SUPPLEMENT TO THE
FIDELITY STRATEGIC INCOME FUND
A FUND OF FIDELITY SCHOOL STREET TRUST
FEBRUARY 27, 1999
STATEMENT OF ADDITIONAL INFORMATION
THE FOLLOWING INFORMATION REPLACES SIMILAR INFORMATION FOUND IN THE
"INVESTMENT POLICIES AND LIMITATIONS" SECTION BEGINNING ON PAGE 2.
(iv) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (2)).
(vi) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 15% of
the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (This limitation does not apply
to purchases of debt securities or to repurchase agreements.)
THE FOLLOWING INFORMATION REPLACES SIMILAR INFORMATION FOUND IN THE
"INVESTMENT POLICIES AND LIMITATIONS" SECTION UNDER THE HEADING
"EXPOSURE TO FOREIGN MARKETS" BEGINNING ON PAGE 4.
It is anticipated that in most cases the best available market for
foreign securities will be on an exchange or in over-the-counter (OTC)
markets located outside of the United States. Foreign stock markets,
while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some
foreign issuers may be less liquid and more volatile than securities
of comparable U.S. issuers. Foreign security trading, settlement and
custodial practices (including those involving securities settlement
where fund assets may be released prior to receipt of payment) are
often less developed than those in U.S. markets, and may result in
increased risk or substantial delays in the event of a failed trade or
the insolvency of, or breach of duty by, a foreign broker-dealer,
securities depository or foreign subcustodian. For example, many
foreign countries are less prepared than the United States to properly
process and calculate information related to dates from and after
January 1, 2000. As a result, some foreign markets, brokers, banks or
securities depositories could experience at least temporary
disruptions, which could result in difficulty buying and selling
securities in certain foreign markets and pricing foreign investments,
and foreign issuers could fail to pay timely dividends, interest or
principal. In addition, the costs associated with foreign investments,
including withholding taxes, brokerage commissions and custodial
costs, are generally higher than with U.S. investments.
THE FOLLOWING INFORMATION REPLACES THE FOURTH AND FIFTH PARAGRAPHS
UNDER "PERFORMANCE COMPARISONS" IN THE "PERFORMANCE" SECTION ON PAGE
38.
Strategic Income may compare its performance to that of the
Fidelity Strategic Income Composite Index, which is a hypothetical
representation of the performance of the fund's general investment
categories according to their respective weightings in the fund's
neutral mix. The Fidelity Strategic Income Composite Index represents
Strategic Income's four general investment categories according to
their respective weighting in the fund's neutral mix (40% high yield,
30% U.S. Government and investment-grade, 15% foreign developed
markets and 15% emerging markets). The following indexes are used to
calculate the Fidelity Strategic Income Composite Index: Merrill Lynch
High Yield Master II Index for the high yield category, Lehman
Brothers Government Bond Index for the U.S. Government and investment
grade category, Salomon Brothers Non-U.S. Dollar World Government Bond
Index for the foreign developed markets category, and J.P. Morgan
Emerging Markets Bond Index Plus for the emerging markets category.
The index weightings of the Fidelity Strategic Income Composite Index
are rebalanced monthly.
MERRILL LYNCH HIGH YIELD MASTER II INDEX. A market value-weighted
index of all domestic and yankee high-yield bonds, including deferred
interest bonds and payment-in-kind securities. Issues included in the
index have maturities of one year or more and have a credit rating
lower than BBB-/Baa3, but are not in default. Issues must have an
outstanding par value of at least $50 million to be included in the
index.
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION FOUND UNDER
"PERFORMANCE COMPARISONS" IN THE "PERFORMANCE" SECTION ON PAGE 38.
Strategic Income may compare its performance to that of the Merrill
Lynch High Yield Master II Index, a market value-weighted index of all
domestic and yankee high-yield bonds, including deferred interest
bonds and payment-in-kind securities. Issues included in the index
have maturities of one year or more and have a credit rating lower
than BBB-/Baa3, but are not in default. Issues must have an
outstanding par value of at least $50 million to be included in the
index.
THE FOLLOWING INFORMATION REPLACES AND SUPPLEMENTS INFORMATION FOUND
IN THE "TRUSTEES AND OFFICERS" SECTION BEGINNING ON PAGE 40.
*EDWARD C. JOHNSON 3d (68), Trustee and President, is Chairman, Chief
Executive Officer 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 Investments Money Management, Inc. (1998),
Fidelity Management & Research (U.K.) Inc., and Fidelity Management &
Research (Far East) Inc. Abigail Johnson, member of the Advisory Board
of Fidelity School Street Trust, is Mr. Johnson's daughter.
ABIGAIL P. JOHNSON (37), Member of the Advisory Board of Fidelity
School Street Trust, is Vice President of certain Equity Funds (1997),
and is a Director of FMR Corp. (1994). Before assuming her current
responsibilities, Ms. Johnson managed a number of Fidelity funds.
Edward C. Johnson 3d, Trustee and President of the Funds, is Ms.
Johnson's father.
THE FOLLOWING INFORMATION FOUND IN THE "TRUSTEES AND OFFICERS" SECTION
BEGINNING ON PAGE 40 HAS BEEN REMOVED.
LEONARD M. RUSH (52), Assistant Treasurer (1994), is an employee of
FMR (1994). Prior to becoming Assistant Treasurer of the Fidelity
funds, Mr. Rush was Chief Compliance Officer of FMR Corp. (1993-1994)
and Chief Financial Officer of Fidelity Brokerage Services, Inc.
(1990-1993).
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION FOUND IN THE
"TRUSTEES AND OFFICERS" SECTION BEGINNING ON PAGE 40.
NED C. LAUTENBACH (55), Member of the Advisory Board (1999), has been
a partner of Clayton, Dubilier & 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).
THE FOLLOWING INFORMATION REPLACES THE COMPENSATION TABLE FOUND IN THE
"TRUSTEES AND OFFICERS" SECTION BEGINNING ON PAGE 43.
The following table sets forth information describing the compensation
of each Trustee and Member of the Advisory Board of the fund for his
or her services for the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
<S> <C> <C>
COMPENSATION TABLE
Trustees and Members of the Aggregate Compensation from Total Compensation from the
Advisory Board Strategic IncomeB,+ Fund Complex*,A
Edward C. Johnson 3d** $ 0 $ 0
Abigail P. Johnson** $ 0 $ 0
J. Gary Burkhead** $ 0 $ 0
Ralph F. Cox $ 5 $ 223,500
Phyllis Burke Davis $ 5 $ 220,500
Robert M. Gates $ 5 $ 223,500
E. Bradley Jones $ 5 $ 222,000
Donald J. Kirk $ 6 $ 226,500
Ned C. Lautenbach*** $ 0 $ 0
Peter S. Lynch** $ 0 $ 0
William O. McCoy $ 5 $ 223,500
Gerald C. McDonough $ 7 $ 273,500
Marvin L. Mann $ 5 $ 220,500
Robert C. Pozen** $ 0 $ 0
Thomas R. Williams $ 5 $ 223,500
</TABLE>
* Information is for the calendar year ended December 31, 1998 for 237
funds in the complex.
** Interested Trustees of the fund, Ms. Johnson and Mr. Burkhead are
compensated by FMR.
*** Effective October 14, 1999, Mr. Lautenbach serves as a Member of
the Advisory Board.
+ Estimated
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, 1998, 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, $55,039; Marvin L. Mann, $55,039; Thomas R.
Williams, $63,433 and William McCoy, $55,039.
B Compensation figures include cash.
THE FOLLOWING INFORMATION REPLACES THE SIMILAR INFORMATION FOUND IN
THE "MANAGEMENT CONTRACTS" SECTION ON PAGE 46.
For providing discretionary investment management and executing
portfolio transactions, the sub-advisers are compensated as follows:
(small solid bullet) FMR pays FMR U.K. and FMR Far East a fee equal to
50% of its monthly management fee with respect to the fund's average
net assets managed by the sub-adviser on a discretionary basis.
(small solid bullet) FMR pays FIJ and FIIA a fee equal to 57% of its
monthly management fee with respect to the fund's average net assets
managed by the sub-adviser on a discretionary basis.
(small solid bullet) FIIA pays FIIA(U.K.)L a fee equal to 110% of
FIIA(U.K.)L's costs incurred in connection with providing
discretionary investment management services.
THE FOLLOWING INFORMATION REPLACES THE "GROUP FEE RATE" AND "EFFECTIVE
ANNUAL FEE RATE" SCHEDULES FOUND ON PAGE 45.
<TABLE>
<CAPTION>
<S> <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 .3700% $ 1 billion .3700%
3 - 6 .3400 50 .2188
6 - 9 .3100 100 .1869
9 - 12 .2800 150 .1736
12 - 15 .2500 200 .1652
15 - 18 .2200 250 .1587
18 - 21 .2000 300 .1536
21 - 24 .1900 350 .1494
24 - 30 .1800 400 .1459
30 - 36 .1750 450 .1427
36 - 42 .1700 500 .1399
42 - 48 .1650 550 .1372
48 - 66 .1600 600 .1349
66 - 84 .1550 650 .1328
84 - 120 .1500 700 .1309
120 - 156 .1450 750 .1291
156 - 192 .1400 800 .1275
192 - 228 .1350 850 .1260
228 - 264 .1300 900 .1246
264 - 300 .1275 950 .1233
300 - 336 .1250 1,000 .1220
336 - 372 .1225 1,050 .1209
372 - 408 .1200 1,100 .1197
408 - 444 .1175 1,150 .1187
444 - 480 .1150 1,200 .1177
480 - 516 .1125 1,250 .1167
516 - 587 .1100 1,300 .1158
587 - 646 .1080 1,350 .1149
646 - 711 .1060 1,400 .1141
711 - 782 .1040
782 - 860 .1020
860 - 946 .1000
946 - 1,041 .0980
1,041 - 1,145 .0960
1,145 - 1,260 .0940
over - 1,260 .0920
</TABLE>
