the sale of shares of the
Portfolio, to increase materially the amount spent by the Portfolio for
distribution, or any amendment of the Management Contract to increase the
amount to be paid by the Portfolio thereunder shall be effective only upon
approval by a vote of a majority of the outstanding voting securities of
the Portfolio, and (b) any material amendments of this Plan shall be
effective only upon approval in the manner provided in the first sentence
in this paragraph.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of the Portfolio.
8. During the existence of this Plan, the Fund shall require the Adviser
and/or Distributor to provide the Fund, for review by the Fund's Board of
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any activity
primarily intended to result in the sale of shares of the Portfolio (making
estimates of such costs where necessary or desirable) and the purposes for
which such expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of shares of the Portfolio.
10. Consistent with the limitation of shareholder liability as set forth
in the Fund's Declaration of Trust, any obligations assumed by the
Portfolio pursuant to this Plan and any agreements related to this Plan
shall be limited in all cases to the Portfolio and its assets, and shall
not constitute obligations of any other series of shares of the Fund.
11. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
int-d&s

Exhibit 16
SCHEDULE FOR COMPUTATION OF PERFORMANCE CALCULATIONS
CUMULATIVE TOTAL RETURNS and their income and capital components are
described in the fund's Statement of Additional Information, and are based
on the net asset values, dividends, capital gain distributions, and
reinvestment prices of the historical period covered.
AVERAGE ANNUAL RETURNS are calculated according to the following formula:
Average Annual Return = [(1 + Cumulative Return)1/n] - 1
[where n = the number of years in the base period]
Included in this exhibit is a chart showing the data used to calculate the
30-Day Yield as of the fund's fiscal year end.
The 30-DAY YIELD is calculated according to the methods prescribed in Form
N-1A Item 22(b)(ii).
30-Day Total Net Income
30-Day Yield = 2<UNDEF>(--------------------------------------------------)
+ 1)6 - 1<UNDEF>
(30-Day Average Shares Outstanding)(Prior Day Price)
30-Day Yield: Investment Grade Bond Portfolio; Total Returns: Asset Manager
Portfolio.

<TABLE>
<CAPTION>
<S> <C>
1 FIDELITY FUNDS 1 227-1 VIP INVESTMENT GRADE BOND SC43160 Page 1

REPORT #R430MA 30 DAY DIVIDEND HISTORY RUN DATE: 02/09/96 TIME: 14:57

From 19951204 To 19960102

INCOME W/

SHARES GROSS WRITE BREAKAGE &

DATE OUTSTANDING INCOME EXPENSES NET INCOME ADJUSTMENTS OFF BREAKAGE WRITE OFF

_________________________________________________________________________________________________________________

4 14,150,546.192 33,186.74 2,880.68 30,306.06 0.00 265.20- 1.14- 30,040.47

5 14,188,801.842 33,694.99 2,889.01 30,805.98 0.00 265.20- 5.34 30,539.64

6 14,237,318.207 33,800.69 2,892.64 30,908.05 0.00 265.20- 4.76- 30,648.19

7 14,235,925.274 33,940.75 2,899.45 31,041.30 0.00 265.20- 6.73- 30,771.34

8 14,228,324.304 33,754.94 2,896.32 30,858.62 0.00 265.20- 4.21- 30,586.69

9 14,228,324.304 33,754.94 2,896.32 30,858.62 0.00 265.20- 1.69- 30,589.21

10 14,228,324.304 33,754.94 2,896.32 30,858.62 0.00 265.20- 0.83 30,591.73

11 14,128,534.225 33,701.38 2,895.44 30,805.94 0.00 265.20- 4.32- 30,541.57

12 14,151,723.884 33,693.84 2,883.54 30,810.30 0.00 162.27- 5.23 30,643.71

13 14,164,452.140 33,680.30 6,396.91- 40,077.21 9,283.59- 162.27- 1.13- 30,636.58

14 14,166,772.509 33,393.99 2,887.49 30,506.50 9,283.59- 162.27- 2.13- 30,343.10

15 14,180,689.503 33,628.56 2,888.58 30,739.98 9,283.59- 162.27- 2.01 30,575.58

16 14,180,689.503 33,628.56 2,888.58 30,739.98 9,283.59- 155.06 6.15 30,579.72

17 14,180,689.503 33,628.56 2,888.58 30,739.98 9,283.59- 155.06 3.89- 30,583.86

18 14,170,931.836 33,874.31 2,890.75 30,983.56 9,283.59- 155.06 1.19 31,134.73

19 14,157,509.668 33,758.88 2,881.52 30,877.36 9,283.59- 155.06 0.35 31,033.61

20 14,178,978.877 33,751.84 2,887.88 30,863.96 9,283.59- 155.06 4.24- 31,019.37

21 14,233,527.051 33,709.48 2,891.72 30,817.76 9,283.59- 155.06 3.57- 30,968.58

22 14,224,341.874 33,608.04 2,899.85 30,708.19 9,283.59- 155.06 7.08 30,859.68

23 14,224,341.874 33,608.04 2,899.85 30,708.19 9,283.59- 155.06 3.51 30,870.33

24 14,224,341.874 33,608.04 2,899.85 30,708.19 9,283.59- 155.06 0.06- 30,866.76

25 14,224,341.874 33,608.04 2,899.85 30,708.19 9,283.59- 155.06 3.63- 30,863.19

26 14,207,052.069 31,268.71 2,903.15 28,365.56 9,283.59- 155.06 3.44 28,516.99

27 14,245,053.438 33,629.10 2,903.51 30,725.59 9,283.59- 155.06 0.81 30,884.09

28 14,334,294.784 33,841.56 2,912.65 30,928.91 9,283.59- 155.06 6.31- 31,084.78

29 14,504,741.038 101,207.70 5,748.81- 106,956.51 85,433.79- 155.06 1.94 30,955.06

30 14,504,741.038 33,735.90 2,929.59 30,806.31 85,433.79- 155.06 4.31- 30,963.31

31 14,504,741.038 33,735.90 2,929.59 30,806.31 85,433.79- 155.06 3.94 30,957.06

1 14,504,741.038 33,735.90 2,929.59 30,806.31 85,433.79- 155.06 2.31- 30,965.31

2 14,551,940.584 31,436.64- 2,903.93- 28,532.71- 23,821.17- 155.06 3.97- 33,232.66

_______________

20.40

1 FIDELITY FUNDS 1 227-1 VIP INVESTMENT GRADE BOND SC43160 Page 2

REPORT #R430MA 30 DAY DIVIDEND HISTORY RUN DATE: 02/09/96 TIME: 14:57

From 19951204 To 19960102

MTD DAILY DIST DIVIDEND -------- SHARES OUTSTANDING -------- DAILY

DATE MIL RATE MIL RATE YIELD PAID | 30-DAY TOTAL 30-DAY AVERAGE | YTM INCOME

___________________________________________________________________________________________________________________

4 0.002123000 0.008656000 6.28 30,041.61 417,524,312.018 13,917,477.067 29,662.24

5 0.002152000 0.010808000 6.35 30,534.30 418,226,411.505 13,940,880.384 29,534.52

6 0.002153000 0.012961000 6.36 30,652.95 418,855,793.931 13,961,859.798 29,693.14

7 0.002162000 0.015123000 6.38 30,778.07 419,446,134.991 13,981,537.833 29,874.46

8 0.002150000 0.017273000 6.36 30,590.90 419,985,667.158 13,999,522.239 29,927.46

9 0.002150000 0.019423000 6.36 30,590.90 420,428,512.688 14,014,283.756 29,899.13

10 0.002150000 0.021573000 6.36 30,590.90 420,842,081.448 14,028,069.382 29,899.13

11 0.002162000 0.023735000 6.39 30,545.89 421,155,860.129 14,038,528.671 29,899.13

12 0.002165000 0.025900000 6.39 30,638.48 421,492,828.469 14,049,760.949 29,648.71

13 0.002163000 0.028063000 6.39 30,637.71 421,843,679.527 14,061,455.984 29,694.16

14 0.002142000 0.030205000 6.33 30,345.23 422,178,706.751 14,072,623.558 29,745.44

15 0.002156000 0.032361000 6.37 30,573.57 422,514,691.498 14,083,823.050 29,688.90

16 0.002156000 0.034517000 6.37 30,573.57 422,834,312.140 14,094,477.071 29,739.80

17 0.002157000 0.036674000 6.37 30,587.75 423,097,535.512 14,103,251.184 29,739.80

18 0.002197000 0.038871000 6.49 31,133.54 423,351,001.217 14,111,700.041 29,739.80

19 0.002192000 0.041063000 6.50 31,033.26 423,591,044.754 14,119,701.492 29,952.15

20 0.002188000 0.043251000 6.46 31,023.61 423,847,949.613 14,128,264.987 29,747.61

21 0.002176000 0.045427000 6.42 30,972.15 424,131,228.954 14,137,707.632 29,717.24

22 0.002169000 0.047596000 6.41 30,852.60 424,369,652.449 14,145,655.082 29,830.57

23 0.002170000 0.049766000 6.39 30,866.82 424,608,075.944 14,153,602.531 29,851.41

24 0.002170000 0.051936000 6.39 30,866.82 424,820,991.481 14,160,699.716 29,851.41

25 0.002170000 0.054106000 6.39 30,866.82 425,033,907.018 14,167,796.901 29,851.41

26 0.002007000 0.056113000 5.91 28,513.55 425,229,532.750 14,174,317.758 29,851.41

27 0.002168000 0.058281000 6.38 30,883.28 425,454,046.791 14,181,801.560 29,872.25

28 0.002169000 0.060450000 6.37 31,091.09 425,713,192.521 14,190,439.751 29,783.49

29 0.002134000 0.062584000 6.26 30,953.12 426,132,979.231 14,204,432.641 29,901.27

30 0.002135000 0.064719000 6.24 30,967.62 426,517,017.335 14,217,233.911 30,280.71

31 0.002134000 0.066853000 6.24 30,953.12 426,877,856.922 14,229,261.897 30,280.71

1 0.002135000 0.002135000 6.24 30,967.62 427,238,696.509 14,241,289.884 30,280.71

2 0.002284000 0.004419000 6.68 33,236.63 427,646,735.642 14,254,891.188 30,280.71

_______________

922,863.48

1 FIDELITY FUNDS 1 227-1 VIP INVESTMENT GRADE BOND SC43160 Page 3

REPORT #R430MA 30 DAY DIVIDEND HISTORY RUN DATE: 02/09/96 TIME: 14:57

From 19951204 To 19960102

DAILY YTM NET DAILY YTM PAYDOWN ADJ TO 30-DAY YTM 30-DAY 30-DAY 30-DAY DAILY SEC PRIOR

DATE INCOME ADJ NET INCOME GAIN/LOSS INCOME NET INCOME MIL RATE YIELD YIELD DAY NAV

___________________________________________________________________________________________________________________

4 0.00 26,781.56 14.33 0.00 800,013.25 0.057574000 5.67 5.61 12.33

5 0.00 26,645.51 19.47 0.00 800,717.81 0.057533000 5.65 5.56 12.37

6 0.00 26,800.50 19.47 0.00 801,548.32 0.057496000 5.65 5.58 12.36

7 0.00 26,975.01 19.47 0.00 802,259.30 0.057461000 5.64 5.60 12.36

8 0.00 27,031.14 3.78- 0.00 802,843.04 0.057422000 5.65 5.62 12.34

9 0.00 27,002.81 222.26 0.00 803,670.49 0.057407000 5.65 5.66 12.34

10 0.00 27,002.81 222.26 0.00 804,249.29 0.057388000 5.65 5.66 12.34

11 0.00 27,003.69 222.26 0.00 804,702.48 0.057364000 5.64 5.66 12.34

12 0.00 26,765.17 222.26 0.00 804,917.15 0.057336000 5.63 5.64 12.36

13 0.00 26,807.48 222.67 0.00 805,176.22 0.057309000 5.63 5.64 12.36

14 0.00 26,857.95 222.67 0.00 805,759.97 0.057303000 5.63 5.65 12.35

15 0.00 26,800.32 222.85 0.00 806,644.62 0.057320000 5.63 5.63 12.36

16 0.00 26,851.22 222.85 0.00 807,275.07 0.057319000 5.63 5.64 12.36

17 0.00 26,851.22 222.85 0.00 807,866.03 0.057318000 5.63 5.64 12.36

18 0.00 26,849.05 222.85 0.00 808,288.80 0.057312000 5.63 5.64 12.36

19 0.00 27,070.63 222.85 0.00 808,933.16 0.057324000 5.65 5.71 12.31

20 0.00 26,859.73 222.81 0.00 809,376.54 0.057322000 5.63 5.65 12.36

21 0.00 26,825.52 222.98 0.00 809,692.96 0.057310000 5.62 5.63 12.37

22 0.00 26,930.72 217.61 0.00 810,002.92 0.057294000 5.63 5.63 12.36

23 0.00 26,951.56 214.64 0.00 810,279.27 0.057281000 5.61 5.63 12.39

24 0.00 26,951.56 214.64 0.00 810,561.48 0.057269000 5.61 5.63 12.39

25 0.00 26,951.56 214.64 0.00 810,729.72 0.057252000 5.61 5.63 12.39

26 0.00 26,948.26 214.64 0.00 810,894.65 0.057235000 5.61 5.63 12.39

27 0.00 26,968.74 214.64 0.00 811,086.89 0.057222000 5.60 5.63 12.41

28 0.00 26,870.84 214.64 0.00 811,270.12 0.057205000 5.59 5.58 12.43

29 0.00 26,971.68 214.98 0.00 811,433.64 0.057182000 5.58 5.56 12.45

30 0.00 27,351.12 212.08 0.00 812,044.19 0.057168000 5.56 5.56 12.48

31 0.00 27,351.12 212.08 0.00 812,742.65 0.057166000 5.56 5.56 12.48

1 0.00 27,351.12 212.08 0.00 813,502.75 0.057171000 5.56 5.56 12.48

2 0.00 27,325.46 212.08 0.00 814,237.18 0.057174000 5.56 5.55 12.48

avg: 12.38

Name: VIP II: Asset Manager PorA. Pay Date E. Original Shares

Notes: B. X-Date F. Total Value

Load: C. Reinvest NAV G. Dividends

Redempt D. Monthend H. CG Long

FiscYea31-Dec

A B C D E F G H

1.00 06-Sep-89 1000.000 10000.00

1.00 Sep-89 1000.000 9990.00

1.00 Oct-89 1000.000 10010.00

1.00 Nov-89 1000.000 10050.00

21-Dec 21-Dec 9.88 Dec-89 1000.000 9970.00 0.09

1.00 Jan-90 1000.000 9750.00

1.00 Feb-90 1000.000 9850.00

1.00 Mar-90 1000.000 9930.00

1.00 Apr-90 1000.000 9800.00

1.00 May-90 1000.000 10300.00

1.00 Jun-90 1000.000 10380.00

1.00 Jul-90 1000.000 10360.00

1.00 Aug-90 1000.000 10020.00

1.00 Sep-90 1000.000 9810.00

1.00 Oct-90 1000.000 9860.00

1.00 Nov-90 1000.000 10340.00

21-Dec 21-Dec 10.24 Dec-90 1000.000 10240.00 0.40

1.00 Jan-91 1000.000 10730.00

1.00 Feb-91 1000.000 11150.00

1.00 Mar-91 1000.000 11330.00

1.00 Apr-91 1000.000 11500.00

1.00 May-91 1000.000 11760.00

1.00 Jun-91 1000.000 11550.00

1.00 Jul-91 1000.000 11840.00

1.00 Aug-91 1000.000 12080.00

1.00 Sep-91 1000.000 12150.00

1.00 Oct-91 1000.000 12230.00

1.00 Nov-91 1000.000 12030.00

1.00 Dec-91 1000.000 12550.00

1.00 Jan-92 1000.000 12710.00

07-Feb 07-Feb 12.18 Feb-92 1000.000 12310.00 0.31 0.06

1.00 Mar-92 1000.000 12280.00

1.00 Apr-92 1000.000 12460.00

1.00 May-92 1000.000 12590.00

1.00 Jun-92 1000.000 12580.00

1.00 Jul-92 1000.000 12790.00

1.00 Aug-92 1000.000 12750.00

1.00 Sep-92 1000.000 12830.00

1.00 Oct-92 1000.000 12850.00

1.00 Nov-92 1000.000 13130.00

1.00 Dec-92 1000.000 13320.00

1.00 Jan-93 1000.000 13560.00

05-Feb 05-Feb 13.13 Feb-93 1000.000 13070.00 0.37 0.05

1.00 Mar-93 1000.000 13440.00

1.00 Apr-93 1000.000 13520.00

1.00 May-93 1000.000 13750.00

1.00 Jun-93 1000.000 13860.00

1.00 Jul-93 1000.000 14030.00

1.00 Aug-93 1000.000 14440.00

1.00 Sep-93 1000.000 14450.00

1.00 Oct-93 1000.000 14840.00

1.00 Nov-93 1000.000 14820.00

1.00 Dec-93 1000.000 15420.00

1.00 Jan-94 1000.000 15910.00

04-Feb 04-Feb 14.99 Feb-94 1000.000 14680.00 0.28 0.14

1.00 Mar-94 1000.000 13990.00

1.00 Apr-94 1000.000 14000.00

1.00 May-94 1000.000 14120.00

1.00 Jun-94 1000.000 13850.00

1.00 Jul-94 1000.000 14090.00

1.00 Aug-94 1000.000 14420.00

02-Sep 02-Sep 14.37 Sep-94 1000.000 14240.00 0.01

1.00 Oct-94 1000.000 14310.00

1.00 Nov-94 1000.000 14100.00

1.00 Dec-94 1000.000 13790.00

1.00 Jan-95 1000.000 13700.00

03-Feb 03-Feb 13.54 Feb-95 1000.000 13630.00 0.290000

1.00 Mar-95 1000.000 13810.00

1.00 Apr-95 1000.000 14030.00

1.00 May-95 1000.000 14210.00

1.00 Jun-95 1000.000 14330.00

1.00 Jul-95 1000.000 14840.00

1.00 Aug-95 1000.000 15020.00

1.00 Sep-95 1000.000 15210.00

1.00 Oct-95 1000.000 15010.00

1.00 Nov-95 1000.000 15400.00

1.00 Dec-95 1000.000 15790.00

1.00 Jan-96 1000.000 16130.00

I. CG Short M. Cap Gain Shares Q. Cap Gains rec'd in Cash

J. NAV N. Cap Gain Value R. Cost of reinvest'd Distributions

K. Div Shares O. Total Value

L. Dividend VaP. Divs rec'd in Cash

I J K L M N O P Q R

10.00 10000

9.99 0 0 0 0 9990 0 0 0

10.01 0 0 0 0 10010 0 0 0

10.05 0 0 0 0 10050 0 0 0

0.02 9.97 9 91 2 20 10081 90 20 110

9.75 9 89 2 20 9859 90 20 110

9.85 9 90 2 20 9960 90 20 110

9.93 9 90 2 20 10041 90 20 110

9.80 9 89 2 20 9909 90 20 110

10.30 9 94 2 21 10415 90 20 110

10.38 9 95 2 21 10496 90 20 110

10.36 9 94 2 21 10475 90 20 110

10.02 9 91 2 20 10132 90 20 110

9.81 9 89 2 20 9919 90 20 110

9.86 9 90 2 20 9970 90 20 110

10.34 9 94 2 21 10455 90 20 110

10.24 49 498 2 21 10758 490 20 514

10.73 49 522 2 22 11273 490 20 514

11.15 49 542 2 23 11715 490 20 514

11.33 49 551 2 23 11904 490 20 514

11.50 49 559 2 23 12082 490 20 514

11.76 49 572 2 24 12355 490 20 514

11.55 49 561 2 23 12135 490 20 514

11.84 49 576 2 24 12439 490 20 514

12.08 49 587 2 24 12692 490 20 514

12.15 49 591 2 25 12765 490 20 514

12.23 49 594 2 25 12849 490 20 514

12.03 49 585 2 24 12639 490 20 514

12.55 49 610 2 25 13185 490 20 514

12.71 49 618 2 26 13354 490 20 514

0.27 12.31 75 928 30 375 13613 800 350 1187

12.28 75 925 30 374 13580 800 350 1187

12.46 75 939 30 380 13779 800 350 1187

12.59 75 949 30 384 13922 800 350 1187

12.58 75 948 30 384 13911 800 350 1187

12.79 75 964 30 390 14144 800 350 1187

12.75 75 961 30 389 14099 800 350 1187

12.83 75 967 30 391 14188 800 350 1187

12.85 75 968 30 392 14210 800 350 1187

13.13 75 989 30 400 14520 800 350 1187

13.32 75 1004 30 406 14730 800 350 1187

13.56 75 1022 30 413 14995 800 350 1187

0.20 13.07 107 1392 52 674 15136 1170 600 1872

13.44 107 1431 52 693 15564 1170 600 1872

13.52 107 1440 52 697 15657 1170 600 1872

13.75 107 1465 52 709 15923 1170 600 1872

13.86 107 1476 52 714 16051 1170 600 1872

14.03 107 1494 52 723 16248 1170 600 1872

14.44 107 1538 52 744 16722 1170 600 1872

14.45 107 1539 52 745 16734 1170 600 1872

14.84 107 1581 52 765 17186 1170 600 1872

14.82 107 1578 52 764 17162 1170 600 1872

15.42 107 1642 52 795 17857 1170 600 1872

15.91 107 1695 52 820 18425 1170 600 1872

0.32 14.68 128 1881 87 1278 17839 1450 1060 2729

13.99 128 1793 87 1218 17001 1450 1060 2729

14.00 128 1794 87 1219 17013 1450 1060 2729

14.12 128 1809 87 1230 17159 1450 1060 2729

13.85 128 1775 87 1206 16831 1450 1060 2729

14.09 128 1806 87 1227 17122 1450 1060 2729

14.42 128 1848 87 1256 17524 1450 1060 2729

14.24 129 1837 87 1240 17317 1460 1060 2742

14.31 129 1846 87 1246 17402 1460 1060 2742

14.10 129 1819 87 1228 17147 1460 1060 2742

13.79 129 1779 87 1201 16770 1460 1060 2742

13.70 129 1767 87 1193 16660 1460 1060 2742

13.63 155 2113 87 1187 16930 1750 1060 3094

13.81 155 2141 87 1203 17154 1750 1060 3094

14.03 155 2175 87 1222 17427 1750 1060 3094

14.21 155 2203 87 1237 17650 1750 1060 3094

14.33 155 2222 87 1248 17800 1750 1060 3094

14.84 155 2301 87 1292 18433 1750 1060 3094

15.02 155 2329 87 1308 18657 1750 1060 3094

15.21 155 2358 87 1325 18893 1750 1060 3094

15.01 155 2327 87 1307 18644 1750 1060 3094

15.40 155 2387 87 1341 19129 1750 1060 3094

15.79 155 2448 87 1375 19613 1750 1060 3094

16.13 155 2501 87 1405 20035 1750 1060 3094

</TABLE>