SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 2-58542)
UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 55 [X]
and
REGISTRATION STATEMENT (No. 811-2737)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 55 [X]
Fidelity Summer Street Trust
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: 617-563-7000
Eric D. Roiter, Secretary
82 Devonshire Street
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) immediately upon filing pursuant to paragraph (b).
(X) on (June 26, 1998) pursuant to paragraph (b).
( ) 60 days after filing pursuant to paragraph (a)(1).
( ) on ( ) pursuant to paragraph (a)(1) of Rule 485
( ) 75 days after filing pursuant to paragraph (a)(2).
( ) on ( ) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date
for a previously filed
post-effective amendment.
FIDELITY CAPITAL & INCOME FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C>
1...................................... COVER PAGE
2A.................................... EXPENSES
B, C............................... CONTENTS; THE FUNDS AT A GLANCE; WHO MAY WANT TO
INVEST
3A.................................... FINANCIAL HIGHLIGHTS
B................................... *
C, D............................. PERFORMANCE
4A I.............................. CHARTER
II............................... THE FUNDS AT A GLANCE; INVESTMENT PRINCIPLES AND
RISKS
B................................... INVESTMENT PRINCIPLES AND RISKS
C................................... WHO MAY WANT TO INVEST; INVESTMENT PRINCIPLES AND
RISKS
5A.................................... CHARTER
B I.............................. COVER PAGE; THE FUNDS AT A GLANCE; CHARTER; DOING
BUSINESS WITH FIDELITY
II.............................. CHARTER
III............................. EXPENSES; BREAKDOWN OF EXPENSES
C................................ CHARTER
D................................ CHARTER; BREAKDOWN OF EXPENSES
E.................................... COVER PAGE; CHARTER
F.................................... EXPENSES
G I.............................. CHARTER
II............................... *
5A.................................. PERFORMANCE
6A I................................. CHARTER
II................................ HOW TO BUY SHARES; HOW TO SELL SHARES; TRANSACTION
DETAILS; EXCHANGE RESTRICTIONS
III................................ CHARTER
B.................................. *
C.................................. TRANSACTION DETAILS; EXCHANGE RESTRICTIONS
D.................................. *
E.................................. COVER PAGE; DOING BUSINESS WITH FIDELITY; HOW TO
BUY SHARES; HOW TO SELL SHARES; INVESTOR SERVICES
F, G.............................. DIVIDENDS, CAPITAL GAINS, AND TAXES
H.............................. *
7 A.................................. COVER PAGE; CHARTER
B................................. EXPENSES; HOW TO BUY SHARES; TRANSACTION DETAILS
C.................................. *
D.................................. HOW TO BUY SHARES
E.................................. *
F................................ BREAKDOWN OF EXPENSES
8...................................... HOW TO SELL SHARES; INVESTOR SERVICES; TRANSACTION
DETAILS; EXCHANGE RESTRICTIONS
9...................................... *
</TABLE>
* Not Applicable
FIDELITY CAPITAL & INCOME FUND
CROSS REFERENCE SHEET
(continued)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C>
10, 11............................. COVER PAGE
12.................................... DESCRIPTION OF THE TRUSTS
13A - C............................ INVESTMENT POLICIES AND LIMITATIONS
D.................................. PORTFOLIO TRANSACTIONS
14A - C............................ TRUSTEES AND OFFICERS
15A, B............................. *
C................................ TRUSTEES AND OFFICERS
16A I................................ FMR, PORTFOLIO TRANSACTIONS
II.............................. TRUSTEES AND OFFICERS
III.............................. MANAGEMENT CONTRACTS
B................................. MANAGEMENT CONTRACTS
C, D............................. CONTRACTS WITH FMR AFFILIATES
E.............................. *
F.............................. DISTRIBUTION AND SERVICE PLANS
G.............................. *
H.............................. DESCRIPTION OF THE TRUSTS
I............................... CONTRACTS WITH FMR AFFILIATES
17A - C........................... PORTFOLIO TRANSACTIONS
D............................... PORTFOLIO TRANSACTIONS
E............................... *
18A................................ DESCRIPTION OF THE TRUSTS
B............................... *
19A................................ ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION
INFORMATION
B............................... ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION
INFORMATION; VALUATION
C............................... *
20.................................. DISTRIBUTIONS AND TAXES
21A, B............................ CONTRACTS WITH FMR AFFILIATES
C............................... *
22A................................ *
B................................ PERFORMANCE
23.................................. FINANCIAL STATEMENTS
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how
each fund invests and the services available to shareholders.
To learn more about each fund and its investments, you can obtain a
copy of each fund's most recent financial report and portfolio
listing, or a copy of the Statement of Additional Information (SAI)
dated June 26, 1998. The SAI has been filed with the Securities and
Exchange Commission (SEC) and is available along with other related
materials on the SEC's Internet Web site (http://www.sec.gov). The SAI
is incorporated herein by reference (legally forms a part of the
prospectus). For a free copy of either document, call
Fidelity (registered trademark) at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or guaranteed
by, any depository institution. Shares are not insured by the FDIC,
Federal Reserve Board, or any other agency, and are subject to
investment risks, including possible loss of principal amount
invested.
The funds may invest significantly in lower-quality debt securities,
sometimes called "junk bonds." These securities carry greater risks,
such as the risk of default, than other debt securities.
FIDELITY
CAPITAL & INCOME
FUND
(FUND NUMBER 038, TRADING SYMBOL FAGIX)
CAPITAL & INCOME SEEKS
INCOME AND CAPITAL GROWTH
BY INVESTING MAINLY IN DEBT
AND EQUITY SECURITIES, WITH
AN EMPHASIS ON
LOWER-QUALITY DEBT
SECURITIES.
FIDELITY
HIGH INCOME
FUND (FORMERLY SPARTAN(REGISTERED TRADEMARK)
HIGH INCOME FUND)
(FUND NUMBER 455, TRADING SYMBOL SPHIX)
HIGH INCOME SEEKS HIGH
CURRENT INCOME BY
INVESTING MAINLY IN
HIGH-YIELDING DEBT
SECURITIES, WITH AN
EMPHASIS ON LOWER-QUALITY
DEBT SECURITIES.
LIKE ALL MUTUAL FUNDS, THESE
SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CAI/SPH-PRO-0698
704233
PROSPECTUS
JUNE 26, 1998(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
CONTENTS
KEY FACTS 5 THE FUNDS AT A GLANCE
5 WHO MAY WANT TO INVEST
6 EXPENSES EACH FUND'S YEARLY OPERATING
EXPENSES.
7 FINANCIAL HIGHLIGHTS A SUMMARY OF
EACH FUND'S FINANCIAL DATA.
9 PERFORMANCE HOW EACH FUND HAS DONE
OVER TIME.
THE FUNDS IN DETAIL 10 CHARTER HOW EACH FUND IS ORGANIZED.
11 INVESTMENT PRINCIPLES AND RISKS EACH
FUND'S OVERALL APPROACH TO INVESTING.
14 BREAKDOWN OF EXPENSES HOW
OPERATING COSTS ARE CALCULATED AND WHAT
THEY INCLUDE.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS DIFFERENT WAYS TO
SET UP YOUR ACCOUNT, INCLUDING
TAX-ADVANTAGED RETIREMENT PLANS.
HOW TO BUY SHARES OPENING AN
ACCOUNT AND MAKING ADDITIONAL
INVESTMENTS.
HOW TO SELL SHARES TAKING MONEY OUT
AND CLOSING YOUR ACCOUNT.
INVESTOR SERVICES SERVICES TO HELP YOU
MANAGE YOUR ACCOUNT.
SHAREHOLDER AND 22 DIVIDENDS, CAPITAL GAINS,
ACCOUNT POLICIES AND TAXES
23 TRANSACTION DETAILS SHARE PRICE
CALCULATIONS AND THE TIMING OF PURCHASES
AND REDEMPTIONS.
24 EXCHANGE RESTRICTIONS
24 APPENDIX
KEY FACTS
THE FUNDS AT A GLANCE
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments (registered trademark) ,
which was established in 1946 and is now America's largest mutual fund
manager. Foreign affiliates of FMR may help choose investments for the
funds.
As with any mutual fund, there is no assurance that a fund will
achieve its goal.
CAPITAL & INCOME
GOAL: Income and capital growth.
STRATEGY: Invests mainly in debt securities and common and preferred
stocks, with an emphasis on lower-quality debt securities.
SIZE: As of April 30, 1998, the fund had over $2.3 billion in
assets.
HIGH INCOME
GOAL: High current income.
STRATEGY: Invests mainly in high-yielding debt securities, with an
emphasis on lower-quality debt securities.
SIZE: As of April 30, 1998, the fund had over $3.1 billion in
assets.
WHO MAY WANT TO INVEST
The funds may be appropriate for long -term, aggressive
investors who understand the potential risks and rewards of investing
in lower-quality debt, including defaulted securities and equity
securities . Investors must be willing to accept the funds' greater
price movements and credit risks.
Capital & Income i s designed for those who want both income and
capital growth from a portfolio of debt and equity investments with a
focus on lower-quality debt securities.
High Income is designed for those wh o want high current income
with some potential for capital growth from a portfolio consisting
mainly of lower-quality debt securities.
THE SPECTRUM OF
FIDELITY FUNDS
Broad categories of Fidelity
funds are presented here in
order of ascending risk.
Generally, investors seeking to
maximize return must assume
greater risk. The funds in this
prospectus are in the INCOME
category.
(solid bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(right arrow) INCOME Seeks income by
investing in bonds.
(solid bullet) GROWTH AND INCOME Seeks
long-term growth and income
by investing in stocks and
bonds.
(solid bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
The value of the funds' investments a nd the income they
generate will vary from day to day, and generally reflect interest
rates, market conditions, and other economic and political news. When
you sell your shares, they may be worth more or less than what you
paid for them. By themselves, the funds do not constitute a balanced
investment plan.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy,
sell, or exchange shares of a fund. In addition, you may be charged an
annual account maintenance fee if your account balance falls below
$2,500. See "Transaction Details," page , for an explanation of
how and when these charges apply.
SALES CHARGE ON PURCHASES NONE
AND REINVESTED DISTRIBUTIONS
DEFERRED SALES CHARGE ON REDEMPTIONS NONE
REDEMPTION FEE (TRADING FEE)
FOR FIDELITY CAPITAL & INCOME FUND 1.50%
ON SHARES HELD LESS THAN 365 DAYS
(AS A % OF AMOUNT REDEEMED)
REDEMPTION FEE (TRADING FEE)
FOR FIDELITY HIGH INCOME FUND 1.00%
ON SHARES HELD LESS THAN 270 DAYS
(AS A % OF AMOUNT REDEEMED)
ANNUAL ACCOUNT MAINTENANCE FEE $12.00
(FOR ACCOUNTS UNDER $2,500)
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets.
Each fund pays a management fee to FMR. FMR is responsible for the
payment of all other expenses for High Income with certain limited
exceptions. Capital & Income also incurs other expenses for services
such as maintaining shareholder records and furnishing shareholder
statements and financial reports. A fund's expenses are factored into
its share price or dividends and are not charged directly to
shareholder accounts (see "Breakdown of Expenses" page ).
The following figures are based on historical expenses, adjusted to
reflect current fees, of each fund and are calculated as a percentage
of average net assets of each fund. A portion of the brokerage
commissions that certain funds pay is used to reduce each of those
fund's expenses. Capital & In c ome has entered into arrangements
with its custodian and transfer agent whereby credits realized as a
result of uninvested cash balances are used to reduce custodian and
transfer agent expenses. Including these reductions, the total fund
operating expenses presented in the table would have been 0.82 %
for Capital & Income.
CAPITAL & INCOME
MANAGEMENT FEE 0.59%
12B-1 FEE NONE
OTHER EXPENSES 0.24%
TOTAL FUND OPERATING EXPENSES 0.83 %
HIGH INCOME
MANAGEMENT FEE 0.80%
12B-1 FEE NONE
OTHER EXPENSES 0.00%
TOTAL FUND OPERATING EXPENSES 0.80 %
EXAMPLES: Let's say, hypothetically, that each fund's annual return is
5% and that your shareholder transaction expenses and each fund's
annual operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses
if you close your account after the number of years indicated:
CAPITAL & INCOME
1 YEAR $ 8
3 YEARS $ 27
5 YEARS $ 46
10 YEARS $ 103
HIGH INCOME
1 YEAR $ 8
3 YEARS $ 26
5 YEARS $ 44
10 YEARS $ 99
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected expenses or returns, all of which may vary.
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow for Capital & Income and
High Income have been audited by Coopers & Lybrand L.L.P., independent
accoun tants. The funds' financial highlights , financial
statements, and reports of the auditor are included in each
fund 's Annual Report, and are incorporated by reference into
(are legally a part of) the funds' SAI. Contact Fidelity for a
fre e copy of an Annual Report or the SAI.
CAPITAL & INCOME
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.SELECTED PER-SHARE DATA AND RATIOS
2.YEARS ENDED APRIL 30 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
3.NET ASSET VALUE, $ 9.280 $ 9.340 $ 9.170 $ 9.590 $ 9.300 $ 8.320 $ 6.920 $ 6.710 $ 8.330 $ 8.720
BEGINNING OF PERIOD
4.INCOME FROM INVESTMENT .721B .605B .902 .814 .871 .645 .725 .722 .994 1.024
OPERATIONS
NET INVESTMENT INCOME
5. NET REALIZED AND 1.385 .093 .119 (.427) .249 .942 1.418 .196 (1.620) (.390)
UNREALIZED GAIN (LOSS)
6. TOTAL FROM INVESTMENT 2.106 .698 1.021 .387 1.120 1.587 2.143 .918 (.626) .634
OPERATIONS
7.LESS DISTRIBUTIONS (.710) (.762) (.724) (.617) (.730) (.619) (.746) (.708) (.994) (1.024)
FROM NET INVESTMENT INCOME
8. IN EXCESS OF NET -- -- (.133) (.202) (.119) -- -- -- -- --
INVESTMENT INCOME
9. TOTAL DISTRIBUTIONS (.710) (.762) (.857) (.819) (.849) (.619) (.746) (.708) (.994) (1.024)
10.REDEMPTION FEES ADDED TO .004 .004 .006 .012 .019 .012 .003 -- -- --
PAID IN CAPITAL
11.NET ASSET VALUE, END OF $ 10.680 $ 9.280 $ 9.340 $ 9.170 $ 9.590 $ 9.300 $ 8.320 $ 6.920 $ 6.710 $ 8.330
PERIOD
12.TOTAL RETURNA 23.59% 7.88% 11.72% 4.63% 12.46% 20.03% 32.95% 14.82% (8.24)% 7.54%
13.NET ASSETS, END OF PERIOD $ 2,356 $ 2,041 $ 2,270 $ 2,256 $ 2,734 $ 2,124 $ 1,579 $ 953 $ 1,062 $ 1,741
(IN MILLIONS)
14.RATIO OF EXPENSES TO .83% .87% .98% .96% .97% .91% .80% .81% .81% .77%
AVERAGE NET ASSETS
15.RATIO OF EXPENSES TO .82%C .86%C .98% .96% .97% .91% .80% .81% .81% .77%
AVERAGE NET ASSETS AFTER
EXPENSE REDUCTIONS
16.RATIO OF NET INVESTMENT 7.23% 6.53% 8.03% 7.38% 6.78% 7.45% 9.77% 11.26% 12.70% 11.96%
INCOME TO AVERAGE NET ASSETS
17.PORTFOLIO TURNOVER RATE 179% 309% 119% 78% 100% 102% 132% 108% 95% 72%
18.AVERAGE COMMISSION $ .0365 .0382
RATED
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
D FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
HIGH INCOME
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
19.SELECTED PER-SHARE DATA AND RATIOS
20.YEARS ENDED APRIL 30 1998 1997 1996 1995 1994 1993 1992 1991E
21.NET ASSET VALUE, BEGINNING $ 12.480 $ 12.510 $ 11.990 $ 11.880 $ 12.220 $ 11.900 $ 10.640 $ 10.000
OF PERIOD
22.INCOME FROM INVESTMENT 1.133D 1.054D 1.099 1.076 1.101 1.175 1.292 .811
OPERATIONS
NET INVESTMENT INCOME
23. NET REALIZED AND 1.431 .192 .723 .139 .357 .672 1.614 .602
UNREALIZED GAIN (LOSS)
24. TOTAL FROM INVESTMENT 2.564 1.246 1.822 1.215 1.458 1.847 2.906 1.413
OPERATIONS
25.LESS DISTRIBUTIONS (1.100) (1.033) (1.190) (.927) (.976) (1.183) (1.342) (.796)
FROM NET INVESTMENT INCOME
26. IN EXCESS OF NET -- -- -- (.109) (.078) -- -- --
INVESTMENT INCOME
27. FROM NET REALIZED GAIN (.310) (.250) (.087) (.080) (.790) (.370) (.320) --
28. IN EXCESS OF NET REALIZED -- -- (.033) -- -- -- -- --
GAIN
29. TOTAL DISTRIBUTIONS (1.410) (1.283) (1.310) (1.116) (1.844) (1.553) (1.662) (.796)
30.REDEMPTION FEES .006 .007 .008 .011 .046 .026 .016 .023
ADDED TO PAID IN CAPITAL
31.NET ASSET VALUE, $ 13.640 $ 12.480 $ 12.510 $ 11.990 $ 11.880 $ 12.220 $ 11.900 $ 10.640
END OF PERIOD
32.TOTAL RETURNB,C 21.62% 10.57% 16.06% 11.07% 12.70% 16.96% 29.76% 15.33%
33.NET ASSETS, END OF PERIOD $ 3,139 $ 1,890 $ 1,355 $ 810 $ 641 $ 601 $ 371 $ 101
(IN MILLIONS)
34.RATIO OF EXPENSES TO .80% .80% .80% .80% .75% .70% .70% .70%A
AVERAGE NET ASSETS
35.RATIO OF EXPENSES TO .80% .80% .79%F .80% .75% .70% .70% .70%A
AVERAGE NET ASSETS AFTER
EXPENSE REDUCTIONS
36.RATIO OF NET INVESTMENT 8.57% 8.51% 8.85% 8.41% 8.07% 9.57% 11.43% 11.98%A
INCOME TO AVERAGE NET ASSETS
37.PORTFOLIO TURNOVER RATE 85% 102% 170% 172% 213% 136% 99% 72%A
38.AVERAGE COMMISSION $ .0450 .0392
RATEG
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD AUGUST 29, 1990 (COMMENCEMENT OF OPERATIONS) TO
APRIL 30, 1991
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S
EXPENSES.
G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND
IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The
total returns that follow are based on historical fund results and do
not reflect the effect of taxes.
Each fund's fiscal year runs from May 1 through April 30. The tables
below show each fund's performance over past fiscal years compared to
different measures, including a comparative index and a competitive
funds average. The charts on page present calendar year performance.
AVERAGE ANNUAL TOTAL RETURNS
FISCAL PERIODS ENDED PAST 1 PAST 5 PAST 10
APRIL 30, 1998 YEAR YEARS YEARS/LIF
E OF FUND
CAPITAL & INCOMEA 23.59% 11.88% 12.23%
HIGH INCOME 21.62% 14.33% 17.38%B
MERRILL LYNCH HIGH YIELD MASTER INDEX 14.01% 10.93% 11.83%
LIPPER HIGH CURRENT YIELD FUNDS AVERAGE 16.59% 10.71% 10.48%
CUMULATIVE TOTAL RETURNS
FISCAL PERIODS ENDED PAST 1 PAST 5 PAST 10
APRIL 30, 1998 YEAR YEARS YEARS/LIF
E OF FUND
CAPITAL & INCOMEA 23.59% 75.29% 216.95%
HIGH INCOME 21.62% 95.37% 241.97%B
MERRILL LYNCH HIGH YIELD MASTER INDEX 14.01% 68.01% 206.02%
LIPPER HIGH CURRENT YIELD FUNDS AVERAGE 16.59% 66.59% 172.82%
A PRIOR TO DECEMBER 30, 1990, CAPITAL & INCOME OPERATED UNDER A
DIFFERENT INVESTMENT OBJECTIVE. ACCORDINGLY, THE FUND'S HISTORICAL
PERFORMANCE MAY NOT REPRESENT ITS CURRENT INVESTMENT POLICIES.
B FROM AUGUST 29, 1990 (COMMENCEMENT OF OPERATIONS)
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated
period of time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate
of return that, if achieved annually, would have produced the same
cumulative total return if performance had been constant over the
entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. Yields
are calculated according to a standard that is required for all stock
and bond funds. Because this differs from other accounting methods,
the quoted yield may not equal the income actually paid to
shareholders.
MERRILL LYNCH HIGH YIELD MASTER INDEX is a market capitalization
weighted index of all domestic and yankee high-yield bonds. Issues
included in the index have maturities of at least one year and have a
credit rating lower than BBB-/Baa3, but are not in default.
Unlike each fund's returns, the total returns of the
comparative index do not include the effect of any brokerage
commissions, transaction fees, or other costs of investing.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
THE COMPETITIVE FUNDS AVERAGE is the Lipper High Current Yield Funds
Average. As of April 30, 1998, the average reflected the performance
of 203 mutual funds with similar investment objectives. This
average, published by Lipper Analytical Services, Inc., excludes the
effect of sales loads.
The funds' recent strategies, performance, and holdings are detailed
twice a year in financial reports, which are sent to all shareholders.
For current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
YEAR-BY-YEAR TOTAL RETURNS
Calendar years
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
CAPITAL & INCOMEA
12.59% -3.22% -3.85% 29.82% 28.05% 24.90% -4.61% 16.74% 11.41% 14.70%
Merrill Lynch High Yield
Master Index
13.47% 4.23% -4.35% 34.58% 18.16% 17.18% -1.17% 19.91% 11.06% 12.82%
Lipper High Current Yield
Funds Average
12.89% -0.58% -10.13% 36.91% 17.52% 18.95% -3.85% 16.43% 13.67% 12.96%
Consumer Price Index
4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32% 1.70%
Percentage (%)
Row: 1, Col: 1, Value: 12.59
Row: 2, Col: 1, Value: -3.22
Row: 3, Col: 1, Value: -3.85
Row: 4, Col: 1, Value: 29.82
Row: 5, Col: 1, Value: 28.05
Row: 6, Col: 1, Value: 24.9
Row: 7, Col: 1, Value: -4.609999999999999
Row: 8, Col: 1, Value: 16.74
Row: 9, Col: 1, Value: 11.41
Row: 10, Col: 1, Value: 14.7
(LARGE SOLID BOX) Capital & Income
YEAR-BY-YEAR TOTAL RETURNS
Calendar years
1991 1992 1993 1994 1995 1996 1997
HIGH INCOME
34.33% 21.49% 21.86% 3.20% 18.5 2 % 14.16% 15.92%
Merrill Lynch
High Yield
Master Index
34.58% 18.16% 17.18% -1.17% 19.91% 11.06% 12.82%
Lipper High
Current YIeld
Funds Average
36.91% 17.52% 18.95% -3.85% 16.43% 13.67% 12.96%
Consumer Price
Index
3.06% 2.90% 2.75% 2.67% 2.54% 3.32% 1.70%
Percentage (%)
Row: 1, Col: 1, Value: 0.0
Row: 2, Col: 1, Value: 0.0
Row: 3, Col: 1, Value: 0.0
Row: 4, Col: 1, Value: 34.33
Row: 5, Col: 1, Value: 21.49
Row: 6, Col: 1, Value: 21.86
Row: 7, Col: 1, Value: 3.2
Row: 8, Col: 1, Value: 18.53
Row: 9, Col: 1, Value: 14.16
Row: 10, Col: 1, Value: 15.92
(LARGE SOLID BOX) High Income
A PRIOR TO DECEMBER 30, 1990, CAPITAL & INCOME OPERATED UNDER A
DIFFERENT INVESTMENT OBJECTIVE. ACCORDINGLY, THE FUND'S
HISTORICAL PERFORMANCE MAY NOT REPRESENT ITS CURRENT INVESTMENT
POLICIES.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders'
money and invests it toward a specified goal. Fidelity Capital &
Income Fund is a diversified fund of Fidelity Summer Street Trust, and
Fidelity High Income Fund is a diversified fund of Fidelity
Fixed-Income Trust. Both trusts are open-end management investment
companies. Fidelity Summer Street Trust was organized as a
Massachusetts business trust on March 23, 1977. Fidelity Fixed-Income
Trust was organized as a Massachusetts business trust on September 5,
1984. There is a remote possibility that one fund might become liable
for a misstatement in the prospectus about another fund.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet periodically throughout the year to oversee the
funds' activities, review contractual arrangements with companies that
provide services to the funds, and review the funds' performance. The
trustees serve as trustees for other Fidelity funds. The majority of
trustees are not otherwise affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL SHAREHOLDER MEETINGS AND MAIL PROXY
MATERIALS. These meetings may be called to elect or remove trustees,
change fundamental policies, approve a management contract, or for
other purposes. Shareholders not attending these meetings are
encouraged to vote by proxy. Fidelity will mail proxy materials in
advance, including a voting card and information about the proposals
to be voted on. The number of votes you are entitled to is based upon
the dollar value of your investment.
FMR AND ITS AFFILIATES
The funds are managed by FMR, which chooses their investments and
handles their business affairs. Fidelity Management & Research (U.K.)
Inc. (FMR U.K.), in London, England, and Fidelity Management &
Research (Far East) Inc. (FMR Far East), in Tokyo, Japan, assist FMR
with foreign investments.
David Glancy is Vice President and manager of Capital & Income,
which he has managed since January 1996. Previously, he managed
another Fidelity fund. Since joining Fidelity in 1990, Mr. Glancy has
worked as an analyst, portfolio assistant and manager.
Tom Soviero is Vice President and manager of High Income, which he
has managed since February 1996. He also manages several
institutional high-yield accounts for Fidelity. Since joining Fidelity
in 1989, Mr. Soviero has worked as an analyst, portfolio
assistant, manager, and director of high-yield research.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services.
Fidelity Service Company, Inc. (FSC) performs transfer agent servicing
functions for each fund.
FMR Corp. is the ultimate parent company of FMR, FMR U.K., and FMR Far
East. Members of the Edward C. Johnson 3d family are the predominant
owners of a class of shares of common stock representing approximately
49% of the voting power of FMR Corp. Under the Investment Company Act
of 1940 (the 1940 Act), control of a company is presumed where one
individual or group of individuals owns more than 25% of the voting
stock of that company; therefore, the Johnson family may be deemed
under the 1940 Act to form a controlling group with respect to FMR
Corp.
FMR may use its broker-dealer affiliates and other firms that sell
fund shares to carry out a fund's transactions, provided that the fund
receives brokerage services and commission rates comparable to those
of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
The yield and share price of a bond fund change daily based on changes
in interest rates and market conditions, and in response to other
economic, political or financial events. The types and maturities of
the securities a bond fund purchases and the credit quality of their
issuers will impact a bond fund's reaction to these events.
In general, bond prices rise when interest rates fall and fall when
interest rates rise. Longer-term bonds are usually more sensitive to
interest rate changes. In other words, the longer the maturity of a
bond, the greater the impact a change in interest rates is likely to
have on the bond's price. In addition, short-term interest rates and
long-term interest rates do not necessarily move in the same amount or
in the same direction. A short-term bond tends to react to changes in
short-term interest rates and a long-term bond tends to react to
changes in long-term interest rates.
The price of a bond is affected by the credit quality of its issuer.
Changes in the financial condition of an issuer, changes in general
economic conditions, and changes in specific economic conditions that
affect a particular type of issuer can impact the credit quality of an
issuer. Lower quality bonds generally tend to be more sensitive to
these changes than higher quality bonds.
Stock values fluctuate in response to the activities of individual
companies and general market and economic conditions.
CAPITAL & INCOME seeks income and capital growth by investing
primarily in debt instruments, convertible securities, and common and
preferred stocks. The fund has broad flexibility to pursue its goal by
investing in instruments of any type or quality, but FMR expects to
invest the majority of the fund's assets in debt instruments and
convertible securities, with particular emphasis on lower-quality
securities. Many of these securities present the risk of default or
may be in default. The fund may also invest in futures contracts and
other derivatives to adjust its investment exposure.
In pursuit of its goal, the fund may invest in the equity and debt
securities of domestic and foreign companies whose financial condition
is perceived to be troubled or uncertain. These companies may be
involved in bankruptcy proceedings, reorganizations, or financial
restructurings. These investments may be considered speculative and
may present substantial potential for loss as well as gain. As a
result, the fund's share price may be particularly volatile.
The fund's success depends on FMR's financial analysis and research,
and its ability to identify undervalued investments in the market.
FMR's analysis focuses on a company's relative values and its
potential for success in light of its current financial situation, its
industry position, economic conditions, and interest rate trends. FMR
also evaluates the probable outcome of any pending restructurings and
any legal or regulatory risks. Because of the fund's investment
strategy, its performance is especially affected by individual company
news.
HIGH INCOME seeks high current income by investing primarily in all
types of income-producing debt securities, preferred stocks, and
convertible securities. FMR normally invests at least 65% of the
fund's total assets in these securities. When consistent with its
goal, the fund may also consider the potential for growth of capital.
The fund may also invest in futures contracts and other derivatives to
adjust its investment exposure.
Although the fund has no limits on the quality and maturity of its
investments, its strategy typically leads to longer-term,
lower-quality, fixed-income securities. These domestic and foreign
investments may present the risk of default or may be in default. If
consistent with its investment objective, however, the fund can also
invest in common stocks, other equity securities, and debt securities
not currently paying interest but which are expected to do so in the
future. Performance is also especially affected by individual company
news. The success of the fund's investment strategy depends on FMR's
analysis of a company's relative values and its potential for success
in light of its current financial situation, its industry position,
economic conditions, and interest rate trends.
FMR may use various investment techniques to hedge a portion of a
fund's risks, but there is no guarantee that these strategies will
work as FMR intends. When you sell your shares of a fund, they may be
worth more or less than what you paid for them.
FMR normally invests each fund's assets according to its investment
strategy. Each fund also reserves the right to invest without
limitation in preferred stocks and investment-grade debt instruments
for temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related
risks. Any restrictions listed supplement those discussed earlier in
this section. A complete listing of each fund's limitations and more
detailed information about each fund's investments are contained in
the funds' SAI. Policies and limitations are considered at the time of
purchase; the sale of instruments is not required in the event of a
subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these
techniques unless it believes that they are consistent with a fund's
investment objective and policies and that doing so will help the fund
achieve its goal. Fund holdings and recent investment strategies are
detailed in each fund's financial reports, which are sent to
shareholders twice a year. For a free SAI or financial report, call
1-800-544-8888.
EQUITY SECURITIES may include common stocks , preferred stocks,
convertible securities, and warrants. Common stocks, the most familiar
type, represent an equity (ownership) interest in a corporation.
Although equity securities have a history of long-term growth in
value, their prices fluctuate based on changes in a company's
financial condition and on overall market and economic conditions.
Smaller companies are especially sensitive to these factors.
RESTRICTIONS: W ith respect to 75% of its total assets, each fund
may not invest in more than 10% of the outstanding voting securities
of a single issuer. For High Income, this limitation does not apply to
securities of other investment companies.
High Income may not i nvest more than 20% of its total assets in
equity securities. This restriction does not apply to income-producing
preferred stocks and convertible securities, nor to equity securities
acquired as part of a unit with fixed-income securities.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers
to borrow money from investors. The issuer generally pays the investor
a fixed, variable, or floating rate of interest, and must repay the
amount borrowed at maturity. Some debt securities, such as zero coupon
bonds, do not pay current interest, but are sold at a discount from
their face values.
Debt securities have varying levels of sensitivity to changes in
interest rates and varying degrees of credit quality. In general, bond
prices rise when interest rates fall, and fall when interest rates
rise. Longer-term bonds and zero coupon bonds are generally more
sensitive to interest rate changes.
Lower-quality debt securities are considered to have speculative
characteristics, and involve greater risk of default or price changes
due to changes in the issuer's creditworthiness, or they may already
be in default. The market prices of these securities may fluctuate
more than higher-quality securities and may decline significantly in
periods of general or regional economic difficulty. Lower-quality
securities may be thinly traded, making them difficult to sell
promptly at an acceptable price. Adverse publicity and changing
investor perceptions may affect the ability to obtain prices for, or
to sell these securities.
The default rate of lower-quality debt securities is likely to be
higher when issuers have difficulty meeting projected goals or
obtaining additional financing. This could occur during economic
recessions or periods of high interest rates. If an issuer defaults,
the fund may try to protect the interests of security holders if it
determines such action to be in the interest of its shareholders.
The following tables provide a summary of ratings assigned to debt
holdings (not including money market instruments) in the funds'
portfolios. These figures are dollar-weighted averages of month-end
portfolio holdings during the fiscal year ended April 1998, and are
presented as a percentage of total security investments. These
percentages are historical and do not necessarily indicate a fund's
current or future debt holdings.
U.S. GOVERNMENT SECURITIES are high-quality debt instruments issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of
the U.S. Government. Not all U.S. Government securities are backed by
the full faith and credit of the United States. For example, U.S.
Government securities such as those issued by Fannie Mae are supported
by the instrumentality's right to borrow money from the U.S. Treasury
under certain circumstances. Other U.S. Government securities, such as
those issued by the Federal Farm Credit Banks Funding Corporation, are
supported only by the credit of the entity that issued them.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies,
and securities issued by U.S. entities with substantial foreign
operations may involve additional risks and considerations. These
include risks relating to political, economic, or regulatory
conditions in foreign countries; fluctuations in foreign currencies;
withholding or other taxes; trading, settlement, custodial, and other
operational risks; and the potentially less stringent investor
protection and disclosure standards of foreign markets. Additionally,
governmental issuers of foreign debt securities may be unwilling to
pay interest and repay principal when due and may require that the
conditions for payment be renegotiated. All of these factors can make
foreign investments, especially those in emerging markets, more
volatile and potentially less liquid than U.S. investments.
ASSET-BACKED SECURITIES include interests in pools of debt securities,
commercial or consumer loans, or other receivables. The value of these
securities depends on many factors, including changes in interest
rates, the availability of information concerning the pool and its
structure, the credit quality of the underlying assets, the market's
perception of the servicer of the pool, and any credit enhancement
provided. In addition, these securities may be subject to prepayment
risk.
MORTGAGE SECURITIES include interests in pools of commercial or
residential mortgages, and may include complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed
securities. Mortgage securities may be issued by agencies or
instrumentalities of the U.S. Government or by private entities.
HIGH INCOME
Fiscal Year Ended April 1998 Debt Holdings, by Rating
MOODY'S INVESTORS
SERVICE STANDARD & POOR'S
(AS A % OF INVESTMENTS) (AS A % OF INVESTMENTS)
Average of Average of
Rating total investments Rating total investments
INVESTMENT GRADE
Highest quality Aaa -- AAA --
High quality Aa -- AA --
Upper-medium
grade A -- A --
Medium grade Baa 0.1 % BBB 1.6 %
LOWER QUALITY
Moderately
speculative Ba 9.8 % BB 7.8 %
Speculative B 45.6 % B 44.9 %
Highly
speculative Caa 8.4 % CCC 8.9 %
Poor quality Ca -- CC 0.6 %
Lowest quality,
no interest C -- C --
In default, in
arrears -- D 0.1 %
REFER TO THE APPENDIX FOR A MORE COMPLETE DISCUSSION OF THESE RATINGS.
THE FUND DOES NOT NECESSARILY RELY ON THE RATINGS OF MOODY'S OR S&P TO
DETERMINE COMPLIANCE WITH ITS DEBT QUALITY
POLICY. SECURITIES NOT RATED BY MOODY'S OR S&P AMOUNTED TO 5.3 %
OF THE FUND'S INVESTMENTS. THIS PERCENTAGE MAY
INCLUDE SECURITIES RATED BY OTHER NATIONALLY RECOGNIZED STATISTICAL
RATING ORGANIZATIONS, AS WELL AS UNRATED SECURITIES.
UNRATED LOWER-QUALITY SECURITIES AMOUNTED TO 5.3 % OF THE FUND'S
INVESTMENTS.
FOR FOREIGN GOVERNMENT SECURITIES NOT INDIVIDUALLY RATED BY A
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION, FMR ASSIGNS
THE RATING OF THE SOVEREIGN CREDIT OF THE ISSUING GOVERNMENT.
CAPITAL & INCOME
Fiscal Year Ended April 1998 Debt Holdings, by Rating
MOODY'S INVESTORS
SERVICE STANDARD & POOR'S
(AS A % OF INVESTMENTS) (AS A % OF INVESTMENTS)
Average of Average of
Rating total investments Rating total investments
INVESTMENT GRADE
Highest quality Aaa 0.4 % AAA 0.4 %
High quality Aa -- AA --
Upper-medium grade A 0.1 % A --
Medium grade Baa 0.3 % BBB 1.2 %
LOWER QUALITY
Moderately speculative Ba 6.9 % BB 6.7 %
Speculative B 40.9 % B 37.8 %
Highly speculative Caa 6.5 % CCC 10.3 %
Poor quality Ca -- CC 0.1 %
Lowest quality, no interest C -- C --
In default, in arrears -- D 0.2 %
REFER TO THE APPENDIX FOR A MORE COMPLETE DISCUSSION OF THESE RATINGS.
THE FUND DOES NOT NECESSARILY RELY ON THE RATINGS OF MOODY'S OR S&P TO
DETERMINE COMPLIANCE WITH ITS DEBT QUALITY
POLICY. SECURITIES NOT RATED BY MOODY'S OR S&P AMOUNTED TO 3.4 %
OF THE FUND'S INVESTMENTS. THIS PERCENTAGE MAY
INCLUDE SECURITIES RATED BY OTHER NATIONALLY RECOGNIZED STATISTICAL
RATING ORGANIZATIONS, AS WELL AS UNRATED SECURITIES.
UNRATED LOWER-QUALITY SECURITIES AMOUNTED TO 3.3 % OF THE FUND'S
INVESTMENTS.
FOR FOREIGN GOVERNMENT SECURITIES NOT INDIVIDUALLY RATED BY A
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION, FMR ASSIGNS
THE RATING OF THE SOVEREIGN CREDIT OF THE ISSUING GOVERNMENT.
The price of a mortgage security may be significantly affected by
changes in interest rates. Some mortgage securities may have a
structure that makes their reaction to interest rates and other
factors difficult to predict, making their price highly volatile.
Also, mortgage securities, especially stripped mortgage-backed
securities, are subject to prepayment risk. Securities subject to
prepayment risk generally offer less potential for gains during a
declining interest rate environment, and similar or greater potential
for loss in a rising interest rate environment.
STRIPPED SECURITIES are the separate income or principal components of
a debt security. The risks associated with stripped securities are
similar to those of other debt securities, although stripped
securities may be more volatile, and the value of certain types of
stripped securities may move in the same direction as interest rates.
U.S. Treasury securities that have been stripped by a Federal Reserve
Bank are obligations issued by the U.S. Treasury.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a
security at one price and simultaneously agrees to sell it back at a
higher price. Delays or losses could result if the other party to the
agreement defaults or becomes insolvent.
REAL ESTATE-RELATED INSTRUMENTS include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors
such as changes in real estate values and property taxes, interest
rates, cash flow of underlying real estate assets, overbuilding, and
the management skill and creditworthiness of the issuer. Real
estate-related instruments may also be affected by tax and regulatory
requirements, such as those relating to the environment.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices,
interest rates, currency exchange rates, commodity prices, or other
factors that affect security values. These techniques may involve
derivative transactions such as buying and selling options and futures
contracts, entering into currency exchange contracts or swap
agreements, purchasing indexed securities, and selling securities
short.
FMR can use these practices to adjust the risk and return
characteristics of a fund's portfolio of investments. If FMR judges
market conditions incorrectly or employs a strategy that does not
correlate well with a fund's investments, these techniques could
result in a loss, regardless of whether the intent was to reduce risk
or increase return. These techniques may increase the volatility of a
fund and may involve a small investment of cash relative to the
magnitude of the risk assumed. In addition, these techniques could
result in a loss if the counterparty to the transaction does not
perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other
borrower. They have additional risks beyond conventional debt
securities because they may entail less legal protection for a fund,
or there may be a requirement that the fund supply additional cash to
a borrower on demand.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined
by FMR, under the supervision of the Board of Trustees, to be
illiquid, which means that they may be difficult to sell promptly at
an acceptable price. The sale of some illiquid securities, and some
other securities, may be subject to legal restrictions. Difficulty in
selling securities may result in a loss or may be costly to a fund.
RESTRICTIONS: Each of Capital & Income and High Income may not
invest more than 15% of its assets in ill iquid securities.
WHEN-ISSUED AND FORWARD PURCHASE OR SALE TRANSACTIONS are trading
practices in which payment and delivery for the security take place at
a later date than is customary for that type of security. The market
value of the security could change during this period.
CASH MANAGEMENT. A fund may invest in money market securities, in
repurchase agreements, and in a money market fund available only to
funds and accounts managed by FMR or its affiliates, whose goal is to
seek a high level of current income while maintaining a stable $1.00
share price. A major change in interest rates or a default on the
money market fund's investments could cause its share price to change.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce
the risks of investing. This may include limiting the amount of money
invested in any one issuer or, on a broader scale, in any one
industry. Economic, business, or political changes can affect all
securities of a similar type.
RESTRICTIONS: With respect to 75% of its total assets, each fund may
not invest more than 5% in the securities of any one issuer. This
limitation does not apply to U.S. Government securities.
Each fund may not invest more than 25% of its total assets in
any one industry. This limitation does not apply to U.S. Government
securities.
BORROWING. Each fund may bor row from banks or from other funds
advised by FMR or its affiliates, or through reverse repurchase
agreements. If a fund borrows money, its share price may be subject to
greater fluctuation until the borrowing is paid off. If a fund makes
additional investments while borrowings are outstanding, this may be
considered a form of leverage.
RESTRICTIONS: Each fund may borrow on ly for temporary or
emergency purposes, but not in an amount exceeding 331/3% of its total
assets.
LENDING securities to broker-dealers and institutions, including
Fidelity Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a
means of earning income. This practice could result in a loss or a
delay in recovering a fund's securities. A fund may also lend money to
other funds advised by FMR or its affiliates.
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of a
fund's total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages
are fundamental, that is, subject to change only by shareholder
approval. The following paragraphs restate all those that are
fundamental. All policies stated throughout this prospectus, other
than those identified in the following paragraphs, can be changed
without shareholder approval.
CAPITAL & INCOME seeks to provide a combination of income and
capital growth by investing primarily in debt instruments and common
and preferred stocks.
HIGH INCOME seeks a high level of current income by investing
primarily in high-yielding, fixed-income securities. In pursuing this
objective, growth of capital may also be considered when consistent
with the fund's objective of seeking high current income.
With respect to 75% of total assets, each fund may not invest more
than 5% in the securities of any one issuer and Capital &
Income may not invest in more than 10% of the outstanding voting
securities of a single issuer. These limitations do not apply to U.S.
Government securities.
Each fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
securities.
Each fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 331/3% of its total assets.
Loans, in the aggregate, may not exceed 331/3% of each fund's total
assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of a fund's assets are reflected in its
share price or dividends; they are neither billed directly to
shareholders nor deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its
investments and business affairs. FMR in turn pays fees to affiliates
who provide assistance with these services. Capital & Income also pays
OTHER EXPENSES, which are explained below .
FMR may, from time to time, agree to reimburse the funds for
management fees and other expenses above a specified limit. FMR
retains the ability to be repaid by a fund if expenses fall below the
specified limit prior to the end of the fiscal year. Reimbursement
arrangements, which may be terminated at any time without notice, can
decrease a fund's expenses and boost its performance.
MANAGEMENT FEE AND OTHER EXPENSES
Each fund's management fee is calculated and paid to FMR every month.
FMR pays all of the other expenses of High Income with limited
exceptions. The annual management fee rate for High Income is
0.80% of its average net assets. For Capital & Income, the fee is
calculated by adding a group fee rate to an individual fund fee
rate, multiplying the result by the fund's monthly average net assets
and dividing by twelve.
The group fee rate is based on the average net assets of all the
mutual funds advised by FMR. This rate cannot rise above 0.37%, and it
drops as total assets under management increase.
For April 1998, the group fee rate was 0.13%. The individual fund
fee rate is 0.45% for Capital & Income. The total management fee for
Capital & Income for the fiscal year ended April 30, 1998 was 0.59% of
the fund's average net assets.
FMR HAS SUB-ADVISORY AGREEMENTS with FMR U.K. and FMR Far East. These
sub-advisers provide FMR with investment research and advice on
issuers based outside the United States. Under the sub-advisory
agreements, FMR pays FMR U.K. and FMR Far East fees equal to 110% and
105%, respectively, of the costs of providing these services.
The sub-advisers may also provide investment management services. In
return, FMR pays FMR U.K. and FMR Far East a fee equal to 50% of its
management fee rate with respect to Capital & Income's
investments that the sub-adviser manages on a discretionary basis.
While the management fee is a significant component of Capital &
Income's annual operating costs, this fund has other expenses as well.
The funds contract with FSC to perfor m transfer agency,
dividend disbursing, shareholder servicing, and accounting functions.
These services include processing shareholder transactions, valuing
each fund's investments, handling securities loans for each fund, and
calculating each fund's share price and dividends.
For the fiscal year ended April 1998, transfer agency and pricing
and bookkeeping fees paid (as a percentage of average net assets)
amounted to the following. These amounts are before expense
reductions, if any.
TRANSFER AGENCY AND
PRICING AND BOOKKEEPING FEES
PAID BY FUND
CAPITAL & INCOME 0.23%
In the case of High Income, FMR, n ot the fund, pays for these
services.
Capital & Income also pays other expenses, such as legal, audit, and
custodian fees; in some instances, proxy solicitation costs; and the
compensation of trustees who are not affiliated with Fidelity. A
broker-dealer may use a portion of the commissions paid by the fund to
reduce the fund's custodian or transfer agent fees.
High Income also pays other expens es, such as brokerage fees
and commissions, interest on borrowings, taxes, and the compensation
of trustees who are not affiliated with Fidelity.
Each fund has adopted a DISTRIBUTION AND SERVICE PLAN. Each
plan rec ognizes that FMR may use its management fee revenues, as
well as its past profits or its resources from any other source, to
pay FDC for expenses incurred in connection with the distribution of
fund shares. FMR directly, or through FDC, may make payments to third
parties, such as banks or broker-dealers, that engage in the sale of,
or provide shareholder support services for, the fund's shares.
Currently, the Board of Trustees of each fund has authorized
such payments.
For the fiscal year ended April 1998, the portfolio turnover
rates for Capital & Income and High Income were 179 % and
85 %, respectively. These rates vary from year to year. High
turnover rates increase transaction costs and may increase taxable
capital gains. FMR considers these effects when evaluating the
anticipated benefits of short-term investing.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of
America's first mutual funds. Today, Fidelity is the largest mutual
fund company in the country, and is known as an innovative provider of
high-quality financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, FBSI. Fidelity is also a
leader in providing tax-advantaged retirement plans for individuals
investing on their own or through their employer.
Fidelity is committed to providing investors with practical
information to make investment decisions. Based in Boston, Fidelity
provides customers with complete service 24 hours a day, 365 days a
year, through a network of telephone service centers around the
country and Fidelity's Web site.
To reach Fidelity for general information, call these numbers:
(solid bullet) For mutual funds, 1-800-544-8888
(solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity
has over 75 walk-in Investor Centers across the country.
If you would prefer to access informa tion on-line, you can visit
Fidelity's Web site at www.fidelity.com.
TYPES OF ACCOUNTS
You may set up an account directly in a fund or, if you own or intend
to purchase individual securities as part of your total investment
portfolio, you may consider investing in a fund through a brokerage
account.
You may purchase or sell shares of the funds through an investment
professional, including a broker, who may charge you a transaction fee
for this service. If you invest through FBSI, another financial
institution, or an investment professional, read their program
materials for any special provisions, additional service features or
fees that may apply to your investment in a fund. Certain features of
the fund, such as the minimum initial or subsequent investment
amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed in the table that follows.
The account guidelines that follow may not apply to certain retirement
accounts. If you are investing through a retirement account or if your
employer offers the funds through a retirement program, you may be
subject to additional fees. For more information, please refer to your
program materials, contact your employer, call your retire m ent
benefits number, visit Fidelity's W eb site at www.fidelity.com,
or contact Fidelity directly, as appropriate.
(CHECKMARK)
Fidelity Facts
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual funds: over 225
(solid bullet) Assets in Fidelity mutual funds: over $595 billion
(solid bullet) Number of shareholder accounts: over 37 million
(solid bullet) Number of investment analysts and portfolio managers:
over 250
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have
two or more owners (tenants).
RETIREMENT
FOR TAX-ADVANTAGE D RETIREMENT SAVINGS
Retirement plans provide individuals with tax-advantaged ways to save
for retirement, either with tax-deductible contributions or tax-free
growth. Retirement accounts require special applications and typically
have lower minimums.
(solid bullet) TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNTS (IRAS)
allow individuals under age 70 with compensation to contribute up to
$2,000 per tax year. Married couples can contribute up to $4,000 per
tax year, provided no more than $2,000 is contributed on behalf of
either spouse. (These limits are aggregate for Traditional and Roth
IRAs.) Contributions may be tax-deductible, subject to certain income
limits.
(solid bullet) ROTH IRAS allow individuals to make non-deductible
contributions of up to $2,000 per tax year. Married couples can
contribute up to $4,000 per tax year, provided no more than $2,000 is
contributed on behalf of either spouse. (These limits are aggregate
for Traditional and Roth IRAs.) Eligibility is subject to certain
income limits. Qualified distributions are tax-free.
(solid bullet) ROTH CONVERSION IRAS allow individuals with assets
held in a Traditional IRA or Rollover IRA to convert those assets to a
Roth Conversion IRA. Eligibility is subject to certain income limits.
Qualified distributions are tax-free.
(solid bullet) ROLLOVER IRAS hel p retain special tax advantages
for certain eligible rollover distributions from employer-sponsored
retirement plans.
(solid bullet) KEOGH PLANS are generally profit sharing or money
purchase pension plans that allow self-employed individuals or small
business owners to make tax-deductible contributions for themselves
and any eligible employees.
(solid bullet) SIMPLE IRAS provide small business owners and those
with self-employment income (and their eligible em ployees) with
many of the advantages of a 401(k) plan, but with fewer administrative
requirements.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS)
provide small business owners or those with self-employment income
(and their eligible employees) with many of the same advantages as a
Keogh, but with fewer administrative requirements.
(solid bullet) SALARY REDUCTION SEP-IRAS (SARSEPS) allow employees
of businesses with 25 or fewer employees to contribute a percentage of
their wages on a tax-deferred basis. These plans must have been
established by the employer prior to January 1, 1997.
(solid bullet) 403(B) CUSTODIAL ACCOUNTS are available to
employees of 501(c)(3) tax-exempt institutions, including schools,
hospitals, and other charitable organizations.
(solid bullet) DEFERRED COMPENSATION PLANS (457 PLANS) are
available to employees of most state and local governments and their
agencies and to employees of tax-exempt institutions.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and
obtain tax benefits. An individual can give up to $10,000 a year per
child without paying federal gift tax. Depending on state laws, you
can set up a custodial account under the Uniform Gifts to Minors Act
(UGMA) or the Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR
OTHER GROUPS
Requires a special application.
HOW TO BUY SHARES
THE PRIC E TO BUY ONE SHARE of each fund is the fund's net asset
value per share (NAV). Each fund's shares are sold without a sales
charge.
Your shares will be purchased at the next NAV calculated after your
invest ment is received in proper form. Each fund's NAV is
normally calculated each business day at 4:00 p.m. Eastern time.
Each fun d reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange
Restrictions" on page 37 . Purchase orders may be refused if, in
FMR's opinion, they would disrupt management of a fund.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application
and mail it along with your check. You may also open your account in
person or by wire as described on page 28. If there is no application
accompanying this prospectus, call 1-800-544-8888 or visit
Fi delity's Web site at www.fidelity.com for an application.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(solid bullet) Mail in an application with a check, or
(solid bullet) Open your account by exchanging from another Fidelity
fund.
IF YOU ARE INVESTING THROUGH A TAX-ADVANTAGED RETIREMENT PLAN, such as
an IRA, for the first time, you will need a special application.
Retirement investing also involves its own investment procedures. Call
1-800-544-8888 or visit Fidelity's Web site at www.fideli ty.com
for more information and a retirement application.
If you buy shares by check or Fidelity Money LineR, and then sell
those shares by any method other than by exchange to another Fidelity
fund, the payment may be delayed for up to seven business days to
ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For certain Fidelity retirement accountsA $500
TO ADD TO AN ACCOUNT $250
For certain Fidelity retirement accountsA $250
Through regular investment plansB $100
MINIMUM BALANCE $2,000
For certain Fidelity retirement accountsA $500
A THESE LOWER MINIMUMS APPLY TO FIDELITY TRADITIONAL IRA, ROTH IRA,
ROTH CONVERSION IRA, ROLLOVER IRA, SEP-IRA, AND KEOGH ACCOUNTS.
B FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER TO
"INVESTOR SERVICES," PAGE 31 .
There is no minimum account balance or initial or subsequent
investment minimum for investments through Fidelity Portfolio
Advisory ServicesSM, a qualified state tuition program, certain
Fidelity retirement accounts funded through salary deduction, or
accounts opened with the proceeds of distribu tions from such
Fidelity retirement ac counts. Refer to the program materials for
details. In addition, each fund reserves the right to waive or
lower investment minimums in other circumstances.
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone (solid bullet) Exchange from another (solid bullet) Exchange from another
1-800-544-7777 Fidelity fund account with Fidelity fund account with
the same registration, the same registration,
including name, address, including name, address, and
and taxpayer ID number. taxpayer ID number.
(solid bullet) Use Fidelity Money Line to
transfer from your bank
account. Call before your
first use to verify that this
service is in place on your
account. Maximum Money
Line: up to $100,000.
Internet (solid bullet) Complete and sign the (solid bullet) Exchange from another
www.fidelity.com application. Make your Fidelity fund account with
check payable to the the same registration,
complete name of the fund. including name, address, and
Mail to the address taxpayer ID number.
indicated on the application.(solid bullet) Use Fidelity Money Line to
transfer from your bank
account. Visit Fidelity's Web
site before your first use to
verify that this service is in
place on your account.
Maximum Money Line: up
to $100,000.
Mail (solid bullet) Complete and sign the (solid bullet) Make your check payable to
application. Make your the complete name of the
check payable to the fund. Indicate your fund
complete name of the fund. account number on your
Mail to the address check and mail to the
indicated on the address printed on your
application. account statement.
(solid bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
In Person (solid bullet) Bring your application and (solid bullet) Bring your check to a
check to a Fidelity Investor Fidelity Investor Center. Call
Center. Call 1-800-544-9797 for the
1-800-544-9797 for the center nearest you.
center nearest you.
Wire (solid bullet) Call 1-800-544-7777 to (solid bullet) Not available for retirement
set up your account and to accounts.
arrange a wire transaction. (solid bullet) Wire to:
Not available for retirement Bankers Trust Company,
accounts. Bank Routing #021001033,
(solid bullet) Wire within 24 hours to: Account #00163053.
Bankers Trust Company, Specify the complete name
Bank Routing #021001033, of the fund and include your
Account #00163053. account number and your
Specify the complete name name.
of the fund and include
your new account number
and your name.
Automatically (solid bullet) Not available. (solid bullet) Use Fidelity Automatic
Account Builder. Sign up for
this service when opening
your account, visit Fidelity's
Web site at
www.fidelity.com to obtain
the form to add the service,
or call 1-800-544-6666 to
add the service.
TDD - Service for the Deaf and Hearing-Impaired: 1-800-544-0118
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HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares.
THE PRICE TO SELL ONE SHARE of each fund is the fund's NAV minus the
trading fee, if applicable. If you sell shares of Capital & Income
after holding them less than 365 days, the fund will deduct a trading
fee equal to 1.50% of the value of those shares. If y ou sell
shares of High Income after holding them less than 270 days, the fund
will deduct a trading fee equal to 1.00% of the value of those shares.
Your shares will be sold at the next NAV calculated after your
order is received in proper form, minus the trad ing fee, if
applicable. Each fund's NAV is normally calculated each business day
at 4:00 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the
methods described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be
made in writing, except for exchanges to other Fidelity funds, which
can be requested by phone, in writing, or through Fidelity's Web
site. Call 1-800-544-6666 for a retirement distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$2,000 worth of shares in the account to keep it open ($500 for
retirement accounts) .
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to
sign up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in
writing and include a signature guarantee if any of the following
situations apply:
(solid bullet) You wish to redeem more than $100,000 worth of shares,
(solid bullet) Your account registration has changed within the last
30 days,
(solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(solid bullet) The check is being made payable to someone other than
the account owner, or
(solid bullet) The redemption proceeds are being transferred to a
Fidelity account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if
authorized under state law), securities exchange or association,
clearing agency, or savings association. A notary public cannot
provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(solid bullet) Your name,
(solid bullet) The fund's name,
(solid bullet) Your fund account number,
(solid bullet) The dollar amount or number of shares to be redeemed,
and
(solid bullet) Any other applicable requirements listed in the table
that follows.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it
to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
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ACCOUNT TYPE SPECIAL REQUIREMENTS
IF YOU SELL SHARES OF CAPITAL & INCOME AFTER HOLDING THEM LESS THAN 365 DAYS, THE FUND WILL
DEDUCT A TRADING FEE EQUAL TO 1.50% OF THE VALUE OF THOSE SHARES. IF YOU SELL SHARES OF HIGH
INCOME AFTER HOLDING THEM LESS THAN 270 DAYS, THE FUND WILL DEDUCT A TRADING FEE EQUAL TO
1.00% OF THE VALUE OF THOSE SHARES.
Phone All account types (solid bullet) Maximum check request:
1-800-544-7777 except retirement $100,000.
(PHONE_GRAPHIC) All account types (solid bullet) For Money Line transfers to
your bank account; minimum:
$10; maximum: up to
$100,000.
(solid bullet) You may exchange to other
Fidelity funds if both accounts
are registered with the same
name(s), address, and taxpayer
ID number.
Mail or in Person Individual, Joint (solid bullet) The letter of instruction must
(MAIL_GRAPHIC) Tenant, Sole be signed by all persons
(HAND_GRAPHIC) Proprietorship, required to sign for
UGMA, UTMA transactions, exactly as their
Retirement account names appear on the account.
(solid bullet) The account owner should
complete a retirement
Trust distribution form. Call
1-800-544-6666 to request
one.
(solid bullet) The trustee must sign the letter
Business or indicating capacity as trustee.
Organization If the trustee's name is not in
the account registration,
provide a copy of the trust
document certified within the
last 60 days.
Executor, (solid bullet) At least one person authorized
Administrator, by corporate resolution to act
Conservator, on the account must sign the
Guardian letter.
(solid bullet) Include a corporate resolution
with corporate seal or a
signature guarantee.
(solid bullet) Call 1-800-544-6666 for
instructions.
Wire All account types (solid bullet) You must sign up for the wire
(WIRE_GRAPHIC) except retirement feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(solid bullet) Your wire redemption request
must be received in proper
form by Fidelity before 4:00
p.m. Eastern time for money to
be wired on the next business
day.
TDD - Service for the Deaf and Hearing-Impaired: 1-800-544-0118
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INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your
account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365
days a year. Whenever you call, you can speak with someone equipped to
provide the information or service you need.
FIDELITY'S WEB SITE at www.fidelity.com offers product and
servicing information, customer education, planning tools, and the
ability to make certain transactions in your account.
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your
account registration)
(solid bullet) Account statements (quarterly)
(solid bullet) Financial reports (every six months)
(CHECKMARK)
24-Hour Service
Account Assistance
1-800-544-6666
Account Transactions
1-800-544-7777
Product Information
1-800-544-8888
Retirement Account Assistance
1-800-544-4774
TouchTone Xpressr
1-800-544-5555
Web Site
www.fidelity.com
Automated service
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more
than one account in the fund. Call 1-800-544-6666 if you need copies
of financial reports, prospectuses, or historical account information.
Electronic copies of most financial reports and prospectuses are
available at Fidelity's Web site. To participate in our
electronic delivery program, call 1-800-544-6666 or visit
Fidelity's Web site at www.fidelity.com for more information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of
other Fidelity funds by telephone, in writ ing, or through
Fidelity's Web site.
Note that exchanges out of a fund are limited to four per calendar
year, and that they may have tax consequences for you. For details on
policies and restrictions governing exchanges, including circumstances
under which a shareholder's exchange privilege may be suspended or
revoked, see page 37.
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from
your account.
FIDELITY MONEY LINE enables you to transfer money by phone between
your bank account and your fund account. Most transfers are complete
within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money
regularly. Fidelity offers convenient services that let you transfer
money into your fund account, or between fund accounts, automatically.
While regular investment plans do not guarantee a profit and will not
protect you against loss in a declining market, they can be an
excellent way to invest for retirement, a home, educational expenses,
and other long-term financial goals. Certain restrictions apply for
retirement accounts. Call 1-800-544-6666 or visit Fidelity's Web
site at www.fidelity.com for more information.
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REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDER r(REGISTERED TRADEMARK)
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or (solid bullet) For a new account, complete the appropriate
quarterly section on the fund application.
(solid bullet) For existing accounts, call 1-800-544-6666
or visit Fidelity's Web site at
www.fidelity.com for an application.
(solid bullet) To change the amount or frequency of your
investment, call 1-800-544-6666 at least
three business days prior to your next
scheduled investment date.
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay (solid bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 or visit
Fidelity's Web site at www.fidelity.com for
an authorization form.
(solid bullet) Changes require a new authorization form.
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, (solid bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (solid bullet) To change the amount or frequency of your
annually investment, call 1-800-544-6666.
A BECAUSE THEIR SHARE PRICES FLUCTUATE, THESE FUNDS MAY NOT BE APPROPRIATE
CHOICES FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
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SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Ea ch fund distributes substantially all of its net investment
income and capital gains to shareholders each year. Income dividends
are declared daily and paid monthly. Capital gains are normally
distributed in June and December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on
the application, call 1-800-544-6666 for instruc tion s. Each
fund offers four options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions
will be automatically reinvested in additional shares of the fund. If
you do not indicate a choice on your application, you will be assigned
this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each
dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
If you select distribution option 2 or 3 and the U.S. Postal
Service does not deliver your checks, your election may be converted
to the Reinvestment Option. You will not receive interest on amounts
represented by uncashed distribution checks. To change your
distribution option, call Fidelity at 1-800-544-6666.
Dividends will be reinvested at the fund's NAV on the last day of the
month. Capital gain distributions will be reinvested at the NAV as of
the date the fund deducts the distribution from its NAV. The mailing
of distribution checks will begin within seven days.
UNDERSTANDING
DISTRIBUTIONS
AS A FUND SHAREHOLDER, YOU ARE
ENTITLED TO YOUR SHARE OF THE
FUND'S NET INCOME AND GAINS
ON ITS INVESTMENTS. THE FUND
PASSES ITS EARNINGS ALONG TO ITS
INVESTORS AS DISTRIBUTIONS.
EACH FUND EARNS INTEREST FROM
ITS INVESTMENTS. THESE ARE
PASSED ALONG AS DIVIDEND
DISTRIBUTIONS. THE FUND MAY
REALIZE CAPITAL GAINS IF IT SELLS
SECURITIES FOR A HIGHER PRICE
THAN IT PAID FOR THEM. THESE
ARE PASSED ALONG AS CAPITAL
GAIN DISTRIBUTIONS.
(CHECKMARK)
TAXES
As with any investment, you should consider how your investment in a
fund will be taxed. If your account is not a tax-advantaged retirement
account, you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income
tax, and may also be subject to state or local taxes. If you live
outside the United States, your distributions could also be taxed by
the country in which you reside. Your distributions are taxable when
they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are
taxable as if they were paid on December 31.
For federal tax purposes, each fund's income and short-term
capital gains are distributed as dividends and taxed as ordinary
income; capital gain distributions are taxed as long-term capital
gains. Every January, Fidelity will send you and the IRS a statement
showing the tax characterization of distributions paid to you in the
previous year.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or
loss is the difference between the cost of your shares and the price
you receive when you sell them.
Whenever you sell shares of a fund, Fidelity will send you a
confirmation statement showing how many shares you sold and at what
price. You will also receive a consolidated transaction statement
every January. However, it is up to you or your tax preparer to
determine whether this sale resulted in a capital gain and, if so, the
amount of tax to be paid. Be sure to keep your regular account
statements; the information they contain will be essential in
calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares when a fund has realized but
not yet distributed capital gains, you will pay the full price for the
shares and then receive a portion of the price back in the form of a
taxable distribution.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on a
fund and its investments, and these taxes generally will reduce a
fund's distributions. However, if you meet certain holding period
requirements with respect to your fund shares, an offsetting tax
credit may be available to you. If you do not meet such holding period
requirements, you may still be entitled to a deduction for certain
foreign taxes. In either case, your tax statement will show more
taxable income or capital gains than were actually distributed by the
fund, but will also show the amount of the available offsetting credit
or deduction.
There are tax requirements that all funds must follow in order to
avoid federal taxation. In its effort to adhere to these requirements,
a fund may have to limit its investment activity in some types of
instruments.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. FSC normally calculates each fund's NAV as of the
close of business of the NYSE, normally 4:00 p.m. Eastern time.
EACH F UN D'S NAV is the value of a single share. The NAV is
computed by adding the value of the fund's investments, cash, and
other assets, subtracting its liabilities, and then dividing the
result by the number of shares outstanding.
Each fund's assets are valued on the basis of information furnished by
a pricing service or market quotations, if available, or by another
method that the Board of Trustees believes accurately reflects fair
value. Short-term securities with remaining maturities of sixty days
or less for which quotations and information furnished by a pricing
service are not readily available are valued on the basis of amortized
cost. This method minimizes the effect of changes in a security's
market value. Foreign securities are valued on the basis of quotations
from the primary market in which they are traded, and are translated
from the local currency into U.S. dollars using current exchange
rates. If the values have been materially affected by events occurring
after the closing of a foreign market, assets may be valued by another
method that the Board of Trustees believes accurately reflects fair
value.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify
that your social security or taxpayer identification number is correct
and that you are not subject to 31% backup withholding for failing to
report income to the IRS. If you violate IRS regulations, the IRS can
require a fund to withhold 31% of your taxable distributions and
redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE OR ELECTRONICALLY.
Fidelity will not be responsible for any losses resulting from
unauthorized transactions if it follows reasonable security procedures
designed to verify the identity of the investor. Fidelity will request
personalized security codes or other information, and may also record
calls. For transactions conducted through the Internet, Fidelity
recommends the use of an Internet browser with 128-bit encryption. You
should verify the accuracy of your confirmation statements immediately
after you receive them. If you do not want the ability to redeem and
exchange by telephone, call Fidelity for instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during
periods of unusual market activity), consider placing your order by
mail or by visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT to suspend the offering of shares for
a period of time.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased
at the next NAV calculated after your investment is received in
proper form. Note the following:
(small solid bullet) All of your purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check,
each check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number
of checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will
be canceled and you could be liable for any losses or fees a fund or
its transfer agent has incurred.
(small solid bullet) Shares begin to earn dividends on the first
business day following the day of purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money
order, U.S. Treasury check, Federal Reserve check, or direct deposit
instead.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements
with FDC may enter confirmed purchase orders on behalf of customers by
phone, with payment to follow no later than the time when a fund is
priced on the following business day. If payment is not received by
that time, the financial institution could be held liable for
resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at
the next NAV calculated after your order is received in proper
form, minus the trading fee, if applicable. Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to
you on the next business day, but if making immediate payment could
adversely affect a fund, it may take up to seven days to pay you.
(small solid bullet) Shares earn dividends through the day of
redemption; however, shares redeemed on a Friday or prior to a holiday
continue to earn dividends until the next business day.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day
after your phone call.
(small solid bullet) Each fund may hold payment on redemptions until
it is reasonably satisfied that investments made by check or Fidelity
Money Line have been collected, which can take up to seven business
days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays),
when trading on the NYSE is restricted, or as permitted by the SEC.
You will not receive interest on amounts represented by uncashed
redemption checks.
A TRADING FEE of 1.50% will be deducted from the redemption amount if
you sell your shares of Capital & Income after holding them less than
365 days. A trading fee of 1.00% will be deducted from the redemption
amount if you sell your shares of High Income after holding them less
than 270 days. This fee is paid to the fund rather than Fidelity, and
is designed to offset the brokerage commissions, market impact, and
other costs associated with fluctuations in fund asset levels and cash
flow caused by short-term shareholder trading.
The trading fee, if applicable, is charged on exchanges out of a fund.
If you bought shares on different days, the shares you held longest
will be redeemed first for purposes of determining whether the trading
fee applies. The trading fee does not apply to shares that were
acquired through reinvestment of distributions.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of
$12.00 from accounts with a value of less than $2,500, subject to an
annual maximum charge of $24.00 per shareholder. It is expected that
accounts will be valued on the second Friday in November of each year.
Accounts opened after September 30 will not be subject to the fee for
that year. The fee, which is payable to the transfer agent, is
designed to offset in part the relatively higher costs of servicing
smaller accounts. This fee will not be deducted from Fidelity
brokerage accounts, retirement accounts (except non-prototype
retirement accounts), accounts using regular investment plans, or if
total assets with Fidelity exceed $30,000. Eligibility for the $30,000
waiver is determined by aggregating Fidelity accounts maintained by
FSC or FBSI which are registered under the same social security number
or which list the same social security number for the custodian of a
Uniform Gifts/Transfers to Minors Act account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $2,000 you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send
the proceeds to you. Your shares will be redeemed at the NAV, minus
the trading fee, if applicable, on the day your account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC may, at its own expense, provide promotional incentives to
qualified recipients who support the sale of shares of the funds
without reimbursement from the funds. Qualified recipients are
securities dealers who have sold fund shares or others, including
banks and other financial institutions, under special arrangements in
connection with FDC's sales activities. In some instances, these
incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or
expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a
fund for shares of other Fidelity funds. However, you should note the
following:
(small solid bullet) The fund you are exchanging into must be
available for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification
number.
(small solid bullet) Before exchanging into a fund, read its
prospectus.
(small solid bullet) If you exchange into a fund with a sales charge,
you pay the percentage-point difference between that fund's sales
charge and any sales charge you have previously paid in connection
with the shares you are exchanging. For example, if you had already
paid a sales charge of 2% on your shares and you exchange them into a
fund with a 3% sales charge, you would pay an additional 1% sales
charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund
performance and shareholders, each fund reserves the right to
temporarily or permanently terminate the exchange privilege of any
investor who makes more than four exchanges out of the fund per
calendar year. Accounts under common ownership or control, including
accounts with the same taxpayer identification number, will be counted
together for purposes of the four exchange limit.
(small solid bullet) The exchange limit may be modified for accounts
in certain institutional retirement plans to conform to plan exchange
limits and Department of Labor regulations. See your plan materials
for further information.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would
be unable to invest the money effectively in accordance with its
investment objective and policies, or would otherwise potentially be
adversely affected.
(small solid bullet) Your exchanges may be restricted or refused if a
fund receives or anticipates simultaneous orders affecting significant
portions of the fund's assets. In particular, a pattern of exchanges
that coincides with a "market timing" strategy may be disruptive to a
fund.
Although the funds will attempt to give you prior notice whenever they
are reasonably able to do so, they may impose these restrictions at
any time. The funds reserve the right to terminate or modify the
exchange privilege in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to 1.00% and trading fees of up to 3.00%
of the amount exchanged. Check each fund's prospectus for details.
APPENDIX
DESCRIPTION OF MOODY'S INVESTORS SERVICE RATINGS OF CORPORATE BONDS
Moody's ratings for obligations with an original remaining maturity in
excess of one year fall within nine categories. They range from Aaa
(highest quality) to C (lowest quality). Moody applies numerical
modifiers of 1, 2, or 3 to each generic rating classification from Aa
through B. The modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks
on the lower end of its generic rating category.
AAA - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high-grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than the Aaa securities.
A- Bonds that are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
BAA - Bonds that are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
BA - Bonds that are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.
CAA - Bonds that are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect
to principal or interest.
CA - Bonds that are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked short-comings.
C - Bonds that are rated C are the lowest-rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
DESCRIPTION OF STANDARD & POOR'S RATINGS OF CORPORATE BONDS
Debt issues may be designated by Standard & Poor's as either
investment grade ("AAA" through "BBB") or speculative grade ("BB"
through "D"). While speculative grade debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major exposures to adverse conditions. Ratings from
AA to CCC may be modified by the addition of a plus sign (+) or minus
sign (-) to show relative standing within the major rating categories.
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher-rated issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher-rated categories.
BB - Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments. The BB rating category is also used
for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating.
B - Debt rated B has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair
capacity or willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and
economic conditions to meet timely payment of interest and repayment
of principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied B or
B- rating.
CC - Debt rated CC is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C
rating may be used to cover a situation where a bankruptcy petition
has been filed but debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest
is being paid.
D - Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The
D rating will also be used upon the filing of a bankruptcy petition if
debt service payments are jeopardized.
Fidelity, Fidelity Investments & (Pyramid) Design, Fidelity
Investments, Fidelity Money Line, TouchTone Xpress, Fidelity Automatic
Account Builder, Spartan, and Directed Dividends are registered
trademarks of FMR Corp.
Portfolio Advisory Services is a service mark of FMR Corp.
The third party marks appearing above are the marks of their
respective owners.
This prospectus is printed on recycled paper using soy-based inks.
FIDELITY CAPITAL & INCOME FUND
A FUND OF FIDELITY SUMMER STREET TRUST
FIDELITY HIGH INCOME FUND (FORMERLY SPARTAN(registered trademark)
HIGH INCOME FUND)
A FUND OF FIDELITY FIXED-INCOME TRUST
STATEMENT OF ADDITIONAL INFORMATION
JUNE 26, 1998
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the funds' current Prospectus
(dated June 26, 1998 ). Please retain this document for future
reference. The funds' Annual Reports are separate documents supplied
with this SAI. To obtain a free additional copy of the Prospectus or
an Annual Report, please call Fidelity (registered trademark) at
1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations 29
Portfolio Transactions 35
Valuation 37
Performance 37
Additional Purchase , Exchange and Redemption Information 41
Distributions and Taxes 41
FMR 41
Trustees and Officers 41
Management Contracts 44
Distribution and Service Plans 47
Contracts with FMR Affiliates 47
Description of the Trusts 48
Financial Statements 49
Appendix 49
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc. (FMR U.K.)
Fidelity Management & Research (Far East) Inc. (FMR Far East)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Service Company, Inc. (FSC)
CAI/SPH-ptb-0698
4 75960
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in
the Prospectus. Unless otherwise noted, whenever an investment policy
or limitation states a maximum percentage of a fund's assets that may
be invested in any security or other asset, or sets forth a policy
regarding quality standards, such standard or percentage limitation
will be determined immediately after and as a result of the fund's
acquisition of such security or other asset. Accordingly, any
subsequent change in values, net assets, or other circumstances will
not be considered when determining whether the investment complies
with the fund's investment policies and limitations.
A fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940 (the
1940 Act)) of the fund. However, except for the fundamental investment
limitations listed below, the investment policies and limitations
described in this SAI are not fundamental and may be changed without
shareholder approval.
INVESTMENT LIMITATIONS OF CAPITAL & INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) 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;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount
not exceeding 331/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with
the 331/3% limitation;
(4) 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;
(5) 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;
(6) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments
backed by real estate or securities of companies engaged in the real
estate business);
(7) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed
by physical commodities); or
(8) lend any security or make any other loan if, as a result, more
than 331/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company with substantially the
same fundamental investment objective, policies and limitations as the
fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL, AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) 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 agree ments
are treated as borrowings for purposes of fundamental investment
limitation (3)). The fund will not borrow from other funds advised
by FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
(iv) The fund does not currently intend to purchase any security if,
as a result, more than 15% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 7.5%
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.)
(vi) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 15% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF HIGH INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer (other than obligations
issued or guaranteed by the government of the United States or its
agencies or instrumentalities) if, as a result, (a) more than 25% of
the value of its total assets would be invested in the securities of a
single issuer, or (b) with respect to 75% of its total assets, more
than 5% of the value of its total assets would be invested in the
securities of a single issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount
not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with
the 33 1/3% limitation;
(4) underwrite securities issued by others (except to the extent that
the fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities);
(5) purchase the securities of any issuer (other than obligations
issued or guaranteed by the government of the United States or its
agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets (taken at current value) would be invested in the
securities of issuers having their principal business activities in
the same industry;
(6) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments
backed by real estate or securities of companies engaged in the real
estate business);
(7) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed
by physical commodities); or
(8) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (but
this limit does not apply to purchases of debt securities or to
repurchase agreements).
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) With respect to 75% of its total assets, the fund does not
currently intend to 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, the fund would own more than 10% of the
outstanding voting securities of that issuer.
(ii) The fund does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to
constitute selling securities short.
(iii) The fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(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 (3)). The fund will not borrow from oth er funds advised
by FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
(v) The fund does not currently intend to purchase any security if, as
a result, more than 15% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(vi) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 7.5%
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.)
With respect to limitation (v), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 15% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
The following pages contain more detailed information about types
of instruments in which a fund may invest, strategies FMR may employ
in pursuit of a fund's investment objective, and a summary of related
risks. FMR may not buy all of these instruments or use all of these
techniques unless it believes that doing so will help a fund achieve
its goal.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be,
"affiliated persons" of the fund under the 1940 Act. These
transactions may involve repurchase agreements with custodian
banks; short-term obligations of, and repurchase agreements with, the
50 largest U.S. banks (measured by deposits); municipal securities;
U.S. Government securities with affiliated financial institutions that
are primary dealers in these securities; short-term currency
transactions; and short-term borrowings. In accordance with exemptive
orders issued by the Securities and Exchange Commission (SEC), the
Board of Trustees has established and periodically reviews procedures
applicable to transactions involving affiliated financial
institutions.
ASSET-BACKED SECURITIES represent interests in pools of mortgages,
loans, receivables or other assets. Payment of interest and repayment
of principal may be largely dependent upon the cash flows generated by
the assets backing the securities and, in certain cases, supported by
letters of credit, surety bonds, or other credit enhancements.
Asset-backed security values may also be affected by the
creditworthiness of the servicing agent for the pool, the originator
of the loans or receivables , or the entities providing
the credit enhancement. In addition, these securities may be
subject to prepayment risk.
CLOSED-END INVESTMENT COMPANIES are investment companies that issue
a fixed number of shares which trade on a stock exchange or
over-the-counter. Closed-end investment companies are professionally
managed and may invest in any type of security. Shares of
closed-end investment companies may trade at a premium or a discount
to their net asset value. A fund may purchase shares of closed-end
investment companies to facilitate investment in certain foreign
countries.
CONVERTIBLE SECURITIES are bonds, debentures, notes,
preferred stocks or other securities that may be converted or
exchanged (by the holder or by the issuer) into shares of the
underlying common stock (or cash or securities of equivalent value) at
a stated exchange ratio. A convertible security may also be called for
redemption or conversion by the issuer after a particular date and
under certain circumstances (including a specified price) established
upon issue. If a convertible security held by a fund is called for
redemption or conversion, the fund could be required to tender it for
redemption, convert it into the underlying common stock, or sell it to
a third party.
Convertible securities generally have less potential for gain or
loss than common stocks. Convertible securities generally provide
yields higher than the underlying common stocks, but generally lower
than comparable non-convertible securities. Because of this higher
yield, convertible securities generally sell at prices above their
"conversion value," which is the current market value of the stock to
be received upon conversion. The difference between this conversion
value and the price of convertible securities will vary over time
depending on changes in the value of the underlying common stocks and
interest rates. When the underlying common stocks decline in value,
convertible securities will tend not to decline to the same extent
because of the interest or dividend payments and the repayment of
principal at maturity for certain types of convertible securities.
However, securities that are convertible other than at the option of
the holder generally do not limit the potential for loss to the same
extent as securities convertible at the option of the holder. When the
underlying common stocks rise in value, the value of convertible
securities may also be expected to increase. At the same time,
however, the difference between the market value of convertible
securities and their conversion value will narrow, which means that
the value of convertible securities will generally not increase to the
same extent as the value of the underlying common stocks. Because
convertible securities may also be interest-rate sensitive, their
value may increase as interest rates fall and decrease as interest
rates rise. Convertible securities are also subject to credit risk,
and are often lower-quality securities.
DELAYED-DELIVERY TRANSACTIONS. Securities may be bought and
sold on a delayed-delivery or when-issued basis. These
transactions involve a commitment to purchase or sell specific
securities at a predetermined price or yield, with payment and
delivery taking place after the customary settlement period for that
type of security. Typically, no interest accrues to the purchaser
until the security is delivered. The fund s may receive fees
or price concessions for entering into delayed-delivery
transactions.
When purchasing securities on a delayed-delivery basis, the
purchaser assumes the rights and risks of ownership, including
the risk s of price and yield fluctuations and the risk that
the security will not be issued as anticipated. Because payment for
the securities is not required until the delivery date, these
risks are in addition to the risks associated with a fund's
investments. If a fund remains substantially fully invested at a time
when delayed-delivery purchases are outstanding, the delayed-delivery
purchases may result in a form of leverage. When delayed-delivery
purchases are outstanding, a fund will set aside appropriate liquid
assets in a segregated custodial account to cover the purchase
obligations. When a fund has sold a security on a delayed-delivery
basis, the fund does not participate in further gains or losses with
respect to the security. If the other party to a delayed-delivery
transaction fails to deliver or pay for the securities, a fund could
miss a favorable price or yield opportunity or suffer a loss.
A fund may renegotiate a delayed delivery transaction and may sell the
underlying securities before delivery , which may result in
capital gains or losses for the fund .
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies,
and securities issued by U.S. entities with substantial foreign
operations may involve significant risks in addition to the risks
inherent in U.S. investments.
Foreign investments involve risk s relating to local political,
economic, regulatory , or social instability, military action or
unrest, or adverse diplomatic developments, and may be affected by
actions of foreign governments adverse to the interests of U.S.
investors. Such actions may include expropriation or nationalization
of assets, confiscatory taxation, restrictions on U.S. investment or
on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There is no assurance that
FMR will be able to anticipate these potential events or counter their
effects. In addition, the value of securities denominated in foreign
currencies and of dividends and interest paid with respect to such
securities will fluctuate based on the relative strength of the U.S.
dollar.
I t 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 . In addition, the costs
associated with foreign investments, including withholding taxes,
brokerage commissions and custodial costs, are generally higher than
with U.S. investments .
Foreign markets may offer less protection to investors than U.S.
markets. Foreign issuers are generally not bound by uniform
accounting, auditing, and financial reporting requirements and
standards of practice comparable to those applicable to U.S. issuers.
Adequate public information on foreign issuers may not be available,
and it may be difficult to secure dividends and information regarding
corporate actions on a timely basis. In general, there is less overall
governmental supervision and regulation of securities exchanges,
brokers, and listed companies than in the United States. OTC markets
tend to be less regulated than stock exchange markets and, in certain
countries, may be totally unregulated. Regulatory enforcement may be
influenced by economic or political concerns, and investors may have
difficulty enforcing their legal rights in foreign countries.
Some foreign securities impose restrictions on transfer within the
United States or to U.S. persons. Although securities subject to such
transfer restrictions may be marketable abroad, they may be less
liquid than foreign securities of the same class that are not subject
to such restrictions.
American Depositary Receipts (ADRs) as well as other "hybrid" forms of
ADRs, including European Depositary Receipts (EDRs) and Global
Depositary Receipts (GDRs), are certificates evidencing ownership of
shares of a foreign issuer. These certificates are issued by
depository banks and generally trade on an established market in the
United States or elsewhere. The underlying shares are held in trust by
a custodian bank or similar financial institution in the issuer's home
country. The depository bank may not have physical custody of the
underlying securities at all times and may charge fees for various
services, including forwarding dividends and interest and corporate
actions. ADRs are alternatives to directly purchasing the underlying
foreign securities in their national markets and currencies. However,
ADRs continue to be subject to many of the risks associated with
investing directly in foreign securities. These risks include foreign
exchange risk as well as the political and economic risks of the
underlying issuer's country.
The risks of foreign investing may be magnified for investments in
emerging markets. Security prices in emerging markets can be
significantly more volatile than those in more developed markets,
reflecting the greater uncertainties of investing in less established
markets and economies. In particular, countries with emerging markets
may have relatively unstable governments, may present the risks of
nationalization of businesses, restrictions on foreign ownership and
prohibitions on the repatriation of assets, and may have less
protection of property rights than more developed countries. The
economies of countries with emerging markets may be based on only a
few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt
burdens or inflation rates. Local securities markets may trade a small
number of securities and may be unable to respond effectively to
increases in trading volume, potentially making prompt liquidation of
holdings difficult or impossible at times.
FOREIGN CURRENCY TRANSACTIONS. A fund may conduct foreign currency
transactions on a spot (i.e., cash) or forward basis (i.e., by
entering into forward contracts to purchase or sell foreign
currencies). Although foreign exchange dealers generally do not charge
a fee for such conversions, they do realize a profit based on the
difference between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign
currency at one rate, while offering a lesser rate of exchange should
the counterparty desire to resell that currency to the dealer. Forward
contracts are customized transactions that require a specific amount
of a currency to be delivered at a specific exchange rate on a
specific date or range of dates in the future. Forward contracts are
generally traded in an interbank market directly between currency
traders (usually large commercial banks) and their customers. The
parties to a forward contract may agree to offset or terminate the
contract before its maturity, or may hold the contract to maturity and
complete the contemplated currency exchange. A fund may use currency
forward contracts for any purpose consistent with its investment
objective.
The following discussion summarizes the principal currency management
strategies involving forward contracts that could be used by a fund. A
fund may also use swap agreements, indexed securities, and options and
futures contracts relating to foreign currencies for the same
purposes.
A "settlement hedge" or "transaction hedge" is designed to protect a
fund against an adverse change in foreign currency values between the
date a security is purchased or sold and the date on which payment is
made or received. Entering into a forward contract for the purchase or
sale of the amount of foreign currency involved in an underlying
security transaction for a fixed amount of U.S. dollars "locks in" the
U.S. dollar price of the security. Forward contracts to purchase or
sell a foreign currency may also be used by a fund in anticipation of
future purchases or sales of securities denominated in foreign
currency, even if the specific investments have not yet been selected
by FMR.
A fund may also use forward contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. For
example, if a fund owned securities denominated in pounds sterling, it
could enter into a forward contract to sell pounds sterling in return
for U.S. dollars to hedge against possible declines in the pound's
value. Such a hedge, sometimes referred to as a "position hedge,"
would tend to offset both positive and negative currency fluctuations,
but would not offset changes in security values caused by other
factors. A fund could also hedge the position by selling another
currency expected to perform similarly to the pound sterling. This
type of hedge, sometimes referred to as a "proxy hedge," could offer
advantages in terms of cost, yield, or efficiency, but generally would
not hedge currency exposure as effectively as a direct hedge into U.S.
dollars. Proxy hedges may result in losses if the currency used to
hedge does not perform similarly to the currency in which the hedged
securities are denominated.
A fund may enter into forward contracts to shift its investment
exposure from one currency into another. This may include shifting
exposure from U.S. dollars to a foreign currency, or from one foreign
currency to another foreign currency. This type of strategy, sometimes
known as a "cross-hedge," will tend to reduce or eliminate exposure to
the currency that is sold, and increase exposure to the currency that
is purchased, much as if a fund had sold a security denominated in one
currency and purchased an equivalent security denominated in another.
Cross-hedges protect against losses resulting from a decline in the
hedged currency, but will cause a fund to assume the risk of
fluctuations in the value of the currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to set
aside appropriate liquid assets in a segregated custodial account to
cover currency forward contracts. As required by SEC guidelines, a
fund will segregate assets to cover currency forward contracts, if
any, whose purpose is essentially speculative. A fund will not
segregate assets to cover forward contracts entered into for hedging
purposes, including settlement hedges, position hedges, and proxy
hedges.
Successful use of currency management strategies will depend on FMR's
skill in analyzing currency values. Currency management strategies may
substantially change a fund's investment exposure to changes in
currency exchange rates and could result in losses to a fund if
currencies do not perform as FMR anticipates. For example, if a
currency's value rose at a time when FMR had hedged a fund by selling
that currency in exchange for dollars, a fund would not participate in
the currency's appreciation. If FMR hedges currency exposure through
proxy hedges, a fund could realize currency losses from both the hedge
and the security position if the two currencies do not move in tandem.
Similarly, if FMR increases a fund's exposure to a foreign currency
and that currency's value declines, a fund will realize a loss. There
is no assurance that FMR's use of currency management strategies will
be advantageous to a fund or that it will hedge at appropriate times.
FUNDS' RIGHTS AS SHAREHOLDERS. The funds do not intend to direct or
administer the day-to-day operations of any company. A fund, however,
may exercise its rights as a shareholder and may communicate its views
on important matters of policy to management, the Board of Directors,
and shareholders of a company when FMR determines that such matters
could have a significant effect on the value of the fund's investment
in the company. The activities in which a fund may engage,
either individually or in conjunction with others, may include, among
others, supporting or opposing proposed changes in a company's
corporate structure or business activities; seeking changes in a
company's directors or management; seeking changes in a company's
direction or policies; seeking the sale or reorganization of the
company or a portion of its assets; or supporting or opposing
third-party takeover efforts. This area of corporate activity is
increasingly prone to litigation and it is possible that a fund could
be involved in lawsuits related to such activities. FMR will monitor
such activities with a view to mitigating, to the extent possible, the
risk of litigation against a fund and the risk of actual liability if
a fund is involved in litigation. No guarantee can be made, however,
that litigation against a fund will not be undertaken or liabilities
incurred.
FUTURES AND OPTIONS. The following paragraphs pertain to
futures and options: Asset Coverage for Futures and Options Positions,
Combined Positions, Correlation of Price Changes, Futures Contracts,
Futures Margin Payments, Limitations on Futures and Options
Transactions, Liquidity of Options and Futures Contracts, Options and
Futures Relating to Foreign Currencies, OTC Options, Purchasing Put
and Call Options, and Writing Put and Call Options.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The funds will
comply with guidelines established by the SEC with respect to coverage
of options and futures strategies by mutual funds and, if the
guidelines so require, will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held
in a segregated account cannot be sold while the futures or option
strategy is outstanding, unless they are replaced with other suitable
assets. As a result, there is a possibility that segregation of a
large percentage of a fund's assets could impede portfolio management
or the fund's ability to meet redemption requests or other current
obligations.
COMBINED POSITIONS involve purchasing and writing options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the
overall position. For example, purchasing a put option and
writing a call option on the same underlying instrument
would construct a combined position whose risk and return
characteristics are similar to selling a futures contract. Another
possible combined position would involve writing a call option at one
strike price and buying a call option at a lower price, to
reduce the risk of the written call option in the event of a
substantial price increase. Because combined options positions involve
multiple trades, they result in higher transaction costs and may be
more difficult to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of
types of exchange-traded options and futures contracts, it is likely
that the standardized contracts available will not match a fund's
current or anticipated investments exactly. A fund may invest in
options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in
which the fund typically invests, which involves a risk that the
options or futures position will not track the performance of the
fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a
fund's investments well. Options and futures prices are affected by
such factors as current and anticipated short-term interest rates,
changes in volatility of the underlying instrument, and the time
remaining until expiration of the contract, which may not affect
security prices the same way. Imperfect correlation may also result
from differing levels of demand in the options and futures markets and
the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. A fund may purchase or sell
options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to
attempt to compensate for differences in volatility between the
contract and the securities, although this may not be successful in
all cases. If price changes in a fund's options or futures positions
are poorly correlated with its other investments, the positions may
fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
FUTURES CONTRACTS. In purchasing a futures contract, the
buyer agrees to purchase a specified underlying instrument at a
specified future date. In selling a futures contract, the
seller agrees to sell a specified underlying instrument at a
specified future date. The price at which the purchase and sale will
take place is fixed when the buyer and seller enter into the
contract. Some currently available futures contracts are based on
specific securities, such as U.S. Treasury bonds or notes, and some
are based on indices of securities prices, such as the Standard &
Poor's 500 Index (S&P 500(registered trademark)). Futures can be held
until their delivery dates, or can be closed out before then if a
liquid secondary market is available.
The value of a futures contract tends to increase and decrease in
tandem with the value of its underlying instrument. Therefore,
purchasing futures contracts will tend to increase a fund's exposure
to positive and negative price fluctuations in the underlying
instrument, much as if it had purchased the underlying instrument
directly. When a fund sells a futures contract, by contrast, the value
of its futures position will tend to move in a direction contrary to
the market. Selling futures contracts, therefore, will tend to offset
both positive and negative market price changes, much as if the
underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract
is not required to deliver or pay for the underlying instrument unless
the contract is held until the delivery date. However, both the
purchaser and seller are required to deposit "initial margin" with a
futures broker, known as a futures commission merchant (FCM), when the
contract is entered into. Initial margin deposits are typically equal
to a percentage of the contract's value. If the value of either
party's position declines, that party will be required to make
additional "variation margin" payments to settle the change in value
on a daily basis. The party that has a gain may be entitled to receive
all or a portion of this amount. Initial and variation margin payments
do not constitute purchasing securities on margin for purposes of a
fund's investment limitations. In the event of the bankruptcy of an
FCM that holds margin on behalf of a fund, the fund may be entitled to
return of margin owed to it only in proportion to the amount received
by the FCM's other customers, potentially resulting in losses to the
fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading
Commission (CFTC) and the National Futures Association, which regulate
trading in the futures markets. The funds intend to comply with Rule
4.5 under the Commodity Exchange Act, which limits the extent to which
the funds can commit assets to initial margin deposits and option
premiums.
In addition, each fund will not: (a) sell futures contracts, purchase
put options, or write call options if, as a result, more than 25% of
the fund's total assets would be hedged with futures and options under
normal conditions; (b) purchase futures contracts or write put options
if, as a result, the fund's total obligations upon settlement or
exercise of purchased futures contracts and written put options would
exceed 25% of its total assets; or (c) purchase call options if, as a
result, the current value of option premiums for call options
purchased by the fund would exceed 5% of the fund's total assets.
These limitations do not apply to options attached to or acquired or
traded together with their underlying securities, and do not apply to
securities that incorporate features similar to options.
The above limitations on the funds' investments in futures contracts
and options, and the funds' policies regarding futures contracts and
options discussed elsewhere in this SAI, may be changed as regulatory
agencies permit.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid secondary market will exist for any particular options or
futures contract at any particular time. Options may have relatively
low trading volume and liquidity if their strike prices are not close
to the underlying instrument's current price. In addition, exchanges
may establish daily price fluctuation limits for options and futures
contracts, and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days
when the price fluctuation limit is reached or a trading halt is
imposed, it may be impossible to enter into new positions or close out
existing positions. If the secondary market for a contract is not
liquid because of price fluctuation limits or otherwise, it could
prevent prompt liquidation of unfavorable positions, and potentially
could require a fund to continue to hold a position until delivery or
expiration regardless of changes in its value. As a result, a fund's
access to other assets held to cover its options or futures positions
could also be impaired.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except
that they are traded on exchanges (and have margin requirements) and
are standardized as to contract size and delivery date. Most currency
futures contracts call for payment or delivery in U.S. dollars. The
underlying instrument of a currency option may be a foreign currency,
which generally is purchased or delivered in exchange for U.S.
dollars, or may be a futures contract. The purchaser of a currency
call obtains the right to purchase the underlying currency, and the
purchaser of a currency put obtains the right to sell the underlying
currency.
The uses and risks of currency options and futures are similar to
options and futures relating to securities or indices, as discussed
above. A fund may purchase and sell currency futures and may purchase
and write currency options to increase or decrease its exposure to
different foreign currencies. Currency options may also be
purchased or written in conjunction with each other or with
currency futures or forward contracts. Currency futures and options
values can be expected to correlate with exchange rates, but may not
reflect other factors that affect the value of a fund's investments. A
currency hedge, for example, should protect a Yen-denominated security
from a decline in the Yen, but will not protect a fund against a price
decline resulting from deterioration in the issuer's creditworthiness.
Because the value of a fund's foreign-denominated investments changes
in response to many factors other than exchange rates, it may not be
possible to match the amount of currency options and futures to the
value of the fund's investments exactly over time.
OTC OPTIONS. Unlike exchange-traded options, which are standardized
with respect to the underlying instrument, expiration date, contract
size, and strike price, the terms of over-the-counter (OTC) options
(options not traded on exchanges) generally are established through
negotiation with the other party to the option contract. While this
type of arrangement allows the purchaser or writer greater
flexibility to tailor an option to its needs, OTC options generally
involve greater credit risk than exchange-traded options, which are
guaranteed by the clearing organization of the exchanges where they
are traded.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the
purchaser obtains the right (but not the obligation) to sell
the option's underlying instrument at a fixed strike price. In return
for this right, the purchaser pays the current market price for
the option (known as the option premium). Options have various types
of underlying instruments, including specific securities, indices of
securities prices, and futures contracts. The purchaser may
terminate its position in a put option by allowing it to expire
or by exercising the option. If the option is allowed to expire,
the purchaser will lose the entire premium . If the
option is exercised , the purchaser completes the sale of
the underlying instrument at the strike price. A purchaser may
also terminate a put option position by closing it out in the
secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if
security prices fall substantially. However, if the underlying
instrument's price does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss
(limited to the amount of the premium , plus related transaction
costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right
to purchase, rather than sell, the underlying instrument at the
option's strike price. A call buyer typically attempts to participate
in potential price increases of the underlying instrument with risk
limited to the cost of the option if security prices fall. At the same
time, the buyer can expect to suffer a loss if security prices do not
rise sufficiently to offset the cost of the option.
WRITING PUT AND CALL OPTIONS. The writer of a put or call
option takes the opposite side of the transaction from the
option's purchaser. In return for receipt of the premium, the writer
assumes the obligation to pay the strike price for the option's
underlying instrument if the other party to the option chooses to
exercise it. The writer may seek to terminate a position in a put
option before exercise by closing out the option in the secondary
market at its current price. If the secondary market is not liquid for
a put option , however, the writer must continue to be
prepared to pay the strike price while the option is outstanding,
regardless of price changes, and must continue to set aside assets to
cover its position. When writing an option on a futures contract, a
fund will be required to make margin payments to an FCM as described
above for futures contracts.
If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it
is likely that the writer will also profit, because it should be able
to close out the option at a lower price. If security prices fall, the
put writer would expect to suffer a loss. This loss should be less
than the loss from purchasing the underlying instrument directly,
however, because the premium received for writing the option should
mitigate the effects of the decline.
Writing a call option obligates the writer to sell or deliver
the option's underlying instrument, in return for the strike price,
upon exercise of the option. The characteristics of writing call
options are similar to those of writing put options, except that
writing calls generally is a profitable strategy if prices remain the
same or fall. Through receipt of the option premium, a call writer
mitigates the effects of a price decline. At the same time, because a
call writer must be prepared to deliver the underlying instrument in
return for the strike price, even if its current value is greater, a
call writer gives up some ability to participate in security price
increases.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed
of in the ordinary course of business at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees,
FMR determines the liquidity of a fund's investments and, through
reports from FMR, the Board monitors investments in illiquid
instruments. In determining the liquidity of a fund's investments, FMR
may consider various factors, including (1) the frequency of trades
and quotations, (2) the number of dealers and prospective purchasers
in the marketplace, (3) dealer undertakings to make a market, (4) the
nature of the security (including any demand or tender features), and
(5) the nature of the marketplace for trades (including the ability to
assign or offset the fund's rights and obligations relating to the
investment).
Investments currently considered by FMR to be illiquid include
repurchase agreements not entitling the holder to re payment of
principal and payment of interest within seven days,
non-government stripped fixed-rate mortgage-backed securities, and
over-the-counter options. Also, FMR may determine some restricted
securities, government-stripped fixed-rate mortgage-backed securities,
loans and other direct debt instruments, emerging market securities,
and swap agreements to be illiquid. However, with respect to
over-the-counter options a fund writes, all or a portion of the value
of the underlying instrument may be illiquid depending on the assets
held to cover the option and the nature and terms of any agreement the
fund may have to close out the option before expiration.
In the absence of market quotations, illiquid investments are priced
at fair value as determined in good faith by a committee appointed by
the Board of Trustees.
INDEXED SECURITIES are instruments whose prices are indexed to
the prices of other securities, securities indices, currencies,
precious metals or other commodities, or other financial indicators.
Indexed securities typically, but not always, are debt securities or
deposits whose value at maturity or coupon rate is determined by
reference to a specific instrument or statistic.
Mortgage-indexed securities, for example, could be structured to
replicate the performance of mortgage securities and the
characteristics of direct ownership.
Gold-indexed securities typically provide for a maturity value that
depends on the price of gold, resulting in a security whose price
tends to rise and fall together with gold prices. Currency-indexed
securities typically are short-term to intermediate-term debt
securities whose maturity values or interest rates are determined by
reference to the values of one or more specified foreign currencies,
and may offer higher yields than U.S. dollar-denominated
securities . Currency-indexed securities may be positively or
negatively indexed; that is, their maturity value may increase when
the specified currency value increases, resulting in a security that
performs similarly to a foreign-denominated instrument, or their
maturity value may decline when foreign currencies increase, resulting
in a security whose price characteristics are similar to a put on the
underlying currency. Currency-indexed securities may also have prices
that depend on the values of a number of different foreign currencies
relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which
they are indexed, and may also be influenced by interest rate changes
in the United States and abroad. Indexed securities may be more
volatile than the underlying instruments. Indexed securities
are also subject to the credit risks associated with the issuer
of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Recent issuers of indexed
securities have included banks, corporations, and certain U.S.
Government agencies.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive
order issued by the SEC, a fund may lend money to, and borrow
money from, other funds advised by FMR or its affiliates. A fund will
lend through the program only when the returns are higher than those
available from an investment in repurchase agreements, and will borrow
through the program only when the costs are equal to or lower than the
cost of bank loans. Interfund loans and borrowings normally extend
overnight, but can have a maximum duration of seven days. Loans may be
called on one day's notice. A fund may have to borrow from a bank at a
higher interest rate if an interfund loan is called or not renewed.
Any delay in repayment to a lending fund could result in a lost
investment opportunity or additional borrowing costs.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. Direct debt instruments are
interests in amounts owed by a corporate, governmental, or other
borrower to lenders or lending syndicates (loans and loan
participations), to suppliers of goods or services (trade claims or
other receivables), or to other parties. Direct debt instruments are
subject to a fund's policies regarding the quality of debt securities.
Purchasers of loans and other forms of direct indebtedness depend
primarily upon the creditworthiness of the borrower for payment of
interest and repayment of principal. Direct debt instruments
may not be rated by any nationally recognized statistical
rating service. If scheduled interest or principal payments
are not made , the value of the instrument may be adversely
affected. Loans that are fully secured provide more protections than
an unsecured loan in the event of failure to make scheduled
interest or principal payments . However, there is no assurance
that the liquidation of collateral from a secured loan would satisfy
the borrower's obligation, or that the collateral could be liquidated.
Indebtedness of borrowers whose creditworthiness is poor involves
substantially greater risks and may be highly speculative. Borrowers
that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed.
Direct indebtedness of developing countries also involves a risk that
the governmental entities responsible for the repayment of the debt
may be unable, or unwilling, to pay interest and repay principal when
due.
Investments in loans through direct assignment of a financial
institution's interests with respect to a loan may involve additional
risks . For example, if a loan is foreclosed, the
purchaser could become part owner of any collateral, and would
bear the costs and liabilities associated with owning and disposing of
the collateral. In addition, it is conceivable that under emerging
legal theories of lender liability, a purchaser could be held
liable as a co-lender. Direct debt instruments may also involve a risk
of insolvency of the lending bank or other intermediary. Direct debt
instruments that are not in the form of securities may offer less
legal protection to the purchaser in the event of fraud or
misrepresentation. In the absence of definitive regulatory guidance,
FMR uses its research to attempt to avoid situations
where fraud or misrepresentation could adversely affect a fund.
A loan is often administered by a bank or other financial institution
that acts as agent for all holders. The agent administers the terms of
the loan, as specified in the loan agreement. Unless, under the terms
of the loan or other indebtedness, the purchaser has direct
recourse against the borrower, the purchaser may have to rely
on the agent to apply appropriate credit remedies against a borrower.
If assets held by the agent for the benefit of a purchaser were
determined to be subject to the claims of the agent's general
creditors, the purchaser might incur certain costs and delays
in realizing payment on the loan or loan participation and could
suffer a loss of principal or interest.
Direct indebtedness may include letters of credit, revolving
credit facilities, or other standby financing commitments that
obligate purchasers to make additional cash payments on
demand. These commitments may have the effect of requiring a purchaser
to increase its investment in a borrower at a time when it would not
otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid. A fund will set aside
appropriate liquid assets in a segregated custodial account to cover
its potential obligations under standby financing commitments.
Each fund limits the amount of total assets that it will invest in any
one issuer or in issuers within the same industry (see each fund's
investment limitations). For purposes of these limitations, a fund
generally will treat the borrower as the "issuer" of indebtedness held
by the fund. In the case of loan participations where a bank or other
lending institution serves as financial intermediary between a fund
and the borrower, if the participation does not shift to the fund the
direct debtor-creditor relationship with the borrower, SEC
interpretations require a fund, in appropriate circumstances, to treat
both the lending bank or other lending institution and the borrower as
"issuers" for these purposes. Treating a financial intermediary as an
issuer of indebtedness may restrict a fund's ability to invest in
indebtedness related to a single financial intermediary, or a group of
intermediaries engaged in the same industry, even if the underlying
borrowers represent many different companies and industries.
LOWER-QUALITY DEBT SECURITIES. Lower-quality debt securities
have poor protection with respect to the payment of interest and
repayment of principal, or may be in default. These securities are
often considered to be speculative and involve greater risk of loss or
price changes due to changes in the issuer's capacity to pay. The
market prices of lower-quality debt securities may fluctuate more than
those of higher-quality debt securities and may decline significantly
in periods of general economic difficulty, which may follow periods of
rising interest rates.
While the market for high-yield corporate debt securities has been in
existence for many years and has weathered previous economic
downturns, the 1980s brought a dramatic increase in the use of such
securities to fund highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication
of the future performance of the high-yield bond market, especially
during periods of economic recession.
The market for lower-quality debt securities may be thinner and less
active than that for higher-quality debt securities, which can
adversely affect the prices at which the former are sold. If market
quotations are not available, lower-quality debt securities will be
valued in accordance with procedures established by the Board of
Trustees, including the use of outside pricing services. Judgment
plays a greater role in valuing high-yield debt securities than is the
case for securities for which more external sources for quotations and
last-sale information are available. Adverse publicity and changing
investor perceptions may affect the liquidity of
lower-quality debt securities and the ability of outside
pricing services to value lower-quality debt securities.
Since the risk of default is higher for lower-quality debt securities,
FMR's research and credit analysis are an especially important part of
managing securities of this type . FMR will attempt to identify
those issuers of high-yielding securities whose financial condition is
adequate to meet future obligations, has improved, or is expected to
improve in the future. FMR's analysis focuses on relative values based
on such factors as interest or dividend coverage, asset coverage,
earnings prospects, and the experience and managerial strength of the
issuer.
A fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise to exercise its rights as a security
holder to seek to protect the interests of security holders if it
determines this to be in the best interest of the fund's shareholders.
MORTGAGE-BACKED SECURITIES are issued by government and
non-government entities such as banks, mortgage lenders, or other
institutions. A mortgage-backed security is an obligation of
the issuer backed by a mortgage or pool of mortgages or a direct
interest in an underlying pool of mortgages. Some mortgage-backed
securities, such as collateralized mortgage obligations (or "CMOs"),
make payments of both principal and interest at a range of
specified intervals; others make semiannual interest payments at a
predetermined rate and repay principal at maturity (like a typical
bond). Mortgage-backed securities are based on different types of
mortgages, including those on commercial real estate or residential
properties. Stripped mortgage-backed securities are created when
the interest and principal components of a mortgage-backed security
are separated and sold as individual securities. In the case of a
stripped mortgage-backed security, the holder of the "principal-only"
security (PO) receives the principal payments made by the underlying
mortgage, while the holder of the "interest-only" security (IO)
receives interest payments from the same underlying mortgage.
The value of mortgage-backed securities may change due to shifts in
the market's perception of issuers and changes in interest
rates . In addition, regulatory or tax changes may adversely affect
the mortgage-backed securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued
by government entities, but also may be subject to greater price
changes than government issues. Mortgage-backed securities are subject
to prepayment risk, which is the risk that early principal payments
made on the underlying mortgages, usually in response to a reduction
in interest rates, will result in the return of principal to the
investor, causing it to be invested subsequently at a lower current
interest rate. Alternatively, in a rising interest rate environment,
mortgage-backed security values may be adversely affected when
prepayments on underlying mortgages do not occur as anticipated,
resulting in the extension of the security's effective maturity and
the related increase in interest rate sensitivity of a longer-term
instrument. The prices of stripped mortgage-backed securities tend to
be more volatile in response to changes in interest rates than those
of non-stripped mortgage-backed securities.
REAL ESTATE INVESTMENT TRUSTS. Equity real estate investment
trusts own real estate properties, while mortgage real estate
investment trusts make construction, development, and long-term
mortgage loans. Their value may be affected by changes in the value of
the underlying property of the trusts, the creditworthiness of the
issuer, property taxes, interest rates, and tax and regulatory
requirements, such as those relating to the environment. Both types of
trusts are dependent upon management skill, are not diversified, and
are subject to heavy cash flow dependency, defaults by borrowers,
self-liquidation, and the possibility of failing to qualify for
tax-free status of income under the Internal Revenue Code and failing
to maintain exemption from the 1940 Act.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is
unrelated to the coupon rate or maturity of the purchased security.
As protection against the risk that the original seller will
not fulfill its obligation, the securities are held in a
separate account at a bank, marked-to-market daily, and maintained
at a value at least equal to the sale price plus the accrued
incremental amount. While it does not presently appear possible to
eliminate all risks from these transactions (particularly the
possibility that the value of the underlying security will be less
than the resale price, as well as delays and costs to a fund in
connection with bankruptcy proceedings), the funds will engage
in repurchase agreement transactions with parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part
of the registration expense and a considerable period may elapse
between the time it decides to seek registration and the time it may
be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to
develop, a fund might obtain a less favorable price than prevailed
when it decided to seek registration of the security.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
fund sells a security to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase that
security at an agreed-upon price and time. While a reverse
repurchase agreement is outstanding, a fund will maintain appropriate
liquid assets in a segregated custodial account to cover its
obligation under the agreement. The funds will enter into reverse
repurchase agreements with parties whose creditworthiness has been
reviewed and found satisfactory by FMR. Such transactions may
increase fluctuations in the market value of fund assets and
may be viewed as a form of leverage.
SECURITIES LENDING. A fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity
Brokerage Services, Inc. (FBSI). FBSI is a member of the New York
Stock Exchange and a subsidiary of FMR Corp.
Securities lending allows a fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there
may be delays in the recovery of loaned securities, or even a loss of
rights in collateral supplied should the borrower fail financially,
loans will be made only to parties deemed by FMR to be of good
standing. Furthermore, they will only be made if, in FMR's judgment,
the consideration to be earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that a
fund may engage in loan transactions only under the following
conditions: (1) the fund must receive 100% collateral in the form of
cash or cash equivalents (e.g., U.S. Treasury bills or notes) from the
borrower; (2) the borrower must increase the collateral whenever the
market value of the securities loaned (determined on a daily basis)
rises above the value of the collateral; (3) after giving notice, the
fund must be able to terminate the loan at any time; (4) the fund must
receive reasonable interest on the loan or a flat fee from the
borrower, as well as amounts equivalent to any dividends, interest, or
other distributions on the securities loaned and to any increase in
market value; (5) the fund may pay only reasonable custodian fees in
connection with the loan; and (6) the Board of Trustees must be able
to vote proxies on the securities loaned, either by terminating the
loan or by entering into an alternative arrangement with the borrower.
Cash received through loan transactions may be invested in other
eligible securities . Investing this cash subjects that investment,
as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
SHORT SALES. A fund may enter into short sales with respect to stocks
underlying its convertible security holdings. For example, if FMR
anticipates a decline in the price of the stock underlying a
convertible security a fund holds, it may sell the stock short. If the
stock price subsequently declines, the proceeds of the short sale
could be expected to offset all or a portion of the effect of the
stock's decline on the value of the convertible security. Each fund
currently intends to hedge no more than 15% of its total assets with
short sales on equity securities underlying its convertible security
holdings under normal circumstances.
When a fund enters into a short sale, it will be required to set aside
securities equivalent in kind and amount to those sold short (or
securities convertible or exchangeable into such securities) and will
be required to hold them aside while the short sale is outstanding. A
fund will incur transaction costs, including interest expenses, in
connection with opening, maintaining, and closing short sales.
SOURCES OF CREDIT OR LIQUIDITY SUPPORT. FMR may rely on its
evaluation of the credit of a bank or other entity in determining
whether to purchase a security supported by a letter of credit
guarantee, put or demand feature, insurance or other source of credit
or liquidity. In evaluating the credit of a foreign bank or other
foreign entities, FMR will consider whether adequate public
information about the entity is available and whether the entity may
be subject to unfavorable political or economic developments, currency
controls, or other government restrictions that might affect its
ability to honor its commitment.
STRIPPED GOVERNMENT SECURITIES. Stripped government
securities are created by separating the income and principal
components of a U.S. Government security and selling them separately.
STRIPS (Separate Trading of Registered Interest and Principal of
Securities) are created when the coupon payments and the principal
payment are stripped from an outstanding U.S. Treasury security by a
Federal Reserve Bank.
Privately stripped government securities are created when a dealer
deposits a U.S. Treasury security or other U.S. Government security
with a custodian for safekeeping. The custodian issues separate
receipts for the coupon payments and the principal payment, which the
dealer then sells.
SWAP AGREEMENTS can be individually negotiated and structured to
include exposure to a variety of different types of investments or
market factors. Depending on their structure, swap agreements may
increase or decrease a fund's exposure to long- or short-term interest
rates (in the United States or abroad), foreign currency values,
mortgage securities, corporate borrowing rates, or other factors such
as security prices or inflation rates. Swap agreements can take many
different forms and are known by a variety of names .
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a
fee by the other party. For example, the buyer of an interest rate cap
obtains the right to receive payments to the extent that a specified
interest rate exceeds an agreed-upon level, while the seller of an
interest rate floor is obligated to make payments to the extent that a
specified interest rate falls below an agreed-upon level. An interest
rate collar combines elements of buying a cap and selling a floor.
Swap agreements will tend to shift a fund's investment exposure from
one type of investment to another. For example, if the fund agreed to
exchange payments in dollars for payments in foreign currency, the
swap agreement would tend to decrease the fund's exposure to U.S.
interest rates and increase its exposure to foreign currency and
interest rates. Caps and floors have an effect similar to buying or
writing options. Depending on how they are used, swap agreements may
increase or decrease the overall volatility of a fund's investments
and its share price and yield.
The most significant factor in the performance of swap agreements is
the change in the specific interest rate, currency, or other factors
that determine the amounts of payments due to and from a fund. If a
swap agreement calls for payments by the fund, the fund must be
prepared to make such payments when due. In addition, if the
counterparty's creditworthiness declined, the value of a swap
agreement would be likely to decline, potentially resulting in losses.
A fund may be able to eliminate its exposure under a swap
agreement either by assignment or other disposition, or by entering
into an offsetting swap agreement with the same party or a similarly
creditworthy party.
A fund will maintain appropriate liquid assets in a segregated
custodial account to cover its current obligations under swap
agreements. If a fund enters into a swap agreement on a net basis, it
will segregate assets with a daily value at least equal to the excess,
if any, of the fund's accrued obligations under the swap agreement
over the accrued amount the fund is entitled to receive under the
agreement. If a fund enters into a swap agreement on other than a net
basis, it will segregate assets with a value equal to the full amount
of the fund's accrued obligations under the agreement.
VARIABLE AND FLOATING RATE SECURITIES provide for periodic
adjustments in the interest rate paid on the security. Variable rate
securities provide for a specified periodic adjustment in the interest
rate, while floating rate securities have interest rates that change
whenever there is a change in a designated benchmark rate. Some
variable or floating rate securities are structured with put features
that permit holders to demand payment of the unpaid principal balance
plus accrued interest from the issuers or certain financial
intermediaries.
ZERO COUPON BONDS do not make interest payments; instead, they are
sold at a discount from their face value and are redeemed at
face value when they mature. Because zero coupon bonds do not pay
current income, their prices can be more volatile t han other
types of fixed-income securities when interest rates change. In
calculating a fund's dividend , a portion of the difference
between a zero coupon bond's purchase price and its face value is
considered income .
P O RTFOLIO 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
management contract. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for
which it or its affiliates act as investment adviser. In selecting
broker-dealers, subject to applicable limitations of the federal
securities laws, FMR considers various relevant factors, including,
but not limited to: the size and type of the transaction; the nature
and character of the markets for the security to be purchased or sold;
the execution efficiency, settlement capability, and financial
condition of the broker-dealer firm; the broker-dealer's execution
services rendered on a continuing basis; the reasonableness of any
commissions; and, if applicable, arrangements for payment of fund
expenses .
If FMR grants investment management authority to a sub-adviser
(see the section entitled "Management Contracts"), that
sub-adviser is authorized to place orders for the purchase and
sale of portfolio securities, and will do so in accordance with the
policies described above .
Generally, commissions for investments traded on foreign
exchanges will be higher than for investments traded on U.S. exchanges
and may not be subject to negotiation.
Each fund may execute portfolio transactions with broker-dealers who
provide research and execution services to the fund or other accounts
over which FMR or its affiliates exercise investment discretion. Such
services may include advice concerning the value of securities; the
advisability of investing in, purchasing, or selling securities; and
the availability of securities or the purchasers or sellers of
securities. In addition, such broker-dealers may furnish analyses and
reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and
effect securities transactions and perform functions incidental
thereto (such as clearance and settlement).
The selection of such broker-dealers for transactions in equity
securities is generally made by FMR (to the extent possible
consistent with execution considerations) in accordance with a
ranking of broker-dealers determined periodically by FMR's investment
staff based upon the quality of research and execution services
provided.
For transactions in fixed-income securities, FMR's selection of
broker-dealers is generally based on the availability of a security
and its price and, to a lesser extent, on the overall quality of
execution and other services, including research, provided by the
broker-dealer.
The receipt of research from broker-dealers that execute transactions
on behalf of a fund may be useful to FMR in rendering investment
management services to that fund or its other clients, and conversely,
such research provided by broker-dealers who have executed transaction
orders on behalf of other FMR clients may be useful to FMR in carrying
out its obligations to a fund. The receipt of such research has not
reduced FMR's normal independent research activities; however, it
enables FMR to avoid the additional expenses that could be incurred if
FMR tried to develop comparable information through its own efforts.
Fixed-income securities are generally purchased from an issuer or
underwriter acting as principal for the securities, on a net basis
with no brokerage commission paid. However, the dealer is compensated
by a difference between the security's original purchase price and the
selling price, the so-called "bid-asked spread." Securities may also
be purchased from underwriters at prices that include underwriting
fees.
Subject to applicable limitations of the federal securities laws, a
fund may pay a broker-dealer commissions for agency tra nsactions
that are in excess of the amount of commissions charged by other
broker-dealers in recognition of their research and execution
services. In order to cause a fund to pay such higher commissions, FMR
must determine in good faith that such commissions are reasonable in
relation to the value of the brokerage and research services provided
by such executing broker-dealers, viewed in terms of a particular
transaction or FMR's overall responsibilities to that fund or its
other clients. In reaching this determination, FMR will not attempt to
place a specific dollar value on the brokerage and research services
provided, or to determine what portion of the compensation should be
related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided
assistance in the distribution of shares of the funds or shares of
other Fidelity funds to the extent permitted by law. FMR may use
research services provided by and place agency transactions with
National Financial Services Corporation (NFSC) and Fidelity Brokerage
Services Japan LLC (FBSJ) , indirect subsidiaries of FMR Corp.,
if the commissions are fair, reasonable, and comparable to commissions
charged by non-affiliated, qualified brokerage firms for similar
services. Prior to December 9, 1997, FMR used research services
provided by and placed agency transactions with Fidelity Brokerage
Services (FBS), an indirect subsidiary of FMR Corp.
FMR may allocate brokerage transactions to broker-dealers (including
affiliates of FMR) who have entered into arrangements with FMR under
which the broker-dealer allocates a portion of the commissions paid by
a fund toward the reduction of that fund's expenses. The transaction
quality must, however, be comparable to those of other qualified
broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members
of national securities exchanges from executing exchange transactions
for accounts which they or their affiliates manage, unless certain
requirements are satisfied. Pursuant to such requirements, the Board
of Trustees has authorized NFSC to execute portfolio transactions on
national securities exchanges in accordance with approved procedures
and applicable SEC rules.
The Trustees of each fund periodically review FMR's performance
of its responsibilities in connection with the placement of portfolio
transactions on behalf of the fund and review the commissions paid by
the fund over representative periods of time to determine if they are
reasonable in relation to the benefits to the fund.
For the fiscal periods ended April 30, 199 8 and 199 7 ,
the portfolio turnover rates were 179 % and 309%,
respectively , for Capital & Income and 85 % and 102%,
respectively , for High Income . Because a high turnover
rate increases transaction costs and may increase taxable gains, FMR
carefully weighs the anticipated benefits of short-term investing
against these consequences. Variations in turnover rate may be due
to a fluctuating volume of shareholder purchase and redemption orders,
market conditions, or charges in FMR's investment outlook.
The following tables show the brokerage commissions paid by the
funds. Significant changes in brokerage commissions paid by a fund
from year to year may result from changing asset levels throughout the
year. A fund may pay both commissions and spreads in connection with
the placement of portfolio transactions.
The following table shows the total amount of brokerage commissions
paid by each fund.
Fiscal Year
Total
Ended Amount Paid
Capital & Income April
1998 $ 943,000
1997 1,294,000
1996 616,000
High Income
1998 299,000
1997 360,000
1996 267,000
Of the following tables, the first shows the total amount of
brokerage commissions paid by each fund to NFSC for the past three
fiscal years. The second table shows the approximate percentage of
aggregate brokerage commissions paid by a fund to NFSC for
transactions involving the approximate percentage of the aggregate
dollar amount of transactions for which the fund paid brokerage
commissions for the fiscal year ended 1998. NFSC is paid on a
commission basis.
<TABLE>
<CAPTION>
<S> <C> <C>
Total Amount Paid
Fiscal Year To NFSC
Ended
Capital & Income April
1998 $ 95,000
1997 21,000
1996 24,000
High Income
1998 21,000
1997 19,000
1996 3,000
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal Year % of % of Aggregate
Ended 199 8 Aggregate Dollar Amount
Commissions of Transactions
Paid to NFSC Effected through
NFSC
Capital & Income (dagger) April 10.1 % 16.5 %
High Income (dagger) April 7.1 % 15.2 %
</TABLE>
(dagger) The difference between the percentage of aggregate
brokerage commissions paid to, and the percentage of the aggregate
dollar amount of transactions effected through, NFSC is a result of
the low commission rates charged by NFSC.
The following table shows the dollar amount of brokerage
commissions paid to firms that provided research services and the
approximate dollar amount of the transactions involved for the fiscal
year ended April 30, 1998.
Fiscal Year $ Amount of $ Amount of
Ended 1998 Commissions Paid Brokerage
to Firms Transactions
that Provided Involved*
Research Services*
Capital & Income April $ 839,000 $ 384,581,000
High Income April 282,000 158,486,000
* The provision of research services was not necessarily a factor
in the placement of all this business with such firms.
The Trustees of each fund have approved procedures in conformity
with Rule 10f-3 under the 1940 Act whereby a fund may purchase
securities that are offered in underwritings in which an affiliate of
FMR participates. These procedures prohibit the funds from directly or
indirectly benefiting an FMR affiliate in connection with such
underwritings. In addition, for underwritings where an FMR affiliate
participates as a principal underwriter, certain restrictions may
apply that could, among other things, limit the amount of securities
that the funds could purchase in the underwriting.
From time to time the Trustees will review whether the recapture for
the benefit of the funds of some portion of the brokerage commissions
or similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at
present no other recapture arrangements are in effect. The Trustees
intend to continue to review whether recapture opportunities are
available and are legally permissible and, if so, to determine in the
exercise of their business judgment whether it would be advisable for
each fund to seek such recapture.
Although the Trustees and officers of each fund are substantially the
same as those of other funds managed by FMR or its affiliates ,
investment decisions for each fund are made independently from those
of other funds managed by FMR or accounts managed by FMR affiliates.
It sometimes happens that the same security is held in the portfolio
of more than one of these funds or accounts. Simultaneous transactions
are inevitable when several funds and accounts are managed by the same
investment adviser, particularly when the same security is suitable
for the investment objective of more than one fund or account.
When two or more funds are simultaneously engaged in the purchase or
sale of the same security, the prices and amounts are allocated in
accordance with procedures believed to be appropriate and equitable
for each fund. In some cases this system could have a detrimental
effect on the price or value of the security as far as each fund is
concerned. In other cases, however, the ability of the funds to
participate in volume transactions will produce better executions and
prices for the funds. It is the current opinion of the Trustees that
the desirability of retaining FMR as investment adviser to each fund
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
VALUATION
Fidelity Service Company, Inc. (FSC) normally determines each fund's
net asset value per share (NAV) as of the close of the New York Stock
Exchange (NYSE) (normally 4:00 p.m. Eastern time). The valuation of
portfolio securities is determined as of this time for the purpose of
computing each fund's NAV.
Portfolio securities are valued by various methods depending on the
primary market or exchange on which they trade. Fixed-income
securities and other assets for which market quotations are readily
available may be valued at market values determined by such
securities' most recent bid prices (sales prices if the principal
market is an exchange) in the principal market in which they normally
are traded, as furnished by recognized dealers in such securities or
assets.
Or, fixed-income securities and convertible securities may be valued
on the basis of information furnished by a pricing service that uses a
valuation matrix which incorporates both dealer-supplied valuations
and electronic data processing techniques. Use of pricing services has
been approved by the Board of Trustees. A number of pricing services
are available, and the funds may use various pricing services or
discontinue the use of any pricing service.
Most equity securities for which the primary market is the United
States are valued at last sale price or, if no sale has occurred, at
the closing bid price. Most equity securities for which the primary
market is outside the United States are valued using the official
closing price or the last sale price in the principal market in which
they are traded. If the last sale price (on the local exchange) is
unavailable, the last evaluated quote or last bid price normally is
used.
Futures contracts and options are valued on the basis of market
quotations, if available. Securities of other open-end investment
companies are valued at their respective NAVs.
Foreign securities are valued based on prices furnished by independent
brokers or quotation services which express the value of securities in
their local currency. FSC gathers all exchange rates daily at the
close of the NYSE using the last quoted price on the local currency
and then translates the value of foreign securities from their local
currencies into U.S. dollars. Any changes in the value of forward
contracts due to exchange rate fluctuations and days to maturity are
included in the calculation of NAV. If an extraordinary event that is
expected to materially affect the value of a portfolio security occurs
after the close of an exchange on which that security is traded, then
that security will be valued as determined in good faith by a
committee appointed by the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less
for which market quotations and information furnished by a pricing
service are not readily available are valued either at amortized
cost or at original cost plus accrued interest, both of which
approximate current value. In addition, securities and other assets
for which there is no readily available market value may be valued in
good faith by a committee appointed by the Board of Trustees. The
procedures set forth above need not be used to determine the value of
the securities owned by a fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method would more
accurately reflect the fair market value of such securities.
PERFORMANCE
A fund may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is
not intended to indicate future returns. Each fund's share price,
yield, and total return fluctuate in response to market conditions and
other factors, and the value of fund shares when redeemed may be more
or less than their original cost.
YIELD CALCULATIONS. Yields for a fund are computed by dividing a
fund's interest and dividend income for a given 30-day or one-month
period, net of expenses, by the average number of shares entitled to
receive distributions during the period, dividing this figure by the
fund's net asset value per share (NAV) at the end of the
period, and annualizing the result (assuming compounding of income) in
order to arrive at an annual percentage rate. Yields do not reflect
Capital & Income's 1.50% trading fee, which applies to shares
held less than 365 days, or High Income's 1.00% trading fee,
which applies to shares held less than 270 days. Income is calculated
for purposes of yield quotations in accordance with standardized
methods applicable to all stock and bond funds. Dividends from equity
investments are treated as if they were accrued on a daily basis,
solely for the purposes of yield calculations. In general, interest
income is reduced with respect to bonds trading at a premium over
their par value by subtracting a portion of the premium from income on
a daily basis, and is increased with respect to bonds trading at a
discount by adding a portion of the discount to daily income. For a
fund's investments denominated in foreign currencies, income and
expenses are calculated first in their respective currencies, and then
are converted to U.S. dollars, either when they are actually converted
or at the end of the 30-day or one month period, whichever is earlier.
Income is adjusted to reflect gains and losses from principal
repayments received by a fund with respect to mortgage-related
securities and other asset-backed securities. Other capital gains
and losses generally are excluded from the calculation as are gains
and losses from currency exchange rate fluctuations.
Income calculated for the purposes of calculating a fund's yield
differs from income as determined for other accounting purposes.
Because of the different accounting methods used, and because of the
compounding of income assumed in yield calculations, a fund's yield
may not equal its distribution rate, the income paid to your account,
or the income reported in the fund's financial statements.
In calculating a fund's yield, a fund may from time to time use a
portfolio security's coupon rate instead of its yield to maturity in
order to reflect the risk premium on that security. This practice will
have the effect of reducing a fund's yield.
Yield information may be useful in reviewing a fund's performance and
in providing a basis for comparison with other investment
alternatives. However, a fund's yield fluctuates, unlike investments
that pay a fixed interest rate over a stated period of time. When
comparing investment alternatives, investors should also note the
quality and maturity of the portfolio securities of respective
investment companies they have chosen to consider.
Investors should recognize that in periods of declining interest rates
a fund's yield will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates a fund's yield will
tend to be somewhat lower. Also, when interest rates are falling, the
inflow of net new money to a fund from the continuous sale of its
shares will likely be invested in instruments producing lower yields
than the balance of the fund's holdings, thereby reducing the fund's
current yield. In periods of rising interest rates, the opposite can
be expected to occur.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect
all aspects of a fund's return, including the effect of reinvesting
dividends and capital gain distributions, and any change in a fund's
NAV over a stated period. Average annual total returns are calculated
by determining the growth or decline in value of a hypothetical
historical investment in a fund over a stated period, and then
calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had
been constant over the period. For example, a cumulative total return
of 100% over ten years would produce an average annual total return of
7.18%, which is the steady annual rate of return that would equal 100%
growth on a compounded basis in ten years. While average annual total
returns are a convenient means of comparing investment alternatives,
investors should realize that a fund's performance is not constant
over time, but changes from year to year, and that average annual
total returns represent averaged figures as opposed to the actual
year-to-year performance of a fund.
In addition to average annual total returns, the fund may quote
unaveraged or cumulative total returns reflecting the simple change in
value of an investment over a stated period. Average annual and
cumulative total returns may be quoted as a percentage or as a dollar
amount, and may be calculated for a single investment, a series of
investments, or a series of redemptions, over any time period. Total
returns may be broken down into their components of income and capital
(including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions
to total return. Total returns may be quoted on a before-tax or
after-tax basis and may or may not include the effect of Capital &
Income's 1.50% trading fee on shares held less than 365
days, or High Income's 1.00% trading fee on shares held less
than 270 days. Excluding a fund's trading fee from a total
return calculation produces a higher total return figure. Total
returns, yields, and other performance information may be quoted
numerically or in a table, graph, or similar illustration.
NET ASSET VALUE. Charts and graphs using a fund's net asset values,
adjusted net asset values, and benchmark indices may be used to
exhibit performance. An adjusted NAV includes any distributions paid
by a fund and reflects all elements of its return. Unless otherwise
indicated, a fund's adjusted NAVs are not adjusted for sales charges,
if any.
CALCULATING HISTORICAL FUND RESULTS. The following tables show
performance for each fund calculated including certain fund
expenses.
For Capital & Income, total returns do not include the effect of
the fund's 1.50% trading fee, applicable to shares held less th an
365 days.
For High Income, total returns do not include the effect of the
fund's 1.00% trading fee, applicable to shares held less than 27 0
days.
HISTORICAL FUND RESULTS. The following table shows each fund's yield
and total return for the period ended April 30, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Returns Cumulative Total Returns
Thirty-Day One Five Ten One Five Ten
Yield Year Years Years/ Year Years Years/
Life of Life of
Fund* Fund*
Capital & Income (dagger) 6.49% 23.59% 11.88% 12.23% 23.59% 75.29% 216.95%
High Income 7.66% 21.6 2 % 14.33% 17.38% 21.62% 95.37% 241.97%
</TABLE>
* Life of Fund figures for High Income are from August 29, 1990
(commencement of operations).
(dagger) Prior to December 30, 1990, Capital & Income operated
under a different investment objective. Accordingly, the fund's
historical performance may not represent its current investment
policies.
The following tables show the income and capital elements of each
fund's cumulative total return. The tables compare each fund's
return to the record of the S&P 500, the Dow Jones Industrial Average
(DJIA), and the cost of living, as measured by the Consumer Price
Index (CPI), over the same period. The CPI information is as of the
month-end closest to the initial investment date for each fund. The
S&P 500 and DJIA comparisons are provided to show how each fund's
total return compared to the record of a broad unmanaged index of
common stocks and a narrower set of stocks of major industrial
companies, respectively, over the same period. Because each fund
invests in fixed-income securities, common stocks represent a
different type of investment from the funds. Common stocks generally
offer greater growth potential than the funds, but generally
experience greater price volatility, which means greater potential for
loss. In addition, common stocks generally provide lower income than
fixed-income investments such as the funds. The S&P 500 and DJIA
returns are based on the prices of unmanaged groups of stocks and,
unlike each fund's returns, do not include the effect of brokerage
commissions or other costs of investing.
T he following tables show the growth in value of a hypothetical
$10,000 investment in each fund during the 10-year period ended April
30, 1998, or life of fund, as applicable, assuming all distributions
were reinvested. Total returns are based on past results and are not
an indication of future performance. Tax consequences of different
investments have not been factored into the figures below.
During the 10-year period ended April 30, 1998, a hypothetical $10,000
investment in Capital & Income would have grown to $ 31,695 .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL & INCOME INDICES
Year Ended Value of Value of Value of Total S&P 500 DJIA Cost of
Initial Reinvested Reinvested Value Living
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1998 $ 12,248 $ 19,447 $ 0 $ 31,695 $ 56,624 $ 59,400 $ 13,877
1997 $ 10,642 $ 15,003 $ 0 $ 25,645 $ 40,140 $ 45,177 $ 13,681
1996 $ 10,711 $ 13,060 $ 0 $ 23,771 $ 32,078 $ 35,167 $ 13,348
1995 $ 10,516 $ 10,760 $ 0 $ 21,276 $ 24,635 $ 26,672 $ 12,972
1994 $ 10,998 $ 9,336 $ 0 $ 20,334 $ 20,973 $ 22,124 $ 12,588
1993 $ 10,665 $ 7,416 $ 0 $ 18,081 $ 19,913 $ 20,035 $ 12,297
1992 $ 9,541 $ 5,523 $ 0 $ 15,064 $ 18,227 $ 19,060 $ 11,913
1991 $ 7,936 $ 3,394 $ 0 $ 11,330 $ 15,981 $ 15,888 $ 11,546
1990 $ 7,695 $ 2,173 $ 0 $ 9,868 $ 13,589 $ 14,073 $ 11,008
1989 $ 9,553 $ 1,201 $ 0 $ 10,754 $ 12,291 $ 12,340 $ 10,512
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Capital
& Income on May 1, 1988, the net amount invested in fund shares
was $10,000. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time
they were reinvested) amounted to $ 25,761 . If distributions had
not been reinvested, the amount of distributions earned from the fund
over time would have been smaller, and cash payments for the period
would have amounted to $ 9,275 for dividends and $ 0 for
capital gain distributions. The figures in the table do not include
the effect of Capital & Income's 1.50% trading fee
applicable to shares held less than 365 days. Prior to December 30,
1990, Capital & Income operated under a different investment
objective. Accordingly, the fund's historical performance may not
represent its current investment policies.
During the period from August 29, 1990 (commencement of operations) to
April 30, 1998, a hypothetical $10,000 investment in High Income would
have grown to $34, 197 .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
HIGH INCOME INDICES
Period Ended Value of Value of Value of Total S&P 500 DJIA Cost of
Initial Reinvested Reinvested Value Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1998 $ 13,640 $ 16,481 $ 4,076 $ 34,197 $ 41,962 $ 42,058 $ 12,348
1997 $ 12,480 $ 12,601 $ 3,037 $ 28,118 $ 29,746 $ 31,987 $ 12,173
1996 $ 12,510 $ 10,398 $ 2,522 $ 25,430 $ 23,772 $ 24,900 $ 11,877
1995 $ 11,990 $ 7,727 $ 2,194 $ 21,911 $ 18,256 $ 18,885 $ 11,543
1994 $ 11,880 $ 5,808 $ 2,039 $ 19,727 $ 15,542 $ 15,665 $ 11,201
1993 $ 12,220 $ 4,364 $ 919 $ 17,503 $ 14,757 $ 14,186 $ 10,942
1992 $ 11,900 $ 2,665 $ 401 $ 14,966 $ 13,507 $ 13,495 $ 10,600
1991* $ 10,640 $ 893 $ 0 $ 11,533 $ 11,843 $ 11,250 $ 10,274
</TABLE>
* From August 29, 1990 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in High
Income on August 29, 1990, the net amount invested in fu nd shares
was $10,000. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and c apital gain
distributions for the period covered (their cash value at the time
they were reinvested) amounted to $28,169. If d istributions had
not been reinvested, the amount of distributions earned from the fund
over time would have been smaller, and cash payments for the period
would have amounted to $8,733 for dividends and $2,240 for capital
gain distributions. The figures i n the table do not include the
effect of High Income's 1.00% trading fee applicable to shares held
less th an 270 days.
PERFORMANCE COMPARISONS. A fund's performance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed
as mutual fund rankings prepared by Lipper Analytical Services, Inc.
(Lipper), an independent service located in Summit, New Jersey that
monitors the performance of mutual funds. Generally, Lipper rankings
are based on total return, assume reinvestment of distributions, do
not take sales charges or trading fees into consideration, and
are prepared without regard to tax consequences. Lipper may also rank
based on yield. In addition to the mutual fund rankings, a fund's
performance may be compared to stock, bond, and money market mutual
fund performance indices prepared by Lipper or other organizations.
When comparing these indices, it is important to remember the risk and
return characteristics of each type of investment. For example, while
stock mutual funds may offer higher potential returns, they also carry
the highest degree of share price volatility. Likewise, money market
funds may offer greater stability of principal, but generally do not
offer the higher potential returns available from stock mutual funds.
From time to time, a fund's performance may also be compared to other
mutual funds tracked by financial or business publications and
periodicals. For example, a fund may quote Morningstar, Inc. in its
advertising materials. Morningstar, Inc. is a mutual fund rating
service that rates mutual funds on the basis of risk-adjusted
performance. Rankings that compare the performance of Fidelity funds
to one another in appropriate categories over specific periods of time
may also be quoted in advertising. A fund may advertise risk
ratings, including symbols or numbers, prepared by independent rating
agencies.
A fund's performance may also be compared to that of a benchmark index
representing the universe of securities in which the fund may invest.
The total return of a benchmark index reflects reinvestment of all
dividends and capital gains paid by securities included in the index.
Unlike a fund's returns, however, the index returns do not reflect
brokerage commissions, transaction fees, or other costs of investing
directly in the securities included in the index.
Each fund may compare its performance to that of the Merrill Lynch
High Yield Master Index, a market capitalization weighted index of all
domestic and yankee high-yield bonds with an outstanding par value of
at least $50 million and maturities of at least one year. Issues
included in the index have a credit rating lower than BBB-/Baa3 but
are not in default (DDD1 or lower). Split-rated issues (i.e., rated
investment-grade by one rating agency and high-yield by another) are
included in the index based on the issue's corresponding composite
rating. Structured-note issues, deferred interest bonds, and
pay-in-kind bonds are excluded.
A fund may be compared in advertising to Certificates of Deposit (CDs)
or other investments issued by banks or other depository institutions.
Mutual funds differ from bank investments in several respects. For
example, a fund may offer greater liquidity or higher potential
returns than CDs, a fund does not guarantee your principal or your
return, and fund shares are not FDIC insured.
Fidelity may provide information designed to help individuals
understand their investment goals and explore various financial
strategies. Such information may include information about current
economic, market, and political conditions; materials that describe
general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; questionnaires
designed to help create a personal financial profile; worksheets used
to project savings needs based on assumed rates of inflation and
hypothetical rates of return; and action plans offering investment
alternatives. Materials may also include discussions of Fidelity's
asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides
historical returns of the capital markets in the United States,
including common stocks, small capitalization stocks, long-term
corporate bonds, intermediate-term government bonds, long-term
government bonds, Treasury bills, the U.S. rate of inflation (based on
the CPI), and combinations of various capital markets. The performance
of these capital markets is based on the returns of different indices.
Fidelity funds may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with
the security types in any capital market may or may not correspond
directly to those of the funds. Ibbotson calculates total returns in
the same method as the funds. The funds may also compare performance
to that of other compilations or indices that may be developed and
made available in the future.
In advertising materials, Fidelity may reference or discuss its
products and services, which may include other Fidelity funds;
retirement investing; brokerage products and services; model
portfolios or allocations; saving for college or other goals; and
charitable giving . In addition, Fidelity may quote or reprint
financial or business publications and periodicals as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the
desirability of owning a particular mutual fund, and Fidelity services
and products. Fidelity may also reprint, and use as advertising and
sales literature, articles from Fidelity Focus(Registered trademark),
a quarterly magazine provided free of charge to Fidelity fund
shareholders.
A fund may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote its current portfolio manager.
VOLATILITY. A fund may quote various measures of volatility and
benchmark correlation in advertising. In addition, the fund may
compare these measures to those of other funds. Measures of volatility
seek to compare a fund's historical share price fluctuations or total
returns to those of a benchmark. Measures of benchmark correlation
indicate how valid a comparative benchmark may be. All measures of
volatility and correlation are calculated using averages of historical
data. In advertising, a fund may also discuss or illustrate examples
of interest rate sensitivity.
MOMENTUM INDICATORS indicate a fund's price movements over specific
periods of time. Each point on the momentum indicator represents a
fund's percentage change in price movements over that period.
A fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a
program, an investor invests a fixed dollar amount in a fund at
periodic intervals, thereby purchasing fewer shares when prices are
high and more shares when prices are low. While such a strategy does
not assure a profit or guard against loss in a declining market, the
investor's average cost per share can be lower than if fixed numbers
of shares are purchased at the same intervals. In evaluating such a
plan, investors should consider their ability to continue purchasing
shares during periods of low price levels.
A fund may be available for purchase through retirement plans or other
programs offering deferral of, or exemption from, income taxes, which
may produce superior after-tax returns over time. For example, a
$1,000 investment earning a taxable return of 10% annually would have
an after-tax value of $1,949 after ten years, assuming tax was
deducted from the return each year at a 31% rate. An equivalent
tax-deferred investment would have an after-tax value of $2,100 after
ten years, assuming tax was deducted at a 31% rate from the
tax-deferred earnings at the end of the ten-year period.
As of April 30, 199 8 , FMR advised over $ 30 billion in
municipal fund assets, $ 103 billion in money market fund
assets, $ 454 billion in equity fund assets, $ 73 billion
in international fund assets, and $ 29 billion in Spartan
fund assets. The funds may reference the growth and variety of money
market mutual funds and the adviser's innovation and participation in
the industry. The equity funds under management figure represents the
largest amount of equity fund assets under management by a mutual fund
investment adviser in the United States, making FMR America's leading
equity (stock) fund manager. FMR, its subsidiaries, and affiliates
maintain a worldwide information and communications network for the
purpose of researching and managing investments abroad.
In addition to performance rankings, a fund may compare its total
expense ratio to the average total expense ratio of similar funds
tracked by Lipper. A fund's total expense ratio is a significant
factor in comparing bond and money market investments because of its
effect on yield.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
Each fund is open for business and its net asset value per share (NAV)
is calculated each day the New York Stock Exchange (NYSE) is open
for trading. The NYSE has designated the following holiday closings
for 1998: New Year's Day, Martin Luther King's Birthday, Presidents'
Day, Good Friday, Memorial Day, Independence Day (observed), Labor
Day, Thanksgiving Day, an d Christmas Day. Although FMR expects the
same holiday schedule to be observed in the future, the NYSE may
modify its holiday schedule at any time. In addition, on days when
the Federal Reserve Wire System is closed, federal funds wires cannot
be sen t.
FSC normally determines each fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated
earlier if trading on the NYSE is restricted or as permitted by the
SEC. To the extent that portfolio securities are traded in other
markets on days when the NYSE is closed, a fund's NAV may be affected
on days when investors do not have access to the fund to purchase or
redeem shares. In addition, trading in some of a fund's portfolio
securities may not occur on days when the fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are
valued in computing each fund's NAV. Shareholders receiving securities
or other property on redemption may realize a gain or loss for tax
purposes, and will incur any costs of sale, as well as the associated
inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, each fund is required to
give shareholders at least 60 days' notice prior to terminating or
modifying its exchange privilege. Under the Rule, the 60-day
notification requirement may be waived if (i) the only effect of a
modification would be to reduce or eliminate an administrative fee,
redemption fee, or deferred sales charge ordinarily payable at the
time of an exchange, or (ii) the fund suspends the redemption of the
shares to be exchanged as permitted under the 1940 Act or the rules
and regulations thereunder, or the fund to be acquired suspends the
sale of its shares because it is unable to invest amounts effectively
in accordance with its investment objective and policies.
In the Prospectus, each fund has notified shareholders that it
reserves the right at any time, without prior notice, to refuse
exchange purchases by any person or group if, in FMR's judgment, the
fund would be unable to invest effectively in accordance with its
investment objective and policies, or would otherwise potentially be
adversely affected.
DISTRIBUTIONS AND TAXES
DIVIDENDS. Because each fund's income is primarily derived from
interest, dividends from the fund generally will not quali fy for
the dividends-received deduction available to corporate shareholders.
Short-term capital gains are distributed as dividend income, but do
not qualify for the dividends-received deduction. A portion of each
fund's dividends derived from certain U.S. Government
securities may be exempt from state and local taxation. Gains
(losses) attributable to foreign currency fluctuations are generally
taxable as ordinary income, and therefore will increase (decrease)
dividend distributions. If a fund's distributions exceed its
net investment company taxable income during a taxable year,
all or a portion of the distributions made in the same taxable year
would be recharacterized as a return of capital to shareholders,
thereby reducing each shareholder's cost basis in the fund.
Mortgage security paydown gains (losses) on mortgage securities
purchased by a fund on or prior to June 8, 1997 are generally taxable
as ordinary income and, therefore, increase (decrease) taxable
dividend distributions. Each fund will send each shareholder a
notice in January describing the tax status of dividend and capital
gain distributions for the prior year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by each
fund on the sale of securities and distributed to shareholders are
federally taxable as long-term capital gains, regardless of the length
of time shareholders have held their shares. If a shareholder receives
a capital gain distribution on shares of a fund, and such
shares are held six months or less and are sold at a loss, the portion
of the loss equal to the amount of the capital gain
distribution will be considered a long-term loss for tax purposes.
Short-term capital gains distributed by each fund are taxable to
shareholders as dividends, not as capital gains.
As of April 30, 1998, Capital & Income had a capital loss
carryforward aggregating approximately $996,000. This loss
carryforward, all of which will expire on April 30, 2005, is available
to offset future capital gains.
As of April 30, 1998, High Income hereby designates approximately
$ 20,750,000 as a capital gain dividend for the purpose of the
dividend-paid deduction.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Foreign governments
may also impose taxes on other payments or gains with respect to
foreign securities. Because each fund does not currently anticipate
that securities of foreign issuers will constitute more than 50% of
its total assets at the end of its fiscal year, shareholders should
not expect to claim a foreign tax credit or deduction on their federal
income tax returns with respect to foreign taxes withheld.
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company
and avoid being subject to federal income or excise taxes at the fund
level, each fund intends to distribute substantially all of its net
investment income and net realized capital gains within each calendar
year as well as on a fiscal year basis , and intends to comply
with other tax rules applicable to regulated investment
companies .
Each fund is treated as a separate entity from the other funds, if
any, of its trust for tax purposes.
If a fund purchases shares in certain foreign investment entities,
defined as passive foreign investment companies (PFICs) in the
Internal Revenue Code, it may be subject to U.S. federal income tax on
a portion of any excess distribution or gain from the disposition of
such shares. Interest charges may also be imposed on a fund with
respect to deferred taxes arising from such distributions or gains.
Generally, a fund will elect to mark-to-market any PFIC shares.
Unrealized gains will be recognized as income for tax purposes and
must be distributed to shareholders as dividends.
OTHER TAX INFORMATION. The information above is only a summary of some
of the tax consequences generally affecting each fund and its
shareholders, and no attempt has been made to discuss individual tax
consequences. In addition to federal income taxes, shareholders may be
subject to state and local taxes on fund distributions, and shares may
be subject to state and local personal property taxes. Investors
should consult their tax advisers to determine whether a fund is
suitable to their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent organized in
1972. The voting common stock of FMR Corp. is divided into two
classes. Class B is held predominantly by members of the Edward C.
Johnson 3d family and is entitled to 49% of the vote on any matter
acted upon by the voting common stock. Class A is held predominantly
by non-Johnson family member employees of FMR Corp. and its affiliates
and is entitled to 51% of the vote on any such matter. The Johnson
family group and all other Class B shareholders have entered into a
shareholders' voting agreement under which all Class B shares will be
voted in accordance with the majority vote of Class B shares. Under
the 1940 Act, control of a company is presumed where one individual or
group of individuals owns more than 25% of the voting stock of that
company. Therefore, through their ownership of voting common stock and
the execution of the shareholders' voting agreement, members of the
Johnson family may be deemed, under the 1940 Act, to form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by its division, Fidelity Investments Retail Marketing
Company, which provides marketing services to various companies within
the Fidelity organization.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures
for personal investing and restricts certain transactions. For
example, all personal trades in most securities require pre-clearance,
and participation in initial public offerings is prohibited. In
addition, restrictions on the timing of personal investing in relation
to trades by Fidelity funds and on short-term trading have been
adopted.
TRUSTEES AND OFFICERS
The Trustees, Members of the Advisory Board, and executive
officers of the trust are listed below. Except as indicated, each
individual has held the office shown or other offices in the same
company for the last five years. All persons named as Trustees and
Members of the Advisory Board also serve in similar capacities for
other funds advised by FMR. The business address of each Trustee,
Member of the Advisory Board, and officer who is an "interested
person" (as defined in the Investment Company Act of 1940) is 82
Devonshire Street, Boston, Massachusetts 02109, which is also the
address of FMR. The business address of all the other Trustees is
Fidelity Investments, P.O. Box 9235, Boston, Massachusetts 02205-9235.
Those Trustees who are "interested persons" by virtue of their
affiliation with either the trust or FMR are indicated by an asterisk
(*).
*EDWARD C. JOHNSON 3d (6 7 ), 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.
J. GARY BURKHEAD (56), Member of the Advisory Board (1997), is Vice
Chairman and a Member of the Board of Directors of FMR Corp. (1997)
and President of Fidelity Personal Investments and Brokerage Group
(1997). Previously, Mr. Burkhead served as President of Fidelity
Management & Research Company.
RALPH F. COX (6 5 ), Trustee, is President of RABAR
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
USA Waste Services, Inc. (non-hazardous waste, 1993), CH2M Hill
Companies (engineering), Rio Grande, Inc. (oil and gas production),
and Daniel Industries (petroleum measurement equipment manufacturer).
In addition, he is a member of advisory boards of Texas A&M University
and the University of Texas at Austin.
PHYLLIS BURKE DAVIS (6 6 ), Trustee. Prior to her retirement in
September 1991, Mrs. Davis was the Senior Vice President of Corporate
Affairs of Avon Products, Inc. She is currently a Director of
BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores),
and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she is a member of
the President's Advisory Council of The University of Vermont School
of Business Administration.
ROBERT M. GATES (5 4 ), Trustee (1997), is a consultant, author,
and 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
LucasVarity PLC (automotive components and diesel engines), Charles
Stark Draper Laboratory (non-profit), NACCO Industries, Inc. (mining
and manufacturing), and TRW Inc. (original equipment and replacement
products). 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.
E. BRADLEY JONES ( 70 ), Trustee. Prior to his retirement in
1984, Mr. Jones was Chairman and Chief Executive Officer of LTV Steel
Company. He is a Director of TRW Inc. (original equipment and
replacement products), Consolidated Rail Corporation, Birmingham Steel
Corporation, and RPM, Inc. (manufacturer of chemical products), and he
previously served as a Director of NACCO Industries, Inc. (mining and
manufacturing, 1985-1995), Hyster-Yale Materials Handling, Inc.
(1985-1995), and Cleveland-Cliffs Inc (mining), and as a Trustee of
First Union Real Estate Investments . In addition, he serves as a
Trustee of the Cleveland Clinic Foundation, where he has also
been a member of the Executive Committee as well as Chairman of
the Board and President, a Trustee and member of the Executive
Committee of University School (Cleveland), and a Trustee of Cleveland
Clinic Florida.
DONALD J. KIRK (6 5 ), Trustee, is Executive-in-Residence (1995)
at Columbia University Graduate School of Business and a financial
consultant. 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 is a
Director of General Re Corporation (reinsurance), and he previously
served as a Director of Valuation Research Corp. (appraisals and
valuations, 1993-1995). In addition, he serves as Chairman of the
Board of Directors of the National Arts Stabilization Fund, Chairman
of the Board of Trustees of the Greenwich Hospital Association,
Director of the Yale-New Haven Health Services Corp. (1998), a
Member 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).
*PETER S. LYNCH (5 5 ), Trustee, is Vice Chairman and Director of
FMR . 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 (6 4 ), Trustee (1997), is the Vice President of
Finance for the University of North Carolina (16-school system, 1995).
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), Weeks Corporation of
Atlanta (real estate, 1994), Carolina Power and Light Company
(electric utility, 1996), and the Kenan Transport Co. (1996).
Previously, he was a Director of First American Corporation (bank
holding company, 1979-1996). In addition, Mr. McCoy serves as a member
of the Board of Visitors for the University of North Carolina at
Chapel Hill (1994) and for the Kenan-Flager Business School
(University of North Carolina at Chapel Hill, 1988).
GERALD C. McDONOUGH (6 9 ), Trustee and Chairman of the
non-interested Trustees, is Chairman of G.M. Management Group
(strategic advisory services) . Mr. McDonough is a Director
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 (6 5 ), Trustee (1993), is Chairman of the Board,
President, and Chief Executive Officer of Lexmark International, Inc.
(office machines, 1991). 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) ,
and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State
United Way (1993) and is a member of the University of Alabama
President's Cabinet.
*ROBERT C. POZEN (51), Trustee (1997) and Senior Vice President, is
also President and a Director of FMR (1997); and President and a
Director of Fidelity Investments Money Management, Inc. (1998),
Fidelity Management & Research (U.K.) Inc. (1997), and Fidelity
Management & Research (Far East) Inc. (1997). Previously, Mr. Pozen
served as General Counsel, Managing Director, and Senior Vice
President of FMR Corp.
THOMAS R. WILLIAMS (6 9 ), Trustee, is President of The Wales
Group, 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 ConAgra, Inc. (agricultural products),
Georgia Power Company (electric utility), National Life
Insurance Company of Vermont, American Software, Inc., and AppleSouth,
Inc. (restaurants, 1992).
BART A. GRENIER, (39), is Vice President of certain High-Income
Bond Funds (1997). Mr. Grenier rejoined Fidelity in August 1997 from
DDJ Capital Management, LLC, where he had served as Managing Director
since April 1997. Mr. Grenier originally joined Fidelity in 1991 as a
senior analyst. Mr. Grenier served as a Director of High-Income Group
Research and as Director of U.S. Equity Research from 1994 to March
1996. He later became Group Leader of the Income-Growth and Asset
Allocation-Income Groups in 1996 and Assistant Equity Division Head in
1997.
DAVID L. GLANCY (37), is Vice President of Fidelity Capital &
Income Fund (1996). Prior to his current responsibilities, Mr. Glancy
managed a variety of Fidelity funds.
THOMAS T. SOVIERO (34), is Vice President of Fidelity High Income
Fund (1996). Since 1994, Mr. Soviero has managed sub-portfolios of a
variety of Fidelity funds. Prior to 1994, Mr. Soviero served as
Director of High-Yield Research.
ERIC D. ROITER (49), Secretary (1998), is Vice President (1998) and
General Counsel of FMR (1998). Mr. Roiter was an Adjunct Member,
Faculty of Law, at Columbia University Law School (1996-1997). Prior
to joining Fidelity, Mr. Roiter was a partner at Debevoise & Plimpton
(1981-1997) and served as an Assistant General Counsel of the U.S.
Securities and Exchange Commission (1979-1981).
RICHARD A. SILVER (51), Treasurer (1997), is Treasurer of the
Fidelity funds and is an employee of FMR (1997). Before joining FMR,
Mr. Silver served as Executive Vice President, Fund Accounting &
Administration at First Data Investor Services Group, Inc.
(1996-1997). Prior to 1996, Mr. Silver was Senior Vice President and
Chief Financial Officer at The Colonial Group, Inc. Mr. Silver also
served as Chairman of the Accounting/Treasurer's Committee of the
Investment Company Institute (1987-1993).
JOHN H. COSTELLO (5 1 ), Assistant Treasurer, is an employee of
FMR.
LEONARD M. RUSH (5 2 ), 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 table sets forth information describing the compensation
of each Trustee and Member of the Advisory Board of each
fund for his or her services for the fiscal year ended April 30,
199 8 , or calendar year ended December 31, 199 7 , as
applicable.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMPENSATION TABLE
Trustees Aggregate Aggregate Total
and Compensation Compensation Compensation
Members of the Advisory Board from Capital & from from the
IncomeB,C, D High IncomeB Fund Complex*,A
J. Gary Burkhead** $ 0 $ 0 $ 0
Ralph F. Cox $ 826 $ 896 $ 214,500
Phyllis Burke Davis $ 826 $ 896 $ 210,000
Robert M. Gates*** $ 843 $ 912 $ 176,000
Edward C. Johnson 3d** $ 0 $ 0 $ 0
E. Bradley Jones $ 826 $ 896 $ 211,500
Donald J. Kirk $ 826 $ 896 $ 211,500
Peter S. Lynch** $ 0 $ 0 $ 0
William O. McCoy**** $ 843 $ 912 $ 214,500
Gerald C. McDonough $ 1031 $ 1118 $ 264,500
Marvin L. Mann $ 815 $ 884 $ 214,500
Robert C. Pozen** $ 0 $ 0 $ 0
Thomas R. Williams $ 826 $ 896 $ 214,500
</TABLE>
* Information is for the calendar year ended December 31, 199 7
for 23 0 funds in the complex.
** Interested Trustees of the funds and Mr. Burkhead are
compensated by FMR.
*** Mr. Gates was appointed to the Board of Trustees of Fidelity
Summer Street Trust and Fidelity Fixed-Income Trust effective
March 1, 1997.
**** Mr. McCoy was appointed to the Board of Trustees of Fidelity
Summer Street Trust and Fidelity Fixed-Income Trust effective
January 1, 1997.
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, 1997, the Trustees accrued
required deferred compensation from the funds as follows: Ralph F.
Cox, $75,000; Phyllis Burke Davis, $75,000; Robert M. Gates, $62,500;
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, $53,699; Marvin L. Mann, $53,699; and Thomas R.
Williams, $62,462.
B Compensation figures include cash, and may include amounts required
to be deferred and amounts deferred at the election of
Trustees.
C The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $390; Phyllis Burke Davis, $390;
Robert M. Gates, $393; E. Bradley Jones, $390; Donald J. Kirk, $390;
William O. McCoy, $393; Gerald C. McDonough, $454; Marvin L. Mann,
$390; and Thomas R. Williams, $390.
D Certain of the non-interested Trustees' aggregate compensation
from the fund includes accrued voluntary deferred compensation as
follows: Ralph F. Cox, $326; Marvin L. Mann, $327; William O. McCoy,
$103; and Thomas R. Williams, $326.
Under a deferred compensation plan adopted in September 1995 and
amended in November 1996 (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 subject to vesting and 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.
As of April 30, 1998, the Trustees, Members of the Advisory Board,
and officers of each fund owned, in the aggregate, less than 1% of
each fund's total outstanding shares.
MANAGEMENT CONTRACTS
Each fund has entered into a management contract with FMR, pursuant
to which FMR furnishes investment advisory and other services.
MANAGEMENT SERVICES. Under the terms of 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 the
fund in accordance with its investment objective, policies, and
limitations. FMR also provides each fund with all necessary office
facilities and personnel for servicing the fund's investments,
compensates all officers of each fund and all Trustees who are
"interested persons" of the trusts 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 securities laws and
making necessary filings under state securities laws; developing
management and shareholder services for each fund; and furnishing
reports, evaluations, and analyses on a variety of subjects to the
Trustees.
MANAGEMENT-RELATED EXPENSES (CAPITAL & INCOME). In addition to the
management fee payable to FMR and the fees payable to the transfer,
dividend disbursing, and shareholder servicing agent, pricing and
bookkeeping agent, and securities lending agent, the fund pays all of
its expenses that are not assumed by those parties. The fund pays for
the typesetting, printing, and mailing of its proxy materials to
shareholders, legal expenses, and the fees of the custodian, auditor
and non-interested Trustees. The fund's management contract further
provides that the fund will pay for typesetting, printing, and mailing
prospectuses, statements of additional information, notices, and
reports to shareholders; however, under the terms of the fund's
transfer agent agreement, the transfer agent bears the costs of
providing these services to existing shareholders. Other expenses paid
by the fund include interest, taxes, brokerage commissions, the fund's
proportionate share of insurance premiums and Investment Company
Institute dues, and the costs of registering shares under federal
securities laws and making necessary filings under state securities
laws. The fund is also liable for such non-recurring expenses as may
arise, including costs of any litigation to which the fund may be a
party, and any obligation it may have to indemnify its officers and
Trustees with respect to litigation.
MANAGEMENT-RELATED EXPENSES (HIGH INCOME). Under the terms of its
management contract with the fund, FMR is responsible for payment of
all operating expenses of the fund with certain exceptions. Specific
expenses payable by FMR include expenses for typesetting, printing,
and mailing proxy materials to shareholders, legal expenses, fees of
the custodian, auditor and interested Trustees, the fund's
proportionate share of insurance premiums and Investment Company
Institute dues, and the costs of registering shares under federal
securities laws and making necessary filings under state securities
laws. The fund's management contract further provides that FMR will
pay for typesetting, printing, and mailing prospectuses, statements of
additional information, notices, and reports to shareholders; however,
under the terms of the fund's transfer agent agreement, the transfer
agent bears the costs of providing these services to existing
shareholders. FMR also pays all fees associated with transfer agent,
dividend disbursing, and shareholder services, pricing and bookkeeping
services, and administration of the fund's securities lending program.
FMR pays all other expenses of High Income with the following
exceptions: fees and expenses of the non-interested Trustees,
interest, taxes, brokerage commissions (if any), and such nonrecurring
expenses as may arise, including costs of any litigation to which the
fund may be a party, and any obligation it may have to indemnify its
officers and Trustees with respect to litigation.
MANAGEMENT FEES. For the services of FMR under the management
contract, High Income pays FMR a monthly management fee at the annual
rate of 0.80% of its average net assets throughout the month.
The management fee paid to FMR by High Income is reduced by an amount
equal to the fees and expenses paid by the fund to the non-interested
Trustees.
For the services of FMR under the management contract, Capital &
Income pays FMR a monthly management fee which has two components: a
group fee rate and an individual fund fee rate.
On January 1, 1996 and August 1, 1994, 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.
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.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual Fee
Assets Rate Assets Rate
0 - $3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1690
24 - 30 .1800 200 .1652
30 - 36 .1750 225 .1618
36 - 42 .1700 250 .1587
42 - 48 .1650 275 .1560
48 - 66 .1600 300 .1536
66 - 84 .1550 325 .1514
84 - 120 .1500 350 .1494
120 - 156 .1450 375 .1476
156 - 192 .1400 400 .1459
192 - 228 .1350 425 .1443
228 - 264 .1300 450 .1427
264 - 300 .1275 475 .1413
300 - 336 .1250 500 .1399
336 - 372 .1225 525 .1385
372 - 408 .1200 550 .1372
408 - 444 .1175
444 - 480 .1150
480 - 516 .1125
Over 516 .1100
T he group fee rate is calculated on a cumulative basis pursuant
to the graduated fee rate schedule shown above on the left. The
schedule above 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 $625 billion of group net assets -
the approximate level for April 199 8 - was 0.13%, which is the
weighted average of the respective fee rates for each level of group
net assets up to $ 625 billion.
The individual fund fee rate for Capital & Incom e is
0.45%. Based on the average group net assets of the funds advised by
FMR for April 199 8 , the fund's annual management fee rate would
be calculated as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Group Fee Rate Individual Fund Fee Rate Management Fee Rate
Capital & Income 0.13% + 0.45% = 0.58%
</TABLE>
O ne-twelfth of this annual management fee rate is applied to
the fund's net assets averaged for the most recent month, giving a
dollar amount, which is the fee for that month.
The following table shows the amount of management fees paid by
each fund to FMR for the past three fiscal years, and the amount of
credits reducing management fees for High Income.
Fund Fiscal Years Ended Amount of Management Fees
April 30 Credits Reducing Paid to FMR
Management Fees
Capital & Income 1998 -- $ 12,603,000
1997(dagger) -- $ 13,271,000
1996 -- $ 16,273,000
High Income 1998 $ 66,000 $ 19,311,000*
1997 $ 60,000 $ 13,079,000*
1996 $ 68,000 $ 8,340,000*
* After reduction of fees and expenses paid by the fund to the
non-interested Trustees.
(dagger) On July 1, 1996, FMR reduced the individual fund fee rate
paid by Capital & Income from 0.55% to 0.45%.
FMR may, from time to time, voluntarily reimburse all or a portion of
a fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to
be repaid for these expense reimbursements in the amount that expenses
fall below the limit prior to the end of the fiscal year.
Expense reimbursements by FMR will increase a fund's total returns and
yield, and repayment of the reimbursement by a fund will lower its
total returns and yield.
SUB-ADVISERS. On behalf of Capital & Income and High Income, 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 Capital & Income, FMR may also grant the sub-advisers
investment management authority as well as the authority to buy and
sell securities if FMR believes it would be beneficial to the fund.
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.
On behalf of Capital & Income, 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 the fund's average net assets managed by the
sub-adviser on a discretionary basis.
No fees were paid to the sub-advisors by FMR on behalf of the funds
for the past three fiscal years.
DISTRIBUTION AND SERVICE PLAN S
The Trustees have approved Distribution and Service Plans on behalf of
each fund (the Plans) pursuant to Rule 12b-1 under the 1940 Act (the
Rule). The Rule provides in substance that a mutual fund may not
engage directly or indirectly in financing any activity that is
primarily intended to result in the sale of shares of the fund except
pursuant to a plan approved on behalf of the fund under the Rule. The
Plans, as approved by the Trustees, allow the funds and FMR to incur
certain expenses that might be considered to constitute indirect
payment by the funds of distribution expenses.
Under each Plan, if the payment of management fees by the fund to FMR
is deemed to be indirect financing by the fund of the distribution of
its shares, such payment is authorized by the Plan. Each Plan
specifically recognizes that FMR may use its management fee revenue,
as well as its past profits or its other resources, to pay FDC for
expenses incurred in connection with the distribution of fund shares.
In addition, each Plan provides that FMR, directly or through FDC, may
make payments to third parties, such as banks or broker-dealers, that
engage in the sale of fund shares, or provide shareholder support
services. Currently, the Board of Trustees has authorized such
payments for each fund.
FMR made no payments either directly or through FDC to third
parties for the fiscal year ended 1998.
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan, and
determined that there is a reasonable likelihood that the Plan will
benefit the fund and its shareholders. In particular, the Trustees
noted that each Plan does not authorize payments by the fund other
than those made to FMR under its management contract with the fund. To
the extent that each Plan gives FMR and FDC greater flexibility in
connection with the distribution of fund shares, additional sales of
fund shares may result. Furthermore, certain shareholder support
services may be provided more effectively under the Plans by local
entities with whom shareholders have other relationships.
The Glass-Steagall Act generally prohibits federally and state
chartered or supervised banks from engaging in the business of
underwriting, selling, or distributing securities. Although the scope
of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, FDC believes
that the Glass-Steagall Act should not preclude a bank from performing
shareholder support services, or servicing and recordkeeping
functions. FDC intends to engage banks only to perform such functions.
However, changes in federal or state statutes and regulations
pertaining to the permissible activities of banks and their affiliates
or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions,
if any, would be necessary to continue to provide efficient and
effective shareholder services. In such event, changes in the
operation of the funds might occur, including possible termination of
any automatic investment or redemption or other services then provided
by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these
occurrences. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein, and
banks and other financial institutions may be required to register as
dealers pursuant to state law.
Each fund may execute portfolio transactions with, and purchase
securities issued by, depository institutions that receive payments
under the Plans. No preference for the instruments of such depository
institutions will be shown in the selection of investments.
CONTRACTS WITH FMR AFFILIATES
Each fund has entered into a transfer agent agreement with
FSC , an affiliate of FMR. Under the terms of the agreements,
FSC performs transfer agency, dividend disbursing, and
shareholder services for each fund.
For providing transfer agency services, FSC receives an
account fee and an asset-based fee each paid monthly with respect to
each account in a fund. For retail accounts and certain institutional
accounts, these fees are based on account size and fund type. For
certain institutional retirement accounts, these fees are based on
fund type. For certain other institutional retirement accounts, these
fees are based on account type (i.e., omnibus or non-omnibus) and, for
non-omnibus accounts, fund type. The account fees are subject to
increase based on postage rate changes.
FSC also collects small account fees from certain accounts with
balances of less than $2,500.
In addition, FSC receives the pro rata portion of the transfer
agency fees applicable to shareholder accounts in a qualified state
tuition program (QSTP), as defined under the Small Business Job
Protection Act of 1996, managed by FMR or an affiliate and each
Fidelity Freedom Fund, a fund of funds managed by an FMR affiliate,
according to the percentage of the QSTP's o r Freedom Fund's assets
that is invested in a fund.
FSC pays out-of-pocket expenses associated with providing transfer
agent services. In addition, FSC bears the expense of typesetting,
printing, and mailing prospectuses, statements of additional
information, and all other reports, notices, and statements to
existing shareholders, with the exception of proxy statements.
Each fund has also entered into a service agent agreement with FSC.
Under the terms of the agreements, FSC calculates the NAV and
dividends for each fund, maintains each fund's portfolio and general
accounting records, and administers each fund's securities lending
program.
For providing pricing and bookkeeping services, FSC receives a
monthly fee based on each fund's average daily net assets throughout
the month. The annual fee rates for pricing and bookkeeping services
for Capital & Income are .0750% of the first $500 million of average
net assets and .0375% for average net assets in excess of $500
million. The fee, not including reimbursement for out-of-pocket
expenses, is limited to a minimum of $60,000 and a maximum of $800,000
per year.
Pricing and bookkeeping fees, including reimbursement for
out-of-pocket expenses, paid by Capital & Income to FSC for the past
three fiscal years are shown in the table below.
Fund 1998 1997 1996
Capital & Income $ 815,000 $ 826,000 $ 649,000
For administering each fund's securities lending program, FSC
receives fees based on the number and duration of individual
securities loans.
For the fiscal years ended April 30, 1998, 1997, and 1996, Capital
& Income paid securities lending fees of $17,000, $0, and $1,000,
respectively.
For High Income, FMR bears the cost of transfer agency, dividend
disbursing, and shareholder services, pricing and bookkeeping
services, and administration of the securities lending program under
the terms of its management contract with the fund.
Each fund has entered into a distribution agreement with FDC, an
affiliate of FMR organized as a Massachusetts corporation on July
18, 1960. FDC is a broker-dealer registered under the Securities
Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc. The distribution agreements call for FDC to
use all reasonable efforts, consistent with its other business, to
secure purchasers for shares of the fund, which are continuously
offered at NAV. Promotional and administrative expenses in connection
with the offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUSTS
TRUSTS' ORGANIZATION. Fidelity Capital & Income Fund is a fund of
Fidelity Summer Street Trust, an open-end management investment
company organized as a Massachusetts business trust on March 23, 1977.
In January 1981, the Declaration of Trust was amended to change the
name of the trust from Fidelity Aggressive Income Fund to Fidelity
High Income Fund. In December 1988, the trust's name was changed to
Fidelity Summer Street Trust. Currently, there is only one fund in the
trust: Fidelity Capital & Income Fund.
Fidelity High Income Fund is a fund of Fidelity Fixed-Income Trust, an
open-end management investment company originally organized as a
Massachusetts corporation on June 25, 1970. On September 5, 1984, the
trust was reorganized as a Massachusetts business trust, at which time
the name was changed from Fidelity Corporate Bond Fund, Inc. to
Fidelity Corporate Bond Fund. On October 25, 1985, the trust's name
was changed to Fidelity Flexible Bond Fund and on August 31, 1986, it
was changed to Fidelity Fixed-Income Trust. Currently, there are five
funds of the trust: Fidelity Investment Grade Bond Fund, Fidelity
Short-Term Bond Fund, Sparta n Government Income Fund, Fidelity
High Income Fund, and Sparta n Short-Intermediate Government
Fund.
The Declarations of Trust permit the Trustees to create additional
funds.
In the event that FMR ceases to be the investment adviser to a trust
or a fund, the right of the trust or fund to use the identifying
name "Fidelity" may be withdrawn. There is a remote possibility
that one fund might become liable for any misstatement in its
prospectus or statement of additional information about another
fund.
The assets of each trust received for the issue or sale of shares
of each of its funds and all income, earnings, profits, and proceeds
thereof, subject only to the rights of creditors, are especially
allocated to such fund, and constitute the underlying assets of such
fund. The underlying assets of each fund are segregated on the books
of account, and are to be charged with the liabilities with respect to
such fund and with a share of the general liabilities of their
respective trusts. Expenses with respect to each trust are to be
allocated in proportion to the asset value of their respective funds,
except where allocations of direct expense can otherwise be fairly
made. The officers of each trust, subject to the general supervision
of the Boards of Trustees, have the power to determine which expenses
are allocable to a given fund, or which are general or allocable to
all of the funds of a certain trust. In the event of the dissolution
or liquidation of a trust, shareholders of each fund of that trust are
entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. Each trust is an entity of the type
commonly known as "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be
held personally liable for the obligations of the trust. Each
Declaration of Trust provides that the trust shall not have any claim
against shareholders except for the payment of the purchase price of
shares and requires that each agreement, obligation, or instrument
entered into or executed by the trust or its Trustees shall include a
provision limiting the obligations created thereby to the trust and
its assets. Each Declaration of Trust provides for indemnification out
of each fund's property of any shareholder held personally liable for
the obligations of the fund. Each Declaration of Trust also provides
that its funds shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the fund and
satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to circumstances in which the fund itself would be unable to
meet its obligations. FMR believes that, in view of the above, the
risk of personal liability to shareholders is remote.
Each Declaration of Trust further provides that the Trustees, if they
have exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declarations of Trust protects Trustees
against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their
office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar value
of net asset value you own. The shares have no preemptive or
conversion rights; the voting and dividend rights, the right of
redemption, and the privilege of exchange are described in the
Prospectus. Shares are fully paid and nonassessable, except as set
forth under the heading "Shareholder and Trustee Liability" above.
Shareholders representing 10% or more of a trust or fund may, as set
forth in the Declarations of Trust, call meetings of a trust or fund
for any purpose related to the trust or fund, as the case may be,
including, in the case of a meeting of an entire trust, the purpose of
voting on removal of one or more Trustees. Each trust or fund may be
terminated upon the sale of its assets to another open-end management
investment company, or upon liquidation and distribution of its
assets, if approved by vote of the holders of a majority of the trust
or the fund, as determined by the current value of each shareholder's
investment in the fund or trust. If not so terminated, each trust or
fund will continue indefinitely. Capital & Income may invest all of
its assets in another investment company.
CUSTODIAN. The Bank of New York, 110 Washington Street, New York, New
York, is custodian of the assets of the funds. The custodian is
responsible for the safekeeping of a fund's assets and the appointment
of any subcustodian banks and clearing agencies. The custodian takes
no part in determining the investment policies of a fund or in
deciding which securities are purchased or sold by a fund. However, a
fund may invest in obligations of its custodian and may purchase
securities from or sell securities to the custodian. The Chase
Manhattan Bank, headquartered in New York, also may serve as a special
purpose custodian of certain assets in connection with repurchase
agreement transactions.
FMR, its officers and directors, its affiliated companies, and the
Board of Trustees may, from time to time, conduct transactions with
various banks, including banks serving as custodians for certain funds
advised by FMR. Transactions that have occurred to date include
mortgages and personal and general business loans. In the judgment of
FMR, the terms and conditions of those transactions were not
influenced by existing or potential custodial or other fund
relationships.
AUDITOR. Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts serves as each fund's independent accountant. The
auditor examines financial statements for the funds and provides other
audit, tax, and related services.
FINANCIAL STATEMENTS
Each fund's financial statements and financial highlights for the
fiscal year ended April 30, 199 8 , and reports of the auditors,
are included in each fund's Annual Report, which are separate reports
supplied with this SAI. The funds' financial statements, including the
financial highlights, and reports of the auditors are incorporated
herein by reference. For a free additional copy of a fund's Annual
Report, contact Fidelity at 1-800-544-8888, 82 Devonshire Street,
Boston, MA 02109.
APPENDIX
Spartan, Fidelity, and Fidelity Focus are registered trademarks of
FMR Corp.
Quotron is a trademark of FMR Cor p.
The third party marks appearing above are the marks of their
respective owner s.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements and Financial Highlights included in
the Annual Report for Fidelity Capital & Income Fund for the fiscal
year ended April 30, 1998 are incorporated herein by reference into
the fund's Statement of Additional Information and were filed on June
18, 1998, for Fidelity Summer Street Trust (File No. 811-2737)
pursuant to Rule 30d-1 under the Investment Company Act of 1940 and
are incorporated herein by reference.
(b) Exhibits:
1. Amended and Restated Declaration of Trust of Fidelity Summer
Street Trust, dated April 14, 1994, is incorporated herein by
reference to Exhibit 1(a) of Post-Effective Amendment No. 48.
2. Bylaws of the Trust, as amended, are incorporated herein by
reference to Exhibit 2(a) of Fidelity Union Street Trust's (File No.
2-50318) Post-Effective Amendment No. 87.
3. Not applicable.
4. Not applicable.
5. (a) Management Contract, dated April 1, 1994, between Fidelity
Capital & Income Fund and Fidelity Management & Research Company is
incorporated herein by reference to Exhibit 5(a) of Post-Effective
Amendment No. 48.
(b) Sub-Advisory Agreement, dated April 1, 1994, between Fidelity
Management & Research Company and Fidelity Management & Research
Company (U.K.) Inc., on behalf of Fidelity Capital & Income Fund, is
incorporated herein by reference to Exhibit 5(b) of Post-Effective
Amendment No. 48.
(c) Sub-Advisory Agreement, dated April 1, 1994, between Fidelity
Management & Research Company and Fidelity Management & Research
Company (Far East) Inc., on behalf of Fidelity Capital & Income Fund,
is incorporated herein by reference to Exhibit 5(c) of Post-Effective
Amendment No. 48.
6. (a) General Distribution Agreement, dated April 1, 1987, between
Fidelity High Income Fund (currently known as Fidelity Capital &
Income Fund) and Fidelity Distributors Corporation is incorporated
herein by reference to Exhibit 6(a) of Post-Effective Amendment No.
50.
(b) Amendment, dated January 1, 1988, to the General Distribution
Agreement between the Registrant and Fidelity Distributors Corporation
is incorporated herein by reference to Exhibit 6(b) of Post-Effective
Amendment No. 50.
(c) Amendments to the General Distribution Agreement between the
Registrant on behalf of Fidelity Capital & Income Fund and Fidelity
Distributors Corporation, dated March 14, 1996 and July 15, 1996, are
incorporated herein by reference to Exhibit 6(a) of Fidelity Court
Street Trust's Post-Effective Amendment No. 61 (File No. 2-58774).
7. (a) Retirement Plan for Non-Interested Person Trustees,
Directors or General Partners, as amended on November 16, 1995, is
incorporated herein by reference to Exhibit 7(a) of Fidelity Select
Portfolio's (File No. 2-69972) Post-Effective Amendment No. 54.
(b) The Fee Deferral Plan for Non-Interested Person Directors and
Trustees of the Fidelity Funds, effective as of September 14, 1995 and
amended through November 14, 1996, is incorporated herein by reference
to Exhibit 7(b) of Fidelity Aberdeen Street Trust's (File No.
33-43529) Post-Effective Amendment No. 19.
8. (a) Custodian Agreement and Appendix C, dated December 1, 1994,
between The Bank of New York and the Registrant on behalf of Fidelity
Capital & Income Fund is incorporated herein by reference to Exhibit
8(a) of Fidelity Hereford Street Trust's Post-Effective Amendment No.
4 (File No. 33-52577).
(b) Appendix A, dated September 18, 1997, to the Custodian Agreement,
dated December 1, 1994, between The Bank of New York and the
Registrant on behalf of Fidelity Capital & Income Fund is incorporated
herein by reference to Exhibit 8(e) of Fidelity Charles Street Trust's
Post-Effective Amendment No. 62 (File No. 2-73133).
(c) Appendix B, dated September 18, 1997, to the Custodian Agreement,
dated December 1, 1994, between The Bank of New York and the
Registrant on behalf of Fidelity Capital & Income Fund is incorporated
herein by reference to Exhibit 8(f) of Fidelity Charles Street Trust's
Post-Effective Amendment No. 62 (File No. 2-73133).
(d) Fidelity Group Repo Custodian Agreement among The Bank of New
York, J. P. Morgan Securities, Inc., and the Registrant on behalf of
Fidelity Capital & Income Fund, dated February 12, 1996, is
incorporated herein by reference to Exhibit 8(d) of Fidelity
Institutional Cash Portfolios' (File No. 2-74808) Post-Effective
Amendment No. 31.
(e) Schedule 1 to the Fidelity Group Repo Custodian Agreement between
The Bank of New York and the Registrant on behalf of Fidelity Capital
& Income Fund, dated February 12, 1996, is incorporated herein by
reference to Exhibit 8(e) of Fidelity Institutional Cash Portfolios'
(File No. 2-74808) Post-Effective Amendment No. 31.
(f) Fidelity Group Repo Custodian Agreement among Chemical Bank,
Greenwich Capital Markets, Inc., and the Registrant on behalf of
Fidelity Capital & Income Fund, dated November 13, 1995, is
incorporated herein by reference to Exhibit 8(f) of Fidelity
Institutional Cash Portfolios' (File No. 2-74808) Post-Effective
Amendment No. 31.
(g) Schedule 1 to the Fidelity Group Repo Custodian Agreement between
Chemical Bank and the Registrant on behalf of Fidelity Capital &
Income Fund, dated November 13, 1995, is incorporated herein by
reference to Exhibit 8(g) of Fidelity Institutional Cash Portfolios'
(File No. 2-74808) Post-Effective Amendment No. 31.
(h) Joint Trading Account Custody Agreement between The Bank of New
York and the Registrant on behalf of Capital & Income Fund, dated May
11, 1995, is incorporated herein by reference to Exhibit 8(h) of
Fidelity Institutional Cash Portfolios' (File No. 2-74808)
Post-Effective Amendment No. 31.
(i) First Amendment to Joint Trading Account Custody Agreement between
The Bank of New York and the Registrant on behalf of Fidelity Capital
& Income Fund, dated July 14, 1995, is incorporated herein by
reference to Exhibit 8(i) of Fidelity Institutional Cash Portfolios'
(File No. 2-74808) Post-Effective Amendment No. 31.
9. Not applicable.
10. Not applicable.
11. Consent of Coopers & Lybrand L.L.P. is filed herein as Exhibit 11.
12. Not applicable.
13. Not applicable.
14. (a) Fidelity Individual Retirement Account Custodial Agreement and
Disclosure Statement, as currently in effect, is incorporated herein
by reference to Exhibit 14(a) of Fidelity Union Street Trust's (File
No. 2-50318) Post-Effective Amendment No. 87.
(b) Fidelity Institutional Individual Retirement Account Custodial
Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(d) of Fidelity Union
Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(c) National Financial Services Corporation Individual Retirement
Account Custodial Agreement and Disclosure Statement, as currently in
effect, is incorporated herein by reference to Exhibit 14(h) of
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(d) Fidelity Portfolio Advisory Services Individual Retirement Account
Custodial Agreement and Disclosure Statement, as currently in effect,
is incorporated herein by reference to Exhibit 14(i) of Fidelity Union
Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(e) Fidelity 403(b)(7) Custodial Account Agreement, as currently in
effect, is incorporated herein by reference to Exhibit 14(e) of
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(f) National Financial Services Corporation Defined Contribution
Retirement Plan and Trust Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(k) of Fidelity Union
Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(g) The CORPORATEplan for Retirement Profit Sharing/401K Plan, as
currently in effect, is incorporated herein by reference to Exhibit
14(l) of Fidelity Union Street Trust's (File No. 2-50318)
Post-Effective Amendment No. 87.
(h) The CORPORATEplan for Retirement Money Purchase Pension Plan, as
currently in effect, is incorporated herein by reference to Exhibit
14(m) of Fidelity Union Street Trust's (File No. 2-50318)
Post-Effective Amendment No. 87.
(i) Fidelity Investments Section 403(b)(7) Individual Custodial
Account Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(f) of Fidelity
Commonwealth Trust's (File No. 2-52322) Post-Effective Amendment No.
57.
(j) Plymouth Investments Defined Contribution Retirement Plan and
Trust Agreement, as currently in effect, is incorporated herein by
reference to Exhibit 14(o) of Fidelity Commonwealth Trust's (File No.
2-52322) Post-Effective Amendment No. 57.
(k) The Fidelity Prototype Defined Benefit Pension Plan and Trust
Basic Plan Document and Adoption Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(d) of Fidelity
Securities Fund's (File No. 2-93601) Post-Effective Amendment No. 33.
(l) The Institutional Prototype Plan Basic Plan Document, Standardized
Adoption Agreement, and Non-Standardized Adoption Agreement, as
currently in effect, is incorporated herein by reference to Exhibit
14(o) of Fidelity Securities Fund's (File No. 2-93601) Post-Effective
Amendment No. 33.
(m) The CORPORATEplan for Retirement 100SM Profit Sharing/401(k)
Basic Plan Document, Standardized Adoption Agreement, and
Non-Standardized Adoption Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(f) of Fidelity
Securities Fund's (File No. 2-93601) Post-Effective Amendment No. 33.
(n) The Fidelity Investments 401(a) Prototype Plan for Tax-Exempt
Employers Basic Plan Document, Standardized Profit Sharing Plan
Adoption Agreement, Non-Standardized Discretionary Contribution Plan
No. 002 Adoption Agreement, and Non-Standardized Discretionary
Contribution Plan No. 003 Adoption Agreement, as currently in effect,
is incorporated herein by reference to Exhibit 14(g) of Fidelity
Securities Fund's (File No. 2-93601) Post-Effective Amendment No. 33.
(o) Fidelity Investments 403(b) Sample Plan Basic Plan Document and
Adoption Agreement, as currently in effect, is incorporated herein by
reference to Exhibit 14(p) of Fidelity Securities Fund's (File No.
2-93601) Post-Effective Amendment No. 33.
(p) Fidelity Defined Contribution Retirement Plan and Trust Agreement,
as currently in effect, is incorporated herein by reference to Exhibit
14(c) of Fidelity Securities Fund's (File No. 2-93601) Post-Effective
Amendment No. 33.
(q) Fidelity SIMPLE-IRAPlan Adoption Agreement, Company Profile Form,
and Plan Document, as currently in effect, is incorporated herein by
reference to Exhibit 14(q) of Fidelity Aberdeen Street Trust's (File
No. 33-43529) Post-Effective Amendment No. 19.
15. Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Capital & Income Fund is incorporated herein by reference to
Exhibit 15 of Post-Effective Amendment No. 54.
16.(a) A schedule for the computation of 30-day yields and total
returns for Fidelity Capital & Income Fund is incorporated herein by
reference to Exhibit 16(a) of Post-Effective Amendment No. 50.
(b) A schedule for the computation of Adjusted NAVs for Fidelity
Capital & Income Fund is incorporated herein by reference to Exhibit
16(b) of Post-Effective Amendment No. 50.
17. Financial Data Schedule is filed herein as Exhibit 27.
18. Not Applicable.
Item 25. Persons Controlled by or under Common Control with Registrant
The Board of Trustees of the Registrant is the same as the board of
other funds advised by FMR, each of which has Fidelity Management &
Research Company as its investment adviser. In addition, the officers
of these funds are substantially identical. Nonetheless, the
Registrant takes the position that it is not under common control with
these other funds since the power residing in the respective boards
and officers arises as the result of an official position with the
respective funds.
Item 26. Number of Holders of Securities
Title of Class: Shares of Beneficial Interest as of April 30, 1998
Name of Series Number of Record Holders
Fidelity Capital & Income Fund 116,169
Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification
shall be provided to any past or present Trustee or officer. It states
that the Registrant shall indemnify any present or past Trustee or
officer to the fullest extent permitted by law against liability and
all expenses reasonably incurred by him in connection with any claim,
action, suit, or proceeding in which he is involved by virtue of his
service as a Trustee, an officer, or both. Additionally, amounts paid
or incurred in settlement of such matters are covered by this
indemnification. Indemnification will not be provided in certain
circumstances, however. These include instances of willful
misfeasance, bad faith, gross negligence, and reckless disregard of
the duties involved in the conduct of the particular office involved.
Pursuant to Section 11 of the Distribution Agreement, the Registrant
agrees to indemnify and hold harmless the Distributor and each of its
directors and officers and each person, if any, who controls the
Distributor within the meaning of Section 15 of the 1933 Act against
any loss, liability, claim, damages or expense arising by reason of
any person acquiring any shares, based upon the ground that the
registration statement, Prospectus, Statement of Additional
Information, shareholder reports or other information filed or made
public by the Registrant included a materially misleading statement or
omission. However, the Registrant does not agree to indemnify the
Distributor or hold it harmless to the extent that the statement or
omission was made in reliance upon, and in conformity with,
information furnished to the Registrant by or on behalf of the
Distributor. The Registrant does not agree to indemnify the parties
against any liability to which they would be subject by reason of
willful misfeasance, bad faith, gross negligence, and reckless
disregard of the obligations and duties under the Distribution
Agreement.
Pursuant to the agreement by which Fidelity Service Company, Inc.
("Service") is appointed transfer agent, the Registrant agrees to
indemnify and hold Service harmless against any losses, claims,
damages, liabilities or expenses (including reasonable counsel fees
and expenses) resulting from:
(1) any claim, demand, action or suit brought by any person other
than the Registrant, including by a shareholder, which names the
Service and/or the Registrant as a party and is not based on and does
not result from Service's willful misfeasance, bad faith or negligence
or reckless disregard of duties, and arises out of or in connection
with Service's performance under the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent
contributed to by Service's willful misfeasance, bad faith or
negligence or reckless disregard of duties) which results from the
negligence of the Registrant, or from Service's acting upon any
instruction(s) reasonably believed by it to have been executed or
communicated by any person duly authorized by the Registrant, or as a
result of Service's acting in reliance upon advice reasonably believed
by Service to have been given by counsel for the Registrant, or as a
result of Service's acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine and signed,
countersigned or executed by the proper person.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY (FMR)
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held,
during the past two fiscal years, the following positions of a
substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Board and Director of FMR; President
and Chief Executive Officer of FMR Corp.; Chairman
of the Board and Director of FMR Corp., FIMM, FMR
U.K., and FMR FAR EAST; Chairman of the Executive
Committee of FMR; Director of Fidelity Investments
Japan Limited; President and Trustee of funds advised
by FMR.
Robert C. Pozen President and Director of FMR; Senior Vice President
and Trustee of funds advised by FMR; President and
Director of FIMM, FMR U.K., and FMR FAR EAST;
Previously, General Counsel, Managing Director, and
Senior Vice President of FMR Corp.
Peter S. Lynch Vice Chairman of the Board and Director of FMR.
Marta Amieva Vice President of FMR.
John H. Carlson Vice President of FMR and of funds advised by FMR.
Dwight D. Churchill Senior Vice President of FMR and Vice President of
Bond Funds advised by FMR; Vice President of FIMM.
Brian Clancy Vice President of FMR and Treasurer of FMR, FIMM,
FMR U.K., and FMR FAR EAST.
Barry Coffman Vice President of FMR.
Arieh Coll Vice President of FMR.
Stephen G. Manning Assistant Treasurer of FMR, FIMM, FMR U.K., FMR
FAR EAST; Treasurer of FMR Corp.
William Danoff Senior Vice President of FMR and Vice President of a
fund advised by FMR.
Scott E. DeSano Vice President of FMR.
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
Walter C. Donovan Vice President of FMR.
Bettina Doulton Vice President of FMR and of funds advised by FMR.
Margaret L. Eagle Vice President of FMR and of funds advised by FMR.
William R. Ebsworth Vice President of FMR.
Richard B. Fentin Senior Vice President of FMR and Vice President of a
fund advised by FMR.
Gregory Fraser Vice President of FMR and of a fund advised by FMR.
Jay Freedman Assistant Clerk of FMR; Clerk of FMR Corp., FMR
U.K., and FMR FAR EAST; Secretary of FIMM.
Robert Gervis Vice President of FMR.
David L. Glancy Vice President of FMR and of a fund advised by FMR.
Kevin E. Grant Vice President of FMR and of funds advised by FMR.
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
Boyce I. Greer Senior Vice President of FMR and Vice President of
Money Market Funds advised by FMR.
Bart A. Grenier Vice President of High-Income Funds advised by
FMR;Vice President of FMR.
Robert Haber Vice President of FMR.
Richard C. Habermann Senior Vice President of FMR; Vice President of funds
advised by FMR.
Richard Hazelwood Vice President of FMR.
Fred L. Henning Jr. Senior Vice President of FMR and Vice President of
Fixed-Income funds advised by FMR.
Bruce T. Herring Vice President of FMR.
Robert F. Hill Vice President of FMR; Director of Technical Research.
Curt Hollingsworth Vice President of FMR and of funds advised by FMR.
Abigail P. Johnson Senior Vice President of FMR and Vice President of
funds advised by FMR; Director of FMR Corp.;
Associate Director and Senior Vice President of Equity
funds advised by FMR.
David B. Jones Vice President of FMR.
Steven Kaye Vice President of FMR and of a fund advised by FMR.
Francis V. Knox Vice President of FMR; Compliance Officer of FMR
U.K.
Robert A. Lawrence Senior Vice President of FMR and Vice President of
Fidelity Real Estate High Income and Fidelity Real
Estate High income II funds advised by FMR; Associate
Director and Senior Vice President of Equity funds
advised by FMR; Previously, Vice President of High
Income funds advised by FMR.
Harris Leviton Vice President of FMR and of a fund advised by FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Richard R. Mace Jr. Vice President of FMR and of funds advised by FMR.
Charles A. Mangum Vice President of FMR and of a fund advised by FMR.
Kevin McCarey Vice President of FMR and of a fund advised by FMR.
Diane M. McLaughlin Vice President of FMR.
Neal P. Miller Vice President of FMR.
David L. Murphy Vice President of FMR and of funds advised by FMR.
Scott A. Orr Vice President of FMR and of funds advised by FMR.
Jacques Perold Vice President of FMR.
Anne Punzak Vice President of FMR.
Kevin A. Richardson Vice President of FMR.
Eric D. Roiter Senior Vice President and General Counsel of FMR and
Secretary of funds advised by FMR.
Mark S. Rzepczynski Vice President of FMR.
Lee H. Sandwen Vice President of FMR.
Patricia A. Satterthwaite Vice President of FMR and of a fund advised by FMR.
Fergus Shiel Vice President of FMR.
Richard A. Silver Vice President of FMR.
Carol A. Smith-Fachetti Vice President of FMR.
Steven J. Snider Vice President of FMR.
Thomas T. Soviero Vice President of FMR and of a fund advised by FMR.
Richard Spillane Senior Vice President of FMR; Associate Director and
Senior Vice President of Equity funds advised by FMR;
Previously, Senior Vice President and Director of
Operations and Compliance of FMR U.K.
Thomas M. Sprague Vice President of FMR and of funds advised by FMR.
Robert E. Stansky Senior Vice President of FMR and Vice President of a
fund advised by FMR.
Scott D. Stewart Vice President of FMR.
Cynthia L. Strauss Vice President of FMR.
Thomas Sweeney Vice President of FMR and of a fund advised by FMR.
Beth F. Terrana Senior Vice President of FMR and Vice President of a
fund advised by FMR.
Yoko Tilley Vice President of FMR.
Joel C. Tillinghast Vice President of FMR and of a fund advised by FMR.
Robert Tuckett Vice President of FMR.
Jennifer Uhrig Vice President of FMR and of funds advised by FMR.
George A. Vanderheiden Senior Vice President of FMR and Vice President of
funds advised by FMR; Director of FMR Corp.
Steven S. Wymer Vice President of FMR and of a fund advised by FMR.
</TABLE>
(2) FIDELITY MANAGEMENT & RESEARCH (U.K.) INC. (FMR U.K.)
25 Lovat Lane, London, EC3R 8LL, England
FMR U.K. provides investment advisory services to Fidelity Management
& Research Company and Fidelity Management Trust Company. The
directors and officers of the Sub-Adviser have held the following
positions of a substantial nature during the past two fiscal years.
Edward C. Johnson 3d Chairman of the Board and Director of FMR U.K.,
FMR, FMR Corp., FIMM, and FMR FAR EAST;
President and Chief Executive Officer of FMR Corp.;
Chairman of the Executive Committee of FMR;
Director of Fidelity Investments Japan Limited;
President and Trustee of funds advised by FMR.
Robert C. Pozen President and Director of FMR; Senior Vice President
and Trustee of funds advised by FMR; President and
Director of FIMM, FMR U.K., and FMR FAR EAST;
Previously, General Counsel, Managing Director, and
Senior Vice President of FMR Corp.
Brian Clancy Treasurer of FMR U.K., FMR FAR EAST, FMR, and
FIMM and Vice President of FMR.
Stephen G. Manning Assistant Treasurer of FMR U.K., FMR, FMR FAR
EAST, and FIMM; Treasurer of FMR Corp.
Francis V. Knox Compliance Officer of FMR U.K.; Previously, Vice
President of FMR.
Jay Freedman Clerk of FMR U.K., FMR FAR EAST, and FMR Corp.;
Assistant Clerk of FMR; Secretary of FIMM.
Sarah H. Zenoble Senior Vice President and Director of Operations
andCompliance.
(3) FIDELITY MANAGEMENT & RESEARCH COMPANY (FAR EAST) INC. (FMR FAR
EAST)
Shiroyama JT Mori Bldg., 4-3-1 Toranomon Minato-ku, Tokyo 105,
Japan
FMR Far East provides investment advisory services to Fidelity
Management & Research Company and Fidelity Management Trust Company.
The directors and officers of the Sub-Adviser have held the following
positions of a substantial nature during the past two fiscal years.
Edward C. Johnson 3d Chairman of the Board and Director of FMR
FAR EAST, FMR, FMR Corp., FIMM, and FMR
U.K.; Chairman of the Executive Committee of
FMR; President and Chief Executive Officer of
FMR Corp.; Director of Fidelity Investments
Japan Limited; President and Trustee of funds
advised by FMR.
Robert C. Pozen President and Director of FMR; Senior Vice
President and Trustee of funds advised by FMR;
President and Director of FIMM, FMR U.K., and
FMR FAR EAST; Previously, General Counsel,
Managing Director, and Senior Vice President of
FMR Corp.
Robert H. Auld Senior Vice President of FMR FAR EAST.
Brian Clancy Treasurer of FMR FAR EAST, FMR U.K., FMR,
and FIMM and Vice President of FMR.
Jay Freedman Clerk of FMR FAR EAST, FMR U.K., and FMR
Corp.; Assistant Clerk of FMR; Secretary of
FIMM.
Stephen G. Manning Assistant Treasurer of FMR FAR EAST, FMR,
FMR U.K., and FIMM; Treasurer of FMR Corp.
Billy Wilder Vice President of FMR FAR EAST; President
and Representative Director of Fidelity
Investments Japan Limited.
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for
most funds advised by FMR.
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Michael Mlinac Director None
James Curvey Director None
Martha B. Willis President None
Eric D. Roiter Senior Vice President Secretary
Caron Ketchum Treasurer and Controller None
Gary Greenstein Assistant Treasurer None
Jay Freedman Assistant Clerk None
Linda Holland Compliance Officer None
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity
Service Company, Inc., 82 Devonshire Street, Boston, MA 02109, or the
fund's custodian The Bank of New York, 110 Washington Street, New
York, N.Y.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
The Registrant, on behalf of Fidelity Capital & Income Fund, provided
the information required by Item 5A is contained in the annual report,
undertakes to furnish to each person to whom a prospectus has been
delivered, upon their request and without charge, a copy of the
Registrant's latest annual report to shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for the effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and
has duly caused this Post-Effective Amendment No. 55 to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston, and Commonwealth of
Massachusetts, on the 18th day of June 1998.
FIDELITY SUMMER STREET TRUST
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons
in the capacities and on the dates indicated.
(Signature) (Title) (Date)
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Edward C. Johnson 3d (dagger) President and Trustee June 18, 1998
Edward C. Johnson 3d (Principal Executive Officer)
/s/Richard A. Silver Treasurer June 18, 1998
Richard A. Silver
/s/Robert C. Pozen Trustee June 18, 1998
Robert C. Pozen
/s/Ralph F. Cox * Trustee June 18, 1998
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee June 18, 1998
Phyllis Burke Davis
/s/Robert M. Gates ** Trustee June 18, 1998
Robert M. Gates
/s/E. Bradley Jones * Trustee June 18, 1998
E. Bradley Jones
/s/Donald J. Kirk * Trustee June 18, 1998
Donald J. Kirk
/s/Peter S. Lynch * Trustee June 18, 1998
Peter S. Lynch
/s/Marvin L. Mann * Trustee June 18, 1998
Marvin L. Mann
/s/William O. McCoy * Trustee June 18, 1998
William O. McCoy
/s/Gerald C. McDonough * Trustee June 18, 1998
Gerald C. McDonough
/s/Thomas R. Williams * Trustee June 18, 1998
Thomas R. Williams
</TABLE>
(dagger) Signatures affixed by Robert C. Pozen pursuant to a power of
attorney dated July 17, 1997 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of
attorney dated December 19, 1996 and filed herewith.
** Signature affixed by Robert C. Hacker pursuant to a power of
attorney dated March 6, 1997 and filed herewith.
POWER OF ATTORNEY
I, the undersigned President and Director, Trustee, or General
Partner, as the case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Hereford Street Trust
Fidelity Advisor Series I Fidelity Income Fund
Fidelity Advisor Series II Fidelity Institutional Cash Portfolios
Fidelity Advisor Series III Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series IV Fidelity Investment Trust
Fidelity Advisor Series V Fidelity Magellan Fund
Fidelity Advisor Series VI Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series VII Fidelity Money Market Trust
Fidelity Advisor Series VIII Fidelity Mt. Vernon Street Trust
Fidelity Beacon Street Trust Fidelity Municipal Trust
Fidelity Boston Street Trust Fidelity Municipal Trust II
Fidelity California Municipal Trust Fidelity New York Municipal Trust
Fidelity California Municipal Trust II Fidelity New York Municipal Trust II
Fidelity Capital Trust Fidelity Phillips Street Trust
Fidelity Charles Street Trust Fidelity Puritan Trust
Fidelity Commonwealth Trust Fidelity Revere Street Trust
Fidelity Concord Street Trust Fidelity School Street Trust
Fidelity Congress Street Fund Fidelity Securities Fund
Fidelity Contrafund Fidelity Select Portfolios
Fidelity Corporate Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Court Street Trust Fidelity Summer Street Trust
Fidelity Court Street Trust II Fidelity Trend Fund
Fidelity Covington Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Daily Money Fund Fidelity U.S. Investments-Government Securities
Fidelity Destiny Portfolios Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity Union Street Trust II
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Newbury Street Trust
Fidelity Financial Trust Variable Insurance Products Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund II
Fidelity Government Securities Fund Variable Insurance Products Fund III
Fidelity Hastings Street Trust
</TABLE>
in addition to any other investment company for which Fidelity
Management & Research Company or an affiliate acts as investment
adviser and for which the undersigned individual serves as President
and Director, Trustee, or General Partner (collectively, the "Funds"),
hereby constitute and appoint Robert C. Pozen my true and lawful
attorney-in-fact, with full power of substitution, and with full power
to him to sign for me and in my name in the appropriate capacity, all
Registration Statements of the Funds on Form N-1A, Form N-8A, or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A, Form N-8A, or any successor thereto, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such
things in my name and on my behalf in connection therewith as said
attorney-in-fact deems necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and the Investment Company
Act of 1940, and all related requirements of the Securities and
Exchange Commission. I hereby ratify and confirm all that said
attorney-in-fact or his substitutes may do or cause to be done by
virtue hereof. This power of attorney is effective for all documents
filed on or after August 1, 1997.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d_ July 17, 1997
Edward C. Johnson 3d
POWER OF ATTORNEY
We, the undersigned Directors, Trustees, or General Partners, as the
case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Government Securities Fund
Fidelity Advisor Annuity Fund Fidelity Hastings Street Trust
Fidelity Advisor Series I Fidelity Hereford Street Trust
Fidelity Advisor Series II Fidelity Income Fund
Fidelity Advisor Series III Fidelity Institutional Cash Portfolios
Fidelity Advisor Series IV Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series V Fidelity Institutional Trust
Fidelity Advisor Series VI Fidelity Investment Trust
Fidelity Advisor Series VII Fidelity Magellan Fund
Fidelity Advisor Series VIII Fidelity Massachusetts Municipal Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust
Fidelity Boston Street Trust Fidelity Mt. Vernon Street Trust
Fidelity California Municipal Trust Fidelity Municipal Trust
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Capital Trust Fidelity New York Municipal Trust
Fidelity Charles Street Trust Fidelity New York Municipal Trust II
Fidelity Commonwealth Trust Fidelity Phillips Street Trust
Fidelity Congress Street Fund Fidelity Puritan Trust
Fidelity Contrafund Fidelity Revere Street Trust
Fidelity Corporate Trust Fidelity School Street Trust
Fidelity Court Street Trust Fidelity Securities Fund
Fidelity Court Street Trust II Fidelity Select Portfolios
Fidelity Covington Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Daily Money Fund Fidelity Summer Street Trust
Fidelity Daily Tax-Exempt Fund Fidelity Trend Fund
Fidelity Destiny Portfolios Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity U.S. Investments-Government Securities
Portfolio, L.P. Fund, L.P.
Fidelity Devonshire Trust Fidelity Union Street Trust
Fidelity Exchange Fund Fidelity Union Street Trust II
Fidelity Financial Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Variable Insurance Products Fund II
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company or an affiliate acts as investment adviser and for
which the undersigned individual serves as Directors, Trustees, or
General Partners (collectively, the "Funds"), hereby constitute and
appoint Arthur J. Brown, Arthur C. Delibert, Stephanie A. Djinis,
Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, and Dana L.
Platt, each of them singly, our true and lawful attorneys-in-fact,
with full power of substitution, and with full power to each of them,
to sign for us and in our names in the appropriate capacities, all
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A or any successor thereto, any Registration
Statements on Form N-14, and any supplements or other instruments in
connection therewith, and generally to do all such things in our names
and behalf in connection therewith as said attorneys-in-fact deems
necessary or appropriate, to comply with the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940, and all
related requirements of the Securities and Exchange Commission. I
hereby ratify and confirm all that said attorneys-in-fact or their
substitutes may do or cause to be done by virtue hereof. This power
of attorney is effective for all documents filed on or after January
1, 1997.
WITNESS our hands on this nineteenth day of December, 1996.
/s/Edward C. Johnson 3d___________ /s/Peter S. Lynch________________
Edward C. Johnson 3d Peter S. Lynch
/s/J. Gary Burkhead_______________ /s/William O. McCoy______________
J. Gary Burkhead William O. McCoy
/s/Ralph F. Cox __________________ /s/Gerald C. McDonough___________
Ralph F. Cox Gerald C. McDonough
/s/Phyllis Burke Davis_____________ /s/Marvin L. Mann________________
Phyllis Burke Davis Marvin L. Mann
/s/E. Bradley Jones________________ /s/Thomas R. Williams ____________
E. Bradley Jones Thomas R. Williams
/s/Donald J. Kirk __________________
Donald J. Kirk
POWER OF ATTORNEY
I, the undersigned Director, Trustee, or General Partner, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Government Securities Fund
Fidelity Advisor Annuity Fund Fidelity Hastings Street Trust
Fidelity Advisor Series I Fidelity Hereford Street Trust
Fidelity Advisor Series II Fidelity Income Fund
Fidelity Advisor Series III Fidelity Institutional Cash Portfolios
Fidelity Advisor Series IV Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series V Fidelity Institutional Trust
Fidelity Advisor Series VI Fidelity Investment Trust
Fidelity Advisor Series VII Fidelity Magellan Fund
Fidelity Advisor Series VIII Fidelity Massachusetts Municipal Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust
Fidelity Boston Street Trust Fidelity Mt. Vernon Street Trust
Fidelity California Municipal Trust Fidelity Municipal Trust
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Capital Trust Fidelity New York Municipal Trust
Fidelity Charles Street Trust Fidelity New York Municipal Trust II
Fidelity Commonwealth Trust Fidelity Phillips Street Trust
Fidelity Congress Street Fund Fidelity Puritan Trust
Fidelity Contrafund Fidelity Revere Street Trust
Fidelity Corporate Trust Fidelity School Street Trust
Fidelity Court Street Trust Fidelity Securities Fund
Fidelity Court Street Trust II Fidelity Select Portfolios
Fidelity Covington Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Daily Money Fund Fidelity Summer Street Trust
Fidelity Daily Tax-Exempt Fund Fidelity Trend Fund
Fidelity Destiny Portfolios Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity U.S. Investments-Government Securities
Portfolio, L.P. Fund, L.P.
Fidelity Devonshire Trust Fidelity Union Street Trust
Fidelity Exchange Fund Fidelity Union Street Trust II
Fidelity Financial Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Variable Insurance Products Fund II
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company or an affiliate acts as investment adviser and for
which the undersigned individual serves as Director, Trustee, or
General Partner (collectively, the "Funds"), hereby constitute and
appoint Arthur J. Brown, Arthur C. Delibert, Stephanie A. Djinis,
Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, and Dana L.
Platt, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to
sign for me and in my name in the appropriate capacities, all
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A or any successor thereto, any Registration
Statements on Form N-14, and any supplements or other instruments in
connection therewith, and generally to do all such things in my name
and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940, and all
related requirements of the Securities and Exchange Commission. I
hereby ratify and confirm all that said attorneys-in-fact or their
substitutes may do or cause to be done by virtue hereof. This power
of attorney is effective for all documents filed on or after March 1,
1997.
WITNESS my hand on the date set forth below.
/s/Robert M. Gates March 6, 1997
Robert M. Gates
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference, into the
Prospectus and Statement of Additional Information in Post-Effective
Amendment No. 55 to the Registration Statement on Form N-1A of
Fidelity Summer Street Trust: Fidelity Capital & Income Fund, of our
report dated June 11, 1998 on the financial statements and financial
highlights included in the April 30, 1998 Annual Report to
Shareholders of Fidelity Capital & Income Fund.
We further consent to the references to our Firm under the headings
"Financial Highlights" in the Prospectus and "Auditor" in the
Statement of Additional Information.
/s/COOPERS & LYBRAND L.L.P
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 18, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000225322
<NAME> Fidelity Summer Street Trust
<SERIES>
<NUMBER> 11
<NAME> Fidelity Capital & Income Fund
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 2,138,974
<INVESTMENTS-AT-VALUE> 2,309,564
<RECEIVABLES> 106,179
<ASSETS-OTHER> 15
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,415,758
<PAYABLE-FOR-SECURITIES> 22,716
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 37,533
<TOTAL-LIABILITIES> 60,249
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,154,354
<SHARES-COMMON-STOCK> 220,502
<SHARES-COMMON-PRIOR> 220,031
<ACCUMULATED-NII-CURRENT> 36,867
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,302)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 170,590
<NET-ASSETS> 2,355,509
<DIVIDEND-INCOME> 28,137
<INTEREST-INCOME> 144,566
<OTHER-INCOME> 0
<EXPENSES-NET> 17,692
<NET-INVESTMENT-INCOME> 155,011
<REALIZED-GAINS-CURRENT> 149,275
<APPREC-INCREASE-CURRENT> 151,434
<NET-CHANGE-FROM-OPS> 455,720
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 152,717
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 40,637
<NUMBER-OF-SHARES-REDEEMED> 53,883
<SHARES-REINVESTED> 13,717
<NET-CHANGE-IN-ASSETS> 314,668
<ACCUMULATED-NII-PRIOR> 29,177
<ACCUMULATED-GAINS-PRIOR> (150,409)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 12,603
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 17,881
<AVERAGE-NET-ASSETS> 2,144,903
<PER-SHARE-NAV-BEGIN> 9.280
<PER-SHARE-NII> .721
<PER-SHARE-GAIN-APPREC> 1.385
<PER-SHARE-DIVIDEND> .710
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.680
<EXPENSE-RATIO> 83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
