VARIABLE INSURANCE PRODUCTS FUND II, 497, 2000-07-19

VARIABLE INSURANCE PRODUCTS FUND II
497, 2000-07-19

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THE FUND OFFERS ITS SHARES ONLY TO SEPARATE ACCOUNTS OF INSURANCE
COMPANIES THAT OFFER VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE
PRODUCTS. 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. PLEASE
READ THIS PROSPECTUS TOGETHER WITH YOUR VARIABLE ANNUITY OR VARIABLE
LIFE INSURANCE PRODUCT PROSPECTUS.

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

FIDELITY(REGISTERED TRADEMARK)
VARIABLE INSURANCE PRODUCTS
SERVICE CLASS
INDEX 500 PORTFOLIO

PROSPECTUS
JUNE 30, 2000

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

CONTENTS

FUND SUMMARY 3 INVESTMENT SUMMARY

3 PERFORMANCE

4 OPERATING EXPENSES

FUND BASICS 4 INVESTMENT DETAILS

5 VALUING SHARES

SHAREHOLDER INFORMATION 5 BUYING AND SELLING SHARES

5 DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS

6 TAX CONSEQUENCES

FUND SERVICES 6 FUND MANAGEMENT

6 FUND DISTRIBUTION

APPENDIX 7 ADDITIONAL INFORMATION ABOUT
THE INDEX

FUND SUMMARY

INVESTMENT SUMMARY

INVESTMENT OBJECTIVE

VIP 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 Standard & Poor's 500SM Index (S&P
500(registered trademark)).

PRINCIPAL INVESTMENT STRATEGIES

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

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

(small solid bullet) Using statistical sampling techniques based on
such factors as capitalization, industry exposures, dividend yield,
price/earnings ratio, price/book ratio, and earnings growth.

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

PRINCIPAL INVESTMENT RISKS

The fund is subject to the following principal investment risks:

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

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

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

When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.

PERFORMANCE

The following information illustrates the changes in the fund's
performance from year to year, as represented by the performance of
Initial Class, and compares the performance of Initial Class of the
fund to the performance of a market index and an average of the
performance of similar funds over various periods of time. Returns for
Initial Class of the fund do not include the effect of any sales
charges or other expenses of any variable annuity or variable life
insurance product. Returns for Initial Class of the fund would be
lower if the effect of those sales charges and expenses were included.
Returns are based on past results and are not an indication of future
performance.

Performance history will be available for Service Class of the fund
after Service Class has been in operation for one calendar year.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR-BY-YEAR RETURNS

VIP INDEX 500 - INITIAL CLASS

Calendar Years 1993 1994 1995 1996 1997 1998 1999

9.74% 1.04% 37.19% 22.71% 32.83% 28.31% 20.52%

</TABLE>

Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: 9.739999999999998
Row: 5, Col: 1, Value: 1.04
Row: 6, Col: 1, Value: 37.19000000000001
Row: 7, Col: 1, Value: 22.71
Row: 8, Col: 1, Value: 32.83
Row: 9, Col: 1, Value: 28.31
Row: 10, Col: 1, Value: 20.52

DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP INDEX
500, THE HIGHEST RETURN FOR A QUARTER WAS 21.36% (QUARTER ENDED
DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS -9.96%
(QUARTER ENDED SEPTEMBER 30, 1998).

THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF VIP
INDEX 500 WAS 2.20%.

THE RETURNS SHOWN ABOVE ARE FOR INITIAL CLASS OF THE FUND, WHICH IS
NOT AVAILABLE THROUGH THIS PROSPECTUS. SERVICE CLASS WOULD HAVE
SUBSTANTIALLY SIMILAR ANNUAL RETURNS TO INITIAL CLASS BECAUSE THE
CLASSES ARE INVESTED IN THE SAME PORTFOLIO OF SECURITIES. SERVICE
CLASS'S RETURNS WILL BE LOWER THAN INITIAL CLASS'S RETURNS TO THE
EXTENT THAT SERVICE CLASS HAS HIGHER EXPENSES.

AVERAGE ANNUAL RETURNS

For the periods ended Past 1 year Past 5 years Life of classA
December 31, 1999

VIP Index 500 - Initial Class 20.52% 28.16% 21.07%

S&P 500 21.04% 28.56% 21.45%

Lipper Variable Annuity S&P 20.48% 28.07% n/a
500 Index Objective Funds
Average

A FROM AUGUST 27, 1992.

If Fidelity Management and Research Company (FMR) had not reimbursed
certain class expenses during these periods, the fund's Initial Class
returns would have been lower.

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

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

OPERATING EXPENSES

The annual class operating expenses provided below for Service Class
of the fund are based on estimated expenses. The annual class
operating expenses do not take into account any fees or other expenses
of any variable annuity or variable life insurance product.

Service Class

Management fee 0.24%

Distribution and Service 0.10%
(12b-1) fee

Other expenses 0.10%

Total annual class operating 0.44%
expensesA

A EFFECTIVE JULY 7, 2000, FMR HAS VOLUNTAR ILY AGREED TO REIMBURSE
SERVICE CLASS OF THE FUND TO THE EXTENT THAT TOTAL OPERATING EXPENSES
(EXCLUDING INTEREST, TAXES, SECURITIES LENDING COSTS, BROKERAGE
COMMISSIONS, AND EXTRAORDINARY EXPENSES), AS A PERCENTAGE OF ITS
AVERAGE NET ASSETS, EXCEED 0.38%. THIS ARRANGEMENT CAN BE
DISCONTINUED BY FMR AT ANY TIME.

FUND BASICS

INVESTMENT DETAILS

INVESTMENT OBJECTIVE

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

PRINCIPAL INVESTMENT STRATEGIES

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

The fund may not always hold all of the same securities as the S&P
500. BT may use statistical sampling techniques to attempt to
replicate the returns of the S&P 500. Statistical sampling techniques
attempt to match the investment characteristics of the index and the
fund by taking into account such factors as capitalization, industry
exposures, dividend yield, price/earnings ratio, price/book ratio, and
earnings growth.

The fund may not track the index perfectly because differences between
the index and the fund's portfolio can cause differences in
performance. In addition, expenses and transaction costs, the size and
frequency of cash flow into and out of the fund, and differences
between how and when the fund and the index are valued can cause
differences in performance.

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

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

DESCRIPTION OF PRINCIPAL SECURITY TYPES

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

PRINCIPAL INVESTMENT RISKS

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

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

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

ISSUER-SPECIFIC CHANGES. Changes in the financial condition of an
issuer, changes in specific economic or political conditions that
affect a particular type of security or issuer, and changes in general
economic or political conditions can affect the value of an issuer's
securities. The value of securities of smaller, less well-known
issuers can be more volatile than that of larger issuers.

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

FUNDAMENTAL INVESTMENT POLICIES

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

VIP 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.

VALUING SHARES

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

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

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

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

SHAREHOLDER INFORMATION

BUYING AND SELLING SHARES

Insurance companies offer variable annuity and variable life insurance
products through separate accounts. Separate accounts - not variable
product owners - are the shareholders of the fund. Variable product
owners hold interests in separate accounts. The terms of the offering
of interests in separate accounts are included in the variable annuity
or variable life insurance product prospectus.

Only separate accounts of insurance companies that have signed the
appropriate agreements with the fund can buy or sell shares of the
fund.

The price to buy one share of Service Class is the class's NAV.
Service Class shares are sold without a sales charge.

Shares will be bought at the next NAV calculated after an order is
received in proper form.

The Board of Trustees that oversees the fund may refuse to sell shares
of the fund or may stop offering shares of the fund for a period of
time or permanently if required by law, required by regulatory
authorities, or in the best interests of shareholders of the fund.

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

Shares will be sold at the next NAV calculated after an order is
received in proper form.

Normally, Fidelity will process redemptions by the next business day,
but Fidelity may take up to seven business days to process redemptions
if making immediate payment would adversely affect the fund.

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

Under certain circumstances (for example, at the request of a
shareholder), redemption proceeds may be paid in securities or other
property rather than in cash if FMR determines it is in the best
interests of the fund.

The fund offers its shares to separate accounts of insurance companies
that may be affiliated or unaffiliated with FMR and/or each other. The
fund currently does not foresee any disadvantages to variable product
owners arising out of the fact that the fund offers its shares to
separate accounts of insurance companies that offer variable annuity
and variable life insurance products. Nevertheless, the Board of
Trustees that oversees the fund intends to monitor events to identify
any material irreconcilable conflicts that may possibly arise and to
determine what action, if any, should be taken in response.

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

The fund earns dividends, interest, and other income from its
investments, and distributes this income (less expenses) to
shareholders as dividends. The fund also realizes capital gains from
its investments, and distributes these gains (less any losses) to
shareholders as capital gain distributions.

The fund normally pays dividends and capital gain distributions at
least annually, in February.

Dividends and capital gain distributions will be automatically
reinvested in additional Service Class shares of the fund.

TAX CONSEQUENCES

Variable product owners seeking to understand the tax consequences of
their investment should consult with their tax advisers or the
insurance company that issued their variable product, or refer to
their variable annuity or variable life insurance product prospectus.

Insurance company separate accounts generally do not pay tax on
dividends or capital gain distributions from the fund.

FUND SERVICES

FUND MANAGEMENT

VIP Index 500 is a mutual fund, an investment that pools shareholders'
money and invests it toward a specified goal.

FMR is the fund's manager.

As of March 31, 2000, FMR had approximately $639.1 billion in
discretionary assets under management.

As the manager, FMR is responsible for handling the fund's business
affairs.

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

As of December 31, 1999, BT had approximately $247.97 billion in
discretionary assets under management.

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

On March 11, 1999, BT announced that it had reached an agreement with
the United States Attorney's Office in the Southern District of New
York to resolve an investigation concerning inappropriate transfers of
unclaimed funds and related record-keeping problems that occurred
between 1994 and early 1996. Pursuant to its agreement with the U.S.
Attorney's Office, BT pleaded guilty to misstating entries in the
bank's books and records and agreed to pay a $60 million fine to
federal authorities. On July 26, 1999, BT was formally sentenced in
United States District Court to pay the $60 million fine. Separately,
BT agreed to pay a $3.5 million fine to the State of New York. The
events leading up to the guilty plea and formal sentence did not arise
out of the investment advisory or mutual fund management activities of
BT or its affiliates.

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

Beginning January 1, 2001, FMR Co., Inc. (FMRC) will serve as a
sub-adviser for the fund. FMRC may provide investment research and
advice and may also provide investment advisory services for the fund.
FMRC is a wholly-owned subsidiary of FMR.

The fund pays a management fee to FMR. The management fee is
calculated and paid to FMR every month.

The fund's annual management fee rate is 0.24% of its average net
assets.

FMR will pay FMRC for providing sub-advisory services.

FMR pays BT for providing investment management and custodial
services.

Prior to October 1, 1999, the fund paid a management fee at an annual
rate of 0.24% of its average net assets to FMR and a sub-advisory fee
(representing 40% of net income from securities lending) to BT.

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

As of May 31, 2000, approximately 26.70% of the fund's total
outstanding shares was held by FMR affiliates.

FUND DISTRIBUTION

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

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

Service Class of the fund has adopted a Distribution and Service Plan
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under
the plan, Service Class of the fund is authorized to pay FDC a 12b-1
fee as compensation for providing services intended to result in the
sale of Service Class shares and/or support services that benefit
variable product owners. Service Class of the fund may pay FDC a 12b-1
fee at an annual rate of 0.25% of its average net assets, or such
lesser amount as the Trustees may determine from time to time. Service
Class of the fund currently pays FDC a 12b-1 fee at an annual rate of
0.10% of its average net assets throughout the month. Service Class's
12b-1 fee rate for the fund may be increased only when the Trustees
believe that it is in the best interests of variable product owners to
do so.

FDC may reallow to intermediaries (such as insurance companies,
broker-dealers, and other service-providers), including its
affiliates, up to the full amount of the Service Class 12b-1 fee, for
providing services intended to result in the sale of Service Class
shares and/or support services that benefit variable product owners.

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

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

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

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

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

APPENDIX

ADDITIONAL INFORMATION ABOUT THE INDEX

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

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

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

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

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

The SAI, the fund's annual and semi-annual reports and other related
materials are available from the Electronic Data Gathering, Analysis,
and Retrieval (EDGAR) Database on the SEC's web site
(http://www.sec.gov). You can obtain copies of this information, after
paying a duplicating fee, by sending a request by e-mail to
[email protected] or by writing the Public Reference Section of the
SEC, Washington, D.C. 20549-0102. You can also review and copy
information about the fund, including the fund's SAI, at the SEC's
Public Reference Room in Washington, D.C. Call 1-202-942-8090 for
information on the operation of the SEC's Public Reference Room.

INVESTMENT COMPANY ACT OF 1940, FILE NUMBER, 811-5511

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

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

The term "VIP" as used in this document refers to Fidelity Variable
Insurance Products.

1.741875.100 VI5S-pro-0600

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

FIDELITY(REGISTERED TRADEMARK)
VARIABLE INSURANCE PRODUCTS
SERVICE CLASS
INVESTMENT GRADE BOND PORTFOLIO

PROSPECTUS
JUNE 30, 2000

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

CONTENTS

FUND SUMMARY 3 INVESTMENT SUMMARY

3 PERFORMANCE

4 OPERATING EXPENSES

FUND BASICS 4 INVESTMENT DETAILS

5 VALUING SHARES

SHAREHOLDER INFORMATION 5 BUYING AND SELLING SHARES

5 DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS

5 TAX CONSEQUENCES

FUND SERVICES 5 FUND MANAGEMENT

6 FUND DISTRIBUTION

FUND SUMMARY

INVESTMENT SUMMARY

INVESTMENT OBJECTIVE

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

PRINCIPAL INVESTMENT STRATEGIES

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

(small solid bullet) Normally investing in U.S. dollar-denominated
investment-grade bonds (those of medium and high quality).

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

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

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

PRINCIPAL INVESTMENT RISKS

The fund is subject to the following principal investment risks:

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

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

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

When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.

PERFORMANCE

Performance history will be available for Service Class of the fund
after Service Class has been in operation for one calendar year.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR-BY-YEAR RETURNS

VIP INDEX 500 - INITIAL CLASS

Calendar Years 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

6.21% 16.38% 6.65% 10.96% -3.76% 17.32% 3.19% 9.06% 8.85% -1.05%

</TABLE>

Percentage (%)
Row: 1, Col: 1, Value: 6.21
Row: 2, Col: 1, Value: 16.38
Row: 3, Col: 1, Value: 6.65
Row: 4, Col: 1, Value: 10.96
Row: 5, Col: 1, Value: -3.76
Row: 6, Col: 1, Value: 17.32
Row: 7, Col: 1, Value: 3.19
Row: 8, Col: 1, Value: 9.060000000000001
Row: 9, Col: 1, Value: 8.850000000000001
Row: 10, Col: 1, Value: -1.05

DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP
INVESTMENT GRADE BOND, THE HIGHEST RETURN FOR A QUARTER WAS 6.23%
(QUARTER ENDED JUNE 30, 1995) AND THE LOWEST RETURN FOR A QUARTER WAS
-2.80% (QUARTER ENDED MARCH 31, 1994).

THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF VIP
INVESTMENT GRADE BOND WAS 2.12%.

AVERAGE ANNUAL RETURNS

For the periods ended Past 1 year Past 5 years Past 10 years
December 31, 1999

VIP Investment Grade Bond - -1.05% 7.30% 7.19%
Initial Class

Lehman Brothers Aggregate -0.82% 7.73% 7.70%
Bond Index

Lipper Variable Annuity -0.60% 7.08% 7.08%
Intermediate Investment
Grade Debt Funds Average

If FMR had not reimbursed certain class expenses during these periods,
the fund's Initial Class returns would have been lower.

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

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

OPERATING EXPENSES

Service Class

Management fee 0.43%

Distribution and Service 0.10%
(12b-1) fee

Other expenses 0.11%

Total annual class operating 0.64%
expensesA

A EFFECTIVE JULY 7, 2000, FMR HAS VOLUNTARILY AGREED TO REIMBURSE
SERVICE CLASS OF THE FUND TO THE EXTENT THAT TOTAL OPERATING EXPENSES
(EXCLUDING INTEREST, TAXES, CERTAIN SECURITIES LENDING COSTS,
BROKERAGE COMMISSIONS, AND EXTRAORDINARY EXPENSES), AS A PERCENTAGE OF
ITS AVERAGE NET ASSETS, EXCEED 0.90%. THIS ARRANGEMENT CAN BE
DISCONTINUED BY FMR AT ANY TIME.

FUND BASICS

INVESTMENT DETAILS

INVESTMENT OBJECTIVE

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

PRINCIPAL INVESTMENT STRATEGIES

FMR normally invests the fund's assets in U.S. dollar-denominated
investment-grade bonds (those of medium and high quality).

FMR uses the Lehman Brothers Aggregate Bond Index as a guide in
structuring the fund and selecting its investments. FMR manages the
fund to have similar overall interest rate risk to the index. As of
December 31, 1999, the dollar-weighted average maturity of the fund
and the index was approximately 8.8 and 8.9 years, respectively. In
determining a security's maturity for purposes of calculating the
fund's average maturity, an estimate of the average time for its
principal to be paid may be used. This can be substantially shorter
than its stated maturity.

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

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

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

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

DESCRIPTION OF PRINCIPAL SECURITY TYPES

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

PRINCIPAL INVESTMENT RISKS

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

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

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

FOREIGN EXPOSURE. Foreign securities and securities issued by U.S.
entities with substantial foreign operations can involve additional
risks relating to political, economic, or regulatory conditions in
foreign countries. All of these factors can make foreign investments
more volatile than U.S. investments.

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

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

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

FUNDAMENTAL INVESTMENT POLICIES

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

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

VALUING SHARES

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

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

SHAREHOLDER INFORMATION

BUYING AND SELLING SHARES

Only separate accounts of insurance companies that have signed the
appropriate agreements with the fund can buy or sell shares of the
fund.

The price to buy one share of Service Class is the class's NAV.
Service Class shares are sold without a sales charge.

Shares will be bought at the next NAV calculated after an order is
received in proper form.

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

Shares will be sold at the next NAV calculated after an order is
received in proper form.

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

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

The fund earns interest, dividends, and other income from its
investments, and distributes this income (less expenses) to
shareholders as dividends. The fund also realizes capital gains from
its investments, and distributes these gains (less any losses) to
shareholders as capital gain distributions.

The fund normally pays dividends and capital gain distributions at
least annually, in February.

Dividends and capital gain distributions will be automatically
reinvested in additional Service Class shares of the fund.

TAX CONSEQUENCES

Insurance company separate accounts generally do not pay tax on
dividends or capital gain distributions from the fund.

FUND SERVICES

FUND MANAGEMENT

VIP Investment Grade Bond is a mutual fund, an investment that pools
shareholders' money and invests it toward a specified goal.

FMR is the fund's manager.

As of March 31, 2000, FMR had approximately $639.1 billion in
discretionary assets under management.

As the manager, FMR is responsible for choosing the fund's investments
and handling its business affairs.

Fidelity Investments Money Management, Inc. (FIMM), in Merrimack, New
Hampshire, serves as a sub-adviser for the fund. FIMM is primarily
responsible for choosing investments for the fund.

FIMM is an affiliate of FMR. As of March 31, 2000, FIMM had
approximately $206.8 billion in discretionary assets under management.

Kevin Grant is vice president and manager of VIP Investment Grade
Bond, which he has managed since February 1997. He also manages
several other Fidelity funds. Mr. Grant joined Fidelity in 1993 as a
portfolio manager.

From time to time a manager, analyst, or other Fidelity employee may
express views regarding a particular company, security, industry, or
market sector. The views expressed by any such person are the views of
only that individual as of the time expressed and do not necessarily
represent the views of Fidelity or any other person in the Fidelity
organization. Any such views are subject to change at any time based
upon market or other conditions and Fidelity disclaims any
responsibility to update such views. These views may not be relied on
as investment advice and, because investment decisions for a Fidelity
fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any Fidelity fund.

The fund pays a management fee to FMR. The management fee is
calculated and paid to FMR every month. The fee is calculated by
adding a group fee rate to an individual fund fee rate, dividing by
twelve, and multiplying the result by the fund's average net assets
throughout the month.

The 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 1999, the group fee rate was 0.1267%. The individual fund
fee rate is 0.30%.

The total management fee for the fiscal year ended December 31, 1999,
was 0.43% of the fund's average net assets.

FMR pays FIMM for providing sub-advisory services.

As of May 31, 2000, approximately 30.38% of the fund's total
outstanding shares was held by FMR affiliates.

FUND DISTRIBUTION

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

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

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

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

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

INVESTMENT COMPANY ACT OF 1940, FILE NUMBER, 811-5511

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

The term "VIP" as used in this document refers to Fidelity Variable
Insurance Products.

1.741876.100 VIGS-pro-0600VI5S-pro-0600

FIDELITY(registered trademark) VARIABLE INSURANCE PRODUCTS
MONEY MARKET PORTFOLIO
A FUND OF VARIABLE INSURANCE PRODUCTS FUND
INDEX 500 PORTFOLIO AND
INVESTMENT GRADE BOND PORTFOLIO
FUNDS OF VARIABLE INSURANCE PRODUCTS FUND II
SERVICE CLASS
STATEMENT OF ADDITIONAL INFORMATION
JUNE 30, 2000

This statement of additional information (SAI) is not a prospectus.
Portions of each fund's annual report are incorporated herein. The
annual report is supplied with this SAI.

To obtain a free additional copy of a prospectus, dated June 30, 2000,
or an annual report, please call Fidelity at 1-888-622-3175.

TABLE OF CONTENTS PAGE

Investment Policies and 11
Limitations

Portfolio Transactions 19

Valuation 21

Performance 22

Additional Purchase and 32
Redemption Information

Distributions and Taxes 32

Trustees and Officers 33

Control of Investment Advisers 36

Management Contracts 37

Distribution Services 41

Transfer and Service Agent 42
Agreements

Description of the Trusts 43

Financial Statements 43

Appendix 43

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

VIPI5MSC-ptb-0600
1.741877.100

(fidelity_logo_graphic)(registered trademark)
82 Devonshire Street, Boston, MA 02109

INVESTMENT POLICIES AND LIMITATIONS

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

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

INVESTMENT LIMITATIONS OF VIP MONEY MARKET PORTFOLIO

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(vii) The fund does not currently intend to lend assets other than
securities to other parties, except by lending money (up to 15% of the
fund's net assets) to registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser. (This
limitation does not apply to purchased of debt securities or to
repurchase agreements.)

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

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

The extent to which the fund may invest in the securities of a single
issuer or a certain number of issuers is limited by the
diversification requirements imposed by Section 817(h) of the Internal
Revenue Code, which are in addition to the diversification
requirements described above in limitations (1) and (i).

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

Pursuant to certain state insurance regulations, any repurchase
agreements the 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.

INVESTMENT LIMITATIONS OF VIP INDEX 500 PORTFOLIO

THE FOLLOWING ARE VIP INDEX 500 PORTFOLIO'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE 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, or
securities of other investment companies) if, as a result, (a) more
than 5% of the fund's total assets would be invested in the securities
of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;

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

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

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

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

THE FOLLOWING INVESTMENT LIMITATIONS FOR VIP INDEX 500 PORTFOLIO ARE
NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL.

(i) 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
transaction in futures contracts and options are not deemed to
constitute selling securities short.

(ii) 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.

(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (3)).

(iv) 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.

(v) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money up to 15% of
the fund's net assets to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (This limitation does not apply
to purchases of debt securities or to repurchase agreements.)

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

(vii) FMR limits the amount of the fund's assets that may be
invested in foreign securities to 50%.

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

For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page 9.

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

INVESTMENT LIMITATIONS OF VIP INVESTMENT GRADE BOND PORTFOLIO

THE FOLLOWING ARE VIP INVESTMENT GRADE BOND PORTFOLIO'S FUNDAMENTAL
INVESTMENT LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:

(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;

THE FOLLOWING INVESTMENT LIMITATIONS FOR VIP INVESTMENT GRADE BOND
PORTFOLIO ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT SHAREHOLDER
APPROVAL.

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

(vii) FMR limits the amount of the fund's assets that may be
invested in foreign securities to 50%.

The extent to which a fund may invest in the securities of a single
issuer or a certain number of issuers is limited by the
diversification requirements imposed by Section 817(h) of the Internal
Revenue Code, which are in addition to the diversification
requirements described above in limitation (1).

Pursuant to certain state insurance regulations, any repurchase
agreements or foreign repurchase agreements the 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.

For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page 19.

The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies Fidelity Management
& Research Company (FMR) or Bankers Trust Company (BT) (for VIP Index
500) may employ in pursuit of a fund's investment objective, and a
summary of related risks. FMR or BT may not buy all of these
instruments or use all of these techniques unless it believes that
doing so will help a fund achieve its goal.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EXPOSURE TO FOREIGN MARKETS . Foreign securities, foreign
currencies, and securities issued by U.S. entities with substantial
foreign operations may involve significant risks in addition to the
risks inherent in U.S. investments.

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

It is anticipated that in most cases the best available market for
foreign securities will be on an exchange or in over-the-counter (OTC)
markets located outside of the United States. Foreign stock markets,
while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some
foreign issuers may be less liquid and more volatile than securities
of comparable U.S. issuers. Foreign security trading, settlement and
custodial practices (including those involving securities settlement
where fund assets may be released prior to receipt of payment) are
often less developed than those in U.S. markets, and may result in
increased risk or substantial delays in the event of a failed trade or
the insolvency of, or breach of duty by, a foreign broker-dealer,
securities depository or foreign subcustodian. In addition, the costs
associated with foreign investments, including withholding taxes,
brokerage commissions and custodial costs, are generally higher than
with U.S. investments.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

FUTURES CONTRACTS. In purchasing a futures contract, the buyer agrees
to purchase a specified underlying instrument at a specified future
date. In selling a futures contract, the seller agrees to sell a
specified underlying instrument at a specified future date. The price
at which the purchase and sale will take place is fixed when the buyer
and seller enter into the contract. Some currently available futures
contracts are based on specific securities, such as U.S. Treasury
bonds or notes, and some are based on indices of securities prices,
such as the Standard & Poor's 500SM Index (S&P 500(registered
trademark)). 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 (other than
the money market fund) has filed a notice of eligibility for exclusion
from the definition of the term "commodity pool operator" with the
Commodity Futures Trading Commission (CFTC) and the National Futures
Association, which regulate trading in the futures markets. The funds
intend to comply with Rule 4.5 under the Commodity Exchange Act, which
limits the extent to which the funds can commit assets to initial
margin deposits and option premiums.

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

BT also intends to follow certain other limitations on VIP Index 500'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 enter 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' (other than the money market
fund's) investments in futures contracts and options, and the funds'
policies regarding futures contracts and options discussed elsewhere
in this SAI may be changed as regulatory agencies permit.

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

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

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

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

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

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

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

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

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

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

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

INDEXED SECURITIES are instruments whose prices are indexed to the
prices of other securities, securities indices, currencies, or other
financial indicators. Indexed securities typically, but not always,
are debt securities or deposits whose value at maturity or coupon rate
is determined by reference to a specific instrument or statistic.

Mortgage-indexed securities, for example, could be structured to
replicate the performance of mortgage securities and the
characteristics of direct ownership.

Currency-indexed securities typically are short-term to
intermediate-term debt securities whose maturity values or interest
rates are determined by reference to the values of one or more
specified foreign currencies, and may offer higher yields than U.S.
dollar-denominated securities. Currency-indexed securities may be
positively or negatively indexed; that is, their maturity value may
increase when the specified currency value increases, resulting in a
security that performs similarly to a foreign-denominated instrument,
or their maturity value may decline when foreign currencies increase,
resulting in a security whose price characteristics are similar to a
put on the underlying currency. Currency-indexed securities may also
have prices that depend on the values of a number of different foreign
currencies relative to each other.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The extent to which a fund can invest in securities of other
investment companies is limited by federal securities laws.

VIP Index 500 may invest in investment companies that seek to track
the performance of indexes other than the index that the fund seeks to
track.

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

Securities lending allows a fund to retain ownership of the securities
loaned and, at the same time, earn additional income. The borrower
provides the fund with collateral in an amount at least equal to the
value of the securities loaned. The fund maintains the ability to
obtain the right to vote or consent on proxy proposals involving
material events affecting securities loaned. If the borrower defaults
on its obligation to return the securities loaned because of
insolvency or other reasons, a fund could experience delays and costs
in recovering the securities loaned or in gaining access to the
collateral. These delays and costs could be greater for foreign
securities. If a fund is not able to recover the securities loaned, a
fund may sell the collateral and purchase a replacement investment in
the market. The value of the collateral could decrease below the value
of the replacement investment by the time the replacement investment
is purchased. Loans will be made only to parties deemed by FMR or BT
to be in good standing and when, in FMR's or BT's judgment, as
appropriate, the income earned would justify the risks.

Cash received as collateral through loan transactions may be invested
in other eligible securities. Investing this cash subjects that
investment, as well as the securities loaned, to market appreciation
or depreciation.

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

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

SOURCES OF LIQUIDITY OR CREDIT SUPPORT. Issuers may employ various
forms of credit and liquidity enhancements, including letters of
credit, guarantees, puts, and demand features, and insurance provided
by domestic or foreign entities such as banks and other financial
institutions. FMR may rely on its evaluation of the credit of the
liquidity or credit enhancement provider in determining whether to
purchase a security supported by such enhancement. In evaluating the
credit of a foreign bank or other foreign entities, FMR will consider
whether adequate public information about the entity is available and
whether the entity may be subject to unfavorable political or economic
developments, currency controls, or other government restrictions that
might affect its ability to honor its commitment. Changes in the
credit quality of the entity providing the enhancement could affect
the value of the security or a fund's share price.

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

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

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

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

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

Swap agreements will tend to shift a fund's investment exposure from
one type of investment to another. For example, if 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 may be able to eliminate its exposure under a swap agreement
either by assignment or other disposition, or by entering into an
offsetting swap agreement with the same party or a similarly
creditworthy party.

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

The most significant factor in the performance of swap agreements is
the change in value of the specific index or 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
and impairing the fund's correlation with the S&P 500. A fund may be
able to eliminate its exposure under a swap agreement either by
assignment or other disposition, or by entering into an offsetting
swap agreement with the same party or a similarly creditworthy party.

TEMPORARY DEFENSIVE POLICIES.

VIP Index 500 reserves the right to invest without limitation in
preferred stocks and investment-grade debt instruments for temporary,
defensive purposes.

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

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

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

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

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

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

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

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

PORTFOLIO TRANSACTIONS

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

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

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

Futures transactions are executed and cleared through FCM's who
receive commissions for their services.

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

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

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

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

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

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

To the extent permitted by applicable law, FMR or BT is authorized to
allocate portfolio transactions in a manner that takes into account
assistance received in the distribution of shares of the funds or
other Fidelity funds and to use the research services of brokerage and
other firms that have provided such assistance. FMR or BT may use
research services provided by and place agency transactions with
National Financial Services Corporation (NFSC) and Fidelity Brokerage
Services Japan LLC (FBSJ), indirect subsidiaries of FMR Corp., if the
commissions are fair, reasonable, and comparable to commissions
charged by non-affiliated, qualified brokerage firms for similar
services. FMR or BT may also place agency transactions with REDIBook
ECN LLC (REDIBook), an electronic communication network (ECN) in which
a wholly-owned subsidiary of FMR Corp. has an equity ownership
interest, if the commissions are fair, reasonable, and comparable to
commissions charged by non-affiliated, qualified brokerage firms for
similar services. In addition, BT may use research services provided
by and place agency transactions with BT Brokerage Corporation, BT
Futures Corporation, and Deutsche Bank Securities Inc., indirect
subsidiaries of Deutsche Bank AG, if the commissions are fair,
reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services. Prior to December 9,
1997, FMR used research services provided by and placed agency
transactions with Fidelity Brokerage Services (FBS), an indirect
subsidiary of FMR Corp.

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

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

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

For the fiscal periods ended December 31, 1999, and 1998, the
portfolio turnover rates were 87% and 239%, respectively, for VIP
Investment Grade Bond and 8% and 4%, respectively, for VIP Index 500.
Variations in turnover rate may be due to a fluctuating volume of
shareholder purchase and redemption orders, market conditions, or
changes in FMR's investment outlook.

The following tables show the brokerage commissions paid by the funds.
Significant changes in brokerage commissions paid by a fund from year
to year may result from changing asset levels throughout the year. A
fund may pay both commissions and spreads in connection with the
placement of portfolio transactions. For the fiscal years ended
December 31, 1999, 1998, and 1997, VIP Money Market and VIP Investment
Grade Bond paid no brokerage commissions.

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

Fiscal Year Ended Total Amount Paid

VIP Index 500 December 31,

1999 $ 312,758

1998 444,470

1997 141,099

The table below shows the total amount of brokerage commissions paid
by each fund to NFSC and FBS, as applicable, for the past three fiscal
years. NFSC and FBS are paid on a commission basis.

Total Amount Paid

Fiscal Year Ended To NFSC To FBS

VIP Index 500 December 31,

1999 $ 0 $ 0

1998 0 0

1997 28 371

During the fiscal years ended December 31, 1999, 1998, and 1997, VIP
Index 500 paid brokerage commissions of $5,754, $0, and $0,
respectively, to BT Brokerage Corporation. BT Brokerage Corporation is
paid on a commission basis. During the fiscal year ended December 31,
1999, this amounted to approximately 2% of the aggregate brokerage
commissions paid by the fund for transactions involving approximately
0% of the aggregate dollar amount of transactions for which the fund
paid brokerage commissions.

During the fiscal years ended December 31, 1999, 1998, and 1997, VIP
Index 500 paid brokerage commissions of $61,676, $43,244, and $0,
respectively, to BT Futures Corporation. BT Futures Corporation is
paid on a commission basis. During the fiscal year ended December 31,
1999, this amounted to approximately 20% of the aggregate brokerage
commissions paid by the fund for transactions involving approximately
85% of the aggregate dollar amount of transactions for which the fund
paid brokerage commissions. The difference between the percentage of
aggregate brokerage commissions paid to, and the percentage of the
aggregate dollar amount of transactions effected through, BT Futures
Corporation is a result of the low commission rates charged by BT
Futures Corporation.

The following table shows the dollar amount of brokerage commissions
paid to firms for providing research services and the approximate
dollar amount of the transactions involved for the fiscal year ended
1999.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal Year Ended 1999 $ Amount of Commissions Paid $ Amount of Brokerage
to Firms for Providing Transactions Involved*
Research Services*

VIP Index 500 December 31 $ 116,864 $ 263,866,303

</TABLE>

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

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

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

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

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

VALUATION

Each class's NAV is the value of a single share. The NAV of Service
Class is computed by adding Service Class's pro rata share of the
value of the fund's investments, cash, and other assets, subtracting
Service Class's pro rata share of the fund's liabilities, subtracting
the liabilities allocated to Service Class, and dividing the result by
the number of shares outstanding.

GROWTH FUND. Portfolio securities are valued by various methods
depending on the primary market or exchange on which they trade. Most
equity securities for which the primary market is the United States
are valued at last sale price or, if no sale has occurred, at the
closing bid price. Most equity securities for which the primary market
is outside the United States are valued using the official closing
price or the last sale price in the principal market in which they are
traded. If the last sale price (on the local exchange) is unavailable,
the last evaluated quote or closing bid price normally is used.
Securities of other open-end investment companies are valued at their
respective NAVs.

Fixed-income securities and other assets for which market quotations
are readily available may be valued at market values determined by
such securities' most recent bid prices (sales prices if the principal
market is an exchange) in the principal market in which they normally
are traded, as furnished by recognized dealers in such securities or
assets. Or, fixed-income securities and convertible securities may be
valued on the basis of information furnished by a pricing service that
uses a valuation matrix which incorporates both dealer-supplied
valuations and electronic data processing techniques. Use of pricing
services has been approved by the Board of Trustees. A number of
pricing services are available, and the fund may use various pricing
services or discontinue the use of any pricing service.

Futures contracts and options are valued on the basis of market
quotations, if available.

Independent brokers or quotation services provide prices of foreign
securities in their local currency. Fidelity Service Company, Inc.
(FSC) gathers all exchange rates daily at the close of the NYSE using
the last quoted price on the local currency and then translates the
value of foreign securities from their local currencies into U.S.
dollars. Any changes in the value of forward contracts due to exchange
rate fluctuations and days to maturity are included in the calculation
of NAV. If an event that is expected to materially affect the value of
a portfolio security occurs after the close of an exchange or market
on which that security is traded, then that security will be valued in
good faith by a committee appointed by the Board of Trustees.

Short-term securities with remaining maturities of sixty days or less
for which market quotations and information furnished by a pricing
service are not readily available are valued either at amortized cost
or at original cost plus accrued interest, both of which approximate
current value.

The procedures set forth above need not be used to determine the value
of the securities owned by the fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method would more
accurately reflect the fair value of such securities. For example,
securities and other assets for which there is no readily available
market value may be valued in good faith by a committee appointed by
the Board of Trustees. In making a good faith determination of the
value of a security, the committee may review price movements in
futures contracts and ADRs, market and trading trends, the bid/ask
quotes of brokers and off-exchange institutional trading.

INCOME FUND. Portfolio securities are valued by various methods
depending on the primary market or exchange on which they trade.
Fixed-income securities and other assets for which market quotations
are readily available may be valued at market values determined by
such securities' most recent bid prices (sales prices if the principal
market is an exchange) in the principal market in which they normally
are traded, as furnished by recognized dealers in such securities or
assets. Or, fixed-income securities and convertible securities may be
valued on the basis of information furnished by a pricing service that
uses a valuation matrix which incorporates both dealer-supplied
valuations and electronic data processing techniques. Use of pricing
services has been approved by the Board of Trustees. A number of
pricing services are available, and the fund may use various pricing
services or discontinue the use of any pricing service.

Futures contracts and options are valued on the basis of market
quotations, if available. Securities of other open-end investment
companies are valued at their respective NAVs.

Independent brokers or quotation services provide prices of foreign
securities in their local currency. FSC gathers all exchange rates
daily at the close of the NYSE using the last quoted price on the
local currency and then translates the value of foreign securities
from their local currencies into U.S. dollars. Any changes in the
value of forward contracts due to exchange rate fluctuations and days
to maturity are included in the calculation of NAV. If an event that
is expected to materially affect the value of a portfolio security
occurs after the close of an exchange or market on which that security
is traded, then that security will be valued in good faith by a
committee appointed by the Board of Trustees.

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

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

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

PERFORMANCE

A class may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is
not intended to indicate future returns. The share price of each class
of a fund (other than the money market fund), the yield of each class
of a money market or income fund, and return fluctuate in response to
market conditions and other factors, and the value of a fund's (other
than the money market fund's) shares when redeemed may be more or less
than their original cost.

YIELD CALCULATIONS (MONEY MARKET FUND). To compute the yield for a
class of the money market fund for a period, the net change in value
of a hypothetical account containing one share reflects the value of
additional shares purchased with dividends from the one original share
and dividends declared on both the original share and any additional
shares. The net change is then divided by the value of the account at
the beginning of the period to obtain a base period return. This base
period return is annualized to obtain a current annualized yield. A
class of the money market fund also may calculate an effective yield
by compounding the base period return over a one-year period. In
addition to the current yield, a class of the money market fund may
quote yields in advertising based on any historical seven-day period.
Yields for each class of the money market fund are calculated on the
same basis as other money market funds, as required by applicable
regulation.

Yield information may be useful in reviewing a class's performance and
in providing a basis for comparison with other investment
alternatives. However, a class's yield fluctuates, unlike investments
that pay a fixed interest rate over a stated period of time. When
comparing investment alternatives, investors should also note the
quality and maturity of the portfolio securities of respective
investment companies they have chosen to consider.

Investors should recognize that in periods of declining interest rates
a class's yield will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates a class's yield will
tend to be somewhat lower. Also, when interest rates are falling, the
inflow of net new money to the fund from the continuous sale of its
shares will likely be invested in instruments producing lower yields
than the balance of the fund's holdings, thereby reducing a class's
current yield. In periods of rising interest rates, the opposite can
be expected to occur.

YIELD CALCULATIONS (INCOME FUND). Yields for a class are computed by
dividing a class's pro rata share of the fund's interest and income
for a given 30-day or one-month period, net of expenses, by the
average number of shares of that class entitled to receive
distributions during the period, dividing this figure by the class's
NAV at the end of the period, and annualizing the result (assuming
compounding of income) in order to arrive at an annual percentage
rate. Income is calculated for purposes of yield quotations in
accordance with standardized methods applicable to all stock and bond
funds. 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 the fund's investments denominated in
foreign currencies, income and expenses are calculated first in their
respective currencies, and then are converted to U.S. dollars, either
when they are actually converted or at the end of the 30-day or one
month period, whichever is earlier. Income is adjusted to reflect
gains and losses from principal repayments received by a fund with
respect to mortgage-related securities and other asset-backed
securities. Other capital gains and losses generally are excluded from
the calculation as are gains and losses from currency exchange rate
fluctuations.

Income calculated for the purposes of calculating a class's yield
differs from income as determined for other accounting purposes.
Because of the different accounting methods used, and because of the
compounding of income assumed in yield calculations, a class's yield
may not equal its distribution rate, the income paid to an investor's
account, or the income reported in the fund's financial statements.

RETURN CALCULATIONS. Returns quoted in advertising reflect all aspects
of a class's return, including the effect of reinvesting dividends and
capital gain distributions, and any change in a class's NAV over a
stated period. A class's return may be calculated by using the
performance data of a previously existing class prior to the date that
the new class commenced operations, adjusted to reflect differences in
sales charges but not 12b-1 fees. A cumulative return reflects actual
performance over a stated period of time. Average annual returns are
calculated by determining the growth or decline in value of a
hypothetical historical investment in a class over a stated period,
and then calculating the annually compounded percentage rate that
would have produced the same result if the rate of growth or decline
in value had been constant over the period. For example, a cumulative
return of 100% over ten years would produce an average annual return
of 7.18%, which is the steady annual rate of return that would equal
100% growth on a compounded basis in ten years. Average annual returns
covering periods of less than one year are calculated by determining a
class's return for the period, extending that return for a full year
(assuming that return remains constant over the year), and quoting the
result as an annual return. While average annual returns are a
convenient means of comparing investment alternatives, investors
should realize that a class's performance is not constant over time,
but changes from year to year, and that average annual returns
represent averaged figures as opposed to the actual year-to-year
performance of a class.

In addition to average annual returns, a class may quote unaveraged or
cumulative returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative returns
may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a
series of redemptions, over any time period. Returns may be broken
down into their components of income and capital (including capital
gains and changes in share price) in order to illustrate the
relationship of these factors and their contributions to return.
Returns may be quoted on a before-tax or after-tax basis. Returns,
yields and other performance information may be quoted numerically or
in a table, graph, or similar illustration.

NET ASSET VALUE. Charts and graphs using a class's NAVs, adjusted
NAVs, and benchmark indexes may be used to exhibit performance. An
adjusted NAV includes any distributions paid by a fund and reflects
all elements of a class's return. Unless otherwise indicated, a
class's adjusted NAVs are not adjusted for sales charges, if any.

MOVING AVERAGES. A growth 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.

HISTORICAL GROWTH FUND RESULTS. The following table shows the class's
returns for the fiscal periods ended December 31, 1999.

Returns for Service Class of the fund do not include the effect of any
sales charges or other expenses of any variable annuity or variable
life insurance product. Returns for Service Class of the fund would be
lower if the effect of those sales charges and expenses were included.

Service Class has a 12b-1 fee of 0.10% which is not included in the
average annual and cumulative returns below.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Average Annual ReturnsA Cumulative ReturnsA

One Year Five Years Life of Fund* One Year Five Years Life of Fund*

VIP Index 500 - Service Class 20.52% 28.16% 21.07% 20.52% 245.78% 307.59%

</TABLE>

* From August 27, 1992 (commencement of operations).

A Initial offering of Service Class will take place on or about July
14, 2000. Service Class returns are those of Initial Class, which has
no 12b-1 fee. If Service Class's total expenses, including 12b-1 fee,
had been reflected, returns would have been lower.

If FMR had not reimbursed certain class expenses during these periods,
the fund's Initial Class returns would have been lower.

HISTORICAL INCOME FUND RESULTS. The following table shows the class's
returns for the fiscal periods ended December 31, 1999.

Service Class has a 12b-1 fee of 0.10% which is not included in the
average annual and cumulative returns below.

Average Annual ReturnsA Cumulative ReturnsA

Thirty-Day Yield One Year Five Years Ten Years One Year Five Years

VIP Investment Grade Bond - * -1.05% 7.30% 7.19% -1.05% 42.20%
Service Class

</TABLE>

Cumulative ReturnsA

Ten Years

VIP Investment Grade Bond - 100.21%
Service Class

</TABLE>

* Not available

If FMR had not reimbursed certain class expenses during these periods,
the fund's Initial Class returns would have been lower.

HISTORICAL MONEY MARKET FUND RESULTS. The following table shows the
class's returns for the fiscal periods ended December 31, 1999.

Service Class has a 12b-1 fee of 0.10% which is not included in the
average annual and cumulative returns below.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Average Annual ReturnsA Cumulative ReturnsA

Seven-Day Yield One Year Five Years Ten Years One Year Five Years

VIP Money Market - Service * 5.17% 5.48% 5.28% 5.17% 30.59%
Class

</TABLE>

<TABLE>
<CAPTION>
<S> <C>
Cumulative ReturnsA

Ten Years

VIP Money Market - Service 67.36%
Class

</TABLE>

* Not available

If FMR had not reimbursed certain class expenses during these periods,
the fund's Initial Class returns would have been lower.

The following tables show the income and capital elements of each
class's cumulative return. The tables compare each class's return to
the record of the S&P 500, the Dow Jones Industrial Average (DJIA),
and the cost of living, as measured by the Consumer Price Index (CPI),
over the same period. The S&P 500 and DJIA comparisons are provided to
show how each class's return compared to the record of a market
capitalization-weighted index of common stocks and a narrower set of
stocks of major industrial companies, respectively, over the same
period. Because each of VIP Investment Grade Bond and VIP Money Market
invests in fixed-income securities, common stocks represent a
different type of investment from the funds. Common stocks generally
offer greater growth potential than the funds, but generally
experience greater price volatility, which means greater potential for
loss. In addition, common stocks generally provide lower income than
fixed-income investments such as the funds. VIP Index 500 has the
ability to invest in securities not included in either index, and its
investment portfolio may or may not be similar in composition to the
indexes. The S&P 500 and DJIA returns are based on the prices of
unmanaged groups of stocks and, unlike each class's returns, do not
include the effect of brokerage commissions or other costs of
investing.

The following tables show the growth in value of a hypothetical
$10,000 investment in Service Class of each fund during the 10-year
period ended December 31, 1999, or life of fund, as applicable,
assuming all distributions were reinvested. Returns are based on past
results and are not an indication of future performance. Tax
consequences of different investments have not been factored into the
figures below.

During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Service Class of VIP Money Market would have
grown to $16,736.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP MONEY MARKET - SERVICE
CLASS

Fiscal Year Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value
Investment Distributions Gain Distributions

1999 $ 10,000 $ 6,736 $ 0 $ 16,736

1998 $ 10,000 $ 5,914 $ 0 $ 15,914

1997 $ 10,000 $ 5,090 $ 0 $ 15,090

1996 $ 10,000 $ 4,302 $ 0 $ 14,302

1995 $ 10,000 $ 3,568 $ 0 $ 13,568

1994 $ 10,000 $ 2,816 $ 0 $ 12,816

1993 $ 10,000 $ 2,293 $ 0 $ 12,293

1992 $ 10,000 $ 1,909 $ 0 $ 11,909

1991 $ 10,000 $ 1,462 $ 0 $ 11,462

1990 $ 10,000 $ 804 $ 0 $ 10,804

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C>
VIP MONEY MARKET - SERVICE INDEXES
CLASS

Fiscal Year Ended S&P 500 DJIA Cost of Living

1999 $ 53,289 $ 53,747 $ 13,347

1998 $ 44,024 $ 42,276 $ 12,998

1997 $ 34,240 $ 35,805 $ 12,791

1996 $ 25,674 $ 28,677 $ 12,577

1995 $ 20,880 $ 22,281 $ 12,173

1994 $ 15,177 $ 16,297 $ 11,872

1993 $ 14,980 $ 15,525 $ 11,562

1992 $ 13,608 $ 13,270 $ 11,253

1991 $ 12,642 $ 12,367 $ 10,936

1990 $ 9,688 $ 9,946 $ 10,611

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Service
Class of VIP Money Market on January 1, 1990, the net amount invested
in Service Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to $16,736. If
distributions had not been reinvested, the amount of distributions
earned from the class over time would have been smaller, and cash
payments for the period would have amounted to $5,162 for dividends
and $0 for capital gain distributions. The money market fund did not
distribute any capital gains during the period. Initial offering of
Service Class of VIP Money Market will take place on or about July 14,
2000. Service Class returns are those of Initial Class, which has no
12b-1 fee. If Service Class's total expenses, including 12b-1 fee, had
been reflected, returns would have been lower.

During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Service Class of VIP Investment Grade Bond would
have grown to $20,021.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP INVESTMENT GRADE BOND -
SERVICE CLASS

Fiscal Year Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value
Investment Distributions Gain Distributions

1999 $ 11,992 $ 7,361 $ 668 $ 20,021

1998 $ 12,781 $ 7,003 $ 449 $ 20,233

1997 $ 12,387 $ 5,875 $ 327 $ 18,589

1996 $ 12,071 $ 4,655 $ 318 $ 17,044

1995 $ 12,308 $ 3,885 $ 325 $ 16,518

1994 $ 10,868 $ 2,924 $ 287 $ 14,079

1993 $ 11,321 $ 3,048 $ 260 $ 14,629

1992 $ 10,819 $ 2,184 $ 180 $ 13,183

1991 $ 10,927 $ 1,434 $ 0 $ 12,361

1990 $ 9,783 $ 838 $ 0 $ 10,621

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C>
VIP INVESTMENT GRADE BOND - INDEXES
SERVICE CLASS

Fiscal Year Ended S&P 500 DJIA Cost of Living

1999 $ 53,289 $ 53,747 $ 13,347

1998 $ 44,024 $ 42,276 $ 12,998

1997 $ 34,240 $ 35,805 $ 12,791

1996 $ 25,674 $ 28,677 $ 12,577

1995 $ 20,880 $ 22,281 $ 12,173

1994 $ 15,177 $ 16,297 $ 11,872

1993 $ 14,980 $ 15,525 $ 11,562

1992 $ 13,608 $ 13,270 $ 11,253

1991 $ 12,642 $ 12,367 $ 10,936

1990 $ 9,688 $ 9,946 $ 10,611

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Service
Class of VIP Investment Grade Bond on January 1, 1990, the net amount
invested in Service Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to $17,503. If
distributions had not been reinvested, the amount of distributions
earned from the class over time would have been smaller, and cash
payments for the period would have amounted to $5,359 for dividends
and $473 for capital gain distributions. Initial offering of Service
Class of VIP Investment Grade Bond will take place on or about July
14, 2000. Service Class returns are those of Initial Class, which has
no 12b-1 fee. If Service Class's total expenses, including 12b-1 fee,
had been reflected, returns would have been lower.

During the period from August 27, 1992 (commencement of operations) to
December 31, 1999, a hypothetical $10,000 investment in Service Class
of VIP Index 500 would have grown to $40,759.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP INDEX 500 - SERVICE CLASS

Fiscal Year Ended Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value
Investment Distributions Gain Distributions

1999 $ 33,482 $ 3,369 $ 3,908 $ 40,759

1998 $ 28,248 $ 2,504 $ 3,067 $ 33,819

1997 $ 22,880 $ 1,717 $ 1,762 $ 26,359

1996 $ 17,810 $ 1,113 $ 921 $ 19,844

1995 $ 15,142 $ 751 $ 278 $ 16,171

1994 $ 11,244 $ 363 $ 180 $ 11,787

1993 $ 11,148 $ 360 $ 158 $ 11,666

1992* $ 10,520 $ 95 $ 16 $ 10,631

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C>
VIP INDEX 500 - SERVICE CLASS INDEXES

Fiscal Year Ended S&P 500 DJIA Cost of Living**

1999 $ 41,692 $ 41,512 $ 11,945

1998 $ 34,444 $ 32,652 $ 11,632

1997 $ 26,788 $ 27,654 $ 11,448

1996 $ 20,087 $ 22,149 $ 11,256

1995 $ 16,336 $ 17,209 $ 10,894

1994 $ 11,874 $ 12,587 $ 10,625

1993 $ 11,720 $ 11,991 $ 10,348

1992* $ 10,647 $ 10,249 $ 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 in Service
Class of VIP Index 500 on August 27, 1992, the net amount invested in
Service Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at
the time they were reinvested) amounted to $13,748. If distributions
had not been reinvested, the amount of distributions earned from the
class over time would have been smaller, and cash payments for the
period would have amounted to $1,480 for dividends and $1,906 for
capital gain distributions. Initial offering of Service Class of VIP
Index 500 will take place on or about July 14, 2000 . Service
Class returns are those of Initial Class, which has no 12b-1 fee. If
Service Class's total expenses, including 12b-1 fee , had
been reflected, returns would have been lower.

PERFORMANCE COMPARISONS. A class's performance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed
as mutual fund rankings prepared by Lipper Inc. (Lipper), an
independent service located in Summit, New Jersey that monitors the
performance of mutual funds. Generally, Lipper rankings are based on
return, assume reinvestment of distributions, do not take sales
charges or trading fees into consideration, and are prepared without
regard to tax consequences. Lipper may also rank based on yield. In
addition to the mutual fund rankings, a class's performance may be
compared to stock, bond, and money market mutual fund performance
indexes prepared by Lipper or other organizations. When comparing
these indexes, it is important to remember the risk and return
characteristics of each type of investment. For example, while stock
mutual funds may offer higher potential returns, they also carry the
highest degree of share price volatility. Likewise, money market funds
may offer greater stability of principal, but generally do not offer
the higher potential returns available from stock mutual funds.

From time to time, a class's performance may also be compared to other
mutual funds tracked by financial or business publications and
periodicals. For example, the class may quote Morningstar, Inc. in its
advertising materials. Morningstar, Inc. is a mutual fund rating
service that rates mutual funds on the basis of risk-adjusted
performance. Rankings that compare the performance of Fidelity funds
to one another in appropriate categories over specific periods of time
may also be quoted in advertising. An income fund may advertise risk
ratings, including symbols or numbers, prepared by independent rating
agencies.

A class's performance may also be compared to that of each index
representing the universe of securities in which the fund may invest.
The return of each index reflects reinvestment of all dividends and
capital gains paid by securities included in each index. Unlike a
class's returns, however, each index's returns do not reflect
brokerage commissions, transaction fees, or other costs of investing
directly in the securities included in the index.

VIP Index 500 may compare its performance to that of the Standard &
Poor's 500 Index, a market capitalization-weighted index of common
stocks.

VIP Investment Grade Bond may compare its performance to the Lehman
Brothers Aggregate Bond Index, a market value-weighted index for
investment-grade fixed-rate debt issues, including government,
corporate, asset-backed, and mortgage-backed securities. Issues
included in the index have an outstanding par value of at least $100
million and maturities of at least one year. Government and corporate
issues include all public obligations of the U.S. Treasury (excluding
flower bonds and foreign-targeted issues) and U.S. Government
agencies, as well as nonconvertible investment-grade, SEC-registered
corporate debt. Mortgage-backed securities include 15- and 30-year
fixed-rate securities backed by mortgage pools of the Government
National Mortgage Association (GNMA), Federal Home Loan Mortgage
Corporation (FHLMC), and Fannie Mae. Asset-backed securities include
credit card, auto, and home equity loans.

A class may be compared in advertising to Certificates of Deposit
(CDs) or other investments issued by banks or other depository
institutions. Mutual funds differ from bank investments in several
respects. For example, a fund may offer greater liquidity or higher
potential returns than CDs, a fund does not guarantee an investor's
principal or return, and fund shares are not FDIC insured.

Fidelity may provide information designed to help individuals
understand their investment goals and explore various financial
strategies. Such information may include information about current
economic, market, and political conditions; materials that describe
general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; questionnaires
designed to help create a personal financial profile; worksheets used
to project savings needs based on assumed rates of inflation and
hypothetical rates of return; and action plans offering investment
alternatives. Materials may also include discussions of Fidelity's
asset allocation funds and other Fidelity funds, products, and
services.

Ibbotson Associates of Chicago, Illinois (Ibbotson) provides
historical returns of the capital markets in the United States,
including common stocks, small capitalization stocks, long-term
corporate bonds, intermediate-term government bonds, long-term
government bonds, Treasury bills, the U.S. rate of inflation (based on
the CPI), and combinations of various capital markets. The performance
of these capital markets is based on the returns of different indexes.

Fidelity funds may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with
the security types in any capital market may or may not correspond
directly to those of the funds. Ibbotson calculates returns in the
same method as the funds. The funds may also compare performance to
that of other compilations or indexes that may be developed and made
available in the future.

A class of the money market fund may compare its performance or the
performance of securities in which it may invest to averages published
by iMoneyNet, Inc. of Westborough, Massachusetts. These averages
assume reinvestment of distributions. iMoneyNet's MONEY FUND REPORT
AVERAGES(trademark)/All Taxable (Money Market), which is reported in
iMoneyNet's MONEY FUND REPORT(trademark), covers 951 taxable money
market funds.

In advertising materials, Fidelity may reference or discuss its
products and services, which may include other Fidelity funds;
retirement investing; brokerage products and services; model
portfolios or allocations; saving for college or other goals; and
charitable giving. In addition, Fidelity may quote or reprint
financial or business publications and periodicals as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the
desirability of owning a particular mutual fund, and Fidelity services
and products. Fidelity may also reprint, and use as advertising and
sales literature, articles from Fidelity Focus(registered trademark),
a quarterly magazine provided free of charge to Fidelity fund
shareholders.

Each fund may be advertised as part of certain asset allocation
programs involving other Fidelity or non-Fidelity mutual funds. These
asset allocation programs may advertise a model portfolio and its
performance results.

A class may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote the fund's current portfolio
manager.

VOLATILITY. A class of a fund (other than the money market fund) may
quote various measures of volatility and benchmark correlation in
advertising. In addition, the class may compare these measures to
those of other funds. Measures of volatility seek to compare a class's
historical share price fluctuations or returns to those of a
benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and
correlation are calculated using averages of historical data. In
advertising, an income fund may also discuss or illustrate examples of
interest rate sensitivity.

MOMENTUM INDICATORS indicate price movements over specific periods of
time for each class of a fund (other than the money market fund). Each
point on the momentum indicator represents a class's percentage change
in price movements over that period.

A fund (other than the money market fund) may advertise examples of
the effects of periodic investment plans, including the principle of
dollar cost averaging. In such a program, an investor invests a fixed
dollar amount in a fund at periodic intervals, thereby purchasing
fewer shares when prices are high and more shares when prices are low.
While such a strategy does not assure a profit or guard against loss
in a declining market, the investor's average cost per share can be
lower than if fixed numbers of shares are purchased at the same
intervals. In evaluating such a plan, investors should consider their
ability to continue purchasing shares during periods of low price
levels.

As of December 31, 1999, FMR advised over $35 billion in municipal
fund assets, $143 billion in taxable fixed-income fund assets, $149
billion in money market fund assets, $630 billion in equity fund
assets, $22 billion in international fund assets, and $41 billion in
Spartan(registered trademark) fund assets. The funds may reference the
growth and variety of money market mutual funds and the adviser's
innovation and participation in the industry. The equity funds under
management figure represents the largest amount of equity fund assets
under management by a mutual fund investment adviser in the United
States, making FMR America's leading equity (stock) fund manager. FMR,
its subsidiaries, and affiliates maintain a worldwide information and
communications network for the purpose of researching and managing
investments abroad.

In addition to performance rankings, each class of the money market or
income fund may compare its total expense ratio to the average total
expense ratio of similar funds tracked by Lipper. A class's total
expense ratio is a significant factor in comparing bond and money
market investments because of its effect on yield.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Under certain circumstances (for example, at the request of a
shareholder), a fund may make redemption payments in whole or in part
in readily marketable securities or other property, valued for this
purpose as they are valued in computing the class's NAV, if FMR
determines it is in the best interests of the fund. VIP Index 500 may
make redemption payments "in kind" to a shareholder that owns 5% or
more of its outstanding voting securities pursuant to an exemptive
order issued by the SEC. Shareholders that receive securities or other
property on redemption may realize a gain or loss for tax purposes,
and will incur any costs of sale, as well as the associated
inconveniences.

DISTRIBUTIONS AND TAXES

The following information is only a summary of some of the tax
consequences affecting insurance company separate accounts invested in
the funds. No attempt has been made to discuss tax consequences
affecting variable product owners. Variable product owners seeking to
understand the tax consequences of their investment should consult
with their tax advisers or the insurance company that issued their
variable product, or refer to their variable annuity or variable life
insurance product prospectus.

Each fund intends to qualify each year as a "regulated investment
company" under Subchapter M of the Internal Revenue Code so that it
will not be liable for federal tax on income and capital gains
distributed to insurance company separate accounts invested in the
fund. In order to qualify as a regulated investment company, and avoid
being subject to federal income or excise taxes at the fund level,
each fund intends to distribute substantially all of its net
investment income and net realized capital gains within each calendar
year as well as on a fiscal year basis, and intends to comply with
other tax rules applicable to regulated investment companies. If a
fund failed to qualify as a"regulated investment company" in any year,
among other consequences, each insurance company separate account
invested in the fund would fail to satisfy the diversification
requirements of Section 817(h) of the Internal Revenue Code.

Each fund also intends to satisfy the diversification requirements of
Section 817(h) of the Internal Revenue Code and the regulations
thereunder. These diversification requirements, which are in addition
to the diversification requirements of Subchapter M, place certain
limitations on the assets of an insurance company separate account
that may be invested in the securities of a single issuer or a certain
number of issuers. Because Section 817(h) and the regulations
thereunder treat the assets of each fund as the assets of the related
insurance company separate account, each fund must also satisfy these
requirements. If a fund failed to satisfy these requirements, a
variable annuity or variable life insurance product supported by an
insurance company separate account invested in the fund would not be
treated as an annuity or as life insurance for tax purposes and would
no longer be eligible for tax deferral.

Foreign governments may withhold taxes on dividends and interest
earned by a fund with respect to foreign securities. Foreign
governments may also impose taxes on other payments or gains with
respect to foreign securities. Because each fund does not currently
anticipate that securities of foreign issuers will constitute more
than 50% of its total assets at the end of its fiscal year,
shareholders should not expect to be eligible to claim a foreign tax
credit or deduction on their tax returns with respect to foreign taxes
withheld.

As of December 31, 1999, VIP Money Market had an aggregate capital
loss carryforward of approximately $102,000. This loss carryforward,
of which $1,000, $28,000, and $73,000 will expire on December 31,
2002, 2005, and 2007, respectively, is available to offset future
capital gains.

As of December 31, 1999, VIP Investment Grade Bond had an aggregate
capital loss carryforward of approximately $11,444,000. This loss
carryforward, all of which will expire on December 31, 2007, is
available to offset future capital gains.

TRUSTEES AND OFFICERS

The Trustees, Member of the Advisory Board, and executive officers of
the trusts and funds, as applicable, are listed below. The Board of
Trustees governs each fund and is responsible for protecting the
interests of shareholders. The Trustees are experienced executives who
meet periodically throughout the year to oversee each fund's
activities, review contractual arrangements with companies that
provide services to each fund, and review each fund's performance.
Except as indicated, each individual has held the office shown or
other offices in the same company for the p ast five years. All
persons named as Trustees and Members of the Advisory Board also serve
in similar capacities for other funds advised by FMR or its
affiliates. The business address of each Trustee, Member of the
Advisory Board, and officer who is an "interested person" (as defined
in the 1940 Act) is 82 Devonshire Street, Boston, Massachusetts 02109,
which is also the address of FMR. The business address of all the
other Trustees is Fidelity Investments, P.O. Box 9235, Boston,
Massachusetts 02205-9235. Those Trustees who are "interested persons"
by virtue of their affiliation with the trusts, FMR, or BT are
indicated by an asterisk (*).

*EDWARD C. JOHNSON 3d (69), Trustee, is President of VIP Money Market,
VIP Investment Grade Bond, and VIP Index 500. Mr. Johnson also serves
as President of other Fidelity funds. He is Chief Executive Officer,
Chairman, and a Director of FMR Corp.; a Director and Chairman of the
Board and of the Executive Committee of FMR; Chairman and a Director
of Fidelity Management & Research (U.K.) Inc. and of Fidelity
Management & Research (Far East) Inc.; Chairman (1998) and a Director
(1997) of Fidelity Investments Money Management, Inc.; Chairman and
Representative Director of Fidelity Investments Japan Limited (1997);
and a Director of FDC and of FMR Co., Inc. (2000).

J. MICHAEL COOK (57), Member of the Advisory Board (2000). Prior to
Mr. Cook's retirement in May 1999, he served as Chairman and Chief
Executive Officer of Deloitte & Touche LLP, Chairman of the Deloitte &
Touche Foundation, and a member of the Board of Deloitte Touche
Tohmatsu. He currently serves as an Executive in Residence of the
Columbia Business School and as a Director of Dow Chemical Company
(2000), HCA - The Healthcare Company (1999), and Children First
(1999). He is a member of the Executive Committee of the Securities
Regulation Institute, a member of the Advisory Board of Boardroom
Consultants, past chairman and a member of the Board of Catalyst (a
leading organization for the advancement of women in business), and a
Director of the STAR Foundation (Society to Advance the Retarded and
Handicapped). He also serves as a member of the Board and Executive
Committee and as Co-Chairman of the Audit and Finance Committee of the
Center for Strategic & International Studies, a member of the Board of
Overseers of the Columbia Business School, and a Member of the
Advisory Board of the Graduate School of Business of the University of
Florida.

RALPH F. COX (67), Trustee, is President of RABAR Enterprises
(management consulting-engineering industry, 1994). Prior to February
1994, he was President of Greenhill Petroleum Corporation (petroleum
exploration and production). Until March 1990, Mr. Cox was President
and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of Waste Management
Inc. (non-hazardous waste, 1993), CH2M Hill Companies (engineering),
and Bonneville Pacific (independent power and petroleum production).
In addition, he is a member of advisory boards of Texas A&M University
and the University of Texas at Austin.

PHYLLIS BURKE DAVIS (68), Trustee. Mrs. Davis is retired from Avon
Products, Inc. where she held various positions including Senior Vice
President of Corporate Affairs and Group Vice President of U.S. sales,
distribution, and manufacturing. She is currently a Director of
BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing), and the TJX Companies, Inc. (retail stores), and
previously served as a Director of Hallmark Cards, Inc., Nabisco
Brands, Inc., and Standard Brands, Inc. In addition, she is a member
of the Board of Directors of the Southampton Hospital in Southampton,
N.Y. (1998).

ROBERT M. GATES (56), Trustee (1997), is a consultant, author, and
lecturer (1993). Mr. Gates was Director of the Central Intelligence
Agency (CIA) from 1991-1993. From 1989 to 1991, Mr. Gates served as
Assistant to the President of the United States and Deputy National
Security Advisor. Mr. Gates is a Director of Charles Stark Draper
Laboratory (non-profit), NACCO Industries, Inc. (mining and
manufacturing), and TRW Inc. (automotive, space, defense, and
information technology). Mr. Gates previously served as a Director of
LucasVarity PLC (automotive components and diesel engines). He is
currently serving as Dean of the George Bush School of Government and
Public Service at Texas A&M University (1999-2000). Mr. Gates also is
a Trustee of the Forum for International Policy and of the Endowment
Association of the College of William and Mary. In addition, he is a
member of the National Executive Board of the Boy Scouts of America.

DONALD J. KIRK (67), Trustee, is Executive-in-Residence (1995) at
Columbia University Graduate School of Business. From 1987 to January
1995, Mr. Kirk was a Professor at Columbia University Graduate School
of Business. Prior to 1987, he was Chairman of the Financial
Accounting Standards Board. Mr. Kirk previously served as a Director
of General Re Corporation (reinsurance, 1987-1998) and as a Director
of Valuation Research Corp. (appraisals and valuations, 1993-1995). He
serves as Chairman of the Board of Directors of National Arts
Stabilization Inc., Chairman of the Board of Trustees of the Greenwich
Hospital Association, Director of the Yale-New Haven Health Services
Corp. (1998), Vice Chairman of the Public Oversight Board of the
American Institute of Certified Public Accountants' SEC Practice
Section (1995), and as a Public Governor of the National Association
of Securities Dealers, Inc. (1996).

MARIE L. KNOWLES (53), Member of the Advisory Board (2000). Beginning
in 1972, Ms. Knowles served in various positions with Atlantic
Richfield Company (ARCO) (diversified energy) including Executive Vice
President and Chief Financial Officer (1996-2000); Director
(1996-1998); and Senior Vice President (1993-1996). In addition, Ms.
Knowles served as President of ARCO Transportation Company
(1993-1996). She currently serves as a Director of Phelps Dodge
Corporation (copper mining and manufacturing), URS Corporation
(multidisciplinary engineering, 1999), and America West Holdings
Corporation (aviation and travel services, 1999). Ms. Knowles also
serves as a member of the National Board of the Smithsonian
Institution and she is a trustee of the Brookings Institution.

NED C. LAUTENBACH (55), Trustee (2000), has been a partner of Clayton,
Dubilier & Rice, Inc. (private equity investment firm) since September
1998. Mr. Lautenbach was Senior Vice President of IBM Corporation from
1992 until his retirement in July 1998. From 1993 to 1995 he was
Chairman of IBM World Trade Corporation. He also was a member of IBM's
Corporate Executive Committee from 1994 to July 1998. He is a Director
of PPG Industries Inc. (glass, coating and chemical manufacturer),
Dynatech Corporation (global communications equipment), Eaton
Corporation (global manufacturer of highly engineered products) and
ChoicePoint Inc. (data identification, retrieval, storage, and
analysis).

*PETER S. LYNCH (56), Trustee, is Vice Chairman and a Director of FMR;
and a Director of FMR Co., Inc. (2000). 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(registered trademark) Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). In addition, he
serves as a Trustee of Boston College, Massachusetts Eye & Ear
Infirmary, Historic Deerfield (1989) and Society for the Preservation
of New England Antiquities, and as an Overseer of the Museum of Fine
Arts of Boston.

WILLIAM O. McCOY (66), Trustee (1997), is the Interim Chancellor for
the University of North Carolina at Chapel Hill. Previously he had
served from 1995 through 1998 as Vice President of Finance for the
University of North Carolina (16-school system). Prior to his
retirement in December 1994, Mr. McCoy was Vice Chairman of the Board
of BellSouth Corporation (telecommunications, 1984) and President of
BellSouth Enterprises (1986). He is currently a Director of Liberty
Corporation (holding company, 1984), Duke-Weeks Realty Corporation
(real estate, 1994), Carolina Power and Light Company (electric
utility, 1996), the Kenan Transport Company (trucking, 1996), and
Dynatech Corporation (electronics, 1999). Previously, he was a
Director of First American Corporation (bank holding company,
1979-1996). In addition, Mr. McCoy served as a member of the Board of
Visitors for the University of North Carolina at Chapel Hill
(1994-1998) and currently serves on the Board of Visitors of the
Kenan-Flager Business School (University of North Carolina at Chapel
Hill, 1988).

GERALD C. McDONOUGH (71), Trustee and Chairman of the non-interested
Trustees, is Chairman of G.M. Management Group (strategic advisory
services). Mr. McDonough is a Director and Chairman of the Board of
York International Corp. (air conditioning and refrigeration) and
Associated Estates Realty Corporation (a real estate investment trust,
1993). Mr. McDonough served as a Director of ACME-Cleveland Corp.
(metal working, telecommunications, and electronic products) from
1987-1996 and Brush-Wellman Inc. (metal refining) from 1983-1997. He
also served as a Director of Commercial Intertech Corp. (hydraulic
systems, building systems, and metal products) from 1992-2000 and
CUNO, Inc. (liquid and gas filtration products) from 1996-2000.

MARVIN L. MANN (66), Trustee , is Chairman Emeritus of Lexmark
International, Inc. (office machines, 1991) where he still remains a
member of the Board. Prior to 1991, he held the positions of Vice
President of International Business Machines Corporation ("IBM") and
President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993), Imation Corp. (imaging and information storage, 1997). He is a
Board member of Dynatech Corporation (electronics, 1999).

*ROBERT C. POZEN (53), Trustee (1997), is Senior Vice President of VIP
Money Market (1997) , VIP Investment Grade Bond (1997) ,
and VIP Index 500 (1997). Mr. Pozen also serves as Senior Vice
President of other Fidelity funds (1997). He is President and a
Director of FMR (1997), Fidelity Management & Research (U.K.) Inc.
(1997), Fidelity Management & Research (Far East) Inc. (1997),
Fidelity Investments Money Management, Inc. (1998), and FMR Co., Inc.
(2000); and a Director of Strategic Advisers, Inc. (1999). Previously,
Mr. Pozen served as General Counsel, Managing Director, and Senior
Vice President of FMR Corp.

THOMAS R. WILLIAMS (71), 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 National Life Insurance Company of Vermont and American Software,
Inc. Mr. Williams was previously a Director of ConAgra, Inc.
(agricultural products), Georgia Power Company (electric utility), and
Avado, Inc. (restaurants).

DWIGHT D. CHURCHILL (46), is Vice President of VIP Money Market
(2000), and VIP Investment Grade Bond. He serves as President of
Fidelity's Fixed-Income Division (2000), Vice President of Fidelity's
Money Market Funds (2000), Vice President of Fidelity's Bond Funds,
Senior Vice President of FMR (1997), and Vice President of FIMM
(1998). Mr. Churchill joined Fidelity in 1993 as Vice President and
Group Leader of Taxable Fixed-Income Investments.

BOYCE I. GREER (44), is Vice President of VIP Money Market (1997). He
serves as Vice President of Fidelity's Municipal Bond Funds (2000),
Group Leader of Fidelity's Municipal Bond Group (2000), Vice President
of Fidelity's Money Market Funds (1997), Group Leader of Fidelity's
Money Market Group (1997), Senior Vice President of FMR (1997), and
Vice President of FIMM (1998). Mr. Greer served as the Leader of the
Fixed-Income Group for Fidelity Management Trust Company (1993-1995)
and was Vice President and Group Leader of Fidelity's Municipal
Fixed-Income Investments (1996-1997).

ROBERT A. LAWRENCE (47), is Vice President of VIP Index 500 (1997).
Mr. Lawrence serves as Vice President of certain High Income Bond
Funds (2000), Vice President of Fidelity Real Estate High Income Fund
(1995) and Fidelity Real Estate High Income Fund II (1996), Vice
President of certain Equity Funds (1997), and Senior Vice President of
FMR (1993).

DAVID L. MURPHY (52) is Vice President of VIP Investment Grade Bond
(2000). He serves as Vice President of Fidelity's Taxable Bond Funds
(2000), Group Leader of Fidelity's Taxable Bond Group (2000), and a
Vice President of FMR (1998). Mr. Murphy joined Fidelity in 1989 as a
manager of fixed-income funds.

KEVIN GRANT (40) is Vice President of VIP Investment Grade Bond (1997)
and other funds advised by FMR. Since joining Fidelity in 1993, Mr.
Grant managed a variety of Fidelity funds.

ROBERT K. DUBY (54) is Vice President of VIP Money Market (1997) and
other funds advised by FMR. Prior to his current responsibilities, Mr.
Duby managed a variety of Fidelity funds.

ERIC D. ROITER (51), is Secretary of VIP Money Market (1998) ,
VIP Investment Grade Bond (1998) , and VIP Index 500 (1998). He
also serves as Secretary of other Fidelity funds (1998); Vice
President, General Counsel, and Clerk of FMR (1998); and Vice
President and Clerk of FDC (1998). Prior to joining Fidelity, Mr.
Roiter was with the law firm of Debevoise & Plimpton, as an associate
(1981-1984) and as a partner (1985-1997), and served as an Assistant
General Counsel of the U.S. Securities and Exchange Commission
(1979-1981). Mr. Roiter was an Adjunct Member, Faculty of Law, at
Columbia University Law School (1996-1997).

ROBERT A. DWIGHT (41), is Treasurer of VIP Money Market (2000) ,
VIP Investment Grade Bond (2000) , and VIP Index 500 (2000). Mr.
Dwight also serves as Treasurer of other Fidelity funds (2000) and is
an employee of FMR. Prior to becoming Treasurer of the Fidelity funds,
he served as President of Fidelity Accounting and Custody Services
(FACS). Before joining Fidelity, Mr. Dwight was Senior Vice President
of fund accounting operations for The Boston Company.

MARIA F. DWYER (41), is Deputy Treasurer of VIP Money Market
(2000) , VIP Investment Grade Bond (2000), and VIP Index 500
(2000). She also serves as Deputy Treasurer of other Fidelity funds
(2000) and is a Vice President (1999) and an employee (1996) of FMR.
Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance
for MFS Investment Management.

STANLEY N. GRIFFITH (53), is Assistant Vice President of VIP Money
Market and VIP Investment Grade Bond (1998). Mr. Griffith is Assistant
Vice President of Fidelity's Fixed-Income Funds (1998) and is an
employee of FMR Corp.

JOHN H. COSTELLO (53), is Assistant Treasurer of VIP Money Market, VIP
Investment Grade Bond, and VIP Index 500. Mr. Costello also serves as
Assistant Treasurer of other Fidelity funds and is an employee of FMR.

THOMAS J. SIMPSON (41), is Assistant Treasurer of VIP Money Market
(1996) and VIP Investment Grade Bond (1998). Mr. Simpson is Assistant
Treasurer of Fidelity's Fixed-Income Funds (1998) and an employee of
FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and
Fund Controller of Liberty Investment Services (1987-1995).

The following table sets forth information describing the compensation
of each Trustee and Member of the Advisory Board of each fund for his
or her services for the fiscal year ended December 31, 1999.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMPENSATION TABLE

Trustees and Member of the Aggregate Compensation from Aggregate Compensation from Aggregate Compensation from
Advisory Board VIP Money MarketB VIP Investment Grade BondB VIP Index 500B

Edward C. Johnson 3d** $ 0 $ 0 $ 0

Ralph F. Cox $ 493 $ 202 $ 1,292

Phyllis Burke Davis $ 480 $ 196 $ 1,257

Robert M. Gates $ 493 $ 202 $ 1,292

E. Bradley Jones**** $ 493 $ 202 $ 1,292

Donald J. Kirk $ 494 $ 202 $ 1,293

Ned C. Lautenbach*** $ 132 $ 46 $ 341

Peter S. Lynch** $ 0 $ 0 $ 0

William O. McCoy $ 485 $ 199 $ 1,273

Gerald C. McDonough $ 610 $ 249 $ 1,599

Marvin L. Mann $ 493 $ 202 $ 1,292

Robert C. Pozen** $ 0 $ 0 $ 0

Thomas R. Williams $ 483 $ 198 $ 1,264

</TABLE>

<TABLE>
<CAPTION>
<S> <C>
COMPENSATION TABLE

Trustees and Member of the Total Compensation from the
Advisory Board Fund Complex*,A

Edward C. Johnson 3d** $ 0

Ralph F. Cox $ 217,500

Phyllis Burke Davis $ 211,500

Robert M. Gates $ 217,500

E. Bradley Jones**** $ 217,500

Donald J. Kirk $ 217,500

Ned C. Lautenbach*** $ 54,000

Peter S. Lynch** $ 0

William O. McCoy $ 214,500

Gerald C. McDonough $ 269,000

Marvin L. Mann $ 217,500

Robert C. Pozen** $ 0

Thomas R. Williams $ 213,000

</TABLE>

* Information is for the calendar year ended December 31, 1999 for 236
funds in the complex.

** Interested Trustees of the funds are compensated by FMR.

*** During the period from October 14, 1999 through December 31, 1999,
Mr. Lautenbach served as a Member of the Advisory Board. Effective
January 1, 2000, Mr. Lautenbach serves as a Member of the Board of
Trustees.

**** Mr. Jones served on the Board of Trustees through December 31,
1999.

A Compensation figures include cash, amounts required to be deferred,
and may include amounts deferred at the election of Trustees. For the
calendar year ended December 31, 1999, the Trustees accrued required
deferred compensation from the funds as follows: Ralph F. Cox,
$75,000; Phyllis Burke Davis, $75,000; Robert M. Gates, $75,000; E.
Bradley Jones, $75,000; Donald J. Kirk, $75,000; William O. McCoy,
$75,000; Gerald C. McDonough, $87,500; Marvin L. Mann, $75,000; and
Thomas R. Williams, $75,000. Certain of the non-interested Trustees
elected voluntarily to defer a portion of their compensation as
follows: Ralph F. Cox, $53,735; William O. McCoy, $53,735; and Thomas
R. Williams, $62,319.

B Compensation figures include cash, and may include amounts required
to be deferred and amounts deferred at the election of Trustees.

Under a deferred compensation plan adopted in September 1995 and
amended in November 1996 and January 2000 (the Plan), non-interested
Trustees must defer receipt of a portion of, and may elect to defer
receipt of an additional portion of, their annual fees. Amounts
deferred under the Plan are treated as though equivalent dollar
amounts had been invested in shares of a cross-section of Fidelity
funds including funds in each major investment discipline and
representing a majority of Fidelity's assets under management (the
Reference Funds). The amounts ultimately received by the Trustees
under the Plan will be directly linked to the investment performance
of the Reference Funds. Deferral of fees in accordance with the Plan
will have a negligible effect on a fund's assets, liabilities, and net
income per share, and will not obligate a fund to retain the services
of any Trustee or to pay any particular level of compensation to the
Trustee. A fund may invest in the Reference Funds under the Plan
without shareholder approval.

As of May 31, 2000, approximately 64.73% of Money Market Portfolio's;
approximately 30.38% of Investment Grade Bond Portfolio's; and
approximately 26.70% of Index 500 Portfolio's total outstanding
shares, respectively, was held by FMR affiliates. FMR Corp. is the
ultimate parent company of these FMR affiliates. By virtue of their
ownership interest in FMR Corp., as described in the "Control of
Investment Advisers" section on page 68, Mr. Edward C. Johnson 3d,
President and Trustee of the fund, and Ms. Abigail P. Johnson, may be
deemed to be a beneficial owner of these shares. As of the above date,
with the exception of Mr. Johnson 3d's and Ms. Johnson's deemed
ownership of Money Market Portfolio's, Investment Grade Bond
Portfolio's, and Index 500 Portfolio's shares, the Trustees, Members
of the Advisory Board, and officers of the funds owned, in the
aggregate, less than 1% of each fund's total outstanding shares.

As of May 31, 2000, the following owned of record or beneficially 5%
or more of each class's outstanding shares:

Money Market Portfolio Initial Class: Fidelity Investments Life
Insurance Company, Boston, MA (60.01%).

Money Market Portfolio Service Class 2: Fidelity Investments, Boston,
MA (100%).

Investment Grade Bond Portfolio Initial Class: Fidelity Investments
Life Insurance Company, Boston, MA (27.63%); Cigna Corporation,
Bloomfield, CT (10.96%); Ameritas Financial Services, Lincoln, NE
(9.12%); American International Life Insurance Company, New York, NY
(7.02%).

Investment Grade Bond Portfolio Service Class 2: Fidelity Investments,
Boston, MA (97.14%).

Index 500 Portfolio Initial Class: Fidelity Investments Life Insurance
Company, Boston, MA (24.29%); American United Life, Indianapolis, IN
(12.56%); Reliastar Financial Corp., Minneapolis, MN (7.39%); Aetna
Inc., Hartford, CT (6.89%); Security First Group, Los Angeles, CA
(6.55%).

Index 500 Portfolio Service Class 2: Fidelity Investments, Boston, MA
(100%).

As of the public offering of Service Class shares of each fund, 100%
of the fund's Service Class shares was held by an FMR affiliate.

A shareholder owning of record or beneficially more than 25% of a
fund's outstanding shares may be considered a controlling person. That
shareholder's vote could have a more significant effect on matters
presented at a shareholders' meeting than votes of other shareholders.

CONTROL OF INVESTMENT ADVISERS

FMR Corp., organized in 1972, is the ultimate parent company of FMR,
Fidelity Investments Money Management, Inc. (FIMM), and FMR Co., Inc.
(FMRC). The voting common stock of FMR Corp. is divided into two
classes. Class B is held predominantly by members of the Edward C.
Johnson 3d family and is entitled to 49% of the vote on any matter
acted upon by the voting common stock. Class A is held predominantly
by non-Johnson family member employees of FMR Corp. and its affiliates
and is entitled to 51% of the vote on any such matter. The Johnson
family group and all other Class B shareholders have entered into a
shareholders' voting agreement under which all Class B shares will be
voted in accordance with the majority vote of Class B shares. Under
the 1940 Act, control of a company is presumed where one individual or
group of individuals owns more than 25% of the voting stock of that
company. Therefore, through their ownership of voting common stock and
the execution of the shareholders' voting agreement, members of the
Johnson family may be deemed, under the 1940 Act, to form a
controlling group with respect to FMR Corp.

At present, the principal operating activities of FMR Corp. are those
conducted by its division, Fidelity Investments Retail Marketing
Company, which provides marketing services to various companies within
the Fidelity organization.

BT, a New York banking corporation with principal offices at 130
Liberty Street, New York, New York 10006, is a wholly-owned subsidiary
of Deutsche Bank AG, whose principal offices are at Taunusanlage 12,
D-60325 Frankfurt am Main, Federal Republic of Germany. Deutsche Bank
AG is a major global banking institution that is engaged in a wide
range of financial services, including investment management, mutual
funds, retail and commercial banking, investment banking, and
insurance.

The funds, FMR, FIMM, FMRC, BT, and Fidelity Distributors Corporation
(FDC) have adopted codes of ethics under Rule 17j-1 of the 1940 Act
that set forth employees' fiduciary responsibilities regarding the
funds, establish procedures for personal investing, and restrict
certain transactions. Employees subject to the codes of ethics,
including Fidelity and BT investment personnel, may invest in
securities for their own investment accounts, including securities
that may be purchased or held by the funds.

MANAGEMENT CONTRACTS

Each fund has entered into a management contract with FMR, pursuant to
which FMR furnishes investment advisory and other services.

MANAGEMENT SERVICES (FOR ALL FUNDS EXCEPT VIP INDEX 500). Under the
terms of its management contract with each fund, FMR acts as
investment adviser and, subject to the supervision of the Board of
Trustees, directs the investments of the fund in accordance with its
investment objective, policies and limitations. FMR also provides each
fund with all necessary office facilities and personnel for servicing
the fund's investments, compensates all officers of each fund and all
Trustees who are "interested persons" of the trusts or of FMR, and all
personnel of each fund or FMR performing services relating to
research, statistical and investment activities.

In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of the fund. These services include
providing facilities for maintaining the fund's organization;
supervising relations with custodians, transfer and pricing agents,
accountants, underwriters and other persons dealing with the fund;
preparing all general shareholder communications and conducting
shareholder relations; maintaining the fund's records and the
registration of the fund's shares under federal securities laws and
making necessary filings under state securities laws; developing
management and shareholder services for the fund; and furnishing
reports, evaluations and analyses on a variety of subjects to the
Trustees.

MANAGEMENT AND SUB-ADVISORY SERVICES (FOR VIP INDEX 500). FMR provides
the fund with all necessary office facilities and personnel for
servicing the fund's investments, compensates all officers of the fund
and all Trustees who are "interested persons" of the trust or of FMR,
and all personnel of the fund or FMR performing services relating to
research, statistical and investment activities.

BT is the sub-adviser of the fund and acts as the fund's custodian.
Under its management contract with the fund, FMR acts as investment
adviser. Under the sub-advisory agreement, and subject to the
supervision of the Board of Trustees, BT directs the investments of
the fund in accordance with its investment objective, policies and
limitations, and provides custodial services to the fund.

BT has been advised by counsel that BT currently may perform the
services for the fund described herein without violation of the
Glass-Steagall Act or other applicable banking laws or regulations.
State laws on this issue may differ from the interpretation of
relevant federal law and banks and financial institutions may be
required to register as dealers pursuant to state securities law.

MANAGEMENT-RELATED EXPENSES. In addition to the management fee payable
to FMR and the fees payable to the transfer, dividend disbursing, and
shareholder servicing agent , pricing and bookkeeping agent, and the
costs associated with securities lending, as applicable, each fund or
each class thereof, as applicable, pays all of its expenses that are
not assumed by those parties. Each fund pays for the typesetting,
printing, and mailing of its proxy materials to shareholders, legal
expenses, and the fees of the custodian (except VIP Index 500),
auditor, and non-interested Trustees. Each fund's management contract
further provides that the fund will pay for typesetting, printing, and
mailing prospectuses, statements of additional information, notices,
and reports to shareholders; however, under the terms of each fund's
transfer agent agreement, the transfer agent bears the costs of
providing these services to existing shareholders of the applicable
classes. Other expenses paid by each fund include interest, taxes,
brokerage commissions, the fund's proportionate share of insurance
premiums and Investment Company Institute dues, and the costs of
registering shares under federal securities laws and making necessary
filings under state securities laws. Each fund is also liable for such
non-recurring expenses as may arise, including costs of any litigation
to which the fund may be a party, and any obligation it may have to
indemnify its officers and Trustees with respect to litigation. Each
fund also pays the costs related to the solicitation of fund proxies
from variable product owners.

MANAGEMENT FEES. For the services of FMR under the management
contract, VIP Index 500 pays FMR a monthly management fee at the
annual rate of 0.24% of the fund's average net assets throughout the
month.

For the services of FMR under the management contract, VIP Investment
Grade Bond pays FMR a monthly management fee which has two components:
a group fee rate and an individual fund fee rate.

For the services of FMR under the management contract, VIP Money
Market pays FMR a monthly management fee which has three components: a
group fee rate, an individual fund fee rate, and an income-based
component of 6% of the fund's monthly gross income in excess of an
annualized 5% yield. For this purpose, gross income includes interest
accrued and/or discount earned (including both original issue discount
and market discount) on portfolio obligations, less amortization of
premium on portfolio obligations. The maximum income-based component
is an amount equal to an annual rate of 0.24% of the fund's average
net assets throughout the month.

The group fee rate is based on the monthly average net assets of all
of the registered investment companies with which FMR has management
contracts.

The following is the fee schedule for VIP Money Market and VIP
Investment Grade Bond.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
INCOME AND MONEY MARKET FUNDS

GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES

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

0 - $3 billion .3700% $ 1 billion .3700%

3 - 6 .3400 50 .2188

6 - 9 .3100 100 .1869

9 - 12 .2800 150 .1736

12 - 15 .2500 200 .1652

15 - 18 .2200 250 .1587

18 - 21 .2000 300 .1536

21 - 24 .1900 350 .1494

24 - 30 .1800 400 .1459

30 - 36 .1750 450 .1427

36 - 42 .1700 500 .1399

42 - 48 .1650 550 .1372

48 - 66 .1600 600 .1349

66 - 84 .1550 650 .1328

84 - 120 .1500 700 .1309

120 - 156 .1450 750 .1291

156 - 192 .1400 800 .1275

192 - 228 .1350 850 .1260

228 - 264 .1300 900 .1246

264 - 300 .1275 950 .1233

300 - 336 .1250 1,000 .1220

336 - 372 .1225 1,050 .1209

372 - 408 .1200 1,100 .1197

408 - 444 .1175 1,150 .1187

444 - 480 .1150 1,200 .1177

480 - 516 .1125 1,250 .1167

516 - 587 .1100 1,300 .1158

587 - 646 .1080 1,350 .1149

646 - 711 .1060 1,400 .1141

711 - 782 .1040

782 - 860 .1020

860 - 946 .1000

946 - 1,041 .0980

1,041 - 1,145 .0960

1,145 - 1,260 .0940

Over 1,260 .0920

</TABLE>

The group fee rate is calculated on a cumulative basis pursuant to the
graduated fee rate schedule shown above on the left. The schedule
above on the right shows the effective annual group fee rate at
various asset levels, which is the result of cumulatively applying the
annualized rates on the left. For example, the effective annual fee
rate at $826 billion of group net assets - the approximate level for
December 1999 - was 0.1267%, which is the weighted average of the
respective fee rates for each level of group net assets up to $826
billion.

The individual fund fee rate for VIP Investment Grade Bond is 0.30%.
Based on the average group net assets of the funds advised by FMR for
December 1999, the fund's annual management fee rate would be
calculated as follows:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Group Fee Rate Individual Fund Fee Rate Management Fee Rate

VIP Investment Grade Bond 0.1267% + 0.30% = 0.4267%

</TABLE>

One-twelfth of the management fee rate is applied to the fund's
average net assets for the month, giving a dollar amount which is the
fee for that month.

VIP Money Market's individual fund fee rate is 0.03%. One-twelfth of
the sum of the group fee rate and the individual fund fee rate is
applied to the fund's average net assets for the month, giving a
dollar amount which is the fee for that month to which the
income-based component is added.

The following table shows the amount of management fees paid by VIP
Money Market and VIP Investment Grade Bond to FMR for the past three
fiscal years.

<TABLE>
<CAPTION>
<S> <C> <C>
Fund Fiscal Years Ended December 31 Management Fees Paid to FMR

VIP Money Market 1999 $ 3,168,788

1998 $ 2,767,757

1997 $ 2,325,636

VIP Investment Grade Bond 1999 $ 3,054,862

1998 $ 2,076,505

1997 $ 1,154,096

</TABLE>

SUB-ADVISER (FOR VIP INDEX 500). VIP Index 500 and FMR have entered
into a sub-advisory agreement with BT. Pursuant to the sub-advisory
agreement, FMR has granted BT investment management authority as well
as the authority to buy and sell securities.

Under the sub-advisory agreement, for providing investment management
and custodial services to VIP Index 500, FMR pays BT fees at an annual
rate of 0.006% of the average net assets of the fund.

The following table shows the amount of management fees paid by VIP
Index 500 to FMR, sub-advisory fees paid by the fund to BT and
sub-advisory fees paid by FMR, on behalf of the fund, to BT for the
past three fiscal years.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fund Fiscal Years Ended December 31 Management Fees Paid to FMR Sub-Advisory Fees Paid to BT

VIP Index 500 1999 $ 11,471,194 $ 125,216

1998 $ 6,919,949 $ 42,017

1997 $ 4,102,533 $ 54*

</TABLE>

<TABLE>
<CAPTION>
<S> <C>
Fund Sub-Advisory Fees Paid by FMR
to BT

VIP Index 500 $ 284,049

$ 171,947

$ 8,298*

</TABLE>

* BT began sub-advising VIP Index 500 in December 1997.

MANAGEMENT-RELATED SERVICES (FOR VIP INDEX 500). The fund has also
entered into a securities lending agreement with BT. Under the terms
of the agreement, BT retains up to 30% of aggregate annual lending
revenues for providing securities lending services.

For each fund (except VIP Index 500), FMR may, from time to time,
voluntarily reimburse all or a portion of a class's operating expenses
(exclusive of interest, taxes, certain securities lending costs,
brokerage commissions, and extraordinary expenses), which is subject
to revision or discontinuance. 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.

For VIP Index 500, FMR may, from time to time, voluntarily reimburse
all or a portion of the class's operating expenses (exclusive of
interest, taxes, securities lending costs, brokerage commissions, and
extraordinary expenses), which is subject to revision or
discontinuance. 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.

FMR voluntarily agreed to reimburse Initial Class if and to the extent
that its aggregate operating expenses, including management fees, were
in excess of an annual rate of its average net assets. The table below
shows the period of reimbursement and level of expense limitation for
the applicable class; the dollar amount of management fees incurred
under the fund's contract before reimbursement; and the dollar amount
of management fees reimbursed by FMR under the expense reimbursement
for the period.

Aggregate Operating Expense Fiscal Year Ended December 31 Management Fee Before
Limitation Reimbursement

VIP Index 500 - Initial Class 0.28% 1999 $ 11,596,410

</TABLE>

Amount of Management Fee
Reimbursement

VIP Index 500 - Initial Class $ 2,693,102

</TABLE>

Expense reimbursements by FMR will increase the class's returns and
yield, and repayment of the reimbursement by the class will lower its
returns and yield.

SUB-ADVISERS (EXCEPT FOR VIP INDEX 500). On behalf of VIP Money Market
and VIP Investment Grade Bond, FMR has entered into a sub-advisory
agreement with FIMM pursuant to which FIMM has primary responsibility
for choosing investments for each fund. Prior to January 23, 1998, FMR
Texas Inc. (FMR Texas) had primary responsibility for providing
investment management services to the money market fund. On January
23, 1998, FMR Texas was merged into FIMM, which succeeded to the
operations of FMR Texas.

Under the terms of the sub-advisory agreements for VIP Money Market
and VIP Investment Grade Bond, FMR pays FIMM fees equal to 50% of the
management fee payable to FMR under its management contract with each
fund. The fees paid to FIMM are not reduced by any voluntary or
mandatory expense reimbursements that may be in effect from time to
time.

On behalf of the money market fund, for the fiscal year ended December
31, 1997, FMR paid FMR Texas a fee of $1,162,818. On behalf of the
money market fund, for the fiscal years ended December 31, 1999 and
1998, FMR paid FIMM fees of $1,584,394 and $1,383,878, respectively.

On behalf of VIP Investment Grade Bond, for the fiscal year ended
December 31, 1999, FMR paid FIMM a fee of $1,527,431.

On January 1, 2001, FMR will enter into a sub-advisory agreement with
FMRC on behalf of VIP Index 500 pursuant to which FMRC may provide
investment research and advice and may also provide investment
advisory services for the fund.

Under the terms of the sub-advisory agreement for VIP Index 500, FMR
will pay FMRC fees equal to 50% of the management fee payable to FMR
with respect to that portion of the fund's assets that will be managed
by FMRC. The fees paid to FMRC will not be reduced by any voluntary or
mandatory expense reimbursements that may be in effect from time to
time.

DISTRIBUTION SERVICES

Each fund has entered into a distribution agreement with FDC, an
affiliate of FMR. FDC is a broker-dealer registered under the
Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc. The distribution agreements
call for FDC to use all reasonable efforts, consistent with its other
business, to secure purchasers for shares of each fund, which are
continuously offered at NAV. Promotional and administrative expenses
in connection with the offer and sale of shares are paid by FMR.

The Trustees have approved Distribution and Service Plans on behalf of
Service Class of each fund (the Plans) pursuant to Rule 12b-1 under
the 1940 Act (the Rule). The Rule provides in substance that a mutual
fund may not engage directly or indirectly in financing any activity
that is primarily intended to result in the sale of shares of the fund
except pursuant to a plan approved on behalf of the fund under the
Rule. The Plans, as approved by the Trustees, allow Service Class and
FMR to incur certain expenses that might be considered to constitute
direct or indirect payment by the funds of distribution expenses.

Pursuant to the Service Class Plan for each fund, FDC is paid a 12b-1
fee at an annual rate of up to 0.25% of Service Class's average net
assets determined at the close of business on each day throughout the
month. Currently, the Trustees have approved a 12b-1 fee for Service
Class of each fund at an annual rate of 0.10% of its average net
assets. This fee rate may be increased only when, in the opinion of
the Trustees, it is in the best interests of variable product owners
to do so.

Currently, FDC may reallow to intermediaries (such as insurance
companies, broker-dealers, and other service-providers), including its
affiliates, up to the full amount of 12b-1 fees paid by Service Class
for providing services intended to result in the sale of Service Class
shares and/or support services that benefit variable product owners.

Under each Service Class Plan, if the payment of management fees by
the fund to FMR is deemed to be indirect financing by the fund of the
distribution of its shares, such payment is authorized by the Plan.
Each Service Class Plan specifically recognizes that FMR may use its
management fee revenue, as well as its past profits or its other
resources, to pay FDC for expenses incurred in connection with
providing services intended to result in the sale of Service Class
shares and/or support services that benefit variable product owners,
including payments of significant amounts made to intermediaries that
provide those services. Currently, the Board of Trustees has
authorized such payments for Service Class shares.

Prior to approving each Service Class Plan, the Trustees carefully
considered all pertinent factors relating to the implementation of the
Plan, and determined that there is a reasonable likelihood that the
Plan will benefit Service Class of the fund and variable product
owners. To the extent that each Service Class Plan gives FMR and FDC
greater flexibility in connection with the distribution of Service
Class shares, additional sales of fund shares or stabilization of cash
flows may result. Furthermore, certain support services that benefit
variable product owners may be provided more effectively under the
Plans by insurance companies and their affiliates with whom variable
product owners have other relationships.

Each Service Class Plan does not provide for specific payments by
Service Class of any of the expenses of FDC, or obligate FDC or FMR to
perform any specific type or level of distribution activities or incur
any specific level of expense in connection with distribution
activities.

The Glass-Steagall Act generally prohibits federally and state
chartered or supervised banks from directly engaging in the business
of underwriting, selling or distributing securities. FDC believes that
the Glass-Steagall Act should not preclude a bank from performing
shareholder support services, or servicing and recordkeeping
functions. FDC intends to engage banks only to perform such functions.
However, changes in federal or state statutes and regulations
pertaining to the permissible activities of banks, as well as further
judicial or administrative decisions or interpretations, could prevent
a bank from continuing to perform all or a part of the contemplated
services. If a bank were prohibited from so acting, the Trustees would
consider what actions, if any, would be necessary to continue to
provide efficient and effective shareholder services. In such event,
changes in the operation of the funds might occur, including possible
termination of any automatic investment or redemption or other
services then provided by the bank. It is not expected that
shareholders would suffer any adverse financial consequences as a
result of any of these occurrences. In addition, state securities laws
on this issue may differ from the interpretations of federal law
expressed herein, and banks and other financial institutions may be
required to register as dealers pursuant to state law.

Each fund may execute portfolio transactions with, and purchase
securities issued by, depository institutions that receive payments
under the Plans. No preference for the instruments of such depository
institutions will be shown in the selection of investments.

FDC may compensate intermediaries that satisfy certain criteria
established from time to time by FDC relating to the level or type of
services provided by the intermediary, the sale or expected sale of
significant amounts of shares, or other factors.

TRANSFER AND SERVICE AGENT AGREEMENTS

Service Class of each fund has entered into a transfer agent agreement
with FIIOC, an affiliate of FMR. Under the terms of the agreements,
FIIOC performs transfer agency, dividend disbursing, and shareholder
services for Service Class of each fund.

For providing transfer agency services, FIIOC receives an asset-based
fee paid monthly with respect to each account in a fund.

For VIP Index 500, the asset-based fees are subject to adjustment if
the year-to-date total return of the S&P 500 exceeds a positive or
negative 15%.

FIIOC pays out-of-pocket expenses associated with providing transfer
agent services. In addition, FIIOC bears the expense of typesetting,
printing, and mailing prospectuses, statements of additional
information, and all other reports, notices, and statements to
existing shareholders, with the exception of proxy statements.

Each fund has entered into a service agent agreement with FSC, an
affiliate of FMR. Under the terms of the agreements, FSC calculates
the NAV and dividends for Service Class of each fund, maintains each
fund's portfolio and general accounting records, and administers VIP
Investment Grade Bond's securities lending program.

For providing pricing and bookkeeping services, FSC receives a monthly
fee based on each fund's average daily net assets throughout the
month.

The annual rates for pricing and bookkeeping services for VIP Index
500 are 0.0365% of the first $500 million of average net assets,
0.0155% of average net assets between $500 million and $3 billion,
0.0040% of average net assets between $3 billion and $25 billion, and
0.00075% of average net assets in excess of $25 billion. The fee, not
including reimbursement for out-of-pocket expenses, is limited to a
minimum of $60,000 per year.

The annual rates for pricing and bookkeeping services for VIP
Investment Grade Bond are 0.0275% of the first $500 million of average
net assets, 0.0175% of average net assets between $500 million and $3
billion, 0.0021% of average net assets between $3 billion and $25
billion, and 0.00075% of average net assets in excess of $25 billion.
The fee, not including reimbursement for out-of-pocket expenses, is
limited to a minimum of $60,000 per year.

The annual rates for pricing and bookkeeping services for VIP Money
Market are 0.0150% of the first $500 million of average net assets,
0.0075% of average net assets between $500 million and $10 billion,
0.0021% of average net assets between $10 billion and $25 billion, and
0.00075% of average net assets in excess of $25 billion. The fee, not
including reimbursement for out-of-pocket expenses, is limited to a
minimum of $40,000 per year.

Pricing and bookkeeping fees, including reimbursement for
out-of-pocket expenses, paid by the funds to FSC for the past three
fiscal years are shown in the table below.

Fund 1999 1998 1997

VIP Money Market $ 175,672 $ 154,243 $ 133,309

VIP Investment Grade Bond $ 182,740 $ 184,025 $ 106,949

VIP Index 500 $ 914,740 $ 806,724 $ 599,917

For administering VIP Investment Grade Bond's securities lending
program, FSC is paid based on the number and duration of individual
securities loans.

For the fiscal years ended December 31, 1999, 1998, and 1997, VIP
Investment Grade Bond did not pay FSC for securities lending.

DESCRIPTION OF THE TRUSTS

TRUST ORGANIZATION. VIP Money Market is a fund of Variable Insurance
Products Fund, an open-end management investment company organized as
a Massachusetts business trust on November 13, 1981. VIP Investment
Grade Bond and VIP Index 500 are funds of Variable Insurance Products
Fund II, an open-end management investment company organized as a
Massachusetts business trust on March 21, 1988. Currently, there are
five funds in Variable Insurance Products Fund: Money Market
Portfolio, High Income Portfolio, Equity-Income Portfolio, Growth
Portfolio, and Overseas Portfolio. Currently, there are five funds in
Variable Insurance Products Fund II: Investment Grade Bond Portfolio,
Asset Manager PortfolioSM, Asset Manager: Growth PortfolioSM, Index
500 Portfolio, and Contrafund(registered trademark) Portfolio. The
Trustees are permitted to create additional funds in the trusts and to
create additional classes of the funds.

The assets of each trust received for the issue or sale of shares of
each of its funds and all income, earnings, profits, and proceeds
thereof, subject to the rights of creditors, are allocated to such
fund, and constitute the underlying assets of such fund. The
underlying assets of each fund in a trust shall be charged with the
liabilities and expenses attributable to such fund, except that
liabilities and expenses may be allocated to a particular class. Any
general expenses of the respective trusts shall be allocated between
or among any one or more of its funds or classes.

SHAREHOLDER LIABILITY. Each trust is an entity commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders
of such a trust may, under certain circumstances, be held personally
liable for the obligations of the trust.

Each Declaration of Trust contains an express disclaimer of
shareholder liability for the debts, liabilities, obligations, and
expenses of the trust or fund. 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 relating to the trust or to a fund shall include
a provision limiting the obligations created thereby to the trust or
to one or more funds and its or their assets. Each Declaration of
Trust further provides that shareholders of a fund shall not have a
claim on or right to any assets belonging to any other fund.

Each Declaration of Trust provides for indemnification out of each
fund's property of any shareholder or former shareholder held
personally liable for the obligations of the fund solely by reason of
his or her being or having been a shareholder and not because of his
or her acts or omissions or for some other reason. Each Declaration of
Trust also provides that each fund shall, upon request, assume the
defense of any claim made against any shareholder for any act or
obligation of the fund and satisfy any judgment thereon. Thus, the
risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a fund
itself would be unable to meet its obligations. FMR believes that, in
view of the above, the risk of personal liability to shareholders is
remote. Claims asserted against one class of shares may subject
holders of another class of shares to certain liabilities.

VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. Shareholders are entitled to one vote for each dollar of net
asset value they own. The voting rights of shareholders can be changed
only by a shareholder vote. Shares may be voted in the aggregate, by
fund, and by class.

The shares have no preemptive or conversion rights. Shares are fully
paid and nonassessable, except as set forth under the heading
"Shareholder Liability" above.

Each trust or a fund may be terminated upon the sale of its assets to,
or merger with, another open-end management investment company or
series thereof, or upon liquidation and distribution of its assets.
Generally, the merger of a trust or a fund with another operating
mutual fund or the sale of substantially all of the assets of a trust
or a fund to another operating mutual fund requires approval by a vote
of shareholders of the trust or the fund. The Trustees may, however,
reorganize or terminate each trust or a fund without prior shareholder
approval. In the event of the dissolution or liquidation of a trust,
shareholders of each of its funds are entitled to receive the
underlying assets of such fund available for distribution. In the
event of the dissolution or liquidation of a fund, shareholders of
that fund are entitled to receive the underlying assets of the fund
available for distribution.

CUSTODIANS. The Bank of New York, 110 Washington Street, New York, New
York, is custodian of the assets of VIP Money Market and VIP
Investment Grade Bond. The custodian is responsible for the
safekeeping of a fund's assets and the appointment of any subcustodian
banks and clearing agencies. The Chase Manhattan Bank, headquartered
in New York, also may serve as a special purpose custodian of certain
assets in connection with repurchase agreement transactions.

BT is custodian of the assets of VIP Index 500. The custodian is
responsible for the safekeeping of a fund's assets and the appointment
of any subcustodian banks and clearing agencies. The Bank of New York
and The Chase Manhattan Bank, each headquartered in New York, also may
serve as special purpose custodian of certain assets in connection
with repurchase agreement transactions.

FMR, its officers and directors, its affiliated companies, Members of
the Advisory Board, and Members of 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. Transactions
that have occurred to date include mortgages and personal and general
business loans. In the judgment of FMR, the terms and conditions of
those transactions were not influenced by existing or potential
custodial or other fund relationships.

AUDITORS. PricewaterhouseCoopers LLP, 160 Federal Street, Boston,
Massachusetts, serves as independent accountant for VIP Money Market.
The auditor examines financial statements for the fund and provides
other audit, tax, and related services.

Deloitte & Touche LLP, 200 Berkeley Street, Boston, Massachusetts,
serves as independent accountant for VIP Investment Grade Bond and VIP
Index 500. The auditor examines financial statements for the funds and
provides other audit, tax, and related services.

FINANCIAL STATEMENTS

Each fund's financial statements and financial highlights for the
fiscal year ended December 31, 1999, and report of the auditor, are
included in the fund's annual report and are incorporated herein by
reference. Financial statements and financial highlights for Service
Class of each fund will be included in each fund's annual report when
the class has completed its first annual period.

APPENDIX

ABOUT THE S&P 500. The S&P 500 is a well-known stock market index that
includes common stocks of companies representing a significant portion
of the market value of all common stocks publicly traded in the United
States. Stocks in the S&P 500 are weighted according to their market
capitalization (i.e., the number of shares outstanding multiplied by
the stock's current price), with the 50 largest stocks currently
comprising approximately 60% of the index's value. The composition of
the S&P 500 is determined by Standard & Poor's and is based on such
factors as the market capitalization and trading activity of each
stock and its adequacy as a representation of stocks in a particular
industry group. Standard & Poor's may change the index's composition
from time to time.

The performance of the S&P 500 is a hypothetical number that does not
take into account brokerage commissions and other costs of investing,
which the funds bear.

Although Standard & Poor's obtains information for inclusion in or for
use in the calculation of the S&P 500 from sources which it considers
reliable, Standard & Poor's does not guarantee the accuracy or the
completeness of the S&P 500 or any data included therein. Standard &
Poor's makes no warranty, express or implied, as to results to be
obtained by the licensee, owners of the funds, or any other person or
entity from the use of the S&P 500 or any data included therein in
connection with the rights licensed hereunder or for any other use.
Standard & Poor's makes no express or implied warranties, and hereby
expressly disclaims all warranties of merchantability or fitness for a
particular purpose with respect to the S&P 500 and any data included
therein.

The following is a list of the 500 stocks comprising the S&P 500 as of
December 31, 1999.

ADC TELECOMMUNICATIONS INC
AFLAC INC
AES CORP
AMR CORP/DE
AT&T CORP
ABBOTT LABORATORIES
ADAPTEC INC
ADOBE SYSTEMS INC
ADVANCED MICRO DEVICES
AETNA INC
AIR PRODUCTS & CHEMICALS INC
ALBERTO-CULVER CO - CL B
ALBERTSONS INC
ALCAN ALUMINIUM LTD
ALCOA INC
ALLEGHENY TECHNOLOGIES INC
ALLERGAN INC
ALLIED WASTE INDS INC
ALLSTATE CORP
ALLTEL CORP
ALZA CORP
AMERADA HESS CORP
AMEREN CORP
AMERICA ONLINE INC
AMERICAN ELECTRIC POWER
AON CORP
APACHE CORP
APPLE COMPUTER INC
APPLIED MATERIALS INC
ARCHER-DANIELS-MIDLAND CO
ARMSTRONG WORLD INDS INC
ASHLAND INC
ASSOC FST CAPITAL CP - CL A
ATLANTIC RICHFIELD CO
AUTODESK INC
AUTOMATIC DATA PROCESSING
AUTOZONE INC
AVERY DENNISON CORP
AVON PRODUCTS
BB&T CORP
BMC SOFTWARE INC
BAKER-HUGHES INC
BALL CORP
BANK OF AMERICA CORP
BANK OF NEW YORK CO INC
BANK ONE CORP
BARD (C.R.) INC
BARRICK GOLD CORPORATION
BAUSCH & LOMB INC
BAXTER INTERNATIONAL INC
BEAR STEARNS COMPANIES INC
BECTON DICKINSON & CO
BED BATH & BEYOND INC
BELL ATLANTIC CORP
BELLSOUTH CORP
BEMIS CO
BEST BUY CO INC
BESTFOODS
BETHLEHEM STEEL CORP
BIOMET INC
BLACK & DECKER CORP
BLOCK H & R INC
BOEING CO
BOISE CASCADE CORP
BOSTON SCIENTIFIC CORP
BRIGGS & STRATTON
BRISTOL MYERS SQUIBB
BROWN-FORMAN - CL B
BRUNSWICK CORP
BRLNGTN NTHRN SANTA FE
BURLINGTON RESOURCES INC
CBS CORP
CIGNA CORP
CMS ENERGY CORP
CSX CORP
CVS CORP
CABLETRON SYSTEMS
CAMPBELL SOUP CO
CAPITAL ONE FINL CORP
CARDINAL HEALTH INC
CARNIVAL CORP
CAROLINA POWER & LIGHT
CATERPILLAR INC
CENDANT CORP
CENTEX CORP
CENTRAL & SOUTH WEST CORP
CENTURYTEL INC
CERIDIAN CORP
CHAMPION INTERNATIONAL CORP
CHASE MANHATTAN CORP
CHEVRON CORP
CHUBB CORP
CINCINNATI FINANCIAL CORP
CINERGY CORP
CIRCUIT CITY STR CRCT CTY GP
CISCO SYSTEMS INC
CITIGROUP INC
CITRIX SYSTEMS INC
CLEAR CHANNEL COMMUNICATIONS
CLOROX CO/DE
COASTAL CORP
COCA-COLA CO
COCA-COLA ENTERPRISES
COLGATE-PALMOLIVE CO
COLUMBIA ENERGY GROUP
COLUMBIA/HCA HLTHCR - VTG
COMCAST CORP - CL A SPL
COMERICA INC
COMPAQ COMPUTER CORP
COMPUTER ASSOCIATES INTL INC
COMPUTER SCIENCES CORP
COMPUWARE CORP
COMVERSE TECHNOLOGY INC
CONAGRA INC
CONOCO INC
CONSECO INC
CONSOLIDATED EDISON INC
CONSOLIDATED NATURAL GAS CO
CONSOLIDATED STORES CORP
CONSTELLATION ENERGY CORP
COOPER INDUSTRIES INC
COOPER TIRE & RUBBER
COORS (ADOLPH) - CL B
CORNING INC
COSTCO WHOLESALE CORP
COUNTRYWIDE CREDIT IND INC
CRANE CO
CROWN CORK & SEAL CO INC
CUMMINS ENGINE
DTE ENERGY CO
DANA CORP
DANAHER CORP
DARDEN RESTAURANTS INC
DEERE & CO
DELL COMPUTER CORP
DELPHI AUTOMOTIVE SYS CORP
DELTA AIR LINES INC
DELUXE CORP
DILLARDS INC - CL A
DISNEY (WALT) COMPANY
DOLLAR GENERAL
DOMINION RESOURCES INC
DONNELLEY (R R) & SONS CO
DOVER CORP
DOW CHEMICAL
DOW JONES & CO INC
DU PONT (E I) DE NEMOURS
DUKE ENERGY CORP
DUN & BRADSTREET CORP
EMC CORP/MA
EASTERN ENTERPRISES
EASTMAN CHEMICAL CO
EASTMAN KODAK CO
EATON CORP
ECOLAB INC
EDISON INTERNATIONAL
EL PASO ENERGY CORP/DE
ELECTRONIC DATA SYSTEMS CORP
EMERSON ELECTRIC CO
ENGELHARD CORP
ENRON CORP
ENTERGY CORP
EQUIFAX INC
EXXON MOBIL CORP
FMC CORP
FPL GROUP INC
FED HOME LOAN MTG CO
FANNIE MAE
FEDERATED DEPT STORES
FEDEX CORP
FIFTH THIRD BANCORP
FIRST DATA CORP
FIRST UNION CORP (N C)
FIRSTAR CORP
FIRSTENERGY CORP
FLEETBOSTON FINANCIAL CORP
FLEETWOOD ENTERPRISES
FLORIDA PROGRESS CORP
FLUOR CORP
FORD MOTOR CO
FORT JAMES CORP
FORTUNE BRANDS INC
FOSTER WHEELER CORP
FRANKLIN RESOURCES INC
FREEPRT MCMOR COP&GLD -
CL B
GPU INC
GTE CORP
GANNETT CO
GAP INC
GATEWAY INC
GENERAL DYNAMICS CORP
GENERAL ELECTRIC CO
GENERAL INSTRUMENT CORP
GENERAL MILLS INC
GENERAL MOTORS CORP
GENUINE PARTS CO
GEORGIA-PACIFIC GROUP
GILLETTE CO
GOLDEN WEST FINANCIAL CORP
GOODRICH (B F) CO
GOODYEAR TIRE & RUBBER CO
GRACE (W R) & CO
GRAINGER (W W) INC
GREAT ATLANTIC & PAC TEA CO
GREAT LAKES CHEMICAL CORP
GUIDANT CORP
HALLIBURTON CO
HARCOURT GENERAL INC
HARRAHS ENTERTAINMENT INC
HARTFORD FINL SVCS GRP INC
HASBRO INC
HEALTHSOUTH CORP
HEINZ (H J) CO
HERCULES INC
HERSHEY FOODS CORP
HEWLETT-PACKARD CO
HILTON HOTELS CORP
HOME DEPOT INC
HOMESTAKE MINING
HONEYWELL INTERNATIONAL INC
HOUSEHOLD INTERNATIONAL INC
HUMANA INC
HUNTINGTON BANCSHARES
IMS HEALTH INC
ITT INDUSTRIES INC
IKON OFFICE SOLUTIONS
ILLINOIS TOOL WORKS
INCO LTD
INGERSOLL-RAND CO
INTEL CORP
INTL BUSINESS MACHINES CORP
INTL FLAVORS & FRAGRANCES
INTL PAPER CO
INTERPUBLIC GROUP OF COS
JEFFERSON-PILOT CORP
JOHNSON & JOHNSON
JOHNSON CONTROLS INC
JOSTENS INC
KLA-TENCOR CORP
K MART CORP
KANSAS CITY SOUTHERN INDS
KAUFMAN & BROAD HOME CORP
KELLOGG CO
KERR-MCGEE CORP
KEYCORP
KIMBERLY-CLARK CORP
KNIGHT-RIDDER INC
KOHLS CORP
KROGER CO
LSI LOGIC CORP
LEGGETT & PLATT INC
LEHMAN BROTHERS HOLDINGS INC
LEXMARK INTL GRP INC - CL A
LILLY (ELI) & CO
LIMITED INC
LINCOLN NATIONAL CORP
LIZ CLAIBORNE INC
LOCKHEED MARTIN CORP
LOEWS CORP
LONGS DRUG STORES INC
LOUISIANA-PACIFIC CORP
LOWES COS
LUCENT TECHNOLOGIES INC
MBIA INC
MBNA CORP
MCI WORLDCOM INC
MGIC INVESTMENT CORP/WI
MALLINCKRODT INC
MANOR CARE INC
MARSH & MCLENNAN COS
MARRIOTT INTL INC
MASCO CORP
MATTEL INC
MAY DEPARTMENT STORES CO
MAYTAG CORP
MCDERMOTT INTL INC
MCDONALDS CORP
MCGRAW-HILL COMPANIES
MCKESSON HBOC INC
MEAD CORP
MEDIAONE GROUP INC
MEDTRONIC INC
MELLON FINANCIAL CORP
MERCK & CO
MEREDITH CORP
MERRILL LYNCH & CO
MICROSOFT CORP
MICRON TECHNOLOGY INC
MILACRON INC
MILLIPORE CORP
MINNESOTA MINING & MFG CO
MIRAGE RESORTS INC
MOLEX INC
MONSANTO CO
MORGAN (J P) & CO
MORGAN STANLEY DEAN WITTER
MOTOROLA INC
NABISCO GROUP HLDGS CORP
NACCO INDUSTRIES - CL A
NATIONAL CITY CORP
NATIONAL SEMICONDUCTOR CORP
NATIONAL SERVICE INDS INC
NAVISTAR INTERNATIONL
NETWORK APPLIANCE INC
NEW CENTURY ENERGIES INC
NEW YORK TIMES CO - CL A
NEWELL RUBBERMAID INC
NEWMONT MINING CORP
NEXTEL COMMUNICATIONS
NIAGARA MOHAWK HOLDINGS INC
NICOR INC
NIKE INC - CL B
NORDSTROM INC
NORFOLK SOUTHERN CORP
NORTEL NETWORKS CORP
NORTHERN STATES POWER/MN
NORTHERN TRUST CORP
NORTHROP GRUMMAN CORP
NOVELL INC
NUCOR CORP
OCCIDENTAL PETROLEUM CORP
OFFICE DEPOT INC
OLD KENT FINANCIAL CORP
OMNICOM GROUP
ONEOK INC
ORACLE CORP
OWENS CORNING
OWENS-ILLINOIS INC
PECO ENERGY CO
PG&E CORP
PE CORP BIOSYSTEMS
PNC BANK CORP
PPG INDUSTRIES INC
PPL CORP
PACCAR INC
PACTIV CORP
PAINE WEBBER GROUP
PALL CORP
PARAMETRIC TECHNOLOGY CORP
PARKER-HANNIFIN CORP
PAYCHEX INC
PENNEY (J C) CO
PEOPLES ENERGY CORP
PEOPLESOFT INC
PEP BOYS-MANNY MOE & JACK
PEPSICO INC
PERKINELMER INC
PHARMACIA & UPJOHN INC
PFIZER INC
PHELPS DODGE CORP
PHILIP MORRIS COS INC
PHILLIPS PETROLEUM CO
PINNACLE WEST CAPITAL
PITNEY BOWES INC
PLACER DOME INC
POLAROID CORP
POTLATCH CORP
PRAXAIR INC
PRICE (T. ROWE) ASSOCIATES
PROCTER & GAMBLE CO
PROGRESSIVE CORP-OHIO
PROVIDIAN FINANCIAL CORP
PUBLIC SERVICE ENTRP
PULTE CORP
QUAKER OATS CO
QUALCOMM INC
QUINTILES TRANSNATIONAL CORP
RALSTON PURINA CO
RAYTHEON CO - CL B
REEBOK INTERNATIONAL LTD
REGIONS FINL CORP
RELIANT ENERGY INC
REPUBLIC NEW YORK CORP
REYNOLDS METALS CO
RITE AID CORP
ROCKWELL INTL CORP
ROHM & HAAS CO
ROWAN COS INC
ROYAL DUTCH PET - NY REG
RUSSELL CORP
RYDER SYSTEM INC
SBC COMMUNICATIONS INC
SLM HLDG CORP
SAFECO CORP
SAFEWAY INC
ST JUDE MEDICAL INC
ST PAUL COS
SARA LEE CORP
SCHERING-PLOUGH
SCHLUMBERGER LTD
SCHWAB (CHARLES) CORP
SCIENTIFIC-ATLANTA INC
SEAGATE TECHNOLOGY
SEAGRAM CO LTD
SEALED AIR CORP
SEARS ROEBUCK & CO
SEMPRA ENERGY
SERVICE CORP INTERNATIONAL
SHARED MEDICAL SYSTEMS CORP
SHERWIN-WILLIAMS CO
SIGMA-ALDRICH
SILICON GRAPHICS INC
SNAP-ON INC
SOLECTRON CORP
SOUTHERN CO
SOUTHTRUST CORP
SOUTHWEST AIRLINES
SPRINGS INDUSTRIES - CL A
SPRINT FON GROUP
SPRINT PCS GROUP
STANLEY WORKS
STAPLES INC
STATE STREET CORP
SUMMIT BANCORP
SUN MICROSYSTEMS INC
SUNOCO INC
SUNTRUST BANKS INC
SUPERVALU INC
SYNOVUS FINANCIAL CP
SYSCO CORP
TJX COMPANIES INC
TRW INC
TANDY CORP
TARGET CORP
TEKTRONIX INC
TELLABS INC
TEMPLE-INLAND INC
TENET HEALTHCARE CORP
TERADYNE INC
TEXACO INC
TEXAS INSTRUMENTS INC
TEXAS UTILITIES CO
TEXTRON INC
THERMO ELECTRON CORP
THOMAS & BETTS CORP
3COM CORP
TIME WARNER INC
TIMES MIRROR COMPANY -
SER A
TIMKEN CO
TORCHMARK CORP
TOSCO CORP
TOYS R US INC
TRICON GLOBAL RESTAURANTS
TRIBUNE CO
TUPPERWARE CORP
TYCO INTERNATIONAL LTD
USX-MARATHON GROUP
UST INC
U S BANCORP/DE
USX-U S STEEL GROUP
UNILEVER N V - NY SHARES
UNICOM CORP
UNION CARBIDE CORP
UNION PACIFIC CORP
UNION PACIFIC RESOURCES GRP
UNION PLANTERS CORP
UNISYS CORP
UNITED HEALTHCARE CORP
US AIRWAYS GROUP INC
U S WEST INC
UNITED TECHNOLOGIES CORP
UNOCAL CORP
UNUMPROVIDENT CORP
VF CORP
VIACOM INC - CL B
VULCAN MATERIALS CO
WACHOVIA CORP
WAL-MART STORES
WALGREEN CO
WARNER-LAMBERT CO
WASHINGTON MUTUAL INC
WASTE MANAGEMENT INC
WATSON PHARMACEUTICALS INC
WELLPOINT HLTH NETWRK -
CL A
WELLS FARGO & CO
WENDY'S INTERNATIONAL INC
WESTVACO CORP
WEYERHAEUSER CO
WHIRLPOOL CORP
WILLAMETTE INDUSTRIES
WILLIAMS COS INC
WINN-DIXIE STORES INC
WORTHINGTON INDUSTRIES
WRIGLEY (WM) JR CO
XILINX INC
XEROX CORP
YAHOO INC
GLOBAL CROSSING LTD
TRANSOCEAN SEDCO FOREX INC

Fidelity, Fidelity Investments & (Pyramid) Design, Fidelity Focus,
Spartan, Magellan, and Contrafund are all registered trademarks of FMR
Corp.

Asset Manager and Asset Manager: Growth are service marks of FMR Corp.

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

The term "VIP" as used in this document refers to Fidelity Variable
Insurance Products.