SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT No. 33-54837
UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 17 [X]
and
REGISTRATION STATEMENT No. 811-7205
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 17 [X]
Variable Insurance Products Fund III
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: 617-563-7000
Eric D. Roiter, Secretary
82 Devonshire Street
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) immediately upon filing pursuant to paragraph (b).
(X) on April 30, 2000 pursuant to paragraph (b).
( ) 60 days after filing pursuant to paragraph (a)(1).
( ) on ( ) pursuant to paragraph (a)(1) of Rule 485.
( ) 75 days after filing pursuant to paragraph (a)(2).
( ) on ( ) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
EACH FUND OFFERS ITS SHARES ONLY TO SEPARATE ACCOUNTS OF INSURANCE
COMPANIES THAT OFFER VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE
PRODUCTS. A FUND MAY NOT BE AVAILABLE IN YOUR STATE DUE TO VARIOUS
INSURANCE REGULATIONS. PLEASE CHECK WITH YOUR INSURANCE COMPANY FOR
AVAILABILITY. IF A FUND IN THIS PROSPECTUS IS NOT AVAILABLE IN YOUR
STATE, THIS PROSPECTUS IS NOT TO BE CONSIDERED A SOLICITATION WITH
RESPECT TO THAT FUND. 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
INITIAL CLASS
GROWTH AND GROWTH & INCOME FUNDS:
INDEX 500 PORTFOLIO
MID CAP PORTFOLIO
GROWTH OPPORTUNITIES PORTFOLIO
CONTRAFUND(registered trademark) PORTFOLIO
GROWTH PORTFOLIO
OVERSEAS PORTFOLIO
BALANCED PORTFOLIO
EQUITY-INCOME PORTFOLIO
GROWTH & INCOME PORTFOLIO
ASSET ALLOCATION FUNDS:
ASSET MANAGER PORTFOLIO SM
ASSET MANAGER: GROWTH PORTFOLIO SM
INCOME FUNDS:
INVESTMENT GRADE BOND PORTFOLIO
HIGH INCOME PORTFOLIO
MONEY MARKET FUND:
MONEY MARKET PORTFOLIO
PROSPECTUS
APRIL 30, 2000
(FIDELITY_LOGO_GRAPHIC)(REGISTERED TRADEMARK)
82 DEVONSHIRE STREET, BOSTON, MA 02109
CONTENTS
FUND SUMMARY 2 INVESTMENT SUMMARY
7 PERFORMANCE
18 OPERATING EXPENSES
FUND BASICS 21 INVESTMENT DETAILS
29 VALUING SHARES
SHAREHOLDER INFORMATION 29 BUYING AND SELLING SHARES
29 DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
30 TAX CONSEQUENCES
FUND SERVICES 30 FUND MANAGEMENT
32 FUND DISTRIBUTION
APPENDIX 32 FINANCIAL HIGHLIGHTS
47 ADDITIONAL INFORMATION ABOUT THE STANDARD &
POOR'S 500SM 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 500 SM
I ndex (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 a s 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, market or 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.
INVESTMENT OBJECTIVE
VIP MID CAP PORTFOLIO seeks long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
Fidelity Management & Research Company (FMR)'s principal investment
strategies include:
(small solid bullet) Normally investing primarily in common stocks.
(small solid bullet) N ormally investing at least 65% of total
assets in securities of companies with medium market capitalizations
(those with market capitalizations similar to companies in the
Standard & Poor's MidCap 400 Index (S&P MidCap 400(registered
trademark) )).
(small solid bullet) Potentially investing in companies with smaller
or larger market capitalizations.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole. The value of securities of smaller
issuers can be more volatile than that of larger issuers.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP GROWTH OPPORTUNITIES PORTFOLIO seeks to provide capital
growth.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Normally investing primarily in common stocks.
(small solid bullet) Potentially investing in other types of
securities, including bonds which may be lower-quality debt
securities.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP CONTRAFUND PORTFOLIO seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Normally investing primarily in common stocks.
(small solid bullet) Investing in securities of companies whose value
it believes is not fully recognized by the public.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP GROWTH PORTFOLIO seeks to achieve capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Normally investing primarily in common stocks.
(small solid bullet) Investing in companies that it believes have
above-average growth potential (stocks of these companies are often
called "growth" stocks).
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole.
(small solid bullet) "GROWTH" INVESTING. "Growth" stocks can perform
differently from the market as a whole and other types of stocks and
can be more volatile than other types of stocks.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP OVERSEAS PORTFOLIO seeks long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Normally investing at least 65% of total assets
in foreign securities.
(small solid bullet) Normally investing primarily in common stocks.
(small solid bullet) Allocating investments across countries and
regions considering the size of the market in each country and region
relative to the size of the international market as a whole.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets, particularly
emerging markets, can be more volatile than the U.S. market due to
increased risks of adverse issuer, political, regulatory, market or
economic developments and can perform differently from the U.S.
market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP BALANCED PORTFOLIO seeks both income and growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Investing approximately 60% of assets in stocks
and other equity securities and the remainder in bonds and other debt
securities, including lower-quality debt securities, when its outlook
is neutral.
(small solid bullet) Investing at least 25% of total assets in
fixed-income senior securities (including debt securities and
preferred stock).
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) With respect to equity investments, emphasizing
above-average income-producing equity securities, which tends to lead
to investments in stocks that have more "value" characteristics than
"growth" characteristics.
(small solid bullet) Analyzing an issuer using fundamental factors and
evaluating each security's current price relative to estimated
long-term value to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) PREPAYMENT. The ability of an issuer of a debt
security to repay principal prior to a security's maturity can cause
greater price volatility if interest rates change.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP EQUITY-INCOME PORTFOLIO seeks reasonable income. The fund
will also consider the potential for capital appreciation. The fund's
goal is to achieve a yield which exceeds the composite yield on the
securities comprising the S&P 500.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Normally investing at least 65% of total assets
in income-producing equity securities, which tends to lead to
investments in large cap "value" stocks.
(small solid bullet) Potentially investing in other types of equity
securities and debt securities, including lower-quality debt
securities.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.
(small solid bullet) "VALUE" INVESTING. "Value" stocks can perform
differently from the market as a whole and other types of stocks and
can continue to be undervalued by the market for long periods of time.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP GROWTH & INCOME PORTFOLIO seeks high total return through a
combination of current income and capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Normally investing a majority of assets in common
stocks with a focus on those that pay current dividends and show
potential for capital appreciation.
(small solid bullet) Potentially investing in bonds, including
lower-quality debt securities, as well as stocks that are not
currently paying dividends, but offer prospects for future income or
capital appreciation.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP ASSET MANAGER PORTFOLIO seeks to obtain high total return
with reduced risk over the long term by allocating its assets among
stocks, bonds, and short-term instruments.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Allocating the fund's assets among stocks, bonds,
and short-term and money market instruments.
(small solid bullet) Maintaining a neutral mix over time of 50% of
assets in stocks, 40% of assets in bonds, and 10% of assets in
short-term and money market instruments.
(small solid bullet) Adjusting allocation among asset classes
gradually within the following ranges: stock class (30%-70%), bond
class (20%-60%), and short-term/money market class (0%-50%).
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Analyzing an issuer using fundamental and/or
quantitative factors and evaluating each security's current price
relative to estimated long-term value to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) PREPAYMENT. The ability of an issuer of a debt
security to repay principal prior to a security's maturity can cause
greater price volatility if interest rates change.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP ASSET MANAGER: GROWTH PORTFOLIO seeks to maximize total
return by allocating its assets among stocks, bonds, short-term
instruments, and other investments.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Allocating the fund's assets among stocks, bonds,
and short-term and money market instruments.
(small solid bullet) Maintaining a neutral mix over time of 70% of
assets in stocks, 25% of assets in bonds, and 5% of assets in
short-term and money market instruments.
(small solid bullet) Adjusting allocation among asset classes
gradually within the following ranges: stock class (50%-100%), bond
class (0%-50%), and short-term/money market class (0%-50%).
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Analyzing an issuer using fundamental and/or
quantitative factors and evaluating each security's current price
relative to estimated long-term value to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) PREPAYMENT. The ability of an issuer of a debt
security to repay principal prior to a security's maturity can cause
greater price volatility if interest rates change.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
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'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.
(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.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP HIGH INCOME PORTFOLIO seeks a high level of current income
while also considering growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Normally investing at least 65% of total assets
in income-producing debt securities, preferred stocks and convertible
securities, with an emphasis on lower-quality debt securities.
(small solid bullet) Potentially investing in non-income producing
securities, including defaulted securities and common stocks.
(small solid bullet) Investing in companies in troubled or uncertain
financial condition.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets, particularly
emerging markets, can be more volatile than the U.S. market due to
increased risks of adverse issuer, political, regulatory, market or
economic developments and can perform differently from the U.S.
market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments and can be difficult to resell.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP MONEY MARKET PORTFOLIO seeks as high a level of current
income as is consistent with preservation of capital and liquidity.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Investing in U.S. dollar-denominated money market
securities and repurchase agreements, and entering into reverse
repurchase agreements.
(small solid bullet) Investing more than 25% of total assets in the
financial services industry.
(small solid bullet) Investing in compliance with industry-standard
requirements for money market funds for the quality, maturity and
diversification of investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a money market security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Entities located in foreign
countries can be affected by adverse political, regulatory, market or
economic developments in those countries.
(small solid bullet) FINANCIAL SERVICES EXPOSURE. Changes in
government regulation and interest rates and economic downturns can
have a significant negative effect on issuers in the financial
services sector.
(small solid bullet) ISSUER-SPECIFIC CHANGES. A decline in the credit
quality of an issuer or the provider of credit support or a
maturity-shortening structure for a security can cause the price of a
money market security to decrease.
An investment in the fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although
the fund seeks to preserve the value of a shareholder's investment at
$1.00 per share, it is possible to lose money by investing in the
fund.
PERFORMANCE
The following information illustrates VIP Mid Cap's performance over
the past year, the changes in each fund's ( other than VIP Mid
Cap's) performance from year to year, compares the performance of
Initial Class of each fund (other than VIP Money Market) to the
performance of a market index over various periods of time, and
compares the performance of Initial Class of each fund (other than VIP
Money Market, VIP Asset Manager and VIP Asset Manager: Growth) to an
average of the performance of similar funds over various periods of
time. Initial Class of VIP Balanced, VIP Asset Manager, and VIP Asset
Manager: Growth also compares its performance to the performance of a
combination of market indexes over various periods of time. Returns
for Initial Class of each 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 each 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.
YEAR-BY-YEAR RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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%.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP MID CAP - INITIAL CLASS
Calendar Year 1999
49.04%
</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: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: 49.04
DURING THE PERIOD SHOWN IN THE CHART FOR INITIAL CLASS OF VIP MID CAP,
THE HIGHEST RETURN FOR A QUARTER WAS 32.12% (QUARTER ENDED DECEMBER
31, 1999) AND THE LOWEST RETURN FOR A QUARTER WAS -1.27% (QUARTER
ENDED SEPTEMBER 30, 1999).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP MID CAP WAS 24.31 %.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP GROWTH OPPORTUNITIES - INITIAL CLASS
Calendar Years 1996 1997 1998 1999
18.27% 29.95% 24.61% 4.27%
</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: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: 18.27
Row: 8, Col: 1, Value: 29.95
Row: 9, Col: 1, Value: 24.61
Row: 10, Col: 1, Value: 4.270000000000001
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP GROWTH
OPPORTUNITIES, THE HIGHEST RETURN FOR A QUARTER WAS 20.74% (QUARTER
ENDED DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS
- -7.99% (QUARTER ENDED SEPTEMBER 30, 1999).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF VIP
GROWTH OPPORTUNITIES WAS 0.14 %.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP CONTRAFUND - INITIAL CLASS
Calendar Years 1996 1997 1998 1999
21.22% 24.14% 29.98% 24.25%
</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: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: 21.22
Row: 8, Col: 1, Value: 24.14
Row: 9, Col: 1, Value: 29.98
Row: 10, Col: 1, Value: 24.25
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP
CONTRAFUND, THE HIGHEST RETURN FOR A QUARTER WAS 23.56% (QUARTER ENDED
DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS -9.89%
(QUARTER ENDED SEPTEMBER 30, 1998).
T HE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP CONTRAFUND WAS 5.45% .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP GROWTH - INITIAL CLASS
Calendar Years 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
-11.73% 45.51% 9.32% 19.37% -0.02% 35.36% 14.71% 23.48% 39.49% 37.44%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: -11.73
Row: 2, Col: 1, Value: 45.51
Row: 3, Col: 1, Value: 9.32
Row: 4, Col: 1, Value: 19.37
Row: 5, Col: 1, Value: -0.02
Row: 6, Col: 1, Value: 35.36
Row: 7, Col: 1, Value: 14.71
Row: 8, Col: 1, Value: 23.48
Row: 9, Col: 1, Value: 39.49
Row: 10, Col: 1, Value: 37.44
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP GROWTH,
THE HIGHEST RETURN FOR A QUARTER WAS 24.29% (QUARTER ENDED DECEMBER
31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS -20.80% (QUARTER
ENDED SEPTEMBER 30, 1990).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP GROWTH WAS 8.72%.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP OVERSEAS - INITIAL CLASS
Calendar Years 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
-1.67% 8.00% -10.72% 37.35% 1.72% 9.74% 13.15% 11.56% 12.81% 42.55%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: -1.67
Row: 2, Col: 1, Value: 8.0
Row: 3, Col: 1, Value: -10.72
Row: 4, Col: 1, Value: 37.34999999999999
Row: 5, Col: 1, Value: 1.72
Row: 6, Col: 1, Value: 9.739999999999998
Row: 7, Col: 1, Value: 13.15
Row: 8, Col: 1, Value: 11.56
Row: 9, Col: 1, Value: 12.81
Row: 10, Col: 1, Value: 42.55
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP
OVERSEAS, THE HIGHEST RETURN FOR A QUARTER WAS 24.78% (QUARTER ENDED
DECEMBER 31, 1999) AND THE LOWEST RETURN FOR A QUARTER WAS -17.65%
(QUARTER ENDED SEPTEMBER 30, 1998).
THE Y EAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP OVERSEAS WAS 0.31%.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP BALANCED - INITIAL CLASS
Calendar Years 1996 1997 1998 1999
9.98% 22.18% 17.64% 4.55%
</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: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: 9.98
Row: 8, Col: 1, Value: 22.18
Row: 9, Col: 1, Value: 17.64
Row: 10, Col: 1, Value: 4.55
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP
BALANCED, THE HIGHEST RETURN FOR A QUARTER WAS 11.83% (QUARTER ENDED
JUNE 30, 1997) AND THE LOWEST RETURN FOR A QUARTER WAS -5.79% (QUARTER
ENDED SEPTEMBER 30, 1998).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP BALANCED W AS 0.47%.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP EQUITY-INCOME - INITIAL CLASS
Calendar Years 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
-15.29% 31.44% 16.89% 18.29% 7.07% 35.09% 14.28% 28.11% 11.63% 6.33%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: -15.29
Row: 2, Col: 1, Value: 31.44
Row: 3, Col: 1, Value: 16.89
Row: 4, Col: 1, Value: 18.29
Row: 5, Col: 1, Value: 7.07
Row: 6, Col: 1, Value: 35.09
Row: 7, Col: 1, Value: 14.28
Row: 8, Col: 1, Value: 28.11
Row: 9, Col: 1, Value: 11.63
Row: 10, Col: 1, Value: 6.33
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP
EQUITY-INCOME, THE HIGHEST RETURN FOR A QUARTER WAS 15.44% (QUARTER
ENDED DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS
- -17.20% (QUARTER ENDED SEPTEMBER 30, 1990).
THE YEAR-TO- DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP EQUITY-INCOM E WAS -2.54%.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP GROWTH & INCOME - INITIAL CLASS
Calendar Years 1997 1998 1999
30.09% 29.59% 9.17%
</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: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: 30.09
Row: 9, Col: 1, Value: 29.59
Row: 10, Col: 1, Value: 9.17
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP GROWTH
& INCOME, THE HIGHEST RETURN FOR A QUARTER WAS 20.97% (QUARTER ENDED
DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS -8.37%
(QUARTER ENDED SEPTEMBER 30, 1998).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP GROWTH & INCOME W AS -0.40%.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP ASSET MANAGER - INITIAL CLASS
Calendar Years 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
6.72% 22.56% 11.71% 21.23% -6.09% 16.96% 14.60% 20.65% 15.05% 11.09%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 6.72
Row: 2, Col: 1, Value: 22.56
Row: 3, Col: 1, Value: 11.71
Row: 4, Col: 1, Value: 21.23
Row: 5, Col: 1, Value: -6.09
Row: 6, Col: 1, Value: 16.96
Row: 7, Col: 1, Value: 14.6
Row: 8, Col: 1, Value: 20.65
Row: 9, Col: 1, Value: 15.05
Row: 10, Col: 1, Value: 11.09
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP ASSET
MANAGER, THE HIGHEST RETURN FOR A QUARTER WAS 12.80% (QUARTER ENDED
DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS -6.67%
(QUARTER ENDED SEPTEMBER 30, 1998).
TH E YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP ASSET MANAGER WAS 2.14 %.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP ASSET MANAGER: GROWTH - INITIAL CLASS
Calendar Years 1996 1997 1998 1999
20.04% 25.07% 17.57% 15.26%
</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: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: 20.04
Row: 8, Col: 1, Value: 25.07
Row: 9, Col: 1, Value: 17.57
Row: 10, Col: 1, Value: 15.26
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP ASSET
MANAGER: GROWTH, THE HIGHEST RETURN FOR A QUARTER WAS 17.69% (QUARTER
ENDED DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS
- -10.12% (QUARTER ENDED SEPTEMBER 30, 1998).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP ASSET MANAGER: GROWTH WAS 0.29 %.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP INVESTMENT GRADE BOND - 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%.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP HIGH INCOME - INITIAL CLASS
Calendar Years 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
-2.23% 35.08% 23.17% 20.40% -1.64% 20.72% 14.03% 17.67% -4.33% 8.25%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: -2.23
Row: 2, Col: 1, Value: 35.08
Row: 3, Col: 1, Value: 23.17
Row: 4, Col: 1, Value: 20.4
Row: 5, Col: 1, Value: -1.64
Row: 6, Col: 1, Value: 20.72
Row: 7, Col: 1, Value: 14.03
Row: 8, Col: 1, Value: 17.67
Row: 9, Col: 1, Value: -4.33
Row: 10, Col: 1, Value: 8.15
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP HIGH
INCOME, THE HIGHEST RETURN FOR A QUARTER WAS 12.69% (QUARTER ENDED
MARCH 31, 1992) AND THE LOWEST RETURN FOR A QUARTER WAS -12.75%
(QUARTER ENDED SEPTEMBER 30, 1998).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP HIGH INCOME WAS -3.60 %.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP MONEY MARKET - INITIAL CLASS
Calendar Years 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
8.04% 6.09% 3.90% 3.23% 4.25% 5.87% 5.41% 5.51% 5.46% 5.17%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 8.039999999999999
Row: 2, Col: 1, Value: 6.09
Row: 3, Col: 1, Value: 3.9
Row: 4, Col: 1, Value: 3.23
Row: 5, Col: 1, Value: 4.25
Row: 6, Col: 1, Value: 5.87
Row: 7, Col: 1, Value: 5.41
Row: 8, Col: 1, Value: 5.51
Row: 9, Col: 1, Value: 5.46
Row: 10, Col: 1, Value: 5.17
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP MONEY
MARKET, THE HIGHEST RETURN FOR A QUARTER WAS 1.96% (QUARTER ENDED
MARCH 31, 1990) AND THE LOWEST RETURN FOR A QUARTER WAS 0.78% (QUARTER
ENDED SEPTEMBER 30, 1993).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP MONEY MARKET WAS 1.43%.
AVERAGE ANNUAL RETURNS
GROWTH AND GROWTH & INCOME FUNDS
<TABLE>
<CAPTION>
For the periods ended December 31, 1999 Past 1 year Past 5 years Past 10 years/ Life of class
<S> <C> <C> <C>
VIP Index 500 - Initial Class 20.52% 28.16% 21.07%A
S&P 500 21.04% 28.56% 21.45%A
Lipper Variable Annuity S&P 500 Index 20.48% 28.07% n/a
Objective Funds Average
VIP Mid Cap - Initial Class 49.04% n/a 53.14%B
S&P MidCap 400 14.72% n/a 20.81%B
Lipper Variable Annuity Mid Cap Funds Average 46.25% n/a n/a
VIP Growth Opportunities - Initial Class 4.27% n/a 21.51%C
S&P 500 21.04% n/a 28.59%C
Lipper Variable Annuity Growth Funds Average 31.48% n/a n/a
VIP Contrafund - Initial Class 24.25% n/a 27.73%C
S&P 500 21.04% n/a 28.59%C
Lipper Variable Annuity Growth Funds Average 31.48% n/a n/a
VIP Growth - Initial Class 37.44% 29.74% 19.94%
Russell 3000 Growth Index 33.83% 31.09% 19.70%
Lipper Variable Annuity Growth Funds Average 31.48% 26.45% 17.79%
VIP Overseas - Initial Class 42.55% 17.37% 11.43%
Morgan Stanley Capital International Europe, 27.22% 12.98% 7.08%
Australasia, Far East Index
Lipper Variable Annuity International Funds 42.88% 17.31% 10.82%
Average
VIP Balanced - Initial Class 4.55% n/a 13.50%C
S&P 500 21.04% n/a 28.59%C
Lipper Variable Annuity Balanced Funds Average 8.58% n/a n/a
Fidelity VIP Balanced Composite Index 12.00% n/a 20.12%C
VIP Equity-Income - Initial Class 6.33% 18.61% 14.49%
Russell 3000 Value Index 6.65% 22.15% 15.31%
Lipper Variable Annuity Equity Income Funds 9.78% 20.59% 14.64%
Average
VIP Growth & Income - Initial Class 9.17% n/a 22.11%D
S&P 500 21.04% n/a 26.79%D
Lipper Variable Annuity Growth & Income 14.51% n/a n/a
Funds Average
</TABLE>
A FROM AUGUST 27, 1992.
B FROM DECEMBER 28, 1998.
C FROM JANUARY 3, 1995.
D FROM DECEMBER 31, 1996.
ASSET ALLOCATION FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the periods ended December 31, 1999 Past 1 year Past 5 years Past 10 years/ Life of class
VIP Asset Manager - Initial Class 11.09% 15.63% 13.14%
S&P 500 21.04% 28.56% 18.21%
Fidelity Asset Manager Composite Index 10.42% 16.69% 11.96%
VIP Asset Manager: Growth - Initial Class 15.26% n/a 20.16%E
S&P 500 21.04% n/a 28.59%E
Fidelity Asset Manager: Growth Composite Index 14.55% n/a 21.45%E
</TABLE>
INCOME FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the periods ended December 31, 1999 Past 1 year Past 5 years Past 10 years
VIP Investment Grade Bond - Initial Class -1.05% 7.30% 7.19%
Lehman Brothers Aggregate Bond Index -0.82% 7.73% 7.70%
Lipper Variable Annuity Intermediate -0.60% 7.08% 7.08%
Investment Grade Debt Funds Average
VIP High Income - Initial Class 8.25% 10.90% 12.44%
Merrill Lynch High Yield Master II Index 2.51% 9.89% 11.21%
Merrill Lynch High Yield Master Index 1.57% 9.61% 10.79%
Lipper Variable Annuity High Current Yield 3.83% 9.48% 10.15%
Funds Average
</TABLE>
MONEY MARKET FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the periods ended December 31, 1999 Past 1 year Past 5 years Past 10 years
VIP Money Market - Initial Class 5.17% 5.48% 5.28%
</TABLE>
E FROM JANUARY 3, 1995.
If FMR had not reimbursed certain class expenses during these periods,
VIP Index 500's, VIP Mid Cap's, VIP Growth Opportunities', VIP
Balanced's, VIP Growth & Income's, VIP Asset Manager's, VIP Asset
Manager: Growth's, VIP Investment Grade Bond's, VIP High Income's, and
VIP Money Market's Initial Class returns would have been lower.
Fidelity VIP Balanced Composite Index is a hypothetical
representation of the performance of VIP Balanced's general investment
categories using a weighting of 60% equity and 40% bond. The following
indexes are used to calculate the composite index: equity - the
Russell 3000(registered trademark) Value Index , and bond - the
Lehman Brothers Aggregate Bond Index. The index weightings of the
composite index are rebalanced monthly.
Fidelity Asset Manager Composite Index is a hypothetical
representation of the performance of VIP Asset Manager's three asset
classes according to their respective weightings in the fund's neutral
mix (50% stocks, 40% bonds and 10% short-term/money market
instruments). The following indexes are used to calculate the
composite index: stocks - the Standard & Poor's 500 Index (S&P 500),
bonds - the Lehman Brothers Aggregate Bond Index, and short-term/money
market instruments - the Lehman Brothers 3-Month Treasury Bill Index.
Prior to January 1, 1997, the Lehman Brothers U.S. Treasury Index was
used for the bond class. The index weightings of the composite index
are rebalanced monthly.
Fidelity Asset Manager: Growth Composite Index is a hypothetical
representation of the performance of VIP Asset Manager: Growth's three
asset classes according to their respective weightings in the fund's
neutral mix (70% stocks, 25% bonds and 5% short-term/money market
instruments). The following indexes are used to calculate the
composite index: stocks - the Standard & Poor's 500 Index (S&P 500),
bonds - the Lehman Brothers Aggregate Bond Index, and short-term/money
market instruments - the Lehman Brothers 3-Month Treasury Bill Index.
Prior to January 1, 1997, the Lehman Brothers U.S. Treasury Index was
used for the bond class. The index weightings of the composite index
are rebalanced monthly.
S&P 500 is a market capitalization-weighted index of common stocks.
S&P MidCap 400 is a market capitalization-weighted index of 400
medium-capitalization stocks.
Russell 3000(registered trademark) Growth Index is a market
capitalization-weighted index of growth-oriented stocks of U.S.
domiciled corporations.
Russell 3000 Value Index is a market capitalization-weighted index of
value-oriented stocks of U.S. domiciled corporations.
Morgan Stanley Capital International Europe, Australasia and Far East
(EAFE) Index is a market capitalization-weighted index that is
designed to represent the performance of developed stock markets
outside the United States and Canada. As of February 29, 2000 ,
the index included over 963 equity securities of companies
domiciled in 20 countries.
The Lehman Brothers 3-Month Treasury Bill Index represents the average
of Treasury Bill rates for each of the prior three months, adjusted to
a bond equivalent yield basis (short-term and money market
instruments).
The Lehman Brothers Aggregate Bond Index is a market value-weighted
index of investment-grade fixed-rate debt issues, including
government, corporate, asset-backed, and mortgage-backed securities,
with maturities of one year or more.
The Lehman Brothers U.S. Treasury Index is a market
value-weighted index of public obligations of the U.S. Treasury with
maturities of one year or more.
Going forward, VIP High Income's performance will be compared
to the Merrill Lynch High Yield Master II Index rather than the
Merrill Lynch High Yield Master Index because the Merrill Lynch High
Yield Master II Index contains deferred interest bonds and
payment-in-kind securities and is therefore a better representation of
the high yield bond universe.
Merrill Lynch High Yield Master II Index is a market value-weighted
index of all domestic and yankee high - yield bonds, including
deferred interest bonds and payment-in-kind securities. Issues
included in the index have maturities of one year or more and have a
credit rating lower than BBB - /Baa3, but are not in default.
Merrill Lynch High Yield Master Index is a market value-weighted index
of all domestic and yankee high-yield bonds. Issues included in the
index have maturities of one year or more and have a credit rating
lower than BBB - /Baa3, but are not in default.
Each 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 Initial Class
of each fund ( other than VIP Investment Grade Bond, VIP High
Income, and VIP Money Market) do not reflect the effect of any expense
reimbursements or reduction of certain expenses during the period. The
annual class operating expenses provided below for Initial Class of
VIP Investment Grade Bond, VIP High Income, and VIP Money Market are
based on historical 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.
<TABLE>
<CAPTION>
Initial Class
<S> <C> <C>
VIP INDEX 500 Management fee 0.24%
Distribution and Service (12b-1) fee None
Other expenses 0.10%
Total annual class operating expensesA 0.34%
VIP MID CAP Management fee 0.57%
Distribution and Service (12b-1) fee None
Other expenses 2.77%
Total annual class operating expensesB 3.34%
VIP GROWTH OPPORTUNITIES Management fee 0.58%
Distribution and Service (12b-1) fee None
Other expenses 0.11%
Total annual class operating expensesB 0.69%
VIP CONTRAFUND Management fee 0.58%
Distribution and Service (12b-1) fee None
Other expenses 0.09%
Total annual class operating expensesB 0.67%
VIP GROWTH Management fee 0.58%
Distribution and Service (12b-1) fee None
Other expenses 0.08%
Total annual class operating expensesB 0.66%
VIP OVERSEAS Management fee 0.73%
Distribution and Service (12b-1) fee None
Other expenses 0.18%
Total annual class operating expensesB 0.91%
VIP BALANCED Management fee 0.43%
Distribution and Service (12b-1) fee None
Other expenses 0.14%
Total annual class operating expensesB 0.57%
VIP EQUITY-INCOME Management fee 0.48%
Distribution and Service (12b-1) fee None
Other expenses 0.09%
Total annual class operating expensesB 0.57%
VIP GROWTH & INCOME Management fee 0.48%
Distribution and Service (12b-1) fee None
Other expenses 0.12%
Total annual class operating expensesB 0.60%
VIP ASSET MANAGER Management fee 0.53%
Distribution and Service (12b-1) fee None
Other expenses 0.10%
Total annual class operating expensesB 0.63%
VIP ASSET MANAGER: GROWTH Management fee 0.58%
Distribution and Service (12b-1) fee None
Other expenses 0.13%
Total annual class operating expensesB 0.71%
VIP INVESTMENT GRADE BOND Management fee 0.43%
Distribution and Service (12b-1) fee None
Other expenses 0.11%
Total annual class operating expensesB 0.54%
VIP HIGH INCOME Management fee 0.58%
Distribution and Service (12b-1) fee None
Other expenses 0.11%
Total annual class operating expensesB 0.69%
VIP MONEY MARKET Management fee 0.18%
Distribution and Service (12b-1) fee None
Other expenses 0.09%
Total annual class operating expenses 0.27%
</TABLE>
A EFFECTIVE APRIL 18, 1997, FMR HAS VOLUNTARILY AGREED TO REIMBURSE
INITIAL CLASS OF VIP INDEX 500 TO THE EXTENT THAT TOTAL OPERATING
EXPENSES (EXCLUDING INTEREST, TAXES, SECURITIES LENDING COSTS,
BROKERAGE COMMISSIONS AND EXTRAORDINARY EXPENSES), AS A PERCENTAGE OF
ITS AVERAGE NET ASSETS, EXCEED 0.28%. THIS ARRANGEMENT CAN BE
DISCONTINUED BY FMR AT ANY TIME.
B FMR HAS VOLUNTARILY AGREED TO REIMBURSE INITIAL CLASS OF
CERTAIN FUNDS TO THE EXTENT THAT TOTAL OPERATING EXPENSES (EXCLUDING
INTEREST, TAXES, CERTAIN SECURITIES LENDING COSTS, BROKERAGE
COMMISSIONS AND EXTRAORDINARY EXPENSES), AS A PERCENTAGE OF THEIR
RESPECTIVE AVERAGE NET ASSETS, EXCEED THE FOLLOWING RATES:
Initial Class Effective Date
VIP Mid Cap 1.00% 12/29/98
VIP Growth Opportunities 1.50% 1/3/95
VIP Contrafund 1.00% 1/3/95
VIP Growth 1.50% 10/9/86
VIP Overseas 1.50% 1/28/87
VIP Balanced 1.50% 1/3/95
VIP Equity-Income 1.50% 10/9/86
VIP Growth & Income 1.00% 12/31/96
VIP Asset Manager 1.25% 1/1/90
VIP Asset Manager: Growth 1.00% 1/3/95
VIP Investment Grade Bond 0.80% 12/5/88
VIP High Income 1.00% 1/1/86
THESE ARRANGEMENTS CAN BE DISCONTINUED BY FMR AT ANY TIME.
A portion of the brokerage commissions that a fund pays is used to
reduce that fund's expenses. In addition, through arrangements with
each fund's custodian, credits realized as a result of uninvested cash
balances are used to reduce custodian expenses. Including these
reductions, the total Initial Class operating expenses are shown in
the table below.
Total Operating Expenses
VIP Index 500 - Initial Class 0.28%A
VIP Mid Cap - Initial Class 0.97%A
VIP Growth Opportunities - Initial Class 0.68%
VIP Contrafund - Initial Class 0.65%
VIP Growth - Initial Class 0.65%
VIP Overseas - Initial Class 0.87%
VIP Balanced - Initial Class 0.55%
VIP Equity-Income - Initial Class 0.56%
VIP Growth & Income - Initial Class 0.59%
VIP Asset Manager - Initial Class 0.62%
VIP Asset Manager: Growth - Initial Class 0.70%
A AFTER REIMBURSEMENT.
FUND BASICS
INVESTMENT DETAILS
THE GROWTH AND GROWTH & INCOME FUNDS
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.
INVESTMENT OBJECTIVE
VIP MID CAP PORTFOLIO seeks long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests the fund's assets primarily in common stocks.
FMR normally invests at least 65% of the fund's total assets in
securities of companies with medium market capitalizations. Medium
market capitalization companies are those whose market capitalization
is similar to the capitalization of companies in the S&P MidCap 400 at
the time of the fund's investment. Companies whose capitalization no
longer meets this definition after purchase continue to be considered
to have a medium market capitalization for purposes of the 65% policy.
As of December 31, 1999, the S&P MidCap 400 included companies with
capitalizations between $ 195.1 million and $ 23.4
billion. The size of companies in the S&P MidCap 400 changes with
market conditions and the composition of the index. FMR may also
invest the fund's assets in companies with smaller or larger market
capitalizations.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
FMR is not constrained by any particular investment style. At any
given time, FMR may tend to buy "growth" stocks or "value" stocks, or
a combination of both types. In buying and selling securities for the
fund, FMR relies on fundamental analysis of each issuer and its
potential for success in light of its current financial condition, its
industry position, and economic and market conditions. Factors
considered include growth potential, earnings estimates, and
management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
INVESTMENT OBJECTIVE
VIP GROWTH OPPORTUNITIES PORTFOLIO seeks to provide capital
growth.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests the fund's assets primarily in common stocks. FMR
may also invest the fund's assets in other types of securities,
including bonds which may be lower-quality debt securities.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
FMR is not constrained by any particular investment style. At any
given time, FMR may tend to buy "growth" stocks or "value" stocks, or
a combination of both types. In buying and selling securities for the
fund, FMR relies on fundamental analysis of each issuer and its
potential for success in light of its current financial condition, its
industry position, and economic and market conditions. Factors
considered include growth potential, earnings estimates, and
management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
INVESTMENT OBJECTIVE
VIP CONTRAFUND PORTFOLIO seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests the fund's assets primarily in common stocks.
FMR invests the fund's assets in securities of companies whose value
FMR believes is not fully recognized by the public. The types of
companies in which the fund may invest include companies experiencing
positive fundamental change, such as a new management team or product
launch, a significant cost-cutting initiative, a merger or
acquisition, or a reduction in industry capacity that should lead to
improved pricing; companies whose earnings potential has increased or
is expected to increase more than generally perceived; companies that
have enjoyed recent market popularity but which appear to have
temporarily fallen out of favor for reasons that are considered
non-recurring or short-term; and companies that are undervalued in
relation to securities of other companies in the same industry.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
FMR is not constrained by any particular investment style. At any
given time, FMR may tend to buy "growth" stocks or "value" stocks, or
a combination of both types. In buying and selling securities for the
fund, FMR relies on fundamental analysis of each issuer and its
potential for success in light of its current financial condition, its
industry position, and economic and market conditions. Factors
considered include growth potential, earnings estimates, and
management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
INVESTMENT OBJECTIVE
VIP GROWTH PORTFOLIO seeks to achieve capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests the fund's assets primarily in common stocks.
FMR invests the fund's assets in companies FMR believes have
above-average growth potential. Growth may be measured by factors such
as earnings or revenue.
Companies with high growth potential tend to be companies with higher
than average price/earnings (P/E) ratios. Companies with strong growth
potential often have new products, technologies, distribution
channels, or other opportunities, or have a strong industry or market
position. The stocks of these companies are often called "growth"
stocks.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
In buying and selling securities for the fund, FMR relies on
fundamental analysis of each issuer and its potential for success in
light of its current financial condition, its industry position, and
economic and market conditions. Factors considered include growth
potential, earnings estimates, and management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
INVESTMENT OBJECTIVE
VIP OVERSEAS PORTFOLIO seeks long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests at least 65% of the fund's total assets in
foreign securities. FMR normally invests the fund's assets primarily
in common stocks.
FMR normally diversifies the fund's investments across different
countries and regions. In allocating the fund's investments across
countries and regions, FMR will consider the size of the market in
each country and region relative to the size of the international
market as a whole.
In buying and selling securities for the fund, FMR relies on
fundamental analysis of each issuer and its potential for success in
light of its current financial condition, its industry position, and
economic and market conditions. Factors considered include growth
potential, earnings estimates, and management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
INVESTMENT OBJECTIVE
VIP BALANCED PORTFOLIO seeks both income and growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR manages the fund to maintain a balance between stocks and bonds.
When FMR's outlook is neutral, it will invest approximately 60% of the
fund's assets in stocks and other equity securities and the remainder
in bonds and other debt securities, including lower-quality debt
securities. FMR may vary from this target if it believes stocks or
bonds offer more favorable opportunities, but will always invest at
least 25% of the fund's total assets in fixed-income senior securities
(including debt securities and preferred stock).
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
With respect to the fund's equity investments, FMR's emphasis on
above-average income-producing equity securities tends to lead to
investments in stocks that have more "value" characteristics than
"growth" characteristics. However, FMR is not constrained by any
particular investment style. In buying and selling securities for the
fund, FMR generally analyzes the issuer of a security using
fundamental factors (e.g., growth potential, earnings estimates, and
management) and evaluates each security's current price relative to
its estimated long-term value.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices, interest rates, or other factors that affect security
values. If FMR's strategies do not work as intended, the fund may not
achieve its objective.
INVESTMENT OBJECTIVE
VIP EQUITY-INCOME PORTFOLIO seeks reasonable income. The fund
will also consider the potential for capital appreciation. The fund's
goal is to achieve a yield which exceeds the composite yield on the
securities comprising the S&P 500.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests at least 65% of the fund's total assets in
income-producing equity securities. FMR may also invest the fund's
assets in other types of equity securities and debt securities,
including lower-quality debt securities.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
FMR's emphasis on above-average income-producing equity securities
tends to lead to investments in large cap "value" stocks. However, FMR
is not constrained by any particular investment style. In buying and
selling securities for the fund, FMR relies on fundamental analysis of
each issuer and its potential for success in light of its current
financial condition, its industry position, and economic and market
conditions. Factors considered include growth potential, earnings
estimates, and management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
INVESTMENT OBJECTIVE
VIP GROWTH & INCOME PORTFOLIO seeks high total return through a
combination of current income and capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests a majority of the fund's assets in common stocks
with a focus on those that pay current dividends and show potential
for capital appreciation. FMR may also invest the fund's assets in
bonds, including lower-quality debt securities, as well as stocks that
are not currently paying dividends, but offer prospects for future
income or capital appreciation.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
FMR is not constrained by any particular investment style. At any
given time, FMR may tend to buy "growth" stocks or "value" stocks, or
a combination of both types. In buying and selling securities for the
fund, FMR relies on fundamental analysis of each issuer and its
potential for success in light of its current financial condition, its
industry position, and economic and market conditions. Factors
considered include growth potential, earnings estimates, and
management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
DESCRIPTION OF PRINCIPAL SECURITY TYPES
EQUITY SECURITIES represent an ownership interest, or the right to
acquire an ownership interest, in an issuer. Different types of equity
securities provide different voting and dividend rights and priority
in the event of the bankruptcy of the issuer. Equity securities
include common stocks, preferred stocks, convertible securities, and
warrants.
DEBT SECURITIES are used by issuers to borrow money. The issuer
usually pays a fixed, variable, or floating rate of interest, and must
repay the amount borrowed at the maturity of the security. Some debt
securities, such as zero coupon bonds, do not pay current interest but
are sold at a discount from their face values. Debt securities include
corporate bonds, government securities, and mortgage and other
asset-backed securities.
PRINCIPAL INVESTMENT RISKS
Many factors affect each fund's performance. A fund's share price
changes daily based on changes in market conditions and interest rates
and in response to other economic, political, or financial
developments. A fund's reaction to these developments will be affected
by the types 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 a fund,
they could be worth more or less than what the shareholder paid for
them.
The following factors can significantly affect a fund's performance.
STOCK MARKET VOLATILITY. The value of equity securities fluctuates in
response to issuer, political, market, and economic developments. In
the short term, equity prices can fluctuate dramatically in response
to these developments. Different parts of the market and different
types of equity securities can react differently to these
developments. For example, large cap stocks can react differently 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.
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.
FOREIGN EXPOSURE. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations
can involve additional risks relating to political, economic, or
regulatory conditions in foreign countries. These risks include
fluctuations in foreign currencies; withholding or other taxes;
trading, settlement, custodial, and other operational risks; and the
less stringent investor protection and disclosure standards of some
foreign markets. All of these factors can make foreign investments,
especially those in emerging markets, more volatile and potentially
less liquid than U.S. investments. In addition, foreign markets can
perform differently from the U.S. market.
Investing in emerging markets can involve risks in addition to and
greater than those generally associated with investing in more
developed foreign markets. The extent of economic development;
political stability; market depth, infrastructure, and capitalization;
and regulatory oversight can be less than in more developed markets.
Emerging market economies can be subject to greater social, economic,
regulatory, and political uncertainties. All of these factors can make
emerging market securities more volatile and potentially less liquid
than securities issued in more developed markets.
PREPAYMENT. Many types of debt securities, including mortgage
securities, are subject to prepayment risk. Prepayment occurs when the
issuer of a security can repay principal prior to the security's
maturity. Securities subject to prepayment 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. The value of securities of smaller,
less well-known issuers can be more volatile than that of larger
issuers. Lower-quality debt securities (those of less than
investment-grade quality) tend to be more sensitive to these changes
than higher-quality debt securities.
Lower-quality debt securities involve greater risk of default or price
changes due to changes in the credit quality of the issuer. The value
of lower-quality debt securities often fluctuates in response to
company, political, or economic developments and can decline
significantly over short periods of time or during periods of general
or regional economic difficulty.
"GROWTH" INVESTING. "Growth" stocks can react differently to issuer,
political, market, and economic developments than the market as a
whole and other types of stocks. "Growth" stocks tend to be more
expensive relative to their earnings or assets compared to other types
of stocks. As a result, "growth" stocks tend to be sensitive to
changes in their earnings and more volatile than other types of
stocks.
"VALUE" INVESTING. "Value" stocks can react differently to issuer,
political, market, and economic developments than the market as a
whole and other types of stocks. "Value" stocks tend to be inexpensive
relative to their earnings or assets compared to other types of
stocks. However, "value" stocks can continue to be inexpensive for
long periods of time and may not ever realize their full value.
In response to market, economic, political, or other conditions, FMR
or BT may temporarily use a different investment strategy for
defensive purposes. If FMR or BT does so, different factors could
affect a fund's performance and the fund may not achieve its
investment objective.
THE ASSET ALLOCATION FUNDS
INVESTMENT OBJECTIVE
VIP ASSET MANAGER PORTFOLIO seeks to obtain high total return
with reduced risk over the long term by allocating its assets among
stocks, bonds, and short-term instruments.
PRINCIPAL INVESTMENT STRATEGIES
FMR allocates the fund's assets among the following classes, or types,
of investments. The STOCK CLASS includes equity securities of all
types. The BOND CLASS includes all varieties of fixed-income
securities, including lower-quality debt securities, maturing in more
than one year. The SHORT-TERM/MONEY MARKET CLASS includes all types of
short-term and money market instruments.
FMR may use its judgment to place a security in the most appropriate
class based on its investment characteristics. Fixed-income securities
may be classified in the bond or short-term/money market class
according to interest rate sensitivity as well as maturity. FMR may
invest the fund's assets in these classes by investing in other funds.
FMR may also invest the fund's assets in other instruments that do not
fall within these classes.
FMR has the ability to allocate the fund's assets within specified
ranges. The fund's neutral mix represents the benchmark for its
combination of investments in each asset class over time. FMR may
change the neutral mix from time to time. The approximate neutral mix
and range for each asset class are shown below:
Neutral Mix STOCKS 50%
(can range from 30-70%)
Row: 1, Col: 1, Value: 10.0
Row: 1, Col: 2, Value: 50.0
Row: 1, Col: 3, Value: 40.0
BONDS 40%
(can range from 20-60%)
SHORT-TERM/MONEY MARKET 10%
(can range from 0-50%)
FMR will not try to pinpoint the precise moment when a major
reallocation should be made. Instead, FMR regularly reviews the fund's
allocation and makes changes gradually to favor investments that it
believes will provide the most favorable outlook for achieving the
fund's objective.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
In buying and selling securities for the fund, FMR generally analyzes
the issuer of a security using fundamental factors (e.g., growth
potential, earnings estimates, and management) and/or quantitative
factors (e.g., historical earnings, dividend yield, and earnings per
share) and evaluates each security's current price relative to its
estimated long-term value.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices, interest rates, or other factors that affect security
values. If FMR's strategies do not work as intended, the fund may not
achieve its objective.
INVESTMENT OBJECTIVE
VIP ASSET MANAGER: GROWTH PORTFOLIO seeks to maximize total
return by allocating its assets among stocks, bonds, short-term
instruments, and other investments.
PRINCIPAL INVESTMENT STRATEGIES
FMR allocates the fund's assets among the following classes, or types,
of investments. The STOCK CLASS includes equity securities of all
types. The BOND CLASS includes all varieties of fixed-income
securities, including lower-quality debt securities, maturing in more
than one year. The SHORT-TERM/MONEY MARKET CLASS includes all types of
short-term and money market instruments.
FMR may use its judgment to place a security in the most appropriate
class based on its investment characteristics. Fixed-income securities
may be classified in the bond or short-term/money market class
according to interest rate sensitivity as well as maturity. FMR may
invest the fund's assets in these classes by investing in other funds.
FMR may also invest the fund's assets in other instruments that do not
fall within these classes.
FMR has the ability to allocate the fund's assets within specified
ranges. The fund's neutral mix represents the benchmark for its
combination of investments in each asset class over time. FMR may
change the neutral mix from time to time. The approximate neutral mix
and range for each asset class are shown below:
Neutral Mix STOCKS 70%
(can range from 50-100%)
Row: 1, Col: 1, Value: 5.0
Row: 1, Col: 2, Value: 70.0
Row: 1, Col: 3, Value: 25.0
BONDS 25%
(can range from 0-50%)
SHORT-TERM/MONEY MARKET 5%
(can range from 0-50%)
FMR will not try to pinpoint the precise moment when a major
reallocation should be made. Instead, FMR regularly reviews the fund's
allocation and makes changes gradually to favor investments that it
believes will provide the most favorable outlook for achieving the
fund's objective.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
In buying and selling securities for the fund, FMR generally analyzes
the issuer of a security using fundamental factors (e.g., growth
potential, earnings estimates, and management) and/or quantitative
factors (e.g., historical earnings, dividend yield, and earnings per
share) and evaluates each security's current price relative to its
estimated long-term value.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
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
EQUITY SECURITIES represent an ownership interest, or the right to
acquire an ownership interest, in an issuer. Different types of equity
securities provide different voting and dividend rights and priority
in the event of the bankruptcy of the issuer. Equity securities
include common stocks, preferred stocks, convertible securities, and
warrants.
DEBT SECURITIES are used by issuers to borrow money. The issuer
usually pays a fixed, variable, or floating rate of interest, and must
repay the amount borrowed at the maturity of the security. Some debt
securities, such as zero coupon bonds, do not pay current interest but
are sold at a discount from their face values. Debt securities include
corporate bonds, government securities, and mortgage and other
asset-backed securities.
MONEY MARKET SECURITIES are high-quality, short-term securities that
pay a fixed, variable, or floating interest rate. Securities are often
specifically structured so that they are eligible investments for a
money market fund. For example, in order to satisfy the maturity
restrictions for a money market fund, some money market securities
have demand or put features, which have the effect of shortening the
security's maturity. Money market securities include bank certificates
of deposit, bank acceptances, bank time deposits, notes, commercial
paper, and U.S. Government securities.
PRINCIPAL INVESTMENT RISKS
Many factors affect each fund's performance. A fund's share price and
yield change daily based on changes in market conditions and interest
rates and in response to other economic, political, or financial
developments. A fund's reaction to these developments will be affected
by the types and maturities of 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 a fund,
they could be worth more or less than what the shareholder paid for
them.
The following factors can significantly affect a fund's performance.
STOCK MARKET VOLATILITY. The value of equity securities fluctuates in
response to issuer, political, market, and economic developments. In
the short term, equity prices can fluctuate dramatically in response
to these developments. Different parts of the market and different
types of equity securities can react differently to these
developments. For example, large cap stocks can react differently 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.
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, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations
can involve additional risks relating to political, economic, or
regulatory conditions in foreign countries. These risks include
fluctuations in foreign currencies; withholding or other taxes;
trading, settlement, custodial, and other operational risks; and the
less stringent investor protection and disclosure standards of some
foreign markets. All of these factors can make foreign investments,
especially those in emerging markets, more volatile and potentially
less liquid than U.S. investments. In addition, foreign markets can
perform differently from the U.S. market.
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. The value of securities of smaller,
less well-known issuers can be more volatile than that of larger
issuers. Lower-quality debt securities (those of less than
investment-grade quality) tend to be more sensitive to these changes
than higher-quality debt securities.
Lower-quality debt securities involve greater risk of default or price
changes due to changes in the credit quality of the issuer. The value
of lower-quality debt securities often fluctuates in response to
company, political, or economic developments and can decline
significantly over short periods of time or during periods of general
or regional economic difficulty.
In response to market, economic, political, or other conditions, FMR
may temporarily use a different investment strategy for defensive
purposes. If FMR does so, different factors could affect a fund's
performance and the fund may not achieve its investment objective.
THE INCOME FUNDS
INVESTMENT OBJECTIVE
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.
INVESTMENT OBJECTIVE
VIP HIGH INCOME PORTFOLIO seeks a high level of current income
while also considering growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests at least 65% of the fund's total assets in
income-producing debt securities, preferred stocks and convertible
securities, with an emphasis on lower-quality debt securities. Many
lower-quality debt securities are subject to legal or contractual
restrictions limiting FMR's ability to resell the securities to the
general public. FMR may also invest the fund's assets in non-income
producing securities, including defaulted securities and common
stocks. FMR currently intends to limit common stocks to 10% of the
fund's total assets. FMR may invest in companies whose financial
condition is troubled or uncertain and that may be involved in
bankruptcy proceedings, reorganizations, or financial restructurings.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
In buying and selling securities for the fund, FMR relies on
fundamental analysis of each issuer and its potential for success in
light of its current financial condition, its industry position, and
economic and market conditions. Factors considered include a
security's structural features and current price compared to its
long-term value, and the earnings potential, credit standing, and
management of the security's issuer.
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
EQUITY SECURITIES represent an ownership interest, or the right to
acquire an ownership interest, in an issuer. Different types of equity
securities provide different voting and dividend rights and priority
in the event of the bankruptcy of the issuer. Equity securities
include common stocks, preferred stocks, convertible securities, and
warrants.
DEBT SECURITIES are used by issuers to borrow money. The issuer
usually pays a fixed, variable, or floating rate of interest, and must
repay the amount borrowed at the maturity of the security. Some debt
securities, such as zero coupon bonds, do not pay current interest but
are sold at a discount from their face values. Debt securities include
corporate bonds, government securities, mortgage and other
asset-backed securities, and loans and loan participations.
PRINCIPAL INVESTMENT RISKS
Many factors affect each fund's performance. A fund's yield and share
price change daily based on changes in interest rates and market
conditions and in response to other economic, political, or financial
developments. A fund's reaction to these developments will be affected
by the types and maturities of 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 a fund,
they could be worth more or less than what the shareholder paid for
them.
The following factors can significantly affect a fund's performance.
STOCK MARKET VOLATILITY. The value of equity securities fluctuates in
response to issuer, political, market, and economic developments. In
the short term, equity prices can fluctuate dramatically in response
to these developments. Different parts of the market and different
types of equity securities can react differently to these
developments. For example, large cap stocks can react differently 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.
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, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations
can involve additional risks relating to political, economic, or
regulatory conditions in foreign countries. These risks include
fluctuations in foreign currencies; withholding or other taxes;
trading, settlement, custodial, and other operational risks; and the
less stringent investor protection and disclosure standards of some
foreign markets. All of these factors can make foreign investments,
especially those in emerging markets, more volatile and potentially
less liquid than U.S. investments. In addition, foreign markets can
perform differently from the U.S. market.
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. The value of securities of smaller,
less well-known issuers can be more volatile than that of larger
issuers. Lower-quality debt securities (those of less than
investment-grade quality) tend to be more sensitive to these changes
than higher-quality debt securities.
Lower-quality debt securities involve greater risk of default or price
changes due to changes in the credit quality of the issuer. The value
of lower-quality debt securities often fluctuates in response to
company, political, or economic developments and can decline
significantly over short periods of time or during periods of general
or regional economic difficulty. Lower-quality debt securities can be
thinly traded or have restrictions on resale, making them difficult to
sell at an acceptable price. The default rate for lower-quality debt
securities is likely to be higher during economic recessions or
periods of high interest rates.
In response to market, economic, political, or other conditions, FMR
may temporarily use a different investment strategy for defensive
purposes. If FMR does so, different factors could affect a fund's
performance and the fund may not achieve its investment objective.
THE MONEY MARKET FUND
INVESTMENT OBJECTIVE
VIP MONEY MARKET PORTFOLIO seeks as high a level of current
income as is consistent with preservation of capital and liquidity.
PRINCIPAL INVESTMENT STRATEGIES
FMR invests the fund's assets in U.S. dollar-denominated money market
securities of domestic and foreign issuers and repurchase agreements.
FMR also may enter into reverse repurchase agreements for the fund.
FMR will invest more than 25% of the fund's total assets in the
financial services industry.
In buying and selling securities for the fund, FMR complies with
industry-standard requirements for money market funds regarding the
quality, maturity, and diversification of the fund's investments. FMR
stresses maintaining a stable $1.00 share price, liquidity, and
income.
DESCRIPTION OF PRINCIPAL SECURITY TYPES
MONEY MARKET SECURITIES are high-quality, short-term securities that
pay a fixed, variable, or floating interest rate. Securities are often
specifically structured so that they are eligible investments for a
money market fund. For example, in order to satisfy the maturity
restrictions for a money market fund, some money market securities
have demand or put features, which have the effect of shortening the
security's maturity. Money market securities include bank certificates
of deposit, bank acceptances, bank time deposits, notes, commercial
paper, and U.S. Government securities.
A REPURCHASE AGREEMENT is an agreement to buy a security at one price
and a simultaneous agreement to sell it back at an agreed-upon price.
PRINCIPAL INVESTMENT RISKS
Many factors affect the fund's performance. The fund's yield will
change daily based on changes in interest rates and other market
conditions. Although the fund is managed to maintain a stable $1.00
share price, there is no guarantee that the fund will be able to do
so. For example, a major increase in interest rates or a decrease in
the credit quality of the issuer of one of the fund's investments
could cause the fund's share price to decrease. While the fund will be
charged premiums by a mutual insurance company for coverage of
specified types of losses related to default or bankruptcy on certain
securities, the fund may incur losses regardless of the insurance.
The following factors can significantly affect the fund's performance.
INTEREST RATE CHANGES. Money market securities have varying levels of
sensitivity to changes in interest rates. In general, the price of a
money market security can fall when interest rates rise and can rise
when interest rates fall. Securities with longer maturities and the
securities of issuers in the financial services sector can be more
sensitive to interest rate changes. Short-term securities tend to
react to changes in short-term interest rates.
FOREIGN EXPOSURE. Issuers located in foreign countries and entities
located in foreign countries that provide credit support or a
maturity-shortening structure can involve increased risks. Extensive
public information about the issuer or provider may not be available
and unfavorable political, economic, or governmental developments
could affect the value of the security.
FINANCIAL SERVICES EXPOSURE. Financial services companies are highly
dependent on the supply of short-term financing. The value of
securities of issuers in the financial services sector can be
sensitive to changes in government regulation and interest rates and
to economic downturns in the United States and abroad.
ISSUER-SPECIFIC CHANGES. Changes in the financial condition of an
issuer, changes in specific economic or political conditions that
affect a particular type of issuer, and changes in general economic or
political conditions can affect the credit quality or value of an
issuer's securities. Entities providing credit support or a
maturity-shortening structure also can be affected by these types of
changes. If the structure of a security fails to function as intended,
the security could decline in value.
FUNDAMENTAL INVESTMENT POLICIES
The policies discussed below are fundamental, that is, subject to
change only by shareholder approval.
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.
VIP MID CAP PORTFOLIO seeks long-term growth of capital.
VIP GROWTH OPPORTUNITIES PORTFOLIO seeks to provide capital
growth by investing primarily in common stocks and securities
convertible into common stocks.
VIP CONTRAFUND PORTFOLIO seeks long-term capital appreciation.
VIP GROWTH PORTFOLIO seeks to achieve capital appreciation.
VIP OVERSEAS PORTFOLIO seeks long-term growth of capital
primarily through investments in foreign securities.
VIP BALANCED PORTFOLIO seeks both income and growth of capital
by investing in a diversified portfolio of equity and fixed-income
securities with income, growth of income, and capital appreciation
potential.
VIP EQUITY-INCOME PORTFOLIO seeks reasonable income by
investing primarily in income-producing equity securities. In choosing
these securities, the fund will also consider the potential for
capital appreciation. The fund's goal is to achieve a yield which
exceeds the composite yield on the securities comprising the S&P 500.
VIP GROWTH & INCOME PORTFOLIO seeks high total return through a
combination of current income and capital appreciation.
VIP ASSET MANAGER PORTFOLIO seeks to obtain high total return
with reduced risk over the long term by allocating its assets among
stocks, bonds, and short-term instruments.
VIP ASSET MANAGER: GROWTH PORTFOLIO seeks to maximize total
return by allocating its assets among stocks, bonds, short-term
instruments, and other investments.
VIP INVESTMENT GRADE BOND PORTFOLIO seeks as high a level of
current income as is consistent with the preservation of capital.
VIP HIGH INCOME PORTFOLIO seeks a high level of current income
by investing primarily in high yielding, fixed-income securities,
while also considering growth of capital.
VIP MONEY MARKET PORTFOLIO seeks as high a level of current
income as is consistent with preservation of capital and liquidity by
investing in money market instruments.
VALUING SHARES
Each fund is open for business each day the New York Stock Exchange
(NYSE) is open.
A class's net asset value per share (NAV) is the value of a single
share. Fidelity normally calculates Initial 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). Each fund's assets are valued as of this time for the purpose
of computing Initial Class's NAV.
To the extent that each fund's assets are traded in other markets on
days when the NYSE is closed, the value of the fund's assets may be
affected on days when the fund is not open for business. In addition,
trading in some of a fund's assets may not occur on days when
the fund is open for business.
The money market fund's assets are valued on the basis of amortized
cost.
Each fund's (other than the money market fund's) assets are
valued primarily on the basis of market quotations or on the basis of
information furnished by a pricing service. Certain short-term
securities are valued on the basis of amortized cost. If market
quotations or information furnished by a pricing service is not
readily available for a security or if a security's value has been
materially affected by events occurring after the close of the
exchange or market on which the security is principally traded (for
example, a foreign exchange or market), that security may be valued by
another method that the Board of Trustees believes accurately reflects
fair value. A security's valuation may differ depending on the method
used for determining value.
SHAREHOLDER INFORMATION
BUYING AND SELLING SHARES
Insurance companies offer variable annuity and variable life
insurance products through separate accounts. Separate accounts - not
variable product owners - are the shareholders of the funds. 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 funds can buy or sell shares of the
funds.
The price to buy one share of Initial Class is the class's NAV.
Initial 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 funds' Board of Trustees may refuse to sell shares of a fund or
may stop offering shares of a 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 Initial 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 a
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 a fund.
Each fund offers its shares to separate accounts of insurance
companies that may be affiliated or unaffiliated with FMR and/or each
other. Each 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 each 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
Each fund earns dividends, interest, and other income from its
investments, and distributes this income (less expenses) to
shareholders as dividends. Each fund also realizes capital gains from
its investments, and distributes these gains (less any losses) to
shareholders as capital gain distributions.
Each of VIP Index 500, VIP Mid Cap, VIP Growth Opportunities, VIP
Contrafund, VIP Growth, VIP Overseas, VIP Balanced, VIP Equity-Income,
VIP Growth & Income, VIP Asset Manager, VIP Asset Manager: Growth, VIP
Investment Grade Bond, and VIP High Income normally pays dividends and
capital gain distributions at least annually, in February.
Distributions from VIP Money Market consist primarily of dividends.
VIP Money Market normally declares dividends daily and pays them
monthly.
Dividends and capital gain distributions will be automatically
reinvested in additional Initial 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 a fund.
FUND SERVICES
FUND MANAGEMENT
Each fund is a mutual fund, an investment that pools shareholders'
money and invests it toward a specified goal.
FMR is each fund's manager.
As of March 25, 1999 , FMR had approximately $ 521.7
billion in discretionary assets under management.
As the manager, FMR is responsible for choosing investments for each
fund (except VIP Index 500) and handling each fund's business affairs.
BT serves as sub-adviser and custodian for VIP Index 500. 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 recor dk eeping 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 VIP Index 500. The SEC has
granted a temporary order to permit BT and its affiliates to continue
to provide investment advisory services to registered investment
companies. There is no assurance that the SEC will grant a permanent
order.
Affiliates assist FMR with foreign investments:
(small solid bullet) Fidelity Management & Research (U.K.) Inc.
(FMR U.K.), in London, England, serves as a sub-adviser for VIP Mid
Cap, VIP Growth Opportunities, VIP Contrafund, VIP Overseas, VIP
Balanced, VIP Growth & Income, VIP Asset Manager, VIP Asset Manager:
Growth, and VIP High Income. FMR U.K. was organized in 1986 to provide
investment research and advice to FMR. FMR U.K. may provide investment
research and advice on issuers based outside the United States and may
also provide investment advisory services for VIP Mid Cap, VIP Growth
Opportunities, VIP Contrafund, VIP Overseas, VIP Balanced, VIP Growth
& Income, VIP Asset Manager, VIP Asset Manager: Growth, and VIP High
Income.
(small solid bullet) Fidelity Management & Research (Far East) Inc.
(FMR Far East) serves as a sub-adviser for VIP Mid Cap, VIP Growth
Opportunities, VIP Contrafund, VIP Overseas, VIP Balanced, VIP Growth
& Income, VIP Asset Manager, VIP Asset Manager: Growth, and VIP High
Income. FMR Far East was organized in 1986 to provide investment
research and advice to FMR. FMR Far East may provide investment
research and advice on issuers based outside the United States and may
also provide investment advisory services for VIP Mid Cap, VIP Growth
Opportunities, VIP Contrafund, VIP Overseas, VIP Balanced, VIP Growth
& Income, VIP Asset Manager, VIP Asset Manager: Growth, and VIP High
Income.
(small solid bullet) Fidelity International Investment Advisors
(FIIA), in Pembroke, Bermuda, serves as a sub-adviser for VIP
Overseas. As of September 28, 1999, FIIA had approximately $3.6
billion in discretionary assets under management. FIIA may provide
investment research and advice on issuers based outside the United
States and may also provide investment advisory services for VIP
Overseas.
(small solid bullet) Fidelity International Investment Advisors
(U.K.) Limited (FIIA(U.K.)L), in London, England, serves as a
sub-adviser for VIP Overseas. As of September 28, 1999, FIIA(U.K.)L
had approximately $2.6 billion in discretionary assets under
management. FIIA(U.K.)L may provide investment research and advice on
issuers based outside the United States and may also provide
investment advisory services for VIP Overseas.
(small solid bullet) Fidelity Investments Japan Limited (FIJ), in
Tokyo, Japan, serves as a sub-adviser for VIP Mid Cap, VIP Growth
Opportunities, VIP Contrafund, VIP Overseas, VIP Balanced, VIP Growth
& Income, VIP Asset Manager, VIP Asset Manager: Growth, and VIP High
Income. As of September 28, 1999, FIJ had approximately $16.3 billion
in discretionary assets under management. FIJ may provide investment
research and advice on issuers based outside the United States for VIP
Mid Cap, VIP Growth Opportunities, VIP Contrafund, VIP Overseas, VIP
Balanced, VIP Growth & Income, VIP Asset Manager, VIP Asset Manager:
Growth, and VIP High Income.
Fidelity Investments Money Management, Inc. (FIMM), in Merrimack, New
Hampshire, serves as sub-adviser for VIP Investment Grade Bond and VIP
Money Market. FIMM is primarily responsible for choosing investments
for VIP Investment Grade Bond and VIP Money Market. FIMM also serves
as sub-adviser for VIP Balanced, VIP Asset Manager, and VIP Asset
Manager: Growth. FIMM is primarily responsible for choosing certain
types of investments for VIP Balanced, VIP Asset Manager, and VIP
Asset Manager: Growth.
FIMM is an affiliate of FMR. As of March 29, 1999 , FIMM had
approximately $ 159.8 billion in discretionary assets under
management.
Beginning January 1, 2001, FMR Co., Inc. (FMRC) will serve as
sub-adviser for VIP Index 500, VIP Mid Cap, VIP Growth Opportunities,
VIP Contrafund, VIP Growth, VIP Overseas, VIP Balanced, VIP
Equity-Income, VIP Growth & Income, VIP Asset Manager, VIP Asset
Manager: Growth, and VIP High Income. FMRC will be primarily
responsible for choosing investments for VIP Mid Cap, VIP Growth
Opportunities, VIP Contrafund, VIP Growth, VIP Overseas, VIP
Equity-Income, VIP Growth & Income, and VIP High Income. FMRC will be
primarily responsible for choosing certain types of investments for
VIP Balanced, VIP Asset Manager, and VIP Asset Manager: Growth. FMRC
may provide investment research and advice and may also provide
investment advisory services for VIP Index 500. FMRC is a wholly owned
subsidiary of FMR.
John Avery is vice president and manager of VIP Balanced, which he has
managed since January 1998; he had been associate manager of the fund
since September 1997. He also manages another Fidelity fund. Mr. Avery
joined Fidelity in 1995 as an analyst. Previously, he was an analyst
for Putnam Investments from 1993 to 1994.
Barry Coffman is vice president and manager of VIP High Income, which
he has managed since August 1990. He also manages other Fidelity
funds. Since joining Fidelity in 1986, Mr. Coffman has worked as an
analyst and manager.
Will Danoff is vice president and manager of VIP Contrafund, which he
has managed since January 1995. He also manages another Fidelity fund.
Since joining Fidelity in 1986, Mr. Danoff has worked as an analyst
and manager.
Bettina Doulton is vice president and manager of VIP Growth
Opportunities, which she has managed since February 2000. She also
manages another Fidelity fund. Since joining Fidelity in 1986, Ms.
Doulton has worked as a research assistant, analyst and manager.
David Felman is vice president and manager of VIP Mid Cap, which he
has managed since August 1999. He also manages other Fidelity funds.
Mr. Felman joined Fidelity as an analyst in 1993.
Kevin Grant is vice president and manager of VIP Balanced and VIP
Investment Grade Bond, which he has managed since March 1996 and
February 1997, respectively. Mr. Grant manages the fixed-income
investments for VIP Balanced. He also manages several other Fidelity
funds. Mr. Grant joined Fidelity in 1993 as a portfolio manager.
Bart Grenier is vice president and manager of VIP Asset Manager and
VIP Asset Manager: Growth, both of which he has managed since May
2000. Mr. Grenier originally joined Fidelity in 1991 as a senior
analyst and has held a number of positions with FMR and served as an
officer of certain other investment companies managed or advised by
FMR.
Richard Mace is vice president and manager of VIP Overseas, which he
has managed since March 1996. He also manages several other Fidelity
funds. Since joining Fidelity in 1987, Mr. Mace has worked as an
analyst and manager.
Stephen Petersen is vice president and manager of VIP Equity-Income,
which he has managed since January 1997. He also manages another
Fidelity fund. Since joining Fidelity in 1980, Mr. Petersen has worked
as an analyst and manager.
Louis Salemy is manager of VIP Growth & Income, which he has managed
since September 1998. Previously, he was associate manager of the
fund. Mr. Salemy also manages another Fidelity fund. Since joining
Fidelity in 1992, Mr. Salemy has worked as an analyst, manager, and
portfolio assistant.
Jennifer Uhrig is vice president and manager of VIP Growth, which she
has managed since January 1997. She also manages another Fidelity
fund. Since joining Fidelity in 1987, Ms. Uhrig has worked as an
analyst and manager.
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.
Each fund pays a management fee to FMR. The management fee is
calculated and paid to FMR every month.
VIP Index 500's annual management fee rate is 0.24% of its average net
assets.
For VIP Mid Cap, VIP Growth Opportunities, VIP Contrafund, VIP Growth,
VIP Overseas, VIP Balanced, VIP Equity-Income, VIP Growth & Income,
VIP Asset Manager, VIP Asset Manager: Growth, VIP Investment Grade
Bond, and VIP High Income, 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 fee for VIP Money Market is calculated by adding a group fee rate
to an individual fund fee rate, dividing by twelve and multiplying the
result by the fund's average net assets throughout the month, and then
adding an income-based fee. The income-based fee is 6% of the fund's
monthly gross income in excess of an annualized 5% yield, but it
cannot rise above an annual rate of 0.24% of the fund's average net
assets throughout that month.
The group fee rate is based on the average net assets of all the
mutual funds advised by FMR. This rate cannot rise above 0.52% for VIP
Mid Cap, VIP Growth Opportunities, VIP Contrafund, VIP Growth, VIP
Overseas, VIP Balanced, VIP Equity-Income, VIP Growth & Income, VIP
Asset Manager, and VIP Asset Manager: Growth, or 0.37% for VIP
Investment Grade Bond, VIP High Income, and VIP Money Market, and it
drops as total assets under management increase.
For December 1999, the group fee rate was 0.1267 % for VIP
Investment Grade Bond, VIP High Income, and VIP Money Market, and the
group fee rate was 0.2768 % for VIP Mid Cap, VIP Growth
Opportunities, VIP Contrafund, VIP Growth, VIP Overseas, VIP Balanced,
VIP Equity-Income, VIP Growth & Income, VIP Asset Manager, and VIP
Asset Manager: Growth. The individual fund fee rate is 0.03% for VIP
Money Market; 0.15% for VIP Balanced; 0.20% for VIP Equity-Income and
VIP Growth & Income; 0.25% for VIP Asset Manager; 0.30% for VIP Mid
Cap, VIP Growth Opportunities, VIP Contrafund, VIP Growth, VIP Asset
Manager: Growth, and VIP Investment Grade Bond; and 0.45% for
VIP Overseas and VIP High Income.
The total management fee, as a percentage of a fund's average net
assets, for the fiscal year ended December 31, 1999, for each fund
(other than VIP Index 500) is shown in the table below.
Total Management Fee
VIP Mid Cap 0.57%
VIP Growth Opportunities 0.58%
VIP Contrafund 0.58%
VIP Growth 0.58%
VIP Overseas 0.73%
VIP Balanced 0.43%
VIP Equity-Income 0.48%
VIP Growth & Income 0.48%
VIP Asset Manager 0.53%
VIP Asset Manager: Growth 0.58%
VIP Investment Grade Bond 0.43%
VIP High Income 0.58%
VIP Money Market 0.18%
FMR pays FIMM, FMR U.K., FMR Far East, and FIIA for providing
sub-advisory services, and FIIA in turn pays FIIA(U.K.)L. FMR Far East
pays FIJ for providing sub-advisory services.
FMR will pay FMRC for providing sub-advisory services.
FMR pays BT for providing investment management and custodial
services.
Prior to October 1, 1999, VIP Index 500 paid a management fee at an
annual rate of 0.24% of its average net assets to FMR and a
sub-advisory fee (representing 40% of net income from securities
lending) to BT.
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 February 29, 2000, approximately 62.71% of VIP Asset Manager:
Growth's; approximately 58.41% of VIP Money Market's; approximately
43.18% of VIP Growth & Income's; approximately 36.88% of VIP
Balanced's; approximately 30.81% of VIP Investment Grade Bond's; and
approximately 26.13% of VIP Index 500's total outstanding shares,
respectively, were held by FMR affiliates.
FUND DISTRIBUTION
Each fund is composed of multiple classes of shares. All classes of a
fund have a common investment objective and investment portfolio.
Fidelity Distributors Corporation (FDC) distributes Initial Class's
shares.
Initial Class of each fund has adopted a Distribution and Service Plan
pursuant to Rule 12b-1 under the Investment Company Act of 1940 that
recognizes that FMR may use its management fee revenues, as well as
its past profits or its resources from any other source, to pay FDC
for expenses incurred in connection with providing services intended
to result in the sale of Initial Class shares and/or support services
that benefit variable product owners . FMR, directly or through
FDC, may pay significant amounts to intermediaries, such as
insurance companies, broker-dealers and other
service-providers, that provide those services. Currently, the
Board of Trustees of each fund has authorized such payments for
Initial Class.
If payments made by FMR to FDC or to intermediaries under a
Distribution and Service Plan were considered to be paid out of
Initial Class's assets on an ongoing basis, they might increase the
cost of a shareholder's investment and might 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.
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 a fund
receives brokerage services and commission rates comparable to those
of other broker-dealers.
BT may allocate brokerage transactions in a manner that takes into
account the sale of shares of VIP Index 500, provided that the fund
receives brokerage services and commission rates comparable to those
of other broker-dealers.
No dealer, sales representative, or any other person has been
authorized to give any information or to make any representations,
other than those contained in this prospectus and in the related
statement of additional information (SAI), in connection with the
offer contained in this prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the funds or FDC. This prospectus and the related SAI do
not constitute an offer by the funds or by FDC to sell shares of the
funds to or to buy shares of the funds from any person to whom it is
unlawful to make such offer.
APPENDIX
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand
Initial Class' s financial history for the past 5 years or, if
shorter, the period of the class' s operations. Certain
information reflects financial results for a single class share. The
total returns in the table represent the rate that an investor would
have earned (or lost) on an investment in the class (assuming
reinvestment of all dividends and distributions). This information has
been audited by PricewaterhouseCoopers LLP (for VIP Mid Cap, VIP
Growth, VIP Overseas , VIP Equity-Income, VIP High Income, and
VIP Money Market) and Deloitte & Touche LLP (1999 annual information
only for VIP Index 500, VIP Growth Opportunities, VIP Contrafund, VIP
Balanced, VIP Growth & Income, VIP Asset Manager, VIP Asset
Manager: Growth, and VIP Investment Grade Bond), independent
accountants, whose reports, along with each fund's financial
highlights and financial statements, are included in each fund's
annual report. Annual information prior to 1999 was audited by
PricewaterhouseCoopers LLP. A free copy of each annual report is
available upon request.
VIP INDEX 500 - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Years ended December 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 141.24 $ 114.40 $ 89.05 $ 75.71 $ 56.22
Income from Investment Operations
Net investment income 1.64 C 1.65 C 1.80 C 1.04 .85
Net realized and unrealized gain (loss) 26.88 29.70 26.67 15.55 19.72
Total from investment operations 28.52 31.35 28.47 16.59 20.57
Less Distributions
From net investment income (1.40) (1.36) (1.03) (.91) (.95)
From net realized gain (.95) (3.15) (2.09) (2.34) (.11)
In excess of net realized gain - - - - (.02)
Total distributions (2.35) (4.51) (3.12) (3.25) (1.08)
Net asset value, end of period $ 167.41 $ 141.24 $ 114.40 $ 89.05 $ 75.71
TOTAL RETURN A, B 20.52% 28.31% 32.83% 22.71% 37.19%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 5,538,735 $ 3,772,068 $ 2,098,042 $ 823,243 $ 245,700
Ratio of expenses to average net assets .28% D .28% D .28% D .28% D .28% D
Ratio of net investment income to average 1.09% 1.33% 1.74% 2.26% 2.70%
net assets
Portfolio turnover rate 8% 4% 9% 14% 16%
</TABLE>
A TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR
INSURANCE COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS SHOWN.
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
VIP MID CAP - INITIAL CLASS
Years ended December 31, 1999 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.31 $ 10.00
Income from Investment Operations
Net investment income (loss) D .00 .00
Net realized and unrealized gain (loss) 5.05 .31
Total from investment operations 5.05 .31
Less Distributions
From net realized gain (.09) -
In excess of net realized gain (.02) -
Total distributions (.11) -
Net asset value, end of period $ 15.25 $ 10.31
TOTAL RETURN B, C 49.04% 3.10%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,744 $ 516
Ratio of expenses to average net assets 1.00% F 1.00% A, F
Ratio of expenses to average net assets .97% G 1.00% A
after expense reductions
Ratio of net investment income (loss) to .01% (.27)% A
average net assets
Portfolio turnover 163% 125% A
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED
ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD DECEMBER 28, 1998 (COMMENCEMENT OF SALE OF INITIAL
CLASS SHARES) TO DECEMBER 31, 1998.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
VIP GROWTH OPPORTUNITIES - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Years ended December 31, 1999 1998 1997 1996 1995 D
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 22.88 $ 19.27 $ 15.40 $ 13.07 $ 10.00
Income from Investment Operations
Net investment income .27 C .26 C .29 C .26 .11
Net realized and unrealized gain (loss) .66 4.29 4.18 2.12 3.14
Total from investment operations .93 4.55 4.47 2.38 3.25
Less Distributions
From net investment income (.23) (.21) (.25) - (.11)
From net realized gain (.43) (.73) (.35) (.05) (.07)
Total distributions (.66) (.94) (.60) (.05) (.18)
Net asset value, end of period $ 23.15 $ 22.88 $ 19.27 $ 15.40 $ 13.07
TOTAL RETURN A, B 4.27% 24.61% 29.95% 18.27% 32.52%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,541,587 $ 1,570,011 $ 1,025,766 $ 383,085 $ 164,303
Ratio of expenses to average net assets .69% .71% .74% .77% .85% E
Ratio of expenses to average net assets .68% F .70% F .73% F .76% F .83% F
after expense reductions
Ratio of net investment income to average 1.20% 1.27% 1.68% 2.29% 2.49%
net assets
Portfolio turnover 42% 29% 26% 28% 38%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
D FOR THE PERIOD JANUARY 3, 1995 (COMMENCEMENT OF SALE OF INITIAL
CLASS SHARES) TO DECEMBER 31, 1995.
E FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
VIP CONTRAFUND - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Years ended December 31, 1999 1998 1997 1996 1995 C
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 24.44 $ 19.94 $ 16.56 $ 13.79 $ 10.00
Income from Investment Operations
Net investment income .12 B .13 B .16 B .14 .06
Net realized and unrealized gain (loss) 5.59 5.54 3.73 2.76 3.91
Total from investment operations 5.71 5.67 3.89 2.90 3.97
Less Distributions
From net investment income (.12) (.14) (.14) - (.06)
From net realized gain (.88) (1.03) (.37) (.13) (.12)
Total distributions (1.00) (1.17) (.51) (.13) (.18)
Net asset value, end of period $ 29.15 $ 24.44 $ 19.94 $ 16.56 $ 13.79
TOTAL RETURN A, E 24.25% 29.98% 24.14% 21.22% 39.72%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 9,005,129 $ 6,388,592 $ 4,107,868 $ 2,394,103 $ 877,000
Ratio of expenses to average net assets .67% .70% .71% .74% .72%
Ratio of expenses to average net assets .65% D .66% D .68% D .71% D .72%
after expense reductions
Ratio of net investment income to average .48% .62% .90% 1.33% 1.07%
net assets
Portfolio turnover 172% 201% 142% 178% 132%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
C FOR THE PERIOD JANUARY 3, 1995 (COMMENCEMENT OF OPERATIONS OF
INITIAL CLASS SHARES) TO DECEMBER 31, 1995.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
E TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
VIP GROWTH - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Years ended December 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 44.87 $ 37.10 $ 31.14 $ 29.20 $ 21.69
Income from Investment Operations
Net investment income .07 B .08 B .20 B .22 .08
Net realized and unrealized gain (loss) 15.10 12.85 6.91 3.82 7.55
Total from investment operations 15.17 12.93 7.11 4.04 7.63
Less Distributions
From net investment income (.08) (.19) (.21) (.08) (.12)
From net realized gain (5.03) (4.97) (.94) (2.02) -
Total distributions (5.11) (5.16) (1.15) (2.10) (.12)
Net asset value, end of period $ 54.93 $ 44.87 $ 37.10 $ 31.14 $ 29.20
TOTAL RETURN A, D 37.44% 39.49% 23.48% 14.71% 35.36%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 17,142,411 $ 11,243,824 $ 7,727,132 $ 6,086,424 $ 4,162,702
Ratio of expenses to average net assets .66% .68% .69% .69% .70%
Ratio of expenses to average net assets .65% C .66% C .67% C .67% C .70%
after expense reductions
Ratio of net investment income to average .14% .21% .58% .81% .37%
net assets
Portfolio turnover 84% 123% 113% 81% 108%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
D TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR
INSURANCE COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS SHOWN.
VIP OVERSEAS - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Years ended December 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 20.06 $ 19.20 $ 18.84 $ 17.06 $ 15.67
Income from Investment Operations
Net investment income .24 C .23 C .30 C .32 C,D .17
Net realized and unrealized gain (loss) 7.95 2.13 1.70 1.88 1.34
Total from investment operations 8.19 2.36 2.00 2.20 1.51
Less Distributions
From net investment income (.31) (.38) (.33) (.20) (.06)
From net realized gain (.50) (1.12) (1.31) (.22) (.02)
In excess of net realized gain - - - - (.04)
Total distributions (.81) (1.50) (1.64) (.42) (.12)
Net asset value, end of period $ 27.44 $ 20.06 $ 19.20 $ 18.84 $ 17.06
TOTAL RETURN A, B 42.55% 12.81% 11.56% 13.15% 9.74%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 2,736,851 $ 2,074,843 $ 1,926,322 $ 1,667,601 $ 1,343,134
Ratio of expenses to average net assets .91% .91% .92% .93% .91%
Ratio of expenses to average net assets .87% E .89% E .90% E .92% E .91%
after expense reductions
Ratio of net investment income to average 1.10% 1.19% 1.55% 1.84% 1.88%
net assets
Portfolio turnover 78% 84% 67% 92% 50%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR
INSURANCE COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS SHOWN.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
D INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH
AMOUNTED TO $.05 PER SHARE.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
VIP BALANCED - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Years ended December 31, 1999 1998 1997 1996 1995 F
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 16.11 $ 14.58 $ 12.23 $ 11.17 $ 10.00
Income from Investment Operations
Net investment income .45 C .44 C .44 C .33 .14
Net realized and unrealized gain (loss) .24 2.00 2.22 .78 1.25
Total from investment operations .69 2.44 2.66 1.11 1.39
Less Distributions
From net investment income (.37) (.36) (.31) (.01) (.14)
From net realized gain (.43) (.55) - (.04) (.08)
Total distributions (.80) (.91) (.31) (.05) (.22)
Net asset value, end of period $ 16.00 $ 16.11 $ 14.58 $ 12.23 $ 11.17
TOTAL RETURN A, B 4.55% 17.64% 22.18% 9.98% 13.92%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 325,371 $ 307,681 $ 214,538 $ 103,110 $ 43,155
Ratio of expenses to average net assets .57% .59% .61% .72% 1.42% D
Ratio of expenses to average net assets .55% E .58% E .60% E .71% E 1.42%
after expense reductions
Ratio of net investment income to average 2.87% 2.94% 3.28% 3.63% 3.56%
net assets
Portfolio turnover 108% 94% 98% 163% 248%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
F FOR THE PERIOD JANUARY 3, 1995 (COMMENCEMENT OF OPERATIONS OF
INITIAL CLASS SHARES) TO DECEMBER 31, 1995.
VIP EQUITY-INCOME - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Years ended December 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 25.42 $ 24.28 $ 21.03 $ 19.27 $ 15.35
Income from Investment Operations
Net investment income .41 B .38 B .36 B .35 .41
Net realized and unrealized gain (loss) 1.10 2.31 5.06 2.30 4.69
Total from investment operations 1.51 2.69 5.42 2.65 5.10
Less Distributions
From net investment income (.38) (.34) (.36) (.03) (.40)
From net realized gain (.84) (1.21) (1.81) (.86) (.78)
Total distributions (1.22) (1.55) (2.17) (.89) (1.18)
Net asset value, end of period $ 25.71 $ 25.42 $ 24.28 $ 21.03 $ 19.27
TOTAL RETURN A, D 6.33% 11.63% 28.11% 14.28% 35.09%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 11,014,291 $ 11,409,912 $ 10,106,742 $ 6,961,090 $ 4,879,435
Ratio of expenses to average net assets .57% .58% .58% .58% .61%
Ratio of expenses to average net assets .56% C .57% C .57% C .56% C .61%
after expense reductions
Ratio of net investment income to average 1.57% 1.58% 1.65% 1.97% 2.56%
net assets
Portfolio turnover 27% 28% 44% 186% 87%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
D TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR
INSURANCE COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS SHOWN.
VIP GROWTH & INCOME - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Years ended December 31, 1999 1998 1997 1996 G
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 16.15 $ 12.53 $ 9.90 $ 10.00
Income from Investment Operations
Net investment income .18 D .15 D .13 D .00
Net realized and unrealized gain (loss) 1.27 3.54 2.84 (.10)
Total from investment operations 1.45 3.69 2.97 (.10)
Less Distributions
From net investment income (.10) - (.08) -
From net realized gain (.20) (.07) (.26) -
Total distributions (.30) (.07) (.34) -
Net asset value, end of period $ 17.30 $ 16.15 $ 12.53 $ 9.90
TOTAL RETURN B, C 9.17% 29.59% 30.09% (1.00)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,259,396 $ 1,141,806 $ 345,287 $ 990
Ratio of expenses to average net assets .60% .61% .70% 1.00% A, E
Ratio of expenses to average net assets .59% F .60% F .70% 1.00% A
after expense reductions
Ratio of net investment income to average 1.08% 1.08% 1.14% 3.89% A
net assets
Portfolio turnover 58% 66% 81% 0% A
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
G FOR THE PERIOD DECEMBER 31, 1996 (COMMENCEMENT OF OPERATIONS OF
INITIAL CLASS SHARES).
VIP ASSET MANAGER - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Years ended December 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 18.16 $ 18.01 $ 16.93 $ 15.79 $ 13.79
Income from Investment Operations
Net investment income .59 C .59 C .57 C .63 .30
Net realized and unrealized gain (loss) 1.28 1.84 2.58 1.55 1.99
Total from investment operations 1.87 2.43 3.15 2.18 2.29
Less Distributions
From net investment income (.60) (.57) (.59) (.57) (.29)
From net realized gain (.76) (1.71) (1.48) (.47) -
Total distributions (1.36) (2.28) (2.07) (1.04) (.29)
Net asset value, end of period $ 18.67 $ 18.16 $ 18.01 $ 16.93 $ 15.79
TOTAL RETURN A, B 11.09% 15.05% 20.65% 14.60% 16.96%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 4,936,926 $ 4,905,468 $ 4,399,937 $ 3,641,194 $ 3,332,844
Ratio of expenses to average net assets .63% .64% .65% .74% .81%
Ratio of expenses to average net assets .62% D .63% D .64% D .73% D .79% D
after expense reductions
Ratio of net investment income to average 3.36% 3.46% 3.43% 3.60% 3.54%
net assets
Portfolio turnover 94% 113% 101% 168% 256%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR
INSURANCE COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS SHOWN.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
VIP ASSET MANAGER: GROWTH - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Years ended December 31, 1999 1998 1997 1996 1995 C
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 17.03 $ 16.36 $ 13.10 $ 11.77 $ 10.00
Income from Investment Operations
Net investment income .40 B .41 B .36 B .21 .10
Net realized and unrealized gain (loss) 2.04 2.19 2.92 2.08 2.20
Total from investment operations 2.44 2.60 3.28 2.29 2.30
Less Distributions
From net investment income (.41) (.34) - (.21) (.11)
From net realized gain (.68) (1.59) (.02) (.75) (.42)
Total distributions (1.09) (1.93) (.02) (.96) (.53)
Net asset value, end of period $ 18.38 $ 17.03 $ 16.36 $ 13.10 $ 11.77
TOTAL RETURN A, F 15.26% 17.57% 25.07% 20.04% 23.02%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 580,555 $ 528,874 $ 483,231 $ 253,024 $ 68,247
Ratio of expenses to average net assets .71% .73% .77% .87% 1.00% D
Ratio of expenses to average net assets .70% E .72% E .76% E .85% E 1.00%
after expense reductions
Ratio of net investment income to average 2.38% 2.60% 2.44% 2.63% 1.69%
net assets
Portfolio turnover 92% 98% 90% 120% 343%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
C FOR THE PERIOD JANUARY 3, 1995 (COMMENCEMENT OF OPERATIONS OF
INITIAL CLASS SHARES) TO DECEMBER 31, 1995.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
F TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
VIP INVESTMENT GRADE BOND - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Years ended December 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 12.960 $ 12.560 $ 12.240 $ 12.480 $ 11.020
Income from Investment Operations
Net investment income .743 B .725 B .759 B .670 .320
Net realized and unrealized gain (loss) (.873) .335 .291 (.290) 1.530
Total from investment operations (.130) 1.060 1.050 .380 1.850
Less Distributions
From net investment income (.510) (.590) (.730) (.620) (.390)
From net realized gain (.160) (.070) - - -
Total distributions (.670) (.660) (.730) (.620) (.390)
Net asset value, end of period $ 12.160 $ 12.960 $ 12.560 $ 12.240 $ 12.480
TOTAL RETURN A (1.05)% 8.85% 9.06% 3.19% 17.32%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 658,852 $ 674,813 $ 324,525 $ 228,594 $ 181,546
Ratio of expenses to average net assets .54% .57% .58% .58% .59%
Ratio of net investment income to average 6.07% 5.85% 6.34% 6.49% 6.53%
net assets
Portfolio turnover rate 87% 239% 191% 81% 182%
</TABLE>
A TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR
INSURANCE COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
VIP HIGH INCOME - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Years ended December 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.530 $ 13.580 $ 12.520 $ 12.050 $ 10.750
Income from Investment Operations
Net investment income 1.095 C 1.111 C 1.124 C .927 .856
Net realized and unrealized gain (loss) (.195) (1.591) .936 .643 1.224
Total from investment operations .900 (.480) 2.060 1.570 2.080
Less Distributions
From net investment income (1.075) D (.970) D (.890) (.920) (.780)
From net realized gain (.030) D (.600) D (.110) (.180) -
In excess of net realized gain (.005) D - - - -
Total distributions (1.110) (1.570) (1.000) (1.100) (.780)
Net asset value, end of period $ 11.320 $ 11.530 $ 13.580 $ 12.520 $ 12.050
TOTAL RETURN A, B 8.25% (4.33)% 17.67% 14.03% 20.72%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 2,257,610 $ 2,348,954 $ 2,329,516 $ 1,588,822 $ 1,040,000
Ratio of expenses to average net assets .69% .70% .71% .71% .71%
Ratio of net investment income to average 9.80% 9.14% 8.88% 9.09% 9.32%
net assets
Portfolio turnover rate 82% 92% 118% 123% 132%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR
INSURANCE COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS SHOWN.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
D THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO
BOOK TO TAX DIFFERENCES.
VIP MONEY MARKET - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Years ended December 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Income from Investment Operations
Net interest income .050 .053 .053 .052 .057
Less Distributions
From net interest income (.050) (.053) (.053) (.052) (.057)
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
TOTAL RETURN A 5.17% 5.46% 5.51% 5.41% 5.87%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,939,491 $ 1,507,489 $ 1,020,794 $ 1,126,155 $ 808,874
Ratio of expenses to average net assets .27% .30% .31% .30% .33%
Ratio of net interest income to average net 5.06% 5.33% 5.32% 5.28% 5.72%
assets
</TABLE>
A TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR
INSURANCE COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS SHOWN.
ADDITIONAL INFORMATION ABOUT THE STANDARD & POOR'S 500 INDEX
S&P does not guarantee the accuracy and/or the completeness of the S&P
500 Index or any data included therein and S&P shall have no liability
for any errors, omissions, or interruptions therein. S&P makes no
warranty, express or implied, as to results to be obtained by
licensee, owners of the product, or any other person or entity from
the use of the S&P 500 Index or any data included therein. S&P makes
no express or implied warranties, and expressly disclaims all
warranties of merchantability or fitness for a particular purpose or
use with respect to the S&P 500 Index or any data included therein.
Without limiting any of the foregoing, in no event shall S&P have any
liability for any special, punitive, indirect, or consequential
damages (including lost profits), even if notified of the possibility
of such damages.
The product is not sponsored, endorsed, sold, or promoted by S&P. S&P
makes no representation or warranty, express or implied, to the owners
of the product or any member of the public regarding the advisability
of investing in securities generally or in the product particularly or
the ability of the S&P 500 Index to track general stock market
performance. S&P's only relationship to the licensee is the licensing
of certain trademarks and trade names of S&P and of the S&P 500 Index
which is determined, composed, and calculated by S&P without regard to
the licensee or the product. S&P has no obligation to take the needs
of the licensee or the owners of the product into consideration in
determining, composing, or calculating the S&P 500 Index. S&P is not
responsible for and has not participated in the determination of the
timing of, prices at, or quantities of the product to be issued or in
the determination or calculation of the equation by which the product
is to be converted into cash. S&P has no obligation or liability in
connection with the administration, marketing, or trading of the
product.
"Standard & Poor's," "S&P," "S&P 500," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed for use by Fidelity Distributors Corporation.
You can obtain additional information about the funds. The funds' SAI
includes more detailed information about each fund and its
investments. The SAI is incorporated herein by reference (legally
forms a part of the prospectus). Each fund's annual and semi-annual
reports include a discussion of the fund's holdings and recent market
conditions and the fund's investment strategies that affected
performance.
For a free copy of any of these documents or to request other
information or ask questions about a fund, call Fidelity at
1-888-622-3175.
The SAI, the funds' 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 funds, including the funds' 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 NUMBERS, 811-3329, 811-5511, AND
811-7205
Fidelity, Contrafund, and Fidelity Investments & (Pyramid) Design are
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.
1.700547.102 VIPIC-pro-0400
EACH FUND OFFERS ITS SHARES ONLY TO SEPARATE ACCOUNTS OF INSURANCE
COMPANIES THAT OFFER VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE
PRODUCTS. A FUND MAY NOT BE AVAILABLE IN YOUR STATE DUE TO VARIOUS
INSURANCE REGULATIONS. PLEASE CHECK WITH YOUR INSURANCE COMPANY FOR
AVAILABILITY. IF A FUND IN THIS PROSPECTUS IS NOT AVAILABLE IN YOUR
STATE, THIS PROSPECTUS IS NOT TO BE CONSIDERED A SOLICITATION WITH
RESPECT TO THAT FUND. 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
GROWTH AND GROWTH & INCOME FUNDS:
MID CAP PORTFOLIO
GROWTH OPPORTUNITIES PORTFOLIO
CONTRAFUND(registered trademark) PORTFOLIO
GROWTH PORTFOLIO
OVERSEAS PORTFOLIO
BALANCED PORTFOLIO
EQUITY-INCOME PORTFOLIO
GROWTH & INCOME PORTFOLIO
ASSET ALLOCATION FUNDS:
ASSET MANAGER SM PORTFOLIO
ASSET MANAGER: GROWTH SM PORTFOLIO
INCOME FUND:
HIGH INCOME PORTFOLIO
PROSPECTUS
APRIL 30, 2000
(FIDELITY_LOGO_GRAPHIC)(REGISTERED TRADEMARK)
82 DEVONSHIRE STREET, BOSTON, MA 02109
CONTENTS
FUND SUMMARY 2 INVESTMENT SUMMARY
7 PERFORMANCE
14 OPERATING EXPENSES
FUND BASICS 17 INVESTMENT DETAILS
23 VALUING SHARES
SHAREHOLDER INFORMATION 23 BUYING AND SELLING SHARES
24 DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
24 TAX CONSEQUENCES
FUND SERVICES 24 FUND MANAGEMENT
26 FUND DISTRIBUTION
APPENDIX 26 FINANCIAL HIGHLIGHTS
FUND SUMMARY
INVESTMENT SUMMARY
INVESTMENT OBJECTIVE
VIP MID CAP PORTFOLIO seeks long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
Fidelity Management & Research Company (FMR)'s principal investment
strategies include:
(small solid bullet) Normally investing primarily in common
stocks.
(small solid bullet) Normally investing at least 65% of total
assets in securities of companies with medium market
capitalizations (those with market capitalizations similar to
companies in the Standard & Poor's MidCap 400 Index (S&P MidCap
400(registered trademark))).
(small solid bullet) Potentially investing in companies with smaller
or larger market capitalizations.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole. The value of securities of smaller
issuers can be more volatile than that of larger issuers.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP GROWTH OPPORTUNITIES PORTFOLIO seeks to provide capital
growth.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) N ormally investing primarily in common
stoc ks.
(small solid bullet) Potentially investing in other types of
securities, including bonds which may be lower-quality debt
securities.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP CONTRAFUND PORTFOLIO seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Nor mally investing primarily in common
stoc ks.
(small solid bullet) Investing in securities of companies whose value
it believes is not fully recognized by the public.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP GROWTH PORTFOLIO seeks to achieve capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Normally investing primarily in common stocks.
(small solid bullet) Investing in companies that it believes have
above-average growth potential (stocks of these companies are often
called "growth" stocks).
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole.
(small solid bullet) "GROWTH" INVESTING. "Growth" stocks can perform
differently from the market as a whole and other types of stocks and
can be more volatile than other types of stocks.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP OVERSEAS PORTFOLIO seeks long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Normally i nvesting at least 65% of total
assets in foreign securi ties.
(small solid bullet) N ormally investing primarily in common
stocks .
(small solid bullet) Allocating investments across countries and
regions considering the size of the market in each country and region
relative to the size of the international market as a whole.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets, particularly
emerging markets, can be more volatile than the U.S. market due to
increased risks of adverse issuer, political, regulatory, market or
economic developments and can perform differently from the U.S.
market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP BALANCED PORTFOLIO seeks both income and growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Investing approximately 60% of assets in stocks
and other equity securities and the remainder in bonds and other debt
securities, including lower-quality debt securities, when its outlook
is neutral.
(small solid bullet) Investing at least 25% of total assets in
fixed-income senior securities (including debt securities and
preferred stock).
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) With respect to equity investments, emphasizing
above-average income-producing equity securities, which tends to lead
to investments in stocks that have more "value" characteristics than
"growth" characteristics.
(small solid bullet) Analyzing an issuer using fundamental factors and
evaluating each security's current price relative to estimated
long-term value to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) PREPAYMENT. The ability of an issuer of a debt
security to repay principal prior to a security's maturity can cause
greater price volatility if interest rates change.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP EQUITY-INCOME PORTFOLIO seeks reasonable income. The fund
will also consider the potential for capital appreciation. The fund's
goal is to achieve a yield which exceeds the composite yield on the
securities comprising the Standard & Poor's 500 SM Index (S&P
500 (registered trademark) ) .
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Normally investing at least 65% of total assets
in income-producing equity securities, which tends to lead to
investments in large cap "value" stocks.
(small solid bullet) Potentially investing in other types of equity
securities and debt securities, including lower-quality debt
securities.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.
(small solid bullet) "VALUE" INVESTING. "Value" stocks can perform
differently from the market as a whole and other types of stocks and
can continue to be undervalued by the market for long periods of time.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP GROWTH & INCOME PORTFOLIO seeks high total return through a
combination of current income and capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Normally investing a majority of assets in common
stocks with a focus on those that pay current dividends and show
potential for capital appreciation.
(small solid bullet) Potentially investing in bonds, including
lower-quality debt securities, as well as stocks that are not
currently paying dividends, but offer prospects for future income or
capital appreciation.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP ASSET MANAGER PORTFOLIO seeks to obtain high total return
with reduced risk over the long term by allocating its assets among
stocks, bonds, and short-term instruments.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Allocating the fund's assets among stocks, bonds,
and short-term and money market instruments.
(small solid bullet) Maintaining a neutral mix over time of 50% of
assets in stocks, 40% of assets in bonds, and 10% of assets in
short-term and money market instruments.
(small solid bullet) Adjusting allocation among asset classes
gradually within the following ranges: stock class (30%-70%), bond
class (20%-60%), and short-term/money market class (0%-50%).
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Analyzing an issuer using fundamental and/or
quantitative factors and evaluating each security's current price
relative to estimated long-term value to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) PREPAYMENT. The ability of an issuer of a debt
security to repay principal prior to a security's maturity can cause
greater price volatility if interest rates change.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP ASSET MANAGER: GROWTH PORTFOLIO seeks to maximize total
return by allocating its assets among stocks, bonds, short-term
instruments, and other investments.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Allocating the fund's assets among stocks, bonds,
and short-term and money market instruments.
(small solid bullet) Maintaining a neutral mix over time of 70% of
assets in stocks, 25% of assets in bonds, and 5% of assets in
short-term and money market instruments.
(small solid bullet) Adjusting allocation among asset classes
gradually within the following ranges: stock class (50%-100%), bond
class (0%-50%), and short-term/money market class (0%-50%).
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Analyzing an issuer using fundamental and/or
quantitative factors and evaluating each security's current price
relative to estimated long-term value to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) PREPAYMENT. The ability of an issuer of a debt
security to repay principal prior to a security's maturity can cause
greater price volatility if interest rates change.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP HIGH INCOME PORTFOLIO seeks a high level of current income
while also considering growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) No rmally investing at least 65% of total
assets in income-producing debt securities, preferred stocks and
convertible securi ties, with an emphasis on lower-quality debt
securities.
(small solid bullet) Potentially investing in non-income producing
securities, including defaulted securities and common stocks.
(small solid bullet) Investing in companies in troubled or uncertain
financial condition.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets, particularly
emerging markets, can be more volatile than the U.S. market due to
increased risks of adverse issuer, political, regulatory, market or
economic developments and can perform differently from the U.S.
market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments and can be difficult to resell.
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 VIP Mid Cap's performance over
the past year, the changes in each fund's ( other than VIP Mid
Cap's) performance from year to year, compares the performance of
Service Class of each fund to the performance of a market index over
various periods of time, and compares the performance of Service Class
of each fund (other than VIP Asset Manager and VIP Asset Manager:
Growth) to an average of the performance of similar funds over various
periods of time. Service Class of VIP Balanced, VIP Asset Manager, and
VIP Asset Manager: Growth also compares its performance to the
performance of a combination of market indexes over various periods of
time. Returns for Service Class of each 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 each
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.
YEAR-BY-YEAR RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP MID CAP - SERVICE CLASS
Calendar Year 1999
48.94%
</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: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: 48.94
DURING THE PERIOD SHOWN IN THE CHART FOR SERVICE CLASS OF VIP MID CAP,
THE HIGHEST RETURN FOR A QUARTER WAS 32.15% (QUARTER ENDED DECEMBER
31, 1999) AND THE LOWEST RETURN FOR A QUARTER WAS -1.27% (QUARTER
ENDED SEPTEMBER 30, 1999).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR SERVICE CLASS OF
VIP MID CAP WAS 24.26%.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP GROWTH OPPORTUNITIES - SERVICE CLASS
Calendar Years 1998 1999
24.51% 4.18%
</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: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: 24.51
Row: 10, Col: 1, Value: 4.18
DURING THE PERIODS SHOWN IN THE CHART FOR SERVICE CLASS OF VIP GROWTH
OPPORTUNITIES, THE HIGHEST RETURN FOR A QUARTER WAS 20.70% (QUARTER
ENDED DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS
- -8.00% (QUARTER ENDED SEPTEMBER 30, 1999).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR SERVICE CLASS OF VIP
GROWTH OPPORTUNITIES WAS 0 .14%.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP CONTRAFUND - SERVICE CLASS
Calendar Years 1998 1999
29.94% 24.15%
</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: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: 29.94
Row: 10, Col: 1, Value: 24.15
DURING THE PERIODS SHOWN IN THE CHART FOR SERVICE CLASS OF VIP
CONTRAFUND, THE HIGHEST RETURN FOR A QUARTER WAS 23.52% (QUARTER ENDED
DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS -9.93%
(QUARTER ENDED SEPTEMBER 30, 199 8) .
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR SERVICE CLASS OF VIP
CONTRAFUND WAS 5.4 2%.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP GROWTH - SERVICE CLASS
Calendar Years 1998 1999
39.38% 37.29%
</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: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: 39.38
Row: 10, Col: 1, Value: 37.29000000000001
DURING THE PERIODS SHOWN IN THE CHART FOR SERVICE CLASS OF VIP GROWTH,
THE HIGHEST RETURN FOR A QUARTER WAS 24.26% (QUARTER ENDED DECEMBER
31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS -5.82% (QUARTER
ENDED SEPTEMBER 30, 1998).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR SERVICE CLASS OF VIP
GROWTH WAS 8.68%.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP OVERSEAS - SERVICE CLASS
Calendar Years 1998 1999
12.69% 42.44%
</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: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: 12.69
Row: 10, Col: 1, Value: 42.44
DURING THE PERIODS SHOWN IN THE CHART FOR SERVICE CLASS OF VIP
OVERSEAS, THE HIGHEST RETURN FOR A QUARTER WAS 24.78% (QUARTER ENDED
DECEMBER 31, 1999) AND THE LOWEST RETURN FOR A QUARTER WAS -17.66%
(QUARTER ENDED SEPTEMBER 30, 1998).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR SERVICE CLASS OF VIP
OVERSEAS WAS 0 .27%.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP BALANCED - SERVICE CLASS
Calendar Years 1998 1999
17.27% 4.43%
</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: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: 17.27
Row: 10, Col: 1, Value: 4.430000000000001
DURING THE PERIODS SHOWN IN THE CHART FOR SERVICE CLASS OF VIP
BALANCED, THE HIGHEST RETURN FOR A QUARTER WAS 11.37% (QUARTER ENDED
DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS -5.87%
(QUARTER ENDED SEPTEMBER 30, 1998).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR SERVICE CLASS OF VIP
BALANCED WAS 0.47 %.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP EQUITY-INCOME - SERVICE CLASS
Calendar Years 1998 1999
11.54% 6.25%
</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: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: 11.54
Row: 10, Col: 1, Value: 6.25
DURING THE PERIODS SHOWN IN THE CHART FOR SERVICE CLASS OF VIP
EQUITY-INCOME, THE HIGHEST RETURN FOR A QUARTER WAS 15.36% (QUARTER
ENDED DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS
- -12.52% (QUARTER ENDED SEPTEMBER 30, 1998).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR SERVICE CLASS OF VIP
EQUITY-INCOME WAS -2.55 %.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP GROWTH & INCOME - SERVICE CLASS
Calendar Years 1998 1999
29.27% 9.06%
</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: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: 29.27
Row: 10, Col: 1, Value: 9.060000000000001
DURING THE PERIODS SHOWN IN THE CHART FOR SERVICE CLASS OF VIP GROWTH
& INCOME, THE HIGHEST RETURN FOR A QUARTER WAS 20.95% (QUARTER ENDED
DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS
- 8.39% (QUARTER ENDED SEPTEMBER 30, 1998).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR SERVICE CLASS OF VIP
GROWTH & INCOME WAS -0.40 %.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP ASSET MANAGER - SERVICE CLASS
Calendar Years 1998 1999
14.82% 11.01%
</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: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: 14.82
Row: 10, Col: 1, Value: 11.01
DURING THE PERIODS SHOWN IN THE CHART FOR SERVICE CLASS OF VIP ASSET
MANAGER, THE HIGHEST RETURN FOR A QUARTER WAS 12.77% (QUARTER ENDED
DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS -6.69%
(QUARTER ENDED SEPTEMBER 30, 1998).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR SERVICE CLASS OF
VIP ASSET MANAGER WAS 2.03%.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP ASSET MANAGER: GROWTH - SERVICE CLASS
Calendar Years 1998 1999
17.18% 15.13%
</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: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: 17.18
Row: 10, Col: 1, Value: 15.13
DURING THE PERIODS SHOWN IN THE CHART FOR SERVICE CLASS OF VIP ASSET
MANAGER: GROWTH, THE HIGHEST RETURN FOR A QUARTER WAS 17.61% (QUARTER
ENDED DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS
- -10.10% (QUARTER ENDED SEPTEMBER 30, 1998).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR SERVICE CLASS OF VIP
ASSET MANAGER: GROWTH WAS 0 .29%.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP HIGH INCOME - SERVICE CLASS
Calendar Years 1998 1999
-4.34% 8.08%
</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: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: -4.34
Row: 10, Col: 1, Value: 8.08
DURING THE PERIODS SHOWN IN THE CHART FOR SERVICE CLASS OF VIP HIGH
INCOME, THE HIGHEST RETURN FOR A QUARTER WAS 5.29% (QUARTER ENDED
MARCH 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS -12.76%
(QUARTER ENDED SEPTEMBER 30, 1998).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR SERVICE CLASS OF VIP
HIGH INCOME WAS -3 .71 %.
AVERAGE ANNUAL RETURNS
GROWTH AND GROWTH & INCOME FUNDS
For the periods ended December 31, 1999 Past 1 year Life of class
VIP Mid Cap - Service Class 48.94% 53.04%A
S&P MidCap 400 14.72% 20.81%A
Lipper Variable Annuity Mid Cap Funds Average 46.25% n/a
VIP Growth Opportunities - Service Class 4.18% 14.96%B
S&P 500 21.04% 24.79%B
Lipper Variable Annuity Growth Funds Average 31.48% n/a
VIP Contrafund - Service Class 24.15% 24.62%B
S&P 500 21.04% 24.79%B
Lipper Variable Annuity Growth Funds Average 31.48% n/a
VIP Growth - Service Class 37.29% 35.35%B
Russell 3000 Growth Index 33.83% 32.70%B
Lipper Variable Annuity Growth Funds Average 31.48% n/a
VIP Overseas - Service Class 42.44% 24.03%B
Morgan Stanley Capital International Europe, 27.22% 21.02%B
Australasia, Far East Index
Lipper Variable Annuity International Funds 42.88% n/a
Average
VIP Balanced - Service Class 4.43% 11.37%B
S&P 500 21.04% 24.79%B
Lipper Variable Annuity Balanced Funds Average 8.58% n/a
Fidelity VIP Balanced Composite Index 12.00% 16.64%B
VIP Equity-Income - Service Class 6.25% 9.94%B
Russell 3000 Value Index 6.65% 11.70%B
Lipper Variable Annuity Equity Income Funds 9.78% n/a
Average
VIP Growth & Income - Service Class 9.06% 19.55%B
S&P 500 21.04% 24.79%B
Lipper Variable Annuity Growth & Income 14.51% n/a
Funds Average
A FROM DECEMBER 28, 1998.
B FROM NOVEMBER 3, 1997.
ASSET ALLOCATION FUNDS
For the periods ended December 31, 1999 Past 1 year Life of class
VIP Asset Manager - Service Class 11.01% 13.04%B
S&P 500 21.04% 24.79%B
Fidelity Asset Manager Composite Index 10.42% 14.67%B
VIP Asset Manager: Growth - Service Class 15.13% 16.24%B
S&P 500 21.04% 24.79%B
Fidelity Asset Manager: Growth Composite Index 14.55% 18.72%B
INCOME FUND
For the periods ended December 31, 1999 Past 1 year Life of class
VIP High Income - Service Class 8.08% 2.22%B
Merrill Lynch High Yield Master II Index 2.51% 3.43%B
Merrill Lynch High Yield Master Index 1.57% 3.33%B
Lipper Variable Annuity High Current Yield 3.83% n/a
Funds Average
B FROM NOVEMBER 3, 1997.
If FMR had not reimbursed certain class expenses during these periods,
VIP Mid Cap 's Service Class returns would have been
lower.
Fidelity VIP Balanced Composite Index is a hypothetical
representation of the performance of VIP Balanced's general investment
categories using a weighting of 60% equity and 40% bond. The following
indexes are used to calculate the composite index: equity - the
Russell 3000(registered trademark) Value Index , and bond - the
Lehman Brothers Aggregate Bond Index. The index weightings of the
composite index are rebalanced monthly.
Fidelity Asset Manager Composite Index is a hypothetical
representation of the performance of VIP Asset Manager's three asset
classes according to their respective weightings in the fund's neutral
mix (50% stocks, 40% bonds and 10% short-term/money market
instruments). The following indexes are used to calculate the
composite index: stocks - the Standard & Poor's 500 Index (S&P 500),
bonds - the Lehman Brothers Aggregate Bond Index, and short-term/money
market instruments - the Lehman Brothers 3-Month Treasury Bill Index.
Prior to January 1, 1997, the Lehman Brothers U.S. Treasury Index was
used for the bond class. The index weightings of the composite index
are rebalanced monthly.
Fidelity Asset Manager: Growth Composite Index is a hypothetical
representation of the performance of VIP Asset Manager: Growth's three
asset classes according to their respective weightings in the fund's
neutral mix (70% stocks, 25% bonds and 5% short - term/money
market instruments). The following indexes are used to calculate the
composite index: stocks - the Standard & Poor's 500 Index (S&P 500),
bonds - the Lehman Brothers Aggregate Bond Index, and
short - term/money market instruments - the Lehman Brothers
3-Month Treasury Bill Index. Prior to January 1, 1997, the Lehman
Brothers U.S. Treasury Index was used for the bond class. The index
weightings of the composite index are rebalanced monthly.
S&P 500 is a market capitalization-weighted index of common stocks.
S&P MidCap 400 is a market capitalization-weighted index of 400
medium-capitalization stocks.
Russell 3000(registered trademark) Growth Index is a market
capitalization-weighted index of growth-oriented stocks of U.S.
domiciled corporations.
Russell 3000 Value Index is a market capitalization-weighted index of
value-oriented stocks of U.S. domiciled corporations.
Morgan Stanley Capital International Europe, Australasia and Far East
(EAFE) Index is a market capitalization-weighted index that is
designed to represent the performance of developed stock markets
outside the United States and Canada. As of February 29, 2000 ,
the index included over 963 equity securities of companies
domiciled in 20 countries.
The Lehman Brothers 3-Month Treasury Bill Index represents the average
of Treasury Bill rates for each of the prior three months, adjusted to
a bond equivalent yield basis (short-term and money market
instruments).
The Lehman Brothers Aggregate Bond Index is a market value-weighted
index of investment-grade fixed-rate debt issues, including
government, corporate, asset-backed, and mortgage-backed securities,
with maturities of one year or more.
The Lehman Brothers U.S. Treasury Index is a market
value-weighted index of public obligations of the U.S. Treasury with
maturities of one year or more.
Going forward, VIP High Income 's performance will be
compared to the Merrill Lynch High Yield Master II Index rather than
the Merrill Lynch High Yield Master Index because the Merrill Lynch
High Yield Master II Index contains deferred interest bonds and
payment-in-kind securities and is therefore a better representation of
the high yield bond universe.
Merrill Lynch High Yield Master II Index is a market value-weighted
index of all domestic and yankee high - yield bonds, including
deferred interest bonds and payment-in-kind securities. Issues
included in the index have maturities of one year or more and have a
credit rating lower than BBB - /Baa3, but are not in default.
Merrill Lynch High Yield Master Index is a market value-weighted index
of all domestic and yankee high-yield bonds. Issues included in the
index have maturities of one year or more and have a credit rating
lower than BBB - /Baa3, but are not in default.
Each Lipper Funds Average reflects the performance (excluding sales
charges) of mutual funds with similar objectives.
OPERATING EXPENSES
The annual class operating expenses pro vided below for Service
Class of each fund (other than VIP High Income) do not reflect the
effect of any expense reimbursements or reduction of certain expenses
during the period. The annual class operating expenses provided below
for Service Class of VIP High Income are based on historical
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.
<TABLE>
<CAPTION>
<S> <C> <C>
Service Class
VIP MID CAP Management fee 0.57%
Distribution and Service (12b-1) fee 0.10%
Other expenses 2.74%
Total annual class operating expensesA 3.41%
VIP GROWTH OPPORTUNITIES Management fee 0.58%
Distribution and Service (12b-1) fee 0.10%
Other expenses 0.11%
Total annual class operating expensesA 0.79%
VIP CONTRAFUND Management fee 0.58%
Distribution and Service (12b-1) fee 0.10%
Other expenses 0.10%
Total annual class operating expensesA 0.78%
VIP GROWTH Management fee 0.58%
Distribution and Service (12b-1) fee 0.10%
Other expenses 0.09%
Total annual class operating expensesA 0.77%
VIP OVERSEAS Management fee 0.73%
Distribution and Service (12b-1) fee 0.10%
Other expenses 0.18%
Total annual class operating expensesA 1.01%
VIP BALANCED Management fee 0.43%
Distribution and Service (12b-1) fee 0.10%
Other expenses 0.14%
Total annual class operating expensesA 0.67%
VIP EQUITY-INCOME Management fee 0.48%
Distribution and Service (12b-1) fee 0.10%
Other expenses 0.09%
Total annual class operating expensesA 0.67%
VIP GROWTH & INCOME Management fee 0.48%
Distribution and Service (12b-1) fee 0.10%
Other expenses 0.12%
Total annual class operating expensesA 0.70%
Service Class
VIP ASSET MANAGER Management fee 0.53%
Distribution and Service (12b-1) fee 0.10%
Other expenses 0.11%
Total annual class operating expensesA 0.74%
VIP ASSET MANAGER: GROWTH Management fee 0.58%
Distribution and Service (12b-1) fee 0.10%
Other expenses 0.14%
Total annual class operating expensesA 0.82%
VIP HIGH INCOME Management fee 0.58%
Distribution and Service (12b-1) fee 0.10%
Other expenses 0.11%
Total annual class operating expensesA 0.79%
</TABLE>
A FMR HAS VOLUNTARILY AGREED TO REIMBURSE SERVICE CLASS OF EACH
FUND TO THE EXTENT THAT TOTAL OPERATING EXPENSES (EXCLUDING INTEREST,
TAXES, CE RTAIN SECURITIES LENDING COSTS, BROKERAGE COMMISSIONS
AND EXTRAORDINARY EXPENSES), AS A PERCENTAGE OF THEIR RESPECTIVE
AVERAGE NET ASSETS, EXCEED THE FOLLOWING RATES:
Service Class Effective Date
VIP Mid Cap 1.10% 12/29/98
VIP Growth Opportunities 1.60% 11/3/97
VIP Contrafund 1.10% 11/3/97
VIP Growth 1.60% 11/3/97
VIP Overseas 1.60% 11/3/97
VIP Balanced 1.60% 11/3/97
VIP Equity-Income 1.60% 11/3/97
VIP Growth & Income 1.10% 11/3/97
VIP Asset Manager 1.35% 11/3/97
VIP Asset Manager: Growth 1.10% 11/3/97
VIP High Income 1.10% 11/3/97
THESE ARRANGEMENTS CAN BE DISCONTINUED BY FMR AT ANY TIME.
A portion of the brokerage commissions that a fund pays is used to
reduce that fund's expenses. In addition, through arrangements with
each fund's custodian, credits realized as a result of uninvested
cash balances are used to reduce custodian expenses. Including
these reductions, the total Service Class operating expenses
are shown in the table below.
Total Operating Expenses
VIP Mid Cap - Service Class 1.07%A
VIP Growth Opportunities - Service Class 0.78%
VIP Contrafund - Service Class 0.75%
VIP Growth - Service Class 0.75%
VIP Overseas - Service Class 0.98%
VIP Balanced - Service Class 0.66%
VIP Equity-Income - Service Class 0.66%
VIP Growth & Income - Service Class 0.69%
VIP Asset Manager - Service Class 0.73%
VIP Asset Manager: Growth - Service Class 0.81%
A AFTER REIMBURSEMENT.
FUND BASICS
INVESTMENT DETAILS
THE GROWTH AND GROWTH & INCOME FUNDS
INVESTMENT OBJECTIVE
VIP MID CAP PORTFOLIO seeks long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests the fund's assets primarily in common stocks.
FMR normally invests at least 65% of the fund's total assets in
securities of companies with medium market capitalizations. Medium
market capitalization companies are those whose market capitalization
is similar to the capitalization of companies in the S&P MidCap 400 at
the time of the fund's investment. Companies whose capitalization no
longer meets this definition after purchase continue to be considered
to have a medium market capitalization for purposes of the 65% policy.
As of December 31, 1999, the S&P MidCap 400 included companies with
capitalizations between $195.1 million and $23.4
billion. The size of companies in the S&P MidCap 400 changes with
market conditions and the composition of the index. FMR may also
invest the fund's assets in companies with smaller or larger market
capitalizations.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
FMR is not constrained by any particular investment style. At any
given time, FMR may tend to buy "growth" stocks or "value" stocks, or
a combination of both types. In buying and selling securities for the
fund, FMR relies on fundamental analysis of each issuer and its
potential for success in light of its current financial condition, its
industry position, and economic and market conditions. Factors
considered include growth potential, earnings estimates, and
management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
INVESTMENT OBJECTIVE
VIP GROWTH OPPORTUNITIES PORTFOLIO seeks to provide capital
growth.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests the fund's assets primarily in common stocks. FMR
may also invest the fund's assets in other types of securities,
including bonds which may be lower-quality debt securities.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
FMR is not constrained by any particular investment style. At any
given time, FMR may tend to buy "growth" stocks or "value" stocks, or
a combination of both types. In buying and selling securities for the
fund, FMR relies on fundamental analysis of each issuer and its
potential for success in light of its current financial condition, its
industry position, and economic and market conditions. Factors
considered include growth potential, earnings estimates, and
management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
INVESTMENT OBJECTIVE
VIP CONTRAFUND PORTFOLIO seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests the fund's assets primarily in common stocks.
FMR invests the fund's assets in securities of companies whose value
FMR believes is not fully recognized by the public. The types of
companies in which the fund may invest include companies experiencing
positive fundamental change, such as a new management team or product
launch, a significant cost-cutting initiative, a merger or
acquisition, or a reduction in industry capacity that should lead to
improved pricing; companies whose earnings potential has increased or
is expected to increase more than generally perceived; companies that
have enjoyed recent market popularity but which appear to have
temporarily fallen out of favor for reasons that are considered
non-recurring or short-term; and companies that are undervalued in
relation to securities of other companies in the same industry.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
FMR is not constrained by any particular investment style. At any
given time, FMR may tend to buy "growth" stocks or "value" stocks, or
a combination of both types. In buying and selling securities for the
fund, FMR relies on fundamental analysis of each issuer and its
potential for success in light of its current financial condition, its
industry position, and economic and market conditions. Factors
considered include growth potential, earnings estimates, and
management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
INVESTMENT OBJECTIVE
VIP GROWTH PORTFOLIO seeks to achieve capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests the fund's assets primarily in common stocks.
FMR invests the fund's assets in companies FMR believes have
above-average growth potential. Growth may be measured by factors such
as earnings or revenue.
Companies with high growth potential tend to be companies with higher
than average price/earnings (P/E) ratios. Companies with strong growth
potential often have new products, technologies, distribution
channels, or other opportunities, or have a strong industry or market
position. The stocks of these companies are often called "growth"
stocks.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
In buying and selling securities for the fund, FMR relies on
fundamental analysis of each issuer and its potential for success in
light of its current financial condition, its industry position, and
economic and market conditions. Factors considered include growth
potential, earnings estimates, and management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
INVESTMENT OBJECTIVE
VIP OVERSEAS PORTFOLIO seeks long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests at least 65% of the fund's total assets in
foreign securities. FMR normally invests the fund's assets primarily
in common stocks.
FMR normally diversifies the fund's investments across different
countries and regions. In allocating the fund's investments across
countries and regions, FMR will consider the size of the market in
each country and region relative to the size of the international
market as a whole.
In buying and selling securities for the fund, FMR relies on
fundamental analysis of each issuer and its potential for success in
light of its current financial condition, its industry position, and
economic and market conditions. Factors considered include growth
potential, earnings estimates, and management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
INVESTMENT OBJECTIVE
VIP BALANCED PORTFOLIO seeks both income and growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR manages the fund to maintain a balance between stocks and bonds.
When FMR's outlook is neutral, it will invest approximately 60% of the
fund's assets in stocks and other equity securities and the remainder
in bonds and other debt securities, including lower-quality debt
securities. FMR may vary from this target if it believes stocks or
bonds offer more favorable opportunities, but will always invest at
least 25% of the fund's total assets in fixed-income senior securities
(including debt securities and preferred stock).
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
With respect to the fund's equity investments, FMR's emphasis on
above-average income-producing equity securities tends to lead to
investments in stocks that have more "value" characteristics than
"growth" characteristics. However, FMR is not constrained by any
particular investment style. In buying and selling securities for the
fund, FMR generally analyzes the issuer of a security using
fundamental factors (e.g., growth potential, earnings estimates, and
management) and evaluates each security's current price relative to
its estimated long-term value.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices, interest rates, or other factors that affect security
values. If FMR's strategies do not work as intended, the fund may not
achieve its objective.
INVESTMENT OBJECTIVE
VIP EQUITY-INCOME PORTFOLIO seeks reasonable income. The fund
will also consider the potential for capital appreciation. The fund's
goal is to achieve a yield which exceeds the composite yield on the
securities comprising the S&P 500.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests at least 65% of the fund's total assets in
income-producing equity securities. FMR may also invest the fund's
assets in other types of equity securities and debt securities,
including lower-quality debt securities.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
FMR's emphasis on above-average income-producing equity securities
tends to lead to investments in large cap "value" stocks. However, FMR
is not constrained by any particular investment style. In buying and
selling securities for the fund, FMR relies on fundamental analysis of
each issuer and its potential for success in light of its current
financial condition, its industry position, and economic and market
conditions. Factors considered include growth potential, earnings
estimates, and management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
INVESTMENT OBJECTIVE
VIP GROWTH & INCOME PORTFOLIO seeks high total return through a
combination of current income and capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests a majority of the fund's assets in common stocks
with a focus on those that pay current dividends and show potential
for capital appreciation. FMR may also invest the fund's assets in
bonds, including lower-quality debt securities, as well as stocks that
are not currently paying dividends, but offer prospects for future
income or capital appreciation.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
FMR is not constrained by any particular investment style. At any
given time, FMR may tend to buy "growth" stocks or "value" stocks, or
a combination of both types. In buying and selling securities for the
fund, FMR relies on fundamental analysis of each issuer and its
potential for success in light of its current financial condition, its
industry position, and economic and market conditions. Factors
considered include growth potential, earnings estimates, and
management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
DESCRIPTION OF PRINCIPAL SECURITY TYPES
EQUITY SECURITIES represent an ownership interest, or the right to
acquire an ownership interest, in an issuer. Different types of equity
securities provide different voting and dividend rights and priority
in the event of the bankruptcy of the issuer. Equity securities
include common stocks, preferred stocks, convertible securities, and
warrants.
DEBT SECURITIES are used by issuers to borrow money. The issuer
usually pays a fixed, variable, or floating rate of interest, and must
repay the amount borrowed at the maturity of the security. Some debt
securities, such as zero coupon bonds, do not pay current interest but
are sold at a discount from their face values. Debt securities include
corporate bonds, government securities, and mortgage and other
asset-backed securities.
PRINCIPAL INVESTMENT RISKS
Many factors affect each fund's performance. A fund's share price
changes daily based on changes in market conditions and interest rates
and in response to other economic, political, or financial
developments. A fund's reaction to these developments will be affected
by the types 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 a fund,
they could be worth more or less than what the shareholder paid for
them.
The following factors can significantly affect a fund's performance.
STOCK MARKET VOLATILITY. The value of equity securities fluctuates in
response to issuer, political, market, and economic developments. In
the short term, equity prices can fluctuate dramatically in response
to these developments. Different parts of the market and different
types of equity securities can react differently to these
developments. For example, large cap stocks can react differently 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.
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.
FOREIGN EXPOSURE. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations
can involve additional risks relating to political, economic, or
regulatory conditions in foreign countries. These risks include
fluctuations in foreign currencies; withholding or other taxes;
trading , settlement, custodial, and other operational risks;
and the less stringent investor protection and disclosure standards of
some foreign markets. All of these factors can make foreign
investments, especially those in emerging markets, more volatile and
potentially less liquid than U.S. investments. In addition, foreign
markets can perform differently from the U.S. market.
Investing in emerging markets can involve risks in addition to and
greater than those generally associated with investing in more
developed foreign markets. The extent of economic development;
political stability; market depth, infrastructure, and capitalization;
and regulatory oversight can be less than in more developed markets.
Emerging market economies can be subject to greater social, economic,
regulatory, and political uncertainties. All of these factors can make
emerging market securities more volatile and potentially less liquid
than securities issued in more developed markets.
PREPAYMENT. Many types of debt securities, including mortgage
securities, are subject to prepayment risk. Prepayment occurs when the
issuer of a security can repay principal prior to the security's
maturity. Securities subject to prepayment 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. The value of securities of smaller,
less well-known issuers can be more volatile than that of larger
issuers. Lower-quality debt securities (those of less than
investment-grade quality) tend to be more sensitive to these changes
than higher-quality debt securities.
Lower-quality debt securities involve greater risk of default or price
changes due to changes in the credit quality of the issuer. The value
of lower-quality debt securities often fluctuates in response to
company, political, or economic developments and can decline
significantly over short periods of time or during periods of general
or regional economic difficulty.
"GROWTH" INVESTING. "Growth" stocks can react differently to issuer,
political, market, and economic developments than the market as a
whole and other types of stocks. "Growth" stocks tend to be more
expensive relative to their earnings or assets compared to other types
of stocks. As a result, "growth" stocks tend to be sensitive to
changes in their earnings and more volatile than other types of
stocks.
"VALUE" INVESTING. "Value" stocks can react differently to issuer,
political, market, and economic developments than the market as a
whole and other types of stocks. "Value" stocks tend to be inexpensive
relative to their earnings or assets compared to other types of
stocks. However, "value" stocks can continue to be inexpensive for
long periods of time and may not ever realize their full value.
In response to market, economic, political, or other conditions, FMR
may temporarily use a different investment strategy for defensive
purposes. If FMR does so, different factors could affect a fund's
performance and the fund may not achieve its investment objective.
THE ASSET ALLOCATION FUNDS
INVESTMENT OBJECTIVE
VIP ASSET MANAGER PORTFOLIO seeks to obtain high total return
with reduced risk over the long term by allocating its assets among
stocks, bonds, and short-term instruments.
PRINCIPAL INVESTMENT STRATEGIES
FMR allocates the fund's assets among the following classes, or types,
of investments. The STOCK CLASS includes equity securities of all
types. The BOND CLASS includes all varieties of fixed-income
securities, including lower-quality debt securities, maturing in more
than one year. The SHORT-TERM/MONEY MARKET CLASS includes all types of
short-term and money market instruments.
FMR may use its judgment to place a security in the most appropriate
class based on its investment characteristics. Fixed-income securities
may be classified in the bond or short-term/money market class
according to interest rate sensitivity as well as maturity. FMR may
invest the fund's assets in these classes by investing in other funds.
FMR may also invest the fund's assets in other instruments that do not
fall within these classes.
FMR has the ability to allocate the fund's assets within specified
ranges. The fund's neutral mix represents the benchmark for its
combination of investments in each asset class over time. FMR may
change the neutral mix from time to time. The approximate neutral mix
and range for each asset class are shown below:
Neutral Mix STOCKS 50%
(can range from 30-70%)
Row: 1, Col: 1, Value: 10.0
Row: 1, Col: 2, Value: 50.0
Row: 1, Col: 3, Value: 40.0
BONDS 40%
(can range from 20-60%)
SHORT-TERM/MONEY MARKET 10%
(can range from 0-50%)
FMR will not try to pinpoint the precise moment when a major
reallocation should be made. Instead, FMR regularly reviews the fund's
allocation and makes changes gradually to favor investments that it
believes will provide the most favorable outlook for achieving the
fund's objective.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
In buying and selling securities for the fund, FMR generally analyzes
the issuer of a security using fundamental factors (e.g., growth
potential, earnings estimates, and management) and/or quantitative
factors (e.g., historical earnings, dividend yield, and earnings per
share) and evaluates each security's current price relative to its
estimated long-term value.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices, interest rates, or other factors that affect security
values. If FMR's strategies do not work as intended, the fund may not
achieve its objective.
INVESTMENT OBJECTIVE
VIP ASSET MANAGER: GROWTH PORTFOLIO seeks to maximize total
return by allocating its assets among stocks, bonds, short-term
instruments, and other investments.
PRINCIPAL INVESTMENT STRATEGIES
FMR allocates the fund's assets among the following classes, or types,
of investments. The STOCK CLASS includes equity securities of all
types. The BOND CLASS includes all varieties of fixed-income
securities, including lower-quality debt securities, maturing in more
than one year. The SHORT-TERM/MONEY MARKET CLASS includes all types of
short-term and money market instruments.
FMR may use its judgment to place a security in the most appropriate
class based on its investment characteristics. Fixed-income securities
may be classified in the bond or short-term/money market class
according to interest rate sensitivity as well as maturity. FMR may
invest the fund's assets in these classes by investing in other funds.
FMR may also invest the fund's assets in other instruments that do not
fall within these classes.
FMR has the ability to allocate the fund's assets within specified
ranges. The fund's neutral mix represents the benchmark for its
combination of investments in each asset class over time. FMR may
change the neutral mix from time to time. The approximate neutral mix
and range for each asset class are shown below:
Neutral Mix
STOCKS 70%
(can range from
50-100%)
Row: 1, Col: 1, Value: 5.0
Row: 1, Col: 2, Value: 70.0
Row: 1, Col: 3, Value: 25.0
BONDS 25%
(can range from
0-50%)
SHORT-TERM/MONE
Y MARKET 5% (can
range from 0-50%)
FMR will not try to pinpoint the precise moment when a major
reallocation should be made. Instead, FMR regularly reviews the fund's
allocation and makes changes gradually to favor investments that it
believes will provide the most favorable outlook for achieving the
fund's objective.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
In buying and selling securities for the fund, FMR generally analyzes
the issuer of a security using fundamental factors (e.g., growth
potential, earnings estimates, and management) and/or quantitative
factors (e.g., historical earnings, dividend yield, and earnings per
share) and evaluates each security's current price relative to its
estimated long-term value.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
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
EQUITY SECURITIES represent an ownership interest, or the right to
acquire an ownership interest, in an issuer. Different types of equity
securities provide different voting and dividend rights and priority
in the event of the bankruptcy of the issuer. Equity securities
include common stocks, preferred stocks, convertible securities, and
warrants.
DEBT SECURITIES are used by issuers to borrow money. The issuer
usually pays a fixed, variable, or floating rate of interest, and must
repay the amount borrowed at the maturity of the security. Some debt
securities, such as zero coupon bonds, do not pay current interest but
are sold at a discount from their face values. Debt securities include
corporate bonds, government securities, and mortgage and other
asset-backed securities.
MONEY MARKET SECURITIES are high-quality, short-term securities that
pay a fixed, variable, or floating interest rate. Securities are often
specifically structured so that they are eligible investments for a
money market fund. For example, in order to satisfy the maturity
restrictions for a money market fund, some money market securities
have demand or put features, which have the effect of shortening the
security's maturity. Money market securities include bank certificates
of deposit, bank acceptances, bank time deposits, notes, commercial
paper, and U.S. Government securities.
PRINCIPAL INVESTMENT RISKS
Many factors affect each fund's performance. A fund's share price and
yield change daily based on changes in market conditions and interest
rates and in response to other economic, political, or financial
developments. A fund's reaction to these developments will be affected
by the types and maturities of 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 a fund,
they could be worth more or less than what the shareholder paid for
them.
The following factors can significantly affect a fund's performance.
STOCK MARKET VOLATILITY. The value of equity securities fluctuates in
response to issuer, political, market, and economic developments. In
the short term, equity prices can fluctuate dramatically in response
to these developments. Different parts of the market and different
types of equity securities can react differently to these
developments. For example, large cap stocks can react differently 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.
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, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations
can involve additional risks relating to political, economic, or
regulatory conditions in foreign countries. These risks include
fluctuations in foreign currencies; withholding or other taxes;
trading, settlement, custodial, and other operational risks; and the
less stringent investor protection and disclosure standards of some
foreign markets. All of these factors can make foreign investments,
especially those in emerging markets, more volatile and potentially
less liquid than U.S. investments. In addition, foreign markets can
perform differently from the U.S. market.
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. The value of securities of smaller,
less well-known issuers can be more volatile than that of larger
issuers. Lower-quality debt securities (those of less than
investment-grade quality) tend to be more sensitive to these changes
than higher-quality debt securities.
Lower-quality debt securities involve greater risk of default or price
changes due to changes in the credit quality of the issuer. The value
of lower-quality debt securities often fluctuates in response to
company, political, or economic developments and can decline
significantly over short periods of time or during periods of general
or regional economic difficulty.
In response to market, economic, political, or other conditions, FMR
may temporarily use a different investment strategy for defensive
purposes. If FMR does so, different factors could affect a fund's
performance and the fund may not achieve its investment objective.
THE INCOME FUND
INVESTMENT OBJECTIVE
VIP HIGH INCOME PORTFOLIO seeks a high level of current income
while also considering growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests at least 65% of the fund's total assets in
income-producing debt securities, preferred stocks and convertible
securities, with an emphasis on lower-quality debt securities. Many
lower-quality debt securities are subject to legal or contractual
restrictions limiting FMR's ability to resell the securities to the
general public. FMR may also invest the fund's assets in non-income
producing securities, including defaulted securities and common
stocks. FMR currently intends to limit common stocks to 10% of the
fund's total assets. FMR may invest in companies whose financial
condition is troubled or uncertain and that may be involved in
bankruptcy proceedings, reorganizations, or financial restructurings.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
In buying and selling securities for the fund, FMR relies on
fundamental analysis of each issuer and its potential for success in
light of its current financial condition, its industry position, and
economic and market conditions. Factors considered include a
security's structural features and current price compared to its
long-term value, and the earnings potential, credit standing, and
management of the security's issuer.
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
EQUITY SECURITIES represent an ownership interest, or the right to
acquire an ownership interest, in an issuer. Different types of equity
securities provide different voting and dividend rights and priority
in the event of the bankruptcy of the issuer. Equity securities
include common stocks, preferred stocks, convertible securities, and
warrants.
DEBT SECURITIES are used by issuers to borrow money. The issuer
usually pays a fixed, variable, or floating rate of interest, and must
repay the amount borrowed at the maturity of the security. Some debt
securities, such as zero coupon bonds, do not pay current interest but
are sold at a discount from their face values. Debt securities include
corporate bonds, government securities, mortgage and other
asset-backed securities, and loans and loan participations.
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.
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.
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, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations
can involve additional risks relating to political, economic, or
regulatory conditions in foreign countries. These risks include
fluctuations in foreign currencies; withholding or other taxes;
trading, settlement, custodial, and other operational risks; and the
less stringent investor protection and disclosure standards of some
foreign markets. All of these factors can make foreign investments,
especially those in emerging markets, more volatile and potentially
less liquid than U.S. investments. In addition, foreign markets can
perform differently from the U.S. market.
ISSUER-SPECIFIC CHANGES. Changes in the financial condition of an
issuer, changes in specific economic or political conditions that
affect a particular type of security or issuer, and changes in
general economic or political conditions can affect the credit
quality or value of an issuer's securities. The value of securities of
smaller, less well-known issuers can be more volatile than that of
larger issuers. Lower-quality debt securities (those of less than
investment-grade quality) tend to be more sensitive to these changes
than higher-quality debt securities.
Lower-quality debt securities involve greater risk of default or price
changes due to changes in the credit quality of the issuer. The value
of lower-quality debt securities often fluctuates in response to
company, political, or economic developments and can decline
significantly over short periods of time or during periods of general
or regional economic difficulty. Lower-quality debt securities can be
thinly traded or have restrictions on resale, making them difficult to
sell at an acceptable price. The default rate for lower-quality debt
securities is likely to be higher during economic recessions or
periods of high interest rates.
In response to market, economic, political, or other conditions, FMR
may temporarily use a different investment strategy for defensive
purposes. If FMR does so, different factors could affect a fund's
performance and the fund may not achieve its investment objective.
FUNDAMENTAL INVESTMENT POLICIES
The policies discussed below are fundamental, that is, subject to
change only by shareholder approval.
VIP MID CAP PORTFOLIO seeks long-term growth of capital.
VIP GROWTH OPPORTUNITIES PORTFOLIO seeks to provide capital
growth by investing primarily in common stocks and securities
convertible into common stocks.
VIP CONTRAFUND PORTFOLIO seeks long-term capital appreciation.
VIP GROWTH PORTFOLIO seeks to achieve capital appreciation.
VIP OVERSEAS PORTFOLIO seeks long-term growth of capital
primarily through investments in foreign securities.
VIP BALANCED PORTFOLIO seeks both income and growth of capital
by investing in a diversified portfolio of equity and fixed-income
securities with income, growth of income, and capital appreciation
potential.
VIP EQUITY-INCOME PORTFOLIO seeks reasonable income by
investing primarily in income-producing equity securities. In choosing
these securities, the fund will also consider the potential for
capital appreciation. The fund's goal is to achieve a yield which
exceeds the composite yield on the securities comprising the S&P 500.
VIP GROWTH & INCOME PORTFOLIO seeks high total return through a
combination of current income and capital appreciation.
VIP ASSET MANAGER PORTFOLIO seeks to obtain high total return
with reduced risk over the long term by allocating its assets among
stocks, bonds, and short-term instruments.
VIP ASSET MANAGER: GROWTH PORTFOLIO seeks to maximize total
return by allocating its assets among stocks, bonds, short-term
instruments, and other investments.
VIP HIGH INCOME PORTFOLIO seeks a high level of current income
by investing primarily in high yielding, fixed-income securities,
while also considering growth of capital.
VALUING SHARES
Each fund is open for business each day the New York Stock Exchange
(NYSE) is open.
A class's net asset value per share (NAV) is the value of a single
share. Fidelity 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). Each fund's assets are valued as of this time for the purpose
of computing Service Class's NAV.
To the extent that each fund's assets are traded in other markets on
days when the NYSE is closed, the value of the fund's assets may be
affected on days when the fund is not open for business. In addition,
trading in some of a fund's assets may not occur on days when
the fund is open for business.
Each fund's assets are valued primarily on the basis of market
quotations or on the basis of information furnished by a pricing
service. Certain short-term securities are valued on the basis of
amortized cost. If market quotations or information furnished by a
pricing service is not readily available for a security or if a
security's value has been materially affected by events occurring
after the close of the exchange or market on which the security is
principally traded (for example, a foreign exchange or market), that
security may be valued by another method that the Board of Trustees
believes accurately reflects fair value. A security's valuation may
differ depending on the method used for determining value.
SHAREHOLDER INFORMATION
BUYING AND SELLING SHARES
Insurance companies offer variable annuity and variable life
insurance products through separate accounts. Separate accounts - not
variable product owners - are the shareholders of the funds. 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 funds can buy or sell shares of the
funds.
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 funds' Board of Trustees may refuse to sell shares of a fund or
may stop offering shares of a 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 a
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 a fund.
Each fund offers its shares to separate accounts of insurance
companies that may be affiliated or unaffiliated with FMR and/or each
other. Each 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 each 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
Each fund earns dividends, interest, and other income from its
investments, and distributes this income (less expenses) to
shareholders as dividends. Each fund also realizes capital gains from
its investments, and distributes these gains (less any losses) to
shareholders as capital gain distributions.
Each 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 a fund.
FUND SERVICES
FUND MANAGEMENT
Each fund is a mutual fund, an investment that pools shareholders'
money and invests it toward a specified goal.
FMR is each fund's manager.
As of March 25, 1999 , FMR had approximately $ 521.7
billion in discretionary assets under management.
As the manager, FMR is responsible for choosing each fund's
investments and handling its business affairs.
Affiliates assist FMR with foreign investments:
(small solid bullet) Fidelity Management & Research (U.K.) Inc. (FMR
U.K.), in London, England, serves as a sub-adviser for VIP Mid Cap,
VIP Growth Opportunities, VIP Contrafund, VIP Overseas, VIP Balanced,
VIP Growth & Income, VIP Asset Manager, VIP Asset Manager: Growth, and
VIP High Income. FMR U.K. was organized in 1986 to provide investment
research and advice to FMR. FMR U.K. may provide investment research
and advice on issuers based outside the United States and may also
provide investment advisory services for VIP Mid Cap, VIP Growth
Opportunities, VIP Contrafund, VIP Overseas, VIP Balanced, VIP Growth
& Income, VIP Asset Manager, VIP Asset Manager: Growth, and VIP High
Income .
(small solid bullet) Fidelity Management & Research (Far East) Inc.
(FMR Far East) serves as a sub-adviser for VIP Mid Cap, VIP Growth
Opportunities, VIP Contrafund, VIP Overseas, VIP Balanced, VIP Growth
& Income, VIP Asset Manager, VIP Asset Manager: Growth, and VIP High
Income. FMR Far East was organized in 1986 to provide investment
research and advice to FMR. FMR Far East may pro vide investment
research and advice on issuers based outside the United States and may
also provide investment advisory services for VIP Mid Cap, VIP
Growth Opportunities, VIP Contrafund, VIP Overseas, VIP Balanced, VIP
Growth & Income, VIP Asset Manager, VIP Asset Manager: Growth, and VIP
High Income.
(small solid bullet) Fidelity International Investment Advisors
(FIIA), in Pembroke, Bermuda, serves as a sub-adviser for VIP
Overseas. As of September 28, 1999 , FIIA had approximately
$ 3.6 billion in discretionary assets under management. FIIA
may pr ovide investment research and advice on issuers based
outside the United States and may also provide investment advisory
services for VIP Overseas.
(small solid bullet) Fidelity International Investment Advisors (U.K.)
Limited (FIIA(U.K.)L), in London, England, serves as a sub-adviser for
VIP Overseas. As of September 28, 1999 , FIIA(U.K.)L had
approximately $ 2.6 billion in discretionary assets under
management. FIIA(U.K.)L may provide investment research and
advice on issuers based outside the United States and may also provide
investment advisory services for VIP Overseas.
(small solid bullet) Fidelity Investments Japan Limited (FIJ), in
Tokyo, Japan, serves as a sub-adviser for VIP Mid Cap, VIP Growth
Opportunities, VIP Contrafund, VIP Overseas, VIP Balanced, VIP Growth
& Income, VIP Asset Manager, VIP Asset Manager: Growth, and VIP High
Income. As of September 28, 1999 , FIJ had approximately
$ 16.3 billion in discretionary assets under management. FIJ
may provide inv estment research and advice on issuers based
outside the United States for VIP Mid Cap, VIP Growth
Opportunities, VIP Contrafund, VIP Overseas, VIP Balanced, VIP Growth
& Income, VIP Asset Manager, VIP Asset Manager: Growth, and VIP High
Income.
Fidelity Investments Money Management, Inc. (FIMM), in Merrimack, New
Hampshire, serves as sub-adviser for VIP Balanced, VIP Asset Manager,
and VIP Asset Manager: Growth. FIMM is primarily responsible for
choosing certain types of investments for VIP Balanced, VIP Asset
Manager, and VIP Asset Manager: Growth.
FIMM is an affiliate of FMR. As of March 29, 1999, FIMM had
approximately $159.8 billion in discretionary assets under management.
Beginning January 1, 2001, FMR Co., Inc. (FMRC) will serve as
sub-adviser for each fund. FMRC will be primarily responsible
for choosing investments for VIP Mid Cap, VIP Growth Opportunities,
VIP Contrafund, VIP Growth, VIP Overseas, VIP Equity-Income, VIP
Growth & Income, and VIP High Income. FMRC will be primarily
responsible for choosing certain types of investments for VIP
Balanced, VIP Asset Manager, and VIP Asset Manager: Growth. FMRC is a
wholly owned subsidiary of FMR.
John Avery is vice president and manager of VIP Balanced, which he has
managed since January 1998; he had been associate manager of the fund
since September 1997. He also manages another Fidelity fund. Mr. Avery
joined Fidelity in 1995 as an analyst. Previously, he was an analyst
for Putnam Investments from 1993 to 1994.
Barry Coffman is vice president and manager of VIP High Income, which
he has managed since August 1990. He also manages other Fidelity
funds. Since joining Fidelity in 1986, Mr. Coffman has worked as an
analyst and manager.
Will Danoff is vice president and manager of VIP Contrafund, which he
has managed since January 1995. He also manages another Fidelity fund.
Since joining Fidelity in 1986, Mr. Danoff has worked as an analyst
and manager.
Bettina Doulton is vice president and manager of VIP Growth
Opportunities, which she has managed since February 2000. She also
manages another Fidelity fund. Since joining Fidelity in 1986, Ms.
Doulton has worked as a research assistant, analyst and manager.
David Felman is vice president and manager of VIP Mid Cap, which he
has managed since August 1999. He also manages other Fidelity funds.
Mr. Felman joined Fidelity as an analyst in 1993.
Kevin Grant is vice president and manager of VIP Balanced, which he
has managed since March 1996. Mr. Grant manages the fixed-income
investments for VIP Balanced. He also manages other Fidelity funds.
Mr. Grant joined Fidelity in 1993 as a portfolio manager.
Bart Grenier is vice president and manager of VIP Asset Manager and
VIP Asset Manager: Growth, both of which he has managed since May
2000. Mr. Grenier originally joined Fidelity in 1991 as a senior
analyst and has held a number of positions with FMR and served as an
officer of certain other investment companies managed or advised by
FMR.
Richard Mace is vice president and manager of VIP Overseas, which he
has managed since March 1996. He also manages several other Fidelity
funds. Since joining Fidelity in 1987, Mr. Mace has worked as an
analyst and manager.
Stephen Petersen is vice president and manager of VIP Equity-Income,
which he has managed since January 1997. He also manages another
Fidelity fund. Since joining Fidelity in 1980, Mr. Petersen has worked
as an analyst and manager.
Louis Salemy is manager of VIP Growth & Income, which he has managed
since September 1998. Previously, he was associate manager of the
fund. Mr Salemy also manages another Fidelity fund. Since joining
Fidelity in 1992, Mr. Salemy has worked as an analyst, manager, and
portfolio assistant.
Jennifer Uhrig is vice president and manager of VIP Growth, which she
has managed since January 1997. She also manages another Fidelity
fund. Since joining Fidelity in 1987, Ms. Uhrig has worked as an
analyst and manager.
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.
Each 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 0.52% for VIP
Mid Cap, VIP Growth Opportunities, VIP Contrafund, VIP Growth, VIP
Overseas, VIP Balanced, VIP Equity-Income, VIP Growth & Income, VIP
Asset Manager, and VIP Asset Manager: Growth, or 0.37% for VIP High
Income, and it drops as total assets under management increase.
For December 1999, the group fee rate was 0.1267 % for VIP High
Income and the group fee rate was 0.2768 % for VIP Mid Cap, VIP
Growth Opportunities, VIP Contrafund, VIP Growth, VIP Overseas, VIP
Balanced, VIP Equity-Income, VIP Growth & Income, VIP Asset Manager,
and VIP Asset Manager: Growth. The individual fund fee rate is 0.15%
for VIP Balanced; 0.20% for VIP Equity-Income and VIP Growth & Income;
0.25% for VIP Asset Manager; 0.30% for VIP Mid Cap, VIP Growth
Opportunities, VIP Contrafund, VIP Growth, and VIP Asset Manager:
Growth; and 0.45% for VIP Overseas and VIP High Income.
The total management fee, as a percentage of a fund's average net
assets, for the fiscal year ended December 31, 1999 , for each
fund is shown in the table below.
Total Management Fee
VIP Mid Cap 0.57%
VIP Growth Opportunities 0.58%
VIP Contrafund 0.58%
VIP Growth 0.58%
VIP Overseas 0.73%
VIP Balanced 0.43%
VIP Equity-Income 0.48%
VIP Growth & Income 0.48%
VIP Asset Manager 0.53%
VIP Asset Manager: Growth 0.58%
VIP High Income 0.58%
FMR pays FIMM, FMR U.K., FMR Far East, and FIIA for providing
sub-advisory services, and FIIA in turn pays FIIA(U.K.)L. FMR Far East
pays FIJ for providing sub-advisory services.
FMR will pay FMRC for providing sub-advisory services.
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 February 29, 2000, approximately 62.71% of VIP Asset Manager:
Growth's; approximately 43.18% of VIP Growth & Income's; and
approximately 36.88% of VIP Balanced's total outstanding shares,
respectively, were held by FMR affiliates.
FUND DISTRIBUTION
Each fund is composed of multiple classes of shares. All classes of a
fund have a common investment objective and investment portfolio.
Fidelity Distributors Corporation (FDC) distributes Service Class's
shares.
Service Class of each fund has adopted a Distribution and Service Plan
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under
the plan, Service Class of each 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 each fund may pay FDC a
12b-1 fee at an annual rate of 0.25% of its average net assets, or
such lesser amount as the Trustees may determine from time to time.
Service Class of each 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 each 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, each 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 each 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.
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 a
fund receives brokerage services and commission rates comparable to
those of other broker-dealers.
No dealer, sales representative, or any other person has been
authorized to give any information or to make any representations,
other than those contained in this prospectus and in the related
statement of additional information (SAI), in connection with the
offer contained in this prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the funds or FDC. This prospectus and the related SAI do
not constitute an offer by the funds or by FDC to sell shares of the
funds to or to buy shares of the funds from any person to whom it is
unlawful to make such offer.
APPENDIX
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand
Service Class' s financial history for the period of the
class' s operations. Certain information reflects financial
results for a single class share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an
investment in the class (assuming reinvestment of all dividends and
distributions). This information has been audited by
PricewaterhouseCoopers LLP (for VIP Mid Cap, VIP Growth, VIP Overseas,
VIP Equity-Income, and VIP High Income) and Deloitte & Touche LLP
(1999 annual information only for VIP Growth Opportunities, VIP
Contrafund, VIP Balanced, VIP Growth & Income, VIP Asset Manager, and
VIP Asset Manager: Growth), independent accountants, whose reports,
along with each fund's financial highlights and financial statements,
are included in each fund's annual report. Annual information prior to
1999 was audited by PricewaterhouseCoopers LLP. A free copy of each
annual report is available upon request.
VIP MID CAP - SERVICE CLASS
Years ended December 31, 1999 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.31 $ 10.00
Income from Investment Operations
Net investment income (loss) D (.01) .00
Net realized and unrealized gain (loss) 5.05 .31
Total from investment operations 5.04 .31
Less Distributions
From net realized gain (.09) -
In excess of net realized gain (.02) -
Total distributions (.11) -
Net asset value, end of period $ 15.24 $ 10.31
TOTAL RETURN B, C 48.94% 3.10%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 25,908 $ 516
Ratio of expenses to average net assets 1.10% F 1.10% A, F
Ratio of expenses to average net assets 1.07% G 1.10% A
after expense reductions
Ratio of net investment income (loss) to (.09)% (.35)% A
average net assets
Portfolio turnover 163% 125% A
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED
ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD DECEMBER 28, 1998 (COMMENCEMENT OF SALE OF SERVICE
CLASS SHARES) TO DECEMBER 31, 1998.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
VIP GROWTH OPPORTUNITIES - SERVICE CLASS
Years ended December 31, 1999 1998 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 22.86 $ 19.27 $ 18.50
Income from Investment Operations
Net investment income D .25 .23 .04
Net realized and unrealized gain (loss) .66 4.30 .73
Total from investment operations .91 4.53 .77
Less Distributions
From net investment income (.22) (.21) -
From net realized gain (.43) (.73) -
Total distributions (.65) (.94) -
Net asset value, end of period $ 23.12 $ 22.86 $ 19.27
TOTAL RETURN B, C 4.18% 24.51% 4.16%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 344,778 $ 149,496 $ 2,589
Ratio of expenses to average net assets .79% .80% .84% A
Ratio of expenses to average net assets .78% F .79% F .83% A, F
after expense reductions
Ratio of net investment income to average 1.09% 1.16% 1.72% A
net assets
Portfolio turnover 42% 29% 26%
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF SERVICE
CLASS SHARES) TO DECEMBER 31, 1997.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
VIP CONTRAFUND - SERVICE CLASS
Years ended December 31, 1999 1998 1997 D
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 24.42 $ 19.93 $ 19.99
Income from Investment Operations
Net investment income C .10 .11 .03
Net realized and unrealized gain (loss) 5.58 5.55 (.09)
Total from investment operations 5.68 5.66 (.06)
Less Distributions
From net investment income (.12) (.14) -
From net realized gain (.88) (1.03) -
Total distributions (1.00) (1.17) -
Net asset value, end of period $ 29.10 $ 24.42 $ 19.93
TOTAL RETURN B, F 24.15% 29.94% (0.30)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 775,216 $ 152,553 $ 3,722
Ratio of expenses to average net assets .78% .80% .81% A
Ratio of expenses to average net assets .75% E .75% E .78% A, E
after expense reductions
Ratio of net investment income to average .37% .53% 1.14% A
net assets
Portfolio turnover 172% 201% 142%
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
D FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF SERVICE
CLASS SHARES) TO DECEMBER 31, 1997.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
G TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
VIP GROWTH - SERVICE CLASS
Years ended December 31, 1999 1998 1997 D
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 44.82 $ 37.09 $ 36.92
Income from Investment Operations
Net investment income C .02 .06 .03
Net realized and unrealized gain (loss) 15.07 12.83 .14
Total from investment operations 15.09 12.89 .17
Less Distributions
From net investment income (.08) (.19) -
From net realized gain (5.03) (4.97) -
Total distributions (5.11) (5.16) -
Net asset value, end of period $ 54.80 $ 44.82 $ 37.09
TOTAL RETURN B, F 37.29% 39.38% .46%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 916,330 $ 136,142 $ 2,015
Ratio of expenses to average net assets .77% .80% .79% A
Ratio of expenses to average net assets .75% E .75% E .77% A, E
after expense reductions
Ratio of net investment income to average .04% .15% .70% A
net assets
Portfolio turnover 84% 123% 113%
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
D FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF SERVICE
CLASS SHARES) TO DECEMBER 31, 1997.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
F TOTAL RETURNS FOR PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED
AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL
RETURNS SHOWN.
VIP OVERSEAS - SERVICE CLASS
Years ended December 31, 1999 1998 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 20.04 $ 19.20 $ 19.36
Income from Investment Operations
Net investment income D .22 .15 .01
Net realized and unrealized gain (loss) 7.94 2.19 (.17)
Total from investment operations 8.16 2.34 (.16)
Less Distributions
From net investment income (.31) (.38) -
From net realized gain (.50) (1.12) -
Total distributions (.81) (1.50) -
Net asset value, end of period $ 27.39 $ 20.04 $ 19.20
TOTAL RETURN B, C 42.44% 12.69% (0.83)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 144,371 $ 34,720 $ 931
Ratio of expenses to average net assets 1.01% 1.01% 1.02% A
Ratio of expenses to average net assets .98% F .97% F 1.01% A, F
after expense reductions
Ratio of net investment income to average 1.00% .80% .31% A
net assets
Portfolio turnover 78% 84% 67%
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF SERVICE
CLASS SHARES) TO DECEMBER 31, 1997.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
VIP BALANCED - SERVICE CLASS
Years ended December 31, 1999 1998 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 16.07 $ 14.59 $ 14.16
Income from Investment Operations
Net investment income D .43 .41 .08
Net realized and unrealized gain (loss) .24 1.98 .35
Total from investment operations .67 2.39 .43
Less Distributions
From net investment income (.37) (.36) -
From net realized gain (.43) (.55) -
Total distributions (.80) (.91) -
Net asset value, end of period $ 15.94 $ 16.07 $ 14.59
TOTAL RETURN B, C 4.43% 17.27% 3.04%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 27,054 $ 9,562 $ 10
Ratio of expenses to average net assets .67% .70% .71% A
Ratio of expenses to average net assets .66% F .69% F .71% A
after expense reductions
Ratio of net investment income to average 2.77% 2.79% 3.43% A
net assets
Portfolio turnover 108% 94% 98%
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF SERVICE
CLASS SHARES) TO DECEMBER 31, 1997.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
VIP EQUITY-INCOME - SERVICE CLASS
Years ended December 31, 1999 1998 1997 D
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 25.39 $ 24.27 $ 23.44
Income from Investment Operations
Net investment income C .38 .36 .05
Net realized and unrealized gain (loss) 1.11 2.31 .78
Total from investment operations 1.49 2.67 .83
Less Distributions
From net investment income (.38) (.34) -
From net realized gain (.84) (1.21) -
Total distributions (1.22) (1.55) -
Net asset value, end of period $ 25.66 $ 25.39 $ 24.27
TOTAL RETURN B, F 6.25% 11.54% 3.54%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 437,332 $ 225,145 $ 5,328
Ratio of expenses to average net assets .67% .68% .68% A
Ratio of expenses to average net assets .66% E .67% E .65% A, E
after expense reductions
Ratio of net investment income to average 1.47% 1.51% 1.63% A
net assets
Portfolio turnover 27% 28% 44%
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
D FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF SERVICE
CLASS SHARES) TO DECEMBER 31, 1997.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
F TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
VIP GROWTH & INCOME - SERVICE CLASS
Years ended December 31, 1999 1998 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 16.11 $ 12.53 $ 12.35
Income from Investment Operations
Net investment income D .16 .15 .03
Net realized and unrealized gain (loss) 1.27 3.50 .49
Total from investment operations 1.43 3.65 .52
Less Distributions
From net investment income (.10) - (.08)
From net realized gain (.20) (.07) (.26)
Total distributions (.30) (.07) (.34)
Net asset value, end of period $ 17.24 $ 16.11 $ 12.53
TOTAL RETURN B, C 9.06% 29.27% 4.29%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 95,600 $ 18,375 $ 10
Ratio of expenses to average net assets .70% .71% .80% A
Ratio of expenses to average net assets .69% F .70% F .80% A
after expense reductions
Ratio of net investment income to average .98% 1.05% 1.24% A
net assets
Portfolio turnover 58% 66% 81%
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF SERVICE
CLASS SHARES) TO DECEMBER 31, 1997.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
VIP ASSET MANAGER - SERVICE CLASS
Years ended December 31, 1999 1998 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 18.10 $ 17.99 $ 17.60
Income from Investment Operations
Net investment income D .56 .57 .10
Net realized and unrealized gain (loss) 1.29 1.82 .29
Total from investment operations 1.85 2.39 .39
Less Distributions
From net investment income (.60) (.57) -
From net realized gain (.76) (1.71) -
Total distributions (1.36) (2.28) -
Net asset value, end of period $ 18.59 $ 18.10 $ 17.99
TOTAL RETURN B, C 11.01% 14.82% 2.22%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 23,677 $ 5,801 $ 10
Ratio of expenses to average net assets .74% .78% .75% A
Ratio of expenses to average net assets .73% F .77% F .75% A
after expense reductions
Ratio of net investment income to average 3.25% 3.49% 3.52% A
net assets
Portfolio turnover 94% 113% 101%
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF SERVICE
CLASS SHARES) TO DECEMBER 31, 1997.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
VIP ASSET MANAGER: GROWTH - SERVICE CLASS
Years ended December 31, 1999 1998 1997 D
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 16.96 $ 16.35 $ 15.94
Income from Investment Operations
Net investment income C .38 .40 .07
Net realized and unrealized gain (loss) 2.03 2.14 .34
Total from investment operations 2.41 2.54 .41
Less Distributions
From net investment income (.41) (.34) -
From net realized gain (.68) (1.59) -
Total distributions (1.09) (1.93) -
Net asset value, end of period $ 18.28 $ 16.96 $ 16.35
TOTAL RETURN B, F 15.13% 17.18% 2.57%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 10,825 $ 3,165 $ 10
Ratio of expenses to average net assets .82% .89% .87% A
Ratio of expenses to average net assets .81% E .88% E .87% A
after expense reductions
Ratio of net investment income to average 2.27% 2.65% 2.70% A
net assets
Portfolio turnover 92% 98% 90%
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
D FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF SERVICE
CLASS SHARES) TO DECEMBER 31, 1997.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
F TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
VIP HIGH INCOME - SERVICE CLASS
Years ended December 31, 1999 1998 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.520 $ 13.570 $ 13.380
Income from Investment Operations
Net investment income D 1.074 1.082 .203
Net realized and unrealized gain (loss) (.194) (1.562) (.013)
Total from investment operations .880 (.480) .190
Less Distributions
From net investment income (1.075) F (.970) F -
From net realized gain (.030) F (.600) F -
In excess of net realized gain (.005) F - -
Total distributions (1.110) (1.570) -
Net asset value, end of period $ 11.290 $ 11.520 $ 13.570
TOTAL RETURN B, C 8.08% (4.34)% 1.42%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 253,972 $ 129,587 $ 2,919
Ratio of expenses to average net assets .79% .82% .81% A
Ratio of expenses to average net assets .79% .82% .80% A, G
after expense reductions
Ratio of net investment income to average 9.69% 9.51% 10.75% A
net assets
Portfolio turnover rate 82% 92% 118%
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF SERVICE
CLASS SHARES) TO DECEMBER 31, 1997.
F THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO
BOOK TO TAX DIFFERENCES.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS'
EXPENSES.
You can obtain additional information about the funds. The funds' SAI
includes more detailed information about each fund and its
investments. The SAI is incorporated herein by reference (legally
forms a part of the prospectus). Each fund's annual and semi-annual
reports include a discussion of the fund's holdings and recent market
conditions and the fund's investment strategies that affected
performance.
For a free copy of any of these documents or to request other
information or ask questions about a fund, call Fidelity at
1-888-622-3175.
The SAI, the funds' annual and semi-annual reports and other related
materials are available from the Electronic Data Gathering,
Analys is, 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, Wa shington, D.C. 20549-0102. You can also review and
copy information about the funds, including the funds' SAI, at the
SEC's Public Reference Room in Washington, D.C . Call 1-202-942-8090
for infor mation on the operation of the SEC's Public Reference
Room.
INVESTMENT COMPANY ACT OF 1940, FILE NUMBERS , 811-3329,
811-5511, AND 811-7205
Fidelity, Contrafund, and Fidelity I nvestments & (Pyramid) Design
are 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 Fidelit y
Variable Insurance Products.
1.700548.102 VIPSC-pro-0400
FIDELITY(registered trademark) VARIABLE INSURANCE PRODUCTS
MONEY MARKET PORTFOLIO, HIGH INCOME PORTFOLIO, EQUITY-INCOME
PORTFOLIO, GROWTH PORTFOLIO, OVERSEAS PORTFOLIO, INVESTMENT GRADE BOND
PORTFOLIO, ASSET MANAGERSM PORTFOLIO, ASSET MANAGER: GROWTHSM
PORTFOLIO, INDEX 500 PORTFOLIO, CONTRAFUND(registered trademark)
PORTFOLIO, BALANCED PORTFOLIO, GROWTH & INCOME PORTFOLIO, GROWTH
OPPORTUNITIES PORTFOLIO, AND MID CAP PORTFOLIO
FUNDS OF VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE
PRODUCTS FUND II, AND VARIABLE INSURANCE PRODUCTS FUND III
INITIAL CLASS, SERVICE CLASS, AND SERVICE CLASS 2
STATEMENT OF ADDITIONAL INFORMATION
APRIL 30, 2000
This statement of additional information (SAI) is not a prospectus.
Portions of each fund's annual report are incorporated herein. The
annual reports are supplied with this SAI.
To obtain a free additional copy of a prospectus, dated April 30,
2000, or an annual report, please call Fidelity at 1-888-622-3175.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations 3
Special Considerations Regarding Canada 12
Special Considerations Regarding Europe 13
Special Considerations Regarding Japan 13
Special Considerations Regarding Asia 14
Pacific Region (ex Japan)
Special Considerations Regarding Latin America 14
Special Considerations Regarding Russia 14
Special Considerations Regarding Africa 15
Portfolio Transactions 15
Valuation 24
Performance 25
Additional Purchase and Redemption Information 96
Distributions and Taxes 96
Trustees and Officers 96
Control of Investment Advisers 103
Management Contracts 104
Distribution Services 115
Transfer and Service Agent Agreements 116
Description of the Trusts 119
Financial Statements 119
Appendix 120
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 invest ing or
send ing money.
(fidelity_logo_graphic)(REGISTERED TRADEMARK)
82 Devonshire Street, Boston, MA 02109
VIPIS2-ptb-0400
1.478007.103
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 a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser. (This
limitation does not apply to purchases 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 limitation (i), certain securities subject to
guarantees (including insurance, letters of credit and demand
features) are not considered securities of their issuer, but are
subject to separate diversification requirements, in accordance with
industry standard requirements for money market funds.
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 limitation (1).
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 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.
INVESTMENT LIMITATIONS OF VIP HIGH INCOME PORTFOLIO, VIP
EQUITY-INCOME PORTFOLIO, VIP GROWTH PORTFOLIO, VIP OVERSEAS
PORTFOLIO, VIP INVESTMENT GRADE BOND PORTFOLIO, VIP ASSET MANAGER
PORTFOLIO, VIP ASSET MANAGER: GROWTH PORTFOLIO, VIP INDEX 500
PORTFOLIO, VIP CONTRAFUND PORTFOLIO, VIP BALANCED PORTFOLIO, VIP
GROWTH & INCOME PORTFOLIO, VIP GROWTH OPPORTUNITIES PORTFOLIO, AND VIP
MID CAP PORTFOLI O
THE FOLLOWING ARE VIP HIGH INCOME PORTFOLIO'S, VIP EQUITY-INCOME
PORTFOLIO'S, VIP GROWTH PORTFOLIO'S, VIP OVERSEAS PORTFOLIO'S, VIP
INVESTMENT GRADE BOND PORTFOLIO'S, VIP ASSET MANAGER PORTFOLIO'S, VIP
ASSET MANAGER: GROWTH PORTFOLIO'S, VIP INDEX 500 PORTFOLIO'S, VIP
CONTRAFUND PORTFOLIO'S, VIP BALANCED PORTFOLIO'S, VIP GROWTH & INCOME
PORTFOLIO'S, VIP GROWTH OPPORTUNITIES PORTFOLIO'S, AND VIP MID CAP
PORTFOLIO'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH IN THEIR
ENTIRETY. EACH FUND MAY NOT:
(1) (for VIP High Income Portfolio, VIP Equity-Income Portfolio, VIP
Growth Portfolio, VIP Overseas Portfolio, VIP Investment Grade Bond
Portfolio, VIP Asset Manager Portfolio, VIP Asset Manager: Growth
Portfolio, VIP Index 500 Portfolio, VIP Contrafund Portfolio, and VIP
Mid Cap Portfolio) with respect to 75% of the fund's total assets,
purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities, or securities of other investment companies) if, as
a result, (a) more than 5% of the fund's total assets would be
invested in the securities of that issuer, or (b) the fund would hold
more than 10% of the outstanding voting securities of that issuer;
(for VIP Balanced Portfolio, VIP Growth & Income Portfolio, and VIP
Growth Opportunities Portfolio) with respect to 75% of the fund's
total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, (a) more than 5% of
the fund's total assets would be invested in the securities of that
issuer, or (b) the fund would hold more than 10% of the outstanding
voting securities of that issuer;
(2) (for VIP High Income Portfolio, VIP Equity-Income Portfolio, VIP
Growth Portfolio, VIP Overseas Portfolio, VIP Investment Grade Bond
Portfolio, VIP Asset Manager Portfolio, VIP Asset Manager: Growth
Portfolio, VIP Index 500 Portfolio, VIP Contrafund Portfolio, VIP
Balanced Portfolio, VIP Growth & Income Portfolio, and VIP Growth
Opportunities Portfolio) issue senior securities, except in connection
with the insurance program established by the fund pursuant to an
exemptive order issued by the Securities and Exchange Commission or as
otherwise permitted under the Investment Company Act of 1940;
(for VIP Mid Cap Portfolio) issue senior securities, except as
permitted under the Investment Company Act of 1940;
(3) (for VIP High Income Portfolio, VIP Equity-Income Portfolio, VIP
Growth Portfolio, VIP Overseas Portfolio, VIP Balanced Portfolio, VIP
Growth Opportunities Portfolio, and VIP Mid Cap Portfolio) borrow
money, except that the fund (i) may borrow money for temporary or
emergency purposes (not for leveraging or investment) or (ii) engage
in reverse repurchase agreements, provided that (i) and (ii) in
combination (borrowings) do not exceed 33 1/3% of its total assets
(including the amount borrowed) less liabilities (other than
borrowings). Any borrowings that come to exceed 33 1/3% of the value
of the fund's total assets by reason of a decline in net assets will
be reduced within three days (exclusive of Sundays and holidays) to
the extent necessary to comply with the 33 1/3% limitation;
(for VIP Investment Grade Bond Portfolio, VIP Asset Manager
Portfolio, VIP Asset Manager: Growth Portfolio, VIP Index 500
Portfolio, VIP Contrafund Portfolio, and VIP Growth & Income
Portfolio) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in
an amount not exceeding 33 1/3% of its total assets (including the
amount borrowed) less liabilities (other than borrowings). Any
borrowings that come to exceed this amount will be reduced within
three days (not including Sundays and holidays) to the extent
necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that
the fund may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of its total assets
would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments
backed by real estate or securities of companies engaged in the real
estate business);
(7) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed
by physical commodities); or
(8) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) (for VIP Balanced Portfolio and VIP Growth Opportunities
Portfolio) Each fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
(for VIP Mid Cap Portfolio) The fund may, notwithstanding any other
fundamental investment policy or limitation, invest all of its assets
in the securities of a single open-end management investment company
managed by Fidelity Management & Research Company or an affiliate or
successor with substantially the same fundamental investment
objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS FOR VIP HIGH INCOME PORTFOLIO,
VIP EQUITY-INCOME PORTFOLIO, VIP GROWTH PORTFOLIO, VIP OVERSEAS
PORTFOLIO, VIP INVESTMENT GRADE BOND PORTFOLIO, VIP ASSET MANAGER
PORTFOLIO, VIP ASSET MANAGER: GROWTH PORTFOLIO, VIP INDEX 500
PORTFOLIO, VIP CONTRAFUND PORTFOLIO, VIP BALANCED PORTFOLIO, VIP
GROWTH & INCOME PORTFOLIO, VIP GROWTH OPPORTUNITIES PORTFOLIO, AND VIP
MID CAP PORTFOLIO ARE NOT FUNDAMENTAL AND MAY BE CHANGED, AS
REGULATORY AGENCIES PERMIT, WITHOUT SHAREHOLDER APPROVAL.
(i) Each fund does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) Each fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) Each fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (3)).
(iv) Each fund does not currently intend to purchase any security if,
as a result, more than 10% (VIP Equity-Income Portfolio, VIP Growth
Portfolio, VIP Investment Grade Bond Portfolio, VIP Asset Manager
Portfolio, VIP Asset Manager: Growth Portfolio, VIP Index 500
Portfolio, VIP Contrafund Portfolio, VIP Balanced Portfolio, VIP
Growth & Income Portfolio, VIP Growth Opportunities Portfolio, and VIP
Mid Cap Portfolio) or more than 15% (VIP High Income Portfolio and VIP
Overseas Portfolio) of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the
prices at which they are valued.
(v) Each fund does not currently intend to lend assets other than
securities to other parties, except by: (a) lending money up to 15% of
the fund's net assets to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (This limitation does not apply
to purchases of debt securities or to repurchase agreements.)
(vi) Each fund does not currently intend to invest in oil, gas, or
other mineral exploration or development programs or leases.
(vii) (for VIP Balanced Portfolio and VIP Growth Opportunities
Portfolio) Each fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
(for VIP Mid Cap Portfolio) The fund does not currently intend to
invest all of its assets in the securities of a single open-end
management investment company managed by Fidelity Management &
Research Company or an affiliate or successor with substantially the
same fundamental investment objective, policies, and limitations as
the fund.
(viii) (for VIP High Income Portfolio, VIP Equity-Income Portfolio,
VIP Growth Portfolio, VIP Investment Grade Bond Portfolio, VIP Asset
Manager Portfolio, and VIP Index 500) FMR limits the amount of each
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 (l) and (i).
For purposes of limitation (5) (for each of VIP Asset Manager and
VIP Asset Manager: Growth), with respect to the fund's investments in
Fidelity Money Market Central Fund, FMR treats the issuers of the
underlying securities owned by Fidelity Money Market Central Fund as
the issuer of Fidelity Money Market Central Fund.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% (VIP Equity-Income Portfolio, VIP Growth Portfolio, VIP
Investment Grade Bond Portfolio, VIP Asset Manager Portfolio, VIP
Asset Manager: Growth Portfolio, VIP Index 500 Portfolio, VIP
Contrafund Portfolio, VIP Balanced Portfolio, VIP Growth & Income
Portfolio, VIP Growth Opportunities Portfolio, and VIP Mid Cap
Portfolio) or more than 15% (VIP High Income Portfolio and VIP
Overseas Portfolio) 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 or foreign repurchase agreements a fund enters into will be
secured by collateral consisting of liquid assets having a market
value of not less than 102% of the cash or assets transferred to the
other party.
For the funds' limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page 11 .
For purposes of VIP Index 500 Portfolio's limitation on concentration
in a single industry, the fund may use the industry categorizations as
defined by BARRA, Inc.
For purposes of normally investing at least 65% of VIP High
Income Portfolio's total assets in income-producing debt securities,
preferred stocks and convertible securities, with an emphasis on
lower-quality debt securities, FMR interprets "total assets" to
exclude collateral received for securities lending transactions.
For purposes of normally investing at least 65% of VIP
Equity-Income Portfolio's total assets in income-producing equity
securities, FMR interprets "total assets" to exclude collateral
received for securities lending transactions.
For purposes of normally investing at least 65% of VIP Mid Cap
Portfolio's total assets in securities of companies with medium market
capitalizations, FMR interprets "total assets" to exclude collateral
received for securities lending transactions.
For purposes of investing at least 25% of VIP Balanced Portfolio's
total assets in fixed-income senior securities (including debt
securities and preferred stock), FMR interprets "total assets" to
exclude collateral received for securities lending transactions.
For purposes of normally investing at least 65% of VIP Overseas
Portfolio's total assets in foreign securities, FMR interprets "total
assets" to exclude collateral received for securities lending
transactions.
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 ALLOCATION (VIP ASSET MANAGER AND VIP ASSET MANAGER: GROWTH
ONLY). The stock class includes domestic and foreign equity
securities of all types (other than adjustable rate preferred
stocks, which are included in the bond class). Securities in the stock
class may include common stocks, fixed-rate preferred stocks
(including convertible preferred stocks), warrants, rights, depositary
receipts, securities of closed-end investment companies, and other
equity securities issued by companies of any size, located anywhere in
the world.
The bond class includes all varieties of domestic and foreign
fixed-income securities maturing in more than one year .
S ecurities in this asset c lass may include bonds, notes,
adjustable-rate preferred stocks, convertible bonds, mortgage-related
and asset-backed securities, domestic and foreign government and
government agency securities, zero coupon bonds, and other
intermediate and long-term securities. These securities may be
denominated in U.S. dollars or foreign currency.
The short-term/money market class includes all types of domestic and
foreign short-term and money market instruments. S hort-term and
money market instruments may include commercial paper, notes, and
other corporate debt securities, government securities issued by U.S.
or foreign governments or their agencies or instrumentalities, bank
deposits and other financial institution obligations, repurchase
agreements involving any type of security, and other similar
short-term instruments. These instruments may be denominated in U.S.
dollars or foreign currency.
FMR may use its judgment to place a security in the most appropriate
asset class based on its investment characteristics. Fixed-income
securities may be classified in the bond or short-term/money market
class according to interest rate sensitivity as well as maturity. A
fund may also make other investments that do not fall within these
asset classes. In making asset allocation decisions, FMR will evaluate
projections of risk, market conditions, economic conditions,
volatility, yields, and returns. FMR's management will use database
systems to help analyze past situations and trends, research
specialists in each of the asset classes to help in securities
selection, portfolio management professionals to determine asset
allocation and to select individual securities, and its own credit
analysis as well as credit analyses provided by rating services.
ASSET-BACKED SECURITIES represent interests in pools of mortgages,
loans, receivables or other assets. Payment of interest and repayment
of principal may be largely dependent upon the cash flows generated by
the assets backing the securities and, in certain cases, supported by
letters of credit, surety bonds, or other credit enhancements.
Asset-backed security values may also be affected by other factors
including changes in interest rates, the availability of information
concerning the pool and its structure, the creditworthiness of the
servicing agent for the pool, the originator of the loans or
receivables, or the entities providing the credit enhancement. In
addition, these securities may be subject to prepayment risk.
BORROWING. Each fund may borrow from banks or from other funds advised
by FMR or its affiliates, or through reverse repurchase agreements. If
a fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is paid off. If a fund makes
additional investments while borrowings are outstanding, this may be
considered a form of leverage.
CASH MANAGEMENT. A fund can hold uninvested cash or can invest it in
cash equivalents such as money market securities, repurchase
agreements or shares of money market funds. Generally, these
securities offer less potential for gains than other types of
securities.
CENTRAL CASH FUNDS are money market funds managed by FMR or its
affiliates that seek to earn a high level of current income (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 .
F oreign 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 . I n 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.
FOREIGN REPURCHASE AGREEMENTS. Foreign repurchase agreements involve
an agreement to purchase a foreign security and to sell that security
back to the original seller at an agreed-upon price in either U.S.
dollars or foreign currency. Unlike typical U.S. repurchase
agreements, foreign repurchase agreements may not be fully
collateralized at all times. T he value of a security purchased
by a fund may be more or less than the price at which the counterparty
has agreed to repurchase the security. In the event of default by the
counterparty, the fund may suffer a loss if the value of the security
purchased is less than the agreed-upon repurchase price, or if the
fund is unable to successfully assert a claim to the collateral under
foreign laws. As a result, foreign repurchase agreements may involve
higher credit risks than repurchase agreements in U.S. markets, as
well as risks associated with currency fluctuations. In addition, as
with other emerging market investments, repurchase agreements with
counterparties located in emerging markets or relating to emerging
markets may involve issuers or counterparties with lower credit
ratings than typical U.S. repurchase agreements.
FUNDS' RIGHTS AS 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 500 SM 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.
Futures may be based o n foreign indexes such as the CAC 40
(France), DAX 30 (Germany), EuroTop 100 (Europe), IBEX (Spain), FTSE
100 (United Kingdom), All Ordinary (Australia), Hang Seng (Hong Kong),
and Nikkei 225, Nikkei 300 and TOPIX (Japan).
The value of a futures contract tends to increase and decrease in
tandem with the value of its underlying instrument. Therefore,
purchasing futures contracts will tend to increase a fund's exposure
to positive and negative price fluctuations in the underlying
instrument, much as if it had purchased the underlying instrument
directly. When a fund sells a futures contract, by contrast, the value
of its futures position will tend to move in a direction contrary to
the market. Selling futures contracts, therefore, will tend to offset
both positive and negative market price changes, much as if the
underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract
is not required to deliver or pay for the underlying instrument unless
the contract is held until the delivery date. However, both the
purchaser and seller are required to deposit "initial margin" with a
futures broker, known as a futures commission merchant (FCM), when the
contract is entered into. Initial margin deposits are typically equal
to a percentage of the contract's value. If the value of either
party's position declines, that party will be required to make
additional "variation margin" payments to settle the change in value
on a daily basis. The party that has a gain may be entitled to receive
all or a portion of this amount. Initial and variation margin payments
do not constitute purchasing securities on margin for purposes of a
fund's investment limitations. In the event of the bankruptcy of an
FCM that holds margin on behalf of a fund, the fund may be entitled to
return of margin owed to it only in proportion to the amount received
by the FCM's other customers, potentially resulting in losses to the
fund.
Although futures exchanges generally operate similarly in the United
States and abroad, foreign futures exchanges may follow trading,
settlement and margin procedures that are different from those for
U.S. exchanges. Futures contracts traded outside the United States may
involve greater risk of loss than U.S.-traded contracts, including
potentially greater risk of losses due to insolvency of a futures
broker, exchange member or other party that may owe initial or
variation margin to a fund. Because initial and variation margin
payments may be measured in foreign currency, a futures contract
traded outside the United States may also involve the risk of foreign
currency fluctuation.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each 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, each growth, growth & income, and asset allocation
fund (except VIP Index 500) will not: (a) sell futures contracts,
purchase put options, or write call options if, as a result, more than
25% of the fund's total assets would be hedged with futures and
options under normal conditions; (b) purchase futures contracts or
write put options if, as a result, the fund's total obligations upon
settlement or exercise of purchased futures contracts and written put
options would exceed 25% of its total assets under normal conditions;
or (c) purchase call options if, as a result, the current value of
option premiums for call options purchased by the fund would exceed 5%
of the fund's total assets. These limitations do not apply to options
attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
In addition, each income fund will not: (a) sell futures contracts,
purchase put options, or write call options if, as a result, more than
25% of the fund's total assets would be hedged with futures and
options under normal conditions; (b) purchase futures contracts or
write put options if, as a result, the fund's total obligations upon
settlement or exercise of purchased futures contracts and written put
options would exceed 25% of its total assets; or (c) purchase call
options if, as a result, the current value of option premiums for call
options purchased by the fund would exceed 5% of the fund's total
assets. These limitations do not apply to options attached to or
acquired or traded together with their underlying securities, and do
not apply to securities that incorporate features similar to options.
BT also intends to follow certain other limitations on 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(registered trademark),
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.
Because the risk of default is higher for lower-quality debt
securities, FMR's research and credit analysis are an especially
important part of managing securities of this type. FMR will attempt
to identify those issuers of high-yielding securities whose financial
condition is adequate to meet future obligations, has improved, or is
expected to improve in the future. FMR's analysis focuses on relative
values based on such factors as interest or dividend coverage, asset
coverage, earnings prospects, and the experience and managerial
strength of the issuer.
A fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise to exercise its rights as a security
holder to seek to protect the interests of security holders if it
determines this to be in the best interest of the fund's shareholders.
MONEY MARKET INSURANCE. The money market fund participates in a mutual
insurance company solely with other funds advised by FMR or its
affiliates. This company provides insurance coverage for losses on
certain money market instruments held by a participating fund
(eligible instruments), including losses from nonpayment of principal
or interest or a bankruptcy or insolvency of the issuer or credit
support provider, if any. The insurance does not cover losses
resulting from changes in interest rates or other market developments.
The money market fund is charged an annual premium for the insurance
coverage and may be subject to a special assessment of up to
approximately two and one-half times the fund's annual gross premium
if covered losses exceed certain levels. A participating fund may
recover no more than $100 million annually, including all other claims
of insured funds, and may only recover if the amount of the loss
exceeds 0.30% of its eligible instruments. The money market fund may
incur losses regardless of the insurance.
MONEY MARKET SECURITIES are high-quality, short-term obligations.
Money market securities may be structured to be, or may employ a trust
or other form so that they are, eligible investments for money market
funds. For example, put features can be used to modify the maturity of
a security or interest rate adjustment features can be used to enhance
price stability. If a structure fails to function as intended, adverse
tax or investment consequences may result. Neither the Internal
Revenue Service (IRS) nor any other regulatory authority has ruled
definitively on certain legal issues presented by certain structured
securities. Future tax or other regulatory determinations could
adversely affect the value, liquidity, or tax treatment of the income
received from these securities or the nature and timing of
distributions made by the funds.
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 indexes that the fund seeks
to track.
SECURITIES LENDING. A fund may lend securities to parties such as
broker-dealers or other institutions, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange
(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 risk s.
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 loan
ed, 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 the money market fund) will incur transaction
costs, including interest expenses, in connection with opening,
maintaining, and closing short sales against the box.
SHORT SALES. Stocks underlying a fund's convertible security holdings
can be sold short. For example, if FMR anticipates a decline in the
price of the stock underlying a convertible security held by a fund,
it may sell the stock short. If the stock price subsequently declines,
the proceeds of the short sale could be expected to offset all or a
portion of the effect of the stock's decline on the value of the
convertible security. Each fund currently intends to hedge no more
than 15% of its total assets with short sales on equity securities
underlying its convertible security holdings under normal
circumstances.
A fund will be required to set aside securities equivalent in kind and
amount to those sold short (or securities convertible or exchangeable
into such securities) and will be required to hold them aside while
the short sale is outstanding. A fund will incur transaction costs,
including interest expenses, in connection with opening, maintaining,
and closing short sales.
SOURCES OF LIQUIDITY OR CREDIT SUPPORT. Issuers may employ various
forms of credit and liquidity enhancements, including letters of
credit, guarantees, puts, and demand features, and insurance provided
by domestic or foreign entities such as banks and other financial
institutions. FMR may rely on its evaluation of the credit 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.
SOVEREIGN DEBT OBLIGATIONS are issued or guaranteed by foreign
governments or their agencies, including debt of Latin American
nations or other developing countries. Sovereign debt may be in the
form of conventional securities or other types of debt instruments
such as loans or loan participations. Sovereign debt of developing
countries may involve a high degree of risk, and may be in default or
present the risk of default. Governmental entities responsible for
repayment of the debt may be unable or unwilling to repay principal
and pay interest when due, and may require renegotiation or
rescheduling of debt payments. In addition, prospects for repayment of
principal and payment of interest may depend on political as well as
economic factors. Although some sovereign debt, such as Brady Bonds,
is collateralized by U.S. Government securities, repayment of
principal and payment of interest is not guaranteed by the U.S.
Government.
STRIPPED SECURITIES are the separate income or principal components of
a debt security. The risks associated with stripped securities are
similar to those of other debt securities, although stripped
securities may be more volatile, and the value of certain types of
stripped securities may move in the same direction as interest rates.
U.S. Treasury securities that have been stripped by a Federal Reserve
Bank are obligations issued by the U.S. Treasury.
Privately stripped government securities are created when a dealer
deposits a U.S. Treasury security or other U.S. Government security
with a custodian for safekeeping. The custodian issues separate
receipts for the coupon payments and the principal payment, which the
dealer then sells.
Because the SEC does not consider privately stripped government
securities to be U.S. Government securities for purposes of Rule 2a-7,
a 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. Each of VIP Equity-Income, VIP Growth,
VIP Overseas, VIP Asset Manager, VIP Asset Manager: Growth, VIP Index
500, VIP Contrafund, VIP Balanced, VIP Growth & Income, VIP Growth
Opportunities, and VIP Mid Cap 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.
VIP High Income reserves the right to invest without limitation in
investment-grade securities for temporary, defensive purposes.
VARIABLE AND FLOATING RATE SECURITIES provide for periodic adjustments
in the interest rate paid on the security. Variable rate securities
provide for a specified periodic adjustment in the interest rate,
while floating rate securities have interest rates that change
whenever there is a change in a designated benchmark rate. Some
variable or floating rate securities are structured with put features
that permit holders to demand payment of the unpaid principal balance
plus accrued interest from the issuers or certain financial
intermediaries.
WARRANTS. Warrants are instruments which entitle the holder to buy an
equity security at a specific price for a specific period of time.
Changes in the value of a warrant do not necessarily correspond to
changes in the value of its underlying security. The price of a
warrant may be more volatile than the price of its underlying
security, and a warrant may offer greater potential for capital
appreciation as well as capital loss.
Warrants do not entitle a holder to dividends or voting rights with
respect to the underlying security and do not represent any rights in
the assets of the issuing company. A warrant ceases to have value if
it is not exercised prior to its expiration date. These factors can
make warrants more speculative than other types of investments.
WHEN-ISSUED AND FORWARD PURCHASE OR SALE TRANSACTIONS involve a
commitment to purchase or sell specific securities at a predetermined
price or yield in which payment and delivery take place after the
customary settlement period for that type of security. Typically, no
interest accrues to the purchaser until the security is delivered.
When purchasing securities pursuant to one of these transactions, the
purchaser assumes the rights and risks of ownership, including the
risks of price and yield fluctuations and the risk that the security
will not be issued as anticipated. Because payment for the securities
is not required until the delivery date, these risks are in addition
to the risks associated with a fund's investments. If a fund remains
substantially fully invested at a time when a purchase is outstanding,
the purchases may result in a form of leverage. When a fund has sold a
security pursuant to one of these transactions, the fund does not
participate in further gains or losses with respect to the security.
If the other party to a delayed-delivery transaction fails to deliver
or pay for the securities, a fund could miss a favorable price or
yield opportunity or suffer a loss.
A fund may renegotiate a when-issued or forward transaction and may
sell the underlying securities before delivery, which may result in
capital gains or losses for the fund.
ZERO COUPON BONDS do not make interest payments; instead, they are
sold at a discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be more volatile than other types of
fixed-income securities when interest rates change. In calculating a
fund's dividend, a portion of the difference between a zero coupon
bond's purchase price and its face value is considered income.
SPECIAL CONSIDERATIONS REGARDING CANADA
POLITICAL. Canada's parliamentary system of government is,
in general, stable. However, from time to time, some provinces, but
particularly Quebec, have called for a revamping of the legal and
financial relationship between the federal government in Ottawa and
the provinces. To date, referendums on Quebec sovereignty have been
defeated, but the issue remains unresolved. The Supreme Court of
Canada decided in August 1998 that if there was a "clear answer" to a
"clear question" in a referendum, then the federal government would be
obliged to negotiate with Quebec.
ECONOMIC. Canada is a major producer of commodities such as
forest products, metals, agricultural products, and energy related
products like oil, gas, and hydroelectricity. Accordingly, changes in
the supply and demand of industrial and basic materials, both
domestically and internationally, can have a significant effect on
Canadian market performance.
In addition, Canada relies considerably on the health of the United
States' economy, its biggest trading partner and largest foreign
investor. The expanding economic and financial integration of the
United States and Canada will likely make the Canadian economy and
securities market increasingly sensitive to U.S. economic and market
events.
CURRENCY. For U.S. investors, investing in any foreign
currency entails an additional risk that is not faced when investing
in the domestic market. Since Canada let its currency float in 1970,
its value has been in a steady decline against the U.S. dollar. While
the decline has helped Canada stay competitive in export markets, U.S.
investors have seen their investment returns eroded by the impact of
currency conversion.
SPECIAL CONSIDERATIONS REGARDING EUROPE
On January 1, 1999, eleven of the fifteen member countries of the
European Union (EU) fixed their currencies irrevocably to the euro,
the new unit of currency of the European Economic and Monetary Union
(EMU). At that time each member's currency was converted at a fixed
rate to the euro. Initially, use of the euro will be confined mainly
to the wholesale financial markets, while its widespread use in the
retail sector will follow the circulation of euro banknotes and coins
on January 1, 2002. At that time, the national banknotes and coins of
participating member countries will cease to be legal tender. In
addition to adopting a single currency, member countries will no
longer control their own monetary policies. Instead, the authority to
direct monetary policy will be exercised by the new European Central
Bank.
While economic and monetary convergence in the EU may offer new
opportunities for those investing in the region, investors should be
aware that the success of the union is not wholly assured. Europe must
grapple with a number of challenges, any one of which could threaten
the survival of this monumental undertaking. Eleven disparate
economies must adjust to a unified monetary system, the absence of
exchange rate flexibility, and the loss of economic sovereignty. The
Continent's economies are diverse, its governments decentralized, and
its cultures differ widely. Unemployment is historically high and
could pose political risk. One or more member countries might exit the
union, placing the currency and banking system in jeopardy.
POLITICAL. For those countries in Western and Eastern Europe
that were not included in the first round of the EU implementation,
the prospects for eventual membership serve as a strong political
impetus for many governments to employ tight fiscal and monetary
policies. Particularly for the Eastern European countries, aspirations
to join the EU are likely to push governments to act decisively.
At the same time, there could become an increasingly widening gap
between rich and poor within the aspiring countries, those countries
who are close to meeting membership criteria, and those who are not
likely to join the EMU. Realigning traditional alliances could alter
trading relationships and potentially provoke divisive socioeconomic
splits. Despite relative calm in Western Europe in recent years, the
risk of regional conflict or targeted terrorist activity could disrupt
European markets.
In the transition to the single economic system, significant
political decisions will be made which will effect the market
regulation, subsidization, and privatization across all industries,
from agricultural products to telecommunications.
ECONOMIC. As economic conditions across member states vary
from robust to dismal, there is continued concern about national-level
support for the currency and the accompanying coordination of fiscal
and wage policy among the eleven EMU member nations. According to the
Maastricht treaty, member countries must maintain inflation below
3.3%, public debt below 60% of GDP, and a deficit of 3% or less of GDP
to qualify for participation in the euro. These requirements severely
limit member countries' ability to implement monetary policy to
address regional economic conditions. Countries that did not qualify
for the euro, such as Greece, risk being left farther behind.
FOREIGN TRADE. The EU has recently been involved in a number
of trade disputes with major trading partners, including the United
States. Tariffs and embargoes have been levied upon imports of
agricultural products and meat that have resulted in the affected
nation levying retaliatory tariffs upon imports from Europe. These
disputes can adversely affect the valuations of the European companies
that export the targeted products.
CURRENCY. For U.S. investors, investing in any foreign
currency entails an additional risk that is not faced when investing
in the domestic market. However, investing in euro-denominated
securities entails risk of being exposed to a new currency that may
not fully reflect the strengths and weaknesses of the disparate
economies that make up the Union. This has been the case in the first
six months of 1999, when the initial exchange rates of the euro versus
many of the world's major currencies steadily declined. In this
environment, U.S. and other foreign investors experienced erosion of
their investment returns in the region. In addition, many European
countries rely heavily upon export dependent businesses and any
strength in the exchange rate between the euro and the dollar can have
either a positive or a negative effect upon corporate profits.
GERMANY. The German economy is heavily industrialized, with
a strong emphasis on manufacturing and exports. Therefore, Germany's
economic growth is heavily dependent on the prosperity of its trading
partners and on currency exchange rates. Germany is closely tied to a
number of Eastern European emerging market economies and weakness in
these economies will likely dampen demand for German exports. Germany
continues to struggle with its incorporation of former East Germany
and the country as a whole faces high labor costs and high
unemployment.
FRANCE. In recent years, the country's economic growth has
been hit by a series of general strikes. France's strong labor unions
reacted negatively to government cuts driven by the country's effort
to meet EMU membership criteria. Recently, unions have demanded a
lower retirement age and a shorter work week. Economic growth also is
limited by the country's pay-as-you-go pension system; spending on
pensions accounts for about 10% of GDP.
NORDIC COUNTRIES. Faced with stronger global competition,
the Nordic countries - Norway, Finland, Denmark, and Sweden - have had
to scale down their historically generous welfare programs, resulting
in drops in domestic demand and increased unemployment. Major
industries in the region, such as forestry, agriculture, and oil, are
heavily resource dependent and face pressure as a result of high labor
costs. Pension reform, union regulation, and further cuts in liberal
social programs will likely need to be addressed as the Nordic
countries face increased international competition.
UNITED KINGDOM. The United Kingdom continues to be overtly
less enthusiastic about EMU than other countries in Europe and has not
committed itself to joining the euro. While the UK views independence
from the EMU as a competitive advantage, the country may not benefit
from its independence if economic conditions on the continent improve.
If the continental European stock markets make more compelling
prospects for economic growth, there is concern that the UK market may
lag its European counterparts.
EASTERN EUROPE. Investing in the securities of Eastern
European issuers is highly speculative and involves risks not usually
associated with investing in the more developed markets of Western
Europe.
The economies of the Eastern European nations are embarking on the
transition from communism at different paces with appropriately
different characteristics. Most Eastern European markets suffer from
thin trading activity, dubious investor protections, and often, a
dearth of reliable corporate information. Information and transaction
costs, differential taxes, and sometimes political or transfer risk
give a comparative advantage to the domestic investor rather than the
foreign investor. In addition, these markets are particularly
sensitive to political, economic, and currency events in Russia and
have recently suffered heavy losses as a result of their trading and
investment links to the troubled Russian economy and currency.
SPECIAL CONSIDERATIONS REGARDING JAPAN
Fueled by public investment, protectionist trade policies, and
innovative management styles, the Japanese economy has transformed
itself since World War II into the world's second largest economy.
Despite its impressive history, investors face special risks when
investing in Japan.
ECONOMIC. Since Japan's bubble economy collapsed eight years
ago, the nation has drifted between modest growth and recession. By
mid-year 1998, the world's second largest economy had slipped into its
deepest recession since World War II. Much of the blame can be placed
on government inaction in implementing long-neglected structural
reforms despite strong and persistent prodding from the International
Monetary Fund (IMF) and the G7 member nations. Steps have been taken
to deregulate and liberalize protected areas of the economy, but the
pace of change has been disappointedly slow.
The most pressing need for action is the daunting task of
overhauling the nation's financial institutions and securing public
support for taxpayer-funded bailouts. Banks, in particular, must
dispose of their huge overhang of bad loans and trim their balance
sheets in preparation for greater competition from foreign
institutions as more areas of the financial sector are opened.
Successful financial sector reform would allow Japan's financial
institutions to act as a catalyst for economic recovery at home and
across the troubled Asian region.
FOREIGN TRADE. Much of Japan's economy is dependent upon
international trade. The country is a leading exporter of automobiles
and industrial machinery as well as industrial and consumer
electronics. While the United States is Japan's largest single trading
partner, close to half of Japan's trade is conducted with developing
nations, almost all of which are in Southeast Asia. For the past two
years, Southeast Asia's economies have been mired in economic
stagnation causing a steep decline in Japan's exports to the area.
Japan's hope for economic recovery and renewed export growth is
largely dependent upon the pace of economic recovery in Southeast
Asia.
NATURAL RESOURCE DEPENDENCY. An island nation with limited
natural resources, Japan is also heavily dependent upon imports of
essential products such as oil, forest products, and industrial
metals. Accordingly, Japan's industrial sector and domestic economy
are highly sensitive to fluctuations in international commodity
prices. In addition, many of these commodities are traded in U.S.
dollars and any strength in the exchange rate between the yen and the
dollar can have either a positive or a negative effect upon corporate
profits.
NATURAL DISASTERS. The Japanese islands have been subjected
to periodic natural disasters including earthquakes, monsoons, and
tidal waves. These events have often inflicted substantial economic
disruption upon the nation's populace and industries.
SPECIAL CONSIDERATIONS REGARDING ASIA PACIFIC REGION (EX JAPAN)
Many countries in the region have historically faced political
uncertainty, corruption, military intervention, and social unrest.
Examples include the ethnic, sectarian, and separatist violence found
in Indonesia, and the nuclear arms threats between India and Pakistan.
To the extent that such events continue in the future, they can be
expected to have a negative effect on economic and securities market
conditions in the region.
ECONOMIC. The economic health of the region depends, in
great part, on each country's respective ability to carry out fiscal
and monetary reforms and its ability to address the IMF's mandated
benchmarks. The majority of the countries in the region can be
characterized as either developing or newly industrialized economies,
which tend to experience more volatile economic cycles than developed
countries. In addition, a number of countries in the region have
historically faced hyperinflation, a deterrent to productivity and
economic growth.
CURRENCY. For U.S. investors, investing in any currency
entails an additional risk that is not faced when investing in the
domestic market. Some countries in the region may impose restrictions
on converting local currency, effectively preventing foreigners from
selling assets and repatriating funds. While flexible exchange rates
through most of the region should allow greater control of domestic
liquidity conditions, the region's currencies generally face
above-average volatility with potentially negative implications for
economic and security market conditions.
NATURAL DISASTERS. The Asia Pacific region has been
subjected to periodic natural disasters such as earthquakes, monsoons,
and tidal waves. These events have often inflicted substantial
economic disruption upon the populace and industry of the countries in
that region.
CHINA AND HONG KONG. As with all transition economies,
China's ability to develop and sustain a credible legal, regulatory,
monetary, and socioeconomic system could influence the course of
outside investment. Hong Kong is closely tied to China, economically
and through China's 1997 acquisition of the country as a Special
Autonomous Region (SAR). Hong Kong's success depends, in large part,
on its ability to retain the legal, financial and monetary systems
that allow economic freedom and market expansion.
SPECIAL CONSIDERATIONS REGARDING LATIN AMERICA
As an emerging market, Latin America has long suffered from
political, economic, and social instability. For investors, this has
meant additional risk caused by periods of regional conflict,
political corruption, totalitarianism, protectionist measures,
nationalization, hyperinflation, debt crises, and currency
devaluation. However, much has changed in the past decade. Democracy
is beginning to become well established in some countries. A move to a
more mature and accountable political environment is well under way.
Domestic economies have been deregulated and have enjoyed sound levels
of growth. Privatization of state-owned companies is almost completed.
Foreign trade restrictions have been relaxed. Large fiscal deficits
have been reduced and inflation controlled. Nonetheless, the volatile
stock markets of 1998 have clearly demonstrated that investors in the
region continue to face a number of potential risks.
POLITICAL. While investors recently have benefited from
friendlier forms of government, the Latin American political climate
is still vulnerable to sudden changes. Many countries in the region
have been in recession and have faced high unemployment. Corruption
remains part of the political landscape. This could lead to social
unrest and changes in governments that are less favorable to
investors. The investor friendly trends of social, economic, and
market reforms seen over the past several years could be reversed.
Also, as has historically been the case, the stock markets may be
subject to increased volatility as some countries approach elections:
Argentina, Chile, Mexico, and Peru.
SOCIAL UNREST. Latin America continues to suffer from one of
the most inequitable distributions of wealth in the world, as well as
rampant delinquency and street crime. The recent reforms and the move
to democracy, which were initially welcomed by the population, so far
have failed to significantly improve the living conditions of the
majority of people. This could lead to social unrest, occasional labor
strikes, rebellion, or civil war.
ECONOMIC. Many countries in the region have experienced
periods of hyperinflation which adversely impacted and may continue to
impact their economies and local stock markets. Despite signs that
inflation has been tamed, the risk of hyperinflation persists.
FOREIGN TRADE. One key to the recent economic growth in the
region has been the reduction of trade barriers and a series of
free-trade agreements. These are currently under pressure given the
recent macro-economic imbalances between many trading partners. One
example would be Mercosur, which includes Argentina, Brazil, Uruguay,
and Paraguay. As long as the economies perform well and the regimes
maintain similar economic and currency policies, all will benefit from
this agreement. However, the recent devaluation of Brazil's currency,
combined with recessions in the region, has created tension between
the largest trading partners, Brazil and Argentina. This could
threaten the pace of vital trade integration and regional economic
stability.
CURRENCY. For U.S. investors, investing in any foreign
market entails the risk of currency fluctuations; any weakness in the
local currency could erode the investment returns to U.S. investors
upon currency conversion. As is typical of emerging markets, Latin
America has a long history of currency devaluation, evidenced by the
Mexican peso crisis and the more recent Brazilian devaluation. The
region remains exposed to currency speculators, particularly if the
economic or political conditions worsen. Countries where the currency
is artificially pegged to the dollar are most at risk. For example,
predatory speculation may shift to Argentina if the cost of
maintaining the currency board reaches an unsustainable level given
the negative impact of the Brazilian devaluation, the economic
recession, the deterioration of the foreign trade balances, and the
mounting fiscal deficit.
SOVEREIGN DEBT. Although austerity programs in many
countries have significantly reduced fiscal deficits, the region is
still facing significant debt. Interest on the debt is subject to
market conditions and may reach levels that would impair economic
activity and create a difficult and costly environment for borrowers.
In addition, governments may be forced to reschedule or freeze their
debt repayment, which could negatively impact the stock market.
NATURAL RESOURCES DEPENDENCY. Commodities such as
agricultural products, minerals, and metals account for a significant
percentage of exports of many Latin American countries. As a result,
these economies have been particularly sensitive to the fluctuation of
commodity prices. As an example, Chile has been affected by the change
in the prices of copper and pulp, which has adversely affected its
economy and stock market. Similarly, because the U.S. is Mexico's
largest trading partner - accounting for more than four-fifths of its
exports - any economic downturn in the U.S. economy could adversely
impact the Mexican economy and stock market.
NATURAL DISASTERS. The region has been subjected to periodic
natural disasters, such as earthquakes and floods. These events have
often inflicted substantial damage upon the populations and the
economy. More recently, weather disorders attributed to the "El Nino"
effect have placed a serious drag on the economy of some countries,
such as Peru and Ecuador.
FINANCIAL REPORTING STANDARDS. As is typical of many
emerging markets, many companies in the region are still controlled by
families and their associates. Accordingly, these owners may not
always act in the best interests of public shareholders. In addition,
rules for disclosing financial information are less stringent, which
increases the difficulty of accessing reliable and viable
information.
SPECIAL CONSIDERATIONS REGARDING RUSSIA
Investing in Russian securities is highly speculative and involves
greater risks than generally encountered when investing in the
securities markets of the U.S. and most other developed countries.
Over the past century, Russia has experienced political and economic
turbulence and has endured decades of communist rule under which tens
of millions of its citizens were collectivized into state agricultural
and industrial enterprises. For most of the past decade, Russia's
government has been faced with the daunting task of stabilizing its
domestic economy, while transforming it into a modern and efficient
structure able to compete in international markets and respond to the
needs of its citizens. However, to date, many of the country's
economic reform initiatives have floundered as the proceeds of IMF and
other economic assistance have been squandered or stolen. In this
environment, there is always the risk that the nation's government
will abandon the current program of economic reform and replace it
with radically different political and economic policies that would be
detrimental to the interests of foreign investors. This could entail a
return to a centrally planned economy and nationalization of private
enterprises similar to what existed under the old Soviet Union. As
recently as 1998, the government imposed a moratorium on the repayment
of its international debt and the restructuring of the repayment
terms.
Foreign investors also face a high degree of currency risk when
investing in Russian securities. In a surprise move in August 1998,
Russia devalued the ruble, defaulted on short-term domestic bonds, and
declared a moratorium on commercial debt payments. In light of these
and other recent government actions, foreign investors face the
possibility of further devaluations. In addition, there is the risk
the government may impose capital controls on foreign portfolio
investments in the event of extreme financial or political crisis.
Such capital controls would prevent the sale of a portfolio of foreign
assets and the repatriation of proceeds.
Many of Russia's businesses have failed to mobilize the available
factors of production because the country's privatization program
virtually ensured the predominance of the old management teams that
are largely non-market-oriented in their management approach. A
combination of poor accounting standards, inept management, endemic
corruption, and limited shareholder rights pose a significant risk,
particularly to foreign investors.
Compared to most national stock markets, the Russian securities
market suffers from a variety of problems not encountered in more
developed markets. Among these are thin trading activity, inadequate
regulatory protection for the rights of investors, and lax custody
procedures. Additionally, there is a dearth of solid corporate
information available to investors.
The Russian economy is heavily dependent upon the export of a range
of commodities including most industrial metals, forestry products,
oil, and gas. Accordingly, it is strongly affected by international
commodity prices and is particularly vulnerable to any weakening in
global demand for these products .
SPECIAL CONSIDERATIONS REGARDING AFRICA
Africa is a highly diverse and politically unstable continent of
over 50 countries and 840 million people. Civil wars, coups, and even
genocidal warfare have beset much of this region in recent years.
Nevertheless, the continent is home to an abundance of natural
resources, including natural gas, aluminum, crude oil, copper, iron,
bauxite, cotton, diamonds, and timber. Wealthier African countries
generally have strong connections to European partners; evidence of
these relationships is seen in the growing market capitalization and
foreign investment. Economic performance remains closely tied to world
commodity markets, particularly oil, as well as agricultural
conditions, such as drought.
Several Northern African countries have substantial oil reserves
and, accordingly, their economies react strongly to world oil prices.
They share a regional and sometimes religious identification with the
oil producing nations of the Middle East and can be strongly affected
by political and economic developments in those countries. As in the
south, weather conditions have a strong impact on many of their
natural resources, as was the case in 1995, when severe drought
adversely affected economic growth.
Several African countries have active equity markets, many
established since 1989. The oldest market, in Egypt, was established
in 1883, while the youngest, in Zambia, was established in 1994. The
mean age for all equity markets is 40 years old. A total of 1,830
firms are listed on the respective exchanges. With the exception of
the relatively large and liquid South African stock market,
sub-Saharan Africa is probably the riskiest of all the world's
emerging markets.
During the past two decades, sub-Saharan Africa has lagged behind
other developing regions in economic growth. The area attracts only a
modest share of foreign direct investment and remains highly dependent
on foreign aid. The financial markets are small and underdeveloped and
offer little regulatory protection for investors. Except for South
Africa, the most fundamental problem in all of the countries in the
region is the absence of an effective court system to ensure the
enforceability of contracts. Investors in the area generally face a
high risk of continuing political and economic instability as well as
currency exchange rate volatility.
SOUTH AFRICA. South Africa has a highly developed and
industrialized economy. It is rich in mineral resources and is the
world's largest producer and exporter of gold. The nation's new
government has made remarkable progress in consolidating the nation's
peaceful transition to democracy and in redressing the socioeconomic
disparities created by apartheid. It has a sophisticated financial
structure with a large and active stock exchange that ranks 19th in
the world in terms of market capitalization. Nevertheless, investors
in South Africa face a number of risks common to other developing
regions. The nation's heavy dependence upon the export of natural
resources makes its economy and stock market vulnerable to weak global
demand and declines in commodity prices. The country's currency
reserves have been a constant problem and its currency can be
vulnerable to devaluation. There is also the risk that ethnic and
civic conflict could result in the abandonment of many of the nation's
free market reforms to the detriment of shareholders.
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 FCMs who
receive commissions for their ser vices.
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 u pon the quality of research and execution
services provided.
For transactions in fixed-income securities, FM R'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. 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 for each fund (except VIP Money Market) are presented
in the table below. 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.
Turnover Rates 1998 1999
VIP High Income 92% 82%
VIP Equity-Income 28% 27%
VIP Growth 123% 84%
VIP Overseas 84% 78%
VIP Investment Grade Bond 239% 87%
VIP Asset Manager 113% 94%
VIP Asset Manager: Growth 98% 92%
VIP Index 500 4% 8%
VIP Contrafund 201% 172%
VIP Balanced 94% 108%
VIP Growth & Income 66% 58%
VIP Growth Opportunities 29% 42%
VIP Mid Cap** 125%* 163%
* Annualized.
** VIP Mid Cap commenced operations on December 28, 1998.
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 High Income December 31
1999 $ 328,701
1998 349,793
1997 252,741
VIP Equity-Income December 31
1999 6,208,570
1998 5,732,062
1997 6,731,778
VIP Growth December 31
1999 13,556,145
1998 13,098,658
1997 9,024,141
VIP Overseas December 31
1999 4,933,697
1998 5,688,122
1997 4,309,359
VIP Asset Manager December 31
1999 2,496,587
1998 2,546,836
1997 2,804,490
VIP Asset Manager: Growth December 31
1999 375,385
1998 397,875
1997 385,678
VIP Index 500 December 31
1999 312,758
1998 444,470
1997 141,099
VIP Contrafund December 31
1999 15,840,679
1998 13,086,814
1997 6,517,509
VIP Balanced December 31
1999 331,588
1998 214,586
1997 110,250
VIP Growth & Income December 31
1999 1,007,324
1998 1,152,338
1997 314,270
VIP Growth Opportunities December 31
1999 1,307,761
1998 752,530
1997 476,750
VIP Mid Cap December 31
1999 11,740
1998* 226
* VIP Mid Cap commenced operations on December 28, 1998.
T he first table shows the total amount of brokerage commissions
paid by each fund to NFSC, FBS and FBSJ, as applicable, for the past
three fiscal years. The second table shows the approximate percentage
of aggregate brokerage commissions paid by a fund to NFSC and FBSJ for
transactions involving the approximate percentage of the aggregate
dollar amount of transactions for which the fund paid brokerage
commissions for the fiscal year ended 1999. NFSC, FBS, and FBSJ are
paid on a commission basis.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Total Amount Paid
Fiscal Year Ended To NFSC To FBS To FBSJ
VIP High Income December 31
1999 $ 7,978 $ 0 $ 0
1998 24,941 0 0
1997 13,664 0 0
VIP Equity-Income December 31
1999 357,904 0 0
1998 677,840 0 0
1997 836,386 13,815 0
VIP Growth December 31
1999 1,077,716 0 16,697
1998 2,062,975 0 0
1997 2,325,582 17,682 0
VIP Overseas December 31
1999 825 0 184
1998 12,752 0 0
1997 8,726 286,119 0
VIP Asset Manager December 31
1999 93,901 0 0
1998 281,085 0 0
1997 507,147 32,266 0
VIP Asset Manager: Growth December 31
1999 12,555 0 0
1998 44,190 0 0
1997 66,125 3,506 0
VIP Index 500 December 31
1999 0 0 0
1998 0 0 0
1997 28 371 0
VIP Contrafund December 31
1999 1,027,934 0 9,208
1998 1,493,029 0 0
1997 1,306,677 86,392 0
VIP Balanced December 31
1999 23,744 0 0
1998 30,577 0 0
1997 21,583 110 0
VIP Growth & Income December 31
1999 93,221 0 0
1998 123,700 0 0
1997 65,536 50 0
VIP Growth Opportunities December 31
1999 107,749 0 0
1998 118,698 0 0
1997 95,777 5,043 0
VIP Mid Cap December 31
1999 591 0 0
1998* 0 0 0
</TABLE>
* VIP Mid Cap commenced operations on December 28, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal Year Ended 1999 % of Aggregate Commissions Paid to NFSC % of Aggregate Dollar Amount of
Transactions Effected through NFSC
VIP High Income* December 31 2% 5%
VIP Equity-Income* December 31 6% 10%
VIP Growth* December 31 8% 15%
VIP Overseas* December 31 0% 0%
VIP Asset Manager* December 31 4% 5%
VIP Asset Manager: Growth* December 31 3% 4%
VIP Index 500* December 31 0% 0%
VIP Contrafund* December 31 6% 10%
VIP Balanced* December 31 7% 15%
VIP Growth & Income* December 31 9% 17%
VIP Growth Opportunities* December 31 8% 13%
VIP Mid Cap*,+ December 31 5% 8%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
% of Aggregate Commissions Paid to FBSJ % of Aggregate Dollar Amount of
Transactions Effected through FBSJ
VIP High Income* 0% 0%
VIP Equity-Income* 0% 0%
VIP Growth* 0% 0%
VIP Overseas* 0% 0%
VIP Asset Manager* 0% 0%
VIP Asset Manager: Growth* 0% 0%
VIP Index 500* 0% 0%
VIP Contrafund* 0% 0%
VIP Balanced* 0% 0%
VIP Growth & Income* 0% 0%
VIP Growth Opportunities* 0% 0%
VIP Mid Cap*,+ 0% 0%
</TABLE>
* The difference between the percentage of aggregate brokerage
commissions paid to, and the percentage of the aggregate dollar amount
of transactions effected through, NFSC and FBSJ is a result of the low
commission rates charged by NFSC and FBSJ.
+ VIP Mid Cap commenced operations on December 28, 1998.
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>
Fiscal Year Ended 1999 $ Amount of Commissions Paid to Firms
that Provided Research Services*
VIP High Income December 31 $ 272,680
VIP Equity-Income December 31 $ 5,786,440
VIP Growth December 31 $ 12,551,846
VIP Overseas December 31 $ 4,064,867
VIP Asset Manager December 31 $ 1,906,726
VIP Asset Manager: Growth December 31 $ 281,834
VIP Index 500 December 31 $ 116,864
VIP Contrafund December 31 $ 14,297,779
VIP Balanced December 31 $ 306,791
VIP Growth & Income December 31 $ 944,370
VIP Growth Opportunities December 31 $ 1,224,089
VIP Mid Cap** December 31 $ 6,915
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
$ Amount of Brokerage Transactions Involved*
VIP High Income $ 84,794,002
VIP Equity-Income $ 5,027,938,779
VIP Growth $ 13,816,073,962
VIP Overseas $ 2,436,440,096
VIP Asset Manager $ 2,019,859,180
VIP Asset Manager: Growth $ 299,259,379
VIP Index 500 $ 263,866,303
VIP Contrafund $ 15,006,679,358
VIP Balanced $ 335,502,688
VIP Growth & Income $ 1,033,690,352
VIP Growth Opportunities $ 1,104,101,222
VIP Mid Cap** $ 5,090,185
</TABLE>
* The provision of research services was not necessarily a factor in
the placement of all this business with such firms.
** VIP Mid Cap commenced operations on December 28, 1998.
The Trustees of each fund have approved procedures in conformity with
Rule 10f-3 under the 1940 Act whereby a fund may purchase securities
that are offered in underwritings in which an affiliate of FMR
participates. These procedures prohibit the funds from directly or
indirectly benefiting an FMR affiliate in connection with such
underwritings. In addition, for underwritings where an FMR affiliate
participates as a principal underwriter, certain restrictions may
apply that could, among other things, limit the amount of securities
that the funds could purchase in the underwriting.
From time to time the Trustees will review whether the recapture for
the benefit of the funds of some portion of the brokerage commissions
or similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at
present no other recapture arrangements are in effect. The Trustees
intend to continue to review whether recapture opportunities are
available and are legally permissible and, if so, to determine in the
exercise of their business judgment whether it would be advisable for
each fund to seek such recapture.
Although the Trustees and officers of each fund are substantially the
same as those of other funds managed by FMR or its affiliates,
investment decisions for each fund are made by FMR or BT, as
appropriate, and are independent from those of other funds or
i nvestment 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 each class
is computed by adding the class's pro rata share of the value of the
applicable fund's investments, cash, and other assets, subtracting the
class's pro rata share of the applicable fund's liabilities,
subtracting the liabilities allocated to the class, and dividing the
result by the number of shares of that class that are outstanding.
GROWTH, GROWTH & INCOME, AND ASSET ALLOCATION FUNDS. Portfolio
securities are valued by various methods depending on the primary
market or exchange on which they trade. Most equity securities for
which the primary market is the United States are valued at last sale
price or, if no sale has occurred, at the closing bid price. Most
equity securities for which the primary market is outside the United
States are valued using the official closing price or the last sale
price in the principal market in which they are traded. If the last
sale price (on the local exchange) is unavailable, the last evaluated
quote or closing bid price normally is used. Securities of other
open-end investment companies are valued at their respective NAVs.
Fixed-income securities and other assets for which market quotations
are readily available may be valued at market values determined by
such securities' most recent bid prices (sales prices if the principal
market is an exchange) in the principal market in which they normally
are traded, as furnished by recognized dealers in such securities or
assets. Or, fixed-income securities and convertible securities may be
valued on the basis of information furnished by a pricing service that
uses a valuation matrix which incorporates both dealer-supplied
valuations and electronic data processing techniques. Use of pricing
services has been approved by the Board of Trustees. A number of
pricing services are available, and the funds may use various pricing
services or discontinue the use of any pricing service.
Futures contracts and options are valued on the basis of market
quotations, if available.
Independent brokers or quotation services provide prices of foreign
securities in their local currency. Fidelity Service Company (FSC)
gathers all exchange rates daily at the close of the NYSE using the
last quoted price on the local currency and then translates the value
of foreign securities from their local currencies into U.S. dollars.
Any changes in the value of forward contracts due to exchange rate
fluctuations and days to maturity are included in the calculation of
NAV. If an event that is expected to materially affect the value of a
portfolio security occurs after the close of an exchange or market on
which that security is traded, then that security will be valued in
good faith by a committee appointed by the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less
for which market quotations and information furnished by a pricing
service are not readily available are valued either at amortized cost
or at original cost plus accrued interest, both of which approximate
current value.
The procedures set forth above need not be used to determine the value
of the securities owned by a fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method would more
accurately reflect the fair 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 FUNDS . Portfolio securities are valued by various
methods depending on the primary market or exchange on which they
trade. Fixed-income securities and other assets for which market
quotations are readily available may be valued at market values
determined by such securities' most recent bid prices (sales prices if
the principal market is an exchange) in the principal market in which
they normally are traded, as furnished by recognized dealers in such
securities or assets. Or, fixed-income securities and convertible
securities may be valued on the basis of information furnished by a
pricing service that uses a valuation matrix which incorporates both
dealer-supplied valuations and electronic data processing techniques.
Use of pricing services has been approved by the Board of Trustees. A
number of pricing services are available, and the funds may use
various pricing services or discontinue the use of any pricing
service.
Most equity securities for which the primary market is the United
States are valued at last sale price or, if no sale has occurred, at
the closing bid price. Most equity securities for which the primary
market is outside the United States are valued using the official
closing price or the last sale price in the principal market in which
they are traded. If the last sale price (on the local exchange) is
unavailable, the last evaluated quote or closing bid price normally is
used.
Futures contracts and options are valued on the basis of market
quotations, if available. Securities of other open-end investment
companies are valued at their respective NAVs.
Independent brokers or quotation services provide prices of foreign
securities in their local currency. FSC gathers all exchange rates
daily at the close of the NYSE using the last quoted price on the
local currency and then translates the value of foreign securities
from their local currencies into U.S. dollars. Any changes in the
value of forward contracts due to exchange rate fluctuations and days
to maturity are included in the calculation of NAV. If an event that
is expected to materially affect the value of a portfolio security
occurs after the close of an exchange or market on which that security
is traded, then that security will be valued in good faith by a
committee appointed by the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less
for which market quotations and information furnished by a pricing
service are not readily available are valued either at amortized cost
or at original cost plus accrued interest, both of which approximate
current value.
The procedures set forth above need not be used to determine the value
of the securities owned by a fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method would more
accurately reflect the fair 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.
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, if
applicable, of each class of an income, money market, growth & income,
or asset allocation 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
y ield 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, GROWTH & INCOME AND ASSET
ALLOCATION FUNDS). Yields for a class are computed by dividing a
class's pro rata share of the fund's interest and dividend income for
a given 30-day or one-month period, net of expenses, by the average
number of shares of that class entitled to receive distributions
during the period, dividing this figure by the class's NAV at the end
of the period, and annualizing the result (assuming compounding of
income) in order to arrive at an annual percentage rate. Income is
calculated for purposes of yield quotations in accordance with
standardized methods applicable to all stock and bond funds. Dividends
from equity securities are treated as if they were accrued on a
daily basis, solely for the purposes of yield calculations. In
general, interest income is reduced with respect to bonds trading at a
premium over their par value by subtracting a portion of the premium
from income on a daily basis, and is increased with respect to bonds
trading at a discount by adding a portion of the discount to daily
income. For a fund's investments denominated in foreign currencies,
income and expenses are calculated first in their respective
currencies, and then are converted to U.S. dollars, either when they
are actually converted or at the end of the 30-day or one month
period, whichever is earlier. Income is adjusted to reflect gains and
losses from principal repayments received by a fund with respect to
mortgage-related securities and other asset-backed securities. Other
capital gains and losses generally are excluded from the calculation
as are gains and losses from currency exchange rate fluctuations.
Income calculated for the purposes of calculating a class's yield
differs from income as determined for other accounting purposes.
Because of the different accounting methods used, and because of the
compounding of income assumed in yield calculations, a class's yield
may not equal its distribution rate, the income paid to an
investor's account, or the income reported in the fund's financial
statements.
In calculating a class's yield, a fund may from time to time use a
portfolio security's coupon rate instead of its yield to maturity in
order to reflect the risk premium on that security. This practice will
have the effect of reducing a class's yield.
Yield information may be useful in reviewing a class's performance and
in providing a basis for comparison with other investment
alternatives. However, a class's yield fluctuates, unlike investments
that pay a fixed interest rate over a stated period of time. When
comparing investment alternatives, investors should also note the
quality and maturity of the portfolio securities of respective
investment companies they have chosen to consider.
Investors should recognize that in periods of declining interest rates
a class's yield will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates a class's yield will
tend to be somewhat lower. Also, when interest rates are falling, the
inflow of net new money to a fund from the continuous sale of its
shares will likely be invested in instruments producing lower yields
than the balance of the fund's holdings, thereby reducing a class's
current yield. In periods of rising interest rates, the opposite can
be expected to occur.
RETURN CALCULATIONS. Returns quoted in advertising reflect all aspects
of a class's return, including the effect of reinvesting dividends and
capital gain distributions, and any change in 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) to illustrate the relationship of
these factors and their contributions to return. Returns may be quoted
on a before-tax or after-tax basis. After-tax returns reflect the
return of a hypothetical account after payment of federal and/or state
taxes using assumed tax rates. After-tax returns may assume that taxes
are paid at the time of distribution or once a year or are paid in
cash or by selling shares, that are held through the entire period,
sold on the last day of the period, or sold at a future date, and
distributions are reinvested or paid in cash. Returns, yields, if
applicable, and other performance information may be quoted
numerically or in a table, graph, or similar illustration.
NET ASSET VALUE. Charts and graphs using a class's NAVs, adjusted
NAVs, and benchmark indexes may be used to exhibit performance. An
adjusted NAV includes any distributions paid by a fund and reflects
all elements of a class's return. Unless otherwise indicated, a
class's adjusted NAVs are not adjusted for sales charges, if any.
MOVING AVERAGES. A growth, growth & income or asset allocation fund
may illustrate performance using moving averages. A long-term moving
average is the average of each week's adjusted closing NAV for a
specified period. A short-term moving average is the average of each
day's adjusted closing NAV for a specified period. Moving Average
Activity Indicators combine adjusted closing NAVs from the last
business day of each week with moving averages for a specified period
to produce indicators showing when an NAV has crossed, stayed above,
or stayed below its moving average. The 13-week and 39-week long-term
moving averages for Initial Class and Service Class of each
fund are shown in the table below.
<TABLE>
<CAPTION>
<S> <C> <C>
Fund 13-Week Long-Term Moving Average 39-Week Long-Term Moving Average
VIP Equity-Income - Initial Class* $ 25.43 $ 26.13
VIP Equity-Income - Service Class* $ 25.38 $ 26.08
VIP Growth - Initial Class* $ 49.70 $ 46.53
VIP Growth - Service Class* $ 49.59 $ 46.44
VIP Overseas - Initial Class* $ 24.22 $ 22.10
VIP Overseas - Service Class* $ 24.18 $ 22.07
VIP Asset Manager - Initial Class* $ 17.94 $ 17.59
VIP Asset Manager - Service Class* $ 17.86 $ 17.51
VIP Asset Manager: Growth - Initial Class* $ 17.33 $ 16.91
VIP Asset Manager: Growth - Service Class* $ 17.42 $ 16.99
VIP Index 500 - Initial Class* $ 158.05 $ 153.81
VIP Contrafund - Initial Class* $ 26.72 $ 25.91
VIP Contrafund - Service Class* $ 26.68 $ 25.87
VIP Balanced - Initial Class* $ 15.69 $ 15.79
VIP Balanced - Service Class* $ 15.64 $ 15.74
VIP Growth & Income - Initial Class* $ 16.86 $ 16.70
VIP Growth & Income - Service Class* $ 16.80 $ 16.65
VIP Growth Opportunities - Initial Class* $ 22.61 $ 22.82
VIP Growth Opportunities - Service Class* $ 22.59 $ 22.80
VIP Mid Cap - Initial Class* $ 13.16 $ 12.05
VIP Mid Cap - Service Class* $ 13.15 $ 12.05
</TABLE>
* On December 31, 1999.
HISTORICAL ASSET ALLOCATION, GROWTH, AND GROWTH & INCOME
FUND RESULTS. The following table shows each class's return s
for the fiscal periods ended December 31, 1999.
Returns for Initial Class, Service Class, and Service Class 2 of
each 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, Service Class, and Service Class 2 of each
fund would be lower if the effect of those sales charges and expenses
were included.
Service Class and Service Class 2 have a 12b-1 fee of 0.10% and 0.25%,
respectively, which is included in the average annual and cumulative
returns.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Average Annual Returns1 Cumulative Returns1
One Year Five Years Ten Years/ Life of Fund* One Year
VIP Equity-Income - Initial Class 6.33% 18.61% 14.49% 6.33%
VIP Equity-Income - Service Class 6.25% 18.57% 14.47% 6.25%
VIP Equity Income - Service Class 2 6.25% 18.57% 14.47% 6.25%
VIP Growth - Initial Class 37.44% 29.74% 19.94% 37.44%
VIP Growth - Service Class 37.29% 29.68% 19.91% 37.29%
VIP Growth - Service Class 2 37.29% 29.68% 19.91% 37.29%
VIP Overseas - Initial Class 42.55% 17.37% 11.43% 42.55%
VIP Overseas - Service Class 42.44% 17.33% 11.41% 42.44%
VIP Overseas - Service Class 2 42.44% 17.33% 11.41% 42.44%
VIP Asset Manager - Initial Class 11.09% 15.63% 13.14% 11.09%
VIP Asset Manager - Service Class 11.01% 15.54% 13.10% 11.01%
VIP Asset Manager - Service Class 2 11.01% 15.54% 13.10% 11.01%
VIP Asset Manager: Growth - Initial Class 15.26% n/a 20.16% 15.26%
VIP Asset Manager: Growth - Service Class 15.13% n/a 20.04% 15.13%
VIP Asset Manager: Growth - Service Class 2 15.13% n/a 20.04% 15.13%
VIP Index 500 - Initial Class 20.52% 28.16% 21.07% 20.52%
VIP Index 500 - Service Class 2 20.52% 28.16% 21.07% 20.52%
VIP Contrafund - Initial Class 24.25% n/a 27.73% 24.25%
VIP Contrafund - Service Class 24.15% n/a 27.69% 24.15%
VIP Contrafund - Service Class 2 24.15% n/a 27.69% 24.15%
VIP Balanced - Initial Class 4.55% n/a 13.50% 4.55%
VIP Balanced - Service Class 4.43% n/a 13.42% 4.43%
VIP Balanced - Service Class 2 4.43% n/a 13.42% 4.43%
VIP Growth & Income - Initial Class 9.17% n/a 22.11% 9.17%
VIP Growth & Income - Service Class 9.06% n/a 21.98% 9.06%
VIP Growth & Income - Service Class 2 9.06% n/a 21.98% 9.06%
VIP Growth Opportunities - Initial Class 4.27% n/a 21.51% 4.27%
VIP Growth Opportunities - Service Class 4.18% n/a 21.47% 4.18%
VIP Growth Opportunities - Service Class 2 4.18% n/a 21.47% 4.18%
VIP Mid Cap - Initial Class 49.04% n/a 53.14% 49.04%
VIP Mid Cap - Service Class 48.94% n/a 53.04% 48.94%
VIP Mid Cap - Service Class 2 48.94% n/a 53.04% 48.94%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Five Years Ten Years/ Life of Fund*
VIP Equity-Income - Initial Class 134.75% 286.95%
VIP Equity-Income - Service Class 134.31% 286.22%
VIP Equity Income - Service Class 2 134.31% 286.22%
VIP Growth - Initial Class 267.56% 515.94%
VIP Growth - Service Class 266.77% 514.61%
VIP Growth - Service Class 2 266.77% 514.61%
VIP Overseas - Initial Class 122.76% 195.10%
VIP Overseas - Service Class 122.36% 194.57%
VIP Overseas - Service Class 2 122.36% 194.57%
VIP Asset Manager - Initial Class 106.69% 243.83%
VIP Asset Manager - Service Class 105.89% 242.50%
VIP Asset Manager - Service Class 2 105.89% 242.50%
VIP Asset Manager: Growth - Initial Class n/a 150.27%
VIP Asset Manager: Growth - Service Class n/a 149.02%
VIP Asset Manager: Growth - Service Class 2 n/a 149.02%
VIP Index 500 - Initial Class 245.78% 307.59%
VIP Index 500 - Service Class 2 245.78% 307.59%
VIP Contrafund - Initial Class n/a 239.57%
VIP Contrafund - Service Class n/a 239.00%
VIP Contrafund - Service Class 2 n/a 239.00%
VIP Balanced - Initial Class n/a 88.27%
VIP Balanced - Service Class n/a 87.59%
VIP Balanced - Service Class 2 n/a 87.59%
VIP Growth & Income - Initial Class n/a 82.20%
VIP Growth & Income - Service Class n/a 81.58%
VIP Growth & Income - Service Class 2 n/a 81.58%
VIP Growth Opportunities - Initial Class n/a 164.65%
VIP Growth Opportunities - Service Class n/a 164.19%
VIP Growth Opportunities - Service Class 2 n/a 164.19%
VIP Mid Cap - Initial Class n/a 53.66%
VIP Mid Cap - Service Class n/a 53.56%
VIP Mid Cap - Service Class 2 n/a 53.56%
</TABLE>
1 Initial offering of Service Class of each fund (except VIP Index
500 and VIP Mid Cap ) took place on November 3, 1997. Service
Class returns prior to November 3, 1997 are those of Initial Class,
which has no 12b-1 fee. If Service Class's 12b-1 fee had been
reflected, returns prior to November 3, 1997 would have been lower.
Initial offering of Service Class 2 of each fund took place on January
12, 2000. Service Class 2 returns for VIP Index 500 are those of
Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee
had been reflected, returns would have been lower. Service Class 2
returns for each fund (except VIP Index 500 and VIP Mid Cap )
from November 3, 1997 through December 31, 1999 are those of Service
Class, which has a 12b-1 fee of 0.10%. Service Class 2 returns prior
to November 3, 1997 are those of Initial Class which has no 12b-1 fee.
If Service Class 2's 12b-1 fee had been reflected, returns would have
been lower.
* Life of fund figures are from commencement of operations (August 27,
1992 for VIP Index 500; January 3, 1995 for VIP
Contrafund, VIP Asset Manager: Growth, VIP Balanced,
and VIP Growth Opportunities; December 31, 1996 for VIP
Growth & Income; and December 28, 1998 for VIP Mid Cap)
through December 31, 1999.
Note: If FMR had not reimbursed certain class expenses during these
periods, VIP Asset Manager's, VIP Asset Manager: Growth's, VIP
Index 500's, VIP Balanced's, VIP Growth & Income's, VIP Growth
Opportunities', and VIP Mid Cap's returns would have been lower.
HISTORICAL INCOME FUND RESULTS. The following table shows each class's
yield and returns for the fiscal periods ended December 31, 1999.
Returns and yields for Initial Class, Service Class, and Service
Class 2 of each fund do not include the effect of any sales charges or
other expenses of any variable annuity or variable life insurance
product. Returns and yields for Initial Class, Service Class, and
Service Class 2 of each fund would be lower if the effect of those
sales charges and expenses were included.
Service Class and Service Class 2 have a 12b-1 fee of 0.10% and 0.25%,
respectively, which is included in the yield, and average annual and
cumulative returns.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Average Annual Returns1
Thirty-Day Yield One Year Five Years Ten Years
VIP High Income - Initial Class 10.99% 8.25% 10.90% 12.44%
VIP High Income - Service Class 10.92% 8.08% 10.84% 12.42%
VIP High Income - Service Class 2 10.92% 8.08% 10.84% 12.42%
VIP Investment Grade Bond - Initial Class 6.78% -1.05% 7.30% 7.19%
VIP Investment Grade Bond - Service Class 2 6.78% -1.05% 7.30% 7.19%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cumulative Returns1
One Year Five Years Ten Years
VIP High Income - Initial Class 8.25% 67.75% 223.13%
VIP High Income - Service Class 8.08% 67.33% 222.33%
VIP High Income - Service Class 2 8.08% 67.33% 222.33%
VIP Investment Grade Bond - Initial Class -1.05% 42.20% 100.21%
VIP Investment Grade Bond - Service Class 2 -1.05% 42.20% 100.21%
</TABLE>
1 Initial offering of Service Class of VIP High Income took place on
November 3, 1997. Service Class returns prior to November 3, 1997 are
those of Initial Class, which has no 12b-1 fee. If Service Class's
12b-1 fee had been reflected, returns prior to November 3, 1997 would
have been lower. Initial offering of Service Class 2 of each fund
took place on January 12, 2000 . Service Class 2 returns for VIP
Investment Grade Bond are those of Initial Class, which has no 12b-1
fee. If Service Class 2's 12b-1 fee had been reflected, returns would
have been lower. Service Class 2 returns for VIP High Income from
November 3, 1997 through December 31, 1999 are those of Service Class,
which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to
November 3, 1997 are those of Initial Class which has no 12b-1 fee. If
Service Class 2's 12b-1 fee had been reflected, returns would have
been lower.
Note: If FMR had not reimbursed certain class expenses during these
periods, VIP High Income's and VIP Investment Grade Bond's
returns would have been lower.
HISTORICAL MONEY MARKET FUND RESULTS. The following table shows each
class's 7-day yield and returns for the fiscal periods ended December
31, 1999.
Returns and yields for Initial Class and Service Class 2 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
and yields for Initial Class and Service Class 2 of the fund would be
lower if the effect of those sales charges and expenses were
included.
Service Class 2 has a 12b-1 fee of 0.25%, which is included in the
7-day yield and average annual and cumulative returns.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Average Annual Returns1 Cumulative Returns1
Seven-Day Yield One Year Five Years Ten Years One Year
VIP Money Market - Initial Class 5.72% 5.17% 5.48% 5.28% 5.17%
VIP Money Market - Service Class 2 5.72% 5.17% 5.48% 5.28% 5.17%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Five Years Ten Years
VIP Money Market - Initial Class 30.59% 67.36%
VIP Money Market - Service Class 2 30.59% 67.36%
</TABLE>
1 Initial offering of Service Class 2 of the fund took place on
January 12, 2000. Service Class 2 returns for VIP Money Market are
those of Initial Class, which has no 12b-1 fee. If Service Class 2's
12b-1 fee had been reflected, returns would have been lower.
Note: If FMR had not reimbursed certain class expenses during these
periods, VIP Money Market's 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 Money Market, VIP High Income, and VIP
Investment Grade Bond invests in fixed-income securities, common
stocks represent a different type of investment from the funds. Common
stocks generally offer greater growth potential than the funds, but
generally experience greater price volatility, which means greater
potential for loss. In addition, common stocks generally provide lower
income than fixed-income investments such as the funds. Each of VIP
Equity-Income, VIP Growth, VIP Overseas, VIP Asset Manager, VIP Asset
Manager: Growth, VIP Index 500, VIP Contrafund, VIP Balanced, VIP
Growth & Income, VIP Growth Opportunities, and VIP Mid Cap has the
ability to invest in securities not included in either index, and its
investment portfolio may or may not be similar in composition to the
indexes. The S&P 500 and DJIA returns are based on the prices of
unmanaged groups of stocks and, unlike each class's returns, do not
include the effect of brokerage commissions or other costs of
investing.
The following tables show the growth in value of a hypothetical
$10,000 investment in each class of each fund during the 10-year
period ended 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 (with the exception of
foreign tax withholdings) have not been factored into the figures
below.
During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Initial Class of VIP Money Market would have
grown to $ 16,736 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP MONEY MARKET - INITIAL CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 10,000 $ 6,736
1998 $ 10,000 $ 5,914
1997 $ 10,000 $ 5,090
1996 $ 10,000 $ 4,302
1995 $ 10,000 $ 3,568
1994 $ 10,000 $ 2,816
1993 $ 10,000 $ 2,293
1992 $ 10,000 $ 1,909
1991 $ 10,000 $ 1,462
1990 $ 10,000 $ 804
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP MONEY MARKET - INITIAL CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living
1999 $ 0 $ 16,736 $ 53,289 $ 53,747 $ 13,347
1998 $ 0 $ 15,914 $ 44,024 $ 42,276 $ 12,998
1997 $ 0 $ 15,090 $ 34,240 $ 35,805 $ 12,791
1996 $ 0 $ 14,302 $ 25,674 $ 28,677 $ 12,577
1995 $ 0 $ 13,568 $ 20,880 $ 22,281 $ 12,173
1994 $ 0 $ 12,816 $ 15,177 $ 16,297 $ 11,872
1993 $ 0 $ 12,293 $ 14,980 $ 15,525 $ 11,562
1992 $ 0 $ 11,909 $ 13,608 $ 13,270 $ 11,253
1991 $ 0 $ 11,462 $ 12,642 $ 12,367 $ 10,936
1990 $ 0 $ 10,804 $ 9,688 $ 9,946 $ 10,611
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Initial
Class of VIP Money Market on January 1, 1990, the net amount invested
in Initial Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for t he 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 fund did not distribute any capital gains during
the period.
During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Service Class 2 of VIP Money Market would have
grown to $16,736.
<TABLE>
<CAPTION>
<S> <C> <C>
VIP MONEY MARKET - SERVICE CLASS 2
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 10,000 $ 6,736
1998 $ 10,000 $ 5,914
1997 $ 10,000 $ 5,090
1996 $ 10,000 $ 4,302
1995 $ 10,000 $ 3,568
1994 $ 10,000 $ 2,816
1993 $ 10,000 $ 2,293
1992 $ 10,000 $ 1,909
1991 $ 10,000 $ 1,462
1990 $ 10,000 $ 804
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP MONEY MARKET - SERVICE CLASS 2 INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA
1999 $ 0 $ 16,736 $ 53,289 $ 53,747
1998 $ 0 $ 15,914 $ 44,024 $ 42,276
1997 $ 0 $ 15,090 $ 34,240 $ 35,805
1996 $ 0 $ 14,302 $ 25,674 $ 28,677
1995 $ 0 $ 13,568 $ 20,880 $ 22,281
1994 $ 0 $ 12,816 $ 15,177 $ 16,297
1993 $ 0 $ 12,293 $ 14,980 $ 15,525
1992 $ 0 $ 11,909 $ 13,608 $ 13,270
1991 $ 0 $ 11,462 $ 12,642 $ 12,367
1990 $ 0 $ 10,804 $ 9,688 $ 9,946
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
VIP MONEY MARKET - SERVICE CLASS 2
Fiscal Year Ended Cost of Living
1999 $ 13,347
1998 $ 12,998
1997 $ 12,791
1996 $ 12,577
1995 $ 12,173
1994 $ 11,872
1993 $ 11,562
1992 $ 11,253
1991 $ 10,936
1990 $ 10,611
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of VIP Money Market on January 1, 1990, the net amount
invested in Service Class 2 shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $ 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 fund did not distribute any capital gains during
the period. Initial offering of Service Class 2 of VIP Money Market
took place on January 12, 2000. Service Class 2 returns are those
of Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1
fee had been reflected, returns would have been lower.
During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Initial Class of VIP High Income would have
grown to $ 32,313 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP HIGH INCOME - INITIAL CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 13,958 $ 15,690
1998 $ 14,217 $ 13,029
1997 $ 16,745 $ 12,925
1996 $ 15,438 $ 9,915
1995 $ 14,858 $ 7,647
1994 $ 13,255 $ 5,340
1993 $ 14,784 $ 4,694
1992 $ 13,342 $ 2,924
1991 $ 11,776 $ 1,430
1990 $ 8,718 $ 1,059
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP HIGH INCOME - INITIAL CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living
1999 $ 2,665 $ 32,313 $ 53,289 $ 53,747 $ 13,347
1998 $ 2,604 $ 29,850 $ 44,024 $ 42,276 $ 12,998
1997 $ 1,530 $ 31,200 $ 34,240 $ 35,805 $ 12,791
1996 $ 1,163 $ 26,516 $ 25,674 $ 28,677 $ 12,577
1995 $ 748 $ 23,253 $ 20,880 $ 22,281 $ 12,173
1994 $ 668 $ 19,263 $ 15,177 $ 16,297 $ 11,872
1993 $ 105 $ 19,583 $ 14,980 $ 15,525 $ 11,562
1992 $ 0 $ 16,266 $ 13,608 $ 13,270 $ 11,253
1991 $ 0 $ 13,206 $ 12,642 $ 12,367 $ 10,936
1990 $ 0 $ 9,777 $ 9,688 $ 9,946 $ 10,611
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Initial
Class of VIP High Income on January 1, 1990, the net amount invested
in Initial Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to
$ 27,482 . 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
$ 9,671 for dividends and $ 1,689 for capital gain
distributions.
During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Service Class of VIP High Income would have
grown to $ 32,233 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP HIGH INCOME - SERVICE CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 13,921 $ 15,654
1998 $ 14,205 $ 13,017
1997 $ 16,732 $ 12,916
1996 $ 15,438 $ 9,915
1995 $ 14,858 $ 7,647
1994 $ 13,255 $ 5,340
1993 $ 14,784 $ 4,694
1992 $ 13,342 $ 2,924
1991 $ 11,776 $ 1,430
1990 $ 8,718 $ 1,059
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP HIGH INCOME - SERVICE CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living
1999 $ 2,658 $ 32,233 $ 53,289 $ 53,747 $ 13,347
1998 $ 2,602 $ 29,824 $ 44,024 $ 42,276 $ 12,998
1997 $ 1,529 $ 31,177 $ 34,240 $ 35,805 $ 12,791
1996 $ 1,163 $ 26,516 $ 25,674 $ 28,677 $ 12,577
1995 $ 748 $ 23,253 $ 20,880 $ 22,281 $ 12,173
1994 $ 668 $ 19,263 $ 15,177 $ 16,297 $ 11,872
1993 $ 105 $ 19,583 $ 14,980 $ 15,525 $ 11,562
1992 $ 0 $ 16,266 $ 13,608 $ 13,270 $ 11,253
1991 $ 0 $ 13,206 $ 12,642 $ 12,367 $ 10,936
1990 $ 0 $ 9,777 $ 9,688 $ 9,946 $ 10,611
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Service
Class of VIP High Income 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
$ 27,482 . 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
$ 9,671 for dividends and $ 1,689 for capital gain
distributions. Initial offering of Service Class of VIP High Income
took place on November 3, 1997. Service Class returns prior to
November 3, 1997 are those of Initial Class, which has no 12b-1 fee.
If Service Class's 12b-1 fee had been reflected, returns prior to
November 3, 1997 would have been lower.
During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Service Class 2 of VIP High Income would have
grown to $ 32,233 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP HIGH INCOME - SERVICE CLASS 2
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 13,921 $ 15,654
1998 $ 14,205 $ 13,017
1997 $ 16,732 $ 12,916
1996 $ 15,438 $ 9,915
1995 $ 14,858 $ 7,647
1994 $ 13,255 $ 5,340
1993 $ 14,784 $ 4,694
1992 $ 13,342 $ 2,924
1991 $ 11,776 $ 1,430
1990 $ 8,718 $ 1,059
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP HIGH INCOME - SERVICE CLASS 2 INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living
1999 $ 2,658 $ 32,233 $ 53,289 $ 53,747 $ 13,347
1998 $ 2,602 $ 29,824 $ 44,024 $ 42,276 $ 12,998
1997 $ 1,529 $ 31,177 $ 34,240 $ 35,805 $ 12,791
1996 $ 1,163 $ 26,516 $ 25,674 $ 28,677 $ 12,577
1995 $ 748 $ 23,253 $ 20,880 $ 22,281 $ 12,173
1994 $ 668 $ 19,263 $ 15,177 $ 16,297 $ 11,872
1993 $ 105 $ 19,583 $ 14,980 $ 15,525 $ 11,562
1992 $ 0 $ 16,266 $ 13,608 $ 13,270 $ 11,253
1991 $ 0 $ 13,206 $ 12,642 $ 12,367 $ 10,936
1990 $ 0 $ 9,777 $ 9,688 $ 9,946 $ 10,611
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of VIP High Income on January 1, 1990, the net amount invested
in Service Class 2 shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to
$ 27,482 . 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
$ 9,671 for dividends and $ 1,689 for capital gain
distributions. I nitial offering of Service Class 2 of VIP High
Income took place on January 12, 2000. Service Class 2 returns
from November 3, 1997 through December 31, 1999 are those of Service
Class which reflect a 12b-1 fee of 0.10%. Service Class 2 returns
prior to November 3, 1997 are those of Initial Class, which has no
12b-1 fee. If Service Class 2's 12b-1 fee had been reflected, returns
would have been lower.
During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Initial Class of VIP Equity-Income would have
grown to $ 38,695 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP EQUITY-INCOME - INITIAL CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 20,919 $ 7,027
1998 $ 20,683 $ 6,366
1997 $ 19,756 $ 5,607
1996 $ 17,111 $ 4,394
1995 $ 15,679 $ 3,990
1994 $ 12,490 $ 2,774
1993 $ 12,563 $ 2,395
1992 $ 10,903 $ 1,731
1991 $ 9,642 $ 1,156
1990 $ 7,738 $ 464
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP EQUITY-INCOME - INITIAL CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living
1999 $ 10,749 $ 38,695 $ 53,289 $ 53,747 $ 13,347
1998 $ 9,342 $ 36,391 $ 44,024 $ 42,276 $ 12,998
1997 $ 7,238 $ 32,601 $ 34,240 $ 35,805 $ 12,791
1996 $ 3,943 $ 25,448 $ 25,674 $ 28,677 $ 12,577
1995 $ 2,598 $ 22,267 $ 20,880 $ 22,281 $ 12,173
1994 $ 1,219 $ 16,483 $ 15,177 $ 16,297 $ 11,872
1993 $ 437 $ 15,395 $ 14,980 $ 15,525 $ 11,562
1992 $ 380 $ 13,014 $ 13,608 $ 13,270 $ 11,253
1991 $ 336 $ 11,134 $ 12,642 $ 12,367 $ 10,936
1990 $ 269 $ 8,471 $ 9,688 $ 9,946 $ 10,611
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Initial
Class of VIP Equity-Income on January 1, 1990, the net amount invested
in Initial Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to
$ 22,077 . 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
$ 3,149 for dividends and $ 5,149 for capital gain
distributions.
During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Service Class of VIP Equity-Income would have
grown to $ 38,622 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP EQUITY-INCOME - SERVICE CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 20,879 $ 7,013
1998 $ 20,659 $ 6,358
1997 $ 19,748 $ 5,604
1996 $ 17,111 $ 4,394
1995 $ 15,679 $ 3,990
1994 $ 12,490 $ 3,774
1993 $ 12,563 $ 2,395
1992 $ 10,903 $ 1,731
1991 $ 9,642 $ 1,156
1990 $ 7,738 $ 464
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP EQUITY-INCOME - SERVICE CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living
1999 $ 10,730 $ 38,622 $ 53,289 $ 53,747 $ 13,347
1998 $ 9,331 $ 36,348 $ 44,024 $ 42,276 $ 12,998
1997 $ 7,235 $ 32,587 $ 34,240 $ 35,805 $ 12,791
1996 $ 3,943 $ 25,448 $ 25,674 $ 28,677 $ 12,577
1995 $ 2,598 $ 22,267 $ 20,880 $ 22,281 $ 12,173
1994 $ 1,219 $ 16,483 $ 15,177 $ 16,297 $ 11,872
1993 $ 437 $ 15,395 $ 14,980 $ 15,525 $ 11,562
1992 $ 380 $ 13,014 $ 13,608 $ 13,270 $ 11,253
1991 $ 336 $ 11,134 $ 12,642 $ 12,367 $ 10,936
1990 $ 269 $ 8,471 $ 9,688 $ 9,946 $ 10,611
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Service
Class of VIP Equity-Income 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
$ 22,077 . 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
$ 3,149 for dividends and $ 5,419 for capital gain
distributions. Initial offering of Service Class of VIP Equity-Income
took place on November 3, 1997. Service Class returns prior to
November 3, 1997 are those of Initial Class, which has no 12b-1 fee.
If Service Class's 12b-1 fee had been reflected, returns prior to
November 3, 1997 would have been lower.
During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Service Class 2 of VIP Equity-Income would have
grown to $ 38,622 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP EQUITY-INCOME - SERVICE CLASS 2
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 20,879 $ 7,013
1998 $ 20,659 $ 6,358
1997 $ 19,748 $ 5,604
1996 $ 17,111 $ 4,394
1995 $ 15,679 $ 3,990
1994 $ 12,490 $ 3,774
1993 $ 12,563 $ 2,395
1992 $ 10,903 $ 1,731
1991 $ 9,642 $ 1,156
1990 $ 7,738 $ 464
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP EQUITY-INCOME - SERVICE CLASS 2 INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA
1999 $ 10,730 $ 38,622 $ 53,289 $ 53,747
1998 $ 9,331 $ 36,348 $ 44,024 $ 42,276
1997 $ 7,235 $ 32,587 $ 34,240 $ 35,805
1996 $ 3,943 $ 25,448 $ 25,674 $ 28,677
1995 $ 2,598 $ 22,267 $ 20,880 $ 22,281
1994 $ 1,219 $ 16,483 $ 15,177 $ 16,297
1993 $ 437 $ 15,395 $ 14,980 $ 15,525
1992 $ 380 $ 13,014 $ 13,608 $ 13,270
1991 $ 336 $ 11,134 $ 12,642 $ 12,367
1990 $ 269 $ 8,471 $ 9,688 $ 9,946
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
VIP EQUITY-INCOME - SERVICE CLASS 2
Fiscal Year Ended Cost of Living
1999 $ 13,347
1998 $ 12,998
1997 $ 12,791
1996 $ 12,577
1995 $ 12,173
1994 $ 11,872
1993 $ 11,562
1992 $ 11,253
1991 $ 10,936
1990 $ 10,611
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of VIP Equity-Income on January 1, 1990, the net amount
invested in Service Class 2 shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $ 22,077 . 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
$ 3,149 for dividends and $ 5,419 for capital gain
distributions. Initial offering of Service Class 2 of VIP
Equity-Income took place on January 12, 2000 . Service Class 2
returns from November 3, 1997 through December 31, 1999 are those of
Service Class which reflect a 12b-1 fee of 0.10%. Service Class 2
returns prior to November 3, 1997 are those of Initial Class, which
has no 12b-1 fee. If Service Class 2's 12b-1 fee had been reflected,
returns would have been lower.
During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Initial Class of VIP Growth would have grown to
$ 61,594 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP GROWTH - INITIAL CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 36,186 $ 2,668
1998 $ 29,559 $ 2,094
1997 $ 24,440 $ 1,550
1996 $ 20,514 $ 1,128
1995 $ 19,236 $ 992
1994 $ 14,289 $ 644
1993 $ 15,204 $ 594
1992 $ 13,017 $ 431
1991 $ 12,194 $ 371
1990 $ 8,505 $ 128
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP GROWTH - INITIAL CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living
1999 $ 22,740 $ 61,594 $ 53,289 $ 53,747 $ 13,347
1998 $ 13,164 $ 44,817 $ 44,024 $ 42,276 $ 12,998
1997 $ 6,139 $ 32,129 $ 34,240 $ 35,805 $ 12,791
1996 $ 4,378 $ 26,020 $ 25,674 $ 28,677 $ 12,577
1995 $ 2,456 $ 22,684 $ 20,880 $ 22,281 $ 12,173
1994 $ 1,824 $ 16,757 $ 15,177 $ 16,297 $ 11,872
1993 $ 963 $ 16,761 $ 14,980 $ 15,525 $ 11,562
1992 $ 593 $ 14,041 $ 13,608 $ 13,270 $ 11,253
1991 $ 279 $ 12,844 $ 12,642 $ 12,367 $ 10,936
1990 $ 194 $ 8,827 $ 9,688 $ 9,946 $ 10,611
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Initial
Class of VIP Growth on January 1, 1990, the net amount invested in
Initial Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at
the time they were reinvested) amounted to $ 24,405 . 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 $ 909 for
dividends and $ 10,086 for capital gain distributions.
During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Service Class of VIP Growth would have grown to
$ 61,461 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP GROWTH - SERVICE CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 36,100 $ 2,663
1998 $ 29,526 $ 2,091
1997 $ 24,433 $ 1,549
1996 $ 20,514 $ 1,128
1995 $ 19,236 $ 992
1994 $ 14,289 $ 644
1993 $ 15,204 $ 594
1992 $ 13,017 $ 431
1991 $ 12,194 $ 371
1990 $ 8,505 $ 128
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP GROWTH - SERVICE CLASS INDEXES
1999 $ 22,698 $ 61,461 $ 53,289 $ 53,747 $ 13,347
1998 $ 13,151 $ 44,768 $ 44,024 $ 42,276 $ 12,998
1997 $ 6,138 $ 32,120 $ 34,240 $ 35,805 $ 12,791
1996 $ 4,378 $ 26,020 $ 25,674 $ 28,677 $ 12,577
1995 $ 2,456 $ 22,684 $ 20,880 $ 22,281 $ 12,173
1994 $ 1,824 $ 16,757 $ 15,177 $ 16,297 $ 11,872
1993 $ 963 $ 16,761 $ 14,980 $ 15,525 $ 11,562
1992 $ 593 $ 14,041 $ 13,608 $ 13,270 $ 11,253
1991 $ 279 $ 12,844 $ 12,642 $ 12,367 $ 10,936
1990 $ 194 $ 8,827 $ 9,688 $ 9,946 $ 10,611
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Service
Class of VIP Growth 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 $ 24,406 . 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 $ 909 for
dividends and $ 10,086 for capital gain distributions. Initial
offering of Service Class of VIP Growth took place on November 3,
1997. Service Class returns prior to November 3, 1997 are those of
Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee
had been reflected, returns prior to November 3, 1997 would have been
lower.
During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Service Class 2 of VIP Growth would have grown
to $ 61,461 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP GROWTH - SERVICE CLASS 2
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 36,100 $ 2,663
1998 $ 29,526 $ 2,091
1997 $ 24,433 $ 1,549
1996 $ 20,514 $ 1,128
1995 $ 19,236 $ 992
1994 $ 14,289 $ 644
1993 $ 15,204 $ 594
1992 $ 13,017 $ 431
1991 $ 12,194 $ 371
1990 $ 8,505 $ 128
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP GROWTH - SERVICE CLASS 2 INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living
1999 $ 22,698 $ 61,461 $ 53,289 $ 53,747 $ 13,347
1998 $ 13,151 $ 44,768 $ 44,024 $ 42,276 $ 12,998
1997 $ 6,138 $ 32,120 $ 34,240 $ 35,805 $ 12,791
1996 $ 4,378 $ 26,020 $ 25,674 $ 28,677 $ 12,577
1995 $ 2,456 $ 22,684 $ 20,880 $ 22,281 $ 12,173
1994 $ 1,824 $ 16,757 $ 15,177 $ 16,297 $ 11,872
1993 $ 963 $ 16,761 $ 14,980 $ 15,525 $ 11,562
1992 $ 593 $ 14,041 $ 13,608 $ 13,270 $ 11,253
1991 $ 279 $ 12,844 $ 12,642 $ 12,367 $ 10,936
1990 $ 194 $ 8,827 $ 9,688 $ 9,946 $ 10,611
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of VIP Growth on January 1, 1990, the net amount invested in
Service Class 2 shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at
the time they were reinvested) amounted to $ 24,406 . 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 $ 909 for
dividends and $ 10,086 for capital gain distributions.
Initial offering of Service Class 2 of VIP Growth took place on
January 12, 2000. Service Class 2 returns from November 3, 1997
through December 31, 1999 are those of Service Class which reflect a
12b-1 fee of 0.10%. Service Class 2 returns prior to November 3, 1997
are those of Initial Class, which has no 12b-1 fee. If Service Class
2's 12b-1 fee had been reflected, returns would have been lower.
During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Initial Class of VIP Overseas would have grown
to $ 29,510 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP OVERSEAS - INITIAL CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 21,657 $ 3,254
1998 $ 15,833 $ 2,045
1997 $ 15,154 $ 1,587
1996 $ 14,870 $ 1,243
1995 $ 13,465 $ 955
1994 $ 12,368 $ 824
1993 $ 12,218 $ 751
1992 $ 9,100 $ 381
1991 $ 10,331 $ 289
1990 $ 9,803 $ 30
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP OVERSEAS - INITIAL CLASS INDEXES
1999 $ 4,599 $ 29,510 $ 53,289 $ 53,747 $ 13,347
1998 $ 2,823 $ 20,701 $ 44,024 $ 42,276 $ 12,998
1997 $ 1,610 $ 18,351 $ 34,240 $ 35,805 $ 12,791
1996 $ 337 $ 16,450 $ 25,674 $ 28,677 $ 12,577
1995 $ 118 $ 14,538 $ 20,880 $ 22,281 $ 12,173
1994 $ 55 $ 13,247 $ 15,177 $ 16,297 $ 11,872
1993 $ 54 $ 13,023 $ 14,980 $ 15,525 $ 11,562
1992 $ 0 $ 9,481 $ 13,608 $ 13,270 $ 11,253
1991 $ 0 $ 10,620 $ 12,642 $ 12,367 $ 10,936
1990 $ 0 $ 9,833 $ 9,688 $ 9,946 $ 10,611
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Initial
Class of VIP Overseas on January 1, 1990, the net amount invested in
Initial Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at
the time they were reinvested) amounted to $ 14,873 . 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 $ 1,665 for
dividends and $ 2,573 for capital gain distributions.
During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Service Class of VIP Overseas would have grown
to $ 29,457 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP OVERSEAS - SERVICE CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 21,618 $ 3,248
1998 $ 15,817 $ 2,042
1997 $ 15,154 $ 1,587
1996 $ 14,870 $ 1,243
1995 $ 13,465 $ 955
1994 $ 12,368 $ 824
1993 $ 12,218 $ 751
1992 $ 9,100 $ 381
1991 $ 10,331 $ 289
1990 $ 9,803 $ 30
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP OVERSEAS - SERVICE CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living
1999 $ 4,591 $ 29,457 $ 53,289 $ 53,747 $ 13,347
1998 $ 2,821 $ 20,680 $ 44,024 $ 42,276 $ 12,998
1997 $ 1,610 $ 18,351 $ 34,240 $ 35,805 $ 12,791
1996 $ 337 $ 16,450 $ 25,674 $ 28,677 $ 12,577
1995 $ 118 $ 14,538 $ 20,880 $ 22,281 $ 12,173
1994 $ 55 $ 13,247 $ 15,177 $ 16,297 $ 11,872
1993 $ 54 $ 13,023 $ 14,980 $ 15,525 $ 11,562
1992 $ 0 $ 9,481 $ 13,608 $ 13,270 $ 11,253
1991 $ 0 $ 10,620 $ 12,642 $ 12,367 $ 10,936
1990 $ 0 $ 9,833 $ 9,688 $ 9,946 $ 10,611
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Service
Class of VIP Overseas 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 $ 14,873 . 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 $ 1,665 for
dividends and $ 2,573 for capital gain distributions. Initial
offering of Service Class of VIP Overseas took place on November 3,
1997. Service Class returns prior to November 3, 1997 are those of
Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee
had been reflected, returns prior to November 3, 1997 would have been
lower.
During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Service Class 2 of VIP Overseas would have grown
to $ 29,457 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP OVERSEAS - SERVICE CLASS 2
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 21,618 $ 3,248
1998 $ 15,817 $ 2,042
1997 $ 15,154 $ 1,587
1996 $ 14,870 $ 1,243
1995 $ 13,465 $ 955
1994 $ 12,368 $ 824
1993 $ 12,218 $ 751
1992 $ 9,100 $ 381
1991 $ 10,331 $ 289
1990 $ 9,803 $ 30
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP OVERSEAS - SERVICE CLASS 2 INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living
1999 $ 4,591 $ 29,457 $ 53,289 $ 53,747 $ 13,347
1998 $ 2,821 $ 20,680 $ 44,024 $ 42,276 $ 12,998
1997 $ 1,610 $ 18,351 $ 34,240 $ 35,805 $ 12,791
1996 $ 337 $ 16,450 $ 25,674 $ 28,677 $ 12,577
1995 $ 118 $ 14,538 $ 20,880 $ 22,281 $ 12,173
1994 $ 55 $ 13,247 $ 15,177 $ 16,297 $ 11,872
1993 $ 54 $ 13,023 $ 14,980 $ 15,525 $ 11,562
1992 $ 0 $ 9,481 $ 13,608 $ 13,270 $ 11,253
1991 $ 0 $ 10,620 $ 12,642 $ 12,367 $ 10,936
1990 $ 0 $ 9,833 $ 9,688 $ 9,946 $ 10,611
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of VIP Overseas on January 1, 1990, the net amount invested in
Service Class 2 shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at
the time they were reinvested) amounted to $14,873. 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 $1,665 for dividends and $2,573 for
capital gain distributions. Initial offering of Service Class 2 of
VIP Overseas took place on January 12, 2000. Service Class 2
returns from November 3, 1997 through December 31, 1999 are those of
Service Class which reflect a 12b-1 fee of 0.10%. Service Class 2
returns prior to November 3, 1997 are those of Initial Class, which
has no 12b-1 fee. If Service Class 2's 12b-1 fee had been reflected,
returns would have been lower.
During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Initial Class of VIP Investment Grade Bond would
have grown to $20,021.
<TABLE>
<CAPTION>
<S> <C> <C>
VIP INVESTMENT GRADE BOND - INITIAL CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 11,992 $ 7,361
1998 $ 12,781 $ 7,003
1997 $ 12,387 $ 5,875
1996 $ 12,071 $ 4,655
1995 $ 12,308 $ 3,885
1994 $ 10,868 $ 2,924
1993 $ 11,321 $ 3,048
1992 $ 10,819 $ 2,184
1991 $ 10,927 $ 1,434
1990 $ 9,783 $ 838
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP INVESTMENT GRADE BOND - INITIAL CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA
1999 $ 668 $ 20,021 $ 53,289 $ 53,747
1998 $ 449 $ 20,233 $ 44,024 $ 42,276
1997 $ 327 $ 18,589 $ 34,240 $ 35,805
1996 $ 318 $ 17,044 $ 25,674 $ 28,677
1995 $ 325 $ 16,518 $ 20,880 $ 22,281
1994 $ 287 $ 14,079 $ 15,177 $ 16,297
1993 $ 260 $ 14,629 $ 14,980 $ 15,525
1992 $ 180 $ 13,183 $ 13,608 $ 13,270
1991 $ 0 $ 12,361 $ 12,642 $ 12,367
1990 $ 0 $ 10,621 $ 9,688 $ 9,946
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
VIP INVESTMENT GRADE BOND - INITIAL CLASS
Fiscal Year Ended Cost of Living
1999 $ 13,347
1998 $ 12,998
1997 $ 12,791
1996 $ 12,577
1995 $ 12,173
1994 $ 11,872
1993 $ 11,562
1992 $ 11,253
1991 $ 10,936
1990 $ 10,611
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Initial
Class of VIP Investment Grade Bond on January 1, 1990, the net amount
invested in Initial Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to
$ 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.
During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Service Class 2 of VIP Investment Grade Bond
would have grown to $ 20,021 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP INVESTMENT GRADE BOND - SERVICE CLASS 2
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 11,992 $ 7,361
1998 $ 12,781 $ 7,003
1997 $ 12,387 $ 5,875
1996 $ 12,071 $ 4,655
1995 $ 12,308 $ 3,885
1994 $ 10,868 $ 2,924
1993 $ 11,321 $ 3,048
1992 $ 10,819 $ 2,184
1991 $ 10,927 $ 1,434
1990 $ 9,783 $ 838
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP INVESTMENT GRADE BOND - SERVICE CLASS 2 INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA
1999 $ 668 $ 20,021 $ 53,289 $ 53,747
1998 $ 449 $ 20,233 $ 44,024 $ 42,276
1997 $ 327 $ 18,589 $ 34,240 $ 35,805
1996 $ 318 $ 17,044 $ 25,674 $ 28,677
1995 $ 325 $ 16,518 $ 20,880 $ 22,281
1994 $ 287 $ 14,079 $ 15,177 $ 16,297
1993 $ 260 $ 14,629 $ 14,980 $ 15,525
1992 $ 180 $ 13,183 $ 13,608 $ 13,270
1991 $ 0 $ 12,361 $ 12,642 $ 12,367
1990 $ 0 $ 10,621 $ 9,688 $ 9,946
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
VIP INVESTMENT GRADE BOND - SERVICE CLASS 2
Fiscal Year Ended Cost of Living
1999 $ 13,347
1998 $ 12,998
1997 $ 12,791
1996 $ 12,577
1995 $ 12,173
1994 $ 11,872
1993 $ 11,562
1992 $ 11,253
1991 $ 10,936
1990 $ 10,611
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of VIP Investment Grade Bond on January 1, 1990, the net
amount invested in Service Class 2 shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $ 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 2 of VIP
Investment Grade Bond took place on January 12, 2000 . Service
Class 2 returns are those of Initial Class, which has no 12b-1 fee. If
Service Class 2's 12b-1 fee had been reflected, returns would have
been lower.
During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Initial Class of VIP Asset Manager would have
grown to $ 34,383 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP ASSET MANAGER - INITIAL CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 18,726 $ 6,626
1998 $ 18,215 $ 5,344
1997 $ 18,064 $ 4,352
1996 $ 16,981 $ 3,238
1995 $ 15,838 $ 2,285
1994 $ 13,831 $ 1,640
1993 $ 15,466 $ 1,491
1992 $ 13,360 $ 875
1991 $ 12,588 $ 491
1990 $ 10,271 $ 401
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP ASSET MANAGER - INITIAL CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living
1999 $ 9,031 $ 34,383 $ 53,289 $ 53,747 $ 13,347
1998 $ 7,391 $ 30,950 $ 44,024 $ 42,276 $ 12,998
1997 $ 4,485 $ 26,901 $ 34,240 $ 35,805 $ 12,791
1996 $ 2,078 $ 22,297 $ 25,674 $ 28,677 $ 12,577
1995 $ 1,332 $ 19,455 $ 20,880 $ 22,281 $ 12,173
1994 $ 1,164 $ 16,635 $ 15,177 $ 16,297 $ 11,872
1993 $ 757 $ 17,714 $ 14,980 $ 15,525 $ 11,562
1992 $ 376 $ 14,611 $ 13,608 $ 13,270 $ 11,253
1991 $ 0 $ 13,079 $ 12,642 $ 12,367 $ 10,936
1990 $ 0 $ 10,672 $ 9,688 $ 9,946 $ 10,611
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Initial
Class of VIP Asset Manager on January 1, 1990, the net amount invested
in Initial Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to
$ 22,691 . 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
$ 4,002 for dividends and $ 5,476 for capital gain
distributions.
During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Service Class of VIP Asset Manager would have
grown to $ 34,250 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP ASSET MANAGER - SERVICE CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 18,646 $ 6,602
1998 $ 18,154 $ 5,328
1997 $ 18,044 $ 4,347
1996 $ 16,981 $ 3,238
1995 $ 15,838 $ 2,285
1994 $ 13,831 $ 1,640
1993 $ 15,466 $ 1,491
1992 $ 13,360 $ 875
1991 $ 12,588 $ 491
1990 $ 10,271 $ 401
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP ASSET MANAGER - SERVICE CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living
1999 $ 9,002 $ 34,250 $ 53,289 $ 53,747 $ 13,347
1998 $ 7,370 $ 30,852 $ 44,024 $ 42,276 $ 12,998
1997 $ 4,480 $ 26,871 $ 34,240 $ 35,805 $ 12,791
1996 $ 2,078 $ 22,297 $ 25,674 $ 28,677 $ 12,577
1995 $ 1,332 $ 19,455 $ 20,880 $ 22,281 $ 12,173
1994 $ 1,164 $ 16,635 $ 15,177 $ 16,297 $ 11,872
1993 $ 757 $ 17,714 $ 14,980 $ 15,525 $ 11,562
1992 $ 376 $ 14,611 $ 13,608 $ 13,270 $ 11,253
1991 $ 0 $ 13,079 $ 12,642 $ 12,367 $ 10,936
1990 $ 0 $ 10,672 $ 9,688 $ 9,946 $ 10,611
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Service
Class of VIP Asset Manager 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
$ 12,692 . 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
$ 4,002 for dividends and $ 5,476 for capital gain
distributions. Initial offering of Service Class of VIP Asset Manager
took place on November 3, 1997. Service Class returns prior to
November 3, 1997 are those of Initial Class, which has no 12b-1 fee.
If Service Class's 12b-1 fee had been reflected, returns prior to
November 3, 1997 would have been lower.
During the 10-year period ended December 31, 1999, a hypothetical
$10,000 investment in Service Class 2 of VIP Asset Manager would have
grown to $ 34,250 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP ASSET MANAGER - SERVICE CLASS 2
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 18,646 $ 6,602
1998 $ 18,154 $ 5,328
1997 $ 18,044 $ 4,347
1996 $ 16,981 $ 3,238
1995 $ 15,838 $ 2,285
1994 $ 13,831 $ 1,640
1993 $ 15,466 $ 1,491
1992 $ 13,360 $ 875
1991 $ 12,588 $ 491
1990 $ 10,271 $ 401
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP ASSET MANAGER - SERVICE CLASS 2 INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA
1999 $ 9,002 $ 34,250 $ 53,289 $ 53,747
1998 $ 7,370 $ 30,852 $ 44,024 $ 42,276
1997 $ 4,480 $ 26,871 $ 34,240 $ 35,805
1996 $ 2,078 $ 22,297 $ 25,674 $ 28,677
1995 $ 1,332 $ 19,455 $ 20,880 $ 22,281
1994 $ 1,164 $ 16,635 $ 15,177 $ 16,297
1993 $ 757 $ 17,714 $ 14,980 $ 15,525
1992 $ 376 $ 14,611 $ 13,608 $ 13,270
1991 $ 0 $ 13,079 $ 12,642 $ 12,367
1990 $ 0 $ 10,672 $ 9,688 $ 9,946
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
VIP ASSET MANAGER - SERVICE CLASS 2
Fiscal Year Ended Cost of Living
1999 $ 13,347
1998 $ 12,998
1997 $ 12,791
1996 $ 12,577
1995 $ 12,173
1994 $ 11,872
1993 $ 11,562
1992 $ 11,253
1991 $ 10,936
1990 $ 10,611
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of VIP Asset Manager on January 1, 1990, the net amount
invested in Service Class 2 shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $ 12,692 . 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
$ 4,002 for dividends and $ 5,476 for capital gain
distributions. Initial offering of Service Class 2 of VIP Asset
Manager took place on January 12, 2000. Service Class 2 returns
from November 3, 1997 through December 31, 1999 are those of Service
Class which reflect a 12b-1 fee of 0.10%. Service Class 2 returns
prior to November 3, 1997 are those of Initial Class, which has no
12b-1 fee. If Service Class 2's 12b-1 fee had been reflected, returns
would have been lower.
During the period from January 3, 1995 (commencement of operations) to
December 31, 1999, a hypothetical $10,000 investment in Initial Class
of VIP Asset Manager: Growth would have grown to $ 25,027 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP ASSET MANAGER: GROWTH - INITIAL CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 18,380 $ 1,561
1998 $ 17,030 $ 891
1997 $ 16,360 $ 435
1996 $ 13,100 $ 348
1995* $ 11,770 $ 110
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP ASSET MANAGER: GROWTH - INITIAL CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA
1999 $ 5,086 $ 25,027 $ 35,119 $ 32,938
1998 $ 3,793 $ 21,714 $ 29,013 $ 25,909
1997 $ 1,674 $ 18,469 $ 22,565 $ 21,943
1996 $ 1,319 $ 14,767 $ 16,920 $ 17,575
1995* $ 422 $ 12,302 $ 13,760 $ 13,655
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
VIP ASSET MANAGER: GROWTH - INITIAL CLASS
Fiscal Year Ended Cost of Living**
1999 $ 11,242
1998 $ 10,949
1997 $ 10,775
1996 $ 10,595
1995* $ 10,254
</TABLE>
* From January 3, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Initial
Class of VIP Asset Manager: Growth on January 3, 1995, the net amount
invested in Initial Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to
$ 15,145 . 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
$ 1,070 for dividends and $ 3,460 for capital gain
distributions.
During the period from January 3, 1995 (commencement of operations) to
December 31, 1999, a hypothetical $10,000 investment in Service Class
of VIP Asset Manager: Growth would have grown to $ 24,902 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP ASSET MANAGER: GROWTH - SERVICE CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 18,280 $ 1,556
1998 $ 16,960 $ 888
1997 $ 16,350 $ 435
1996 $ 13,100 $ 348
1995* $ 11,770 $ 110
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP ASSET MANAGER: GROWTH - SERVICE CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA
1999 $ 5,066 $ 24,902 $ 35,119 $ 32,938
1998 $ 3,780 $ 21,628 $ 29,013 $ 25,909
1997 $ 1,673 $ 18,458 $ 22,565 $ 21,943
1996 $ 1,319 $ 14,767 $ 16,920 $ 17,575
1995* $ 422 $ 12,302 $ 13,760 $ 13,655
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
VIP ASSET MANAGER: GROWTH - SERVICE CLASS
Fiscal Year Ended Cost of Living**
1999 $ 11,242
1998 $ 10,949
1997 $ 10,775
1996 $ 10,595
1995* $ 10,254
</TABLE>
* From January 3, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Service
Class of VIP Asset Manager: Growth on January 3, 1995, the net amount
invested in Service Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to
$ 15,145 . 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
$ 1,070 for dividends and $ 3,460 for capital gain
distributions. Initial offering of Service Class of VIP Asset Manager:
Growth took place on November 3, 1997. Service Class returns prior to
November 3, 1997 are those of Initial Class, which has no 12b-1 fee.
If Service Class's 12b-1 fee had been reflected, returns prior to
November 3, 1997 would have been lower.
During the period from January 3, 1995 (commencement of operations) to
December 31, 1999, a hypothetical $10,000 investment in Service Class
2 of VIP Asset Manager: Growth would have grown to $ 24,902 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP ASSET MANAGER: GROWTH - SERVICE CLASS 2
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 18,280 $ 1,556
1998 $ 16,960 $ 888
1997 $ 16,350 $ 435
1996 $ 13,100 $ 348
1995* $ 11,770 $ 110
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP ASSET MANAGER: GROWTH - SERVICE CLASS 2 INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA
1999 $ 5,066 $ 24,902 $ 35,119 $ 32,938
1998 $ 3,780 $ 21,628 $ 29,013 $ 25,909
1997 $ 1,673 $ 18,458 $ 22,565 $ 21,943
1996 $ 1,319 $ 14,767 $ 16,920 $ 17,575
1995* $ 422 $ 12,302 $ 13,760 $ 13,655
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
VIP ASSET MANAGER: GROWTH - SERVICE CLASS 2
Fiscal Year Ended Cost of Living**
1999 $ 11,242
1998 $ 10,949
1997 $ 10,775
1996 $ 10,595
1995* $ 10,254
</TABLE>
* From January 3, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of VIP Asset Manager: Growth on January 3, 1995, the net
amount invested in Service Class 2 shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $ 15,145 . 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
$ 1,070 for dividends and $ 3,460 for capital gain
distributions. Initial offering of Service Class 2 of VIP Asset
Manager: Growth took place on January 12, 2000. Service Class 2
returns from November 3, 1997 through December 31, 1999 are those of
Service Class which reflect a 12b-1 fee of 0.10%. Service Class 2
returns prior to November 3, 1997 are those of Initial Class, which
has no 12b-1 fee. If Service Class 2's 12b-1 fee had been reflected,
returns would have been lower.
During the period from August 27, 1992 (commencement of operations) to
December 31, 1999, a hypothetical $10,000 investment in Initial Class
of VIP Index 500 would have grown to $ 40,759 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP INDEX 500 - INITIAL CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 33,482 $ 3,369
1998 $ 28,248 $ 2,504
1997 $ 22,880 $ 1,717
1996 $ 17,810 $ 1,113
1995 $ 15,142 $ 751
1994 $ 11,244 $ 363
1993 $ 11,148 $ 360
1992* $ 10,520 $ 95
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP INDEX 500 - INITIAL CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living**
1999 $ 3,908 $ 40,759 $ 41,692 $ 41,512 $ 11,945
1998 $ 3,067 $ 33,819 $ 34,444 $ 32,652 $ 11,632
1997 $ 1,762 $ 26,359 $ 26,788 $ 27,654 $ 11,448
1996 $ 921 $ 19,844 $ 20,087 $ 22,149 $ 11,256
1995 $ 278 $ 16,171 $ 16,336 $ 17,209 $ 10,894
1994 $ 180 $ 11,787 $ 11,874 $ 12,587 $ 10,625
1993 $ 158 $ 11,666 $ 11,720 $ 11,991 $ 10,348
1992* $ 16 $ 10,631 $ 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 Initial
Class of VIP Index 500 on August 27, 1992, the net amount invested in
Initial Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at
the time they were reinvested) amounted to $ 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.
During the period from August 27, 1992 (commencement of operations) to
December 31, 1999, a hypothetical $10,000 investment in Service Class
2 of VIP Index 500 would have grown to $ 40,759 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP INDEX 500 - SERVICE CLASS 2
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 33,482 $ 3,369
1998 $ 28,248 $ 2,504
1997 $ 22,880 $ 1,717
1996 $ 17,810 $ 1,113
1995 $ 15,142 $ 751
1994 $ 11,244 $ 363
1993 $ 11,148 $ 360
1992* $ 10,520 $ 95
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP INDEX 500 - SERVICE CLASS 2 INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living**
1999 $ 3,908 $ 40,759 $ 41,692 $ 41,512 $ 11,945
1998 $ 3,067 $ 33,819 $ 34,444 $ 32,652 $ 11,632
1997 $ 1,762 $ 26,359 $ 26,788 $ 27,654 $ 11,448
1996 $ 921 $ 19,844 $ 20,087 $ 22,149 $ 11,256
1995 $ 278 $ 16,171 $ 16,336 $ 17,209 $ 10,894
1994 $ 180 $ 11,787 $ 11,874 $ 12,587 $ 10,625
1993 $ 158 $ 11,666 $ 11,720 $ 11,991 $ 10,348
1992* $ 16 $ 10,631 $ 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 2 of VIP Index 500 on August 27, 1992, the net amount invested
in Service Class 2 shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to
$ 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 2 of VIP Index 500
took place on January 12, 2000. Service Class 2 returns are those
of Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1
fee had been reflected, returns would have been lower.
During the period from January 3, 1995 (commencement of operations) to
December 31, 1999, a hypothetical $10,000 investment in Initial Class
of VIP Contrafund would have grown to $ 33,957 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP CONTRAFUND - INITIAL CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 29,150 $ 767
1998 $ 24,440 $ 507
1997 $ 19,940 $ 262
1996 $ 16,560 $ 73
1995* $ 13,790 $ 61
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP CONTRAFUND - INITIAL CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living**
1999 $ 4,040 $ 33,957 $ 35,119 $ 32,938 $ 11,242
1998 $ 2,382 $ 27,329 $ 29,013 $ 25,909 $ 10,949
1997 $ 824 $ 21,026 $ 22,565 $ 21,943 $ 10,775
1996 $ 304 $ 16,937 $ 16,920 $ 17,575 $ 10,595
1995* $ 121 $ 13,972 $ 13,760 $ 13,655 $ 10,254
</TABLE>
* From January 3, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Initial
Class of VIP Contrafund on January 3, 1995, the net amount invested in
Initial Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at
the time they were reinvested) amounted to $ 13,185 . 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 $ 460 for
dividends and $ 2,530 for capital gain distributions.
During the period from January 3, 1995 (commencement of operations) to
December 31, 1999, a hypothetical $10,000 investment in Service Class
of VIP Contrafund would have grown to $ 33,900 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP CONTRAFUND - SERVICE CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 29,100 $ 766
1998 $ 24,420 $ 506
1997 $ 19,930 $ 261
1996 $ 16,560 $ 73
1995* $ 13,790 $ 61
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP CONTRAFUND - SERVICE CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living**
1999 $ 4,034 $ 33,900 $ 35,119 $ 32,938 $ 11,242
1998 $ 2,380 $ 27,306 $ 29,013 $ 25,909 $ 10,949
1997 $ 824 $ 21,015 $ 22,565 $ 21,943 $ 10,775
1996 $ 304 $ 16,937 $ 16,920 $ 17,575 $ 10,595
1995* $ 121 $ 13,972 $ 13,760 $ 13,655 $ 10,254
</TABLE>
* From January 3, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Service
Class of VIP Contrafund on January 3, 1995, the net amount invested in
Service Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at
the time they were reinvested) amounted to $ 13,185 . 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 $ 460 for
dividends and $ 2,530 for capital gain distributions. Initial
offering of Service Class of VIP Contrafund took place on November 3,
1997. Service Class returns prior to November 3, 1997 are those of
Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee
had been reflected, returns prior to November 3, 1997 would have been
lower.
During the period from January 3, 1995 (commencement of operations) to
December 31, 1999, a hypothetical $10,000 investment in Service Class
2 of VIP Contrafund would have grown to $ 33,900 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP CONTRAFUND - SERVICE CLASS 2
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 29,100 $ 766
1998 $ 24,420 $ 506
1997 $ 19,930 $ 261
1996 $ 16,560 $ 73
1995* $ 13,790 $ 61
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP CONTRAFUND - SERVICE CLASS 2 INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA
1999 $ 4,034 $ 33,900 $ 35,119 $ 32,938
1998 $ 2,380 $ 27,306 $ 29,013 $ 25,909
1997 $ 824 $ 21,015 $ 22,565 $ 21,943
1996 $ 304 $ 16,937 $ 16,920 $ 17,575
1995* $ 121 $ 13,972 $ 13,760 $ 13,655
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
VIP CONTRAFUND - SERVICE CLASS 2
Fiscal Year Ended Cost of Living**
1999 $ 11,242
1998 $ 10,949
1997 $ 10,775
1996 $ 10,595
1995* $ 10,254
</TABLE>
* From January 3, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of VIP Contrafund on January 3, 1995, the net amount invested
in Service Class 2 shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to
$ 13,185 . 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
$ 460 for dividends and $ 2,530 for capital gain
distributions. Initial offering of Service Class 2 of VIP
Contrafund took place on January 12, 2000. Service Class 2 returns
from November 3, 1997 through December 31, 1999 are those of Service
Class which reflect a 12b-1 fee of 0.10%. Service Class 2 returns
prior to November 3, 1997 are those of Initial Class, which has no
12b-1 fee. If Service Class 2's 12b-1 fee had been reflected, returns
would have been lower.
During the period from January 3, 1995 (commencement of operations) to
December 31, 1999, a hypothetical $10,000 investment in Initial Class
of VIP Balanced would have grown to $ 18,827 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP BALANCED - INITIAL CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 16,000 $ 1,476
1998 $ 16,110 $ 1,047
1997 $ 14,580 $ 556
1996 $ 12,230 $ 154
1995* $ 11,170 $ 141
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP BALANCED - INITIAL CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living**
1999 $ 1,351 $ 18,827 $ 35,119 $ 32,938 $ 11,242
1998 $ 851 $ 18,008 $ 29,013 $ 25,909 $ 10,949
1997 $ 171 $ 15,307 $ 22,565 $ 21,943 $ 10,775
1996 $ 144 $ 12,528 $ 16,920 $ 17,575 $ 10,595
1995* $ 81 $ 11,392 $ 13,760 $ 13,655 $ 10,254
</TABLE>
* From January 3, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Initial
Class of VIP Balanced on January 3, 1995, the net amount invested in
Initial Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at
the time they were reinvested) amounted to $ 12,438 . 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 $ 1,180 for
dividends and $ 1,110 for capital gain distributions.
During the period from January 3, 1995 (commencement of operations) to
December 31, 1999, a hypothetical $10,000 investment in Service Class
of VIP Balanced would have grown to $ 18,759 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP BALANCED - SERVICE CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 15,940 $ 1,471
1998 $ 16,070 $ 1,045
1997 $ 14,590 $ 556
1996 $ 12,230 $ 154
1995* $ 11,170 $ 141
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP BALANCED - SERVICE CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living**
1999 $ 1,348 $ 18,759 $ 35,119 $ 32,938 $ 11,242
1998 $ 849 $ 17,964 $ 29,013 $ 25,909 $ 10,949
1997 $ 172 $ 15,318 $ 22,565 $ 21,943 $ 10,775
1996 $ 144 $ 12,528 $ 16,920 $ 17,575 $ 10,595
1995* $ 81 $ 11,392 $ 13,760 $ 13,655 $ 10,254
</TABLE>
* From January 3, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Service
Class of VIP Balanced on January 3, 1995, the net amount invested in
Service Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at
the time they were reinvested) amounted to $ 12,438 . 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 $ 1,180 for
dividends and $ 1,110 for capital gain distributions. Initial
offering of Service Class of VIP Balanced took place on November 3,
1997. Service Class returns prior to November 3, 1997 are those of
Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee
had been reflected, returns prior to November 3, 1997 would have been
lower.
During the period from January 3, 1995 (commencement of operations) to
December 31, 1999, a hypothetical $10,000 investment in Service Class
2 of VIP Balanced would have grown to $ 18,759 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP BALANCED - SERVICE CLASS 2
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 15,940 $ 1,471
1998 $ 16,070 $ 1,045
1997 $ 14,590 $ 556
1996 $ 12,230 $ 154
1995* $ 11,170 $ 141
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP BALANCED - SERVICE CLASS 2 INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living**
1999 $ 1,348 $ 18,759 $ 35,119 $ 32,938 $ 11,242
1998 $ 849 $ 17,964 $ 29,013 $ 25,909 $ 10,949
1997 $ 172 $ 15,318 $ 22,565 $ 21,943 $ 10,775
1996 $ 144 $ 12,528 $ 16,920 $ 17,575 $ 10,595
1995* $ 81 $ 11,392 $ 13,760 $ 13,655 $ 10,254
</TABLE>
* From January 3, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of VIP Balanced on January 3, 1995, the net amount invested in
Service Class 2 shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at
the time they were reinvested) amounted to $ 12,438 . 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 $ 1,180 for
dividends and $ 1,110 for capital gain distributions. Initial
offering of Service Class 2 of VIP Balanced took place on January 12,
2000. Service Class 2 returns from November 3, 1997 through
December 31, 1999 are those of Service Class which reflect a 12b-1 fee
of 0.10%. Service Class 2 returns prior to November 3, 1997 are those
of Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1
fee had been reflected, returns would have been lower.
During the period from December 31, 1996 (commencement of operations)
to December 31, 1999, a hypothetical $10,000 investment in Initial
Class of VIP Growth & Income would have grown to $ 18,220 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP GROWTH & INCOME - INITIAL CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 17,300 $ 227
1998 $ 16,150 $ 106
1997* $ 12,530 $ 82
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP GROWTH & INCOME - INITIAL CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA
1999 $ 693 $ 18,220 $ 20,396 $ 18,454
1998 $ 434 $ 16,690 $ 16,850 $ 14,515
1997* $ 267 $ 12,879 $ 13,105 $ 12,294
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
VIP GROWTH & INCOME - INITIAL CLASS
Fiscal Year Ended Cost of Living**
1999 $ 10,612
1998 $ 10,334
1997* $ 10,170
</TABLE>
* From December 31, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Initial
Class of VIP Growth & Income on December 31, 1996, the net amount
invested in Initial Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to
$ 10,722 . 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
$ 180 for dividends and $ 530 for capital gain
distributions.
During the period from December 31, 1996 (commencement of operations)
to December 31, 1999, a hypothetical $10,000 investment in Service
Class of VIP Growth & Income would have grown to $ 18,158 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP GROWTH & INCOME - SERVICE CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 17,240 $ 227
1998 $ 16,110 $ 106
1997* $ 12,530 $ 82
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP GROWTH & INCOME - SERVICE CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA
1999 $ 691 $ 18,158 $ 20,396 $ 18,454
1998 $ 433 $ 16,649 $ 16,850 $ 14,515
1997* $ 267 $ 12,879 $ 13,105 $ 12,294
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
VIP GROWTH & INCOME - SERVICE CLASS
Fiscal Year Ended Cost of Living**
1999 $ 10,612
1998 $ 10,334
1997* $ 10,170
</TABLE>
* From December 31, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Service
Class of VIP Growth & Income on December 31, 1996, the net amount
invested in Service Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to
$ 10,722 . 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
$ 180 for dividends and $ 530 for capital gain
distributions. Initial offering of Service Class of VIP Growth &
Income took place on November 3, 1997. Service Class returns prior to
November 3, 1997 are those of Initial Class, which has no 12b-1 fee.
If Service Class's 12b-1 fee had been reflected, returns prior to
November 3, 1997 would have been lower.
During the period from December 31, 1996 (commencement of operations)
to December 31, 1999, a hypothetical $10,000 investment in Service
Class 2 of VIP Growth & Income would have grown to $ 18,158 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP GROWTH & INCOME - SERVICE CLASS 2
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 17,240 $ 227
1998 $ 16,110 $ 106
1997* $ 12,530 $ 82
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP GROWTH & INCOME - SERVICE CLASS 2 INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA
1999 $ 691 $ 18,158 $ 20,396 $ 18,454
1998 $ 433 $ 16,649 $ 16,850 $ 14,515
1997* $ 267 $ 12,879 $ 13,105 $ 12,294
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
VIP GROWTH & INCOME - SERVICE CLASS 2
Fiscal Year Ended Cost of Living**
1999 $ 10,612
1998 $ 10,334
1997* $ 10,170
</TABLE>
* From December 31, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of VIP Growth & Income on December 31, 1996, the net amount
invested in Service Class 2 shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $ 10,722 . 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
$ 180 for dividends and $ 530 for capital gain
distributions. Initial offering of Service Class 2 of VIP Growth &
Income took place on January 12, 2000. Service Class 2 returns
from November 3, 1997 through December 31, 1999 are those of Service
Class which reflect a 12b-1 fee of 0.10%. Service Class 2 returns
prior to November 3, 1997 are those of Initial Class, which has no
12b-1 fee. If Service Class 2's 12b-1 fee had been reflected, returns
would have been lower.
During the period from January 3, 1995 (commencement of operations) to
December 31, 1999, a hypothetical $10,000 investment in Initial Class
of VIP Growth Opportunities would have grown to $ 26,465 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP GROWTH OPPORTUNITIES - INITIAL CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 23,150 $ 1,119
1998 $ 22,880 $ 836
1997 $ 19,270 $ 479
1996 $ 15,400 $ 130
1995* $ 13,070 $ 111
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP GROWTH OPPORTUNITIES - INITIAL CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA
1999 $ 2,196 $ 26,465 $ 35,119 $ 32,938
1998 $ 1,665 $ 25,381 $ 29,013 $ 25,909
1997 $ 619 $ 20,368 $ 22,565 $ 21,943
1996 $ 143 $ 15,673 $ 16,920 $ 17,575
1995* $ 71 $ 13,252 $ 13,760 $ 13,655
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
VIP GROWTH OPPORTUNITIES - INITIAL CLASS
Fiscal Year Ended Cost of Living**
1999 $ 11,242
1998 $ 10,949
1997 $ 10,775
1996 $ 10,595
1995* $ 10,254
</TABLE>
* From January 3, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Initial
Class of VIP Growth Opportunities on January 3, 1995, the net amount
invested in Initial Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to
$ 12,567 . If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been
smaller, and cash payments for the period would have amounted to
$ 800 for dividends and $ 1,630 for capital gain
distributions.
During the period from January 3, 1995 (commencement of operations) to
December 31, 1999, a hypothetical $10,000 investment in Service Class
of VIP Growth Opportunities would have grown to $ 26,419 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP GROWTH OPPORTUNITIES - SERVICE CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 23,120 $ 1,106
1998 $ 22,860 $ 835
1997 $ 19,270 $ 479
1996 $ 15,400 $ 130
1995* $ 13,070 $ 111
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP GROWTH OPPORTUNITIES - SERVICE CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA
1999 $ 2,193 $ 26,419 $ 35,119 $ 32,938
1998 $ 1,664 $ 25,359 $ 29,013 $ 25,909
1997 $ 619 $ 20,368 $ 22,565 $ 21,943
1996 $ 143 $ 15,673 $ 16,920 $ 17,575
1995* $ 71 $ 13,252 $ 13,760 $ 13,655
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
VIP GROWTH OPPORTUNITIES - SERVICE CLASS
Fiscal Year Ended Cost of Living**
1999 $ 11,242
1998 $ 10,949
1997 $ 10,775
1996 $ 10,595
1995* $ 10,254
</TABLE>
* From January 3, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Service
Class of VIP Growth Opportunities on January 3, 1995, the net amount
invested in Service Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to
$ 12,556 . 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
$ 790 for dividends and $ 1,630 for capital gain
distributions. Initial offering of Service Class of VIP Growth
Opportunities took place on November 3, 1997. Service Class returns
prior to November 3, 1997 are those of Initial Class, which has no
12b-1 fee. If Service Class's 12b-1 fee had been reflected, returns
prior to November 3, 1997 would have been lower.
During the period from January 3, 1995 (commencement of operations) to
December 31, 1999, a hypothetical $10,000 investment in Service Class
2 of VIP Growth Opportunities would have grown to $ 26,419 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP GROWTH OPPORTUNITIES - SERVICE CLASS 2
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 23,120 $ 1,106
1998 $ 22,860 $ 835
1997 $ 19,270 $ 479
1996 $ 15,400 $ 130
1995* $ 13,070 $ 111
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP GROWTH OPPORTUNITIES - SERVICE CLASS 2 INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA
1999 $ 2,193 $ 26,419 $ 35,119 $ 32,938
1998 $ 1,664 $ 25,359 $ 29,013 $ 25,909
1997 $ 619 $ 20,368 $ 22,565 $ 21,943
1996 $ 143 $ 15,673 $ 16,920 $ 17,575
1995* $ 71 $ 13,252 $ 13,760 $ 13,655
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
VIP GROWTH OPPORTUNITIES - SERVICE CLASS 2
Fiscal Year Ended Cost of Living**
1999 $ 11,242
1998 $ 10,949
1997 $ 10,775
1996 $ 10,595
1995* $ 10,254
</TABLE>
* From January 3, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of VIP Growth Opportunities on January 3, 1995, the net amount
invested in Service Class 2 shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted
to $ 12,556 . 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
$ 790 for dividends and $ 1,630 for capital gain
distributions. Initial offering of Service Class 2 of VIP Growth
Opportunities took place on January 12, 2000 . Service Class 2
returns from November 3, 1997 through December 31, 1999 are those of
Service Class which reflect a 12b-1 fee of 0.10%. Service Class 2
returns prior to November 3, 1997 are those of Initial Class, which
has no 12b-1 fee. If Service Class 2's 12b-1 fee had been reflected,
returns would have been lower.
During the period from December 28, 1998 (commencement of operations)
to December 31, 1999, a hypothetical $10,000 investment in Initial
Class of VIP Mid Cap would have grown to $ 15,366 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP MID CAP - INITIAL CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 15,250 $ 0
1998* $ 10,310 $ 0
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP MID CAP - INITIAL CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living**
1999 $ 116 $ 15,366 $ 12,143 $ 12,652 $ 10,268
1998* $ 0 $ 10,310 $ 10,032 $ 9,952 $ 10,000
</TABLE>
* From December 28, 1998 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Initial
Class of VIP Mid Cap on December 28, 1998, the net amount invested in
Initial Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at
the time they were reinvested) amounted to $ 10,110 . 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 $ 0 for dividends
and $ 110 for capital gain distributions.
During the period from December 28, 1998 (commencement of operations)
to December 31, 1999, a hypothetical $10,000 investment in Service
Class of VIP Mid Cap would have grown to $ 15,356 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP MID CAP - SERVICE CLASS
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 15,240 $ 0
1998* $ 10,310 $ 0
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP MID CAP - SERVICE CLASS INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living**
1999 $ 116 $ 15,356 $ 12,143 $ 12,652 $ 10,268
1998* $ 0 $ 10,310 $ 10,032 $ 9,952 $ 10,000
</TABLE>
* From December 28, 1998 (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 Mid Cap on December 28, 1998, 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 $ 10,110 . 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 $ 0 for dividends
and $ 110 for capital gain distributions.
During the period from December 28, 1998 (commencement of operations)
to December 31, 1999, a hypothetical $10,000 investment in Service
Class 2 of VIP Mid Cap would have grown to $ 15,356 .
<TABLE>
<CAPTION>
<S> <C> <C>
VIP MID CAP - SERVICE CLASS 2
Fiscal Year Ended Value of Initial $10,000 Investment Value of Reinvested Dividend Distributions
1999 $ 15,240 $ 0
1998* $ 10,310 $ 0
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP MID CAP - SERVICE CLASS 2 INDEXES
Fiscal Year Ended Value of Reinvested Capital Gain Distributions Total Value S&P 500 DJIA Cost of Living**
1999 $ 116 $ 15,356 $ 12,143 $ 12,652 $ 10,268
1998* $ 0 $ 10,310 $ 10,032 $ 9,952 $ 10,000
</TABLE>
* From December 28, 1998 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Service
Class 2 of VIP Mid Cap on December 28, 1998, the net amount invested
in Service Class 2 shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to
$ 10,110 . 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
$ 0 for dividends and $ 110 for capital gain
distributions. Initial offering of Service Class 2 of VIP Mid Cap
took place on January 12, 2000 . Service Class 2 returns prior to
December 31, 1999 are those of Service Class which reflect a 12b-1 fee
of 0.10%. If Service Class 2's 12b-1 fee had been reflected, returns
would have been lower.
INTERNATIONAL INDEXES, MARKET CAPITALIZATION, AND NATIONAL
STOCK MARKET RETURN
The following tables show the total market capitalization of certain
countries according to the Morgan Stanley Capital International
indexes database, the total market capitalization of Latin American
countries according to the International Finance Corporation Emerging
Markets database, and the performance of national stock markets as
measured in U.S. dollars by the Morgan Stanley Capital International
stock market indexes for the twelve months ended December 31, 1999. Of
course, these results are not indicative of future stock market
performance or the funds' performance. Market conditions during the
periods measured fluctuated widely. Brokerage commissions and other
fees are not factored into the values of the indexes.
MARKET CAPITALIZATION. Companies outside the United States now make up
nearly two-thirds of the world's stock market capitalization.
According to Morgan Stanley Capital International, the size of the
markets as measured in U.S. dollars grew from $ 8,045.9 billion
in 199 8 to $ 10,573.8 billion in 1999 .
The following table measures the total market capitalization of
certain countries according to the Morgan Stanley Capital
International indexes database. The value of each market is measured
in billions of U.S. dollars as of December 31, 1999.
TOTAL MARKET CAPITALIZATION
Australia $ 248.7 Japan $ 2,779.3
Austria $ 22.2 Malaysia $ 77.3
Belgium $ 91.0 Netherlands $ 530.8
Canada $ 441.2 Norway $ 37.8
Denmark $ 79.2 Singapore $ 107.9
France $ 1,039.2 Spain $ 272.8
Germany $ 1,061.4 Sweden $ 272.2
Hong Kong $ 236.7 Switzerland $ 576.2
Italy $ 428.6 United Kingdom $ 1,941.5
United States $ 10,148.8
The following table measures the total market capitalization of Latin
American countries according to the International Finance Corporation
Emerging Markets database. The value of each market is measured in
billions of U.S. dollars as of December 31, 1999.
TOTAL MARKET CAPITALIZATION - LATIN AMERICA
Argentina $ 23.0
Brazil $ 134.0
Chile $ 38.8
Colombia $ 3.9
Mexico $ 128.4
Venezuela $ 7.4
Peru $ 6.4
Total Latin America $ 341.9
NATIONAL STOCK MARKET PERFORMANCE. Certain national stock markets have
outperformed the U.S. stock market. The first table below represents
the performance of national stock markets as measured in U.S. dollars
by the Morgan Stanley Capital International stock market indexes for
the twelve months ended December 31, 1999. The second table shows the
same performance as measured in local currency. Each table measures
return based on the period's change in price, dividends paid on stocks
in the index, and the effect of reinvesting dividends net of any
applicable foreign taxes. These are unmanaged indexes composed of a
sampling of selected companies representing an approximation of the
market structure of the designated country.
STOCK MARKET PERFORMANCE
MEASURED IN U.S. DOLLARS
Australia 17.62% Japan 61.53%
Austria -9.11% Malaysia 114.61%
Belgium -14.26% Netherlands 6.88%
Canada 53.74% Norway 31.70%
Denmark 12.06% Singapore 60.17%
France 29.27% Spain 4.83%
Germany 20.04% Sweden 79.74%
Hong Kong 59.52% Switzerland -7.02%
Italy -0.26% United Kingdom 12.45%
United States 21.92%
STOCK MARKET PERFORMANCE
MEASURED IN LOCAL CURRENCY
Australia 10.25% Japan 46.57%
Austria 6.47% Malaysia 50.19%
Belgium 0.45% Netherlands 25.21%
Canada 45.26% Norway 38.92%
Denmark 30.73% Singapore 101.33%
France 51.44% Spain 22.81%
Germany 40.63% Sweden 89.44%
Hong Kong 60.06% Switzerland 8.36%
Italy 16.84% United Kingdom 16.08%
United States 21.92%
The following table shows the average annualized stock market returns
measured in U.S. dollars as of December 31, 1999.
STOCK MARKET PERFORMANCE
Five Years Ended Ten Years Ended
December 31, 1999 December 31, 1999
Germany 20.66% 12.31%
Hong Kong 14.14% 20.48%
Japan 1.96% -0.85%
Spain 29.07% 13.16%
United Kingdom 20.20% 14.24%
United States 29.02% 18.12%
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, a class may quote Morningstar, Inc. in its
advertising materials. Morningstar, Inc. is a mutual fund rating
service that rates mutual funds on the basis of risk-adjusted
performance. Rankings that compare the performance of Fidelity funds
to one another in appropriate categories over specific periods of time
may also be quoted in advertising. 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.
The Fidelity Asset Manager Composite Index and Fidelity
Asset Manager: Growth Composite Index (for VIP Asset Manager and
VIP Asset Manager: Growth) are hypothetical representations of the
performance of each fund's asset classes according to their respective
weighting in each fund's neutral mix. The weightings are rebalanced
monthly.
For periods after January 1, 1997, the Fidelity Asset Manager
Composite Index represents VIP Asset Manager's three asset classes
according to their respective weightings in the fund's neutral mix
(10% short-term/money market; 40% bonds; and 50% stocks).
For periods after January 1, 1997, the Fidelity Asset Manager:
Growth Composite Index represents VIP Asset Manager: Growth's
three asset classes according to their respective weightings in the
fund's neutral mix (5% short-term/money market; 25% bonds; and 70%
stocks).
The following indexes are used to calculate the Fidelity Asset
Manager Composite Index and the Fidelity Asset Manager: Growth
Composite Index : the S&P 500 for the stock class, the Lehman
Brothers Aggregate Bond Index for the bond class, and the Lehman
Brothers 3-Month Treasury Bill Index for the short-term/money market
class.
For periods between June 1, 1992 and January 1, 1997, the Fidelity
Asset Manager Composite Index represented VIP Asset Manager's
three asset classes according to their respective weightings in the
fund's neutral mix (20% short-term instruments; 40% bonds; and 40%
stocks) during that period of time. The following indexes are used to
calculate the Fidelity Asset Manager Composite Index during
that period of time: the Lehman Brothers 3-Month Treasury Bill Index;
the Lehman Brothers U.S. Treasury Index; and the S&P 500. For periods
prior to June 1, 1992, the Fidelity Asset Manager Composite
Index represented VIP Asset Manager's three asset classes according to
their respective weightings in the fund's neutral mix (30% money
market instruments; 40% bonds; and 30% stocks) during that period of
time. The following indexes are used to calculate the Fidelity
Asset Manager Composite Index during that period of time: the
Lehman Brothers 3-Month Treasury Bill Index; the Lehman Brothers U.S.
Treasury Index; and the S&P 500.
For periods prior to January 1, 1997, the Fidelity Asset Manager:
Growth Composite Index represented VIP Asset Manager: Growth's
three asset classes according to their respective weightings in the
fund's neutral mix (5% short-term instruments; 30% bonds; and 65%
stocks) during that period of time. The following indexes are used to
calculate the Fidelity Asset Manager: Growth Composite Index
during that period of time: the Lehman Brothers 3-Month Treasury Bill
Index; the Lehman Brothers U.S. Treasury Index; and the S&P 500.
S&P 500. A market capitalization-weighted index of common stocks.
LEHMAN BROTHERS AGGREGATE BOND INDEX is a market value-weighted index
for investment-grade fixed-rate debt issues, including government,
corporate, asset-backed, and mortgage-backed securities. Issues
included in the index have an outstanding par value of at least $100
million and maturities of at least one year. Government and corporate
issues include all public obligations of the U.S. Treasury (excluding
flower bonds and foreign-targeted issues) and U.S. Government
agencies, as well as nonconvertible investment-grade, SEC-registered
corporate debt. Mortgage-backed securities include 15- and 30-year
fixed-rate securities backed by mortgage pools of the Government
National Mortgage Association (GNMA), Federal Home Loan Mortgage
Corporation (FHLMC), and Fannie Mae. Asset-backed securities include
credit card, auto, and home equity loans.
LEHMAN BROTHERS U.S. TREASURY INDEX is a market value-weighted index
of public obligations of the U.S. Treasury with maturities of one year
or more. Issues in the index must have at least $100 million par
amount outstanding. Certain special issues, such as flower bonds,
targeted investor notes (TINs), and state and local government series
(SLGs) bonds are excluded.
LEHMAN BROTHERS 3-MONTH TREASURY BILL INDEX is a representation of the
average of T-Bill rates for each of the prior three months, adjusted
to a bond equivalent yield basis (short-term instruments).
Each of VIP Asset Manager and VIP Asset Manager: Growth has the
ability to invest in securities that are not included in any of the
indexes, and each fund's actual investment portfolio may not reflect
the composition or the weighting of the indexes used. The Lehman
Brothers 3-Month Treasury Bill Index, the Lehman Brothers U.S.
Treasury Index, the Lehman Brothers Aggregate Bond Index, the S&P 500,
and the asset allocation composite indexes include reinvestment of
income or dividends, as appropriate, and are based on the prices of
unmanaged groups of U.S. Treasury obligations, other fixed-income
obligations, or stocks, as appropriate. Unlike each fund's returns,
the indexes do not include the effect of paying brokerage commissions,
spreads, or other costs of investing. Historical results are used for
illustrative purposes only and do not reflect the past or future
performance of the funds.
The following table represents the comparative indexes' calendar
year-to-year performance.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Lehman Brothers 3-Month Treasury Bill Index Lehman Brothers Aggregate Bond Index Lehman Brothers U.S. Treasury Index
1999 4.90% -0.82% -2.56%
1998 5.31% 8.69% 10.03%
1997 5.52% 9.65% 9.57%
1996 5.38% 3.63% 2.70%
1995 6.09% 18.47% 18.35%
1994 4.26% -2.92% -3.38%
1993 3.20% 9.75% 10.68%
1992 2.92% 7.40% 7.21%
1991 6.22% 16.00% 15.29%
1990 8.21% 8.96% 8.54%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
S&P 500
1999 21.04%
1998 28.58%
1997 33.36%
1996 22.96%
1995 37.58%
1994 1.32%
1993 10.08%
1992 7.62%
1991 30.47%
1990 -3.10%
</TABLE>
VIP Balanced may compare its performance to that of the Fidelity
VIP Balanced Composite Index which is a hypothetical
representation of the performance of the fund's general investment
categories using a weighting of 60% equity and 40% bond. The following
indexes are used to calculate the Fidelity VIP Balanced
Composite Index: Russell 3000(registered trademark) Value Index
for the equity category and the Lehman Brothers Aggregate Bond
Index for the bond category. The index weightings of the Fidelity
VIP Balanced Composite Index are rebalanced monthly.
RUSSELL 3000 VALUE INDEX is a market capitalization-weighted index
of value-oriented stocks of U.S. domiciled companies .
Value-oriented stocks tend to have lower price-to-book ratios and
lower forecasted values.
LEHMAN BROTHERS AGGREGATE BOND INDEX is a market value-weighted index
for investment-grade fixed-rate debt issues, including government,
corporate, asset-backed, and mortgage-backed securities. Issues
included in the index have an outstanding par value of at least $100
million and maturities of at least one year. Government and corporate
issues include all public obligations of the U.S. Treasury (excluding
flower bonds and foreign-targeted issues) and U.S. Government
agencies, as well as nonconvertible investment-grade, SEC-registered
corporate debt. Mortgage-backed securities include 15- and 30-year
fixed-rate securities backed by mortgage pools of the Government
National Mortgage Association (GNMA), Federal Home Loan Mortgage
Corporation (FHLMC), and Fannie Mae. Asset-backed securities include
credit card, auto, and home equity loans.
Each of VIP Asset Manager, VIP Asset Manager: Growth, VIP Index 500,
VIP Contrafund, VIP Balanced, VIP Growth & Income, and VIP Growth
Opportunities may compare its performance to that of the Standard &
Poor's 500 Index, a market capitalization-weighted index of common
stocks.
VIP Growth may compare its performance to that of the Russell 3000
Growth Index, a market capitalization-weighted index of
growth - oriented stocks of U.S. domiciled companies.
Growth-oriented stocks tend to have higher price-to-book ratios and
higher forecasted growth values.
Each of VIP Equity-Income and VIP Balanced may compare its
performance to that of the Russell 3000 Value Index, a market
capitalization-weighted index of value-oriented stocks of U.S.
domiciled companies. Value-oriented stocks tend to have lower
price-to-book ratios and lower forecasted values.
VIP Mid Cap may compare its performance to that of the Standard &
Poor's MidCap 400(registered trademark) Index, a market
capitalization-weighted index of 400 medium-capitalization stocks.
VIP Overseas may compare its performance to that of the Morgan Stanley
Capital International Europe, Australasia and Far East (EAFE) Index, a
market capitalization-weighted index that is designed to represent the
performance of developed stock markets outside of the United States
and Canada. The index returns for periods after January 1, 1997 are
adjusted for tax withholding rates applicable to U.S.-based mutual
funds organized as Massachusetts business trusts. Effective October 1,
1998, the country of Malaysia was removed from this index. The index
returns reflect the inclusion of Malaysia prior to October 1, 1998.
Stocks are selected for the Morgan Stanley Capital International
(MSCI) index on the basis of industry representation, liquidity,
sufficient float, and avoidance of cross-ownership.
Each of VIP Balanced, VIP Investment Grade Bond , VIP Asset Manager,
and VIP Asset Manager: Growth may also compare its performance to
the Lehman Brothers Aggregate Bond Index, a market value-weighted
index for investment-grade fixed-rate debt issues, including
government, corporate, asset-backed, and mortgage-backed securities.
Issues included in the index have an outstanding par value of at least
$100 million and maturities of at least one year. Government and
corporate issues include all public obligations of the U.S. Treasury
(excluding flower bonds and foreign-targeted issues) and U.S.
Government agencies, as well as nonconvertible investment-grade,
SEC-registered corporate debt. Mortgage-backed securities include 15-
and 30-year fixed-rate securities backed by mortgage pools of the
Government National Mortgage Association (GNMA), Federal Home Loan
Mortgage Corporation (FHLMC), and Fannie Mae. Asset-backed securities
include credit card, auto, and home equity loans.
Each of VIP Asset Manager and VIP Asset Manager: Growth may also
compare its performance to the Lehman Brothers 3-Month Treasury Bill
Index, a representation of the average of T-Bill rates for each of the
prior three months, adjusted to a bond equivalent yield basis
(short-term instruments).
VIP High Income may compare its performance to that of the Merrill
Lynch High Yield Master II Index, a market value-weighted index of all
domestic and yankee high-yield bonds, including deferred interest
bonds and payment-in-kind securities. Issues included in the index
have maturities of one year or more and have a credit rating lower
than BBB-/Baa3, but are not in default. Issues must have an
outstanding par value of at least $50 million to be included in the
index.
VIP High Income may also compare its performance to that of the
Merrill Lynch High Yield Master Index, a market value-weighted index
of all domestic and yankee high-yield bonds with an outstanding par
value of at least $50 million and maturities of at least one year.
Issues included in the index have a credit rating lower than BBB-/Baa3
but are not in default (DDD1 or lower). Split-rated issues (i.e.,
rated investment-grade by one rating agency and high-yield by another)
are included in the index based on the issue's corresponding composite
rating. Structured-note issues, deferred interest bonds, and
pay-in-kind bonds are excluded.
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 IBC Financial Data, Inc. of Ashland, Massachusetts. These averages
assume reinvestment of distributions. IBC's MONEY FUND REPORT
AVERAGES(trademark)/All Taxable (Money Market), which is reported in
IBC'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, a rticles 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, growth & income, or asset allocation fund may
also discuss or illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate price movements over specific periods of
time for each class of 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 a 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 A ND 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 each 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. If, at the close of its fiscal year,
more than 50% of a fund's total assets is invested in securities of
foreign issuers, the fund may elect to pass through eligible foreign
taxes paid and thereby allow shareholders to take a deduction or, if
they meet certain holding period requirements with respect to fund
shares, a credit on their tax returns.
As of D ecember 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 D ecember 31, 2002, 2005, and
2007, respectively, is available to offset future capital gains.
As of D ecember 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 D ecember 31, 2007, is available to offset future
capital gains.
As of D ecember 31, 1999, VIP High Income had an
aggregate capital loss carryforward of approximately
$78,395,000 . This loss carryforward, all of which will
expire on D ecember 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 last five years. All persons
named as Trustees also serve in similar capacities for other funds
advised by FMR or its affiliates. The business address of each
Trustee , Member of 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(registered trademark), P.O. Box 9235, Boston,
Massachusetts 02205-9235. Those Trustees who are "interested persons"
by virtue of their affiliation with the trust s , FMR , or
BT are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d (69), Trustee, is President of VIP Money
Market, VIP High Income, VIP Equity-Income, VIP Growth, VIP Overseas,
VIP Investment Grade Bond, VIP Asset Manager, VIP Asset Manager:
Growth, VIP Index 500, VIP Contrafund, VIP Balanced, VIP Growth &
Income, VIP Growth Opportunities, and VIP Mid Cap. 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).
Abigail Johnson, Vice President of VIP Growth, VIP Contrafund, VIP
Growth Opportunities, and VIP Mid Cap, is Mr. Johnson's daughter.
ABIGAIL P. JOHNSON (38), is Vice President of certain Equity Funds
(1997), and is a Director of FMR Corp. (1994). Before assuming her
current responsibilities, Ms. Johnson managed a number of Fidelity
funds. Edward C. Johnson 3d, Trustee and President of the Funds, is
Ms. Johnson's father.
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), Columbia/HCA Healthcare Corporation (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, a Director of the National Forum for Health Care Quality,
Measurement and Reporting, past chairman and a member of the Board of
Catalyst (a leading organization for the advancement of women in
business), and is 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).
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),
Commercial Intertech Corp. (hydraulic systems, building systems, and
metal products, 1992), CUNO, Inc. (liquid and gas filtration products,
1996), and Associated Estates Realty Corporation (a real estate
investment trust, 1993). Mr. McDonough served as a Director of
ACME-Cleveland Corp. (metal working, telecommunications, and
electronic products) from 1987-1996 and Brush-Wellman Inc. (metal
refining) from 1983-1997.
MARVIN L. MANN (66), Trustee (1993), 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, VIP High Income, VIP Equity-Income, VIP Growth, VIP
Overseas, VIP Investment Grade Bond, VIP Asset Manager, VIP Asset
Manager: Growth, VIP Index 500, VIP Contrafund, VIP Balanced, VIP
Growth & Income, VIP Growth Opportunities (1997) and VIP Mid Cap. 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 Investment Grade
Bond. He serves as President of the Fixed-Income Division (2000), Vice
President of Bond Funds, Group Leader of the Bond Group, Senior Vice
President of FMR (1997), and Vice President of FIMM (1998). Mr.
Churchill joined Fidelity in 1993 as Vice President and Group Leader
of Taxable Fixed-Income Investments.
BOYCE I. GREER (43), is Vice President of VIP Money Market (1997).
He serves as Vice President of Money Market Funds (1997), Group Leader
of the Money Market Group (1997), Senior Vice President of FMR (1997),
and Vice President of FIMM (1998). Mr. Greer served as the Leader of
the Fixed-Income Group for Fidelity Management Trust Company
(1993-1995) and was Vice President and Group Leader of Municipal
Fixed-Income Investments (1996-1997).
ROBERT A. LAWRENCE (47), is Vice President of VIP High Income
(2000) and VIP Asset Manager, VIP Asset Manager: Growth, and 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).
RICHARD A. SPILLANE, JR. (48), is Vice President of VIP
Equity-Income, VIP Overseas, VIP Balanced, and VIP Growth & Income. He
serves as Vice President of certain Equity Funds and Senior Vice
President of FMR (1997). Since joining Fidelity, Mr. Spillane is Chief
Investment Officer for Fidelity International, Limited. Prior to that
position, Mr. Spillane served as Director of Research.
JOHN D. AVERY (35), is vice president of Balanced Portfolio (1999) and
another fund advised by FMR. Since joining Fidelity in 1995,
Mr. Avery worked as a research analyst, portfolio assistant, and
manager of several Fidelity funds.
BARRY J. COFFMAN (40), is vice president of High Income Portfolio.
WILLIAM DANOFF (39), is vice president of Contrafund Portfolio (1995)
and another fund advised by FMR. Prior to his current
responsibilities, Mr. Danoff managed another Fidelity fund.
BETTINA DOULTON (35), is vice president of Growth Opportunities
Portfolio (2000) and other funds advised by FMR. Prior to her current
responsibilities, Ms. Doulton managed a variety of Fidelity funds.
ROBERT DUBY (54), is vice president of Money Market Portfolio (1997)
and other funds advised by FMR. Prior to his current responsibilities,
Mr. Duby managed a variety of Fidelity funds.
DAVID FELMAN (34), is vice president of Mid Cap Portfolio (1999) and
another fund advised by FMR. Prior to his current responsibilities,
Mr. Felman managed a variety of Fidelity funds.
KEVIN E. GRANT (40), is vice president of Investment Grade Bond
Portfolio (1997), Balanced Portfolio (1996), and other funds advised
by FMR. Since joining Fidelity in 1993, Mr. Grant managed a variety of
Fidelity funds.
BART A. GRENIER (40), is vice president of VIP Asset Manager and
VIP Asset Manager: Growth which he has managed since May 2000. Mr.
Grenier originally joined Fidelity in 1991 as a senior analyst and has
held a number of positions with FMR and served as an officer of
certain other investment companies managed or advised by F MR.
RICHARD R. MACE, JR. (38), is vice president of Overseas Portfolio
(1996) and other funds advised by FMR. Prior to his current
responsibilities, Mr. Mace managed a variety of Fidelity funds.
CHARLES S. MORRISON II (39), is vice president of Asset Manager
Portfolio (1997), Asset Manager: Growth Portfolio (1997), and other
funds advised by FMR. Prior to his current responsibilities, Mr.
Morrison managed a variety of Fidelity funds.
STEPHEN R. PETERSEN (44), is vice president of Equity-Income Portfolio
(1997) and other funds advised by FMR. Prior to his current
responsibilities, Mr. Petersen managed a variety of Fidelity funds.
STEVEN J. SNIDER (40), is vice president of Asset Manager Portfolio
(1998) and Asset Manager: Growth Portfolio (1998). Prior to his
current responsibilities, Mr. Snider managed a variety of Fidelity
funds.
JOHN J. TODD (51), is vice president of Asset Manager Portfolio
(1996), Asset Manager: Growth Portfolio (1996), and other funds
advised by FMR. Prior to his current responsibilities, Mr. Todd
managed a variety of Fidelity funds.
JENNIFER UHRIG (39), is vice president of Growth Portfolio (1997) and
other funds advised by FMR. Prior to her current responsibilities, Ms.
Uhrig managed a variety of Fidelity funds.
ERIC D. ROITER (51), is Secretary of VIP Money Market, VIP High
Income, VIP Equity-Income, VIP Growth, VIP Overseas, VIP Investment
Grade Bond, VIP Asset Manager, VIP Asset Manager: Growth, VIP Index
500, VIP Contrafund, VIP Balanced, VIP Growth & Income, VIP Growth
Opportunities (1998) and VIP Mid Cap. 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, VIP High
Income, VIP Equity-Income, VIP Growth, VIP Overseas, VIP Investment
Grade Bond, VIP Asset Manager, VIP Asset Manager: Growth, VIP Index
500, VIP Contrafund, VIP Balanced, VIP Growth & Income, VIP Growth
Opportunities, and VIP Mid Cap (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, VIP
High Income, VIP Equity-Income, VIP Growth, VIP Overseas, VIP
Investment Grade Bond, VIP Asset Manager, VIP Asset Manager: Growth,
VIP Index 500, VIP Contrafund, VIP Balanced, VIP Growth & Income, VIP
Growth Opportunities, and VIP Mid Cap (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.
MATTHEW N. KARSTETTER (38), is Deputy Treasurer of VIP Money
Market, VIP High Income, VIP Equity-Income, VIP Growth, VIP Overseas,
VIP Investment Grade Bond, VIP Asset Manager, VIP Asset Manager:
Growth, VIP Index 500, VIP Contrafund, VIP Balanced, VIP Growth &
Income, VIP Growth Opportunities (1998) and VIP Mid Cap. He also
serves as Deputy Treasurer of other Fidelity funds (1998) and is an
employee of FMR (1998). Before joining FMR, Mr. Karstetter served as
Vice President of Investment Accounting and Treasurer of IDS Mutual
Funds at American Express Financial Advisors (1996-1998). Prior to
1996, Mr. Karstetter was Vice President, Mutual Fund Services at State
Street Bank & Trust (1991-1996).
STANLEY N. GRIFFITH (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 an employee
of FMR Corp.
JOHN H. COSTELLO (53), is Assistant Treasurer of VIP Money Market,
VIP High Income, VIP Equity-Income, VIP Growth, VIP Overseas, VIP
Investment Grade Bond, VIP Asset Manager, VIP Asset Manager: Growth,
VIP Index 500, VIP Contrafund, VIP Balanced, VIP Growth & Income, VIP
Growth Opportunities, and VIP Mid Cap. 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
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 of each fund for his or her services for the fiscal
year ended December 31, 1999.
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
AGGREGATE COMPENSATION FROM A FUND Edward C. Johnson 3d** J. Michael Cook ***** Ralph F. Cox Phyllis Burke Davis
VIP Money MarketB $ 0 $ 0 $ 493 $ 480
VIP High IncomeB $ 0 $ 0 $ 716 $ 694
VIP Equity-IncomeB,C,G $ 0 $ 0 $ 3,349 $ 3,252
VIP GrowthB,D,G $ 0 $ 0 $ 3,782 $ 3,683
VIP OverseasB,E,G $ 0 $ 0 $ 614 $ 598
VIP Investment Grade BondB $ 0 $ 0 $ 202 $ 196
VIP Asset ManagerB,F,G $ 0 $ 0 $ 1,383 $ 1,343
VIP Asset Manager: GrowthB $ 0 $ 0 $ 154 $ 150
VIP Index 500B $ 0 $ 0 $ 1,292 $ 1,257
VIP ContrafundB $ 0 $ 0 $ 2,140 $ 2,082
VIP BalancedB $ 0 $ 0 $ 99 $ 96
VIP Growth & IncomeB $ 0 $ 0 $ 369 $ 358
VIP Growth OpportunitiesB $ 0 $ 0 $ 517 $ 502
VIP Mid CapB $ 0 $ 0 $ 1 $ 1
TOTAL COMPENSATION FROM THE FUND COMPLEX*,A $ 0 $ 0 $ 217,500 $ 211,500
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
AGGREGATE COMPENSATION FROM A FUND Robert M. Gates E. Bradley Jones **** Donald J. Kirk Ned C. Lautenbach***
VIP Money MarketB $ 493 $ 493 $ 494 $ 132
VIP High IncomeB $ 716 $ 716 $ 715 $ 162
VIP Equity-IncomeB,C,G $ 3,349 $ 3,349 $ 3,346 $ 779
VIP GrowthB,D,G $ 3,782 $ 3,783 $ 3,785 $ 1,001
VIP OverseasB,E,G $ 614 $ 614 $ 614 $ 156
VIP Investment Grade BondB $ 202 $ 202 $ 202 $ 46
VIP Asset ManagerB,F,G $ 1,383 $ 1,383 $ 1,381 $ 321
VIP Asset Manager: GrowthB $ 154 $ 154 $ 154 $ 37
VIP Index 500B $ 1,292 $ 1,292 $ 1,293 $ 341
VIP ContrafundB $ 2,140 $ 2,140 $ 2,141 $ 558
VIP BalancedB $ 99 $ 99 $ 99 $ 24
VIP Growth & IncomeB $ 369 $ 369 $ 369 $ 91
VIP Growth OpportunitiesB $ 517 $ 517 $ 517 $ 126
VIP Mid CapB $ 1 $ 1 $ 1 $ 0
TOTAL COMPENSATION FROM THE FUND COMPLEX*,A $ 217,500 $ 217,500 $ 217,500 $ 54,000
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
AGGREGATE COMPENSATION FROM A FUND Peter S. Lynch ** William O. McCoy Gerald C. McDonough Marvin L. Mann
VIP Money MarketB $ 0 $ 485 $ 610 $ 493
VIP High IncomeB $ 0 $ 707 $ 885 $ 716
VIP Equity-IncomeB,C,G $ 0 $ 3,306 $ 4,141 $ 3,349
VIP GrowthB,D,G $ 0 $ 3,728 $ 4,681 $ 3,782
VIP OverseasB,E,G $ 0 $ 606 $ 760 $ 614
VIP Investment Grade BondB $ 0 $ 199 $ 249 $ 202
VIP Asset ManagerB,F,G $ 0 $ 1,365 $ 1,709 $ 1,383
VIP Asset Manager: GrowthB $ 0 $ 152 $ 191 $ 154
VIP Index 500B $ 0 $ 1,273 $ 1,599 $ 1,292
VIP ContrafundB $ 0 $ 2,109 $ 2,647 $ 2,140
VIP BalancedB $ 0 $ 97 $ 122 $ 99
VIP Growth & IncomeB $ 0 $ 364 $ 456 $ 369
VIP Growth OpportunitiesB $ 0 $ 510 $ 639 $ 517
VIP Mid CapB $ 0 $ 1 $ 1 $ 1
TOTAL COMPENSATION FROM THE FUND COMPLEX*,A $ 0 $ 214,500 $ 269,000 $ 217,500
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
AGGREGATE COMPENSATION FROM A FUND Robert C. Pozen** Thomas R. Williams
VIP Money MarketB $ 0 $ 483
VIP High IncomeB $ 0 $ 701
VIP Equity-IncomeB,C,G $ 0 $ 3,277
VIP GrowthB,D,G $ 0 $ 3,704
VIP OverseasB,E,G $ 0 $ 602
VIP Investment Grade BondB $ 0 $ 198
VIP Asset ManagerB,F,G $ 0 $ 1,354
VIP Asset Manager: GrowthB $ 0 $ 151
VIP Index 500B $ 0 $ 1,264
VIP ContrafundB $ 0 $ 2,095
VIP BalancedB $ 0 $ 97
VIP Growth & IncomeB $ 0 $ 361
VIP Growth OpportunitiesB $ 0 $ 506
VIP Mid CapB $ 0 $ 1
TOTAL COMPENSATION FROM THE FUND COMPLEX*,A $ 0 $ 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.
***** Effective March 16, 2000, Mr. Cook serves as a Member of the
Advisory Board.
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.
C The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $ 1,563 ; Phyllis Burke
Davis, $ 1,563 ; Robert M. Gates, $ 1,563 ; E. Bradley
Jones, $ 1,563 ; Donald J. Kirk, $ 1,563 ; William O. McCoy,
$ 1,563 ; Gerald C. McDonough, $ 1,824 ; Marvin L. Mann,
$ 1,563 ; and Thomas R. Williams, $ 1,563 .
D The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $ 1,769 ; Phyllis Burke
Davis, $ 1,769 ; Robert M. Gates, $ 1,769 ; E. Bradley
Jones, $ 1,769 ; Donald J. Kirk, $ 1,769 ; William O. McCoy,
$ 1,769 ; Gerald C. McDonough, $ 2,064 ; Marvin L. Mann,
$ 1,769 ; and Thomas R. Williams, $ 1,769 .
E The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $ 287 ; Phyllis Burke
Davis, $ 287 ; Robert M. Gates, $ 287 ; E. Bradley Jones,
$ 287 ; Donald J. Kirk, $ 287 ; William O. McCoy,
$ 287 ; Gerald C. McDonough, $ 335 ; Marvin L. Mann,
$ 287 ; and Thomas R. Williams, $ 287 .
F The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $ 645 ; Phyllis Burke
Davis, $ 645 ; Robert M. Gates, $ 645 ; E. Bradley Jones,
$ 645 ; Donald J. Kirk, $ 645 ; William O. McCoy,
$ 645 ; Gerald C. McDonough, $ 753 ; Marvin L. Mann,
$ 645 ; and Thomas R. Williams, $ 645 .
G Certain of the non-interested Trustees' aggregate compensation from
a fund includes accrued voluntary deferred compensation as follows:
Ralph F. Cox, $1,300, VIP Equity-Income; William O. McCoy, $1,300,
VIP Equity-Income; Thomas R. Williams, $1,300, VIP Equity-Income;
Ralph F. Cox, $1,469, VIP Growth; William O. McCoy, $1,469, VIP
Growth; Thomas R. Williams, $1,469, VIP Growth; Ralph F. Cox, $238,
VIP Overseas; William O. McCoy, $238, VIP Overseas; Thomas R.
Williams, $238, VIP Overseas; Ralph F. Cox, $536, VIP Asset Manager;
William O. McCoy, $536, VIP Asset Manager; and Thomas R. Williams,
$536, VIP Asset Manager.
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 February 29, 2000, approximately 62.71% of VIP Asset Manager:
Growth's; approximately 58.41% of VIP Money Market's; approximately
43.18% of VIP Growth & Income's; approximately 36.88% of VIP
Balanced's; approximately 30.81% of VIP Investment Grade Bond's; and
approximately 26.13% of VIP Index 500's; approximately 20.09% of VIP
Contrafund's; approximately 17.80% of VIP Asset Manager's;
approximately 15.99% of VIP Growth Opportunities'; approximately
14.42% of VIP Overseas'; approximately 13.02% of VIP Growth's;
approximately 12.47% of VIP Equity-Income's; approximately 11.03% of
VIP High Income's; and 3.07% of VIP Mid Cap's total outstanding shares
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 145, Mr. Edward C. Johnson 3d, President and Trustee of the
funds, and Ms. Abigail P. Johnson, Vice President of VIP Growth, VIP
Contrafund, VIP Growth Opportunities, and VIP Mid Cap, 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 VIP Asset Manager: Growth's, VIP Money Market's, VIP Growth &
Income's, VIP Balanced's, VIP Investment Grade Bond's, VIP Index
500's, VIP Contrafund's, VIP Asset Manager's, VIP Growth
Opportunities', VIP Overseas', VIP Growth's, VIP Equity-Income's, VIP
High Income's, and VIP Mid Cap's shares, the Trustees, Member 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 February 29, 2000, the following owned of record or
beneficially 5% or more (up to and including 25%) of each class's
outstanding shares:
VIP Money Market Initial Class: Fidelity Investments Life Insurance
Company, Boston, MA (54.32%); American International Life Insurance
Corp., New York, NY (5.66%); Reliastar Financial Corp., Minneapolis,
MN (5.65%).
VIP Money Market Service Class 2: Fidelity Investments, Boston, MA
(100%).
VIP High Income Initial Class: Nationwide Insurance Enterprises,
Columbus, OH (31.77%); Allmerica Financial Corp., Worcester, MA
(19.27%); Fidelity Investments Life Insurance Company, Boston, MA
(11.43%).
VIP High Income Service Class: Nationwide Insurance Enterprises,
Columbus, OH (83.17%).
VIP High Income Service Class 2: Fidelity Investments, Boston, MA
(99.98%).
VIP Equity-Income Initial Class: Nationwide Insurance Enterprises,
Columbus, OH (25.06%); Fidelity Investments Life Insurance Company,
Boston, MA (11.69%); Allmerica Financial Corp., Worcester, MA
(10.18%); Aetna Inc., Hartford, CT (8.18%); GE Financial Assurance
Holdings, Inc., Richmond, VA (6.64%); Citigroup, Inc., Hartford, CT
(5.03%).
VIP Equity-Income Service Class: Nationwide Insurance Enterprises,
Columbus, OH (87.45%).
VIP Equity-Income Service Class 2: Minnesota Life Insurance
Company, St. Paul, MN (91.64%); Fidelity Investments, Boston, MA
(8.37%).
VIP Growth Initial Class: Nationwide Insurance Enterprises,
Columbus, OH (24.42%); Fidelity Investments Life Insurance Company,
Boston, MA (12.69%); Aetna Inc., Hartford, CT (9.37%); Allmerica
Financial Corp., Worcester, MA (8.16%); Citigroup, Inc., Hartford, CT
(7.40%).
VIP Growth Service Class: Nationwide Insurance Enterprises,
Columbus, OH (68.70%); Lincoln, Fort Wayne, IN (11.78%).
VIP Growth Service Class 2: Fidelity Investments, Boston, MA
(76.13%); Provident Mutual Life Insurance Co., Newark, DE
(23.88%).
VIP Overseas Initial Class: Nationwide Insurance Enterprises,
Columbus, OH (27.09%); Fidelity Investments Life Insurance Company,
Boston, MA (14.16%); Allmerica Financial Corp., Worcester, MA (7.55%);
Metropolitan Life Insurance Company, Boston, MA (9.78%); GE Financial
Assurance Holdings, Inc., Richmond, VA (5.18%).
VIP Overseas Service Class: Nationwide Insurance Enterprises,
Columbus, OH (69.51%); IDS Life Insurance Company, Minneapolis, MN
(7.82%); ARM Financial Group, Louisville, KY (6.36%).
VIP Overseas Service Class 2: Fidelity Investments, Boston, MA
(80.48%); Provident Mutual Life Insurance Co., Newark, DE
(19.52%).
VIP Investment Grade Bond Initial Class: Fidelity Investments Life
Insurance Company, Boston, MA (28.23%); Cigna Corporation, Bloomfield,
CT (10.78%); Ameritas Financial Services, Lincoln, NE (9.45%);American
International Life Insurance Corp., New York, NY (6.96%).
VIP Investment Grade Bond Service Class 2: Fidelity Investments,
Boston, MA (100%).
VIP Asset Manager Initial Class: Nationwide Insurance Enterprises,
Columbus, OH (22.32%); Fidelity Investments Life Insurance Company,
Boston, MA (15.97%); GE Financial Assurance Holdings, Inc., Richmond,
VA (9.88%); Citigroup, Inc., Hartford, CT (9.34%); American United
Life, Indianapolis, IN (6.21%).
VIP Asset Manager Service Class: Ameritas Financial Services,
Lincoln, NE (50.07%); Nationwide Insurance Enterprises, Columbus, OH
(5.44%).
VIP Asset Manager Service Class 2: Fidelity Investments, Boston, MA
(100%).
VIP Asset Manager: Growth Initial Class: Fidelity Investments Life
Insurance Company, Boston, MA (58.15%); Mutual of Omaha, Omaha, NE
(10.74%); Empire Fidelity Investments Life Insurance Company, New
York, NY (5.86%).
VIP Asset Manager: Growth Service Class: Ameritas Financial
Services, Lincoln, NE (23.72%); Nationwide Insurance Enterprises,
Columbus, OH (8.49%).
VIP Asset Manager: Growth Service Class 2: Fidelity Investments,
Boston, MA (99.99%).
VIP Index 500 Initial Class: Fidelity Investments Life Insurance
Company, Boston, MA (23.70%); American United Life, Indianapolis, IN
(11.42%); Reliastar Financial Corp., Minneapolis, MN (6.86%); Aetna
Inc., Hartford, CT (6.60%); Security First Group, Los Angeles, CA
(5.92%).
VIP Index 500 Service Class 2: Fidelity Investments, Boston, MA
(100%).
VIP Contrafund Initial Class: Fidelity Investments Life Insurance
Company, Boston, MA (19.92%); Nationwide Insurance Enterprises,
Columbus, OH (19.09%); Aetna Inc., Hartford, CT (11.79%); GE Financial
Assurance Holdings, Inc., Richmond, VA (6.09%); New York Life Group,
New York, NY (5.01%).
VIP Contrafund Service Class: Nationwide Insurance Enterprises,
Columbus, OH (57.62%); Lincoln, Fort Wayne, IN (21.86%).
VIP Contrafund Service Class 2: Minnesota Life Insurance Company,
St. Paul, MN (96.15%).
VIP Balanced Initial Class: Fidelity Investments Life Insurance
Company, Boston, MA (36.13%); Aegon USA Securities Inc., Cedar Rapids,
IA (6.13%).
VIP Balanced Service Class: Wilmington Trust Company, Wilmington,
DE (10.32%); Wachovia Corp., Winston-Salem, NC (7.10%); Nationwide
Insurance Enterprises, Columbus, OH (6.56%); KeyCorp, Inc., Cleveland,
OH (6.34%); BankBoston Corporation, Boston, MA (5.25%); HSBC Bank USA,
Buffalo, NY (5.11%).
VIP Balanced Service Class 2: Fidelity Investments, Boston, MA
(100%).
VIP Growth & Income Initial Class: Fidelity Investments Life
Insurance Company, Boston, MA (42.89%); Minnesota Life Insurance
Company, St. Paul, MN (22.76%); GE Financial Assurance Holdings, Inc.,
Richmond, VA (11.10%); ARM Financial Group, Louisville, KY
(5.78%).
VIP Growth & Income Service Class: IDS Life Insurance Company,
Minneapolis, MN (47.39%).
VIP Growth & Income Service Class 2: Fidelity Investments, Boston,
MA (99.97%).
VIP Growth Opportunities Initial Class: Fidelity Investments Life
Insurance Company, Boston, MA (18.17%); Nationwide Insurance
Enterprises, Columbus, OH (19.00%); GE Financial Assurance Holdings,
Inc., Richmond, VA (7.31%); A.G. Edwards & Sons Inc., Saint Louis, MO
(5.68%).
VIP Growth Opportunities Service Class: Nationwide Insurance
Enterprises, Columbus, OH (63.60%).
VIP Growth Opportunities Service Class 2: Fidelity Investments,
Boston, MA (79.64%); Provident Mutual Life Insurance Co., Newark, DE
(20.35%).
VIP Mid Cap Initial Class: Aegon USA Securities Inc., Cedar Rapids,
IA (33.53%); Fidelity Investments, Boston, MA (20.48%); American
National Life Insurance Co. of Texas, Galveston, TX (15.50%); American
National Life Insurance Co., Boston, MA (7.34%).
VIP Mid Cap Service Class: IDS Life Insurance Company, Minneapolis,
MN (60.29%); ARM Financial Group, Louisville, KY (8.92%); The
Guardian, Bethlehem, PA (8.14%).
VIP Mid Cap Service Class 2: Minnesota Life Insurance Company, St.
Paul, MN (94.01%); Fidelity Investments, Boston, MA (5.98%).
As of November 30, 1999, approximately 50.20% of VIP Mid Cap's
total outstanding shares were held by IDS Life Insurance Company;
approximately 29.12% of VIP High Income's total outstanding shares
were held by Nationwide Insurance Enterprises; and approximately
30.76% of VIP Overseas' total outstanding shares were held by
Nationwide Insurance Enterprises.
As of February 29, 2000, approximately 54.10% of VIP Mid Cap's
total outstanding shares were held by IDS Life Insurance Company;
approximately 37.53% of VIP High Income's total outstanding shares
were held by Nationwide Insurance Enterprises; approximately 29.75% of
VIP Overseas' total outstanding shares were held by Nationwide
Insurance Enterprises; approximately 28.13% of VIP Equity-Income's
total outstanding shares were held by Nationwide Insurance
Enterprises; approximately 28.01% of VIP Growth Opportunities' total
outstanding shares were held by Nationwide Insurance Enterprises; and
approximately 27.64% of VIP Growth's total outstanding shares were
held by Nationwide Insurance Enterprises.
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), Fidelity
Management & Research (U.K.) Inc. (FMR U.K.), Fidelity Management &
Research (Far East) Inc. (FMR Far East) 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.
Fidelity International Limited (FIL), a Bermuda company formed in
1968, is the ultimate parent company of Fidelity International
Investment Advisors (FIIA), Fidelity Investments Japan Limited (FIJ)
and Fidelity International Investment Advisors (U.K.) Limited
(FIIA(U.K.)L). Edward C. Johnson 3d, Johnson family members, and
various trusts for the benefit of the Johnson family own, directly or
indirectly, more than 25% of the voting common stock of FIL. FIL
provides investment advisory services to non-U.S. investment companies
and institutional investors investing in securities throughout the
world .
B T, 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, FMR U.K., FMR Far East, FIIA,
FIIA(U.K.)L, BT, and 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 each fund. These services include
providing facilities for maintaining each fund's organization;
supervising relations with custodians, transfer and pricing agents,
accountants, underwriters, and other persons dealing with each fund;
preparing all general shareholder communications and conducting
shareholder relations; maintaining each fund's records and the
registration of each fund's shares under federal securities laws and
making necessary filings under state securities laws; developing
management and shareholder services for each fund; and furnishing
reports, evaluations and analyses on a variety of subjects to the
Trustees.
MANAGEMENT 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.
In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of the fund. These services include
providing facilities for maintaining the fund's organization;
supervising relations with custodians, transfer and pricing agents,
accountants, underwriters and other persons dealing with the fund;
preparing all general shareholder communications and conducting
shareholder relations; maintaining the fund's records and the
registration of the fund's shares under federal securities laws and
making necessary filings under state securities laws; developing
management and shareholder services for the fund; and furnishing
reports, evaluations and analyses on a variety of subjects to the
Trustees.
BT is the sub-adviser of the fund and acts as the fund's custodian.
Under its management contract with the fund, FMR acts as investment
adviser. Under the sub-advisory agreement, and subject to the
supervision of the Board of Trustees, BT directs the investments of
the fund in accordance with its investment objective, policies and
limitations, and provides custodial services to the 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 High
Income, VIP Equity-Income, VIP Growth, VIP Overseas, VIP Investment
Grade Bond, VIP Asset Manager, VIP Asset Manager: Growth, VIP
Contrafund, VIP Balanced, VIP Growth & Income, VIP Growth
Opportunities, and VIP Mid Cap each 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, VIP Investment
Grade Bond, and VIP High Income.
INCOME AND MONEY MARKET FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Assets Annualized Rate Group Net Assets Effective Annual Fee Rate
0 - $3 billion .3700% $ 1 billion .3700%
3 - 6 .3400 50 .2188
6 - 9 .3100 100 .1869
9 - 12 .2800 150 .1736
12 - 15 .2500 200 .1652
15 - 18 .2200 250 .1587
18 - 21 .2000 300 .1536
21 - 24 .1900 350 .1494
24 - 30 .1800 400 .1459
30 - 36 .1750 450 .1427
36 - 42 .1700 500 .1399
42 - 48 .1650 550 .1372
48 - 66 .1600 600 .1349
66 - 84 .1550 650 .1328
84 - 120 .1500 700 .1309
120 - 156 .1450 750 .1291
156 - 192 .1400 800 .1275
192 - 228 .1350 850 .1260
228 - 264 .1300 900 .1246
264 - 300 .1275 950 .1233
300 - 336 .1250 1,000 .1220
336 - 372 .1225 1,050 .1209
372 - 408 .1200 1,100 .1197
408 - 444 .1175 1,150 .1187
444 - 480 .1150 1,200 .1177
480 - 516 .1125 1,250 .1167
516 - 587 .1100 1,300 .1158
587 - 646 .1080 1,350 .1149
646 - 711 .1060 1,400 .1141
711 - 782 .1040
782 - 860 .1020
860 - 946 .1000
946 - 1,041 .0980
1,041 - 1,145 .0960
1,145 - 1,260 .0940
Over 1,260 .0920
</TABLE>
The group fee rate is calculated on a cumulative basis pursuant to the
graduated fee rate schedule shown above on the left. The schedule
above on the right shows the effective annual group fee rate at
various asset levels, which is the result of cumulatively applying the
annualized rates on the left. For example, the effective annual fee
rate at $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 following is the fee schedule for VIP Equity-Income, VIP Growth,
VIP Overseas, VIP Asset Manager, VIP Asset Manager: Growth, VIP
Contrafund, VIP Balanced, VIP Growth & Income, VIP Growth
Opportunities, and VIP Mid Cap.
GROWTH, GROWTH & INCOME, AND ASSET ALLOCATION FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Assets Annualized Rate Group Net Assets Effective Annual Fee Rate
0 - $3 billion .5200% $ 1 billion .5200%
3 - 6 .4900 50 .3823
6 - 9 .4600 100 .3512
9 - 12 .4300 150 .3371
12 - 15 .4000 200 .3284
15 - 18 .3850 250 .3219
18 - 21 .3700 300 .3163
21 - 24 .3600 350 .3113
24 - 30 .3500 400 .3067
30 - 36 .3450 450 .3024
36 - 42 .3400 500 .2982
42 - 48 .3350 550 .2942
48 - 66 .3250 600 .2904
66 - 84 .3200 650 .2870
84 - 102 .3150 700 .2838
102 - 138 .3100 750 .2809
138 - 174 .3050 800 .2782
174 - 210 .3000 850 .2756
210 - 246 .2950 900 .2732
246 - 282 .2900 950 .2710
282 - 318 .2850 1,000 .2689
318 - 354 .2800 1,050 .2669
354 - 390 .2750 1,100 .2649
390 - 426 .2700 1,150 .2631
426 - 462 .2650 1,200 .2614
462 - 498 .2600 1,250 .2597
498 - 534 .2550 1,300 .2581
534 - 587 .2500 1,350 .2566
587 - 646 .2463 1,400 .2551
646 - 711 .2426
711 - 782 .2389
782 - 860 .2352
860 - 946 .2315
946 - 1,041 .2278
1,041 - 1,145 .2241
1,145 - 1,260 .2204
Over 1,260 .2167
</TABLE>
The group fee rate is calculated on a cumulative basis pursuant to the
graduated fee rate schedule shown above on the left. The schedule
above on the right shows the effective annual group fee rate at
various asset levels, which is the result of cumulatively applying the
annualized rates on the left. For example, the effective annual fee
rate at $ 826 billion of group net assets - the approximate
level for December 1999 - was 0.2768%, 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 each of VIP High Income, VIP
Equity-Income, VIP Growth, VIP Overseas, VIP Investment Grade Bond,
VIP Asset Manager, VIP Asset Manager: Growth, VIP Contrafund, VIP
Balanced, VIP Growth & Income, VIP Growth Opportunities, and VIP Mid
Cap is set forth in the following table . Based on the average
group net assets of the funds advised by FMR for December 1999, each
fund's annual management fee rate would be calculated as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Group Fee Rate Individual Fund Fee Rate Management Fee Rate
VIP High Income 0.1267% + 0.45% = 0.5767%
VIP Equity-Income 0.2768% + 0.20% = 0.4768%
VIP Growth 0.2768% + 0.30% = 0.5768%
VIP Overseas 0.2768% + 0.45% = 0.7268%
VIP Investment Grade Bond 0.1267% + 0.30% = 0.4267%
VIP Asset Manager 0.2768% + 0.25% = 0.5268%
VIP Asset Manager: Growth 0.2768% + 0.30% = 0.5768%
VIP Contrafund 0.2768% + 0.30% = 0.5768%
VIP Balanced 0.2768% + 0.15% = 0.4268%
VIP Growth & Income 0.2768% + 0.20% = 0.4768%
VIP Growth Opportunities 0.2768% + 0.30% = 0.5768%
VIP Mid Cap 0.2768% + 0.30% = 0.5768%
</TABLE>
One-twelfth of the management fee rate is applied to each fund's
average net assets for the month, giving a dollar amount which is
the fee for that month.
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, VIP High Income, VIP Equity-Income, VIP Growth, VIP
Overseas, VIP Investment Grade Bond, VIP Asset Manager, VIP Asset
Manager: Growth, VIP Contrafund, VIP Balanced, VIP Growth & Income,
VIP Growth Opportunities, and VIP Mid Cap to FMR for the past
three fiscal years.
<TABLE>
<CAPTION>
Fund Fiscal Years Ended December 31 Management Fees Paid to FMR
<S> <C> <C>
VIP Money Market 1999 $ 3,168,788
1998 $ 2,767,757
1997 $ 2,325,636
VIP High Income 1999 $ 14,638,965
1998 $ 14,703,631
1997 $ 11,403,916
VIP Equity-Income 1999 $ 56,916,465
1998 $ 54,109,035
1997 $ 42,199,618
VIP Growth 1999 $ 81,026,539
1998 $ 53,412,717
1997 $ 41,416,431
VIP Overseas 1999 $ 16,245,906
1998 $ 15,441,406
1997 $ 14,309,058
VIP Investment Grade Bond 1999 $ 3,054,862
1998 $ 2,076,505
1997 $ 1,154,096
VIP Asset Manager 1999 $ 25,926,306
1998 $ 24,986,229
1997 $ 22,002,088
VIP Asset Manager: Growth 1999 $ 3,196,423
1998 $ 2,924,293
1997 $ 2,323,242
VIP Contrafund 1999 $ 45,655,867
1998 $ 29,603,506
1997 $ 19,646,719
VIP Balanced 1999 $ 1,522,322
1998 $ 1,135,397
1997 $ 722,612
VIP Growth & Income 1999 $ 6,383,024
1998 $ 3,437,849
1997 $ 862,309
VIP Growth Opportunities 1999 $ 10,735,937
1998 $ 8,011,214
1997 $ 4,186,484
VIP Mid Cap 1999 $ 26,332
1998* $ 67
</TABLE>
* VIP Mid Cap commenced operations on December 28, 1998.
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.
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.
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 a 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.
Expense reimbursements by FMR will increase a class's returns and
yield, and repayment of the reimbursement by a class will lower its
returns and yield.
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.
<TABLE>
<CAPTION>
<S> <C> <C>
Aggregate Operating Expense Limitation Fiscal Year Ended December 31
VIP Index 500 - Initial Class 0.28% 1999
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Management Fee Before Reimbursement Amount of Management Fee Reimbursement
VIP Index 500 - Initial Class $ 11,596,410 $ 2,693,102
</TABLE>
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. On behalf of VIP Asset
Manager, VIP Asset Manager: Growth, and VIP Balanced, FMR has entered
into a sub-advisory agreement with FIMM pursuant to which FIMM has
primary responsibility for choosing certain types of investments for
each fund. Prior to January 23, 1998, FMR Texas Inc. (FMR Texas) had
primary responsibility for providing investment management services to
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 . Under the terms of the sub-advisory agreements for VIP
Asset Manager, VIP Asset Manager: Growth, and VIP Balanced, FMR pays
FIMM fees equal to 50% of the management fee payable to FMR with
respect to that portion of the fund's assets that are managed by FIMM.
The fees paid to FIMM are not reduced by any voluntary or mandatory
expense reimbursements that may be in effect from time to time.
On behalf of the money market fund, for the fiscal year ended
D ecember 31, 1997, FMR paid FMR Texas a fee of $1,162,818. On
behalf of the money market fund, for the fiscal years ended
D ecember 31, 1999 and 1998, FMR paid FIMM fees of
$ 1,584,394 , and $1,383,878, respectively.
Fees paid to FIMM by FMR on behalf of VIP Investment Grade Bond, VIP
Asset Manager, VIP Asset Manager: Growth, and VIP Balanced for the
past fiscal year are shown in the table below.
Fund Fiscal Year Ended December 31 Fees Paid to FIMM
VIP Investment Grade Bond 1999 $ 1,527,431
VIP Asset Manager 1999 $ 12,963,153
VIP Asset Manager: Growth 1999 $ 1,598,212
VIP Balanced 1999 $ 761,161
On January 1, 2001, FMR will enter into a sub-advisory agreement
with FMRC on behalf of VIP High Income, VIP Equity-Income, VIP Growth,
VIP Overseas, VIP Asset Manager, VIP Asset Manager: Growth, VIP
Contrafund, VIP Balanced, VIP Growth & Income, VIP Growth
Opportunities, and VIP Mid Cap pursuant to which FMRC will have
primary responsibility for choosing investments for each fund. 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 High Income,
VIP Equity-Income, VIP Growth, VIP Overseas, VIP Asset Manager, VIP
Asset Manager: Growth, VIP Contrafund, VIP Balanced, VIP Growth &
Income, VIP Growth Opportunities, and VIP Mid Cap, FMR will pay FMRC
fees equal to 50% of the management fee payable to FMR under its
management contract with each 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.
On behalf of VIP High Income, VIP Asset Manager, VIP Asset Manager:
Growth, VIP Contrafund, VIP Balanced, VIP Growth & Income, VIP
Growth Opportunities, and VIP Mid Cap, FMR has entered into
sub-advisory agreements with FMR U.K. and FMR Far East. On behalf
of VIP Overseas, FMR has entered into sub-advisory agreements with FMR
U.K., FMR Far East, and FIIA. FIIA, in turn, has entered into a
sub-advisory agreement with FIIA(U.K.)L. Pursuant to the sub-advisory
agreements, FMR may receive from the sub-advisers investment research
and advice on issuers outside the United States and FMR may grant the
sub-advisers investment management authority as well as the authority
to buy and sell securities if FMR believes it would be beneficial to
the funds.
On behalf of VIP High Income, VIP Overseas, VIP Asset Manager, VIP
Asset Manager: Growth, VIP Contrafund, VIP Balanced, VIP Growth &
Income, VIP Growth Opportunities, and VIP Mid Cap, FMR Far East has
entered into a sub-advisory agreement with FIJ pursuant to which FMR
Far East may receive from FIJ investment research and advice relating
to Japanese issuers (and such other Asian issuers as FMR Far East may
designate).
For providing non-discretionary investment advice and research
services the sub-advisers are compensated as follows:
(small solid bullet) FMR pays FMR U.K. and FMR Far East fees equal to
110% and 105%, respectively, of FMR U.K.'s and FMR Far East's costs
incurred in connection with providing investment advice and research
services.
(small solid bullet) FMR pays FIIA f ees equal to 30% of FMR's
monthly management fee with respect to the average net assets held by
the fund for which the sub-adviser has provided FMR with investment
advice and research services.
(small solid bullet) FIIA pays FIIA(U.K.)L a fee equal to 110% of
FIIA(U.K.)L's costs incurred in connection with providing investment
advice and research services.
(small solid bullet) FMR Far East pays FIJ a fee equal to 100% of
FIJ's costs incurred in connection with providing investment advice
and research services for a fund to FMR Far East.
On behalf of VIP High Income, VIP Asset Manager, VIP Asset Manager:
Growth, VIP Contrafund, VIP Balanced, VIP Growth & Income, VIP Growth
Opportunities, and VIP Mid Cap, for providing discretionary investment
management and executing portfolio transactions, the sub-advisers are
compensated as follows:
(small solid bullet) FMR pays FMR U.K. and FMR Far East a fee equal to
50% of its monthly management fee with respect to the fund's average
net assets managed by the sub-adviser on a discretionary basis.
On behalf of VIP Overseas, for providing discretionary investment
management and executing portfolio transactions, the sub-advisers are
compensated as follows:
(small solid bullet) FMR pays FMR U.K. and FMR Far East a fee equal to
50% of its monthly management fee with respect to the fund's average
net assets managed by the sub-adviser on a discretionary basis.
(small solid bullet) FMR pays FIIA a fee equal to 57% of its
monthly management fee with respect to the fund's average net assets
managed by the sub-adviser on a discretionary basis.
(small solid bullet) FIIA pays FIIA(U.K.)L a fee equal to 110% of
FIIA(U.K.)L's costs incurred in connection with providing
discretionary investment management services.
For investment advice and research services, no fees were paid to
FMR U.K. and FMR Far East on behalf of VIP High Income
for the past three fiscal years. For investment advice and research
services, no fees were paid to FIIA and FIIA(U.K.)L on behalf of VIP
Overseas for the past three fiscal years.
For providing investment advice and research services, fees paid to
FMR U.K. and FMR Far East on behalf of VIP Overseas, VIP
Asset Manager, VIP Asset Manager: Growth, VIP Contrafund, VIP
Balanced, VIP Growth & Income, VIP Growth Opportunities, and VIP Mid
Cap for the past three fiscal years are shown in the table below.
Fiscal Year Ended December 31 FMR U.K. FMR Far East
VIP Overseas
1999 $ 2,242,676 $ 1,379,736
1998 $ 1,535,144 $ 1,318,561
1997 $ 1,028,965 $ 984,199
VIP Asset Manager
1999 $ 174,700 $ 107,321
1998 $ 108,507 $ 91,546
1997 $ 206,758 $ 194,817
VIP Asset Manager: Growth
1999 $ 6,981 $ 4,267
1998 $ 4,096 $ 3,492
1997 $ 16,483 $ 15,673
VIP Contrafund
1999 $ 683,323 $ 410,783
1998 $ 169,713 $ 152,437
1997 $ 189,013 $ 184,518
VIP Balanced
1999 $ 12,793 $ 7,926
1998 $ 13,435 $ 11,589
1997 $ 6,670 $ 6,406
VIP Growth & Income
1999 $ 27,334 $ 16,748
1998 $ 23,562 $ 20,398
1997 $ 7,591 $ 7,566
VIP Growth Opportunities
1999 $ 110,606 $ 68,225
1998 $ 74,582 $ 64,055
1997 $ 29,514 $ 28,662
VIP Mid Cap
1999 $ 118 $ 69
1998* $ 0 $ 0
* VIP Mid Cap commenced operations on December 28, 1998.
For discretionary investment management and execution of portfolio
transactions, no fees were paid to FMR U.K., FMR Far East, or FIIA on
behalf of the funds for the past three fiscal years.
DISTRIBUTION SERVICES
Each fund has entered into a distribution agreement with Fidelity
Distributors Corporation (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
Initial Class of each fund, Service Class of each fund (except VIP
Money Market, VIP Investment Grade Bond, and VIP Index 500), and
Service Class 2 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 Initial Class,
Service Class, and Service Class 2 and FMR to incur certain expenses
that might be considered to constitute direct or indirect payment by
the funds of distribution expenses.
Pursuant to the Service Class Plan for each fund (except VIP Money
Market, VIP Investment Grade Bond, and VIP Index 500), 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 ( except VIP Money Market, VIP Investment
Grade Bond, and VIP Index 500) 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
v ariable p roduct 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.
Pursuant to the Service Class 2 Plan for each fund, FDC is paid a
12b-1 fee at an annual rate of 0.25% of Service Class 2's average net
assets determined at the close of business on each day throughout the
month.
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
2 for providing services intended to result in the sale of Service
Class 2 shares and/or support services that benefit variable product
owners.
For the fiscal year ended December 31, 1999, Service Class of each
fund (except VIP Money Market, VIP Investment Grade Bond, and VIP
Index 500) paid FDC the following 12b-1 fees all of which were
reallowed to intermediaries:
Fund
VIP High Income $ 187,615
VIP Equity-Income $ 335,256
VIP Growth $ 403,810
VIP Overseas $ 66,278
VIP Asset Manager $ 14,423
VIP Asset Manager: Growth $ 6,803
VIP Contrafund $ 353,057
VIP Balanced $ 18,312
VIP Growth Opportunities $ 244,429
VIP Growth & Income $ 41,594
VIP Mid Cap $ 3,806
Under each Initial Class Plan, if the payment of management fees by
the fund to FMR is deemed to be indirect financing by the fund of the
distribution of its shares, such payment is authorized by the Plan.
Each Initial Class Plan specifically recognizes that FMR may use its
management fee revenue, as well as its past profits or its other
resources, to pay FDC for expenses incurred in connection with
providing services intended to result in the sale of Initial Class
shares and/or support services that benefit variable product
owners . In addition, each Initial Class Plan provides that FMR,
directly or through FDC, may pay significant amounts to
intermediaries, such as insurance companies, broker-dealers and other
service-providers, that provide those services. Currently, the
Board of Trustees has authorized such payments for Initial Class
shares.
Under each Service Class and Service Class 2 Plan, if the payment of
management fees by the fund to FMR is deemed to be indirect financing
by the fund of the distribution of its shares, such payment is
authorized by the Plan. Each Service Class and Service Class 2 Plan
specifically recognizes that FMR may use its management fee revenue,
as well as its past profits or its other resources, to pay FDC for
expenses incurred in connection with providing services intended to
result in the sale of Service Class and Service Class 2 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 and
Service Class 2 shares.
Prior to approving each Initial Class, Service Class, and Service
Class 2 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 the
applicable class of the fund and v ariable p roduct
owners. In particular, the Trustees noted that each Initial Class Plan
does not authorize payments by Initial Class of the fund other than
those made to FMR under its management contract with the fund. To the
extent that each Initial Class, Service Class, and Service Class 2
Plan gives FMR and FDC greater flexibility in connection with the
distribution of shares of the applicable class, 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 v ariable
product owners have other relationships.
Each Service Class and Service Class 2 Plan does not provide for
specific payments by the applicable 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.
F DC 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
Each class of each fund has entered into a transfer agent agreement
with FIIOC, an affiliate of FMR. Under the terms of the agreements,
FIIOC performs transfer agency, dividend disbursing, and
shareholder services for each 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 Equity-Income, VIP Growth, VIP Overseas, VIP Asset Manager,
VIP Asset Manager: Growth, VIP Index 500, VIP Contrafund, VIP
Balanced, VIP Growth & Income, VIP Growth Opportunities, and VIP Mid
Cap, 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 also entered into a service agent agreement with FSC, an
affiliate of FMR. Under the terms of the agreements, FSC calculates
the NAV and dividends for each class of each fund, maintains each
fund's portfolio and general accounting records, and administers
VIP High Income's, VIP Equity-Income's, VIP Growth's, VIP
Overseas', VIP Investment Grade Bond's, VIP Asset Manager's, VIP Asset
Manager: Growth's, VIP Contrafund's, VIP Balanced's, VIP Growth &
Income's, VIP Growth Opportunities', and VIP Mid Cap'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 domestic
equity funds 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 domestic
fixed-income funds 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 high
income funds are 0.0500% of the first $500 million of average net
assets, 0.0200% 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
international funds are 0.0600% of the first $500 million of
average net assets, 0.0440% 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 money
market funds 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 High Income $ 799,993 $ 811,713 $ 812,930
VIP Equity-Income $ 1,000,681 $ 837,053 $ 819,525
VIP Growth $ 1,024,502 $ 821,826 $ 816,139
VIP Overseas $ 1,017,529 $ 804,948 $ 803,038
VIP Investment Grade Bond $ 182,740 $ 184,025 $ 106,949
VIP Asset Manager $ 938,127 $ 857,083 $ 809,468
VIP Asset Manager: Growth $ 242,995 $ 301,355 $ 234,257
VIP Index 500 $ 914,740 $ 806,724 $ 599,917
VIP Contrafund $ 955,854 $ 822,681 $ 807,242
VIP Balanced $ 162,232 $ 156,276 $ 97,323
VIP Growth Opportunities $ 586,989 $ 563,938 $ 358,089
VIP Growth & Income $ 446,582 $ 355,446 $ 113,129
VIP Mid Cap* $ 60,000 $ 682 N/A
* VIP Mid Cap commenced operations on December 28, 1998.
For administering VIP High Income's, VIP Equity-Income's, VIP
Growth's, VIP Overseas', VIP Investment Grade Bond's, VIP Asset
Manager's, VIP Asset Manager: Growth's, VIP Contrafund's, VIP
Balanced's, VIP Growth & Income's, VIP Growth Opportunities', and VIP
Mid Cap'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
High Income, VIP Investment Grade Bond, and VIP Mid Cap did not pay
FSC for securities lending.
Payments made by the funds to FSC for securities lending for the past
three fiscal years are shown in the table below.
Fund 1999 1998 1997
VIP Equity-Income $ 621 $ 0 $ 0
VIP Growth $ 3,005 $ 0 $ 0
VIP Overseas $ 240 $ 0 $ 0
VIP Asset Manager $ 452 $ 0 $ 0
VIP Asset Manager: Growth $ 3 $ 0 $ 0
VIP Contrafund $ 2,108 $ 0 $ 0
VIP Balanced $ 11 $ 0 $ 0
VIP Growth & Income $ 1 $ 0 $ 0
VIP Growth Opportunities $ 2 $ 0 $ 0
DESCRIPTION OF THE TRUSTS
TRUST ORGANIZATION. Money Market Portfolio, High Income Portfolio,
Equity-Income Portfolio, Growth Portfolio, and Overseas Portfolio are
funds of Variable Insurance Products Fund, an open-end management
investment company organized as a Massachusetts business trust on
November 13, 1981. Investment Grade Bond Portfolio, Asset Manager
Portfolio, Asset Manager: Growth Portfolio, Index 500 Portfolio, and
Contrafund Portfolio are funds of Variable Insurance Products Fund II,
an open-end management investment company organized as a Massachusetts
business trust on March 21, 1988. Balanced Portfolio, Growth & Income
Portfolio, Growth Opportunities Portfolio, and Mid Cap Portfolio are
funds of Variable Insurance Products Fund III, an open-end management
investment company organized as a Massachusetts business trust on July
14, 1994. On December 30, 1996, Variable Insurance Products Fund III
changed its name from Fidelity Advisor Annuity Fund to Variable
Insurance Products Fund III. On December 30, 1996, Balanced Portfolio
changed its name from Advisor Annuity Income & Growth Fund to Balanced
Portfolio. On December 30, 1996, Growth Opportunities Portfolio
changed its name from Advisor Annuity Growth Opportunities Fund to
Growth Opportunities Portfolio. 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
Portfolio, Asset Manager: Growth Portfolio, Index 500
Portfolio, and Contrafund Portfolio . Currently, there
are four funds in Variable Insurance Products Fund III: Balanced
Portfolio, Growth & Income Portfolio, Growth Opportunities Portfolio,
and Mid Cap 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.
For Variable Insurance Products Fund III , the 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
shall include a provision limiting the obligations created thereby to
the trust and its assets.
For Variable Insurance Products Fund and Variable Insurance
Products Fund II, 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. S hareholder s 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.
Variable Insurance Products Fund III or a fund may be
terminated upon the sale of its assets to another open-end management
investment company, or upon liquidation and distribution of its
assets, if approved by a vote of shareholders of the trust or the
fund. In the event of the dissolution or liquidation of the trust,
shareholders of each of its funds are entitled to receive the
underlying assets of such fund available for distribution. In the
event of the dissolution or liquidation of a fund, shareholders of
that fund are entitled to receive the underlying assets of the fund
available for distribution.
Variable Insurance Products Fund and Variable Insurance Products Fund
II or a fund or a class may be terminated upon the sale of its
assets to, or merger with, another open-end management investment
company , series, or class thereof, or upon liquidation and
distribution of its assets. Generally, the merger of a trust or a fund
or a class with another operating mutual fund or the
sale of all or a portion of the assets of a trust or a fund
or a class to another operating mutual fund requires
approval by a vote of shareholders of the trust or the fund or the
class . The Trustees may, however, reorganize or terminate each
trust or a fund or a class 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 or a class ,
shareholders of that fund or that class are entitled to receive
the underlying assets of the fund or class 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, VIP High
Income, and VIP Investment Grade Bond. The Chase Manhattan Bank, 1
Chase Manhattan Plaza, New York, New York, is custodian of the assets
of VIP Equity-Income, VIP Overseas, VIP Asset Manager, VIP Asset
Manager: Growth, VIP Balanced, and VIP Growth & Income. Brown Brothers
Harriman & Co., 40 Water Street, Boston, Massachusetts is custodian of
the assets of VIP Growth, VIP Contrafund, VIP Growth Opportunities,
and VIP Mid Cap. Each custodian is responsible for the safekeeping of
a fund's assets and the appointment of any subcustodian banks and
clearing agencies. For VIP Money Market, VIP High Income, VIP
Investment Grade Bond, VIP Growth, VIP Contrafund, VIP Growth
Opportunities, and VIP Mid Cap. 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. For VIP Equity-Income, VIP Overseas, VIP Asset Manager,
VIP Asset Manager: Growth, VIP Balanced, VIP Growth & Income, VIP
Growth, VIP Contrafund, VIP Growth Opportunities, and VIP Mid Cap. The
Bank of New York, 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, 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. The Boston branch of VIP Growth's, VIP
Contrafund's, VIP Growth Opportunities', and VIP Mid Cap's custodian
leases its office space from an affiliate of FMR at a lease payment
which, when entered into, was consistent with prevailing market rates.
Transactions that have occurred to date include mortgages and personal
and general business loans. In the judgment of FMR, the terms and
conditions of those transactions were not influenced by existing or
potential custodial or other fund relationships.
AUDITOR S . PricewaterhouseCoopers LLP, 160 Federal Street,
Boston, Massachusetts, serves as independent accountant for VIP Money
Market, VIP High Income, VIP Equity-Income, VIP Growth, VIP Overseas,
and VIP Mid Cap. The auditor examines financial statements for the
funds and provides other audit, tax, and related services.
Effective February 18, 1999, Deloitte & Touche LLP, 200 Berkeley
Street, Boston, Massachusetts, serves as independent accountant for
VIP Investment Grade Bond, VIP Asset Manager, VIP Asset Manager:
Growth, VIP Index 500, VIP Contrafund, VIP Balanced, VIP Growth &
Income, and VIP Growth Opportunities for the next fiscal period. The
auditor examines financial statements for the funds and provides other
audit, tax, and related services.
FINANCIAL STATEMENTS
Each fund's financial statements and financial highlights for the
fiscal year ended D ecember 31, 1 999, 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 2 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 60.0 % 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 D ecember 31 .
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, Contrafund, Fidelity Investments & (Pyramid) Design,
Fidelity Focus, Spartan, Fidelity Investments, and Magellan are
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.
EACH FUND OFFERS ITS SHARES ONLY TO SEPARATE ACCOUNTS OF INSURANCE
COMPANIES THAT OFFER VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE
PRODUCTS. A FUND MAY NOT BE AVAILABLE IN YOUR STATE DUE TO VARIOUS
INSURANCE REGULATIONS. PLEASE CHECK WITH YOUR INSURANCE COMPANY FOR
AVAILABILITY. IF A FUND IN THIS PROSPECTUS IS NOT AVAILABLE IN YOUR
STATE, THIS PROSPECTUS IS NOT TO BE CONSIDERED A SOLICITATION WITH
RESPECT TO THAT FUND. 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 2
GROWTH AND GROWTH & INCOME FUNDS:
INDEX 500 PORTFOLIO
MID CAP PORTFOLIO
GROWTH OPPORTUNITIES PORTFOLIO
CONTRAFUND(registered trademark) PORTFOLIO
GROWTH PORTFOLIO
OVERSEAS PORTFOLIO
BALANCED PORTFOLIO
EQUITY-INCOME PORTFOLIO
GROWTH & INCOME PORTFOLIO
ASSET ALLOCATION FUNDS:
ASSET MANAGER PORTFOLIO SM
ASSET MANAGER: GROWTH PORTFOLIO SM
INCOME FUNDS:
INVESTMENT GRADE BOND PORTFOLIO
HIGH INCOME PORTFOLIO
MONEY MARKET FUND:
MONEY MARKET PORTFOLIO
PROSPECTUS
APRIL 30, 2000
(FIDELITY_LOGO_GRAPHIC)(REGISTERED TRADEMARK)
82 DEVONSHIRE STREET, BOSTON, MA 02109
CONTENTS
FUND SUMMARY 2 INVESTMENT SUMMARY
7 PERFORMANCE
19 OPERATING EXPENSES
FUND BASICS 21 INVESTMENT DETAILS
28 VALUING SHARES
SHAREHOLDER INFORMATION 28 BUYING AND SELLING SHARES
29 DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
29 TAX CONSEQUENCES
FUND SERVICES 29 FUND MANAGEMENT
31 FUND DISTRIBUTION
APPENDIX 32 ADDITIONAL INFORMATION ABOUT THE STANDARD &
POOR'S 500SM 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 500 SM Index
(S&P 500 (registered trademark) ) .
PRINCIPAL INVESTMENT STRATEGIES
Bankers Trust Company (BT)'s principal investment strategies include:
(small solid bullet) Normally i nvesting 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, market or 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.
INVESTMENT OBJECTIVE
VIP MID CAP PORTFOLIO seeks long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
Fidelity Management & Research Company (FMR)'s principal investment
strategies include:
(small solid bullet) Normally i nvesting primarily in common
stocks.
(small solid bullet) Normally i nvesting at least 65% of total
assets in securities of companies with medium market capitalizations
(those with market capitalizations similar to companies in the
Standard & Poor's MidCap 400 Index (S&P MidCap 400 (registered
trademark) )) .
(small solid bullet) Potentially investing in companies with smaller
or larger market capitalizations.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently
from the value of the market as a whole. The value of
securities of smaller issuers can be more volatile than that of larger
issuers.
When a shareholder sells shares of the fund, they could be
worth more or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP GROWTH OPPORTUNITIES PORTFOLIO seeks to provide capital
growth.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Normally i nvesting primarily in common
stocks.
(small solid bullet) Potentially investing in other types of
securities, including bonds which may be lower-quality debt
securities.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently
from the value of the market as a whole. Lower-quality debt
securities (those of less than investment-grade quality) can be more
volatile due to increased sensitivity to adverse issuer, political,
regulatory, market or economic developments.
When a shareholder sells shares of the fund, they could be
worth more or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP CONTRAFUND PORTFOLIO seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Normally i nvesting primarily in common
stocks.
(small solid bullet) Investing in securities of companies whose value
it believes is not fully recognized by the public.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently
from the value of the market as a whole.
When a shareholder sells shares of the fund, they could be
worth more or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP GROWTH PORTFOLIO seeks to achieve capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Normally i nvesting primarily in common
stocks.
(small solid bullet) Investing in companies that it believes have
above-average growth potential (stocks of these companies are often
called "growth" stocks).
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently
from the value of the market as a whole.
(small solid bullet) "GROWTH" INVESTING. "Growth" stocks can perform
differently from the market as a whole and other types of
stocks and can be more volatile than other types of stocks.
When a shareholder sells shares of the fund, they could be
worth more or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP OVERSEAS PORTFOLIO seeks long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Normally i nvesting at least 65% of total
assets in foreign securities.
(small solid bullet) Normally i nvesting primarily in common
stocks.
(small solid bullet) Allocating investments across countries and
regions considering the size of the market in each country and region
relative to the size of the international market as a whole.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets, particularly
emerging markets, can be more volatile than the U.S. market due to
increased risks of adverse issuer, political, regulatory, market or
economic developments and can perform differently from the U.S.
market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently
from the value of the market as a whole.
When a shareholder sells shares of the fund, they could be
worth more or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP BALANCED PORTFOLIO seeks both income and growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Investing approximately 60% of assets in stocks
and other equity securities and the remainder in bonds and other debt
securities, including lower-quality debt securities, when its outlook
is neutral.
(small solid bullet) Investing at least 25% of total assets in
fixed-income senior securities (including debt securities and
preferred stock).
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) With respect to equity investments, emphasizing
above-average income-producing equity securities, which tends to lead
to investments in stocks that have more "value" characteristics than
"growth" characteristics.
(small solid bullet) Analyzing an issuer using fundamental
factors and evaluating each security's current price relative to
estimated long-term value to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to
decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) PREPAYMENT. The ability of an issuer of a debt
security to repay principal prior to a security's maturity can cause
greater price volatility if interest rates change.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently
from the value of the market as a whole. Lower-quality debt
securities (those of less than investment-grade quality) can be more
volatile due to increased sensitivity to adverse issuer, political,
regulatory, market or economic developments.
When a shareholder sells shares of the fund, they could be
worth more or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP EQUITY-INCOME PORTFOLIO seeks reasonable income. The fund
will also consider the potential for capital appreciation. The fund's
goal is to achieve a yield which exceeds the composite yield on the
securities comprising the S&P 500.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Normally i nvesting at least 65% of total
assets in income-producing equity securities, which tends to lead to
investments in large cap "value" stocks.
(small solid bullet) Potentially investing in other types of equity
securities and debt securities, including lower-quality debt
securities.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently
from the value of the market as a whole. Lower-quality debt
securities (those of less than investment-grade quality) can be more
volatile due to increased sensitivity to adverse issuer, political,
regulatory, market or economic developments.
(small solid bullet) "VALUE" INVESTING. "Value" stocks can perform
differently from the market as a whole and other types of
stocks and can continue to be undervalued by the market for long
periods of time.
When a shareholder sells shares of the fund, they could be
worth more or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP GROWTH & INCOME PORTFOLIO seeks high total return through a
combination of current income and capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Normally i nvesting a majority of assets in
common stocks with a focus on those that pay current dividends and
show potential for capital appreciation.
(small solid bullet) Potentially investing in bonds, including
lower-quality debt securities, as well as stocks that are not
currently paying dividends, but offer prospects for future income or
capital appreciation.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently
from the value of the market as a whole. Lower-quality debt
securities (those of less than investment-grade quality) can be more
volatile due to increased sensitivity to adverse issuer, political,
regulatory, market or economic developments.
When a shareholder sells shares of the fund, they could be
worth more or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP ASSET MANAGER PORTFOLIO seeks to obtain high total return
with reduced risk over the long term by allocating its assets among
stocks, bonds, and short-term instruments.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Allocating the fund's assets among stocks, bonds,
and short-term and money market instruments.
(small solid bullet) Maintaining a neutral mix over time of 50% of
assets in stocks, 40% of assets in bonds, and 10% of assets in
short-term and money market instruments.
(small solid bullet) Adjusting allocation among asset classes
gradually within the following ranges: stock class (30%-70%), bond
class (20%-60%), and short-term/money market class (0%-50%).
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Analyzing an issuer using fundamental and/or
quantitative factors and evaluating each security's current price
relative to estimated long-term value to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) PREPAYMENT. The ability of an issuer of a debt
security to repay principal prior to a security's maturity can cause
greater price volatility if interest rates change.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently
from the value of the market as a whole. Lower-quality debt
securities (those of less than investment-grade quality) can be more
volatile due to increased sensitivity to adverse issuer, political,
regulatory, market or economic developments.
When a shareholder sells shares of the fund, they could be worth more
or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP ASSET MANAGER: GROWTH PORTFOLIO seeks to maximize total
return by allocating its assets among stocks, bonds, short-term
instruments, and other investments.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Allocating the fund's assets among stocks, bonds,
and short-term and money market instruments.
(small solid bullet) Maintaining a neutral mix over time of 70% of
assets in stocks, 25% of assets in bonds, and 5% of assets in
short-term and money market instruments.
(small solid bullet) Adjusting allocation among asset classes
gradually within the following ranges: stock class (50%-100%), bond
class (0%-50%), and short-term/money market class (0%-50%).
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Analyzing an issuer using fundamental and/or
quantitative factors and evaluating each security's current price
relative to estimated long-term value to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently from the U.S. market.
(small solid bullet) PREPAYMENT. The ability of an issuer of a debt
security to repay principal prior to a security's maturity can cause
greater price volatility if interest rates change.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently
from the value of the market as a whole. Lower-quality debt
securities (those of less than investment-grade quality) can be more
volatile due to increased sensitivity to adverse issuer, political,
regulatory, market or economic developments.
When a shareholder sells shares of the fund, they could be
worth more or less than what the shareholder paid for them.
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's principal investment strategies include:
(small solid bullet) Normally i nvesting 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.
(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.
When a shareholder sells shares of the fund, they could be
worth more or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP HIGH INCOME PORTFOLIO seeks a high level of current income
while also considering growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Normally i nvesting at least 65% of total
assets in income-producing debt securities, preferred stocks and
convertible securities, with an emphasis on lower-quality debt
securities.
(small solid bullet) Potentially investing in non-income producing
securities, including defaulted securities and common stocks.
(small solid bullet) Investing in companies in troubled or uncertain
financial condition.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets, particularly
emerging markets, can be more volatile than the U.S. market due to
increased risks of adverse issuer, political, regulatory, market or
economic developments and can perform differently from the U.S.
market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently
from the value of the market as a whole. Lower-quality debt
securities (those of less than investment-grade quality) can be more
volatile due to increased sensitivity to adverse issuer, political,
regulatory, market or economic developments and can be difficult to
resell .
When a shareholder sells shares of the fund, they could be
worth more or less than what the shareholder paid for them.
INVESTMENT OBJECTIVE
VIP MONEY MARKET PORTFOLIO seeks as high a level of current
income as is consistent with preservation of capital and liquidity.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Investing in U.S. dollar-denominated money market
securities and repurchase agreements, and entering into reverse
repurchase agreements.
(small solid bullet) Investing more than 25% of total assets in the
financial services industry.
(small solid bullet) Investing in compliance with industry-standard
requirements for money market funds for the quality, maturity and
diversification of investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a money market security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Entities located in foreign
countries can be affected by adverse political, regulatory, market or
economic developments in those countries.
(small solid bullet) FINANCIAL SERVICES EXPOSURE. Changes in
government regulation and interest rates and economic downturns
can have a significant negative effect on issuers in the
financial services sector.
(small solid bullet) ISSUER-SPECIFIC CHANGES. A decline in the credit
quality of an issuer or the provider of credit support or a
maturity-shortening structure for a security can cause the price of a
money market security to decrease.
An investment in the fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although
the fund seeks to preserve the value of a shareholder's
investment at $1.00 per share, it is possible to lose money by
investing in the fund.
PERFORMANCE
The following information illustrates VIP Mid Cap's performance
over the past year, as represented by the performance of Initial
Class; illustrates the changes in each fund's (other than VIP
Mid Cap's) performance from year to year, as represented by the
performance of Initial Class; compares the performance of
Initial Class of each fund (other than VIP Money Market)
to the performance of a market index over various periods of
time; and compares the performance of Initial Class of each
fund (other than VIP Money Market, VIP Asset Manager and
VIP Asset Manager: Growth) to an average of the performance of
similar funds over various periods of time. Initial Class of
VIP Balanced, VIP Asset Manager, and VIP Asset Manager:
Growth also compares its performance to the performance of a
combination of market indexes over various periods of time. Returns
for Initial Class of each 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 each 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 2 after
Service Class 2 has been in operation for one calendar year.
YEAR-BY-YEAR RETURNS
VIP INDEX 500 - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 VIP INDEX 500,
WHICH IS NOT AVAILABLE THROUGH THIS PROSPECTUS. SERVICE CLASS 2 WOULD
HAVE SUBSTANTIALLY SIMILAR ANNUAL RETURNS TO INITIAL CLASS BECAUSE THE
CLASSES ARE INVESTED IN THE SAME PORTFOLIO OF SECURITIES. SERVICE
CLASS 2'S RETURNS WILL BE LOWER THAN INITIAL CLASS'S RETURNS TO THE
EXTENT THAT SERVICE CLASS 2 HAS HIGHER EXPENSES.
VIP MID CAP - INITIAL CLASS
Calendar Year 1999
49.04%
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: 49.04
DURING THE PERIOD SHOWN IN THE CHART FOR INITIAL CLASS OF VIP MID
CAP, THE HIGHEST RETURN FOR A QUARTER WAS 32.12% (QUARTER ENDED
DECEMBER 31, 1999) AND THE LOWEST RETURN FOR A QUARTER WAS -1.27%
(QUARTER ENDED SEPTEMBER 30, 1999).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP MID CAP WAS 24.31%.
THE RETURNS SHOWN ABOVE ARE FOR INITIAL CLASS OF VIP MID CAP, WHICH
IS NOT AVAILABLE THROUGH THIS PROSPECTUS. SERVICE CLASS 2 WOULD HAVE
SUBSTANTIALLY SIMILAR ANNUAL RETURNS TO INITIAL CLASS BECAUSE THE
CLASSES ARE INVESTED IN THE SAME PORTFOLIO OF SECURITIES. SERVICE
CLASS 2'S RETURNS WILL BE LOWER THAN INITIAL CLASS'S RETURNS TO THE
EXTENT THAT SERVICE CLASS 2 HAS HIGHER EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP GROWTH OPPORTUNITIES - INITIAL CLASS
Calendar Years 1996 1997 1998 1999
18.27% 29.95% 24.61% 4.27%
</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: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: 18.27
Row: 8, Col: 1, Value: 29.95
Row: 9, Col: 1, Value: 24.61
Row: 10, Col: 1, Value: 4.270000000000001
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP
GROWTH OPPORTUNITIES, THE HIGHEST RETURN FOR A QUARTER WAS 20.74%
(QUARTER ENDED DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER
WAS -7.99% (QUARTER ENDED SEPTEMBER 30, 1999).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP GROWTH OPPORTUNITIES WAS 0.14%.
THE RETURNS SHOWN ABOVE ARE FOR INITIAL CLASS OF VIP GROWTH
OPPORTUNITIES, WHICH IS NOT AVAILABLE THROUGH THIS PROSPECTUS. SERVICE
CLASS 2 WOULD HAVE SUBSTANTIALLY SIMILAR ANNUAL RETURNS TO INITIAL
CLASS BECAUSE THE CLASSES ARE INVESTED IN THE SAME PORTFOLIO OF
SECURITIES. SERVICE CLASS 2'S RETURNS WILL BE LOWER THAN INITIAL
CLASS'S RETURNS TO THE EXTENT THAT SERVICE CLASS 2 HAS HIGHER
EXPENSES.
VIP CONTRAFUND - INITIAL CLASS
Calendar Years 1996 1997 1998 1999
21.22% 24.14% 29.98% 24.25%
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: 21.22
Row: 8, Col: 1, Value: 24.14
Row: 9, Col: 1, Value: 29.98
Row: 10, Col: 1, Value: 24.25
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP
CONTRAFUND, THE HIGHEST RETURN FOR A QUARTER WAS 23.56% (QUARTER ENDED
DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS -9.89%
(QUARTER ENDED SEPTEMBER 30, 1998).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP CONTRAFUND WAS 5.45%.
THE RETURNS SHOWN ABOVE ARE FOR INITIAL CLASS OF VIP CONTRAFUND,
WHICH IS NOT AVAILABLE THROUGH THIS PROSPECTUS. SERVICE CLASS 2 WOULD
HAVE SUBSTANTIALLY SIMILAR ANNUAL RETURNS TO INITIAL CLASS BECAUSE THE
CLASSES ARE INVESTED IN THE SAME PORTFOLIO OF SECURITIES. SERVICE
CLASS 2'S RETURNS WILL BE LOWER THAN INITIAL CLASS'S RETURNS TO THE
EXTENT THAT SERVICE CLASS 2 HAS HIGHER EXPENSES.
VIP GROWTH - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar Years 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
-11.73% 45.51% 9.32% 19.37% -0.02% 35.36% 14.71% 23.48% 39.49% 37.44%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: -11.73
Row: 2, Col: 1, Value: 45.51
Row: 3, Col: 1, Value: 9.32
Row: 4, Col: 1, Value: 19.37
Row: 5, Col: 1, Value: -0.02
Row: 6, Col: 1, Value: 35.36
Row: 7, Col: 1, Value: 14.71
Row: 8, Col: 1, Value: 23.48
Row: 9, Col: 1, Value: 39.49
Row: 10, Col: 1, Value: 37.44
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP
GROWTH, THE HIGHEST RETURN FOR A QUARTER WAS 24.29% (QUARTER ENDED
DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS -20.80%
(QUARTER ENDED SEPTEMBER 30, 1990).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP GROWTH WAS 8.72%.
THE RETURNS SHOWN ABOVE ARE FOR INITIAL CLASS OF VIP GROWTH, WHICH
IS NOT AVAILABLE THROUGH THIS PROSPECTUS. SERVICE CLASS 2 WOULD HAVE
SUBSTANTIALLY SIMILAR ANNUAL RETURNS TO INITIAL CLASS BECAUSE THE
CLASSES ARE INVESTED IN THE SAME PORTFOLIO OF SECURITIES. SERVICE
CLASS 2'S RETURNS WILL BE LOWER THAN INITIAL CLASS'S RETURNS TO THE
EXTENT THAT SERVICE CLASS 2 HAS HIGHER EXPENSES.
VIP OVERSEAS - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar Years 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
-1.67% 8.00% -10.72% 37.35% 1.72% 9.74% 13.15% 11.56% 12.81% 42.55%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: -1.67
Row: 2, Col: 1, Value: 8.0
Row: 3, Col: 1, Value: -10.72
Row: 4, Col: 1, Value: 37.34999999999999
Row: 5, Col: 1, Value: 1.72
Row: 6, Col: 1, Value: 9.739999999999998
Row: 7, Col: 1, Value: 13.15
Row: 8, Col: 1, Value: 11.56
Row: 9, Col: 1, Value: 12.81
Row: 10, Col: 1, Value: 42.55
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP
OVERSEAS, THE HIGHEST RETURN FOR A QUARTER WAS 24.78% (QUARTER ENDED
DECEMBER 31, 1999) AND THE LOWEST RETURN FOR A QUARTER WAS -17.65%
(QUARTER ENDED SEPTEMBER 30, 1998).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP OVERSEAS WAS 0.31%.
THE RETURNS SHOWN ABOVE ARE FOR INITIAL CLASS OF VIP OVERSEAS,
WHICH IS NOT AVAILABLE THROUGH THIS PROSPECTUS. SERVICE CLASS 2 WOULD
HAVE SUBSTANTIALLY SIMILAR ANNUAL RETURNS TO INITIAL CLASS BECAUSE THE
CLASSES ARE INVESTED IN THE SAME PORTFOLIO OF SECURITIES. SERVICE
CLASS 2'S RETURNS WILL BE LOWER THAN INITIAL CLASS'S RETURNS TO THE
EXTENT THAT SERVICE CLASS 2 HAS HIGHER EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP BALANCED - INITIAL CLASS
Calendar Years 1996 1997 1998 1999
9.98% 22.18% 17.64% 4.55%
</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: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: 9.98
Row: 8, Col: 1, Value: 22.18
Row: 9, Col: 1, Value: 17.64
Row: 10, Col: 1, Value: 4.55
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP
BALANCED, THE HIGHEST RETURN FOR A QUARTER WAS 11.83% (QUARTER ENDED
JUNE 30, 1997) AND THE LOWEST RETURN FOR A QUARTER WAS -5.79% (QUARTER
ENDED SEPTEMBER 30, 1998).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP BALANCED WAS 0.47%.
THE RETURNS SHOWN ABOVE ARE FOR INITIAL CLASS OF VIP BALANCED,
WHICH IS NOT AVAILABLE THROUGH THIS PROSPECTUS. SERVICE CLASS 2 WOULD
HAVE SUBSTANTIALLY SIMILAR ANNUAL RETURNS TO INITIAL CLASS BECAUSE THE
CLASSES ARE INVESTED IN THE SAME PORTFOLIO OF SECURITIES. SERVICE
CLASS 2'S RETURNS WILL BE LOWER THAN INITIAL CLASS'S RETURNS TO THE
EXTENT THAT SERVICE CLASS 2 HAS HIGHER EXPENSES.
VIP EQUITY-INCOME - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar Years 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
-15.29% 31.44% 16.89% 18.29% 7.07% 35.09% 14.28% 28.11% 11.63% 6.33%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: -15.29
Row: 2, Col: 1, Value: 31.44
Row: 3, Col: 1, Value: 16.89
Row: 4, Col: 1, Value: 18.29
Row: 5, Col: 1, Value: 7.07
Row: 6, Col: 1, Value: 35.09
Row: 7, Col: 1, Value: 14.28
Row: 8, Col: 1, Value: 28.11
Row: 9, Col: 1, Value: 11.63
Row: 10, Col: 1, Value: 6.33
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP
EQUITY-INCOME, THE HIGHEST RETURN FOR A QUARTER WAS 15.44% (QUARTER
ENDED DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS
- -17.20% (QUARTER ENDED SEPTEMBER 30, 1990).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP EQUITY-INCOME WAS -2.54%.
THE RETURNS SHOWN ABOVE ARE FOR INITIAL CLASS OF VIP EQUITY-INCOME,
WHICH IS NOT AVAILABLE THROUGH THIS PROSPECTUS. SERVICE CLASS 2 WOULD
HAVE SUBSTANTIALLY SIMILAR ANNUAL RETURNS TO INITIAL CLASS BECAUSE THE
CLASSES ARE INVESTED IN THE SAME PORTFOLIO OF SECURITIES. SERVICE
CLASS 2'S RETURNS WILL BE LOWER THAN INITIAL CLASS'S RETURNS TO THE
EXTENT THAT SERVICE CLASS 2 HAS HIGHER EXPENSES.
VIP GROWTH & INCOME - INITIAL CLASS
Calendar Years 1997 1998 1999
30.09% 29.59% 9.17%
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: 30.09
Row: 9, Col: 1, Value: 29.59
Row: 10, Col: 1, Value: 9.17
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP
GROWTH & INCOME, THE HIGHEST RETURN FOR A QUARTER WAS 20.97% (QUARTER
ENDED DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS
- -8.37% (QUARTER ENDED SEPTEMBER 30, 1998).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP GROWTH & INCOME WAS -0.40%.
THE RETURNS SHOWN ABOVE ARE FOR INITIAL CLASS OF VIP GROWTH &
INCOME, WHICH IS NOT AVAILABLE THROUGH THIS PROSPECTUS. SERVICE CLASS
2 WOULD HAVE SUBSTANTIALLY SIMILAR ANNUAL RETURNS TO INITIAL CLASS
BECAUSE THE CLASSES ARE INVESTED IN THE SAME PORTFOLIO OF SECURITIES.
SERVICE CLASS 2'S RETURNS WILL BE LOWER THAN INITIAL CLASS'S RETURNS
TO THE EXTENT THAT SERVICE CLASS 2 HAS HIGHER EXPENSES.
VIP ASSET MANAGER - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar Years 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
6.72% 22.56% 11.71% 21.23% -6.09% 16.96% 14.60% 20.65% 15.05% 11.09%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 6.72
Row: 2, Col: 1, Value: 22.56
Row: 3, Col: 1, Value: 11.71
Row: 4, Col: 1, Value: 21.23
Row: 5, Col: 1, Value: -6.09
Row: 6, Col: 1, Value: 16.96
Row: 7, Col: 1, Value: 14.6
Row: 8, Col: 1, Value: 20.65
Row: 9, Col: 1, Value: 15.05
Row: 10, Col: 1, Value: 11.09
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP
ASSET MANAGER, THE HIGHEST RETURN FOR A QUARTER WAS 12.80% (QUARTER
ENDED DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS
- -6.67% (QUARTER ENDED SEPTEMBER 30, 1998).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP ASSET MANAGER WAS 2.14%.
THE RETURNS SHOWN ABOVE ARE FOR INITIAL CLASS OF VIP ASSET MANAGER,
WHICH IS NOT AVAILABLE THROUGH THIS PROSPECTUS. SERVICE CLASS 2 WOULD
HAVE SUBSTANTIALLY SIMILAR ANNUAL RETURNS TO INITIAL CLASS BECAUSE THE
CLASSES ARE INVESTED IN THE SAME PORTFOLIO OF SECURITIES. SERVICE
CLASS 2'S RETURNS WILL BE LOWER THAN INITIAL CLASS'S RETURNS TO THE
EXTENT THAT SERVICE CLASS 2 HAS HIGHER EXPENSES.
VIP ASSET MANAGER: GROWTH - INITIAL CLASS
Calendar Years 1996 1997 1998 1999
20.04% 25.07% 17.57% 15.26%
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: 20.04
Row: 8, Col: 1, Value: 25.07
Row: 9, Col: 1, Value: 17.57
Row: 10, Col: 1, Value: 15.26
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP
ASSET MANAGER: GROWTH, THE HIGHEST RETURN FOR A QUARTER WAS 17.69%
(QUARTER ENDED DECEMBER 31, 1998) AND THE LOWEST RETURN FOR A QUARTER
WAS -10.12% (QUARTER ENDED SEPTEMBER 30, 1998).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP ASSET MANAGER: GROWTH WAS 0.29%.
THE RETURNS SHOWN ABOVE ARE FOR INITIAL CLASS OF VIP ASSET MANAGER:
GROWTH, WHICH IS NOT AVAILABLE THROUGH THIS PROSPECTUS. SERVICE CLASS
2 WOULD HAVE SUBSTANTIALLY SIMILAR ANNUAL RETURNS TO INITIAL CLASS
BECAUSE THE CLASSES ARE INVESTED IN THE SAME PORTFOLIO OF SECURITIES.
SERVICE CLASS 2'S RETURNS WILL BE LOWER THAN INITIAL CLASS'S RETURNS
TO THE EXTENT THAT SERVICE CLASS 2 HAS HIGHER EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP INVESTMENT GRADE BOND - 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%.
THE RETURNS SHOWN ABOVE ARE FOR INITIAL CLASS OF VIP INVESTMENT
GRADE BOND, WHICH IS NOT AVAILABLE THROUGH THIS PROSPECTUS. SERVICE
CLASS 2 WOULD HAVE SUBSTANTIALLY SIMILAR ANNUAL RETURNS TO INITIAL
CLASS BECAUSE THE CLASSES ARE INVESTED IN THE SAME PORTFOLIO OF
SECURITIES. SERVICE CLASS 2'S RETURNS WILL BE LOWER THAN INITIAL
CLASS'S RETURNS TO THE EXTENT THAT SERVICE CLASS 2 HAS HIGHER
EXPENSES.
VIP HIGH INCOME - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar Years 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
-2.23% 35.08% 23.17% 20.40% -1.64% 20.72% 14.03% 17.67% -4.33% 8.25%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: -2.23
Row: 2, Col: 1, Value: 35.08
Row: 3, Col: 1, Value: 23.17
Row: 4, Col: 1, Value: 20.4
Row: 5, Col: 1, Value: -1.64
Row: 6, Col: 1, Value: 20.72
Row: 7, Col: 1, Value: 14.03
Row: 8, Col: 1, Value: 17.67
Row: 9, Col: 1, Value: -4.33
Row: 10, Col: 1, Value: 8.25
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP HIGH
INCOME, THE HIGHEST RETURN FOR A QUARTER WAS 12.69% (QUARTER ENDED
MARCH 31, 1992) AND THE LOWEST RETURN FOR A QUARTER WAS -12.75%
(QUARTER ENDED SEPTEMBER 30, 1998).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP HIGH INCOME WAS -3.60%.
THE RETURNS SHOWN ABOVE ARE FOR INITIAL CLASS OF VIP HIGH INCOME,
WHICH IS NOT AVAILABLE THROUGH THIS PROSPECTUS. SERVICE CLASS 2 WOULD
HAVE SUBSTANTIALLY SIMILAR ANNUAL RETURNS TO INITIAL CLASS BECAUSE THE
CLASSES ARE INVESTED IN THE SAME PORTFOLIO OF SECURITIES. SERVICE
CLASS 2'S RETURNS WILL BE LOWER THAN INITIAL CLASS'S RETURNS TO THE
EXTENT THAT SERVICE CLASS 2 HAS HIGHER EXPENSES.
VIP MONEY MARKET - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar Years 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
8.04% 6.09% 3.90% 3.23% 4.25% 5.87% 5.41% 5.51% 5.46% 5.17%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 8.039999999999999
Row: 2, Col: 1, Value: 6.09
Row: 3, Col: 1, Value: 3.9
Row: 4, Col: 1, Value: 3.23
Row: 5, Col: 1, Value: 4.25
Row: 6, Col: 1, Value: 5.87
Row: 7, Col: 1, Value: 5.41
Row: 8, Col: 1, Value: 5.51
Row: 9, Col: 1, Value: 5.46
Row: 10, Col: 1, Value: 5.17
DURING THE PERIODS SHOWN IN THE CHART FOR INITIAL CLASS OF VIP
MONEY MARKET, THE HIGHEST RETURN FOR A QUARTER WAS 1.96% (QUARTER
ENDED MARCH 31, 1990) AND THE LOWEST RETURN FOR A QUARTER WAS 0.78%
(QUARTER ENDED SEPTEMBER 30, 1993).
THE YEAR-TO-DATE RETURN AS OF MARCH 31, 2000 FOR INITIAL CLASS OF
VIP MONEY MARKET WAS 1.43%.
THE RETURNS SHOWN ABOVE ARE FOR INITIAL CLASS OF VIP MONEY MARKET,
WHICH IS NOT AVAILABLE THROUGH THIS PROSPECTUS. SERVICE CLASS 2 WOULD
HAVE SUBSTANTIALLY SIMILAR ANNUAL RETURNS TO INITIAL CLASS BECAUSE THE
CLASSES ARE INVESTED IN THE SAME PORTFOLIO OF SECURITIES. SERVICE
CLASS 2'S RETURNS WILL BE LOWER THAN INITIAL CLASS'S RETURNS TO THE
EXTENT THAT SERVICE CLASS 2 HAS HIGHER EXPENSES.
AVERAGE ANNUAL RETURNS
GROWTH AND GROWTH & INCOME FUNDS
<TABLE>
<CAPTION>
For the periods ended December 31, 1999 Past 1 year Past 5 years Past 10 years/ Life of class
<S> <C> <C> <C>
VIP Index 500 - Initial Class 20.52% 28.16% 21.07%A
S&P 500 21.04% 28.56% 21.45%A
Lipper Variable Annuity S&P 500 Index 20.48% 28.07% n/a
Objective Funds Average
VIP Mid Cap - Initial Class 49.04% n/a 53.14%B
S&P MidCap 400 14.72% n/a 20.81%B
Lipper Variable Annuity Mid Cap Funds Average 46.25% n/a n/a
VIP Growth Opportunities - Initial Class 4.27% n/a 21.51%C
S&P 500 21.04% n/a 28.59%C
Lipper Variable Annuity Growth Funds Average 31.48% n/a n/a
VIP Contrafund - Initial Class 24.25% n/a 27.73%C
S&P 500 21.04% n/a 28.59%C
Lipper Variable Annuity Growth Funds Average 31.48% n/a n/a
VIP Growth - Initial Class 37.44% 29.74% 19.94%
Russell 3000 Growth Index 33.83% 31.09% 19.70%
Lipper Variable Annuity Growth Funds Average 31.48% 26.45% 17.79%
VIP Overseas - Initial Class 42.55% 17.37% 11.43%
Morgan Stanley Capital International Europe, 27.22% 12.98% 7.08%
Australasia, Far East Index
Lipper Variable Annuity International Funds 42.88% 17.31% 10.82%
Average
</TABLE>
A FROM AUGUST 27, 1992.
B FROM DECEMBER 28, 1998.
C FROM JANUARY 3, 1995.
THE RETURNS SHOWN ABOVE ARE FOR INITIAL CLASS OF EACH FUND, WHICH
ARE NOT AVAILABLE THROUGH THIS PROSPECTUS. SERVICE CLASS 2 WOULD HAVE
SUBSTANTIALLY SIMILAR ANNUAL RETURNS TO INITIAL CLASS BECAUSE THE
CLASSES ARE INVESTED IN THE SAME PORTFOLIO OF SECURITIES. SERVICE
CLASS 2'S RETURNS WILL BE LOWER THAN INITIAL CLASS'S RETURNS TO THE
EXTENT THAT SERVICE CLASS 2 HAS HIGHER EXPENSES.
GROWTH AND GROWTH & INCOME FUNDS - CONTINUED
<TABLE>
<CAPTION>
For the periods ended December 31, 1999 Past 1 year Past 5 years Past 10 years/ Life of class
<S> <C> <C> <C>
VIP Balanced - Initial Class 4.55% n/a 13.50%C
S&P 500 21.04% n/a 28.59%C
Lipper Variable Annuity Balanced Funds Average 8.58% n/a n/a
Fidelity VIP Balanced Composite Index 12.00% n/a 20.12%C
VIP Equity-Income - Initial Class 6.33% 18.61% 14.49%
Russell 3000 Value Index 6.65% 22.15% 15.31%
Lipper Variable Annuity Equity Income Funds 9.78% 20.59% 14.64%
Average
VIP Growth & Income - Initial Class 9.17% n/a 22.11%D
S&P 500 21.04% n/a 26.79%D
Lipper Variable Annuity Growth & Income 14.51% n/a n/a
Funds Average
</TABLE>
ASSET ALLOCATION FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the periods ended December 31, 1999 Past 1 year Past 5 years Past 10 years/ Life of class
VIP Asset Manager - Initial Class 11.09% 15.63% 13.14%
S&P 500 21.04% 28.56% 18.21%
Fidelity Asset Manager Composite Index 10.42% 16.69% 11.96%
VIP Asset Manager: Growth - Initial Class 15.26% n/a 20.16%C
S&P 500 21.04% n/a 28.59%C
Fidelity Asset Manager: Growth Composite Index 14.55% n/a 21.45%C
</TABLE>
INCOME FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the periods ended December 31, 1999 Past 1 year Past 5 years Past 10 years
VIP Investment Grade Bond - Initial Class -1.05% 7.30% 7.19%
Lehman Brothers Aggregate Bond Index -0.82% 7.73% 7.70%
Lipper Variable Annuity Intermediate -0.60% 7.08% 7.08%
Investment Grade Debt Funds Average
VIP High Income - Initial Class 8.25% 10.90% 12.44%
Merrill Lynch High Yield Master II Index 2.51% 9.89% 11.21%
Merrill Lynch High Yield Master Index 1.57% 9.61% 10.79%
Lipper Variable Annuity High Current Yield 3.83% 9.48% 10.15%
Funds Average
</TABLE>
MONEY MARKET FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the periods ended December 31, 1999 Past 1 year Past 5 years Past 10 years
VIP Money Market - Initial Class 5.17% 5.48% 5.28%
</TABLE>
C FROM JANUARY 3, 1995.
D FROM DECEMBER 31, 1996.
THE RETURNS SHOWN ABOVE ARE FOR INITIAL CLASS OF EACH FUND, WHICH
ARE NOT AVAILABLE THROUGH THIS PROSPECTUS. SERVICE CLASS 2 WOULD HAVE
SUBSTANTIALLY SIMILAR ANNUAL RETURNS TO INITIAL CLASS BECAUSE THE
CLASSES ARE INVESTED IN THE SAME PORTFOLIO OF SECURITIES. SERVICE
CLASS 2'S RETURNS WILL BE LOWER THAN INITIAL CLASS'S RETURNS TO THE
EXTENT THAT SERVICE CLASS 2 HAS HIGHER EXPENSES.
If FMR had not reimbursed certain class expenses during these periods,
VIP Index 500's, VIP Mid Cap's, VIP Growth Opportunities', VIP
Balanced's, VIP Growth & Income's, VIP Asset Manager's, VIP Asset
Manager: Growth's, VIP Investment Grade Bond's, VIP High Income's, and
VIP Money Market's Initial Class returns would have been lower.
Fidelity VIP Balanced Composite Index is a hypothetical representation
of the performance of VIP Balanced's general investment categories
using a weighting of 60% equity and 40% bond. The following indexes
are used to calculate the composite index: equity - the Russell
3000(registered trademark) Value Index , and bond - the Lehman
Brothers Aggregate Bond Index. The index weightings of the composite
index are rebalanced monthly.
Fidelity Asset Manager Composite Index is a hypothetical
representation of the performance of VIP Asset Manager's three
asset classes according to their respective weightings in the fund's
neutral mix (50% stocks, 40% bonds and 10% short-term/money market
instruments ). The following indexes are used to calculate the
composite index: stocks - the Standard & Poor's 500 Index (S&P 500),
bonds - the Lehman Brothers Aggregate Bond Index, and short-term/money
market instruments - the Lehman Brothers 3-Month Treasury Bill
Index. Prior to January 1, 1997, the Lehman Brothers U.S. Treasury
Index was used for the bond class. The index weightings of the
composite index are rebalanced monthly.
Fidelity Asset Manager: Growth Composite Index is a
hypothetical representation of the performance of VIP Asset
Manager: Growth's three asset classes according to their respective
weightings in the fund's neutral mix (70% stocks, 25% bonds and 5%
short-term/money market instruments ). The following indexes are
used to calculate the composite index: stocks - the Standard & Poor's
500 Index (S&P 500), bonds - the Lehman Brothers Aggregate Bond Index,
and short-term/money market instruments - the Lehman Brothers
3-Month Treasury Bill Index. Prior to January 1, 1997, the Lehman
Brothers U.S. Treasury Index was used for the bond class. The index
weightings of the composite index are rebalanced monthly.
S&P 500 is a market capitalization-weighted index of common stocks.
S&P MidCap 400 is a market capitalization-weighted index of 400
medium-capitalization stocks.
Russell 3000(registered trademark) Growth Index is a market
capitalization-weighted index of growth-oriented stocks of U.S.
domiciled corporations .
Russell 3000 Value Index is a market capitalization-weighted index of
value-oriented stocks of U.S. domiciled corporations .
Morgan Stanley Capital International Europe, Australasia and
Far East (EAFE) Index is a market capitalization-weighted index that
is designed to represent the performance of developed stock markets
outside the United States and Canada. As of February 29,
2000 , the index included over 963 equity securities of
companies domiciled in 20 countries .
The Lehman Brothers 3-Month Treasury Bill Index represents the average
of Treasury Bill rates for each of the prior three months, adjusted to
a bond equivalent yield basis (short-term and money market
instruments).
The Lehman Brothers Aggregate Bond Index is a market value-weighted
index of investment-grade fixed-rate debt issues, including
government, corporate, asset-backed, and mortgage-backed securities,
with maturities of one year or more.
The Lehman Brothers U.S. Treasury Index is a market
value-weighted index of public obligations of the U.S. Treasury with
maturities of one year or more.
Going forward, VIP High Income's performance will be compared to
the Merrill Lynch High Yield Master II Index rather than the Merrill
Lynch High Yield Master Index because the Merrill Lynch High Yield
Master II Index contains deferred interest bonds and payment-in-kind
securities and is therefore a better representation of the high yield
bond universe.
Merrill Lynch High Yield Master II Index is a market value-weighted
index of all domestic and yankee high-yield bonds, including deferred
interest bonds and payment - in - kind securities. Issues
included in the index have maturities of one year or more and have a
credit rating lower than BBB - /Baa3, but are not in default.
Merrill Lynch High Yield Master Index is a market value-weighted index
of all domestic and yankee high-yield bonds. Issues included in the
index have maturities of one year or more and have a credit rating
lower than B BB- /Baa3, but are not in default.
Each 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 2 of each 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.
<TABLE>
<CAPTION>
Service Class 2
<S> <C> <C>
VIP INDEX 500 Management fee 0.24%
Distribution and Service (12b-1) fee 0.25%
Other expenses 0.11%
Total annual class operating expensesA 0.60%
VIP MID CAP Management fee 0.57%
Distribution and Service (12b-1) fee 0.25%
Other expenses 0.43%
Total annual class operating expensesB 1.25%
VIP GROWTH OPPORTUNITIES Management fee 0.58%
Distribution and Service (12b-1) fee 0.25%
Other expenses 0.13%
Total annual class operating expensesB 0.96%
VIP CONTRAFUND Management fee 0.58%
Distribution and Service (12b-1) fee 0.25%
Other expenses 0.12%
Total annual class operating expensesB 0.95%
VIP GROWTH Management fee 0.58%
Distribution and Service (12b-1) fee 0.25%
Other expenses 0.10%
Total annual class operating expensesB 0.93%
VIP OVERSEAS Management fee 0.73%
Distribution and Service (12b-1) fee 0.25%
Other expenses 0.18%
Total annual class operating expensesB 1.16%
VIP BALANCED Management fee 0.43%
Distribution and Service (12b-1) fee 0.25%
Other expenses 0.16%
Total annual class operating expensesB 0.84%
VIP EQUITY-INCOME Management fee 0.48%
Distribution and Service (12b-1) fee 0.25%
Other expenses 0.10%
Total annual class operating expensesB 0.83%
VIP GROWTH & INCOME Management fee 0.48%
Distribution and Service (12b-1) fee 0.25%
Other expenses 0.13%
Total annual class operating expensesB 0.86%
VIP ASSET MANAGER Management fee 0.53%
Distribution and Service (12b-1) fee 0.25%
Other expenses 0.11%
Total annual class operating expensesB 0.89%
VIP ASSET MANAGER: GROWTH Management fee 0.58%
Distribution and Service (12b-1) fee 0.25%
Other expenses 0.15%
Total annual class operating expensesB 0.98%
VIP INVESTMENT GRADE BOND Management fee 0.43%
Distribution and Service (12b-1) fee 0.25%
Other expenses 0.14%
Total annual class operating expensesB 0.82%
VIP HIGH INCOME Management fee 0.58%
Distribution and Service (12b-1) fee 0.25%
Other expenses 0.12%
Total annual class operating expensesB 0.95%
VIP MONEY MARKET Management fee 0.18%
Distribution and Service (12b-1) fee 0.25%
Other expenses 0.12%
Total annual class operating expensesB 0.55%
</TABLE>
A EFFECTIVE JANUARY 12, 2000, FMR HAS VOLUNTARILY AGREED TO
REIMBURSE SERVICE CLASS 2 OF VIP INDEX 500 TO THE EXTENT THAT TOTAL
OPERATING EXPENSES (EXCLUDING INTEREST, TAXES, SECURITIES LENDING
COSTS, BROKERAGE COMMISSIONS AND EXTRAORDINARY EXPENSES), AS A
PERCENTAGE OF ITS AVERAGE NET ASSETS, EXCEED 0.53%. THIS ARRANGEMENT
CAN BE DISCONTINUED BY FMR AT ANY TIME.
B FMR HAS VOLUNTARILY AGREED TO REIMBURSE SERVICE CLASS 2 OF
CERTAIN FUNDS TO THE EXTENT THAT TOTAL OPERATING EXPENSES
(EXCLUDING INTEREST, TAXES, CERTAIN SECURITIES LENDING COSTS,
BROKERAGE COMMISSIONS AND EXTRAORDINARY EXPENSES), AS A PERCENTAGE OF
THEIR RESPECTIVE AVERAGE NET ASSETS, EXCEED THE FOLLOWING RATES:
Service Class 2 Effective Date
VIP Mid Cap 1.25% 1/12/00
VIP Growth Opportunities 1.75% 1/12/00
VIP Contrafund 1.25% 1/12/00
VIP Growth 1.75% 1/12/00
VIP Overseas 1.75% 1/12/00
VIP Balanced 1.75% 1/12/00
VIP Equity-Income 1.75% 1/12/00
VIP Growth & Income 1.25% 1/12/00
VIP Asset Manager 1.50% 1/12/00
VIP Asset Manager: Growth 1.25% 1/12/00
VIP Investment Grade Bond 1.05% 1/12/00
VIP High Income 1.25% 1/12/00
VIP Money Market 0.60% 1/12/00
THESE ARRANGEMENTS CAN BE DISCONTINUED BY FMR AT ANY TIME.
FUND BASICS
INVESTMENT DETAILS
THE GROWTH AND GROWTH & INCOME FUNDS
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.
INVESTMENT OBJECTIVE
VIP MID CAP PORTFOLIO seeks long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests the fund's assets primarily in common stocks.
FMR normally invests at least 65% of the fund's total assets in
securities of companies with medium market capitalizations. Medium
market capitalization companies are those whose market capitalization
is similar to the capitalization of companies in the S&P MidCap 400 at
the time of the fund's investment. Companies whose capitalization no
longer meets this definition after purchase continue to be considered
to have a medium market capitalization for purposes of the 65% policy.
As of December 31, 1999 , the S&P MidCap 400 included companies
with capitalizations between $195.1 million and $23. 4 billion.
The size of companies in the S&P MidCap 400 changes with market
conditions and the composition of the index. FMR may also invest the
fund's assets in companies with smaller or larger market
capitalizations.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
FMR is not constrained by any particular investment style. At any
given time, FMR may tend to buy "growth" stocks or "value" stocks, or
a combination of both types. In buying and selling securities for the
fund, FMR relies on fundamental analysis of each issuer and its
potential for success in light of its current financial condition, its
industry position, and economic and market conditions. Factors
considered include growth potential, earnings estimates , and
management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
INVESTMENT OBJECTIVE
VIP GROWTH OPPORTUNITIES PORTFOLIO seeks to provide capital
growth.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests the fund's assets primarily in common stocks. FMR
may also invest the fund's assets in other types of securities,
including bonds which may be lower-quality debt securities.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
FMR is not constrained by any particular investment style. At any
given time, FMR may tend to buy "growth" stocks or "value" stocks, or
a combination of both types. In buying and selling securities for the
fund, FMR relies on fundamental analysis of each issuer and its
potential for success in light of its current financial condition, its
industry position, and economic and market conditions. Factors
considered include growth potential, earnings estimates , and
management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
INVESTMENT OBJECTIVE
VIP CONTRAFUND PORTFOLIO seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests the fund's assets primarily in common stocks.
FMR invests the fund's assets in securities of companies whose value
FMR believes is not fully recognized by the public. The types of
companies in which the fund may invest include companies experiencing
positive fundamental change , such as a new management team or
product launch, a significant cost-cutting initiative, a merger or
acquisition, or a reduction in industry capacity that should lead to
improved pricing; companies whose earnings potential has increased or
is expected to increase more than generally perceived; companies that
have enjoyed recent market popularity but which appear to have
temporarily fallen out of favor for reasons that are considered
non-recurring or short-term; and companies that are undervalued in
relation to securities of other companies in the same industry.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
FMR is not constrained by any particular investment style. At any
given time, FMR may tend to buy "growth" stocks or "value" stocks, or
a combination of both types. In buying and selling securities for the
fund, FMR relies on fundamental analysis of each issuer and its
potential for success in light of its current financial condition, its
industry position, and economic and market conditions. Factors
considered include growth potential, earnings estimates , and
management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
INVESTMENT OBJECTIVE
VIP GROWTH PORTFOLIO seeks to achieve capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests the fund's assets primarily in common stocks.
FMR invests the fund's assets in companies FMR believes have
above-average growth potential. Growth may be measured by factors such
as earnings or revenue.
Companies with high growth potential tend to be companies with higher
than average price/earnings (P/E) ratios. Companies with strong growth
potential often have new products, technologies, distribution
channels , or other opportunities , or have a strong
industry or market position. The stocks of these companies are often
called "growth" stocks.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
In buying and selling securities for the fund, FMR relies on
fundamental analysis of each issuer and its potential for success in
light of its current financial condition, its industry position, and
economic and market conditions. Factors considered include growth
potential, earnings estimates , and management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
INVESTMENT OBJECTIVE
VIP OVERSEAS PORTFOLIO seeks long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests at least 65% of the fund's total assets in
foreign securities. FMR normally invests the fund's assets primarily
in common stocks.
FMR normally diversifies the fund's investments across different
countries and regions. In allocating the fund's investments across
countries and regions, FMR will consider the size of the market in
each country and region relative to the size of the international
market as a whole.
In buying and selling securities for the fund, FMR relies on
fundamental analysis of each issuer and its potential for success in
light of its current financial condition, its industry position, and
economic and market conditions. Factors considered include growth
potential, earnings estimates , and management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
INVESTMENT OBJECTIVE
VIP BALANCED PORTFOLIO seeks both income and growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR manages the fund to maintain a balance between stocks and bonds.
When FMR's outlook is neutral, it will invest approximately 60% of the
fund's assets in stocks and other equity securities and the remainder
in bonds and other debt securities, including lower-quality debt
securities. FMR may vary from this target if it believes stocks or
bonds offer more favorable opportunities, but will always invest at
least 25% of the fund's total assets in fixed-income senior securities
(including debt securities and preferred stock).
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
With respect to the fund's equity investments, FMR's emphasis on
above-average income-producing equity securities tends to lead to
investments in stocks that have more "value" characteristics than
"growth" characteristics. However, FMR is not constrained by any
particular investment style. In buying and selling securities for the
fund, FMR generally analyzes the issuer of a security using
fundamental factors (e.g., growth potential, earnings estimates, and
management) and evaluates each security's current price relative to
its estimated long-term value.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices, interest rates , or other factors that affect
security values. If FMR's strategies do not work as intended, the fund
may not achieve its objective.
INVESTMENT OBJECTIVE
VIP EQUITY-INCOME PORTFOLIO seeks reasonable income. The fund
will also consider the potential for capital appreciation. The fund's
goal is to achieve a yield which exceeds the composite yield on the
securities comprising the S&P 500.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests at least 65% of the fund's total assets in
income-producing equity securities. FMR may also invest the fund's
assets in other types of equity securities and debt securities,
including lower-quality debt securities.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
FMR's emphasis on above-average income-producing equity securities
tends to lead to investments in large cap "value" stocks. However, FMR
is not constrained by any particular investment style. In buying and
selling securities for the fund, FMR relies on fundamental analysis of
each issuer and its potential for success in light of its current
financial condition, its industry position, and economic and market
conditions. Factors considered include growth potential, earnings
estimates , and management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values.
If FMR's strategies do not work as intended, the fund may not achieve
its objective.
INVESTMENT OBJECTIVE
VIP GROWTH & INCOME PORTFOLIO seeks high total return through a
combination of current income and capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests a majority of the fund's assets in common stocks
with a focus on those that pay current dividends and show potential
for capital appreciation. FMR may also invest the fund's assets in
bonds, including lower-quality debt securities, as well as stocks that
are not currently paying dividends, but offer prospects for future
income or capital appreciation.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
FMR is not constrained by any particular investment style. At any
given time, FMR may tend to buy "growth" stocks or "value" stocks, or
a combination of both types. In buying and selling securities for the
fund, FMR relies on fundamental analysis of each issuer and its
potential for success in light of its current financial condition, its
industry position, and economic and market conditions. Factors
considered include growth potential, earnings estimates , and
management.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
DESCRIPTION OF PRINCIPAL SECURITY TYPES
EQUITY SECURITIES represent an ownership interest, or the right to
acquire an ownership interest, in an issuer. Different types of equity
securities provide different voting and dividend rights and priority
in the event of the bankruptcy of the issuer. Equity securities
include common stocks, preferred stocks, convertible
securities , and warrants.
DEBT SECURITIES are used by issuers to borrow money. The issuer
usually pays a fixed, variable , or floating rate of interest,
and must repay the amount borrowed at the maturity of the security.
Some debt securities, such as zero coupon bonds, do not pay current
interest but are sold at a discount from their face values.
Debt securities include corporate bonds, government securities, and
mortgage and other asset-backed securities.
PRINCIPAL INVESTMENT RISKS
Many factors affect each fund's performance. A fund's share price
changes daily based on changes in market conditions and interest rates
and in response to other economic, political , or financial
developments. A fund's reaction to these developments will be affected
by the types 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 a fund, they could be worth more or less than what
the shareholder paid for them.
The following factors can significantly affect a fund's
performance.
STOCK MARKET VOLATILITY. The value of equity securities fluctuates in
response to issuer, political, market , and economic
developments. In the short term, equity prices can fluctuate
dramatically in response to these developments. Different parts of the
market and different types of equity securities can react differently
to these developments. For example, large cap stocks can react
differently 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.
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.
FOREIGN EXPOSURE. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations
can involve additional risks relating to political, economic ,
or regulatory conditions in foreign countries. These risks include
fluctuations in foreign currencies; withholding or other taxes;
trading , settlement, custodial, and other operational risks;
and the less stringent investor protection and disclosure standards of
some foreign markets. All of these factors can make foreign
investments, especially those in emerging markets, more volatile and
potentially less liquid than U.S. investments. In addition, foreign
markets can perform differently from the U.S. market.
Investing in emerging markets can involve risks in addition to
and greater than those generally associated with investing in more
developed foreign markets. The extent of economic development;
political stability; market depth, infrastructure , and
capitalization ; and regulatory oversight can be less
than in more developed markets. Emerging market economies can be
subject to greater social, economic, regulatory , and political
uncertainties. All of these factors can make emerging market
securities more volatile and potentially less liquid than securities
issued in more developed markets.
PREPAYMENT. Many types of debt securities, including mortgage
securities, are subject to prepayment risk. Prepayment occurs when the
issuer of a security can repay principal prior to the security's
maturity. Securities subject to prepayment 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. The value of securities of
smaller, less well-known issuers can be more volatile than that of
larger issuers. Lower-quality debt securities (those of less than
investment-grade quality) tend to be more sensitive to these changes
than higher-quality debt securities.
Lower-quality debt securities involve greater risk of default or price
changes due to changes in the credit quality of the issuer. The value
of lower-quality debt securities often fluctuates in response to
company, political , or economic developments and can decline
significantly over short periods of time or during periods of general
or regional economic difficulty.
"GROWTH" INVESTING. "Growth" stocks can react differently to issuer,
political, market , and economic developments than the market as
a whole and other types of stocks. "Growth" stocks tend to be more
expensive relative to their earnings or assets compared to other types
of stocks. As a result, "growth" stocks tend to be sensitive to
changes in their earnings and more volatile than other types of
stocks.
"VALUE" INVESTING. "Value" stocks can react differently to issuer,
political, market , and economic developments than the market as
a whole and other types of stocks. "Value" stocks tend to be
inexpensive relative to their earnings or assets compared to other
types of stocks. However, "value" stocks can continue to be
inexpensive for long periods of time and may not ever realize their
full value.
In response to market, economic, political , or other
conditions, FMR or BT may temporarily use a different
investment strategy for defensive purposes. If FMR or BT does
so, different factors could affect a fund's performance and the fund
may not achieve its investment objective.
THE ASSET ALLOCATION FUNDS
INVESTMENT OBJECTIVE
VIP ASSET MANAGER PORTFOLIO seeks to obtain high total return
with reduced risk over the long term by allocating its assets among
stocks, bonds, and short-term instruments.
PRINCIPAL INVESTMENT STRATEGIES
FMR allocates the fund's assets among the following classes, or types,
of investments. The STOCK CLASS includes equity securities of all
types. The BOND CLASS includes all varieties of fixed-income
securities, including lower-quality debt securities, maturing in more
than one year. The SHORT-TERM/MONEY MARKET CLASS includes all types of
short-term and money market instruments.
FMR may use its judgment to place a security in the most
appropriate class based on its investment characteristics.
Fixed-income securities may be classified in the bond or
short-term/money market class according to interest rate sensitivity
as well as maturity. FMR may invest the fund's assets in these
classes by investing in other funds. FMR may also invest the
fund's assets in other instruments that do not fall within these
classes.
FMR has the ability to allocate the fund's assets within specified
ranges. The fund's neutral mix represents the benchmark for its
combination of investments in each asset class over time. FMR may
change the neutral mix from time to time. The approximate neutral mix
and range for each asset class are shown below:
Neutral Mix STOCKS 50%
(can range from 30-70%)
Row: 1, Col: 1, Value: 10.0
Row: 1, Col: 2, Value: 50.0
Row: 1, Col: 3, Value: 40.0
BONDS 40%
(can range from 20-60%)
SHORT-TERM/MONEY MARKET 10%
(can range from 0-50%)
FMR will not try to pinpoint the precise moment when a major
reallocation should be made. Instead, FMR regularly reviews
the fund's allocation and makes changes gradually to favor
investments that it believes will provide the most favorable
outlook for achieving the fund's objective.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
In buying and selling securities for the fund, FMR generally analyzes
the issuer of a security using fundamental factors (e.g., growth
potential, earnings estimates , and management) and/or
quantitative factors (e.g., historical earnings, dividend
yield , and earnings per share) and evaluates each security's
current price relative to its estimated long-term value.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices, interest rates , or other factors that affect
security values. If FMR's strategies do not work as intended, the fund
may not achieve its objective.
INVESTMENT OBJECTIVE
VIP ASSET MANAGER: GROWTH PORTFOLIO seeks to maximize total
return by allocating its assets among stocks, bonds, short-term
instruments, and other investments.
PRINCIPAL INVESTMENT STRATEGIES
FMR allocates the fund's assets among the following classes, or types,
of investments. The STOCK CLASS includes equity securities of all
types. The BOND CLASS includes all varieties of fixed-income
securities, including lower-quality debt securities, maturing in more
than one year. The SHORT-TERM/MONEY MARKET CLASS includes all types of
short-term and money market instruments.
FMR may use its judgment to place a security in the most
appropriate class based on its investment characteristics.
Fixed-income securities may be classified in the bond or
short-term/money market class according to interest rate sensitivity
as well as maturity. FMR may invest the fund's assets in these
classes by investing in other funds. FMR may also invest the
fund's assets in other instruments that do not fall within these
classes.
FMR has the ability to allocate the fund's assets within specified
ranges. The fund's neutral mix represents the benchmark for its
combination of investments in each asset class over time. FMR may
change the neutral mix from time to time. The approximate neutral mix
and range for each asset class are shown below:
Neutral Mix STOCKS 70%
(can range from 50-100%)
Row: 1, Col: 1, Value: 5.0
Row: 1, Col: 2, Value: 70.0
Row: 1, Col: 3, Value: 25.0
BONDS 25%
(can range from 0-50%)
SHORT-TERM/MONEY MARKET 5%
(can range from 0-50%)
FMR will not try to pinpoint the precise moment when a major
reallocation should be made. Instead, FMR regularly reviews the fund's
allocation and makes changes gradually to favor investments that it
believes will provide the most favorable outlook for achieving the
fund's objective.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
In buying and selling securities for the fund, FMR generally analyzes
the issuer of a security using fundamental factors (e.g., growth
potential, earnings estimates , and management) and/or
quantitative factors (e.g., historical earnings, dividend
yield , and earnings per share) and evaluates each security's
current price relative to its estimated long-term value.
FMR may lend the fund's securities to broker-dealers or other
institutions to earn income for the fund.
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
EQUITY SECURITIES represent an ownership interest, or the right to
acquire an ownership interest, in an issuer. Different types of equity
securities provide different voting and dividend rights and priority
in the event of the bankruptcy of the issuer. Equity securities
include common stocks, preferred stocks, convertible
securities , and warrants.
DEBT SECURITIES are used by issuers to borrow money. The issuer
usually pays a fixed, variable , or floating rate of interest,
and must repay the amount borrowed at the maturity of the security.
Some debt securities, such as zero coupon bonds, do not pay current
interest but are sold at a discount from their face values. Debt
securities include corporate bonds, government securities, and
mortgage and other asset-backed securities.
MONEY MARKET SECURITIES are high-quality, short-term securities that
pay a fixed, variable , or floating interest rate. Securities
are often specifically structured so that they are eligible
investments for a money market fund. For example, in order to satisfy
the maturity restrictions for a money market fund, some money market
securities have demand or put features , which have the effect
of shortening the security's maturity . M oney market securities
include bank certificates of deposit, bank acceptances, bank time
deposits, notes, commercial paper , and U.S. Government
securities.
PRINCIPAL INVESTMENT RISKS
Many factors affect each fund's performance. A fund's share price and
yield change daily based on changes in market conditions and interest
rates and in response to other economic, political , or
financial developments. A fund's reaction to these developments will
be affected by the types and maturities of 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 a fund, they could be worth more or less than what
the shareholder paid for them.
The following factors can significantly affect a fund's
performance.
STOCK MARKET VOLATILITY. The value of equity securities fluctuates in
response to issuer, political, market , and economic
developments. In the short term, equity prices can fluctuate
dramatically in response to these developments. Different parts of the
market and different types of equity securities can react differently
to these developments. For example, large cap stocks can react
differently 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.
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, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations
can involve additional risks relating to political, economic ,
or regulatory conditions in foreign countries. These risks include
fluctuations in foreign currencies; withholding or other taxes;
trading, settlement, custodial , and other operational risks;
and the less stringent investor protection and disclosure standards of
some foreign markets. All of these factors can make foreign
investments, especially those in emerging markets, more volatile and
potentially less liquid than U.S. investments. In addition, foreign
markets can perform differently from the U.S. market.
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. The value of securities of
smaller, less well-known issuers can be more volatile than that of
larger issuers. Lower-quality debt securities (those of less than
investment-grade quality) tend to be more sensitive to these changes
than higher-quality debt securities.
Lower-quality debt securities involve greater risk of default or price
changes due to changes in the credit quality of the issuer. The value
of lower-quality debt securities often fluctuates in response to
company, political , or economic developments and can decline
significantly over short periods of time or during periods of general
or regional economic difficulty.
In response to market, economic, political , or other
conditions, FMR may temporarily use a different investment strategy
for defensive purposes. If FMR does so, different factors could affect
a fund's performance and the fund may not achieve its investment
objective.
THE INCOME FUNDS
INVESTMENT OBJECTIVE
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, 199 9 , 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.
T o 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.
INVESTMENT OBJECTIVE
VIP HIGH INCOME PORTFOLIO seeks a high level of current income
while also considering growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests at least 65% of the fund's total assets in
income-producing debt securities, preferred stocks and convertible
securities, with an emphasis on lower-quality debt securities. Many
lower-quality debt securities are subject to legal or contractual
restrictions limiting FMR's ability to resell the securities to the
general public. FMR may also invest the fund's assets in non-income
producing securities, including defaulted securities and common
stocks. FMR currently intends to limit common stocks to 10% of the
fund's total assets. FMR may invest in companies whose financial
condition is troubled or uncertain and that may be involved in
bankruptcy proceedings, reorganizations , or financial
restructurings.
FMR may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
In buying and selling securities for the fund, FMR relies on
fundamental analysis of each issuer and its potential for success in
light of its current financial condition, its industry position, and
economic and market conditions. Factors considered include a
security's structural features and current price compared to its
long-term value, and the earnings potential, credit standing ,
and management of the security's issuer.
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
EQUITY SECURITIES represent an ownership interest, or the right to
acquire an ownership interest, in an issuer. Different types of equity
securities provide different voting and dividend rights and priority
in the event of the bankruptcy of the issuer. Equity securities
include common stocks, preferred stocks, convertible
securities , and warrants.
DEBT SECURITIES are used by issuers to borrow money. The issuer
usually pays a fixed, variable , or floating rate of interest,
and must repay the amount borrowed at the maturity of the security.
Some debt securities, such as zero coupon bonds, do not pay current
interest but are sold at a discount from their face values. Debt
securities include corporate bonds, government securities, mortgage
and other asset-backed securities, and loans and loan participations.
PRINCIPAL INVESTMENT RISKS
Many factors affect each fund's performance. A fund's yield and share
price change daily based on changes in interest rates and market
conditions and in response to other economic, political , or
financial developments. A fund's reaction to these developments will
be affected by the types and maturities of 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 a fund, they could be worth more or less than what
the shareholder paid for them.
The following factors can significantly affect a fund's
performance.
STOCK MARKET VOLATILITY. The value of equity securities fluctuates in
response to issuer, political, market , and economic
developments. In the short term, equity prices can fluctuate
dramatically in response to these developments. Different parts of the
market and different types of equity securities can react differently
to these developments. For example, large cap stocks can react
differently 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.
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, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations
can involve additional risks relating to political, economic ,
or regulatory conditions in foreign countries. These risks include
fluctuations in foreign currencies; withholding or other taxes;
trading, settlement, custodial , and other operational risks;
and the less stringent investor protection and disclosure standards of
some foreign markets. All of these factors can make foreign
investments, especially those in emerging markets, more volatile and
potentially less liquid than U.S. investments. In addition, foreign
markets can perform differently from the U.S. market.
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. The value of securities of
smaller, less well-known issuers can be more volatile than that of
larger issuers. Lower-quality debt securities (those of less than
investment-grade quality) tend to be more sensitive to these changes
than higher-quality debt securities.
Lower-quality debt securities involve greater risk of default or price
changes due to changes in the credit quality of the issuer. The value
of lower-quality debt securities often fluctuates in response to
company, political , or economic developments and can decline
significantly over short periods of time or during periods of general
or regional economic difficulty. Lower-quality debt securities can be
thinly traded or have restrictions on resale, making them difficult to
sell at an acceptable price. The default rate for lower-quality debt
securities is likely to be higher during economic recessions or
periods of high interest rates.
In response to market, economic, political , or other
conditions, FMR may temporarily use a different investment strategy
for defensive purposes. If FMR does so, different factors could affect
a fund's performance and the fund may not achieve its investment
objective.
THE MONEY MARKET FUND
INVESTMENT OBJECTIVE
VIP MONEY MARKET PORTFOLIO seeks as high a level of current
income as is consistent with preservation of capital and liquidity.
PRINCIPAL INVESTMENT STRATEGIES
FMR invests the fund's assets in U.S. dollar-denominated money market
securities of domestic and foreign issuers and repurchase
agreements. FMR also may enter into reverse repurchase agreements for
the fund.
FMR will invest more than 25% of the fund's total assets in the
financial services industry.
In buying and selling securities for the fund, FMR complies with
industry-standard requirements for money market funds regarding the
quality, maturity , and diversification of the fund's
investments. FMR stresses maintaining a stable $1.00 share price,
liquidity , and income.
DESCRIPTION OF PRINCIPAL SECURITY TYPES
MONEY MARKET SECURITIES are high-quality, short-term securities
that pay a fixed, variable , or floating interest rate.
Securities are often specifically structured so that they are eligible
investments for a money market fund. For example, in order to satisfy
the maturity restrictions for a money market fund, some money market
securities have demand or put features , which have the effect
of shortening the security's maturity. M oney market securities
include bank certificates of deposit, bank acceptances, bank time
deposits, notes, commercial paper , and U.S. Government
securities.
A REPURCHASE AGREEMENT is an agreement to buy a security at one
price and a simultaneous agreement to sell it back at an
agreed-upon price.
PRINCIPAL INVESTMENT RISKS
Many factors affect the fund's performance. The fund's yield will
change daily based on changes in interest rates and other market
conditions. Although the fund is managed to maintain a stable $1.00
share price, there is no guarantee that the fund will be able to do
so. For example, a major increase in interest rates or a decrease in
the credit quality of the issuer of one of the fund's investments
could cause the fund's share price to decrease. While the fund will be
charged premiums by a mutual insurance company for coverage of
specified types of losses related to default or bankruptcy on certain
securities, the fund may incur losses regardless of the insurance.
The following factors can significantly affect the fund's
performance.
INTEREST RATE CHANGES. Money market securities have varying levels of
sensitivity to changes in interest rates. In general, the price of a
money market security can fall when interest rates rise and can rise
when interest rates fall. Securities with longer maturities and the
securities of issuers in the financial services sector can be more
sensitive to interest rate changes. Short-term securities tend to
react to changes in short-term interest rates.
FOREIGN EXPOSURE. Issuers located in foreign countries and entities
located in foreign countries that provide credit support or a
maturity-shortening structure can involve increased risks. Extensive
public information about the issuer or provider may not be available
and unfavorable political, economic , or governmental
developments could affect the value of the security.
FINANCIAL SERVICES EXPOSURE. Financial services companies are highly
dependent on the supply of short-term financing. The value of
securities of issuers in the financial services sector can be
sensitive to changes in government regulation and interest rates and
to economic downturns in the United States and abroad.
ISSUER-SPECIFIC CHANGES. Changes in the financial condition of an
issuer, changes in specific economic or political conditions that
affect a particular type of issuer, and changes in general economic or
political conditions can affect the credit quality or value of an
issuer's securities. Entities providing credit support or a
maturity-shortening structure also can be affected by these types of
changes. If the structure of a security fails to function as intended,
the security could decline in value.
FUNDAMENTAL INVESTMENT POLICIES
The policies discussed below are fundamental, that is, subject to
change only by shareholder approval.
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.
VIP MID CAP PORTFOLIO seeks long-term growth of capital.
VIP GROWTH OPPORTUNITIES PORTFOLIO seeks to provide capital
growth by investing primarily in common stocks and securities
convertible into common stocks.
VIP CONTRAFUND PORTFOLIO seeks long-term capital appreciation.
VIP GROWTH PORTFOLIO seeks to achieve capital appreciation.
VIP OVERSEAS PORTFOLIO seeks long-term growth of capital
primarily through investments in foreign securities.
VIP BALANCED PORTFOLIO seeks both income and growth of capital
by investing in a diversified portfolio of equity and fixed-income
securities with income, growth of income, and capital appreciation
potential.
VIP EQUITY-INCOME PORTFOLIO seeks reasonable income by
investing primarily in income-producing equity securities. In choosing
these securities, the fund will also consider the potential for
capital appreciation. The fund's goal is to achieve a yield which
exceeds the composite yield on the securities comprising the S&P 500.
VIP GROWTH & INCOME PORTFOLIO seeks high total return through a
combination of current income and capital appreciation.
VIP ASSET MANAGER PORTFOLIO seeks to obtain high total return
with reduced risk over the long term by allocating its assets among
stocks, bonds, and short-term instruments.
VIP ASSET MANAGER: GROWTH PORTFOLIO seeks to maximize total
return by allocating its assets among stocks, bonds, short-term
instruments, and other investments.
VIP INVESTMENT GRADE BOND PORTFOLIO seeks as high a level of
current income as is consistent with the preservation of capital.
VIP HIGH INCOME PORTFOLIO seeks a high level of current income
by investing primarily in high yielding, fixed-income securities,
while also considering growth of capital.
VIP MONEY MARKET PORTFOLIO seeks as high a level of current
income as is consistent with preservation of capital and liquidity by
investing in money market instruments.
VALUING SHARES
Each fund is open for business each day the New York Stock Exchange
(NYSE) is open.
A class's net asset value per share (NAV) is the value of a single
share. Fidelity normally calculates Service Class 2's NAV as of the
close of business of the NYSE, normally 4:00 p.m. Eastern time.
However, NAV may be calculated earlier if trading on the NYSE is
restricted or as permitted by the Securities and Exchange Commission
(SEC). Each fund's assets are valued as of this time for the purpose
of computing Service Class 2's NAV.
To the extent that each fund's assets are traded in other markets on
days when the NYSE is closed, the value of the fund's assets may be
affected on days when the fund is not open for business. In addition,
trading in some of a fund's assets may not occur on days when
the fund is open for business.
The money market fund 's assets are valued on the basis
of amortized cost.
Each fund's (other than money market fund's) assets are valued
primarily on the basis of market quotations or on the basis of
information furnished by a pricing service. Certain short-term
securities are valued on the basis of amortized cost. If market
quotations or information furnished by a pricing service is not
readily available for a security or if a security's value has been
materially affected by events occurring after the close of the
exchange or market on which the security is principally traded (for
example, a foreign exchange or market), that security may be valued by
another method that the Board of Trustees believes accurately reflects
fair value. A security's valuation may differ depending on the method
used for determining value.
SHAREHOLDER INFORMATION
BUYING AND SELLING SHARES
Insurance companies offer variable annuity and variable life
insurance products through separate accounts. Separate accounts - not
variable product owners - are the shareholders of the funds. 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 funds can buy or sell shares of the
funds.
The price to buy one share of Service Class 2 is the class's NAV.
Service Class 2 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 funds' Board of Trustees may refuse to sell shares of a fund or
may stop offering shares of a 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 2 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 a
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 a fund.
Each fund offers its shares to separate accounts of insurance
companies that may be affiliated or unaffiliated with FMR and/or each
other. Each 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 each 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
Each fund earns dividends, interest, and other income from its
investments, and distributes this income (less expenses) to
shareholders as dividends. Each fund also realizes capital gains from
its investments, and distributes these gains (less any losses) to
shareholders as capital gain distributions.
Each of VIP Index 500, VIP Mid Cap, VIP Growth Opportunities, VIP
Contrafund, VIP Growth, VIP Overseas, VIP Balanced, VIP Equity-Income,
VIP Growth & Income, VIP Asset Manager, VIP Asset Manager: Growth, VIP
Investment Grade Bond, and VIP High Income normally pays dividends and
capital gain distributions at least annually, in February.
Distributions from VIP Money Market consist primarily of dividends.
VIP Money Market normally declares dividends daily and pays them
monthly.
Dividends and capital gain distributions will be automatically
reinvested in additional Service Class 2 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 ca pital gain distributions from a fund.
FUND SERVICES
FUND MANAGEMENT
Each fund is a mutual fund, an investment that pools shareholders'
money and invests it toward a specified goal.
FMR is each fund's manager.
As of March 25, 1999, FMR had approximately $ 521.7
billion in discretionary assets under management.
As the manager, FMR is responsible for choosing investments for
each fund (except VIP Index 500) and handling each
fund's business affairs.
BT serves as sub-adviser and custodian for VIP Index 500. 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 recordkeeping 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 VIP Index 500. The SEC has
granted a temporary order to permit BT and its affiliates to continue
to provide investment advisory services to registered investment
companies. There is no assurance that the SEC will grant a permanent
order.
Affiliates assist FMR with foreign investments:
(small solid bullet) Fidelity Management & Research (U.K.) Inc. (FMR
U.K.), in London, England, serves as a sub-adviser for VIP Mid
Cap, VIP Growth Opportunities, VIP Contrafund,
VIP Overseas, VIP Balanced, VIP Growth & Income,
VIP Asset Manager, VIP Asset Manager: Growth, and
VIP High Income. FMR U.K. was organized in 1986 to provide
investment research and advice to FMR. FMR U.K. may
provide investment research and advice on issuers based outside
the United States and may also provide investment advisory services
for VIP Mid Cap, VIP Growth Opportunities, VIP
Contrafund, VIP Overseas, VIP Balanced, VIP
Growth & Income, VIP Asset Manager, VIP Asset Manager:
Growth, and VIP High Income.
(small solid bullet) Fidelity Management & Research (Far East)
Inc. (FMR Far East) serves as a sub-adviser for VIP Mid Cap,
VIP Growth Opportunities, VIP Contrafund, VIP
Overseas, VIP Balanced, VIP Growth & Income, VIP
Asset Manager, VIP Asset Manager: Growth, and VIP High
Income. FMR Far East was organized in 1986 to provide investment
research and advice to FMR. FMR Far East may provide
investment research and advice on issuers based outside the United
States and may also provide investment advisory services for
VIP Mid Cap, VIP Growth Opportunities, VIP
Contrafund, VIP Overseas, VIP Balanced, VIP
Growth & Income, VIP Asset Manager, VIP Asset Manager:
Growth, and VIP High Income.
(small solid bullet) Fidelity International Investment Advisors
(FIIA), in Pembroke, Bermuda, serves as a sub-adviser for VIP
Overseas. As of September 28, 1999 , FIIA had approximately
$ 3.6 billion in discretionary assets under management.
FIIA may provide investment research and advice on issuers
based outside the United States and may also provide investment
advisory services for VIP Overseas .
(small solid bullet) Fidelity International Investment Advisors (U.K.)
Limited (FIIA(U.K.)L), in London, England, serves as a sub-adviser for
VIP Overseas. As of September 28, 1999 , FIIA(U.K.)L had
approximately $ 2.6 billion in discretionary assets under
management. FIIA(U.K.)L may provide investment research
and advice on issuers based outside the United States and may also
provide investment advisory services for VIP Overseas .
(small solid bullet) Fidelity Investments Japan Limited (FIJ), in
Tokyo, Japan, serves as a sub-adviser for VIP Mid Cap,
VIP Growth Opportunities, VIP Contrafund, VIP
Overseas, VIP Balanced, VIP Growth & Income, VIP
Asset Manager, VIP Asset Manager: Growth, and VIP High
Income. As of September 28, 1999 , FIJ had approximately
$ 16.3 billion in discretionary assets under management.
FIJ may provide investment research and advice on issuers
based outside the United States for VIP Mid Cap, VIP
Growth Opportunities, VIP Contrafund, VIP Overseas,
VIP Balanced, VIP Growth & Income, VIP Asset
Manager, VIP Asset Manager: Growth, and VIP High Income.
Fidelity Investments Money Management, Inc. (FIMM), in Merrimack, New
Hampshire, serves as sub-adviser for VIP Investment Grade Bond
and VIP Money Market. FIMM is primarily responsible for
choosing investments for VIP Investment Grade Bond and
VIP Money Market. FIMM also serves as sub-adviser for
VIP Balanced, VIP Asset Manager, and VIP Asset
Manager: Growth. FIMM is primarily responsible for choosing
certain types of investments for VIP Balanced, VIP Asset
Manager, and VIP Asset Manager: Growth.
FIMM is an affiliate of FMR. As of March 29, 1999 , FIMM had
approximately $ 159.8 billion in discretionary assets under
management.
Beginning January 1, 2001, FMR Co., Inc. (FMRC) will serve as
sub-adviser for VIP Index 500, VIP Mid Cap, VIP Growth Opportunities,
VIP Contrafund, VIP Growth, VIP Overseas, VIP Balanced, VIP
Equity-Income, VIP Growth & Income, VIP Asset Manager, VIP Asset
Manager: Growth, and VIP High Income. FMRC will be primarily
responsible for choosing investments for VIP Mid Cap, VIP Growth
Opportunities, VIP Contrafund, VIP Growth, VIP Overseas, VIP
Equity-Income, VIP Growth & Income, and VIP High Income. FMRC will be
primarily responsible for choosing certain types of investments for
VIP Balanced, VIP Asset Manager, and VIP Asset Manager: Growth. FMRC
may provide investment research and advice and may also provide
investment advisory services for VIP Index 500. FMRC is a wholly owned
subsidiary of FMR.
John Avery is vice president and manager of VIP
Balanced , which he has managed since January 1998; he had been
associate manager of the fund since September 1997. He also manages
another Fidelity fund. Mr. Avery joined Fidelity in 1995 as an
analyst. Previously, he was an analyst for Putnam Investments from
1993 to 1994.
Barry Coffman is vice president and manager of VIP High
Income , which he has managed since August 1990. He
also manages other Fidelity funds. Since joining Fidelity in
1986, Mr. Coffman has worked as an analyst and manager.
Will Danoff is vice president and manager of VIP
Contrafund , which he has managed since January 1995. He also
manages another Fidelity fund. Since joining Fidelity in 1986, Mr.
Danoff has worked as an analyst and manager.
Bettina Doulton is vice president and manager of VIP Growth
Opportunities , which she has managed since February 2000. She
also manages another Fidelity fund. Since joining Fidelity in 1986,
Ms. Doulton has worked as a research assistant, analyst and
manager.
David Felman is vice president and manager of VIP Mid
Cap , which he has managed since August 1999. He also manages other
Fidelity funds. Mr. Felman joined Fidelity as an analyst in
1993.
Kevin Grant is vice president and manager of VIP Balanced and
VIP Investment Grade Bond , which he has managed since March
1996 and February 1997, respectively. Mr. Grant manages the
fixed-income investments for VIP Balanced. He also manages several
other Fidelity funds. Mr. Grant joined Fidelity in 1993 as a portfolio
manager.
Bart Grenier is vice president and manager of VIP Asset Manager and
VIP Asset Manager: Growth, both of which he has managed since May
2000. Mr. Grenier originally joined Fidelity in 1991 as a senior
analyst and has held a number of positions with FMR and served as an
officer of certain other investment companies managed or advised by
FMR.
Richard Mace is vice president and manager of VIP
Overseas , which he has managed since March 1996. He also
manages several other Fidelity funds. Since joining Fidelity in 1987,
Mr. Mace has worked as an analyst and manager.
Stephen Petersen is vice president and manager of VIP
Equity-Income , which he has managed since January 1997. He also
manages another Fidelity fund. Since joining Fidelity in 1980, Mr.
Petersen has worked as an analyst and manager.
Louis Salemy is manager of VIP Growth & Income ,
which he has managed since September 1998. Previously, he was
associate manager of the fund . Mr. Salemy also manages
another Fidelity fund. Since joining Fidelity in 1992, Mr. Salemy
has worked as an analyst, manager, and portfolio assistant.
Jennifer Uhrig is vice president and manager of VIP
Growth , which she has managed since January 1997. She also
manages another Fidelity fund. Since joining Fidelity in 1987, Ms.
Uhrig has worked as an analyst and manager.
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.
E ach fund pays a management fee to FMR. The management
fee is calculated and paid to FMR every month.
VIP Index 500's annual management fee rate is 0.24% of its average
net assets.
For VIP Mid Cap, VIP Growth Opportunities, VIP Contrafund, VIP
Growth, VIP Overseas, VIP Balanced, VIP Equity-Income, VIP Growth &
Income, VIP Asset Manager, VIP Asset Manager: Growth, VIP Investment
Grade Bond, and VIP High Income, 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 fee for VIP Money Market is calculated by adding a group
fee rate to an individual fund fee rate, dividing by twelve and
multiplying the result by the fund's average net assets throughout the
month, and then adding an income-based fee. The income-based fee is
6% of the fund's monthly gross income in excess of an annualized 5%
yield, but it cannot rise above an annual rate of 0.24% of the fund's
average net assets throughout that month.
The group fee rate is based on the average net assets of all the
mutual funds advised by FMR. This rate cannot rise above 0.52% for
VIP Mid Cap, VIP Growth Opportunities, VIP
Contrafund, VIP Growth, VIP Overseas, VIP
Balanced, VIP Equity-Income, VIP Growth & Income,
VIP Asset Manager, and VIP Asset Manager: Growth, or
0.37% for VIP Investment Grade Bond, VIP High Income,
and VIP Money Market, and it drops as total assets under
management increase.
For December 1999, the group fee rate was 0.1267% for VIP
Investment Grade Bond, VIP High Income, and VIP Money
Market, and the group fee rate was 0.2768% for VIP Mid Cap,
VIP Growth Opportunities, VIP Contrafund, VIP
Growth, VIP Overseas, VIP Balanced, VIP
Equity-Income, VIP Growth & Income, VIP Asset Manager,
and VIP Asset Manager: Growth. The individual fund fee rate is
0.03% for VIP Money Market ; 0.15% for VIP Balanced ;
0.20% for VIP Equity-Income and VIP Growth &
Income ; 0.25% for VIP Asset Manager ; 0.30% for
VIP Mid Cap, VIP Growth Opportunities, VIP
Contrafund, VIP Growth, VIP Asset Manager: Growth, and
VIP Investment Grade Bond ; and 0.45% for VIP Overseas
and VIP High Income.
The total management fee, as a percentage of a fund's average net
assets, for the fiscal year ended December 31, 1999, for each fund
(other than VIP Index 500) is shown in the table below.
Total Management Fee
VIP Mid Cap 0.57%
VIP Growth Opportunities 0.58%
VIP Contrafund 0.58%
VIP Growth 0.58%
VIP Overseas 0.73%
VIP Balanced 0.43%
VIP Equity-Income 0.48%
VIP Growth & Income 0.48%
VIP Asset Manager 0.53%
VIP Asset Manager: Growth 0.58%
VIP Investment Grade Bond 0.43%
VIP High Income 0.58%
VIP Money Market 0.18%
FMR pays FIMM, FMR U.K., FMR Far East, and FIIA for providing
sub-advisory services, and FIIA in turn pays FIIA(U.K.)L. FMR Far East
pays FIJ for providing sub-advisory services.
FMR will pay FMRC for providing sub-advisory services.
FMR pays BT for providing investment management and custodial
services.
Prior to October 1, 1999, VIP Index 500 paid a management fee at an
annual rate of 0.24% of its average net assets to FMR and a
sub-advisory fee (representing 40% of net income from securities
lending) to BT.
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 February 29, 2000, approximately 62.71% of VIP Asset Manager:
Growth's; approximately 58.41% of VIP Money Market's; approximately
43.18% of VIP Growth & Income's; approximately 36.88% of VIP
Balanced's; approximately 30.81% of VIP Investment Grade Bond's; and
approximately 26.13% of VIP Index 500's total outstanding shares,
respectively, were held by FM R affiliates.
FUND DISTRIBUTION
Each fund is composed of multiple classes of shares. All classes of a
fund have a common investment objective and investment portfolio.
Fidelity Distributors Corporation (FDC) distributes Service
Class 2's shares.
Service Class 2 of each fund has adopted a Distribution and Service
Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940.
Under the plan, Service Class 2 of each fund is authorized to pay FDC
a 12b-1 fee as compensation for providing services intended to result
in the sale of Service Class 2 shares and/or support services that
benefit variable product owners. Service Class 2 of each fund
currently pays FDC a 12b-1 fee at an annual rate of 0.25% of its
average net assets throughout the month.
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 2 12b-1 fee, for providing
services intended to result in the sale of Service Class 2 shares
and/or support services that benefit variable product owners.
In addition, each Service Class 2 plan specifically recognizes that
FMR may make payments from its management fee revenue, past profits,
or other resources to FDC for expenses incurred in connection with
providing services intended to result in the sale of Service Class 2
shares and/or 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 each fund
has authorized such payments for Service Class 2.
Because 12b-1 fees are paid out of Service Class 2's assets on an
ongoing basis, they will increase the cost of 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.
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 a fund
receives brokerage services and commission rates comparable to those
of other broker-dealers.
BT may allocate brokerage transactions in a manner that takes into
account the sale of shares of VIP Index 500, provided that the
fund receives brokerage services and commission rates comparable to
those of other broker-dealers.
No dealer, sales representative, or any other person has been
authorized to give any information or to make any representations,
other than those contained in this prospectus and in the related
statement of additional information (SAI), in connection with the
offer contained in this prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the funds or FDC. This prospectus and the related SAI do
not constitute an offer by the funds or by FDC to sell shares of the
funds to or to buy shares of the funds from any person to whom it is
unlawful to make such offer.
APPENDIX
ADDITIONAL INFORMATION ABOUT THE STANDARD & POOR'S 500 INDEX
S&P does not guarantee the accuracy and/or the completeness of the S&P
500 Index or any data included therein and S&P shall have no liability
for any errors, omissions, or interruptions therein. S&P makes no
warranty, express or implied, as to results to be obtained by
licensee, owners of the product, or any other person or entity from
the use of the S&P 500 Index or any data included therein. S&P makes
no express or implied warranties, and expressly disclaims all
warranties of merchantability or fitness for a particular purpose or
use with respect to the S&P 500 Index or any data included therein.
Without limiting any of the foregoing, in no event shall S&P have any
liability for any special, punitive, indirect, or consequential
damages (including lost profits), even if notified of the possibility
of such damages.
The product is not sponsored, endorsed, sold, or promoted by S&P. S&P
makes no representation or warranty, express or implied, to the owners
of the product or any member of the public regarding the advisability
of investing in securities generally or in the product particularly or
the ability of the S&P 500 Index to track general stock market
performance. S&P's only relationship to the licensee is the licensing
of certain trademarks and trade names of S&P and of the S&P 500 Index
which is determined, composed, and calculated by S&P without regard to
the licensee or the product. S&P has no obligation to take the needs
of the licensee or the owners of the product into consideration in
determining, composing, or calculating the S&P 500 Index. S&P is not
responsible for and has not participated in the determination of the
timing of, prices at, or quantities of the product to be issued or in
the determination or calculation of the equation by which the product
is to be converted into cash. S&P has no obligation or liability in
connection with the administration, marketing, or trading of the
product.
"Standard & Poor's," "S&P," "S&P 500," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed for use by Fidelity Distributors Corporation.
You can obtain additional information about the funds. The funds' SAI
includes more detailed information about each fund and its
investments. The SAI is incorporated herein by reference (legally
forms a part of the prospectus). Each fund's annual and semi-annual
reports include a discussion of the fund's holdings and recent market
conditions and the fund's investment strategies that affected
performance.
For a free copy of any of these documents or to request other
information or ask questions about a fund, call Fidelity at
1-888-622-3175 .
The SAI, the funds' 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 w eb
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 funds, including the
funds' 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 NUMBERS, 811-3329, 811-5511, AND
811-7205
Fidelity, Contrafund, and Fidelity I nvestments & (Pyramid) Design
are 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 Fidelit y
Variable Insurance Products.
1.733316.101 VIP2C-pro-0400
Variable Insurance Products Fund III
Post-Effective Amendment No. 17
PART C. OTHER INFORMATION
Item 23. Exhibits
(a) (1) Declaration of Trust, dated July 14, 1994, is incorporated
herein by reference to Exhibit 1 to the Registration Statement filed
on July 29, 1994.
(2) Supplement to the Declaration of Trust, dated December 30, 1996,
is incorporated herein by reference to Exhibit 1(b) of Post-Effective
Amendment No. 8.
(b) Bylaws of the Trust, as amended and dated May 19, 1994, are
incorporated herein by reference to Exhibit 2(a) of Fidelity Union
Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(c) Not applicable.
(d) (1) Management Contract between Fidelity Advisor Annuity Growth
Opportunities Fund (currently known as Growth Opportunities Portfolio)
and Fidelity Management & Research Company, dated November 18, 1994,
is incorporated herein by reference to Exhibit 5(b) of Post-Effective
Amendment No. 1.
(2) Management Contract between Fidelity Advisor Annuity Income &
Growth Fund (currently known as Balanced Portfolio) and Fidelity
Management & Research Company, dated November 18, 1994, is
incorporated herein by reference to Exhibit 5(c) of Post-Effective
Amendment No. 1.
(3) Management Contract between Growth & Income Portfolio and
Fidelity Management & Research Company, dated January 1, 1997, is
incorporated herein by reference to Exhibit 5(g) of Post-Effective
Amendment No. 7.
(4) Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (U.K.) Inc. on behalf of
Fidelity Advisor Annuity Growth Opportunities Fund (currently known as
Growth Opportunities Portfolio), dated November 18, 1994, is
incorporated herein by reference to Exhibit 5(i) of Post-Effective
Amendment No. 1.
(5) Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (U.K.) Inc. on behalf of
Fidelity Advisor Annuity Income & Growth Fund (currently known as
Balanced Portfolio), dated November 18, 1994, is incorporated herein
by reference to Exhibit 5(j) of Post-Effective Amendment No. 1.
(6) Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (U.K.) Inc. on behalf of
Growth & Income Portfolio, dated January 1, 1997, is incorporated
herein by reference to Exhibit 5(m) of Post-Effective Amendment No. 7.
(7) Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (Far East) Inc. on behalf
of Fidelity Advisor Annuity Growth Opportunities Fund (currently known
as Growth Opportunities Portfolio), dated November 18, 1994, is
incorporated herein by reference to Exhibit 5(m) of Post-Effective
Amendment No. 1.
(8) Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (Far East) Inc. on behalf
of Fidelity Advisor Annuity Income & Growth Fund (currently known as
Balanced Portfolio), dated November 18, 1994, is incorporated herein
by reference to Exhibit 5(n) of Post-Effective Amendment No. 1.
(9) Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (Far East) Inc. on behalf
of Growth & Income Portfolio, dated January 1, 1997, is incorporated
herein by reference to Exhibit 5(i) of Post-Effective Amendment No. 9.
(10) Management Contract between Mid Cap Portfolio and Fidelity
Management & Research Company, dated November 19, 1998, is
incorporated herein by reference to Exhibit d(10) of Post-Effective
Amendment No. 13.
(11) Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (U.K.) Inc. on behalf of
Mid Cap Portfolio, dated November 19, 1998, is incorporated herein by
reference to Exhibit d(11) of Post-Effective Amendment No. 13.
(12) Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (Far East) Inc. on behalf
of Mid Cap Portfolio, dated November 19, 1998, is incorporated herein
by reference to Exhibit d(12) of Post-Effective Amendment No. 13.
(13) Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Investments Money Management, Inc. on behalf of
Balanced Portfolio, dated January 1, 1999, is incorporated herein by
reference to Exhibit d(13) of Post-Effective Amendment No. 13.
(14) Form of Sub-Advisory Agreement between Fidelity Management &
Research Company and FMR Co., Inc. on behalf of Growth Opportunities
Portfolio is filed herein as Exhibit d(14).
(15) Form of Sub-Advisory Agreement between Fidelity Management &
Research Company and FMR Co., Inc. on behalf of Balanced Portfolio is
filed herein as Exhibit d(15).
(16) Form of Sub-Advisory Agreement between Fidelity Management &
Research Company and FMR Co., Inc. on behalf of Growth & Income
Portfolio is filed herein as Exhibit d(16).
(17) Form of Sub-Advisory Agreement between Fidelity Management &
Research Company and FMR Co., Inc. on behalf of Mid Cap Portfolio is
filed herein as Exhibit d(17).
(18) Research Agreement between Fidelity Management & Research (Far
East) Inc. and Fidelity Investments Japan Limited on behalf of
Balanced Portfolio, dated January 1, 2000, is filed herein as Exhibit
d(18).
(19) Research Agreement between Fidelity Management & Research (Far
East) Inc. and Fidelity Investments Japan Limited on behalf of Growth
& Income Portfolio, dated January 1, 2000, is filed herein as Exhibit
d(19).
(20) Research Agreement between Fidelity Management & Research (Far
East) Inc. and Fidelity Investments Japan Limited on behalf of Growth
Opportunities Portfolio, dated January 1, 2000, is filed herein as
Exhibit d(20).
(21) Research Agreement between Fidelity Management & Research (Far
East) Inc. and Fidelity Investments Japan Limited on behalf of Mid Cap
Portfolio, dated January 1, 2000, is filed herein as Exhibit d(21).
(e) (1) General Distribution Agreement between Fidelity Advisor
Annuity Growth Opportunities Fund (currently known as Growth
Opportunities Portfolio) and Fidelity Distributors Corporation, dated
November 18, 1994, is incorporated herein by reference to Exhibit 6(b)
of Post-Effective Amendment No. 1.
(2) General Distribution Agreement between Fidelity Advisor Annuity
Income & Growth Fund (currently known as Balanced Portfolio) and
Fidelity Distributors Corporation, dated November 18, 1994, is
incorporated herein by reference to Exhibit 6(c) of Post-Effective
Amendment No. 1.
(3) General Distribution Agreement between Growth & Income Portfolio
and Fidelity Distributors Corporation, dated December 19, 1996, is
incorporated herein by reference to Exhibit 6(c) of Post-Effective
Amendment No. 9.
(4) General Distribution Agreement between Mid Cap Portfolio and
Fidelity Distributors Corporation, dated November 19, 1998, is
incorporated herein by reference to Exhibit (e)(8) of Post-Effective
Amendment No. 13.
(5) Amendments to the General Distribution Agreement between
Variable Insurance Products Fund III and Fidelity Distributors
Corporation on behalf of Growth Opportunities Portfolio and Balanced
Portfolios, dated March 14, 1996 and July 15, 1996, are incorporated
herein by reference to Exhibit 6(a) of Fidelity Court Street Trust's
(File No. 2-58774) Post-Effective Amendment No. 61.
(6) Form of Service Contract between Fidelity Distributors
Corporation and "Qualified Recipients" with respect to Initial Class
shares is incorporated herein by reference to Exhibit 6(e) of
Post-Effective Amendment No. 12.
(7) Form of Service Contract between Fidelity Distributors
Corporation and "Qualified Recipients" with respect to Service Class
shares is incorporated herein by reference to Exhibit 6(f) of
Post-Effective Amendment No. 12 .
(8) Form of Service Contract between Fidelity Distributors
Corporation and "Qualified Recipients" with respect to Service Class 2
shares is filed herein as Exhibit e(7).
(f) (1) The Fee Deferral Plan for Non-Interested Person Directors and
Trustees of the Fidelity Funds, effective as of September 14, 1995 and
amended through November 14, 1996, is incorporated herein by reference
to Exhibit 7(b) of Fidelity Aberdeen Street Trust's (File No.
33-43529) Post-Effective Amendment No. 19.
(g) (1) Custodian Agreement and Appendix C, dated August 1, 1994,
between The Chase Manhattan Bank, N.A. and Variable Insurance Products
Fund III on behalf of Balanced Portfolio and Growth & Income Portfolio
are incorporated herein by reference to Exhibit 8(a) of Fidelity
Investment Trust's (File No. 2-90649) Post-Effective Amendment No. 59.
(2) Appendix A, dated February, 22, 2000, to the Custodian
Agreement, dated August 1, 1994, between The Chase Manhattan Bank,
N.A. and Variable Insurance Products Fund III on behalf of Balanced
Portfolio and Growth & Income Portfolio is incorporated herein by
reference to Exhibit g(6) of Fidelity Commonwealth Trust's (File No.
2-52322) Post-Effective Amendment No. 69.
(3) Appendix B, dated March 16, 2000, to the Custodian Agreement,
dated August 1, 1994, between The Chase Manhattan Bank, N.A. and
Variable Insurance Products Fund III on behalf of Balanced Portfolio
and Growth & Income Portfolio is incorporated herein by reference to
Exhibit g(7) of Fidelity Commonwealth Trust's (File No. 2-52322)
Post-Effective Amendment No. 69.
(4) Addendum, dated October 21, 1996, to the Custodian Agreement,
dated August 1, 1994, between The Chase Manhattan Bank, N.A. and
Variable Insurance Products Fund III on behalf of Balanced Portfolio
and Growth & Income Portfolio is incorporated herein by reference to
Exhibit g(4) of Fidelity Charles Street Trust's (File No. 2-73133)
Post-Effective Amendment No. 65.
(5) Custodian Agreement and Appendix C, dated September 1, 1994,
between Brown Brothers Harriman & Company and Variable Insurance
Products Fund III on behalf of Growth Opportunities Portfolio and Mid
Cap Portfolio are incorporated herein by reference to Exhibit 8(a) of
Fidelity Commonwealth Trust's (File No. 2-52322) Post-Effective
Amendment No. 56.
(6) Appendix A, dated August 11, 1999, to the Custodian Agreement,
dated September 1, 1994, between Brown Brothers Harriman & Company and
Variable Insurance Products Fund III on behalf of Growth Opportunities
Portfolio and Mid Cap Portfolio is incorporated herein by reference to
Exhibit g(6) of Fidelity Advisor Series I's (File No. 2-84776)
Post-Effective Amendment No. 50.
(7) Appendix B, dated March 16, 2000, to the Custodian Agreement,
dated September 1, 1994, between Brown Brothers Harriman & Company and
Variable Insurance Products Fund III on behalf of Growth Opportunities
Portfolio and Mid Cap Portfolio is incorporated herein by reference to
Exhibit g(3) of Fidelity Commonwealth Trust's (File No. 2-52322)
Post-Effective Amendment No. 69.
(8) Addendum, dated October 21, 1996, to the Custodian Agreement,
dated September 1, 1994, between Brown Brothers Harriman & Company and
Variable Insurance Products Fund III on behalf of Growth Opportunities
Portfolio and Mid Cap Portfolio is incorporated herein by reference to
Exhibit g(4) of Fidelity Commonwealth Trust's (File No. 2-52322)
Post-Effective Amendment No. 68.
(9) Form of Fidelity Group Repo Custodian Agreement among The Bank
of New York, J.P. Morgan Securities, Inc., and the Registrant is filed
herein as Exhibit g(9).
(10) Form of Schedule 1 to the Fidelity Group Repo Custodian
Agreement betweenThe Bank of New York and the Registrant is filed
herein as Exhibit g(10).
(11) Form of Fidelity Group Repo Custodian Agreement among Chemical
Bank, Greenwich Capital Markets, Inc., and the Registrant is filed
herein as Exhibit g(11).
(12) Form of Schedule 1 to the Fidelity Group Repo Custodian
Agreement between Chemical Bank and the Registrant is filed herein as
Exhibit g(12).
(13) Form of Joint Trading Account Custody Agreement between The
Bank of New York and the Registrant is filed herein as Exhibit g(13).
(14) Form of First Amendment to Joint Trading Account Custody
Agreement between The Bank of New York and the Registrant is filed
herein as Exhibit g(14).
(h) Not applicable.
(i) (1) Legal Opinion of Kirkpatrick & Lockhart LLP for Initial
Class, Service Class, and Service Class 2 of Balanced Portfolio,
Growth & Income Portfolio, Growth Opportunities Portfolio, and Mid Cap
Portfolio, dated April 25, 2000, is filed herein as Exhibit i(1).
(j) (1) Consent of PricewaterhouseCoopers LLP, dated April 25, 2000,
is filed herein as Exhibit j(1).
(2) Consent of PricewaterhouseCoopers LLP, dated April 25, 2000, is
filed herein as Exhibit j(2).
(3) Consent of Deloitte & Touche LLP, dated April 25, 2000, is
filed herein as Exhibit j(3).
(k) Not applicable.
(l) Not applicable.
(m) (1) Distribution and Service Plan pursuant to Rule 12b-1 for
Growth & Income Portfolio: Initial Class is incorporated herein by
reference to Exhibit m(1) of Post-Effective Amendment No. 15.
(2) Distribution and Service Plan pursuant to Rule 12b-1 for Growth
Opportunities Portfolio: Initial Class is incorporated herein by
reference to Exhibit m(2) of Post-Effective Amendment No. 15.
(3) Distribution and Service Plan pursuant to Rule 12b-1 for
Balanced Portfolio: Initial Class is incorporated herein by reference
to Exhibit m(3) of Post-Effective Amendment No. 15.
(4) Distribution and Service Plan pursuant to Rule 12b-1 for Growth
& Income Portfolio: Service Class is incorporated herein by reference
to Exhibit m(4) of Post-Effective Amendment No. 15.
(5) Distribution and Service Plan pursuant to Rule 12b-1 for Growth
Opportunities Portfolio: Service Class is incorporated herein by
reference to Exhibit m(5) of Post-Effective Amendment No. 15.
(6) Distribution and Service Plan pursuant to Rule 12b-1 for
Balanced Portfolio: Service Class is incorporated herein by reference
to Exhibit m(6) of Post-Effective Amendment No. 15.
(7) Distribution and Service Plan pursuant to Rule 12b-1 for Mid
Cap Portfolio: Initial Class is incorporated herein by reference to
Exhibit m(7) of Post-Effective Amendment No. 15.
(8) Distribution and Service Plan pursuant to Rule 12b-1 for Mid
Cap Portfolio: Service Class is incorporated herein by reference to
Exhibit m(8) of Post-Effective Amendment No. 15.
(9) Distribution and Service Plan pursuant to Rule 12b-1 for Growth
& Income Portfolio: Service Class 2 is incorporated herein by
reference to Exhibit m(9) of Post-Effective Amendment No. 16.
(10) Distribution and Service Plan pursuant to Rule 12b-1 for
Growth Opportunities Portfolio: Service Class 2 is incorporated herein
by reference to Exhibit m(10) of Post-Effective Amendment No. 16.
(11) Distribution and Service Plan pursuant to Rule 12b-1 for
Balanced Portfolio: Service Class 2 is incorporated herein by
reference to Exhibit m(11) of Post-Effective Amendment No. 16.
(12) Distribution and Service Plan pursuant to Rule 12b-1 for Mid
Cap Portfolio: Service Class 2 is incorporated herein by reference to
Exhibit m(12) of Post-Effective Amendment No. 16.
(n) Not applicable.
(o) (1) Multiple Class of Shares Plan for VIP Funds dated December
16, 1999 is incorporated herein by reference to Exhibit o(1) of
Post-Effective Amendment No. 16.
(p) (1) Code of Ethics, dated January 1, 2000, adopted by the funds,
Fidelity Management & Research Company, Fidelity Investments Money
Management, Inc., FMR Co., Inc., Fidelity Management & Research (U.K.)
Inc., Fidelity Management & Research (Far East) Inc., Fidelity
Investments Japan Limited, and Fidelity Distributors Corporation
pursuant to Rule 17j-1 is incorporated herein by reference to Exhibit
p(1) of Fidelity Commonwealth Trust's (File No. 2-52322)
Post-Effective Amendment No. 69.
Item 24. Trusts Controlled by or under Common Control with this Trust
The Board of Trustees of the Trust is the same as the board of other
Fidelity funds, each of which has Fidelity Management & Research
Company, or an affiliate, as its investment adviser. In addition, the
officers of the Trust are substantially identical to those of the
other Fidelity funds. Nonetheless, the Trust takes the position that
it is not under common control with other Fidelity funds because the
power residing in the respective boards and officers arises as the
result of an official position with the respective trusts.
Item 25. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification
shall be provided to any past or present Trustee or officer. It states
that the Trust shall indemnify any present or past trustee or officer
to the fullest extent permitted by law against liability, and all
expenses reasonably incurred by him or her in connection with any
claim, action, suit or proceeding in which he or she is involved by
virtue of his or her service as a trustee or officer and against any
amount incurred in settlement thereof. Indemnification will not be
provided to a person adjudged by a court or other adjudicatory body to
be liable to the Trust or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of his
or her duties (collectively, "disabling conduct"), or not to have
acted in good faith in the reasonable belief that his or her action
was in the best interest of the Trust. In the event of a settlement,
no indemnification may be provided unless there has been a
determination, as specified in the Declaration of Trust, that the
officer or trustee did not engage in disabling conduct.
Pursuant to Section 11 of the Distribution Agreement, the Trust
agrees to indemnify and hold harmless the Distributor and each of its
directors and officers and each person, if any, who controls the
Distributor within the meaning of Section 15 of the 1933 Act against
any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss,
liability, claim, damages, or expense and reasonable counsel fees
incurred in connection therewith) arising by reason of any person
acquiring any shares, based upon the ground that the registration
statement, Prospectus, Statement of Additional Information,
shareholder reports or other information filed or made public by the
Trust (as from time to time amended) included an untrue statement of a
material fact or omitted to state a material fact required to be
stated or necessary in order to make the statements not misleading
under the 1933 Act, or any other statute or the common law. However,
the Trust does not agree to indemnify the Distributor or hold it
harmless to the extent that the statement or omission was made in
reliance upon, and in conformity with, information furnished to the
Trust by or on behalf of the Distributor. In no case is the indemnity
of the Trust in favor of the Distributor or any person indemnified to
be deemed to protect the Distributor or any person against any
liability to the Issuer or its security holders to which the
Distributor or such person would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
Pursuant to the agreement by which Fidelity Investments Institutional
Operations Company, Inc. ("FIIOC") is appointed transfer agent, the
Registrant agrees to indemnify and hold FIIOC harmless against any
losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from:
(1) any claim, demand, action or suit brought by any person other
than the Registrant, including by a shareholder, which names FIIOC
and/or the Registrant as a party and is not based on and does not
result from FIIOC's willful misfeasance, bad faith or negligence or
reckless disregard of duties, and arises out of or in connection with
FIIOC's performance under the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent
contributed to by FIIOC's willful misfeasance, bad faith or negligence
or reckless disregard of duties) which results from the negligence of
the Registrant, or from FIIOC's acting upon any instruction(s)
reasonably believed by it to have been executed or communicated by any
person duly authorized by the Registrant, or as a result of FIIOC's
acting in reliance upon advice reasonably believed by FIIOC to have
been given by counsel for the Registrant, or as a result of FIIOC's
acting in reliance upon any instrument or stock certificate reasonably
believed by it to have been genuine and signed, countersigned or
executed by the proper person.
Item 26. Business and Other Connections of Investment Advisers
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY (FMR)
82 Devonshire Street, Boston, MA 02109
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held,
during the past two fiscal years, the following positions of a
substantial nature.
Edward C. Johnson 3d Chairman of the Board and
Director of FMR; Chief
Executive Officer, Chairman
of the Board, and Director
of FMR Corp., Fidelity
Investments Money
Management, Inc. (FIMM),
Fidelity Management &
Research (U.K.) Inc. (FMR
U.K.), Fidelity Management &
Research (Far East) Inc.
(FMR Far East), and Fidelity
Management & Research Co.,
Inc. (FMRC); Chairman of the
Executive Committee of FMR;
Chairman and Representative
Director of Fidelity
Investments Japan Limited
(FIJ); President and Trustee
of funds advised by FMR.
Robert C. Pozen President and Director of
FMR; Senior Vice President
and Trustee of funds advised
by FMR; President and
Director of FIMM, FMRC, FMR
U.K., and FMR Far East;
Director of Strategic
Advisers, Inc.; Previously,
General Counsel, Managing
Director, and Senior Vice
President of FMR Corp.
Peter S. Lynch Vice Chairman of the Board
and Director of FMR and FMRC.
John Avery Vice President of FMR and of
funds advised by FMR.
Robert Bertelson Vice President of FMR and of
a fund advised by FMR.
John H. Carlson Vice President of FMR and of
funds advised by FMR.
Robert C. Chow Vice President of FMR and of
a fund advised by FMR.
Dwight D. Churchill Senior Vice President of FMR
and Vice President of Bond
Funds advised by FMR; Vice
President of FIMM.
Laura B. Cronin Vice President of FMR and
Treasurer of FMR, FIMM, FMR
U.K., FMRC and FMR Far East.
Barry Coffman Vice President of FMR and of
a fund advised by FMR.
Arieh Coll Vice President of FMR.
Catherine Collins Vice President of FMR.
Frederic G. Corneel Tax Counsel of FMR.
William Danoff Senior Vice President of FMR
and Vice President of funds
advised by FMR.
Scott E. DeSano Vice President of FMR.
Penelope Dobkin Vice President of FMR and of
a fund advised by FMR.
Walter C. Donovan Vice President of FMR.
Bettina Doulton Senior Vice President of FMR
and of funds advised by FMR.
Stephen DuFour Vice President of FMR and of
a fund advised by FMR.
Maria F. Dwyer Vice President of FMR and
Deputy Treasurer of the
Fidelity funds.
Margaret L. Eagle Vice President of FMR and of
a fund advised by FMR.
William R. Ebsworth Vice President of FMR.
David Felman Vice President of FMR and of
a fund advised by FMR.
Richard B. Fentin Senior Vice President of FMR
and Vice President of a fund
advised by FMR.
Karen Firestone Vice President of FMR and of
a fund advised by FMR.
Michael B. Fox Assistant Treasurer of FMR,
FIMM, FMR U.K., and FMR Far
East; Vice President and
Treasurer of FMR Corp. and
Strategic Advisers, Inc.;
Vice President of FMR U.K.,
FMR Far East, and FIMM.
Gregory Fraser Vice President of FMR and of
funds advised by FMR.
Jay Freedman Assistant Clerk of FMR; Clerk
of FMR Corp., FMR U.K., FMR
Far East, FMRC, and
Strategic Advisers, Inc.;
Secretary of FIMM; Vice
President and Deputy General
Counsel of FMR Corp.
David L. Glancy Vice President of FMR and of
funds advised by FMR.
Barry A. Greenfield Vice President of FMR and of
funds advised by FMR.
Boyce I. Greer Senior Vice President of FMR
and Vice President of Money
Market Funds advised by FMR;
Vice President of FIMM.
Bart A. Grenier Senior Vice President of FMR
and Vice President of
High-Income Funds advised by
FMR.
Robert J. Haber Vice President of FMR.
Richard C. Habermann Senior Vice President of FMR
and Vice President of funds
advised by FMR.
Fred L. Henning Jr. Senior Vice President of FMR;
Senior Vice President of
FIMM; Vice President of
Fixed-Income Funds advised
by FMR.
Bruce T. Herring Vice President of FMR.
Robert F. Hill Vice President of FMR and
Director of Technical
Research.
Frederick Hoff Vice President of FMR.
Abigail P. Johnson Senior Vice President of FMR
and Vice President of funds
advised by FMR; Director of
FMR Corp.; Associate
Director and Senior Vice
President of Equity Funds
advised by FMR.
David B. Jones Vice President of FMR.
Steven Kaye Senior Vice President of FMR
and of a fund advised by FMR.
Francis V. Knox Vice President of FMR;
Compliance Officer of FMR
U.K. and FMR Far East.
Harris Leviton Vice President of FMR and of
a fund advised by FMR.
Bradford E. Lewis Vice President of FMR and of
funds advised by FMR.
Richard R. Mace Jr. Vice President of FMR and of
funds advised by FMR.
Shigeki Makino Vice President of FMR.
Charles A. Mangum Vice President of FMR and of
funds advised by FMR.
Kevin McCarey Vice President of FMR and of
funds advised by FMR.
James McDowell Senior Vice President of FMR.
Neal P. Miller Vice President of FMR and of
a fund advised by FMR.
Jacques Perold Vice President of FMR.
Stephen Petersen Senior Vice President of FMR
and Vice President of funds
advised by FMR.
Alan Radlo Vice President of FMR.
Eric D. Roiter Vice President, General
Counsel, and Clerk of FMR
and Secretary of funds
advised by FMR.
Lee H. Sandwen Vice President of FMR.
Patricia A. Satterthwaite Vice President of FMR and of
funds advised by FMR.
Fergus Shiel Vice President of FMR and of
funds advised by FMR.
Richard A. Silver Vice President of FMR.
Carol A. Smith-Fachetti Vice President of FMR.
Steven J. Snider Vice President of FMR and of
funds advised by FMR.
Thomas T. Soviero Vice President of FMR and of
a fund advised by FMR.
Richard Spillane Senior Vice President of FMR;
Associate Director and
Senior Vice President of
Equity Funds advised by FMR;
Previously, Senior Vice
President and Director of
Operations and Compliance of
FMR U.K.
Thomas M. Sprague Vice President of FMR and of
a fund advised by FMR.
Robert E. Stansky Senior Vice President of FMR
and Vice President of a fund
advised by FMR.
Scott D. Stewart Vice President of FMR and of
funds advised by FMR.
Beth F. Terrana Senior Vice President of FMR
and Vice President of funds
advised by FMR.
Yoko Tilley Vice President of FMR.
Joel C. Tillinghast Vice President of FMR and of
a fund advised by FMR.
Robert Tuckett Vice President of FMR.
Jennifer Uhrig Vice President of FMR and of
funds advised by FMR.
George A. Vanderheiden Senior Vice President of FMR
and Director of FMR Corp.
Jason Weiner Vice President of FMR and of
a fund advised by FMR.
Steven S. Wymer Vice President of FMR and of
a fund advised by FMR.
(2) FMR CO., INC. (FMRC)
82 Devonshire Street, Boston, MA 02109
FMRC provides investment advisory services to Fidelity Management &
Research Company. The directors and officers of the Sub-Adviser have
held the following positions of a substantial nature during the past
two fiscal years.
Edward C. Johnson 3d Chairman of the Board and
Director of FMRC, FMR U.K.,
FMR, FMR Corp., FIMM, and
FMR Far East; President and
Chief Executive Officer of
FMR Corp.; Chairman of the
Executive Committee of FMR;
Chairman and Representative
Director of Fidelity
Investments Japan Limited
(FIJ); President and Trustee
of funds advised by FMR.
Robert C. Pozen Senior Vice President and
Trustee of funds advised by
FMR; President and Director
of FMRC, FIMM, FMR, FMR
U.K., and FMR Far East;
Director of Strategic
Advisers, Inc.; Previously,
General Counsel, Managing
Director, and Senior Vice
President of FMR Corp.
Peter S. Lynch Vice Chairman of the Board
and Director of FMR and FMRC.
Brian Clancy Vice President.
Laura B. Cronin Treasurer of FMRC, FMR U.K.,
FMR Far East, FMR, and FIMM
and Vice President of FMR.
Jay Freedman Assistant Clerk of FMR; Clerk
of FMR Corp., FMR U.K., FMR
Far East, FMRC, and
Strategic Advisers, Inc.;
Secretary of FIMM; Vice
President and Deputy General
Counsel of FMR Corp.
(3) FIDELITY MANAGEMENT & RESEARCH (U.K.) INC. (FMR U.K.)
25 Lovat Lane, London, EC3R 8LL, England
FMR U.K. provides investment advisory services to Fidelity Management
& Research Company and Fidelity Management Trust Company. The
directors and officers of the Sub-Adviser have held the following
positions of a substantial nature during the past two fiscal years.
Edward C. Johnson 3d Chairman of the Board and
Director of FMR U.K., FMRC,
FMR, FMR Corp., FIMM, and
FMR Far East; President and
Chief Executive Officer of
FMR Corp.; Chairman of the
Executive Committee of FMR;
Chairman and Representative
Director of Fidelity
Investments Japan Limited
(FIJ); President and Trustee
of funds advised by FMR.
Robert C. Pozen President and Director of FMR
U.K.; Senior Vice President
and Trustee of funds advised
by FMR; President and
Director of FIMM, FMR, FMRC,
and FMR Far East; Director
of Strategic Advisers, Inc.;
Previously, General Counsel,
Managing Director, and
Senior Vice President of FMR
Corp.
Laura B. Cronin Treasurer of FMR U.K., FMR
Far East, FMR, and FIMM and
Vice President of FMR.
Michael B. Fox Assistant Treasurer of FMR
U.K., FMR, FMR Far East,
FMRC, and FIMM; Vice
President of FMR U.K., FMR
Far East, and FIMM; Vice
President and Treasurer of
FMR Corp. and Strategic
Advisers, Inc.
Simon Fraser Senior Vice President of FMR
U.K. and Director and
President of FIIA.
Jay Freedman Clerk of FMR U.K., FMR Far
East, FMR Corp., FMRC, and
Strategic Advisers, Inc.;
Assistant Clerk of FMR;
Secretary of FIMM; Vice
President and Deputy General
Counsel of FMR Corp.
Susan Englander Hislop Assistant Clerk of FMR U.K.,
FMR Far East, and Strategic
Advisers, Inc.; Assistant
Secretary of FIMM.
Francis V. Knox Compliance Officer of FMR
U.K. and FMR Far East; Vice
President of FMR.
(4) FIDELITY MANAGEMENT & RESEARCH (Far East) INC. (FMR Far East)
Shiroyama JT Mori Bldg., 4-3-1 Toranomon Minato-ku, Tokyo 105,
Japan
FMR Far East provides investment advisory services to Fidelity
Management & Research Company and Fidelity Management Trust Company.
The directors and officers of the Sub-Adviser have held the following
positions of a substantial nature during the past two fiscal years.
Edward C. Johnson 3d Chairman of the Board and
Director of FMR Far East,
FMR, FMR Corp., FMRC, FIMM,
and FMR U.K.; Chairman of
the Executive Committee of
FMR; President and Chief
Executive Officer of FMR
Corp.; Chairman and
Representative Director of
Fidelity Investments Japan
Limited (FIJ); President and
Trustee of funds advised by
FMR.
Robert C. Pozen President and Director of FMR
Far East; Senior Vice
President and Trustee of
funds advised by FMR;
President and Director of
FIMM, FMR U.K., FMRC, and
FMR; Director of Strategic
Advisers, Inc.; Previously,
General Counsel, Managing
Director, and Senior Vice
President of FMR Corp.
Robert H. Auld Senior Vice President of FMR
Far East.
Laura B. Cronin Treasurer of FMR Far East,
FMR U.K., FMR, FMRC, and
FIMM and Vice President of
FMR.
Michael B. Fox Assistant Treasurer of FMR
Far East, FMR, FMR U.K., and
FIMM; Vice President of FMR
Far East and FMR U.K.; Vice
President and Treasurer of
FMR Corp. and Strategic
Advisers, Inc.
Francis V. Knox Compliance Officer of FMR Far
East and FMR U.K.; Vice
President of FMR.
Jay Freedman Clerk of FMR Far East, FMR
U.K., FMR Corp., FMRC, and
Strategic Advisers, Inc.;
Assistant Clerk of FMR;
Secretary of FIMM; Vice
President and Deputy General
Counsel of FMR Corp.
Susan Englander Hislop Assistant Clerk of FMR Far
East, FMR U.K., and
Strategic Advisers, Inc.;
Assistant Secretary of FIMM.
Billy Wilder Vice President of FMR Far
East; President and
Representative Director of
FIJ.
(5) FIDELITY INVESTMENTS MONEY MANAGEMENT, INC. (FIMM)
1 Spartan Way, Merrimack, NH 03054
FIMM provides investment advisory services to Fidelity Management &
Research Company. The directors and officers of the Sub-Adviser have
held the following positions of a substantial nature during the past
two fiscal years.
Edward C. Johnson 3d Chairman of the Board and
Director of FIMM, FMR, FMR
Corp., FMR Far East, FMRC,
and FMR U.K.; Chairman of
the Executive Committee of
FMR; President and Chief
Executive Officer of FMR
Corp.; Chairman and
Representative Director of
Fidelity Investments Japan
Limited (FIJ); President and
Trustee of funds advised by
FMR.
Robert C. Pozen President and Director of
FIMM; Senior Vice President
and Trustee of funds advised
by FMR; President and
Director of FMR, FMR U.K.,
FMRC, and FMR Far East;
Director of Strategic
Advisers, Inc.; Previously,
General Counsel, Managing
Director, and Senior Vice
President of FMR Corp.
Fred L. Henning Jr. Senior Vice President of
FIMM; Senior Vice President
of FMR and Vice President of
Fixed-Income Funds advised
by FMR.
Boyce I. Greer Vice President of FIMM;
Senior Vice President of FMR
and Vice President of Money
Market Funds advised by FMR.
Dwight D. Churchill Vice President of FIMM;
Senior Vice President of FMR
and Vice President of Bond
Funds advised by FMR.
Laura B. Cronin Treasurer of FIMM, FMR Far
East, FMR U.K., FMRC, and
FMR and Vice President of FMR.
Michael B. Fox Assistant Treasurer of FIMM,
FMR U.K., FMR Far East, and
FMR; Vice President and
Treasurer of FMR Corp. and
Strategic Advisers, Inc.;
Vice President of FIMM, FMR
U.K., and FMR Far East.
Jay Freedman Secretary of FIMM; Clerk of
FMR U.K., FMR Far East, FMR
Corp., FMRC, and Strategic
Advisers, Inc.; Assistant
Clerk of FMR; Vice President
and Deputy General Counsel
of FMR Corp.
Susan Englander Hislop Assistant Secretary of FIMM;
Assistant Clerk of FMR U.K.,
FMR Far East, and Strategic
Advisers, Inc.
Stanley N. Griffith Assistant Secretary of FIMM.
(6) FIDELITY INVESTMENTS JAPAN LIMITED (FIJ)
Shiroyama JT Mori Bldg., 4-3-1 Toranomon Minato-ku, Tokyo 105,
Japan
The directors and officers of FIJ have held, during the past two
fiscal years, the following positions of a substantial nature.
Edward C. Johnson 3d Chairman and Representative
Director of FIJ; Chairman of
the Board and Director of
FMR Far East, FMR, FMR
Corp., FMR U.K., FMRC, and
FIMM; Chairman of the
Executive Committee of FMR;
President and Chief
Executive Officer of FMR
Corp.; President and Trustee
of funds advised by FMR.
Yasuo Kuramoto Vice Chairman and
Representative Director of
FIJ.
Billy Wilder President and Representative
Director of FIJ; Vice
President of FMR Far East.
Noboru Kawai Director and General Manager
of Administration of FIJ.
Tetsuzo Nishimura Director and Vice President
of Wholesales/ Broker
Distribution of FIJ.
Hiroshi Yamashita Senior Managing Director of
FIJ.
Yasushi Murofushi Statutory Auditor of FIJ.
Takeshi Okazaki Director and Head of
Institutional Sales of FIJ.
Simon Haslam Director of FIJ; Director and
Chief Financial Officer of
FIIA, FISL (U.K.), and FII;
Director and Secretary of
FIIA(U.K.)L; Previously,
Chief Financial Officer of
FIL; Company Secretary of
Fidelity Investments Group
of Companies (U.K.).
Item 27. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for
all funds advised by FMR or an affiliate.
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Fund
Edward L. McCartney Director and President None
J. Gary Burkhead Director None
Paul J. Gallagher Director None
Kevin J. Kelly Director None
Daniel T. Geraci Executive Vice President None
Eric D. Roiter Vice President and Clerk Secretary
Jane Greene Treasurer and Controller None
Gary Greenstein Assistant Treasurer None
Jay Freedman Assistant Clerk None
Linda Capps Holland Compliance Officer None
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 28. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company, Fidelity Service
Company, Inc. or Fidelity Investments Institutional Operations
Company, Inc., 82 Devonshire Street, Boston, MA 02109, or the funds'
respective custodians: The Chase Manhattan Bank, 1 Chase Manhattan
Plaza, New York, NY; and Brown Brothers Harriman & Co., 40 Water
Street, Boston, MA.
Item 29. Management Services
Not applicable.
Item 30. Undertakings
The Registrant undertakes for Variable Insurance Products Fund III:
Mid Cap Portfolio: (1) to call a meeting of shareholders for the
purpose of voting upon the questions of removal of a trustee or
trustees, when requested to do so by record holders of not less than
10% of its outstanding shares; and (2) to assist in communications
with other shareholders pursuant to Section 16(c)(1) and (2), whenever
shareholders meeting the qualifications set forth in Section 16(c)
seek the opportunity to communicate with other shareholders with a
view toward requesting a meeting.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for the effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and
has duly caused this Post-Effective Amendment No. 17 to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston, and Commonwealth of
Massachusetts, on the 26th day of April 2000.
Variable Insurance Products Fund III
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons
in the capacities and on the dates indicated.
(Signature) (Title) (Date)
/s/Edward C. Johnson 3d(dagger) President and Trustee April 26, 2000
Edward C. Johnson 3d (Principal Executive Officer)
/s/Robert A. Dwight Treasurer April 26, 2000
Robert A. Dwight
/s/Robert C. Pozen Trustee April 26, 2000
Robert C. Pozen
/s/Ralph F. Cox* Trustee April 26, 2000
Ralph F. Cox
/s/Phyllis Burke Davis* Trustee April 26, 2000
Phyllis Burke Davis
/s/Robert M. Gates* Trustee April 26, 2000
Robert M. Gates
/s/Donald J. Kirk* Trustee April 26, 2000
Donald J. Kirk
/s/Ned C. Lautenbach* Trustee April 26, 2000
Ned C. Lautenbach
/s/Peter S. Lynch* Trustee April 26, 2000
Peter S. Lynch
/s/Marvin L. Mann* Trustee April 26, 2000
Marvin L. Mann
/s/William O. McCoy* Trustee April 26, 2000
William O. McCoy
/s/Gerald C. McDonough* Trustee April 26, 2000
Gerald C. McDonough
/s/Thomas R. Williams* Trustee April 26, 2000
Thomas R. Williams
(dagger) Signatures affixed by Robert C. Pozen pursuant to a power of
attorney dated July 17, 1997 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of
attorney dated December 16, 1999 and filed herewith.
POWER OF ATTORNEY
We, the undersigned Directors, Trustees, or General Partners, as the
case may be, of the following investment companies:
Colchester Street Trust Fidelity Hastings Street Trust
Fidelity Aberdeen Street Trust Fidelity Hereford Street Trust
Fidelity Advisor Series I Fidelity Income Fund
Fidelity Advisor Series II Fidelity Institutional
Fidelity Advisor Series III Tax-Exempt Cash Portfolios
Fidelity Advisor Series IV Fidelity Investment Trust
Fidelity Advisor Series V Fidelity Magellan Fund
Fidelity Advisor Series VI Fidelity Massachusetts
Fidelity Advisor Series VII Municipal Trust
Fidelity Advisor Series VIII Fidelity Money Market Trust
Fidelity Beacon Street Trust Fidelity Mt. Vernon Street
Fidelity Boston Street Trust Trust
Fidelity California Municipal Fidelity Municipal Trust
Trust Fidelity Municipal Trust II
Fidelity California Municipal Fidelity New York Municipal
Trust II Trust
Fidelity Capital Trust Fidelity New York Municipal
Fidelity Charles Street Trust Trust II
Fidelity Commonwealth Trust Fidelity Oxford Street Trust
Fidelity Concord Street Trust Fidelity Phillips Street Trust
Fidelity Congress Street Fund Fidelity Puritan Trust
Fidelity Contrafund Fidelity Revere Street Trust
Fidelity Court Street Trust Fidelity School Street Trust
Fidelity Court Street Trust II Fidelity Securities Fund
Fidelity Covington Trust Fidelity Select Portfolios
Fidelity Destiny Portfolios Fidelity Summer Street Trust
Fidelity Devonshire Trust Fidelity Trend Fund
Fidelity Exchange Fund Fidelity U.S.
Fidelity Financial Trust Investments-Bond Fund, L.P.
Fidelity Fixed-Income Trust Fidelity U.S.
Fidelity Government Investments-Government
Securities Fund Securities
Fund, L.P.
Fidelity Union Street Trust
Fidelity Union Street Trust II
Newbury Street Trust
Variable Insurance Products
Fund
Variable Insurance Products
Fund II
plus any other investment company for which Fidelity Management &
Research Company or an affiliate acts as investment adviser and for
which the undersigned individual serves as Directors, Trustees, or
General Partners (collectively, the "Funds"), hereby constitute and
appoint Arthur J. Brown, Arthur C. Delibert, Stephanie A. Djinis,
Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, and Dana L.
Platt, each of them singly, our true and lawful attorneys-in-fact,
with full power of substitution, and with full power to each of them,
to sign for us and in our names in the appropriate capacities, all
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A or any successor thereto, any Registration
Statements on Form N-14, and any supplements or other instruments in
connection therewith, and generally to do all such things in our names
and behalf in connection therewith as said attorneys-in-fact deems
necessary or appropriate, to comply with the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940, and all
related requirements of the Securities and Exchange Commission. I
hereby ratify and confirm all that said attorneys-in-fact or their
substitutes may do or cause to be done by virtue hereof. This power
of attorney is effective for all documents filed on or after January
1, 2000.
WITNESS our hands on this sixteenth day of December, 1999.
/s/Edward C. Johnson 3d /s/Peter S. Lynch
Edward C. Johnson 3d Peter S. Lynch
/s/Ralph F. Cox /s/William O. McCoy
Ralph F. Cox William O. McCoy
/s/Phyllis Burke Davis /s/Gerald C. McDonough
Phyllis Burke Davis Gerald C. McDonough
/s/Ned C. Lautenbach /s/Marvin L. Mann
Ned C. Lautenbach Marvin L. Mann
/s/Donald J. Kirk /s/Thomas R. Williams
Donald J. Kirk Thomas R. Williams
/s/Robert C. Pozen /s/Robert M. Gates
Robert C. Pozen Robert M. Gates
POWER OF ATTORNEY
I, the undersigned President and Director, Trustee, or General
Partner, as the case may be, of the following investment companies:
Fidelity Aberdeen Street Trust Fidelity Hereford Street Trust
Fidelity Advisor Series I Fidelity Income Fund
Fidelity Advisor Series II Fidelity Institutional Cash
Fidelity Advisor Series III Portfolios
Fidelity Advisor Series IV Fidelity Institutional
Fidelity Advisor Series V Tax-Exempt Cash Portfolios
Fidelity Advisor Series VI Fidelity Investment Trust
Fidelity Advisor Series VII Fidelity Magellan Fund
Fidelity Advisor Series VIII Fidelity Massachusetts
Fidelity Beacon Street Trust Municipal Trust
Fidelity Boston Street Trust Fidelity Money Market Trust
Fidelity California Municipal Fidelity Mt. Vernon Street
Trust Trust
Fidelity California Municipal Fidelity Municipal Trust
Trust II Fidelity Municipal Trust II
Fidelity Capital Trust Fidelity New York Municipal
Fidelity Charles Street Trust Trust
Fidelity Commonwealth Trust Fidelity New York Municipal
Fidelity Concord Street Trust Trust II
Fidelity Congress Street Fund Fidelity Phillips Street Trust
Fidelity Contrafund Fidelity Puritan Trust
Fidelity Corporate Trust Fidelity Revere Street Trust
Fidelity Court Street Trust Fidelity School Street Trust
Fidelity Court Street Trust II Fidelity Securities Fund
Fidelity Covington Trust Fidelity Select Portfolios
Fidelity Daily Money Fund Fidelity Sterling Performance
Fidelity Destiny Portfolios Portfolio, L.P.
Fidelity Deutsche Mark Fidelity Summer Street Trust
Performance Fidelity Trend Fund
Portfolio, L.P. Fidelity U.S.
Fidelity Devonshire Trust Investments-Bond Fund, L.P.
Fidelity Exchange Fund Fidelity U.S.
Fidelity Financial Trust Investments-Government
Fidelity Fixed-Income Trust Securities
Fidelity Government Fund, L.P.
Securities Fund Fidelity Union Street Trust
Fidelity Hastings Street Trust Fidelity Union Street Trust II
Fidelity Yen Performance
Portfolio, L.P.
Newbury Street Trust
Variable Insurance Products
Fund
Variable Insurance Products
Fund II
Variable Insurance Products
Fund III
in addition to any other investment company for which Fidelity
Management & Research Company or an affiliate acts as investment
adviser and for which the undersigned individual serves as President
and Director, Trustee, or General Partner (collectively, the "Funds"),
hereby constitute and appoint Robert C. Pozen my true and lawful
attorney-in-fact, with full power of substitution, and with full power
to him to sign for me and in my name in the appropriate capacity, all
Registration Statements of the Funds on Form N-1A, Form N-8A, or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A, Form N-8A, or any successor thereto, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such
things in my name and on my behalf in connection therewith as said
attorney-in-fact deems necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and the Investment Company
Act of 1940, and all related requirements of the Securities and
Exchange Commission. I hereby ratify and confirm all that said
attorney-in-fact or his substitutes may do or cause to be done by
virtue hereof. This power of attorney is effective for all documents
filed on or after August 1, 1997.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d July 17, 1997
Edward C. Johnson 3d
Exhibit d(14)
FORM OF
SUB-ADVISORY AGREEMENT
between
FMR CO., INC. and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this __ day of _____, 200_, by and between FMR Co.,
Inc., a Massachusetts corporation with principal offices at 82
Devonshire Street, Boston, Massachusetts (hereinafter called the
``Sub-Adviser") and Fidelity Management & Research Company, a
Massachusetts corporation with principal offices at 82 Devonshire
Street, Boston, Massachusetts (hereinafter called the ``Adviser").
WHEREAS the Adviser has entered into a Management Contract with
Variable Insurance Products Fund III, a Massachusetts business trust
which may issue one or more series of shares of beneficial interest
(hereinafter called the ``Fund"), on behalf of Growth Opportunities
Portfolio (hereinafter called the ``Portfolio"), pursuant to which the
Adviser is to act as investment manager and adviser to the Portfolio,
and
WHEREAS the Sub-Adviser was formed for the purpose of providing
investment management of equity and high income funds and advising
generally with respect to equity and high income instruments.
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the Adviser and the Sub-Adviser agree
as follows:
1. (a) The Sub-Adviser shall, subject to the supervision of the
Adviser, direct the investments of all or such portion of the
Portfolio's assets as the Adviser shall designate in accordance with
the investment objective, policies and limitations as provided in the
Portfolio's Prospectus or other governing instruments, as amended from
time to time, the Investment Company Act of 1940 and rules thereunder,
as amended from time to time (the ``1940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser or Sub-Adviser. The Sub-Adviser shall also furnish for the
use of the Portfolio office space and all necessary office facilities,
equipment and personnel for servicing the investments of the
Portfolio; and shall pay the salaries and fees of all personnel of the
Sub-Adviser performing services for the Portfolio relating to
research, statistical and investment activities. The Sub-Adviser is
authorized, in its discretion and without prior consultation with the
Portfolio or the Adviser, to buy, sell, lend and otherwise trade in
any stocks, bonds and other securities and investment instruments on
behalf of the Portfolio. The investment policies and all other
actions of the Portfolio are and shall at all times be subject to the
control and direction of the Fund's Board of Trustees.
(b) The Sub-Adviser shall also furnish such reports, evaluations,
information or analyses to the Fund and the Adviser as the Fund's
Board of Trustees or the Adviser may request from time to time or as
the Sub-Adviser may deem to be desirable. The Sub-Adviser shall make
recommendations to the Fund's Board of Trustees with respect to
Portfolio policies, and shall carry out such policies as are adopted
by the Trustees. The Sub-Adviser shall, subject to review by the
Board of Trustees, furnish such other services as the Sub-Adviser
shall from time to time determine to be necessary or useful to perform
its obligations under this Agreement and which are not otherwise
furnished by the Adviser.
(c) The Sub-Adviser shall place all orders for the purchase and sale
of portfolio securities for the Portfolio's account with brokers or
dealers selected by the Sub-Adviser, which may include brokers or
dealers affiliated with the Adviser or Sub-Adviser. The Sub-Adviser
shall use its best efforts to seek to execute portfolio transactions
at prices which are advantageous to the Portfolio and at commission
rates which are reasonable in relation to the benefits received. In
selecting brokers or dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of l934) to the Portfolio and/or
the other accounts over which the Sub-Adviser, Adviser or their
affiliates exercise investment discretion. The Sub-Adviser is
authorized to pay a broker or dealer who provides such brokerage and
research services a commission for executing a portfolio transaction
for the Portfolio which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction if the Sub-Adviser determines in good faith that such
amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer.
This determination may be viewed in terms of either that particular
transaction or the overall responsibilities which the Sub-Adviser and
its affiliates have with respect to accounts over which they exercise
investment discretion. The Trustees of the Fund shall periodically
review the commissions paid by the Portfolio to determine if the
commissions paid over representative periods of time were reasonable
in relation to the benefits to the Portfolio.
2. As compensation for the services to be furnished by the
Sub-Adviser hereunder, the Adviser agrees to pay the Sub-Adviser a
monthly fee equal to 50% of the management fee (including performance
adjustments, if any) that the Portfolio is obligated to pay the
Adviser under the Portfolio's Management Contract with the Adviser in
respect of that portion of the Portfolio's assets managed by the
Sub-Adviser during such month. Such fee shall not be reduced to
reflect expense reimbursements or fee waivers by the Adviser, if any,
in effect from time to time.
3. It is understood that Trustees, officers, and shareholders of the
Fund are or may be or become interested in the Adviser or the
Sub-Adviser as directors, officers or otherwise and that directors,
officers and stockholders of the Adviser or the Sub-Adviser are or may
be or become similarly interested in the Fund, and that the Adviser or
the Sub-Adviser may be or become interested in the Fund as a
shareholder or otherwise.
4. It is understood that the Portfolio will pay all its expenses
other than those expressly stated to be payable by the Sub-Adviser
hereunder or by the Adviser under the Management Contract with the
Portfolio, which expenses payable by the Portfolio shall include,
without limitation, (i) interest and taxes; (ii) brokerage commissions
and other costs in connection with the purchase or sale of securities
and other investment instruments; (iii) fees and expenses of the
Fund's Trustees other than those who are ``interested persons" of the
Fund, the Sub-Adviser or the Adviser; (iv) legal and audit expenses;
(v) custodian, registrar and transfer agent fees and expenses; (vi)
fees and expenses related to the registration and qualification of the
Fund and the Portfolio's shares for distribution under state and
federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders of the
Portfolio; (viii) all other expenses incidental to holding meetings of
the Portfolio's shareholders, including proxy solicitations therefor;
(ix) a pro rata share, based on relative net assets of the Portfolio
and other registered investment companies having Advisory and Service
or Management Contracts with the Adviser, of 50% of insurance premiums
for fidelity and other coverage; (x) its proportionate share of
association membership dues; (xi) expenses of typesetting for printing
Prospectuses and Statements of Additional Information and supplements
thereto; (xii) expenses of printing and mailing Prospectuses and
Statements of Additional Information and supplements thereto sent to
existing shareholders; and (xiii) such non-recurring or extraordinary
expenses as may arise, including those relating to actions, suits or
proceedings to which the Portfolio is a party and the legal obligation
which the Portfolio may have to indemnify the Fund's Trustees and
officers with respect thereto.
5. The Services of the Sub-Adviser to the Adviser are not to be
deemed to be exclusive, the Sub-Adviser being free to render services
to others and engage in other activities, provided, however, that such
other services and activities do not, during the term of this
Agreement, interfere, in a material manner, with the Sub-Adviser's
ability to meet all of its obligations with respect to rendering
investment advice hereunder. The Sub-Adviser shall for all purposes
be an independent contractor and not an agent or employee of the
Adviser or the Fund.
6. In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties hereunder on the part
of the Sub-Adviser, the Sub-Adviser shall not be subject to liability
to the Advisor, the Trust or to any shareholder of the Portfolio for
any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security.
7. (a) Subject to prior termination as provided in sub-paragraph (d)
of this paragraph 7, this Agreement shall continue in force until July
__, 200_, and indefinitely thereafter, but only so long as the
continuance after such period shall be specifically approved at least
annually by vote of the Fund's Board of Trustees or by vote of a
majority of the outstanding voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent subject to the
provisions of Section 15 of the 1940 Act, as modified by or
interpreted by any applicable order or orders of the Securities and
Exchange Commission (the "Commission") or any rules or regulations
adopted by, or interpretive releases of, the Commission.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of
this paragraph 7, the terms of any continuance or modification of the
Agreement must have been approved by the vote of a majority of those
Trustees of the Fund who are not parties to such Agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
(d) Either the Adviser, the Sub-Adviser or the Portfolio may, at any
time on sixty (60) days' prior written notice to the other parties,
terminate this Agreement, without payment of any penalty, by action of
its Board of Trustees or Directors, or by vote of a majority of its
outstanding voting securities. This Agreement shall terminate
automatically upon the termination of the Management Contract between
the Fund, on behalf of the Portfolio, and the Adviser. This Agreement
shall terminate automatically in the event of its assignment.
8. The Sub-Adviser is hereby expressly put on notice of the
limitation of shareholder liability as set forth in the Declaration of
Trust or other organizational document of the Fund and agrees that any
obligations of the Fund or the Portfolio arising in connection with
this Agreement shall be limited in all cases to the Portfolio and its
assets, and the Sub-Adviser shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Portfolio.
Nor shall the Sub-Adviser seek satisfaction of any such obligation
from the Trustees or any individual Trustee.
9. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT GIVING
EFFECT TO THE CHOICE OF LAWS PROVISIONS THEREOF.
The terms ``registered investment company," ``vote of a majority of
the outstanding voting securities," ``assignment," and ``interested
persons," when used herein, shall have the respective meanings
specified in the Investment Company Act of 1940 as now in effect or as
hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to
be signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.
[SIGNATURE LINES OMITTED]
Exhibit d(15)
FORM OF
SUB-ADVISORY AGREEMENT
between
FMR CO., INC. and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this __ day of _____, 200_, by and between FMR Co.,
Inc., a Massachusetts corporation with principal offices at 82
Devonshire Street, Boston, Massachusetts (hereinafter called the
``Sub-Adviser") and Fidelity Management & Research Company, a
Massachusetts corporation with principal offices at 82 Devonshire
Street, Boston, Massachusetts (hereinafter called the ``Adviser").
WHEREAS the Adviser has entered into a Management Contract with
Variable Insurance Products Fund III, a Massachusetts business trust
which may issue one or more series of shares of beneficial interest
(hereinafter called the ``Fund"), on behalf of Balanced Portfolio
(hereinafter called the ``Portfolio"), pursuant to which the Adviser
is to act as investment manager and adviser to the Portfolio, and
WHEREAS the Sub-Adviser was formed for the purpose of providing
investment management of equity and high income funds and advising
generally with respect to equity and high income instruments.
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the Adviser and the Sub-Adviser agree
as follows:
1. (a) The Sub-Adviser shall, subject to the supervision of the
Adviser, direct the investments of all or such portion of the
Portfolio's assets as the Adviser shall designate in accordance with
the investment objective, policies and limitations as provided in the
Portfolio's Prospectus or other governing instruments, as amended from
time to time, the Investment Company Act of 1940 and rules thereunder,
as amended from time to time (the ``1940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser or Sub-Adviser. The Sub-Adviser shall also furnish for the
use of the Portfolio office space and all necessary office facilities,
equipment and personnel for servicing the investments of the
Portfolio; and shall pay the salaries and fees of all personnel of the
Sub-Adviser performing services for the Portfolio relating to
research, statistical and investment activities. The Sub-Adviser is
authorized, in its discretion and without prior consultation with the
Portfolio or the Adviser, to buy, sell, lend and otherwise trade in
any stocks, bonds and other securities and investment instruments on
behalf of the Portfolio. The investment policies and all other
actions of the Portfolio are and shall at all times be subject to the
control and direction of the Fund's Board of Trustees.
(b) The Sub-Adviser shall also furnish such reports, evaluations,
information or analyses to the Fund and the Adviser as the Fund's
Board of Trustees or the Adviser may request from time to time or as
the Sub-Adviser may deem to be desirable. The Sub-Adviser shall make
recommendations to the Fund's Board of Trustees with respect to
Portfolio policies, and shall carry out such policies as are adopted
by the Trustees. The Sub-Adviser shall, subject to review by the
Board of Trustees, furnish such other services as the Sub-Adviser
shall from time to time determine to be necessary or useful to perform
its obligations under this Agreement and which are not otherwise
furnished by the Adviser.
(c) The Sub-Adviser shall place all orders for the purchase and sale
of portfolio securities for the Portfolio's account with brokers or
dealers selected by the Sub-Adviser, which may include brokers or
dealers affiliated with the Adviser or Sub-Adviser. The Sub-Adviser
shall use its best efforts to seek to execute portfolio transactions
at prices which are advantageous to the Portfolio and at commission
rates which are reasonable in relation to the benefits received. In
selecting brokers or dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of l934) to the Portfolio and/or
the other accounts over which the Sub-Adviser, Adviser or their
affiliates exercise investment discretion. The Sub-Adviser is
authorized to pay a broker or dealer who provides such brokerage and
research services a commission for executing a portfolio transaction
for the Portfolio which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction if the Sub-Adviser determines in good faith that such
amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer.
This determination may be viewed in terms of either that particular
transaction or the overall responsibilities which the Sub-Adviser and
its affiliates have with respect to accounts over which they exercise
investment discretion. The Trustees of the Fund shall periodically
review the commissions paid by the Portfolio to determine if the
commissions paid over representative periods of time were reasonable
in relation to the benefits to the Portfolio.
2. As compensation for the services to be furnished by the
Sub-Adviser hereunder, the Adviser agrees to pay the Sub-Adviser a
monthly fee equal to 50% of the management fee (including performance
adjustments, if any) that the Portfolio is obligated to pay the
Adviser under the Portfolio's Management Contract with the Adviser in
respect of that portion of the Portfolio's assets managed by the
Sub-Adviser during such month. Such fee shall not be reduced to
reflect expense reimbursements or fee waivers by the Adviser, if any,
in effect from time to time.
3. It is understood that Trustees, officers, and shareholders of the
Fund are or may be or become interested in the Adviser or the
Sub-Adviser as directors, officers or otherwise and that directors,
officers and stockholders of the Adviser or the Sub-Adviser are or may
be or become similarly interested in the Fund, and that the Adviser or
the Sub-Adviser may be or become interested in the Fund as a
shareholder or otherwise.
4. It is understood that the Portfolio will pay all its expenses
other than those expressly stated to be payable by the Sub-Adviser
hereunder or by the Adviser under the Management Contract with the
Portfolio, which expenses payable by the Portfolio shall include,
without limitation, (i) interest and taxes; (ii) brokerage commissions
and other costs in connection with the purchase or sale of securities
and other investment instruments; (iii) fees and expenses of the
Fund's Trustees other than those who are ``interested persons" of the
Fund, the Sub-Adviser or the Adviser; (iv) legal and audit expenses;
(v) custodian, registrar and transfer agent fees and expenses; (vi)
fees and expenses related to the registration and qualification of the
Fund and the Portfolio's shares for distribution under state and
federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders of the
Portfolio; (viii) all other expenses incidental to holding meetings of
the Portfolio's shareholders, including proxy solicitations therefor;
(ix) a pro rata share, based on relative net assets of the Portfolio
and other registered investment companies having Advisory and Service
or Management Contracts with the Adviser, of 50% of insurance premiums
for fidelity and other coverage; (x) its proportionate share of
association membership dues; (xi) expenses of typesetting for printing
Prospectuses and Statements of Additional Information and supplements
thereto; (xii) expenses of printing and mailing Prospectuses and
Statements of Additional Information and supplements thereto sent to
existing shareholders; and (xiii) such non-recurring or extraordinary
expenses as may arise, including those relating to actions, suits or
proceedings to which the Portfolio is a party and the legal obligation
which the Portfolio may have to indemnify the Fund's Trustees and
officers with respect thereto.
5. The Services of the Sub-Adviser to the Adviser are not to be
deemed to be exclusive, the Sub-Adviser being free to render services
to others and engage in other activities, provided, however, that such
other services and activities do not, during the term of this
Agreement, interfere, in a material manner, with the Sub-Adviser's
ability to meet all of its obligations with respect to rendering
investment advice hereunder. The Sub-Adviser shall for all purposes
be an independent contractor and not an agent or employee of the
Adviser or the Fund.
6. In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties hereunder on the part
of the Sub-Adviser, the Sub-Adviser shall not be subject to liability
to the Advisor, the Trust or to any shareholder of the Portfolio for
any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security.
7. (a) Subject to prior termination as provided in sub-paragraph (d)
of this paragraph 7, this Agreement shall continue in force until July
__, 200_, and indefinitely thereafter, but only so long as the
continuance after such period shall be specifically approved at least
annually by vote of the Fund's Board of Trustees or by vote of a
majority of the outstanding voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent subject to the
provisions of Section 15 of the 1940 Act, as modified by or
interpreted by any applicable order or orders of the Securities and
Exchange Commission (the "Commission") or any rules or regulations
adopted by, or interpretive releases of, the Commission.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of
this paragraph 7, the terms of any continuance or modification of the
Agreement must have been approved by the vote of a majority of those
Trustees of the Fund who are not parties to such Agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
(d) Either the Adviser, the Sub-Adviser or the Portfolio may, at any
time on sixty (60) days' prior written notice to the other parties,
terminate this Agreement, without payment of any penalty, by action of
its Board of Trustees or Directors, or by vote of a majority of its
outstanding voting securities. This Agreement shall terminate
automatically upon the termination of the Management Contract between
the Fund, on behalf of the Portfolio, and the Adviser. This Agreement
shall terminate automatically in the event of its assignment.
8. The Sub-Adviser is hereby expressly put on notice of the
limitation of shareholder liability as set forth in the Declaration of
Trust or other organizational document of the Fund and agrees that any
obligations of the Fund or the Portfolio arising in connection with
this Agreement shall be limited in all cases to the Portfolio and its
assets, and the Sub-Adviser shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Portfolio.
Nor shall the Sub-Adviser seek satisfaction of any such obligation
from the Trustees or any individual Trustee.
9. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT GIVING
EFFECT TO THE CHOICE OF LAWS PROVISIONS THEREOF.
The terms ``registered investment company," ``vote of a majority of
the outstanding voting securities," ``assignment," and ``interested
persons," when used herein, shall have the respective meanings
specified in the Investment Company Act of 1940 as now in effect or as
hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to
be signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.
[SIGNATURE LINES OMITTED]
Exhibit d(16)
FORM OF
SUB-ADVISORY AGREEMENT
between
FMR CO., INC. and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this __ day of _____, 200_, by and between FMR Co.,
Inc., a Massachusetts corporation with principal offices at 82
Devonshire Street, Boston, Massachusetts (hereinafter called the
"Sub-Adviser") and Fidelity Management & Research Company, a
Massachusetts corporation with principal offices at 82 Devonshire
Street, Boston, Massachusetts (hereinafter called the "Adviser").
WHEREAS the Adviser has entered into a Management Contract with
Variable Insurance Products Fund III, a Massachusetts business trust
which may issue one or more series of shares of beneficial interest
(hereinafter called the "Fund"), on behalf of Growth & Income
Portfolio (hereinafter called the "Portfolio"), pursuant to which the
Adviser is to act as investment manager and adviser to the Portfolio,
and
WHEREAS the Sub-Adviser was formed for the purpose of providing
investment management of equity and high income funds and advising
generally with respect to equity and high income instruments.
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the Adviser and the Sub-Adviser agree
as follows:
1. (a) The Sub-Adviser shall, subject to the supervision of the
Adviser, direct the investments of all or such portion of the
Portfolio's assets as the Adviser shall designate in accordance with
the investment objective, policies and limitations as provided in the
Portfolio's Prospectus or other governing instruments, as amended from
time to time, the Investment Company Act of l940 and rules thereunder,
as amended from time to time (the "l940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser or Sub-Adviser. The Sub-Adviser shall also furnish for the
use of the Portfolio office space and all necessary office facilities,
equipment and personnel for servicing the investments of the
Portfolio; and shall pay the salaries and fees of all personnel of the
Sub-Adviser performing services for the Portfolio relating to
research, statistical and investment activities. The Sub-Adviser is
authorized, in its discretion and without prior consultation with the
Portfolio or the Adviser, to buy, sell, lend and otherwise trade in
any stocks, bonds and other securities and investment instruments on
behalf of the Portfolio. The investment policies and all other
actions of the Portfolio are and shall at all times be subject to the
control and direction of the Fund's Board of Trustees.
(b) The Sub-Adviser shall also furnish such reports, evaluations,
information or analyses to the Fund and the Adviser as the Fund's
Board of Trustees or the Adviser may request from time to time or as
the Sub-Adviser may deem to be desirable. The Sub-Adviser shall make
recommendations to the Fund's Board of Trustees with respect to
Portfolio policies, and shall carry out such policies as are adopted
by the Trustees. The Sub-Adviser shall, subject to review by the
Board of Trustees, furnish such other services as the Sub-Adviser
shall from time to time determine to be necessary or useful to perform
its obligations under this Agreement and which are not otherwise
furnished by the Adviser.
(c) The Sub-Adviser shall place all orders for the purchase and sale
of portfolio securities for the Portfolio's account with brokers or
dealers selected by the Sub-Adviser, which may include brokers or
dealers affiliated with the Adviser or Sub-Adviser. The Sub-Adviser
shall use its best efforts to seek to execute portfolio transactions
at prices which are advantageous to the Portfolio and at commission
rates which are reasonable in relation to the benefits received. In
selecting brokers or dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of l934) to the Portfolio and/or
the other accounts over which the Sub-Adviser, Adviser or their
affiliates exercise investment discretion. The Sub-Adviser is
authorized to pay a broker or dealer who provides such brokerage and
research services a commission for executing a portfolio transaction
for the Portfolio which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction if the Sub-Adviser determines in good faith that such
amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer.
This determination may be viewed in terms of either that particular
transaction or the overall responsibilities which the Sub-Adviser and
its affiliates have with respect to accounts over which they exercise
investment discretion. The Trustees of the Fund shall periodically
review the commissions paid by the Portfolio to determine if the
commissions paid over representative periods of time were reasonable
in relation to the benefits to the Portfolio.
2. As compensation for the services to be furnished by the
Sub-Adviser hereunder, the Adviser agrees to pay the Sub-Adviser a
monthly fee equal to 50% of the management fee (including performance
adjustments, if any) that the Portfolio is obligated to pay the
Adviser under the Portfolio's Management Contract with the Adviser in
respect of that portion of the Portfolio's assets managed by the
Sub-Adviser during such month. Such fee shall not be reduced to
reflect expense reimbursements or fee waivers by the Adviser, if any,
in effect from time to time.
3. It is understood that Trustees, officers, and shareholders of the
Fund are or may be or become interested in the Adviser or the
Sub-Adviser as directors, officers or otherwise and that directors,
officers and stockholders of the Adviser or the Sub-Adviser are or may
be or become similarly interested in the Fund, and that the Adviser or
the Sub-Adviser may be or become interested in the Fund as a
shareholder or otherwise.
4. It is understood that the Portfolio will pay all its expenses
other than those expressly stated to be payable by the Sub-Adviser
hereunder or by the Adviser under the Management Contract with the
Portfolio, which expenses payable by the Portfolio shall include,
without limitation, (i) interest and taxes; (ii) brokerage commissions
and other costs in connection with the purchase or sale of securities
and other investment instruments; (iii) fees and expenses of the
Fund's Trustees other than those who are ``interested persons" of the
Fund, the Sub-Adviser or the Adviser; (iv) legal and audit expenses;
(v) custodian, registrar and transfer agent fees and expenses; (vi)
fees and expenses related to the registration and qualification of the
Fund and the Portfolio's shares for distribution under state and
federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders of the
Portfolio; (viii) all other expenses incidental to holding meetings of
the Portfolio's shareholders, including proxy solicitations therefor;
(ix) a pro rata share, based on relative net assets of the Portfolio
and other registered investment companies having Advisory and Service
or Management Contracts with the Adviser, of 50% of insurance premiums
for fidelity and other coverage; (x) its proportionate share of
association membership dues; (xi) expenses of typesetting for printing
Prospectuses and Statements of Additional Information and supplements
thereto; (xii) expenses of printing and mailing Prospectuses and
Statements of Additional Information and supplements thereto sent to
existing shareholders; and (xiii) such non-recurring or extraordinary
expenses as may arise, including those relating to actions, suits or
proceedings to which the Portfolio is a party and the legal obligation
which the Portfolio may have to indemnify the Fund's Trustees and
officers with respect thereto.
5. The Services of the Sub-Adviser to the Adviser are not to be
deemed to be exclusive, the Sub-Adviser being free to render services
to others and engage in other activities, provided, however, that such
other services and activities do not, during the term of this
Agreement, interfere, in a material manner, with the Sub-Adviser's
ability to meet all of its obligations with respect to rendering
investment advice hereunder. The Sub-Adviser shall for all purposes
be an independent contractor and not an agent or employee of the
Adviser or the Fund.
6. In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties hereunder on the part
of the Sub-Adviser, the Sub-Adviser shall not be subject to liability
to the Advisor, the Trust or to any shareholder of the Portfolio for
any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security.
7. (a) Subject to prior termination as provided in sub-paragraph (d)
of this paragraph 7, this Agreement shall continue in force until July
__,200_, and indefinitely thereafter, but only so long as the
continuance after such period shall be specifically approved at least
annually by vote of the Fund's Board of Trustees or by vote of a
majority of the outstanding voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent subject to the
provisions of Section 15 of the 1940 Act, as modified by or
interpreted by any applicable order or orders of the Securities and
Exchange Commission (the "Commission") or any rules or regulations
adopted by, or interpretive releases of, the Commission.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of
this paragraph 7, the terms of any continuance or modification of the
Agreement must have been approved by the vote of a majority of those
Trustees of the Fund who are not parties to such Agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
(d) Either the Adviser, the Sub-Adviser or the Portfolio may, at any
time on sixty (60) days' prior written notice to the other parties,
terminate this Agreement, without payment of any penalty, by action of
its Board of Trustees or Directors, or by vote of a majority of its
outstanding voting securities. This Agreement shall terminate
automatically upon the termination of the Management Contract between
the Fund, on behalf of the Portfolio, and the Adviser. This Agreement
shall terminate automatically in the event of its assignment.
8. The Sub-Adviser is hereby expressly put on notice of the
limitation of shareholder liability as set forth in the Declaration of
Trust or other organizational document of the Fund and agrees that any
obligations of the Fund or the Portfolio arising in connection with
this Agreement shall be limited in all cases to the Portfolio and its
assets, and the Sub-Adviser shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Portfolio.
Nor shall the Sub-Adviser seek satisfaction of any such obligation
from the Trustees or any individual Trustee.
9. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT GIVING
EFFECT TO THE CHOICE OF LAWS PROVISIONS THEREOF.
The terms ``registered investment company," ``vote of a majority of
the outstanding voting securities," ``assignment," and ``interested
persons," when used herein, shall have the respective meanings
specified in the Investment Company Act of 1940 as now in effect or as
hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to
be signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.
[SIGNATURE LINES OMITTED]
Exhibit d(17)
FORM OF
SUB-ADVISORY AGREEMENT
between
FMR CO., INC. and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this __ day of _____, 200_, by and between FMR Co.,
Inc., a Massachusetts corporation with principal offices at 82
Devonshire Street, Boston, Massachusetts (hereinafter called the
``Sub-Adviser") and Fidelity Management & Research Company, a
Massachusetts corporation with principal offices at 82 Devonshire
Street, Boston, Massachusetts (hereinafter called the ``Adviser").
WHEREAS the Adviser has entered into a Management Contract with
Variable Insurance Products Fund III, a Massachusetts business trust
which may issue one or more series of shares of beneficial interest
(hereinafter called the ``Fund"), on behalf of Mid Cap Portfolio
(hereinafter called the ``Portfolio"), pursuant to which the Adviser
is to act as investment manager and adviser to the Portfolio, and
WHEREAS the Sub-Adviser was formed for the purpose of providing
investment management of equity and high income funds and advising
generally with respect to equity and high income instruments.
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the Adviser and the Sub-Adviser agree
as follows:
1. (a) The Sub-Adviser shall, subject to the supervision of the
Adviser, direct the investments of all or such portion of the
Portfolio's assets as the Adviser shall designate in accordance with
the investment objective, policies and limitations as provided in the
Portfolio's Prospectus or other governing instruments, as amended from
time to time, the Investment Company Act of 1940 and rules thereunder,
as amended from time to time (the ``1940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser or Sub-Adviser. The Sub-Adviser shall also furnish for the
use of the Portfolio office space and all necessary office facilities,
equipment and personnel for servicing the investments of the
Portfolio; and shall pay the salaries and fees of all personnel of the
Sub-Adviser performing services for the Portfolio relating to
research, statistical and investment activities. The Sub-Adviser is
authorized, in its discretion and without prior consultation with the
Portfolio or the Adviser, to buy, sell, lend and otherwise trade in
any stocks, bonds and other securities and investment instruments on
behalf of the Portfolio. The investment policies and all other
actions of the Portfolio are and shall at all times be subject to the
control and direction of the Fund's Board of Trustees.
(b) The Sub-Adviser shall also furnish such reports, evaluations,
information or analyses to the Fund and the Adviser as the Fund's
Board of Trustees or the Adviser may request from time to time or as
the Sub-Adviser may deem to be desirable. The Sub-Adviser shall make
recommendations to the Fund's Board of Trustees with respect to
Portfolio policies, and shall carry out such policies as are adopted
by the Trustees. The Sub-Adviser shall, subject to review by the
Board of Trustees, furnish such other services as the Sub-Adviser
shall from time to time determine to be necessary or useful to perform
its obligations under this Agreement and which are not otherwise
furnished by the Adviser.
(c) The Sub-Adviser shall place all orders for the purchase and sale
of portfolio securities for the Portfolio's account with brokers or
dealers selected by the Sub-Adviser, which may include brokers or
dealers affiliated with the Adviser or Sub-Adviser. The Sub-Adviser
shall use its best efforts to seek to execute portfolio transactions
at prices which are advantageous to the Portfolio and at commission
rates which are reasonable in relation to the benefits received. In
selecting brokers or dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of l934) to the Portfolio and/or
the other accounts over which the Sub-Adviser, Adviser or their
affiliates exercise investment discretion. The Sub-Adviser is
authorized to pay a broker or dealer who provides such brokerage and
research services a commission for executing a portfolio transaction
for the Portfolio which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction if the Sub-Adviser determines in good faith that such
amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer.
This determination may be viewed in terms of either that particular
transaction or the overall responsibilities which the Sub-Adviser and
its affiliates have with respect to accounts over which they exercise
investment discretion. The Trustees of the Fund shall periodically
review the commissions paid by the Portfolio to determine if the
commissions paid over representative periods of time were reasonable
in relation to the benefits to the Portfolio.
2. As compensation for the services to be furnished by the
Sub-Adviser hereunder, the Adviser agrees to pay the Sub-Adviser a
monthly fee equal to 50% of the management fee (including performance
adjustments, if any) that the Portfolio is obligated to pay the
Adviser under the Portfolio's Management Contract with the Adviser in
respect of that portion of the Portfolio's assets managed by the
Sub-Adviser during such month. Such fee shall not be reduced to
reflect expense reimbursements or fee waivers by the Adviser, if any,
in effect from time to time.
3. It is understood that Trustees, officers, and shareholders of the
Fund are or may be or become interested in the Adviser or the
Sub-Adviser as directors, officers or otherwise and that directors,
officers and stockholders of the Adviser or the Sub-Adviser are or may
be or become similarly interested in the Fund, and that the Adviser or
the Sub-Adviser may be or become interested in the Fund as a
shareholder or otherwise.
4. It is understood that the Portfolio will pay all its expenses
other than those expressly stated to be payable by the Sub-Adviser
hereunder or by the Adviser under the Management Contract with the
Portfolio, which expenses payable by the Portfolio shall include,
without limitation, (i) interest and taxes; (ii) brokerage commissions
and other costs in connection with the purchase or sale of securities
and other investment instruments; (iii) fees and expenses of the
Fund's Trustees other than those who are ``interested persons" of the
Fund, the Sub-Adviser or the Adviser; (iv) legal and audit expenses;
(v) custodian, registrar and transfer agent fees and expenses; (vi)
fees and expenses related to the registration and qualification of the
Fund and the Portfolio's shares for distribution under state and
federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders of the
Portfolio; (viii) all other expenses incidental to holding meetings of
the Portfolio's shareholders, including proxy solicitations therefor;
(ix) a pro rata share, based on relative net assets of the Portfolio
and other registered investment companies having Advisory and Service
or Management Contracts with the Adviser, of 50% of insurance premiums
for fidelity and other coverage; (x) its proportionate share of
association membership dues; (xi) expenses of typesetting for printing
Prospectuses and Statements of Additional Information and supplements
thereto; (xii) expenses of printing and mailing Prospectuses and
Statements of Additional Information and supplements thereto sent to
existing shareholders; and (xiii) such non-recurring or extraordinary
expenses as may arise, including those relating to actions, suits or
proceedings to which the Portfolio is a party and the legal obligation
which the Portfolio may have to indemnify the Fund's Trustees and
officers with respect thereto.
5. The Services of the Sub-Adviser to the Adviser are not to be
deemed to be exclusive, the Sub-Adviser being free to render services
to others and engage in other activities, provided, however, that such
other services and activities do not, during the term of this
Agreement, interfere, in a material manner, with the Sub-Adviser's
ability to meet all of its obligations with respect to rendering
investment advice hereunder. The Sub-Adviser shall for all purposes
be an independent contractor and not an agent or employee of the
Adviser or the Fund.
6. In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties hereunder on the part
of the Sub-Adviser, the Sub-Adviser shall not be subject to liability
to the Advisor, the Trust or to any shareholder of the Portfolio for
any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security.
7. (a) Subject to prior termination as provided in sub-paragraph (d)
of this paragraph 7, this Agreement shall continue in force until July
__, 200_, and indefinitely thereafter, but only so long as the
continuance after such period shall be specifically approved at least
annually by vote of the Fund's Board of Trustees or by vote of a
majority of the outstanding voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent subject to the
provisions of Section 15 of the 1940 Act, as modified by or
interpreted by any applicable order or orders of the Securities and
Exchange Commission (the "Commission") or any rules or regulations
adopted by, or interpretive releases of, the Commission.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of
this paragraph 7, the terms of any continuance or modification of the
Agreement must have been approved by the vote of a majority of those
Trustees of the Fund who are not parties to such Agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
(d) Either the Adviser, the Sub-Adviser or the Portfolio may, at any
time on sixty (60) days' prior written notice to the other parties,
terminate this Agreement, without payment of any penalty, by action of
its Board of Trustees or Directors, or by vote of a majority of its
outstanding voting securities. This Agreement shall terminate
automatically upon the termination of the Management Contract between
the Fund, on behalf of the Portfolio, and the Adviser. This Agreement
shall terminate automatically in the event of its assignment.
8. The Sub-Adviser is hereby expressly put on notice of the
limitation of shareholder liability as set forth in the Declaration of
Trust or other organizational document of the Fund and agrees that any
obligations of the Fund or the Portfolio arising in connection with
this Agreement shall be limited in all cases to the Portfolio and its
assets, and the Sub-Adviser shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Portfolio.
Nor shall the Sub-Adviser seek satisfaction of any such obligation
from the Trustees or any individual Trustee.
9. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT GIVING
EFFECT TO THE CHOICE OF LAWS PROVISIONS THEREOF.
The terms ``registered investment company," ``vote of a majority of
the outstanding voting securities," ``assignment," and ``interested
persons," when used herein, shall have the respective meanings
specified in the Investment Company Act of 1940 as now in effect or as
hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to
be signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.
[SIGNATURE LINES OMITTED]
Exhibit d(18)
RESEARCH AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH (FAR EAST), INC.
AND
FIDELITY INVESTMENTS JAPAN LIMITED
AGREEMENT made this 1st day of January, 2000, by and between Fidelity
Management & Research (Far East), Inc., a Massachusetts corporation
(the "Sub-Advisor"); and Fidelity Investments Japan Limited, a
Japanese corporation (the "Japan Sub-Advisor").
WHEREAS, Fidelity Management & Research Company, a Massachusetts
corporation (the "Advisor"), has entered into a Management Contract
(the "Management Contract") with Variable Insurance Products Fund III,
a Massachusetts business trust which may issue one or more series of
shares of beneficial interest (the "Trust"), on behalf of Balanced
Portfolio (the "Portfolio"), pursuant to which the Advisor acts as
investment advisor to the Portfolio; and
WHEREAS, the Sub-Advisor has entered into a Sub-Advisory Agreement
(the "Sub-Advisory Agreement") with the Advisor, pursuant to which the
Sub-Advisor, directly or through certain of its subsidiaries or other
affiliated persons, may provide, at the Advisor's discretion,
investment advice or investment management and order execution
services to the Portfolio; and
WHEREAS, the Japan Sub-Advisor has personnel in Japan, and has been
formed for the purpose, among others, of researching and compiling
information and recommendations with respect to the economies of Japan
and other Asian countries and the securities of issuers located in
Japan and other Asian countries;
NOW THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the Sub-Advisor and the Japan
Sub-Advisor hereby agree as follows:
1. Delegation of Duties: Pursuant to paragraph 1(c) of the
Sub-Advisory Agreement, the Sub-Advisor hereby delegates to the Japan
Sub-Advisor, and the Japan Sub-Advisor hereby accepts, responsibility
for performing such non-discretionary investment advisory and research
services relating to the Japanese economy and the securities of
Japanese issuers (and such other Asian economies and issuers as the
Sub-Advisor may request from time to time) as may be requested of the
Sub-Advisor by the Advisor pursuant to the Sub-Advisory Agreement.
The Japan Sub-Advisor shall pay the salaries and fees of all personnel
of the Japan Sub-Advisor performing such services on behalf of the
Portfolio.
(a) INVESTMENT ADVICE: In connection with the performance of such
services, the Japan Sub-Advisor shall furnish to the Advisor and the
Sub-Advisor such factual information, research reports and investment
recommendations as Advisor or the Sub-Advisor may reasonably require.
Such information may include written and oral reports and analyses.
All such reports, recommendations, analyses and other information may
be used, transferred, assigned or sold by the Sub-Advisor, in its sole
discretion, without the consent of the Japan Sub-Advisor.
(b) SUBSIDIARIES AND AFFILIATES: The Japan Sub-Advisor may perform
any or all of the services contemplated by this Agreement directly or
through such of its subsidiaries or other affiliated persons as the
Japan Sub-Advisor shall determine; provided, however, that performance
of such services through such subsidiaries or other affiliated persons
shall have been approved by the Trust to the extent required pursuant
to the 1940 Act and rules thereunder.
2. Information to be Provided to the Trust, the Advisor and the
Sub-Advisor: The Japan Sub-Advisor shall furnish such reports,
evaluations, information or analyses to the Trust, the Advisor, and
the Sub-Advisor, as the Trust's Board of Trustees, the Advisor or the
Sub-Advisor may reasonably request from time to time, or as the Japan
Sub-Advisor may deem to be desirable.
3. Compensation: For the services provided under this Agreement, the
Sub-Advisor agrees to pay the Japan Sub-Advisor a monthly fee equal to
100% of the Japan Sub-Advisor's costs incurred in connection with
rendering the services provided hereunder. The Japan Sub-Advisor's
fee shall not be reduced to reflect expense reimbursements or fee
waivers by the Sub-Advisor or the Advisor, if any, in effect from time
to time.
4. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the Japan
Sub-Advisor hereunder, by the Sub-Advisor under the Sub-Advisory
Agreement or by the Advisor under the Management Contract.
5. Interested Persons: It is understood (i) that Trustees, officers,
and shareholders of the Trust are or may be or become interested in
the Advisor, the Sub-Advisor or the Japan Sub-Advisor as directors,
officers or otherwise, (ii) that directors, officers and stockholders
of the Advisor, the Sub-Advisor or the Japan Sub-Advisor are or may be
or become similarly interested in the Trust, and (iii) that the
Advisor, the Sub-Advisor or the Japan Sub-Advisor are or may be or
become interested in the Trust as a shareholder or otherwise.
6. Services to Other Companies or Accounts: The services of the
Japan Sub-Advisor to the Sub-Advisor are not to be deemed to be
exclusive, the Japan Sub-Advisor being free to render services to
others and engage in other activities, provided, however, that such
other services and activities do not, during the term of this
Agreement, interfere in a material manner, with the Japan
Sub-Advisor's ability to meet all of its obligations hereunder. The
Japan Sub-Advisor shall for all purposes be an independent contractor
and not an agent or employee of the Sub-Advisor, the Advisor or the
Trust.
7. Standard of Care: In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Japan Sub-Advisor, the Japan Sub-Advisor
shall not be subject to liability to the Sub-Advisor, the Advisor, the
Trust or to any shareholder of the Portfolio for any act or omission
in the course, of or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale
of any security.
8. Liability. Notwithstanding anything in this Agreement to the
contrary, it is understood that the Sub-Advisor shall remain liable to
the Advisor and the Portfolio under the Sub-Advisory Agreement for the
acts and omissions of Japan Sub-Advisor taken in the course of the
performance of the Japan Sub-Advisor's duties hereunder to the same
extent as would be the case had the Sub-Advisor performed such acts or
omissions itself, provided, however, that to the extent the
Sub-Advisor suffers a loss to the Advisor or the Portfolio as a result
of or arising out of such acts or omissions of the Japan Sub-Advisor,
the Sub-Advisor shall be entitled to seek redress against the Japan
Sub-Advisor in accordance with the terms hereof.
9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of
this paragraph 9, this Agreement shall continue in force until July
31, 2000 and indefinitely thereafter, but only so long as the
continuance after such period shall be specifically approved at least
annually by vote of the Trust's Board of Trustees or by vote of a
majority of the outstanding voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Advisor,
the Sub-Advisor, the Japan Sub-Advisor and the Portfolio subject to
the provisions of Section 15 of the 1940 Act, as modified by or
interpreted by any applicable order or orders of the Securities and
Exchange Commission (the "Commission") or any rules or regulations
adopted by, or interpretative releases of, the Commission.
(c) In addition to the requirements of subparagraphs (a) and (b) of
this paragraph 9, the terms of any continuance or modification of this
Agreement must have been approved by the vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
(d) Either the Advisor, the Sub-Advisor, the Japan Sub-Advisor or the
Portfolio may, at any time on sixty (60) days' prior written notice to
the other parties, terminate this Agreement, without payment of any
penalty, by action of its Board of Trustees or Directors, or with
respect to the Portfolio by vote of a majority of its outstanding
voting securities. This Agreement shall terminate automatically in
the event of its assignment.
10. Limitation of Liability: The Japan Sub-Advisor is hereby
expressly put on notice of the limitation of shareholder liability as
set forth in the Declaration of Trust or other organizational document
of the Trust and agrees that any obligations of the Trust or the
Portfolio arising in connection with this Agreement shall be limited
in all cases to the Portfolio and its assets, and the Japan
Sub-Advisor shall not seek satisfaction of any such obligation from
the shareholders or any shareholder of the Portfolio. Nor shall the
Japan Sub-Advisor seek satisfaction of any such obligation from the
Trustees or any individual Trustee.
11. Governing Law: This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of
Massachusetts, without giving effect to the choice of laws provisions
thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested person,"
when used herein, shall have the respective meanings specified in the
1940 Act as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to
be signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.
FIDELITY MANAGEMENT & RESEARCH (FAR EAST), INC.
BY: /s/Laura B. Cronin
Laura B. Cronin
Treasurer
FIDELITY INVESTMENTS JAPAN LIMITED
BY: /s/Billy Wilder
Billy Wilder
President
Exhibit d(19)
RESEARCH AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH (FAR EAST), INC.
AND
FIDELITY INVESTMENTS JAPAN LIMITED
AGREEMENT made this 1st day of January, 2000, by and between Fidelity
Management & Research (Far East), Inc., a Massachusetts corporation
(the "Sub-Advisor"); and Fidelity Investments Japan Limited, a
Japanese corporation (the "Japan Sub-Advisor").
WHEREAS, Fidelity Management & Research Company, a Massachusetts
corporation (the "Advisor"), has entered into a Management Contract
(the "Management Contract") with Variable Insurance Products Fund III,
a Massachusetts business trust which may issue one or more series of
shares of beneficial interest (the "Trust"), on behalf of Growth &
Income Portfolio (the "Portfolio"), pursuant to which the Advisor acts
as investment advisor to the Portfolio; and
WHEREAS, the Sub-Advisor has entered into a Sub-Advisory Agreement
(the "Sub-Advisory Agreement") with the Advisor, pursuant to which the
Sub-Advisor, directly or through certain of its subsidiaries or other
affiliated persons, may provide, at the Advisor's discretion,
investment advice or investment management and order execution
services to the Portfolio; and
WHEREAS, the Japan Sub-Advisor has personnel in Japan, and has been
formed for the purpose, among others, of researching and compiling
information and recommendations with respect to the economies of Japan
and other Asian countries and the securities of issuers located in
Japan and other Asian countries;
NOW THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the Sub-Advisor and the Japan
Sub-Advisor hereby agree as follows:
1. Delegation of Duties: Pursuant to paragraph 1(c) of the
Sub-Advisory Agreement, the Sub-Advisor hereby delegates to the Japan
Sub-Advisor, and the Japan Sub-Advisor hereby accepts, responsibility
for performing such non-discretionary investment advisory and research
services relating to the Japanese economy and the securities of
Japanese issuers (and such other Asian economies and issuers as the
Sub-Advisor may request from time to time) as may be requested of the
Sub-Advisor by the Advisor pursuant to the Sub-Advisory Agreement.
The Japan Sub-Advisor shall pay the salaries and fees of all personnel
of the Japan Sub-Advisor performing such services on behalf of the
Portfolio.
(a) INVESTMENT ADVICE: In connection with the performance of such
services, the Japan Sub-Advisor shall furnish to the Advisor and the
Sub-Advisor such factual information, research reports and investment
recommendations as Advisor or the Sub-Advisor may reasonably require.
Such information may include written and oral reports and analyses.
All such reports, recommendations, analyses and other information may
be used, transferred, assigned or sold by the Sub-Advisor, in its sole
discretion, without the consent of the Japan Sub-Advisor.
(b) SUBSIDIARIES AND AFFILIATES: The Japan Sub-Advisor may perform
any or all of the services contemplated by this Agreement directly or
through such of its subsidiaries or other affiliated persons as the
Japan Sub-Advisor shall determine; provided, however, that performance
of such services through such subsidiaries or other affiliated persons
shall have been approved by the Trust to the extent required pursuant
to the 1940 Act and rules thereunder.
2. Information to be Provided to the Trust, the Advisor and the
Sub-Advisor: The Japan Sub-Advisor shall furnish such reports,
evaluations, information or analyses to the Trust, the Advisor, and
the Sub-Advisor, as the Trust's Board of Trustees, the Advisor or the
Sub-Advisor may reasonably request from time to time, or as the Japan
Sub-Advisor may deem to be desirable.
3. Compensation: For the services provided under this Agreement, the
Sub-Advisor agrees to pay the Japan Sub-Advisor a monthly fee equal to
100% of the Japan Sub-Advisor's costs incurred in connection with
rendering the services provided hereunder. The Japan Sub-Advisor's
fee shall not be reduced to reflect expense reimbursements or fee
waivers by the Sub-Advisor or the Advisor, if any, in effect from time
to time.
4. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the Japan
Sub-Advisor hereunder, by the Sub-Advisor under the Sub-Advisory
Agreement or by the Advisor under the Management Contract.
5. Interested Persons: It is understood (i) that Trustees, officers,
and shareholders of the Trust are or may be or become interested in
the Advisor, the Sub-Advisor or the Japan Sub-Advisor as directors,
officers or otherwise, (ii) that directors, officers and stockholders
of the Advisor, the Sub-Advisor or the Japan Sub-Advisor are or may be
or become similarly interested in the Trust, and (iii) that the
Advisor, the Sub-Advisor or the Japan Sub-Advisor are or may be or
become interested in the Trust as a shareholder or otherwise.
6. Services to Other Companies or Accounts: The services of the
Japan Sub-Advisor to the Sub-Advisor are not to be deemed to be
exclusive, the Japan Sub-Advisor being free to render services to
others and engage in other activities, provided, however, that such
other services and activities do not, during the term of this
Agreement, interfere in a material manner, with the Japan
Sub-Advisor's ability to meet all of its obligations hereunder. The
Japan Sub-Advisor shall for all purposes be an independent contractor
and not an agent or employee of the Sub-Advisor, the Advisor or the
Trust.
7. Standard of Care: In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Japan Sub-Advisor, the Japan Sub-Advisor
shall not be subject to liability to the Sub-Advisor, the Advisor, the
Trust or to any shareholder of the Portfolio for any act or omission
in the course, of or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale
of any security.
8. Liability. Notwithstanding anything in this Agreement to the
contrary, it is understood that the Sub-Advisor shall remain liable to
the Advisor and the Portfolio under the Sub-Advisory Agreement for the
acts and omissions of Japan Sub-Advisor taken in the course of the
performance of the Japan Sub-Advisor's duties hereunder to the same
extent as would be the case had the Sub-Advisor performed such acts or
omissions itself, provided, however, that to the extent the
Sub-Advisor suffers a loss to the Advisor or the Portfolio as a result
of or arising out of such acts or omissions of the Japan Sub-Advisor,
the Sub-Advisor shall be entitled to seek redress against the Japan
Sub-Advisor in accordance with the terms hereof.
9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of
this paragraph 9, this Agreement shall continue in force until July
31, 2000 and indefinitely thereafter, but only so long as the
continuance after such period shall be specifically approved at least
annually by vote of the Trust's Board of Trustees or by vote of a
majority of the outstanding voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Advisor,
the Sub-Advisor, the Japan Sub-Advisor and the Portfolio subject to
the provisions of Section 15 of the 1940 Act, as modified by or
interpreted by any applicable order or orders of the Securities and
Exchange Commission (the "Commission") or any rules or regulations
adopted by, or interpretative releases of, the Commission.
(c) In addition to the requirements of subparagraphs (a) and (b) of
this paragraph 9, the terms of any continuance or modification of this
Agreement must have been approved by the vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
(d) Either the Advisor, the Sub-Advisor, the Japan Sub-Advisor or the
Portfolio may, at any time on sixty (60) days' prior written notice to
the other parties, terminate this Agreement, without payment of any
penalty, by action of its Board of Trustees or Directors, or with
respect to the Portfolio by vote of a majority of its outstanding
voting securities. This Agreement shall terminate automatically in
the event of its assignment.
10. Limitation of Liability: The Japan Sub-Advisor is hereby
expressly put on notice of the limitation of shareholder liability as
set forth in the Declaration of Trust or other organizational document
of the Trust and agrees that any obligations of the Trust or the
Portfolio arising in connection with this Agreement shall be limited
in all cases to the Portfolio and its assets, and the Japan
Sub-Advisor shall not seek satisfaction of any such obligation from
the shareholders or any shareholder of the Portfolio. Nor shall the
Japan Sub-Advisor seek satisfaction of any such obligation from the
Trustees or any individual Trustee.
11. Governing Law: This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of
Massachusetts, without giving effect to the choice of laws provisions
thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested person,"
when used herein, shall have the respective meanings specified in the
1940 Act as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to
be signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.
FIDELITY MANAGEMENT & RESEARCH (FAR EAST), INC.
BY: /s/Laura B. Cronin
Laura B. Cronin
Treasurer
FIDELITY INVESTMENTS JAPAN LIMITED
BY: /s/Billy Wilder
Billy Wilder
President
Exhibit d(20)
RESEARCH AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH (FAR EAST), INC.
AND
FIDELITY INVESTMENTS JAPAN LIMITED
AGREEMENT made this 1st day of January, 2000, by and between Fidelity
Management & Research (Far East), Inc., a Massachusetts corporation
(the "Sub-Advisor"); and Fidelity Investments Japan Limited, a
Japanese corporation (the "Japan Sub-Advisor").
WHEREAS, Fidelity Management & Research Company, a Massachusetts
corporation (the "Advisor"), has entered into a Management Contract
(the "Management Contract") with Variable Insurance Products Fund III,
a Massachusetts business trust which may issue one or more series of
shares of beneficial interest (the "Trust"), on behalf of Growth
Opportunities Portfolio (the "Portfolio"), pursuant to which the
Advisor acts as investment advisor to the Portfolio; and
WHEREAS, the Sub-Advisor has entered into a Sub-Advisory Agreement
(the "Sub-Advisory Agreement") with the Advisor, pursuant to which the
Sub-Advisor, directly or through certain of its subsidiaries or other
affiliated persons, may provide, at the Advisor's discretion,
investment advice or investment management and order execution
services to the Portfolio; and
WHEREAS, the Japan Sub-Advisor has personnel in Japan, and has been
formed for the purpose, among others, of researching and compiling
information and recommendations with respect to the economies of Japan
and other Asian countries and the securities of issuers located in
Japan and other Asian countries;
NOW THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the Sub-Advisor and the Japan
Sub-Advisor hereby agree as follows:
1. Delegation of Duties: Pursuant to paragraph 1(c) of the
Sub-Advisory Agreement, the Sub-Advisor hereby delegates to the Japan
Sub-Advisor, and the Japan Sub-Advisor hereby accepts, responsibility
for performing such non-discretionary investment advisory and research
services relating to the Japanese economy and the securities of
Japanese issuers (and such other Asian economies and issuers as the
Sub-Advisor may request from time to time) as may be requested of the
Sub-Advisor by the Advisor pursuant to the Sub-Advisory Agreement.
The Japan Sub-Advisor shall pay the salaries and fees of all personnel
of the Japan Sub-Advisor performing such services on behalf of the
Portfolio.
(a) INVESTMENT ADVICE: In connection with the performance of such
services, the Japan Sub-Advisor shall furnish to the Advisor and the
Sub-Advisor such factual information, research reports and investment
recommendations as Advisor or the Sub-Advisor may reasonably require.
Such information may include written and oral reports and analyses.
All such reports, recommendations, analyses and other information may
be used, transferred, assigned or sold by the Sub-Advisor, in its sole
discretion, without the consent of the Japan Sub-Advisor.
(b) SUBSIDIARIES AND AFFILIATES: The Japan Sub-Advisor may perform
any or all of the services contemplated by this Agreement directly or
through such of its subsidiaries or other affiliated persons as the
Japan Sub-Advisor shall determine; provided, however, that performance
of such services through such subsidiaries or other affiliated persons
shall have been approved by the Trust to the extent required pursuant
to the 1940 Act and rules thereunder.
2. Information to be Provided to the Trust, the Advisor and the
Sub-Advisor: The Japan Sub-Advisor shall furnish such reports,
evaluations, information or analyses to the Trust, the Advisor, and
the Sub-Advisor, as the Trust's Board of Trustees, the Advisor or the
Sub-Advisor may reasonably request from time to time, or as the Japan
Sub-Advisor may deem to be desirable.
3. Compensation: For the services provided under this Agreement, the
Sub-Advisor agrees to pay the Japan Sub-Advisor a monthly fee equal to
100% of the Japan Sub-Advisor's costs incurred in connection with
rendering the services provided hereunder. The Japan Sub-Advisor's
fee shall not be reduced to reflect expense reimbursements or fee
waivers by the Sub-Advisor or the Advisor, if any, in effect from time
to time.
4. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the Japan
Sub-Advisor hereunder, by the Sub-Advisor under the Sub-Advisory
Agreement or by the Advisor under the Management Contract.
5. Interested Persons: It is understood (i) that Trustees, officers,
and shareholders of the Trust are or may be or become interested in
the Advisor, the Sub-Advisor or the Japan Sub-Advisor as directors,
officers or otherwise, (ii) that directors, officers and stockholders
of the Advisor, the Sub-Advisor or the Japan Sub-Advisor are or may be
or become similarly interested in the Trust, and (iii) that the
Advisor, the Sub-Advisor or the Japan Sub-Advisor are or may be or
become interested in the Trust as a shareholder or otherwise.
6. Services to Other Companies or Accounts: The services of the
Japan Sub-Advisor to the Sub-Advisor are not to be deemed to be
exclusive, the Japan Sub-Advisor being free to render services to
others and engage in other activities, provided, however, that such
other services and activities do not, during the term of this
Agreement, interfere in a material manner, with the Japan
Sub-Advisor's ability to meet all of its obligations hereunder. The
Japan Sub-Advisor shall for all purposes be an independent contractor
and not an agent or employee of the Sub-Advisor, the Advisor or the
Trust.
7. Standard of Care: In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Japan Sub-Advisor, the Japan Sub-Advisor
shall not be subject to liability to the Sub-Advisor, the Advisor, the
Trust or to any shareholder of the Portfolio for any act or omission
in the course, of or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale
of any security.
8. Liability. Notwithstanding anything in this Agreement to the
contrary, it is understood that the Sub-Advisor shall remain liable to
the Advisor and the Portfolio under the Sub-Advisory Agreement for the
acts and omissions of Japan Sub-Advisor taken in the course of the
performance of the Japan Sub-Advisor's duties hereunder to the same
extent as would be the case had the Sub-Advisor performed such acts or
omissions itself, provided, however, that to the extent the
Sub-Advisor suffers a loss to the Advisor or the Portfolio as a result
of or arising out of such acts or omissions of the Japan Sub-Advisor,
the Sub-Advisor shall be entitled to seek redress against the Japan
Sub-Advisor in accordance with the terms hereof.
9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of
this paragraph 9, this Agreement shall continue in force until July
31, 2000 and indefinitely thereafter, but only so long as the
continuance after such period shall be specifically approved at least
annually by vote of the Trust's Board of Trustees or by vote of a
majority of the outstanding voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Advisor,
the Sub-Advisor, the Japan Sub-Advisor and the Portfolio subject to
the provisions of Section 15 of the 1940 Act, as modified by or
interpreted by any applicable order or orders of the Securities and
Exchange Commission (the "Commission") or any rules or regulations
adopted by, or interpretative releases of, the Commission.
(c) In addition to the requirements of subparagraphs (a) and (b) of
this paragraph 9, the terms of any continuance or modification of this
Agreement must have been approved by the vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
(d) Either the Advisor, the Sub-Advisor, the Japan Sub-Advisor or the
Portfolio may, at any time on sixty (60) days' prior written notice to
the other parties, terminate this Agreement, without payment of any
penalty, by action of its Board of Trustees or Directors, or with
respect to the Portfolio by vote of a majority of its outstanding
voting securities. This Agreement shall terminate automatically in
the event of its assignment.
10. Limitation of Liability: The Japan Sub-Advisor is hereby
expressly put on notice of the limitation of shareholder liability as
set forth in the Declaration of Trust or other organizational document
of the Trust and agrees that any obligations of the Trust or the
Portfolio arising in connection with this Agreement shall be limited
in all cases to the Portfolio and its assets, and the Japan
Sub-Advisor shall not seek satisfaction of any such obligation from
the shareholders or any shareholder of the Portfolio. Nor shall the
Japan Sub-Advisor seek satisfaction of any such obligation from the
Trustees or any individual Trustee.
11. Governing Law: This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of
Massachusetts, without giving effect to the choice of laws provisions
thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested person,"
when used herein, shall have the respective meanings specified in the
1940 Act as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to
be signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.
FIDELITY MANAGEMENT & RESEARCH (FAR EAST), INC.
BY: /s/Laura B. Cronin
Laura B. Cronin
Treasurer
FIDELITY INVESTMENTS JAPAN LIMITED
BY: /s/Billy Wilder
Billy Wilder
President
Exhibit d(21)
RESEARCH AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH (FAR EAST), INC.
AND
FIDELITY INVESTMENTS JAPAN LIMITED
AGREEMENT made this 1st day of January, 2000, by and between Fidelity
Management & Research (Far East), Inc., a Massachusetts corporation
(the "Sub-Advisor"); and Fidelity Investments Japan Limited, a
Japanese corporation (the "Japan Sub-Advisor").
WHEREAS, Fidelity Management & Research Company, a Massachusetts
corporation (the "Advisor"), has entered into a Management Contract
(the "Management Contract") with Variable Insurance Products Fund III,
a Massachusetts business trust which may issue one or more series of
shares of beneficial interest (the "Trust"), on behalf of Mid Cap
Portfolio (the "Portfolio"), pursuant to which the Advisor acts as
investment advisor to the Portfolio; and
WHEREAS, the Sub-Advisor has entered into a Sub-Advisory Agreement
(the "Sub-Advisory Agreement") with the Advisor, pursuant to which the
Sub-Advisor, directly or through certain of its subsidiaries or other
affiliated persons, may provide, at the Advisor's discretion,
investment advice or investment management and order execution
services to the Portfolio; and
WHEREAS, the Japan Sub-Advisor has personnel in Japan, and has been
formed for the purpose, among others, of researching and compiling
information and recommendations with respect to the economies of Japan
and other Asian countries and the securities of issuers located in
Japan and other Asian countries;
NOW THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the Sub-Advisor and the Japan
Sub-Advisor hereby agree as follows:
1. Delegation of Duties: Pursuant to paragraph 1(c) of the
Sub-Advisory Agreement, the Sub-Advisor hereby delegates to the Japan
Sub-Advisor, and the Japan Sub-Advisor hereby accepts, responsibility
for performing such non-discretionary investment advisory and research
services relating to the Japanese economy and the securities of
Japanese issuers (and such other Asian economies and issuers as the
Sub-Advisor may request from time to time) as may be requested of the
Sub-Advisor by the Advisor pursuant to the Sub-Advisory Agreement.
The Japan Sub-Advisor shall pay the salaries and fees of all personnel
of the Japan Sub-Advisor performing such services on behalf of the
Portfolio.
(a) INVESTMENT ADVICE: In connection with the performance of such
services, the Japan Sub-Advisor shall furnish to the Advisor and the
Sub-Advisor such factual information, research reports and investment
recommendations as Advisor or the Sub-Advisor may reasonably require.
Such information may include written and oral reports and analyses.
All such reports, recommendations, analyses and other information may
be used, transferred, assigned or sold by the Sub-Advisor, in its sole
discretion, without the consent of the Japan Sub-Advisor.
(b) SUBSIDIARIES AND AFFILIATES: The Japan Sub-Advisor may perform
any or all of the services contemplated by this Agreement directly or
through such of its subsidiaries or other affiliated persons as the
Japan Sub-Advisor shall determine; provided, however, that performance
of such services through such subsidiaries or other affiliated persons
shall have been approved by the Trust to the extent required pursuant
to the 1940 Act and rules thereunder.
2. Information to be Provided to the Trust, the Advisor and the
Sub-Advisor: The Japan Sub-Advisor shall furnish such reports,
evaluations, information or analyses to the Trust, the Advisor, and
the Sub-Advisor, as the Trust's Board of Trustees, the Advisor or the
Sub-Advisor may reasonably request from time to time, or as the Japan
Sub-Advisor may deem to be desirable.
3. Compensation: For the services provided under this Agreement, the
Sub-Advisor agrees to pay the Japan Sub-Advisor a monthly fee equal to
100% of the Japan Sub-Advisor's costs incurred in connection with
rendering the services provided hereunder. The Japan Sub-Advisor's
fee shall not be reduced to reflect expense reimbursements or fee
waivers by the Sub-Advisor or the Advisor, if any, in effect from time
to time.
4. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the Japan
Sub-Advisor hereunder, by the Sub-Advisor under the Sub-Advisory
Agreement or by the Advisor under the Management Contract.
5. Interested Persons: It is understood (i) that Trustees, officers,
and shareholders of the Trust are or may be or become interested in
the Advisor, the Sub-Advisor or the Japan Sub-Advisor as directors,
officers or otherwise, (ii) that directors, officers and stockholders
of the Advisor, the Sub-Advisor or the Japan Sub-Advisor are or may be
or become similarly interested in the Trust, and (iii) that the
Advisor, the Sub-Advisor or the Japan Sub-Advisor are or may be or
become interested in the Trust as a shareholder or otherwise.
6. Services to Other Companies or Accounts: The services of the
Japan Sub-Advisor to the Sub-Advisor are not to be deemed to be
exclusive, the Japan Sub-Advisor being free to render services to
others and engage in other activities, provided, however, that such
other services and activities do not, during the term of this
Agreement, interfere in a material manner, with the Japan
Sub-Advisor's ability to meet all of its obligations hereunder. The
Japan Sub-Advisor shall for all purposes be an independent contractor
and not an agent or employee of the Sub-Advisor, the Advisor or the
Trust.
7. Standard of Care: In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Japan Sub-Advisor, the Japan Sub-Advisor
shall not be subject to liability to the Sub-Advisor, the Advisor, the
Trust or to any shareholder of the Portfolio for any act or omission
in the course, of or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale
of any security.
8. Liability. Notwithstanding anything in this Agreement to the
contrary, it is understood that the Sub-Advisor shall remain liable to
the Advisor and the Portfolio under the Sub-Advisory Agreement for the
acts and omissions of Japan Sub-Advisor taken in the course of the
performance of the Japan Sub-Advisor's duties hereunder to the same
extent as would be the case had the Sub-Advisor performed such acts or
omissions itself, provided, however, that to the extent the
Sub-Advisor suffers a loss to the Advisor or the Portfolio as a result
of or arising out of such acts or omissions of the Japan Sub-Advisor,
the Sub-Advisor shall be entitled to seek redress against the Japan
Sub-Advisor in accordance with the terms hereof.
9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of
this paragraph 9, this Agreement shall continue in force until July
31, 2000 and indefinitely thereafter, but only so long as the
continuance after such period shall be specifically approved at least
annually by vote of the Trust's Board of Trustees or by vote of a
majority of the outstanding voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Advisor,
the Sub-Advisor, the Japan Sub-Advisor and the Portfolio subject to
the provisions of Section 15 of the 1940 Act, as modified by or
interpreted by any applicable order or orders of the Securities and
Exchange Commission (the "Commission") or any rules or regulations
adopted by, or interpretative releases of, the Commission.
(c) In addition to the requirements of subparagraphs (a) and (b) of
this paragraph 9, the terms of any continuance or modification of this
Agreement must have been approved by the vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
(d) Either the Advisor, the Sub-Advisor, the Japan Sub-Advisor or the
Portfolio may, at any time on sixty (60) days' prior written notice to
the other parties, terminate this Agreement, without payment of any
penalty, by action of its Board of Trustees or Directors, or with
respect to the Portfolio by vote of a majority of its outstanding
voting securities. This Agreement shall terminate automatically in
the event of its assignment.
10. Limitation of Liability: The Japan Sub-Advisor is hereby
expressly put on notice of the limitation of shareholder liability as
set forth in the Declaration of Trust or other organizational document
of the Trust and agrees that any obligations of the Trust or the
Portfolio arising in connection with this Agreement shall be limited
in all cases to the Portfolio and its assets, and the Japan
Sub-Advisor shall not seek satisfaction of any such obligation from
the shareholders or any shareholder of the Portfolio. Nor shall the
Japan Sub-Advisor seek satisfaction of any such obligation from the
Trustees or any individual Trustee.
11. Governing Law: This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of
Massachusetts, without giving effect to the choice of laws provisions
thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested person,"
when used herein, shall have the respective meanings specified in the
1940 Act as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to
be signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.
FIDELITY MANAGEMENT & RESEARCH (FAR EAST), INC.
BY: /s/Laura B. Cronin
Laura B. Cronin
Treasurer
FIDELITY INVESTMENTS JAPAN LIMITED
BY: /s/Billy Wilder
Billy Wilder
President
Exhibit e(7)
FORM OF
SERVICE CONTRACT
With Respect to Service Class 2 Shares of:
{Insert trust name and fund name}
To Fidelity Distributors Corporation:
We desire to enter into a Contract with you for activities in
connection with (i) the distribution of shares of the funds noted
above (the "Funds") of which you are the principal underwriter as
defined in the Investment Company Act of 1940 (the "Act") and for
which you are the agent for the continuous distribution of shares, and
(ii) the servicing of holders of shares of the Funds and existing and
prospective holders of Variable Products (as defined below).
THE TERMS AND CONDITIONS OF THIS CONTRACT ARE AS FOLLOWS:
1. We shall provide distribution and certain shareholder services for
our clients who own or are considering the purchase of variable
annuity contracts or variable life insurance policies for which shares
of the Funds are available as underlying investment options ("Variable
Products"), which services may include, without limitation, answering
questions about the Funds from owners of Variable Products; receiving
and answering correspondence (including requests for prospectuses and
statements of additional information for the Funds); performing
sub-accounting with respect to Variable Products' values allocated to
the Funds; preparing, printing and distributing reports of values to
owners of Variable Products who have contract values allocated to the
Funds; printing and distributing prospectuses, statements of
additional information, any supplements to prospectuses and statements
of additional information, and shareholder reports; preparing,
printing and distributing marketing materials for Variable Products;
assisting customers in completing applications for Variable Products
and selecting underlying mutual fund investment options; preparing,
printing and distributing subaccount performance figures for
subaccounts investing in Fund shares; and providing other reasonable
assistance in connection with the distribution of Fund shares to
insurers.
2. We shall provide such office space and equipment, telephone
facilities and personnel (which may be all or any part of the space,
equipment and facilities currently used in our business, or all or any
personnel employed by us) as is necessary or beneficial for us to
provide information and services to existing and prospective owners of
Variable Products, and to assist you in providing services with
respect to Variable Products.
3. We agree to indemnify and hold you, the Funds, and the agents and
affiliates of each, harmless from any and all direct or indirect
liabilities or losses resulting from requests, directions, actions or
inactions, of or by us or our officers, employees or agents regarding
the purchase, redemption, transfer or registration of Fund shares that
underlie Variable Products of our clients. Such indemnification shall
survive the termination of this Contract.
Neither we nor any of our officers, employees or agents are
authorized to make any representation concerning Fund shares except
those contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be
amended or supplemented from time to time, or in reports or proxy
statements for the Fund, or in sales literature or other promotional
material approved by the Fund or its designee or by you, except with
the permission of the Fund or you or the designee of either.
4. In consideration of the services and facilities described herein,
we shall be entitled to receive, and you shall pay or cause to be paid
to us, fees at an annual rate as set forth on the accompanying fee
schedule. We understand that the payment of such fees has been
authorized pursuant to, and shall be paid in accordance with, a
Distribution and Service Plan approved by the Board of Trustees of the
applicable Fund, by those Trustees who are not "interested persons" of
the Fund (as defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of the Distribution and
Service Plan or in any agreements related to the Distribution and
Service Plan ("Qualified Trustees"), and by shareholders of such
class; and that such fees are subject to change during the term of
this Contract and shall be paid only so long as this Contract is in
effect. We also understand and agree that, notwithstanding anything
to the contrary, if at any time payment of all such fees would, in
your reasonable determination, conflict with the limitations on sales
or service charges set forth in Section 2830(d) of the NASD Conduct
Rules, then such fees shall not be paid; provided that in such event
each Fund's Board of Trustees may, but is not required to, establish
procedures to pay such fees, or a portion thereof, in such manner and
amount as they shall deem appropriate.
5. We agree to conduct our activities in accordance with any
applicable federal or state laws and regulations, including securities
laws and any obligation thereunder to disclose to our clients the
receipt of fees in connection with their investment in Variable
Products.
6. This Contract shall continue in force for one year from the
effective date (see below), and thereafter shall continue
automatically for successive annual periods, provided such continuance
is specifically subject to termination without penalty at any time if
a majority of each Fund's Qualified Trustees or a majority of the
outstanding voting securities (as defined in the 1940 Act) of the
applicable class vote to terminate or not to continue the Distribution
and Service Plan. Either of us also may cancel this Contract without
penalty upon telephonic or written notice to the other; and upon
telephonic or written notice to us, you may also amend or change any
provision of this Contract. This Contract will also terminate
automatically in the event of its assignment (as defined in the 1940
Act).
7. All communications to you shall be sent to you at your offices, 82
Devonshire Street, Boston, MA 02109. Any notice to us shall be duly
given if mailed or telegraphed to us at the address shown in this
Contract.
8. This Contract shall be construed in accordance with the laws of
the Commonwealth of Massachusetts.
Very truly yours,
____________________________________________________
Name of Qualified Recipient (Please Print or Type)
____________________________________________________
Street
____________________________________________________
City State Zip Code
Date: ______________________________
FIDELITY DISTRIBUTORS CORPORATION
By: ______________________________________
Eric D. Roiter
NOTE: Please return TWO signed copies of this Service Contract to
Fidelity Distributors Corporation. Upon acceptance, one countersigned
copy will be returned to you.
FOR INTERNAL USE ONLY:
EFFECTIVE DATE: ___________________
FEE SCHEDULE FOR QUALIFIED RECIPIENTS OF
{Insert trust name and fund name}
(1) Those who have signed the Service Contract and who render
distribution, administrative support and recordkeeping services as
described in paragraph 1 of the Service Contract will hereafter be
referred to as "Qualified Recipients."
(2) A Qualified Recipient providing services pursuant to the Service
Contract will be paid a monthly fee at an annualized rate of __ basis
points of the average aggregate net assets of its clients invested in
Service Class 2 shares of the Funds listed above.
(3) In addition, a Qualified Recipient providing services pursuant
to the Service Contract will be paid a quarterly fee at an annualized
rate of __ basis points of the average aggregate net assets of its
clients invested in Service Class 2 Shares of the Funds listed above.
In order to be assured of receiving full payment under this paragraph
(3) for a given calendar quarter, a Qualified Recipient must have
insurance company clients with a minimum of $_____ of average net
assets in the aggregate in the Funds listed below. For any calendar
quarter during which assets in these Funds are in the aggregate less
than $___, the amount of qualifying assets may be considered to be
zero for the purpose of computing the payments due under this
paragraph (3), and the payments under this paragraph (3) may be
reduced or eliminated.
{Insert trust name and fund name}
Exhibit g(9)
Form of
FIDELITY GROUP
REPO CUSTODIAN AGREEMENT
FOR JOINT TRADING ACCOUNT
AGREEMENT dated as of ______, among THE BANK OF NEW YORK, a banking
corporation organized under the laws of the State of New York ("Repo
Custodian"), J.P. MORGAN SECURITIES INC. ("Seller") and each of the
entities listed on Schedule A-1, A-2, A-3 and A-4 (collectively, the
"Funds" and each a "Fund") hereto, acting on behalf of itself or (i)
in the case of the Funds listed on Schedule A-1 or A-2 hereto which
are portfolios or series, acting through the series company listed on
Schedule A-1 or A-2 hereto, (ii) in the case of the accounts listed on
Schedule A-3 hereto, acting through Fidelity Management & Research
Company, and (iii) in the case of the commingled or individual
accounts listed on Schedule A-4 hereto, acting through Fidelity
Management Trust Company (collectively, the "Funds" and each, a
"Fund").
WITNESSETH
WHEREAS, each of the Funds has entered into a master repurchase
agreement dated as of ___________, (the "Master Agreement") with
Seller pursuant to which from time to time one or more of the Funds,
as buyers, and Seller, as seller, may enter into repurchase
transactions effected through one or more joint trading accounts
(collectively, the "Joint Trading Account") established and
administered by one or more custodians of the Funds identified on
Schedule C hereto (each a "Custodian"); and,
WHEREAS, in each such repurchase transaction Seller will sell to such
Funds certain Securities (as hereinafter defined) selected from
Eligible Securities (as hereinafter defined) held by Repo Custodian,
subject to an agreement by Seller to repurchase such Securities; and
WHEREAS, Repo Custodian currently maintains a cash and securities
account (the "Seller Account") for Seller for the purpose of, among
other things, effecting repurchase transactions hereunder; and
WHEREAS, the Funds desire that the Repo Custodian serve as the
custodian for the Funds in connection with the repurchase transactions
effected hereunder, and that the Repo Custodian hold cash, Cash
Collateral (as hereinafter defined) and Securities for the Funds for
the purpose of effecting repurchase transactions hereunder.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Definitions.
Whenever used in this Agreement, the following terms shall have the
meanings set forth below:
(a) "Banking Day" shall mean any day on which the Funds, Seller
Custodian, Repo Custodian, and the Federal Reserve Banks where the
Custodian and the Repo Custodian are located, are each open for
business.
(b) "Cash Collateral" shall mean all cash, denominated in U.S.
Dollars, credited by Repo Custodian to a Transaction Account pursuant
to Paragraphs 3, 6, 8 or 9 of the Master Agreement.
(c) "Custodian" shall have the meaning set forth in the preamble of
this Agreement.
(d) "Eligible Securities" shall mean those securities which are
identified as permissible securities for a particular Transaction
Category.
(e) "FICASH I Transaction" and "FICASH III Transaction " shall mean a
repurchase transaction in which the Repurchase Date is the Banking Day
next following the Sale Date and for which securities issued by the
government of the United States of America that are direct obligations
of the government of the United States of America shall constitute
Eligible Securities.
(f) "FICASH II Transaction" shall mean a repurchase transaction in
which the Repurchase Date is the Banking Day next following the Sale
Date and for which one or more of the following two categories of
securities, as specified by the Funds, shall constitute Eligible
Securities: (x) securities issued by the government of the United
States of America that are direct obligations of the government of the
United States of America, or (y) securities issued by or guaranteed as
to principal and interest by the government of the United States of
America, or by its agencies and/or instrumentalities, including, but
not limited to, the Federal Home Loan Bank, Federal Home Loan Mortgage
Corp., Government National Mortgage Association, Federal National
Mortgage Association, Federal Farm Credit Bank, Federal Intermediate
Credit Bank, Banks for Cooperatives, and Federal Land Banks.
(g) "FITERM I Transaction" and "FITERM III Transaction" shall mean a
repurchase transaction in which the Repurchase Date is a date fixed by
agreement between Seller and the Participating Funds which is not the
Banking Day next following the Sale Date and for which securities
issued by the government of the United States of America that are
direct obligations of the government of the United States of America
shall constitute Eligible Securities.
(h) "FITERM II Transaction" shall mean a repurchase transaction in
which the Repurchase Date is a date fixed by agreement between Seller
and the Participating Funds which is not the Banking Day next
following the Sale Date and for which one or more of the following two
categories of securities, as specified by the Funds, shall constitute
Eligible Securities: (x) securities issued by the government of the
United States of America that are direct obligations of the government
of the United States of America, or (y) securities issued by or
guaranteed as to principal and interest by the government of the
United States of America, or by its agencies and/or instrumentalities,
including, but not limited to, the Federal Home Loan Bank, Federal
Home Loan Mortgage Corp., Government National Mortgage Association,
Federal National Mortgage Association, Federal Farm Credit Bank,
Federal Intermediate Credit Bank, Banks for Cooperatives, and Federal
Land Banks.
(i) "Fund" shall have the meaning set forth in the preamble of this
Agreement.
(j) "Fund Agent" shall mean the agent for the Participating Funds
designated in Paragraph 18 of the Master Agreement.
(k) "Joint Trading Account" shall have the meaning set forth in the
preamble of this Agreement.
(l) "Margin Percentage" with respect to any repurchase transaction
shall be 102% or such other percentage as is agreed to by Seller and
the Participating Funds (except that in no event shall the Margin
Percentage be less than 100%).
(m) "Market Value" shall have the meaning set forth in Paragraph 4 of
the Master Agreement.
(n) "Master Agreement" shall have the meaning set forth in the
preamble of this Agreement.
(o) "1940 Act" shall mean have the meaning set forth in Paragraph
3(c) of this Agreement.
(p) "Partial Payment" shall have the meaning set forth in Section
4(g) of this Agreement.
(q) "Participating Funds" shall mean those Funds that are parties to
a particular repurchase transaction effected through the Joint Trading
Account.
(r) "Pricing Rate" shall mean the per annum percentage rate agreed to
by Seller and the Participating Funds for a repurchase transaction.
(s) "Pricing Services" shall have the meaning set forth in Paragraph
7 of this Agreement.
(t) "Repo Custodian" shall have the meaning set forth in the preamble
of this Agreement.
(u) "Repurchase Date" shall mean the date fixed by agreement between
Seller and the Participating Funds on which the Seller is to
repurchase Securities and Cash Collateral, if any, from the
Participating Funds and the Participating Funds are to resell the
Securities and Cash Collateral, if any, including any date determined
by application of the provisions of Paragraphs 7 and 15 of the Master
Agreement.
(v) "Repurchase Price" for each repurchase transaction shall mean the
Sale Price, plus an incremental amount determined by applying the
Pricing Rate to the Sale Price, calculated on the basis of a 360-day
year and the number of actual days elapsed from (and including) the
Sale Date to (but excluding) the Repurchase Date.
(w) "Sale Date" shall mean the Banking Day on which Securities and
Cash Collateral, if any, are to be sold to the Participating Funds by
Seller pursuant to a repurchase transaction hereunder.
(x) "Sale Price" shall mean the price agreed upon by the
Participating Funds and Seller at which the Securities and Cash
Collateral, if any, are to be sold to the Participating Funds by
Seller.
(y) "Securities" shall mean all Eligible Securities delivered by
Seller or to be delivered by Seller to the Participating Funds
pursuant to a particular repurchase transaction and not yet
repurchased hereunder, together with all rights related thereto and
all proceeds thereof.
(z) "Securities System" shall have the meaning set forth in Paragraph
3(c) of this Agreement.
(aa) "Seller" shall have the meaning set forth in the preamble to
this Agreement.
(bb) "Seller Account" shall have the meaning set forth in the
preamble of this Agreement.
(cc) "Transaction Account" shall mean a cash account established and
maintained by Repo Custodian for the Funds to effect repurchase
transactions pursuant to the Master Agreement.
(dd) "Transaction Category" shall mean the particular type of
repurchase transaction effected hereunder, as determined with
reference to the term of the transaction and the categories of
Securities that constitute Eligible Securities therefor, which term
shall include FICASH I Transactions, FICASH II Transactions, FICASH
III Transactions, FITERM I Transactions, FITERM II Transactions,
FITERM III Transactions, and such other transaction categories as may
from time to time be designated by the Funds by notice to Seller,
Custodian and Repo Custodian.
2. Appointment of Repo Custodian. Upon the terms and conditions set
forth in this Agreement, Repo Custodian is hereby appointed by the
Funds to act as the custodian for the Participating Funds to hold
cash, Cash Collateral and Securities for the purpose of effecting
repurchase transactions for the Participating Funds through the Joint
Trading Account pursuant to the Master Agreement. Repo Custodian
hereby acknowledges the terms of the Master Agreement between the
Funds and Seller (attached as an Exhibit hereto), as amended from time
to time, and agrees to abide by the provisions thereof to the extent
such provisions relate to the responsibilities and operations of Repo
Custodian hereunder.
3. Maintenance of Transaction Accounts.
(a) Repo Custodian shall establish and maintain one or more
Transaction Accounts for the purpose of effecting repurchase
transactions hereunder for the Funds, in each case pursuant to the
Master Agreement. From time to time the Funds may cause Custodian, on
behalf of the Funds, to deposit Securities and cash with Repo
Custodian in the designated Transaction Account, in each case in
accordance with Paragraph 3 of the Master Agreement.
(b) Repo Custodian shall keep all Securities, cash and Cash
Collateral received for the Participating Funds segregated at all
times from those of any other person, firm or corporation in its
possession and shall identify all such Securities, cash and Cash
Collateral as subject to this Agreement and the Master Agreement.
Segregation may be accomplished by physical segregation with respect
to certificated securities held by the Repo Custodian and, in
addition, by appropriate identification on the books and records of
Repo Custodian in the case of all other Securities, cash and Cash
Collateral. Title to all Securities and Cash Collateral under a
repurchase transaction shall pass to the Participating Funds that are
parties to such repurchase transaction. All such Securities and Cash
Collateral shall be held by Repo Custodian for the Participating
Funds, and shall be subject at all times to the proper instructions of
the Participating Funds, or the Custodian on behalf of the
Participating Funds, with respect to the holding, transfer or
disposition of such Securities and Cash Collateral. Repo Custodian
shall include in its records for each Transaction Account all
instructions received by it which evidence an interest of the
Participating Funds in the Securities and Cash Collateral and shall
hold physically segregated any written agreement, receipt or other
writing received by it which evidences an interest of the
Participating Funds in the Securities and Cash Collateral.
(c) Any requirement to "deliver" or "transfer" cash or Cash
Collateral to the Participating Funds or to "credit" a Transaction
Account under this or any other paragraph of this Agreement shall be
made in immediately available funds. If Repo Custodian is required to
"deliver" or "transfer" Securities to the Participating Funds under
this or any other paragraph of this Agreement, Repo Custodian shall
take, or cause to be taken, the following actions to perfect the
Participating Funds' interest in such Securities as an outright
purchaser: (i) in the case of certificated securities and instruments
held by Seller, by physical delivery of the share certificates or
other instruments representing the Securities and by physical
segregation of such certificates or instruments from the Repo
Custodian's other assets in a manner indicating that the Securities
are being held for the Participating Funds (such securities and
instruments to be delivered in form suitable for transfer or
accompanied by duly executed instruments of transfer or assignment in
blank and accompanied by such other documentation as the Participating
Funds may request), (ii) in the case of Securities held in a customer
only account in a clearing agency or federal book-entry system
authorized for use by the Funds and meeting the requirements of Rule
17f-4 under the Investment Company Act of 1940, as amended (the "1940
Act") (such authorized agency or system being referred to herein as a
"Securities System"), by appropriate entry on the books and records of
Repo Custodian identifying the Securities as belonging to the
Participating Funds, or (iii) in the case of Securities held in Repo
Custodian's own account in a Securities System, by transfer to a
customer only account in the Securities System and by appropriate
entry on the books and records of Repo Custodian identifying such
Securities as belonging to the Participating Funds; provided, further,
that Repo Custodian shall confirm to the Participating Funds the
identity of the Securities transferred or delivered. Acceptance of a
"due bill", "trust receipt" or similar receipt or notification of
segregation issued by a third party with respect to Securities held by
such third party shall not constitute good delivery of Securities to
Repo Custodian for purposes of this Agreement or the Master Agreement
and shall expressly violate the terms of this Agreement and the Master
Agreement. The Funds shall identify by notice to Repo Custodian and
Seller those agencies or systems which have been approved by the Funds
for use under this Agreement and the Master Agreement. The Funds
hereby notify Repo Custodian and Seller that the following agencies
and systems have been approved by the Funds for use under this
Agreement and the Master Agreement, until such time as Repo Custodian
and Seller shall have been notified by the Funds to the contrary: (i)
Participants Trust Company; (ii) The Depository Trust Company; and
(iii) any book-entry system as provided in (A) Subpart O of Treasury
Circular No. 300, 31 CFR 306.115, (B) Subpart B of Treasury Circular
Public Debt Series No. 27-76, 31 CFR 350.2, or (C) the book-entry
regulations of federal agencies substantially in the form of 31 CFR
306.115.
4. Repurchase Transactions.
(a) Repo Custodian shall make all credits and debits to the
Transaction Account and effect the transfer of Securities to or from
the Participating Funds upon proper instructions received from the
Participating Funds, or the Custodian on behalf of the Participating
Funds, and shall make all credits and debits to the Seller Account and
effect the transfer of Securities to or from the Seller upon proper
instructions received from Seller. In the event that Repo Custodian
receives conflicting proper instructions from Seller and the
Participating Funds, or the Custodian on behalf of the Participating
Funds, Repo Custodian shall follow the Participating Funds' or the
Custodian's proper instructions. The Participating Funds shall give
Repo Custodian only such instructions as shall be permitted by the
Master Agreement. Notwithstanding the preceding sentence, the
Participating Funds, or the Custodian on behalf of the Participating
Funds, may from time to time instruct Repo Custodian to transfer cash
from the Transaction Account to Custodian.
(b) (i) Whenever on any Banking Day one or more Funds and Seller agree
to enter into a repurchase transaction, Seller and the Participating
Funds, or the Custodian on behalf of the Participating Funds, will
give Repo Custodian proper instructions by telephone or otherwise on
the Sale Date, specifying the Transaction Category, Repurchase Date,
Sale Price, Repurchase Price or the applicable Pricing Rate and the
Margin Percentage for each such repurchase transaction.
(ii) In the case of repurchase transactions in which the Repurchase
Date is the Banking Day next following the Sale Date (x) the
Participating Funds may increase or decrease the Sale Price for any
such repurchase transaction by no more than 10% of the initial Sale
Price by causing to be delivered further proper instructions by
telephone or otherwise to Repo Custodian prior to the close of
business on the Sale Date and (y) Seller and the Participating Funds
may by mutual consent agree to increase or decrease the Sale Price by
more than 10% of the initial Sale Price by causing to be provided
further proper instructions to Repo Custodian by the close of business
on the Sale Date. In any event, Repo Custodian shall not be
responsible for determining whether any such increase or decrease of
the Sale Price exceeds the 10% limitation.
(c) Seller will take such actions as are necessary to ensure that on
the Sale Date the aggregate Market Value of all Securities held by
Repo Custodian for Seller and cash in the Seller Account equals or
exceeds the Margin Percentage of the Sale Price. Seller shall give
Repo Custodian proper instructions specifying with respect to each of
the Securities which is to be the subject of a repurchase transaction
(a) the name of the issuer and the title of the Securities, and (b)
the Market Value of such Securities. Such instructions shall
constitute Seller's instructions to Repo Custodian to transfer the
Securities to the Participating Funds and/or Cash Collateral from the
Seller Account to the Transaction Account.
(d) Prior to the close of business on the Sale Date, the
Participating Funds shall transfer to, or maintain on deposit with,
Repo Custodian in the Transaction Account immediately available funds
in an amount equal to the Sale Price with respect to a particular
repurchase transaction.
(e) Prior to the close of business on the Sale Date, Repo Custodian
shall transfer Securities from Seller to the Participating Funds
and/or cash held in the Seller Account to the Transaction Account and
shall transfer to the Seller Account immediately available funds from
the Transaction Account in accordance with the following provisions:
(i) Repo Custodian shall determine that all securities to be
transferred by Seller to the Participating Funds are Eligible
Securities. Any securities which are not Eligible Securities for a
particular repurchase transaction hereunder shall not be included in
the calculations set forth below and shall not be transferred to the
Participating Funds.
(ii) Repo Custodian shall then calculate the aggregate Market Value
of the Securities and cash, if any, to be so transferred.
(iii) Repo Custodian shall notify Seller in the event that the
aggregate Market Value of Securities and cash, if any, applicable to
the repurchase transaction is less than the Margin Percentage of the
Sale Price and Seller shall transfer, by the close of business on the
Sale Date, to Repo Custodian additional Securities and/or cash in the
amount of such deficiency. If Seller does not, by the close of
business on the Sale Date, transfer additional Securities and/or cash,
the Market Value of which equals or exceeds such deficiency, Repo
Custodian may, at its option, without notice to Seller, advance the
amount of such deficiency to Seller in order to effectuate the
repurchase transaction. It is expressly agreed that Repo Custodian is
not obligated to make an advance to Seller to enable it to complete
any repurchase transaction.
(iv) Subject to the provisions of Subparagraph (v) below, Repo
Custodian shall cause the Securities applicable to the repurchase
transaction received from Seller to be transferred to the
Participating Funds and shall cause any cash received from Seller to
be transferred to the Transaction Account, against transfer of the
Sale Price from the Transaction Account to the Seller Account, such
transfers of Securities and/or cash and funds to occur simultaneously
on a delivery versus payment basis.
(v) Notwithstanding anything to the contrary, if, for any repurchase
transaction, the amount of immediately available funds in the
Transaction Account is less than the agreed upon Sale Price in
connection with the repurchase transaction immediately prior to
effectuating such repurchase transaction, or if the aggregate Market
Value of the Securities and cash, if any, applicable to such
repurchase transaction is less than the Sale Price multiplied by the
Margin Percentage immediately prior to effectuating such repurchase
transaction, Repo Custodian shall effect the repurchase transaction to
the best of its ability by transferring Securities from Seller to the
Participating Funds and/or cash from the Seller Account to the
Transaction Account with an aggregate Market Value equal to the lesser
of (x) the amount of immediately available funds in the Transaction
Account multiplied by the Margin Percentage and (y) the aggregate
Market Value of the Securities available for transfer from Seller to
the Participating Funds and cash, if any, in the Seller Account,
against the transfer of immediately available funds from the
Transaction Account to the Seller Account in an amount equal to the
aggregate Market Value of the Securities and/or cash to be transferred
divided by the Margin Percentage; provided, however, that in either
such event Repo Custodian shall have the right not to transfer to the
Participating Funds such Securities and not to transfer such cash, if
any, to the Transaction Account and not to transfer from the
designated Transaction Account such funds as Repo Custodian
determines, in its sole discretion, will not be the subject of a
repurchase transaction. The actions of Repo Custodian pursuant to
this subparagraph (e)(v) shall not affect the obligations and
liabilities of the parties to each other pursuant to the Master
Agreement with regard to such repurchase transaction.
(f) In the event that on a Banking Day Seller desires to substitute
Securities applicable to such repurchase transaction with Eligible
Securities and/or Cash Collateral (to the extent provided in the
Master Agreement), Repo Custodian shall perform such substitution in
accordance with the following provisions:
(i) Repo Custodian shall determine that all securities to be
transferred to the Participating Funds are Eligible Securities. Any
securities which are not eligible for repurchase transactions
hereunder shall not be included in the calculations set forth below
and shall not be transferred to the Participating Funds.
(ii) Repo Custodian shall then calculate the aggregate Market Value
of the Eligible Securities and/or Cash Collateral to be transferred.
Repo Custodian shall not make any substitution if, at the time of
substitution, the aggregate Market Value of all Securities and any
Cash Collateral applicable to such repurchase transaction immediately
after such substitution would be less than the Margin Percentage of
the Repurchase Price (calculated as if the Repurchase Date were the
date of substitution).
(iii) Repo Custodian shall then deliver to the Seller, subject to the
qualifications set forth above, the Securities to be substituted
against the delivery by Repo Custodian of substitute Eligible
Securities to the Participating Funds and/or the crediting of the
Transaction Account with Cash Collateral.
(iv) In the event Seller has caused Repo Custodian to credit the
Transaction Account with Cash Collateral in lieu of substitute
Eligible Securities, and has failed to deliver Eligible Securities
against such Cash Collateral not later than the close of business on
such Banking Day in accordance with the terms of the Master Agreement,
Repo Custodian shall promptly, but in no event later than 10:00 a.m.
the following Banking Day, notify the Participating Funds and Seller
of such failure.
(g) With respect to each repurchase transaction, at 10:00 a.m. New
York time, or at such other time as specified in proper instructions
of the Participating Funds (or the Custodian on behalf of the
Participating Funds) on the Repurchase Date, Repo Custodian shall
debit the Seller Account and credit the Transaction Account in the
amount of the Repurchase Price and shall transfer Securities from the
Participating Funds to the Seller and Cash Collateral, if any, from
the Transaction Account to the Seller Account in accordance with the
following provisions:
(i) If the amount of available funds in the Seller Account equals or
exceeds the Repurchase Price, Repo Custodian shall debit the Seller
Account and credit the Transaction Account in the amount of the
Repurchase Price and shall transfer all Securities applicable to such
repurchase transaction from the Participating Funds to the Seller and
debit the Transaction Account and credit the Seller Account in the
amount of any Cash Collateral applicable to such repurchase
transaction.
(ii) If the amount of available funds in the Seller Account is less
than the Repurchase Price, then Repo Custodian shall notify the Seller
of the amount of the deficiency and Seller shall promptly cause such
amount to be transferred to the Seller Account. If Seller fails to
cause the transfer of the entire amount of the deficiency to the
Seller Account, then Repo Custodian may, at its option and without
notice to Seller, advance to Seller the amount of such remaining
deficiency. It is expressly agreed that Repo Custodian is not
obligated to make any advance to Seller. If, following such transfer
and/or advance, the amount of available funds in the Seller Account
equals or exceeds the Repurchase Price then Repo Custodian shall debit
the Seller Account and credit the Transaction Account in the amount of
the Repurchase Price and shall transfer from the Participating Funds
to the Seller all Securities applicable to such repurchase transaction
and debit the Transaction Account and credit the Seller Account in the
amount of any Cash Collateral applicable to such repurchase
transaction.
(iii) If the Seller fails to cause the transfer of the entire amount
of the deficiency, as required by (ii) above, and Repo Custodian fails
to advance to Seller an amount sufficient to eliminate the entire
deficiency, then Repo Custodian shall debit the Seller Account in the
amount of all immediately available funds designated by Seller as
applicable to the repurchase transaction and credit the Transaction
Account in such amount (such amount being referred to as the "Partial
Payment") and shall transfer Securities from the Participating Funds
to the Seller such that the aggregate Market Value of all remaining
Securities and Cash Collateral in the Transaction Account with respect
to such repurchase transaction shall at least equal the difference
between Margin Percentage of the Repurchase Price and the Partial
Payment.
5. Payments on Securities. Repo Custodian shall credit to the Seller
Account as soon as received, all principal, interest and other sums
paid by or on behalf of the issuer in respect of the Securities and
collected by Repo Custodian, except as otherwise provided in Paragraph
8 of the Master Agreement.
6. Daily Statement. On each Banking Day on which any Participating
Funds have an outstanding repurchase transaction, Repo Custodian shall
deliver by facsimile to Custodian and to the Participating Funds a
statement identifying the Securities held by Repo Custodian with
respect to such repurchase transaction and the cash and Cash
Collateral, if any, held by Repo Custodian in the Transaction Account,
including a statement of the then current Market Value of such
Securities and the amounts, if any, credited to the Transaction
Account as of the close of trading on the previous Banking Day. Repo
Custodian shall also deliver to Custodian and the Participating Funds
such additional statements as the Participating Funds may reasonably
request.
7. Valuation.
(a) Repo Custodian shall confirm the Market Value of Securities and
the amount of Cash Collateral, if any (i) on the Sale Date prior to
transferring the Sale Price out of the Transaction Account to the
Seller Account against the receipt from Seller of the Securities and
Cash Collateral, if any, and (ii) on each Banking Day on which such
repurchase transaction is outstanding. If on any Banking Day the
aggregate Market Value of the Securities and Cash Collateral with
respect to any repurchase transaction is less than the Margin
Percentage of the Repurchase Price (calculated as if the Repurchase
Date were such Banking Day) for such transaction, Repo Custodian shall
promptly, but in any case no later than 10:00 a.m. the following
Banking Day, notify Seller. If on any Banking Day the aggregate
market value of the Securities and Cash Collateral with respect to any
repurchase transaction is less than the Margin Percentage of the
Repurchase Price (calculated as if the Repurchase Date were such
Banking Day) for such transaction, and Seller fails to deliver
additional Eligible Securities applicable to such repurchase
transaction or an additional amount of Cash Collateral by the close of
business on such Banking Day such that the aggregate market value of
the Securities and Cash Collateral at least equals the Margin
Percentage of the Repurchase Price (calculated as if the Repurchase
Date were such Banking Day), Repo Custodian shall promptly, but in any
event no later than 10:00 a.m. the following Banking Day, notify the
Participating Funds of such failure. For purposes of determining
Seller's margin maintenance requirements on the Sale Date for
repurchase transactions in which the Repurchase Date is the Banking
Day immediately following the Sale Date, such aggregate market value
shall equal at least the Margin Percentage of the Sale Price.
(b) Repo Custodian shall determine the bid side portion of the Market
Value of the Securities by reference to the independent pricing
services ("Pricing Services") set forth on Schedule B. It is
understood and agreed that Repo Custodian shall use the prices made
available by the Pricing Services on the Banking Day of such
determination unless Seller and the Participating Funds mutually agree
that some other prices shall be used and so notify Repo Custodian by
proper instructions of the sum of the prices of all such Securities
priced in such different manner. In the event that Repo Custodian is
unable to obtain a valuation of any Securities from the Pricing
Services, Repo Custodian shall request a bid quotation from a broker's
broker or a broker dealer, set forth in Schedule B, other than Seller.
In the event Repo Custodian is unable to obtain a bid quotation for
any Securities from such a broker's broker or a broker dealer, Repo
Custodian (i) shall not include any such Securities in the
determination of whether the aggregate Market Value of the Securities
and any Cash Collateral equals at least the Margin Percentage of the
Repurchase Price and (ii) shall redeliver such Securities to Seller if
the Market Value of all other Securities and any Cash Collateral with
respect to such repurchase transaction equals at least the Margin
Percentage of the Repurchase Price (calculated as if the Repurchase
Date were such Banking Day). The Repo Custodian may rely on prices
quoted by Pricing Services, broker's brokers or broker dealers, except
Seller, as set forth in Schedule B.
(c) (i) If, on any Banking Day, the aggregate Market Value of the
Securities and any Cash Collateral with respect to a repurchase
transaction is less than the Margin Percentage of the Repurchase Price
(calculated as if the Repurchase Date were such Banking Day)
applicable to such repurchase transaction, Repo Custodian shall
deliver to the Participating Funds an amount of additional Eligible
Securities applicable to such repurchase transaction and/or debit the
Seller Account and credit the Transaction Account with an additional
amount of Cash Collateral, such that the aggregate Market Value of all
Securities and any Cash Collateral with respect to such repurchase
transaction shall equal at least the Margin Percentage of the
Repurchase Price (calculated as if the Repurchase Date were such
Banking Day) applicable to such repurchase transaction; except that,
for purposes of determining Seller's margin maintenance requirements
on the Sale Date for repurchase transactions in which the Repurchase
Date is the Banking Day immediately following the Sale Date, such
aggregate market value shall equal at least the Margin Percentage of
the Sale Price.
(ii) If, on any Banking Day, the aggregate Market Value of the
Securities and any Cash Collateral with respect to a repurchase
transaction exceeds the Margin Percentage of the Repurchase Price
(calculated as if the Repurchase Date were such Banking Day)
applicable to such repurchase transaction, Repo Custodian shall return
to the Seller all or a portion of such Securities or Cash Collateral,
if any; provided that the Market Value of the remaining Securities and
any Cash Collateral with respect to the repurchase transaction shall
be at least equal to the Margin Percentage of the Repurchase Price
(calculated as if the Repurchase Date were such Banking Day)
applicable to such repurchase transaction. At any time and from time
to time with respect to any repurchase transaction, if authorized by
the Participating Funds, or the Custodian on behalf of the
Participating Funds, the Repo Custodian shall debit the Transaction
Account by an amount of Cash Collateral and credit the Seller Account
by the same amount of Cash Collateral against simultaneous delivery
from Seller to the Participating Funds of Eligible Securities
applicable to such repurchase transaction with a Market Value at least
equal to the amount of Cash Collateral credited and debited.
8. Authorized Persons. Schedule C hereto sets forth those persons
who are authorized to act for Repo Custodian, Custodian, Seller and
the Funds, respectively, under this Agreement.
9. Proper Instructions. Proper instructions shall mean a tested
telex, facsimile, a written request, direction, instruction or
certification signed or initialed by or on behalf of the party giving
the instructions by one or more authorized persons (as provided in
Paragraph 8); provided, however, that no instructions directing the
delivery of Securities or the payment of funds to any individual who
is an authorized signatory of Custodian or Repo Custodian shall be
signed by that individual. Telephonic, other oral or
electro-mechanical or electronic instructions (including the code
which may be assigned by Repo Custodian to Custodian from time to
time) given by one of the above authorized persons shall also be
considered proper instructions if the party receiving such
instructions reasonably believes them to have been given by an
authorized person with respect to the transaction involved. Oral
instructions will be confirmed by tested telex, facsimile or in
writing in the manner set forth above. The Funds authorize Repo
Custodian to tape record any and all telephonic or other oral
instructions given to Repo Custodian. Proper instructions may relate
to specific transactions or to types or classes of transactions, and
may be in the form of standing instructions.
10. Standard of Care.
(a) Repo Custodian shall be obligated to exercise reasonable care and
diligence in carrying out the provisions of this Agreement and the
Master Agreement and shall be liable to each of the Funds and Seller
for any expenses or damages to the Funds or Seller for breach of Repo
Custodian's standard of care in this Agreement, as further provided in
this Paragraph. Repo Custodian assumes responsibility for loss to any
property held by it pursuant to the provisions of this Agreement which
is occasioned by the negligence of, or conversion, misappropriation or
theft by, Repo Custodian's officers, employees and agents. Repo
Custodian, at its option, may insure itself against loss from any
cause but shall be under no obligation to obtain insurance directly
for the benefit of the Funds. So long as and to the extent that Repo
Custodian exercises reasonable care and diligence and acts without
negligence, misfeasance or misconduct, Repo Custodian shall not be
liable to Seller or the Funds for (i) any action taken or omitted in
good faith in reliance upon proper instructions, (ii) any action taken
or omitted in good faith upon any notice, request, certificate or
other instrument reasonably believed by it to be genuine and to be
signed by the proper party or parties, (iii) any delay or failure to
act as may be required under this Agreement or under the Master
Agreement when such delay or failure is due to any act of God or war,
(iv) the actions or omissions of a Securities System, (v) the title,
validity or genuineness of any security received, delivered or held by
it pursuant to this Agreement or the Master Agreement, (vi) the
legality of the purchase or sale of any Securities by or to the
Participating Funds or Seller or the propriety of the amount for which
the same are purchased or sold (except to the extent of Repo
Custodian's obligations hereunder to determine whether securities are
Eligible Securities and to calculate the Market Value of Securities
and any Cash Collateral), (vii) the due authority of any person listed
on Schedule C to act on behalf of Custodian, Seller or the Funds, as
the case may be, with respect to this Agreement or (viii) the errors
of the Pricing Services, broker's brokers or broker dealers set forth
in Schedule B.
(b) Repo Custodian shall not be liable to Seller or the Funds for, or
considered to be the custodian of, any Eligible Securities or any
money to be used in a repurchase transaction, whether or not such
money is represented by any check, draft, or other instrument for the
payment of money, until the Eligible Securities have been delivered in
accordance with Paragraph 3 or until Repo Custodian actually receives
and collects such money on behalf of Seller or the Funds directly or
by the final crediting of the Seller Account or a Transaction Account
through the Securities System, except that this Paragraph 10(b) shall
not be deemed to limit the liability of Repo Custodian to Seller or
the Funds if the non-delivery of such Eligible Securities or the
failure to receive and collect such money results from the breach by
Repo Custodian of its obligations under this Agreement or the Master
Agreement.
(c) Repo Custodian shall not be under any duty or obligation to
ascertain whether any Securities at any time delivered to or held by
it are such as properly may be held by the Participating Funds;
provided that notwithstanding anything to the contrary herein, Repo
Custodian shall be obligated to act in accordance with the guidelines
and proper instructions of the Participating Funds, or the Custodian
on behalf of the Participating Funds, with respect to the types of
Eligible Securities and the issuers of such Eligible Securities that
may be used in specific repurchase transactions.
(d) Repo Custodian promptly shall notify the Fund Agent and the
Custodian if Securities held by Repo Custodian are in default or if
payment on any Securities has been refused after due demand and
presentation and Repo Custodian shall take action to effect collection
of any such amounts upon the proper instructions of the Participating
Funds, or the Custodian on behalf of the Participating Funds, and
assurances satisfactory to it that it will be reimbursed for its costs
and expenses in connection with any such action.
(e) Repo Custodian shall have no duties, other than such duties as
are necessary to effectuate repurchase transactions in accordance with
this Agreement and the Master Agreement within the standard of care
set forth in Paragraph 10(a) above and in a commercially reasonable
manner.
11. Representations and Additional Covenants of Repo Custodian.
(a) Repo Custodian represents and warrants that (i) it is duly
authorized to execute and deliver this Agreement and to perform its
obligations hereunder and has taken all necessary action to authorize
such execution, delivery and performance, (ii) the execution, delivery
and performance of this Agreement do not and will not violate any
ordinance, declaration of trust, partnership agreement, articles of
incorporation, charter, rule or statute applicable to it or any
agreement by which it is bound or by which any of its assets are
affected, (iii) the person executing this Agreement on its behalf is
duly and properly authorized to do so, (iv) it has (and will maintain)
a copy of this Agreement and evidence of its authorization in its
official books and records, and (v) this Agreement has been executed
by one of its duly authorized officers at the level of Vice President
or higher.
(b) Repo Custodian further represents and warrants that (i) it has
not pledged, encumbered, hypothecated, transferred, disposed of, or
otherwise granted, any third party an interest in any Securities, (ii)
it does not have any security interest, lien or right of setoff in the
Securities, and (iii) it has not been notified by any third party, in
its capacity as Repo Custodian, custodian bank or clearing bank, of
the existence of any lien, claim, charge or encumbrance with respect
to any Securities that are the subject of such repurchase transaction.
Repo Custodian agrees that (i) it will not pledge, encumber,
hypothecate, transfer, dispose of, or otherwise grant, any third party
an interest in any Securities, (ii) it will not acquire any security
interest, lien or right of setoff in the Securities, and (iii) it will
promptly notify the Fund Agent, if, during the term of any outstanding
repurchase transaction, it is notified by any third party, in its
capacity as Repo Custodian, custodian bank or clearing bank, of the
Participating Funds or Seller, of the existence of any lien, claim,
charge or encumbrance with respect to any Securities that are the
subject of such repurchase transaction.
12. Indemnification.
(a) Notwithstanding the Participating Fund's obligation to the Repo
Custodian under Paragraph 12(b) below, so long as and to the extent
that Repo Custodian is in the exercise of reasonable care and
diligence and acts without negligence, misfeasance or misconduct,
Seller will indemnify Repo Custodian and hold it harmless against any
and all losses, claims, damages, liabilities or actions to which it
may become subject, and reimburse it for any expenses (including
attorneys' fees and expenses) incurred by it in connection therewith,
insofar as such losses, claims, damages, liabilities or actions arise
out of or are based upon or in any way related to this Agreement, the
Master Agreement or those arrangements. Without limiting the
generality of the foregoing indemnification, Repo Custodian shall be
indemnified by Seller for all costs and expenses, including attorneys'
fees, for its successful defense against claims that Repo Custodian
breached its standard of care and was negligent or engaged in
misfeasance or misconduct.
(b) So long as and to the extent that Repo Custodian is in the
exercise of reasonable care and diligence and acts without negligence,
misconduct or misfeasance, the Participating Funds will indemnify Repo
Custodian and hold it harmless against any and all losses, claims,
damages, liabilities or actions to which it may become subject, and
reimburse it for any expenses (including attorneys' fees and expenses)
incurred by it in connection therewith, insofar as such losses,
claims, damages, liabilities or actions result from the negligence,
misconduct or misfeasance of the Participating Funds under this
Agreement.
13. Rights and Remedies. The rights and remedies conferred upon the
parties hereto shall be cumulative, and the exercise or waiver of any
thereof shall not preclude or inhibit the exercise of any additional
rights and remedies.
14. Modification or Amendment. Except as otherwise provided in this
Paragraph 14, no modification, waiver or amendment of this Agreement
shall be binding unless in writing and executed by the parties hereto.
Schedule A, listing the Funds, may be amended from time to time to add
or delete Funds by the Funds (i) delivering an executed copy of an
addendum to Schedule A to Seller and Repo Custodian, and (ii)
amending Schedule A to the Master Agreement in accordance with the
provisions therein. The amendment of Schedule A as provided above
shall constitute appointment of Repo Custodian as a custodian for such
Fund. Schedule B may be amended from time to time by an instrument in
writing, or counterpart thereof, executed by Repo Custodian, Seller
and the Funds. Schedule C may be amended from time to time to change
an authorized person of: (i) the Funds, by written notice to Repo
Custodian and Seller by Ms. Sarah Zenoble or the Treasurer of the
Funds (or such persons who may be authorized from time to time in
writing by Ms. Zenoble or the President or Treasurer of Fidelity
Management and Research Company to trade on behalf of Fidelity's
taxable money market funds); (ii) Seller, by written notice to Repo
Custodian and the Funds by any Vice President of Seller; (iii) Repo
Custodian, by written notice to Seller, Custodian and the Funds by any
Vice President of Repo Custodian; and (iv) Custodian, by written
notice to Repo Custodian by any Vice President of Custodian. Schedule
D may be amended from time to time by any party hereto by delivery of
written notice to the other parties hereto. Repo Custodian shall
receive notice of any amendment to the Master Agreement at the address
set forth in Schedule D hereto; and, if such amendment would have a
material adverse effect on the rights of, or would materially increase
the obligations of Repo Custodian under this Agreement, any such
amendment shall also require the consent of Repo Custodian. Any such
amendment shall be deemed not to be material if Repo Custodian fails
to object in writing within 21 days after receipt of notice thereof.
No amendment to this Agreement shall affect the rights or obligations
of any Fund with respect to any outstanding repurchase transaction
entered into under this Agreement and the Master Agreement prior to
such amendment or with respect to any actions or omissions by any
party hereto prior to such amendment. In the event of conflict
between this Agreement and the Master Agreement, the Master Agreement
shall control.
15. Termination. This Agreement shall terminate forthwith upon
termination of the Master Agreement or may be terminated by any party
hereto on ten Banking Days' written notice to the other parties;
provided, however, that any such termination shall not affect any
repurchase transaction then outstanding or any rights or obligations
under this Agreement or the Master Agreement with respect to any
actions or omissions of any party hereto prior to termination. In the
event of termination, Repo Custodian will deliver any Securities, Cash
Collateral or cash held by it or any agent to Custodian or to such
successor custodian or custodian or subcustodian as the Participating
Funds shall instruct.
16. Compensation. Seller agrees to pay Repo Custodian compensation
for the services to be rendered hereunder, based upon rates which
shall be agreed upon from time to time.
17. Notices. Except with respect to communications between Custodian
and the Funds which shall be governed by the custodian agreement or
subcustodian agreement between such parties, as the case may be, and
except as otherwise provided herein or as the parties to the Agreement
shall from time to time otherwise agree, all instructions, notices,
reports and other communications contemplated by this Agreement shall
be given to the party entitled to receive such notice at the telephone
number and address listed on Schedule D hereto.
18. Severability. If any provision of this Agreement is held to be
unenforceable as a matter of law, the other terms and provisions
hereof shall not be affected thereby and shall remain in full force
and effect.
19. Binding Nature. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their successors and
assignees; provided that, no party hereto may assign this Agreement or
any of the rights or obligations hereunder without the prior written
consent of the other parties.
20. Headings. Section headings are for reference purposes only and
shall not be construed as a part of this Agreement.
21. Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one
instrument.
22. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
23. Limitation of Liability. Seller is hereby expressly put on
notice that the Declarations of Trust or the Certificates and
Agreements of Limited Partnership, as the case may be, of each
Participating Fund contain a limitation of liability provision
pursuant to which the obligations assumed by such Participating Fund
hereunder shall be limited in all cases to such Participating Fund and
its assets or, in the case of a series Fund, to the assets of that
series only, and neither Seller nor its respective agents or assigns
shall seek satisfaction of any such obligation from the officers,
employees, agents, directors, trustees, shareholders or partners of
any such Participating Fund or series.
24. Rights and Obligations of Each Fund. The rights and obligations
set forth in this Agreement with respect to each repurchase
transaction shall accrue only to the Participating Funds in accordance
with their respective interests therein. No other Fund shall receive
any rights or have any liabilities arising from any action or inaction
of any Participating Fund under this Agreement with respect to such
repurchase transaction.
25. General Provisions. This Agreement supersedes any other
custodian agreement by and among Seller, the Funds, and Repo Custodian
concerning repurchase transactions effected through the Joint Trading
Account. It is understood and agreed that time is of the essence with
respect to the performance of each party's respective obligations
hereunder.
26. Disclosure Relating to Certain Federal Protections
The parties acknowledge that they have been advised that:
(a) In the case of transactions in which one of the parties is a
broker or dealer registered with the SEC under Section 15 of the
Exchange Act, the Securities Investor Protection Corporation has taken
the position that the provisions of the Securities Investor Protection
Act of 1970 (the "SIPA") do not protect the other party with respect
to any transaction hereunder; and
(b) In the case of transactions in which one of the parties is a
government securities broker or a government securities dealer
registered with the SEC under Section 15C of the Exchange Act, SIPA
will not provide protection to the other party with respect to any
transaction hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
[Signature Lines Omitted]
SCHEDULE B
PRICING SOURCES
PRICING SERVICES
U.S. Government Securities Interactive Data Services or Mellon Data
Services (or any other pricing service mutually agreed upon by Seller
and the Funds)
GNMA - The Bond Buyer
FHLMC - The Bond Buyer
All other U.S. Government
and Agency Securities Interactive Data Services or Mellon Data
Services (or any other pricing service mutually agreed upon by Seller
and the Funds)
BROKERS' BROKERS AND BROKER DEALERS
U.S. Government Securities - Any Primary Dealer
GNMA - Any Primary Broker-Dealer's bid rate for such security
FHLMC - Any Primary Broker-Dealer's bid rate for such security
All other U.S. Government and Agency Securities - Any Primary
Broker-Dealer's bid rate for such security
Prices shall be as of the business day of the date of determination
or the last quote available. The pricing services, Brokers' Brokers
and Broker Dealers may be changed from time to time by agreement of
all the parties.
SCHEDULE C
AUTHORIZED PERSONS
Repo Custodian
Ken Rindos
Kurt Woetzel
Custodian
Ken Rindos
Kurt Woetzel
Seller
Joseph P. Blauvelt
Michael B. Boyer
Robert E. Curry
Patrick Doyle
Frank Forgione
Edward J. Frederick
Christopher Juliano
Joseph Marrone
Thomas T. McGee
John S. Mehrtens
John A. Michielini
Allen Smith, II
The Funds
Barron, Leland C. Harlow, Katharyn M. Stehman, Burnell R.
Carbone, John M. Henning, Frederick L. Jr. Todd, Deborah
Curtis, Fritz Huyck, Timothy Todd, John J.
Duby, Robert K. Jamen, Jon Torres, Joseph E.
Egan, Dorothy T. Litterst, Robert Williams, Richard
Glocke, David Silver, Samuel Zenoble, Sarah
SCHEDULE D
NOTICES
If to Custodian: The Bank of New York
One Wall Street, 4th Floor
New York, NY 10286
Telephone: (212) 635-7947
Attention: Sherman Yu, Esq.
With a copy to the Fund Agent
If to Repo Custodian: The Bank of New York
One Wall Street, 4th Floor
New York, New York 10286
Telephone: (212) 635-4809
Attention: Ms. Kristin Smith
If to Seller: J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Telephone: (212) 483-2323
Attention: Middle Office Traders Support
If to any of the Funds: FMR Texas Inc.
400 East Las Colinas Blvd., CP9M
Irving, Texas 75039
Telephone: (214) 584-7800
Attention: Ms. Deborah R. Todd or
Mr. Samuel Silver
If to the Fund Agent: Fidelity Investments
[Name of Fund]
400 East Las Colinas Blvd., CP9E
Irving, Texas 75039
Telephone: (214) 584-4071
Attention: Mr. Mark Mufler
277282.c1
Exhibit g(10)
SCHEDULE 1
The following lists the additional counterparties to the Repo
Custodian Agreement for Joint Trading Account between The Bank of New
York and the Fidelity Funds:
BZW Government Securities, Inc.
CS First Boston Corp.
Daiwa Securities America, Inc.
Deutsche Bank Securities Corp.
Donaldson, Lufkin & Jenerette Securities Corp.
Fuji Securities, Inc.
Goldman Sachs & Co
Morgan Stanley & Co., Inc.
NationsBanc Capital Markets
Nikko Securities Co. International, Inc.
Nomura Securities International, Inc.
Prudential Securities, Inc.
Salomon Brothers, Inc.
Sanwa BJK Securities Co., LP
SBC Capital Markets, Inc.
Smith Barney, Inc.
Exhibit g(11)
Form of
FIDELITY GROUP
REPO CUSTODIAN AGREEMENT
FOR JOINT TRADING ACCOUNT
AGREEMENT dated as of ________, among CHEMICAL BANK, a banking
corporation organized under the laws of the State of New York ("Repo
Custodian"), GREENWICH CAPITAL MARKETS, INC. ("Seller") and each of
the entities listed on Schedule A-1, A-2, A-3 and A-4 hereto acting on
behalf of itself or (i) in the case of a series company, on behalf of
one or more of its portfolios or series listed on Schedule A-1 or A-2
hereto, (ii) in the case of the accounts listed on Schedule A-3
hereto, acting through Fidelity Management & Research Company, and
(iii) in the case of the commingled or individual accounts listed on
Schedule A-4 hereto, acting through Fidelity Management Trust Company
(collectively, the "Funds" and each, a "Fund").
WITNESSETH
WHEREAS, each of the Funds has entered into a master repurchase
agreement dated as of _____________, (the "Master Agreement") with
Seller pursuant to which from time to time one or more of the Funds,
as buyers, and Seller, as seller, may enter into repurchase
transactions effected through one or more joint trading accounts
(collectively, the "Joint Trading Account") established and
administered by one or more custodians of the Funds identified on
Schedule C hereto (each a "Custodian"); and,
WHEREAS, in each such repurchase transaction Seller will sell to such
Funds certain Securities (as hereinafter defined) selected from
Eligible Securities (as hereinafter defined) held by Repo Custodian ,
subject to an agreement by Seller to repurchase such Securities; and
WHEREAS, Repo Custodian currently maintains a cash and securities
account (the "Seller Account") for Seller for the purpose of, among
other things, effecting repurchase transactions hereunder; and
WHEREAS, the Funds desire that the Repo Custodian serve as the
custodian for each of the Funds in connection with the repurchase
transactions effected hereunder, and that the Repo Custodian hold
cash, Cash Collateral (as hereinafter defined) and Securities for each
of the Funds for the purpose of effecting repurchase transactions
hereunder.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Definitions.
Whenever used in this Agreement, the following terms shall have the
meanings set forth below:
(a) "Banking Day" shall mean any day on which the Funds, Seller
Custodian, Repo Custodian, and the Federal Reserve Banks where the
Custodian and the Repo Custodian are located, are each open for
business.
(b) "Cash Collateral" shall mean all cash, denominated in U.S.
Dollars, credited by Repo Custodian to a Transaction Account pursuant
to Paragraphs 3, 6, 8 or 9 of the Master Agreement.
(c) "Custodian" shall have the meaning set forth in the preamble of
this Agreement.
(d) "Eligible Securities" shall mean those securities which are
identified as permissible securities for a particular Transaction
Category.
(e) "FICASH I Transaction" and "FICASH III Transaction" shall mean a
repurchase transaction in which the Repurchase Date is the Banking Day
next following the Sale Date and for which securities issued by the
government of the United States of America that are direct obligations
of the government of the United States of America shall constitute
Eligible Securities.
(f) "FICASH II Transaction" shall mean a repurchase transaction in
which the Repurchase Date is the Banking Day next following the Sale
Date and for which one or more of the following two categories of
securities, as specified by the Funds, shall constitute Eligible
Securities: (x) securities issued by the government of the United
States of America that are direct obligations of the government of the
United States of America, or (y) securities issued by or guaranteed as
to principal and interest by the government of the United States of
America, or by its agencies and/or instrumentalities, including, but
not limited to, the Federal Home Loan Bank, Federal Home Loan Mortgage
Corp., Government National Mortgage Association, Federal National
Mortgage Association, Federal Farm Credit Bank, Federal Intermediate
Credit Bank, Banks for Cooperatives, and Federal Land Banks.
(g) "FITERM I Transaction" and "FITERM III Transaction" shall mean a
repurchase transaction in which the Repurchase Date is a date fixed by
agreement between Seller and the Participating Funds which is not the
Banking Day next following the Sale Date, or if applicable, the date
fixed upon exercise of an Unconditional Resale Right (as hereinafter
defined) by the Participating Funds and for which securities issued by
the government of the United States of America that are direct
obligations of the government of the United States of America shall
constitute Eligible Securities.
(h) "FITERM II Transaction" shall mean a repurchase transaction in
which the Repurchase Date is a date fixed by agreement between Seller
and the Participating Funds which is not the Banking Day next
following the Sale Date, or, if applicable, the date fixed upon
exercise of an Unconditional Resale Right (as hereinafter defined) by
the Participating Funds and for which one or more of the following two
categories of securities, as specified by the Funds, shall constitute
Eligible Securities: (x) securities issued by the government of the
United States of America that are direct obligations of the government
of the United States of America, or (y) securities issued by or
guaranteed as to principal and interest by the government of the
United States of America, or by its agencies and/or instrumentalities,
including, but not limited to, the Federal Home Loan Bank, Federal
Home Loan Mortgage Corp., Government National Mortgage Association,
Federal National Mortgage Association, Federal Farm Credit Bank,
Federal Intermediate Credit Bank, Banks for Cooperatives, and Federal
Land Banks.
(i) "Fund" shall have the meaning set forth in the preamble of this
Agreement.
(j) "Fund Agent" shall mean the agent for the Participating Funds
designated in Paragraph 18 of the Master Agreement.
(k) "Joint Trading Account" shall have the meaning set forth in the
preamble of this Agreement.
(l) "Margin Percentage" with respect to any repurchase transaction
shall be 102% or such other percentage as is agreed to by Seller and
the Participating Funds (except that in no event shall the Margin
Percentage be less than 100%).
(m) "Market Value" shall have the meaning set forth in Paragraph 4 of
the Master Agreement.
(n) "Master Agreement" shall have the meaning set forth in the
preamble of this Agreement.
(o) "1940 Act" shall mean have the meaning set forth in Paragraph
3(c) of this Agreement.
(p) "Partial Payment" shall have the meaning set forth in Section
4(g) of this Agreement.
(q) "Participating Funds" shall mean those Funds that are parties to
a particular repurchase transaction effected through the Joint Trading
Account.
(r) "Pricing Rate" shall mean the per annum percentage rate agreed to
by Seller and the Participating Funds for a particular repurchase
transaction.
(s) "Pricing Services" shall have the meaning set forth in Paragraph
7 of this Agreement.
(t) "Repo Custodian" shall have the meaning set forth in the preamble
of this Agreement.
(u) "Repurchase Date" shall mean the date fixed by agreement between
Seller and the Participating Funds on which the Seller is to
repurchase Securities and Cash Collateral, if any, from the
Participating Funds and the Participating Funds are to resell the
Securities and Cash Collateral, if any, including any date determined
by application of the provisions of Paragraphs 7(a) and 15 of the
Master Agreement.
(v) "Repurchase Price" for each repurchase transaction shall mean the
Sale Price, plus an incremental amount determined by applying the
Pricing Rate to the Sale Price, calculated on the basis of a 360-day
year and the number of actual days elapsed from (and including) the
Sale Date to (but excluding) the Repurchase Date.
(w) "Sale Date" shall mean the Banking Day on which Securities and
Cash Collateral, if any, are to be sold to the Participating Funds by
Seller pursuant to a repurchase transaction hereunder.
(x) "Sale Price" shall mean the price agreed upon by the
Participating Funds and Seller at which the Securities and Cash
Collateral, if any, are to be sold to the Participating Funds by
Seller.
(y) "Securities" shall mean all Eligible Securities delivered by
Seller or to be delivered by Seller to the Participating Funds
pursuant to a particular repurchase transaction and not yet
repurchased hereunder, together with all rights related thereto and
all proceeds thereof.
(z) "Securities System" shall have the meaning set forth in Paragraph
3(c) of this Agreement.
(aa) "Seller" shall have the meaning set forth in the preamble to
this Agreement.
(bb) "Seller Account" shall have the meaning set forth in the
preamble of this Agreement.
(cc) "Transaction Account" shall mean a cash account established and
maintained by Repo Custodian for the Funds to effect repurchase
transactions pursuant to the Master Agreement.
(dd) "Transaction Category" shall mean the particular type of
repurchase transaction effected hereunder, as determined with
reference to the term of the transaction and the categories of
Securities that constitute Eligible Securities therefor, which term
shall include FICASH I Transactions, FICASH II Transactions, FICASH
III Transactions, FITERM I Transactions, FITERM II Transactions,
FITERM III Transactions, and such other transaction categories as may
from time to time be designated by the Funds by notice to Seller,
Custodian and Repo Custodian.
(ee) "Unconditional Resale Right" shall have the meaning set forth
in Paragraph 7(b) of the Master Agreement.
(ff) "Valuation Day" shall mean any day on which Repo Custodian is
open for business.
2. Appointment of Repo Custodian. Upon the terms and conditions set
forth in this Agreement, Repo Custodian is hereby appointed by the
Funds to act as the custodian for the Participating Funds to hold
cash, Cash Collateral and Securities for the purpose of effecting
repurchase transactions for the Participating Funds through the Joint
Trading Account pursuant to the Master Agreement. Repo Custodian
hereby acknowledges the terms of the Master Agreement between the
Funds and Seller (attached as an Exhibit hereto), as amended from time
to time, and agrees to abide by the provisions thereof to the extent
such provisions relate to the responsibilities and operations of Repo
Custodian hereunder.
3. Maintenance of Transaction Accounts.
(a) Repo Custodian shall establish and maintain one or more
Transaction Accounts for the purpose of effecting repurchase
transactions hereunder for the Funds, in each case pursuant to the
Master Agreement. From time to time the Funds may cause Custodian, on
behalf of the Funds, to deposit Securities and cash with Repo
Custodian in the designated Transaction Account, in each case in
accordance with Paragraph 3 of the Master Agreement.
(b) Repo Custodian shall keep all Securities, cash and Cash
Collateral received for the Participating Funds segregated at all
times from those of any other person, firm or corporation in its
possession and shall identify all such Securities, cash and Cash
Collateral as subject to this Agreement and the Master Agreement.
Segregation may be accomplished by physical segregation with respect
to certificated securities held by the Repo Custodian and, in
addition, by appropriate identification on the books and records of
Repo Custodian in the case of all other Securities, cash and Cash
Collateral. Title to all Securities and Cash Collateral under a
repurchase transaction shall pass to the Participating Funds that are
parties to such repurchase transaction. All such Securities and Cash
Collateral shall be held by Repo Custodian for the Participating
Funds, and shall be subject at all times to the proper instructions of
the Participating Funds, or the Custodian on behalf of the
Participating Funds, with respect to the holding, transfer or
disposition of such Securities and Cash Collateral. Repo Custodian
shall include in its records for each Transaction Account all
instructions received by it which evidence an interest of the
Participating Funds in the Securities and Cash Collateral and shall
hold physically segregated any written agreement, receipt or other
writing received by it which evidences an interest of the
Participating Funds in the Securities and Cash Collateral.
(c) Any requirement to "deliver" or "transfer" cash or Cash
Collateral to the Participating Funds or to "credit" a Transaction
Account under this or any other paragraph of this Agreement shall be
made in immediately available funds. If Repo Custodian is required to
"deliver" or "transfer" Securities to the Participating Funds under
this or any other paragraph of this Agreement, Repo Custodian shall
take, or cause to be taken, the following actions to perfect the
Participating Funds' interest in such Securities as an outright
purchaser: (i) in the case of certificated securities and instruments
held by Seller, by physical delivery of the share certificates or
other instruments representing the Securities and by physical
segregation of such certificates or instruments from the Repo
Custodian's other assets in a manner indicating that the Securities
are being held for the Participating Funds (such securities and
instruments to be delivered in form suitable for transfer or
accompanied by duly executed instruments of transfer or assignment in
blank and accompanied by such other documentation as the Participating
Funds may request), (ii) in the case of Securities held in a customer
only account in a clearing agency or federal book-entry system
authorized for use by the Funds and meeting the requirements of Rule
17f-4 under the Investment Company Act of 1940, as amended (the "1940
Act") (such authorized agency or system being referred to herein as a
"Securities System"), by appropriate entry on the books and records of
Repo Custodian identifying the Securities as belonging to the
Participating Funds, or (iii) in the case of Securities held in Repo
Custodian's own account in a Securities System, by transfer to a
customer only account in the Securities System and by appropriate
entry on the books and records of Repo Custodian identifying such
Securities as belonging to the Participating Funds; provided, further,
that Repo Custodian shall confirm to the Participating Funds the
identity of the Securities transferred or delivered. Acceptance of a
"due bill", "trust receipt" or similar receipt or notification of
segregation issued by a third party with respect to Securities held by
such third party shall not constitute good delivery of Securities to
Repo Custodian for purposes of this Agreement or the Master Agreement
and shall expressly violate the terms of this Agreement and the Master
Agreement. The Funds shall identify by notice to Repo Custodian and
Seller those agencies or systems which have been approved by the Funds
for use under this Agreement and the Master Agreement. The Funds
hereby notify Repo Custodian and Seller that the following agencies
and systems have been approved by the Funds for use under this
Agreement and the Master Agreement, until such time as Repo Custodian
and Seller shall have been notified by the Funds to the contrary: (i)
Participants Trust Company; (ii) The Depository Trust Company; and
(iii) any book-entry system as provided in (A) Subpart O of Treasury
Circular No. 300, 31 CFR 306.115, (B) Subpart B of Treasury Circular
Public Debt Series No. 27-76, 31 CFR 350.2, or (C) the book-entry
regulations of federal agencies substantially in the form of 31 CFR
306.115.
4. Repurchase Transactions.
(a) Repo Custodian shall make all credits and debits to the
Transaction Account and effect the transfer of Securities to or from
the Participating Funds upon proper instructions received from the
Participating Funds, or the Custodian on behalf of the Participating
Funds, and shall make all credits and debits to the Seller Account and
effect the transfer of Securities to or from the Seller upon proper
instructions received from Seller. In the event that Repo Custodian
receives conflicting proper instructions from Seller and the
Participating Funds, or the Custodian on behalf of the Participating
Funds, Repo Custodian shall follow the Participating Funds' or the
Custodian's proper instructions. The Participating Funds shall give
Repo Custodian only such instructions as shall be permitted by the
Master Agreement. Notwithstanding the preceding sentence, the
Participating Funds, or the Custodian on behalf of the Participating
Funds, may from time to time instruct Repo Custodian to transfer cash
from the Transaction Account to Custodian so long as such transfer is
not in contravention of the Master Agreement.
(b) (i) Whenever on any Banking Day one or more Funds and Seller agree
to enter into a repurchase transaction, Seller and the Participating
Funds, or the Custodian on behalf of the Participating Funds, will
give Repo Custodian proper instructions by telephone or otherwise by
5:00 p.m. New York time on the Sale Date, specifying the Transaction
Category, Repurchase Date, Sale Price, Repurchase Price or the
applicable Pricing Rate and the Margin Percentage for each such
repurchase transaction.
(ii) In the case of repurchase transactions in which the Repurchase
Date is the Banking Day next following the Sale Date (x) the
Participating Funds may increase or decrease the Sale Price for any
such repurchase transaction by no more than 10% of the initial Sale
Price by causing to be delivered further proper instructions by
telephone or otherwise to Repo Custodian by 5:15 p.m. New York time
(or at such later time as may be agreed upon by the parties) on the
Sale Date and (y) Seller and the Participating Funds may by mutual
consent agree to increase or decrease the Sale Price by more than 10%
of the initial Sale Price by causing to be provided further proper
instructions to Repo Custodian by the close of business on the Sale
Date. In any event, Repo Custodian shall not be responsible for
determining whether any such increase or decrease of the Sale Price
exceeds the 10% limitation.
(c) Seller will take such actions as are necessary to ensure that on
the Sale Date the aggregate Market Value of all Securities held by
Repo Custodian for Seller and cash in the Seller Account equals or
exceeds the Margin Percentage of the Sale Price. Seller shall give
Repo Custodian proper instructions specifying with respect to each of
the Securities which is to be the subject of a repurchase transaction
(a) the name of the issuer and the title of the Securities, and (b)
the Market Value of such Securities. Such instructions shall
constitute Seller's instructions to Repo Custodian to transfer the
Securities to the Participating Funds and/or Cash Collateral from the
Seller Account to the Transaction Account.
(d) By 5:00 p.m. New York Time on the Sale Date, the Participating
Funds shall transfer to, or maintain on deposit with, Repo Custodian
in the Transaction Account immediately available funds in an amount
equal to the Sale Price with respect to a particular repurchase
transaction.
(e) Prior to the close of business on the Sale Date, Repo Custodian
shall transfer Securities from Seller to the Participating Funds
and/or cash held in the Seller Account to the Transaction Account and
shall transfer to the Seller Account immediately available funds from
the Transaction Account in accordance with the following provisions:
(i) Repo Custodian shall determine that all securities to be
transferred by Seller to the Participating Funds are Eligible
Securities. Any securities which are not Eligible Securities for a
particular repurchase transaction hereunder shall not be included in
the calculations set forth below and shall not be transferred to the
Participating Funds.
(ii) Repo Custodian shall then calculate the aggregate Market Value
of the Securities and cash, if any, to be so transferred.
(iii) Repo Custodian shall notify Seller in the event that the
aggregate Market Value of Securities and cash, if any, applicable to
the repurchase transaction is less than the Margin Percentage of the
Sale Price and Seller shall transfer, by the close of business on the
Sale Date, to Repo Custodian additional Securities and/or cash in the
amount of such deficiency. If Seller does not, by the close of
business on the Sale Date, transfer additional Securities and/or cash,
the Market Value of which equals or exceeds such deficiency, Repo
Custodian may, at its option, without notice to Seller, advance the
amount of such deficiency to Seller in order to effectuate the
repurchase transaction. It is expressly agreed that Repo Custodian is
not obligated to make an advance to Seller to enable it to complete
any repurchase transaction.
(iv) Subject to the provisions of Subparagraph (v) below, Repo
Custodian shall cause the Securities applicable to the repurchase
transaction received from Seller to be transferred to the
Participating Funds and shall cause any cash received from Seller to
be transferred to the Transaction Account, against transfer of the
Sale Price from the Transaction Account to the Seller Account, such
transfers of Securities and/or cash and funds to be deemed to occur
simultaneously.
(v) Notwithstanding anything to the contrary, if, for any repurchase
transaction, the amount of immediately available funds in the
Transaction Account is less than the agreed upon Sale Price in
connection with the repurchase transaction immediately prior to
effectuating such repurchase transaction, or if the aggregate Market
Value of the Securities and cash, if any, applicable to such
repurchase transaction is less than the Sale Price multiplied by the
Margin Percentage immediately prior to effectuating such repurchase
transaction, Repo Custodian shall effect the repurchase transaction to
the best of its ability by transferring Securities from Seller to the
Participating Funds and/or cash from the Seller Account to the
Transaction Account with an aggregate Market Value equal to the lesser
of (x) the amount of immediately available funds in the Transaction
Account multiplied by the Margin Percentage and (y) the aggregate
Market Value of the Securities available for transfer from Seller to
the Participating Funds and cash, if any, in the Seller Account,
against the transfer of immediately available funds from the
Transaction Account to the Seller Account in an amount equal to the
aggregate Market Value of the Securities and/or cash to be transferred
divided by the Margin Percentage; provided, however, that in either
such event Repo Custodian shall have the right not to transfer to the
Participating Funds such Securities and not to transfer such cash, if
any, to the Transaction Account and not to transfer from the
designated Transaction Account such funds as Repo Custodian
determines, in its sole discretion, will not be the subject of a
repurchase transaction. The actions of Repo Custodian pursuant to
this subparagraph (e)(v) shall not affect the obligations and
liabilities of the parties to each other pursuant to the Master
Agreement with regard to such repurchase transaction.
(f) In the event that on a Banking Day Seller desires to substitute
Securities applicable to such repurchase transaction with Eligible
Securities and/or Cash Collateral (to the extent provided in the
Master Agreement), Repo Custodian shall perform such substitution in
accordance with the following provisions:
(i) Repo Custodian shall determine that all securities to be
transferred to the Participating Funds are Eligible Securities. Any
securities which are not eligible for repurchase transactions
hereunder shall not be included in the calculations set forth below
and shall not be transferred to the Participating Funds.
(ii) Repo Custodian shall then calculate the aggregate Market Value
of the Eligible Securities and/or Cash Collateral to be transferred.
Repo Custodian shall not make any substitution if, at the time of
substitution, the aggregate Market Value of all Securities and any
Cash Collateral applicable to such repurchase transaction immediately
after such substitution would be less than the Margin Percentage of
the Repurchase Price (calculated as if the Repurchase Date were the
date of substitution).
(iii) Repo Custodian shall then deliver to the Seller, subject to the
qualifications set forth above, the Securities to be substituted
against the delivery by Repo Custodian of substitute Eligible
Securities to the Participating Funds and/or the crediting of the
Transaction Account with Cash Collateral.
(iv) In the event Seller has caused Repo Custodian to credit the
Transaction Account with Cash Collateral in lieu of substitute
Eligible Securities, and has failed to deliver Eligible Securities
against such Cash Collateral not later than the close of business on
such Banking Day in accordance with the terms of the Master Agreement,
Repo Custodian shall promptly, but in no event later than 10:00 a.m.
the following Banking Day, notify the Participating Funds and Seller
of such failure.
(g) With respect to each repurchase transaction, at 9:00 a.m. New
York time, or at such other time as specified in proper instructions
of the Participating Funds (or the Custodian on behalf of the
Participating Funds) on the Repurchase Date, Repo Custodian shall
debit the Seller Account and credit the Transaction Account in the
amount of the Repurchase Price and shall transfer Securities from the
Participating Funds to the Seller and Cash Collateral, if any, from
the Transaction Account to the Seller Account in accordance with the
following provisions:
(i) If the amount of available funds in the Seller Account equals or
exceeds the Repurchase Price, Repo Custodian shall debit the Seller
Account and credit the Transaction Account in the amount of the
Repurchase Price and shall transfer all Securities applicable to such
repurchase transaction from the Participating Funds to the Seller and
debit the Transaction Account and credit the Seller Account in the
amount of any Cash Collateral applicable to such repurchase
transaction.
(ii) If the amount of available funds in the Seller Account is less
than the Repurchase Price, then Repo Custodian shall notify the Seller
of the amount of the deficiency and Seller shall promptly cause such
amount to be transferred to the Seller Account. If Seller fails to
cause the transfer of the entire amount of the deficiency to the
Seller Account, then Repo Custodian may, at its option and without
notice to Seller, advance to Seller the amount of such remaining
deficiency. It is expressly agreed that Repo Custodian is not
obligated to make any advance to Seller. If, following such transfer
and/or advance, the amount of available funds in the Seller Account
equals or exceeds the Repurchase Price then Repo Custodian shall debit
the Seller Account and credit the Transaction Account in the amount of
the Repurchase Price and shall transfer from the Participating Funds
to the Seller all Securities applicable to such repurchase transaction
and debit the Transaction Account and credit the Seller Account in the
amount of any Cash Collateral applicable to such repurchase
transaction.
(iii) If the Seller fails to cause the transfer of the entire amount
of the deficiency, as required by (ii) above, and Repo Custodian fails
to advance to Seller an amount sufficient to eliminate the entire
deficiency, then Repo Custodian shall debit the Seller Account in the
amount of all immediately available funds designated by Seller as
applicable to the repurchase transaction and credit the Transaction
Account in such amount (such amount being referred to as the "Partial
Payment") and shall transfer Securities from the Participating Funds
to the Seller such that the aggregate Market Value of all remaining
Securities and Cash Collateral in the Transaction Account with respect
to such repurchase transaction shall at least equal the difference
between Margin Percentage of the Repurchase Price and the Partial
Payment.
5. Payments on Securities. Repo Custodian shall credit to the Seller
Account as soon as received, all principal, interest and other sums
paid by or on behalf of the issuer in respect of the Securities and
collected by Repo Custodian, except as otherwise provided in Paragraph
8 of the Master Agreement.
6. Daily Statement. On each Banking Day on which any Participating
Funds have an outstanding repurchase transaction, Repo Custodian shall
deliver by facsimile, or other electronic means acceptable to the
Participating Funds, the Custodian and the Repo Custodian, to
Custodian and to the Participating Funds a statement identifying the
Securities held by Repo Custodian with respect to such repurchase
transaction and the cash and Cash Collateral, if any, held by Repo
Custodian in the Transaction Account, including a statement of the
then current Market Value of such Securities and the amounts, if any,
credited to the Transaction Account as of the close of trading on the
previous Banking Day. Repo Custodian shall also deliver to Custodian
and the Participating Funds such additional statements as the Repo
Custodian and the Participating Funds may agree upon from time to
time.
7. Valuation.
(a) Repo Custodian shall confirm the Market Value of Securities and
the amount of Cash Collateral, if any (i) on the Sale Date prior to
transferring the Sale Price out of the Transaction Account to the
Seller Account against the receipt from Seller of the Securities and
Cash Collateral, if any, and (ii) on each Valuation Day on which such
repurchase transaction is outstanding. If on any Valuation Day the
aggregate Market Value of the Securities and Cash Collateral with
respect to any repurchase transaction is less than the Margin
Percentage of the Repurchase Price (calculated as if the Repurchase
Date were such Valuation Day) for such transaction, Repo Custodian
shall promptly, but in any case no later than 10:00 a.m. the following
Valuation Day, notify Seller. If on any Valuation Day the aggregate
market value of the Securities and Cash Collateral with respect to any
repurchase transaction is less than the Margin Percentage of the
Repurchase Price (calculated as if the Repurchase Date were such
Valuation Day) for such transaction, and Seller fails to deliver
additional Eligible Securities applicable to such repurchase
transaction or an additional amount of Cash Collateral by the close of
business on such Valuation Day such that the aggregate market value of
the Securities and Cash Collateral at least equals the Margin
Percentage of the Repurchase Price (calculated as if the Repurchase
Date were such Valuation Day), Repo Custodian shall promptly, but in
any event no later than 10:00 a.m. the following Valuation Day, notify
the Participating Funds of such failure.
(b) Repo Custodian shall determine the bid side portion of the Market
Value of the Securities by reference to the independent pricing
services ("Pricing Services") set forth on Schedule B. It is
understood and agreed that Repo Custodian shall use the prices made
available by the Pricing Services at the close of business of the
preceding Valuation Day. In the event that Repo Custodian is unable
to obtain a valuation of any Securities from the Pricing Services,
Repo Custodian shall request a bid quotation from a broker's broker or
a broker dealer, set forth in Schedule B, other than Seller. In the
event Repo Custodian is unable to obtain a bid quotation for any
Securities from such a broker's broker or a broker dealer, Repo
Custodian (i) shall not include any such Securities in the
determination of whether the aggregate Market Value of the Securities
and any Cash Collateral equals at least the Margin Percentage of the
Repurchase Price and (ii) shall redeliver such Securities to Seller if
the Market Value of all other Securities and any Cash Collateral with
respect to such repurchase transaction equals at least the Margin
Percentage of the Repurchase Price (calculated as if the Repurchase
Date were such Valuation Day). The Repo Custodian may rely on prices
quoted by Pricing Services, broker's brokers or broker dealers, except
Seller, as set forth in Schedule B.
(c) (i) If, on any Valuation Day, the aggregate Market Value of the
Securities and any Cash Collateral with respect to a repurchase
transaction is less than the Margin Percentage of the Repurchase Price
(calculated as if the Repurchase Date were such Valuation Day)
applicable to such repurchase transaction, Repo Custodian shall
deliver to the Participating Funds an amount of additional Eligible
Securities applicable to such repurchase transaction and/or debit the
Seller Account and credit the Transaction Account with an additional
amount of Cash Collateral, such that the aggregate Market Value of all
Securities and any Cash Collateral with respect to such repurchase
transaction shall equal at least the Margin Percentage of the
Repurchase Price (calculated as if the Repurchase Date were such
Valuation Day) applicable to such repurchase transaction.
(ii) If, on any Valuation Day, the aggregate Market Value of the
Securities and any Cash Collateral with respect to a repurchase
transaction exceeds the Margin Percentage of the Repurchase Price
(calculated as if the Repurchase Date were such Valuation Day)
applicable to such repurchase transaction, Repo Custodian shall return
to the Seller all or a portion of such Securities or Cash Collateral,
if any; provided that the Market Value of the remaining Securities and
any Cash Collateral with respect to the repurchase transaction shall
be at least equal to the Margin Percentage of the Repurchase Price
(calculated as if the Repurchase Date were such Valuation Day)
applicable to such repurchase transaction. At any time and from time
to time with respect to any repurchase transaction, if authorized by
the Participating Funds, or the Custodian on behalf of the
Participating Funds, the Repo Custodian shall debit the Transaction
Account by an amount of Cash Collateral and credit the Seller Account
by the same amount of Cash Collateral against simultaneous delivery
from Seller to the Participating Funds of Eligible Securities
applicable to such repurchase transaction with a Market Value at least
equal to the amount of Cash Collateral credited and debited.
8. Authorized Persons. Schedule C hereto sets forth those persons
who are authorized to act for Repo Custodian, Custodian, Seller and
the Funds, respectively, under this Agreement.
9. Proper Instructions. Proper instructions shall mean a tested
telex, facsimile, a written request, direction, instruction or
certification signed or initialed by or on behalf of the party giving
the instructions by one or more authorized persons (as provided in
Paragraph 8); provided, however, that no instructions directing the
delivery of Securities or the payment of funds to any individual who
is an authorized signatory of Custodian or Repo Custodian shall be
signed by that individual. Telephonic, other oral or
electro-mechanical or electronic instructions (including the code
which may be assigned by Repo Custodian to Custodian from time to
time) given by one of the above authorized persons shall also be
considered proper instructions if the party receiving such
instructions reasonably believes them to have been given by an
authorized person with respect to the transaction involved. Oral
instructions will be confirmed by tested telex, facsimile or in
writing in the manner set forth above. The Funds and Seller authorize
Repo Custodian to tape record any and all telephonic or other oral
instructions given to Repo Custodian. Proper instructions may relate
to specific transactions or to types or classes of transactions, and
may be in the form of standing instructions.
10. Standard of Care.
(a) Repo Custodian shall be obligated to use reasonable care and
diligence in carrying out the provisions of this Agreement and the
Master Agreement and shall be liable to the Funds and/or Seller only
for direct damages resulting from the negligence or willful misconduct
of the Repo Custodian or its officers, employees or agents. The
parties hereby agree that Repo Custodian shall not be liable for
consequential, special or indirect damages, even if Repo Custodians
has been advised as to the possibility thereof. So long as and to the
extent that Repo Custodian exercises reasonable care and diligence and
acts without negligence, misfeasance or misconduct, Repo Custodian
shall not be liable to Seller or the Funds for (i) any action taken or
omitted in good faith in reliance upon proper instructions, (ii) any
action taken or omitted in good faith upon any notice, request,
certificate or other instrument reasonably believed by it to be
genuine and to be signed by the proper party or parties, (iii) any
delay or failure to act as may be required under this Agreement or
under the Master Agreement when such delay or failure is due to any
act of God or war, (iv) the actions or omissions of a Securities
System, (v) the title, validity or genuineness of any security
received, delivered or held by it pursuant to this Agreement or the
Master Agreement, (vi) the legality of the purchase or sale of any
Securities by or to the Participating Funds or Seller or the propriety
of the amount for which the same are purchased or sold (except to the
extent of Repo Custodian's obligations hereunder to determine whether
securities are Eligible Securities and to calculate the Market Value
of Securities and any Cash Collateral), (vii) the due authority of any
person listed on Schedule C to act on behalf of Custodian, Seller or
the Funds, as the case may be, with respect to this Agreement or
(viii) the errors of the Pricing Services, broker's brokers or broker
dealers set forth in Schedule B.
(b) Repo Custodian shall not be liable to Seller or the Funds for, or
considered to be the custodian of, any Eligible Securities or any
money to be used in a repurchase transaction, whether or not such
money is represented by any check, draft, or other instrument for the
payment of money, until the Eligible Securities have been delivered in
accordance with Paragraph 3 or until Repo Custodian actually receives
and collects such money on behalf of Seller or the Funds directly or
by the final crediting of the Seller Account or a Transaction Account
through the Securities System, except that this Paragraph 10(b) shall
not be deemed to limit the liability of Repo Custodian to Seller or
the Funds if the non-delivery of such Eligible Securities or the
failure to receive and collect such money results from the breach by
Repo Custodian of its obligations under this Agreement or the Master
Agreement.
(c) Repo Custodian shall not be under any duty or obligation to
ascertain whether any Securities at any time delivered to or held by
it are such as properly may be held by the Participating Funds;
provided that notwithstanding anything to the contrary herein, Repo
Custodian shall be obligated to act in accordance with the guidelines
and proper instructions of the Participating Funds, or the Custodian
on behalf of the Participating Funds, with respect to the types of
Eligible Securities and the issuers of such Eligible Securities that
may be used in specific repurchase transactions.
(d) Repo Custodian promptly shall notify the Fund Agent and the
Custodian if Securities held by Repo Custodian are in default or if
payment on any Securities has been refused after due demand and
presentation and Repo Custodian shall take action to effect collection
of any such amounts upon the proper instructions of the Participating
Funds, or the Custodian on behalf of the Participating Funds, and
assurances satisfactory to it that it will be reimbursed for its costs
and expenses in connection with any such action.
(e) Repo Custodian shall have no duties, other than such duties as
are necessary to effectuate repurchase transactions in accordance with
this Agreement and the Master Agreement within the standard of care
set forth in Paragraph 10(a) above and in a commercially reasonable
manner.
11. Representations and Additional Covenants of Repo Custodian.
(a) Repo Custodian represents and warrants that (i) it is duly
authorized to execute and deliver this Agreement and to perform its
obligations hereunder and has taken all necessary action to authorize
such execution, delivery and performance, (ii) the execution, delivery
and performance of this Agreement do not and will not violate any
ordinance, declaration of trust, partnership agreement, articles of
incorporation, charter, rule or statute applicable to it or any
agreement by which it is bound or by which any of its assets are
affected, (iii) the person executing this Agreement on its behalf is
duly and properly authorized to do so, (iv) it has (and will maintain)
a copy of this Agreement and evidence of its authorization in its
official books and records, and (v) this Agreement has been executed
by one of its duly authorized officers at the level of Vice President
or higher.
(b) Repo Custodian further represents and warrants that (i) it has
not pledged, encumbered, hypothecated, transferred, disposed of, or
otherwise granted, any third party an interest in any Securities, (ii)
it does not have any security interest, lien or right of setoff in the
Securities, and (iii) it has not received notification from any third
party, in its capacity as Repo Custodian, custodian bank or clearing
bank, of any lien, claim, charge or encumbrance with respect to any
Securities that are the subject of such repurchase transaction. Repo
Custodian agrees that (i) it will not pledge, encumber, hypothecate,
transfer, dispose of, or otherwise grant, any third party an interest
in any Securities, (ii) it will not acquire any security interest,
lien or right of setoff in the Securities, and (iii) it will promptly
notify the Fund Agent, if, during the term of any outstanding
repurchase transaction, it is notified by any third party, in its
capacity as Repo Custodian, custodian bank or clearing bank, of the
Participating Funds or Seller, of the existence of any lien, claim,
charge or encumbrance with respect to any Securities that are the
subject of such repurchase transaction.
12. Indemnification.
(a) Notwithstanding the Participating Fund's obligation to the Repo
Custodian under Paragraph 12(b) below, so long as and to the extent
that Repo Custodian is in the exercise of reasonable care and
diligence and acts without negligence, misfeasance or misconduct,
Seller will indemnify Repo Custodian and hold it harmless against any
and all losses, claims, damages, liabilities or actions to which it
may become subject, and reimburse it for any expenses (including
attorneys' fees and expenses) incurred by it in connection therewith,
insofar as such losses, claims, damages, liabilities or actions arise
out of or are based upon or in any way related to this Agreement, the
Master Agreement or any transactions contemplated hereby or thereby or
effected hereunder or thereunder. Without limiting the generality of
the foregoing indemnification, Repo Custodian shall be indemnified by
Seller for all costs and expenses, including attorneys' fees, for its
successful defense against claims that Repo Custodian breached its
standard of care and was negligent or engaged in misfeasance or
misconduct.
(b) So long as and to the extent that Repo Custodian is in the
exercise of reasonable care and diligence and acts without negligence,
misconduct or misfeasance, the Participating Funds will indemnify Repo
Custodian and hold it harmless against any and all losses, claims,
damages, liabilities or actions to which it may become subject, and
reimburse it for any expenses (including attorneys' fees and expenses)
incurred by it in connection therewith, insofar as such losses,
claims, damages, liabilities or actions result from the negligence,
misconduct or misfeasance of the Participating Funds under this
Agreement.
13. Rights and Remedies. The rights and remedies conferred upon the
parties hereto shall be cumulative, and the exercise or waiver of any
thereof shall not preclude or inhibit the exercise of any additional
rights and remedies.
14. Modification or Amendment. Except as otherwise provided in this
Paragraph 14, no modification, waiver or amendment of this Agreement
shall be binding unless in writing and executed by the parties hereto.
Schedule A, listing the Funds, may be amended from time to time to add
or delete Funds by the Funds (i) delivering an executed copy of an
addendum to Schedule A to Seller and Repo Custodian, and (ii)
amending Schedule A to the Master Agreement in accordance with the
provisions therein. The amendment of Schedule A as provided above
shall constitute appointment of Repo Custodian as a custodian for such
Fund. Schedule B may be amended from time to time by an instrument in
writing, or counterpart thereof, executed by Repo Custodian, Seller
and the Funds. Schedule C may be amended from time to time to change
an authorized person of: (i) the Funds, by written notice to Repo
Custodian and Seller by Ms. Sarah Zenoble or the Treasurer of the
Funds (or such persons who may be authorized from time to time in
writing by Ms. Zenoble or the President or Treasurer of Fidelity
Management and Research Company to trade on behalf of Fidelity's
taxable money market funds); (ii) Seller, by written notice to Repo
Custodian and the Funds by any Vice President of Seller; (iii) Repo
Custodian, by written notice to Seller, Custodian and the Funds by any
Vice President of Repo Custodian; and (iv) Custodian, by written
notice to Repo Custodian by any Vice President of Custodian. Schedule
D may be amended from time to time by any party hereto by delivery of
written notice to the other parties hereto. Repo Custodian shall
receive notice of any amendment to the Master Agreement at the address
set forth in Schedule D hereto; and, if such amendment would have a
material adverse effect on the rights of, or would materially increase
the obligations of Repo Custodian under this Agreement, any such
amendment shall also require the consent of Repo Custodian. Any such
amendment shall be deemed not to be material if Repo Custodian fails
to object in writing within 21 days after receipt of notice thereof.
No amendment to this Agreement shall affect the rights or obligations
of any Fund with respect to any outstanding repurchase transaction
entered into under this Agreement and the Master Agreement prior to
such amendment or with respect to any actions or omissions by any
party hereto prior to such amendment. In the event of conflict
between this Agreement and the Master Agreement, the Master Agreement
shall control.
15. Termination. This Agreement shall terminate forthwith upon
termination of the Master Agreement or may be terminated by any party
hereto on ten Valuation Days' written notice to the other parties;
provided, however, that any such termination shall not affect any
repurchase transaction then outstanding or any rights or obligations
under this Agreement or the Master Agreement with respect to any
actions or omissions of any party hereto prior to termination. In the
event of termination, Repo Custodian will deliver any Securities, Cash
Collateral or cash held by it or any agent to Custodian or to such
successor custodian or custodian or subcustodian as the Participating
Funds shall instruct.
16. Compensation. Seller agrees to pay Repo Custodian compensation
for the services to be rendered hereunder, based upon rates which
shall be agreed upon from time to time.
17. Notices. Except with respect to communications between Custodian
and the Funds which shall be governed by the custodian agreement or
subcustodian agreement between such parties, as the case may be, and
except as otherwise provided herein or as the parties to the Agreement
shall from time to time otherwise agree, all instructions, notices,
reports and other communications contemplated by this Agreement shall
be given to the party entitled to receive such notice at the telephone
number and address listed on Schedule D hereto.
18. Severability. If any provision of this Agreement is held to be
unenforceable as a matter of law, the other terms and provisions
hereof shall not be affected thereby and shall remain in full force
and effect.
19. Binding Nature. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their successors and
assignees; provided that, no party hereto may assign this Agreement or
any of the rights or obligations hereunder without the prior written
consent of the other parties.
20. Headings. Section headings are for reference purposes only and
shall not be construed as a part of this Agreement.
21. Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one
instrument.
22. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
23. Limitation of Liability. Repo Custodian and Seller are hereby
expressly put on notice of the limitation of liability set forth in
the Declarations of Trust and in the Certificates and Agreements of
Limited Partnership of the Funds and agree that the obligations
assumed by any Fund hereunder shall be limited in all cases to a Fund
and its assets or, in the case of a series Fund, to the assets of that
series only, and neither Seller, Repo Custodian nor their respective
agents or assigns shall seek satisfaction of any such obligation from
the officers, agents, employees, directors, trustees, shareholders or
partners of any such Fund or series.
24. Rights and Obligations of Each Fund. The rights and obligations
set forth in this Agreement with respect to each repurchase
transaction shall accrue only to the Participating Funds in accordance
with their respective interests therein. No other Fund shall receive
any rights or have any liabilities arising from any action or inaction
of any Participating Fund under this Agreement with respect to such
repurchase transaction.
25. General Provisions. This Agreement supersedes any other
custodian agreement by and among Seller, the Funds, and Repo Custodian
concerning repurchase transactions effected through the Joint Trading
Account. It is understood and agreed that time is of the essence with
respect to the performance of each party's respective obligations
hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
[Signature Lines Omitted]
SCHEDULE B
PRICING SOURCES
PRICING SERVICES
U.S. Government Securities Interactive Data Services or Mellon Data
Services (or any other pricing service mutually agreed upon by Seller
and the Funds)
GNMA - The Bond Buyer
FHLMC - The Bond Buyer
All other U.S. Government
and Agency Securities Interactive Data Services or Mellon Data
Services (or any other pricing service mutually agreed upon by Seller
and the Funds)
BROKERS' BROKERS AND BROKER DEALERS
U.S. Government Securities - Any Primary Dealer
GNMA - Any Primary Broker-Dealer's bid rate for such security
FHLMC - Any Primary Broker-Dealer's bid rate for such security
All other U.S. Government and Agency Securities - Any Primary
Broker-Dealer's bid rate for such security
Prices shall be as of the business day immediately preceding the date
of determination or the last quote available. The pricing services,
Brokers' Brokers and Broker Dealers may be changed from time to time
by agreement of all the parties.
SCHEDULE C
AUTHORIZED PERSONS
Repo Custodian
Anthony Isola
Raymond Stancil
William Mosca
Leonardo Nichols
Alan Mann
Allen B. Clark
Custodian
Ken Rindos
Kurt Woetzel
Seller
Gary F. Holloway
Konrad R. Kruger
Stephen M. Peet
Raymond E. Humiston
P. Michael Florio
Ben Carpenter
Blake S. Drexler
Derick B. Burgher
Lyn Kratovil
The Funds
Leland Barron
Wickliffe Curtis
Dorothy Egan
David Glocke
Katharyn Harlow
Timothy Huyck
Jon Jamen
Robert Litterst
Sam Silver
Burnell Stehman
Jeffrey St. Peters
Deborah Todd
John Todd
Joseph Torres
Richard Williams
SCHEDULE D
NOTICES
If to Custodian: Morgan Guaranty Trust Co. of New York
15 Broad Street, 16th Floor
New York, New York 10015
Telephone: (212) 483-4150
Attention: Ms. Kimberly Smith
or
The Bank of New York
One Wall Street, 4th Floor
New York, NY 10286
Telephone: (312) 635-4808
Attention: Claire Meskovic
With a copy to the Fund Agent
If to Repo Custodian: Chemical Bank
4 New York Plaza
21st Floor
New York, NY 10004-2477
Telephone: (212) 623-6446
Attention: Anthony Isola
If to Seller: Greenwich Capital Markets, Inc.
600 Steamboat Road
Greenwich, Connecticut 06830
Telephone: (203) 625-7909
Attention: Peter Sanchez
If to any of the Funds: FMR Texas Inc.
400 East Las Colinas Blvd., CP9M
Irving, Texas 75039
Telephone: (214) 584-7800
Attention: Ms. Deborah R. Todd or
Mr. Samuel Silver
If to the Fund Agent: Fidelity Investments
[Name of Fund]
400 East Las Colinas Blvd., CP9E
Irving, Texas 75039
Telephone: (214) 584-4071
Attention: Mr. Mark Mufler
277262.c1
Exhibit g(12)
SCHEDULE 1
The following lists the additional counterparties to the Repo
Custodian Agreement for Joint Trading Account between Chemical Bank
and the Fidelity Funds:
Chase Securities, Inc.
CS First Boston Corp.
Dresdner Securities (U.S.A.), Inc.
HSBC Securities, Inc.
Lehman Government Securities, Inc.
Merrill Lynch Government Securities, Inc.
Paine Webber, Inc.
Salomon Brothers, Inc.
UBS Securities, Inc.
Exhibit g(13)
Form of
JOINT TRADING ACCOUNT CUSTODY AGREEMENT
Between
THE BANK OF NEW YORK
and
FIDELITY FUNDS
Dated as of: _________
Exhibit g(13)
TABLE OF CONTENTS
Page
ARTICLE I - APPOINTMENT OF CUSTODIAN 2
ARTICLE II - POWERS AND DUTIES OF CUSTODIAN 2
Section 2.01. Establishment of Accounts 2
Section 2.02. Receipt of Funds 2
Section 2.03. Repurchase Transactions 2
Section 2.04. Other Transfers 4
Section 2.05. Custodian's Books and Records 5
Section 2.06. Reports by Independent Certified Public Accountants 5
Section 2.07. Securities System 6
Section 2.08. Collections 6
Section 2.09. Notices, Consents, Etc. 6
Section 2.10. Notice of Custodian's Inability to Perform 7
ARTICLE III - PROPER INSTRUCTIONS AND RELATED MATTERS 7
Section 3.01. Proper Instructions; Special Instruction 7
Section 3.02. Authorized Persons 8
Section 3.03. Investment Limitations 8
Section 3.04. Persons Having Access to Assets of the Funds 8
Section 3.05. Actions of Custodian Based on Proper Instructions and
Special
Instructions 9
ARTICLE IV - STANDARD OF CARE; INDEMNIFICATION 9
Section 4.02. Liability of Custodian for Actions of Securities Systems
9
Section 4.03. Indemnification 9
Section 4.04. Funds, Right to Proceed 10
ARTICLE V - COMPENSATION 11
Section 5.01. Compensation 11
Section 5.02. Waiver of Right of Set-Off 11
ARTICLE VI - TERMINATION 11
Section 6.01. Events of Termination 11
Section 6.02. Successor Custodian; Payment of Compensation 11
ARTICLE VII - MISCELLANEOUS 12
Section 7.01. Representative Capacity and Binding Obligation 12
Section 7.02. Entire Agreement 12
Section 7.03. Amendments 12
Section 7.04. Interpretation 12
Section 7.05. Captions 13
Section 7.06. Governing Law 13
Section 7.07. Notice and Confirmations 13
Section 7.08. Assignment 14
Section 7.09. Counterparts 14
Section 7.10. Confidentiality; Survival of Obligations 14
Exhibit g(13)
Form of
JOINT TRADING ACCOUNT CUSTODY AGREEMENT
AGREEMENT dated as of ___________ by and between The Bank of New York
(hereinafter referred to as the "Custodian") and each of the entities
listed on Schedules A-1, A-2, A-3 and A-4 hereto, acting on behalf of
itself or, (i) in the case of a series company, on behalf of one or
more of its portfolios or series listed on Schedule A-1 or A-2 hereto,
(ii) in the case of the accounts listed on Schedule A-3 hereto, acting
through Fidelity Management & Research Company, and (iii) in the case
of the commingled or individual accounts listed on Schedule A-4
hereto, acting through Fidelity Management Trust Company
(collectively, the "Funds" and each, a "Fund").
W I T N E S S E T H
WHEREAS, each of the Funds desire to appoint the Custodian as its
custodian for the purpose of establishing and administering one or
more joint trading accounts or subaccounts thereof (individually, an
"Account" and collectively, the "Accounts") and holding cash and
securities for the Funds in connection with repurchase transactions
effected through the Accounts; and
WHEREAS, one or more of the Funds may, from time to time, enter into
one or more written repurchase agreements pursuant to which one or
more of the Funds agrees to purchase and resell, and the sellers named
in such agreements agree to sell and repurchase through the Accounts,
certain securities (collectively, the "Securities") (such repurchase
agreements being hereinafter referred to, collectively, as the
"Repurchase Agreements"); and
WHEREAS, each of the custodians identified in ScheduleB hereto (each,
a "Fund Custodian") serves as the primary custodian for one or more of
the Funds; and
WHEREAS, from time to time one or more of the Funds may arrange to
transfer cash or Securities from one or more Fund Custodians to the
Custodian or transfer cash or Securities from the Custodian to one or
more Fund Custodians, or in the case of Funds in which Custodian is
also Fund Custodian, such Fund may arrange for transfer of cash or
Securities between an Account and an account maintained by Custodian
in its capacity as Fund Custodian for such Fund, in each event in
connection with Repurchase Agreement transactions; and
WHEREAS, from time to time, such Funds may arrange to transfer cash
or securities from the Custodian to the seller in such Repurchase
Agreement transactions, or in the case in which Custodian is also the
clearing bank for such seller, such Funds may arrange for transfer of
cash or securities between an Account and an account maintained by
Custodian for such seller in its capacity as clearing bank, in each
event in connection with two-party Repurchase Agreement transactions;
and
WHEREAS, each of the custodians identified in Schedule C hereto
(each, a "Repo Custodian") serves as a third-party custodian of the
Funds for purposes of effecting third-party Repurchase Agreement
transactions; and
WHEREAS, from time to time one or more of the Funds may arrange to
transfer cash or Securities from the Custodian to one or more Repo
Custodians or transfer cash or Securities from one or more Repo
Custodians to the Custodian, or in the case in which Custodian is also
Repo Custodian, such Funds may arrange for transfer of cash or
securities between an Account and an account maintained for such Funds
in its capacity as Repo Custodian, in each event in connection with
third-party Repurchase Agreement transactions;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I - APPOINTMENT OF CUSTODIAN
Each of the Funds hereby employs and appoints the Custodian as its
custodian, subject to the terms and provisions of this Agreement.
ARTICLE II - POWERS AND DUTIES OF CUSTODIAN
As custodian, the Custodian shall have and perform the powers and
duties, and only such powers and duties, as are set forth in this
Agreement.
Section 2.01. Establishment of Accounts. The Custodian shall
establish one or more Accounts as segregated joint trading accounts
for the Funds through which the Funds shall, from time to time, effect
Repurchase Agreement transactions.
Section 2.02. Receipt of Funds. The Custodian shall, from time to
time, receive funds for or on behalf of the Funds and shall hold such
funds in safekeeping. Upon receipt of Proper Instructions, the
Custodian shall credit funds so received to one or more Accounts
designated in such Proper Instructions. Promptly after receipt of
such funds from the Fund Custodian or a Repo Custodian or promptly
following the transfer to an Account from any account maintained by
Custodian in its capacity as Fund Custodian, or as Repo Custodian, the
Custodian shall provide written confirmation of such receipt to the
Fund Custodian or Repo Custodian, when and as applicable, and of such
receipt or transfer to the Fund Agent designated in Section 7.07(b)
hereof (the "Fund Agent"). The Custodian shall designate on its books
and records the funds allocable to each Account and the identity of
each Fund participating in such Account.
Section 2.03. Repurchase Transactions. The Funds may, from time to
time, enter into Repurchase Agreement transactions. In connection
with each such Repurchase Agreement transaction, unless otherwise
specifically directed by Special Instructions, the Custodian shall
take the following actions:
(a) Purchase of Securities. Upon receipt of Proper Instructions, the
Custodian shall pay for and receive Securities and any cash
denominated in U.S. Dollars which is serving as collateral ("Cash
Collateral"), provided that payment therefor shall be made by the
Custodian only against prior or simultaneous receipt of the Securities
and any Cash Collateral in the manner prescribed in subsection 2.03(b)
below. Except as provided in Section2.04 hereof, in no event shall
the Custodian deliver funds from an Account for the purchase of
Securities and any Cash Collateral prior to receipt of the Securities
and any Cash Collateral by the Custodian or a Securities System (as
hereinafter defined). The Custodian is not under any obligation to
make credit available to the Funds to complete transactions hereunder.
Promptly after the transfer of funds and receipt of Securities and any
Cash Collateral, the Custodian shall provide a confirmation to the
Fund Agent, setting forth (i) the Securities and any Cash Collateral
which the Custodian has received pursuant to the Repurchase Agreement
transaction, (ii) the amount of funds transferred from the applicable
Account, and (iii) any security or transaction identification numbers
reasonably requested by the Fund Agent.
(b) Receipt and Holding of Securities. In connection with each
Repurchase Agreement transaction, the Custodian shall receive and hold
the Securities as follows: (i) in the case of certificated securities,
by physical receipt of the certificates or other instruments
representing such Securities and by physical segregation of such
certificates or instruments from other assets of the Custodian in a
manner indicating that such Securities belong to specified Funds; and
(ii) in the case of Securities held in book-entry form by a Securities
System (as hereinafter defined), by appropriate transfer and
registration of such Securities to a customer only account of the
Custodian on the book-entry records of the Securities System, and by
appropriate entry on the books and records of the Custodian
identifying such Securities as belonging to specified Funds.
(c) Sale of Securities. Upon receipt of Proper Instructions, the
Custodian shall make delivery of Securities and any Cash Collateral
held in or credited to an Account against prior or simultaneous
payment for such Securities in immediately available funds in the form
of: (i) cash, bank credit, or bank wire transfer received by the
Custodian; or (ii) credit to the customer only account of the
Custodian with a Securities System. Notwithstanding the foregoing,
the Custodian shall make delivery of Securities held in physical form
in accordance with "street delivery custom" to a broker or its
clearing agent, against delivery to the Custodian of a receipt for
such Securities; provided that the Custodian shall have taken all
actions possible to ensure prompt collection of the payment for, or
the return of such Securities by the broker or its clearing agent.
Promptly after the transfer of Securities and any Cash Collateral and
the receipt of funds, the Custodian shall provide a confirmation to
the Fund Agent, setting forth the amount of funds received by the
Custodian or a Securities System for credit to the applicable Account.
(d) Additional Functions. Upon receipt of Proper Instructions, the
Custodian shall take all such other actions as specified in such
Proper Instructions and as shall be reasonable or necessary with
respect to Repurchase Agreement transactions and the Securities and
funds transferred and received pursuant to such transactions,
including, without limitation, all such actions as shall be prescribed
in the event of a default under a Repurchase Agreement.
(e) Nondiscretionary Functions. The Custodian shall attend to all
non-discretionary details in connection with the purchase, sale,
transfer or other dealings with Securities or other assets of the
Funds held by the Custodian.
(f) In the event that the Custodian is directed by Proper
Instructions to make any payment or transfer of funds on behalf of a
Fund for which there would be, at the close of business on the date of
such payment or transfer, insufficient funds held by the Custodian on
behalf of such Fund, the Custodian may, in its discretion, provide an
overdraft ("Overdraft") to the Fund, in an amount sufficient to allow
the completion of such payment or transfer. Any Overdraft provided
hereunder: (a) shall be payable on the next Business Day, unless
otherwise agreed by the Fund and the Custodian; and (b) shall accrue
interest form the date of the Overdraft to the date of payment in full
by the Fund at a rate agreed upon in writing, from time to time, by
the Custodian and the Fund. The Custodian and the Funds acknowledge
that the purpose of such Overdrafts is to temporarily finance the
purchase or sale of securities for prompt delivery in accordance with
the terms hereof, or to meet emergency expenses not reasonably
foreseeable by a particular Fund. The Funds hereby agree that the
Custodian shall have a continuing lien and security interest in and to
all Securities whose purchase is financed by Custodian and which are
in Custodian's possession or in the possession or control of any third
party acting on Custodian's behalf and the proceeds thereof. In this
regard, Custodian shall be entitled to all the rights and remedies of
a pledgee under common law and a secured party under the New York
Uniform Commercial Code and any other applicable laws or regulations
as then in effect.
Section 2.04. Other Transfers.
(a) In addition to transfers of funds and Securities referred to in
Section 2.03, the Custodian shall transfer funds and Securities held
in an Account: (a) upon receipt of Proper Instructions, to (i)any
Fund Custodian, or (ii)any other account maintained for any Fund by
the Custodian in its capacity as a Fund Custodian, (iii)any Repo
Custodian or (iv) any other account maintained for any Fund by the
Custodian in its capacity as a Repo Custodian; or (b) upon receipt of
Special Instructions, and subject to Section 3.04 hereof, to any other
person or entity designated in such Special Instructions.
(b) Determination of Fund Custodian Daily Net Amount. On each
banking day, based upon daily transaction information provided to the
Custodian by the Funds, Custodian shall determine: (i) the amount of
cash due to be transferred on such day by each Fund Custodian to the
Custodian in connection with all Repurchase Agreement transactions in
which the date fixed for the repurchase and resale of Securities is
the banking day next following the date on which the sale and purchase
of such Securities takes place (each, an "Overnight Repo Transaction")
to be effected through the Accounts in such day; and (ii) the amount
of cash due to be transferred on such day by Custodian to such Fund
Custodian in connection with all outstanding Overnight Repo
Transactions previously effected through the Accounts (the difference
between (i) and (ii) with respect to each Fund Custodian being
referred to as the "Fund Custodian Daily Net Amount"). On each
banking day, Custodian shall notify each Fund Custodian of the
foregoing determination and, unless otherwise directed in accordance
with Proper Instructions, Custodian shall (i) instruct such Fund
Custodian to transfer cash to the Custodian equal to the Fund
Custodian Daily Net Amount (if the Fund Custodian Daily Net Amount is
positive) or (ii) transfer to such Fund Custodian cash equal to the
Fund Custodian Daily Net Amount (if the Fund Custodian Daily Net
Amount is negative).
(c) Determination of Repo Custodian Daily Net Amount. On each
banking day, based upon daily transaction information provided to the
Custodian by the Funds and each Repo Custodian, Custodian shall
determine: (i) the amount of cash due to be transferred on such day
by each Repo Custodian on behalf of the Funds to all counterparties in
connection with all third-party Overnight Repo Transactions to be
effected through the Accounts on such day; and (ii) the amount of cash
due to be transferred on such day by each Repo Custodian on behalf of
all counterparties to the Funds in connection with all outstanding
third-party Overnight Repo Transactions previously effected through
the Accounts (the difference between (i) and (ii) with respect to each
Repo Custodian being referred to as the "Repo Custodian Daily Net
Amount"). On each banking day, Custodian shall notify the Funds of
the foregoing determinations and, unless otherwise directed in
accordance with Proper Instructions, Custodian shall (i) transfer to
each Repo Custodian cash equal to the Repo Custodian Daily Net Amount
(if the Repo Custodian Daily Net Amount is positive) or (ii) instruct
each Repo Custodian to transfer to the Custodian cash equal to the
Repo Custodian Daily Net Amount (if the Repo Custodian Daily Net
Amount is negative).
Section 2.05. Custodian's Books and Records. The Custodian shall
provide any assistance reasonably requested by the Funds in the
preparation of reports to shareholders of the Funds and others, audits
of accounts, and other ministerial matters of like nature. The
Custodian shall maintain complete and accurate records with respect to
cash and Securities held for the benefit of the Funds as required by
the rules and regulations of the Securities and Exchange Commission
applicable to investment companies registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"),
including: (a) journals or other records of original entry containing
a detailed and itemized daily record of all receipts and deliveries of
securities (including certificate and transaction identification
numbers, if any), and all receipts and disbursements of cash; (b)
ledgers or other records reflecting Securities in transfer, and
Securities in physical possession; and (c) cancelled checks and bank
records related thereto. The Custodian shall keep such other books
and records of the Funds relating to repurchase transactions effected
through the Accounts as the Funds shall reasonably request. Such
books and records maintained by the Custodian shall reflect at all
times the identity of each Fund participating in each Account and the
aggregate amount of the Securities and any Cash Collateral held by the
Custodian on behalf of the Funds in such Account pursuant to this
Agreement. All such books and records maintained by the Custodian
shall be maintained in a form acceptable to the Funds and in
compliance with the rules and regulations of the Securities and
Exchange Commission, including, but not limited to, books and records
required to be maintained by Section 31(a) of the Investment Company
Act and the rules from time to time adopted thereunder. All books and
records maintained by the Custodian relating to the Accounts shall at
all times be the property of the Funds and shall be available during
normal business hours for inspection and use by the Funds and their
agents, including, without limitation, their independent certified
public accountants. Notwithstanding the preceding sentence, the Funds
shall not take any actions or cause Custodian to take any actions
which would cause, either directly or indirectly, the Custodian to
violate any applicable laws, regulations, rules or orders.
Section 2.06. Reports by Independent Certified Public Accountants.
At the request of the Funds, the Custodian shall deliver to the Funds
such annual reports and other interim reports prepared by the
independent certified public accountants of the Custodian with respect
to the services provided by the Custodian under this Agreement,
including, without limitation, the Custodian's accounting system,
internal accounting control and procedures for safeguarding
Securities, including Securities deposited and/or maintained in a
Securities System. Such reports, which shall be of sufficient scope
and in sufficient detail as may reasonably be required by the Funds
and as may reasonably by obtained by the Custodian, shall provide
reasonable assurance to the Funds that the procedures employed by the
independent certified public accountants are reasonably designed to
detect any material inadequacies with respect to the matters discussed
in the report, shall state in detail the material inadequacies
disclosed by such examination, and, if no such inadequacies exist,
shall so state.
Section 2.07. Securities System. As used herein the term "Securities
System" shall mean each of the following: (a) the Depository Trust
Company; (b) the Participants Trust Company; (c) any book-entry system
as provided in (i) Subpart0 of Treasury Circular No. 300, 31CFR
306.115, (ii) SubpartB of Treasury Circular Public Debt Series No.
27-76, 31CFR 350.2, or (iii) the book-entry regulations of federal
agencies substantially in the form of 31CFR 306.115; or (d) any
domestic clearing agency registered with the Securities and Exchange
Commission under Section17A of the Securities Exchange Act of 1934, as
amended (or as may otherwise be authorized by the Securities and
Exchange Commission to serve in the capacity of depository or clearing
agent for the securities or other assets of investment companies)
which acts as a securities depository and the use of which has been
approved in Special Instructions. Use of a Securities System by the
Custodian shall be in accordance with applicable Federal Reserve Board
and Securities and Exchange Commission rules and regulations, if any,
and subject to the following provisions:
(A) The Custodian may deposit and/or maintain Securities held
hereunder in a Securities System, provided that such Securities are
represented in an account of the Custodian in the Securities System
which account shall not contain any assets of the Custodian other than
assets held as a fiduciary, custodian, or otherwise for customers.
(B) The Custodian shall, if requested by the Funds, provide the Funds
with all reports obtained by the Custodian with respect to the
Securities System's accounting system, internal accounting control and
procedures for safeguarding securities deposited in the Securities
System.
(C) Upon receipt of Special Instructions, the Custodian shall
terminate the use hereunder of any Securities System (except for the
federal book-entry system) as promptly as practicable and shall take
all actions reasonably practicable to safeguard the Securities and
other assets of the Funds maintained with such Securities System.
Section 2.08. Collections. The Custodian shall (a) collect, receive
and deposit in the applicable Account all income and other payments
with respect to Securities held by the Custodian hereunder; (b)
endorse and deliver any instruments required to effect such
collection; and (c) execute ownership and other certificates and
affidavits for all federal, state and foreign tax purposes in
connection with receipt of income or other payments with respect to
Securities, or in connection with the transfer of Securities.
Section 2.09. Notices, Consents, Etc. The Custodian shall deliver to
the Funds, in the most expeditious manner practicable, all notices,
consents or announcements affecting or relating to Securities held by
the Custodian on behalf of the Funds that are received by the
Custodian, and, upon receipt of Proper Instructions, the Custodian
shall execute and deliver such consents or other authorizations as may
be required.
Section 2.10. Notice of Custodian's Inability to Perform. The
Custodian shall promptly notify the Funds in writing by facsimile
transmission or such other manner as the Funds may designate, if, for
any reason: (a) the Custodian determines that it is unable to perform
any of its duties or obligations hereunder or its duties or
obligations with respect to any repurchase transaction; or (b) the
Custodian reasonably foresees that it will be unable to perform any
such duties or obligations.
ARTICLE III - PROPER INSTRUCTIONS AND RELATED MATTERS
Section 3.01. Proper Instructions; Special Instruction.
(a) Proper Instructions. As used herein, the term "Proper
Instructions" shall mean: (i) a tested telex, a written (including,
without limitation, facsimile transmission) request, direction,
instruction or certification signed or initialed by one or more
Authorized Persons (as hereinafter defined); (ii) a telephonic or
other oral communication by one or more Authorized Persons; or (iii) a
communication effected directly between electromechanical or
electronic devices or systems (including, without limitation,
computers) by one or more Authorized Persons; provided, however, that
communications of the types described in clauses (ii) and (iii) above
purporting to be given by an Authorized Person shall be considered
Proper Instructions only if the Custodian reasonably believes such
communications to have been given by an Authorized Person with respect
to the transaction involved. Proper Instructions in the form of oral
communications shall be confirmed by the Funds by tested telex or in
writing in the manner set forth in clause(i) above, but the lack of
such confirmation shall in no way affect any action taken by the
Custodian in reliance upon such oral instructions prior to the
Custodian's receipt of such confirmation. Each of the Funds and the
Custodian is hereby authorized to record any and all telephonic or
other oral instructions communicated to the Custodian. Proper
Instructions may relate to specific transactions or to types or
classes of transactions, and may be in the form of standing
instructions.
(b) Special Instructions. As used herein, the term "Special
Instructions" shall mean Proper Instructions countersigned or
confirmed in writing by, in the case of the entities listed in
Schedules A-1 or A-2 hereto, the Treasurer or any Assistant Treasurer
of the Funds or any other person designated in writing by the
Treasurer of the Funds, and in the case of each of the entities listed
on Schedules A-3 or A-4, by the officer who is a signatory to this
Agreement on behalf of such entity or any other person designated in
writing by such officer or an officer of such entity of higher
authority, which countersignature or written confirmation shall be (i)
included on the same instrument containing the Proper Instructions or
on a separate instrument relating thereto, and (ii) delivered by hand,
by facsimile transmission, or in such other manner as the parties
hereto may agree in writing.
(c) Address for Proper Instructions and Special Instructions. Proper
Instructions and Special Instructions shall be delivered to the
Custodian at the address and/or telephone, telecopy or telex number
agreed upon from time to time by the Custodian and the Funds.
Section 3.02. Authorized Persons. Concurrently with the execution of
this Agreement and from time to time thereafter, as appropriate, the
Funds shall deliver to the Custodian, duly certified as appropriate by
the Treasurer or any Assistant Treasurer of the Funds or by a
Secretary or Assistant Secretary of the Funds, and in the case of each
of the entities listed on Schedules A-3 or A-4, by the officer who is
a signatory to this Agreement on behalf of such entity or any other
person designated in writing by such officer or an officer of higher
authority, a certificate setting forth (a) the names, signatures and
scope of authority of all persons authorized to give Proper
Instructions or any other notice, request, direction, instruction,
certificate or instrument on behalf of the Funds (collectively, the
"Authorized Persons," and individually, an "Authorized Person"), and
(b) the names and signatures of those persons authorized to issue
Special Instructions. Such certificate may be accepted and relied
upon by the Custodian as conclusive evidence of the facts set forth
therein and shall be considered to be in full force and effect until
delivery to the Custodian of a similar certificate to the contrary.
Upon delivery of a certificate which deletes the name of a person
previously authorized to give Proper Instructions or to issue Special
Instructions, such person shall no longer be considered an Authorized
Person or authorized to issue Special Instructions, as applicable.
Section 3.03. Investment Limitations. In performing its duties
hereunder the Custodian may assume, unless and until it receives
special Instructions to the contrary (a "Contrary Notice"), that
Proper Instructions received by it are not in conflict with or in any
way contrary to any investment or other limitation applicable to any
of the Funds. The Custodian shall in no event be liable to the Funds
and shall be indemnified by the Funds for any loss, damage or expense
to the Custodian arising out of any violation of any investment or
other limitation to which any Fund is subject, except to the extent
that such loss, damage or expense: (i) relates to a violation of any
investment or other limitation of a Fund occurring after receipt by
the Custodian of a Contrary Notice; or (ii) arises from a breach of
this Agreement by the Custodian.
Section 3.04. Persons Having Access to Assets of the Funds. No
Authorized Person, Trustee, officer, employee or agent of the Funds
(other than the Custodian) shall have physical access to the assets of
the Funds held by the Custodian, or shall be authorized or permitted
to withdraw any such assets for delivery to an account of such person,
nor shall the Custodian deliver any such assets to any such person;
provided, however, that nothing in this Section 3.04 shall prohibit:
(a) any Authorized Person from giving Proper Instructions, or the
persons described in Section 3.01(b) from issuing Special
Instructions, so long as such action does not result in delivery of or
access to assets of the Funds prohibited by this Section 3.04; or (b)
the Funds' independent certified public accountants from examining or
reviewing the assets of the Funds held by the Custodian.
Section 3.05. Actions of Custodian Based on Proper Instructions and
Special Instructions. Subject to the provisions of Section 4.01
hereof, the Custodian shall not be responsible for the title, validity
or genuineness of any property, or evidence of title thereof, received
by it or delivered by it pursuant to this Agreement.
ARTICLE IV - STANDARD OF CARE; INDEMNIFICATION
Section 4.01. Standard of Care.
(a) General Standard of Care. The Custodian shall exercise
reasonable care and diligence in carrying out all of its duties and
obligations under this Agreement, and shall be liable to the Funds for
all loss, damage and expense incurred or suffered by the Funds,
resulting from the failure of the Custodian to exercise such
reasonable care and diligence or from any other breach by the
Custodian of the terms of this Agreement.
(b) Acts of God, Etc. In no event shall the Custodian incur
liability hereunder if the Custodian is prevented, forbidden or
delayed from performing, or omits to perform, any act or thing which
this Agreement provides shall be performed or omitted to be performed
by reason of: (i) any provision of any present or future law or
regulation or order of the United States of America, or any state
thereof, or of any foreign country, or political subdivision thereof
or of any court of competent jurisdiction; or (ii) any act of God or
war; unless, in each case, such delay or nonperformance is caused by
(A) the negligence, misfeasance or misconduct of the Custodian, or (B)
a malfunction or failure of equipment maintained or operated by the
Custodian other than a malfunction or failure caused by events beyond
the Custodian's control and which could not reasonably be anticipated
and/or prevented by the Custodian.
(c) Mitigation by Custodian. Upon the occurrence of any event which
causes or may cause any loss, damage or expense to the Funds, the
Custodian shall use all commercially reasonable efforts and shall take
all reasonable steps under the circumstances to mitigate the effects
of such event and to avoid continuing harm to the Funds.
Section 4.02. Liability of Custodian for Actions of Securities
Systems. Notwithstanding the provisions of Section4.01 to the
contrary, the Custodian shall not be liable to the Funds for any loss,
damage or expense resulting from the use by the Custodian of a
Securities System, unless such loss, damage or expense is caused by,
or results from, negligence, misfeasance or misconduct of the
Custodian. In the case of loss, damage or expense resulting from use
of a Securities System by the Custodian, the Custodian shall take all
reasonable steps to enforce such rights as it may have against the
Securities System to protect the interest of the Funds.
Section 4.03. Indemnification.
(a) Indemnification Obligations. Subject to the limitations set
forth in this Agreement, the Funds severally agree to indemnify and
hold harmless the Custodian from all claims and liabilities (including
reasonable attorneys' fees) incurred or assessed against the Custodian
for actions taken in reliance upon Proper Instructions or Special
Instructions; provided, however, that such indemnity shall not apply
to claims and liabilities occasioned by or resulting from the
negligence, misfeasance or misconduct of the Custodian, or any other
breach of this Agreement by the Custodian. In addition, the Funds
severally agree to indemnify the Custodian against any liability
incurred by the Custodian by reason of taxes assessed to the
Custodian, or other costs, liability or expenses incurred by the
Custodian, resulting directly or indirectly solely from the fact that
securities and other property of the Funds is registered in the name
of the Custodian; provided, however, in no event shall such
indemnification be applicable to income, franchise or similar taxes
which may be imposed or applied against the Custodian or charges
imposed by a Federal Reserve Bank with respect to intra-day overdrafts
unless separately agreed to by the Funds.
(b) Extent of Liability. Notwithstanding anything to the contrary
contained herein, with respect to the indemnification obligations of
the Funds provided in this Section4.03, each Fund shall be: (i)
severally, and not jointly and severally, liable with each of the
other Funds; and (ii) liable only for its pro rata share of such
liabilities, determined with reference to such Fund's proportionate
interest in the aggregate of assets held by the Custodian in the
Account with respect to which such liability relates at the time such
liability was incurred, as reflected on the books and records of the
Funds.
(c) Notice of Litigation, Right to Prosecute, Etc. The Custodian
shall promptly notify the Funds in writing of the commencement of any
litigation or proceeding brought against the Custodian in respect of
which indemnity may be sought against the Funds pursuant to this
Section4.03. The Funds shall be entitled to participate in any such
litigation or proceeding and, after written notice from the Funds to
the Custodian, the Funds may assume the defense of such litigation or
proceeding with counsel of their choice at their own expense. The
Custodian shall not consent to the entry of any judgment or enter into
any settlement in any such litigation or proceeding without providing
the Funds with adequate notice of any such settlement or judgment, and
without the Funds' prior written consent. The Custodian shall submit
written evidence to the Funds with respect to any cost or expense for
which it seeks indemnification in such form and detail as the Funds
may reasonably request.
Section 4.04. Funds, Right to Proceed. Notwithstanding anything to
the contrary contained herein, the Funds shall have, at their election
upon reasonable notice to the Custodian, the right to enforce, to the
extent permitted by any applicable agreement and applicable law, the
Custodian's rights against any Securities System or other person for
loss, damage or expense caused the Custodian or the Funds by such
Securities System or other person, and shall be entitled to enforce
the rights of the Custodian with respect to.any claim against such
Securities System or other person which the Custodian may have as a
consequence of any such loss, damage or expense if and to the extent
that the Custodian or any Fund has not been made whole for any such
loss, damage or expense.
ARTICLE V - COMPENSATION
Section 5.01. Compensation. The Custodian shall be compensated for
its services hereunder in an amount, and at such times, as may be
agreed upon, from time to time, by the Custodian and the Funds. Each
Fund shall be severally, and not jointly, liable with the other Funds
only for its pro rata share of such compensation, determined with
reference to such Fund's proportionate interest in each Repurchase
Agreement transaction to which such compensation relates.
Section 5.02. Waiver of Right of Set-Off. The Custodian hereby
waives and relinquishes all contractual and common law rights of
set-off to which it may now or hereafter be or become entitled with
respect to any obligations of the Funds to the Custodian arising under
this Agreement.
ARTICLE VI - TERMINATION
Section 6.01. Events of Termination. This Agreement shall continue
in full force and effect until the first to occur of: (a) termination
by the Custodian or the Funds by an instrument in writing delivered to
the other party, such termination to take effect not sooner than
ninety (90) days after the date of such delivery; or (b) termination
by the Funds by written notice delivered to the Custodian, based upon
the Funds' determination that there is a reasonable basis to conclude
that the Custodian is insolvent or that the financial condition of the
Custodian is deteriorating in any material respect, in which case
termination shall take effect upon the Custodians receipt of such
notice or at such later time as the Funds shall designate; provided,
however, that this Agreement may be terminated as to one or more Funds
(but less than all Funds) by delivery of an amended Schedule A-1, A-2,
A-3 or A-4 pursuant to Section7.03 hereof. The execution and delivery
of an amended Schedule A-1, A-2, A-3 or A-4 which deletes one or more
Funds shall constitute a termination of this Agreement only with
respect to such deleted Fund(s).
Section 6.02. Successor Custodian; Payment of Compensation. Each of
the Funds may identify a successor custodian to which the cash,
Securities and other assets of such Fund shall, upon termination of
this Agreement, be delivered; provided that in the case of the
termination of this Agreement with respect to any of the Funds, such
Fund or Funds shall direct the Custodian to transfer the assets of
such Fund or Funds held by the Custodian pursuant to Proper
Instructions. The Custodian agrees to cooperate with the Funds in the
execution of documents and performance or all other actions necessary
or desirable in order to substitute the successor custodian for the
Custodian under this Agreement. In the event of termination, each
Fund shall make payment of such Fund's applicable share of unpaid
compensation within a reasonable time following termination and
delivery of a statement to the Funds setting forth such fees. The
termination of this Agreement with respect to any of the Funds shall
be governed by the provisions of this ArticleVI as to notice, payments
and delivery of securities and other assets, and shall not affect the
obligations of the parties hereunder with respect to the other Funds
set forth in Schedule A-1, A-2, A-3 or A-4 as amended from time to
time.
ARTICLE VII - MISCELLANEOUS
Section 7.01. Representative Capacity and Binding Obligation. A COPY
OF THE DECLARATION OF TRUST OR OTHER ORGANIZATIONAL DOCUMENTS OF EACH
FUND IS ON FILE WITH THE SECRETARY OF THE STATE OF EACH FUND'S
FORMATION, AND NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT IS NOT
EXECUTED ON BEHALF OF THE TRUSTEES OF ANY FUND AS INDIVIDUALS, AND THE
OBLIGATIONS OF THIS AGREEMENT ARE NOT BINDING UPON ANY OF THE
SHAREHOLDERS, TRUSTEES, DIRECTORS, PARTNERS, OFFICERS, EMPLOYEES OR
AGENTS OF ANY FUND INDIVIDUALLY, BUT ARE BINDING ONLY UPON THE ASSETS
AND PROPERTY OF THE FUNDS, AND IN THE CASE OF SERIES COMPANIES, SUCH
FUNDS' RESPECTIVE PORTFOLIOS OR SERIES.
THE CUSTODIAN AGREES THAT NO SHAREHOLDER, TRUSTEE, DIRECTOR, PARTNER,
OFFICER, EMPLOYEE OR AGENT OF ANY FUND MAY BE HELD PERSONALLY LIABLE
OR RESPONSIBLE FOR ANY OBLIGATIONS OF THE FUNDS ARISING OUT OF THIS
AGREEMENT. WITH RESPECT TO OBLIGATIONS OF EACH FUND ARISING OUT OF
THIS AGREEMENT, THE CUSTODIAN SHALL LOOK FOR PAYMENT OR SATISFACTION
OF ANY CLAIM SOLELY TO THE ASSETS AND PROPERTY OF THE FUND TO WHICH
SUCH OBLIGATION RELATES AS THOUGH EACH FUND HAD SEPARATELY CONTRACTED
WITH THE CUSTODIAN BY SEPARATE WRITTEN INSTRUMENT."
Section 7.02. Entire Agreement. This Agreement constitutes the
entire understanding and agreement of the parties hereto with respect
to the subject matter hereof.
Section 7.03. Amendments. No provision of this Agreement may be
amended except by a statement in writing signed by the party against
which enforcement of the amendment is sought; provided, however,
Schedule A-1, A-2, A-3 or A-4 listing the Funds which are parties
hereto, Schedule B listing the Fund Custodians and Schedule C listing
the Repo Custodians may be amended from time to time to add or delete
one or more Funds, Fund Custodians or Repo Custodians, as the case may
be, by the Funds' delivery of an amended Schedule A-1, A-2, A-3 or
A-4, Schedule B or Schedule C to the Custodian. The deletion of one
or more Funds from Schedule A-1, A-2, A-3 or A-4 shall have the effect
of terminating this Agreement as to such Fund(s), but shall not affect
this Agreement with respect to any other Fund.
Section 7.04. Interpretation. In connection with the operation of
this Agreement, the Custodian, and the Funds may agree in writing from
time to time on such provisions interpretative of or in addition to
the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. No
interpretative or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this
Agreement.
Section 7.05. Captions. Headings contained in this Agreement, which
are included as convenient references only, shall have no bearing upon
the interpretation of the terms of the Agreement or the obligations of
the parties hereto.
Section 7.06. Governing Law. THE PROVISIONS OF THIS AGREEMENT SHALL
BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF.
Section 7.07. Notice and Confirmations.
(a) Except as provided in Section 7.07(b) below and except in the
case of Proper Instructions or Special Instructions, notices and other
writings contemplated by this Agreement shall be delivered by hand or
by facsimile transmission (provided that in the case of delivery by
facsimile transmission, notice shall also be mailed postage prepaid)
to the parties at the following addresses:
(i) If to the Funds:
FMR Texas Inc.
400 East Las Colinas Blvd., CP9M
Irving, Texas 75039
Telephone: (214) 584-7800
Attention: Ms. Deborah Todd or
Mr. Samuel Silver
(ii) If to the Custodian:
The Bank of New York
One Wall Street
Fourth Floor
New York, NY 10286
Attn: Claire Meskovic
Telephone: (212) 635-4808
Telefax: (212) 635-4828
(b) The Custodian may provide the confirmations required by Sections
2.02 and 2.03 of this Agreement by making the information available in
the form of a communication directly between electromechanical or
electrical devices or systems (including, without limitation,
computers) (or in such other manner as the parties hereto may agree in
writing) to the following Fund Agent:
Fidelity Accounting and Custody
Domestic Securities Operations
400 East Las Colinas Blvd., CP9E
Irving, Texas 75039
Telephone: (214) 506-4071
Attention: Mr. Mark Mufler
The address and telephone number of the Funds, the Fund Agent and the
Custodian and the identity of the Fund Agent specified in this Section
7.07 may be changed by written notice of the Funds to Custodian or
Custodian to the Funds, as the case may be. All written notices which
are required or provided to be given hereunder shall be effective upon
actual receipt by the entity to which such notice is given.
Section 7.08. Assignment. This Agreement shall be binding on and
shall inure to the benefit of the parties hereto and their respective
successors and assigns, provided that, no party hereto may assign this
Agreement or any of its rights or obligations hereunder without the
prior written consent of each of the other parties.
Section 7.09. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
This Agreement shall become effective when one or more counterparts
have been signed and delivered by each of the parties.
Section 7.10. Confidentiality; Survival of Obligations. The parties
hereto agree that they shall each shall treat confidentially the terms
and conditions of this Agreement and all information provided by each
party to the others regarding its business and operations. All
confidential information provided by a party hereto shall be used by
any other party hereto solely for the purpose of rendering services
pursuant to this Agreement and, except as may be required in carrying
out this Agreement, shall not be disclosed to any third party without
the prior consent of such providing party. The foregoing shall not be
applicable to any information that is publicly available when provided
or thereafter becomes publicly available other than through a breach
of this Agreement, or that is required to be disclosed by any bank
examiner of the Custodian, any auditor of the parties hereto or by
judicial or administrative process or otherwise by applicable law or
regulation. The provisions of this Section 7.10 and Sections3.03,
4.01, 4.02, 4.03, 4.04, 4.05, 7.01 and 7.06 shall survive any
termination of this Agreement, provided that in the event of
termination the Custodian agrees that it shall transfer and return
Securities and other assets held by the Custodian for the benefit of
the Funds as the Funds direct pursuant to Proper Instructions.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed in its name and behalf on the day and year first above
written.
[Signature Lines Omitted]
SCHEDULES A-1, A-2, A-3 AND A-4
TO JOINT TRADING ACCOUNT CUSTODY AGREEMENT BETWEEN
THE BANK OF NEW YORK AND FIDELITY FUNDS DATED AS OF __________
The following is a list of the Funds to which this Agreement applies:
SCHEDULE B
TO JOINT TRADING ACCOUNT CUSTODY AGREEMENT
BETWEEN THE BANK OF NEW YORK AND
FIDELITY FUNDS DATED AS OF MAY 11, 1995
The following is a list of the Fund Custodians of the Funds:
The Bank of New York
Morgan Guaranty Trust Company
Brown Brothers Harriman & Co.
First Union National Bank Charlotte
Chase Manhattan Bank, N.A.
State Street Bank and Trust Company
SCHEDULE C
TO JOINT TRADING ACCOUNT CUSTODY AGREEMENT
BETWEEN THE BANK OF NEW YORK AND
FIDELITY FUNDS DATED AS OF MAY 11, 1995
The following is a list of Repo Custodians of the Funds:
The Bank of New York
Chemical Bank
Morgan Guaranty Trust Company
Exhibit g(14)
Form of
FIRST AMENDMENT TO
JOINT TRADING ACCOUNT CUSTODY AGREEMENT
BETWEEN
THE BANK OF NEW YORK
AND
FIDELITY FUNDS
FIRST AMENDMENT TO JOINT TRADING ACCOUNT CUSTODY AGREEMENT BETWEEN
THE BANK OF NEW YORK AND FIDELITY FUNDS, dated as of _______, by and
between THE BANK OF NEW YORK ("Custodian") and each of the entities
listed on SchedulesA-1, A-2, A-3 and A-4 hereto on behalf of itself
or, (i) in the case of a series company, on behalf of one or more of
its portfolios or series listed on SchedulesA-1 or A-2 hereto, (ii) in
the case of the accounts listed on Schedule A-3 hereto, acting through
Fidelity Management & Research Company, and (iii)in the case of the
commingled or individual accounts listed on Schedule A-4 hereto,
acting through Fidelity Management Trust Company (collectively, the
"Funds" and each, a "Fund").
WITNESSETH
WHEREAS, Custodian and certain of the Funds have entered into that
certain Joint Trading Account Custody Agreement between The Bank of
New York and Fidelity Funds, dated as of ______ (the "Agreement"),
pursuant to which the Funds have appointed the Custodian as its
custodian for the purpose of establishing and administering one or
more joint trading accounts or subaccounts thereof (individually, an
"Account" and collectively, the "Accounts") and holding cash and
securities for the Funds in connection with repurchase transactions
effected through the Accounts; and
WHEREAS, Seller and the Funds desire to amend the Agreement as set
forth below.
NOW, THEREFORE, in consideration of the premises and mutual promises
and covenants contained herein, the parties hereto agree as follows.
Unless otherwise defined herein or the context otherwise requires,
terms used in this Amendment, including the preamble and recitals,
have the meanings provided in the Agreement.
The Agreement is hereby amended by deleting Paragraph2.03(f) in its
entirety and substituting the following in lieu thereof:
Exhibit g(14)
"(f) Overdraft. In the event that the Custodian is directed by
Proper Instructions to make any payment or transfer of funds on behalf
of a Fund for which there would be, at the close of business on the
date of such payment or transfer, insufficient funds held by the
Custodian on behalf of such Fund, the Custodian may, in its
discretion, provide an overdraft ("Overdraft") to the Fund (such Fund
being referred to herein as an "Overdraft Fund"), in an amount
sufficient to allow the completion of such payment or transfer. Any
Overdraft provided hereunder: (a) shall be payable on the next
Business Day, unless otherwise agreed by the Overdraft Fund and the
Custodian; and (b) shall accrue interest from the date of the
Overdraft to the date of payment in full by the Overdraft Fund at a
rate agreed upon in writing, from time to time, by the Custodian and
the Overdraft Fund. The Custodian and the Funds acknowledge that the
purpose of such Overdrafts is to temporarily finance the purchase or
sale of securities for prompt delivery in accordance with the terms
hereof. The Custodian hereby agrees to notify each Overdraft Fund by
3:00 p.m., New York time, of the amount of any Overdraft. Provided
that Custodian has given the notice required by this subparagraph (f),
the Funds hereby agree that, as security for the Overdraft of an
Overdraft Fund, the Custodian shall have a continuing lien and
security interest in and to all interest of such Overdraft Fund in
Securities whose purchase is financed by Custodian and which are in
Custodian's possession or in the possession or control of any third
party acting on Custodian's behalf and the proceeds thereof. In this
regard, Custodian shall be entitled to all the rights and remedies of
a pledgee under common law and a secured party under the New York
Uniform Commercial Code and any other applicable laws or regulations
as then in effect."
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be
executed and delivered under seal by their duly authorized officers.
BANK OF NEW YORK
[Signature Lines Omitted]
FIDELITY INVESTMENT COMPANIES LISTED
ON SCHEDULE A-1 HERETO AND ACCOUNTS
LISTED ON SCHEDULE A-3 HERETO
Dated:
[Signature Lines Omitted]
FIDELITY INVESTMENT COMPANIES LISTED
ON SCHEDULE A-2 HERETO
Dated:
[Signature Lines Omitted]
ACCOUNTS LISTED ON SCHEDULE A-4 HERETO
By: FIDELITY MANAGEMENT TRUST COMPANY
Dated:
[Signature Lines Omitted]
Kirkpatrick & Lockhart llp 1800 Massachusetts Avenue, NW
Second Floor
Washington, DC 20036-1800
202.778.9000
www.kl.com
April 25, 2000
Variable Insurance Products Fund III
82 Devonshire Street
Boston, Massachusetts 02109
Ladies and Gentlemen:
You have requested our opinion, as counsel to Variable Insurance
Products Fund III (the "Trust"), as to certain matters regarding the
issuance of Shares of the Trust. As used in this letter, the term
"Shares" means the Initial Class, Service Class, and Service Class 2
shares of beneficial interest of Balanced Portfolio, Growth & Income
Portfolio, Growth Opportunities Portfolio, and Mid Cap Portfolio, each
a series of the Trust.
As such counsel, we have examined certified or other copies, believed
by us to be genuine, of the Trust's Declaration of Trust and by-laws
and such resolutions and minutes of meetings of the Trust's Board of
Trustees as we have deemed relevant to our opinion, as set forth
herein. Our opinion is limited to the laws and facts in existence on
the date hereof, and it is further limited to the laws (other than the
conflict of law rules) in the Commonwealth of Massachusetts that in
our experience are normally applicable to the issuance of shares by
unincorporated voluntary associations and to the Securities Act of
1933 ("1933 Act"), the Investment Company Act of 1940 ("1940 Act") and
the regulations of the Securities and Exchange Commission ("SEC")
thereunder.
Based on present laws and facts, we are of the opinion that the
issuance of the Shares has been duly authorized by the Trust and that,
when sold in accordance with the terms contemplated by Post-Effective
Amendment No. 17 to the Trust's Registration Statement on Form N-1A
and each subsequent Post-Effective Amendment ("PEA") to said
registration statement, including receipt by the Trust of full payment
for the Shares and compliance with the 1933 Act and the 1940 Act, the
Shares will have been validly issued, fully paid and non-assessable.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under
certain circumstances, be held personally liable for the obligations
of the Trust. The Declaration of Trust states that all persons
extending credit to, contracting with or having any claim against the
Trust or the Trustees shall look only to the assets of the appropriate
series of the Trust for payment under such credit, contract or claim;
and neither the shareholders nor the Trustees, nor any of their
agents, whether past, present or future, shall be personally liable
therefor. It also requires that every note, bond, contract or other
undertaking issued by or on behalf of the Trust or the Trustees
relating to the Trust shall include a recitation limiting the
obligation represented thereby to the Trust and its assets. The
Declaration of Trust further provides: (1) for indemnification from
the assets of the series of the Trust for all loss and expense of any
shareholder held personally liable for the obligations of the Trust by
virtue of ownership of shares of the Trust; and (2) for the series of
the Trust to assume the defense of any claim against the shareholder
for any act or obligation of the series of the Trust. Thus, the risk
of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust or series
would be unable to meet its obligations.
We hereby consent to this opinion accompanying or being incorporated
by reference in the PEA when it is filed with the SEC.
Very truly yours,
KIRKPATRICK & LOCKHART LLP
/s/Kirkpatrick & Lockhart LLP
Exhibit j(1)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference into the
Prospectuses and Statement of Additional Information in Post-Effective
Amendment No. 17 to the Registration Statement on Form N-1A of
Variable Insurance Products Fund III: Balanced Portfolio, Growth &
Income Portfolio, and Growth Opportunities Portfolio of our reports
dated February 10, 1999 on the financial statements and financial
highlights included in the December 31, 1998 Annual Report to
Shareholders of Variable Insurance Products Fund III: Balanced
Portfolio, Growth & Income Portfolio, and Growth Opportunities
Portfolio.
We further consent to the references to our Firm under the headings
"Financial Highlights" in the Prospectuses and "Auditors" in the
Statement of Additional Information.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2000
Exibit j(2)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference into the
Prospectuses and Statement of Additional Information constituting part
of Post-Effective Amendment No. 17 to the Registration Statement on
Form N-1A of Variable Insurance Products Fund III: Mid Cap Portfolio,
of our report dated February 10, 2000 on the financial statements and
financial highlights included in the December 31, 1999 Annual Reports
to Shareholders of Variable Insurance Products Fund III: Mid Cap
Portfolio.
We further consent to the references to our Firm under the headings
"Financial Highlights" in the Prospectuses and "Auditors" in the
Statement of Additional Information.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2000
Exhibit j(3)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference constituting part of
Post-Effective Amendment No. 17 to the Registration Statement No.
811-7205 on Form N-1A of Variable Insurance Products Fund III, of our
report dated February 11, 2000 appearing in the Annual Reports to
Shareholders of Balanced Portfolio, Growth & Income Portfolio, and
Growth Opportunities Portfolio for the year ended December 31, 1999.
We also consent to the references to us under the headings "Financial
Highlights" in the Prospectuses and "Auditors" in the Statement of
Additional Information, which are a part of such Registration
Statement.
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
Boston, Massachusetts
April 25, 2000
