SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the [X]
Registrant
Filed by a [ ]
Party other than the
Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the
Commission Only (as
permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under
Rule 14a-12
(Name of Registrant as
Specified In Its Charter)
(IF YOU CHECKED "FILED BY
REGISTRANT ABOVE" DO NOT
FILL THIS IN: Name of
Person(s) Filing Proxy
Statement, if other than the
Registrant)
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:
[ ] 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.
(1) Amount Previously Paid:
(2) Form, Schedule or
Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
BALANCED PORTFOLIO, GROWTH & INCOME PORTFOLIO,
GROWTH OPPORTUNITIES PORTFOLIO, MID CAP PORTFOLIO
FUNDS OF
VARIABLE INSURANCE PRODUCTS FUND III
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-5429
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of the above funds:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
Meeting) of Balanced Portfolio, Growth & Income Portfolio, Growth
Opportunities Portfolio, and Mid Cap Portfolio (the funds), will be
held at an office of Variable Insurance Produc ts Fund II I (the
trust), 27 State Street, 10th Floor, Boston, Massachusetts 02109 on
July 19, 2000, 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 elect a Board of Trustees.
2. To ratify the selection of Deloitte & Touche LLP or
PricewaterhouseCoopers LLP as independent accountants of the
funds.
3. To authorize the Trustees to adopt an amended and restated
Declaration of Trust.
4. To approve an amended management contract for Balanced Portfolio.
5. To approve an amended management contract for Growth & Income
Portfolio.
6. To approve an amended management contract for Growth Opportunities
Portfolio.
7. To approve an amended management contract for Mid Cap Portfolio.
8. To approve an amended sub-advisory agreement with FMR U.K. for
Balanced Portfolio and Growth Opportunities Portfolio.
9. To approve an amended sub-advisory agreement with FMR U.K. for
Growth & Income Portfolio.
10. To approve an amended sub-advisory agreement with FMR Far East
for Balanced Portfolio and Growth Opportunities Portfolio.
11. To approve an amended sub-advisory agreement with FMR Far East
for Growth & Income Portfolio.
12. To modify Balanced Portfolio's fundamental investment objective
and eliminate a fundamental investment policy of the fund.
ADOPTION OF STANDARDIZED INVESTMENT LIMITATIONS
13. To amend the fundamental investment limitation concerning
diversification to exclude securities of other investment
companies from the limitation for Balanced Portfolio, Growth &
Income Portfolio, and Growth Opportunities Portfolio.
14. To amend the fundamental investment limitation concerning
underwriting for Balanced Portfolio, Growth & Income Portfolio,
Growth Opportunities Portfolio, and Mid Cap Portfolio.
15. To amend the fundamental investment limitation concerning
concentration for Balanced Portfolio, Growth & Income Portfolio,
Growth Opportunities Portfolio, and Mid Cap Portfolio.
The Board of Trustees has fixed the close of business on May 22, 2000
as the record date for the determination of the shareholders of each
of the funds and classes, 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
May 22, 2000
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 RESPONDING 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, Trustee
u/t/d 12/28/78
C. 1) Anthony B. Craft, Cust. Anthony B. Craft
f/b/o Anthony B. Craft, Jr.
UGMA
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF
VARIABLE INSURANCE PRODU CTS FUND III:
BALANCED PORTFOLIO
GROWTH & INCOME PORTFOLIO
GROWTH OPPORTUNITIES PORTFOLIO
MID CAP PORTFOLIO
TO BE HELD ON JULY 19, 2000
This Proxy Statement is furnished in connection with a solicitation
of proxies made by, and on behalf of, the Board of Trustees of
Variable Insurance Products Fund III (the trust) to be used at
the Special Meeting of Shareholders of Balanced Portfolio, Growth &
Income Portfolio, Growth Opportunities Portfolio, and Mid Cap
Portfolio (the funds) and at any adjournments thereof (the Meeting),
to be held on July 19, 2000 at 9:00 a.m. at 27 State Street, 10th
Floor, Boston, Massachusetts 02109, an office of the trust and
Fidelity Management & Research Company (FMR), the funds' 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 May 22, 2000.
Supplementary solicitations may be made by mail, telephone, telegraph,
facsimile, electronic means or by personal interview by
representatives of the trust. The expenses in connection with
preparing this Proxy Statement and its enclosures and of all
solicitations, including telephone voting, will be paid by Balanced
Portfolio, Growth & Income Portfolio, Growth Opportunities Portfolio,
and Mid Cap Portfolio, provided the expenses do not exceed the
fund s' existing expense cap for each class of each fund listed
on page . Expenses exceeding each class's expense cap will be
paid by FMR. The funds 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 funds' 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 funds, is 82 Devonshire Street, Boston, Massachusetts 02109. The
principal business address of Fidelity Investments Money Management,
Inc. (FIMM), subadviser to Balanced Portfolio, is 1 Spartan Way,
Merrimack, New Hampshire 03054. Fidelity Investments Japan Limited
(FIJ) located at Shiroyama JT Mori Blgd., 4-3-1 Toranomon, Minato-ku,
Tokyo 105 is also a subadviser to the fund s .
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, by the trust's receipt of a subsequent valid telephonic
vote 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. With respect to fund
shares held in Fidelity individual retirement accounts (including
Traditional, Rollover, SEP, SAR-SEP, Roth and SIMPLE IRAs), the IRA
Custodian will vote those shares for which it has received
instructions from shareholders only in accordance with such
instructions. If Fidelity IRA shareholders do not vote their shares,
the IRA Custodian will vote their shares for them, in the same
proportion as other Fidelity IRA shareholders have voted, but only to
the extent necessary to reach quorum at the meeting.
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 the trust issued and outstanding as of March
31, 2000 are indicated in the following table:
Balanced Portfolio:
Initial Class 18,963,929
Service Class 1,799,480
Service Class 2 6,794
Growth & Income Portfolio:
Initial Class 69,573,271
Service Class 8,600,986
Service Class 2 6,453
Growth Opportunities Portfolio:
Initial Class 62,381,528
Service Class 16,576,172
Service Class 2 8,828
Mid Cap Portfolio:
Initial Class 394,947
Service Class 4,141,610
Service Class 2 456,812
To the knowledge of the trust, substantial (5% or more) record or
beneficial ownership of each fund and class on March 31, 2000 was as
follows:
Balanced Portfolio Initial Class: Fidelity Investments Life
Insurance Company, Boston, MA (36.04%); Aegon USA Securities Inc.,
Cedar Rapids, IA (6.40%).
Balanced Portfolio Service Class: Wilmington Trust Company,
Wilmington, DE (10.47%); Wachovia Corp., Winston-Salem, NC (7.38%);
Nationwide Insurance Enterprises, Columbus, OH (6.59%); KeyCorp, Inc.,
Cleveland, OH (6.34%); BankBoston Corporation, Boston, MA (5.39%);
HSBC Bank USA, Buffalo, NY (5.20%).
Balanced Portfolio Service Class 2: Fidelity Investments, Boston,
MA (100%).
Growth & Income Portfolio Initial Class: Fidelity Investments Life
Insurance Company, Boston, MA (42.72%); Minnesota Life Insurance
Company, St. Paul, MN (22.55%); GE Financial Assurance Holdings, Inc.,
Richmond, VA (11.78%); The Integrity Companies, Louisville, KY
(5.82%).
Growth & Income Portfolio Service Class: IDS Life Insurance
Company, Minneapolis, MN (51.44%).
Growth & Income Portfolio Service Class 2: Fidelity Investments,
Boston, MA (99.97%).
Growth Opportunities Portfolio Initial Class: Nationwide Insurance
Enterprises, Columbus, OH (19.33%); Fidelity Investments Life
Insurance Company, Boston, MA (18.23%); GE Financial Assurance
Holdings, Inc., Richmond, VA (7.71%); A. G. Edwards & Sons Inc., Saint
Louis, MO (5.62%).
Growth Opportunities Portfolio Service Class: Nationwide Insurance
Enterprises, Columbus, OH (62.59%).
Growth Opportunities Portfolio Service Class 2: Fidelity
Investments, Boston, MA (63.43%); Provident Mutual Life Insurance Co.,
Newark, DE (36.55%).
Mid Cap Portfolio Initial Class: Aegon USA Securities Inc., Cedar
Rapids, IA (36.62%); American National Life Insurance Co. of Texas,
Galveston, TX (17.40%); Fidelity Investments, Boston, MA (12.88%);
American National Life Insurance Co., Boston, MA (7.14%); GenAmerican
Corporation, Saint Louis, MO (5.09%).
Mid Cap Portfolio Service Class: IDS Life Insurance Company,
Minneapolis, MN (61.20%); The Integrity Companies, Louisville, KY
(7.66%); The Guardian, Bethlehem, PA (7.37%).
Mid Cap Portfolio Service Class 2: Minnesota Life Insurance
Company, St. Paul, MN (98.47%).
FMR has advised the trust that for Proposals 1-3 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 funds on that date.
Shareholders of record at the close of business on May 22, 2000 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 FUNDS' ANNUAL REPORT FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999 CALL 1-800-544-5429 OR WRITE TO FIDELITY
DISTRIBUTORS CORPORATION AT 82 DEVONSHIRE STREET, BOSTON,
MASSACHUSETTS 02109.
VOTE REQUIRED: A PLURALITY OF ALL VOTES CAST AT THE MEETING IS
SUFFICIENT TO APPROVE PROPOSAL 1 AND A MAJORITY OF ALL VOTES OF THE
APPROPRIATE FUND CAST AT THE MEETING IS SUFFICIENT TO APPROVE PROPOSAL
2. APPROVAL OF PROPOSAL 3 REQUIRES THE AFFIRMATIVE VOTE OF A "MAJORITY
OF THE OUTSTANDING VOTING SECURITIES" OF THE ENTIRE TRUST. APPROVAL OF
PROPOSALS 4 THROUGH 15 REQ UIRES THE AFFIRMATIVE VOTE OF A
"MAJORITY OF THE OUTSTANDING VOTING SECURITIES" OF THE APPROPRIATE
CLASS. 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.
The following tables summarize the proposals applicable to each class
of shares of each fund.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Proposal # Proposal Description Applicable Funds Page
1. To elect as Trustees the All 3
twelve nominees presented in
proposal 1.
2. To ratify the selection of All 12
Deloitte & Touche LLP and
PricewaterhouseCoopers LLP
as independent accountants
of the funds.
3. To authorize the Trustees to All 12
adopt an amended and
restated Declaration of Trust.
4. To approve an amended Balanced Portfolio 13
management contract for the
fund that would reduce the
management fee payable to
FMR by the fund as FMR's
assets under management
increase.
5. To approve an amended Growth & Income Portfolio 18
management contract for the
fund that would reduce the
management fee payable to
FMR by the fund as FMR's
assets under management
increase.
6. To approve an amended Growth Opportunities Portfolio 21
management contract for the
fund that would reduce the
management fee payable to
FMR by the fund as FMR's
assets under management
increase.
7. To approve an amended Mid Cap Portfolio 25
management contract for the
fund that would reduce the
management fee payable to
FMR by the fund as FMR's
assets under management
increase.
8. To approve an amended Balanced Portfolio Growth 28
sub-advisory agreement with Opportunities Portfolio
FMR U.K. to provide
investment advice and
research services or
investment management
services.
9. To approve an amended Growth & Income Portfolio 29
sub-advisory agreement with
FMR U.K. to provide
investment advice and
research services or
investment management
services.
10. To approve an amended Balanced Portfolio Growth 30
sub-advisory agreement with Opportunities Portfolio
FMR Far East to provide
investment advice and
research services or
investment management
services.
11. To approve an amended Growth & Income Portfolio 31
sub-advisory agreement with
FMR East to provide
investment advice and
research services or
investment management
services.
12. To modify the fund's Balanced Portfolio 31
fundamental investment
objective and eliminate a
fundamental investment
policy of the fund.
ADOPTION OF STANDARDIZED
INVESTMENT LIMITATIONS
13. To amend the fundamental Balanced Portfolio Growth & 32
investment limitation Income Portfolio Growth
concerning diversification. Opportunities Portfolio
14. To amend the fundamental All 32
limitation concerning
underwriting.
15. To amend the fundamental All 33
limitation concerning
concentration.
</TABLE>
1. TO ELECT A BOARD OF TRUSTEES.
The purpose of this proposal is to elect a Board of Trustees of the
Trust. Pursuant to the provisions of the Declaration of Trust of
Variable Insurance Products Fund III, the Trustees have
determined that the number of Trustees shall be fixed at twelve. It is
intended that the enclosed proxy card will be voted for the election
as Trustees of the twelve nominees listed below, unless such authority
has been withheld in the proxy card.
All nominees named below are currently Trustees of Variable Insurance
Products Fund III and have served in that capacity continuously
since originally elected or appointed. Robert M. Gates, William O.
McCoy, Robert C. Pozen, and Ned C. Lautenbach were selected by the
trust's Nominating and Administration Committee (see page 13) and were
appointed to the Board in March 1997, January 1997, August 1997, and
January 2000 respectively. None of the nominees are related to one
another. Those nominees indicated by an asterisk (*) are "interested
persons" of the trust by virtue of, among other things, their
affiliation with either the trust, the funds' investment adviser (FMR,
or the Adviser), or the funds' distribution agent, FDC. The business
address of each nominee who is an "interested person" is 82 Devonshire
Street, Boston, Massachusetts 02109, and the business address of all
other nominees is Fidelity Investments, P.O. Box 9235, Boston,
Massachusetts 02205-9235. Except for Mr. Gates, Mr. Lautenbach, Mr.
McCoy, and Mr. Pozen, each of the nominees is currently a Trustee of
55 registered investment companies advised by FMR. Mr. Gates, Mr.
McCoy, and Mr. Pozen are currently Trustees of 56 registered
investment companies advised by FMR. Mr. Lautenbach is currently a
Trustee of 52 registered investment companies advised by FMR.
In the election of Trustees, those twelve nominees receiving the
highest number of votes cast at the Meeting, providing a quorum is
present, shall be elected.
<TABLE>
<CAPTION>
<S> <C> <C>
Nominee (Age) Principal Occupation** Year of Election or Appointment
Ralph F. Cox (68) President of RABAR 1991
Enterprises (management
consulting-engineering
industry, 1994). Prior to
February 1994, he was
President of Greenhill
Petroleum Corporation
(petroleum exploration and
production). Until March
1990, Mr. Cox was President
and Chief Operating Officer
of Union Pacific Resources
Company (exploration and
production). He is a
Director of Waste Management
Inc. (non-hazardous waste,
1993), CH2M Hill Companies
(engineering), and
Bonneville Pacific
(independent power and
petroleum production). In
addition, he is a member of
advisory boards of Texas A&M
University and the
University of Texas at Austin.
Phyllis Burke Davis (68) Retired from Avon Products, 1992
Inc. where she held various
positions including Senior
Vice President of Corporate
Affairs and Group Vice
President of U.S. sales,
distribution, and
manufacturing. She is
currently a Director of
BellSouth Corporation
(telecommunications), Eaton
Corporation (manufacturing),
and the TJX Companies, Inc.
(retail stores), and
previously served as a
Director of Hallmark Cards,
Inc., Nabisco Brands, Inc.,
and Standard Brands, Inc. In
addition, she is a member of
the Board of Directors of
the Southampton Hospital in
Southampton, N.Y. (1998).
Robert M. Gates Consultant, author, and 1997
(56) lecturer (1993). Mr. Gates
was Director of the Central
Intelligence Agency (CIA)
from 1991-1993. From 1989 to
1991, Mr. Gates served as
Assistant to the President
of the United States and
Deputy National Security
Advisor. Mr. Gates is a
Director of Charles Stark
Draper Laboratory
(non-profit), NACCO
Industries, Inc. (mining and
manufacturing), and TRW Inc.
(automotive, space, defense,
and information technology).
Mr. Gates previously served
as a Director of LucasVarity
PLC (automotive components
and diesel engines). He is
currently serving as Dean of
the George Bush School of
Government and Public
Service at Texas A & M
University (1999-2000). Mr.
Gates also is a Trustee of
the Forum for International
Policy and of the Endowment
Association of the College
of William and Mary. In
addition, he is a member of
the National Executive Board
of the Boy Scouts of America.
*Edward C. Johnson 3d President, is Chief Executive 1994
(70) Officer, Chairman and a
Director of FMR Corp.; a
Director and Chairman of the
Board and of the Executive
Committee of FMR; Chairman
and a Director of Fidelity
Management & Research (U.K.)
Inc. and of Fidelity
Management & Research (Far
East) Inc.; Chairman (1998)
and a Director (1997) of
Fidelity Investments Money
Management, Inc.; Chairman
and Representative Director
of Fidelity Investments
Japan Limited (1997) and a
Director of FDC and FMR Co.,
Inc. (2000).
Donald J. Kirk Executive-in-Residence (1995) 1987
(67) at Columbia University
Graduate School of Business.
From 1987 to January 1995,
Mr. Kirk was a Professor at
Columbia University Graduate
School of Business. Prior to
1987, he was Chairman of the
Financial Accounting
Standards Board. Mr. Kirk
previously served as a
Director of General Re
Corporation (reinsurance,
1987-1998) and as a Director
of Valuation Research Corp.
(appraisals and valuations,
1993-1995). He serves as
Chairman of the Board of
Directors of National Arts
Stabilization Inc., Chairman
of the Board of Trustees of
the Greenwich Hospital
Association, Director of the
Yale-New Haven Health
Services Corp. (1998), Vice
Chairman of the Public
Oversight Board of the
American Institute of
Certified Public
Accountants' SEC Practice
Section (1995), and as a
Public Governor of the
National Association of
Securities Dealers, Inc.
(1996).
Ned C. Lautenbach Partner of Clayton, Dubilier 2000
(56) & Rice, Inc. (private equity
investment firm) since
September 1998. Mr.
Lautenbach was Senior Vice
President of IBM Corporation
from 1992 until his
retirement in July 1998.
From 1993 to 1995 he was
Chairman of IBM World Trade
Corporation. He also was a
member of IBM's Corporate
Executive Committee from
1994 to July 1998. He is a
Director of PPG Industries
Inc. (glass, coating and
chemical manufacturer),
Dynatech Corporation (global
communications equipment),
Eaton Corporation (global
manufacturer of highly
engineered products) and
ChoicePoint Inc. (data
identification, retrieval,
storage, and analysis).
*Peter S. Lynch Vice Chairman and a Director 1990
(57) of FMR; and a Director of
FMR Co., Inc. (2000). Prior
to May 31, 1990, he was a
Director of FMR and
Executive Vice President of
FMR (a position he held
until March 31, 1991); Vice
President of Fidelity
Magellan Fund and FMR Growth
Group Leader; and Managing
Director of FMR Corp. Mr.
Lynch was also Vice
President of Fidelity
Investments Corporate
Services (1991-1992). In
addition, he serves as a
Trustee of Boston College,
Massachusetts Eye & Ear
Infirmary, Historic
Deerfield (1989) and Society
for the Preservation of New
England Antiquities, and as
an Overseer of the Museum of
Fine Arts of Boston.
William O. McCoy Interim Chancellor for the 1997
(66) University of North Carolina
at Chapel Hill. Previously
he had served from 1995
through 1998 as Vice
President of Finance for the
University of North Carolina
(16-school system). Prior to
his retirement in December
1994, Mr. McCoy was Vice
Chairman of the Board of
BellSouth Corporation
(telecommunications, 1984)
and President of BellSouth
Enterprises (1986). He is
currently a Director of
Liberty Corporation (holding
company, 1984), Duke-Weeks
Realty Corporation (real
estate, 1994), Carolina
Power and Light Company
(electric utility, 1996),
the Kenan Transport Company
(trucking, 1996), and
Dynatech Corporation
(electronics, 1999).
Previously, he was a
Director of First American
Corporation (bank holding
company, 1979-1996). In
addition, Mr. McCoy served
as a member of the Board of
Visitors for the University
of North Carolina at Chapel
Hill (1994-1998) and
currently serves on the
Board of Visitors of the
Kenan-Flager Business School
(University of North
Carolina at Chapel Hill,
1988).
Gerald C. McDonough Chairman of the 1989
(72) non-interested Trustees, is
Chairman of G.M. Management
Group (strategic advisory
services). Mr. McDonough is
a Director and Chairman of
the Board of York
International Corp. (air
conditioning and
refrigeration), Commercial
Intertech Corp. (hydraulic
systems, building systems,
and metal products, 1992),
CUNO, Inc. (liquid and gas
filtration products, 1996),
and Associated Estates
Realty Corporation (a real
estate investment trust,
1993). Mr. McDonough served
as a Director of
ACME-Cleveland Corp. (metal
working, telecommunications,
and electronic products)
from 1987-1996 and
Brush-Wellman Inc. (metal
refining) from 1983-1997.
Marvin L. Mann Chairman Emeritus of Lexmark 1993
(67) International, Inc. (office
machines, 1991) where he
still remains a member of
the Board. Prior to 1991, he
held the positions of Vice
President of International
Business Machines
Corporation ("IBM") and
President and General
Manager of various IBM
divisions and subsidiaries.
Mr. Mann is a Director of
M.A. Hanna Company
(chemicals, 1993), Imation
Corp. (imaging and
information storage, 1997).
He is a Board member of
Dynatech Corporation
(electronics, 1999).
*Robert C. Pozen Senior Vice President, is 1997
(53) also President and a
Director of FMR (1997),
Fidelity Management &
Research (U.K.) Inc. (1997),
Fidelity Management &
Research (Far East) Inc.
(1997), Fidelity Investments
Money Management, Inc.
(1998), and FMR Co., Inc.
(2000); and a Director of
Strategic Advisers, Inc.
(1999). Previously, Mr.
Pozen served as General
Counsel, Managing Director,
and Senior Vice President of
FMR Corp.
Thomas R. Williams President of The Wales Group, 1989
(71) Inc. (management and
financial advisory
services). Prior to retiring
in 1987, Mr. Williams served
as Chairman of the Board of
First Wachovia Corporation
(bank holding company), and
Chairman and Chief Executive
Officer of The First
National Bank of Atlanta and
First Atlanta Corporation
(bank holding company). He
is currently a Director of
National Life Insurance
Company of Vermont and
American Software, Inc. Mr.
Williams was previously a
Director of ConAgra, Inc.
(agricultural products),
Georgia Power Company
(electric utility), and
Avado, Inc. (restaurants).
</TABLE>
** Except as otherwise indicated, each individual has held the office
shown or other offices in the same company for the last five years.
As of March 31, 2000, the nominees, Trustees and officers of the
Trust and the funds owned, in the aggregate, less than 1% of the
funds' outstanding shares.
If elected, the Trustees will hold office without limit in time
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 such removal; (c) any Trustee who requests to be
retired or who has become incapacitated by illness or injury may be
retired by written instrument signed by a majority of the other
Trustees; and (d) a Trustee may be removed at any Special Meeting of
shareholders by a two-thirds vote of the outstanding voting securities
of the trust. 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 the 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 trust's Board, which is currently composed of three interested
and nine non-interested Trustees, met eleven times during the twelve
months ended December 31, 1999. It is expected that the Trustees will
meet at least ten times a year at regularly scheduled meetings.
The trust's Audit Committee is composed entirely of Trustees who are
not interested persons of the trust, FMR or its affiliates and
normally meets four times a year, or as required, in conjunction with
meetings of the Board of Trustees. Currently, Messrs. Kirk (Chairman),
Gates and Lautenbach, and Mrs. Davis are members of the committee. The
committee oversees and monitors the trust's internal control
structure, its auditing function and its financial reporting process,
including the resolution of material reporting issues. The committee
recommends to the Board of Trustees the appointment of auditors for
the trust. It reviews audit plans, fees and other material
arrangements in respect of the engagement of auditors, including
non-audit services to be performed. It reviews the qualifications of
key personnel involved in the foregoing activities. The committee
plays an oversight role in respect of the trust's investment
compliance procedures and the code of ethics. During the twelve months
ended December 31, 1999, the committee held nine meetings.
The trust's Nominating and Administration Committee is currently
composed of Messrs. McDonough (Chairman), Cox, Mann, and Williams. The
committee members confer periodically and hold meetings as required.
The committee makes nominations for independent trustees, and for
membership on committees. The committee periodically reviews
procedures and policies of the Board of Trustees and committees. It
acts as the administrative committee under the Retirement Plan for
non-interested trustees who retired prior to December 30, 1996. It
monitors the performance of legal counsel employed by the trust and
the independent trustees. The committee in the first instance monitors
compliance with, and acts as the administrator of the provisions of
the code of ethics applicable to the independent trustees. During the
twelve months ended December 31, 1999, the committee held three
meetings. The Nominating and Administration Committee will consider
nominees recommended by shareholders. Recommendations should be
submitted to the committee in care of the Secretary of the Trust. The
trust does not have a compensation committee; such matters are
considered by the Nominating and Administration Committee.
The following table sets forth information describing the
compensation of each Trustee and Members of the Advisory Board of each
fund for his or her services for the fiscal year ended December 31,
1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
COMPENSATION TABLE
AGGREGATE COMPENSATION FROM A Edward C. Johnson 3d** J. Michael Cook***** Ralph F. Cox Phyllis Burke Davis
FUND
BalancedB $ 0 $ 0 $ 99 $ 96
Growth & IncomeB $ 0 $ 0 $ 369 $ 358
Growth OpportunitiesB $ 0 $ 0 $ 517 $ 502
Mid CapB $ 0 $ 0 $ 1 $ 1
TOTAL COMPENSATION FROM THE $ 0 $ 0 $217,500 $211,500
FUND COMPLEX*,A
AGGREGATE COMPENSATION FROM A Ned C. Lautenbach*** Peter S. Lynch** William O. McCoy Gerald C. Mc- Donough
FUND
BalancedB $ 24 $ 0 $ 97 $ 122
Growth & IncomeB $ 91 $ 0 $ 364 $ 456
Growth OpportunitiesB $ 126 $ 0 $ 510 $ 639
Mid CapB $ 0 $ 0 $ 1 $ 1
TOTAL COMPENSATION FROM THE $ 54,000 $ 0 $214,500 $269,000
FUND COMPLEX*,A
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMPENSATION TABLE
AGGREGATE COMPENSATION FROM A Robert M. Gates E. Bradley Jones**** Donald J. Kirk
FUND
BalancedB $ 99 $ 99 $ 99
Growth & IncomeB $ 369 $ 369 $ 369
Growth OpportunitiesB $ 517 $ 517 $ 517
Mid CapB $ 1 $ 1 $ 1
TOTAL COMPENSATION FROM THE $217,500 $217,500 $217,500
FUND COMPLEX*,A
AGGREGATE COMPENSATION FROM A Marvin L. Mann Robert C. Pozen** Thomas R. Williams
FUND
BalancedB $ 99 $ 0 $ 97
Growth & IncomeB $ 369 $ 0 $ 361
Growth OpportunitiesB $ 517 $ 0 $ 506
Mid CapB $ 1 $ 0 $ 1
TOTAL COMPENSATION FROM THE $217,500 $ 0 $213,000
FUND COMPLEX*,A
</TABLE>
* Information is for the calendar year ended December 31, 1999 for 236
funds in the complex.
** Interested Trustees of the funds are compensated by FMR.
*** During the period from October 14, 1999 through December 31, 1999,
Ned C. Lautenbach served as a Member of the Advisory Board of the
trust. Effective January 1, 2000, Mr. Lautenbach serves as a Member of
the Board of Trustees.
**** Mr. Jones served on the Board of Trustees through December 31,
1999.
***** Effective April 1, 2000, Mr. Cook serves as a Member of the
Advisory Board.
A Compensation figures include cash, amounts required to be deferred,
and may include amounts deferred at the election of Trustees. For the
calendar year ended December 31, 1999, the Trustees accrued required
deferred compensation from the funds as follows: Ralph F. Cox,
$75,000; Phyllis Burke Davis, $75,000; Robert M. Gates, $75,000; E.
Bradley Jones, $75,000; Donald J. Kirk, $75,000; William O. McCoy,
$75,000; Gerald C. McDonough, $87,500; Marvin L. Mann, $75,000; and
Thomas R. Williams, $75,000. Certain of the non-interested Trustees
elected voluntarily to defer a portion of their compensation as
follows: Ralph F. Cox, $53,735; William O. McCoy, $53,735; and Thomas
R. Williams, $62,319.
B Compensation figures include cash, and may include amounts required
to be deferred and amounts deferred at the election of Trustees.
Under a deferred compensation plan adopted in September 1995 and
amended in November 1996 and January 2000 (the Plan), non-interested
Trustees must defer receipt of a portion of, and may elect to defer
receipt of an additional portion of, their annual fees. Amounts
deferred under the Plan are treated as though equivalent dollar
amounts had been invested in shares of a cross-section of Fidelity
funds including funds in each major investment discipline and
representing a majority of Fidelity's assets under management (the
Reference Funds). The amounts ultimately received by the Trustees
under the Plan will be directly linked to the investment performance
of the Reference Funds. Deferral of fees in accordance with the Plan
will have a negligible effect on a fund's assets, liabilities, and net
income per share, and will not obligate a fund to retain the services
of any Trustee or to pay any particular level of compensation to the
Trustee. A fund may invest in the Reference Funds under the Plan
without shareholder approval.
2. TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP OR
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS OF THE
FUNDS.
By a vote of the non-interested Trustees, the firms of Deloitte &
Touche LLP (Balanced Portfolio, Growth & Income Portfolio, and Growth
Opportunities Portfolio) and PricewaterhouseCoopers LLP (Mid Cap
Portfolio) have been selected as independent accountants for such
funds to sign or certify any financial statements of such funds
required by any law or regulation to be certified by an independent
accountant and filed with the Securities and Exchange Commission (SEC)
or any state. Pursuant to the 1940 Act, such selection requires the
ratification of shareholders. In addition, as required by the 1940
Act, the vote of the Trustees is subject to the right of the funds, by
vote of a majority of their outstanding voting securities at any
meeting called for the purpose of voting on such action, to terminate
such employment without penalty. Deloitte & Touche LLP and
PricewaterhouseCoopers LLP have advised the funds that to the best of
their knowledge and belief, as of the record date, no Deloitte &
Touche LLP or PricewaterhouseCoopers LLP professional had any direct
or material indirect ownership interest in the funds inconsistent with
the independence standards pertaining to accountants.
For Mid Cap Portfolio, for fiscal years end December 31, 1999
and December 31, 1998, the firm of PricewaterhouseCoopers LLP
acted as the fund's independent accountants. For Balanced
Portfolio, Growth & Income Portfolio, and Growth Opportunities
Portfolio, for fiscal year ended December 31, 1998, the firm of
PricewaterhouseCoopers LLP acts as each fund's independent
accountants. Effective February 18, 1999, the non-interested Trustees
selected the firm of Deloitte & Touche LLP as the independent
accountants for Balanced Portfolio, Growth & Income Portfolio, and
Growth Opportunities Portfolio beginning with each fund's fiscal year
ending December 31, 1999 , upon the recommendation of each
fund's Audit Committee.
The independent accountants' audit reports for the fiscal years ended
December 31, 1999 and December 31, 1998 did not contain an adverse
opinion or disclaimer of opinion, nor were such reports qualified or
modified as to uncertainty, audit scope, or accounting principles.
Further, there were no disagreements between each fund and the
independent accountants on accounting principles or practices,
financial statement disclosures, or audit scope or procedures, which
if not resolved to the satisfaction of the independent accountants
would have caused them to make reference to the subject matter of the
disagreements in connection with their reports on the financial
statements for such years.
The independent accountants examine annual financial statements for
each fund and provide other audit and tax-related services. In
recommending the selection of each fund's accountants, the Audit
Committee reviewed the nature and scope of the services to be provided
(including non-audit services) and whether the performance of such
services would affect the accountants' independence. Representatives
of Deloitte & Touche LLP or PricewaterhouseCoopers LLP are not
expected to be present at the Meeting, but have been given the
opportunity to make a statement if they so desire and will be
available should any matter arise requiring their presence.
3. TO AUTHORIZE THE TRUSTEES TO ADOPT AN AMENDED AND RESTATED
DECLARATION OF TRUST.
The Board of Trustees has approved and recommends that the
shareholders of the trust authorize them to adopt and execute an
Amended and Restated Declaration of Trust for the trust and the funds
of the trust in the form attached to this Proxy Statement as Exhibit 1
(New Declaration of Trust). The attached New Declaration of Trust has
been marked to show changes from the trust's existing Declaration of
Trust (Current Declaration of Trust). The New Declaration of Trust is
a more modern form of trust instrument for a Massachusetts business
trust, and, going forward, will be used as the standard Declaration of
Trust for all new Fidelity Massachusetts business trusts.
The New Declaration of Trust gives the Trustees more flexibility and,
subject to applicable requirements of the 1940 Act and Massachusetts
law, broader authority to act. This increased flexibility may allow
the Trustees to react more quickly to changes in competitive and
regulatory conditions and, as a consequence, may allow the funds to
operate in a more efficient and economical manner. ADOPTION OF THE NEW
DECLARATION OF TRUST WILL NOT ALTER IN ANY WAY THE TRUSTEES' EXISTING
FIDUCIARY OBLIGATIONS TO ACT WITH DUE CARE AND IN THE SHAREHOLDERS'
INTERESTS. BEFORE UTILIZING ANY NEW FLEXIBILITY THAT THE NEW
DECLARATION OF TRUST MAY AFFORD, THE TRUSTEES MUST FIRST CONSIDER THE
SHAREHOLDERS' INTERESTS AND THEN ACT IN ACCORDANCE WITH SUCH
INTERESTS.
Adoption of the New Declaration of Trust will NOT result in any
changes in the funds' Trustees or officers or in the investment
policies described in the funds' current prospectuses.
Generally, a majority of the Trustees may amend the Current
Declaration of Trust when authorized by a "majority of the outstanding
voting securities" (as defined in the 1940 Act) of the trust. On
October 16, 1997, the Trustees approved the form of the New
Declaration of Trust. On December 18, 1997 and November 18, 1999, the
Board approved several additional changes to the form of the New
Declaration of Trust, which changes have been incorporated into the
form attached to this Proxy Statement. On November 18, 1999 and
December 16, 1999, the Board authorized the submission of the New
Declaration of Trust to the trust's shareholders for their
authorization at this Meeting.
The New Declaration of Trust amends the Current Declaration of Trust
in a number of significant ways. The following discussion summarizes
some of the more significant amendments to the Current Declaration of
Trust effected by the New Declaration of Trust.
IN ADDITION TO THE CHANGES DESCRIBED BELOW, THERE ARE OTHER
SUBSTANTIVE AND STYLISTIC DIFFERENCES BETWEEN THE NEW DECLARATION OF
TRUST AND THE CURRENT DECLARATION OF TRUST. THE FOLLOWING SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE NEW DECLARATION OF TRUST
ITSELF, WHICH IS ATTACHED AS EXHIBIT 1 TO THIS PROXY STATEMENT.
SIGNIFICANT CHANGES EFFECTED BY THE NEW DECLARATION OF TRUST.
REORGANIZATION OR TERMINATION OF THE TRUST OR ITS SERIES OR CLASSES.
Unlike the Current Declaration of Trust, the New Declaration of Trust
generally permits the Trustees, subject to applicable Federal and
state law, to reorganize or terminate all or a portion of the trust or
any of its series or classes. The Current Declaration of Trust
requires shareholder approval in order to reorganize or terminate the
trust or any of its series.
Under certain circumstances, it may not be in the shareholders'
interest to require a shareholder meeting to permit all or a portion
of the trust, a fund or class to reorganize into another entity. For
example, in order to reduce the cost and scope of state regulatory
constraints or to take advantage of a more favorable tax treatment
offered by another state, the Trustees may determine that it would be
in the shareholders' interests to reorganize a fund to domicile it in
another state or to change its legal form. Under the Current
Declaration of Trust, the Trustees cannot effectuate such a
potentially beneficial reorganization without first conducting a
shareholder meeting and incurring the attendant costs and delays. In
contrast, the New Declaration of Trust gives the Trustees the
flexibility to reorganize all or a portion of the trust or any of its
series or classes and achieve potential shareholder benefits without
incurring the delay and potential costs of a proxy solicitation. Such
flexibility should help to assure that the trust and its funds operate
under the most appropriate form of organization.
Similarly, under certain circumstances, it may not be in the
shareholders' interest to require a shareholder meeting to permit the
Trustees to terminate a fund or class. For example, a fund may have
insufficient assets to invest effectively or excessively high expense
levels due to operational needs. Under such circumstances, absent
viable alternatives, the Trustees may determine that terminating the
fund is in the shareholders' interest and the only appropriate course
of action. The process of obtaining shareholder approval of the fund's
termination may, however, make it more difficult to complete the
fund's liquidation and termination and, in general, will increase the
costs associated with the termination. In such a case, it may be in
the shareholders' interest to permit fund termination without
incurring the costs and delays of a shareholder meeting.
As discussed above, before allowing a trust, fund, or class
reorganization or termination to proceed without shareholder approval,
the Trustees have a fiduciary responsibility to first determine that
the proposed transaction is in the shareholders' interest. Any
exercise of the Trustees' increased authority under the New
Declaration of Trust is also subject to any applicable requirements of
the 1940 Act and Massachusetts law. Of course, in all cases, the New
Declaration of Trust would require that shareholders receive written
notification of any proposed transaction.
The New Declaration of Trust does NOT give the Trustees the authority
to merge a fund or class with another operating mutual fund or sell
all or a portion of a class's or fund's assets to another operating
mutual fund without first seeking shareholder approval. Under the New
Declaration of Trust, shareholder approval is still required for these
transactions.
FUTURE AMENDMENTS OF THE DECLARATION OF TRUST. The New Declaration of
Trust permits the Trustees, with certain exceptions, to amend the
Declaration of Trust without shareholder approval. Under the New
Declaration of Trust, shareholders generally have the right to vote on
any amendment affecting their right to vote, on any amendment altering
the maximum number of permitted Trustees, on any amendment affecting
the New Declaration of Trust's amendment provisions, on any amendment
required by law or the trust's registration statement, and on any
matter submitted to shareholders by the Trustees. The Current
Declaration of Trust, on the other hand, generally gives shareholders
the exclusive power to amend the Declaration of Trust. By allowing
amendment of the Declaration of Trust without shareholder approval,
the New Declaration of Trust gives the Trustees the necessary
authority to react quickly to future contingencies. As mentioned
above, such increased authority remains subordinate to the Trustees'
continuing fiduciary obligations to act with due care and in the
shareholders' interest.
REFERENCES TO CLASSES. The New Declaration of Trust includes explicit
references to "classes" of a fund in appropriate places throughout the
document. Classes are often a more efficient way of offering a
specific investment strategy to different types of investors without
creating separate funds for each type of investor. Each class
represents an interest in the same portfolio of securities but may be
offered with different service features, distribution arrangements or
fees. Although the Trustees are not prohibited from authorizing the
issuance of classes of shares under the Current Declaration of Trust,
the Trustees believe that it is appropriate to explicitly describe
their ability, without a vote of shareholders, to establish new
classes of shares, to change or abolish existing classes of shares, to
divide an existing fund into classes of shares, and to take any other
action with respect to classes that they deem appropriate.
INVESTMENT IN OTHER INVESTMENT COMPANIES. The New Declaration of
Trust clarifies that the Trustees may authorize the investment of a
portion of a fund's assets in one or more open-end investment
companies (Fund-of-Funds Structure). The current Declaration of Trust
explicitly allows the Trustees to authorize the fund to invest all of
its assets in a single open-end investment company but does not
specifically provide the Trustees with the ability to invest a portion
of its assets in one or more investment companies. In a Fund-of-Funds
Structure, each fund retains its own characteristics, but is able to
achieve efficiencies by consolidating portfolio management for some or
all of its assets with other funds or to achieve other operational
efficiencies. The purpose of the Fund-of-Funds Structure generally is
to achieve operational efficiencies by consolidating portfolio
management for a portion of a fund's assets with other funds which
invest a portion of their assets similarly. For example, three
different funds with different allocations among stocks, bonds and
money market investments but similar investment policies within each
asset class might each invest in the same stock, bond and money market
funds. The Fund-of-Funds Structure allows multiple funds with similar
investment policies for a portion of their assets to consolidate
portfolio management in a single pool for their assets that are
managed similarly. FMR and the Board of Trustees continually review
methods of structuring mutual funds to take advantage of potential
efficiencies or other benefits. While neither FMR nor the Trustees
have determined that a Fund-of-Funds Structure is appropriate at this
time, the Trustees believe it could be in the best interests of each
fund to adopt such a structure at a future date. If approved, the New
Declaration of Trust would provide the Trustees with the power to
authorize a fund to invest all or a portion of its assets in one or
more open-end investment companies. The Trustees will authorize such a
transaction only if a Fund-of-Funds Structure is permitted under the
fund's investment policies and if they determine that a Fund-of-Funds
Structure is in the best interests of a fund and its shareholders.
OTHER CHANGES EFFECTED BY THE NEW DECLARATION OF TRUST.
In addition to the significant changes above, the New Declaration of
Trust modifies the Current Declaration of Trust in a number of
important ways, including the following:
1. The New Declaration of Trust modifies the Current Declaration of
Trust to allow FMR to enter into a Management Contract with the trust,
on behalf of each fund, and to amend the fund's respective Management
Contract subject to the provisions of Section 15 of the 1940 Act, as
modified or interpreted by the SEC. In contrast, the Current
Declaration of Trust explicitly requires the vote of a majority of the
outstanding voting securities of a fund to enter into and amend
Management Contracts. A corresponding change is also proposed for the
funds' Management Contracts. For more information on this topic
generally, see "Modification of Management Contract Amendment
Provisions" on pages 25, 28, 32, and 35.
2. The New Declaration of Trust broadens the authority of the
Trustees to redeem a shareholder for any reason deemed appropriate by
the Trustees. The Trustees' ability to do so would be limited by the
1940 Act and other applicable legal and regulatory requirements. The
Current Declaration of Trust explicitly allows the Trustees only to
redeem shareholders who do not meet a fund's minimum balance
requirement.
3. The New Declaration of Trust explicitly allows the Trustees to
effect Fund-of-Funds Structures, mergers, reorganizations and similar
transactions through any method approved by the Trustees, including
share-for-share exchanges, transfers or sale of assets, shareholder
in-kind redemptions and purchases, and exchange offers.
4 The New Declaration of Trust clarifies that the Trustees may impose
other fees (for example, purchase fees) in addition to sales charges
upon investment in a fund and clarifies that deferred sales charges
and other fees (for example, redemption fees) may be imposed upon
redemption of a fund's shares.
5. The New Declaration of Trust confirms and clarifies various
existing Trustee powers. For example, the New Declaration of Trust
clarifies that the Trustees, in addition to banks and trust companies,
may employ as fund custodians companies that are members of a national
securities exchange or other entities permitted under the 1940 Act;
delegate authority to investment advisers and other agents; adopt and
offer dividend reinvestment and related plans; operate and carry on
the business of an investment company; interpret the investment
policies, practices, and limitations of any fund; and deal in shares
of a fund.
6. The New Declaration of Trust clarifies that no shareholder of a
trust series shall have a claim on the assets of another series and
further clarifies that, by virtue of investing in a fund, a
shareholder is deemed to have assented to and agreed to be bound by
the terms of the New Declaration of Trust.
7. The New Declaration of Trust deletes various technical and/or
antiquated requirements from the Current Declaration of Trust,
including existing requirements that a Trustee vacancy be deemed to
occur when a Trustee is absent from his or her state of residence,
that Trustee vacancies must be filled within six calendar months, and
that portfolio securities be held pursuant to safeguards prescribed by
usual Massachusetts practice.
8. The New Declaration of Trust clarifies that the Trustees may
authorize dividends of fund property in addition to stock dividends.
9. The New Declaration of Trust permits the rights and preferences of
a series or class to be set forth in the registration statement for
such series or class or in any other document in addition to in a
resolution of the Board of Trustees.
10. Lastly, the New Declaration of Trust generally expands various
1940 Act defined terms to encompass SEC modifications and
interpretations. Specific references to discrete sections of the 1940
Act that are contained in the New Declaration of Trust have likewise
been expanded to include SEC modifications and interpretations.
CONCLUSION. The Board of Trustees has concluded that the proposed
adoption of the New Declaration of Trust is in the best interests of
the trust's shareholders. Accordingly, the Trustees unanimously
recommend that the shareholders vote FOR the proposal to authorize
them to adopt and execute the New Declaration of Trust. If the
proposal is not approved, the Current Declaration of Trust will remain
unchanged and in effect.
4. TO APPROVE AN AMENDED MANAGEMENT CONTRACT FOR BALANCED PORTFOLIO.
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). First, the individual fund fee rate would be reduced from
0.20% to 0.15% of the fund's average daily net assets, resulting in a
net decrease of 0.05% of average net assets. The Amended Contract
modifies the management fee that FMR receives from the fund to provide
for lower fees when FMR's assets under management exceed certain
levels. 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
(Present 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 26
for more details. THE AMENDED CONTRACT WILL RESULT IN A MANAGEMENT FEE
THAT IS THE SAME AS, OR LOWER THAN, THE FEE PAYABLE UNDER THE PRESENT
CONTRACT. The proposed reduction in the fund's individual fund fee
rate was voluntarily adopted by FMR on July 1, 1996. (For information
on FMR, see the section entitled "Activities and Management of FMR" on
page 42.)
PROPOSED AMENDMENTS TO THE PRESENT MANAGEMENT CONTRACT. A copy of the
Amended Contract, marked to indicate the proposed amendments, is
supplied as Exhibit 2 on page . Except for the modifications discussed
above, it is substantially identical to the Present Contract. (For a
detailed discussion of the fund's Present Contract, refer to the
section entitled "Present Management Contracts" beginning on page 43.)
If approved by shareholders, the Amended Contract will take effect on
August 1, 2000 and will remain in effect through July 31, 2001 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, 2000 and thereafter only as long as its continuance is approved at
least annually as above.
The management fee is an annual percentage of the fund's average net
assets (the management fee rate), calculated and paid monthly. The
management fee rate is the sum of two components: a Group Fee Rate,
which varies according to assets under management by FMR, and a fixed
Individual Fund Fee Rate. The Amended Contract modifies the
Individual Fund Fee Rate from 0.20% of the fund's average net assets
to 0.15% of the fund's average net assets. The Amended Contract
modifies the Group Fee Rate by providing for lower fee rates if FMR's
assets under management remain above $426 billion.
MODIFICATION TO INDIVIDUAL FUND FEE RATE. The Amended Contract for
the fund would decrease the fund's Individual Fund Fee Rate from 0.20%
to 0.15% of the fund's average daily net assets. The proposed
reduction in the fund's Individual Fund Fee Rate was voluntarily
adopted by FMR on July 1, 1996.
MODIFICATION TO GROUP FEE RATE. The Group Fee Rate varies based upon
the monthly average of the aggregate 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 Amended Contract would
not change the group fee calculation for assets under management by
FMR of $426 billion or less. Above $426 billion in assets under FMR's
management, the Group Fee Rate declines under both the Present
Contract and the Amended Contact, but under the Amended Contract, it
declines faster. Group Fee Rates that are lower than those contained
in the fund's Present Contract have been voluntarily implemented by
FMR on January 1, 1996 and August 1, 1999.
The Group Fee Rate is calculated according to a graduated schedule
providing for different rates for different levels of assets under
management by FMR. The rate at which the Group Fee Rate declines is
determined by fee "breakpoints" that provide for lower fee rates when
assets increase. The Amended Contract adds 13 new fee breakpoints for
assets under FMR's management above $426 billion as illustrated in the
following table. (For an explanation of how the Group Fee Rate is used
to calculate the management fee, see the section entitled "Present
Management Contracts" beginning on page 43.)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GROUP FEE RATE BREAKPOINTS
Present Contract Amended Contract
Average Group Assets ($ Present Contract* Average Group Assets ($ Amended Contract
billions) billions)
Over 390 .2700% 390 - 426 .2700%
426 - 462 .2650%
462 - 498 .2600%
498 - 534 .2550%
534 - 587 .2500%
587 - 646 .2463%
646 - 711 .2426%
711 - 782 .2389%
782 - 860 .2352%
860 - 946 .2315%
946 - 1,041 .2278%
1,041 - 1,145 .2241%
1,145 - 1,260 .2204%
Over 1,260 .2167%
</TABLE>
The result at various levels of group net assets is illustrated by
the table below.
EFFECTIVE ANNUAL GROUP FEE RATES
Group Net Assets ($ billions) Present Contract* Amended Contract
150 .3371% .3371%
200 .3284% .3284%
250 .3219% .3219%
300 .3163% .3163%
350 .3113% .3113%
400 .3067% .3067%
450 .3026% .3024%
500 .2994% .2982%
550 .2967% .2942%
600 .2945% .2904%
650 .2926% .2870%
700 .2910% .2838%
750 .2896% .2809%
800 .2884% .2782%
850 .2873% .2756%
900 .2863% .2732%
950 .2855% .2710%
1,000 .2847% .2689%
1,050 .2840% .2669%
1,100 .2834% .2649%
1,150 .2828% .2631%
1,200 .2822% .2614%
1,250 .2817% .2597%
1,300 .2813% .2581%
1,350 .2809% .2566%
1,400 .2805% .2551%
* Does not reflect voluntary adoption of extended group fee rate
schedules by FMR on January 1, 1996 and August 1, 1999.
Average assets under FMR's management for March 31, 2000 were
approximately $888 b illion.
COMPARISON OF MANAGEMENT FEES. For the month ended March 31, 2000,
average assets under management by FMR were approximately $ 888
billion. The fund's management fee rate under the Amended Contract,
for the month ended March 31, 2000, would have been 0.4238%, compared
to 0.4865% under the Present Contract. The Individual Fund Fee
Rate will decrease by 0.05% of the fund's average net assets under the
Amended Contract. The group fee rate remains the same under
both the Present Contract and the Amended Contract until assets under
FMR's management exceed $426 billion, at which point the management
fee rate under the Amended Contract begins to decline relative to the
Present Contract.
The following chart compares the fund's management fee as calculated
under the terms of the Present Contract for fiscal 1999 to the
management fee the fund would have incurred if the Amended Contract
had been in effect, and shows the difference between the two as a
percentage of the management fee paid under the Present Contract.
BALANCED PORTFOLIO
Present Contract Amended Contract
Management Fee* Management Fee Percentage Difference
$1,727,462 $1,522,322 (11.88%)
* Does not reflect voluntary adoption of extended group fee rate
schedules by FMR on January 1, 1996, and August 1, 1999 , or does
not reflect voluntary adoption of individual fund fee rate on July 1,
1996 .
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 15, 1999 and October 14, 1999. The Board
of Trustees considered and approved the modifications to the Group Fee
Rate schedule during the two month period from September to October
1999 and November to December 1995. 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 received materials specifically relating
to the Amended Contract. These materials included (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, and (iii) the economic outlook and the
general investment outlook in the markets in which the fund invests.
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:
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.
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 ratio 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. The Independent Trustees have also
concluded that the existing group fee structure should be continued
but determined that it would be appropriate to change the group fee
structure as proposed herein.
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 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.
CONCLUSION. Based on their evaluation of all material factors and
assisted by the advice of independent counsel, the Trustees concluded
(i) that the existing management fee structure is fair and reasonable
and (ii) that the proposed modifications to the management fee
structure, that is the reduction of the Individual Fund Fee Rate, the
reduction of the Group Fee Rate schedule, 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.
5. TO APPROVE AN AMENDED MANAGEMENT CONTRACT FOR GROWTH & INCOME
PORTFOLIO.
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 modifies the management fee that FMR
receives from the fund to provide for lower fees when FMR's assets
under management exceed certain levels. 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 (Present 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 32 for more details. THE AMENDED
CONTRACT WILL RESULT IN A MANAGEMENT FEE THAT IS THE SAME AS, OR LOWER
THAN, THE FEE PAYABLE UNDER THE PRESENT CONTRACT. (For information on
FMR, see the section entitled "Activities and Management of FMR" on
page 45.)
PROPOSED AMENDMENTS TO THE PRESENT MANAGEMENT CONTRACT. A copy of the
Amended Contract, marked to indicate the proposed amendments, is
supplied as Exhibit 3 on page . Except for the modifications discussed
above, it is substantially identical to the Present Contract. (For a
detailed discussion of the fund's Present Contract, refer to the
section entitled "Present Management Contracts" beginning on page 46.)
If approved by shareholders, the Amended Contract will take effect on
August 1, 2000 and will remain in effect through July 31, 2001 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, 2000 and thereafter only as long as its continuance is approved at
least annually as above.
The management fee is an annual percentage of the fund's average net
assets (the management fee rate), calculated and paid monthly. The
management fee rate is the sum of two components: a Group Fee Rate,
which varies according to assets under management by FMR, and a fixed
Individual Fund Fee Rate. The Amended Contract modifies the Group Fee
Rate by providing for lower fee rates if FMR's assets under management
remain above $587 billion.
MODIFICATION TO GROUP FEE RATE. The Group Fee Rate varies based upon
the monthly average of the aggregate 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 Amended Contract would
not change the group fee calculation for assets under management by
FMR of $587 billion or less. Above $587 billion in assets under FMR's
management, the Group Fee Rate declines under both the Present
Contract and the Amended Contact, but under the Amended Contract, it
declines faster. Group Fee Rates that are lower than those contained
in the fund's Present Contract have been voluntarily implemented by
FMR on January 1, 1996, and August 1, 1999.
The Group Fee Rate is calculated according to a graduated schedule
providing for different rates for different levels of assets under
management by FMR. The rate at which the Group Fee Rate declines is
determined by fee "breakpoints" that provide for lower fee rates when
assets increase. The Amended Contract adds nine new fee breakpoints
for assets under FMR's management above $587 billion as illustrated in
the following table. (For an explanation of how the Group Fee Rate is
used to calculate the management fee, see the section entitled
"Present Management Contracts" beginning on page 47.)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GROUP FEE RATE BREAKPOINTS
Present Contract Amended Contract
Average Group Assets ($ Present Contract* Average Group Assets ($ Amended Contract
billions) billions)
Over 534 .2500% 534 - 587 .2500%
587 - 646 .2463%
646 - 711 .2426%
711 - 782 .2389%
782 - 860 .2352%
860 - 946 .2315%
946 - 1,041 .2278%
1,041 - 1,145 .2241%
1,145 - 1,260 .2204%
Over 1,260 .2167%
</TABLE>
The result at various levels of group net assets is illustrated by
the table below.
EFFECTIVE ANNUAL GROUP FEE RATES
Group Net Assets ($ billions) Present Contract* Amended Contract
150 .3371% .3371%
200 .3284% .3284%
250 .3219% .3219%
300 .3163% .3163%
350 .3113% .3113%
400 .3067% .3067%
450 .3024% .3024%
500 .2982% .2982%
550 .2942% .2942%
600 .2905% .2904%
650 .2874% .2870%
700 .2847% .2838%
750 .2824% .2809%
800 .2804% .2782%
850 .2786% .2756%
900 .2770% .2732%
950 .2756% .2710%
1,000 .2743% .2689%
1,050 .2731% .2669%
1,100 .2721% .2649%
1,150 .2711% .2631%
1,200 .2702% .2614%
1,250 .2694% .2597%
1,300 .2687% .2581%
1,350 .2680% .2566%
1,400 .2673% .2551%
* Does not reflect voluntary adoption of extended group fee rate
schedules by FMR on January 1, 1996 and August 1, 1999.
Average assets under FMR's management for March 31, 2000 were
approximately $888 b illion.
COMPARISON OF MANAGEMENT FEES. For the month ended March 31, 2000,
average assets under management by FMR were approximately $888
billion. the fund's management fee rate under the Amended Contract,
for the month ended March 31, 2000, would have been 0.4738%, compared
t o 0.4773% under the Present Contract. The management fee rate
remains the same under both the Present Contract and the Amended
Contract until assets under FMR's management exceed $587 billion, at
which point the management fee rate under the Amended Contract begins
to decline relative to the Present Contract.
The following chart compares the fund's management fee as calculated
under the terms of the Present Contract for fiscal 1999 to the
management fee the fund would have incurred if the Amended Contract
had been in effect, and shows the difference between the two as a
percentage of the management fee paid under the Present Contract.
GROWTH & INCOME PORTFOLIO
Present Contract Amended Contract
Management Fee* Management Fee Percentage Difference
$6,393,968 $6,383,024 (0.17%)
* Does not reflect voluntary adoption of extended group fee rate
schedules by FMR on January 1, 1996, and August 1, 1999.
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 15, 1999 and October 14, 1999. The Board
of Trustees considered and approved the modifications to the Group Fee
Rate schedule during the two month period from September to October
1999 and November to December 1995. 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 received materials specifically relating
to the Amended Contract. These materials included (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, and (iii) the economic outlook and the
general investment outlook in the markets in which the fund invests.
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:
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.
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 ratio 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. The Independent Trustees have also
concluded that the existing group fee structure should be continued
but determined that it would be appropriate to change the group fee
structure as proposed herein.
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 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.
CONCLUSION. Based on their evaluation of all material factors and
assisted by the advice of independent counsel, the Trustees concluded
(i) that the existing management fee structure is fair and reasonable
and (ii) that the proposed modifications to the management fee
structure, that is the reduction of the Group Fee Rate schedule 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.
6. TO APPROVE AN AMENDED MANAGEMENT CONTRACT FOR GROWTH OPPORTUNITIES
PORTFOLIO.
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 modifies the management fee that FMR
receives from the fund to provide for lower fees when FMR's assets
under management exceed certain levels. 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 (Present 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 39 for more details. THE AMENDED
CONTRACT WILL RESULT IN A MANAGEMENT FEE THAT IS THE SAME AS, OR LOWER
THAN, THE FEE PAYABLE UNDER THE PRESENT CONTRACT. (For information on
FMR, see the section entitled "Activities and Management of FMR" on
page 48.)
PROPOSED AMENDMENTS TO THE PRESENT MANAGEMENT CONTRACT. A copy of the
Amended Contract, marked to indicate the proposed amendments, is
supplied as Exhibit 4 on page . Except for the modifications discussed
above, it is substantially identical to the Present Contract. (For a
detailed discussion of the fund's Present Contract, refer to the
section entitled "Present Management Contracts" beginning on page 49.)
If approved by shareholders, the Amended Contract will take effect on
August 1, 2000 and will remain in effect through July 31, 2001 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, 2000 and thereafter only as long as its continuance is approved at
least annually as above.
The management fee is an annual percentage of the fund's average net
assets (the management fee rate), calculated and paid monthly. The
management fee rate is the sum of two components: a Group Fee Rate,
which varies according to assets under management by FMR, and a fixed
Individual Fund Fee Rate. The Amended Contract modifies the Group Fee
Rate by providing for lower fee rates if FMR's assets under management
remain above $426 billion.
MODIFICATION TO GROUP FEE RATE. The Group Fee Rate varies based upon
the monthly average of the aggregate 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 Amended Contract would
not change the group fee calculation for assets under management by
FMR of $426 billion or less. Above $426 billion in assets under FMR's
management, the Group Fee Rate declines under both the Present
Contract and the Amended Contact, but under the Amended Contract, it
declines faster. Group Fee Rates that are lower than those contained
in the fund's Present Contract have been voluntarily implemented by
FMR on January 1, 1996 and August 1, 1999.
The Group Fee Rate is calculated according to a graduated schedule
providing for different rates for different levels of assets under
management by FMR. The rate at which the Group Fee Rate declines is
determined by fee "breakpoints" that provide for lower fee rates when
assets increase. The Amended Contract adds 13 new fee breakpoints for
assets under FMR's management above $426 billion as illustrated in the
following table. (For an explanation of how the Group Fee Rate is used
to calculate the management fee, see the section entitled "Present
Management Contracts" beginning on page 50.)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GROUP FEE RATE BREAKPOINTS
PRESENT CONTRACT AMENDED CONTRACT
Average Group Assets ($ Present Contract* Average Group Assets ($ Amended Contract
billions) billions)
Over 390 .2700% 390 - 426 .2700%
426 - 462 .2650%
462 - 498 .2600%
498 - 534 .2550%
534 - 587 .2500%
587 - 646 .2463%
646 - 711 .2426%
711 - 782 .2389%
782 - 860 .2352%
860 - 946 .2315%
946 - 1,041 .2278%
1,041 - 1,145 .2241%
1,145 - 1,260 .2204%
Over 1,260 .2167%
</TABLE>
The result at various levels of group net assets is illustrated by
the table below.
EFFECTIVE ANNUAL GROUP FEE RATES
Group Net Assets ($ billions) Present Contract* Amended Contract
150 .3371% .3371%
200 .3284% .3284%
250 .3219% .3219%
300 .3163% .3163%
350 .3113% .3113%
400 .3067% .3067%
450 .3026% .3024%
500 .2994% .2982%
550 .2967% .2942%
600 .2945% .2904%
650 .2926% .2870%
700 .2910% .2838%
750 .2896% .2809%
800 .2884% .2782%
850 .2873% .2756%
900 .2863% .2732%
950 .2855% .2710%
1,000 .2847% .2689%
1,050 .2840% .2669%
1,100 .2834% .2649%
1,150 .2828% .2631%
1,200 .2822% .2614%
1,250 .2817% .2597%
1,300 .2813% .2581%
1,350 .2809% .2566%
1,400 .2805% .2551%
* Does not reflect voluntary adoption of extended group fee rate
schedules by FMR on January 1, 1996 and August 1, 1999.
Average assets under FMR's management for March 31, 2000 were
approximately $888 billion.
COMPARISON OF MANAGEMENT FEES. For the month ended March 31, 2000,
average assets under management by FMR were approximately $888
billion. The fund's management fee rate under the Amended Contract,
for the month ended March 31, 2000, would have been 0.5738%, compared
to 0.5865% un der the Present Contract. The management fee rate
remains the same under both the Present Contract and the Amended
Contract until assets under FMR's management exceed $426 billion, at
which point the management fee rate under the Amended Contract begins
to decline relative to the Present Contract.
The following chart compares the fund's management fee under the
terms of the Present Contract for fiscal 1999 to the management
fee the fund would have incurred if the Amended Contract had been in
effect, and shows the difference between the two as a percentage of
the management fee paid under the Present Contract.
GROWTH OPPORTUNITIES PORTFOLIO
Present Contract Amended Contract
Management Fee* Management Fee Percentage Difference
$10,886,003 $10,735,937 (1.38%)
* Does not reflect voluntary adoption of extended group fee rate
schedules by FMR on January 1, 1996 and August 1, 1999.
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 15, 1999 and October 14, 1999. The Board
of Trustees considered and approved the modifications to the Group Fee
Rate schedule during the two month period from September to October
1999 and November to December 1995. 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 received materials specifically relating
to the Amended Contract. These materials included (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, and (iii) the economic outlook and the
general investment outlook in the markets in which the fund invests.
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:
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.
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 ratio 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. The Independent Trustees have also
concluded that the existing group fee structure should be continued
but determined that it would be appropriate to change the group fee
structure as proposed herein.
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 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.
CONCLUSION. Based on their evaluation of all material factors and
assisted by the advice of independent counsel, the Trustees concluded
(i) that the existing management fee structure is fair and reasonable
and (ii) that the proposed modifications to the management fee
structure, that is the reduction of the Group Fee Rate schedule 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.
7. TO APPROVE AN AMENDED MANAGEMENT CONTRACT FOR MID CAP PORTFOLIO.
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 modifies the management fee that FMR
receives from the fund to provide for lower fees when FMR's assets
under management exceed certain levels. 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 (Present 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 45 for more details. THE AMENDED
CONTRACT WILL RESULT IN A MANAGEMENT FEE THAT IS THE SAME AS, OR LOWER
THAN, THE FEE PAYABLE UNDER THE PRESENT CONTRACT. (For information on
FMR, see the section entitled "Activities and Management of FMR" on
page 51.)
PROPOSED AMENDMENTS TO THE PRESENT MANAGEMENT CONTRACT. A copy of the
Amended Contract, marked to indicate the proposed amendments, is
supplied as Exhibit 5 on page . Except for the modifications discussed
above, it is substantially identical to the Present Contract. (For a
detailed discussion of the fund's Present Contract, refer to the
section entitled "Present Management Contracts" beginning on page 52.)
If approved by shareholders, the Amended Contract will take effect on
August 1, 2000 and will remain in effect through July 31, 2001 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, 2000 and thereafter only as long as its continuance is approved at
least annually as above.
The management fee is an annual percentage of the fund's average net
assets (the management fee rate), calculated and paid monthly. The
management fee rate is the sum of two components: a Group Fee Rate,
which varies according to assets under management by FMR, and a fixed
Individual Fund Fee Rate. The Amended Contract modifies the Group Fee
Rate by providing for lower fee rates if FMR's assets under management
remain above $587 billion.
MODIFICATION TO GROUP FEE RATE. The Group Fee Rate varies based upon
the monthly average of the aggregate 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 Amended Contract would
not change the group fee calculation for assets under management by
FMR of $587 billion or less. Above $587 billion in assets under FMR's
management, the Group Fee Rate declines under both the Present
Contract and the Amended Contact, but under the Amended Contract, it
declines faster. Group Fee Rates that are lower than those contained
in the fund's Present Contract have been voluntarily implemented by
FMR on January 1, 1996, and August 1, 1999.
The Group Fee Rate is calculated according to a graduated schedule
providing for different rates for different levels of assets under
management by FMR. The rate at which the Group Fee Rate declines is
determined by fee "breakpoints" that provide for lower fee rates when
assets increase. The Amended Contract adds nine new fee breakpoints
for assets under FMR's management above $587 billion as illustrated in
the following table. (For an explanation of how the Group Fee Rate is
used to calculate the management fee, see the section entitled
"Present Management Contracts" beginning on page 53.)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GROUP FEE RATE BREAKPOINTS
Present Contract Amended Contract
Average Group Assets ($ Present Contract* Average Group Assets ($ Amended Contract
billions) billions)
Over 534 .2500% 534 - 587 .2500%
587 - 646 .2463%
646 - 711 .2426%
711 - 782 .2389%
782 - 860 .2352%
860 - 946 .2315%
946 - 1,041 .2278%
1,041 - 1,145 .2241%
1,145 - 1,260 .2204%
Over 1,260 .2167%
</TABLE>
The result at various levels of group net assets is illustrated by
the table below.
EFFECTIVE ANNUAL GROUP FEE RATES
Group Net Assets ($ billions) Present Contract* Amended Contract
150 .3371% .3371%
200 .3284% .3284%
250 .3219% .3219%
300 .3163% .3163%
350 .3113% .3113%
400 .3067% .3067%
450 .3024% .3024%
500 .2982% .2982%
550 .2942% .2942%
600 .2905% .2904%
650 .2874% .2870%
700 .2847% .2838%
750 .2824% .2809%
800 .2804% .2782%
850 .2786% .2756%
900 .2770% .2732%
950 .2756% .2710%
1,000 .2743% .2689%
1,050 .2731% .2669%
1,100 .2721% .2649%
1,150 .2711% .2631%
1,200 .2702% .2614%
1,250 .2694% .2597%
1,300 .2687% .2581%
1,350 .2680% .2566%
1,400 .2673% .2551%
* Does not reflect voluntary adoption of extended group fee rate
schedules by FMR on January 1, 1996 and August 1, 1999.
Average assets under FMR's management for March 31, 2000 were
approximately $888 billion.
COMPARISON OF MANAGEMENT FEES. For the month ended March 31, 2000,
average assets under management by FMR were approximatel y $888
billion. The fund's management fee rate under the Amended Contract,
for the month ended March 31, 2000, would have been 0.5738%, compared
to 0.5773% under the Present Contract. The management fee rate
remains the same under both the Present Contract and the Amended
Contract until assets under FMR's management exceed $587 billion, at
which point the management fee rate under the Amended Contract begins
to decline relative to the Present Contract.
The following chart compares the fund's management fee under the
terms of the Present Co ntract for fiscal 1999 to t he management
fee the fund would have incurred if the Amended Contract had been in
effect, and shows the difference between the two as a percentage of
the management fee paid under the Present Contract.
MID CAP PORTFOLIO
Present Contract Amended Contract
Management Fee* Management Fee Percentage Difference
$26,414 $26,332 (0.31%)
* Does not reflect voluntary adoption of extended group fee rate
schedules by FMR on January 1, 1996 and August 1, 1999.
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 15, 1999 and October 14, 1999. The Board
of Trustees considered and approved the modifications to the Group Fee
Rate schedule during the two month period from September to October
1999 and November to December 1995. 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 received materials specifically relating
to the Amended Contract. These materials included (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, and (iii) the economic outlook and the
general investment outlook in the markets in which the fund invests.
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:
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.
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 ratio 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. The Independent Trustees have also
concluded that the existing group fee structure should be continued
but determined that it would be appropriate to change the group fee
structure as proposed herein.
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 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.
CONCLUSION. Based on their evaluation of all material factors and
assisted by the advice of independent counsel, the Trustees concluded
(i) that the existing management fee structure is fair and reasonable
and (ii) that the proposed modifications to the management fee
structure, that is the reduction of the Group Fee Rate schedule 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.
8. TO APPROVE A NEW SUB-ADVISORY AGREEMENT WITH FMR U.K. FOR BALANCED
PORTFOLIO AND GROWTH OPPORTUNITIES PORTFOLIO.
In conjunction with its portfolio management responsibilities on
behalf of each 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 each fund approve a new sub-advisory
agreement (the Proposed Agreement) among FMR, FMR U.K., and the trust
on behalf of each 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 each fund and its shareholders. In
addition, the Proposed Agreement would allow FMR, FMR U.K., and the
trust, on behalf of each 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 each 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 each fund to FMR.
On July 15, 1999, the Board of Trustees agreed to submit the Proposed
Agreement to shareholders of each 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 each fund access to managers
located abroad who may have more specialized expertise with respect to
local companies and markets. Additionally, the Trustees believe that
each 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 each 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 each fund (the Current Agreement). The Current Agreement, dated
November 18, 1994, was approved by FMR, then sole shareholder of
each fund on November 9, 1994 . A copy of the Proposed
Agreement is attached to this proxy statement as Exhibit 6 on page .
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 and FIJ" on page 56.
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 each 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 EACH FUND, pays FMR
U.K.'s fee equal to 110% of its costs incurred in connection with the
agreement.
For the fiscal year ended December 31, 1999, FMR paid FMR U.K .
$12,793 and $110,606, on behalf of Balanced Portfolio and Growth
Opportunities Portfolio, respectively. 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 funds. 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 each 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 each
fund's Prospectus or other governing instruments and such other
limitations as each 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 each 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 each fund.
The Proposed Agreement would also allow FMR, FMR U.K., and the trust,
on behalf of each 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 each 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
EACH 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, 2001 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
each 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 each fund and its shareholders. The Trustees recommend
voting FOR the proposal. With respect to each fund, if the Proposed
Agreement is approved by shareholders, the Proposed Agreement will
take effect on the first day of the first month following approval.
With respect to each fund, if the Proposed Agreement is not approved,
the Current Agreement with FMR U.K. will remain in effect.
9. TO APPROVE A NEW SUB-ADVISORY AGREEMENT WITH FMR U.K. FOR GROWTH &
INCOME PORTFOLIO.
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) among FMR, FMR U.K., and the trust
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 July 15, 1999, 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, 1997, was approved by FMR, then sole shareholder of the
fund on De cember 30, 1996. A cop y of the Proposed Agreement is
attached to this proxy statement as Exhibit 7 on page .
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 and FIJ" on page 58.
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 December 31, 1999, FMR paid FMR U.K.
$27,334 on be half of Growth and Income Portfolio. 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 funds. 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, 2001 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. With respect to the fund, if the Proposed
Agreement is approved by shareholders, the Proposed Agreement will
take effect on the first day of the first month following approval.
With respect to the fund, if the Proposed Agreement is not approved,
the Current Agreement with FMR U.K. will remain in effect.
10. TO APPROVE A NEW SUB-ADVISORY AGREEMENT WITH FMR FAR EAST FOR
BALANCED PORTFOLIO AND GROWTH OPPORTUNITIES PORTFOLIO.
In conjunction with its portfolio management responsibilities on
behalf of each 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 each fund approve a new sub-advisory
agreement (the Proposed Agreement) among FMR, FMR Far East, and the
trust, on behalf of each 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 each fund and its
shareholders. In addition, the Proposed Agreement would allow FMR, FMR
Far East, and the trust, on behalf of each 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 each 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 each fund to FMR.
On July 15, 1999, the Board of Trustees agreed to submit the Proposed
Agreement to shareholders of each 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 each fund access to
managers located abroad who may have more specialized expertise with
respect to local companies and markets. Additionally, the Trustees
believe that each 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
each 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 each fund (the Current Agreement). The Current Agreement,
dated November 18, 1994, was approved by FMR, then sole shareholder of
each fund on November 9, 1994 . A copy of the Proposed
Agreement is attached to this proxy statement as Exhibit 8 on page .
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 and FIJ" on page 60.
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 each 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 EACH FUND,
pays FMR Far East's fee equal to 105% of its costs incurred in
connection with the agreement.
For the fiscal year ended December 31, 1999, FMR paid FMR Far Eas t
$7,926 and $68,225, o n behalf of Balanced Portfolio and Growth
Opportunities, respectively. 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 funds. 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 each 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
each fund's Prospectus or other governing instruments and such other
limitations as each 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 each 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 each
fund.
The Proposed Agreement would also allow FMR, FMR Far East, and the
trust, on behalf of each 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 each 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
EACH 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, 2001 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
each 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 each fund and its shareholders. The Trustees recommend
voting FOR the proposal. With respect to each fund, if the Proposed
Agreement is approved by shareholders, the Proposed Agreement will
take effect on the first day of the first month following approval.
With respect to each fund, if the Proposed Agreement is not approved,
the Current Agreement with FMR Far East will remain in effect.
11. TO APPROVE A NEW SUB-ADVISORY AGREEMENT WITH FMR FAR EAST FOR
GROWTH & INCOME PORTFOLIO.
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) among FMR, FMR Far East, and the
trust, 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 July 15, 1999, 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, 1997, was approved by FMR, then sole
shareholder of the fund on December 30, 1996. A copy of the
Proposed Agreement is attached to this proxy statement as Exhibit 9 on
page .
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 and FIJ" on page 62.
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 December 31, 1999, FMR paid FMR Far Ea st
$16,748 on behalf of Growth & Income. 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 funds. 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, 2001 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, the Current Agreement with FMR Far East will remain in
effect.
12. TO MODIFY BALANCED PORTFOLIO'S FUNDAMENTAL INVESTMENT OBJECTIVE
AND ELIMINATE A FUNDAMENTAL INVESTMENT POLICY OF THE FUND.
The Board of Trustees has approved, and recommends that shareholders
of Balanced Portfolio approve, modif ications to the fund's
fundamental investment objective and elimination of a
fundamental investment policy. The fund's fundamental investment
objective and a fundamental investment policy currently reads as
follows:
"Balanced Portfolio seeks both income and growth of capital by
investing in a diversified portfolio of equity and fixed-income
securities with income, growth of income, and capital appreciation
potential."
If the proposal is approved, the fund's fundamental investment
objective would read as follows (deleted language is [bracketed];
added language is underlined):
"Balanced Portfolio seeks [both] income and capital growth [of
capital] consistent with reasonable risk [by investing in a
diversified portfolio of equity and fixed-income securities with
income, growth of income, and capital appreciation potential]."
Because the fund's investment objective and the foregoing investment
policy are fundamental, they cannot be modified or eliminated without
shareholder approval.
DISCUSSION OF PROPOSED MODIFICATIONS. Modifying the fund's
fundamental investment objective and eliminating the foregoing
fundamental investment policy will allow the fund to more clearly
communicate its investment objective and investment strategies by
standardizing its investment disclosure in a manner consistent with
other Fidelity funds with similar investment disciplines. If the
proposal is approved, the fund will continue to rely on its
fundamental policy regarding diversification (see proposal 13)
and its existing non-fundamental policy of investing approximately 60%
of its assets in stocks and other equity securities and the remainder
in bonds and other debt securities. Pursuant to current fundamental
policy, the fund is "diversified" as defined in the Investment Company
Act of 1940, which means that, with respect to at least 75% of its
total assets, (a) no more than 5% of its total assets are invested in
the securities of a single issuer and (b) the fund owns no more than
10% of the outstanding voting securities of such issuer.
Fundamental policies can be changed or eliminated only with
shareholder approval, while non-fundamental policies can be changed or
eliminated without shareholder approval. Changes in non-fundamental
policies, however, are still subject to the supervision of the Board
of Trustees. Modifying the fund's fundamental investment objective and
eliminating the fundamental policy as proposed are not expected to
materially affect the way the fund is managed.
CONCLUSION. The Board of Trustees has concluded that modifying the
fund's fundamental investment objective and eliminating the
fundamental policy as described above are in the best interests of the
fund and its shareholders. The Trustees recommend voting FOR the
proposal. If approved by shareholders, the changes will become
effective when disclosure is revised to reflect them. If the approval
is not approved by the fund's shareholders, the fund's current
fundamental investment objective and policy discussed above will not
change.
ADOPTION OF STANDARDIZED INVESTMENT LIMITATIONS
The primary purpose of Proposals 13, 14, and 15 is to revise several
of the funds' investment limitations to conform to limitations which
are standard for similar types of funds managed by FMR. The Board of
Trustees asked FMR to analyze the various fundamental and
non-fundamental investment limitations of the Fidelity funds, and,
where practical and appropriate to a fund's investment objective and
policies, propose to shareholders adoption of standard fundamental
limitations and elimination of certain other fundamental limitations.
Generally, when fundamental limitations are eliminated, Fidelity's
standard non-fundamental limitations replace them. By making these
limitations non-fundamental, the Board of Trustees may amend a
limitation as they deem appropriate, without seeking shareholder
approval. The Board of Trustees would amend the limitations to
respond, for instance, to developments in the marketplace, or changes
in federal or state law. The costs of shareholder meetings called for
these purposes are generally borne by a fund and its shareholders.
It is not anticipated that these proposals will substantially affect
the way a fund is currently managed. However, FMR is presenting them
to you for your approval because FMR believes that increased
standardization will help to promote operational efficiencies and
facilitate monitoring of compliance with fundamental and
non-fundamental investment limitations. Although adoption of a new or
revised limitation is not likely to have any impact on the current
investment techniques employed by a fund, it will contribute to the
overall objectives of standardization.
13. TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
DIVERSIFICATION TO EXCLUDE "SECURITIES OF OTHER INVESTMENT
COMPANIES" FROM THE LIMITATION FOR BALANCED PORTFOLIO, GROWTH &
INCOME PORTFOLIO, AND GROWTH OPPORTUNITIES PORTFOLIO.
Balanced Portfolio's, Growth & Income Portfolio's, and Growth
Opportunities Portfolio's current fundamental investment limitation
concerning diversification states:
"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 each fund vote to replace
the fund's fundamental investment limitation with the following
amended fundamental investment limitation governing diversification
(additional language is underlined):
"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 primary purpose of the proposal is to exclude securities of other
investment companies from each fund's fundamental diversification
limitation. Subject to the restrictions in the Investment Company Act
of 1940 and each fund's other investment policies and limitations,
the fund would be able to invest without limit in securities of
other investment companies. The 1940 Act permits a fund to invest all
or a portion of its assets in other affiliated investment companies
subject to restrictions on the level of its investments and on the
fees charged. In addition, FMR has received exemptive orders from
the Securities and Exchange Commission (SEC) permitting a fund to
invest in affiliated investment companies subject to different
restrictions on the level of its investment and the fees charged.
Currently under an exemptive order from the SEC, FMR may invest in
money market or short-term bond funds managed by FMR or an affiliate
subject to the following restrictions: 1) up to 25% of each fund's
total assets for cash management purposes, and 2) without limit its
cash collateral from securities lending. Each fund currently
invests in such a money market fund for cash management purposes and
to invest its cash collateral from securities lending.
If the proposal is approved, each fu nd could invest more
significantly in other investment companies without being subject to
the fund's diversification restrictions. For example, each fund could
invest more cash collateral (greater than 25% of its total assets)
from securities lending in a money market fund managed by FMR or an
affiliate. In addition if the proposal is approved, each fund could
invest more than 25% of its total assets in another investment company
rat her than invest directly in securities if such investment
company followed the same investment strategy as each fund for t hat
portion of its assets. The Trustees would permit this type of
structure if they determined that such an investment strategy was in
the best interest of the fund and its shareholders. FMR and the
Trustees continually review methods of structuring mutual funds to
take advantage of potential efficiencies or other benefits. At
present, the Trustees have not considered any specific proposal to
invest in such a manner.
If this proposal is approved, each fund's amended fundamental
diversification limitation cannot be changed without the approval of
the shareholders.
CONCLUSION. The Board of Trustees has concluded that the proposed
amendment will benefit each 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 a fund, that
fund's current fundamental diversification limitation will not change.
14. TO AMEND EACH FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
UNDERWRITING.
Each fund's current fundamental investment limitation concerning
underwriting states:
"The fund may not underwrite securities issued by others, except to
the extent that the fund may be considered an underwriter within the
meaning of the Securities Act of 1933 in the disposition of restricted
securities."
The Trustees recommend that shareholders of each fund vote to replace
this limitation with the following fundamental investment limitation
governing underwriting (additional language is ((underlined))):
"The fund may not underwrite securities issued by others, except to
the extent that the fund may be considered an underwriter within the
meaning of the Securities Act of 1933 in the disposition of restricted
securities ((or in connection with investments in other investment
companies.))"
The primary purpose of the proposal is to clarify that each fund is
not prohibited from investing in other investment companies, if as a
result of such investment, each fund is technically considered an
underwriter under federal securities laws.
The proposal also serves to conform each fund's fundamental
investment limitation concerning underwriting to a limitation which is
expected to become standard for all funds managed by FMR or its
affiliates. If the proposal is approved, the new limitation may not be
changed without the approval of shareholders.
Adoption of the proposed limitation concerning underwriting is not
expected to affect the way in which each fund is managed, the
investment performance of each fund, or the securities or instruments
in which each fund invests.
CONCLUSION. The Board of Trustees has concluded that the proposal
will benefit each fund and its shareholders. The Trustees recommend
voting FOR the proposal. Upon shareholder approval, the amended
fundamental limitation will become effective when disclosure is
revised to reflect the changes. If the proposal is not approved by the
shareholders of a fund, that fund's current limitation will remain
unchanged.
15. TO AMEND EACH FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
THE CONCENTRATION OF ITS INVESTMENTS IN A SINGLE INDUSTRY.
Each fund's current fundamental investment limitation concerning the
concentration of its investments within a single industry states:
"The fund may not purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of companies
whose principal business activities are in the same industry."
The Trustees recommend that shareholders of each fund vote to replace
this fundamental investment limitation with the following amended
fundamental investment limitation governing concentration (additional
language is ((underlined))):
"The fund may not 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, more than 25% of the fund's total assets
would be invested in the securities of companies whose principal
business activities are in the same industry."
The primary purpose of the proposal is to explicitly exclude
investment companies from the each fund's fundamental concentration
limitation.
FMR does not believe that investment companies should be treated as
an industry for purposes of each fund's fundamental concentration
limitation. Significant investments in investment companies do not
expose each fund to the risk of any specific industry like significant
investments in a industry such as financial services or real estate
would.
The proposal also serves to conform each fund's fundamental
investment limitation concerning concentration to a limitation which
is expected to become standard for all funds managed by FMR or its
affiliates. If the proposal is approved, the new limitation may not be
changed without the approval of shareholders.
Adoption of the proposed limitation concerning concentration is not
expected to affect the way in which each fund is managed, the
investment performance of each fund, or the securities or instruments
in which ea ch fund invests. Adoption of the proposed limitation
concerning concentration is not expected to affect the way in which
each fund is managed, the investment performance of each fund, or the
securities or instruments in which each fund invests because
currently, if each fund were to invest in open-end investment
companies managed by FMR or an affiliate, FMR would treat the issuer
of the underlying securities held by such open-end investment company
as the issuer of the security for purposes of each fund's fundamental
concentration limitation.
CONCLUSION. The Board of Trustees has concluded that the proposal
will benefit each fund and its shareholders. The Trustees recommend
voting FOR the proposal. Upon shareholder approval, the amended
fundamental limitation will become effective when disclosure is
revised to reflect the changes. If the proposal is not approved by the
shareholders of a fund, that fund's current 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 and average net assets of funds with investment objectives
similar to Balanced Portfolio, Growth & Income Portfolio, Growth
Opportunities Portfolio, and Mid Cap Portfolio and advised by FMR is
contained in the Table of Average Net Assets and Expense Ratios in
Exhibit 10 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 have included mortgages
and personal and general business loans. In the judgment of FMR, the
terms and conditions of those transactions were not influenced by
existing or potential 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; Peter S.
Lynch, Vice Chairman; and Abigail P. Johnson, Senior Vice President.
With the exception of Ms. Johnson, each of the Directors is also a
Trustee of the trust. Messrs. Johnson 3d, Pozen, Ms. Johnson, John H.
Costello, Matthew N. Karstetter, Maria F. Dwyer, Eric D. Roiter,
Robert A. Dwight, Robert A. Lawrence, Richard A. Spillane Jr., John D.
Avery, Bettina Doulton, David Felman, and Kevin E. Grant are currently
officers of the trust and officers or employees of FMR or FMR Corp.
A ll 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 and Ms. Abigail
P. Johnson'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 January 1, 1999 through March 31, 2000, no
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 FIMM
FIMM is a wholly owned subsidiary of FMR formed in 1997 to provide
portfolio management services to certain Fidelity funds and investment
advice with respect to fixed-income instruments.
Funds with investment objectives similar to Balanced Portfolio for
which FMR has entered into a sub-advisory agreement with FIMM, and the
net assets of each of these funds, are indicated in the Table of
Average Net Assets and Expense Ratios in Exhibit 10 beginning on page
.
The Directors of FIMM are Edward C. Johnson 3d, Chairman, and Robert
C. Pozen, President. Mr. Johnson 3d also is President and a Trustee of
the trust and of other funds advised by FMR; Chairman, Chief Executive
Officer, President, and a Director of FMR Corp.; Chairman of the Board
and of the Executive Committee of FMR; a Director of FMR; and Chairman
and Director of FMR U.K. and FMR Far East. In addition, Mr. Pozen is
Senior Vice President and a Trustee of other funds advised by FMR; a
Director of FMR Corp.; Director of FMR; and President and Director of
FMR U.K. and FMR Far East. Each of the Directors is a stockholder of
FMR Corp. The principal business address of the Directors is 82
Devonshire Street, Boston, Massachusetts 02109.
ACTIVITIES AND MANAGEMENT OF FMR U.K., FMR FAR EAST AND FIJ
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 grant FMR U.K. and FMR Far
East 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.
FIJ is a wholly owned subsidiary of Fidelity International Limited,
organized in Japan in 1986 to provide research and investment
recommendations with respect to companies primarily based in Japan and
other parts of Asia.
Funds with investment objectives similar to Balanced Portfolio,
Growth & Income Portfolio, and Growth Opportunities Portfolio 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 10 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 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.
The Directors of FIJ are Billy Wilder, President, Simon Haslam,
Edward C. Johnson 3d, Noboru Kawai, Yasuo Kuramoto, Tetsuzo Nishimura,
Takeshi Okazaki, and Hiroshi Yamashita. With the exception of Mr.
Edward C. Johnson 3d, the principal business address of each of the
Directors is Shiroyama JT Mori Building, 4-3-1 Toranomon, Minato-ku,
Tokyo 105, Japan. The principal business address of Mr. Edward C.
Johnson 3d is 82 Devonshire Street, Boston, Massachusetts 02109.
PRESENT MANAGEMENT CONTRACTS
Each fund employs FMR to furnish investment advisory and other
services. Under its management contract with each fund, FMR acts as
investment adviser and, subject to the supervision of the Board of
Trustees, directs the investments of each fund in accordance with its
investment objective, policies, and limitations. FMR also provides
each fund with all necessary office facilities and personnel for
servicing each fund's investments, compensates all officers of each
fund and all Trustees who are "interested persons" of the trust or of
FMR, and all personnel of each 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 each fund. These services include
providing facilities for maintaining each fund's organization;
supervising relations with custodians, transfer and pricing agents,
accountants, underwriters, and other persons dealing with each fund;
preparing all general shareholder communications and conducting
shareholder relations; maintaining each fund's records and the
registration of each fund's shares under federal and state laws;
developing management and shareholder services for each 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 proposals 4, 5, 6
and 7.
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. Each fund pays pricing and
bookkeeping fees to FSC, an affiliate of FMR, on behalf of each class
of the fund. Although each fund's current management contract provides
that each fund will pay for typesetting, printing, and mailing
prospectuses, statements of additional information, notices, and
reports to shareholders, the trust, on behalf of each fund has entered
into a revised transfer agent agreement with FSC, pursuant to which
FIIOC bears the costs of providing these services to existing
shareholders of the applicable classes. Other expenses paid by each
fund include interest, taxes, brokerage commissions, and each fund's
proportionate share of insurance premiums and Investment Company
Institute dues. Each fund is also liable for such non-recurring
expenses as may arise, including costs of any litigation to which each
fund may be a party, and any obligation it may have to indemnify its
officers and Trustees with respect to litigation.
Transfer agent fees and pricing and bookkeeping fees ,
including reimbursement for out-of-pocket expenses, paid to FIIOC and
FSC by the applicable class for fiscal 1999 are presented in the table
below.
<TABLE>
<CAPTION>
<S> <C> <C>
Fund Transfer Agent Fees Pricing and Bookkeeping Fees
Balanced Portfolio $ 236,669 $ 162,243
Growth & Income Portfolio $ 884,058 $ 446,583
Growth Opportunities Portfolio $ 1,224,961 $ 586,991
Mid Cap Portfolio $ 4,287 $ 60,000
</TABLE>
FSC also received fees for administering each fund's securities
lending program. Securities lending costs are based on the number and
duration of individual securities loans. Securities lending costs for
fiscal 1999 for Balanced Portfolio, Growth & Income Portfolio, Growth
Opportunities Portfolio, and Mid Cap Portfolio were $11, $1, $2 and
$0, respectively.
Each 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. Each
distribution agreement calls for FDC to use all reasonable efforts,
consistent with its other business, to secure purchasers for shares of
the class, which are continuously offered at net asset value per
share. Promotional and administrative expenses in connection with the
offer and sale of shares are paid by FMR.
FMR is the manager of Balanced Portfolio and Growth Opportunities
Portfolio pursuant to management contracts dated November 18, 1994,
which were approved by FMR, as the then sole shareholder of
each fund on November 9, 1994 . FMR is the manager of
Growth & Income Portfolio pursuant to a management contract dated
January 1, 1997, which was approved by FMR, as the then sole
shareholder of the fund on D ecember 30, 1996. FMR is the
manager of Mid Cap Portfolio pursuant to a management contract dated
November 19, 1998, which was approved by FMR, as the then sole
shareholder of the fund, prior to commencement of operations.
For the services of FMR under each management contract, each fund
pays FMR a monthly management fee which has two components: a group
fee rate and an individual fund fee rate.
The group fee rate is based on the monthly average net assets of all
of the registered investment companies with which FMR has management
contracts and is calculated on a cumulative basis pursuant to the
graduated fee rate schedule shown below on the left. The schedule
below on the right shows the effective annual group fee rate at
various asset levels, which is the result of cumulatively applying the
annualized rates on the left. For example, the effective annual fee
rate at $826 billion of group net assets - the approximate level for
December 31, 1999 - was 0.2768%, which is the weighted average of the
respective fee rates for each level of group net assets up to $826
billion.
On August 1, 1999 and January 1, 1996, FMR voluntarily modified the
breakpoints in the group fee rate schedule. The revised group fee rate
schedule, depicted below, provides for lower management fee rates as
FMR's assets under management increase.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Assets Annualized Rate Group Net Assets Effective Annual Fee Rate
0 - $3 billion .5200% $1 billion .5200%
3 - 6 .4900 50 .3823
6 - 9 .4600 100 .3512
9 - 12 .4300 150 .3371
12 - 15 .4000 200 .3284
15 - 18 .3850 250 .3219
18 - 21 .3700 300 .3163
21 - 24 .3600 350 .3113
24 - 30 .3500 400 .3067
30 - 36 .3450 450 .3024
36 - 42 .3400 500 .2982
42 - 48 .3350 550 .2942
48 - 66 .3250 600 .2904
66 - 84 .3200 650 .2870
84 - 102 .3150 700 .2838
102 - 138 .3100 750 .2809
138 - 174 .3050 800 .2782
174 - 210 .3000 850 .2756
210 - 246 .2950 900 .2732
246 - 282 .2900 950 .2710
282 - 318 .2850 1,000 .2689
318 - 354 .2800 1,050 .2669
354 - 390 .2750 1,100 .2649
390 - 426 .2700 1,150 .2631
426 - 462 .2650 1,200 .2614
462 - 498 .2600 1,250 .2597
498 - 534 .2550 1,300 .2581
534 - 587 .2500 1,350 .2566
587 - 646 .2463 1,400 .2551
646 - 711 .2426
711 - 782 .2389
782 - 860 .2352
860 - 946 .2315
946 - 1,041 .2278
1,041 - 1,145 .2241
1,145 - 1,260 .2204
Over 1,260 .2167
</TABLE>
The individual fund fee rate for Balanced Portfolio and Growth &
Income Portfolio is 0.20%. Balanced Portfolio's individual fund fee
rate was voluntarily reduced to 0.15% by FMR on July 1, 1996. The
individual fund fee rate for Growth Opportunities Portfolio and Mid
Cap Portfolio is 0.30%. Based on the average group net assets of the
funds advised by FMR for December 31, 1999, each fund's annual
management fee rate would be calculated as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Fund Group Fee Rate Individual Fund Fee Rate Management Fee Rate
Balanced Portfolio 0.2768% + 0.15% = 0.4268%*
Growth & Income Portfolio 0.2768% + 0.20% = 0.4768%
Growth Opportunities Portfolio 0.2768% + 0.30% = 0.5768%
Mid Cap Portfolio 0.2768% + 0.30% = 0.5768%
</TABLE>
* If the voluntary reduction effective July 1, 1996 were not in
effect, the total management fee rate in this example would have been
0.4768%.
One-twelfth of this annual management fee rate is applied to each
fund's net assets averaged for the most recent month, giving a dollar
amount, which is the fee for that month.
During fiscal 1999, FMR received $1,522,322, $6,383,024, $10,735,937
and $26,332 for its services as investment adviser to Balanced
Portfolio, Growth & Income Portfolio, Growth Opportunities Portfolio,
and Mid Cap Portfolio, respectively. These fee s are eq uivalent
to 0.43%, 0.48%, 0.58%, and 0.57%, respectively, of the average net
assets of each fund.
FMR may, from time to time, voluntarily agree to reimburse all or a
portion of each class's total operating expenses (exclusive of
interest, taxes, certain securities lending costs, 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. These
arrangements can discontinued by FMR at any time.
FMR has voluntarily agreed, subject to revision or discontinuance, to
reimburse each class of the funds to the extent that its total
operating expenses, as a percentage of its respective average net
assets exceed the following rates:
Fund Initial Class Service Class Service Class 2
Balanced Portfolio 1.50% 1.60% 1.75%
Growth & Income Portfolio 1.00% 1.10% 1.25%
Growth Opportunities Portfolio 1.50% 1.60% 1.75%
Mid Cap Portfolio 1.00% 1.10% 1.25%
SUB-ADVISORY AGREEMENTS
On behalf of Balanced Portfolio, FMR has entered into a sub-advisory
agreement with FIMM pursuant to which FIMM chooses certain investments
for Balanced Portfolio. The sub-advisory agreement is dated
January 1, 1999 .
Under the sub-advisory agreement, FMR pays FIMM fees equal to 50% of
the management fee payable to FMR under its management contract with
the fund. The fees paid to FIMM are not reduced by any voluntary or
mandatory expense reimbursements that may be in effect from time to
time. For the fiscal year ended 1999, FMR paid FIMM fees of
$761,161, on behalf of Balanced Portfolio.
On behalf of Balanced Portfolio, Growth & Income Portfolio, Growth
Opportunities Portfolio, and Mid Cap Portfolio, 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 the sub-advisers. On
behalf of the funds, FMR may also grant FMR U.K. and FMR Far East
investment management authority as well as the authority to buy and
sell securities if FMR believes it would be beneficial to the funds.
Balanced Portfolio's and Growth Opportunities Portfolio's sub-advisory
agreements, dated November 18, 1994, were approved by FMR as sole
shareholder of each fund on November 9, 1994 . Growth & Income
Portfolio's sub-advisory agreement, dated January 1, 1997, was
approved by FMR as sole shareholder of the fund on D ecember 30,
1996 . Mid Cap Portfolio's sub-advisory agreement, dated November
19, 1998, was approved by FMR as the then sole shareholder of the fund
prior to commencement of operations.
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 discretionary investment management and executing
portfolio transactions, FMR pays FMR U.K. and FMR Far East a fee equal
to 50 % of its monthly management fee rate with respect to each
fund's average net assets managed by the sub-adviser on a
discretionary basis.
For providing investment advice and research services, on behalf of
each fund, the fees paid to the sub-advisers for the fiscal year ended
1999 were as follows:
FMR U.K. FMR Far East
Balanced Portfolio $ 12,793 $ 7,926
Growth & Income Portfolio $ 27,334 $ 16,748
Growth Opportunities Portfolio $ 110,606 $ 68,225
Mid Cap Portfolio $ 118 $ 69
For providing discretionary investment management and executing
portfolio transactions on behalf of the funds, no fees were paid to
FMR U.K. or FMR Far East by FMR for fiscal 1999.
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), LLC31
(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.
The brokerage commissions paid to NFSC by each fund for fiscal 1999
are listed in the following table:
Brokerage Commissions Paid to
NFSC
Balanced Portfolio $ 23,744
Growth & Income Portfolio $ 93,221
Growth Opportunities Portfolio $ 107,749
Mid Cap Portfolio $ 591
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 Fidelity Service Company, Inc.,
P.O. Box 789, Boston, MA 02109, 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
The language to be added to the current Declaration of Trust is
((underlined)), and the language to be deleted is set forth in
[brackets]. Headings that were underlined in the trust's current
Declaration of Trust remain underlined in this Exhibit.
FORM OF
AMENDED AND RESTATED DECLARATION OF TRUST
((VARIABLE INSURANCE PRODUCTS FUND III))
DATED [JULY 14, 1994] ((_________________
AMENDED AND RESTATED DECLARATION OF TRUST, made [July 14, 1994] ((,
2000 by each of the Trustees whose signature is affixed hereto)) (the
"Trustees").
WHEREAS, the Trustees desire to ((amend and restate this Declaration
of Trust for the sole purpose of supplementing the Declaration of
Trust to incorporate amendments duly adopted)); ((and))
WHEREAS, ((this trust was initially made on July 14, 1994 by)) Edward
C. Johnson 3d, J. Gary Burkhead, and Gary L. French ((in order)) to
establish a trust [fund] for the investment and reinvestment of funds
contributed thereto; and
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust [fund] hereunder shall be held and managed in
[T]((t))rust under this ((Amended and Restated)) Declaration of Trust
as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
NAME
[Section 1] ((SECTION 1)). This Trust shall be known as "Variable
Insurance Products Fund III."
DEFINITIONS
[Section 2] ((SECTION 2)). Wherever used herein, unless otherwise
required by the context or specifically provided:
(a) The [T]((t))erms"Affiliated Person((,))"[,] "Assignment((,))"[,]
"Commission((,))"[,] "Interested Person((,))"[,] "Majority Shareholder
Vote" (the 67% or 50% requirement of the third sentence of Section
2(a)(42) of the 1940 Act, whichever may be applicable)((,)) and
"Principal Underwriter" shall have the meanings given them in the 1940
Act, as ((modified by or interpreted by any applicable order or orders
of the Commission or any rules or regulations adopted or
interpretative releases of the Commission thereunder)) [amended from
time to time];
(b) (("Bylaws" shall mean the bylaws of the Trust, if any, as
amended from time to time;))
(c) (("Class" refers to the class of Shares of a Series of the Trust
established in accordance with the provisions of Article III;))
(d) (("Declaration of Trust" means this Amended and Restated
Declaration of Trust, as further amended or restated, from time to
time;))
(((e))) [(c)] "Net Asset Value" means the net asset value of each
Series of the Trust ((or Class thereof determined in the manner
provided in Article X, Section 3;
(d)] "Shareholder" means a record owner of Shares of the Trust;
(((g))) [(f)] "Shares" means the equal proportionate transferable
units of interest into which the beneficial interest of the Trust or
each Series shall be divided from time to time, including such
[c]((C))lass or [c]((C))lasses of Shares as the Trustees may from time
to time create and establish and including fractions of Shares as well
as whole Shares as consistent with the requirements of Federal and/or
state securities laws; [and]
(h) "Series" refers to [any] series of Shares of the Trust
established in accordance with the provisions of Article III [.];
(((i))) [(b)] [The] "Trust" refers to Variable Insurance Products
Fund III and reference to the Trust, when applicable to one or
more Series of the Trust, shall refer to any such Series;
(((j))) [(e)] [The] "Trustees" refer to the individual trustees in
their capacity as trustees hereunder of the Trust and their successor
or successors for the time being in office as such trustee or
trustees; ((and))
(((k))) (g)] [The] "1940 Act" refers to the Investment Company Act
of 1940, as amended from time to time((.)) [; and]
ARTICLE II
PURPOSE OF TRUST
The purpose of this Trust is to provide investors a continuous source
of managed investment in securities.
ARTICLE III
BENEFICIAL INTEREST
SHARES OF BENEFICIAL INTEREST
[Section 1]((Section 1)). The beneficial interest in the Trust shall
be divided into such transferable Shares of one or more separate and
distinct Series or [c]((C))lasses ((of Series)) as the Trustees
shall((,)) from time to time((,)) create and establish. The number of
((authorized)) Shares ((of each Series, and Class thereof,)) is
unlimited((.)) [and] [e]Each Share shall be without par value and
shall be fully paid and nonassessable. The Trustees shall have full
power and authority, in their sole discretion((, and without obtaining
any prior authorization or vote of the Shareholders [or] of any Series
or [c]((C))lass of [Shareholders of] the Trust[,] (((a))) to create
and establish (and to change in any manner) Shares or any Series or
[c]((C))lasses thereof with such preferences, voting powers,
rights((,)) and privileges as the Trustees may((,)) from time to
time((,)) determine[,]((;)) (((b))) to divide or combine the Shares or
any Series or [c]((C))lasses thereof into a greater or lesser
number[,]((;)) (((c))) to classify or reclassify any issued Shares [or
any Series or classes thereof] into one or more Series or
[c]((C))lasses of Shares[,]((;)) (((d))) to abolish any one or more
Series or [c]((C))lasses of Shares[,]((;)) and (((e))) to take such
other action with respect to the Shares as the Trustees may deem
desirable.
[ESTABLISHMENT OF SERIES]
((ESTABLISHMENT OF SERIES AND CLASSES))
[Section2]((SECTION 2)). The establishment of any Series ((or Class
thereof)) shall be effective upon the adoption of a resolution by a
majority of the then Trustees setting forth such establishment and
designation and the relative rights and preferences of the Shares of
such Series ((or Class, whether directly in such resolution or by
reference to, or approval of, another document that sets forth such
relative rights and preferences of the Shares of such Series or Class
including, without limitation, any registration statement of the
Trust, or as otherwise provided in such resolution.)) At any time that
there are no Shares outstanding of any particular Series ((or Class))
previously established and designated, the Trustees may by a majority
vote abolish [that] ((such)) Series ((or Class)) and the establishment
and designation thereof.
OWNERSHIP OF SHARES
[Section 3]((SECTION 3)). The ownership of Shares shall be recorded
in the books of the Trust ((or a transfer or similar agent)). The
Trustees may make such rules as they consider appropriate for the
transfer of Shares and similar matters. The record books of the Trust
((as kept by the Trust or by any transfer or similar agent, as the
case may be,)) shall be conclusive as to who are the holders of Shares
and as to the number of Shares held from time to time by each
Shareholder.
INVESTMENT IN THE TRUST
[Section 4]((SECTION 4)). The Trustees shall accept investments in
the Trust from such persons and on such terms as they may((,)) from
time to time((,)) authorize. Such investments may be in the form of
cash((,)) [or] securities((, or)) ((other property)) in which the
appropriate Series is authorized to invest, valued as provided in
Article X, Section 3. After the date of the initial contribution of
capital, the number of Shares to represent the initial contribution
may in the Trustees' discretion be considered as outstanding((,)) and
the amount received by the Trustees on account of the contribution
shall be treated as an asset of the Trust. Subsequent investments in
the Trust shall be credited to each Shareholder's account in the form
of full Shares at the Net Asset Value per Share next determined after
the investment is received; provided, however, that the Trustees may,
in their sole discretion [,] (a) impose a sales charge ((or other
fee)) upon investments in the Trust ((or Series or any Classes
thereof,)) and (b) issue fractional Shares.
[ASSETS AND LIABILITIES OF SERIES]
((ASSETS AND LIABILITIES OF SERIES AND CLASSES))
[Section 5]((SECTION 5)). All consideration received by the Trust for
the issue or sale of Shares of a particular Series, together with all
assets in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange((,)) or liquidation of such
assets, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall be referred to
as "assets belonging to" that Series. In addition((,)) any assets,
income, earnings, profits, and proceeds thereof, funds, or payments
[which] ((that)) are not readily identifiable as belonging to any
particular Series ((or Class)) shall be allocated by the Trustees
between and among one or more of the Series ((or Classes)) in such
manner as they, in their sole discretion, deem fair and equitable.
Each such allocation shall be conclusive and binding upon the
Shareholders of all Series ((or Classes)) for all purposes[,] and
shall be referred to as assets belonging to that Series ((or Class.))
The assets belonging to a particular Series shall be so recorded upon
the books of the Trust[,] ((or of its agent or agents)) and shall be
held by the Trustees in [t]Trust for the benefit of the holders of
Shares of that Series.
The assets belonging to each particular Series shall be charged with
the liabilities of that Series and all expenses, costs, charges((,))
and reserves attributable to that Series((, except that liabilities
and expenses may, in the Trustees' discretion, be allocated solely to
a particular Class and, in which case, shall be borne by that Class.))
Any general liabilities, expenses, costs, charges((,)) or reserves of
the Trust [which] ((that)) are not readily identifiable as belonging
to any particular Series ((or Class)) shall be allocated and charged
by the Trustees between or among any one or more of the Series ((or
Classes)) in such manner as the Trustees, in their sole
discretion((,)) deem fair and equitable ((and shall be referred to as
"liabilities belonging to" that Series or Class. Each such allocation
shall be conclusive and binding upon the Shareholders of all Series
((or Classes)) for all purposes. Any creditor of any Series may look
only to the assets of that Series to satisfy such creditor's debt.
((No Shareholder or former Shareholder of any Series shall have a
claim on or any right to any assets allocated or belonging to any
other Series.))
NO PREEMPTIVE RIGHTS
[Section 6]((SECTION 6)). Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities
issued by the Trust or the Trustees.
[LIMITATION OF PERSONAL LIABILITY]
((STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY
[Section 7]((SECTION 7)). ((Shares shall be deemed to be personal
property giving only the rights provided in this instrument. Every
shareholder by virtue of having become a shareholder shall be held to
have expressly assented and agreed to be bound by the terms hereof. No
Shareholder of the Trust and of each Series shall be personally liable
for the debts, liabilities, obligations, and expenses incurred by,
contracted for, or otherwise existing with respect to, the Trust or by
or on behalf of any Series.)) The Trustees shall have no power to bind
any Shareholder personally or to call upon any Shareholder for the
payment of any sum of money or assessment whatsoever other than such
as the Shareholder may((,)) at any time((,)) personally agree to pay
by way of subscription for any Shares or otherwise. Every note, bond,
contract((,)) or other undertaking issued by or on behalf of the Trust
or the Trustees relating to the Trust ((or to a Series)) shall include
a recitation limiting the obligation represented thereby to the Trust
((or to one or more Series)) and its ((or their)) assets (but the
omission of such a recitation shall not operate to bind any
Shareholder ((or Trustee))).
ARTICLE IV
THE TRUSTEES
MANAGEMENT OF THE TRUST
[Section 1]((SECTION 1)). The business and affairs of the Trust shall
be managed by the Trustees, and they shall have all powers necessary
and desirable to carry out that responsibility.
[ELECTION: INITIAL TRUSTEES]
((INITIAL TRUSTEES: ELECTION))
[Section 2]((SECTION 2)). ((The initial Trustees shall be at least
three individuals who shall affix their signatures hereto. ))On a date
fixed by the Trustees, the Shareholders shall elect not less than
three Trustees. A Trustee shall not be required to be a Shareholder of
the Trust. [The initial Trustees shall be Edward C. Johnson 3d, J.
Gary Burkhead and Gary L. French and such other individuals as the
Board of Trustees shall appoint pursuant to Section 4 of the Article
IV.]
TERM OF OFFICE OF TRUSTEES
[Section 3]((SECTION 3)). The Trustees shall hold office during the
lifetime of this Trust, and until its termination as hereinafter
provided; except (a) that any Trustee may resign his trust by written
instrument signed by him and delivered to the other Trustees, which
shall take effect upon such delivery or upon such later date as is
specified therein; (b) that any Trustee may be removed at any time by
written instrument, signed by at least two-thirds (((2/3))) of the
number of Trustees prior to such removal, specifying the date when
such removal shall become effective; (c) that any Trustee who requests
in writing to be retired or who has become incapacitated by illness or
injury may be retired by written instrument signed by a majority of
the other Trustees, specifying the date of his retirement; and (d) a
Trustee may be removed at any [S]((s))pecial [M]((m))eeting of the
Trust by a vote of two-thirds (((2/3))) of the outstanding Shares.
RESIGNATION AND APPOINTMENT OF TRUSTEES
[Section 4]((SECTION 4)). In case of the declination, death,
resignation, retirement, ((or)) removal[, incapacity, or inability] of
any of the Trustees, ((or)) in case a vacancy shall, by reason of an
increase in number ((of the Trustees)), or for any other reason,
exist, the remaining Trustees shall fill such vacancy by appointing
such other person as they in their discretion shall see fit consistent
with the limitations under the 1940 Act. Such appointment shall be
evidenced by a written instrument signed by a majority of the Trustees
in office or by recording in the records of the Trust, whereupon the
appointment shall take effect. An appointment of a Trustee may be made
by the Trustees then in office in anticipation of a vacancy to occur
by reason of retirement, resignation((,)) or increase in number of
Trustees effective at a later date, provided that said appointment
shall become effective only at or after the effective date of said
retirement, resignation((,)) or increase in number of Trustees. As
soon as any Trustee so appointed shall have accepted this
[t]((T))rust, the [t]((T))rust estate shall vest in the new Trustee or
Trustees, together with the continuing Trustees, without any further
act or conveyance, and he shall be deemed a Trustee hereunder. The
((foregoing)) power of appointment is subject to the provisions of
Section 16(a) of the 1940 Act[.]((,)) ((as modified by or interpreted
by any applicable order or orders of the Commission or any rules or
regulations adopted or interpretative releases of the Commission.))
[TEMPORARY ABSENCE OF TRUSTEE]
((TEMPORARY ABSENCE OF TRUSTEES))
[Section 5]((SECTION 5)). Any Trustee may, by power of attorney,
delegate his power for a period not exceeding six (((6) ))months at
any one time to any other Trustee or Trustees, provided that in no
case shall less than two Trustees personally exercise the other powers
hereunder except as herein otherwise expressly provided.
NUMBER OF TRUSTEES
Section 6. The number of Trustees, not less than three (3) nor more
than twelve (12), serving hereunder at any time shall be determined by
the Trustees themselves.
Whenever a vacancy in the Board of Trustees shall occur, until such
vacancy is filled, or while any Trustee is [absent from the
Commonwealth of Massachusetts or, if not a domiciliary of
Massachusetts, is absent from his state of domicile, or is] physically
or mentally incapacitated by reason of disease or otherwise, the other
Trustees shall have all the powers hereunder and the certificate of
the other Trustees of such vacancy[, absence] or incapacity[,] shall
be conclusive [, provided, however, that no vacancy shall remain
unfilled for a period longer than six calendar months].
EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE
[Section 7]((SECTION 7)). The death, declination, resignation,
retirement, removal, incapacity, or inability of the Trustees, or any
one of them, shall not operate to annul the Trust or to revoke any
existing agency created pursuant to the terms of this Declaration of
Trust.
OWNERSHIP OF ASSETS OF THE TRUST
[Section 8]((SECTION 8)). The assets of the Trust shall be held
separate and apart from any assets now or hereafter held in any
capacity other than as Trustee hereunder by the Trustees or any
successor Trustees. All of the assets of the Trust shall at all times
be considered as vested in the Trustees. No Shareholder shall be
deemed to have a severable ownership in any individual asset of the
Trust or any right of parition or possession thereof, but each
Shareholder shall have a proportionate undivided beneficial interest
in the Trust ((or Series)).
ARTICLE V
POWERS OF THE TRUSTEES
POWERS
[Section 1]((SECTION 1)). The Trustees((,)) in all instances((,))
shall act as principals[,] and are and shall be free from the control
of the Shareholders. The Trustees shall have full power and authority
to do any and all acts and to make and execute any and all contracts
and instruments that they may consider necessary or appropriate in
connection with the management of the Trust. ((Except as otherwise
provided herein or in the 1940 Act, t))[T]he Trustees shall not in any
way be bound or limited by present or future laws or customs in regard
to trust investments, but shall have full authority and power to make
any and all investments [which] ((that)) they, in their [uncontrolled]
discretion, shall deem proper to accomplish the purpose of this Trust.
Subject to any applicable limitation in [the] ((this)) Declaration of
Trust or the Bylaws of the Trust, ((if any,)) the Trustees shall have
power and authority:
(a) To invest and reinvest cash and other property, and to hold cash
or other property uninvested[,] without, in any event((,)) bound or
limited by any present or future law or custom in regard to
investments by Trustees, and to sell, exchange, lend, pledge,
mortgage, hypothecate, write options on((,)) and lease any or all of
the assets of the Trust.
(b) To adopt Bylaws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend
and repeal them to the extent that they do not reserve that right to
the Shareholders.
(c) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate.
(d) To employ [a] ((one or more)) bank((s,)) [or] trust [company]
((companies, companies that are members of a national securities
exchange, or other entities permitted under the 1940 Act, as modified
by or interpreted by any applicable order or orders of the Commission
or any rules or regulations adopted or interpretative releases of the
Commission thereunder,)) as custodian((s)) of any assets of the Trust
subject to any conditions set forth in this Declaration of Trust or in
the Bylaws, if any.
(e) To retain a transfer agent and Shareholder servicing agent, or
both.
(f) To provide for the distribution of interests of the Trust either
through a [p]((P))rincipal [u]((U))nderwriter in the manner
hereinafter provided for or by the Trust itself, or both.
(g) To set record dates in the manner hereinafter provided for.
(h) To delegate such authority as they consider desirable to any
officers of the Trust and to any ((investment adviser, manager,
[agent,] custodian((,)) [or] underwriter[.]((, other agent or
independent contractor.))
(i) To sell or exchange any or all of the assets of the Trust,
subject to the provisions of Article XII, Section 4 [(b)] hereof.
(j) To vote or give assent[,] or exercise any rights of ownership[,]
with respect to stock or other securities or property; and to execute
and deliver powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such
power and discretion with relation to securities or property as the
Trustees shall deem proper.
(k) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities.
(l) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered((,)) or other negotiable form;
or either in its own name or in the name of a custodian or a nominee
or nominees((.)) [subject in either case to proper safeguards
according to the usual practice of Massachusetts trust companies or
investment companies.]
(m) To establish separate and distinct Series with separately
defined investment objectives and policies and distinct investment
purposes in accordance with the provisions of Article III ((and to
establish Classes of such Series having relative rights, powers, and
duties as the Trustees may provide consistent with applicable laws)).
(n) To allocate assets, liabilities((,)) and expenses of the Trust
to a particular Series ((or Class, as appropriate,)) or to apportion
the same between or among two or more Series ((or Classes, as
appropriate,)) provided that any liabilities or expenses incurred by a
particular Series ((or Class)) shall be payable solely out of the
assets belonging to that Series as provided for in Article III.
(o) To consent to or participate in any plan for the reorganization,
consolidation((,)) or merger of any corporation or concern, any
security of which is held in the Trust; to consent to any contract,
lease, mortgage, purchase, or sale of property by such corporation or
concern, and to pay calls or subscriptions with respect to any
security held in the Trust.
(p) To compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust or any matter in controversy((,)) including, but
not limited to, claims for taxes.
(q) To make distributions of income and of capital gains to
Shareholders in the manner hereinafter provided for.
(r) To borrow money((,)) and to pledge((,)) mortgage((,)) [and] or
hypothecate the assets of the Trust, subject to ((the)) applicable
requirements of the 1940 Act.
(s) To establish, from time to time, a minimum total investment for
Shareholders[,] and to require the redemption of the Shares of any
Shareholders whose investment is less than such minimum upon giving
notice to such Shareholder.
(((t) To operate as and carry on the business of an investment
company and to exercise all the powers necessary and appropriate to
the conduct of such operations.))
(((u) To interpret the investment policies, practices or limitations
of any Series.))
(((v) To issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, and otherwise deal in Shares and,
subject to the provisions set forth in Article III and Article X, to
apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds or property of the Trust, or the
particular Series of the Trust, with respect to which such Shares are
issued.))
[(t)](((w))) Notwithstanding any other provision hereof, to invest
all ((or a portion)) of the assets of any [s]((S))eries in ((one or
more)) [a single] open-end investment compan((ies))[y], including
investment by means of transfer of such assets in exchange for an
interest or interests in such investment company[;] ((or companies or
by any other method approved by the Trustees.))
(((x) In general to carry on any other business in connection with
or incidental to any of the foregoing powers, to do everything
necessary, suitable or proper for the accomplishment of any purpose or
the attainment of any object or the furtherance of any power herein
before set forth, either alone or in association with others, and to
do every other act or thing incidental or appurtenant to or growing
out of or connected with the aforesaid business or purposes, objects
or powers.))
((The foregoing clauses shall be construed both as objects and
powers, and the foregoing enumeration of specific powers shall not be
held to limit or restrict in any manner the general powers of the
Trustees. Any action by one or more of the Trustees in their capacity
as such hereunder shall be deemed an action on behalf of the Trust or
the applicable Series and not an action in an individual capacity.))
((The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust or any Series or
Class thereof.))
No one dealing with the Trustees shall be under any obligation to
make any inquiry concerning the authority of the Trustees, or to see
to the application of any payments made or property transferred to the
Trustees or upon their order.
TRUSTEES AND OFFICERS AS SHAREHOLDERS
[Section 2]((SECTION 2)). Any Trustee, officer or other agent of the
Trust may acquire, own and dispose of Shares to the same extent as if
he were not a Trustee, officer or agent; and the Trustees may issue
and sell or cause to be issued and sold Shares to and buy such Shares
from any such person of any firm or company in which he is interested,
subject only to the general limitations herein contained as to the
sale and purchase of such Shares; and all subject to any restrictions
which may be contained in the Bylaws, if any.
ACTION BY THE TRUSTEES
[Section 3]((SECTION 3)). ((Except as otherwise provided herein or in
the 1940 Act, the ))Trustees shall act by majority vote at a meeting
duly called or by unanimous written consent without a meeting or by
telephone consent provided a quorum of Trustees participate in any
such telephonic meeting, unless the 1940 Act requires that a
particular action be taken only at a meeting [of] ((at which)) the
((Trustees are present in person. At any meeting of the Trustees, a
majority of the Trustees shall constitute a quorum. Meetings of the
Trustees may be called orally or in writing by the Chairman of the
Trustees or by any two other Trustees. Notice of the time, date((,))
and place of all meetings of the Trustees shall be given by the party
calling the meeting to each Trustee by telephone((,)) ((telefax,))
[or] telegram((,)) or ((other electro-mechanical means)) sent to his
home or business address at least twenty-four (((24))) hours in
advance of the meeting or by written notice mailed to his home or
business address at least seventy-two (((72))) hours in advance of the
meeting. Notice need not be given to any Trustee who attends the
meeting without objecting to the lack of notice or who executes a
written waiver of notice with respect to the meeting. Subject to the
requirements of the 1940 Act, the Trustees by majority vote may
delegate to any one of their number their authority to approve
particular matters or take particular actions on behalf of the Trust.
((Written consents or waivers of Trustees may be executed in one or
more counterparts. Execution of a written consent or waiver and
delivery thereof to the Trust may be accomplished by telefax or other
electro-mechanical means.))
CHAIRMAN OF THE TRUSTEES
[Section 4]((SECTION 4)). The Trustees may appoint one of their
number to be Chairman of the Board of Trustees. The Chairman shall
preside at all meetings of the Trustees, shall be responsible for the
execution of policies established by the Trustees and the
administration of the Trust, and may be the chief executive, financial
and accounting officer of the Trust.
ARTICLE VI
EXPENSES OF THE TRUST
TRUSTEE REIMBURSEMENT
[Section 1]((SECTION 1)). Subject to the provisions of Article III,
Section 5, the Trustees shall be reimbursed from the Trust estate or
the assets belonging to the appropriate Series for their expenses and
disbursements, including, without limitation, fees and expenses of
Trustees who are not Interested Persons of the Trust[,]((;)) interest
expense, taxes, fees and commissions of every kind[,]((;)) expenses of
pricing Trust portfolio securities expenses of issue, repurchase and
redemption of shares including expenses attributable to a program of
periodic repurchases or redemptions, expenses of registering and
qualifying the Trust and its Shares under Federal and[S]((s))tate laws
and regulations[,]((;)) charges of custodians, transfer agents, and
registrars[,]((;)) expenses of preparing and setting up in type
[P]((p))rospectuses and [S]((s))tatements of [A]((a))dditional
[I]((i))nformation[,]((;)) expenses of printing and distributing
prospectuses sent to existing Shareholders[,]((;)) auditing and legal
expenses[,]((;)) reports to Shareholders[,]((;)) expenses of meetings
of Shareholders and proxy solicitations therefor[,]((;)) insurance
expense[,]((;)) association membership dues((;)) and for such
non-recurring items as may arise, including litigation to which the
Trust is a party[,]((;)) and for all losses and liabilities by them
incurred in administering the Trust, and for the payment of such
expenses, disbursements, losses((,)) and liabilities the Trustees
shall have a lien on the assets belonging to the appropriate Series
prior to any rights or interests of the Shareholders thereto. This
section shall not preclude the Trust from directly paying any of the
aforementioned fees and expenses.
ARTICLE VII
[INVESTMENT ADVISER, PRINCIPAL UNDERWRITER AND TRANSFER AGENT]
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER, AND TRANSFER AGENT
INVESTMENT ADVISER
[Section 1]((SECTION 1)). Subject to [a Majority Shareholder Vote]
((applicable requirements of the 1940 Act, as modified by or
interpreted by any applicable order of the Commission or any rules or
regulations adopted or interpretative releases of the Commission
thereunder, the)) Trustees may((,)) in their discretion ((and)) from
time to time((,)) enter into an investment advisory or management
contract(s) with respect to the Trust or any Series thereof whereby
the other party(ies) to such contract(s) shall undertake to furnish
the Trustees such management, investment advisory, statistical((,))
and research facilities and services and such other facilities and
services, if any, and all upon such terms and conditions, as the
Trustees may((,)) in their discretion((,)) determine. Notwithstanding
any provisions of this Declaration of Trust, the Trustees may
authorize the investment adviser(s) (subject to such general or
specific instructions as the Trustees may from time to time adopt) to
effect purchases, sales or exchanges of portfolio securities and other
investment instruments of the Trust on behalf of the Trustees or may
authorize any officer, agent, or Trustee to effect such purchases,
sales((,)) or exchanges pursuant to recommendations of the investment
adviser (and all without further action by the Trustees). Any such
purchases, sales((,)) and exchanges shall be deemed to have been
authorized by all of the Trustees.
The Trustees may, subject to applicable requirements of the 1940 Act,
((as modified by or interpreted by any applicable order or orders of
the Commission or any rules or regulations adopted or interpretative
releases of the Commission thereunder,)) including those relating to
Shareholder approval, authorize the investment adviser to employ one
or more sub-advisers from time to time to perform such of the acts and
services of the investment adviser, and upon such terms and
conditions, as may be agreed upon between the investment adviser and
sub-adviser.
PRINCIPAL UNDERWRITER
[Section 2]((SECTION 2)). The Trustees may in their discretion from
time to time enter into [(a)] ((an exclusive or non-exclusive))
contract(s) ((on behalf of the Trust or any Series or Class thereof))
providing for the sale of the Shares, whereby the Trust may either
agree to sell the Shares to the other party to the contract or appoint
such other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as may be prescribed in
the Bylaws, if any, and such further terms and conditions as the
Trustees may((,)) in their discretion((,)) determine not inconsistent
with the provisions of this Article VII[,] or of the Bylaws, if
any((.))[; and] [s]((S))uch contract may also provide for the
repurchase or sale of Shares by such other party as principal or as
agent of the Trust.
TRANSFER AGENT
[Section 3]((SECTION 3)). The Trustees may((,)) in their discretion
((and)) from time to time((,)) enter into[a] ((one or more)) transfer
agency and Shareholder service contract((s)) whereby the other party
shall undertake to furnish the Trustees with transfer agency and
Shareholder services. [The] ((Such)) contracts shall be on such terms
and conditions as the Trustees may((,)) in their discretion((,))
determine not inconsistent with the provisions of this Declaration of
Trust or of the Bylaws, if any. Such services may be provided by one
or more entities.
PARTIES TO CONTRACT
[Section 4]((SECTION 4)). Any contract of the character described in
Sections 1, 2 and 3 of this Article VII or in Article IX hereof may be
entered into with any corporation, firm, partnership, trust or
association, although one or more of the Trustees or officers of the
Trust may be an officer, director, trustee, shareholder, or member of
such other party to the contract, and no such contract shall be
invalidated or rendered voidable by reason of the existence of any
relationship, nor shall any person holding such relationship be liable
merely by reason of such relationship for any loss or expense to the
Trust under or by reason of said contract or accountable for any
profit realized directly or indirectly therefrom, provided that the
contract when entered into was reasonable and fair and not
inconsistent with the provisions of this Article VII or the Bylaws, if
any. The same person (including a firm, corporation, partnership,
trust, or association) may be the other party to contracts entered
into pursuant to Sections 1, 2 and 3 above or Article IX, and any
individual may be financially interested or otherwise affiliated with
persons who are parties to any or all of the contracts mentioned in
this Section 4.
PROVISIONS AND AMENDMENTS
[Section 5]((SECTION 5)). Any contract entered into pursuant to
Sections 1 and 2 of this Article VII shall be consistent with and
subject to the requirements of Section 15 of the 1940 Act((, as
modified by or interpreted by any applicable order or orders of the
Commission or any rules or regulations adopted or interpretative
releases of the Commission (or)) [including any amendments thereof or]
other applicable Act of Congress hereafter enacted)((,)) with respect
to its continuance in effect, ((its amendment,)) its termination, and
the method of authorization and approval of such contract or renewal
thereof[, and no amendment to any contract, entered into pursuant to
Section 1 shall be effective unless assented to by a Majority
Shareholder Vote].
ARTICLE VIII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
VOTING POWERS
[Section 1]((SECTION 1)). The Shareholders shall have power to vote
[(i)] (((a))) for the election of Trustees as provided in Article IV,
Section 2[,]((;)) [(ii)] (((b))) for the removal of Trustees as
provided in Article IV, Section 3(d)[,]((;)) [(iii)] (((c))) with
respect to any investment advisory or management contract as provided
in Article VII, Sections 1 and 5[,]((; [(iv)] (((d) with respect to
any termination, merger, consolidation, reorganization, or sale of
assets of the Trust or any of its Series or Classes as provided in
Article XII, Section 4; (e))) with respect to the amendment of this
Declaration of Trust as provided in Article XII, Section 7[,]((;))
[(v)] (((f))) to the same extent as the shareholders of a
Massachusetts business corporation, as to whether or not a court
action, proceeding or claim should be brought or maintained
derivatively or as a class action on behalf of the Trust or the
Shareholders, provided, however, that a Shareholder of a particular
Series shall not be entitled to bring any derivative or class action
on behalf of any other Series of the Trust[,]((;)) and [(vi)] (((g)))
with respect to such additional matters relating to the Trust as may
be required or authorized by law, by this Declaration of Trust, or the
Bylaws of the Trust, if any, or any registration of the Trust with the
[Securities and Exchange] Commission [(the "Commission")] or any
[S]((s))tate, as the Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, all
[s]((S))hares shall be voted by individual Series, ((except as
provided in the following sentence and)) except [(i)] (((a))) when
required by the 1940 Act, Shares shall be voted in the aggregate and
not by individual Series; and [(ii)](((b) when the Trustees have
determined that the matter affects only the interests of one or more
Series, then only the Shareholders of such Series shall be entitled to
vote thereon. ((The Trustees may also determine that a matter affects
only the interests of one or more Classes of a Series, in which case,
any such matter shall be voted on by such Class or Classes. A
Shareholder of each Series or Class thereof)) shall be entitled to one
vote for each dollar of net asset value (number of Shares owned times
net asset value per share) of such Series[,] ((or Class thereof ))on
any matter on which such Shareholder is entitled to vote((,)) and each
fractional dollar amount shall be entitled to a proportionate
fractional vote. There shall be no cumulative voting in the election
of Trustees. Shares may be voted in person or by proxy. Until Shares
are issued, the Trustees may exercise all rights of Shareholders and
may take any action required or permitted by law, this Declaration of
Trust or any Bylaws of the Trust((, if any,)) to be taken by
Shareholders.
MEETINGS
[Section 2]((SECTION 2)). The first Shareholders' meeting shall be
held as specified in Section 2 of Article IV at the principal office
of the Trust or such other place as the Trustees may designate.
Special meetings of the Shareholders of any Series may be called by
the Trustees and shall be called by the Trustees upon the written
request of Shareholders owning at least one-tenth (((1/10))) of the
outstanding Shares entitled to vote. Whenever ten or more Shareholders
meeting the qualifications set forth in Section 16(c) of the 1940 Act,
((as modified by or interpreted by any applicable order or orders of
the Commission or any rules or regulations adopted or interpretative
releases of the Commission,)) [as the same may be amended from time to
time,] seek the opportunity of furnishing materials to the other
Shareholders with a view to obtaining signatures on such a request for
a meeting, the Trustees shall comply with the provisions of said
Section 16(c) with respect to providing such Shareholders access to
the list of the Shareholders of record of the Trust or the mailing of
such materials to such Shareholders of record. Shareholders shall be
entitled to at least fifteen (((15))) days' notice of any meeting.
QUORUM AND REQUIRED VOTE
[Section 3]((SECTION 3)). A majority of Shares entitled to vote in
person or by proxy shall be a quorum for the transaction of business
at a Shareholders' meeting, except that where any provision of law or
of this Declaration of Trust permits or requires that holders of any
Series ((or Class)) shall vote as a Series ((or Class)) then a
majority of the aggregate number of Shares of that Series ((or Class))
entitled to vote shall be necessary to constitute a quorum for the
transaction of business by that Series ((or Class)). Any lesser number
shall be sufficient for adjournments. Any adjourned session or
sessions may be held, within a reasonable time after the date set for
the original meeting, without the necessity of further notice. Except
when a larger vote is required ((by applicable law or by any provision
of this Declaration of Trust or the Bylaws, ((if any,)) a majority of
the Shares voted in person or by proxy shall decide any questions and
a plurality shall elect a Trustee, provided that where any provision
of law or of this Declaration of Trust permits or requires that the
holders of any Series ((or Class)) shall vote as a Series ((or
Class,)) then a majority of the Shares of that Series ((or Class))
voted on the matter shall decide that matter insofar as that Series
((or Class)) is concerned. ((Shareholders may act by unanimous written
consent. Actions taken by a Series or Class may be consented to
unanimously in writing by Shareholders of that Series or Class.))
ARTICLE IX
CUSTODIAN
APPOINTMENT AND DUTIES
[Section 1]((SECTION 1. The Trustees shall at all times employ a
bank((, a company that is a member of a national securities exchange))
[or] trust company((, or other entity permitted under the 1940 Act, as
modified by or interpreted by any applicable order or orders of the
Commission or any rules or regulations adopted or interpretative
releases of the Commission thereunder,)) having capital, surplus((,))
and undivided profits of at least two million dollars
($2,000,000)((,)) or such other amount [or such other entity] as shall
be allowed by the Commission or by the 1940 Act, as custodian with
authority as its agent, but subject to such restrictions, limitations
[or] ((and)) other requirements, if any, as may be contained in the
Bylaws of the Trust, if any:
(1) to hold the securities owned by the Trust and deliver the same
upon written order or oral order, if confirmed in writing, or by such
electro-mechanical or electronic devices as are agreed to by the Trust
and the custodian, if such procedures have been authorized in writing
by the Trust;
(2) to receive and receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as the
Trustees may direct; and
(3) to disburse such funds upon orders or vouchers;
and the Trust may also employ such custodian as its agent:
(1) to keep the books and accounts of the Trust and furnish clerical
and accounting services; and
(2) to compute, if authorized to do so [by]((, the [Trustees, the]
Net Asset Value of any Series ((or Class thereof in accordance with
the provisions hereof; all upon such basis of compensation as may be
agreed upon between the Trustees and the custodian. [If so directed by
a Majority Shareholder Vote, the custodian shall deliver and pay over
all property of the Trust held by it as specified in such vote.]
The Trustees may also authorize the custodian to employ one or more
sub-custodian from time to time to perform such of the acts and
services of the custodian, and upon such terms and conditions, as may
be agreed upon between the custodian and such sub-custodian and
approved by the Trustees, provided that in every case such
sub-custodian shall be a bank((,)) ((a company that is a member of a
national securities exchange,)) [or] trust company, or ((other entity
permitted under the 1940 Act, as modified by or interpreted by any
applicable order or orders of the Commission or any rules or
regulations adopted or interpretative releases of the Commission
thereunder,)) [organized under the laws of the United States or one of
the states thereof and] having capital, surplus((,)) and [individual]
((undivided)) profits of at least two million dollars
($2,000,000)((,)) or such other [person] ((amount)) as [may] ((shall))
be [permitted] ((allowed)) by the Commission((,)) or [otherwise in
accordance with] ((by)) the 1940 Act [as from time to time amended].
[CENTRAL CERTIFICATE SYSTEM]
((CENTRAL DEPOSITORY SYSTEM))
[Section 2]((SECTION 2.)) Subject to such rules, regulations and
orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the
Trust in a system for the central handling of securities established
by a national securities exchange or a national securities association
registered with the Commission under the Securities Exchange Act of
1934((,)) or such other person as may be permitted by the
Commission[,] or otherwise in accordance with the 1940 Act [as from
time to time amended] pursuant to which system all securities of any
particular class or series of any issuer deposited within the system
are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities[,]((;))
provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust ((or its custodian, subcustodians, or
other authorized agents)).
ARTICLE X
[DISTRIBUTIONS AND REDEMPTIONS]
((DISTRIBUTIONS, REDEMPTIONS AND DETERMINATION OF NET ASSET VALUE))
DISTRIBUTIONS
[Section 1]SECTION 1.
(a) The Trustees may from time to time declare and pay dividends.
The amount of such dividends and the payment of them shall be wholly
in the discretion of the Trustees.
(b) The Trustees shall have ((the)) power, to the fullest extent
permitted by the laws of Massachusetts, at any time to declare and
cause to be paid dividends on Shares of a particular Series, from the
assets belonging to that Series, which dividends, at the election of
the Trustees, may be paid daily or otherwise pursuant to a standing
resolution or resolutions adopted only once or with such frequency as
the Trustees may determine, and may be payable in Shares of that
Series((, or Classes thereof)) at the election of each Shareholder of
that Series.
((The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans, or related plans as
the Trustees shall deem appropriate.))
(c) Anything in this instrument to the contrary notwithstanding, the
Trustees may at any time declare and distribute ((a dividend of stock
or other property)) pro rata among the Shareholders of a particular
Series((, or Class thereof,)) as of the record date of that Series
((or Class)) fixed as provided in ((Article XII,)) Section 3 [hereof a
"stock dividend"].
REDEMPTIONS
[Section 2]((SECTION 2)). In case any holder of record of Shares of a
particular Series ((or Class of a Series)) desires to dispose of his
Shares, he may deposit at the office of the transfer agent or other
authorized agent of that Series a written request or such other form
of request as the Trustees may((,)) from time to time((,)) authorize,
requesting that the Series purchase the Shares in accordance with this
Section 2; and the Shareholder so requesting shall be entitled to
require the Series to purchase, and the Series or the principal
underwriter of the Series shall purchase his said Shares, but only at
the Net Asset Value thereof (as described in Section 3 hereof). The
Series shall make payment for any such Shares to be redeemed, as
aforesaid, in cash or property from the assets of that Series((,)) and
payment for such Shares ((less any applicable deferred sales charges
and/or fees)) shall be made by the Series or the principal underwriter
of the Series to the Shareholder of record within seven (7) days after
the date upon which the request is effective.
[DETERMINATION OF NET ASSET VALUE]
((DETERMINATION OF NET ASSET VALUE AND VALUATION OF PORTFOLIO ASSETS))
[Section 3]((SECTION 3)). The term "Net Asset Value" of any Series
((or Class)) shall mean that amount by which the assets of that
Series[,] ((or Class)) exceed its liabilities, all as determined by or
under the direction of the Trustees. Such value per Share shall be
determined separately for each Series ((or Class)) of Shares and shall
be determined on such days and at such times as the Trustees may
determine. Such determination shall be made with respect to securities
for which market quotations are readily available, at the market value
of such securities; and with respect to other securities and assets,
at the fair value as determined in good faith by the Trustees,
provided, however, that the Trustees, without Shareholder approval,
may alter the method of appraising portfolio securities insofar as
permitted under the 1940 Act and the rules, regulations((,)) and
interpretations thereof promulgated or issued by the Commission or
insofar as permitted by any [O]((o))rder of the Commission applicable
to the Series. The Trustees may delegate any of [their] ((its)) powers
and duties under this Section 3 with respect to appraisal of assets
and liabilities. At any time, the Trustees may cause the value per
Share last determined to be determined again in ((a)) similar manner
and may fix the time when such redetermined value shall become
effective.
SUSPENSION OF THE RIGHT OF REDEMPTION
[Section 4]((SECTION 4)). The Trustees may declare a suspension of
the right of redemption or postpone the date of payment as permitted
under the 1940 Act. Such suspension shall take effect at such time as
the Trustees shall specify((,)) but not later than the close of
business on the business day next following the declaration of
suspension, and thereafter there shall be no right of redemption or
payment until the Trustees shall declare the suspension at an end. In
the case of a suspension of the right of redemption, a Shareholder may
either withdraw his request for redemption or receive payment based on
the Net Asset Value per Share existing after the termination of the
suspension. ((In the event that any Series is divided into Classes,
the provisions of this Section, to the extent applicable as determined
in the discretion of the Trustees and consistent with applicable law,
may be equally applied to each such Class)).
REDEMPTION OF SHARES
[Section 5]((SECTION 5. The Trustees may require Shareholders to
redeem Shares for any reason under terms set by the Trustees,
including, but not limited to, (i) the determination of the Trustees
that direct or indirect ownership of Shares of any Series has or may
become concentrated in such Shareholder to an extent that would
disqualify any Series as a regulated investment company under the
Internal Revenue Code of 1986, as amended (or any successor statute
thereto), (ii) the failure of a Shareholder to supply a tax
identification number if required to do so, or (iii) the failure of a
Shareholder to pay when due for the purchase of Shares issued to him.
The redemption shall be effected at the redemption price and in the
manner provided in this Article X.
The holders of Shares shall upon demand disclose to the Trustees in
writing such information with respect to direct and indirect ownership
of Shares as the Trustees deem necessary to comply with the provisions
of the Internal Revenue Code, or to comply with the requirements of
any other taxing authority.))
ARTICLE XI
LIMITATION OF LIABILITY AND INDEMNIFICATION
LIMITATION OF LIABILITY
[Section 1]((SECTION 1.)) Provided they have exercised reasonable
care and have acted under the reasonable belief that their actions are
in the best interest of the Trust, the Trustees shall not be
responsible for or liable in any event for neglect or wrongdoing of
them or any officer, agent, employee((,)) or investment adviser of the
Trust, but nothing contained herein shall protect any Trustee against
any liability to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence((,)) or reckless
disregard of the duties involved in the conduct of his office.
[INDEMNIFICATION]
((INDEMNIFICATION OF COVERED PERSONS))
[Section 2]((SECTION 2.))
(a) Subject to the exceptions and limitations contained in Section
(b) below:
(i) every person who is, or has been, a Trustee or officer of the
Trust (hereinafter referred to as "Covered Person") shall be
indemnified by the appropriate Series to the fullest extent permitted
by law against liability and against all expenses reasonably incurred
or paid by him in connection with any claim, action, suit, or
proceeding in which he becomes involved as a party or otherwise by
virtue of his being or having been a Trustee or officer and against
amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal or
other, including appeals), actual or threatened while in office or
thereafter, and the words "liability" and "expenses" shall include,
without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered
Person:
(i) who shall have been adjudicated by a court or body before which
the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office((;)) or (B) not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence((,)) or reckless disregard of
the duties involved in the conduct of his office,
(A) by the court or other body approving the settlement;
(B) by at least a majority of those Trustees who are neither
[i]((I))nterested [p]((P))ersons of the Trust nor are parties to the
matter based upon a review of readily available facts (as opposed to a
full trial-type inquiry); or
(C) by written opinion of independent legal counsel based upon a
review of readily available facts (as opposed to a full trial-type
inquiry);
provided, however, that any Shareholder may, by appropriate legal
proceedings, challenge any such determination by the Trustees, or by
independent counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall
not be exclusive of or affect any other rights to which any Covered
Person may now or hereafter be entitled, shall continue as to a person
who has ceased to be such Trustee or officer((,)) and shall inure to
the benefit of the heirs, executors((,)) and administrators of such a
person. Nothing contained herein shall affect any rights to
indemnification to which Trust personnel, other than Trustees and
officers, and other persons may be entitled by contract or otherwise
under law.
(d) Expenses in connection with the preparation and presentation of
a defense to any claim, action, suit((,)) or proceeding of the
character described in [p]((P))aragraph (a) of this Section 2 may be
paid by the applicable Series from time to time prior to final
disposition thereof upon receipt of an undertaking by or on behalf of
such Covered Person that such amount will be paid over by him to the
applicable Series if it is ultimately determined that he is not
entitled to indemnification under this Section 2; provided, however,
that either [(a)](((i))) such Covered Person shall have provided
appropriate security for such undertaking[,]((;)) [(b)](((ii))) the
Trust is insured against losses arising out of any such advance
payments((;)) or [(e)](((iii))) either a majority of the Trustees who
are neither interested persons of the Trust nor parties to the matter,
or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed
to a trial-type inquiry or full investigation), that there is reason
to believe that such Covered Person will be found entitled to
indemnification under this Section 2.
INDEMNIFICATION OF SHAREHOLDERS
[Section 3]((SECTION 3.)) In case any Shareholder or former
Shareholder of any Series of the Trust shall be held to be personally
liable solely by reason of his being or having been a Shareholder and
not because of his acts or omissions or for some other reason, the
Shareholder or former Shareholder (or his heirs, executors,
administrators((,)) or other legal representatives or((,)) in the case
of a corporation or other entity, its corporate or other general
successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all
loss and expense arising from such liability. The Series shall, upon
request by the Shareholder, assume the defense of any claim made
against the Shareholder for any act or obligation of the Series and
satisfy any judgment thereon.
ARTICLE XII
MISCELLANEOUS
[TRUST NOT A PARTNERSHIP ETC.]
((TRUST NOT A PARTNERSHIP, ETC.))
[Section 1]((SECTION 1)) It is hereby expressly declared that a trust
((is created hereby)) and not a partnership((, joint stock
association, corporation, bailment, or any form of a legal
relationship other than)) [is created hereby]. No Trustee hereunder
shall have any power to personally bind [personally] either the
Trust's officers or any Shareholder. All persons extending credit to,
contracting with((,)) or having any claim against the Trust or the
Trustees shall look only to the assets of the appropriate Series for
payment under such credit, contract((,)) or claim; and neither the
Shareholders nor the Trustees, nor any of their agents, whether past,
present((,)) or future, shall be personally liable therefor. Nothing
in this Declaration of Trust shall protect a Trustee against any
liability to which the Trustee would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence((,)) or reckless
disregard of the duties involved in the conduct of the office of
Trustee hereunder.
[TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY]
((TRUSTEES' GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY))
[Section 2]((SECTION 2.)) The exercise by the Trustees of their
powers and discretions hereunder in good faith and with reasonable
care under the circustances then prevailing, shall be binding upon
everyone interested. Subject to the provisions of Section 1 of this
Article XII and to Article XI, the Trustees shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees may take
advice of counsel or other experts with respect to the meaning and
operation of this Declaration of Trust, and subject to the provisions
of Section 1 of this Article XII and to Article XI, shall be under no
liability for any act or omission in accordance with such advice or
for failing to follow such advice. The Trustees shall not be required
to give any bond as such, nor any surety if a bond is obtained.
ESTABLISHMENT OF RECORD DATES
[Section 3]((SECTION 3.)) The Trustees may close the stock transfer
books of the Trust for a period not exceeding sixty (60) days
preceding the date of any meeting of Shareholders, or the date for the
payment of any dividends, or the date for the allotment of rights, or
the date when any change or conversion or exchange of Shares shall go
into effect; or in lieu of closing the stock transfer books as
aforesaid, the Trustees may fix in advance a date[,] not exceeding
sixty (60) days preceding the date of any meeting of Shareholders, or
the date for payment of any dividends((,)) or the date for the
allotment of rights, or the date when any change or conversion or
exchange of Shares shall go into effect, as a record date for the
determination of the Shareholders entitled to notice of, and to vote
at, any such meeting, or entitled to receive payment of any such
dividend, or to any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of
Shares, and in such case such Shareholders and only such Shareholders
as shall be Shareholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting, or to
receive payment of such dividend, or to receive such allotment or
rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any Shares on the books of the Trust
after any such record date fixed or aforesaid.
[TERMINATION OF TRUST]
((DURATION; TERMINATION OF TRUST, A SERIES OR A CLASS; MERGERS, ETC.))
[Section 4]
[(a) This Trust shall continue without limitation of time but
subject to the provisions of sub-section (b) of this Section 4.]
[(b) Subject to a Majority Shareholder Vote of each Series affected
by the matter or, if applicable, to a Majority Shareholder Vote of the
Trust, the Trustees may]
((SECTION 4.1. DURATION. The Trust shall continue without limitation
of time, but subject to the provisions of this Article XII.))
((Section 4.2. Termination of the Trust, a Series or a Class.))
(((a) Subject to applicable Federal and state law, the Trust or any
Series or Class thereof may be terminated:))
(((i) by Majority Shareholder Vote of the Trust, each Series
affected, or each Class affected, as the case may be; or))
(((ii) without the vote or consent of Shareholders by a majority of
the Trustees either at a meeting or by written consent.))
((The Trustees shall provide written notice to the affected
Shareholders of a termination effected under clause (ii) above. Upon
the termination of the Trust or the Series or Class,))
(((i) the Trust or the Series or Class shall carry on no business
except for the purpose of winding up its affairs;)) [sell and convey
the assets of the Trust or any affected Series to another trust,
partnership, association or corporation organized under the laws of
any state which is a diversified open-end management investment
company as defined in the 1940 Act, for adequate consideration which
may include the assumption of all outstanding obligations, taxes and
other liabilities, accrued or contingent, of the Trust or any affected
Series, and which may include shares of beneficial interest or stock
of such trust, partnership, association or corporation; or]
(((ii) the Trustees shall proceed to wind up the affairs of the
Trust or the Series or Class, and all of the powers of the Trustees
under this Declaration of Trust shall continue until the affairs of
the Trust shall have been wound up, including the power to fulfill or
discharge the contracts of the Trust or the Series or Class thereof;
collect its assets; sell, convey, assign, exchange, transfer, or
otherwise dispose of all or any part of the remaining Trust property
or Trust property allocated or belonging to such Series or Class to
one or more persons at public or private sale for consideration that
may consist in whole or in part of cash, securities, or other property
of any kind; discharge or pay its liabilities; and do all other acts
appropriate to liquidate its business; provided that any sale,
conveyance, assignment, exchange, transfer, or other disposition of
all or substantially all the Trust property or Trust property
allocated or belonging to such Series or Class (other than as provided
in (iii) below) shall require Shareholder approval in accordance with
Section 4.3 below; and))
[(ii) at any time sell and convert into money all of the assets of
the Trust or any affected Series.]
[Upon making provision for the payment of all such liabilities in
either (i) or (ii), by such assumption or otherwise, the Trustees
shall distribute the remaining proceeds or assets (as the case may be)
ratably among the holders of the Shareholders of the Trust or any
affected Series then outstanding.]
(((iii) after paying or adequately providing for the payment of all
liabilities, and upon receipt of such leases, indemnities, and
refunding agreements as they deem necessary for their protection, the
Trustees shall distribute the remaining Trust property or the
remaining property of the terminated Series or Class, in cash or in
kind or partly each, among the Shareholders of the Trust or the Series
or Class according to their respective rights; and))
[(c) Upon completion of the distribution of the remaining proceeds
or the remaining assets as provided in sub-section (b), the Trust or
any affected Series shall terminate and the Trustees shall be
discharged of any and all further liabilities and duties hereunder and
the right, title and interest of all parties shall be canceled and
discharged.]
(((b) after termination of the Trust or the Series or Class and
distribution to the Shareholders as herein provided, a majority of the
Trustees shall execute and lodge among the records of the Trust and
file with the Secretary of The Commonwealth of Massachusetts, if
required, an instrument in writing setting forth the act of such
termination, and the Trustees shall thereupon be discharged from all
further liabilities and duties with respect to the Trust or the
terminated Series or Class, and the rights and interests of all
Shareholders of the Trust or the terminated Series or Class shall
thereupon cease.))
((SECTION 4.3. MERGER, CONSOLIDATION, AND SALE OF ASSETS. Subject to
applicable Federal and state law and except as otherwise provided in
Section 4.4 below, the Trust or any Series or Class thereof may merge
or consolidate with any other corporation, association, trust, or
other organization or may sell, lease, or exchange all or a portion of
the Trust property or Trust property allocated or belonging to such
Series or Class, including its good will, upon such terms and
conditions and for such consideration when and as authorized at any
meeting of Shareholders called for such purpose by a Majority
Shareholder Vote of the Trust or affected Series or Class, as the case
may be. Such transactions may be effected through share-for-share
exchanges, transfers or sale of assets, shareholder in-kind
redemptions and purchases, exchange offers, or any other method
approved by the Trustees.))
((SECTION 4.4. INCORPORATION; REORGANIZATION. Subject to applicable
Federal and state law, the Trustees may without the vote or consent of
Shareholders cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any
other trust, partnership, limited liability company, association, or
other organization to take over all or a portion of the Trust property
or all or a portion of the Trust property allocated or belonging to
such Series or Class or to carry on any business in which the Trust
shall directly or indirectly have any interest, and to sell, convey
and transfer the Trust property or the Trust property allocated or
belonging to such Series or Class to any such corporation, trust,
limited liability company, partnership, association, or organization
in exchange for the shares or securities thereof or otherwise, and to
lend money to, subscribe for the shares or securities of, and enter
into any contracts with any such corporation, trust, partnership,
limited liability company, association, or organization, or any
corporation, partnership, limited liability company, trust,
association, or organization in which the Trust or such Series holds
or is about to acquire shares or any other interest. Subject to
applicable Federal and state law, the Trustees may also cause a merger
or consolidation between the Trust or any successor thereto or any
Series or Class thereof and any such corporation, trust, partnership,
limited liability company, association, or other organization. Nothing
contained herein shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in organizing one
or more corporations, trusts, partnerships, limited liability
companies, associations, or other organizations and selling,
conveying, or transferring the Trust property or a portion of the
Trust property to such organization or entities; provided, however,
that the Trustees shall provide written notice to the affected
Shareholders of any transaction whereby, pursuant to this Section 4.4,
the Trust or any Series or Class thereof sells, conveys, or transfers
all or a portion of its assets to another entity or merges or
consolidates with another entity. Such transactions may be effected
through share-for-share exchanges, transfers or sale of assets,
shareholder in-kind redemptions and purchases, exchange offers, or any
other method approved by the Trustees.))
FILING OF COPIES, REFERENCES, AND HEADINGS
[Section 5]((SECTION 5.)) The original or a copy of this instrument
and of each [d]((D))eclaration of [t]((T))rust supplemental hereto
shall be kept at the office of the Trust where it may be inspected by
any Shareholder. A copy of this instrument and of each supplemental
[d]((Declaration of [t]((Trust shall be filed by the Trustees with the
Secretary of [t]((T))he Commonwealth of Massachusetts and the Boston
City Clerk, as well as any other governmental office where such filing
may from time to time be required. Anyone dealing with the Trust may
rely on a certificate by an officer or Trustee of the Trust as to
whether or not any such supplemental [d]((D))eclarations of [t]((Trust
have been made and as to any matters in connection with the Trust
hereunder, and with the same effect as if it were the original, may
rely on a copy certified by an officer or Trustee of the Trust to be a
copy of this instrument or of any such supplemental [d]((D))eclaration
of [t]((T))rust. In this instrument or in any such
supplemental[d]((D))eclaration of [t]((T))rust, references to this
instrument[,] and all expressions like "herein," "hereof" and
"hereunder," shall be deemed to refer to this instrument as amended or
affected by any such supplemental [d]((D))eclaration of [t]((T))rust.
Headings are placed herein for convenience of reference only and in
case of any conflict, the text of this instrument, rather than the
headings, shall control. This instrument may be executed in any number
of counterparts each of which shall be deemed an original.
APPLICABLE LAW
[Section 6]((SECTION 6.)) The [t]((T))rust set forth in this
instrument is made in [t]((T))he Commonwealth of Massachusetts, and it
is created under and is to be governed by and construed and
administered according to the laws of said Commonwealth. The Trust
shall be of the type commonly called a Massachusetts business trust,
and without limiting the provisions hereof, the Trust may exercise all
powers which are ordinarily exercised by such a trust((, and the
absence of specific reference herein to any such power, privilege, or
action shall not imply that the Trust may not exercise such power or
privilege or take such actions)).
AMENDMENTS
[Section 7]((SECTION 7)). [If authorized by votes of] ((Except as
specifically provided herein, ))the Trustees [and] ((may, without
shareholder vote, amend or otherwise supplement this Declaration of
Trust by making an amendment,)) a [Majority Shareholder Vote,]
((Declaration of Trust supplemental hereto ))or [by] ((an amended and
restated Declaration of Trust. Shareholders shall have the right to
vote (a) on ))any [larger] ((amendment that would affect their right
to ))vote [which] ((granted in Section 1 of Article VIII; (b) on any
amendment that would alter the maximum number of Trustees permitted
under Section 6 of Article IV; (c) on any amendment to this Section 7;
(d) on any amendment as)) may be required by [applicable] law or [this
Declaration of Trust in] ((by the Trust's registration statement filed
with the Commission; and (e) on)) any [particular case,] ((amendment
submitted to them by the Trustees. Any amendment required or permitted
to be submitted to Shareholders that, as)) the Trustees [shall amend
or otherwise supplement this instrument, by making a declaration of
trust supplemental hereto, which thereafter shall form a part hereof,
except that an amendment which] ((determine,)) affect the Shareholders
of one or more Series [but not the Shareholders of all outstanding
Series] ((or Classes)) shall be authorized by vote of the Shareholders
[holding a majority of the Shares entitled to vote] of each Series
((or Class)) affected and no vote of [S]((s))hareholders of a Series
((or Class)) not affected shall be required. [Amendments having the
purpose of changing the name of the Trust or of supplying]
((Notwithstanding anything else herein,)) any [omission, curing any
ambiguity or curing, correcting or supplementing any defective or
inconsistent provision contained herein] ((amendment to Article XI))
shall not [require authorization by Shareholder vote. Copies of]
((limit)) the [supplemental declaration] ((rights to indemnification
or insurance provided therein with respect to action or omission)) of
[trust shall be filed as specified in Section 5 of this Article XII]
((Covered Persons prior to such amendment.))
FISCAL YEAR
[Section 8] ((SECTION 8.)) The fiscal year of the Trust shall end on
a specified date as set forth in the Bylaws, if any, provided,
however, that the Trustees may, without Shareholder approval, change
the fiscal year of the Trust.
USE OF THE WORD "FIDELITY"
[Section 9] ((SECTION 9.)) Fidelity Management & Research Company
("FMR") has consented to the use by any Series of the Trust of the
identifying word "Fidelity" in the name of any Series of the Trust at
some future date. Such consent is conditioned upon the employment of
FMR ((or a subsidiary or affiliate thereof)) as investment adviser of
each Series of the Trust. As between the Trust and itself, FMR
controls the use of the name of the Trust insofar as such name
contains the identifying word "Fidelity((.))" [.] FMR may from time to
time use the identifying word "Fidelity" in other connections and for
other purposes, including, without limitation, in the names of other
investment companies, corporations[,] or businesses [which] ((that))
it may manage, advise, sponsor or own or in which it may have a
financial interest. FMR may require the Trust or any Series thereof to
cease using the identifying word "Fidelity" in the name of the Trust
or any Series thereof if the Trust or any Series thereof ceases to
employ FMR or a subsidiary or affiliate thereof as investment adviser.
((PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS
((SECTION 10. (a) The provisions of this Declaration of Trust are
severable, and, if the Trustees shall determine, with the advice of
counsel, that any of such provisions is in conflict with the 1940 Act,
the regulated investment company provisions of the Internal Revenue
Code or with other applicable laws and regulations, the conflicting
provision shall be deemed never to have constituted a part of this
Declaration of Trust; provided, however, that such determination shall
not affect any of the remaining provisions of this Declaration of
Trust or render invalid or improper any action taken or omitted prior
to such determination.))
(((b) If any provision of this Declaration of Trust shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such
jurisdiction and shall not in any manner affect such provisions in any
other jurisdiction or any other provision of this Declaration of Trust
in any jurisdiction.))
IN WITNESS WHEREOF, the undersigned, being all of the
[initial]Trustees of the Trust, have executed this instrument ((as of
the date set forth above.)) this 14th day July, 1994.]
[SIGNATURE LINES OMITTED]
EXHIBIT 2
((UNDERLINED)) DISCLOSURE WILL BE ADDED
[BRACKETED] DISCLOSURE WILL BE DELETED
((FORM OF))
MANAGEMENT CONTRACT
BETWEEN
[FIDELITY ADVISOR ANNUITY FUND] ((VARIABLE INSURANCE PRODUCTS
FUND III))
[FIDELITY ADVISOR ANNUITY INCOME AND GROWTH FUND]
((BALANCED PORTFOLIO))
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT ((AMENDED and RESTATED as of)) [made] this [18th] ((__))
day of [November 1994] ((_______)) ((2000)), by and between Fidelity
[Advisor Annuity Fund] ((Variable Insurance Products Fund
III)), a Massachusetts business trust which may issue one or more
series of shares of beneficial interest (hereinafter called the
"Fund"), on behalf of [Fidelity Advisor Annuity Income & Growth Fund]
Balanced Portfolio (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 November 18, 1994, 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 August 1, 2000.))
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the
supervision of the Fund's Board of Trustees, direct the investments of
the Portfolio in accordance with the investment objective, policies
and limitations as provided in the Portfolio's Prospectus or other
governing instruments, as amended from time to time, the Investment
Company Act of 1940 and rules thereunder, as amended from time to time
(the "1940 Act"), and such other limitations as the Portfolio may
impose by notice in writing to the Adviser. The Adviser shall also
furnish for the use of the Portfolio office space and all necessary
office facilities, equipment and personnel for servicing the
investments of the Portfolio; and shall pay the salaries and fees of
all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all
personnel of the Fund or the Adviser performing services relating to
research, statistical and investment activities. The Adviser is
authorized, in its discretion and without prior consultation with the
Portfolio, to buy, sell, lend and otherwise trade in any stocks, bonds
and other securities and investment instruments on behalf of the
Portfolio. The investment policies and all other actions of the
Portfolio are and shall at all times be subject to the control and
direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for
the performance by its affiliates of) the management and
administrative services necessary for the operation of the Fund. The
Adviser shall, subject to the supervision of the Board of Trustees,
perform various services for the Portfolio, including but not limited
to: (i) providing the Portfolio with office space, equipment and
facilities (which may be its own) for maintaining its organization;
(ii) on behalf of the Portfolio, supervising relations with, and
monitoring the performance of, custodians, depositories, transfer and
pricing agents, accountants, attorneys, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be
necessary or desirable; (iii) preparing all general shareholder
communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered,
maintaining the registration and qualification of the Portfolio's
shares under federal and state law; and (vii) investigating the
development of and developing and implementing, if appropriate,
management and shareholder services designed to enhance the value or
convenience of the Portfolio as an investment vehicle.
The Adviser shall also furnish such reports, evaluations, information
or analyses to the Fund as the Fund's Board of Trustees may request
from time to time or as the Adviser may deem to be desirable. The
Adviser shall make recommendations to the Fund's Board of Trustees
with respect to Fund policies, and shall carry out such policies as
are adopted by the Trustees. The Adviser shall, subject to review by
the Board of Trustees, furnish such other services as the Adviser
shall from time to time determine to be necessary or useful to perform
its obligations under this Contract.
(c) The Adviser shall place all orders for the purchase and sale of
portfolio securities for the Portfolio's account with brokers or
dealers selected by the Adviser, which may include brokers or dealers
affiliated with the Adviser. The Adviser shall use its best efforts to
seek to execute portfolio transactions at prices which are
advantageous to the Portfolio and at commission rates which are
reasonable in relation to the benefits received. In selecting brokers
or dealers qualified to execute a particular transaction, brokers or
dealers may be selected who also provide brokerage and research
services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Portfolio and/or the other
accounts over which the Adviser or its affiliates exercise investment
discretion. The Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess
of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser determines in
good faith that such amount of commission is reasonable in relation to
the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either
that particular transaction or the overall responsibilities which the
Adviser and its affiliates have with respect to accounts over which
they exercise investment discretion. The Trustees of the Fund shall
periodically review the commissions paid by the Portfolio to determine
if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor.
The Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of
the Fund are or may be or become interested in the Adviser as
directors, officers or otherwise and that directors, officers and
stockholders of the Adviser are or may be or become similarly
interested in the Fund, and that the Adviser may be or become
interested in the Fund as a shareholder or otherwise.
3. The Adviser will be compensated on the following basis for the
services and facilities to be furnished hereunder. The Adviser shall
receive a monthly management fee, payable monthly as soon as
practicable after the last day of each month, composed of a Group Fee
and an Individual Fund Fee.
(a) Group Fee Rate. The Group Fee Rate shall be based upon the
monthly average of the net assets of the registered investment
companies having Advisory and Service or Management Contracts with the
Adviser (computed in the manner set forth in the fund's Declaration of
Trust or other organizational document) determined as of the close of
business on each business day throughout the month. The Group Fee Rate
shall be determined on a cumulative basis pursuant to the following
schedule:
Average Group Assets Annualized Rate
0 - $3 billion .5200%
3 - 6 .4900
6 - 9 .4600
9 - 12 .4300
12 - 15 .4000
15 - 18 .3850
18 - 21 .3700
21 - 24 .3600
24 - 30 .3500
30 - 36 .3450
36 - 42 .3400
42 - 48 .3350
48 - 66 .3250
66 - 84 .3200
84 - 102 .3150
102 - 138 .3100
138 - 174 .3050
174 - 210 .3000
210 - 246 .2950
246 - 282 .2900
282 - 318 .2850
318 - 354 .2800
354 - 390 .2750
[Over 390] [.2700%]
((390)) - ((426)) ((.2700))
((426)) - ((462)) ((.2650))
((462)) - ((498)) ((.2600))
((498)) - ((534)) ((.2550))
((534)) - ((587)) ((.2500))
((587)) - ((646)) ((.2463))
((646)) - ((711)) ((.2426))
((711)) - ((782)) ((.2389))
((782)) - ((860)) ((.2352))
((860)) - ((946)) ((.2315))
((946)) - ((1,041)) ((.2278))
((1,041)) - ((1,145)) ((.2241))
((1,145)) - ((1,260)) ((.2204))
((over)) ((1,260)) ((.2167))
(b) Individual Fund Fee Rate. The Individual Fund Fee Rate shall
be .15%.
The sum of the Group Fee Rate, calculated as described above to the
nearest millionth, and the Individual Fund Fee Rate shall constitute
the Annual Management Fee Rate. One-twelfth of the Annual Management
Fee Rate shall be applied to the average of the net assets of the
Portfolio (computed in the manner set forth in the Fund's Declaration
of Trust or other organizational document) determined as of the close
of business on each business day throughout the month.
(c) In case of termination of this Contract during any month, the
fee for that month shall be reduced proportionately on the basis of
the number of business days during which it is in effect, and the fee
computed upon the average net assets for the business days it is so in
effect for that month.
4. It is understood that the Portfolio will pay all its expenses,
which expenses payable by the Portfolio shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and
other costs in connection with the purchase or sale of securities and
other investment instruments; (iii) fees and expenses of the Fund's
Trustees other than those who are "interested persons" of the Fund or
the Adviser; (iv) legal and audit expenses; (v) custodian, registrar
and transfer agent fees and expenses; (vi) fees and expenses related
to the registration and qualification of the Fund and the Portfolio's
shares for distribution under state and federal securities laws; (vii)
expenses of printing and mailing reports and notices and proxy
material to shareholders of the Portfolio; (viii) all other expenses
incidental to holding meetings of the Portfolio's shareholders,
including proxy solicitations therefor; (ix) a pro rata share, based
on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management
Contracts with the Adviser, of 50% of insurance premiums for fidelity
and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing
Prospectuses and Statements of Additional Information and supplements
thereto; (xii) expenses of printing and mailing Prospectuses and
Statements of Additional Information and supplements thereto sent to
existing shareholders; and (xiii) such non-recurring or extraordinary
expenses as may arise, including those relating to actions, suits or
proceedings to which the Portfolio is a party and the legal obligation
which the Portfolio may have to indemnify the Fund's Trustees and
officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and
engage in other activities, provided, however, that such other
services and activities do not, during the term of this Contract,
interfere, in a material manner, with the Adviser's ability to meet
all of its obligations with respect to rendering services to the
Portfolio hereunder. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject
to liability to the Portfolio or to any shareholder of the Portfolio
for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security ((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, [1995] ((2001)) 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 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 3
((UNDERLINED)) DISCLOSURE WILL BE ADDED [BRACKETED] DISCLOSURE
WILL BE DELETED
((FORM OF))
MANAGEMENT CONTRACT
BETWEEN
VARIABLE INSURANCE PRODUCTS FUND III
GROWTH AND INCOME PORTFOLIO
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT ((AMENDED and RESTATED as of)) [made] this [1st] ((__)) day
of [January 1997] ((_______)) ((2000)), by and between Fidelity
[Advisor Annuity Fund] ((Variable Insurance Products Fund
III)), a Massachusetts business trust which may issue one or more
series of shares of beneficial interest (hereinafter called the
"Fund"), on behalf of Growth and Income Portfolio (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 November 1, 1997, 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 August 1, 2000.))
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the
supervision of the Fund's Board of Trustees, direct the investments of
the Portfolio in accordance with the investment objective, policies
and limitations as provided in the Portfolio's Prospectus or other
governing instruments, as amended from time to time, the Investment
Company Act of 1940 and rules thereunder, as amended from time to time
(the "1940 Act"), and such other limitations as the Portfolio may
impose by notice in writing to the Adviser. The Adviser shall also
furnish for the use of the Portfolio office space and all necessary
office facilities, equipment and personnel for servicing the
investments of the Portfolio; and shall pay the salaries and fees of
all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all
personnel of the Fund or the Adviser performing services relating to
research, statistical and investment activities. The Adviser is
authorized, in its discretion and without prior consultation with the
Portfolio, to buy, sell, lend and otherwise trade in any stocks, bonds
and other securities and investment instruments on behalf of the
Portfolio. The investment policies and all other actions of the
Portfolio are and shall at all times be subject to the control and
direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for
the performance by its affiliates of) the management and
administrative services necessary for the operation of the Fund. The
Adviser shall, subject to the supervision of the Board of Trustees,
perform various services for the Portfolio, including but not limited
to: (i) providing the Portfolio with office space, equipment and
facilities (which may be its own) for maintaining its organization;
(ii) on behalf of the Portfolio, supervising relations with, and
monitoring the performance of, custodians, depositories, transfer and
pricing agents, accountants, attorneys, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be
necessary or desirable; (iii) preparing all general shareholder
communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered,
maintaining the registration and qualification of the Portfolio's
shares under federal and state law; and (vii) investigating the
development of and developing and implementing, if appropriate,
management and shareholder services designed to enhance the value or
convenience of the Portfolio as an investment vehicle.
The Adviser shall also furnish such reports, evaluations, information
or analyses to the Fund as the Fund's Board of Trustees may request
from time to time or as the Adviser may deem to be desirable. The
Adviser shall make recommendations to the Fund's Board of Trustees
with respect to Fund policies, and shall carry out such policies as
are adopted by the Trustees. The Adviser shall, subject to review by
the Board of Trustees, furnish such other services as the Adviser
shall from time to time determine to be necessary or useful to perform
its obligations under this Contract.
(c) The Adviser [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 [as] a commission for
executing a portfolio transaction for the Portfolio which is in excess
of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser determines in
good faith that such amount of commission is reasonable in relation to
the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either
that particular transaction or the overall responsibilities which the
Adviser and its affiliates have with respect to accounts over which
they exercise investment discretion. The Trustees of the Fund shall
periodically review the commissions paid by the Portfolio to determine
if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor.
The Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of
the Fund are or may be or become interested in the Adviser as
directors, officers or otherwise and that directors, officers and
stockholders of the Adviser are or may be or become similarly
interested in the Fund, and that the Adviser may be or become
interested in the Fund as a shareholder or otherwise.
3. The Adviser will be compensated on the following basis for the
services and facilities to be furnished hereunder. The Adviser shall
receive a monthly management fee, payable monthly as soon as
practicable after the last day of each month, composed of a Group Fee
and an Individual Fund Fee.
(a) Group Fee Rate. The Group Fee Rate shall be based upon the
monthly average of the net assets of the registered investment
companies having Advisory and Service or Management Contracts with the
Adviser (computed in the manner set forth in the fund's Declaration of
Trust or other organizational document) determined as of the close of
business on each business day throughout the month. The Group Fee Rate
shall be determined on a cumulative basis pursuant to the following
schedule:
Average Group Assets Annualized Rate
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%]
((534)) - ((587)) ((.2500))
((587)) - ((646)) ((.2463))
((646)) - ((711)) ((.2426))
((711)) - ((782)) ((.2389))
((782)) - ((860)) ((.2352))
((860)) - ((946)) ((.2315))
((946)) - ((1,041)) ((.2278))
((1,041)) - ((1,145)) ((.2241))
((1,145)) - ((1,260)) ((.2204))
((over)) (( 1,260)) ((.2167))
(b) Individual Fund Fee Rate. The Individual Fund Fee Rate shall be
.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 Adviser
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, [1993] ((2001)) 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 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 [Funds] 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 [SEC] 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 4
((UNDERLINED)) DISCLOSURE WILL BE ADDED
[BRACKETED] DISCLOSURE WILL BE DELETED
((FORM OF))
MANAGEMENT CONTRACT
BETWEEN
[FIDELITY ADVISOR ANNUITY FUND] ((VARIABLE INSURANCE PRODUCTS FUND
III))
[FIDELITY ADVISOR ANNUITY GROWTH OPPORTUNITIES FUND]
((GROWTH OPPORTUNITIES PORTFOLIO))
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT ((AMENDED and RESTATED as of)) [made] this [18th] ((__))
day of [November 1994] ((_______)) ((2000)), by and between Fidelity
[Advisor Annuity Fund] ((Variable Insurance Products Fund
III)), a Massachusetts business trust which may issue one or more
series of shares of beneficial interest (hereinafter called the
"Fund"), on behalf of Growth Opportunities Portfolio (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 November 18, 1994, 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 August 1, 2000.))
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the
supervision of the Fund's Board of Trustees, direct the investments of
the Portfolio in accordance with the investment objective, policies
and limitations as provided in the Portfolio's Prospectus or other
governing instruments, as amended from time to time, the Investment
Company Act of 1940 and rules thereunder, as amended from time to time
(the "1940 Act"), and such other limitations as the Portfolio may
impose by notice in writing to the Adviser. The Adviser shall also
furnish for the use of the Portfolio office space and all necessary
office facilities, equipment and personnel for servicing the
investments of the Portfolio; and shall pay the salaries and fees of
all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all
personnel of the Fund or the Adviser performing services relating to
research, statistical and investment activities. The Adviser is
authorized, in its discretion and without prior consultation with the
Portfolio, to buy, sell, lend and otherwise trade in any stocks, bonds
and other securities and investment instruments on behalf of the
Portfolio. The investment policies and all other actions of the
Portfolio are and shall at all times be subject to the control and
direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for
the performance by its affiliates of) the management and
administrative services necessary for the operation of the Fund. The
Adviser shall, subject to the supervision of the Board of Trustees,
perform various services for the Portfolio, including but not limited
to: (i) providing the Portfolio with office space, equipment and
facilities (which may be its own) for maintaining its organization;
(ii) on behalf of the Portfolio, supervising relations with, and
monitoring the performance of, custodians, depositories, transfer and
pricing agents, accountants, attorneys, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be
necessary or desirable; (iii) preparing all general shareholder
communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered,
maintaining the registration and qualification of the Portfolio's
shares under federal and state law; and (vii) investigating the
development of and developing and implementing, if appropriate,
management and shareholder services designed to enhance the value or
convenience of the Portfolio as an investment vehicle.
The Adviser shall also furnish such reports, evaluations, information
or analyses to the Fund as the Fund's Board of Trustees may request
from time to time or as the Adviser may deem to be desirable. The
Adviser shall make recommendations to the Fund's Board of Trustees
with respect to Fund policies, and shall carry out such policies as
are adopted by the Trustees. The Adviser shall, subject to review by
the Board of Trustees, furnish such other services as the Adviser
shall from time to time determine to be necessary or useful to perform
its obligations under this Contract.
(c) The Adviser shall place all orders for the purchase and sale of
portfolio securities for the Portfolio's account with brokers or
dealers selected by the Adviser, which may include brokers or dealers
affiliated with the Adviser. The Adviser shall use its best efforts to
seek to execute portfolio transactions at prices which are
advantageous to the Portfolio and at commission rates which are
reasonable in relation to the benefits received. In selecting brokers
or dealers qualified to execute a particular transaction, brokers or
dealers may be selected who also provide brokerage and research
services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Portfolio and/or the other
accounts over which the Adviser or its affiliates exercise investment
discretion. The Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess
of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser determines in
good faith that such amount of commission is reasonable in relation to
the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either
that particular transaction or the overall responsibilities which the
Adviser and its affiliates have with respect to accounts over which
they exercise investment discretion. The Trustees of the Fund shall
periodically review the commissions paid by the Portfolio to determine
if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor.
The Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of
the Fund are or may be or become interested in the Adviser as
directors, officers or otherwise and that directors, officers and
stockholders of the Adviser are or may be or become similarly
interested in the Fund, and that the Adviser may be or become
interested in the Fund as a shareholder or otherwise.
3. The Adviser will be compensated on the following basis for the
services and facilities to be furnished hereunder. The Adviser shall
receive a monthly management fee, payable monthly as soon as
practicable after the last day of each month, composed of a Group Fee
and an Individual Fund Fee.
(a) Group Fee Rate. The Group Fee Rate shall be based upon the
monthly average of the net assets of the registered investment
companies having Advisory and Service or Management Contracts with the
Adviser (computed in the manner set forth in the fund's Declaration of
Trust or other organizational document) determined as of the close of
business on each business day throughout the month. The Group Fee Rate
shall be determined on a cumulative basis pursuant to the following
schedule:
Average Group Assets Annualized Rate
0 - $3 billion .5200%
3 - 6 .4900
6 - 9 .4600
9 - 12 .4300
12 - 15 .4000
15 - 18 .3850
18 - 21 .3700
21 - 24 .3600
24 - 30 .3500
30 - 36 .3450
36 - 42 .3400
42 - 48 .3350
48 - 66 .3250
66 - 84 .3200
84 - 102 .3150
102 - 138 .3100
138 - 174 .3050
174 - 210 .3000
210 - 246 .2950
246 - 282 .2900
282 - 318 .2850
318 - 354 .2800
354 - 390 .2750
[Over 390] [.2700%]
((390)) - ((426)) .2700
((426)) - ((462)) .2650
((462)) - ((498)) .2600
((498)) - ((534)) .2550
((534)) - ((587)) .2500
((587)) - ((646)) .2463
((646)) - ((711)) .2426
((711)) - ((782)) .2389
((782)) - ((860)) .2352
((860)) - ((946)) .2315
((946)) - ((1,041)) .2278
((1,041 - 1,145)) .2241
((1,145)) - ((1,260)) .2204
((over 1,260)) .2167
(b) Individual Fund Fee Rate. The Individual Fund Fee Rate shall be
.30%.
The sum of the Group Fee Rate, calculated as described above to the
nearest millionth, and the Individual Fund Fee Rate shall constitute
the Annual Management Fee Rate. One-twelfth of the Annual Management
Fee Rate shall be applied to the average of the net assets of the
Portfolio (computed in the manner set forth in the Fund's Declaration
of Trust or other organizational document) determined as of the close
of business on each business day throughout the month.
(c) In case of termination of this Contract during any month, the
fee for that month shall be reduced proportionately on the basis of
the number of business days during which it is in effect, and the fee
computed upon the average net assets for the business days it is so in
effect for that month.
4. It is understood that the Portfolio will pay all its expenses,
which expenses payable by the Portfolio shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and
other costs in connection with the purchase or sale of securities and
other investment instruments; (iii) fees and expenses of the Fund's
Trustees other than those who are "interested persons" of the Fund or
the Adviser; (iv) legal and audit expenses; (v) custodian, registrar
and transfer agent fees and expenses; (vi) fees and expenses related
to the registration and qualification of the Fund and the Portfolio's
shares for distribution under state and federal securities laws; (vii)
expenses of printing and mailing reports and notices and proxy
material to shareholders of the Portfolio; (viii) all other expenses
incidental to holding meetings of the Portfolio's shareholders,
including proxy solicitations therefor; (ix) a pro rata share, based
on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management
Contracts with the Adviser, of 50% of insurance premiums for fidelity
and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing
Prospectuses and Statements of Additional Information and supplements
thereto; (xii) expenses of printing and mailing Prospectuses and
Statements of Additional Information and supplements thereto sent to
existing shareholders; and (xiii) such non-recurring or extraordinary
expenses as may arise, including those relating to actions, suits or
proceedings to which the Portfolio is a party and the legal obligation
which the Portfolio may have to indemnify the Fund's Trustees and
officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and
engage in other activities, provided, however, that such other
services and activities do not, during the term of this Contract,
interfere, in a material manner, with the Adviser's ability to meet
all of its obligations with respect to rendering services to the
Portfolio hereunder. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject
to liability to the Portfolio or to any shareholder of the Portfolio
for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security ((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, [1995] ((2001)) 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 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 5
((UNDERLINED)) DISCLOSURE WILL BE ADDED
[BRACKETED] DISCLOSURE WILL BE DELETED
((FORM OF))
MANAGEMENT CONTRACT
BETWEEN
VARIABLE INSURANCE PRODUCTS FUND III
MID CAP PORTFOLIO
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT ((AMENDED and RESTATED as of)) [made] this [19th] ((__))
day of [November 1998] ((_______)) ((2000)), by and between Fidelity
[Advisor Annuity Fund] ((Variable Insurance Products Fund
III)), a Massachusetts business trust which may issue one or more
series of shares of beneficial interest (hereinafter called the
"Fund"), on behalf of Mid Cap Portfolio (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 November 19, 1998, 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 August 1, 2000.))
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the
supervision of the Fund's Board of Trustees, direct the investments of
the Portfolio in accordance with the investment objective, policies
and limitations as provided in the Portfolio's Prospectus or other
governing instruments, as amended from time to time, the Investment
Company Act of 1940 and rules thereunder, as amended from time to time
(the "1940 Act"), and such other limitations as the Portfolio may
impose by notice in writing to the Adviser. The Adviser shall also
furnish for the use of the Portfolio office space and all necessary
office facilities, equipment and personnel for servicing the
investments of the Portfolio; and shall pay the salaries and fees of
all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all
personnel of the Fund or the Adviser performing services relating to
research, statistical and investment activities. The Adviser is
authorized, in its discretion and without prior consultation with the
Portfolio, to buy, sell, lend and otherwise trade in any stocks, bonds
and other securities and investment instruments on behalf of the
Portfolio. The investment policies and all other actions of the
Portfolio are and shall at all times be subject to the control and
direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for
the performance by its affiliates of) the management and
administrative services necessary for the operation of the Fund. The
Adviser shall, subject to the supervision of the Board of Trustees,
perform various services for the Portfolio, including but not limited
to: (i) providing the Portfolio with office space, equipment and
facilities (which may be its own) for maintaining its organization;
(ii) on behalf of the Portfolio, supervising relations with, and
monitoring the performance of, custodians, depositories, transfer and
pricing agents, accountants, attorneys, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be
necessary or desirable; (iii) preparing all general shareholder
communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered,
maintaining the registration and qualification of the Portfolio's
shares under federal and state law; and (vii) investigating the
development of and developing and implementing, if appropriate,
management and shareholder services designed to enhance the value or
convenience of the Portfolio as an investment vehicle.
The Adviser shall also furnish such reports, evaluations, information
or analyses to the Fund as the Fund's Board of Trustees may request
from time to time or as the Adviser may deem to be desirable. The
Adviser shall make recommendations to the Fund's Board of Trustees
with respect to Fund policies, and shall carry out such policies as
are adopted by the Trustees. The Adviser shall, subject to review by
the Board of Trustees, furnish such other services as the Adviser
shall from time to time determine to be necessary or useful to perform
its obligations under this Contract.
(c) The Adviser shall place all orders for the purchase and sale of
portfolio securities for the Portfolio's account with brokers or
dealers selected by the Adviser, which may include brokers or dealers
affiliated with the Adviser. The Adviser shall use its best efforts to
seek to execute portfolio transactions at prices which are
advantageous to the Portfolio and at commission rates which are
reasonable in relation to the benefits received. In selecting brokers
or dealers qualified to execute a particular transaction, brokers or
dealers may be selected who also provide brokerage and research
services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Portfolio and/or the other
accounts over which the Adviser or its affiliates exercise investment
discretion. The Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess
of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser determines in
good faith that such amount of commission is reasonable in relation to
the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either
that particular transaction or the overall responsibilities which the
Adviser and its affiliates have with respect to accounts over which
they exercise investment discretion. The Trustees of the Fund shall
periodically review the commissions paid by the Portfolio to determine
if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor.
The Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of
the Fund are or may be or become interested in the Adviser as
directors, officers or otherwise and that directors, officers and
stockholders of the Adviser are or may be or become similarly
interested in the Fund, and that the Adviser may be or become
interested in the Fund as a shareholder or otherwise.
3. The Adviser will be compensated on the following basis for the
services and facilities to be furnished hereunder. The Adviser shall
receive a monthly management fee, payable monthly as soon as
practicable after the last day of each month, composed of a Group Fee
and an Individual Fund Fee.
(a) Group Fee Rate. The Group Fee Rate shall be based upon the
monthly average of the net assets of the registered investment
companies having Advisory and Service or Management Contracts with the
Adviser (computed in the manner set forth in the fund's Declaration of
Trust or other organizational document) determined as of the close of
business on each business day throughout the month. The Group Fee Rate
shall be determined on a cumulative basis pursuant to the following
schedule:
Average Group Assets Annualized Rate
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%]
((534)) - ((587)) ((.2500))
((587)) - ((646)) ((.2463))
((646)) - ((711)) ((.2426))
((711)) - ((782)) ((.2389))
((782)) - ((860)) ((.2352))
((860)) - ((946)) ((.2315))
((946)) - ((1,041)) ((.2278))
((1,041 - 1,145)) ((.2241))
((1,145)) - ((1,260)) ((.2204))
((over)) ((1,260)) ((.2167))
(b) Individual Fund Fee Rate. The Individual Fund Fee Rate shall be
.30%.
The sum of the Group Fee Rate, calculated as described above to the
nearest millionth, and the Individual Fund Fee Rate shall constitute
the Annual Management Fee Rate. One-twelfth of the Annual Management
Fee Rate shall be applied to the average of the net assets of the
Portfolio (computed in the manner set forth in the Fund's Declaration
of Trust or other organizational document) determined as of the close
of business on each business day throughout the month.
(c) In case of termination of this Contract during any month, the
fee for that month shall be reduced proportionately on the basis of
the number of business days during which it is in effect, and the fee
computed upon the average net assets for the business days it is so in
effect for that month.
4. It is understood that the Portfolio will pay all its expenses
which expenses payable by the Portfolio shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and
other costs in connection with the purchase or sale of securities and
other investment instruments; (iii) fees and expenses of the Fund's
Trustees other than those who are "interested persons" of the Fund or
the Adviser; (iv) legal and audit expenses; (v) custodian, registrar
and transfer agent fees and expenses; (vi) fees and expenses related
to the registration and qualification of the Fund and the Portfolio's
shares for distribution under state and federal securities laws; (vii)
expenses of printing and mailing reports and notices and proxy
material to shareholders of the Portfolio; (viii) all other expenses
incidental to holding meetings of the Portfolio's shareholders,
including proxy solicitations therefor; (ix) a pro rata share, based
on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management
Contracts with the Adviser, of 50% of insurance premiums for fidelity
and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing
Prospectuses and Statements of Additional Information and supplements
thereto; (xii) expenses of printing and mailing Prospectuses and
Statements of Additional Information and supplements thereto sent to
existing shareholders; and (xiii) such non-recurring or extraordinary
expenses as may arise, including those relating to actions, suits or
proceedings to which the Portfolio is a party and the legal obligation
which the Portfolio may have to indemnify the Fund's Trustees and
officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and
engage in other activities, provided, however, that such other
services and activities do not, during the term of this Contract,
interfere, in a material manner, with the Adviser's ability to meet
all of its obligations with respect to rendering services to the
Portfolio hereunder. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject
to liability to the Portfolio or to any shareholder of the Portfolio
for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security 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, [1999] ((2001 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 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 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 Commission.
IN WITNESS WHEREOF the parties have caused this instrument to be
signed [on] ((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 6
((UNDERLINED)) DISCLOSURE WILL BE ADDED
[BRACKETED] DISCLOSURE WILL BE DELETED
((FORM OF))
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
AND
[FIDELITY ADVISOR ANNUITY FUND] ((VARIABLE INSURANCE PRODUCTS FUND
III)) ON BEHALF OF
(NAME OF FUND)
AGREEMENT made this [18th] ((1st)) day of [November, 1994]
((_______)), ((2000)), by and between Fidelity Management & Research
Company, a Massachusetts corporation with principal offices at 82
Devonshire Street, Boston, Massachusetts (hereinafter called the
"Advisor"); Fidelity Management & Research (U.K.) Inc. (hereinafter
called the "Sub-Advisor"); and [Fidelity Advisor Annuity Income &
Growth Fund] ((Variable Insurance Products Fund III)), a
Massachusetts business trust which may issue one or more series of
shares of beneficial interest (hereinafter called the "Trust") on
behalf of (Name of Fund) (hereinafter called the "Portfolio").
((Required authorization and approval by shareholders and Trustees
having been obtained, the Fund, on behalf of the Portfolio, the
Adviser and the Sub-Advisor hereby consent, pursuant to Paragraph 6 of
the existing Sub-Advisory Agreement dated November 18, 1994, to a
modification of said Agreement in the manner set below. The Amended
Sub-Advisory Agreement shall, when executed by duly authorized
officers of the Fund, the Adviser and the Sub-Advisor, take effect on
August 1, 2000.))
WHEREAS the Trust and the Advisor have entered into a Management
Contract on behalf of the Portfolio, pursuant to which the Advisor is
to act as investment manager of the Portfolio; and
WHEREAS the Sub-Advisor and its subsidiaries and other affiliated
persons have personnel in various locations throughout the world and
have been formed in part for the purpose of researching and compiling
information and recommendations with respect to the economies of
various countries, and securities of issuers located in such
countries, and providing investment advisory services in connection
therewith;
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the Trust, the Advisor and the
Sub-Advisor agree as follows:
1. Duties: The Advisor may, in its discretion, appoint the
Sub-Advisor to perform one or more of the following services with
respect to all or a portion of the investments of the Portfolio. The
services and the portion of the investments of the Portfolio to be
advised or managed by the Sub-Advisor shall be as agreed upon from
time to time by the Advisor and the Sub-Advisor. The Sub-Advisor shall
pay the salaries and fees of all personnel of the Sub-Advisor
performing services for the Portfolio relating to research,
statistical and investment activities.
(a) INVESTMENT ADVICE: If and to the extent requested by the
Advisor, the Sub-Advisor shall provide investment advice to the
Portfolio and the Advisor with respect to all or a portion of the
investments of the Portfolio, and in connection with such advice shall
furnish the Portfolio and the Advisor such factual information,
research reports and investment recommendations as the Advisor may
reasonably require. Such information may include written and oral
reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the
Advisor, the Sub-Advisor shall, subject to the supervision of the
Advisor, manage all or a portion of the investments of the Portfolio
in accordance with the investment objective, policies and limitations
provided in the Portfolio's Prospectus or other governing instruments,
as amended from time to time, the Investment Company Act of 1940 (the
"1940 Act") and rules thereunder, as amended from time to time, and
such other limitations as the Trust or Advisor may impose with respect
to the Portfolio by notice to the Sub-Advisor. With respect to the
portion of the investments of the Portfolio under its management, the
Sub-Advisor is authorized to make investment decisions on behalf of
the Portfolio with regard to any stock, bond, other security or
investment instrument, and to place orders for the purchase and sale
of such securities through such broker-dealers as the Sub-Advisor may
select. The Sub-Advisor may also be authorized, but only to the extent
such duties are delegated in writing by the Advisor, to provide
additional investment management services to the Portfolio, including
but not limited to services such as managing foreign currency
investments, purchasing and selling or writing futures and options
contracts, borrowing money or lending securities on behalf of the
Portfolio. All investment management and any other activities of the
Sub-Advisor shall at all times be subject to the control and direction
of the Advisor and the Trust's Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any or
all of the services contemplated by this Agreement directly or through
such of its subsidiaries or other affiliated persons as the
Sub-Advisor shall determine; provided, however, that performance of
such services through such subsidiaries or other affiliated persons
shall have been approved by the Trust to the extent required pursuant
to the 1940 Act and rules thereunder.
2. Information to be Provided to the Trust and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees
or the Advisor may reasonably request from time to time, or as the
Sub-Advisor may deem to be desirable.
3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Advisor
shall place all orders for the purchase and sale of portfolio
securities for the Portfolio's account with brokers or dealers
selected by the Sub-Advisor, which may include brokers or dealers
affiliated with the Advisor or Sub-Advisor. The Sub-Advisor shall use
its best efforts to seek to execute portfolio transactions at prices
which are advantageous to the Portfolio and at commission rates which
are reasonable in relation to the benefits received. In selecting
brokers or dealers qualified to execute a particular transaction,
brokers or dealers may be selected who also provide brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of l934) to the Portfolio and/or to the other
accounts over which the Sub-Advisor or Advisor exercise investment
discretion. The Sub-Advisor is authorized to pay a broker or dealer
who provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess
of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Advisor determines
in good faith that such amount of commission is reasonable in relation
to the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either
that particular transaction or the overall responsibilities which the
Sub-Advisor has with respect to accounts over which it exercises
investment discretion. The Trustees of the Trust shall periodically
review the commissions paid by the Portfolio to determine if the
commissions paid over representative periods of time were reasonable
in relation to the benefits to the Portfolio.
4. Compensation: The Advisor shall compensate the Sub-Advisor on the
following basis for the services to be furnished hereunder.
(a) INVESTMENT ADVISORY FEE: For services provided under
subparagraph (a) of paragraph 1 of this Agreement, the Advisor agrees
to pay the Sub-Advisor a monthly Sub-Advisory Fee. The Sub-Advisory
Fee shall be equal to 110% of the Sub-Advisor's costs incurred in
connection with rendering the services referred to in subparagraph (a)
of paragraph 1 of this Agreement. The Sub-Advisory Fee shall not be
reduced to reflect expense reimbursements or fee waivers by the
Advisor, if any, in effect from time to time.
(b) INVESTMENT MANAGEMENT FEE: For services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Advisor agrees
to pay the Sub-Advisor a monthly Investment Management Fee. The
Investment Management Fee shall be equal to: (i) 50% of the monthly
management fee rate (including performance adjustments, if any) that
the Portfolio is obligated to pay the Advisor under its Management
Contract with the Advisor, multiplied by: (ii) the fraction equal to
the net assets of the Portfolio as to which the Sub-Advisor shall have
provided investment management services divided by the net assets of
the Portfolio for that month. If in any fiscal year the aggregate
expenses of the Portfolio exceed any applicable expense limitation
imposed by any state or federal securities laws or regulations, and
the Advisor waives all or a portion of its management fee or
reimburses the Portfolio for expenses to the extent required to
satisfy such limitation, the Investment Management Fee paid to the
Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements
and the Advisor subsequently recovers all or any portion of such
waivers or reimbursements, then the Sub-Advisor shall be entitled to
receive from the Advisor a proportionate share of the amount
recovered. To the extent that waivers and reimbursements by the
Advisor required by such limitations are in excess of the Advisor's
management fee, the Investment Management Fee paid to the Sub-Advisor
will be reduced to zero for that month, but in no event shall the
Sub-Advisor be required to reimburse the Advisor for all or a portion
of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph (1)
for the same portion of the investments of the Portfolio for the same
period, the fees paid to the Sub-Advisor with respect to such
investments shall be calculated exclusively under subparagraph (b) of
this paragraph 4.
5. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the
Sub-Advisor hereunder or by the Advisor under the Management Contract
with the Portfolio, which expenses payable by the Portfolio shall
include, without limitation, (i) interest and taxes; (ii) brokerage
commissions and other costs in connection with the purchase or sale of
securities and other investment instruments; (iii) fees and expenses
of the Trust's Trustees other than those who are "interested persons"
of the Trust, the Sub-Advisor or the Advisor; (iv) legal and audit
expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the Trust and the Portfolio's shares for distribution
under state and federal securities laws; (vii) expenses of printing
and mailing reports and notices and proxy material to shareholders of
the Portfolio; (viii) all other expenses incidental to holding
meetings of the Portfolio's shareholders, including proxy
solicitations therefore; (ix) a pro rata share, based on relative net
assets of the Portfolio and other registered investment companies
having Advisory and Service or Management Contracts with the Advisor,
of 50% of insurance premiums for fidelity and other coverage; (x) its
proportionate share of association membership dues; (xi) expenses of
typesetting for printing Prospectuses and Statements of Additional
Information and supplements thereto; (xii) expenses of printing and
mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to
indemnify the Trust's Trustees and officers with respect thereto.
6. Interested Persons: It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the
Advisor or the Sub-Advisor as directors, officers or otherwise and
that directors, officers and stockholders of the Advisor or the
Sub-Advisor are or may be or become similarly interested in the Trust,
and that the Advisor or the Sub-Advisor may be or become interested in
the Trust as a shareholder or otherwise.
7. Services to Other Companies or Accounts: The services of the
Sub-Advisor to the Advisor are not to be deemed to be exclusive, the
Sub-Advisor being free to render services to others and engage in
other activities, provided, however, that such other services and
activities do not, during the term of this Agreement, interfere, in a
material manner, with the Sub-Advisor's ability to meet all of its
obligations hereunder. The Sub-Advisor shall for all purposes be an
independent contractor and not an agent or employee of the Advisor or
the Trust.
8. Standard of Care: In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Sub-Advisor, the Sub-Advisor shall not be
subject to liability to the Advisor, the Trust or to any shareholder
of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that
may be sustained in the purchase, holding or sale of any security.
9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of
this paragraph 9, this Agreement shall continue in force until July
31, [1995] ((2001)) and indefinitely thereafter, but only so long as
the continuance after such period shall be specifically approved at
least annually by vote of the Trust's Board of Trustees or by vote of
a majority of the outstanding voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Advisor,
the Sub-Advisor and the Portfolio ((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.)) [, such consent on the
part of the Portfolio to be authorized by vote of a majority of
outstanding voting securities of the Portfolio.]
(c) In addition to the requirements of subparagraphs (a) and (b) of
this paragraph 9, the terms of any continuance or modification of this
Agreement must have been approved by the vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
(d) Either the Advisor, the Sub-Advisor or the Portfolio may, at any
time on sixty (60) days' prior written notice to the other parties,
terminate this Agreement, without payment of any penalty, by action of
its Board of Trustees or Directors, or with respect to the Portfolio
by vote of a majority of its outstanding voting securities. This
Agreement shall terminate automatically in the event of its
assignment.
10. Limitation of Liability: The Sub-Advisor is hereby expressly put
on notice of the limitation of shareholder liability as set forth in
the Declaration of Trust or other organizational document of the Trust
and agrees that any obligations of the Trust or the Portfolio arising
in connection with this Agreement shall be limited in all cases to the
Portfolio and its assets, and the Sub-Advisor shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Portfolio. Nor shall the Sub-Advisor seek
satisfaction of any such obligation from the Trustees or any
individual Trustee.
11. Governing Law: This Agreement shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Massachusetts,
without giving effect to the choice of laws provisions thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested
persons," when used herein, shall have the respective meanings
specified in the 1940 Act as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to
be signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.
[SIGNATURE LINES OMITTED]
EXHIBIT 7
((UNDERLINED)) DISCLOSURE WILL BE ADDED
[BRACKETED] DISCLOSURE WILL BE DELETED
((FORM OF))
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
AND
VARIABLE INSURANCE PRODUCTS FUND III ON BEHALF OF
GROWTH & INCOME PORTFOLIO
AGREEMENT made this 1st day of [January, 1997] ((_______)), ((2000)),
by and between Fidelity Management & Research Company, a Massachusetts
corporation with principal offices at 82 Devonshire Street, Boston,
Massachusetts (hereinafter called the "Advisor"); Fidelity Management
& Research (U.K.) Inc. (hereinafter called the "Sub-Advisor"); and
Variable Insurance Products Fund III, a Massachusetts business
trust which may issue one or more series of shares of beneficial
interest (hereinafter called the "Trust") on behalf of Growth & Income
Portfolio (hereinafter called the "Portfolio").
((Required authorization and approval by shareholders and Trustees
having been obtained, the Fund, on behalf of the Portfolio, the
Adviser and the Sub-Advisor hereby consent, pursuant to Paragraph 6 of
the existing Sub-Advisory Agreement dated January 1, 1997, to a
modification of said Agreement in the manner set below. The Amended
Sub-Advisory Agreement shall, when executed by duly authorized
officers of the Fund, the Adviser and the Sub-Advisor, take effect on
August 1, 2000.))
WHEREAS the Trust and the Advisor have entered into a Management
Contract on behalf of the Portfolio, pursuant to which the Advisor is
to act as investment manager of the Portfolio; and
WHEREAS the Sub-Advisor and its subsidiaries and other affiliated
persons have personnel in various locations throughout the world and
have been formed in part for the purpose of researching and compiling
information and recommendations with respect to the economies of
various countries, and securities of issuers located in such
countries, and providing investment advisory services in connection
therewith;
NOW, THEREFORE, in consideration of the premises and the mutual
[premises] ((promises)) hereinafter set forth, the Trust, the Advisor
and the Sub-Advisor agree as follows:
1. Duties: The Advisor may, in its discretion, appoint the
Sub-Advisor to perform one or more of the following services with
respect to all or a portion of the investments of the Portfolio. The
services and the portion of the investments of the Portfolio to be
advised or managed by the Sub-Advisor shall be as agreed upon from
time to time by the Advisor and the Sub-Advisor. The Sub-Advisor shall
pay the salaries and fees of all personnel of the Sub-Advisor
performing services for the Portfolio relating to research,
statistical and investment activities.
(a) INVESTMENT ADVICE: If and to the extent requested by the
Advisor, the Sub-Advisor shall provide investment advice to the
Portfolio and the Advisor with respect to all or a portion of the
investments of the Portfolio, and in connection with such advice shall
furnish the Portfolio and the Advisor such factual information,
research reports and investment recommendations as the Advisor may
reasonably require. Such information may include written and oral
reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the
Advisor, the Sub-Advisor shall, subject to the supervision of the
Advisor, manage all or a portion of the investments of the Portfolio
in accordance with the investment objective, policies and limitations
provided in the Portfolio's Prospectus or other governing instruments,
as amended from time to time, the Investment Company Act of 1940 (the
"1940 Act") and rules thereunder, as amended from time to time, and
such other limitations as the Trust or Advisor may impose with respect
to the Portfolio by notice to the Sub-Advisor. With respect to the
portion of the investments of the Portfolio under its management, the
Sub-Advisor is authorized to make investment decisions on behalf of
the Portfolio with regard to any stock, bond, other security or
investment instrument, and to place orders for the purchase and sale
of such securities through such broker-dealers as the Sub-Advisor may
select. The Sub-Advisor may also be authorized, but only to the extent
such duties are delegated in writing by the Advisor, to provide
additional investment management services to the Portfolio,
including[,] but not limited to services such as managing foreign
currency investments, purchasing and selling or writing futures and
options contracts, borrowing money or lending securities on behalf of
the Portfolio. All investment management and any other activities of
the Sub-Advisor shall at all times be subject to the control and
direction of the Advisor and the Trust's Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any or
all of the services contemplated by this Agreement directly or through
such of its subsidiaries or other affiliated persons as the
Sub-Advisor shall determine; provided, however, that performance of
such services through such subsidiaries or other affiliated persons
shall have been approved by the Trust to the extent required pursuant
to the 1940 Act and rules thereunder.
2. Information to be Provided to the Trust and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees
or the Advisor may reasonably request from time to time, or as the
Sub-Advisor may deem to be desirable.
3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Advisor
shall place all orders for the purchase and sale of portfolio
securities for the Portfolio's account with brokers or dealers
selected by the Sub-Advisor, which may include brokers or dealers
affiliated with the Advisor or Sub-Advisor. The Sub-Advisor shall use
its best efforts to seek to execute portfolio transactions at prices
which are advantageous to the Portfolio and at commission rates which
are reasonable in relation to the benefits received. In selecting
brokers or dealers qualified to execute a particular transaction,
brokers or dealers may be selected who also provide brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of l934) to the Portfolio and/or to the other
accounts over which the Sub-Advisor or Advisor exercise investment
discretion. The Sub-Advisor is authorized to pay a broker or dealer
who provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess
of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Advisor determines
in good faith that such amount of commission is reasonable in relation
to the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either
that particular transaction or the overall responsibilities which the
Sub-Advisor has with respect to [amounts] ((accounts)) over which it
exercises investment discretion. The Trustees of the Trust shall
periodically review the commissions paid by the Portfolio to determine
if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Portfolio.
4. Compensation: The Advisor shall compensate the Sub-Advisor on the
following basis for the services to be furnished hereunder.
(a) INVESTMENT ADVISORY FEE: For services provided under
subparagraph (a) of paragraph 1 of this Agreement, the Advisor agrees
to pay the Sub-Advisor a monthly Sub-Advisory Fee. The Sub-Advisory
Fee shall be equal to 110% of the Sub-Advisor's costs incurred in
connection with rendering the services referred to in subparagraph (a)
of paragraph 1 of this Agreement. The Sub-Advisory Fee shall not be
reduced to reflect expense reimbursements or fee waivers by the
Advisor, if any, in effect from time to time.
(b) INVESTMENT MANAGEMENT FEE: For services provided under
subparagraph [(9b)] (((b))) of paragraph 1 of this Agreement, the
Advisor agrees to pay the Sub-Advisor a monthly Investment Management
Fee. The Investment Management Fee shall be equal to: (i) 50% of the
monthly management fee rate (including performance adjustments, if
any) that the Portfolio is obligated to pay the Advisor under its
Management Contract with the Advisor, multiplied by: (ii) the fraction
equal to the net assets of the Portfolio as to which the Sub-Advisor
shall have provided investment management services divided by the net
assets of the Portfolio for that month. If in any fiscal year the
aggregate expenses of the Portfolio exceed any applicable expense
limitation imposed by any state or federal securities laws or
regulations, and the Advisor waives all or a portion of its management
fee or reimburses the Portfolio for expenses to the extent required to
satisfy such limitation, the Investment Management Fee paid to the
Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements
and the Advisor subsequently recovers all or any portion of such
waivers or reimbursements, then the Sub-Advisor shall be entitled to
receive from the Advisor a proportionate share of the amount
recovered. To the extent that waivers and reimbursements by the
Advisor required by such limitations are in excess of the Advisor's
management fee, the Investment Management Fee paid to the Sub-Advisor
will be reduced to zero for that month, but in no event shall the
Sub-Advisor be required to reimburse the Advisor for all or a portion
of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph (1)
for the same portion of the investments of the Portfolio for the same
period, the fees paid to the Sub-Advisor with respect to such
investments shall be calculated exclusively under subparagraph (b) of
this paragraph 4.
5. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the
Sub-Advisor hereunder or by the Advisor under the Management Contract
with the Portfolio, which expenses payable by the Portfolio shall
include, without limitation, (i) interest and taxes; (ii) brokerage
commissions and other costs in connection with the purchase or sale of
securities and other investment instruments; (iii) fees and expenses
of the Trust's Trustees other than those who are "interested persons"
of the Trust, the Sub-Advisor or the Advisor; (iv) legal and audit
expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the Trust and the Portfolio's shares for distribution
under state and federal securities laws; (vii) expenses of printing
and mailing reports and notices and proxy material to shareholders of
the Portfolio; (viii) all other expenses incidental to holding
meetings of the Portfolio's shareholders, including proxy
solicitations therefore; (ix) a pro rata share, based on relative net
assets of the Portfolio and other registered investment companies
having Advisory and Service or Management Contracts with the Advisor,
of 50% of insurance premiums for fidelity and other coverage; (x) its
proportionate share of association membership dues; (xi) expenses of
typesetting for printing Prospectuses and Statements of Additional
Information and supplements thereto; (xii) expenses of printing and
mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to
indemnify the Trust's Trustees and officers with respect thereto.
6. Interested Persons: It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the
Advisor or the Sub-Advisor as directors, officers or otherwise and
that directors, officers and stockholders of the Advisor or the
Sub-Advisor are or may be or become similarly interested in the Trust,
and that the Advisor or the Sub-Advisor may be or become interested in
the Trust as a shareholder or otherwise.
7. Services to Other Companies or Accounts: The services of the
Sub-Advisor to the Advisor are not to be deemed to be exclusive, the
Sub-Advisor being free to render services to others and engage in
other activities, provided, however, that such other services and
activities do not, during the term of this Agreement, interfere, in a
material manner, with the Sub-Advisor's ability to meet all of its
obligations hereunder. The Sub-Advisor shall for all purposes be an
independent contractor and not an agent or employee of the Advisor or
the Trust.
8. Standard of Care: In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Sub-Advisor, the Sub-Advisor shall not be
subject to liability to the Advisor, the Trust or to any shareholder
of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that
may be sustained in the purchase, holding or sale of any security.
9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of
this paragraph 9, this Agreement shall continue in force until July
31, [1997] ((2001)) and indefinitely thereafter, but only so long as
the continuance after such period shall be specifically approved at
least annually by vote of the Trust's Board of Trustees or by vote of
a majority of the outstanding voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Advisor,
the Sub-Advisor and the Portfolio ((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.)) [, such consent on the
part of the Portfolio to be authorized by vote of a majority of
outstanding voting securities of the Portfolio.]
(c) In addition to the requirements of subparagraphs (a) and (b) of
this paragraph 9, the terms of any continuance or modification of this
Agreement must have been approved by the vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
(d) Either the Advisor, the Sub-Advisor or the Portfolio may, at any
time on sixty (60) days' prior written notice to the other parties,
terminate this Agreement, without payment of any penalty, by action of
its Board of Trustees or Directors, or with respect to the Portfolio
by vote of a majority of its outstanding voting securities. This
Agreement shall terminate automatically in the event of its
assignment.
10. Limitation of Liability: The Sub-Advisor is hereby expressly put
on notice of the limitation of shareholder liability as set forth in
the Declaration of Trust or other organizational document of the Trust
and agrees that any obligations of the Trust or the Portfolio arising
in connection with this Agreement shall be limited in all cases to the
Portfolio and its assets, and the Sub-Advisor shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Portfolio. Nor shall the Sub-Advisor seek
satisfaction of any such obligation from the Trustees or any
individual Trustee.
11. Governing Law: This Agreement shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Massachusetts,
without giving effect to the choice of laws provisions thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested
persons," when used herein, shall have the respective meanings
specified in the 1940 Act as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to
be signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.
[SIGNATURE LINES OMITTED]
EXHIBIT 8
((UNDERLINED)) DISCLOSURE WILL BE ADDED
[BRACKETED] DISCLOSURE WILL BE DELETED
((FORM OF))
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.
AND
[FIDELITY ADVISOR ANNUITY FUND] ((VARIABLE INSURANCE PRODUCTS FUND
III)) ON BEHALF OF
(NAME OF FUND)
AGREEMENT made this [18th] ((1st)) day of [November, 1994]
((_______)), ((2000)), by and between Fidelity Management & Research
Company, a Massachusetts corporation with principal offices at 82
Devonshire Street, Boston, Massachusetts (hereinafter called the
"Advisor"); Fidelity Management & Research (Far East) Inc.
(hereinafter called the "Sub-Advisor"); and [Fidelity Advisor Annuity
Fund] ((Variable Insurance Products Fund III)), a Massachusetts
business trust which may issue one or more series of shares of
beneficial interest (hereinafter called the "Trust") on behalf of
(NAME OF FUND) (hereinafter called the "Portfolio").
((Required authorization and approval by shareholders and Trustees
having been obtained, the Fund, on behalf of the Portfolio, the
Adviser and the Sub-Advisor hereby consent, pursuant to November 18,
1994, to a modification of said Agreement in the manner set below. The
Amended Sub-Advisory Agreement shall, when executed by duly authorized
officers of the Fund, the Adviser and the Sub-Advisor, take effect on
August 1, 2000.))
WHEREAS the Trust and the Advisor have entered into a Management
Contract on behalf of the Portfolio, pursuant to which the Advisor is
to act as investment manager of the Portfolio; and
WHEREAS the Sub-Advisor and its subsidiaries and other affiliated
persons have personnel in various locations throughout the world and
have been formed in part for the purpose of researching and compiling
information and recommendations with respect to the economies of
various countries, and securities of issuers located in such
countries, and providing investment advisory services in connection
therewith;
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the Trust, the Advisor and the
Sub-Advisor agree as follows:
1. Duties: The Advisor may, in its discretion, appoint the
Sub-Advisor to perform one or more of the following services with
respect to all or a portion of the investments of the Portfolio. The
services and the portion of the investments of the Portfolio to be
advised or managed by the Sub-Advisor shall be as agreed upon from
time to time by the Advisor and the Sub-Advisor. The Sub-Advisor shall
pay the salaries and fees of all personnel of the Sub-Advisor
performing services for the Portfolio relating to research,
statistical and investment activities.
(a) INVESTMENT ADVICE: If and to the extent requested by the
Advisor, the Sub-Advisor shall provide investment advice to the
Portfolio and the Advisor with respect to all or a portion of the
investments of the Portfolio, and in connection with such advice shall
furnish the Portfolio and the Advisor such factual information,
research reports and investment recommendations as the Advisor may
reasonably require. Such information may include written and oral
reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the
Advisor, the Sub-Advisor shall, subject to the supervision of the
Advisor, manage all or a portion of the investments of the Portfolio
in accordance with the investment objective, policies and limitations
provided in the Portfolio's Prospectus or other governing instruments,
as amended from time to time, the Investment Company Act of 1940 (the
"1940 Act") and rules thereunder, as amended from time to time, and
such other limitations as the Trust or Advisor may impose with respect
to the Portfolio by notice to the Sub-Advisor. With respect to the
portion of the investments of the Portfolio under its management, the
Sub-Advisor is authorized to make investment decisions on behalf of
the Portfolio with regard to any stock, bond, other security or
investment instrument, and to place orders for the purchase and sale
of such securities through such broker-dealers as the Sub-Advisor may
select. The Sub-Advisor may also be authorized, but only to the extent
such duties are delegated in writing by the Advisor, to provide
additional investment management services to the Portfolio, including
but not limited to services such as managing foreign currency
investments, purchasing and selling or writing futures and options
contracts, borrowing money, or lending securities on behalf of the
Portfolio. All investment management and any other activities of the
Sub-Advisor shall at all times be subject to the control and direction
of the Advisor and the Trust's Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any or
all of the services contemplated by this Agreement directly or through
such of its subsidiaries or other affiliated persons as the
Sub-Advisor shall determine; provided, however, that performance of
such services through such subsidiaries or other affiliated persons
shall have been approved by the Trust to the extent required pursuant
to the 1940 Act and rules thereunder.
2. Information to be Provided to the Trust and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees
or the Advisor may reasonably request from time to time, or as the
Sub-Advisor may deem to be desirable.
3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Advisor
shall place all orders for the purchase and sale of portfolio
securities for the Portfolio's account with brokers or dealers
selected by the Sub-Advisor, which may include brokers or dealers
affiliated with the Advisor or Sub-Advisor. The Sub-Advisor shall use
its best efforts to seek to execute portfolio transactions at prices
which are advantageous to the Portfolio and at commission rates which
are reasonable in relation to the benefits received. In selecting
brokers or dealers qualified to execute a particular transaction,
brokers or dealers may be selected who also provide brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of l934) to the Portfolio and/or to the other
accounts over which the Sub-Advisor or Advisor exercise investment
discretion. The Sub-Advisor is authorized to pay a broker or dealer
who provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess
of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Advisor determines
in good faith that such amount of commission is reasonable in relation
to the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either
that particular transaction or the overall responsibilities which the
Sub-Advisor has with respect to accounts over which it exercises
investment discretion. The Trustees of the Trust shall periodically
review the commissions paid by the Portfolio to determine if the
commissions paid over representative periods of time were reasonable
in relation to the benefits to the Portfolio.
4. Compensation: The Advisor shall compensate the Sub-Advisor on the
following basis for the services to be furnished hereunder.
(a) INVESTMENT ADVISORY FEE: For services provided under
subparagraph (a) of paragraph 1 of this Agreement, the Advisor agrees
to pay the Sub-Advisor a monthly Sub-Advisory Fee. The Sub-Advisory
Fee shall be equal to 105% of the Sub-Advisor's costs incurred in
connection with rendering the services referred to in subparagraph (a)
of paragraph 1 of this Agreement. The Sub-Advisory Fee shall not be
reduced to reflect expense reimbursements or fee waivers by the
Advisor, if any, in effect from time to time.
(b) INVESTMENT MANAGEMENT FEE: For services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Advisor agrees
to pay the Sub-Advisor a monthly Investment Management Fee. The
Investment Management Fee shall be equal to: (i) 50% of the monthly
management fee rate (including performance adjustments, if any) that
the Portfolio is obligated to pay the Advisor under its Management
Contract with the Advisor, multiplied by: (ii) the fraction equal to
the net assets of the Portfolio as to which the Sub-Advisor shall have
provided investment management services divided by the net assets of
the Portfolio for that month. If in any fiscal year the aggregate
expenses of the Portfolio exceed any applicable expense limitation
imposed by any state or federal securities laws or regulations, and
the Advisor waives all or a portion of its management fee or
reimburses the Portfolio for expenses to the extent required to
satisfy such limitation, the Investment Management Fee paid to the
Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements
and the Advisor subsequently recovers all or any portion of such
waivers and reimbursements, then the Sub-Advisor shall be entitled to
receive from the Advisor a proportionate share of the amount
recovered. To the extent that waivers and reimbursements by the
Advisor required by such limitations are in excess of the Advisor's
management fee, the Investment Management Fee paid to the Sub-Advisor
will be reduced to zero for that month, but in no event shall the
Sub-Advisor be required to reimburse the Advisor for all or a portion
of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph 1
for the same portion of the investments of the Portfolio for the same
period, the fees paid to the Sub-Advisor with respect to such
investments shall be calculated exclusively under subparagraph (b) of
this paragraph 4.
5. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the
Sub-Advisor hereunder or by the Advisor under the Management Contract
with the Portfolio, which expenses payable by the Portfolio shall
include, without limitation, (i) interest and taxes; (ii) brokerage
commissions and other costs in connection with the purchase or sale of
securities and other investment instruments; (iii) fees and expenses
of the Trust's Trustees other than those who are "interested persons"
of the Trust, the Sub-Advisor or the Advisor; (iv) legal and audit
expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the Trust and the Portfolio's shares for distribution
under state and federal securities laws; (vii) expenses of printing
and mailing reports and notices and proxy material to shareholders of
the Portfolio; (viii) all other expenses incidental to holding
meetings of the Portfolio's shareholders, including proxy
solicitations therefore; (ix) a pro rata share, based on relative net
assets of the Portfolio and other registered investment companies
having Advisory and Service or Management Contracts with the Advisor,
of 50% of insurance premiums for fidelity and other coverage; (x) its
proportionate share of association membership dues; (xi) expenses of
typesetting for printing Prospectuses and Statements of Additional
Information and supplements thereto; (xii) expenses of printing and
mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to
indemnify the Trust's Trustees and officers with respect thereto.
6. Interested Persons: It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the
Advisor or the Sub-Advisor as directors, officers or otherwise and
that directors, officers and stockholders of the Advisor or the
Sub-Advisor are or may be or become similarly interested in the Trust,
and that the Advisor or the Sub-Advisor may be or become interested in
the Trust as a shareholder or otherwise.
7. Services to Other Companies or Accounts: The services of the
Sub-Advisor to the Advisor are not to be deemed to be exclusive, the
Sub-Advisor being free to render services to others and engage in
other activities, provided, however, that such other services and
activities do not, during the term of this Agreement, interfere, in a
material manner, with the Sub-Advisor's ability to meet all of its
obligations hereunder. The Sub-Advisor shall for all purposes be an
independent contractor and not an agent or employee of the Advisor or
the Trust.
8. Standard of Care: In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Sub-Advisor, the Sub-Advisor shall not be
subject to liability to the Advisor, the Trust or to any shareholder
of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that
may be sustained in the purchase, holding or sale of any security.
9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of
this paragraph 9, this Agreement shall continue in force until July
31, [1995] ((2001)) and indefinitely thereafter, but only so long as
the continuance after such period shall be specifically approved at
least annually by vote of the Trust's Board of Trustees or by vote of
a majority of the outstanding voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Advisor,
the Sub-Advisor and the Portfolio ((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.))[, such consent on the
part of the Portfolio to be authorized by vote of a majority of the
outstanding voting securities of the Portfolio.]
(c) In addition to the requirements of subparagraphs (a) and (b) of
this paragraph 9, the terms of any continuance or modification of this
Agreement must have been approved by the vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
(d) Either the Advisor, the Sub-Advisor or the Portfolio may, at any
time on sixty (60) days' prior written notice to the other parties,
terminate this Agreement, without payment of any penalty, by action of
its Board of Trustees or Directors, or with respect to the Portfolio
by vote of a majority of its outstanding voting securities. This
Agreement shall terminate automatically in the event of its
assignment.
10. Limitation of Liability: The Sub-Advisor is hereby expressly put
on notice of the limitation of shareholder liability as set forth in
the Declaration of Trust or other organizational document of the Trust
and agrees that any obligations of the Trust or the Portfolio arising
in connection with this Agreement shall be limited in all cases to the
Portfolio and its assets, and the Sub-Advisor shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Portfolio. Nor shall the Sub-Advisor seek
satisfaction of any such obligation from the Trustees or any
individual Trustee.
11. Governing Law: This Agreement shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Massachusetts,
without giving effect to the choice of laws provisions thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested
persons," when used herein, shall have the respective meanings
specified in the 1940 Act as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to
be signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.
[SIGNATURE LINES OMITTED]
EXHIBIT 9
((UNDERLINED)) DISCLOSURE WILL BE ADDED
[BRACKETED] DISCLOSURE WILL BE DELETED
((FORM OF))
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.
AND
VARIABLE INSURANCE PRODUCTS FUND III ON BEHALF OF
GROWTH & INCOME PORTFOLIO
AGREEMENT made this 1st day of [January, 1996] ((_______)), ((2000)),
by and between Fidelity Management & Research Company, a Massachusetts
corporation with principal offices at 82 Devonshire Street, Boston,
Massachusetts (hereinafter called the "Advisor"); Fidelity Management
& Research (Far East) Inc. (hereinafter called the "Sub-Advisor"); and
Variable Insurance Products Fund III, a Massachusetts business
trust which may issue one or more series of shares of beneficial
interest (hereinafter called the "Trust") on behalf of Growth & Income
Portfolio (hereinafter called the "Portfolio").
((Required authorization and approval by shareholders and Trustees
having been obtained, the Fund, on behalf of the Portfolio, the
Adviser and the Sub-Advisor hereby consent, pursuant to January 1,
1997, to a modification of said Agreement in the manner set below. The
Amended Sub-Advisory Agreement shall, when executed by duly authorized
officers of the Fund, the Adviser and the Sub-Advisor, take effect on
August 1, 2000.))
WHEREAS the Trust and the Advisor have entered into a Management
Contract on behalf of the Portfolio, pursuant to which the Advisor is
to act as investment manager of the Portfolio; and
WHEREAS the Sub-Advisor and its subsidiaries and other affiliated
persons have personnel in various locations throughout the world and
have been formed in part for the purpose of researching and compiling
information and recommendations with respect to the economies of
various countries, and securities of issuers located in such
countries, and providing investment advisory services in connection
therewith;
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the Trust, the Advisor and the
Sub-Advisor agree as follows:
1. Duties: The Advisor may, in its discretion, appoint the
Sub-Advisor to perform one or more of the following services with
respect to all or a portion of the investments of the Portfolio. The
services and the portion of the investments of the Portfolio to be
advised or managed by the Sub-Advisor shall be as agreed upon from
time to time by the Advisor and the Sub-Advisor. The Sub-Advisor shall
pay the salaries and fees of all personnel of the Sub-Advisor
performing services for the Portfolio relating to research,
statistical and investment activities.
(a) INVESTMENT ADVICE: If and to the extent requested by the
Advisor, the Sub-Advisor shall provide investment advice to the
Portfolio and the Advisor with respect to all or a portion of the
investments of the Portfolio, and in connection with such advice shall
furnish the Portfolio and the Advisor such factual information,
research reports and investment recommendations as the Advisor may
reasonably require. Such information may include written and oral
reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the
Advisor, the Sub-Advisor shall, subject to the supervision of the
Advisor, manage all or a portion of the investments of the Portfolio
in accordance with the investment objective, policies and limitations
provided in the Portfolio's Prospectus or other governing instruments,
as amended from time to time, the Investment Company Act of 1940 (the
"1940 Act") and rules thereunder, as amended from time to time, and
such other limitations as the Trust or Advisor may impose with respect
to the Portfolio by notice to the Sub-Advisor. With respect to the
portion of the investments of the Portfolio under its management, the
Sub-Advisor is authorized to make investment decisions on behalf of
the Portfolio with regard to any stock, bond, other security or
investment instrument, and to place orders for the purchase and sale
of such securities through such broker-dealers as the Sub-Advisor may
select. The Sub-Advisor may also be authorized, but only to the extent
such duties are delegated in writing by the Advisor, to provide
additional investment management services to the Portfolio, including
but not limited to services such as managing foreign currency
investments, purchasing and selling or writing futures and options
contracts, borrowing money, or lending securities on behalf of the
Portfolio. All investment management and any other activities of the
Sub-Advisor shall at all times be subject to the control and direction
of the Advisor and the Trust's Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any or
all of the services contemplated by this Agreement directly or through
such of its subsidiaries or other affiliated persons as the
Sub-Advisor shall determine; provided, however, that performance of
such services through such subsidiaries or other affiliated persons
shall have been approved by the Trust to the extent required pursuant
to the 1940 Act and rules thereunder.
2. Information to be Provided to the Trust and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees
or the Advisor may reasonably request from time to time, or as the
Sub-Advisor may deem to be desirable.
3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Advisor
shall place all orders for the purchase and sale of portfolio
securities for the Portfolio's account with brokers or dealers
selected by the Sub-Advisor, which may include brokers or dealers
affiliated with the Advisor or Sub-Advisor. The Sub-Advisor shall use
its best efforts to seek to execute portfolio transactions at prices
which are advantageous to the Portfolio and at commission rates which
are reasonable in relation to the benefits received. In selecting
brokers or dealers qualified to execute a particular transaction,
brokers or dealers may be selected who also provide brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of l934) to the Portfolio and/or to the other
accounts over which the Sub-Advisor or Advisor exercise investment
discretion. The Sub-Advisor is authorized to pay a broker or dealer
who provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess
of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Advisor determines
in good faith that such amount of commission is reasonable in relation
to the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either
that particular transaction or the overall responsibilities which the
Sub-Advisor has with respect to accounts over which it exercises
investment discretion. The Trustees of the Trust shall periodically
review the commissions paid by the Portfolio to determine if the
commissions paid over representative periods of time were reasonable
in relation to the benefits to the Portfolio.
4. Compensation: The Advisor shall compensate the Sub-Advisor on the
following basis for the services to be furnished hereunder.
(a) INVESTMENT ADVISORY FEE: For services provided under
subparagraph (a) of paragraph 1 of this Agreement, the Advisor agrees
to pay the Sub-Advisor a monthly Sub-Advisory Fee. The Sub-Advisory
Fee shall be equal to 105% of the Sub-Advisor's costs incurred in
connection with rendering the services referred to in subparagraph (a)
of paragraph 1 of this Agreement. The Sub-Advisory Fee shall not be
reduced to reflect expense reimbursements or fee waivers by the
Advisor, if any, in effect from time to time.
(b) INVESTMENT MANAGEMENT FEE: For services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Advisor agrees
to pay the Sub-Advisor a monthly Investment Management Fee. The
Investment Management Fee shall be equal to: (i) 50% of the monthly
management fee rate (including performance adjustments, if any) that
the Portfolio is obligated to pay the Advisor under its Management
Contract with the Advisor, multiplied by: (ii) the fraction equal to
the net assets of the Portfolio as to which the Sub-Advisor shall have
provided investment management services divided by the net assets of
the Portfolio for that month. If in any fiscal year the aggregate
expenses of the Portfolio exceed any applicable expense limitation
imposed by any state or federal securities laws or regulations, and
the Advisor waives all or a portion of its management fee or
reimburses the Portfolio for expenses to the extent required to
satisfy such limitation, the Investment Management Fee paid to the
Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements
and the Advisor subsequently recovers all or any portion of such
waivers and reimbursements, then the Sub-Advisor shall be entitled to
receive from the Advisor a proportionate share of the amount
recovered. To the extent that waivers and reimbursements by the
Advisor required by such limitations are in excess of the Advisor's
management fee, the Investment Management Fee paid to the Sub-Advisor
will be reduced to zero for that month, but in no event shall the
Sub-Advisor be required to reimburse the Advisor for all or a portion
of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph 1
for the same portion of the investments of the Portfolio for the same
period, the fees paid to the Sub-Advisor with respect to such
investments shall be calculated exclusively under subparagraph (b) of
this paragraph 4.
5. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the
Sub-Advisor hereunder or by the Advisor under the Management Contract
with the Portfolio, which expenses payable by the Portfolio shall
include, without limitation, (i) interest and taxes; (ii) brokerage
commissions and other costs in connection with the purchase or sale of
securities and other investment instruments; (iii) fees and expenses
of the Trust's Trustees other than those who are "interested persons"
of the Trust, the Sub-Advisor or the Advisor; (iv) legal and audit
expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the Trust and the Portfolio's shares for distribution
under state and federal securities laws; (vii) expenses of printing
and mailing reports and notices and proxy material to shareholders of
the Portfolio; (viii) all other expenses incidental to holding
meetings of the Portfolio's shareholders, including proxy
solicitations therefore; (ix) a pro rata share, based on relative net
assets of the Portfolio and other registered investment companies
having Advisory and Service or Management Contracts with the Advisor,
of 50% of insurance premiums for fidelity and other coverage; (x) its
proportionate share of association membership dues; (xi) expenses of
typesetting for printing Prospectuses and Statements of Additional
Information and supplements thereto; (xii) expenses of printing and
mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to
indemnify the Trust's Trustees and officers with respect thereto.
6. Interested Persons: It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the
Advisor or the Sub-Advisor as directors, officers or otherwise and
that directors, officers and stockholders of the Advisor or the
Sub-Advisor are or may be or become similarly interested in the Trust,
and that the Advisor or the Sub-Advisor may be or become interested in
the Trust as a shareholder or otherwise.
7. Services to Other Companies or Accounts: The services of the
Sub-Advisor to the Advisor are not to be deemed to be exclusive, the
Sub-Advisor being free to render services to others and engage in
other activities, provided, however, that such other services and
activities do not, during the term of this Agreement, interfere, in a
material manner, with the Sub-Advisor's ability to meet all of its
obligations hereunder. The Sub-Advisor shall for all purposes be an
independent contractor and not an agent or employee of the Advisor or
the Trust.
8. Standard of Care: In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the [party] ((part)) of the Sub-Advisor, the Sub-Advisor
shall not be subject to liability to the Advisor, the Trust or to any
shareholder of the Portfolio for any act or omission in the course of,
or connected with, rendering services hereunder or for any losses that
may be sustained in the purchase, holding or sale of any security.
9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of
this paragraph 9, this Agreement shall continue in force until July
31, [1997] ((2001)) and indefinitely thereafter, but only so long as
the continuance after such period shall be specifically approved at
least annually by vote of the Trust's Board of Trustees or by vote of
a majority of the outstanding voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Advisor,
the Sub-Advisor and the Portfolio ((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.))[, such consent on the
part of the Portfolio to be authorized by vote of a majority of the
outstanding voting securities of the Portfolio.]
(c) In addition to the requirements of subparagraphs (a) and (b) of
this paragraph 9, the terms of any continuance or modification of this
Agreement must have been approved by the vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
(d) Either the Advisor, the Sub-Advisor or the Portfolio may, at any
time on sixty (60) days' prior written notice to the other parties,
terminate this Agreement, without payment of any penalty, by action of
its Board of Trustees or Directors, or with respect to the Portfolio
by vote of a majority of its outstanding voting securities. This
Agreement shall terminate automatically in the event of its
assignment.
10. Limitation of Liability: The Sub-Advisor is hereby expressly put
on notice of the limitation of shareholder liability as set forth in
the Declaration of Trust or other organizational document of the Trust
and agrees that any obligations of the Trust or the Portfolio arising
in connection with this Agreement shall be limited in all cases to the
Portfolio and its assets, and the Sub-Advisor shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Portfolio. Nor shall the Sub-Advisor seek
satisfaction of any such obligation from the Trustees or any
individual Trustee.
11. Governing Law: This Agreement shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Massachusetts,
without giving effect to the choice of laws provisions thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested
persons," when used herein, shall have the respective meanings
specified in the 1940 Act as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to
be signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.
[SIGNATURE LINES OMITTED]
EXHIBIT 10
FUNDS ADVISED BY FMR - TABLE OF AVERAGE NET ASSETS AND EXPENSE RATIOS
(A)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
INVESTMENT OBJECTIVE AND FUND FISCAL YEAR END (A) AVERAGE NET ASSETS RATIO OF NET ADVISORY FEES
(MILLIONS)(B) TO AVERAGE NET ASSETS PAID
TO FMR (C)
GROWTH
Large Cap Stock(g) 4/30/99 $ 286.2 0.54%
Mid Cap Stock(g) 4/30/99 1,687.0 0.50
Small Cap Stock(g) 4/30/99 557.9 0.73
Contrafund II(g) 6/30/99 566.7 0.59
Fidelity Fifty(g) 6/30/99 180.5 0.46
Advisor Focus Funds:
Consumer Industries:(g)
Class A 7/31/99 2.7 0.58
Class T 7/31/99 17.5 0.58
Class B 7/31/99 7.5 0.58
Class C 7/31/99 1.9 0.58
Institutional Class 7/31/99 5.0 0.58
Cyclical Industries:(g)
Class A 7/31/99 0.6 0.58
Class T 7/31/99 2.8 0.58
Class B 7/31/99 1.1 0.58
Class C 7/31/99 0.5 0.58
Institutional Class 7/31/99 1.9 0.58
Financial Services:(g)
Class A 7/31/99 23.2 0.58
Class T 7/31/99 111.8 0.58
Class B 7/31/99 76.1 0.58
Class C 7/31/99 25.5 0.58
Institutional Class 7/31/99 8.0 0.58
Health Care:(g)
Class A 7/31/99 40.3 0.58
Class T 7/31/99 186.3 0.58
Class B 7/31/99 130.3 0.58
Class C 7/31/99 57.0 0.58
Institutional Class 7/31/99 20.0 0.58
Natural Resources:(g)
Class A 7/31/99 6.3 0.58
Class T 7/31/99 274.3 0.58
Class B 7/31/99 40.3 0.58
Class C 7/31/99 4.9 0.58
Institutional Class 7/31/99 4.0 0.58
Technology:(g)
Class A 7/31/99 42.1 0.58
Class T 7/31/99 192.9 0.58
Class B 7/31/99 118.4 0.58
Class C 7/31/99 34.3 0.58
Institutional Class 7/31/99 16.7 0.58
Utilities Growth:(g)
Class A 7/31/99 6.7 0.58
Class T 7/31/99 32.9 0.58
Class B 7/31/99 29.3 0.58
Class C 7/31/99 9.2 0.58
Institutional Class 7/31/99 4.4 0.58
Blue Chip Growth(g) 7/31/99 $ 20,095.3 0.47%
Dividend Growth(g) 7/31/99 10,816.0 0.64
Low-Priced Stock(g) 7/31/99 8,273.4 0.82
OTC Portfolio(g) 7/31/99 5,575.5 0.50
Export and Multinational 8/31/99 404.7 0.58
Fund(g)
Destiny I:(g)
Class O 9/30/99 7,214.4 0.29
Class N(e) 9/30/99 0.2 0.29(d)
Destiny II:(g)
Class O 9/30/99 5,093.0 0.45
Class N(e) 9/30/99 0.5 0.45(d)
Advisor Diversified
International:(e)(f)(x)
Class A 10/31/99 1.9 0.72(d)
Class T 10/31/99 11.8 0.72(d)
Class B 10/31/99 4.0 0.72(d)
Class C 10/31/99 3.4 0.72(d)
Institutional Class 10/31/99 1.6 0.72(d)
Advisor Emerging Asia:(e)(f)
Class A 10/31/99 82.3 1.07
Class T 10/31/99 0.7 1.07(d)
Class B 10/31/99 0.4 1.07(d)
Class C 10/31/99 0.3 1.07(d)
Institutional Class 10/31/99 0.1 1.07(d)
Advisor Europe Capital
Appreciation:(e)(f)(x)
Class A 10/31/99 1.5 0.72(d)
Class T 10/31/99 8.4 0.72(d)
Class B 10/31/99 2.5 0.72(d)
Class C 10/31/99 2.6 0.72(d)
Institutional Class 10/31/99 0.7 0.72(d)
Advisor Global Equity:(e)(f)(x)
Class A 10/31/99 1.4 0.73(d)
Class T 10/31/99 2.2 0.73(d)
Class B 10/31/99 1.5 0.73(d)
Class C 10/31/99 1.7 0.73(d)
Institutional Class 10/31/99 1.1 0.73(d)
Advisor International Capital
Appreciation:(f)(x)
Class A 10/31/99 1.6 0.73
Class T 10/31/99 21.1 0.73
Class B 10/31/99 6.0 0.73
Class C 10/31/99 3.7 0.73
Institutional Class 10/31/99 5.9 0.73
Advisor Japan:(e)(f)(x)
Class A 10/31/99 2.3 0.72(d)
Class T 10/31/99 8.4 0.72(d)
Class B 10/31/99 5.7 0.72(d)
Class C 10/31/99 6.4 0.72(d)
Institutional Class 10/31/99 1.3 0.72(d)
Advisor Latin America:(e)(f)(x)
Class A 10/31/99 $ 0.6 0.73%(d)
Class T 10/31/99 0.8 0.73(d)
Class B 10/31/99 0.7 0.73(d)
Class C 10/31/99 0.6 0.73(d)
Institutional Class 10/31/99 0.4 0.73(d)
Advisor Overseas:(f)
Class A 10/31/99 16.5 0.90
Class T 10/31/99 1,212.8 0.90
Class B 10/31/99 70.9 0.90
Class C 10/31/99 22.3 0.90
Institutional Class 10/31/99 81.3 0.90
Aggressive International(f) 10/31/99 441.9 0.83
Canada(f) 10/31/99 45.3 0.32
Capital Appreciation(g) 10/31/99 2,734.2 0.43
Disciplined Equity(g) 10/31/99 3,168.8 0.42
Diversified International (f) 10/31/99 2,607.3 0.83
Emerging Markets(f) 10/31/99 343.0 0.73
Europe(f) 10/31/99 1,467.1 0.60
Europe Capital Appreciation(f) 10/31/99 568.9 0.66
France(f) 10/31/99 12.8 0.00(z)
Germany(f) 10/31/99 24.6 0.74
Hong Kong and China(f) 10/31/99 148.8 0.73
Japan(f) 10/31/99 450.4 0.86
Japan Small Companies(f) 10/31/99 668.5 0.72
Latin America(f) 10/31/99 329.7 0.73
Nordic(f) 10/31/99 104.8 0.73
Overseas(f) 10/31/99 3,964.2 0.92
Pacific Basin(f) 10/31/99 352.2 0.92
Small Cap Selector(g) 10/31/99 582.3 0.42
Southeast Asia(f) 10/31/99 300.1 0.89
Stock Selector(g) 10/31/99 1,676.3 0.38
TechnoQuant Growth(g) 10/31/99 50.6 0.33
United Kingdom(f) 10/31/99 6.7 0.00(z)
Value(g) 10/31/99 5,311.3 0.32
Worldwide(f) 10/31/99 962.4 0.73
Advisor Dividend Growth:(g)(h)
Class A 11/30/99 23.1 0.58
Class T 11/30/99 172.6 0.58
Class B 11/30/99 145.7 0.58
Class C 11/30/99 79.3 0.58
Institutional Class 11/30/99 24.1 0.58
Advisor Equity Growth:(g)(h)
Class A 11/30/99 $ 236.8 0.58%
Class T 11/30/99 6,598.6 0.58
Class B 11/30/99 789.5 0.58
Class C 11/30/99 221.9 0.58
Institutional Class 11/30/99 1,262.1 0.58
Advisor Growth
Opportunities:(g)(h)
Class A 11/30/99 526.9 0.43
Class T 11/30/99 25,620.7 0.43
Class B 11/30/99 1,976.6 0.43
Class C 11/30/99 537.7 0.43
Institutional Class 11/30/99 635.8 0.43
Advisor Large Cap:(g)(h)
Class A 11/30/99 11.8 0.58
Class T 11/30/99 172.1 0.58
Class B 11/30/99 72.7 0.58
Class C 11/30/99 15.8 0.58
Institutional Class 11/30/99 12.1 0.58
Advisor Mid Cap:(g)(h)
Class A 11/30/99 17.0 0.58
Class T 11/30/99 424.8 0.58
Class B 11/30/99 93.4 0.58
Class C 11/30/99 22.2 0.58
Institutional Class 11/30/99 42.9 0.58
Advisor Retirement
Growth:(g)(h)(x)
Class A 11/30/99 1.8 0.58
Class T 11/30/99 10.8 0.58
Class B 11/30/99 6.0 0.58
Class C 11/30/99 3.5 0.58
Institutional Class 11/30/99 0.5 0.58
Advisor Small Cap:(g)(h)
Class A 11/30/99 33.4 0.73
Class T 11/30/99 231.8 0.73
Class B 11/30/99 95.2 0.73
Class C 11/30/99 77.2 0.73
Institutional Class 11/30/99 43.0 0.73
Advisor TechnoQuant Growth:
(g)(h)
Class A 11/30/99 3.2 0.58
Class T 11/30/99 15.1 0.58
Class B 11/30/99 12.0 0.58
Class C 11/30/99 0.9 0.58
Institutional Class 11/30/99 1.1 0.58
Advisor Value Strategies:(g)(h)
Class A 11/30/99 5.0 0.35
Class T 11/30/99 420.3 0.35
Class B 11/30/99 94.0 0.35
Initial Class 11/30/99 18.7 0.35
Institutional Class 11/30/99 5.1 0.35
Aggressive Growth(g)(h) 11/30/99 $ 5,619.2 0.72%
Growth Company(g)(h) 11/30/99 13,628.6 0.51
New Millennium(g)(h) 11/30/99 2,232.6 0.74
Retirement Growth(g)(h) 11/30/99 5,370.5 0.43
Contrafund(g)(h) 12/31/99 41,975.2 0.45
Trend(g)(h) 12/31/99 1,274.3 0.37
Variable Insurance Products:
Growth(h)
Initial Class 12/31/99 13,569.8 0.58
Service Class 12/31/99 408.0 0.58
Overseas(f)(h)
Initial Class 12/31/99 2,157.5 0.73
Service Class 12/31/99 66.8 0.73
Variable Insurance Products II:
Contrafund(g)(h)
Initial Class 12/31/99 7,517.9 0.58
Service Class 12/31/99 356.3 0.58
Variable Insurance Products
III:
Growth Opportunities(g)(h)
Initial Class 12/31/99 1,604.2 0.58
Service Class 12/31/99 244.4 0.58
Mid Cap(g)(h)
Initial Class 12/31/99 0.7 0.57
Service Class 12/31/99 3.9 0.57
Select Portfolios:
Air Transportation(g)(h) 2/29/00 55.8 0.58
Automotive(g)(h) 2/29/00 23.2 0.57
Banking(g)(h) 2/29/00 701.0 0.58
Biotechnology(g)(h) 2/29/00 1,298.4 0.59
Brokerage and Investment 2/29/00 476.6 0.58
Management(g)(h)
Business Services and 2/29/00 64.4 0.58
Outsourcing(g)(h)
Chemicals(g)(h) 2/29/00 38.6 0.58
Computers(g)(h) 2/29/00 2,400.1 0.58
Construction and Housing(g)(h) 2/29/00 16.4 0.58
Consumer Industries(g)(h) 2/29/00 74.6 0.58
Cyclical Industries(g)(h) 2/29/00 6.5 0.15(z)
Defense and Aerospace(g)(h) 2/29/00 35.0 0.58
Developing 2/29/00 1,411.6 0.58
Communications(g)(h)
Electronics(g)(h) 2/29/00 4,649.2 0.58
Energy(g)(h) 2/29/00 207.4 0.58
Energy Service(g)(h) 2/29/00 685.1 0.58
Environmental Services(g)(h) 2/29/00 16.0 0.58
Financial Services(g)(h) 2/29/00 513.7 0.58
Food and Agriculture(g)(h) 2/29/00 151.1 0.58
Gold(g)(h) 2/29/00 190.2 0.58
Health Care(g)(h) 2/29/00 2,796.5 0.58
Home Finance(g)(h) 2/29/00 503.1 0.58
Industrial Equipment(g)(h) 2/29/00 35.3 0.58
Industrial Materials(g)(h) 2/29/00 22.6 0.59
Select Portfolios: continued
Insurance(g)(h) 2/29/00 $ 63.5 0.58%
Leisure(g)(h) 2/29/00 401.0 0.58
Medical Delivery(g)(h) 2/29/00 63.3 0.58
Medical Equipment and 2/29/00 39.4 0.58
Systems(g)(h)
Multimedia(g)(h) 2/29/00 211.4 0.58
Natural Gas(g)(h) 2/29/00 58.5 0.58
Natural Resources(g)(h) 2/29/00 17.0 0.58
Paper and Forest Products 2/29/00 21.2 0.58
(g)(h)
Retailing(g)(h) 2/29/00 182.3 0.57
Software and Computer 2/29/00 881.6 0.58
Services(g)(h)
Technology(g)(h) 2/29/00 2,949.5 0.59
Telecommunications(g)(h) 2/29/00 1,171.1 0.58
Transportation(g)(h) 2/29/00 20.9 0.58
Utilities Growth(g)(h) 2/29/00 600.1 0.58
Magellan(g)(h) 3/31/00 97,656.1 0.57
</TABLE>
(a) All fund data are as of the fiscal year end noted in the chart
or as of March 31, 2000, 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 or class 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 a (z). For multiple class funds, the
ratio of net advisory fees to average net assets is presented gross of
reductions for certain classes, for presentation purposes. Funds so
affected are indicated by an (x).
(d) Annualized
(e) Less than a complete fiscal year
(f) Fidelity Management & Research Company (FMR) 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 (FIIA (U.K.)
L), with respect to the fund.
(g) FMR has entered into sub-advisory agreements with FMR U.K., FMR
Far East and FIJ with respect to the fund.
(h) Beginning January 1, 2001, FMR Co., Inc. (FMRC) will serve as
sub-advisor for the fund. FMR will be primarily responsible for
choosing investments for the fund. FMRC is a wholly owned subsidiary
of FMR.
EXHIBIT 11
FUNDS ADVISED BY FMR - TABLE OF AVERAGE NET ASSETS AND EXPENSE RATIOS
(A)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
INVESTMENT OBJECTIVE AND FUND FISCAL YEAR END (A) AVERAGE NET ASSETS RATIO OF NET ADVISORY FEES
(MILLIONS)(B) TO AVERAGE NET ASSETS PAID
TO FMR (C)
GROWTH AND INCOME
Fidelity Fund(g) 6/30/99 $ 10,633.0 0.38%
Growth & Income II(e)(g) 6/30/99 129.4 0.48(d)
Balanced(g) 7/31/99 5,362.6 0.44
Global Balanced(f) 7/31/99 94.6 0.74
Growth & Income(g) 7/31/99 46,670.7 0.49
Puritan(h) 7/31/99 25,230.8 0.44
Asset Manager(h) 9/30/99 12,583.2 0.53
Asset Manager: Growth(h) 9/30/99 5,164.3 0.58
Asset Manager: Income(h) 9/30/99 915.9 0.43
International Growth & 10/31/99 898.2 0.73
Income(f)
Advisor Asset
Allocation:(e)(h)(i)(x)
Class A 11/30/99 1.3 0.58(d)
Class B 11/30/99 4.5 0.58(d)
Class T 11/30/99 5.9 0.58(d)
Class C 11/30/99 2.3 0.58(d)
Institutional Class 11/30/99 0.8 0.58(d)
Advisor Balanced:(h)(i)
Class A 11/30/99 38.5 0.43
Class B 11/30/99 96.1 0.43
Class T 11/30/99 2,955.9 0.43
Class C 11/30/99 38.9 0.43
Institutional Class 11/30/99 69.6 0.43
Advisor Equity Income:(g)(i)
Class A 11/30/99 97.6 0.48
Class B 11/30/99 919.6 0.48
Class T 11/30/99 2,682.1 0.48
Class C 11/30/99 54.3 0.48
Institutional Class 11/30/99 491.8 0.48
Advisor Growth & Income:(g)(i)
Class A 11/30/99 81.1 0.48
Class B 11/30/99 338.2 0.48
Class T 11/30/99 728.8 0.48
Class C 11/30/99 160.3 0.48
Institutional Class 11/30/99 116.9 0.48
Convertible Securities(g)(i) 11/30/99 1,061.8 0.60
Equity-Income II(g)(i) 11/30/99 19,387.2 0.48
Variable Insurance Products I:
Equity-Income
Initial Class 12/31/99 11,490.7 0.48
Service Class 12/31/99 336.8 0.48
Variable Insurance Products II:
Asset Manager(h)(i)
Initial Class 12/31/99 4,863.8 0.53
Service Class 12/31/99 14.6 0.53
Asset Manager: Growth(h)(i)
Initial Class 12/31/99 543.3 0.58
Service Class 12/31/99 6.9 0.58
Variable Insurance Products
III:
Balanced Portfolio(h)(i)
Initial Class 12/31/99 $ 334.9 0.43%
Service Class 12/31/99 18.4 0.43
Growth & Income(g)(i)
Initial Class 12/31/99 1,286.2 0.48
Service Class 12/31/99 42.0 0.48
Equity-Income(g)(i) 1/31/00 23,682.8 0.48
Utilities Fund(g)(i) 1/31/00 2,555.9 0.58
</TABLE>
(a) All fund data are as of the fiscal year end noted in the chart
or as of March 31, 2000, 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. For
multiple class funds, the ratio of net advisory fees to average net
assets is presented gross of reductions for certain classes, for
presentation purposes. Funds so affected are indicated by a (x).
(d) Annualized.
(e) Less than a complete fiscal year
(f) Fidelity Management & Research Company (FMR) 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 (FIIA (U.K.)
L), with respect to the fund.
(g) FMR has entered into sub-advisory agreements with FMR U.K., FMR
Far East and FIJ, with respect to the fund.
(h) FMR has entered into sub-advisory agreements with Fidelity
Investments Money Management, Inc., FMR U.K., FMR Far East and FIJ,
with respect to the fund.
(i) Beginning January 1, 2001, FMR Co., Inc (FMRC) will serve as
sub-advisor for the fund. FMR will be primarily responsible for
choosing investments for the fund. FMRC is a wholly owned subsidiary
of FMR.
VIPIII-PXS-0500 CUSIP# 315802504/FUND# 616
1.739386.100 CUSIP# 922176300/FUND# 469
CUSIP# 922176607/FUND# 380
CUSIP# 315802702/FUND# 147
CUSIP# 922176102/FUND# 473
CUSIP# 922176706/FUND# 382
CUSIP# 315802207/FUND# 617
CUSIP# 922176201/FUND# 491
CUSIP# 922176888/FUND# 385
CUSIP# 922176409/FUND# 772
CUSIP# 922176508/FUND# 773
CUSIP# 922176805/FUND# 387
Vote this proxy card TODAY! Your prompt response will
save your 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.
- ----------------------------------------------------------------------
VARIABLE INSURANCE PRODUCTS III: BALANCED PORTFOLIO
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward
C. Johnson 3d, Eric D. Roiter, and Thomas R. Williams, or any one or
more of them, attorneys, with full power of substitution, to vote all
shares of VARIABLE INSURANCE PRODUCTS III: BALANCED PORTFOLIO which
the undersigned is entitled to vote at the Special Meeting of
Shareholders of the fund to be held at an office of the trust at 27
State Street, 10th Floor, Boston, MA 02109, on July 19, 2000 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 ______________
________________________________________________
________________________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
cusip# 922176300/fund# 469
cusip# 315802504/fund# 616
cusip# 922176607/fund# 380
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>
1. To elect the twelve nominees [ ] FOR all nominees listed [ ] WITHHOLD authority to 1.
specified below as Trustees: (except as marked to the vote for all nominees.
(01) Ralph F. Cox, (02) contrary below).
Phyllis Burke Davis, (03)
Robert M. Gates, (04) Edward
C. Johnson 3d, (05) Donald
J. Kirk, (06) Ned C.
Lautenbach, (07) Peter S.
Lynch, (08) William O.
McCoy, (09) Gerald C.
McDonough, (10) Marvin L.
Mann, (11) Robert C. Pozen,
(12) Thomas R. Williams.
(INSTRUCTION: TO WITHHOLD
AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE(S), WRITE
THE NAME(S) OF THE
NOMINEE(S) ON THE LINE
BELOW.)
</TABLE>
______________________________________________________________________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
2. To ratify the selection of FOR [ ] AGAINST [ ] ABSTAIN [ ] 2.
Deloitte & Touche LLP as
independent accountants of
the fund.
3. To authorize the Trustees to FOR [ ] AGAINST [ ] ABSTAIN [ ] 3.
adopt an amended and
restated Declaration of Trust.
4. To approve an amended FOR [ ] AGAINST [ ] ABSTAIN [ ] 4.
management contract for the
fund.
8. To approve an amended FOR [ ] AGAINST [ ] ABSTAIN [ ] 8.
sub-advisory agreement with
FMR U.K. for the fund.
10. To approve an amended FOR [ ] AGAINST [ ] ABSTAIN [ ] 10.
sub-advisory agreement with
FMR Far East for the fund.
12. To modify the fund's FOR [ ] AGAINST [ ] ABSTAIN [ ] 12.
fundamental investment
objective and eliminate a
fundamental investment
policy of the fund.
13. To amend the fund's FOR [ ] AGAINST [ ] ABSTAIN [ ] 13.
fundamental investment
limitation concerning
diversification to exclude
securities of other
investment companies from
the limitation.
14. To amend the fund's FOR [ ] AGAINST [ ] ABSTAIN [ ] 14.
fundamental investment
limitation concerning
underwriting.
15. To amend the fund's FOR [ ] AGAINST [ ] ABSTAIN [ ] 15.
fundamental investment
limitation concerning
concentration.
</TABLE>
VB-PXC-500 cusip# 922176300/fund# 469
cusip# 315802504/fund# 616
cusip# 922176607/fund# 380
Vote this proxy card TODAY! Your prompt response will
save your 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.
- ----------------------------------------------------------------------
VARIABLE INSURANCE PRODUCTS III: GROWTH OPPORTUNITIES PORTFOLIO
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward
C. Johnson 3d, Eric D. Roiter, and Thomas R. Williams, or any one or
more of them, attorneys, with full power of substitution, to vote all
shares of VARIABLE INSURANCE PRODUCTS III: GROWTH OPPORTUNITIES
PORTFOLIO which the undersigned is entitled to vote at the Special
Meeting of Shareholders of the fund to be held at an office of the
trust at 27 State Street, 10th Floor, Boston, MA 02109, on July 19,
2000 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 ______________
________________________________________________
________________________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
cusip# 922176201/fund# 491
cusip# 922176888/fund# 385
cusip# 315802207/fund# 617
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>
1. To elect the twelve nominees [ ] FOR all nominees listed [ ] WITHHOLD authority to 1.
specified below as Trustees: (except as marked to the vote for all nominees.
(01) Ralph F. Cox, (02) contrary below).
Phyllis Burke Davis, (03)
Robert M. Gates, (04) Edward
C. Johnson 3d, (05) Donald
J. Kirk, (06) Ned C.
Lautenbach, (07) Peter S.
Lynch, (08) William O.
McCoy, (09) Gerald C.
McDonough, (10) Marvin L.
Mann, (11) Robert C. Pozen,
(12) Thomas R. Williams.
(INSTRUCTION: TO WITHHOLD
AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE(S), WRITE
THE NAME(S) OF THE
NOMINEE(S) ON THE LINE
BELOW.)
</TABLE>
______________________________________________________________________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
2. To ratify the selection of FOR [ ] AGAINST [ ] ABSTAIN [ ] 2.
Deloitte & Touche LLP as
independent accountants of
the fund.
3. To authorize the Trustees to FOR [ ] AGAINST [ ] ABSTAIN [ ] 3.
adopt an amended and
restated Declaration of Trust.
6. To approve an amended FOR [ ] AGAINST [ ] ABSTAIN [ ] 6.
management contract for the
fund.
8. To approve an amended FOR [ ] AGAINST [ ] ABSTAIN [ ] 8.
sub-advisory agreement with
FMR U.K. for the fund.
10. To approve an amended FOR [ ] AGAINST [ ] ABSTAIN [ ] 10.
sub-advisory agreement with
FMR Far East for the fund.
13. To amend the fund's FOR [ ] AGAINST [ ] ABSTAIN [ ] 13.
fundamental investment
limitation concerning
diversification to exclude
securities of other
investment companies from
the limitation.
14. To amend the fund's FOR [ ] AGAINST [ ] ABSTAIN [ ] 14.
fundamental investment
limitation concerning
underwriting.
15. To amend the fund's FOR [ ] AGAINST [ ] ABSTAIN [ ] 15.
fundamental investment
limitation concerning
concentration.
</TABLE>
VGO-PXC-500 cusip# 922176201/fund# 491
cusip# 922176888/fund# 385
cusip# 315802207/fund# 617
Vote this proxy card TODAY! Your prompt response will
save your 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.
- ----------------------------------------------------------------------
VARIABLE INSURANCE PRODUCTS III: GROWTH & INCOME PORTFOLIO
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward
C. Johnson 3d, Eric D. Roiter, and Thomas R. Williams, or any one or
more of them, attorneys, with full power of substitution, to vote all
shares of VARIABLE INSURANCE PRODUCTS III: GROWTH & INCOME PORTFOLIO
which the undersigned is entitled to vote at the Special Meeting of
Shareholders of the fund to be held at an office of the trust at 27
State Street, 10th Floor, Boston, MA 02109, on July 19, 2000 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 ______________
________________________________________________
________________________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
cusip# 315802702/fund# 147
cusip# 922176102/fund# 473
cusip# 922176706/fund# 382
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>
1. To elect the twelve nominees [ ] FOR all nominees listed [ ] WITHHOLD authority to 1.
specified below as Trustees: (except as marked to the vote for all nominees.
(01) Ralph F. Cox, (02) contrary below).
Phyllis Burke Davis, (03)
Robert M. Gates, (04) Edward
C. Johnson 3d, (05) Donald
J. Kirk, (06) Ned C.
Lautenbach, (07) Peter S.
Lynch, (08) William O.
McCoy, (09) Gerald C.
McDonough, (10) Marvin L.
Mann, (11) Robert C. Pozen,
(12) Thomas R. Williams.
(INSTRUCTION: TO WITHHOLD
AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE(S), WRITE
THE NAME(S) OF THE
NOMINEE(S) ON THE LINE
BELOW.)
</TABLE>
______________________________________________________________________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
2. To ratify the selection of FOR [ ] AGAINST [ ] ABSTAIN [ ] 2.
Deloitte & Touche LLP as
independent accountants of
the fund.
3. To authorize the Trustees to FOR [ ] AGAINST [ ] ABSTAIN [ ] 3.
adopt an amended and
restated Declaration of Trust.
5. To approve an amended FOR [ ] AGAINST [ ] ABSTAIN [ ] 5.
management contract for the
fund.
9. To approve an amended FOR [ ] AGAINST [ ] ABSTAIN [ ] 9.
sub-advisory agreement with
FMR U.K. for the fund.
11. To approve an amended FOR [ ] AGAINST [ ] ABSTAIN [ ] 11.
sub-advisory agreement with
FMR Far East for the fund.
13. To amend the fund's FOR [ ] AGAINST [ ] ABSTAIN [ ] 13.
fundamental investment
limitation concerning
diversification to exclude
securities of other
investment companies from
the limitation.
14. To amend the fund's FOR [ ] AGAINST [ ] ABSTAIN [ ] 14.
fundamental investment
limitation concerning
underwriting.
15. To amend the fund's FOR [ ] AGAINST [ ] ABSTAIN [ ] 15.
fundamental investment
limitation concerning
concentration.
</TABLE>
VGI-PXC-500 cusip# 315802702/fund# 147
cusip# 922176102/fund# 473
cusip# 922176706/fund# 382
Vote this proxy card TODAY! Your prompt response will
save your 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.
- ----------------------------------------------------------------------
VARIABLE INSURANCE PRODUCTS III: MID CAP PORTFOLIO
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward
C. Johnson 3d, Eric D. Roiter, and Thomas R. Williams, or any one or
more of them, attorneys, with full power of substitution, to vote all
shares of VARIABLE INSURANCE PRODUCTS III: MID CAP PORTFOLIO which the
undersigned is entitled to vote at the Special Meeting of Shareholders
of the fund to be held at an office of the trust at 27 State Street,
10th Floor, Boston, MA 02109, on July 19, 2000 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 ______________
________________________________________________
________________________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
cusip# 922176409/fund# 772
cusip# 922176508/fund# 773
cusip# 922176805/fund# 387
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>
1. To elect the twelve nominees [ ] FOR all nominees listed [ ] WITHHOLD authority to 1.
specified below as Trustees: (except as marked to the vote for all nominees.
(01) Ralph F. Cox, (02) contrary below).
Phyllis Burke Davis, (03)
Robert M. Gates, (04) Edward
C. Johnson 3d, (05) Donald
J. Kirk, (06) Ned C.
Lautenbach, (07) Peter S.
Lynch, (08) William O.
McCoy, (09) Gerald C.
McDonough, (10) Marvin L.
Mann, (11) Robert C. Pozen,
(12) Thomas R. Williams.
(INSTRUCTION: TO WITHHOLD
AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE(S), WRITE
THE NAME(S) OF THE
NOMINEE(S) ON THE LINE
BELOW.)
</TABLE>
______________________________________________________________________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
2. To ratify the selection of FOR [ ] AGAINST [ ] ABSTAIN [ ] 2.
PricewaterhouseCoopers LLP
as independent accountants
of the fund.
3. To authorize the Trustees to FOR [ ] AGAINST [ ] ABSTAIN [ ] 3.
adopt an amended and
restated Declaration of Trust.
7. To approve an amended FOR [ ] AGAINST [ ] ABSTAIN [ ] 7.
management contract for the
fund.
14. To amend the fund's FOR [ ] AGAINST [ ] ABSTAIN [ ] 14.
fundamental investment
limitation concerning
underwriting.
15. To amend the fund's FOR [ ] AGAINST [ ] ABSTAIN [ ] 15.
fundamental investment
limitation concerning
concentration.
</TABLE>
VMC-PXC-500 cusip# 922176409/fund# 772
cusip# 922176508/fund# 773
cusip# 922176805/fund# 387
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
PROXY MATERIALS
PLEASE CAST YOUR VOTE NOW!
VIP III: BALANCED PORTFOLIO, GROWTH & INCOME PORTFOLIO, GROWTH
OPPORTUNITIES PORTFOLIO, AND MID CAP PORTFOLIO
Dear Contract Holder:
I am writing to let you know that a special shareholder meeting of VIP
III: Balanced Portfolio, Growth & Income Portfolio, Growth
Opportunities Portfolio, and Mid Cap Portfolio will be held on July
19, 2000. The purpose of the meeting is to vote on several important
proposals that affect this trust and its respective funds. As a
contract holder, you have the opportunity to voice your opinion on the
matters that affect your funds. This package contains information
about the proposals and the material to use when voting by mail.
Please read the enclosed materials and cast your vote on the proxy
card(s). PLEASE VOTE AND RETURN YOUR CARD(S) PROMPTLY. YOUR VOTE IS
EXTREMELY IMPORTANT, NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY
BE.
All of the proposals have been carefully reviewed by the Board of
Trustees. The Trustees, most of whom are not affiliated with Fidelity,
are responsible for protecting the interests of the shareholders of
the VIP III: Balanced Portfolio, Growth & Income Portfolio, Growth
Opportunities Portfolio, and Mid Cap Portfolio. The Trustees believe
these proposals are in the best interest of shareholders, and
recommend that you vote FOR each proposal.
The following Q& A is provided to assist you in understanding the
proposals. Each proposal is described in the enclosed proxy statement.
VOTING BY MAIL IS QUICK AND EASY. EVERYTHING YOU NEED IS ENCLOSED. To
cast your vote, simply complete the proxy card(s) enclosed in this
package. Be sure to sign the card(s) before mailing them in the
postage-paid envelope.
If you have any questions before you vote, please contact your
insurance company. They'll be glad to help you get your vote in
quickly. Thank you for your participation in this important
initiative.
Sincerely,
Edward C. Johnson 3d
Chairman and Chief Executive Officer
Important information to help you understand and vote on the VIP III
Trust proxy proposals.
PLEASE READ THE FULL TEXT OF THE ENCLOSED PROXY STATEMENT. BELOW IS A
BRIEF OVERVIEW OF THE PROPOSALS FOUND IN THE PROXY STATEMENT THAT WILL
BE VOTED ON AT THE SPECIAL SHAREHOLDER MEETING. IF YOU HAVE ANY
QUESTIONS REGARDING THE PROPOSALS PLEASE CALL YOUR INSURANCE COMPANY.
WHY DO WE NEED TO ELECT A BOARD OF TRUSTEES?
The trustees of the VIP III trust have determined that the number of
trustees shall be fixed at twelve. At any time at least two-thirds of
the trustees must be elected by the shareholders. Due to attrition we
are close to the two-thirds elected number.
WHAT FUNDS ARE IMPACTED BY THE PROPOSAL TO ELECT A BOARD OF TRUSTEES?
The proposal impacts the Funds of the VIP III Trust: Balanced
Portfolio, Growth & Income Portfolio, Growth Opportunities Portfolio
and Mid Cap Portfolio. Please review the proxy statement for specific
details.
ARE ALL OF THE FUNDS IMPACTED BY THE OTHER PROPOSALS IN THIS PROXY?
No. The proxy statement summarizes each proposal and the portfolio or
portfolios impacted. Please review the proxy statement for specific
fund details.
WHY ARE WE REQUESTING THE RATIFICATION OF THE SELECTION OF DELOITTE &
TOUCHE LLP AND PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS?
The independent accountants examine annual financial statements for
the funds and provide other audit and tax-related services. Deloitte &
Touche LLP and PricewaterhouseCoopers LLP have been selected by a vote
of the non-interested trustees as independent accountants for the
above referenced funds. Such selection requires the ratification of
shareholders.
WHY ARE THE FUNDS PROPOSING TO ADOPT AN AMENDED AND RESTATED
DECLARATION OF TRUST (THE NEW DECLARATION OF TRUST)?
The New Declaration of Trust is a more modern form of the trust
instrument for a Massachusetts business trust. It gives the Trustees
more flexibility and, subject to the applicable requirements of
Federal and state law, broader authority to act. This increased
flexibility may allow the Trustees to react more quickly to changes in
competitive and regulatory conditions. Adoption of the New Declaration
of Trust will not alter the Trustees existing fiduciary obligations to
act in the best interest of the shareholders. Before utilizing any new
flexibility that the New Declaration of Trust may afford, the Trustees
must first consider the shareholders' interests and act in accordance
with such interests. The new Declaration of Trust amends the Current
Declaration of Trust in a number of significant ways. Please review
the proxy statement for specific details.
WHAT IS BEING AMENDED IN THE MANAGEMENT CONTRACTS FOR THE NAMED FUNDS?
The management fees that FMR receives from the funds to provide for
lower fees when FMR's assets under management exceed certain levels
are being amended for the named funds. The amended contracts will
result in a management fee that is the same as, or lower than, the fee
payable under the present management contracts.
WHY ARE THE FUNDS PROPOSING TO AMEND THE SUB-ADVISORY AGREEMENTS WITH
FMR U.K.?
Under the current agreements, FMR U.K. acts as an investment
consultant to FMR, providing investment research information and
portfolio management advice as FMR requests. FMR has entered into
sub-advisory agreements with affiliates whose offices are
geographically dispersed around the world. The proposed amendments
would allow FMR to receive investment advice and research services
from FMR U.K. and also permit FMR to grant FMR U.K. investment
management authority if FMR believes it would be beneficial to the
funds and its shareholders. The Trustees believe that the funds 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. This research complements other
research on foreign securities produced by FMR's U.S.-based research
analysts and portfolio managers. Because FMR pays all of FMR U.K.'s
fees, the proposed amendments would not affect the fees paid by the
funds.
WHY ARE THE FUNDS PROPOSING TO AMEND THE SUB-ADVISORY AGREEMENTS WITH
FMR FAR EAST?
The funds are proposing to amend the sub-advisory agreements with FMR
Far East for the same reasons as stated above for FMR U.K.
WHY IS BALANCED PORTFOLIO PROPOSING TO MODIFY ITS FUNDAMENTAL
INVESTMENT OBJECTIVE AND ELIMINATE A FUNDAMENTAL INVESTMENT POLICY?
Modifying the portfolio's fundamental investment objective and
eliminating a fundamental investment policy will allow the fund to
more clearly communicate its investment objective and investment
strategies by standardizing its investment disclosure in a manner more
consistent with other Fidelity funds with similar investment
disciplines.
WHAT IS THE PURPOSE OF PROPOSALS 13, 14 AND 15?
The primary purpose of proposals 13, 14 and 15 is to revise several of
the funds' investment limitations to conform to limitations which are
standard for similar types of funds managed by FMR. Please review the
proxy statement for additional details.
HOW DO I VOTE MY SHARES?
You can vote your shares by completing and signing each enclosed proxy
card, and mailing it in the enclosed postage paid envelope. If you
need assistance, or have any questions regarding the proposals, please
contact your insurance company representative.
HOW DO I SIGN THE PROXY CARD?
INDIVIDUAL ACCOUNTS: Your name should be signed exactly as it appears
in the registration on the proxy card.
JOINT ACCOUNTS: Either party may sign, but the name of the party
signing should conform exactly to a name shown on the registration.
ALL OTHER ACCOUNTS: The person signing must indicate his or her
capacity. For example, a trustee for a trust or other entity should
sign, "Ann B. Collins, Trustee."
(2_FIDELITY)LOGOS)(registered trademark) VIPIII-pxl-0500
1.739497.100
