FIDELITY ADVISOR FUNDS
CLASS A AND CLASS B
Equity Income, Limited Term Bond and Limited Term Tax-Exempt are comprised
of three classes of shares: Class A, Class B and Institutional Class.
Strategic Opportunities is comprised of three classes of shares: Class A,
Class B and Initial Class. Equity Portfolio Growth is comprised of two
classes of shares: Class A and Institutional Class. Emerging Markets
Income, Strategic Income, High Yield, Government Investment, and High
Income Municipal are comprised of two classes of shares: Class A and Class
B. Overseas, Growth Opportunities, Global Resources, Income & Growth, Short
Fixed-Income and Short-Intermediate Tax-Exempt are comprised of Class A
shares only. All classes of a fund have a common investment objective and
investment portfolio.
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how each
fund invests and the services available to shareholders.
To learn more about each fund and its investments, you can obtain a copy of
the applicable fund's most recent financial report and portfolio listing or
a copy of the Statement of Additional Information (SAI) dated February 24,
1995. The SAI has been filed with the Securities and Exchange Commission
(SEC) and is incorporated herein by reference (legally forms a part of the
prospectus). For a free copy of either document, contact Fidelity
Distributors Corporation (FDC), 82 Devonshire Street, Boston, MA 02109, or
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.
EMERGING MARKETS INCOME,HIGH YIELD, STRATEGIC INCOME AND HIGH INCOME
MUNICIPAL MAY EACH 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 PRINCIPLES AND RISKS" ON PAGE
FOR FURTHER INFORMATION.
LIKE ALL MUTUAL FUNDS, 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.
ACOM-pro-295
GROWTH FUNDS:
Fidelity Advisor Overseas Fund
Fidelity Advisor Equity Portfolio Growth
Fidelity Advisor Global Resources Fund
Fidelity Advisor Growth Opportunities Fund
Fidelity Advisor Strategic Opportunities Fund
GROWTH AND INCOME FUNDS:
Fidelity Advisor Equity Income Fund (formerly Fidelity Advisor Equity
Portfolio Income)
Fidelity Advisor Income & Growth Fund
TAXABLE-INCOME FUNDS:
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Limited Term Bond Fund
Fidelity Advisor Short Fixed-Income Fund
TAX-EXEMPT/MUNICIPAL FUNDS:
Fidelity Advisor High Income Municipal Fund
Fidelity Advisor Limited Term Tax-Exempt Fund
Fidelity Advisor Short-Intermediate Tax-Exempt Fund
PROSPECTUS
FEBRUARY 24, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
KEY FACTS WHO MAY WANT TO INVEST
EXPENSES Each class's sales charge (load) and its yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary of each fund's financial
data.
PERFORMANCE How each fund has done over time.
THE FUNDS IN DETAIL CHARTER How each fund is organized.
INVESTMENT PRINCIPLES AND RISKS Each fund's overall
approach to investing.
BREAKDOWN OF EXPENSES How operating costs are
calculated and what they include.
YOUR ACCOUNT TYPES OF ACCOUNTS Different ways to set up your
account, including tax-sheltered retirement plans.
HOW TO BUY SHARES Opening an account and making
additional investments.
HOW TO SELL SHARES Taking money out and closing your
account.
INVESTOR SERVICES Services to help you manage your
account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND TAXES
ACCOUNT POLICIES
TRANSACTION DETAILS Share price calculations and the
timing of purchases and redemptions.
EXCHANGE RESTRICTIONS
SALES CHARGE REDUCTIONS AND WAIVERS
APPENDIX
</TABLE>
KEY FACTS
WHO MAY WANT TO INVEST
Shares are offered through this prospectus to investors who engage an
Investment Professional for investment advice.
Overseas, Equity Portfolio Growth, Global Resources, Growth Opportunities,
Strategic Opportunities, Equity Income, Income & Growth, High Yield,
Government Investment, Limited Term Bond, Short Fixed-Income, High Income
Municipal and Limited Term Tax-Exempt are diversified funds.
Emerging Markets Income, Strategic Income, and Short-Intermediate
Tax-Exempt are non-diversified funds. Non-diversified funds may invest a
greater portion of their assets in securities of a single issuer than
diversified funds. As a result, changes in the financial condition or
market assessment of a single issuer could cause greater fluctuations in
share value than a diversified fund.
Overseas, Equity Portfolio Growth, Global Resources, Growth Opportunities,
Strategic Opportunities, Equity Income and Income & Growth are designed for
investors who are willing to ride out stock market fluctuations in pursuit
of potentially high long-term returns. Overseas, Equity Portfolio Growth,
Global Resources, Growth Opportunities and Strategic Opportunities are
designed for investors who want to be invested in the stock market for its
long-term growth potential. These funds invest for growth and do not pursue
income. Equity Income and Income & Growth are designed for those investors
who seek a combination of growth and income from equity and some bond
investments.
High Income Municipal, Limited Term Tax-Exempt and Short-Intermediate
Tax-Exempt are designed for investors in higher tax brackets who seek high
current income that is free from federal income tax. Limited Term
Tax-Exempt and Short-Intermediate Tax-Exempt also invest consistent with
consideration of capital preservation. High Income Municipal focuses on
lower-quality debt securities and may be appropriate for long-term,
aggressive investors who understand the potential risks and rewards of
investing in lower-quality debt securities, including defaulted securities.
Government Investment, Limited Term Bond and Short Fixed-Income are
designed for investors who seek high current income from a portfolio of
investment-grade debt securities. These funds also invest consistent with
consideration of capital preservation.
Emerging Markets Income, High Yield, and Strategic Income are designed for
investors who want high current income with some potential for capital
growth from a portfolio of debt instruments with a focus on lower-quality
debt securities and income-producing equity securities. These funds may be
appropriate for long-term, aggressive investors who understand the
potential risks and rewards of investing in lower-quality debt securities,
including defaulted securities.
The value of each fund's investments and, as applicable, the income they
generate, varies from day to day, generally reflecting changes in market
conditions, interest rates and other company, political, and economic news.
The risk and potential reward of fixed-income investments depend on their
quality and maturity of its investments. Over time, stocks, although more
volatile, have shown greater growth potential than other types of
securities. In the shorter term, however, stock prices can fluctuate
dramatically in response to these factors.
The investments of Strategic Income, Government Investment, Limited Term
Bond, and Short Fixed-Income are also subject to prepayments, which can
lower a fund's yield, particularly in periods of declining interest rates.
In addition, Overseas, Global Resources, Emerging Markets Income and
Strategic Income may also be appropriate for investors who want to pursue
their investment goals in markets outside of the United States. By
including international investments in your portfolio, you can achieve an
extra level of diversification and also participate in opportunities around
the world. However, there are additional risks involved with international
investing. The performance of international funds depends upon currency
values, the political and regulatory environment, and overall economic
factors in the countries in which a fund invests. These risks may be more
significant for those funds that focus on emerging markets.
Each fund is not in itself a balanced investment plan. You should consider
your investment objective and tolerance for risk when making an investment
decision. When you sell your fund shares, they may be worth more or less
than what you paid for them.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy, sell,
exchange, or hold shares of a fund. Lower front-end sales charges may be
available with purchases of $50,000 or more in conjunction with various
programs. See "Transaction Details," page , for an explanation of how and
when these charges apply.
A contingent deferred sales charge (CDSC) is imposed only if you redeem
Class B shares within 5 years of purchase. See "Transaction Details," page
, for information about the CDSC.
Clas Clas
s A s B
Maximum sales charge on purchases 4.75 None
for all Advisor funds (except Short Fixed-Income and
Short-Intermediate Tax-Exempt)
(as a % of offering price)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Maximum sales charge on purchases 1.50 None
of Short Fixed-Income or Short-Intermediate Tax-Exempt
(as a % of offering price)
Maximum CDSC on purchases None 4.00[
(as a % of the lesser of original purchase price A]
or redemption proceeds)
</TABLE>
Maximum sales charge on None None
reinvested distributions
Redemption fee None None
Exchange fee None None
Annual account maintenance fee $12.0 $12.0
(For Account Balances under $2,500) 0 0
[A] DECLINES OVER 5 YEARS FROM 4.00% TO 0%.
ANNUAL OPERATING EXPENSES are paid out of each class's assets. Each fund
pays a management fee to Fidelity Management & Research (FMR) that, for
Overseas, Growth Opportunities and Strategic Opportunities, varies based on
performance. Each fund also incurs other expenses for services such as
maintaining shareholder records and furnishing shareholder statements and
financial reports.
12b-1 fees for Class A and Class B include a distribution fee and, for
Class B, a shareholder service fee. Distribution fees are paid by each
class to FDC for services and expenses in connection with the distribution
of the applicable class's shares. Shareholder service fees are paid by
Class B to Investment Professionals for services and expenses incurred in
connection with providing personal service and/or maintenance of Class B
shareholder accounts. Long-term shareholders may pay more than the economic
equivalent of the maximum sales charges permitted by the National
Association of Securities Dealers, Inc. (NASD), due to 12b-1 fees.
Each class's expenses are factored into its share price or dividends and
are not charged directly to shareholder accounts (see "Breakdown of
Expenses" on page ).
Effective August 1, 1994, FMR voluntarily agreed to implement management
fee reductions for Equity Portfolio Growth. The individual fund fee rate
was reduced from 0.33% to 0.30%. If this agreement was not in effect, total
operating expenses would have been 1.71%.
A portion of the brokerage commissions that Equity Portfolio Growth, Global
Resources, Growth Opportunities and Income & Growth paid was used to reduce
each class's expenses. Without this reduction, the total Class A operating
expenses would have been 1.71% for Equity Portfolio Growth, 2.10% for
Global Resources, 1.63% for Growth Opportunities, 1.67% for Equity Income
and 1.59% for Income and Growth, respectively.
The following are projections based on historical expenses (except
Strategic Income) of each class of each fund, and are calculated as a
percentage of average net assets.
EQUITY FUNDS
Operating Expenses Class A Class B
OVERSEAS Management fee 0.80 n/a
%
12b-1 fee 0.65 n/a
%
Other expenses 0.67 n/a
%
Total operating expenses 2.12 n/a
%
<TABLE>
<CAPTION>
<S> <C> <C> <C>
EQUITY PORTFOLIO GROWTH Management fee (after reimbursement) 0.62 n/a
%
12b-1 fee 0.65 n/a
%
Other expenses 0.41 n/a
%
Total operating expenses 1.68%[ n/a
A]
GLOBAL RESOURCES Management fee 0.77 n/a
%
12b-1 fee 0.65 n/a
%
Other expenses 0.65 n/a
%
Total operating expenses 2.07%[ n/a
A]
GROWTH OPPORTUNITIES Management fee 0.69 n/a
%
12b-1 fee 0.65 n/a
%
Other expenses 0.28 n/a
%
Total operating expenses 1.62%[ n/a
A]
STRATEGIC OPPORTUNITIES Management fee 0.67 0.67
% %
12b-1 fee (including 0.25% Shareholder 0.65 1.00
Service Fee for Class B shares) % %
Other expenses 0.47 0.47
% %
Total operating expenses 1.79%[ 2.14
B] %
EQUITY INCOME Management fee 0.50 0.50
% %
12b-1 fee (including 0.25% Shareholder 0.65 1.00
Service Fee for Class B shares) % %
Other expenses 0.49 0.49%[
% C]
Total operating expenses 1.64 1.99
% %
INCOME & GROWTH Management fee 0.52 n/a
%
12b-1 fee 0.65 n/a
%
Other expenses 0.41 n/a
%
Total fund operating expenses 1.58%[ n/a
A]
</TABLE>
[A] A PORTION OF THE BROKERAGE COMMISSIONS THAT THE FUNDS PAID WAS USED TO
REDUCE EACH CLASS'S EXPENSES. WITHOUT THIS REDUCTION, THE TOTAL OPERATING
EXPENSES FOR CLASS A WOULD HAVE BEEN: EQUITY PORTFOLIO GROWTH 1.71%; GLOBAL
RESOURCES, 2.10%; GROWTH OPPORTUNITIES, 1.63%; EQUITY INCOME, 1.67%; INCOME
& GROWTH, 1.59%.
[B] INCLUDES THE EFFECT OF ANNUALIZING A VOLUNTARY REIMBURSEMENT OF FEES BY
FMR.
[C] PROJECTIONS ARE BASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
TAXABLE INCOME
Operating Expenses Class A Class B
<TABLE>
<CAPTION>
<S> <C> <C> <C>
EMERGING MARKETS INCOME Management fee 0.70 0.70
% %
12b-1 fee (including 0.25% Shareholder 1.00
Service Fee for Class B shares) 0.25 %
%
Other expenses (after reimbursement) 0.55%[ 0.55%[
C] C]
Total operating expenses 1.50 2.25
% %
HIGH YIELD Management fee 0.60 0.60
% %
12b-1 fee (including 0.25% Shareholder 0.25 1.00
Service Fee for Class B shares) % %
Other expenses 0.35 0.35%[
% C]
Total operating expenses 1.20 1.95
% %
STRATEGIC INCOME Management fee 0.61 0.61
% %
12b-1 fee (including 0.25% Shareholder 0.25 1.00
Service Fee for Class B shares) % %
Other expenses (after reimbursement) 0.49%[ 0.49%[
C] C]
Total operating expenses 1.35 2.10
% %
GOVERNMENT INVESTMENT Management fee 0.46 0.46
% %
12b-1 fee (including 0.25% Shareholder 0.25 1.00
Service Fee for Class B shares) % %
Other expenses (after reimbursement) 0.03 0.03%[
% C]
Total operating expenses 0.74 1.49
% %
LIMITED TERM BOND Management fee 0.46 0.46
% %
12b-1 fee (including 0.25% Shareholder 0.25 1.00
Service Fee for Class B shares) % %
Other expenses (after reimbursement) 0.36 0.36%[
% C]
Total operating expenses 1.07 1.82
% %
SHORT FIXED-INCOME Management fee 0.46 n/a
%
12b-1 fee 0.15 n/a
%
Other expenses 0.36 n/a
%
Total operating expenses 0.97% n/a
</TABLE>
TAX-EXEMPT/MUNICIPAL
Operating Expenses Class A Class B
<TABLE>
<CAPTION>
<S> <C> <C> <C>
HIGH INCOME MUNICIPAL Management fee 0.41 0.41
% %
12b-1 fee (including 0.25% Shareholder 0.25 1.00
Service Fee for Class B shares) % %
Other expenses 0.23 0.23%[
% C]
Total operating expenses 0.89 1.64
% %
LIMITED TERM TAX-EXEMPT Management fee 0.41 0.41
% %
12b-1 fee (including 0.25% Shareholder 0.25 1.00
Service Fee for Class B shares) % %
Other expenses (after reimbursement) 0.24 0.24%[
% C]
Total operating expenses 0.90 1.65
% %
SHORT-INTERMEDIATE TAX-EXEMPT Management fee 0.41 n/a
%
12b-1 fee 0.15 n/a
%
Other expenses (after reimbursement) 0.19 n/a
%
Total fund operating expenses 0.75 n/a
%
</TABLE>
[C] PROJECTIONS ARE BASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
EXPENSE TABLE EXAMPLE: You would pay the following expenses, including the
maximum front-end sales charge or CDSC, as applicable, on a $1,000
investment, assuming a 5% annual return and either (1) full redemption or
(2) no redemption, at the end of each time period:
EQUITY FUNDS
Examples
Class A Class B Class B
(1) (1) (2)
OVERSEAS After 1 year $68 n/a n/a
After 3 $111 n/a n/a
years
After 5 $156 n/a n/a
years
After 10 $281 n/a n/a
years
EQUITY PORTFOLIO GROWTH After 1 year $64 n/a n/a
After 3 $99 n/a n/a
years
After 5 $135 n/a n/a
years
After 10 $239 n/a n/a
years
GLOBAL RESOURCES After 1 year $68 n/a n/a
After 3 $109 n/a n/a
years
After 5 $154 n/a n/a
years
After 10 $276 n/a n/a
years
GROWTH OPPORTUNITIES After 1 year $63 n/a n/a
After 3 $96 n/a n/a
years
After 5 $131 n/a n/a
years
After 10 $231 n/a n/a
years
STRATEGIC OPPORTUNITIES After 1 year $65 $61[A] $21
After 3 $101 $95[A] $65
years
After 5 $140 $122[A] $112
years
After 10 $248 $224 $224
years[B]
EQUITY INCOME After 1 year $64 $61[A] $21
After 3 $99 $94[A] $64
years
After 5 $135 $120[A] $110
years
After 10 $239 $221 $221
years[B]
INCOME & GROWTH After 1 year $63 n/a n/a
After 3 $95 n/a n/a
years
After 5 $129 n/a n/a
years
After 10 $226 n/a n/a
years
[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
[B] REFLECTS CONVERSION TO CLASS A SHARES AFTER SIX YEARS.
TAXABLE INCOME
Examples
Class A Class B Class B
(1) (1) (2)
EMERGING MARKETS INCOME After 1 year $62 $63[A] $23
After 3 $93 $100[A] $70
years
After 5 $125 $130[A] $120
years
After 10 $218 $222 $222
years[B]
HIGH YIELD After 1 year $59 $60[A] $20
After 3 $84 $91[A] $61
years
After 5 $110 $115[A] $105
years
After 10 $186 $190 $190
years[B]
STRATEGIC INCOME After 1 year $61 $61[A] $21
After 3 $88 $96[A] $66
years
After 5 $118 $123[A] $113
years
After 10 $202 $206 $206
years[B]
GOVERNMENT INVESTMENT After 1 year $55 $55[A] $15
After 3 $70 $77[A] $47
years
After 5 $87 $91[A] $81
years
After 10 $135 $139 $139
years[B]
LIMITED TERM BOND After 1 year $58 $58[A] $18
After 3 $80 $87[A] $57
years
After 5 $104 $109[A] $99
years
After 10 $172 $176 $176
years[B]
SHORT FIXED-INCOME After 1 year $25 n/a n/a
After 3 $45 n/a n/a
years
After 5 $68 n/a n/a
years
After 10 $132 n/a n/a
years
[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
[B] REFLECTS CONVERSION TO CLASS A SHARES AFTER SIX YEARS.
TAX-EXEMPT/MUNICIPAL
Examples
Class A Class B Class B
(1) (1) (2)
HIGH INCOME MUNICIPAL After 1 year $56 $57[A] $17
After 3 $75 $82[A] $52
years
After 5 $94 $99[A] $89
years
After 10 $152 $156 $156
years[B]
LIMITED TERM TAX-EXEMPT After 1 year $56 $57[A] $17
After 3 $75 $82[A] $52
years
After 5 $95 $100[A] $90
years
After 10 $153 $157 $157
years[B]
SHORT-INTERMEDIATE TAX-EXEMPT After 1 year $23 n/a n/a
After 3 $39 n/a n/a
years
After 5 $56 n/a n/a
years
After 10 $107 n/a n/a
years
[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
[B] REFLECTS CONVERSION TO CLASS A SHARES AFTER SIX YEARS.
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.
FMR has voluntarily agreed to reimburse Class A and Class B of Emerging
Markets Income, Strategic Income, Government Investment, Limited Term Bond,
Limited Term Tax-Exempt, and Short-Intermediate Tax-Exempt to the extent
that total operating expenses (as a percentage of average net assets) of
each of their respective average net assets exceeds the following: for
Emerging Markets Income 1.50% for Class A and 2.25% for Class B; for
Strategic Income 1.35% for Class A and 2.10% for Class B; for Government
Investment 0.74% for Class A and 1.49% for Class B; for Limited Term Bond
1.07% for Class A and 1.82% for Class B; for Limited Term Tax-Exempt 0.90%
for Class A and 1.65% for Class B; and for Short-Intermediate Tax-Exempt
0.75% for Class A. If these agreements were not in effect, other expenses
and total operating expenses would have been:
Other Expenses Total Expenses
Class Class Class A Class B
A B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Emerging Markets Income [D] 1.20% 0.90% 2.15% 2.60%[C]
Strategic Income [D] 1.64% 0.89% 2.50%[ 2.50%[C]
C]
Government Investment 0.76% 0.95% 1.47% 2.62%[C],[
D]
Limited Term Bond 0.43% 1.12% 1.09% 2.41%[D]
Limited Term Tax-Exempt 0.38% 0.95% 1.04% 2.36%[D]
Short-Intermediate Tax-Exempt [D] 0.98% n/a 1.54% n/a
</TABLE>
Interest, taxes, brokerage commissions, or extraordinary expenses are not
included in these expense limitations.
[C] REFLECTS LIMITATIONS THAT WOULD HAVE BEEN IN EFFECT UNDER A STATE
EXPENSE LIMITATION.
[D] ANNUALIZED
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow and each fund's financial
statements are included in each fund's Annual Report. The annual
information has been audited by each fund's independent accountants. Their
reports on the financial statements and financial highlights are included
in each Annual Report. The financial statements, the financial highlights,
and the reports are incorporated by reference into the funds' SAI, which
may be obtained free of charge from FDC.
OVERSEAS
1.Selected 2. 3. 4.Class 5.
Per-Share A
Data and
Ratios
6.Years 1990 1991 1992 1993 1994
ended
October 31
7.Net asset $ 10.00 $ 9.55 $ 9.78 $ 9.07 $ 12.93
value,
beginning of
period
8.Income
from
Investment
Operations
9. Net .05 .14 .05 .03 .01
investment
income
10. Net (.50) .17 (.62) 3.93 1.14
realized and
unrealized
gain (loss)
on
investments
11. Total (.45) .31 (.57) 3.96 1.15
from
investment
operations
12.Less
Distributions
13. From -- (.07) (.14) (.07) --
net
investment
income
14. From -- (.01) -- (.03) (.02)
net realized
gain
15. Total -- (.08) (.14) (.10) (.02)
distributions
16.Net asset $ 9.55 $ 9.78 $ 9.07 $ 12.93 $ 14.06
value, end of
period
17.Total (4.50)% 3.25% (5.88)% 44.13% 8.91%
return
18.Net $ 18,161 $ 19,091 $ 18,652 $ 221,37 $ 653,77
assets, end 0 4
of period
(000 omitted)
19.Ratio of 3.07% 2.85% 2.64% 2.38% 2.12%
expenses to ,
average net
assets
20.Ratio of 1.45% 1.48% .48% (.18)% .05%
net
investment
income to
average net
assets
21.Portfolio 137% 226% 168% 42% 34%
turnover rate
A 1.ANNUALIZED.
B 2.APRIL 23, 1990 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1990.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN.
E INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN CURRENCY
RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME.
F EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE LIMITATION.
EQUITY PORTFOLIO GROWTH
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3.Select Institutional Class A
ed Class
Per-Sha
re Data
and
Ratios
</TABLE>
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4.Years
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1992 1993 1994
ended
Novemb
er 30
5.Net
$ 8.03 $ 11.09 $ 13.18 $ 9.92 $ 12.02 $ 17.32 $ 15.55 $ 24.28 $ 26.37 $ 29.74 $ 23.78 $ 26.33 $ 29.50
asset
value,
beginnin
g of
period
6.Incom
e from
Investm
ent
Operati
ons
7. Net
.01 .03 .00 .28 .06 .01 .04 .17 .19 .30 .01 (.07) .08
investm
ent
income
8. Net
3.05 2.41 (2.03) 2.59 5.50 .34 8.69 4.55 3.78 .42 2.54 3.82 .39
realized
and
unrealiz
ed gain
(loss)
on
investm
ents
9. Total
3.06 2.44 (2.03) 2.87 5.56 .35 8.73 4.72 3.97 .72 2.55 3.75 .47
from
investm
ent
operatio
ns
10.Less
Distribut
ions
11. Fr
- -- (.02) (.01) (.01) (.26) (.08) -- (.03) (.10) (.11) -- (.08) --
om net
investm
ent
income
12. Fr
- -- (.33) (1.22) (.76) -- (2.04) -- (2.60) (.50) (1.45) -- (.50) (1.45)
om net
realized
gain
13. Tot
- -- (.35) (1.23) (.77) (.26) (2.12) -- (2.63) (.60) (1.56) -- (.58) (1.45)
al
distributi
ons
14.Net
$ 11.09 $ 13.18 $ 9.92 $ 12.02 $ 17.32 $ 15.55 $ 24.28 $ 26.37 $ 29.74 $ 28.90 $ 26.33 $ 29.50 $ 28.52
asset
value,
end of
period
15.Total
38.11% 22.55% (17.12) 29.77% 47.18% 2.75% 56.14% 21.14% 15.36% 2.46% 10.72% 14.52% 1.58%
return, %
16.Net
$ 23,44 $ 63,60 $ 43,53 $ 20,18 $ 24,52 $ 27,47 $ 68,76 $ 179,3 $ 296,4 $ 410,45 $ 22,65 $ 377,8 $ 874,17
assets,
7 7 7 2 3 3 6 25 66 0 5 94 2
end of
period
(000
omitted)
17.Rati
1.50% 1.07% 1.11% 1.47% 1.60% 1.74% 1.13% .98% .94% .84% 1.47% 1.84% 1.70%
o of
expense
s to
average
net
assets
18.Rati
1.50% 1.07% 1.11% 1.47% 1.60% 1.74% 1.13% .98% .95% .86% 1.47% 1.85% 1.71%
o of
expense
s to
average
net
assets
before
expense
reductio
ns
19.Rati
.43% .29% -- 1.20% .38% .07% .25% .73% .66% 1.00% .25% (.24)% .15%
o of net
investm
ent
income
to
average
net
assets
20.Portf
108% 115% 226% 331% 269% 262% 254% 240% 160% 137% 240% 160% 137%
olio
turnover
</TABLE>
GLOBAL RESOURCES
21.Selected 22. 23. 24. 25.Clas 26. 27.
Per-Share s A
Data and
Ratios
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
28.Years 1988 1989 1990 1991 1992 1993 1994
ended
October 31
29.Net asset $ 10.00 $ 11.47 $ 12.60 $ 12.30 $ 14.11 $ 13.88 $ 17.59
value,
beginning of
period
30.Income
from
Investment
Operations
31. Net (.05) .10 (.10) (.15) (.10) .22 (.11)
investment
income
32. Net 1.52 1.96 .93 2.45 .79 4.91 .76
realized and
unrealized
gain (loss)
on
investments
33. Total 1.47 2.06 .83 2.30 .69 5.13 .65
from
investment
operations
34.Less
Distributions
35. From -- -- (.08) -- -- -- --
net
investment
income
36. From -- (.93) (1.05) (.49) (.92) (1.42) (.68)
net realized
gain
37. Total -- (.93) (1.13) (.49) (.92) (1.42) (.68)
distributions
38.Net asset $ 11.47 $ 12.60 $ 12.30 $ 14.11 $ 13.88 $ 17.59 $ 17.56
value, end of
period
39.Total 14.70% 19.63% 6.37% 19.50% 5.97% 41.05% 3.97%
return,
40.Net $ 916 $ 2,049 $ 4,615 $ 5,940 $ 7,087 $ 40,309 $ 199,36
assets, end 1
of period
(000 omitted)
41.Ratio of 2.85% 3.23% 3.34% 3.35% 3.27% 2.62% 2.07%
expenses to
average net
assets
42.Ratio of 2.85% 3.23% 3.34% 3.35% 3.94% 2.63% 2.10%
expenses to
average net
assets
before
expense
reductions
43.Ratio of (.64)% .83% (1.13)% (1.28)% (1.22)% (1.18)% (.67)%
net
investment
income to
average net
assets
44.Portfolio 220% 249% 229% 256% 248% 208% 125%
turnover rate
</TABLE>
A ANNUALIZED
B DECEMBER 29, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1988.
C COMMENCEMENT OF SALE OF CLASS A SHARES SEPTEMBER 10, 1992.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING.
E TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
F THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
G 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.
H FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A PORTION
OF THE FUND'S EXPENSES.
I EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
J NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH
AMOUNTED TO $.17 PER SHARE.
K AS OF OCTOBER 1, 1991, THE FUND DISCONTINUED THE USE OF EQUALIZATION
ACCOUNTING.
GROWTH OPPORTUNITIES
45.Selected Class A
Per-Share
Data and
Ratios
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
46.Years 1988 1989 1990 1991 1992 1993 1994
ended
October 31
47.Net asset $ 10.00 $ 14.27 $ 16.53 $ 12.99 $ 20.58 $ 21.14 $ 25.39
value,
beginning of
period
48.Income
from
Investment
Operations
49. Net .05 .02 .18 .06 .14 .08 .22
investment
income
50. Net 4.22 3.03 (2.50) 7.70 2.04 5.56 1.92
realized and
unrealized
gain (loss)
on
investments
51. Total 4.27 3.05 (2.32) 7.76 2.18 5.64 2.14
from
investment
operations
52.Less
Distributions
53. From -- (.03) (.05) (.17) (.09) (.13) (.07)
net
investment
income
54. From -- (.76) (1.17) -- (1.53) (1.26) (.84)
net realized
gain
55. Total -- (.79) (1.22) (.17) (1.62) (1.39) (.91)
distributions
56.Net asset $ 14.27 $ 16.53 $ 12.99 $ 20.58 $ 21.14 $ 25.39 $ 26.62
value, end of
period
57.Total 42.70% 22.69% (15.05) 60.25% 12.09% 28.11% 8.71%
return, %
58.Net $ 8,097 $ 34,351 $ 51,122 $ 213,09 $ 580,59 $ 2,054,9 $ 4,598,6
assets, end 5 5 88 68
of period
(000 omitted)
59.Ratio of 2.52%, 2.45% 2.00% 1.73% 1.60% 1.64% 1.62%
expenses to
average net
assets
60.Ratio of 2.52%, 2.45% 2.00% 1.73% 1.60% 1.65% 1.63%
expenses to
average net
assets
before
expense
reductions
61.Ratio of .82% .31% 1.49% .47% .80% .43% 1.12%
net
investment
income to
average net
assets
62.Portfolio 143% 163% 136% 142% 94% 69% 43%
turnover rate
</TABLE>
STRATEGIC OPPORTUNITIES - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
63.Sele
cted
Per-Sha
re Data
and
Ratios
64.Year 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1994
s ended
Septemb
er 30
65.Net $ 11.05 $ 12.70 $ 16.71 $ 19.13 $ 15.65 $ 19.77 $ 17.37 $ 21.55 $ 19.72 $ 22.72 $ 20.23
asset
value,
beginnin
g of
period
66.Inco
me from
Investm
ent
Operati
ons
67. Ne .35 .36 .53 .48 .64 .80 .77 .73 .45 .54 .13
t
investm
ent
income
68. Ne 1.56 5.05 2.95 (1.80) 4.08 (2.49) 4.26 .58 4.46 (.81) (.74)
t
realized
and
unrealiz
ed gain
(loss)
on
investm
ents
69. Tot 1.91 5.41 3.48 (1.32) 4.72 (1.69) 5.03 1.31 4.91 (.27) (.61)
al from
investm
ent
operatio
ns
70.Less
Distribut
ions
71. Fr (.06) (.24) (.09) (.25) (.60) (.71) (.85) (.72) (.70) (.51) (.50)
om net
investm
ent
income
72. Fr (.20) (1.16) (.97) (1.91) - - - (2.42) (1.21) (1.71) (.26)
om net
realized
gain
73. Tot (.26) (1.40) (1.06) (2.16) (.60) (.71) (.85) (3.14) (1.91) (2.22) (.76)
al
distributi
ons
74.Net $ 12.70 $ 16.71 $ 19.13 $ 15.65 $ 19.77 $ 17.37 $ 21.55 $ 19.72 $ 22.72 $ 20.23 $ 18.86
asset
value,
end of
period
75.Total 17.64% 46.10 21.87 (4.63) 31.19 (8.96) 30.01 7.89% 26.98 (1.51)% (3.02)
return, % % % % % % % %
76.Net $ 13,60 $ 31,99 $ 27,80 $ 19,22 $ 19,78 $ 15,98 $ 19,19 $ 17,93 $ 20,70 $ 18,850 $ 17,58
assets, 2 1 9 1 0 8 3 3 7 3
end of
period
(000
omitted)
77.Rati 1.50% 1.50% 1.30% 1.49% .64% 1.03% 1.00% .87% .89% 1.14% 1.11%
o of ,E
expense
s to
average
net
assets
78.Rati 1.50% 1.50% 1.30% 1.49% 1.04% 1.03% 1.00% .87% 1.05% 1.15% 1.14%
o of ,
expense
s to
average
net
assets
before
expense
reductio
ns
79.Rati 2.87% 2.40% 2.88% 3.31% 4.08% 4.21% 4.12% 3.78% 2.74% 2.60% 2.65%
o of net
investm
ent
income
to
average
net
assets
80.Portf 214% 225% 255% 160% 89% 114% 223% 211% 183% 159% 228%
olio
turnover
</TABLE>
A ANNUALIZED.
B NOVEMBER 18, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1988.
C FOR THE THREE MONTHS ENDED DECEMBER 31, 1994.
D NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH
AMOUNTED TO $.09 PER SHARE.
E FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A PORTION
OF THE FUND'S EXPENSES.
F TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
G THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
H AS OF OCTOBER 1, 1991, THE FUND DISCONTINUED THE USE OF EQUALIZATION
ACCOUNTING.
I EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
J NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
K 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%.
L INCLUDES REIMBURSEMENT OF $.08 PER SHARE FROM FIDELITY SERVICE COMPANY
FOR ADJUSTMENTS TO PRIOR PERIODS FEES.
M INCLUDES REIMBURSEMENT OF $.03 PER SHARE FROM FMR FOR ADJUSTMENTS TO
PRIOR PERIODS' FEES.
STRATEGIC OPPORTUNITIES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
81.Sele Class A Class B
cted
Per-Sha
re Data
and
ratios
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
82.Year 1986 1987 1988 1989 1990 1991 1992 1993 1994 1994 1994 1994
s ended
Septemb
er 30
83.Net $ 17.81 $ 16.71 $ 19.06 $ 15.53 $ 19.55 $ 17.21 $ 21.38 $ 19.53 $ 22.52 $ 19.96 $ 19.65 $ 19.98
asset
value,
beginnin
g of
period
84.Inco
me from
Investm
ent
Operati
ons
85. Ne .08 .46 .42 .50 .70 .66 .61 .33 .39 .10 .05 .06
t
investm
ent
income
86. Ne (1.18) 2.95 (1.80) 4.08 (2.49) 4.26 .58 4.44 (.81) (.75) .28 (.74)
t
realized
and
unrealiz
ed gain
(loss)
on
investm
ents
87. Tot (1.10) 3.41 (1.38) 4.58 (1.79) 4.92 1.19 4.77 (.42) (.65) .33 (.68)
al from
investm
ent
operatio
ns
88.Less
Distribut
ions
89. Fr -- (.09) (.24) (.56) (.55) (.75) (.62) (.57) (.43) (.35) -- (.47)
om net
investm
ent
income
90. Fr -- (.97) (1.91) -- -- -- (2.42) (1.21) (1.71) (.26) -- (.26)
om net
realized
gain
91. Tot -- (1.06) (2.15) (.56) (.55) (.75) (3.04) (1.78) (2.14) (.61) -- (.73)
al
distributi
ons
92.Net $ 16.71 $ 19.06 $ 15.53 $ 19.55 $ 17.21 $ 21.38 $ 19.53 $ 22.52 $ 19.96 $ 18.70 $ 19.98 $ 18.57
asset
value,
end of
period
93.Total (6.23) 21.28% (4.98) 30.45% (9.49) 29.51% 7.26% 26.33% (2.24)% (3.26)% 1.68% (3.41)%
return, % % %
94.Net $ 22,14 $ 283,1 $ 191,4 $ 198,1 $ 172,0 $ 199,6 $ 194,7 $ 269,8 $ 385,34 $ 375,69 $ 8,824 $ 17,090
assets, 1 17 54 74 86 04 10 83 9 1
end of
period
(000
omitted)
95.Rati 1.50% 1.67% 1.71% 1.51% 1.59% 1.56% 1.46% 1.57% 1.84% 1.73% 2.63% 2.53%
o of , ,, , ,
expense
s to
average
net
assets
96.Rati 1.50% 1.67% 1.71% 1.51% 1.59% 1.56% 1.46% 1.73% 1.85% 1.84% 2.84% 2.58%
o of , ,, , ,
expense
s to
average
net
assets
before
expense
reductio
ns
97.Rati 2.77% 2.36% 3.10% 3.23% 3.70% 3.61% 3.22% 2.06% 1.89% 2.03% 1.11% 1.22%
o of net
investm
ent
income
to
average
net
assets
98.Portf -- 225% 160% 89% 114% 223% 211% 183% 159% 228% 159% 228%
olio
turnover
</TABLE>
EQUITY INCOME
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
99.Sele Institutional Class A Class B
cted Class
Per-Sha
re Data
and
Ratios
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Years 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1992 1993 1994 1994
ended
Novembe
r 30
100.Net $ 10.24 $ 11.95 $ 13.54 $ 10.93 $ 11.10 $ 12.27 $ 9.52 $ 11.08 $ 12.88 $ 14.93 $ 12.37 $ 12.86 $ 14.86 $ 15.21
asset
value,
beginnin
g of
period
101.Inc
ome
from
Investm
ent
Operati
ons
102. Ne .79 .78 .76 .75 .75 .69 .63 .49 .39 .41 .13 .33 .28 .08
t
investm
ent
income
103. Ne 1.69 1.92 (1.53) 1.81 1.17 (2.42) 1.52 1.79 2.02 1.05 .47 1.97 1.03 .72
t
realized
and
unrealiz
ed
gain
(loss)
on
investm
ents
104. Tot 2.48 2.70 (.77) 2.56 1.92 (1.73) 2.15 2.28 2.41 1.46 .60 2.30 1.31 .80
al from
investm
ent
operatio
ns
105.Le
ss
Distribut
ions
106. Fr (.77) (.77) (.70) (.74) (.75) (.72) (.59) (.48) (.36) (.32) (.11) (.30) (.21) (.07)
om net
investm
ent
income
107. Fr -- (.34) (1.14) (1.65) -- (.30) -- -- -- -- -- -- -- --
om net
realized
gain
108. Tot (.77) (1.11) (1.84) (2.39) (.75) (1.02) (.59) (.48) (.36) (.32) (.11) (.30) (.21) (.07)
al
distributi
ons
109.Net $ 11.95 $ 13.54 $ 10.93 $ 11.10 $ 12.27 $ 9.52 $ 11.08 $ 12.88 $ 14.93 $ 16.07 $ 12.86 $ 14.86 $ 15.96 $ 15.94
asset
value,
end of
period
110.Tot 24.86 23.48 (7.28) 26.99 17.58 (14.90) 22.97 20.91 18.90 9.82% 4.88% 18.03 8.84% 5.25%
al % % % % % % % % % %
return,
111.Net $ 349,2 $ 544,2 $ 443,6 $ 436,7 $ 463,6 $ 253,0 $ 168,5 $ 139,3 $ 191,1 $ 197,5 $ 1,462 $ 42,32 $ 179,5 $ 35,37
assets, 62 69 03 53 96 49 90 91 38 33 6 01 3
end of
period
(000
omitted)
112.Rat .63% .61% .54% .55% .55% .61% .67% .71% .79% .71% 1.55% 1.77% 1.64% 2.18%
io of ,
expense
s to
average
net
assets
113.Rat .63% .61% .61% .65% .65% .71% .77% .79% .80% .73% 1.55% 1.77% 1.67% 2.24%
io of ,
expense
s to
average
net
assets
before
expense
reductio
ns
114.Rat 7.36% 6.06% 5.58% 6.86% 6.09% 6.11% 5.66% 3.77% 3.00% 2.62% 3.39% 2.02% 1.69% 1.15%
io of net
investm
ent
income
to
average
net
assets
115.Por 110% 107% 137% 78% 93% 103% 91% 51% 120% 140% 51% 120% 140% 140%
tfolio
turnover
</TABLE>
A ANNUALIZED.
B AUGUST 20, 1986 (COMMENCEMENT OF OPERATIONS) TO SEPTEMBER 30, 1986.
C COMMENCEMENT OF SALE OF CLASS A SHARES SEPTEMBER 10, 1992.
D COMMENCEMENT OF SALE OF CLASS B SHARES JUNE 30, 1994.
E FOR THE THREE MONTHS ENDED DECEMBER 31, 1994.
F FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A PORTION
OF THE FUND'S EXPENSES.
G TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
H THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD FMR NOT REIMBURSED CERTAIN
EXPENSES DURING THE PERIODS SHOWN.
I AS OF OCTOBER 1, 1991, THE FUND DISCONTINUED THE USE OF EQUALIZATION
ACCOUNTING.
J 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.
K 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%.
L INCLUDES REIMBURSEMENT OF $.03 PER SHARE FROM FMR FOR ADJUSTMENTS TO
PRIOR PERIODS' FEES
M 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.
N EFFECTIVE APRIL 1, 1987 TO SEPTEMBER 10, 1992, FMR REIMBURSED .10% OF THE
ANNUAL MANAGEMENT FEE OF .50%.
O INCLUDES $.04 PER SHARE FROM FOREIGN TAXES RECOVERED.
P NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
Q INCLUDES THE EFFECT OF ANNUALIZING A VOLUNTARY REIMBURSEMENT OF FEES BY
FMR.
INCOME & GROWTH
116.Sel Class A
ected
Per-Sha
re Data
and
Ratios
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
117.Yea 1987 1988 1989 1990 1991 1992 1993 1994
rs ended
October
31
118.Net $ 10.00 $ 9.44 $ 11.07 $ 12.77 $ 10.41 $ 14.13 $ 14.41 $ 15.91
asset
value,
beginnin
g of
period
119.Inc
ome
from
Investm
ent
Operati
ons
120. Ne .27 .62 1.01 .56 .51 .50 .48 .38
t
investm
ent
income
121. Ne (.63) 1.56 1.27 (1.34) 3.74 .85 2.18 (.79)
t
realized
and
unrealiz
ed gain
(loss)
on
investm
ents
122. Tot (.36) 2.18 2.28 (.78) 4.25 1.35 2.66 (.41)
al from
investm
ent
operatio
ns
123.Le
ss
Distribut
ions
124. Fr (.20) (.55) (.58) (1.06) (.53) (.46) (.56) (.28)
om net
investm
ent
income
125. In -- -- -- -- -- -- -- (.02)
excess
of net
investm
ent
income
126. Fr -- -- -- (.52) -- (.61) (.60) (.49)
om net
realized
gain
127. Re -- -- -- -- -- -- -- (.04)
turn of
Capital
128. Tot (.20) (.55) (.58) (1.58) (.53) (1.07) (1.16) (.83)
al
distributi
ons
129.Net $ 9.44 $ 11.07 $ 12.77 $ 10.41 $ 14.13 $ 14.41 $ 15.91 $ 14.67
asset
value,
end of
period
130.Tot (3.90)% 23.66% 21.15% (7.15)% 41.73% 10.27% 19.66% (2.69)%
al
return,
131.Net $ 34,376 $ 36,224 $ 46,139 $ 60,934 $ 135,53 $ 397,67 $ 1,654,1 $ 3,128,7
assets, 3 2 24 76
end of
period
(000
omitted)
132.Rat 2.06% 2.06% 1.91% 1.85% 1.71% 1.60% 1.51% 1.58%
io of
expense
s to
average
net
assets
133.Rat 2.06% 2.06% 1.91% 1.85% 1.71% 1.60% 1.52% 1.59%
io of
expense
s to
average
net
assets
before
expense
reductio
ns
134.Rat 3.95% 5.83% 8.80% 5.29% 4.19% 3.97% 3.24% 3.79%
io of net
investm
ent
income
to
average
net
assets
135.Por 206% 204% 151% 297% 220% 389% 200% 202%
tfolio
turnover
rate
</TABLE>
EMERGING MARKETS INCOME
136.Selected Per-Share Data Class A Class B
137.Year ended December 31 1994 1994
138.Net asset value, beginning of $ 10.000 $ 9.700
period
139.Income from Investment
Operations
140. Net investment income .356 .167
141. Net realized and unrealized gain (.073) .227
(loss) on investments
142. Total from investment .283 .394
operations
143.Less Distributions
144. From net investment income (.353) (.220)
145. In excess of net investment (.150) (.094)
income
146. From net realized gain (.010) (.010)
147. In excess of net realized gain (.250) (.250)
148. Total distributions (.763) (.574)
149.Net asset value, end of period $ 9.520 $ 9.520
150.Total return, 2.47% 3.67%
151.Net assets, end of period (000 $ 30,029 $ 5,034
omitted)
152.Ratio of expenses to average 1.50% 2.25%,
net assets
153.Ratio of expenses to average 2.15% 2.60%,
net assets before expense reductions
154.Ratio of net investment income 6.60% 5.86%
to average net assets
155.Portfolio turnover 354% 354%
A ANNUALIZED.
B JANUARY 6, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1987.
C 3.MARCH 10, 1994 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1994.
D COMMENCEMENT OF SALE OF CLASS B SHARES JUNE 30, 1994.
E TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
F THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
G NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH
AMOUNTED TO $ .26 PER SHARE.
H FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A PORTION
OF THE FUND'S EXPENSES.
I 1.EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE LIMITATION.
HIGH YIELD
2.Select Class A Class B
ed
Per-Sha
re Data
and
Ratios
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3.Years 1987 1988 1989 1990 1991 1992 1993 1994 1994
ended
October
31
4.Net $ 10.000 $ 9.090 $ 9.860 $ 8.970 $ 8.150 $ 10.120 $ 11.070 $ 12.010 $ 11.300
asset
value,
beginnin
g of
period
5.Incom
e from
Investm
ent
Operati
ons
6. Net .878 1.165 1.237 1.144 1.115 1.146 .980 .848 .223
investm
ent
income
7. Net (.910) .770 (.890) (.820) 1.948 .975 1.153 (.537) (.118)
realized
and
unrealiz
ed gain
(loss)
on
investm
ents
8. Total (.032) 1.935 .347 .324 3.063 2.121 2.133 .311 .105
from
investm
ent
operatio
ns
9.Less
Distribut
ions
10. Fr (.878) (1.165) (1.237) (1.144) (1.093) (1.171) (.963) (.851) (.195)
om net
investm
ent
income
11. Fr -- -- -- -- -- -- (.230) (.250) --
om net
realized
gain
12. Tot (.878) (1.165) (1.237) (1.144) (1.093) (1.171) (1.193) (1.101) (.195)
al
distributi
ons
13.Net $ 9.090 $ 9.860 $ 8.970 $ 8.150 $ 10.120 $ 11.070 $ 12.010 $ 11.220 $ 11.210
asset
value,
end of
period
14.Total (.81)% 22.14% 3.34% 3.58% 39.67% 21.96% 20.47% 2.64% .93%
return,
15.Net $ 9,077 $ 11,900 $ 13,315 $ 15,134 $ 38,681 $ 136,31 $ 485,55 $ 679,623 $ 16,959
assets, 6 9
end of
period
(000
omitted)
16.Rati 1.24% 1.10% 1.10% 1.10% 1.10% 1.10% 1.11% 1.20% 2.20%
o of
expense
s to
average
net
assets
17.Rati 2.25%, 2.22% 2.17% 2.04% 1.76% 1.16% 1.11% 1.20% 2.20%
o of
expense
s to
average
net
assets
before
expense
reductio
ns
18.Rati 10.74% 11.86% 12.98% 12.72% 12.20% 9.95% 8.09% 6.92% 5.92%
o of net
investm
ent
income
to
average
net
assets
19.Portf 166% 135% 131% 90% 103% 100% 79% 118% 118%
olio
turnover
</TABLE>
STRATEGIC INCOME
20.Selected Per-Share Data and Class A Class B
Ratios
21.Year ended December 31 1994 1994
22.Net asset value, beginning of $ 10.000 $ 10.000
period
23.Income from Investment
Operations
24. Net investment income .064 .072
25. Net realized and unrealized gain (.046) (.078)
(loss) on investments
26. Total from investment .018 (.006)
operations
27.Less Distributions
28. From net investment income (.098) (.084)
29.Net asset value, end of period $ 9.920 $ 9.910
30.Total return, .17% (.06)%
31.Net assets, end of period (000 $ 10,687 $ 9,379
omitted)
32.Ratio of expenses to average net 1.35% 2.10%
assets
33.Ratio of expenses to average net 2.50%, 2.50%,
assets before expense reductions
34.Ratio of net investment income to 5.80% 5.06%
average net assets
35.Portfolio turnover 104% 104%
A ANNUALIZED.
B JANUARY 5, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1987.
C OCTOBER 31, 1994 (COMMENCEMENT OF SALES OF CLASS A & CLASS B SHARES) TO
DECEMBER 31, 1994.
D COMMENCEMENT OF SALE OF CLASS B SHARES JUNE 30, 1994.
E TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
F THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
G EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
H NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
I THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
GOVERNMENT INVESTMENT
36.Selected Class A Class B
Per-Share
Data and
Ratios
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
37.Years 1987 1988 1989 1990 1991 1992 1993 1994 1994
ended
October 31
38.Net asset $ 10.000 $ 9.200 $ 9.260 $ 9.310 $ 9.150 $ 9.590 $ 9.730 $ 10.140 $ 9.100
value,
beginning of
period
39.Income
from
Investment
Operations
40. Net .614 .769 .773 .735 .700 .666 .567 .515 .144
investment
income
41. Net (.800) .060 .050 (.160) .419 .125 .601 (1.031) (.137)
realized and
unrealized
gain (loss)
on
investments
42. Total (.186) .829 .823 .575 1.119 .791 1.168 (.516) .007
from
investment
operations
43.Less
Distributions
44. From (.614) (.769) (.773) (.735) (.679) (.651) (.558) (.504) (.157)
net
investment
income
45. From -- -- -- -- -- -- (.200) (.130) --
net realized
gain
46. In -- -- -- -- -- -- -- (.030) --
excess of net
realized gain
on
investments
47. Total (.614) (.769) (.773) (.735) (.679) (.651) (.758) (.664) (.157)
distributions
48.Net asset $ 9.200 $ 9.260 $ 9.310 $ 9.150 $ 9.590 $ 9.730 $ 10.140 $ 8.960 $ 8.950
value, end of
period
49.Total (1.84)% 9.34% 9.37% 6.48% 12.65% 8.49% 12.53% (5.27)% 0.10%
return,
50.Net $ 4,584 $ 6,590 $ 8,203 $ 9,822 $ 13,058 $ 23,281 $ 69,876 $ 114,453 $ 2,062
assets, end
of period
(000 omitted)
51.Ratio of 1.29% 1.10% 1.10% 1.10% 1.10% 1.10% .68% .74% 1.70%
expenses to
average net
assets
52.Ratio of 2.36% 2.25% 2.75% 2.74% 2.46% 1.79% 1.32% 1.47% 2.62%
expenses to
average net
assets
before
expense
reductions
53.Ratio of 8.12% 8.30% 8.45% 8.04% 7.47% 6.98% 6.11% 6.18% 5.22%
net
investment
income to
average net
assets
54.Portfolio 32% 44% 42% 31% 54% 315% 333% 313% 313%
turnover
</TABLE>
LIMITED TERM BOND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55.Selected Institutional Class A Class B
Per-Share Class
Data and
Ratios
</TABLE>
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Years ended
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1992 1993 1994 1994
November 30
56.Net asset
$ 9.960 $ 10.55 $ 11.24 $ 10.25 $ 10.18 $ 10.41 $ 10.14 $ 10.55 $ 10.64 $ 11.16 $ 10.96 $ 10.64 $ 11.14 $ 10.43
value,
0 0 0 0 0 0 0 0 0 0 0 0 0
beginning of
period
57.Income
from
Investment
Operations
58. Net
1.053 1.026 .953 .944 .937 .901 .884 .840 .832 .602 .170 .785 .609 .204
investment
income
59. Net
.590 .710 (.770) (.070) .230 (.270) .411 .102 .531 (.833) (.320) .511 (.876) (.178)
realized and
unrealized
gain
(loss) on
investments
60. Total
1.643 1.736 .183 .874 1.167 .631 1.295 .942 1.363 (.231) (.150) 1.296 (.267) .026
from
investment
operations
61.Less
Distributions
62. From
(1.053) 1.026 (.953) (.944) (.937) (.901) (.885) (.852) (.843) (.597) (.170) (.796) (.555) (.187)
net
investment
income
63. From
- -- -- -- -- -- -- -- -- -- (.062) -- -- (.058) (.019)
Return of
Capital
64. From
- -- (.020) (.220) -- -- -- -- -- -- -- -- -- -- --
net realized
gain
65. Total
(1.053) (1.046) (1.173) (.944) (.937) (.901) (.885) (.852) (.843) (.659) (.170) (.796) (.613) (.206)
distributions
66.Net asset
$ 10.55 $ 11.24 $ 10.25 $ 10.18 $ 10.41 $ 10.14 $ 10.55 $ 10.64 $ 11.16 $ 10.27 $ 10.64 $ 11.14 $ 10.26 $ 10.25
value, end of
0 0 0 0 0 0 0 0 0 0 0 0 0 0
period
67.Total
17.40 17.04 1.78% 8.81% 12.03 6.46% 13.35 9.21% 13.17 (2.10) (1.37) 12.50 (2.44) .24%
return,
% % % % % % % % %
68.Net
$ 253,9 $ 418,6 $ 407,2 $ 418,9 $ 426,8 $ 356,5 $ 327,7 $ 160,1 $ 183,7 $ 172,1 $ 2,583 $ 59,18 $ 141,8 $ 3,156
assets, end
13 32 28 29 32 64 56 56 90 22 4 66
of period (000
omitted)
69.Ratio of
.65% .53% .53% .54% .54% .58% .57% .57% .64% .61% .82% 1.23% 1.02% 1.65%
expenses to
average net
assets
70.Ratio of
.65% .53% .53% .54% .54% .58% .57% .57% .64% .61% .82% 1.23% 1.09% 2.41%
expenses to
average net
assets
before
expense
reductions
71.Ratio of
10.29 9.22% 9.03% 9.16% 9.16% 8.90% 8.59% 7.96% 7.41% 6.45% 7.67% 6.81% 6.04% 5.42%
net
%
investment
income to
average net
assets
72.Portfolio
88% 59% 92% 48% 87% 59% 60% 7% 59% 68% 7% 59% 68% 68%
turnover
</TABLE>
A ANNUALIZED.
B JANUARY 7, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1987.
C COMMENCEMENT OF SALE OF CLASS A SHARES SEPTEMBER 10, 1992.
D COMMENCEMENT OF SALE OF CLASS B SHARES JUNE 30, 1994.
E TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
F THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
G 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.
H THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSFICATIONS RELATED TO BOOK TO TAX
DIFFERENCES.
SHORT FIXED-INCOME
73.Selected Class A
Per-Share
Data and
Ratios
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
74.Years 1987 1988 1989 1990 1991 1992 1993 1994
ended
October 31
75.Net asset $ 10.000 $ 10.060 $ 9.940 $ 9.950 $ 9.620 $ 9.870 $ 9.950 $ 10.090
value,
beginning of
period
76.Income .101 .852 .832 .868 .848 .830 .732 .559
from
Investment
Operations
Net
investment
income
77. Net .060 (.120) .010 (.330) .270 .071 .146 (.581)
realized and
unrealized
gain (loss)
on
investments
78. Total .161 .732 .842 .538 1.118 .901 .878 (.022)
from
investment
operations
79.Less (.101) (.852) (.832) (.868) (.868) (.821) (.738) (.464)
Distributions
From net
investment
income
80. In -- -- -- -- -- -- -- (.044)
excess of net
investment
income
81. Return -- -- -- -- -- -- -- (.080)
of Capital
82. Total (.101) (.852) (.832) (.868) (.868) (.821) (.738) (.588)
Distributions
83.Net asset $ 10.060 $ 9.940 $ 9.950 $ 9.620 $ 9.870 $ 9.950 $ 10.090 $ 9.480
value, end of
period
84.Total 1.61% 7.56% 8.89% 5.59% 12.19% 9.44% 9.13% (.22)%
return,
85.Net $ 3,252 $ 13,433 $ 12,394 $ 13,062 $ 25,244 $ 170,55 $ 654,20 $ 787,92
assets, end 8 2 6
of period
(000 omitted)
86.Ratio of .90% .90% .90% .90% .90% .90% .95% .97%
expenses to
average net
assets
87.Ratio of 2.15%, 1.84% 2.22% 1.90% 1.74% 1.03% .95% .97%
expenses to
average net
assets
before
expense
reductions
88.Ratio of 7.65% 8.39% 8.45% 8.86% 8.50% 7.59% 6.77% 5.91%
net
investment
income to
average net
assets
89.Portfolio 119% 178% 157% 144% 127% 57% 58% 108%
turnover rate
</TABLE>
HIGH INCOME MUNICIPAL
90.Selected Class A Class B
Per-Share
Data and
Ratios
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
91.Years 1987 1988 1989 1990 1991 1992 1993 1994 1994
ended
October 31
92.Net asset $ 10.000 $ 9.850 $ 10.460 $ 10.820 $ 10.870 $ 11.410 $ 11.650 $ 12.720 $ 11.610
value,
beginning of
period
93.Income
from
Investment
Operations
94. Net .092 .750 .800 .811 .803 .774 .710 .689 .188
investment
income
95. Net (.150) .610 .410 .150 .660 .250 1.100 (1.430) (.400)
realized and
unrealized
gain (loss)
on
investments
96. Total (.058) 1.360 1.210 .961 1.463 1.024 1.810 (.741) (.212)
from
investment
operations
97.Less
Distributions
98. From (.092) (.750) (.800) (.811) (.803) (.774) (.710) (.689) (.188)
net
investment
income
99. From -- -- (.050) (.100) (.120) (.010) (.030) (.060) --
net realized
gain
100. In -- -- -- -- -- -- -- (.010) --
excess of net
realized gain
101. Total (.092) (.750) (.850) (.911) (.923) (.784) (.740) (.759) (.188)
distributions
102.Net $ 9.850 $ 10.460 $ 10.820 $ 10.870 $ 11.410 $ 11.650 $ 12.720 $ 11.220 $ 11.210
asset value,
end of period
103.Total (.58)% 14.22% 12.05% 9.28% 14.02% 9.21% 15.95% (6.03)% (1.86)%
return,
104.Net $ 1,275 $ 3,290 $ 6,669 $ 22,702 $ 67,135 $ 156,65 $ 497,57 $ 544,422 $ 9,968
assets, end 9 5
of period
(000 omitted)
105.Ratio of .80% .89% .90% .90% .90% .90% .92% .89% 2.09%
expenses to
average net
assets
106.Ratio of 2.25% 2.25% 2.75% 2.09% 1.24% .96% .92% .89% 2.09%
expenses to
average net
assets
before
expense
reductions
107.Ratio of 7.24% 7.33% 7.60% 7.37% 7.08% 6.59% 5.59% 5.78% 4.58%
net
investment
income to
average net
assets
108.Portfolio -- 19% 27% 11% 10% 13% 27% 38% 38%
turnover
</TABLE>
A ANNUALIZED.
B SEPTEMBER 16, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1987.
C COMMENCEMENT OF SALE OF CLASS B SHARES JUNE 30, 1994.
D TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
E THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
F EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
LIMITED TERM TAX-EXEMPT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
109.Selecte Institutional Class A Class B
d Per-Share Class
Data and
Ratios
</TABLE>
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Years ended
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1992 1993 1994 1994
November 30
110.Net
$ 10.00 $ 10.28 $ 10.99 $ 10.38 $ 10.52 $ 10.61 $ 10.64 $ 10.80 $ 11.08 $ 10.460 $ 11.01 $ 11.08 $ 10.460 $ 9.890
asset value,
0 0 0 0 0 0 0 0 0 0 0
beginning of
period
111.Income
from
Investment
Operations
112. Net
.130 .671 .641 .650 .674 .689 .682 .666 .536 .481 .131 .508 .455 .155
investment
income
113. Net
.280 .760 (.540) .140 .090 .030 .160 .280 .260 (1.030) .070 .260 (1.040) (.490)
realized and
unrealized
gain (loss)
on
investments
114. Total
.410 1.431 .101 .790 .764 .719 .842 .946 .796 (.549) .201 .768 (.585) (.335)
from
investment
operations
115.Less
Distributions
116. From
(.130) (.671) (.641) (.650) (.674) (.689) (.682) (.666) (.536) (.481) (.131) (.508) (.455) (.155)
net
investment
income
117. From
- -- (.050) (.070) -- -- -- -- -- (.880) -- -- (.880) -- --
net realized
gain
118. In
- -- -- -- -- -- -- -- -- -- (.020) -- -- (.020) --
excess of net
realized gain
119. Total
(.130) (.721) (.711) (.650) (.674) (.689) (.682) (.666) (1.416) (.501) (.131) (1.388) (.475) (.155)
distributions
120.Net
$ 10.28 $ 10.99 $ 10.38 $ 10.52 $ 10.61 $ 10.64 $ 10.80 $ 11.08 $ 10.46 $ 9.410 $ 11.08 $ 10.46 $ 9.400 $ 9.400
asset value,
0 0 0 0 0 0 0 0 0 0 0
end of period
121.Total
4.12% 14.39% .97% 7.77% 7.50% 7.04% 8.15% 9.01% 8.01% (5.43)% 1.37% 7.72% (5.78)% (3.44)
return,
122.Net
$ 94,39 $ 161,0 $ 162,8 $ 132,4 $ 121,4 $ 111,50 $ 100,2 $ 28,42 $ 15,07 $ 11,702 $ 1,752 $ 39,80 $ 57,382 $ 1,682
assets, end
1 45 57 43 18 6 94 8 6 0
of period
(000 omitted)
123.Ratio of
.69% .58% .59% .63% .65% .62% .61% .66% .65% .65% 1.04% .90% .90% 1.65%
expenses to
average net
assets
124.Ratio of
.69% .58% .59% .63% .65% .62% .61% .67% .83% .76% 1.06% 1.36% 1.04% 2.36%
expenses to
average net
assets
before
expense
reductions
125.Ratio of
6.33% 6.29% 6.01% 6.20% 6.45% 6.53% 6.40% 6.05% 5.01% 4.75% 5.65% 4.76% 4.49% 3.74%
net
investment
income
to average
net assets
126.Portfolio
103% 34% 43% 24% 31% 32% 20% 36% 46% 53% 36% 46% 53% 53%
turnover
</TABLE>
SHORT-INTERMEDIATE TAX-EXEMPT
127.Selected Per-Share Data and Class A
Ratios
128.Year ended November 30 1994
129.Net asset value, beginning of $ 10.000
period
130.Income from Investment .259
Operations
Net interest income
131. Net realized and unrealized gain (.230)
(loss) on investments
132. Total from investment .029
operations
133.Less Distributions (.259)
From net interest income
134.Net asset value, end of period $ 9.770
135.Total return, .27%
136.Net assets, end of period (000 $ 16,563
omitted)
137.Ratio of expenses to average .75%,
net assets
138.Ratio of expenses to average 1.54%,
net assets before expense reductions
139.Ratio of net interest income to 3.74%
average net assets
140.Portfolio turnover rate 111%
A ANNUALIZED.
B SEPTEMBER 19, 1985 (COMMENCEMENT OF OPERATIONS) TO NOVEMBER 30, 1985.
C MARCH 16, 1994 (COMMENCEMENT OF OPERATIONS) TO NOVEMBER 30, 1994.
D COMMENCEMENT OF SALE OF CLASS A SHARES SEPTEMBER 10, 1992.
E COMMENCEMENT OF SALE OF CLASS B SHARES JUNE 30, 1994.
F TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
G THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
H FMR VOLUNTARILY AGREED TO LIMIT THE EXPENSES (EXCLUDING INTEREST, TAXES
BROKERAGE COMMISSIONS AND EXTRAORDINARY EXPENSES) TO .75% OF AVERAGE NET
ASSETS.
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN and/or YIELD.
Each class's performance is affected by the expenses of that class;
accordingly, performance may be different among the classes. The exclusion
of any applicable sales charge from a performance calculation produces a
higher return.
EXPLANATION OF TERMS
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. Average annual total returns covering
periods of less than one year assume that performance will remain constant
for the rest of the year.
Average annual and cumulative total returns usually will include the effect
of paying the maximum applicable sales charge.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders. This difference may
be significant for a fund whose investments are denominated in foreign
currencies.
In calculating yield, Overseas, Equity Portfolio Growth, Global Resources,
Growth Opportunities, Strategic Opportunities, Equity Income, Income &
Growth, Emerging Markets Income, High Yield, Strategic Income, Short
Fixed-Income and High Income Municipal 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.
A TAX-EQUIVALENT YIELD shows what an investor would have to earn before
taxes to equal a tax-free yield.
Each class of a growth or growth and income fund may quote its adjusted NAV
including all distributions paid. This value may be averaged over specified
periods and may be used to calculate a class's moving average.
The funds' recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders.
For current performance or a free annual report, please contact your
Investment Professional.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders' money
and invests it toward a specified goal. Equity Portfolio Growth is a
diversified fund of Fidelity Advisor Series I, a Massachusetts business
trust organized on June 24, 1983. Growth Opportunities, Income & Growth,
High Yield, Government Investment and Short Fixed-Income are diversified
funds of Fidelity Advisor Series II, a Massachusetts business trust
organized on April 24, 1986. Equity Income is a diversified fund of
Fidelity Advisor Series III, a Massachusetts business trust organized on
May 17, 1982. Limited Term Bond is a diversified fund of Fidelity Advisor
Series IV, a Massachusetts business trust organized on May 6, 1983. Global
Resources and High Income Municipal are diversified funds of Fidelity
Advisor Series V, a Massachusetts business trust organized on April 24,
1986. Limited Term Tax-Exempt is a diversified fund and Short-Intermediate
Tax-Exempt is a non-diversified fund of Fidelity Advisor Series VI, a
Massachusetts business trust organized on June 1, 1983. Overseas is a
diversified fund of Fidelity Advisor Series VII, a Massachusetts business
trust organized on March 21, 1980. Emerging Markets Income and Strategic
Income are non-diversified funds and Strategic Opportunities is a
diversified fund of Fidelity Advisor Series VIII, a Massachusetts business
trust organized on September 23, 1983. Each trust is an open-end management
investment company. There is a remote possibility that one fund might
become liable for a misstatement in the prospectus about another fund.
INSTITUTIONAL SHARES. Equity Portfolio Growth, Equity Income, Limited Term
Bond and Limited Term Tax-Exempt each offer shares to institutional and
retail investors. Shares offered to institutional investors (Institutional
Class 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 Class shares are $100,000 and $2,500,
respectively. The minimum account balance is $40,000. Institutional Class
shares are offered through a separate prospectus. Institutional Class
shares of one fund may be exchanged for Institutional Class shares of
another Fidelity Advisor Fund or of another Fidelity fund. Transfer agent
and shareholder services for Institutional Class shares are performed by
Fidelity Investments Institutional Operations Company (FIIOC). For each
fund's respective fiscal year end, total operating expenses for
Institutional Class shares as a percent of average net assets were: 0.84%
for Equity Portfolio Growth (after reimbursement); 0.71% for Equity Income;
0.61% for Limited Term Bond; and 0.65% after reimbursement for Limited Term
Tax-Exempt. Institutional Class shares of each fund have a Distribution and
Service Plan that does 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 Class shares. Institutional Class 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 Class shares.
Strategic Opportunities offers three classes of shares: Class A, Class B
and Initial Class. Initial Class shares are offered only to current Initial
Class shareholders through a separate prospectus.
Strategic Opportunities Initial Class has a maximum 4.75% front-end sales
charge. New investors may not purchase Initial Shares. Current shareholders
may make additional investments in Initial Class of $250 or more. The
minimum account balance for Initial Class is $1,000. Reduced sales charges
apply to purchases of $50,000 or more of Initial Class. Transfer agent and
shareholders services for Initial Class are performed by Fidelity Service
Company (FSC). For the fiscal year ended December 31, 1994, total operating
expenses as a percentage of net assets for Initial Class was 1.11%.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the funds' activities,
review contractual arrangements with companies that provide services to the
funds, and review the funds' performance. The majority of trustees are not
otherwise affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These
meetings may be called to elect or remove trustees, change fundamental
policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
The transfer agent will mail proxy materials in advance, including a voting
card and information about the proposals to be voted on. For shareholders
of Overseas, Equity Portfolio Growth, Strategic Opportunities, Emerging
Markets Income, Strategic Income, Limited Term Tax-Exempt and
Short-Intermediate Tax-Exempt, you are entitled to one vote for each share
you own. For shareholders of Global Resources, Growth Opportunities, Equity
Income, Income & Growth, High Yield, Government Investment, Limited Term
Bond, Short Fixed-Income and High Income Municipal, the number of votes you
are entitled to is based upon the dollar value of your investment.
Separate votes are taken by each class of shares, each fund, or the trust,
respectively, if a matter affects just that class of shares, fund, or
trust, respectively.
FMR AND ITS AFFILIATES
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, Massachusetts 02109. It includes a number
of different subsidiaries and divisions which provide a variety of
financial services and products. The funds employ various Fidelity
companies to perform activities required for their operation.
The funds are managed by FMR, which chooses each fund's investments and
handles its business affairs. FMR chooses the investments for each fund
(except Government Investment, High Income Municipal, Limited Term
Tax-Exempt and Short-Intermediate Tax-Exempt) with the assistance of
foreign affiliates.
Affiliates assist FMR with foreign securities: Fidelity Management &
Research (U.K.) Inc. (FMR U.K.), in London, England; Fidelity Management &
Research (Far East) Inc. (FMR Far East), in Tokyo, Japan; Fidelity
International Investment Advisors (FIIA), in Pembroke, Bermuda; Fidelity
International Investment Advisors (U.K.) Limited (FIIAL U.K.), in Kent,
England; and Fidelity Investment Japan Ltd. (FIJ), in Tokyo, Japan.
As of January 31, 1995, FMR advised funds having approximately 22 million
shareholder accounts with a total value of more than $250 billion.
Bettina E. Doulton has been manager of Advisor Equity 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
1986.
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 its inception in 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 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 Overseas and VIP: Overseas.
Previously he managed Emerging Markets, Europe, Pacific Basin, Japan, and
International Growth & Income. Mr. Hickling joined Fidelity in 1982.
Robert Ives is manager of Advisor Government Investment, which he has
managed since February 1995. Mr. Ives also manages Spartan Government
Income and Government Securities. Previously, he managed Ginnie Mae and
Spartan Ginnie Mae. Mr. Ives joined Fidelity in 1991, after receiving an
M.B.A. from the University of Chicago. Previously, Mr. Ives was a
consultant to the U.S. Air Force for MITRE Corp. and an engineer at Bell
Labs.
Jonathan Kelly is manager of Advisor Emerging Markets Income, which he has
managed since January 1995. He also manages Global Bond and New Markets
Income and Canada Emerging Markets Income. He joined Fidelity in 1991,
after receiving his M.B.A. from the Wharton School at the University of
Pennsylvania. Mr. Kelly worked in the money management field prior to
business school.
Malcolm W. MacNaught is vice president and manager of Advisor Global
Resources which he has managed since December 1987. Mr. MacNaught also
manages Select Precious Metals and Minerals and Select American Gold. Mr.
MacNaught joined Fidelity in 1968.
Charles Morrison is manager of Advisor Short Fixed-Income which he has
managed since February 1995. He also manages Spartan Short-Term Bond and
Short-Term Bond. Mr. Morrison is vice president of Fidelity Management
Trust Company. He joined Fidelity in 1987.
David Murphy is manager of Advisor Short-Intermediate Tax-Exempt Fund. He
also manages Limited Term Municipal, New York Tax-Free Insured, Spartan
Intermediate Municipal, Spartan California Intermediate Municipal, Spartan
New York Intermediate Municipal, Spartan Short-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 manager of Advisor Strategic Income, which he has
managed since October 1994. Mr. Taylor also manages VIP II: Investment
Grade Bond. In addition, he manages Income Plus for Fidelity International.
Previously, he managed Short-Term Bond, Spartan Short-Term Bond, Advisor
Short Fixed-Income, 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.
Guy E. Wickwire is a vice president and manager of Advisor High Income
Municipal which he has managed since July 1994. Mr. Wickwire also manages
Massachusetts Tax-Free High Yield and Insured Tax-Free.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
FDC distributes and markets Fidelity's funds and services. FIIOC performs
sub-transfer agent servicing functions for Class A and transfer agent
servicing functions for Class B shares of each fund.
FMR Corp. is the ultimate parent company of FMR, FMR U.K., and FMR Far
East. Through ownership of voting common stock, members of the Edward C.
Johnson 3d family form a controlling group with respect to FMR Corp.
Changes may occur in the Johnson family group, through death or disability,
which would result in changes in each individual family member's holding of
stock. Such changes could result in one or more family members becoming
holders of over 25% of the stock. FMR Corp. has received an opinion of
counsel that changes in the composition of the Johnson family group under
these circumstances would not result in the termination of the funds'
management or distribution contracts and, accordingly, would not require a
shareholder vote to continue operation under those contracts.
Fidelity International Limited (FIL), is the parent company of FIIA, FIJ,
and FIIAL U.K. The Johnson family group also owns, directly or indirectly,
more than 25% of the voting common stock of FIL.
United Missouri Bank, N.A. (UMB) is the transfer agent for High Income
Municipal, Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt,
although it employs State Street Bank & Trust Company (State Street), P.O.
Box 8302, Boston, Massachusetts 02266-8302 to perform these functions for
Class A of each of the funds and employs FIIOC to perform these functions
for Class B of each of the funds. UMB is located at 1010 Grand Avenue,
Kansas City, Missouri 64106.
A broker-dealer may use a portion of the commissions paid by Overseas,
Equity Portfolio Growth, Global Resources, Growth Opportunities, Strategic
Opportunities, Equity Income, Income & Growth and High Yield to reduce each
of their custodian or transfer agent fees. FMR may use its broker-dealer
affiliates and other firms that sell fund shares to carry out a fund's
transactions, provided that a fund receives brokerage services and
commission rates comparable to those of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
The value of each fund's investments varies based on many factors. Stock
values fluctuate, sometimes dramatically, in response to the activities of
individual companies and general market and economic conditions. Over time,
however, stocks have shown greater long-term growth potential than other
types of securities.
The value of bonds fluctuates based on changes in domestic or foreign
interest rates, the credit quality of the issuer, market conditions, and
other economic and political news. In general, bond prices rise when
interest rates fall, and vice versa. This effect is usually more pronounced
for longer-term securities. Lower-quality securities offer higher yields,
but also carry more risk.
Because many foreign investments are denominated in foreign currencies,
changes in the value of these currencies can significantly affect a fund's
share price. General economic and political factors in the various world
markets can also impact the value of your investment, especially for
securities in emerging markets. Many investments in emerging markets can be
considered speculative, and therefore may offer higher income and total
return potential, but significantly greater risk.
FMR may use various investment techniques to hedge a fund's risks, but
there is no guarantee that these strategies will work as intended. When you
sell your shares, they may be worth more or less than what you paid for
them.
If you are subject to the federal alternative minimum tax, you should note
that High Income Municipal may invest all of its assets and
Short-Intermediate Tax-Exempt may invest 20% of its assets in municipal
securities issued to finance private activities. The interest from these
investments is a tax-preference item for purposes of the tax.
OVERSEAS FUND seeks growth of capital primarily through investments in
foreign securities.
The fund defines foreign securities as securities of issuers whose
principal activities are outside of the United States. The fund currently
intends to invest at least 65% of its total assets in securities of issuers
from at least three different countries outside of North America (the
United States, Canada, Mexico and Central America). There is no limit on
investments in any one region, country, or currency, although the fund
normally invests in at least three different countries. 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
United States), the Far East and Pacific Basin, and Western Europe. The
fund may invest in many types of issuers, including companies and other
business organizations as well as governments and their agencies. The fund
expects that equity securities (including shares of closed-end investment
companies and depositary receipts) will account for the majority of its
investments.
Although the majority of the fund's investments are expected to be in
equity securities, the fund may also purchase debt securities, including
lower-quality, higher yielding securities. FMR will not emphasize income in
choosing investments unless FMR believes the income will contribute to the
securities' growth potential. The fund currently intends to limit its
investments in these securities to 35% of its assets. FMR may also 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.
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. When
allocating the fund's investments among countries and regions, FMR
considers such factors as the potential for economic growth, expected
levels of inflation, governmental policies and the outlook for currency
relationships. Although the fund may invest significantly in the United
States, the fund currently intends to be as fully invested in non-U.S.
issuers as is practicable in light of the fund's cash flow and cash needs.
EQUITY PORTFOLIO GROWTH seeks to achieve capital appreciation by investing
primarily in common and preferred stock and securities convertible into the
common stock of companies with above-average growth characteristics.
The fund, under normal conditions, will invest at least 65% of its total
assets in common and preferred stock. The fund looks for domestic and
foreign companies with above-average growth characteristics compared to the
average of the companies included in the S&P 500. Growth may be measured by
factors such as earnings or gross sales. Companies with strong growth
potential often have new products, technologies, distribution channels, or
other opportunities. As a general rule, these companies may include
smaller, less well-known companies, and companies whose stocks have higher
than average price/earnings (P/E) ratios. The market prices of these stocks
may be particularly sensitive to economic, market, or company news. FMR may
also pursue growth in larger or revitalized companies or companies that
hold a strong position in the market. These growth characteristics may be
found in mature or declining industries.
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 supply goods and services to such companies, or in physical
commodities.
Under normal conditions, 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. FMR will seek securities that are priced relative to
the intrinsic value of the relevant natural resource or that are issued by
companies positioned to benefit from particular periods in the economic
cycle. Accordingly, the fund may shift its emphasis from one natural
resource industry to another depending upon prevailing trends or
developments. The fund may also invest in securities of companies in other
industries, and in corporate and governmental debt securities of all types.
The fund expects to invest a majority of its assets in the securities of
companies that have their principal business activities in at least three
different countries (including the United States).
A company will be deemed to have substantial ownership of, or activities in
natural resources if, at the time those company's securities are acquired,
at least 50% of the company's assets are involved, either directly or
through subsidiaries, in exploring, mining, refining, processing,
transporting, fabricating, dealing in, or owning natural resources. Natural
resources include precious metals (e.g., gold, platinum and silver),
ferrous and nonferrous metals (e.g., iron, aluminum and copper), strategic
metals (e.g., uranium and titanium), hydrocarbons (e.g., coal,oil and
natural gases), chemicals, forest products, real estate, food products and
other basic commodities.
Although the fund is authorized to invest up to 50% of its assets in
physical commodities, it currently intends to invest no more than 25% of
its total assets in them, and intends to limit its physical commodity
investments to readily marketable precious metals. 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.
GROWTH OPPORTUNITIES FUND seeks to provide capital growth by investing
primarily in common stocks and securities convertible into common stocks.
Under normal conditions, at least 65% of the fund's total assets will be
invested in securities of companies that FMR believes have long-term growth
potential. Although the fund invests primarily in common stock and
securities convertible into common stock, it has the ability to purchase
other securities, such as preferred stock and bonds, that may produce
capital growth. The fund may invest in foreign securities without
limitation.
STRATEGIC OPPORTUNITIES FUND seeks capital appreciation by investing
primarily in securities of companies believed by FMR to involve a "special
situation."
Under normal conditions, the fund will invest at least 65% of its total
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:
(small solid bullet) A technological advance or discovery, the offering of
a new or unique product or service, or changes in consumer demand or
consumption forecasts.
(small solid 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.
(small solid bullet) New or changed management, or material changes in
management policies or corporate structure.
(small solid bullet) Significant economic or political occurrences abroad,
including changes in foreign or domestic import and tax laws or other
regulations.
(small solid bullet) Other events, including natural disasters, favorable
litigation settlements, or a major change in demographic patterns.
"Special situations" often involve breaks with past experience. They can be
relatively aggressive investments.
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. The fund may invest up to
30% of its assets in foreign investments.
EQUITY INCOME seeks a yield from dividend and interest income which exceeds
the composite dividend yield on securities comprising the S&P 500. In
addition, consistent with the primary objective of obtaining dividend and
interest income, the fund will consider the potential for achieving capital
appreciation.
The fund, under normal conditions, will invest at least 65% of its total
assets in income-producing equity securities. For purposes of this policy,
equity securities are defined as common and preferred stocks. The balance
of the fund's assets will tend to be invested in debt securities, a high
percentage of which are expected to be convertible into common stocks. The
fund does not intend to invest in securities of issuers without proven
earnings and/or credit histories. Because the fund invests for income, as
well as capital appreciation, investors should not expect capital
appreciation comparable with funds which seek only capital appreciation.
The yield on the fund's assets 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.
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.
The fund invests in equity securities, convertible securities, common and
preferred stocks, and other fixed-income securities that provide income or
opportunities for capital growth. The fund may buy securities that are not
currently paying income but offer prospects for future income. The fund may
invest in securities of foreign issuers. In selecting investments for the
fund, FMR will consider such factors as the issuer's financial strength,
its outlook for increased dividend or interest payments, and the potential
for capital gains.
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.
Under normal conditions, the fund will invest at least 65% of its total
assets in debt securities and other instruments of issuers in emerging
markets. Countries with emerging markets include countries (i) that have an
emerging stock market, as defined by the International Finance Corporation,
(ii) with low-to middle-income economies, according to the World Bank, or
(iii) that are listed in World Bank publications as "developing."
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. FMR expects that emerging market opportunities
will be found mainly in Latin America, Asia, Africa, and emerging European
nations. 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.
There is no limit on investments in any one region, country, or currency,
although the fund normally invests in at least three different countries.
The fund may also invest a portion of its assets in common and preferred
stocks of emerging markets issuers, debt securities of non-emerging market
foreign issuers, and lower-quality debt securities of U.S. issuers. FMR
does not currently anticipate that these investments will exceed
approximately 20% of the fund's total assets. In addition, 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.
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.
The fund, under normal conditions, will invest at least 65% of its total
assets in income producing debt securities and preferred stocks, including
convertible and zero coupon bonds. The fund may also invest in securities
issued or guaranteed by the U.S. Government, any state or any of their
respective subdivisions, agencies or instrumentalities, and securities of
foreign issuers, including securities of foreign governments. The fund may
invest up to 35% of its total assets in equity securities, including common
stocks, warrants and rights.
STRATEGIC INCOME FUND seeks a high level of current income by investing
primarily in debt securities. The fund may also seek capital appreciation.
The fund invests primarily in fixed-income securities, allocated among
three broad categories: (1) U.S. government securities, including mortgage
securities and securities issued by government agencies; (2) corporate
securities, including lower-quality, high-yield securities as well as
investment-grade corporate bonds; and (3) foreign corporate and
governmental securities, including emerging market instruments and
securities of issuers in more developed markets. Although FMR expects that
the fund will normally have investments in each of the three asset
categories, there is no limit on the amount that the fund may invest in any
one type of fixed-income securities from time to time. Diversification,
when successful, can mean higher returns with decreased volatility. By
allocating its investments across different types of fixed-income
securities, the fund attempts to moderate the significant investment risks
of each category through diversification. However, each category may
decline at the same time.
FMR regularly reviews the fund's allocation and makes changes gradually
over time to favor investments that it believes provide the most favorable
outlook for achieving the fund's objective.
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.
Under normal circumstances, at least 65% of the fund's total assets will be
invested in government securities. The fund considers "government
securities" to include those which are subject to repurchase agreements.
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). These securities may or may not be fully backed
by the U.S. Government. In seeking current income, the fund also may
consider the potential for capital gain.
LIMITED TERM BOND FUND seeks to provide a high rate of income through
investment primarily in investment-grade fixed income obligations.
The fund seeks high current income by investing primarily in fixed-income
obligations of all types. The fund invests in domestic and foreign
investment grade securities. When consistent with its primary objective,
the fund may also seek capital appreciation. Under normal conditions, the
fund maintains a dollar-weighted average maturity of 10 years or less, but
individual securities may be of any maturity. In determining a security's
maturity for purposes of calculating the fund's average maturity, estimates
of the expected time for its principal to be repaid may be used. This can
be substantially shorter than its stated final maturity.
SHORT FIXED-INCOME FUND seeks to obtain a high level of current income,
consistent with the preservation of capital, by investing primarily in a
broad range of investment-grade fixed-income securities. Where appropriate
the fund will take advantage of opportunities to realize capital
appreciation. Under normal conditions, the fund maintains a dollar-weighted
average maturity of 10 years or less, but individual securities may be of
any maturity. In determining a security's maturity for purposes of
calculating the fund's average maturity, estimates of the expected time for
its principal to be repaid may be used. This can be substantially shorter
than its stated final maturity.
The fund, under normal conditions, will invest primarily in
investment-grade fixed-income securities of all types. Fixed-income
securities in which the fund may invest include, in any proportion, bonds,
notes, mortgage-related and asset-backed securities, U.S. government and
U.S. government agency obligations, zero coupon securities and convertible
securities, and short-term obligations such as certificates of deposit,
repurchase agreements, bankers' acceptances and commercial paper. Under
normal conditions, at least 65% of the fund's total assets will be invested
in bonds. The fund may invest a portion of its assets in securities issued
by foreign companies and foreign governments. Under normal conditions, the
fund maintains a dollar-weighted average maturity of three years or less,
but individual securities may be of any maturity. In determining a
security's maturity for purposes of calculating the fund's average
maturity, estimates of the expected time for its principal to be repaid may
be used. This can be substantially shorter than its stated final maturity.
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 normally invests so that at least 80% of its net assets is
invested in municipal obligations whose interest is free from federal
income tax. The fund may invest in medium- and lower-quality municipal
obligations. 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, but individual
securities may be of any maturity. The fund may invest more than 25% of its
assets in bonds 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. The fund reserves the right to invest up to 100% of
its assets in municipal obligations subject to the federal alternative
minimum tax.
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.
The fund normally will invest so that 80% or more of its net assets will be
invested in securities whose interest is free from federal income tax. The
fund invests in municipal obligations judged by FMR to be essentially the
same quality as those rated within the three highest rating categories by
Moody's and S&P. Under normal conditions, at least 80% of the fund's net
assets will be invested in obligations having remaining maturities of 15
years or less . The fund maintains a dollar-weighted average maturity of 10
years or less. In determining a security's maturity for purposes of
calculating the fund's average maturity, estimates of the expected time for
its principal to be repaid may be used. This can be substantially shorter
than its stated final maturity. The fund may also invest 25% or more 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. The fund currently does not intend to invest
in taxable obligations or in AMT bonds.
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.
The fund invests primarily in municipal securities. The fund normally will
invest so that 80% or more of its net assets will be invested in securities
whose interest is free from federal income tax. Under normal conditions,
the fund maintains a dollar-weighted average maturity of between two and
four years, but individual securities may be of any maturity. In
determining a security's maturity for purposes of calculating the fund's
average maturity, estimates of the expected time for its principal to be
repaid may be used. This can be substantially shorter than its stated final
maturity. The fund may, under normal circumstances, 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 minimum tax. The fund 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. The
fund may also invest 25% or more of its total assets in municipal
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).
TEMPORARY DEFENSIVE INVESTMENT POLICIES. FMR normally invests each fund's
assets according to its investment strategy.
Overseas, Equity Portfolio Growth, Global Resources, Growth Opportunities,
Strategic Opportunities, Equity Income, and Income & Growth each reserve
the right to invest without limitation in preferred stocks and
investment-grade debt instruments for temporary, defensive purposes.
High Yield reserves the right to invest in preferred stocks and
investment-grade debt instruments for temporary, defensive purposes.
Limited Term Bond, Emerging Markets Income, Strategic Income, Government
Investment and Short Fixed-Income reserve the right to invest without
limitation in investment-grade money market or short-term debt instruments
for temporary, defensive purposes.
High Income Municipal, Limited Term Tax-Exempt, and Short-Intermediate
Tax-Exempt each do not expect to invest in federally taxable obligations.
High Income Municipal, Limited Term Tax-Exempt and Short-Intermediate
Tax-Exempt each, however, reserves the right to invest without limitation
in short-term instruments, to hold a substantial amount of uninvested cash,
or to invest more than normally permitted in federally taxable obligations
for temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, and strategies FMR may employ in
pursuit of a fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. A complete listing of each fund's policies
and limitations and more detailed information about each fund's investments
is contained in the SAI. Policies and limitations are considered at the
time of purchase; the sale of instruments is not required in the event of a
subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help a fund
achieve its goal. Current holdings and recent investment strategies are
described in a fund's financial reports, which are sent to shareholders
twice a year. For a free SAI or financial report, call your Investment
Professional.
EQUITY SECURITIES may include common stocks, preferred stocks, convertible
securities, and warrants. Common stocks, the most familiar type, represent
an equity (ownership) interest in a corporation. Although equity securities
have a history of long-term growth in value, their prices fluctuate based
on changes in a company's financial condition and on overall market and
economic conditions. Smaller companies are especially sensitive to these
factors.
RESTRICTIONS: With respect to 75% of its total assets, each of Overseas,
Global Resources, Growth Opportunities, Equity Income, Income & Growth,
High Yield, Government Investment, Limited Term Bond, Short Fixed-Income
and High Income Municipal may not purchase more than 10% of the outstanding
voting securities of a single issuer.
With respect to 100% of its assets each of Equity Portfolio Growth,
Strategic Opportunities and Limited Term Tax-Exempt may not purchase more
than 10% of the outstanding voting securities of a single issuer.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. Debt
securities, loans, and other direct debt have varying degrees of quality
and varying levels of sensitivity to changes in interest rates. Longer-term
bonds are generally more sensitive to interest rate changes than short-term
bonds.
Taxable lower-quality debt securities (sometimes called "junk bonds") are,
and tax-exempt lower-quality debt securities may be, considered to be
speculative and involve greater risk of default or price changes due to
changes in the issuer's creditworthiness, or they may already be in
default. The market prices of these securities may fluctuate more than
higher-quality securities and may decline significantly in periods of
general economic difficulty.
Lower-quality foreign government securities are often considered to be
speculative and involve greater risk of default or price changes, or they
may already be in default. These risks are in addition to the general risks
associated with foreign securities.
The following table provides a summary of ratings assigned to debt holdings
(not including money market instruments) in the funds' portfolios. These
figures are dollar-weighted averages of month-end portfolio holdings during
fiscal 1994, and are presented as a percentage of total security
investments. These percentages are historical and do not necessarily
indicate a fund's current or future debt holdings.
FISCAL 1994 DEBT HOLDINGS, BY RATING
(AS A % OF ASSETS IN EACH RATING CATEGORY) (AS A % OF ASSETS IN EACH
RATING CATEGORY)
INVESTMENT GRADE LOWER QUALITY
STANDARD & POOR'S CORPORATION AAA, AA, A BBB BB B CCC CC,C D NR
EQUITY FUNDS:
Overseas .43 -- -- -- -- -- -- .61
Equity Portfolio Growth -- -- .01 -- -- -- -- .01
Global Resources -- -- -- -- -- -- -- --
Growth Opportunities 6.38 -- -- -- -- -- -- .17
Strategic Opportunities 15.67 -- .28 .33 -- .04 .76 1.29
Equity Income 2.03 .50 .38 2.17 .03 -- -- .50
Income & Growth 19.17 2.93 4.39 4.28 .97 -- -- 11.79
TAXABLE/FIXED-INCOME
Emerging Markets Income -- -- 9.37 5.32 -- -- -- 54.79
High Yield .79 .26 8.02 32.56 4.79 .61 4.69 29.11
Strategic Income 31.24 .69 2.84 20.62 -- -- -- 10.73
Government Investment 89.71 -- -- -- -- -- -- .56
Limited Term Bond 69.85 .12 -- -- -- -- -- .09
Short Fixed-Income 28.28 21.14 6.40 .69 -- -- -- 16.94
TAX-EXEMPT/MUNICIPAL FUNDS:
High Income Municipal 32.93 22.73 6.31 2.32 -- -- -- 31.76
Limited Term Tax-Exempt 78.53 -- -- -- -- -- -- 10.16
Short Intermediate Tax-Exempt 64.65 -- 9.86 -- -- -- -- 10.96
MOODY'S INVESTOR SERVICE, INC.
Aaa, Aa, A Baa Ba B Caa Ca C --
EQUITY FUNDS:
Overseas .49 -- -- .50 -- -- -- .05
Equity Portfolio Growth -- -- .02 -- -- -- -- --
Global Resources -- -- -- -- -- -- -- --
Growth Opportunities 6.42 -- -- .13 -- -- -- --
Strategic Opportunities 15.67 -- .61 -- .88 .03 .04 1.14
Equity Income 2.13 .61 .19 2.38 -- -- -- .32
Income & Growth 20.40 1.97 3.92 8.48 .55 .25 -- 7.97
TAXABLE/FIXED-INCOME
Emerging Markets Income 1.01 -- 8.44 16.37 -- -- -- 43.66
High Yield -- .18 3.71 38.04 7.49 2.77 .56 28.07
Strategic Income 31.24 -- 1.49 22.86 -- -- -- 10.51
Government Investment 90.27 -- -- -- -- -- -- --
Limited Term Bond 69.25 .72 -- -- -- -- -- .09
Short Fixed-Income 29.78 21.17 9.90 3.27 -- -- -- 9.32
TAX-EXEMPT/MUNICIPAL FUNDS:
High Income Municipal 27.46 28.41 10.76 1.38 -- -- -- 28.05
Limited Term Tax-Exempt 88.37 -- -- -- -- -- -- .33
Short Intermediate Tax-Exempt 69.51 7.11 2.75 -- -- -- -- 6.10
FOR SOME FOREIGN GOVERNMENT OBLIGATIONS, FMR ASSIGNS THE RATINGS OF THE
SOVEREIGN CREDIT OF THE ISSUING GOVERNMENT.
THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED DIRECTLY OR
INDIRECTLY BY MOODY'S OR S&P AMOUNTED TO 41.73%
(EMERGING MARKETS), 0% (EQUITY PORTFOLIO GROWTH), .31% (EQUITY INCOME), 0%
(GROWTH OPPORTUNITIES),.05%
(OVERSEAS), 1.14% (STRATEGIC OPPORTUNITIES), 4.85% (INCOME & GROWTH), 0%
(GLOBAL RESOURCES), 5.51% (STRATEGIC
INCOME), 22.19% (HIGH YIELD)AND 7.85% FOR (SHORT FIXED-INCOME). THESE
PERCENTAGES MAY INCLUDE SECURITIES RATED BY
OTHER NATIONALLY RECOGNIZED RATING SERVICES, AS WELL AS UNRATED SECURITIES.
FMR HAS DETERMINED THAT UNRATED SECURITIES
THAT ARE LOWER QUALITY ACCOUNT FOR 41.51% (EMERGING MARKETS), 0% (EQUITY
PORTFOLIO GROWTH), .31% (EQUITY INCOME), 0%
(GROWTH OPPORTUNITIES), 0% (OVERSEAS), 1.14% (STRATEGIC OPPORTUNITIES),
.3.87% (INCOME & GROWTH), 0% (GLOBAL
RESOURCES), 5.51% (STRATEGIC INCOME), 22.19% (HIGH YIELD)AND 3.88% FOR
(SHORT FIXED-INCOME) OF EACH FUND'S TOTAL
SECURITY INVESTMENTS. REFER TO THE FUND'S SAI FOR A MORE COMPLETE
DISCUSSION OF THESE RATINGS.
THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED BY MOODY'S AND S&P
AMOUNTED TO 20.86% (HIGH INCOME
MUNICIPAL), 0% (LIMITED TERM TAX-EXEMPT) AND 1.46% (SHORT-INTERMEDIATE
TAX-EXEMPT). THESE PERCENTAGES MAY
INCLUDE SECURITIES RATED BY OTHER NATIONALLY RECOGNIZED RATING SERVICES, AS
WELL AS UNRATED SECURITIES. FMR HAS
DETERMINED THAT UNRATED SECURITIES THAT ARE LOWER QUALITY ACCOUNT FOR
18.09% (HIGH INCOME MUNICIPAL), 0% (LIMITED
TERM TAX-EXEMPT) AND 0% (SHORT-INTERMEDIATE TAX-EXEMPT) OF EACH FUND'S
SECURITY INVESTMENTS. REFER TO THE FUND'S
SAI FOR A MORE COMPLETE DISCUSSION OF THESE RATINGS.
RESTRICTIONS: For all funds, other than Limited Term Tax-Exempt and
Short-Intermediate Tax-Exempt, purchase of a debt security is consistent
with a fund's debt quality policy if it is rated at or above the stated
level by Moody's or rated in the equivalent categories by S&P, or is
unrated but judged to be of equivalent quality by FMR.
Limited Term Bond currently intends to limit its investments in debt
securities to those of Baa-quality and above, and currently intends to
limit its investments in debt securities rated Baa to 5% of its assets.
Short Fixed-Income currently intends to limit its investments in lower than
Baa-quality debt securities to 35% of its assets and currently intends to
limit its investments in debt securities to B-quality and above.
Purchase of a debt security is consistent with Short-Intermediate
Tax-Exempt's debt quality policy if, with respect to 60% of its assets, it
is judged by FMR to be of equivalent quality to debt securities rated A or
better by Moody's or S&P. The fund currently intends to limit its
investments in debt securities to those rated below BAA by Moody's or BBB
by S&P, or unrated debt securities judged by FMR to be of equivalent
quality to 5% of its assets. The fund currently intends to limit its
investments in debt securities to Ba quality and above.
Global Resources currently intends to limit its investments in lower than
Baa-quality debt securities to 35% of its assets and currently intends to
limit its investments in debt securities to Caa-quality and above.
Each of Overseas, Equity Portfolio Growth, Growth Opportunities, Strategic
Opportunities, Equity Income and Income & Growth currently intends to limit
its investments in lower than Baa-quality debt securities to 35% of its
assets.
Purchase of a debt security is consistent with Limited Term Tax-Exempt's
debt quality policy if it is rated at or above the stated level by Moody's
and S&P; however, the fund may invest up to 20% of its total assets, in
municipal obligations which are unrated by Moody's and S&P but judged by
FMR to meet the fund's quality standards. The fund currently intends to
limit its investment in debt securities to those of A-quality or above.
MONEY MARKET INSTRUMENTS are high-quality instruments that present minimal
credit risk. They may include U.S. government obligations, commercial paper
and other short-term corporate obligations, and certificates of deposit,
bankers' acceptances, bank deposits, and other financial institution
obligations. These instruments may carry fixed or variable interest rates.
U.S. GOVERNMENT SECURITIES are high-quality debt securities issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. government. Not all U.S. government securities are backed by the full
faith and credit of the United States. For example, securities issued by
the Federal Farm Credit Bank or by the Federal National Mortgage
Association are supported by the instrumentality's right to borrow money
from the U.S. Treasury under certain circumstances. However, securities
issued by the Financing Corporation are supported only by the credit of the
entity that issued them.
FOREIGN SECURITIES and foreign currencies may involve additional risks.
These include currency fluctuations, risks relating to political or
economic conditions in the foreign country, and the potentially less
stringent investor protection and disclosure standards of foreign markets.
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.
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.
ASSET-BACKED SECURITIES may include interests in pools of the following:
purchase contracts, financing leases, or sales agreements entered into by
municipalities; lower-rated debt securities; or consumer loans. The value
of these securities may be significantly affected by changes in interest
rates, the market's perception of issuers, and the creditworthiness of the
parties involved. Certain asset-backed securities rely on continued
payments by a municipality, and may also be subject to prepayment risk.
MORTGAGE SECURITIES are interests in pools of commercial or residential
mortgages, and may include complex instruments such as collateralized
mortgage obligations and stripped mortgage-backed securities. Mortgage
securities may be issued by the U.S. government or by private entities. For
example, Ginnie Maes are interests in pools of mortgage loans insured or
guaranteed by a U.S. government agency. Because mortgage securities pay
both interest and principal as their underlying mortgages are paid off,
they are subject to prepayment risk. This is especially true for stripped
securities. Also, the value of a mortgage security may be significantly
affected by changes in interest rates. Some mortgage securities may have a
structure that makes their reaction to interest rates and other factors
difficult to predict, making their value highly volatile.
STRIPPED SECURITIES are the separate income or principal components of a
debt instrument. These involve risks that are similar to those of other
debt securities, although they may be more volatile, and certain stripped
securities move in the same direction as interest rates.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. They may be issued in
anticipation of future revenues, and may be backed by the full taxing power
of a municipality, the revenues from a specific project, or the credit of a
private organization. A security's credit may be enhanced by a bank,
insurance company, or other financial institution. A fund may own a
municipal security directly or through a participation interest.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
OTHER MUNICIPAL SECURITIES may include general obligations of U.S.
territories and possessions such as Guam, the Virgin Islands, and Puerto
Rico, and their political subdivisions and public corporations.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
VARIABLE AND FLOATING RATE SECURITIES may have interest rates that move in
tandem with a benchmark, helping to stabilize their prices. Inverse
floaters have interest rates that move in the opposite direction from the
benchmark, making the instrument's market value more volatile.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or a financial intermediary. In exchange for this benefit, a fund
may pay periodic fees or accept a lower interest rate. Demand features and
standby commitments are types of put features.
REAL ESTATE-RELATED INSTRUMENTS include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors such
as changes in real estate values and property taxes, interest rates, cash
flow of underlying real estate assets, overbuilding, and the management
skill and creditworthiness of the issuer. Real estate-related instruments
may also be affected by tax and regulatory requirements, such as those
relating to the environment.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, currency exchange rates, commodity prices, or other factors that
affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts,
entering into currency exchange contracts or swap agreements, purchasing
indexed securities, and selling securities short.
FMR can use these practices to adjust the risk and return characteristics
of a fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with a
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of a fund and may involve a small investment of
cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other borrower.
They have additional risks beyond conventional debt securities because they
may entail less legal protection for a fund, or there may be a requirement
that the fund supply additional cash to a borrower on demand.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect a fund's yield.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a security at
one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
FOREIGN REPURCHASE AGREEMENTS may be less well secured than U.S. repurchase
agreements, and may be denominated in foreign currencies. They also may
involve greater risk of loss if the counterparty defaults. Some
counterparties in these transactions may be less creditworthy than those in
U.S. markets.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
temporarily transfers possession of a portfolio instrument to another party
in return for cash. This could increase the risk of fluctuation in the
fund's yield or in the market value of its assets.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some securities, including illiquid securities, may be subject
to legal restrictions. Difficulty in selling securities may result in a
loss or may be costly to a fund.
RESTRICTIONS. Each of Equity Portfolio Growth, Global Resources, Growth
Opportunities, Strategic Opportunities, Equity Income, Income & Growth,
Government Investment, Limited Term Bond, Short Fixed-Income, High Income
Municipal, Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt may
not purchase a security if, as a result, more than 10% of its net assets
would be invested in illiquid securities.
RESTRICTIONS. Each of Overseas, Emerging Markets Income, High Yield, and
Strategic Income may not purchase a security if, as a result, more than 15%
of its net assets would be invested in illiquid securities.
WARRANTS are instruments which entitle the holder to buy underlying equity
securities at a specific price for a specific period of time. A warrant
tends to be more volatile than its underlying securities and ceases to have
value if it is not exercised prior to its expiration date. In addition,
changes in the value of a warrant do not necessarily correspond to changes
in the value of its underlying securities.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry or type of
project. Economic, business, or political changes can affect all securities
of a similar type. A fund that is not diversified may be more sensitive to
changes in the market value of a single issuer or industry.
RESTRICTIONS: With respect to 75% of its total assets, each of Overseas,
Global Resources, Growth Opportunities, Equity Income, Income & Growth,
High Yield, Government Investment, Limited Term Bond, Short Fixed-Income,
High Income Municipal and Limited Term Tax-Exempt may not purchase a
security if, as a result, more than 5% would be invested in the securities
of a single issuer. With respect to 100% of its assets, each of Equity
Portfolio Growth and Strategic Opportunities may not purchase a security
if, as a result, more than 5% would be invested in the securities of a
single issuer. These limitations do not apply to U.S. government
securities.
Emerging Markets Income, Strategic Income and Short-Intermediate Tax-Exempt
are considered non-diversified. Generally, to meet federal tax requirements
at the close of each quarter, each fund does not invest more than 25% of
its total assets in any one issuer and, with respect to 50% of total
assets, does not invest more than 5% in any one issuer. These limitations
do not apply to U.S. government securities.
BORROWING. Each fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If a fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If a fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: Each fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 33% of its total assets.
LENDING. Lending securities to broker-dealers and institutions, including
FBSI, an affiliate of FMR, is a means of earning income. This practice
could result in a loss or a delay in recovering a fund's securities. A fund
may also lend money to other funds advised by FMR and to issuers in
connection with certain direct debt transactions.
RESTRICTIONS: Loans, in the aggregate, may not exceed 33% of each fund's
total assets; however Limited Term Tax-Exempt, High Income Municipal and
Short-Intermediate Tax-Exempt do not currently intend to make loans.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraphs restates all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraphs of this section, can be changed without shareholder
approval.
OVERSEAS FUND seeks growth of capital primarily through investments in
foreign securities.
EQUITY PORTFOLIO GROWTH seeks to achieve capital appreciation by investing
primarily in common and preferred stock and securities convertible into the
common stock of companies with above average growth characteristics.
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 supply goods and services to such companies, or in physical
commodities. The fund is authorized to invest up to 50% of its assets in
physical commodities.
GROWTH OPPORTUNITIES FUND seeks to provide capital growth by investing
primarily in common stocks and securities convertible into common stocks.
STRATEGIC OPPORTUNITIES FUND seeks to achieve capital appreciation by
investing primarily in securities of companies believed by FMR to involve a
"special situation." Under normal conditions, the fund will invest at least
65% of its total assets in companies involving a special situation. FMR
intends to invest primarily in common stocks; however, it may also invest
in debt securities of all types and quality if FMR believes that investing
in these securities will result in capital appreciation. The fund may
invest up to 30% of its assets in foreign investments.
EQUITY INCOME FUND seeks a yield from dividend and interest income which
exceeds the composite dividend yield on securities comprising the S&P 500.
In addition, consistent with the primary objective of obtaining dividend
and interest income, the fund will consider the potential for achieving
capital appreciation.
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.
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.
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.
STRATEGIC INCOME FUND seeks a high level of current income by investing
primarily in debt securities. The fund may also seek capital appreciation.
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.
LIMITED TERM BOND FUND seeks to provide a high rate of income through
investment primarily in investment-grade fixed income obligations.
SHORT FIXED-INCOME FUND seeks to obtain a high level of current income,
consistent with the preservation of capital, by investing primarily in a
broad range of investment-grade fixed-income securities. Where appropriate
the fund will take advantage of opportunities to realize capital
appreciation.
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.
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. The fund invests in municipal obligations
judged by FMR to be essentially the same quality as those rated within the
three highest rating categories by Moody's and S&P. The fund may invest up
to 20% of its total assets in municipal obligations which are unrated by
Moody's and S&P, but judged by FMR to meet the fund's quality standard.
Under normal conditions, at least 80% of the fund's assets will be invested
in obligations having remaining maturities of 15 years or less. The fund
maintains a dollar-weighted average maturity of 10 years or less.
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.
With respect to 75% of its total assets, each of Overseas, Global
Resources, Growth Opportunities, Equity Income, Income & Growth, High
Yield, Government Investment, Limited Term Bond, Short Fixed-Income, High
Income Municipal and Limited Term Tax-Exempt may not purchase a security
if, as a result, more than 5% would be invested in the securities of a
single issuer. With respect to 100% of its assets, each of Equity Portfolio
Growth and Strategic Opportunities may not purchase a security if, as a
result, more than 5% would be invested in any one issuer.
With respect to 75% of its total assets, each of Overseas, Global
Resources, Growth Opportunities, Equity Income, Income & Growth, High
Yield, Government Investment, Limited Term Bond, Short Fixed-Income and
High Income Municipal may not purchase more than 10% of the outstanding
voting securities of a single issuer. With respect to 100% of its assets,
each of Equity Portfolio Growth, Strategic Opportunities, and Limited Term
Tax-Exempt may not purchase more than 10% of the outstanding voting
securities of a single issuer.
Each fund may borrow only for temporary or emergency purposes, but not in
an amount exceeding 33% of its total assets.
Loans, in the aggregate, may not exceed 33% of each fund's total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of each class's assets are reflected in the
applicable class's share price or dividends; they are neither billed
directly to shareholders nor deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to affiliates who provide
assistance with these services for certain of the funds. Each fund also
pays OTHER EXPENSES, which are explained on page .
FMR may, from time to time, agree to reimburse a fund for management fees
and other expenses above a specified limit. FMR retains the ability to be
repaid by each fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease each fund's expenses and boost its
performance.
MANAGEMENT FEE
The MANAGEMENT FEE is calculated and paid to FMR every month. The fee for
Equity Portfolio Growth, Global Resources, Income & Growth, Emerging
Markets Income, High Yield, Government Investment, Strategic Income,
Limited Term Bond, Short Fixed-Income, High Income Municipal, Limited Term
Tax-Exempt, and Short-Intermediate Tax-Exempt is calculated by adding a
group fee rate to an individual fee rate, and multiplying the result by
each fund's average net assets. The fee for Overseas, Growth Opportunities
and Strategic Opportunities is determined by taking a BASIC FEE and then
applying a PERFORMANCE ADJUSTMENT. The performance adjustment either
increases or decreases the management fee, depending on how well each fund
has performed relative to the Morgan Stanley Capital International Europe
Australia, Far East Index for Overseas or the S&P 500 for each of Growth
Opportunities and Strategic Opportunities.
Equity Income pays FMR a monthly management fee at a flat annual rate of
0.50% of its average net assets.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. For Overseas, Equity Portfolio Growth, Global
Resources, Growth Opportunities, Strategic Opportunities, and Income &
Growth (the Equity Funds), this rate cannot rise above 0.52%, it drops as
total assets under management increase. For Emerging Markets, High Yield,
Strategic Income, Government Investment, Limited Term Bond, Short
Fixed-Income, High Income Municipal, Limited Term Tax-Exempt and
Short-Intermediate Tax-Exempt (the Bond Funds) this rate cannot rise above
0.37%, and it drops as total assets under management increase. The basic
fee rate (calculated monthly) is calculated by adding a group fee rate to
an individual fund fee rate, and multiplying the result by each fund's
average net assets.
The performance adjustment rate is calculated monthly by comparing each of
Overseas', Growth Opportunities' and Strategic Opportunities' performance
to that of the respective indices over the most recent 36-month period. The
difference is translated into a dollar amount that is added to or
subtracted from the basic fee. The maximum annualized performance
adjustment rate is +/- 0.20%.
Investment performance will be measured separately for each class of shares
offered by Strategic Opportunities, and the least of the three results
obtained will be used in calculating the performance adjustment.
The basic fee rate for fiscal 1994 was 0.77% for Overseas, 0.62% for Growth
Opportunities and 0.62% for Strategic Opportunities. For Overseas and
Global Resources this rate was higher than that of most other 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.
Group Individual Total Fee
Fee Rate Fund Fee Manageme
Rate nt
Overseas 0.32% 0.45% 0.80%
Equity Portfolio Growth 0.32% 0.32%[A] 0.64%[A]
Global Resources 0.32% 0.45% 0.77%
Growth Opportunities 0.32% 0.30% 0.69%
Strategic Opportunities 0.32% 0.30% 0.67%[C]
Income & Growth 0.32% 0.20% 0.52%
Emerging Markets Income 0.16% 0.55% 0.70%[C]
High Yield 0.15% 0.45% 0.60%
Strategic Income 0.16% 0.45% 0.60%[C]
Government Investment 0.16% 0.30% 0.46%
Limited Term Bond 0.16% 0.25%[B] 0.41%
Short Fixed-Income 0.16% 0.30% 0.46%
High Income Municipal 0.16% 0.25% 0.41%
Limited Term Tax-Exempt 0.16% 0.25% 0.41%
Short-Intermediate Tax-Exempt 0.16% 0.25% 0.41%[C]
[A] EFFECTIVE AUGUST 1, 1994, FMR VOLUNTARILY AGREED TO REDUCE THE FUND'S
MANAGEMENT FEE FROM 0.33% TO 0.30%. IF THIS REDUCTION WERE NOT IN EFFECT,
DURING FISCAL 1994, THE TOTAL FEE WOULD HAVE BEEN 0.65%.
[B] ON DECEMBER 14, 1994, SHAREHOLDERS OF THE FUND APPROVED AN INCREASE FOR
THE INDIVIDUAL FUND FEE RATE FROM 0.25% TO 0.30% EFFECTIVE FEBRUARY 24,
1995. IF THIS INCREASE WERE IN EFFECT DURING FISCAL 1994, THE TOTAL FEE
WOULD HAVE BEEN 0.46%
[C] ANNUALIZED.
FMR HAS SUB-ADVISORY AGREEMENTS with four affiliates: FMR U.K., FMR Far
East, FIJ, and FIIA. FIIA in turn has a sub-advisory agreement with FIIAL
U.K. These sub-advisers are compensated for providing FMR with investment
research and advice on issuers based outside the United States. FMR pays
FMR U.K. and FMR Far East fees equal to 110% and 105%, respectively, of the
costs of providing these services. FMR pays FIJ and FIIA a fee equal to 30%
of its management fee rate associated with investments for which the
sub-adviser provided investment advice.
The sub-advisers may also provide investment management services. In
return, FMR pays FMR U.K., FMR Far East, FIJ, and FIIA a fee equal to 50%
of its management fee rate with respect to a fund's investments that the
sub-adviser manages on a discretionary basis. FIIA pays FIIAL U.K. a fee
equal to 110% of the cost of providing these services. For fiscal 1994,
FMR, on behalf of each fund, paid FMR U.K., FMR Far East, F1J and FIIA fees
amounting to less than 0.01% of each fund's average net assets. Limited
Term Bond, did not pay fees to either FMR U.K., FMR Far East, FIJ or FIIA
for fiscal 1994.
OTHER EXPENSES
While the management fee is a significant component of each fund's annual
operating costs, the funds have other expenses as well.
State Street performs certain transfer agency, dividend disbursing and
shareholder services for Class A of Overseas, Equity Portfolio Growth,
Global Resources, Growth Opportunities, Strategic Opportunities, Equity
Income, Income & Growth, Emerging Markets Income, High Yield, Strategic
Income, Government Investment, Limited Term Bond and Short Fixed-Income
(the Taxable Funds). FIIOC performs certain transfer agency, dividend
disbursing and shareholder services for Class B of the Taxable Funds. FSC
calculates the NAV and dividends for each class of the Taxable Funds,
maintains the general accounting records for the Taxable Funds and
administers the securities lending program for each of the Taxable Funds
(except for Government Investment). In fiscal 1994, fees paid by Class A to
State Street amount to 0.43% for Overseas, 0.20% for Equity Portfolio
Growth, 0.42% for Global Resources, 0.22% for Growth Opportunities, 0.39%
(annualized) for Strategic Opportunities, 0.38% for Equity Income, 0.20%
for Income & Growth, 0.36% (annualized) for Emerging Markets Income, 0.24%
for High Yield, 0.39% (annualized) for Strategic Income, 0.30% for Limited
Term Bond, 0.55% for Government Investment, 0.22% for Short Fixed-Income,
of Class A average net assets. In fiscal 1994, fees paid by Class B
(annualized) to FIIOC amounted to 0.66% for Strategic Opportunities, 0.51%
for Equity Income, 0.86% for Emerging Markets Income, 0.40% for High Yield,
0.16% for Strategic Income, 0.45% for Government Investment, and 0.50% for
Limited Term Bond. In fiscal 1994, fees paid to FSC amounted to 0.06% for
Overseas, 0.04% for Equity Portfolio Growth, 0.06% for Global Resources,
0.02% for Growth Opportunities, 0.06% (annualized) for Strategic
Opportunities, 0.06% for Equity Income, 0.03% for Income & Growth, 0.21%
(annualized) for Emerging Markets Income, 0.04% for High Yield, 0.43% for
Strategic Income, 0.05% for Government Investment, 0.04% for Limited Term
Bond, and 0.03% for Short Fixed-Income.
UMB has entered into sub-arrangements with State Street pursuant to which
State Street performs certain transfer agency, dividend disbursing and
shareholder services for Class A shares of High Income Municipal, Limited
Term Tax-Exempt and Short-Intermediate Tax-Exempt (the Tax-Free Funds). UMB
has entered into sub-arrangements with FIIOC pursuant to which FIIOC
performs certain transfer agency, dividend disbursing and shareholder
services for Class B shares of the Tax Free Funds. UMB has entered into
sub-arrangements with FSC pursuant to which FSC calculates the NAV and
dividends for each class of the Tax Free Funds, and maintains each of the
Tax-Free Fund's general accounting records. All of the fees are paid to
State Street, FIIOC, and FSC by UMB, which is reimbursed by the applicable
class or fund, as appropriate, for such payments. In fiscal 1994, fees paid
by UMB to State Street on behalf of the Class A shares amounted to 0.15%
for High Income Municipal, 0.18% for Limited Term Tax-Exempt, and 0.11%
(annualized) for Short-Intermediate Tax-Exempt, of Class A' s average net
assets. In fiscal 1994, fees paid by UMB to FIIOC on behalf of the Class B
shares amounted to 0.28% (annualized)for High Income Municipal, and 0.25%
(annualized) for Limited Term Tax-Exempt of Class B's average net assets.
In fiscal 1994 fees paid by UMB to FSC amounted to 0.04% for High Income
Municipal, 0.07% for Limited Term Tax-Exempt and 0.42% (annualized) for
Short-Intermediate Tax-Exempt, of each fund's average net assets.
State Street has also entered into sub-arrangements with FIIOC pursuant to
which FIIOC performs certain transfer agency, dividend disbursing and
shareholder services for Class A shares. State Street pays 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.
Class A shares of each fund have adopted a DISTRIBUTION AND SERVICE PLAN.
Under the Plans, Class A of each fund is authorized to pay FDC a monthly
distribution fee as compensation for its services and expenses in
connection with the distribution of Class A shares and providing personal
service to and/or maintenance of Class A shareholder accounts. Class A of
Equity Portfolio Growth and Equity Income may pay FDC a distribution fee at
an annual rate up to 0.75% of its average net assets, or such lesser amount
as the Trustees may determine from time to time. Class A of Emerging
Markets Income, High Yield, Strategic Income, Government Investment,
Limited Term Bond, High Income Municipal, Limited Term Tax-Exempt, Short
Fixed-Income and Short-Intermediate Tax-Exempt may pay FDC a distribution
fee at an annual rate up to 0.40% of its average net assets, or such lesser
amount as the Trustees may determine from time to time. Class A of each of
Overseas, Equity Portfolio Growth, Global Resources, Growth Opportunities,
Strategic Opportunities, Equity Income, and Income & Growth currently pays
FDC monthly at an annual rate of 0.65% of average net assets; and Class A
of each of Emerging Markets Income, High Yield, Strategic Income,
Government Investment, Limited Term Bond, High Income Municipal and Limited
Term Tax-Exempt currently pays FDC at an annual rate of 0.25% of average
net assets; and Class A of each of Short Fixed-Income and
Short-Intermediate Tax-Exempt currently pays FDC monthly at an annual rate
of 0.15% of each of its average net assets. For purposes of calculating
the distribution fee, average net assets are determined at the close of
business on each day throughout the month. The distribution fee may be
increased only when the Trustees believe that it is in the best interest of
the applicable class's shareholders to do so.
Up to the full amount of the Class A distribution fee may be reallowed to
Investment Professionals based upon the level of marketing and distribution
services provided.
Class B shares of Strategic Opportunities, Equity Income, Emerging Markets
Income, High Yield, Strategic Income, Government Investment, Limited Term
Bond, High Income Municipal and Limited Term Tax-Exempt have also adopted a
DISTRIBUTION AND SERVICE PLAN. Under the Class B Plans, Class B of each
fund is authorized to pay FDC a monthly distribution fee as compensation
for its services and expenses in connection with the distribution of Class
B shares of each fund. Class B of each fund currently pays the distributor
monthly at an annual rate of 0.75% of its average net assets determined at
the close of business on each day throughout the month. In addition,
pursuant to each Class B Plan, Investment Professionals are compensated at
an annual rate of 0.25% of average net assets of Class B shares for
providing personal service to and/or maintenance of Class B shareholder
accounts.
The Plans also specifically recognize that FMR may make payments from its
management fee, revenue, past profits or other resources to Investment
Professionals for their services to each Class's shareholders.
Each fund also pays other expenses, such as legal, audit, and custodian
fees; in some instances, proxy solicitation costs; and the compensation of
trustees who are not affiliated with Fidelity. A broker-dealer may use a
portion of the commission paid by a fund to reduce a fund's custodian or
transfer agent fees.
The portfolio turnover rate for fiscal 1994 was 34% for Overseas, 137% for
Equity Portfolio Growth, 125% for Global Resources, 43% for Growth
Opportunities, 228% (annualized) for Strategic Opportunities, 140% for
Equity Income, 202% for Income & Growth, 354% (annualized) for Emerging
Markets Income, 118% for High Yield, 104% (annualized) for Strategic
Income, 68% for Limited Term Bond, 313% for Government Investment, 108% for
Short Fixed-Income, 38% for High Income Municipal, 53% for Limited Term
Tax-Exempt, and 111% (annualized) for Short-Intermediate Tax-Exempt. These
rates vary from year to year. High turnover rates increase transaction
costs and may increase taxable capital gains. FMR considers these effects
when evaluating the anticipated benefits of short-term investing.
YOUR ACCOUNT
TYPES OF ACCOUNTS
Read your Investment Professional's program materials in conjunction with
this prospectus for additional service features or fees that may apply.
Certain features of the funds, such as minimum initial or subsequent
investment amounts, may be modified in these programs, and administrative
charges may be imposed for the services rendered.
The different ways to set up (register) your account with Fidelity are
listed below.
The account guidelines that follow may not apply to certain funds or to
certain retirement accounts. For instance, tax-free funds are not available
for purchase in retirement accounts. If your employer offers a fund through
a retirement program, contact your employer for more information.
Otherwise, call your Investment Professional directly.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
RETIREMENT
TAX FREE FUNDS ARE NOT AVAILABLE FOR RETIREMENT ACCOUNTS.
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
Retirement plans allow individuals to shelter investment income and
capital gains from current taxes. In addition, contributions to these
accounts may be tax deductible. Retirement accounts require special
applications and typically have lower minimums.
(solid bullet) INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal
age under 70 with earned income to invest up to $2,000 per tax year.
Individuals can also invest in a spouse's IRA if the spouse has earned
income of less than $250.
(solid bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small
business owners or those with self-employed income (and their eligible
employees) with many of the same advantages as a Keogh, but with fewer
administrative requirements.
(solid bullet) 401(K) PLANS allow employees of corporations of all sizes to
contribute a percentage of their wages on a tax-deferred basis. These
accounts need to be established by the trustee of the plan.
(solid bullet) MONEY PURCHASE/PROFIT SHARING PLANS (Keogh Plans) are
tax-deferred pension accounts designated for employees of unincorporated
businesses or for persons who are self-employed.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA). Contact your investment
professional
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Contact your Investment Professional.
HOW TO BUY SHARES
Once each business day, two share prices are calculated for Class A shares
of each fund: the offering price and the NAV. The offering price for Class
A shares includes a front-end sales charge, which you pay when you buy
Class A shares, unless you qualify for a reduction or waiver as described
on page . When you buy Class A shares at the offering price, the transfer
agent deducts the applicable sales charge and invests the rest at NAV. Each
fund's Class B NAV is also calculated every business day. Class B shares of
each fund are sold without a front-end sales charge and may be subject to a
CDSC upon redemption. For information on how the CDSC is calculated, see
"Transactions Details," page .
Shares are purchased at the next offering price or NAV, as applicable,
calculated after your investment is received and accepted. The offering
price and NAV are normally calculated at 4:00 P.M. Eastern time.
If you are placing your order through an Investment Professional, it is the
responsibility of your Investment Professional to transmit your order to
buy shares to the appropriate transfer agent before 4:00 p.m. Eastern time.
The transfer agent must receive payment within five business days after an
order for shares is placed; otherwise your purchase order may be canceled
and you could be held liable for resulting fees and/or losses.
Share certificates may be available for Class A shares upon request only.
Share certificates are not available for Class B shares.
IF YOU ARE NEW TO THE FIDELITY ADVISOR FUNDS, complete and sign an account
application and mail it along with your check. If there is no account
application accompanying this prospectus, call your Investment
Professional.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY ADVISOR FUND, you can:
(small solid bullet) Mail an account application with a check,
(small solid bullet) Wire money into your account,
(small solid bullet) Open an account by exchanging from the same class of
another Fidelity Advisor fund, or
(small solid bullet) Contact your Investment Professional.
If you are investing through a tax-sheltered retirement plan, such as an
IRA, for the first time, you will need a special application. Contact your
Investment Professional for more information and a retirement account
application.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For Fidelity Advisor retirement accounts $ 500
Through automatic investment plans $1,000
TO ADD TO AN ACCOUNT $250
For Fidelity Advisor retirement accounts $100
Through automatic investment plans $100
MINIMUM BALANCE $1,000
For Fidelity Advisor retirement accounts None
PURCHASE AMOUNTS OF MORE THAN $250,000 WILL NOT BE ACCEPTED FOR CLASS B
SHARES.
For further information on opening an account, please consult your
Investment Professional or refer to the account application.
<TABLE>
<CAPTION>
<S> <C> <C>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
PHONE (small solid bullet) Contact your
Investment Professional (small solid bullet) Contact your Investment Professional or,
YOUR INVESTMENT PROFESSIONAL or, if you are investing through a if you are investing through a
Broker-Dealer or Insurance Broker-Dealer or Insurance
Representative call 1-800-522-7297. Representative call 1-800-522-7297. If
If you are investing through a Bank you are investing through a Bank
Representative call 1-800-843-3001. Representative call 1-800-843-3001.
(small solid bullet) Exchange from
the same class of (small solid bullet) Exchange from the same class of another
another Fidelity Advisor fund
account Fidelity Advisor fund account with the
with the same registration,
including same registration, including name,
name, address, and taxpayer ID address, and taxpayer ID number.
number.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Mail (mail_graphic) (small solid bullet) Complete and sign the
account (small solid bullet) Make your check payable to the complete
application. Make your check payable name of the fund of your choice and note
to the complete name of the fund of the applicable class. Indicate your fund
your choice and note the applicable account number on your check and mail
class. Mail to the appropriate address to the address printed on your account
indicated on the application. statement.
(small solid bullet) Exchange by mail: call your Investment
Professional for instructions.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
In Person (hand_graphic) (small solid bullet) Bring your account
application and (small solid bullet) Bring your check to your Investment
check to your Investment Professional.
Professional.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Wire (wire_graphic) (small solid bullet) Not available (small solid bullet) If you are investing through a
Broker-Dealer or Insurance
Representative, wire to:
State Street Bank & Trust Co.
Routing # 011000028
ATTN: Custody & Shareholder
Services Division
CREDIT: Fund Name
DDA# 99029084
FBO: (Account name)
(Account number)
If you are investing through a Bank
Representative, wire to:
Banker's Trust Co.
Routing # 021001033
Fidelity Advisor DART System
A/C #00159759
FBO: (Account name)
(Account number)
Specify the complete name of the fund of
your choice and note the applicable class,
and include your account number and
your name.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Automatically (automatic_graphic) (small solid bullet) Not available. (small solid bullet) Use Fidelity Advisor Systematic
Investment Program. Sign up for this
service when opening your account, or
call your Investment Professional to begin
the program.
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next NAV calculated after your order is received and accepted by the
transfer agent, less any applicable CDSC. NAV is normally calculated at
4:00 p.m. Eastern time.
TO SELL SHARES IN A FIDELITY ADVISOR RETIREMENT ACCOUNT, your request must
be made in writing, except for exchanges to other eligible Fidelity funds,
which can be requested by phone or in writing. For a retirement
distribution form contact your Investment Professional or, if you purchased
your shares through a Broker-Dealer or Insurance Representative, call
1-800-522-7297. If you purchased your shares through a Bank Representative,
call 1-800-843-3001.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR NON-RETIREMENT ACCOUNT SHARES,
leave at least $1,000 worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE you will need to sign up for these services in
advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner,
(small solid bullet) The redemption proceeds are being transferred to a
Fidelity Advisor account with a different registration, or
(small solid bullet) You wish to have redemption proceeds wired to a
non-predesignated bank account.
You should be able to obtain a signature guarantee from a bank, broker,
dealer, credit union (if authorized under state law), securities exchange
or association, clearing agency, or savings association. A notary public
cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) The applicable class name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
signed certificates (if applicable), and
(small solid bullet) Any other applicable requirements listed in the
following table.
Deliver your letter to your Investment Professional, or mail it to the
following address:
(small solid bullet) If you purchase your shares through a Broker-Dealer or
Insurance Representative:
Fidelity Advisor Funds
P.O. Box 8302
Boston, MA 02266-8302
(small solid bullet) If you purchased your shares through a Bank
Representative:
Fidelity Investments Institutional Operations Co.
82 Devonshire Street ZR5
Boston, MA 02109
Unless otherwise instructed, the transfer agent will send a check to the
record address.
CHECKWRITING
If you have a checkbook for your account in Short Fixed-Income or
Short-Intermediate Tax-Exempt, you may write an unlimited number of checks.
The minimum amount for a check is $500. Do not, however, try to close out
your account by check.
ACCOUNT TYPE SPECIAL REQUIREMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PHONE All account types except retirement (small solid bullet) Maximum check request: $100,000.
YOUR INVESTMENT PROFESSIONAL
(phone_graphic) All account types (small solid bullet) You may exchange to the same class
of other Fidelity Advisor funds if both
accounts are registered with the
same name(s), address, and
taxpayer ID number.
Mail or in Person (
mail_graphic)(hand_graphic) Individual, Joint Tenant, (small solid bullet) The letter of instruction (with signature
Sole Proprietorship, guaranteed) must be signed by all
UGMA, UTMA persons required to sign for
transactions, exactly as their names
Retirement account appear on the account and sent to
your Investment Professional or the
transfer agent.
(small solid bullet) The account owner should complete
a retirement distribution form.
Contact your Investment
Professional or, if you purchased
your shares through a Broker-Dealer
or Insurance Representative, call
1-800-522-7297. If you purchased
your shares through a Bank
Representative, call 1-800-843-3001.
Trust (small solid bullet) The trustee must sign the letter
indicating capacity as trustee. If the
trustee's name is not in the account
registration, provide a copy of the trust
document certified within the last 60
days.
Business or Organization (small solid bullet) At least one person authorized by
corporate resolution to act on the
account must sign the letter.
Executor, Administrator, (small solid bullet) For instructions contact your
Conservator/Guardian Investment Professional or, if you
purchased your shares through a
Broker-Dealer or Insurance
Representative, call 1-800-522-7297.
If you purchased your shares through
a Bank Representative, call
1-800-843-3001.
Wire (wire_graphic) All account types except retirement (small solid bullet) You must sign up for the wire feature
before using it. To verify that it is in
place, contact your Investment
Professional or, if you purchased
your shares through a Broker-Dealer
or Insurance Representative, call
1-800-522-7297. If you purchased
your shares through a Bank
Representative, call 1-800-843-3001.
Minimum wire: $500.00.
(small solid bullet) Your wire redemption request must
be received by the transfer agent
before 4:00 p.m. Eastern time for
money to be wired on the next
business day.
Check (check_graphic) For all non-retirement Short (small solid bullet) Minimum check: $500.
Fixed-Income and short-Intermediate (small solid bullet) All account owners must sign a
Tax-Exempt accounts only. signature card to receive a
checkbook.
</TABLE>
TELEPHONE REDEMPTIONS CANNOT BE PROCESSED FOR FIDELITY ADVISOR FUND
PROTOTYPE RETIREMENT ACCOUNTS WHERE STATE STREET BANK AND TRUST COMPANY IS
THE CUSTODIAN.
INVESTOR SERVICES
Fidelity Advisor funds provide a variety of services to help you manage
your account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that the transfer agent sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction that
affects your account balance or your account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed,
even if you have more than one account in the fund. Call your Investment
Professional if you need additional copies of financial reports.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your shares and buy shares of the same
class of other Fidelity Advisor funds by telephone or in writing. The Class
A shares you exchange will carry credit for any front-end sales charge you
previously paid in connection with their purchase.
Note that exchanges out of a fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page .
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM lets you set up periodic
redemptions from your account. Only Class A shares are eligible for this
program. Because of Class A' s front-end sales charge, you may not want to
set up a systematic withdrawal plan during a period when you are buying
Class A shares on a regular basis.
One easy way to pursue your financial goals is to invest money regularly.
Fidelity Advisor funds offer convenient services that let you transfer
money into your fund account, or between fund accounts, automatically.
While regular investment plans do not guarantee a profit and will not
protect you against loss in a declining market, they can be an excellent
way to invest for retirement, a home, educational expenses, and other
long-term financial goals. Certain restrictions apply for retirement
accounts. Call your Investment Professional for more information.
REGULAR INVESTMENT PLANS
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY ADVISOR FUND
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM MINIMUM FREQUENCY SETTING UP OR CHANGING
INITIAL SUBSEQUENT Monthly, bimonthly, (small solid bullet) For a new account, complete the appropriate section on the
$1,000 $100[A] quarterly, application.
or semi-annually (small solid bullet) For existing accounts, call your Investment Professional for an
application.
(small solid bullet) To change the amount or frequency of your investment, contact
your Investment Professional directly or, if you purchased your
shares through a Broker-Dealer or Insurance Representative, call
1-800-522-7297. If you purchased your shares through a Bank
Representative, call 1-800-843-3001. Call at least 10 business
days prior to your next scheduled investment date. (20 business
days if you purchased your shares through a bank)
</TABLE>
FIDELITY ADVISOR SYSTEMATIC EXCHANGE PROGRAM
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND OR A FIDELITY ADVISOR FUND
TO ANOTHER FIDELITY ADVISOR FUND,
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, quarterly, (small solid bullet) To establish, call your Investment Professional after both
semi-annually, or accounts are opened.
annually (small solid bullet) To change the amount or frequency of your investment, contact
your Investment Professional directly or, if you purchased your
shares through a Broker-Dealer or Insurance Representative, call
1-800-522-7297. If you purchased your shares through a Bank
Representative, call 1-800-843-3001.
(small solid bullet) The account from which the exchanges are to be processed must
have a minimum balance of $10,000. The account into which the
exchange is being processed must have a minimum of $1,000.
(small solid bullet) Call at least 2 business days prior to your next scheduled
exchange date..
</TABLE>
[A] BECAUSE THEIR SHARE PRICES FLUCTUATE, THESE FUNDS MAY NOT BE
APPROPRIATE CHOICES FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net income and capital gains
to shareholders each year. Each fund pays capital gains, if any, in
December and may pay additional capital gains after the close of its fiscal
year. Normally, dividends for Equity Income and Income & Growth are
distributed in March, June, September and December; dividends for Overseas,
Equity Portfolio Growth, Global Resources, Growth Opportunities and
Strategic Opportunities are distributed in December; dividends for Equity
Portfolio Growth and Equity Income may also be are distributed in January;
dividends for Emerging Markets Income, Strategic Income, High Yield,
Limited Term Bond, Government Investment, Short Fixed-Income, High Income
Municipal, Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt are
declared daily and paid monthly.
DISTRIBUTION OPTIONS
When you open an account, specify on your account application how you want
to receive your distributions. The funds offer four options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the same class of the
fund. If you do not indicate a choice on your application, you will be
assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested in additional shares of the same class of the
fund, but you will be sent a check for each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
4. DIRECTED DIVIDENDS PROGRAM(registered trademark). Your dividend and
capital gain distributions will be automatically invested in the same class
of shares of another identically registered Fidelity Advisor fund.
If you select distribution option 2 or 3 and the U.S. Postal Service cannot
deliver your checks, or if your checks remain uncashed for six months,
those checks will be reinvested in your account at the current NAV and your
election may be converted to the Reinvestment Option. You may change your
distribution option at anytime by notifying the transfer agent in writing.
FOR RETIREMENT ACCOUNTS, all distributions are automatically reinvested.
When you are over 59 years old, you can receive distributions in cash.
Shares purchased through reinvestment of dividend and capital gain
distributions are not subject to a sales charge. If you direct Class A
distributions to a fund with a 4.75% front-end sales charge, you will not
pay a sales charge on those purchases.
When each of Overseas, Equity Portfolio Growth, Global Resources, Growth
Opportunities, Strategic Opportunities, Equity Income and Income & Growth
deducts a distribution from its NAV, the reinvestment price is the
applicable fund's NAV at the close of business that day.
Dividends from Emerging Markets Income, High Yield, Strategic Income,
Government Investment, Limited Term Bond, Short Fixed-Income, High Income
Municipal, Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt will
be reinvested at the applicable fund's NAV on the last day of the month.
Capital gain distributions from these funds will be reinvested at the NAV
as of the date the applicable fund deducts the distributions from its NAV.
Distribution checks will be mailed within seven days, or longer for a
December ex-dividend date.
TAXES
As with any investment, you should consider how an investment in the funds
could affect you. Below are some of the funds' tax implications. If your
account is not a tax-deferred retirement account, be aware of these tax
implications.
TAXES ON DISTRIBUTIONS. Interest income that High Income Municipal, Limited
Term Tax-Exempt, and Short-Intermediate Tax-Exempt earn is distributed to
shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed. Distributions from Overseas,
Equity Portfolio Growth, Global Resources, Growth Opportunities, Strategic
Opportunities, Equity Income,Income & Growth, Emerging Markets Income, High
Yield, Strategic Income, Government Investment, Limited Term Bond and Short
Fixed-Income, however, are subject to federal income tax and may also be
subject to state or local taxes. If you live outside the United States,
your distributions from these funds could also be taxed by the country in
which you reside.
For federal tax purposes income and short-term capital gain distributions,
for each of Overseas, Equity Portfolio Growth,Global Resources, Growth
Opportunities, Strategic Opportunities, Equity Income, Income & Growth,
Emerging Markets Income, High Yield, Strategic Income, Government
Investment, Limited Term Bond and Short Fixed-Income are taxed as
dividends; long-term capital gain distributions are taxed as long-term
capital gains.
Mutual fund dividends from U.S. government securities are generally free
from state and local income taxes. However, particular states may limit
this benefit, and some types of securities, such as repurchase agreements
and some agency-backed securities, may not qualify for the benefit. In
addition, some states may impose intangible property taxes. You should
consult your own tax adviser for details and up-to-date information on the
tax laws in your state.
However, for shareholders of High Income Municipal, Limited Term Tax-Exempt
and Short-Intermediate Tax-Exempt, gain on the sale of tax-free bonds
results in taxable distributions. Short-term capital gains and a portion of
the gain on bonds purchased at a discount are taxed as dividends; long-term
capital gain distributions, if any, are taxed as long-term capital gains.
Distributions are taxable when they are paid, whether you take them in cash
or reinvest them. However, distributions declared in December and paid in
January are taxable as if they were paid on December 31.
Every January, the transfer agent will send you and the IRS a statement
showing the taxable distributions paid to you in the previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. High Income Municipal may invest so that up to
100% of its income and Short-Intermediate Tax-Exempt may invest so that up
to 20% of its income is derived from these securities. Individuals who are
subject to the tax must report this interest on their tax returns.
A portion of the dividends from High Income Municipal, Limited Term
Tax-Exempt, and Short-Intermediate Tax-Exempt's may be free from state or
local taxes. Income from investments in your state are often tax-free to
you. Each year, the transfer agent will send you a breakdown of income from
each state to help you calculate your taxes.
During fiscal 1994, 100% of the income dividends from High Income
Municipal, Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt's
were free from federal income tax. And during fiscal 1994, 5.63% of High
Income Municipal's and 11.07% of Short-Intermediate Tax-Exempt's income
dividends were subject to the federal alternative minimum tax.
TAXES ON TRANSACTIONS. Your redemptions-including exchanges-are subject to
capital gains tax. A capital gain or loss is the difference between the
cost of your shares and the price you receive when you sell them.
Whenever you sell shares of a fund, the transfer agent will send you a
confirmation statement showing how many shares you sold and at what price.
You will also receive a consolidated transaction statement at least
quarterly. However, it is up to you or your tax preparer to determine
whether this sale resulted in a capital gain and, if so, the amount of tax
to be paid. BE SURE TO KEEP YOUR REGULAR ACCOUNT STATEMENTS; the
information they contain will be essential in calculating the amount of
your capital gains.
"BUYING A DIVIDEND." If you buy shares just before a fund deducts a capital
gain distribution or dividend distribution, as applicable, from its NAV,
you will pay the full price for the shares and then receive a portion of
the price back in the form of a taxable distribution.
CURRENCY CONSIDERATIONS. For funds that can invest in foreign securities,
if a fund's dividends exceed its taxable income in any year, which is
sometimes the result of currency-related losses, all or a portion of the
fund's dividends may be treated as a return of capital to shareholders for
tax purposes. To minimize the risk of a return of capital, each of these
funds may adjust its dividends to take currency fluctuations into account,
which may cause the dividends to vary. Any return of capital will reduce
the cost basis of your shares, which will result in a higher reported
capital gain or a lower reported capital loss when you sell your shares.
The statement you receive in January will specify if any distributions
included a return of capital.
Undistributed net gains from currency transactions, if any, will generally
be distributed as a separate dividend in December.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on a fund and
its investments and these taxes generally will reduce a fund's
distributions. However, an offsetting tax credit or deduction may be
available to you. If so, your tax statement will show more taxable income
or capital gains than were actually distributed by the fund, but will also
show the amount of the available offsetting credit or deduction.
There are tax requirements that all funds must follow in order to avoid
federal taxation. In its effort to adhere to these requirements, a fund may
have to limit its investment activity in some types of instruments.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Each class's NAV and offering price, as applicable, is calculated
as of the close of business of the NYSE, normally 4:00 p.m. Eastern time.
A CLASS'S NAV is the value of a single share. The NAV of each class is
computed by adding that class's pro rata share of the value of the
applicable fund's investments, cash, and other assets, subtracting that
class's pro rata share of the value of the applicable fund's liabilities,
subtracting the liabilities allocated to that class, and dividing by the
number of shares of that class that are outstanding.
Each fund's assets are valued primarily on the basis of market quotations.
Foreign securities are valued on the basis of quotations from the primary
market in which they are traded, and are translated from the local currency
into U.S. dollars using current exchange rates. If quotations are not
available, or if the values have been materially affected by events
occurring after the closing of a foreign market, assets are valued by a
method that the Board of Trustees believes accurately reflects fair value.
THE OFFERING PRICE (price to buy one share) is the applicable class's NAV,
plus a sales charge for Class A shares. Class A has a maximum sales charge
of 4.75% (1.50% for Short Fixed-Income and Short-Intermediate Tax-Exempt)
of the offering price. The REDEMPTION PRICE (price to sell one share) is
the applicable class's NAV, minus any applicable CDSC for Class B shares.
SALES CHARGES AND INVESTMENT PROFESSIONAL
CONCESSIONS - CLASS A (EXCEPT SHORT FIXED INCOME AND SHORT-INTERMEDIATE
TAX-EXEMPT)
Sales Charge as % of
Amount Invested Offering Net Investment
Price Amount Profession
Investe al
d Concession
as % of
Offering
Price
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[A]
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[A]
[A] INVESTMENT PROFESSIONALS WILL BE COMPENSATED WITH A FEE OF 0.25% FOR
PURCHASES OF $1 MILLION OR MORE IF THE ASSETS ON WHICH THE 0.25% 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 ON PAGE . ALL ASSETS ON WHICH THE 0.25% FEE IS PAID
MUST REMAIN IN CLASS A SHARES OF THE FIDELITY ADVISOR FUNDS, INITIAL CLASS
SHARES OF DAILY MONEY FUND: U.S. TREASURY PORTFOLIO, OR SHARES OF DAILY
MONEY FUND: MONEY MARKET PORTFOLIO OR DAILY TAX-EXEMPT MONEY FUND FOR A
PERIOD OF ONE UNINTERRUPTED YEAR, OR THE INVESTMENT PROFESSIONAL WILL BE
REQUIRED TO REFUND THIS FEE TO FDC.
CONTINGENT DEFERRED SALES CHARGE. Class B shares may, upon redemption, be
assessed a CDSC based on the following schedule:
From Date of Purchase Contingent
Deferred
Sales Charge
Less than 1 year 4%
1 year to less than 3 years 3%
3 years to less than 4 years 2%
4 years to less than 5 years 1%
5 years to less than 6 years [A] 0%
[A] AFTER A MAXIMUM HOLDING PERIOD OF 6 YEARS, CLASS B SHARES WILL CONVERT
AUTOMATICALLY TO CLASS A SHARES OF THE SAME FIDELITY ADVISOR FUND. SEE
"CONVERSION FEATURE" BELOW FOR MORE INFORMATION.
Investment Professionals with which FDC has agreements receive as
compensation from FDC a concession equal to 3% of your purchase of Class B
shares.
The CDSC will be calculated based on the lesser of the cost of Class B
shares at the initial date of purchase or the value of Class B shares at
redemption, not including any reinvested dividends or capital gains. In
determining the applicability and rate of any CDSC at redemption, Class B
shares representing reinvested dividends and capital gains, if any, will be
redeemed first, followed by Class B shares that have been held for the
longest period of time. Class B shares acquired through distributions
(dividends or capital gains) will not be subject to a CDSC.
CONVERSION FEATURE. After a maximum holding period of six years from the
initial date of purchase, Class B shares convert automatically to Class A
shares of the same Fidelity Advisor fund. Conversion to Class A shares will
be made at NAV. At the time of conversion, a portion of the Class B shares
purchased through the reinvestment of dividends or capital gains (Dividend
Shares) will also convert to Class A shares. The portion of Dividend Shares
that will convert is determined by the ratio of your converting Class B
non-Dividend Shares to your total Class B non-Dividend Shares. (A portion
of Class B shares that had been acquired previously by exchange also may
convert, representing the appreciated value of, and/or reinvested dividends
or capital gains earned on, Class B shares prior to their exchange.)
For more information about the CDSC, including the conversion feature and
the permitted circumstances for CDSC waivers, contact your Investment
Professional.
REINSTATEMENT PRIVILEGE. If you have sold all or part of your Class A or
Class B shares of a fund, you may reinvest an amount equal to all or a
portion of the redemption proceeds in the same class of the fund or 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. Under these circumstances, the dollar amount
of the CDSC you paid on Class B shares will be reimbursed to you by
reinvesting that amount in Class B shares. 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 a fund and certain restrictions
may apply. For purposes of the CDSC schedule, the holding period of your
Class B shares will continue as if Class B shares had not been redeemed.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require a fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE: Fidelity and the transfer
agent may only be liable for losses resulting from unauthorized
transactions if they do not follow reasonable procedures designed to verify
the identity of the caller. Fidelity and the transfer agent will request
personalized security codes or other information, and may also record
calls. You should verify the accuracy of the confirmation statements
immediately after receipt. If you do not want the ability to redeem and
exchange by telephone, call the transfer agent for instructions. Additional
documentation may be required from corporations, associations and certain
fiduciaries.
IF YOU ARE UNABLE TO REACH THE TRANSFER AGENT BY PHONE (for example, during
periods of unusual market activity), consider placing your order by mail.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on this page. Purchase orders may be refused if, in FMR's opinion, they
would disrupt management of a fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased at the
next NAV or offering price, as applicable, calculated after your order is
received and accepted by the transfer agent. Note the following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) The funds do not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
cancelled and you could be liable for any losses or fees a fund or the
transfer agent has incurred.
(small solid bullet) Direct Purchases: You begin to earn dividends as of
the first business day following the day the fund receives payment.
(small solid bullet) Automated Order Purchases: You begin to earn dividends
as of the business day your order is received and accepted.
AUTOMATED ORDERS PURCHASE. Class A and Class B shares of the funds, can be
purchased or sold through Investment Professionals utilizing an automated
order placement and settlement system that guarantees payment for orders on
a specified date.
TO AVOID THE COLLECTION PERIOD associated with check purchases, consider
buying shares by bank wire, U.S. Postal money order, U.S. Treasury check,
or Federal Reserve check.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV, minus any applicable CDSC, calculated after your order is
received and accepted. Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on
the next business day, but if making immediate payment could adversely
affect a fund, it may take up to seven days to pay you.
(small solid bullet) Shares of Emerging Markets Income, Strategic Income,
High Yield, Limited Term Bond, Government Investment, Short Fixed-Income,
High Income Municipal, Limited Term Tax-Exempt and Short-Intermediate
Tax-Exempt will earn dividends through the date of redemption; however,
shares redeemed on a Friday or prior to a holiday will continue to earn
dividends until the next business day.
(small solid bullet) Each fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check have been collected,
which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
(small solid bullet) If you sell shares by writing a check 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.
THE TRANSFER AGENT RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE
of $12.00 from accounts with a value of less than $2,500 (including any
amount paid as a sales charge). The fee, which is payable to the transfer
agent, is designed to offset in part the relatively higher costs of
servicing smaller accounts.
IF YOUR NON-RETIREMENT ACCOUNT BALANCE FALLS BELOW $1,000, you will be
given 30 days' notice to reestablish the minimum balance. If you do not
increase your balance, the transfer agent reserves the right to close your
account and send the proceeds to you. Your shares will be redeemed at the
NAV, minus any applicable CDSC, on the day your account is closed.
THE TRANSFER AGENT MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC will, 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.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging Class A or Class B
shares of a fund for the same class of shares of other Fidelity Advisor
funds. However, you should note the following:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you
pay the difference between that fund's sales charge and any sales charge
you have previously paid in connection with the shares you are exchanging.
For example, if you had already paid a sales charge of 2% on your shares
and you exchange them into a fund with a 3% sales charge, you would pay an
additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, each fund reserves the right to temporarily or
permanently terminate the exchange privilege of any investor who makes more
than four exchanges out of the fund per calendar year. Accounts under
common ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if a fund
receives or anticipates simultaneous orders affecting significant portions
of the fund's assets. In particular, a pattern of exchanges that coincide
with a "market timing" strategy may be disruptive to a fund.
Although the funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time.
The funds reserve the right to terminate or modify the exchange privilege
in the future.
SALES CHARGE REDUCTIONS AND WAIVERS
The front-end sales charge will be reduced for purchases of Class A shares
according to the Sales Charge Schedule shown on page 42 if your purchase
qualifies for one of the following reduction plans. Please refer to the
funds' SAI for more details about each plan or call your Investment
Professional. If you purchased your shares through a Broker-Dealer or
Insurance Representative, call 1-800-522-7297. If you purchased your shares
through a Bank Representative, call 1-800-843-3001.
Your purchases and existing balances of Class B shares may be included in
the following programs for purposes of qualifying for a Class A front-end
sales charge reduction.
QUANTITY DISCOUNTS apply to purchases of Class A shares of a single
Fidelity Advisor fund or to combined purchases of Class A and Class B
shares of any Fidelity Advisor funds, and to purchases 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. (Minimum
investment is $50,000, except that the minimum investment in each of
Short-Fixed Income or Short-Intermediate Tax-Exempt is $1 million.)
To qualify for a quantity discount, investing in a fund's Class A shares
for several accounts at the same time will be considered a single
transaction (Combined Purchase), as long as shares are purchased through
one Investment Professional and the total is at least $50,000 (or at least
$1 million for each of Advisor Short Fixed-Income Fund or Advisor
Short-Intermediate Tax-Exempt Fund).
RIGHTS OF ACCUMULATION let you determine your front-end sales charge on
Class A shares by adding to your new purchase of Class A shares the value
of all of the Fidelity Advisor fund Class A and Class B shares held by you,
your spouse, and your children under age 21. You can also add 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.
A LETTER OF INTENT lets you receive the same reduced front-end sales charge
on purchases of Class A shares made during a 13-month period as if the
total amount invested during the period had been invested in a single lump
sum. (see Quantity Discounts above.) You must file your non-binding Letter
within 90 days of the start of your purchases. Your initial investment must
be at least 5% of the amount you plan to invest. Out of the initial
investment, 5% of the dollar amount specified in the Letter will be
registered in your name and held in escrow. You will earn income dividends
and capital gain distributions on escrowed Class A shares. Neither income
dividends nor capital gain distributions reinvested in additional Class A
or Class B shares will apply toward completion of the Letter. The escrow
will be released when your purchase of the total amount has been completed.
You are not obligated to complete the Letter, and in such a case,
sufficient escrowed Class A shares will be redeemed to pay any applicable
front-end sales charges.
A FRONT-END SALES CHARGE WILL NOT APPLY TO THE FOLLOWING CLASS A SHARES:
1. Purchased by a bank trust officer, registered representative, or other
employee (or a member of one of their immediate families) of Investment
Professionals having agreements with FDC;
2. Purchased 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 trust for the sole benefit of the minor child of a Fidelity
trustee or employee;
3. Purchased by a charitable organization (as defined in Section 501(c)(3)
of the Internal Revenue Code) investing $100,000 or more;
4. Purchased for 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. Purchased by a trust institution or bank trust department investing on
its own behalf or on behalf of its clients;
6. Purchased in an account for which a bank or broker-dealer charges an
asset management fee, provided the bank or broker-dealer has an agreement
with FDC;
7. Purchased as part of an employee benefit plan having more than 200
eligible employees or a minimum of $1 million of plan assets invested in
Fidelity Advisor funds.
8. Purchased for a Fidelity or Fidelity Advisor IRA account with the
proceeds of a distribution (i) from an employee benefit plan that qualified
for waiver or had a minimum of $3 million in plan assets invested in
Fidelity funds; or (ii) from an insurance company separate account
qualifying under 9 below, or used to fund annuity contracts purchased by
employee benefit plans having in the aggregate at least $3 million in plan
assets invested in Fidelity mutual funds;
9. Purchased for an insurance company separate account used to fund annuity
contracts for employee benefit plans which, in the aggregate, have more
than 200 eligible employees or a minimum of $1 million in plan assets
invested in Fidelity Advisor funds;
10. Purchased for any state, county, or city, or any governmental
instrumentality, department, authority or agency; or
11. Purchased with redemption proceeds from other mutual fund complexes on
which you have previously paid a front-end sales charge or CDSC.
Qualification for front-end sales charge waivers must be cleared through
FDC in advance, and employee benefit plan investors must meet additional
requirements specified in the funds' SAI.
THE CDSC ON CLASS B SHARES MAY BE WAIVED:
1. In cases of disability or death, provided that Class B shares are
redeemed within one year following the death or the initial determination
of disability, or
2. In connection with a total or partial redemption related to certain
distributions from retirement plans or accounts.
Your Investment Professional should call Fidelity for more information.
APPENDIX
DESCRIPTION OF MOODY'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 B 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 S&P'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 rate 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.
FIDELITY ADVISOR OVERSEAS FUND, FIDELITY ADVISOR EQUITY PORTFOLIO GROWTH,
FIDELITY ADVISOR GLOBAL RESOURCES FUND, FIDELITY ADVISOR GROWTH
OPPORTUNITIES FUND, FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND, FIDELITY
ADVISOR EQUITY INCOME FUND, FIDELITY ADVISOR INCOME & GROWTH FUND, FIDELITY
ADVISOR EMERGING MARKETS INCOME FUND, FIDELITY ADVISOR HIGH YIELD FUND,
FIDELITY ADVISOR STRATEGIC INCOME FUND, FIDELITY ADVISOR GOVERNMENT
INVESTMENT FUND, FIDELITY ADVISOR LIMITED TERM BOND FUND, FIDELITY ADVISOR
SHORT FIXED-INCOME FUND, FIDELITY ADVISOR HIGH INCOME MUNICIPAL FUND,
FIDELITY ADVISOR LIMITED TERM TAX-EXEMPT FUND, AND FIDELITY ADVISOR
SHORT-INTERMEDIATE TAX-EXEMPT FUND
FUNDS OF FIDELITY ADVISOR SERIES I-VIII
CLASS A AND CLASS B
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 24, 1995
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the funds' current Prospectus (dated
February 24, 1995) for Class A and Class B shares. Please retain this
document for future reference. Each fund's financial statements and
financial highlights, included in their respective Annual Reports for the
most recent fiscal period, which are separate reports, are incorporated
herein by reference.
Additional copies of this SAI, any Prospectus, Annual or Semiannual Report
are available without charge upon request from Fidelity Distributors
Corporation, 82 Devonshire Street, Boston, Massachusetts, 02109 or from
your Investment Professional.
TABLE OF CONTENTS PAGE
<TABLE>
<CAPTION>
<S> <C>
Investment Policies and Limitations
Special Considerations Affecting Canada
Special Considerations Affecting Latin America
Special Considerations Affecting Japan, the Pacific Basin, and Southeast Asia
Special Considerations Affecting Europe
Special Considerations Affecting Africa
Portfolio Transactions
Valuation
Performance
Additional Purchase, Exchange, and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contract
The Distributor
Distribution and Service Plans
Description of the Trusts
Financial Statements
Appendix
</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.)
Fidelity Investments Japan Limited (FIJ)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
ACOM-ptb-295
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectuses. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a fund's assets that may be
invested in any security or other assets, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of a 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 a fund's investment policies and
limitations.
A fund's fundamental investment policies and limitations cannot be changed
without approval of a "majority of the outstanding voting securities" (as
defined in the Investment Company Act of 1940 (the 1940 Act)) of the fund.
OVERSEAS FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than 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;
(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); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
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 purchase interests in real estate
investment trusts that are not readily marketable or interests in real
estate limited partnerships that are not listed on an exchange or traded on
the NASDAQ National Market System if, as a result, the sum of such
interests and other investments considered illiquid under limitation (iv)
would exceed 15% of the fund's net assets.
(vi) 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).
(vii) 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.
(viii) 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.
(ix) 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.
(x) 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 .
EQUITY PORTFOLIO GROWTH
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer (other than obligations issued or
guaranteed by the Government of the United States, its agencies or
instrumentalities) if, as a result (a) more than 5% of the fund's total
assets (taken at current value) would be invested in the securities of such
issuer, or (b) the fund would hold more than 10% of the voting securities
of such issuer;
(2) make short sales of securities (unless it owns or by virtue of its
ownership of other securities has the right to obtain, securities
equivalent in kind and amount to the securities sold), provided, however,
that the fund may purchase or sell futures contracts;
(3) purchase any securities on margin, except for such short-term credits
as are necessary for the clearance of transactions, provided, however, that
the fund may make initial and variation margin payments in connection with
purchases or sales of futures contracts or of options on futures contracts;
(4) 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 the fund's total assets (including the
amount borrowed) less liabilities (not including borrowings). Any
borrowings that come to exceed 33 1/3% of the value of the fund's total
assets by reason of a decline in net assets will be reduced within 3 days
(exclusive of Sundays and holidays) to the extent necessary to comply with
the 33 1/3% limitation;
(5) underwrite any issue of securities (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);
(6) 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, 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;
(7) purchase or sell real estate (but this shall not prevent the fund from
investing in marketable securities issued by companies such as real estate
investment trusts which deal in real estate or interests therein and
participation interests in pools of real estate mortgage loans);
(8) 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);
(9) lend any security or make any other loan if, as a result, more than 33
1/3% of the fund's total assets would be lent to other parties, except (i)
through the purchase of a portion of an issue of debt securities in
accordance with its investment objective, policies and limitations, or (ii)
by engaging in repurchase agreements with respect to portfolio securities;
(10) purchase securities of other investment companies (except in the open
market where no commission other than the ordinary broker's commission is
paid, or as a part of a merger or consolidation, and in no event may
investments in such securities exceed 10% of the total assets of the fund);
(11) purchase the securities of any issuer if, as a result, more than 5% of
the fund's total assets (taken at current value) would be invested in the
securities of companies which, including predecessors, have a record of
less than three years of continuous operation; or
(12) invest in oil, gas, or other mineral exploration or development
programs.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short unless it
owns or has the right to obtain securities sold short, and provided that
transactions in futures contracts and options are not deemed to constitute
selling securities short.
(ii) 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 (4)). 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.
(iii) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(iv) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) 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 (b) acquiring
loans, loan participations, or other forms of direct debt instruments and,
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements).
(v) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of the fund's net assets. Included
in that amount, but not to exceed 2% of the fund's net assets, may be
warrants that are not listed on the New York Stock Exchange or the American
Stock Exchange. Warrants acquired by the fund in units or attached to
securities are not subject to these restrictions.
(vi) The fund does not currently intend to purchase interests in real
estate investment trusts that are not readily marketable, or interests in
real estate limited partnerships that are not listed on an exchange or
traded on the NASDAQ National Market System if, as a result, the sum of
such interests and other investments considered illiquid under limitation
(iii) would exceed 10% of the fund's net assets.
(vii) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the fund and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(viii) 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 .
GLOBAL RESOURCES FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than obligations issued or guaranteed by the
government of the United States, or any of its agencies or
instrumentalities) if, as a result thereof, (a) more than 5% of the fund's
total assets would be invested in the securities of such issuer, or (b) the
fund would hold more than 10% of the outstanding voting securities of such
issuer;
(2) issue senior securities, except as permitted under the 1940 Act;
(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 this amount will be reduced within three days (not including
Sundays and holidays) to the extent necessary to comply with the 33 1/3%
limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business: or
(7) 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.
(8) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
(i) With respect to 100% of its total assets, the fund does not currently
intend to purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, the fund would own more than 10% of the
outstanding voting securities of such issuer.
(ii) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or fund 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.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they cannot be sold or disposed of
in the ordinary course of business at approximately the prices at which
they are valued.
(vi) The fund does not currently intend to purchase interests in real
estate investment trusts that are not readily marketable or interests in
real estate limited partnerships that are not listed on an exchange or
traded on the NASDAQ National Market System if, as a result, the sum of
such interests and other investments considered illiquid under limitation
(v) would exceed 10% of the fund's net assets.
(vii) The fund does not currently intend to invest in physical commodities
other than precious metals (i.e., gold, palladium, platinum and silver) and
it intends to limit such investments to not more than 25% of the fund's
total assets. The fund may receive no more than 10% of its yearly income
from gains resulting from selling metals or any other physical commodity.
(viii) The fund does not currently intend to lend assets other than
securities to other parties, except by lending money up to 5% of the fund's
net assets to a registered investment company or fund for which FMR or an
affiliate serves as investment adviser. (This limit does not apply to
purchases of debt securities or to repurchase agreements.)
(ix) 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.
(x) 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.
(xi) 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.
(xii) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(xiii) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For the fund's limitations on futures contracts and options, see the
section entitled "Limitations on Futures and Options Transactions" on page
.
GROWTH OPPORTUNITIES FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) sell securities short, unless it owns, or by virtue of ownership of
other securities has the right to obtain, securities equivalent in kind and
amount to the securities sold. This limitation shall not limit the fund's
ability to take a short position in a futures contract or forward contract;
(4) purchase securities on margin, except that the fund may obtain such
short-term credits as are necessary for the clearance of transactions. This
limitation shall not limit the fund's ability to make initial and variation
margin payments in connection with purchases or sales of futures contracts
or of options on futures contracts;
(5) 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 to the extent necessary to
comply with the 33 1/3% limitation. The Fund may engage in reverse
repurchase agreements and may not purchase any security while borrowings
representing more than 5% of its net assets are outstanding;
(6) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(7) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(8) purchase or sell real estate (but this shall not prevent the fund from
investing in marketable securities issued by companies such as real estate
investment trusts which deal in real estate or interests therein and
participation interests in pools of real estate mortgage loans);
(9) invest in physical commodities;
(10) lend any securities or make any other loan if, as a result, more than
33 1/3% of the fund's total assets would be lent to other parties, except
(i) through the purchase of a portion of an issue of debt securities in
accordance with its investment objective, policies, and limitations, or
(ii) by engaging in repurchase agreements with respect to portfolio
securities;
(11) purchase securities of other investment companies, except in the open
market where no commission except the ordinary broker's commission is paid,
or as a part of a merger or consolidation, and in no event will such
securities be purchased if, as a result, more than 10% of the value of the
total assets of the fund would be invested in the securities of other
investment companies; or
(12) invest in oil, gas, other mineral exploration or development programs.
Investment limitation (5) is construed in conformity with the 1940 Act;
and, accordingly, "three days" means three business days, exclusive of
Sundays and holidays.
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 sold short, and provided that
transactions in futures contracts and options are not deemed to constitute
selling securities short.
(ii) 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 (5)). 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.
(iii) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they cannot be sold or disposed of
in the ordinary course of business at approximately the prices at which
they are valued.
(iv) The fund does not currently intend to purchase interests in real
estate investment trusts that are not readily marketable or interests in
real estate limited partnerships that are not listed on an exchange or
traded on the NASDAQ National Market System if, as a result, the sum of
such interests and other investments considered illiquid under limitation
(iii) would exceed 10% of the fund's net assets.
(v) The fund does not currently intend to lend assets other than securities
to other parties, except by (a) 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 (b) acquiring loans, loan
participations, or other forms of direct debt instruments, and in
connection therewith, assuming any associated unfunded commitments of the
sellers. (This limit does not apply to purchases of debt securities or to
repurchase agreements.)
(vi) The fund does not currently intend to purchase or retain securities
issued by other open-end investment companies. This limitation does 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 cost of the market, in excess of 5% of the Fund's net assets.
Included in that amount, but not to exceed 2% of net assets, may be
warrants that are not listed on the New York Stock Exchange or the American
Stock Exchange. 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" on page
.
STRATEGIC OPPORTUNITIES FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer (other than obligations issued or
guaranteed by the government of the United States, its agencies, or
instrumentalities) if, as a result thereof, more than 5% of the fund's
total assets (taken at current value) would be invested in the securities
of such issuer;
(2) purchase the securities of any issuer, if such purchase, at the time
thereof, would cause more than 10% of the outstanding voting securities of
such issuer to be held in the fund's portfolio;
(3) issue senior securities (except to the extent that issuance of one or
more classes of shares of the fund in accordance with an Order issued by
the Securities and Exchange Commission may be deemed to constitute issuance
of a senior security);
(4) make short sales of securities, (unless it owns, or by virtue of its
ownership of other securities has the right to obtain, at no additional
cost, securities equivalent in kind and amount to the securities sold);
provided, however, that the fund may enter into forward foreign currency
exchange transactions; and further provided that the fund may purchase or
sell futures contracts;
(5) purchase any securities or other property on margin, (except for such
short-term credits as are necessary for the clearance of transactions);
provided, however, that the fund may make initial and variation margin
payments in connection with purchases or sales of futures contracts or
options on futures contracts;
(6) 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 the fund's total assets (including the
amount borrowed) less liabilities (not including 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. the fund will not purchase securities for investment while
borrowings equaling 5% or more of its total assets are outstanding;
(7) 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");
(8) 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 would be invested in the securities of one or more issuers
having their principal business activities in the same industry;
(9) purchase or sell real estate (but this shall not prevent the fund from
investing in marketable securities issued by companies such as real estate
investment trusts which deal in real estate or interests therein and
participation interests in pools of real estate mortgage loans);
(10) 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);
(11) lend any security or make any other loan if as a result, more than 33
1/3% of the fund's total assets would be lent to other parties except (i)
through the purchase of a portion of an issue of debt securities in
accordance with its investment objective, policies, and limitations, or
(ii) by engaging in repurchase agreements with respect to portfolio
securities;
(12) purchase securities of other investment companies (except in the open
market where no commission other than the ordinary broker's commission is
paid, or as part of a merger or consolidation, and in no event may
investments in such securities exceed 10% of the value of total assets of
the fund). The fund may not purchase or retain securities issued by other
open-end investment companies;
(13) invest more than 5% of the fund's total assets (taken at market value)
in the securities of companies which, including predecessors, have a record
of less than three years' continuous operation; or
(14) invest in oil, gas, or other mineral exploration or development
programs.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) 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 (6)). 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.
(ii) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(iii) The fund does not currently intend to purchase interests in real
estate investment trusts that are not readily marketable or interests in
real estate limited partnerships that are not listed on an exchange or
traded on the NASDAQ National Market System if, as a result, the sum of
such interests and other investments considered illiquid under limitation
(ii) would exceed 10% of the fund's net assets.
(iv) 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.)
(v) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of the fund's net assets. Included
in that amount, but not to exceed 2% of the fund's net assets, may be
warrants that are not listed on the New York Stock Exchange or the American
Stock Exchange. Warrants acquired by the fund in units or attached to
securities are not subject to these restrictions.
(vi) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(vii) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the fund and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(viii) The fund does not currently intend to sell securities short unless
it owns or has the right to obtain securities sold short, and provided that
transactions in futures contracts and options are not deemed to constitute
selling securities short.
EQUITY INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result (a)
more than 5% of the fund's total assets would be invested in the securities
of that issuer, or (b) the fund would hold more than 10% of the outstanding
voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of 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 INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser of (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 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to purchase interests in real estate
investment trusts that are not readily marketable or interests in real
estate limited partnerships that are not listed on an exchange or traded on
the NASDAQ National Market System if, as a result, the sum of such
interests and other investments considered illiquid under limitation (iv)
would exceed 10% of the fund's net assets.
(vi) The fund does not currently intend to lend assets other than
securities to other parties, except (a) by 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 (b) acquiring
loans, loan participations, or other forms of direct debt instruments and
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(vii) 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.
(viii) 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.
(ix) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of the fund's net assets. Included
in that amount, but not to exceed 2% of the fund's net assets, may be
warrants that are not listed on the New York Stock Exchange or the American
Stock Exchange. Warrants acquired by the fund in units or attached to
securities are not subject to these restrictions.
(x) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the Trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(xi) 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 .
INCOME & GROWTH FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) With respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) sell securities short, unless it owns, or by virtue of ownership of
other securities has the right to obtain, securities equivalent in kind and
amount to the securities sold. This limitation shall not limit the fund's
ability to take a short position in a futures contract or forward contract;
(4) purchase securities on margin, except that the fund may obtain such
short-term credits as are necessary for the clearance of transactions. This
limitation shall not limit the fund's ability to make initial and variation
margin payments in connection with purchases or sales of futures contracts
or of options on futures contracts;
(5) 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 to the extent necessary to
comply with the 33 1/3% limitation. The fund may engage in reverse
repurchase agreements and may not purchase any security while borrowings
representing more than 5% of its net assets are outstanding;
(6) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(7) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(8) purchase or sell real estate (but this shall not prevent the fund from
investing in marketable securities issued by companies such as real estate
investment trusts which deal in real estate or interests therein and
participation interests in pools of real estate mortgage loans);
(9) 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);
(10) lend any security or make any other loan if, as a result more than 33
1/3% of the fund's total assets would be lent to other parties, except (i)
through the purchase of a portion of an issue of debt securities in
accordance with its investment objective, policies, and limitations, or
(ii) by engaging in repurchase agreements with respect to portfolio
securities; or
(11) purchase securities of other investment companies, except in the open
market where no commission except the ordinary broker's commission is paid,
or as a part of a merger or consolidation, and in no event will such
securities be purchased if, as a result, more than 10% of the value of the
total assets of the fund would be invested in the securities of other
investment companies.
Investment limitation (5) is construed in conformity with the 1940 Act;
accordingly, "three days" means three business days, exclusive of Sundays
and holidays.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
(i) 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 (5)). 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.
(ii) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(iii) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) 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 (b) acquiring
loans, loan participations or other forms of direct debt instruments and,
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(iv) 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.
(v) 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.
(vi) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of its net assets. Included in
that amount, but not to exceed 2% of the fund's net assets, may be warrants
that are not listed on the New York Stock Exchange or the American Stock
Exchange. Warrants acquired by the fund in units or attached to securities
are not subject to these restrictions.
(vii) The fund does not currently intend to invest in oil, gas, other
mineral exploration or development programs or leases.
(viii) The fund does not currently intend to purchase interests in real
estate investment trusts that are not readily marketable or interests in
real estate limited partnerships that are not listed on an exchange or
traded on the NASDAQ, National Market System if, as a result, the sum of
such interests and other investments considered illiquid under limitation
(ii) would exceed 10% of the fund's net assets.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page .
EMERGING MARKETS INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(5) 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);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(7) lend any security or make any other loan if, as a result, more than 33
1/3% of total assets would be lent to other parties, but this limitation
does not apply to purchases of debt securities or to repurchase agreements.
(8) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objectives, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualifications as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "government securities" as defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)). 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.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 15% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to invest in interests in real
estate investment trusts that are not readily marketable, or to invest in
interests in real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(vii) The fund does not currently intend to lend assets other than
securities to other parties, except (a) by lending money (up to 7.5% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser, or (b) acquiring
loans, loan participations, or other forms of direct debt instruments and
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(viii) 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.
(ix) 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.
(x) The fund does not currently intend to invest in oil, gas or other
mineral exploration or development programs or leases.
(xi) 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.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page .
HIGH YIELD FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the value of the fund's total assets would be invested
in the securities of that issuer, or (b) it would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others except to the extent that the
fund may be considered 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 securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 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.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL:
(i) The fund 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.
(ii) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 15% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to purchase interests in real estate
investment trusts that are not readily marketable or interests in real
estate limited partnerships that are not listed on an exchange or traded on
the NASDAQ National Market System if, as a result, the sum of such
interests and other investments considered illiquid under limitation (v)
would exceed 15% of the fund's net assets.
(vi) The fund does not currently intend to lend assets other than
securities to other parties, except by (i) lending money (up to 7.5% of the
fund's net assets) to a registered investment company or for which FMR or
an affiliate serves as investment adviser or (ii) acquiring loans and loan
participations and, in connection therewith, assuming any associated
unfunded loan commitments of the sellers. (This limitation does not apply
to purchases of debt securities or to repurchase agreements.)
(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 5% of the fund's net assets.
Included in that amount, but not to exceed 2% of the fund's net assets, may
be warrants that are not listed on the New York Stock Exchange or the
American Stock Exchange. 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.
(x) 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 as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(xi) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company, managed by
Fidelity Management & Research Company or an affiliate or successor, with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page .
STRATEGIC INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the 1940 Act;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others except to the extent that the
fund may be considered to be an underwriter within the meaning of the
Securities Act of 1933, in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(5) 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);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(7) 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.
(8) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objectives, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL:
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "government securities" as defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)). 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.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 15% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 7.5% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser or (b) acquiring
loans and loan participations or other forms of direct debt instruments
and, in connection therewith, assuming any associated unfunded loan
commitments of the sellers. (This limitation does not apply to purchases of
debt securities or to repurchase agreements.)
(vii) 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 as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(viii) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(ix) 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.
(x) The fund does not currently intend to invest in oil, gas, or other
mineral explorations or development programs or leases.
(xi) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company managed by
FMR or an affiliate or successor with substantially the same fundamental
investment objective, policies, and limitations as the fund.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page .
GOVERNMENT INVESTMENT FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets,purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,(a)
more than 5% of the fund's total assets would be invested in the securities
of that issuer, or (b) the fund would hold more than 10% of the outstanding
voting securities of that issuer;
(2) 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;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of 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 investments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies 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 repurchase
agreements; or
(9) issue senior securities, except as permitted under the Investment
Company Act of 1940.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser, or (b) by engaging in reverse repurchase agreements
with any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
borrow from 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.
(iii) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed illiquid because they are subject to legal or contractual
restrictions on resale or because they cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they are
valued.
(iv) The fund does not currently intend to invest in securities of real
estate investment trusts that are not readily marketable, or to invest in
securities of real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(v) The fund does not currently intend to lend assets other than
securities to other parties, except by lending money (up to 7.5% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser. (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 3
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 5% of the fund's net assets.
Included in that amount, but not to exceed 2% of the fund's net assets, may
be warrants that are not listed on the New York Stock Exchange or the
American Stock Exchange. 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.
(x) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the fund and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(xi) The fund does not currently intend to enter into any futures contract
or option on a futures contract if, as a result, the sum of initial margin
deposits on futures contracts and related options and premiums paid for
options on futures contracts the fund has purchased, after taking into
account unrealized profits and losses on such contracts would exceed 5% of
the fund's total assets.
For the fund's limitations on futures and options contracts, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page .
LIMITED TERM BOND FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment), in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings.) Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(5) 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);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(7) lend any security or make any other loan if, as a result, more than 33
1/3% of the fund's total assets would be lent to other parties (but this
limitation does not apply to purchases of debt securities or to repurchase
agreements).
(8) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund may borrow money only (a) from a bank or from a registered
investment company or fund for which FMR or an affiliate serves as
investment advisor or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)). 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.
(ii) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(iii) The fund does not currently intend to lend assets other than
securities to other parties, except by: (a) lending money (up to 7.5% of
the fund's net assets) to a registered investment company or fund for which
FMR or an affiliate serves as investment adviser or (b) acquiring loans,
loan participations, or other forms of direct debt instruments, and, in
connection therewith, assuming any associated unfunded commitments of the
sellers. (This limitation does not apply to purchases of debt securities or
to repurchase agreements.)
(iv) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the Trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(v) The fund does not currently intend to invest in oil, gas or other
mineral exploration or development programs or leases.
(vi) The fund does not currently intend to invest in interests in real
estate investment trusts that are not readily marketable or to invest in
interests in real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(vii) 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.
(viii) 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.
(ix) The fund currently does not 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.
(x) 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.
(xi) The fund does nor currently intend to invest all of its assets in the
securities of a single open-end management investment company managed by
FMR or an affiliate or successor with substantially the same fundamental
investment objective, policies, and limitations as the fund.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page .
SHORT FIXED-INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 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.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING 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 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 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.
(iii) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(iv) The fund does not currently intend to lend assets other than
securities to other parties, except by (i) lending money (up to 7.5% of the
fund's net assets) to a registered investment company or fund 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 limit does not apply to purchases of debt securities or to
repurchase agreements.
(v) 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.
(vi) 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.
(vii) The fund does not currently intend to purchase warrants, valued at
the lower of cost or market, in excess of 5% of the fund's net assets.
Included in that amount, but not to exceed 2% of the fund's net assets, may
be warrants that are not listed on the New York Stock Exchange or the
American Stock Exchange. Warrants acquired by the fund in units or attached
to securities are not subject to these restrictions.
(viii) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(ix) 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.
(x) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company managed by
FMR or an affiliate or successor with substantially the same fundamental
investment objective, policies, and limitations as the fund.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" on page
.
HIGH INCOME MUNICIPAL FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others (except to the extent that the
fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities);
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 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.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase 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 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to (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
(vi) The fund does not currently intend to invest in interests of real
estate investment trusts that are not readily marketable, or to invest in
interests of real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(vii) The fund does not currently intend to engage in repurchase agreements
or make loans (but this limitation does not apply to purchases of debt
securities).
(viii) The fund does not currently intend to invest more than 25% of its
total assets in industrial revenue bonds related to a single industry.
(ix) 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.
(x) The fund does not currently intend to invest in oil, gas or other
mineral exploration or development programs or leases.
(xi) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the fund and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(xii) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company managed by
FMR or an affiliate or successor with substantially the same fundamental
investment objective, policies, and limitations as the fund.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" on page
.
LIMITED TERM TAX-EXEMPT FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS AND
POLICIES SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer (except the United States
government, its agencies or instrumentalities or securities which are
backed by the full faith and credit of the United States) if, as a result,
(a) more than 5% of its total assets would be invested in the securities of
such issuer; provided, however, that up to 25% of its total assets may be
invested without regard to such 5% limitation (as used in this Prospectus,
the entity which has the ultimate responsibility for the payment of
interest and principal on a particular security will be treated as its
issuer); and (b) the fund would hold more than 10% of the voting securities
of such issuer;
(2) make short sales of securities; provided, however, that the fund may
purchase or sell futures contracts;
(3) purchase any securities on margin, except for such short-term credits
as are necessary for the clearance of transactions, provided, however, that
the fund may make initial and variation margin payments in connection with
purchases or sales of futures contracts or of options on futures contracts;
(4) 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 the fund's 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 (within 3 days) reduced to the extent
necessary to comply with the 33 1/3% limitation (the fund will not purchase
securities for investment while borrowings equal to 5% or more of its total
assets are outstanding);
(5) underwrite any issue of securities, except to the extent that the
purchase of municipal bonds in accordance with the fund's investment
objective, policies and limitations, either directly from the issuer, or
from an underwriter for an issuer, may be deemed to be underwriting;
(6) purchase the securities of any issuer (except the United States
government, its agencies or instrumentalities or securities which are
backed by the full faith and credit of the United States) if, as a result,
more than 25% of the fund's total assets would be invested in industrial
development bonds whose issuers are in any one industry;
(7) purchase or sell real estate, but this shall not prevent the fund from
investing in bonds or other obligations secured by real estate or interests
therein;
(8) make loans, except (a) by the purchase of a portion of an issue of debt
securities in accordance with its investment objective, policies and
limitations, and (b) by engaging in repurchase agreements;
(9) purchase the securities of other investment companies or investment
trusts;
(10) purchase the securities of any issuer (except the United States
government, its agencies or instrumentalities or securities which are
backed by the full faith and credit of the United States) if, as a result,
more than 5% of its total assets would be invested in securities, such as
industrial development bonds, where payment of principal and interest are
the responsibility of a company with less than three years' operating
history;
(11) invest in oil, gas or other mineral exploration or development
programs;
(12) purchase the securities of any issuer (except the United States
government, its agencies or instrumentalities or securities which are
backed by the full faith and credit of the United States) if, as a result,
the fund would hold the securities of any issuer other than the securities
of the fund where the Trustees and officers of the Trust, or of the
Manager, together own beneficially more than 5% of such outstanding
securities; or
(13) invest in companies for the purpose of exercising control or
management.
Investment limitation (4) is construed in conformity with the Investment
Company Act of 1940 (1940 Act) accordingly, "three days" means three days
exclusive of Sundays and holidays.
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 sold short, and provided that
transactions in futures contracts and options are not deemed to constitute
selling securities short.
(ii) 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 (4). 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.
(iii) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(iv) The fund does not currently intend to engage in repurchase agreements
or make loans but this limitation does not apply to purchases of debt
securities.
For the fund's limitations on futures contracts and options, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page .
SHORT-INTERMEDIATE TAX-EXEMPT FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(5) 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;
(6) 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);
(7) 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); or
(8) invest in oil, gas or other mineral exploration or development
programs.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "government securities" as defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)). 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.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(vii) 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.
(viii) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the Trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(ix) 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 continuous operation.
(x) The fund may not 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.)
(xi) The fund does not currently intend to invest in interests of real
estate investment trusts that are not readily marketable, or to invest in
interests of real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(xii) 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 .
For purposes of certain fundamental investment limitations, FMR identifies
the issuer of a security depending on its terms and conditions. In
identifying the issuer, FMR will consider the entity or entities
responsible for payment of interest and repayment of principal and the
source of such payments; the way in which assets and revenues of an issuing
political subdivision are separated from those of other political entities;
and whether a governmental body is guaranteeing the security.
EACH FUND'S INVESTMENTS MUST BE CONSISTENT WITH ITS INVESTMENT OBJECTIVE
AND POLICIES. ACCORDINGLY, NOT ALL OF THE SECURITY TYPES AND INVESTMENT
TECHNIQUES DISCUSSED BELOW ARE ELIGIBLE INVESTMENTS FOR EACH OF THE FUNDS.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the 1940 Act. These transactions may 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
(SEC), the Board of Trustees (the Trustees) has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
FUNDS' RIGHTS AS A SHAREHOLDER. The funds do not intend to direct or
administer the day-to-day operations of any company. A fund, however, may
exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the Board of Directors, and
shareholders of a company when FMR determines that such matters could have
a significant effect on the value of a fund's investment in the company.
The activities that a 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
company's direction or policies; seeking the sale or reorganization of the
company or a portion of its assets; or supporting or opposing third party
takeover efforts. This area of corporate activity is increasingly prone to
litigation and it is possible that a fund could be involved in lawsuits
related to such activities. FMR will monitor such activities with a view to
mitigating, to the extent possible, the risk of litigation against the fund
and the risk of actual liability if a fund is involved in litigation. No
guarantee can be made, however, that litigation against the fund will not
be undertaken or liabilities incurred.
LOWER-QUALITY DEBT SECURITIES. A fund may purchase lower-quality debt
securities (those rated below Baa by Moody's Investors Service, Inc.
(Moody's) or rated in the equivalent categories by any other nationally
recognized rating service or is unrated but judged by FMR to be of
equivalent quality) that have poor protection with respect to the payment
of interest and repayment of principal, or may be in default. These
securities are often considered to be speculative and involve greater risk
of loss or price changes due to changes in the issuer's capacity to pay.
The market prices of lower-quality debt securities may fluctuate more than
those of higher-quality debt securities and may decline significantly in
periods of general economic difficulty, which may follow periods of rising
interest rates.
While the market for high-yield corporate debt securities has been in
existence for many years and has weathered previous economic downturns, the
1980s brought a dramatic increase in the use of such securities to fund
highly leveraged corporate acquisitions and restructurings. Past experience
may not provide an accurate indication of the future performance of the
high-yield bond market, especially during periods of economic recession. In
fact, from 1989 to 1991, the percentage of lower-quality securities that
defaulted rose significantly above prior levels, although the default rate
decreased 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 services to value lower-quality debt
securities and a fund's ability to sell 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 a 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. Each 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.
LOWER-QUALITY MUNICIPAL SECURITIES. The tax-free bond funds may invest a
portion of their assets in lower-quality municipal securities as described
in the investment policies and risks section in the Prospectus.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 a fund's
ability to dispose of lower-quality bonds. The outside pricing services are
monitored by FMR and reported to the Board to determine whether the
services are furnishing prices that accurately reflect fair value. The
impact of changing investor perceptions may be especially pronounced in
markets where municipal securities are thinly traded. Each fund may choose,
at its expense or in conjunction with others, to pursue litigation or
otherwise 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.
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 each 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 a 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 a 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 could be liquidated. Indebtedness of borrowers whose
creditworthiness is poor involves substantially greater risks and may be
highly speculative. Borrowers that are in bankruptcy or restructuring may
never pay off their indebtedness, or may pay only a small fraction of the
amount owed. Direct indebtedness of developing countries also involves a
risk that the governmental entities responsible for the repayment of the
debt may be unable, or unwilling, to pay interest and repay principal when
due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to a 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 a fund in the event of fraud or misrepresentation. In the
absence of definitive regulatory guidance, each 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, each 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 a 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 each 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
borrower's condition makes it unlikely that the amount will ever be repaid.
Each fund will set aside appropriate liquid assets in a segregated
custodial account to cover its potential obligations under standby
financing commitments.
Each fund limits the amount of total assets that it will invest in any one
issuer or in issuers within the same industry (see each fund's investment
limitations). For purposes of these limitations, each 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 each 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 these purposes. Treating a
financial intermediary as an issuer of indebtedness may restrict a fund's
ability to invest in indebtedness related to a single financial
intermediary, or a group of intermediaries engaged in the same industry,
even if the underlying borrowers represent many different companies and
industries.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is unrelated to
the coupon rate or maturity of the purchased security. While it does not
presently appear possible to eliminate all risks from these transactions
(particularly the possibility that the value of the underlying security
will be less than the real price, as well as delays and costs to a fund in
connection with bankruptcy proceedings), it is each fund's (except Equity
Portfolio Growth) current policy to engage in repurchase agreement
transactions with parties whose creditworthiness has been reviewed and
found satisfactory by FMR. Equity Portfolio Growth and Income & Growth
limit repurchase agreement transactions to banks of the Federal Reserve
System and primary dealers in U.S. government securities.
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, a 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, a fund will maintain appropriate liquid assets in a segregated
custodial account to cover its obligation under the agreement. A 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 a fund's assets and may be
viewed as a form of leverage.
DELAYED-DELIVERY TRANSACTIONS. A fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by a fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security (and more than
seven days in the future). Typically, no interest accrues to the purchaser
until the security is delivered. A fund may receive fees for entering into
delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, a fund assumes the
rights and risks of ownership, including the risk of price and yield
fluctuations. Because a fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
a fund's other investments. If a fund remains substantially fully invested
at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, a fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a fund has sold a security on a delayed-delivery
basis, a fund does not participate in further gains or losses with respect
to the security. If the other party to a delayed-delivery transaction fails
to deliver or pay for the securities, a fund could miss a favorable price
or yield opportunity, or could suffer a loss.
A fund may renegotiate delayed-delivery transactions after they are entered
into, and may sell underlying securities before they are delivered, which
may result in capital gains or losses.
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 Trustees, FMR determines the
liquidity of a fund's investments and, through reports from FMR, the Board
monitors investments in illiquid instruments. In determining the liquidity
of a fund's investments, FMR may consider various factors including (1) the
frequency of trades and quotations, (2) the number of dealers and
prospective purchasers in the marketplace, (3) dealer undertakings to make
a market, (4) the nature of the security (including any demand or tender
features) and (5) the nature of the marketplace for trades (including the
ability to assign or offset the fund's rights and obligations relating to
the investment). Investments currently considered by a 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.
Also, FMR may determine some restricted securities, municipal lease
obligations, government-stripped fixed-rate mortgage-backed securities,
loans and other direct debt instruments, emerging market securities, and
swap agreements to be illiquid. However, with respect to over-the-counter
options a fund writes, all or a portion of the value of the underlying
instrument may be illiquid depending on the assets held to cover the option
and the nature and terms of any agreement a fund may have to close out the
option before expiration. In the absence of market quotations, illiquid
investments are priced at face 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, a fund were in a position where
10% or 15% of its net assets (depending on the fund's investment
limitations) 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, a fund may be obligated to pay all or part of the
registration expense and a considerable period may elapse between the time
it decides to seek registration and the time it may be permitted to sell a
security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, a fund might obtain a
less favorable price than prevailed when it decided to seek registration of
the security.
SECURITIES LENDING. A fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange
(NYSE) and a subsidiary of FMR Corp.
Securities lending allows a fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there may be
delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be
made only to parties deemed by FMR to be of good standing. Furthermore,
they will only be made if, in FMR's judgment, the consideration to be
earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that a fund
may engage in loan transactions only under the following conditions: (1) a
fund must receive 100% collateral in the form of cash or cash equivalents
(e.g., U.S. Treasury bills or notes) from the borrower; (2) the borrower
must increase the collateral whenever the market value of the securities
loaned (determined on a daily basis) rises above the value of the
collateral; (3) after giving notice, a fund must be able to terminate the
loan at any time; (4) a fund must receive reasonable interest on the loan
or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) a fund may pay only reasonable custodian
fees in connection with the loan; and (6) the Board of Trustees must be
able to vote proxies on the securities loaned, either by terminating the
loan or by entering into an alternative arrangement with the borrower.
Cash received through loan transactions may be invested in any security in
which a 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).
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 a fund's exposure to long- or
short-term interest rates (in the United States or abroad), foreign
currency values, mortgage securities, corporate borrowing rates, or other
factors such as security prices or inflation rates. Swap agreements can
take many different forms and are known by a variety of names. A fund is
not limited to any particular form of swap agreement if FMR determines it
is consistent with a 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
rights 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 a 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 and yield.
The most significant factor in the performance of swap agreements is the
change in the specific interest rate, currency, or other factors that
determine the amounts of payments due to and from a fund. If a swap
agreement calls for payments by a fund, a fund must be prepared to make
such payments when due. In addition, if the counterparty's creditworthiness
declined, the value of a swap agreement would be likely to decline,
potentially resulting in losses. A fund expects to be able to reduce 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.
A fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If a fund
enters into a swap agreement on a net basis, it will segregate assets with
a daily value at least equal to the excess, if any, of a fund's accrued
obligations under the swap agreement over the accrued amount a fund is
entitled to receive under the agreement. If a fund enters into a swap
agreement on other than a net basis, it will segregate assets with a value
equal to the full amount of a fund's accrued obligations under the
agreement.
INDEXED SECURITIES. A fund may purchase securities whose prices are indexed
to the prices of other securities, securities indices, currencies, precious
metals or other commodities, or other financial indicators. Indexed
securities typically, but not always, are debt securities or deposits whose
value at maturity or coupon rate is determined by reference to a specific
instrument or statistic. 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.
FOREIGN INVESTMENTS. Investing in securities issued by companies or other
issuers whose principal activities are outside the United States may
involve significant risks in addition to the risks inherent 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
issuers' financial condition and operations, particularly those not subject
to the disclosure and reporting requirements of the U.S. securities laws.
Foreign issuers are generally not bound by uniform accounting, auditing,
and financial reporting requirements and standards of practice comparable
to those applicable to U.S. issuers. Further, economies of particular
countries or areas of the world may differ favorably or unfavorably from
the economy of the United States.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments
adverse to the interests of U.S. investors, including the possibility of
expropriation or nationalization of assets, confiscatory taxation,
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency into U.S. dollars, or other government intervention. There
may be a greater possibility of default by foreign governments or foreign
government-sponsored enterprises. Investments in foreign countries also
involve a risk of local political, economic, or social instability,
military action or unrest, or adverse diplomatic developments. There is no
assurance that FMR will be able to anticipate these potential events or
counter their effects. The considerations noted above generally are
intensified for investments in developing countries. Developing countries
may have relatively unstable governments, economies based on only a few
industries, and securities markets that trade a small number of securities.
Foreign markets may offer less protection to investors than U.S. markets.
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 issuers (particularly those
located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. issuers. Foreign security trading practices,
including those involving securities settlement where fund assets may be
released prior to receipt of payment, may expose a fund to increased risk
in the event of a failed trade or the insolvency of a foreign
broker-dealer, and may involve substantial delays. In addition, the costs
of foreign investing, including withholding taxes, brokerage commissions
and custodial costs, are generally higher than for U.S. investors. In
general, there is less overall governmental supervision and regulation of
securities exchanges, brokers, and listed companies than in the United
States. It may also be difficult to enforce legal rights in foreign
countries.
Each fund may invest in foreign securities that impose restrictions on
transfer within the United States or to U.S. persons. Although securities
subject to such transfer restrictions may be marketable abroad, they may be
less liquid than foreign securities of the same class that are not subject
to such restrictions.
A fund may invest in American Depository Receipts and European Depository
Receipts (ADRs and EDRs), which 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 the 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 TRANSACTIONS. A fund may conduct foreign currency
transactions on a spot (i.e., cash) basis or by entering into forward
contracts to purchase or sell foreign currencies at a future date and
price. A 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 generally 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 a fund at one rate, while offering a lesser rate
of exchange should a fund desire to resell that currency to the dealer.
Forward contracts are generally traded in an 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 its maturity, or may hold the contract to
maturity and complete the contemplated currency exchange.
A fund may use currency forward contracts for any purpose consistent with
its investment objective. The following discussion summarizes the principal
currency management strategies involving forward contracts that could be
used by a fund. A fund may also use swap agreements, indexed securities,
and options and futures contracts relating to foreign currencies for the
same purposes.
When a 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, a 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. This technique is sometimes referred to as a "settlement hedge"
or "transaction hedge." A 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.
A fund may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For example,
if a fund owned securities denominated in pounds sterling, it could enter
into a forward contract to sell pounds sterling in return for U.S. dollars
to hedge against possible declines in the pound's value. Such a hedge,
sometimes referred to as a "position hedge," would tend to offset both
positive and negative currency fluctuations, but would not offset changes
in security values caused by other factors. A fund could also hedge the
position by selling another currency expected to perform similarly to the
pound sterling - for example, by entering into a forward contract to sell
Deutschemarks or European Currency Units in return for U.S. dollars. This
type of hedge, sometimes referred to as a "proxy hedge," could offer
advantages in terms of cost, yield, or efficiency, but generally would not
hedge currency exposure as effectively as a simple hedge into U.S. dollars.
Proxy hedges may result in losses if the currency used to hedge does not
perform similarly to the currency in which the hedged securities are
denominated.
A fund may enter into forward contracts to shift its investment exposure
from one currency into another. This may include shifting exposure from
U.S. dollars to a foreign currency, or from one foreign currency to another
foreign currency. For example, if a fund held investments denominated in
Deutschemarks, a fund could enter into forward contracts to sell
Deutschemarks 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 a fund had sold a security denominated in one currency
and purchased an equivalent security denominated in another. Cross-hedges
protect against losses resulting from a decline in the hedged currency, but
will cause a fund to assume the risk of fluctuations in the value of the
currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to set aside
appropriate liquid assets in a segregated custodial account to cover
currency forward contracts. As required by SEC guidelines, the fund will
segregate assets to cover currency forward contracts, if any, whose purpose
is essentially speculative. A fund will not segregate assets to cover
forward contracts entered into for hedging purposes, including settlement
hedges, position hedges, and proxy hedges.
Successful use of currency management strategies will depend on FMR's skill
in analyzing and predicting currency values. Currency management strategies
may substantially change a fund's investment exposure to changes in
currency exchange rates, and could result in losses to a fund if currencies
do not perform as FMR anticipates. For example, if a currency's value rose
at a time when FMR had hedged a fund by selling that currency in exchange
for dollars, a fund would be unable to participate in the currency's
appreciation. If FMR hedges currency exposure through proxy hedges, a 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 a fund's exposure to a foreign currency, and that currency's
value declines, a fund will realize a loss. There is no assurance that
FMR's use of currency management strategies will be advantageous to the
fund or that it will hedge at an appropriate time.
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 a 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. A fund generally will
not be obligated to pay the full purchase price if it fails to perform
under a refunding contract. Instead, refunding contracts generally provide
for payment of liquidated damages to the issuer (currently 15-20% of the
purchase price). A fund may secure its obligations under a refunding
contract by depositing collateral or a letter of credit equal to the
liquidated damages provisions of the refunding contract. When required by
SEC guidelines, a fund will place liquid assets in a segregated custodial
account equal in amount to its obligations under refunding contracts.
INVERSE FLOATERS. A fund may invest in inverse floaters, which 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.
VARIABLE OR FLOATING RATE OBLIGATIONS bear variable or floating interest
rates and carry rights that permit holders to demand payment of the unpaid
principal balance plus accrued interest from the issuers or certain
financial intermediaries. Floating rate instruments have interest rates
that change whenever there is a change in a designated base rate while
variable rate instruments provide for a specified periodic adjustment in
the interest rate. These formulas are designed to result in a market value
for the instrument that approximates its par value. A fund may invest in
fixed-rate bonds that are subject to third party puts and in participation
interests in such bonds held in trust or otherwise. These bonds and
participation interests have tender options or demand features that permit
a fund to tender (or put) the bonds to an institution at periodic intervals
and to receive the principal amount thereof. A fund considers variable rate
instruments structured in this way (Participating VRDOs) to be essentially
equivalent to other VRDOs it purchases. The Internal Revenue Service (IRS)
has not ruled whether the interest on Participating VRDOs is tax-exempt
and, accordingly, a fund intends to purchase these instruments based on
opinions of bond counsel.
TENDER OPTION BONDS are created by coupling an intermediate- or long-term,
fixed-rate, tax-exempt bond (generally held pursuant to a custodial
arrangement) with a tender agreement that gives the holder the option to
tender the bond at its face value. As consideration for providing the
tender option, the sponsor (usually a bank, broker-dealer, or other
financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, a fund effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. In selecting tender option bonds for a fund, FMR will consider the
creditworthiness of the issuer of the underlying bond, the custodian, and
the third party provider of the tender option. In certain instances, a
sponsor may terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
ZERO COUPON BONDS do not make regular 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.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. A fund may acquire
standby commitments to enhance the liquidity of portfolio securities.
Ordinarily a fund will not transfer a standby commitment to a third party,
although it could sell the underlying municipal security to a third party
at any time. A fund may purchase standby commitments separate from or in
conjunction with the purchase of securities subject to such commitments. In
the latter case, a fund would pay a higher price for the securities
acquired, thus reducing their yield to maturity.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
support an instrument supported by a letter of credit. 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.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by a fund; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
FEDERALLY TAXABLE OBLIGATIONS. A tax-exempt fund does not intend to invest
in securities whose interest is federally taxable; however, from time to
time, a tax-exempt fund may invest a portion of its assets on a temporary
basis in fixed-income obligations whose interest is subject to federal
income tax. For example, a tax-exempt fund may invest in obligations whose
interest is federally taxable pending the investment or reinvestment in
municipal securities of proceeds from the sale of its shares or sales of
portfolio securities.
Should a tax-exempt fund invest in federally taxable obligations, it would
purchase securities that in FMR's judgment are of high quality. These would
include obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities; obligations of domestic banks; and
repurchase agreements. The tax-exempt fund's standards for high quality,
taxable obligations are essentially the same as those described by Moody's
in rating corporate obligations within its two highest ratings of Prime-1
and Prime-2, and those described by Standard & Poor's Corporation (S&P) in
rating corporate obligations within its two highest ratings of A-1 and A-2.
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. If such proposals were enacted, the availability of municipal
obligations and the value of the tax-exempt fund's holdings would be
affected and the Trustees would reevaluate the tax-exempt fund's investment
objectives and policies.
The tax-exempt fund anticipates being as fully invested as practicable in
municipal securities; however, there may be occasions when, as a result of
maturities of portfolio securities, sales of fund shares, or in order to
meet redemption requests, the tax-exempt fund may hold cash that is not
earning income. In addition, there may be occasions when, in order to raise
cash to meet redemptions, the tax-exempt fund may be required to sell
securities at a loss.
MUNICIPAL LEASE OBLIGATIONS. A fund may invest a portion of its assets in
municipal leases and participation interests therein. These obligations,
which may take the form of a lease, an installment purchase, or a
conditional sale contract, are issued by state and local governments and
authorities to acquire land and a wide variety of equipment and facilities.
Generally, a fund will not hold such obligations directly as a lessor of
the property, but will purchase a participation interest in a municipal
obligation from a bank or other third party. A participation interest gives
the fund a specified, undivided interest in the obligation in proportion to
its purchased interest in the total amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
INTERFUND BORROWING PROGRAM. Each fund has received permission from the SEC
to lend money to and borrow money from other funds advised by FMR or its
affiliates, but will participate in the interfund borrowing program only as
a borrower. Interfund loans normally will extend overnight, but can have a
maximum duration of seven days. A fund will borrow through the program only
when the costs are equal to or lower than the costs of bank loans. 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.
REAL ESTATE-RELATED INSTRUMENTS include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors such
as changes in real estate values and property taxes, interest rates, cash
flow of underlying real estate assets, overbuilding, and the management
skill and creditworthiness of the issuer. Real estate-related instruments
may also be affected by tax and regulatory requirements, such as those
relating to the environment.
MORTGAGE-BACKED SECURITIES. The fund may purchase mortgage-backed
securities sponsored by government 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 the
fund may invest in them if FMR determines they are consistent with the
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.
SHORT SALES. A fund may enter into short sales with respect to stocks
underlying its convertible security holdings. For example, if FMR
anticipates a decline in the price of the stock underlying a convertible
security a fund holds, it may sell the stock short. If the stock price
subsequently declines, the proceeds of the short sale could be expected to
offset all or a portion of the effect of the stock's decline on the value
of the convertible security. A fund currently intends to hedge no more than
15% of its total assets with short sales on equity securities underlying
its convertible security holdings under normal circumstances.
If a 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. A fund will incur transaction costs, including interest
expense, in connection with opening, maintaining, and closing short sales
against the box.
WARRANTS. A fund may invest in warrants which entitle the holder to buy
equity securities at a specific price for a specific period of time.
Warrants may be considered more speculative then certain other types of
investments in that they do not entitle a holder to dividends or voting
rights with respect to the securities which may be purchased, nor do they
represent any rights in the assets of the issuing company. The value of a
warrant may be more volatile than the value of the securities underlying
the warrants. 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.
PHYSICAL COMMODITIES. As a practical matter, investments in other types of
physical commodities can present concerns such as delivery, storage and
maintenance, possible illiquidity and the unavailability of accurate market
valuations. FMR, in addressing these concerns, currently intends to
purchase only readily marketable precious metals and to deliver and store
them 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. Global Resources may receive no more than 10% of
its yearly income from gains resulting from selling metals or any other
physical commodity. Therefore, the fund may be required either to hold its
metals or to sell them at a loss, or to sell its portfolio securities at a
gain,when it would not otherwise do so for investment reasons.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The funds have filed
notices 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. Each fund intends to comply with
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 to the above limitations, a fund will not: (a) sell futures
contracts, purchase put options, or write call options if, as a result,
more than 25% of a 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, a 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
a fund would exceed 5% of a 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 a fund's investments in futures contracts and
options, and a fund's policies regarding futures contracts and options
discussed elsewhere in this SAI, are not fundamental policies and may be
changed as regulatory agencies permit.
FUTURES CONTRACTS. When a fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
a 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 a fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Standard & Poor's 500 Composite Index of 500
Stocks (S&P 500). Futures can be held until their delivery dates, or can be
closed out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase a fund's exposure to positive and negative
price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When a fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of a fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of a fund, a fund may be
entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to a
fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a 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, a fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. A 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, a
fund will lose the entire premium it paid. If a fund exercises the option,
it completes the sale of the underlying instrument at the strike price. A
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 typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
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 typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When a 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, a 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, a fund will be required to make margin payments to an FCM as
described above for futures contracts. A 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 a fund has written, however, a 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 generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates a 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. A 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, a 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 a fund's current or
anticipated investments exactly. A fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of a fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. A fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in a fund's options or futures positions are poorly correlated with
its other investments, the positions may fail to produce anticipated gains
or result in losses that are not offset by gains in other investments.
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 a 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 a fund to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, a
fund's access to other assets held to cover its options or futures
positions could also be impaired.
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 a 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. A fund
may purchase and sell currency futures and may purchase and write currency
options to increase or decrease its exposure to different foreign
currencies. A 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
a fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect a
fund against a price decline resulting from deterioration in the issuer's
creditworthiness. Because the value of a fund's foreign-denominated
investments changes in response to many factors other than exchange rates,
it may not be possible to match the amount of currency options and futures
to the value of a fund's investments exactly over time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. A fund will comply with
guidelines established by the SEC with respect to coverage of options and
futures strategies by mutual funds, and if the guidelines so require will
set aside appropriate liquid assets in a segregated custodial account in
the amount prescribed. Securities held in a segregated account cannot be
sold while the futures or option strategy is outstanding, unless they are
replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of a fund's assets could impede
portfolio management or the fund's ability to meet redemption requests or
other current obligations.
ELECTRIC UTILITIES INDUSTRY. The electric utilities industry has been
experiencing, and will continue to experience, increased competitive
pressures. Federal legislation in the last two years will open transmission
access to any electricity supplier, although it is not presently known to
what extent competition will evolve. Other risks include: (a) the
availability and cost of fuel, (b) the availability and cost of capital,
(c) the effects of conservation on energy demand, (d) the effects of
rapidly changing environmental, safety, and licensing requirements, and
other federal, state, and local regulations, (e) timely and sufficient rate
increases, and (f) opposition to nuclear power.
HEALTH CARE INDUSTRY. The health care industry is subject to regulatory
action by a number of private and governmental agencies, including federal,
state, and local governmental agencies. A major source of revenues for the
health care industry is payments from the Medicare and Medicaid programs.
As a result, the industry is sensitive to legislative changes and
reductions in governmental spending for such programs. Numerous other
factors may affect the industry, such as general and local economic
conditions; demand for services; expenses (including malpractice insurance
premiums); and competition among health care providers. In the future, the
following elements may adversely affect health care facility operations:
adoption of legislation proposing a national health insurance program;
other state or local health care reform measures; medical and technological
advances which dramatically alter the need for health services or the way
in which such services are delivered; changes in medical coverage which
alter the traditional fee-for-service revenue stream; and efforts by
employers, insurers, and governmental agencies to reduce the costs of
health insurance and health care services.
HOUSING. Housing revenue bonds are generally issued by a state, county,
city, local housing authority, or other public agency. They are secured by
the revenues derived from mortgages purchased with the proceeds of the bond
issue. It is extremely difficult to predict the supply of available
mortgages to be purchased with the proceeds of an issue or the future cash
flow from the underlying mortgages. Consequently, there are risks that
proceeds will exceed supply, resulting in early retirement of bonds, or
that homeowner repayments will create an irregular cash flow. Many factors
may affect the financing of multi-family housing projects, including
acceptable completion of construction, proper management, occupancy and
rent levels, economic conditions, and changes to current laws and
regulations.
EDUCATION. In general, there are two types of education-related bonds;
those issued to finance projects for public colleges and universities, and
those representing pooled interests in student loans. Bonds issued to
supply public educational institutions with funds are subject to the risk
of unanticipated revenue decline, primarily the result of decreasing
student enrollment. Among the factors that may affect enrollment are
restrictions on students' ability to pay tuition, availability of state and
federal funding, and general economic conditions. Student loan revenue
bonds are generally offered by state (or substate) authorities or
commissions and are backed by pools of student loans. Underlying student
loans may be guaranteed by state guarantee agencies and may be subject to
reimbursement by the United States Department of Education (DOE) through
its guaranteed student loan program (GSLP). Others may be private,
uninsured loans made to parents or students which are supported by reserves
or other forms of credit enhancement. Recoveries of principal due to loan
defaults may be applied to redemption of bonds or may be used to re-lend,
depending on program latitude and demand for loans. Cash flows supporting
student loan revenue bonds are impacted by numerous factors, including the
rate of student loan defaults, seasoning of the loan portfolio, and student
repayment deferral periods of forbearance. Other risks associated with
student loan revenue bonds include potential changes in federal legislation
regarding student loan revenue bonds, state guarantee agency reimbursement
and continued federal interest and other program subsidies currently in
effect.
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 Ocean. Major Canadian companies
include those involved in the energy industry, industrial materials
(chemicals, base metals, timber and paper) and agricultural materials
(grain cereals). 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. 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 and 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. Canada is also a
major exporter of agricultural products.
Canada, the U.S. and Mexico began to implement the North American Free
Trade Agreement (NAFTA) in 1994, reducing trade barriers affecting
important sectors of each country's economy. This agreement is expected to
lead to increased trade among the three countries.
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. Although
the Canadian political system is generally more stable than that of many
other foreign countries, continued tension with respect to greater
independence for, or possible separation of, Quebec causes political
uncertainty. Moreover, while the Canadian dollar is generally less volatile
relative to the U.S. dollar than other foreign currencies, the value of the
Canadian dollar has decreased significantly in recent years. Continued
efforts to reduce the structural Canadian budget deficit will be required.
FMR is unable to predict what effect, if any, such factors would have on
instruments held in the fund's portfolio.
Securities of Canadian companies are not considered by FMR to have the same
level of risk as those of other non-U.S. companies. 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 fund may elect to participate in new
equity issues or initial public offerings of Canadian companies.
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
series of markets. 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 (including
assassinations), high inflation, capital export or repatriation
restrictions, and nationalization have further exacerbated economic
conditions. Changes in political leadership and 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. Free trade zones are
being discussed in various areas around the region, the most notable being
that Mexico, the United States, and Canada encompassed in NAFTA.
The process of economic integration in Latin America has nonetheless been
slow, and obstacles remain formidable. Contrary to expectations, the
financial crisis that has plagued the region in recent years has not
generally encouraged integration. This is largely because of the individual
countries' urgent need for foreign exchange, which has been difficult to
obtain. Latin American equity markets can be extremely volatile and in the
past have shown little correlation with the United States market.
Currencies are typically weak, but most are 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. By the early 1990s, growth in national output had recovered
somewhat. The government, in consultation with international economic
agencies, attempted to implement programs to stabilize the economy and
foster growth. The government strongly supported NAFTA as a means to
promote growth. The United States is Mexico's major trading partner,
accounting for two-thirds of its exports and imports. After petroleum,
border assembly plants and tourism are the largest earners of foreign
exchange.
Continued political unrest, particularly in southern Mexico, and
uncertainty as to the effectiveness of reforms have had an adverse impact
on economic development. In December, 1994, Mexico reversed a long-held
currency policy by devaluing the Mexican peso and allowing it to float
freely. The value of the peso against the U.S. dollar and other currencies
declined sharply. As a result, Mexican stocks plunged while interest rates
soared, and other Latin America securities markets were also adversely
affected. Extension and continuance of financial aid to Mexico from the
U.S., including loan guarantees, is uncertain at this time.
Brazil is the sixth largest country in the world in population, with about
155 million people, and represents a huge domestic market. Brazil entered
the 1990s with declining real growth, runaway inflation, an unserviceable
foreign debt of $122 billion, and a lack of policy direction. Brazil's rate
of consumer-price inflation continues to accelerate while gross domestic
product (GDP) remains depressed. A major long-run strength is Brazil's
natural resources. Iron ore, bauxite, tin, gold, and forestry products make
up some to 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 the
economy to increased foreign competition. Privatization of certain
industries is proceeding slowly.
Chile, like Brazil, is endowed with considerable mining resources,
particularly copper. Export production (especially in the forestry and
mining sectors) continues to be the main long-term engine of economic
growth and modernization. Economic reform has been ongoing in Chile for
over 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. By pegging the exchange
rate of the Argentine peso to the United States dollar, banning price
indexation, and extensively privatizing and deregulating industrial and
service activities, Argentina has managed to cut inflation to record lows
and spur economic growth. External debt has created severe debt servicing
difficulties and hurting the country's creditworthiness with international
lenders. 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. Price controls did not prevent annual inflation from
reaching at least 75% in 1994, compared to 45.9% in 1993. The official
target of 25-30% inflation for 1995 is improbable, with a continuation of
higher levels more likely. The failure of major banks adversely affected
the Venezuelan economy in 1994 and could continue to have a negative
impact. Plans for privatization and exchange and interest rate
liberalization are examples of recently introduced reforms.
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 has caused many international businesses to
question Thailand's political stability.
Hong Kong's economic growth which was vigorous in the 1980's has not been
positively affected by its impending return to Chinese dominion in 1997.
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 actions of the government of
China. Business confidence in Hong Kong, therefore, can be significantly
affected by developments, which in turn can affect markets and business
performance. In preparation for 1997, Hong Kong has continued to develop
trade with China, 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.
Inflation rates, however, began to challenge South Korea's strong economic
performance in the early 1990's. Moreover, the international situation
between South Korea and North Korea continues to be uncertain.
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 United States 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 as
the government followed prudent fiscal/monetary policies. Malaysia's high
export dependence level leaves it vulnerable to recession in the countries
with which it trades 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 1970s and 1980s. However, in the 1990s, the
growth rate in Japan has slowed. 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 has waned. The banking sector has experienced a sharp
rise in non-performing loans, and strains in the financial system may
continue. Continued political uncertainty has resulted from numerous
changes in government, shifting government coalitions and the political and
economic problems associated with a large trade imbalance.
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 recovered slightly 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 United States and other countries with which it
trades. 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 many 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 exporter of mutton, and 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.
SPECIAL CONSIDERATIONS AFFECTING EUROPE
Most Eastern European nations, including Hungary, Poland, the Czech
Republic, Slovakia, and Romania have had centrally planned, socialist
economies since shortly after World War II. A number of their governments,
including those of Hungary, the Czech Republic, 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. 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. Ethnic and civil conflict currently rage in the former
Yugoslavia. The outcome is uncertain.
At present, no Eastern European country has a developed stock market, but
Poland, Hungary, and the Czech Republic have small securities markets in
operation. Both the European Union (EU) and Japan, among others, have made
overtures to establish trading arrangements and assist in the economic
development of the Eastern European nations. Following reunification,
Germany remains a firm and reliable member of the EU and numerous other
international alliances and organizations. To reduce inflation caused by
the unification of East and West Germany, Germany adopted a tight monetary
policy which led to weakened exports and a reduced domestic demand for
goods and services. Although reunification could prove to be an engine for
domestic and international growth in the long-term, many potential benefits
have yet to be realized.
Portugal is a genuinely emerging market which has experienced rapid growth
since the mid-1980s, except for a brief period of stagnation over 1990-91.
Portugal's government remains committed to privatization of the financial
system away from one dependent upon the banking system to a more balanced
structure appropriate for the requirements of a modern economy.
Economic reforms launched in the 1980s continue to benefit Turkey in the
1990s. Turkey's economy has grown since the 1980s. Agriculture remains the
most important economic sector, employing over half of the labor force, and
accounting for significant portions of GDP and exports. Inflation and
interest rates remain high, and a large budget deficit will continue to
cause difficulties in Turkey's substantial transformation from a centrally
controlled to a free market economy.
Like many other Western economies, Greece suffered severely from the global
oil price hikes of the 1970s, with annual GDP growth plunging from 8% to 2%
in the 1980s, and inflation, unemployment, and budget deficits rising
sharply. The fall of the socialist government in 1989 and the inability of
the conservative opposition to obtain a clear majority led to business
uncertainty and the prospect for continued flat economic performance. Once
Greece has sorted out its political situation, it will have to face the
challenges posed by the steadily increasing integration of the EU,
including the progressive lowering of trade and investment barriers.
Tourism continues as a major industry, providing a vital offset to a
sizable commodity trade deficit.
SPECIAL CONSIDERATIONS AFFECTING AFRICA
Africa is a continent of roughly 50 countries with a total population of
approximately 840 million people. Literacy rates (the percentage of people
who are over 15 years of age and who can read and write) are relatively
low, ranging from 20% to 60%. The primary industries include crude oil,
natural gas, manganese ore, phosphate, bauxite, copper, iron, diamond,
cotton, coffee, cocoa, timber, tobacco, sugar, tourism, and cattle. Many
African countries are fraught with political instability. However, there
has been a trend over the past several years toward democratization. Many
countries are moving from a military style, Marxist, or single party
government to a multi-party system. Still, there remain many countries that
do not have a stable political process. Many countries have been enmeshed
in civil ethnic or border wars. Ethnic, religious, cultural and linguistic
differences divide the African peoples. Economically, the Northern Rim
countries (including Morocco, Egypt, and Algeria, Nigeria, Zimbabwe, and
South Africa) are the wealthier countries on the continent due to their
strong ties with the European nations. The market capitalization of these
countries has been growing recently as more international companies invest
in Africa and as local companies start to list on the exchanges. However,
religious strife has been a significant source of instability in the
Northern Rim countries. Racial discord in South Africa may be reduced by
constitutional and political changes that are in progress, as well as
increased foreign investments, the long-term future of South Africa remains
uncertain.
On the other end of the economic spectrum are countries, such as Burkina
Faso, Madagascar, and Malawi, that are considered to be among the poorest
or least developed in the world. These countries are generally landlocked
or have poor natural resources. The economies of many African countries are
heavily dependent on international oil prices. Of all the African
industries, oil has been the most lucrative, accounting for 40% to 60% of
many countries' Gross Domestic Product. However, general decline in oil
prices has had an adverse impact on many economies.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of each fund by FMR pursuant to authority contained in the
management contract. If FMR grants investment management authority to the
sub-advisers (see the section entitled "Management and Other Services"),
the sub-advisers are authorized to place orders for the purchase and sale
of portfolio securities, and will do so in accordance with the policies
described below. FMR is also responsible for the placement of transaction
orders for other investment companies and accounts for which it or its
affiliates act as investment adviser. In selecting broker-dealers, subject
to applicable limitations of the federal securities laws, FMR considers
various relevant factors, including, but not limited to: the size and type
of the transaction; the nature and character of the markets for the
security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; the
reasonableness of any commissions; and for equity funds, arrangements for
payment of fund expenses. Generally, commissions for foreign investments
traded will be higher than for United States investments and may not be
subject to negotiation.
The funds may execute portfolio transactions with broker-dealers who
provide research and execution services to the funds 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). Generally, FMR selects such broker-dealers
for equity funds (to the extent possible consistent with execution
considerations) in accordance with a ranking of broker-dealers determined
periodically by FMR's investment staff, and for other funds, based upon the
quality of research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the funds may be useful to FMR in rendering investment management
services to the funds 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 funds. 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 the 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 each 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 funds 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 funds or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with 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 3d 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.
FMR may allocate brokerage transactions to broker-dealers who have entered
into arrangements with FMR under which the broker-dealer allocates a
portion of the commissions paid by Overseas, Global Resources, Growth
Opportunities, Equity Portfolio Growth, Equity Income, Strategic
Opportunities, and Income & Growth toward payment of each fund's expenses,
such as transfer agent 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.
Each fund's Trustees periodically review FMR's performance of its
responsibilities in connection with the placement of portfolio transactions
on behalf of the funds and review the commissions paid by each fund over
representative periods of time to determine if they are reasonable in
relation to the benefits to the fund.
For the fiscal periods ended 1993 and 1994, respectively, each fund's
portfolio turnover rates are shown in the chart below. Because a high
turnover rate increases transaction costs and may increase taxable gains,
FMR carefully weighs the anticipated benefits of short-term investing
against these consequences. An increased turnover rate is due to a greater
volume of shareholder purchase orders, short-term interest rate volatility
and other special market conditions.
Fund Fiscal Period Ended 1993 1994
Overseas October 31 42% 34%
Equity Portfolio Growth November 30 160% 137%
Global Resources October 31 208% 125%
Growth Opportunities October 31 69% 43%
Strategic Opportunities September 30+ 183% 159%
Equity Income November 30 120% 140%
Income & Growth October 31 200% 202%
Emerging Markets Income December 31 n/a* 354%**
High Yield October 31 79% 118%
Strategic Income December 31 n/a* 104%**
Government Investment October 31 333% 313%
Limited Term Bond November 30 59% 68%
Short Fixed-Income October 31 58% 108%
High Income Municipal October 31 27% 38%
Limited Term Tax-Exempt November 30 46% 53%
Short-Intermediate Tax-Exempt November 30 n/a* 111%**
* Emerging Markets Income, Strategic Income, and Short-Intermediate
Tax-Exempt commenced operations on 3/10/94, 10/31/94, and 3/16/94,
respectively. Portfolio turnover rates shown are from commencement of
operations to the end of the fiscal period, as indicated.
** Annualized
+ On November 9, 1994, the Board of Trustees voted to change Strategic
Opportunities' fiscal year end from September 30 to December 31.
The brokerage commissions incurred by each fund, the percentage of this
amount paid to firms providing research, the fees paid to, and the amount
of transactions effected through, FBSI and FBSL for the past three fiscal
years are listed in the following table. Each fund pays both commissions
and spreads in connection with the placement of portfolio transactions;
FBSI is paid on a commission basis. The difference between the percentage
of brokerage commissions paid and and the percentage of the dollar amount
of transactions effected through FBSI is a result of the low commission
rates charged by FBSI.
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED: TOTAL % PAID TO TO FBSI TO FBSL
10/31= * FIRMS
11/30= ** PROVIDING
12/31= *** RESEARCH
<S> <C> <C> <C> <C>
OVERSEAS**
1994 $ 1,601,660 84.8% $ 685 0
1993 500,186 87.0 800 0
1992 119,400 89.0 30 1,179
EQUITY PORTFOLIO GROWTH **
1994 2,086,370 58.7 729,903 0
1993 915,767 55.0 362,158 0
1992 424,364 55.0 148,571 0
GLOBAL RESOURCES *
1994 630,752 63.7 195,272 0
1993 147,017 66.3 41,286 0
1992 58,180 73.0 13,864 0
GROWTH OPPORTUNITIES *
1994 3,589,080 54.9 1,368,574 0
1993 2,583,165 59.2 899,767 0
1992 1,147,967 65.1 334,189 925
STRATEGIC OPPORTUNITIES ***
10/1/94 - 12/31/94 403,617 58.7 70,462 0
10/1/93 - 9/30/94 1,166,854 76.9 151,233 0
1993 1,068,788 82.0 103,206 0
1992 1,087,115 78.3 126,298 0
EQUITY INCOME **
1994 827,499 59.1 290,182 0
1993 557,493 68.6 126,832 0
1992 342,397 60.1 107,503 441
INCOME & GROWTH *
1994 7,338,038 76.1 1,104,577 0
1993 2,998,137 64.9 796,821 0
1992 767,720 63 143,974 0
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FISCAL PERIOD ENDED: % OF % OF % OF % OF
10/31= * COMMISSIONS COMMISSIONS TRANSACTIONS TRANSACTIONS
11/30= ** PAID TO FBSI PAID TO FBSL EFFECTED EFFECTED
12/31= *** 1994 1994 THROUGH THROUGH FBSL
TO FBSI 1994
1994
Overseas * .04 0 17.46 0
Equity Portfolio Growth ** 35.0 0 49.2 0
Global Resources * 31.0 0 52.7 0
Growth Opportunities * 38.1 0 50.1 0
Strategic Opportunities *** 17.5 0 29.9 0
Equity Income ** 35.1 0 45.6 0
Income & Growth * 15.1 0 20.7 0
</TABLE>
From time to time, the Trustees will review whether the recapture for the
benefit of the funds of some portion of the brokerage commissions or
similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to continue
to review whether recapture opportunities are available and are legally
permissible and, if so, to determine in the exercise of their business
judgment whether it would be advisable for each fund to seek such
recapture.
Although the Trustees and officers of each fund are substantially the same
as those of other funds managed by FMR, investment decisions for each fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund. In
some cases this system could have a detrimental effect on the price or
value of the security as far as each fund is concerned. In other cases,
however, the ability of the funds to participate in volume transactions
will produce better executions and prices for the funds. It is the current
opinion of the Trustees that the desirability of retaining FMR as
investment adviser to each fund outweighs any disadvantages that may be
said to exist from exposure to simultaneous transactions.
VALUATION
High Yield, Limited Term Bond, Short Fixed-Income, Government Investment,
High Income Municipal, Limited Term Tax-Exempt, and Short-Intermediate
Tax-Exempt value securities and other assets for which market quotations
are readily available at market values determined by their most recent bid
prices (sales prices if the principal market is an exchange) in the
principal market in which such securities normally are traded as furnished
by recognized dealers in such securities or assets. Futures contracts and
options are valued on the basis of available market quotations if
available.
Securities of the above-mentioned funds may also be valued on the basis of
valuations furnished by a pricing service which utilizes both
dealer-supplied valuations and evaluations based on expert analysis of the
market data and other factors if such valuations are believed to reflect
more accurately the fair value of such securities. Use of a pricing service
has been approved by the Board of Trustees. There are a number of pricing
services available, and the Trustees, on the basis of an on-going
evaluation of these services, may use other pricing services or discontinue
the use of any pricing service in whole or in part. Securities and other
assets not valued by a pricing service or for which market quotations are
not readily available (including restricted securities, if any) are
appraised at their fair value in good faith under consistently applied
procedures established by and under the general supervision of the Board of
Trustees.
For High Income Municipal, Limited Term Tax-Exempt, and Short-Intermediate
Tax-Exempt, valuations of portfolio securities furnished by the pricing
service employed by a fund are based upon a computerized matrix system
and/or appraisals by the pricing service, in each case in reliance upon
information concerning market transactions and quotations from recognized
municipal securities dealers. The methods used by the pricing service and
the quality of valuations so established are reviewed by officers of the
Trust and Fidelity Service Company under the general supervision of the
Trustees or officers acting on behalf of the Board of Trustees.
U.S. Treasury securities are valued on the basis of valuations furnished by
a pricing service which utilizes both dealer-supplied valuations and
electronic data processing techniques. Such techniques take into account
factors such as institutional-size 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 prices or exchange or over-the-counter prices, since such valuations
are believed to reflect more accurately the fair value of such securities.
The portfolio securities of Emerging Markets Income and Strategic Income,
including ADRs, EDRs, and other forms of depository receipts, are valued
(i) by appraising the portfolio securities that are traded on the NYSE at
the closing bid price, or, if no closing bid price is available, at the
last traded bid price; or (ii) by appraising foreign securities as nearly
as possible in the manner described in clause (i) if such securities are
traded on any other U.S., Canadian, or foreign exchange, or, if not so
traded, on the basis of closing over-the-counter bid prices, if available.
The procedures set forth in (i) and (ii) above need not be used to
determine the value of securities owned by a fund if, in the opinion of the
Board of Trustees, some other method (e.g., based on 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. Use of a pricing service has been approved by the Board of
Trustees. There are a number of pricing services available, and the
Trustees, on the basis of an on-going evaluation of these services, may use
other pricing services, or discontinue the use of any pricing service in
whole or in part.
If closing prices are unavailable, foreign securities will be valued at the
last traded bid price available prior to the time a fund's NAV is
determined. Foreign security prices are furnished by independent brokers or
quotation services which express the value of the securities in their local
currency. FSC gathers all exchange rates daily at the close of the NYSE
using the last quoted price, as applicable, on the local currency and then
translates the values 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. Foreign security prices that cannot be obtained by the independent
brokers or quotation services are priced individually by FSC using
dealer-supplied quotations. If an extraordinary event that is expected to
affect materially 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 at fair value as determined in good faith under the direction of the
Board of Trustees. Short-term obligations that mature in 60 days or less
(from the date of purchase) are valued at amortized cost, which constitutes
fair value. All other securities and other assets are appraised at their
fair value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Portfolio securities of Overseas, Growth Opportunities, Equity Portfolio
Growth, Global Resources, Equity Income, Strategic Opportunities, and
Income & Growth 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 United States are valued at last sale price or,
if no sale has occurred, at the closing bid price. Most equity securities
for which the primary market is outside the United States are valued using
the official closing price or the last sale price in the principal market
in which they are traded. If the last sale price (on the local exchange) is
unavailable, the last evaluated quote or last bid price normally is used.
Short-term securities (securities having a maturity of one year or less)
are valued either at amortized cost or at original cost plus accrued
interest, 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
two-fold 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. All other securities
and other assets are appraised at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees.
Generally, the valuation of portfolio securities and other assets held by a
fund is substantially completed each day at the close of the NYSE. The
values of any such securities or other assets held by a fund are determined
as of such time for the purpose of computing the fund's net asset value.
PERFORMANCE
Class A and Class B shares may quote performance in various ways. All
performance information supplied by the funds in advertising is historical
and is not intended to indicate future returns. Share price, yield, 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.
YIELD CALCULATIONS. Yields for a class are computed by dividing the class's
pro rata share of the applicable interest and dividend income, if any, for
a given 30-day or one-month period, net of expenses, by the average number
of shares of that class entitled to receive distributions during the
period, dividing this figure by the class's NAV or offering price at the
end of the period, and annualizing the result (assuming compounding of
income) in order to arrive at an annual percentage rate. Yields do not
reflect any contingent deferred sales charge. Income is calculated for
purposes of yield quotations in accordance with standardized methods
applicable to all stock and bond funds. Dividends from equity investments
are treated as if they were accrued on a daily basis, solely for the
purposes of yield calculations. In general, interest income is reduced with
respect to bonds trading at a premium over their par value by subtracting a
portion of the premium from income on a daily basis, and is increased with
respect to bonds trading at a discount by adding a portion of the discount
to daily income. For a fund's investments denominated in foreign
currencies, income and expenses are calculated first in their respective
currencies, and are then converted to U.S. dollars, either when they are
actually converted or at the end of the 30-day or one month period,
whichever is earlier. Capital gains and losses generally are excluded from
the calculation as are gains and losses from currency exchange rate
fluctuations. Income calculated for the purposes of calculating a class's
yield differs from income as determined for other accounting purposes.
Because of the different accounting methods used, and because of the
compounding of income assumed in yield calculations, a class's yield may
not equal its distribution rate, the income paid to your account, or the
income reported in the fund's financial statements.
In calculating a class's yield, a fund may from time to time use a
portfolio security's coupon rate instead of its yield to maturity in order
to reflect the risk premium on that security. This practice will have the
effect of reducing a class's yield.
Yield information may be useful in reviewing a class's performance and in
providing a basis for comparison with other investment alternatives.
However, each class's yield fluctuates, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of respective investment companies they have chosen to
consider. Investors should recognize that in periods of declining interest
rates, a class's yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates, the class's yield
will tend to be somewhat lower. Also, when interest rates are falling, the
inflow of net new money to a fund from the continuous sale of its shares
will likely be invested in instruments producing lower yields than the
balance of the fund's holdings, thereby reducing the class's current yield.
In periods of rising interest rates, the opposite can be expected to occur.
Tax-equivalent yield is the rate an investor would have to earn from a
fully taxable investment after taxes to equal the class's tax-free yield.
Tax-equivalent yields are calculated by dividing a class's yield by the
result of one minus a stated federal or combined federal and state tax
rate. If any portion of a class's yield is tax-exempt, only that portion is
adjusted in the calculation.
The following table shows the effect of a shareholder's tax status on
effective yield under federal income tax laws for 1995. It shows the
approximate yield a taxable security must provide at various income
brackets to produce after-tax yields equivalent to those of hypothetical
tax-exempt obligations yielding from 2.00% to 8.00%. Of course, no
assurance can be given that a class will achieve any specific tax-exempt
yield. While the funds invests principally in obligations whose interest is
exempt from federal income tax, other income received by the funds may be
taxable.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 TAX RATES AND TAX-EQUIVALENT YIELDS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal If individual tax-exempt yield is:
Income
</TABLE>
Tax 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00%
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single Return Joint Return* Bracket Then Taxable equivalent yield is:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$23,351 - $56,500 $36,001 - $94,250 28.0% 2.78% 4.17% 5.56% 6.94% 8.33% 9.72% 11.11%
$56,551 - $117,950 $94,251 - $143,600 31.0% 2.90% 4.35% 5.80% 7.25% 8.70% 10.14% 11.59%
$117,951 - $143,601 - 36.0% 3.13% 4.69% 6.25% 7.81% 9.38% 10.94% 12.50%
$256,500 $256,500
$256,501 - $256,501 39.6% 3.31% 4.97% 6.62% 8.28% 9.93% 11.59% 13.25%
</TABLE>
* Net amount subject to federal income tax after deductions and exemptions.
Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions, limitations
on itemized deductions, and other credits, exclusions, and adjustments
which may increase a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
A tax-free fund may invest a portion of its assets in obligations that are
subject to federal income tax. When the fund invests in these obligations,
its tax-equivalent yields will be lower. In the table above, tax-equivalent
yields are calculated assuming investments are 100% federally tax-free.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of a fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the NAV over a stated
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 total
return of 100% over ten years would produce an average annual return of
7.18%, which is the steady annual rate of return that would equal 100%
growth on a compounded basis in ten years. For classes less than one year
old, average annual returns covering periods of less than one year are
calculated by determining a class's total return for the period, extending
that return for a full year (assuming that return remains constant over the
year), and quoting the result as an annual return. While average annual
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, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted on a
before-tax or after-tax basis and may be quoted with or without taking the
maximum front-end or contingent deferred sales charge into account.
Excluding the sales charge from a total return calculation produces a
higher total return figure. Total returns, yield, and other performance
information may be quoted numerically or in a table, graph, or similar
illustration.
NET ASSET VALUE. Charts and graphs using net asset values, adjusted net
asset values, and benchmark indices may be used to exhibit performance. An
adjusted NAV includes any distributions paid and reflects all elements of
its return. Unless otherwise indicated, adjusted NAVs are not adjusted for
sales charges, if any.
MOVING AVERAGES. A growth or growth and income 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.
The 13-week and 39-week long-term moving averages are shown below:
Fund As of 13-Week 39-Week
Overseas 10/28/94 $14.01 $13.88
Equity Portfolio Growth - Class A 11/25/94 28.83 28.55
Equity Portfolio Growth - Institutional 11/25/94 29.17 28.84
Global Resources 10/28/94 17.65 17.17
Growth Opportunities 10/28/94 26.30 25.87
Strategic Opportunities - Initial 12/30/94 18.92 19.18
Strategic Opportunities - Class A 12/30/94 18.79 19.08
Strategic Opportunities - Class B 12/30/94 18.65 18.96
Equity Income - Class A 11/25/94 16.24 15.65
Equity Income - Class B 11/25/94 16.23 15.64
Equity Income - Institutional 11/25/94 16.33 15.70
Income & Growth 10/28/94 14.77 14.84
HISTORICAL BOND FUND RESULTS. The following tables show yields,
tax-equivalent yields (for tax-free funds), and total returns for 1994
fiscal periods ended as indicated for each class of the following funds.
The tax-equivalent yield is based on a 31% federal income tax rate. Note
that each fund may invest in securities whose income is subject to the
federal alternative minimum tax.
<TABLE>
<CAPTION>
<S> <C> <C>
FISCAL PERIOD ENDED:
10/31 - * Average Annual Total Returns Cumulative Total Returns
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11/30 - ** Tax-Equiva- One Five Ten Years/ One Five Ten Years/
12/31 - *** Yield lent Yield Year Years Life of Year Years Life of
fund+ fund+
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Emerging Markets 8.71% N/A n/a n/a n/a n/a n/a 2.47%
Income-Class A***1
Emerging Markets 8.19% N/A n/a n/a n/a n/a n/a 1.96%
Income-Class B***3
High Yield- Class A*1 7.33% N/A -2.23% 15.75% 12.99% 2.64% 118.17% 173.14%
High Yield-Class B*3 7.04% N/A -1.60% 16.66% 13.63% 2.14% 117.09% 171.80%
Strategic Income- 7.67% N/A n/a n/a n/a n/a n/a 0.17%
Class A***1
Strategic Income- 6.81% N/A n/a n/a n/a n/a n/a -0.06%
Class B***3
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Government 6.46% N/A -9.77% 5.73% 5.77% -5.27% 38.71% 62.83%
Investment-Class A*1
Government 6.02% N/A -9.20% 6.53% 6.37% -5.66% 38.13% 62.15%
Investment-Class B*3
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Limited 5.98% N/A -7.07% 6.59% 8.90% -2.44% 44.42% 146.17%
Term Bond-Class A**1
Limited 5.47% N/A -6.59% 7.38% 9.37% -2.91% 43.72% 144.98%
Term Bond-Class B**3
Limited 6.53% N/A -2.10% 7.86% 9.55% -2.10% 46.01% 148.89%
Term Bond-Institutional
Class**
Short-Fixed 6.10% N/A -1.72% 6.82% 7.32% -0.22% 41.17% 68.00%
Income-Class A*2
High Income 5.99% 8.68% -10.49% 7.15% 8.56% -6.03% 48.27% 88.65%
Municipal-Class A*1
High Income 5.30% 7.68% -10.00% 7.95% 9.23% -6.47% 47.57% 87.76%
Municipal-Class B*3
Limited Term Tax- 4.97% 7.20% -10.25% 4.05% 5.93% -5.78% 28.03% 78.39%
Exempt-Class A**1
Limited Term Tax- 4.35% 6.30% -9.74% 4.84% 6.44% -6.15% 27.53% 77.69%
Exempt-Class B**3
Limited Term Tax- 5.47% 7.93% -5.43% 5.21% 6.57% -5.43% 28.90% 79.59%
Exempt-Institutional
Class**
Short Intermediate 4.83% 7.00% n/a n/a -1.74% n/a n/a 0.27%
Tax-Exempt-Class A**2
</TABLE>
+ Life of fund figures are from commencement of operations (March 10, 1994
for Emerging Markets Income; January 5, 1987 for High Yield; October 31,
1994 for Strategic Income; January 7, 1987 for Government Investment;
September 16, 1987 for Short Fixed-Income and High Income Municipal;
September 19, 1985 for Limited Term Tax-Exempt; and March 16, 1994 for
Short-Intermediate Tax-Exempt) to 1994 fiscal year end.
1 Average Annual Total Return figures include the effect of the class's
4.75% front-end sales charge.
2 Average Annual Total Return figures include the effect of the class's
1.50% front-end sales charge.
3 Average Annual Total Return figures include the effect of the class's
maximum 4.0% CDSC.
Note: If FMR had not reimbursed certain fund expenses during these periods,
the total returns for certain periods for Emerging Markets Income, High
Yield, Strategic Income, Government Investment, Limited Term Bond, Short
Fixed Income, High Income Municipal, Limited Term Tax-Exempt, and
Short-Intermediate Tax-Exempt would have been lower. If Emerging Markets
Income Class A and Class B; Strategic Income - Class A and Class B; Limited
Term Bond - Class A and Class B; Government Investment - Class A and Class
B; Limited Term Tax-Exempt Class A, Class B, and Institutional Class; and
Short-Intermediate Tax Exempt - Class A had not been in reimbursement,
their yields and tax-equivalent yields (if applicable) would have been:
8.06% and 7.84%; 5.69% and 5.18%; 5.91% and 4.71%; 5.73% and 5.10%;
4.83%/7.00%, 3.64%/5.28%, and 5.36%/7.77%; and 4.04%/5.86%.
HISTORICAL EQUITY FUND RESULTS. The following table shows the total returns
for 1994 fiscal periods ended as indicated for each class of the following
funds.
<TABLE>
<CAPTION>
<S> <C> <C>
FISCAL PERIOD ENDED:
10/31 - * Average Annual Total Returns Cumulative Total Returns
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11/30 - ** One Five Ten Years/ One Five Ten Years/
12/31 - *** Year Years Life of Year Years Life of
fund+ fund+
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Overseas Class-A*1 3.74% n/a 7.50% 8.91% n/a 45.67%
EPG-Class A** -3.24% 16.55% 19.14% 1.58% 125.75% 504.83%
EPG-Institutional Class 2.46% 18.10% 19.93% 2.46% 129.70% 515.42%
Global -0.97% 13.48% 14.86% 3.97% 97.54% 171.05%
Resources-Class A**1
Growth 3.55% 15.15% 19.94% 8.71% 112.51% 272.05%
Opportunities-Class
A**1
Strategic -11.58% 6.55% 13.88% -7.17% 44.18% 285.19%
Opportunities-Class
A***1
Strategic -10.79% 7.44% 14.43% -7.22% 44.11% 285.00%
Opportunities-Class
B***2
Strategic -10.80% 7.20% 14.38% -6.35% 48.64% 302.39%
Opportunities-Initial
Class ***
Equity Income-Class 3.67% 9.10% 12.68% 8.84% 62.28% 246.39%
A**1
Equity Income-Class 4.77% 10.02% 13.22% 8.77% 62.17% 246.17%
B**2
Equity 9.82% 10.56% 13.43% 9.82% 65.21% 252.65%
Income-Institutional
Class**
Income & -7.31% 9.99% 11.34% -2.69% 68.98% 143.26%
Growth-Class A*1
</TABLE>
+ Life of fund figures are from commencement of operations (April 23, 1990
for Overseas; December 29, 1987 for Global Resources; November 18, 1987 for
Growth Opportunities; and January 6, 1987 for Income & Growth).
1 Average Annual Total Return figures include the effect of the class's
4.75% front-end sales charge.
2 Average Annual Total Return figures include the effect of the class's
maximum 4.0% CDSC.
Note: If FMR had not reimbursed certain fund expenses during these periods,
the total returns for certain periods for Overseas, Global Resources,
Equity Income, and Growth Opportunities would have been lower.
DOMESTIC FUND RETURNS. The following tables show the income and capital
elements of the cumulative total return for each class of each fund. The
table compares each fund's return to the record of the Aggregate Bond Index
Portfolio (bond funds only), the S&P 500 (equity funds only), the Dow Jones
Industrial Average (DJIA) (equity funds only), and the cost of living
(measured by the Consumer Price Index (CPI) over the same period. The CPI
information is as of the month end closest to the initial investment date
for each fund. Returns for international bond funds may be compared to the
following indices: the J.P. Morgan Emerging Markets Bond Index, a broad
measure of bond performance in developing countries; the Salomon Brothers
World Government Bond Index, which measures the performance of bonds issued
by the U.S. and foreign governments; and the Lehman Brothers 1-3 Year
Government Bond Index, which measures the performance of short-term U.S.
government bonds. Returns for high yield bond funds may be compared to the
Merrill Lynch High Yield Master Index, an unmanaged index of
higher-yielding, lower quality corporate bonds. Strategic Income Fund may
compare itself to a customized composite index equally comprised of the
J.P. Morgan Global Index ex-U.S., a broad measure of bond performance in
foreign countries; the Merrill Lynch High Yield Master, a broad measure of
higher yielding bonds; and the Lehman Brothers Government Treasury Long
Term Index, a broad measure of long term U.S. government bonds. The
comparisons to the Aggregate Bond Index Portfolio show a class's total
return compared to the record of a broad average of debt securities. The
Aggregate Bond Index is a total return index measuring both the capital
price changes and the income underlying the universe of securities weighted
by market value outstanding, and, unlike a class's returns, its returns do
not include the effect of paying brokerage commissions and other costs of
investing. The S&P 500 and DJIA comparisons are provided to show how each
class's total return compared to the record of a broad average of common
stock prices and a narrower set of stocks of major industrial companies,
respectively, over the same period. Of course, since bond funds invest in
fixed-income securities, common stocks represent a different type of
investment from the fund. Common stocks generally offer greater growth
potential than mutual funds, but generally experience greater price
volatility, which means greater potential for loss. In addition, common
stocks generally provide lower income than a fixed-income investment such
as the funds. Each fund has the ability to invest in securities not
included in either index, and its investment portfolio may or may not be
similar in composition to the indices. Figures for the S&P 500 and DJIA are
based on the prices of unmanaged groups of stocks and, unlike the classes'
returns, do not include the effect of paying brokerage commissions or other
costs of investing.
The following charts show the growth of a hypothetical $10,000 investment
in each class, assuming all distributions were reinvested. This was a
period of fluctuating interest rates, bond prices, and stock prices and the
figures below should not be considered representative of the dividend
income or capital gain or loss that could be realized from an investment in
the class today. Tax consequences of different investments have not been
factored into the figures.
INSTITUTIONAL/INITIAL CLASS CHARTS. Institutional and Initial Class shares
are sold to eligible investors without a sales charge or a 12b-1 fee.
CLASS A CHARTS. Class A shares are sold to eligible investors with a
maximum 4.75% (1.50% for Short Fixed-Income and Short-Intermediate
Tax-Exempt) front-end sales charge, which is reflected in the figures set
forth in the charts below. On September 10, 1992, a .65% (for equity funds)
or a .25% (for fixed-income funds, except Short Fixed-Income and
Short-Intermediate Tax-Exempt, which have a .15% 12b-1 fee) 12b-1 fee for
all Class A shares was imposed. The Class A 12b-1 fee is not reflected in
figures prior to that date. The initial offering of Class A shares for
Equity Portfolio Growth, Equity Income, Limited Term Tax-Exempt, and
Limited Term Bond was September 10, 1992. Prior to that date, the figures
for these funds reflect Institutional Class (Initial Class for Strategic
Opportunities) data, i.e., no sales charge or 12b-1 fee.
CLASS B CHARTS. Class B shares are sold to eligible investors with a 1.00%
12b-1 fee and may be subject to the contingent deferred sales charge upon
redemption (maximum 4.00%). The 1.00% 12b-1 fee is reflected in figures for
the period beginning on June 30, 1994, the initial offering date of Class B
shares. Prior to that date, the figures for Class B shares reflect Class A
and Institutional Class (Initial Class for Strategic Opportunities) data,
as applicable, for the particular fund, as described above.
EQUITY PORTFOLIO GROWTH - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living*
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1985 $ 13,155 $ 0 $ 0 $ 13,155 $ 12,899 $ 12,966 $ 10,351
1986 15,634 28 459 16,121 16,469 17,477 10,484
1987 11,767 31 1,564 13,362 15,699 17,258 10,959
1988 14,258 52 3,029 17,339 19,361 20,628 11,425
1989 20,545 611 4,364 25,520 25,333 27,398 11,956
1990 18,445 674 7,102 26,221 24,451 26,939 12,707
1991 28,800 1,052 11,089 40,941 29,428 31,509 13,086
1992 31,232 1,199 17,090 49,521 34,872 37,054 13,485
1993 34,992 1,512 20,207 56,711 38,394 42,501 13,846
1994 33,830 1,462 22,318 57,610 38,795 44,332 14,236
</TABLE>
* From month-end closest to initial investment date.
EQUITY PORTFOLIO GROWTH - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living*
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1985 $ 13,811 $ 0 $ 0 $ 13,811 $ 12,899 $ 12,966 $ 10,351
1986 16,413 29 482 16,924 16,469 17,477 10,484
1987 12,354 32 1,641 14,027 15,699 17,258 10,959
1988 14,969 55 3,180 18,204 19,361 20,628 11,425
1989 21,569 642 4,582 26,793 25,333 27,398 11,956
1990 19,365 707 7,456 27,528 24,451 26,939 12,707
1991 30,237 1,104 11,642 42,983 29,428 31,509 13,086
1992 32,839 1,261 17,970 52,070 34,872 37,054 13,485
1993 37,036 1,645 21,386 60,067 38,394 42,501 13,846
1994 35,990 1,822 23,731 61,543 38,795 44,332 14,236
</TABLE>
* From month-end closest to initial investment date.
GLOBAL RESOURCES - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total S&P of
Ended Oct. 31 Investment Distributions Distributions Value 500 DJIA Living**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1988* $ 10,925 $ 0 $ 0 $ 10,925 $ 11,702 $ 11,395 $ 10,416
1989 12,002 0 1,068 13,070 14,791 14,557 10,884
1990 11,716 81 2,106 13,903 13,683 13,970 11,568
1991 13,440 93 3,081 16,614 18,268 18,172 11,906
1992 13,221 91 4,293 17,605 20,090 19,672 12,288
1993 16,754 116 7,961 24,831 23,093 23,104 12,626
1994 16,726 116 8,975 25,817 23,986 25,207 12,955
</TABLE>
* From December 29, 1987 (commencement of operations).
** From month-end closest to initial investment date.
GROWTH OPPORTUNITIES - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total S&P of
Ended Oct. 31 Investment Distributions Distributions Value 500 DJIA Living**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1988* $ 13,592 $ 0 $ 0 $ 13,592 $ 11,872 $ 11,566 $ 10,416
1989 15,745 35 896 16,676 15,006 14,775 10,884
1990 12,373 71 1,721 14,165 13,882 14,179 11,568
1991 19,602 371 2,727 22,700 18,534 18,444 11,906
1992 20,136 499 4,810 25,445 20,383 19,966 12,288
1993 24,184 790 7,623 32,597 23,430 23,449 12,626
1994 25,356 925 9,157 35,438 24,336 25,585 12,955
</TABLE>
* From November 18, 1987 (commencement of operations).
** From month-end closest to initial investment date.
STRATEGIC OPPORTUNITIES - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total S&P of
Ended Dec. 31 Investment Distributions Distributions Value 500 DJIA Living*
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1985 $ 11,799 $ 233 $ 1,079 $ 13,101 $ 13,175 $ 13,356 $ 10,380
1986 14,178 355 2,227 16,760 15,636 16,967 10,494
1987 11,388 535 3,776 15,699 16,459 17,889 10,959
1988 13,435 1,302 4,454 19,191 19,193 20,737 11,443
1989 17,327 2,375 5,745 25,447 25,274 27,323 11,975
1990 15,429 3,078 5,116 23,623 24,486 27,176 12,707
1991 16,172 4,106 8,796 29,074 31,951 33,791 13,096
1992 16,662 5,147 11,008 32,817 34,393 36,257 13,476
1993 18,193 6,361 14,969 39,523 37,859 42,418 13,846
1994 16,356 6,383 13,951 36,690 38,358 44,527 14,217
</TABLE>
* From month-end closest to initial investment date.
STRATEGIC OPPORTUNITIES - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total S&P of
Ended Dec. 31 Investment Distributions Distributions Value 500 DJIA Living*
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1985 $ 12,388 $ 234 $ 1,133 $ 13,755 $ 13,175 $ 13,356 $ 10,380
1986 14,885 372 2,338 17,595 15,636 16,967 10,494
1987 11,956 561 3,964 16,481 16,459 17,889 10,959
1988 14,105 1,367 4,677 20,149 19,193 20,737 11,443
1989 18,191 2,493 6,031 26,715 25,274 27,323 11,975
1990 16,198 3,231 5,371 24,800 24,486 27,176 12,707
1991 16,979 4,311 9,235 30,525 31,951 33,791 13,096
1992 17,493 5,403 11,557 34,453 34,393 36,257 13,476
1993 19,100 6,678 15,716 41,494 37,859 42,418 13,846
1994 17,052 6,899 14,549 38,500 38,358 44,527 14,217
</TABLE>
* From month-end closest to initial investment date.
STRATEGIC OPPORTUNITIES - INITIAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total S&P of
Ended Dec. 31 Investment Distributions Distributions Value 500 DJIA Living**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1985 $ 11,799 $ 223 $ 1,079 $ 13,101 $ 13,175 $ 13,356 $ 10,380
1986 14,178 355 2,227 16,760 15,636 16,967 10,494
1987 11,467 547 3,788 15,802 16,459 17,889 10,959
1988 13,548 1,366 4,476 19,390 19,193 20,737 11,443
1989 17,388 2,652 5,744 25,784 25,274 27,323 11,975
1990 15,499 3,465 5,120 24,084 24,486 27,176 12,707
1991 16,260 4,673 8,858 29,791 31,951 33,791 13,096
1992 16,741 5,959 11,104 33,804 34,393 36,257 13,476
1993 18,324 7,425 15,179 40,928 37,859 42,418 13,846
1994 16,496 7,660 14,172 38,328 38,358 44,527 14,217
</TABLE>
** From month-end closest to initial investment date.
EQUITY INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1985 $ 11,116 $ 777 $ 0 $ 11,893 $ 12,899 $ 12,966 $ 10,351
1986 12,595 1,711 380 14,686 16,469 17,477 10,484
1987 10,167 2,077 1,373 13,617 15,699 17,258 10,959
1988 10,325 3,242 3,725 17,292 19,361 20,628 11,425
1989 11,413 4,801 4,118 20,332 25,333 27,398 11,956
1990 8,855 4,848 3,598 17,301 24,451 26,939 12,707
1991 10,306 6,782 4,188 21,276 29,428 31,509 13,086
1992 11,962 8,862 4,860 25,684 34,872 37,054 13,485
1993 13,822 10,876 5,616 30,314 38,394 42,501 13,846
1994 14,846 12,116 6,032 32,994 38,795 44,332 14,236
</TABLE>
** From month-end closest to initial investment date.
EQUITY INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living*
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1985 $ 11,670 $ 816 $ 0 $ 12,486 $ 12,899 $ 12,966 $ 10,351
1986 13,223 1,797 398 15,418 16,469 17,477 10,484
1987 10,674 2,180 1,441 14,295 15,699 17,258 10,959
1988 10,840 3,403 3,911 18,154 19,361 20,628 11,425
1989 11,982 5,040 4,323 21,345 25,333 27,398 11,956
1990 9,297 5,090 3,777 18,164 24,451 26,939 12,707
1991 10,820 7,120 4,396 22,336 29,428 31,509 13,086
1992 12,559 9,304 5,103 26,966 34,872 37,054 13,485
1993 14,512 11,418 5,896 31,826 38,394 42,501 13,846
1994 15,566 12,725 6,325 34,616 38,795 44,332 14,236
</TABLE>
* From month-end closest to initial investment date.
EQUITY INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living*
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1985 $ 11,670 $ 816 $ 0 $ 12,486 $ 12,899 $ 12,966 $ 10,351
1986 13,223 1,797 398 15,418 16,469 17,477 10,484
1987 10,674 2,180 1,441 14,295 15,699 17,258 10,959
1988 10,840 3,403 3,911 18,154 19,361 20,628 11,425
1989 11,982 5,040 4,323 21,345 25,333 27,398 11,956
1990 9,297 5,090 3,777 18,164 24,451 26,939 12,707
1991 10,820 7,120 4,396 22,336 29,428 31,509 13,086
1992 12,578 9,318 5,111 27,007 34,872 37,504 13,485
1993 14,580 11,608 5,924 32,112 38,394 42,501 13,846
1994 15,693 13,195 6,376 35,264 38,795 44,332 14,236
</TABLE>
* From month-end closest to initial investment date.
INCOME & GROWTH - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total S&P of
Ended Oct. 31 Investment Distributions Distributions Value 500 DJIA Living**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1987 $ 8,992 $ 161 $ 0 $ 9,153 $ 10,232 $ 10,358 $ 10,434
1988 10,544 774 0 11,318 11,747 11,572 10,878
1989 12,163 1,549 0 13,712 14,849 14,782 11,367
1990 9,916 2,328 488 12,732 13,736 14,187 12,081
1991 13,459 3,924 663 18,046 18,339 18,454 12,434
1992 13,726 4,641 1,532 19,899 20,169 19,977 12,833
1993 15,154 6,002 2,653 23,809 23,183 23,462 13,186
1994 13,973 6,056 3,141 23,170 24,080 25,598 13,529
</TABLE>
* From January 6, 1987 (commencement of operations).
** From month-end closest to initial investment date.
HIGH YIELD - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Aggregate Cost
Period $10,000 Dividend Capital Gain Total Bond of
Ended Oct. 31 Investment Distributions Distributions Value Index+ Living**
</TABLE>
1987* $ 8,658 $ 790 $ 0 $ 9,448 $ 9,917 $ 10,434
1988 9,392 2,148 0 11,540 11,054 10,878
1989 8,544 3,381 0 11,925 12,369 11,367
1990 7,763 4,589 0 12,352 13,150 12,081
1991 9,639 7,613 0 17,252 15,229 12,434
1992 10,544 10,496 0 21,040 16,727 12,833
1993 11,440 13,420 488 25,348 18,712 13,186
1994 10,687 14,350 980 26,017 18,025 13,529
* From January 5, 1987 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
HIGH YIELD - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total Aggregate of
Ended Oct. 31 Investment Distributions Distributions Value Bond Index+ Living**
</TABLE>
1987* $ 9,090 $ 829 $ 0 $ 9,919 $ 9,917 $ 10,434
1988 9,860 2,256 0 12,116 11,054 10,878
1989 8,970 3,550 0 12,520 12,369 11,367
1990 8,150 4,818 0 12,968 13,150 12,081
1991 10,120 7,992 0 18,112 15,229 12,434
1992 11,070 11,020 0 22,090 16,727 12,833
1993 12,010 14,089 512 26,611 18,712 13,186
1994 11,210 14,942 1,028 27,180 18,025 13,529
* From January 5, 1987 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
STRATEGIC INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total Aggregate of
Ended Dec. 31 Investment Distributions Distributions Value Bond Index+ Living**
</TABLE>
1994* $ 9,449 $ 93 $ 0 $ 9,542 $ 10,047 $ 10,013
* From October 31, 1994 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
STRATEGIC INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total Aggregate of
Ended Dec. 31 Investment Distributions Distributions Value Bond Index+ Living**
</TABLE>
1994* $ 9,910 $ 84 $ 0 $ 9,994 $ 10,047 $ 10,013
* From October 31, 1994 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
GOVERNMENT INVESTMENT - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total Aggregate of
Ended Dec. 31 Investment Distributions Distributions Value Bond Living**
Index+
</TABLE>
1987* $ 8,763 $ 587 $ 0 $ 9,350 $ 10,133 $ 10,434
1988 8,820 1,403 0 10,223 10,932 10,878
1989 8,868 2,313 0 11,181 12,520 11,367
1990 8,715 3,190 0 11,905 13,642 12,081
1991 9,134 4,277 0 13,411 15,825 12,434
1992 9,268 5,281 0 14,549 16,996 12,833
1993 9,658 6,395 318 16,371 18,653 13,186
1994 8,534 6,472 503 15,509 18,109 13,529
* From January 7, 1987 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
GOVERNMENT INVESTMENT - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total Aggregate of
Ended Oct. 31 Investment Distributions Distributions Value Bond Index+ Living**
</TABLE>
1987* $ 9,200 $ 616 $ 0 $ 9,816 $ 9,917 $ 10,434
1988 9,260 1,473 0 10,733 11,054 10,878
1989 9,310 2,429 0 11,739 12,369 11,367
1990 9,150 3,349 0 12,499 13,150 12,081
1991 9,590 4,490 0 14,080 15,229 12,434
1992 9,730 5,545 0 15,275 16,727 12,833
1993 10,140 6,714 334 17,189 18,712 13,186
1994 8,950 6,737 528 16,215 18,025 13,529
* From January 7, 1987 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
LIMITED TERM BOND - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total Aggregate of
Ended Nov. 30 Investment Distributions Distributions Value Bond Index+ Living*
</TABLE>
1985 $ 10,089 $ 1,093 $ 0 $ 11,182 $ 13,436 $ 10351
1986 10,749 2,315 22 13,086 15,900 10,484
1987 9,802 3,257 260 13,319 16,180 10,959
1988 9,735 4,499 258 14,492 17,674 11,425
1989 9,955 6,016 264 16,235 20,211 11,956
1990 9,697 7,330 257 17,284 21,741 12,707
1991 10,089 9,235 268 19,592 24,875 13,086
1992 10,175 10,919 270 21,364 27,079 13,485
1993 10,653 13,098 283 24,034 30,029 13,846
1994 9,812 13,376 260 23,448 29,110 14,236
* From month-end closest to initial investment date.
+ From month-end following initial investment date.
LIMITED TERM BOND - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total Aggregate of
Ended Nov. 30 Investment Distributions Distributions Value Bond Index+ Living*
</TABLE>
1985 $ 10,592 $ 1,147 $ 0 $ 11,739 $ 13,436 $ 10,351
1986 11,285 2,431 24 13,740 15,900 10,484
1987 10,291 3,419 273 13,983 16,180 10,959
1988 10,221 4,723 271 15,215 17,674 11,425
1989 10,452 6,316 277 17,045 20,211 11,956
1990 10,181 7,696 270 18,147 21,741 12,707
1991 10,592 9,695 281 20,568 24,875 13,086
1992 10,683 11,463 283 22,429 27,079 13,485
1993 11,185 13,751 297 25,233 30,029 13,846
1994 10,291 13,934 273 24,498 29,110 14,236
* From month-end closest to initial investment date.
+ From month-end following initial investment date.
LIMITED TERM BOND - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total Aggregate of
Ended Nov. 30 Investment Distributions Distributions Value Bond Index+ Living*
</TABLE>
1985 $ 10,592 $ 1,147 $ 0 $ 11,739 $ 13,436 $ 10,351
1986 11,285 2,431 24 13,710 15,900 10,484
1987 10,291 3,419 273 13,983 16,180 10,959
1988 10,221 4,723 271 15,215 17,674 11,425
1989 10,452 6,316 277 17,045 20,211 11,956
1990 10,181 7,696 270 18,147 21,741 12,707
1991 10,592 9,695 281 20,568 24,875 13,086
1992 10,683 11,498 283 22,464 27,079 13,485
1993 11,205 13,920 297 25,422 30,029 13,846
1994 10,311 14,304 273 24,888 29,110 14,236
* From month-end closest to initial investment date.
+ From month-end following initial investment date.
SHORT FIXED-INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total Aggregate of
Ended Oct. 31 Investment Distributions Distributions Value Bond Index+ Living**
</TABLE>
1987* $ 9,909 $ 100 $ 0 $ 10,009 $ 10,356 $ 10,026
1988 9,791 974 0 10,765 11,543 10,452
1989 9,801 1,921 0 11,722 12,917 10,922
1990 9,476 2,902 0 12,378 13,732 11,609
1991 9,722 4,165 0 13,887 15,903 11,948
1992 9,801 5,397 0 15,198 17,467 12,330
1993 9,939 6,645 0 16,584 19,540 12,670
1994 9,338 7,211 0 16,549 18,823 13,000
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
HIGH INCOME MUNICIPAL - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total Aggregate of
Ended Oct. 31 Investment Distributions Distributions Value Bond Index+ Living**
</TABLE>
1987* $ 9,382 $ 87 $ 0 $ 9,469 $ 10,356 $ 10,026
1988 9,963 852 0 10,815 11,543 10,452
1989 10,306 1,759 54 12,119 12,917 10,922
1990 10,354 2,722 168 13,244 13,732 11,609
1991 10,868 3,903 330 15,101 15,903 11,948
1992 11,097 5,044 351 16,492 17,467 12,330
1993 12,116 6,577 429 19,122 19,540 12,670
1994 10,687 6,808 473 17,968 18,823 13,000
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
HIGH INCOME MUNICIPAL - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total Aggregate of
Ended Oct. 31 Investment Distributions Distributions Value Bond Index+ Living**
</TABLE>
1987* $ 9,850 $ 92 $ 0 $ 9,942 $ 10,356 $ 10,026
1988 10,460 895 0 11,355 11,543 10,452
1989 10,820 1,847 57 12,724 12,917 10,922
1990 10,870 2,858 176 13,904 13,732 11,609
1991 11,410 4,097 347 15,854 15,903 11,948
1992 11,650 5,296 368 17,314 17,467 12,330
1993 12,720 6,905 450 20,075 19,540 12,670
1994 11,210 7,069 496 18,775 18,823 13,000
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
LIMITED TERM TAX-EXEMPT - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total Aggregate of
Ended Nov. 30 Investment Distributions Distributions Value Bond Index+ Living**
</TABLE>
1985* $ 9,792 $ 126 $ 0 $ 9,918 $ 10,455 $ 10,065
1986 10,468 826 51 11,345 12,372 10,194
1987 9,887 1,451 117 11,455 12,590 10,656
1988 10,020 2,207 118 12,345 13,752 11,108
1989 10,106 3,046 119 13,271 15,726 11,625
1990 10,135 3,951 120 14,206 16,917 12,355
1991 10,287 4,955 122 15,364 19,356 12,724
1992 10,554 6,062 125 16,741 21,071 13,112
1993 9,963 6,581 1,489 18,033 23,366 13,463
1994 8,954 6,669 1,369 16,992 22,651 13,841
* From September 19, 1985 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
LIMITED TERM TAX-EXEMPT - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total Aggregate of
Ended Nov. 30 Investment Distributions Distributions Value Bond Index+ Living**
</TABLE>
1985* $ 10,280 $ 132 $ 0 $ 10,412 $ 10,455 $ 10,065
1986 10,990 867 53 11,910 12,372 10,194
1987 10,380 1,524 123 12,027 12,590 10,656
1988 10,520 2,317 124 12,961 13,752 11,108
1989 10,610 3,198 125 13,933 15,726 11,625
1990 10,640 4,148 126 14,914 16,917 12,355
1991 10,800 5,202 128 16,130 19,356 12,724
1992 11,080 6,365 131 17,576 21,071 13,112
1993 10,460 6,909 1,564 18,933 23,366 13,463
1994 9,400 6,931 1,437 17,768 22,651 13,841
* From September 19, 1985 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
LIMITED TERM TAX-EXEMPT-INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total Aggregate of
Ended Nov. 30 Investment Distributions Distributions Value Bond Index+ Living**
</TABLE>
1985* $ 10,280 $ 132 $ 0 $ 10,412 $ 10,455 $ 10,065
1986 10,990 867 53 11,910 12,372 10,194
1987 10,380 1,524 123 12,027 12,590 10,656
1988 10,520 2,317 124 12,961 13,752 11,108
1989 10,610 3,198 125 13,933 15,726 11,625
1990 10,640 4,148 126 14,914 16,917 12,355
1991 10,800 5,202 128 16,130 19,356 12,724
1992 11,080 6,371 131 17,582 21,071 13,112
1993 10,460 6,967 1,564 18,991 23,366 13,463
1994 9,410 7,110 1,440 17,960 22,651 13,841
* From September 19, 1985 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
SHORT-INTERMEDIATE TAX-EXEMPT - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total Aggregate of
Ended Nov. 30 Investment Distributions Distributions Value Bond Index+ Living**
</TABLE>
1994 $ 9,623 $ 254 $ 0 $ 9,877 $ 9,926 $ 10,183
* From March 16, 1994 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
The yield for the S&P 500 for the year ended December 31, 1994 was 2.93%,
calculated by dividing the dollar value of dividends paid by the S&P 500
stocks during the period by the average value of the S&P 500 on December
31, 1994. The S&P yield is calculated differently from each class's yield.
For example, a class's yield calculation treats dividends as accrued in
anticipation of payment, rather than recording them when paid.
INTERNATIONAL FUNDS. The following tables show the income and capital
elements of the total return for each class of the following funds from the
date it commenced operations through the 1994 fiscal period, ended as
indicated. The classes may compare their total returns to the record of the
following Morgan Stanley Capital International indices: the World Index;
EAFE Index; the Europe Index; the Pacific Index, the Combined Far East
ex-Japan Free Index; and the Latin America Free Index. The EAFE Index
combines the Europe and Pacific indices. The addition of Canada, the United
States, and South African Gold Mines to the EAFE index compiles the World
Index which includes over 1400 companies. The Europe Index and Pacific
Index are subsets of the Morgan Stanley Capital International World Index,
which is also published by Morgan Stanley Capital International, S.A. The
Europe and Pacific Indices are weighted by the market value of each
country's stock exchange(s). The companies included in the indices change
only in the event of mergers, takeovers, failures and the like, and minor
adjustments may be made when Morgan Stanley Capital International, S.A.
reviews the companies covered as to suitability every three or four years.
<TABLE>
<CAPTION>
<S> <C> <C>
Fund Comparative Index Description of Index
Overseas Morgan Stanley Capital International An unmanaged index of 900 foreign common
Europe, Australia, Far East Index stocks
(EAFE)
Emerging Markets J.P. Morgan Emerging An unmanaged index of fixed income securities
Income Market Bond Index from developing nations
</TABLE>
Each table compares the returns for each class of the following funds to
the record of the S&P 500, the DJIA, a foreign stock market index as
described above, and the cost of living (measured by the Consumer Price
Index, or CPI) over the same period. The CPI information is as of the month
end closest to the initial investment date for each fund. The S&P 500 and
DJIA comparisons are provided to show how each class's total return
compared to the record of a broad range of U.S. common stocks and a
narrower set of stocks of major U.S. industrial companies, respectively,
over the same period. The funds have the ability to invest in securities
not included in the indices, and their investment portfolios may or may not
be similar in composition to the indices. The EAFE Index, Europe Index,
Pacific Index, Combined Far East Free Ex-Japan Index, TSE 300 Index, TOPIX
Index, S&P 500, and DJIA are based on the prices of unmanaged groups of
stocks and, unlike each class's returns, their returns do not include the
effect of paying brokerage commissions and other costs of investing.
The following charts show the growth of a hypothetical $10,000 investment
in each class, assuming all distributions were reinvested. This was a
period of fluctuating interest rates, bond prices, and stock prices and the
figures below should not be considered representative of the dividend
income or capital gain or loss that could be realized from an investment in
the class today. Tax consequences of different investments have not been
factored into the figures.
CLASS A CHARTS. Class A shares are sold to eligible investors with a
maximum 4.75% (1.50% for Short Fixed-Income and Short-Intermediate
Tax-Exempt) front-end sales charge, which is reflected in the figures set
forth in the charts below. On September 10, 1992, a 0.65% (for equity
funds) or a 0.25% (for fixed-income funds, except Short Fixed-Income and
Short-Intermediate Tax-Exempt, which have a 0.15% 12b-1 fee) 12b-1 fee for
all Class A shares was imposed. The Class A 12b-1 fee is not reflected in
figures prior to that date. The initial offering of Class A shares for
Equity Portfolio Growth, Equity Income, Limited Term Tax-Exempt, and
Limited Term Bond was September 10, 1992. Prior to that date, the figures
for these funds reflect Institutional Class data, i.e., no sales charge or
12b-1 fee.
CLASS B CHARTS. Class B shares are sold to eligible investors with a 1.00%
12b-1 fee and may be subject to the contingent deferred sales charge
(maximum 4.00%) applicable upon redemption. The 1.00% 12b-1 fee is
reflected in figures for the period beginning on June 30, 1994, the initial
offering date of Class B shares. Prior to that date, the figures for Class
B shares reflect Class A data for the particular fund, as described above.
OVERSEAS-CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Dividend Capital Gain Total EAFE S&P of
Ended Oct. 31 Investment Distributions Distributions Value Index 500 DJIA Living**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1990* $ 9,096 $ 0 $ 0 $ 9,096 $ 9,968 $ 9,246 $ 9,246 $ 10,357
1991 9,315 77 0 9,392 10,661 12,344 12,027 10,659
1992 8,639 200 0 8,839 9,252 13,575 13,020 11,001
1993 12,316 424 0 12,740 12,717 15,604 15,291 11,303
1994 13,392 483 0 13,875 14,002 16,208 16,684 11,598
</TABLE>
* From April 23, 1990 (commencement of operations).
** From month-end closest to initial investment date.
EMERGING MARKETS INCOME-CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Value of Value of J.P. Morgan
Initial Reinvested Reinvested Emerging Cost
Period $10,000 Dividend Capital Gain Total Market Bond of
Ended Dec. Investment Distributions Distributions Value Index Living**
31
</TABLE>
1994* $ 9,068 $ 457 $ 235 $ 9,760 $ 9,989 $ 10,204
* From March 10, 1994 (commencement of operations).
** From month-end closest to initial investment date.
EMERGING MARKETS INCOME-CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J.P. Morgan
Initial Reinvested Reinvested Emerging Cost
Period $10,000 Dividend Capital Gain Total Market Bond S&P of
Ended Dec. Investment Distributions Distributions Value Index 500 DJIA Living**
31
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994* $ 9,520 $ 430 $ 246 $ 10,196 $ 9,989 $ 20,674 $ 10,178 $ 10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end closest to initial investment date.
The following table reflects the cost of the initial $10,000 investment in
each of the classes, plus the aggregate cost of reinvested dividends and
capital gain distributions, if any, from the fund's commencement of
operations to the end of its fiscal period in 1994. If no additional shares
of these funds had been acquired through the reinvestment of distributions,
the cash payments from these funds would have come to the amounts shown in
column (A) for capital gain distributions, and the amounts shown in column
(B) for income dividends. No adjustment has been made for a shareholder's
income tax liability on dividends and capital gain distributions.
(A) (B)
CAPITAL GAIN INCOME
FUND COST DISTRIBUTIONS DIVIDENDS
Overseas-A $24,857 $10,557 $581
Equity Portfolio Growth-A 25,863 11,083 772
Equity Portfolio Growth-Institutional 16,456 5,229 76
Global Resources-A 16,797 5,296 514
Growth Opportunities-A 28,518 8,432 3,848
Strategic Opportunities-A 29,681 8,852 4,151
Strategic Opportunities-B 29,936 8,432 4,522
Strategic Opportunities-Initial 23,178 3,191 5,609
Equity Income-A 23,857 3,350 5,898
Equity Income-B 24,205 3,350 6,055
Equity Income-Institutional 18,033 2,105 4,086
Income & Growth-A 10,750 248 479
Emerging Markets Income-A 10,731 260 451
Emerging Markets Income-B 23,956 467 8,089
High Yield-A 25,541 490 8,447
High Yield-B 10,093 0 93
Strategic Income-A 10,084 0 84
Strategic Income-B 17,342 333 5,038
Government Investment-A 17,657 350 5,261
Government Investment-B 23,973 230 8,552
Limited Term Bond-A 24,573 241 8,938
Limited Term Bond-B 24,933 241 9,089
Limited Term Bond-Institutional 17,505 0 5,582
Short Fixed-Income-A 17,299 362 5,171
High Income Municipal-A 17,588 380 5,384
High Income Municipal-B 18,965 972 5,489
Limited Term Tax-Exempt-A 19,339 1,020 5,724
Limited Term Tax-Exempt-B 19,522 1,020 5,820
Limited Term Tax-Exempt-Institutional 10,258 0 255
Short-Intermediate Tax-Exempt-A 10,328 0 324
INTERNATIONAL INDICES, MARKET CAPITALIZATION, AND NATIONAL STOCK MARKET
RETURN. The following tables show the indexed market capitalization of
certain countries included in the Morgan Stanley Capital International
Indices (MSCI) database as of December 31, 1994 and the performance of
national stock markets as measured in U.S. dollars and in local currency by
the Morgan Stanley Capital International stock market indices for the
twelve months ended October 31, 1994. Of course, these results are not
indicative of future stock market performance or the classes' performance.
Market conditions during the periods measured fluctuated widely. Brokerage
commissions and other fees are not factored into the values of the indices.
MARKET CAPITALIZATION. Companies outside the United States now make up
nearly two-thirds of the world's stock market capitalization. According to
Morgan Stanley Capital International, the size of the markets as measured
in U.S. dollars grew from $2,011 billion in 1982 to $7,659 billion in
1994.The following table measures the indexed 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, 1994.
MSCI INDEX MARKET CAPITALIZATION
Australia $125.10 Japan $2,145.70
Austria 18.00 Netherlands 167.90
Belgium 49.30 Norway 19.90
Canada 171.10 Singapore/Malaysia 175.00
Denmark 35.30 Spain 74.30
France 265.60 Sweden 76.10
Germany 300.10 Switzerland 215.00
Hong Kong 196.50 United Kingdom 731.00
Italy 102.90 United States 2,784.70
The following table measures the total market capitalization of Latin
American countries according to the MSCI Index database. The value of the
markets is measured in billions of U.S. dollars as of December 31, 1994.
MSCI INDEX MARKET CAPITALIZATION - LATIN AMERICA
Argentina $ 23,742
Brazil 95,841
Chile 38,160
Colombia 7,764
Mexico 70,281
Venezuela 3,328
Total Latin America $ 239,116
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
months ended October 31, 1994. 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, dividends paid on stocks in the index, and
the effect of reinvesting dividends 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 2.932% Japan 8.122%
Austria -5.91 Netherlands 14.089
Belgium 13.47 Norway 15.120
Canada 1.173 Singapore/Malaysia 33.750/7.946
Denmark 7.285 Spain -1.426
France 2.592 Sweden 19.165
Germany 8.752 Switzerland 11.086
Hong Kong 2.047 United Kingdom 7.843
Italy 17.332 United States 1.679
STOCK MARKET PERFORMANCE (CUMULATIVE TOTAL RETURNS)
MEASURED IN LOCAL CURRENCY
Australia -2.232% Japan -3.213%
Austria -15.340 Netherlands 2.517
Belgium -3.057 Norway 3.208
Canada 3.599 Singapore/Malaysia 23.794/7.963
Denmark -6.058 Spain -7.860
France -9.690 Sweden 5.680
Germany -2.090 Switzerland 5.573
Hong Kong 2.034 United Kingdom -1.884
Italy 11.405 United States 1.679
The following table shows the average annualized stock market returns as of
October 31, 1994.
STOCK MARKET PERFORMANCE MEASURED IN U.S. DOLLARS
Five Years Ended Ten Years Ended
Germany 11.01% 18.19%
Hong Kong 31.98 30.82
Japan -1.87 17.68
Spain 1.52 19.61
United Kingdom 12.81 18.64
United States 9.51 13.60
Performance may be compared to the performance of other mutual funds in
general, or to the performance of particular types of mutual funds. These
comparisons may be expressed as mutual fund rankings prepared by Lipper
Analytical Services, Inc. (Lipper), an independent service located in
Summit, New Jersey that monitors the performance of mutual funds. Lipper
generally ranks funds on the basis of total return, assuming reinvestment
of distributions, but does not take sales charges or redemption fees into
consideration, and is prepared without regard to tax consequences. Lipper
may also rank bond funds based on yield. In addition to mutual fund
rankings, performance may be compared to stock, bond, and money market
mutual fund performance indices prepared by Lipper or other organizations.
When comparing these indices, it is important to remember the risk and
return characteristics of each type of investment. For example, while stock
mutual funds may offer higher potential returns, they also carry the
highest degree of share price volatility. Likewise, money market funds may
offer greater stability of principal, but generally do not offer the higher
potential returns from stock mutual funds.
From time to time, performance may also be compared to other mutual funds
tracked by financial or business publications and periodicals. For example,
a class may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Rankings that compare the
performance of Fidelity funds to one another in appropriate categories over
specific periods of time may also be quoted in advertising.
A class may be compared in advertising to Certificates of Deposit (CDs) or
other investments issued by banks or other depository institutions. Mutual
funds differ from bank investments in several respects. For example, a fund
may offer greater liquidity or higher potential returns than CDs, a fund
does not guarantee your principal or your return, and fund shares are not
FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; Fidelity Asset Allocation Program materials,
including computerized investment planning software and a workbook
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; questionnaires designed
to help create a personal financial profile; worksheets used to assess
savings needs based on assumed rates of inflation and hypothetical rates of
return; and action plans offering investment alternatives. Materials may
also include discussions of Fidelity's asset allocation funds and other
Fidelity funds, products, and services.
Each fund may be advertised as part of certain asset allocation programs
involving other Fidelity mutual funds. These asset allocation programs may
advertise a model portfolio and its performance results.
Each fund may be advertised as part of a no transaction fee ("NTF") program
in which Fidelity and non-Fidelity mutual funds are offered. The Fidelity
Spectrum Program, an NTF program offered to institutional clients, may
include the funds and may advertise performance results.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the classes.
Performance comparisons may also be made to other compilations or indices
that may be developed and made available in the future.
Each class of a bond fund may compare its performance or the performance of
securities in which that bond fund may invest to averages published by IBC
USA (Publications), Inc. of Ashland, Massachusetts. These averages assume
reinvestment of distributions. The Bond fund Report AverageS(trademark)/All
Taxable (Strategic Income, Government Investment, Limited Term Bond, High
Yield, Short-Fixed Income) covers over 488 taxable bond funds, The Bond
fund Report AverageS(trademark)/Municipal (Limited Term Tax-Exempt, High
Income Municipal, Short-Intermediate Tax-Exempt) covers over 433 tax-free
bond funds. The averages are reported in the BOND FUND REPORT(registered
trademark). When evaluating comparisons to money market funds, investors
should consider the relevant differences in investment objectives and
policies. Specifically, money market funds invest in short-term,
high-quality instruments and seek to maintain a stable $1.00 share price. A
bond fund, however, invests in longer-term instruments and its share price
changes daily in response to a variety of factors.
A tax-free bond fund may compare and contrast in advertising the relative
advantages of investing in a mutual fund versus an individual municipal
bond. Unlike tax-free mutual funds, individual municipal bonds offer a
stated rate of interest and, if held to maturity, repayment of principal.
Although some individual municipal bonds might offer a higher return, they
do not offer the reduced risk of a mutual fund that invests in many
different securities. The initial investment requirements and sales charges
of many tax-free mutual funds are lower than the purchase cost of
individual municipal bonds, which are generally issued in $5,000
denominations and are subject to direct brokerage costs.
VOLATILITY. Various measures of volatility and benchmark correlation may be
quoted in advertising. In addition, a fund may compare these measures to
those of other funds. Measures of volatility seek to compare a class'
historical share price fluctuations or total returns to those of a
benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data. In advertising, a fund
may also discuss or illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate a class's price movements over specific
periods of time. Each point on the momentum indicator represents the
class's percentage change in price movements over that period. Examples of
the effects of periodic investment plans, including the principle of dollar
cost averaging may be advertised. In such a program, an investor invests a
fixed dollar amount in a class at periodic intervals, thereby purchasing
fewer shares when prices are high and more shares when prices are low.
While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than
if fixed numbers of shares are purchased at the same intervals. In
evaluating such a plan, investors should consider their ability to continue
purchasing shares during periods of low price levels.
A class may be available for purchase through retirement plans or other
programs offering deferral of, or exemption from, income taxes, which may
produce superior after-tax returns over time. For example, a $1,000
investment earning a taxable return of 10% annually would have an after-tax
value of $1,949 after ten years, assuming tax was deducted from the return
each year at a 31% rate. An equivalent tax-deferred investment would have
an after-tax value of $2,100 after ten years, assuming tax was deducted at
a 31% rate from the tax-deferred earnings at the end of the ten-year
period.
As of December 31, 1994, FMR advised over $25 billion in tax-free fund
assets, $55 billion in money market fund assets, $165 billion in equity
fund assets, and $19 billion in international fund assets. The funds may
reference the growth and variety of money market mutual funds and the
adviser's innovation and participation in the industry. The "equity funds
under management" figure represents the largest amount of equity fund
assets under management by a mutual fund investment adviser in the United
States, making FMR America's leading equity (stock) fund manager. FMR, its
subsidiaries, and affiliates maintain a worldwide information and
communications network for the purpose of researching and managing
investments abroad, with over 90 employees in four foreign countries.
In addition to performance rankings, each class of each bond fund may
compare its total expense ratio to the average total expense ratio of
similar funds tracked by Lipper. A class's total expense ratio is a
significant factor in comparing bond and money market investments because
of its effect on yield.
Each fund may present its fund numbers, Quotron numbers and CUSIP numbers
and discuss or quote its current portfolio manager.
ADDITIONAL PURCHASE, EXCHANGE, AND REDEMPTION INFORMATION
Pursuant to Rule 22d-1 under the 1940 Act, FDC exercises its right to waive
Class A's maximum 4.75% (1.50% for Short-Fixed Income and
Short-Intermediate Tax-Exempt) sales charge in connection with the fund's
merger with or acquisition of any investment company or trust. In addition,
FDC has chosen to waive Class A's sales charge in certain instances because
of efficiencies involved in those sales of shares. The sales charge will
not apply:
1. to shares purchased by a bank trust officer, registered representative,
or other employee (and their immediate families) of Investment
Professionals under special arrangements in connection with FDC's sales
activities;
2.. to shares purchased 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. to shares purchased by a charitable organization (as defined in Section
501(c)(3) of the Internal Revenue Code) investing $100,000 or more;
4. to shares purchased for a charitable remainder trust or life income pool
established for the benefit of a charitable organization (as defined by
Section 501(c)(3) of the Internal Revenue Code);
5. to shares purchased by a trust institution or bank trust department
investing on their own behalf or on the behalf of their clients;
6. to shares purchased by accounts to which a bank or broker-dealer charges
an asset management fee, provided the bank or broker-dealer has an
Agreement with Distributors;
7. to shares purchased in connection with an employee benefit plan
(including the 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 and having more than 200 eligible
employees, or a minimum of $1,000,000 in plan assets invested in the assets
of which are held in a bona fide trust for the exclusive benefit of
employees participating therein;
8. to shares in a Fidelity IRA or Fidelity Advisor IRA account purchased
(including purchases by exchange) 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. to shares purchased 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 in assets invested in Fidelity Advisor funds;
10. to shares purchased by any state, county, city, or government
instrumentality, department or authority or agency; or
11. to shares purchased with redemption proceeds from other mutual fund
complexes on which the investor has paid a front-end or contingent deferred
sales charge.
QUANTITY DISCOUNTS. To obtain a reduction of the front-end sales charge on
Class A shares, 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.
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 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 a
single fiduciary account or for a single or a parent-subsidiary group of
"employee benefits plans" (as defined in Section 3(3) of ERISA); and
tax-exempt organizations as defined under Section 501(c)(3) of the Internal
Revenue Code.
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. The value of currently held Fidelity Advisor
Fund Class A and Class B shares, and 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, is determined at the current
day's NAV at the close of business, and is added to the amount of your new
purchase valued at the current offering price to determine your reduced
front-end sales charge.
LETTER OF INTENT. You may obtain Class A shares at the same reduced
front-end sales charge by filing a non-binding Letter of Intent (the
Letter) within 90 days of the start of Class A purchases. Each Class A
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 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 Advisor Short Fixed-Income fund or Advisor
Short-Intermediate Tax-Exempt fund) 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 Class A shares are purchased.
Neither income nor capital gain distributions taken 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 future 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 total purchase.
If you do not complete your purchase under the Letter within the 13-month
period, 30 days' written notice will be provided for you to pay the
increased front-end sales charges due. Otherwise, sufficient escrowed Class
A shares will be redeemed to pay such charges.
Each fund is open for business and the NAV for each class is calculated
each day the NYSE is open for trading. The NYSE has designated the
following holiday closings for 1995: New Year's Day (observed),
Washington's Birthday, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day. Although FMR expects the same
holiday schedule to be observed in the future, the NYSE may modify its
holiday schedule at any time. Each class's NAV is calculated as of the
close of the NYSE (normally 4:00 p.m. Eastern time). However, NAV may be
calculated earlier if trading on the NYSE is restricted or as permitted by
the SEC. To the extent that portfolio securities are traded in other
markets on days when the NYSE is closed, a class's NAV may be affected on
days when investors do not have access to the fund to purchase or redeem
shares. In addition, trading in some of a fund's portfolio securities may
not occur on days when the fund is open for business. 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 a fund's NAV. Shareholders receiving securities or other property
on redemption may realize a gain or loss for tax purposes, and will incur
any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, each fund is required to give
shareholders at least 60 days' notice prior to terminating or modifying its
exchange privilege. Under the Rule, the 60-day notification requirement may
be waived if (i) the only effect of a modification would be to reduce or
eliminate an administrative fee, redemption fee, or deferred sales charge
ordinarily payable at the time of an exchange, or (ii) the fund suspends
the redemption of the shares to be exchanged as permitted under the 1940
Act or the rules and regulations thereunder, or the fund to be acquired
suspends the sale of its shares because it is unable to invest amounts
effectively in accordance with its investment objective and policies.
In the prospectus, each fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
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 Fidelity with alternate instructions.
DIVIDENDS. A portion of a fund's income may qualify for the
dividends-received deduction available to corporate shareholders to the
extent that a fund's income is derived from qualifying dividends. Because a
fund may also earn other types of income, such as interest, income from
securities loans, non-qualifying dividends and short-term capital gains,
the percentage of dividends from the equity portfolios that qualify for the
deduction will generally be less than 100%. A fund will notify corporate
shareholders annually of the percentage of fund dividends which qualify for
the dividends received deduction. A portion of a fund's dividends derived
from certain U.S. Government obligations may be exempt from state and local
taxation. Gains (losses) attributable to foreign currency fluctuations are
generally taxable as ordinary income and therefore will increase (decrease)
dividend distributions. A fund will send each shareholder a notice in
January describing the tax status of dividends and capital gain
distributions for the prior year.
As a result of The Tax Reform Act of 1986, interest on certain "private
activity" securities (referred to as "qualified bonds" in the Internal
Revenue Code) is subject to the federal alternative minimum tax (AMT),
although the interest continues to be excludable from gross income for
other tax purposes. Interest from private activity securities will be
considered tax-exempt for purposes of a fund's policies of investing so
that at least 80% of its income is free from federal income tax. Interest
from private activity securities is a tax preference item for the purpose
of determining whether a taxpayer is subject to the AMT and the amount of
AMT tax to be paid, if any. Private activity securities issued after August
7, 1986 to benefit a private or industrial user or to finance a private
facility are affected by this rule.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by a 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 shareholders
have held their shares. If a shareholder receives a long-term capital gain
distribution on shares of a fund, and such shares are held six months or
less and are sold at a loss, the portion of the loss equal to the amount of
the long-term capital gain distribution will be considered a long-term loss
for tax purposes.
A portion of the gain on bonds purchased at a discount after April 30, 1993
and short-term capital gains distributed by a fund are federally taxable to
shareholders as dividends, not as capital gains. Distributions from the
short-term capital gains do not qualify for the dividends-received
deduction. Dividend distributions resulting from a recharacterization of
gain from the sale of bonds purchased at a discount after April 30, 1993
are not considered income for the purposes of a fund's policy of investing
so that at least 80% of its income is free from federal income tax.
As of December 31, 1994, Strategic Opportunities had a capital loss
carryover, available to offset future capital gains, of approximately
$1,141,000, which will expire on December 31, 2002.
As of October 31, 1994, Income & Growth had a capital loss carryover,
available to offset future capital gains, of approximately $18,212,000,
which will expire on October 31, 2002.
As of October 31, 1994, High Yield had a capital loss carryover, available
to offset future capital gains, of approximately $9,447,000, which will
expire on October 31, 2002.
As of October 31, 1994, Government Investment had a capital loss carryover,
available to offset future capital gains, of approximately $4,569,000,
which will expire on October 31, 2002.
As of November 30, 1994, Limited Term Bond had a capital loss carryover,
available to offset future capital gains, of approximately $6,852,000, of
which $5,673,000, $1,034,000, and $145,000 will expire on November 30,
1998, 1999, and 2002, respectively.
As of October 31, 1994, Short Fixed-Income had a capital loss carryover,
available to offset future capital gains, of approximately $18,238,000 of
which $1,000, $19,000, $128,000, $63,000, $286,000, $38,000, $336,000, and
$17,367,000 will expire between October 31, 1995 to October 31, 2002.
As of October 31, 1994, High Income Municipal had a capital loss carryover,
available to offset future capital gains, of approximately $3,173,000,
which will expire on October 31, 2002.
As of November 30, 1994, Limited Term Tax-Exempt had a capital loss
carryover, available to offset future capital gains, of approximately
$627,000, which will expire on November 30, 2002.
As of November 30, 1994, Short-Intermediate Tax-Exempt had a capital loss
carryover, available to offset future capital gains, of approximately
$8,000, which will expire on November 30, 2002.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Foreign governments may
also impose taxes on other payments or gains with respect to foreign
securities. If, at the close of its fiscal year, more than 50% of a fund's
total assets are invested in securities of foreign issuers, the fund may
elect to pass through foreign taxes paid and thereby allow shareholders to
take a credit or deduction on their individual tax returns.
STATE AND LOCAL TAXES. For mutual funds organized as business trusts, most
states' laws provide for a pass-through of the state and local income tax
exemption afforded to direct owners of U.S. government securities.
Therefore, for residents of most states, the tax treatment of your dividend
distributions from the Fund will be the same as if you directly owned your
proportionate share of the Fund's portfolio securities. Thus, because the
income earned on most U.S. government securities in which the fund invests
is exempt from state and local income taxes in most states, the portion of
your dividends from the Fund attributable to these securities will also be
free from income taxes in those states. The exemption from state and local
income taxation does not preclude states from assessing other taxes on the
ownership of U.S. government securities.
TAX STATUS OF THE FUNDS. Each fund has qualified and intends to continue to
qualify as a "regulated investment company" for tax purposes, so that it
will not be liable for federal tax on income and capital gains distributed
to shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes, each fund intends to
distribute substantially all of its net investment income and realized
capital gains within each calendar year as well as on a fiscal year basis.
Each 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 a 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 a fund's investments in
such instruments.
If a fund purchases shares in certain foreign investment entities, called
passive foreign investment companies (PFICs), it may be subject to U.S.
federal income tax on a portion of any excess distribution or gain from the
disposition of such shares. Interest charges may also be imposed on the
fund with respect to deferred taxes arising from such distributions or
gains.
Each fund is treated as a separate entity from the other funds in its
Trust, if any, for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting a fund and its shareholders, and
no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders of a fund may be subject to
state and local taxes on distributions received from a fund. Investors
should consult their tax advisors to determine whether a fund is suitable
for their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company organized
in 1972. Through ownership of voting common stock and the execution of a
shareholders' voting agreement, Edward C. Johnson 3d, Johnson family
members, and various trusts for the benefit of the Johnson family form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
Fidelity Investments Institutional Operations Company (FIIOC), which
performs shareholder servicing functions for institutional customers and
funds sold through intermediaries; and Fidelity Investments Retail
Marketing Company, which provides marketing services to various companies
within the Fidelity organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades require pre-clearance, and participation in initial public
offerings is prohibited. In addition, restrictions on the timing of
personal investing in relation to trades by Fidelity funds and on
short-term trading have been adopted.
TRUSTEES AND OFFICERS
The Board of Trustees and executive officers of the Trusts 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, MA 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., 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., 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). Until March 1990, Mr. Cox was President and Chief
Operating Officer of Union Pacific Resources Company (exploration and
production). He is a Director of Sanifill 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 is a member of 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 Corporation, Hyster-Yale Materials Handling, Inc., and RPM, Inc.
(manufacturer of chemical products, 1990). In addition, he serves as a
Trustee of First Union Real Estate Investments, a Trustee and member of
the Executive Committee of the Cleveland Clinic Foundation, a Trustee and
member of the Executive Committee of University School (Cleveland), and a
Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, One Harborside, 680 Steamboat Road, Greenwich, CT, Trustee,
is Executive-in-Residence (1995) at Columbia University Graduate School of
Business and a financial consultant. From 1987 to January 1995, Mr. Kirk
was a Professor at Columbia University Graduate School of Business. Prior
to 1987, he was Chairman of the Financial Accounting Standards Board. Mr.
Kirk is a Director of General Re Corporation (reinsurance) and 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, Vice Chairman of the Board of Trustees of the Greenwich Hospital
Association, and as a Member of the Public Oversight Board of the American
Institute of Certified Public Accountants' SEC Practice Section (1995).
*PETER S. LYNCH, Trustee (1990) is Vice Chairman and Director of FMR
(1992). Prior to May 31, 1990, he was a Director of FMR and Executive Vice
President of FMR (a position he held until March 31, 1991); Vice President
of Fidelity Magellan Fund and FMR Growth Group Leader; and Managing
Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity
Investments Corporate Services (1991-1992). He is a Director of W.R. Grace
& Co. (chemicals) and Morrison Knudsen Corporation (engineering and
construction). In addition, he serves as a Trustee of Boston College,
Massachusetts Eye & Ear Infirmary, Historic Deerfield 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, 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),
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, Trustee. 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
addition, he serves as a Trustee of Corporate Property Investors, the EPS
Foundation at Trinity College, the Naples Philharmonic Center for the Arts,
and Rensselaer Polytechnic Institute, and he is a member of the Advisory
Boards of Butler Capital Corporation Funds 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 of 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), Georgia Power Company (electric utility), Gerber Alley
& Associates, Inc. (computer software), National Life Insurance Company of
Vermont, American Software, Inc., and AppleSouth, Inc. (restaurants, 1992).
WILLIAM J. HAYES, Vice President (1994), is Vice President of Fidelity's
equity funds; Senior Vice President of FMR; and Managing Director of FMR
Corp.
ROBERT A. LAWRENCE, Vice President (1994), is Vice President of Fidelity's
high income funds and Senior Vice President of FMR (1993). Prior to
joining FMR, Mr. Lawrence was Managing Director of the High Yield
Department for Citicorp (1984-1991).
ARTHUR S. LORING, Secretary, is Senior Vice President (1993) and General
Counsel of FMR, Vice President-Legal of FMR Corp., and Vice President and
Clerk of FDC.
ROBERT H. MORRISON, Manager of Security Transactions of Fidelity's equity
funds, is Vice President of FMR.
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).
JOHN H. COSTELLO, Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, Assistant Treasurer (1994), is an employee of FMR (1994).
Prior to becoming Assistant Treasurer of the Fidelity funds, Mr. Rush was
Chief Compliance Officer of FMR Corp. (1993-1994); Chief Financial Officer
of Fidelity Brokerage Services, Inc. (1990-1993); and Vice President,
Assistant Controller, and Director of the Accounting Department - First
Boston Corp. (1986-1990).
MARGARET L. EAGLE, is Vice President of High Yield and an employee of FMR.
MICHAEL GRAY, is Vice President of Limited Term Bond (1989) and an employee
of FMR.
ROBERT HABER, is Vice President of Income & Growth (1989) and an employee
of FMR.
JOHN F. HALEY, JR., is Vice President of Limited Term Tax-Exempt and an
employee of FMR.
MALCOLM W. MacNAUGHT II, is Vice President of Global Resources (1991) and
an employee of FMR.
ROBERT STANSKY, is Vice President of Equity Portfolio Growth (1991) and of
other funds advised by FMR, and an employee of FMR.
GEORGE A. VANDERHEIDEN, is Vice President of Growth Opportunities (1990)
and an employee of FMR.
GUY E. WICKWIRE, is Vice President of High Income Municipal (1994) and an
employee of FMR.
The following table sets forth information describing the compensation of
each current non-interested trustee of each fund for his or her services as
trustee for the 1994 fiscal year ended as indicated.
COMPENSATION TABLE
Aggregate Compensation
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fiscal Period Ended: Ralph F. Phyllis Richard E. Donald Gerald C. Edward Marvin Thomas
10/31 - * Cox Burke J. Flynn Bradley J. Kirk McDonough H. L. Mann R.
11/30 - ** Davis Jones Malone Williams
12/31 - ***
Overseas* $ 190 $ 187 $ 229 $ 185 $ 187 $ 191 $ 194 $ 287 $ 188
Equity Portfolio 473 460 569 462 467 473 479 474 469
Growth**
Global Resources* 49 48 59 47 48 49 50 48 48
Growth 1,467 1,446 1,766 1,432 1,448 1,480 1,501 1,447 1,453
Opportunities*
Strategic 183 179 227 181 181 183 188 183 185
Opportunities***
Equity Income** 126 123 152 123 125 126 128 127 125
Income & Growth* 1,201 1,185 1,447 1,173 1,186 1,213 1,230 1,186 1,191
Emerging Markets 11 8 11 9 9 9 9 10 9
Income***+
High Yield* 296 292 356 288 292 299 303 292 292
Strategic 3 2 3 3 2 2 3 2 3
Income***+
Government 43 42 52 42 42 43 44 42 42
Investment*
Limited Term 139 136 168 136 138 139 141 139 138
Bond**
Short 400 395 481 391 396 405 410 395 396
Fixed-Income*
High Income 275 271 330 268 271 278 281 271 271
Municipal*
Limited Term 34 33 41 33 33 34 34 34 33
Tax-Exempt**
Short-Intermediate 5 4 6 5 5 5 5 5 5
Tax-Exempt**+
</TABLE>
+ Estimated
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Pension or Estimated Annual Total
Retirement Benefits Upon Compensation
Benefits Accrued Retirement from from the Fund
from the Fund the Fund Complex*
Complex* Complex*
Ralph F. Cox $ 5,200 $ 52,000 $ 125,000
Phyllis Burke Davis 5,200 52,000 122,000
Richard J. Flynn 0 52,000 154,500
E. Bradley Jones 5,200 49,400 123,500
Donald J. Kirk 5,200 52,000 125,000
Gerald C. McDonough 5,200 52,000 125,000
Edward H. Malone 5,200 44,200 128,000
Marvin L. Mann 5,200 52,000 125,000
Thomas R. Williams 5,200 52,000 126,500
</TABLE>
* Information is as December 31, 1994 for the 206 funds in the complex.
Under a retirement program that was adopted in July 1988 Trustees, upon
reaching age 72, become eligible to participate in a retirement program
under which they receive payments during their lifetime from a fund based
on their basic trustee fees and length of service. The obligation of a fund
to make such payments are not secured or funded. Trustees become eligible
if, at the time of retirement, they have served on the Board for at least
five years. Currently, Messrs. Ralph S. Saul, William R. Spaulding, Bertram
H. Witham, and David L. Yunich, all former non-interested Trustees, receive
retirement benefits under the program
Under a retirement program that 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 trustee fees and length of
service. Currently, Messrs. William R. Spaulding, Bertram H. Witham, and
David L. Yunich participate in the program.
On January 31, 1995 the trustees and officers owned in the aggregate less
than 1% of each fund's outstanding shares.
MANAGEMENT CONTRACT
Each fund employs FMR to furnish investment advisory and other services.
Under its management contract with each fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of each fund in accordance with its investment objective,
policies and limitations. FMR also provides each fund with all necessary
office facilities and personnel for servicing each fund's investments,
compensates all officers of each fund and all Trustees who are "interested
persons" of the Trust or of FMR, and all personnel of each fund or FMR
performing services relating to research, statistical, and investment
activities. In addition, FMR or its affiliates, subject to the supervision
of the Board of Trustees, provide the management and administrative
services necessary for the operation of each fund. These services include
providing facilities for maintaining each fund's organization; supervising
relations with custodians, transfer and pricing agents, accountants,
underwriters and other persons dealing with each fund; preparing all
general shareholder communications and conducting shareholder relations;
maintaining each fund's records and the registration of each fund's shares
under federal and state laws; developing management and shareholder
services for each fund; and furnishing reports, evaluations, and analyses
on a variety of subjects to the Trustees.
In addition to the management fee payable to FMR and the fees payable, as
applicable, to State Street Bank and Trust Company (State Street), transfer
agent for Class A shares of taxable funds; FIIOC, transfer agent for Class
B shares of taxable funds; FSC, pricing and bookkeeping agent for taxable
funds; and United Missouri Bank, N.A. (UMB), transfer agent and pricing and
bookeeping agent for non-taxable funds; each fund pays all of its expenses,
without limitation, that are not assumed by those parties. Each fund pays
for the typesetting, printing, and mailing of its proxy materials to
shareholders, legal expenses, and the fees of the custodian, auditor and
non-interested Trustees. Although each fund's current management contract
provides that each fund will pay for typesetting, printing, and mailing
prospectuses, statements of additional information, notices and reports to
shareholders, the Trust, on behalf of each fund has entered into a revised
transfer agent agreement, pursuant to which the transfer agent bears the
costs of providing these services to existing shareholders. Other expenses
paid by each fund include interest, taxes, brokerage commissions, each
fund's proportionate share of insurance premiums and Investment Company
Institute dues, and the costs of registering shares under federal and state
securities laws. Each fund is also liable for such non-recurring expenses
as may arise, including costs of any litigation to which each fund may be a
party, and any obligation it may have to indemnify its officers and
Trustees with respect to litigation.
State Street is transfer and shareholders' servicing agent for Class A
shares of the taxable funds. FIIOC is transfer and shareholders' servicing
agent for Class B shares of the Taxable Funds. UMB is the transfer and
shareholders' servicing agent for Class A and Class B shares of the
tax-free funds. On behalf of Class A shares of the Tax-Free Funds, UMB has
entered into sub-arrangements with State Street pursuant to which State
Street performs as transfer and shareholders' servicing agent. State Street
has further delegated certain transfer and shareholders' services for Class
A shares of the Tax-Free Funds to FIIOC. On behalf of Class B shares of
tax-free funds, UMB has entered into sub-arrangements with FIIOC pursuant
to which FIIOC performs as transfer and shareholders' servicing agent. For
every account, Class A and Class B of each fund pay an annual fee and an
asset based fee based on account size. The asset-based fees of the equity
and growth and income funds are subject to adjustment if the year-to-date
total return of the Standard & Poor's Composite Index of 500 Stocks is
greater than positive or negative 15%.
For accounts that State Street maintains on behalf of UMB, State Street
receives all such fees. For accounts that FIIOC maintains on behalf of UMB
or State Street, FIIOC receives all such fees. For accounts for which FIIOC
provides limited services, FIIOC receives a portion of related account fees
and asset-based fees, less applicable charges and expenses of State Street
for account maintenance and transactions.
State Street and FIIOC, as applicable, pay 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 all other reports, notices, and statements
to shareholders, with the exception of proxy statements.
FSC performs the calculations necessary to determine NAV and dividends for
Class A and Class B of each taxable fund, maintains each taxable fund's
accounting records and administers each taxable fund's securities lending
program. UMB has sub-arrangements with FSC pursuant to which FSC performs
the calculations necessary to determine the NAV and dividends for the Class
A and Class B of each tax-free fund, and maintains the accounting records
for each tax-free funds. The fee rates for pricing and bookkeeping services
are based on each fund's average net assets, specifically, 0.06% for the
first $500 million of average net assets and 0.03% 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 by the funds for the past three fiscal
years were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FUND 1994 1993 1992
Overseas $ 251,241 $ 57,711 $ 48,617
Equity Portfolio Growth $ 461,039 $ 234,813 $ 79,601
Global Resources $ 73,164 $ 45,425 $ 46,390
Growth Opportunities $ 758,343 $ 513,950 $ 236,689
Strategic Opportunities (10/1/94 - 12/31/94) $ 61,356 $ 145,494 $ 129,183
Strategic Opportunities (10/1/93 - 9/30/94) $ 215,648 $ N/A $ N/A
Equity Income $ 168,364 $ 113,026 $ 91,899
Income & Growth $ 750,743 $ 410,561 $ 148,775
Emerging Markets Income $ 36,412* $ N/A $ N/A
High Yield $ 223,567 $ 121,204 $ 46,036
Strategic Income $ 7,500* $ N/A $ N/A
Government Investment $ 46,218 $ 46,457 $ 45,676
Limited Term Bond $ 118,125 $ 81,106 $ 97,683
Short Fixed-Income $ 264,455 $ 143,813 $ 47,624
High Income Municipal $ 220,222 $ 157,559 $ 65,541
Limited Term Tax-Exempt $ 48,062 $ 45,724 $ 59,094
Short-Intermediate Tax-Exempt $ 31,953* $ N/A $ N/A
</TABLE>
* Emerging Markets Income, Strategic Income, and Short Intermediate
Tax-Exempt commenced operations on March 10, 1994, October 31, 1994, and
March 16, 1994, respectively.
FSC also receives fees for administering Limited Term Bond's securities
lending program. Securities lending fees are based on the number and
duration of individual securities loans. For the fiscal years ended 1994,
1993, and 1992, Limited Term Bond incurred securities lending fees of $0,
$0, and $25, respectively.
For the tax-free funds, the transfer agent fees and charges, and pricing
and bookkeeping fees described above are paid to FIIOC and FSC,
respectively, by UMB, which is entitled to reimbursement from the fund for
these expenses.
FMR is each fund's manager pursuant to management contracts approved by
shareholders on the dates shown in the table below. The management fee paid
to FMR is reduced by an amount equal to the fees and expenses of the
non-interested Trustees.
Fund Date of Management Contract Date of Shareholder Approval
Overseas 1/1/93 12/1/92
Equity Portfolio Growth 12/1/90 11/14/90
Global Resources 12/30/88 11/16/94
Growth Opportunities 1/1/95 12/14/94
Strategic Opportunities 11/29/90 12/19/90
Equity Income 8/1/86 7/23/86
Income & Growth 1/1/95 12/14/94
Emerging Markets Income 1/20/94 2/10/94
High Yield 1/1/95 12/14/94
Strategic Income 9/16/94 10/14/94
Government Investment 12/30/88 10/18/88
Limited Term Bond 1/1/95 12/14/94
Short Fixed Income 12/30/80 10/18/88
High Income Municipal 12/30/88 10/18/88
Limited Term Tax-Exempt 1/29/89 11/16/88
Short-Intermediate Tax-Exempt 1/21/94 2/10/94
For the services of FMR under the contract, Equity Income pays FMR a
monthly management fee at the annual rate of .50% of its average net assets
throughout the month. For the fiscal years ended November 30, 1994, 1993,
and 1992, FMR received $1,392,206, $933,830 and $736,344, respectively,
after reduction of fees and expenses of the non-interested Trustees.
For the services of FMR under the contract, Equity Portfolio Growth, Global
Resources, Income & Growth, Emerging Markets Income, High Yield, Strategic
Income, Government Investment, Limited Term Bond, Short Fixed-Income, High
Income Municipal, Limited Term Tax-Exempt, and Short-Intermediate
Tax-Exempt each pay FMR a monthly management fee composed of a basic fee.
For the services of FMR under the contract, Overseas, Growth Opportunities,
and Strategic Opportunities pay FMR a monthly management fee composed of
the sum of two elements: a basic fee and a performance adjustment based on
a comparison of Overseas, Growth Opportunities, and Strategic
Opportunities' performance to that of the S&P 500, EAFE, and the S&P 500,
respectively.
COMPUTING THE BASIC FEE. Overseas, Equity Portfolio Growth, Global
Resources, Growth Opportunities, Strategic Opportunities, Income & Growth,
Emerging Markets Income, High Yield, Strategic Income, Government
Investment, Limited Term Bond, Short Fixed Income, High Income Municipal ,
Limited Term Tax-Exempt, and Short-Intermediate Tax-Exempt's basic fee
rates are 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 of the registered investment companies with which FMR has management
contracts and is calculated on a cumulative basis pursuant to the graduated
fee rate schedule shown below on the left. Also shown below on the right is
the effective annual group fee rate schedule which is the result of
cumulatively applying the annualized rates at varying asset levels. For
example, the effective annual fee rate at $273 billion of group net assets
- - the approximate level for October 31, 1994 - was 0.3191% for equity funds
and 0.1561% for fixed income funds, which is the weighted average of the
respective fee rates for each level of group net assets up to that level.
The effective annual fee rate at $274 billion of group net assets - the
approximate level for November 30, 1994 - was 0.3190% for equity funds and
0.1560% for fixed income funds. The effective annual fee rate at $271
billion of group net assets - the approximate level for December 31, 1994 -
was 0.3193% for equity funds and 0.1563% for fixed income funds.
FIXED-INCOME FUNDS
The following fee schedule is the current fee schedule for all fixed-income
funds.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual Fee
Assets Rate Assets Rate
0 - $ 3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1690
24 - 30 .1800 200 .1652
30 - 36 .1750 225 .1618
36 - 42 .1700 250 .1587
42 - 48 .1650 275 .1560
48 - 66 .1600 300 .1536
66 - 84 .1550 325 .1514
84 - 120 .1500 350 .1494
120 - 156 .1450 375 .1476
156 - 192 .1400 400 .1459
192 - 228 .1350
228 - 264 .1300
264 - 300 .1275
300 - 336 .1250
336 - 372 .1225
Over 372 .1200
This fee schedule was approved by shareholders of all fixed-income funds
except Limited Term Tax-Exempt Fund. (See chart indicating Date of
Management Contract and Shareholder Approval.)
Under Limited Term Tax-Exempt Fund's current management contract, the group
fee rate is based on a schedule with breakpoints ending at .1400% for
average group net assets in excess of $174 billion. The following Fee
schedule is the fee schedule which was in effect through August 1, 1994,
and was either approved by shareholders or voluntarily adopted by FMR.
Group fee rate breakpoints shown for average group net assets in excess of
$120 billion and under $228 billion were voluntarily adopted by FMR, and
went into effect on January 1, 1992. Additional breakpoints for average
group net assets in excess of $228 billion were voluntarily adopted by FMR
on November 1, 1993.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints.
Each revised group fee rate schedule provides for lower management fee
rates as FMR's assets under management increase.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
0 - $ 3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1695
24 - 30 .1800 200 .1658
30 - 36 .1750 225 .1629
36 - 42 .1700 250 .1604
42 - 48 .1650 275 .1583
48 - 66 .1600 300 .1565
66 - 84 .1550 325 .1548
84 - 120 .1500 350 .1533
120 - 174 .1450 400 .1507
174 - 228 .1400
228 - 282 .1375
282 - 336 .1350
Over 336 .1325
EQUITY FUNDS
The following fee schedule is the current fee schedule for all equity funds
(except Equity Income, see above).
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual Fee
Assets Rate Assets Rate
0 - $ 3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3249
36 - 42 .3400 250 .3219
42 - 48 .3350 275 .3190
48 - 66 .3250 300 .3163
66 - 84 .3200 325 .3137
84 - 102 .3150 350 .3113
102 - 138 .3100 375 .3090
138 - 174 .3050 400 .3067
174 - 210 .3000
210 - 246 .2950
246 - 282 .2900
282 - 318 .2850
318 - 354 .2800
354 - 390 .2750
Over 390 .2700
This fee schedule was approved by shareholders of all equity funds except
Overseas, Equity Portfolio Growth, Strategic Opportunities, and Equity
Income (see chart indicating date of management contract and date of
shareholder approval.)
Under Overseas, Equity Portfolio Growth, and Strategic Opportunities'
current management contract, the group fee rate is based on a schedule with
breakpoints ending at .3000% for average group net assets in excess of $174
billion.
The following fee schedule is the fee schedule which was in effect through
August 1, 1994, and was either approved by shareholders or voluntarily
adopted by FMR.
Group fee rate breakpoints shown for average group net assets in excess of
$138 billion and under $228 billion were voluntarily adopted by FMR, and
went into effect on January 1, 1992. Additional breakpoints for average
group net assets in excess of $228 billion were voluntarily adopted by FMR
on November 1, 1993.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints.
Each revised group fee rate schedule provides for lower management fee
rates as FMR's assets under management increase.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
0 - $ 3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3253
36 - 42 .3400 250 .3223
42 - 48 .3350 275 .3198
48 - 66 .3250 300 .3175
66 - 84 .3200 325 .3153
84 - 102 .3150 350 .3133
102 - 138 .3100
138 - 174 .3050
174 - 228 .3000
228 - 282 .2950
282 - 336 .2900
Over 336 .2850
Based on the average group net assets of the funds advised by FMR for
December 1994, the annual basic fee rate would be calculated as follows:
Group Fee Rate Individual Fund Fee Rate Basic Fee Rate
Overseas
.3193% + .45% = .7693%
Equity Portfolio Growth
.3193% + .30%* = .6193%
Global Resources
.3193% + .45% = .7693%
Growth Opportunities
.3193% + .30% = .6193%
Strategic Opportunities
.3193% + .30% = .6193%
Income & Growth
.3193% + .20% = .5193%
Group Fee Rate Individual Fund Fee Rate Basic Fee Rate
Emerging Markets Income
.1563% + .55% = .7063%
High Yield
.1563% + .45% = .6063%
Strategic Income
.1563% + .45% = .6063%
Government Investment
.1563% + .30% = .4563%
Limited Term Bond
.1563% + .30%** = .4563%
Short Fixed-Income
.1563% + .30% = .4563%
High Income Municipal
.1563% + .25% = .4063%
Limited Term Tax-Exempt
.1563% + .25% = .4063%
Short-Intermediate Tax-Exempt
.1563% + .25% = .4063%
* Effective August 1, 1994, FMR voluntarily agreed to reduce the individual
fund fee rate from 0.33% to 0.30%. If this reduction were not in effect
during fiscal 1994, the total management fee would have been 0.65%.
** On December 14, 1994, shareholders of the fund approved an increase for
the individual fund fee rate from 0.25% to 0.30% effective February 24,
1995. If this increase were in effect during fiscal 1994, the total fee
would have been 0.46%.
One-twelfth of this annual basic fee rate is applied to each fund's net
assets averaged for the most recent month, giving a dollar amount, which is
the fee for that month.
COMPUTING THE PERFORMANCE ADJUSTMENT. The basic fee is subject to upward or
downward adjustment, depending upon whether, and to what extent, Strategic
Opportunities, Overseas, and Growth Opportunities' investment performance
for the performance period exceeds, or is exceeded by, the record of the
S&P 500, EAFE, and S&P 500, respectively (the Indices) over the same
period. Starting with the twelfth month, the performance adjustment takes
effect. Each month subsequent to the twelfth month, a new month is added to
the performance period until the performance period equals 36 months.
Thereafter, the performance period consists of the most recent month plus
the previous 35 months. Each percentage point of difference, calculated to
the nearest 1.0% (up to a maximum difference of +/- 10.00 ) is multiplied
by a performance adjustment rate of .02%. Thus, the maximum annualized
adjustment rate is +/- .20%. Strategic Opportunities is comprised of three
classes of shares: Initial Class shares, Class A shares and Class B shares.
Investment performance will be measured separately for each class, and the
least of the three results obtained will be used in calculating the
performance adjustment to the management fee paid by the fund. This
performance comparison is made at the end of each month. One twelfth (1/12)
of this rate is then applied to each fund's average net assets for the
entire performance period, giving a dollar amount which will be added to
(or subtracted from) the basic fee.
Each class's performance is calculated based on change in net asset value.
For purposes of calculating the performance adjustment, any dividends or
capital gain distributions paid by each class are treated as if reinvested
in that class's shares at the net asset value as of the record date for
payment. The record of the Index is based on change in value and is
adjusted for any cash distributions from the companies whose securities
compose the Index.
Because the adjustment to the basic fee is based on each class's
performance compared to the investment record of the Index, the controlling
factor is not whether each class's performance is up or down per se, but
whether it is up or down more or less than the record of the Index.
Moreover, the comparative performance of each class is based solely on the
relevant performance period without regard to the cumulative performance
over a longer or shorter period of time.
The table below shows the management fees received by FMR for its services
as investment adviser to the funds. The fees were equivalent to the
percentage of the average net assets of each fund, as indicated.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED:
10/31-* MANAGEMENT FEE AS A
11/30-** PERFORMANCE ADJUSTMENT PERCENTAGE OF
12/31-*** MANAGEMENT FEE + AVERAGE NET ASSETS
<S> <C> <C> <C>
OVERSEAS*
1994 $3,435,695 $133,032 (upward) .80%
1993 503,110 3,885 (downward) .77
1992 139,234 6,062 (downward) .75
EQUITY PORTFOLIO GROWTH **
1994 6,567,305 N/A .64
1993 2,646,631 N/A .66
1992 860,709 N/A .67
GLOBAL RESOURCES *
1994 890,892 N/A .77
1993 111,465 N/A .77
1992 49,323 N/A .79
GROWTH OPPORTUNITIES *
1994 22,087,985 2,130,192 (upward) .69
1993 8,250,306 709,376 (upward) .68
1992 2,747,645 240,501 (upward) .69
STRATEGIC OPPORTUNITIES *** +++
10/1/94 - 12/31/94 682,856 37,843 (upward) .67 (annualized)
10/1/93 - 9/30/94 2,582,584 359,674 (upward) .72
1993 1,291,906 81,040 (upward) .54
1992 1,087,250 268,871 (downward) .51
EQUITY INCOME **
1994 1,392,206 N/A .50
1993 933,830 N/A .50
1992 ++++ 736,344 N/A .50
INCOME & GROWTH *
1994 13,325,884 N/A .52
1993 4,578,813 N/A .53
1992 1,291,531 N/A .53
EMERGING MARKETS INCOME ***
1994 ++ 122,088 N/A .70
HIGH YIELD **
1994 3,737,959 N/A .60
1993 1,539,682 N/A .51
1992 397,638 N/A .52
STRATEGIC INCOME ***
1994 ++ 10,348 N/A .60
GOVERNMENT INVESTMENT **
1994 422,255 N/A .46
1993 186,973 N/A .46
1992 78,107 N/A .47
LIMITED TERM BOND **
1994 1,180,785 N/A .41
1993 818,426 N/A .42
1992 963,611 N/A .42
SHORT FIXED INCOME *
1994 $3,713,144 N/A .46%
1993 1,674,841 N/A .47
1992 368,993 N/A .47
HIGH INCOME MUNICIPAL **
1994 2,257,113 N/A .41
1993 1,314,060 N/A .42
1992 439,804 N/A .42
LIMITED TERM TAX-EXEMPT **
1994 286,027 N/A .41
1993 156,087 N/A .42
1992 268,825 N/A .42
SHORT INTERMEDIATE TAX-EXEMPT**
1994++ 31,109 N/A .41
</TABLE>
+ Management Fee includes performance adjustments for Overseas, Growth
Opportunities, and Strategic Opportunities.
++ Emerging Markets Income, Strategic Income, and Short Intermediate
Tax-Exempt commenced operations on March 10, 1994, October 31, 1994, and
March 16, 1994, respectively. Management fee percentages for these funds
are annualized.
+++ On November 9, 1994, the Board of Trustees voted to change Strategic
Opportunities' fiscal year end from September 30 to December 31.
++++Management fee does not include a voluntary reimbursement of 0.10% of
average net assets for the period December 1, 1991 to September 10, 1992.
FUND OPERATION EXPENSE REIMBURSEMENTS. FMR may, from time to time,
voluntarily reimburse all or a portion of a fund's operation expenses
(exclusive of interest, taxes, brokerage commissions, and extraordinary
expenses) above a specified percentage of average net assets. FMR retains
the ability to be repaid for these expense reimbursements in the amount
that expenses fall below the limit prior to the end of the fiscal year.
Expense reimbursements by FMR will increase each fund's total returns
and/or yield and reimbursement by each fund will lower its total returns
and/or yield.
FMR has voluntarily agreed to reimburse Class A and Class B of Emerging
Markets Income, Strategic Income, Government Investment, Limited Term Bond,
Limited Term Tax-Exempt, and Short-Intermediate Tax-Exempt-Class A to the
extent that total operating expenses (as a percentage of average net
assets) of each of their respective average net assets exceeds the
following: for Emerging Markets Income 1.50% for Class A and 2.25% for
Class B; for Strategic Income 1.35% for Class A and 2.10% for Class B; for
Government Investment 0.74% for Class A and 1.49% for Class B; for Limited
Term Bond 1.07% for Class A and 1.82% for Class B; for Limited Term
Tax-Exempt 0.90% for Class A and 1.65% for Class B; and for
Short-Intermediate Tax-Exempt 0.75% for Class A. If these agreements were
not in effect, other expenses and total operating expenses would have been:
Other Expenses Total Expenses
Class A Class B Class A Class B
Emerging Markets Income + 1.20% 0.90% 2.15% 2.60%
Strategic Income + 1.64% 0.89% 2.50%* 2.50%*
Government Investment 0.76% 0.95% 1.47% 2.62%+
Limited Term Bond 0.43% 1.12% 1.09% 2.41%+
Limited Term Tax-Exempt 0.38% 0.95% 1.04% 2.36%+
Short-Intermediate Tax-Exempt + 0.98% n/a 1.54% n/a
* Reflects limitations that would have been in effect under a state expense
limitation.
+ Annualized
To comply with the California Code of Regulations, FMR will reimburse each
fund if and to the extent that each 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 each fund's expenses for purposes of this regulation, each
fund may exclude interest, taxes, brokerage commissions, and extraordinary
expenses, as well as a portion of its distribution plan expenses and
custodian fees attributable to investments in foreign securities.
SUB-ADVISERS. On behalf of Strategic Opportunities, Global Resources,
Income & Growth, High Yield, Equity Income, Limited Term Bond, Equity
Portfolio Growth, and Short Fixed-Income, FMR has entered into sub-advisory
agreements with FMR U.K. and FMR Far East. On behalf of Overseas, 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. On
behalf of Emerging Markets Income, FMR has entered into sub-advisory
agreements with FMR U.K., FMR Far East, FIJ, 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 United States from the sub-advisers.
On behalf of Global Resources, Growth Opportunities, Income & Growth, High
Yield, Limited Term Bond, Emerging Markets Income, and Short Fixed-Income,
FMR may also grant FMR U.K. and FMR Far East investment management
authority as well as the authority to buy and sell securities if FMR
believes it would be beneficial to the funds.
Currently, FMR U.K., FMR Far East, FIJ, FIIA, and FIIAL U.K. each focus on
issuers in countries other than the United States such as those in Europe,
Asia, and the Pacific Basin. FMR U.K. and FMR Far East, which were
organized in 1986, are wholly owned subsidiaries of FMR. FIJ and FIIA are
wholly owned subsidiaries 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 throughout the world. Edward C. Johnson 3d, Johnson
family members, and various trusts for the benefit of the Johnson family
owns, directly or indirectly, more than 25% of the voting common stock of
FIL. FIJ was organized in Japan in 1986. FIIA was organized in Bermuda in
1983. FIIAL U.K. was organized in the United Kingdom in 1984, and is a
wholly owned subsidiary of Fidelity International Management Holdings
Limited, an indirect wholly owned subsidiary of FIL.Under the sub-advisory
agreements FMR pays the fees of FMR U.K., FMR Far East, FIJ, and FIIA.
FIIA, in turn, pays the fees of FIIAL U.K. For providing non-discretionary
investment advice and research services the sub-advisers are compensated as
follows:
(medium solid 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.
(medium solid bullet) FMR pays FIIA and FIJ fees equal to 30% of FMR's
monthly management fee with respect to the average net assets held by the
fund for which the sub-adviser has provided FMR with investment advice and
research services.
(medium solid 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.
On behalf of Global Resources, Growth Opportunities, Income & Growth,
Emerging Markets Income, High Yield, Short Fixed-Income, and Limited Term
Bond, for providing discretionary investment management and executing
portfolio transactions, the sub-advisers are compensated as follows:
(medium solid bullet) FMR pays FMR U.K., FMR Far East, FIJ, and FIIA a fee
equal to 50% of its monthly management fee (including any performance
adjustment, if applicable) with respect to the fund's average net assets
managed by the sub-adviser on a discretionary basis.
(medium solid bullet) FIIA pays FIIAL U.K. a fee equal to 110% of FIIAL
U.K.'s costs incurred in connection with providing discretionary investment
management services.
The table below shows the fees paid for providing investment advice and
research services by FMR to FMR U.K., FMR Far East, FIIA, and FIJ, and by
FIIA to FIIAL with respect to certain of the funds for the fiscal periods
ended 1994, 1993, and 1992.
FEES PAID TO FOREIGN SUB-ADVISERS
FUND FEES PAID BY FMR TO FMR U.K. FEES PAID BY FMR TO FMR FAR EAST
1994 1993 1992 1994 1993 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Overseas 153,288 14,363 13,189 174,129 22,357 16,736
Equity Portfolio Growth 13,191 3,144 2,425 15,192 5,021 2,126
Global Resources 2,598 N/A N/A 2,932 N/A N/A
Growth Opportunities 67,818 N/A N/A 82,741 N/A N/A
Strategic Opportunities 7,794 N/A N/A 7,712 N/A N/A
(10/1/93 - 9/30/94)
Strategic Opportunities 7,352 4,560 88 7,701 11,267 117
(10/1/94 - 12/31/94)
Equity Income 12,197 4,669 5,237 13,970 7,199 6,544
Income & Growth 248,936 N/A N/A 299,094 N/A N/A
TOTAL
</TABLE>
FEES PAID BY FMR TO FIIA FEES PAID BY FIIA TO FIIAL
1994 1993 1992 1994 1993 1992
Overseas 0 0 0 0 0 0
TOTAL
THE DISTRIBUTOR
Each fund has a Distribution Agreement with FDC, a Massachusetts
corporation organized July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc. The distribution agreement calls
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of a fund, which are continuously offered.
Promotional and administrative expenses in connection with the offer and
sale of shares are paid by FDC.
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved Distribution and Service Plans on behalf of
Class A and Class B shares of the funds (the Plans) pursuant to Rule 12b-1
under the 1940 Act (the Rule). The Rule provides in substance that a mutual
fund may not engage directly or indirectly in financing any activity that
is primarily intended to result in the sale of shares of a fund except
pursuant to a plan approved on behalf of the fund under the Rule. The
Plans, as approved by the Trustees, to allow Class A and Class B of the
funds and FMR to incur certain expenses that might be considered to
constitute direct or indirect payment by the funds of distribution
expenses.
Pursuant to the Plans, FDC is paid a distribution fee as a percentage of
Class A average net assets at an annual rate of up to 0.75% for Equity
Portfolio Growth and Strategic Opportunities; up to 0.40% for each of
Emerging Markets Income, High Yield, Strategic Income, Limited Term Bond,
High Income Municipal, and Limited-Term Tax-Exempt; up to 0.65% for each
of Overseas, Growth Opportunities, Global Resources, Equity Income, and
Income & Growth; and up to 0.15% for Short Fixed-Income and
Short-Intermediate Tax-Exempt; and FDC is paid a distribution fee as a
percentage of class B average net assets at an annual rate of 0.75% for all
funds with Class B shares. For the purpose of calculating the distributions
fees, average net assets are determined as of the close of business on each
day throughout the month, but excluding assets attributable to Class A
shares of Equity Portfolio Growth, Equity Income, Short-Intermediate
Tax-Exempt, Limited Term Tax-Exempt, Overseas, Strategic Opportunities,
Strategic Income, and Emerging Markets Income purchased more than 144
months prior to such day. Currently, the Trustees have approved a
distribution fee for Class A of Overseas, Equity Portfolio Growth, Equity
Income, Growth Opportunities, Global Resources, Strategic Opportunities,
and Income & Growth at an annual rate of 0.65% for Class A of Emerging
Markets Income, High Yield, Limited Term Bond, Government Investment, High
Income Municipal, and Limited Term Tax-Exempt at an annual rate of 0.25%,
and for Class A of Short Fixed-Income and Short-Intermediate Tax-Exempt at
an annual rate of 0.15% of average net assets. This fee may be increased
only when, in the opinion of the Trustees, it is in the best interests of
the shareholders of Class A to do so. Class B of each fund also pays
Investment Professionals a service fee at an annual rate of 0.25% of its
average daily net assets determined as of the close of business on each day
throughout the month for personal service and/or the maintenance of
shareholder accounts.
CLASS A DISTRIBUTION FEES
1992 1993 1994
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Paid to Paid to Paid to
Investment Investment Investment
Professionals Retained Professionals Retained Professionals Retained
by FDC Total Fees by FDC Total Fees by FDC Total Fees
FUND
Overseas 93,132 27,492 120,624 325,181 97,554 422,735 2,139,864 641,958 2,781,822
Equity Portfolio Growth 9,477 2,843 12,320 258,713 883,141 1,141,854 3,312,525 999,987 4,312,512
Global Resources 31,323 9,198 40,521 69,457 23,643 93,100 577,607 173,281 750,888
Growth Opportunities 2,004,271 559,131 2,563,402 5,996,770 1,799,030 7,795,800 16,056,714 4,817,016 20,873,730
Strategic Opportunities 993,375 273,263 1,266,638 1,092,965 330,491 1,423,456 470,225 141,067 611,292
Equity Income 614 136 750 94,623 28,435 123,058 441,208 132,362 573,570
Income & Growth 314,506 1,252,622 1,567,128 1,299,026 4,330,092 5,629,118 13,406,000 3,203,000 16,609,000
Emerging Markets Income N/A N/A N/A N/A N/A N/A 31,604 8,331 39,935
High Yield 190,342 0 190,342 745,985 0 745,985 1,526,214 0 1,526,214
Strategic Income N/A N/A N/A N/A N/A N/A 1,626 488 2,144
Government Investment 41,048 0 41,048 101,981 0 101,981 227,532 0 227,532
Limited Term Bond 549 0 549 56,220 0 56,220 264,949 0 264,949
Short Fixed-Income 117,265 0 117,265 538,933 0 538,933 1,212,008 0 1,212,008
High Income Municipal 41,048 0 41,048 101,981 0 101,981 1,374,438 0 1,374,438
Limited Term Tax- 576 0 576 38,552 0 38,552 138,512 0 138,512
Exempt
Short-Intermediate N/A N/A N/A N/A N/A N/A 11,446 0 11,446
Tax-Exempt
</TABLE>
CLASS B DISTRIBUTION FEES
1994
FUND SHAREHOLDER RETAINED TOTAL FEES
SERVICE BY FDC
FEES
Strategic Opportunities 7,964 23,892 31,856
Equity Income 16,215 54,580 70,795
Emerging Markets Income 3,215 9,771 12,986
High Yield 7,052 21,157 28,209
Strategic Income 2,155 6,465 8,620
Government Investment 817 2,449 3,266
Limited Term Bond 1,689 5,070 6,759
High Income Municipal 3,238 9,713 12,951
Limited Term Tax-Exempt 965 2,893 3,858
Under each Plan, if the payment of management fees by the funds to FMR is
deemed to be indirect financing by the funds of the distribution of their
shares, such payment is authorized by the Plans. Each Plan also
specifically recognizes that FMR, either directly or through FDC, may use
its management fee revenue, past profits, or other resources, without
limitation, to pay promotional and administrative expenses in connection
with the offer and sale of shares of the applicable class of each fund. In
addition, each 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 the applicable class of each fund or to third parties,
including banks, that render shareholder support services.
Each Plan has been approved by the Trustees. As required by the Rule, the
Trustees carefully considered all pertinent factors relating to the
implementation of each Plan prior to its approval, and have determined that
there is a reasonable likelihood that the Plan will benefit the applicable
class and its shareholders. To the extent that each Plan gives FMR and FDC
greater flexibility in connection with the distribution of shares of the
applicable class of each fund, additional sales of fund shares may result.
Furthermore, certain shareholder support services may be provided more
effectively under the Plans by local entities with whom shareholders have
other relationships.
None of the Plans provides for specific payments by the applicable class of
any of the expenses of FDC, or obligates FDC or FMR to perform any specific
type or level of distribution activities or incur any specific level of
expense in connection with distribution activities. After payments by FDC
for advertising, marketing and distribution, and payments to third parties,
the amounts remaining, if any, may be used as FDC may elect.
The Plans were approved by shareholders on the dates shown in the table
below:
DATE OF SHAREHOLDER APPROVAL
FUND CLASS A CLASS B
Overseas 10/90 05/26/94
Equity Portfolio Growth 9/25/86 05/26/94
Global Resources 12/01/94 N/A
Growth Opportunities 1/1/95 N/A
Strategic Opportunities 8/25/87 05/26/94
Equity Income 7/23/86 05/26/94
Income & Growth 1/1/95 1/1/95
Emerging Markets Income 2/10/94 N/A
High Yield 1/1/95 1/1/95
Strategic Income 10/14/94 10/14/94
Government Investment 1/1/95 1/1/95
Limited Term Bond 1/1/95 1/1/95
Short Fixed Income 1/1/95 1/1/95
High Income Municipal 12/1/94 12/1/94
Limited Term Tax-Exempt 11/5/86 5/26/94
Short-Intermediate Tax-Exempt 11/26/86 11/26/86
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services, or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the funds
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed
herein, and banks and financial institutions may be required to register as
dealers pursuant to state law.
Each fund may execute portfolio transactions with, and purchase securities
issued by, depository institutions that receive payments under the Plans.
No preference for the instruments of such depository institutions will be
shown in the selection of investments.
DESCRIPTION OF THE TRUSTS
TRUST ORGANIZATION. Equity Portfolio Growth is a series of Fidelity Advisor
Series I, an open-end management investment company organized as a
Massachusetts business trust by a Declaration of Trust dated June 24, 1983,
as amended and restated July 18, 1991, and as supplemented April 15, 1993.
On July 18, 1991, the name was changed from Equity Portfolio Growth to
Fidelity Broad Street Trust. On April 15, 1993, its name was changed by an
amendment to the Declaration of Trust from Fidelity Broad Street Trust:
Equity Portfolio: Growth to Fidelity Advisor Series I: Equity Portfolio
Growth.
Short-Fixed Income Fund, Government Investment Fund, High Yield Fund,
Growth Opportunities Fund, and Income & Growth Fund are series of Fidelity
Advisor Series II, an open-end management investment company organized as a
Massachusetts business trust by a Declaration of Trust dated April 24,
1986. On April 7, 1993, the Board of Trustees voted to change the name of
the Trust from Fidelity Diversified Trust to Fidelity Advisor Series II.
Equity Income Fund is a series of Fidelity Advisor Series III, an open-end
management investment company organized as a Massachusetts business trust
by a Declaration of Trust dated May 17, 1982. On January 29, 1986, the name
was changed from Equity Portfolio: Income to Fidelity Franklin Street
Trust. On April 15, 1993 the Trust's name was again changed to Fidelity
Advisor Series III.
Limited Term Bond Fund is a series of Fidelity Advisor Series IV, an
open-end management investment company organized as a Massachusetts
business trust by a Declaration of Trust dated May 6, 1983. On January 29,
1992 the name of the Trust was changed from Income Portfolios to Fidelity
Income Trust, and on April 15, 1993, the Board of Trustees voted to change
the Trust's name to Fidelity Advisor Series IV.
Global Resources Fund and High Income Municipal Fund are series of Fidelity
Advisor Series V, an open-end management investment company organized as a
Massachusetts business trust by a Declaration of Trust dated April 23,
1986, as amended and restated July 18, 1991, and as supplemented April 15,
1993. On July 18, 1991, the Board of Trustees voted to change the name of
the Trust from Plymouth Investment Series to Fidelity Investment Series,
and on April 15, 1993, the Board voted to change the Trust's name to
Fidelity Advisor Series V.
Short-Intermediate Tax-Exempt Fund and Limited Term Tax-Exempt Fund are
series of Fidelity Advisor Series VI, an open-end management investment
company organized as a Massachusetts business trust by a Declaration of
Trust dated June 1, 1983, as amended and restated May 5, 1993. On January
29, 1992, the name of the Trust was changed from Tax-Exempt Funds to
Fidelity Oliver Street Trust and on April 15, 1993 the Board of Trustees
voted to change the name of the Trust to Fidelity Advisor Series VI.
Overseas Fund is a series of Fidelity Advisor Series VII, an open-end
management investment company organized as a Massachusetts business trust
by a Declaration of Trust dated March 21, 1980 as amended and restated July
18, 1991 and as supplemented April 15, 1993. On July 18, 1991, the Board of
Trustees voted to change the name of the Trust from Plymouth Securities
Trust from Plymouth Investment Series 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.
Strategic Opportunities Fund, Strategic Income Fund, and Emerging Markets
Income Fund are series of Fidelity Advisor Series VIII, an open-end
management investment company organized as a Massachusetts business trust
by a Declaration of Trust dated September 23, 1983, as amended and restated
October 1, 1986 and as supplemented November 29, 1990. On April 15, 1993
the name of the Trust was changed from Fidelity Special Situations Fund to
Fidelity Advisor Series VIII.
Each Declaration of Trust permits the Trustees to create additional funds.
In the event that FMR ceases to be the investment adviser to a fund, the
right of the Trust or fund to use the identifying name "Fidelity" may be
withdrawn.
The assets of the Trust received for the issue or sale of shares of each
series and all income, earnings, profits, and proceeds thereof, subject
only to the rights of creditors, are especially allocated to such series,
and constitute the underlying assets of such fund. The underlying assets of
each series are segregated on the books of account, and are to be charged
with the liabilities with respect to such fund and with a share of the
general expenses of the Trust. Expenses with respect to the Trust are to be
allocated in proportion to the asset value of the respective series, except
where allocations of direct expense can otherwise be fairly made. The
officers of the Trust, subject to the general supervision of the Board of
Trustees, have the power to determine which expenses are allocable to a
given series, or which are general or allocable to all of the series. In
the event of the dissolution or liquidation of the Trust, shareholders of
each series are entitled to receive as a class the underlying assets of
such series available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. Each Trust is an entity of the type
commonly known as "Massachusetts business trust." Under Massachusetts law,
shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. 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 the Trustees include a provision limiting the obligations created
thereby to the Trust and its assets. The Declaration of Trust provides for
indemnification out of each fund's property of any shareholders held
personally liable for the obligations of the fund. The Declaration of Trust
also provides that each fund shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the fund
and satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to
circumstances in which the fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for neglect or wrongdoing,
but nothing in the Declaration of Trust protects a Trustee against any
liability to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties in the conduct of his office. Claims asserted against Class A shares
may subject holders of Class B shares to certain liabilities and claims
asserted against Class B shares may subject holders of Class A shares to
certain liabilities.
VOTING RIGHTS. A 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 a Trust, a fund, or class
of a fund may, as set forth in the Declaration of Trust, call meetings of
the Trust, fund or class, as applicable, for any purpose, related to the
Trust, fund, or class, as the case may be, including the case of meeting of
the Trust, the purpose of voting on removal of one or more Trustees. The
Trust or any fund may be terminated upon the sale of its assets to another
open-end management investment company, or upon liquidation and
distribution of its assets, if approved by vote of the holders of a
majority of the outstanding shares of the funds of Advisor Series I, III,
VI, VII, and VIII, or, as determined by the current value of each
shareholder's investment in the funds of Advisor Series II, IV, and V. If
not so terminated, the Trust and funds will continue indefinitely. Global
Resources, Strategic Opportunities, Emerging Markets Income, High Yield,
Strategic Income, Government Investment, Limited Term Bond, Short
Fixed-Income, and High Income Municipal may invest all of their assets in
another investment company.
As of January 31, 1995, the following owned of record or beneficially more
than 5% of the outstanding shares of the classes of the following Fidelity
Advisor funds:
Equity Portfolio Growth-Class A: Cigna Securities, Inc., Hartford, CT (10%)
Growth Opportunities-Class A: Cigna Securities, Inc., Hartford, CT (24%)
Strategic Opportunities-Class A: Cigna Securities, Inc., Hartford, CT (8%);
Merrill Lynch, Pierce, Fenner & Smith,
Jacksonville, FL (18%)
Strategic Opportunities-Class B: Merrill Lynch, Pierce, Fenner & Smith,
Jacksonville, FL (5%)
Equity Income-Institutional Class: First National Bank of Ohio, Akron, OH
(9%)
Income & Growth-Class A: Cigna Securities, Inc., Hartford, CT (22%)
Government Investment-Class B: SouthWest Securities, Dallas, TX (5%)
Limited Term Bond-Class A: Trust Company of America, Boulder, CO (11%)
Limited Term Bond-Class B: State Street Bank and Trust Company, Decatur, GA
(5%)
Limited Term Bond-Institutional Class: First National Bank of Ohio, Akron,
OH (8%); First National Bank of Commerce,
New Orleans, LA (5%); Hawkeye Trust Division, Des Moines, IA (6%)
High Income Municipal-Class B: Merrill Lynch, Pierce, Fenner & Smith,
Jacksonville, FL (5%)
Limited Term Tax-Exempt-Class A: Merrill Lynch, Pierce, Fenner & Smith,
Jacksonville, FL (9%)
Limited Term Tax-Exempt-Class B: Donaldson, Lufkin & Jenrette, Jersey City,
NJ (17%)
Short-Intermediate Tax-Exempt-Class A: David W. Dowdy, Colleyville, TX
(5%); National Financial Services Corporation,
Honolulu, HI (11%)
CUSTODIANS. Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts, is custodian of the assets of Global Resources, Growth
Opportunities, and Strategic Opportunities. The Chase Manhattan Bank, 1211
Avenue of the Americas, New York, New York, is custodian of the assets of
Overseas, Equity Portfolio Growth, Equity Income, Income & Growth, and
Emerging Markets Income. The Bank of New York, 110 Washington Street, New
York, New York, is custodian of the assets of High Yield, Strategic Income,
Government Investment, Limited Term Bond, and Short Fixed Income. United
Missouri Bank, 1010 Grand Avenue, Kansas City, Missouri, is custodian of
the assets of High Income Municipal, Limited Term Tax-Exempt, and
Short-Intermediate Tax-Exempt. The custodian is responsible for the
safekeeping of the fund's assets and the appointment of subcustodian banks
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 a fund. A fund may, however, invest in obligations of
the custodian and may purchase securities from or sell securities 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 custodians for certain of the funds advised by
FMR. The Boston branch of the fund's custodian bank leases its office space
from an affiliate of FMR at a lease payment which, when entered into, was
consistent with prevailing market rates. Transactions that have occurred to
date have included mortgages and personal and general business loans. In
the judgment of FMR, the terms and conditions of those transactions were
not influenced by existing or potential custodial or other fund
relationships.
AUDITOR. Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts 02109 serves as the independent accountant for Equity
Portfolio Growth, Global Resources, Growth Opportunities, Strategic
Opportunities, Equity Income, Income & Growth, Emerging Markets Income,
High Yield, Strategic Income, Government Investment, Limited Term Bond,
Short Fixed Income, High Income Municipal, Limited Term Tax-Exempt, and
Short-Intermediate Tax-Exempt. Price Waterhouse LLP, 160 Federal Street,
Boston, Massachusetts 02110, serves as the independent accountant for
Overseas. The auditor examines financial statements for each fund and
provides other audit, tax, and related services.
FINANCIAL STATEMENTS
Each class's financial statements and financial highlights for the fiscal
period ended October 31, November 30, or December 31, 1994, as appropriate,
are included in the Annual Reports, which are separate reports supplied
with this SAI. Each class's financial statements and financial highlights
are incorporated herein by reference.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of
each investment by the number of days remaining to its maturity, adding
these calculations, and then dividing the total by the value of the fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
Also, the maturities of mortgage-backed securities and some asset-backed
securities, such as collateralized mortgage obligations, are determined on
a weighted average life basis, which is the average time for principal to
be repaid. For a mortgage security, this average time is calculated by
estimating the expected principal payments during the life of the mortgage.
The weighted average life of these securities is likely to be substantially
shorter than their stated final maturity.
