UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-5511
Variable Insurance Products Fund II
(Exact name of registrant as specified in charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address of principal executive offices) (Zip code)
Eric D. Roiter, Secretary
82 Devonshire St.
Boston, Massachusetts 02109
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-563-7000
Date of fiscal year end: | December 31 |
| |
Date of reporting period: | June 30, 2006 |
Item 1. Reports to Stockholders
Fidelity® Variable Insurance Products:
Index 500 Portfolio
Semiannual Report
June 30, 2006
(2_fidelity_logos) (Registered_Trademark)
Contents
Shareholder Expense Example | <Click Here> | An example of shareholder expenses. |
Investment Changes | <Click Here> | A summary of major shifts in the fund's investments over the past six months. |
Investments | <Click Here> | A complete list of the fund's investments with their
market values. |
Financial Statements | <Click Here> | Statements of assets and liabilities, operations, and
changes in net assets, as well as financial highlights. |
Notes | <Click Here> | Notes to the financial statements. |
| | |
| | |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at www.sec.gov. You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
Fidelity Variable Insurance Products are separate account options which are purchased through a variable insurance contract.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.advisor.fidelity.com.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Portfolio
VIP Index 500 Portfolio
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2006 to June 30, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. An annual index fund fee of $10 that is charged once a year may apply for certain accounts with a value of less than $10,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. An annual index fund fee of $10 that is charged once a year may apply for certain accounts with a value of less than $10,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| Beginning
Account Value
January 1, 2006 | Ending
Account Value
June 30, 2006 | Expenses Paid
During Period*
January 1, 2006
to June 30, 2006 |
Initial Class | | | |
Actual | $ 1,000.00 | $ 1,026.90 | $ .50 |
Hypothetical A | $ 1,000.00 | $ 1,024.30 | $ .50 |
Service Class | | | |
Actual | $ 1,000.00 | $ 1,026.40 | $ 1.00 |
Hypothetical A | $ 1,000.00 | $ 1,023.80 | $ 1.00 |
Service Class 2 | | | |
Actual | $ 1,000.00 | $ 1,025.60 | $ 1.76 |
Hypothetical A | $ 1,000.00 | $ 1,023.06 | $ 1.76 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
| Annualized
Expense Ratio |
Initial Class | .10% |
Service Class | .20% |
Service Class 2 | .35% |
Semiannual Report
VIP Index 500 Portfolio
Investment Changes
Top Ten Stocks as of June 30, 2006 |
| % of fund's
net assets | % of fund's net assets
6 months ago |
Exxon Mobil Corp. | 3.2 | 3.1 |
General Electric Co. | 3.0 | 3.3 |
Citigroup, Inc. | 2.1 | 2.2 |
Bank of America Corp. | 1.9 | 1.6 |
Microsoft Corp. | 1.8 | 2.1 |
Procter & Gamble Co. | 1.6 | 1.7 |
Johnson & Johnson | 1.5 | 1.6 |
Pfizer, Inc. | 1.5 | 1.5 |
American International Group, Inc. | 1.3 | 1.6 |
Altria Group, Inc. | 1.3 | 1.4 |
| 19.2 | |
Market Sectors as of June 30, 2006 |
| % of fund's
net assets | % of fund's net assets
6 months ago |
Financials | 21.2 | 21.3 |
Information Technology | 14.7 | 15.1 |
Health Care | 12.1 | 13.3 |
Industrials | 11.6 | 11.3 |
Energy | 10.1 | 9.3 |
Consumer Discretionary | 10.1 | 10.9 |
Consumer Staples | 9.5 | 9.5 |
Utilities | 3.4 | 3.4 |
Telecommunication Services | 3.3 | 3.0 |
Materials | 3.0 | 3.0 |
Asset Allocation |
To match the Standard & Poor's 500 Index, the VIP Index 500 Portfolio seeks 100% investment exposure to stocks at all times. |
Semiannual Report
VIP Index 500 Portfolio
Investments June 30, 2006 (Unaudited)
Showing Percentage of Net Assets
Common Stocks - 99.0% |
| Shares | | Value (Note 1) |
CONSUMER DISCRETIONARY - 10.1% |
Auto Components - 0.2% |
Cooper Tire & Rubber Co. (d) | 14,470 | | $ 161,196 |
Goodyear Tire & Rubber Co. (a)(d) | 41,805 | | 464,036 |
Johnson Controls, Inc. | 45,994 | | 3,781,627 |
| | 4,406,859 |
Automobiles - 0.4% |
Ford Motor Co. | 442,560 | | 3,066,941 |
General Motors Corp. (d) | 133,423 | | 3,974,671 |
Harley-Davidson, Inc. | 63,377 | | 3,478,764 |
| | 10,520,376 |
Distributors - 0.1% |
Genuine Parts Co. | 40,737 | | 1,697,103 |
Diversified Consumer Services - 0.1% |
Apollo Group, Inc. Class A (a) | 33,015 | | 1,705,885 |
H&R Block, Inc. | 77,477 | | 1,848,601 |
| | 3,554,486 |
Hotels, Restaurants & Leisure - 1.5% |
Carnival Corp. unit | 102,466 | | 4,276,931 |
Darden Restaurants, Inc. | 30,420 | | 1,198,548 |
Harrah's Entertainment, Inc. | 43,585 | | 3,102,380 |
Hilton Hotels Corp. | 78,033 | | 2,206,773 |
International Game Technology | 79,995 | | 3,035,010 |
Marriott International, Inc. Class A | 77,140 | | 2,940,577 |
McDonald's Corp. | 293,965 | | 9,877,224 |
Starbucks Corp. (a) | 181,061 | | 6,836,863 |
Starwood Hotels & Resorts Worldwide, Inc. | 51,249 | | 3,092,365 |
Wendy's International, Inc. | 27,512 | | 1,603,674 |
Yum! Brands, Inc. | 64,157 | | 3,225,172 |
| | 41,395,517 |
Household Durables - 0.6% |
Black & Decker Corp. | 17,929 | | 1,514,283 |
Centex Corp. | 28,632 | | 1,440,190 |
D.R. Horton, Inc. | 64,174 | | 1,528,625 |
Fortune Brands, Inc. | 34,593 | | 2,456,449 |
Harman International Industries, Inc. | 15,784 | | 1,347,480 |
KB Home | 17,781 | | 815,259 |
Leggett & Platt, Inc. | 43,009 | | 1,074,365 |
Lennar Corp. Class A | 32,894 | | 1,459,507 |
Newell Rubbermaid, Inc. | 65,300 | | 1,686,699 |
Pulte Homes, Inc. | 50,244 | | 1,446,525 |
Snap-On, Inc. | 13,704 | | 553,916 |
The Stanley Works | 16,677 | | 787,488 |
Whirlpool Corp. | 18,397 | | 1,520,512 |
| | 17,631,298 |
Internet & Catalog Retail - 0.1% |
Amazon.com, Inc. (a) | 72,949 | | 2,821,667 |
Leisure Equipment & Products - 0.2% |
Brunswick Corp. | 22,315 | | 741,974 |
Eastman Kodak Co. | 67,763 | | 1,611,404 |
|
| Shares | | Value (Note 1) |
Hasbro, Inc. | 40,613 | | $ 735,501 |
Mattel, Inc. | 91,880 | | 1,516,939 |
| | 4,605,818 |
Media - 3.4% |
CBS Corp. Class B | 182,240 | | 4,929,592 |
Clear Channel Communications, Inc. | 118,726 | | 3,674,570 |
Comcast Corp. Class A (a) | 498,449 | | 16,319,220 |
Dow Jones & Co., Inc. (d) | 13,942 | | 488,109 |
E.W. Scripps Co. Class A | 20,064 | | 865,561 |
Gannett Co., Inc. | 56,104 | | 3,137,897 |
Interpublic Group of Companies, Inc. (a)(d) | 102,914 | | 859,332 |
McGraw-Hill Companies, Inc. | 84,409 | | 4,239,864 |
Meredith Corp. | 9,974 | | 494,112 |
News Corp. Class A | 558,057 | | 10,703,533 |
Omnicom Group, Inc. | 40,247 | | 3,585,605 |
The New York Times Co. Class A (d) | 34,171 | | 838,556 |
The Walt Disney Co. | 517,787 | | 15,533,610 |
Time Warner, Inc. | 1,010,203 | | 17,476,512 |
Tribune Co. | 51,661 | | 1,675,366 |
Univision Communications, Inc. Class A (a) | 52,618 | | 1,762,703 |
Viacom, Inc. Class B (non-vtg.) (a) | 170,102 | | 6,096,456 |
| | 92,680,598 |
Multiline Retail - 1.2% |
Big Lots, Inc. (a)(d) | 26,896 | | 459,384 |
Dillard's, Inc. Class A | 14,583 | | 464,469 |
Dollar General Corp. | 73,547 | | 1,028,187 |
Family Dollar Stores, Inc. | 36,643 | | 895,188 |
Federated Department Stores, Inc. | 130,511 | | 4,776,703 |
JCPenney Co., Inc. | 55,401 | | 3,740,122 |
Kohl's Corp. (a) | 80,315 | | 4,748,223 |
Nordstrom, Inc. | 50,804 | | 1,854,346 |
Sears Holdings Corp. (a) | 22,881 | | 3,542,894 |
Target Corp. | 203,688 | | 9,954,233 |
| | 31,463,749 |
Specialty Retail - 2.0% |
AutoNation, Inc. (a) | 34,989 | | 750,164 |
AutoZone, Inc. (a) | 12,619 | | 1,112,996 |
Bed Bath & Beyond, Inc. (a) | 66,582 | | 2,208,525 |
Best Buy Co., Inc. | 94,976 | | 5,208,484 |
Circuit City Stores, Inc. | 35,522 | | 966,909 |
Gap, Inc. | 129,756 | | 2,257,754 |
Home Depot, Inc. | 487,623 | | 17,452,027 |
Limited Brands, Inc. | 80,930 | | 2,070,999 |
Lowe's Companies, Inc. | 183,022 | | 11,103,945 |
Office Depot, Inc. (a) | 67,875 | | 2,579,250 |
OfficeMax, Inc. | 16,781 | | 683,826 |
RadioShack Corp. | 31,924 | | 446,936 |
Sherwin-Williams Co. | 26,282 | | 1,247,869 |
Staples, Inc. | 171,771 | | 4,177,471 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
CONSUMER DISCRETIONARY - continued |
Specialty Retail - continued |
Tiffany & Co., Inc. | 33,179 | | $ 1,095,571 |
TJX Companies, Inc. | 107,818 | | 2,464,719 |
| | 55,827,445 |
Textiles, Apparel & Luxury Goods - 0.3% |
Coach, Inc. (a) | 90,815 | | 2,715,369 |
Jones Apparel Group, Inc. | 26,555 | | 844,183 |
Liz Claiborne, Inc. | 24,655 | | 913,714 |
NIKE, Inc. Class B | 44,538 | | 3,607,578 |
VF Corp. | 20,716 | | 1,407,031 |
| | 9,487,875 |
TOTAL CONSUMER DISCRETIONARY | | 276,092,791 |
CONSUMER STAPLES - 9.5% |
Beverages - 2.1% |
Anheuser-Busch Companies, Inc. | 182,313 | | 8,311,650 |
Brown-Forman Corp. Class B (non-vtg.) | 19,618 | | 1,401,706 |
Coca-Cola Enterprises, Inc. | 71,600 | | 1,458,492 |
Constellation Brands, Inc. Class A (sub. vtg.) (a) | 46,921 | | 1,173,025 |
Molson Coors Brewing Co. Class B | 13,588 | | 922,353 |
Pepsi Bottling Group, Inc. | 31,636 | | 1,017,097 |
PepsiCo, Inc. | 389,843 | | 23,406,174 |
The Coca-Cola Co. | 483,507 | | 20,800,471 |
| | 58,490,968 |
Food & Staples Retailing - 2.4% |
Costco Wholesale Corp. | 111,170 | | 6,351,142 |
CVS Corp. | 193,072 | | 5,927,310 |
Kroger Co. | 170,676 | | 3,730,977 |
Safeway, Inc. | 106,184 | | 2,760,784 |
SUPERVALU, Inc. | 48,250 | | 1,481,275 |
Sysco Corp. | 145,919 | | 4,459,285 |
Wal-Mart Stores, Inc. | 589,861 | | 28,413,604 |
Walgreen Co. | 238,304 | | 10,685,551 |
Whole Foods Market, Inc. | 33,048 | | 2,136,223 |
| | 65,946,151 |
Food Products - 1.1% |
Archer-Daniels-Midland Co. | 154,390 | | 6,373,219 |
Campbell Soup Co. | 43,718 | | 1,622,375 |
ConAgra Foods, Inc. | 122,524 | | 2,709,006 |
Dean Foods Co. (a) | 32,087 | | 1,193,316 |
General Mills, Inc. | 83,969 | | 4,337,839 |
H.J. Heinz Co. | 79,033 | | 3,257,740 |
Hershey Co. | 41,899 | | 2,307,378 |
Kellogg Co. | 57,529 | | 2,786,129 |
McCormick & Co., Inc. (non-vtg.) | 31,254 | | 1,048,572 |
Sara Lee Corp. | 179,325 | | 2,872,787 |
|
| Shares | | Value (Note 1) |
Tyson Foods, Inc. Class A | 59,432 | | $ 883,160 |
Wm. Wrigley Jr. Co. | 52,373 | | 2,375,639 |
| | 31,767,160 |
Household Products - 2.2% |
Clorox Co. | 35,591 | | 2,169,983 |
Colgate-Palmolive Co. | 121,416 | | 7,272,818 |
Kimberly-Clark Corp. | 108,461 | | 6,692,044 |
Procter & Gamble Co. | 774,139 | | 43,042,128 |
| | 59,176,973 |
Personal Products - 0.2% |
Alberto-Culver Co. | 17,944 | | 874,232 |
Avon Products, Inc. | 106,227 | | 3,293,037 |
Estee Lauder Companies, Inc. Class A | 28,033 | | 1,084,036 |
| | 5,251,305 |
Tobacco - 1.5% |
Altria Group, Inc. | 492,614 | | 36,172,646 |
Reynolds American, Inc. | 20,219 | | 2,331,251 |
UST, Inc. | 38,075 | | 1,720,609 |
| | 40,224,506 |
TOTAL CONSUMER STAPLES | | 260,857,063 |
ENERGY - 10.1% |
Energy Equipment & Services - 2.0% |
Baker Hughes, Inc. | 80,390 | | 6,579,922 |
BJ Services Co. | 75,846 | | 2,826,022 |
Halliburton Co. | 121,775 | | 9,036,923 |
Nabors Industries Ltd. (a) | 73,226 | | 2,474,307 |
National Oilwell Varco, Inc. (a) | 41,277 | | 2,613,660 |
Noble Corp. | 32,500 | | 2,418,650 |
Rowan Companies, Inc. | 26,002 | | 925,411 |
Schlumberger Ltd. (NY Shares) | 278,346 | | 18,123,108 |
Transocean, Inc. (a) | 76,649 | | 6,156,448 |
Weatherford International Ltd. (a) | 82,256 | | 4,081,543 |
| | 55,235,994 |
Oil, Gas & Consumable Fuels - 8.1% |
Anadarko Petroleum Corp. | 108,171 | | 5,158,675 |
Apache Corp. | 77,931 | | 5,318,791 |
Chesapeake Energy Corp. | 97,235 | | 2,941,359 |
Chevron Corp. | 522,908 | | 32,451,670 |
ConocoPhillips | 389,407 | | 25,517,841 |
CONSOL Energy, Inc. | 43,207 | | 2,018,631 |
Devon Energy Corp. | 103,798 | | 6,270,437 |
El Paso Corp. | 164,129 | | 2,461,935 |
EOG Resources, Inc. | 57,228 | | 3,968,190 |
Exxon Mobil Corp. | 1,427,345 | | 87,567,605 |
Hess Corp. | 56,887 | | 3,006,478 |
Kerr-McGee Corp. | 53,554 | | 3,713,970 |
Kinder Morgan, Inc. | 24,589 | | 2,456,195 |
Marathon Oil Corp. | 85,503 | | 7,122,400 |
Murphy Oil Corp. | 39,186 | | 2,188,930 |
Occidental Petroleum Corp. | 101,034 | | 10,361,037 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
ENERGY - continued |
Oil, Gas & Consumable Fuels - continued |
Sunoco, Inc. | 31,286 | | $ 2,167,807 |
Valero Energy Corp. | 145,193 | | 9,658,238 |
Williams Companies, Inc. | 140,405 | | 3,279,861 |
XTO Energy, Inc. | 85,903 | | 3,802,926 |
| | 221,432,976 |
TOTAL ENERGY | | 276,668,970 |
FINANCIALS - 21.2% |
Capital Markets - 3.4% |
Ameriprise Financial, Inc. | 57,653 | | 2,575,360 |
Bank of New York Co., Inc. | 182,069 | | 5,862,622 |
Bear Stearns Companies, Inc. | 28,453 | | 3,985,696 |
Charles Schwab Corp. | 243,408 | | 3,889,660 |
E*TRADE Financial Corp. (a) | 100,600 | | 2,295,692 |
Federated Investors, Inc. Class B (non-vtg.) | 19,913 | | 627,260 |
Franklin Resources, Inc. | 36,185 | | 3,141,220 |
Goldman Sachs Group, Inc. | 101,925 | | 15,332,578 |
Janus Capital Group, Inc. | 49,928 | | 893,711 |
Legg Mason, Inc. | 31,153 | | 3,100,347 |
Lehman Brothers Holdings, Inc. | 126,314 | | 8,229,357 |
Mellon Financial Corp. | 97,563 | | 3,359,094 |
Merrill Lynch & Co., Inc. | 217,984 | | 15,162,967 |
Morgan Stanley | 252,684 | | 15,972,156 |
Northern Trust Corp. | 43,724 | | 2,417,937 |
State Street Corp. | 78,405 | | 4,554,546 |
T. Rowe Price Group, Inc. | 62,652 | | 2,368,872 |
| | 93,769,075 |
Commercial Banks - 4.2% |
AmSouth Bancorp. | 81,643 | | 2,159,457 |
BB&T Corp. | 129,755 | | 5,396,510 |
Comerica, Inc. | 38,319 | | 1,992,205 |
Commerce Bancorp, Inc., New Jersey | 43,452 | | 1,549,933 |
Compass Bancshares, Inc. | 30,463 | | 1,693,743 |
Fifth Third Bancorp | 131,285 | | 4,850,981 |
First Horizon National Corp. | 29,071 | | 1,168,654 |
Huntington Bancshares, Inc. | 57,864 | | 1,364,433 |
KeyCorp | 95,354 | | 3,402,231 |
M&T Bank Corp. | 18,620 | | 2,195,670 |
Marshall & Ilsley Corp. | 53,150 | | 2,431,081 |
National City Corp. | 127,974 | | 4,631,379 |
North Fork Bancorp, Inc., New York | 109,742 | | 3,310,916 |
PNC Financial Services Group, Inc. | 69,828 | | 4,899,831 |
Regions Financial Corp. | 107,604 | | 3,563,844 |
SunTrust Banks, Inc. | 85,784 | | 6,541,888 |
Synovus Financial Corp. | 76,139 | | 2,039,002 |
U.S. Bancorp, Delaware | 419,897 | | 12,966,419 |
Wachovia Corp. | 379,462 | | 20,521,305 |
|
| Shares | | Value (Note 1) |
Wells Fargo & Co. | 396,336 | | $ 26,586,219 |
Zions Bancorp | 25,033 | | 1,951,072 |
| | 115,216,773 |
Consumer Finance - 1.0% |
American Express Co. | 291,077 | | 15,491,118 |
Capital One Financial Corp. | 71,492 | | 6,108,991 |
SLM Corp. | 96,929 | | 5,129,483 |
| | 26,729,592 |
Diversified Financial Services - 5.4% |
Bank of America Corp. | 1,076,586 | | 51,783,787 |
CIT Group, Inc. | 47,027 | | 2,459,042 |
Citigroup, Inc. | 1,172,776 | | 56,574,714 |
JPMorgan Chase & Co. | 819,690 | | 34,426,980 |
Moody's Corp. | 57,627 | | 3,138,366 |
| | 148,382,889 |
Insurance - 4.7% |
ACE Ltd. | 76,715 | | 3,881,012 |
AFLAC, Inc. | 117,632 | | 5,452,243 |
Allstate Corp. | 149,892 | | 8,203,589 |
AMBAC Financial Group, Inc. (d) | 24,941 | | 2,022,715 |
American International Group, Inc. | 612,775 | | 36,184,364 |
Aon Corp. | 75,175 | | 2,617,594 |
Cincinnati Financial Corp. | 40,878 | | 1,921,675 |
Genworth Financial, Inc. Class A (non-vtg.) | 86,064 | | 2,998,470 |
Hartford Financial Services Group, Inc. | 71,503 | | 6,049,154 |
Lincoln National Corp. | 67,738 | | 3,823,133 |
Loews Corp. | 95,785 | | 3,395,578 |
Marsh & McLennan Companies, Inc. | 129,616 | | 3,485,374 |
MBIA, Inc. | 31,784 | | 1,860,953 |
MetLife, Inc. | 178,972 | | 9,165,156 |
Principal Financial Group, Inc. | 65,342 | | 3,636,282 |
Progressive Corp. | 184,600 | | 4,746,066 |
Prudential Financial, Inc. | 116,069 | | 9,018,561 |
SAFECO Corp. | 28,120 | | 1,584,562 |
The Chubb Corp. | 97,883 | | 4,884,362 |
The St. Paul Travelers Companies, Inc. | 164,255 | | 7,322,488 |
Torchmark Corp. | 23,675 | | 1,437,546 |
UnumProvident Corp. | 70,636 | | 1,280,631 |
XL Capital Ltd. Class A | 42,534 | | 2,607,334 |
| | 127,578,842 |
Real Estate Investment Trusts - 0.9% |
Apartment Investment & Management Co. Class A | 22,929 | | 996,265 |
Archstone-Smith Trust | 50,423 | | 2,565,018 |
Boston Properties, Inc. | 21,544 | | 1,947,578 |
Equity Office Properties Trust | 86,375 | | 3,153,551 |
Equity Residential (SBI) | 68,708 | | 3,073,309 |
Kimco Realty Corp. | 49,918 | | 1,821,508 |
Plum Creek Timber Co., Inc. | 43,488 | | 1,543,824 |
ProLogis Trust | 57,793 | | 3,012,171 |
Public Storage, Inc. | 19,524 | | 1,481,872 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
FINANCIALS - continued |
Real Estate Investment Trusts - continued |
Simon Property Group, Inc. | 43,247 | | $ 3,586,906 |
Vornado Realty Trust | 28,056 | | 2,736,863 |
| | 25,918,865 |
Thrifts & Mortgage Finance - 1.6% |
Countrywide Financial Corp. | 143,344 | | 5,458,540 |
Fannie Mae | 228,340 | | 10,983,154 |
Freddie Mac | 163,015 | | 9,293,485 |
Golden West Financial Corp., Delaware | 60,424 | | 4,483,461 |
MGIC Investment Corp. | 20,627 | | 1,340,755 |
Sovereign Bancorp, Inc. | 88,780 | | 1,803,122 |
Washington Mutual, Inc. | 226,653 | | 10,330,844 |
| | 43,693,361 |
TOTAL FINANCIALS | | 581,289,397 |
HEALTH CARE - 12.1% |
Biotechnology - 1.2% |
Amgen, Inc. (a) | 278,191 | | 18,146,399 |
Biogen Idec, Inc. (a) | 81,121 | | 3,758,336 |
Genzyme Corp. (a) | 61,418 | | 3,749,569 |
Gilead Sciences, Inc. (a) | 107,344 | | 6,350,471 |
MedImmune, Inc. (a) | 58,684 | | 1,590,336 |
| | 33,595,111 |
Health Care Equipment & Supplies - 1.5% |
Bausch & Lomb, Inc. | 12,685 | | 622,072 |
Baxter International, Inc. | 154,476 | | 5,678,538 |
Becton, Dickinson & Co. | 58,345 | | 3,566,630 |
Biomet, Inc. | 58,051 | | 1,816,416 |
Boston Scientific Corp. (a) | 286,643 | | 4,827,068 |
C.R. Bard, Inc. | 24,430 | | 1,789,742 |
Hospira, Inc. (a) | 36,852 | | 1,582,425 |
Medtronic, Inc. | 284,749 | | 13,360,423 |
St. Jude Medical, Inc. (a) | 85,155 | | 2,760,725 |
Stryker Corp. | 68,985 | | 2,904,958 |
Zimmer Holdings, Inc. (a) | 58,539 | | 3,320,332 |
| | 42,229,329 |
Health Care Providers & Services - 2.7% |
Aetna, Inc. | 133,762 | | 5,341,117 |
AmerisourceBergen Corp. | 49,518 | | 2,075,795 |
Cardinal Health, Inc. | 98,535 | | 6,338,757 |
Caremark Rx, Inc. | 104,374 | | 5,205,131 |
CIGNA Corp. | 28,253 | | 2,783,203 |
Coventry Health Care, Inc. (a) | 37,864 | | 2,080,248 |
Express Scripts, Inc. (a) | 34,686 | | 2,488,374 |
HCA, Inc. | 96,267 | | 4,153,921 |
Health Management Associates, Inc. Class A | 56,800 | | 1,119,528 |
Humana, Inc. (a) | 38,842 | | 2,085,815 |
|
| Shares | | Value (Note 1) |
Laboratory Corp. of America Holdings (a) | 29,418 | | $ 1,830,682 |
Manor Care, Inc. (d) | 18,639 | | 874,542 |
McKesson Corp. | 71,746 | | 3,392,151 |
Medco Health Solutions, Inc. (a) | 71,166 | | 4,076,388 |
Patterson Companies, Inc. (a) | 32,708 | | 1,142,490 |
Quest Diagnostics, Inc. | 38,336 | | 2,297,093 |
Tenet Healthcare Corp. (a) | 111,033 | | 775,010 |
UnitedHealth Group, Inc. | 317,773 | | 14,229,875 |
WellPoint, Inc. (a) | 150,377 | | 10,942,934 |
| | 73,233,054 |
Health Care Technology - 0.0% |
IMS Health, Inc. | 47,113 | | 1,264,984 |
Life Sciences Tools & Services - 0.3% |
Applera Corp. - Applied Biosystems Group | 43,656 | | 1,412,272 |
Fisher Scientific International, Inc. (a) | 29,288 | | 2,139,488 |
Millipore Corp. (a)(d) | 12,543 | | 790,084 |
PerkinElmer, Inc. | 29,871 | | 624,304 |
Thermo Electron Corp. (a) | 38,616 | | 1,399,444 |
Waters Corp. (a) | 24,418 | | 1,084,159 |
| | 7,449,751 |
Pharmaceuticals - 6.4% |
Abbott Laboratories | 360,053 | | 15,701,911 |
Allergan, Inc. | 36,014 | | 3,862,862 |
Barr Pharmaceuticals, Inc. (a) | 25,047 | | 1,194,491 |
Bristol-Myers Squibb Co. | 463,878 | | 11,995,885 |
Eli Lilly & Co. | 266,612 | | 14,735,645 |
Forest Laboratories, Inc. (a) | 76,881 | | 2,974,526 |
Johnson & Johnson | 698,542 | | 41,856,637 |
King Pharmaceuticals, Inc. (a) | 57,140 | | 971,380 |
Merck & Co., Inc. | 514,880 | | 18,757,078 |
Mylan Laboratories, Inc. | 49,596 | | 991,920 |
Pfizer, Inc. | 1,728,621 | | 40,570,735 |
Schering-Plough Corp. | 349,398 | | 6,649,044 |
Watson Pharmaceuticals, Inc. (a) | 24,065 | | 560,233 |
Wyeth | 317,526 | | 14,101,330 |
| | 174,923,677 |
TOTAL HEALTH CARE | | 332,695,906 |
INDUSTRIALS - 11.6% |
Aerospace & Defense - 2.4% |
General Dynamics Corp. | 95,233 | | 6,233,952 |
Goodrich Corp. | 29,231 | | 1,177,717 |
Honeywell International, Inc. | 195,321 | | 7,871,436 |
L-3 Communications Holdings, Inc. | 28,773 | | 2,170,060 |
Lockheed Martin Corp. | 83,547 | | 5,993,662 |
Northrop Grumman Corp. | 81,098 | | 5,195,138 |
Raytheon Co. | 105,258 | | 4,691,349 |
Raytheon Co. warrants 6/16/11 (a) | 3,996 | | 50,549 |
Rockwell Collins, Inc. | 40,362 | | 2,255,025 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
INDUSTRIALS - continued |
Aerospace & Defense - continued |
The Boeing Co. | 188,630 | | $ 15,450,683 |
United Technologies Corp. | 238,476 | | 15,124,148 |
| | 66,213,719 |
Air Freight & Logistics - 1.1% |
FedEx Corp. | 71,981 | | 8,411,700 |
United Parcel Service, Inc. Class B | 255,884 | | 21,066,930 |
| | 29,478,630 |
Airlines - 0.1% |
Southwest Airlines Co. | 166,615 | | 2,727,488 |
Building Products - 0.2% |
American Standard Companies, Inc. | 41,737 | | 1,805,960 |
Masco Corp. | 93,704 | | 2,777,387 |
| | 4,583,347 |
Commercial Services & Supplies - 0.7% |
Allied Waste Industries, Inc. (a) | 57,061 | | 648,213 |
Avery Dennison Corp. | 25,896 | | 1,503,522 |
Cendant Corp. | 235,968 | | 3,843,919 |
Cintas Corp. | 32,528 | | 1,293,313 |
Equifax, Inc. | 30,332 | | 1,041,601 |
Monster Worldwide, Inc. (a) | 30,284 | | 1,291,915 |
Pitney Bowes, Inc. | 52,367 | | 2,162,757 |
R.R. Donnelley & Sons Co. | 50,981 | | 1,628,843 |
Robert Half International, Inc. | 40,528 | | 1,702,176 |
Waste Management, Inc. | 128,600 | | 4,614,168 |
| | 19,730,427 |
Construction & Engineering - 0.1% |
Fluor Corp. | 20,655 | | 1,919,469 |
Electrical Equipment - 0.5% |
American Power Conversion Corp. | 40,020 | | 779,990 |
Cooper Industries Ltd. Class A | 21,799 | | 2,025,563 |
Emerson Electric Co. | 96,833 | | 8,115,574 |
Rockwell Automation, Inc. | 41,877 | | 3,015,563 |
| | 13,936,690 |
Industrial Conglomerates - 4.1% |
3M Co. | 177,862 | | 14,365,914 |
General Electric Co. | 2,453,109 | | 80,854,473 |
Textron, Inc. | 30,691 | | 2,829,096 |
Tyco International Ltd. | 480,459 | | 13,212,623 |
| | 111,262,106 |
Machinery - 1.6% |
Caterpillar, Inc. | 157,974 | | 11,765,904 |
Cummins, Inc. | 10,955 | | 1,339,249 |
Danaher Corp. | 55,658 | | 3,579,923 |
Deere & Co. | 55,338 | | 4,620,170 |
Dover Corp. | 48,100 | | 2,377,583 |
Eaton Corp. | 35,434 | | 2,671,724 |
Illinois Tool Works, Inc. | 97,705 | | 4,640,988 |
Ingersoll-Rand Co. Ltd. Class A | 77,620 | | 3,320,584 |
|
| Shares | | Value (Note 1) |
ITT Industries, Inc. | 43,636 | | $ 2,159,982 |
Navistar International Corp. (a) | 14,554 | | 358,174 |
PACCAR, Inc. | 39,331 | | 3,240,088 |
Pall Corp. | 29,450 | | 824,600 |
Parker Hannifin Corp. | 28,384 | | 2,202,598 |
| | 43,101,567 |
Road & Rail - 0.8% |
Burlington Northern Santa Fe Corp. | 86,028 | | 6,817,719 |
CSX Corp. | 52,275 | | 3,682,251 |
Norfolk Southern Corp. | 97,831 | | 5,206,566 |
Ryder System, Inc. | 14,390 | | 840,808 |
Union Pacific Corp. | 63,450 | | 5,898,312 |
| | 22,445,656 |
Trading Companies & Distributors - 0.0% |
W.W. Grainger, Inc. | 18,001 | | 1,354,215 |
TOTAL INDUSTRIALS | | 316,753,314 |
INFORMATION TECHNOLOGY - 14.7% |
Communications Equipment - 2.7% |
ADC Telecommunications, Inc. (a) | 27,658 | | 466,314 |
Andrew Corp. (a) | 37,658 | | 333,650 |
Avaya, Inc. (a) | 96,965 | | 1,107,340 |
CIENA Corp. (a) | 138,641 | | 666,863 |
Cisco Systems, Inc. (a) | 1,440,155 | | 28,126,227 |
Comverse Technology, Inc. (a) | 47,655 | | 942,139 |
Corning, Inc. (a) | 367,446 | | 8,888,519 |
JDS Uniphase Corp. (a) | 397,481 | | 1,005,627 |
Juniper Networks, Inc. (a)(d) | 133,467 | | 2,134,137 |
Lucent Technologies, Inc. (a)(d) | 1,056,867 | | 2,557,618 |
Motorola, Inc. | 582,691 | | 11,741,224 |
QUALCOMM, Inc. | 395,428 | | 15,844,800 |
Tellabs, Inc. (a) | 105,712 | | 1,407,027 |
| | 75,221,485 |
Computers & Peripherals - 3.4% |
Apple Computer, Inc. (a) | 200,645 | | 11,460,842 |
Dell, Inc. (a) | 535,901 | | 13,081,343 |
EMC Corp. (a) | 557,834 | | 6,119,439 |
Gateway, Inc. (a)(d) | 62,342 | | 118,450 |
Hewlett-Packard Co. | 658,091 | | 20,848,323 |
International Business Machines Corp. | 365,757 | | 28,097,453 |
Lexmark International, Inc. Class A (a) | 24,846 | | 1,387,152 |
NCR Corp. (a) | 42,936 | | 1,573,175 |
Network Appliance, Inc. (a) | 88,270 | | 3,115,931 |
QLogic Corp. (a) | 38,036 | | 655,741 |
SanDisk Corp. (a) | 46,081 | | 2,349,209 |
Sun Microsystems, Inc. (a) | 825,155 | | 3,424,393 |
| | 92,231,451 |
Electronic Equipment & Instruments - 0.3% |
Agilent Technologies, Inc. (a) | 100,455 | | 3,170,360 |
Jabil Circuit, Inc. | 42,007 | | 1,075,379 |
Molex, Inc. | 33,492 | | 1,124,326 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
INFORMATION TECHNOLOGY - continued |
Electronic Equipment & Instruments - continued |
Sanmina-SCI Corp. (a) | 125,702 | | $ 578,229 |
Solectron Corp. (a) | 215,725 | | 737,780 |
Symbol Technologies, Inc. | 59,866 | | 645,954 |
Tektronix, Inc. | 19,732 | | 580,515 |
| | 7,912,543 |
Internet Software & Services - 1.4% |
eBay, Inc. (a) | 272,783 | | 7,989,814 |
Google, Inc. Class A (sub. vtg.) (a) | 48,621 | | 20,388,244 |
VeriSign, Inc. (a) | 57,831 | | 1,339,944 |
Yahoo!, Inc. (a) | 295,795 | | 9,761,235 |
| | 39,479,237 |
IT Services - 1.0% |
Affiliated Computer Services, Inc. Class A (a) | 27,973 | | 1,443,687 |
Automatic Data Processing, Inc. | 135,974 | | 6,166,421 |
Computer Sciences Corp. (a) | 44,308 | | 2,146,280 |
Convergys Corp. (a) | 33,058 | | 644,631 |
Electronic Data Systems Corp. | 122,306 | | 2,942,682 |
First Data Corp. | 180,605 | | 8,134,449 |
Fiserv, Inc. (a) | 41,448 | | 1,880,081 |
Paychex, Inc. | 78,842 | | 3,073,261 |
Sabre Holdings Corp. Class A | 31,317 | | 688,974 |
Unisys Corp. (a) | 80,921 | | 508,184 |
| | 27,628,650 |
Office Electronics - 0.1% |
Xerox Corp. (a) | 216,634 | | 3,013,379 |
Semiconductors & Semiconductor Equipment - 2.7% |
Advanced Micro Devices, Inc. (a) | 114,206 | | 2,788,911 |
Altera Corp. (a) | 84,763 | | 1,487,591 |
Analog Devices, Inc. | 85,202 | | 2,738,392 |
Applied Materials, Inc. | 368,917 | | 6,005,969 |
Broadcom Corp. Class A (a) | 108,060 | | 3,247,203 |
Freescale Semiconductor, Inc. Class B (a) | 95,724 | | 2,814,286 |
Intel Corp. | 1,372,301 | | 26,005,104 |
KLA-Tencor Corp. | 46,967 | | 1,952,418 |
Linear Technology Corp. | 71,630 | | 2,398,889 |
LSI Logic Corp. (a) | 93,591 | | 837,639 |
Maxim Integrated Products, Inc. | 75,655 | | 2,429,282 |
Micron Technology, Inc. (a) | 171,066 | | 2,576,254 |
National Semiconductor Corp. | 79,647 | | 1,899,581 |
Novellus Systems, Inc. (a) | 30,018 | | 741,445 |
NVIDIA Corp. (a) | 83,162 | | 1,770,519 |
PMC-Sierra, Inc. (a) | 48,710 | | 457,874 |
Teradyne, Inc. (a) | 46,763 | | 651,409 |
Texas Instruments, Inc. | 367,560 | | 11,133,392 |
Xilinx, Inc. | 81,036 | | 1,835,465 |
| | 73,771,623 |
Software - 3.1% |
Adobe Systems, Inc. (a) | 141,245 | | 4,288,198 |
|
| Shares | | Value (Note 1) |
Autodesk, Inc. (a) | 54,661 | | $ 1,883,618 |
BMC Software, Inc. (a) | 50,208 | | 1,199,971 |
CA, Inc. | 107,639 | | 2,211,981 |
Citrix Systems, Inc. (a) | 42,971 | | 1,724,856 |
Compuware Corp. (a) | 89,025 | | 596,468 |
Electronic Arts, Inc. (a) | 72,226 | | 3,108,607 |
Intuit, Inc. (a) | 40,305 | | 2,434,019 |
Microsoft Corp. | 2,069,666 | | 48,223,218 |
Novell, Inc. (a) | 79,977 | | 530,248 |
Oracle Corp. (a) | 918,714 | | 13,312,166 |
Parametric Technology Corp. (a) | 26,280 | | 334,019 |
Symantec Corp. (a) | 244,195 | | 3,794,790 |
| | 83,642,159 |
TOTAL INFORMATION TECHNOLOGY | | 402,900,527 |
MATERIALS - 3.0% |
Chemicals - 1.5% |
Air Products & Chemicals, Inc. | 52,886 | | 3,380,473 |
Ashland, Inc. | 16,765 | | 1,118,226 |
Dow Chemical Co. | 226,879 | | 8,855,087 |
E.I. du Pont de Nemours & Co. | 217,339 | | 9,041,302 |
Eastman Chemical Co. | 19,288 | | 1,041,552 |
Ecolab, Inc. | 42,963 | | 1,743,439 |
Hercules, Inc. (a) | 26,805 | | 409,044 |
International Flavors & Fragrances, Inc. | 18,644 | | 657,015 |
Monsanto Co. | 63,831 | | 5,373,932 |
PPG Industries, Inc. | 39,075 | | 2,578,950 |
Praxair, Inc. | 76,227 | | 4,116,258 |
Rohm & Haas Co. | 34,285 | | 1,718,364 |
Sigma Aldrich Corp. | 15,794 | | 1,147,276 |
| | 41,180,918 |
Construction Materials - 0.1% |
Vulcan Materials Co. | 23,735 | | 1,851,330 |
Containers & Packaging - 0.2% |
Ball Corp. | 24,699 | | 914,851 |
Bemis Co., Inc. | 24,732 | | 757,294 |
Pactiv Corp. (a) | 33,299 | | 824,150 |
Sealed Air Corp. | 19,246 | | 1,002,332 |
Temple-Inland, Inc. | 26,066 | | 1,117,449 |
| | 4,616,076 |
Metals & Mining - 0.9% |
Alcoa, Inc. | 205,267 | | 6,642,440 |
Allegheny Technologies, Inc. | 20,579 | | 1,424,890 |
Freeport-McMoRan Copper & Gold, Inc. Class B | 44,461 | | 2,463,584 |
Newmont Mining Corp. | 105,901 | | 5,605,340 |
Nucor Corp. | 73,509 | | 3,987,863 |
Phelps Dodge Corp. | 48,082 | | 3,950,417 |
United States Steel Corp. | 29,464 | | 2,066,016 |
| | 26,140,550 |
Paper & Forest Products - 0.3% |
International Paper Co. | 116,292 | | 3,756,232 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
MATERIALS - continued |
Paper & Forest Products - continued |
Louisiana-Pacific Corp. | 25,053 | | $ 548,661 |
MeadWestvaco Corp. | 42,735 | | 1,193,589 |
Weyerhaeuser Co. | 58,088 | | 3,615,978 |
| | 9,114,460 |
TOTAL MATERIALS | | 82,903,334 |
TELECOMMUNICATION SERVICES - 3.3% |
Diversified Telecommunication Services - 2.6% |
AT&T, Inc. | 917,213 | | 25,581,071 |
BellSouth Corp. | 426,719 | | 15,447,228 |
CenturyTel, Inc. | 27,403 | | 1,018,021 |
Citizens Communications Co. | 76,662 | | 1,000,439 |
Embarq Corp. (a) | 35,168 | | 1,441,536 |
Qwest Communications International, Inc. (a) | 369,290 | | 2,987,556 |
Verizon Communications, Inc. | 688,208 | | 23,048,086 |
| | 70,523,937 |
Wireless Telecommunication Services - 0.7% |
ALLTEL Corp. | 91,795 | | 5,859,275 |
Sprint Nextel Corp. | 702,788 | | 14,048,732 |
| | 19,908,007 |
TOTAL TELECOMMUNICATION SERVICES | | 90,431,944 |
UTILITIES - 3.4% |
Electric Utilities - 1.5% |
Allegheny Energy, Inc. (a) | 38,534 | | 1,428,455 |
American Electric Power Co., Inc. | 92,929 | | 3,182,818 |
Edison International | 76,863 | | 2,997,657 |
Entergy Corp. | 49,056 | | 3,470,712 |
Exelon Corp. | 157,707 | | 8,962,489 |
FirstEnergy Corp. | 77,812 | | 4,218,189 |
FPL Group, Inc. | 95,369 | | 3,946,369 |
Pinnacle West Capital Corp. | 23,402 | | 933,974 |
PPL Corp. | 89,763 | | 2,899,345 |
Progress Energy, Inc. | 59,679 | | 2,558,439 |
Southern Co. | 175,058 | | 5,610,609 |
| | 40,209,056 |
Gas Utilities - 0.0% |
Nicor, Inc. | 10,470 | | 434,505 |
Peoples Energy Corp. | 9,061 | | 325,381 |
| | 759,886 |
Independent Power Producers & Energy Traders - 0.5% |
AES Corp. (a) | 155,306 | | 2,865,396 |
Constellation Energy Group, Inc. | 42,216 | | 2,301,616 |
Dynegy, Inc. Class A (a) | 87,073 | | 476,289 |
TXU Corp. | 109,090 | | 6,522,491 |
| | 12,165,792 |
|
| Shares | | Value (Note 1) |
Multi-Utilities - 1.4% |
Ameren Corp. | 48,444 | | $ 2,446,422 |
CenterPoint Energy, Inc. | 73,458 | | 918,225 |
CMS Energy Corp. (a)(d) | 52,172 | | 675,106 |
Consolidated Edison, Inc. | 57,982 | | 2,576,720 |
Dominion Resources, Inc. | 81,989 | | 6,131,957 |
DTE Energy Co. | 41,938 | | 1,708,554 |
Duke Energy Corp. | 291,347 | | 8,556,861 |
KeySpan Corp. | 41,275 | | 1,667,510 |
NiSource, Inc. | 64,325 | | 1,404,858 |
PG&E Corp. | 81,901 | | 3,217,071 |
Public Service Enterprise Group, Inc. | 59,325 | | 3,922,569 |
Sempra Energy | 61,121 | | 2,779,783 |
TECO Energy, Inc. | 49,250 | | 735,795 |
Xcel Energy, Inc. | 95,659 | | 1,834,740 |
| | 38,576,171 |
TOTAL UTILITIES | | 91,710,905 |
TOTAL COMMON STOCKS (Cost $1,609,736,076) | 2,712,304,151 |
U.S. Treasury Obligations - 0.1% |
| Principal Amount | | |
U.S. Treasury Bills, yield at date of purchase 4.87% 9/21/06 (e)
(Cost $1,977,821) | | $ 2,000,000 | | 1,978,422 |
Money Market Funds - 1.3% |
| Shares | | |
Fidelity Cash Central Fund, 5.11% (b) | 20,244,875 | | 20,244,875 |
Fidelity Securities Lending Cash Central Fund, 5.14% (b)(c) | 16,643,986 | | 16,643,986 |
TOTAL MONEY MARKET FUNDS (Cost $36,888,861) | 36,888,861 |
TOTAL INVESTMENT PORTFOLIO - 100.4% (Cost $1,648,602,758) | | 2,751,171,434 |
NET OTHER ASSETS - (0.4)% | | (12,292,529) |
NET ASSETS - 100% | $ 2,738,878,905 |
Futures Contracts |
| Expiration Date | | Underlying Face Amount at Value | | Unrealized Appreciation/(Depreciation) |
Purchased |
Equity Index Contracts |
86 S&P 500 Index Contracts | Sept. 2006 | | $ 27,507,100 | | $ 541,623 |
|
The face value of futures purchased as a percentage of net assets - 1.0% |
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
(e) Security or a portion of the security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $1,978,422. |
|
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 540,334 |
Fidelity Securities Lending Cash Central Fund | 64,853 |
Total | $ 605,187 |
Income Tax Information |
At December 31, 2005, the fund had a capital loss carryforward of approximately $153,711,966 of which $119,767,806 and $33,944,160 will expire on December 31, 2010 and 2011, respectively. |
See accompanying notes which are an integral part of the financial statements.
VIP Index 500 Portfolio
VIP Index 500 Portfolio
Financial Statements
Statement of Assets and Liabilities
| June 30, 2006 (Unaudited) |
Assets | | |
Investment in securities, at value (including securities loaned of $15,852,705) - See accompanying schedule: Unaffiliated issuers (cost $1,611,713,897) | $ 2,714,282,573 | |
Affiliated Central Funds (cost $36,888,861) | 36,888,861 | |
Total Investments (cost $1,648,602,758) | | $ 2,751,171,434 |
Cash | | 2,301,881 |
Receivable for investments sold | | 1,972,262 |
Receivable for fund shares sold | | 558,692 |
Dividends receivable | | 3,085,624 |
Interest receivable | | 130,550 |
Other receivables | | 109,396 |
Total assets | | 2,759,329,839 |
| | |
Liabilities | | |
Payable for investments purchased | $ 1,757,100 | |
Payable for fund shares redeemed | 1,679,530 | |
Accrued management fee | 225,929 | |
Distribution fees payable | 38,283 | |
Payable for daily variation on futures contracts | 68,695 | |
Other affiliated payables | 37,411 | |
Collateral on securities loaned, at value | 16,643,986 | |
Total liabilities | | 20,450,934 |
| | |
Net Assets | | $ 2,738,878,905 |
Net Assets consist of: | | |
Paid in capital | | $ 1,725,247,998 |
Undistributed net investment income | | 24,753,858 |
Accumulated undistributed net realized gain (loss) on investments | | (114,233,248) |
Net unrealized appreciation (depreciation) on investments | | 1,103,110,297 |
Net Assets | | $ 2,738,878,905 |
Statement of Assets and Liabilities - continued
| June 30, 2006 (Unaudited) |
Initial Class:
Net Asset Value, offering price and redemption price per share ($2,534,655,744 ÷ 17,702,712 shares) | | $ 143.18 |
| | |
Service Class:
Net Asset Value, offering price and redemption price per share ($29,966,889 ÷ 209,817 shares) | | $ 142.82 |
| | |
Service Class 2:
Net Asset Value, offering price and redemption price per share ($174,256,272 ÷ 1,226,666 shares) | | $ 142.06 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
VIP Index 500 Portfolio
Financial Statements - continued
Statement of Operations
| Six months ended June 30, 2006 (Unaudited) |
| | |
Investment Income | | |
Dividends | | $ 25,889,472 |
Interest | | 64,327 |
Income from affiliated Central Funds (including $64,853 from security lending) | | 605,187 |
Total income | | 26,558,986 |
Expenses | | |
Management fee | $ 1,415,405 | |
Distribution fees | 227,018 | |
Independent trustees' compensation | 8,257 | |
Appreciation in deferred trustee compensation account | 1,478 | |
Interest | 12,296 | |
Miscellaneous | 4,244 | |
Total expenses before reductions | 1,668,698 | |
Expense reductions | (2,444) | 1,666,254 |
Net investment income (loss) | | 24,892,732 |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | | |
Investment securities: | | |
Unaffiliated issuers | 43,670,037 | |
Futures contracts | (131,210) | |
Total net realized gain (loss) | | 43,538,827 |
Change in net unrealized appreciation (depreciation) on: Investment securities | 7,546,840 | |
Futures contracts | 567,475 | |
Delayed delivery commitments | 11,836 | |
Total change in net unrealized appreciation (depreciation) | | 8,126,151 |
Net gain (loss) | | 51,664,978 |
Net increase (decrease) in net assets resulting from operations | | $ 76,557,710 |
Statement of Changes in Net Assets
| Six months ended
June 30, 2006
(Unaudited) | Year ended
December 31,
2005 |
Increase (Decrease) in Net Assets | | |
Operations | | |
Net investment income (loss) | $ 24,892,732 | $ 48,461,159 |
Net realized gain (loss) | 43,538,827 | 37,676,164 |
Change in net unrealized appreciation (depreciation) | 8,126,151 | 44,486,040 |
Net increase (decrease) in net assets resulting from operations | 76,557,710 | 130,623,363 |
Distributions to shareholders from net investment income | (48,550,321) | (49,776,021) |
Share transactions - net increase (decrease) | (114,128,193) | (163,340,650) |
Total increase (decrease) in net assets | (86,120,804) | (82,493,308) |
| | |
Net Assets | | |
Beginning of period | 2,824,999,709 | 2,907,493,017 |
End of period (including undistributed net investment income of $24,753,858 and undistributed net investment income of $48,409,064, respectively) | $ 2,738,878,905 | $ 2,824,999,709 |
See accompanying notes which are an integral part of the financial statements.
VIP Index 500 Portfolio
Financial Highlights - Initial Class
| Six months ended
June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 |
Selected Per-Share Data | | | | | | |
Net asset value, beginning of period | $ 141.88 | $ 137.76 | $ 126.13 | $ 99.92 | $ 130.08 | $ 149.53 |
Income from Investment Operations | | | | | | |
Net investment income (loss) E | 1.28 | 2.36 | 2.18 F | 1.63 | 1.51 | 1.48 |
Net realized and unrealized gain (loss) | 2.51 | 4.15 | 11.10 | 26.18 | (30.18) | (19.34) |
Total from investment operations | 3.79 | 6.51 | 13.28 | 27.81 | (28.67) | (17.86) |
Distributions from net investment income | (2.49) | (2.39) | (1.65) | (1.60) | (1.49) | (1.59) |
Net asset value, end of period | $ 143.18 | $ 141.88 | $ 137.76 | $ 126.13 | $ 99.92 | $ 130.08 |
Total Return B, C, D | 2.69% | 4.82% | 10.62% | 28.41% | (22.25)% | (12.09)% |
Ratios to Average Net Assets G | | | | | | |
Expenses before reductions | .10% A | .14% | .35% | .34% | .33% | .35% |
Expenses net of fee waivers, if any | .10% A | .13% | .28% | .28% | .28% | .28% |
Expenses net of all reductions | .10% A | .13% | .28% | .28% | .28% | .28% |
Net investment income (loss) | 1.78% A | 1.73% | 1.71% | 1.50% | 1.34% | 1.09% |
Supplemental Data | | | | | | |
Net assets, end of period (000 omitted) | $ 2,534,656 | $ 2,641,527 | $ 2,778,226 | $ 3,031,540 | $ 2,497,252 | $ 3,475,357 |
Portfolio turnover rate | 7% A | 7% | 5% | 6% | 7% | 9% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown. D Total returns would have been lower had certain expenses not been reduced during the periods shown. E Calculated based on average shares outstanding during the period. F Investment income per share reflects a special dividend which amounted to $.36 per share. G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. |
Financial Highlights - Service Class
| Six months ended
June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 |
Selected Per-Share Data | | | | | | |
Net asset value, beginning of period | $ 141.48 | $ 137.41 | $ 125.86 | $ 99.74 | $ 129.94 | $ 149.46 |
Income from Investment Operations | | | | | | |
Net investment income (loss) E | 1.21 | 2.22 | 2.05 F | 1.54 | 1.34 | 1.24 |
Net realized and unrealized gain (loss) | 2.50 | 4.14 | 11.07 | 26.11 | (30.07) | (19.23) |
Total from investment operations | 3.71 | 6.36 | 13.12 | 27.65 | (28.73) | (17.99) |
Distributions from net investment income | (2.37) | (2.29) | (1.57) | (1.53) | (1.47) | (1.53) |
Net asset value, end of period | $ 142.82 | $ 141.48 | $ 137.41 | $ 125.86 | $ 99.74 | $ 129.94 |
Total Return B, C, D | 2.64% | 4.71% | 10.51% | 28.27% | (22.32)% | (12.18)% |
Ratios to Average Net Assets G | | | | | | |
Expenses before reductions | .20% A | .24% | .47% | .46% | .47% | .56% |
Expenses net of fee waivers, if any | .20% A | .23% | .38% | .38% | .38% | .38% |
Expenses net of all reductions | .20% A | .23% | .38% | .38% | .38% | .38% |
Net investment income (loss) | 1.68% A | 1.63% | 1.61% | 1.40% | 1.24% | .99% |
Supplemental Data | | | | | | |
Net assets, end of period (000 omitted) | $ 29,967 | $ 27,178 | $ 23,216 | $ 15,404 | $ 7,494 | $ 3,278 |
Portfolio turnover rate | 7% A | 7% | 5% | 6% | 7% | 9% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown. D Total returns would have been lower had certain expenses not been reduced during the periods shown. E Calculated based on average shares outstanding during the period. F Investment income per share reflects a special dividend which amounted to $.36 per share. G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Service Class 2
| Six months ended
June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 |
Selected Per-Share Data | | | | | | |
Net asset value, beginning of period | $ 140.68 | $ 136.71 | $ 125.31 | $ 99.29 | $ 129.43 | $ 149.18 |
Income from Investment Operations | | | | | | |
Net investment income (loss) E | 1.09 | 2.01 | 1.85 F | 1.37 | 1.19 | 1.09 |
Net realized and unrealized gain (loss) | 2.50 | 4.11 | 11.01 | 26.03 | (30.00) | (19.23) |
Total from investment operations | 3.59 | 6.12 | 12.86 | 27.40 | (28.81) | (18.14) |
Distributions from net investment income | (2.21) | (2.15) | (1.46) | (1.38) | (1.33) | (1.61) |
Net asset value, end of period | $ 142.06 | $ 140.68 | $ 136.71 | $ 125.31 | $ 99.29 | $ 129.43 |
Total Return B, C, D | 2.56% | 4.55% | 10.34% | 28.09% | (22.45)% | (12.31)% |
Ratios to Average Net Assets G | | | | | | |
Expenses before reductions | .35% A | .39% | .61% | .60% | .60% | .61% |
Expenses net of fee waivers, if any | .35% A | .38% | .53% | .53% | .53% | .53% |
Expenses net of all reductions | .35% A | .38% | .53% | .53% | .53% | .53% |
Net investment income (loss) | 1.53% A | 1.48% | 1.46% | 1.25% | 1.09% | .84% |
Supplemental Data | | | | | | |
Net assets, end of period (000 omitted) | $ 174,256 | $ 156,295 | $ 106,051 | $ 64,844 | $ 31,035 | $ 19,338 |
Portfolio turnover rate | 7% A | 7% | 5% | 6% | 7% | 9% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown. D Total returns would have been lower had certain expenses not been reduced during the periods shown. E Calculated based on average shares outstanding during the period. F Investment income per share reflects a special dividend which amounted to $.36 per share. G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. |
See accompanying notes which are an integral part of the financial statements.
VIP Index 500 Portfolio
Notes to Financial Statements
For the period ended June 30, 2006 (Unaudited)
1. Significant Accounting Policies.
VIP Index 500 Portfolio (the Fund) is a fund of Variable Insurance Products Fund II, (the trust) (referred to in this report as VIP Index 500 Portfolio) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. Shares of the Fund may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts. The Fund offers the following classes of shares: Initial Class shares, Service Class shares and Service Class 2 shares. All classes have equal rights and voting privileges, except for matters affecting a single class. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust.
Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan), independent Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, their annual compensation. Prior to July 1, 2006, deferred amounts were treated as though equivalent dollar amounts had been invested in a cross-section of other Fidelity funds, and were marked-to-market. Effective July 1, 2006, deferred amounts will be directly invested in a cross-section of Fidelity funds. Deferred amounts remain in the Fund until distributed in accordance with the Plan.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to futures transactions, capital loss carryforwards and losses deferred due to wash sales.
The federal tax cost of investments and unrealized appreciation (depreciation) as of period end were as follows:
Unrealized appreciation | $ 1,248,502,350 | |
Unrealized depreciation | (154,255,671) | |
Net unrealized appreciation (depreciation) | $ 1,094,246,679 | |
Cost for federal income tax purposes | $ 1,656,924,755 | |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
Futures Contracts. The Fund may use futures contracts to manage its exposure to the stock market. Buying futures tends to increase a fund's exposure to the underlying instrument, while selling futures tends to decrease a fund's exposure to the underlying instrument or hedge other fund investments. Upon entering into a futures contract, a fund is required to deposit with a clearing broker, no later than the following business day, an amount ("initial margin") equal to a certain percentage of the face value of the contract. The initial margin may be in the form of cash or securities and is transferred to a segregated account on settlement date. Subsequent payments ("variation margin") are made or received by a fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized gains or losses. Realized gains (losses) are recorded upon the expiration or closing of the futures contract. Securities deposited to meet margin requirements are identified in the Schedule of Investments. Futures contracts involve, to varying degrees, risk of loss in excess of any futures variation margin reflected in the Statement of Assets and Liabilities. The underlying face amount at value of any open futures contracts at period end is shown in the Schedule of Investments under the caption "Futures Contracts." This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments or if the counterparties do not perform under the contract's terms. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $99,915,245 and $270,458,979, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee that is based on an annual rate of .10% of the Fund's average net assets. Under the management contract, FMR pays all other fund-level expenses, except the compensation of the independent Trustees and certain other expenses such as interest expense, including commitment fees. In addition, under an expense contract, FMR pays all class-level expenses except distribution and service fees so that total expenses do not exceed .10% of each class' average net assets plus the distribution and service fee applicable to each class, with certain exceptions.
Sub-Adviser. Geode Capital Management, LLC (Geode), serves as sub-adviser for the Fund. Geode provides discretionary investment advisory services to the Fund and is paid by FMR for providing these services.
VIP Index 500 Portfolio
4. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate 12b-1 Plans for each Service Class of shares. Each Service Class pays Fidelity Distributors Corporation (FDC), an affiliate of FMR, a service fee. For the period, the service fee is based on an annual rate of .10% of Service Class' average net assets and .25% of Service Class 2's average net assets.
For the period, each class paid FDC the following amounts, all of which were re-allowed to insurance companies for the distribution of shares and providing shareholder support services:
Service Class | $ 14,440 | |
Service Class 2 | 212,578 | |
| $ 227,018 | |
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the Fund's transfer, dividend disbursing, and shareholder servicing agent. Under the expense contract, the classes do not pay transfer agent fees.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Interfund Lending Program. Pursuant to an Exemptive Order issued by the SEC, the Fund, along with other registered investment companies having management contracts with FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Funds to borrow from, or lend money to, other participating affiliated funds. At period end, there were no interfund loans outstanding. The Fund's activity in this program during the period for which loans were outstanding was as follows:
Borrower or Lender | Average Daily
Loan Balance | Weighted Average
Interest Rate | Interest
Expense |
Borrower | $ 8,763,455 | 4.59% | $ 12,296 |
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $4,244 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds.
7. Expense Reductions.
Through arrangements with the Fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's miscellaneous expenses by $2,444.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
At the end of the period, FMR or its affiliates were the owners of record of 33% of the total outstanding shares of the Fund.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| Six months ended
June 30,
2006 | Year ended
December 31,
2005 |
From net investment income | | |
Initial Class | $ 45,574,056 | $ 47,629,866 |
Service Class | 458,108 | 396,447 |
Service Class 2 | 2,518,157 | 1,749,708 |
Total | $ 48,550,321 | $ 49,776,021 |
10. Share Transactions.
Transactions for each class of shares were as follows:
| Shares | Dollars |
| Six months ended
June 30,
2006 | Year ended
December 31,
2005 | Six months ended June 30,
2006 | Year ended
December 31,
2005 |
Initial Class | | | | |
Shares sold | 438,723 | 1,147,551 | $ 63,364,093 | $ 156,365,229 |
Reinvestment of distributions | 321,397 | 353,180 | 45,574,056 | 47,629,866 |
Shares redeemed | (1,675,641) | (3,050,219) | (242,275,254) | (415,532,468) |
Net increase (decrease) | (915,521) | (1,549,488) | $ (133,337,105) | $ (211,537,373) |
Service Class | | | | |
Shares sold | 23,514 | 41,683 | $ 3,404,157 | $ 5,655,385 |
Reinvestment of distributions | 3,238 | 2,945 | 458,108 | 396,447 |
Shares redeemed | (9,036) | (21,485) | (1,300,254) | (2,921,334) |
Net increase (decrease) | 17,716 | 23,143 | $ 2,562,011 | $ 3,130,498 |
Service Class 2 | | | | |
Shares sold | 255,305 | 540,862 | $ 36,574,328 | $ 72,886,987 |
Reinvestment of distributions | 17,882 | 13,056 | 2,518,157 | 1,749,708 |
Shares redeemed | (157,517) | (218,660) | (22,445,584) | (29,570,470) |
Net increase (decrease) | 115,670 | 335,258 | $ 16,646,901 | $ 45,066,225 |
VIP Index 500 Portfolio
Semiannual Report
VIP Index 500 Portfolio
Semiannual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Geode Capital Management, LLC
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Service Agents
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Fidelity Service Company, Inc.
Boston, MA
Custodian
Mellon Bank, N.A.
Pittsburgh, PA
VIPIDX-SANN-0806
1.705630.108
Item 2. Code of Ethics
Not applicable.
Item 3. Audit Committee Financial Expert
Not applicable.
Item 4. Principal Accountant Fees and Services
Not applicable.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Schedule of Investments
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
There were no material changes to the procedures by which shareholders may recommend nominees to the Variable Insurance Products Fund II: Index 500 Portfolio's Board of Trustees.
Item 11. Controls and Procedures
(a)(i) The President and Treasurer and the Chief Financial Officer have concluded that the Variable Insurance Products Fund II: Index 500 Portfolio's (the "Fund") disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act) provide reasonable assurances that material information relating to the Fund is made known to them by the appropriate persons, based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report.
(a)(ii) There was no change in the Fund's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Fund's internal control over financial reporting.
Item 12. Exhibits
(a) | (1) | Not applicable. |
(a) | (2) | Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT. |
(a) | (3) | Not applicable. |
(b) | | Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Variable Insurance Products Fund II
By: | /s/Christine Reynolds |
| Christine Reynolds |
| President and Treasurer |
| |
Date: | August 17, 2006 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/Christine Reynolds |
| Christine Reynolds |
| President and Treasurer |
| |
Date: | August 17, 2006 |
By: | /s/Joseph B. Hollis |
| Joseph B. Hollis |
| Chief Financial Officer |
| |
Date: | August 17, 2006 |
