EXHIBIT 5(l)
SUBADVISORY AGREEMENT
This Agreement is entered into as of the 1st day of December, 1997,
among Variable Insurance Products Fund II, a Massachusetts business
trust (the "Trust"), on behalf of Index 500 Portfolio, a series
portfolio of the Trust (the "Portfolio"), Fidelity Management &
Research Company, a Massachusetts corporation ("Manager"), and Bankers
Trust Company, a New York banking corporation ("Subadviser").
WHEREAS, the Trust, on behalf of the Portfolio, has entered into a
Management Contract, dated December 1, 1997, with Manager (the
"Management Contract"), pursuant to which Manager has agreed to
provide certain management and administrative services to the
Portfolio; and
WHEREAS, Manager desires to appoint Subadviser as investment
subadviser to provide the investment advisory and administrative
services to the Portfolio specified herein, and Subadviser is willing
to serve the Portfolio in such capacity; and
WHEREAS, the trustees of the Trust (the "Trustees"), including a
majority of the Trustees who are not "interested persons" (as such
term is defined below) of any party to this Agreement, and the
shareholder(s) of the Portfolio, have each consented to such an
arrangement;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
I. APPOINTMENT OF SUBADVISER; COMPENSATION
1.1 Appointment as Subadviser. Subject to and in accordance with
the provisions hereof, Manager hereby appoints Subadviser as
investment subadviser to perform the various investment advisory and
other services to the Portfolio set forth herein and, subject to the
restrictions set forth herein, hereby delegates to Subadviser the
authority vested in Manager pursuant to the Management Contract to the
extent necessary to enable Subadviser to perform its obligations under
this Agreement.
1.2 Scope of Investment Authority. (a) The Subadviser is hereby
authorized, on a discretionary basis, to manage the investments and
determine the composition of the assets of the Portfolio, subject at
all times to (i) the supervision and control of the Trustees, (ii) the
requirements of the Investment Company Act of 1940 and rules
thereunder, as amended from time to time (the "Investment Company
Act"), (iii) the investment objective, policies and limitations, as
provided in the Portfolio's Prospectus and other governing documents,
and (iv) such instructions, policies and limitations relating to the
Portfolio as the Trustees or Manager may from time to time adopt and
communicate in writing to Subadviser. Notwithstanding anything herein
to the contrary, Subadviser is not authorized to take any action,
including the purchase and sale of portfolio securities, in
contravention of any restriction, limitation, objective, policy or
instruction described in the previous sentence.
(b) It is understood and agreed that, for so long as this Agreement
shall remain in effect, Subadviser shall retain discretionary
investment authority over the manner in which the Portfolio's assets
are invested, and Manager shall not have the right to overrule any
investment decision with respect to a particular security made by
Subadviser, provided that the Trustees and Manager shall at all times
have the right to monitor the Portfolio's investment activities and
performance, require Subadviser to make reports and give explanations
as to the manner in which the Portfolio's assets are being invested,
and, should either Manager or the Trustees become dissatisfied with
Subadviser's performance in any way, terminate this Agreement in
accordance with the provisions of Section 9.2 hereof.
1.3 Appointment as Proxy Voting Agent. Subject to and in accordance
with the provisions hereof, the Trustees hereby appoint Subadviser as
the Portfolio's proxy voting agent, and hereby delegate to Subadviser
discretionary authority to vote all proxies solicited by or with
respect to issuers of securities in which the assets of the Portfolio
may be invested from time to time. Upon written notice to Subadviser,
the Trustees may at any time withdraw the authority granted to
Subadviser pursuant to this Section 1.3 to perform any or all of the
proxy voting services contemplated hereby.
1.4 Governing Documents. Manager will provide Subadviser with
copies of (i) the Trust's Declaration of Trust and By-laws, as
currently in effect, (ii) the Portfolio's currently effective
prospectus and statement of additional information, as set forth in
the Trust's registration statement under the Investment Company Act
and the Securities Act of 1933, as amended, (iii) any instructions,
investment policies or other restrictions adopted by the Trustees or
Manager supplemental thereto, and (iv) the Management Contract.
Manager will provide Subadviser with such further documentation and
information concerning the investment objectives, policies and
restrictions applicable to the Portfolio as Subadviser may from time
to time reasonably request.
1.5 Subadviser's Relationship. Notwithstanding anything herein to
the contrary, Subadviser shall be an independent contractor and will
have no authority to act for or represent the Trust, the Portfolio or
Manager in any way or otherwise be deemed an agent of any of them,
except to the extent expressly authorized by this Agreement or in
writing by the Trust or Manager.
1.6 Compensation. Subadviser shall be compensated for the services
it performs on behalf of the Portfolio in accordance with the terms
set forth in Appendix A to this Agreement.
II. SERVICES TO BE PERFORMED BY SUBADVISER
2.1 Investment Advisory Services. (a) In fulfilling its
obligations to manage the assets of the Portfolio, Subadviser will:
(i) formulate and implement a continuous investment program for the
Portfolio, including, without limitation, implementation of a
securities lending program in accordance with the provisions of
Article III hereof;
(ii) take whatever steps are necessary to implement these investment
programs by the purchase and sale of securities and other investments,
including the selection of brokers or dealers, the placing of orders
for such purchases and sales in accordance with the provisions of
paragraph (b) below and assuring that such purchases and sales are
properly settled and cleared;
(iii) provide such reports with respect to the implementation of the
Portfolio's investment program as the Trustees or Manager shall
reasonably request; and
(iv) provide advice and assistance to Manager as to the
determination of the fair
value of certain securities where market quotations are not readily
available for purposes of calculating net asset value of the Portfolio
in accordance with valuation procedures and methods established by the
Trustees.
(b) The Subadviser shall place all orders for the purchase and sale
of portfolio securities for the Portfolio's account with brokers and
dealers selected by Subadviser. Such brokers and dealers may include
brokers or dealers that are "affiliated persons" (as such term is
defined in the Investment Company Act) of the Trust, the Portfolio,
Manager or Subadviser, provided that Subadviser shall only place
orders on behalf of the Portfolio with such affiliated persons in
accordance with procedures adopted by the Trustees pursuant to Rule
17e-1 under the Investment Company Act. The Subadviser 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 other
accounts over which Subadviser or its affiliates exercise investment
discretion. The Subadviser is authorized to pay a broker or dealer
who provided 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 Subadviser 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
Subadviser and its affiliates have in respect to accounts over which
they exercise investment discretion. The Trustees shall periodically
review the commissions paid by the Portfolio to determine if the
commissions paid over representative periods were reasonable in
relation to the benefits to the Portfolio.
2.2. Administrative and Other Services. (a) Subadviser will, at
its expense, furnish (i) all necessary investment and management
facilities, including salaries of personnel required for it to execute
its duties faithfully, and (ii) administrative facilities, including
bookkeeping, clerical personnel and equipment necessary for the
efficient conduct of the investment affairs of the Portfolio
(excluding determination of net asset values and shareholder
accounting services).
(b) Subadviser will maintain all accounts, books and records with
respect to the Portfolio as are required of an investment adviser of a
registered investment company pursuant to the Investment Company Act
and the rules thereunder. Subadviser agrees that such records are the
property of the Trust, and will be surrendered to the Trust promptly
upon request. The Manager shall be granted reasonable access to the
records and documents in Subadviser's possession relating to the
Portfolios.
(c) Subadviser shall provide such information as is necessary to
enable Manager to prepare and update the Trust's registration
statement (and any supplement thereto) and the Portfolio's financial
statements. Subadviser understands that the Trust and Manager will
rely on such information in the preparation of the Trust's
registration statement and the Portfolio's financial statements, and
hereby covenants that any such information approved by Subadviser
expressly for use in such registration and/or financial statements
shall be true and complete in all material respects.
(d) Subadviser will vote the Portfolio's investment securities in
the manner in which Subadviser believes to be in the best interests of
the Portfolio, and shall review its proxy voting activities on a
periodic basis with the Trustees.
(e) Subadviser will provide custodian services to the Portfolio in
accordance with the provisions of a separate Custodian Agreement,
dated as of the date hereof, between the Trust, on behalf of the
Portfolio, and Subadviser.
III. SECURITIES LENDING
3.1. Appointment as Agent. For as long as this Agreement shall
remain in effect, Subadviser is hereby authorized as the Portfolio's
agent to lend on a disclosed basis the Portfolio's securities.
Subadviser is further authorized as the Portfolio's agent to sign
agreements with borrowers, ownership or other certificates as may be
required by the Internal Revenue Service or any other tax authorities,
and to take any other actions necessary to effect such loans.
3.2. Indemnification. (a) In the event that any securities lending
transaction is terminated and the loaned securities or any portion
thereof shall not have been returned to the Portfolio by or on behalf
of the borrower within the time specified by Subadviser's agreement
with the borrower (the "Delivery Date"), Subadviser shall, at its
expense, within one (1) business day after the Delivery Date replace
the loaned securities (or any portion thereof not so returned) with a
like amount of the loaned securities of the same issuer, class and
denomination, and hold the Portfolio, the Trustees and Manager
harmless from any brokerage commission, fees, taxes or other expenses
incurred by Subadviser in the purchase of such replacement
securities. If Subadviser is unable to purchase such replacement
securities on the open market within one business day after the
Delivery Date (the "Reimbursement Date"), Subadviser shall credit the
Portfolio's account by the close of business on the Reimbursement Date
with an amount of cash in U.S. dollars equal to (i) if the Portfolio
shall continue to hold such unreturned loaned securities, the Market
Value (as defined below) of such unreturned loaned securities
determined at the close of business as of the Reimbursement Date, plus
all financial benefits derived from the beneficial ownership of the
unreturned loaned securities which have accrued on such securities
whether or not received from borrower, or (ii) if the Portfolio shall
have sold such securities prior to the Reimbursement Date, (A) the
sale proceeds in respect of such sale, to the extent not received by
the Portfolio, plus (B) any interest, penalties, fees or other costs,
if any, incurred by the Portfolio as a direct result of a failure to
settle such sale on a timely basis, provided that such interest,
penalties, fees or other costs shall not include any consequential or
special damages which may arise out of such failure to settle such
sale on a timely basis. The "Market Value" of any securities on any
given day shall be the fair market value of such security on such day,
as determined in accordance with the Portfolio's valuation procedures
and methods, as adopted by the Trustees.
(b) In the event that Subadviser shall be required to make any
payment to the Portfolio or shall incur any loss or expense pursuant
to paragraph (a) above, it shall, to the extent of such payment or
loss or expense, be subrogated to, and succeed to, all of the
Portfolio's rights against the borrower and to the collateral
involved. To the extent the collateral consists of cash or securities
issued or guaranteed by the United States Government or its agencies,
the Portfolio shall contemporaneously with any such payment to the
Portfolio by Subadviser surrender same to Subadviser for its sole
disposition.
(c) Notwithstanding the foregoing, in no event shall Subadviser
incur liability pursuant to paragraph (a) above if Subadviser is
prevented, forbidden or delayed from causing a loaned security to be
returned to the Portfolio by the applicable Delivery Date by reason of
(i) any provision of any present or future law or regulation or order
of the United States of America, or any state thereof, or of any
foreign country, or political subdivision thereof, or of any court of
competent jurisdiction; or (ii) any act of God or war or other similar
circumstance beyond the control of Subadviser unless, in each case,
such delay or nonperformance is caused by (A) the negligence,
misfeasance or misconduct of Subadviser or any of its directors,
officers, employees or agents, or (B) a malfunction or failure of
equipment operated or utilized by Subadviser other than a malfunction
or failure beyond Subadviser's control and which could not have been
reasonably anticipated and/or prevented by Subadviser.
3.3. Market Risk. The Portfolio acknowledges that any cash
collateral provided by a borrower in respect of a securities lending
transaction may be invested by Subadviser on the Portfolio's behalf at
the Portfolio's risk, and if, upon termination of any loan, the cash
collateral held by Subadviser for Portfolio's account is less than the
amount required to be returned to the borrower under Subadviser's
agreement with the borrower, the Portfolio will provide borrower with
cash in the amount of any such deficiency.
3.4. Subadviser's Relationships with Borrowers. The Portfolio
acknowledges that Subadviser or its affiliates may be a creditor of,
for its own account or in a fiduciary capacity, or generally engage in
any kind of commercial or investment banking business with, a
borrower, to whom Subadviser has lent the Portfolio's securities.
Without limiting the generality of the foregoing, Subadviser shall not
be required to disclose to the Portfolio or Manager any financial
information about a borrower obtained in the course of its
relationship with such borrower.
3.5 Securities Lending Procedures. Subadviser's securities lending
activities on behalf of the Portfolio shall be governed by such
procedures as shall be adopted by the Trustees or Manager, as the same
may be amended from time to time.
IV. COMPLIANCE; CONFIDENTIALITY
4.1 Compliance. (a) Subadviser will comply with (i) all applicable
state and federal laws and regulations governing the performance of
the Subadviser's duties hereunder, (ii) the investment objective,
policies and limitations, as provided in the Portfolio's Prospectus
and other governing documents, and (iii) such instructions, policies
and limitations relating to the Portfolio as the Trustees or Manager
may from time to time adopt and communicate in writing to subadviser.
(b) Subadviser will adopt a written code of ethics complying with
the requirements of Rule 17j-1 under the Investment Company Act and
will provide the Trust with a copy of such code of ethics, evidence of
its adoption and copies of any supplemental policies and procedures
implemented to ensure compliance therewith.
4.2 Confidentiality. The parties to this Agreement agree that each
shall treat as confidential all information provided by a party to the
others regarding such party's business and operations, including
without limitation the investment activities or holdings of the
Portfolio. All confidential information provided by a party hereto
shall be used by any other parties hereto solely for the purposes of
rendering services pursuant to this Agreement and, except as may be
required in carrying out the terms of this Agreement, shall not be
disclosed to any third party without the prior consent of such
providing party. The foregoing shall not be applicable to any
information that is publicly available when provided or which
thereafter becomes publicly available other than in contravention of
this Section 4.2 or which is required to be disclosed by any
regulatory authority in the lawful and appropriate exercise of its
jurisdiction over a party, by any auditor of the parties hereto, by
judicial or administrative process or otherwise by applicable law or
regulation.
V. LIABILITY OF SUBADVISER
5.1 Liability; Standard of Care. Notwithstanding anything herein to
the contrary, except as provided in Section 3.2 hereof, neither
Subadviser, nor any of its directors, officers or employees, shall be
liable to Manager or the Trust for any loss resulting from
Subadviser's acts or omissions as Subadviser to the Portfolio, except
to the extent any such losses result from bad faith, willful
misfeasance, reckless disregard or gross negligence on the part of the
Subadviser or any of its directors, officers or employees in the
performance of the Subadviser's duties and obligations under this
Agreement.
5.2 Indemnification. (a) Subadviser agrees to indemnify and hold
the Trust and Manager harmless from any and all direct or indirect
liabilities, losses or damages (including reasonable attorneys fees)
suffered by the Trust or Manager resulting from (i) Subadviser's
breach of its duties hereunder, or (ii) bad faith, willful
misfeasance, reckless disregard or gross negligence on the part of the
Subadviser or any of its directors, officers or employees in the
performance of the Subadviser's duties and obligations under this
Agreement, except to the extent such loss results from the Trust's or
Manager's own willful misfeasance, bad faith, reckless disregard or
negligence in the performance of their respective duties and
obligations under the Management Contract or this Agreement.
(b) Manager hereby agrees to indemnify and hold Subadviser harmless
from any and all direct or indirect liabilities, losses or damages
(including reasonable attorneys fees) suffered by Subadviser resulting
from (i) Manager's breach of its duties under the Management Contract,
or (ii) bad faith, willful misfeasance, reckless disregard or gross
negligence on the part of Manager or any of its directors, officers or
employees in the performance of Manager's duties and obligations under
this Agreement, except to the extent such loss results from
Subadviser's own willful misfeasance, bad faith, reckless disregard or
negligence in the performance of Subadviser's duties and obligations
under this Agreement.
VI. SUPPLEMENTAL ARRANGEMENTS; EXPENSES; INSURANCE
6.1 Supplemental Arrangements. Subject to the prior written consent
of the Trustees and Manager, Subadviser may enter into arrangements
with other persons affiliated with Subadviser to better fulfill its
obligations under this Agreement for the provision of certain
personnel and facilities to Subadviser, provided that such
arrangements do not rise to the level of an advisory contract subject
to the requirements of Section 15 of the Investment Company Act.
6.2 Expenses. It is understood that the Portfolio will pay all of
its expenses other than those expressly stated to be payable by
Subadviser hereunder or by Manager under the Management Agreement.
Subadviser expressly agrees to pay the cost of all custody services
required by the Portfolio. Expenses paid by the Portfolios will
include, but not be limited to, (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 Trustees other than those who are "interested persons" of the
Trust, Manager or Subadviser; (iv) legal and audit expenses; (v)
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; (viii) 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 the relative net assets of the Portfolio and other
registered investment companies having Advisory and Service or
Management Contracts with the Manager, of 50% of insurance premiums
for fidelity bond and other coverage; (x) investment management fees;
(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 any legal obligation that the Portfolio may
have to indemnify the Trustees, officers and/or employees or agents
with respect thereto. Subadviser shall not cause the Trust or the
Portfolios to incur any expenses, other than those reasonably
necessary for Subadviser to fulfill its obligations under this
Agreement, unless Subadviser has first notified Manager of its
intention to do so.
6.3 Insurance. Subadviser shall maintain for the duration hereof,
with an insurer acceptable to Manager, a blanket bond and professional
liability (errors and omissions) insurance in amounts reasonably
acceptable to Manager. Subadviser agrees that such insurance shall be
considered primary and Subadviser shall assure that such policies pay
claims prior to similar policies that may be maintained by Manager.
In the event Subadviser fails to have in force such insurance, that
failure will not exclude Subadviser's responsibility to pay up to the
limit Subadviser would have had to pay had said insurance been in
force.
VII. CONFLICTS OF INTEREST
7.1 Conflicts of Interest. It is understood that the Trustees,
officers, agents and shareholders of the Trust are or may be
interested in Subadviser as directors, officers, stockholders or
otherwise; that directors, officers, agents and stockholders of
Subadviser are or may be interested in the Trust as trustees,
officers, shareholders or otherwise; that Subadviser may be interested
in the Trust; and that the existence of any such dual interest shall
not affect the validity of this Agreement or of any transactions
hereunder except as otherwise provided in the Trust's Declaration of
Trust and the Articles of Incorporation of Subadviser, respectively,
or by specific provisions of applicable law.
VIII. REGULATION
8.1 Regulation. Subadviser shall submit to all regulatory and
administrative bodies having jurisdiction over the services provided
pursuant to this Agreement any information, reports or other material
which any such body by reason of this Agreement may reasonably request
or require pursuant to applicable laws and regulations.
IX. DURATION AND TERMINATION OF AGREEMENT
9.1 Effective Date; Duration; Continuance. (a) This Agreement
shall become effective on December 1, 1997.
(b) Subject to prior termination pursuant to Section 9.2 below, this
Agreement shall continue in force until July 31, 1998, 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 or by a vote of a majority of the outstanding voting
securities of the Portfolio, provided that in either event such
continuance shall also be approved by the vote of a majority of the
Trustees who are not "interested persons" (as such term is defined in
the Investment Company Act) of any party to this Agreement cast in
person at a meeting called for the purpose of voting on such approval.
(c) Shareholder approval of this Agreement or any continuance of
this Agreement, if required, shall be effective with respect to the
Portfolio if a majority of the outstanding voting securities of the
series (as defined in Rule 18f-2(h) under the Investment Company Act)
of shares of the Portfolio votes to approve this Agreement or its
continuance.
9.2 Termination and Assignment. This Agreement may be terminated at
any time, upon sixty days' written notice, without the payment of any
penalty, (i) by the Trustees, (ii) by the vote of a majority of the
outstanding voting securities of the Portfolio; (iii) by Manager, or
(iv) by Subadviser.
(b) This Agreement will terminate automatically, without the payment
of any penalty, (i) in the event of its assignment (as defined in the
Investment Company Act) or (ii) in the event the Management Contract
is terminated for any reason.
9.3 Definitions. The terms "registered investment company," "vote
of a majority of the outstanding voting securities," "assignment," and
"interested persons," when used herein, shall have the respective
meanings specified in the Investment Company Act as now in effect or
as hereafter amended, and subject to such orders or no-action letters
as may be granted by the Securities and Exchange Commission.
X. REPRESENTATIONS, WARRANTIES AND COVENANTS
10.1 Representations of the Portfolio. The Trust, on behalf of the
Portfolio, represents and warrants that:
(i) the Trust is a business trust established pursuant to the laws
of the Commonwealth of Massachusetts;
(ii) the Trust is duly registered as an investment company under the
Investment Company Act and the Portfolio is a duly constituted series
portfolio thereof;
(iii) the execution, delivery and performance of this Agreement are
within the Trust's powers, have been and remain duly authorized by all
necessary action (including without limitation all necessary approvals
and other actions required under the Investment Company Act) and will
not violate or constitute a default under any applicable law or
regulation or of any decree, order, judgment, agreement or instrument
binding on the Trust or the Portfolio;
(iv) no consent (including, but not limited to, exchange control
consents) of any applicable governmental authority or body is
necessary, except for such consents as have been obtained and are in
full force and effect, and all conditions of which have been duly
complied with; and
(v) this Agreement constitutes a legal, valid and binding obligation
enforceable against the Trust and the Portfolio in accordance with its
terms.
10.2 Representations of the Manager. The Manager represents,
warrants and agrees that:
(i) Manager is a corporation established pursuant to the laws of the
Commonwealth of Massachusetts;
(ii) Manager is duly registered as an "investment adviser" under the
Investment Advisers Act of 1940 ("Advisers Act");
(iii) Manager has been duly appointed by the Trustees and
Shareholders of the Portfolio to provide investment services to the
Portfolio as contemplated by the Management Contract;
(iv) the execution, delivery and performance of this Agreement are
within Manager's powers, have been and remain duly authorized by all
necessary corporate action and will not violate or constitute a
default under any applicable law or regulation or of any decree,
order, judgment, agreement or instrument binding on Manager;
(v) no consent (including, but not limited to, exchange control
consents) of any applicable governmental authority or body is
necessary, except for such consents as have been obtained and are in
full force and effect, and all conditions of which have been duly
complied with; and
(vi) this Agreement constitutes a legal, valid and binding obligation
enforceable against Manager.
10.3 Representations of Subadviser. Subadviser represents, warrants
and agrees that:
(i) Subadviser is a New York banking corporation established
pursuant to the laws of the State of New York;
(ii) Subadviser is duly registered as an "investment adviser" under
the Advisers Act; or is a "bank" as defined in Section 202 (a) (2) of
the Advisers Act or an "insurance company" as defined in Section 202
(a) (2) of the Advisers Act.
(iii) the execution, delivery and performance of this Agreement are
within Subadviser's powers, have been and remain duly authorized by
all necessary corporate action and will not violate or constitute a
default under any applicable law or regulation or of any decree,
order, judgment, agreement or instrument binding on Subadviser;
(iv) no consent (including, but not limited to, exchange control
consents) of any applicable governmental authority or body is
necessary, except for such consents as have been obtained and are in
full force and effect, and all conditions of which have been duly
complied with; and
(v) this Agreement constitutes a legal, valid and binding obligation
enforceable against Subadviser.
10.4 Covenants of Subadviser. (a) Subadviser will promptly notify
the Trust and Manager in writing of the occurrence of any event which
could have a material impact on the performance of its obligations
pursuant to this Agreement, including without limitation:
(i) the occurrence of any event which could disqualify Subadviser
from serving as an investment adviser of a registered investment
company pursuant to Section 9 (a) of the Investment Company Act or
otherwise;
(ii) any material change in the Subadviser's overall business
activities that may have a material adverse affect on the Subadviser's
ability to perform under its obligations under this Agreement;
(iii) any event that would constitute a change in control of
Subadviser;
(iv) any change in the portfolio manager of the Portfolio; and
(v) the existence of any pending or threatened audit, investigation,
complaint, examination or other inquiry (other than routine regulatory
examinations or inspections) relating to the Portfolio conducted by
any state or federal governmental regulatory authority.
(b) Subadviser agrees that it will promptly supply Manager with
copies of any material changes to any of the documents provided by
Subadviser pursuant to Section 4.1.
XI. MISCELLANEOUS PROVISIONS
11.1 Use of Subadviser's Name. Neither the Trust nor Manager will
use the name of Subadviser, or any affiliate of Subadviser, in any
prospectus, advertisement sales literature or other communication to
the public except in accordance with such policies and procedures as
shall be mutually agreed to in writing by the Subadviser and the
Manager.
11.2 Use of Trust or Manager's Name. Subadviser will not use the
name of Manager, the Trust or the Portfolio in any prospectus,
advertisement, sales literature or other communication to the public
except in accordance with such policies and procedures as shall be
mutually agreed to in writing by the Subadviser and the Manager.
11.3 Amendments. This Agreement may only be amended with the prior
written consent of each of the parties hereto and if such amendment is
specifically approved (i) by the vote of a majority of the outstanding
voting securities of the Portfolio, and (ii) by the vote of a majority
of the Trustees who are not interested persons (as such term is
defined in the Investment Company Act) of any person to this Agreement
cast in person at a meeting called for the purpose of voting on such
approval. The required shareholder approval shall be effective with
respect to the Portfolio if a majority of the outstanding voting
securities of the Portfolio vote to approve the amendment.
11.4 Entire Agreement. This Agreement contains the entire
understanding and agreement of the parties with respect to the subject
hereof.
11.5 Captions. The headings in the sections of this Agreement are
inserted for convenience of reference only and shall not constitute a
part of the Agreement.
11.6 Notices. All notices required to be given pursuant to this
Agreement shall be delivered or mailed to the last known business
address of the Trust, Manager or Subadviser, as the case may be, in
person or by registered mail or a private mail or delivery service
providing the sender with notice of receipt. Notice shall be deemed
given on the date delivered or mailed in accordance with this Section
11.6.
11.7 Severability. Should any portion of this Agreement, for any
reason, be held to be void at law or in equity, the Agreement shall be
construed, insofar as is possible, as if such portion had never been
contained herein.
11.8 Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the
Commonwealth of Massachusetts (without giving effect to the choice of
law provisions thereof), or any of the applicable provisions of the
Investment Company Act. To the extent that the laws of the
Commonwealth of Massachusetts, or any of the provisions in this
Agreement, conflict with applicable provisions of the Investment
Company Act, the latter shall control.
11.9 Limitation of Liability. A copy of the Declaration of Trust
establishing the Trust, dated March 21, 1988, together with all
amendments, is on file in the office of the Secretary of the
Commonwealth of Massachusetts, and notice is hereby given that this
Agreement is not executed on behalf of any of the Trustees as
individuals and no Trustee, shareholder, officer, employee or agent of
the Trust shall be held to any personal liability, nor shall resort be
had to their private property, for the satisfaction of any obligation
or claim, in connection with the affairs of the Trust or the
Portfolio, but only the assets belonging to the Portfolio shall be
liable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed under seal by their duly authorized officers as of the
date first mentioned above.
Variable Insurance Products Fund II, on behalf of Index 500 Portfolio
By:____/s/Xxxxxx X. Pozen_____
Name:
Title:
Fidelity Management & Research Company
By:_____/s/Xxxxxx X. Pozen_____
Name:
Title:
Bankers Trust Company
By:_______Richard J. Vella_____
Name:
Title:
APPENDIX A
Pursuant to Section 1.6 of the Subadvisory Agreement among Variable
Insurance Products Fund II (the "Trust"), on behalf of Index 500
Portfolio (the "Portfolio"), Fidelity Management & Research Company
("Manager") and Bankers Trust Company ("Subadviser"), Subadviser shall
be compensated for the services it performs on behalf of the Portfolio
as follows:
1. Fees Payable by Manager. Manager will pay Subadviser a monthly
fee computed at an annual rate of 0.006% (0.6 basis points) of the
average daily net assets of the Portfolio (computed in the manner set
forth in the Trust's Declaration of Trust) throughout the month.
Subadviser's fee shall be computed monthly, and within twelve
business days of the end of each calendar month, Manager shall
transmit to Subadviser the fee for the previous month. Payment shall
be made in federal funds wired to a bank account designated by
Subadviser. If this Agreement becomes effective or terminates before
the end of any month, the fee (if any) for the period from the
effective date to the end of such month or from the beginning of such
month to the date of termination, as the case may be, shall be
prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs.
Subadviser agrees to look exclusively to Manager, and not to any
assets of the Trust or the Portfolio, for the payment of Subadviser's
fees arising under this Paragraph 1.
2. Fees Payable by Trust. The Trust, on behalf of the Portfolio,
shall pay Subadviser a monthly fee equal to 40% of the Portfolio's
aggregate Net Securities Lending Income (as defined below)
attributable to the securities lending activities conducted by
Subadviser on the Portfolio's behalf. For purposes of this Paragraph
2, the Portfolio's aggregate "Net Securities Lending Income" for any
given month shall be calculated in accordance with the following
provisions:
(A) LOANS COLLATERALIZED BY CASH. For securities lending transactions
collateralized by cash, the Portfolio's aggregate Net Securities
Lending Income attributable to such transactions for such month shall
be equal to (I) the income earned by the Portfolio from investing such
cash collateral during such month, plus (II) if such cash collateral
is invested in a money market fund or similar investment vehicle
managed by Subadviser or its affiliates, an amount equal to the
Portfolio's pro rata share (calculated by dividing the average daily
amount of the Portfolio's cash collateral so invested during such
month by the average daily net assets of such investment vehicle for
such month) of the Total Operating Expenses (as defined below) accrued
by such investment vehicle in respect of such month, less (III) any
rebates, commissions or similar fees paid by the Portfolio in respect
of such transactions during such month. For purposes of this
subparagraph 2(a), an investment vehicle's "Total Operating Expenses"
shall consist of "Management Fees," "Rule 12b-1 Fees," and "Other
Expenses," as such terms are defined in paragraphs 8, 9, and 10,
respectively, of the instructions to Part A, Item 2 of the form of
registration statement promulgated by the Securities and Exchange
Commission on Form N-1A, as the same may be amended from time to time.
(B) LOANS COLLATERALIZED BY SECURITIES. For securities lending
transactions collateralized by securities or a letter of credit, the
Portfolio's aggregate Net Securities Lending Income attributable to
such transactions for such month shall be equal to (I) the securities
lending fees paid by the borrower to the Portfolio in respect of such
transactions, less (II) any rebates, commissions or similar fees paid
by the Portfolio in respect of such transactions.
(C) SUBSTITUTE PAYMENTS. Substitute payments received by the
Portfolio from a borrower in lieu of any dividends, distributions or
other financial benefits paid out in respect of a loaned security
shall not be considered part of the Portfolio's Net Securities Lending
Income for purposes of calculating the fee payable by the Portfolio
pursuant to this Paragraph 2, except that (I) to the extent that any
such substitute payment exceeds the amount that the Portfolio would
have received had such security not been loaned to the borrower, the
Portfolio's Net Securities Lending Income shall be increased by an
amount equal to the difference, and (II) to the extent that any such
substitute payment is less than the amount that the Portfolio would
have received had such security not been loaned to the borrower, the
Portfolio's Net Securities Lending Income shall be decreased by an
amount equal to the difference
The fees payable by the Portfolio pursuant to this Paragraph 2 shall
accrue daily and shall be paid to Subadviser monthly within twelve
business days of the end of each calendar month. If the Portfolio's
aggregate Net Securities Lending Income for any calendar month shall
be a negative amount, the fee payable by the Portfolio for such month
pursuant to this Paragraph 2 shall be zero, and an amount equal to 40%
of such negative Net Securities Lending Income shall be carried
forward and applied against future fees earned by Subadviser pursuant
to this Paragraph 2 for a period not to exceed 3 calendar months.
Subadviser agrees to look exclusively to the assets of the Portfolio,
and not to any other assets of the Trust or Manager, for the payment
of Subadviser's fees arising under this Paragraph 2.
