Exhibit (d)(3)
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 PORTFOLIO
AGREEMENT made this 16th day of September, 1998, by and between
Fidelity Management & Research Company, a Massachusetts corporation
with principal offices at 00 Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx
(hereinafter called the "Adviser"); Fidelity Management & Research
(U.K.) Inc. (hereinafter called the "Sub-Adviser"); 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 Portfolio (hereinafter
called the "Portfolio").
WHEREAS the Trust and the Adviser have entered into a Management
Contract on behalf of the Portfolio, pursuant to which the Adviser is
to act as investment manager of the Portfolio; and
WHEREAS the Sub-Adviser 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 Adviser and the
Sub-Adviser agree as follows:
1. Duties: The Adviser may, in its discretion, appoint the
Sub-Adviser 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-Adviser shall be as agreed upon from
time to time by the Adviser and the Sub-Adviser. The Sub-Adviser shall
pay the salaries and fees of all personnel of the Sub-Adviser
performing services for the Portfolio relating to research,
statistical and investment activities.
(a) INVESTMENT ADVICE: If and to the extent requested by the
Adviser, the Sub-Adviser shall provide investment advice to the
Portfolio and the Adviser 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 Adviser such factual information,
research reports and investment recommendations as the Adviser may
reasonably require. Such information may include written and oral
reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the
Adviser, the Sub-Adviser shall, subject to the supervision of the
Adviser, 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 Adviser may impose with respect
to the Portfolio by notice to the Sub-Adviser. With respect to the
portion of the investments of the Portfolio under its management, the
Sub-Adviser 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-Adviser may
select. The Sub-Adviser may also be authorized, but only to the extent
such duties are delegated in writing by the Adviser, 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-Adviser shall at all times be subject to the control and direction
of the Adviser and the Trust's Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The Sub-Adviser 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-Adviser 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 Adviser: The
Sub-Adviser shall furnish such reports, evaluations, information or
analyses to the Trust and the Adviser as the Trust's Board of Trustees
or the Adviser may reasonably request from time to time, or as the
Sub-Adviser may deem to be desirable.
3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Adviser
shall place all orders for the purchase and sale of portfolio
securities for the Portfolio's account with brokers or dealers
selected by the Sub-Adviser, which may include brokers or dealers
affiliated with the Adviser or Sub-Adviser. The Sub-Adviser shall use
its best efforts to seek to execute portfolio transactions at prices
which are advantageous to the Portfolio and at commission rates which
are reasonable in relation to the benefits received. In selecting
brokers or dealers qualified to execute a particular transaction,
brokers or dealers may be selected who also provide brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of l934) to the Portfolio and/or to the other
accounts over which the Sub-Adviser or Adviser exercise investment
discretion. The Sub-Adviser is authorized to pay a broker or dealer
who provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess
of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines
in good faith that such amount of commission is reasonable in relation
to the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either
that particular transaction or the overall responsibilities which the
Sub-Adviser 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 Adviser shall compensate the Sub-Adviser 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 Adviser agrees
to pay the Sub-Adviser a monthly Sub-Advisory Fee. The Sub-Advisory
Fee shall be equal to 110% of the Sub-Adviser'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
Adviser, 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 Adviser agrees
to pay the Sub-Adviser 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 Adviser under its Management
Contract with the Adviser, multiplied by: (ii) the fraction equal to
the net assets of the Portfolio as to which the Sub-Adviser 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 Adviser 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-Adviser will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Adviser reduces its fees to reflect such waivers or reimbursements
and the Adviser subsequently recovers all or any portion of such
waivers or reimbursements, then the Sub-Adviser shall be entitled to
receive from the Adviser a proportionate share of the amount
recovered. To the extent that waivers and reimbursements by the
Adviser required by such limitations are in excess of the Adviser's
management fee, the Investment Management Fee paid to the Sub-Adviser
will be reduced to zero for that month, but in no event shall the
Sub-Adviser be required to reimburse the Adviser for all or a portion
of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Adviser 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-Adviser 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-Adviser hereunder or by the Adviser under the Management Contract
with the Portfolio, which expenses payable by the Portfolio shall
include, without limitation, (i) interest and taxes; (ii) brokerage
commissions and other costs in connection with the purchase or sale of
securities and other investment instruments; (iii) fees and expenses
of the Trust's Trustees other than those who are "interested persons"
of the Trust, the Sub-Adviser or the Adviser; (iv) legal and audit
expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the 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 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 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
Adviser or the Sub-Adviser as directors, officers or otherwise and
that directors, officers and stockholders of the Adviser or the
Sub-Adviser are or may be or become similarly interested in the Trust,
and that the Adviser or the Sub-Adviser 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-Adviser to the Adviser are not to be deemed to be exclusive, the
Sub-Adviser being free to render services to others and engage in
other activities, provided, however, that such other services and
activities do not, during the term of this Agreement, interfere, in a
material manner, with the Sub-Adviser's ability to meet all of its
obligations hereunder. The Sub-Adviser shall for all purposes be an
independent contractor and not an agent or employee of the Adviser 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-Adviser, the Sub-Adviser shall not be
subject to liability to the Adviser, 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 sub-paragraph (d) of
this paragraph 9, this Agreement shall continue in force until July
31, 1999 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 Adviser,
the Sub-Adviser and the Portfolio subject to the provisions of Section
15 of the 1940 Act, as modified by any applicable order or orders of
the Securities and Exchange Commission (the "Commission") or any rules
or regulations adopted by, or interpretative releases of, the
Commission.
(c) In addition to the requirements of sub-paragraphs (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 Adviser, the Sub-Adviser or the Portfolio may, at any
time on sixty (60) days' prior written notice to the other parties,
terminate this Agreement, without payment of any penalty, by action of
its Board of Trustees or Directors, or 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-Adviser is hereby expressly put
on notice of the limitation of shareholder liability as set forth in
the Declaration of Trust or other organizational document of the 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-Adviser shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Portfolio. Nor shall the Sub-Adviser seek
satisfaction of any such obligation from the Trustees or any
individual Trustee.
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 Investment Company Act of 1940 as now in effect or as
hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to
be signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.
SIGNATURE LINES OMITTED
