SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
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Fidelity Advisor Series III
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which
transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total Fee Paid:
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<CAPTION>
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a) (2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of
its filing.
</TABLE>
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
FIDELITY ADVISOR EQUITY INCOME FUND
CLASS A
CLASS T
CLASS B
CLASS C
INSTITUTIONAL CLASS
A FUND OF
FIDELITY ADVISOR SERIES III
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-522-7297
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Fidelity Advisor Equity Income Fund:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
Meeting) of Fidelity Advisor Equity Income Fund, Class A, Class T,
Class B, Class C, and Institutional Class (the fund), will be held at
the office of Fidelity Advisor Series III (the trust), 82 Devonshire
Street, Boston, Massachusetts 02109 on November 18, 1998, at 9:00 a.m.
The purpose of the Meeting is to consider and act upon the following
proposals, and to transact such other business as may properly come
before the Meeting or any adjournments thereof.
1. To approve an amended management contract for the fund.
2. To approve a new sub-advisory agreement with FMR Far East for the
fund.
3. To approve a new sub-advisory agreement with FMR U.K. for the fund.
4 To amend the Class T Distribution and Service Plan of the fund.
5. To amend the Class B Distribution and Service Plan of the fund.
6. To approve an agreement and plan providing for the reorganization
of the
fund from a separate series of one Massachusetts business trust to
another.
7. To adopt a new fundamental investment policy for the fund
permitting the fund to invest all of its assets in another open-end
investment company managed by FMR or an affiliate with substantially
the same investment objective and policies.
8. To amend the fund's fundamental investment limitation concerning
diversification.
The Board of Trustees has fixed the close of business on September
21, 1998 as the record date for the determination of the shareholders
of the fund and each class, if applicable entitled to notice of, and
to vote at, such Meeting and any adjournments thereof.
By order of the Board of Trustees,
ERIC D. ROITER Secretary
September 21, 1998
YOUR VOTE IS IMPORTANT -
PLEASE RETURN YOUR PROXY CARD PROMPTLY.
SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. ANY
SHAREHOLDER WHO DOES NOT EXPECT TO ATTEND THE MEETING IS URGED TO
INDICATE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE AND SIGN
IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF
MAILED IN THE UNITED STATES. IN ORDER TO AVOID UNNECESSARY EXPENSE, WE
ASK YOUR COOPERATION IN MAILING YOUR PROXY CARD PROMPTLY, NO MATTER
HOW LARGE OR SMALL YOUR HOLDINGS MAY BE.
INSTRUCTIONS FOR EXECUTING PROXY CARD
The following general rules for executing proxy cards may be of
assistance to you and help avoid the time and expense involved in
validating your vote if you fail to execute your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Your name should be signed exactly as it
appears in the registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the registration.
3. ALL OTHER ACCOUNTS should show the capacity of the individual
signing. This can be shown either in the form of the account
registration itself or by the individual executing the proxy card. For
example:
REGISTRATION VALID SIGNATURE
A. 1) ABC Corp. John Smith, Treasurer
2) ABC Corp. John Smith, Treasurer
c/o John Smith, Treasurer
B. 1) ABC Corp. Profit Sharing Plan Ann B. Collins,
Trustee
2) ABC Trust Ann B. Collins,
Trustee
3) Ann B. Collins, Trustee Ann B. Collins,
u/t/d 12/28/78 Trustee
C. 1) Anthony B. Craft, Cust. Anthony B. Craft
f/b/o Anthony B. Craft, Jr.
UGMA
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF
FIDELITY ADVISOR SERIES III:
FIDELITY ADVISOR EQUITY INCOME FUND
TO BE HELD ON NOVEMBER 18, 1998
This Proxy Statement is furnished in connection with a solicitation
of proxies made by, and on behalf of, the Board of Trustees of
Fidelity Advisor Series III (the trust) to be used at the Special
Meeting of Shareholders of Fidelity Advisor Equity Income Fund (the
fund) and at any adjournments thereof (the Meeting), to be held on
November 18, 1998 at 9:00 a.m. at 82 Devonshire Street, Boston,
Massachusetts 02109, the principal executive office of the trust and
Fidelity Management & Research Company (FMR), the fund's investment
adviser.
The purpose of the Meeting is set forth in the accompanying Notice.
The solicitation is being made primarily by the mailing of this Proxy
Statement and the accompanying proxy card on or about September 21,
1998. Supplementary solicitations may be made by mail, telephone,
telegraph, facsimile, electronic means or by personal interview by
representatives of the trust. In addition, Management Information
Services Corp. (MIS) and D.F. King & Co., Inc. may be paid on a
per-call basis to solicit shareholders on behalf of the fund at an
anticipated cost of approximately $9,800. The expenses in connection
with preparing this Proxy Statement and its enclosures and of all
solicitations will be paid by the fund, provided the expenses do not
exceed each class's existing expense cap listed on page 38. Expenses
exceeding each class's expense cap will be paid by FMR. The fund will
reimburse brokerage firms and others for their reasonable expenses in
forwarding solicitation material to the beneficial owners of shares.
The principal business address of Fidelity Distributors Corporation
(FDC), the fund's principal underwriter and distribution agent, and
Fidelity Management & Research (U.K.) Inc. (FMR U.K.) and Fidelity
Management & Research (Far East) Inc. (FMR Far East), subadvisers to
the fund, is 82 Devonshire Street, Boston, Massachusetts 02109.
If the enclosed proxy card is executed and returned, it may
nevertheless be revoked at any time prior to its use by written
notification received by the trust, by the execution of a later-dated
proxy card, or by attending the Meeting and voting in person.
All proxy cards solicited by the Board of Trustees that are properly
executed and received by the Secretary prior to the Meeting, and are
not revoked, will be voted at the Meeting. Shares represented by such
proxies will be voted in accordance with the instructions thereon. If
no specification is made on a proxy card, it will be voted FOR the
matters specified on the proxy card. Only proxies that are voted will
be counted towards establishing a quorum. Broker non-votes are not
considered voted for this purpose. Shareholders should note that while
votes to ABSTAIN will count toward establishing a quorum, passage of
any proposal being considered at the Meeting will occur only if a
sufficient number of votes are cast FOR the proposal. Accordingly,
votes to ABSTAIN and votes AGAINST will have the same effect in
determining whether the proposal is approved.
The fund may also arrange to have votes recorded by telephone. D.F.
King & Co., Inc. may be paid on a per-call basis for vote-by-phone
solicitations on behalf of the fund at an anticipated cost of
approximately $9,800. The expenses in connection with telephone voting
will be paid by the fund, provided the expenses do not exceed the
fund's existing class expense caps, as described on page 38. Expenses
exceeding each class's expense cap will be paid by FMR. If the fund
records votes by telephone, it will use procedures designed to
authenticate shareholders' identities, to allow shareholders to
authorize the voting of their shares in accordance with their
instructions, and to confirm that their instructions have been
properly recorded. Proxies voted by telephone may be revoked at any
time before they are voted in the same manner that proxies voted by
mail may be revoked.
If a quorum is not present at the Meeting, or if a quorum is present
at the Meeting but sufficient votes to approve one or more of the
proposed items are not received, or if other matters arise requiring
shareholder attention, the persons named as proxy agents may propose
one or more adjournments of the Meeting to permit further solicitation
of proxies. Any such adjournment will require the affirmative vote of
a majority of those shares present at the Meeting or represented by
proxy. When voting on a proposed adjournment, the persons named as
proxy agents will vote FOR the proposed adjournment all shares that
they are entitled to vote with respect to each item, unless directed
to vote AGAINST the item, in which case such shares will be voted
AGAINST the proposed adjournment with respect to that item. A
shareholder vote may be taken on one or more of the items in this
Proxy Statement prior to such adjournment if sufficient votes have
been received and it is otherwise appropriate.
Shares of each class of Fidelity Advisor Equity Income Fund issued
and outstanding as of July 31, 1998 are indicated in the following
table:
Fidelity Advisor Equity Income Fund
Class A
Class T
Class B
Class C
Institutional Class
[As of July 31, 1998, the nominees and officers of the trust owned,
in the aggregate, less than 1% of the outstanding shares of each class
of the fund.]
[To the knowledge of the trust, substantial (5% or more) record or
beneficial ownership of each class of the fund on July 31, 1998, was
as follows:]
[FMR has advised the trust that for Proposals 1 through 8 contained
in this Proxy Statement, it will vote its shares at the Meeting FOR
each Proposal. To the knowledge of the trust, no other shareholder
owned of record or beneficially more than 5% of the outstanding shares
of each class of the fund on that date.]
Shareholders of record at the close of business on September 21, 1998
will be entitled to vote at the Meeting. Each such shareholder will be
entitled to one vote for each dollar of net asset value held on that
date.
FOR A FREE COPY OF THE FUND'S ANNUAL REPORTS FOR THE FISCAL YEAR
ENDED NOVEMBER 30, 1997 AND THE SEMIANNUAL REPORTS FOR THE FISCAL
PERIOD ENDED MAY 31, 1998, CALL 1-800-522-7297 OR WRITE TO FDC AT 82
DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109.
VOTE REQUIRED: APPROVAL OF PROPOSALS 1 THROUGH 3 AND 6 THROUGH 8
REQUIRES THE AFFIRMATIVE VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING
SECURITIES" OF THE FUND. APPROVAL OF PROPOSALS 4 AND 5 REQUIRES THE
AFFIRMATIVE VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING SECURITIES"
OF CLASS T AND CLASS B SHAREHOLDERS, RESPECTIVELY. UNDER THE
INVESTMENT COMPANY ACT OF 1940 (THE 1940 ACT), THE VOTE OF A "MAJORITY
OF THE OUTSTANDING VOTING SECURITIES" MEANS THE AFFIRMATIVE VOTE OF
THE LESSER OF (A) 67% OR MORE OF THE VOTING SECURITIES PRESENT AT THE
MEETING OR REPRESENTED BY PROXY IF THE HOLDERS OF MORE THAN 50% OF THE
OUTSTANDING VOTING SECURITIES ARE PRESENT OR REPRESENTED BY PROXY OR
(B) MORE THAN 50% OF THE OUTSTANDING VOTING SECURITIES. BROKER
NON-VOTES ARE NOT CONSIDERED "PRESENT" FOR THIS PURPOSE.
1. TO APPROVE AN AMENDED MANAGEMENT CONTRACT FOR THE FUND.
The Board of Trustees, including the Trustees who are not "interested
persons" of the trust or of FMR (the Independent Trustees), has
approved, and recommends that shareholders of the fund approve, a
proposal to adopt an amended management contract with FMR (the Amended
Contract). The Amended Contract changes the fund's current management
fee arrangement to a fee arrangement that is standard for comparable
Fidelity equity funds. The change in the fund's management fee
structure is discussed in more detail below. In addition, the Amended
Contract allows FMR and the trust, on behalf of the fund, to modify
the Management Contract subject to the requirements of the 1940 Act.
The existing Management Contract currently requires the vote of a
majority of the fund's outstanding voting securities to authorize all
amendments. See "Modification of Management Contract Amendment
Provisions" on page 6 for more details.
MODIFICATION OF MANAGEMENT FEE STRUCTURE.The fund's current
management fee is an annual percentage of the fund's average net
assets and is calculated and paid monthly. Under the fund's present
management contract (the Present Contract), the fund pays FMR a "flat"
fee at an annual rate of 0.50% of the fund's average daily net assets.
The fund also pays all of its other operating expenses. The Amended
Contract replaces this flat management fee structure with a "group
fee" structure that is standard for other comparable Fidelity equity
funds.
Under the Amended Contract, the fund would pay FMR a monthly
management fee that is calculated by adding a Group Fee Rate to an
Individual Fund Fee Rate and multiplying the result by the fund's
average net assets. The Group Fee Rate varies based upon the monthly
average of the net assets of all registered investment companies
having management contracts with FMR (assets under management by FMR).
For example, as assets under management by FMR increase, the Group Fee
Rate declines. The Individual Fund Fee Rate is a fixed rate specific
to the fund. Under the Amended Contract, the fund's Individual Fund
Fee Rate would equal 0.20%. In addition to the management fee, the
fund would continue to pay all of its other operating expenses.
The fund's proposed Group Fee Rate would be calculated according to
the graduated schedule below. The schedule provides for different fee
rates for different levels of assets under management by FMR. As
illustrated in the table, the rate at which the Group Fee Rate
declines is determined by fee "breakpoints" that provide for lower fee
rates when the total assets managed by FMR increase.
Average Group Net Assets Annualized Group Fee Rate
(for each level)
0 - $ 3 billion .5200%
3 - 6 .4900
6 - 9 .4600
9 - 12 .4300
12 - 15 .4000
15 - 18 .3850
18 - 21 .3700
21 - 24 .3600
24 - 30 .3500
30 - 36 .3450
36 - 42 .3400
42 - 48 .3350
48 - 66 .3250
66 - 84 .3200
84 - 102 .3150
102 - 138 .3100
138 - 174 .3050
174 - 210 .3000
210 - 246 .2950
246 - 282 .2900
282 - 318 .2850
318 - 354 .2800
354 - 390 .2750
390 - 426 .2700
426 - 462 .2650
462 - 498 .2600
498 - 534 .2550
Over - 534 .2500
Average assets under FMR's management for June 1998 were
approximately $624 billion.
A copy of the Amended Contract, marked to indicate the proposed
amendments, is supplied as Exhibit 1 on page __ . Except for the
modifications discussed above, the Amended Contract is substantially
identical to the Present Contract. (For a detailed discussion of the
fund's Present Contract, refer to the section entitled "Present
Management Contract" beginning on page 35.) If approved by
shareholders, the Amended Contract will take effect on December 1,
1998 (or, if later, the first day of the first month following
approval) and will remain in effect through July 31, 1999 and
thereafter, but only as long as its continuance is approved at least
annually by (i) the vote, cast in person at a meeting called for the
purpose, of a majority of the Independent Trustees and (ii) the vote
of either a majority of the Trustees or by the vote of a majority of
the outstanding shares of the fund. If the Amended Contract is not
approved, the Present Contract will continue in effect through July
31, 1999, and thereafter only as long as its continuance is approved
at least annually as above.
IMPACT OF PROPOSED MODIFICATION OF MANAGEMENT FEE STRUCTURE. At FMR's
level of assets under management for June 1998 ($624 billion ),
changing from the fund's current flat 0.50% management fee rate to a
group fee structure would reduce FMR's management fee by 2.22%. For
the fund's fiscal year ended November 30, 1997, using the proposed
group fee structure, FMR's management fee equals 0.4978% of the fund's
average net assets. For fiscal 1997, the proposed group fee structure
lowers the management fee rate by 0.39% of the fund's average net
assets for the year compared to the rate FMR was entitled to receive
under the Present Contract (0.50%).
The future impact of the proposed fee change will depend on certain
factors and may represent an increase or decrease from the management
fee under the Present Contract. Specifically, replacing the fund's
flat 0.50% management fee with the proposed group fee structure will
either increase the fund's management fee or reduce it depending on
the level of FMR's future assets under management. If FMR's future
assets under management equal or exceed their June 1998 level of $624
billion, adoption of the group fee structure will result in lower
management fees. Conversely, if FMR's future assets under management
decline below their June 1998 level, the fund's management fee under
the proposed group fee structure might be higher than the fund's
current flat rate of 0.50%.
In sum, based on FMR's assets under management for June 1998,
adopting the group fee structure will lead to an immediate reduction
in the fund's management fee and may lead to further fee reductions if
FMR's assets under management continue to grow. If FMR's assets under
management drop below their June 1998 level, adoption of the proposed
group fee structure may result in a management fee rate that is higher
than the fund's current rate.
COMPARISON OF MANAGEMENT FEES AND TOTAL EXPENSES. The following chart
compares the fund's management fee under the terms of the Present
Contract for the twelve month period ended November 30, 1997 to the
management fee that the fund would have incurred under the Amended
Contract if it had been in effect during that period.
Present Contract Amended Contract Percentage Difference
Management Fee Management Fee
$14,927,663 $14,869,828 -0.39%
The following tables provide data concerning each class's management
fees and expenses as a percentage of average net assets for the fiscal
year ended November 30, 1997 under the Present Contract and if the
Amended Contract had been in effect during the same period.
The following figures are based on historical expenses adjusted to
reflect current fees of Class A, Class T, Class B, Class C, and
Institutional Class shares of the fund and are calculated as a
percentage of average net assets of each class.
CLASS A PRESENT CONTRACT AMENDED CONTRACT
Management Fee 0.50% 0.4978%
Rule 12b-1 Fee 0.25% 0.2500%
Other Expenses* 0.35% 0.3500%
Total Operating Expenses 1.10% 1.0978%
CLASS T PRESENT CONTRACT AMENDED CONTRACT
Management Fee 0.50% 0.4978%
Rule 12b-1 Fee 0.50% 0.5000%
Other Expenses 0.23% 0.2300%
Total Operating Expenses 1.23% 1.2278%
CLASS B PRESENT CONTRACT AMENDED CONTRACT
Management Fee 0.50% 0.4978%
Rule 12b-1 Fee 1.00% 1.0000%
Other Expenses 0.24% 0.2400%
Total Operating Expenses 1.74% 1.7378%
CLASS C PRESENT CONTRACT AMENDED CONTRACT
Management Fee 0.50% 0.4978%
Rule 12b-1 Fee 1.00% 1.0000%
Other Expenses*,A 0.35% 0.3500%
Total Operating Expenses 1.85% 1.8478%
INSTITUTIONAL CLASS PRESENT CONTRACT AMENDED CONTRACT
Management Fee 0.50% 0.4978%
Rule 12b-1 Fee None 0.0000%
Other Expenses 0.19% 0.1900%
Total Operating Expenses 0.69% 0.6878%
* After reimbursement.
A Based on estimated expenses for the first year.
FMR has voluntarily agreed to reimburse each class of the fund to the
extent that total operating expenses exceed 1.10%, 1.35%, 1.85%, 1.85%
and 0.85% of the average net assets of Class A, Class T, Class B,
Class C, and Institutional Class, respectively. If these agreements
were not in effect, total operating expenses, as a percentage of
average net assets, for Class A and Class C would have been as
follows: (i) for Class A: 1.2800% under the Present Contract and
1.2778% under the Amended Contract; and (ii) for Class C: 1.8800%
under the Present Contract and 1.8778% under the Amended Contract.
A portion of the brokerage commissions that the fund pays is used to
reduce the fund's expenses. In addition, the fund has entered into
arrangements with its custodian and transfer agent whereby credits
realized as a result of uninvested cash balances are used to reduce
custodian and transfer agent expenses. Including these reductions, the
total operating expenses presented in the tables would have been
1.0900% for Class A, 1.2100% for Class T, 1.7300% for Class B, 1.8500%
for Class C and 0.6700% for Institutional Class under the Present
Contract and 1.2478% for Class A, 1.2078% for Class T, 1.7278% for
Class B, 1.8078% for Class C and 0.6678% for Institutional Class under
the Amended Contract.
MODIFICATION OF MANAGEMENT CONTRACT AMENDMENT PROVISIONS. The Amended
Contract allows FMR and the Trust, on behalf of the fund, to amend the
Management Contract subject to the provisions of Section 15 of the
1940 Act, as modified or interpreted by the Securities and Exchange
Commission. In contrast, the Present Contract explicitly requires the
vote of a majority of the outstanding voting securities of the fund to
authorize all amendments. Generally, the proposed modification to the
Present Contract's amendment provisions will allow FMR and the trust,
on behalf of the fund, to amend the Management Contract without
shareholder vote if the 1940 Act permits them to do so. For example,
under current interpretations of Section 15 of the 1940 Act, the
Amended Contract would give FMR and the trust the ability to amend the
Management Contract to immediately reflect a management fee decrease
without the delay of having to first conduct a proxy solicitation. In
short, the proposed modification gives FMR and the trust added
flexibility to amend the Management Contract subject to 1940 Act
constraints. Of course, any future amendments to the Management
Contract would require the approval of the fund's Board of Trustees.
MATTERS CONSIDERED BY THE BOARD
The mutual funds for which the members of the Board of Trustees serve
as Trustees are referred to herein as the "Fidelity funds." The Board
of Trustees meets eleven times a year. The Board of Trustees,
including the Independent Trustees, believe that matters bearing on
the appropriateness of the fund's management fees are considered at
most, if not all, of their meetings. While the full Board of Trustees
or the Independent Trustees, as appropriate, act on all major matters,
a significant portion of the activities of the Board of Trustees
(including certain of those described herein) are conducted through
committees. The Independent Trustees meet frequently in executive
session and are advised by independent legal counsel selected by the
Independent Trustees.
The proposal to present the Amended Contract to shareholders was
approved by the Board of Trustees of the fund, including all of the
Independent Trustees, on July 16, 1998. The Board of Trustees consider
and approve twice a year portfolio transactions with broker-dealers
who provide research services to the funds. The Board of Trustees
received materials relating to the Amended Contract in advance of the
meeting at which the Amended Contract was considered, and had the
opportunity to ask questions and request further information in
connection with such consideration.
INFORMATION RECEIVED BY THE INDEPENDENT TRUSTEES. In connection with
their meetings the Trustees receive materials that relate to the
Amended Contract. These materials include; (i) information on the
investment performance of the fund, a peer group of funds and an
appropriate index or combination of indices, (ii) sales and redemption
data in respect of the fund, (iii) the economic outlook and the
general investment outlook in the markets in which the fund invests,
and (iv) notable changes in the fund's investments. The Board of
Trustees and the Independent Trustees also consider periodically other
material facts such as (1) FMR's results and financial condition, (2)
arrangements in respect of the distribution of the fund's shares, (3)
the procedures employed to determine the value of the fund's assets,
(4) the allocation of the fund's brokerage, if any, including
allocations to brokers affiliated with FMR and the use of "soft"
commission dollars to pay fund expenses and to pay for research and
other similar services, (5) FMR's management of the relationships with
the fund's custodian and subcustodians, (6) the resources devoted to
and the record of compliance with the fund's investment policies and
restrictions and with policies on personal securities transactions and
(7) the nature, cost and character of non-investment management
services provided by FMR and its affiliates.
In response to questions raised by the Independent Trustees,
additional information was furnished by FMR including, among other
items, information on and analysis of (a) the overall organization of
FMR, (b) the impact of performance adjustments to management fees, (c)
the choice of performance indices and benchmarks, (d) the composition
of peer groups of funds, (e) transfer agency and bookkeeping fees paid
to affiliates of FMR, (f) investment performance, (g) investment
management staffing, (h) the potential for achieving further economies
of scale, (i) operating expenses paid to third parties, and (j) the
information furnished to investors, including the fund's shareholders.
In considering the Amended Contract, the Board of Trustees and the
Independent Trustees did not identify any single factor as
all-important or controlling, and the following summary does not
detail all the matters considered. Matters considered by the Board of
Trustees and the Independent Trustees in connection with their
approval of the Amended Contract include the following:
INVESTMENT COMPLIANCE AND PERFORMANCE. The Board of Trustees and the
Independent Trustees considered whether the fund has operated within
its investment objective and its record of compliance with its
investment restrictions. They also reviewed monthly the fund's
investment performance as well as the performance of a peer group of
mutual funds, and the performance of an appropriate index or
combination of indices.
FMR'S PERSONNEL AND METHODS. The Board of Trustees and the
Independent Trustees review at least annually the background of the
fund's portfolio manager and the fund's investment objective and
discipline. The Independent Trustees have also had discussions with
senior management of FMR responsible for investment operations and the
senior management of Fidelity's equity group. Among other things they
considered the size, education and experience of FMR's investment
staff, its use of technology, and FMR's approach to recruiting,
training and retaining portfolio managers and other research, advisory
and management personnel.
NATURE AND QUALITY OF OTHER SERVICES. The Board of Trustees and the
Independent Trustees considered the nature, quality, cost and extent
of administrative and shareholder services performed by FMR and
affiliated companies, both under the present contract and the Amended
Contract and under separate agreements covering transfer agency
functions and pricing, bookkeeping and securities lending services, if
any. The Board of Trustees and the Independent Trustees have also
considered the nature and extent of FMR's supervision of third party
service providers, principally custodians and subcustodians.
EXPENSES. The Board of Trustees and the Independent Trustees
considered each classes' expense ratios and expense ratios of a peer
group of funds. They also considered the amount and nature of fees
paid by shareholders.
PROFITABILITY. The Board of Trustees and the Independent Trustees
considered the level of FMR's profits in respect of the management of
the Fidelity funds, including the fund. This consideration included an
extensive review of FMR's methodology in allocating its costs to the
management of the fund. The Board of Trustees and the Independent
Trustees have concluded that the cost allocation methodology employed
by FMR has a reasonable basis and is appropriate in light of all of
the circumstances. They considered the profits realized by FMR in
connection with the operation of the fund and whether the amount of
profit is a fair entrepreneurial profit for the management of the
fund. They also considered the profits realized from non-fund
businesses which may benefit from or be related to the fund's
business. The Board of Trustees and the Independent Trustees also
considered FMR's profit margins in comparison with available industry
data, both accounting for and ignoring marketing expenses.
ECONOMIES OF SCALE. The Board of Trustees and the Independent
Trustees considered whether there have been economies of scale in
respect of the management of the Fidelity funds, whether the Fidelity
funds (including the fund) have appropriately benefitted from any
economies of scale, and whether there is potential for realization of
any further economies of scale. The Board of Trustees and the
Independent Trustees have concluded that FMR's mutual fund business
presents some limited opportunities to realize economies of scale and
that these economies are being shared between fund shareholders and
FMR in an appropriate manner.
OTHER BENEFITS TO FMR. The Board of Trustees and the Independent
Trustees also considered the character and amount of fees paid by the
fund and the fund's shareholders for services provided by FMR and its
affiliates, including fees for services like transfer agency, fund
accounting and direct shareholder services. They also considered the
allocation of fund brokerage to brokers affiliated with FMR and the
receipt of sales loads and payments under Rule 12b-1 plans in respect
of certain of the Fidelity funds. The Board of Trustees and the
Independent Trustees also considered the revenues and profitability of
FMR's businesses other than its mutual fund business, including FMR's
retail brokerage, correspondent brokerage, capital markets, trust,
investment advisory, pension record keeping, insurance, publishing,
real estate, international research and investment funds, and others.
The Board of Trustees and the Independent Trustees considered the
intangible benefits that accrue to FMR and its affiliates by virtue of
their relationship with the fund.
OTHER BENEFITS TO SHAREHOLDERS. The Board of Trustees and the
Independent Trustees considered the benefit to shareholders of
investing in a fund that is part of a large family of funds offering a
variety of investment disciplines and providing for a large variety of
fund and shareholder services. With regard to the proposed
modification to the Present Contract's amendment provisions, the Board
of Trustees and the Independent Trustees considered the benefit to
shareholders of FMR's and the trust's increased flexibility (within
1940 Act constraints) to amend the Management Contract without the
delays and potential costs of a proxy solicitation.
CONCLUSION. Based on their evaluation of all material factors and
assisted by the advice of independent counsel, the Trustees concluded
(i) that the proposed modifications to the management fee structure,
that is the implementation of the Group Fee Rate structure and the
proposed modification to the Present Contract's amendment provisions,
are in the best interest of the fund's shareholders. The Board of
Trustees, including the Independent Trustees, voted to approve the
submission of the Amended Contract to shareholders of the fund and
recommends that shareholders of the fund vote FOR the Amended
Contract. If approved, the Amended Contract will take effect on the
first day of the first month following shareholder approval.
2. TO APPROVE A NEW SUB-ADVISORY AGREEMENT WITH FMR FAR EAST FOR THE
FUND.
In conjunction with its portfolio management responsibilities on
behalf of the fund, FMR has entered into sub-advisory agreements with
affiliates whose offices are geographically dispersed around the
world. To strengthen these relationships, the Board of Trustees
proposes that shareholders of the fund approve a new sub-advisory
agreement (the Proposed Agreement) between FMR Far East and FMR on
behalf of the fund to replace FMR's existing agreement with FMR Far
East. The Proposed Agreement would allow FMR not only to receive
investment advice and research services from FMR Far East, but also
would permit FMR to grant FMR Far East investment management authority
if FMR believes it would be beneficial to the fund and its
shareholders. In addition, the Proposed Agreement would allow FMR, FMR
Far East, and the trust, on behalf of the fund, to modify the Proposed
Agreement subject to the requirements of the 1940 Act. The existing
sub-advisory agreement currently in effect with FMR Far East requires
the vote of a majority of the fund's outstanding voting securities to
authorize all amendments. Because FMR pays all of FMR Far East's fees,
the Proposed Agreement would not affect the fees paid by the fund to
FMR.
On October 16, 1997, the Board of Trustees agreed to submit the
Proposed Agreement to shareholders of the fund pursuant to a unanimous
vote of both the full Board of Trustees and those Trustees who were
not "interested persons" of the trust or FMR. FMR provided substantial
information to the Trustees to assist them in their deliberations. The
Trustees determined that allowing FMR to grant investment management
authority to FMR Far East would provide FMR increased flexibility in
the assignment of portfolio managers and give the fund access to
managers located abroad who may have more specialized expertise with
respect to local companies and markets. Additionally, the Trustees
believe that the fund and its shareholders may benefit from giving
FMR, through FMR Far East, the ability to execute portfolio
transactions from points in the Far East that are physically closer to
foreign issuers and the primary markets in which their securities are
traded. Increasing FMR's proximity to foreign markets should enable
the fund to participate more readily in full trading sessions on
foreign exchanges and to react more quickly to changing market
conditions. With regard to the proposed modification to the existing
sub-advisory agreement's amendment provisions, the Trustees considered
the benefit to shareholders of FMR's, FMR Far East's, and the trust's
increased flexibility (within 1940 Act constraints) to amend the
agreement without delays and potential costs of a proxy solicitation.
If approved by shareholders, the Proposed Agreement will replace the
sub-advisory agreement currently in effect with FMR Far East with
respect to the fund (the Current Agreement). The Current Agreement,
dated January 1, 1991, was approved by the fund's shareholders on
November 14, 1990. A copy of the Proposed Agreement is attached to
this proxy statement as Exhibit 2.
FMR Far East, with its principal office in Tokyo, Japan, is a
wholly-owned subsidiary of FMR established in 1986 to provide
investment research to FMR with respect to foreign securities. This
research complements other research on foreign securities produced by
FMR's U.S.-based research analysts and portfolio managers, or obtained
from broker-dealers or other sources.
FMR Far East may also provide investment advisory services to FMR
with respect to other investment companies for which FMR serves as
investment adviser, and to other clients. Currently, FMR Far East's
only client other than FMR is Fidelity International Limited (FIL), an
affiliate of FMR organized under the laws of Bermuda. FIL provides
investment advisory services to non-U.S. investment companies and
institutional investors investing in securities of issuers throughout
the world. Edward C. Johnson 3d, President and a Trustee of the trust,
is Chairman and a Director of FMR Far East, Chairman and a Director of
FIL, and a principal stockholder of both FIL and FMR. For more
information on FMR Far East, see the section entitled "Activities and
Management of FMR U.K. and FMR Far East" on page 34.
Under the Current Agreement, FMR Far East acts as an investment
consultant to FMR and supplies FMR with investment research
information and portfolio management advice as FMR reasonably requests
on behalf of the fund. FMR Far East provides investment advice and
research services with respect to issuers located outside of the
United States, focusing primarily on companies based in the Far East.
Under the Current Agreement with FMR Far East, FMR, NOT THE FUND, pays
FMR Far East's fee equal to 105% of its costs incurred in connection
with the agreement.
For the fiscal year ended November 30, 1997, FMR paid FMR Far East
$85,667 on behalf of the fund. Fees paid to the sub-adviser are not
reduced to reflect expense reimbursements or fee waivers by FMR, if
any, in effect from time to time.
Although FMR employees are expected to consult regularly with FMR Far
East, under the Current Agreement, FMR Far East has no authority to
make investment decisions on behalf of the fund. Under the Proposed
Agreement, FMR would continue to receive investment advice from FMR
Far East, but it could also grant investment management authority to
FMR Far East with respect to all or a portion of the fund's assets. If
FMR Far East were to exercise investment management authority on
behalf of the fund, it would be required, subject to the supervision
of FMR, to direct the investments of the fund in accordance with the
fund's investment objective, policies, and limitations as provided in
the fund's Prospectus or other governing instruments and such other
limitations as the fund may impose by notice in writing to FMR or FMR
Far East. If FMR grants investment management authority to FMR Far
East with respect to all or a portion of the fund's assets, FMR Far
East would be authorized to buy or sell stocks, bonds, and other
securities for the fund subject to the overall supervision of FMR and
the Board of Trustees. In addition, the Proposed Agreement would
authorize FMR to delegate other investment management services to FMR
Far East, including, but not limited to, currency management services
(including buying and selling currency options and entering into
currency forward and futures contracts on behalf of the fund), other
transactions in futures contracts and options, and borrowing or
lending portfolio securities. If any of these investment management
services were delegated, FMR Far East would continue to be subject to
the control and direction of FMR and the Board of Trustees and to be
bound by the investment objective, policies, and limitations of the
fund.
The Proposed Agreement would also allow FMR, FMR Far East, and the
trust, on behalf of the fund, to amend the Proposed Agreement subject
to the provisions of Section 15 of the 1940 Act, as modified or
interpreted by the Securities and Exchange Commission. In contrast,
the Current Agreement explicitly requires the vote of a majority of
the outstanding voting securities of the fund to authorize all
amendments. Generally, the proposed modification to the Current
Agreement's amendment provisions would allow amendment of the
sub-advisory agreement without shareholder vote only if the 1940 Act
so permits. In short, the proposed modification gives FMR, FMR Far
East, and the trust added flexibility to amend the sub-advisory
agreement subject to 1940 Act constraints. Of course, any future
amendments to the sub-advisory agreement would require the approval of
the Board of Trustees.
THE PROPOSED AGREEMENT WOULD NOT INCREASE THE FEES PAID TO FMR BY THE
FUND. The fees paid by FMR to FMR Far East for investment advice as
described above would remain unchanged. However, to the extent that
FMR granted investment management authority to FMR Far East, FMR would
pay FMR Far East 50% of its monthly management fee with respect to the
average net assets managed on a discretionary basis by FMR Far East
for investment management and portfolio execution services.
If approved by shareholders, the Proposed Agreement would take effect
on the first day of the first month following approval and would
continue in force until July 31, 1999 and from year to year
thereafter, but only as long as its continuance was approved at least
annually by (i) the vote, cast in person at a meeting called for the
purpose, of a majority of those Trustees who are not "interested
persons" of the trust or FMR and (ii) the vote of either a majority of
the Trustees or by the vote of a majority of the outstanding shares of
the fund.
The Proposed Agreement could be transferred to a successor of FMR Far
East without resulting in its termination and without shareholder
approval, as long as the transfer did not constitute an assignment
under applicable securities regulations. The Proposed Agreement would
be terminable on 60 days' written notice by either party to the
agreement and the Proposed Agreement would terminate automatically in
the event of its assignment.
CONCLUSION. The Board of Trustees has concluded that the proposal
will benefit the fund and its shareholders. The Trustees recommend
voting FOR the proposal. If the Proposed Agreement is approved by
shareholders, the Proposed Agreement will take effect on the first day
of the first month following approval. If the Proposed Agreement is
not approved, FMR will continue to manage the fund under its current
Management Contract and the Current Agreement with FMR Far East will
remain in effect.
3. TO APPROVE A NEW SUB-ADVISORY AGREEMENT WITH FMR U.K. FOR THE FUND.
In conjunction with its portfolio management responsibilities on
behalf of the fund, FMR has entered into sub-advisory agreements with
affiliates whose offices are geographically dispersed around the
world. To strengthen these relationships, the Board of Trustees
proposes that shareholders of the fund approve a new sub-advisory
agreement (the Proposed Agreement) between FMR U.K. and FMR on behalf
of the fund to replace FMR's existing agreement with FMR U.K. The
Proposed Agreement would allow FMR not only to receive investment
advice and research services from FMR U.K., but also would permit FMR
to grant FMR U.K. investment management authority if FMR believes it
would be beneficial to the fund and its shareholders. In addition, the
Proposed Agreement would allow FMR, FMR U.K., and the trust, on behalf
of the fund, to modify the Proposed Agreement subject to the
requirements of the 1940 Act. The existing sub-advisory agreement
currently in effect with FMR U.K. requires the vote of a majority of
the fund's outstanding voting securities to authorize all amendments.
Because FMR pays all of FMR U.K.'s fees, the Proposed Agreement would
not affect the fees paid by the fund to FMR.
On October 16, 1997, the Board of Trustees agreed to submit the
Proposed Agreement to shareholders of the fund pursuant to a unanimous
vote of both the full Board of Trustees and those Trustees who were
not "interested persons" of the trust or FMR. FMR provided substantial
information to the Trustees to assist them in their deliberations. The
Trustees determined that allowing FMR to grant investment management
authority to FMR U.K. would provide FMR increased flexibility in the
assignment of portfolio managers and give the fund access to managers
located abroad who may have more specialized expertise with respect to
local companies and markets. Additionally, the Trustees believe that
the fund and its shareholders may benefit from giving FMR, through FMR
U.K., the ability to execute portfolio transactions from points in
Europe that are physically closer to foreign issuers and the primary
markets in which their securities are traded. Increasing FMR's
proximity to foreign markets should enable the fund to participate
more readily in full trading sessions on foreign exchanges, and to
react more quickly to changing market conditions. With regard to the
proposed modification to the existing sub-advisory agreement's
amendment provisions, the Trustees considered the benefit to
shareholders of FMR's, FMR U.K.'s, and the trust's increased
flexibility (within 1940 Act constraints) to amend the agreement
without the delays and potential costs of a proxy solicitation.
If approved by shareholders, the Proposed Agreement will replace the
sub-advisory agreement currently in effect with FMR U.K. with respect
to the fund (the Current Agreement). The Current Agreement, dated
January 1, 1991, was approved by the fund's shareholders on November
14, 1990. A copy of the Proposed Agreement is attached to this proxy
statement as Exhibit 3.
FMR U.K., with its principal office in London, England, is a
wholly-owned subsidiary of FMR established in 1986 to provide
investment research to FMR with respect to foreign securities. This
research complements other research on foreign securities produced by
FMR's U.S.-based research analysts and portfolio managers, or obtained
from broker-dealers or other sources.
FMR U.K. may also provide investment advisory services to FMR with
respect to other investment companies for which FMR serves as
investment adviser, and to other clients. Currently, FMR U.K.'s only
client other than FMR is Fidelity International Limited (FIL), an
affiliate of FMR organized under the laws of Bermuda. FIL provides
investment advisory services to non-U.S. investment companies and
institutional investors investing in securities of issuers throughout
the world. Edward C. Johnson 3d, President and a Trustee of the trust,
is Chairman and a Director of FMR U.K., Chairman and a Director of
FIL, and a principal stockholder of both FIL and FMR. For more
information on FMR U.K., see the section entitled "Activities and
Management of FMR U.K. and FMR Far East" on page 34.
Under the Current Agreement, FMR U.K. acts as an investment
consultant to FMR and supplies FMR with investment research
information and portfolio management advice as FMR reasonably requests
on behalf of the fund. FMR U.K. provides investment advice and
research services with respect to issuers located outside of the
United States, focusing primarily on companies based in Europe. Under
the Current Agreement with FMR U.K., FMR, NOT THE FUND, pays FMR
U.K.'s fee equal to 110% of its costs incurred in connection with the
agreement.
For the fiscal year ended November 30, 1997, FMR paid FMR U.K.
$89,084 on behalf of the fund. Fees paid to the sub-adviser are not
reduced to reflect expense reimbursements or fee waivers by FMR, if
any, in effect from time to time.
Although FMR employees are expected to consult regularly with FMR
U.K., under the Current Agreement, FMR U.K. has no authority to make
investment decisions on behalf of the fund. Under the Proposed
Agreement, FMR would continue to receive investment advice from FMR
U.K., but it could also grant investment management authority to FMR
U.K. with respect to all or a portion of the fund's assets. If FMR
U.K. were to exercise investment management authority on behalf of the
fund, it would be required, subject to the supervision of FMR, to
direct the investments of the fund in accordance with the fund's
investment objective, policies, and limitations as provided in the
fund's Prospectus or other governing instruments and such other
limitations as the fund may impose by notice in writing to FMR or FMR
U.K. If FMR grants investment management authority to FMR U.K. with
respect to all or a portion of the fund's assets, FMR U.K. would be
authorized to buy or sell stocks, bonds, and other securities for the
fund subject to the overall supervision of FMR and the Board of
Trustees. In addition, the Proposed Agreement would authorize FMR to
delegate other investment management services to FMR U.K., including,
but not limited to, currency management services (including buying and
selling currency options and entering into currency forward and
futures contracts on behalf of the fund), other transactions in
futures contracts and options, and borrowing or lending portfolio
securities. If any of these investment management services were
delegated, FMR U.K. would continue to be subject to the control and
direction of FMR and the Board of Trustees and to be bound by the
investment objective, policies, and limitations of the fund
The Proposed Agreement would also allow FMR, FMR U.K., and the trust,
on behalf of the fund, to amend the Proposed Agreement subject to the
provisions of Section 15 of the 1940 Act, as modified or interpreted
by the Securities and Exchange Commission. In contrast, the Current
Agreement explicitly requires the vote of a majority of the
outstanding voting securities of the fund to authorize all amendments.
Generally, the proposed modification to the Current Agreement's
amendment provisions would allow amendment of the sub-advisory
agreement without shareholder vote only if the 1940 Act so permits. In
short, the proposed modification gives FMR, FMR U.K., and the trust
added flexibility to amend the sub-advisory agreement subject to 1940
Act constraints. Of course, any future amendments to the sub-advisory
agreement would require the approval of the Board of Trustees.
THE PROPOSED AGREEMENT WOULD NOT INCREASE THE FEES PAID TO FMR BY THE
FUND. The fees paid by FMR to FMR U.K. for investment advice as
described above would remain unchanged. However, to the extent that
FMR granted investment management authority to FMR U.K., FMR would pay
FMR U.K. 50% of its monthly management fee with respect to the average
net assets managed on a discretionary basis by FMR U.K. for investment
management and portfolio execution services.
If approved by shareholders, the Proposed Agreement would take effect
on the first day of the first month following approval and would
continue in force until July 31, 1999 and from year to year
thereafter, but only as long as its continuance was approved at least
annually by (i) the vote, cast in person at a meeting called for the
purpose, of a majority of those Trustees who are not "interested
persons" of the trust or FMR and (ii) the vote of either a majority of
the Trustees or by the vote of a majority of the outstanding shares of
the fund.
The Proposed Agreement could be transferred to a successor of FMR
U.K. without resulting in its termination and without shareholder
approval, as long as the transfer did not constitute an assignment
under applicable securities regulations. The Proposed Agreement would
be terminable on 60 days' written notice by either party to the
agreement and the Proposed Agreement would terminate automatically in
the event of its assignment.
CONCLUSION. The Board of Trustees has concluded that the proposal
will benefit the fund and its shareholders. The Trustees recommend
voting FOR the proposal. If the Proposed Agreement is approved by
shareholders, the Proposed Agreement will take effect on the first day
of the first month following approval. If the Proposed Agreement is
not approved, FMR will continue to manage the fund under its current
Management Contract and the Current Agreement with FMR U.K. will
remain in effect.
4. TO AMEND THE CLASS T DISTRIBUTION AND SERVICE PLAN OF THE FUND.
The Board of Trustees has approved, and recommends that Class T
shareholders approve, an amended Distribution and Service Plan for
Class T shares (the Amended Class T Plan). Rule 12b-1 (the Rule) under
the 1940 Act provides that in order for a mutual fund to act as a
distributor of its shares, a written plan "describing all material
aspects of the proposed financing of distribution" must be adopted by
the fund.
A copy of the Amended Class T Plan is attached to this Proxy
Statement as Exhibit 4.
THE CURRENT CLASS T PLAN. The Current Class T Plan (the Current Class
T Plan) was adopted on September 10, 1992. Under the Current Class T
Plan, Class T may pay FDC a fee at an annual rate of up to 0.75% of
its average daily net assets. The determination of daily net assets is
made at the close of business each day throughout the month, but the
net assets for purposes of calculating the fee exclude assets
attributable to shares purchased more than 144 months (12 years) prior
to such date. The Trustees have approved a distribution fee for Class
T at an annual rate of 0.50% of its average net assets. For the fiscal
year ended November 30, 1997, Class T paid $9,636,000 in distribution
fees to FDC, which amounted to 0.50% of its average net assets. FDC
may pay all or a portion of such fees to securities dealers or other
investment professionals as distribution or service fees. To the
extent the fee is not paid to investment professionals, FDC may use
the fees for its expenses incurred in the distribution of Class T
shares. For the fiscal year ended November 30, 1997, FDC paid, on
behalf of Class T shares, $9,636,000 in distribution fees to National
Financial Services Corporation (NFSC), an affiliate of FMR Corp. NFSC
passed 100% of these fees to investment professionals. FDC and NFSC
are both subsidiaries of FMR Corp. Members of Mr. Edward C. Johnson
3d's family are the predominant owners of a class of shares of common
stock, representing approximately 49% of the voting power of FMR
Corp., and, therefore, under the 1940 Act may be deemed to form a
controlling group with respect to FMR Corp.
The Current Class T Plan also provides that to the extent that the
fund's payment of management fees to FMR might be considered to
constitute "indirect" financing of activities "primarily intended to
result in the sale of shares," such payment is expressly authorized.
Although the Current Class T Plan specifies that FMR and FDC may
engage in various distribution activities, it does not require them to
perform any specific type of distribution activity or to incur any
specific level of expense for such activities. FDC may retain any
amounts received under the Plan in excess of its expenditures.
THE AMENDED CLASS T PLAN. The Amended Class T Plan is identical to
the Current Class T Plan, except that shares held more than 144 months
would no longer be excluded when calculating the amount of the
distribution fee.
When the Fidelity Advisor funds were first introduced in the
mid-1980's, the National Association of Securities Dealers, Inc.
(NASD) Conduct Rules set a limit on the amount of front-end sales
charges which a fund could impose. However, no similar limit existed
for 12b-1 fees. The 144-month limitation was an effort by FDC and the
Board of Trustees to protect shareholders against payment on a given
amount of assets over an indefinite period of time. The 144-month
period was intended to result in a limit on total distribution charges
(front-end sales charges plus 12b-1 fees) comparable to the front-end
sales charge limit then imposed by the NASD.
In July 1993, the NASD amended its Conduct Rules to establish a
combined limit on mutual fund sales charges and 12b-1 fees. Like the
144-month limitation, the NASD Rule restricts a mutual fund's total
payment of 12b-1 fees. Under the NASD Rule, a mutual fund is subject
to a limit on aggregate payments of 7.25% of total new gross sales
(6.25% if a service fee is also imposed), plus interest. When the
limit is reached, no further sales charges may be paid by the mutual
fund to the distributor, and no further payments under the 12b-1 plan
can be made, until the mutual fund has further gross sales that result
in an increased limit.
The NASD Rule has become the industry standard for restricting
distribution charges. Regardless of whether the proposal is approved,
each class is, and will continue to be, subject to the NASD Rule. The
NASD Rule addresses concerns similar to those that the 144-month
limitation was intended to address. However, the NASD Rule and the
144-month limitation address these concerns in different ways. For
example, using reasonable sales, redemption and performance
assumptions, there is a considerable likelihood that many mutual funds
may never reach the limit imposed by the NASD Rule, because the limit
is constantly increased by additional gross sales. To the extent that
this is true, if Class T contains assets older than 144 months, it
will pay more in 12b-1 fees if the proposal is approved than it would
pay under the Current Class T Plan.
If approved by shareholders, the Amended Class T Plan will continue
in effect as long as its continuance is specifically approved at least
annually by a majority of the Board of Trustees, including a majority
of the Trustees who are not "interested persons" of the trust and who
have no direct or indirect financial interest in the operation of the
Plan or any agreement related to the Plan (the non-interested
Trustees), cast in person at a meeting called for the purpose of
voting on the Plan.
TRUSTEE CONSIDERATION. In determining to recommend the adoption of
the Amended Class T Plan, the Trustees considered a variety of factors
and were advised by counsel who are not counsel to FMR or FDC.
Implementation of the Amended Class T Plan should assist in attracting
investment professionals for the sale of shares and thus increase the
fund's asset base, which in turn may prove beneficial to the fund and
its shareholders by spreading fixed costs over a larger asset base and
making additional monies available for investing. Positive cash flow
affords portfolio management greater ability to diversify investments
and minimizes the need to sell securities to meet redemptions. In
addition, since each class is dependent primarily on investment
professionals for sales of its shares, the ongoing payment to
investment professionals who have sold shares (by reallowance of the
distribution fee) should provide incentives to offer better and
continuous services to current shareholders. Investment professionals
also allow investors access to investment alternatives to which they
might otherwise not have been exposed.
The Board recognizes that a higher level of fund assets benefits FMR
by increasing its management fee revenues. The Board believes that
revenues received by FMR contribute to its continuing ability to
attract and retain a high caliber of investment and other personnel
and to develop and implement new systems for providing services and
information to shareholders. The Board considers this to be an
important benefit to the fund.
CONCLUSION. The Board of Trustees recommends that Class T
shareholders vote FOR approval of the amendment to the Class T
Distribution and Service Plan. If approved, the Amended Class T Plan
will become effective the first day of the month following shareholder
approval. If the Amended Class T Plan is not approved by Class T
shareholders, the Current Class T Plan will remain in effect unchanged
for shares purchased into Class T.
5. TO AMEND THE CLASS B DISTRIBUTION AND SERVICE PLAN OF THE FUND.
The Board of Trustees has approved, and recommends that Class B
shareholders approve, an amended Distribution and Service Plan for
Class B shares (the Amended Class B Plan). Rule 12b-1 (the Rule) under
the 1940 Act provides that in order for a mutual fund to act as a
distributor of its shares, a written plan "describing all material
aspects of the proposed financing of distribution" must be adopted by
the fund.
A copy of the Amended Class B Plan is attached to this Proxy
Statement as Exhibit 5.
THE CURRENT CLASS B PLAN. The Current Class B Plan (the Current Class
B Plan) was adopted on June 26, 1994. Under the Current Class B Plan,
Class B may pay FDC a distribution fee at an annual rate of up to
0.75% of its average daily net assets. The determination of daily net
assets is made at the close of business each day throughout the month,
but the net assets for purposes of calculating the distribution fee
exclude assets attributable to shares purchased more than 144 months
(12 years) prior to such date. Under the Current Class B Plan, Class B
may also pay FDC a shareholder service fee at an annual rate of up to
0.25% of its average daily net assets. The Trustees have approved a
distribution fee for Class B shares at an annual rate of 0.75% of its
average net assets and a shareholder service fee for Class B shares at
an annual rate of 0.25% of its average net assets. FDC uses
shareholder service fees to compensate investment professionals for
personal service and/or the maintenance of shareholder accounts. For
the fiscal year ended November 30, 1997, Class B paid $4,395,750 in
distribution fees and $1,465,250 in shareholder service fees to FDC,
which amounted to 0.75% and 0.25%, respectively, of its average net
assets. FDC may pay all or a portion of such fees to securities
dealers or other investment professionals as distribution or service
fees. To the extent the fees are not paid to investment professionals,
FDC may use the fees for its expenses incurred in the distribution of,
or shareholder support services for, Class B shares. For the fiscal
year ended November 30, 1997, FDC paid, on behalf of Class B shares,
$1,465,000 in shareholder service fees to National Financial Services
Corporation (NFSC), an affiliate of FMR Corp. NFSC passed 100% of
these fees to investment professionals. FDC and NFSC are both
subsidiaries of FMR Corp. Members of Mr. Edward C. Johnson 3d's family
are the predominant owners of a class of shares of common stock,
representing approximately 49% of the voting power of FMR Corp., and,
therefore, under the 1940 Act may be deemed to form a controlling
group with respect to FMR Corp.
The Current Class B Plan also provides that to the extent that the
fund's payment of management fees to FMR might be considered to
constitute "indirect" financing of activities "primarily intended to
result in the sale of shares," such payment is expressly authorized.
Although the Current Class B Plan specifies that FMR and FDC may
engage in various distribution activities, it does not require them to
perform any specific type of distribution activity or to incur any
specific level of expense for such activities. FDC may retain any
amounts received under the Plan in excess of its expenditures.
THE AMENDED CLASS B PLAN. The Amended Class B Plan is identical to
the Current Class B Plan except that shares held more than 144 months
would no longer be excluded when calculating the amount of the
distribution fee.
When the Fidelity Advisor funds were first introduced in the
mid-1980's, the National Association of Securities Dealers, Inc.
(NASD) Conduct Rules set a limit on the amount of front-end sales
charges which a fund could impose. However, no similar limit existed
for 12b-1 fees. The 144-month limitation was an effort by FDC and the
Board of Trustees to protect shareholders against payment on a given
amount of assets over an indefinite period of time. The 144-month
period was intended to result in a limit on total distribution charges
(front-end sales charges plus 12b-1 fees) comparable to the front-end
sales charge limit then imposed by the NASD.
In July 1993, the NASD amended its Conduct Rules to establish a
combined limit on mutual fund sales charges and 12b-1 fees. Like the
144-month limitation, the NASD Rule restricts a mutual fund's total
payment of 12b-1 fees. Under the NASD Rule, a mutual fund is subject
to a limit on aggregate payments of 7.25% of total new gross sales
(6.25% if a service fee is also imposed), plus interest. When the
limit is reached, no further sales charges may be paid by the mutual
fund to the distributor, and no further payments under the 12b-1 plan
can be made, until the mutual fund has further gross sales that result
in an increased limit.
The NASD Rule has become the industry standard for restricting
distribution charges. Regardless of whether the proposal is approved,
each class is, and will continue to be, subject to the NASD Rule. The
NASD Rule addresses concerns similar to those that the 144-month
limitation was intended to address. However, the NASD Rule and the
144-month limitation address these concerns in different ways. For
example, using reasonable sales, redemption and performance
assumptions, there is a considerable likelihood that many mutual funds
may never reach the limit imposed by the NASD Rule, because the limit
is constantly increased by additional gross sales. To the extent that
this is true, if Class B contains assets older than 144 months it will
pay more in 12b-1 fees if the proposal is approved than it would pay
under the Current Class B Plan.
If approved by shareholders, the Amended Class B Plan will continue
in effect as long as its continuance is specifically approved at least
annually by a majority of the Board of Trustees, including a majority
of the Trustees who are not "interested persons" of the trust and who
have no direct or indirect financial interest in the operation of the
Plan or any agreement related to the Plan (the non-interested
Trustees), cast in person at a meeting called for the purpose of
voting on the Plan.
TRUSTEE CONSIDERATION. In determining to recommend the adoption of
the Amended Class B Plan, the Trustees considered a variety of factors
and were advised by counsel who are not counsel to FMR or FDC.
Implementation of the Amended Class B Plan should assist in attracting
investment professionals for the sale of shares and thus increase the
fund's asset base, which in turn may prove beneficial to the fund and
its shareholders by spreading fixed costs over a larger asset base and
making additional monies available for investing. Positive cash flow
affords portfolio management a greater ability to diversify
investments and minimizes the need to sell securities to meet
redemptions. In addition, since each class is dependent primarily on
investment professionals for sales of its shares, the ongoing payment
to investment professionals who have sold shares (by reallowance of
the distribution fee) should provide incentives to offer better and
continuous services to current shareholders. Investment professionals
also allow investors access to investment alternatives to which they
might otherwise not have been exposed.
The Board recognizes that a greater level of fund assets benefits FMR
by increasing its management fee revenues. The Board believes that
revenues received by FMR contribute to its continuing ability to
attract and retain a high caliber of investment and other personnel
and to develop and implement new systems for providing services and
information to shareholders. The Board considers this to be an
important benefit to the fund.
CONCLUSION. The Board of Trustees recommends that Class B
shareholders vote FOR approval of the amendment to the Class B
Distribution and Service Plan. If Class B shareholders approve the
Amended Class B Plan, the amended Plan will become effective the first
day of the month following shareholder approval. If Class B
shareholders do not approve the Amended Class B Plan, the Current
Class B Plan will remain in effect unchanged. In this event, the
144-month period would commence for Class B shares at the time they
are purchased but would never be completed because the Class B shares
convert automatically to Class A shares after a maximum holding period
of seven years.
6. TO APPROVE AN AGREEMENT AND PLAN PROVIDING FOR THE REORGANIZATION
OF THE FUND FROM A SEPARATE SERIES OF ONE MASSACHUSETTS BUSINESS TRUST
TO ANOTHER.
The Board of Trustees has approved an Agreement and Plan of
Reorganization (the Plan of Reorganization) in the form attached to
this Proxy Statement as Exhibit 6. The Plan of Reorganization provides
for the reorganization of Fidelity Advisor Equity Income Fund (the
Fund) from a separate series of Fidelity Advisor Series III (the
Trust), a Massachusetts business trust, to a newly-established,
separate series of Fidelity Advisor Series I (Advisor Series I), also
a Massachusetts business trust (the Reorganization).
The investment objective, policies, and limitations of the Fund will
not change except as approved by shareholders and as described in this
proxy statement. A separate series of Advisor Series I will carry on
the business of the Fund following the Reorganization (the Series).
The Series, which has not yet commenced business operations, will have
an investment objective, policies, and limitations identical to those
of the Fund (except as they may be modified pursuant to a vote of the
shareholders as proposed in this proxy statement).
Since both the Trust and Advisor Series I are Massachusetts business
trusts, organized under substantially similar Declarations of Trust,
the rights of the security holders of the Fund under state law and the
Fund's governing documents, except as noted below, are expected to
remain the same after the Reorganization. See "Comparison of
Declarations of Trust" on page 28 for more information.
The Reorganization will not affect the operation of the Fund in a
material manner. The same individuals serve as Trustees of both
trusts. Both trusts are authorized to issue an unlimited number of
shares of beneficial interest, and each Declaration of Trust permits
the Trustees to create one or more additional series or funds.
The Fund's fiscal year end will not change as a result of the
Reorganization, although the Trustees may change the fiscal year at
their discretion.
FMR, the Fund's investment adviser, will be responsible for the
investment management of the Series, subject to the supervision of the
Board of Trustees, under a management contract substantively identical
to the contract in effect between FMR and the Fund immediately prior
to the Closing Date (including as it may be modified pursuant to a
vote of shareholders of the Fund as proposed in the Proxy Statement)
(the New Management Contract); similarly, Fidelity Management &
Research (U.K.) Inc. (FMR U.K.) and Fidelity Management & Research
(Far East) Inc. (FMR Far East), the Fund's sub-advisers, will have
primary responsibility for providing investment advice and research
services outside the United States under Sub-Advisory Agreements
substantively identical to the agreements in effect between FMR U.K.
and FMR Far East and FMR immediately prior to the Closing Date
(including as each may be modified pursuant to a vote of shareholders
of the Fund as proposed in the Proxy Statement)(the New Sub-Advisory
Agreements).
The Fund's distribution agent, Fidelity Distributors Corporation
(FDC) will distribute shares of the Series under a General
Distribution Agreement substantively identical to the contract in
effect between FDC and the Fund immediately prior to the Closing Date.
REASON FOR THE PROPOSED REORGANIZATION. The Fund is presently
organized as a series of the Trust, which has one series of shares or
funds. The Board of Trustees unanimously recommend reorganization of
the Fund to a separate series of Advisor Series I (i.e., into the
Series), which will succeed to the business of the Fund. Moving the
Fund from the Trust to Advisor Series I will consolidate and
streamline the production and mailing of certain legal documents. THE
PROPOSED CHANGE WILL HAVE NO MATERIAL EFFECT ON SHAREHOLDERS OR THE
MANAGEMENT OF THE FUND.
The proposal to present the Plan of Reorganization to shareholders
was approved by the Board of Trustees of the Trust, including all of
the Trustees who are not interested persons of FMR, on October 16,
1997. The Board of Trustees recommend that Fund shareholders vote FOR
the approval of the Plan of Reorganization described below. Such a
vote encompasses approval of the reorganization of the Fund to a
separate series of Advisor Series I; temporary waiver of certain
investment limitations of the Fund to permit the Reorganization (see
"Temporary Waiver of Investment Restrictions" on page 28); and
authorization of The Trust, as sole shareholder of the Series, to
approve (i) the New Management Contract for the Series; (ii) the New
Sub-Advisory Agreements between FMR and FMR U.K. and FMR Far East,
with respect to the Series; and (iii) the Distribution and Service
Plans for each class of the Series under Rule 12b-1, substantively
identical to the Plans in effect with respect to each class of the
Fund immediately prior to the Closing Date (including as the
Distribution and Service Plans may be modified pursuant to a vote of
shareholders of the Fund's classes, as proposed in this Proxy
Statement (the New Plans)). If shareholders of the Fund do not approve
the Plan of Reorganization, the Fund will continue to operate as a
series of the Trust.
SUMMARY OF THE PLAN OF REORGANIZATION. The following discussion
summarizes the important terms of the Plan of Reorganization. This
summary is qualified in its entirety by reference to the Plan of
Reorganization itself.
On the Closing Date (defined below) of the Reorganization, the Fund
will transfer all of its assets to the Series, a series of shares of
Advisor Series I established for the purpose of effecting the
Reorganization, in exchange for the assumption by the Series of all of
the liabilities of the Fund and the issuance of shares of beneficial
interest of the Series (Series Shares) equal to the number of Fund
shares of the corresponding classes outstanding on the Closing Date.
Immediately thereafter, the Fund will distribute one Series Share of
the applicable class for each Fund share (the Fund Shares) held by the
shareholder of such class on the Closing Date to each Fund
shareholder, in exchange for such Fund Shares. Immediately after this
distribution of the Series Shares, the Fund will be terminated and, as
soon as practicable thereafter, will be wound up and liquidated. UPON
COMPLETION OF THE REORGANIZATION, EACH FUND SHAREHOLDER OF EACH CLASS
WILL BE THE OWNER OF FULL AND FRACTIONAL SERIES SHARES EQUAL IN
NUMBER, DENOMINATION, AND AGGREGATE NET ASSET VALUE TO HIS OR HER FUND
SHARES OF THE CORRESPONDING CLASS.
The Plan of Reorganization authorizes the Trust as the then sole
initial shareholder of the Series or class, as appropriate, to approve
(i) the New Management Contract, (ii) the New Sub-Advisory Agreements
with respect to the Series, and (iii) the New Plans.
Advisor Series I's Board of Trustees will hold office without time
limits, except that (a) any Trustee may resign; (b) any Trustee may be
removed by written instrument signed by at least two-thirds of the
number of Trustees prior to removal; (c) any Trustee who requests to
be retired by written instrument signed by a majority of the other
Trustees or who is unable to serve due to physical or mental
incapacity by reason of disease or otherwise, death, or for any other
reason, may be retired; and (d) a Trustee may be removed at any
Special Meeting of the shareholders by a vote of two-thirds of the
outstanding shares of Advisor Series I. In case a vacancy shall for
any reason exist, the remaining Trustees will fill such vacancy by
appointing another Trustee, so long as, immediately after such
appointment, at least two-thirds of the Trustees have been elected by
shareholders. If, at any time, less than a majority of the Trustees
holding office has been elected by shareholders, the Trustees then in
office will promptly call a shareholders' meeting for the purpose of
electing a Board of Trustees. Otherwise, there will normally be no
meeting of shareholders for the purpose of electing Trustees.
The New Management Contract, the New Sub-Advisory Agreements, and the
New Plans will take effect on the Closing Date. The New Management
Contract and, the New Sub-Advisory Agreements, will continue in force
until July 31, 1999. The New Plans will continue in force until April
30, 1999. Each New Sub-Advisory Agreement and the New Management
Contract, will continue in force thereafter from year to year so long
as their continuance is approved at least annually by (i) the vote of
a majority of the Trustees who are not "interested persons" of Advisor
Series I, FMR, or, in the case of the agreement, FMR U.K. or FMR Far
East, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the vote of a majority of the Trustees or
by the vote of a majority of the outstanding shares of the Series. The
New Plans will continue in effect only if approved annually by a vote
of the Trustees and of those Trustees who are not interested persons,
cast in person at a meeting called for that purpose. The New
Management Contract and the New Sub-Advisory Agreements will be
terminable without penalty on sixty days' written notice either by
Advisor Series I, FMR, FMR U.K., or FMR Far East, as the case may be,
and will terminate automatically in the event of its assignment. The
New Plans may be terminable at any time, without the payment of any
penalty, by a vote of a majority of the Independent Trustees or by a
vote of a majority of the outstanding voting securities of the fund OR
of the applicable class.
Assuming the Plan of Reorganization is approved, it is currently
contemplated that the Reorganization will become effective at the
close of business on February 26, 1999 (the Closing Date). However,
the Reorganization may become effective at such other date as the
parties may agree in writing.
The obligations of the Trust and Advisor Series I under the Plan of
Reorganization are subject to various conditions as stated therein.
Notwithstanding the approval of the Plan of Reorganization by Fund
shareholders, the Plan of Reorganization may be terminated or amended
at any time prior to the Reorganization by action of the Trustees to
provide against unforeseen events, if (1) there is a material breach
by the other party of any representation, warranty, or agreement
contained in the Plan of Reorganization to be performed at or prior to
the Closing Date or (2) it reasonably appears that a party will not or
cannot meet a condition of the Plan of Reorganization. Generally,
either party may at any time waive the other party's compliance with
any of the covenants and conditions contained in, or both parties may
amend, the Plan of Reorganization, provided that such waiver or
amendment does not materially adversely affect the interests of Fund
shareholders.
CONTINUATION OF FUND SHAREHOLDER ACCOUNTS AND PLANS. Advisor Series
I's transfer agent will establish accounts for the Series'
shareholders containing the appropriate number and denominations of
Series Shares of each class to be received by each holder of Fund
Shares of the corresponding class under the Plan of Reorganization.
Such accounts will be identical in all material respects to the
accounts currently maintained by the Fund's transfer agent for the
Fund's shareholders. Fund shareholders who are receiving payment under
a withdrawal plan with respect to Fund Shares will retain the same
rights and privileges as to Series Shares under the Plan of
Reorganization. Similarly, no further action will be necessary in
order to continue any automatic investment plan or retirement plan
currently maintained by a Fund shareholder with respect to Fund
Shares.
EXPENSES. The Fund and the Series shall each be responsible for all
of their respective expenses of the Reorganization, estimated at
$9,000 in the aggregate, provided that they do not exceed the expense
cap for each class of the fund. Expenses exceeding a class's expense
cap, as applicable, will be paid by FMR.
COMPARISON OF DECLARATIONS OF TRUST. Advisor Series I's Declaration
of Trust differs from the Trust's Current Declaration of Trust in one
material aspect.
Specifically, Advisor Series I's New Declaration of Trust clarifies
that the Trustees may authorize the investment of all of a fund's
assets in another open-end investment company ("Master Feeder Fund
Structure"). The Trust's Current Declaration of Trust does not
specifically provide the Trustees the ability to authorize the Master
Feeder Fund Structure. The purpose of a Master Feeder Fund Structure
is to achieve operational efficiencies by consolidating portfolio
management while maintaining different distribution and servicing
structures. In order to implement a Master Feeder Fund Structure, both
the Declaration of Trust and the fund's policies must permit the
structure. Currently, the Fund's policies do not allow for such
investments. Proposal 7 on page 29 seeks the approval of the Fund's
shareholders to adopt a fundamental investment policy to permit
investments in another open-end investment company with substantially
the same investment objectives and policies. For more information on
the Master Feeder Fund Structure see Proposal 7 on page 29.
TEMPORARY WAIVER OF INVESTMENT RESTRICTIONS. Certain fundamental
investment restrictions of the Fund, which prohibit the Fund from
acquiring more than a stated percentage of ownership of another
company, might be construed as restricting the Fund's ability to carry
out the Reorganization. By approving the Plan of Reorganization, Fund
shareholders will be agreeing to waive, only for the purpose of the
Reorganization, those fundamental investment restrictions that could
prohibit or otherwise impede the transaction.
TAX CONSEQUENCES OF THE REORGANIZATION. Each trust will receive an
opinion from their counsel, Kirkpatrick & Lockhart LLP, that the
Reorganization will constitute a tax-free reorganization within the
meaning of Section 368(a)(1)(F) of the Internal Revenue Code of 1986,
as amended. Accordingly, no gain or loss will be recognized for
federal income tax purposes by the Fund, the Series, or the Fund's
shareholders upon (1) the transfer of the Fund's assets in exchange
solely for the Series Shares and the assumption by the Trust on behalf
of the Series of the Fund's liabilities or (2) the distribution of
Series Shares to the Fund's shareholders in exchange for their Fund
Shares. The opinion further provides, among other things, that (a) the
basis for federal income tax purposes of the Series Shares to be
received by each Fund shareholder will be the same as that of his or
her Fund Shares immediately prior to the Reorganization; and (b) each
Fund shareholder's holding period for his or her Series Shares will
include the Fund shareholder's holding period for his or her Fund
Shares, provided that said Fund Shares were held as capital assets on
the date of the exchange.
CONCLUSION. The Board of Trustees has concluded that the proposed
Plan of Reorganization to reorganize the Fund into a separate series
of a Massachusetts business trust is in the best interest of the
Fund's shareholders. The Trustees recommend that the Fund's
shareholders vote FOR the approval of the Plan of Reorganization as
described above. Such a vote encompasses approval of the
reorganization of the Fund to a separate series of a Massachusetts
business trust; temporary waiver of certain investment limitations of
the Fund to permit the Reorganization (see "Temporary Waiver of
Investment Restrictions" on page 28); authorization of the Trust, as
sole shareholder of the Series, or class, as appropriate, to approve
(i) the New Management Contract, (ii) the New Sub-Advisory Agreements
for the Series between FMR and FMR U.K. and FMR Far East, and (iii)
the New Plans. If approved, the Plan of Reorganization will take
effect on the Closing Date. If the Plan of Reorganization is not
approved, the Fund will continue to operate as a series of the Trust.
7. TO ADOPT A NEW FUNDAMENTAL INVESTMENT POLICY FOR THE FUND
PERMITTING THE FUND TO INVEST ALL OF ITS ASSETS IN ANOTHER OPEN-END
INVESTMENT COMPANY MANAGED BY FMR OR AN AFFILIATE WITH SUBSTANTIALLY
THE SAME INVESTMENT OBJECTIVE AND POLICIES.
The Board of Trustees has approved, and recommends that shareholders
of the fund approve, the adoption of a new fundamental investment
policy that would permit the fund to invest all of its assets in
another open-end investment company managed by FMR or an affiliate
with substantially the same investment objective and policies.
Adoption of the policy would allow the Fund to participate in a
so-called "Master Feeder Fund" organizational format (Master Feeder
Fund Structure).
Participation in a Master Feeder Fund Structure would allow the fund
to combine its assets with other funds having substantially the same
investment objective and policies, but differing distribution or
servicing arrangements. By combining its assets in a central "Master
Fund" with other participating "Feeder Funds," the fund would be able
to maintain its unique distribution and servicing structure while
potentially achieving operational efficiencies through the
consolidation of portfolio management. For example, if FMR managed
three funds all with the same investment objective and policies, a
Master Feeder Fund Structure would allow FMR to manage one combined
fund (rather than three), but still offer three distinct products each
having different servicing features and pricing (e.g., one distinct
product for retail investors, a second for institutional investors and
a third for foreign investors). The purpose of a Master Feeder Fund
Structure would be to allow FMR to manage only one fund in each
investment discipline (Master Fund), but still be able to offer that
investment discipline with a variety of different servicing features
and pricing (Feeder Funds). The Master Feeder Fund Structure is
explained in more detail below. A diagram comparing a typical "stand
alone" fund structure to a Master Feeder Fund Structure is attached to
this Proxy Statement as Exhibit 7.
If the proposal is approved by shareholders, THE TRUSTEES WILL ONLY
AUTHORIZE INVESTING THE FUND'S ASSETS IN A MASTER FUND IF THEY
DETERMINE THAT A MASTER FEEDER FUND STRUCTURE IS IN THE BEST INTERESTS
OF THE FUND'S SHAREHOLDERS, and, if, upon advice of counsel, they
determine that the investment will not have material adverse tax
consequences to the fund or its shareholders.
THE MASTER FEEDER FUND STRUCTURE. The term "Master Feeder Fund
Structure" refers to a two-tiered arrangement in which typically one
or more mutual funds with substantially identical investment
objectives (the Feeder Funds) combine their assets by investing in a
single investment company having the same investment objective (the
Master Fund). The Feeder Funds sell their shares to the public and
invest all of their assets in shares of the Master Fund. In turn, the
Master Fund, in accordance with its and the Feeder Funds' common
investment objective, invests its assets in appropriate portfolio
securities (e.g., stocks, bonds, or money market instruments). The
Master Fund is not offered to the public: it sells its shares only to
the Feeder Funds. The individual Feeder Funds are generally sold
through different distribution channels to discrete targeted markets,
such as retail investors, institutional investors or foreign
investors. Administrative and service features will vary among Feeder
Funds depending upon the level of service sought by the fund's
investors. Simply stated, the Master Feeder Fund Structure
consolidates portfolio management and related functions at the Master
Fund (or bottom tier) level and segregates marketing and distribution
to the Feeder Fund (or top tier) level.
The Master Feeder Fund Structure may offer certain advantages over
more traditional "stand alone" funds. For example, participating
Feeder Funds may achieve economies of scale by sharing among a greater
number of investment dollars fixed expenses of portfolio management
and fund administration. Feeder Funds may also be able to achieve
greater diversification by means of a larger portfolio of securities
than could be achieved by individual funds. In short, the Master
Feeder Fund Structure gives participating Feeder Funds the ability to
tailor services and fees for particular market segments while
providing the economies of scale available to a larger fund.
REASON FOR THE PROPOSAL. FMR and the Board of Trustees continually
review methods of structuring methods to take advantage of potential
efficiencies. While neither the Board nor FMR has determined that the
fund should invest in a Master Fund, the Trustees believe it could be
in the best interests of the fund to adopt such a structure at a
future date.
At present, certain of the fund's fundamental investment policies and
limitations would prevent the fund from investing all of its assets in
a Master Fund and would require a vote of shareholders before the fund
could participate in a Master Feeder Fund Structure. These policies
include the fund's limitations on investing more than 5% of total
assets in a single issuer or more than 25% of total assets in a single
industry, purchasing more than 10% of the outstanding voting
securities of a single issuer, underwriting securities, and purchasing
the securities of other investment companies. To avoid the costs
associated with a subsequent shareholder meeting, the Trustees
recommend that shareholders approve the proposal to permit the fund to
invest its assets in a single Master Fund, without a further vote of
shareholders. If shareholders approve this proposal, the
above-mentioned restricted policies would no longer preclude the
fund's investment in a Master Fund.
DISCUSSION. As discussed above, FMR may manage a number of mutual
funds with similar investment objectives, policies, and limitations,
but with different features and services. Were these comparable funds
to combine their assets, operational efficiencies could be achieved,
offering the opportunity to reduce costs. Similarly, FMR anticipates
that a Master Feeder Fund Structure would facilitate the introduction
of new Fidelity mutual funds, increasing the investment options
available to shareholders.
The fund's method of operation and shareholder services would not be
materially affected by its investment in a Master Fund, except that
the assets of the fund would be managed as part of a larger fund. Were
the fund to invest all of its assets in a Master Fund, it would hold
only a single investment security (i.e., shares of the Master Fund).
The Master Fund, in turn, would directly invest in individual
securities pursuant to its investment objective (which would be
identical to the fund's investment objective). The Master Fund would
be managed by FMR or an affiliate, such as Fidelity Investments Money
Management, Inc. in the case of a money market fund.
The Trustees would retain the right to withdraw the fund's
investments from a Master Fund at any time and would do so if the
Master Fund's investment objective and policies were no longer
appropriate for the fund. The fund would then resume investing
directly in individual securities as it does currently.
If, as a Feeder Fund, the fund is asked to vote at a shareholder
meeting of the Master Fund, the fund, if required by applicable law or
its policies, would hold a meeting of its shareholders to vote on the
matters to be considered at the Master Fund shareholder meeting. The
fund would cast its votes at the Master Fund meeting in the same
proportion as the fund's shareholders voted at their meeting.
At present, the Trustees have not considered any specific proposal to
authorize a Master Feeder Fund Structure. As mentioned, the Trustees
will authorize investing the fund's assets in a Master Fund only if
they determine that a Master Feeder Fund Structure is in the best
interests of the fund's shareholders and if, upon advice of counsel,
they determine that the investment will not have material adverse tax
consequences to the fund or its shareholders. In determining whether
to invest in a Master Fund, the Trustees will consider, among other
things, the opportunity to reduce costs and to achieve operational
efficiencies. The Trustees will not authorize investment in a Master
Fund if doing so would materially increase costs (including fees) to
shareholders.
FMR may benefit from the use of a Master Feeder Fund Structure if
overall assets under management are increased (since FMR's fees are
based on assets). Also, FMR's expenses of providing investment and
other services to the fund may be reduced. If the fund's investment in
a Master Fund were to reduce FMR's expenses materially, the Trustees
would consider whether a reduction in FMR's management fee would be
appropriate if and when a Master Feeder Fund Structure is implemented.
PROPOSED FUNDAMENTAL POLICY. To allow the fund to invest in a Master
Fund at a future date, the Trustees recommend that the fund adopt the
following fundamental policy:
"The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company managed by Fidelity
Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund."
If the proposal is adopted, the Trustees intend to adopt a
non-fundamental investment limitation for the fund that states:
"The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company
managed by Fidelity Management & Research Company or an affiliate or
successor with substantially the same fundamental investment
objective, policies, and limitations as the fund."
CONCLUSION. The Board of Trustees has concluded that the proposal
will benefit the fund and its shareholders. The Trustees recommend
voting FOR the proposal. Upon shareholder approval, the fundamental
limitation will become effective when disclosure is revised to reflect
the changes. If the proposal is not approved by the shareholders of
the fund, the fund's current investment policies will remain unchanged
with respect to potential investment in Master Funds.
8. TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
DIVERSIFICATION.
The fund's current fundamental investment limitation concerning
diversification is as follows:
"The fund may not with respect to 75% of the fund's total assets,
purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, if, as a result, (a) more than 5% of the fund's
total assets would be invested in the securities of that issuer, or
(b) the fund would hold more than 10% of the outstanding voting
securities of that issuer."
The Trustees recommend that shareholders of the fund vote to replace
the fund's current fundamental investment limitation with the
following amended fundamental investment limitation governing
diversification:
"The fund may not with respect to 75% of the fund's total assets,
purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities, or securities of other investment companies) if, as
a result, (a) more than 5% of the fund's total assets would be
invested in the securities of that issuer, or (b) the fund would hold
more than 10% of the outstanding voting securities of that issuer."
The percentage limits in the proposed fundamental limitation
concerning diversification are the percentage limitations imposed by
the 1940 Act for diversified investment companies. The amended
fundamental diversification limitation makes one change from the
current limitation: subject to applicable 1940 Act requirements, it
would permit the fund to invest without limit in the securities of
other investment companies. Pursuant to an order of exemption granted
by the SEC, the fund may invest up to 25% of total assets in
non-publicly offered money market or short-term bond funds (the
Central Funds) managed by FMR or an affiliate of FMR. The Central
Funds do not currently pay investment advisory, management, or
transfer agent fees, but do pay minimal fees for services, such as
custodian, auditor, and Independent Trustees fees. FMR anticipates
that making use of the Central Funds will benefit the fund by
enhancing the efficiency of cash management and by providing increased
short-term investment opportunities. If the proposal is approved, the
Central Funds are expected to serve as a principal option for cash
investment for the fund.
If this proposal is approved, the amended fundamental diversification
limitation cannot be changed without the approval of the shareholders
and the non-fundamental limitation cannot be changed without the
approval of the Board of Trustees.
CONCLUSION. The Board of Trustees has concluded that the proposed
amendment will benefit the fund and its shareholders. The Trustees
recommend voting FOR the proposal. The amended fundamental
diversification limitation, upon shareholder approval, will become
effective when the disclosure is revised to reflect the changes. If
the proposal is not approved by the shareholders of the fund, the
fund's current fundamental diversification limitation will remain
unchanged.
OTHER BUSINESS
The Board knows of no other business to be brought before the
Meeting. However, if any other matters properly come before the
Meeting, it is the intention that proxies that do not contain specific
instructions to the contrary will be voted on such matters in
accordance with the judgment of the persons therein designated.
ACTIVITIES AND MANAGEMENT OF FMR
FMR, a corporation organized in 1946, serves as investment adviser to
a number of investment companies. Information concerning the advisory
fees, net assets, and total expenses of funds with investment
objectives similar to Fidelity Advisor Equity Income Fund and advised
by FMR is contained in the Table of Average Net Assets and Expense
Ratios in Exhibit 8 beginning on page __.
FMR, its officers and directors, its affiliated companies, and the
Trustees, from time to time have transactions with various banks,
including the custodian banks for certain of the funds advised by FMR.
Those transactions that have occurred to date include mortgages and
personal and general business loans. In the judgment of FMR, the terms
and conditions of those transactions were not influenced by existing
or potential custodial or other fund relationships.
The Directors of FMR are Edward C. Johnson 3d, Chairman of the Board
and of the Executive Committee; Robert C. Pozen, President; and Peter
S. Lynch, Vice Chairman. Each of the Directors is also a Trustee of
the trust. Messrs. Johnson 3d, Pozen, J. Gary Burkhead, John H.
Costello, Eric D. Roiter, Richard A. Silver, Leonard M. Rush, Robert
Chow, and Richard A. Spillane Jr. are currently officers of the trust
and officers or employees of FMR or FMR Corp. With the exception of
Mr. Costello and Mr. Silver, all of these persons hold or have options
to acquire stock of FMR Corp. The principal business address of each
of the Directors of FMR is 82 Devonshire Street, Boston, Massachusetts
02109.
All of the stock of FMR is owned by its parent company, FMR Corp., 82
Devonshire Street, Boston, Massachusetts 02109, which was organized on
October 31, 1972. Members of Mr. Edward C. Johnson 3d's family are the
predominant owners of a class of shares of common stock, representing
approximately 49% of the voting power of FMR Corp., and, therefore,
under the 1940 Act may be deemed to form a controlling group with
respect to FMR Corp.
During the period December 1, 1997 through July 31, 1998, the
following transactions were entered into by Trustees and nominees as
Trustee of the trust involving more than 1% of the voting common,
non-voting common and equivalent stock, or preferred stock of FMR
Corp.
ACTIVITIES AND MANAGEMENT OF FMR U.K. AND FMR FAR EAST
FMR U.K. and FMR Far East are wholly-owned subsidiaries of FMR formed
in 1986 to provide research and investment advice with respect to
companies based outside the United States for certain funds for which
FMR acts as investment adviser. FMR may also grant the sub-advisers
investment management authority as well as authority to buy and sell
securities for certain of the funds for which it acts as investment
adviser, if FMR believes it would be beneficial to a fund.
Funds with investment objectives similar to Fidelity Advisor Equity
Income Fund managed by FMR with respect to which FMR currently has
sub-advisory agreements with either FMR U.K. or FMR Far East, and the
net assets of each of these funds, are indicated in the Table of
Average Net Assets and Expense Ratios in Exhibit 8 beginning on page
_.
The Directors of FMR U.K. and FMR Far East are Edward C. Johnson 3d,
Chairman, and Robert C. Pozen, President. Mr. Johnson 3d also is
President and a Trustee of the trust and other funds advised by FMR;
Chairman and a Director of Fidelity Investments Money Management, Inc.
(FIMM); Chairman, Chief Executive Officer, President, and a Director
of FMR Corp., and a Director and Chairman of the Board and of the
Executive Committee of FMR. In addition, Mr. Pozen is Senior Vice
President and a Trustee of the trust and of other funds advised by
FMR; President and a Director of FMR; and President and a Director of
FIMM. Each of the Directors is a stock holder of FMR Corp. The
principal business address of the Directors is 82 Devonshire Street,
Boston, Massachusetts 02109.
PRESENT MANAGEMENT CONTRACT
The fund employs FMR to furnish investment advisory and other
services. Under its management contract with the fund, FMR acts as
investment adviser and, subject to the supervision of the Board of
Trustees, directs the investments of the fund in accordance with its
investment objective, policies, and limitations. FMR also provides the
fund with all necessary office facilities and personnel for servicing
the fund's investments, compensates all officers of the fund and all
Trustees who are "interested persons" of the trust or of FMR, and all
personnel of the fund or FMR performing services relating to research,
statistical, and investment activities.
In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of the fund. These services include
providing facilities for maintaining the fund's organization;
supervising relations with custodians, transfer and pricing agents,
accountants, underwriters, and other persons dealing with the fund;
preparing all general shareholder communications and conducting
shareholder relations; maintaining the fund's records and the
registration of the fund's shares under federal and state laws;
developing management and shareholder services for the fund; and
furnishing reports, evaluations, and analyses on a variety of subjects
to the Trustees. Services provided by affiliates of FMR will continue
under the proposed management contract described in Proposal 1.
In addition to the management fee payable to FMR, each class pays
transfer agent fees to Fidelity Investments Institutional Operations
Company, Inc. (FIIOC), an affiliate of FMR. The fund pays pricing and
bookkeeping fees to Fidelity Service Company, Inc. (FSC) on behalf of
each class of the fund. Although the fund's current management
contract provides that the fund will pay for typesetting, printing,
and mailing prospectuses, statements of additional information,
notices and reports to shareholders, the trust, on behalf of the fund
has entered into a revised transfer agent agreement with FIIOC
pursuant to which FIIOC bears the costs of providing these services to
existing shareholders of the applicable classes. Other expenses paid
by the fund include interest, taxes, brokerage commissions, and the
fund's proportionate share of insurance premiums and Investment
Company Institute dues. The fund is also liable for such non-recurring
expenses as may arise, including costs of any litigation to which the
fund may be a party, and any obligation it may have to indemnify its
officers and Trustees with respect to litigation.
Transfer agent fees, including reimbursement for out-of-pocket
expenses, paid to FIIOC by the applicable class for fiscal 1997
amounted to $31,096 for Class A, $3,560,594 for Class T, $1,193,682
for Class B, $50 for Class C and $624,246 for Institutional Class,
respectively. Pricing and bookkeeping fees, including reimbursement
for out-of-pocket expenses, paid to FSC by the fund for fiscal 1997
amounted to $808,212. FSC also received fees for administering the
fund's securities lending program. Securities lending fees are based
on the number and duration of individual securities loans. For the
fiscal year ended 1997, the fund incurred no securities lending fees.
The fund also has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer
registered under the Securities Exchange Act of 1934 and is a member
of the National Association of Securities Dealers, Inc. The
distribution agreement calls for FDC to use all reasonable efforts,
consistent with its other business, to secure purchasers for shares of
the fund, which are continuously offered. Promotional and
administrative expenses in connection with the offer and sale of
shares are paid by FMR.
Sales charge revenue paid to, and retained by, FDC for fiscal 1997
amounted to the following:
Paid to FDC
Retained by FDC
Class A Class T
Class A Class T
$461,000 $1,835,000 $124,000 $533,000
FDC collected deferred sales charge revenue on Class B shares during
fiscal 1997 of $ 1,017,000 for the fund. When shares subject to a
deferred sales charge are sold, FDC pays commissions from its own
resources to dealers through which the sales are made.
In addition, FDC received from the fund fees pursuant to Distribution
and Service Plans under Rule 12b-1 in fiscal 1997 as follows:
Fees Paid to FDC
Class A $32,000
Class T $9,636,000
Class B $5,861,000
Class C $256
Institutional Class $0
Currently, up to the full amount of distribution fees paid by Class A
and Class T under their respective Distribution and Service Plans may
be reallowed to investment professionals as compensation for their
services in connection with the distribution of Class A or Class T
shares, as applicable, and for providing support services to Class A
or Class T shareholders, as applicable, based upon the level of
services provided.
Currently, the full amount of distribution fees paid by Class B under
its Distribution and Service Plan is retained by FDC as compensation
for its services and expenses in connection with the distribution of
Class B shares, and up to the full amount of service fees paid by
Class B under its Distribution and Service Plan may be reallowed to
investment professionals for providing personal service to and/or
maintenance of Class B shareholder accounts.
Currently and except as provided below, for the first year of
investment, the full amount of distribution fees paid by Class C is
retained by FDC as compensation for its services and expenses in
connection with the distribution of Class C shares, and the full
amount of service fees paid by Class C is retained by FDC for
providing personal service to and/or maintenance of Class C
shareholder accounts. Normally, after the first year of investment, up
to the full amount of the distribution fees paid by Class C may be
reallowed to investment professionals as compensation for their
services in connection with the distribution of Class C shares, and up
to the full amount of service fees paid by Class C may be reallowed to
investment professionals for providing personal service and/or
maintenance of Class C shareholder accounts. For purchases of Class C
shares made for an employee benefit plan or through reinvested
dividends or capital gain distributions, during the first year of
investment and thereafter, up to the full amount of distribution fees
and service fees paid by such Class C shares may be reallowed to
investment professionals as compensation for their services in
connection with the distribution of Class C shares and for providing
personal service to and/or maintenance of Class C shareholder
accounts.
FMR is the fund's manager pursuant to a management contract dated
August 1, 1986, which was approved by shareholders on July 23, 1986.
For services under the contract, the fund pays FMR a management fee
at an annual rate of 0.50% of the fund's average net assets.
FMR may, from time to time, agree to reimburse all or a portion of a
class's total operating expenses (exclusive of interest, taxes,
brokerage commissions, and extraordinary expenses). FMR retains the
ability to be repaid for these expense reimbursements in the amount
that expenses fall below the limit prior to the end of the fiscal
year.
FMR has voluntarily agreed, subject to revision or termination, to
reimburse each class of the fund to the extent that its total
operating expenses, as a percentage of its respective average net
assets exceed the following rates:
Class A Class T Class B Class C Institution
1.10% 1.35% 1.85% 1.85% al Class
0.85%
Effective November 1, 1997, Class A, Class T, Class B, and
Institutional Class expense limitations were changed from 1.50% to
1.10%, 1.75% to 1.35%, 2.25% to 1.85%, and 1.25% to 0.85% of each
Class' average net assets, respectively.
SUB-ADVISORY AGREEMENTS
On behalf of Fidelity Advisor Equity Income Fund, FMR has entered
into sub-advisory agreements with FMR U.K. and FMR Far East. Pursuant
to the sub-advisory agreements, FMR may receive investment advice and
research services outside the United States from sub-advisers. The
sub-advisory agreement with FMR U.K., dated January 1, 1991, was
approved by shareholders on November 14, 1990. The sub-advisory
agreement with FMR Far East, dated January 1, 1991, was approved by
shareholders on November 14, 1990.
Currently, FMR U.K. and FMR Far East each focus on issuers in
countries other than the United States such as those in Europe, Asia,
and the Pacific Basin.
FMR U.K. and FMR Far East, which were organized in 1986, are wholly
owned subsidiaries of FMR. Under the sub-advisory agreements FMR pays
the fees of FMR U.K. and FMR Far East. For providing non-discretionary
investment advice and research services, FMR pays FMR U.K. and FMR Far
East fees equal to 110% and 105% respectively, of FMR U.K.'s and FMR
Far East's costs incurred in connection with providing investment
advice and research services.
For providing investment advice and research services, the fees paid
to the sub-advisers for the fiscal year ended 1997 were as follows:
FMR U.K. FMR Far East
$89,084 $85,667
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are
placed on behalf of each fund by FMR pursuant to authority contained
in the fund's management contract.
FMR may place agency transactions with National Financial Services
Corporation (NFSC) and Fidelity Brokerage Services (Japan), LLC
(FBSJ), indirect subsidiaries of FMR Corp., if the commissions are
fair, reasonable, and comparable to commissions charged by
non-affiliated, qualified brokerage firms for similar services. Prior
to December 9, 1997, FMR used research services provided by and placed
agency transactions with Fidelity Brokerage Services (FBS), an
indirect subsidiary of FMR Corp.
During fiscal 1997, the fund paid brokerage commissions of $473,418
to NFSC. During fiscal 1997, this amounted to approximately 17% of the
aggregate brokerage commissions paid by the fund.
SUBMISSION OF CERTAIN SHAREHOLDER PROPOSALS
The trust does not hold annual shareholder meetings. Shareholders
wishing to submit proposals for inclusion in a proxy statement for a
subsequent shareholder meeting should send their written proposals to
the Secretary of the Trust, 82 Devonshire Street, Boston,
Massachusetts 02109.
NOTICE TO BANKS, BROKER-DEALERS AND
VOTING TRUSTEES AND THEIR NOMINEES
Please advise the trust, in care of Client Services at
1-800-522-7297, whether other persons are beneficial owners of shares
for which proxies are being solicited and, if so, the number of copies
of the Proxy Statement and Annual Reports you wish to receive in order
to supply copies to the beneficial owners of the respective shares.
EXHIBIT 1
((UNDERLINED)) LANGUAGE WILL BE ADDED;
[BRACKETED] LANGUAGE WILL BE DELETED.
FORM OF
MANAGEMENT CONTRACT
BETWEEN
FIDELITY ADVISOR SERIES III:
[EQUITY PORTFOLIO: INCOME] ((FIDELITY ADVISOR EQUITY INCOME FUND))
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
[AGREEMENT] ((AMENDMENT)) made this [1st] ((__)) day of [August,]
((_______)) [1986] ((1998)), by and between [Equity Portfolio:
Income] ((Fidelity Advisor Series III)), a Massachusetts business
trust [that] ((which)) may issue one or more series of shares of
beneficial interest (hereinafter called the "Fund"), on behalf of [its
single existing series of shares of beneficial interest] ((Fidelity
Advisor Equity Income Fund)) (hereinafter called the "Portfolio"), and
Fidelity Management & Research Company, a Massachusetts corporation
(hereinafter called the "Adviser") ((as set forth in its entirety
below)).
((Required authorization and approval by shareholders and Trustees
having been obtained, the Fund, on behalf of the Portfolio, and the
Adviser hereby consent, pursuant to Paragraph 6 of the existing
Management Contract dated August 1, 1986, to a modification of said
Contract in the manner set forth below. The Amended Management
Contract shall, when executed by duly authorized officers of the Fund
and Adviser, take effect on ________________.))
1. (a) Investment Advisory Services. The Adviser undertakes to act
as investment adviser of the Portfolio and shall, subject to the
supervision of the Fund's Board of Trustees, direct the investments of
the Portfolio in accordance with the investment objective, policies
and limitations as provided in the Portfolio's Prospectus or other
governing instruments, as amended from time to time, the Investment
Company Act of 1940 and rules thereunder, as amended from time to time
(the "1940 Act"), and such other limitations as the Portfolio may
impose by notice in writing to the Adviser. The Adviser shall also
furnish for the use of the Portfolio office space and all necessary
office facilities, equipment and personnel for servicing the
investments of the Portfolio; and shall pay the salaries and fees of
all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all
personnel of the Fund or the Adviser performing services relating to
research, statistical and investment activities. The Adviser is
authorized, in its discretion and without prior consultation with the
Portfolio, to buy, sell, lend and otherwise trade in any stocks, bonds
and other securities and investment instruments on behalf of the
Portfolio. The investment policies and all other actions of the
Portfolio are and shall at all times be subject to the control and
direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for
the performance by its affiliates of) the management and
administrative services necessary for the operation of the Fund. The
Adviser shall, subject to the supervision of the Board of Trustees,
perform various services for the Portfolio, including but not limited
to: (i) providing the Portfolio with office space, equipment and
facilities (which may be its own) for maintaining its organization;
(ii) on behalf of the Portfolio, supervising relations with, and
monitoring the performance of, custodians, depositories, transfer and
pricing agents, accountants, attorneys, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be
necessary or desirable; (iii) preparing all general shareholder
communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered,
maintaining the registration and qualification of the Portfolio's
shares under [F]((f))ederal and state law; and (vii) investigating the
development of and developing and implementing, if appropriate,
management and shareholder services designed to enhance the value or
convenience of the Portfolio as an investment vehicle.
The Adviser shall also furnish such reports, evaluations, information
or analyses to the Fund as the Fund's Board of Trustees may request
from time to time or as the Adviser may deem ((to be)) desirable. The
Adviser shall make recommendations to the Fund's Board of Trustees
with respect to Fund policies, and shall carry out such policies as
are adopted by the Trustees. The Adviser shall, subject to review by
the Board of Trustees, furnish such other services as the Adviser
shall from time to time determine to be necessary or useful to perform
its obligations under this Contract.
(c) The Adviser[,at its own expense,] shall place all orders for the
purchase and sale of portfolio securities for the Portfolio's account
with brokers or dealers selected by the Adviser, which may include
brokers or dealers affiliated with the Adviser. The Adviser shall use
its best efforts to seek to execute portfolio transactions at prices
which are advantageous to the Portfolio and at commission rates which
are reasonable in relation to the benefits received. In selecting
brokers or dealers qualified to execute a particular transaction,
brokers or dealers may be selected who also provide brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Portfolio and/or the other
accounts over which the Adviser or its affiliates exercise investment
discretion. The Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess
of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser determines in
good faith that such amount of commission is reasonable in relation to
the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either
that particular transaction or the overall responsibilities which the
Adviser and its affiliates have with respect to accounts over which
they exercise investment discretion. The Trustees of the Fund shall
periodically review the commissions paid by the Portfolio to determine
if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor.
The Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of
the Fund are or may be or become interested in the Adviser as
directors, officers or otherwise and that directors, officers and
stockholders of the Adviser are or may be or become similarly
interested in the Fund, and that the Adviser may be or become
interested in the Fund as a shareholder or otherwise.
3. ((The Adviser will be compensated on the following basis))
[F]((f))or the services and facilities to be furnished
hereunder[,]((.)) ((The Adviser)) shall receive [an annual] ((a
monthly)) management fee, payable monthly as soon as practicable after
the last day of each month((,)) [and equivalent to an annual rate of
.5% of average daily net assets] ((composed of a Group Fee and an
Individual Fund Fee)).
(a) ((Group Fee Rate. The Group Fee Rate shall be based upon the
monthly average of the net assets of the registered investment
companies having Advisory and Service or Management Contracts with the
Adviser (computed in the manner set forth in the fund's Declaration of
Trust or other organizational document) determined as of the close of
business on each business day throughout the month. The Group Fee Rate
shall be determined on a cumulative basis pursuant to the following
schedule:))
((Average Net Assets)) ((Annualized Fee Rate (for each level)))
((0)) - (($ 3 billion)) ((.5200%))
((3)) - ((6)) ((.4900))
((6)) - ((9)) ((.4600))
((9)) - ((12)) ((.4300))
((12)) - ((15)) ((.4000))
((15)) - ((18)) ((.3850))
((18)) - ((21)) ((.3700))
((21)) - ((24)) ((.3600))
((24)) - ((30)) ((.3500))
((30)) - ((36)) ((.3450))
((36)) - ((42)) ((.3400))
((42)) - ((48)) ((.3350))
((48)) - ((66)) ((.3250))
((66)) - ((84)) ((.3200))
((84)) - ((102)) ((.3150))
((102)) - ((138)) ((.3100))
((138)) - ((174)) ((.3050))
((174)) - ((210)) ((.3000))
((210)) - ((246)) ((.2950))
((246)) - ((282)) ((.2900))
((282)) - ((318)) ((.2850))
((318)) - ((354)) ((.2800))
((354)) - ((390)) ((.2750))
((390)) - ((426)) ((.2700))
((426)) - ((462)) ((.2650))
((462)) - ((498)) ((.2600))
((498)) - ((534)) ((.2550))
((Over)) ((534)) ((.2500))
(((b) Individual Fund Fee Rate. The Individual Fund Fee Rate shall
be 0.20%.))
((The sum of the Group Fee Rate, calculated as described above to the
nearest millionth, and the Individual Fund Fee Rate shall constitute
the Annual Management Fee Rate. One-twelfth of the Annual Management
Fee Rate shall be applied to the average of the net assets of the
Portfolio (computed in the manner set forth in the Fund's Declaration
of Trust or other organizational document) determined as of the close
of business on each business day throughout the month.))
(((c) In case of termination of this Contract during any month, the
fee for that month shall be reduced proportionately on the basis of
the number of business days during which it is in effect, and the fee
computed upon the average net assets for the business days it is so in
effect for that month.))
4. It is understood that the Portfolio will pay all its expenses
[other than those expressly stated to be payable by the Advisor
hereunder], which expenses payable by the Portfolio shall include,
without limitation, (i) interest and taxes; (ii) brokerage commissions
and other costs in connection with the purchase or sale of securities
and other investment instruments; (iii) fees and expenses of the
Fund's Trustees other than those who are "interested persons" of the
Fund or the Adviser; (iv) legal and audit expenses; (v) custodian,
registrar and transfer agent fees and expenses; (vi) fees and expenses
related to the registration and qualification of the Fund and the
Portfolio's shares for distribution under state and federal securities
laws; (vii) expenses of printing and mailing reports and notices and
proxy material to shareholders of the Portfolio; (viii) all other
expenses incidental to holding meetings of the Portfolio's
shareholders, including proxy solicitations therefor; (ix) a pro rata
share, based on relative net assets of the Portfolio and other
registered investment companies having Advisory and Service or
Management Contracts with the Adviser((,)) of 50% of insurance
premiums for fidelity and other coverage; (x) its proportionate share
of association membership dues; (xi) expenses of typesetting for
printing Prospectuses and Statements of Additional Information and
supplements thereto; (xii) expenses of printing and mailing
Prospectuses and Statements of Additional Information and supplements
thereto sent to existing shareholders; and (xiii) such non-recurring
or extraordinary expenses as may arise, including those relating to
actions, suits or proceedings to which the Portfolio is a party and
the legal obligation which the Portfolio may have to indemnify the
Fund's Trustees and officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and
engage in other activities, provided, however, that such other
services and activities do not, during the term of this Contract,
interfere, in a material manner, with the Adviser's ability to meet
all of its obligations with respect to rendering services to the
Portfolio hereunder. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject
to liability to the Portfolio or to any shareholder of the Portfolio
for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security ((or other investment
instrument)).
6. (a) Subject to prior termination as provided in sub-paragraph (d)
of this paragraph 6, this Contract shall continue in force until July
31, [1987] ((1999)) and indefinitely thereafter, but only so long as
the continuance after such date shall be specifically approved at
least annually by vote of the Trustees of the Fund or by vote of a
majority of the outstanding voting securities of the Portfolio.
(b) This Contract may be modified by mutual consent[, such consent on
the part of the Fund to be authorized by vote of a majority of the
outstanding voting securities of the Portfolio] ((subject to the
provisions of Section 15 of the 1940 Act, as modified by or
interpreted by any applicable order or orders of the Securities and
Exchange Commission (the "Commission") or any rules or regulations
adopted by, or interpretative releases of, the Commission)).
(c) In addition to the requirements of sub-paragraphs (a) and (b) of
this paragraph 6, the terms of any continuance or modification of this
Contract must have been approved by the vote of a majority of those
Trustees of the Fund who are not parties to the Contract or interested
persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval.
(d) Either party hereto may, at any time on sixty (60) days' prior
written notice to the other, terminate this Contract, without payment
of any penalty, by action of its Trustees or Board of Directors, as
the case may be, or with respect to the Portfolio by vote of a
majority of the outstanding voting securities of the Portfolio. This
Contract shall terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Declaration of Trust
((or other organizational document)) and agrees that the obligations
assumed by the Fund pursuant to this Contract shall be limited in all
cases to the Portfolio and its assets, and the Adviser shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Portfolio or [the] ((any)) other Portfolios of the
Fund. In addition, the Adviser shall not seek satisfaction of any
such obligations from the Trustees or any individual Trustee. The
Adviser understands that the rights and obligations of any Portfolio
under the Declaration of Trust ((or other organizational document))
are separate and distinct from those of any and all other Portfolios.
((8.)) ((This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts,
without giving effect to the choice of laws provisions thereof.))
The terms "vote of a majority of the outstanding ((voting))
securities," "assignment," and "interested persons," when used herein,
shall have the respective meanings specified in the 1940 Act, as now
in effect or as hereafter amended, and subject to such orders as may
be granted by the [Securities and Exchange] Commission.
IN WITNESS WHEREOF the parties have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.
[SIGNATURE LINES OMITTED]
EXHIBIT 2
((UNDERLINED)) LANGUAGE WILL BE ADDED;
[BRACKETED] LANGUAGE WILL BE DELETED.
FORM OF
SUB-ADVISORY AGREEMENT
BETWEEN
[FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.]
((FIDELITY MANAGEMENT & RESEARCH COMPANY))
AND
[FIDELITY MANAGEMENT & RESEARCH COMPANY]
((FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.))
((AND))
((FIDELITY ADVISOR SERIES III ON BEHALF OF FIDELITY ADVISOR EQUITY
INCOME FUND))
AGREEMENT made this [1st] ((___)) day of [January] ((____)), [1991]
((1998)), by and between Fidelity Management & Research [(Far East)
Inc.] ((Company,)) a Massachusetts corporation with principal offices
at 82 Devonshire Street, Boston, Massachusetts (hereinafter called the
["Sub-Adviser"] ((("Advisor")))((;)) [and] Fidelity Management &
Research [Company] (((Far East) Inc. (hereinafter called the
"Sub-Advisor"); and Fidelity Advisor Series III,)) a Massachusetts
[corporation with principal offices at 82 Devonshire Street, Boston,
Massachusetts] ((business trust which may issue one or more series of
shares of beneficial interest)) (hereinafter called the ["Adviser"]
((("Trust"))) ((on behalf of Fidelity Advisor Equity Income Fund
(hereinafter called the "Portfolio"))).
WHEREAS the [Adviser has] ((Trust and the Advisor have)) entered into
a Management Contract [with Equity Portfolio: Income, a Massachusetts
business trust which may issue one or more series of shares of
beneficial interest (hereinafter called the "Fund"),] on behalf of
[Equity Portfolio: Income (hereinafter called the "Portfolio")] ((the
Portfolio)), pursuant to which the [Adviser] ((Advisor)) is to act as
investment [adviser to] ((manager of)) the Portfolio[,]((;)) and
WHEREAS the [Sub-Adviser has] ((Sub-Advisor and its subsidiaries and
other affiliated persons have)) personnel in [Asia and the
Pacific Basin and was formed] ((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 [outside of North America, principally in Asia and the Pacific
Basin.] ((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]
((Advisor)) and the [Sub-Adviser] ((Sub-Advisor)) agree as follows:
[1. The Sub-Adviser shall act as an investment consultant to the
Adviser and shall furnish the Adviser factual information, research
reports and investment recommendations relating to non-U.S. issuers of
securities located in, and the economies of, various countries outside
the U.S., all as the Adviser may reasonably require. Such information
shall include written and oral reports and analyses.]
((1. Duties: The Advisor may, in its discretion, appoint the
Sub-Advisor to perform one or more of the following services with
respect to all or a portion of the investments of the Portfolio. The
services and the portion of the investments of the Portfolio to be
advised or managed by the Sub-Advisor shall be as agreed upon from
time to time by the Advisor and the Sub-Advisor. The Sub-Advisor shall
pay the salaries and fees of all personnel of the Sub-Advisor
performing services for the Portfolio relating to research,
statistical and investment activities.))
(((a) INVESTMENT ADVICE: If and to the extent requested by the
Advisor, the Sub-Advisor shall provide investment advice to the
Portfolio and the Advisor with respect to all or a portion of the
investments of the Portfolio, and in connection with such advice shall
furnish the Portfolio and the Advisor such factual information,
research reports and investment recommendations as the Advisor may
reasonably require. Such information may include written and oral
reports and analyses.))
(((b) INVESTMENT MANAGEMENT: If and to the extent requested by the
Advisor, the Sub-Advisor shall, subject to the supervision of the
Advisor, manage all or a portion of the investments of the Portfolio
in accordance with the investment objective, policies and limitations
provided in the Portfolio's Prospectus or other governing instruments,
as amended from time to time, the Investment Company Act of 1940 (the
"1940 Act") and rules thereunder, as amended from time to time, and
such other limitations as the Trust or Advisor may impose with respect
to the Portfolio by notice to the Sub-Advisor. With respect to the
portion of the investments of the Portfolio under its management, the
Sub-Advisor is authorized to make investment decisions on behalf of
the Portfolio with regard to any stock, bond, other security or
investment instrument, and to place orders for the purchase and sale
of such securities through such broker-dealers as the Sub-Advisor may
select. The Sub-Advisor may also be authorized, but only to the extent
such duties are delegated in writing by the Advisor, to provide
additional investment management services to the Portfolio, including
but not limited to services such as managing foreign currency
investments, purchasing and selling or writing futures and options
contracts, borrowing money, or lending securities on behalf of the
Portfolio. All investment management and any other activities of the
Sub-Advisor shall at all times be subject to the control and direction
of the Advisor and the Trust's Board of Trustees.))
(((c) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any
or all of the services contemplated by this Agreement directly or
through such of its subsidiaries or other affiliated persons as the
Sub-Advisor shall determine; provided, however, that performance of
such services through such subsidiaries or other affiliated persons
shall have been approved by the Trust to the extent required pursuant
to the 1940 Act and rules thereunder.))
((2. Information to be Provided to the Trust and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees
or the Advisor may reasonably request from time to time, or as the
Sub-Advisor may deem to be desirable.))
((3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Advisor
shall place all orders for the purchase and sale of portfolio
securities for the Portfolio's account with brokers or dealers
selected by the Sub-Advisor, which may include brokers or dealers
affiliated with the Advisor or Sub-Advisor. The Sub-Advisor shall use
its best efforts to seek to execute portfolio transactions at prices
which are advantageous to the Portfolio and at commission rates which
are reasonable in relation to the benefits received. In selecting
brokers or dealers qualified to execute a particular transaction,
brokers or dealers may be selected who also provide brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of l934) to the Portfolio and/or to the other
accounts over which the Sub-Advisor or Advisor exercise investment
discretion. The Sub-Advisor is authorized to pay a broker or dealer
who provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess
of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Advisor determines
in good faith that such amount of commission is reasonable in relation
to the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either
that particular transaction or the overall responsibilities which the
Sub-Advisor has with respect to accounts over which it exercises
investment discretion. The Trustees of the Trust shall periodically
review the commissions paid by the Portfolio to determine if the
commissions paid over representative periods of time were reasonable
in relation to the benefits to the Portfolio.))
[2. The Sub-Adviser will be compensated by the Adviser on the
following basis for the services to be furnished hereunder: the
Adviser agrees to pay the Sub-Adviser a monthly fee equal to 105% of
the Sub-Adviser's costs incurred in connection with the Agreement,
said costs to be determined in relation to the assets of the Portfolio
that benefits from the services of the Sub-Adviser.]
((4. Compensation: The Advisor shall compensate the Sub-Advisor on
the following basis for the services to be furnished hereunder.))
(((a) INVESTMENT ADVISORY FEE: For services provided under
subparagraph (a) of paragraph 1 of this Agreement, the Advisor agrees
to pay the Sub-Advisor a monthly Sub-Advisory Fee. The Sub-Advisory
Fee shall be equal to 105% of the Sub-Advisor's costs incurred in
connection with rendering the services referred to in subparagraph (a)
of paragraph 1 of this Agreement. The Sub-Advisory Fee shall not be
reduced to reflect expense reimbursements or fee waivers by the
Advisor, if any, in effect from time to time.))
(((b) INVESTMENT MANAGEMENT FEE: For services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Advisor agrees
to pay the Sub-Advisor a monthly Investment Management Fee. The
Investment Management Fee shall be equal to: (i) 50% of the monthly
management fee rate (including performance adjustments, if any) that
the Portfolio is obligated to pay the Advisor under its Management
Contract with the Advisor, multiplied by: (ii) the fraction equal to
the net assets of the Portfolio as to which the Sub-Advisor shall have
provided investment management services divided by the net assets of
the Portfolio for that month. If in any fiscal year the aggregate
expenses of the Portfolio exceed any applicable expense limitation
imposed by any state or federal securities laws or regulations, and
the Advisor waives all or a portion of its management fee or
reimburses the Portfolio for expenses to the extent required to
satisfy such limitation, the Investment Management Fee paid to the
Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements
and the Advisor subsequently recovers all or any portion of such
waivers and reimbursements, then the Sub-Advisor shall be entitled to
receive from the Advisor a proportionate share of the amount
recovered. To the extent that waivers and reimbursements by the
Advisor required by such limitations are in excess of the Advisor's
management fee, the Investment Management Fee paid to the Sub-Advisor
will be reduced to zero for that month, but in no event shall the
Sub-Advisor be required to reimburse the Advisor for all or a portion
of such excess reimbursements.))
(((c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph 1
for the same portion of the investments of the Portfolio for the same
period, the fees paid to the Sub-Advisor with respect to such
investments shall be calculated exclusively under subparagraph (b) of
this paragraph 4.))
((5. Expenses: It is understood that the Portfolio will pay all of
its expenses other than those expressly stated to be payable by the
Sub-Advisor hereunder or by the Advisor under the Management Contract
with the Portfolio, which expenses payable by the Portfolio shall
include, without limitation, (i) interest and taxes; (ii) brokerage
commissions and other costs in connection with the purchase or sale of
securities and other investment instruments; (iii) fees and expenses
of the Trust's Trustees other than those who are "interested persons"
of the Trust, the Sub-Advisor or the Advisor; (iv) legal and audit
expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the Trust and the Portfolio's shares for distribution
under state and federal securities laws; (vii) expenses of printing
and mailing reports and notices and proxy material to shareholders of
the Portfolio; (viii) all other expenses incidental to holding
meetings of the Portfolio's shareholders, including proxy
solicitations therefore; (ix) a pro rata share, based on relative net
assets of the Portfolio and other registered investment companies
having Advisory and Service or Management Contracts with the Advisor,
of 50% of insurance premiums for fidelity and other coverage; (x) its
proportionate share of association membership dues; (xi) expenses of
typesetting for printing Prospectuses and Statements of Additional
Information and supplements thereto; (xii) expenses of printing and
mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to
indemnify the Trust's Trustees and officers with respect thereto.))
[3.] ((6. Interested Persons:)) It is understood that Trustees,
officers, and shareholders of the [Fund] ((Trust)) are or may be or
become interested in the [Adviser and] ((Advisor or)) the
[Sub-Adviser] ((Sub-Advisor)) as directors, officers or
otherwise and that directors, officers and stockholders of the
[Adviser and] ((Advisor or)) the [Sub-Adviser] ((Sub-Advisor)) are or
may be or become similarly interested in the [Fund] ((Trust)), and
that the [Adviser] ((Advisor)) or the [Sub-Adviser] ((Sub-Advisor))
may be or become interested in the [Fund] ((Trust)) as a shareholder
or otherwise.
[4. The Sub-Adviser shall for all purposes be an independent
contractor and not an agent or employee of the Adviser or the Fund.
The Sub-Adviser shall have no authority to act for, represent, bind or
obligate the Adviser or the Fund, and shall in no event have
discretion to invest or reinvest assets held by the Portfolio.]
[5.](( 7. Services to Other Companies or Accounts:)) The
[S]((s))ervices of the [Sub-Adviser] ((Sub-Advisor )) to
the [Adviser] ((Advisor)) are not to be deemed to be exclusive, the
[Sub-Adviser] ((Sub-Advisor)) being free to render services to others
and engage in other activities, provided, however, that such other
services and activities do not, during the term of this Agreement,
interfere, in a material manner, with the [Sub-Adviser's]
((Sub-Advisor's)) ability to meet all of its obligations [with respect
to rendering investment advice] hereunder. ((The Sub-Advisor shall for
all purposes be an independent contractor and not an agent or employee
of the Advisor or the Trust.))
((8. Standard of Care:)) In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the [Sub-Adviser] ((Sub-Advisor)), the
[Sub-Adviser] ((Sub-Advisor)) shall not be subject to liability to the
[Adviser] ((Advisor,)) the [Fund] ((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:))
[6.] (a) Subject to prior termination as provided in subparagraph (d)
of this paragraph [6] ((9)), this Agreement shall continue in force
until July 31, [1991] ((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 [Fund's] ((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]
((Advisor,)) the[ Sub-Adviser] ((Sub-Advisor)) and the Portfolio[,
such consent on the part of the Portfolio to be authorized by vote of
a majority of the outstanding voting securities of the Portfolio]
((subject to the provisions of Section 15 of the 1940 Act, as modified
by or interpreted by any applicable order or orders of the Securities
and Exchange Commission (the "Commission") or any rules or regulations
adopted by, or interpretative releases of, the Commission.))
(c) In addition to the requirements of [sub-paragraphs]
((subparagraphs)) (a) and (b) of this paragraph [6] ((9)), the terms
of any continuance or modification of [the] ((this)) Agreement must
have been approved by the vote of a majority of those Trustees of the
[Fund] ((Trust)) who are not parties to [such] ((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] ((Advisor)), the [Sub-Adviser]
((Sub-Advisor)) or the Portfolio may, at any time on sixty (60) days'
prior written notice to the other parties, terminate this Agreement,
without payment of any penalty, by action of its Board of Trustees or
Directors, or ((with respect to the Portfolio)) by vote of a majority
of its outstanding voting securities. This Agreement shall terminate
automatically in the event of its assignment.
[7.] ((10. Limitation of Liability:)) The [Sub-Adviser]
((Sub-Advisor)) is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Declaration of Trust ((or
other organizational document)) of the [Fund] ((Trust)) and agrees
that any obligations of the [Fund] ((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] ((Sub-Advisor)) shall
not seek satisfaction of any such obligation from the shareholders or
any shareholder of the Portfolio. Nor shall the [Sub-Adviser]
((Sub-Advisor)) seek satisfaction of any such obligation from the
Trustees or any individual Trustee.
((11. Governing Law: This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of
Massachusetts, without giving effect to the choice of laws provisions
thereof.))
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested
persons," when used herein, shall have the respective meanings
specified in the [Investment Company Act of] 1940 ((Act)) as now in
effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to
be signed in their behalf by their respective officers thereunto duly
authorized, ((and their respective seals to be hereunto affixed,)) all
as of the date written above.
[SIGNATURE LINES OMITTED]
EXHIBIT 3
((UNDERLINED)) LANGUAGE WILL BE ADDED;
[BRACKETED] LANGUAGE WILL BE DELETED.
FORM OF
SUB-ADVISORY AGREEMENT
BETWEEN
[FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.]
((FIDELITY MANAGEMENT & RESEARCH COMPANY))
AND
[FIDELITY MANAGEMENT & RESEARCH COMPANY]
((FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.))
((AND))
((FIDELITY ADVISOR SERIES III ON BEHALF OF FIDELITY ADVISOR EQUITY
INCOME FUND))
AGREEMENT made this [1st] ((___)) day of [January] ((_______)),
[1991] ((1998)), by and between Fidelity Management & Research [(U.K.)
Inc.] ((Company)), a Massachusetts corporation with principal offices
at 82 Devonshire Street, Boston, Massachusetts (hereinafter called the
["Sub-Adviser"] ((("Advisor")))((;)) [and] Fidelity Management &
Research [Company,] (((U.K.) Inc. (hereinafter called the
"Sub-Advisor"); and Fidelity Advisor Series III,)) a Massachusetts
[corporation with principal offices at 82 Devonshire Street, Boston,
Massachusetts] ((business trust which may issue one or more series of
shares of beneficial interest)) (hereinafter called the ["Adviser"]
(("Trust"))) ((on behalf of Fidelity Advisor Equity Income Fund
(hereinafter called the "Portfolio"))).
WHEREAS the [Adviser has] ((Trust and the Advisor have)) entered into
a Management Contract [with Equity Portfolio: Income, a Massachusetts
business trust which may issue one or more series of shares of
beneficial interest (hereinafter called the "Fund")], on behalf of
[Equity Portfolio: Income (hereinafter called the "Portfolio")] ((the
Portfolio)), pursuant to which the [Adviser] ((Advisor)) is to act as
investment [adviser to] ((manager of )) the
Portfolio[,]((;)) and
WHEREAS the [Sub-Adviser has] ((Sub-Advisor and its subsidiaries and
other affiliated persons have)) personnel in [Western Europe and was
formed] ((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 [outside of North
America, principally in Western Europe.] ((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]
((Advisor)) and the [Sub-Adviser] ((Sub-Advisor)) agree as follows:
[1. The Sub-Adviser shall act as an investment consultant to the
Adviser and shall furnish the Adviser factual information, research
reports and investment recommendations relating to non-U.S. issuers of
securities located in, and the economies of, various countries outside
the U.S., all as the Adviser may reasonably require. Such information
shall include written and oral reports and analyses.]
((1. Duties: The Advisor may, in its discretion, appoint the
Sub-Advisor to perform one or more of the following services with
respect to all or a portion of the investments of the Portfolio. The
services and the portion of the investments of the Portfolio to be
advised or managed by the Sub-Advisor shall be as agreed upon from
time to time by the Advisor and the Sub-Advisor. The Sub-Advisor shall
pay the salaries and fees of all personnel of the Sub-Advisor
performing services for the Portfolio relating to research,
statistical and investment activities.))
(((a) INVESTMENT ADVICE: If and to the extent requested by the
Advisor, the Sub-Advisor shall provide investment advice to the
Portfolio and the Advisor with respect to all or a portion of the
investments of the Portfolio, and in connection with such advice shall
furnish the Portfolio and the Advisor such factual information,
research reports and investment recommendations as the Advisor may
reasonably require. Such information may include written and oral
reports and analyses.))
(((b) INVESTMENT MANAGEMENT: If and to the extent requested by the
Advisor, the Sub-Advisor shall, subject to the supervision of the
Advisor, manage all or a portion of the investments of the Portfolio
in accordance with the investment objective, policies and limitations
provided in the Portfolio's Prospectus or other governing instruments,
as amended from time to time, the Investment Company Act of 1940 (the
"1940 Act") and rules thereunder, as amended from time to time, and
such other limitations as the Trust or Advisor may impose with respect
to the Portfolio by notice to the Sub-Advisor. With respect to the
portion of the investments of the Portfolio under its management, the
Sub-Advisor is authorized to make investment decisions on behalf of
the Portfolio with regard to any stock, bond, other security or
investment instrument, and to place orders for the purchase and sale
of such securities through such broker-dealers as the Sub-Advisor may
select. The Sub-Advisor may also be authorized, but only to the extent
such duties are delegated in writing by the Advisor, to provide
additional investment management services to the Portfolio, including
but not limited to services such as managing foreign currency
investments, purchasing and selling or writing futures and options
contracts, borrowing money or lending securities on behalf of the
Portfolio. All investment management and any other activities of the
Sub-Advisor shall at all times be subject to the control and direction
of the Advisor and the Trust's Board of Trustees.))
(((c) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any
or all of the services contemplated by this Agreement directly or
through such of its subsidiaries or other affiliated persons as the
Sub-Advisor shall determine; provided, however, that performance of
such services through such subsidiaries or other affiliated persons
shall have been approved by the Trust to the extent required pursuant
to the 1940 Act and rules thereunder.))
((2. Information to be Provided to the Trust and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees
or the Advisor may reasonably request from time to time, or as the
Sub-Advisor may deem to be desirable.))
((3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Advisor
shall place all orders for the purchase and sale of portfolio
securities for the Portfolio's account with brokers or dealers
selected by the Sub-Advisor, which may include brokers or dealers
affiliated with the Advisor or Sub-Advisor. The Sub-Advisor shall use
its best efforts to seek to execute portfolio transactions at prices
which are advantageous to the Portfolio and at commission rates which
are reasonable in relation to the benefits received. In selecting
brokers or dealers qualified to execute a particular transaction,
brokers or dealers may be selected who also provide brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of l934) to the Portfolio and/or to the other
accounts over which the Sub-Advisor or Advisor exercise investment
discretion. The Sub-Advisor is authorized to pay a broker or dealer
who provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess
of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Advisor determines
in good faith that such amount of commission is reasonable in relation
to the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either
that particular transaction or the overall responsibilities which the
Sub-Advisor has with respect to accounts over which it exercises
investment discretion. The Trustees of the Trust shall periodically
review the commissions paid by the Portfolio to determine if the
commissions paid over representative periods of time were reasonable
in relation to the benefits to the Portfolio.))
[2. The Sub-Adviser will be compensated by the Adviser on the
following basis for the services to be furnished hereunder: the
Adviser agrees to pay the Sub-Adviser a monthly fee equal to 110% of
the Sub-Adviser's costs incurred in connection with the Agreement,
said costs to be determined in relation to the assets of the Portfolio
that benefit from the services of the Sub-Adviser.]
((4. Compensation: The Advisor shall compensate the Sub-Advisor on
the following basis for the services to be furnished hereunder.))
(((a) INVESTMENT ADVISORY FEE: For services provided under
subparagraph (a) of paragraph 1 of this Agreement, the Advisor agrees
to pay the Sub-Advisor a monthly Sub-Advisory Fee. The Sub-Advisory
Fee shall be equal to 110% of the Sub-Advisor's costs incurred in
connection with rendering the services referred to in subparagraph (a)
of paragraph 1 of this Agreement. The Sub-Advisory Fee shall not be
reduced to reflect expense reimbursements or fee waivers by the
Advisor, if any, in effect from time to time.))
(((b) INVESTMENT MANAGEMENT FEE: For services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Advisor agrees
to pay the Sub-Advisor a monthly Investment Management Fee. The
Investment Management Fee shall be equal to: (i) 50% of the monthly
management fee rate (including performance adjustments, if any) that
the Portfolio is obligated to pay the Advisor under its Management
Contract with the Advisor, multiplied by: (ii) the fraction equal to
the net assets of the Portfolio as to which the Sub-Advisor shall have
provided investment management services divided by the net assets of
the Portfolio for that month. If in any fiscal year the aggregate
expenses of the Portfolio exceed any applicable expense limitation
imposed by any state or federal securities laws or regulations, and
the Advisor waives all or a portion of its management fee or
reimburses the Portfolio for expenses to the extent required to
satisfy such limitation, the Investment Management Fee paid to the
Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements
and the Advisor subsequently recovers all or any portion of such
waivers or reimbursements, then the Sub-Advisor shall be entitled to
receive from the Advisor a proportionate share of the amount
recovered. To the extent that waivers and reimbursements by the
Advisor required by such limitations are in excess of the Advisor's
management fee, the Investment Management Fee paid to the Sub-Advisor
will be reduced to zero for that month, but in no event shall the
Sub-Advisor be required to reimburse the Advisor for all or a portion
of such excess reimbursements.))
(((c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph (1)
for the same portion of the investments of the Portfolio for the same
period, the fees paid to the Sub-Advisor with respect to such
investments shall be calculated exclusively under subparagraph (b) of
this paragraph 4.))
((5. Expenses: It is understood that the Portfolio will pay all of
its expenses other than those expressly stated to be payable by the
Sub-Advisor hereunder or by the Advisor under the Management Contract
with the Portfolio, which expenses payable by the Portfolio shall
include, without limitation, (i) interest and taxes; (ii) brokerage
commissions and other costs in connection with the purchase or sale of
securities and other investment instruments; (iii) fees and expenses
of the Trust's Trustees other than those who are "interested persons"
of the Trust, the Sub-Advisor or the Advisor; (iv) legal and audit
expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the Trust and the Portfolio's shares for distribution
under state and federal securities laws; (vii) expenses of printing
and mailing reports and notices and proxy material to shareholders of
the Portfolio; (viii) all other expenses incidental to holding
meetings of the Portfolio's shareholders, including proxy
solicitations therefore; (ix) a pro rata share, based on relative net
assets of the Portfolio and other registered investment companies
having Advisory and Service or Management Contracts with the Advisor,
of 50% of insurance premiums for fidelity and other coverage; (x) its
proportionate share of association membership dues; (xi) expenses of
typesetting for printing Prospectuses and Statements of Additional
Information and supplements thereto; (xii) expenses of printing and
mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to
indemnify the Trust's Trustees and officers with respect thereto.))
[3.] ((6. Interested Persons:)) It is understood that Trustees,
officers, and shareholders of the [Fund] ((Trust)) are or may be or
become interested in the [Adviser and] ((Advisor or)) the
[Sub-Adviser] ((Sub-Advisor)) as directors, officers or otherwise and
that directors, officers and stockholders of the [Adviser and]
((Advisor or)) the [Sub-Adviser] ((Sub-Advisor)) are or may be or
become similarly interested in the [Fund] ((Trust)), and that the
[Adviser] ((Advisor)) or the [Sub-Adviser] ((Sub-Advisor)) may be or
become interested in the [Fund] ((Trust)) as a shareholder or
otherwise.
[4. The Sub-Adviser shall for all purposes be an independent
contractor and not an agent or employee of the Adviser or the Fund.
The Sub-Adviser shall have no authority to act for, represent, bind or
obligate the Adviser or the Fund, and shall in no event have
discretion to invest or reinvest assets held by the Portfolio.]
[5.] ((7. Services to Other Companies or Accounts:)) The
[S]((s))ervices of the [Sub-Adviser] ((Sub-Advisor)) to the [Adviser]
((Advisor)) are not to be deemed to be exclusive, the [Sub-Adviser]
((Sub-Advisor)) being free to render services to others and engage in
other activities, provided, however, that such other services and
activities do not, during the term of this Agreement, interfere, in a
material manner, with the [Sub-Adviser's] ((Sub-Advisor's)) ability to
meet all of its obligations [with respect to rendering investment
advice] hereunder. ((The Sub-Advisor shall for all purposes be an
independent contractor and not an agent or employee of the Advisor or
the Trust.))
((8. Standard of Care:)) In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the [Sub-Adviser] ((Sub-Advisor)), the
[Sub-Adviser] ((Sub-Advisor)) shall not be subject to liability to the
[Adviser] ((Advisor)), the [Fund] ((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:))
[6.] (a) Subject to prior termination as provided in subparagraph
(d) of this paragraph [6] ((9)), this Agreement shall continue in
force until July 31, [1991] ((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 [Fund's]
((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]
((Advisor)), the [Sub-Adviser] ((Sub-Advisor)) and the Portfolio[,
such consent on the part of the Portfolio to be authorized by vote of
a majority of the outstanding voting securities of the Portfolio]
((subject to the provisions of Section 15 of the 1940 Act, as modified
by or interpreted by any applicable order or orders of the Securities
and Exchange Commission (the "Commission") or any rules or regulations
adopted by, or interpretative releases of, the Commission)).
(c) In addition to the requirements of [sub-paragraphs]
((subparagraphs)) (a) and (b) of this paragraph [6] ((9)), the terms
of any continuance or modification of [the] ((this)) Agreement must
have been approved by the vote of a majority of those Trustees of the
[Fund] ((Trust)) who are not parties to [such] ((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] ((Advisor)), the [Sub-Adviser]
((Sub-Advisor)) or the Portfolio may, at any time on sixty (60) days'
prior written notice to the other parties, terminate this Agreement,
without payment of any penalty, by action of its Board of Trustees or
Directors, or ((with respect to the Portfolio)) by vote of a majority
of its outstanding voting securities. This Agreement shall terminate
automatically in the event of its assignment.
[7.](( 10. Limitation of Liability:)) The [Sub-Adviser]
((Sub-Advisor)) is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Declaration of Trust ((or
other organizational document)) of the [Fund] ((Trust)) and agrees
that any obligations of the [Fund] ((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] ((Sub-Advisor)) shall
not seek satisfaction of any such obligation from the shareholders or
any shareholder of the Portfolio. Nor shall the [Sub-Adviser]
((Sub-Advisor)) seek satisfaction of any such obligation from the
Trustees or any individual Trustee.
((11. Governing Law: This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of
Massachusetts, without giving effect to the choice of laws provisions
thereof.))
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested
persons," when used herein, shall have the respective meanings
specified in the [Investment Company Act of] 1940 ((Act)) as now in
effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to
be signed in their behalf by their respective officers thereunto duly
authorized, ((and their respective seals to be hereunto affixed,)) all
as of the date written above.
[SIGNATURE LINES OMITTED]
EXHIBIT 4
((UNDERLINED)) LANGUAGE WILL BE ADDED;
[BRACKETED] LANGUAGE WILL BE DELETED
FORM OF
DISTRIBUTION AND SERVICE PLAN
FIDELITY ADVISOR EQUITY INCOME FUND
[(FORMERLY FIDELITY ADVISOR EQUITY PORTFOLIO: INCOME)]
CLASS T SHARES [(FORMERLY RETAIL CLASS)]
1. This Distribution and Service Plan (the "Plan"), when effective
in accordance with its terms, shall be the written plan contemplated
by [Securities and Exchange Commission] Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "Act") for ((the))
Class T ((shares)) of Fidelity Advisor Equity Income Fund[, (the
"Portfolio")] ((("Class T"))), a [series] ((class)) of ((shares of
Fidelity Advisor Equity Income Fund (the "Fund"), a portfolio of))
[Fidelity Franklin Street Trust (the "Fund")] ((Fidelity Advisor
Series III (the "Trust"))).
2. The [Fund] ((Trust)) has entered into a General Distribution
Agreement on behalf of the [Portfolio] ((Fund)) with Fidelity
Distributors Corporation (the "Distributor"), [a wholly-owned
subsidiary of Fidelity Management & Research Company (the "Advisor"),]
under which the Distributor uses all reasonable efforts, consistent
with its other business, to secure purchasers of the [Portfolio's]
((Fund's)) shares of beneficial interest (the "Shares"). Such efforts
may include, but neither are required to include nor are limited to,
the following: (1) formulation and implementation of marketing and
promotional activities, such as mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (2) preparation,
printing and distribution of sales literature; (3) preparation,
printing and distribution of prospectuses of the [Portfolio] ((Fund))
and reports to recipients other than ((the)) existing shareholders of
the [Portfolio] ((Fund)); (4) obtaining such information, analyses and
reports with respect to marketing and promotional activities as the
Distributor may((,)) from time to time, deem advisable; (5) making
payments to securities dealers and others engaged in the sale[s] of
Shares or who engage in shareholder support services; and (6)
providing training, marketing and support to such dealers [and others]
with respect to the sale of Shares.
3. In consideration for the services provided and the expenses
incurred by the Distributor pursuant to the General Distribution
Agreement ((and paragraph 2 hereof, all with respect to Class T
Shares)), [the] Class T [of the Portfolio] shall pay to the
Distributor a fee at the annual rate of ((0)).75% (((or such lesser
amount as the Trustees may, from time to time, determine))) of [such
Class's] ((the)) average daily net assets ((of Class T)) throughout
the month((.)) [,or such lesser amount as may be established from time
to time by the Trustees of the Fund, as specified in paragraph 6 of
this Plan. Such fee shall be computed and paid monthly.] The
determination of daily net assets shall be made at the close of
business each day throughout the month and computed in the manner
specified in the [Portfolio's] ((Fund's)) then current Prospectus for
the determination of the net asset value of [shares of] ((the Fund's))
Class T ((Shares.)) [but shall exclude assets attributable to (i)
shares purchased more than 144 months prior to such day (ii) any other
Class of the Portfolio.] The Distributor may use all or any portion
of the fee received pursuant to [the] ((this)) Plan to compensate
securities dealers or other persons who have engaged in the sale of
((Class T)) Shares or in shareholder support services pursuant to
agreements with the Distributor, or to pay any of the expenses
associated with other activities authorized under paragraph 2
[t]hereof.
4. [Each Class of the Portfolio] ((The Fund)) presently pays, and
will continue to pay, a management fee to ((Fidelity Management &
Research Company)) ((())the (("))Adviser((("))) pursuant to a
management agreement between the [Portfolio] ((Fund)) and the Adviser
(the "Management Contract"). It is recognized that the Adviser may
use its management fee revenue, as well as its past profits or its
resources from any other source[s], to make payment[s] to the
Distributor with respect to any expenses incurred in connection with
the distribution of ((Class T)) Shares, including the activities
referred to in paragraph[s] 2 [and 3] hereof. To the extent that the
payment of management fees by the [Class] ((Fund)) to the Adviser
should be deemed to be indirect financing of any activity primarily
intended to result in the sale ((of Class T)) [s]((S))hares within the
meaning of Rule 12b-1, then such payment shall be deemed to be
authorized by this Plan.
5. This Plan shall become effective upon the [the first business day
of the month following] ((the)) approval by a vote of at least a
"majority of the outstanding voting securities" (as defined in the
Act) of Class T, this Plan having been approved by a vote of a
majority of the Trustees of the [Fund] ((Trust)), including a majority
of Trustees who are not "interested persons" of the [Fund] ((Trust))
(as defined in the Act) and who have no direct or indirect financial
interest in the operation of this Plan or in any agreement related to
the Plan (the "Independent Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain
in effect until [July 31, 1993] ((April 30, 1999)), and from year to
year thereafter; provided, however, that such continuance is subject
to approval annually by a vote of a majority of the Trustees of the
[Fund] ((Trust)), including a majority of the Independent Trustees,
cast in person at a meeting called for the purpose of voting on this
Plan. This Plan may be amended at any time by the Board of Trustees,
provided that (a) any amendment to increase materially the [maximum]
fee provided for in paragraph 3 hereof[,] or any amendment of the
Management Contract to increase the amount to be paid by the
[Portfolio] ((Fund)) thereunder[,] shall be effective only upon
approval by a vote of a majority of the outstanding voting securities
of Class T, in the case of [the] ((this)) Plan, or upon approval by a
vote of a majority of the outstanding voting securities of the
[Portfolio] ((Fund)), in the case of the Management Contract, and (b)
any material amendment of this Plan shall be effective only upon
approval in the manner provided in the first sentence of this
paragraph 6.
7. This Plan may be terminated at any time, without the payment of
any penalty, by vote of a majority of the Independent Trustees or by a
vote of a majority of the outstanding voting securities of [the] Class
((T)).
8. During the existence of this Plan, the [Fund] ((Trust)) shall
require the Adviser and/or the Distributor to provide the [Fund]
((Trust)), for review by the [Fund's] Trustees, and the Trustees shall
review, at least quarterly, a written report of the amounts expended
in connection with financing any activity primarily intended to result
in the sale of shares of Class T (making estimates of such costs where
necessary or desirable) and the purposes for which such expenditures
were made.
9. This Plan does not require the Adviser or Distributor to perform
any specific type or level of distribution activities or to incur any
specific level of expenses for activities primarily intended to result
in the sale of [shares of the] Class ((T Shares)).
10. Consistent with the limitation of shareholder liability as set
forth in the [Fund's] ((Trust's)) Declaration of Trust, [any]
obligation assumed by Class T pursuant to this Plan [or] ((and)) any
agreement related to this Plan shall be limited in all cases to Class
T and its assets and shall not constitute an obligation of any
shareholder of the [Fund] ((Trust)) or of any other [series or]
[C]((c))lass of the Fund((,)) ((series of the Trust or class of such
series)).
11. If any provision of the Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.
EXHIBIT 5
((UNDERLINED)) LANGUAGE WILL BE ADDED;
[BRACKETED] LANGUAGE WILL BE DELETED.
FORM OF
DISTRIBUTION AND SERVICE PLAN
FIDELITY ADVISOR EQUITY INCOME FUND [(FORMERLY FIDELITY EQUITY
PORTFOLIO: INCOME)]
CLASS B ((SHARES))
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
[Securities and Exchange Commission] Rule 12b-1 under the Investment
Company Act of 1940, as amended (the (("))Act") for [the] Class B
shares of Fidelity Advisor Equity Income Fund ("Class B"), a class of
shares of Fidelity Advisor Equity Income Fund (the "Fund"), a series
of Fidelity Advisor Series III (the "Trust").
2. The Trust has entered into a General Distribution Agreement on
behalf of the Fund with Fidelity Distributors Corporation (the
"Distributor") under which the Distributor uses all reasonable
efforts, consistent with its other business, to secure purchasers of
the Fund's shares of beneficial interest (the "[s]((S))hares"). Such
efforts may include, but neither are required to include nor are
limited to, the following: (1) formulation and implementation of
marketing and promotional activities, such as mail promotions and
television, radio, newspaper, magazine and other mass media
advertising; (2) preparation, printing and distribution of sales
literature; (3) preparation, printing and distribution of prospectuses
of the Fund and reports to recipients other than existing shareholders
of the Fund; (4) obtaining such information, analyses and reports with
respect to marketing and promotional activities as the Distributor
may, from time to time, deem advisable; (5) making payments to
securities dealers and others engaged in the sale of [s]((S))hares or
[who engage] in shareholder support services ("Investment
Professionals"); and (6) providing training, marketing and support to
Investment Professionals with respect to the sale of [s]((S))hares.
3. In accordance with such terms as the Trustees may, from time to
time establish, and in conjunction with its services under the General
Distribution Agreement with respect to [shares of] Class B ((Shares))
[("Class B Shares")], the Distributor is hereby [specifically]
((expressly)) authorized to make payments to Investment Professionals
in connection with the sale of [the] Class B Shares. Such payments
may be paid as a percentage of the dollar amount of purchases of Class
B Shares attributable to a particular Investment Professional, or may
take such other form as may be approved by the Trustees.
4. In consideration [for] ((of)) the services provided and the
expenses incurred by the Distributor pursuant to the General
Distribution Agreement and paragraphs 2 and 3 hereof, all with respect
to [the] Class B Shares:
(a) Class B shall pay to the Distributor a monthly distribution fee
at the annual rate of 0.75% (or such lesser amount as the Trustees
may, from time to time, determine) of the average daily net assets of
Class B throughout the month. The determination of daily net assets
shall be made at the close of business each day throughout the month
and computed in the manner specified in the Fund's then current
Prospectus for the determination of the net asset value of Class B
Shares, but shall exclude assets attributable to [(i) Class B Shares
purchased more than 144 months prior to such date or (ii)] any other
class of [s]((S))hares of the Fund. The Distributor may, but shall
not be required to, use all or any portion of the distribution fee
received pursuant to the Plan to compensate Investment Professionals
who have engaged in the sale of Class B Shares or in shareholder
support services ((with respect to Class B Shares)) pursuant to
agreements with the Distributor, or to pay any of the expenses
associated with other activities authorized under paragraphs 2 and 3
hereof; and
(b) In addition, the Plan recognizes that the Distributor may, in
accordance with such terms as the Trustees may from time to time
establish, receive all or a portion of any sales charges, including
contingent deferred sales charges, which may be imposed upon the sale
or redemption of Class B Shares.
5. Separate from any payments made as described in paragraph 4
hereof, Class B shall also pay to the Distributor a service fee at the
annual rate of 0.25% (or such lesser amount as the Trustees may, from
time to time, determine) of the average daily net assets of Class B
throughout the month. The determination of daily net assets shall be
made at the close of business each day throughout the month and
computed in the manner specified in the Fund's then current Prospectus
for the determination of the net asset value of Class B Shares, but
shall exclude assets attributable to any other class of [s]((S))hares
of the Fund. In accordance with such terms as the Trustees may from
time to time establish, the Distributor may use all or a portion of
such service fees to compensate Investment Professionals for personal
service and/or the maintenance of shareholder accounts, or for other
services for which "service fees" lawfully may be paid in accordance
with applicable rules and regulations.
6. The Fund presently pays, and will continue to pay, a management
fee to Fidelity Management [and] ((&)) Research Company (the
"Adviser") pursuant to a management agreement between the Fund and the
Adviser (the "Management Contract"). It is recognized that the
Adviser may use its management fee revenue, as well as its past
profits or its resources from any other source, to make payment[s] to
the Distributor with respect to any expenses incurred in connection
with the distribution of Class B Shares, including the activities
referred to in paragraphs 2 and 3 hereof. To the extent that the
payment of management fees by the Fund to the Adviser should be deemed
to be indirect financing of any activity primarily intended to result
in the sale of Class B Shares within the meaning of Rule 12b-1, then
such payment shall be deemed to be authorized by this Plan.
7. This Plan shall become effective upon the [first business day of
the month following] approval by ["] a vote of at least a
(("))majority of the outstanding voting securities" (as defined in the
Act) of Class B, this Plan having been approved by a vote of a
majority of the Trustees of the Trust, including a majority of
Trustees who are not ["](("))interested persons" of the Trust (as
defined in the Act) and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement related to
the Plan (the "Independent Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan.
8. This Plan shall, unless terminated as hereinafter provided,
remain in effect until [[date]] ((April 30, 1999)), and from year to
year thereafter; provided, however, that such continuance is subject
to approval annually by a vote of a majority of the Trustees of the
Trust, including a majority of the Independent Trustees, cast in
person at a meeting called for the purpose of voting on this Plan.
This Plan may be amended at any time by the Board of Trustees,
provided that (a) any amendment to increase materially the fees
provided for in paragraphs 4 and 5 hereof or any amendment of the
Management Contract to increase the amount to be paid by the Fund
thereunder shall be effective only upon approval by a vote of a
majority of the outstanding voting securities of Class B, in the case
of this Plan, or upon approval by a vote of the majority of the
outstanding voting securities of the Fund, in the case of the
Management Contract, and (b) any material amendment of this Plan shall
be effective only upon approval in the manner provided in the first
sentence of ((this)) paragraph [7] ((8)).
9. This Plan may be terminated at any time, without the payment of
any penalty, by vote of a majority of the Independent Trustees or by a
vote of a majority of the outstanding voting securities of Class B.
10. During the existence of this Plan, the Trust shall require the
Adviser and/or the Distributor to provide the Trust, for review by the
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any
activity primarily intended to result in the sale of Class B Shares
(making estimates of such costs where necessary or desirable) and the
purposes for which such expenditures were made.
11. This Plan does not require the Adviser or Distributor to perform
any specific type or level of distribution activities or to incur any
specific level of expenses for activities primarily intended to result
in the sale of Class B Shares.
12. Consistent with the limitation of shareholder liability as set
forth in the Trust's Declaration of Trust, any obligation assumed by
Class B pursuant to this Plan and any agreement related to this Plan
shall be limited in all cases to Class B and its assets and shall not
constitute an obligation of any shareholder of the Trust or of any
other class of the Fund, series of the Trust or class of such series.
13. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.
EXHIBIT 6
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the Agreement) is made as
of the __ day of ____ 199_, by and between Fidelity Advisor Series III
(Advisor Series III), on behalf of Fidelity Advisor Equity Income Fund
(the Fund), a separate series of Advisor Series III, and Fidelity
Advisor Series I (Advisor Series I), each a business trust duly formed
under the laws of the Commonwealth of Massachusetts.
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368(a)(1)(F) of the
Internal Revenue Code of 1986, as amended (the Code). The
reorganization will comprise (a) the transfer of all of the assets of
the Fund to a series of Advisor Series I (the Series) solely in
exchange for Class A, Class T, Class B, Class C, and Institutional
Class shares of beneficial interest of the Series (the Series
Shares) and the assumption by the Series of the Fund's liabilities;
and (b) the constructive distribution of such Series Shares by the
Fund to its shareholders (Fund Shareholders) in complete liquidation
and termination of the Fund, in exchange for the corresponding classes
of all of the Fund's outstanding shares (Fund Shares). The Fund shall
receive shares of the applicable classes of the Series equal to the
number and class of Fund Shares on the Closing Date (as defined
below). Immediately thereafter, the Fund shall then distribute to each
Fund Shareholder one Series Share for each Fund Share held by the
shareholder on the Closing Date. The foregoing transactions are
referred to herein as the "Reorganization."
In consideration of the mutual promises and subject to the terms and
conditions herein, the parties covenant and agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE FUND
Advisor Series III, on behalf of the Fund, represents and warrants as
follows:
(a) The Fund is a series of Advisor Series III, a business trust duly
formed, validly existing, and in good standing under the laws of the
Commonwealth of Massachusetts, and has the power to own all of its
properties and assets and to carry out its obligations under this
Agreement. It has all necessary federal, state, and local
authorizations to carry out its business as now being conducted and to
carry out this Agreement;
(b) The Fund is a series of Advisor Series III, which is duly
registered as an open-end management investment company under the
Investment Company Act of 1940 (the 1940 Act), as amended, and such
registration is in full force and effect;
(c) The Fund is not in, and the execution, delivery and performance
of this Agreement will not result in a violation of any provision of
the Amended and Restated Declaration of Trust or the Bylaws of Advisor
Series III, or, to the Fund's knowledge, of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Fund is
a party or by which the Fund is bound or result in the acceleration of
any obligation or the imposition of any penalty under any agreement,
judgment or decree to which the Fund is a party or is bound;
(d) The Fund has no material contracts or other commitments (other
than this Agreement) that will not be terminated without liability to
the Fund on or prior to the Closing Date;
(e) To the Fund's knowledge, no material legal, administrative, or
other proceeding or investigation of, or before, any court or
governmental body presently is pending or threatened against the Fund
or any of its properties or assets that assert liability on the part
of the Fund, except as previously disclosed in writing to Advisor
Series I. The Fund knows of no facts that might form the basis for the
institution of such proceedings;
(f) The Fund has filed or will file all federal and state tax returns
that, to the knowledge of the Fund's officers, are required to be
filed by the Fund and has paid or will pay all federal and state taxes
shown to be due on said returns or provision shall have been made for
the payment thereof, and, to the best of the Fund's knowledge, no such
return is currently under audit and no assessment has been asserted
with respect to such returns;
(g) All of the issued and outstanding shares of the Fund are, and at
the Closing Date will be, duly and validly issued and outstanding and
fully paid and nonassessable as a matter of Massachusetts law (except
as disclosed in the Fund's Statement of Additional Information) and
have been offered for sale in conformity with all applicable federal
securities laws. All of the issued and outstanding shares of the Fund
will, at the Closing Date, be held by the persons and in the amounts
as certified in accordance with the provisions of this Agreement;
(h) The information to be furnished by the Fund for use in
applications for orders, registration statements, proxy materials and
other documents that may be necessary in connection with the
transactions contemplated hereby shall be accurate and complete and
shall comply in all material respects with federal securities and
other laws and regulations thereunder applicable thereto;
(i) At both the Valuation Time (as defined in Section 4) and the
Closing Date (as defined in Section 6), the Fund will have the full
right, power, and authority to sell, assign, transfer, and deliver its
portfolio securities and any other assets of the Fund to be
transferred to the Series pursuant to this Agreement. As of the
Closing Date, subject only to the delivery of the Fund's portfolio
securities and any such other assets as contemplated by this
Agreement, the Series will acquire the Fund's portfolio securities and
any such other assets subject to no encumbrances, liens, or security
interests (except for those that may arise in the ordinary course and
are disclosed to the Series) and without any restrictions upon the
transfer thereof;
(j) The execution, delivery, and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary
corporate action on the part of the Fund, and this Agreement
constitutes a valid and binding obligation of the Fund enforceable in
accordance with its terms, subject to shareholder approval;
(k) To the best knowledge of the Fund's management, there is no plan
or intention by any of the Fund's shareholders to sell, exchange or
otherwise dispose of any of the Series Shares to be received in the
Reorganization;
(l) The Fund shares are widely held and may be purchased and redeemed
upon request;
(m) Immediately following consummation of the Reorganization, the
Fund Shareholders will own all of the Series Shares and will own such
shares solely by reason of their ownership of the Fund Shares
immediately prior to the Reorganization;
(n) Immediately following the consummation of the Reorganization,
Advisor Series I will hold, on behalf of the Series, the same assets
and be subject to the same liabilities that the Fund held or was
subject to immediately prior thereto, except for assets used to pay
expenses incurred in connection with the Reorganization. Assets used
to pay expenses and all distributions (except for distributions and
redemptions arising in the ordinary course of the Fund's business as
an open-end investment company) made by the Fund immediately preceding
the Reorganization will, in the aggregate, constitute less than 1% of
the net assets of the Fund;
(o) At the time of the Reorganization, the Fund will not have
outstanding any warrants, options, convertible securities, or any
other type of right pursuant to which any person could acquire shares
of beneficial interest in the Fund;
(p) The Fund's liabilities to be assumed by the Series in the
Reorganization were incurred by the Fund in the ordinary course of its
business and are associated with the assets to be transferred;
(q) Fund Shareholders each will pay their own expenses, if any,
incurred in connection with the Reorganization;
(r) The fair market value of the Fund's assets to be transferred by
the Fund to the Series will equal or exceed the Fund's liabilities to
be assumed by the Series plus the liabilities to which the transferred
assets are subject;
(s) The Fund is a regulated investment company as defined in Section
851 of the Code;
(t) The Fund is not under the jurisdiction of a court in a proceeding
under Title 11 of the United States Code or similar case within the
meaning of Section 368(a)(3)(A) of the Code;
(u) Immediately after the Reorganization, the Fund will not hold any
assets, conduct any business activities, or have any beneficial
owners;
(v) There is no current plan or intention for Advisor Series III to
create a new series;
(w) To the Fund's knowledge, no consent, approval, authorization, or
order of any court or governmental authority is required for the
consummation by the Fund of the transactions contemplated by this
Agreement, except such as shall have been obtained under the
Securities Act of 1933 (the 1933 Act), the Securities Exchange Act of
1934 (the 1934 Act), and the 1940 Act;
(x) The Fund has no known liabilities of a material nature,
contingent or otherwise, other than those shown as belonging to it on
its statement of assets and liabilities as of May 31, 1997, and those
incurred in the ordinary course of the Fund's business as an
investment company since May 31, 1997.
2. REPRESENTATIONS AND WARRANTIES OF ADVISOR SERIES I
Advisor Series I represents and warrants as follows:
(a) Advisor Series I is a business trust duly formed, validly
existing, and in good standing under the laws of the Commonwealth of
Massachusetts. It has all necessary federal, state, and local
authorizations to carry out its business as now being conducted and to
carry out this Agreement;
(b) Advisor Series I is duly registered as an open-end management
investment company under the 1940 Act, and the Series is a duly
established and designated series of Advisor Series I;
(c) Advisor Series I is not in, and the execution, delivery and
performance of this Agreement will not result in a violation of any
provision of the Declaration of Trust or Bylaws of Advisor Series I,
or, to Advisor Series I's knowledge, of any agreement, indenture,
instrument, contract, lease or other undertaking to which Advisor
Series I is a party or by which Advisor Series I is bound or result in
the acceleration of any obligation or the imposition of any penalty
under any agreement, judgment or decree to which Advisor Series I is a
party or is bound;
(d) To Advisor Series I's knowledge, no material legal,
administrative, or other proceeding or investigation of, or before,
any court or governmental body presently is pending or threatened
against Advisor Series I or any of its properties or assets that
assert liability on the part of Advisor Series I, except as previously
disclosed in writing to Advisor Series I. Advisor Series I knows of no
facts that might form the basis for the institution of such
proceedings;
(e) Advisor Series I intends for the Series to be a regulated
investment company under Section 851 of the Code;
(f) Prior to the Closing Date, there shall be no issued and
outstanding Series Shares or any other securities issued by the Series
(except for the one share of each class that may be issued to FMR);
Series Shares issued in connection with the transactions contemplated
herein will be duly and validly issued and outstanding, fully paid and
non-assessable under Massachusetts law on the Closing Date;
(g) The execution, delivery, and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary
corporate action on the part of Advisor Series I, and, upon its proper
execution, this Agreement will constitute a valid and binding
obligation of Advisor Series I enforceable against the Series in
accordance with its terms;
(h) As of the Closing Date, the Series Shares will have been duly
authorized and, when so issued and delivered, will be duly and validly
issued shares of the Series, fully paid and non-assessable under
Massachusetts law except that under Massachusetts law, shareholders of
a Massachusetts business trust, under certain circumstances, may be
held personally liable for obligations of Advisor Series I;
(i) The fair market value of the Series Shares to be received by the
Fund Shareholders will be equal to the fair market value of their Fund
Shares surrendered in exchange therefor;
(j) Advisor Series I has no plan or intention on behalf of the Series
to issue additional Series Shares following the Reorganization other
than in the ordinary course of the business of the Series as the
series of a registered open-end investment company;
(k) Advisor Series I has no plan or intention to redeem or otherwise
reacquire any of the Series Shares issued to the Fund Shareholders
pursuant to the Reorganization other than through redemptions arising
in the ordinary course of the business of the Series as a series of a
registered open-end investment company;
(l) Following the Reorganization, Advisor Series I, on behalf of the
Series, will continue the Fund's historic business;
(m) Advisor Series I has no plan or intention to sell or otherwise
dispose of any of the Fund's assets to be acquired by the Series in
the Reorganization, except for dispositions made in the ordinary
course of its business or dispositions necessary to maintain the
status of the Series as a regulated investment company under Section
851 of the Code;
(n) No consideration other than Series Shares will be issued in
exchange for the Fund Shares in the Reorganization.
(o) At the time of the Reorganization, there will be no intercompany
indebtedness existing between the Series and the Fund that was issued,
acquired, or that will be settled at a discount.
(p) At the time of the Reorganization, the Series will be a regulated
investment company as defined in section 851 of the Code.
(q) The information to be furnished by Advisor Series I with respect
to the Series for use in applications for orders, registration
statements, proxy materials and other documents that may be necessary
in connection with the transactions contemplated hereby shall be
accurate and complete and shall comply in all material respects with
federal securities and other laws and regulations applicable thereto;
(r) Advisor Series I, on behalf of the Series, shall use all
reasonable efforts to obtain the approvals and authorizations required
by the 1933 Act and the 1940 Act as it may deem appropriate in order
to operate after the Closing Date;
(s) To Advisor Series I's knowledge, no consent, approval,
authorization, or order of any court or governmental authority is
required for the consummation by the Series of the transactions
contemplated by this Agreement, except such as shall have been
obtained under the 1933 Act, the 1934 Act, and the 1940 Act; and
(t) Advisor Series I, on behalf of the Series, will use the Employer
Identification Number that was used by the Fund.
3. REORGANIZATION
(a) Subject to the requisite approval of the Fund Shareholders, if
applicable, and to the other terms and conditions contained herein,
the Fund agrees to assign, convey, transfer, and deliver to the Series
established by Advisor Series I solely for the purpose of acquiring
all of the assets of the Fund (which Series has not issued any Series
Shares (except for one share of each class that may be issued to FMR)
or commenced operations) as of the Closing Date all of the assets of
the Fund of any kind and nature existing on the Closing Date. The
Series agrees in exchange therefor (1) to assume all of the Fund's
liabilities existing on or after the Closing Date, whether or not
determinable on the Closing Date, and (2) to issue and deliver to the
Fund the number of full and fractional Series Shares of the applicable
classes equal to the value and number of full and fractional shares of
the corresponding classes of the Fund outstanding at the time of the
closing, as described in paragraph 6, as of the Closing Date provided
for in Section 6(a).
(b) The assets of the Fund to be acquired by the Series and allocated
thereto shall include, without limitation, all cash, cash equivalents,
securities, receivables (including interest or dividends receivables),
claims, choses in action, and other property owned by the Fund, and
any deferred or prepaid expenses shown as an asset on the books of the
Fund on the Closing Date. The Fund will pay or cause to be paid to the
Series any dividend or interest payments received by it on or after
the Closing Date with respect to the assets transferred to the Series
hereunder, and the Series will retain any dividend or interest
payments received by it after the Valuation Time (as defined in
Section 4) with respect to the assets transferred hereunder without
regard to the payment date thereof. The liabilities of the Fund to be
assumed by the Series and allocated thereto, shall include (except as
otherwise provided herein) all of the Fund's liabilities, debts,
obligations, and duties, of whatever kind or nature, whether
absolute, accrued, contingent, or otherwise, whether or not
determinable on the Closing Date, and whether or not specifically
referred to in this Agreement.
(c) Immediately upon delivery to the Fund of the Series Shares, the
individual Trustees of Advisor Series III or any officer duly
authorized by them, on Advisor Series III's behalf as the then sole
shareholder of the Series, shall approve (i) a Management Contract
between Advisor Series I, on behalf of the Series, and FMR, (ii)
Sub-Advisory Agreements between FMR and Fidelity Management & Research
(U.K.) Inc. and Fidelity Management & Research (Far East) Inc., (iii)
a Distribution and Service Plan f under Rule 12b-1 under the 1940 Act
between Advisor Series I, on behalf of each class of the Series, and
Fidelity Distributors Corporation (FDC) (such Management Contracts,
Sub-Advisory Agreements, and Distribution Plans being substantively
identical to the contracts, agreements, and plans currently in effect
with respect to the Fund or class immediately prior to the Closing
Date (as defined below), except as to the parties to such
contract,agreements, and plans, (iv) the independent accountants who
currently serve in that capacity for the Fund, and (v) the adoption of
the revised fundamental policies described in Proposals 7 and 8 of the
Proxy Statement.
(d) Pursuant to this Agreement, as soon after the Closing Date as is
conveniently practicable (the Liquidation Date), the Fund will
constructively distribute to the Fund Shareholders the Series Shares
of the applicable classes pro rata in proportion to their respective
shares of beneficial interest of the corresponding classes of the
Fund, such Fund Shareholders being shareholders of record as
determined as of the Valuation Time on the Closing Date in accordance
with the Advisor Series III Amended and Restated Declaration of Trust,
in liquidation of such Fund. Such distribution will be accomplished by
the Series' transfer agent opening accounts on the share records of
the Series in the names of such Fund Shareholders and transferring the
Series Shares of the applicable classes thereto. Each Fund
Shareholder's account shall be credited with the respective pro rata
number of full and fractional (rounded to the third decimal place)
Series Shares of the applicable classes due that shareholder. All
outstanding Fund Shares, including any represented by certificates,
shall simultaneously be canceled on the Fund's share transfer records.
The Series shall not issue certificates representing Series Shares in
connection with such distribution.
(e) Immediately after the distribution of the Series Shares as set
forth in Section 3(d), the Fund shall be liquidated and terminated,
and any such further actions shall be taken in connection therewith as
required by applicable law.
(f) Any transfer taxes payable upon issuance of Series Shares in a
name other than that of the registered holder on the Fund's books of
the Fund Shares constructively exchanged for the Series Shares shall
be paid by the person to whom such Series Shares are to be issued, as
a condition of such transfer.
(g) Any reporting responsibility of the Fund is and shall remain the
responsibility of the Fund up to and including the date on which it is
liquidated.
4. VALUATION
(a) The valuation time shall be the close of business of the New York
Stock Exchange on the Closing Date (the Valuation Time) or such other
time as may be mutually agreed upon in writing by the parties hereto.
(b) The value of the Fund's net assets to be acquired by the Series
hereunder shall be the net asset value per share of each class
computed as of the Valuation Time, using the valuation procedures set
forth in the Fund's then current Prospectus and Statement of
Additional Information.
(c) The number, value, class, and denomination of full and fractional
Series Shares to be issued in exchange for the Fund's net assets shall
be equal to the number, value, class, and denomination of full and
fractional Fund Shares outstanding on the Closing Date.
(d) All computations pursuant to this Section shall be made by
Fidelity Service Company, Inc. (FSC), a wholly-owned subsidiary of FMR
Corp., in accordance with its regular practice as pricing agent for
the Fund.
5. FEES; EXPENSES
(a) Advisor Series I and the Fund each represents that there is no
person who dealt with it who by reason of such dealings is entitled to
any broker's or finder's fees or commissions arising out of the
transactions contemplated hereby.
(b) The Fund shall be responsible for all expenses, fees and other
charges in connection with the transactions contemplated by the
Agreement, provided that they do not exceed each class's existing
expense cap. Expenses exceeding each class's expense cap, as
applicable, will be paid by FMR, but not including costs incurred in
connection with the purchase or sale of portfolio securities.
6. CLOSING DATE
(a) The transfer of the Fund's assets in exchange for the assumption
by the Series of the Fund's liabilities and the issuance of Series
Shares, as described above, together with related acts necessary to
consummate the same (the Closing), unless otherwise provided herein,
shall occur at the principal office of Advisor Series III and Advisor
Series I, 82 Devonshire Street, Boston, Massachusetts, on February 26,
1999, or at such other place or date as the parties may agree in
writing (the Closing Date). All acts taking place at the Closing shall
be deemed to take place simultaneously as of the Valuation Time or at
such other time and/or place as the parties may agree.
(b) In the event that, on the Closing Date (i) any of the markets for
securities held by the Fund are closed to trading, or (ii) trading
thereon is restricted, or (iii) trading or reporting of trading on
said markets or elsewhere is disrupted, all so that accurate appraisal
of the total net asset value of the Fund is impracticable, the Closing
Date shall be postponed until the first business day after the day
when such trading shall have been fully resumed and reporting shall
have been restored, or such other date as the parties may agree.
(c) The Fund shall deliver at the Closing a certificate of an
authorized officer stating that it has notified The Chase Manhattan
Bank, as custodian for the Fund, of the Fund's reorganization to a
series of Advisor Series I.
(d) Fidelity Investments Institutional Operations Company, Inc.
(FIIOC), as transfer agent for the Fund, shall deliver at the Closing
a certificate as to the conversion on its books and records of each
Fund Shareholder account to an account as a holder of Series Shares.
Advisor Series I shall issue and deliver a confirmation to the Fund
evidencing the Series Shares to be credited as of the Closing Date or
provide evidence satisfactory to the Fund that such Series Shares have
been credited to the Fund's account on the books of Advisor Series I.
At the Closing, each party shall deliver to the other such bills of
sale, checks, assignments, stock certificates, receipts or other
documents as such other party or its counsel may reasonably request.
7. SHAREHOLDER MEETING AND TERMINATION OF THE FUND
(a) If required to do so pursuant to the terms of Advisor Series
III's Amended and Restated Declaration of Trust or otherwise by
applicable law, the Fund agrees to call a meeting of its shareholders
(the Shareholders' Meeting) to consider and act upon this Agreement.
The Fund shall take all other action necessary to obtain approval of
the transactions contemplated hereby.
(b) The Fund agrees that as soon as reasonably practicable after
distribution of the Series Shares, the Fund shall be liquidated and
terminated as a series of Advisor Series III pursuant to its Amended
and Restated Declaration of Trust, any further actions shall be taken
in connection therewith as required by applicable law, and on and
after the Closing Date the Fund shall not conduct any business except
in connection with its liquidation and termination.
8. CONDITIONS TO OBLIGATIONS OF ADVISOR SERIES I
The obligations of Advisor Series I hereunder shall be subject to the
following conditions:
(a) That the Fund furnishes to Advisor Series I a statement, dated as
of the Closing Date, signed by an officer of Advisor Series III,
certifying that as of the Valuation Time and the Closing Date all
representations and warranties of the Fund made in this Agreement are
true and correct in all material respects and that the Fund has
complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to such dates;
(b) That the Fund furnishes Advisor Series I with copies of the
resolutions, certified by an officer of Advisor Series III, evidencing
the adoption of this Agreement and, if applicable, the approval of the
transactions contemplated herein by the requisite vote of the holders
of the outstanding shares of beneficial interest of the Fund;
(c) That the Fund shall deliver to Advisor Series I at the Closing a
statement of its assets and liabilities, together with a certificate
as to the aggregate asset value of the Fund's portfolio securities,
all as of the Valuation Time, certified on the Fund's behalf by its
Treasurer or Assistant Treasurer;
(d) That the Fund's custodian shall deliver to Advisor Series I a
certificate identifying the assets of the Fund held by such custodian
as of the Valuation Time on the Closing Date and stating that at the
Valuation Time (i) the assets held by the custodian will be
transferred to the Series; (ii) the Fund's assets have been duly
endorsed in proper form for transfer in such condition as to
constitute good delivery thereof; and (iii) to the best of the
custodian's knowledge, all necessary taxes in conjunction with the
delivery of the assets, including all applicable federal and state
stock transfer stamps, if any, have been paid or provision for payment
has been made;
(e) That the Fund's transfer agent shall deliver to Advisor Series I
at the Closing a certificate setting forth the number of shares of
each class of shares of the Fund outstanding as of the Valuation Time
and the name and address of each holder of record of any such shares
and the number of shares held of record by each such shareholder;
(f) If applicable, that the Fund calls a Shareholders' Meeting to
consider and act upon this Agreement and that the Fund takes all other
action necessary to obtain approval of the transactions contemplated
hereby;
(g) That the Fund delivers to Advisor Series I a certificate of an
officer of Advisor Series III, dated the Closing Date, that there has
been no material adverse change in the Fund's financial position since
May 31, 1997, other than changes in the market value of its portfolio
securities, or changes due to net redemptions of its shares, dividends
paid, or losses from operations; and
(h) That all of the issued and outstanding shares of beneficial
interest of the Fund shall have been offered for sale and sold in
conformity with all applicable state securities laws and, to the
extent that any audit of the records of the Fund or its transfer agent
by Advisor Series I or its agents shall have revealed otherwise, the
Fund shall have taken all actions that in the opinion of Advisor
Series I are necessary to remedy any prior failure on the part of the
Fund to have offered for sale and sold such shares in conformity with
such laws.
9. CONDITIONS TO OBLIGATIONS OF THE FUND
The obligations of the Fund hereunder shall be subject to the
following conditions:
(a) That Advisor Series I shall have executed and delivered to the
Fund an Assumption of Liabilities, certified by an officer of Advisor
Series I, dated as of the Closing Date pursuant to which Advisor
Series I, on behalf of the Series, will assume all of the liabilities
of the Fund existing at the Valuation Time in connection with the
transactions contemplated by this Agreement;
(b) That Advisor Series I furnishes to the Fund a statement, dated as
of the Closing Date, signed by an officer of Advisor Series I,
certifying that as of the Valuation Time and the Closing Date all
representations and warranties of the Series made in this Agreement
are true and correct in all material respects, and Advisor Series I
has complied with all the agreements and satisfied all the conditions
on its part to be performed or satisfied at or prior to such dates;
and
(c) That the Fund shall have received an opinion of Kirkpatrick &
Lockhart LLP, counsel to the Fund and Advisor Series I, to the effect
that the Series Shares are duly authorized and upon delivery to the
Fund as provided in this Agreement will be validly issued and will be
fully paid and nonassessable under Massachusetts law.
10. CONDITIONS TO OBLIGATIONS OF THE FUND AND ADVISOR SERIES I
The obligations of the Fund and Advisor Series I hereunder shall be
subject to the following conditions:
(a) If applicable, that this Agreement shall have been adopted and
the transactions contemplated herein shall have been approved by the
requisite vote of the holders of the outstanding shares of beneficial
interest of the Fund;
(b) That all consents of other parties and all other consents,
orders, and permits of federal, state, and local regulatory
authorities (including those of the Securities and Exchange Commission
and of state blue sky and securities authorities, including "no
action" positions of such federal or state authorities) deemed
necessary by Advisor Series I or the Fund to permit consummation, in
all material respects, of the transactions contemplated hereby shall
have been obtained, except where failure to obtain any such consent,
order, or permit would not involve a risk of a material adverse effect
on the assets or properties of Advisor Series I or the Fund, provided
that either party hereto may for itself waive any of such conditions;
(c) That all proceedings taken by either the Fund or the Series in
connection with the transactions contemplated by this Agreement and
all documents incidental thereto shall be satisfactory in form and
substance to it and its counsel, Kirkpatrick & Lockhart LLP;
(d) That Advisor Series I shall have taken all necessary action so
that the Series shall be a series of a registered open-end investment
company under the 1940 Act immediately after the closing.
(e) That there shall not be any material litigation pending with
respect to the matters contemplated by this Agreement;
(f) That Advisor Series I and the Fund shall have received an opinion
of Kirkpatrick & Lockhart LLP satisfactory to Advisor Series I and the
Fund that for federal income tax purposes:
(i) The Reorganization should constitute a reorganization under
Section 368(a)(1)(F) of the Code, and the Fund and the Series each
should be a party to the Reorganization under section 368(b) of the
Code;
(ii) No gain or loss will be recognized by the Fund upon the
transfer of all of its assets to the Series in exchange solely for the
applicable classes of the Series Shares and the assumption of the
Fund's liabilities followed by the distribution of those the Series
Shares to the shareholders of the corresponding classes of the Fund;
(iii) No gain or loss will be recognized by the Series on the
receipt of the Fund's assets in exchange solely for the the Series
Shares and the assumption of the Fund's liabilities;
(iv) The basis of the Fund's assets in the hands of the Series will
be the same as the basis of such assets in the Fund's hands
immediately prior to the Reorganization;
(v) The Series' holding period in the assets to be received from the
Fund will include the Fund's holding period in such assets;
(vi) A Fund Shareholder will recognize no gain or loss on the
exchange of his or her shares of beneficial interest in the Fund for
the Series Shares in the Reorganization;
(vii) A Fund Shareholder's basis in the the Series Shares to be
received by him or her will be the same as his or her basis in the
Fund Shares exchanged therefor;
(viii) A Fund Shareholder's holding period for his or her Series
Shares will include the holding period of the Fund Shares exchanged,
provided that those Fund Shares were held as capital assets on the
date of the Reorganization;
(ix) The Reorganization will not result in the termination of the
Fund's taxable year, and the Fund's tax attributes enumerated in
Section 381(c) of the Code will be taken into account by the Series as
if there had been no conversion.
Notwithstanding anything herein to the contrary, neither the Fund nor
Advisor Series I may waive the conditions set forth in this subsection
10(f).
11. COVENANTS OF THE FUND
(a) The Fund covenants to operate its business in the ordinary course
between the date hereof and the Closing Date, it being understood that
such ordinary course of business will include the payment of customary
dividends and distributions.
(b) The Fund covenants that the Series Shares are not being acquired
for the purpose of making any distribution thereof, other than in
accordance with the terms of this Agreement.
(c) The Fund covenants that it will assist Advisor Series I in
obtaining such information as Advisor Series I reasonably requests
concerning the beneficial ownership of Fund Shares.
(d) The Fund covenants that its liquidation and termination will be
effected in the manner provided in its Amended and Restated
Declaration of Trust in accordance with applicable law and, after the
Closing Date, the Fund will not conduct any business except in
connection with its liquidation and termination.
12. TERMINATION; WAIVER
(a) The parties hereto may terminate this Agreement by mutual
consent. In addition, either party may, at its option, terminate this
Agreement at or prior to the Closing Date because
(i) Of a material breach by the other of any representation,
warranty, or agreement contained herein to be performed at or prior to
the Closing Date; or
(ii) A condition herein expressed to be precedent to the obligations
of the terminating party has not been met and it reasonably appears
that it will not or cannot be met.
(b) In the event of any such termination, there shall be no liability
for damages on the part of Advisor Series I or the Fund, or their
respective Trustees or officers.
13. SOLE AGREEMENT; AMENDMENTS; WAIVERS; SURVIVAL OF WARRANTIES
(a) This Agreement supersedes all previous correspondence and oral
communications between the parties regarding the subject matter
hereof, constitutes the only understanding with respect to such
subject matter, may not be changed except by a letter of agreement
signed by each party hereto and shall be construed in accordance with
and governed by the laws of the Commonwealth of Massachusetts.
(b) This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the appropriate
officers of Advisor Series III, Advisor Series I, the Fund, or the
Series; provided, however, that following the shareholders' meeting,
if any, called by the Fund pursuant to Section 7 of this Agreement, no
such amendment may have the effect of changing the provisions for
determining the number of the Series Shares to be received by the Fund
shareholders under this Agreement to the detriment of such
shareholders without their further approval.
(c) Either party may waive any condition to its obligations
hereunder, provided that such waiver does not have any material
adverse effect on the interests of Fund Shareholders.
The representations, warranties, and covenants contained in the
Agreement, or in any document delivered pursuant hereto or in
connection herewith, shall survive the consummation of the
transactions contemplated hereunder.
14. LIMITATION OF LIABILITY
Copies of the Declarations of Trust of Advisor Series I and Advisor
Series III, as amended and restated, are on file with the Secretary of
State of the Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed on behalf of the Trustees of Advisor
Series I and Advisor Series III as trustees and not individually and
that the obligations of the Fund and the Series under this instrument
are not binding upon any of Advisor Series III's or Advisor Series I's
Trustees, officers, or shareholders individually, but are binding only
upon the assets and property of such Fund or Series. The Fund and
Advisor Series I each agrees that its obligations hereunder apply only
to such Fund and the Series, respectively, and not to its shareholders
individually or to the trustees of such Fund or Series.
15. ASSIGNMENT
This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment
or transfer of any rights or obligations hereunder shall be made by
any party without the written consent of the other party. Nothing
herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm, or corporation other than the
parties hereto and their respective successors and assigns any rights
or remedies under or by reason of this Agreement.
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer.
FIDELITY ADVISOR SERIES III, ON BEHALF OF
FIDELITY ADVISOR EQUITY INCOME FUND
[SIGNATURE LINES OMITTED]
FIDELITY ADVISOR SERIES I
[SIGNATURE LINES OMITTED]
FMR HEREBY AGREES TO ASSUME THE EXPENSES PROVIDED FOR IN
ACCORDANCE WITH PARAGRAPH 5(B) OF THIS AGREEMENT.
FIDELITY MANAGEMENT & RESEARCH COMPANY
[SIGNATURE LINE OMITTED]
EXHIBIT 7
COMPARISON OF STAND ALONE FUND STRUCTURE
TO
MASTER FEEDER FUND STRUCTURE
STAND ALONE FUND STRUCTURE
The "Stand Alone Fund Structure" diagram contains three circles
labeled "Individual Fund A-1 (Managed by FMR)," "Individual Fund A-2
(Managed by FMR)," and "Individual Fund A-3 (Managed by FMR),"
respectively. Above each circle attached by a line is a single
rectangular box. The three rectangular boxes are labeled "Retail
Investors," "Institutional Investors," and "Retirement Investors,"
respectively.
MASTER FEEDER FUND STRUCTURE
The "Master Feeder Fund Structure" diagram contains a single circle
labeled "Master Fund (Managed by FMR)." Surrounding the circle
attached by lines are three square boxes labeled "Feeder Fund A-1,"
"Feeder Fund A-2," and "Feeder Fund A-3," respectively. Attached to
each square box a line is a single rectangular box. The three
rectangular boxes are labeled "Retail Investors," "Institutional
Investors," and Retirement Investors," respectively.
EXHIBIT 8
FUNDS ADVISED BY FMR - TABLE OF AVERAGE NET ASSETS AND EXPENSE RATIOS
[TO BE UPDATED]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
INVESTMENT FISCAL AVERAGE RATIO OF NET
OBJECTIVE AND FUND YEAR END (A) NET ASSETS ADVISORY FEES
(MILLIONS)(B) TO AVERAGE
NET ASSETS
PAID
TO FMR (C)
GROWTH AND INCOME
Equity-Income ((pound)) 1/31/97 $ 12,640.8 0.45%
Real Estate ((pound)) 1/31/97 1,021.7 0.60
Utilities Fund ((pound)) 1/31/97 1,312.8 0.54
Spartan U.S. Equity Index 2/28/97 5,035.0 0.01*
Spartan Market Index 4/30/97 1,491.9 0.45
Fidelity Fund ((pound)) 6/30/97 4,503.9 0.39
Balanced ((pound)) 7/31/97 3,927.2 0.45
Dividend Growth ((pound)) 7/31/97 2,674.3 0.65
Global Balanced ((rex-all)) 7/31/97 76.2 0.75
Growth & Income ((pound)) 7/31/97 25,463.2 0.50
Puritan ((pound)) 7/31/97 19,047.2 0.45
Advisor Balanced: ((pound))
Class A 10/31/97 4.3 0.45*
Class B 10/31/97 7.7 0.45
Class T 10/31/97 2,909.7 0.45
Class C ((hollow diamond)) 10/31/98** 38.6 0.45
Institutional Class 10/31/97 28.2 0.45
International Growth & Income ((rex-all)) 10/31/97 1,090.1 0.75
Advisor Equity Income: ((pound))
Class A 11/30/97 12.9 0.50*
Class B 11/30/97 586.4 0.50*
Class T 11/30/97 1,928.3 0.50
Class C 11/30/97 0.0 0.50*
Institutional Class 11/30/97 459.4 0.50
Advisor Growth & Income: ((pound))
Class A 11/30/97 2.8 0.50*
Class B 11/30/97 12.9 0.50*
Class T 11/30/97 55.6 0.50
Class C 11/30/97 0.0 0.50*
Institutional Class 11/30/97 13.5 0.50
Convertible Securities ((pound)) 11/30/97 1,080.2 0.46
Equity-Income II ((pound)) 11/30/97 15,981.8 0.50
Variable Insurance Products:
Equity-Income
Initial Class 12/31/97 8,495.3 0.50
Service Class 12/31/97 1,479.1 0.50
Variable Insurance Products II:
Index 500 12/31/97 $ 1,493.1 0.15%*
Variable Insurance Products III: ((pound))
Balanced Portfolio
Initial Class 12/31/97 162.0 0.45
Service Class 12/31/97 0.0 0.45
Growth & Income
Initial Class 12/31/97 174.8 0.49
Service Class 12/31/97 0.0 0.49
</TABLE>
(a) All fund data are as of the fiscal year end noted in the chart or
as of December 31, 1997, if fiscal year end figures are not yet
available.
(b) Average net assets are computed on the basis of average net assets
of each fund at the close of business on each business day throughout
its fiscal period.
(c) Reflects reductions for any expense reimbursement paid by or due
from FMR pursuant to voluntary or state expense limitations. Funds so
affected are indicated by an (*).
** Less than a complete fiscal year
((rex-all)) Fidelity Management & Research Company has entered into
sub-advisory agreements with the following affiliates: Fidelity
Management & Research (U.K.) Inc. (FMR U.K.), Fidelity Management &
Research (Far East) Inc. (FMR Far East), Fidelity Investments Japan
Ltd. (FIJ), Fidelity International Investment Advisors (FIIA), and
Fidelity International Investment Advisors (U.K.) Limited (FIIAL
U.K.), with respect to the fund.
((pound)) Fidelity Management & Research Company has entered into
sub-advisory agreements with FMR U.K. and FMR Far East, with respect
to the fund.
((hollow diamond)) The ratio of net advisory fees to average net
assets paid to FMR represents the amount as of the prior fiscal year
end. Updated ratios will be presented for each class of shares of the
fund when the next fiscal year end figures are available.
Vote this proxy card TODAY! Your prompt response will
save Fidelity Advisor Equity Income Fund the expense of additional
mailings.
Return the proxy card in the enclosed envelope or mail to:
FIDELITY INVESTMENTS
Proxy Department
P.O. Box 9107
Hingham, MA 02043-9848
PLEASE DETACH AT PERFORATION BEFORE MAILING.
- ----------------------------------------------------------------------
FIDELITY ADVISOR SERIES III: FIDELITY ADVISOR EQUITY INCOME FUND
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward
C. Johnson 3d, Eric D. Roiter, and Robert M. Gates, or any one or more
of them, attorneys, with full power of substitution, to vote all
shares of Fidelity Advisor Series III: Fidelity Advisor Equity Income
Fund which the undersigned is entitled to vote at the Special Meeting
of Shareholders of the fund to be held at the office of the trust at
82 Devonshire St., Boston, MA 02109, on November 18, 1998 at 9:00 a.m.
and at any adjournments thereof. All powers may be exercised by a
majority of said proxy holders or substitutes voting or acting or, if
only one votes and acts, then by that one. This Proxy shall be voted
on the proposals described in the Proxy Statement as specified on the
reverse side. Receipt of the Notice of the Meeting and the
accompanying Proxy Statement is hereby acknowledged.
NOTE: Please sign exactly as your name appears on this Proxy. When
signing in a fiduciary capacity, such as executor, administrator,
trustee, attorney, guardian, etc., please so indicate. Corporate and
partnership proxies should be signed by an authorized person
indicating the person's title.
Date _____________, 1998
_______________________________________
_______________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
cusip # 315808402/fund # 246
cusip # 315808303/fund # 180
cusip # 315808501/fund # 480
cusip # 315808204/fund # 280
cusip # 315808105/fund # 080
Please refer to the Proxy Statement discussion of each of these
matters.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE
PROPOSALS.
As to any other matter, said attorneys shall vote in accordance with
their best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
- ----------------------------------------------------------------------
______________________________________________________________________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1. To approve an amended management contract for the FOR [ ] AGAINST [ ] ABSTAIN [ ] 1.
fund.
2. To approve a new sub-advisory agreement with FMR FOR [ ] AGAINST [ ] ABSTAIN [ ] 2.
Far East for the fund.
3. To approve a new sub-advisory agreement with FMR FOR [ ] AGAINST [ ] ABSTAIN [ ] 3.
U.K. for the fund.
4. To amend the Class T Distribution and Service Plan FOR [ ] AGAINST [ ] ABSTAIN [ ] 4.
of the fund.
5. T o amend the Class B Distribution and Service Plan FOR [ ] AGAINST [ ] ABSTAIN [ ] 5.
of the fund.
6. To approve an agreement and plan providing for the FOR [ ] AGAINST [ ] ABSTAIN [ ] 6.
reorganization of the fund from a separate series of
one Massachusetts business trust to another.
7. To adopt a new fundamental investment policy for the FOR [ ] AGAINST [ ] ABSTAIN [ ] 7.
fund permitting the fund to invest all of its assets in
another open-end investment company managed by
FMR or an affiliate with substantially the same
investment objective and policies.
8. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 8.
limitation concerning diversification.
</TABLE>
EPII-PXC-0998 cusip # 315808402/fund # 246
cusip # 315808303/fund # 180
cusip # 315808501/fund # 480
cusip # 315808204/fund # 280
cusip # 315808105/fund # 080
