File No. 33-20773
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (NO 33-20773)
UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 14 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT [x]
COMPANY ACT OF 1940
Amendment No. [ ]
Variable Insurance Products Fund II
(Exact Name of Registrant as Specified in Declaration of Trust)
82 Devonshire St., Boston, MA 02109
(Address of Principal Executive Office)
Registrant's Telephone Number (617) 570-7000
Arthur S. Loring, Esq.
82 Devonshire Street,
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) Immediately upon filing pursuant to paragraph (b)
( ) On April 30, 1994 pursuant to paragraph (b)
(x) 60 days after filing pursuant to paragraph (a)
( ) On () pursuant to paragraph (a) of Rule 485
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940. The most recent notice required by such
Rule was filed on February 23, 1994.
VARIABLE INSURANCE PRODUCTS FUND II
CROSS REFERENCE SHEET
Form N-1A Item Number
Part A Prospectus Caption
1 a,b Cover Page
2 a,b,c *
3 a,b *
c Performance
4 a(i) The Fidelity Organization
a(ii) The Funds at a Glance; Investment Principals and Risks;
Securities and Investment Practices; Fundamental
Investment Policies and Restrictions
b,c Investment Principals and Risks; Securities and
Investment Practices; Fundamental Investment Policies and
Restrictions
5 a,b(i) The Fidelity Organization
b(ii)(iii),c The Funds at a Glance; FMR and Its Affiliates;
Breakdown of Expenses
d FMR and Its Affiliates; Breakdown of Expenses
e Breakdown of Expenses; Other Expenses
f, g Breakdown of Expenses
6 a(i) (ii) Charter; FMR and Its Affiliates
a(iii) *
b FMR and Its Affiliates
c,d *
e Cover Page, Distributions and Taxes
f,g Distributions and Taxes
7 a FMR and Its Affiliates
b(i),(ii) Transaction Details
b(iii,iv,v) *
c,d,e *
f Other Expenses
8 a Transaction Details
b,c *
d Transaction Details
9 *
_______________
* Not Applicable
Part B Statement of Information Caption
10,11 Cover Page
12 *
13 a,b,c Investment Policies and Limitations
d *
14 a,b Trustees and Officers
c *
15 a, b, c *
16 a(i) FMR
a(ii) Trustees and Officers
a(iii),b Management Contracts, Contracts with
Companies Affiliated with FMR
c *
d Contracts with Companies Affiliated with
FMR
e *
f Distribution and Service Plans
g *
h Description of the Trust
i *Contracts with Companies Affiliated with
FMR; Description of the Trust
17 a, c, Portfolio Transactions
b, d, e *
18 a Description of the Trust
b *
19 a Additional Purchase and Redemption
Information
b Valuation of Portfolio Securities;
Additional Purchase and
Redemption Information
c *
20 Taxes
21 a(i),(ii) Contracts with Companies Affiliated with
FMR
a(iii),b,c *
22 Performance
23 *
_________
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information to help you decide if
the goal of one or more of the funds matches your own.
To learn more about each fund and the investments each may make, you can
obtain a copy of the funds' Statement of Additional Information (SAI) dated
November _. The SAI has been filed with the Securities and Exchange
Commission (SEC) and is incorporated herein by reference (legally forms a
part of the prospectus). For a free copy of the SAI, contact your insurance
company.
Shares of each fund may only be purchased by the separate accounts of
insurance companies, for the purpose of funding variable annuity and
variable life insurance contracts. Particular funds may not be available in
your state due to various insurance regulations. Please check with your
insurance company for available funds. Inclusion of a fund in this
Prospectus which is not available in your state is not to be considered a
solicitation. This Prospectus should be read in conjunction with the
prospectus of the separate account of the specific insurance product which
accompanies this Prospectus.
THESE SECURITIES
HAVE NOT BEEN
APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
VIPII-pro-1194
VARIABLE INSURANCE
PRODUCTS FUND II
CONTRAFUND PORTFOLIO is a growth fund. It seeks to increase the value of
your investment over the long term by investing in securities of companies
that are undervalued or out-of-favor.
ASSET MANAGER: GROWTH PORTFOLIO is an asset allocation fund which seeks to
maximize total return over the long term through investments in stocks,
bonds, and short-term instruments.
PROSPECTUS
NOVEMBER 15, 1994(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
CONTENTS
KEY FACTS THE FUNDS AT A GLANCE
WHO MAY WANT TO INVEST
INVESTMENT PRINCIPLES AND RISKS
Each fund's overall approach to
investing.
THE FUNDS IN DETAIL CHARTER How each fund is
organized.
SECURITIES AND INVESTMENT
PRACTICES Detailed information
about types of instruments each
fund may purchase and each
fund's investment strategies.
BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
PERFORMANCE
YOUR ACCOUNT THE FIDELITY ORGANIZATION
ACCOUNT POLICIES DISTRIBUTIONS AND TAXES
TRANSACTION DETAILS Share price
calculations and how to invest and
redeem.
KEY FACTS
THE FUNDS AT A GLANCE
MANAGEMENT: Fidelity Management & Research Company (FMR), 82 Devonshire
Street, Boston, Massachusetts, is the management arm of Fidelity
Investments, which was established in 1946 and is now America's largest
mutual fund manager. Foreign affiliates of FMR may help choose investments
for the funds.
As with any mutual fund, there is no assurance that a fund will achieve its
goal.
CONTRAFUND
GOAL: To seek capital appreciation (increase in the value of the fund's
shares).
STRATEGY: Invests mainly in equity securities of companies that are
undervalued or out-of-favor.
ASSET MANAGER: GROWTH
GOAL: To seek maximum total return over the long term.
STRATEGY: The fund diversifies across stocks, bonds, and short-term
instruments, both here and abroad, to pursue its goal. The fund has a
neutral mix which represents the way the fund's investments will generally
be allocated over the long term. This mix will vary over short-term periods
as fund management gradually adjusts the fund's holdings - within defined
ranges - based on the current outlook for the different markets.
Neutral Mix
Stocks 65%
(can range
from
0-100%)
Row: 1, Col: 1, Value: 5.0
Row: 1, Col: 2, Value: 65.0
Row: 1, Col: 3, Value: 30.0
Bonds 30%
(can range
from
0-100%)
Short-Term
5%
(can range
from
0-100%)
Each fund pays a management fee to FMR. It also incurs other expenses for
services such as maintaining shareholder records and furnishing shareholder
statements and financial reports. For a discussion of these fees, please
see the section entitled Management, Distribution and Service Fees.
WHO MAY WANT TO INVEST
CONTRAFUND PORTFOLIO: The fund may be appropriate for investors who are
willing to ride out stock market fluctuations in pursuit of potentially
high long-term returns. The fund is designed for those who are looking for
an investment approach that follows a contrarian philosophy. This approach
focuses on companies that are currently out of public favor but show
potential for capital appreciation. Over time, stocks have shown greater
growth potential than other types of securities. In the shorter term,
however, stock prices can fluctuate dramatically in response to these
factors.
ASSET MANAGER: GROWTH PORTFOLIO is designed for investors who want to
diversify among stocks, bonds, and short-term instruments in one fund. If
you are looking for an investment that uses this technique in aggressive
pursuit of total return, this fund may be appropriate for you.
Because the fund owns different types of domestic and foreign investments,
its performance is affected by many factors. The value of each fund's
investments and the income they generate varies from day to day, generally
reflecting changes in interest rates, market conditions, and other company,
political and economic news. Performance also depends on FMR's skill in
allocating assets. When funds shares are redeemed, they may be worth more
or less than their original cost.
THE SPECTRUM OF
FUNDS
Broad categories of funds are
presented here in order of
ascending risk. Generally,
investors seeking to
maximize return must
assume greater risk. The
funds in this prospectus are
in the GROWTH category.
(solid bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(solid bullet) INCOME Seeks income by
investing in bonds.
(right arrow) GROWTH AND INCOME
Seeks long-term growth and
income by investing in stocks
and bonds.
(right arrow) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
Like most mutual funds, these funds by themselves do not constitute a
balanced investment plan. The value of each fund's investments will vary
from day to day, generally reflecting changes in market conditions,
interest rates, and other political and economic views. When fund shares
are redeemed, they may be worth more or less than their original cost.
INVESTMENT PRINCIPLES AND RISKS
CONTRAFUND PORTFOLIO SEEKS CAPITAL APPRECIATION by investing in companies
that FMR believes to be undervalued due to an overly pessimistic appraisal
by the public. In pursuit of the fund's goal, FMR looks for companies with
the following characteristics:
(small solid bullet) unpopular, but improvements seem possible due to
developments such as a change in management, a new product line, or an
improved balance sheet,
(small solid bullet) recently popular, but temporarily out of favor due to
short-term or one-time factors, or
(small solid bullet) undervalued compared to other companies in the same
industry.
This strategy can lead to investments in domestic or foreign companies,
many of which may not be well known. The stocks of small companies often
involve more risk than those of larger companies. The fund usually invests
primarily in common stock and securities convertible into common stock, but
it has the flexibility to invest in any type of security that may produce
capital appreciation.
ASSET MANAGER: GROWTH PORTFOLIO SEEKS TO MAXIMIZE TOTAL RETURN over the
long term by allocating its assets among stocks, bonds, and short-term
instruments. Allocating assets among different types of investments allows
the fund to take advantage of opportunities wherever they may occur, but
also subjects the fund to the risks of a given investment type. Stock
values fluctuate in response to the activities of individual companies and
general market and economic conditions. The value of bonds and short-term
instruments fluctuates based on changes in interest rates and in the credit
quality of the issuer.
FMR regularly reviews the fund's allocation and specific investments, and
makes changes gradually over time to favor investments that it believes
provide the most favorable outlook for achieving the fund's objective.
Although FMR uses its expertise and resources in choosing investments and
in allocating assets, FMR's decisions may not be advantageous to the fund.
The fund allocates its assets among the following classes, or types, of
investments. The STOCK CLASS includes equity securities of all types. The
BOND CLASS includes all varieties of fixed-income instruments with
maturities of more than three years (including adjustable-rate preferred
stock). The SHORT-TERM CLASS includes all types of short-term instruments
with remaining maturities of three years or less. Within each of these
classes, the fund may aggressively invest in both domestic and foreign
securities.
FMR has the ability to allocate the fund's assets within specified ranges.
The fund's NEUTRAL MIX indicates the benchmark for its combination of
investments in each asset class over time. FMR may change the neutral mix
from time to time. The range and approximate neutral mix for each asset
class are shown below. Some types of investments, such as indexed
securities, can fall into more than one asset class. The fund may also make
other investments that do not fall within any of these classes.
Range Neutral mix
STOCK CLASS 0-100% 65%
BOND CLASS 0-100% 30%
SHORT-TERM CLASS 0-100% 5%
Asset Manager: Growth Portfolio's aggressive approach focuses on stocks for
high potential returns. Because the fund can invest in bonds and short-term
instruments, its return may not be as high as a fund that invests only in
stocks.
In pursuit of the fund's objective, FMR will not try to pinpoint the
precise moment when a major reallocation should be made. Asset shifts among
classes will be made gradually over time. Under normal circumstances, a
single reallocation will not involve more than 20% of the fund's total
assets.
The fund diversifies across investment types more than most mutual funds.
No one mutual fund, however, can provide an appropriate balanced investment
plan for all investors.
EACH FUND'S stock values fluctuate in response to the activities of
individual companies and general market and economic conditions. Each fund
spreads investment risk by limiting its holdings in any one company or
industry. FMR may use various investment techniques to hedge a fund's
risks, but there is no guarantee that these strategies will work as FMR
intends. When fund shares are redeemed, they may be worth more or less than
their original cost.
FMR normally invests each fund's assets according to its investment
strategy. Each fund also reserves the right to invest without limitation in
preferred stocks and investment-grade debt instruments for temporary,
defensive purposes.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders' money
and invests it toward a specified goal. In technical terms, each fund is
currently a diversified fund of Variable Insurance Products Fund II, an
open-end management investment company organized as a Massachusetts
business trust on March 21, 1988.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the funds' activities,
review contractual arrangements with companies that provide services to the
funds, and review performance. The majority of trustees are not otherwise
affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These
meetings may be called to elect or remove trustees, change fundamental
policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
An insurance company issuing a variable contract that participates in the
funds will vote shares held in its separate account as required by law and
interpretations thereof, as may be amended or changed from time to time. In
accordance with current law and interpretations thereof, a participating
insurance company is required to request voting instructions from
policyowners and must vote shares in the separate account in proportion to
the voting instructions received. For a further discussion, please refer to
your insurance company's separate account prospectus.
FMR AND ITS AFFILIATES
The funds are managed by FMR, which chooses their investments and handles
their business affairs. On behalf of each fund, two affiliates advise FMR
on foreign investments: Fidelity Management & Research (U.K.) Inc. (FMR
U.K.), in London, England, and Fidelity Management & Research (Far East)
Inc. (FMR Far East), in Tokyo, Japan.
William Danoff is manager and vice president of Contrafund Portfolio, which
he has managed since the fund's inception. Mr. Danoff also manages Fidelity
Contrafund, which he has managed since October 1990. Previously, he managed
Select Retailing and assisted on Magellan. Mr. Danoff joined Fidelity in
1986 as an equity analyst.
Robert Beckwitt is manager and vice president of Asset Manager: Growth
Portfolio, which he has managed since the fund's inception. Mr. Beckwitt
also manages Fidelity Asset Manager, Fidelity Asset Manager: Income,
Fidelity Asset Manager: Growth and VIP II Asset Manager Portfolio. In
addition, he serves as chief investment strategist for Fidelity Portfolio
Advisory Service. Previously, he managed Spartan Government Income, Spartan
Long-Term Government Bond, and was director of quantitative research. Mr.
Beckwitt joined Fidelity in 1985.
Fidelity Distributors Corporation (FDC) distributes and markets Fidelity's
funds and services. Fidelity Investments Institutional Operations Company
(FIIOC), 82 Devonshire Street, Boston, Massachusetts, performs transfer
agent servicing functions for the funds.
FMR Corp. is the ultimate parent company of FMR, FMR Far East, and FMR U.K.
Through ownership of voting common stock, members of the Edward C. Johnson
3d family form a controlling group with respect to FMR Corp. Changes may
occur in the Johnson family group, through death or disability, which would
result in changes in each individual family member's holding of stock. Such
changes could result in one or more family members becoming holders of over
25% of the stock. FMR Corp. has received an opinion of counsel that changes
in the composition of the Johnson family group under these circumstances
would not result in the termination of the funds' management or
distribution contracts and, accordingly, would not require a shareholder
vote to continue operation under those contracts.
FMR may use its broker-dealer affiliates and other firms that sell fund
shares to carry out a fund's transactions, provided that the fund receives
brokerage services and commission rates comparable to those of other
broker-dealers.
Each fund may sell its shares to separate accounts of insurance companies
which are both affiliated and unaffiliated with FMR. Each fund currently
does not foresee any disadvantages to policyowners arising out of the fact
that each fund offers its shares to separate accounts of various insurance
companies to serve as the investment medium for their variable insurance
products. Nevertheless, the Board of Trustees intends to monitor events in
order to identify any material irreconcilable conflicts which may possibly
arise, and to determine what action, if any, should be taken in response to
such conflicts. If such a conflict were to occur, one or more insurance
companies' separate accounts might be required to withdraw its investments
in one or more funds and shares of another fund may be substituted. This
might force a fund to sell securities at disadvantageous prices. In
addition, the Board of Trustees may refuse to sell shares of any fund to
any separate account or may suspend or terminate the offering of shares of
any fund if such action is required by law or regulatory authority or is in
the best interests of the shareholders of the fund.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, and strategies FMR may employ in
pursuit of a fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. A complete listing of each fund's policies
and limitations and more detailed information about the funds' investments
is contained in the funds' SAI. Policies and limitations are considered at
the time of purchase; the sale of instruments is not required in the event
of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help the
funds achieve their goals.
EQUITY SECURITIES may include common stocks, preferred stocks, convertible
securities, and warrants. Common stocks, the most familiar type, represent
an equity (ownership) interest in a corporation. Although equity securities
have a history of long-term growth in value, their prices fluctuate based
on changes in a company's financial condition and on overall market and
economic conditions. Smaller companies are especially sensitive to these
factors.
RESTRICTIONS: With respect to 75% of total assets, a fund may not own more
than 10% of the outstanding voting securities of a single issuer.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. Debt
securities, loans, and other direct debt have varying degrees of quality
and varying levels of sensitivity to changes in interest rates. Longer-term
bonds are generally more sensitive to interest rate changes than short-term
bonds.
U.S. government securities are high-quality instruments issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. government. Not all U.S. government securities are backed by the full
faith and credit of the United States. Some are supported only by the
credit of the agency that issued them.
Lower-quality debt securities (sometimes called "junk bonds") are often
considered to be speculative and involve greater risk of default or price
changes due to changes in the issuer's creditworthiness, or they may
already be in default. The market prices of these securities may fluctuate
more than higher-quality securities and may decline significantly in
periods of general economic difficulty.
RESTRICTIONS: Contrafund and Asset Manager: Growth Portfolios each does not
currently intend to invest more than 5% and 35%, respectively, of its
assets in lower-quality debt securities.
MONEY MARKET INSTRUMENTS are high-quality instruments that present minimal
credit risk. They may include U.S. government obligations, commercial paper
and other short-term corporate obligations, and certificates of deposit,
bankers' acceptances, bank deposits, and other financial institution
obligations. These instruments may carry fixed or variable interest rates.
FOREIGN SECURITIES and foreign currencies may involve additional risks.
These include currency fluctuations, risks relating to political or
economic conditions in the foreign country, and the potentially less
stringent investor protection and disclosure standards of foreign markets.
In addition to the political and economic factors that can affect foreign
securities, a governmental issuer may be unwilling to repay principal and
interest when due, and may require that the conditions for payment be
renegotiated. These factors could make foreign investments, especially
those in developing countries, more volatile.
RESTRICTIONS: Each fund may not invest more than 20% of its assets in any
one foreign country except, each fund may have an additional 15% invested
in securities of issuers located in any one (but only one) of the following
countries: Australia, Canada, France, Japan, the United Kingdom or Germany.
ASSET-BACKED AND MORTGAGE SECURITIES may include pools of lower-rated debt
securities, or consumer loans or mortgages, such as collateralized mortgage
obligations and stripped mortgage-backed securities. The value of these
securities may be significantly affected by changes in interest rates, the
market's perception of the issuers, and the creditworthiness of the parties
involved. These securities may also be subject to prepayment risk.
STRIPPED SECURITIES are the separate income or principal components of a
debt instrument. These involve risks that are similar to those of other
debt securities, although they may be more volatile.
REAL ESTATE-RELATED INSTRUMENTS include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors such
as changes in real estate values and property taxes, interest rates, cash
flow of underlying real estate assets, overbuilding, and the management
skill and creditworthiness of the issuer. Real estate-related instruments
may also be affected by tax and regulatory requirements, such as those
relating to the environment.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, currency exchange rates, commodity prices, or other factors that
affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts,
entering into currency exchange contracts or swap agreements, purchasing
indexed securities, and selling securities short.
FMR can use these practices to adjust the risk and return characteristics
of a fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other borrower.
They have additional risks beyond conventional debt securities because they
may entail less legal protection for a fund, or there may be a requirement
that a fund supply additional cash to a borrower on demand.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect the market value of the fund's assets.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a security at
one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
FOREIGN REPURCHASE AGREEMENTS may be less well secured than U.S. repurchase
agreements, and may be denominated in foreign currencies. They also may
involve greater risk of loss if the counterparty defaults. Some
counterparties in these transactions may be less creditworthy than those in
U.S. markets.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of other securities, including illiquid securities, may be subject
to legal restrictions. Difficulty in selling securities may result in a
loss or may be costly to a fund.
RESTRICTIONS: A fund may not purchase a security if, as a result, more than
10% of its assets would be invested in illiquid securities.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry.
RESTRICTIONS: With respect to 75% of total assets, each fund may not invest
more than 5% of its total assets in any one issuer. Each fund also may not
invest more than 25% of its total assets in any one industry. These
limitations do not apply to U.S. government securities.
BORROWING. A fund may borrow from banks or from other funds advised by FMR,
or through reverse repurchase agreements. If a fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: A fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 25% of its total assets.
LENDING. Lending securities to broker-dealers and institutions, including
FBSI, an affiliate of FMR, is a means of earning income. This practice
could result in a loss or a delay in recovering a fund's securities. A fund
may also lend money to other funds advised by FMR.
RESTRICTIONS: Loans, in the aggregate, may not exceed 33% of a fund's total
assets.
OTHER INSTRUMENTS may include convertible bonds, depositary receipts,
preferred stocks, rights, securities of closed-end investment companies and
warrants.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraphs restate all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraphs, can be changed without shareholder approval.
CONTRAFUND PORTFOLIO seeks capital appreciation by investing in securities
of companies believed by FMR to be undervalued due to an overly pessimistic
appraisal by the public of their future outlook. FMR will study the outlook
for individual companies and industries and their relative market
positions, and will invest in the securities of companies (1) which have
been unpopular for some time but where recent developments bring hope of
improved operating results; (2) which 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; or (3) which appear undervalued
in relation to popular securities of other companies in the same industry.
The fund will remain substantially fully invested in common stocks,
preferred stocks, bonds, securities with warrants attached, and other
certificates of indebtedness. The fund will usually be primarily invested
in common stocks and securities convertible into common stocks. However, if
FMR believes that market conditions warrant a more conservative approach,
the fund may make substantial investments in investment-grade fixed-income
obligations of all types and U.S. government obligations. With respect to
75% of total assets, the fund may not invest more than 5% of its total
assets in any one issuer and may not own more than 10% of the outstanding
voting securities of a single issuer. The fund may not invest more than 25%
of its total assets in any one industry. Loans, in the aggregate, may not
exceed 33% of the fund's total assets.
ASSET MANAGER: GROWTH PORTFOLIO seeks to maximize total return by
allocating its assets among stocks, bonds, short-term instruments, and
other investments. With respect to 75% of total assets, the fund may not
invest more than 5% of its total assets in any one issuer and may not own
more than 10% of the outstanding voting securities of a single issuer. The
fund may not invest more than 25% of its total assets in any one industry.
Loans, in the aggregate, will be limited to 33% of total assets.
INTERNAL REVENUE SERVICE (IRS) LIMITATIONS. In addition to the above, each
fund also follows certain limitations imposed by the IRS on separate
accounts of insurance companies relating to the tax-deferred status of
variable contracts. More specific information may be contained in your
insurance company's separate account prospectus.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of a fund's assets are reflected in its share
price or dividends.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to affiliates who provides
assistance with these services. Each fund also pays OTHER EXPENSES, which
are explained on page .
FMR may, from time to time, agree to reimburse the funds for management
fees and other expenses above a specified limit. FMR retains the ability to
be repaid by a fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease a fund's expenses and boost its
performance.
MANAGEMENT FEE
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, and
multiplying the result by the fund's average net assets.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. This rate cannot rise above .52%, and it drops as
total assets under management increase.
For _____ 1994, the group fee rate was __%. The individual fund fee rate is
.30% for Contrafund Portfolio and .40 for Asset Manager: Growth Portfolio.
The total management fee rate for fiscal 19__ , after reimbursement, is
estimated to be __% for Contrafund Portfolio and __% for Asset Manager:
Growth Portfolio.
FMR HAS SUB-ADVISORY AGREEMENTS with FMR U.K. and FMR Far East on behalf of
each fund. FMR U.K. and FMR Far East provide FMR with investment research
and advice on issuers based outside the United States. Under the
sub-advisory agreements, FMR pays FMR U.K. and FMR Far East fees equal to
110% and 105%, respectively, of the costs of providing these services. The
sub-advisers may also provide investment management services. In return,
FMR pays FMR U.K. and FMR Far East 50% of its management fee rate with
respect to a fund's investments that the sub-adviser manages on a
discretionary basis.
OTHER EXPENSES
While the management fee is a significant component of the funds' annual
operating costs, the funds have other expenses as well.
The funds contract with FIIOC to maintain the master accounts of the
participating insurance companies.
The funds also contract with Fidelity Service Company (FSC), 82 Devonshire
Street, Boston, Massachusetts, to perform many transaction and accounting
functions. These services include processing shareholder transactions,
valuing each fund's investments, and handling securities loans.
The funds also pay other expenses, such as legal, audit, and custodian
fees; proxy solicitation costs; and the compensation of trustees who are
not affiliated with Fidelity. A broker-dealer may use a portion of the
commissions paid by a fund to reduce the fund's custodian or transfer agent
fees.
Each fund has adopted a Distribution and Service Plan. These plans
recognize that FMR may use its resources, including management fees, to pay
expenses associated with the sale of fund shares. This may include payments
to third parties, such as banks or broker-dealers, that provide shareholder
support services or engage in the sale of the fund's shares. It is
important to note, however, that the funds do not pay FMR any separate fees
for this service.
The annualized portfolio turnover rates for Contrafund Portfolio and Asset
Manager: Growth Portfolio are not expected to exceed __% and __%,
respectively, in the first fiscal period. These rates vary from year to
year. High turnover rates increase transaction costs. FMR considers these
effects when evaluating the anticipated benefits of short-term investing.
PERFORMANCE
Each fund's total return may be quoted in advertising if accompanied by
performance of your insurance company's separate account. Performance is
based on historical results and is not intended to indicate future
performance.
TOTAL RETURN is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results. Average annual total returns covering
periods of less than one year assume that performance will remain constant
for the rest of the year.
UNDERSTANDING
PERFORMANCE
As economic conditions
change, different investments
do better than others. While
Asset Manager: Growth
invests in stocks, bonds, and
short-term instruments, each
fund's primary emphasis is in
stocks Each fund's
performance tends to be
related to that of the overall
stock market. Historically,
stock market performance
has been characterized by
volatility in the short run and
growth in the long run. Since
shares of each fund may only
be purchased through a
variable annuity or variable
life insurance contract, you
should carefully review the
prospectus of the insurance
product you have chosen for
information on relevant
charges and expenses.
(checkmark)
THE S&P 500(registered trademark) is the Standard & Poor's Composite Index
of 500 Stocks, a widely recognized, unmanaged index of common stock prices.
The S&P 500 figures assume reinvestment of all dividends paid by stocks
included in the index. They do not, however, include any allowance for the
brokerage commissions or other fees you would pay if you actually invested
in those stocks.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
THE COMPETITIVE FUNDS AVERAGES, which assume reinvestment of distributions,
are published by Lipper Analytical Services, Inc. Contrafund Portfolio
compares its performance to the Lipper Growth Funds Average, and Asset
Manager: Growth Portfolio compares to the Lipper Flexible Portfolio Funds
Average. These averages currently reflect the performance of over ___ and
___ mutual funds with similar objectives, respectively.
Other illustrations of fund performance may show moving averages over
specified periods.
THE FIDELITY ORGANIZATION
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over ___
(solid bullet) Assets in Fidelity mutual
funds: over $___ billion
(solid bullet) Number of shareholder
accounts: over __ million
(solid bullet) Number of investment
analysts and portfolio
managers: over ___
(checkmark)
ACCOUNT POLICIES
DISTRIBUTIONS AND TAXES
For a discussion of the tax status of your variable insurance contract,
refer to the prospectus of your insurance company's separate account. It is
suggested you keep all statements you receive to assist in your personal
recordkeeping.
It is expected that shares of the funds will be held under the terms of
variable annuity or variable life insurance contracts. Under current tax
law, dividends or capital gain distributions from any fund are not
currently taxable when left to accumulate within a variable annuity or
variable life insurance contract. Depending on the variable contract,
withdrawals from the contracts may be subject to ordinary income tax and,
in addition to a 10% penalty tax on withdrawals before age 59 1/2.
Each fund is treated as a separate entity for federal income tax purposes.
Each fund intends to pay out all of its net investment income and net
realized capital gains for each year. Dividends from the funds will be
distributed at least annually. Each fund makes dividend and capital gain
distributions on a per-share basis. After distribution from the fund, the
fund's share price drops by the amount of the distribution. Because
dividends and capital gain distributions are reinvested, the total value of
an account will not be affected because, although the shares will have a
lower price, there will be correspondingly more of them. Normally, net
realized capital gains, if any, are distributed each year for each fund.
Such income and capital gain distributions are automatically reinvested in
additional shares of the funds.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates each fund's NAV as of the close of
business of the NYSE, normally 4 p.m. Eastern time.
EACH FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
Each fund's assets are valued primarily on the basis of market quotations.
Foreign securities are valued on the basis of quotations from the primary
market in which they are traded, and are translated from the local currency
into U.S. dollars using current exchange rates. If quotations are not
readily available or if the values have been materially affected by events
occurring after the closing of a foreign market, assets are valued by a
method that the Board of Trustees believes accurately reflects fair value.
EACH FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order. Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of a fund.
INVESTMENTS AND REDEMPTIONS. Investments may be made only by separate
accounts established and maintained by insurance companies for the purpose
of funding variable insurance contracts. Please refer to the prospectus of
your insurance company's separate account for information on how to invest
in each fund.
Each Participating insurance company receives orders from its variable
contract owners to purchase or redeem shares of the funds each Business
Day. That night, all orders received by that insurance company on that
Business Day are aggregated, and the insurance company places a net
purchase or redemption order for shares of one or more funds the morning of
the next Business Day. These orders are generally executed at the NAV that
was computed at the close of the previous Business Day in order to provide
a match between the variable contract owners' orders to the insurance
companies and the insurance companies' orders to a fund. In some cases, an
insurance company's orders for fund shares may be executed at the NAV next
computed after the order is actually transmitted to a fund.
Redemption proceeds will normally be wired to the insurance company on the
next business day after receipt of the redemption instructions by a fund
but in no event later than 7 days following receipt of instructions. Each
fund may suspend redemptions or postpone payment dates on days when the New
York Stock Exchange is closed (other than weekend or holidays), when
trading on the New York Stock Exchange is restricted, or as permitted by
the Securities and Exchange Commission.
Please refer to the prospectus of your insurance company's separate account
for more information on how to invest and redeem from each fund.
From Filler pages
VARIABLE INSURANCE PRODUCTS FUND II:
ASSET MANAGER: GROWTH PORTFOLIO AND CONTRAFUND PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
__________, 1994
This Statement is not a prospectus but should be read in conjunction with
the current prospectus (dated ______, 1994) for Variable Insurance Products
Fund II (the Trust): Asset Manager: Growth Portfolio and Contrafund
Portfolio. Shares of the Trust may only be purchased by the separate
accounts of insurance companies. Please retain this Statement for future
reference. To obtain additional copies of the Prospectus or Annual Report
please contact your insurance company or call Fidelity Distributors
Corporation at 800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations 2
Portfolio Transactions 10
Valuation of Fund Securities 11
Performance 12
General Information 15
Additional Purchase and Redemption Information 16
Taxes 16
FMR 17
Trustees and Officers 17
Management Contracts 19
Distribution and Service Plans 21
Contracts With Companies Affiliated With FMR 22
Description of the Trust 23
Financial Statements 24
Appendix 24
INVESTMENT ADVISOR
Fidelity Management & Research Company
SUB-ADVISORS
Fidelity Management & Research (U.K.) Inc.
Fidelity Management & Research (Far East) Inc.
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Investments Institutional Operations Company (FIIOC)
VIP2/ptB-1-- 11/94
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in
values, net assets, or other circumstances will not be considered when
determining whether the investment complies with the fund's investment
policies and limitations.
Each fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940) of each
fund. However, except for the fundamental investment limitations set forth
below, the investment policies and limitations described in this Statement
of Additional Information are not fundamental and may be changed without
shareholder approval.
THE FOLLOWING ARE ASSET MANAGER: GROWTH AND CONTRAFUND PORTFOLIOS'
FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH IN THEIR ENTIRETY. EACH FUND
MAY NOT:
(1) With respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) 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 the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
THE FOLLOWING INVESTMENT LIMITATIONS FOR ASSET MANAGER: GROWTH AND
CONTRAFUND PORTFOLIOS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER NOTIFICATION.
(i) Each fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) Each fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) Each fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment advisor or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). Each fund will not
borrow money in excess of 25% of net assets so long as this limitation is
required for certification by certain state insurance departments. Any
borrowings that come to exceed this amount will be reduced within seven
days (not including Sundays and holidays) to the extent necessary to comply
with the 25% limitation. Each fund will not purchase any security while
borrowings representing more than 5% of its total assets are outstanding.
Each fund will not borrow from other funds advised by FMR or its affiliates
if total outstanding borrowings immediately after such borrowing would
exceed 15% of the fund's total assets.
(iv) Each fund does not currently intend to purchase any security if, as a
result, more than 10% of each fund's net assets would be invested in
securities that are deemed to be illiquid because they are subject to legal
or contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) Each fund does not currently intend to lend assets other than
securities to other parties, except by: (a) lending money (up to 5% of each
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment advisor or (b) acquiring
loans, loan participations, or other forms of direct debt instruments and,
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(vi) Each fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(vii) Each fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
For each fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions." For
limitations on short sales, see the section entitled "Short Sales."
In accordance with the funds' fundamental investment policies, there are no
limitations on the percentage of the funds' assets which may be invested in
any one type of instrument. Nor are there limitations (except those
imposed by certain state insurance regulations) on the percentage of the
funds' assets which may be invested in any foreign country. However, in
order to comply with diversification requirements under Section 817(h) of
the Internal Revenue Code of 1986, as amended, in connection with FMR
serving as investment advisor, each fund has agreed to certain
non-fundamental limitations. Please refer to your insurance company's
separate account prospectus for more information.
ASSET ALLOCATION. (Asset Manager: Growth Portfolio) The short-term class
includes all types of domestic and foreign securities and short-term
instruments with remaining maturities of three years or less. FMR will
seek to maximize total return within this asset class by taking advantage
of yield differentials between different instruments, issuers, and
currencies. Short-term instruments may include corporate debt securities
such as commercial paper and notes; government securities issued by U.S. or
foreign governments or their agencies or instrumentalities; bank deposits
and other financial institution obligations; repurchase agreements
involving any type of security; and other similar short-term instruments.
These instruments may be denominated in U.S. dollars or foreign currency.
The bond class includes all varieties of domestic and foreign fixed-income
securities with maturities greater than three years. FMR seeks to maximize
total returns within the bond class by adjusting the fund's investments in
securities with different credit qualities, maturities, and coupon or
dividend rates, and by seeking to take advantage of yield differentials
between securities. Securities in this class may include bonds, notes,
adjustable-rate preferred stocks, convertible bonds, mortgage-related and
asset-backed securities, domestic and foreign government and government
agency securities, zero coupon bonds, and other intermediate-term and
long-term securities. As with the short-term class, these securities may
be denominated in U.S. dollars or foreign currency. The fund may invest in
securities of any quality, including lower-quality, high-yielding debt
securities commonly referred to as "junk bonds," as well as higher quality
securities (lower-quality debt securities are currently limited to 35% of
the fund's assets).
The stock class includes domestic and foreign equity securities of all
types (other than adjustable-rate preferred stocks, which are included in
the bond class). FMR seeks to maximize total return within this asset
class by actively allocating assets to industry sectors expected to benefit
from major trends, and to individual stocks that FMR believes to have
superior investment potential. When FMR selects equity securities, it
considers both growth and anticipated dividend income. Securities in the
stock class may include common stocks, fixed-rate preferred stocks
(including convertible preferred stocks), warrants, rights, depositary
receipts, securities of closed-end investment companies, and other equity
securities issued by companies of any size, located anywhere in the world.
In making asset allocation decisions, FMR will evaluate projections of
risk, market conditions, economic conditions, volatility, yields, and
returns. FMR's management will use database systems to help analyze past
situations and trends, research specialists in each of the asset classes to
help in securities selection, portfolio management professionals to
determine asset allocation and to select individual securities, and its own
credit analysis as well as credit analyses provided by rating services.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940. These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S. government
securities with affiliated financial institutions that are primary dealers
in these securities; short-term currency transactions; and short-term
borrowings. In accordance with exemptive orders issued by the Securities
and Exchange Commission (SEC), the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
FUNDS' RIGHTS AS A SHAREHOLDER. Each fund does not intend to direct or
administer the day-to-day operations of any company. Each fund, however,
may exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the Board of Directors, and
shareholders of a company when FMR determines that such matters could have
a significant effect on the value of each fund's investment in the company.
The activities that each fund may engage in, either individually or in
conjunction with others, may include, among others, supporting or opposing
proposed changes in a company's corporate structure or business activities;
seeking changes in a company's directors or management; seeking changes in
a company's direction or policies; seeking the sale or reorganization of
the company or a portion of its assets; or supporting or opposing third
party takeover efforts. This area of corporate activity is increasingly
prone to litigation and it is possible that each fund could be involved in
lawsuits related to such activities. FMR will monitor such activities with
a view to mitigating, to the extent possible, the risk of litigation
against each fund and the risk of actual liability if each fund is involved
in litigation. No guarantee can be made, however, that litigation against
each fund will not be undertaken or liabilities incurred.
ASSET-BACKED SECURITIES may include pools of mortgages, loans, receivables
or other assets. Payment of principal and interest may be largely
dependent upon the cash flows generated by the assets backing the
securities, and, in certain cases, supported by letters of credit, surety
bonds, or other credit enhancements. The value of asset-backed securities
may also be affected by the creditworthiness of the servicing agent for the
pool, the originator of the loans or receivables, or the financial
institution(s) providing the credit support.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of each fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of each fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset each fund's rights and
obligations relating to the investment).
Investments currently considered to be illiquid include repurchase
agreements not entitling the holder to payment of principal and interest
within seven days, over-the-counter options and non-government stripped
fixed-rate mortgage-backed securities. Also, FMR may determine some
restricted securities, government-stripped fixed-rate mortgage-backed
securities, loans and other direct debt instruments, and swap agreements to
be illiquid. However, with respect to over-the-counter options each fund
writes, all or a portion of the value of the underlying instrument may be
illiquid depending on the assets held to cover the option and the nature
and terms of any agreement each fund may have to close out the option
before expiration.
In the absence of market quotations, illiquid investments are priced at
fair value as determined in good faith by a committee appointed by the
Board of Trustees. If through a change in values, net assets, or other
circumstances, each fund were in a position where more than 10% of each
fund's net assets were invested in illiquid securities, it would seek to
take appropriate steps to protect liquidity.
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, each fund may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the
time it decides to seek registration and the time each fund may be
permitted to sell a security under an effective registration statement.
If, during such a period, adverse market conditions were to develop, each
fund might obtain a less favorable price than prevailed when it decided to
seek registration of the security.
INTERFUND BORROWING PROGRAM. Each fund has received permission from the SEC
to lend money to and borrow money from other funds advised by FMR or its
affiliates. Interfund loans and borrowings normally will extend overnight,
but can have a maximum duration of seven days. Loans may be called on one
day's notice. Each fund will lend through the program only when the
returns are higher than those available at the same time from other
short-term instruments (such as repurchase agreements), and will borrow
through the program only when the costs are equal to or lower than the cost
of bank loans. Each 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.
VARIABLE OR FLOATING RATE OBLIGATIONS bear variable or floating interest
rates and carry rights that permit holders to demand payment of the unpaid
principal balance plus accrued interest from the issuers or certain
financial intermediaries. Floating rate instruments have interest rates
that change whenever there is a change in a designated base rate while
variable rate instruments provide for a specified periodic adjustment in
the interest rate. These formulas are designed to result in a market value
for the instrument that approximates its par value.
In a REPURCHASE AGREEMENT, a fund purchases a security and simultaneously
commits to resell that security to the seller at an agreed upon price on an
agreed upon date within a specified number of days from the date of
purchase. The resale price reflects the purchase price plus an agreed upon
market rate of interest which is unrelated to the coupon rate or maturity
of the purchased security. A repurchase agreement involves the obligation
of the seller to pay the agreed upon price, which obligation is in effect
secured by the value (at least equal to the amount of the agreed upon
resale price and marked to market daily) of the underlying security. Each
fund may engage in a repurchase agreement with respect to any security in
which it is authorized to invest. While it does not presently appear
possible to eliminate all risks from these transactions (particularly the
possibility of a decline in the market value of the underlying securities,
as well as delay and costs to each fund in connection with bankruptcy
proceedings), it is the policy of each fund to limit repurchase agreements
to those whose creditworthiness has been reviewed and found satisfactory by
FMR.
FOREIGN REPURCHASE AGREEMENTS may include agreements to purchase and sell
foreign securities in exchange for fixed U.S. dollar amounts, or in
exchange for specified amounts of foreign currency. Unlike typical U.S.
repurchase agreements, foreign repurchase agreements may not be fully
collateralized at all times. The value of the 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 a default by the counterparty, a
fund may suffer a loss if the value of the security purchased is less than
the agreed-upon repurchase price, or if a 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 market securities may involve issuers or
counterparties with lower credit ratings than typical U.S. repurchase
agreements.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, a fund will maintain appropriate liquid assets in a segregated
custodial account to cover its obligation under the agreement. A fund will
enter into reverse repurchase agreements only with parties whose
creditworthiness has been reviewed and found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of a fund's
assets and may be viewed as a form of leverage.
LOWER-RATED DEBT SECURITIES. While the market for high yield corporate debt
securities has been in existence for many years and has weathered previous
economic downturns, the 1980's brought a dramatic increase in the use of
such securities to fund highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication of
the future performance of the high yield bond market, especially during
periods of economic recession. In fact, from 1989 to 1991, the percentage
of lower-rated debt securities that defaulted rose significantly above
prior levels, although the default rate decreased in 1992 and 1993.
The market for lower-rated securities may be thinner and less active than
that for higher quality securities, which can adversely affect the prices
at which the former are sold. If market quotations are not available,
lower-rated debt securities will be valued in accordance with procedures
established by the Board of Trustees, including the use of outside pricing
services. Judgement plays a greater role in valuing high yield corporate
debt securities than is the case for securities for which more external
sources for quotations and last-sale information are available. Adverse
publicity and changing investor perceptions may affect the ability of
outside pricing services to value lower-rated debt securities, and the
fund's ability to dispose of these bonds.
Since the risk of default is higher for lower-rated debt securities, FMR's
research and credit analysis are an especially important part of managing
securities of this type held by the fund. In considering investments for
the fund, FMR will attempt to identify those high-yielding debt securities
whose financial condition is adequate to meet future obligations, has
improved, or is expected to improve in the future. FMR's analysis focuses
on relative values based on such factors as interest or dividend coverage,
asset coverage, earnings prospects, and the experience and managerial
strength of the issuer.
Each fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise to exercise its rights as a security holder
to seek to protect the interests of security holders if it determines this
to be in the best interest of fund shareholders.
SWAP AGREEMENTS. Swap agreements can be individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on their structure, swap
agreements may increase or decrease a fund's exposure to long or short-term
interest rates (in the U.S. or abroad), foreign currency values, mortgage
securities, corporate borrowing rates, or other factors such as security
prices or inflation rates. Swap agreements can take many different forms
and are known by a variety of names. A fund is not limited to any
particular form of swap agreement if FMR determines it is consistent with a
fund's investment objective and policies.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines
elements of buying a cap and selling a floor.
Swap agreements will tend to shift a fund's investment exposure from one
type of investment to another. For example, if a fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreements
would tend to decrease the portfolio's exposure to U.S. interest rates and
increase 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 a fund, it must be prepared to make such
payments when due. In addition, if the counterparty's creditworthiness
declined, the value of a swap agreement would be likely to decline,
potentially resulting in losses. A fund expects to be able to eliminate
its exposure under swap agreements either by assignment or other
disposition, or by entering into an offsetting swap agreement with the same
party or a similarly creditworthy party.
Each fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If a fund
enters into a swap agreement on a net basis, it will segregate assets with
a daily value at least equal to the excess, if any, of its accrued
obligations under the swap agreement over the accrued amount it is entitled
to receive under the agreement. If a fund enters into a swap agreement on
other than a net basis, it will segregate assets with a value equal to the
full amount of its accrued obligations under the agreement.
INDEXED SECURITIES. Each fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, currencies,
precious metals or other commodities, or other financial indicators.
Indexed securities typically, but not always, are debt securities or
deposits whose value at maturity or coupon rate is determined by reference
to a specific instrument or statistic. Gold-indexed securities, for
example, typically provide for a maturity value that depends on the price
of gold, resulting in a security whose price tends to rise and fall
together with gold prices. Currency-indexed securities typically are
short-term to intermediate-term debt securities whose maturity values or
interest rates are determined by reference to the values of one or more
specified foreign currencies, and may offer higher yields than U.S.
dollar-denominated securities of equivalent issuers. Currency-indexed
securities may be positively or negatively indexed; that is, their maturity
value may increase when the specified currency value increases, resulting
in a security that performs similarly to a foreign-denominated instrument,
or their maturity value may decline when foreign currencies increase,
resulting in a security whose price characteristics are similar to a put on
the underlying currency. Currency-indexed securities may also have prices
that depend on the values of a number of different foreign currencies
relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they
are indexed, and may also be influenced by interest rate changes in the
U.S. and abroad. At the same time, indexed securities are subject to the
credit risks associated with the issuer of the security, and their values
may decline substantially if the issuer's creditworthiness deteriorates.
Recent issuers of indexed securities have included banks, corporations, and
certain U.S. government agencies. FMR will use its judgment in determining
whether indexed securities should be treated as short-term instruments,
bonds, stocks, or as a separate asset class for purposes of a fund's
investment allocations, depending on the individual characteristics of the
securities. Indexed securities may be more volatile than the underlying
instruments.
WARRANTS. Warrants are securities that give a fund the right to purchase
equity securities from the issuer at a specific price (the strike price)
for a limited period of time. The strike price of warrants typically is
much lower than the current market price of the underlying securities, yet
they are subject to similar price fluctuations. As a result, warrants may
be more volatile investments than the underlying securities and may offer
greater potential for capital appreciation as well as capital loss.
Warrants do not entitle a holder to dividends or voting rights with respect
to the underlying securities and do not represent any rights in the assets
of the issuing company. Also, the value of the warrant does not
necessarily change with the value of the underlying securities and a
warrant ceases to have value if it is not exercised prior to the expiration
date. These factors can make warrants more speculative than other types of
investments.
DELAYED DELIVERY TRANSACTIONS. Each fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by each fund to purchase or sell specific securities at a
predetermined price and yield, with payment and delivery taking place after
the customary settlement period for that type of security (and more than
seven days in the future). Typically, no interest accrues to the purchaser
until the security is delivered. Each fund may receive fees for entering
into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, each fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because each fund is not required to pay for securities
until the delivery date, these risks are in addition to the risks
associated with each fund's other investments. If each fund remains
substantially fully invested at a time when delayed-delivery purchases are
outstanding, the delayed-delivery purchases may result in a form of
leverage. When delayed-delivery purchases are outstanding, each fund will
set aside appropriate liquid assets in a segregated custodial account to
cover its purchase obligations. When each fund has sold a security on a
delayed-delivery basis, each 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,
each fund could miss a favorable price or yield opportunity, or could
suffer a loss.
Each fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
MORTGAGE-BACKED SECURITIES. A fund may purchase mortgage-backed securities
issued by government and non-government entities such as banks, mortgage
lenders, or other financial institutions. A mortgage-backed security may
be an obligation of the issuer backed by a mortgage or pool of mortgages or
a direct interest in an underlying pool of mortgages. Some mortgage-backed
securities, such as collateralized mortgage obligations or CMOs, make
payments of both principal and interest at a variety of intervals; others
make semiannual interest payments at a predetermined rate and repay
principal at maturity (like a typical bond). Mortgage-backed securities
are based on different types of mortgages including those on commercial
real estate or residential properties. Other types of mortgage-backed
securities will likely be developed in the future, and a fund may invest in
them if FMR determines they are consistent with a fund's investment
objective and policies.
The value of mortgage-backed securities may change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
government issues. Mortgage-backed securities are subject to prepayment
risk. Prepayment, which occurs when unscheduled or early payments are made
on the underlying mortgages, may shorten the effective maturities of these
securities and may lower their total returns.
STRIPPED MORTGAGE-BACKED SECURITIES are created when a U.S. government
agency or a financial institution separates the interest and principal
components of a mortgage-backed security and sells them as individual
securities. The holder of the "principal-only" security (PO) receives the
principal payments made by the underlying mortgage-backed security, while
the holder of the "interest-only" security (IO) receives interest payments
from the same underlying security.
The prices of stripped mortgage-backed securities may be particularly
affected by changes in interest rates. As interest rates fall, prepayment
rates tend to increase, which tends to reduce prices of IOs and increase
prices of POs. Rising interest rates can have the opposite effect.
ZERO COUPON BONDS. Zero coupon bonds do not make interest payments;
instead, they are sold at a deep discount from their face value and are
redeemed at face value when they mature. Because zero coupon bonds do not
pay current income, their prices can be very volatile when interest rates
change. In calculating its dividends, a fund takes into account as income
a portion of the difference between a zero coupon bond's purchase price and
its face value.
SECURITIES LENDING. Each fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange
(NYSE) and a subsidiary of FMR Corp.
Securities lending allows a fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there may
be delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be
made only to parties deemed by FMR to be of good standing. Furthermore,
they will only be made if, in FMR's judgment, the consideration to be
earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that a fund
may engage in loan transactions only under the following conditions: (1)
the fund must receive 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of
the collateral; (3) after giving notice, the fund must be able to terminate
the loan at any time; (4) the fund must receive reasonable interest on the
loan or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) the fund may pay only reasonable
custodian fees in connection with the loan; and (6) the Board of Trustees
must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with
the borrower.
Cash received through loan transactions may be invested in any security in
which the fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. Direct debt instruments are
interests in amounts owed by a corporate, governmental, or other borrower
to lenders or lending syndicates (loans and loan participations), to
suppliers of goods or services (trade claims or other receivables), or to
other parties. Direct debt instruments are subject to a fund's policies
regarding the quality of debt securities.
Purchasers of loans and other forms of direct indebtedness depend primarily
upon the creditworthiness of the borrower for payment of principal and
interest. Direct debt instruments may not be rated by any nationally
recognized rating service. If a fund does not receive scheduled interest or
principal payments on such indebtedness, a fund's share price and yield
could be adversely affected. Loans that are fully secured offer a fund more
protections than an unsecured loan in the event of non-payment of scheduled
interest or principal. However, there is no assurance that the liquidation
of collateral from a secured loan would satisfy the borrower's obligation,
or that the collateral could be liquidated. Indebtedness of borrowers whose
creditworthiness is poor involves substantially greater risks, and may be
highly speculative. Borrowers that are in bankruptcy or restructuring may
never pay off their indebtedness, or may pay only a small fraction of the
amount owed. Direct indebtedness of developing countries also involves a
risk that the governmental entities responsible for the repayment of the
debt may be unable, or unwilling, to pay interest and repay principal when
due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to a fund.
For example, if a loan is foreclosed, a fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning
and disposing of the collateral. In addition, it is conceivable that under
emerging legal theories of lender liability, a fund could be held liable as
a co-lender. Direct debt instruments may also involve a risk of insolvency
of the lending bank or other intermediary. Direct debt instruments that are
not in the form of securities may offer less legal protection to a fund in
the event of fraud or misrepresentation. In the absence of definitive
regulatory guidance, a fund relies on FMR's research in an attempt to avoid
situations where fraud or misrepresentation could adversely affect a fund.
A loan is often administered by a bank or other financial institution that
acts as agent for all holders. The agent administers the terms of the
loan, as specified in the loan agreement. Unless, under the terms of the
loan or other indebtedness, a fund has direct recourse against the
borrower, it may have to rely on the agent to apply appropriate credit
remedies against a borrower. If assets held by the agent for the benefit of
a fund were determined to be subject to the claims of the agent's general
creditors, a fund might incur certain costs and delays in realizing payment
on the loan or loan participation and could suffer a loss of principal or
interest.
Direct indebtedness purchased by a fund may include letters of credit,
revolving credit facilities, or other standby financing commitments
obligating a fund to pay additional cash on demand. These commitments may
have the effect of requiring a fund to increase its investment in a
borrower at a time when it would not otherwise have done so, even if the
borrower's condition makes it unlikely that the amount will ever be repaid.
A fund will set aside appropriate liquid assets in a segregated custodial
account to cover its potential obligations under standby financing
commitments.
A fund limits the amount of total assets that it will invest in any one
issuer or in issuers within the same industry (see limitations 1 and 5).
For purposes of these limitations, a fund generally will treat the borrower
as the "issuer" of indebtedness held by a 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 a 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.
FOREIGN INVESTMENTS. Foreign investments can involve significant risks in
addition to the risks inherent in U.S. investments. The value of
securities denominated in or indexed to foreign currencies, and of
dividends and interest from such securities, can change significantly when
foreign currencies strengthen or weaken relative to the U.S. dollar.
Foreign securities markets generally have less trading volume and less
liquidity than U.S. markets, and prices on some foreign markets can be
highly volatile. Many foreign countries lack uniform accounting and
disclosure standards comparable to those applicable to U.S. companies, and
it may be more difficult to obtain reliable information regarding an
issuer's financial condition and operations. In addition, the costs of
foreign investing, including withholding taxes, brokerage commissions, and
custodial costs, are generally higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including
those involving the release of assets in advance of payment, may involve
increased risks in the event of a failed trade or the insolvency of a
broker-dealer, and may involve substantial delays. It may also be
difficult to enforce legal rights in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments
adverse to the interests of U.S. investors, including the possibility of
expropriation or nationalization of assets, confiscatory taxation,
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency into U.S. dollars, or other government intervention.
There may be a greater possibility of default by foreign governments or
foreign government-sponsored enterprises. Investments in foreign countries
also involve a risk of local political, economic, or social instability,
military action or unrest, or adverse diplomatic developments. There is no
assurance that FMR will be able to anticipate these potential events or
counter their effects.
The considerations noted above generally are intensified for investments in
developing countries. Developing countries may have relatively unstable
governments, economies based on only a few industries, and securities
markets that trade a small number of securities.
Each fund may invest in foreign securities that impose restrictions on
transfer within the U.S. or to U.S. persons. Although securities subject
to 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 and European Depositary Receipts (ADRs and
EDRs) are certificates evidencing ownership of shares of a foreign-based
issuer held in trust by a bank or similar financial institution. Designed
for use in U.S. and European securities markets, respectively, ADRs and
EDRs are alternatives to the purchase of the underlying securities in their
national markets and currencies.
FOREIGN CURRENCY TRANSACTIONS. Each fund may hold foreign currency
deposits from time to time, and may convert dollars and foreign currencies
in the foreign exchange markets. Currency conversion involves dealer
spreads and other costs, although commissions usually are not charged.
Currencies may be exchanged on a spot (i.e., cash) basis, or by entering
into forward contracts to purchase or sell foreign currencies at a future
date and price. Forward contracts generally are traded in an inter bank
market conducted directly between currency traders (usually large
commercial banks) and their customers. The parties to a forward contract
may agree to offset or terminate the contract before its maturity, or may
hold the contract to maturity and complete the contemplated currency
exchange.
Each fund may use currency forward contracts to manage currency risks and
to facilitate transactions in foreign securities. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by each fund.
In connection with purchases and sales of securities denominated in foreign
currencies, each fund may enter into currency forward contracts to fix a
definite price for the purchase or sale in advance of the trade's
settlement date. This technique is sometimes referred to as a "settlement
hedge" or "transaction hedge." FMR expects to enter into settlement hedges
in the normal course of managing each fund's foreign investments. Each
fund could also enter into forward contracts to purchase or sell a foreign
currency in anticipation of future purchases or sales of securities
denominated in foreign currency, even if the specific investments have not
yet been selected by FMR.
Each may also use forward contracts to hedge against a decline in the value
of existing investments denominated in foreign currency. For example, if
each 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. Each fund could also hedge the
position by selling another currency expected to perform similarly to the
pound sterling - for example, by entering into a forward contract to sell
Deutschemarks or European Currency Units in return for U.S. dollars. This
type of hedge, sometimes referred to as a "proxy hedge," could offer
advantages in terms of cost, yield, or efficiency, but generally would not
hedge currency exposure as effectively as a simple hedge into U.S. dollars.
Proxy hedges may result in losses if the currency used to hedge does not
perform similarly to the currency in which the hedged securities are
denominated.
A fund may enter into forward contracts to shift its investment exposure
from one currency into another currency that is expected to perform better
relative to the U.S. dollar. For example, if a fund held investments
denominated in Deutschemarks, the fund could enter into forward contracts
to sell Deutschemarks and purchase Swiss Francs. This type of strategy,
sometimes known as a "cross-hedge," will tend to reduce or eliminate
exposure to the currency that is sold, and increase exposure to the
currency that is purchased, much as if the fund had sold a security
denominated in one currency and purchased an equivalent security
denominated in another. Cross-hedges protect against losses resulting from
a decline in the hedged currency, but will cause the fund to assume the
risk of fluctuations in the value of the currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to set aside
appropriate liquid assets in a segregated custodial account to cover
currency forward contracts. As required by SEC guidelines, each fund will
segregate assets to cover currency forward contracts, if any, whose purpose
is essentially speculative. Each fund will not segregate assets to cover
forward contracts entered into for hedging purposes, including settlement
hedges, position hedges, and proxy hedges.
Successful use of forward currency contracts will depend on FMR's skill in
analyzing and predicting currency values. Forward contracts may
substantially change each fund's investment exposure to changes in currency
exchange rates, and could result in losses to each fund if currencies do
not perform as FMR anticipates. For example, if a currency's value rose at
a time when FMR had hedged each fund by selling that currency in exchange
for dollars, each fund would be unable to participate in the currency's
appreciation. If FMR hedges currency exposure through proxy hedges, each
fund could realize currency losses from the hedge and the security position
at the same time if the two currencies do not move in tandem. Similarly,
if FMR increases each fund's exposure to a foreign currency, and that
currency's value declines, each fund will realize a loss. There is no
assurance that FMR's use of forward currency contracts will be advantageous
to each fund or that it will hedge at an appropriate time.
SHORT SALES. A fund may enter into short sales with respect to stocks
underlying its convertible security holdings. For example, if FMR
anticipates a decline in the price of the stock underlying a convertible
security it holds, it may sell the stock short. If the stock price
subsequently declines, the proceeds of the short sale could be expected to
offset all or a portion of the effect of the stock's decline on the value
of the convertible security. 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.
When a fund enters into a short sale, it will be required to set aside
securities equivalent in kind and amount to those sold short (or securities
convertible or exchangeable into such securities) and will be required to
continue to hold them while the short sale is outstanding. Each fund will
incur transaction costs, including interest expense, in connection with
opening, maintaining, and closing short sales.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each 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 Section 4.5 of the
regulations under the Commodity Exchange Act, which limits the extent to
which a fund can commit assets to initial margin deposits and option
premiums.
In addition, each fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of each
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, each 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 each fund would
exceed 5% of each fund's total assets. These limitations for each fund 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.
FUTURES CONTRACTS. When each fund purchases a futures contract, it agrees
to purchase a specified underlying instrument at a specified future date.
When each fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when each fund enters into the contract.
Some currently available futures contracts are based on specific
securities, such as U.S. Treasury bonds or notes, and some are based on
indices of securities prices, such as the Standard & Poor's 500 Composite
Stock Price Index (S&P 500) and the Bond Buyer Index of municipal bonds.
Futures can be held until their delivery dates, or can be closed out before
then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase each fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When each 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 each fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of each fund, each 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 each fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, each fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, each fund
pays the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. Each fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
each fund will lose the entire premium it paid. If each fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. Each fund may also terminate a put option position by closing it
out in the secondary market at its current price, if a liquid secondary
market exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When each fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, each fund assumes the obligation to pay
the strike price for the option's underlying instrument if the other party
to the option chooses to exercise it. When writing an option on a futures
contract each fund will be required to make margin payments to an FCM as
described above for futures contracts. Each fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option each fund has written, however, each
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates each fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those
of writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
COMBINED POSITIONS. Each fund may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, each fund may purchase a put option and write a
call option on the same underlying instrument, in order to construct a
combined position whose risk and return characteristics are similar to
selling a futures contract. Another possible combined position would
involve writing a call option at one strike price and buying a call option
at a lower price, in order to reduce the risk of the written call option in
the event of a substantial price increase. Because combined options
positions involve multiple trades, they result in higher transaction costs
and may be more difficult to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match each fund's current or
anticipated investments exactly. Each fund may invest in options and
futures contracts based on securities with different issuers, maturities,
or other characteristics from the securities in which it typically invests,
which involves a risk that the options or futures position will not track
the performance of each fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match each
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. Each 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 each 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.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for each fund
to enter into new positions or close out existing positions. If the
secondary market for a contract is not liquid because of price fluctuation
limits or otherwise, it could prevent prompt liquidation of unfavorable
positions, and potentially could require each fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, each fund's access to other assets held to cover its options
or futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter 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 each
fund 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.
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. Each
fund may purchase and sell currency futures and may purchase and write
currency options to increase or decrease its exposure to different foreign
currencies. Each fund may also purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with
exchange rates, but may not reflect other factors that affect the value of
each fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect
each fund against a price decline resulting from deterioration in the
issuer's creditworthiness. Because the value of each 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 each fund's investments exactly over
time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. Each fund will comply
with guidelines established by the SEC with respect to coverage of options
and futures strategies by mutual funds, and if the guidelines so require
will set aside appropriate liquid assets in a segregated custodial account
in the amount prescribed. Securities held in a segregated account cannot
be sold while the futures or option strategy is outstanding, unless they
are replaced with other suitable assets. As a result, there is a
possibility that segregation of a large percentage of each fund's assets
could impede portfolio management or each fund's ability to meet redemption
requests or other current obligations.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of a fund by FMR pursuant to authority contained in each fund's
Management Contract. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for which it
or its affiliates act as investment advisor. In selecting broker-dealers,
subject to applicable limitations of the federal securities laws, FMR will
consider various relevant factors, including, but not limited to, the size
and type of the transaction; the nature and character of the markets for
the security to be purchased or sold; the execution efficiency, settlement
capability and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; the
reasonableness of any commissions; and arrangements for payment of fund
expenses. FMR may allocate brokerage transactions to broker-dealers who
have entered into arrangements with FMR under which the broker-dealer
allocates a portion of the commissions paid by a fund toward payment of a
fund's expenses, such as transfer agent fees or custodian fees. The
transaction quality must, however, be comparable to those of other
qualified broker-dealers. Commissions for foreign investments traded on
foreign exchanges will generally be higher than for U.S. investments and
may not be subject to negotiation.
Each fund may execute portfolio transactions with broker-dealers who
provide research and execution services to a fund and other accounts over
which FMR or its affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). The selection of such broker-dealers is
generally made by FMR (to the extent possible consistent with execution
considerations) in accordance with a ranking of broker-dealers determined
periodically by FMR's investment staff based upon the quality of research
and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of a fund may be useful to FMR in rendering investment management
services to a fund or its other clients, and conversely, such information
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to a fund. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause a
fund to pay such higher commissions, FMR must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage
and research services provided by such executing broker-dealers viewed in
terms of a particular transaction or FMR's overall responsibilities to a
fund and its other clients. In reaching this determination, FMR will not
attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the compensation should
be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of each fund or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI) and Fidelity Brokerage Services, Ltd. (FBSL), subsidiaries of
FMR Corp., if the commissions are fair, reasonable, and comparable to
commissions charged by non-affiliated, qualified brokerage firms for
similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, except if certain
requirements are satisfied. Pursuant to such requirements, the Board of
Trustees has authorized FBSI to execute fund portfolio transactions on
national securities exchanges in accordance with approved procedures and
applicable SEC rules.
The Trustees of the Trust periodically review FMR's performance of its
responsibilities in connection with the placement of portfolio transactions
on behalf of the funds and review the commissions paid by the funds over
representative periods of time to determine whether they are reasonable in
relation to the benefits to each fund. The frequency of portfolio
transactions, or turnover rate, will vary from year to year depending on
market conditions. Because a high turnover rate increases brokerage costs,
FMR carefully weighs the added costs of short-term investment against
anticipated gain.
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. The funds seek to recapture soliciting 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 the funds to seek such
recapture.
Although the Trustees and officers of the Trust are substantially the same
as those of other funds managed by FMR, investment decisions for the funds
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds are managed by
the same investment advisor, particularly when the same security is
suitable for the investment objective of more than one fund.
When two or more portfolios or funds are simultaneously engaged in the
purchase or sale of the same security, the prices and amounts are allocated
in accordance with a formula considered by the officers of the portfolio
involved to be equitable to each fund or portfolio. In some cases this
system could have a detrimental effect on the price or volume of the
security as far as the funds are 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 advisor
to the funds outweigh any disadvantages that may be said to exist from
exposure to simultaneous transactions.
VALUATION OF FUND SECURITIES
Portfolio securities are valued by various methods depending on the primary
market or exchange on which they trade. Equity securities for which the
primary market is the U.S. are valued at last sale price or, if no sale has
occurred, at the closing bid price. Equity securities for which the primary
market is outside the U.S. are valued using the official closing price or
the last sale price in the principal market where they are traded. If the
last sale price (on the local exchange) is unavailable, the last evaluated
quote or last bid price is normally used. Short-term securities are valued
either at amortized cost or at original cost plus accrued interest, both of
which approximate current value. Fixed-income securities are valued
primarily by a pricing service that uses a vendor security valuation matrix
which incorporates both dealer-supplied valuations and electronic data
processing techniques. This twofold approach is believed to more accurately
reflect fair value because it takes into account appropriate factors such
as institutional trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data, without exclusive reliance upon quoted, exchange, or
over-the-counter prices. Use of pricing services has been approved by the
Board of Trustees.
Securities and other assets for which there is no readily available market
are valued in good faith by a committee appointed by the Board of Trustees.
The procedures set forth above need not be used to determine the value of
the securities owned by the fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method (e.g., closing
over-the-counter bid prices in the case of debt instruments traded on an
exchange) would more accurately reflect the fair market value of such
securities.
Generally, the valuation of foreign and domestic equity securities, as well
as corporate bonds, U.S. government securities, money market instruments,
and repurchase agreements, is substantially completed each day at the close
of the NYSE. The values of any such securities held by the fund are
determined as of such time for the purpose of computing the fund's net
asset value. Foreign security prices are furnished by independent brokers
or quotation services which express the value of securities in their local
currency. FSC gathers all exchange rates daily at the close of the NYSE
using the last quoted price on the local currency and then translates the
value of foreign securities from their local currency into U.S. dollars.
Any changes in the value of forward contracts due to exchange rate
fluctuations and days to maturity are included in the calculation of net
asset value. If an extraordinary event that is expected to materially
affect the value of a portfolio security occurs after the close of an
exchange on which that security is traded, then the security will be valued
as determined in good faith by a committee appointed by the Board of
Trustees.
PERFORMANCE
The funds may quote their performance in various ways. All performance
information supplied by each fund in advertising is historical and is not
intended to indicate future returns. Each fund's share price, yield and
total return fluctuate in response to market conditions and other factors,
and the value of each fund's shares when redeemed may be more or less than
their original cost.
YIELD CALCULATIONS. Yields for the funds used in advertising are computed
by dividing the funds' interest income for a given 30-day or one month
period, net of expenses, by the average number of shares entitled to
receive dividends during the period, dividing this figure by the funds' NAV
per share at the end of the period and annualizing the result (assuming
compounding of income) in order to arrive at an annual percentage rate.
Income is calculated for purposes of yield quotations in accordance with
standardized methods applicable to all stock and bond funds. In general,
interest income is reduced with respect to bonds trading at a premium over
their par value by subtracting a portion of the premium from income on a
daily basis, and is increased with respect to bonds trading at a discount
by adding a portion of the discount to daily income. Capital gains and
losses generally are excluded from the calculation.
Income calculated for the purposes of calculating the funds' yields differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding assumed
in yield calculations, the yields quoted for the funds may differ from the
rate of distributions the funds paid over the same period or the rate of
income reported in the funds' financial statements.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of the funds' return, including the effect of reinvesting dividends
and capital gain distributions, and any change in a fund's NAV per share
over the period. Average annual total returns are calculated by
determining the growth or decline in value of a hypothetical investment in
a fund over a stated period, and then calculating the annually compounded
percentage rate that would have produced the same result if the rate of
growth or decline in value had been constant over the period. For example,
a cumulative return of 100% over ten years would produce an average annual
total return of 7.18%, which is the steady annual rate that would equal
100% growth on a compounded basis in ten years. While average annual total
returns are a convenient means of comparing investment alternatives,
investors should realize that the funds' performance is not constant over
time, but changes from year to year, and that average annual total returns
represent averaged figures as opposed to the actual year-to-year
performance of a fund.
In addition to average annual total returns, each fund may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, and/or a
series of redemptions, over any time period. Total returns may be broken
down into their components of income and capital (including capital gains
and changes in share price) in order to illustrate the relationship of
these factors and their contributions to total return. An example of this
type of illustration is given below. Total returns, yields, and other
performance information may be quoted numerically or in a table, graph, or
similar illustration.
NET ASSET VALUE. Charts and graphs using a fund's net asset values or an
insurance company's sub-account unit values, adjusted net asset values, and
benchmark indices may be used to exhibit performance. An adjusted NAV
includes any distributions paid by a fund and reflects all elements of its
return. Unless otherwise indicated, a fund's adjusted NAVs (or an
insurance company's sub-account unit values) are not adjusted for sales
charges, if any.
MOVING AVERAGES. A fund may illustrate performance using moving averages.
A long-term moving average is the average of each week's adjusted closing
NAV for a specified period. A short-term moving average is the average of
each day's adjusted closing NAV for a specified period. Moving Average
Activity Indicators combine adjusted closing NAVs from the last business
day of each week with moving averages for a specified period to produce
indicators showing when an NAV has crossed, stayed above, or stayed below
its moving average.
The funds are available for purchase only through variable annuity or
variable life insurance contracts or other programs offering deferral of
income taxes on earnings, which may produce superior after-tax returns over
time. For example, a $1,000 investment earning a taxable return of 10%
annually would have an after-tax value of $1,949 after 10 years, assuming
tax was deducted from the return each year at a 31% rate. An equivalent
tax-deferred investment would have an after-tax value of $2,100 after 10
years, assuming tax was deducted at the 31% rate from the deferred earnings
at the end of the 10 year period. Individuals holding shares of the funds
through a variable annuity or variable life insurance contract may receive
additional tax benefits from the deferral of income taxes associated with
variable contracts. Individuals should consult their tax advisors to
determine the effect of holding variable contracts on their individual tax
situations.
YIELDS AND TOTAL RETURNS QUOTED FOR A FUND INCLUDE THE EFFECT OF DEDUCTING
EACH FUND'S EXPENSES, BUT MAY NOT INCLUDE CHARGES AND EXPENSES ATTRIBUTABLE
TO ANY PARTICULAR INSURANCE PRODUCT. SINCE YOU CAN ONLY PURCHASE SHARES OF
THE FUNDS THROUGH A VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE CONTRACT,
YOU SHOULD CAREFULLY REVIEW THE PROSPECTUS OF THE INSURANCE PRODUCT YOU
HAVE CHOSEN FOR INFORMATION ON RELEVANT CHARGES AND EXPENSES. Excluding
these charges from quotations of the funds' performance has the effect of
increasing the performance quoted.
GENERAL INFORMATION
A fund's performance may be compared to the performance of other mutual
funds in general, or to the performance of particular types of mutual
funds. These comparisons may be expressed as mutual fund rankings
prepared by Lipper Analytical Services, Inc. (Lipper), an independent
service located in Summit, New Jersey that monitors the performance of
mutual funds. Lipper generally ranks funds on the basis of total return,
assuming reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. Lipper may also rank funds based on yield. Asset Manager:
Growth Portfolio may compare its performance to the Aggressive Asset
Allocation Composite Index. The Aggressive Asset Allocation Composite Index
is a hypothetical representation of the performance of the combination of
the fund's three asset classes according to their respective weighting in
the fund's neutral mix (5% - short-term instruments; 30% - bonds; and 65% -
stocks). The following indices are used to calculate the Aggressive Asset
Allocation Composite Index: the Salomon Brothers 3-Month T-Bill Total Rate
of Return Index, representing the average of T-Bill rates for each of the
prior three months, adjusted to a bond equivalent yield basis (short-term
instruments); the Lehman Brothers Treasury Bond Index, a widely utilized
benchmark of bond market performance that includes virtually all long-term
public obligations of the U.S. Treasury (bonds); and the S&P 500, which
represents common stocks (stocks). Each fund may also compare its
performance against the Consumer Price Index (CPI) and the funds in Lipper
Annuity & Closed-End Survey (LACES). LACES consists of periodic reports
that track the performance of closed-end mutual funds and variable
annuities at the separate account level. A fund will compare itself only
to annuities, not to closed-end funds in LACES. Each fund may quote its
performance in advertising and other types of literature as compared to the
performance of the S&P 500, (a registered trademark of Standard & Poor's
Corporation). The S&P 500 is an unmanaged index of common stock prices.The
performance of the S&P 500 Index is based on changes in the prices of
stocks composing the Index and assumes the reinvestment of all dividends
paid on such stocks. Taxes, brokerage commissions and other fees are
disregarded in computing the level of the S&P 500 Index. In addition to
the mutual fund rankings, a fund's performance may be compared to mutual
fund performance indices prepared by Lipper.
From time to time, a fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, a fund may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. For
example, Fidelity's FundMatchsm Program includes a workbook describing
general principles of investing, such as asset allocation, diversification,
risk tolerance, and goal setting; a questionnaire designed to help create a
personal financial profile; and an action plan offering investment
alternatives. Materials may also include discussions of Fidelity's three
asset allocation funds and other Fidelity funds, products, and services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds and insurance
products; retirement investing; brokerage products and services; the
effects of periodic investment plans and dollar cost averaging; saving for
college; charitable giving; and the Fidelity credit card. In addition,
Fidelity may quote financial or business publications and periodicals,
including model portfolios or allocations, as they relate to fund
management, investment philosophy, and investment techniques. Fidelity may
also reprint, and use as advertising and sales literature, articles from
Fidelity Focus, a quarterly magazine provided free of charge to Fidelity
fund shareholders.
Each fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
VOLATILITY. A fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, a fund may compare these measures
to those of other funds. Measures of volatility seek to compare a fund's
historical share price fluctuations or total returns to those of a
benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data.
MOMENTUM INDICATORS indicate a fund's price movements over specific periods
of time. Each point on the momentum indicator represents a fund's
percentage change in price movements over that period.
The funds may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a
program, a policyowner invests a fixed dollar amount in an insurance
company's sub-account which in turn invests in a fund at periodic
intervals, thereby purchasing fewer units when prices are high and more
units when prices are low. While such a strategy does not assure a profit
nor guard against loss in a declining market, the policyowner's average
cost per unit can be lower than if fixed numbers of units had been
purchased at those intervals. In evaluating such a plan, policyowners
should consider their ability to continue purchasing units through periods
of low price levels.
Each fund has an investment objective similar to an existing Fidelity
retail fund. Asset Manager: Growth Portfolio is most similar to Fidelity
Asset Manager: Growth and Contrafund Portfolio is most similar to Fidelity
Contrafund. Performance will differ between the funds and their
corresponding retail funds due in part to differences in investment
policies. The effect of insurance charges levied at the separate account
level of insurance companies will also affect performance.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each fund is open for business and its NAV is calculated each day the NYSE
is open for trading. The NYSE has designated the following holiday
closings for 1994: President's Day, Good Friday, Memorial Day, Independence
Day (observed), Labor Day, Thanksgiving Day, and Christmas Day (observed).
Although FMR expects the same holiday schedule, with the addition of New
Year's Day, to be observed in the future, the NYSE may modify its holiday
schedule at any time. On any day that the NYSE closes early, or as
permitted by the SEC, the right is reserved to advance the time on that day
by which purchase and redemption orders must be received. To the extent
that each fund's securities are traded in other markets on days the NYSE is
closed, each fund's NAV may be affected on days when investors do not have
access to each fund to purchase or redeem shares.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing the NAV of each fund. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
TAXES
For a discussion of tax consequences of a variable contract, please refer
to your insurance company's separate account prospectus. Variable
contracts purchased through insurance company separate accounts provide for
the accumulation of all earnings from interest, dividends, and capital
appreciation without current federal income tax liability to the owner.
Depending on the variable contract distributions from the contract may be
subject to ordinary income tax and in addition, a 10% penalty tax on
distributions before age 59 1/2. Only the portion of a distribution
attributable to income is subject to federal income tax. Investors should
consult with competent tax advisors for a more complete discussion of
possible tax consequences in a particular situation.
Section 817(h) of the Internal Revenue Code provides that the investments
of a separate account underlying a variable insurance contract (or the
investments of a mutual fund, the shares of which are owned by the variable
separate account) must be "adequately diversified" in order for the
contract to be treated as an annuity or life insurance for tax purposes.
The Treasury Department has issued regulations prescribing these
diversification requirements. Each fund intends to comply with these
requirements.
Each fund intends to qualify each year as a "regulated investment company"
for tax purposes, so that it will not be liable for federal tax on income
and capital gains distributed to shareholders. In order to qualify as a
regulated investment company and avoid being subject to federal income or
excise taxes, each fund intends to distribute substantially all its net
taxable income and net realized capital gains within each calendar year as
well as on a fiscal year basis. Each fund also intends to comply with
other tax rules applicable to regulated investment companies including a
requirement that gross capital gains from selling securities held less than
three months must constitute less than 30% of each fund's gross income for
each fiscal year. Income and capital gain distributions are reinvested in
additional shares of each fund. This is done to preserve the tax
advantaged status of the variable contracts. Each fund is treated as a
separate entity for tax purposes.
FMR
FMR is a wholly owned subsidiary of FMR Corp., a parent company organized
in 1972. At present, the principal operating activities of FMR Corp. are
those conducted by three of its divisions as follows: FSC, which is the
transfer and shareholder servicing agent for certain of the funds advised
by FMR; FIIOC, which performs shareholder servicing functions for certain
institutional customers; and Fidelity Investments Retail Marketing Company,
which provides marketing services to various companies within the Fidelity
organization.
Several affiliates of FMR are also engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory, and administrative services to retirement plans and corporate
employee benefit accounts. Fidelity Management & Research (U.K.) Inc. (FMR
U.K.) and Fidelity Management & Research (Far East) Inc. (FMR Far East),
both wholly owned subsidiaries of FMR formed in 1986, supply investment
research, and may supply portfolio management services, to FMR in
connection with certain funds advised by FMR. Analysts employed by FMR,
FMR U.K., and FMR Far East research and visit thousands of domestic and
foreign companies each year. FMR Texas Inc., a wholly owned subsidiary of
FMR formed in 1989, supplies portfolio management and research services in
connection with certain money market funds advised by FMR.
TRUSTEES AND OFFICERS
The Trust's Trustees and executive officers are listed below. Except as
indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
and officers also serve in similar capacities for other funds advised by
FMR. Unless otherwise noted, the business address of each Trustee and
officer is 82 Devonshire Street, Boston, Massachusetts, 02109, which is
also the address of FMR. Those Trustees who are "interested persons" (as
defined in the Investment Company Act of 1940) by virtue of their
affiliation with the Trust or FMR, are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive
Officer and a Director of FMR Corp.; a Director and Chairman of the Board
and of the Executive Committee of FMR; Chairman and a Director of FMR Texas
Inc. (1989), Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas Inc. (1989), Fidelity Management
& Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a
consultant to Western Mining Corporation (1994). Prior to February 1994, he
was President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Until March 1990, Mr. Cox was President and Chief
Operating Officer of Union Pacific Resources Company (exploration and
production). He is a Director of Sanifill Corporation (non-hazardous
waste, 1993) and CH2M Hill Companies (engineering). In addition, he served
on the Board of Directors of the Norton Company (manufacturer of industrial
devices, 1983-1990) and continues to serve on the Board of Directors of the
Texas State Chamber of Commerce, and is a member of advisory boards of
Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton, NY, Trustee (1992).
Prior to her retirement in September 1991, Mrs. Davis was the Senior Vice
President of Corporate Affairs of Avon Products, Inc. She is currently a
Director of BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores, 1990),
and previously served as a Director of Hallmark Cards, Inc. (1985-1991) and
Nabisco Brands, Inc. In addition, she serves as a Director of the New York
City Chapter of the National Multiple Sclerosis Society, and is a member of
the Advisory Council of the International Executive Service Corps. and the
President's Advisory Council of The University of Vermont School of
Business Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive
Officer of LTV Steel Company. Prior to May 1990, he was Director of
National City Corporation (a bank holding company) and National City Bank
of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation, Hyster-Yale Materials Handling, Inc. (1989), and RPM,
Inc. (manufacturer of chemical products, 1990). In addition, he serves as
a Trustee of First Union Real Estate Investments, Chairman of the Board of
Trustees and a member of the Executive Committee of the Cleveland Clinic
Foundation, a Trustee and a member of the Executive Committee of University
School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1-North, Greenwich, CT,
Trustee, is a Professor at Columbia University Graduate School of Business
and a financial consultant. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance) and Valuation Research Corp. (appraisals and
valuations, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization Fund and Vice Chairman of the
Board of Trustees of the Greenwich Hospital Association.
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior to
his retirement on May 31, 1990, he was a Director of FMR (1989) and
Executive Vice President of FMR (a position he held until March 31, 1991);
Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen Corporation
(engineering and construction). In addition, he serves as a Trustee of
Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield
(1989) and Society for the Preservation of New England Antiquities, and as
an Overseer of the Museum of Fine Arts of Boston (1990).
GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), is
Chairman of G.M. Management Group (strategic advisory services). Prior to
his retirement in July 1988, he was Chairman and Chief Executive Officer of
Leaseway Transportation Corp. (physical distribution services). Mr.
McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration,
1989), Commercial Intertech Corp. (water treatment equipment, 1992), and
Associated Estates Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee. Prior
to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company.
He is a Director of Allegheny Power Systems, Inc. (electric utility),
General Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer). In
addition, he serves as a Trustee of Corporate Property Investors, the EPS
Foundation at Trinity College, the Naples Philharmonic Center for the Arts,
and Rensselaer Polytechnic Institute, and he is a member of the Advisory
Boards of Butler Capital Corporation Funds and Warburg, Pincus Partnership
Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee, is President of The Wales Group, Inc. (management and financial
advisory services). Prior to retiring in 1987, Mr. Williams served as
Chairman of the Board of First Wachovia Corporation (bank holding company),
and Chairman and Chief Executive Officer of The First National Bank of
Atlanta and First Atlanta Corporation (bank holding company). He is
currently a Director of BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software), Georgia Power Company (electric utility), Gerber Alley
& Associates, Inc. (computer software), National Life Insurance Company of
Vermont, American Software, Inc. (1989), and AppleSouth, Inc. (restaurants,
1992).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and Senior
Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
JOHN H. COSTELLO, Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, Assistant Treasurer (1994), is an employee of FMR (1994).
Prior to becoming Assistant Treasurer of the Fidelity funds, Mr. Rush was
Chief Compliance Officer of FMR Corp. (1993-1994); Chief Financial Officer
of Fidelity Brokerage Services, Inc. (1990-1993); and Vice President,
Assistant Controller, and Director of the Accounting Department - First
Boston Corp. (1986-1990).
ARTHUR S. LORING, Secretary, is Senior Vice President (1993) and General
Counsel of FMR, Vice President-Legal of FMR Corp., and Vice President and
Clerk of FDC.
WILLIAM J. HAYES, Vice President (1994), is Vice President of Fidelity's
equity funds; Senior Vice President of FMR; and Managing Director of FMR
Corp.
Under a retirement program that became effective on November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the fund based on their basic trustee fees and length of
service. Currently, Messrs. Robert L. Johnson, William R. Spaulding,
Bertram H. Witham, and David L. Yunich participate in the program.
A shareholder owning more than 25% of a particular fund's shares may be
considered to be a "controlling person" of that fund. Accordingly, its
vote could have a more significant effect on matters presented to
shareholders for approval than the votes of the fund's other shareholders.
MANAGEMENT CONTRACTS
Each fund employs FMR to furnish investment advisory and other services to
the funds. Under FMR's Management Contract with each fund, FMR acts as
investment advisor and, subject to the supervision of the Board of
Trustees, directs the investments of each fund in accordance with its
investment objective, policies and limitations. FMR also provides each
fund with all necessary office facilities and personnel for servicing each
fund's investments, and compensates all officers of the Trust, all Trustees
who are "interested persons" of the Trust or of FMR and all personnel of
the Trust or FMR performing services relating to research, statistical and
investment activities. In addition, FMR or its affiliates, subject to the
supervision of the Board of Trustees, provide the management and
administrative services necessary for the operation of each fund. These
services include providing facilities for maintaining each fund's
organization, supervising relations with custodians, transfer and pricing
agents, accountants, underwriters and other persons dealing with each fund,
preparing all general shareholder communications and conducting shareholder
relations, maintaining each fund's records and the registration of each
fund's shares under federal and state law, developing management and
shareholder services for each fund and furnishing reports, evaluations and
analyses on a variety of subjects to the Trust's Board of Trustees.
In addition to the management fee payable to FMR and the fees payable to
FSC and FIIOC, each fund pays all its expenses, without limitation, that
are not assumed by those parties. Each fund pays for the typesetting,
printing and mailing of its Prospectuses, Statements of Additional
Information, reports and proxy material to existing shareholders, legal
expenses and the fees of the custodian, auditor and non-interested
Trustees. Other charges paid by each fund include interest, taxes,
brokerage commissions, each fund's proportionate share of insurance
premiums and Investment Company Institute dues, and the costs of
registering shares under federal and state securities laws. Each fund is
also liable for such nonrecurring expenses as may arise, including costs of
litigation to which each fund may be a party and any obligation they may
have to indemnify the officers and Trustees of the Trust with respect to
litigation.
ASSET MANAGER: GROWTH PORTFOLIO AND CONTRAFUND PORTFOLIO. FMR is each
fund's manager pursuant to Management Contracts each dated _______, 1994.
For the services of FMR under each Contract, each fund pays FMR a monthly
management fee composed of the sum of two elements: a group fee rate and
an individual fund fee rate. The group fee rate is based on the monthly
average net assets of all of the registered investment companies with which
FMR has management contracts and is calculated on a cumulative basis
pursuant to the graduated fee rate schedule shown on the left of the chart
below. On the right, the effective fee rate schedule shows the results of
cumulatively applying the annualized rates at varying asset levels. For
example, the effective annual fee rate at $232 billion of group net
assets--their approximate level for the month of December 1993 was .3243%,
which is the weighted average of the respective fee rates for each level of
group net assets up to that level.
GROUP FEE RATE EFFECTIVE ANNUAL
SCHEDULE* FEE RATES
Rate Group Effective
Asset Levels Net Annual
Assets Fee Rate
0 - $ 3 billion .520% $ 0.5 billion .5200%
3 - 6 .490 25 .4238
6 - 9 .460 50 .3823
9 - 12 .430 75 .3626
12 - 15 .400 100 .3512
15 - 18 .385 125 .3430
18 - 21 .370 150 .3371
21 - 24 .360 175 .3325
24 - 30 .350 200 .3284
30 - 36 .345 225 .3249
36 - 42 .340 250 .3219
42 - 48 .335 275 .3190
48 - 66 .325 300 .3163
66 - 84 .320 325 .3137
84 - 102 .315 350 .3113
102 - 138 .310 375 .3090
138 - 174 .305 400 .3067
174 - 210 .300
210 - 246 .295
246 - 282 .290
282 318 .285
318 354 .280
354 390 .275
Over 390 .270
The individual fund fee rate for Asset Manager: Growth Portfolio is .40%
and the individual fund fee rate for Contrafund Portfolio is .30%. Based
on the average net assets of the funds advised by FMR for December 1993,
the annual Management Fee rate would be calculated as follows:
ASSET MANAGER: GROWTH PORTFOLIO
Group Fee Rate Individual Fund Fee Rate Management Fee Rate
.3243% + .40% = .7243%
CONTRAFUND PORTFOLIO
Group Fee Rate Individual Fund Fee Rate Management Fee Rate
.3243% + .30% = .6243%
One twelfth (1/12) of the annual Management Fee rate is then applied to
each fund's average net assets for the current month, giving a dollar
amount which is the monthly fee.
SUB-ADVISORS. On ________, 1994, FMR entered into sub-advisory agreements
with Fidelity Management & Research (U.K.) Inc. (FMR (U.K.)) and Fidelity
Management & Research (Far East) Inc. (FMR Far East), pursuant to which FMR
(U.K.) and FMR Far East supply FMR with investment research and
recommendations concerning foreign securities for the benefit of Asset
Manager Portfolio.
FMR (U.K.) and FMR Far East, both wholly owned subsidiaries of FMR, were
formed in 1986 and registered under the Investment Advisers Act of 1940 on
May 11, 1987 to research and to make recommendations with respect to
companies located outside of North America.
The sub-advisory agreements provide that FMR, and not the fund, will pay
fees to FMR (U.K.) and FMR Far East equal to 110% and 105%, respectively,
of FMR (U.K.)'s and FMR Far East's costs incurred in connection with each
agreement, said costs to be determined in relation to the assets of the
fund that benefit from the services of the sub-advisors.
DISTRIBUTION AND SERVICE PLAN
Each fund has adopted a Distribution and Service Plan (the Plans) under
Rule 12b-1 of the Investment Company Act of 1940 (the Rule). The Rule
provides, in substance, that a mutual fund may not engage directly or
indirectly in financing any activity that is primarily intended to result
in the sale of shares of the Trust except pursuant to a plan adopted by the
Trust under the Rule. The Trust's Board of Trustees has adopted the Plans
to allow each fund and FMR to incur certain expenses that might be
considered to constitute indirect payment by the funds of distribution
expenses. Under the Plans, if the payment by a fund to FMR of management
fees should be deemed to be indirect financing by a fund of the
distribution of its shares, such payment is authorized by the Plans.
The Plans specifically recognize that FMR, either directly or through FDC,
may use its management fee revenue, past profits or other resources,
without limitation, to pay promotional and administrative expenses in
connection with the offer and sale of shares of the funds. In addition,
the Plans provide that FMR may use its resources, including its management
fee revenues to make payments to third parties that provide assistance in
selling shares of the funds or to third parties including banks, that
render shareholder support services. However, no such payments to third
parties are currently contemplated.
Each fund's Plan has been approved by the Trustees. As required by the
Rule, the Trustees carefully considered all pertinent factors relating to
the implementation of each Plan prior to its approval, and have determined
that there is a reasonable likelihood that each Plan will benefit the
respective fund and its shareholders. In particular, the Trustees noted
that the respective Plans do not authorize payments by the fund other than
those made to FMR under the Management Contract with each fund. To the
extent that the Plans give FMR and FDC greater flexibility in connection
with the distribution of shares of each fund, additional sales of the
funds' shares may result. Additionally, certain shareholder support
services may be provided more effectively under each Plan by local entities
with whom shareholders have other relationships.
CONTRACTS WITH COMPANIES AFFILIATED WITH FMR
Each fund has an agreement with FSC, an affiliate of FMR Corp., under which
FSC determines the NAV per share and dividends of each fund and maintains
the portfolio and general accounting records of each fund. The fee rates
are based on each fund's average net assets as follows: .06% for the first
$500 million of average net assets and .03% for average net assets in
excess of $500 million. For each fund, the fee is limited to a minimum of
$45,000 and a maximum of $750,000 per year.
In addition, FSC is paid a fee which ranges from $5 to $40 for each
portfolio transaction, depending on the type of transaction, and is
reimbursed for out-of-pocket expenses. The transaction fees will be
adjusted to reflect increases in a Bureau of Labor Statistics labor cost
index.
Each fund utilizes FIIOC, an affiliate of FMR, to maintain the master
accounts of the participating insurance companies. Under the transfer
agent agreements with FIIOC, each fund pays a fee of $95 per shareholder
account per year and a fee of $20 for each monetary transaction. In
addition to providing transfer agent and shareholder servicing functions,
FIIOC pays all transfer agent out-of-pocket expenses and also pays for the
typesetting, printing and mailing of Prospectuses, Statements of Additional
Information, reports, notices and statements to shareholders allocable to
the master accounts of participating insurance companies.
Each fund has a Distribution Agreement with FDC, a Massachusetts
corporation organized July 18, 1960. 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 the funds which are continuously offered
at net asset value. Promotional and administrative expenses, in connection
with the offer and sale of shares, are paid for by FMR.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Asset Manager: Growth Portfolio and Contrafund
Portfolio are funds of Variable Insurance Products Fund II, an open-end
management investment company, organized March 21, 1988. Currently, there
are five funds of the Trust: Investment Grade Bond Portfolio, Asset Manager
Portfolio, Index 500 Portfolio, Asset Manager: Growth Portfolio and
Contrafund Portfolio. The Declaration of Trust permits the Trustees to
create additional funds.
Investments in the Trust may be made only by the separate accounts of
insurance companies for the purpose of funding variable annuity and
variable life insurance contracts issued by insurance companies.
In the event that FMR ceases to be the investment advisor to the Trust or a
fund, the right of the Trust or fund to use the identifying name "Fidelity"
may be withdrawn. There is a remote possibility that one fund might become
liable for any misstatement in its prospectus or statement of additional
information about another fund.
The assets of the Trust received for the issue or sale of shares of each
fund and all income, earnings, profits, and proceeds thereof, subject only
to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of
each fund are segregated on the books of account, and are to be charged
with the liabilities with respect to such fund and with a share of the
general expenses of the Trust. Expenses with respect to the Trust are to be
allocated in proportion to the asset value of the respective funds, except
where allocations of direct expense can otherwise be fairly made. The
officers of the Trust, subject to the general supervision of the Board of
Trustees, have the power to determine which expenses are allocable to a
given fund, or which are general or allocable to all of the funds. In the
event of the dissolution or liquidation of the Trust, shareholders of each
fund are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The Trust is an entity of the type
commonly known as "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. 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 shall include a provision limiting the obligations
created thereby to the Trust and its assets. The Declaration of Trust
provides for indemnification out of each fund's property of any
shareholders held personally liable for the obligations of the fund. The
Declaration of Trust also provides that each fund shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of the fund and satisfy any judgment thereon. Thus, the risk of
a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which the fund itself would be unable to
meet its obligations. FMR believes that, in view of the above, the risk of
personal liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. The shares have no preemptive or conversion rights; the voting
and dividend rights, the right of redemption, and the privilege of exchange
are described in the Prospectus. Shares are fully paid and nonassessable,
except as set forth under the heading "Shareholder and Trustee Liability"
above. Shareholders representing 10% or more of the Trust or a fund may, as
set forth in the Declaration of Trust, call meetings of the Trust or a fund
for any purpose related to the Trust or fund, as the case may be,
including, in the case of a meeting of the entire Trust, the purpose of
voting on removal of one or more Trustees. The Trust or any fund may be
terminated upon the sale of its assets to another open-end management
investment company, or upon liquidation and distribution of its assets, if
approved by vote of the holders of a majority of the Trust or the fund. If
not so terminated, the Trust and the funds will continue indefinitely.
CUSTODIAN. [insert custodians] The custodians take no part in determining
the investment policies of each fund or in deciding which securities are
purchased or sold by each fund. Each fund, however, may invest in
obligations of the custodians and may purchase securities from or sell
securities to the custodians.
FMR, its affiliated companies and its officers and directors, and the
Trust's Trustees, may from time to time have transactions with various
banks, including custodian and subcustodian banks for certain of the funds
advised by FMR. The Boston branch of Brown Brothers Harriman & Co. leases
its office space from an affiliate of FMR at a lease payment which, when
entered into, was consistent with prevailing market rates. Other
transactions that have occurred to date have included 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 custodian or other fund relationships.
AUDITOR. Price Waterhouse LLP, 160 Federal Street, Boston, MA serves as
the funds' independent accountant, providing audit services including (1)
audit of annual financial statements, (2) assistance and consultation in
connection with SEC filings and (3) review of the annual federal income tax
returns filed on behalf of each fund.
APPENDIX
The DOLLAR-WEIGHTED AVERAGE MATURITY of a fund's fixed-income holdings is
derived by multiplying the value of each fixed-income investment held by a
fund by the number of days remaining to its maturity, adding these
calculations, and then dividing the total by the value the fund's
fixed-income holdings. An obligation's maturity is typically determined on
a stated final maturity basis, although there are some exceptions to this
rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
Also, the maturities of mortgage-backed securities and some asset-backed
securities. such as collateralized mortgage obligations, are determined on
a weighted average life basis, which is the average time for principal to
be repaid. For a mortgage security, this average time is calculated by
assuming a constant prepayment rate for the life of the mortgage. The
weighted average life of these securities is likely to be substantially
shorter than their stated final maturity.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
AAA - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA - Bonds which are rated Aa are judged to be of high quality by all
standards. together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protections may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest may be present which suggest a
susceptibility to impairment sometime in the future.
BAA - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds which are rates Ba are judged to have speculative elements.
Their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
CAA - Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
CA - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
short-comings.
C - Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers, 1,2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated debt issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
The B rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of adverse business, financial, or
economic conditions, it is not likely to have the capacity to pay interest
and repay principal.
CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed but
debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating will
also be used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
DESCRIPTION OF FITCH INVESTOR'S SERVICE, INC.'S COMMERCIAL PAPER RATINGS:
FITCH-1--(Highest Grade) Commercial paper assigned this rating is regarded
as having the strongest degree of assurance for timely payment.
FITCH-2--(Very Good Grade) Issues assigned this rating reflect an assurance
of timely payment only slightly less in degree than the strongest issues.
DESCRIPTION OF FITCH INVESTOR'S SERVICE, INC.'S CORPORATE BOND RATINGS:
AAA--Bonds of this rating are regarded as strictly high grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions,
and liable to but slight market fluctuation other than through changes in
the money rate. The factor last named is of importance, varying with the
length of maturity. Such bonds are mainly senior issues of strong
companies, and are most numerous in the railway and public utility fields,
though some industrial obligations have this rating. The prime feature of
an AAA bond is of showing of earnings several times or many times interest
requirements with such stability of applicable earnings that safety is
beyond reasonable question whatever changes occur in conditions. Other
features may enter, such as a wide margin of protection through collateral
security or direct lien on specific property as in the case of high-class
equipment certificates or bonds that are first mortgages on valuable real
estate. Sinking funds or voluntary reduction of the debt, by call or
purchase are often factors, while guarantee or assumption by parties other
than the original debtor may influence the rating.
AA--Bonds in this group are of safety virtually beyond question, and as a
class are readily saleable while many are highly active. Their merits are
not greatly unlike those of the "AAA" class, but a bond so rated may be of
junior though strong lien--in many cases directly following an AAA bond--or
the margin of safety is strikingly broad. The issue may be the obligation
of a small company, strongly secured but influenced as to rating by the
lesser financial power of the enterprise and more local type of market.
DESCRIPTION OF DUFF & PHELPS INC.'S COMMERCIAL PAPER RATINGS:
DUFF 1--High certainty of timely payment. Liquidity factors are excellent
and supported by strong fundamental protection factors. Risk factors are
minor.
DUFF 2--Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing internal funds needs may enlarge
total financing requirements, access to capital markets is good. Risk
factors are small.
DESCRIPTION OF DUFF & PHELPS INC.'S CORPORATE BOND RATINGS:
DUFF 1--Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
DUFF 2,3,4--High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic
conditions.
A rating is not a recommendation to purchase, sell or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor. When a security has received more than one rating,
each should be evaluated independently.
The ratings are based on current information furnished by the issuer or
obtained by the rating services from other sources which they consider
reliable. The ratings may be changed, suspended or withdrawn as a result
of changes in, or unavailability of, such information, or for other
reasons. Ratings may be qualified with a plus (+) or minus (-); however,
these qualifications are not taken into account for the purposes of the
fund's investment policies and limitations.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) 1. Financial Statements - Not applicable.
(b) Exhibits:
(1) (a) Declaration of Trust dated as of March 21, 1988 is incorporated
herein by reference to Exhibit 1 to Registration Statement incorporated on
March 18, 1988.
(b) Supplement to the Declaration of Trust dated January 1, 1990 is
incorporated herein by reference to Exhibit 1(b) to Post-Effective
Amendment No. 3.
(2) None.
(3) None.
(4) None.
(5) (a) Management Contract between Short-Term Portfolio and Fidelity
Management & Research Company dated November 11, 1988 is incorporated
herein by reference to Exhibit 5(a) to Post-Effective Amendment No. 1.
(b) Management Contract between Asset Manager Portfolio and Fidelity
Management & Research Company dated August 31, 1989, is incorporated herein
by reference to Exhibit 5(b) to Post-Effective Amendment No. 4.
(c) Sub-Advisory Agreement between Fidelity Management & Research Company
and Fidelity Management & Research (U.K.) Inc. on behalf of Asset Manager
Portfolio dated January 1, 1990 is incorporated herein by reference to
Exhibit 5(c) to Post-Effective Amendment No. 4.
(d) Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (Far East) Inc. on behalf of
Asset Manager Portfolio dated January 1, 1990 is incorporated herein by
reference to Exhibit 5(d) to Post-Effective Amendment No. 4.
(e) Form of Management Contract between Index 500 Portfolio and Fidelity
Management & Research Company, was filed as Exhibit 5(e) to Post-Effective
Amendment No. 8.
(f) Form of Management Contract between Investment Grade Bond Portfolio
and Fidelity Management & Research Company was filed as Exhibit 5(f) to
Post-Effective Amendment No. 10.
(g) Form of Management Contract between Asset Manager Portfolio and
Fidelity Management & Research Company was filed as Exhibit 5(g) to
Post-Effective Amendment No. 10.
(h) Form of Management Contract between Asset Manager: Growth Portfolio
and Fidelity Management & Research Company is filed herein as Exhibit 5(h).
(i) Form of Management Contract between Contrafund Portfolio and
Fidelity Management & Research Company is filed herein as Exhibit 5(i).
(j) Form of Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (U.K.) Inc. on behalf of Asset
Manager: Growth Portfolio is filed herein as Exhibit 5(j).
(k) Form of Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (Far East) Inc. on behalf of
Asset Manager: Growth Portfolio is filed herein as Exhibit 5(k).
(l) Form of Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (U.K.) Inc. on behalf of
Contrafund Portfolio is filed herein as Exhibit 5(l).
(m) Form of Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (Far East) Inc. on behalf of
Contrafund Portfolio is filed herein as Exhibit 5(m).
(6) (a) General Distribution Agreement between Short-Term Portfolio and
Fidelity Distributors Corporation dated November 11, 1988 is incorporated
herein by reference to Exhibit 6(a) to the Registration Statement.
(b) General Distribution Agreement between Asset Manager Portfolio and
Fidelity Distributors Corporation dated August 31, 1989 is incorporated
herein by reference to Exhibit 6(b) to Post-Effective Amendment No. 5.
(c) Form of General Distribution Agreement between Index 500 Portfolio and
Fidelity Distributors Corporation was filed as Exhibit 6(c) to
Post-Effective Amendment No. 8.
(d) Form of General Distribution Agreement between Asset Manager: Growth
Portfolio and Fidelity Distributors Corporation is filed herein as Exhibit
6(d).
(e) Form of General Distribution Agreement between Contrafund Portfolio
and Fidelity Distributors Corporation is filed herein as Exhibit 6(e).
(7) None.
(8) (a) Custodian Agreement between Short-Term Portfolio and Security
Pacific National Bank, dated July 13, 1988, is incorporated herein by
reference to Exhibit 8 to Pre-Effective Amendment No. 2.
(b) Amendment to Custodian Agreement between Short-Term Portfolio and
Security Pacific National Bank, dated November 20, 1989 is incorporated
herein by reference to Exhibit 8(b) to Post-Effective Amendment No. 4.
(c) Custodian Agreement between Asset Manager Portfolio and Fidelity
Management Trust Company, dated February 15, 1990, is incorporated herein
by reference to Exhibit 8(c) to Post-Effective Amendment No. 4.
(d) Form of Amendment to Custodian Agreement between Short-Term Portfolio
and Security Pacific National Bank, was filed as Exhibit 8(d) to
Post-Effective Amendment No. 6.
(e) Custodian Agreement between Asset Manager Portfolio and The Chase
Manhattan Bank, N.A., dated July 18, 1991, is incorporated herein by
reference to Exhibit 8(e) to Post-Effective Amendment No. 8.
(f) Custodian Agreement between Investment Grade Bond Portfolio and The
Bank of New York, dated July 18, 1991, is incorporated herein by reference
to Exhibit 8(f) to Post-Effective Amendment No. 8.
(9) (a) Amended Service Agreement between the Registrant and Fidelity
Service Company including Schedules B (pricing and bookkeeping) and C
(securities lending) to that Agreement for Short-Term Portfolio and Asset
Manager Portfolio, dated June 1, 1989, is incorporated herein by reference
to Exhibit 9(a) to Post-Effective Amendment No. 3.
(b) Amended Transfer Agent Agreement between the Registrant and Fidelity
Investments Institutional Operations Company including Schedule A to that
agreement for Short-Term Portfolio and Asset Manager Portfolio, dated June
1, 1989, is incorporated herein by reference to Exhibit 9(b) to
Post-Effective Amendment No. 3.
(c) Form of Amended Schedule B to the Service Agreement between the
Registrant and Fidelity Service Co. for Investment Grade Bond Portfolio and
Asset Manager Portfolio was filed as Exhibit 9(c) to Post-Effective
Amendment No. 8.
(d) Form of Schedules B (pricing and bookkeeping) and C (securities
lending) to the Service Agreement between the Registrant and Fidelity
Service Co. for Index 500 Portfolio was filed as Exhibit 9(d) to
Post-Effective Amendment No. 8.
(e) Form of Schedule A to the Transfer Agent Agreement between the
Registrant and Fidelity Investments Institutional Operations Company for
Index 500 Portfolio, was filed as Exhibit 9(e) to Post-Effective Amendment
No. 8.
(10) None.
(11) Not applicable.
(12) None.
(13) None.
(14) None.
(15) (a) Distribution and Service Plan pursuant to Rule 12b-1 for
Short-Term Portfolio is incorporated herein by reference to Exhibit 15 to
Pre-Effective Amendment No. 2.
(b) Distribution and Service Plan pursuant to Rule 12b-1 for Asset Manager
Portfolio is incorporated herein by reference to Exhibit 15(b) to
Post-Effective Amendment No. 3.
(c) Form of Distribution and Service Plan pursuant to Rule 12b-1 for Index
500 Portfolio was filed as Exhibit 15(c) to Post-Effective Amendment No. 8.
(d) Form of Distribution and Service Plan pursuant to Rule 12b-1 for Asset
Manager: Growth Portfolio is filed herein as Exhibit 15(d).
(e) Form of Distribution and Service Plan pursuant to Rule 12b-1 for
Contrafund Portfolio is filed herein as Exhibit 15(e).
(16) Schedule for Computation of performance quotations is incorporated
herein by reference to Exhibit 16 to Post-Effective Amendment No. 10.
(a) Backup for the computation of a moving average (using Asset Manager
Portfolio as an example) is filed herein as Exhibit 16(a).
Item 25. Persons Controlled by or Under Common Control with Registrant
The Board of Trustees of Registrant is the same as the Board of Trustees
of other funds advised by Fidelity Management & Research Company ("FMR").
In addition, the officers of these funds are substantially identical.
Registrant takes the position that it is not under common control with any
of the above funds since the power residing in the respective companies,
boards and officers arises in each instance as the result of an official
position with the respective funds.
Item 26. Number of Holders of Securities
August 31, 1994
Title of Class Number of Record Holders
Investment Grade Bond Portfolio 27
Asset Manager Portfolio 60
Index 500 Portfolio 27
Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification shall be
provided to any past or present Trustee or officer. It states that the
Registrant shall indemnify any present or past Trustee, or officer to the
fullest extent permitted by law against liability and all expenses
reasonably incurred by him in connection with any claim, action suit or
proceeding in which he is involved by virtue of his service as a trustee,
an officer, or both. Additionally, amounts paid or incurred in settlement
of such matters are covered by this indemnification. Indemnification will
not be provided in certain circumstances, however. These include instances
of willful misfeasance, bad faith, gross negligence, and reckless disregard
of the duties involved in the conduct of the particular office involved.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held, during the
past two fiscal years, the following positions of a substantial nature.
Edward C. Johnson 3d Chairman of the Executive Committee of FMR;
President and Chief Executive Officer of FMR
Corp.; Chairman of the Board and a Director of
FMR, FMR Corp., FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.; President
and Trustee of funds advised by FMR.
J. Gary Burkhead President of FMR; Managing Director of FMR
Corp.; President and a Director of FMR Texas
Inc., Fidelity Management & Research (U.K.)
Inc., and Fidelity Management & Research (Far
East) Inc.; Senior Vice President and Trustee of
funds advised by FMR.
Peter S. Lynch Vice Chairman of FMR (1992).
Robert Beckwitt Vice President of FMR and of funds advised by
FMR.
David Breazzano Vice President of FMR (1993) and of a fund
advised by FMR.
Stephan Campbell Vice President of FMR (1993).
Dwight Churchill Vice President of FMR (1993).
Rufus C. Cushman, Jr. Vice President of FMR and of funds advised by
FMR; Corporate Preferred Group Leader.
Will Danoff Vice President of FMR (1993) and of a fund
advised by FMR.
Scott DeSano Vice President of FMR (1993).
Penelope Dobkin Vice President of FMR and of a fund advised by
FMR.
Larry Domash Vice President of FMR (1993).
George Domolky Vice President of FMR (1993) and of a fund
advised by FMR.
Robert K. Duby Vice President of FMR.
Margaret L. Eagle Vice President of FMR and of a fund advised by
FMR.
Kathryn L. Eklund Vice President of FMR.
Richard B. Fentin Senior Vice President of FMR (1993) and of a
fund advised by FMR.
Daniel R. Frank Vice President of FMR and of funds advised by
FMR.
Gary L. French Vice President of FMR and Treasurer of the funds
advised by FMR.
Michael S. Gray Vice President of FMR and of funds advised by
FMR.
Lawrence Greenberg Vice President of FMR (1993).
Barry A. Greenfield Vice President of FMR and of a fund advised by
FMR.
William J. Hayes Senior Vice President of FMR; Equity Division
Leader.
Robert Haber Vice President of FMR and of funds advised by
FMR.
Richard Haberman Senior Vice President of FMR (1993).
Daniel Harmetz Vice President of FMR and of a fund advised by
FMR.
Ellen S. Heller Vice President of FMR.
John Hickling Vice President of FMR (1993) and of funds
advised by FMR.
<TABLE>
<CAPTION>
<S> <C>
Robert F. Hill Vice President of FMR; and Director of Technical
Research.
Stephen Jonas Treasurer and Vice President of FMR (1993);
Treasurer of FMR Texas Inc. (1993), Fidelity
Management & Research (U.K.) Inc. (1993), and
Fidelity Management & Research (Far East) Inc.
(1993).
David B. Jones Vice President of FMR (1993).
Steven Kaye Vice President of FMR (1993) and of a fund
advised by FMR.
Frank Knox Vice President of FMR (1993).
Robert A. Lawrence Senior Vice President of FMR (1993); and High
Income Division Leader.
Alan Leifer Vice President of FMR and of a fund advised by
FMR.
Harris Leviton Vice President of FMR (1993) and of a fund
advised by FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by
FMR.
Malcolm W. McNaught III Vice President of FMR (1993).
Robert H. Morrison Vice President of FMR and Director of Equity
Trading.
David Murphy Vice President of FMR and of funds advised by
FMR.
Andrew Offit Vice President of FMR (1993).
Judy Pagliuca Vice President of FMR (1993).
Jacques Perold Vice President of FMR.
Anne Punzak Vice President of FMR and of funds advised by
FMR.
Lee Sandwen Vice President of FMR (1993).
Patricia A. Satterthwaite Vice President of FMR (1993) and of a fund .
Thomas T. Soviero Vice President of FMR (1993).
Richard A. Spillane Vice President of FMR and of funds advised by
FMR; and Director of Equity Research.
Robert E. Stansky Senior Vice President of FMR (1993) and of funds
advised by FMR.
Thomas Steffanci Senior Vice President of FMR (1993); and
Fixed-Income Division Leader.
Gary L. Swayze Vice President of FMR and of funds advised by
FMR; and Tax-Free Fixed-Income Group Leader.
Thomas Sweeney Vice President of FMR (1993).
Donald Taylor Vice President of FMR (1993) and of funds
advised by FMR.
Beth F. Terrana Senior Vice President of FMR (1993) and of funds
advised by FMR.
Joel Tillinghast Vice President of FMR (1993) and of a fund
advised by FMR.
Robert Tucket Vice President of FMR (1993).
George A. Vanderheiden Senior Vice President of FMR; Vice President of
funds advised by FMR; and Growth Group
Leader.
Jeffrey Vinik Senior Vice President of FMR (1993) and of a
fund advised by FMR.
Guy E. Wickwire Vice President of FMR and of a fund advised by
FMR.
Arthur S. Loring Senior Vice President (1993), Clerk and General
Counsel of FMR; Vice President, Legal of FMR
Corp.; and Secretary of funds advised by FMR.
</TABLE>
(2) FIDELITY MANAGEMENT & RESEARCH (U.K.) INC. (FMR U.K.)
FMR U.K. provides investment advisory services to Fidelity Management &
Research Company and Fidelity Management Trust Company. The directors and
officers of the Sub-Adviser have held the following positions of a
substantial nature during the past two fiscal years.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR U.K.; Chairman of
the Executive Committee of FMR; Chief Executive
Officer of FMR Corp.; Chairman of the Board and a
Director of FMR, FMR Corp., FMR Texas Inc., and
Fidelity Management & Research (Far East) Inc.;
President and Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR U.K.; President of
FMR; Managing Director of FMR Corp.; President
and a Director of FMR Texas Inc. and Fidelity
Management & Research (Far East) Inc.; Senior Vice
President and Trustee of funds advised by FMR.
Richard C. Habermann Senior Vice President of FMR U.K.; Senior Vice
President of Fidelity Management & Research (Far
East) Inc.; Director of Worldwide Research of FMR.
Rick Spillane Senior Vice President and Director of Operations and
Compliance of FMR U.K. (1993).
Stephen Jonas Treasurer of FMR U.K. (1993), Fidelity Management
& Research (Far East) Inc. (1993), and FMR Texas
Inc. (1993); Treasurer and Vice President of FMR
(1993).
David Weinstein Clerk of FMR U.K.; Clerk of Fidelity Management &
Research (Far East) Inc.; Secretary of FMR Texas Inc.
</TABLE>
(3) FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC. (FMR Far East)
FMR Far East provides investment advisory services to Fidelity Management
& Research Company and Fidelity Management Trust Company. The directors
and officers of the Sub-Adviser have held the following positions of a
substantial nature during the past two fiscal years.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR Far East; Chairman
of the Executive Committee of FMR; Chief
Executive Officer of FMR Corp.; Chairman of the
Board and a Director of FMR, FMR Corp., FMR
Texas Inc. and Fidelity Management & Research
(U.K.) Inc.; President and Trustee of funds advised
by FMR.
J. Gary Burkhead President and Director of FMR Far East; President of
FMR; Managing Director of FMR Corp.; President
and a Director of FMR Texas Inc. and Fidelity
Management & Research (U.K.) Inc.; Senior Vice
President and Trustee of funds advised by FMR.
Richard C. Habermann Senior Vice President of FMR Far East; Senior Vice
President of Fidelity Management & Research
(U.K.) Inc.; Director of Worldwide Research of
FMR.
William R. Ebsworth Vice President of FMR Far East.
Bill Wilder Vice President of FMR Far East (1993).
Stephen Jonas Treasurer of FMR Far East (1993), Fidelity
Management & Research (U.K.) Inc. (1993), and
FMR Texas Inc. (1993); Treasurer and Vice
President of FMR (1993).
David C. Weinstein Clerk of FMR Far East; Clerk of Fidelity
Management & Research (U.K.) Inc.; Secretary of
FMR Texas Inc.
</TABLE>
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR and the following other funds:
CrestFunds, Inc.
ARK Funds
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Nita B. Kincaid Director None
W. Humphrey Bogart Director None
Kurt A. Lange President and Treasurer None
William L. Adair Senior Vice President None
Thomas W. Littauer Senior Vice President None
Arthur S. Loring Vice President and Clerk Secretary
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity Service
Co., 82 Devonshire Street, Boston, MA 02109 or the funds custodian (to be
determined)
Item 31. Management Services - Not applicable.
Item 32. Undertakings
The Registrant undertakes to file a Post-Effective Amendment, using
financial statements for Asset Manager: Growth Portfolio and Contrafund
Portfolio, which need not be certified, within six months of the fund's
effectiveness, unless permitted by the SEC to extend this period.
The Registrant undertakes for Asset Manager: Growth Portfolio and
Contrafund 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.
The Registrant, on behalf of Asset Manager: Growth Portfolio and
Contrafund Portfolio, provided the information required by Item 5A is
contained in the annual report, undertakes to furnish to each person to
whom a prospectus has been delivered, upon their request and without
charge, a copy of the Registrant's latest annual report to shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 14 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 16 day of September 1994.
VARIABLE INSURANCE PRODUCTS FUND II
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
(Signature) (Title) (Date)
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Edward C. Johnson 3d(dagger) President and Trustee September 16, 1994
Edward C. Johnson 3d (Principal Executive Officer)
</TABLE>
/s/Gary L. French Treasurer September 16, 1994
Gary L. French
/s/J. Gary Burkhead Trustee September 16, 1994
J. Gary Burkhead
/s/Ralph F. Cox * Trustee September 16, 1994
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee September 16, 1994
Phyllis Burke Davis
/s/Richard J. Flynn * Trustee September 16, 1994
Richard J. Flynn
/s/E. Bradley Jones * Trustee September 16, 1994
E. Bradley Jones
/s/Donald J. Kirk * Trustee September 16, 1994
Donald J. Kirk
/s/Peter S. Lynch * Trustee September 16, 1994
Peter S. Lynch
/s/Edward H. Malone * Trustee September 16, 1994
Edward H. Malone
/s/Marvin L. Mann * Trustee September 16, 1994
Marvin L. Mann
/s/Gerald C. McDonough* Trustee September 16, 1994
Gerald C. McDonough
/s/Thomas R. Williams * Trustee September 16, 1994
Thomas R. Williams
(dagger) Signatures affixed by J. Gary Burkhead pursuant to a power of
attorney dated October 20, 1993 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated October 20, 1993 and filed herewith.
POWER OF ATTORNEY
We, the undersigned Directors, Trustees or General Partners, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VII Fidelity Municipal Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Securities Fund
Fidelity Commonwealth Trust Fidelity Select Portfolios
Fidelity Congress Street Fund Fidelity Sterling Performance Portfolio, L.P.
Fidelity Contrafund Fidelity Summer Street Trust
Fidelity Corporate Trust Fidelity Trend Fund
Fidelity Court Street Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Destiny Portfolios Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Income Fund
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned
individuals serve as Board Members (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Xupolos, each of them singly, our true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for us and in our names in the appropriate capacities, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
our names and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS our hands on this twentieth day of October, 1993.
/s/Edward C. Johnson 3d /s/Peter S. Lynch
Edward C. Johnson 3d Peter S. Lynch
/s/J. Gary Burkhead /s/Edward H. Malone
J. Gary Burkhead Edward H. Malone
/s/Richard J. Flynn /s/Gerald C. McDonough
Richard J. Flynn Gerald C. McDonough
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
/s/Donald J. Kirk
Donald J. Kirk
POWER OF ATTORNEY
I, the undersigned President and Director, Trustee or General Partner, as
the case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VII Fidelity Municipal Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Securities Fund
Fidelity Commonwealth Trust Fidelity Select Portfolios
Fidelity Congress Street Fund Fidelity Sterling Performance Portfolio, L.P.
Fidelity Contrafund Fidelity Summer Street Trust
Fidelity Corporate Trust Fidelity Trend Fund
Fidelity Court Street Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Destiny Portfolios Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Income Fund
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned individual
serves as President and Board Member (collectively, the "Funds"), hereby
severally constitute and appoint J. Gary Burkhead, my true and lawful
attorney-in-fact, with full power of substitution, and with full power to
sign for me and in my name in the appropriate capacity, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and behalf in connection therewith as said attorney-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission. I hereby ratify
and confirm all that said attorneys-in-fact or their substitutes may do or
cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d October 20, 1993
Edward C. Johnson 3d
POWER OF ATTORNEY
I, the undersigned Director, Trustee or General Partner, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Magellan Fund
Fidelity Advisor Series III Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series IV Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Select Portfolios
Fidelity Commonwealth Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Congress Street Fund Fidelity Summer Street Trust
Fidelity Contrafund Fidelity Trend Fund
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Devonshire Trust Fidelity U.S. Investments-Government Securities
Fidelity Financial Trust Fund, L.P.
Fidelity Fixed-Income Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Government Securities Fund Spartan U.S. Treasury Money Market
Fidelity Hastings Street Trust Fund
Fidelity Income Fund Variable Insurance Products Fund
Fidelity Institutional Trust Variable Insurance Products Fund II
Fidelity Investment Trust
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned individual
serves as a Board Member (collectively, the "Funds"), hereby severally
constitute and appoint Arthur J. Brown, Arthur C. Delibert, Robert C.
Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A. Xupolos, each
of them singly, my true and lawful attorneys-in-fact, with full power of
substitution, and with full power to each of them, to sign for me and in my
name in the appropriate capacity, all Pre-Effective Amendments to any
Registration Statements of the Funds, any and all subsequent Post-Effective
Amendments to said Registration Statements, any Registration Statements on
Form N-14, and any supplements or other instruments in connection
therewith, and generally to do all such things in my name and behalf in
connection therewith as said attorneys-in-fact deem necessary or
appropriate, to comply with the provisions of the Securities Act of 1933
and Investment Company Act of 1940, and all related requirements of the
Securities and Exchange Commission, hereby ratifying and confirming all
that said attorneys-in-fact or their substitutes may do or cause to be done
by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Ralph F. Cox October 20, 1993
Ralph F. Cox
POWER OF ATTORNEY
I, the undersigned Director, Trustee or General Partner, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Special Situations Fund
Fidelity Advisor Series IV Fidelity Sterling Performance Portfolio, L.P.
Fidelity Advisor Series VI Fidelity Trend Fund
Fidelity Advisor Series VII Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Advisor Series VIII Fidelity U.S. Investments-Government Securities
Fidelity Contrafund Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity Yen Performance Portfolio, L.P.
Portfolio, L.P. Spartan U.S. Treasury Money Market
Fidelity Fixed-Income Trust Fund
Fidelity Government Securities Fund Variable Insurance Products Fund
Fidelity Hastings Street Trust Variable Insurance Products Fund II
Fidelity Institutional Trust
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned individual
serves as a Board Member (collectively, the "Funds"), hereby severally
constitute and appoint Arthur J. Brown, Arthur C. Delibert, Robert C.
Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A. Xupolos, each
of them singly, my true and lawful attorneys-in-fact, with full power of
substitution, and with full power to each of them, to sign for me and in my
name in the appropriate capacity, all Pre-Effective Amendments to any
Registration Statements of the Funds, any and all subsequent Post-Effective
Amendments to said Registration Statements, any Registration Statements on
Form N-14, and any supplements or other instruments in connection
therewith, and generally to do all such things in my name and behalf in
connection therewith as said attorneys-in-fact deem necessary or
appropriate, to comply with the provisions of the Securities Act of 1933
and Investment Company Act of 1940, and all related requirements of the
Securities and Exchange Commission, hereby ratifying and confirming all
that said attorneys-in-fact or their substitutes may do or cause to be done
by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Marvin L. Mann October 20, 1993
Marvin L. Mann
POWER OF ATTORNEY
I, the undersigned Director, Trustee or General Partner, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series IV Fidelity School Street Trust
Fidelity Advisor Series VI Fidelity Select Portfolios
Fidelity Advisor Series VIII Fidelity Sterling Performance Portfolio, L.P.
Fidelity Beacon Street Trust Fidelity Trend Fund
Fidelity Capital Trust Fidelity Union Street Trust
Fidelity Commonwealth Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Contrafund Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Yen Performance Portfolio, L.P.
Fidelity Devonshire Trust Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Institutional Trust
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned individual
serves as a Board Member (collectively, the "Funds"), hereby severally
constitute and appoint Arthur J. Brown, Arthur C. Delibert, Robert C.
Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A. Xupolos, each
of them singly, my true and lawful attorneys-in-fact, with full power of
substitution, and with full power to each of them, to sign for me and in my
name in the appropriate capacity, all Pre-Effective Amendments to any
Registration Statements of the Funds, any and all subsequent Post-Effective
Amendments to said Registration Statements, any Registration Statements on
Form N-14, and any supplements or other instruments in connection
therewith, and generally to do all such things in my name and behalf in
connection therewith as said attorneys-in-fact deem necessary or
appropriate, to comply with the provisions of the Securities Act of 1933
and Investment Company Act of 1940, and all related requirements of the
Securities and Exchange Commission, hereby ratifying and confirming all
that said attorneys-in-fact or their substitutes may do or cause to be done
by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Phyllis Burke Davis October 20, 1993
Phyllis Burke Davis
EXHIBIT 5(h)
FORM OF
MANAGEMENT CONTRACT
between
VARIABLE INSURANCE PRODUCTS FUND II:
ASSET MANAGER: GROWTH PORTFOLIO
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this 1st day of [MONTH] 1994, by and between Variable
Insurance Products Fund II, a Massachusetts business trust which may issue
one or more series of shares of beneficial interest (hereinafter called the
"Fund"), on behalf of Asset Manager: Growth Portfolio (hereinafter called
the "Portfolio"), and Fidelity Management & Research Company, a
Massachusetts corporation (hereinafter called the "Adviser").
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the supervision
of the Fund's Board of Trustees, direct the investments of the Portfolio 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. The 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 officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all personnel of
the Fund or the Adviser performing services relating to research,
statistical and investment activities. The Adviser is authorized, in its
discretion and without prior consultation with the Portfolio, 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) Management Services. The Adviser shall perform (or arrange for the
performance by its affiliates of) the management and administrative
services necessary for the operation of the Fund. The Adviser shall,
subject to the supervision of the Board of Trustees, perform various
services for the Portfolio, including but not limited to: (i) providing the
Portfolio with office space, equipment and facilities (which may be its
own) for maintaining its organization; (ii) on behalf of the Portfolio,
supervising relations with, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys,
underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable; (iii) preparing all general
shareholder communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered, maintaining
the registration and qualification of the Portfolio's shares under federal
and state law; and (vii) investigating the development of and developing
and implementing, if appropriate, management and shareholder services
designed to enhance the value or convenience of the Portfolio as an
investment vehicle.
The Adviser shall also furnish such reports, evaluations, information or
analyses to the Fund as the Fund's Board of Trustees may request from time
to time or as the Adviser may deem to be desirable. The Adviser shall make
recommendations to the Fund's Board of Trustees with respect to Fund
policies, and shall carry out such policies as are adopted by the Trustees.
The Adviser shall, subject to review by the Board of Trustees, furnish such
other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Contract.
(c) The 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 Adviser, which may include brokers or dealers affiliated
with the Adviser. The 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 1934) to the Portfolio and/or the
other accounts over which the Adviser or its affiliates exercise investment
discretion. The 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 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 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.
The Adviser shall, in acting hereunder, be an independent contractor. The
Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of the
Fund are or may be or become interested in the Adviser as directors,
officers or otherwise and that directors, officers and stockholders of the
Adviser are or may be or become similarly interested in the Fund, and that
the Adviser may be or become interested in the Fund as a shareholder or
otherwise.
3. The Adviser will be compensated on the following basis for the services
and facilities to be furnished hereunder. The Adviser shall receive a
monthly management fee, payable monthly as soon as practicable after the
last day of each month, composed of a Group Fee and an Individual Fund Fee.
(a) Group Fee Rate. The Group Fee Rate shall be based upon the monthly
average of the net assets of the registered investment companies having
Advisory and Service or Management Contracts with the Adviser (computed in
the manner set forth in the Fund's Declaration of Trust or other
organizational document) determined as of the close of business on each
business day throughout the month. The Group Fee Rate shall be determined
on a cumulative basis pursuant to the following schedule:
Average Net Assets Annualized Fee Rate (for each level)
0 - $ 3 billion .5200%
3 - 6 .4900%
6 - 9 .4600%
9 - 12 .4300%
12 - 15 .4000%
15 - 18 .3850%
18 - 21 .3700%
21 - 24 .3600%
24 - 30 .3500%
30 - 36 .3450%
36 - 42 .3400%
42 - 48 .3350%
48 - 66 .3250%
66 - 84 .3200%
84 - 102 .3150%
102 - 138 .3100%
138 - 174 .3050%
174 - 210 .3000%
210 - 246 .2950%
246 - 282 .2900%
282 - 318 .2850%
318 - 354 .2800%
354 - 390 .2750%
Over 390 .2700%
(b) Individual Fund Fee Rate. The Individual Fund Fee Rate shall be .40%.
The sum of the Group Fee Rate, calculated as described above to the
nearest millionth, and the Individual Fund Fee Rate shall constitute the
Annual Management Fee Rate. One-twelfth of the Annual Management Fee Rate
shall be applied to the average of the net assets of the Portfolio
(computed in the manner set forth in the Fund's Declaration of Trust or
other organizational document) determined as of the close of business on
each business day throughout the month.
(c) In case of termination of this Contract during any month, the fee for
that month shall be reduced proportionately on the basis of the number of
business days during which it is in effect, and the fee computed upon the
average net assets for the business days it is so in effect for that month.
4. It is understood that the Portfolio will pay all its expenses, 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 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 Adviser to the Portfolio are not to be deemed
exclusive, the 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 Contract, interfere, in a
material manner, with the Adviser's ability to meet all of its obligations
with respect to rendering services to the Portfolio hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser,
the Adviser shall not be subject to liability to the Portfolio 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.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Contract shall continue in force until July 31, 1995
and indefinitely thereafter, but only so long as the continuance after such
date shall be specifically approved at least annually by vote of the
Trustees of the Fund or by vote of a majority of the outstanding voting
securities of the Portfolio.
(b) This Contract may be modified by mutual consent, such consent on the
part of the Fund to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of this Contract
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to the Contract or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval.
(d) Either party hereto may, at any time on sixty (60) days' prior written
notice to the other, terminate this Contract, without payment of any
penalty, by action of its Trustees or Board of Directors, as the case may
be, or with respect to the Portfolio by vote of a majority of the
outstanding voting securities of the Portfolio. This Contract shall
terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Declaration of Trust or
other organizational document and agrees that the obligations assumed by
the Fund pursuant to this Contract shall be limited in all cases to the
Portfolio and its assets, and the Adviser shall not seek satisfaction of
any such obligation from the shareholders or any shareholder of the
Portfolio or any other Portfolios of the Fund. In addition, the Adviser
shall not seek satisfaction of any such obligations from the Trustees or
any individual Trustee. The Adviser understands that the rights and
obligations of any Portfolio under the Declaration of Trust or other
organizational document are separate and distinct from those of any and all
other Portfolios.
8. 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 "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act, as now in effect or as
hereafter amended, and subject to such orders as may be granted by the
Securities and Exchange Commission.
IN WITNESS WHEREOF the parties 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.
VARIABLE INSURANCE PRODUCTS FUND II
on behalf of Asset Manager: Growth Portfolio
By _________________________________________
Senior Vice President
FIDELITY MANAGEMENT & RESEARCH COMPANY
By _________________________________________
President
LG913180012
EXHIBIT 5(i)
FORM OF
MANAGEMENT CONTRACT
between
VARIABLE INSURANCE PRODUCTS FUND II:
CONTRAFUND PORTFOLIO
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this 1st day of [MONTH] 1994, by and between Variable
Insurance Products Fund II, a Massachusetts business trust which may issue
one or more series of shares of beneficial interest (hereinafter called the
"Fund"), on behalf of Contrafund Portfolio (hereinafter called the
"Portfolio"), and Fidelity Management & Research Company, a Massachusetts
corporation (hereinafter called the "Adviser").
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the supervision
of the Fund's Board of Trustees, direct the investments of the Portfolio 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. The 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 officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all personnel of
the Fund or the Adviser performing services relating to research,
statistical and investment activities. The Adviser is authorized, in its
discretion and without prior consultation with the Portfolio, 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) Management Services. The Adviser shall perform (or arrange for the
performance by its affiliates of) the management and administrative
services necessary for the operation of the Fund. The Adviser shall,
subject to the supervision of the Board of Trustees, perform various
services for the Portfolio, including but not limited to: (i) providing the
Portfolio with office space, equipment and facilities (which may be its
own) for maintaining its organization; (ii) on behalf of the Portfolio,
supervising relations with, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys,
underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable; (iii) preparing all general
shareholder communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered, maintaining
the registration and qualification of the Portfolio's shares under federal
and state law; and (vii) investigating the development of and developing
and implementing, if appropriate, management and shareholder services
designed to enhance the value or convenience of the Portfolio as an
investment vehicle.
The Adviser shall also furnish such reports, evaluations, information or
analyses to the Fund as the Fund's Board of Trustees may request from time
to time or as the Adviser may deem to be desirable. The Adviser shall make
recommendations to the Fund's Board of Trustees with respect to Fund
policies, and shall carry out such policies as are adopted by the Trustees.
The Adviser shall, subject to review by the Board of Trustees, furnish such
other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Contract.
(c) The 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 Adviser, which may include brokers or dealers affiliated
with the Adviser. The 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 1934) to the Portfolio and/or the
other accounts over which the Adviser or its affiliates exercise investment
discretion. The 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 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 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.
The Adviser shall, in acting hereunder, be an independent contractor. The
Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of the
Fund are or may be or become interested in the Adviser as directors,
officers or otherwise and that directors, officers and stockholders of the
Adviser are or may be or become similarly interested in the Fund, and that
the Adviser may be or become interested in the Fund as a shareholder or
otherwise.
3. The Adviser will be compensated on the following basis for the services
and facilities to be furnished hereunder. The Adviser shall receive a
monthly management fee, payable monthly as soon as practicable after the
last day of each month, composed of a Group Fee and an Individual Fund Fee.
(a) Group Fee Rate. The Group Fee Rate shall be based upon the monthly
average of the net assets of the registered investment companies having
Advisory and Service or Management Contracts with the Adviser (computed in
the manner set forth in the Fund's Declaration of Trust or other
organizational document) determined as of the close of business on each
business day throughout the month. The Group Fee Rate shall be determined
on a cumulative basis pursuant to the following schedule:
Average Net Assets Annualized Fee Rate (for each level)
0 - $ 3 billion .5200%
3 - 6 .4900%
6 - 9 .4600%
9 - 12 .4300%
12 - 15 .4000%
15 - 18 .3850%
18 - 21 .3700%
21 - 24 .3600%
24 - 30 .3500%
30 - 36 .3450%
36 - 42 .3400%
42 - 48 .3350%
48 - 66 .3250%
66 - 84 .3200%
84 - 102 .3150%
102 - 138 .3100%
138 - 174 .3050%
174 - 210 .3000%
210 - 246 .2950%
246 - 282 .2900%
282 - 318 .2850%
318 - 354 .2800%
354 - 390 .2750%
Over 390 .2700%
(b) Individual Fund Fee Rate. The Individual Fund Fee Rate shall be .30%.
The sum of the Group Fee Rate, calculated as described above to the
nearest millionth, and the Individual Fund Fee Rate shall constitute the
Annual Management Fee Rate. One-twelfth of the Annual Management Fee Rate
shall be applied to the average of the net assets of the Portfolio
(computed in the manner set forth in the Fund's Declaration of Trust or
other organizational document) determined as of the close of business on
each business day throughout the month.
(c) In case of termination of this Contract during any month, the fee for
that month shall be reduced proportionately on the basis of the number of
business days during which it is in effect, and the fee computed upon the
average net assets for the business days it is so in effect for that month.
4. It is understood that the Portfolio will pay all its expenses, 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 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 Adviser to the Portfolio are not to be deemed
exclusive, the 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 Contract, interfere, in a
material manner, with the Adviser's ability to meet all of its obligations
with respect to rendering services to the Portfolio hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser,
the Adviser shall not be subject to liability to the Portfolio 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.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Contract shall continue in force until July 31, 1995
and indefinitely thereafter, but only so long as the continuance after such
date shall be specifically approved at least annually by vote of the
Trustees of the Fund or by vote of a majority of the outstanding voting
securities of the Portfolio.
(b) This Contract may be modified by mutual consent, such consent on the
part of the Fund to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of this Contract
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to the Contract or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval.
(d) Either party hereto may, at any time on sixty (60) days' prior written
notice to the other, terminate this Contract, without payment of any
penalty, by action of its Trustees or Board of Directors, as the case may
be, or with respect to the Portfolio by vote of a majority of the
outstanding voting securities of the Portfolio. This Contract shall
terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Declaration of Trust or
other organizational document and agrees that the obligations assumed by
the Fund pursuant to this Contract shall be limited in all cases to the
Portfolio and its assets, and the Adviser shall not seek satisfaction of
any such obligation from the shareholders or any shareholder of the
Portfolio or any other Portfolios of the Fund. In addition, the Adviser
shall not seek satisfaction of any such obligations from the Trustees or
any individual Trustee. The Adviser understands that the rights and
obligations of any Portfolio under the Declaration of Trust or other
organizational document are separate and distinct from those of any and all
other Portfolios.
8. 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 "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act, as now in effect or as
hereafter amended, and subject to such orders as may be granted by the
Securities and Exchange Commission.
IN WITNESS WHEREOF the parties 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.
VARIABLE INSURANCE PRODUCTS FUND II
on behalf of Contrafund Portfolio
By _________________________________________
Senior Vice President
FIDELITY MANAGEMENT & RESEARCH COMPANY
By _________________________________________
President
LG913180012
EXHIBIT 5(j)
FORM OF
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
AND
VARIABLE INSURANCE PRODUCTS FUND II ON BEHALF OF
ASSET MANAGER: GROWTH PORTFOLIO
AGREEMENT made this ___ day of ____, 1994, by and between Fidelity
Management & Research Company, a Massachusetts corporation with principal
offices at 82 Devonshire Street, Boston, Massachusetts (hereinafter called
the "Advisor"); Fidelity Management & Research (U.K.) Inc. (hereinafter
called the "Sub-Advisor"); and Variable Insurance Products Fund II, a
Massachusetts business trust which may issue one or more series of shares
of beneficial interest (hereinafter called the "Trust") on behalf of Asset
Manager: Growth Portfolio (hereinafter called the "Portfolio").
WHEREAS the Trust and the Advisor have entered into a Management Contract
on behalf of the Portfolio, pursuant to which the Advisor is to act as
investment manager of the Portfolio; and
WHEREAS the Sub-Advisor and its subsidiaries and other affiliated persons
have personnel in various locations throughout the world and have been
formed in part for the purpose of researching and compiling information and
recommendations with respect to the economies of various countries, and
securities of issuers located in such countries, and providing investment
advisory services in connection therewith;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Trust, the Advisor and the Sub-Advisor agree as
follows:
1. Duties: The Advisor may, in its discretion, appoint the Sub-Advisor
to perform one or more of the following services with respect to all or a
portion of the investments of the Portfolio. The services and the portion
of the investments of the Portfolio to be advised or managed by the
Sub-Advisor shall be as agreed upon from time to time by the Advisor and
the Sub-Advisor. The Sub-Advisor shall pay the salaries and fees of all
personnel of the Sub-Advisor performing services for the Portfolio relating
to research, statistical and investment activities.
(a) INVESTMENT ADVICE: If and to the extent requested by the Advisor, the
Sub-Advisor shall provide investment advice to the Portfolio and the
Advisor with respect to all or a portion of the investments of the
Portfolio, and in connection with such advice shall furnish the Portfolio
and the Advisor such factual information, research reports and investment
recommendations as the Advisor may reasonably require. Such information
may include written and oral reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the Advisor,
the Sub-Advisor shall, subject to the supervision of the Advisor, manage
all or a portion of the investments of the Portfolio in accordance with the
investment objective, policies and limitations provided in the Portfolio's
Prospectus or other governing instruments, as amended from time to time,
the Investment Company Act of 1940 (the "1940 Act") and rules thereunder,
as amended from time to time, and such other limitations as the Trust or
Advisor may impose with respect to the Portfolio by notice to the
Sub-Advisor. With respect to the portion of the investments of the
Portfolio under its management, the Sub-Advisor is authorized to make
investment decisions on behalf of the Portfolio with regard to any stock,
bond, other security or investment instrument, and to place orders for the
purchase and sale of such securities through such broker-dealers as the
Sub-Advisor may select. The Sub-Advisor may also be authorized, but only
to the extent such duties are delegated in writing by the Advisor, to
provide additional investment management services to the Portfolio,
including but not limited to services such as managing foreign currency
investments, purchasing and selling or writing futures and options
contracts, borrowing money or lending securities on behalf of the
Portfolio. All investment management and any other activities of the
Sub-Advisor shall at all times be subject to the control and direction of
the Advisor and the Trust's Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The 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 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 and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees or
the Advisor may reasonably request from time to time, or as the Sub-Advisor
may deem to be desirable.
3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Advisor 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-Advisor,
which may include brokers or dealers affiliated with the Advisor or
Sub-Advisor. The Sub-Advisor 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 to
the other accounts over which the Sub-Advisor or Advisor exercise
investment discretion. The Sub-Advisor 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-Advisor 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-Advisor has with respect to
accounts over which it exercises investment discretion. The Trustees of
the Trust 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.
4. Compensation: The Advisor shall compensate the Sub-Advisor on the
following basis for the services to be furnished hereunder.
(a) INVESTMENT ADVISORY FEE: For services provided under subparagraph (a)
of paragraph 1 of this Agreement, the Advisor agrees to pay the Sub-Advisor
a monthly Sub-Advisory Fee. The Sub-Advisory Fee shall be equal to 110% of
the Sub-Advisor's costs incurred in connection with rendering the services
referred to in subparagraph (a) of paragraph 1 of this Agreement. The
Sub-Advisory Fee shall not be reduced to reflect expense reimbursements or
fee waivers by the Advisor, if any, in effect from time to time.
(b) INVESTMENT MANAGEMENT FEE: For services provided under subparagraph
(b) of paragraph 1 of this Agreement, the Advisor agrees to pay the
Sub-Advisor a monthly Investment Management Fee. The Investment Management
Fee shall be equal to: (i) 50% of the monthly management fee rate
(including performance adjustments, if any) that the Portfolio is obligated
to pay the Advisor under its Management Contract with the Advisor,
multiplied by: (ii) the fraction equal to the net assets of the Portfolio
as to which the Sub-Advisor shall have provided investment management
services divided by the net assets of the Portfolio for that month. If in
any fiscal year the aggregate expenses of the Portfolio exceed any
applicable expense limitation imposed by any state or federal securities
laws or regulations, and the Advisor waives all or a portion of its
management fee or reimburses the Portfolio for expenses to the extent
required to satisfy such limitation, the Investment Management Fee paid to
the Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements and
the Advisor subsequently recovers all or any portion of such waivers or
reimbursements, then the Sub-Advisor shall be entitled to receive from the
Advisor a proportionate share of the amount recovered. To the extent that
waivers and reimbursements by the Advisor required by such limitations are
in excess of the Advisor's management fee, the Investment Management Fee
paid to the Sub-Advisor will be reduced to zero for that month, but in no
event shall the Sub-Advisor be required to reimburse the Advisor for all or
a portion of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph (1) for
the same portion of the investments of the Portfolio for the same period,
the fees paid to the Sub-Advisor with respect to such investments shall be
calculated exclusively under subparagraph (b) of this paragraph 4.
5. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the Sub-Advisor
hereunder or by the Advisor 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 Trust's Trustees
other than those who are "interested persons" of the Trust, the Sub-Advisor
or the Advisor; (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 Trust 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 therefore;
(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 Advisor, 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 Trust's Trustees and officers with respect thereto.
6. Interested Persons: It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the Advisor
or the Sub-Advisor as directors, officers or otherwise and that directors,
officers and stockholders of the Advisor or the Sub-Advisor are or may be
or become similarly interested in the Trust, and that the Advisor or the
Sub-Advisor may be or become interested in the Trust as a shareholder or
otherwise.
7. Services to Other Companies or Accounts: The services of the
Sub-Advisor to the Advisor are not to be deemed to be exclusive, the
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 Sub-Advisor's ability to meet all of its obligations hereunder.
The Sub-Advisor shall for all purposes be an independent contractor and not
an agent or employee of the Advisor or the Trust.
8. 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 Sub-Advisor, the Sub-Advisor 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.
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, 1995 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 and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(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 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 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 Sub-Advisor shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the
Portfolio. Nor shall the 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 persons,"
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 (U.K.) INC.
BY:_____________________________________________________
Title
FIDELITY MANAGEMENT & RESEARCH COMPANY
BY: ___________________________________________
Title
VARIABLE INSURANCE PRODUCTS FUND II ON BEHALF OF
ASSET MANAGER: GROWTH PORTFOLIO
BY: ____________________________________________
Title
LG920650.023
EXHIBIT 5(k)
FORM OF
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.
AND
VARIABLE INSURANCE PRODUCTS FUND II ON BEHALF OF
ASSET MANAGER: GROWTH PORTFOLIO
AGREEMENT made this ___ day of _______, 1994, by and between Fidelity
Management & Research Company, a Massachusetts corporation with principal
offices at 82 Devonshire Street, Boston, Massachusetts (hereinafter called
the "Advisor"); Fidelity Management & Research (Far East) Inc. (hereinafter
called the "Sub-Advisor"); and Variable Insurance Products Fund II, a
Massachusetts business trust which may issue one or more series of shares
of beneficial interest (hereinafter called the "Trust") on behalf of Asset
Manager: Growth Portfolio (hereinafter called the "Portfolio").
WHEREAS the Trust and the Advisor have entered into a Management Contract
on behalf of the Portfolio, pursuant to which the Advisor is to act as
investment manager of the Portfolio; and
WHEREAS the Sub-Advisor and its subsidiaries and other affiliated persons
have personnel in various locations throughout the world and have been
formed in part for the purpose of researching and compiling information and
recommendations with respect to the economies of various countries, and
securities of issuers located in such countries, and providing investment
advisory services in connection therewith;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Trust, the Advisor and the Sub-Advisor agree as
follows:
1. Duties: The Advisor may, in its discretion, appoint the Sub-Advisor
to perform one or more of the following services with respect to all or a
portion of the investments of the Portfolio. The services and the portion
of the investments of the Portfolio to be advised or managed by the
Sub-Advisor shall be as agreed upon from time to time by the Advisor and
the Sub-Advisor. The Sub-Advisor shall pay the salaries and fees of all
personnel of the Sub-Advisor performing services for the Portfolio relating
to research, statistical and investment activities.
(a) INVESTMENT ADVICE: If and to the extent requested by the Advisor, the
Sub-Advisor shall provide investment advice to the Portfolio and the
Advisor with respect to all or a portion of the investments of the
Portfolio, and in connection with such advice shall furnish the Portfolio
and the Advisor such factual information, research reports and investment
recommendations as the Advisor may reasonably require. Such information
may include written and oral reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the Advisor,
the Sub-Advisor shall, subject to the supervision of the Advisor, manage
all or a portion of the investments of the Portfolio in accordance with the
investment objective, policies and limitations provided in the Portfolio's
Prospectus or other governing instruments, as amended from time to time,
the Investment Company Act of 1940 (the "1940 Act") and rules thereunder,
as amended from time to time, and such other limitations as the Trust or
Advisor may impose with respect to the Portfolio by notice to the
Sub-Advisor. With respect to the portion of the investments of the
Portfolio under its management, the Sub-Advisor is authorized to make
investment decisions on behalf of the Portfolio with regard to any stock,
bond, other security or investment instrument, and to place orders for the
purchase and sale of such securities through such broker-dealers as the
Sub-Advisor may select. The Sub-Advisor may also be authorized, but only
to the extent such duties are delegated in writing by the Advisor, to
provide additional investment management services to the Portfolio,
including but not limited to services such as managing foreign currency
investments, purchasing and selling or writing futures and options
contracts, borrowing money, or lending securities on behalf of the
Portfolio. All investment management and any other activities of the
Sub-Advisor shall at all times be subject to the control and direction of
the Advisor and the Trust's Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The 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 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 and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees or
the Advisor may reasonably request from time to time, or as the Sub-Advisor
may deem to be desirable.
3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Advisor 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-Advisor,
which may include brokers or dealers affiliated with the Advisor or
Sub-Advisor. The Sub-Advisor 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 to
the other accounts over which the Sub-Advisor or Advisor exercise
investment discretion. The Sub-Advisor 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-Advisor 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-Advisor has with respect to
accounts over which it exercises investment discretion. The Trustees of
the Trust 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.
4. Compensation: The Advisor shall compensate the Sub-Advisor on the
following basis for the services to be furnished hereunder.
(a) INVESTMENT ADVISORY FEE: For services provided under subparagraph (a)
of paragraph 1 of this Agreement, the Advisor agrees to pay the Sub-Advisor
a monthly Sub-Advisory Fee. The Sub-Advisory Fee shall be equal to 105% of
the Sub-Advisor's costs incurred in connection with rendering the services
referred to in subparagraph (a) of paragraph 1 of this Agreement. The
Sub-Advisory Fee shall not be reduced to reflect expense reimbursements or
fee waivers by the Advisor, if any, in effect from time to time.
(b) INVESTMENT MANAGEMENT FEE: For services provided under subparagraph
(b) of paragraph 1 of this Agreement, the Advisor agrees to pay the
Sub-Advisor a monthly Investment Management Fee. The Investment Management
Fee shall be equal to: (i) 50% of the monthly management fee rate
(including performance adjustments, if any) that the Portfolio is obligated
to pay the Advisor under its Management Contract with the Advisor,
multiplied by: (ii) the fraction equal to the net assets of the Portfolio
as to which the Sub-Advisor shall have provided investment management
services divided by the net assets of the Portfolio for that month. If in
any fiscal year the aggregate expenses of the Portfolio exceed any
applicable expense limitation imposed by any state or federal securities
laws or regulations, and the Advisor waives all or a portion of its
management fee or reimburses the Portfolio for expenses to the extent
required to satisfy such limitation, the Investment Management Fee paid to
the Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements and
the Advisor subsequently recovers all or any portion of such waivers and
reimbursements, then the Sub-Advisor shall be entitled to receive from the
Advisor a proportionate share of the amount recovered. To the extent that
waivers and reimbursements by the Advisor required by such limitations are
in excess of the Advisor's management fee, the Investment Management Fee
paid to the Sub-Advisor will be reduced to zero for that month, but in no
event shall the Sub-Advisor be required to reimburse the Advisor for all or
a portion of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph 1 for
the same portion of the investments of the Portfolio for the same period,
the fees paid to the Sub-Advisor with respect to such investments shall be
calculated exclusively under subparagraph (b) of this paragraph 4.
5. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the Sub-Advisor
hereunder or by the Advisor 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 Trust's Trustees
other than those who are "interested persons" of the Trust, the Sub-Advisor
or the Advisor; (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 Trust 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 therefore;
(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 Advisor, 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 Trust's Trustees and officers with respect thereto.
6. Interested Persons: It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the Advisor
or the Sub-Advisor as directors, officers or otherwise and that directors,
officers and stockholders of the Advisor or the Sub-Advisor are or may be
or become similarly interested in the Trust, and that the Advisor or the
Sub-Advisor may be or become interested in the Trust as a shareholder or
otherwise.
7. Services to Other Companies or Accounts: The services of the
Sub-Advisor to the Advisor are not to be deemed to be exclusive, the
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 Sub-Advisor's ability to meet all of its obligations hereunder.
The Sub-Advisor shall for all purposes be an independent contractor and not
an agent or employee of the Advisor or the Trust.
8. 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 Sub-Advisor, the Sub-Advisor 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.
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, 1995
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 and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(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 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 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 Sub-Advisor shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the
Portfolio. Nor shall the 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 persons,"
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:_____________________________________________________
Title
FIDELITY MANAGEMENT & RESEARCH COMPANY
BY: ___________________________________________
Title
VARIABLE INSURANCE PRODUCTS FUND II ON BEHALF OF
ASSET MANAGER: GROWTH PORTFOLIO
BY: ____________________________________________
Title
LG920650.023
EXHIBIT 5(l)
FORM OF
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
AND
VARIABLE INSURANCE PRODUCTS FUND II ON BEHALF OF
CONTRAFUND PORTFOLIO
AGREEMENT made this ___ day of ____, 1994, by and between Fidelity
Management & Research Company, a Massachusetts corporation with principal
offices at 82 Devonshire Street, Boston, Massachusetts (hereinafter called
the "Advisor"); Fidelity Management & Research (U.K.) Inc. (hereinafter
called the "Sub-Advisor"); and Variable Insurance Products Fund II, a
Massachusetts business trust which may issue one or more series of shares
of beneficial interest (hereinafter called the "Trust") on behalf of
Contrafund Portfolio (hereinafter called the "Portfolio").
WHEREAS the Trust and the Advisor have entered into a Management Contract
on behalf of the Portfolio, pursuant to which the Advisor is to act as
investment manager of the Portfolio; and
WHEREAS the Sub-Advisor and its subsidiaries and other affiliated persons
have personnel in various locations throughout the world and have been
formed in part for the purpose of researching and compiling information and
recommendations with respect to the economies of various countries, and
securities of issuers located in such countries, and providing investment
advisory services in connection therewith;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Trust, the Advisor and the Sub-Advisor agree as
follows:
1. Duties: The Advisor may, in its discretion, appoint the Sub-Advisor
to perform one or more of the following services with respect to all or a
portion of the investments of the Portfolio. The services and the portion
of the investments of the Portfolio to be advised or managed by the
Sub-Advisor shall be as agreed upon from time to time by the Advisor and
the Sub-Advisor. The Sub-Advisor shall pay the salaries and fees of all
personnel of the Sub-Advisor performing services for the Portfolio relating
to research, statistical and investment activities.
(a) INVESTMENT ADVICE: If and to the extent requested by the Advisor, the
Sub-Advisor shall provide investment advice to the Portfolio and the
Advisor with respect to all or a portion of the investments of the
Portfolio, and in connection with such advice shall furnish the Portfolio
and the Advisor such factual information, research reports and investment
recommendations as the Advisor may reasonably require. Such information
may include written and oral reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the Advisor,
the Sub-Advisor shall, subject to the supervision of the Advisor, manage
all or a portion of the investments of the Portfolio in accordance with the
investment objective, policies and limitations provided in the Portfolio's
Prospectus or other governing instruments, as amended from time to time,
the Investment Company Act of 1940 (the "1940 Act") and rules thereunder,
as amended from time to time, and such other limitations as the Trust or
Advisor may impose with respect to the Portfolio by notice to the
Sub-Advisor. With respect to the portion of the investments of the
Portfolio under its management, the Sub-Advisor is authorized to make
investment decisions on behalf of the Portfolio with regard to any stock,
bond, other security or investment instrument, and to place orders for the
purchase and sale of such securities through such broker-dealers as the
Sub-Advisor may select. The Sub-Advisor may also be authorized, but only
to the extent such duties are delegated in writing by the Advisor, to
provide additional investment management services to the Portfolio,
including but not limited to services such as managing foreign currency
investments, purchasing and selling or writing futures and options
contracts, borrowing money or lending securities on behalf of the
Portfolio. All investment management and any other activities of the
Sub-Advisor shall at all times be subject to the control and direction of
the Advisor and the Trust's Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The 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 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 and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees or
the Advisor may reasonably request from time to time, or as the Sub-Advisor
may deem to be desirable.
3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Advisor 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-Advisor,
which may include brokers or dealers affiliated with the Advisor or
Sub-Advisor. The Sub-Advisor 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 to
the other accounts over which the Sub-Advisor or Advisor exercise
investment discretion. The Sub-Advisor 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-Advisor 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-Advisor has with respect to
accounts over which it exercises investment discretion. The Trustees of
the Trust 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.
4. Compensation: The Advisor shall compensate the Sub-Advisor on the
following basis for the services to be furnished hereunder.
(a) INVESTMENT ADVISORY FEE: For services provided under subparagraph (a)
of paragraph 1 of this Agreement, the Advisor agrees to pay the Sub-Advisor
a monthly Sub-Advisory Fee. The Sub-Advisory Fee shall be equal to 110% of
the Sub-Advisor's costs incurred in connection with rendering the services
referred to in subparagraph (a) of paragraph 1 of this Agreement. The
Sub-Advisory Fee shall not be reduced to reflect expense reimbursements or
fee waivers by the Advisor, if any, in effect from time to time.
(b) INVESTMENT MANAGEMENT FEE: For services provided under subparagraph
(b) of paragraph 1 of this Agreement, the Advisor agrees to pay the
Sub-Advisor a monthly Investment Management Fee. The Investment Management
Fee shall be equal to: (i) 50% of the monthly management fee rate
(including performance adjustments, if any) that the Portfolio is obligated
to pay the Advisor under its Management Contract with the Advisor,
multiplied by: (ii) the fraction equal to the net assets of the Portfolio
as to which the Sub-Advisor shall have provided investment management
services divided by the net assets of the Portfolio for that month. If in
any fiscal year the aggregate expenses of the Portfolio exceed any
applicable expense limitation imposed by any state or federal securities
laws or regulations, and the Advisor waives all or a portion of its
management fee or reimburses the Portfolio for expenses to the extent
required to satisfy such limitation, the Investment Management Fee paid to
the Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements and
the Advisor subsequently recovers all or any portion of such waivers or
reimbursements, then the Sub-Advisor shall be entitled to receive from the
Advisor a proportionate share of the amount recovered. To the extent that
waivers and reimbursements by the Advisor required by such limitations are
in excess of the Advisor's management fee, the Investment Management Fee
paid to the Sub-Advisor will be reduced to zero for that month, but in no
event shall the Sub-Advisor be required to reimburse the Advisor for all or
a portion of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph (1) for
the same portion of the investments of the Portfolio for the same period,
the fees paid to the Sub-Advisor with respect to such investments shall be
calculated exclusively under subparagraph (b) of this paragraph 4.
5. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the Sub-Advisor
hereunder or by the Advisor 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 Trust's Trustees
other than those who are "interested persons" of the Trust, the Sub-Advisor
or the Advisor; (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 Trust 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 therefore;
(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 Advisor, 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 Trust's Trustees and officers with respect thereto.
6. Interested Persons: It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the Advisor
or the Sub-Advisor as directors, officers or otherwise and that directors,
officers and stockholders of the Advisor or the Sub-Advisor are or may be
or become similarly interested in the Trust, and that the Advisor or the
Sub-Advisor may be or become interested in the Trust as a shareholder or
otherwise.
7. Services to Other Companies or Accounts: The services of the
Sub-Advisor to the Advisor are not to be deemed to be exclusive, the
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 Sub-Advisor's ability to meet all of its obligations hereunder.
The Sub-Advisor shall for all purposes be an independent contractor and not
an agent or employee of the Advisor or the Trust.
8. 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 Sub-Advisor, the Sub-Advisor 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.
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, 1995 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 and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(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 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 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 Sub-Advisor shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the
Portfolio. Nor shall the 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 persons,"
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 (U.K.) INC.
BY:_____________________________________________________
Title
FIDELITY MANAGEMENT & RESEARCH COMPANY
BY: ___________________________________________
Title
VARIABLE INSURANCE PRODUCTS FUND II ON BEHALF OF
CONTRAFUND PORTFOLIO
BY: ____________________________________________
Title
LG920650.023
EXHIBIT 5(m)
FORM OF
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.
AND
VARIABLE INSURANCE PRODUCTS FUND II ON BEHALF OF
CONTRAFUND PORTFOLIO
AGREEMENT made this ___ day of _______, 1994, by and between Fidelity
Management & Research Company, a Massachusetts corporation with principal
offices at 82 Devonshire Street, Boston, Massachusetts (hereinafter called
the "Advisor"); Fidelity Management & Research (Far East) Inc. (hereinafter
called the "Sub-Advisor"); and Variable Insurance Products Fund II, a
Massachusetts business trust which may issue one or more series of shares
of beneficial interest (hereinafter called the "Trust") on behalf of
Contrafund Portfolio (hereinafter called the "Portfolio").
WHEREAS the Trust and the Advisor have entered into a Management Contract
on behalf of the Portfolio, pursuant to which the Advisor is to act as
investment manager of the Portfolio; and
WHEREAS the Sub-Advisor and its subsidiaries and other affiliated persons
have personnel in various locations throughout the world and have been
formed in part for the purpose of researching and compiling information and
recommendations with respect to the economies of various countries, and
securities of issuers located in such countries, and providing investment
advisory services in connection therewith;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Trust, the Advisor and the Sub-Advisor agree as
follows:
1. Duties: The Advisor may, in its discretion, appoint the Sub-Advisor
to perform one or more of the following services with respect to all or a
portion of the investments of the Portfolio. The services and the portion
of the investments of the Portfolio to be advised or managed by the
Sub-Advisor shall be as agreed upon from time to time by the Advisor and
the Sub-Advisor. The Sub-Advisor shall pay the salaries and fees of all
personnel of the Sub-Advisor performing services for the Portfolio relating
to research, statistical and investment activities.
(a) INVESTMENT ADVICE: If and to the extent requested by the Advisor, the
Sub-Advisor shall provide investment advice to the Portfolio and the
Advisor with respect to all or a portion of the investments of the
Portfolio, and in connection with such advice shall furnish the Portfolio
and the Advisor such factual information, research reports and investment
recommendations as the Advisor may reasonably require. Such information
may include written and oral reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the Advisor,
the Sub-Advisor shall, subject to the supervision of the Advisor, manage
all or a portion of the investments of the Portfolio in accordance with the
investment objective, policies and limitations provided in the Portfolio's
Prospectus or other governing instruments, as amended from time to time,
the Investment Company Act of 1940 (the "1940 Act") and rules thereunder,
as amended from time to time, and such other limitations as the Trust or
Advisor may impose with respect to the Portfolio by notice to the
Sub-Advisor. With respect to the portion of the investments of the
Portfolio under its management, the Sub-Advisor is authorized to make
investment decisions on behalf of the Portfolio with regard to any stock,
bond, other security or investment instrument, and to place orders for the
purchase and sale of such securities through such broker-dealers as the
Sub-Advisor may select. The Sub-Advisor may also be authorized, but only
to the extent such duties are delegated in writing by the Advisor, to
provide additional investment management services to the Portfolio,
including but not limited to services such as managing foreign currency
investments, purchasing and selling or writing futures and options
contracts, borrowing money, or lending securities on behalf of the
Portfolio. All investment management and any other activities of the
Sub-Advisor shall at all times be subject to the control and direction of
the Advisor and the Trust's Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The 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 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 and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees or
the Advisor may reasonably request from time to time, or as the Sub-Advisor
may deem to be desirable.
3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Advisor 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-Advisor,
which may include brokers or dealers affiliated with the Advisor or
Sub-Advisor. The Sub-Advisor 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 to
the other accounts over which the Sub-Advisor or Advisor exercise
investment discretion. The Sub-Advisor 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-Advisor 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-Advisor has with respect to
accounts over which it exercises investment discretion. The Trustees of
the Trust 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.
4. Compensation: The Advisor shall compensate the Sub-Advisor on the
following basis for the services to be furnished hereunder.
(a) INVESTMENT ADVISORY FEE: For services provided under subparagraph (a)
of paragraph 1 of this Agreement, the Advisor agrees to pay the Sub-Advisor
a monthly Sub-Advisory Fee. The Sub-Advisory Fee shall be equal to 105% of
the Sub-Advisor's costs incurred in connection with rendering the services
referred to in subparagraph (a) of paragraph 1 of this Agreement. The
Sub-Advisory Fee shall not be reduced to reflect expense reimbursements or
fee waivers by the Advisor, if any, in effect from time to time.
(b) INVESTMENT MANAGEMENT FEE: For services provided under subparagraph
(b) of paragraph 1 of this Agreement, the Advisor agrees to pay the
Sub-Advisor a monthly Investment Management Fee. The Investment Management
Fee shall be equal to: (i) 50% of the monthly management fee rate
(including performance adjustments, if any) that the Portfolio is obligated
to pay the Advisor under its Management Contract with the Advisor,
multiplied by: (ii) the fraction equal to the net assets of the Portfolio
as to which the Sub-Advisor shall have provided investment management
services divided by the net assets of the Portfolio for that month. If in
any fiscal year the aggregate expenses of the Portfolio exceed any
applicable expense limitation imposed by any state or federal securities
laws or regulations, and the Advisor waives all or a portion of its
management fee or reimburses the Portfolio for expenses to the extent
required to satisfy such limitation, the Investment Management Fee paid to
the Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements and
the Advisor subsequently recovers all or any portion of such waivers and
reimbursements, then the Sub-Advisor shall be entitled to receive from the
Advisor a proportionate share of the amount recovered. To the extent that
waivers and reimbursements by the Advisor required by such limitations are
in excess of the Advisor's management fee, the Investment Management Fee
paid to the Sub-Advisor will be reduced to zero for that month, but in no
event shall the Sub-Advisor be required to reimburse the Advisor for all or
a portion of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph 1 for
the same portion of the investments of the Portfolio for the same period,
the fees paid to the Sub-Advisor with respect to such investments shall be
calculated exclusively under subparagraph (b) of this paragraph 4.
5. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the Sub-Advisor
hereunder or by the Advisor 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 Trust's Trustees
other than those who are "interested persons" of the Trust, the Sub-Advisor
or the Advisor; (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 Trust 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 therefore;
(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 Advisor, 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 Trust's Trustees and officers with respect thereto.
6. Interested Persons: It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the Advisor
or the Sub-Advisor as directors, officers or otherwise and that directors,
officers and stockholders of the Advisor or the Sub-Advisor are or may be
or become similarly interested in the Trust, and that the Advisor or the
Sub-Advisor may be or become interested in the Trust as a shareholder or
otherwise.
7. Services to Other Companies or Accounts: The services of the
Sub-Advisor to the Advisor are not to be deemed to be exclusive, the
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 Sub-Advisor's ability to meet all of its obligations hereunder.
The Sub-Advisor shall for all purposes be an independent contractor and not
an agent or employee of the Advisor or the Trust.
8. 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 Sub-Advisor, the Sub-Advisor 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.
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, 1995
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 and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(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 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 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 Sub-Advisor shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the
Portfolio. Nor shall the 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 persons,"
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:_____________________________________________________
Title
FIDELITY MANAGEMENT & RESEARCH COMPANY
BY: ___________________________________________
Title
VARIABLE INSURANCE PRODUCTS FUND II ON BEHALF OF
CONTRAFUND PORTFOLIO
BY: ____________________________________________
Title
LG920650.023
EXHIBIT 6(d)
FORM OF
GENERAL DISTRIBUTION AGREEMENT
between
VARIABLE INSURANCE PRODUCTS FUND II
and
FIDELITY DISTRIBUTORS CORPORATION
Agreement made this ___ day of _________, 1994, between Variable Insurance
Products Fund II, a Massachusetts business trust having its principal place
of business in Boston, Massachusetts and which may issue one or more series
of beneficial interest ("Issuer"), with respect to shares of Asset Manager:
Growth Portfolio, a series of the Issuer, and Fidelity Distributors
Corporation, a Massachusetts corporation having its principal place of
business in Boston, Massachusetts ("Distributors").
In consideration of the mutual promises and undertakings herein contained,
the parties agree as follows:
1. Sale of Shares - The Issuer grants to Distributors the right to sell
shares on behalf of the Issuer during the term of this Agreement and
subject to the registration requirements of the Securities Act of 1933, as
amended ("1933 Act"), and of the laws governing the sale of securities in
the various states ("Blue Sky Laws") under the following terms and
conditions: Distributors (i) shall have the right to sell, as agent on
behalf of the Issuer, shares authorized for issue and registered under the
1933 Act, and (ii) may sell shares under offers of exchange, if available,
between and among the funds advised by Fidelity Management & Research
Company ("FMR").
2. Sale of Shares by the Issuer - The rights granted to Distributors shall
be nonexclusive in that the Issuer reserves the right to sell its shares to
investors on applications received and accepted by the Issuer. Further,
the Issuer reserves the right to issue shares in connection with the merger
or consolidation, or acquisition by the Issuer through purchase or
otherwise, with any other investment company, trust, or personal holding
company.
3. Shares Covered by this Agreement - This Agreement shall apply to
unissued shares of the Issuer, shares of the Issuer held in its treasury in
the event that in the discretion of the Issuer treasury shares shall be
sold, and shares of the Issuer repurchased for resale.
4. Public Offering Price - Except as otherwise noted in the Issuer's
current Prospectus and/or Statement of Additional Information, all shares
sold to investors by Distributors or the Issuer will be sold at the public
offering price. The public offering price for all accepted subscriptions
will be the net asset value per share, as determined in the manner
described in the Issuer's current Prospectus and/or Statement of Additional
Information, plus a sales charge (if any) described in the Issuer's current
Prospectus and/or Statement of Additional Information. The Issuer shall in
all cases receive the net asset value per share on all sales. If a sales
charge is in effect, Distributors shall have the right subject to such
rules or regulations of the Securities and Exchange Commission as may then
be in effect pursuant to Section 22 of the Investment Company Act of 1940
to pay a portion of the sales charge to dealers who have sold shares of the
Issuer. If a fee in connection with shareholder redemptions is in effect,
the Issuer shall collect the fee on behalf of Distributors and, unless
otherwise agreed upon by the Issuer and Distributors, Distributors shall be
entitled to receive all of such fees.
5. Suspension of Sales - If and whenever the determination of net asset
value is suspended and until such suspension is terminated, no further
orders for shares shall be processed by Distributors except such
unconditional orders as may have been placed with Distributors before it
had knowledge of the suspension. In addition, the Issuer reserves the
right to suspend sales and Distributors' authority to process orders for
shares on behalf of the Issuer if, in the judgment of the Issuer, it is in
the best interests of the Issuer to do so. Suspension will continue for
such period as may be determined by the Issuer.
6. Solicitation of Sales - In consideration of these rights granted to
Distributors, Distributors agrees to use all reasonable efforts, consistent
with its other business, to secure purchasers for shares of the Issuer.
This shall not prevent Distributors from entering into like arrangements
(including arrangements involving the payment of underwriting commissions)
with other issuers. This does not obligate Distributors to register as a
broker or dealer under the Blue Sky Laws of any jurisdiction in which it is
not now registered or to maintain its registration in any jurisdiction in
which it is now registered. If a sales charge is in effect, Distributors
shall have the right to enter into sales agreements with dealers of its
choice for the sale of shares of the Issuer to the public at the public
offering price only and fix in such agreements the portion of the sales
charge which may be retained by dealers, provided that the Issuer shall
approve the form of the dealer agreement and the dealer discounts set forth
therein and shall evidence such approval by filing said form of dealer
agreement and amendments thereto as an exhibit to its currently effective
Registration Statement under the 1933 Act.
7. Authorized Representations - Distributors is not authorized by the
Issuer to give any information or to make any representations other than
those contained in the appropriate registration statements or Prospectuses
and Statements of Additional Information filed with the Securities and
Exchange Commission under the 1933 Act (as these registration statements,
Prospectuses and Statements of Additional Information may be amended from
time to time), or contained in shareholder reports or other material that
may be prepared by or on behalf of the Issuer for Distributors' use. This
shall not be construed to prevent Distributors from preparing and
distributing sales literature or other material as it may deem appropriate.
8. Portfolio Securities - Portfolio securities of the Issuer may be bought
or sold by or through Distributors, and Distributors may participate
directly or indirectly in brokerage commissions or "spreads" for
transactions in portfolio securities of the Issuer.
9. Registration of Shares - The Issuer agrees that it will take all action
necessary to register shares under the 1933 Act (subject to the necessary
approval of its shareholders) so that there will be available for sale the
number of shares Distributors may reasonably be expected to sell. The
Issuer shall make available to Distributors such number of copies of its
currently effective Prospectus and Statement of Additional Information as
Distributors may reasonably request. The Issuer shall furnish to
Distributors copies of all information, financial statements and other
papers which Distributors may reasonably request for use in connection with
the distribution of shares of the Issuer.
10. Expenses - The Issuer shall pay all fees and expenses (a) in connection
with the preparation, setting in type and filing of any registration
statement, Prospectus and Statement of Additional Information under the
1933 Act and amendments for the issue of its shares, (b) in connection with
the registration and qualification of shares for sale in the various states
in which the Board of Trustees of the Issuer shall determine it advisable
to qualify such shares for sale (including registering the Issuer as a
broker or dealer or any officer of the Issuer as agent or salesman in any
state), (c) of preparing, setting in type, printing and mailing any report
or other communication to shareholders of the Issuer in their capacity as
such, and (d) of preparing, setting in type, printing and mailing
Prospectuses, Statements of Additional Information and any supplements
thereto sent to existing shareholders.
As provided in the Distribution and Service Plan adopted by the Issuer, it
is recognized by the Issuer that FMR may reimburse Distributors for any
direct expenses incurred in the distribution of shares of the Issuer from
any source available to it, including advisory and service or management
fees paid to it by the Issuer.
11. Indemnification - The Issuer agrees to indemnify and hold harmless
Distributors and each of its directors and officers and each person, if
any, who controls Distributors 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 Issuer (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 Issuer does not agree to indemnify
Distributors 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 Issuer by or on behalf of Distributors. In no case (i) is
the indemnity of the Issuer in favor of Distributors or any person
indemnified to be deemed to protect Distributors or any person against any
liability to the Issuer or its security holders to which Distributors or
such person would otherwise be subject by reason of wilful 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,
or (ii) is the Issuer to be liable under its indemnity agreement contained
in this paragraph with respect to any claim made against Distributors or
any person indemnified unless Distributors or person, as the case may be,
shall have notified the Issuer in writing of the claim within a reasonable
time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon
Distributors or any such person (or after Distributors or such person shall
have received notice of service on any designated agent). However, failure
to notify the Issuer of any claim shall not relieve the Issuer from any
liability which it may have to Distributors or any person against whom such
action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Issuer shall be entitled to participate
at its own expense in the defense, or, if it so elects, to assume the
defense of any suit brought to enforce any claims, but if the Issuer elects
to assume the defense, the defense shall be conducted by counsel chosen by
it and satisfactory to Distributors or person or persons, defendant or
defendants in the suit. In the event the Issuer elects to assume the
defense of any suit and retain counsel, Distributors, officers or directors
or controlling person or persons, defendant or defendants in the suit,
shall bear the fees and expenses of any additional counsel retained by
them. If the Issuer does not elect to assume the defense of any suit, it
will reimburse Distributors, officers or directors or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Issuer agrees to notify
Distributors promptly of the commencement of any litigation or proceedings
against it or any of its officers or trustees in connection with the
issuance or sale of any of the shares.
Distributors also covenants and agrees that it will indemnify and hold
harmless the Issuer and each of its Board members and officers and each
person, if any, who controls the Issuer within the meaning of Section 15 of
the 1933 Act, against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees
incurred in connection therewith) arising by reason of any person acquiring
any shares, based upon the 1933 Act or any other statute or common law,
alleging any wrongful act of Distributors or any of its employees or
alleging that the registration statement, Prospectus, Statement of
Additional Information, shareholder reports or other information filed or
made public by the Issuer (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,
insofar as the statement or omission was made in reliance upon, and in
conformity with information furnished to the Issuer by or on behalf of
Distributors. In no case (i) is the indemnity of Distributors in favor of
the Issuer or any person indemnified to be deemed to protect the Issuer or
any person against any liability to which the Issuer 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, or (ii) is
Distributors to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Issuer or any person
indemnified unless the Issuer or person, as the case may be, shall have
notified Distributors in writing of the claim within a reasonable time
after the summons or other first written notification giving information of
the nature of the claim shall have been served upon the Issuer or any such
person (or after the Issuer or such person shall have received notice of
service on any designated agent). However, failure to notify Distributors
of any claim shall not relieve Distributors from any liability which it may
have to the Issuer or any person against whom the action is brought
otherwise than on account of its indemnity agreement contained in this
paragraph. In the case of any notice to Distributors, it shall be entitled
to participate, at its own expense, in the defense or, if it so elects, to
assume the defense of any suit brought to enforce the claim, but if
Distributors elects to assume the defense, the defense shall be conducted
by counsel chosen by it and satisfactory to the Issuer, to its officers and
Board and to any controlling person or persons, defendant or defendants in
the suit. In the event that Distributors elects to assume the defense of
any suit and retain counsel, the Issuer or controlling persons, defendant
or defendants in the suit, shall bear the fees and expense of any
additional counsel retained by them. If Distributors does not elect to
assume the defense of any suit, it will reimburse the Issuer, officers and
Board or controlling person or persons, defendant or defendants in the
suit, for the reasonable fees and expenses of any counsel retained by them.
Distributors agrees to notify the Issuer promptly of the commencement of
any litigation or proceedings against it in connection with the issue and
sale of any of the shares.
12. Effective Date - This agreement shall be effective upon its execution,
and unless terminated as provided, shall continue in force until January
31, 1995 and thereafter from year to year, provided continuance is approved
annually by the vote of a majority of the Board members of the Issuer, and
by the vote of those Board members of the Issuer who are not "interested
persons" of the Issuer and, if a plan under Rule 12b-1 under the Investment
Company Act of 1940 is in effect, by the vote of those Board members of the
Issuer who are not "interested persons" of the Issuer and who are not
parties to the Distribution and Service Plan or this Agreement and have no
financial interest in the operation of the Distribution and Service Plan or
in any agreements related to the Distribution and Service Plan, cast in
person at a meeting called for the purpose of voting on the approval. This
Agreement shall automatically terminate in the event of its assignment. As
used in this paragraph, the terms "assignment" and "interested persons"
shall have the respective meanings specified in the Investment Company Act
of 1940 as now in effect or as hereafter amended. In addition to
termination by failure to approve continuance or by assignment, this
Agreement may at any time be terminated by either party upon not less than
sixty days' prior written notice to the other party.
13. Notice - Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other
party at the last address furnished by the other party to the party giving
notice: if to the Issuer, at 82 Devonshire Street, Boston, Massachusetts,
and if to Distributors, at 82 Devonshire Street, Boston, Massachusetts.
14. Limitation of Liability - Distributors is expressly put on notice of
the limitation of shareholder liability as set forth in the Declaration of
Trust or other organizational document of the Issuer and agrees that the
obligations assumed by the Issuer under this contract shall be limited in
all cases to the Issuer and its assets. Distributors shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Issuer. Nor shall Distributors seek satisfaction of any
such obligation from the Trustees or any individual Trustee of the Issuer.
Distributors understands that the rights and obligations of each series of
shares of the Issuer under the Issuer's Declaration of Trust or other
organizational document are separate and distinct from those of any and all
other series.
15. 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.
IN WITNESS WHEREOF, the Issuer has executed this instrument in its name
and behalf, and its seal affixed, by one of its officers duly authorized,
and Distributors has executed this instrument in its name and behalf by one
of its officers duly authorized, as of the day and year first above
written.
VARIABLE INSURANCE PRODUCTS FUND II
By _____________________________
FIDELITY DISTRIBUTORS CORPORATION
By _____________________________
EXHIBIT 6(e)
FORM OF
GENERAL DISTRIBUTION AGREEMENT
between
VARIABLE INSURANCE PRODUCTS FUND II
and
FIDELITY DISTRIBUTORS CORPORATION
Agreement made this ___ day of _________, 1994, between Variable Insurance
Products Fund II, a Massachusetts business trust having its principal place
of business in Boston, Massachusetts and which may issue one or more series
of beneficial interest ("Issuer"), with respect to shares of Contrafund
Portfolio, a series of the Issuer, and Fidelity Distributors Corporation, a
Massachusetts corporation having its principal place of business in Boston,
Massachusetts ("Distributors").
In consideration of the mutual promises and undertakings herein contained,
the parties agree as follows:
1. Sale of Shares - The Issuer grants to Distributors the right to sell
shares on behalf of the Issuer during the term of this Agreement and
subject to the registration requirements of the Securities Act of 1933, as
amended ("1933 Act"), and of the laws governing the sale of securities in
the various states ("Blue Sky Laws") under the following terms and
conditions: Distributors (i) shall have the right to sell, as agent on
behalf of the Issuer, shares authorized for issue and registered under the
1933 Act, and (ii) may sell shares under offers of exchange, if available,
between and among the funds advised by Fidelity Management & Research
Company ("FMR").
2. Sale of Shares by the Issuer - The rights granted to Distributors shall
be nonexclusive in that the Issuer reserves the right to sell its shares to
investors on applications received and accepted by the Issuer. Further,
the Issuer reserves the right to issue shares in connection with the merger
or consolidation, or acquisition by the Issuer through purchase or
otherwise, with any other investment company, trust, or personal holding
company.
3. Shares Covered by this Agreement - This Agreement shall apply to
unissued shares of the Issuer, shares of the Issuer held in its treasury in
the event that in the discretion of the Issuer treasury shares shall be
sold, and shares of the Issuer repurchased for resale.
4. Public Offering Price - Except as otherwise noted in the Issuer's
current Prospectus and/or Statement of Additional Information, all shares
sold to investors by Distributors or the Issuer will be sold at the public
offering price. The public offering price for all accepted subscriptions
will be the net asset value per share, as determined in the manner
described in the Issuer's current Prospectus and/or Statement of Additional
Information, plus a sales charge (if any) described in the Issuer's current
Prospectus and/or Statement of Additional Information. The Issuer shall in
all cases receive the net asset value per share on all sales. If a sales
charge is in effect, Distributors shall have the right subject to such
rules or regulations of the Securities and Exchange Commission as may then
be in effect pursuant to Section 22 of the Investment Company Act of 1940
to pay a portion of the sales charge to dealers who have sold shares of the
Issuer. If a fee in connection with shareholder redemptions is in effect,
the Issuer shall collect the fee on behalf of Distributors and, unless
otherwise agreed upon by the Issuer and Distributors, Distributors shall be
entitled to receive all of such fees.
5. Suspension of Sales - If and whenever the determination of net asset
value is suspended and until such suspension is terminated, no further
orders for shares shall be processed by Distributors except such
unconditional orders as may have been placed with Distributors before it
had knowledge of the suspension. In addition, the Issuer reserves the
right to suspend sales and Distributors' authority to process orders for
shares on behalf of the Issuer if, in the judgment of the Issuer, it is in
the best interests of the Issuer to do so. Suspension will continue for
such period as may be determined by the Issuer.
6. Solicitation of Sales - In consideration of these rights granted to
Distributors, Distributors agrees to use all reasonable efforts, consistent
with its other business, to secure purchasers for shares of the Issuer.
This shall not prevent Distributors from entering into like arrangements
(including arrangements involving the payment of underwriting commissions)
with other issuers. This does not obligate Distributors to register as a
broker or dealer under the Blue Sky Laws of any jurisdiction in which it is
not now registered or to maintain its registration in any jurisdiction in
which it is now registered. If a sales charge is in effect, Distributors
shall have the right to enter into sales agreements with dealers of its
choice for the sale of shares of the Issuer to the public at the public
offering price only and fix in such agreements the portion of the sales
charge which may be retained by dealers, provided that the Issuer shall
approve the form of the dealer agreement and the dealer discounts set forth
therein and shall evidence such approval by filing said form of dealer
agreement and amendments thereto as an exhibit to its currently effective
Registration Statement under the 1933 Act.
7. Authorized Representations - Distributors is not authorized by the
Issuer to give any information or to make any representations other than
those contained in the appropriate registration statements or Prospectuses
and Statements of Additional Information filed with the Securities and
Exchange Commission under the 1933 Act (as these registration statements,
Prospectuses and Statements of Additional Information may be amended from
time to time), or contained in shareholder reports or other material that
may be prepared by or on behalf of the Issuer for Distributors' use. This
shall not be construed to prevent Distributors from preparing and
distributing sales literature or other material as it may deem appropriate.
8. Portfolio Securities - Portfolio securities of the Issuer may be bought
or sold by or through Distributors, and Distributors may participate
directly or indirectly in brokerage commissions or "spreads" for
transactions in portfolio securities of the Issuer.
9. Registration of Shares - The Issuer agrees that it will take all action
necessary to register shares under the 1933 Act (subject to the necessary
approval of its shareholders) so that there will be available for sale the
number of shares Distributors may reasonably be expected to sell. The
Issuer shall make available to Distributors such number of copies of its
currently effective Prospectus and Statement of Additional Information as
Distributors may reasonably request. The Issuer shall furnish to
Distributors copies of all information, financial statements and other
papers which Distributors may reasonably request for use in connection with
the distribution of shares of the Issuer.
10. Expenses - The Issuer shall pay all fees and expenses (a) in connection
with the preparation, setting in type and filing of any registration
statement, Prospectus and Statement of Additional Information under the
1933 Act and amendments for the issue of its shares, (b) in connection with
the registration and qualification of shares for sale in the various states
in which the Board of Trustees of the Issuer shall determine it advisable
to qualify such shares for sale (including registering the Issuer as a
broker or dealer or any officer of the Issuer as agent or salesman in any
state), (c) of preparing, setting in type, printing and mailing any report
or other communication to shareholders of the Issuer in their capacity as
such, and (d) of preparing, setting in type, printing and mailing
Prospectuses, Statements of Additional Information and any supplements
thereto sent to existing shareholders.
As provided in the Distribution and Service Plan adopted by the Issuer, it
is recognized by the Issuer that FMR may reimburse Distributors for any
direct expenses incurred in the distribution of shares of the Issuer from
any source available to it, including advisory and service or management
fees paid to it by the Issuer.
11. Indemnification - The Issuer agrees to indemnify and hold harmless
Distributors and each of its directors and officers and each person, if
any, who controls Distributors 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 Issuer (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 Issuer does not agree to indemnify
Distributors 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 Issuer by or on behalf of Distributors. In no case (i) is
the indemnity of the Issuer in favor of Distributors or any person
indemnified to be deemed to protect Distributors or any person against any
liability to the Issuer or its security holders to which Distributors or
such person would otherwise be subject by reason of wilful 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,
or (ii) is the Issuer to be liable under its indemnity agreement contained
in this paragraph with respect to any claim made against Distributors or
any person indemnified unless Distributors or person, as the case may be,
shall have notified the Issuer in writing of the claim within a reasonable
time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon
Distributors or any such person (or after Distributors or such person shall
have received notice of service on any designated agent). However, failure
to notify the Issuer of any claim shall not relieve the Issuer from any
liability which it may have to Distributors or any person against whom such
action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Issuer shall be entitled to participate
at its own expense in the defense, or, if it so elects, to assume the
defense of any suit brought to enforce any claims, but if the Issuer elects
to assume the defense, the defense shall be conducted by counsel chosen by
it and satisfactory to Distributors or person or persons, defendant or
defendants in the suit. In the event the Issuer elects to assume the
defense of any suit and retain counsel, Distributors, officers or directors
or controlling person or persons, defendant or defendants in the suit,
shall bear the fees and expenses of any additional counsel retained by
them. If the Issuer does not elect to assume the defense of any suit, it
will reimburse Distributors, officers or directors or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Issuer agrees to notify
Distributors promptly of the commencement of any litigation or proceedings
against it or any of its officers or trustees in connection with the
issuance or sale of any of the shares.
Distributors also covenants and agrees that it will indemnify and hold
harmless the Issuer and each of its Board members and officers and each
person, if any, who controls the Issuer within the meaning of Section 15 of
the 1933 Act, against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees
incurred in connection therewith) arising by reason of any person acquiring
any shares, based upon the 1933 Act or any other statute or common law,
alleging any wrongful act of Distributors or any of its employees or
alleging that the registration statement, Prospectus, Statement of
Additional Information, shareholder reports or other information filed or
made public by the Issuer (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,
insofar as the statement or omission was made in reliance upon, and in
conformity with information furnished to the Issuer by or on behalf of
Distributors. In no case (i) is the indemnity of Distributors in favor of
the Issuer or any person indemnified to be deemed to protect the Issuer or
any person against any liability to which the Issuer 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, or (ii) is
Distributors to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Issuer or any person
indemnified unless the Issuer or person, as the case may be, shall have
notified Distributors in writing of the claim within a reasonable time
after the summons or other first written notification giving information of
the nature of the claim shall have been served upon the Issuer or any such
person (or after the Issuer or such person shall have received notice of
service on any designated agent). However, failure to notify Distributors
of any claim shall not relieve Distributors from any liability which it may
have to the Issuer or any person against whom the action is brought
otherwise than on account of its indemnity agreement contained in this
paragraph. In the case of any notice to Distributors, it shall be entitled
to participate, at its own expense, in the defense or, if it so elects, to
assume the defense of any suit brought to enforce the claim, but if
Distributors elects to assume the defense, the defense shall be conducted
by counsel chosen by it and satisfactory to the Issuer, to its officers and
Board and to any controlling person or persons, defendant or defendants in
the suit. In the event that Distributors elects to assume the defense of
any suit and retain counsel, the Issuer or controlling persons, defendant
or defendants in the suit, shall bear the fees and expense of any
additional counsel retained by them. If Distributors does not elect to
assume the defense of any suit, it will reimburse the Issuer, officers and
Board or controlling person or persons, defendant or defendants in the
suit, for the reasonable fees and expenses of any counsel retained by them.
Distributors agrees to notify the Issuer promptly of the commencement of
any litigation or proceedings against it in connection with the issue and
sale of any of the shares.
12. Effective Date - This agreement shall be effective upon its execution,
and unless terminated as provided, shall continue in force until January
31, 1995 and thereafter from year to year, provided continuance is approved
annually by the vote of a majority of the Board members of the Issuer, and
by the vote of those Board members of the Issuer who are not "interested
persons" of the Issuer and, if a plan under Rule 12b-1 under the Investment
Company Act of 1940 is in effect, by the vote of those Board members of the
Issuer who are not "interested persons" of the Issuer and who are not
parties to the Distribution and Service Plan or this Agreement and have no
financial interest in the operation of the Distribution and Service Plan or
in any agreements related to the Distribution and Service Plan, cast in
person at a meeting called for the purpose of voting on the approval. This
Agreement shall automatically terminate in the event of its assignment. As
used in this paragraph, the terms "assignment" and "interested persons"
shall have the respective meanings specified in the Investment Company Act
of 1940 as now in effect or as hereafter amended. In addition to
termination by failure to approve continuance or by assignment, this
Agreement may at any time be terminated by either party upon not less than
sixty days' prior written notice to the other party.
13. Notice - Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other
party at the last address furnished by the other party to the party giving
notice: if to the Issuer, at 82 Devonshire Street, Boston, Massachusetts,
and if to Distributors, at 82 Devonshire Street, Boston, Massachusetts.
14. Limitation of Liability - Distributors is expressly put on notice of
the limitation of shareholder liability as set forth in the Declaration of
Trust or other organizational document of the Issuer and agrees that the
obligations assumed by the Issuer under this contract shall be limited in
all cases to the Issuer and its assets. Distributors shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Issuer. Nor shall Distributors seek satisfaction of any
such obligation from the Trustees or any individual Trustee of the Issuer.
Distributors understands that the rights and obligations of each series of
shares of the Issuer under the Issuer's Declaration of Trust or other
organizational document are separate and distinct from those of any and all
other series.
15. 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.
IN WITNESS WHEREOF, the Issuer has executed this instrument in its name
and behalf, and its seal affixed, by one of its officers duly authorized,
and Distributors has executed this instrument in its name and behalf by one
of its officers duly authorized, as of the day and year first above
written.
VARIABLE INSURANCE PRODUCTS FUND II
By _____________________________
FIDELITY DISTRIBUTORS CORPORATION
By _____________________________
EXHIBIT 15(d)
FORM OF
DISTRIBUTION AND SERVICE PLAN
of Variable Insurance Products Fund II:
Asset Manager: Growth Portfolio
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by Rule
12b-1 under the Investment Company Act of 1940 (the "Act") of Asset
Manager: Growth Portfolio (the "Portfolio"), a series of shares of Variable
Insurance Products Fund II (the "Fund").
2. The Fund has entered into a General Distribution Agreement with respect
to the Portfolio with Fidelity Distributors Corporation (the
"Distributor"), a wholly-owned subsidiary of Fidelity Management & Research
Company (the "Adviser"), under which the Distributor uses all reasonable
efforts, consistent with its other business, to secure purchasers for the
Portfolio's shares of beneficial interest ("shares"). Under the agreement,
the Distributor pays the expenses of printing and distributing any
prospectuses, reports and other literature used by the Distributor,
advertising, and other promotional activities in connection with the
offering of shares of the Portfolio for sale to the public. It is
understood that the Adviser may reimburse the Distributor for these
expenses from any source available to it, including management fees paid to
it by the Portfolio.
3. The Adviser directly, or through the Distributor, may, subject to the
approval of the Trustees, make payments to securities dealers and other
third parties who engage in the sale of shares or who render shareholder
support services, including but not limited to providing office space,
equipment and telephone facilities, answering routine inquiries regarding
the Portfolio, processing shareholder transactions and providing such other
shareholder services as the Fund may reasonably request.
4. The Portfolio will not make separate payments as a result of this Plan
to the Adviser, Distributor or any other party, it being recognized that
the Portfolio presently pays, and will continue to pay, a management fee to
the Adviser. To the extent that any payments made by the Portfolio to the
Adviser, including payment of management fees, should be deemed to be
indirect financing of any activity primarily intended to result in the sale
of shares of the Portfolio within the context of Rule 12b-1 under the Act,
then such payments shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities of the Portfolio" (as defined in the Act),
the plan having been approved by a vote of a majority of the Trustees of
the Fund, including a majority of Trustees who are not "interested persons"
of the Fund (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any agreements
related to this Plan (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect from the date specified above until July 31, 1995, and from year to
year thereafter, provided, however, that such continuance is subject to
approval annually by a vote of a majority of the Trustees of the Fund,
including a majority of the Independent Trustees, cast in person at a
meeting called for the purpose of voting on this Plan. This Plan may be
amended at any time by the Board of Trustees, provided that (a) any
amendment to authorize direct payments by the Portfolio to finance any
activity primarily intended to result in the sale of shares of the
Portfolio, to increase materially the amount spent by the Portfolio for
distribution, or any amendment of the Management Contract to increase the
amount to be paid by the Portfolio thereunder shall be effective only upon
approval by a vote of a majority of the outstanding voting securities of
the Portfolio, and (b) any material amendments of this Plan shall be
effective only upon approval in the manner provided in the first sentence
in this paragraph.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of the Portfolio.
8. During the existence of this Plan, the Fund shall require the Adviser
and/or Distributor to provide the Fund, for review by the Fund's Board of
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any activity
primarily intended to result in the sale of shares of the Portfolio (making
estimates of such costs where necessary or desirable) and the purposes for
which such expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of shares of the Portfolio.
10. Consistent with the limitation of shareholder liability as set forth
in the Fund's Declaration of Trust or other organizational document, any
obligations assumed by the Portfolio pursuant to this Plan and any
agreements related to this Plan shall be limited in all cases to the
Portfolio and its assets, and shall not constitute obligations of any other
series of shares of the Fund.
11. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
LG912940020
EXHIBIT 15(e)
FORM OF
DISTRIBUTION AND SERVICE PLAN
of Variable Insurance Products Fund II:
Contrafund Portfolio
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by Rule
12b-1 under the Investment Company Act of 1940 (the "Act") of Contrafund
Portfolio (the "Portfolio"), a series of shares of Variable Insurance
Products Fund II (the "Fund").
2. The Fund has entered into a General Distribution Agreement with respect
to the Portfolio with Fidelity Distributors Corporation (the
"Distributor"), a wholly-owned subsidiary of Fidelity Management & Research
Company (the "Adviser"), under which the Distributor uses all reasonable
efforts, consistent with its other business, to secure purchasers for the
Portfolio's shares of beneficial interest ("shares"). Under the agreement,
the Distributor pays the expenses of printing and distributing any
prospectuses, reports and other literature used by the Distributor,
advertising, and other promotional activities in connection with the
offering of shares of the Portfolio for sale to the public. It is
understood that the Adviser may reimburse the Distributor for these
expenses from any source available to it, including management fees paid to
it by the Portfolio.
3. The Adviser directly, or through the Distributor, may, subject to the
approval of the Trustees, make payments to securities dealers and other
third parties who engage in the sale of shares or who render shareholder
support services, including but not limited to providing office space,
equipment and telephone facilities, answering routine inquiries regarding
the Portfolio, processing shareholder transactions and providing such other
shareholder services as the Fund may reasonably request.
4. The Portfolio will not make separate payments as a result of this Plan
to the Adviser, Distributor or any other party, it being recognized that
the Portfolio presently pays, and will continue to pay, a management fee to
the Adviser. To the extent that any payments made by the Portfolio to the
Adviser, including payment of management fees, should be deemed to be
indirect financing of any activity primarily intended to result in the sale
of shares of the Portfolio within the context of Rule 12b-1 under the Act,
then such payments shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities of the Portfolio" (as defined in the Act),
the plan having been approved by a vote of a majority of the Trustees of
the Fund, including a majority of Trustees who are not "interested persons"
of the Fund (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any agreements
related to this Plan (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect from the date specified above until July 31, 1995, and from year to
year thereafter, provided, however, that such continuance is subject to
approval annually by a vote of a majority of the Trustees of the Fund,
including a majority of the Independent Trustees, cast in person at a
meeting called for the purpose of voting on this Plan. This Plan may be
amended at any time by the Board of Trustees, provided that (a) any
amendment to authorize direct payments by the Portfolio to finance any
activity primarily intended to result in the sale of shares of the
Portfolio, to increase materially the amount spent by the Portfolio for
distribution, or any amendment of the Management Contract to increase the
amount to be paid by the Portfolio thereunder shall be effective only upon
approval by a vote of a majority of the outstanding voting securities of
the Portfolio, and (b) any material amendments of this Plan shall be
effective only upon approval in the manner provided in the first sentence
in this paragraph.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of the Portfolio.
8. During the existence of this Plan, the Fund shall require the Adviser
and/or Distributor to provide the Fund, for review by the Fund's Board of
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any activity
primarily intended to result in the sale of shares of the Portfolio (making
estimates of such costs where necessary or desirable) and the purposes for
which such expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of shares of the Portfolio.
10. Consistent with the limitation of shareholder liability as set forth
in the Fund's Declaration of Trust or other organizational document, any
obligations assumed by the Portfolio pursuant to this Plan and any
agreements related to this Plan shall be limited in all cases to the
Portfolio and its assets, and shall not constitute obligations of any other
series of shares of the Fund.
11. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
LG912940020
