FIDELITY ADVISOR FUNDS CLASS A
PROSPECTUS
82 DEVONSHIRE STREET
BOSTON, MASSACHUSETTS 02109
JUNE 30 , 1994
The Fidelity Advisor Funds (Funds) offer investors a broad selection of
portfolios.
INTERNATIONAL FUNDS:
FIDELITY ADVISOR OVERSEAS FUND
FIDELITY ADVISOR EMERGING MARKETS INCOME FUND
EQUITY FUNDS:
FIDELITY ADVISOR EQUITY PORTFOLIO GROWTH
FIDELITY ADVISOR GROWTH OPPORTUNITIES FUND
FIDELITY ADVISOR GLOBAL RESOURCES FUND
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND
(formerly Fidelity Special Situations Fund: Advisor Class)
FIDELITY ADVISOR EQUITY PORTFOLIO INCOME
FIDELITY ADVISOR INCOME & GROWTH FUND
FIXED-INCOME FUNDS:
FIDELITY ADVISOR HIGH YIELD FUND
FIDELITY ADVISOR LIMITED TERM BOND FUND
FIDELITY ADVISOR GOVERNMENT INVESTMENT FUND
FIDELITY ADVISOR SHORT FIXED-INCOME FUND
MUNICIPAL/TAX-EXEMPT FUNDS:
FIDELITY ADVISOR HIGH INCOME MUNICIPAL FUND
FIDELITY ADVISOR LIMITED TERM TAX-EXEMPT FUND
FIDELITY ADVISOR SHORT-INTERMEDIATE TAX-EXEMPT FUND
Fidelity Advisor Equity Portfolio Growth is a portfolio of Fidelity Advisor
Series I. Fidelity Advisor Growth Opportunities Fund, Fidelity Advisor
Income & Growth Fund, Fidelity Advisor High Yield Fund, Fidelity
Advisor Government Investment Fund and Fidelity Advisor Short Fixed-Income
Fund are portfolios of Fidelity Advisor Series II. Fidelity Advisor Equity
Portfolio Income is a portfolio of Fidelity Advisor Series III. Fidelity
Advisor Limited Term Bond Fund is a portfolio of Fidelity Advisor Series
IV. Fidelity Advisor Global Resources Fund and Fidelity Advisor High Income
Municipal Fund are portfolios of Fidelity Advisor Series V. Fidelity
Advisor Limited Term Tax-Exempt Fund and Fidelity Advisor
Short-Intermediate Tax-Exempt Fund are portfolios of Fidelity Advisor
Series VI. Fidelity Advisor Overseas Fund is a portfolio of Fidelity
Advisor Series VII. Fidelity Advisor Strategic Opportunities Fund and
Fidelity Advisor Emerging Markets Income Fund are portfolios of Fidelity
Advisor Series VIII. Certain funds sell two classes of shares to retail
investors: Class A shares and Class B shares. Class A shares are offered
through this prospectus. Class B shares are offered through a separate
prospectus.
FIDELITY ADVISOR EMERGING MARKETS INCOME FUND, FIDELITY ADVISOR HIGH
YIELD FUND AND FIDELITY ADVISOR HIGH INCOME MUNICIPAL FUND MAY INVEST
WITHOUT LIMITATION IN LOWER-QUALITY DEBT SECURITIES, SOMETIMES CALLED "JUNK
BONDS." INVESTORS SHOULD CONSIDER THAT THESE SECURITIES CARRY GREATER
RISKS, SUCH AS THE RISK OF DEFAULT, THAN OTHER DEBT SECURITIES. REFER TO
"INVESTMENT POLICIES AND RISKS" ON PAGE FOR FURTHER INFORMATION.
Please read this Prospectus before investing. It is designed to provide you
with information and help you decide if a Fund's goals match your own.
RETAIN THIS DOCUMENT FOR FUTURE REFERENCE.
A Statement of Additional Information (SAI) dated June 30 , 1994 for
each Fund has been filed with the Securities and Exchange Commission (SEC)
and each is incorporated herein by reference. SAIs and each Fund's Annual
Report are available free upon request from Fidelity Distributors
Corporation (Distributors), 82 Devonshire Street, Boston, MA 02109, or from
your investment professional.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE
NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY,
AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
(registered trademark)
TABLE OF CONTENTS Page
FINANCIAL HISTORY
Shareholder Transaction Expenses
FINANCIAL HIGHLIGHTS
INVESTMENT OBJECTIVES
INVESTMENT POLICIES AND RISKS
INVESTMENT LIMITATIONS
HOW TO BUY SHARES
Sales Charges and Investment Professional Concessions
Minimum Account Balance
Sales Charge Waivers
INVESTOR SERVICES
Quantity Discounts
Combined Purchases
Rights of Accumulation
Letter of Intent
Fidelity Advisor Systematic Investment Program
SHAREHOLDER COMMUNICATIONS
HOW TO EXCHANGE
Fidelity Advisor Systematic Exchange Program
HOW TO SELL SHARES
Redemption Requests by Telephone
Redemption Requests in Writing
Reinstatement Privilege
Fidelity Advisor Systematic Withdrawal Program
Checkwriting Service
DISTRIBUTION OPTIONS
DISTRIBUTIONS AND TAXES
Distributions
Capital Gains
"Buying a Dividend"
Federal Taxes
Effect of Foreign Taxes 26
State and Local Taxes
Other Tax Information
FEES
Management and Other Services
Distribution and Service Plans
VALUATION
PERFORMANCE
PORTFOLIO TRANSACTIONS
THE TRUSTS AND THE FIDELITY ORGANIZATION
APPENDIX
FINANCIAL HISTORY
The purpose of the table below is to assist you in understanding the
various costs and expenses that an investor in Class A shares of each
fund would bear directly or indirectly. This standard format was
developed for use by all mutual funds to help investors make
investment decisions. This expense information should be considered
along with other important information such as each Fund's investment
objective and past performance .
1.SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge (as a percentage of the offering price)
- -Short-Intermediate Tax-Exempt Fund 1.50 %
- -Short Fixed-Income Fund 1.50 %
- -Other Fidelity Advisor Funds 4.75 %
Sales Charge on Reinvested Distributions None
Deferred Sales Charge on Redemptions None
Redemption Fees None
Exchange Fees None
SHAREHOLDER TRANSACTION EXPENSES represent charges paid when you purchase,
sell or exchange Class A shares of a Fund. If you exchange Class A shares
or direct dividends of Short Fixed-Income Fund or Short-Intermediate
Tax-Exempt into Class A shares of other Fidelity Advisor Funds, a
differential sales charge may apply. Lower sales charges may be available
with purchases of $50,000 or more or in conjunction with various programs.
See "How to Buy Shares," page .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
INTERNATIONAL FUNDS: MANAGEM 12B-1 OTHER TOTAL
ENT FEE EXPENSE OPERATING
FEE (DISTRIBUT S EXPENSES
ION
FEE)
Overseas .77% .65% .96% 2.38%
Emerging Markets Income1 .71% .25% .54%* 1.50%
EQUITY FUNDS:
Equity Portfolio Growth .66% .65% .53%* 1.84%
Growth Opportunities .68% .65% .31%* 1.64%
Global Resources .77% .65% 1.20%* 2.62%
Strategic Opportunities .54% .65% .38% 1.57%
Equity Portfolio Income .50% .65% .62% 1.77%
Income & Growth .53% .65% .33%* 1.51%
FIXED-INCOME FUNDS:
High Yield .51% .25% .35% 1.11%
Limited Term Bond .42% .25% .23%* .90%
Government Investment . 46 % .25% . 24 %* . 95 %
Short Fixed-Income .47% .15% .33% .95%
MUNICIPAL/TAX-EXEMPT FUNDS:
High Income Municipal .42% .25% .25% .92%
Limited Term Tax-Exempt .42% .25% .23%* .90%
Short-Intermediate Tax-Exempt1 .41% .15% .19%* .75%
</TABLE>
* AFTER EXPENSE REDUCTIONS
1 PROJECTIONS ARE BASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
ANNUAL OPERATING EXPENSES are based on historical expenses for the most
recent fiscal year ended o r in the case of Emerging Markets Income
and Short-Intermediate T a x-Exempt are based on estimated expenses
for the first year of operation. M anagement fees are paid by each
Fund to Fidelity Management & Research Company (FMR) for managing its
investments and business affairs. Management fees for Overseas, Growth
Opportunities and Strategic Opportunities will vary based on
performance . Distribution fees are paid by Class A shares of the
Funds to Distributors for services and expenses in connection with the
distribution of Class A shares. Long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charges permitted by
the National Association of Securities Dealer s, Inc. (NASD )
due to 12b-1 fees. The Funds incur other expenses for maintaining
shareholder records, furnishing shareholder statements and reports,
c ustodial, legal and accounting services, registering a Trust or
F und with federal and state regulatory authorities and other
miscella n eous services. A portion of the brokerage commissions that
Equity Portfolio Growth, Growth Opportunities, Global Resources and Income
& Growth paid were used to reduce Fund expenses. Without this
reduction, other expenses and the total operating expenses for their
Class A shares would have been .54% and 1.85%, respectively (Equity
Portfolio Growth); .32% and 1.65%, respectively (Growth Opportunities);
1.21% and 2.63%, respectively (Global Resources); and .34% and 1.52%,
respectively (Income and Growth). FMR has voluntarily agreed to
reimburse Emerging Markets Income, Government Investment, Limited Term
Tax-Exempt, Short-Intermediate Tax-Exempt and (effective July 1, 1994)
Limited Term Bond, to the extent that total operating expenses for Class A
shares (exclusive of taxes, interest, brokerage commissions, and
extraordinary expenses) are in excess of an annual rate of 1.50%,
0. 9 5%, 0.90%, .75%, and .90% respectively, of average net assets. If
reimbursements were not in effect, the management fees, other expenses
(including Distribution F ees) and total operating expenses
for Class A shares would have been: . 71%, 1.08%, and 1.79% (Emerging
Markets Income, estimated); .46%, .86%, and 1.32%, (Government
Investment); . 42%, .94%, and 1.36%, (Limited Term Tax-Exempt) ;
.41%, .66%, and 1.07% (Short-Intermediate Tax-Exempt, estimated); and 42%,
.81% and 1.23% (Limited Term Bond). Please refer to the section "Fees,"
page .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EXPENSE TABLE EXAMPLE:
You would pay the following expenses, including the
maximum sales charge, on a $1,000 investment in Class
A shares of a Fund assuming (1) a 5% annual return
and (2) full redemption at the end of each time period:
INTERNATIONAL FUNDS:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Overseas $ 70 $ 118 $ 169 $ 306
Emerging Markets Income1 62 93 -- --
EQUITY FUNDS:
Equity Portfolio Growth 65 103 142 265
Growth Opportunities 63 97 132 233
Global Resources 73 125 180 329
Strategic Opportunities 63 95 129 225
Equity Portfolio Income 65 101 139 246
Income & Growth 62 93 126 219
FIXED-INCOME FUNDS:
High Yield 58 81 106 176
Limited Term Bond 56 75 95 153
Government Investment 53 66 79 119
Short Fixed-Income 25 45 67 130
MUNICIPAL/TAX-EXEMPT FUNDS:
High Income Municipal 56 75 96 155
Limited Term Tax-Exempt 56 75 95 153
Short-Intermediate Tax-Exempt1 26 48 -- --
</TABLE>
The HYPOTHETICAL EXAMPLE illustrates the expenses, including the maximum
sales charge, associated with a $1,000 investment in Class A shares of each
Fund over periods of one, three, five and ten years, based on the expenses
(after reimbursements, if any) in the above table and an assumed annual
return of 5%. THE RETURN OF 5% AND EXPENSES SHOULD NOT BE CONSIDERED
INDICATIONS OF ACTUAL OR EXPECTED CLASS A PERFORMANCE OR EXPENSES, BOTH OF
WHICH MAY VARY.
FINANCIAL HIGHLIGHTS
The tables that follow are included in each Fund's Annual Report (except
for Emerging Markets Income and Short-Intermediate Tax Exempt) and have
been audited by each Fund's independent accountants. Their reports on the
Financial Statements and Financial Highlights are included in each Fund's
Annual Report. The Financial Statements and Financial Highlights are
incorporated by reference into each Fund's Statement of Additional
Information. The Strategic Opportunities table provides semiannual
information and is unaudited.
FIDELITY ADVISOR OVERSEAS FUND
April 23, 1990
(Commencement of
Years Ended October 31, Operations) to
1993 1992 1991 October 31, 1990
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.07 $ 9.78 $ 9.55 $ 10.00
Income from Investment Operations
Net investment income .03 .05 .14 .05
Net realized and unrealized gain (loss) on investments 3.93 (.62) .17 (.50)
Total from investment operations 3.96 (.57) .31 (.45)
Less Distributions
From net investment income (.07) (.14) (.07) -
From net realized gain on investments (.03)(s diamond)- (.01)(s diamond)-
Total distributions (.10) (.14) (.08) -
Net asset value, end of period $ 12.93 $ 9.07 $ 9.78 $ 9.55
TOTAL RETURN (dagger)(double dagger) 44.13% (5.88)% 3.25% (4.50)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 221,370 $ 18,652 $ 19,091 $ 18,161
Ratio of expenses to average net assets 2.38% 2.64% 2.85% 3.07%*+
Ratio of net investment income to average net assets (.18)% .48% 1.48% 1.45%*
Portfolio turnover rate 42% 168% 226% 137%*
</TABLE>
FIDELITY ADVISOR EMERGING MARKETS INCOME FUND
<TABLE>
<CAPTION>
<S> <C>
March 10, 1994
(commencement
of
operations) to
May 31, 1994
(Unaudited)
SELECTED PER-SHARE DATA
Net asset value beginning of period $ 10.000
Income from Investment Operations
Not Investment income .086
Net realized and unrealized gain (loss) on investments .247
Total from investment operations .333
Less Distributions
From net investment income (.083)
Net asset value end of period $ 10.250
TOTAL RETURN (dagger) (double dagger) 3.36%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 7,119
Ratio of expenses to average net assets 1.50%*
Ratio of expenses to average net assets before voluntary expense reductions 2.60%*+
Ratio of net investment income to average net assets 3.83%*
Portfolio turnover rate 107%
</TABLE>
* ANNUALIZED.
(dagger) TOTAL RETURN DOES NOT INCLUDE THE ONE TIME SALES CHARGE AND,
FOR PERIODS OF LESS THAN ONE YEAR, IS NOT ANNUALIZED.
(double dagger) TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES
NOT BEEN REDUCED DURING THE PERIODS SHOWN.
(s diamond) INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON
FOREIGN CURRENCY RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME.
+ EXPENSES WERE LIMITED TO A PERCENTAGE OF AVERAGE NET ASSETS IN
ACCORDANCE WITH A STATE LIMITATION.
FIDELITY ADVISOR EQUITY PORTFOLIO GROWTH
Equity Portfolio
Growth - Class A Equity Portfolio Growth - Institutional
Class
Year Period
Ended Ended
Nov. 30, Nov. 30 Years Ended November 30,
SELECTED PER-SHARE DATA 1993 1992** 1993 1992 1991 1990 1989 1988 1987 1986
1985 1984
Net asset value, beginning of period $ 26.33 $ 23.78 $ 26.37 $ 24.28 $
15.55 $ 17.32 $ 12.02 $ 9.92 $ 13.18 $ 11.09 $ 8.03 $ 10.05
Income from Investment Operations
Net investment income (.07)(dagger)(dagger) .01(dagger)(dagger)
.19(dagger)(dagger) .17(dagger)(dagger) .04 .01 .06 .28#
.00(dagger)(dagger) .03 .01 .02
Net realized and unrealized gain
(loss) on investments 3.82 2.54 3.78 4.55 8.69 .34 5.50 2.59
(2.03) 2.41 3.05 (2.04)
Total from investment operations 3.75 2.55 3.97 4.72 8.73 .35
5.56 2.87 (2.03) 2.44 3.06 (2.02)
Less Distributions
From net investment income (.08) - (.10) (.03) - (.08) (.26)
(.01) (.01) (.02) - -
From net realized gain on investments (.50) - (.50) (2.60) -
(2.04) - (.76) (1.22) (.33) - -
Total distributions (.58) - (.60) (2.63) - (2.12) (.26) (.77)
(1.23) (.35) - -
Net asset value, end of period $ 29.50 $ 26.33 $ 29.74 $ 26.37 $ 24.28 $
15.55 $ 17.32 $ 12.02 $ 9.92 $ 13.18 $ 11.09 $ 8.03
TOTAL RETURN (dagger)(double dagger) 14.52% 10.72% 15.36% 21.14%
56.14% 2.75% 47.18% 29.77% (17.12)% 22.55% 38.11% (20.10)%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, end of period (000 omitted) $ 377,984 $ 22,655 $ 296,466 $
179,325 $ 68,766 $ 27,473 $ 24,523 $ 20,182 $ 43,537 $ 63,607 $ 23,447 $
4,117
Ratio of expenses to average net assets 1.84%## 1.47%* .94%## .98%
1.13% 1.74% 1.60% 1.47% 1.11% 1.07% 1.50%+ 1.50%+
Ratio of expenses to average net assets
before expense reductions 1.85%## 1.47%* .95% ## .98% 1.13% 1.74%
1.60% 1.47% 1.11% 1.07% 1.50%+ 1.50%+
Ratio of net investment income to
average net assets (.24)% .25%* .66% .73% .25% .07% .38% 1.20%
.00% .29% .43% .33%
Portfolio turnover rate 160% 240% 160% 240% 254% 262% 269% 331%
226% 115% 108% 453%
FIDELITY ADVISOR GROWTH OPPORTUNITIES FUND
November 18, 1987
(Commencement of
Years Ended October 31, Operations) to
1993 1992 1991 1990 1989 October 31, 1988
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 21.14 $ 20.58 $ 12.99 $ 16.53 $ 14.27 $ 10.00
Income from Investment Operations
Net investment income .08 .14 .06 .18(s diamond) .02 .05
Net realized and unrealized gain (loss) on investments 5.56 2.04 7.70 (2.50) 3.03 4.22
Total from investment operations 5.64 2.18 7.76 (2.32) 3.05 4.27
Less Distributions
From net investment income (.13) (.09) (.17) (.05) (.03) -
From net realized gain on investments (1.26) (1.53) - (1.17) (.76) -
Total distributions (1.39) (1.62) (.17) (1.22) (.79) -
Net asset value, end of period $ 25.39 $ 21.14 $ 20.58 $ 12.99 $ 16.53 $ 14.27
TOTAL RETURN (dagger)(double dagger) 28.11% 12.09% 60.25% (15.05)% 22.69% 42.70%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 2,054,988 $ 580,595 $ 213,095 $ 51,122 $ 34,351 $ 8,097
Ratio of expenses to average net assets 1.64%# 1.60% 1.73% 2.00% 2.45% 2.52%*
# +
Ratio of expenses to average net assets before expense
reductions 1.65%# 1.60% 1.73% 2.00% 2.45% 2.52%*
#
Ratio of net investment income to average net assets .43% .80% .47% 1.49% .31% .82%*
Portfolio turnover rate 69% 94% 142% 136% 163% 143%*
</TABLE>
* ANNUALIZED.
** INITIAL OFFERING OF CLASS A SHARES, SEPTEMBER 10, 1992.
(dagger) TOTAL RETURN DOES NOT INCLUDE THE ONE TIME SALES CHARGE AND, FOR
PERIODS OF LESS THAN ONE YEAR, IS NOT ANNUALIZED.
(dagger)(dagger) NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED
ON AVERAGE SHARES OUTSTANDING.
(double dagger) TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
# DURING THE PERIOD A SHAREHOLDER REDEEMED A SIGNIFICANT PORTION OF THE
ASSETS OF THE FUND. DUE TO THE TIMING OF THIS TRANSACTION, THE FUND
EXPERIENCED AN UNUSUALLY HIGH LEVEL OF INVESTMENT INCOME PER SHARE.
## FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A PORTION
OF THE FUND'S EXPENSES.
(s diamond) NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND
WHICH AMOUNTED TO $.09 PER SHARE.
+ EXPENSES WERE LIMITED TO A PERCENTAGE OF AVERAGE NET ASSETS IN ACCORDANCE
WITH A STATE EXPENSE LIMITATION.
FIDELITY ADVISOR GLOBAL RESOURCES FUND
December 29, 1987
(Commencement of
Years Ended October 31, Operations) to
1993 1992 1991 1990 1989 October 31, 1988
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period
$ 13.88 $ 14.11 $ 12.30 $ 12.60 $ 11.47 $ 10.00
Income from Investment Operations
Net investment income
.22 (.10) (.15) (.10) .10(s diamond) (.05)
Net realized and unrealized gain (loss) on investments
4.91 .79 2.45 .93 1.96 1.52
Total from investment operations
5.13 .69 2.30 .83 2.06 1.47
Less Distributions
From net investment income
- - - - (.08) - -
From net realized gain on investments
(1.42) (.92) (.49) (1.05) (.93) -
Total distributions
(1.42) (.92) (.49) (1.13) (.93) -
Net asset value, end of period
$ 17.59 $ 13.88 $ 14.11 $ 12.30 $ 12.60 $ 11.47
TOTAL RETURN (dagger)(double dagger)
41.05% 5.97% 19.50% 6.37% 19.63% 14.70%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted)
$ 40,309 $ 7,087 $ 5,940 $ 4,615 $ 2,049 $ 916
Ratio of expenses to average net assets
2.62%** 3.27%(dagger)(dagger) 3.35%(dagger)(dagger) 3.34%(dagger)(dagger) 3.23%(dagger)(dagger) 2.85%*(dagger)
(dagger)
Ratio of expenses to average net assets before expense
2.63%** 3.94% 3.35% 3.34% 3.23% 2.85%*
reductions
Ratio of net investment income to average net assets
(1.18)% (1.22)% (1.28)% (1.13)% .83% (.64)%*
Portfolio turnover rate
208% 248% 256% 229% 249% 220%*
</TABLE>
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND
August 20, 1986
Six Months (Commencement
Ended of Operations) to
March 31, 1994 Years Ended September 30, September 30,
(Unaudited) 1993 1992(dagger)(dagger) 1991 1990 1989 1988 1987 1986
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 22.52 $ 19.53 $ 21.38 $ 17.21
$ 19.55 $ 15.53 $ 19.06 $ 16.71 $ 17.81
Income from Investment Operations
Net investment income (.24) .33 .61 .66 .70 .50 .42 .46
.08 (s diamond)
Net realized and unrealized gain (loss) on investments (.69)
4.44 .58 4.26 (2.49) 4.08 (1.80) 2.95 (1.18)
Total from investment operations (.93) 4.77 1.19 4.92 (1.79)
4.58 (1.38) 3.41 (1.10)
Less Distributions
From net investment income (.43) (.57) (.62) (.75) (.55)
(.56) (.24) (.09) --
From net realized gain on investments (1.71) (1.21) (2.42) -
-- -- (1.91) (.97) --
Total distributions (2.14) (1.78) (3.04) (.75) (.55) (.56)
(2.15) (1.06) -
Net asset value, end of period $ 19.45 $ 22.52 $ 19.53 $ 21.38 $
17.21 $ 19.55 $ 15.53 $ 19.06 $ 16.71
TOTAL RETURN (dagger)(double dagger) (4.73%) 26.33% 7.26%
29.51% (9.49)% 30.45% (4.98)% 21.28% (6.23)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 331,650 $ 269,833 $ 194,694 $
199,604 $ 172,083 $ 198,198 $ 191,454 $ 283,117 $ 22,141
Ratio of expenses to average net assets 1.88%* 1.57%++ 1.46% 1.56%
1.59% 1.51% 1.71% 1.67%+ 1.50%* +
Ratio of net investment income to average net assets 1.49%* 2.06% 3.22%
3.61% 3.70% 3.23% 3.10% 2.36% 2.77%*
Portfolio turnover rate 241%* 183% 211% 223% 114% 89% 160% 225% --
* ANNUALIZED.
** FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A PORTION
OF THE FUND'S EXPENSES.
(dagger) TOTAL RETURN DOES NOT INCLUDE THE ONE TIME SALES CHARGE AND, FOR
PERIODS OF LESS THAN ONE YEAR, IS NOT ANNUALIZED.
(dagger)(dagger) AS OF OCTOBER 1, 1991, THE FUND DISCONTINUED THE USE OF
EQUALIZATION ACCOUNTING.
# EXPENSES WERE LIMITED TO A PERCENTAGE OF AVERAGE NET ASSETS IN ACCORDANCE
WITH A STATE EXPENSE LIMITATION REGULATION.
(double dagger) TOTAL RETURN WOULD HAVE BEEN LOWER HAD FMR NOT REIMBURSED
CERTAIN EXPENSES DURING THE PERIODS SHOWN.
(s diamond) NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND
WHICH AMOUNTED TO $.17 PER SHARE.
(h diamond) NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
UNDISTRIBUTED NET INVESTMENT INCOME PER SHARE AT THE END OF THE PERIOD LESS
THE AMOUNT OF UNDISTRIBUTED NET INVESTMENT INCOME PER SHARE OF THE FUND AT
AUGUST 20, 1986.
+ EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. IN
ADDITION, DURING THE PERIOD JULY 1, 1986 THROUGH OCTOBER 31, 1987 FMR
WAIVED .05% OF THE ANNUAL INDIVIDUAL FUND FEE OF .35%.
++ INCLUDES REIMBURSEMENT OF $.03 PER SHARE FROM FMR FOR ADJUSTMENTS TO
PRIOR PERIODS' FEES. IF THIS REIMBURSEMENT HAD NOT EXISTED THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS WOULD HAVE BEEN 1.73%.
FIDELITY ADVISOR EQUITY PORTFOLIO INCOME
Equity Portfolio
Income - Class A Equity Portfolio Income -
Institutional Class
Year Period
Ended Ended
Nov. 30 Nov. 30 Years Ended November 30,
SELECTED PER-SHARE DATA 1993 1992** 1993 1992 1991 1990 1989 1988 1987 1986
1985 1984
Net asset value, beginning of period $ 12.86 $ 12.37 $ 12.88 $ 11.08 $
9.52 $ 12.27 $ 11.10 $ 10.93 $ 13.54 $ 11.95 $ 10.24 $ 10.49
Income from Investment Operations
Net investment income .33 .13 .39 .49 .63 # .69 .75 .75 .76
.78 .79 .72
Net realized and unrealized gain
(loss) on investments 1.97 .47 2.02 1.79 1.52 (2.42) 1.17
1.81 (1.53) 1.92 1.69 (.14)
Total from investment operations 2.30 .60 2.41 2.28 2.15 (1.73)
1.92 2.56 (.77) 2.70 2.48 .58
Less Distributions
From net investment income (.30) (.11) (.36) (.48) (.59) (.72)
(.75) (.74) (.70) (.77) (.77) (.74)
From net realized gain on investments - - - - - (.30) -
(1.65) (1.14) (.34) - (.09)
Total distributions (.30) (.11) (.36) (.48) (.59) (1.02) (.75)
(2.39) (1.84) (1.11) (.77) (.83)
Net asset value, end of period $ 14.86 $ 12.86 $ 14.93 $ 12.88 $ 11.08 $
9.52 $ 12.27 $ 11.10 $ 10.93 $ 13.54 $ 11.95 $ 10.24
TOTAL RETURN (dagger)(double dagger) 18.03% 4.88% 18.90% 20.91%
22.97% (14.90)% 17.58% 26.99% (7.28)% 23.48% 24.86% 6.20%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, end of period (000 omitted) $ 42,326 $ 1,462 $ 191,138 $
139,391 $ 168,590 $ 253,049 $ 463,696 $ 436,753 $ 443,603 $ 544,269 $
349,262 $ 89,364
Ratio of expenses to average net assets 1.77% 1.55%* .79%## .71%(h
diamond) .67%(h diamond) .61%(h diamond) .55%(h diamond) .55%(h diamond)
.54%(h diamond) .61% .63% .77%
Ratio of expenses to average net assets
before expense reductions 1.77% 1.55%* .80%## .79%(h diamond) .77%(h
diamond) .71%(h diamond) .65%(h diamond) .65%(h diamond) .61%(h diamond)
.61% .63% .77%
Ratio of net investment income
to average net assets 2.02% 3.39%* 3.00% 3.77% 5.66% 6.11% 6.09%
6.86% 5.58% 6.06% 7.36% 7.86%
Portfolio turnover rate 120% 51% 120% 51% 91% 103% 93% 78% 137%
107% 110%(dagger)(dagger)(dagger) 121%
FIDELITY ADVISOR INCOME & GROWTH FUND
January 6, 1987
(Commencement of
Years Ended October 31, Operations) to
1993 1992 1991 1990 1989 1988 October 31, 1987
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 14.41 $ 14.13 $ 10.41 $ 12.77 $ 11.07 $ 9.44 $ 10.00
Income from Investment Operations
Net investment income .48 .50 .51 .56 1.01(dagger)(dagger) .62 .27
Net realized and unrealized gain
(loss) on 2.18 .85 3.74 (1.34) 1.27 1.56 (.63)
investments
Total from investment operations 2.66 1.35 4.25 (.78) 2.28 2.18 (.36)
Less Distributions
From net investment income (.56) (.46) (.53) (1.06) (.58) (.55) (.20)
From net realized gain on investments(.60) (.61) - (.52) - - -
Total distributions (1.16) (1.07) (.53) (1.58) (.58) (.55) (.20)
Net asset value, end of period $ 15.91 $ 14.41 $ 14.13 $ 10.41 $ 12.77 $ 11.07 $ 9.44
TOTAL RETURN (dagger)(double dagger) 19.66% 10.27% 41.73% (7.15)% 21.15% 23.66% (3.90)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted)$ 1,654,124 $ 397,672 $ 135,533 $ 60,934 $ 46,139 $ 36,224 $ 34,376
Ratio of expenses to average net assets 1.51%# 1.60% 1.71% 1.85% 1.91% 2.06% 2.06%*
#
Ratio of expenses to average net
assets before 1.52%# 1.60% 1.71% 1.85% 1.91% 2.06% 2.06%*
expense reductions #
Ratio of net investment income to
average net 3.24% 3.97% 4.19% 5.29% 8.80% 5.83% 3.95%*
assets
Portfolio turnover rate 200% 389% 220% 297% 151% 204% 206%*
</TABLE>
* ANNUALIZED.
** INITIAL OFFERING OF CLASS A SHARES, SEPTEMBER 10, 1992.
(dagger) TOTAL RETURN DOES NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
(dagger)(dagger) NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL
DIVIDEND WHICH AMOUNTED TO $ .26 PER SHARE.
(dagger)(dagger)(dagger) IN JULY 1985, THE SEC ADOPTED REVISIONS TO
EXISTING RULES WITH RESPECT TO THE CALCULATION OF THE PORTFOLIO TURNOVER
RATE. THE REVISED RULES REQUIRE THE INCLUSION IN THE CALCULATION OF
LONG-TERM U.S. GOVERNMENT SECURITIES WHICH, PRIOR TO THESE REVISIONS, WERE
EXCLUDED FROM THE CALCULATION.
(double dagger) TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
(h diamond) EFFECTIVE APRIL 1, 1987 TO SEPTEMBER 10, 1992, FMR REIMBURSED
.10% OF THE ANNUAL MANAGEMENT FEE OF .50%.
# INCLUDES $.04 PER-SHARE FROM FOREIGN TAXES RECOVERED.
## FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A PORTION
OF THE FUND'S EXPENSES.
FIDELITY ADVISOR HIGH YIELD FUND
January 5, 1987
(Commencement of
Years Ended October 31, Operations) to
1993 1992 1991 1990 1989 1988 October 31, 1987
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.070 $ 10.120 $ 8.150 $ 8.970 $ 9.860 $ 9.090 $ 10.000
Income from Investment Operations
Net investment income .980 1.146 1.115 1.144 1.237 1.165 .878
Net realized and unrealized gain (loss) on 1.153 .975 1.948 (.820) (.890) .770 (.910)
investments
Total from investment operations 2.133 2.121 3.063 .324 .347 1.935 (.032)
Less Distributions
From net investment income (.963) (1.171) (1.093) (1.144) (1.237) (1.165) (.878)
From net realized gain on investments (.230) - - - - - -
Total distributions (1.193) (1.171) (1.093) (1.144) (1.237) (1.165) (.878)
Net asset value, end of period $ 12.010 $ 11.070 $ 10.120 $ 8.150 $ 8.970 $ 9.860 $ 9.090
TOTAL RETURN (dagger)(double dagger) 20.47% 21.96% 39.67% 3.58% 3.34% 22.14% (.81)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 485,559 $ 136,316 $ 38,681 $ 15,134 $ 13,315 $ 11,900 $ 9,077
Ratio of expenses to average net assets 1.11% 1.10% 1.10% 1.10% 1.10% 1.10% 1.24%*
Ratio of expenses to average net assets before1.11% 1.16% 1.76% 2.04% 2.17% 2.22% 2.25%*(dagger)
voluntary (dagger)
expense limitation
Ratio of net investment income to average net 8.09% 9.95% 12.20% 12.72% 12.98% 11.86% 10.74%*
assets
Portfolio turnover rate 79% 100% 103% 90% 131% 135% 166%*
</TABLE>
FIDELITY ADVISOR LIMITED TERM BOND FUND
Limited Term
Bond Fund - Class A Limited Term Bond Fund - Institutional
Class
Year Period February 2, 1984
Ended Ended (Commencement
Nov. 30, Nov. 30 Years Ended November 30, of Operations) to
SELECTED PER-SHARE DATA 1993 1992** 1993 1992 1991 1990 1989 1988 1987 1986
1985 November 30, 1984
Net asset value, beginning
of period $ 10.640 $ 10.960 $ 10.640 $ 10.550 $ 10.140 $ 10.410 $ 10.180
$ 10.250 $ 11.240 $ 10.550 $ 9.960 $ 10.000
Income from Investment Operations
Net investment income .785 .170 .832 .840 .884 .901 .937 .944
.953 1.026 1.053 .897
Net realized and unrealized gain (loss)
on investments .511 (.320)+ .531 .102 .411 (.270) .230 (.070)
(.770) .710 .590 (.040)
Total from investment operations 1.296 (.150) 1.363 .942 1.295 .631
1.167 .874 .183 1.736 1.643 .857
Less Distributions
From net investment income (.796) (.170) (.843) (.852) (.885)
(.901) (.937) (.944) (.953) (1.026) (1.053) (.897)
From net realized gain on investments - -- -- -- -- -- -- --
(.220) (.020) -- --
Total distributions (.796) (.170) (.843) (.852) (.885) (.901)
(.937) (.944) (1.173) (1.046) (1.053) (.897)
Net asset value, end of period $ 11.140 $ 10.640 $ 11.160 $ 10.640 $
10.550 $ 10.140 $ 10.410 $ 10.180 $ 10.250 $ 11.240 $ 10.550 $ 9.960
TOTAL RETURN (dagger)(double dagger) 12.50% (1.37)% 13.17% 9.21%
13.35% 6.46% 12.03% 8.81% 1.78% 17.04% 17.40% 9.33%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 59,184 $ 2,583 $ 183,790 $
160,156 $ 327,756 $ 356,564 $ 426,832 $ 418,929 $ 407,228 $ 418,632 $
253,913 $ 15,192
Ratio of expenses to average net assets 1.23% .82%* .64% .57% .57%
.58% .54% .54% .53% .53% .65% 1.50%*(dagger)(dagger)
Ratio of net investment income to
average net assets 6.81% 7.67%* 7.41% 7.96% 8.59% 8.90% 9.16%
9.16% 9.03% 9.22% 10.29% 11.01%*
Portfolio turnover rate 59% 7% 59% 7% 60% 59% 87% 48% 92% 59%
88%(dagger)(dagger)(dagger) 12%*
* ANNUALIZED.
** INITIAL OFFERING OF CLASS A SHARES, SEPTEMBER 10, 1992.
(dagger) TOTAL RETURN DOES NOT INCLUDE THE ONE TIME SALES CHARGE AND, FOR
PERIODS OF LESS THAN ONE YEAR, IS NOT ANNUALIZED.
(dagger)(dagger) EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE
LIMITATION.
(dagger)(dagger)(dagger) IN JULY 1985, THE SEC ADOPTED REVISIONS TO
EXISTING RULES WITH RESPECT TO THE CALCULATION OF THE PORTFOLIO TURNOVER
RATE. THE REVISED RULES REQUIRE THE INCLUSION IN THE CALCULATION OF
LONG-TERM U.S. GOVERNMENT SECURITIES WHICH, PRIOR TO THESE REVISIONS, WERE
EXCLUDED FROM THE CALCULATION.
(double dagger) TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
+ THE AMOUNT SHOWN IN THIS CAPTION, WHILE DETERMINABLE BY THE SUMMATION OF
AMOUNTS COMPUTED DAILY AS SHARES WERE SOLD OR REPURCHASED, IS ALSO THE
BALANCING FIGURE DERIVED FROM THE OTHER FIGURES IN THE STATEMENT AND HAS
BEEN SO COMPUTED. THE AMOUNT SHOWN FROM THE PERIOD ENDED NOVEMBER 30, 1992
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD DOES NOT ACCORD WITH THE NET
REALIZED AND UNREALIZED GAIN ON INVESTMENTS FOR THE PERIOD BECAUSE OF THE
TIMING OF SALES AND REPURCHASES OF THE FUND SHARES IN RELATION TO
FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
FIDELITY ADVISOR GOVERNMENT INVESTMENT FUND
January 7, 1987
(Commencement of
Years Ended October 31, Operations) to
1993 1992 1991 1990 1989 1988 October 31, 1987
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.730 $ 9.590 $ 9.150 $ 9.310 $ 9.260 $ 9.200 $ 10.000
Income from Investment Operations
Net investment income .567 .666 .700 .735 .773 .769 .614
Net realized and unrealized gain (loss) on .601 .125 .419 (.160) .050 .060 (.800)
investments
Total from investment operations 1.168 .791 1.119 .575 .823 .829 (.186)
Less Distributions
From net investment income (.558) (.651) (.679) (.735) (.773) (.769) (.614)
From net realized gain on investments (.200) - - - - - -
Total distributions (.758) (.651) (.679) (.735) (.773) (.769) (.614)
Net asset value, end of period $ 10.140 $ 9.730 $ 9.590 $ 9.150 $ 9.310 $ 9.260 $ 9.200
TOTAL RETURN (dagger)(double dagger) 12.53% 8.49% 12.65% 6.48% 9.37% 9.34% (1.84)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 69,876 $ 23,281 $ 13,058 $ 9,822 $ 8,203 $ 6,590 $ 4,584
Ratio of expenses to average net assets .68% 1.10% 1.10% 1.10% 1.10% 1.10% 1.29%*
Ratio of expenses to average net assets before 1.32% 1.79% 2.46% 2.74% 2.75% 2.25% 2.36%*
voluntary
expense limitation
Ratio of net investment income to average net 6.11% 6.98% 7.47% 8.04% 8.45% 8.30% 8.12%*
assets
Portfolio turnover rate 333% 315% 54% 31% 42% 44% 32%*
</TABLE>
FIDELITY ADVISOR SHORT FIXED-INCOME FUND
September 16, 1987
(Commencement of
Years Ended October 31, Operations) to
1993 1992 1991 1990 1989 1988 October 31, 1987
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.950 $ 9.870 $ 9.620 $ 9.950 $ 9.940 $ 10.060 $ 10.000
Income from Investment Operations
Net investment income .732 .830 .848 .868 .832 .852 .101
Net realized and unrealized gain (loss) on .146 .071 .270 (.330) .010 (.120) .060
investments
Total from investment operations .878 .901 1.118 .538 .842 .732 .161
Less Distributions
From net investment income (.738) (.821) (.868) (.868) (.832) (.852) (.101)
Net asset value, end of period $ 10.090 $ 9.950 $ 9.870 $ 9.620 $ 9.950 $ 9.940 $ 10.060
TOTAL RETURN (dagger)(double dagger) 9.13% 9.44% 12.19% 5.59% 8.89% 7.56% 1.61%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 654,202 $ 170,558 $ 25,244 $ 13,062 $ 12,394 $ 13,433 $ 3,252
Ratio of expenses to average net assets .95% .90% .90% .90% .90% .90% .90%*
Ratio of expenses to average net assets before.95% 1.03% 1.74% 1.90% 2.22% 1.84% 2.15%*(dagger)
voluntary (dagger)
expense limitation
Ratio of net investment income to average net 6.77% 7.59% 8.50% 8.86% 8.45% 8.39% 7.65%*
assets
Portfolio turnover rate 58% 57% 127% 144% 157% 178% 119%*
</TABLE>
* ANNUALIZED.
(dagger) TOTAL RETURN DOES NOT INCLUDE THE ONE TIME SALES CHARGE AND, FOR
PERIODS OF LESS THAN ONE YEAR, IS NOT ANNUALIZED.
(dagger)(dagger) EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE
LIMITATION.
(double dagger) TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
FIDELITY ADVISOR HIGH INCOME MUNICIPAL FUND
September 16, 1987
(Commencement of
Years Ended October 31, Operations) to
SELECTED PER-SHARE DATA 1993 1992 1991 1990 1989 1988 October
31, 1987
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.650 $ 11.410 $ 10.870 $ 10.820 $ 10.460 $ 9.850 $ 10.000
Income from Investment Operations
Net interest income .710 .774 .803 .811 .800 .750 .092
Net realized and unrealized gain (loss) on1.100 .250 .660 .150 .410 .610 (.150)
investments
Total from investment operations 1.810 1.024 1.463 .961 1.210 1.360 (.058)
Less Distributions
From net interest income (.710) (.774) (.803) (.811) (.800) (.750) (.092)
From net realized gain on investments (.030) (.010) (.120) (.100) (.050) - -
Total distributions (.740) (.784) (.923) (.911) (.850) (.750) (.092)
Net asset value, end of period $ 12.720 $ 11.650 $ 11.410 $ 10.870 $ 10.820 $ 10.460 $ 9.850
TOTAL RETURN (dagger)(double dagger) 15.95% 9.21% 14.02% 9.28% 12.05% 14.22% (.58)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 497,575 $ 156,659 $ 67,135 $ 22,702 $ 6,669 $ 3,290 $ 1,275
Ratio of expenses to average net assets .92% .90% .90% .90% .90% .89% .80%*
Ratio of expenses to average net assets
before .92% .96% 1.24% 2.09% 2.75% 2.25% 2.25%*
voluntary (h diamond) (h diamond) (h diamond)
expense limitation
Ratio of net interest income to average
net assets 5.59% 6.59% 7.08% 7.37% 7.60% 7.33% 7.24%*
Portfolio turnover rate 27% 13% 10% 11% 27% 19% -%
</TABLE>
FIDELITY ADVISOR LIMITED TERM TAX-EXEMPT FUND
Limited Term
Tax-Exempt Fund - Class A Limited Term Tax-Exempt Fund -
Institutional Class
September 19, 1985
Year Period (Commencement
Ended Ended of Operations) to
Nov. 30 Nov. 30 Years Ended November 30, November 30,
SELECTED PER-SHARE DATA 1993 1992** 1993 1992 1991 1990 1989 1988 1987
1986 1985
Net asset value, beginning of period $ 11.080 $ 11.010 $ 11.080 $ 10.800 $
10.640 $ 10.610 $ 10.520 $ 10.380 $ 10.990 $ 10.280 $ 10.000
Income from Investment Operations
Net interest income .508 .131 .536 .666 .682 .689 .674 .650 .641
.671 .130
Net realized and unrealized gain (loss) on investments .260 .070 .260
.280 .160 .030 .090 .140 (.540) .760 .280
Total from investment operations .768 .201 .796 .946 .842 .719
.764 .790 .101 1.431 .410
Less Distributions
From net interest income (.508) (.131) (.536) (.666) (.682) (.689)
(.674) (.650) (.641) (.671) (.130)
From net realized gain on investments (.880) -- (.880) -- -- --
- -- -- (.070) (.050) --
Total distributions (1.388) (.131) (1.416) (.666) (.682) (.689)
(.674) (.650) (.711) (.721) (.130)
Net asset value, end of period $ 10.460 $ 11.080 $ 10.460 $ 11.080 $
10.800 $ 10.640 $ 10.610 $ 10.520 $ 10.380 $ 10.990 $ 10.280
TOTAL RETURN (dagger)(double dagger) 7.72% 1.37% 8.01% 9.01% 8.15%
7.04% 7.50% 7.77% .97% 14.39% 4.12%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 39,800 $ 1,752 $ 15,076 $ 28,428
$ 100,294 $ 111,506 $ 121,418 $ 132,443 $ 162,857 $ 161,045 $ 94,391
Ratio of expenses to average net assets .90% 1.04%* .65% .66% .61%
.62% .65% .63% .59% .58% .69%*
Ratio of expenses to average net assets before voluntary
expense limitation 1.36% 1.06%* .83% .67% .61% .62% .65% .63%
.59% .58% .69%*
Ratio of net investment income to average net assets 4.76% 5.65%* 5.01%
6.05% 6.40% 6.53% 6.45% 6.20% 6.01% 6.29% 6.33%*
Portfolio turnover rate 46% 36% 46% 36% 20% 32% 31% 24% 43% 34%
103%*
* ANNUALIZED.
** INITIAL OFFERING OF CLASS A SHARES, SEPTEMBER 13, 1992.
(dagger) TOTAL RETURN DOES NOT INCLUDE THE ONE TIME SALES CHARGE AND, FOR
PERIODS OF LESS THAN ONE YEAR, IS NOT ANNUALIZED.
(double dagger) TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
(h diamond) EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE
LIMITATION.
FIDELITY ADVISOR SHORT-INTERMEDIATE TAX-EXEMPT FUND
<TABLE>
<CAPTION>
<S> <C>
March 16, 1994
(commencement
of operations) to
May 31, 1994
(Unaudited)
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.000
Income from Investment Operations
.060
Net interest income
Net realized and unrealized gain (loss) on investments (.040)
Total from investment operations .020
Less Distributions
(.060)
From net interest income
Net asset value, end of period $ 9.960
TOTAL RETURN (dagger)(double dagger) .20%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 9,222
Ratio of expenses to average net assets .75%*
Ratio of expenses to average net assets before voluntary expense reductions 2.46%*
Ratio of net interest income to average net assets 2.66%*
Portfolio turnover rate 43%*
</TABLE>
* ANNUALIZED
(dagger) TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
(double dagger) THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD THE ADVISOR
NOT REIMBURSED EXPENSES DURING THE PERIOD.
INVESTMENT OBJECTIVES
INTERNATIONAL FUNDS:
FIDELITY ADVISOR OVERSEAS FUND seeks growth of capital primarily through
investments in foreign securities.
FIDELITY ADVISOR EMERGING MARKETS INCOME FUND seeks a high level of
current income by investing primarily in debt securities and other
instruments of issuers in emerging markets. As a secondary objective, the
Fund seeks capital appreciation.
EQUITY FUNDS:
FIDELITY ADVISOR EQUITY PORTFOLIO GROWTH seeks to achieve capital
appreciation by investing primarily in the common and preferred stock and
securities convertible into the common stock, of companies with above
average growth characteristics.
FIDELITY ADVISOR GROWTH OPPORTUNITIES FUND seeks to provide capital growth
by investing primarily in common stocks and securities convertible into
common stocks.
FIDELITY ADVISOR GLOBAL RESOURCES FUND seeks long-term growth of capital
and protection of the purchasing power of shareholders' capital by
investing primarily in securities of foreign and domestic companies that
own or develop natural resources, or that supply goods and services to such
companies, or in physical commodities.
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND seeks capital appreciation by
investing primarily in securities of companies believed by FMR to involve a
"special situation."
FIDELITY ADVISOR EQUITY PORTFOLIO INCOME seeks a yield from dividend and
interest income which exceeds the composite dividend yield on securities
comprising the Standard & Poor's Composite Index of 500 Stocks (S&P
500).
FIDELITY ADVISOR INCOME & GROWTH FUND seeks both income and growth of
capital by investing in a diversified portfolio of equity and fixed-income
securities with income, growth of income and capital appreciation
potential.
FIXED-INCOME FUNDS:
FIDELITY ADVISOR HIGH YIELD FUND seeks a combination of a high level of
income and the potential for capital gains by investing in a diversified
portfolio consisting primarily of high-yielding, fixed-income and zero
coupon securities, such as bonds, debentures and notes, convertible
securities and preferred stocks.
FIDELITY ADVISOR LIMITED TERM BOND FUND seeks to provide a high rate of
income through investment in high and upper-medium grade fixed-income
obligations.
FIDELITY ADVISOR GOVERNMENT INVESTMENT FUND seeks a high level of current
income by investing primarily in obligations issued or guaranteed by the
U.S. government or any of its agencies or instrumentalities.
FIDELITY ADVISOR SHORT FIXED-INCOME FUND seeks to obtain a high level of
current income, consistent with preservation of capital, by investing
primarily in a broad range of investment grade fixed-income securities.
MUNICIPAL/TAX-EXEMPT FUNDS:
FIDELITY ADVISOR HIGH INCOME MUNICIPAL FUND seeks to provide a high current
yield by investing in a diversified portfolio of municipal obligations
whose interest is not included in gross income for purposes of calculating
federal income tax. The Fund reserves the right to invest up to 100% of its
assets in municipal obligations subject to the federal alternative minimum
tax.
FIDELITY ADVISOR LIMITED TERM TAX-EXEMPT FUND seeks the highest level of
income exempt from federal income taxes that can be obtained consistent
with the preservation of capital, from a diversified portfolio of high
quality or upper-medium quality municipal obligations.
FIDELITY ADVISOR SHORT-INTERMEDIATE TAX-EXEMPT FUND seeks as high a level
of current income, exempt from federal income tax, as is consistent with
preservation of capital by focusing on investment-grade municipal
securities.
The investment objective of each Fund is fundamental and can only be
changed by vote of a majority of the outstanding shares of the Fund. Except
as otherwise noted, the investment limitations and policies of Equity
Portfolio Growth, Strategic Opportunities, Income & Growth,
L imited Term Bond, Government Investment, High Income Municipal ,
and Limited Term Tax-Exemp t are fundamental and may not be
changed without shareholder approval. Except for the investment limitations
and policies identified as fundamental, the limitations and policies of
Overseas, E merging Markets Income, Growth Opportunities,
G lobal Resources, Equity Portfolio Income, High Yield, Short
Fixed-Income , and Short-Intermediate Tax-Exempt are not fundamental.
Non-fundamental investment limitations and policies may be changed without
shareholder approval.
The yield, return and potential price changes of each Fund depend on the
quality and maturity of the obligations in its portfolio, as well as on
market conditions. Risks vary based on the type of fund in which you are
investing. As is the case with any investment in securities, investment in
the Funds involve certain risks and , therefore , a Fund may
not always achieve its investment objective.
INVESTMENT POLICIES AND RISKS
Further information relating to the types of securities in which each Fund
may invest and the investment policies of each Fund in general are set
forth in the Appendix to this Prospectus and in each Fund's SAI.
INTERNATIONAL FUNDS: Risks associated with international investing include
currency values, the political and regulatory environment, and overall
economic factors in the countries in which a Fund invests. Investing in an
international fund may be more suitable for aggressive investors who want
to achieve an extra level of diversification in their investment portfolio
by participating in growth opportunities around the world. FMR
determines where an issuer is located by looking at such factors as its
country of organization, the primary trading market for its securities, and
the location of its assets, personnel, sales, and earnings.
FIDELITY ADVISOR OVERSEAS FUND defines foreign securities as securities of
issuers whose principal activities are outside of the United States.
Normally, at least 65% of the Fund's total assets will be invested in
securities of issuers from at least three different countries outside of
North America (the U.S., Canada, Mexico, and Central America). The Fund
expects to invest most of its assets in securities of issuers located in
developed countries in these general geographic areas: The Americas (other
than the U.S.), the Far East and the Pacific Basin, and Western Europe. In
determining whether a company's or organization's principal activities are
in a particular region, FMR will look at such factors as the location of
assets, personnel, sales, and earnings.
FMR expects that opportunities for capital growth will come most often from
common stock and other equity securities, and therefore, expects that
equity securities will account for the majority of the Fund's investments.
However, the Fund also may find opportunities for capital growth from debt
securities of any quality or maturity by reason of anticipated changes in
such factors as interest rates, currency relationships, or the credit
standing of individual issuers. The Fund will not consider dividend income
as a primary factor in choosing securities, unless FMR believes the income
will contribute to the securities' growth potential.
When allocating the investments of the Fund among geographic regions and
individual countries, and among assets denominated in U.S. and foreign
currencies, FMR considers various factors, such as prospects for relative
economic growth among countries, regions or geographic areas; expected
levels of inflation; government policies influencing business conditions;
and the outlook for currency relationships. Although the Fund has the
ability under normal conditions to invest up to 35% of its total assets in
the U.S., FMR currently intends to manage the Fund to be as fully invested
outside the U.S. as is practicable in light of the Fund's cash flow and
cash needs.
The equity securities in which the Fund may invest include common stocks of
companies or closed-end investment companies, securities such as warrants
or rights that are convertible into common stock, preferred stocks, and
depositary receipts for those securities.
The Fund may invest in debt securities of any type of issuer, including
governments and governmental entities (including supranational
organizations such as the World Bank) as well as corporations and other
business organizations. The Fund has no limitation on the quality of debt
securities in which it may invest. The Fund may invest in lower-quality,
high-yielding debt securities sometimes referred to as "junk
bonds"), although it intends to limit its investments in these securities
to 35% of its assets. FMR may invest a portion of the Fund's assets in
high-quality, short-term debt securities, bank deposits and money market
instruments (including repurchase agreements) denominated in U.S. dollars
or foreign currencies. When market conditions warrant, FMR can make
substantial temporary defensive investments in U.S. government securities
or investment-grade obligations of companies incorporated in, and having
principal business activities in, the U.S.
The Fund may also purchase or engage in indexed securities, illiquid
investments, loans and other direct debt instruments, options and futures
contracts, repurchase agreements and securities loans, restricted
securities, and swap agreements.
CONSIDERATIONS IN INVESTING IN SHARES OF OVERSEAS FUND:
Investing outside the U.S. involves different opportunities and different
risks from U.S. investments. FMR believes that it may be possible to obtain
significant returns from a portfolio of foreign investments, or a
combination of foreign investments and U.S. investments, and to achieve
increased diversification in comparison to a portfolio invested solely in
U.S. securities. By including international investments in your investment
portfolio, you may gain increased diversification by combining securities
from various countries and geographic areas that offer different investment
opportunities and are affected by different economic trends. At the same
time, these opportunities and trends involve risks that may not be
encountered with U.S. investments.
International investing in general may involve greater risks than U.S.
investments. There is generally less publicly available information about
foreign issuers, and there may be less government regulation and
supervision of foreign stock exchanges, brokers, and listed companies.
There may be difficulty in enforcing legal rights outside the U.S. Foreign
companies generally are not subject to uniform accounting, auditing, and
financial reporting standards, practices, and requirements comparable to
those that apply to U.S. companies. Security trading practices abroad may
offer less protection to investors such as the Fund. Settlement of
transactions in some foreign markets may be delayed or may be less frequent
than in the U.S., which could affect the liquidity of the Fund.
Additionally, in some foreign countries, there is the possibility of
expropriation or confiscatory taxation; limitations on the removal of
securities, property, or other assets of the Fund; political or social
instability; or diplomatic developments which could affect U.S. investments
in foreign countries. FMR will take these factors into consideration in
managing the Fund's investments.
The Fund may invest a portion of its assets in developing countries, or in
countries with a new or developing capital market. The considerations noted
above are generally intensified for these investments. These countries may
have relatively unstable governments, economies based on only a few
industries, and securities markets that trade a small number of securities.
Securities of issuers located in these countries tend to have volatile
prices and may offer significant potential for loss as well as gain.
EMERGING MARKETS INCOME FUND will, under normal conditions, invest at least
65% of its total assets in debt securities and other instruments of issuers
in emerging markets. For this purpose, "emerging markets" will include any
countries (I) having an "emerging stock market" as defined by the
International Finance Corporation; (II) with low- to middle-income
economies according to the International Bank for Reconstruction and
Development (the World Bank); or (III) listed in World Bank publications as
"developing." Currently, the countries NOT included in these categories are
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Spain, Sweden,
Switzerland, the United Kingdom, and the U.S. For purposes of this 65%
policy, issuers whose principal activities are in countries with emerging
markets include issuers: (1) organized under the laws of, (2) whose
securities have their primary trading market in, (3) deriving at least 50%
of their revenues or profits from goods sold, investments made, or services
performed in, or (4) having at least 50% of their assets located in, a
country with an emerging market.
The Fund emphasizes countries with relatively low gross national product
per capita compared to the world's major economies, and with the potential
for rapid economic growth. Many investments in emerging markets can be
considered speculative, and therefore may offer higher income potential
than the developed markets of the world. Investments in emerging markets
can involve significant risks and the Fund is designed for aggressive
investors.
Under current market conditions, FMR expects that emerging market
opportunities will be found mainly within Latin America, and to a lesser
extent in Africa, Asia and emerging European nations. FMR will actively
manage the allocation of the Fund's investments among countries, geographic
regions, and currency denominations in an attempt to achieve current income
and capital appreciation. In doing so, FMR will also consider such factors
as prospects for relative economic growth among countries, regions, or
geographic areas, expected levels of inflation, government policies
influencing business conditions, current and anticipated interest rates,
and the outlook for currency relationships. Although the Fund will normally
invest in at least three different countries, it is not limited to any
particular country or currency, and may invest substantially all of its
assets in any one country.
The Fund may invest in all types of fixed-income instruments, including
corporate debt securities, sovereign debt instruments issued by governments
or governmental entities, and all types of domestic and foreign money
market instruments. The Fund may invest in lower- quality ,
high-yielding U.S. corporate debt securities (sometimes referred to as
"junk bonds"). Many emerging market securities are of
below-investment-grade quality, and at any one time substantially all of
the Fund's assets may be invested in securities that are of poor quality or
are in default. Lower-quality debt securities are those rated below Baa
by Moody's or BBB by S&P.
Other investments the Fund may make or engage in include options and
futures contracts, swap agreements, indexed securities, loans and other
direct debt instruments, repurchase agreements and securities loans,
foreign repurchase agreements, illiquid investments, restricted securities,
mortgage-backed securities, asset-backed securities,
delayed-delivery transactions, and interfund borrowing. The Fund may also
invest a portion of its assets in common and preferred stocks of emerging
market issuers, debt securities of non-emerging market foreign issuers, and
lower-quality debt securities of U.S. issuers. Although the Fund may invest
up to 35% of its total assets in these securities, FMR does not currently
anticipate that these investments will exceed approximately 20% of the
Fund's total assets. Though these types of investments present the
possibility for significant capital appreciation over the long-term, they
may fluctuate dramatically in the short term and entail a high degree of
risk.
For cash management purposes, the Fund will ordinarily invest a portion of
its assets in high-quality, short-term debt securities and money market
instruments, including repurchase agreements and bank deposits denominated
in U.S. or foreign currencies. When, in FMR's judgment, market conditions
warrant, the Fund can make substantial temporary defensive investments in
money market instruments, U.S. government securities, or investment-grade
obligations of U.S. companies.
CONSIDERATIONS OF INVESTING IN THE SHARES OF EMERGING MARKETS INCOME FUND:
International investing in general may involve greater risks than U.S.
investments. There is generally less publicly available information about
foreign issuers, and there may be less government regulation and
supervision of foreign stock exchanges, brokers, and listed companies.
There may be difficulty in enforcing legal rights outside the U.S. Foreign
companies generally are not subject to uniform accounting, auditing, and
financial reporting standards, practices, and requirements comparable to
those that apply to U.S. companies. Security trading practices abroad may
offer less protection to investors such as the Fund. Settlement of
transactions in some foreign markets may be delayed or may be less frequent
than in the U.S., which could affect the liquidity of the Fund.
Additionally, in some foreign countries, there is the possibility of
expropriation or confiscatory taxation; limitations on the removal of
securities, property, or other assets of the Fund; political or social
instability; or diplomatic developments which could affect U.S. investments
in foreign countries. FMR will take these factors into consideration in
managing the Fund's investments.
These risks may be intensified in the case of investments in emerging
markets or countries with limited or developing capital markets. Security
prices in emerging markets can be significantly more volatile than in more
developed nations, reflecting the greater uncertainties of investing in
less established markets and economies. In particular, countries with
emerging markets may have relatively unstable governments; present the risk
of nationalization of businesses, restrictions on foreign ownership, or
prohibitions of repatriation of assets; and may have less protection of
property rights than more developed countries. The economies of countries
with emerging markets may be predominantly 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 substantial holdings difficult or impossible
at times. Securities of issuers located in countries with emerging markets
may have limited marketability and may be subject to more abrupt or erratic
price movements.
By itself, the Fund does not constitute a balanced investment plan. The
Fund is designed for aggressive investors interested in the investment
opportunities and income potential offered by securities issued in emerging
markets. The value of the Fund's investments and the income they generate
will vary from day to day, generally reflecting changes in interest rates,
market conditions, and other political and economic news. The Fund's
performance will also depend on currency values, foreign economies, and
other factors relating to foreign investments. Because the Fund focuses on
emerging markets, it involves higher risks than U.S. bond investments.
Investors should be willing to assume a greater degree of investment risk
and should expect a higher level of volatility than is generally associated
with investing in more established markets. The Fund's yield and share
price will change based on changes in foreign interest rates, the value of
foreign currencies, and issuers' creditworthiness. In general, bond prices
rise when interest rates fall, and vice versa. The Fund's share price,
yield, and total return fluctuate, and your investment may be worth more or
less than your original cost when you redeem your shares.
The Fund is non-diversified, which means that it may invest a greater
portion of its assets in securities of a single issuer than would be the
case if it were diversified. As a result, changes in the financial
condition or market assessment of a single issuer could cause greater
fluctuation in the Fund's share value.
EQUITY FUNDS. Equity funds invest in common stock and other equity
securities in search of growth or a combination of growth and income. The
share value of equity funds depends heavily on stock market
conditions in the U.S. and abroad, and can also be affected by changes in
interest rates or other economic conditions. Investments in equity Funds
are more suitable for investors who take a long-term approach to investing.
FIDELITY ADVISOR EQUITY PORTFOLIO GROWTH as a general rule, will invest in
the securities of companies whose growth in the areas of earnings or gross
sales measured either in dollars or in unit volume (either on an absolute
or percentage basis) may exceed that of the average of the companies whose
securities are included in the S&P 500. These securities generally
command high multiples (price/earnings ratios) in the stock markets over
time. Above average growth characteristics are most often associated with
companies in new and emerging areas of the economy but occasionally can be
found in the stronger companies of more mature and even declining
industries. The Fund will, therefore, be invested in the securities of
smaller, less well-known companies except when FMR believes that
opportunities for above-average growth are presented by larger, more mature
companies which have undergone reformation and revitalization or possess a
strong position in relation to the market as a whole.
The market price of securities with above average growth characteristics
often can experience a more sudden and more dramatic downward reaction to
negative news than is the case with securities carrying a lower market
multiple. This can be particularly true for companies with a narrow product
line or whose securities are relatively thinly traded,
characteristics which are common to smaller, less well-known companies.
As a non-fundamental policy, at least 65% of the total assets of the Fund
normally will be invested in common and preferred stock. The balance of
the fund will tend to be invested in debt obligations, a high
percentage of which are expected to be convertible into common stocks.
As a non-fundamental policy t he Fund may invest in lower-quality,
high yielding debt securities (sometimes referred to as "junk bonds "),
although it currently intends to limit its investments in these
securities to 35% of its assets. The Fund also may purchase or engage in
foreign investments, indexed securities, illiquid investments, loans and
other direct debt instruments, options and futures contracts, repurchase
agreements and securities loans, restricted securities, swap agreements,
and warrants.
FIDELITY ADVISOR GROWTH OPPORTUNITIES FUND. Under normal circumstances, at
least 65% of the Fund's total assets will be invested in securities of
companies that FMR believes have long-term growth potential. Growth can be
considered either appreciation of the security itself or growth of the
company's earnings or gross sales. Accordingly, these securities will often
pay little, if any, income, which will be entirely incidental to the
objective of capital growth.
The Fund also has the ability to purchase other securities, such as
preferred stock and bonds that may produce capital growth. Securities may
be of all types or quality. The Fund may invest in lower-quality,
high-yielding debt securities (sometimes referred to as "junk bonds"),
although it intends to limit its investments in these securities to
35% of its assets.
The Fund may purchase foreign investments of all types without limitation
and may enter into foreign forward currency exchange contracts. T he
Fund may purchase or engage in indexed securities, illiquid investments,
loans and other direct debt instruments, options and futures contracts,
repurchase agreements and securities loans, restricted securities, reverse
repurchase agreements, swap agreements, and warrants.
The Fund may make substantial temporary investments in high-quality debt
securities and money market instruments, including commercial paper,
obligations of banks or the U.S. government and repurchase agreements for
defensive purposes when, in FMR's judgment, economic or market conditions
warrant.
FIDELITY ADVISOR GLOBAL RESOURCES FUND. Under normal circumstances, the
Fund will invest at least 65% of its total assets in securities of foreign
and domestic companies that own or develop natural resources, or supply
goods and services to such companies, or in physical commodities. The
remainder of the Fund may be invested in other investments including debt
securities of any kind including asset-backed securities, obligations of
foreign governments or their political subdivisions, foreign companies and
supranational organizations, and common and preferred stocks of
corporations not necessarily engaged in natural resources. FMR will seek
securities that are priced relative to the intrinsic value of the relevant
natural resource or that are issued by companies which are positioned to
benefit during particular portions of the economic cycle. Accordingly, the
Fund may shift its emphasis from one natural resource industry to another
depending upon prevailing trends or developments. For example, when FMR
anticipates significant economic, political or financial pressures or major
dislocations in the foreign currency exchange markets, the Fund may, in
seeking to protect the purchasing power of shareholders' capital, invest a
substantial portion of its assets in companies that explore for, extract,
process, or deal in precious metals, and/or invest in precious metals
themselves. The Fund expects to invest a majority of its assets to be
invested in securities of companies that have their principal business
activities in at least three different countries (including the U.S.).
A company will be deemed to have substantial ownership of, or activities
in, natural resources if, at the time of the Fund's acquisition of its
securities, at least 50% of the company's assets are involved in, either
directly or through subsidiaries, exploring, mining, refining, processing,
transporting, fabricating, dealing in, or owning natural resources. Natural
resources include precious metals (such as gold, palladium, platinum and
silver), ferrous and nonferrous metals (such as iron, aluminum and copper),
strategic metals (such as uranium and titanium), hydrocarbons (such as
coal, oil and natural gases), chemicals, forest products, real estate, food
products and other basic commodities which, historically, have been
produced and marketed profitably during periods of rising inflation.
The Fund may purchase foreign securities of all types without limitation
and may enter into forward foreign currency exchange contracts for the
purpose of managing exchange rate risks. The Fund may invest in
lower-quality, high-yielding debt securities ( sometimes referred to
as "junk bonds''), rated as low as CCC by Standard & Poor's Corporation
(S&P) or Caa by Moody's Investors Service, Inc. (Moody's). The Fund
does not currently intend to invest more than 35% of its net assets in debt
securities rated below BBB or Baa. Debt securities ordinarily will make up
a relatively small portion of the Fund's assets.
The Fund may purchase ADRs and EDRs. The Fund may purchase indexed
securities, illiquid investments, loans and other direct debt instruments,
options and futures contracts, repurchase agreements and securities loans,
restricted securities, and warrants. The Fund may also purchase securities
on a delayed-delivery basis.
As a fundamental policy, the Fund is authorized to invest up to 50% of its
assets in physical commodities. In order to permit the sale of the Fund's
shares in certain states, the Fund has adopted a non-fundamental policy of
limiting investments in physical commodities to precious metals (i.e.,
gold, palladium, platinum and silver) to 25% of the Fund's total assets.
Investments in other types of physical commodities could present concerns,
including practical problems of delivery, storage and maintenance, possible
illiquidity, the unavailability of accurate market valuations and increased
expenses. When a precious metal is purchased, FMR currently intends that it
will be only in a form that is readily marketable and that it will be
delivered to and stored with a qualified U.S. bank. Investments in bullion
earn no investment income and may involve higher custody and transaction
costs than investments in securities. The Fund may receive no more than 10%
of its yearly income from gains resulting from selling metals or any other
physical commodity. The Fund may be required, therefore, either to hold its
metals or sell them at a loss, or to sell its portfolio securities at a
gain, when it would not otherwise do so for investment reasons. Precious
metals, at times, have been subject to substantial price fluctuations over
short periods of time and may be affected by unpredictable international
monetary and political policies such as currency devaluations or
revaluations, economic and social conditions within a country, trade
imbalances, or trade or currency restrictions between countries.
Since the Fund may invest in physical commodities and utilize investment
techniques which are subject to market fluctuations and/or foreign market
risk, an investment in the Fund may be considered more speculative than an
investment in other funds that seek capital growth. The value of equity
securities of natural resource companies will fluctuate pursuant to market
conditions generally, as well as the market for the particular natural
resource in which the issuer is involved. In addition, the values of
natural resources are subject to numerous factors, including nature and
international politics.
During periods when, in FMR's opinion, a temporary defensive posture in the
market is appropriate, the Fund may invest without limitation in cash or
high-quality money market instruments including, but not limited to,
certificates of deposit, commercial paper and obligations issued by the
U.S. government or any of its agencies or instrumentalities.
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND. As a non-fundamental policy,
the Fund normally will invest at least 65% of its assets in companies
involving a "special situation." The term "special situation" refers to
FMR's identification of an unusual, and possibly non-repetitive,
development taking place in a company or a group of companies in an
industry. A special situation may involve one or more of the following
characteristics:
(bullet) A technological advance or discovery, the offering of a new or
unique product or service, or changes in consumer demand or consumption
forecasts.
(bullet) Changes in the competitive outlook or growth potential of an
industry or a company within an industry, including changes in the scope or
nature of foreign competition or the development of an emerging industry.
(bullet) New or changed management, or material changes in management
policies or corporate structure.
(bullet) Significant economic or political occurrences abroad, including
changes in foreign or domestic import and tax laws or other regulations.
(bullet) Other events, including natural disasters, favorable litigation
settlements, or a major change in demographic patterns.
In seeking capital appreciation, the Fund also may invest in securities of
companies not involving a special situation, but which are companies with
valuable fixed assets and whose securities are believed by FMR to be
undervalued in relation to the companies' assets, earnings, or growth
potential.
FMR intends to invest primarily in common stocks and securities that are
convertible into common stocks; however, it also may invest in debt
securities of all types and quality if FMR believes that investing in these
securities will result in capital appreciation. As a non-fundamental
investment policy, the Fund may invest in lower-quality, high-yielding debt
securities ( sometimes referred to as "junk bonds") , although
it intends to limit its investments in these securities to 35% of its
assets. The Fund also may invest in unrated securities. The Fund may invest
up to 30% of its assets in foreign investments of all types and may enter
into forward foreign currency exchange contracts for the purpose of
managing exchange rate risks. The Fund may purchase or engage in indexed
securities, illiquid instruments, loans and other direct debt instruments,
options and futures contracts, repurchase agreements and securities loans,
restricted securities, swap agreements, warrants, and zero coupon bonds.
The Fund expects to be fully invested under most market conditions. The
Fund may make substantial temporary investments in high-quality debt
securities for defensive purposes when, in FMR's judgment, a more
conservative approach to investment is desirable.
An investment in the Fund may be considered more speculative than an
investment in other funds that seek capital appreciation. There are greater
risks involved in investing in securities of smaller companies rather than
companies operating according to established patterns and having longer
operating histories. The Fund may invest in securities in which other
investors have not shown significant interest or confidence, and which are
more sensitive to stock market fluctuations. Larger well-established
companies experiencing a special situation may involve, to a certain
extent, breaks with past experience, which may pose greater risks. There
are also greater risks involved in investing in securities of companies
that are not currently favored by the public but show potential for capital
appreciation.
FIDELITY ADVISOR EQUITY PORTFOLIO INCOME. It is the policy of the Fund that
at least 65% of its total assets normally will be invested in
income-producing equity securities. For purposes of this policy, equity
securities are defined as common stocks and preferred stocks.
The balance of the Fund will tend to be invested in debt obligations, a
high percentage of which are expected to be convertible into common stocks.
As a non-fundamental policy, the Fund may invest in lower-quality
high-yielding debt securities ( sometimes referred to as "junk
bonds"), although it currently intends to limit its investments in these
securities to 35% of its assets. H owever, the Fund does not
int end to invest in securities of issuers without proven
earnings a nd/or credit histories. T he Fund may purchase or
engage in foreign investments, indexed securities, illiquid investments,
loans and other direct debt instruments, futures and options, repurchase
agreements and securities loans, restricted securities, short sales, swap
agreements, and warrants.
Because of the income considerations, investors should not expect capital
appreciation comparable to the appreciation which could be achieved by
funds whose primary objective is capital appreciation. While the investment
portfolio will not mirror the stocks in the S&P 500 , the yield
on the overall investment portfolio generally will increase or decrease
from year to year in accordance with market conditions and in relation to
the changes in yields of the stocks included in the S&P 500.
The Fund may make temporary investments in securities such as
investment-grade bonds or short-term notes for defensive purposes.
FIDELITY ADVISOR INCOME & GROWTH FUND. I n vests in equity
securities, convertible securities, preferred and common stocks paying any
combination of dividends and capital gains and in fixed-income securities.
The Fund also may buy securities that are not providing dividends but offer
prospects for growth of capital or future income. The proportion of the
Fund's assets invested in each type of security will vary from time to time
in accordance with FMR's assessment of economic conditions.
In selecting securities for the Fund, FMR will consider such factors as the
company's financial strength, its outlook for increased dividend or
interest payments (defined herein as "growth of income") and capital gains.
In addition, industry factors and overall economic conditions may be
considered. The Fund may invest in equity securities of some smaller, more
rapidly growing companies. Investing in smaller, less well-known companies,
especially those that have a narrow product line or are thinly traded,
often involves greater risk than investing in established companies with
proven track records. In selecting fixed-income securities for the Fund
(such as bonds, notes, mortgage securities, convertible securities, and
short-term obligations such as bankers' acceptances, certificates of
deposit, and commercial paper), FMR will consider several factors,
including maturity, quality and expected yield.
The Fund may invest in lower-quality high-yielding debt securities
( sometimes referred to as "junk bonds"). The Fund currently intends
to limit its investments in these securities to 35% of its assets. The Fund
also may invest in or engage in foreign investments, currency exchange
contracts, indexed securities, illiquid instruments, loans and other direct
debt instruments, options and futures contracts, repurchase agreements and
securities loans, restricted securities, swap agreements, warrants, and
zero coupon bonds. The Fund may, for temporary defensive purposes, invest
without limit in short-term securities.
FIXED-INCOME FUNDS. Fixed-Income Funds invest primarily in debt securities
(e.g., bonds, debentures, notes and similar obligations). The share value
of fixed-income funds tends to move inversely with changes in prevailing
interest rates. Shorter-term bonds are less sensitive to interest rate
changes, but longer-term bonds generally offer higher yields. It also is
important to note that high-yielding, lower-quality bonds involve greater
risks, because there is a greater possibility of a financial reversal
affecting the issuer's ability to pay interest and principal on time. Share
value and yield are not guaranteed and will fluctuate based on credit
quality and changes in interest rates.
FMR will use its extensive research facilities in addition to considering
the ratings of Nationally Recognized Statistical Rating Organizations
(NRSROs) in selecting investments for the Funds. Unrated securities are not
necessarily of lower quality than rated securities, but they may not be
attractive to as many buyers. This credit analysis includes consideration
of the economic feasibility, the financial condition of the issuer with
respect to liquidity, cash flow and political developments that may affect
credit quality. Since the risk of default is higher for lower-quality
obligations, FMR's research and analysis are an integral part of choosing a
Fund's securities. Through portfolio diversification and careful credit
analysis, FMR can reduce risk, although there can be no assurance that
losses will not occur. FMR also considers trends in the economy, in
geographic areas, in various industries, and in the financial markets.
FIDELITY ADVISOR HIGH YIELD FUND. As a non-fundamental policy, the Fund
normally will invest at least 65% of its total assets in high-yielding,
income producing debt securities and preferred stocks, including
convertible and zero coupon bonds. The Fund may invest all or a
substantial portion of its assets in lower-quality debt securities
(sometimes referred to as "junk bonds"). Please refer to "Risks of
Lower-Quality Taxable Debt Securities, page ." In addition, the Fund
also may invest in government securities, securities of any state or any of
its subdivisions, agencies or instrumentalities, and securities of foreign
issuers, including securities of foreign governments. The Fund may invest
up to 35% of its assets in equity securities, including common stocks,
warrants and rights.
Debt instruments include securities such as bonds, notes, convertible
bonds, and mortgage-backed or asset-backed securities; commercial paper and
other money market instruments, including repurchase agreements; and loans,
trade claims, and similar instruments representing indebtedness of a
corporate borrower. These instruments may provide for interest payments in
cash or in kind, may pay no interest, or may be in default, and may have
warrants attached or otherwise include rights to purchase common stocks.
The Fund may purchase debt instruments in public offerings or through
private placements. The Fund has no specific limitations on the maturity or
credit ratings of the debt instruments in which it invests.
The Fund may enter into forward currency contracts and may purchase
or engage in foreign investments, indexed securities, illiquid investments,
loans and other direct debt instruments, options and futures contracts,
repurchase agreements and securities loans, restricted securities, reverse
repurchase agreements, and swap agreements.
RISKS OF LOWER-QUALITY TAXABLE DEBT SECURITIES :
Lower-quality debt securities usually are defined as securities rated Ba or
lower by Moody's or BB or lower by S&P. Lower- quality debt
securities are considered speculative and involve greater risk of loss than
higher- quality debt securities, and are more sensitive to changes in
the issuer's capacity to pay. This is an aggressive approach to income
investing.
The 1980s saw a dramatic increase in the use of lower- quality debt
securities to finance highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication of
the future performance of lower- quality debt securities, especially
during periods of economic recession. In fact, from 1989 to 1991, the
percentage of lower- quality debt securities that defaulted rose
significantly above prior levels, although the default rate decreased in
1992 and 1993 .
Lower- quality debt securities may be thinly traded, which can
adversely affect the prices at which these securities can be sold and can
result in high transaction costs. If market quotations are not available,
lower- quality debt securities will be valued in accordance with
standards set by the Boards of Trustees, including the use of outside
pricing services. Judgment plays a greater role in valuing
lower- quality debt securities than securities for which more
extensive quotations and last sale information are available. Adverse
publicity and changing investor perceptions may affect the ability of
outside pricing services to value lower- quality debt securities, and
the Fund's ability to dispose of these securities.
The market prices of lower- quality debt securities may decline
significantly in periods of general economic difficulty, which may follow
periods of rising interest rates. During an economic downturn or a
prolonged period of rising interest rates, the ability of issuers of
lower- quality debt to service their payment obligations, meet
projected goals, or obtain additional financing may be impaired.
The Fund may choose, at its own 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 interest of Fund shareholders.
The considerations discussed above for lower- quality debt securities
also apply to lower-quality, unrated debt instruments of all types,
including loans and other direct indebtedness of businesses with poor
credit standing. Unrated debt instruments are not necessarily of
lower-quality than rated securities, but they may not be attractive to as
many buyers. The Fund relies more on FMR's credit analysis when investing
in debt instruments that are unrated. Please refer to page for a
discussion of Moody's and S&P ratings.
FIDELITY ADVISOR LIMITED TERM BOND FUND. Under no rmal
circums ta nces the Fund will invest in fixed-income securities
as follows:
(I) Corporate obligations which are rated AAA, AA, or A by S&P, or Aaa,
Aa, or A by Moody's;
(II) Obligations issued or guaranteed as to interest and principal by the
government of the U.S., or any agency or instrumentality thereof;
(III) Obligations (including certificates of deposit and bankers'
acceptances) of U.S. banks which at the date of investment have capital
gains, surplus, and undivided profits (as of the date of their most
recently published annual financial statements) in excess of $100,000,000;
(IV) Commercial paper which at the date of investment is rated A-1 or A-2
by S&P or Prime-1 or Prime-2 by Moody's or, if not rated, is issued by
companies which at the date of investment have an outstanding debt issue
rated AAA, AA, or A by S&P or Aaa, Aa, or A by Moody's; and
(V) Such other fixed-income instruments as the Board of Trustees, in its
judgment, deems to be of comparable quality to those enumerated above.
The Fund also may invest in unrated instruments, and may at times purchase
instruments rated below A if FMR judges them to be of comparable quality to
those rated A or better. Currently, the Fund does not intend to invest in
debt obligations rated below Baa/BBB. Instruments in which the Fund may
invest include asset-backed securities, collateralized mortgage
obligations, convertible securities, loans and other direct debt
instruments, mortgage-backed securities, and zero coupon bonds. For
purposes of the Fund's investment policies, those instruments described in
this paragraph and in (i) through (v) above are considered "bonds."
FMR's standards for determining high- and upper-medium grades are
essentially the same as those described by S&P and Moody's as
characteristic of their ratings of A and above. Such instruments have
strong protection of principal and interest payments. In addition to
reliance on S&P's or Moody's ratings, FMR also performs its own credit
analysis. Investment-grade bonds are generally of medium to high quality.
Those rated in the lower end of the category (Baa/BBB), however, may
possess speculative characteristics and may be more sensitive to economic
changes and changes in the financial condition of issuers.
In addition, the Fund may seek capital appreciation when consistent with
its primary objective. In seeking capital appreciation, FMR will select
securities for the Fund based on its judgment as to economic and market
conditions and the prospects for interest rate changes.
The Fund may purchase or engage in foreign investments, indexed securities,
illiquid investments, options and futures contracts, repurchase
agreements and securities loans, restricted securities, and swap
agreements. The Fund also may engage in reverse repurchase agreements for
temporary or emergency purposes and not for investment purposes.
The Fund will maintain a dollar-weighted average maturity of 10 years or
less. B ased on FMR's assessment of interest rate trends, generally,
the average maturity will be shortened when interest rates are expected to
rise and lengthened up to 10 years when interest rates are expected to
decline.
FIDELITY ADVISOR GOVERNMENT INVESTMENT FUND. Under normal circumstances, as
a non-fundamental policy at least 65% of the Fund's total assets
will be invested in government securities.
The Fund invests primarily in obligations issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities (U.S. government
securities), including U.S. Treasury bonds, notes and bills, Government
National Mortgage Association mortgage-backed pass-through certificates
(Ginnie Maes) and mortgage-backed securities issued by the Federal National
Mortgage Association (Fannie Maes) or the Federal Home Loan Mortgage
Corporation (Freddie Macs). The U.S. government securities the Fund invests
in may or may not be fully backed by the U.S. government. The Fund may
enter into repurchase agreements involving any securities in which it may
invest and also may enter into reverse repurchase agreements. The Fund
considers "government securities" to include U.S. government securities
subject to repurchase agreements. The Fund is not restricted as to the
percentage of its assets that may be invested in any one type of U.S.
government security. The Fund may for temporary defensive purposes invest
without limit in U.S. government securities having a maturity of 365 days
or less. The Fund may invest in delayed-delivery transactions, options and
futures contracts, indexed securities, swap agreements and zero coupon
bonds. In seeking current income, the Fund also may consider the potential
for capital gain.
FIDELITY ADVISOR SHORT FIXED-INCOME FUND. Under normal conditions, at least
65% of the Fund's total assets will be invested in fixed-income securities.
Where consistent with its investment objective, the Fund will take
advantage of opportunities to realize capital appreciation.
The Fund normally will invest primarily in investment-grade fixed-income
securities of all types. Investment-grade fixed-income securities are
considered to be securities rated Baa or higher by Moody's or BBB or higher
by S&P, and unrated securities that are of equivalent quality in FMR's
opinion. The Fund may invest in lower-quality, high-yielding securities
( sometimes referred to as "junk bonds"), as long as they are
consistent with the Fund's objective of obtaining a high level of current
income consistent with the preservation of capital. The Fund currently
intends to limit its investments in these securities to 35% of its assets.
As a non-fundamental policy, the Fund does not currently expect to invest
in securities rated lower than B by S&P or Moody's.
Fixed-income securities may include, in any proportion, bonds, notes, U.S.
government and government agency obligations, mortgage-related and
asset-backed securities, zero coupon securities, foreign securities,
indexed securities and convertible securities, and short-term obligations
such as certificates of deposit, repurchase agreements, bankers'
acceptances and commercial paper. The Fund also may purchase or engage in
illiquid investments, loans and other direct debt instruments, options and
futures contracts, restricted securities, and swap agreements.
In making investment decisions for the Fund, FMR will consider many factors
other than current yield, including the preservation of capital, the
potential for realizing capital appreciation, maturity and yield to
maturity. FMR will adjust the Fund's investments in particular securities
or in types of debt securities in response to its appraisal of changing
economic conditions and trends. FMR may sell securities in anticipation of
a market decline or purchase securities in anticipation of a market rise.
In addition, FMR may sell one security and purchase another security of
comparable quality and maturity to take advantage of what FMR believes to
be short-term differentials in market values or yield disparities. The Fund
may invest a portion of its assets in securities issued by foreign
companies and foreign governments, which may be less liquid or more
volatile than domestic investments. The Fund's investments, other than
those backed by the U.S. government, are subject to the ability of the
issuer to make payment at maturity.
The Fund will maintain a dollar-weighted maturity of three years or less.
The Fund may hold individual securities with remaining maturities of more
than three years, as long as the Fund's average maturity is three years or
less.
MUNICIPAL/TAX-EXEMPT FUNDS. Tax-Exempt Funds invest primarily in municipal
securities which are issued by state and local governments and their
agencies to raise money for various public purposes, including general
purpose financing for state and local governments as well as financing for
specific projects or public facilities. Municipal securities may be backed
by the full taxing power of a municipality or by the revenues from a
specific project or the credit of a private organization. Some municipal
securities are insured by private insurance companies, while others may be
supported by letters of credit furnished by domestic or foreign banks. FMR
monitors the financial condition of parties (including insurance companies,
banks, and corporations) whose creditworthiness is relied upon in
determining the credit quality of securities the Funds may purchase.
Yields on municipal bonds, and therefore the yield of High Income
Municipal , Limited Term Tax-Exempt and Short-Intermediate
Tax-Exempt depend on factors such as general market conditions,
interest rates, the size of a particular offering, the maturities of the
obligations and the quality of the issues. The ability of the Funds to
achieve their investment objectives is also dependent on the continuing
ability of the issuers of the municipal obligations in which the Funds
invest to meet their obligations for the payment of interest and principal
when due.
Bonds generally are considered to be interest rate sensitive, which means
that their values move inversely to interest rates. Long-term municipal
bonds generally are more exposed to market fluctuations resulting from
changes in interest rates than are short-term municipal bonds.
While the market for municipals is considered to be substantial, adverse
publicity and changing investor perceptions may affect the ability of
outside pricing services used by a Fund to value its portfolio securities
and the Fund's ability to dispose of lower- quality bonds. The
outside pricing services are consistently monitored to assure that
securities are valued by a method that the Boards believe accurately
reflects fair value. The impact of changing investor perceptions may be
especially pronounced in markets where municipal securities are thinly
traded.
The Funds' investments in municipal securities may include fixed, variable,
or floating rate general obligation and revenue bonds (including municipal
lease obligations and resource recovery bonds); zero coupon and
asset-backed securities; inverse floaters; tax, revenue, or bond
anticipation notes; and tax-exempt commercial paper. The Funds may buy or
sell securities on a when-issued or delayed-delivery basis (including
refunding contracts), and may purchase restricted and illiquid
securities. The Funds may also buy and sell options and futures contracts.
Municipal obligations, including industrial development revenue bonds, are
issued by or on behalf of states, territories, and possessions of the U.S.
and the District of Columbia and their political subdivisions, agencies,
and instrumentalities.
Each Fund may invest more than 25% of its total assets in securities
whose revenue sources are from similar types of projects (e.g., education,
electric utilities, health care, housing, transportation, or water, sewer
and gas utilities) or whose issuers share the same geographic location.
As a result, a fund may be more susceptible to economic, business
or political development s than would a portfolio of bonds
with a greater variety of issuers. These developments include proposed
legislation or pending court decisions affecting the financing of such
projects and market factors affecting the demand for their services or
products.
FIDELITY ADVISOR HIGH INCOME MUNICIPAL FUND. Interest from all or a portion
of the Fund's municipal bonds may be a "tax preference" item for some
shareholders in determining their federal alternative minimum tax.
Stability and growth of principal also will be considered when choosing
securities.
Interest on some "private activity" municipal obligations is subject to the
federal alternative minimum tax AMT bonds. AMT bonds are municipal
obligations that benefit a private or industrial user or finance a private
facility. The Fund reserves the right to invest up to 100% of its assets in
AMT bonds.
The Fund may invest in municipal obligations which are rated in the medium
and lower quality categories of NRSROs (such as obligations rated
Caa by Moody's or CCC by S&P) or which are unrated, but judged by FMR,
pursuant to procedures established by the Board of Trustees, to meet the
quality standards of the Fund. Municipal obligations which are in the
medium and lower rating categories or which are unrated generally offer a
higher current yield than those offered by municipal obligations which are
in the higher rating categories. Since available yields and the yield
differential between higher and lower- quality obligations vary over
time, no specific level of income or yield differential can be assured.
Lower- quality bonds (those rated Ba/BB or lower) involve greater
risk, including risk of default.
The Fund also may purchase tax-exempt instruments that become available in
the future as long as FMR believes that their quality is equivalent to
those rated Caa or CCC or better by Moody's or S&P, respectively.
The Fund's yield depends in part on the quality of its investments.
Obligations rated investment grade or better (Baa/BBB or higher) generally
are of medium to high quality. These securities typically have moderate to
poor protection of principal and interest payments and have speculative
characteristics.
Unrated obligations may be either investment grade or lower quality, but
usually are not attractive to as many buyers. The Fund relies heavily on
FMR's credit analysis when purchasing unrated or lower- quality
bonds.
While lower- quality bonds traditionally have been less sensitive to
interest rate changes than higher- quality investments, as with all
bonds, the prices of lower- quality bonds will be affected by
interest rate changes. Economic changes may affect lower- quality
securities differently than other securities. Lower- quality
municipal bonds may be more sensitive to adverse economic changes
(including recession) in specific regions or localities or among specific
types of issuers. During an economic downturn or a prolonged period of
rising interest rates, issuers of lower- quality debt may have
problems servicing their debt, meeting projected revenue goals, or
obtaining additional financing. Periods of economic uncertainty and
interest rate changes may cause market price volatility for
lower- quality bonds and corresponding volatility in the Fund's share
price.
During periods when, in FMR's opinion, a temporary defensive posture in the
market is appropriate, the Fund may invest without limitation in cash or in
obligations whose interest payments may be federally taxable. Taxable
obligations include, but are not limited to, certificates of deposit,
commercial paper, obligations issued by the U.S. government or any of its
agencies or instrumentalities, and repurchase agreements.
The Fund may purchase long-term municipals with maturities of 20 years or
more, which generally produce higher yields than short-term municipals. The
Fund also may purchase short-term municipal obligations in order to provide
for short-term capital needs. The average maturity of the Fund is currently
expected to be greater than 20 years. Since the Fund's objective is to
provide a high current yield, the Fund will purchase municipals with an
emphasis on income. FMR may vary the Fund's average maturity depending on
anticipated market conditions. Generally, the average maturity will be
shortened when interest rates are expected to rise and lengthened when
rates are expected to decline.
FIDELITY ADVISOR LIMITED TERM TAX-EXEMPT FUND. Under normal conditions, at
least 80% of the Fund's annual income will be exempt from federal income
taxes and at least 80% of the Fund's net assets will be invested in
obligations having remaining maturities of 15 years or less. The Fund will
maintain a dollar-weighted average maturity of 10 years or less.
The Fund will invest in municipal obligations which, in the judgment of
FMR, are high quality or at least upper-medium quality. The Fund's
standards for high quality and upper-medium quality obligations are
essentially the same as those described by Moody's in rating municipal
obligations within its three highest ratings of Aaa, Aa, and A and as those
described by S&P in rating such obligations within its three highest
ratings of AAA, AA and A. As a non-fundamental policy, the Fund will not
purchase a security rated by Moody's or S&P unless it has received at
least an A rating from either rating service.
The Fund m a y invest up to 20% of its total assets in municipal
obligations which are unrated by Moody's or S&P if, in the judgment of
FMR, such municipal obligations meet the standards of quality as set forth
above. Unrated bonds are not necessarily of lower quality and may have
higher yields than rated bonds, but the market for rated bonds is usually
broader.
The Fund may invest up to 25% of its total assets in a single issuer's
securities.
The Fund currently does not intend to invest in taxable obligations;
however, consistent with that portion of its investment objective concerned
with the preservation of capital, from time to time the Fund may invest a
portion (normally not to exceed 20%) of its net assets on a temporary basis
in fixed-income obligations whose interest is subject to federal income
tax. These taxable obligations may include repurchase agreements. The Fund
does not currently intend to invest in AMT bonds.
FIDELITY ADVISOR SHORT - INTERMEDIATE TAX-EXEMPT . Under
normal conditions, the Fund will invest so that 80% or more of its net
assets will be invested in securities whose interest is exempt from federal
income tax. The Fund maintains the ability under normal circumstances, to
invest up to 20% of its net assets in municipal securities issued to
finance private activities whose interest is a tax-preference item for
purposes of the federal alternative tax. If you are subject to the federal
alternative minimum tax, a portion of your income may not be exempt from
federal income tax.
The Fund normally invests at least 60% of its net assets in securities that
FMR judges to be of equivalent quality to those rated A or better by
Moody's or S&P. The Fund may not invest more than 5% of its net assets
in securities rated below Baa by Moody's or BBB by S&P, or in unrated
securities of equivalent quality, and does not currently intend to purchase
securities rated lower than Ba or BB.
The Fund normally maintains a dollar-weighted average maturity of
between two and four years. Although the Fund is permitted to hold
securities with maturities of more than four years, its dollar-weighted
average maturity is limited to a maximum of four years.
The Fund may temporarily change its investment focus for defensive
purposes. During periods when, in FMR's opinion, a temporary defensive
posture in the market is appropriate, the Fund may hold cash that is not
earning interest or invest without limitation in short-term municipal
obligations and money market instruments, including obligations whose
interest may be federally taxable. Under such circumstances, the Fund may
temporarily invest so that less than 80% of its net assets will be invested
in securities whose interest is exempt from federal income tax. Federally
taxable obligations include, but are not limited to, obligations issued by
the U.S. government or any of its agencies or instrumentalities,
high-quality commercial paper, certificates of deposit, and repurchase
agreements. The Fund does not intend to invest in federally taxable
obligations under normal conditions.
The Fund is non-diversified, which means that it may invest a greater
portion of its assets in securities of a single issuer than would be the
case if it were diversified. As a result, changes in the financial
condition or market assessment of a single issuer could cause greater
fluctuation in the Fund's share value.
INVESTMENT LIMITATIONS
Each Fund has adopted the following investment limitations designed to
reduce investment risk. The policies and limitations discussed below, and
in the Appendix beginning on page , are considered at the time of purchase.
With the exception of each Fund's borrowing policy, the sale of portfolio
securities is not required in the event of a subsequent change in
circumstances.
DIVERSIFICATION: These limitations do not apply to U.S. government
securities and are fundamental unless otherwise noted.
(bullet) Equity Portfolio Growth and Strategic Opportunities each may not
purchase a security if, as a result, more than 5% of its total assets would
be invested in the securities of any issuer;
(bullet) As a non-fundamental policy, generally to meet federal tax
requirements at the close of each quarter, Emerging Markets Income and
Short-Intermediate Tax-Exempt may not (1) with respect to 50% of its total
assets, purchase a security if more than 5% of its total assets would be
invested in the securities of a single issuer; and (2) invest more than 25%
of its total assets in securities of a single issuer.
(bullet) With respect to 75% of its total assets, each other Fund may not
purchase a security if, as a result, more than 5% of its total assets would
be invested in the securities of any issuer.
(bullet) Each Fund (except Emerging Markets Income and
Short-Intermediate Tax-Exempt) may not purchase a security if, as a
result, it would hold more than 10% of the outstanding voting securities of
any issuer (except that Overseas, Growth Opportunities, Equity
Portfolio Income, Income & Growth, High Yield, Government
Investment, Short Fixed-Income and High Income Municipal each
may invest up to 25% of its total assets without regard to this
limitation .)
(bullet) Limited Term Tax-Exempt may not purchase the securities of any
issuer if, as a result, more than 25% of its total assets would be invested
in industrial development bonds whose issuers are in any one industry.
(bullet) Each other Fund may not purchase the securities of any issuer if,
as a result, more than 25% of the Fund's total assets would be invested in
the securities of issuers having their principal business activities in the
same industry. Limited Term Bond may, however, invest more than 25% of its
total assets in obligations of banks, although it has no current intention
of so doing.
(bullet) As a non-fundamental policy, Short-Intermediate Tax-Exempt may
invest any portion of its assets in industrial revenue bonds (IRBs) backed
by private issuers, and may invest up to 25% of its total assets in IRBs
related to a single industry.
BORROWING: The following limitations are fundamental.
(bullet) Each fund may borrow money for temporary or emergency purposes,
in an amount not exceeding 33 1/3% of the value of its total assets;
(bullet) Strategic Opportunities, Limited Term Bond, and Limited Term
Tax-Exempt may not purchase any security while borrowings representing more
than 5% of its total assets are outstanding.
(bullet) Growth Opportunities, Income & Growth, Government Investment
Short Fixed - Income and High Income Municipal may not purchase any
security while borrowings representing more than 5% of its net assets are
outstanding.
The following limitations are non-fundamental.
(bullet) Each other fund may not purchase any security while borrowings
representing more than 5% of its total assets are outstanding.
(bullet) Each Fund may borrow money from banks or from other funds advised
by FMR, or by engaging in reverse repurchase agreements.
LENDING: Percentage limitations are fundamental.
(bullet) High Income Municipal , Limited Term Tax-Exempt and
Short-Intermediate Tax-Exempt do not currently intend to engage in
repurchase agreements or make loans (but this limitation does not apply to
purchases of debt securities).
(bullet) Each other Fund (A) may lend securities to a broker-dealer or
institution when the loan is fully collateralized; and (B) may lend money
to a mutual fund advised by FMR or an affiliate. Each Fund will limit loans
in the aggregate to 33 1/3% of its total assets.
Each Fund has received permission from the SEC to lend money to and borrow
money from other funds advised by FMR or its affiliates, High Income
Municipal, Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt will
participate only as borrowers. If a Fund borrows money, its share price may
be subject to greater fluctuation until the borrowing is paid off. To this
extent, purchasing securities when borrowings are outstanding may involve
an element of leverage.
As a non-fundamental policy, each Fund may not purchase a security, if as a
result, more than 15% (Overseas, Emerging Markets Income and High Yield) or
10% (all others) of its net assets would be invested in illiquid
investments.
HOW TO BUY SHARES
S hares of each Fund are offered continuously to investors who engage
an investment professional for investment advice and may be purchased at
the public offering price (the offering price) next determined after the
transfer agent receives your order to purchase. State Street Bank and Trust
Company (the Transfer Agent), P.O. Box 8302, Boston, Massachusetts
02266-8302, provides transfer and dividend paying services for Class A
shares of each Fund.
The offering price is equal to the net asset value per share (NAV) plus a
sales charge, which is a variable percentage of the offering price
depending upon the amount of the purchase. The table above shows total
sales charges and concessions to securities dealers and banks (investment
professionals) with which Distributors has Agreements.
You can open an account with a minimum initial investment of $2,500 by
completing and returning an account application. You can make additional
investments of $250 or more. For tax-deferred retirement plans, including
IRA accounts, there is a $500 minimum initial investment and a $100
subsequent investment minimum. For accounts established under the Fidelity
Advisor Systematic Investment Program or the Fidelity Advisor Systematic
Exchange Program, there is a $1,000 initial and $100 monthly subsequent
investment minimum requirement. FOR FURTHER INFORMATION ON OPENING AN
ACCOUNT, PLEASE CONSULT YOUR INVESTMENT PROFESSIONAL OR REFER TO THE
CLASS A ACCOUNT APPLICATION.
It is the responsibility of your investment professional to transmit your
order to purchase shares to the Transfer Agent before 4:00 p.m. Eastern
time in order for you to receive that day's Class A share price. The
Transfer Agent must receive payment within five business days after an
order is placed ; otherwise, the purchase order may be canceled and
you could be held liable for resulting fees and/or losses. To eliminate
the need for safekeeping, the Funds will issue certificates for shares only
upon request.
All of your purchases must be made in U.S. dollars and checks must be drawn
on U.S. banks. Each Fund reserves the right to limit the number of your
checks processed at one time. If your check does not clear, the Fund may
cancel your purchase and you could be held liable for any fees and/or
losses incurred. When you purchase directly by check, the Fund can hold the
proceeds of redemptions until the Transfer Agent is reasonably satisfied
that the purchase payment has been collected (which can take up to seven
calendar days). You may avoid a delay in receiving redemption proceeds by
purchasing shares with a certified check. S hares of the fixed-income
funds purchased through investment professionals utilizing an automated
order placement and settlement system that guarantees payment for orders on
a specified date, begin to earn income dividends on that date. Direct
purchases and all other orders begin to earn dividends on the business day
after the Fund receives payment.
Each Fund and Distributors reserve the right to suspend the offering of
shares for a period of time and to reject any order for the purchase of
shares, including certain purchases by exchange (see "How to Exchange,''
page ).
2.SALES CHARGES AND INVESTMENT PROFESSIONAL CONCESSIONS
SALES CHARGES AS % OF INVESTMENT PROFESSIONAL
AMOUNT OF PURCHASE OFFERING NET AMOUNT CONCESSION AS %
IN SINGLE TRANSACTIONS PRICE INVESTED OF OFFERING PRICE
FIDELITY ADVISOR FUNDS
Less than $50,000 4.75% 4.99% 4.00%
$50,000 to less than $100,000 4.50% 4.71% 4.00%
$100,000 to less than $250,000 3.50% 3.63% 3.00%
$250,000 to less than $500,000 2.50% 2.56% 2.00%
$500,000 to less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more None None See Below*
SHORT FIXED-INCOME FUND AND
SHORT-INTERMEDIATE TAX-EXEMPT FUND:
Less than $1,000,000 1.50% 1.52% 1.20%
$1,000,000 or more None None See Below*
* INVESTMENT PROFESSIONALS WILL BE COMPENSATED WITH A FEE OF .25% FOR
PURCHASES OF $1 MILLION OR MORE, IF THE ASSETS ON WHICH THE .25% IS PAID
REMAIN WITHIN THE FIDELITY ADVISOR FUNDS FOR ONE YEAR, EXCEPT FOR PURCHASES
THROUGH A BANK OR BANK-AFFILIATED BROKER-DEALER THAT QUALIFY FOR A SALES
CHARGE WAIVER DESCRIBED BELOW. ALL ASSETS ON WHICH THE .25% FEE IS PAID
MUST REMAIN IN CLASS A SHARES OF THE FIDELITY ADVISOR FUNDS, INITIAL CLASS
SHARES OF DAILY MONEY FUND, OR SHARES OF DAILY TAX-EXEMPT MONEY FUND FOR A
PERIOD OF ONE UNINTERRUPTED YEAR OR THE INVESTMENT PROFESSIONAL WILL BE
REQUIRED TO REFUND THIS FEE TO DISTRIBUTORS.
3.MINIMUM ACCOUNT BALANCE. You must maintain an account balance of $1,000
in Class A shares. If your account falls below $1,000 due to redemption of
Class A shares, the Transfer Agent may close it at the NAV next determined
on the day your account is closed and mail you the proceeds at the address
shown on the Transfer Agent's records. The Transfer Agent will give you 30
days' notice that your account will be closed unless you make an investment
to increase your account balance to the $1,000 minimum. The minimum account
balance does not apply to IRA accounts.
4.SALES CHARGE WAIVERS. Sales charges do not apply to Class A shares of a
Fund purchased:
(1) by registered representatives, bank trust officers and other employees
(and their immediate families) of investment professionals having
Agreements with Distributors;
(2) by a current or former Trustee or officer of a Fidelity fund or a
current or retired officer, director or regular employee of FMR Corp. or
its direct or indirect subsidiaries (a "Fidelity Trustee or employee"), the
spouse of a Fidelity Trustee or employee, a Fidelity Trustee or employee
acting as custodian for a minor child, or a person acting as trustee of a
trust for the sole benefit of the minor child of a Fidelity Trustee or
employee;
(3) by a charitable organization (as defined in Section 501(c)(3) of the
Internal Revenue Code) investing $100,000 or more;
(4) by a charitable remainder trust or life income pool established for the
benefit of a charitable organization (as defined in Section 501(c)(3) of
the Internal Revenue Code);
(5) by trust institutions (including bank trust departments) investing on
their own behalf or on behalf of their clients;
(6) in accounts as to which a bank or broker-dealer charges an asset
management fee, provided the bank or broker-dealer has an Agreement
with Distributors;
(7) as part of an employee benefit plan having more than 200 eligible
employees or a minimum of $1,000,000 invested in Fidelity Advisor Funds;
(8) in a Fidelity or Fidelity Advisor IRA account purchased with the
proceeds of a distribution from (i) an employee benefit plan having more
than 200 eligible employees or a minimum of $3,000,000 in plan assets
invested in Fidelity mutual funds or $1,000,000 invested in Fidelity
Advisor mutual funds, or (ii) an insurance company separate account
qualifying under (9) below, or funding annuity contracts purchased by
employee benefit plans which in the aggregate have at least $3,000,000 in
plan assets invested in Fidelity mutual funds;
(9) by an insurance company separate account used to fund annuity contracts
purchased by employee benefit plans which in the aggregate have more than
200 eligible employees or $1,000,000 invested in Fidelity Advisor mutual
funds;
(10) by any state, county, city, or any governmental instrumentality,
department, authority or agency; or
(11) with redemption proceeds from other mutual fund complexes on which the
investor has paid a front-end sales charge only.
Qualification for sales charge waivers must be cleared through Distributors
in advance, and employee benefit plan investors must meet additional
requirements specified in the Funds' SAIs. YOUR INVESTMENT PROFESSIONAL
SHOULD CALL FIDELITY FOR MORE INFORMATION.
INVESTOR SERVICES
You may initiate many transactions by telephone. Note that the Transfer
Agent will not be responsible for any losses resulting from unauthorized
transactions if it follows reasonable procedures designed to verify the
identity of the caller. The Transfer Agent will request personalized
security codes or other information, and may also record calls. 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 the Transfer Agent for instructions.
5.QUANTITY DISCOUNTS. Reduced sales charges are applicable to purchases of
Class A shares of a Fund in amounts of $50,000 or more ($1,000,000 or more
for Short Fixed-Income or Short-Intermediate Tax-Exempt). Your purchases
of Class B shares may be included for purposes of qualifying for a Class A
front-end sales charge reduction in the following programs. To obtain
the reduction of the sales charge, you or your investment professional must
notify the Transfer Agent at the time of purchase whenever a quantity
discount is applicable to your purchase. Upon such notification, you will
receive the lowest applicable sales charge.
For purposes of qualifying for a reduction in front-end sales
charges under the Combined Purchase, Rights of Accumulation or Letter of
Intent programs, the following may qualify as an individual, or a "company"
as defined in Section 2(a)(8) of the Investment Company Act of 1940 (1940
Act): an individual, spouse, and their children under age 21 purchasing for
his, her, or their own account; a trustee, administrator or other fiduciary
purchasing for a single trust estate or single fiduciary account or for a
single or a parent-subsidiary group of "employee benefit plans" (as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974);
and tax-exempt organizations as defined under Section 501(c)(3) of the
Internal Revenue Code.
6.COMBINED PURCHASES. When you invest in Class A shares of a Fund for
several accounts at the same time, you may combine these investments into a
single transaction to qualify for the quantity discount if purchased
through one investment professional and if the total is at least $50,000
(at least $1,000,000 for Short Fixed-Income or Short-Intermediate
Tax-Exempt).
7.RIGHTS OF ACCUMULATION. Your "Rights of Accumulation" permit reduced
front-end sales charges on any future purchases of Class A shares
after you have reached a new breakpoint in a Fund's sales charge schedule.
You may add the value of currently held Class A and Class B shares of
Fidelity Advisor Funds, and the value of Initial Class shares and Class
B shares of Daily Money Fund : U.S. Treasury Portfolio and shares of
Daily Money Fund: Money Market Portfolio and Daily Tax-Exempt Money
Fund ACQUIRED BY EXCHANGE FROM ANY FIDELITY ADVISOR FUND, determined at the
current day's NAV at the close of business, to the amount of your new
purchase valued at the current offering price , to determine your
reduced front-end sales charge.
8.LETTER OF INTENT. If you anticipate purchasing a Fund's Class A shares
in amounts of $50,000 or more ($1,000,000 for Short Fixed-Income or
Short-Intermediate Tax-Exempt) alone or in combination with Class A
or Class B shares of other Fidelity Advisor Funds , Initial Class shares
and Class B shares of Daily Money Fund: U.S. Treasury Portfolio, and shares
of Daily Money Fund: Money Market Portfolio and Daily Tax-Exempt Money Fund
ACQUIRED BY EXCHANGE FROM ANY FIDELITY ADVISOR FUND, within a 13-month
period, you may obtain Class A shares at the same reduced sales charge as
though the total quantity were invested in one lump sum, by filing a
non-binding Letter of Intent (the Letter) within 90 days of the start of
the purchases. Each Class A investment you make after signing the Letter
will be entitled to the sales charge applicable to the total investment
indicated in the Letter. For example, a $2,500 purchase of Class A shares
toward a $50,000 Letter would receive the same reduced sales charge as if
the $50,000 ($1,000,000 for Short Fixed-Income or Short-Intermediate
Tax-Exempt) had been invested at one time. To ensure that the reduced price
will be received on future purchases, you or your investment professional
must inform the Transfer Agent that the Letter is in effect each time Class
A shares are purchased. Neither income dividends nor capital gain
distributions reinvested in additional Class A or Class B shares
will apply toward the completion of the Letter.
Your initial investment must be at least 5% of the total amount you plan to
invest. Out of the initial purchase, 5% of the dollar amount specified in
the Letter will be registered in your name and held in escrow. The Class A
shares held in escrow cannot be redeemed or exchanged until the Letter is
satisfied or the additional sales charges have been paid. You will earn
income dividends and capital gain distributions on escrowed Class A shares.
The escrow will be released when your purchase of the total amount has been
completed. You are not obligated to complete the Letter.
If you purchase more than the amount specified in the Letter and qualify
for a further front-end sales charge reduction, the front-end sales charge
will be adjusted to reflect your total purchase at the end of 13 months.
Surplus funds will be applied to the purchase of additional Class A shares
at the then current offering price applicable to the total purchase.
If you do not complete your purchase under the Letter within the 13-month
period, you will receive 30 days' written notice to pay the
increased front-end sales charges due. Otherwise, sufficient escrowed Class
A shares will be redeemed to pay such charges.
FOR MORE INFORMATION ON THE TERMS OF QUANTITY DISCOUNTS, PLEASE CONSULT
YOUR INVESTMENT PROFESSIONAL.
9.FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM. You can make regular
investments in Class A shares of a Fidelity Advisor Fund with the
Systematic Investment Program by completing the appropriate section of the
account application and attaching a voided personal check. Investments may
be made monthly by automatically deducting $100 or more from your bank
checking account. You may change the amount of your monthly purchase at any
time. There is a $1,000 minimum initial investment requirement for the
Systematic Investment Program. S hares will be purchased at the
offering price next determined following receipt of the investment by the
Transfer Agent. You may cancel the Systematic Investment Program at any
time without payment of a cancellation fee. You will receive a confirmation
from the Transfer Agent for every transaction, and a debit entry will
appear on your bank statement.
SHAREHOLDER COMMUNICATIONS
The Transfer Agent or your investment professional will send you a
confirmation after every transaction that affects your share balance or
account registration. In addition, a consolidated statement will be
provided at least quarterly. At least twice a year each shareholder will
receive the Fund's financial statements, with a summary of its portfolio
composition and performance. To reduce expenses, only one copy of most
shareholder reports (such as a Fund's Annual Report) will be mailed to each
shareholder address. Please write to the Transfer Agent or contact your
investment professional if you need to have additional reports sent each
time.
Each Fund pays for these shareholder communications, but not for special
services that are required by a few shareholders, such as a request for a
historical transcript of an account. You may be required to pay a fee for
such special services. If you are purchasing shares of a Fund through a
program of administrative services offered by an investment professional,
you should read the additional materials pertaining to that program in
conjunction with this prospectus. Certain features of each Fund, such as
the minimum initial or subsequent investment, may be modified in these
programs, and administrative charges may be imposed for the services
rendered.
HOW TO EXCHANGE
An exchange is the redemption of Class A shares of one Fund and the
purchase of Class A shares of another Fund, each at the next determined
NAV. The exchange privilege is a convenient way to buy and sell Class A
shares of the Fidelity Advisor Funds, Initial Class s hares of Daily
Money Fund : U.S. Treasury Portfolio , and shares of Daily Money
Fund: Money Market Portfolio and Daily Tax-Exempt Money Fund ,
provided such Funds are registered in your state.
To protect each Fund's performance and shareholders, FMR discourages
frequent trading in response to short-term market fluctuations. Each Fund
reserves the right to refuse exchange purchases by any person or group if,
in FMR's opinion, the Fund would be unable to invest effectively in
accordance with its investment objective and policies, or would otherwise
be affected adversely. Your exchanges may be restricted or refused if a
Fund receives or anticipates simultaneous orders affecting significant
portions of a Fund's assets. In particular, a pattern of exchanges that
coincides with a "market timing" strategy may be disruptive to a Fund.
Exchange restrictions may be imposed at any time. The Funds may modify or
terminate the exchange privilege. The exchange limit may be modified for
certain institutional retirement plans.
Exchange instructions may be given by you in writing or by telephone
directly to the Transfer Agent or through your investment professional .
If you choose to exchange by writing, you must send a letter of instruction
with your signature guaranteed either directly to the Transfer Agent or to
your investment professional, accompanied by either the certificates
representing the shares to be redeemed or, if no certificates have been
issued, by a stock power form with your signature guaranteed. FOR MORE
INFORMATION ON ENTERING AN EXCHANGE TRANSACTION, PLEASE CONSULT YOUR
INVESTMENT PROFESSIONAL.
Before you make an exchange:
1. Read the prospectus of the Fund into which you want to exchange.
2. Class A shares of a Fund may be exchanged for Class A shares of another
Fidelity Advisor Fund seven calendar days after purchase, at NAV. If you
have held Class A shares of Short Fixed-Income Fund or Short-Intermediate
Tax-Exempt for less than six months, you will pay a sales charge equal to
the difference between the front-end sales charge on the Class A shares of
the Fund you are exchanging into and the front-end sales charge applicable
to Class A shares of Short Fixed-Income or Short-Intermediate Tax-Exempt
being exchanged. For example, if you paid the full 1.50 % front-end
sales charge when you purchased your Short Fixed-Income Class A shares, you
will have to pay a sales charge of up to 3.25% when you exchange these
shares into Class A shares of another Fidelity Advisor Fund with a maximum
front-end sales charge of 4.75%. After six months, shares may be exchanged
at NAV. Exchanges of Initial Class shares of Daily Money Fund: U.S.
Treasury Portfolio or shares of Daily Money Fund: Money Market Portfolio
and Daily Tax-Exempt Money Fund into Class A shares of a Fidelity Advisor
Fund will be processed at the next determined offering price (unless
the shares were acquired by exchange from another Fidelity Advisor Fund).
3. You may exchange only between accounts that are registered in the
same name, address, and taxpayer identification number.
4. You may make four exchanges out of each Fund per calendar year.
If you exceed this limit, your future purchases of (including exchanges
into) Fidelity Advisor Funds may be permanently refused. For purposes of
the four exchange limit, accounts under common ownership or control,
including accounts having the same taxpayer identification number, will be
aggregated. Systematic exchanges are not subject to this four exchange
limit (see following section).
5. TAXES: The exchange of Class A shares is considered a sale and
may be taxable. The Transfer Agent will send you or your
investment professional a confirmation of each exchange transaction.
10.FIDELITY ADVISOR SYSTEMATIC EXCHANGE PROGRAM. You can exchange a
specific dollar amount of Class A shares from a Fund into Class A shares of
another Fidelity Advisor Fund , Initial Class shares of Daily Money Fund:
U.S. Treasury Portfolio or shares of Daily Money Fund: Money Market
Portfolio and Daily Tax-Exempt Money Fund on a periodic basis
under the following conditions:
1. The account from which the exchanges are to be processed must have a
minimum balance of $10,000.
2. The account into which the exchanges are to be processed must be an
existing account with a minimum balance of $1,000.
3. Both accounts must have identical registrations and taxpayer
identification numbers. The minimum amount that can be exchanged
systematically into a Fund is $100.
4. Systematic e xchanges will be processed at the NAV determined on
the transaction date, except that s ystematic e xchanges into
Class A shares of a Fidelity Advisor Fund from Initial Class s hares
of Daily Money Fund : U.S. Treasury Portfolio or shares of Daily
Money Fund: Money Market Portfolio and Daily Tax-Exempt Money Fund,
will be processed at the offering price next determined on the transaction
date (unless the shares were acquired by exchange from another Fidelity
Advisor Fund).
HOW TO SELL SHARES
You may sell (redeem) all or a portion of your shares on any day the New
York Stock Exchange (NYSE) is open, at the NAV next determined after the
Transfer Agent receives your request to sell. Orders to sell may be placed
by you in writing or by telephone or through your investment professional.
If you choose to sell shares by written instruction, you must send a
letter of instruction with your signature guaranteed either directly to the
Transfer Agent or to your investment professional, accompanied by either
the certificates representing the shares to be redeemed or, if no
certificates have been issued, by a stock power form with your signature
guaranteed. Orders to sell received by the Transfer Agent before 4:00
p.m. Eastern time will receive that day's Class A share price. For
orders to sell placed through your investment professional, it is the
investment professional's responsibility to transmit such orders to the
Transfer Agent by 4:00 p.m. Eastern time for you to receive that day's
Class A share price.
Once your Class A shares are redeemed, a Fund normally will send the
proceeds on the next business day to the address of record. If making
immediate payment could adversely affect the Fund, the Fund may take up to
seven days to pay you. A Fund may withhold redemption proceeds until it is
reasonably satisfied that it has collected investments that were made by
check (which may take up to seven calendar days).
When the NYSE is closed (or when trading is restricted) for any reason
other than its customary weekend or holiday closings, or under any
emergency circumstances as determined by the SEC to merit such action, a
Fund may suspend redemption or postpone payment dates for more than seven
days. The Transfer Agent requires additional documentation to redeem shares
registered in the name of a corporation, agent or fiduciary or a surviving
joint owner. Call 1-800-526-0084 for specific requirements.
11.REDEMPTION REQUESTS BY TELEPHONE .
TO RECEIVE A CHECK. You may sell shares of a Fund having a value of
$100,000 or less from your account by calling the Transfer Agent.
Redemption proceeds must be sent to the address of record listed on the
account, and a change of address must not have occurred within the
preceding 3 0 days.
TO RECEIVE A WIRE. You may sell shares of a Fund and have the proceeds
wired to a pre-designated bank account. Wires will generally be sent the
next business day following the redemption of shares from your
account.
Telephone redemptions cannot be processed for Fidelity Advisor Fund
prototype retirement accounts where State Street Bank and Trust Company is
the custodian.
12.REDEMPTION REQUESTS IN WRITING. For your protection, if you sell shares
of a Fund having a value of more than $100,000, if you are sending
the proceeds of a redemption of any amount to an address other than the
address of record listed on the account, if you have requested a
change of address within the preceding 3 0 days, or if you wish to
have the proceeds wired to a non - predesignated bank account, you
must send a letter of instruction signed by all registered owners with
signature(s) guaranteed to the Transfer Agent. A signature guarantee is a
widely recognized way to protect you by guaranteeing the signature on your
request; it may not be provided by a notary public. Signature guarantee(s)
will be accepted from banks, brokers, dealers, municipal securities
dealers, municipal securities brokers, government securities dealers,
government securities brokers, credit unions (if authorized under state
law), national securities exchanges, registered securities associations,
clearing agencies and savings associations.
13.REINSTATEMENT PRIVILEGE. If you have sold all or part of your Class A
shares of a Fund you may reinvest an amount equal to all or a portion of
the redemption proceeds in Class A shares of the Fund or in Class A shares
of any of the other Fidelity Advisor Funds, at the NAV next determined
after receipt of your investment order, provided that such reinvestment is
made within 30 days of redemption. You must reinstate your Class A shares
into an account with the same registration. This privilege may be exercised
only once by a shareholder with respect to a Fund and certain restrictions
may apply.
14.FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM. If you own Class A
shares of a Fund worth $10,000 or more, you may periodically have proceeds
sent automatically from your account to you, to a person named by you, or
to your bank checking account. Your Systematic Withdrawal Program payments
are drawn from Class A share redemptions. If Systematic Withdrawal Program
redemptions exceed distributions earned on your Class A shares, your
account eventually may be exhausted. Since a sales charge is applied on new
Class A shares you buy, it is to your disadvantage to buy Class A shares
while also making systematic redemptions. You may obtain information about
the Systematic Withdrawal Program by contacting your investment
professional.
15.CHECKWRITING SERVICE. Short Fixed-Income and Short-Intermediate
Tax-Exempt each offer a checkwriting service ($500 minimum)
to allow the redemption of shares from your account. Refer to the Class
A account application or each SAI and complete the attached signature
card. Upon receipt of the properly completed Class A account
application and signature card, the Fund will provide checks. If you redeem
by check from the Fund and the amount of the check is greater than the
value of your account, your check will be returned to you and you may be
subject to additional charges.
DISTRIBUTION OPTIONS
When you fill out your account Class A application, you can choose
from four Distribution Options:
1. REINVESTMENT OPTION. Dividends and capital gain distributions will be
automatically reinvested in additional Class A shares of a Fund. If you do
not indicate a choice on your account application, you will be assigned
this option.
2. INCOME-EARNED OPTION. Capital gain distributions will be automatically
reinvested, but a check will be sent for each dividend distribution.
3. CASH OPTION. A check will be sent for each dividend and capital gain
distribution.
4. DIRECTED DIVIDENDS(Registered trademark) PROGRAM. Dividends and capital
gain distributions will be automatically invested in Class A shares
of another identically registered Fidelity Advisor Fund.
You may change your Distribution Option at any time by notifying the
Transfer Agent in writing. Distribution checks for fixed-income funds will
be mailed no later than seven days after the last day of the month. On the
day a Fund goes ex-dividend, the amount of the distribution is deducted
from its share price. Reinvestment of distributions will be made at that
day's NAV. If you select option 2 or 3 and the U.S. Postal Service cannot
deliver your checks, or if your checks remain uncashed for six months,
distribution checks will be reinvested in your account at the current NAV
and your election may be converted to the Reinvestment Option.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. The Funds distribute substantially all of their net
investment income and capital gains, if any, to shareholders each year
pursuant to the following schedule. Each Fund may pay capital gains in
December. In addition, Equity Portfolio Growth, Equity Portfolio Income,
Limited Term Bond and Limited Term Tax-Exempt may pay capital gains in
January as well. Emerging Markets Income may also pay capital gains in
February.
Equity Portfolio Growth pays net investment income, if any, in January and
December; Overseas, Growth Opportunities, Global Resources, and Strategic
Opportunities pay in December; Emerging Markets Income, High Yield,
Limited Term Bond, Government Investment, Short Fixed-Income, High Income
Municipal, Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt
declare dividends daily and pay monthly; and Equity Portfolio Income and
Income & Growth declare dividends in March, June, September, and
December and pay the following month.
16.CAPITAL GAINS. You may realize a gain or loss when you sell (redeem) or
exchange shares. For most types of accounts, a Fund will report the
proceeds of your redemptions to you and the IRS annually. However, because
the tax treatment also depends on your purchase price and your personal tax
position, YOU SHOULD KEEP YOUR REGULAR ACCOUNT STATEMENTS TO USE IN
DETERMINING YOUR TAX.
17."BUYING A DIVIDEND." On the record date for a distribution from a Fund,
the Fund's share price is reduced by the amount of the distribution. If you
buy shares just before the record date (buying a dividend), you will pay
the full offering price for the shares, and then receive a portion of the
price back as a taxable distribution.
18.FEDERAL TAXES. Distributions from each Fund's income and short-term
capital gains are taxed as dividends, and long-term capital gain
distributions are taxed as long-term capital gains. Gains on the sale of
tax-free bonds results in a taxable distribution. Short-term capital gains
and a portion of the gain on bonds purchased at a discount after April 30,
1993 are taxed as dividends. Distributions are taxable when they are paid,
whether you take them in cash or reinvest them in additional shares, except
that distributions declared in December and paid in January are taxable as
if paid on December 31. Each Fund will send you a tax statement by January
31 showing the tax status of the distributions you received in the past
year. A copy will be filed with the Internal Revenue Service (IRS).
To the extent that a Fund invest s in municipal obligations whose
interest is subject to the federal alternative minimum tax for individuals
(AMT bonds) , i ndividuals who are subject to the AMT will be required
to report a portion of the Fund's dividends as a "tax-preference item" in
determining their federal tax. Federally tax-free interest earned by the
Funds is federally tax-free when distributed as income dividends. During
the most recent fiscal year ended, 100% of the income dividends for High
Income Municipal and Limited Term Tax-Exempt were free from federal tax. If
the Funds earn taxable income from any of their investments, it will be
distributed as a taxable dividend. Some of the Funds may be eligible for
the dividends-received deduction for corporations.
EFFECT OF FOREIGN TAXES. A Fund may pay withholding or other
taxes to foreign governments during the year. These taxes would reduce the
Fund's dividends, but would be included in the taxable income reported on
your tax statement. You may be able to claim an offsetting tax credit or
itemized deduction for foreign taxes paid by the Fund. Your tax statement
will generally show the amount of foreign tax for which a credit or
deduction will be available.
STATE AND LOCAL TAXES. Mutual fund dividends from U.S. government
securities generally are free from state and local income taxes. However,
particular states may limit this benefit, and some tupes of securitites,
such as repurchase agreements and some agency backed securitites, may not
qualify for the benefit. Ginnie mae securities and other mortgage-backed
securities are notable exceptions in most states. Some states may impose
intangible property taxes.
OTHER TAX INFORMATION. The information above is only a summary of some
of the tax consequences generally affecting the Funds and their
shareholders, and no attempt has been made to discuss individual tax
consequences. In addition to federal tax, shareholders may be subject to
state or local taxes on their investments. Investors should consult their
tax advisors for details and up-to-date information on the tax laws in
their state to determeine whether the fund is suitable to their particular
tax situation.
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.
FEES
19.MANAGEMENT AND OTHER SERVICES. For managing its investments and business
affairs, each Fund pays a monthly fee to FMR.
Each Fund (with the exception of Equity Portfolio Income, see below) pays a
monthly fee to FMR based on a basic fee rate, which is the sum of two
components:
1. A group fee rate based on the monthly average net assets of all of the
mutual funds advised by FMR. This rate for Equity Funds cannot rise above
.52% and it drops (to as low as a marginal rate of .31%*) as total assets
in all of these funds rise. The effective Equity Fund group fee rate for
September 1993, October 1993 and November 1993 was .3262%, .3254% and
.3250%, respectively. The group fee rate for Fixed-Income Funds cannot rise
above .37% and it drops (to as low as a marginal rate of .15%*) as total
assets in all of these funds rise. The effective Fixed-Income group fee
rate for October 1993 and November 1993 was .1631% and .1627%,
respectively.
2. An individual fund fee rate, which varies for each Fund.
* FMR VOLUNTARILY AGREED TO ADOPT REVISED GROUP FEE RATE SCHEDULES WHICH
PROVIDE FOR A MARGINAL RATE AS LOW AS .285% (EQUITY FUNDS) AND .1325%
(FIXED-INCOME FUNDS) WHEN AVERAGE GROUP NET ASSETS EXCEED $336 BILLION.
(THE MANAGEMENT CONTRACTS FOR EMERGING MARKETS INCOME, HIGH YIELD, AND
SHORT-INTERMEDIATE TAX-EXEMPT CONTAIN THE REVISED GROUP FEE RATE
SCHEDULES.) A NEW MANAGEMENT CONTRACT WITH A REVISED GROUP FEE RATE
SCHEDULE WILL BE PRESENTED FOR APPROVAL AT EACH FUND'S NEXT SHAREHOLDER
MEETING.
One-twelfth of the annual basic fee rate is applied to each Fund's
net assets averaged over the most recent month, giving a dollar amount
which is the management fee for that month.
Equity Portfolio Income pays FMR a monthly management fee at an annual rate
of .50% of its average net assets.
The following are the individual fund fee rates and total management fees
for each Fund's most recent fiscal year end.
TOTAL
MANAGEMENT FEE
INDIVIDUAL (AS A PERCENT OF AVERAGE
FUND FEE RATE NET ASSETS)
(AS A PERCENTAGE OF BEFORE REIMBURSEMENTS,
AVERAGE NET ASSETS) IF ANY
INTERNATIONAL FUNDS:
Overseas 0.45% 0.77%(dagger)
Emerging Markets Income* 0.55% 0.71%
EQUITY FUNDS:
Equity Portfolio Growth 0.33% 0.66%
Growth Opportunities 0.30% 0.68%
Global Resources 0.45% 0.77%(dagger)
Strategic Opportunities 0.30% 0.54%
Equity Portfolio Income .NA 0.50%
Income & Growth 0.20% 0.53%
FIXED-INCOME FUNDS:
High Yield 0.45% 0.51%
Limited Term Bond 0.25% 0.42%
Government Investment 0.30% 0.46%
Short Fixed-Income 0.30% 0.47%
MUNICIPAL/TAX-EXEMPT FUNDS:
High Income Municipal Fund 0.25% 0.42%
Limited Term Tax-Exempt Fund 0.25% 0.42%
Short-Intermediate Tax -Exempt * 0.25% 0.41%
(dagger) TOTAL MANAGEMENT FEES ARE HIGHER THAN THOSE CHARGED BY MOST MUTUAL
FUNDS, BUT NOT NECESSARILY HIGHER THAN THOSE OF A TYPICAL INTERNATIONAL
FUND, DUE TO THE GREATER COMPLEXITY, EXPENSE AND COMMITMENT OF RESOURCES
INVOLVED IN INTERNATIONAL INVESTING.
* PROJECTIONS FOR FIRST YEAR OF OPERATIONS.
In addition to the basic fee, the management fees for Overseas, Growth
Opportunities, and Strategic Opportunities vary based on performance. The
performance adjustment is added to or subtracted from the management
fee and is calculated monthly. It is based on a comparison of each Fund's
performance to that of an index, over the most recent 36-month period. The
difference is converted into a dollar amount that is added to or subtracted
from the management fee. This adjustment rewards FMR when the Fund
outperforms the index and reduces FMR's fee when the Fund underperforms the
index. The maximum annualized performance index adjustment rate for each
Fund is +/- .20%. Overseas compares itself to the Morgan Stanley Capital
International Europe, Australia, Far East Index. (Prior to December 1,
1992, Overseas Fund's performance adjustment was based on a comparison with
the Morgan Stanley Capital International Europe Index.) Growth
Opportunities and Strategic Opportunities compare themselves to the S&P
500. See "The Trusts and the Fidelity Organization" for information
regarding performance calculations for Strategic Opportunities.
FMR may, from time to time, agree to reimburse a Fund for expenses
(excluding interest, taxes, brokerage commissions, and extraordinary
expenses) above a specified percentage of average net assets. FMR retains
the ability to be repaid by a Fund for these expense reimbursements in the
amount that expenses fall below the limit prior to the end of the fiscal
year. Fee reimbursements by FMR will increase a Fund's yield and total
return, and repayment by a Fund will lower its yield and total return. FMR
has voluntarily agreed to reimburse expenses of the Class A shares of
Emerging Markets Income, (effective July 1, 1994) Limited Term Bond,
Government Investment, Limited Term Tax-Exempt and Short-Intermediate Tax
Exempt to the extent that total expenses exceed, 1.50%, 0.90%,
0.95 %, .90% and .75%, respectively, of average net assets of Class A
shares.
FMR has entered into sub-advisory agreements on behalf of certain Funds.
Sub-advisors provide research and investment advice and research services
with respect to issuers based outside the United States and FMR may
grant sub-advisers investment management authority to buy and sell
securities if FMR believes it would be beneficial to a Fund.
Overseas, Emerging Markets Income, Equity Portfolio Growth,
Strategic Opportunities, Equity Portfolio Income , High Yield and
Limited Term Bond each have entered into sub-advisory agreements with
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 . FMR U.K. focuses primarily on
issuers based in Europe, and FMR Far East focuses primarily on
issuers based in Asia and the Pacific Basin. Under the sub-advisory
agreements, FMR, not the Fund, pay s FMR U.K. and FMR Far East fees
equal to 110% and 105%, respectively, of each sub-advisor's costs incurred
in connection with its sub-advisory agreement.
In addition, Overseas and Emerging Markets Income each have entered into a
sub-advisory agreement with Fidelity International Investment Advisors
(FIIA) , in Pembroke, Bermuda, and Fidelity Investments Japan Limited
(FIJ), in Tokyo, Japan. FIJ and FIIA are both Bermuda-based subsidiaries of
Fidelity International Limited (FIL). FIIA, in turn, has entered into a
sub-advisory agreement with its wholly owned subsidiary Fidelity
International Investment Advisors (U.K.) Limited (FIIAL U.K.) , in Kent,
England . Currently, FIIAL U.K. focuses on issuers based in
countries other than the United States , including countries in
Europe, Asia, and the Pacific Basin. Under the sub-advisory agreement, FMR
pays FIIA 30% of its monthly management fee with respect to the average
market value of investments held by the Fund for which FIJ and
FIIA , respectively, have provided FMR with investment advice.
FIIA, in turn, pays FIIAL U.K. a fee equal to 110% of FIIAL U.K.'s costs
incurred in connection with providing investment advice and research
services. For providing investment management services, the subadvisers
are compensated as follows: (a) FMR pays FMR (U.K.), FMR Far East, FIJ and
FIIA 50% of its monthly management fee with respect to Emerging Markets
Income's average net assets managed by the sub-advisers on a discretionary
basis; and (b) FIIA pays FIIAL U.K.'s costs incurred in connection with
providing investment management services.
The Transfer Agent is paid fees based on the type, size and number of
accounts in Class A shares of a Fund and the number of transactions made by
Class A shareholders. The Transfer Agent has a sub-arrangement
with Fidelity Investments Institutional Operations Company (FIIOC), 82
Devonshire Street, Boston, Massachusetts 02109, an affiliate of FMR for
certain transfer dividend paying and shareholder services . The Transfer
Agent pays to FIIOC a portion of its fee for Class A accounts
for which FIIOC provides limited services, or its full fee for Class
A accounts that FIIOC maintains on its behalf.
The fees for pricing and bookkeeping services are based on a Fund's average
net assets, but must fall within a range of $45,000 to $750,000 per year.
Fidelity Service Co. (Service), 82 Devonshire Street, Boston, Massachusetts
02109, an affiliate of FMR, calculates each Fund's daily Class A
share price, and maintains its general accounting records (with the
exception of High Income Municipal and Limited Term Tax-Exempt, see below).
For those Funds which can engage in securities lending, Service also
administers its securities lending program. For the most recent fiscal
year , each Fund's fees for pricing and bookkeeping services
(including related out-of-pocket expenses) amounted to: $57,711 (Overseas);
$234,813 (Equity Portfolio Growth); $513,950 (Growth Opportunities);
$45,425 (Global Resources); $145,494 (Strategic Opportunities); $113,026
(Equity Portfolio Income); $410,561 (Income & Growth); $121,204 (High
Yield); $81,106 (Limited Term Bond); $46,457 (Government Investment); and
$143,813 (Short Fixed-Income).
For High Income Municipal, Limited Term Tax-Exempt and Short-Intermediate
Tax-Exempt, United Missouri Bank, N.A. (United Missouri), 1010 Grand
Avenue, Kansas City, Missouri 64106, acts as the custodian, transfer agent
for Class A shares and pricing and bookkeeping agent. United
Missouri has a sub-arrangement with the Transfer Agent for transfer agent
services and a sub-arrangement with Service for pricing and bookkeeping
services. For the most recent fiscal year ended, fees paid to Service
(including related out-of-pocket expenses) amounted to $157,559 (High
Income Municipal) and $45,724 (Limited Term Tax-Exempt). All of the fees
are paid to the Transfer Agent and Service by United Missouri, which is
reimbursed by the Funds for such payments.
20.DISTRIBUTION AND SERVICE PLANS. The Board of Trustees of each Trust has
adopted a Distribution and Service Plan (the Plans) on behalf of each
Fund's Class A shares, 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 intended primarily
to result in the sale of shares of a fund except pursuant to a plan adopted
by the fund under the Rule. The Boards of Trustees have adopted the Plans
to allow Class A shares and FMR to incur certain expenses that might be
considered to constitute direct or indirect payment by Class A
shares of distribution expenses.
Under each Plan, Class A shares are authorized to pay Distributors a
monthly distribution fee as compensation for its services and expenses in
connection with the distribution of Class A shares of the Fund. The
Class A shares of e ach Fund pay Distributors a distribution fee at an
annual percentage of average net assets of Class A shares of
that Fund determined as of the close of business on each day
throughout the month. The Class A shares of Overseas, Growth Opportunities,
Global Resources, Strategic Opportunities, and Income & Growth each pay
a distribution fee of .65% of their respective average net
assets . The Class A shares of Equity Portfolio Growth and Equity
Portfolio Income each pay a distribution fee of .65% of their
respective average net assets (the Board can approve a maximum rate of
.75%). The Class A shares of Emerging Markets Income, High Yield, Limited
Term Bond, Government Investment, High Income Municipal and Limited Term
Tax-Exempt each pay a distribution fee of .25% of their
respective average net assets (the Board can approve a maximum rate of
.40%). The Class A shares of Short Fixed-Income and Short-Intermediate
Tax-Exempt each pay a distribution fee of .15% of their
respective average net assets . Up to the full amount of the
distribution fee paid by Class A of each Fund to Distributors may be
reallowed to investment professionals based upon the level of marketing and
distribution services provided.
Each Plan also provides that, through Distributors, FMR may make
payments from its management fee or other resources to investment
professionals in connection with the distribution of Class A shares.
Distributors will compensate investment professionals with a
fee of .25% if the assets on which the .25% is paid remain in Class A
shares of the Fidelity Advisor Funds for one uninterrupted year or the
investment professional will be required to refund this fee to
Distributors. The fee will not be paid on purchases through a bank or
bank-affiliated broker-dealers that qualifies for a Sales Charge
Waiver described on page 12. FMR may terminate the program at any time.
Class A shares of each Fund bear the f ees paid pursuant to
their Plan . Such fees are not borne by individual accounts, and
will comply with the restrictions imposed by the NASD rule
regarding asset based sales charges . Distribution fees
will reduce the net investment income and total return of a Fund's Class A
shares.
Investment professionals who provide enhanced inquiry, order entry and
sales facilities in connection with transactions in Class A shares by their
clients may receive an administrative fee up to the maximum applicable
sales charge described in "Sales Charges and Investment Professional
Concessions," on page . In addition, Distributors may , at its
expense, provide promotional incentives such as sales contests and
luxury trips to investment professionals who support the sale of
shares of the Funds. In some instances, these incentives will be
offered only to certain types of investment professionals, such as
bank-affiliated or non-bank affiliated broker-dealers, or to investment
professionals whose representatives provide services in connection with the
sale or expected sale of significant amounts of shares.
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 fully defined, in Distributors' opinion it
should not prohibit banks from being paid for shareholder servicing and
recordkeeping. If, because of changes in law or regulation, or because of
new interpretations of existing law, a bank or a Fund were prevented from
continuing these arrangements, it is expected that the Board would make
other arrangements for these services and that shareholders would not
suffer adverse financial consequences. 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.
VALUATION
A Fund's shares are valued at NAV. NAV for Class A shares of each Fund
is determined by adding Class A's pro rata share of the value of
all security holdings and other assets of the Fund, deducting Class A's
pro rata share of the liabilities of the Fund, deducting the
liabilities allocated to Class A and then dividing the result by the
n umber of Class A shares of the Fund outstanding.
NAV normally is calculated as of the close of business of the NYSE
(normally 4:00 p.m. Eastern time). The Funds are open for business and NAV
is calculated each day the NYSE is open for trading. Fund securities and
other assets are valued primarily on the basis of market quotations
furnished by pricing services, or if quotations are not available, by a
method that the Board of Trustees believes accurately reflects fair value.
Foreign securities are valued based on quotations from the primary market
in which they are traded and are converted from the local currency into
U.S. dollars using current exchange rates.
PERFORMANCE
Each Fund's performance may be quoted in advertising in terms of
total return. All performance information is historical and is not intended
to indicate future performance. Share price and total return fluctuate in
response to market conditions and other factors, and the value of a Fund's
shares when sold may be worth more or less than their original cost.
Excluding a sales charge from a performance calculation produces a higher
total return figure. TOTAL RETURN is the change in value of an investment
in a Fund 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. When an average
annual return covers a period of less than one year, the calculation
assumes that performance will remain constant for the rest of the year.
Since this may or may not occur, the average annual returns should be
viewed as a hypothetical rather than actual performance figure. Average
annual and cumulative total returns usually will include the effect of
paying a Fund's maximum sales charge.
The Funds also may quote performance in terms of yield. 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. High Income
Municipal , Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt
may quote a TAX-EQUIVALENT YIELD, which shows the taxable yield an investor
would have to earn before taxes to equal the Fund's tax-free yield.
A tax-equivalent yield is calculated by dividing a Fund's yield by the
result of one minus a stated federal or state tax rate. Because yield
calculations differ from other accounting methods, the quoted yield may not
equal the income actually paid to shareholders. This difference may be
significant for funds whose investments are denominated in foreign
currencies. In calculating yield, the Funds may from time to time use a
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.
For additional performance information, please contact your investment
professional or Distributors for a free Annual Report and SAI.
PORTFOLIO TRANSACTIONS
FMR uses various brokerage firms to carry out each Fund's equity security
transactions. Fixed-income securities are generally traded in the
over-the-counter market through broker-dealers. A broker-dealer is a
securities firm or bank which makes a market for securities by offering to
buy at one price and sell at a slightly higher price. The difference is
known as a spread. Foreign securities are normally traded in foreign
countries since the best available market for foreign securities is often
on foreign markets. In transactions on foreign stock exchanges, brokers'
commissions are generally fixed and are often higher than in the U.S.,
where commissions are negotiated. Since FMR, directly or through affiliated
sub-advisers, places a large number of transactions, including those of
Fidelity's other funds, the Funds pay lower commissions than those paid by
individual investors, and broker-dealers are willing to work with the Funds
on a more favorable spread.
The Funds have authorized FMR to allocate transactions to some
broker-dealers who help distribute the Fund's shares or the shares of
Fidelity's other funds to the extent permitted by law, and on an agency
basis to Fidelity Brokerage Services, Inc. (FBSI) and Fidelity Brokerage
Services Ltd. (FBSL), affiliates of FMR. FMR will make such allocations if
commissions are comparable to those charged by non- affiliated qualified
broker-dealers for similar services.
FMR may also allocate brokerage transactions to a Fund's custodian, acting
as a broker-dealer, or other broker-dealers, so long as transaction quality
and commission rates are comparable to those of other broker-dealers, where
the broker-dealer will allocate a portion of the commissions paid toward
payment of a Fund's expenses. These expenses currently include transfer
agent fees and custodian fees.
Higher commissions may be paid to those firms that provide research,
valuation and other services to the extent permitted by law. FMR also is
authorized to allocate brokerage transactions to FBSI in order to secure
from FBSI research services produced by third party, independent entities.
FMR may use this research information in managing each Fund's assets, as
well as assets of other clients.
When consistent with its investment objective, each Fixed-Income fund may
engage in short-term trading. Also, a security may be sold and another of
comparable quality simultaneously purchased to take advantage of what FMR
believes to be a temporary disparity in the normal yield relationship of
the two securities.
The frequency of portfolio transactions - the turnover rate - will vary
from year to year depending on market conditions. Each Fund's turnover rate
for the most recent fiscal year ended was: 42% (Overseas); 160% (Equity
Portfolio Growth); 69% (Growth Opportunities); 208% (Global Resources);
183% (Strategic Opportunities); 120% (Equity Portfolio Income); 200%
(Income & Growth); 79% (High Yield); 59% (Limited Term Bond); 333%
(Government Investment); 58% (Short Fixed Income); 27% (High Income
Municipal); and 46% (Limited Term Tax-Exempt). The annualized portfolio
turnover rates of Emerging Market Income and Short-Intermediate Tax-Exempt
are not expected to exceed 200% and 75%, respectively, for their first
fiscal periods ending December 31, 1994 and November 30, 1994,
respectively.
Because a high portfolio turnover rate increases transaction costs
and may increase taxable capital gains, FMR carefully weighs the
anticipated benefits of short-term investing against these consequences.
THE TRUSTS AND THE FIDELITY ORGANIZATION
Each Trust is an open-end management investment company. Each Trust
was established by a separate Declaration of Trust as a Massachusetts
business trust on each date as follows: June 24, 1983, Fidelity Advisor
Series I; April 24, 1986, Fidelity Advisor Series II; May 17, 1982,
Fidelity Advisor Series III; May 6, 1983, Fidelity Advisor Series IV; April
24, 1986, Fidelity Advisor Series V; June 1, 1983, Fidelity Advisor Series
VI; March 21, 1980, Fidelity Advisor Series VII; and September 23, 1983,
Fidelity Advisor Series VIII. Each Trust has its own Board of Trustees that
supervises Fund activities and reviews the Fund s' contractual
arrangements with companies that provide the Funds with services. As
Massachusetts business trusts, the Trusts are not required to hold annual
shareholder meetings, although special meetings may be called for a class
of shares, a Fund or the Trust as a whole for purposes such as electing or
removing Trustees, changing fundamental investment policies or limitations
or approving a management contract or plan of distribution. As a
shareholder, you receive one vote for each share and fractional votes for
fractional shares of the Fund you own. For shareholders of Equity Portfolio
Income the number of votes to which you are entitled is based on the dollar
value of your investment. Separate votes are taken by each class of shares,
or each Fund if a matter affects just that class of shares or Fund,
respectively. There is a remote possibility that one Fund might become
liable for any misstatement in the p rospectus about another Fund.
Each class of shares is offered through a separate prospectus.
CLASS B. Fidelity Advisor Emerging Markets Income Fund, Fidelity Advisor
Strategic Opportunities Fund, Fidelity Advisor Equity Portfolio Income,
Fidelity Advisor High Yield Fund, Fidelity Advisor Limited Term Bond Fund,
Fidelity Advisor Government Investment Fund, Fidelity Advisor High Income
Municipal Fund, and Fidelity Advisor Limited Term Tax-Exempt Fund each
offer a class of shares with a contingent deferred sales charge to
retail investors who engage an investment professional for investment
advice ( Class B shares). Class B shares of each Fund are
subject to an annual distribution fee of .75% of their respective
average net assets, an annual service fee of .25% of their
respective average net assets and a contingent deferred sales charge
upon redemption within five years of purchase, which decreases from a
maximum of 4% to 0%. At the end of six years , Class B shares of a
Fund automatically convert to Class A shares of the same Fund .
The initial and subsequent investment minimums for Class B shares
are identical to those for Class A shares . Class B shares of a
Fidelity Advisor Fund may be exchanged only for Class B shares of other
Fidelity Advisor Funds or Class B shares of Daily Money Fund: U.S.
Treasury Portfolio. Transfer agent and shareholder services for Class B
shares of Fidelity Advisor Emerging Markets Income Fund, Fidelity
Advisor Strategic Opportunities Fund, Fidelity Advisor Equity Portfolio
Income, Fidelity Advisor High Yield Fund, Fidelity Advisor Limited Term
Bond Fund and Fidelity Advisor Government Investment Fund are performed by
FIIOC ; and for Class B shares of Fidelity Advisor High Income
Municipal Fund and Fidelity Advisor Limited Term Tax-Exempt Fund are
performed by United Missouri Bank . For the current fiscal year, total
operating expenses for Class B shares are estimated to be as follows:
2.25%, after reimbursement, for Fidelity Advisor Emerging Markets Income
Fund; 1.67% for Fidelity Advisor High Income Municipal Fund; 1.86% for
Fidelity Advisor High Yield Fund; 1.70% , after reimbursement, for
Fidelity Advisor Government Investment Fund; 2.12% for Fidelity Advisor
Equity Portfolio Income; 1.92% for Fidelity Advisor Strategic Opportunities
Fund; 1.65%, after reimbursement, for Fidelity Advisor Limited Term Bond
Fund; and 1.65%, after reimbursement, for Fidelity Advisor Limited Term
Tax-Exempt Fund. Investment professionals may receive different levels of
compensation with respect to one particular class of shares over another
class of shares in the Funds.
INSTITUTIONAL SHARES. Fidelity Advisor Equity Portfolio Growth, Fidelity
Advisor Equity Portfolio Income, Fidelity Advisor Limited Term Bond Fund
and Fidelity Advisor Limited Term Tax-Exempt Fund each offers shares to
institutional and retail investors. Shares offered to institutional
investors (Institutional shares) are offered continuously at NAV to (I)
banks and trust institutions investing for their own accounts or for
accounts of their trust customers, (II) plan sponsors meeting the ERISA
definition of fiduciary, (III) government entities or authorities and (IV)
corporations with at least $100 million in annual revenues. The initial and
subsequent investment minimums for Institutional shares are $100,000 and
$2,500, respectively. The minimum account balance is $40,000. Institutional
shares of one fund may be exchanged for Institutional shares of another
Fidelity Advisor Fund. Transfer agent and shareholder services for
Institutional shares are performed by FIIOC. For the fiscal year ended
November 30, 1993, total operating expenses for Institutional shares as a
percent of average net assets were as follows: .94% for Fidelity Advisor
Equity Portfolio Growth, .79% for Fidelity Advisor Equity Portfolio Income,
.64% for Fidelity Advisor Limited Term Bond and .65% for Fidelity Advisor
Limited Term Tax-Exempt. Institutional Shares have Distribution and Service
Plans that do not provide for payment of a separate distribution fee;
rather the Plans recognize that FMR may use its management fee and other
resources to pay expenses for distribution-related activities and may make
payments to investment professionals that provide shareholder support
services or sell Institutional shares. Institutional shares also do not
bear a shareholder service fee. Investment professionals currently do not
receive compensation in connection with distribution and/or shareholder
servicing of Institutional shares.
Strategic Opportunities offers a class of shares with a maximum 4.75%
front-end sales charge to current holders of such shares (Initial Shares).
New investors may not purchase Initial Shares. Current shareholders may
make additional investments in Initial Shares of $250 or more. The minimum
account balance for Initial Shares is $1,000. Reduced sales charges apply
to purchases of $50,000 or more of Initial Shares. An investor in Initial
Shares also may qualify for a reduction of the sales charge under the
Rights of Accumulation or Letter of Intent programs. Sales charges on
Initial Shares are waived for certain groups of investors. Transfer agent
and shareholders services for Initial Shares are performed by Service. For
the fiscal year ended September 30, 1993, total operating expenses as a
percentage of net asset value for Initial Shares were .89%.
Strategic Opportunities offers three classes of shares, Initial Shares,
Class A shares and Class B shares. Class A shares are offered through
this prospectus. Initial Shares and Class B shares are described above and
offered through separate prospectuses. Investment performance will be
measured separately for Initial Shares, Class A shares and Class B shares,
and the least of the three results obtained will be used in calculating the
performance adjustment to the management fee paid by Strategic
Opportunities.
Fidelity Investments is one of the largest investment management
organizations in the U.S. and has its principal business address at 82
Devonshire Street, Boston, MA 02109. It includes a number of different
companies that provide a variety of financial services and products. The
Trusts employ various Fidelity companies to perform certain activities
required to operate the Funds.
Fidelity Management & Research Company is the original Fidelity company
founded in 1946. It provides a number of mutual funds and other clients
with investment research and portfolio management services. It maintains a
large staff of experienced investment personnel and a full complement of
related support facilities. As of April 30, 1994 FMR advised funds
having approximately 1 6 million shareholder accounts with a total
value of more than $225 billion. Fidelity Distributors Corp. distributes
shares for the Fidelity funds.
FMR Corp. is the parent company for the Fidelity companies. Through
ownership of voting common stock, Edward C. Johnson 3d (President and a
Trustee of the Trust), Johnson family members, and various trusts for the
benefit of Johnson family members form a controlling group with respect to
FMR Corp.
Peter J. Allegrini is manager of Advisor High Income Municipal, which he
has managed since February 1992. Mr. Allegrini also manages Spartan
Connecticut Municipal High Yield, Michigan Tax-Free High Yield and Ohio
Tax-Free High Yield. Mr. Allegrini joined Fidelity in 1982.
Robert K. Citrone is manager of Advisor Emerging Market Income. He also
manages Fidelity New Markets Income Fund, which he has managed since May
1993 and serves as strategist for Fidelity's emerging market fixed-income
investments. Mr. Citrone joined Fidelity in 1990.
Bettina E. Doulton has been manager of Advisor Equity Portfolio Income
since August 1993, and VIP Equity-Income since July 1993. Previously, she
managed Select Automotive Portfolio and assisted on Equity-Income Portfolio
and Magellan(Registered trademark). Ms. Doulton also served as an analyst
following the domestic and European automotive and tire manufacturing
industry as well as the gaming and lodging industry. She joined Fidelity in
1985.
Margaret L. Eagle is vice president and manager of Advisor High Yield,
which she has managed since it began in January 1987. Ms. Eagle also
manages several pension fund accounts. Previously, she managed Spartan High
Income, and High Income (now Capital & Income). She also managed the
bond portion of Puritan(Registered trademark). Ms. Eagle joined Fidelity in
1980.
Daniel R. Frank is vice president and manager of Advisor Strategic
Opportunities which he has managed since December 1983. Previously, he was
an assistant to Peter Lynch on Magellan. Mr. Frank joined Fidelity in 1979.
Michael S. Gray is vice president and manager of Advisor Limited Term Bond
which he has managed since August 1987. Mr. Gray also manages Investment
Grade Bond, Spartan Investment Grade Bond, and Intermediate Bond. Mr. Gray
joined Fidelity in 1982.
Robert E. Haber is vice president and manager of Advisor Income &
Growth, which he has managed since January 1987. Mr. Haber also manages
Balanced and co-manages Global Balanced. Previously, he managed Convertible
Securities. Mr. Haber joined Fidelity in 1985.
John (Jack) F. Haley Jr. is vice president and manager of Advisor Limited
Term Tax-Exempt, which he has managed since September 1985. Mr.
Haley also manages California Tax-Free Insured, California Tax-Free High
Yield, and Spartan California Municipal High Yield. Mr. Haley joined
Fidelity in 1981.
John R. Hickling is manager of Advisor Overseas, which he has managed since
February 1993. Mr. Hickling also manages Japan, Overseas and VIP:
Overseas. Previously he managed Emerging Markets, Europe and Pacific Basin.
Mr. Hickling joined Fidelity in 1982.
Curtis Hollingsworth is vice president and manager of Advisor Government
Investment, which he has managed since January 1992. Mr. Hollingsworth also
manages Short-Intermediate Government, Government Securities, Institutional
Short-Intermediate Government, Spartan Limited Maturity Government Bond,
Spartan Long-Term Government Bond and Spartan Short-Intermediate
Government. He joined Fidelity in 1983.
Malcolm W. MacNaught is vice president and manager of Advisor Global
Resources, which he has managed since November 1988. Mr. MacNaught also
manages Select Precious Metals and Minerals and Select American Gold.
Previously, he managed Fidelity Fund and Convertable Securities. Mr.
MacNaught joined Fidelity in 1968.
David Murphy is manager of Advisor Short-Intermediate Tax-Exempt Fund
which he has managed since March 1994 . He also manages Limited Term
Municipals, Spartan Intermediate Municipal and Spartan New Jersey Municipal
High Yield. Before joining Fidelity in 1989, he managed municipal bond
funds at Scudder, Stevens & Clark.
Robert E. Stansky is vice president and manager of Advisor Equity Portfolio
Growth, which he has managed since April 1987. Mr. Stansky also manages
Growth Company. Previously, he managed Emerging Growth and Select Defense
and Aerospace. Mr. Stansky joined Fidelity in 1983.
Donald G. Taylor is vice president and manager of Advisor Short
Fixed-Income, which he has managed since September 1989. Mr. Taylor also
manages Short-Term Bond, Spartan Short-Term Income , and VIP II:
Investment Grade Bond. In addition, he manages Income Plus for Fidelity
International and serves as an assistant on Asset Manager: Income.
Previously, he managed Corporate Trust, Qualified Dividend, VIP: Zero
Coupon Bond and Utilities Income. Mr. Taylor joined Fidelity in 1986.
George A. Vanderheiden is vice president and manager of Advisor Growth
Opportunities, which he has managed since November 1987. Mr. Vanderheiden
also manages Destiny I and Destiny II. He is a managing director of FMR
Corp., Leader of the Growth Group, and joined Fidelity in 1971.
APPENDIX
The following paragraphs provide a brief description of securities in which
the Funds may invest and transactions they may make . T he Funds are
not limited by this discussion, however, and may purchase other
types of securities securities and enter into other types of
transactions if they are consistent with the Funds' investment objectives
and policies.
DELAYED-DELIVERY TRANSACTIONS. Securities may be bought and sold on a
when-issued or delayed-delivery basis, with payment and delivery taking
place at a future date. The market value of securities purchased in this
way may change before the delivery date which could increase fluctuations
in a Fund's yield. Ordinarily, a Fund will not earn interest on securities
purchased until they are delivered.
EQUITY SECURITIES include common stocks, preferred stocks, convertible
securities, and warrants. While FMR believes that these types of
investments in emerging markets present the possibility for significant
capital appreciation over the long-term, they also entail a high degree of
risk. The prices of emerging market equities can fluctuate dramatically in
response to company, market, economic, or political news.
FOREIGN CURRENCIES. The value of investments and the value of dividends and
interest earned may be significantly affected by changes in currency
exchange rates. Some foreign currency values may be volatile, and there is
the possibility of governmental controls on currency exchange or
governmental intervention in currency markets, which could adversely affect
a fund. Although FMR may attempt to manage currency exchange rate risks,
there is no assurance that FMR will do so at an appropriate time or that
FMR will be able to predict exchange rates accurately. For example, if FMR
increases a fund's exposure to a foreign currency, and that currency's
value subsequently falls, FMR's currency management may result in increased
losses to the Fund. Similarly, if FMR hedges the Fund's exposure to a
foreign currency, and that Currency's value rises, the Fund will lose the
opportunity to participate in the currency's appreciation.
CURRENCY MANAGEMENT. The relative performance of foreign currencies is an
important factor in a Fund's performance. FMR may manage a Fund's exposure
to various currencies to take advantage of different yield, risk, and
return characteristics that different currencies can provide for U.S.
investors.
To manage exposure to currency fluctuations, the Fund may enter into
currency exchange contracts (agreements to exchange one currency for
another at a future date) or currency swap agreements, buy and sell options
and futures contracts relating to foreign currencies, and purchase
securities indexed to foreign currencies. A Fund will use currency exchange
contracts in the normal course of business to lock in an exchange rate in
connection with purchases and sales of securities denominated in foreign
currencies. Other currency management strategies allow FMR to hedge
portfolio securities, to shift investment exposure from one currency to
another, or to attempt to profit from anticipated declines in the value of
a foreign currency relative to the U.S. dollar. There is no limitation on
the amount of a Fund's assets that may be committed to currency management
strategies.
FOREIGN INVESTMENTS involve additional risks. Foreign securities and
securities denominated in or indexed to foreign currencies may be affected
by the strength of foreign currencies relative to the U.S. dollar, or by
political or economic developments in foreign countries. Foreign companies
may not be subject to accounting standards or governmental supervision
comparable to U.S. companies, and there may be less public information
about their operations. In addition to the political and economic
factors that can affect foreign securities, a governmental issuer may be
unwilling to repay principal and interest when due, and may require that
the conditions for payment be renegotiated. These factors could make
foreign investments, especially those in developing countries, more
volatile. FMR considers these factors in making investments for the
Funds.
A Fund may enter into currency exchange contracts (agreements to exchange
one currency for another at a future date) to manage currency risks and to
facilitate transactions in foreign securities. Although currency forward
contracts can be used to protect the Fund from adverse exchange rate
changes, they involve a risk of loss if FMR fails to predict foreign
currency values correctly.
ILLIQUID INVESTMENTS. Under the supervision of the Board of Trustees, FMR
determines the liquidity of each Fund's investments. The absence of a
trading market can make it difficult to ascertain a market value for
illiquid investments. Disposing of illiquid investments may involve
time-consuming negotiation and legal expenses, and it may be difficult or
impossible for a Fund to sell them promptly at an acceptable price.
INDEXED SECURITIES. Indexed securities values are linked to currencies,
interest rates, commodities, indices, or other financial indicators. Most
indexed securities are short to intermediate term fixed-income securities
whose values at maturity or interest rates rise or fall according to the
change in one or more specified underlying instruments. Indexed securities
may be positively or negatively indexed (i.e., their value may increase or
decrease if the underlying instrument appreciates), and may have return
characteristics similar to direct investments in the underlying instrument
or to one or more options on the underlying instrument. Indexed securities
may be more volatile than the underlying instrument itself.
INTERFUND BORROWING PROGRAM. Interfund loans and borrowings normally will
extend overnight, but can have a maximum duration of seven days. A Fund
will lend through the program only when the returns are higher than those
available at the same time from other short-term instruments (such as
repurchase agreements), and will borrow through the program only when the
costs are equal to or lower than the cost of bank loans. Each Fund will not
lend more than 5% (Equity Funds) or 7.5% (Fixed-Income Funds) of its assets
to other funds, and will not borrow through the program if, after doing so,
total outstanding borrowings would exceed 15% of total assets. Loans may be
called on one day's notice, and 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 are interests in amounts owed by a
corporate, governmental or other borrower to another party. They may
represent amounts owed 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 involve the risk
of loss in case of default or insolvency of the borrower and may offer less
legal protection to a Fund in the event of fraud or misrepresentation. In
addition, loan participations involve a risk of insolvency of the lending
bank or other financial intermediary. Direct debt instruments may also
include standby financing commitments that obligate a Fund to supply
additional cash to the borrower on demand.
LOWER-QUALITY DEBT SECURITIES are those rated Ba or lower by Moody's or BB
or lower by S&P that have poor protection against default in the
payment of principal and interest 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-rated debt securities may fluctuate more than those of
higher-rated debt securities, and may decline significantly in periods of
general economic difficulty, which may follow periods of rising interest
rates. See "Debt Obligations" on page .
SOVEREIGN DEBT OBLIGATIONS debt instruments issued or guaranteed by foreign
governments or their agencies, including debt of Latin American nations or
other developing countries. Sovereign debt may be in the form of
conventional securities or other types of debt instruments such as loans or
loan participations. Sovereign debt of developing countries may involve a
high degree of risk, and may be in default or present the risk of default.
Governmental entities responsible for repayment of the debt may be unable
or unwilling to repay principal and interest when due, and may require
renegotiation or rescheduling of debt payments. In addition, prospects for
repayment of principal and interest may depend on political as well as
economic factors.
MORTGAGE-BACKED SECURITIES are issued by government entities and
non-government entities such as banks, mortgage lenders, or other financial
institutions.
A mortgage-backed security may be 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 (CMOs), make payments of both principal and interest at a
variety of 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. Other
types of mortgage-backed securities will likely be developed in the future,
and a Fund may invest in them if FMR determines they are consistent with a
Fund's investment objective and policies.
The value of mortgage-backed securities may change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage 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. Prepayment, which occurs when unscheduled or early payments are made
on the underlying mortgages, may shorten the effective maturities of these
securities and may lower their total returns.
STRIPPED MORTGAGE-BACKED SECURITIES are created when a U.S. government
agency or a financial institution separates the interest and principal
components of a mortgage-backed security and sells them as individual
securities. The holder of the "principal-only" security (PO) receives the
principal payments made by the underlying mortgage-backed security, while
the holder of the "interest-only" security (IO) receives interest payments
from the same underlying security. The prices of stripped mortgage-backed
securities may be particularly affected by changes in interest rates. As
interest rates fall, prepayment rates tend to increase, which tends to
reduce prices of IOs and increase prices of POs. Rising interest rates can
have the opposite effect.
ASSET-BACKED SECURITIES represent interests in pools of consumer loans
(generally unrelated to mortgage loans) and most often are structured as
pass-through securities. Interest and principal payments ultimately depend
on payment of the underlying loans by individuals, although the securities
may be supported by letters of credit or other credit enhancements. The
value of asset-backed securities may also depend on the creditworthiness of
the servicing agent for the loan pool, the originator of the loans, or the
financial institution providing the credit enhancement.
A Fund may purchase units of beneficial interest in pools of purchase
contracts, financing leases, and sales agreements entered into by
municipalities. These municipal obligations may be created when a
municipality enters into an installment purchase contract or lease with a
vendor and may be secured by the assets purchased or leased by the
municipality. However, except in very limited circumstances, there will be
no recourse against the vendor if the municipality stops making payments.
The market for tax-exempt asset-backed securities is still relatively new.
These obligations are likely to involve unscheduled prepayments of
principal, which may lower total returns .
OPTIONS AND FUTURES CONTRACTS are bought and sold to manage a Fund's
exposure to changing interest rates, security prices, and currency exchange
rates. Some options and futures strategies, including selling futures,
buying puts, and writing calls, tend to hedge a Fund's investment against
price fluctuations. Other strategies, including buying futures, writing
puts, and buying calls, tend to increase market exposure. Options and
futures may be combined with each other or with forward contracts in order
to adjust the risk and return characteristics of the overall strategy. A
Fund may invest in options and futures based on any type of security,
index, or currency, including options and futures traded on foreign
exchanges and options not traded on exchanges.
Options and futures can be volatile investments and involve certain risks.
If FMR applies a hedge at an inappropriate time or judges market conditions
incorrectly, options and futures strategies may lower a Fund's return. A
Fund could also experience losses if the prices of its options and futures
positions were poorly correlated with its other investments, or if it could
not close out its positions because of an illiquid secondary market.
Options and futures do not pay interest, but may produce taxable capital
gains.
Each Fund will not hedge more than 25% of its total assets by selling
futures, buying puts, and writing calls under normal conditions. In
addition each Fund will not buy futures or write puts whose underlying
value exceeds 25% of its total assets, and will not buy calls with a value
exceeding 5% of its total assets.
REAL ESTATE BACKED SECURITIES. Real estate industry companies may include
among others: real estate investment trusts; brokers or real estate
developers; and companies with substantial real estate holdings, such as
paper and lumber producers and hotel and entertainment companies. Companies
engaged in the real estate industry may be subject to certain risks
including: declines in the value of real estate, risks related to general
and local conditions, overbuilding and increased competition, increases in
property taxes and operating expenses, and variations in rental income.
REPURCHASE AGREEMENTS AND SECURITIES LOANS. In a repurchase agreement, a
Fund buys a security at one price and simultaneously agrees to sell it back
at a higher price. A Fund may also make securities loans to broker-dealers
and institutional investors, including FBSI. In the event of the bankruptcy
of the other party to either a repurchase agreement or a securities loan, a
Fund could experience delays in recovering its cash or the securities it
lent. To the extent that, in the meantime, the value of the securities
purchased had decreased or the value of the securities lent had increased,
a Fund could experience a loss. In all cases, FMR must find the
creditworthiness of the other party to the transaction satisfactory.
FOREIGN REPURCHASE AGREEMENTS may be less well secured than U.S. repurchase
agreements, and may be denominated in foreign currencies. They also involve
greater risk of loss of the counterparty defaults. Some counterparties in
these transactions may be less creditworthy than those in U.S. markets.
RESTRICTED SECURITIES are securities which cannot be sold to the public
without registration under the Securities Act of 1933. Unless registered
for sale, these securities can only be sold in privately negotiated
transactions or pursuant to an exemption from registration.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a Fund
temporarily transfers possession of a portfolio instrument to another
party, such as a bank or broker-dealer, in return for cash. At the same
time, the Fund agrees to repurchase the instrument at an agreed-upon price
and time. A Fund expects that it will engage in reverse repurchase
agreements for temporary purposes such as to fund redemptions. Reverse
repurchase agreements may increase the risk of fluctuation in the market
value of a Fund's assets or in its yield.
SHORT SALES. If a Fund enters into short sales with respect to stocks
underlying its convertible security holdings, the transaction may help to
hedge against the effect of stock price declines, but may result in losses
if a convertible security's price does not track the price of its
underlying equity. Under normal conditions convertible securities hedged
with short sales are not currently expected to exceed 15% of a Fund's total
assets.
SWAP AGREEMENTS. As one way of managing its exposure to different types of
investments, a Fund may enter into interest rate swaps, currency swaps, and
other types of swap agreements such as caps, collars, and floors. In a
typical interest rate swap, one party agrees to make regular payments equal
to a floating interest rate times a "notional principal amount," in return
for payments equal to a fixed rate times the same amount, for a specified
period of time. If a swap agreement provides for payments in different
currencies, the parties might agree to exchange the notional principal
amount as well. Swaps may also depend on other prices or rates, such as the
value of an index or mortgage prepayment rates.
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 a 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.
Swap agreements are sophisticated hedging instruments that typically
involve a small investment of cash relative to the magnitude of risks
assumed. As a result, swaps can be highly volatile and may have a
considerable impact on a Fund's performance. Swap agreements are subject to
risks related to the counterparty's ability to perform, and may decline in
value if the counterparty's creditworthiness deteriorates. A Fund may also
suffer losses if it is unable to terminate outstanding swap agreements or
reduce its exposure through offsetting transactions.
VARIABLE OR FLOATING RATE OBLIGATIONS, including certain participation
interests in municipal obligations, have interest rate adjustment formulas
that help to stabilize their market values. Many variable and floating rate
instruments also carry demand features that permit the fund to sell them at
par value plus accrued interest on short notice.
WARRANTS entitle the holder to buy equity securities at a specific price
for a specific period of time. Warrants tend to be more volatile than their
underlying securities. Also, the value of the warrant does not necessarily
change with the value of the underlying securities and a warrant ceases to
have value if it is not exercised prior to the expiration date.
ZERO COUPON BONDS do not make interest payments; instead, they are sold at
a deep 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 very volatile when interest rates change. In calculating its
daily dividend, a Fund takes into account as income a portion of the
difference between a zero coupon bond's purchase price and its face value.
A broker-dealer creates a DERIVATIVE ZERO by separating the interest and
principal components of a U.S. Treasury security and selling them as two
individual securities. CATS (Certificates of Accrual on Treasury
Securities), TIGRs (Treasury Investment Growth Receipts), and TRs (Treasury
Receipts) are examples of derivative zeros. Government Investment Fund has
been advised that the staff of the Division of Investment Management of the
SEC does not consider these instruments U.S. government securities as
defined by the 1940 Act. Therefore, Government Investment Fund will not
treat these obligations as U.S. government securities for purposes of the
65% portfolio composition test mentioned on page 21.
The Federal Reserve Bank creates STRIPS (Separate Trading of Registered
Interest and Principal of Securities) by separating the interest and
principal components of an outstanding U.S. Treasury bond and selling them
as individual securities. Bonds issued by the Resolution Funding
Corporation (REFCORP) and the Financing Corporation (FICO) can also be
separated in this fashion. ORIGINAL ISSUE ZEROS are zero coupon securities
originally issued by the U.S. government or a government agency.
DEBT OBLIGATIONS. The table below provides a summary of ratings assigned to
debt holdings (not including money market instruments) in Funds which have
the ability to invest over 5% in lower-rated debt securities. These figures
are dollar-weighted averages of month-end portfolio holdings during the
thirteen months ended September 30, 1993 (Strategic Opportunities), October
31, 1993 (Income & Growth, High Yield, Short Fixed-Income, and High
Income Municipal,) and November 30, 1993 (and Equity Portfolio Income),
presented as a percentage of total investments. These percentages are
historical and are not necessarily indicative of the quality of current or
future portfolio holdings, which may vary.
The dollar-weighted average of debt securities not rated by either Moody's
or S&P amounted to 0% (Equity Portfolio Growth), .89% (Strategic
Opportunities), .57% (Equity Portfolio Income), 6.72% (Income &
Growth), 18.74% (High Yield), 5.85% (Short Fixed-Income), and 25.23% (High
Income Municipal) of total investments. This may include securities rated
by other nationally recognized rating organizations, as well as unrated
securities. Unrated securities are not necessarily lower-quality
securities.
As of October 31, 1993, (Global Resources) and December 31, 1993
(Emerging Markets Income) had no investments below Baa/BBB.
MOODY'S RATING & PERCENTAGE OF INVESTMENTS
MOOD EQUITY STRATE EQUITY INCOME HIGH SHORT HIGH
Y'S PORTFOLI GIC PORTFOLIO & YIELD FIXED- INCOME
RATIN O OPPORT INCOME GROWTH INCOME MUNICI
G GROWTH UNITIES PAL
Aaa/A -- 15.99 1.02% 22.75% .02% 25.81% 27.39%
a/A %
Baa -- -- .77% .86% -- 34.74% 20.40%
Ba -- .18% 1.25% 6.09% 6.60% 12.76% 8.10%
B .07% .22% 1.27% 3.89% 34.26% 1.08% .63%
Caa -- 1.63 .06% .66% 9.09% -- --
%
Ca/C -- -- -- -- 4.50% -- --
S&P RATING & PERCENTAGE OF INVESTMENTS
S&AM EQUITY STRATE EQUITY INCOM HIGH SHORT HIGH
P;P PORTFO GIC PORTFO E YIELD FIXED INCOM
RATIN LIO OPPORT LIO & - E
G GROWT UNITIES INCOM GROWT INCO MUNICI
H E H ME PAL
AAA/A -- 15.99 1.03 21.9 .97% 27.08 29.05
A/A % % 8% % %
BBB -- -- .84% 2.03 1.09% 33.92 18.73
% % %
BB -- -- .98% 2.22 6.94% 7.55 4.37
% % %
B .07% .80% 1.35 2.51 33.28 1.13 1.75
% % % % %
CCC -- -- .15% .69% 7.62% .04%
CC/C -- -- -- --% 1.55%
D -- .89% .03% 5.58%
THE FOLLOWING DESCRIBES MUNICIPAL INSTRUMENTS:
MUNICIPAL SECURITIES include GENERAL OBLIGATION SECURITIES, which are
backed by the full taxing power of a municipality, and REVENUE SECURITIES,
which are backed by the revenues of a specific tax, project, or facility.
INDUSTRIAL REVENUE BONDS are a type of revenue bond backed by the credit
and security of a private issuer and may involve greater risk. PRIVATE
ACTIVITY MUNICIPAL SECURITIES, which may be subject to the federal
alternative minimum tax, include securities issued to finance housing
projects, student loans, and privately owned solid waste disposal
and water and sewage treatment facilities.
TAX AND REVENUE ANTICIPATION NOTES are issued by municipalities in
expectation of future tax or other revenues, and are payable from those
specific taxes or revenues. BOND ANTICIPATION NOTES normally provide
interim financing in advance of an issue of bonds or notes, the proceeds of
which are used to repay the anticipation notes. TAX-EXEMPT COMMERCIAL PAPER
is issued by municipalities to help finance short-term capital or operating
needs.
MUNICIPAL LEASE OBLIGATIONS are issued by a state or local government or
authority to acquire land and a wide variety of equipment and facilities.
These obligations typically are not fully backed by the municipality's
credit, and their interest may become taxable if the lease is assigned. If
funds are not appropriated for the following year's lease payments, the
lease may terminate, with the possibility of significant loss to a Fund.
CERTIFICATES OF PARTICIPATION in municipal lease obligations or installment
sales contracts entitle the holder to a proportionate interest in the
lease-purchase payments made.
RESOURCE RECOVERY BONDS are a type of revenue bond issued to build
facilities such as solid waste incinerators or waste-to-energy plants.
Typically, a private corporation will be involved, at least during the
construction phase, and the revenue stream will be secured by fees or rents
paid by municipalities for use of the facilities. The viability of a
resource recovery project, environmental protection regulations, and
project operator tax incentives may affect the value and credit quality of
resource recovery bonds.
A DEMAND FEATURE is a put that entitles the security holder to repayment of
the principal amount of the underlying security, upon notice at any time or
at specified intervals. A STANDBY COMMITMENT is a put that entitles the
security holder to same-day settlement at amortized cost plus accrued
interest.
Issuers or financial intermediaries who provide demand features or standby
commitments often support their ability to buy securities on demand by
obtaining LETTERS OF CREDIT (LOCS) or other guarantees from domestic or
foreign banks. LOCs also may be used as credit supports for other types of
municipal instruments. FMR may rely upon its evaluation of a bank's credit
in determining whether to purchase an instrument supported by an LOC. In
evaluating a foreign bank's credit, FMR will consider whether adequate
public information about the bank is available and whether the bank may be
subject to unfavorable political or economic developments, currency
controls, or other governmental restrictions that might affect the bank's
ability to honor its credit commitment.
INVERSE FLOATERS are instruments whose interest rates bear an inverse
relationship to the interest rate on another security or the value of an
index. Changes in the interest rate on the other security or index
inversely affect the residual interest rate paid on the inverse floater,
with the result that the inverse floater's price will be considerably more
volatile than that of a fixed-rate bond. For example, a municipal issuer
may decide to issue two variable rate instruments instead of a single
long-term, fixed-rate bond. The interest rate on one instrument reflects
short-term interest rates, while the interest rate on the other instrument
(the inverse floater) reflects the approximate rate the issuer would have
paid on a fixed-rate bond, multiplied by two, minus the interest rate paid
on the short-term instrument. Depending on market availability, the two
portions may be recombined to form a fixed-rate municipal bond. The market
for inverse floaters is relatively new.
REFUNDING CONTRACTS. A Fund may purchase securities on a when-issued basis
in connection with the refinancing of an issuer's outstanding indebtedness.
Refunding contracts require the issuer to sell and the Fund to buy refunded
municipal obligations at a stated price and yield on a settlement date that
may be several months or several years in the future.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
AAA - Bonds 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
edge." 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 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
in Aaa securities.
A - Bonds 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 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 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 rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
CAA - Bonds 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 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 rated C are the lowest-rated class of bonds and issued so rated
can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through C in its corporate bond rating system. 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 in the lower end of its
generic rating category.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S CORPORATE BOND RATINGS:
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.
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.
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 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.
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.
The ratings from AA to D may be modified by the addition of a plus or minus
to show relative standing within the major rating categories.
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations, other than those
contained in this Prospectus and in the related SAIs, in connection with
the offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the Fund or Distributors. This Prospectus and the related
SAIs do not constitute an offer by a Fund or by Distributors to sell or to
buy shares of a Fund to any person to whom it is unlawful to make such
offer.
FIDELITY ADVISOR OVERSEAS FUND - CLASS A
A FUND OF FIDELITY ADVISOR SERIES VII
STATEMENT OF ADDITIONAL INFORMATION
JUNE 30, 1994
This Statement is not a prospectus but should be read in conjunction with
the current Fidelity Advisor Overseas F und (the Fund) Prospectus
(dated June 30, 1994). Please retain this document for future reference.
The Fund's Annual Report for the fiscal year ended October 31, 1993, a
separate report supplied with this Statement of Additional Information, is
incorporated herein by reference. Additional copies of either the
Prospectus, Statement of Additional Information or Annual Report are
available without charge upon request from Fidelity Distributors
Corporation, 82 Devonshire Street, Boston, Massachusetts 02109, or from
your investment professional.
NATIONWIDE 800-840-6333
TABLE OF CONTENTS PAGE
<TABLE>
<CAPTION>
<S> <C>
Investment Policies and Limitations 2
Special Considerations Affecting Europe 10
Special Considerations Affecting Japan, the Pacific Basin and Southeast Asia 13
Special Considerations Affecting Canada 16
Special Considerations Affecting Latin America 16
Portfolio Transactions 18
Valuation of Portfolio Securities 20
Performance 20
Additional Purchase, Exchange and Redemption Information 25
Distributions and Taxes 27
FMR 28
Trustees and Officers 28
Management and Other Services 30
The Distributor 33
Distribution and Service Plan 33
Description of the Trust 34
Financial Statements 35
</TABLE>
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)
Fidelity International Investment Advisors (FIIA)
Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.)
DISTRIBUTOR
Fidelity Distributors Corporation (Distributors)
TRANSFER AGENT
State Street Bank and Trust Company (State Street)
CUSTODIAN
The Chase Manhattan Bank, N.A. (Chase)
AO S -PTB-694
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 the Fund's assets that may be
invested in any security or other assets, or sets forth a policy regarding
quality standards, such percentage limitation or standard shall 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.
The Fund's fundamental policies and limitations may not be changed without
approval by a "majority of the outstanding shares" (as defined in the
Investment Company Act of 1940) of the Fund. However, except for the
fundamental investment limitations set forth below, the investment policies
and limitations described in this Statement of Additional Information are
not fundamental and may be changed without shareholder approval. 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 obligations issued or guaranteed by the
government of the United States, its agencies or instrumentalities) if, as
a result thereof: (i) more than 5% of the Fund's total assets would be
invested in the securities of such issuer or (ii) the Fund would hold more
than 10% of the outstanding voting securities of such issuer; or
(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 the value of its total assets (including the amount
borrowed), less liabilities (other than borrowings). Any borrowings that
come to exceed 33 1/3% of the Fund's total assets by reason of a decline in
net assets will be reduced within three days (exclusive of Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation.
(4) underwrite any issue of securities, 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, its agencies or
instrumentalities) if, as a result thereof, 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);
(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
limitation does not apply to purchases of debt securities or to repurchase
agreements.
THE FOLLOWING 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 agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The Fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. 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 price
at which they are valued.
(v) The Fund does not currently intend to lend assets other than securities
to other parties, except by (i) lending money (up to 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 (ii) 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 (a) purchase securities of other
investment companies, except in the open market where no commission except
the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(vii) The Fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(viii) The Fund does not currently intend to purchase warrants, valued at
the lower of cost or market, in excess of 10% of the Fund's net assets.
Included in that amount, but not to exceed 2% of net assets, are warrants
whose underlying securities are not traded on principal domestic or foreign
exchanges. Warrants acquired by the Fund in units or attached to
securities are not subject to these restrictions.
(ix) The Fund does not currently intend to invest in oil, gas or other
mineral exploration or development programs or leases.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page 7.
AFFILIATED BANK TRANSACTIONS. The Fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940. These
transactions may include 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, the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
FUND'S RIGHTS AS A SHAREHOLDER. The Fund does not intend to direct or
administer the day-to-day operations of any company. The 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 upon the value of the Fund's investment in the
company. The activities that the Fund may engage in, 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 the 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 the Fund and the risk of actual liability if the Fund is
involved in litigation. No guarantee can be made, however, that litigation
against the Fund may not be undertaken or liabilities incurred.
LOWER-QUALITY DEBT SECURITIES. While the market for high-yield corporate
debt securities has been in existence for many years and 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. In fact, from 1989 to 1991, the percentage of lower-quality
debt securities that defaulted rose significantly above prior levels,
although the default rate decrease in 1992 and 1993.
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 corporate 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 ability of outside pricing s3ervices to value lower-quality debt
securities and the Fund's ability to dispose of these 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 held by the Fund. In considering
investments for the fund, 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.
The 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.
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 the Fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of the 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 a the Fund's rights and
obligations relating to the investment). Investments currently considered
by the Fund to be illiquid include repurchase agreements not entitling the
holder to payment of principal and interest within seven days and
over-the-counter options and non-government stripped fixed-rate
mortgage-backed securities.
Also, FMR may determine some restricted securities, government-stripped
fixed-rate mortgage-backed securities, loans and other direct debt
instruments, and swap agreements to be illiquid. However, with respect to
over-the-counter options the 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. 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 were invested in illiquid
securities, it would seek to take appropriate steps to protect liquidity.
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, the 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 the Fund may be permitted
to sell a security under an effective registration statement. If, during
such a period, adverse market conditions were to develop, the Fund might
obtain a less favorable price than prevailed when it decided to seek
registration of the security.
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 the 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 principal and
interest. Direct debt instruments may not be rated by any nationally
recognized rating service. If the Fund does not receive scheduled interest
or principal payments on such indebtedness, the Fund's share price and
yield could be adversely affected. Loans that are fully secured offer the
Fund more protections than an unsecured loan in the event of non-payment of
scheduled interest or principal. However, there is no assurance that the
liquidation of collateral from a secured loan would satisfy the borrower's
obligation, or that the collateral can 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
will also involve 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 to the Fund.
For example, if a loan is foreclosed, the Fund 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, the Fund 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 Fund in the event of fraud or misrepresentation. In the
absence of definitive regulatory guidance, the Fund relies on FMR's
research in an attempt to avoid situations where fraud or misrepresentation
could adversely affect the 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 Fund has direct recourse against the
borrower, it 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 the Fund were determined to be subject to the claims of the agent's
general creditors, the Fund 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 purchased by the Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments
obligating the Fund to pay additional cash on demand. These commitments
may have the effect of requiring the Fund to increase its investment in a
borrower at a time when it would not otherwise have done so, even if the
company's condition makes it unlikely that the amount will even be repaid.
The Fund will set aside appropriate liquid assets in a segregated custodial
account to cover its potential obligations under standby financing
commitments.
The Fund limits the amount of total assets that it will invest in any one
issuer or in issuers within the same industry (see limitations (1) and
(5)). For purposes of these limitations, the 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 the Fund and the borrower, if the
participation does not shift to the Fund the direct debtor-creditor
relationship with the borrower, SEC interpretations require the Fund, in
appropriate circumstances, to treat both the lending bank or other lending
institution and the borrower as "issuers" for the purposes of determining
whether the Fund has invested more than 5% of its total assets in a single
issuer. Treating a financial intermediary as an issuer of indebtedness may
restrict the 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.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Fund purchases a
security and simultaneously commits to resell that security to the seller
at an agreed-upon price on an agreed-upon date within a number of days from
the date of purchase. 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. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is
in effect secured by the value (at least equal to the amount of the
agreed-upon resale price and marked to market daily) of the underlying
security. The Fund may engage in repurchase agreements with respect to any
security in which it is authorized to invest. While it does not presently
appear possible to eliminate all risks from these transactions
(particularly the possibility of a decline in the market value of the
underlying securities, as well as delays and costs to the Fund in
connection with bankruptcy proceedings), it is the current policy of the
Fund to limit repurchase agreement transactions to those parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
FOREIGN REPURCHASE AGREEMENTS. Foreign repurchase agreements may include
agreements to purchase and sell foreign securities in exchange for fixed
U.S. dollar amounts, or in exchange for specified amounts of foreign
currency. Unlike typical U.S. repurchase agreements, foreign repurchase
agreements may not be fully collateralized at all times. The value of the
security purchased by the Fund may be more or less than the price at which
the counterparty has agreed to repurchase the security. In the event of a
default by the counterparty, the Fund may suffer a loss if the value of the
security purchased is less than the agreed-upon repurchase price, or if the
Fund is unable to successfully assert a claim to the collateral under
foreign laws. As a result, foreign repurchase agreements may involve
higher credit risks than repurchase agreements in U.S. markets, as well as
risks associated with currency fluctuations. In addition, as with other
emerging market investments, repurchase agreements with counterparties
located in emerging markets or relating to emerging market securities may
involve issuers or counterparties with lower credit ratings than typical
U.S. repurchase agreements.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the Fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the Fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The Fund will enter into reverse repurchase agreements only with parties
whose creditworthiness has been found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of the Fund's
assets and may be viewed as a form of leverage.
SECURITIES LENDING. The Fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI a member of the New York Stock Exchange (NYSE)
and a subsidiary of FMR Corp.
Securities lending allows the 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 staff of the SEC that
the Fund is permitted to 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 (determined on a daily basis) rises above
the level 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 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 either by terminating the
loan or entering into an alternative arrangement with the borrower.
Cash received through loan transactions may be invested in any security in
which the Fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
FOREIGN SECURITIES. Investing in securities issued by companies or other
issuers whose principal activities are outside the United States may
involve significant risks not present in U.S. investments. 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. In addition, there is generally less publicly
available information about foreign companies, particularly those not
subject to the disclosure and reporting requirements of the U.S. securities
laws. Foreign companies are generally not bound by uniform accounting,
auditing, and financial reporting requirements and standards of practice
comparable to those applicable to U.S. companies. Investments in foreign
securities also involve the risk of possible adverse changes in investment
or exchange control regulations, expropriation or confiscatory taxation,
limitation on the removal of monies or other assets of the Fund, political
or financial instability or diplomatic and other developments which could
affect such investments. Further, economies of particular countries or
areas of the world may differ favorably or unfavorably from the economy of
the United States.
It is anticipated that in most cases the best available market for foreign
securities will be on exchanges or in over-the-counter 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 companies (particularly those
located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. companies. Foreign security trading
practices, including those involving securities settlement where Fund
assets may be released prior to receipt of payment, may expose the Fund to
increased risk in the event of a failed trade or the insolvency of a
foreign broker-dealer. In addition, foreign brokerage commissions and
other fees are generally higher than on securities traded in the United
States and may be non-negotiable. In general, there is less overall
governmental supervision and regulation of securities exchanges, brokers
and listed companies than in the United States.
The Fund may invest in foreign securities that impose restrictions on
transfer within the United States or to United States 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 and European Depositary Receipts (ADRs and
EDRs) are certificates evidencing ownership of shares of a foreign-based
issuer held in trust by a bank or similar financial institution. Designed
for use in U.S. and European securities markets, respectively, ADRs and
EDRs are alternatives to the purchase of the underlying securities in their
national markets and currencies.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. The Fund may conduct foreign
currency exchange transactions on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, or by entering
into forward contracts to purchase or sell foreign currencies at a future
date and price (i.e., a "forward foreign currency contract" or "forward
contract"). The Fund will convert currency on a spot basis from time to
time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, 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 to the Fund at one rate, while offering a lesser
rate of exchange should the Fund desire to resell that currency to the
dealer. Forward contracts are traded in the interbank market conducted
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 maturity, or may hold the contract to
maturity and complete the contemplated currency exchange.
The Fund may use currency forward contracts for any purpose consistent with
its investment objective. The following discussion summarizes some, but
not all, of the possible currency management strategies involving forward
contracts that could be used by the Fund. The Fund may also use options
and futures contracts relating to foreign currencies for the same purposes.
When the Fund agrees to buy or sell a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security.
By entering into a forward contract for the purchase or sale, for a fixed
amount of U.S. dollars, of the amount of foreign currency involved in the
underlying security transaction, the Fund will be able to protect itself
against an adverse change in foreign currency values between the date the
security is purchased or sold and the date on which payment is made or
received. The Fund may also enter into forward contracts to purchase or
sell a foreign currency 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.
The Fund may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For
example, if the Fund owned securities denominated in Pounds Sterling, the
Fund could enter into a forward contract to sell Pounds 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") will tend to offset
both positive and negative currency fluctuations, but will not offset
changes in security values caused by other factors. The Fund could also
hedge the position by selling another currency expected to perform
similarly to the Pound, for example, by entering into a forward contract to
sell Deutsche Marks in exchange for U.S. dollars. This type of strategy,
sometimes known as a "proxy hedge," may offer advantages in terms of cost,
yield or efficiency, but generally will not hedge currency exposure as
effectively as a simple hedge into U.S. dollars. Proxy hedges may result
in losses to the Fund if the currency used to hedge does not perform
similarly to the currency in which the hedged securities are denominated.
The Fund may enter into forward contracts to shift its investment exposure
from one currency into another currency that is expected to perform better
relative to the U.S. dollar. For example, if the Fund held investments
denominated in Deutsche Marks, the Fund could enter into forward contracts
to sell Deutsche Marks and purchase Swiss Francs. 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 the 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 the 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, the Fund will
segregate assets to cover currency forward contracts, if any, whose purpose
is essentially speculative. The 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 forward currency contracts will depend on FMR's skill in
analyzing and predicting currency values. Forward contracts may
substantially change the Fund's investment exposure to changes in currency
exchange rates, and could result in losses to the Fund if currencies do not
perform as FMR anticipates. For example, if a currency's value rose at a
time when FMR had hedged the Fund by selling that currency in exchange for
dollars, the Fund would be unable to participate in the currency's
appreciation. If FMR hedges currency exposure through proxy hedges, the
Fund could realize currency losses from the hedge and the security position
at the same time if the two currencies do not move in tandem. Similarly,
if FMR increases the Fund's exposure to a foreign currency, and that
currency's value declines, the Fund will realize a loss. There is no
assurance that FMR's use of forward currency contracts will be advantageous
to the Fund or that they will hedge at an appropriate time.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The Fund intends to file
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, before engaging in any purchases or sales of futures
contracts or options on futures contracts. The Fund intends to comply
wi t h Rule 4.5 under the Commodity Exchange Act, which limits the
extent to which the fund can commit assets to initial margin deposits and
option premiums.
In addition, the 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 Fund's investments in futures contracts and
options, and the Fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information may be
changed as regulatory agencies permit.
FUTURES CONTRACTS. When the Fund purchases a futures contract, it agrees
to purchase a specified underlying instrument at a specified future date.
When the Fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the Fund enters into the contract.
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 the Fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if the
Fund had purchased the underlying instrument directly. When the 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 of a futures contract 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 the Fund's investment
limitations. In the event of the bankruptcy of an FCM that holds margin on
behalf of the 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 result in losses to the Fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Fund
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 Fund
pays the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indexes of securities prices, and futures contracts. The Fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the Fund will lose the entire premium it paid. If the Fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. The Fund 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 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 paid, 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 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. When the Fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Fund 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. When writing an option on a futures
contract, the Fund will be required to make margin payments to an FCM as
described above for futures contracts. The Fund may seek to terminate its
position in a put option it writes 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 the Fund has written, however, the
Fund 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.
If security prices rise, a put writer would 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 Fund 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.
COMBINED POSITIONS. The Fund may purchase and write 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, the Fund may purchase a put option and write a call option on the
same underlying instrument, in order to 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, in order 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 the Fund's current or
anticipated investments exactly. The Fund may invest in options and
futures contracts based on securities with different issuers, maturities,
or other characteristics from the securities in which it 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 the 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. The 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 the 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.
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 for the Fund
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 the Fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, the Fund's access to other assets held to cover its options or
futures positions could also be impaired.
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 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
Fund 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.
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. The
Fund may purchase and sell currency futures and may purchase and write
currency options to increase or decrease its exposure to different foreign
currencies. The Fund may also purchase and write currency options 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
the Fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect
the Fund against a price decline resulting from deterioration in the
issuer's creditworthiness. Because the value of the 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.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The Fund will comply
with guidelines established by the Securities and Exchange Commission 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
the Fund's assets could impede portfolio management or the Fund's ability
to meet redemption requests or other current obligations.
SWAP AGREEMENTS. 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 the Fund's exposure to long- or
short-term interest rates (in the U.S. 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. The Fund is not
limited to any particular form of swap agreement if FMR determines it is
consistent with the Fund's investment objective and policies.
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 the 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 the Fund's investments and its share price.
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 the 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. The Fund expects to be able to
eliminate its exposure under swap agreements either by assignment or other
disposition, or by entering into an offsetting swap agreement with the same
party or a similarly creditworthy party.
The Fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If the
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 the 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.
INDEXED SECURITIES. The Fund may purchase securities whose prices are
indexed to the prices of other securities, securities indexes, 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. Gold-indexed securities, for
example, 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 of equivalent issuers. 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
U.S. and abroad. At the same time, indexed securities are 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. Indexed securities may be more volatile
than the underlying instruments.
SHORT SALES "AGAINST THE BOX." If the Fund enters into a short sale
against the box, it will be required to set aside securities equivalent in
kind and amount to the securities sold short (or securities convertible or
exchangeable into such securities) and will be required to hold such
securities while the short sale is outstanding. The Fund will incur
transaction costs, including interest expense, in connection with opening,
maintaining, and closing short sales against the box.
WARRANTS. Warrants are securities that give the Fund the right to purchase
equity securities from the issuer at a specific price (the strike price)
for a limited period of time. The strike price of warrants typically is
much lower than the current market price of the underlying securities, yet
they are subject to greater price fluctuations. As a result, warrants may
be more volatile investments than the underlying securities and may offer
greater potential for capital appreciation as well as capital loss.
Warrants do not entitle a holder to dividends or voting rights with respect
to the underlying securities and do not represent any rights in the assets
of the issuing company. Also, the value of the warrant does not
necessarily change with the value of the underlying securities and a
warrant ceases to have value if it is not exercised prior to the expiration
date. These factors can make warrants more speculative than other types of
investments.
SPECIAL CONSIDERATIONS AFFECTING EUROPE
New developments surrounding the creation of a unified common market in
Europe have helped to reduce physical and economic barriers promoting the
free flow of goods and services throughout Western Europe. These new
developments could make this new unified market one of the largest in the
world. However, encouraging signs of stronger growth in North America
contrasted with marked deterioration in economic performance in Europe,
where recessionary tendencies persisted through much of 1993. The sharp
slowing of growth in Europe reflects a range of adverse factors, including
tight monetary conditions, inadequate progress toward inflation convergence
and budgetary consolidation in many countries, and the attendant weakness
of consumer and business confidence. More generally, the turbulence in
foreign exchange markets since the middle of 1992 and an escalation of
tensions over trade have contributed to increased uncertainty in many
countries.
The economic situation also remains difficult for countries in transition
from central planning, following what has already been a sizable decline in
output. The contraction now appears to be bottoming out in parts of
central Europe, where some countries are projected to register positive
growth in 1994. But key aspects of the reform and stabilization efforts
have not yet been fully implemented, and there remain risks of policy
slippages. In the Russian Federation and most other countries of the
former Soviet Union, economic conditions are of particular concern because
of economic instability due to political unrest and armed conflicts in many
regions.
Notwithstanding the continued economic difficulties in many countries,
recent positive developments offer hope for a cooperative growth strategy
in the near term, which could also permit a strengthening of global
economic performance over the medium term. Many developing countries are
reaping the fruits of sustained reform and stabilization efforts. There
are now early signs of recovery in some of the economies in transition.
Efforts to enhance assistance to countries affected by the transition to
market-based trading systems occurring in central Europe and the former
Soviet Union, and to low-income countries to support strengthened
stabilization and restructuring efforts, are moving forward. In Europe,
exchange market tensions have eased, and interest rates have been falling
and should continue to do so as evidence accumulates of the waning of
inflationary pressures.
The European Community (EC) consists of Belgium, Denmark, France, Germany,
Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, and the
United Kingdom (the member states). In 1986, the member states of the EC
signed the "Single European Act," an agreement committing these countries
to the establishment of a market among themselves, unimpeded by internal
barriers or hindrances to the free movement of goods, persons, services, or
capital. To meet this goal, a series of directives have been issued to the
member states. Compliance with these directives is designed to eliminate
three principal categories of barriers: 1) physical frontiers, such as
customs posts and border controls; 2) technical barriers (which include
restrictions operating within national territories) such as regulations and
norms for goods and services (product standards); discrimination against
foreign bids (bids by other EC members) on public purchases; or
restrictions on foreign requests to establish subsidiaries; and (3) fiscal
frontiers, notably the need to levy value-added taxes, tariffs, or excises
on goods or services imported from other EC states.
The ultimate goal of this project is to achieve a large unified domestic
European market in which available resources would be more efficiently
allocated through the elimination of the above-mentioned barriers and the
added costs associated with those barriers. Elimination of these barriers
would simplify product distribution networks, allow economies of scale to
be more readily achieved, and free the flow of capital and other resources.
The Maastricht Treaty on economic and monetary union (EMU) attempts to
provide its members with a stable monetary framework consistent with the
EC's broad economic goals. But until the EMU Takes effect, which is
intended to occur between 1997 and 1999, the community will face the need
to reinforce monetary cooperation in order to reduce the risk of a
recurrence of tensions between domestic and external policy objectives.
The total European market, as represented by both EC and non-EC countries,
consists of over 328 million consumers, making it larger currently than
either the United States or Japanese markets. European businesses compete
nationally and internationally in a wide range of industries including:
telecommunications and information services, roads and transportation,
building materials, food and beverages, broadcast and media, financial
services, electronics, and textiles. Actual and anticipated actions on the
part of member states to conform to the unified Europe directives has
prompted interest and activity not only by European firms, but also by
foreign entities anxious to establish a presence in the Europe that will
result from these changes. Indications of the effect of this response to a
unified Europe can be seen in the areas of mergers and acquisitions,
corporate expansion and development, GNP growth, and national stock market
activity.
The early experience of the former centrally planned economies has already
demonstrated the crucially important link between structural reforms,
macroeconomic stabilization, and successful economic transformation. Among
the central European countries, the Czech Republic, Hungary, and Poland
have made the greatest progress in structural reform; inflationary
pressures there have abated following price liberalization, and output has
begun to recover. These achievements will be difficult to sustain,
however, in the absence of strong efforts to contain the large fiscal
deficits that have accompanied the considerable losses of output and tax
revenue since the start of the reform process.
In the Baltic countries there are encouraging signs that reforms are taking
hold and are being supported by strong stabilization efforts. In most
other countries of the former Soviet Union, in contrast, inadequate
stabilization efforts now threaten to lead to hyper-inflation, which could
derail the reform process. Inflation, which had abated following the
immediate impact of price liberalization in early 1992, surged to extremely
high levels in late 1992 and early 1993. The main reason for this
development has been excessive credit expansion to the government and to
state enterprises. The transformation process is being seriously hampered
by the widespread subsidization of inefficient enterprises and the
resulting misallocation of resources. The lack of effective economic and
monetary cooperation among the countries of the former Soviet Union
exacerbates other problems by severely constraining trade flows and
impeding inflation control. Partly as a result of these difficulties, some
countries have decided that the introduction of separate currencies offers
the best scope for avoiding hyper-inflation and for improving economic
conditions. This development can facilitate the implementations of
stronger stabilization programs. Economic conditions appear to have
improved for some of the transition economies of central EuropE during the
past year. Following three successive years of output declines, there are
preliminary indication s of a turnaround in the former Czech and Slovak
Federal Republic, Hungary, and Poland; growth in private sector activity
and strong exports, especially to western Europe, now appear to have
contained the fall in output. Most central European countries in
transition, however, are expected to achieve positive real growth in 1994
as market reforms deepen. The strength of the projected output gains will
depend crucially on the ability of the reforming countries to contain
fiscal deficits and inflation and on their continued access to, and success
in, export markets. Economic conditions in the former Soviet Union have
continued to deteriorate. Real GDP in Russia is estimated to have fallen
19 percent in 1992, after a 9 percent decline in 1991. In many other
countries of the region, output losses have been even larger. These
declines reflect the adjustment difficulties during the early stages of the
transition, high rates of inflation, the compression of imports, disruption
in trade among the countries of the former Soviet Union, and uncertainties
about the reform process itself. Large-scale subsidies are delaying
industrial restructuring and are exacerbating the fiscal situation. A
reversal of these adverse factors is not anticipated in the near term, and
output is expected to decline further in most of these countries. A number
of their governments, including those of Hungary, and Poland, are currently
implementing or considering reforms directed at political and economic
liberalization, including efforts to foster multi-party political systems,
decentralize economic planning, and move toward free market economies. At
present, no Eastern European country has a developed stock market, but
Poland and Hungary and the Czech Republic have small securities markets in
operation. Ethnic and civil conflict currently rage throughout the former
Yugoslavia. The outcome is uncertain.
Both the EC and Japan, among others, have made overtures to establish
trading arrangements and assist in the economic development of the Eastern
European nations. In the rest of Europe, monetary policy and financial
market developments have been dominated by the currency turmoil that began
in September 1992. At the same time, conditions are improving for
significant reductions of official interest rates in Europe, which should
help to contain recessionary forces and ensure that recovery takes hold by
1994. There is also an urgent need for positive steps to resist
protectionist pressures, especially by b ringing the multilateral trade
negotiations under the Uruguay Round of the General Agreement on Trade and
Tariffs (GATT) to a successful conclusion. Determined action to alleviate
short-term difficulties and to achieve key medium-term objectives would
unquestionably strengthen consumer and business confidence. Interest
rates generally have declined somewhat with the easing of tensions in the
Exchange Rate Mechanism (ERM), but for most countries tight monetary
conditions remain an obstacle to stronger growth and a threat to exchange
market stability. However, in the long-term, reunification could prove to
be an engine for domestic and international growth.
The conditions that have given rise to these developments are changeable,
and there is no assurance that reforms will continue or that their goals
will be achieved.
REAL GDP ANNUAL RATE OF GROWTH
OCTOBER 1993
Denmark 0.0%
France 1.3
Germany 1.2
Italy 2.9
Netherlands 3.6
Spain 0.1
Switzerland (1.1)
United Kingdom 1.1
Source: International Monetary Fund
(Figures are quoted based on each country's domestic currency.)
NATIONAL INDICES* (OCTOBER 1993)
EUROPE
1 month 12 months 5 years
Greece 10.45 24.86 14.74
Portugal 22.39 27.11 -1.69
Turkey 50.18 156.34 35.59
*Growth in U.S. dollars.
Source: Morgan Stanley
NATIONAL INDICES(dagger) (OCTOBER 1993)
EUROPE
1 month 12 months 5 years
Greece 23.04 49.41 26.64
Portugal 43.86 59.07 1.55
Turkey 101.04 322.29 104.04
(dagger)Growth in local currency.
Source: Morgan Stanley
SPECIAL CONSIDERATIONS AFFECTING JAPAN, THE PACIFIC BASIN, AND SOUTHEAST
ASIA
Many Asian countries may be subject to a greater degree of social,
political and economic instability than is the case in the United States
and Western European countries. Such instability may result from (i)
authoritarian governments or military involvement in political and economic
decision-making; (ii) popular unrest associated with demands for improved
political, economic and social conditions; (iii) internal insurgencies;
(iv) hostile relations with neighboring countries; and (v) ethnic,
religious and racial disaffection.
The economies of most of the Asian countries are heavily dependent upon
international trade and are accordingly affected by protective trade
barriers and the economic conditions of their trading partners,
principally, the United States, Japan, China and the European Community.
The enactment by the United States or other principal trading partners of
protectionist trade legislation, reduction of foreign investment in the
local economies and general declines in the international securities
markets could have a significant adverse effect upon the securities markets
of the Asian countries.
Thailand has one of the fastest growing stock markets in the world. The
manufacturing sector is becoming increasingly sophisticated and is
benefiting from export-oriented investing. The manufacturing and service
sectors continue to account for the bulk of Thailand's economic growth.
The agricultural sector continues to become less important. The government
has followed fairly sound fiscal and monetary policies, aided by increased
tax receipts from a fast moving economy. The government also continues to
move ahead with new projects - especially telecommunications, roads and
port facilities - needed to refurbish the country's overtaxed
infrastructure. Nonetheless, political unrest coupled with the shooting of
antigovernment demonstrators in May of 1992 has caused many international
businesses to question Thailand's political stability.
Hong Kong's impending return to Chinese dominion in 1997 has not initially
had a positive effect on its economic growth which was vigorous in the
1980's. Although China has committed by treaty to preserve the economic
and social freedoms enjoyed in Hong Kong for 50 years after regaining
control of Hong Kong, the continuation of the current form of the economic
system in Hong Kong after the reversion will depend on the action s of the
government of China. Business confidence in Hong Kong, therefore, can be
significantly affected by such developments, which in turn can affect
markets and business performance. In preparation for 1997, Hong Kong has
continued to develop trade with China, where it is the largest foreign
investor, while also maintaining its long-standing export relationship with
the United States. Spending on infrastructure improvements is a
significant priority of the colonial government while the private sector
continues to diversify abroad based on its position as an established
international trade center in the Far East.
In terms of GDP, industrial standards and level of education, South Korea
is second only to Japan in Asia. It enjoys the benefits of a diversified
economy with well developed sectors in electronics, automobiles, textiles
and shoe manufacture, steel and shipbuilding among others. The driving
force behind the economy's dynamic growth has been the planned development
of an export-oriented economy in a vigorously entrepreneurial society.
Real GDP grew about 4.3% in 1993. Labor unrest was noticeably calmer,
unemployment averaged a low of 2.3%, and investment was strong. Inflation
rates, however, are beginning to challenge South Korea's strong economic
performance. Both Koreas joined the United Nations separately in late
1991, creating another forum for negotiation and joint cooperation.
Reunification of North Korea and South Korea could have a detrimental
effect on the economy of South Korea.
Indonesia is a mixed economy with many socialist institutions and central
planning but with a recent emphasis on deregulation and private enterprise.
Like Thailand, Indonesia has extensive natural wealth, yet with a large and
rapidly increasingly population, it remains a poor country. Indonesia's
dependence on commodity exports makes it vulnerable to a fall in world
commodity prices.
Malaysia has one of the fastest growing economies in the Asian-Pacific
region. Malaysia has become the world's third-largest producer of
semiconductor devices (after the U.S. and Japan) and the world's largest
exporter of semiconductor devices. More remarkable is the country's
ability to achieve rapid economic growth with relative price stability (2%
inflation over the past five years) as the government followed prudent
fiscal/monetary policies. Malaysia's high export dependence level leaves
it vulnerable to a recession in the Organization for Economic Cooperation
and Development countries or a fall in world commodity prices.
Singapore has an open entrepreneurial economy with strong service and
manufacturing sectors and excellent international trading links derived
from its history. During the 1970s and the early 1980s, the economy
expanded rapidly, achieving an average annual growth rate of 9%. Per
capita GDP is among the highest in Asia. Singapore holds a position as a
major oil refining and services center.
Japan currently has the second largest GDP in the world. The Japanese
economy has grown substantially over the last three decades. Its growth
rate averaged over 5% in the 1970's and 1980. However, in 1992, the growth
rate in Japan slowed to 0.6% and their budget showed a deficit of 11/2%
percent of GDP. Despite small rallies and market gains, Japan has been
plagued with economic sluggishness. Economic conditions have weakened
considerably in Japan since October 1992. The boom in Japan's equity and
property markets during the expansion of the late 1980's supported high
rates of investment and consumer spending on durable goods, but both of
these components of demand have now retreated sharply following the the
decline in asset prices. Profits have fallen sharply, the previously tight
labor market conditions have eased considerably, and consumer confidence is
low. The banking sector has experienced a sharp rise in non-performing
loans, and strains in the financial system are likely to continue. The
decline in interest rates and the two large fiscal stimulus packages should
help to contain the recessionary forces, but substantial uncertainties
remain. The general government position has deteriorated as a result of
weakening economic growth, as well as, stimulative measures taken recently
to support economic activity and to restore financial stability.
Although Japan's economic growth has declined significantly since 1990,
many Japanese companies seem capable of rebounding due to increased
investments, smaller borrowings, increased product development and
continued government support. Growth is expected to recover in 1994.
Japan's economic growth in the early 1980's was due in part to government
borrowings. Japan is heavily dependent upon international trade and,
accordingly, has been and may continue to be adversely affected by trade
barriers, and other protectionist or retaliatory measures of, as well as
economic conditions in, the U.S. and other countries with which they trade.
Industry, the most important sector of the economy, is heavily dependent on
imported raw materials and fuels. Japan's major industries are in the
engineering, electrical, textile, chemical, automobile, fishing, and
telecommunication fields. Japan imports iron ore, copper, and may forest
products. Only 19% of its land is suitable for cultivation. Japan's
agricultural economy is subsidized and protected. It is about 50%
self-sufficient in food production. Even though Japan produces a minute
rice surplus, it is dependent upon large imports of wheat, sorghum, and
soybeans from other countries. Japan's high volume of exports such as
automobiles, machine tools, and semiconductors have caused trade tensions
with other countries, particularly the United States. Attempts to approve
trading agreements between the countries may reduce the friction caused by
the current trade imbalance.
Australia has a prosperous Western-style capitalist economy, with a per
capita GDP comparable to levels in industrialized West European countries.
It is rich in natural resources and is the world's largest exporter of beef
and wool, second-largest for mutton, and is among the top wheat exporters.
Australia is also a major exporter of minerals, metals and fossil fuels.
Due to the nature of its exports, a downturn in world commodity prices can
have a big impact on its economy.
EMERGING MARKETS: ASIA
MARKET CAPITALIZATION IN U.S. DOLLARS
SEPTEMBER 1993
Billions:
India 29.25
Indonesia 10.85
Korea 70.61
Malaysia 87.76
Pakistan 4.74
Philippines 14.28
Sri Lanka .79
Taiwan 52.34
Thailand 48.82
NATIONAL INDICES* OCTOBER 1993
ASIA
1 month 12 months 5 years
India 30.20 n/a n/a
Indonesia 42.45 39.03 26.80
Israel 6.50 n/a n/a
Jordan 7.41 34.15 4.70
Korea .30 19.89 -4.08
Malaysia 42.47 67.80 23.91
Pakistan 29.19 n/a n/a
Philippines 32.73 47.36 24.44
Sri Lanka 57.91 n/a n/a
Taiwan -13.43 5.81 -8.48
Thailand 41.73 42.95 24.47
*Growth in U.S. dollars.
Source: Morgan Stanley
NATIONAL INDICES(dagger) OCTOBER 1993
ASIA
1 month 12 months 5 years
India 30.32 n/a n/a
Indonesia 43.96 42.84 32.09
Israel 12.52 n/a n/a
Jordan 9.92 36.89 13.63
Korea 1.79 23.82 -1.33
Malaysia 41.95 70.92 22.83
Pakistan 45.39 n/a n/a
Philippines 46.90 74.26 32.75
Sri Lanka 62.12 n/a n/a
Taiwan -10.24 12.01 -9.56
Thailand 42.47 42.83 24.48
(dagger)Growth in local currency.
Source: Morgan Stanley
ASIAN STOCK MARKET RETURNS (OCTOBER 1993)
Average annual stock market Stock market returns
return (Local currency %) (Local currency%)
1989-1992 11 months to November 30,1993
China n/a n/a
Hong Kong 17.9 64.6
India 36.9 27.6
Indonesia 4.0 80.5
Japan (14.2) 5.6
Korea (9.0) 19.7
Malaysia 12.2 67.8
Philippines 25.4 86.9
Singapore 7.1 32.2
Taiwan (11.2) 32.0
Thailand 22.5 53.6
REAL GDP (OCTOBER 1993)
Average Real GDP
Growth for the Period Nominal GDP
1980-1992 1992
% (US$ billions)
China 9.7 435(a)
Hong Kong 6.8 96
India 5.3 266
Indonesia 5.6 126
Japan 4.0 3,670
Korea 9.2 297
Malaysia 5.9 55
Philippines 1.0 52
Singapore 6.5 46
Taiwan 7.6 207
Thailand 7.9 104
SPECIAL CONSIDERATIONS AFFECTING CANADA
Canada occupies the northern part of North America and is the second
largest country in the world (3.97 million square miles in area) extending
from the Atlantic Ocean to the Pacific. The companies may include those
involved in the energy industry, industrial materials (chemicals, base
metals, timber and paper) and agricultural materials (grain cereals). The
securities of companies in the energy industry are subject to changes in
value and dividend yield which depend, to a large extent, on the price and
supply of energy fuels. Rapid price and supply fluctuations may be caused
by events relating to international politics, energy conservation and the
success of exploration products. Canada is one the world's leading
industrial countries, as well as a major exporter of agricultural
products. Canada is rich in natural resources such as zinc, uranium,
nickel, gold, silver, aluminum, iron and copper. Forest covers over 44% of
land area, making Canada a leading world producer of newsprint. The economy
of Canada is strongly influenced by the activities of companies and
industries involved in the production and processing of natural resources.
Canada is a major producer of hydroelectricity, oil and gas. The business
activities of companies in the energy field may include the production,
generation, transmission, marketing, control or measurement of energy or
energy fuels. Economic prospects are changing due to recent government
attempts to reduce restrictions against foreign investment.
Canadian securities are not considered by FMR to have the same level of
risk as other nation's securities. Canadian and U.S. companies are
generally subject to similar auditing and accounting procedures, and
similar government supervision and regulation. Canadian markets are more
liquid than many other foreign markets and share similar characteristics
with U.S. markets. The political system is more stable than in some other
foreign countries, and the Canadian dollar is generally less volatile
relative to the U.S. dollar.
Many factors affect and could have an adverse impact on the financial
condition of Canada, including social, environmental and economic
conditions; factors which are not within the control of Canada. In Canada,
where recovery is not yet as firmly established as in the United States,
interest rates have been coming down after a sharp rise associated with
exchange market developments in the fall of 1992. In light of the cyclical
situation, there should be room for a further easing of interest rates
without jeopardizing the progress made toward price stability. Continued
perseverance in reducing the structural budget deficit also is required.
FMR is unable to predict what effect, if any, such factors would have on
instruments held in the fund's portfolio.
Beginning in January of 1989 the U.S. - Canada Free Trade Agreement will be
phased in over a period of 10 years. This agreement will remove tariffs on
U.S. technology and Canadian agricultural products in addition to removing
trade barriers affecting other important sectors of each country's economy.
Canada, the U.S. and Mexico will implement the North American Free Trade
Agreement, beginning in 1994. This cooperation is expected to lend to
increased trade and to reduce barriers.
The majority of new equity issues or initial public offerings in Canada are
through underwritten offerings. The Fund may elect to participate in these
issues.
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICA
Latin America is a region rich in natural resources such as oil, copper,
tin, silver, iron ore, forestry, fishing, livestock, and agriculture. The
region has a large population (roughly 300 million) representing a large
domestic market. Economic growth was strong in the 1960s and 1970s, but
slowed dramatically in the 1980s as a result of poor economic policies,
higher international interest rates and the denial of access to new foreign
capital. Capital flight has proven a persistent problem and external debt
has been forcibly rescheduled. Political turmoil, high inflation, capital
repatriation restrictions and nationalization have further exacerbated
conditions.
Changes in political leadership, the implementation of market oriented
economic policies, such as privatization, trade reform and fiscal and
monetary reform are among the recent steps taken to renew economic growth.
External debt is being restructured and flight capital (domestic capital
that has left the home country) has begun to return. Inflation control
efforts have also been implemented. A Free Trade zone has been established
in various areas around the region, the most notable being a free zone
between Mexico, the U.S., and Canada. Latin American equity markets can
be extremely volatile and in the past have shown little correlation with
the U.S. market. Currencies are typically weak, but most are now
relatively free floating, and it is not unusual for the currencies to
undergo wide fluctuations in value over short periods of time due to
changes in the market.
Mexico's economy is a mixture of state-owned industrial plants (notably
oil), private manufacturing and services, and both large-scale and
traditional agriculture. In the 1980s, Mexico experienced severe economic
difficulties: the nation accumulated large external debts as world
petroleum prices fell; rapid population growth outstripped the domestic
food supply; and inflation, unemployment, and pressures to emigrate became
more acute. Growth in national output however appears to be recovering,
rising from 1.4% in 1988 to 3.9% in 1990. The U.S. is Mexico's major
trading partner, accounting for two-thirds of its exports and imports. In
fact, the U.S. now exports more goods to Mexico than Japan. After
petroleum, border assembly plants and tourism are the largest earners of
foreign exchange. The government, in consultation with international
economic agencies, is implementing programs to stabilize the economy and
foster growth. Mexico, the U.S. and Canada will implement the North
American Free Trade Agreement, beginning in 1994. This cooperation is
expected to lead to increased trade and reduced barriers.
Brazil entered the 1990s with declining real growth, runaway inflation, an
unserviceable foreign debt of $122 billion, and a lack of policy direction.
A major long-run strength is Brazil's natural resources. Iron ore,
bauxite, tin, gold, and forestry products make up some of Brazil's basic
natural resource base, which includes some of the largest mineral reserves
in the world. A vibrant private sector is marred by an inefficient public
sector. The government has embarked on an ambitious reform program that
seeks to modernize and reinvigorate the economy by stabilizing prices,
deregulating the economy, and opening it to increased foreign competition.
In terms of population, Brazil is the sixth largest in the world with
about 155 million people and represents a huge domestic market.
Chile, like Brazil, is endowed with considerable mining resources, in
particular copper. Economic reform has been ongoing in Chile for at least
15 years, but political democracy has only recently returned to Chile.
Privatization of the public sector beginning in the early 1980s has
bolstered the equity market. A well organized pension system has created a
long-term domestic investor base.
Argentina is strong in wheat production and other foodstuffs and livestock
ranching. A well-educated and skilled population boasts one of the highest
literacy rates in the region. The country has been ravaged by decades of
extremely high inflation and political instability. Recent attempts by the
present political regime to slow inflation and rationalize government
spending appear to be meeting with some success. Privatization is ongoing
and should reduce the amount of external debt outstanding.
Venezuela has substantial oil reserves. External debt is being
renegotiated, and the government is implementing economic reform in order
to reduce the size of the public sector. Internal gasoline prices, which
are one-third those of international prices, are being increased in order
to reduce subsidies. Plans for privatization and exchange and interest
rate liberalization are examples of recently introduced reforms.
EMERGING MARKETS: LATIN AMERICA
MARKET CAPITALIZATION IN U.S. DOLLARS
SEPTEMBER 1993
Billions:
Argentina 24.99
Brazil 48.62
Chile 22.77
Colombia 4.89
Mexico 89.46
Peru 3.00
Venezuela 4.83
NATIONAL INDICES* OCTOBER 1993
LATIN AMERICA
1 month 12 months 5 years
Argentina 38.32 57.19 43.89
Brazil 34.75 59.55 17.76
Chile 22.52 5.29 39.10
Colombia 28.01 n/a n/a
Mexico 19.14 23.46 55.30
Peru 49.87 n/a n/a
Venezuela -2.97 n/a n/a
*Growth in U.S. dollars.
Source: Morgan Stanley
NATIONAL INDICES(dagger) OCTOBER 1993
LATIN AMERICA
1 month 12 months 5 years
Argentina 38.54 58.79 427.44
Brazil 626.43 3354.77 1434.40
Chile 24.74 16.14 54.05
Colombia 35.13 n/a n/a
Mexico 19.87 23.74 65.40
Peru 66.63 n/a n/a
Venezuela 13.46 n/a n/a
(dagger)Growth in local currency.
Source: Morgan Stanley
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the 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 will consider
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 arrangements for payment of fund
expenses. Commissions for foreign investments traded on foreign exchanges
will generally be higher than for U.S. investments and may not be subject
to negotiation.
T he 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; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). The selection of such broker-dealers 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 such
research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the Fund may be useful to FMR in rendering investment management
services to the 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 the 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.
Subject to applicable limitations of federal securities laws,
broker-dealers may receive commissions for agency transactions 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
the 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 the Fund and 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 Fund or shares of other Fidelity funds
to the extent permitted by law. FMR may use research services provided by
and place agency transactions with FBSI and Fidelity Brokerage Services,
Ltd. (FBSL), 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 September 4,
1992, FBSL operated under the name Fidelity Portfolio Services, Ltd. (FPSL)
as a wholly owned subsidiary of Fidelity International Limited (FIL).
Edward C. Johnson 3rd is Chairman of FIL. Mr. Johnson 3d, Johnson family
members, and various trusts for the benefit of the Johnson family own,
directly or indirectly, more than 25% of the voting common stock of FIL.
F MR may allocate brokerage transactions to broker-dealers who have
entered into arrangements with FMR under which the b roker-dealer
allocates a portion of the commissions paid by the fund toward payment of
the Fund's expenses, such as transfer a g ent fees or custodian fees.
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 FBSI to execute portfolio transactions on national securities
exchanges in accordance with approved procedures and applicable SEC rules.
The Trustees 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 p eriods ended October 31, 1993 and 1992 the Fund's
portfolio turnover rates were 42% and 168%, respectively. As a result of
the investment activities described herein, it is likely that the Fund, as
other international mutual funds, will engage in a considerable volume of
trading in securities. It can be expected that the Fund will have a higher
turnover rate, and thus a higher incidence of short-term capital gains
taxable as ordinary income, than might be expected from investment
companies that invest substantially all of their portfolios on a long-term
basis. Shareholders should realize that a high rate of portfolio turnover
involves correspondingly greater trading costs. These trading costs must
be borne directly by the Fund.
F or the fiscal 1993, 1992 , and 1991, the Fund paid brokerage
commissions of $500,186, $119,400 and $133,571, respectively. During the
same periods, approximately $436,122, $106,073, and $119,909 or 87%, 89%,
and 90%, respectively, of these com m issions were paid to brokerage
firms that provided research services, although the provision of such
services was not necessarily a factor in the placement all of this business
with such firms. The Fund pays both commissions and spreads in connection
with the placement of portfolio transactions; FBSI is paid on a commission
basis.
During fiscal 1993, 1992 and 1991, the Fund paid brokerage commissions of
$800, $30, and $242, respectively to FBSI. This amounted to .16%, .03%,
and .18% of the aggregate brokerage commissions paid by the Fund for
transactions involving .76%, .14%, and .74%, respectively, of the aggregate
dollar amount of transactions in which the Fund paid brokerage commissions.
The difference in the percentage of the brokerage commissions paid to, and
the percentage of the dollar amount of transactions effected through FBSI
is a result of the low commission rates charged by FBSI.
During the fiscal 1993, 1992 and 1991, the Fund paid $0, $1,179, and $3,132
in brokerage commissions to FBSL, respectively. This amounted to
approximately 0%, .99%, and 2.35%, respectively, of the aggregate brokerage
commissions paid by the Fund, for transactions involving approximately 0%,
1.80%, and 3.31%, respectively, of the dollar amount of transactions in
which the Fund paid brokerage commissions.
From time to time the Trustees will review whether the recapture for the
benefit of the Fund of some portion of the brokerage commissions or similar
fees paid by the Fund on portfolio transactions is legally permissible and
advisable. The Fund seeks to r ecapture 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 the Fund to seek such
recapture.
Although the Trustees and officers of the Fund are substantially the same
as those of other funds managed by FMR, investment decisions for the 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 or 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 engaged simultaneously in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with a formula considered by the officers of the funds involved to be
equitable to each fund. In some cases this system could have a detrimental
effect on the price or value of the security as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions and prices for the
Fund. It is the current opinion of the Trustees that the desirability of
retaining FMR as investment adviser to the Fund outweighs any disadvantages
that may be said to exist from exposure to simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
Portf o lio securities are valued by various methods depending on the
primary market or exchange on which they trade. Most equity securities for
which the primary market is the U.S. are valued at last sale price or, if
no sale has occurred, at the closing bid price. Equity securities for
which the primary market is outside the U.S. are valued using the official
closing price or the last sale price in the principal market where they are
traded. If the last sale price (on the local exchange) is unavailable, the
last evaluated quote or last bid price is normally used. Short-term
securities are valued either at amortized cost or at original cost plus
accrued in t erest, both of which approximate current value.
Convertible securities and fixed-income securities are valued primarily by
a pricing service that uses a vendor security valuation matrix which
incorporates both dealer-supplied valuations and electronic data processing
techniques. This twofold approach is believed to more accurately reflect
fair value because it takes into account appropriate factors such as
institutional trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data, without exclusive reliance upon quoted, exchange, or
over-the-counter prices. Use of pricing services has been approved by the
Board of Trustees.
Securities and other assets for which there is no readily available market
are 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 the Fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method (e.g., closing
over-the-counter bid prices in the case of debt instruments traded on an
exchange) would more accurately reflect the fair market value of such
securities.
Generally, the valuation of foreign and domestic equity securities, as well
as corporate bonds, U.S. government securities, money market instruments,
and repurchase agreements, is substantially completed each day at the close
of the NYSE. The values of any such securities held by the Fund are
determined as of such time for the purpose of computing the Fund's net
asset value (NAV). Foreign security prices are furnished by independent
brokers or quotation services which express the value of securities in
their local currency. Service 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 currency
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 the security will be
valued as determined in good faith by a committee appointed by the Board of
Trustees.
PERFORMANCE
The Fund may quote its performance in various ways. All performance
information supplied in advertising is historical and is not intended to
indicate future returns. Share price and total return fluctuate in
response to market conditions and other factors, and the value of shares
when redeemed may be more or less than their original cost.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of return, including the effect of reinvesting dividends and
capital gain distributions, and any change in the NAV over the period.
Average annual total returns are calculated by determining the growth or
decline in value of a hypothetical historical investment 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 return
of 100% over ten years would produce an average annual total return of
7.18%, which is the steady annual rate 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 performance is not constant over time, but changes from year
to year, and that average annual returns represent averaged figures as
opposed to the actual year-to-year performance.
In addition to average annual total returns, unaveraged or cumulative total
returns reflecting the simple change in value of an investment over a
stated period may be quoted. 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, and/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. An example of this type of
illustration is given below. Total returns may be quoted with or without
taking the maximum sales charge into account. Total returns may be quoted
on a before-tax or after-tax basis. Excluding the Fund's sales charge from
a total return calculation produces a higher total return figure. Total
returns and other performance information may be quoted numerically or in a
table, graph or similar illustration.
To illustrate the components of overall performance, the Fund may separate
its cumulative and average annual returns into income results and capital
gains or losses.
The following chart shows total returns for the periods ended October 31,
1993.
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS(DAGGER) TOTAL RETURN(DAGGER)
One Year 37.28% 44.13%
Life of Fund* 7.10% 33.75%
(DAGGER) Av e rage annual total returns include the effect of the
maximum 4.75% sales charge. Cumulative total returns do not include the
effect of this sales charge and would have been lower if the sales charge
had been taken into account.
* Life of Fund: April 23, 1990 (commencement of operations) to October 31,
1993.
N ET ASSET VALUE. Charts and graphs using the 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
the Fund and reflects all elements of its return. Unless otherwise
indicated, the Fund's adjusted NAVs are not adjusted for sales charges, if
any.
M O VING AVERAGES. The Fund may illustrate performance using moving
averages. A long-term moving average is the average of each week's
adjusted closing NAV for a specified period. A short-term moving average
is the average of each day's adjusted closing NAV for a specified period.
Moving Average Activity Indicators combine adjusted closing NAVs from the
last business day of each week with moving averages for a specified period
to produce indicators showing when an NAV has crossed, stayed above, or
stayed below its moving average. On October 29, 1993, the 13-week and
39-week long-term moving averages were 12.72 and 11.59, respectively.
PERFORMANCE COMPARISONS. The 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. The 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. Lipper generally ranks funds on the basis of
total return, assuming reinvestment of dividends, but does not take sales
charges or redemption fees or tax consequences into consideration. Lipper
may also rank funds based on yield. In addition to mutual fund rankings,
the Fund's performance may be compared to mutual fund performance indices
prepared by Lipper.
From time to time, the Fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, Morningstar, Inc. may be quoted 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.
The F u nd may be compared in advertising to Certificates of Deposit
(CDs) or other investments issued by banks. Mutual funds differ from
ba n k investment in several respects. For example, the Fund may
offer greater liquidity or higher potential returns than CDs, and the
Fu n d does not guarantee your principal or your return.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. For
example, Fidelity's Asset Allocation Program materials may include:
compu t erized investment planning softw a re, a workbook
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed
to help create a personal financial profile; and an action plan offering
investment alternatives.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the U.S., 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 Consumer Price Index (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 Fund. Ibbotson calculates total returns in the same method as
the Fund. Performance comparisons may also be made to that of other
compilations or indices that may be developed and made available in the
future.
Performance may also be compared to that of the Standard & Poor's 500
Composite Stock Price Index (S&P 500, which is a registered trademark
of Standard & Poor's Corporation), the Dow Jones Industrial Average
(the DOW or DJIA) or to the Morgan Stanley Capital International Europe,
Australia, Far East Index (the EAFE Index), which is an unmanaged index of
common stock prices of more than 900 companies from the United Kingdom,
Germany, France, Switzerland, the Netherlands, Italy, Belgium, Spain,
Sweden, Denmark, Austria, Norway, Australia, Japan, Hong Kong and Singapore
converted into U.S. dollars. Total returns for the EAFE Index reflect
changes in share prices of stocks included in the Index and assume
reinvestment of dividends paid on those stocks. The S&P 500 and the
DOW are widely recognized, unmanaged indices of common stock prices. The
performance of the S&P 500 is based on changes in the prices of stocks
comprising the index and assumes the reinvestment of all dividends paid on
such stocks. Taxes, brokerage commissions and other fees are disregarded
in computing the level of the S&P 500 and the D J IA.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment pl a ns and dollar cost averaging . In addition, Fidelity
may quote financial or business publications or periodicals, including
model portfolios or allocations, as they relate to fund management,
investment philosophy, and investment techniques.
The Fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
A ccording to the Investment Company Institute, over the past ten
years, assets in equity funds increased from $75.8 billion in 1983 to
approximately $659.3 billion at the end of 1993. As of December 31,
1993, FMR managed approximately $125 billion in equity funds assets, as
defined and tracked by Lipper. From time to time the Fund may compare
FMR's fixed income assets under management with that of other investment
advisers.
VOLATILITY. Various measures of volatility and benchmark correlation may
be quoted in advertising. In addition, the Fund may compare these measures
to those of other funds. Measures of volatility seek to compare 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.
MOMENTUM INDICATORS indicate the Fund's price movements over specific
periods of time. Each point on the momentum indicator represents the
percentage change in price movements over that period.
The 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 portfolio 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 had
been purchased at the same intervals. In evaluating such a plan, investors
should consider their ability to continue purchasing shares through periods
of low price levels.
The 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.
HISTORICAL FUND RESULTS. The following chart shows the income and capital
elements of the Fund's year-by-year total return from April 23, 1990
(Commencement of Operations) through October 31, 1993. (Prior to December
1, 1992, the Fund compared its total return to the record of the Europe
Index, which illustrated how the Fund's total return compared to the record
of a broad range of European stocks.) Effective December 1, 1992, the
comparative index used in the Fund's performance changed to the EAFE Index.
The Fund may also compare its performance to the record of the S&P 500,
the Dow Jones Industrial Average (DJIA), and the cost of living (measured
by the CPI) over the same period. The EAFE, NASDAQ, S&P 500 and DJIA
comparisons are provided to show how the Fund's total return compared to
the record of a broad range of foreign and domestic common stocks and for
the DJIA, a narrower set of stocks of major U.S. industrial companies over
the same period. The Fund has the ability to invest in securities not
included in the indices, and its investment portfolio may or may not be
similar in composition to the indices. The EAFE Index, the S&P 500,
the DJIA, and the NASDAQ are based on the prices of unmanaged groups of
stocks and, unlike the Fund's returns, their returns do not include the
effect of paying brokerage commissions and other costs of investing.
During the period from April 23, 1990 (commencement of operations) to
October 31, 1993 a hypothetical investment of $10,000 in the Fidelity
Advisor Overseas Fund would have grown to $12,740, assuming all
distributions were reinvested. This was a period of widely fluctuating
stock prices, and should not necessarily be considered a representation of
the income and capital gain or loss that may be realized from an investment
in the Fund today.
FIDELITY ADVISOR OVERSEAS FUND INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VALUE OF VALUE OF VALUE OF
INITIAL REINVESTED REINVESTED COST
PERIOD $10,000 DIVIDEND CAPITAL GAIN TOTAL EAFE OF
ENDED INVESTMENT DISTRIBUTIONS DISTRIBUTIONS VALUE S& DJIA INDEX(dagger) LIVING**
10/31/90* $9,096 $0 $0 $9,096 P 500 $9,246 $9,815 $10,357
10/31/91 9,315 77 0 9,392 $9,246 12,027 10,497 10,659
10/31/92 8,639 200 0 8,839 12,344 13,020 9,110 11,001
10/31/93 12,316 424 0 12,740 13,575 15,291 12,522 11,303
15,604
</TABLE>
* April 23, 1990 (commencement of operations) to October 31, 1990.
** From month-end closest to initial investment date.
(dagger) Total returns for the EAFE Index reflect changes in share prices
of stocks included in the Index and assume reinvestment of dividends paid
on those stocks. On December 1, 1992, shareholders approved amendments to
the Fund's investment parameters. Prior to December 1, 1992, the
comparative index used in the Fund's performance adjustment was the Morgan
Stanley Capital International Europe Index (the Europe Index), which is an
unmanaged index of foreign common stock prices converted into U.S. dollars.
Currently, the common stocks of over 500 foreign companies, representing 12
European countries, make up the Europe Index. As of November 30, 1992 the
total value of the Europe Index was $10,192. If this balance had been
transferred to the EAFE Index as of December 1, 1992 the ending balance
would have been $13,879 on October 31, 1993.
EXPLANATORY NOTES: With an initial investment of $10,000 made on April 23,
1990, the net amount invested in Fund shares was $9,525, assuming the
current 4.75% maximum sales charge was deducted as if it had been in effect
at that time. The cost of the initial investment ($10,000) together with
the aggregate cost of reinvested dividends and capital gain distributions
for the period covered (that is, their cash value at the time they were
reinvested), amounted to $10,308. If distributions had not been
reinvested, the amount of distributions earned from the Fund over time
would have been smaller, and the cash payments for the period would have
amounted to $305 for income dividends and $0 for capital gain
distributions. Tax consequences have not been factored into the above
figures.
MARKET CAPITALIZATION. Companies outside the U.S. now make up nearly
two-thirds of the world's stock market capitalization. According to Morgan
Stanley Capital International World Index, the size of the markets as
measured in U.S. dollars grew from $2,011 billion in 1982 to $11,638
billion as of December 31, 1993.
The following table measures the total market capitalization of certain
countries according to the Morgan Stanley Capital International Indices
database. The value of the markets are measured in billions of U.S.
dollars as of December 31, 1993.
TOTAL MARKET CAPITALIZATION
Australia $ 196 Japan $ 2,885
Austria 28 Netherlands 171
Belgium 76 Norway 26
Canada 297 Singapore/Malaysia 297
Denmark 40 Spain 115
France 453 Sweden 102
Germany 443 Switzerland 244
Hong Kong 383 United Kingdom 1,190
Italy 135 United States 4,467
NATIONAL STOCK MARKET PERFORMANCE. Certain national stock markets have
outperformed the U.S. stock market. The first table below represents the
performance of national stock markets as measured in U.S. dollars by the
Morgan Stanley Capital International stock market indices for the twelve
month period ended December 31, 1993. The second table shows the same
performance as measured in local currency. Each table measures total
return based on the period's change in price, assuming any dividends are
reinvested monthly and net of any applicable foreign taxes. These are
unmanaged indices composed of a sampling of selected companies representing
an approximation of the market structure of the designated country.
STOCK MARKET PERFORMANCE (CUMULATIVE TOTAL RETURNS)
MEASURED IN U.S. DOLLARS
Australia 36.6% Japan 25.7%
Austria 28.6 Netherlands 36.6
Belgium 24.9 Norway 42.6
Canada 18.4 Singapore/Malaysia 89.0
Denmark 33.3 Spain 31.2
France 21.6 Sweden 37.6
Germany 36.3 Switzerland 46.7
Hong Kong 116.7 United Kingdom 24.4
Italy 29.5 United States 10.1
STOCK MARKET PERFORMANCE (CUMULATIVE TOTAL RETURNS)
MEASURED IN LOCAL CURRENCY
Australia 38.7% Japan 12.4%
Austria 38.0 Netherlands 45.8
Belgium 35.9 Norway 54.7
Canada 23.5 Singapore/Malaysia 90.4
Denmark 44.7 Spain 63.6
France 30.0 Sweden 62.5
Germany 46.2 Switzerland 48.5
Hong Kong 116.3 United Kingdom 27.4
Italy 50.0 United States 10.1
Of course, these results do not indicate future stock market performance or
the Fund's performance. Market conditions during the period measured
fluctuated widely. Brokerage commissions and other fees were not factored
into the values of the indices.
TRADITION OF PERFORMANCE. Fidelity's tradition of performance is achieved
through:
(bullet) MONEY MANAGEMENT: a proud tradition of money management
motivated by the expectation of excellence backed by solid analysis and
worldwide resources. Fidelity employs a bottom-up approach to security
selection based upon in-depth analysis of the fundamentals of that
investment opportunity.
(bullet) INNOVATION: constant attention to the changing needs of today's
investors and vigilance to the opportunities that arise from changing
global markets. Research is central to Fidelity's investment
decision-making process. Fidelity's greatest resource -- over 200 skilled
investment professionals--is supported with the most sophisticated
technology available.
Fidelity provides:
(bullet) Global research resources: an opportunity to diversify
portfolios and share in the growth of markets outside the United States.
(bullet) In-house, proprietary bond-rating system, constantly updated,
which provides extremely sensitive credit analysis.
(bullet) Comprehensive chart room with over 1500 exhibits to provide
sophisticated charting of worldwide economic, financial, and technical
indicators, as well as to provide tracking of over 800 individual stocks
for portfolio managers.
(bullet) State-of-the-art trading desk, with access to over 200 brokerage
houses, providing real-time information to achieve the best executions and
optimize the value of each transaction.
(bullet) Use of extensive on-line computer-based research services.
(bullet) SERVICE: timely, accurate and complete reporting. Prompt and
expert attention when an investor or an investment professional needs it.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
HOLIDAY SCHEDULE. The Fund is open for business and the NAV is calculated
each day that the NYSE is open for trading. The N YS E has designated
the following holiday closings for 1994: Presidents' Day, Good Friday,
Memorial Day, Independence Day , Labor Day, Thanksgiving Day, and Christmas
Day (observed). Although FMR expects the same holiday schedule, with the
addition of New Year's Day, to be observed in the future, the NYSE may
modify its holiday schedule at any time. On any day that the NYSE closes
early, or as permitted by the SEC, the right is reserved to advance the
time on that day by which purchase and redemption orders must be received.
To the extent that portfolio securities are traded in other markets on days
when the NYSE is closed the Fund's NAV may be affected on days when
investors do not have access to the Fund to purchase or redeem shares.
Certain Fidelity funds may follow different holiday closing schedules.
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 the Fund's NAV . Shareholders receiving any such 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 (the Rule), the 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, the 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
might otherwise be adversely affected.
PURCHASE INFORMATION
As provided for in Rule 22d-1 under the 1940 Act, Distributors exercises
its right to waive the Fund's shares' maximum 4.75% sales charge in
connection with the Fund's merger with or acquisition of any investment
company or trust.
NET ASSET VALUE PURCHASES. Sales charges do not apply to shares purchased:
(1) by registered representatives, bank trust officers and other employees
(and their immediate families) of investment professionals having
agreements with Distributors; (2) by a current or former Trustee or officer
of a Fidelity fund or a current or retired officer, director or regular
employee of FMR Corp. or its direct or indirect subsidiaries (a "Fidelity
Trustee or employee"), the spouse of a Fidelity Trustee or employee, a
Fidelity Trustee or employee acting as custodian for a minor child, or a
person acting as trustee of a trust for the sole benefit of the minor child
of a Fidelity Trustee or employee; (3) by a charitable organization (as
defined in Section 501(c)(3) of the Internal Revenue Code) investing
$100,000 or more; (4) by a charitable remainder trust or life income pool
established for the benefit of a charitable organization (as defined in
Section 501(c)(3) of the Internal Revenue Code); (5) by trust institutions
(departments) investing on their own behalf or on behalf of their clients;
(6) in a c counts as to which a bank or broker-dealer charges an asset
management fee, provided the bank or broker-dealer has an agreement with
Distributors; (7) as part of an employee benefit plan (including
Fidelity-Sponsored 403(b) and Corporate IRA programs, but otherwise as
defined in the Employee Retirement Income Security Act (ERISA)), maintained
by a U.S. employer having more than 200 eligible employees, or a minimum of
$1,000,000 invested in Fidelity Advisor mutual funds, and the assets of
which are held in a bona fide trust for the exclusive benefit of employees
participating therein; (8) in a Fidelity or Fidelity Advisor IRA account
purchased with the proceeds of a distribution from an employee benefit plan
having more than 200 eligible employees or a minimum of $3,000,000 in plan
assets invested in Fidelity mutual funds or $1,000,000 invested in Fidelity
Advisor mutual funds; (9) by an insurance company separate account used to
fund annuity contracts purchased by employee benefit plans (including
403(b) programs, but otherwise as defined in ERISA), which, in the
aggregate, have either more than 200 eligible employees or a minimum of
$1,000,000 invested in Fidelity Advisor mutual funds; (10) by any state,
county, or city, or any governmental instrumentality, department, authority
or agency; or (11) with redemption proceeds from other mutual fund
complexes on which the investor has paid a front-end sales charge only.
Distributors compensates securities dealers and banks having agreements
with Distributors (investment professionals), who sell shares according to
the schedule in the Prospectus. D i stributors compensates investment
professionals with a fee of .25% on purchases of $1 million or more, except
for purchases made through a bank or bank affiliated broker-dealer that
qualify for a Sales Charge Waiver described in the prospectus. All assets
on which the .25% fee is paid must remain within the Fidelity Advisor Funds
(including shares exchanged into Daily Money Fund and Daily Tax-Exempt
Money Fund) for a period of one uninterrupted year or the investment
professional will be required to refund this fee to Distributors.
Purchases by insurance company separate accounts will qualify for the .25%
fee only if an insurance company's client relationship underlying the
separate account exceeds $1 million. It is the responsibility of the
insurance company to maintain records of purchases by any such client
relationship. Distributors may request records evidencing any fees payable
through this program.
QUANTITY DISCOUNTS. Reduced sales charges are applicable to purchases of
shares of the Fund in amounts of $50,000 or more of the Fund alone or in
combination with purchases of Class A and Class B shares of certain other
Fidelity Advisor Funds made at any one time (including Daily Money Fund and
Daily Tax-Exempt Money Fund shares acquired by exchange from any Fidelity
Advisor Fund with a front-end sales charge). To obtain the reduction of
the sales charge, you or your investment professional must notify the
Transfer Agent at the time of purchase whenever a quantity discount is
applicable to your purchase. Upon such notification, you will receive the
lowest applicable front-end sales charge.
In addition to investing at one time in any combination of funds in an
amount entitling you to a reduced front-end sales charge, you may qualify
for a reduction in the front-end sales charge under the following programs:
COMBINED PURCHASES. When you invest for several accounts at the same time,
you may combine these investments into a single transaction if purchased
through one investment professional and if the total is at least $50,000.
The following may qualify for this privilege: an individual, or "company"
as defined in Section 2(a)(8) of the 1940 Act; an individual, spouse, and
their children under age 21 purchasing for his, her, or their own account;
a trustee, administrator or other fiduciary purchasing for a single trust
estate or single fiduciary account or for a single or a parent-subsidiary
group of "employee benefit plans" (as defined in Section 3(3) of ERISA);
and tax-exempt organizations under Section 501(c)(3) of the Internal
Revenue Code.
RIGHTS OF ACCUMULATION. Your "Rights of Accumulation" permit reduced
front-end sales charges on any future purchases after you have reached a
new breakpoint (see the Prospectus for the sales charge schedule). You can
add the value of existing Fidelity Advisor Fund Class A and Class B shares,
held by you, your spouse, and your children under age 21 determined at the
previous day's NAV at the close of business, to the amount of your new
purchase valued at the current offering price to determine your reduced
sales charge. You can also add shares of Daily Money Fund and Daily
Tax-Exempt Fund, provided they were acquired by exchange from any Fidelity
Advisor Fund with a sales charge to the amount of your new purchase.
LETTER OF INTENT. If you anticipate purchasing $50,000 or more of shares
in combination with Class A or Class B shares of certain other Fidelity
Advisor Funds within a 13-month period, you may obtain Class A shares at
the same reduced-front-end sales charge as though the total quantity were
invested in one lump sum, by filing a nonbinding Letter of Intent (the
Letter) within 90 days of the start of the purchases. Each investment you
make after signing the Letter will be entitled to the front-end sales
charge applicable to the total investment indicated in the Letter. For
example, a $2,500 purchase toward a $50,000 Letter would receive the same
reduced sales charge as if the $50,000 had been invested at one time. To
ensure that the reduced front-end sales charge will be received on future
purchases, you or your investment professional must inform the Transfer
Agent that the Letter is in effect each time shares are purchased. Neither
income dividends nor capital gain distributions taken in additional shares
will apply toward the completion of the Letter.
Your initial investment must be at least 5% of the total amount you plan to
invest. Out of the initial purchase, 5% of the dollar amount specified in
the Letter will be registered in your name and held in escrow. The shares
held in escrow cannot be redeemed or exchanged until the Letter is
satisfied or the additional front-end sales charges have been paid. You
will earn income dividends and capital gain distributions on escrowed Class
A shares. The escrow will be released when your purchase of the total
amount has been completed. You are not obligated to complete the Letter.
If you purchase more than the amount specified in the Letter and qualify
for a further sales charge reduction, the sales charge will be adjusted to
reflect your total purchase at the end of 13 months. Surplus funds will be
applied to the purchase of additional Class A shares at the then current
offering price applicable to the total purchase.
If you do not complete your purchase under the Letter within the 13-month
period, your front-end sales charge will be adjusted upward, corresponding
to the amount actually purchased, and if after 30 days' written notice, you
do not pay the increased sales charge, sufficient escrowed shares will be
redeemed to pay such charge.
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM. You can make regular
investments in the Fund or other Fidelity Advisor Funds with the Systematic
Investment Program by completing the appropriate section of the account
application and attaching a voided personal check with your bank's magnetic
ink coding number across the front. If your bank account is jointly owned,
be sure that all owners sign. Investments may be made monthly by
automatically deducting $100 or more from your bank checking account. You
may change the amount of your monthly purchase at any time. There is a
$1,000 minimum initial investment requirement for the Systematic Investment
Program.
Your account will be drafted on or about the first business day of every
month. Shares will be purchased at the offering price next determined
following receipt of the order by the Transfer Agent. You may cancel your
participation in the Systematic Investment program at any time without
payment of a cancellation fee. You will receive a confirmation from the
Transfer Agent for every transaction, and a debit entry will appear on your
bank statement.
EXCHANGE INFORMATION
FIDELITY ADVISOR SYSTEMATIC EXCHANGE PROGRAM. With the Systematic Exchange
Plan, you can exchange a specific dollar amount from the Fund into the same
class of other Fidelity Advisor Funds on a monthly, quarterly or semiannual
basis.
(bullet) The account from which the exchanges are to be processed must
have a minimum value of $10,000 before you may elect to begin exchanging
systematically. The account into which the exchanges are to be processed
must be an existing account with a minimum of $1,000.
(bullet) Both accounts must have identical registrations and taxpayer
identification numbers. The minimum amount to be exchanged systematically
is $100.
(bullet) Systematic Exchanges will be processed at the NAV determined on
the transaction date, except that Systematic Exchanges into a Fidelity
Advisor Fund from any eligible money market fund will be processed at the
offering price next determined on the transaction date, unless the shares
were acquired by exchange from another Fidelity Advisor Fund.
REDEMPTION INFORMATION
REINSTATEMENT PRIVILEGE. If you have sold all or part of your shares you
may reinvest an amount equal to all or a portion of the redemption proceeds
in the Fund or the same class of the other Fidelity Advisor Funds, at the
NAV next determined after receipt of your investment order, provided that
such reinvestment is made within 30 days of redemption. You must reinstate
your shares into an account with the same registration. This privilege may
be exercised only once by a shareholder with respect to the Fund.
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM. If you own shares worth
$10,000 or more, you can have monthly, quarterly or semiannual checks sent
from your account to you, to a person named by you, or to your bank
checking account. You may obtain information about the Systematic
Withdrawal Plan by contacting your investment professional. Your Systematic
Withdrawal Plan payments are drawn from share redemptions. If Systematic
Withdrawal Plan redemptions exceed income dividends earned on your shares,
your account eventually may be exhausted. Since a sales charge is applied
on new shares you buy, it is to your disadvantage to buy shares while also
making systematic redemptions.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, the Transfer Agent may reinvest your distributions
at the then-current NAV. All subsequent distributions will then be
reinvested until you provide the Transfer Agent with alternate
instructions.
DIVIDENDS. Gains (losses) attributable to foreign currency fluctuations
generally are taxable as ordinary income and therefore increase (decrease)
dividend distributions. Because the Fund invests primarily in foreign
securities, corporate shareholders should not expect dividends from the
Fund to qualify for the dividends received deduction. The Fund's earning
qualifying dividends from U.S. corporations will notify corporate
shareholders annually of the percentage of Fund dividends which qualify for
the dividends received deduction. Dividends are distributed annually,
usually in December.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the Fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time that
the shareholders have held their shares. If a shareholder receives a
long-term capital gain distribution on shares of the Fund and such shares
are held for six months or less and are sold at a loss, the portion of the
loss equal to the amount of the long-term capital gain distribution will be
considered a long-term loss for tax purposes.
Short-term capital gains distributed by the Fund are taxable to
shareholders as dividends, not as capital gains. Distributions from the
short-term capital gains do not qualify for the dividends received
deduction. As of October 31, 1993, the Fund had a capital loss carryover,
available to offset future capital gains, of approximately $949,000 of
which will expire on October 31, 1999.
FOREIGN TAXES. Foreign governments may withhold taxes from dividends or
interest paid with respect to foreign securities. The Fund intends to
elect to pass through foreign taxes paid in order for a shareholder to take
a credit or deduction if, at the close of its fiscal year, more than 50% of
the Fund's total assets are invested in securities of foreign issuers.
TAX STATUS OF THE FUND. The Fund has qualified and intends to continue 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 and excise taxes at the
Fund level, the Fund intends to distribute substantially all of its net
taxable income and realized capital gains within each calendar year as well
as on a fiscal year basis. The Fund also intends to comply with other tax
rules applicable to regulated investment companies, including a requirement
that capital gains from the sale of securities held for less than three
months must constitute less than 30% of the Fund's gross income for each
fiscal year. Gains from some forward currency contracts, futures contracts
and options, are included in this 30% calculation, which may limit the
Fund's investments in such instruments.
If the Fund purchases shares in certain foreign investment entities,
defined as passive foreign investment companies (PFICs under the Internal
Revenue Code), it may be subject to U.S. federal income taxes on a portion
of any excess distribution or gain from the disposition of such shares.
Interest charges may also be imposed on the Fund with respect to deferred
taxes arising from such distributions or gains.
The Fund is treated as a separate entity from the other funds of Fidelity
Advisor Series VII for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting the Fund and its shareholders, and
no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders of the Fund may be subject
to state and local taxes on distributions received from the Fund.
Investors should consult their tax advisers to determine whether the Fund
is suitable for their particular tax situation.
FMR
FMR is a wholly owned subsidiary of FMR Corp., a parent company organized
in 1972. At present, the principal operating activities of FMR Corp. are
those conducted by three of its divisions as follows: Fidelity Service Co.
(Service), which is the transfer and shareholder servicing agent for
certain of the funds advised by FMR; Fidelity Investments Institutional
Operations Company, which performs shareholder servicing functions for
certain institutional customers; and Fidelity Investments Retail Marketing
Company, which provides marketing services to various companies within the
Fidelity organization.
Several affiliates of FMR also are engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory and administrative services to retirement plans and corporate
employee benefit accounts. FMR U.K. and FMR Far East, both wholly owned
subsidiaries of FMR formed in 1986, supply investment research, and may
supply portfolio management services to FMR in connection with certain
funds advised by FMR. Analysts employed by FMR, FMR U.K., and FMR Far East
research and visit thousands of domestic and foreign companies each year.
FMR Texas Inc., a wholly owned subsidiary of FMR formed in 1989, supplies
portfolio management and research services in connection with certain money
market funds advised by FMR.
TRUSTEES AND OFFICERS
The Board of Trustees 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 officers also serve in similar capacities for other funds
advised by FMR. Unless otherwise noted, the business address of each
Trustee and officer is 82 Devonshire Street, Boston, Massachusetts 02109,
which is also the address of FMR. Those Trustees who are "interested
persons" (as defined in the 1940 Act) by virtue of their affiliation with
either the Fund or FMR, are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d, 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 FMR Texas
Inc. (1989), Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas Inc. (1989), Fidelity Management
& Research (U.K.) Inc. and Fidelity Management & Research (Far
East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a
consultant to Western Mining Corporation (1994). Prior to February 1994 he
was President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Before retiring in March 1990, Mr. Cox was President
and Chief Operating Officer of Union Pacific Resources Company (exploration
and production). He is a Director of Sa n fill Corporation
(non-hazardous waste. 1993) and CH2M Hill Companies (engineering). In
addition, he served on the Board of Directors of the Norton Company
(manufacturer of industrial devices, 1983-1990) and continues to serve on
the Board of Directors of the Texas State Chamber of Commerce, and is a
member of advisory boards of Texas A&M University and the University of
Texas at Austin.
PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton, NY, Trustee (1992).
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, 1990),
and previously served as a Director of Hallmark Cards, Inc. (1985-1991) and
Nabisco Brands, Inc. In addition, she serves as a Director of the New York
City Chapter of the National Multiple Sclerosis Society, and is a member of
the Advisory Council of the International Executive Service Corps. and the
President's Advisory Council of The University of Vermont School of
Business Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls,OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive
Officer of LTV Steel Company. Prior to May 1990, he was Director of
National City Corporation (a bank holding company) and National City Bank
of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc. (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporati o n, Hyster-Yale Materials Handling, Inc. (1989), and
RPM, Inc. (manufacturer of chemical products, 1990). In addition, he
serves as a Trustee of First Union Real Estate Investments; Chairman of the
Board of Trustees and a member of the Executive Committee of the Cleveland
Clinic Foundation, a Trustee and a member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1-North, Greenwich, CT,
Trustee, is a Professor at Columbia University Graduate School of Business
and a financial consultant. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance), and Valuation Research Corp. (appraisals and
valuations, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization Fund and Vice Chairman of the
Board of Trustees of the Greenwich Hospital Association (1989).
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior to
his retirement on May 31, 1990, he was a Director of FMR (1989) 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). He is a Director of
W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen Corporation
(engineering and construction). 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 (1990).
GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), is
Chairman of G.M. Management Group (strategic advisory services). Prior to
his retirement in July 1988, he was Chairman and Chief Executive Officer of
Leaseway Transportation Corp. (physical distribution services). Mr.
McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration,
1989), Commercial Intertech Corp. (water treatment equipment, 1992) and
Associated Estates Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trus t ee.
Prior to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company.
He is a Director of Allegheny Power Systems, Inc. (electric utility),
General Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer).
In additio n , he serves as a Trustee of Corporate Property Investors,
the EPS Foundation at Trinity College, the Naples Philharmonic
Cent e r for the Arts, and Rensellar Polytechnic Institute, and he is
a member of the Advisory Boards of Butler Capital Corporation F u nds
and Warburg, Pincus Partnership Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, 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 M.A. Hanna Company (chemicals, 1993)
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 (1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
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 BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software, 1988), Georgia Power Company (electric utility), Gerber
Alley & Associates, Inc. (computer software), National Life Insurance
Company of Vermont, American Software, Inc. (1989), and AppleSouth, Inc.
(restaurants, 1992).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and
Senior Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
ARTHUR S. LORING, Secretary, is Senior Vice President and General Counsel
of FMR, Vice President-Legal of FMR Corp., and Vice President and Clerk of
FDC.
ROBERT H. MORRISON, Manager, Security Transactions, is an employee of FMR.
Under a retirement program, which became effective on November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the Fund, based on their basic trustees fees and length of
service. Currently, Messrs. Robert L. Johnson, William R. Spaulding,
Bertram H. Witham, and David L. Yunich participate in the program.
On February 28, 1994, the Trustees and officers owned in the aggregate less
than 1% of the Fund's outstanding shares.
MANAGEMENT AND OTHER SERVICES
The Fund employs FMR to furnish investment advisory and other services.
Under its Management Contract with the Fund, FMR acts as investment adviser
and, subject to the supervision of the Board of Trustees, directs the
investments of the Fund in accordance with its investment objective,
policies, and limitations. FMR also provides the Fund with all office
facilities and personnel for servicing the Fund's investments, and
compensates all officers of the Trust, all Trustees who are "interested
persons" of the Trust or of FMR, and all personnel of the Trust or FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of the Fund. These services include: providing
facilities for maintaining the Fund's organization; supervising relations
with custodians, transfer and pricing agents, accountants, underwriters and
other persons dealing with the Fund; preparing all general shareholder
communications and conducting shareholder relations; maintaining the Fund's
records and the registration of the Fund's shares under federal and state
law; developing management and shareholder services for the Fund; and
furnishing reports, evaluations and analyses on a variety of subjects to
the Board of Trustees.
In addition to the management fee payable to FMR and the fees payable to
Service and State Street, the Fund pays all its expenses, without
limitation, that are not assumed by those parties. The Fund pays for
typesetting, printing and mailing proxy material to shareholders, legal
expenses and the fees of the custodian, auditor and non-interested
Trustees. Although the Fund's Management contract provides that the Fund
will pay for typesetting, printing and mailing prospectuses, statements of
additional information, notices, and reports to shareholders, the Trust has
entered into a revised transfer agent agreement with State Street pursuant
to which State Street bears the cost 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 and state securities laws. The Fund is
also liable for such nonrecurring expenses as may arise, including costs of
litigation to which the Fund may be a party and any obligation it may have
to indemnify its officers and Trustees of the Trust with respect to such
litigation.
FMR is the Fund's Manager pursuant to a Management Contract dated January
1, 1993, which was approved by shareholders on December 1, 1992. For the
services of FMR under the contract, the Fund pays a monthly management fee
composed of the sum of two elements: a fee and a performance adjustment
based on a comparison of the Fund's performance to that of the EAFE Index.
COMPUTING THE BASIC FEE. The Fund's basic fee rate is composed of two
elements: a group fee rate and an individual fund fee rate. The group fee
rate is based on the monthly average net assets of all registered
investment companies with which FMR has management contracts and is
calculated on a cumulative basis pursuant to the graduated fee rate
schedule shown below on the left. On the right, the effective fee rate
schedules show the result of cumulatively applying the annualized rates at
varying asset levels. For example, the effective annual fee rate at $223
billion of group net assets--their approximate level for the month of
October 1993 was .3254%, which is the weighted average of the respective
fee rates for each level of group net assets up to $223 billion.
GROUP FEE RATE SCHEDULE* EFFECTIVE ANNUAL FEE
RATES
Average Group Effective
Group Annualized Net Annual
Assets Rate Assets Fee Rate
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
$ 0 - 3 billion .520% $ 0.5 billion .5200%
3 - 6 .490 25 .4238
6 - 9 .460 50 .3823
9 - 12 .430 75 .3626
12 - 15 .400 100 .3512
15 - 18 .385 125 .3430
18 - 21 .370 150 .3371
21 - 24 .360 175 .3325
24 - 30 .350 200 .3284
30 - 36 .345 225 .3253
36 - 42 .340 250 .3223
42 - 48 .335 275 .3198
48 - 66 .325 300 .3175
66 - 84 .320 325 .3153
84 - 102 .315 350 .3133
102 - 138 .310
138 - 174 .305
174 - 228 .300
228 - 282 .295
282 336 .290
Over 336 .285
</TABLE>
* The rates shown for average group assets in excess of $138 billion were
adopted by FMR on a voluntary basis on January 1, 1992. Rates in excess of
$174 billion were adopted by FMR on a voluntary basis on November 1, 1993.
Each was adopted pending shareholder approval of a new management contract
reflecting the extended schedule. The extended schedule provides for lower
management fees as total assets under management increase.
The individual fund fee rate is .45%. Based on the average group net
assets of funds advised by FMR for October 1993, the annual management fee
rate would be calculated as follows:
GROUP FEE RATE INDIVIDUAL FUND FEE RATE BASIC FEE RATE
.3254% + .45% = .7754%
One-twelfth of this annual basic 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.
Prior to January 1, 1992, the Fund's group fee rate was based on a schedule
with break points ending at .310% for average group assets in excess of
$102 billion. This shorter schedule was included in the Fund's prior
management contract with FMR dated April 20, 1990.
COMPUTING THE PERFORMANCE ADJUSTMENT. The basic fee is subject to an
upward or downward adjustment, depending upon whether, and to what extent,
the Fund's investment performance for the performance period exceeds, or is
exceeded by, the record of the EAFE Index over the same period. The
performance period consists of the most recent month plus the previous 35
months. Each percentage point of difference (up to a maximum difference of
+ 10) is multiplied by a performance adjustment rate of .02%. The maximum
annualized adjustment rate is therefore + .20%. This performance
comparison is made at the end of each month. One-twelfth of this rate is
then applied to the Fund's average net assets for the entire performance
period, giving a dollar amount which will be added to (or subtracted from)
the management fee.
The Fund's performance is calculated based on change in NAV. For purposes
of calculating the performance adjustment, any dividends or capital gain
distributions paid by the Fund are treated as if reinvested in Fund shares
at the NAV as of the record date for payment. The record of the EAFE Index
is based on change in value and is adjusted for any cash distributions from
the companies whose securities make up the EAFE Index.
THE PERFORMANCE PERIOD. The performance period commences with the Fund's
first full month of operations. Starting with the twelfth month after that
date (April 1991), the performance adjustment for the Fund took effect.
Each month subsequent to May 1991, a new month will be added to the
performance period until the performance period equals 36 months.
Thereafter, the performance period will consist of the most recent month
plus the previous 35 months.
Because the adjustment to the basic fee is based on the Fund's performance
compared to the investment record of the EAFE Index, the controlling factor
is not whether the Fund's performance is up or down per se, but whether it
is up or down more or less than the record of the EAFE Index. Moreover,
the comparative investment performance of the Fund is based solely on the
relevant performance period without regard to the cumulative performance
over a longer or shorter period of time.
During the fiscal years ended October 31, 1993, 1992, and 1991 FMR received
$503,110, $139,234, and $148,643, respectively, (before reimbursement of
expenses) for its services as investment adviser to the Fund. These fees,
which include both the basic fee and the performance adjustment, were
equivalent to .77%, .75%, and .78%, respectively, of the average net assets
of the Fund for each of those years. For fiscal 1993, 1992, and 1991, the
downward performance adjustments amounted to $3,885, $6,062, and $2,710,
respectively.
To comply with the California Code of Regulations, FMR will reimburse the
Fund if and to the extent that the Fund's aggregate annual operating
expenses exceed specified percentages of its average net assets. The
applicable percentages are 2 1/2% of the first $30 million, 2% of the next
$70 million, and 1 1/2% of average net assets in excess of $100 million.
When calculating the Fund's expenses for purposes of this regulation, the
Fund may exclude interest, taxes, brokerage commissions, and extraordinary
expenses, as well as a portion of its distribu t ion plan expenses.
FMR may, from time to time, agree to voluntarily to reimburse the Fund for
expenses above a specified percentage of average net assets. F M R
retains the ability to be repaid for these expense reimbursements in the
amount that expenses fall below the limit prior to the en d of the
fiscal year. Reimbursements or expense limitations by FMR will increase a
class' yield and total return. Reimbursement s by a class will lower
its yield and total return.
SUB-ADV I SERS. FMR has entered into sub-advisory agreements with FMR
U.K., FMR Far East, and FIIA. FIIA, in turn, has entered into a
sub-advisory agreement with FIIAL U.K. Pursuant to the sub-advisory
agreements, FMR may receive investment advice and research services outside
the U.S. from the sub-advisors and may grant the sub-advisors 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., FMR Far East, FIIA, and FIIAL U.K. each focus on
companies in countries other than the United States including countries in
Europe Asia, and the Pacific Basin.
FMR U.K. and FMR Far East are wholly owned subsidiaries of FMR. FIIA is a
wholly owned subsidiary of Fidelity International Limited (FIL), a Bermuda
company formed in 1968 which primarily provides investment advisory
services to non-U.S. investment companies and institutional investors
investing in securities of issuers throughout the world. Edward C. Johnson
3d, together with various trusts for the benefit of Johnson family members
own, directly or indirectly, more than 25% of the voting stock of FIL.
FIIA was organized in Bermuda in 1983 and FIIAL U.K. was organized in the
United Kingdom in 1984.
Under the sub-advisory agreements FMR pays fees to FMR U.K., FMR Far East,
and FIIA. FIIA, in turn, pays fees to FIIAL U.K. For providing investment
advice and research services the sub-advisors are compensated as follows:
(bullet) 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.
(bullet) FMR pays FIIA 30% of FMR's monthly management fee with respect to
the average market value of investments held by the Fund for which FIIA has
provided FMR with investment advice.
(bullet) FIIA pays FIIAL U.K. a fee equal to 110% of FIIAL U.K.'s costs
incurred in connection with providing investment advice and research
services.
For providing investment management and executing portfolio transactions,
the sub-advisors are compensated as follows:
(bullet) FMR pays FMR U.K., FMR Far East, and FIIA 50% of its monthly
management fee (including any performance adjustment) with respect to the
Fund's average net assets managed by the sub-advisor on a discretionary
basis.
(bullet) FIIA pays FIIAL U.K. 110% of FIIAL U.K.'s costs incurred with
providing investment management services.
The fees paid to FMR U.K. and FMR Far East under the subadvisory agreements
for fiscal 1993 and 1992 are shown in the table below:
Fees Paid to Fees Paid to
Fiscal Year FMR U.K. FMR Far East
1993 $14,363 $22,357
1992 $13,189 $16,736
State Street is transfer, dividend disbursing and shareholder servicing
agent for the fund. State Street has delegated certain transfer,
dividend-paying and shareholder services to FIIOC. Under the trust's
contract with State Street, the fund pays a per account fee of $30 and a
monetary transaction fee of $6. For accounts that FiIOC maintains on
behalf of State Street, FIIOC receives all such fees. For accounts as to
which FIIOC provides limited services, FIIOC may receive a portion
(currently $20 and $6, respectively) or related per account fees and
monetary transaction fees, less applicable charges and expenses of State
Street for account maintenance and transactions.
Fees for certain institutional retirement plan accounts are based on the
net asset value of all such accounts in the fund. FIIOC pays out-of-pocket
expenses associated with providing transfer agent services. In addition,
FIIOC bears the expense of typesetting, printing, and mailing prospectuses,
statements of additional information, and al other reports, notices, and
statements to shareholders, with the exception of proxy statements.
The trust has a contract with Service which provides that Service will
perform the calculations necessary to determine the fund's net asset value
per share and dividends, and maintain the fund's accounting records. Prior
to July 1, 1991, the annual fee for these pricing and bookkeeping services
was based on two schedules, one pertaining to the fund's average net
assets, and one pertaining to the type and number of transactions the fund
made. The fee rates in effect as of July 1, 1991 are based on the fund's
average net assets, specifically, .06% for the first $500 million of
average net assets and .03% for average net assets in excess of $500
million. The fee is limited to a minimum of $45,000 and a maximum of
$750,000 per year. Pricing and bookkeeping fees, including related
out-of-pocket expenses, paid to Service for fiscal 1993, 1992, and 1991
were $57,711, $48,617, and $82,991, respectively.
THE DISTRIBUTOR
The Fund has a distribution agreement with Distributors, a Massachusetts
corporation organized July 18, 1960. Distributors, is a broker-dealer
registered under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. The distribution agreement
calls for Distributors to use all reasonable efforts, consistent with its
other business, to secure purchasers for shares of the Fund, which are
continuously offered. Promotional and administrative expenses in
connection with the offer and sale of shares are paid by Distributors.
DISTRIBUTION AND SERVICE PLAN
The T r ustees of the Trust have adopted a Distribution and
Service Plan on behalf of Class A shares of the Fund (the Plan) pursuant
t t Rule 12b-1 under the 1940 Act (the Rule). As required by the
Rule, the Trustees carefully considered all pertinent factors
rela t ing to the implementation of the Plan prior to its approval,
and have determined that there is a reasonable likeliho o d that the
Plan will benefit Class A and its shareholders.
Pur s uant to the Class A Plan, Class A pays Distributors a
distribution fee at an annual rate of up to .65% of its average net assets
determined as of the close of business on each day throughout the month,
but excluding assets attributable to Class A shares purchased more than 144
months prior to such day. Currently, the Trustees have approved a
distribution fee for Class A at an annual rate of .65% of its average net
assets. this fee may be increased only when, in the opinion of the
Trustees, it is in the best interests of the Class A shareholders to do so.
For the fiscal years ended October 31, 1993, 1992 and 1991, Class A
paid distribution fees to Distributors of which $97,554, $27,492, and
$26,850, respectively, was retained by Distributors
The Pl a n also specifically recognizes that FMR, either directly
or through Distributors, may use its management fee revenue, past
p r ofits or other resources, without limitation, to pay promotional
and administrative expenses in connection with the offer and s ale of
shares of Class A. Under the Plan, if the payment by the Fund to FMR of
management fees should be deemed to be indirect financing of the
distribution of shares of Class A, such payment is authorized by the Plan.
In addition, the Plan provides that FMR may use its resources, including
its management fee revenues, to make payments to third parties that assist
in selling shares of Class A or in other distribution activities relating
to that class. To the extent that the Plan gives FMR and Distributors
greater flexibility in connection with the distribution of shares of Class
A, additional sales of Fund shares may result. Additionally, certain
shareholder support services may be provided more effectively under the
Plan by local entities with whom shareholders have other relationships.
The Plan d o es not provide for specific payments by Class A of
any of the expenses of Distributors, or obligate Distributors or FMR to
perf o rm any specific type or level of distribution activities or
incur any specific level of expense in connection with distribution
a c tivities. After payments by Distributors for advertising,
marketing and distribution, and payments to investment
professio n als, the amounts remaining, if any, may be used as
Distributors may elect.
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 fully defined,
in Distributors' opinion, it should not prohibit banks from being paid for
shareholder support services, servicing and record keeping functions.
distributors may engage banks to perform only these 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
an event, changes in the operation of the Fund 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. The Fund may execute portfolio transactions with and purchase
securities issued by depository institutions that receive payments under
the Plan. No preference for the instruments of such depository
institutions will be shown in the selection of investments. In addition,
state securities laws on this issue may differ from the interpretations of
federal law expressed herein, and banks and financial institutions may be
required to register as dealers pursuant to state law.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Advisor Overseas Fund is a fund of Fidelity
Advisor Series VII, an open-end management investment company organized as
a Massachusetts business trust by Declaration of Trust dated March 21,
1980. On July 18, 1991 the Board of Trustees voted to change the name of
the Trust from Plymouth Securities Trust to Fidelity Securities Trust, and
on April 15, 1993 the Board of Trustees voted to change the name of the
Trust to Advisor Series VII. The Declaration of Trust permits the Trustees
to create additional funds.
In the event that FMR ceases to be the investment adviser to the Fund, the
right of the Trust or Fund to use the identifying name "Fidelity" may be
withdrawn.
SHAREHOLDER AND TRUSTEE LIABILITY. The Trust is an entity of the type
commonly known as a "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. The 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 Trustee include a provision limiting the obligations created
thereby to the Trust and its assets. The Declaration of Trust provides for
indemnification out of a Fund's property of any shareholder held personally
liable for the obligations of the Fund. The Declaration of Trust also
provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder of the Fund 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.
The 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 Declaration 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. The Fund's capital consists of shares of beneficial
interest. 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 the Trust or the Fund may,
as set forth in the Declaration of Trust, call meetings of the Trust or the
Fund, as the case may be, for any purpose including removal of one or more
Trustees. The Trust or the 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 the vote of the
holders of a majority of the outstanding shares of the Trust or the Fund.
If not so terminated, the Trust and the Fund will continue indefinitely.
As of M a rch 15, 1994, the following owned of record or beneficially
5% or more of outstanding shares of the Fund: Smith Barney Shearson, New
York, NY., owned 11.95%. National Financial Data Services, New York, NY,
owned 8.27%; Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL,
owned 6.95%; and A.G. Edwards & Sons, St. Louis, MO, owned 6.40%.
CUSTODIAN. Chase Manhattan Bank, N.A., 1121 Avenue of the Americas, New
York, NY, is custodian of the assets of the Fund. The custodian is
responsible for the safekeeping of the Fund's assets and the appointment of
subcustodian and clearing agencies. The custodian takes no part in
determining the investment policies of the Fund or in deciding which
securities are purchased or sold by the Fund. The Fund may, however invest
in obligations of the custodian and may purchase or sell securities from or
to the custodian.
FMR, its officers and directors, its affiliated companies, and the Trust's
Trustees may, from time to time, have transactions with various banks,
including banks serving as custodian banks for certain of the 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.
Fund securities (including ADRs) purchased in the United States are
maintained in the custody of the custodian and may be deposited into the
Federal Reserve Treasury Department Book Entry System or the Security
Depository System of the Depository Trust Company. The custodian has
entered into sub-custodian agreements with several foreign banks or
clearing agencies, pursuant to which portfolio securities which are
purchased outside the United States are maintained in the custody of these
entities. These subcustodian arrangements with entities incorporated or
organized in countries outside of the United States are permitted in
accordance with the conditions of an exemptive order, as amended, granted
to the custodian by the SEC.
AUDITOR. Price Waterhouse, 160 Federal Street, Boston, MA, serves as the
Fund's independent accountant. The auditor examines financial statements
for the Fund and provides other audit, tax, and related services.
FINANCIAL STATEMENTS
The Annual Report for the fiscal year ended October 31, 1993 is a separate
report supplied with this Statement of Additional Information and is
incorporated herein by reference.
