SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 2-55725)
UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.
Post-Effective Amendment No. 82 [X]
and
REGISTRATION STATEMENT (No. 811-2720)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 82 [X]
Fidelity Municipal Trust
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: 617-570-7000
Arthur S. Loring, Secretary
82 Devonshire Street
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) immediately upon filing pursuant to paragraph (b).
( ) on ( ) pursuant to paragraph (b).
( ) 60 days after filing pursuant to paragraph (a)(1).
(X) on (October 31, 1997) pursuant to paragraph (a)(1) of Rule 485.
( ) 75 days after filing pursuant to paragraph (a)(2).
( ) on ( ) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date for a
previously filed
post-effective amendment.
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and filed the Notice required by such Rule
on February 27, 1997.
FIDELITY ADVISOR FUNDS CLASS A, CLASS T, CLASS B, AND CLASS C PROSPECTUS
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b,c .............................. Contents; Who May Want to Invest
3 a .............................. Financial Highlights
b .............................. *
c .............................. Performance, Appendix B
d .............................. Cover Page; Performance
4 a i............................. Charter
ii........................... Investment Principles and Risks
b .............................. Investment Principles and Risks
c .............................. Who May Want to Invest; Investment Principles
and Risks
5 a .............................. Charter
b i............................. Cover Page; Charter
ii........................... Charter
iii.......................... Expenses; Breakdown of Expenses
c .............................. Charter
d .............................. Charter; Breakdown of Expenses
e .............................. Charter; Breakdown of Expenses
f .............................. Expenses
g i............................. Charter
ii........................... *
5A .............................. *
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares; Investor
Services; Transaction Details; Exchange
Restrictions; Sales Charge Reductions and Waivers
iii.......................... Charter
b ............................. Charter
c .............................. Transaction Details; Exchange Restrictions
d .............................. Who May Want to Invest
e .............................. Cover Page; How to Buy Shares; How to Sell
Shares; Investor Services; Exchange Restrictions;
Sales Charge Reductions and Waivers
f, g .............................. Dividends, Capital Gains, and Taxes
h .............................. Who May Want to Invest
7 a .............................. Cover Page; Charter
b .............................. How to Buy Shares; Transaction Details
c .............................. Sales Charge Reductions and Waivers
d .............................. How to Buy Shares
e .............................. Breakdown of Expenses; Transaction Details
f .............................. Expenses; Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how each
fund invests and the services available to shareholders.
To learn more about each fund and its investments, you can obtain a copy of
a fund's most recent financial report and portfolio listing or a copy of
the Statement of Additional Information (SAI) dated October 31 ,
1997. The SAI has been filed with the Securities and Exchange Commission
(SEC) and is available along with other related materials on the SEC's
Internet Web site (http://www.sec.gov). The SAI is incorporated herein by
reference (legally forms a part of the prospectus). For a free copy of
either document, 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, FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT
TO INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL AMOUNT INVESTED.
HIGH YIELD AND STRATEGIC IN COME MAY INVEST
SIGNIFICANTLY IN LOWE R- QUALITY DEBT SECURITIES, SOMETIMES
CALLED "JUNK BONDS." T HESE SECURITIES CARRY GREATER RISKS, SUCH AS
THE RISK OF DEFAULT, THAN OTHER DEBT SECURITIES.
LIKE ALL MUTUAL FUNDS, THESE
SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR
ADEQU ACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
ACOM-pro- 0297-01
GROWTH FUNDS: Classes
Fidelity Advisor TechnoQuant(trademark) Growth Fund A,T,B, C Fidelity
Advisor Mid Cap Fund A,T,B, C Fidelity Advisor Equity Growth Fund
A,T,B, C Fidelity Advisor Growth Opportunities Fund A,T,B, C
Fidelity Advisor Strategic Opportunities Fund A,T,B Fidelity Advisor Large
Cap Fund A,T,B, C
FIDELITY ADVISOR FUNDS
CLASS A, CLASS T, CLASS B,
AND CLASS C
GROWTH AND INCOME FUNDS:
Fidelity Advisor Growth & Income Fund A,T,B, C Fidelity Advisor
Equity Income Fund A,T,B, C Fidelity Advisor Balanced Fund
A,T,B, C
TAXABLE INCOME FUNDS:
Fidelity Advisor High Yield Fund A,T,B, C Fidelity Advisor Strategic
Income Fund A,T,B ,C Fidelity Advisor Mortgage Securities Fund A,T,B
Fidelity Advisor Government Investment Fund A,T,B ,C Fidelity Advisor
Intermediate Bond Fund A,T,B ,C Fidelity Advisor Short Fixed-Income
Fund A,T, C
MUNICIPAL FUNDS:
Fidelity Advisor High Income Municipal Fund A,T,B ,C Fidelity Advisor
Municipal Bond Fund A,T,B Fidelity Advisor Intermediate Municipal
Income Fund A,T,B ,C Fidelity Advisor Short-Intermediate Municipal
A,T
Income Fund
STATE MUNICIPAL FUNDS:
Fidelity Advisor California Municipal Income A,T,B Fund
Fidelity Advisor New York Municipal Income Fund A,T,B
PROSPECTUS
OCTOBER 31 , 1997(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET,
BOSTON, MA 02109
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
KEY FACTS 1 WHO MAY WANT TO INVEST
2 EXPENSES Each class's sales charge (load) and its yearly
operating expenses.
14 FINANCIAL HIGHLIGHTS A summary of each fund's financial
data.
15 PERFORMANCE How each fund has done over time.
THE FUNDS IN DETAIL 27 CHARTER How each fund is organized.
29 INVESTMENT PRINCIPLES AND RISKS Each fund's overall
approach to investing.
38 BREAKDOWN OF EXPENSES How operating costs are
calculated and what they include.
YOUR ACCOUNT 43 TYPES OF ACCOUNTS Different ways to set up your
account, including tax-sheltered retirement plans.
44 HOW TO BUY SHARES Opening an account and making
additional investments.
46 HOW TO SELL SHARES Taking money out and closing your
account.
47 INVESTOR SERVICES Services to help you manage your
account.
SHAREHOLDER AND ACCOUNT POLICIES 50 DIVIDENDS, CAPITAL GAINS, AND TAXES
51 TRANSACTION DETAILS Share price calculations and the
timing of purchases and redemptions.
56 EXCHANGE RESTRICTIONS
56 SALES CHARGE REDUCTIONS AND WAIVERS
58 APPENDIX A
60 APPENDIX B
</TABLE>
KEY FACTS
WHO MAY WANT TO INVEST
Class A, Class T, Class B, and Class C shares are offered to
investors who engage an investment professional for investment advice.
TechnoQuant(Trademark) Growth, Mid Cap, Equity Growth, Growth
Opportunities, Strategic Opportunities, Large Cap, Growth & Income, Equity
Income, Balanced, High Yield, Mortgage Securities, Government Investment,
Intermediate Bond, Short Fixed-Income, High Income Municipal, Municipal
Bond, and Intermediate Municipal Income are diversified funds.
Strategic Income, Short-Intermediate Municipal Income, California Municipal
Income, and New York Municipal Income are non-diversified funds.
Non-diversified funds may invest a greater portion of their assets in
securities of individual issuers than diversified funds. As a result,
changes in the market value of a single issuer could cause greater
fluctuations in share value than would occur in a more diversified fund.
TechnoQuant Growth, Mid Cap, Equity Growth, Growth Opportunities, Strategic
Opportunities, Large Cap, Growth & Income, Equity Income, and Balanced are
designed for investors who are willing to ride out stock market
fluctuations in pursuit of potentially high long-term returns. TechnoQuant
Growth, Mid Cap, Equity Growth, Growth Opportunities, Strategic
Opportunities, and Large Cap 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. Growth & Income, Equity
Income, and Balanced are designed for those investors who seek a
combination of growth and income from equity and some bond investments.
TechnoQuant Growth is designed to provide an alternative to more
traditional styles of investing for growth-oriented investors. The fund
utilizes computer-aided quantitative analysis emphasizing technical
factors, such as historical price and volume relationships.
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.
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
additional diversification and participate in growth opportunities around
the world.
Mortgage Securities is designed for investors who seek high current income
from a portfolio of mortgage-related securities of all types.
Government Investment is designed for investors who seek high current
income from a portfolio of U.S. Government securities in a manner
consistent with preserving principal.
Intermediate Bond and Short Fixed-Income are designed for investors who
seek high current income from a portfolio of investment-grade debt
securities consistent with capital preservation.
High Income Municipal, Municipal Bond, Intermediate Municipal Income, and
Short-Intermediate Municipal Income are designed for investors in higher
tax brackets who seek high current income that is free from federal income
tax. Municipal Bond, Intermediate Municipal Income, and Short-Intermediate
Municipal Income also invest consistent with consideration of capital
preservation. High Income Municipal may invest in lower-quality
municipal securities which involve greater risk than investment-grade
securities.
California Municipal Income is designed for investors in higher tax
brackets who seek high current income that is free from federal and
California personal income taxes. New York Municipal Income is designed for
investors in higher tax brackets who seek high current income that is free
from federal and New York State and City personal income taxes.
The value of each fund's investments and, as applicable, the income they
generate, will vary from day to day, and generally reflect changes in
market conditions, interest rates and other company, political, and
economic news. In the short term, stock prices can fluctuate dramatically
in response to these factors. The securities of small, less well-known
companies may be more volatile than those of larger companies. Bond values
fluctuate based on changes in interest rates and the credit quality of the
issuer, and may be subject to prepayment risk, which can limit their price
appreciation potential in periods of declining interest rates. Over time,
however, stocks, although more volatile, have shown greater growth
potential than other types of securities. Investments in foreign securities
may involve risks in addition to those of U.S. investments, including
increased political and economic risk, as well as exposure to currency
fluctuations.
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.
Each fund is composed of multiple classes of shares. All classes of a fund
have a common investment objective and investment portfolio. Class A and
Class T shares have a front-end sales charge and pay a 12b-1 fee.
Class A and Class T shares may be subject to a contingent deferred
sales charge (CDSC). Class B and Class C shares do not have a
front-end sales charge, but do have a CDSC, and pay a 12b-1 fee.
Institutional Class shares have no sales charge and do not pay a
12b-1 fee, but are available only to certain types of investors.
See "Sales Charge Reductions and Waivers," page 56, for Institutional
Class eligibility information. You may obtain more information about
Institutional Class shares, which are not offered through this prospectus,
by calling 1-800-843-3001 or from your investment professional.
The performance of one class of shares of a fund may be different from
the performance of another class of shares of the same fund because of
different sales charges and class expenses. Contact your investment
professional to discuss which class is appropriate for you.
In determining which class of shares is appropriate for you, you should
consider, among other factors, the amount you plan to invest, the length of
time you intend to hold your shares, your eligibility for a sales charge
waiver or reduction, and the package of services provided to you by your
investment professional and the overall costs of those services.
In general, Class A shares have higher costs than Class T shares over a
short holding period because Class A shares have a higher front-end sales
charge, and Class A shares have lower costs than Class T shares over a
longer holding period because Class A shares have lower 12b-1 fees. If you
are planning to invest a significant amount either at one time or through a
regular investment program, you should consider the reduced front-end sales
charges available on Class A and Class T shares. If you are eligible for a
front-end sales charge waiver on a purchase of both Class A and Class T
shares, Class A shares generally will have lower costs than Class T shares
because Class A shares have lower 12b-1 fees. However, you should evaluate
the overall costs of purchasing Class A shares or Class T shares in the
context of the package of services provided to you by your investment
professional. See "Transaction Details," page __, and "Sales Charge
Reductions and Waivers," page 56, for sales charge reduction and waiver
information.
If you prefer not to pay a front-end sales charge, you should consider
Class B or Class C shares. While Class B and Class C shares are subject to
higher ongoing costs than Class A or Class T shares, in general because of
their higher 12b-1 fees, Class B and Class C shares are sold with a CDSC
instead of a front-end sales charge so your entire purchase amount is
immediately invested. In general, Class B shares have higher costs than
Class C shares over a short holding period because Class B shares have a
higher CDSC that declines over a maximum of six years, and Class B shares
have lower costs than Class C shares over a longer period because Class B
shares convert to Class A shares after a maximum of seven years. Please
note that purchase amounts of more than $250,000 will not be accepted for
Class B shares, that purchase amounts of more than $1,000,000 will not be
accepted for Class C shares, and that Class A or Class T shares may have
lower costs for investments that qualify for a front-end sales charge
reduction or waiver. If you sell your Class B shares of the
Intermediate-Term Bond Funds within three years or your Class B shares of
the Bond Funds and the Equity Funds within six years, you will normally pay
a CDSC that varies depending on how long you have held your shares. If you
sell your Class C shares within one year, you will normally pay a 1.00%
CDSC. See "Transaction Details," page 51, for CDSC schedules and related
information. Class B shares will automatically convert to Class A shares
after a holding period of four years for the Intermediate-Term Bond Funds
and seven years for the Bond Funds and the Equity Funds. Class C shares do
not convert to another class of shares. See "Transaction Details," page 51,
for conversion information.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy or
sell shares of a fund. In addition, you may be charged an annual account
maintenance fee if your account balance falls below $2,500. Lower front-end
sales charges may be available with purchases of $50,000 or more. See
"Transaction Details," page 51, for an explanation of how and when these
charges apply.
A CDSC is imposed on Class B shares only if you redeem Class B shares
within three years of purchase for the Intermediate -Term
Bond Funds , or within six years of purchase for the Bond Funds
and the Equity Funds . A CDSC is imposed on Class C shares only if
you redeem Class C shares within one year of purchase. See "Transaction
Details," page 51, for information about the CDSC.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Clas Clas Clas Class
s A s T s B C
Maximum sales charge (as a % 5.75 3.50 None None
of offering price) on purchases % %
of: TechnoQuant Growth, Mid
Cap, Equity Growth, Growth
Opportunities, Strategic
Opportunities*, Large Cap,
Growth & Income, Equity
Income, and Balanced (the
Equity Funds)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum sales charge (as a % 4.75 3.50 None None
of offering price) on purchases % %
of: High Yield, Strategic Income,
Mortgage Securities*,
Government Investment, High
Income Municipal, Municipal
Bond*, California Municipal
Income*, and New York
Municipal Income* (the Bond
Funds)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum sales charge (as a % 3.75 2.75 None None
of offering price) on purchases % %
of: Intermediate Bond and
Intermediate Municipal Income
(the Intermediate-Term Bond
Funds)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum sales charge (as a % 1.50 1.50 ** None
of offering price) on purchases % %
of: Short Fixed-Income and
Short-Intermediate Municipal
Income* (the Short-Term Bond
Funds)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum CDSC for all Equity None None 5.00[ 1.00%
and Bond Funds (as a % of the [A] [A] B] [D]
lesser of original purchase price
or redemption proceeds)
Maximum CDSC for the None None 3.00[ 1.00%
Intermediate-Term Bond Funds [A] [A] C] [D]
(as a % of the lesser of original
purchase price or redemption
proceeds)
Maximum CDSC for Short None None ** 1.00%
Fixed-Income and [A] [A] [D]
Short-Intermediate Municipal
Income* (as a % of the lesser of
original purchase price or
redemption proceeds)
Maximum sales charge on None None None None
reinvested distributions
Redemption Fee None None None None
Exchange Fee None None None None
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Annual account maintenance $12. $12. $12. $12.0
fee
00 00 00 0
(for accounts under $2,500)
</TABLE>
* FUND DOES NOT OFFER CLASS C SHARES.
** FUNDS DO NOT OFFER CLASS B SHARES.
[A] A CDSC OF 0.25% IS ASSESSED ON CERTAIN REDEMPTIONS OF CLASS A
AND CLASS T SHARES ON WHICH A FINDER'S FEE WAS PAID. SEE "TRANSACTION
DETAILS , " PAGE 51.
[B] DECLINES OVER 6 YEARS FROM 5.00% TO 0%.
[C] DECLINES OVER 3 YEARS FROM 3.00% TO 0%.
[D] ON CLASS C SHARES REDEEMED WITHIN 1 YEAR OF PURCHASE.
ANNUAL OPERATING EXPENSES are paid out of each fund's assets. Each fund
pays a management fee to Fidelity Management & Research Company (FMR) that,
for 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, Class T, Class B, and Class C include a
distribution fee and, for Class B and Class C, a shareholder service fee.
Distribution fees are paid by each class of each fund 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 and Class C of
the funds to FDC for services and expenses in connection with
providing personal service to and/or maintenance of Class B and
Class C 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., 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 38).
The following figures are based on estimated or historical expenses,
adjusted to reflect current fees, of each class of each fund and are
calculated as a percentage of average net assets of the applicable class of
each fund.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
EQUITY
FUNDS
Operating Expenses Class Class T Class B Class C
A
TECHNOQUANT Management fee 0.60%[ 0.60% 0.60% 0.60%
GROWTH A] [A] [A] [A]
12b-1 fee (including 0.25%
Shareholder Service Fee for 0.25% 0.50% 1.00% 1.00%
Class B and Class C shares)
Other expenses 0.90%[ 0.90% 0.90% %[A]
A] [A] [A]
Total operating expenses 1.75% 2.00% 2.50% %
MID CAP Management fee 0.60% 0.60% 0.60% 0.60%
12b-1 fee (including 0.25%
Shareholder Service Fee for 0.25% 0.50% 1.00% 1.00%
Class B and Class C shares)
Other expenses 0.52%[ 0.50% 0.78% %[A]
A]
Total operating expenses 1.37% 1.60% 2.38% %
EQUITY GROWTH Management fee 0.61% 0.61% 0.61% 0.61%
12b-1 fee (including 0.25%
Shareholder Service Fee for 0.25% 0.50% 1.00% 1.00%
Class B and Class C shares)
Other expenses 0.33%[ 0.25% 0.34% %[A]
A] [A]
Total operating expenses 1.19% 1.36% 1.95% %
GROWTH Management fee 0.61% 0.61% 0.61% 0.61%
OPPORTUNITIES
12b-1 fee (including 0.25%
Shareholder Service Fee for 0.25% 0.50% 1.00% 1.00%
Class B and Class C shares)
Other expenses 0.28%[ 0.23% 0.32% %[A]
A] [A]
Total operating expenses 1.14% 1.34% 1.93% %
STRATEGIC Management fee 0 .48% 0.48% 0.48% *
OPPORTUNITIES
12b-1 fee (including 0.25%
Shareholder Service Fee for 0 .25% 0.50% 1.00% *
Class B shares)
Other expenses 0 .52%[A 0.30% 0.32% *
]
Total operating expenses 1.25% 1.28% 1.80% *
LARGE CAP Management fee 0.60% 0.60% 0.60% 0.60%
12b-1 fee (including 0.25%
Shareholder Service Fee for 0.25% 0.50% 1.00% 1.00%
Class B and Class C shares)
Other expenses (after
reimbursement) 0.90%[A 0.90% 0.90% %[A]
]
Total operating expenses 1.75% 2.00% 2.50% %
GROWTH & Management fee 0.50% 0.50% 0.50% 0.50%
INCOME [A] [A] [A] [A]
12b-1 fee (including 0.25%
Shareholder Service Fee for 0.25% 0.50% 1.00% 1.00%
Class B and Class C shares)
Other expenses 0.75%[A 0.56% 0.75% %[A]
] [A] [A]
Total operating expenses 1.50% 1.56% 2.25% %
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
EQUITY INCOME Management fee 0.50% 0.50% 0.50% 0.50%
12b-1 fee (including 0.25% Shareholder
Service Fee for 0.25% 0.50% 1.00% 1.00%
Class B and Class C shares)
Other expenses 0.35%[A 0.27% 0.31% %[A]
]
Total operating expenses 1.10% 1.27% 1.81% %
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
BALANCED Management fee 0.45% 0.45% 0.45% 0.45%
12b-1 fee (including 0.25% Shareholder Service
Fee for 0.25% 0.50% 1.00% 1.00%
Class B and Class C shares)
Other expenses 0.40% 0.26% 0.44% %[A]
[A] [A]
Total operating expenses 1.10% 1.21% 1.89% %
</TABLE>
* FUND DOES NOT OFFER CLASS C SHARES.
[A] BASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
TAXABLE INCOME FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Operating Expenses Class Class T Class B Class C
A
HIGH YIELD Management fee 0.60 0.60% 0.60% 0.60%
%
12b-1 fee (including 0.25%
Shareholder Service Fee for 0.15 0.25% 0.90% 1.00%
Class B and Class C shares) %
Other expenses 0.37% 0.27% 0.29% %[A]
[A]
Total operating expenses 1.12 1.12% 1.79% %
%
STRATEGIC Management fee 0.59 0.59% 0.59% 0.59%
INCOME %
12b-1 fee (including 0.25% Shareholder
Service Fee for 0.15 0.25% 0.90% 1.00%
Class B and Class C shares) %
Other expenses (after reimbursement
Class A ) 0.51% 0.39% 0.39% %[A]
[A]
Total operating expenses 1.25 1.23% 1.88% %
%
MORTGAGE Management fee 0.45 0.45% 0.45% *
SECURITIES %
12b-1 fee (including 0.25% Shareholder
Service Fee for 0.15 0.25% 0.90% *
Class B shares) %
Other expenses (after
reimbursement) 0.30% 0.30%[ 0.30%[ *
[A] A] A]
Total operating expenses 0.90 1.00% 1.65% *
%
GOVERNMENT Management fee 0.45 0.45% 0.45% 0.45%
INVESTMENT %
12b-1 fee (including 0.25% Shareholder
Service Fee for 0.15 0.25% 0.90% 1.00%
Class B and Class C shares) %
Other expenses (after reimbursement
Class A and 0.30% 0.30% 0.30% %[A]
Class B) [A]
Total operating expenses 0.90 1.00% 1.65% %
%
INTERMEDIATE Management fee 0.45 0.45% 0.45% 0.45%
BOND %
12b-1 fee (including 0.25% Shareholder
Service Fee for 0.15 0.25% 0.90% 1.00%
Class B and Class C shares) %
Other expenses (after reimbursement
Class A and 0.30% 0.27% 0.30% %[A]
Class B) [A]
Total operating expenses 0.90 0.97% 1.65% %
%
SHORT Management fee 0.45 0.45% ** 0.45%
FIXED-INCOME %
12b-1 fee (including 0.25% Shareholder
Service Fee for 0.15 0.15% ** 1.00%
Class C shares) %
Other expenses (after reimbursement
Class A) 0.30% 0.28% ** %[A]
[A]
Total operating expenses 0.90 0.88% ** %
%
</TABLE>
* FUND DOES NOT OFFER CLASS C SHARES.
** FUND DOES NOT OFFER CLASS B SHARES.
[A] BASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
MUNICIPAL FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Operating Expenses Clas Class T Class B Class C
s A
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
HIGH INCOME Management fee 0.40% 0.40% 0.40% 0.40%
MUNICIPAL
12b-1 fee (including 0.25% Shareholder
Service Fee for 0.15% 0.25% 0.90% 1.00%
Class B and Class C shares)
Other expenses (after reimbursement Class
A) 0.35%[A 0.24% 0.27% %[A]
]
Total operating expenses 0.90% 0.89% 1.57% %
MUNICIPAL Management fee 0.40% 0.40% 0.40% *
BOND
12b-1 fee (including 0.25% Shareholder
Service Fee for 0.15% 0.25% 0.90% *
Class B shares)
Other expenses (after reimbursement) 0.35%[A 0.35% 0.35% *
] [A] [A]
Total operating expenses 0.90% 1.00% 1.65% *
INTERMEDIATE Management fee 0.40% 0.40% 0.40% 0.40%
MUNICIPAL
INCOME
12b-1 fee (including 0.25% Shareholder
Service Fee for 0.15% 0.25% 0.90% 1.00%
Class B and Class C shares)
Other expenses (after reimbursement) 0.35%[A 0.35% 0.35% %[A]
]
Total operating expenses 0.90% 1.00% 1.65% %
SHORT-INTERME Management fee 0.40% 0.40% ** *
DIATE
MUNICIPAL
INCOME
12b-1 fee (Distribution fee) 0.15% 0.15% ** *
Other expenses (after reimbursement) 0.35%[A 0.35% ** *
]
Total operating expenses 0.90% 0.90% ** *
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
STATE
MUNICIPAL
FUNDS
Operating Expenses Class Class T Class B Class C
A
CALIFORNIA Management fee 0.40%[A 0.40%[ 0.40%[ *
MUNICIPAL ] A] A]
INCOME
12b-1 fee (including 0.25% Shareholder
Service Fee for 0.15% 0.25 0.90 *
Class B shares) % %
Other expenses (after reimbursement) 0.35%[A 0.35%[ 0.35 *
] A] %[A]
Total operating expenses 0.90% 1.00 1.65 *
% %
NEW YORK Management fee 0.40% 0.40% 0.40% *
MUNICIPAL
INCOME
12b-1 fee (including 0.25% Shareholder
Service Fee for 0.15% 0.25 0.90 *
Class B shares) % %
Other expenses (after reimbursement) 0.35%[A 0.35 0.35 *
] % %
Total operating expenses 0.90% 1.00% 1.65 *
%
</TABLE>
*FUND DOES NOT OFFER CLASS C SHARES.
** FUND DOES NOT OFFER CLASS B SHARES.
[A] BASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
A portion of the brokerage commissions that certain of the funds pay is
used to reduce fund expenses. In addition, certain funds have entered into
arrangements with their custodian and transfer agent whereby credits
realized as a result of uninvested cash balances are used to
reduce custodian and transfer agent expenses. Including these reductions,
the total operating expenses presented in the preceding tables for the
applicable class would have been:
Class Class
T B
Mid Cap 1.60% 2.37%
Equity Growth 1.34% 1.95%
Strategic Opportunities 1.27% 1.79%
Large Cap 2.00% 2.50%
Equity Income 1.26% 1.79%
Balanced 1.20% 1.90%
High Yield 1.11% 1.79%
Strategic Income 1.22% 1.87%
Government Investment 0.99% 1.67%
Intermediate Bond 0.96% 1.66%
Short-Intermediate Municipal Income 0.89% *
* FUND DOES NOT OFFER CLASS B SHARES.
California Municipal Income Fund 0.87% 1.62%
New York Municipal Income Fund 0.97% 1.62%
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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Full Redemption No
Redemption
Clas Class T Class B Class C Class Class C
s A B
TECHNOQUANT GROWTH After 1 year $7 $50 $72[A] $[A] $22 $
1
After 3 years $99 $82 $97[A] $ $67 $
MID CAP After 1 year $71 $51 $74[A] $[A] $24 $
After 3 years $98 $84 $104[A] $ $74 $
After 5 years $ $ $[A] $ $ $
After 10 $ $ $ $ $ $
years[B]
EQUITY GROWTH After 1 year $69 $48 $70[A] $[A] $20 $
After 3 years $93 $77 $91[A] $ $61 $
After 5 years $119 $107 $125[A] $ $105 $
After 10 $19 $193 $199 $ $199 $
years[B] 4
GROWTH OPPORTUNITIES After 1 year $68 $48 $70[A] $[A] $20 $
After 3 years $92 $76 $91[A] $ $61 $
After 5 years $117 $106 $124[ $ $104 $
A]
After 10 $18 $191 $19 $ $195 $
years[B] 8 5
STRATEGIC OPPORTUNITIES After 1 year $70 $48 $68[A] * $18 *
After 3 years $95 $74 $87[A] * $57 *
After 5 years $12 $103 $117[A * $97 *
2 ]
After 10 $20 $184 $19 * $190 *
years[B] 0 0
LARGE CAP After 1 year $74 $55 $75[A] $[A] $25 $
After 3 years $10 $96 $108[ $ $78 $
9 A]
After 5 years $ $ $[A] $ $ $
After 10 $ $ $ $ $ $
years [B]
GROWTH & INCOME After 1 year $69 $48 $69[A] $[A] $19 $
After 3 years $93 $77 $90[A] $ $60 $
EQUITY INCOME After 1 year $68 $47 $68[A] $[A] $18 $
After 3 years $90 $74 $87[A] $ $57 $
After 5 years $115 $102 $118[A $ $98 $
]
After 10 $18 $183 $18 $ $185 $
years [B] 4 5
BALANCED After 1 year $68 $47 $69[A] $[A] $19 $
After 3 years $90 $72 $89[A] $ $59 $
After 5 years $115 $99 $122[ $ $102 $
A]
After 10 $18 $176 $191 $ $191 $
years[B] 4
</TABLE>
*FUND DOES NOT OFFER CLASS C SHARES.
[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
[B] REFLECTS CONVERSION OF CLASS B SHARES TO CLASS A SHARES AFTER SEVEN
YEARS.
TAXABLE INCOME FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Examples
Full Redemption No Redemption
Class Class T Class B Class C Class Class C
A B
HIGH YIELD After 1 year $58 $46 $68[A] $[A] $18 $
After 3 years $81 $69 $86[A] $ $56 $
After 5 years $10 $95 $117[A $ $97 $
6 ]
After 10 $17 $167 $18 $ $185 $
years[B] 7 5
STRATEGIC INCOME After 1 year $60 $47 $69[A] $[A] $19 $
After 3 years $85 $73 $89[A] $ $59 $
After 5 years $11 $100 $122[A $ $102 $
3 ]
After 10 $19 $179 $19 $ $196 $
years[B] 1 6
MORTGAGE SECURITIES After 1 year $56 $45 $67[A] * $17 *
After 3 years $75 $66 $82[A] * $52 *
After 5 years $95 $88 $110[A * $90 *
]
After 10 $15 $153 $16 * $166 *
years[B] 3 6
GOVERNMENT INVESTMENT After 1 year $56 $45 $67[A] $[A] $17 $
After 3 years $75 $66 $82[A] $ $52 $
After 5 years $95 $88 $110[A $ $90 $
]
After 10 $15 $153 $166 $ $166 $
years[B] 3
INTERMEDIATE BOND After 1 year $46 $37 $47[A] $[A] $17 $
After 3 years $65 $58 $62[A] $ $52 $
After 5 $85 $80 $90 $ $90 $
years[C]
After 10 $14 $143 $16 $ $166 $
years[C] 4 6
SHORT FIXED-INCOME After 1 year $24 $24 ** $[A] ** $
After 3 years $43 $43 ** $ ** $
After 5 years $64 $63 ** $ ** $
After 10 $12 $122 ** $ ** $
years 4
</TABLE>
* FUND DOES NOT OFFER CLASS C SHARES.
** FUND DOES NOT OFFER CLASS B SHARES.
[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
[B] REFLECTS CONVERSION OF CLASS B SHARES TO CLASS A SHARES AFTER SEVEN
YEARS.
[C] REFLECTS CONVERSION OF CLASS B SHARES TO CLASS A SHARES AFTER FOUR
YEARS.
MUNICIPAL FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Examples
Full Redemption No Redemption
Class Class T Class B Class C Class B Class
A C
HIGH INCOME MUNICIPAL After 1 year $56 $44 $66[A] $[A] $16 $
After 3 years $75 $62 $80[A] $ $50 $
After 5 years $95 $83 $106[ $ $86 $
A]
After 10 $15 $14 $16 $ $160 $
years[B] 3 1 0
MUNICIPAL BOND After 1 year $56 $45 $67[A] * $17 *
After 3 years $75 $66 $82[A] * $52 *
After 5 years $95 $88 $110[ * $90 *
A]
After 10 $15 $15 $16 * $166 *
years[B] 3 3 6
INTERMEDIATE MUNICIPAL INCOME After 1 year $46 $37 $47[A] $[A] $17 $
After 3 years $65 $58 $62[A] $ $52 $
After 5 $85 $81 $90 $ $90 $
years[C]
After 10 $14 $14 $16 $ $166 $
years[C] 4 7 6
SHORT-INTERMEDIATE MUNICIPAL
INCOME After 1 year $24 $24 ** * ** *
After 3 years $43 $43 ** * ** *
After 5 years $64 $64 ** * ** *
After 10 $12 $12 ** * ** *
years 4 4
</TABLE>
STATE MUNICIPAL FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Examples
Full Redemption No Redemption
Class Class T Class B Class C Class B Class C
A
CALIFORNIA MUNICIPAL
INCOME After 1 year $56 $45 $67[ * $17 *
A]
After 3 years $75 $66 $82[ * $52 *
A]
After 5 years $ $ $[A] * $ *
After 10 $ $ $[A] * $ *
years[B]
NEW YORK MUNICIPAL
INCOME After 1 year $56 $45 $67[ * $17 *
A]
After 3 years $75 $66 $82[ * $52 *
A]
After 5 years $95 $88 $110[ * $90 *
A]
After 10 $15 $15 $166 * $166 *
years[B] 3 3
</TABLE>
* FUND DOES NOT OFFER CLASS C SHARES.
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.
** FUND DOES NOT OFFER CLASS B SHARES.
[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
[B] REFLECTS CONVERSION OF CLASS B SHARES TO CLASS A SHARES AFTER SEVEN
YEARS.
[C] REFLECTS CONVERSION OF CLASS B SHARES TO CLASS A SHARES AFTER FOUR
YEARS.
FMR has voluntarily agreed to reimburse Class A, Class T, Class B, and
Class C of each fund to the extent that total operating expenses, as a
percentage of their respective average net assets, exceed the following
rates:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class Effectiv Class Effecti Class Effecti Class Effecti
A e T ve B ve C ve
Date Date Date Date
TechnoQuant 1.75% 12/31/9 2.00% 12/31/9 2.50% 12/31/9 % _/__/97
Growth 6 6 6
Mid Cap 1.75% 8/30/96 2.00% 2/20/96 2.50% 2/20/96 % _/__/97
Equity Growth 1.75% 1/1/97 2.00% 1/1/97 2.50% 12/31/9 % _/__/97
6
Growth Opportunities 1.75% 3/1/97 2.00% 3/1/97 2.50% 3/1/97 % _/__/97
Strategic 1.75% 3/1/97 2.00% 3/1/97 2.50% 3/1/97 * *
Opportunities
Large Cap 1.75% 8/30/96 2.00% 2/20/96 2.50% 2/20/96 % _/__/97
Growth & Income 1.50% 12/31/9 1.75% 12/31/9 2.25% 12/31/9 % _/__/97
6 6 6
Equity Income 1.50% 3/1/97 1.75% 3/1/97 2.25% 3/1/97 % _/__/97
Balanced 1.50% 8/30/96 1.75% 1/1/96 2.25% 12/31/9 % _/__/97
6
High Yield 1.25% 8/30/96 1.35% 7/1/95 2.00% 1/1/96 % _/__/97
Strategic Income 1.25% 8/30/96 1.35% 10/31/9 2.00% 1/1/96 % _/__/97
4
Mortgage Securities 0.90% 3/1/97 1.00% 3/1/97 1.65% 3/1/97 * *
Government 0.90% 8/30/96 1.00% 7/1/95 1.65% 1/1/96 % _/__/97
Investment
Intermediate Bond 0.90% 8/30/96 1.00% 7/1/95 1.65% 1/1/96 % _/__/97
Short Fixed-Income 0.90% 8/30/96 0.90% 8/30/96 ** ** % **
High Income 0.90% 8/30/96 1.00% 7/1/95 1.65% 1/1/96 % _/__/97
Municipal
Municipal Bond 0.90% 3/1/97 1.00% 7/1/95 1.65% 7/1/96 * *
Intermediate 0.90% 8/30/96 1.00% 7/1/95 1.65% 1/1/96 % _/__/97
Municipal Income
Short-Intermediate 0.90% 8/30/96 0.90% 7/1/95 ** ** * *
Municipal Income
California Municipal 0.90% 8/30/96 1.00% 8/1/95 1.65% 1/1/96 * *
Income
New York Municipal 0.90% 8/30/96 1.00% 8/1/95 1.65% 1/1/96 * *
Income
</TABLE>
* FUND DOES NOT OFFER CLASS C SHARES.
** FUND DOES NOT OFFER CLASS B SHARES.
If these agreements were not in effect, other expenses and total operating
expenses, as a percentage of average net assets, would have been the
following amounts:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other Expenses Total Operating Expenses
Class Class Class Class Class Class Class B Class
A[A] T B C [A] A[A] T C[A]
Growth (dagger) (dagger) (dagger) % (dagger) (dagger) %
Opportunities
(dagger)
Large Cap 0.96 1.34% 2.35% % 1.81% 2.44% 3.95% %
%
Strategic 0.65% (dagger) (dagger) % 1.39% (dagger) (dagger) %
Income
Mortgage 2.25% 0.53% 1.08% * 2.85% 1.23% 2.43% *
Securities[A]
Government 0.72 (dagger) 0.43% % 1.32% (dagger) 1.78% %
Investment %
Intermediate 0.48 (dagger) 0.44% % 1.08% (dagger) 1.79% %
Bond %
Short 0.50 (dagger) ** % 1.10% (dagger) ** %
Fixed-Income %
High Income 0.48 (dagger) (dagger) % 1.03% (dagger) (dagger) %
Municipal %
Municipal 2.80% 0.37% 0.52% * 3.35% 1.02% 1.82% *
Bond[A]
Intermediate 1.00% 0.39% 0.56% % 1.55% 1.04% 1.86% %
Municipal
Income
Short-
Intermedi 1.29% 0.60% ** * 1.84% 1.15% ** *
ate
Municipal
Income
California 2.01% 0.38% 0.95% * 2.50%[B] 1.03% 2.25% *
Municipal
Income[A]
New York 1.95% 1.97% 2.42% * 2.50% 2.62% 3.72% *
Municipal
Income
</TABLE>
* FUND DOES NOT OFFER CLASS C SHARES.
** FUND DOES NOT OFFER CLASS B SHARES.
[A] BASED ON ESTIMATED EXPENSES FOR THE FIRST YEAR.
[B] LIMITED IN ACCORDANCE WITH A STATE LIMITATION. WITHOUT THIS LIMITATION,
TOTAL OPERATING EXPENSES WOULD BE 2.56% FOR CALIFORNIA MUNICIPAL INCOME,
CLASS A.
(dagger) TOTAL OPERATING EXPENSES WERE LESS THAN THE VOLUNTARY EXPENSE CAPS
IN EFFECT DURING THE FISCAL YEAR ENDED 1996.
Expenses eligible for reimbursement do not include interest, taxes,
brokerage commissions, and extraordinary expenses.
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow for certain funds contain
annual information which has been audited by ______________ ,
independent accountants. The financial highlights tables for Mortgage
Securities have been audited by ___________________ , independent
accountants. The funds' financial highlights, financial statements, and
reports of the auditors are included in each fund's Annual Report, and are
incorporated by reference into (are legally a part of) the funds' SAI.
Contact FDC or your investment professional for a free copy of an Annual
Report or the SAI. Class C of each fund (except Strategic Opportunities,
Mortgage Securities, Municipal Bond, Short-Intermediate Municipal Income,
California Municipal Income, and New York Municipal Income) is expected to
commence operations on or about November 1, 1997.
[INSERT A TABLE FOR EACH FUND HERE]
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN and/or YIELD.
For Growth Opportunities, Balanced, High Yield, Government Investment,
Short Fixed-Income, High Income Municipal, California Municipal Income, and
New York Municipal Income the fiscal year runs from November 1 to October
31. For TechnoQuant Growth, Mid Cap, Equity Growth, Large Cap, Growth &
Income, Equity Income, Intermediate Bond, Intermediate Municipal Income,
and Short-Intermediate Municipal Income the fiscal year runs from December
1 to November 30. For Strategic Opportunities, Strategic Income, and
Municipal Bond, the fiscal year runs from January 1 to December 31. For
Mortgage Securities the fiscal year runs from August 1 to July 31. The
tables below show the performance of each class of each fund (except
Mortgage Securities) over past fiscal periods ended April 30, 1997, May 31,
1997, and June 30, 1997, as indicated. The performance of each class of
Mortgage Securities over past fiscal years is shown in the tables below.
The charts in Appendix B, beginning on page 60, present calendar year
performance for each class compared to different measures,
including a competitive funds average .
EQUITY FUNDS - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Return F Cumulative Total Return F
</TABLE>
EQUITY FUNDS - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Return F Cumulative Total Return F
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past Past 5 10 Past 6 Past 1 Past 5 10
1 years Years/ month year years Years/
year Life of s Life of
fund+ fund+
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
TECH n/a n/a n/a n/a n/a n/a %
NOQU
ANT
GROW
TH -
CLASS
A [C]
TECH n/a n/a n/a n/a n/a n/a %
NOQU
ANT
GROW
TH -
CLASS
A
(LOAD
ADJ.)
[A][C]
MID % n/a % % % n/a %
CAP -
CLASS
A [C]
MID % n/a % % % n/a %
CAP -
CLASS
A
(LOAD
ADJ.)
[A][C]
EQUIT % % % % % % %
Y
GROW
TH -
CLASS
A[C]
EQUIT % % % % % % %
Y
GROW
TH -
CLASS
A
(LOAD
ADJ.)
[A][C]
GROW % % % % % % %
TH
OPPO
RTUNIT
IES -
CLASS
A[B]
GROW % % % % % % %
TH
OPPO
RTUNIT
IES -
CLASS
A
(LOAD
ADJ.)[
A][B]
STRAT % % % % % % %
EGIC
OPPO
RTUNIT
IES -
CLASS
A [D]
STRAT % % % % % % %
EGIC
OPPO
RTUNIT
IES -
CLASS
A
(LOAD
ADJ.)
[A][D]
LARGE % n/a % % % n/a %
CAP -
CLASS
A [C]
LARGE % n/a % % % n/a %
CAP -
CLASS
A
(LOAD
ADJ.)
[A][C]
GROW n/a n/a n/a n/a n/a n/a %
TH &
INCO
ME -
CLASS
A [C]
GROW n/a n/a n/a n/a n/a n/a %
TH &
INCO
ME -
CLASS
A
(LOAD
ADJ.)
[A][C]
EQUIT % % % % % % %
Y
INCO
ME -
CLASS
A [C]
EQUIT % % % % % % %
Y
INCO
ME -
CLASS
A
(LOAD
ADJ.)
[A][C]
BALAN % % % % % % %
CED -
CLASS
A[B]
BALAN % % % % % % %
CED -
CLASS
A
(LOAD
ADJ.)[
A][B]
</TABLE>
TAXABLE BOND FUNDS - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Return F Cumulative Total Return F
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 Past 6 Past 1 Past 5 10
year years Years/ month year years Years/
Life of s Life of
fund+ fund+
HIGH % % % % % % %
YIELD
-
CLASS
A[B]
HIGH % % % % % % %
YIELD
-
CLASS
A
(LOAD
ADJ.)[
A][B]
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
STRAT % n/a % % % n/a %
EGIC
INCO
ME -
CLASS
A [D]
STRAT % n/a % % % n/a %
EGIC
INCO
ME -
CLASS
A
(LOAD
ADJ.)[
A][D]
MORTG % % % n/a % % %
AGE
SECU
RITIES
-
CLASS
A[E]
MORTG % % % n/a % % %
AGE
SECURI
TIES -
CLASS
A
(LOAD
ADJ.)
[A][E]
GOVE % % % % % % %
RNME
NT
INVES
TMENT
-
CLASS
A [B]
GOVE % % % % % % %
RNME
NT
INVEST
MENT
-
CLASS
A
(LOAD
ADJ.)
[A][B]
INTER % % % % % % %
MEDI
ATE
BOND
-
CLASS
A [C]
INTERM % % % % % % %
EDIATE
BOND
-
CLASS
A
(LOAD
ADJ.)
[A][C]
SHORT % % % % % % %
FIXED
-INCO
ME -
CLASS
A [B]
SHORT % % % % % % %
FIXED
-INCO
ME -
CLASS
A
(LOAD
ADJ.)[
A][B]
</TABLE>
MUNICIPAL FUNDS - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Return F Cumulative Total Return F
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 Past 6 Past 1 Past 5 10
year years years/ month year years years/
Life of s Life of
fund+ fund+
HIGH % % % % % % %
INCO
ME
MUNI
CIPAL
-
CLASS
A [B]
HIGH % % % % % % %
INCO
ME
MUNI
CIPAL
-
CLASS
A
(LOAD
ADJ.)[
A][B]
MUNI % % % % % % %
CIPAL
BOND
-
CLASS
A [D]
MUNI % % % % % % %
CIPAL
BOND
-
CLASS
A
(LOAD
ADJ.)[
A] [D]
INTER % % % % % % %
MEDI
ATE
MUNI
CIPAL
INCO
ME -
CLASS
A [C]
INTER % % % % % % %
MEDI
ATE
MUNI
CIPAL
INCO
ME -
CLASS
A
(LOAD
ADJ.)[
A][C]
SHORT % n/a % % % n/a %
-INTER
MEDI
ATE
MUNI
CIPAL
INCO
ME -
CLASS
A [C]
SHORT % n/a % % % n/a %
-INTER
MEDI
ATE
MUNI
CIPAL
INCO
ME -
CLASS
A
(LOAD
ADJ.)[
A][C]
</TABLE>
STATE MUNICIPAL FUNDS - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Return F Cumulative Total Return F
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 Past 6 Past 1 Past 5 10
year years years/ month year years years/
Life of s Life of
fund+ fund+
CALIFO % n/a % % % n/a %
RNIA
MUNI
CIPAL
INCO
ME -
CLASS
A [B]
CALIFO % n/a % % % n/a %
RNIA
MUNI
CIPAL
INCO
ME -
CLASS
A
(LOAD
ADJ.)[
A][B]
NEW % n/a % % % n/a %
YORK
MUNI
CIPAL
INCO
ME -
CLASS
A [B]
NEW % n/a % % % n/a %
YORK
MUNI
CIPAL
INCO
ME -
CLASS
A
(LOAD
ADJ.)[
A][B]
</TABLE>
EQUITY FUNDS - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Return F Cumulative Total Return F
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 Past 6 Past 1 Past 5 10
year years Years/ month year years Years/
Life of s Life of
fund+ fund+
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
TECH n/a n/a n/a n/a n/a n/a %
NOQU
ANT
GROW
TH -
CLASS
T[C]
TECH n/a n/a n/a n/a n/a n/a %
NOQU
ANT
GROW
TH -
CLASS
T
(LOAD
ADJ.)
[A][C]
MID % n/a % % % n/a %
CAP -
CLASS
T[C]
MID % n/a % % % n/a %
CAP -
CLASS
T
(LOAD
ADJ.)
[A][C]
EQUIT % % % % % % %
Y
GROW
TH -
CLASS
T [C]
EQUIT % % % % % % %
Y
GROW
TH -
CLASS
T
(LOAD
ADJ.)
[A][C]
GROW % % % % % % %
TH
OPPO
RTUNIT
IES -
CLASS
T [B]
GROW % % % % % % %
TH
OPPO
RTUNIT
IES -
CLASS
T
(LOAD
ADJ.)[
A][B]
STRAT % % % % % % %
EGIC
OPPO
RTUNIT
IES -
CLASS
T [D]
STRAT % % % % % % %
EGIC
OPPO
RTUNIT
IES -
CLASS
T
(LOAD
ADJ.)
[A][D]
LARGE % n/a % % % n/a %
CAP -
CLASS
T [C]
LARGE % n/a % % % n/a %
CAP -
CLASS
T
(LOAD
ADJ.)
[A][C]
GROW n/a n/a n/a n/a n/a n/a %
TH &
INCO
ME -
CLASS
T [C]
GROW n/a n/a n/a n/a n/a n/a %
TH &
INCO
ME -
CLASS
T
(LOAD
ADJ.)
[A][C]
EQUIT % % % % % % %
Y
INCO
ME -
CLASS
T [C]
EQUIT % % % % % % %
Y
INCO
ME -
CLASS
T
(LOAD
ADJ.)
[A][C]
BALAN % % % % % % %
CED -
CLASS
T [B]
BALAN % % % % % % %
CED -
CLASS
T
(LOAD
ADJ.)[
A][B]
</TABLE>
TAXABLE BOND FUNDS - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Return F Cumulative Total Return F
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 Past 6 Past 1 Past 5 10
year years Years/ month years years Years/
Life of s Life of
fund+ fund+
HIGH % % % % % % %
YIELD
-
CLASS
T [B]
HIGH % % % % % % %
YIELD
-
CLASS
T
(LOAD
ADJ.)[
A]][B]
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
STRAT % n/a % % % n/a %
EGIC
INCO
ME -
CLASS
T [D]
STRAT % n/a % % % n/a %
EGIC
INCO
ME -
CLASS
T
(LOAD
ADJ.)[
A][D]
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
MORTG % % % n/a % % %
AGE
SECU
RITIES
-
CLASS
T [E]
MORTG % % % n/a % % %
AGE
SECURI
TIES -
CLASS
T
(LOAD
ADJ.)
[A][E]
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
GOVE % % % % % % %
RNME
NT
INVES
TMENT
-
CLASS
T [B]
GOVE % % % % % % %
RNME
NT
INVEST
MENT
-
CLASS
T
(LOAD
ADJ.)
[A][B]
INTER % % % % % % %
MEDI
ATE
BOND
-
CLASS
T [C]
INTERM % % % % % % %
EDIATE
BOND
-
CLASS
T
(LOAD
ADJ.)
[A] [C]
SHORT % % % % % % %
FIXED
-INCO
ME -
CLASS
T [B]
SHORT % % % % % % %
FIXED
-INCO
ME -
CLASS
T
(LOAD
ADJ.)[
A][B]
</TABLE>
MUNICIPAL FUNDS - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Return F Cumulative Total Return F
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 Past 6 Past 1 Past 5 10
year years years/ month years years years/
Life of s Life of
fund+ fund+
HIGH % % % % % % %
INCO
ME
MUNI
CIPAL
-
CLASS
T [B]
HIGH % % % % % % %
INCO
ME
MUNI
CIPAL
-
CLASS
T
(LOAD
ADJ.)[
A][B]
MUNI % % % % % % %
CIPAL
BOND
-
CLASS
T [D]
MUNI % % % % % % %
CIPAL
BOND
-
CLASS
T
(LOAD
ADJ.)[
A][D]
INTER % % % % % % %
MEDI
ATE
MUNI
CIPAL
INCO
ME -
CLASS
T [C]
INTER % % % % % % %
MEDI
ATE
MUNI
CIPAL
INCO
ME -
CLASS
T
(LOAD
ADJ.)[
A][C]
SHORT % n/a % % % n/a %
-INTER
MEDI
ATE
MUNI
CIPAL
INCO
ME -
CLASS
T [C]
SHORT % n/a % % % n/a %
-INTER
MEDI
ATE
MUNI
CIPAL
INCO
ME -
CLASS
T
(LOAD
ADJ.)[
A][C]
STATE MUNICIPAL FUNDS - CLASS T
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Return F Cumulative Total Return F
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 Past 6 Past 1 Past 5 10
year years years/ month years years years/
Life of s Life of
fund+ fund+
CALIFO % n/a % % % n/a %
RNIA
MUNI
CIPAL
INCO
ME -
CLASS
T[B]
CALIFO % n/a % % % n/a %
RNIA
MUNI
CIPAL
INCO
ME -
CLASS
T
(LOAD
ADJ.)[
A][B]
NEW % n/a % % % n/a %
YORK
MUNI
CIPAL
INCO
ME -
CLASS
T [B]
NEW % n/a % % % n/a %
YORK
MUNI
CIPAL
INCO
ME -
CLASS
T
(LOAD
ADJ.)[
A][B]
</TABLE>
EQUITY FUNDS - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Return F Cumulative Total Return F
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 Past 6 Past 1 Past 5 10
year years years/ month years years years/
Life of s Life of
fund+ fund+
TECH n/a n/a n/a n/a n/a n/a %
NOQU
ANT
GROW
TH -
CLASS
B [C]
TECH n/a n/a n/a n/a n/a n/a %
NOQU
ANT
GROW
TH -
CLASS
B
(LOAD
ADJ.)[
A][C]
MID % n/a % % % n/a %
CAP -
CLASS
B [C]
MID % n/a % % % n/a %
CAP -
CLASS
B
(LOAD
ADJ.)[
A][C]
EQUIT % % % % % % %
Y
GROW
TH -
CLASS
B [C]
EQUIT % % % % % % %
Y
GROW
TH -
CLASS
B
(LOAD
ADJ.)
[A][C]
GROW % % % % % % %
TH
OPPO
RTUNIT
IES -
CLASS
B [B]
GROW % % % % % % %
TH
OPPO
RTUNIT
IES -
CLASS
B
(LOAD
ADJ.)[
A][B]
STRAT % % % % % % %
EGIC
OPPO
RTUNIT
IES -
CLASS
B [D]
STRAT % % % % % % %
EGIC
OPPO
RTUNIT
IES -
CLASS
B
(LOAD
ADJ.)
[A][D]
LARGE % n/a % % % n/a %
CAP -
CLASS
B [C]
LARGE % n/a % % % n/a %
CAP -
CLASS
B
(LOAD
ADJ.)[
A][C]
GROW n/a n/a n/a n/a n/a n/a %
TH &
INCO
ME -
CLASS
B [C]
GROW n/a n/a n/a n/a n/a n/a %
TH &
INCO
ME -
CLASS
B
(LOAD
ADJ.)[
A][C]
EQUIT % % % % % % %
Y
INCO
ME -
CLASS
B [C]
EQUIT % % % % % % %
Y
INCO
ME -
CLASS
B
(LOAD
ADJ.)[
A][C]
BALAN % % % % % % %
CED -
CLASS
B [B]
BALAN % % % % % % %
CED -
CLASS
B
(LOAD
ADJ.)[
A][B]
</TABLE>
TAXABLE BOND FUNDS - CLASS B
Average Annual Total ReturnF Cumulative Total ReturnF
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 Past 6 Past 1 Past 5 10
year years years/ month years years years/
Life of s Life of
fund+ fund+
HIGH % % % % % % %
YIELD
-
CLASS
B [B]
HIGH % % % % % % %
YIELD
-
CLASS
B
(LOAD
ADJ.)[
A][B]
STRAT % n/a % % % n/a %
EGIC
INCO
ME -
CLASS
B [D]
STRAT % n/a % % % n/a %
EGIC
INCO
ME -
CLASS
B
(LOAD
ADJ.)[
A][D]
MORTG % % % n/a % % %
AGE
SECU
RITIES
-
CLASS
B [E]
MORTG % % % n/a % % %
AGE
SECURI
TIES -
CLASS
B
(LOAD
ADJ.)
[A][E]
GOVE % % % % % % %
RNME
NT
INVES
TMENT
-
CLASS
B [B]
GOVE % % % % % % %
RNME
NT
INVEST
MENT
-
CLASS
B
(LOAD
ADJ.)[A
][B]
INTER % % % % % % %
MEDI
ATE
BOND
-
CLASS
B [C]
INTER % % % % % % %
MEDI
ATE
BOND
-
CLASS
B
(LOAD
ADJ.)[
A][C]
</TABLE>
MUNICIPAL FUNDS - CLASS B
Average Annual Total ReturnF Cumulative Total ReturnF
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 Past 6 Past 1 Past 5 10
year years years/ month years years years/
Life of s Life of
fund+ fund+
HIGH % % % % % % %
INCO
ME
MUNI
CIPAL
-
CLASS
B [B]
HIGH % % % % % % %
INCO
ME
MUNI
CIPAL
-
CLASS
B
(LOAD
ADJ.)[
A][B]
MUNI % % % % % % %
CIPAL
BOND
-
CLASS
B [D]
MUNI % % % % % % %
CIPAL
BOND
-
CLASS
B
(LOAD
ADJ.)[
A][D]
INTER % % % % % % %
MEDI
ATE
MUNI
CIPAL
INCO
ME -
CLASS
B [C]
INTER % % % % % % %
MEDI
ATE
MUNI
CIPAL
INCO
ME -
CLASS
B
(LOAD
ADJ.)[
A][C]
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
STATE MUNICIPAL FUNDS - CLASS B 6.08
</TABLE>
Average Annual Total ReturnF Cumulative Total ReturnF
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 Past 6 Past 1 Past 5 10
year years years/ month years years years/
Life of s Life of
fund+ fund+
CALIFO % n/a % % % % %
RNIA
MUNI
CIPAL
INCO
ME -
CLASS
B [B]
CALIFO % n/a % % % % %
RNIA
MUNI
CIPAL
INCO
ME -
CLASS
B
(LOAD
ADJ.)[
A][B]
NEW % n/a % % % % %
YORK
MUNI
CIPAL
INCO
ME -
CLASS
B [B]
NEW % n/a % % % % %
YORK
MUNI
CIPAL
INCO
ME -
CLASS
B
(LOAD
ADJ.)[
A][B]
</TABLE>
EQUITY FUNDS - CLASS C
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Return F Cumulative Total Return F
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 Past 6 Past 1 Past 5 10
year years Years/ month year years Years/
Life of s Life of
fund+ fund+
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
TECH n/a n/a n/a n/a n/a n/a %
NOQU
ANT
GROW
TH -
CLASS
C [C]
TECH n/a n/a n/a n/a n/a n/a %
NOQU
ANT
GROW
TH -
CLASS
C
(LOAD
ADJ.)
[A][C]
MID n/a n/a n/a n/a n/a n/a %
CAP -
CLASS
C [C]
MID n/a n/a n/a n/a n/a n/a %
CAP -
CLASS
C
(LOAD
ADJ.)
[A][C]
EQUIT % % % % % % %
Y
GROW
TH -
CLASS
C[C]
EQUIT % % % % % % %
Y
GROW
TH -
CLASS
C
(LOAD
ADJ.)
[A][C]
GROW % % % % % % %
TH
OPPO
RTUNIT
IES -
CLASS
C[B]
GROW % % % % % % %
TH
OPPO
RTUNIT
IES -
CLASS
C
(LOAD
ADJ.)[
A][B]
LARGE % n/a % % % n/a %
CAP -
CLASS
C [C]
LARGE % n/a % % % n/a %
CAP -
CLASS
C
(LOAD
ADJ.)
[A][C]
GROW n/a n/a n/a n/a n/a n/a %
TH &
INCO
ME -
CLASS
C [C]
GROW n/a n/a n/a n/a n/a n/a %
TH &
INCO
ME -
CLASS
C
(LOAD
ADJ.)
[A][C]
EQUIT % % % % % % %
Y
INCO
ME -
CLASS
C [C]
EQUIT % % % % % % %
Y
INCO
ME -
CLASS
C
(LOAD
ADJ.)
[A][C]
BALAN % % % % % % %
CED -
CLASS
C[B]
BALAN % % % % % % %
CED -
CLASS
C
(LOAD
ADJ.)[
A][B]
</TABLE>
TAXABLE BOND FUNDS - CLASS C
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Return F Cumulative Total Return F
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 Past 6 Past 1 Past 5 10
year years Years/ month year years Years/
Life of s Life of
fund+ fund+
HIGH % % % % % % %
YIELD
-
CLASS
C[B]
HIGH % % % % % % %
YIELD
-
CLASS
C
(LOAD
ADJ.)[
A][B]
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
STRAT % n/a % % % n/a %
EGIC
INCO
ME -
CLASS
C [D]
STRAT % n/a % % % n/a %
EGIC
INCO
ME -
CLASS
C
(LOAD
ADJ.)[
A][D]
GOVE % % % % % % %
RNME
NT
INVES
TMENT
-
CLASS
C [B]
GOVE % % % % % % %
RNME
NT
INVEST
MENT
-
CLASS
C
(LOAD
ADJ.)
[A][B]
INTER % % % % % % %
MEDI
ATE
BOND
-
CLASS
C [C]
INTERM % % % % % % %
EDIATE
BOND
-
CLASS
C
(LOAD
ADJ.)
[A][C]
SHORT % % % % % % %
FIXED
-INCO
ME -
CLASS
C [B]
SHORT % % % % % % %
FIXED
-INCO
ME -
CLASS
C
(LOAD
ADJ.)[
A][B]
</TABLE>
MUNICIPAL FUNDS - CLASS C
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Return F Cumulative Total Return F
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 Past 6 Past 1 Past 5 10
year years years/ month year years years/
Life of s Life of
fund+ fund+
HIGH % % % % % % %
INCO
ME
MUNI
CIPAL
-
CLASS
C [B]
HIGH % % % % % % %
INCO
ME
MUNI
CIPAL
-
CLASS
C
(LOAD
ADJ.)[
A][B]
INTER % % % % % % %
MEDI
ATE
MUNI
CIPAL
INCO
ME -
CLASS
C [C]
INTER % % % % % % %
MEDI
ATE
MUNI
CIPAL
INCO
ME -
CLASS
C
(LOAD
ADJ.)[
A][C]
</TABLE>
+ LIFE OF FUND FIGURES ARE FROM COMMENCEMENT OF OPERATIONS (NOVEMBER 18,
1987 FOR GROWTH OPPORTUNITIES; OCTOBER 31, 1994 FOR STRATEGIC INCOME;
SEPTEMBER 16, 1987 FOR SHORT FIXED-INCOME AND HIGH INCOME MUNICIPAL; MARCH
16, 1994 FOR SHORT-INTERMEDIATE MUNICIPAL INCOME; AUGUST 21, 1995 FOR NEW
YORK MUNICIPAL INCOME; FEBRUARY 20, 1996 FOR MID CAP, LARGE CAP, AND
CALIFORNIA MUNICIPAL INCOME; AND DECEMBER 31, 1996 FOR TECHNOQUANT GROWTH
AND GROWTH & INCOME) THROUGH THE SEMIANNUAL PERIODS ENDED 1997.
[A] LOAD ADJUSTED RETURNS INCLUDE THE EFFECT OF PAYING CLASS A'S MAXIMUM
FRONT-END SALES CHARGE OF 5.75% FOR THE EQUITY FUNDS; 4.75% FOR THE BOND
FUNDS; 3.75 % FOR THE INTERMEDIATE-TERM BOND FUNDS; AND 1.50% FOR THE
SHORT-TERM BOND FUNDS. LOAD ADJUSTED RETURNS INCLUDE THE EFFECT OF PAYING
CLASS T'S MAXIMUM FRONT-END SALES CHARGE OF 3.50% FOR THE EQUITY FUNDS AND
BOND FUNDS; 2.75% FOR THE INTERMEDIATE-TERM BOND FUNDS; AND 1.50% FOR THE
SHORT-TERM BOND FUNDS.
CLASS B'S AND CLASS C'S CDSC INCLUDED IN THE TOTAL RETURN FIGURES
ARE CALCULATED PURSUANT TO THE CDSC SCHEDULES FOUND ON PAGE 54.
[B] PERIOD ENDED APRIL 30, 1997.
[C] PERIOD ENDED MAY 31, 1997.
[D] PERIOD ENDED JUNE 30, 1997.
[E] PERIOD ENDED JULY 31, 1997.
[F] INITIAL OFFERING OF CLASS A FOR EACH FUND (EXCEPT MORTGAGE SECURITIES
AND MUNICIPAL BOND) TOOK PLACE ON SEPTEMBER 3, 1996. RETURNS PRIOR TO
SEPTEMBER 3, 1996 (EXCEPT FOR EQUITY GROWTH, EQUITY INCOME, INTERMEDIATE
BOND, AND INTERMEDIATE MUNICIPAL INCOME) ARE THOSE OF CLASS T, AND REFLECT
CLASS T'S APPLICABLE 12B-1 FEE ( 0.65% FOR EQUITY FUNDS PRIOR TO
JANUARY 1, 1996). FOR EQUITY GROWTH, EQUITY INCOME, INTERMEDIATE BOND,AND
INTERMEDIATE MUNICIPAL INCOME RETURNS BETWEEN SEPTEMBER 10, 1992 AND
SEPTEMBER 3, 1996 ARE THOSE OF CLASS T AND REFLECT CLASS T'S APPLICABLE
12B-1 FEE (0.65% FOR EQUITY FUNDS PRIOR TO JANUARY 1, 1996). RETURNS
BETWEEN COMMENCEMENT OF OPERATIONS AND SEPTEMBER 10, 1992 REFLECT THE
RETURNS OF INSTITUTIONAL CLASS, THE ORIGINAL CLASS OF EACH FUND, WHICH DOES
NOT HAVE A 12B-1 FEE. CLASS A RETURNS WOULD HAVE BEEN LOWER IF ITS12B-1 FEE
HAD BEEN REFLECTED IN RETURNS PRIOR TO SEPTEMBER 10, 1992.
INITIAL OFFERING OF CLASS A, CLASS T, AND CLASS B OF MORTGAGE SECURITIES
TOOK PLACE ON MARCH 3, 1997. RETURNS PRIOR TO MARCH 3, 1997 ARE THOSE OF
INITIAL CLASS, THE ORIGINAL CLASS OF THE FUND, WHICH DOES NOT BEAR A 12B-1
FEE. CLASS T AND CLASS A RETURNS WOULD HAVE BEEN LOWER IF THEIR RESPECTIVE
12B-1 FEES WERE REFLECTED IN RETURNS PRIOR TO MARCH 3, 1997. CLASS B
RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE HAD BEEN REFLECTED IN
RETURNS PRIOR TO MARCH 3, 1997.
INITIAL OFFERING OF CLASS A OF MUNICIPAL BOND TOOK PLACE ON MARCH 3, 1997.
RETURNS BETWEEN JULY 1, 1996 AND MARCH 3, 1997 ARE THOSE OF CLASS T AND
REFLECT CLASS T'S 0.25% 12B-1 FEE. RETURNS PRIOR TO JULY 1, 1996 ARE THOSE
OF INITIAL CLASS, THE ORIGINAL CLASS OF THE FUND, WHICH DOES NOT BEAR A
12B-1 FEE. CLASS A RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE HAD BEEN
REFLECTED IN RETURNS PRIOR TO JULY 1, 1996.
INITIAL OFFERING OF CLASS T AND CLASS B OF MUNICIPAL BOND TOOK PLACE ON
JULY 1, 1996. RETURNS PRIOR TO THAT DATE ARE THOSE OF INITIAL CLASS, THE
ORIGINAL CLASS OF THE FUND, WHICH DOES NOT HAVE A 12B-1 FEE. CLASS T
RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE HAD BEEN REFLECTED IN
RETURNS PRIOR TO JULY 1, 1996. CLASS B RETURNS WOULD HAVE BEEN LOWER IF ITS
12B-1 FEE HAD BEEN REFLECTED IN RETURNS PRIOR TO JULY 1, 1996.
INITIAL OFFERING OF CLASS T OF EQUITY GROWTH, EQUITY INCOME, INTERMEDIATE
BOND, AND INTERMEDIATE MUNICIPAL INCOME TOOK PLACE ON SEPTEMBER 10, 1992.
CLASS T BEARS A 12B-1 FEE (AT THEN CURRENTLY APPLICABLE RATES FOR EQUITY
GROWTH AND EQUITY INCOME OF 0.65%, AND FOR INTERMEDIATE BOND AND
INTERMEDIATE MUNICIPAL INCOME OF 0.25%) WHICH IS NOT REFLECTED IN RETURNS
PRIOR TO SEPTEMBER 10, 1992. RETURNS PRIOR TO SEPTEMBER 10, 1992 ARE THOSE
OF INSTITUTIONAL CLASS, THE ORIGINAL CLASS OF EACH FUND, WHICH DOES NOT
BEAR A 12B-1 FEE. CLASS T RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE
HAD BEEN REFLECTED IN RETURNS PRIOR TO SEPTEMBER 10, 1992.
INITIAL OFFERING OF CLASS B OF EQUITY GROWTH TOOK PLACE ON DECEMBER 31,
1996. CLASS B BEARS A 12B-1 FEE, WHICH IS NOT REFLECTED IN RETURNS PRIOR TO
DECEMBER 31, 1996. RETURNS BETWEEN SEPTEMBER 10, 1992 AND DECEMBER 31, 1996
ARE THOSE OF CLASS T AND REFLECT CLASS T'S APPLICABLE 12B-1 FEE (0.65%
PRIOR TO JANUARY 1, 1996). RETURNS PRIOR TO SEPTEMBER 10, 1992 ARE THOSE OF
THE INSTITUTIONAL CLASS, THE ORIGINAL CLASS OF THE FUND, WHICH DOES NOT
BEAR A 12B-1 FEE. CLASS B RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE
HAD BEEN REFLECTED IN RETURNS PRIOR TO DECEMBER 31, 1996.
INITIAL OFFERING OF CLASS B OF BALANCED TOOK PLACE ON DECEMBER 31, 1996.
CLASS B BEARS A 12B-1 FEE, WHICH IS NOT REFLECTED IN RETURNS PRIOR TO
DECEMBER 31, 1996. RETURNS PRIOR TO DECEMBER 31, 1996 ARE THOSE OF CLASS T
AND REFLECT CLASS T'S APPLICABLE 12B-1 FEE (0.65% PRIOR TO JANUARY 1,
1996). CLASS B RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE HAD BEEN
REFLECTED IN RETURNS PRIOR TO DECEMBER 31, 1996.
INITIAL OFFERING OF CLASS B OF GROWTH OPPORTUNITIES TOOK PLACE ON MARCH 3,
1997. RETURNS PRIOR TO MARCH 3, 1997 ARE THOSE OF CLASS T, THE ORIGINAL
CLASS OF THE FUND, AND REFLECT CLASS T'S APPLICABLE 12B-1 FEE (0.65% PRIOR
TO JANUARY 1, 1996). CLASS B RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE
HAD BEEN REFLECTED IN RETURNS PRIOR TO MARCH 3, 1997.
INITIAL OFFERING OF CLASS B OF EQUITY INCOME, INTERMEDIATE BOND, AND
INTERMEDIATE MUNICIPAL INCOME TOOK PLACE ON JUNE 30, 1994. CLASS B BEARS A
12B-1 FEE (1.00% FOR BOND FUNDS PRIOR TO JANUARY 1, 1996) WHICH IS NOT
REFLECTED IN RETURNS PRIOR TO JUNE 30, 1994. RETURNS BETWEEN SEPTEMBER 10,
1992 AND JUNE 30, 1994 ARE THOSE OF CLASS T AND REFLECT CLASS T'S THEN
APPLICABLE 12B-1 FEE OF 0.65% FOR EQUITY INCOME, AND 0.25% FOR INTERMEDIATE
BOND AND INTERMEDIATE MUNICIPAL INCOME. RETURNS PRIOR TO SEPTEMBER 10, 1992
ARE THOSE OF INSTITUTIONAL CLASS, THE ORIGINAL CLASS OF THESE FUNDS, WHICH
DOES NOT BEAR A 12B-1 FEE. CLASS B RETURNS WOULD HAVE BEEN LOWER IF ITS
12B-1 FEE HAD BEEN REFLECTED IN RETURNS PRIOR TO JUNE 30, 1994.
INITIAL OFFERING OF CLASS B OF STRATEGIC OPPORTUNITIES TOOK PLACE ON JUNE
30, 1994. CLASS B BEARS A 1.00% 12B-1 FEE WHICH IS NOT REFLECTED IN RETURNS
PRIOR TO JUNE 30, 1994. RETURNS PRIOR TO JUNE 30, 1994 ARE THOSE OF CLASS
T. CLASS T RETURNS INCLUDE A THEN APPLICABLE 12B-1 FEE OF 0.65%. CLASS B
RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE HAD BEEN REFLECTED IN PRIOR
DATE RETURNS.
INITIAL OFFERING OF CLASS B OF HIGH YIELD, GOVERNMENT INVESTMENT, AND HIGH
INCOME MUNICIPAL TOOK PLACE ON JUNE 30, 1994. CLASS B BEARS A 12B-1 FEE (AT
A THEN CURRENTLY APPLICABLE COMBINED RATE OF 1.00%) WHICH IS NOT REFLECTED
IN RETURNS PRIOR TO JUNE 30, 1994. RETURNS PRIOR TO JUNE 30, 1994 ARE THOSE
OF CLASS T, THE ORIGINAL CLASS OF THESE FUNDS, AND INCLUDE THE THEN
APPLICABLE CLASS T 12B-1 FEE OF 0.25%. CLASS B RETURNS WOULD HAVE BEEN
LOWER IF ITS 12B-1 FEE HAD BEEN REFLECTED IN RETURNS PRIOR TO JUNE 30,
1994.
CLASS C OF EACH FUND (EXCEPT STRATEGIC OPPORTUNITIES, MORTGAGE
SECURITIES, MUNICIPAL BOND, SHORT-INTERMEDIATE MUNICIPAL INCOME, CALIFORNIA
MUNICIPAL INCOME, AND NEW YORK MUNICIPAL INCOME) IS EXPECTED TO COMMENCE
OPERATIONS ON OR ABOUT NOVEMBER 1, 1997.
CLASS C RETURNS FOR TECHNOQUANT GROWTH, MID CAP, LARGE CAP, GROWTH &
INCOME, AND STRATEGIC INCOME PRIOR TO THE COMMENCEMENT OF OPERATIONS OF
CLASS C ARE THOSE OF CLASS B, AN ORIGINAL CLASS OF EACH FUND, AND REFLECT
CLASS B'S APPLICABLE 12B-1 FEE (1.00% PRIOR TO JANUARY 1, 1996 FOR
STRATEGIC INCOME). CLASS C RETURNS FOR STRATEGIC INCOME WOULD HAVE BEEN
LOWER IF ITS 12B-1 FEE HAD BEEN REFLECTED IN RETURNS AFTER JANUARY 1, 1996.
CLASS C RETURNS FOR EQUITY GROWTH BETWEEN DECEMBER 31, 1996 AND
COMMENCEMENT OF OPERATIONS OF CLASS C ARE THOSE OF CLASS B, AND REFLECT
CLASS B'S APPLICABLE 12B-1 FEE. RETURNS BETWEEN SEPTEMBER 10, 1992 AND
DECEMBER 31, 1996 ARE THOSE OF CLASS T AND REFLECT CLASS T'S APPLICABLE
12B-1 FEE (0.65% PRIOR TO JANUARY 1, 1996). RETURNS PRIOR TO SEPTEMBER 10,
1992 ARE THOSE OF INSTITUTIONAL CLASS, THE ORIGINAL CLASS OF THE FUND,
WHICH DOES NOT BEAR A 12B-1 FEE. CLASS C RETURNS WOULD HAVE BEEN LOWER IF
ITS 12B-1 FEE HAD BEEN REFLECTED IN RETURNS PRIOR TO DECEMBER 31, 1996.
CLASS C RETURNS FOR GROWTH OPPORTUNITIES BETWEEN MARCH 3, 1997 AND
COMMENCEMENT OF OPERATIONS OF CLASS C ARE THOSE OF CLASS B, AND REFLECT
CLASS B'S APPLICABLE 12B-1 FEE. RETURNS PRIOR TO MARCH 3, 1997 ARE THOSE OF
CLASS T, THE ORIGINAL CLASS OF THE FUND, AND REFLECT CLASS T'S APPLICABLE
12B-1 FEE (0.65% PRIOR TO JANUARY 1, 1996). CLASS C RETURNS WOULD HAVE BEEN
LOWER IF ITS 12B-1 FEE HAD BEEN REFLECTED IN RETURNS PRIOR TO MARCH 3,
1997.
CLASS C RETURNS FOR BALANCED BETWEEN DECEMBER 31, 1996 AND COMMENCEMENT OF
OPERATIONS OF CLASS C ARE THOSE OF CLASS B, AND REFLECT CLASS B'S
APPLICABLE 12B-1 FEE. RETURNS PRIOR TO DECEMBER 31, 1996 ARE THOSE OF CLASS
T AND REFLECT CLASS T'S APPLICABLE 12B-1 FEE (0.65% PRIOR TO JANUARY 1,
1996). CLASS C RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE HAD BEEN
REFLECTED IN RETURNS PRIOR TO DECEMBER 31, 1996.
CLASS C RETURNS FOR HIGH YIELD, GOVERNMENT INVESTMENT, AND HIGH INCOME
MUNICIPAL BETWEEN JUNE 30, 1994 AND COMMENCEMENT OF OPERATIONS OF CLASS C
ARE THOSE OF CLASS B, AND REFLECT CLASS B'S APPLICABLE 12B-1 FEE (1.00%
PRIOR TO JANUARY 1, 1996). RETURNS PRIOR TO JUNE 30, 1994 ARE THOSE OF
CLASS T, THE ORIGINAL CLASS OF THESE FUNDS, AND INCLUDE CLASS T'S
APPLICABLE 12B-1 FEE OF 0.25%. CLASS C RETURNS WOULD HAVE BEEN LOWER IF ITS
12B-1 FEE HAD BEEN REFLECTED IN PRIOR DATE RETURNS.
CLASS C RETURNS FOR SHORT FIXED-INCOME PRIOR TO COMMENCEMENT OF OPERATIONS
OF CLASS C ARE THOSE OF CLASS T, AND REFLECT CLASS T'S APPLICABLE 12B-1
FEE. CLASS C RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE HAD BEEN
REFLECTED IN PRIOR DATE RETURNS.
CLASS C RETURNS FOR EQUITY INCOME, INTERMEDIATE BOND, AND INTERMEDIATE
MUNICIPAL INCOME BETWEEN JUNE 30, 1994 AND COMMENCEMENT OF OPERATIONS OF
CLASS C ARE THOSE OF CLASS B, AND REFLECT CLASS B'S APPLICABLE 12B-1 FEE
(1.00% FOR INTERMEDIATE BOND AND INTERMEDIATE MUNICIPAL INCOME PRIOR TO
JANUARY 1, 1996).RETURNS BETWEEN SEPTEMBER 10, 1992 AND JUNE 30, 1994 ARE
THOSE OF CLASS T AND REFLECT CLASS T'S THEN APPLICABLE 12B-1 FEE OF 0.65%
FOR EQUITY INCOME, AND 0.25% FOR INTERMEDIATE BOND AND INTERMEDIATE
MUNICIPAL INCOME. RETURNS PRIOR TO SEPTEMBER 10, 1992 ARE THOSE OF
INSTITUTIONAL CLASS, THE ORIGINAL CLASS OF THESE FUNDS, WHICH DOES NOT BEAR
A 12B-1 FEE. CLASS C RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE HAD
BEEN REFLECTED IN PRIOR DATE RETURNS.
The exclusion of any applicable sales charge from a performance calculation
produces a higher return.
If FMR had not reimbursed certain class expenses during these periods,
total returns would have been lower.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment over a given period,
assuming reinvestment of any dividends and capital gains. A CUMULATIVE
TOTAL RETURN reflects actual performance over a stated period of time. An
AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that, if
achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period. Average annual total
returns smooth out variations in performance; they are not the same as
actual year-by-year results. 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 funds whose investments are
denominated in foreign securities.
In calculating yield, a fund 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.
THE COMPETITIVE FUNDS AVERAGE is each fund's applicable Lipper Funds
Average, which reflects the performance of mutual funds with similar
objectives. These averages, published by Lipper Analytical Services, Inc.,
exclude the effect of sales loads.
STANDARD & POOR'S 500 INDEX (S&P 500) is a widely recognized, unmanaged
index of common stocks.
STANDARD & POOR'S MIDCAP 400 INDEX is a widely recognized, unmanaged
index of 400 medium-capitalization stocks.
MERRILL LYNCH HIGH YIELD MASTER INDEX is a market capitalization weighted
index of all domestic and yankee high-yield bonds. Issues included in the
index have maturities of at least one year and have a credit rating lower
than BBB-/Baa3, but are not in default.
LEHMAN BROTHERS 1-3 YEAR GOVERNMENT/CORPORATE BOND INDEX is a market value
weighted performance benchmark for government and corporate fixed-rate debt
issues with maturities between one and three years.
SALOMON BROTHERS MORTGAGE INDEX is a market capitalization weighted index
of 15- and 30-year fixed-rate securities backed by mortgage pools of the
Government National Mortgage Association (GNMA), Fannie Mae and
Federal Home Loan Mortgage Corporation (FHLMC), and Fannie Mae and
FHLMC balloon mortgages with fixed-rate coupons.
SALOMON BROTHERS TREASURY/AGENCY INDEX is a market capitalization weighted
index of U.S. Treasury and U.S. government agency securities with
fixed-rate coupons and weighted average lives of at least one year.
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX is a market
value weighted performance benchmark for government and corporate
fixed-rate debt issues with maturities between one and 10 years.
Unlike each class's returns, the total returns of each comparative index do
not include the effect of any brokerage commissions, transaction fees, or
other costs of investing.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
Each class of each equity fund may quote its adjusted net asset value
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. TechnoQuant Growth, Equity Growth,
Mid Cap, Large Cap, and Growth & Income are diversified funds of Fidelity
Advisor Series I, a Massachusetts business trust organized on June 24,
1983. Growth Opportunities, Balanced, High Yield, Government Investment,
and Short Fixed-Income are diversified funds and Strategic Income is a
non-diversified fund of Fidelity Advisor Series II, a Massachusetts
business trust organized on April 23 , 1986. Equity Income is a
diversified fund of Fidelity Advisor Series III, a Massachusetts business
trust organized on May 17, 1982. Intermediate Bond is a diversified fund of
Fidelity Advisor Series IV, a Massachusetts business trust organized on May
6, 1983. High Income Municipal is a diversified fund and California
Municipal Income and New York Municipal Income are non-diversified funds of
Fidelity Advisor Series V, a Massachusetts business trust organized on
April 23, 1986. Intermediate Municipal Income is a diversified fund and
Short-Intermediate Municipal Income is a non-diversified fund of Fidelity
Advisor Series VI, a Massachusetts business trust organized on June 1,
1983. Strategic Opportunities is a diversified fund of Fidelity
Advisor Series VIII, a Massachusetts business trust organized on
September 22 , 1983. Mortgage Securities is a diversified fund of
Fidelity Income Fund, a Massachusetts business trust organized on August 7,
1984. Municipal Bond is a diversified fund of Fidelity Municipal Trust, a
Massachusetts business trust organized on June 22, 1984. 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.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet periodically throughout the year to oversee the
funds' activities, review contractual arrangements with companies that
provide services to the funds, and review the funds' performance. The
trustees serve as trustees for other Fidelity funds. The majority of
trustees are not otherwise affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL SHAREHOLDER MEETINGS AND MAIL PROXY
MATERIALS. These meetings may be called to elect or remove trustees, change
fundamental policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
The transfer agent will mail proxy materials in advance, including a voting
card and information about the proposals to be voted on. The number
of votes you are entitled to is based upon the dollar value of your
investment.
Separate votes are taken by each class of shares, fund, or trust, 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 investments with the assistance
of foreign affiliates for all funds except Government Investment, High
Income Municipal, Municipal Bond, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income.
(small solid bullet) Fidelity Management & Research (U.K.) Inc. (FMR U.K.),
in London, England, serves as a sub-adviser for TechnoQuant Growth, Mid
Cap, Equity Growth, Growth Opportunities, Strategic Opportunities, Large
Cap, Growth & Income, Equity Income, Balanced, High Yield, Strategic
Income, Mortgage Securities, Intermediate Bond, and Short
Fixed-Income .
(small solid bullet) Fidelity Management & Research Far East Inc. (FMR Far
East), in Tokyo, Japan, serves as a sub-adviser for TechnoQuant Growth, Mid
Cap, Equity Growth, Growth Opportunities, Strategic Opportunities, Large
Cap, Growth & Income, Equity Income, Balanced, High Yield, Strategic
Income, Mortgage Securities, Intermediate Bond, and Short
Fixed-Income .
(small solid bullet) Fidelity International Investment Advisors (FIIA), in
Pembroke, Bermuda, serves as a sub-adviser for Strategic Income.
(small solid bullet) Fidelity International Investment Advisors (U.K.)
Limited (FIIA(U.K.)L) , in London, England, serves as a
sub-adviser for Strategic Income.
(small solid bullet) Fidelity Investment Japan Limited (FIJ), in Tokyo,
Japan serves as a sub-adviser for Strategic Income.
As of September 30, 1997, FMR advised funds having approximately __million
shareholder accounts with a total value of more than $__ billion.
John Carlson is Vice President and manager of Advisor Strategic Income,
which he has managed since August 1995. He also manages several
other Fidelity funds. Prior to joining Fidelity in 1995, Mr. Carlson was
Executive Director of emerging markets at Lehman Brothers International
from 1992 through 1995.
Robert Chow is manager of Advisor Equity Income, which he has managed since
March 1996. Previously, he managed other Fidelity funds. Since joining
Fidelity in 1989, Mr. Chow has worked as an analyst, portfolio assistant
and manager.
Katherine Collins is manager of Advisor Mid Cap, which she has managed
since January 1997. She also manages another Fidelity fund. Since joining
Fidelity in 1990, Ms. Collins has worked as an analyst and manager.
Bettina Doulton is Vice President and lead manager of Advisor Balanced,
which she has managed since March 1996. She also manages other Fidelity
funds. Since joining Fidelity in 1986, Ms. Doulton has worked as a research
assistant, analyst and manager.
Andrew Dudley is manager of Advisor Short Fixed-Income, which he has
managed since February 1997. Mr. Dudley joined Fidelity as a manager in
1996. Previously, he was a portfolio manager with Putnam Investments from
1991 to 1996.
Margaret Eagle is Vice President and manager of Advisor High Yield and
Advisor Strategic Income's high yield investments, which she has managed
since January 1987 and January 1996 , respectively .
A ddition ally , she is a Senior Vice President of Fidelity
Trust Company. Ms. Eagle joined Fidelity in 1980.
George Fischer is Vice President and manager of Advisor Municipal
Bond and Advisor High Income Municipal, which he has managed since October
1995 and April 1997, respectively. He also manages several other Fidelity
funds. Since joining Fidelity in 1989, Mr. Fischer has worked as an analyst
and manager.
Kevin Grant is Vice President and manager of Advisor Intermediate Bond and
Advisor Balanced Fund's fixed-income investments, which he has managed
since October 1995 and March 1996, respectively. He also manages several
other Fidelity funds. Prior to joining Fidelity in 1993, Mr. Grant was a
vice president and chief mortgage strategist at Morgan Stanley for three
years.
Brian Hogan is manager of Advisor Strategic Income Fund's emerging
market securities. Since joining Fidelity is 1994, Mr. Hogan has worked as
a fixed-income analyst, research analyst and manager. Previously, he worked
as a analyst for Conseco Capital Management from 1993 to 1994 and Aegon USA
Investment Management from 1990 to 1993.
Curt Hollingsworth is Vice President and manager of Advisor Government
Investment and Advisor Strategic Income Fund's domestic investment-grade
and U.S. government investments, all of which he has managed since February
1997. He also manages other Fidelity funds. Since joining Fidelity in 1983,
Mr. Hollingsworth has worked as a fixed-income trader and portfolio
manager.
Jonathan Kelly is manager of Advisor Strategic Income Fund's foreign bond
investments in developed markets, which he has managed since January 1996.
Previously, he managed other Fidelity funds. Since joining Fidelity in
1991, Mr. Kelly has worked as a foreign bond analyst and manager.
Tim Krochuk is manager of Advisor TechnoQuant Growth, which he has managed
since inception. He also manages another Fidelity fund. Previously, he was
a quantitative analyst. Mr. Krochuk joined Fidelity as a research associate
in 1992, after receiving a bachelor of arts degree in economics/pre-med
from Harvard University.
Harris Leviton is Vice President and manager of Advisor Strategic
Opportunities, which he has managed since March 1996. Previously, he
managed other Fidelity funds. Since joining Fidelity in 1986, he has worked
as an analyst and manager.
Norm Lind is Vice President and manager of Advisor New York Municipal
Income and Advisor Short-Intermediate Municipal Income, which he has
managed since August 1995 and October 1995, respectively. He also manages
other Fidelity funds. Since joining Fidelity in 1986, Mr. Lind has worked
as an analyst and manager.
David Murphy is Vice President and manager of Advisor Intermediate
Municipal Income, which he has managed since March 1995. He also manages
several other Fidelity funds. Mr. Murphy joined Fidelity as a portfolio
manager in 1989.
Jonathan Short is Vice President and manager of Advisor California
Municipal Income, which he has managed since inception. He also manages
several other Fidelity funds. Since joining Fidelity in 1990, Mr. Short has
worked as an analyst and manager.
Thomas Silvia is manager of Advisor Mortgage Securities . He has been a
co-manager of the fund since February 1997. Mr. Silvia joined Fidelity
as a senior mortgage trader in 1993. Previously, he was a quantitative
analyst with Donaldson, Lufkin & Jenrette in New York from 1990 to 1993.
Thomas Sprague is Vice President and manager of Advisor Large Cap,
which he has managed since March 1996. He also manages another Fidelity
fund. Since joining Fidelity in 1989, he has worked as an analyst and
manager.
Beth Terrana is Vice President and manager of Advisor Growth & Income,
which she has managed since inception. She also manages other Fidelity
funds. Since joining Fidelity in 1983, Ms. Terrana has worked as an
analyst, portfolio assistant and manager.
Jennifer Uhrig is Vice President and manager of Advisor Equity Growth,
which she has managed since January 1997. She also manages another Fidelity
fund. Since joining Fidelity in 1987, Ms. Uhrig has worked as an analyst
and manager.
George Vanderheiden is Vice President and manager of Advisor Growth
Opportunities, which he has managed since November 1987. He also manages
several other Fidelity funds. Mr. Vanderheiden joined Fidelity in 1971.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
FDC distributes and markets Fidelity's funds and services.
Fidelity Investments Institutional Operations Company, Inc. (FIIOC)
performs transfer agent servicing functions for each class of the Equity
Funds, High Yield, Strategic Income, Mortgage Securities, Government
Investment, Intermediate Bond, and Short Fixed-Income. UMB Bank, n.a. (UMB)
is the transfer agent for High Income Municipal, Municipal Bond,
Intermediate Municipal Income, Short-Intermediate Municipal Income,
California Municipal Income, and New York Municipal Income, although it
employs FIIOC to perform these functions for each class of each fund. UMB
is located at 1010 Grand Avenue, Kansas City, Missouri.
FMR Corp. is the ultimate parent company of FMR, FMR U.K., and FMR Far
East. Members of the Edward C. Johnson 3d family are the predominant owners
of a class of shares of common stock representing approximately 49% of the
voting power of FMR Corp. Under the Investment Company Act of 1940 (the
1940 Act), control of a company is presumed where one individual or group
of individuals owns more than 25% of the voting stock of that company;
therefore, the Johnson family may be deemed under the 1940 Act to form a
controlling group with respect to FMR Corp.
Fidelity International Limited (FIL), is the parent company of FIIA, FIJ,
and FIIA(U.K.)L The Johnson family group also owns, directly or indirectly,
more than 25% of the voting common stock of FIL.
As of September 30, 1997, approximately ____% and ____% of each of [NAME OF
FUND]'s and [NAME OF FUND]'s total outstanding shares, respectively, were
held by [FMR/FMR and [an] FMR affiliate[s]/[an] FMR affiliate[s].
FMR may use its broker-dealer affiliates and other firms that sell fund
shares to carry out a fund's transactions, provided that the fund receives
brokerage services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
EACH FUND'S INVESTMENT APPROACH
The value of each fund's domestic and foreign investments varies in
response to many factors. Stock values fluctuate in response to the
activities of individual companies and general market and economic
conditions. Bond values fluctuate based on changes in interest rates,
market conditions, other economic and political news, and on their quality
and maturity. In general, bond prices rise when interest rates fall, and
fall when interest rates rise. This effect is more pronounced for
longer-term securities. Lower-quality securities offer higher yields, but
also carry more risk.
Funds which invest in foreign securities have increased economic and
political risks as they are exposed to events and factors in the various
world markets. This is especially true for funds that invest in emerging
markets. Also, because many of the funds' investments are denominated in
foreign currencies, changes in the value of foreign currencies can
significantly affect a fund's share price. FMR may use a variety of
investment techniques to either increase or decrease a fund's investment
exposure to any currency.
The total return from a bond includes both income and price gains or
losses. In selecting investments for a bond fund, FMR considers a bond's
expected income together with its potential for price gains or losses.
While income is generally the most important component of bond returns over
time, a bond fund's emphasis on income does not mean the fund invests only
in the highest-yielding bonds available, or that it can avoid losses of
principal.
FMR generally focuses on assembling a portfolio of bonds that it believes
will provide the best balance between risk and return within the range of
eligible investments for the fund. FMR's evaluation of a potential
investment includes an analysis of the credit quality of the issuer, its
structural features, its current price compared to FMR's estimate of its
long-term value, and any short-term trading opportunities resulting from
market inefficiencies.
FMR may use various investment techniques to hedge a portion of the funds'
risks, but there is no guarantee that these strategies will work as FMR
intends. When you sell your shares, they may be worth more or less than
what you paid for them.
TECHNOQUANT GROWTH FUND seeks growth of capital by investing mainly in
common stocks. However, the fund has the flexibility to invest in other
types of equity securities and debt securities as well. The fund's security
selection process utilizes computer-aided, quantitative analysis. FMR's
computer models use many types of data, but emphasize technical factors
such as historical price and volume relationships. Fundamental criteria,
such as earnings estimates, and dividend yield may also be considered.
FMR's emphasis on technical analysis can result in the fund holding
different types of stocks at different times. For example, the fund may
hold stocks of companies with large or small market capitalization or high
or low price/earnings ratios. The fund's focus may change rapidly based on
FMR's analysis of the most current information. At times, the fund may be
concentrated in a small number of market sectors or securities.
MID CAP FUND seeks long-term growth of capital by investing primarily in
equity securities of companies with medium market capitalizations. FMR
normally invests at least 65% of the fund's total assets in these
securities. The fund has the flexibility, however, to invest the balance in
other market capitalizations and security types.
Medium market capitalization companies are those whose market
capitalization falls within the capitalization range of the S&P MidCap 400
at the time of the fund's investment. The S&P MidCap 400 Index is an
unmanaged index of medium-capitalization stocks. Companies whose
capitalization falls outside this range after purchase continue to be
considered medium-capitalized for purposes of the 65% policy. As of
December 31, 1996, the S&P MidCap 400 included companies with
capitalizations of between $192 million and $6.5 billion.
Investing in medium capitalization stocks may involve greater risk than
investing in large capitalization stocks, since they can be subject to more
abrupt or erratic movements. However, they tend to involve less risk than
stocks of small capitalization companies.
EQUITY GROWTH FUND seeks capital appreciation by investing primarily in
common and preferred stock and securities convertible into the common stock
of companies with above-average growth characteristics. FMR normally
invests at least 65% of the fund's 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. The S&P 500 is a registered trademark of Standard & Poor's.
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.
GROWTH OPPORTUNITIES FUND seeks capital growth by investing primarily in
common stocks and securities convertible into common stocks. FMR normally
invests at least 65% of the fund's total assets 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." FMR normally invests at least 65% of the fund's total assets in
these securities. 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.
LARGE CAP FUND seeks long-term growth of capital by investing primarily in
equity securities of companies with large market capitalizations. FMR
normally invests at least 65% of the fund's total assets in these
securities. The fund has the flexibility, however, to invest the balance in
other market capitalizations and security types.
FMR defines large market capitalization companies as those with market
capitalizations of $1 billion or more at the time of the fund's investment.
Companies whose capitalization falls below this level after purchase
continue to be considered large-capitalized for purposes of the 65% policy.
Companies with large market capitalizations typically have a large number
of publicly held shares and a high trading volume, resulting in a high
degree of liquidity. These tend to be quality companies with strong
management organizations. However, large capitalization companies may have
less growth potential than smaller companies and may be able to react less
quickly to changes in the marketplace.
GROWTH & INCOME FUND seeks high total return through a combination of
current income and capital appreciation. The fund invests mainly in equity
securities. The fund expects to invest the majority of its assets in
domestic and foreign equity securities, with a focus on those that pay
current dividends and show potential earnings growth. However, the fund may
buy debt securities as well as equity securities that are not currently
paying dividends, but offer prospects for capital appreciation or future
income.
EQUITY INCOME FUND seeks a yield which exceeds the composite dividend yield
of securities comprising the S&P 500. In addition, consistent with the
primary objective of obtaining income, the fund will consider the potential
for achieving capital appreciation. FMR normally invests at least 65% of
the fund's 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 seeks to achieve a yield that beats that of the S&P 500. 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.
BALANCED 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. FMR manages the fund
to maintain a balance between stocks and bonds. When FMR's outlook is
neutral, it will invest approximately 60% of the fund's assets in stocks
and other equity securities and the remainder in bonds and other
fixed-income securities. FMR may vary from this target if it believes
stocks or bonds offer more favorable opportunities, but will always invest
at least 25% of the fund's total assets in fixed-income senior securities
(including debt securities and preferred stock).
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.
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. FMR normally invests at least 65% of the fund's total
assets in these securities.
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 four
general investment categories: high yield securities, U.S. Government and
investmen t- grade securities, emerging market securities, and foreign
developed market securities. The fund's neutral mix, or the benchmark for
its combination of investments in each category over time, is approximately
40% high yield, 30% U.S. Government and investment-grade, 15% emerging
markets and 15% foreign developed markets.
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. In normal market environments,
FMR expects the fund's asset allocation to approximate the neutral mix
within a range of plus or minus 10% of assets per category. There are no
absolute limits on the percent of assets invested in each category,
however, and FMR reserves the right to change the neutral mix from time to
time.
The HIGH YIELD category includes high-yielding, lower-quality debt
securities consisting mainly of U.S. securities of a quality grade lower
than BBB. The U.S. GOVERNMENT AND INVESTMENT-GRADE category includes
mortgage securities, U.S. Government securities, government agency
securities and other U.S. dollar-denominated securities of investment-grade
quality. The EMERGING MARKET category includes corporate and governmental
debt securities of issuers located in emerging markets. The FOREIGN
DEVELOPED MARKET category includes corporate and governmental debt
securities of issuers located in developed foreign markets. These
investment categories are only general guidelines, and FMR may use its
judgment as to which category an investment falls within. The fund may also
make investments that do not fall within these categories.
By allocating its investments across different types of fixed-income
securities, the fund attempts to moderate the significant risks of each
investment category through diversification. Diversification, when
successful, can mean higher returns with decreased volatility. However,
each of the fund's four investment categories may experience periods of
volatile returns, and it is possible for all investment categories to
decline at the same time.
MORTGAGE SECURITIES FUND seeks high current income, consistent with prudent
investment risk, by investing primarily in mortgage-related securities.
When consistent with its goal, the fund may also consider the potential for
capital gain. FMR normally invests at least 65% of the fund's total assets
in mortgage-related securities. The fund may also invest in U.S. Government
securities and instruments related to U.S. Government securities.
Instruments related to U.S. G overnment securities may include
futures or options on U.S. Government securities or interests in U.S.
Government securities that have been repackaged by dealers or other third
parties.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to government bonds with maturities between two and 10 years.
However, the reaction of mortgage securities to changes in interest rates
can be difficult to predict since mortgage securities are subject to
prepayment of principal and can be structured in a complex manner. As of
July 31, 1997, the fund's dollar-weighted average maturity was
approximately __ years.
GOVERNMENT INVESTMENT FUND seeks high current income by investing in U.S.
Government securities and instruments related to U.S. Government securities
under normal conditions. FMR normally invests the fund's assets only in
U.S. Government securities, repurchase agreements, and other instruments
related to U.S. Government securities. Under normal conditions, FMR invests
at least 65% of the fund's total assets in U.S. Government securities and
repurchase agreements for U.S. Government securities. Other instruments may
include futures or options on U.S. Government securities or interests in
U.S. Government securities that have been repackaged by dealers or other
third parties. It is important to note that neither the fund nor its
yield are guaranteed by the U.S. Government.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to government bonds with maturities between five and 12 years. As
of October 31, 1996, the fund's dollar-weighted average maturity was
approximately 8.5 years.
INTERMEDIATE BOND FUND seeks high current income by investing in U.S.
dollar-denominated investment-grade debt securities under normal
conditions. When consistent with its primary objective, the fund may also
seek capital appreciation. Although the fund can invest in securities of
any maturity, the fund normally maintains a dollar-weighted average
maturity between three and 10 years.
In determining a security's maturity for purposes of calculating the fund's
average maturity, an estimate of the average time for its principal to be
paid may be used. This can be substantially shorter than its stated final
maturity. As of November 30, 1996, the fund's dollar-weighted average
maturity was approximately 5.7 years.
SHORT FIXED-INCOME FUND seeks high current income, consistent with the
preservation of capital, by investing in U.S. dollar-denominated
investment-grade debt securities under normal conditions. Where appropriate
the fund will take advantage of opportunities to realize capital
appreciation. FMR normally invests at least 65% of the fund's total assets
in fixed-income securities of all types which may include convertible and
zero coupon securities.
Although the fund can invest in securities of any maturity, the fund
maintains a dollar-weighted average maturity of three years or less under
normal conditions. In determining a security's maturity for purposes of
calculating the fund's average maturity, an estimate of the average time
for its principal to be paid may be used. This can be substantially shorter
than its stated final maturity. As of October 31, 1996, the fund's
dollar-weighted average maturity was approximately 2.2 years.
HIGH INCOME MUNICIPAL FUND seeks high current income that is free from
federal income tax by investing primarily in investment-grade
municipal securities. The fund may also invest up to 35% of its assets
in below investment-grade securities. FMR normally invests so that at
least 80% of the fund's assets is invested in municipal securities whose
interest is free from federal income tax. In addition, FMR may invest all
of the fund's assets in municipal securities issued to finance private
activities. The interest from these securities is a tax preference item for
the purposes of the federal alternative minimum tax.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds with maturities between eight and 18
years. As of October 31, 1996, the fund's dollar-weighted average
maturity was approximately 16.4 years.
MUNICIPAL BOND FUND seeks a high level of current income that is free from
federal income tax, consistent with preservation of capital, by investing
in investment-grade municipal securities under normal conditions. FMR
normally invests so that at least 80% of the fund's assets is invested in
municipal securities whose interest is free from federal income tax. In
addition, FMR may invest all of the fund's assets in municipal securities
issued to finance private activities. The interest from these securities is
a tax preference item for purposes of the federal alternative minimum tax.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds with maturities between eight and 18 years. As
of December 31, 1996, the fund's dollar-weighted average maturity was
approximately 12.4 years.
INTERMEDIATE MUNICIPAL INCOME FUND seeks high current income that is free
from federal income tax, consistent with the preservation of capital, by
investing in investment-grade municipal securities under normal conditions.
FMR normally invests so that at least 80% of the fund's assets is invested
in municipal securities whose interest is free from federal income tax. In
addition, FMR may invest all of the fund's assets in municipal securities
issued to finance private activities. The interest from these securities is
a tax preference item for the purposes of the federal alternative minimum
tax.
Although the fund can invest in securities of any maturity, the fund
maintains a dollar-weighted average maturity of between three and 10 years
under normal conditions. FMR seeks to manage the fund so that it generally
reacts to changes in interest rates similarly to municipal bonds with
maturities between seven and 10 years. As of November 30, 1996, the fund's
dollar-weighted average maturity was approximately 8.6 years.
SHORT-INTERMEDIATE MUNICIPAL INCOME FUND seeks high current income that is
free from federal income tax, consistent with preservation of capital, by
investing in investment-grade municipal securities under normal conditions.
FMR normally invests so that at least 80% of the fund's assets is invested
in municipal securities whose interest is free from federal income tax. In
addition, FMR may invest all of the fund's assets in municipal securities
issued to finance private activities. The interest from these securities is
a tax preference item for the purposes of the federal alternative minimum
tax.
Although the fund can invest in securities of any maturity, the fund
maintains a dollar-weighted average maturity of between two and five years
under normal conditions. As of November 30, 1996, the fund's
dollar-weighted average maturity was approximately 3.4 years.
CALIFORNIA MUNICIPAL INCOME FUND seeks high current income that is free
from federal income tax and California state personal income tax by
investing in investment-grade municipal securities under normal conditions.
FMR normally invests so that at least 80% of the fund's assets is invested
in securities whose interest is free from federal and California income
taxes. In addition, FMR may invest all of the fund's assets in municipal
securities issued to finance private activities. The interest from these
securities is a tax preference item for the purposes of the federal
alternative minimum tax.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds with maturities between eight and 18 years. As
of October 31, 1996, the fund's dollar-weighted average maturity was
approximately 14.4 years.
The performance of California Municipal Income is affected by the economic
and political conditions within the state of California. California
suffered a severe economic recession between 1990-1993, which resulted in
broad-based revenue shortfalls for the State and many local governments.
California's fiscal condition has improved as its economy has been in a
sustained recovery since 1994. During the recession, the State
substantially reduced local assistance, and further reductions could
adversely affect the financial condition of cities, counties and other
government agencies facing constraints in their own revenue collections.
California's long-term credit rating stabilized after having been reduced
in the past several years. California voters in the past have passed
amendments to the California Constitution and other measures that limit the
taxing and spending authority of California governmental entities, and
future voter initiatives could result in adverse consequences affecting
California municipal bonds.
NEW YORK MUNICIPAL INCOME FUND seeks high current income that is free from
federal income tax and New York State and City personal income taxes by
investing in investment-grade municipal securities under normal conditions.
FMR normally invests so that at least 80% of the fund's assets is invested
in securities whose interest is free from federal and New York State and
City personal income taxes. In addition, FMR may invest all of the fund's
assets in municipal securities issued to finance private activities. The
interest from these securities is a tax preference item for the purposes of
the federal alternative minimum tax.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds with maturities between eight and 18 years. As
of October 31, 1996, the fund's dollar-weighted average maturity was
approximately 13.3 years.
The performance of New York Municipal Income is affected by the economic
and political conditions within the state of New York. Both New York City
and State have recently experienced significant financial difficulty, and
both the City's and the State's credit ratings are among the lowest in the
country.
TEMPORARY DEFENSIVE POLICIES. FMR normally invests each fund's assets
according to its investment strategy.
Each of the Equity Funds, High Yield, and Strategic Income reserves the
right to invest without limitation in preferred stocks and investment-grade
debt instruments for temporary, defensive purposes.
Each of Mortgage Securities, Government Investment, Intermediate Bond, and
Short Fixed-Income reserves the right to invest without limitation in
investment-grade money market or short-term debt instruments for temporary,
defensive purposes.
Each of High Income Municipal, Municipal Bond, Intermediate Municipal
Income, and Short-Intermediate Municipal Income do not expect to invest in
federally taxable obligations. California Municipal Income and New York
Municipal Income do not expect to invest in federally or state taxable
obligations. Each of High Income Municipal, Municipal Bond, Intermediate
Municipal Income, Short-Intermediate Municipal Income, California Municipal
Income, and New York Municipal Income, 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 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, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related risks.
Any restrictions listed supplement those discussed earlier in this section.
A complete listing of each fund's limitations and more detailed information
about each fund's investments are contained in the funds' SAI. Policies and
limitations are considered at the time of purchase; the sale of instruments
is not required in the event of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques
unless it believes that they are consistent with a fund's investment
objective and policies and that doing so will help a fund achieve its goal.
Fund holdings and recent investment strategies are detailed in each fund's
financial reports, which are sent to shareholders twice a year. For a free
SAI or financial report, call 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 total assets, each of the Equity Funds,
High Yield, Mortgage Securities, Government Investment, Intermediate Bond,
Short Fixed-Income, High Income Municipal, Municipal Bond, and Intermediate
Municipal Income may not purchase more than 10% of the outstanding voting
securities of a single issuer. For TechnoQuant Growth, Mid Cap, Equity
Growth, Growth Opportunities, Strategic Opportunities, Large Cap, and
Growth & Income, this limitation does not apply to securities of other
investment companies.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer generally pays the investor a
fixed, variable, or floating rate of interest, and must repay the amount
borrowed at maturity. Some debt securities, such as zero coupon
bonds, do not pay current interest, but are sold at a discount from
their face values.
Debt securities have varying levels of sensitivity to changes in interest
rates and varying degrees of credit quality. In general, bond prices rise
when interest rates fall, and fall when interest rates rise. Longer-term
bonds and zero coupon bonds are generally more sensitive to interest rate
changes. In addition, bond prices are also affected by the credit quality
of the issuer.
Lower-quality debt securities are considered to have speculative
characteristics, and involve greater risk of default or price changes due
to changes in the issuer's creditworthiness, or they may already be in
default. The market prices of these securities may fluctuate more than
higher-quality securities and may decline significantly in periods of
general or regional economic difficulty. Lower-quality securities may be
thinly traded, making them difficult to sell promptly at an acceptable
price. Adverse publicity and changing investor perceptions may affect the
ability to obtain prices for, or to sell these securities.
The default rate of lower-quality debt securities is likely to be higher
when issuers have difficulty meeting projected goals or obtaining
additional financing. This could occur during economic recessions or
periods of high interest rates. If an issuer defaults, the fund may try to
protect the interests of security holders if it determines such action to
be in the interest of its shareholders.
The table on the following page 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 the fiscal year ended 1996, 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 YEAR ENDED 1996 DEBT HOLDINGS
Mid Equity Growth Strategic Large Growth & Equity High Strategic High
Income
S&P RATING Cap Growth Opportunities Opportunities Cap Income Income
Balanced Yield Income Municipal
INVESTMENT GRADE
Highest quality AAA
High quality AA -- -- 15.44% 6.43% -- -- 2.80% 31.90% -- 40.55% 27.16%
Upper-medium grade A
Medium grade BBB -- -- -- -- -- -- -- 3.26% 0.30% 0.57% 22.24%
LOWER QUALITY
Moderately speculative BB -- -- -- -- -- -- 0.45% 0.56% 11.90% 8.33%
9.89%
Speculative B 0.06% -- -- -- -- -- 0.06% 1.96% 47.80% 27.31% 0.53%
Highly speculative CCC -- -- -- -- -- -- 0.25% 5.40% 2.20% --
Poor quality CC -- -- -- -- -- -- -- -- -- -- --
Lowest quality, no interest C
In default, in arrears D -- -- -- -- -- -- -- -- 0.10% --
0.38%
Mid Equity Growth Strategic Large Growth & Equity High Strategic High
Income
MOODY'S RATING Cap Growth Opportunities Opportunities Cap Income Income
Balanced Yield Income
Municipal
INVESTMENT GRADE
Highest quality Aaa
High quality Aa -- -- 15.44% 6.43% -- -- 2.80% 33.87% -- 39.06% 26.58%
Upper-medium grade A
Medium grade Baa -- -- -- -- -- -- 0.02% 2.29% 0.10% 0.18% 22.72%
LOWER QUALITY
Moderately speculative Ba -- -- -- -- -- -- 0.25% 0.94% 8.60% 7.21%
9.19%
Speculative B -- -- -- 0.21% -- -- 0.26% 2.29% 48.90% 27.31% 0.18%
Highly speculative Caa -- -- -- -- -- -- -- 0.12% 9.70% 3.23% 0.60%
Poor quality Ca -- -- -- -- -- -- -- -- 0.03% 0.02% --
Lowest quality, no interest C -- -- -- -- -- -- -- -- -- --
- --
In default, in arrears --- -- -- -- -- -- -- -- -- -- --
- --
EACH FUND DOES NOT NECESSARILY RELY ON THE RATINGS OF MOODY'S OR S&P TO
DETERMINE COMPLIANCE WITH ITS DEBT QUALITY POLICY.
REFER TO THE APPENDIX FOR A MORE COMPLETE DISCUSSION OF THESE RATINGS.
SECURITIES NOT RATED BY MOODY'S AND S&P AMOUNTED TO 0.76% FOR BALANCED,
1.02% FOR STRATEGIC OPPORTUNITIES, AND
7.68% FOR HIGH YIELD, 8.98% FOR STRATEGIC INCOME, AND 27.02% FOR HIGH
INCOME MUNICIPAL. THESE PERCENTAGES MAY
INCLUDE SECURITIES RATED BY OTHER NATIONALLY RECOGNIZED STATISTICAL RATING
ORGANIZATIONS, AS WELL AS UNRATED SECURITIES. FMR
HAS DETERMINED THAT UNRATED SECURITIES THAT ARE LOWER QUALITY ACCOUNT FOR
0.76% FOR BALANCED, 1.02% FOR STRATEGIC
OPPORTUNITIES, 7.68% FOR HIGH YIELD, 8.97% FOR STRATEGIC INCOME, AND 24.84%
FOR HIGH INCOME MUNICIPAL. FOR FOREIGN
GOVERNMENT OBLIGATIONS NOT INDIVIDUALLY RATED BY A NATIONALLY RECOGNIZED
STATISTICAL RATING ORGANIZATION, FMR ASSIGNS A RATING
BASED ON THE RATING OF THE SOVEREIGN CREDIT OF THE ISSUING GOVERNMENT.
RESTRICTIONS: For all of the Equity Funds, 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 Investors Service (Moody's) or rated in the
equivalent categories by Standard & Poor's (S&P), or is unrated but judged
to be of equivalent quality by FMR.
Each of Mid Cap, Equity Growth, Growth Opportunities, Strategic
Opportunities, Large Cap, Growth & Income, Equity Income, and Balanced
currently intends to limit its investments in lower than Baa-quality debt
securities to less than 35% of its assets.
TechnoQuant Growth currently intends to limit its investments in lower than
Baa-quality debt securities to 5% of its assets.
Each of Mortgage Securities, Short Fixed-Income, Intermediate Municipal
Income, Short-Intermediate Municipal Income, California Municipal Income,
and New York Municipal Income normally invests in investment-grade
securities, but reserves the right to invest up to 5% of its assets in
below investment-grade securities. A security is considered to be
investment-grade if it is rated investment-grade by Moody's, S&P, Duff &
Phelps Credit Rating Co. (Duff & Phelps), or Fitch Investors Service, L.P.
(Fitch), or is unrated but judged by FMR to be of equivalent quality.
Intermediate Bond invests only in investment-grade securities, and will
limit its investments in medium quality securities to 5% of its assets. A
security is considered to be investment-grade or medium quality if it is
rated investment-grade or medium quality, respectively, by Moody's, S&P,
Duff & Phelps, or Fitch, or is unrated but judged by FMR to be of
equivalent quality.
High Income Municipal currently intends to limit its investment in below
investment-grade securities to less than 35% of its assets and does not
currently intend to invest more than 10% of its total assets in bonds that
are in default. A security is considered to be investment-grade if it is
rated investment-grade by Moody's, S&P, Duff & Phelps, or Fitch, or is
unrated but judged by FMR to be of equivalent quality.
Municipal Bond invests only in investment-grade securities. A security is
considered to be investment-grade if it is judged by FMR to be of
equivalent quality to securities rated Baa or BBB or higher by Moody's or
S&P, respectively. However, the fund will limit its investments in medium
quality securities as judged by FMR to one-third of its total assets; will
not purchase securities rated below Baa or BBB by Moody's or S&P,
respectively; and will not invest more than 20% of its total assets in
securities not rated by Moody's and S&P.
U.S. GOVERNMENT SECURITIES are high-quality debt instruments issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. Government. Not all U.S. Government securities are backed by the full
faith and credit of the United States. For example, U.S. Government
securities such as those issued by Fannie Mae are supported by the
instrumentality's right to borrow money from the U.S. Treasury under
certain circumstances. Other U.S. Government securities, such as those
issued by the Federal Farm Credit Banks Funding Corporation, are supported
only by the credit of the entity that issued them.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
or private purposes, including general financing for state and local
governments, or financing for specific projects or public facilities.
They may be fully or partially backed by the local government, or by the
credit of a private issuer or the current or anticipated revenues from
specific projects or assets. Because many municipal securities are issued
to finance similar types of projects, especially those relating to
education, health care, housing, transportation, and utilities, the
municipal markets can be affected by conditions in those sectors. In
addition, all municipal securities may be affected by uncertainties
regarding their tax status, legislative changes, or rights of municipal
securities holders. A municipal security may be owned directly or through a
participation interest.
CREDIT AND LIQUIDITY SUPPORT. Issuers may employ various forms of credit
and liquidity enhancement, including letters of credit, guarantees, puts
and demand features, and insurance, provided by foreign or domestic
entities such as banks and other financial institutions. These arrangements
expose a fund to the credit risk of the entity providing the credit or
liquidity support. Changes in the credit quality of the provider could
affect the value of the security and a fund's share price.
STATE MUNICIPAL SECURITIES include municipal obligations issued by the
state of California or New York or their respective counties,
municipalities, authorities, or other subdivisions. The ability of issuers
to repay their debt can be affected by many factors that impact the
economic vitality of either the state or a region within the state.
Other state municipal securities include obligations of U.S. territories
and possessions such as Guam, the Virgin Islands, Puerto Rico, and their
political subdivisions and public corporations. The economy of Puerto Rico
is closely linked to the U.S. economy and will be affected by the strength
of the U.S. dollar, interest rates, the price stability of oil imports, and
the continued existence of favorable tax incentives.
OTHER INSTRUMENTS may include securities of closed-end investment
companies.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations may
involve additional risks and considerations. These include risks relating
to political or economic conditions in foreign countries, fluctuations in
foreign currencies, withholding or other taxes, operational risks,
increased regulatory burdens, and the potentially less stringent investor
protection and disclosure standards of foreign markets. Additionally,
governmental issuers of foreign debt securities may be unwilling to pay
interest and repay principal when due and may require that the conditions
for payment be renegotiated. All of these factors can make foreign
investments, especially those in developing countries, more volatile than
U.S. investments.
ASSET-BACKED SECURITIES include interests in pools of purchase
contracts, financing leases, or sales agreements entered into by
municipalities, debt securities, or consumer loans. The value of these
securities depends on many factors, including changes in interest rates,
the availability of information concerning the pool and its structure, the
credit quality of the underlying assets, the market's perception of the
servicer of the pool, and any credit e n hancement provided. In
addition, these securities may be subject to prepayment risk.
MORTGAGE SECURITIES i nclude interests in pools of commercial or
residential mortgages, and may include complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed
securities. Mortgage securities may be issued by agencies or
instrumentalities of the U.S. G overnment or by private entities.
The price of a mortgage security may be significantly affected by changes
in interest rates. Some mortgage securities may have a structure that makes
their reaction to interest rates and other factors difficult to predict,
making their price highly volatile. Also, mortgage securities, especially
stripped mortgage-backed securities, are subject to prepayment risk.
Securities subject to prepayment risk generally offer less potential for
gains during a declining interest rate environment, and similar or greater
potential for loss in a rising interest rate environment.
RESTRICTIONS: Government Investment does not currently intend to invest
more than 40% of its assets in mortgage securities.
VARIABLE AND FLOATING RATE SECURITIES have interest rates that are
periodically adjusted either at specific intervals or whenever a benchmark
rate changes. Inverse floaters have interest rates that move in the
opposite direction from a benchmark, making the security's market value
more volatile.
STRIPPED SECURITIES are the separate income or principal components of a
debt security. The risks associated with stripped securities are similar to
those of other debt securities, although stripped securities may be more
volatile, and the value of certain types of stripped securities may move in
the same direction as interest rates. U.S. Treasury securities that have
been stripped by a Federal Reserve Bank are obligations issued by the U.S.
Treasury.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a security at
one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
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.
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.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or another party. In exchange for this benefit, a fund may accept a
lower interest rate. Demand features and standby commitments are types of
put features.
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.
REAL ESTATE-RELATED INSTRUMENTS include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors such
as changes in real estate values and property taxes, interest rates, cash
flow of underlying real estate assets, overbuilding, and the management
skill and creditworthiness of the issuer. Real estate-related instruments
may also be affected by tax and regulatory requirements, such as those
relating to the environment.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, currency exchange rates, commodity prices, or other factors that
affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts,
entering into currency exchange contracts or swap agreements, purchasing
indexed securities, and selling securities short.
FMR can use these practices to adjust the risk and return characteristics
of a fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with a
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of a fund and may involve a small investment of
cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other borrower.
They have additional risks beyond conventional debt securities because they
may entail less legal protection for a fund, or there may be a requirement
that the fund supply additional cash to a borrower on demand.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some illiquid securities, and some other securities, may be
subject to legal restrictions. Difficulty in selling securities may result
in a loss or may be costly to a fund.
RESTRICTIONS: Each fund (except High Yield and Strategic Income) may not
purchase a security if, as a result, more than 10% of its assets would be
invested in illiquid securities.
Each of High Yield and Strategic Income may not purchase a security if, as
a result, more than 15% of its assets would be invested in illiquid
securities.
WHEN-ISSUED AND FORWARD PURCHASE OR SALE TRANSACTIONS are trading practices
in which payment and delivery for the security take place at a later
date than is customary for that type of security. The market value of
the security could change during this period.
CASH MANAGEMENT. A fund may invest in money market securities, in
repurchase agreements, and in a money market fund available only to funds
and accounts managed by FMR or its affiliates, whose goal is to seek a high
level of current income (exempt from federal income tax in the case of a
municipal money market fund) while maintaining a stable $1.00 share price.
A major change in interest rates or a default on the money market fund's
investments could cause its share price to change.
RESTRICTIONS: California Municipal Income and New York Municipal Income do
not currently intend to invest in a money market fund. High Income
Municipal, Municipal Bond, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income do not currently intend to invest in repurchase
agreements.
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 the Equity
Funds, High Yield, Mortgage Securities, Government Investment, Intermediate
Bond, Short Fixed-Income, High Income Municipal, Municipal Bond, and
Intermediate Municipal Income may not purchase a security if, as a result,
more than 5% would be invested in the securities of any issuer. This
limitation does not apply to U.S. Government securities or, for TechnoQuant
Growth, Mid Cap, Equity Growth, Growth Opportunities, Strategic
Opportunities, Large Cap, and Growth & Income, to securities of other
investment companies.
Strategic Income, Short-Intermediate Municipal Income, California Municipal
Income, and New York Municipal Income 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 issuer
and, with respect to 50% of total assets, does not invest more than 5% of
its total assets in any issuer. These limitations do not apply to U.S.
Government securities or to securities of other investment companies.
A fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government securities.
Each of High Income Municipal, Municipal Bond, Intermediate Municipal
Income, Short-Intermediate Municipal Income, California Municipal Income,
and New York Municipal Income may invest more than 25% of its total assets
in tax-free securities that finance similar types of projects.
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 331/3% of its total assets.
LENDING securities to broker-dealers and institutions, including Fidelity
Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a means of earning
income. This practice could result in a loss or a delay in recovering a
fund's securities. A fund may also lend money to other funds advised by
FMR.
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of a fund's
total assets; however, Government Investment, High Income Municipal,
Municipal Bond, Intermediate Municipal Income, Short-Intermediate Municipal
Income, California Municipal Income, and New York Municipal Income 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 restate all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraphs, can be changed without shareholder approval.
TECHNOQUANT GROWTH FUND seeks capital growth.
MID CAP FUND seeks long-term growth of capital.
EQUITY GROWTH FUND 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.
GROWTH OPPORTUNITIES FUND seeks to provide capital growth by investing
primarily in common stocks and securities convertible into common stocks.
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. 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.
LARGE CAP FUND seeks long-term growth of capital.
GROWTH & INCOME FUND seeks high total return through a combination of
current income and capital appreciation.
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.
BALANCED 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.
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.
MORTGAGE SECURITIES FUND seeks a high level of current income, consistent
with prudent investment risk, by investing primarily in mortgage-related
securities. In seeking current income, the fund may also consider the
potential for capital gain.
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.
INTERMEDIATE 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. The fund normally invests at least 80% of its assets in
municipal obligations whose interest is free from federal income tax.
MUNICIPAL BOND FUND seeks to provide as high a level of interest income
exempt from federal income tax as is consistent with preservation of
capital.
The fund invests in a diversified portfolio of municipal bonds. The fund
will invest primarily in municipal bonds judged by FMR to be of high-grade
or upper-medium-grade quality, although it may invest up to one-third of
its total assets in bonds judged to be of medium-grade quality if they are
suitable for achieving its investment objective. The fund's standards for
high-grade, upper-medium-grade, and medium-grade obligations are
essentially the same as Moody's and S&P's four highest categories of Baa or
BBB and above. The fund will not invest in any bond rated lower than Baa by
Moody's or BBB by S&P, but may invest up to 20% of its total assets in
bonds not rated by either of these rating services if FMR judges them to
meet the fund's quality standards. The fund will normally invest at least
80% of its assets in municipal securities whose interest is exempt from
federal income tax.
INTERMEDIATE MUNICIPAL INCOME FUND seeks the highest level of income exempt
from federal income taxes that can be obtained consistent with the
preservation of capital. The fund normally invests at least 80% of its
assets in securities whose interest is free from federal income tax.
SHORT-INTERMEDIATE MUNICIPAL INCOME FUND seeks as high a level of current
income, exempt from federal income tax, as is consistent with preservation
of capital. The fund normally invests at least 80% of its assets in
municipal obligations whose interest is free from federal income tax.
CALIFORNIA MUNICIPAL INCOME FUND seeks a high level of current income free
from federal income tax and California state personal income tax by
investing primarily in municipal securities. The fund normally invests at
least 80% of its assets in securities whose interest is free from federal
and California income taxes.
NEW YORK MUNICIPAL INCOME FUND seeks a high level of current income free
from federal income tax and New York State and City personal income taxes
by investing primarily in municipal securities. The fund normally invests
at least 80% of its assets in securities whose interest is free from
federal and New York State and City personal income taxes.
With respect to 75% of its total assets, each of the Equity Funds, High
Yield, Mortgage Securities, Government Investment, Intermediate Bond, Short
Fixed-Income, High Income Municipal, Municipal Bond, and Intermediate
Municipal Income may not purchase a security if, as a result, more than
5% would be invested in the securities of any one issuer and may not
purchase more than 10% of the outstanding voting securities of a single
issuer. These limitations do not apply to U.S. Government securities or,
for TechnoQuant Growth, Mid Cap, Equity Growth, Growth Opportunities,
Strategic Opportunities, Large Cap, and Growth & Income, to securities of
other investment companies.
Each fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
securities.
Each fund may borrow only for temporary or emergency purposes, but not in
an amount exceeding 331/3% of its total assets.
Loans, in the aggregate, may not exceed 331/3% of each fund's total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of each class's assets are reflected in that
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 a fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease a fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. Equity Income
pays a monthly management fee at an annual rate of 0.50% of its
average net assets. For each of TechnoQuant Growth, Mid Cap, Equity
Growth, Large Cap, Growth & Income, Balanced, High Yield, Strategic Income,
Mortgage Securities, Government Investment, Intermediate Bond, Short
Fixed-Income, High Income Municipal, Municipal Bond, Intermediate Municipal
Income, Short-Intermediate Municipal Income, California Municipal Income,
and New York Municipal Income, the fee is calculated by adding a group fee
rate to an individual fund fee rate, and multiplying the result by the
fund's average net assets. For Growth Opportunities and Strategic
Opportunities, the fee is calculated 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 S&P 500.
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 the fund's average net assets.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. This rate cannot rise above 0.52% for TechnoQuant
Growth, Mid Cap, Equity Growth, Growth Opportunities, Strategic
Opportunities, Large Cap, Growth & Income, and Balanced or 0.37% for
High Yield, Strategic Income, Mortgage Securities, Government Investment,
Intermediate Bond, Short Fixed-Income, High Income Municipal, Municipal
Bond, Intermediate Municipal Income, Short-Intermediate Municipal Income,
California Municipal Income, and New York Municipal Income, and it drops as
total assets under management increase.
The performance adjustment rate is calculated monthly by comparing Growth
Opportunities' and Strategic Opportunities' performance to that of the S&P
500 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% of a fund's
average net assets over the performance period.
For the purposes of calculating the performance adjustment for each of
Growth Opportunities and Strategic Opportunities, the fund's investment
performance will be based on the average performance of all classes of the
fund weighted according to their average assets for each month in the
performance period.
The following table states the management fee rate for each fund for its
most recent fiscal year end:
Group Individual Total
Fee Rate Fund Fee Manageme
Rate nt Fee
TechnoQuant Growth [A] 0.30% 0.30% 0.60%
Mid Cap 0.30% 0.30% 0.60%
Equity Growth 0.30% 0.30% 0.61%
Growth Opportunities [B] 0.30% 0.30% 0.61%
Strategic Opportunities [B] 0.30% 0.30% 0.48%
Large Cap 0.30% 0.30% 0.60%
Growth & Income [A] 0.30% 0.20% 0.50%
Equity Income n/a n/a 0.50%
Balanced 0.30% 0.15%[C 0.50%
]
High Yield 0.14% 0.45% 0.60%
Strategic Income 0.14% 0.45% 0.59%
Mortgage Securities 0.15% 0.30% 0.45%
Government Investment 0.14% 0.30% 0.45%
Intermediate Bond 0.14% 0.30% 0.45%
Short Fixed-Income 0.14% 0.30% 0.45%
High Income Municipal Fund 0.14% 0.25% 0.40%
Municipal Bond Fund 0.14% 0.25% 0.40%
Intermediate Municipal Income 0.14% 0.25% 0.40%
Short-Intermediate Municipal Income 0.14% 0.25% 0.40%
California Municipal Income [A] 0.14% 0.25% 0.40%
New York Municipal Income 0.14% 0.25% 0.40%
[A] ESTIMATED
[B] THE BASIC FEE RATE FOR THE FISCAL YEAR ENDED 1996 WAS 0.61% FOR GROWTH
OPPORTUNITIES AND 0.61% FOR STRATEGIC OPPORTUNITIES.
[C] EFFECTIVE AUGUST 1, 1996, FMR VOLUNTARILY AGREED TO REDUCE THE FUND'S
INDIVIDUAL FUND FEE RATE FROM 0.20% TO 0.15%. IF THIS REDUCTION WERE NOT IN
EFFECT, THE TOTAL FEE WOULD HAVE BEEN 0.55%.
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
FIIA(U.K.)L. 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 FIIA(U.K.)L a fee
equal to 110% of the cost of providing these services.
For the fiscal year ended 1996, FMR, on behalf of each fund with
sub-advisory agreements paid FMR U.K., FMR Far East, FIJ, and FIIA fees
equal to less than 0.01% of each fund's average net assets.
OTHER EXPENSES
While the management fee is a significant component of each fund's annual
operating costs, the funds have other expenses as well.
FIIOC performs transfer agency, dividend disbursing and shareholder
servicing functions for each class of the Equity Funds, High Yield,
Strategic Income, Mortgage Securities, Government Investment, Intermediate
Bond, and Short Fixed-Income (the Taxable Funds) . Fidelity Service
Company, Inc. (FSC) calculates the net asset value per share (NAV) and
dividends for each class of the Taxable Funds and maintains the
general accounting records and administers the securities lending program
for the Taxable Funds .
For the fiscal year ended 1997, transfer agency fees (as a percentage of
average net assets) for Class A, Class T, and Class B of Mortgage
Securities amounted to __%, __%, and __%, respectively. Pricing and
bookkeeping fees (as a percentage of average net assets) for Mortgage
Securities amounted to __%. These amounts are before expense reductions, if
any.
For the fiscal year ended 1996, transfer agency and pricing and
bookkeeping fees (as a percentage of average net assets) amounted to the
following. These amounts are before expense reductions , if
any.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Pricing and
Transfer Agency Fees Bookkeepin
Paid by g Fees
Paid
Class T Class B by Fund
Mid Cap 0.25% 0.27% 0.05%
Equity Growth 0.19% ** 0.02%
Growth Opportunities 0.19% *** 0.01%
Strategic Opportunities 0.22% 0.25% 0.05%
Large Cap 0.24% 0.28% 0.22%
Equity Income 0.20% 0.22% 0.04%
Balanced 0.19% ** 0.02%
High Yield 0.20% 0.20% 0.04%
Strategic Income 0.22% 0.20% 0.06%
Government Investment 0.21% 0.24% 0.04%
Intermediate Bond 0.19% 0.24% 0.04%
Short-Fixed Income 0.22% * 0.04%
</TABLE>
* FUND DOES NOT OFFER CLASS B SHARES.
** CLASS COMMENCED OPERATIONS ON DECEMBER 31, 1996.
*** CLASS COMMENCED OPERATIONS ON MARCH 3, 1997.
UMB is the transfer and service agent for High Income Municipal,
Municipal Bond, Intermediate Municipal Income, Short-Intermediate Municipal
Income, California Municipal Income, and New York Municipal Income (the
Municipal Funds) . UMB has entered into a sub-agreement with
FIIOC. FIIOC performs transfer agency, dividend disbursing and shareholder
servicing functions for each class of the Municipal Funds .
UMB has also entered into a sub-agreement with FSC. FSC calculates
the NAV and dividends for each class of the Municipal Funds , and
maintains the general accounting records for each fund.
Under the terms of the sub-agreements , FIIOC and FSC receive all
related fees paid to UMB by the applicable class.
For the fiscal year ended 1996, transfer agency and pricing and
bookkeeping fees paid (as a percentage of average net assets) amounted to
the following. These amounts are before expense reductions ,
if any.
Transfer Agency Pricing
Fees Paid by and
Bookkeep
ing Fees
Paid
Class T Class B by Fund
High Income Municipal 0.18% 0.16% 0.04%
Municipal Bond 0.20% 0.46% 0.03%
Intermediate Municipal Income 0.17% 0.20% 0.08%
Short-Intermediate Municipal Income 0.20% * 0.20%
California Municipal Income 0.22% 0.24% 0.18%
New York Municipal Income 0.14% 0.17% 0.10%
* FUND DOES NOT OFFER CLASS B SHARES.
Class A shares of each fund have adopted a DISTRIBUTION AND SERVICE PLAN.
Under the p lans, 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. Class A of the Equity
Funds may pay FDC a distribution fee at an annual rate of 0.75% of
its average net assets, or such lesser amount as the Trustees may determine
from time to time. Class A of the Bond Funds, the Intermediate-Term Bond
Funds, and the Short-Term Bond Funds may pay FDC a distribution fee at an
annual rate of 0.40% of its average net assets, or such lesser
amount as the Trustees may determine from time to time. Class A of the
Equity Funds currently pays FDC a monthly distribution fee at an annual
rate of 0.25% if its average net assets throughout the month; Class A of
each of the Bond Funds, the Intermediate-Term Bond Funds, and the
Short-Term Bond Funds currently pays FDC a monthly distribution fee at an
annual rate of 0.15% of its average net assets throughout the month. Class
A distribution fee rates may be increased only when the Trustees believe
that it is in the best interests of Class A shareholders to do so.
Class T shares of each fund have adopted a DISTRIBUTION AND SERVICE PLAN.
Under the p lans, Class T 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 T shares. Class T of TechnoQuant
Growth, Mid Cap, Equity Growth, Equity Income, Large Cap, and Growth &
Income may pay FDC a distribution fee at an annual rate of 0.75% of its
average net assets, or such lesser amount as the Trustees may determine
from time to time. Class T of Growth Opportunities, Strategic
Opportunities, and Balanced may pay FDC a distribution fee at an annual
rate of 0.65% of its average net assets, or such lesser amount as the
Trustees may determine from time to time. Class T of High Yield, Strategic
Income, Mortgage Securities, Government Investment, Intermediate Bond, High
Income Municipal, Municipal Bond, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income may pay FDC a distribution fee at an annual rate of
0.40% of its average net assets, or such lesser amount as the Trustees may
determine from time to time. Class T of Short Fixed-Income may pay FDC a
distribution fee at an annual rate of 0.15% of its average net assets, or
such lesser amount as the Trustees may determine from time to time. Class T
of each of the Equity Funds currently pays FDC a monthly distribution fee
at an annual rate of 0.50% if its average net assets throughout the month;
Class T of each of the Bond Funds and the Intermediate-Term Bond Funds
currently pays FDC a monthly distribution fee at an annual rate of 0.25% of
its average net assets throughout the month; and Class T of each of the
Short-Term Bond Funds currently pays FDC a monthly distribution fee at an
annual rate of 0.15% of its average net assets throughout the month. Class
T distribution fee rates for all funds except Short Fixed-Income may
be increased only when the Trustees believe that it is in the best
interests of Class T shareholders to do so.
Up to the full amount of the Class A and Class T distribution fees may be
reallowed to investment professionals, as compensation for their services
in connection with the distribution of Class A and Class T shares and for
providing support services to Class A and Class T shareholders, based upon
the level of such services provided. These services may include, without
limitation, answering investor inquiries regarding the funds; providing
assistance to investors in changing dividend options, account designations,
and addresses; performing subaccounting and maintaining Class A and Class T
shareholder accounts; processing purchase and redemption transactions,
including automatic investment and redemption of investor account balances;
providing periodic statements showing an investor's account balance and
integrating other transactions into such statements; and performing other
administrative services in support of the shareholder.
Class B shares of each Equity Fund, Bond Fund, and Intermediate-Term Bond
Fund have adopted a DISTRIBUTION AND SERVICE PLAN. Under the 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. Class B of each fund may pay FDC a
distribution fee at an annual rate of 0.75% of its average net assets, or
such lesser amount as the Trustees may determine from time to time. Class B
of the Equity Funds currently pays FDC a monthly distribution fee at an
annual rate of 0.75% of its average net assets throughout the month. Class
B of each of the Bond Funds and the Intermediate-Term Bond Funds pays FDC a
monthly distribution fee at an annual rate of 0.65% of its average net
assets, or such lesser amount as the Trustees may determine from time to
time. Class B distribution fee rates for each of the Bond Funds and
Intermediate-Term Bond Funds may be increased only when the Trustees
believe that it is in the best interests of Class B shareholders to do so.
In addition, pursuant to each Class B plan, Class B of each fund pays FDC a
monthly service fee at an annual rate of 0.25% of Class B's average net
assets throughout the month. The full amount of the Class B service fee is
reallowed to investment professionals for providing personal service to
and/or maintenance of Class B shareholder accounts.
Class C shares of each fund (except Strategic Opportunities, Mortgage
Securities, Municipal Bond, Short-Intermediate Municipal Income, California
Municipal Income, and New York Municipal Income) have adopted a
DISTRIBUTION AND SERVICE PLAN. Under the plans, Class C 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 C
shares. Class C of each fund may pay FDC a distribution fee at an annual
rate of 0.75% of its average net assets, or such lesser amount as the
Trustees may determine from time to time. Class C of each fund currently
pays FDC a monthly distribution fee at an annual rate of 0.75% of its
average net assets throughout the month. After the first year of
investment, up to the full amount of the Class C distribution fee may be
reallowed to investment professionals as compensation for their services in
connection with the distribution of Class C shares.
In addition, pursuant to each Class C plan, Class C of each fund pays FDC a
monthly service fee at an annual rate of 0.25% of Class C's average net
assets throughout the month. After the first year of investment, the full
amount of the Class C service fee is reallowed to investment professionals
for providing personal service to and/or maintenance of Class C shareholder
accounts.
The Class A, Class T, Class B, and Class C plans specifically
recognize that FMR may make payments from its management fee revenue, past
profits, or other resources to FDC for expenses incurred in connection with
the distribution of the applicable class's shares, including payments made
to investment professionals that provide shareholder support services or
engage in the sale of the applicable class's shares. Currently, the
Board of Trustees of each fund has authorized such payments.
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 commissions paid by a fund to reduce that fund's custodian
or transfer agent fees.
The portfolio turnover rate for TechnoQuant Growth is projected to exceed
200% for its first fiscal period ending November 30, 1997. The portfolio
turnover rate for Growth & Income is not expected to exceed 200% for its
first fiscal period ending November 30, 1997. These rates will vary from
year to year.
The portfolio turnover rate for the fiscal year ended 1997 was __% for
Mortgage Securities.
The portfolio turnover rate for the fiscal year ended 1996 was 101% for Mid
Cap, 76% for Equity Growth, 33% for Growth Opportunities, 151% for
Strategic Opportunities, 59% for Large Cap, 78% for Equity Income, 223% for
Balanced, 121% for High Yield, 119% for Strategic Income, 153% for
Government Investment, 200% for Intermediate Bond, 124% for Short
Fixed-Income, 49% for High Income Municipal, 35% for Municipal Bond, 35%
for Intermediate Municipal Income, 62% for Short-Intermediate Municipal
Income, 21% for California Municipal Income, and 17% for New York Municipal
Income.
Portfolio turnover 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
When you invest through an investment professional, your investment
professional, including a broker-dealer or financial institution, may
charge you a transaction fee with respect to the purchase and sale of fund
shares. 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.
The different ways to set up (register) your account with Fidelity are
listed at right.
The account guidelines that follow may not apply to certain funds or to
certain retirement accounts. For instance, municipal funds are not
available for purchase in retirement accounts. If you are investing through
a retirement account or if your employer offers a fund through a retirement
program, you may be subject to additional fees. For more information,
please refer to your program materials, contact your employer, or call your
retirement benefits number or your investment professional directly, as
appropriate.
If you have selected Fidelity Advisor funds as an investment option through
an insurance company group pension program, please contact the provider
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 (THE FOLLOWING OPTIONS ARE AVAILABLE ONLY FOR TAXABLE FUNDS)
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 and under 701/2 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) 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.
(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) SIMPLE IRAS provide small business owners and those with
self-employed income (and their eligible employees) with many of the
advantages of a 401(k) plan, but with fewer administrative
requirements.
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 and
Class T shares of each fund: the offering price and the NAV. If you pay a
front-end sales charge or qualify for a reduction as described on page 56,
your Class A or Class T share price will be the offering price. If
you qualify for a front-end sales charge waiver as described on page 56,
your Class A or Class T share price will be the NAV. When you buy Class A
or Class T shares at the offering price, Fidelity deducts the
appropriate sales charge and invests the rest in Class A or Class T shares
of the fund. The NAV for each of Class B and Class C is also
calculated every business day. Class B and Class C 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
"Transaction Details," page 51.
Shares are purchased at the next offering price or NAV, as applicable,
calculated after your order is received and accepted. The offering price
and NAV are normally calculated at 4:00 p.m. Eastern time.
It is the responsibility of your investment professional to transmit your
order to buy shares to Fidelity before the close of business on the
day you place your order.
Fidelity must receive payment within three 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 are not available for Class A, Class T, Class B, or
Class C 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 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.
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) Place an order and wire money into your account,
(small solid bullet) Open your account by exchanging from the same class of
another Fidelity Advisor fund or from another Fidelity fund, or
(small solid bullet) Contact your investment professional.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For Fidelity Advisor IRA, Rollover IRA, SEP-IRA
and Keogh accounts $500
Through regular investment plans*
$1,000
TO ADD TO AN ACCOUNT $250
For Fidelity Advisor IRA, Rollover IRA, SEP-IRA and Keogh accounts $100
Through regular investment plans*
$100
MINIMUM BALANCE $1,000
For Fidelity Advisor IRA, Rollover IRA, SEP-IRA and Keogh accounts NONE
*AN ACCOUNT MAY BE OPENED WITH A MINIMUM OF $1,000, PROVIDED THAT A REGULAR
INVESTMENT PLAN IS ESTABLISHED AT THE TIME THE ACCOUNT IS OPENED. FOR MORE
INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER TO "INVESTOR
SERVICES," PAGE 47.
Investment and account minimums are waived for purchases of Class T
shares with distributions from a Fidelity Defined Trust account.
There is no minimum account balance or initial or subsequent investment
minimum for certain retirement accounts funded through salary deduction, or
accounts opened with the proceeds of distributions from such Fidelity
retirement accounts. Refer to the program materials for details.
PURCHASE AMOUNTS OF MORE THAN $ 250,000 WILL NOT BE ACCEPTED FOR
CLASS B SHARES.
PURCHASE AMOUNTS OF MORE THAN $1 MILLION WILL NOT BE ACCEPTED FOR
CLASS C SHARES.
For further information on opening an account, please consult your
investment professional or refer to the account application.
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
<TABLE>
<CAPTION>
<S> <C> <C>
PHONE (small solid bullet) Contact your investment professional (small solid bullet) Contact your investment
YOUR INVESTMENT
PROFESSIONAL] or, if you are investing through a professional or, if you are investing
broker-dealer or insurance through a broker-dealer or
representative, call insurance representative, call
1-800-522-7297. If you are investing 1-800-522-7297. If you are
through a bank representative, call investing through a bank
1-800-843-3001. representative, call
(small solid bullet) Exchange from the same class of 1-800-843-3001.
another Fidelity Advisor fund or from (small solid bullet) Exchange from the same class of
another Fidelity fund account with the another Fidelity Advisor fund or
same registration, including name, from another Fidelity fund account
address, and taxpayer ID number. with the same registration,
including name, address, and
taxpayer ID 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
application. Make your check complete name of the fund of your
payable to the complete name of the choice and note the applicable
fund of your choice and note the class. Indicate your fund account
applicable class. Mail to the address number on your check and mail to
indicated on the application. the address printed on your account
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) Wire to:
Banker's Trust Co.
Routing # 021001033
Fidelity DART Depository
Account # 00159759
FBO: (Account name)
(Account number)
Specify the complete name of the
fund of your choice, 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, less any
applicable CDSC. NAV is normally calculated at 4:00 p.m. Eastern time.
It is the responsibility of your investment professional to transmit your
order to sell shares to Fidelity before the close of business on the
day you place your order.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the methods
described on these two pages.
TO SELL SHARES IN A FIDELITY ADVISOR RETIREMENT ACCOUNT, your request must
be made in writing, except for exchanges to shares of the same class of
another Fidelity Advisor fund or shares of other Fidelity funds, which can
be requested by phone or in writing.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at
least $1,000 worth of shares in the account to keep it open (account
minimum balances do not apply to retirement and Fidelity Defined Trust
accounts).
TO SELL SHARES BY BANK WIRE, you will need to sign up for this service 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,
(small solid bullet) You wish to set up the bank wire feature, 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 previously issued), and
(small solid bullet) Any other applicable requirements listed in the table
on page 47.
Deliver your letter to your investment professional, or mail it to the
following address:
Fidelity Investments
P.O. Box 770002
Cincinnati, OH 45277-0081
Unless otherwise instructed, Fidelity will send a check to the
record address.
CHECKWRITING
If you have a checkbook for your account in Short Fixed-Income or
Short-Intermediate Municipal Income, 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
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<S> <C> <C>
PHONE All account types except retirement (small solid bullet) Maximum check request: $100,000.
YOUR INVESTMENT PROFESSIONAL]
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(phone_graphic) All account types (small solid bullet) You may exchange to the same
class of other Fidelity Advisor funds
or to other Fidelity 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
Sole Proprietorship, UGMA, UTMA signature guarantee) must be
signed by all persons required to
sign for transactions, exactly as
their names appear on the account
Retirement account and sent to your investment
professional.
(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 (with
signature guaranteed).
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
(small solid bullet) Your wire redemption request must
be received and accepted by
Fidelity before 4:00 p.m. Eastern
time for money to be wired on the
next business day.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
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
Municipal Income accounts only. signature card to receive a
checkbook.
</TABLE>
INVESTOR SERVICES
Fidelity Advisor funds provide a variety of services to help you manage
your account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after certain
transaction s , not including reinvestments , that affect
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 and
prospectuses will be mailed, even if you have more than one account in a
fund. Call your investment professional if you need additional copies of
financial reports and prospectuses.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your Class A or Class T shares and buy the
same class of shares of other Fidelity Advisor funds or Daily Money
Class shares of Treasury Fund, Prime Fund, and Tax-Exempt Fund
by telephone or in writing. You may sell your Class B shares and buy Class
B shares of other Fidelity Advisor funds or Advisor B Class shares of
Treasury Fund by telephone or in writing. You may sell your Class C
shares and buy Class C shares of other Fidelity Advisor funds or
Advisor C Class shares of Treasury Fund by telephone or in writing. The
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 "Exchange
Restrictions," page 56.
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM lets you set up periodic
redemptions from your Class A, Class T, Class B, or Class C account.
Accounts with a value of $10,000 or more in Class A, Class T, Class B, or
Class C shares are eligible for this program. Aggregate redemptions per
12-month period from your Class B or Class C account may not exceed 10% of
the account value and are not subject to a CDSC. Because of Class A's
and Class T'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 or
Class T 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>
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<S> <C> <C>
MINIMUM MINIMUM FREQUENCY SETTING UP OR CHANGING
INITIAL ADDITIONAL Monthly, bimonthly, (small solid bullet) For a new account, complete the appropriate section on the
$1,000 $100 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>
TO DIRECT DISTRIBUTIONS FROM A FIDELITY DEFINED TRUST TO CLASS T OF A
FIDELITY ADVISOR FUND
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM MINIMUM SETTING UP OR CHANGING
INITIAL ADDITIONAL (small solid bullet) For a new or existing account, ask your investment professional
Not Not for the appropriate enrollment form.
Applicable Ap (small solid bullet) To change the fund to which your distributions are directed,
plicable contact your investment professional for instructions.
</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 accounts
semi-annually, or 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) Both accounts must have the same registrations and taxpayer ID
numbers.
(small solid bullet) Call at least 2 business days prior to your next scheduled
exchange date.
</TABLE>
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 Growth & Income, Equity Income, and Balanced
are distributed in March, June, September and December; dividends for
TechnoQuant Growth, Mid Cap, Equity Growth, Growth Opportunities, Strategic
Opportunities, and Large Cap are distributed in December; dividends for
Strategic Income, High Yield, Mortgage Securities, Government Investment,
Intermediate Bond, Short Fixed-Income, High Income Municipal, Municipal
Bond, Intermediate Municipal Income, Short-Intermediate Municipal Income,
California Municipal Income, and New York Municipal Income 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(registered trademark) PROGRAM. Your dividend
distributions will be automatically invested in the same class of shares of
another identically registered Fidelity Advisor fund. You will be sent a
check for your capital gain distributions or your capital gain
distributions will be automatically reinvested in additional shares of the
same class of the fund.
If you select distribution option 2, 3, or 4 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. To change
your distribution option, call 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.
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 or
Class T distributions to a fund with a front-end sales charge, you will not
pay a sales charge on those purchases.
When each of the Equity Funds deducts a distribution from its NAV,
the reinvestment price is the applicable class's NAV at the close of
business that day. Dividends from the Bond Funds, the Intermediate-Term
Bond Funds and the Short-Term Bond Funds will be reinvested at the
applicable class's NAV on the last day of the month. Capital gain
distributions from the Bond Funds, the Intermediate-Term Bond Funds, and
the Short-Term Bond Funds will be reinvested at the NAV as of the date the
applicable fund deducts the distributions from its NAV. The mailing of
distribution checks will begin 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 the Municipal Funds
earn is distributed to shareholders as income dividends. Interest that is
federally tax-free remains tax-free when it is distributed. Distributions
from each fund (except the Municipal Funds ), however, are subject to
federal income tax. Each fund (except California Municipal Income and New
York Municipal Income) 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 fund (except the Municipal Funds ) are taxed as dividends;
long-term capital gain distributions are taxed as long-term capital gains.
However for shareholders of the Municipal Funds , 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.
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. Ginnie
Mae securities and other mortgage-backed securities are notable exceptions
in most states. 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.
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, Fidelity 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. Each of the Municipal Funds may invest up
to 100% of its assets in these securities. Individuals who are subject to
the tax must report this interest on their tax returns.
A portion of the dividends from each of the Municipal Funds may be
free from state or local taxes. Income from investments in your state are
often tax-free to you. Each year, Fidelity will send you a breakdown
of each of these funds' income from each state to help you calculate your
taxes.
To the extent that California Municipal Income's income dividends are
derived from interest on California state tax-free investments, they will
be free from California state personal income tax. Distributions derived
from obligations that are not California state tax-free obligations, as
well as distributions from short or long-term capital gains, are subject to
California state personal income tax. Corporate taxpayers should note that
the fund's income dividends and other distributions are not exempt from
California state franchise or corporate income taxes.
To the extent that New York Municipal Income's income dividends are derived
from state tax-free investments, they will be free from New York State and
City personal income taxes.
During the fiscal year ended 1996, 100% of the income dividends from High
Income Municipal, Municipal Bond, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income was free from federal income tax. During the fiscal
year ended 1996, 100% of California Municipal Income's income dividends was
free from California taxes, and 100% of New York Municipal Income's income
dividends was free from New York taxes. During the fiscal year ended 1996,
26.36% of High Income Municipal's, 0.79% of Municipal Bond's, 7.58% of
Intermediate Municipal Income's, 18.99% of Short-Intermediate Municipal
Income's, 5.5% of California Municipal Income's, and 0.09% of New York
Municipal Income'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, Fidelity will send you a
confirmation statement showing how many shares you sold and at what price.
You will also receive a consolidated transaction statement 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 when a class has realized but not
yet distributed income or capital gains, you will pay the full price for
the shares and then receive a portion of the price back in the form of a
taxable distribution.
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, a fund
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.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on a fund
and its investments and these taxes generally will reduce the 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 offering price and NAV are normally 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 the
result by the number of shares of that class that are outstanding.
Each fund's assets are valued primarily on the basis of market
quotations or on the basis of information furnished by a pricing
service. Short-term securities with remaining maturities of sixty days
or less for which quotations and information furnished by a pricing
service are not readily available are valued on the basis of amortized
cost. This method minimizes the effect of changes in a security's market
value. Foreign securities are valued on the basis of quotations from the
primary market in which they are traded, and are translated from the local
currency into U.S. dollars using current exchange rates. In addition,
if quotations and information furnished by a pricing service are not
readily available, or if the values have been materially affected by events
occurring after the closing of a foreign market, assets may be valued by
another method that the Board of Trustees believes accurately
reflects fair value.
The OFFERING PRICE (price to buy one share) of Class A and Class T
of each fund is its NAV divided by the difference between one and the
applicable sales charge percentage. Class A has a maximum sales charge of
5.75 % of the offering price for the Equity Funds; 4.75 % of
the offering price for the Bond Funds; 3.75 % of the offering price
for the Intermediate-Term Bond Funds; and 1.50% of the offering price for
the Short-Term Bond Funds. Class T has a maximum sales charge of 3.50% of
the offering price for the Equity Funds and the Bond Funds; 2.75% of the
offering price for the Intermediate-Term Bond Funds; and 1.50% of the
offering price for the Short-Term Bond Funds. The OFFERING PRICE of Class B
and Class C of each fund is its NAV. A class's REDEMPTION PRICE
(price to sell one share) is its NAV minus any applicable CDSC.
SALES CHARGES AND INVESTMENT PROFESSIONAL
CONCESSIONS - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C>
EQUITY FUNDS: Sales Charge: Investment
Profession
al
Concession
as % of
Offering
Price
As a % As an
of approxi
Offering
mate %
Price of Net
Amount
Investe
d
Up to $49,999 5.75 6.10 5.00%
% %
$50,000 to $99,999 4.50 4.71 3.75%
% %
$100,000 to $249,999 3.50 3.63 2.75%
% %
$250,000 to $499,999 2.50 2.56 2.00%
% %
$500,000 to $999,999 2.00 2.04 1.75%
% %
$1,000,000 to $24,999,999 1.00 1.01 0.75%
% %
$25,000,000 or more None* Non *
e*
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
BOND FUNDS: Sales Charge: Investment
Profession
al
Concession
as % of
Offering
Price
As a % As an
of approxi
Offering
mate %
Price of Net
Amount
Investe
d
Up to $49,999 4.75 4.99 4.25%
% %
$50,000 to $99,999 4.50 4.71 4.00%
% %
$100,000 to $249,999 3.50 3.63 3.00%
% %
$250,000 to $499,999 2.50 2.56 2.25%
% %
$500,000 to $999,999 2.00 2.04 1.75%
% %
$1,000,000 to $24,999,999 0.50 0.50 0.50%
% %
$25,000,000 or more None* None* *
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INTERMEDIATE-TERM BOND FUNDS: Sales Charge: Investment
Profession
al
Concession
as % of
Offering
Price
As a % As an
of approxi
Offering
mate %
Price of Net
Amount
Investe
d
Up to $49,999 3.75 3.91 3.00%
% %
$50,000 to $99,999 3.00 3.10 2.25%
% %
$100,000 to $249,999 2.25 2.30 1.75%
% %
$250,000 to $499,999 1.75 1.78 1.50%
% %
$500,000 to $999,999 1.50 1.52 1.25%
% %
$1,000,000 to $24,999,999 0.50 0.50 0.50%
% %
$25,000,000 or more None* Non *
e*
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHORT-TERM BOND FUNDS: Sales Charge: Investment
Profession
al
Concession
as % of
Offering
Price
As a % As an
of approxi
Offering mate %
of Net
Price Amount
Investe
d
Up to $499,999 1.50 1.52 1.25%
% %
$500,000 to $999,999 1.00 1.01 0.75%
% %
$1,000,000 or more None* None* *
</TABLE>
SALES CHARGES AND INVESTMENT PROFESSIONAL
CONCESSIONS - CLASS T
EQUITY FUNDS: Sales Charge: Investment
Profession
al
Concession
as % of
Offering
Price
As a % As an
of approxi
Offering mate
Price % of
Net
Amount
Investe
d
Up to $49,999 3.50 3.63 3.00%
% %
$50,000 to $99,999 3.00 3.09 2.50%
% %
$100,000 to $249,999 2.50 2.56 2.00%
% %
$250,000 to $499,999 1.50 1.52 1.25%
% %
$500,000 to $999,999 1.00 1.01 0.75%
% %
$1,000,000 or more None* Non *
e*
BOND FUNDS: Sales Charge: Investment
Profession
al
Concession
as % of
Offering
Price
As a % As an
of approxi
Offering mate %
Price of Net
Amount
Investe
d
Up to $49,999 3.50 3.63 3.00%
% %
$50,000 to $99,999 3.00 3.09 2.50%
% %
$100,000 to $249,999 2.50 2.56 2.00%
% %
$250,000 to $499,999 1.50 1.52 1.25%
% %
$500,000 to $999,999 1.00 1.01 0.75%
% %
$1,000,000 or more None* Non *
e*
INTERMEDIATE-TERM BOND FUNDS: Sales Charge: Investment
Profession
al
Concession
as % of
Offering
Price
As a % As an
of approxi
Offering mate %
Price of Net
Amount
Investe
d
Up to $49,999 2.75 2.83 2.25%
% %
$50,000 to $99,999 2.25 2.30 2.00%
% %
$100,000 to $249,999 1.75 1.78 1.50%
% %
$250,000 to $499,999 1.50 1.52 1.25%
% %
$500,000 to $999,999 1.00 1.01 0.75%
% %
$1,000,000 or more None* Non *
e*
SHORT-TERM BOND FUNDS: Sales Charge: Investment
Profession
al
Concession
as % of
Offering
Price
As a % As an
of approxi
Offering mate
Price % of
Net
Amount
Investe
d
Up to $499,999 1.50 1.52 1.25%
% %
$500,000 to $999,999 1.00 1.01 0.75%
% %
$1,000,000 or more None* Non *
e*
* SEE SECTION ENTITLED FINDER ' S FEE.
FINDER ' S FEE. For all funds except the Short-Term Bond Funds, an
eligible purchases of (i) Class A shares in amounts of $1 million or
more that qualify for a Class A load waiver, (ii) Class A shares in amounts
of $25 million or more, or (iii) Class T shares in amounts of $1
million or more, investment professionals will be compensated with a fee at
the rate of 0.25% of the amount purchased. For the Short-Term Bond
Funds, on eligible purchases of Class A or Class T shares in amounts of $1
million or more, investment professionals will be compensated with a fee at
the rate of 0.25% of the amount purchased.
Any assets on which a finder ' s fee has been paid will bear a
CDSC (Class A or Class T CDSC) if they do not remain in Class A or
Class T shares of the Fidelity Advisor funds, or Daily Money Class shares
of Treasury Fund, Prime Fund, or Tax-Exempt Fund, for a period of at least
one uninterrupted year. The Class A or Class T CDSC will be 0.25% of the
lesser of the cost of the shares at the initial date of purchase or the
value of the shares at redemption, not including any reinvested dividends
or capital gains. Class A or Class T CDSC shares representing reinvested
dividends and capital gains, if any, will be redeemed first, followed by
other Class A or Class T CDSC shares that have been held for the longest
period of time.
Shares held by an insurance company separate account will be aggregated at
the client (e.g., the contract holder or plan sponsor) level, not at the
separate account level. Upon request, anyone claiming eligibility for the
0.25% fee with respect to shares held by an insurance company separate
account must provide FDC access to records detailing purchases at the
client level.
With respect to employee benefit plans, the Class A or Class T CDSC
does not apply to the following types of redemptions : (i) plan loans
or distributions or (ii) exchanges to non-Advisor fund investment options.
With respect to Individual Retirement Accounts, the Class A or Class
T CDSC does not apply to redemptions made for disability, payment of death
benefits, or required partial distributions starting at age 70. Your
investment professional should advise Fidelity at the time your
redemption order is placed if you qualify for a waiver of the Class A or
Class T CDSC.
CONTINGENT DEFERRED SALES CHARGE. Class B shares may, upon redemption, be
assessed a CDSC based on the following schedule:
EQUITY FUNDS:
From Date of Purchase Contingent
Deferred
Sales Charge
Less than 1 year 5%
1 year to less than 2 years 4%
2 years to less than 3 years 3%
3 years to less than 4 years 3%
4 years to less than 5 years 2%
5 years to less than 6 years 1%
6 years to less than 7 years [A] 0%
BOND FUNDS:
From Date of Purchase Contingent
Deferred
Sales Charge
Less than 1 year 5%
1 year to less than 2 years 4%
2 years to less than 3 years 3%
3 years to less than 4 years 3%
4 years to less than 5 years 2%
5 years to less than 6 years 1%
6 years to less than 7 years [A] 0%
INTERMEDIATE-TERM BOND FUNDS:
From Date of Purchase Contingent
Deferred
Sales Charge
Less than 1 year 3%
1 year to less than 2 years 2%
2 years to less than 3 years 1%
3 years to less than 4 years [B] 0%
[A] AFTER A HOLDING PERIOD OF SEVEN YEARS, CLASS B SHARES WILL
CONVERT AUTOMATICALLY TO CLASS A SHARES OF THE SAME FIDELITY ADVISOR FUND.
SEE "CONVERSION FEATURE" BELOW FOR MORE INFORMATION.
[B] AFTER A HOLDING PERIOD OF FOUR YEARS, CLASS B SHARES WILL
CONVERT AUTOMATICALLY TO CLASS A SHARES OF THE SAME FIDELITY ADVISOR FUND.
SEE "CONVERSION FEATURE" BELOW FOR MORE INFORMATION.
When exchanging Class B shares of one fund for Class B shares of another
Fidelity Advisor fund or Advisor B Class shares of Treasury Fund ,
your Class B shares retain the CDSC schedule in effect when they were
originally purchased.
At the time of sale, investment professionals with whom FDC has
agreements receive as compensation from FDC a concession equal to 4.00%
(2.00% for the Intermediate-Term Bond Funds) of your purchase of Class B
shares.
Class C shares may, upon redemption within one year of purchase, be
assessed a CDSC of 1.00%.
At the time of sale, investment professionals with whom FDC has agreements
receive as compensation from FDC a concession equal to 1.00% of your
purchase of Class C shares.
The CDSC for Class B and Class C shares will be calculated based on
the lesser of the cost of the shares at the initial date of purchase
or the value of those shares at redemption, not including any
reinvested dividends or capital gains. Class B and Class C shares
acquired through distributions (dividends or capital gains) will not be
subject to a CDSC. In determining the applicability and rate of any CDSC at
redemption, Class B or Class C shares representing reinvested
dividends and capital gains, if any, will be redeemed first, followed by
those shares that have been held for the longest period of time.
CONVERSION FEATURE. After a holding period of seven years (four
years for the Intermediate-Term Bond Funds) from the initial date of
purchase, Class B shares and any capital appreciation associated with those
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.
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,
Class T, Class B, or Class C 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 any of the other Fidelity Advisor funds, at the NAV
next determined after receipt and acceptance of your investment order,
provided that such reinvestment is made within 90 days of
redemption. Under these circumstances, the dollar amount of the CDSC, if
any, you paid on Class A, Class T, Class B, or Class C shares
will be reimbursed to you by reinvesting that amount in Class A, Class T,
Class B, or Class C shares, as applicable. 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 holding period schedule,
the holding period of your Class A , Class T, Class B, or Class
C shares will continue as if the 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 may only
be liable for losses resulting from unauthorized transactions if it does
not follow reasonable procedures designed to verify the identity of the
caller. Fidelity 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 Fidelity for
instructions. Additional documentation may be required from corporations,
associations, and certain fiduciaries.
IF YOU ARE UNABLE TO REACH FIDELITY 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 page 56. 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. Note the following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
canceled and you could be liable for any losses or fees a fund or
Fidelity has incurred.
(small solid bullet) Automated Purchase Orders: For shares of the Bond
Funds, the Intermediate-Term Bond Funds, and the Short-Term Bond Funds, you
begin to earn dividends as of the day your funds are received.
(small solid bullet) Other Purchases: For shares of the Bond Funds, the
Intermediate-Term Bond Funds, and the Short-Term Bond Funds, you begin to
earn dividends as of the first business day following the day your funds
are received.
AUTOMATED PURCHASE ORDERS. Class A, Class T, Class B, and Class C
shares 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.
CONFIRMED PURCHASES. Certain financial institutions that meet FDC's
creditworthiness criteria may enter confirmed purchase orders on behalf of
customers by phone, with payment to follow no later than close of business
on the next business day. If payment is not received by the next business
day, the order will be canceled and the financial institution will be
liable for any losses.
TO AVOID THE COLLECTION PERIOD associated with check purchases, consider
buying shares by bank wire, U.S. Postal money order, U.S. Treasury check,
Federal Reserve check, or automatic investment plans.
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 the Bond Funds, the Intermediate-Term
Bond Funds, and the Short-Term Bond Funds 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 of Short Fixed-Income and
Short-Intermediate Municipal Income 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.
FIDELITY 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), subject to an annual maximum charge of $60.00 per
shareholder. Accounts opened after September 30 will not be subject
to the fee for that year. The fee, which is payable to the transfer agent,
is designed to offset in part the relatively higher costs of servicing
smaller accounts. The fee will not be deducted from retirement accounts
(except non-prototype retirement accounts), accounts using a systematic
investment program, certain (Network Level I and III) accounts which are
maintained through National Securities Clearing Corporation (NSCC), or if
total assets in Fidelity mutual funds exceed $50,000. Eligibility for the
$50,000 waiver is determined by aggregating Fidelity mutual fund accounts
(excluding contractual plans) maintained (i) by FIIOC and (ii) through
NSCC; provided those accounts are registered under the same primary social
security number.
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, Fidelity 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.
FIDELITY 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, Class T,
Class B, or Class C shares of a fund for the same class of shares of
other Fidelity Advisor funds; Class A or Class T shares for Daily Money
Class shares of Treasury Fund, Prime Fund, or Tax-Exempt Fund; Class B
shares for Advisor B Class shares of Treasury Fund; and Class C
shares for Advisor C Class shares of Treasury Fund . If you purchased
your Class T shares through certain investment professionals that have
signed an agreement with FDC, you also have the privilege of exchanging
your Class T shares for shares of Fidelity Capital Appreciation Fund.
However, you should note the following:
(small solid bullet) The fund or class you are exchanging into must be
available for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund or class, read its
prospectus.
(small solid bullet) If you have held Class A or Class T shares of
Short Fixed-Income or Short-Intermediate Municipal Income for less than six
months and you exchange into Class A or Class T of another Advisor fund,
you pay the difference between that fund's Class A or Class T front-end
sales charge and any Class A or Class T front-end sales charge you
may have previously paid in connection with the shares you are exchanging.
(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 a fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) The exchange limit may be modified for accounts in
certain institutional retirement plans to conform to plan exchange limits
and Department of Labor regulations. See your plan materials for further
information.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if a fund
receives or anticipates simultaneous orders affecting significant portions
of the fund's assets. In particular, a pattern of exchanges that coincides
with a "market timing" strategy may be disruptive to a fund.
(small solid bullet) Any exchanges of Class A , Class T, Class B, or
Class C shares are not subject to a CDSC.
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 these exchange
privileges in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
redemption fees of up to 1.00% on exchanges. Check each fund's prospectus
for details.
SALES CHARGE REDUCTIONS AND WAIVERS
The front-end sales charge will be reduced for purchases of Class A and
Class T shares according to the Sales Charge schedule shown on page 52.
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 A, Class T, Class B, and
Class C shares may be included in the following programs for purposes of
qualifying for a Class A or Class T front-end sales charge reduction.
QUANTITY DISCOUNTS apply to purchases of Class A or Class T shares of a
single Fidelity Advisor fund or to combined purchases of (i) Class A, Class
T, Class B, and Class C shares of any Fidelity Advisor fund, (ii) Advisor B
Class shares and Advisor C Class shares of Treasury Fund, and (iii) Daily
Money Class shares of Treasury Fund, Prime Fund, and Tax-Exempt Fund
acquired by exchange from any Fidelity Advisor fund. The minimum investment
eligible for a quantity discount is $50,000, except that the minimum
investment for the Short-Term Bond Funds is $500,000.
To qualify for a quantity discount, investing in a fund's Class A, Class
T, Class B, and Class C 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 $500,000 for the Short-Term Bond Funds).
RIGHTS OF ACCUMULATION let you determine your front-end sales charge on
Class A and Class T shares by adding to your new purchase of Class A and
Class T shares the value of all of the Fidelity Advisor fund Class A, Class
T, Class B, and Class C shares held by you, your spouse, and your
children under age 21. You can also add the value of Advisor B Class shares
and Advisor C Class shares of Treasury Fund, and Daily Money Class shares
of Treasury Fund, Prime Fund, and Tax-Exempt Fund acquired by exchange from
any Fidelity Advisor fund.
A LETTER OF INTENT ( L etter) lets you receive the same reduced
front-end sales charge on purchases of Class A and Class T 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).
Purchases of Class B and Class C shares during the 13-month period will
count toward the completion of your Letter. You must file your
non-binding Letter with Fidelity 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, Class A or Class T shares
equal to 5% of the dollar amount specified in your Letter will be
registered in your name and held in escrow. You will earn income dividends
and capital gain distributions on escrowed Class A and Class T shares.
Reinvested income and capital gain distributions do not count toward the
completion of your Letter. The escrow will be released when your
purchase of the total amount has been completed. You are not obligated to
complete your Letter, and in such a case, sufficient escrowed Class
A or Class T 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 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;
2. Purchased by a trust institution or bank trust department
(excluding employee benefit plan assets) that has executed a participation
agreement with FDC specifying certain asset minimums and qualifications,
and marketing restrictions. Assets managed by third parties do not qualify
for this waiver;
3. Purchased for use in a broker-dealer managed account program,
provided the broker-dealer has executed a participation agreement with FDC
specifying certain asset minimums and qualifications, and marketing,
program and trading restrictions. Employee benefit plan assets do not
qualify for this waiver;
4. Purchased on a discretionary basis by a registered investment
advisor which is not part of an organization primarily engaged in the
brokerage business, that has executed a participation agreement with FDC
specifying certain asset minimums and qualifications, and marketing,
program and trading restrictions. Employee benefit plan assets do not
qualify for this waiver; or
5. Purchased as part of an employee benefit plan having $25 million
or more in plan assets.
For the purpose of load waiver (3), certain broker-dealers that otherwise
meet the qualifications and asset minimums established by FDC are not
required to sign a participation agreement.
A FRONT-END SALES CHARGE WILL NOT APPLY TO THE FOLLOWING CLASS T 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 FIL or their 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. Purchased by a charitable organization (as defined for purposes of
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 for
purposes of Section 501(c)(3) of the Internal Revenue Code);
5. Purchased for a Fidelity or Fidelity Advisor account with the proceeds
of a distribution (i) from an employee benefit plan that qualified for
waiver (11) below or had a minimum of $3 million in plan assets
invested in Fidelity funds; or (ii) from an insurance company separate
account qualifying under (6) 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 funds. (Distributions other
than those transferred to an IRA account must be transferred directly into
a Fidelity account);
6. 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;
7. Purchased for any state, county, or city, or any governmental
instrumentality, department, authority or agency;
8. Purchased with redemption proceeds from other mutual fund complexes on
which you have previously paid a front-end sales charge or CDSC;
9. Purchased by a trust institution or bank trust department (excluding
assets described in (11) and (12) below) that has executed a participation
agreement with FDC specifying certain asset minimums and qualifications,
and marketing restrictions. Assets managed by third parties do not qualify
for this waiver;
10. Purchased for use in a broker-dealer managed account program, provided
the broker-dealer has executed a participation agreement with FDC
specifying certain asset minimums and qualifications, and marketing,
program and trading restrictions. Employee benefit plan assets do not
qualify for this waiver;
11. Purchased as part of an employee benefit plan having more than (i) 200
eligible employees or a minimum of $1 million of plan assets invested in
Fidelity Advisor funds; or (ii) 25 eligible employees or $250,000 of plan
assets invested in Fidelity Advisor funds that subscribe to the Advisor
Retirement Connection or similar FIIS-sponsored program;
12. Purchased as part of an employee benefit plan through an intermediary
that has executed a participation agreement with FDC specifying certain
asset minimums and qualifications, and marketing, program and trading
restrictions;
13. Purchased on a discretionary basis by a registered investment advisor
which is not part of an organization primarily engaged in the brokerage
business, that has executed a participation agreement with FDC specifying
certain asset minimums and qualifications, and marketing, program and
trading restrictions. Employee benefit plan assets do not qualify for this
waiver; or
14. Purchased with distributions of income, principal, and capital gains
from Fidelity Defined Trusts.
Employee benefits plans that purchased Class T shares load waived prior to
June 30, 1995 but do not meet the qualifications of waiver (12) will be
permitted to make additional purchases of Class T shares on a load waived
basis.
You must notify FDC in advance if you qualify for a front-end sales charge
waiver. Employee benefit plan investors must meet additional requirements
specified in the funds' SAI.
If you are investing through an account managed by a broker-dealer, if you
have authorized an investment adviser to make investment decisions for you,
or if you are investing through a trust department, you may qualify to
purchase Class A shares without a sales charge (as described in (2), (3)
and (4) on page 57 ), Class T shares without a sales charge (as
described in (9), (10) and (13) beginning on page 57), or
Institutional Class shares. Because Institutional Class shares have no
sales charge, and do not pay a 12b-1 fe e , Institutional Class
shares are expected to have a higher total return than Class A, Class T,
Class B, or Class C shares. Contact your investment professional to
discuss if you qualify.
THE CDSC ON CLASS B AND CLASS C SHARES MAY BE WAIVED:
1. In cases of disability or death, provided that the shares are redeemed
within one year following the death or the initial determination of
disability;
2. In connection with a total or partial redemption related to certain
distributions from retirement plans or accounts at age 701/2, which are
permitted without penalty pursuant to the Internal Revenue Code; or
3. In connection with redemptions through the Fidelity Advisor Systematic
Withdrawal Program.
Your investment professional should call Fidelity for more information.
No dealer, sales representative, or any other person has been authorized to
give any information or to make any representations, other than those
contained in this Prospectus and in the related SAI, in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the funds or FDC. This Prospectus and the related SAI do not
constitute an offer by the funds or by FDC to sell or to buy shares of the
funds to any person to whom it is unlawful to make such offer.
APPENDIX A
DESCRIPTION OF MOODY'S INVESTORS SERVICE RATINGS OF CORPORATE BONDS
Moody's ratings for obligations with an original remaining maturity in
excess of one year fall within nine categories. They range from Aaa
(highest quality) to C (lowest quality). Moody applies numerical modifiers
of 1, 2, or 3 to each generic rating classification from Aa through B. The
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks on the lower end of its
generic rating category.
AAA - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than the Aaa securities.
A - Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
BAA - Bonds that are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
CAA - Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
CA - Bonds that are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
short-comings.
C - Bonds that are rated C are the lowest-rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
DESCRIPTION OF STANDARD & POOR'S RATINGS OF CORPORATE BONDS
Debt issues may be designated by Standard & Poor's as either investment
grade ("AAA" through "BBB") or speculative grade ("BB" through "D"). While
speculative grade debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major
exposures to adverse conditions. Ratings from AA to CCC may be modified by
the addition of a plus sign (+) or minus sign (-) to show relative standing
within the major rating categories.
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal. The
CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed but
debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating will also
be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized .
SHAREHOLDER AND ACCOUNT POLICIES
APPENDIX B
EQUITY GROWTH - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
EQUITY GROWTH - CLASS A -0.57 15.57 44.84 6.93% 64.71 9.89% 14.85 -0.89 39.14 16.21
% % % % % % % %
Lipper Growth Funds AverageA 3.08% 14.79 26.91 -4.49 36.70 8.08% 10.63 -2.17 30.79 19.24
% % % % % % % %
S&P 500 5.10% 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 14.51
Row: 2, Col: 1, Value: -0.5700000000000001
Row: 3, Col: 1, Value: 15.57
Row: 4, Col: 1, Value: 44.84
Row: 5, Col: 1, Value: 6.930000000000001
Row: 6, Col: 1, Value: 64.71000000000001
Row: 7, Col: 1, Value: 9.890000000000001
Row: 8, Col: 1, Value: 14.85
Row: 9, Col: 1, Value: -0.89
Row: 10, Col: 1, Value: 39.14
Row: 11, Col: 1, Value: 16.21
(LARGE SOLID BOX) EQUITY GROWTH - CLASS A
GROWTH OPPORTUNITIES - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
GROWTH OPPORTUNITIES - CLASS A 33.28 24.14 -1.65 42.68 15.03 22.17 2.86% 33.04 17.69
% % % % % % % %
Lipper Growth Funds AverageA 14.79 26.91 -4.49 36.70 8.08% 10.63 -2.17 30.79 19.24
% % % % % % % %
S&P 500 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 33.28
Row: 4, Col: 1, Value: 24.14
Row: 5, Col: 1, Value: -1.65
Row: 6, Col: 1, Value: 42.68
Row: 7, Col: 1, Value: 15.03
Row: 8, Col: 1, Value: 22.17
Row: 9, Col: 1, Value: 2.86
Row: 10, Col: 1, Value: 33.04
Row: 11, Col: 1, Value: 17.69
(LARGE SOLID BOX) GROWTH OPPORTUNITIES - CLASS
A
STRATEGIC OPPORTUNITIES - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
STRATEGIC OPPORTUNITIES - CLASS A -6.33 22.25 32.60 -7.17 23.08 12.87 20.44 -7.17 38.16 1.53%
% % % % % % % % %
Lipper Capital Appreciation FundsB -0.03 14.09 26.60 -8.24 39.91 8.78% 15.68 -3.38 30.34 16.31
% % % % % % % % %
S&P 500 5.10% 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 27.92
Row: 2, Col: 1, Value: -6.33
Row: 3, Col: 1, Value: 22.25
Row: 4, Col: 1, Value: 32.6
Row: 5, Col: 1, Value: -7.17
Row: 6, Col: 1, Value: 23.08
Row: 7, Col: 1, Value: 12.87
Row: 8, Col: 1, Value: 20.44
Row: 9, Col: 1, Value: 7.17
Row: 10, Col: 1, Value: 38.16
Row: 11, Col: 1, Value: 1.53
(LARGE SOLID BOX) STRATEGIC OPPORTUNITIES -
CLASS A
EQUITY INCOME - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
EQUITY INCOME - CLASS A -2.24 23.23 18.43 -14.2 29.81 14.68 18.03 6.46% 32.55 14.47
% % % 8% % % % % %
Lipper Equity Income Funds AverageC -2.18 16.74 22.18 -6.78 26.86 9.77% 13.66 -2.54 30.17 18.85
% % % % % % % % %
S&P 500 5.10% 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 17.44
Row: 2, Col: 1, Value: -2.24
Row: 3, Col: 1, Value: 23.23
Row: 4, Col: 1, Value: 18.43
Row: 5, Col: 1, Value: -14.28
Row: 6, Col: 1, Value: 29.81
Row: 7, Col: 1, Value: 14.68
Row: 8, Col: 1, Value: 18.03
Row: 9, Col: 1, Value: 6.46
Row: 10, Col: 1, Value: 32.55
Row: 11, Col: 1, Value: 14.47
(LARGE SOLID BOX) EQUITY INCOME - CLASS A
BALANCED - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
BALANCED - CLASS A 20.89 24.60 -2.94 34.48 9.20% 19.66 -5.09 14.06 8.31%
% % % % % % %
Lipper Balanced Funds AverageD 12.34 19.57 -0.57 26.69 7.07% 10.91 -2.50 25.16 13.76
% % % % % % % %
S&P 500 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 20.89
Row: 4, Col: 1, Value: 24.6
Row: 5, Col: 1, Value: -2.94
Row: 6, Col: 1, Value: 34.48
Row: 7, Col: 1, Value: 9.199999999999999
Row: 8, Col: 1, Value: 19.66
Row: 9, Col: 1, Value: -5.09
Row: 10, Col: 1, Value: 14.06
Row: 11, Col: 1, Value: 8.31
(LARGE SOLID BOX) BALANCED -
CLASS A
HIGH YIELD - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
HIGH YIELD - CLASS A 17.24 3.64% 7.30% 34.94 23.09 20.45 -1.49 19.27 13.05
% % % % % % %
Lipper High Current Yield Funds 12.89 -0.58 -10.1 36.91 17.51 18.95 -3.85 16.43 13.67
AverageE % % 3% % % % % % %
Merrill Lynch High Yield Master Index 13.47 4.23% -4.35 34.58 18.16 17.18 -1.17 19.91 11.06
% % % % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 17.24
Row: 4, Col: 1, Value: 3.64
Row: 5, Col: 1, Value: 7.3
Row: 6, Col: 1, Value: 34.94
Row: 7, Col: 1, Value: 23.09
Row: 8, Col: 1, Value: 20.45
Row: 9, Col: 1, Value: -1.49
Row: 10, Col: 1, Value: 19.27
Row: 11, Col: 1, Value: 13.05
(LARGE SOLID BOX) HIGH YIELD - CLASS A
STRATEGIC INCOME - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995 1996
STRATEGIC INCOME - CLASS A 22.02 12.81
% %
Lipper Multi-Sector Income Funds AverageF 16.92 11.74
% %
Merrill Lynch High Yield Master Index 19.91 11.06
% %
Consumer Price Index 2.54% 3.32%
</TABLE>
MORTGAGE SECURITIES - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
MORTGAGE SECURITIES - CLASS A 11.26 2.70% 6.72% 13.64 10.36 13.61 5.45% 6.71% 1.94% 17.02
% % % % %
Lipper U.S. Mortgage Funds 11.27 2.53% 7.47% 12.71 9.52% 15.00 6.38% 7.58% -4.83 16.29
AverageG % % % % %
Salomon Brothers Mortgage Index 13.44 4.06% 8.81% 15.16 10.90 15.64 7.37% 7.04% -1.43 16.77
% % % % % %
Consumer Price Index 1.10% 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 11.26
Row: 2, Col: 1, Value: 2.7
Row: 3, Col: 1, Value: 6.72
Row: 4, Col: 1, Value: 13.64
Row: 5, Col: 1, Value: 10.36
Row: 6, Col: 1, Value: 13.61
Row: 7, Col: 1, Value: 5.45
Row: 8, Col: 1, Value: 6.71
Row: 9, Col: 1, Value: 1.94
Row: 10, Col: 1, Value: 17.02
Row: 11, Col: 1, Value: 0.0
(LARGE SOLID BOX) MORTGAGE SECURITIES -
CLASS A
GOVERNMENT INVESTMENT - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
GOVERNMENT INVESTMENT - CLASS A 6.57% 11.75 8.37% 13.45 6.48% 9.36% -3.85 17.65 1.99%
% % % %
Lipper General U.S. Government 6.67% 12.46 8.22% 14.44 6.41% 9.42% -4.64 17.34 1.72%
Bond Funds AverageH % % % %
Salomon Brothers Treasury/Agency 7.10% 14.24 8.78% 15.33 7.24% 10.74 -3.40 18.39 2.76%
Index % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 6.57
Row: 4, Col: 1, Value: 11.75
Row: 5, Col: 1, Value: 8.370000000000001
Row: 6, Col: 1, Value: 13.45
Row: 7, Col: 1, Value: 6.48
Row: 8, Col: 1, Value: 9.360000000000001
Row: 9, Col: 1, Value: -3.85
Row: 10, Col: 1, Value: 17.65
Row: 11, Col: 1, Value: 1.99
(LARGE SOLID BOX) GOVERNMENT INVESTMENT -
CLASS A
INTERMEDIATE BOND - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
INTERMEDIATE BOND - CLASS A 2.32% 7.84% 12.11 7.91% 15.16 7.13% 11.49 -2.47 12.19 3.16%
% % % % %
Lipper Intermediate Investment Grade 2.13% 7.06% 11.67 7.22% 15.63 6.88% 9.52% -3.25 16.62 3.12%
Bond Funds AverageI % % % %
Lehman Brothers Intermediate 3.66% 6.67% 12.77 9.16% 14.62 7.17% 8.79% -1.93 15.33 4.05%
Government/Corporate Bond Index % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 14.33
Row: 2, Col: 1, Value: 2.32
Row: 3, Col: 1, Value: 7.84
Row: 4, Col: 1, Value: 12.11
Row: 5, Col: 1, Value: 7.91
Row: 6, Col: 1, Value: 15.16
Row: 7, Col: 1, Value: 7.13
Row: 8, Col: 1, Value: 11.49
Row: 9, Col: 1, Value: -2.47
Row: 10, Col: 1, Value: 12.19
Row: 11, Col: 1, Value: 3.16
(LARGE SOLID BOX) INTERMEDIATE BOND - CLASS A
SHORT FIXED-INCOME - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
SHORT FIXED-INCOME - CLASS A 6.19% 10.31 5.87% 13.37 7.61% 9.49% -3.37 9.81% 4.07%
% % %
Lipper Short Investment Grade Bond 6.86% 10.22 7.87% 12.88 5.97% 6.45% -0.44 10.84 4.64%
Funds AverageJ % % % %
Lehman Brothers 1-3 Year 6.34% 10.97 9.69% 11.83 6.35% 5.55% 0.55% 10.96 5.14%
Government/Corporate Bond Index % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 6.19
Row: 4, Col: 1, Value: 10.31
Row: 5, Col: 1, Value: 5.87
Row: 6, Col: 1, Value: 13.37
Row: 7, Col: 1, Value: 7.609999999999999
Row: 8, Col: 1, Value: 9.49
Row: 9, Col: 1, Value: -3.37
Row: 10, Col: 1, Value: 9.81
Row: 11, Col: 1, Value: 4.07
(LARGE SOLID BOX) SHORT FIXED-INCOME - CLASS A
HIGH INCOME MUNICIPAL - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
HIGH INCOME MUNICIPAL - CLASS A 11.80 13.09 10.29 12.18 11.11 13.79 -8.05 16.65 2.99%
% % % % % % % %
Lipper High Yield Municipal Bond 11.28 10.11 5.13% 11.52 8.51% 11.41 -4.67 15.98 4.17%
Funds AverageK % % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 11.8
Row: 4, Col: 1, Value: 13.09
Row: 5, Col: 1, Value: 10.29
Row: 6, Col: 1, Value: 12.18
Row: 7, Col: 1, Value: 11.11
Row: 8, Col: 1, Value: 13.79
Row: 9, Col: 1, Value: -8.050000000000001
Row: 10, Col: 1, Value: 16.65
Row: 11, Col: 1, Value: 2.99
(LARGE SOLID BOX) HIGH INCOME MUNICIPAL -
CLASS A
MUNICIPAL BOND - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
MUNICIPAL BOND - CLASS A -1.56 12.30 9.56% 6.91% 11.91 8.93% 13.17 -8.49 18.15 3.88%
% % % % % %
Lipper General Municipal Debt Funds -0.94 11.53 9.65% 6.05% 12.09 8.79% 12.47 -6.50 16.84 3.30%
AverageL % % % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: -1.56
Row: 3, Col: 1, Value: 12.3
Row: 4, Col: 1, Value: 9.56
Row: 5, Col: 1, Value: 6.91
Row: 6, Col: 1, Value: 11.91
Row: 7, Col: 1, Value: 8.93
Row: 8, Col: 1, Value: 13.17
Row: 9, Col: 1, Value: -8.49
Row: 10, Col: 1, Value: 18.15
Row: 11, Col: 1, Value: 3.88
(LARGE SOLID BOX) MUNICIPAL BOND -
CLASS A
INTERMEDIATE MUNICIPAL INCOME - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
INTERMEDIATE MUNICIPAL INCOME - 2.33% 7.38% 7.79% 6.37% 9.64% 7.31% 9.43% -5.68 14.20 3.78%
CLASS A % %
Lipper Intermediate Municipal Debt 1.32% 7.57% 8.26% 6.59% 10.52 7.80% 10.18 -3.51 12.89 3.70%
Funds AverageM % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: 2.33
Row: 3, Col: 1, Value: 7.38
Row: 4, Col: 1, Value: 7.79
Row: 5, Col: 1, Value: 6.37
Row: 6, Col: 1, Value: 9.639999999999999
Row: 7, Col: 1, Value: 7.31
Row: 8, Col: 1, Value: 9.43
Row: 9, Col: 1, Value: -5.68
Row: 10, Col: 1, Value: 14.2
Row: 11, Col: 1, Value: 3.78
(LARGE SOLID BOX) INTERMEDIATE MUNICIPAL
INCOME - CLASS A
SHORT-INTERMEDIATE MUNICIPAL INCOME - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995 1996
SHORT-INTERMEDIATE MUNICIPAL 8.68% 3.53%
INCOME - CLASS A
Lipper Short-Intermediate Municipal 7.43% 3.53%
Debt Funds AverageN
Consumer Price Index 2.54% 3.32%
</TABLE>
NEW YORK MUNICIPAL INCOME - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1996
NEW YORK MUNICIPAL - CLASS A 3.50%
Lipper New York Municipal Debt Funds AverageO 3.15%
Consumer Price Index 3.32%
</TABLE>
EQUITY GROWTH - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
EQUITY GROWTH - CLASS T -0.57 15.57 44.84 6.93% 64.71 9.89% 14.85 -0.89 39.14 16.24
% % % % % % % %
Lipper Growth Funds AverageA 3.08% 14.79 26.91 -4.49 36.70 8.08% 10.63 -2.17 30.79 19.24
% % % % % % % %
S&P 500 5.10% 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 14.51
Row: 2, Col: 1, Value: -0.5700000000000001
Row: 3, Col: 1, Value: 15.57
Row: 4, Col: 1, Value: 44.84
Row: 5, Col: 1, Value: 6.930000000000001
Row: 6, Col: 1, Value: 64.71000000000001
Row: 7, Col: 1, Value: 9.890000000000001
Row: 8, Col: 1, Value: 14.85
Row: 9, Col: 1, Value: -0.89
Row: 10, Col: 1, Value: 39.14
Row: 11, Col: 1, Value: 16.24
(LARGE SOLID BOX) EQUITY GROWTH - CLASS T
GROWTH OPPORTUNITIES - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
GROWTH OPPORTUNITIES - CLASS T 33.28 24.14 -1.65 42.68 15.03 22.17 2.86% 33.04 17.73
% % % % % % % %
Lipper Growth Funds AverageA 14.79 26.91 -4.49 36.7% 8.08% 10.63 -2.17 30.79 19.24
% % % % % % %
S&P 500 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 33.28
Row: 4, Col: 1, Value: 24.14
Row: 5, Col: 1, Value: -1.65
Row: 6, Col: 1, Value: 42.68
Row: 7, Col: 1, Value: 15.03
Row: 8, Col: 1, Value: 22.17
Row: 9, Col: 1, Value: 2.86
Row: 10, Col: 1, Value: 33.04
Row: 11, Col: 1, Value: 17.73
(LARGE SOLID BOX) GROWTH OPPORTUNITIES - CLASS
T
STRATEGIC OPPORTUNITIES - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
STRATEGIC OPPORTUNITIES - CLASS T -6.33 22.25 32.60 -7.17 23.08 12.87 20.44 -7.17 38.16 1.53%
% % % % % % % % %
Lipper Capital Appreciation FundsB -0.03 14.09 26.60 -8.24 39.91 8.78% 15.68 -3.38 30.34 16.31
% % % % % % % % %
S&P 500 5.10% 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 27.92
Row: 2, Col: 1, Value: -6.33
Row: 3, Col: 1, Value: 22.25
Row: 4, Col: 1, Value: 32.6
Row: 5, Col: 1, Value: -7.17
Row: 6, Col: 1, Value: 23.08
Row: 7, Col: 1, Value: 12.87
Row: 8, Col: 1, Value: 20.44
Row: 9, Col: 1, Value: -7.17
Row: 10, Col: 1, Value: 38.16
Row: 11, Col: 1, Value: 1.53
(LARGE SOLID BOX) STRATEGIC OPPORTUNITIES -
CLASS T
EQUITY INCOME - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
EQUITY INCOME - CLASS T -2.24 23.23 18.43 -14.2 29.81 14.68 18.03 6.46% 32.55 14.61
% % % 8% % % % % %
Lipper Equity Income Funds AverageC -2.18 16.74 22.18 -6.78 26.86 9.77% 13.66 -2.54 30.17 18.85
% % % % % % % % %
S&P 500 5.10% 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 17.44
Row: 2, Col: 1, Value: -2.24
Row: 3, Col: 1, Value: 23.23
Row: 4, Col: 1, Value: 18.43
Row: 5, Col: 1, Value: -14.28
Row: 6, Col: 1, Value: 29.81
Row: 7, Col: 1, Value: 14.68
Row: 8, Col: 1, Value: 18.03
Row: 9, Col: 1, Value: 6.46
Row: 10, Col: 1, Value: 32.55
Row: 11, Col: 1, Value: 14.61
(LARGE SOLID BOX) EQUITY INCOME - CLASS T
BALANCED - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
BALANCED - CLASS T 20.89 24.60 -2.94 34.48 9.20% 19.66 -5.09 14.06 8.43%
% % % % % % %
Lipper Balanced Funds AverageD 12.34 19.57 -0.57 26.69 7.07% 10.91 -2.50 25.16 13.76
% % % % % % % %
S&P 500 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 20.89
Row: 4, Col: 1, Value: 24.6
Row: 5, Col: 1, Value: -2.94
Row: 6, Col: 1, Value: 34.48
Row: 7, Col: 1, Value: 9.199999999999999
Row: 8, Col: 1, Value: 19.66
Row: 9, Col: 1, Value: -5.09
Row: 10, Col: 1, Value: 14.06
Row: 11, Col: 1, Value: 8.43
(LARGE SOLID BOX) BALANCED -
CLASS T
HIGH YIELD - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
HIGH YIELD - CLASS T 17.24 3.64% 7.30% 34.94 23.09 20.45 -1.49 19.27 13.26
% % % % % % %
Lipper High Current Yield Funds 12.89 -0.58 -10.1 36.91 17.51 18.95 -3.85 16.43 13.67
AverageE % % 3% % % % % % %
Merrill Lynch High Yield Master Index 13.47 4.23% -4.35 34.58 18.16 17.18 -1.17 19.91 11.06
% % % % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 17.24
Row: 4, Col: 1, Value: 3.64
Row: 5, Col: 1, Value: 7.3
Row: 6, Col: 1, Value: 34.94
Row: 7, Col: 1, Value: 23.09
Row: 8, Col: 1, Value: 20.45
Row: 9, Col: 1, Value: -1.49
Row: 10, Col: 1, Value: 19.27
Row: 11, Col: 1, Value: 13.26
(LARGE SOLID BOX) HIGH YIELD - CLASS T
STRATEGIC INCOME - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995 1996
STRATEGIC INCOME - CLASS T 22.02 12.89
% %
Lipper Multi-Sector Income Funds AverageF 16.92 11.74
% %
Merrill Lynch High Yield Master Index 19.91 11.06
% %
Consumer Price Index 2.54% 3.32%
</TABLE>
MORTGAGE SECURITIES - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
MORTGAGE SECURITIES - CLASS T 11.26 2.70% 6.72% 13.64 10.36 13.61 5.45% 6.71% 1.94% 17.02
% % % % %
Lipper U.S. Mortgage Funds 11.27 2.53% 7.47% 12.71 9.52% 15.00 6.38% 7.58% -4.83 16.29
AverageG % % % % %
Salomon Brothers Mortgage Index 13.44 4.06% 8.81% 15.16 10.90 15.64 7.37% 7.04% -1.43 16.77
% % % % % %
Consumer Price Index 1.10% 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 11.26
Row: 2, Col: 1, Value: 2.7
Row: 3, Col: 1, Value: 6.72
Row: 4, Col: 1, Value: 13.64
Row: 5, Col: 1, Value: 10.36
Row: 6, Col: 1, Value: 13.61
Row: 7, Col: 1, Value: 5.45
Row: 8, Col: 1, Value: 6.71
Row: 9, Col: 1, Value: 1.94
Row: 10, Col: 1, Value: 17.02
Row: 11, Col: 1, Value: 0.0
(LARGE SOLID BOX) MORTGAGE SECURITIES -
CLASS T
GOVERNMENT INVESTMENT - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
GOVERNMENT INVESTMENT - CLASS T 6.57% 11.75 8.37% 13.45 6.48% 9.36% -3.85 17.65 2.12%
% % % %
Lipper General U.S. Government 6.67% 12.46 8.22% 14.44 6.41% 9.42% -4.64 17.34 1.72%
Bond Funds AverageH % % % %
Salomon Brothers Treasury/Agency 7.10% 14.24 8.78% 15.33 7.24% 10.74 -3.40 18.39 2.76%
Index % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 6.57
Row: 4, Col: 1, Value: 11.75
Row: 5, Col: 1, Value: 8.370000000000001
Row: 6, Col: 1, Value: 13.45
Row: 7, Col: 1, Value: 6.48
Row: 8, Col: 1, Value: 9.360000000000001
Row: 9, Col: 1, Value: -3.85
Row: 10, Col: 1, Value: 17.65
Row: 11, Col: 1, Value: 2.12
(LARGE SOLID BOX) GOVERNMENT INVESTMENT -
CLASS T
INTERMEDIATE BOND - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
INTERMEDIATE BOND - CLASS T 2.32% 7.84% 12.11 7.91% 15.16 7.13% 11.49 -2.47 12.19 3.41%
% % % % %
Lipper Intermediate Investment Grade 2.13% 7.06% 11.67 7.22% 15.63 6.88% 9.52% -3.25 16.62 3.12%
Bond Funds AverageI % % % %
Lehman Brothers Intermediate 3.66% 6.67% 12.77 9.16% 14.62 7.17% 8.79% -1.93 15.33 4.05%
Government/Corporate Bond Index % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 14.33
Row: 2, Col: 1, Value: 2.32
Row: 3, Col: 1, Value: 7.84
Row: 4, Col: 1, Value: 12.11
Row: 5, Col: 1, Value: 7.91
Row: 6, Col: 1, Value: 15.16
Row: 7, Col: 1, Value: 7.13
Row: 8, Col: 1, Value: 11.49
Row: 9, Col: 1, Value: -2.47
Row: 10, Col: 1, Value: 12.19
Row: 11, Col: 1, Value: 3.41
(LARGE SOLID BOX) INTERMEDIATE BOND - CLASS T
SHORT FIXED-INCOME - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
SHORT FIXED-INCOME - CLASS T 6.19% 10.31 5.87% 13.37 7.61% 9.49% -3.37 9.81% 4.57%
% % %
Lipper Short Investment Grade Bond 6.86% 10.22 7.87% 12.88 5.97% 6.45% -0.44 10.84 4.64%
Funds AverageJ % % % %
Lehman Brothers 1-3 Year 6.84% 10.97 9.69% 11.83 6.35% 5.55% 0.55% 10.96 5.26%
Government/Corporate Bond Index % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 6.19
Row: 4, Col: 1, Value: 10.31
Row: 5, Col: 1, Value: 5.87
Row: 6, Col: 1, Value: 13.37
Row: 7, Col: 1, Value: 7.609999999999999
Row: 8, Col: 1, Value: 9.49
Row: 9, Col: 1, Value: -3.37
Row: 10, Col: 1, Value: 9.81
Row: 11, Col: 1, Value: 4.57
(LARGE SOLID BOX) SHORT FIXED-INCOME - CLASS T
HIGH INCOME MUNICIPAL - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
HIGH INCOME MUNICIPAL - CLASS T 11.80 13.09 10.29 12.18 11.11 13.79 -8.05 16.65 2.95%
% % % % % % % %
Lipper High Yield Municipal Bond 11.28 10.11 5.13% 11.52 8.51% 11.41 -4.67 15.98 4.17%
Funds AverageK % % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 11.8
Row: 4, Col: 1, Value: 13.09
Row: 5, Col: 1, Value: 10.29
Row: 6, Col: 1, Value: 12.18
Row: 7, Col: 1, Value: 11.11
Row: 8, Col: 1, Value: 13.79
Row: 9, Col: 1, Value: -8.050000000000001
Row: 10, Col: 1, Value: 16.65
Row: 11, Col: 1, Value: 2.95
(LARGE SOLID BOX) HIGH INCOME MUNICIPAL -
CLASS T
MUNICIPAL BOND - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
MUNICIPAL BOND - CLASS T -1.56 12.30 9.56% 6.91% 11.91 8.93% 13.17 -8.49 18.15 3.88%
% % % % % %
Lipper General Municipal Debt Funds -0.94 11.53 9.65% 6.05% 12.09 8.79% 12.47 -6.50 16.84 3.30%
AverageL % % % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: -1.56
Row: 3, Col: 1, Value: 12.3
Row: 4, Col: 1, Value: 9.56
Row: 5, Col: 1, Value: 6.91
Row: 6, Col: 1, Value: 11.91
Row: 7, Col: 1, Value: 8.93
Row: 8, Col: 1, Value: 13.17
Row: 9, Col: 1, Value: -8.49
Row: 10, Col: 1, Value: 18.51
Row: 11, Col: 1, Value: 3.88
(LARGE SOLID BOX) MUNICIPAL BOND -
CLASS T
INTERMEDIATE MUNICIPAL INCOME - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
INTERMEDIATE MUNICIPAL INCOME - 2.33% 7.38% 7.79% 6.37% 9.64% 7.31% 9.43% -5.68 14.20 3.89%
CLASS T % %
Lipper Intermediate Municipal Debt 1.32% 7.57% 8.26% 6.59% 10.52 7.80% 10.18 -3.51 12.89 3.70%
Funds AverageM % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: 2.33
Row: 3, Col: 1, Value: 7.38
Row: 4, Col: 1, Value: 7.79
Row: 5, Col: 1, Value: 6.37
Row: 6, Col: 1, Value: 9.639999999999999
Row: 7, Col: 1, Value: 7.31
Row: 8, Col: 1, Value: 9.43
Row: 9, Col: 1, Value: -5.68
Row: 10, Col: 1, Value: 14.2
Row: 11, Col: 1, Value: 3.89
(LARGE SOLID BOX) INTERMEDIATE MUNICIPAL
INCOME - CLASS T
SHORT-INTERMEDIATE MUNICIPAL INCOME - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995 1996
SHORT-INTERMEDIATE MUNICIPAL 8.68% 3.64%
INCOME - CLASS T
Lipper Short-Intermediate Municipal 7.43% 3.53%
Debt Funds AverageN
Consumer Price Index 2.54% 3.32%
</TABLE>
NEW YORK MUNICIPAL INCOME - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1996
NEW YORK MUNICIPAL - CLASS T 3.50%
Lipper New York Municipal Debt Funds AverageO 3.15%
Consumer Price Index 3.32%
</TABLE>
EQUITY GROWTH - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
EQUITY GROWTH - CLASS B -0.57 15.57 44.84 6.93% 64.71 9.89% 14.85 -0.89 39.14 15.69
% % % % % % % %
Lipper Growth Funds AverageA 3.08% 14.79 26.91 -4.49 36.70 8.08% 10.63 -2.17 30.79 19.24
% % % % % % % %
S&P 500 5.10% 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: -0.5700000000000001
Row: 3, Col: 1, Value: 15.57
Row: 4, Col: 1, Value: 44.84
Row: 5, Col: 1, Value: 6.930000000000001
Row: 6, Col: 1, Value: 64.71000000000001
Row: 7, Col: 1, Value: 9.890000000000001
Row: 8, Col: 1, Value: 14.85
Row: 9, Col: 1, Value: -0.89
Row: 10, Col: 1, Value: 39.14
Row: 11, Col: 1, Value: 15.69
(LARGE SOLID BOX) EQUITY GROWTH - CLASS B
GROWTH OPPORTUNITIES - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
GROWTH OPPORTUNITIES - CLASS B 33.28 24.14 -1.65 42.68 15.03 22.17 2.86% 33.04 17.73
% % % % % % % %
Lipper Growth Funds AverageA 14.79 26.91 -4.49 36.7% 8.08% 10.63 -2.17 30.79 19.24
% % % % % % %
S&P 500 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 33.28
Row: 4, Col: 1, Value: 24.14
Row: 5, Col: 1, Value: -1.65
Row: 6, Col: 1, Value: 42.68
Row: 7, Col: 1, Value: 15.03
Row: 8, Col: 1, Value: 22.17
Row: 9, Col: 1, Value: 2.86
Row: 10, Col: 1, Value: 33.04
Row: 11, Col: 1, Value: 17.73
(LARGE SOLID BOX) GROWTH OPPORTUNITIES - CLASS
B
STRATEGIC OPPORTUNITIES - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
STRATEGIC OPPORTUNITIES - CLASS B -6.33 22.25 32.60 -7.17 23.08 12.87 20.44 -7.22 37.35 1.00%
% % % % % % % % %
Lipper Capital Appreciation FundsB -0.03 14.09 26.60 -8.24 39.91 8.78% 15.68 -3.38 30.34 16.31
% % % % % % % % %
S&P 500 5.10% 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 27.92
Row: 2, Col: 1, Value: -6.33
Row: 3, Col: 1, Value: 22.25
Row: 4, Col: 1, Value: 32.6
Row: 5, Col: 1, Value: -7.17
Row: 6, Col: 1, Value: 23.08
Row: 7, Col: 1, Value: 12.87
Row: 8, Col: 1, Value: 20.44
Row: 9, Col: 1, Value: -7.22
Row: 10, Col: 1, Value: 37.34999999999999
Row: 11, Col: 1, Value: 1.0
(LARGE SOLID BOX) STRATEGIC OPPORTUNITIES -
CLASS B
EQUITY INCOME - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
EQUITY INCOME - CLASS B -2.24 23.23 18.43 -14.2 29.81 14.68 18.03 6.39% 31.96 14.00
% % % 8% % % % % %
Lipper Equity Income Funds AverageC -2.18 16.74 22.18 -6.78 26.86 9.77% 13.66 -2.54 30.17 18.85
% % % % % % % % %
S&P 500 5.10% 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 17.44
Row: 2, Col: 1, Value: -2.24
Row: 3, Col: 1, Value: 23.23
Row: 4, Col: 1, Value: 18.43
Row: 5, Col: 1, Value: -14.28
Row: 6, Col: 1, Value: 29.81
Row: 7, Col: 1, Value: 14.68
Row: 8, Col: 1, Value: 18.03
Row: 9, Col: 1, Value: 6.39
Row: 10, Col: 1, Value: 31.96
Row: 11, Col: 1, Value: 14.0
(LARGE SOLID BOX) EQUITY INCOME - CLASS B
BALANCED - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
BALANCED - CLASS B 20.89 24.60 -2.94 34.48 9.20% 19.66 -5.09 14.06 8.29%
% % % % % % %
Lipper Balanced Funds AverageD 12.34 19.57 -0.57 26.69 7.07% 10.91 -2.50 25.16 13.76
% % % % % % % %
S&P 500 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 20.89
Row: 4, Col: 1, Value: 24.6
Row: 5, Col: 1, Value: -2.94
Row: 6, Col: 1, Value: 34.48
Row: 7, Col: 1, Value: 9.199999999999999
Row: 8, Col: 1, Value: 19.66
Row: 9, Col: 1, Value: -5.09
Row: 10, Col: 1, Value: 14.06
Row: 11, Col: 1, Value: 8.289999999999999
(LARGE SOLID BOX) BALANCED -
CLASS B
HIGH YIELD - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
HIGH YIELD - CLASS B 17.24 3.64% 7.30% 34.94 23.09 20.45 -2.11 18.34 12.45
% % % % % % %
Lipper High Current Yield Funds AverageE 12.89 -0.58 -10.1 36.91 17.51 18.95 -3.85 16.43 13.67
% % 3% % % % % % %
Merrill Lynch High Yield Master Index 13.47 4.23% -4.35 34.58 18.16 17.18 -1.17 19.91 11.06
% % % % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 17.24
Row: 4, Col: 1, Value: 3.64
Row: 5, Col: 1, Value: 7.3
Row: 6, Col: 1, Value: 34.94
Row: 7, Col: 1, Value: 23.09
Row: 8, Col: 1, Value: 20.45
Row: 9, Col: 1, Value: -2.11
Row: 10, Col: 1, Value: 18.34
Row: 11, Col: 1, Value: 12.45
(LARGE SOLID BOX) HIGH YIELD - CLASS B
STRATEGIC INCOME - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995 1996
STRATEGIC INCOME - CLASS B 21.35 12.14
% %
Lipper Multi-Sector Income Funds AverageF 16.92 11.74
% %
Merrill Lynch High Yield Master Index 19.91 11.06
% %
Consumer Price Index 2.54% 3.32%
</TABLE>
MORTGAGE SECURITIES - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
MORTGAGE SECURITIES - CLASS B 11.26 2.70% 6.72% 13.64 10.36 13.61 5.45% 6.71% 1.94% 17.02
% % % % %
Lipper U.S. Mortgage Funds 11.27 2.53% 7.47% 12.71 9.52% 15.00 6.38% 7.58% -4.83 16.29
AverageG % % % % %
Salomon Brothers Mortgage Index 13.44 4.06% 8.81% 15.16 10.90 15.64 7.37% 7.04% -1.43 16.77
% % % % % %
Consumer Price Index 1.10% 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 11.26
Row: 2, Col: 1, Value: 2.7
Row: 3, Col: 1, Value: 6.72
Row: 4, Col: 1, Value: 13.64
Row: 5, Col: 1, Value: 10.36
Row: 6, Col: 1, Value: 13.61
Row: 7, Col: 1, Value: 5.45
Row: 8, Col: 1, Value: 6.71
Row: 9, Col: 1, Value: 1.94
Row: 10, Col: 1, Value: 17.02
Row: 11, Col: 1, Value: 0.0
(LARGE SOLID BOX) MORTGAGE SECURITIES -
CLASS B
GOVERNMENT INVESTMENT - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
GOVERNMENT INVESTMENT - CLASS B 6.57% 11.75 8.37% 13.45 6.48% 9.36% -4.38 16.92 1.37%
% % % %
Lipper General U.S. Government 6.67% 12.46 8.22% 14.44 6.41% 9.42% -4.64 17.34 1.72%
Bond Funds AverageH % % % %
Salomon Brothers Treasury/Agency 7.10% 14.24 8.78% 15.33 7.24% 10.74 -3.40 18.39 2.76%
Index % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 6.57
Row: 4, Col: 1, Value: 11.75
Row: 5, Col: 1, Value: 8.370000000000001
Row: 6, Col: 1, Value: 13.45
Row: 7, Col: 1, Value: 6.48
Row: 8, Col: 1, Value: 9.360000000000001
Row: 9, Col: 1, Value: -4.38
Row: 10, Col: 1, Value: 16.92
Row: 11, Col: 1, Value: 1.37
(LARGE SOLID BOX) GOVERNMENT INVESTMENT -
CLASS B
INTERMEDIATE BOND - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
INTERMEDIATE BOND - CLASS B 2.32% 7.84% 12.11 7.91% 15.16 7.13% 11.49 -3.12 11.51 2.63%
% % % % %
Lipper Intermediate Investment Grade 2.13% 7.06% 11.67 7.22% 15.63 6.88% 9.52% -3.25 16.62 3.12%
Bond Funds AverageI % % % %
Lehman Brothers Intermediate 3.66% 6.67% 12.77 9.16% 14.62 7.17% 8.79% -1.93 15.33 4.05%
Government/Corporate Bond Index % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 14.33
Row: 2, Col: 1, Value: 2.32
Row: 3, Col: 1, Value: 7.84
Row: 4, Col: 1, Value: 12.11
Row: 5, Col: 1, Value: 7.91
Row: 6, Col: 1, Value: 15.16
Row: 7, Col: 1, Value: 7.13
Row: 8, Col: 1, Value: 11.49
Row: 9, Col: 1, Value: -3.1
Row: 10, Col: 1, Value: 11.51
Row: 11, Col: 1, Value: 2.63
(LARGE SOLID BOX) INTERMEDIATE BOND - CLASS B
HIGH INCOME MUNICIPAL - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
HIGH INCOME MUNICIPAL - CLASS B 11.80 13.09 10.29 12.18 11.11 13.79 -8.54 15.60 2.28%
% % % % % % % %
Lipper High Yield Municipal Bond 11.28 10.11 5.13% 11.52 8.51% 11.41 -4.67 15.98 4.17%
Funds AverageK % % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 11.8
Row: 4, Col: 1, Value: 13.09
Row: 5, Col: 1, Value: 10.29
Row: 6, Col: 1, Value: 12.18
Row: 7, Col: 1, Value: 11.11
Row: 8, Col: 1, Value: 13.79
Row: 9, Col: 1, Value: -8.52
Row: 10, Col: 1, Value: 15.6
Row: 11, Col: 1, Value: 2.28
(LARGE SOLID BOX) HIGH INCOME MUNICIPAL -
CLASS B
MUNICIPAL BOND - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
MUNICIPAL BOND - CLASS B -1.56 12.30 9.56% 6.91% 11.91 8.93% 13.17 -8.49 18.15 3.69%
% % % % % %
Lipper General Municipal Debt Funds -0.94 11.53 9.65% 6.05% 12.09 8.79% 12.47 -6.50 16.84 3.30%
AverageL % % % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: -1.56
Row: 3, Col: 1, Value: 12.3
Row: 4, Col: 1, Value: 9.56
Row: 5, Col: 1, Value: 6.91
Row: 6, Col: 1, Value: 11.91
Row: 7, Col: 1, Value: 8.93
Row: 8, Col: 1, Value: 13.17
Row: 9, Col: 1, Value: -8.49
Row: 10, Col: 1, Value: 18.51
Row: 11, Col: 1, Value: 3.69
(LARGE SOLID BOX) MUNICIPAL BOND -
CLASS B
INTERMEDIATE MUNICIPAL INCOME - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
INTERMEDIATE MUNICIPAL INCOME - 2.33% 7.38% 7.79% 6.37% 9.64% 7.32% 9.43% -6.13 13.22 3.23%
CLASS B % %
Lipper Intermediate Municipal Debt 1.32% 7.57% 8.26% 6.59% 10.52 7.80% 10.18 -3.51 12.89 3.70%
Funds AverageM % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 13.71
Row: 2, Col: 1, Value: 2.33
Row: 3, Col: 1, Value: 7.38
Row: 4, Col: 1, Value: 7.79
Row: 5, Col: 1, Value: 6.37
Row: 6, Col: 1, Value: 9.639999999999999
Row: 7, Col: 1, Value: 7.319999999999999
Row: 8, Col: 1, Value: 9.43
Row: 9, Col: 1, Value: -6.119999999999999
Row: 10, Col: 1, Value: 13.22
Row: 11, Col: 1, Value: 2.84
(LARGE SOLID BOX) INTERMEDIATE MUNICIPAL
INCOME - CLASS B
NEW YORK MUNICIPAL INCOME - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1996
NEW YORK MUNICIPAL INCOME - CLASS 2.84%
B
Lipper New York Municipal Debt 3.15%
Funds
AverageO
Consumer Price Index 3.32%
</TABLE>
EQUITY GROWTH - CLASS C
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total
returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
EQUITY GROWTH - CLASS C % % % % % % % % % %
Lipper Growth Funds
AverageA 3.08% 14.79 26.91 -4.49 36.70 8.08% 10.63 -2.17 30.79 19.24
% % % % % % % %
S&P 500 5.10% 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
Row: 11, Col: 1, Value: nil
(LARGE SOLID BOX) EQUITY GROWTH - CLASS C
GROWTH OPPORTUNITIES - CLASS C
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
GROWTH OPPORTUNITIES - CLASS C % % % % % % % % %
Lipper Growth Funds AverageA 14.79 26.91 -4.49 36.70 8.08% 10.63 -2.17 30.79 19.24
% % % % % % % %
S&P 500 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
Row: 11, Col: 1, Value: nil
(LARGE SOLID BOX) STRATEGIC OPPORTUNITIES -
CLASS C
EQUITY INCOME - CLASS C
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total
returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
EQUITY INCOME - CLASS C % % % % % % % % % %
Lipper Equity Income Funds
AverageC -2.18 16.74 22.18 -6.78 26.86 9.77% 13.66 -2.54 30.17 18.85
% % % % % % % % %
S&P 500 5.10% 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
Row: 11, Col: 1, Value: nil
(LARGE SOLID BOX) EQUITY INCOME - CLASS C
BALANCED - CLASS C
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
BALANCED - CLASS C % % % % % % % % %
Lipper Balanced Funds AverageD 12.34 19.57 -0.57 26.69 7.07% 10.91 -2.50 25.16 13.76
% % % % % % % %
S&P 500 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
Row: 11, Col: 1, Value: nil
(LARGE SOLID BOX) BALANCED -
CLASS C
HIGH YIELD - CLASS C
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
HIGH YIELD - CLASS C % % % % % % % % %
Lipper High Current Yield Funds 12.89 -0.58 -10.1 36.91 17.51 18.95 -3.85 16.43 13.67
AverageE % % 3% % % % % % %
Merrill Lynch High Yield Master
Index 13.47 4.23% -4.35 34.58 18.16 17.18 -1.17 19.91 11.06
% % % % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
Row: 11, Col: 1, Value: nil
(LARGE SOLID BOX) HIGH YIELD - CLASS C
STRATEGIC INCOME - CLASS C
<TABLE>
<CAPTION>
<S> <C> <C>
Calendar year total returns+ 1995 1996
STRATEGIC INCOME - CLASS C % %
Lipper Multi-Sector Income Funds AverageF 16.92 11.74
% %
Merrill Lynch High Yield Master Index 19.91 11.06
% %
Consumer Price Index 2.54% 3.32%
</TABLE>
GOVERNMENT INVESTMENT - CLASS C
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
GOVERNMENT INVESTMENT - CLASS C % % % % % % % % %
Lipper General U.S. Government 6.67% 12.46 8.22% 14.44 6.41% 9.42% -4.64 17.34 1.72%
Bond Funds AverageH % % % %
Salomon Brothers Treasury/Agency 7.10% 14.24 8.78% 15.33 7.24% 10.74 -3.40 18.39 2.76%
Index % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
Row: 11, Col: 1, Value: nil
(LARGE SOLID BOX) GOVERNMENT INVESTMENT -
CLASS C
INTERMEDIATE BOND - CLASS C
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total
returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
INTERMEDIATE BOND - CLASS C % % % % % % % % % %
Lipper Intermediate
Investment Grade 2.13% 7.06% 11.67 7.22% 15.63 6.88% 9.52% -3.25 16.62 3.12%
Bond Funds AverageI % % % %
Lehman Brothers
Intermediate 3.66% 6.67% 12.77 9.16% 14.62 7.17% 8.79% -1.93 15.33 4.05%
Government/Corporate Bond
Index % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
Row: 11, Col: 1, Value: nil
(LARGE SOLID BOX) INTERMEDIATE BOND - CLASS C
SHORT FIXED-INCOME - CLASS C
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total
returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
SHORT FIXED-INCOME - CLASS C % % % % % % % % %
Lipper Short Investment Grade Bond 6.86% 10.22 7.87% 12.88 5.97% 6.45% -0.44 10.84 4.64%
Funds AverageJ % % % %
Lehman Brothers 1-3 Year 6.84% 10.97 9.69% 11.83 6.35% 5.55% 0.55% 10.96 5.26%
Government/Corporate Bond Index % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
Row: 11, Col: 1, Value: nil
(LARGE SOLID BOX) SHORT FIXED-INCOME - CLASS C
HIGH INCOME MUNICIPAL - CLASS C
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total
returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
HIGH INCOME MUNICIPAL - CLASS C % % % % % % % % %
Lipper High Yield Municipal Bond 11.28 10.11 5.13% 11.52 8.51% 11.41 -4.67 15.98 4.17%
Funds AverageK % % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
Row: 11, Col: 1, Value: nil
(LARGE SOLID BOX) HIGH INCOME MUNICIPAL -
CLASS C
INTERMEDIATE MUNICIPAL INCOME - CLASS C
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total
returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
INTERMEDIATE MUNICIPAL
INCOME - % % % % % % % % % %
CLASS C
Lipper Intermediate Municipal
Debt 1.32% 7.57% 8.26% 6.59% 10.52 7.80% 10.18 -3.51 12.89 3.70%
Funds AverageM % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
Row: 11, Col: 1, Value: nil
(LARGE SOLID BOX) INTERMEDIATE MUNICIPAL
INCOME - CLASS C
+ RETURNS DO NOT INCLUDE THE EFFECT OF PAYING CLASS A OR CLASS T'S MAXIMUM
FRONT-END SALES CHARGE OR CLASS B AND CLASS C' S APPLICABLE
CONTINGENT DEFERRED SALES CHARGE.
[F] INITIAL OFFERING OF CLASS A FOR EACH FUND (EXCEPT MORTGAGE SECURITIES
AND MUNICIPAL BOND) TOOK PLACE ON SEPTEMBER 3, 1996. RETURNS PRIOR TO
SEPTEMBER 3, 1996 (EXCEPT FOR EQUITY GROWTH, EQUITY INCOME, INTERMEDIATE
BOND, AND INTERMEDIATE MUNICIPAL INCOME) ARE THOSE OF CLASS T, AND REFLECT
CLASS T'S APPLICABLE 12B-1 FEE ( 0.65% FOR EQUITY FUNDS PRIOR TO
JANUARY 1, 1996). FOR EQUITY GROWTH, EQUITY INCOME, INTERMEDIATE BOND,AND
INTERMEDIATE MUNICIPAL INCOME RETURNS BETWEEN SEPTEMBER 10, 1992 AND
SEPTEMBER 3, 1996 ARE THOSE OF CLASS T AND REFLECT CLASS T'S APPLICABLE
12B-1 FEE (0.65% FOR EQUITY FUNDS PRIOR TO JANUARY 1, 1996). RETURNS
BETWEEN COMMENCEMENT OF OPERATIONS AND SEPTEMBER 10, 1992 REFLECT THE
RETURNS OF INSTITUTIONAL CLASS, THE ORIGINAL CLASS OF EACH FUND, WHICH DOES
NOT HAVE A 12B-1 FEE. CLASS A RETURNS WOULD HAVE BEEN LOWER IF ITS12B-1 FEE
HAD BEEN REFLECTED IN RETURNS PRIOR TO SEPTEMBER 10, 1992.
INITIAL OFFERING OF CLASS A, CLASS T, AND CLASS B OF MORTGAGE SECURITIES
TOOK PLACE ON MARCH 3, 1997. RETURNS PRIOR TO MARCH 3, 1997 ARE THOSE OF
INITIAL CLASS, THE ORIGINAL CLASS OF THE FUND, WHICH DOES NOT BEAR A 12B-1
FEE. CLASS T AND CLASS A RETURNS WOULD HAVE BEEN LOWER IF THEIR RESPECTIVE
12B-1 FEES WERE REFLECTED IN RETURNS PRIOR TO MARCH 3, 1997. CLASS B
RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE HAD BEEN REFLECTED IN
RETURNS PRIOR TO MARCH 3, 1997.
INITIAL OFFERING OF CLASS A OF MUNICIPAL BOND TOOK PLACE ON MARCH 3, 1997.
RETURNS BETWEEN JULY 1, 1996 AND MARCH 3, 1997 ARE THOSE OF CLASS T AND
REFLECT CLASS T'S 0.25% 12B-1 FEE. RETURNS PRIOR TO JULY 1, 1996 ARE THOSE
OF INITIAL CLASS, THE ORIGINAL CLASS OF THE FUND, WHICH DOES NOT BEAR A
12B-1 FEE. CLASS A RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE HAD BEEN
REFLECTED IN RETURNS PRIOR TO JULY 1, 1996.
INITIAL OFFERING OF CLASS T AND CLASS B OF MUNICIPAL BOND TOOK PLACE ON
JULY 1, 1996. RETURNS PRIOR TO THAT DATE ARE THOSE OF INITIAL CLASS, THE
ORIGINAL CLASS OF THE FUND, WHICH DOES NOT HAVE A 12B-1 FEE. CLASS T
RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE HAD BEEN REFLECTED IN
RETURNS PRIOR TO JULY 1, 1996. CLASS B RETURNS WOULD HAVE BEEN LOWER IF ITS
12B-1 FEE HAD BEEN REFLECTED IN RETURNS PRIOR TO JULY 1, 1996.
INITIAL OFFERING OF CLASS T OF EQUITY GROWTH, EQUITY INCOME,
INTERMEDIATE BOND, AND INTERMEDIATE MUNICIPAL INCOME TOOK PLACE ON
SEPTEMBER 10, 1992. CLASS T BEARS A 12B-1 FEE (AT THEN CURRENTLY APPLICABLE
RATES FOR EQUITY GROWTH AND EQUITY INCOME OF 0.65%, AND FOR INTERMEDIATE
BOND AND INTERMEDIATE MUNICIPAL INCOME OF 0.25%) WHICH IS NOT REFLECTED IN
RETURNS PRIOR TO SEPTEMBER 10, 1992. RETURNS PRIOR TO SEPTEMBER 10, 1992
ARE THOSE OF INSTITUTIONAL CLASS, THE ORIGINAL CLASS OF EACH FUND, WHICH
DOES NOT BEAR A 12B-1 FEE. CLASS T RETURNS WOULD HAVE BEEN LOWER IF ITS
12B-1 FEE HAD BEEN REFLECTED IN RETURNS PRIOR TO SEPTEMBER 10, 1992 .
INITIAL OFFERING OF CLASS B OF EQUITY GROWTH TOOK PLACE ON DECEMBER 31,
1996. CLASS B BEARS A 12B-1 FEE, WHICH IS NOT REFLECTED IN RETURNS PRIOR TO
DECEMBER 31, 1996. RETURNS BETWEEN SEPTEMBER 10, 1992 AND DECEMBER 31, 1996
ARE THOSE OF CLASS T AND REFLECT CLASS T'S APPLICABLE 12B-1 FEE (0.65%
PRIOR TO JANUARY 1, 1996). RETURNS PRIOR TO SEPTEMBER 10, 1992 ARE THOSE OF
THE INSTITUTIONAL CLASS, THE ORIGINAL CLASS OF THE FUND, WHICH DOES NOT
BEAR A 12B-1 FEE. CLASS B RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE
HAD BEEN REFLECTED IN RETURNS PRIOR TO DECEMBER 31, 1996 .
INITIAL OFFERING OF CLASS B OF BALANCED TOOK PLACE ON DECEMBER 31, 1996.
CLASS B BEARS A 12B-1 FEE, WHICH IS NOT REFLECTED IN RETURNS PRIOR TO
DECEMBER 31, 1996. RETURNS PRIOR TO DECEMBER 31, 1996 ARE THOSE OF CLASS T
AND REFLECT CLASS T'S APPLICABLE 12B-1 FEE (0.65% PRIOR TO JANUARY 1,
1996). CLASS B RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE HAD BEEN
REFLECTED IN RETURNS PRIOR TO DECEMBER 31, 1996 .
INITIAL OFFERING OF CLASS B OF GROWTH OPPORTUNITIES TOOK PLACE ON MARCH 3,
1997. RETURNS PRIOR TO MARCH 3, 1997 ARE THOSE OF CLASS T, THE ORIGINAL
CLASS OF THE FUND, AND REFLECT CLASS T'S APPLICABLE 12B-1 FEE (0.65% PRIOR
TO JANUARY 1, 1996). CLASS B RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE
HAD BEEN REFLECTED IN RETURNS PRIOR TO MARCH 3, 1997 .
INITIAL OFFERING OF CLASS B OF EQUITY INCOME, INTERMEDIATE BOND,
AND INTERMEDIATE MUNICIPAL INCOME TOOK PLACE ON JUNE 30, 1994. CLASS B
BEARS A 12B-1 FEE (1.00% FOR BOND FUNDS PRIOR TO JANUARY 1, 1996) WHICH IS
NOT REFLECTED IN RETURNS PRIOR TO JUNE 30, 1994. RETURNS BETWEEN SEPTEMBER
10, 1992 AND JUNE 30, 1994 ARE THOSE OF CLASS T AND REFLECT CLASS T'S THEN
APPLICABLE 12B-1 FEE OF 0.65% FOR EQUITY INCOME, AND 0.25% FOR INTERMEDIATE
BOND AND INTERMEDIATE MUNICIPAL INCOME. RETURNS PRIOR TO SEPTEMBER 10, 1992
ARE THOSE OF THE INSTITUTIONAL CLASS, THE ORIGINAL CLASS OF THESE FUNDS,
WHICH DOES NOT BEAR A 12B-1 FEE. CLASS B RETURNS WOULD HAVE BEEN LOWER IF
ITS 12B-1 FEE HAD BEEN REFLECTED IN RETURNS PRIOR TO JUNE 30, 1994 .
INITIAL OFFERING OF CLASS B FOR STRATEGIC OPPORTUNITIES TOOK PLACE ON JUNE
30, 1994. CLASS B BEARS A 1.00% 12B-1 FEE WHICH IS NOT REFLECTED IN RETURNS
PRIOR TO JUNE 30, 1994. RETURNS PRIOR TO JUNE 30, 1994 ARE THOSE OF CLASS
T. CLASS T RETURNS INCLUDE A THEN APPLICABLE 12B-1 FEE OF 0.65%. CLASS B
RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE HAD BEEN REFLECTED IN
RETURNS PRIOR TO JUNE 30, 1994 .
INITIAL OFFERING OF CLASS B OF HIGH YIELD, GOVERNMENT INVESTMENT,
AND HIGH INCOME MUNICIPAL TOOK PLACE ON JUNE 30, 1994. CLASS B BEARS A
12B-1 FEE (AT A THEN CURRENTLY APPLICABLE COMBINED RATE OF 1.00%) WHICH IS
NOT REFLECTED IN RETURNS PRIOR TO JUNE 30, 1994. RETURNS PRIOR TO JUNE 30,
1994 ARE THOSE OF CLASS T, THE ORIGINAL CLASS OF THESE FUNDS, AND INCLUDE
THE THEN APPLICABLE CLASS T 12B-1 FEE OF 0.25%. CLASS B RETURNS WOULD HAVE
BEEN LOWER IF ITS 12B-1 FEE HAD BEEN REFLECTED IN RETURNS PRIOR TO JUNE
30, 1994 .
CLASS C OF EACH FUND (EXCEPT STRATEGIC OPPORTUNITIES, MORTGAGE
SECURITIES, MUNICIPAL BOND, SHORT-INTERMEDIATE MUNICIPAL INCOME, CALIFORNIA
MUNICIPAL INCOME, AND NEW YORK MUNICIPAL INCOME) IS EXPECTED TO COMMENCE
OPERATIONS ON OR ABOUT NOVEMBER 1, 1997.
CLASS C RETURNS FOR TECHNOQUANT GROWTH, MID CAP, LARGE CAP, GROWTH &
INCOME, AND STRATEGIC INCOME PRIOR TO THE COMMENCEMENT OF OPERATIONS OF
CLASS C ARE THOSE OF CLASS B, AN ORIGINAL CLASS OF EACH FUND, AND REFLECT
CLASS B'S APPLICABLE 12B-1 FEE (1.00% PRIOR TO JANUARY 1, 1996 FOR
STRATEGIC INCOME). CLASS C RETURNS FOR STRATEGIC INCOME WOULD HAVE BEEN
LOWER IF ITS 12B-1 FEE HAD BEEN REFLECTED IN RETURNS AFTER JANUARY 1, 1996.
CLASS C RETURNS FOR EQUITY GROWTH BETWEEN DECEMBER 31, 1996 AND
COMMENCEMENT OF OPERATIONS OF CLASS C ARE THOSE OF CLASS B, AND REFLECT
CLASS B'S APPLICABLE 12B-1 FEE. RETURNS BETWEEN SEPTEMBER 10, 1992 AND
DECEMBER 31, 1996 ARE THOSE OF CLASS T AND REFLECT CLASS T'S APPLICABLE
12B-1 FEE (0.65% PRIOR TO JANUARY 1, 1996). RETURNS PRIOR TO SEPTEMBER 10,
1992 ARE THOSE OF INSTITUTIONAL CLASS, THE ORIGINAL CLASS OF THE FUND,
WHICH DOES NOT BEAR A 12B-1 FEE. CLASS C RETURNS WOULD HAVE BEEN LOWER IF
ITS 12B-1 FEE HAD BEEN REFLECTED IN RETURNS PRIOR TO DECEMBER 31, 1996.
CLASS C RETURNS FOR GROWTH OPPORTUNITIES BETWEEN MARCH 3, 1997 AND
COMMENCEMENT OF OPERATIONS OF CLASS C ARE THOSE OF CLASS B, AND REFLECT
CLASS B'S APPLICABLE 12B-1 FEE. RETURNS PRIOR TO MARCH 3, 1997 ARE THOSE OF
CLASS T, THE ORIGINAL CLASS OF THE FUND, AND REFLECT CLASS T'S APPLICABLE
12B-1 FEE (0.65% PRIOR TO JANUARY 1, 1996). CLASS C RETURNS WOULD HAVE BEEN
LOWER IF ITS 12B-1 FEE HAD BEEN REFLECTED IN RETURNS PRIOR TO MARCH 3,
1997.
CLASS C RETURNS FOR BALANCED BETWEEN DECEMBER 31, 1996 AND COMMENCEMENT OF
OPERATIONS OF CLASS C ARE THOSE OF CLASS B, AND REFLECT CLASS B'S
APPLICABLE 12B-1 FEE. RETURNS PRIOR TO DECEMBER 31, 1996 ARE THOSE OF CLASS
T AND REFLECT CLASS T'S APPLICABLE 12B-1 FEE (0.65% PRIOR TO JANUARY 1,
1996). CLASS C RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE HAD BEEN
REFLECTED IN RETURNS PRIOR TO DECEMBER 31, 1996.
CLASS C RETURNS FOR HIGH YIELD, GOVERNMENT INVESTMENT, AND HIGH INCOME
MUNICIPAL BETWEEN JUNE 30, 1994 AND COMMENCEMENT OF OPERATIONS OF CLASS C
ARE THOSE OF CLASS B, AND REFLECT CLASS B'S APPLICABLE 12B-1 FEE (1.00%
PRIOR TO JANUARY 1, 1996). RETURNS PRIOR TO JUNE 30, 1994 ARE THOSE OF
CLASS T, THE ORIGINAL CLASS OF THESE FUNDS, AND INCLUDE CLASS T'S
APPLICABLE 12B-1 FEE OF 0.25%. CLASS C RETURNS WOULD HAVE BEEN LOWER IF ITS
12B-1 FEE HAD BEEN REFLECTED IN PRIOR DATE RETURNS.
CLASS C RETURNS FOR SHORT FIXED-INCOME PRIOR TO COMMENCEMENT OF OPERATIONS
OF CLASS C ARE THOSE OF CLASS T, AND REFLECT CLASS T'S APPLICABLE 12B-1
FEE. CLASS C RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE HAD BEEN
REFLECTED IN PRIOR DATE RETURNS.
CLASS C RETURNS FOR EQUITY INCOME, INTERMEDIATE BOND, AND INTERMEDIATE
MUNICIPAL INCOME BETWEEN JUNE 30, 1994 AND COMMENCEMENT OF OPERATIONS OF
CLASS C ARE THOSE OF CLASS B, AND REFLECT CLASS B'S APPLICABLE 12B-1 FEE
(1.00% FOR INTERMEDIATE BOND AND INTERMEDIATE MUNICIPAL INCOME PRIOR TO
JANUARY 1, 1996).RETURNS BETWEEN SEPTEMBER 10, 1992 AND JUNE 30, 1994 ARE
THOSE OF CLASS T AND REFLECT CLASS T'S THEN APPLICABLE 12B-1 FEE OF 0.65%
FOR EQUITY INCOME, AND 0.25% FOR INTERMEDIATE BOND AND INTERMEDIATE
MUNICIPAL INCOME. RETURNS PRIOR TO SEPTEMBER 10, 1992 ARE THOSE OF
INSTITUTIONAL CLASS, THE ORIGINAL CLASS OF THESE FUNDS, WHICH DOES NOT BEAR
A 12B-1 FEE. CLASS C RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE HAD
BEEN REFLECTED IN PRIOR DATE RETURNS.
[A] THE LIPPER GROWTH FUNDS AVERAGE CURRENTLY REFLECTS THE PERFORMANCE OF
OVER 669 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[B] THE LIPPER CAPITAL APPRECIATION FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 189 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[C] THE LIPPER EQUITY INCOME FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 160 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[D] THE LIPPER BALANCED FUNDS AVERAGE CURRENTLY REFLECTS THE PERFORMANCE OF
OVER 272 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[E] THE LIPPER HIGH CURRENT YIELD FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 148 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[F] THE LIPPER MULTI-SECTOR INCOME FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 51 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[G] THE LIPPER U.S. MORTGAGE FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 59 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[H] THE LIPPER GENERAL U.S. GOVERNMENT BOND FUNDS AVERAGE CURRENTLY
REFLECTS THE PERFORMANCE OF OVER 170 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[I] THE LIPPER INTERMEDIATE INVESTMENT GRADE BOND FUNDS AVERAGE CURRENTLY
REFLECTS THE PERFORMANCE OF OVER 176 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[J] THE LIPPER SHORT INVESTMENT GRADE BOND FUNDS AVERAGE CURRENTLY REFLECTS
THE PERFORMANCE OF OVER 95 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[K] THE LIPPER HIGH YIELD MUNICIPAL BOND FUNDS AVERAGE CURRENTLY REFLECTS
THE PERFORMANCE OF OVER 43 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[L] THE LIPPER GENERAL MUNICIPAL DEBT FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 225 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[M] THE LIPPER INTERMEDIATE MUNICIPAL DEBT FUNDS AVERAGE CURRENTLY REFLECTS
THE PERFORMANCE OF OVER 136 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[N] THE LIPPER SHORT-INTERMEDIATE MUNICIPAL DEBT FUNDS AVERAGE CURRENTLY
REFLECTS THE PERFORMANCE OF OVER 28 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[O] THE LIPPER NEW YORK MUNICIPAL DEBT FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 96 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
FIDELITY ADVISOR FUNDS INSTITUTIONAL CLASS PROSPECTUS
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b,c .............................. Who May Want to Invest
3 a .............................. Financial Highlights
b .............................. *
c .............................. Performance, Appendix B
d .............................. Cover Page; Performance
4 a i............................. Charter
ii........................... Investment Principles and Risks
b .............................. Investment Principles and Risks
c .............................. Who May Want to Invest; Investment Principles
and Risks
5 a .............................. Charter
b i............................. Cover Page; Charter
ii........................... Charter; Breakdown of Expenses
iii.......................... Expenses; Breakdown of Expenses
c .............................. Charter
d .............................. Charter; Breakdown of Expenses
e .............................. Charter; Breakdown of Expenses
f .............................. Expenses
g .............................. Charter
5A .............................. Performance
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares; Investor
Services; Transaction Details; Exchange
Restrictions
iii.......................... Charter
b ............................. Charter
c .............................. Transactions Details; Exchange Restrictions
d .............................. Who May Want to Invest
e .............................. Cover Page; How to Buy Shares; How to Sell
Shares; Investor Services; Exchange Restrictions
f, g .............................. Dividends, Capital Gains, and Taxes
h .............................. Who May Want to Invest
7 a .............................. Cover Page; Charter
b .............................. How to Buy Shares; Transaction Details
c .............................. *
d .............................. How to Buy Shares
e .............................. Breakdown of Expenses; Transaction Details
f .............................. Expenses; Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
FIDELITY ADVISOR FUNDS
INSTITUTIONAL CLASS
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
a fund's most recent financial report and portfolio listing or a
copy of the Statement of Additional Information (SAI) dated Octob er 31,
1 997. The SAI has been filed with the Securities and Exchange
Commission (SEC) and is available along with other related materials on the
SEC's Internet Web site (http://www.sec.gov). The SAI is incorporated
herein by reference (legally forms a part of the prospectus). For a free
copy of either document, 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, FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT
TO INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL AMOUNT INVESTED.
HIGH YIELD AND STRATEGIC INCOME MAY INVEST SIGNIFICANTLY IN
LOWER-QUALITY DEBT SECURITIES, SOMETIMES CALLED "JUNK BONDS." THESE
SECURITIES CARRY GREATER RISKS, SUCH AS THE RISK OF DEFAULT, THAN OTHER
DEB T SECURITIES.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES
HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE
COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
ACOMI-pro-02 97-01
GROWTH FUNDS:
Fidelity Advisor TechnoQuantTM Growth Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth Opportunities Fund
Fidelity Advisor Strategic Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS:
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balan ced Fun d
TAXABLE INCOME FUNDS:
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS:
Fidelity Advisor High Income Municipal Fund
Fidelity Advisor Municipal Bond Fund
Fidelity Advisor Intermediate Municipal Income Fund
Fidelity Advisor Short-Intermediate Municipal Income Fund
STATE MUNICIPAL FUNDS:
Fidelity Advisor California Municipal Income Fund
Fidelity Advisor New York Municipal Income Fund
PROSPECTUS
OCTOBER 31, 199 7(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET,
BOSTON, MA 02109
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
KEY FACTS 3 WHO MAY WANT TO INVEST
4 EXPENSES Institutional Class's yearly operating
expenses.
9 FINANCIAL HIGHLIGHTS A summary of each fund's financial
data.
10 PERFORMANCE How each fund has done over time.
THE FUNDS IN DETAIL 13 CHARTER How each fund is organized.
15 INVESTMENT PRINCIPLES AND RISKS Each fund's overall
approach to investing.
25 BREAKDOWN OF EXPENSES How operating costs are
calculated and what they include.
YOUR ACCOUNT 28 TYPES OF ACCOUNTS Different ways to set up your
account, including tax-sheltered retirement plans.
28 HOW TO BUY SHARES Opening an account and making
additional investments.
30 HOW TO SELL SHARES Taking money out and closing your
account.
31 INVESTOR SERVICES Services to help you manage your
account.
SHAREHOLDER AND ACCOUNT POLICIES 33 DIVIDENDS, CAPITAL GAINS, AND TAXES
34 TRANSACTION DETAILS Share price calculations and the
timing of purchases and redemptions.
36 EXCHANGE RESTRICTIONS
37 APPENDIX A
39 APPENDIX B
</TABLE>
KEY FACTS
WHO MAY WANT TO INVEST
Institutional Class shares are offered to accounts managed (i) by a bank
trust department and other trust institutions, (ii) by a broker-dealer and
(iii) by a registered investment advisor (RIA) on a discretionary basis
(collectively, eligible intermediaries).
Institutional Class shares are available through eligible intermediaries
that have signed a participation agreement with FDC. The participation
agreement specifies certain aggregate asset minimums and asset
qualifications, trading guidelines, marketing restrictions, and program
requirements. In addition, Institutional Class shares are available through
certain eligible intermediaries that meet qualifications established by FDC
but have not signed a participation agreement.
Investors (including employee benefit plans) and intermediaries (other than
eligible intermediaries) that established Institutional Class accounts
prior to June 30, 1995, may continue to purchase Institutional Class
shares.
TechnoQuant(Trademark) Growth, Mid Cap, Equity Growth, Growth
Opportunities, Strategic Opportunities, Large Cap, Growth & Income, Equity
Income, Balanced, High Yield, Mortgage Securities, Government Investment,
Intermediate Bond, Short Fixed-Income, High Income Municipal, Municipal
Bond, and Intermediate Municipal Income are diversified funds.
Strategic Income, Short-Intermediate Municipal Income, California Municipal
Income, and New York Municipal Income are non-diversified funds.
Non-diversified funds may invest a greater portion of their assets in
securities of individual issuers than diversified funds. As a result,
changes in the market value of a single issuer could cause greater
fluctuations in share value than would occur in a more diversified fund.
TechnoQuant Growth, Mid Cap, Equity Growth, Growth Opportunities, Strategic
Opportunities, Large Cap, Growth & Income, Equity Income, and Balanced are
designed for investors who are willing to ride out stock market
fluctuations in pursuit of potentially high long-term returns. TechnoQuant
Growth, Mid Cap, Equity Growth, Growth Opportunities, Strategic
Opportunities, and Large Cap 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. Growth & Income, Equity
Income, and Balanced are designed for those investors who seek a
combination of growth and income from equity and some bond investments.
TechnoQuant Growth is designed to provide an alternative to more
traditional styles of investing for growth-oriented investors. The fund
utilizes computer-aided quantitative analysis emphasizing technical
factors, such as historical price and volume relationships.
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.
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
additional diversification and participate in growth opportunities around
the world.
Mortgage Securities is designed for investors who seek high current income
from a portfolio of mortgage-related securities of all types.
Government Investment is designed for investors who seek high current
income from a portfolio of U.S. Government securities in a manner
consistent with preserving principal.
Intermediate Bond and Short Fixed-Income are designed for investors who
seek high current income from a portfolio of investment-grade debt
securities consistent with capital preservation.
High Income Municipal, Municipal Bond, Intermediate Municipal Income, and
Short-Intermediate Municipal Income are designed for investors in higher
tax brackets who seek high current income that is free from federal income
tax. Municipal Bond, Intermediate Municipal Income, and Short-Intermediate
Municipal Income also invest consistent with consideration of capital
preservation. Hig h Income Municipal may invest in lower-quality
municipal securities which involve greater risk than investment-grade
securitie s.
California Municipal Income is designed for investors in higher tax
brackets who seek high current income that is free from federal and
California personal income taxes. New York Municipal Income is designed for
investors in higher tax brackets who seek high current income that is free
from federal and New York State and City personal income taxes.
The value of each fund's investments and, as applicable, the income they
generate, will vary from day to day, and generally reflect changes in
market conditions, interest rates and other company, political, and
economic news. In the short term, stock prices can fluctuate dramatically
in response to these factors. The securities of small, less well-known
companies may be more volatile than those of larger companies. Bond values
fluctuate based on changes in interest rates and the credit quality of the
issuer, and may be subject to prepayment risk, which can limit their price
appreciation potential in periods of declining interest rates. Over time,
however, stocks, although more volatile, have shown greater growth
potential than other types of securities. Investments in foreign securities
may involve risks in addition to those of U.S. investments, including
increased political and economic risk, as well as exposure to currency
fluctuations.
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.
Each fund is composed of multiple classes of shares. All classes of a fund
have a common investment objective and investment portfolio. Class A and
Class T shares have a front-end sales charge and pay a 12b-1 fee. Class A
and Class T shares may be s ubject to a contingent deferred sales charge
(CDSC) . Class B and Class C shares do not have a front-end sales
charge, but do have a CDSC, and pay a 12b-1 fee. You may obtain more
information about Class A, Class T, Class B, and Class C s hares,
which are not offered through this prospectus, by calling 1-800-843-3001 or
from your investment professional.
The performance of one class of shares of a fund may be different from
the performance of another class of shares of the same fund because of
different sales charges and class expenses. For exa mple, because
Institutional Class shares have no sales charge, and do not pay a
12b-1 fee, Institutional Class shares are expected to have a higher
total ret urn than Class A, Class T, Class B, or Class C shar es.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy or
sell Institutional Class shares of a fund. In addition, you may be charged
an annual account maintenance fee if your account balance falls below
$2,500. See "Transaction Details," page ___, for an explanation of
how and when these charges apply.
Maximum sales charge on purchases and reinvested distributions None
Maximum deferred sales charge None
Redemption fee None
Exchange fee None
Annual account maintenance fee (for accounts under $2,500) $12.0
0
ANNUAL OPERATING EXPENSES are paid out of each fund's assets. Each fund
pays a management fee to Fidelity Management & Research Company (FMR) that,
for 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.
Institutional 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 ___).
The fo llowing figures are based on e stimated or historical expenses,
adjusted to reflect current fees, of the Institutional Class of each fund
and are calculated as a percentage of average net assets of the
Institutional Class of each fund.
EXPENSE TABLE EXAMPLE: You would pay the following expenses on a $1,000
investment in Institutional Class shares, assuming a 5% annual return and
full redemption at the end of each time period:
EQUITY FUNDS
Operating Expenses Examples
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
TECHNOQUANT GROWTH Management fee 0.60% After 1 $ 15
[A] year
12b-1 fee None After 3 $ 47
years
Other expenses 0.90%[A]
Total operating expenses 1.50%
MID CAP Management fee 0.60% After 1 $ 15
year
12b-1 fee None After 3 $ 47
years
Other expenses (after 0.90%
reimbursement)
Total operating expenses 1.50%
EQUITY GROWTH Management fee 0.61% After 1 $ 8
year
12b-1 fee None After 3 $ 25
years
Other expenses 0.18% After 5 $ 44
years
Total operating expenses 0.79% After 10 $ 98
years
GROWTH OPPORTUNITIES Management fee 0.61% After 1 $ 9
year
12b-1 fee None After 3 $ 27
years
Other expenses 0.24% After 5 $ 47
years
Total operating expenses 0.85% After 10 $ 10
years 5
STRATEGIC OPPORTUNITIES Management fee 0.48% After 1 $ 8
year
12b-1 fee None After 3 $ 25
years
Other expenses 0.30% After 5 $ 43
years
Total operating expenses 0.78% After 10 $ 97
years
LARGE CAP Management fee 0.60% After 1 $ 15
year
12b-1 fee None After 3 $ 47
years
Other expenses (after 0.90%
reimbursement)
Total operating expenses 1.50%
GROWTH & INCOME Management fee 0.50% After 1 $ 13
[A] year
12b-1 fee None After 3 $ 40
years
Other expenses 0.75%[A
]
Total operating expenses 1.25%
EQUITY INCOME Management fee 0.50% After 1 $ 7
year
12b-1 fee None After 3 $ 23
years
Other expenses 0.21% After 5 $ 40
years
Total operating expenses 0.71% After 10 $ 88
years
BALANCED Management fee 0.45% After 1 $ 10
year
12b-1 fee None After 3 $ 32
years
Other expenses 0.56% After 5 $ 56
years
Total operating expenses 1.01% After 10 $ 12
years 4
</TABLE>
[A] BASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
TAXABLE INCOME FUNDS
Operating Expenses Examples
HIGH YIELD Management fee 0.60% After 1 $ 11
year
12b-1 fee None After 3 $ 35
years
Other expenses 0.50% After 5 $ 61
years
Total operating expenses 1.10% After 10 $ 13
years 4
STRATEGIC INCOME Management fee 0.59% After 1 $ 11
year
12b-1 fee None After 3 $ 35
years
Other expenses (after 0.51% After 5 $ 61
reimbursement) years
Total operating expenses 1.10% After 10 $ 13
years 4
MORTGAGE SECURITIES Management fee 0.45% After 1 $ 8
year
12b-1 fee None After 3 $ 24
years
Other expenses [A] 0.30%
Total operating expenses 0.75%
GOVERNMENT INVESTMENT Management fee 0.45% After 1 $ 8
year
12b-1 fee None After 3 $ 24
years
Other expenses (after 0.30% After 5 $ 42
reimbursement) years
Total operating expenses 0.75% After 10 $ 93
years
INTERMEDIATE BOND Management fee 0.45% After 1 $ 7
year
12b-1 fee None After 3 $ 21
years
Other expenses 0.21% After 5 $ 37
years
Total operating expenses 0.66% After 10 $ 82
years
SHORT FIXED-INCOME Management fee 0.45% After 1 $ 8
year
12b-1 fee None After 3 $ 26
years
Other expenses (after 0.35% After 5 $ 44
reimbursement) years
Total operating expenses 0.80% After 10 $ 99
years
MUNICIPAL FUNDS
Operating Expenses Examples
HIGH INCOME MUNICIPAL Management fee 0.40% After 1 $ 8
year
12b-1 fee None After 3 $ 24
years
Other expenses (after 0.35% After 5 $ 42
reimbursement) years
Total operating expenses 0.75% After 10 $ 93
years
MUNICIPAL BOND Management fee 0.40% After 1 $ 8
year
12b-1 fee None After 3 $ 24
years
Other expenses (after 0.35% After 5 $ 42
reimbursement) [A] years
Total operating expenses 0.75% After 10 $ 93
years
[A] BASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
Operating Expenses Examples
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
INTERMEDIATE MUNICIPAL INCOME Management fee 0.40% After 1 $ 8
year
12b-1 fee None After 3 $ 24
years
Other expenses (after 0.35% After 5 $ 42
reimbursement) years
Total operating expenses 0.75% After 10 $ 93
years
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHORT-INTERMEDIATE MUNICIPAL INCOME Management fee 0.40% After 1 $ 8
year
12b-1 fee None After 3 $ 24
years
Other expenses (after 0.35% After 5 $ 42
reimbursement) years
Total operating expenses 0.75% After 10 $ 93
years
</TABLE>
STATE MUNICIPAL FUNDS
Operating Expenses Examples
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL INCOME Management fee 0.40%[ After 1 $ 8
A] year
12b-1 fee None After 3 $ 24
years
Other expenses (after 0.35%[A
reimbursement) ]
Total operating expenses 0.75%
NEW YORK MUNICIPAL INCOME Management fee 0.40% After 1 $ 8
year
12b-1 fee None After 3 $ 24
years
Other expenses (after 0.35% After 5 $ 42
reimbursement) years
Total operating expenses 0.75% After 10 $ 93
years
</TABLE>
[A] BASED ON ESTIMATED EXPENSES FOR THE FIRST YEAR.
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.
A portion of the brokerage commissions that certai n of the f unds pay
is used to reduce fund expenses. In addition, certain funds have entered
into arrangements with their custodian and transfer agent whereby
credits r ealized as a result of uninvested cash balances are used to
reduce custodian and transfer agent expenses. Including these reductions,
th e total Institutional Cla ss operating expenses presented in the
preceding table would have been:
Institutional
Class
Equity Growth 0.77%
Growth Opportunities 0.84%
Strategic Opportunities 0.76%
Large Cap 1.48%
Equity Income 0.70%
Balanced 0.98%
High Yield 1.05%
Intermediate Municipal Income 0.74%
California Municipal Income 0.72%
Short-Intermediate Municipal Income 0.74%
New York Municipal Income 0.68%
FMR has voluntarily agreed to reimburse the Institutional Class of ea ch
fund to the extent that total operating expenses, as a percentage of
their respective average net assets, exceed the following rates:
Effective
Date
TechnoQuant Growth 1.50 12/31/9
% 6
Mid Cap 1.50 2/20/96
%
Equity Growth 1.50 1/1/97
%
Strategic Opportunities 1.50 3/1/97
%
Growth Opportunities 1.50 3/1/97
%
Large Cap 1.50 2/20/96
%
Growth & Income 1.25 12/31/9
% 6
Equity Income 1.25 3/1/97
%
Balanced 1.25 10/30/9
% 5
High Yield 1.10 7/1/95
%
Strategic Income 1.10 7/1/95
%
Mortgage Securities 0.75 3/1/97
%
Government Investment 0.75 7/1/95
%
Intermediate Bond 0.75 7/1/95
%
Short-Fixed Income 0.75 8/30/96
%
High Income Municipal 0.75 7/1/95
%
Municipal Bond 0.75 7/1/96
%
Intermediate Municipal Income 0.75 7/1/95
%
Short-Intermediate Municipal Income 0.75 7/1/95
%
California Municipal Income 0.75 8/1/95
%
New York Municipal Income 0.75 8/1/95
%
If these agreements were not in effect, other expenses and total operating
expenses of the Institutional Class of each fund, as a percentage of
average net assets, would have been the following amounts:
<TABLE>
<CAPTION>
<S> <C><C> <C> <C>
Other Expenses Total Operating
Expenses
TechnoQuant Growth 7.03 7.63
% %
Mid Cap 2.64 3.24
% %
Large Cap 1.94 2.54
% %
Growth & Income 0.78 1.28
% %
Strategic Income 0.96 1.55
% %
Mortgage Securities 4.12 4.57
% %
Government 0.38 0.83
Investment % %
Short Fixed-Income 0.55 1.00
% %
High Income 3.86 4.26
Municipal % %
Municipal Bond[A] 1.14 1.54
% %
Intermediate 0.44 0.84
Municipal Income % %
Short-Intermediate 13.15 13.55
Municipal Income % %
California Municipal 0.45 0.85
Income[A] % %
New York Municipal 3.43 3.83
Income % %
</TABLE>
[A] BASED ON ESTIMATED EXPENSES FOR THE FIRST YEAR
Expenses eligible for reimbursement do not include interest, taxes,
brokerage commissions, and extraordinary expenses.
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow for certain funds contain
annual information which has been audited by ____, independent accountants.
The financial highlights tables that follow for Mortgage Securities have
been audited by ____ , independent accountants. The funds' financial
highlights, financial statements, and reports of the auditors are included
in each fund's Annual Report, and are incorporated by reference into (are
legally a part of) the funds' SAI. Contact FDC or your investment
professional for a free copy of an Annual Report or the SAI.
[INSERT A TABLE FOR EACH FUND HERE]
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN and/or YIELD.
For Growth Opportunities, Balanced, High Yield, Government Investment,
Short Fixed-Income, High Income Municipal, California Municipal Income, and
New York Municipal Income, the fiscal year runs from November 1 to October
31. For TechnoQuant Growth, Mid Cap, Equity Growth, Large Cap, Growth &
Income, Equity Income, Intermediate Bond, Intermediate Municipal Income,
and Short-Intermediate Municipal Income, the fiscal year runs from December
1 to November 30. For Strategic Opportunities, Strategic Income, and
Municipal Bond, the fiscal year runs from January 1 to December 31. For
Mortgage Securities, the fiscal year runs from August 1 to July 31. The
tables below show the performance of Institutional Class of each fund
(except Mortgage Securities) over past fiscal periods ended April 30, 1997,
May 31, 1997, or June 30, 1997, as indicated. The performance of
Institutional Class of Mortgage Securities over past fiscal years is shown
in the tables below. The charts in Appendix B, beginning on page ____,
present Institutional Class's calendar year performance compared to
different measures, including a competitive funds averag e.
GROWTH FUNDS - INSTITUTIONAL CLASS
Average Annual Total Return* Cumulative Total Return*
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 year Past 5 years 10 Years/ Past 6 Past 1 year Past 5 years 10 Years/Life
Life of fund+ months of fund+
TECHNOQUANT GROWTH[B]
MID CAP[B]
EQUITY GROWTH[B]
GROWTH OPPORTUNITIES[A]
STRATEGIC OPPORTUNITIES[C]
LARGE CAP[B]
GROWTH & INCOME[B]
EQUITY INCOME[B]
BALANCED[A]
</TABLE>
TAXABLE INCOME FUNDS - INSTITUTIONAL CLASS
Average Annual Total Return* Cumulative Total Return*
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 year Past 5 years 10 Years/ Past 6 Past 1 year Past 5 years 10 Years/Life
Life of fund+ months of fund+
HIGH YIELD [A] % %
STRATEGIC INCOME [C] % %
MORTGAGE SECURITIES [D] % %
GOVERNMENT INVESTMENT % %
[A]
INTERMEDIATE BOND [B] % %
SHORT FIXED-INCOME [A] % %
</TABLE>
MUNICIPAL FUNDS - INSTITUTIONAL CLASS
Average Annual Total Return* Cumulative Total Return*
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 year Past 5 years 10 Years/ Past 6 Past 1 year Past 5 years 10 Years/Life
Life of fund+ months of fund+
HIGH INCOME MUNICIPAL [A]
MUNICIPAL BOND[C]
INTERMEDIATE MUNICIPAL
INCOME [B]
SHORT-INTERMEDIATE
MUNICIPAL INCOME [B]
</TABLE>
STATE MUNICIPAL FUNDS - INSTITUTIONAL CLASS
Average Annual Total Return* Cumulative Total Return
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 year Past 5 years 10 Years/ Past 6 Past 1 year Past 5 years 10 Years/Life
Life of fund+ months of fund+
CALIFORNIA MUNICIPAL
INCOME[A]
NEW YORK MUNICIPAL
INCOME [A]
</TABLE>
[A] PERIOD ENDED APRIL 30, 1997.
[B] PERIOD ENDED MAY 31, 1997.
[C] PERIOD ENDED JUNE 30, 1997.
[D] PERIOD ENDED JULY 31, 1997.
+ LIFE OF FUND FIGURES ARE FROM COMMENCEMENT OF OPERATIONS (NOVEMBER 18,
1987 FOR GROWTH OP PORTUNITIES ; OCTOBER 31, 1994 FOR STRATEGIC
INCOME; SEPTEMBER 16, 1987 FOR SHORT FIXED-INCOME AND HIGH INCOME
MUNICIPAL; MARCH 16, 1994 FOR SHORT-INTERMEDIATE MUNICIPAL INCOME; AUGUST
21, 1995 FOR NEW YORK MUNICIPAL INCOME; FEBRUARY 20, 1996 FOR MID CAP,
LARGE CAP, AND CALIFORNIA MUNICIPAL INCOME; AND DECEMBER 31, 1996 FOR
TECHNOQUANT GROWTH AND GROWTH & INCOME) THROUGH THE SEMIANNUAL PERIODS
ENDED 1997.
* INITIAL OFFERING OF INSTITUTIONAL CLASS FOR GROWTH OPPORTUNITIES,
BALANCED, HIGH YIELD, STRATEGIC INCOME, GOVERNMENT INVESTMENT, SHORT
FIXED-INCOME, HIGH INCOME MUNICIPAL, AND SHORT-INTERMEDIATE MUNICIPAL
INCOME TOOK PLACE ON JULY 3, 1995 AND DO NOT BEAR A SALES LOAD OR 12B-1
FEE. RETURNS PRIOR TO JULY 3, 1995 ARE THOSE OF CLASS T , THE
ORIGINAL CLASS OF THESE FUNDS AND INCLUDE A CLASS T 12B-1 FEE (AT A THEN
CURRENTLY APPLICABLE RATE OF 0.65% FOR GROWTH OPPORTUNITIES AND BALANCED;
0.25% FOR HIGH YIELD, STRATEGIC INCOME, GOVERNMENT INVESTMENT, AND HIGH
INCOME MUNICIPAL, AND 0.15% FOR SHORT FIXED-INCOME AND SHORT-INTERMEDIATE
MUNICIPAL INCOME). INITIAL OFFERING OF INSTITUTIONAL CLASS FOR
STRATEGIC OPPORTUNITIES TOOK PLACE ON JULY 3, 1995. INSTITUTIONAL CLASS
DOES NOT BEAR A SALES LOAD OR 12B-1 FEE. RETURNS PRIOR TO JULY 3, 1995,
ARE THOSE OF CLASS T AND INCLUDE A THEN CURRENTLY APPLICABLE CLASS T
12B-1 FEE OF 0.65%. INITIAL OFFERING OF INSTITUTIONAL CLASS FOR
MUNICIPAL BOND TOOK PLACE ON JULY 1, 1996. INSTITUTIONAL CLASS DOES
NOT BEAR A SALES LOAD OR 12B-1 FEE. RETURNS PRIOR TO JULY 1, 1996 ARE
THOSE OF INITIAL CLASS, THE ORIGINAL CLASS OF THE FUND WHICH DOES NOT BEAR
A 12B-1 FEE. INITIAL OFFERING OF INSTITUTIONAL CLASS FOR TECHNOQUANT
GROWTH AND GROWTH & INCOME TOOK PLACE ON DECEMBER 31, 1996. INSTITUTIONAL
CLASS DOES NOT BEAR A SALES LOAD OR 12B-1 FEE . INITIAL OFFERING OF
INSTITUTIONAL CLASS FOR MORTGAGE SECURITIES TOOK PLACE ON MARCH
3, 1997 . INSTITUTIONAL CLASS DOES NOT BEAR A SALES LOAD OR 12B-1 FEE.
RETURNS PRIOR TO MARCH 3, 1997 ARE THOSE OF INITIAL CLASS, THE
ORIGINAL CLASS OF THE FUND, WHICH DOES NOT BEAR A 12B-1 FEE.
If FMR had not reimbursed certain class expenses during these periods,
total returns would have been lower.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment over a given period,
assuming reinvestment of any dividends and capital gains. A CUMULATIVE
TOTAL RETURN reflects actual performance over a stated period of time. An
AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that, if
achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period. Average annual total
returns smooth out variations in performance; they are not the same as
actual year-by-year results. Average annual total returns covering periods
of less than one year assume that performance will remain constant for the
rest of the year.
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.
T his difference may be significant for funds whose investments are
denominated in foreign securities.
In calculating yield, a fund 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.
THE COMPETITIVE FUNDS AVERAGE is each fund's applicable Lipper Funds
Average, which reflects the performance of mutual fu nds with sim ilar
investment objectives. These averages, published by Lipper Analytical
Services, Inc., exclude the effect of sal es loads.
STANDARD & POOR'S 500 INDEX (S&P 500 (registered trademark) ) is a
widely recognized, unmanaged index of common stocks.
STANDARD & POOR'S MIDCAP 400 INDEX is a widely recognized, unmanaged
index of 400 medium-capitalization stocks.
MERRILL LYNCH HIGH YIELD MASTER INDEX is a market capitalization weighted
index of all domestic and yankee high-yield bonds. Issues included in the
index have maturities of at least one year and have a credit rating lower
than BBB-/Baa3, but are not in default.
LEHMAN BROTHERS 1-3 YEAR GOVERNMENT/CORPORATE BOND INDEX is a market value
weighted performance benchmark for government and corporate fixed-rate debt
issues with maturities between one and three years.
SALOMON BROTHERS MORTGAGE INDEX is a market capitalization weighted index
of 15- and 30-year fixed-rate securities backed by mortgage pools of the
Government National Mortgage Association (GNMA), Fa nnie Mae a nd
Federal Home Loan Mortgage Corporatio n (FHLMC), and Fannie Mae and
FHLMC balloon mortgages with fixed-rate coupons.
SALOMON BROTHERS TREASURY/AGENCY INDEX is a market capitalization weighted
index of U.S. Treasury and U.S. government agency securities with
fixed-rate coupons and weighted average lives of at least one year.
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX is a market
value weighted performance benchmark for government and corporate
fixed-rate debt issues with maturities between one and 10 years.
Unlike Institutional Class's returns, the total returns of each comparative
index do not include the effect of any brokerage commissions, transaction
fees, or other costs of investing.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
The Institutional Class of each equity fund may quote its adjusted net
asset value 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. TechnoQuant Growth, Equity Growth,
Mid Cap, Large Cap, and Growth & Income are diversified funds of Fidelity
Advisor Series I, a Massachusetts business trust organized on June 24,
1983. Growth Opportunities, Balanced, High Yield, Government Investment,
and Short Fixed-Income are diversified funds and Stra tegic Inc ome is
a non-diversified fund of Fidelity Advisor Series II, a Massachusetts
business trust organized on April 23 , 1986. Equity Income is a
diversified fund of Fidelity Advisor Series III, a Massachusetts business
trust organized on May 17, 1982. Intermediate Bond is a diversified fund of
Fidelity Advisor Series IV, a Massachusetts business trust organized on May
6, 1983. High Income Municipal is a diversified fund and California
Municipal Income and New York Municipal Income are non-diversified funds of
Fidelity Advisor Series V, a Massachusetts business trust organized on
April 2 3, 1986. Intermediate Municipal Income is a diversified fund
and Short-Intermediate Municipal Income is a non-diversified fund of
Fidelity Advisor Series VI, a Massachusetts business trust organized on
June 1, 1983. Strategic Opportunities is a diversified fund of Fidelity
Advisor Series VIII, a Massachusetts business trust organized on September
22 , 1983. Mortgage Securities is a diversified fund of Fidelity
Income Fund, a Massachusetts business trust organized on August 7, 1984.
Municipal Bond is a diversified fund of Fidelity Municipal Trust, a
Massachusetts business trust organized on June 22, 1984. 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.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet periodically throughout the year to oversee the
funds' activities, review contractual arrangements with companies that
provide services to the funds, and review the funds' performance. Th e
trustees serve as trustees for other Fidel ity funds. The majority of
trustees are not otherwise affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL SHAREHOLDER MEETINGS AND MAIL PROXY
MATERIALS. These meetings may be called to elect or remove trustees, change
fundamental policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
The transfer agent will mail proxy materials in advance, including a voting
card and information about the proposals to be voted on. T he 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, fund, or trust, 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 investments with the assistance
of foreign affiliates for all funds except Government Investment, High
Income Municipal, Municipal Bond, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income.
(small solid bullet) Fidelity Management & Research (U.K.) Inc. (FMR U.K.),
in London, England, serves as a sub-adviser for TechnoQuant Growth, Mid
Cap, Equity Growth, Growth Opportunities, Strategic Opportunities, Large
Cap, Growth & Income, Equity Income, Balanced, High Yield, Strategic
Income, Mortgage Securities, Intermediate Bond, and Short Fixed-Income.
(small solid bullet) Fidelity Management & Research Far East Inc. (FMR Far
East), in Tokyo, Japan, serves as a sub-adviser for TechnoQuant Growth, Mid
Cap, Equity Growth, Growth Opportunities, Strategic Opportunities, Large
Cap, Growth & Income, Equity Income, Balanced, High Yield, Strategic
Income, Mortgage Securities, Intermediate Bond, and Short Fixed-Income.
(small solid bullet) Fidelity International Investment Advisors (FIIA), in
Pembroke, Bermuda, serves as a sub-adviser for Strategic Income.
(small solid bullet) Fidelity International Investment Advisors (U.K.)
Limited (FIIA(U.K.)L), in London, England, serves as a sub-adviser
for Strategic Income.
(small solid bullet) Fidelity Investment Japan L imited (FIJ), in
Tokyo, Japan serves as a sub-adviser for Strategic Income.
As of September 30, 1997, FMR advised funds having approximately
__million shareholder accounts with a total value of more than $__
billion .
John Carlson is Vice President and manager of Advisor Strategic Income,
which he has managed sinc e Augu st 1995. He also manages several
other Fidelity funds. Prior to joining Fidelity in 1995, Mr. Carlson was
Executive Director of emerging markets at Lehman Brothers International
from 1992 through 1995.
Robert Chow is manager of Advisor Equity Income, which he has managed since
March 1996. Previously, he managed other Fidelity funds. Since joining
Fidelity in 1989, Mr. Chow has worked as an analyst, portfolio assistant
and manager.
Katherine Collins is manager of Advisor Mid Cap, which she has managed
since January 1997. She also manages another Fidelity fund. Since joining
Fidelity in 1990, Ms. Collins has worked as an analyst and manager.
Bettina Doulton is Vice President and lead manager of Advisor Balanced,
which she has managed since March 1996. She also manages other Fidelity
funds. Since joining Fidelity in 1986, Ms. Doulton has worked as a research
assistant, analyst and manager.
Andrew Dudley is manager of Advisor Short Fixed-Income, which he has
managed since February 1997. Mr. Dudley joined Fidelity as a manager in
1996. Previously, he was a portfolio manager with Putnam Investments from
1991 to 1996.
Margaret Eagle is Vice President and manager of Advisor High Yield and
Advis or Strategic Income's high yield investments, which she has managed
since January 1987 and Janua ry 1996, respectively. Additionally, she is
a Senior Vice President of Fidelity Trust Company. Ms. Eagle joined
Fidelity in 1980.
George Fischer is V ice President and manager of Advisor Municipal
Bond and Advisor High Income Municipal, which he has managed since October
1995 and April 1997, respectively. He also manages several other Fidelity
funds. Since joining Fidelity in 1989, Mr. Fischer has worked as an analyst
and manager.
Kevin Grant is Vice President an d m anager of Advisor Intermediate
Bond and Advisor Balanced Fund's fixed-income investments, which he has
managed since Octob er 1 995 and March 1996, respectively. He also
manages several other Fidelity funds. Prior to joining Fidelity in 1993,
Mr. Grant was a vice president and chief mortgage strategist at Morgan
Stanley for three years.
Brian Hogan is manager of Advisor Strategic Income Fund's emerging
market securities. Since joining Fidelity in 1994, Mr. Hogan has worked as
a fixed-income analyst, research analyst and manager. Previously, he worked
as an analyst for Conseco Capital Management from 1993 to 1994 and Aegon
USA Investment Management from 1990 to 1993.
Curt Hollingsworth is Vice President and manager of Advisor Government
Investment and Advisor Strategic Income Fund's domestic investment-grade
and U.S. government investments, all of which he has managed since February
1997. He also manages other Fidelity funds. Since joining Fidelity in 1983,
Mr. Hollingsworth has worked as a fixed-income trader and portfolio
manager.
Jonathan Kelly is manager of Advisor Strategic Income Fund's foreign bond
investments in developed markets, which he has managed since January 1996.
Previously, he managed other Fidelity funds. Since joining Fidelity in
1991, Mr. Kelly has worked as a foreign bond analyst and manager.
Tim Krochuk is manager of Advisor TechnoQuant Growth, which he has managed
since inception. He also manages another Fidelity fund. Previously, he was
a quantitative analyst. Mr. Krochuk joined Fidelity as a research associate
in 1992, after receiving a bachelor of arts degree in economics/pre-med
from Harvard University.
Harris Leviton is Vice President and manager of Advisor Strategic
Opportunities, which he has managed since March 1996. Previously, he
managed other Fidelity funds. Since joining Fidelity in 1986, he has worked
as an analyst and manager.
Norm Lind is Vice President and manager of Advisor New York Municipal
Income and Advisor Short-Intermediate Municipal Income, which he has
managed since August 1995 and October 1995, respectively. He also manages
other Fidelity funds. Since joining Fidelity in 1986, Mr. Lind has worked
as an analyst and manager.
David Murphy is Vice President and manager of Advisor Intermediate
Municipal Income, which he has managed since March 1995. He also manages
several other Fidelity funds. Mr. Murphy joined Fidelity as a portfolio
manager in 1 989.
Jonathan S hort i s Vice President and manager of Advisor California
Municipal Income, which he has managed since inception. He also manages
several other Fidelity funds. Since joining Fidelity in 1990, Mr. Short has
worked as an analyst and manager.
Thomas Si lvia is manager of Advisor Mortgage Securities. He has been
a co-manager of the fund since February 1997. Mr. Silvia joined Fidelity as
a senior mortgage trader in 1993. Previously, he was a quantitative
analyst with Donaldson, Lufkin & Jenrette in New York from 1990 to
1993.
Thomas Sprague is Vice Preside nt and manager of Advisor Large Cap,
which he has managed since March 1996. He also manages another Fidelity
fund. Since joining Fidelity in 1989, he has worked as an analyst and
manager.
Beth Terrana is Vice President and manager of Advisor Growth & Income,
which she has managed since inception. She also manages other Fidelity
funds. Since joining Fidelity in 1983, Ms. Terrana has worked as an
analyst, portfolio assistant and manager.
Jennifer Uhrig is Vice President and manager of Advisor Equity Growth,
which she has managed since January 1997. She also manages another Fidelity
fund. Since joining Fidelity in 1987, Ms. Uhrig has worked as an analyst
and manager.
George Vanderheiden is Vice President and manager of Advisor Growth
Opportunities, which he has managed since November 1987. He also manages
several other Fidelity funds. Mr. Vanderheiden joined Fidelity in 1971.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
FDC distributes and markets Fidelity's funds and services.
Fidelity Investments Institutional Operations Company, Inc. (FIIOC)
performs transfer agent servicing functions for the Institutional Class of
the Equity Funds, High Yield, Strategic Income, Mortgage Securities,
Government Investment, Intermediate Bond, and Short Fixed-Income. UMB Bank,
n.a. (UMB) is the transfer agent for High Income Municipal, Municipal Bond,
Intermediate Municipal Income, Short-Intermediate Municipal Income,
California Municipal Income, and New York Municipal Income, although it
employes FIIOC to perform these functions for Institutional Class of each
fund. UMB is located at 1010 Grand Avenue, Kansas City, Missouri.
FMR Corp. is the ultimate parent company of FMR, FMR U.K., and FMR Far
East. Members of the Edward C. Johnson 3d family are the predominant owners
of a class of shares of common stock representing approximately 49% of the
voting power of FMR Corp. Under the Investment Company Act of 1940 (the
1940 Act), control of a company is presumed where one individual or group
of individuals owns more than 25% of the voting stock of that company;
therefore, the Johnson family may be deemed under the 1940 Act to form a
controlling group with respect to FMR Corp.
Fidelity International Limited (FIL), is the parent company of FIIA, FIJ,
and FIIA(U.K.)L. The Johnson family group also owns, directly or
indirectly, more than 25% of the voting common stock of FIL.
As of September 30, 1997, approximately ____% and ____% of each
of___and____total outstanding shares, respectively, were held by FMR and an
FMR affiliate.
As of September 30, 1997, approximately ____% of______total outstanding
shares were held by_____; approximately ___% of_____total outstanding
shares were held by_____; and approximately ___% of_____total outstanding
shares were held by____.
FMR may use its broker-dealer affiliates and other firms that sell fund
shares to carry out a fund's transactions, provided that the fund receives
brokerage services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
E ACH FUND'S INVESTMENT AP PROACH
The value of each fund's domestic and foreign investments varies in
response to many factors. Stock values fluctuate in response to the
activities of individual companies and general market and economic
conditions. Bond values fluctuate based on changes in interest rates,
market conditions, other economic and political news, and on their quality
and maturity. In general, bond prices rise when interest rates fall, and
fall when interest rates rise. This effect is more pron ounced for
longer-term securities. Lower-quality securities offer higher yields, but
also carry more risk.
Funds which invest in foreign securities have increased economic and
political risks as they are exposed to events and factors in the various
world markets. This is especially true for funds that invest in emerging
markets. Also, because many of the funds' investments are denominated in
foreign currencies, changes in the value of foreign currencies can
significantly affect a fund's share price. FMR may use a variety of
investment techniques to either increase or decrease a fund's investment
exposure to any currency.
The total return from a bond includes both income and price gains or
losses. In selecting investments for a bond fund, FMR considers a bond's
expected income together with its potential for price gains or losses.
While income is generally the most important component of bond returns over
time, a bond fund's emphasis on income does not mean the fund invests only
in the highest-yielding bonds available, or that it can avoid losses of
principal.
FMR generally focuses on assembling a portfolio of bonds that it believes
will provide the best balance between risk and return within the range of
eligible investments for the fund. FMR's evaluation of a potential
investment includes an analysis of the credit quality of the issuer, its
structural features, its current price compared to FMR's estimate of its
long-term value, and any short-term trading opportunities resulting from
market inefficiencies.
FMR may use various investment techniques to hedge a portion of the funds'
risks, but there is no guarantee that these strategies will work as FMR
intends. When you sell your shares, they may be worth more or less than
what you paid for them.
TECHNOQUANT GROWTH FUND seeks growth of capital by investing mainly in
common stocks. However, the fund has the flexibility to invest in other
types of equity securities and debt securities as well. The fund's security
selection process utilizes computer-aided, quantitative analysis. FMR's
computer models use many types of data, but emphasize technical factors
such as historical price and volume relationships. Fundamental criteria,
such as earnings estimates, and dividend yield may also be considered.
FMR's emphasis on technical analysis can result in the fund holding
different types of stocks at different times. For example, the fund may
hold stocks of companies with large or small market capitalization or high
or low price/earnings ratios. The fund's focus may change rapidly based on
FMR's analysis of the most current information. At times, the fund may be
concentrated in a small number of market sectors or securities.
MID CAP FUND seeks long-term growth of capital by investing primarily in
equity securities of companies with medium market capitalizations. FMR
normally invests at least 65% of the fund's total assets in these
securities. The fund has the flexibility, however, to invest the balance in
other market capitalizations and security types.
Medium market capitalization companies are those whose market
capitalization falls within the capitalization range of the S&P MidCap 400
at the time of the fund's investment. The S&P MidCap 400 Index is an
unmanaged index of medium-capitalization stocks. Companies whose
capitalization falls outside this range after purchase continue to be
considered medium-capitalized for purposes of the 65% policy. As of
December 31, 1996, the S&P MidCap 400 included companies with
capitalizations of between $192 million and $6.5 billion.
Investing in medium capitalization stocks may involve greater risk than
investing in large capitalization stocks, since they can be subject to more
abrupt or erratic movements. However, they tend to involve less risk than
stocks of small capitalization companies.
EQUITY GROWTH FUND seeks capital appreciation by investing primarily in
common and preferred stock and securities convertible into the common stock
of companies with above-average growth characteristics. FMR normally
invests at least 65% of the fund's 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. The S&P 500 is a registered trademark of Standard & Poor's.
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.
GROWTH OPPORTUNITIES FUND seeks capital growth by investing primarily in
common stocks and securities convertible into common stocks. FMR normally
invests at least 65% of the fund's total assets 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." FMR normally invests at least 65% of the fund's total assets in
these securities. 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.
LARGE CAP FUND seeks long-term growth of capital by investing primarily in
equity securities of companies with large market capitalizations. FMR
normally invests at least 65% of the fund's total assets in these
securities. The fund has the flexibility, however, to invest the balance in
other market capitalizations and security types.
FMR defines large market capitalization companies as those with market
capitalizations of $1 billion or more at the time of the fund's investment.
Companies whose capitalization falls below this level after purchase
continue to be considered large-capitalized for purposes of the 65% policy.
Companies with large market capitalizations typically have a large number
of publicly held shares and a high trading volume, resulting in a high
degree of liquidity. These tend to be quality companies with strong
management organizations. However, large capitalization companies may have
less growth potential than smaller companies and may be able to react less
quickly to changes in the marketplace.
GROWTH & INCOME FUND seeks high total return through a combination of
current income and capital appreciation. The fund invests mainly in equity
securities. The fund expects to invest the majority of its assets in
domestic and foreign equity securities, with a focus on those that pay
current dividends and show potential earnings growth. However, the fund may
buy debt securities as well as equity securities that are not currently
paying dividends, but offer prospects for capital appreciation or future
income.
EQUITY INCOME FUND seeks a yield which exceeds the composite dividend yield
of securities comprising the S&P 500. In addition, consistent with the
primary objective of obtaining income, the fund will consider the potential
for achieving capital appreciation. FMR normally invests at least
6 5% of the fund's 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 seeks to achieve a yield that beats that of the S&P 500. 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.
BALANCED 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. FMR manages the fund
to maintain a balance between stocks and bonds. When FMR's outlook is
neutral, it will invest approximately 60% of the fund's assets in stocks
and other equity securities and the remainder in bonds and other
fixed-income securities. FMR may vary from this target if it believes
stocks or bonds offer more favorable opportunities, but will always invest
at least 25% of the fund's total assets in fixed-income senior securities
(including debt securities and preferred stock).
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.
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. FMR normally invests at least 65% of the fund's total
assets in these securities.
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 four
general investment categories: high yield securities, U.S. Government and
investment-grade securities, emerging market securities, and foreign
developed market securities. The fund's neutral mix, or the benchmark for
its combination of investments in each category over time, is approximately
40% high yield, 30% U.S. Government and investment-grade, 15% emerging
markets and 15% foreign developed markets.
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. In normal market environments,
FMR expects the fund's asset allocation to approximate the neutral mix
within a range of plus or minus 10% of assets per category. There are no
absolute limits on the percent of assets invested in each category,
however, and FMR reserves the right to change the neutral mix from time to
time.
The HIGH YIELD category includes high-yielding, lower-quality debt
securities consisting mainly of U.S. securities of a quality grade lower
than BBB. The U.S. GOVERNMENT AND INVESTMENT-GRADE category includes
mortgage securities, U.S. Government securities, government agency
securities and other U.S. dollar-denominated securities of investment-grade
quality. The EMERGING MARKET category includes corporate and governmental
debt securities of issuers located in emerging markets. The FOREIGN
DEVELOPED MARKET category includes corporate and governmental debt
securities of issuers located in developed foreign markets. These
investment categories are only general guidelines, and FMR may use its
judgment as to which category an investment falls within. The fund may also
make investments that do not fall within these categories.
By allocating its investments across different types of fixed-income
securities, the fund attempts to moderate the significant risks of each
investment category through diversification. Diversification, when
successful, can mean higher returns with decreased volatility. However,
each of the fund's four investment categories may experience periods of
volatile returns, and it is possible for all investment categories to
decline at the same time.
MORTGAGE SECURITIES FUND seeks high current income, consistent with prudent
investment risk, by investing primarily in mortgage-related securities.
When consistent with its goal, the fund may also consider the potential for
capital gain. FMR normally invests at least 65% of the fund's total assets
in mortgage-related securities. The fund may also invest in U.S. Government
securities and instruments related to U.S. Government securities.
Instruments related to U.S. Government securities may include futures or
options on U.S. Government securities or interests in U.S. Government
securities that have been repackaged by dealers or other third parties.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to government bonds with maturities between two and 10 years.
However, the reaction of mortgage securities to changes in interest rates
can be difficult to predict since mortgage securities are subject to
prepayment of principal and can be structured in a complex manner. As of
July 31, 1997 , the fund's dollar-weighted average maturity was
approximately ___ years.
GOVERNMENT INVESTMENT FUND seeks high current income by investing in U.S.
Government securities and instruments related to U.S. Government securities
under normal conditions. FMR normally invests the fund's assets only in
U.S. Government securities, repurchase agreements, and other instruments
related to U.S. Government securities. Under normal conditions, FMR invests
at least 65% of the fund's total assets in U.S. Government securities and
repurchase agreements for U.S. Government securities. Other instruments may
include futures or options on U.S. Government securities or interests in
U.S. Government securities that have been repackaged by dealers or other
third parties. It is important to note that neither the fund nor its yield
are guaranteed by the U.S. Government.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to government bonds with maturities between five and 12 years. As
of October 31, 1996, the fund's dollar-weighted average maturity was
approximately 8.5 years.
INTERMEDIATE BOND FUND seeks high current income by investing in U.S.
dollar-denominated investment-grade debt securities under normal
conditions. When consistent with its primary objective, the fund may also
seek capital appreciation. Although the fund can invest in securities of
any maturity, the fund normally maintains a dollar-weighted average
maturity between three and 10 years.
In determining a security's maturity for purposes of calculating the fund's
average maturity, an estimate of the average time for its principal to be
paid may be used. This can be substantially shorter than its stated final
maturity. As of November 30, 1996, the fund's dollar-weighted average
maturity was approximately 5.7 years.
SHORT FIXED-INCOME FUND seeks high current income, consistent with the
preservation of capital, by investing in U.S. dollar-denominated
investment-grade debt securities under normal conditions. Where appropriate
the fund will take advantage of opportunities to realize capital
appreciation. FMR normally invests at least 65% of the fund's total assets
in fixed-income securities of all types which may include convertible and
zero coupon securities.
Although the fund can invest in securities of any maturity, the fund
maintains a dollar-weighted average maturity of three years or less under
normal conditions. In determining a security's maturity for purposes of
calculating the fund's average maturity, an estimate of the average time
for its principal to be paid may be used. This can be substantially shorter
than its stated final maturity. As of October 31, 1996, the fund's
dollar-weighted average maturity was approximately 2.2 years.
HIGH INCOME MUNICIPAL FUND seeks high current income that is free from
federal income tax by investi ng primarily in investment-grade
municipal securities. The fund may also invest up to 35% of its assets
in below investment-grade securiti es. FMR normally invests so that at
least 80% of the fund's assets is invested in municipal securities
whose interest is free from federal income tax. In addition, FMR may invest
all of the fund's assets in municipal securities issued to finance private
activities. The interest from these securities is a tax preference item for
the purposes of the federal alternative minimum tax.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds with maturities between eight an d 18
year s. As of October 31, 1996, the fund's dollar-weighted average
maturity was approximately 16.4 years.
MUNICIPAL BOND FUND seeks a high level of current income that is free from
federal income tax, consistent with preservation of capital, by investing
in investment-grade municipal securities under normal conditions. FMR
normally invests so that at least 80% of the fund's assets is
in ves ted in municipal securities whose interest is free from federal
income tax. In addition, FMR may invest all of the fund's assets in
municipal securities issued to finance private activities. The interest
from these securities is a tax preference item for purposes of the federal
alternative minimum tax.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds with maturities between eight and 18 years. As
of December 31, 1996, the fund's dollar-weighted average maturity was
approximately 12.4 years.
INTERMEDIATE MUNICIPAL INCOME FUND seeks high current income that is free
from federal income tax, consistent with the preservation of capital, by
investing in investment-grade municipal securities under normal conditions.
FMR normally invests so that at least 80% of the fund's as set s is
invested in municipal securities whose interest is free from federal income
tax. In addition, FMR may invest all of the fund's assets in municipal
securities issued to finance private activities. The interest from these
securities is a tax preference item for the purposes of the federal
alternative minimum tax.
Although the fund can invest in securities of any maturity, the fund
maintains a dollar-weighted average maturity of between three and 10 years
under normal conditions. FMR seeks to manage the fund so that it generally
reacts to changes in interest rates similarly to municipal bonds with
maturities between seven and 10 years. As of November 30, 1996, the fund's
dollar-weighted average maturity was approximately 8.6 years.
SHORT-INTERMEDIATE MUNICIPAL INCOME FUND seeks high current income that is
free from federal income tax, consistent with preservation of capital, by
investing in investment-grade municipal securities under normal conditions.
FMR normally invests so that at least 80% of the fund's assets is
investe d in municipal securities whose interest is free from federal
income tax. In addition, FMR may invest all of the fund's assets in
municipal securities issued to finance private activities. The interest
from these securities is a tax preference item for the purposes of the
federal alternative minimum tax.
Although the fund can invest in securities of any maturity, the fund
maintains a dollar-weighted average maturity of between two and five years
under normal conditions. As of November 30, 1996, the fund's
dollar-weighted average maturity was approximately 3.4 years.
CALIFORNIA MUNICIPAL INCOME FUND seeks high current income that is free
from federal income tax and California state personal income tax by
investing in investment-grade municipal securities under normal conditions.
FMR normally invests so that at least 80% of the fund's assets is
invested in securities whose interest is free from federal and
California income taxes. In addition, FMR may invest all of the fund's
assets in municipal securities issued to finance private activities. The
interest from these securities is a tax preference item for the purposes of
the federal alternative minimum tax.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds with maturities between eight and 18 years. As
of October 31, 1996, the fund's dollar-weighted average maturity was
approximately 14.4 years.
The performance of California Municipal Income is affected by the economic
and political conditions within the state of California. California
suffered a severe economic recession between 1990-1993, which resulted in
broad-based revenue shortfalls for the State and many local governments.
California's fiscal condition has improved as its economy has been in a
sustained recovery since 1994. During the recession, the State
substantially reduced local assistance, and further reductions could
adversely affect the financial condition of cities, counties and other
government agencies facing constraints in their own revenue collections.
California's long-term credit rating stabilized after having been reduced
in the past several years. California voters in the past have passed
amendments to the California Constitution and other measures that limit the
taxing and spending authority of California governmental entities, and
future voter initiatives could result in adverse consequences affecting
California municipal bonds.
NEW YORK MUNICIPAL INCOME FUND seeks high current income that is free from
federal income tax and New York State and City personal income taxes by
investing in investment-grade municipal securities under normal conditions.
FMR normally invests so that at least 80% of the fund's asse ts is
invested in securities whose interest is free from federal and New York
State and City personal income taxes. In addition, FMR may invest all of
the fund's assets in municipal securities issued to finance private
activities. The interest from these securities is a tax preference item for
the purposes of the federal alternative minimum tax.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds with maturities between eight and 18 years. As
of October 31, 1996, the fund's dollar-weighted average maturity was
approximately 13.3 years.
The performance of New York Municipal Income is affected by the economic
and political conditions within the state of New York. Both New York City
and State have recently experienced significant financial difficulty, and
both the City's and the State's credit ratings are among the lowest in the
country.
TEMPORARY DEFENSIVE POLICIES. FMR normally invests each fund's assets
according to its investment strategy.
Each of the E quity Funds , High Yield, and Strategic Income reserves
the right to invest without limitation in preferred stocks and
investment-grade debt instruments for temporary, defensive purposes.
Each of Mortgage Securities, Government Investment, Intermediate Bond, and
Short Fixed-Income reserves the right to invest without limitation in
investment-grade money market or short-term debt instruments for temporary,
defensive purposes.
Each of High Income Municipal, Municipal Bond, Intermediate Municipal
Income, and Short-Intermediate Municipal Income do not expect to invest in
federally taxable obligations. California Municipal Income and New York
Municipal Income do not expect to invest in federally or state taxable
obligations. Each of High Income Municipal, Municipal Bond, Intermediate
Municipal Income, Short-Intermediate Municipal Income, California Municipal
Income, and New York Municipal Income, 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 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, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related risks.
Any restrictions listed supplement those discussed earlier in this section.
A complete listing of each fund's limitations and more detailed information
about each fund's investments are contained in the funds' SAI. Policies and
limitations are considered at the time of purchase; the sale of instruments
is not required in the event of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques
unless it believes that they are consistent with a fund's investment
objective and policies and that doing so will help a fund achieve its goal.
Fund holdings and recent investment strategies are detailed in each fund's
financial reports, which are sent to shareholders twice a year. For a free
SAI or financial report, call 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 the
Equity Fun ds, High Yield, Mortgage Securities, Government
Investment, Intermediate Bond, Short Fixed-Income, High Income Municipal,
Municipal Bond, and Intermediate Municipal Income may not purchase more
than 10% of the outstanding voting securities of a single issuer. For
TechnoQuant Growth, Mid Cap, Equity Growt h, Growth Opportunities,
Strategic Opportunities, Large Cap, and Growth & Income, this
limitation does not apply to securities of other investment companies.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer generally pays the investor a
fixed, variable, or floating rate of interest, and must repay the amount
borrowed at maturity. Some debt securities, such as zero coupon bonds, do
not pay current interest, but are sold at a discount from their face
values.
Debt securities have varying levels of sensitivity to changes in
interest rates and varying degrees of credit quality. In general, bond
pri ces rise when interest rates fall, and fall when interest rates
rise. Longer-term bonds and zero coupon bonds are generally more sensitive
to interest rate changes. In a ddition, bond prices are also affected by
the credit quality of the iss uer.
L ower-quality debt securities are considered to have speculative
chara cteristics, and involve greater risk of default or price changes
due to changes in the issuer's creditworthiness, or they may already be in
default. The market prices of these securities may fluctuate more than
higher-quality securities and may decline significantly in periods of
general or regio nal economic difficulty. Lower-quality securities may be
thinly traded, making them difficult to sell promptly at an acceptable
price. Adverse publicity and changing investor perceptions may affect the
ability to obtain prices for, or to sell these securitie s.
The default rate of lower-quality debt securities is likely to be higher
when issuers have difficulty meeting projected goals or obtaining
additional financing. This could occur during economic recessions or
periods of high interest rates. If an issuer defaults, the fund may try to
protect the interests of security holders if it determines such action to
be in the interest of its shareholders.
The table on the followi ng page 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 the fiscal year ended 1996, 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 YEAR ENDED 1996 DEBT HOLDINGS
Mid Equity Growth Strategic Large Growth & Equity High Strategic High
Income
S&P RATING Cap Growth Opportunities Opportunities Cap Income Income
Balanced Yield Income Municipal
INVESTMENT GRADE
Highest quality AAA
High quality AA -- -- 15.44% 6.43% -- -- 2.80% 31.90% -- 40.55% 27.16%
Upper-medium grade A
Medium grade BBB -- -- -- -- -- -- -- 3.26% 0.30% 0.57% 22.24%
LOWER QUALITY
Moderately speculative BB -- -- -- -- -- -- 0.45% 0.56% 11.90% 8.33%
9.89%
Speculative B 0.06% -- -- -- -- -- 0.06% 1.96% 47.80% 27.31% 0.53%
Highly speculative CCC -- -- -- -- -- -- 0.25% 5.40% 2.20% --
Poor quality CC -- -- -- -- -- -- -- -- -- -- --
Lowest quality, no interest C
In default, in arrears D -- -- -- -- -- -- -- -- 0.10% --
0.38%
Mid Equity Growth Strategic Large Growth & Equity High Strategic High
Income
MOODY'S RATING Cap Growth Opportunities Opportunities Cap Income Income
Balanced Yield Income
Municipal
INVESTMENT GRADE
Highest quality Aaa
High quality Aa -- -- 15.44% 6.43% -- -- 2.80% 33.87% -- 39.06% 26.58%
Upper-medium grade A
Medium grade Baa -- -- -- -- -- -- 0.02% 2.29% 0.10% 0.18% 22.72%
LOWER QUALITY
Moderately speculative Ba -- -- -- -- -- -- 0.25% 0.94% 8.60% 7.21%
9.19%
Speculative B -- -- -- 0.21% -- -- 0.26% 2.29% 48.90% 27.31% 0.18%
Highly speculative Caa -- -- -- -- -- -- -- 0.12% 9.70% 3.23% 0.60%
Poor quality Ca -- -- -- -- -- -- -- -- 0.03% 0.02% --
Lowest quality, no interest C -- -- -- -- -- -- -- -- -- --
- --
In default, in arrears --- -- -- -- -- -- -- -- -- -- --
- --
EACH FUND DOES NOT NECESSARILY RELY ON THE RATINGS OF MOODY'S OR S&P TO
DETERMINE COMPLIANCE WITH ITS DEBT QUALITY POLICY.
REFER TO THE APPENDIX FOR A MORE COMPLETE DISCUSSION OF THESE RATINGS.
SECURITIES NOT RATED BY MOODY'S AND S&P AMOUNTED TO 0.76% FOR BALANCED,
1.02% FOR STRATEGIC OPPORTUNITIES, AND
7.68% FOR HIGH YIELD, 8.98% FOR STRATEGIC INCOME, AND 27.02% FOR HIGH
INCOME MUNICIPAL. THESE PERCENTAGES MAY
INCLUDE SECURITIES RATED BY OTHER NATIONALLY RECOGNIZED STATISTICAL RATING
ORGANIZATIONS, AS WELL AS UNRATED SECURITIES. FMR
HAS DETERMINED THAT UNRATED SECURITIES THAT ARE LOWER QUALITY ACCOUNT FOR
0.76% FOR BALANCED, 1.02% FOR STRATEGIC
OPPORTUNITIES, 7.68% FOR HIGH YIELD, 8.97% FOR STRATEGIC INCOME, AND 24.84%
FOR HIGH INCOME MUNICIPAL. FOR FOREIGN
GOVERNMENT OBLIGATIONS NOT INDIVIDUALLY RATED BY A NATIONALLY RECOGNIZED
STATISTICAL RATING ORGANIZATION, FMR ASSIGNS A RATING
BASED ON THE RATING OF THE SOVEREIGN CREDIT OF THE ISSUING GOVERNMENT.
RESTRICTIONS: For all of the Equi ty Funds, 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 Investors Service (Moody's) or rated
in the equivalent categories by Standard & Poor's (S&P), or is unrated but
judged to be of equivalent quality by FMR.
Each of Mid Cap, Equity Growth, Growth Opportunities, Strategic
Opportunities, Large Cap, Growth & Income, Equity Income, and Balanced
currently intends to limit its investments in lower than Baa-quality debt
securities to less than 35% of its assets.
TechnoQuant Growth currently intends to limit its investments in lower than
Baa-quality debt securities to 5% of its assets.
Each of Mortgage Securities, Short Fixed-Income, Intermediate Municipal
Income, Short-Intermediate Municipal Income, California Municipal Income,
and New York Municipal Income normally invests in investment-grade
securities, but reserves the right to invest up to 5% of its assets in
below investment-grade securities. A security is considered to be
investment-grade if it is rated investment-grade by Moody's, S&P, Duff &
Phelps Credit Rating Co. (Duff & Phelps), or Fitch Investors Service, L.P.
(Fitch), or is unrated but judged by FMR to be of equivalent quality.
Intermediate Bond invests only in investment-grade securities, and will
limit its investments in medium quality securities to 5% of its assets. A
security is considered to be investment-grade or medium quality if it is
rated investment-grade or medium quality, respectively, by Moody's, S&P,
Duff & Phelps, or Fitch, or is unrated but judged by FMR to be of
equivalent quality.
High Income Municipal currently intends to limit its investment in below
investment-grade securities to less than 35% of its assets and does not
currently intend to invest more than 10% of its total assets in bonds that
are in default. A security is considered to be investment-grade if it is
rated investment-grade by Moody's, S&P, Duff & Phelps, or Fitch, or is
unrated but judged by FMR to be of equivalent qual ity.
Municipal Bond invests only in investment-grade securities. A security is
considered to be investment-grade if it is judged by FMR to be of
equivalent quality to securities rated Baa or BBB or higher by Moody's or
S&P, respectively. However, the fund will limit its investments in medium
quality securities as judged by F MR to one-third of its total
assets; will not purchase securities rated below Baa or BBB by Moody's or
S&P, respectively; and will not invest more than 20% of its total assets in
securities not rated by Moody's and S&P.
U.S. GOVERNMENT SECURITIES are high-quality debt instruments issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. Government. Not all U.S. Government securities are backed by the full
faith and credit of the United States. For example, U.S. Government
securities such as those issued b y Fannie Mae are supported by the
instrumentality's right to borrow money from the U.S. Treasury under
certain circumstances. Other U.S. Government securit ies , such as
those issued by the Federal Farm Credit Banks Funding Corporatio n,
are supported only by the credit of the entity that issued them.
MUNICIPAL SECURITIES are issued to raise money for a va riety of public
or private purpos es, including general financing for state and local
governments, or financing for specific projects or public facilities. They
may be fully or partially backed by the local government, or by the
credit of a private issuer or the current or anticipated revenues from
specific projects or assets. Because many municipal securities are issued
to finance similar types of projects, especially those relating to
education, health care, housing, transportation, and utilities, the
municipal markets can be affected by conditions in those sectors. In
addition, all municipal securities may be affected by uncertainties
regarding their tax status, legislative changes, or rights of municipal
securities holders. A municipal security may be owned directly or through a
participatio n interest.
CREDIT AND LIQUIDITY SUPPORT. Issuers may employ various forms of credit
and liquidity enhancement, including letters of credit, guarantees, puts
and demand features, and insurance, provided by foreign or domestic
entities such as banks and other financial institutions. These arrangements
expose a fund to the credit risk of the entity providing the credit or
liquidity support. Changes in the credit quality of the provider could
affect the value of the security and the fund's share price.
STATE MUNICIPAL SECURITIES include municipal obligations issued by the
state of California or New York or their respective counties,
municipalities, authorities, or other subdivisions. The ability of issuers
to repay their debt can be affected by many factors that impact the
economic vitality of either the state or a region within the state.
Other state municipal securities include obligations of U.S. territories
and possessions such as Guam, the Virgin Islands, Puerto Rico, and their
political subdivisions and public corporations. The economy of Puerto Rico
is closely linked to the U.S. economy and will be affected by the strength
of the U.S. dollar, interest rates, the price stability of oil imports, and
the continued existence of favorable tax in centi ves.
OTHER INSTRUMENTS may include securities of closed-end investment
companies.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations may
involve additional risks and considerations. These include risks relating
to political or economic conditions in foreign countries, fluctuations in
foreign currencies, withholding or other taxes, operational risks,
increased regulatory burdens, and the potentially less stringent investor
protection and disclosure standards of foreign markets. Additionally,
governmental issuers of foreign debt securities may be unwilling to pay
interest and repay principal when due and may require that the conditions
for payment be renegotiated. All of these factors can make foreign
investments, especially those in developing countries, more volatile than
U.S. investments.
ASSET-BACKED SECURITIES inclu de interests in pools of purchase
contracts, financing leases, or sales agreements entered into by
municipalities, debt securities, or consumer loans. The value of these
securities depends on many factors, including changes in interest rates,
the availability of information concerning the pool and its structure, the
credit quality of the underlying assets, the market's perception of the
servicer of the pool, and any credit enhancement provided. In addition,
these securities may be subject to prepayment risk.
MORTGAGE SECURITIES include interests in pools of commercial or residential
mortgages, and may include complex instruments such as collateralized
mortgage obligations and stripped mortgage-backed securities. Mortgage
securities may be issued by agencies or instrumentalities of the U.S.
Government or by private entities.
The price of a mortgage security may be significantly affected by changes
in interest rates. Some mortgage securities may have a structure that makes
their reaction to interest rates and other factors difficult to predict,
making their price highly volatile. Also, mortgage securities, especially
stripped mortgage-backed securities, are subject to prepayment risk.
Securities subject to prepayment risk generally offer less potential for
gains during a declining interest rate environment, and similar or greater
potential for loss in a rising interest rate environment.
RESTRICTIONS: Government Investment does not currently intend to
invest more than 40% of its assets in mortgage securities.
VARIABLE AND FLOATING RATE SECURITIES have interest rates that are
periodically adjusted either at specific intervals or whenever a benchmark
rate changes. Inverse floaters have interest rates that move in the
opposite direction from a benchmark, making the security's market value
more volatile.
STRIPPED SECURITIES are the separate income or principal components of a
debt security. The risks associated with stripped securities are similar to
those of other debt securities, although stripped securities may be more
volatile, and the value of certain types of stripped securities may move in
the same direction as interest rates. U.S. Treasury securities that have
been stripped by a Federal Reserve Bank are obligations issued by the U.S.
Treasury.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a security at
one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
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.
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.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or another party. In exchange for this benefit, a fund may accept a
lower interest rate. Demand features and standby commitments are types of
put features.
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.
REAL ESTATE-RELATED INSTRUMENTS include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors such
as changes in real estate values and property taxes, interest rates, cash
flow of underlying real estate assets, overbuilding, and the management
skill and creditworthiness of the issuer. Real estate-related instruments
may also be affected by tax and regulatory requirements, such as those
relating to the environment.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, currency exchange rates, commodity prices, or other factors that
affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts,
entering into currency exchange contracts or swap agreements, purchasing
indexed securities, and selling securities short.
FMR can use these practices to adjust the risk and return characteristics
of a fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with a
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of a fund and may involve a small investment of
cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other borrower.
They have additional risks beyond conventional debt securities because they
may entail less legal protection for a fund, or there may be a requirement
that the fund supply additional cash to a borrower on demand.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some illiquid securities, and some other securities, may be
subject to legal restrictions. Difficulty in selling securities may result
in a loss or may be costly to a fund.
RESTRICTIONS: Each fund (except High Yield and Strategic Income) may not
purchase a security if, as a result, more than 10% of its assets would be
invested in illiquid securities.
Ea ch of High Yield and Strategic Income may not purchase a security
if, as a result, more than 15% of its assets would be invested in illiquid
securities.
WHEN-ISSUED AND FORWARD PURCHASE OR SALE TRANSACTIONS are trading practices
in which payment and delivery for the security take place at a later
date than is customary for that type of security. The market v alue of
the security could change during this period.
CASH MANAGEMENT. A fund may invest in money market securities, in
repurchase agreements, and in a money market fund available only to funds
and accounts managed by FMR or its affiliates, whose goal is to seek a high
level of current income (exempt from federal income tax in the case of a
municipal money market fund) while maintaining a stable $1.00 share price.
A major change in interest rates or a default on the money market fund's
investments could cause its share price to change.
RESTRICTIONS: California Municipal Income and New York Municipal Income do
not currently intend to invest in a money market fund. High Income
Municipal, Municipal Bond, Intermediate Municipal Income, and
Short-Intermediate Municipal Income, California Municipal Income, New York
Municipal Income, do not currently inte nd to inv est in repurchase
agreements.
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.
RE STR ICTIONS: With respect to 75% of its total ass ets, each of
the Equity Funds , High Yield, Mortgage Securities, Government
Investment, Intermediate Bond, Short Fixed-Income, High Income Municipal,
Municipal Bond, and Intermediate Municipal Income may not purchase a
security if, as a result, more than 5% would be invested in the securities
of any issuer. This limitation does not apply to U.S. Government securities
or, for Te chnoQuant Growth, Mid Cap, Equity Growth, Growth
Opportunities, Strategic Opportunities, Large Cap, and Growth & Income,
to securities of other investment companies.
Strategic Income, Short-Intermediate Municipal Income, California Municipal
Income, and New York Municipal Income 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 issuer
and, with respect to 50% of total assets, does not invest more than 5% of
its total assets in an y is suer. These limitations do not apply to
U.S. Government securities or to securities of other investment companies.
A fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government securities.
Each of High Income Municipal, Municipal Bond, Intermediate Municipal
Income, Short-Intermediate Municipal Income, California Municipal Income,
and New York Municipal Income may invest more than 25% of its total assets
in tax-free securities that finance similar types of projects.
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 331/3% of its total assets.
LENDING securities to broker-dealers and institutions, including Fidelity
Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a means of earning
income. This practice could result in a loss or a delay in recovering a
fund's securities. A fund may also lend money to other funds advised by
FMR.
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of a fund's
total assets; however, Government Investment, High Income Municipal,
Municipal Bond, Intermediate Municipal Income, Short-Intermediate Municipal
Income, California Municipal Income, and New York Municipal Income 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 restate all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraphs, can be changed without shareholder approval.
TECHNOQUANT GROWTH FUND seeks capital growth.
MID CAP FUND seeks long-term growth of capital.
EQUITY GROWTH FUND 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 characteri stics.
GROWTH OPPORTUNITIES FUND seeks to provide capital growth by investing
primarily in common stocks and securities convertible into common stocks.
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. 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.
LARGE CAP FUND seeks long-term growth of capital.
GROWTH & INCOME FUND seeks high total return through a combination of
current income and capital appreciation.
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.
BALANCED 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.
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.
MORTGAGE SECURITIES FUND seeks a high level of current income, consistent
with prudent investment risk, by investing primarily in mortgage-related
securities. In seeking current income, the fund may also consider the
potential for capital gain.
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.
INTERMEDIATE 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. The fund normally invests at least 80% of its assets in
municipal obligations whose interest is free from federal income tax.
MUNICIPAL BOND FUND seeks to provide as high a level of interest income
exempt from federal income tax as is consistent with preservation of
capital.
The fund invests in a diversified portfolio of municipal bonds. The fund
will invest primarily in municipal bonds judged by FMR to be of high-grade
or upper-medium-grade quality, although it may invest up to one-third of
its total assets in bonds judged to be of medium-grade quality if they are
suitable for achieving its investment objective. The fund's standards for
high-grade, upper-medium-grade, and medium-grade obligations are
essentially the same as Moody's and S&P's four highest categories of Baa or
BBB and above. The fund will not invest in any bond rated lower than Baa by
Moody's or BBB by S&P, but may invest up to 20% of its total assets in
bonds not rated by either of these rating services if FMR judges them to
meet the fund's quality standards. The fund will normally invest at least
80% of its assets in municipal securities whose interest is exempt from
federal income tax.
INTERMEDIATE MUNICIPAL INCOME FUND seeks the highest level of income exempt
from federal income taxes that can be obtained consistent with the
preservation of capital. The fund normally invests at least 80% of its
assets in securities whose interest is free from federal income tax.
SHORT-INTERMEDIATE MUNICIPAL INCOME FUND seeks as high a level of current
income, exempt from federal income tax, as is consistent with preservation
of capital. The fund normally invests at least 80% of its assets in
municipal obligations whose interest is free from federal income tax.
CALIFORNIA MUNICIPAL INCOME FUND seeks a high level of current income free
from federal income tax and California state personal income tax by
investing primarily in municipal securities. The fund normally invests at
least 80% of its assets in securities whose interest is free from federal
and California income taxes.
NEW YORK MUNICIPAL INCOME FUND seeks a high level of current income free
from federal income tax and New York State and City personal income taxes
by investing primarily in municipal securities. The fund normally invests
at least 80% of its assets in securities whose interest is free from
federal and New York State and City personal income taxes.
With respect to 75% of its total assets, each of th e Equity Funds,
High Yield, Mortgage Securities, Government Investment, Intermediate Bond,
Short Fixed-Income, High Income Municipal, Municipal Bond, and Intermediate
Municipal Income may not purchase a security if, as a result, more than 5%
would be invested in the securities of any one issu er and may not
purchase more than 10% of the outstanding securities of a single issuer.
These limitations do not apply to U.S. Government securities or, for
TechnoQuant Growth, Mid Cap, Equity Growth, Growth Opportunities, Strategic
Opportunities, Large Cap, and Growth & Income, to securities of other
investment companies.
Each fund may not invest more than 25% of its total assets in any one
indu stry. This limitation does not apply to U.S. Government
securities.
Each fund may borrow only for temporary or emergency purposes, but not in
an amount exceeding 331/3% of its total assets.
Loans, in the aggregate, may not exceed 331/3% of each fund's total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of each class's assets are reflected in that
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 a fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease a fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. Equity Income
pays a monthly management fee at an annual rate of 0.50% of its average net
assets. F or each of TechnoQuant Growth, Mid Cap, Equity Growth,
Large Cap, Growth & Income, Balanced, High Yield, Strategic Income,
Mortgage Securities, Government Investment, Intermediate Bond, Short
Fixed-Income, High Income Municipal, Municipal Bond, Intermediate Municipal
Income, Short-Intermediate Municipal Income, California Municipal Income,
and New York Municipal Income, the fee is calculated by adding a group fee
rate to an individual fun d fee rate, and multiplying the result by
the fund's average net assets. F or Growth Opportunities and
Strategic Opportunities, the fee is calculated 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 S&P 500.
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 the
fund's average net assets.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. This rate cannot rise above 0.52% for TechnoQuant
Growth, Mid Cap, Equity Growth, Growth Opportunities, Strategic
Opportunities, Large Cap, Growth & Income, and Balanced or 0.37% for High
Yield, Strategic Income, Mortgage Securities, Government Investment,
Intermediate Bond, Short Fixed-Income, High Income Municipal, Municipal
Bond, Intermediate Municipal Income, Short-Intermediate Municipal Income,
California Municipal Income, and New York Municipal Income, and it drops as
total assets under management increase.
The performance adjustment rate is calculated monthly by comparing Growth
Opportunities' and Strategic Opportunities' performance to that of the S&P
500 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% of a fund's
average net assets over the performance period.
For purposes of calculating the performance adjustment for each of
Growth Opportunities and Strategic Opportunities, the fund's investment
performance will be based on the average performance of all classes of the
fund weighted according to their average assets for each mont h in the
performance period.
The following table states the manage ment fee rate for each fund for
its most recent fiscal year end:
Group Individual Total
Fee Rate Fund Fee Manageme
Rate nt Fee
TechnoQuant Growth [A] 0.30% 0.30% 0.60%
Mid Cap 0.30% 0.30% 0.60%
Equity Growth 0.30% 0.30% 0.61%
Growth Opportunities [C] 0.30% 0.30% 0.61%
Strategic Opportunities [C] 0.30% 0.30% 0.48%
Large Cap 0.30% 0.30% 0.60%
Growth & Income [A] 0.30% 0.20% 0.50%
Equity Income n/a n/a 0.50%
Balanced 0.30% 0.15%[D 0.50%
]
High Yield 0.14% 0.45% 0.60%
Strategic Income 0.14% 0.45% 0.59%
Mortgage Securities 0.15% 0.30% 0.45%
Government Investment 0.14% 0.30% 0.45%
Intermediate Bond 0.14% 0.30% 0.45%
Short Fixed-Income 0.14% 0.30% 0.45%
High Income Municipal Fund 0.14% 0.25% 0.40%
Municipal Bond Fund 0.14% 0.25% 0.40%
Intermediate Municipal Income 0.14% 0.25% 0.40%
Short-Intermediate Municipal Income 0.14% 0.25% 0.40%
California Municipal Income[A] 0.14% 0.25% 0.40%
New York Municipal Income 0.14% 0.25% 0.40%
[A] ESTIMATED
[C] THE BASIC FEE RATE FOR THE FISCAL YEAR ENDED 1996 WAS 0.61% FOR
GROWTH OPPORTUNITIES AND 0.61% FOR STRATEGIC OPPORTUNITIES.
[D] EFFECTIVE AUGUST 1, 1996, FMR VOLUNTARILY AGREED TO REDUCE THE FUND'S
INDIVIDUAL FUND FEE RATE FROM 0.20% TO 0.15%. IF THIS REDUCTION WAS NOT IN
EFFECT, THE TOTAL FEE WOULD HAVE BEEN 0.55%.
The performance adjustment rate is calculated monthly by comparing the
performance of each of Growth Opportunities and Strategic Opportunities to
that of the S&P 500 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%.
For purposes of calculating the performance adjustment for each of
Growth Opportunities and Strategic Opportunities, the fund's investment
performance will be based on the average performance of all classes of the
fund weighted according to their average assets for each mont h in the
performance period.
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
FIIA(U .K.) L. 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 FIIA(U. K.)L
a fee equal to 110% of the cost of providing these services.
For the fiscal year ended 1996, FMR, on behalf of each fund with
sub-advisory agreements paid FMR U.K., FMR Far East, FIJ, and FIIA fees
equal to less than 0.01%, of each fund's average net assets.
OTHER EXPENSES
While the management fee is a significant component of each fund's annual
operating costs, the funds have other expenses as well.
FIIOC performs transfer agency, dividend disbursing and shareholder
servicing functions for the Institutional Class of the Equity Funds ,
High Yield, Strategic Income, Mortgage Securities, Government Investment,
Intermediate Bond, and Short Fixed-Income (the Taxable Funds). Fidelity
Service Company, Inc. (FSC) calculates the net a sset value per share
(NAV) and dividends for the Institutional Class of the Taxable Funds, and
maintains the general accounting records and administers the securities
lending program for the Taxable Funds.
For the fiscal year ended 1997, transfer agency fees (as a percentage of
average net assets) for Institutional Class of Mortgage Securities amounted
to ____%. Pricing and bookkeeping fees (as a percentage of average net
assets) for Mortgage Securities amounted to ___%. These amounts are
before expense reductions, if any.
For the fiscal year ended 1996, transfer agency and pricing and bookkeeping
fees (as a percentage of average net assets) amounted to the following.
These amounts are before expense reductions, if any.
Transfer Pricing and
Agency Bookkeepin
Fee s g Fee s
Paid Paid
Mid Cap 0.16% 0.05%
Equity Growth 0.14% 0.02%
Growth Opportunities 0.14% 0.01%
Strategic Opportunities 0.16% 0.05%
Large Cap 0.16% 0.22%
Equity Income 0.14% 0.04%
Balanced 0.15% 0.02%
High Yield 0.16% 0.04%
Strategic Income 0.17% 0.06%
Government Investment 0.16% 0.04%
Intermediate Bond 0.14% 0.04%
Short Fixed-Income 0.15% 0.04%
UMB is the transfer and service agent for High Income Municipal,
Municipal Bond, Intermediate Municipal Income, Short-Intermediate Municipal
Income, California Municipal Income and New York Municipal Income (the
Municipal Funds). UMB has entered into a sub-agreement with FIIOC. FIIOC
performs transfer agency, dividend disbursing and shareholder servicing
functions for the I nstitutional Class of the Municipal Funds. UMB has
also entered into a sub-agreement with FSC. FSC calculates the NAV and
dividends for the Institutional Class of the Municipal Funds, and maintains
the general accounting records for each fund. Under the terms of the
sub-agreements, FIIOC and FSC receive all related fees paid to UMB by the
Institutional Class.
For the fiscal year ended 1996, transfer agency and pricing and bookkeeping
fees paid (as a percentage of average net assets) amounted to the
following. These amounts are before expense reductions, if any.
Transfer Pricing
Agency and
Fees Paid Bookkeep
ing Fees
Paid
High Income Municipal 0.20% 0.04%
Municipal Bond 0.31% 0.03%
Intermediate Municipal Income 0.17% 0.08%
Short-Intermediate Municipal Income 0.33% 0.20%
California Municipal Income 0.13% 0.18%
New York Municipal Income 0.10% 0.10%
The Institutional Class of each fund has adopted a DISTRIBUTION AND SERVICE
PLAN. Each plan recognizes that FMR may use its management fee revenues, as
well as its past profits or its resources from any other source, to pay FDC
for expenses incurred in connection with the distribution of Institutional
Class shares. FMR directly, or through FDC, may make payments to third
parties, such as banks or broker-dealers, that engage in the sale of, or
provide shareholder support services for, Institutional Class shares.
Curren tly, the Board of Trustees of each fund has authorized such
payments.
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 commissions paid by a fund to reduce that fund's custodian
or transfer agent fees.
The portfolio turnover rate for TechnoQuant Growth is projected to exceed
200% for its first fiscal period ending November 30, 1997. The portfolio
turnover rate for Growth & Income is not expected to exceed 200% for its
first fiscal period ending November 30, 1997. T hese rates will vary from
year to year.
The portfolio turnover rate for the fiscal year ended 1997 was %
for Mortgage Securities .
The portfolio turnover rate for the fiscal year ended 1996 was 101% for Mid
Cap, 76% for Equity Growth, 33% for Growth Opportunities, 151% for
Strategic Opportunities, 59% for Large Cap, 78% for Equity Income, 223% for
Balanced, 121% for High Yield, 119% for Strategic I nco me, 153% for
Government Investment, 200% for Intermediate Bond, 124% for Short
Fixed-Income, 49% for High Income Municipal, 35% for Municipal Bond, 35%
for Intermediate Municipal Income, 62% for Short-Intermediate Municipal
Income, 21% for California Municipal Income, and 17% for New York Municipal
Income.
Portfolio tu rnover rat es 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
When you invest through an investment professional, your investment
professional, including a broker-dealer or financial institution, may
charge you a transaction fee with respect to the purchase and sale of fund
shares. 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.
The different ways to set up (register) your account with Fidelity are
list ed below .
The account guidelines that follow may not apply to certain funds or to
certain retirement accounts. For instance, municipal funds are not
available for purchase in retirement accounts. If you are investing through
a retirement account or if your employer offers a fund through a retirement
program, you may be subject to additional fees. For more information,
please refer to your program materials, contact your employer, or call your
retirement benefits number or your investment professional directly, as
appropriate.
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 (THE FOLLOWING OPTIONS ARE AVAILABLE ONLY FOR TAXABLE FUNDS)
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 and under 701/2 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) 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.
(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) SIMPLE IRAS provide small business owners and those with
self-employed income (and their eligible employees) with many of the
advantages of a 401(k) plan, but with fewer administrative
requirements.
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
INSTITUTIONAL CLASS'S SHARE PRICE, called NAV, is calculated every business
day. Institutional Class shares are sold without a sales charge.
Shares are purchased at the next NAV calculated after your order is
received and accepted. NAV is normally calculated at 4:00 p.m. Eastern
time.
It is the responsibility of your investment professional to transmit your
order to buy shares to F idelity before the close of business on the
day you place your order.
Fidelity must receive payment within three 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 are not available for Institutional Class shares.
IF YOU ARE NEW TO THE FIDELITY ADVISOR FUNDS, complete and sign an account
application and mail it along with your check. You may also open your
account by wire as described on page __. If there is no account application
accompanying this prospectus, call 1-800-843-3001 or 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.
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) Place an order and wire money into your account,
(small solid bullet) Open your account by exchanging from the same class of
another Fidelity Advisor fund or from another Fidelity fund, or
(small solid bullet) Contact your investment professional.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For Fidelity Advisor IRA, Rollover IRA, SEP-IRA and Keogh accounts $500
Through regular investment plans* $1,000
TO ADD TO AN ACCOUNT $250
For Fidelity Advisor IRA, Rollover IRA, SEP-IRA and Keogh accounts $100
Through regular investment plans* $100
MINIMUM BALANCE $1,000
For Fidelity Advisor IRA, Rollover IRA, SEP-IRA and Keogh accounts NONE
*An account may be opened with a minimum of $1,000, provided that a regular
investment plan is established at the time the account is opened. For more
information about regular investment plans, please refer to "Investor
Services," page __.
There is no minimum account balance or initial or subsequent investment
minimum for certain retirement accounts funded through salary deduction, or
accounts opened with the proceeds of distributions from such Fidelity
retirement accounts. Refer to the program materials for details.
For further information on opening an account, please consult your
investment professional or refer to the account application.
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
PHONE (small solid bullet) Exchange from the same class of (small solid bullet) Exchange from the same class of
1-800-843-3001
OR YOUR
INVESTMENT another Fidelity Advisor fund or from another Fidelity Advisor fund or from
PROFESSIONAL another Fidelity fund account with another Fidelity fund account with
the same registration, including the same registration, including
name, address, and taxpayer ID name, address, and taxpayer ID
number. number.
Mail (mail_graphic)(small solid bullet) Complete and sign the account (small solid bullet) Make your check payable to the
application. Make your check complete name of the fund of your
payable to the complete name of the choice and note the applicable
fund of your choice and note the class. Indicate your fund account
applicable class. Mail to the address number on your check and mail to
indicated on the application. the address printed on your account
statement.
(small solid bullet) Exchange by mail: call
1-800-843-3001 or your investment
professional for instructions.
</TABLE>
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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.
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Wire (wire_graphic) (small solid bullet) Call 1-800-843-3001 to set up your (small solid bullet) Not available for retirement
account and to arrange a wire accounts.
transaction. Not available for (small solid bullet) Wire to:
retirement accounts. Banker's Trust Co.
(small solid bullet) Wire to: Routing # 021001033
Banker's Trust Co. Fidelity DART Depository
Routing # 021001033 Account # 00159759
Fidelity DART Depository FBO: (account name)
Account #00159759 (account number)
FBO: (account name)
(account number) Specify the complete name of the
fund of your choice, note the
Specify the complete name of the applicable class and include your
fund of your choice, note the account number and your name.
applicable class and include your
new account number and your name.
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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. NAV is
normally calculated at 4:00 p.m. Eastern time.
It is the responsibility of your investment professional to transmit your
order to sell shares to Fidelity before the close of business on the
day you place your order.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the methods
described on these two pages.
TO SELL SHARES IN A FIDELITY ADVISOR RETIREMENT ACCOUNT, your request must
be made in writing, except for exchanges to shares of the same class of
another Fidelity Advisor fund or shares of other Fidelity funds, which can
be requested by phone or in writing.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $1,000
worth of shares in the account to keep it open (account minimum balances do
not apply to retirement accounts).
TO SELL SHARES BY BANK WIRE, you will need to sign up for this service 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 Ad visor account with a different registration,
(small solid bullet) You wish to set up the bank wire feature, 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,
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:
Fidelity Investments
P.O. Box 770002
Cincinnati, OH 45277-0081
Unless otherwise instructed, Fidelity will send a check to the
record address.
ACCOUNT TYPE SPECIAL REQUIREMENTS
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PHONE All account types except retirement (small solid bullet) Maximum check request: $100,000.
1-800-843-3001 OR YOUR
INVESTMENT PROFESSIONAL
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(phone_graphic) All account types (small solid bullet) You may exchange to the same
class of other Fidelity Advisor funds
or to other Fidelity 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 must be
Sole Proprietorship, UGMA, UTMA signed by all persons required to
sign for transactions, exactly as
their names appear on the account.
Retirement account (small solid bullet) The account owner should complete
a retirement distribution form. Call
1-800-843-3001 or your investment
professional to request one.
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) Call 1-800-843-3001 or your
Conservator/Guardian investment professional for
instructions.
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, call 1-800-843-3001.
Minimum wire: $500.
(small solid bullet) Your wire redemption request must
be received and accepted by the
transfer agent before 4:00 p.m.
Eastern time for money to be wired
on the next business day.
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INVESTOR SERVICES
Fidelity Advisor funds provide a variety of services to help you manage
your account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after certain transactions
that affect 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 and
prospectuses 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 and prospectuses.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your Institutional Class shares and buy
Institutional Class shares of other Fidelity Advisor funds or shares of
other Fidelity funds, by telephone or in writing.
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 "Exchange
Restrictions," page __.
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM lets you set up periodic
redemptions from your account. Accounts with a value of $10,000 or more in
Institutional Class shares are eligible for this program.
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
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MINIMUM MINIMUM FREQUENCY SETTING UP OR CHANGING
INITIAL ADDITIONAL Monthly, bimonthly, (small solid bullet) For a new account, complete the appropriate section on the
$1,000 $100 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, call 1-800-843-3001. Call
at least 10 business days prior to your next scheduled investment
date.
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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 Growth & Income, Equity Income, and Balanced
are distributed in March, June, September and December; dividends for
TechnoQuant Growth, Mid Cap, Equity Growth, Growth Opportunities, Strategic
Opportunities, and Large Cap are distributed in December; dividends for
Strategic Income, High Yield, Mortgage Securities, Government Investment,
Intermediate Bond, Short Fixed-Income, High Income Municipal, Municipal
Bond, Intermediate Municipal Income, Short-Intermediate Municipal Income,
California Municipal Income, and New York Municipal Income 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(registered trademark) PROGRAM. Your dividend
distributions will be automatically invested in the same class of shares of
another identically registered Fidelity Advisor fund. You will be sent a
check for your capital gain distributions or your capital gain
distributions will be automatically reinvested in additional shares of the
same class of the fund.
If you select distribution option 2, 3, or 4 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. To change
your distribution option, call your investment professional directly or
call 1-800-843-3001.
For retirement accounts, all distributions are automatically reinvested.
When you are over 59 years old, you can receive distributions in cash.
When each of the Equity Funds d educts a distribution from its NAV,
the reinvestment price is the applicable class's NAV at the close of
business that day. Dividends fro m the Bond Funds, the Intermediate-Term
Bond Funds, and the Short-T erm Bond Funds will be reinvested at the
applicable class's NAV on the last day of the month. Capital gain
distributions from Bo nd Funds, the Intermediate-Term Bond Funds, and
the Short-Term Bo nd 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 t he Municipal Funds
earn is distributed to shareholders as income dividends. Interest that is
federally tax-free remains tax-free when it is distributed. Distributions
from each fund (except the Muni cipal Funds ), however, are subject to
federal income tax. Each fund (except California Municipal Income and New
York Municipal Income) 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 fund (exc ept the Municipal Funds ) are taxed as dividends;
long-term capital gain distributions are taxed as long-term capital gains.
However, for shareholders of the M unicipal Funds , 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.
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. Ginnie
Mae securities and other mortgage-backed securities are notable exceptions
in most states. 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.
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, Fi delity 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. Each of the Municipal Funds may invest up
to 100% of its assets in these securities. Individuals who are subject to
the tax must report this interest on their tax returns.
A portion of the dividends from each of the Municipal Funds may be free
from state or local taxes. Income from investments in your state are often
tax-free to you. Each year, Fidelity will send you a breakdown of each of
these funds' income from each state to help you calculate your taxes.
To the extent that California Municipal Income's income dividends are
derived from interest on California state tax-free investments, they will
be free from California state personal income tax. Distributions derived
from obligations that are not California state tax-free obligations, as
well as distributions from short or long-term capital gains, are subject to
California state personal income tax. Corporate taxpayers should note that
the fund's income dividends and other distributions are not exempt from
California state franchise or corporate income taxes.
To the extent that New York Municipal Income's income dividends are derived
from state-tax free investments, they will be free from New York State and
City personal income taxes.
During the fiscal year ended 1996, 100% of the income dividends from High
Income Municipal, Municipal Bond, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income and New
York Municipal Income was free from federal income tax. During the fiscal
year ended 1996, 100% of California Municipal Income's income dividends was
free from California taxes, and 100% of New York Municipal Income's income
dividends was free from New York taxes. During the fiscal year ended 1996,
26.36% of High Income Municipal's, 0.79% of Municipal Bond's, 7.58% of
Intermediate Municipal Income's, 18.99% of Short-Intermediate Municipal
Income's, 5.5% of California Municipal Income's, and 0.09% of New York
Municipal Income fund'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, Fide lity 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 when a class has realized but not
yet distribute d income or capital gains, you will pay the full price
for the shares and then receive a portion of the price back in the form of
a taxable distribution.
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 fund 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 capi tal.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on a fund and
its investments and these taxes generally will reduce the 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 funds, 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 is normally 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 the
result by the number of shares of that class that are outstanding.
Each fund's assets are valued primarily on the basis of market quotations
or on th e basis of information furnished by a pricing service.
Short-term securities with remaining maturities of sixty days or less for
which quotations and information furnished by a pricing service are not
readily available are valued on the basis of amortized cost. This method
minimizes the effect of changes in a security's market valu e. 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. In addition, if quot ations and
information furnished by a pr icing service are not readily available,
or if the values have been materially affected by events occurring after
the closing of a foreign market, assets may be valued by another method
that the Board of Trustees believes accurately reflects fair value.
INSTITUTIONAL CLA SS'S OFFERING PRICE (price to buy one share) is its
NAV. Institutional class's REDEMPTION PRICE (price to sell one share)
is its NAV.
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 m ay on ly
be liable for losses resulting from unauthorized transactions if it does
not follow reasonable procedures designed to verify the identity of the
caller. Fidelity will re quest 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 Fide lity f or
instructions. Additional documentation may be required from corporations,
associations, and certain fiduciaries.
IF YOU ARE U NABLE TO REACH FIDELITY 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 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 calculated after your order is received and accepted. Note the
following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
canceled and you could be liable for any losses or fees a fund or
Fidelity has incurred.
(small solid bullet) Automated Purchase Orders: For shares of High Yield,
Strategic Income, Mortgage Securities, Government Investment, Intermediate
Bond, Short Fixed-Income, High Income Municipal, Intermediate Municipal
Income, Short-Intermediate Municipal, California Municipal Income, and New
York Municipal Income begin to earn dividends as of the day your funds are
received.
(small solid bullet) Other Purchases: For shares of High Yield, Strategic
Income, Mortgage Securities, Government Investment, Intermediate Bond,
Short Fixed-Income, High Income Municipal, Intermediate Municipal Income,
Short-Intermediate Municipal, California Municipal Income, and New York
Municipal Income, you begin to earn dividends as of the first business day
following the day your funds are received.
AUTOMATED PURCHASE ORDERS. Institutional Class shares 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.
CONFIRMED PURCHASES. Certain financial institutions that meet FDC's
creditworthiness criteria may enter confirmed purchase orders on behalf of
customers by phone, with payment to follow no later than close of business
on the next business day. If payment is not received by the next business
day, the order will be canceled and the financial institution will be
liable for any losses.
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, or automatic investment plans.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV 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 the Bonds Funds, the Intermediate-Term
Bond Funds, and the Short-Term Bond Funds 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.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of
$12.00 from accounts with a value of less than $2,500, subject to an annual
maximum charge of $60.00 per shareholder. Accounts opened after September
30 will not be subject to the fee for that year. The fee, which is payable
to the transfer agent, is designed to offset in part the relatively higher
costs of servicing smaller accounts. The fee will not be deducted from
retirement accounts (except non-prototype retirement accounts), accounts
using a systematic investment program, certain (Network Level I and III)
accounts which are maintained through National Securities Clearing
Corporation (NSCC), or if total assets in Fidelity mutual funds exceed
$50,000. Eligibility for the $50,000 waiver is determined by aggregating
Fidelity mutual fund accounts (excluding contractual plans) maintained (i)
by FIIOC and (ii) through NSCC; provided those accounts are registered
under the same primary social security number.
IF YOUR NON-RETIREMENT AC COUNT BALANCE FALLS BELOW $1,000 you will
be given 30 days' notice to reestablish the minimum balance. If you do not
increase your balance, F idelity reser ves the right to close your
account and send the proceeds to you. Your shares will be redeemed at the
NAV on the day your account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC 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 your Institutional
Class shares for Institutional Class shares of other Fidelity Advisor funds
or for shares of other Fidelity funds. However, you should note the
following:
(small solid bullet) The fund or class you are exchanging into must be
available for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund or class, read its
prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you
pay the perc entage difference between that fund's sales charge and
any sales charge you may 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 a 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) Th e exchange limit may be modified for accounts in
certain institutional retirement plans to conform to plan exchange limits
and Department of Labor regulations. See your plan materials for further
informa tion.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if a fund
receives or anticipates simultaneous orders affecting significant portions
of the fund's assets. In particular, a pattern of exchanges that coincides
with a "market timing" strategy may be disruptive to a fund.
Although the funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time.
The funds reserve the right to terminate or modify these exchange
privileges in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
fees of up to 1.00% on purchases, administrative fees of up to $7.50, and
redemption fees of up to 1.50% on exchanges. Check each fund's prospectus
for d etails.
No dealer, sales representative, or any other person has been authorized
to give any information or to make any representations, other than those
contained in this Prospectus and in the related SAI, in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the funds or FDC. This Prospectus and the related SAI do not
constitute an offer by the funds or by FDC to sell or to buy shares of the
funds to any person to whom it is unlawful to make such o ffer.
APPENDIX A
DESCRIPTION OF MOODY'S INVESTORS SERVICE RATINGS OF CORPORATE BONDS
Moody's ratings fo r obligations with an original remaining maturity in
excess of one year fall within nine categories. They range from Aaa
(highest quality) to C (lowest quality). Moody applies numerical modifiers
of 1, 2, or 3 to each generic rating classification from Aa through B. The
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks on the lower end of its
generic rating cate gory.
AAA - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than the Aaa securities.
A - Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
BAA - Bonds that are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
CAA - Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
CA - Bonds that are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
short-comings.
C - Bonds that are rated C are the lowest-rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
DESCRIPTION OF STANDARD & POOR'S RATINGS OF CORPORATE BONDS
D ebt issues may be designated by Standard & Poor's as either investment
grade ("AAA" through "BBB") or speculative grade ("BB" through "D"). While
speculative grade debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major
exposures to adverse conditions. Ratings from AA to CCC may be modified by
the addition of a plus sign (+) or minus sign (-) to show relative standing
within the major rating categori es.
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal. The
CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed but
debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating will also
be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
APPENDIX B
EQUITY GROWTH - INSTITUTIONAL CLASS
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Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
EQUITY GROWTH - INSTITUTIONAL CLASS -0.57 15.57 44.84 6.93% 64.71 10.14 15.71 -0.04 40.12 16.89
% % % % % % % % %
Lipper Growth Funds AverageA 3.08% 14.79 26.91 -4.49 36.70 8.08% 10.63 -2.17 30.79 19.24
% % % % % % % %
S&P 500 5.10% 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: -0.5700000000000001
Row: 2, Col: 1, Value: 15.57
Row: 3, Col: 1, Value: 44.84
Row: 4, Col: 1, Value: 6.930000000000001
Row: 5, Col: 1, Value: 64.71000000000001
Row: 6, Col: 1, Value: 10.14
Row: 7, Col: 1, Value: 15.71
Row: 8, Col: 1, Value: -0.04
Row: 9, Col: 1, Value: 40.12
Row: 10, Col: 1, Value: 16.89
(LARGE SOLID BOX) EQUITY GROWTH - INSTITUTIONAL
CLASS
GROWTH OPPORTUNITIES - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
GROWTH OPPORTUNITIES - 33.28 24.14 -1.65 42.68 15.03 22.17 2.86% 33.58 18.30
INSTITUTIONAL CLASS % % % % % % % %
Lipper Growth Funds AverageA 14.79 26.91 -4.49 36.70 8.08% 10.63 -2.17 30.79 19.24
% % % % % % % %
S&P 500 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 0.0
Row: 2, Col: 1, Value: 33.28
Row: 3, Col: 1, Value: 24.14
Row: 4, Col: 1, Value: -1.65
Row: 5, Col: 1, Value: 42.68
Row: 6, Col: 1, Value: 15.03
Row: 7, Col: 1, Value: 22.17
Row: 8, Col: 1, Value: 2.86
Row: 9, Col: 1, Value: 33.58
Row: 10, Col: 1, Value: 18.3
(LARGE SOLID BOX) GROWTH OPPORTUNITIES -
INSTITUTIONAL CLASS
STRATEGIC OPPORTUNITIES - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
STRATEGIC OPPORTUNITIES - -6.33 22.25 32.60 -7.17 23.08 12.87 20.44 -7.17 38.60 1.99%
INSTITUTIONAL CLASS % % % % % % % % %
Lipper Capital Appreciation FundsB -0.03 14.09 26.60 -8.24 39.91 8.78% 15.68 -3.38 30.34 16.31
% % % % % % % % %
S&P 500 5.10% 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: -6.33
Row: 2, Col: 1, Value: 22.25
Row: 3, Col: 1, Value: 32.6
Row: 4, Col: 1, Value: -7.17
Row: 5, Col: 1, Value: 23.08
Row: 6, Col: 1, Value: 12.87
Row: 7, Col: 1, Value: 20.44
Row: 8, Col: 1, Value: -7.17
Row: 9, Col: 1, Value: 38.6
Row: 10, Col: 1, Value: 1.99
(LARGE SOLID BOX) STRATEGIC OPPORTUNITIES -
INSTITUTIONAL CLASS
EQUITY INCOME - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
EQUITY INCOME - INSTITUTIONAL CLASS -2.24 23.23 18.43 -14.2 29.81 14.94 18.80 7.50% 33.49 15.26
% % % 8% % % % % %
Lipper Equity Income Funds AverageC -2.18 16.74 22.18 -6.78 26.86 9.77% 13.66 -2.54 30.17 18.85
% % % % % % % % %
S&P 500 5.10% 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: -2.24
Row: 2, Col: 1, Value: 23.23
Row: 3, Col: 1, Value: 18.43
Row: 4, Col: 1, Value: -14.28
Row: 5, Col: 1, Value: 29.81
Row: 6, Col: 1, Value: 14.94
Row: 7, Col: 1, Value: 18.8
Row: 8, Col: 1, Value: 7.5
Row: 9, Col: 1, Value: 33.49
Row: 10, Col: 1, Value: 15.26
(LARGE SOLID BOX) EQUITY INCOME -
INSTITUTIONAL CLASS
BALANCED - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
BALANCED - INSTITUTIONAL CLASS 20.89 24.60 -2.94 34.48 9.20% 19.66 -5.09 15.00 8.68%
% % % % % % %
Lipper Balanced Funds AverageD 12.34 19.57 -0.57 26.69 7.07% 10.91 -2.50 25.16 13.76
% % % % % % % %
S&P 500 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58 22.96
% % % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: 20.89
Row: 3, Col: 1, Value: 24.6
Row: 4, Col: 1, Value: -2.94
Row: 5, Col: 1, Value: 34.58
Row: 6, Col: 1, Value: 9.199999999999999
Row: 7, Col: 1, Value: 19.66
Row: 8, Col: 1, Value: -5.09
Row: 9, Col: 1, Value: 15.0
Row: 10, Col: 1, Value: 8.68
(LARGE SOLID BOX) BALANCED - INSTITUTIONAL CLASS
HIGH YIELD - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
HIGH YIELD - INSTITUTIONAL CLASS 17.24 3.64% 7.30% 34.94 23.09 20.45 -1.49 18.69 13.24
% % % % % % %
Lipper High Current Yield Funds 12.89 -0.58 -10.1 36.91 17.51 18.95 -3.85 16.43 13.67
AverageE % % 3% % % % % % %
Merrill Lynch High Yield Master Index 13.47 4.23% -4.35 34.58 18.16 17.18 -1.17 19.91 11.06
% % % % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: 17.24
Row: 3, Col: 1, Value: 3.64
Row: 4, Col: 1, Value: 7.3
Row: 5, Col: 1, Value: 34.94
Row: 6, Col: 1, Value: 23.09
Row: 7, Col: 1, Value: 20.45
Row: 8, Col: 1, Value: -1.49
Row: 9, Col: 1, Value: 18.69
Row: 10, Col: 1, Value: 13.24
(LARGE SOLID BOX) HIGH YIELD - INSTITUTIONAL
CLASS
STRATEGIC INCOME - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995 1996
STRATEGIC INCOME - INSTITUTIONAL 22.41 13.04
CLASS % %
Lipper Multi-Sector Income Funds AverageF 16.92 11.74
% %
Merrill Lynch High Yield Master Index 19.91 11.06
% %
Consumer Price Index 2.54% 3.32%
</TABLE>
MORTGAGE SECURITIES - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
MORTGAGE SECURITIES - 11.26 2.70% 6.72% 13.64 10.36 13.61 5.45% 6.71% 1.94% 17.02
INSTITUTIONAL CLASS % % % % %
Lipper U.S. Mortgage Funds 11.27 2.53% 7.47% 12.71 9.52% 15.00 6.38% 7.58% -4.83 16.29
AverageG % % % % %
Salomon Brothers Mortgage Index 13.44 4.06% 8.81% 15.16 10.90 15.64 7.37% 7.04% -1.43 16.77
% % % % % %
Consumer Price Index 1.10% 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 11.26
Row: 2, Col: 1, Value: 2.7
Row: 3, Col: 1, Value: 6.72
Row: 4, Col: 1, Value: 13.64
Row: 5, Col: 1, Value: 10.36
Row: 6, Col: 1, Value: 13.61
Row: 7, Col: 1, Value: 5.45
Row: 8, Col: 1, Value: 6.71
Row: 9, Col: 1, Value: 1.94
Row: 10, Col: 1, Value: 17.02
(LARGE SOLID BOX) MORTGAGE SECURITIES -
INSTITUTIONAL CLASS
GOVERNMENT INVESTMENT - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
GOVERNMENT INVESTMENT - 6.57% 11.75 8.37% 13.45 6.48% 9.36% -3.85 17.70 2.33%
INSTITUTIONAL CLASS % % % %
Lipper General U.S. Government 6.67% 12.46 8.22% 14.44 6.41% 9.42% -4.64 17.34 1.72%
Funds AverageH % % % %
Salomon Brothers Treasury/Agency 7.10% 14.24 8.78% 15.33 7.24% 10.74 -3.40 18.39 2.76%
Index % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: 6.57
Row: 3, Col: 1, Value: 11.75
Row: 4, Col: 1, Value: 8.370000000000001
Row: 5, Col: 1, Value: 13.45
Row: 6, Col: 1, Value: 6.48
Row: 7, Col: 1, Value: 9.360000000000001
Row: 8, Col: 1, Value: -3.85
Row: 9, Col: 1, Value: 17.7
Row: 10, Col: 1, Value: 2.33
(LARGE SOLID BOX) GOVERNMENT INVESTMENT -
INSTITUTIONAL CLASS
INTERMEDIATE BOND - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
INTERMEDIATE BOND - INSTITUTIONAL 2.32% 7.84% 12.11 7.91% 15.16 7.32% 12.08 -2.06 12.50 3.70%
CLASS % % % % %
Lipper Intermediate Investment Grade 2.13% 7.06% 11.67 7.22% 15.63 6.88% 9.52% -3.25 16.62 3.12%
Debt Funds AverageI % % % %
Lehman Brothers Intermediate 3.66% 6.67% 12.77 9.16% 14.62 7.17% 8.79% -1.93 15.33 4.05%
Government/Corporate Bond Index % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 2.32
Row: 2, Col: 1, Value: 7.84
Row: 3, Col: 1, Value: 12.11
Row: 4, Col: 1, Value: 7.91
Row: 5, Col: 1, Value: 15.16
Row: 6, Col: 1, Value: 7.319999999999999
Row: 7, Col: 1, Value: 12.08
Row: 8, Col: 1, Value: -2.06
Row: 9, Col: 1, Value: 12.5
Row: 10, Col: 1, Value: 3.7
(LARGE SOLID BOX) INTERMEDIATE BOND -
INSTITUTIONAL CLASS
SHORT FIXED-INCOME - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
SHORT FIXED-INCOME - INSTITUTIONAL 6.19% 10.31 5.87% 13.37 7.61% 9.49% -3.37 9.90% 4.69%
CLASS % % %
Lipper Short Investment Grade Bond 6.86% 10.22 7.87% 12.88 5.97% 6.45% -0.44 10.84 4.64%
Funds AverageJ % % % %
Lehman Brothers 1-3 Year 6.34% 10.97 9.69% 11.83 6.35% 5.55% 0.55% 10.96 5.14%
Government/Corporate Bond Index % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: 6.19
Row: 3, Col: 1, Value: 10.31
Row: 4, Col: 1, Value: 5.87
Row: 5, Col: 1, Value: 13.37
Row: 6, Col: 1, Value: 7.609999999999999
Row: 7, Col: 1, Value: 9.49
Row: 8, Col: 1, Value: -3.37
Row: 9, Col: 1, Value: 9.9
Row: 10, Col: 1, Value: 4.69
(LARGE SOLID BOX) SHORT FIXED-INCOME -
INSTITUTIONAL CLASS
HIGH INCOME MUNICIPAL - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
HIGH INCOME MUNICIPAL - 11.80 13.09 10.29 12.18 11.11 13.79 -8.05 16.84 3.09%
INSTITUTIONAL CLASS % % % % % % % %
Lipper High Yield Municipal Bond 11.28 10.11 5.13% 11.52 8.51% 11.41 -4.67 15.98 4.17%
Funds AverageK % % % % % %
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: 11.8
Row: 3, Col: 1, Value: 13.09
Row: 4, Col: 1, Value: 10.29
Row: 5, Col: 1, Value: 12.18
Row: 6, Col: 1, Value: 11.11
Row: 7, Col: 1, Value: 13.79
Row: 8, Col: 1, Value: -8.050000000000001
Row: 9, Col: 1, Value: 16.84
Row: 10, Col: 1, Value: 3.09
(LARGE SOLID BOX) HIGH INCOME MUNICIPAL -
INSTITUTIONAL CLASS
MUNICIPAL BOND- INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
MUNICIPAL BOND - INSTITUTIONAL CLASS -1.56 12.30 9.56% 6.91% 11.91 8.93% 13.17 -8.49 18.15 4.02%
% % % % % %
Lipper General Municipal Debt Funds -0.94 11.53 9.65% 6.05% 12.09 8.79% 12.47 -6.50 16.84 3.30%
AverageL % % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: -1.56
Row: 2, Col: 1, Value: 12.3
Row: 3, Col: 1, Value: 9.56
Row: 4, Col: 1, Value: 6.91
Row: 5, Col: 1, Value: 11.91
Row: 6, Col: 1, Value: 8.93
Row: 7, Col: 1, Value: 13.17
Row: 8, Col: 1, Value: -8.49
Row: 9, Col: 1, Value: 18.15
Row: 10, Col: 1, Value: -4.02
(LARGE SOLID BOX) MUNICIPAL BOND- INSTITUTIONAL
CLASS
INTERMEDIATE MUNICIPAL INCOME - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
INTERMEDIATE MUNICIPAL INCOME - 2.33% 7.38% 7.79% 6.37% 9.64% 7.28% 9.94% -5.43 14.37 4.15%
INSTITUTIONAL CLASS % %
Lipper Intermediate Municipal Debt 1.32% 7.57% 8.26% 6.59% 10.52 7.80% 10.18 -3.51 12.89 3.70%
Funds AverageM % % % %
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 2.33
Row: 2, Col: 1, Value: 7.38
Row: 3, Col: 1, Value: 7.79
Row: 4, Col: 1, Value: 6.37
Row: 5, Col: 1, Value: 9.639999999999999
Row: 6, Col: 1, Value: 7.28
Row: 7, Col: 1, Value: 9.94
Row: 8, Col: 1, Value: -5.430000000000001
Row: 9, Col: 1, Value: 14.37
Row: 10, Col: 1, Value: 4.149999999999999
(LARGE SOLID BOX) INTERMEDIATE MUNICIPAL
INCOME - INSTITUTIONAL CLASS
SHORT-INTERMEDIATE MUNICIPAL INCOME - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995 1996
SHORT-INTERMEDIATE MUNICIPAL 8.75 3.67
INCOME - INSTITUTIONAL CLASS % %
Lipper Short- Intermediate Municipal 7.43 3.53
Debt Funds AverageN % %
Cons u mer Price Index 2.54 3.32
% %
</TABLE>
NEW YORK MUNICIPAL INCOME - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1996
NEW YORK MUNICIPAL INCOME - 3.81%
INSTITUTIONAL CLASS
Lipper New York Municipal Debt 3.15%
Funds AverageP
Consumer Price Index 3.32%
</TABLE>
+INITIAL OFFERING OF INSTITUTIONAL CLASS SHARES FOR GROWTH OPPORTUNITIES,
BALANCED, HIGH YIELD, STRATEGIC INCOME, GOVERNMENT INVESTMENT, SHORT
FIXED-INCOME, HIGH INCOME MUNICIPAL, AND SHORT-I NTERMEDIAT E
MUNICIPAL INCOME TOOK PLACE ON JULY 3, 1995. RETURNS PRIOR TO JULY 3, 1995,
ARE THOSE OF CLASS T SHARES, THE ORIGINAL CLASS OF THESE FUNDS AND INCLUDE
A CLASS T 12B-1 FEE (AT A THEN CURRENTLY APPLICABLE RATE OF 0.65% FOR
GROWTH OPPORTUNITIES AND BALANCED, 0.25% FOR HIGH YIELD, STRATEGIC INCOME,
GOVERNMENT INVESTMENT, AND HIGH INCOME MUNICIPAL, AND 0.15% FOR SHORT
FIXED-INCOME AND SHORT-INTERMEDIATE MUNICIPAL INCOME). INITIAL OFFERING OF
INSTITUTIONAL CLASS SHARES FOR STRATEGIC OPPORTUNITIES TOOK PLAC E ON
JULY 3, 1995. RETURNS PRIOR TO JULY 3, 1995, ARE THOSE OF CLASS T
SHARES AND INCLUDE A THEN CURRENTLY APPLICABLE CLASS T 12B-1 FEE OF 0.65%.
INITIAL OFFERING OF INSTITUTIONAL CLASS SHARES OF MUNICIPAL BOND TOOK PLACE
ON JULY 2, 1996. RETURNS PRIOR TO JULY 2, 1996, ARE THOSE OF INITIAL CLASS,
THE ORIGINAL CLASS OF THE FUND WHICH DOES NOT BEAR A 12B-1 FEE. INITIAL
OFFERING OF INSTITUTIONAL CLASS SHARES OF MORTGAGE SEC URITIES TOOK PLACE
ON FEBRUARY 28, 1997. RETURNS PRIOR TO THE INITIAL OFFERING DATE ARE
THOSE OF THE INITIAL CLASS, THE ORIGINAL CLASS OF THE FUND WHICH DOES NOT
BEAR A 12B-1 FEE.
[A] THE LIPPER GROWTH FUNDS AVERAGE CURRENTLY REFLECTS THE PERFORMANCE OF
OVER 669 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[B] THE LIPPER CAPITAL APPRECIATION FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 189 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[C] THE LIPPER EQUITY INCOME FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 160 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[D] THE LIPPER BALANCED FUNDS AVERAGE CURRENTLY REFLECTS THE PERFORMANCE OF
OVER 272 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[E] THE LIPPER HIGH CURRENT YIELD FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 148 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[F] THE LIPPER MULTI-SECTOR INCOME FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 51 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[G] THE LIPPER U.S. MORTGAGE FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 59 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[H] THE LIPPER GENERAL U.S. GOVERNMENT BOND FUNDS AVERAGE CURRENTLY
REFLECTS THE PERFORMANCE OF OVER 170 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[I] THE LIPPER INTERMEDIATE INVESTMENT GRADE BOND FUNDS AVERAGE CURRENTLY
REFLECTS THE PERFORMANCE OF OVER 176 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[J] THE LIPPER SHORT INVESTMENT GRADE BOND FUNDS AVERAGE CURRENTLY REFLECTS
THE PERFORMANCE OF OVER 95 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[K] THE LIPPER HIGH YIELD MUNICIPAL BOND FUNDS AVERAGE CURRENTLY REFLECTS
THE PERFORMANCE OF OVER 43 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[L] THE LIPPER GENERAL MUNICIPAL DEBT FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 225 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[M] THE LIPPER INTERMEDIATE MUNICIPAL DEBT FUNDS AVERAGE CURRENTLY REFLECTS
THE PERFORMANCE OF OVER 136 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[N] THE LIPPER SHORT MUNICIPAL DEBT FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 28 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[O] THE LIPPER NEW YORK MUNICIPAL DEBT FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 96 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
FIDELITY ADVISOR FUNDS:
CLASS A, CLASS T, CLASS B, CLASS C, INSTITUTIONAL CLASS, AND INITIAL CLASS
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C>
10.................................. Cover Page
..
11.................................. Cover Page
..
12.................................. Description of the Trust
..
13 Investment Policies and Limitations
a-c..............................
Portfolio Transactions
d.................................
14 Trustees and Officers
a-c..............................
15 a-c Trustees and Officers
.............................
16 a FMR; Portfolio Transactions
i..............................
Trustees and Officers
ii............................
Management Contracts
iii...........................
Management Contracts
b.................................
c, Contracts with FMR Affiliates
d.............................
Management Contracts
e.................................
Distribution and Service Plans
f.................................
*
g.................................
Description of the Trust
h.................................
Contracts with FMR Affiliates
i.................................
17 Portfolio Transactions
a-d.............................
e............................. *
18 Description of the Trust
a.................................
*
b.................................
19 Additional Purchase, Exchange and Redemption
a................................. Information
Valuation; Additional Purchase, Exchange and
b................................. Redemption Information
*
c.................................
20.................................. Distributions and Taxes
..
21 a, Contracts with FMR Affiliates; Distribution and
b............................. Service Plans
*
c.................................
22 a *
.............................
b Performance
................................
23.................................. Financial Statements
..
</TABLE>
* Not Applicable
FIDELITY ADVISOR FUNDS
CLASS A, CLASS T, CLASS B, CLASS C, INSTITUTIONAL CLASS, AND INITIAL CLASS
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 31, 1997
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the funds' current Prospectuses
(dated October 31, 1997) for Class A, Class T, Class B, Class C,
Institutional Class, and Initial Class shares (except Fidelity Advisor
Municipal Bond Fund: Initial Class and Fidelity Advisor Strategic
Opportunities Fund: Initial Class). Fidelity Advisor Municipal Bond Fund:
Initial Class and Fidelity Advisor Strategic Opportunities Fund: Initial
Class Prospectuses are dated February 28, 1997. Initial Class shares are
available only to current Initial Class shareholders. Please retain this
document for future reference. The funds' Annual Reports are separate
documents supplied with this SAI. To obtain a free additional copy of a
Prospectus or an Annual Report, please call Fidelity at 1-800-544-8888 or
your investment professional.
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TABLE OF CONTENTS PAGE
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
Special Considerations Affecting New York
Special Considerations Affecting California
Special Considerations Affecting Puerto Rico
Portfolio Transactions
Valuation
Performance
Additional Purchase, Exchange, and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contracts
Distribution and Service Plans
Contracts with FMR Affiliates
Description of the Trusts
Financial Statements
Appendix
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ACOM-ptb-0297-01
For more information on any Fidelity fund, including charges and expenses,
call or write for a free prospectus. Read it carefully before you invest or
send money.
GROWTH FUNDS
Fidelity Advisor TechnoQuantTM Growth Fund
Fidelity Advisor International Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth Opportunities Fund
Fidelity Advisor Strategic Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor High Income Municipal Fund
Fidelity Advisor Municipal Bond Fund
Fidelity Advisor Intermediate Municipal Income Fund
Fidelity Advisor Short-Intermediate Municipal Income Fund
Fidelity Advisor New York Municipal Income Fund
Fidelity Advisor California Municipal Income Fund
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)
TRANSFER AGENTS
Fidelity Investments Institutional Operations Company, Inc. (FIIOC) (Class
A, Class T, Class B, and Institutional Class - Taxable Funds)
UMB Bank, n.a. (UMB) (Class A, Class T, Class B, Institutional Class, and
Initial Class - Municipal Funds)
Fidelity Service Company, Inc. (FSC) (Initial Class - Taxable Funds)
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets or other circumstances will not be considered when determining
whether the investment complies with 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 (1940 Act)) of the fund.
However, except for the fundamental investment limitations listed below and
the policies restated in the "Fundamental Policies" paragraph on page , the
investment policies and limitations described in this SAI are not
fundamental and may be changed without shareholder approval.
TECHNOQUANTTM 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, or securities of
other investment companies) if, as a result, (a) more than 5% of the fund's
total assets would be invested in the securities of that issuer, or (b) the
fund would hold more than 10% of the outstanding voting securities of that
issuer;
(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 managed by Fidelity Management &
Research Company or an affiliate or successor 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 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.)
(vi) 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" on page
.
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 securities issued or guaranteed by the
U.S. Government, or any of its agencies or instrumentalities, or securities
of other investment companies) if, as a result, (a) more than 5% of the
fund's total assets would be invested in the securities of that issuer, or
(b) the fund would hold more than 10% of the outstanding voting securities
of that issuer;
(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 managed by Fidelity
Management & Research Company or an affiliate or successor 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 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 prices
at which they are valued.
(v) The fund does not currently intend to lend assets other than securities
to other parties, except by (a) lending money (up to 5% of the fund's net
assets) to a registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) acquiring loans, loan
participations, or other forms of direct debt instruments and, in
connection therewith, assuming any associated unfunded commitments of the
sellers. (This limitation does not apply to purchases of debt securities or
to repurchase agreements).
( vi) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company 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" on page
.
MID CAP 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 or securities of
other investment companies) if, as a result, (a) more than 5% of the fund's
total assets would be invested in the securities of that issuer, or (b) the
fund would hold more than 10% of the outstanding voting securities of that
issuer;
(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 managed by Fidelity Management &
Research Company or an affiliate or successor 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 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.)
(vi) 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" on page
.
EQUITY 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 or securities
of other investment companies) if, as a result, (a) more than 5% of the
fund's total assets would be invested in the securities of that issuer, or
(b) the fund would hold more than 10% of the outstanding voting securities
of that issuer;
(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 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);
(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, 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.
(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 managed by Fidelity
Management & Research Company or an affiliate or successor 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 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.)
(vi) 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" 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 i nstrumentalities, or securities of
other investment companies) if, as a result, (a) more than 5% of the
fund's total assets would be invested in the securities of that issuer, or
(b) the fund would hold more than 10% of the outstanding voting securities
of that issuer;
(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 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 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.)
(vi) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
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) with respect to 75% of the fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed by the
U.S. government or any of its agencies or instrumentalities or securities
of other investment companies) if, as a result, (a) more than 5% of the
fund's total assets would be invested in the securities of that issuer, or
(b) the fund would hold more than 10% of the outstanding voting securities
of that issuer;
(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 managed by Fidelity
Management & Research Company or an affiliate or successor 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 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.)
(vi) 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" on page
.
LARGE CAP 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 or securities of
other investment companies) if, as a result, (a) more than 5% of the fund's
total assets would be invested in the securities of that issuer, or (b) the
fund would hold more than 10% of the outstanding voting securities of that
issuer;
(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 managed by Fidelity Management &
Research Company or an affiliate or successor 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 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.)
(vi) 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" on page
.
INTERNATIONAL CAPITAL APPRECIATION 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, or securities of
other investment companies) if, as a result, (a) more than 5% of the fund's
total assets would be invested in the securities of that issuer, or (b) the
fund would hold more than 10% of the outstanding voting securities of that
issuer;
(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 managed by Fidelity Management &
Research Company or an affiliate or successor 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 15% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to lend assets other than securities
to other parties, except by (a) lending money (up to 5% of the fund's net
assets) to a registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) acquiring loans, loan
participations, or other forms of direct debt instruments and, in
connection therewith, assuming any associated unfunded commitments of the
sellers. (This limitation does not apply to purchases of debt securities or
to repurchase agreements.)
(vi) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company 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" on page
.
GROWTH & 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, or securities of
other investment companies) if, as a result, (a) more than 5% of the fund's
total assets would be invested in the securities of that issuer, or (b) the
fund would hold more than 10% of the outstanding voting securities of that
issuer;
(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 managed by Fidelity Management &
Research Company or an affiliate or successor 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 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.)
(vi) 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" on page
.
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 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 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.)
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" on page
.
BALANCED 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 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 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.)
(vi) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
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 objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) In order to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended, the fund
currently intends to comply with certain diversification limits imposed by
Subchapter M.
(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 (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.)
(vii) 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 purposes of limitation (i), Subchapter M generally requires the fund to
invest no more that 25% of its total assets in securities of any one issuer
and to invest at least 50% of its total assets so that no more than 5% of
the fund's total assets are invested in securities of any one issuer.
However, Subchapter M allows unlimited investments in cash, cash items,
government securities (as defined in Subchapter M) and securities of other
investment companies. These tax requirements are generally applied at the
end of each quarter of the fund's taxable year.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" 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 an underwriter within the meaning of the Securities
Act of 1933, in the disposition of restricted securities;
(5) purchase the securities 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 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 prices
at which they are valued.
(v) The fund does not currently intend to lend assets other than securities
to other parties, except by (a) lending money (up to 7.5% of the fund's net
assets) to a registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) acquiring loans, loan
participations, or other forms of direct debt instruments and, in
connection therewith, assuming any associated unfunded commitments of the
sellers. (This limitation does not apply to purchases of debt securities or
to repurchase agreements.)
(vi) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" 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 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 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 INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL:
(i) In order to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended, the fund
currently intends to comply with certain diversification limits imposed by
Subchapter M.
(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, 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 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 purposes of limitation (i), Subchapter M generally requires the fund to
invest no more that 25% of its total assets in securities of any one issuer
and to invest at least 50% of its total assets so that no more than 5% of
the fund's total assets are invested in securities of any one issuer.
However, Subchapter M allows unlimited investments in cash, cash items,
government securities (as defined in Subchapter M) and securities of other
investment companies. These tax requirements are generally applied at the
end of each quarter of the fund's taxable year.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" on page
.
MORTGAGE SECURITIES 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 any security if, as a result thereof, more than 25% of the
value of its total assets would be invested in the securities of companies
having their principal business activities in the same industry (this
limitation does not apply to securities issued or guaranteed by the United
States Government, its agencies or instrumentalities);
(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 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 portfolio for which FMR or an
affiliate serves as investment adviser or (ii) acquiring loans, loan
participations, or other forms of direct debt instruments and, in
connection therewith, assuming any associated unfunded commitments of the
sellers. (This limitation does not apply to purchases of debt securities or
to repurchase agreements.)
(vi) The fund does not currently intend to 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 and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" 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) 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 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); 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 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 lend assets other than securities
to other parties, except by (a) lending money (up to 7.5% of the fund's net
assets) to a registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser, or (b) acquiring loans, loan
participations, or other forms of direct debt instruments and, in
connection therewith, assuming any associated unfunded commitments of the
sellers. (This limitation does not apply to purchases of debt securities or
to repurchase agreements.)
(vi) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" on page
.
INTERMEDIATE 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) 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 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).
(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 lend assets other than securities
to other parties, except by (a) lending money (up to 7.5% of the fund's net
assets) to a registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) acquiring loans, loan
participations, or other forms of direct debt instruments and, in
connection therewith, assuming any associated unfunded commitments of the
sellers. (This limitation does not apply to purchases of debt securities or
to repurchase agreements.)
(vi) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" 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 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 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 portfolio for which FMR or an
affiliate serves as investment adviser or (ii) acquiring loans, loan
participations, or other forms of direct debt instruments and, in
connection therewith, assuming any associated unfunded commitments of the
sellers. (This limitation does not apply to purchases of debt securities or
to repurchase agreements.)
(vi) The fund does not currently intend to 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 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 engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(vi) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of investment limitations (1) and (5), 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.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" on page
.
MUNICIPAL 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) 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, 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.
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 engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
For purposes of limitations (1) and (5), 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.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" on page
.
INTERMEDIATE MUNICIPAL 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 its 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, 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 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);
(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; or
(9) invest in companies for the purpose of exercising control or
management.
(10) 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 managed by Fidelity Management &
Research Company or an affiliate or successor 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 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 engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(vi) 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 purposes of investment limitations (1) and (5), 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.
For the fund's limitations on futures contracts and options, see the
section entitled "Limitations on Futures and Options Transactions" on page
.
SHORT-INTERMEDIATE MUNICIPAL 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, 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); 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 managed by Fidelity Management &
Research Company or an affiliate or successor 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) In order to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended, the fund
currently intends to comply with certain diversification limits imposed by
Subchapter M.
(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 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 purposes of limitation (i), Subchapter M generally requires the fund to
invest no more than 25% of its total assets in securities of any one issuer
and to invest at least 50% of its total assets so that no more than 5% of
the fund's total assets are invested in securities of any one issuer.
However, Subchapter M allows unlimited investments in cash, cash items,
government securities (as defined in Subchapter M) and securities of other
investment companies. These tax requirements are generally applied at the
end of each quarter of the fund's taxable year.
For purposes of investment limitations (4) and (i), 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.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" on page
.
NEW YORK MUNICIPAL 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, 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); 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 managed by Fidelity Management &
Research Company or an affiliate or successor 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) In order to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended, the fund
currently intends to comply with certain diversification limits imposed by
Subchapter M.
(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 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 purposes of limitation (i), Subchapter M generally requires the fund to
invest no more than 25% of its total assets in securities of any one issuer
and to invest at least 50% of its total assets so that no more than 5% of
the fund's total assets are invested in securities of any one issuer.
However, Subchapter M allows unlimited investments in cash, cash items,
government securities (as defined in Subchapter M) and securities of other
investment companies. These tax requirements are generally applied at the
end of each quarter of the fund's taxable year.
For purposes of investment limitations (4) and (i), 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.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" on page
.
CALIFORNIA MUNICIPAL 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, 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); 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 managed by Fidelity Management &
Research Company or an affiliate or successor 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) In order to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended, the fund
currently intends to comply with certain diversification limits imposed by
Subchapter M.
(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 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 purposes of limitation (i), Subchapter M generally requires the fund to
invest no more than 25% of its total assets in securities of any one issuer
and to invest at least 50% of its total assets so that no more than 5% of
the fund's total assets are invested in securities of any one issuer.
However, Subchapter M allows unlimited investments in cash, cash items,
government securities (as defined in Subchapter M) and securities of other
investment companies. These tax requirements are generally applied at the
end of each quarter of the fund's taxable year.
For purposes of investment limitations (4) and (i), 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.
For the fund's limitations on futures and options transaction, see the
section entitled "Limitations on Futures and Options Transactions" on page
.
THE FOLLOWING PAGES CONTAIN MORE DETAILED INFORMATION ABOUT TYPES OF
INSTRUMENTS IN WHICH A FUND MAY INVEST, STRATEGIES FMR MAY EMPLOY IN
PURSUIT OF A FUND'S INVESTMENT OBJECTIVE, AND A SUMMARY OF RELATED RISKS.
FMR MAY NOT BUY ALL OF THESE INSTRUMENTS OR USE ALL OF THESE TECHNIQUES
UNLESS IT BELIEVES THAT DOING SO WILL HELP A FUND ACHIEVE ITS GOAL.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the 1940 Act. These transactions may 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 has established and periodically reviews
procedures applicable to transactions involving affiliated financial
institutions.
ASSET-BACKED SECURITIES represent interests in pools of consumer loans
(generally unrelated to mortgage loans) and most often are structured as
pass-through securities. Interest and principal payments ultimately depend
upon payment of the underlying loans by individuals, although the
securities may be supported by letters of credit or other credit
enhancements. The value of asset-backed securities may also depend on the
creditworthiness of the servicing agent for the loan pool, the originator
of the loans, or the financial institution providing the credit
enhancement.
CLOSED-END INVESTMENT COMPANIES. A fund may purchase the shares of
closed-end investment companies to facilitate investment in certain
countries. Shares of closed-end investment companies may trade at a premium
or a discount to their net asset value.
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. 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
the 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, the fund does not participate in further gains or losses with
respect to the security. If the other party to a delayed-delivery
transaction fails to deliver or pay for the securities, a fund could miss a
favorable price or yield opportunity, or 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.
DIRECT INVESTMENT IN MORTGAGES. Although Mortgage Securities has no current
intention to invest directly in mortgages, it may in the future invest up
to 10% of the value of total assets directly in mortgages securing
residential real estate. These mortgages are normally available from
lending institutions which group together a number of mortgages (usually 10
to 50) for resale and which act as servicing agent for the purchaser with
respect to, among other things, the receipt of principal and interest
payments. The vendor of such mortgages receives a fee from the fund for
acting as servicing agent. The vendor does not provide any insurance or
guarantees covering the repayment of principal or interest on the
mortgages. Unlike pass-through securities, these constitute direct
investment in mortgages inasmuch as the fund, rather than a financial
intermediary, becomes the mortgagee. At present, such investments are
considered to be illiquid by FMR. The fund will invest in such mortgages
only if FMR has determined through an examination of the mortgage loans and
their originators (which may include an examination of such factors as
percentage of family income dedicated to loan service and the relationship
between loan value and market value) that purchase of the mortgages should
not present a significant risk of loss to the fund.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations may
involve significant risks in addition to the risks inherent in U.S.
investments. 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.
Foreign investments involve a risk of local political, economic, or social
instability, military action or unrest, or adverse diplomatic developments,
and may be affected by actions of foreign governments adverse to the
interests of U.S. investors. Such actions may include 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
is no assurance that FMR will be able to anticipate these potential events
or counter their effects. These risks are magnified for investments in
developing countries, which may have relatively unstable governments,
economies based on only a few industries, and securities markets that trade
a small number of securities.
Economies of particular countries or areas of the world may differ
favorably or unfavorably from the economy of the United States. 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 an exchange 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 result in 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. 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.
Some foreign securities impose restrictions on transfer within the United
States or to U.S. persons. Although securities subject to such transfer
restrictions may be marketable abroad, they may be less liquid than foreign
securities of the same class that are not subject to such restrictions.
American Depositary Receipts (ADRs), as well as other "hybrid" forms of
ADRs, including European Depositary Receipts (EDRs) and Global Depositary
Receipts (GDRs), are certificates evidencing ownership of shares of a
foreign issuer. These certificates are issued by depository banks and
generally trade on an established market in the United States or elsewhere.
The underlying shares are held in trust by a custodian bank or similar
financial institution in the issuer's home country. The depository bank may
not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and
interest and corporate actions. ADRs are alternatives to directly
purchasing the underlying foreign securities in their national markets and
currencies. However, ADRs continue to be subject to many of the risks
associated with investing directly in foreign securities. These risks
include foreign exchange risk as well as the political and economic risks
of the underlying issuer's country.
F ANNIE MAES AND FREDDIE MACS are pass-through securities issued by the
Fannie Mae and the Federal Home Loan Mortgage Corporation (FHLMC),
respectively. Fannie Mae and FHLMC , which guarantee payment of interest
and principal on Fannie Maes and Freddie Macs, are federally chartered
corporations supervised by the U.S. Government and acting as governmental
instrumentalities under authority granted by Congress. Fannie Mae is
authorized to borrow from the U.S. Treasury to meet its obligations.
Fannie Maes and Freddie Macs are not backed by the full faith and
credit of the U.S. Government; however, their close relationship with the
U.S. Government makes them high quality securities with minimal credit
risks.
FEDERALLY TAXABLE OBLIGATIONS. Under normal conditions, the municipal funds
do not intend to invest in securities whose interest is federally taxable.
However, from time to time on a temporary basis, each municipal fund may
invest a portion of its assets in fixed-income obligations whose interest
is subject to federal income tax.
Should a municipal fund invest in federally taxable obligations, it would
purchase securities that, in FMR's judgment, are of high quality. These
would include those obligations issued or guaranteed by the U.S. Government
or its agencies or instrumentalities; obligations of domestic banks; and
repurchase agreements. The funds' standards for high-quality, taxable
obligations are essentially the same as those described by Moody's Investor
Service (Moody's) in rating corporate obligations within its two highest
ratings of Prime-1 and Prime-2, and those described by Standard & Poor's
(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. Proposals also may be introduced before state legislatures that
would affect the state tax treatment of the municipal funds' distributions.
If such proposals were enacted, the availability of municipal obligations
and the value of the municipal funds' holdings would be affected and the
Trustees would reevaluate the municipal funds' investment objectives and
policies.
FOREIGN CURRENCY TRANSACTIONS. A fund may conduct foreign currency
transactions on a spot (i.e., cash) or forward basis (i.e., by entering
into forward contracts to purchase or sell foreign currencies). Although
foreign exchange dealers generally do not charge a fee for such
conversions, they do realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency at one rate, while offering a
lesser rate of exchange should the counter-party desire to resell that
currency to the dealer. Forward contracts are customized transactions that
require a specific amount of a currency to be delivered at a specific
exchange rate on a specific date or range of dates in the future. Forward
contracts are generally traded in an interbank market directly between
currency traders (usually large commercial banks) and their customers. The
parties to a forward contract may agree to offset or terminate the contract
before its maturity, or may hold the contract to maturity and complete the
contemplated currency exchange. A fund may use currency forward contracts
for any purpose consistent with its investment objective.
The following discussion summarizes the principal currency management
strategies involving forward contracts that could be used by a fund. A fund
may also use swap agreements, indexed securities, and options and futures
contracts relating to foreign currencies for the same purposes.
A "settlement hedge" or "transaction hedge" is designed to protect a fund
against an adverse change in foreign currency values between the date a
security is purchased or sold and the date on which payment is made or
received. Entering into a forward contract for the purchase or sale of the
amount of foreign currency involved in an underlying security transaction
for a fixed amount of U.S. dollars "locks in" the U.S. dollar price of the
security. Forward contracts to purchase or sell a foreign currency may also
be used by a fund in anticipation of future purchases or sales of
securities denominated in foreign currency, even if the specific
investments have not yet been selected by FMR.
A fund may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For example,
if a fund owned securities denominated in pounds sterling, it could enter
into a forward contract to sell pounds sterling in return for U.S. dollars
to hedge against possible declines in the pound's value. Such a hedge,
sometimes referred to as a "position hedge," would tend to offset both
positive and negative currency fluctuations, but would not offset changes
in security values caused by other factors. A fund could also hedge the
position by selling another currency expected to perform similarly to the
pound sterling. This type of hedge, sometimes referred to as a "proxy
hedge," could offer advantages in terms of cost, yield, or efficiency, but
generally would not hedge currency exposure as effectively as a direct
hedge into U.S. dollars. Proxy hedges may result in losses if the currency
used to hedge does not perform similarly to the currency in which the
hedged securities are denominated.
A fund may enter into forward contracts to shift its investment exposure
from one currency into another. This may include shifting exposure from
U.S. dollars to a foreign currency, or from one foreign currency to another
foreign currency. This type of strategy, sometimes known as a
"cross-hedge," will tend to reduce or eliminate exposure to the currency
that is sold, and increase exposure to the currency that is purchased, much
as if a fund had sold a security denominated in one currency and purchased
an equivalent security denominated in another. Cross-hedges protect against
losses resulting from a decline in the hedged currency, but will cause a
fund to assume the risk of fluctuations in the value of the currency it
purchases.
Under certain conditions, SEC guidelines require mutual funds to set aside
appropriate liquid assets in a segregated custodial account to cover
currency forward contracts. As required by SEC guidelines, a fund will
segregate assets to cover currency forward contracts, if any, whose purpose
is essentially speculative. A fund will not segregate assets to cover
forward contracts entered into for hedging purposes, including settlement
hedges, position hedges, and proxy hedges.
Successful use of currency management strategies will depend on FMR's skill
in analyzing currency values. Currency management strategies may
substantially change a fund's investment exposure to changes in currency
exchange rates and could result in losses to a fund if currencies do not
perform as FMR anticipates. For example, if a currency's value rose at a
time when FMR had hedged a fund by selling that currency in exchange for
dollars, a fund would not participate in the currency's appreciation. If
FMR hedges currency exposure through proxy hedges, a fund could realize
currency losses from both the hedge and the security position if the two
currencies do not move in tandem. Similarly, if FMR increases a fund's
exposure to a foreign currency and that currency's value declines, a fund
will realize a loss. There is no assurance that FMR's use of currency
management strategies will be advantageous to a fund or that it will hedge
at appropriate times.
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.
FUNDS' RIGHTS AS SHAREHOLDERS. The funds do not intend to direct or
administer the day-to-day operations of any company. A fund, however, may
exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the Board of Directors, and
shareholders of a company when FMR determines that such matters could have
a significant effect on the value of the fund's investment in the company.
The activities 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
a company's direction or policies; seeking the sale or reorganization of
the company or a portion of its assets; or supporting or opposing
third-party takeover efforts. This area of corporate activity is
increasingly prone to litigation and it is possible that a fund could be
involved in lawsuits related to such activities. FMR will monitor such
activities with a view to mitigating, to the extent possible, the risk of
litigation against a fund and the risk of actual liability if a fund is
involved in litigation. No guarantee can be made, however, that litigation
against a fund will not be undertaken or liabilities incurred.
FUTURES AND OPTIONS. The following paragraphs pertain to futures and
options; Asset Coverage for Futures and Options Positions, Combined
Positions, Correlation of Price Changes, Futures Contracts, Futures Margin
Payments, Limitations on Futures and Options Transactions, Liquidity of
Options and Futures Contracts, Options and Futures Relating to Foreign
Currencies, OTC Options, Purchasing Put and Call Options, and Writing Put
and Call Options.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. Each 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.
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.
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 Index (S&P
500(registered trademark)). Futures can be held until their delivery dates,
or can be closed out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase a fund's exposure to positive and negative
price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When a fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of a fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of a fund, the fund may be
entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each fund (except
International Capital Appreciation) has filed and International Capital
Appreciation Fund intends to file a notice of eligibility for exclusion
from the definition of the term "commodity pool operator" with the
Commodity Futures Trading Commission (CFTC) and the National Futures
Associatio n, 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, each fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on each fund's investments in futures contracts and
options, and each fund's policies regarding futures contracts and options
discussed elsewhere in this SAI, may be changed as regulatory agencies
permit.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible 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.
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 the fund's investments exactly over time.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (OTC) (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.
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, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, 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, the
fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. 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, the fund assumes the obligation to pay the strike
price for the option's underlying instrument if the other party to the
option chooses to exercise it. When writing an option on a futures
contract, 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, the fund
must continue to be prepared to pay the strike price while the option is
outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would 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.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of a fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of a fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features) and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment).
Investments currently considered by a fund to be illiquid include
repurchase agreements not entitling the holder to payment of principal and
interest within seven days, non-government-stripped fixed-rate
mortgage-backed securities, 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 the fund may have to close out the option before
expiration.
In the absence of market quotations, illiquid investments are priced at
fair value as determined in good faith by a committee appointed by the
Board of Trustees. If, through a change in values, net assets or other
circumstances, a fund were in a position where more than 10% or 15% of its
net assets (see each fund's non-fundamental investment limitations) was
invested in illiquid securities, it would seek to take appropriate steps to
protect liquidity.
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. Indexed securities may have principal payments as
well as coupon payments that depend on the performance of one or more
interest rates. Their coupon rates or principal payments may change by
several percentage points for every 1% interest rate change. A
mortgage-indexed security, for example, could be synthesized to replicate
the performance of mortgage securities and the characteristics of direct
ownership. 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
United States 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.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive order
issued by the SEC, each fund has received permission to lend money to, and
borrow money from, other funds advised by FMR or its affiliates. High
Income Municipal, Municipal Bond, Intermediate Municipal Income,
Short-Intermediate Municipal Income, New York Municipal Income, and
California Municipal Income currently intend to participate in this program
only as borrowers. A fund will borrow through the program only when the
costs are equal to or lower than the cost of bank loans. Interfund loans
and borrowings normally extend overnight, but can have a maximum duration
of seven days. Loans may be called on one day's notice. A fund will lend
through the program only when the returns are higher than those available
from an investment in repurchase agreements. A fund may have to borrow from
a bank at a higher interest rate if an interfund loan is called or not
renewed. Any delay in repayment to a lending fund could result in a lost
investment opportunity or additional borrowing costs.
INVERSE FLOATERS have variable interest rates that typically move in the
opposite direction from prevailing short-term interest rate levels - rising
when prevailing short-term interest rates fall, and vice versa. This
interest rate feature can make the prices of inverse floaters considerably
more volatile than bonds with comparable maturities.
ISSUER LOCATION. 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. The issuer of a security is considered to be located in a
particular country if: (1) the security is issued or guaranteed by the
government of the country or any of its agencies, political subdivisions,
or instrumentalities, (2) the security has its primary trading market in
that country; or (3) the issuer is organized under the laws of the country,
derives at least 50% of its revenues or profits from goods sold,
investments made or services performed in the country, or has at least 50%
of its assets located in the country.
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, a 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 a 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.
A fund will set aside appropriate liquid assets in a segregated custodial
account to cover its potential obligations under standby financing
commitments.
Each fund limits the amount of total assets that it will invest in any one
issuer or in issuers within the same industry (see each fund's investment
limitations). For purposes of these limitations, a fund generally will
treat the borrower as the "issuer" of indebtedness held by the fund. In the
case of loan participations where a bank or other lending institution
serves as financial intermediary between a fund and the borrower, if the
participation does not shift to the fund the direct debtor-creditor
relationship with the borrower, SEC interpretations require 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.
LOWER-QUALITY DEBT SECURITIES. A fund may purchase lower-quality debt
securities that have poor protection with respect to the payment of
interest and repayment of principal. These securities are often considered
to be speculative and involve greater risk of loss or price changes due to
changes in the issuer's capacity to pay. The market prices of lower-quality
debt securities may fluctuate more than those of higher-quality debt
securities and may decline significantly in periods of general economic
difficulty, which may follow periods of rising interest rates.
While the market for high-yield corporate debt securities has been in
existence for many years and has weathered previous economic downturns, the
1980s brought a dramatic increase in the use of such securities to fund
highly leveraged corporate acquisitions and restructurings. Past experience
may not provide an accurate indication of the future performance of the
high-yield bond market, especially during periods of economic recession.
The market for lower-quality debt securities may be thinner and less active
than that for higher-quality debt securities, which can adversely affect
the prices at which the former are sold. If market quotations are not
available, lower-quality debt securities will be valued in accordance with
procedures established by the Board of Trustees, including the use of
outside pricing services. Judgment plays a greater role in valuing
high-yield 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 dispose of these securities.
Since the risk of default is higher for lower-quality debt securities,
FMR's research and credit analysis are an especially important part of
managing securities of this type held by a fund. In considering investments
for a 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.
A 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.
LOWER-QUALITY MUNICIPAL SECURITIES. A fund may invest a portion of its
assets in lower-quality municipal securities as described 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.
A 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.
MORTGAGE-BACKED SECURITIES. A fund may purchase mortgage-backed securities
issued by government and non-government entities such as banks, mortgage
lenders, or other financial institutions. A mortgage-backed security is an
obligation of the issuer backed by a mortgage or pool of mortgages or a
direct interest in an underlying pool of mortgages. Some mortgage-backed
securities, such as collateralized mortgage obligations (CMOs), make
payments of both principal and interest at a variety of intervals; others
make semiannual interest payments at a predetermined rate and repay
principal at maturity (like a typical bond). Mortgage-backed securities are
based on different types of mortgages including those on commercial real
estate or residential properties. Other types of mortgage-backed securities
will likely be developed in the future, and a fund may invest in them if
FMR determines they are consistent with 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.
MUNICIPAL LEASES and participation interests therein may take the form of a
lease, an installment purchase, or a conditional sale contract, and are
issued by state and local governments and authorities to acquire land or 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 a 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.
MUNICIPAL MARKET DISRUPTION RISK. The value of municipal securities may be
affected by uncertainties in the municipal market related to legislation or
litigation involving the taxation of municipal securities or the rights of
municipal securities holders in the event of a bankruptcy. Municipal
bankruptcies are relatively rare, and certain provisions of the U.S.
Bankruptcy Code governing such bankruptcies are unclear and remain
untested. Further, the application of state law to municipal issuers could
produce varying results among the states or among municipal securities
issuers within a state. These legal uncertainties could affect the
municipal securities market generally, certain specific segments of the
market, or the relative credit quality of particular securities. Any of
these effects could have a significant impact on the prices of some or all
of the municipal securities held by a fund.
MUNICIPAL SECTORS:
EDUCATION. In general, there are two types of education-related bonds;
those issued to finance projects for public and private colleges and
universities, and those representing pooled interests in student loans.
Bonds issued to supply educational institutions with funds are subject to
the risk of unanticipated revenue decline, primarily the result of
decreasing student enrollment or decreasing state and federal funding.
Among the factors that may lead to declining or insufficient revenues 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 through its
guaranteed student loan program. 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 during 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.
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 generally
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.
TRANSPORTATION. Transportation debt may be issued to finance the
construction of airports, toll roads, highways or other transit facilities.
Airport bonds are dependent on the general stability of the airline
industry and on the stability of a specific carrier that uses the airport
as a hub. Air traffic generally tracks broader economic trends and is also
affected by the price and availability of fuel. Toll road bonds are also
affected by the cost and availability of fuel as well as toll levels, the
presence of competing roads, and the general economic health of the area.
Fuel costs and availability also affect other transportation-related
securities, as does the presence of alternate forms of transportation, such
as public transportation.
WATER AND SEWER. Water and sewer revenue bonds are often considered to have
relatively secure credit as a result of their issuer's importance, monopoly
status, and generally unimpeded ability to raise rates. Despite this, lack
of water supply due to insufficient rain, run-off, or snow pack is a
concern that has led to past defaults. Further, public resistance to rate
increases, costly environmental litigation, and Federal environmental
mandates are challenges faced by issuers of water and sewer bonds.
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.
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.
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. To protect a fund
from the risk that the original seller will not fulfill its obligation, the
securities are held in an account of the fund at a bank, marked-to-market
daily, and maintained at a value at least equal to the sale price plus the
accrued incremental amount. While it does not presently appear possible to
eliminate all risks from these transactions (particularly the
possibility that the value of the underlying security will be less than the
resale price, as well as delays and costs to a fund in connection with
bankruptcy proceedings), it is each fund's current policy to engage in
repurchase agreement transactions with parties whose creditworthiness has
been reviewed and found satisfactory by FMR.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part of the
registration expense and a considerable period may elapse between the time
it decides to seek registration and the time it may be permitted to sell a
security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, a fund might obtain a
less favorable price than prevailed when it decided to seek registration of
the security.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a 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.
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)
the fund must receive 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of
the collateral; (3) after giving notice, the fund must be able to terminate
the loan at any time; (4) the fund must receive reasonable interest on the
loan or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) the fund may pay only reasonable
custodian fees in connection with the loan; and (6) the Board of Trustees
must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with
the borrower.
Cash received through loan transactions may be invested in 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).
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.
When a fund enters into a short sale, 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 them aside while the short sale is outstanding. A fund
will incur transaction costs, including interest expense, in connection
with opening, maintaining, and closing short sales.
SOVEREIGN DEBT OBLIGATIONS. A fund may purchase sovereign debt instruments
issued or guaranteed by foreign governments or their agencies, including
debt of Latin American nations or other developing countries. Sovereign
debt may be in the form of conventional securities or other types of debt
instruments such as loans or loan participations. Sovereign debt of
developing countries may involve a high degree of risk, and may be in
default or present the risk of default. Governmental entities responsible
for repayment of the debt may be unable or unwilling to repay principal and
interest when due, and may require renegotiation or rescheduling of debt
payments. In addition, prospects for repayment of principal and interest
may depend on political as well as economic factors.
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
purchase 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.
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.
SWAP AGREEMENTS. Swap agreements can be individually negotiated and
structured to include exposure to a variety 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 a fund's investments and its share price and yield.
The most significant factor in the performance of swap agreements is the
change in the specific interest rate, currency, or other factors that
determine the amounts of payments due to and from a fund. If a swap
agreement calls for payments by a fund, the fund must be prepared to make
such payments when due. In addition, if the counterparty's creditworthiness
declined, the value of a swap agreement would be likely to decline,
potentially resulting in losses. A fund expects to be able to eliminate its
exposure under swap agreements either by assignment or other disposition,
or by entering into an offsetting swap agreement with the same party or a
similarly creditworthy party.
A fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If a fund
enters into a swap agreement on a net basis, it will segregate assets with
a daily value at least equal to the excess, if any, of the fund's accrued
obligations under the swap agreement over the accrued amount the fund is
entitled to receive under the agreement. If a fund enters into a swap
agreement on other than a net basis, it will segregate assets with a value
equal to the full amount of the fund's accrued obligations under the
agreement.
TENDER OPTION BONDS are created by coupling an intermediate-or long-term,
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.
VARIABLE OR FLOATING RATE OBLIGATIONS, including certain participation
interests in municipal instruments, have interest rate adjustment formulas
that help stabilize their market values. Many variable and floating rate
instruments also carry demand features that permit a fund to sell them at
par value plus accrued interest on short notice.
In many instances 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. The funds consider variable rate instruments structured in this
way (Participating VRDOs) to be essentially equivalent to other VRDOs they
purchase. The IRS has not ruled whether the interest on Participating VRDOs
is tax-exempt, and, accordingly, the funds intend to purchase these
instruments based on opinions of bond counsel. The funds may also invest in
fixed-rate bonds that are subject to third party puts and in participation
interests in such bonds held by a bank in trust or otherwise.
WARRANTS are securities that give a fund the right to purchase equity
securities from the issuer at a specific price (the strike price) for a
limited period of time. The strike price of warrants typically is much
lower than the current market price of the underlying securities, yet they
are subject to similar price fluctuations. As a result, warrants may be
more volatile investments than the underlying securities and may offer
greater potential for capital appreciation as well as capital loss.
Warrants do not entitle a holder to dividends or voting rights with respect
to the underlying securities and do not represent any rights in the assets
of the issuing company. Also, the value of the warrant does not necessarily
change with the value of the underlying securities, and a warrant ceases to
have value if it is not exercised prior to expiration date. These factors
can make warrants more speculative than other types of investments.
ZERO COUPON BONDS do not make interest payments; instead, they are sold at
a deep discount from their face value and are redeemed at face value when
they mature. Because zero coupon bonds do not pay current income, their
prices can be very volatile when interest rates change. In calculating its
dividends, a fund takes into account as income a portion of the difference
between a zero coupon bond's purchase price and its face value.
A broker-dealer creates a DERIVATIVE ZERO by separating the
interest and principal components of a U.S. Treasury security and selling
them as two individual securities. CATS (Certificates of Accrual on
Treasury Securities), TIGRs (Treasury Investment Growth Receipts), and TRs
(Treasury Receipts) are examples of derivative zeros.
The Federal Reserve Bank creates STRIPS (Separate Trading of
Registered Interest and Principal of Securities) by separating the interest
and principal components of an outstanding U.S. Treasury bond and selling
them as individual securities. Bonds issued by the Resolution Funding
Corporation (REFCORP) and the Financing Corporation (FICO) can also be
separated in this fashion. ORIGINAL ISSUE ZEROS are zero coupon
securities originally issued by the U.S. Government, a government agency,
or a corporation in zero coupon form.
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 . The companies in which
a fund may invest may include those involved in the energy industry,
industrial materials (chemicals, base metals, timber, and paper), and
agricultural materials (grain cereals). The securities of companies in the
energy industry are subject to changes in value and dividend yield which
depend, to a large extent, on the price and supply of energy fuels. Rapid
price and supply fluctuations may be caused by events relating to
international politics, energy conservation, and the success of exploration
projects. Canada is one of the world's leading industrial countries, as
well as a major exporter of agricultural products. Canada is rich in
natural resources such as zinc, uranium, nickel, gold, silver, aluminum,
iron, and copper. Forest covers over 44% of its land area, making Canada a
leading world producer of newsprint. The economy of Canada is strongly
influenced by the activities of companies and industries involved in the
production and processing of natural resources. Canada is a major producer
of hydroelectricity, oil, and gas. The business activities of companies in
the energy field may include the production, generation, transmission,
marketing, control, or measurement of energy or energy fuels. Economic
prospects are changing due to recent government attempts to reduce
restrictions against foreign investment.
Canadian securities are not considered by FMR to have the same level of
risk as other nation s ' securities. Canadian and U.S. companies are
generally subject to similar auditing and accounting procedures, and
similar government supervision and regulation. Canadian markets are more
liquid than many other foreign markets and share similar characteristics
with U.S. markets. The political system is more stable than in some other
foreign countries, and the Canadian dollar is generally less volatile
relative to the U.S. dollar.
Many factors affect and could have an adverse impact on the financial
condition of Canada, including social, environmental, and economic
conditions; factors which are not within the control of Canada. In Canada,
the pace of economic recovery slowed markedly in 1995 owing to the
tightening of monetary conditions early in the year and the risk premiums
in interest rates that resulted from political and economic uncertainties,
as well as the economic slowdown in the United States. Following the
referendum on Quebec sovereignty in October 1995, confidence improved and
interest rates fell significantly, which should permit the pace of economic
activity to pick up during 1996. Fiscal imbalances have diminished
considerably in recent years but the federal and provincial governments
will need to ensure that further consolidation is achieved in 1996 and over
the medium term. Inflation has remained low, which provides some
flexibility for further easing of monetary policy if warranted by cyclical
considerations and by further progress on the fiscal front. Overall,
conditions are good for Canada's expansion to proceed at a healthy rate.
The U.S. - Canada Free Trade Agreement which became effective in
January 1989, will be phased in over a period of 10 years. This agreement
will remove tariffs on U.S. technology and Canadian agricultural products
in addition to removing trade barriers affecting other important sectors of
each country's economy. Relations with the U.S. are likely to be further
strengthened by the implementation of the North American Free Trade
Agreement, which came into effect in January 1994.
The majority of new equity issues or initial public offerings in Canada are
through underwritten offerings. The funds may elect to participate in these
issues.
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICA
Latin America is a region rich in natural resources such as oil, copper,
tin, silver, iron ore, forestry, fishing, livestock, and agriculture. The
region has a large population (over 350 million) representing a large
domestic market. The region has been transitional over the last five years
from the stagnant 1980s, which were characterized by poor economic
policies, higher international interest rates, and limited access to new
foreign capital.
High inflation and low economic growth have given way to stable, manageable
inflation rates and higher economic growth. Changes in political
leadership, the implementation of market-oriented economic policies, such
as privatization, trade reform and monetary reform have been among the
recent steps taken to modernize the Latin American economies and to
regenerate growth in the region. Various trade agreements have also been
formed within the region such as the Andean Pact, Mercosur and the North
America Free Trade Agreement (NAFTA). The largest of these is NAFTA, which
was implemented on January 1, 1994.
Latin American equity markets can be extremely volatile and in the past
have shown little correlation with the U.S. market. Currencies are
typically weak, but most are now relatively free floating, and it is not
unusual for the currencies to undergo wide fluctuations in value over short
periods of time due to changes in the market.
Mexico's economy has been transformed significantly over the last 6-7
years. In the past few years the government has sold the telephone company,
the major steel companies, the banks and many other state-owned
enterprises. The major state ownership remaining is in the oil sector and
the electricity sector. The United States is Mexico's major trading
partner, accounting for two-thirds of its exports and imports. The
government, in consultation with international economic agencies, is
implementing programs to stabilize the economy and foster growth.
In the early 1980s Mexico experienced a foreign debt crisis. By 1987,
foreign debt had reached prohibitive levels, accounting for 90 to 95
percent of GDP, thus draining Mexico of all its resources. By the end of
1994, a large current account deficit, fueled in part by expansionary
policy, and the burden of its large national debt forced the Mexican
government to devalue the peso, triggering a severe crisis of confidence.
Both the crisis and the measures taken to stabilize the economy since, have
led to severely reduced domestic demand, which has been only partially
offset by positive trade-related activity. Following a difficult year that
saw real output contract by almost 7 percent, the recovery that had begun
gathered strength by late 1996. There are still risks arising from
fragility in the banking sector, and continuing fiscal discipline will be
needed to maintain market confidence.
Brazil entered the 1990s with declining real growth, runaway inflation, an
unserviceable foreign debt of $122 billion, and a lack of policy direction.
Over the past few years, Brazil has been able to stabilize its domestic
economy through a relentless process of balancing the government budget,
the privatization of state enterprises, deregulation and reduction of red
tape and introducing greater competition into the domestic business
environment. Monthly inflation was brought down from 43 percent in the
first half of 1994 to 1.5 percent in 1995. This reduction reflects the
success of the Real Plan, which included the elimination of most forms of
backward-looking indexation, the introduction of a new currency, and tight
credit policy, which subsequently led to a nominal appreciation of the
exchange rate. A major long-run strength is Brazil's natural resources.
Iron ore, bauxite, tin, gold, and forestry products make up some of
Brazil's basic natural resource base, which includes some of the largest
mineral reserves in the world. In terms of population, Brazil is the
fifth-largest in the world with about 154+ million people and represents a
huge domestic market.
Chile, like Brazil, is endowed with considerable mineral resources, in
particular copper. Economic reform has been ongoing in Chile for at least
15 years, but political democracy has only recently returned to Chile.
Privatization of the public sector beginning in the early 1980s has
bolstered the equity market and given Chile the most competitive and
successful economy in Latin America. A well organized pension system has
created a long-term domestic investor base. Chile tightened its monetary
policy late in 1995 amid signs of overheating and 1996 GDP growth slowed
while inflation moderated.
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. Privatization is
ongoing and should reduce the amount of external debt outstanding. The
markets for labor, capital and goods and services have been deregulated.
Nearly all non-tariff barriers and export taxes have been eliminated, the
tariff structure simplified and tariffs sharply reduced. In the first
months of 1995 the government had to struggle to prevent a Mexican-style
collapse of the economy. A significant adjustment of the fiscal stance,
together with a restructuring of the banking system, particularly the
provincial banks, helped contain the spillover effects of the crisis in
Mexico. The government vowed to maintain a restrictive fiscal policy and
the peso's convertibility to the U.S. dollar after the recent resignation
of Domingo Cavallo, the Economy Minister who masterminded the most
successful reform program in Argentina's post-World War II history, and
this commitment is seen as the key to the country's economic stability.
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, were increased in order to
reduce subsidies. However, economic conditions worsened in 1995, as the
government failed to reduce the fiscal deficit, and investment stagnated.
Prospects for an improvement in economic situation in 1997 depend on the
adoption of a credible exchange rate policy, the removal of controls,
strengthening the fiscal position through measures such as privatization,
and addressing the problems of the banking sector.
EMERGING MARKETS: LATIN AMERICA
MARKET CAPITALIZATION IN U.S. DOLLARS
DECEMBER 1995
Billions:
Argentina $38
Brazil 148
Chile 73
Colombia 17
Mexico 91
Peru 12
Venezuela 4
Source: The LGT Guide to World Equity Markets, 1996
For national stock market performance, please see the section on
Performance beginning on page .
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 success of market reforms and a surge in infrastructure spending have
fueled rapid growth in many developing countries in Asia. Rapidly rising
household incomes have fostered large middle classes and new waves of
consumer spending. Increases in infrastructure spending and consumer
spending have made domestic demand the growth engine for these countries.
Thus, their growth now depends less upon exports to OECD countries. While
exports may no longer be the sole source of growth for developing
economies, improved competitiveness in export markets has contributed to
growth in many of these nations. The increased productivity of many Asian
countries has enabled them to achieve, or continue, their status as top
exporters while improving their national living standards.
The emerging market economies of Asia are likely to remain particularly
buoyant, although growth may likely moderate in several of them. This
should help to alleviate inflationary pressures and reduce current account
imbalances associated in part with large private capital inflows.
Nevertheless, actions already taken in Indonesia, Malaysia, and Thailand to
dampen domestic demand may need to be followed up by additional measures of
restraint.
Thailand has one of the fastest-growing economies in the region, with over
8% average growth in recent years. The economy has until now been run on a
strictly centralist principle, with five-year targets for most product
sectors, but policies have now been relaxed to allow foreign companies into
the market. Most of the Thai population rely on agriculture, largely in a
subsistence capacity: rice, sugar, maize and vegetables are grown for the
home market, while palm oil, fishing and (until the recent ban) timber
extraction have been the main export crops. Industry is moderately
developed but revolves around primary commodity processing for the local
market. The major exception is the minerals sector, which contributes over
half of the country's wealth: tin, lead, iron, tungsten, antimony and
lignite are extracted for export. There is a small and growing tourist
industry, but the sector was adversely affected by political uncertainties
in recent years. In mid-1995, the ruling Democrat Party lost the support of
one of the four coalition partners, it resigned and was replaced in a full
election by the opposition Chart Thai Party. However, King Bhumibol
Adulyadej has been forthright in his condemnation of the new government,
sparking fears of a constitutional challenge.
Hong Kong's impending return to Chinese dominion on July 1, 1997, has not
initially had a positive effect on its economic growth which was vigorous
in the 1980s. 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 such developments, which in turn can
affect markets and business performance. In preparation for 1997, Hong Kong
has continued to develop trade with China, where it is the largest foreign
investor, while also maintaining its long-standing export relationship with
the United States. Spending on infrastructure improvements is a significant
priority of the colonial government while the private sector continues to
diversify abroad based on its position as an established international
trade center in the Far East. It is important to note that a substantial
portion of the companies listed on the Hong Kong Stock Exchange are
involved in real estate-related business.
China's economy has grown at the extraordinary rate of 10% per year on
average over the past decade with the industrial segment leading the way.
China's economic growth itself has been characterized by spurts of almost
uncontrolled growth alternating with periods of harsh austerity measures,
causing inefficiencies and dislocations within China, including troublesome
inflation rates of over 16% per year over the past five years. Foreign
trading is limited to a special class of shares (Class B) which were
created for that purpose, and the government must approve sales of Class B
shares among foreign investors.
China is greatly dependent on foreign trade, particularly with Japan, the
United States, and Germany. If political events become severe in China,
there is always the danger that the United States or other nations could
alter their trade stance towards China, which could hurt its economy by
reducing exports. In addition, the strength of the economy and the weakness
of the government could lead to substantially higher inflation in coming
years, which would erode investors' earnings through the mechanism of
changing rates of currency exchange. A tightening in the money supply as
well as some supply-side constraints on the very rapid growth of exports in
1995 served to discourage foreign investment and has contributed to lower
prices for Class B shares. However, due to lax enforcement of regulatory
policies, Class B shares have been opened to local investors and their
prices roughly doubled in November 1996.
In terms of GDP, industrial standards and level of education, South Korea
is second only to Japan in Asia. It enjoys the benefits of a diversified
economy with well-developed sectors in electronics, automobiles, textiles
and shoe manufacture, steel and shipbuilding among others. The driving
force behind the economy's dynamic growth has been the planned development
of an export-oriented economy in a vigorously entrepreneurial society. Real
GDP grew about 9.5% in 1995. Recent volatility of the political scene is
unlikely to deflect continued economic growth. Both Koreas joined the
United Nations separately in late 1991, creating another forum for
negotiation and joint cooperation. Reunification of North Korea and South
Korea could have a detrimental effect on the economy of South Korea.
Indonesia is a mixed economy with many socialist institutions and central
planning but with a recent emphasis on deregulation and private enterprise.
Like Thailand, Indonesia has extensive natural wealth yet with a large and
rapidly increasing population. Dependent on oil exports during the 1980s,
crude oil alone contributes 80% of all foreign exchange revenues.
Indonesia's economy is growing very rapidly and the Suharto regime is
attempting to move away from dependence on oil. However, the country
remains generally very poor and has only a limited potential domestic
market for consumer goods. Foreign investment regulations were relaxed in
1994 and 1995, in an effort to stimulate growth.
Malaysia has one of the fastest-growing economies in the Asian-Pacific
region. Rapid industrialization is transforming the economy away from its
traditional agricultural base, and in the process it is creating major new
opportunities for providers of consumer goods and services. Malaysia has
become the world's top producer and exporter of semiconductor devices.
Meanwhile, the high import content of newly established, fast-growing
manufacturing industries and Malaysian consumers' high marginal propensity
to import, has resulted in a high current-account deficit (10% of GDP),
which may have a negative impact on equity performance.
Singapore has an open entrepreneurial economy with strong service and
manufacturing sectors and excellent international trading links derived
from its history. Singapore's economy has boomed since the 1960s, thanks to
the government's policy of encouraging highly skilled and hence high
value-added manufacturing facilities. Per capita GDP is among the highest
in Asia. However, the country keeps a tight rein on imports and engages in
extensive regulation of the economy, in manufacturing in particular.
Although financial services now contribute almost as much to the economy as
manufacturing, 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 1994, the growth
rate in Japan slowed to 0.6% and its budget showed a deficit of 7.8% of
GDP. The boom in Japan's equity and property markets during the expansion
of the late 1980s supported high rates of investment and consumer spending
on durable goods, but both of these components of demand have now retreated
sharply following the decline in asset prices. This led to major
bankruptcies in the financial sector that have continued through the end of
1996. Economic activity now appears to be picking up in Japan after
protracted sluggishness that has left the economy with considerable margins
of unused resources. The supportive stance of both monetary and fiscal
policies and the correction of the yen's excessive appreciation in early
1995 helped the recovery to continue. Confidence in the financial system
has begun to improve somewhat with the announcement of a strategy for
resolving the financial problems of Japanese banks, steps to deal more
effectively with failed institutions, and plans to strengthen banking
supervision. Nevertheless, extricating financial institutions from their
bad loans problem could act as a drag on the pace of recovery. Fiscal
policy is appropriately aimed at providing continuing support in 1996 but
budgetary consolidation will need to resume when the recovery gathers
enough momentum to permit a withdrawal of stimulus.
In addition to a cyclical downturn, Japan is suffering through structural
adjustments. Like the Europeans, the Japanese have seen a deterioration in
their competitiveness due to high wages, a strong currency and structural
rigidities. Japan has also become a mature industrial economy and, as a
result, will see its long-term growth rate slow down over the next ten
years. Finally, Japan is reforming its political process and deregulating
its economy. This has brought about turmoil, uncertainty and a crisis of
confidence.
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.
Australia has a prosperous Western-style capitalist economy, with a per
capita GDP comparable to levels in industrialized Western European
countries. Economic growth accelerated markedly in 1994 as robust domestic
spending boosted activity. However, business investment remains weak. The
many setbacks since the 1970s have resulted primarily from the loss of
Australia's almost guaranteed export markets in Britain, after the latter's
accession to the European Union, but also from the slump in world mineral
prices and from the government's failure to reduce public spending.
Unemployment remains uncompromisingly high, and there are few signs of a
change at present. Much of the most dominant activity in Australia is
farming, especially of wheat, and sheep rearing: together, the two
contribute more than half of the country's export revenues. Minerals
provide the next most significant source of foreign exchange, although the
industry will remain vulnerable to fluctuations in the state of the world
minerals markets. Most recently, oil and gas development has been
proceeding at a particularly rapid pace. Manufacturing has moved away from
the processing of agricultural and mineral raw materials: there is a wide
range of often sophisticated engineering activity, and Australia is a very
large producer of motor vehicles.
EMERGING MARKETS: ASIA
MARKET CAPITALIZATION IN U.S. DOLLARS
DECEMBER 1995
Billions:
India $183
Indonesia 66
Korea 182
Malaysia 223
Pakistan 10
Philippines 59
Sri Lanka 2
Taiwan 187
Thailand 143
Source: The LGT Guide to World Equity Markets, 1996
For national stock market performance, please see the section on
Performance beginning on page .
REAL GDP ANNUAL RATE OF GROWTH 1995
China 10.2%
Hong Kong 5.0
India 6.2
Indonesia 8.1
Japan 0.9
Korea 9.0
Malaysia 9.6
Philippines 4.8
Singapore 8.9
Taiwan 6.4
Thailand 8.6
Source: World Economic Outlook, May 1996
SPECIAL CONSIDERATIONS AFFECTING EUROPE
New developments surrounding the creation of a unified common market in
Europe have helped to reduce physical and economic barriers, promoting the
free flow of goods and services throughout western Europe. These new
developments could make this new unified market one of the largest in the
world. However, growth slowed more markedly than expected during 1995 in
the region, leading to further increases in unemployment in some countries
from already high levels and also to fears of a new economic downturn. The
most pronounced deterioration in cyclical conditions since early 1995 has
been in Germany, France, several other countries closely linked to the
deutsche mark, and Switzerland. In response, short-term interest rates have
been reduced significantly and several countries have taken various fiscal
and structural measures to revive confidence and stimulate job creation.
The timing and strength of the expected pickup in activity in these
countries is somewhat uncertain, but the conditions appear to be in place
for a quickening in the pace of economic growth during 1997. A
strengthening of activity in these countries is essential to put
unemployment securely on a downward path and to facilitate fiscal
consolidation in accordance with the agreed timetable for Economic and
Monetary Union (EMU). Conversely, a prolonged period of lackluster growth
could exacerbate doubts about the EMU timetable and might lead to tensions
in financial markets.
The eastern European countries, after several years of declining output,
have generally shown dramatic growth in 1994 and 1995. Despite formidable
obstacles and major differences among countries and regions, many nations
are making substantial progress in their efforts to become market-oriented
economies. Poland, the Czech and Slovak Republics, and Slovenia, have
achieved some of the most impressive results. Disciplined financial
policies, structural reforms, trade liberalization, and rapid growth of
trade, especially with western Europe, are important factors contributing
to the rapid transformation that is taking place in these economies. Many
of the countries that are less advanced in the transition, including some
of the former Soviet republics, have made significant progress with
structural reform, including price liberalization, privatization, and the
dismantling of trade barriers. There has been progress toward macroeconomic
stability, although the sustainability of recent reductions in inflation is
in doubt in some cases. Output appears to have bottomed out during 1995 in
Russia, but political instability in 1996 dampened prospects for a quick
economic recovery. Economic prospects have also improved in Kazakstan, the
Kyrgyz Republic, Moldova, Armenia, Georgia, and Uzbekistan. Ukraine made
considerable progress with stabilization and systemic reform in 1995; in
the absence of policy slippage, the decline in output should bottom out in
1996. In Belarus, Tajikistan, and Turkmenistan, where reform and
stabilization efforts have been inadequate thus far, the contraction of
output may well continue. Armed conflicts continue to delay the necessary
reforms in several other countries, but throughout the former Yugoslavia
prospects for recovery have now improved following the cessation of
hostilities in Bosnia and Herzegovina.
Notwithstanding the continued economic difficulties in many countries,
recent positive developments offer hope for a cooperative growth strategy
in the near term, which could also permit a strengthening of global
economic performance over the medium term. Efforts to enhance assistance to
countries affected by the transition to market-based trading systems
occurring in central Europe and the former Soviet Union, and to low-income
countries to support strengthened stabilization and restructuring efforts,
are moving forward. Many of the transition countries have achieved
considerable progress with macroeconomic stabilization and reform, and
fruits of their efforts to transform their economies are increasingly
visible.
The European Union (EU) consists of 15 member states including Belgium,
Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands,
Portugal, Spain, the United Kingdom, Austria, Finland and Sweden. In 1986,
the member states of the EU signed the "Single European Act", an agreement
committing these countries to the establishment of a market among
themselves, unimpeded by internal barriers or hindrances to the free
movement of goods, persons, services, or capital. To meet this goal, a
series of directives have been issued to the member states. Compliance with
these directives is designed to eliminate three principal categories of
barriers: (1) physical frontiers, such as customs posts and border
controls; (2) technical barriers (which include restrictions operating
within national territories) such as regulations and norms for goods and
services (product standards); discrimination against foreign bids (bids by
other EU members) on public purchases; or restrictions on foreign requests
to establish subsidiaries; and (3) fiscal frontiers, notably value-added
taxes, tariffs, or excises on goods or services imported from other EU
states.
The ultimate goal of this project is to achieve a large unified domestic
European market in which available resources would be more efficiently
allocated through the elimination of the above-mentioned barriers and the
added costs associated with those barriers. Elimination of these barriers
would simplify product distribution networks, allow economies of scale to
be more readily achieved, and free the flow of capital and other resources.
The Maastricht Treaty on economic and monetary union (EMU) attempts to
provide its members with a stable monetary framework consistent with the
EU's broad economic goals. But until the EMU takes effect, which is
intended to occur before 1999, the community will face the need to
reinforce monetary cooperation in order to reduce the risk of a recurrence
of tensions between domestic and external policy objectives.
The total European market, as represented by EU countries, consists of over
370 million consumers, making it larger currently than either the U.S. or
Japanese markets. European businesses compete nationally and
internationally in a wide range of industries including: telecommunications
and information services, roads and transportation, building materials,
food and beverages, broadcast and media, financial services, electronics,
and textiles. Actual and anticipated actions on the part of member states
to conform to the unified Europe directives have prompted interest and
activity not only by European firms, but also by foreign entities anxious
to establish a presence in Europe that will result from these changes.
Indications of the effect of this response to a unified Europe can be seen
in the areas of mergers and acquisitions, corporate expansion and
development, GDP growth, and national stock market activity. In the
long-term, economic unification of Europe could prove to be an engine for
domestic and international growth.
REAL GDP ANNUAL RATE OF GROWTH
1995
Denmark 2.9%
France 2.4
Germany 1.9
Italy 3.2
Netherlands 2.4
Spain 3.0
Switzerland 0.7
United Kingdom 2.4
Source: World Economic Outlook, May 1996
(Figures are quoted based on each country's domestic currency.)
For national stock market performance, please see the section on
Performance beginning on page .
SPECIAL CONSIDERATIONS AFFECTING AFRICA
Africa is a continent of roughly 50 countries with a total population of
over 700 million people. 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 of the countries are fraught with political instability. However,
there has been a trend over the past five years toward democratization.
Still, there remain many countries that do not have a stable political
process. Other countries have been enmeshed in civil wars and border
clashes.
Economically, the Northern Rim countries (including Morocco, Egypt, and
Algeria) and 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.
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' GDP. However, the general decline in oil prices has had an
adverse impact on many economies.
SPECIAL CONSIDERATIONS AFFECTING NEW YORK
The financial condition of New York State (the State), its public
authorities and public benefit corporations (the Authorities) and its local
governments, particularly The City of New York (the City), could affect the
market values and marketability of, and therefore the net asset value per
share and the interest income of New York Municipal Income Fund or result
in the default of existing obligations, including obligations which may be
held by the fund. The following section provides only a brief summary of
the complex factors affecting the financial situation in New York and is
based on information obtained from the State, certain of its Authorities,
the City and certain other localities, as publicly available on the date of
this SAI. The information contained in such publicly available documents
has not been independently verified. It should be noted that the
creditworthiness of obligations issued by local issuers may be unrelated to
the creditworthiness of the State, and that there is no obligation on the
part of the State to make payment on such local obligations in the event of
default in the absence of a specific guarantee or pledge provided by the
State.
The State and the City are each facing serious financial difficulties and
have each experienced recent declines in their credit standings. S&P and
Moody's have each assigned ratings for the State's general obligation bonds
that are among the three lowest of those states with rated general
obligation bonds. S&P and Moody's have each assigned ratings for the City's
general obligations that are among the four lowest of those cities with
rated general obligation bonds. The ratings of certain related debt of
other issuers for which the State has an outstanding moral obligation,
lease purchase, guarantee or other contractual obligation are generally
linked directly to the State's rating. Should the financial condition of
the State, its Authorities, or its local governments deteriorate, their
respective credit ratings could be further reduced, and the market value
and marketability of their outstanding notes and bonds could be adversely
affected, and their respective access to the public credit markets
jeopardized.
ECONOMIC FACTORS. New York is the third most populous state in the nation,
and has a relatively high level of personal wealth. However, the State
economy has grown more slowly than that of the nation as a whole, resulting
in the gradual erosion of its relative economic affluence (due to factors
such as relative costs for taxes, labor, and energy). The State's economy
is diverse, with a comparatively large share of the nation's financial,
insurance, transportation, communications, and services employment, and a
very small share of the nations' farming and mining activity. Travel and
tourism constitute an important part of the State's economy. New York has a
declining proportion of its workforce engaged in manufacturing and
increasing proportion engaged in service industries. The State, therefore
is likely to be less affected than the nation as a whole during an economic
recession concentrated in construction and manufacturing sectors of the
economy, but is likely to be more affected during a recession concentrated
in the service-producing sector. The State's manufacturing and maritime
base have been seriously eroded, as illustrated by the decline of the steel
industry in the Buffalo area and of the apparel and textile industries in
the City. In addition, the City experienced substantial socio-economic
changes, as a large segment of its population and a significant share of
corporate headquarters and other businesses relocated (many out-of-state).
Both the State and the City experienced substantial revenue increases in
the mid-1980s attributable directly and indirectly to growth in new jobs,
rising profits, and capital appreciation derived from the finance sector of
the City's economy. From 1977 to its 1988 peak, the finance, insurance and
real estate sectors rose to 55%, to account for 23% of total earnings in
the City and 14% Statewide (compared to 7% nationwide). The finance
sector's growth was a catalyst for the New York City metropolitan region's
related business and professional services, retail trade and residential
and commercial real estate markets. The then-rising real estate market
contributed to City revenues, as higher property values and new
construction added to collections from property taxes, mortgage recording,
and transfer taxes and sales taxes on building materials. The boom on Wall
Street more than compensated for the continued erosion of the State's (and
the City's) manufacturing and maritime base, since average wages in finance
and related business and professional services were substantially higher
(thereby providing a net increase of higher incomes, taxed at even higher
marginal rates).
During the calendar years 1984 through 1991, the State's rate of economic
expansion was somewhat slower than that of the nation as a whole. In the
1990-91 national recession, the economy of the Northeast region in general
and the State in particular was more heavily damaged than that of the rest
of the nation and has been slower to recover. Although the national economy
began to expand in 1991, the State economy remained in recession until
1993, when employment growth resumed. Employment growth has been hindered
during recent years by significant cutbacks in the computer and instrument
manufacturing, utility and defense industries. Personal income increased
substantially in 1992 and 1993 and the State economy entered the third year
of a slow recovery in 1995. Most of the growth occurred in the trade,
construction and service industries, with business, social services and
health sectors accounting for most of the service industry growth.
According to assumptions contained in the State financial plan for fiscal
year 1995-1996 issued on July 25, 1996 (the 1996-97 State Financial Plan),
employment is projected to continue to grow modestly during 1996 and 1997,
and although the rate of increase is expected to be slightly above the rate
experienced in 1995, it is expected to be below the rate experienced in
1994. The Third-Quarter Update to the 1996-97 State Financial Plan issued
on January 14, 1997 (the "Third-Quarter Update") reflects stronger than
expected growth during the first half of calendar year 1996 and continues
to project overall employment growth at a modest rate, reflecting the
slowdown in the national economy, continued spending restraint in
government and restructuring in the health care and financial sectors.
Actual receipts through the first two quarters of the State 1996-97 fiscal
year reflected a stronger-than-expected growth in most tax receipts (by
approximately $250 million) and actual disbursements during the same period
were approximately $415 million less than projected. The 1996-97 State
Financial Plan was revised along with the release of the Third-Quarter
Update and the Governors Executive Budget for the 1997-98 fiscal year
released on January 14, 1997 (the "1997-98 Executive Budget"). The General
Fund Financial Plan, as revised, continues to be balanced and would have
shown an operating surplus of $1.3 billion but for certain tax reduction
actions which were implemented on January 1, 1997 to help finance 1997-98
spending requirements.
Notwithstanding the State budget for fiscal year 1996-97 which enacts
significant tax and program reductions, the State can expect to confront
structural deficits in future years. The 1996-97 State Financial Plan
includes actions that will have an effect on the budget outlook for fiscal
year 1996-97 and beyond. The net impact of these and other factors is
expected to provide greater reductions in future fiscal years. The net
impact of these and other factors is expected to produce a potential
imbalance in receipts and disbursements for future fiscal years.
Additionally, uncertainties with regard to both the economy and potential
decisions to be made at the federal level add further pressure on the
balanced budget outlook for fiscal year 1996-97 and fiscal years beyond.
For example, various proposals relating to federal tax and spending
policies may have a significant impact on the State's financial condition
in fiscal year 1996-97 and subsequent fiscal years.
Further, there can be no assurance that the State economy will not
experience worse-than-predicted results in the 1996-97 fiscal year with
corresponding material and adverse effects on the State's projections of
receipts and disbursements. The 1996-97 State Financial Plan is based upon
forecasts of national and State economic activity. As all State financial
plans are based upon forecasts of national and State economic activity, it
should be noted that many uncertainties exist in forecasts, including
federal financial and monetary policies, the availability of credit and the
condition of the world economy. In addition, the economic and financial
condition of the State may be affected by various financial, social,
economic and political factors. These factors can be complex, may vary from
year to year and are frequently the results of actions taken not only by
the State and its agencies and instrumentalities, but also by other
entities, such as the federal government, that are not under the control of
the State.
The fiscal health of the State may also be impacted by the fiscal health of
the City. Although the City has had a balanced budget since 1981, estimates
of the City's future revenues and expenditures are subject to various
uncertainties. For example, the effects of the October 1987 stock market
crash and the 1990-92 national recession have had a disproportionately
adverse impact on the New York City metropolitan region, as private sector
job losses since 1989 have offset all the prior employment gains of the
1980s. Declines in both employment and earnings in the finance sector
contributed to declines in retail sales and real estate values. In
addition, a number of widely publicized bankruptcies among highly leveraged
retailing, brokerage and real estate development companies occurred. The
effects of the recession have extended to banking, insurance, business
services (such as law, accounting and advertising), publishing and
communications. Factors which may inhibit the City's economic recovery
include (i) credit restraints imposed by the weak financial condition of
several major money center banks located in the City; (ii) increases in
combined State and local tax burdens, if uncompetitive tax rates are
imposed; (iii) perceived declines in the quality of life attributable to
service reductions and the deterioration of the City's infrastructure; (iv)
additional employment losses in the City's banking sector or corporate
headquarters complex due to further corporate relocations or
restructurings; or (v) increased expenditures for public health assistance
and care. The City's future economic condition will also likely be affected
by its competitive position as a world financial center (compared to
London, Tokyo, Frankfurt, and competing regional U.S. centers). Investors
should note that the budget for the City's 1996 fiscal year addresses a
projected $2.6 billion budget gap. Most of the budget-gap closing
initiatives may be implemented only with the cooperation of certain City
officials, the City's municipal unions, or the State or Federal
governments. No assurance can be given that such initiatives will be taken.
While the State's economy is broader-based than that of the City,
particular industries are concentrated in and have a disproportionate
impact on certain areas, such as heavy industry in Buffalo, photographic
and optical equipment in Rochester, machinery and transportation equipment
in Syracuse and Utica-Rome, computers in Binghamton and in the Mid-Hudson
Valley, and electrical equipment in the Albany-Troy-Schenectady area.
Constraints on economic growth, taxpayer resistance to proposed substantial
increases in local tax rates, and reductions in State aid in regions apart
from the City have contributed to financial difficulties for several county
and other local governments.
THE STATE. As noted above, the financial condition of the State is affected
by several factors, including the strength of the State and its regional
economies, actions of the federal government, and State actions affecting
the level of receipts and disbursements. Owing to these and other factors,
the State may, in future years, face substantial potential budget gaps
resulting from a significant disparity between tax revenues projected from
a lower recurring receipts base and the future costs of maintaining State
programs at current levels. The State has been experiencing and continues
to experience substantial financial difficulties, with General Fund (the
principal operating account) deficits incurred during the fiscal years
1989-1990 through 1991-1992. The State's accumulated General Fund deficit
(on a GAAP basis) grew 91% from fiscal year1986-87 to fiscal year1990-91,
and reached a then-record $6.265 billion (audited) by March 31, 1991. An
accumulated General Fund deficit at March 31, 1993 was restated to be
$2.551 billion. The State ended its 1993-94 fiscal year with a negative
fund balance of $1.637 billion. This represented an improvement over prior
years, primarily due to an improving national and State economy resulting
in higher-than-expected receipts from personal income tax and various
business taxes and the relative success of the New York Local Government
Assistance Corporation (LGAC). The General Fund showed an operating surplus
of $914 million (on a GAAP basis). The State's 1994-95 fiscal year budget
was adopted on June 8, 1994, more than two months after the beginning of
the State's fiscal year. The State ended its fiscal year 1994-95 reporting
a General Fund operating deficit of $1.426 billion, primarily due to
changes in accounting methodologies used by the State Comptroller and the
use of $1.026 billion of the fiscal year 1993-94 cash surplus to fund
operating expenses in fiscal year 1994-95. These factors were offset by net
proceeds of $315 million of bonds issued by LGAC. Actual receipts reported
fell short of original projections, primarily in the categories of business
taxes. These shortfalls were offset by better than expected performance in
the remaining taxes, principally the user taxes and fees. Total
expenditures for fiscal year 1994-95 increased $2.083 billion, or 6.7% over
the prior fiscal year.
On June 7, 1995, the New York State legislature passed the final
legislation regarding the State's 1995-96 budget, again adopting such
budget more than two months after the beginning of the State's fiscal year.
Both the enacted budget bills for 1995-96 and the 1995-96 State Financial
Plan included reductions in the actual level of spending from that which
occurred in the 1994-95 fiscal year and project reductions in Medicaid and
State Authority operating costs. The 1995-96 budget also projected an
approximate increase of 3% in all governmental funds over the amounts
received in fiscal year 1994-95 and included the phase-in of a three-year
reduction in the State's personal income tax. The State ended its 1995-96
fiscal year with a General Fund surplus, showing a balance of $287 million,
which was an increase of $129 million from the prior fiscal year. Revenues
exceeded projections by $270 million and spending for social service and
all other programs was $175 million lower than forecast. General Fund
receipts reflected a decrease of 1.1% from levels of the prior fiscal year.
The State's budget for the 1996-97 fiscal year was enacted by the
legislature on July 13, 1996, more than three months after the beginning of
such fiscal year. The adopted budget for 1996-97 projects a year-over-year
increase in General Fund disbursements of 0.2%, and increases General Fund
spending by $842 million, primarily for increased costs for education,
special education and higher education, community projects and increased
assistance to fiscally distressed cities. Resources used to fund these
additional expenditures include $540 million in increased projected
revenues for 1996-97 based on higher than projected tax collections during
the second half of the prior fiscal year, $110 million in projected
receipts from a new State tax amnesty program and other resources,
including certain non-recurring resources. The total amount of such
non-recurring resources (sometimes referred to as "one-shots") included in
the 1996-97 State budget is projected to be $1.3 billion, or 3.9% of total
General Fund receipts.
The 1997-98 Executive Budget, which is expected to be revised on or about
February 14, 1997, contains financial projections for the State's 1998-99
and 1999-2000 fiscal years and detailed estimates of receipts, among other
items. The 1997-98 Executive Budget projects a balance on a cash basis in
the General Fund and reflects a continuing strategy of substantially
reduced State spending including social welfare spending, and efficiency
and productivity initiatives. Total General Fund receipts are projected to
be $32.88 billion, a decrease of $88 million from total receipts projected
in the current fiscal year, and total General Fund disbursements are
projected to be $33.84 billion, a decrease of $56 million from spending
totals projected for the current fiscal year. The 1997-98 Executive Budget
identifies a $2.3 billion budget gap, which it proposes to close primarily
through spending reductions and medicaid cost containment measures, the use
of a portion of the projected 1996-97 budget surplus and other actions.
Even if all spending and tax cuts contained in the State budget for fiscal
year 1996-97 are successfully implemented, resulting in a balanced budget
for fiscal year 1996-97, there can be no assurance that the State will not
face budget gaps in future years, resulting from a disparity between tax
revenues projected from a lower recurring-receipts base and the spending
required to maintain State programs at current levels. Furthermore, the
State is a party to numerous lawsuits in which an adverse decision could
require extraordinary expenditures.
The State's budget for fiscal year 1996-97 and future fiscal years may be
materially adversely impacted by future changes to federal entitlement
programs either not foreseen or inaccurately forecast at the time such
budget was enacted. Recent changes at the federal level and uncertainties
stemming from such changes continue to represent significant risk to the
efficacy of the State's fiscal year 1996-97 budget, since federal
expenditure reductions could reduce, or in some cases eliminate, federal
funding of some local programs and accordingly might impose substantial
increased expenditure requirements on affected localities. On August 22,
1996, the President signed into law the Personal Responsibility and Work
Opportunity Reconciliation Act of 1996. This federal legislation
fundamentally changed the programmatic and fiscal responsibilities for
administration of welfare programs at the federal, state and local levels.
The new law abolishes the federal Aid to Families with Dependent Children
program (AFDC), and creates a new Temporary Assistance to Needy Families
program (TANF) funded with a fixed federal block grant to states. The new
law also imposes (with certain exceptions) a five-year durational limit on
TANF recipients, requires that virtually all recipients be engaged in work
or community service activities within two years of receiving benefits, and
limits assistance provided to certain immigrants and other classes of
individuals. States are required to meet work activity participation
targets for their TANF caseload; these requirements are phased in over
time. States that fail to meet these federally mandated job participation
rates, or that fail to conform with certain other federal standards, face
potential sanctions in the form of a reduced federal block grant. On
October 16, 1996, the Governor submitted the State's TANF implementation
plan to the federal government as required under the new federal welfare
law. On December 13, 1996, the State's plan was approved by the federal
government. Legislation will be required to implement the State's TANF
plan, and the Governor has introduced legislation necessary to conform with
federal law. States are required to comply with the new federal welfare
reform law no later than July 1, 1997. There can be no assurance that the
Legislature will enact welfare reform proposals as submitted by the
Governor and as required under federal law. Certain major budgetary
considerations affecting the State are outlined below.
REVENUE BASE. The State's principal revenue sources are economically
sensitive, and include the personal income tax (52% of fiscal year 1995-96
General Fund receipts and estimated to be approximately 53% of fiscal year
1996-97 General Fund receipts), user taxes and fees (20% of both fiscal
year 1995-96 and estimated 1996-97 General Fund receipts), and business
taxes (15% and 14%, respectively, of fiscal year 1995-96 and estimated
fiscal year 1996-97 General Fund tax receipts). Uncertainties in taxpayer
behavior as a result of actual and proposed changes in federal tax law also
can have an adverse impact on State tax receipts. One-fourth of the 4%
State sales tax has been dedicated to pay debt service of LGAC, and has
correspondingly reduced General Fund receipts. To the extent those moneys
are not necessary for payment to LGAC, they are transferred from the LGAC
Tax fund to the General Fund and reported as a transfer from other funds
rather than as sales and use tax receipts. During fiscal years 1991-92,
1992-93, 1993-94, and 1994-95 moneys were so transferred. Capital gains are
a significant component of income tax collections. Auto sales and building
materials are significant components of retail sales tax collections. Tax
rates are relatively high and may impose political and economic constraints
on the ability of the State to further increase its taxes. In 1995, the
State enacted a tax-reduction program designed to reduce, by 20 percent
over three years, receipts from the personal income tax. The tax had
remained unchanged since 1989 as a result of annual deferrals of tax
reductions originally enacted in 1987. The tax-reduction program is
estimated to reduce receipts by $2.3 billion in the 1996-97 fiscal year and
produce further significant reductions in fiscal year 1997-98. In addition
to such reductions in overall tax rates, the tax-reduction program also
includes other modifications to the tax laws which will have the effect of
lowering the amount of tax revenues to be received by the State. In the
absence of countervailing economic growth or expenditure cuts, the tax cuts
could make the achievement of a balanced State budget more difficult in
future years.
A significant risk to the 1996-97 State Financial Plan arises from proposed
tax legislation in the U.S. Congress. Changes to the federal tax treatment
of capital gains, if made, are likely to flow automatically to the State
personal income tax. Such changes, depending upon their precise character
and timing, as well as taxpayer response, could produce revenue loss during
the remainder of the State's 1996-97 fiscal year.
STATE DEBT. The State has the heaviest debt burden of any state (with
nearly $5.05 billion of long-term general obligations, $5.28 billion of
LGAC debt and $20.34 billion of lease-purchase or other contractual debt
outstanding as of March 31, 1996), and debt service costs absorb a large
share of the State's budget. As of March 31, 1996, the State is also
obligated with respect to nearly $6.46 billion for statutory moral
obligations for nine of its Authorities and for guarantees of $315 million
of other Authority debt. Historically, the State has had one of the largest
seasonal financing requirements of any municipal issuer, and was required
each spring to borrow substantial sums from public credit markets to
finance its accumulated General Fund deficit and its scheduled payments of
aid to local governments and school districts. To help reduce such seasonal
financing needs, the State created LGAC as a financing vehicle to finance
the State's local assistance payments by issuing long-term debt, payable
over 30 years from a portion of the State sales tax, as discussed above. As
of June 1995, LGAC had issued bonds and notes to provide net proceeds of
$4.7 billion, thus completing the LGAC program. The impact of LGAC's
borrowing is that the State is able to meet its cash flow needs in the
first quarter of the 1995-96 fiscal year without relying on short-term
seasonal borrowings. Spring borrowing has not been included in a State
Financial Plan since the 1994-95 State Financial Plan. The 1994-95 fiscal
year was the first year in 35 years that there was no short-term borrowing.
Investors should note that the enabling legislation for LGAC contains a
covenant restricting the amount of any future State spring borrowing, which
may reduce the State's fiscal flexibility in future years.
BUDGETARY FLEXIBILITY. A significant portion of the State's General Fund
budget is accounted for by contractually required expenses (such as pension
and debt service costs) and by federally mandated programs (such as AFDC
and Medicaid). In addition, State aid for school districts comprises a
major share of the budget, and total appropriations and distribution of
such aid is especially contentious politically. Furthermore, the State's
ability to respond to unanticipated developments in the future may have
been impaired since the State has utilized a substantial range of actions
of a non-recurring nature in recent years to finance its General fund
operations, including tapping excess monies in special funds, refinancing
outstanding debt to reduce reserve fund requirements and current (but not
long-term) debt service costs, recalculating pension fund contributions,
selling State assets, reimbursing past General Fund expenditures by the
issuance of authority debt and deferring payment for expenditures to future
fiscal years. The 1996-97 State Financial Plan contains actions of a
non-recurring nature including the use of certain surplus funds available
from the Medical Malpractice Insurance Association (MMIA) (approximately
$481 million), savings from refinancing of certain pension and bond
obligations (approximately $222 million) and non-recurring resources
carried forward from the State's prior fiscal year and various other
actions (approximately $314 million). It has been reported that certain
health care providers are considering a challenge to the State's rights to
the MMIA surplus revenues, totaling approximately $1.3 billion.
LABOR COSTS. The State government workforce is mostly unionized, subject to
the Taylor Law which authorizes collective bargaining and prohibits (but
has not historically prevented) strikes and work slowdowns. Costs for
employee health benefits have increased substantially, and can be expected
to further increase. The State has a substantial unfunded liability for
future pension benefits, and has utilized changes in its pension fund
investment return assumptions to reduce current contribution requirements.
If such investment earnings assumptions are not sustained by actual
results, additional State contributions will be required in future years to
meet the State's contractual obligations. The State's change in actuarial
method from the aggregate cost method to a modified projected unit credit
in the 1990-91 fiscal year created a substantial surplus that was amortized
and applied to offset the State's contribution through the 1993-94 fiscal
year. This change in actuarial method was ruled unconstitutional by the
State's highest court and the State returned to the aggregate cost method
in fiscal year 1994-95 using a four-year phase-in. Employer contributions,
including the State's, are expected to increase over the next five to ten
years.
PUBLIC ASSISTANCE. The State has the second largest number of persons
receiving public assistance (AFDC and Home Relief) of any state. AFDC costs
are shared among the federal government, the State and its counties
(including the City) by statutory formula. Caseloads tend to rise
significantly during economic downturns, but have fallen only in the later
stages of past economic recoveries. The budget adopted for fiscal year
1996-97 includes reduction in disbursements for public assistance.
MEDICAID. The State participates in the federal Medicaid program under a
State plan approved by the Health Care Financing Administration. Currently,
the federal government provides a substantial portion of eligible program
costs, with the remainder shared by the State and its counties (including
the City). Basic program eligibility and benefits are determined by federal
guidelines, but the State provides a number of optional benefits and
expanded eligibility. Program costs have increased substantially in recent
years, and account for a rising share of the State budget. Federal law
requires the State adopt reimbursement rates for hospitals and nursing
homes that are reasonable and adequate to meet the costs that must be
incurred by efficiently and economically operated facilities in providing
patient care, a standard that has led to past litigation by hospitals and
nursing homes seeking higher reimbursement from the State. The budget
adopted for fiscal year 1996-97 includes reductions in spending for
Medicare. Cutbacks in State spending for Medicaid may adversely affect the
financial condition of hospitals and health care institutions that are the
obligors of bonds that may be held by the fund.
THE STATE AUTHORITIES. The State's Authorities are not subject to the
constitutional restrictions on the incurrence of debt which apply to the
State itself, and may issue bonds and notes within the amounts of, and as
otherwise restricted by, their legislative authorization. The New York
State Public Authorities Control Board approves the issuance of debt and
major contracts by ten of the Authorities. As of September 30, 1995, the
date of the latest available data, there were 17 Authorities that had
outstanding debt of $100 million or more, the aggregate debt of which
(including refunding bonds and moral obligation, lease-purchase,
contractual obligation, or State-guaranteed debt) then totaled
approximately $73.45 billion. As of March 31, 1996, aggregate public
authority debt outstanding as State-supported was approximately $30.67
billion and State-related debt was approximately $38.26 billion. In recent
years the State has provided financial assistance through appropriations,
in some cases of a recurring nature, to certain Authorities for operating
and other expenses and, (from 1976 to 1987) in fulfillment of its
commitments on moral obligation indebtedness or otherwise, for debt
service. The State has budgeted operating assistance of approximately $1.09
billion for the Metropolitan Transportation Authority (MTA) for fiscal year
1996-97. This assistance is expected to continue to be required (and may
increase) in future years. Failure by the State to appropriate necessary
amounts or to take other action to permit the Authorities to meet their
obligations could adversely affect the ability of the State and the
Authorities to obtain financing in the public credit markets and the market
price of the State's outstanding bonds and notes.
The MTA oversees the operation of the City's subway and bus lines by its
affiliates, the New York City Transit Authority and the Manhattan and Bronx
Surface Transit Operating Authority (collectively, the TA). MTA
subsidiaries operate certain commuter rail and bus lines in the New York
metropolitan area. An affiliated agency, the Triborough Bridge and Tunnel
Authority (TBTA), operates certain intrastate toll bridges and tunnels. To
maintain its facilities and equipment, which deteriorated significantly in
the late 1970s due to deferred maintenance, the MTA prepared a five-year
capital program subject to approval by the MTA Capital Program Review
Board. State legislation accompanying the State's budget for fiscal year
1996-97 authorized the MTA, TBTA and TA to issue an aggregate of $6.5
billion in bonds to finance a portion of a new $11.98 billion MTA capital
plan for the 1995 through 1999 calendar years (the "1995-1999 Capital
Program"). The 1995-1999 Capital Program assumes the issuance of an
estimated $5.1 billion in bonds under this $6.5 billion aggregate bonding
authority. If the 1995-1999 Capital Program is delayed or reduced,
ridership and fare revenues may decline, which could impair the MTA's
ability to meet its operating expenses without additional State assistance.
In addition, because fares are not sufficient to finance its mass transit
operations, the MTA has depended and will continue to depend for operating
Support upon a system of State, local government and TBTA support, and, to
the extent available, federal assistance (including loans, grants and
operating subsidies). If current revenue projections are not realized
and/or operating expenses exceed current projections, the TA or commuter
railroads may seek additional State assistance, raise fares or take other
actions. No assurance can be given that any such assistance will continue
at any particular level or in any fixed relationship to the operating costs
and capital needs of the MTA.
THE CITY. The City has required, and continues to require, significant
financial assistance from the State. The City depends on State assistance
both to enable the City to balance its budget and to meet its cash
requirements. In the early 1970s, the City incurred substantial operating
deficits, and its financial controls, accounting practices, and disclosure
policies were widely criticized. In 1975, the City encountered severe
financial difficulties and lost access to the public credit markets. The
State Legislature responded in 1975 by creating the Municipal Assistance
Corporation For The City of New York (MAC) to provide financing assistance
for the City and the Financial Control Board to exercise certain oversight
and review functions with respect to the City's finances. The Financial
Control Board's powers over the City were suspended in June 1986, but would
be reinstated (under current law) if the City experiences certain adverse
financial circumstances. At the time of the fiscal crisis, the State
provided substantial financial assistance to the City, the federal
government provided the City with direct seasonal loans and guarantees on
the City's long-term debt, and the City's labor unions accepted deferrals
of wage increases and approved purchases of City bonds by the pension
funds. No assurance can be given that similar assistance would again be
made available if needed, particularly given the current budgetary
constraints faced by both the federal and State governments.
The City provides services usually undertaken by counties, school districts
or special districts in other large urban areas including the provision of
social services such as day care, foster care, health care, family
planning, services for the elderly and special employment services for
needy individuals and families who qualify for such assistance. State law
requires the City to allocate a large portion of its total budget to Board
of Education operations, and mandates the City to assume the local share of
public assistance and Medicaid costs. For each of the 1981 through 1995
fiscal years, the City achieved balanced operating results as reported in
accordance with generally accepted accounting principles (GAAP). While the
City has had GAAP operating surpluses during the 1980's, the City has
experienced ongoing and growing financial difficulties, primarily related
to the impact of the 1989-1992 recession on the local economy (reducing
revenues from most major taxes and increasing public assistance and
Medicaid caseloads), rising health care costs for City employees and for
Medicaid, and rising inflation and interest rates. To address substantial
budget gaps occurring as a result of these difficulties, the City has
implemented gap-closing programs in recent fiscal years, which relied
primarily on actions of a non-recurring nature, but included substantial
property tax rate increases and a personal income tax surcharge and
significant service reductions. Aid to nonprofit cultural institutions in
the City was significantly reduced (as was State aid to such institutions),
including certain institutions that are obligors of bonds that may be held
by the fund. The City achieved balanced operating results as reported in
accordance with GAAP for the 1994 fiscal year. For fiscal year 1995, the
City adopted a budget which halted the trend in recent years of substantial
increases in City-funded spending from one year to the next and the City
budget adopted for fiscal year 1996 reduced City-funded spending for the
second consecutive year. The City budget adopted for fiscal year 1997 (the
"1997 City Budget") continues the trend of reduced City-funded spending for
the third consecutive year.
Pursuant to State law, the City prepares a four-year annual financial plan,
which is reviewed and revised on a quarterly basis and includes the City's
capital, revenue and expense projections and outlines proposed budget
gap-closing programs for those years with projected budget gaps. The mayor
is responsible for preparing the City's four-year financial plan, including
the City's current financial plan for the 1997 through 2000 fiscal years
revised and published on November 14, 1996 (the "1997-2000 Financial
Plan"). The 1997-2000 Financial Plan projects substantial budget gaps
(approximately $1.2 billion, $2.1 billion and $3.0 billion) for each of the
1998 through 2000 fiscal years, and assumes additional programs to reduce
expenditures and to increase revenues to close such projected budget gaps.
The City's projections set forth in the 1997-2000 Financial Plan are based
on various assumptions and contingencies which are uncertain and which may
not materialize. Changes in major assumptions could significantly affect
the City's ability to balance its budget and to meet its annual cash flow
and financing requirements. Such assumptions and contingencies include the
timing and pace of a regional and local economic recovery, increases in
employment growth, the ability to implement proposed reductions in City
personnel and other cost reduction initiatives, which may require in
certain cases, the cooperation of the City's municipal unions, the ability
to complete revenue generating transactions, provision of State and federal
aid and mandate relief, and the impact on City revenues of proposals for
federal and State welfare reform. No assurance can be given that the
assumptions used by the City in the 1997-2000 Financial Plan will be
realized. Further, cost-containment assumptions contained in both the
1997-2000 Financial Plan and the 1997 City Budget may be significantly
adversely affected by the changes which may result from the adoption of the
State's fiscal year 1996-97 budget as well as from recent changes occurring
at the federal level with respect to various social spending programs.
Additionally, actions taken in recent fiscal years to avert deficits may
have reduced the City's flexibility in responding to future budgetary
imbalances, and have deferred certain expenditures to later fiscal years.
The 1997 City Budget identifies a $2.6 billion budget gap which it attempts
to close by implementing a variety of actions, including an approximate
$1.2 billion reduction in City spending for a variety of services and
programs, a renewal of the 12.5% personal income tax surcharge, and the use
of non-recurring measures estimated to provide approximately $1.4 billion
in one-time savings. The City's budget for fiscal year 1997 has been the
subject of substantial criticism, questioning, among other things, the
capacity of the City to generate future revenues sufficient to meet
expected expenditure increases and to provide necessary municipal services.
Such criticism has also noted the City's reliance on non-recurring
resources to close budget gaps and has charged that the City has made no
progress in achieving structural balance.
The City Budget for the fiscal year 1997, like all City budgets, is subject
to the ability of the City to implement the proposed reductions in
expenditures, personal services and personnel, which are substantial and
may be difficult to implement. For example, one of the key items contained
in the 1997 City Budget was the sale of the City's water system for
approximately $2.3 billion. This plan has been hotly contested since it was
announced, has been the focus of several lawsuits and has been ruled
illegal by both the lower and the Appeals Court. It is unclear whether a
final appeal will be sought. Further, the 1997 City Budget and the
1997-2000 Financial Plan reflect the costs of tentative settlements with a
coalition of municipal unions which together represent approximately 2/3 of
its workforce. There can be no assurance that such proposed settlement will
be ratified. In addition, certain proposals may be offset by various State
and federal legislation which could mandate levels of nature in recent
years to finance its General Fund operations, including tapping excess
monies in special funds, refinancing outstanding debt to reduce reserve
fund requirements and current (but not long-term) debt service costs,
recalculating pension fund contributions, selling state assets, reimbursing
past General Fund expenditures by the issuance of Authority debt and
deferring payment for expenditures to future fiscal years. The 1996-97
State Financial Plan contains actions of a non-recurring nature including
the use of certain surplus funds available from the MMIA (approximately
$481 million), savings from refinancing of certain pension and bond
obligations (approximately $222 million) and non-recurring resources
carried forward from the State's prior fiscal year and various other
actions (approximately $314 million). It has been reported that certain
health care providers are considering a challenge to the State's rights to
the MMIA surplus revenues, totaling approximately $1.3 billion. In
addition, certain proposals may be offset by various State and Federal
legislation which could mandate levels of City funding inconsistent with
the 1997 City Budget and the 1997-2000 Financial Plan. In addition, the
1997-2000 Financial Plan anticipates the receipt of substantial amounts of
Federal aid. Certain proposed State and Federal actions are subject to
approvals from the Legislature, the Governor and the President, as
applicable. Both Federal and State actions are uncertain; certain
legislative proposals contemplate significant reductions in Federal
spending, including proposed Federal welfare reform which could result in
caps on, or block grants of, Federal programs. Further, no assurance can be
given that either such actions will in fact be taken or that the projected
savings will result even if such actions are taken.
The City derives its revenues from a variety of local taxes, user charges,
miscellaneous revenues and federal and State unrestricted and categorical
grants. The City projects that local revenues will provide approximately
68.2% of total revenues in fiscal year 1997 while federal aid, including
categorical grants, will provide 11.5% in fiscal year 1997 and State aid,
including unrestricted aid and categorical grants, will provide 20.3% in
fiscal year 1997. As a proportion of total revenues, State aid has remained
relatively constant over the period from 1980 to 1990, while federal aid
was sharply reduced (having provided nearly 20% of total fiscal year 1980
revenues). The largest source of the City's revenues is the real estate tax
(approximately 22% of total revenues projected for fiscal year 1997), at
rates levied by the City council (subject to certain State constitutional
limits). State legislation requires that increases in assessments of
certain classes of real property be phased-in over a five-year period;
thus, property owners may receive higher assessments when property values
are declining. However, in the event of a reduction in total assessments,
higher tax rates would be required to maintain the same amount of tax
revenue. The City derives the remainder of its tax revenues from a variety
of other economically sensitive local taxes (subject to authorization by
the legislature), including: a local sales and compensating use tax
(primarily dedicated to MAC debt service) imposed in addition to the
State's retail sales tax; the personal income tax on City residents and the
earnings tax on non-residents; a general corporation tax; and a financial
corporation tax. High tax burdens in the city impose political and economic
constraints on the ability of the City to increase local tax rates. The
City's four-year financial plans have been the subject of extensive public
comment and criticism, principally questioning the reasonableness of
assumptions that the City will have the capacity to generate sufficient
revenues in the future to provide the level of services contained in such
City financial plans. On July 10, 1995, S&P lowered the City's credit
rating from A- to BBB+, among the lowest ratings of any major city in the
country. The rating agency cited specifically the City Budget's reliance on
"one-shot" measures to balance the budget for fiscal year 1996 without
rectifying the underlying structural problems, its continued optimistic
projections of State and Federal aid, and continued high debt levels. S&P
also mentioned the feeble local economy and the City Budget's over-reliance
on the financial services sector which historically has been volatile. On
February 28, 1996, Fitch Investors Service, L.P., placed the City's general
obligation bonds on Fitch Alert with negative implications.
The City is the largest municipal debt issuer in the nation, and has more
than doubled its debt load since the end of fiscal year 1988, in large
measure to rehabilitate its extensive, aging physical plant. The City's
seasonal borrowing needs increased significantly during fiscal years 1990
and 1991, largely due to delayed State aid payments, and totalled $1.4
billion in fiscal year 1993, $1.75 billion in fiscal year 1994, $2.2
billion in fiscal year 1995 and $2.4 billion in fiscal year 1996. Current
projections do not forecast a need for seasonal financing for fiscal year
1997. The City's current capital financing program reflects major
reductions (approximately $2.13 billion) in the size of the capital program
to be implemented cumulatively through fiscal year 1999 which is intended
to reduce future debt service requirements. Such reductions may adversely
affect the condition of the City's aging and deteriorating infrastructure
and physical assets, such as sewers, streets, bridges and tunnels, and mass
transit facilities. Further, the City's capital financing program currently
contemplates receipt of proceeds of approximately $1 billion resulting from
the sale of the City's water and sewer system to the Water Board, and
proposes to utilize a substantial portion of such proceeds for capital
project improvements. It is unlikely that such proceeds will become
available for capital improvements, because, as discussed above, the
legality of the sale of the water system has been successfully challenged
in the lower and the intermediate appeals court. In the event such proceeds
are not available, the City will be required to find alternative sources of
funding or to reduce the capital program by a corresponding amount.
In November 1993, the voters approved a proposed charter whereby Staten
Island would secede from the City. Staten Island is one of five
counties/boroughs, comprising 4% of the City's population and 19% of its
land area. State law provides a complex mechanism for such secession. The
State Legislature is also considering establishment of a similar secession
mechanism for Queens.
OTHER LOCALITIES. Certain localities in addition to the City could have
financial problems which, if significant, could lead to requests for
additional State assistance during the State's 1995-96 fiscal year and
thereafter. Fiscal difficulties experienced by the City of Yonkers, for
example, could result in State actions to allocate State resources in
amounts that cannot yet be determined. In the recent past, the State
provided substantial financial assistance to its political subdivisions,
primarily for aid to elementary, secondary and higher education, Medicaid
income maintenance, and local transportation programs. The legislature
enacted substantial reductions from previously budgeted levels of State aid
since December 1990. To the extent the State is constrained by its
financial condition, State assistance to localities may be further reduced,
compounding the serious fiscal constraints already experienced by many
local governments. Localities also face anticipated and potential problems
resulting from pending litigation (including challenges to local property
tax assessments), judicial decisions and socio-economic trends. The
Legislature enacted substantial reductions from previously budgeted levels
of State aid since December 1990.
SPECIAL CONSIDERATIONS AFFECTING CALIFORNIA
Certain California constitutional amendments, legislative measures,
executive orders, administrative regulations, and voter initiatives, as
discussed below, could adversely affect the market values and marketability
of, or result in default of, existing obligations, including obligations
that may be held by the fund. Obligations of the state or local governments
may also be affected by budgetary pressures affecting the State of
California (the State) and economic conditions in the State. Interest
income to the fund could also be adversely affected. The following
discussion highlights only some of the more significant financial trends
and problems, and is based on information drawn from official statements
and prospectuses relating to securities offerings of the State, its
agencies, or instrumentalities, as available as of the date of this SAI.
FMR has not independently verified any of the information contained in such
official statements and other publicly available documents, but is not
aware of any fact which would render such information inaccurate.
CONSTITUTIONAL LIMITATIONS ON TAXES, OTHER CHANGES AND APPROPRIATIONS
LIMITATION ON PROPERTY TAXES. Certain obligations held by the fund may be
obligations of issuers that rely in whole or in part, directly or
indirectly, on AD VALOREM property taxes as a source of revenue. The taxing
powers of local governments and districts are limited by Article XIIIA of
the California Constitution, enacted by the voters in 1978 and commonly
known as "Proposition 13." Briefly, Proposition 13 limits to 1% of full
cash value the rate of AD VALOREM property taxes on real property and
generally restricts the increase in taxes upon reassessment of property to
2% per year, except upon new construction or change of ownership (subject
to a number of exemptions). Taxing entities may, however, raise AD VALOREM
taxes above the 1% limit to pay debt service on voter-approved bonded
indebtedness.
Under Article XIIIA, the basic 1% AD VALOREM tax levy is applied against
the assessed value of property as of the owner's date of acquisition (or as
of March 1, 1975 if acquired earlier), subject to certain adjustments. This
system has resulted in widely varying amounts of tax on similarly situated
properties. Several lawsuits were filed challenging the acquisition-based
assessment system of Proposition 13, but on June 18, 1992, the U.S. Supreme
Court announced a decision upholding Proposition 13.
Article XIIIA prohibits local governments from raising revenues through AD
VALOREM property taxes above the 1% limit; it also requires voters of any
government unit to give 2/3 approval to levy any "special tax." However,
court decisions allowed non-voter-approved levies of "general taxes" which
were not dedicated to a specific use.
LIMITATIONS ON OTHER TAXES, FEES AND CHARGES. On November 5, 1996, the
voters of the State approved Proposition 218, called the "Right to Vote on
Taxes Act." Proposition 218 added Articles XIIIC and XIIID to the State
Constitution, which contain a number of provisions affecting the ability of
local agencies to levy and collect both existing and future taxes,
assessments, fees and charges.
Article XIIIC requires that all new or increased local taxes be submitted
to the electorate before they become effective. Taxes for general
governmental purposes require a majority vote and taxes for specific
purposes require a two-thirds vote. Further, any general purpose tax which
was imposed, extended or increased without voter approval after December
31, 1994, must be approved by a majority vote within two years.
Article XIIID contains several new provisions making it generally more
difficult for local agencies to levy and maintain "assessments" for
municipal services and programs. Article XIIID also contains several new
provisions affecting "fees" and "charges," defined for purposes of Article
XIIID to mean "any levy other than an ad valorem tax, a special tax, or an
assessment, imposed by a [local government] upon a parcel or upon a person
as an incident of property ownership, including a user fee or charge for a
property-related service." All new and existing property-related fees and
charges must conform to requirements prohibiting, among other things, fees
and charges which generate revenues exceeding the funds required to provide
the property-related service or are used for unrelated purposes. There are
new notice, hearing and protest procedures for levying or increasing
property-related fees and charges, and, except for fees or charges for
sewer, water and refuse collection services (or fees for electrical and gas
service, which are not treated as "property-related" for purposes of
Article XIIID), no property-related fee or charge may be imposed or
increased without majority approval by the property owners subject to the
fee or charge or, at the option of the local agency, two-thirds voter
approval by the electorate residing in the affected area.
In addition to the provisions described above, Article XIIIC removes
limitations on the initiative power in matters of local taxes, assessments,
fees and charges. Consequently, local voters could, by future initiative,
repeal, reduce or prohibit the future imposition or increase of any local
tax, assessment, fee or charge. It is unclear how this right of local
initiative may be used in cases where taxes or charges have been or will be
specifically pledged to secure debt issues.
The interpretation and application of Proposition 218 will ultimately be
determined by the courts with respect to a number of matters, and it is not
possible at this time to predict with certainty the outcome of such
determinations. Proposition 218 is generally viewed as restricting the
fiscal flexibility of local governments, and for this reason, some ratings
of California cities and counties have been, and others may be, reduced.
APPROPRIATIONS LIMITS. The State and its local governments are subject to
an annual "appropriations limit" imposed by Article XIIIB of the California
Constitution, enacted by the voters in 1979 and significantly amended by
Propositions 98 and 111 in 1988 and 1990, respectively. Article XIIIB
prohibits the State or any covered local government from spending
"appropriations subject to limitation" in excess of the appropriations
limit imposed. "Appropriations subject to limitation" are authorizations to
spend "proceeds of taxes," which consist of tax revenues and certain other
funds, including proceeds from regulatory licenses, user charges, or other
fees to the extent that such proceeds exceed the cost of providing the
product or service; but " proceeds of taxes" for local governments exclude
most State subventions. No limit is imposed on appropriations of funds
which are not "proceeds of taxes," such as reasonable user charges or fees
and certain other non-tax funds, including bond proceeds.
Among the expenditures not included in the Article XIIIB appropriations
limit are: (1) the debt service cost of bonds issued or authorized prior to
January 1, 1979, or subsequently authorized by the voters; (2)
appropriations arising from certain emergencies declared by the Governor;
(3) appropriations for certain capital outlay projects; and (4)
appropriations by the State of post-1989 increases in gasoline taxes and
vehicle weight fees.
The appropriations limit for each year is adjusted annually to reflect
changes in cost of living and population, and any transfers of service
responsibilities between government units. The definitions for such
adjustments were liberalized by Proposition 111 to follow more closely
growth in the State's economy. For the 1990-91 fiscal year, each unit of
government has recalculated its appropriations limit by taking the actual
1986-87 limit and applying the Proposition 111 annual adjustments forward
to 1990-91. This was expected to raise the limit in most cases.
Under Proposition 111, "excess" revenues are measured over a two-year
cycle. With respect to local governments, excess revenues must be returned
by a revision of tax rates or fee schedules within the two subsequent
fiscal years. The appropriations limit for a local government may be
overridden by referendum under certain conditions for up to four years at a
time. With respect to the State, 50% of any excess revenues is to be
distributed to K-12 school and community college districts (collectively,
K-14 districts) and the other 50% is to be refunded to taxpayers.
In the years immediately following enactment, very few California
governmental entities operated near their appropriations limit. In the
mid-to-late 1980's, many entities were at or approaching their limit, and
several successfully obtained voter approval for four-year waivers of the
limit. Since Proposition 111, the appropriations limit has again ceased to
be a practical limit on California governments, but this condition may
change in the future. During fiscal year 1986-87, State receipts from
proceeds of taxes exceeded its appropriations limit by $1.138 billion,
which was returned to taxpayers. Since that time, appropriations subject to
limitation were under the State limit. The 1996-97 Budget provide for State
appropriations more than $7.0 billion under the limit for fiscal year
1996-97.
OBLIGATIONS OF THE STATE OF CALIFORNIA
As of February 1, 1997, the State had approximately $17.8 billion of
general obligation bonds outstanding (including $306 million of commercial
paper notes which are intended to be refinanced by future bond sales), and
$7.6 billion remained authorized but unissued. In addition, at February 1,
1997, the State had lease-purchase obligations, payable from the State's
General Fund, of approximately $6.1 billion. State voters approved an
additional $2.1 billion of new bonds on the November 5, 1996 ballot. Of the
State's outstanding general obligation debt, approximately 21% is presently
self-liquidating (for which program revenues are anticipated to be
sufficient to reimburse the General Fund for debt service payments). In
fiscal year 1995-96, debt service on general obligation bonds and
lease-purchase debt was approximately 5.2% of General Fund revenues. The
State has paid the principal of and interest on its general obligation
bonds, lease-purchase debt, and short-term obligations when due.
ECONOMY
The State's economy is the largest among the 50 states and one of the
largest in the world. The State's population grew by 27% in the 1980s and,
at over 32 million, it now represents over 12% of the total U.S.
population. Total personal income in the State, at an estimated $760
billion in 1995, accounts for more than 12% of all personal income in the
nation. Total employment in 1995 was over 14 million, the majority of which
is in the service, trade, and manufacturing sectors.
From mid-1990 to late 1993, the State suffered a recession with the worst
economic, fiscal and budget conditions since the 1930s. Construction,
manufacturing (especially aerospace), and financial services, among others,
were all severely affected, particularly in Southern California. Job losses
were the worst of any post-war recession. Employment levels stabilized by
late 1993 and steady growth has occurred since the start of 1994;
pre-recession job levels were reached in early 1996. Unemployment, while
higher than the national average, came down significantly from the January
1994 peak of 10%. Economic indicators show a steady recovery underway in
California since the start of 1994 particularly in export-related
industries, services, electronics, entertainment and tourism, although the
residential housing sector has been weaker than in previous recoveries. Any
delay or reversal of the economic recovery may cause a recurrence of
revenue shortfalls for the State.
RECENT STATE FINANCIAL RESULTS
The principal sources of State General Fund revenues in 1994-95 were the
California personal income tax (43% of total revenues), the sales tax
(34%), bank and corporation taxes (13%), and the gross premium tax on
insurance (3%). The State maintains a Special Fund for Economic
Uncertainties (the SFEU), derived from General Fund revenues, as a reserve
to meet cash needs of the General Fund, but which is required to be
replenished as soon as sufficient revenues are available. Year-end balances
in the SFEU are included for financial reporting purposes in the General
Fund balance. In recent years (but not in the past four years, as the
recession cut revenues and created a deficit), the State has budgeted to
maintain the SFEU at around 3% of General Fund expenditures.
Throughout the 1980s, State spending increased rapidly as the State
population and economy also grew rapidly, including many assistance
programs to local governments, which were constrained by Proposition 13 and
other laws. The largest State program is assistance to local public school
districts. In 1988, an initiative (Proposition 98) was enacted which
(subject to suspension by a 2/3 vote of the Legislature and the Governor)
guarantees local school districts and community college districts a minimum
share of State General Fund revenues (currently about 35%).
Since the start of fiscal year 1990-91 until fiscal year 1995-96, the State
faced adverse economic, fiscal, and budget conditions. The economic
recession seriously affected State tax revenues. It also caused increased
expenditures for health and welfare programs. The State is also facing a
structural imbalance in its budget with the largest programs supported by
the General Fund (education, health, welfare and corrections) growing at
rates significantly higher than the growth rates for the principal revenue
sources of the General Fund. These structural concerns will continue in
future years; in particular, it is anticipated that there will be a need to
increase capital and operating costs of the correctional system in response
to a "Three Strikes" law enacted in 1994 which mandates life imprisonment
for certain felony offenders.
RECENT BUDGETS. As a result of these factors, among others, from the late
1980s until 1992-93 the State had a period of nearly chronic budget
imbalance, with expenditures exceeding revenues in four out of six years,
and the State accumulated and sustained a budget deficit in the SFEU
approaching $2.8 billion at its peak at June 30, 1993. Starting in fiscal
year 1990-91 and for each year thereafter, each budget required
multibillion dollar actions to bring projected revenues and expenditures
into balance and to close large "budget gaps" which were identified. The
Legislature and Governor eventually agreed on a number of different steps
to produce Budget Acts in the years 1991-92 to 1995-96, including:
(small solid bullet) significant cuts in health and welfare program
expenditures;
(small solid bullet) transfers of program responsibilities and some funding
sources from the State to local governments, coupled with some reduction in
mandates on local government;
(small solid bullet) transfer of about $3.6 billion in annual local
property tax revenues from cities, counties, redevelopment agencies and
some other districts to local school districts, thereby reducing state
funding for schools;
(small solid bullet) reduction in growth of support for higher education
programs, coupled with increases in student fees;
(small solid bullet) revenue increases (particularly in the fiscal year
1991-92 budget), most of which were for a short duration;
(small solid bullet) increased reliance on aid from the federal government
to offset the costs of incarcerating, educating and providing health and
welfare services to undocumented aliens (although these efforts have
produced much less federal aid than the State Administration had
requested); and
(small solid bullet) various one-time adjustment and accounting changes.
Despite these budget actions, the effects of the recession led to large
unanticipated deficits in the SFEU, as compared to projected positive
balances. By the start of fiscal year 1993-94, the accumulated deficit was
so large (almost $2.8 billion) that it was impractical to budget to retire
it in one year, so a two-year program was implemented, using the issuance
of revenue anticipation warrants to carry a portion of the deficit past the
end of the fiscal year. When the economy failed to recover sufficiently in
1993-94, a second two-year plan was implemented in 1994-95, to carry the
final retirement of the deficit into 1995-96.
The combination of stringent budget actions cutting State expenditures and
the turnaround of the economy starting in late 1993 finally led to the
restoration of positive financial results. While General Fund revenues and
expenditures were essentially equal in fiscal year 1992-93 (following two
years of excess expenditures over revenues), the General Fund had positive
operating results in fiscal year 1993-94, fiscal year 1994-95, and fiscal
year 1995-96, which reduced the accumulated budget deficit to less than
$100 million as of June 30, 1996.
The State Department of Finance estimated that the General Fund received
revenues of about $46.3 billion in fiscal year 1995-96, more than $2
billion higher than was originally expected, as a result of the
strengthening economy. Expenditures totaled about $45.4 billion, also about
$2 billion higher than budgeted, because, among other factors, the State
Constitution requires disbursement of a percentage of revenues to local
school districts and federal actions to reduce welfare costs and to pay for
costs of illegal immigrants were not forthcoming to the extent expected.
A consequence of the accumulated budget deficits in the early 1990s,
together with other factors such as disbursement of funds to local school
districts "borrowed" from future fiscal years and hence not shown in the
annual budget, was to significantly reduce the State's cash resources
available to pay its ongoing obligations. When the Legislature and the
Governor failed to adopt a budget for fiscal year 1992-93 by July 1, 1992,
which would have allowed the State to carry out its normal annual cash flow
borrowing to replenish its cash reserves, the State Controller was forced
to issue approximately $3.8 billion of registered warrants (IOUs) over a
2-month period to pay a variety of obligations representing prior years'
(or continuing) appropriations and mandates from court orders. Available
funds were used to make constitutionally-mandated payments, such as debt
service on bonds and warrants.
The State's cash condition became so serious that from late spring 1992
until 1995, the State had to rely on issuance of short-term notes which
matured in a subsequent fiscal year to finance its ongoing deficit and pay
current obligations. With the repayment of the last of these deficit notes
in April, 1996, the State does not plan to rely further on external
borrowing across fiscal years, but will continue its normal cash flow
borrowing during a fiscal year.
CURRENT BUDGET. The 1996-97 Budget Act was signed by the Governor on July
15, 1996, along with various implementing bills. The Legislature rejected
the Governor's proposed 15% cut in personal income taxes (to be phased over
three years), but did approve a 5% cut in bank and corporation taxes, to be
effective for income years starting on January 1, 1997. As a result,
revenues for the Fiscal Year are estimated to total $47.643 billion, a 3.3%
increase over the final estimated 1995-96 revenues. The Budget Act contains
General Fund appropriations totaling $47.251 billion, a 4.0% increase over
the final estimated 1995-96 expenditures.
The following are principal features of the 1996-97 Budget Act:
1. Funding for schools and community college districts increased by $1.65
billion total above revised 1995-96 levels. Almost half of this money was
budgeted to fund class-size reductions in kindergarten and grades 1-3.
Also, for the second year in a row, the full cost of living allowance
(3.2%) was funded. The funding increases have brought K-12 expenditures to
almost $4,800 per pupil, an almost 15% increase over the level prevailing
during the recession years.
2. Proposed cuts in health and welfare totaling $660 million. All of these
cuts require federal law changes (including welfare reform, which was
enacted), federal waivers, or federal budget appropriations in order to be
achieved. Ultimate federal actions after enactment of the Budget Act will
allow the State to save only about $360 million of this amount.
3. A 4.9% increase in funding for the University of California and the
California State University system, with no increases in student fees for
the second consecutive year.
4. The Budget Act assumed the federal government will provide approximately
$700 million in new aid for incarceration and health care costs of illegal
immigrants. These funds reduce appropriations in these categories that
would otherwise have to be paid from the General Fund.
With signing of the Budget Act, the State implemented its regular cash flow
borrowing program with the issuance of $3.0 billion of Revenue Anticipation
Notes to mature on June 30, 1997. The Budget Act appropriated a modest
budget reserve in the SFEU of $305 million, as of June 30, 1997. The
General Fund fund balance, however, still reflects $1.6 billion of "loans"
which the General Fund made to local schools in the recession years,
representing cash outlays above the mandatory minimum funding level.
Settlement of litigation over these transactions in July 1996 calls for
repayment of these loans over the period ending in 2001-02, about equally
split between outlays from the General Fund and from schools' entitlements.
The 1996-97 Budget Act contained a $150 million appropriation from the
General Fund toward this settlement.
The Department of Finance projected, when the Budget Act was passed, that,
on June 30, 1997, the State's available internal borrowable (cash)
resources will be $2.9 billion, after payment of all obligations due by
that date, so that no external cross-fiscal year borrowing will be needed.
The State will continue to rely on internal borrowing and intra-year
external note borrowing to meet its cash flow requirements.
The Department of Finance has reported that, based on stronger than
expected revenues during the first six months of the 1996-97 fiscal year,
reflecting the continued strength of the State's economic recovery, General
Fund revenues for the full 1996-97 fiscal year will be almost $1 billion
above projections, at about $48.4 billion. This is expected to be offset by
required increased payments to schools, and lower than expected savings
resulting from federal welfare reform actions and federal aid for illegal
immigrants. As a result, the expected balance of the SFEU at June 30, 1997,
has been slightly reduced to about $197 million, still the first positive
balance in the decade of the 90's. The State has not yet given any
prediction of how the federal welfare reform law will impact the State's
finances, or those of its local agencies; the State is in the midst of
making many decisions concerning implementation of the new welfare law.
PROPOSED 1997-98 BUDGET. On January 9, 1997, the Governor released his
proposed budget for fiscal year 1997-98. Assuming continuing strength in
the economy, the Governor projects General Fund revenues of $50.7 billion,
and proposes expenditures of $50.3 billion, to leave a budget reserve in
the SFEU of $550 million at June 30, 1998. The Governor proposed further
programs to reduce class size in lower primary grades, using excess
revenues from fiscal year 1996-97. He also proposed a further cut in
corporate taxes, and sweeping changes in public assistance programs to
respond to the new federal welfare reform law.
The State's financial difficulties for the past budget years and other
factors noted above will result in continued pressure upon almost all local
governments, especially those which depend on State aid, such as school
districts and counties. While recent budgets included both permanent tax
increases and actions to reduce costs of state government over the longer
term, the Governor and other analysts have noted that structural imbalances
still exist, and there can be no assurance that the State will not face
budget gaps in the future.
The ratings on California's long-term general obligation bonds were reduced
in the early 1990's from "AAA" levels which had existed prior to the
recession. In 1996, Fitch and Standard & Poor's raised their ratings of
California's general obligation bonds, which are currently assigned ratings
of "A+" from Standard & Poor's, "A1" from Moody's and "A+" from Fitch.
OBLIGATIONS OF OTHER CALIFORNIA ISSUERS
STATE ASSISTANCE. Property tax revenues received by local governments
declined more than 50% following passage of Proposition 13. Subsequently,
the State's Legislature enacted measures to provide for the redistribution
of the State's General Fund surplus to local agencies; the reallocation of
certain State revenues to local agencies; and the assumption of certain
governmental functions by the State to assist municipal issuers to raise
revenues. Total local assistance from the State's General Fund totaled
approximately $33.4 billion in fiscal year 1995-96 (over 70% of General
Fund expenditures) and has been budgeted at $35.0 billion for fiscal year
1996-97, including the effect of implementing reductions in certain aid
programs. To reduce State General Fund support for school districts, the
1992-93 and 1993-94 Budget Acts caused local governments to transfer $3.8
billion of property tax revenues to school districts, representing reversal
of the post-Proposition 13 "bailout" aid.
To the extent the State should be constrained by its Article XIIIB
appropriations limit, or its obligation to conform to Proposition 98, or
other considerations, the absolute level, or the rate of growth, of State
assistance to local governments may continue to be reduced. Any such
reductions in State aid could compound the serious fiscal constraints
already experienced by many local governments, particularly counties. A
number of counties both rural and urban, have indicated that their
budgetary condition is extremely serious. At the start of fiscal year
1995-96, Los Angeles County ("L.A. County") the largest county in the
State, was forced to impose significant cuts in services and personnel,
particularly in the health care system, in order to balance its budget.
L.A. County's debt was downgraded by Moody's and S&P in the summer of 1995.
Orange County, which recently emerged from federal bankruptcy protection,
has substantially reduced services and personnel in order to live within
much reduced means. A school district (Richmond Unified) filed for
protection under bankruptcy laws several years ago, but the petition was
later dismissed; other school districts have indicated financial stress,
although none has threatened bankruptcy.
ASSESSMENT BONDS. Municipal obligations which are assessment bonds or
Mello-Roos bonds may be adversely affected by a general decline in real
estate values or a slowdown in real estate sales activity. In many cases,
such bonds are secured by land which is undeveloped at the time of issuance
but anticipated to be developed within a few years after issuance. In the
event of such reduction or slowdown, such development may not occur or may
be delayed, thereby increasing the risk of a default on the bonds. Because
the special assessments or taxes securing these bonds are not the personal
liability of the owners of the property assessed, the lien on the property
is the only security for the bonds. Moreover, in most cases the issuer of
these bonds is not required to make payments on the bonds in the event of
delinquency in the payment of assessments or taxes, except from amounts, if
any, in a reserve fund established for the bonds.
CALIFORNIA LONG-TERM LEASE OBLIGATIONS. Certain State long-term lease
obligations, though typically payable from the General Fund of the
municipality, are subject to "abatement" in the event the facility being
leased is unavailable for beneficial use and occupancy by the municipality
during the term of the lease. Abatement is not a default, and there may be
no remedies available to the holders of the certificates evidencing the
lease obligation in the event abatement occurs. The most common causes of
abatement are failure to complete construction of the facility before the
end of the period during which lease payments have been capitalized and
uninsured casualty losses to the facility (e.g., due to earthquake). In the
event abatement occurs with respect to a lease obligation, lease payments
may be interrupted (if all available insurance proceeds and reserves are
exhausted) and the certificates may not be paid when due.
Several years ago the Richmond Unified School District (District) entered
into a lease transaction in which certain existing properties of the
District were sold and leased back in order to obtain funds to cover
operating deficits. Following a fiscal crisis in which the District's
finances were taken over by a State receiver (including a brief period
under bankruptcy court protection), the District failed to make rental
payments on this lease, resulting in a lawsuit by the Trustee for the
Certificate of Participation holders. One of the defenses raised in answer
to this lawsuit was the invalidity of the original lease transaction. The
trial court upheld the validity of the District's lease, and the case has
been settled. However, any future judgment in a similar case against the
position taken by the Trustee may have implications for lease transactions
of a similar nature by other State entities.
OTHER CONSIDERATIONS. The repayment of Industrial Development Securities
secured by real property may be affected by State laws limiting foreclosure
rights of creditors. Health Care and Hospital Securities may be affected by
changes in State regulations governing cost reimbursements to health care
providers under Medi-Cal (the State's Medicaid program), including risks
related to the policy of awarding exclusive contracts to certain hospitals.
Limitations on AD VALOREM property taxes may particularly affect "tax
allocation" bonds issued by State redevelopment agencies. Such bonds are
secured solely by the increase in assessed valuation of a redevelopment
project area after the start of redevelopment activity. In the event that
assessed values in the redevelopment project decline (for example, because
of a major natural disaster such as an earthquake), the tax increment
revenue may be insufficient to make principal and interest payments on
these bonds. Both Moody's and S&P suspended ratings on State tax allocation
bonds after the enactment of Articles XIIIA and XIIIB, and only resumed
such ratings on a selective basis.
Proposition 87, approved by State voters in 1988, requires that all
revenues produced by a tax rate increase go directly to the taxing entity
which increased such tax rate to repay that entity's general obligation
indebtedness. As a result, redevelopment agencies (which, typically, are
the issuers of Tax Allocation Securities) no longer receive an increase in
tax increment when taxes on property in the project area are increased to
repay voter-approved bonded indebtedness.
Substantially all of the State is within an active geologic region subject
to major seismic activity. Any California municipal obligation held by the
fund could be affected by an interruption of revenues because of damaged
facilities or, consequently, income tax deductions for casualty losses or
property tax assessment reductions. Compensatory financial assistance could
be constrained by the inability of (i) an issuer to have obtained
earthquake insurance coverage at reasonable rates; (ii) an insurer to
perform on its contracts of insurance in the event of widespread losses; or
(iii) the federal or State government to appropriate sufficient funds
within their respective budget limitations.
Because of the complex nature of Articles XIIIA, XIIIB, XIIIC and XIIID of
the California Constitution (described briefly above), the ambiguities and
possible inconsistencies in their terms, and the impossibility of
predicting future appropriations or changes in population and the cost of
living, and the probability of continuing legal challenges, it is not
currently possible to determine fully the impact of these provisions, or
the outcome of any pending litigation with respect to those provisions on
State obligations held by the fund or on the ability of the State or local
governments to pay debt service on such obligations. Legislation has been
or may be introduced (either in the State Legislature or by initiative)
which would modify existing taxes or other revenue-raising measures or
which either would further limit or, alternatively, would increase the
abilities of State and local governments to impose new taxes or increase
existing taxes. It is not presently possible to predict the extent to which
any such legislation will be enacted, or if enacted, how it would affect
California municipal obligations. It is also not presently possible to
predict the extent of future allocations of State revenues to local
governments or the abilities of State or local governments to pay the
interest on, or repay the principal of, such California municipal
obligations in light of future fiscal circumstances.
SPECIAL FACTORS AFFECTING PUERTO RICO
The following only highlights some of the more significant financial trends
and problems affecting the Commonwealth of Puerto Rico (the "Commonwealth"
or "Puerto Rico"), and is based on information drawn from official
statements and prospectuses relating to the securities offerings of Puerto
Rico, its agencies and instrumentalities, as available on the date of this
Statement of Additional Information. FMR has not independently verified any
of the information contained in such official statements, prospectuses and
other publicly available documents, but is not aware of any fact which
would render such information materially inaccurate.
The economy of Puerto Rico is closely linked with that of the United
States, and in fiscal 1995 trade with the United States accounted for
approximately 89% of Puerto Rico's exports and approximately 65% of its
imports. In this regard, in fiscal 1995 Puerto Rico experienced a $4.6
billion positive adjusted merchandise trade balance.
Since fiscal 1985 personal income, both aggregate and per capita, has
increased consistently each fiscal year. In fiscal 1995 aggregate personal
income was $27.0 billion ($26.2 billion in 1992 prices) and personal per
capita income was $7,296 ($7,074 in 1992 prices). Gross domestic product in
fiscal 1992 was $23.7 billion and gross product in fiscal 1996 was $30.2
billion; ($26.7 billion in 1992 prices). This represents an increase in
gross product of 27.5% from fiscal 1992 to 1996 (12.7% in 1992 prices). For
fiscal 1997, an increase in gross domestic product of 2.7% over fiscal 1996
is forecasted. However, actual growth in the Puerto Rico economy will
depend on several factors including the condition of the U.S. economy, the
exchange value of the U.S. dollar, the price stability of oil imports,
increase in the number of visitors to the island, the level of exports, the
level of federal transfers, and the cost of borrowing.
Puerto Rico's economy continued to expand throughout the five-year period
from fiscal 1992 through fiscal 1996. Almost every sector of the economy
participated and record levels of employment were achieved. Factors behind
the continued expansion included government sponsored economic development
programs, periodic declines in the exchange value of the U.S. dollar, the
level of federal transfers and the relatively low cost of borrowing funds
during the period.
Puerto Rico has made marked improvements in fighting unemployment.
Unemployment is at a low level compared to that of the late 1970s, but it
still remains significantly above the United States average and has been
increasing in recent years. Despite long term improvements, the
unemployment rate rose from 16.5% to 16.8% from fiscal 1992 to fiscal 1993.
However, by the end of fiscal 1994, the unemployment rate dropped to 15.9%
and as of the end of fiscal 1996, stands at 13.8%. Despite this downturn,
there is a possibility that the unemployment rate will increase.
Manufacturing is the largest sector in the economy accounting for $17.7
billion or 41.8% of gross domestic product in fiscal 1995. Manufacturing
has experienced a basic change over the years as a result of the influx of
higher wage, high technology industries such as the pharmaceutical
industry, electronics, computers, microprocessors, scientific instruments
and high technology machinery. The service sector, which includes finance,
insurance, real estate, wholesale and retail trade, hotels and related
services and other services, ranks second in its contribution to gross
domestic product and is the sector that employs the greatest number of
people. In fiscal 1995, the service sector generated $15.9 billion in gross
domestic product or 37.5% of the total. Employment in this sector grew from
449,000 in fiscal 1992 to 527,000 in fiscal 1996, a cumulative increase of
17.6%, which increase was greater than the 11.8% cumulative growths in
employment over the same period, providing 46.7% of total employment. The
government sector of the Commonwealth plays an important role in the
economy of the island. In fiscal year 1995 the government accounted for
$4.5 billion or 10.6% of Puerto Rico's gross domestic product and provided
21.7% of the total employment. Tourism also contributes significantly to
the island economy, accounting for $1.8 billion of gross domestic product
in fiscal 1995.
The present administration has developed and is implementing a new economic
development program which is based on the premise that the private sector
should provide the primary impetus for economic development and growth.
This new program, which is referred to as the New Economic Model, promotes
changing the role of the government from one of being a provider of most
basic services to that of a facilitator for private sector initiatives and
encourages private sector investment by reducing government-imposed
regulatory restraints.
The New Economic Model contemplates the development of initiatives that
will foster private investment in, and private management of, sectors that
are served more efficiently and effectively by the private enterprise. One
of these initiatives has been the adoption of a new tax code intended to
expand the tax base, reduce top personal and corporate tax rates, and
simplify the tax system.
The New Economic Model also seeks to identify and promote areas in which
Puerto Rico can compete more effectively in the global markets. Tourism has
been identified as one such area because of its potential for job creation
and contribution to the gross product. In 1993, a new Tourism Incentives
Act and a Tourism Development Fund were implemented in order to provide
special tax incentives and financing for the development of new hotel
projects and the tourism industry. As a result of these initiatives, new
hotels have been constructed or are under construction which have increased
the number of hotel rooms on the island from 8,415 in fiscal 1992 to 10,345
in fiscal 1996 and to 12,250 by the end of fiscal 1997.
The New Economic Model also seeks to reduce the size of the government's
direct contribution to gross domestic product. As part of this goal the
government has transferred certain governmental operations and sold a
number of its assets to private parties. Among these are: (i) the sale of
the assets of the Puerto Rico Maritime Authority; (ii) the execution of a
five-year management agreement for the operation and management of the
Aqueducts and Sewer Authority by a private company; (iii) the execution by
the Aqueducts and Sewer Authority of a construction and operating agreement
with a private consortium for the design, construction, and operation of an
approximately 75 million gallon per day water pipeline to the San Juan
metropolitan area from the Dos Bocas reservoir in Utuado; and (iv) the
execution by the Electric Power Authority of power purchase contracts with
private power producers under which two cogeneration plants (with a total
capacity of 800 megawatts) will be constructed.
As part of the government's program to facilitate the provision of private
health services, in 1994 a new health insurance program was started in the
Fajardo region to provide qualifying Puerto Rico residents with
comprehensive health insurance coverage. In conjunction with this program
certain public health facilities are being privatized. The administration's
goal is to provide universal health insurance for such qualifying
residents. The total cost of this program will depend on the number of
municipalities included and the total number of participants. As of June
30, 1996, over 760,000 persons were participating in the program at an
annual cost to the General Fund of approximately $296 million.
One of the factors assisting the development of the manufacturing sector in
Puerto Rico has been the federal and Commonwealth tax incentives available,
most notably section 936 of the Internal Revenue Code of 1986, as amended
("Section 936") and the Commonwealth's Industrial Incentives Program. The
Industrial Incentives Program, through the 1987 Industrial Incentives Act,
grants corporations engaged in certain qualified activities a fixed 90%
exemption from Commonwealth income and property taxes and a 60% exemption
from municipal license taxes during a 10, 15, 20, or 25 year period
depending on location.
For many years, United States companies operating in Puerto Rico enjoyed a
special tax credit that was available under Section 936 of the Code.
Originally, the credit provided an effective 100% federal tax exemption for
operating and qualifying investment income from Puerto Rico sources.
Amendments to Section 936 made in 1993 (the "1993 Amendments") instituted
two alternative methods for calculating the tax credit and limited the
amount of the credit that a qualifying company could claim. These
limitations are based on a percentage of qualifying income (the "percentage
of income limitation") and on qualifying expenditures on wages and other
wage related benefits (the "economic activity limitation", also known as
the "wage credit limitation"). As a result of amendments incorporated in
the Small Business Job Protection Act of 1996 enacted by the United States
Congress and signed into law by President Clinton on August 20, 1996 (the
"1996 Amendments"), as described below the tax credit is now being phased
out over a ten-year period for existing claimants and is no longer
available for corporations that establish operations in Puerto Rico after
October 13, 1995 (including existing Section 936 Corporations (as defined
below) to the extent substantially new operations are established in Puerto
Rico). The 1996 Amendments also moved the credit based on the economic
activity limitation to Section 30A of the Code and phased it out over 10
years. In addition, the 1996 Amendments eliminated the credit previously
available for income derived from certain qualified investments in Puerto
Rico. The Section 30A Credit and the remaining Section 936 credit are
discussed below.
SECTION 30A. The 1996 Amendments added a new Section 30A to the Code.
Section 30A permits a "qualifying domestic corporation" ("QDC") that meets
certain gross income tests (which are similar to the 80% and 75% gross
income tests of Section 936 of the Code discussed below) to claim a credit
(the "Section 30A Credit") against the federal income tax imposed on
taxable income derived from sources outside the United States from the
active conduct of a trade or business in Puerto Rico or from the sale of
substantially all the assets used in such business ("possession income").
A QDC is a United States corporation which (i) was actively conducting a
trade or business in Puerto Rico on October 13, 1995, (ii) had a Section
936 election in effect for its taxable year that included October 13, 1995,
(iii) does not have in effect an election to use the percentage limitation
of Section 936(a)(4)(B) of the Code, and (iv) does not add a "substantial
new line of business."
The Section 30A Credit is limited to the sum of (i) 60% of qualified
possession wages as defined in the Code, which includes wages up to 85% of
the maximum earnings subject to the OASDI portion of Social Security taxes
plus an allowance for fringe benefits of 15% of qualified possession wages,
(ii) a specified percentage of depreciation deductions ranging between 15%
and 65%, based on the class life of tangible property, and (iii) a portion
of Puerto Rico income taxes paid by the QDC, up to a 9% effective tax rate
(but only if the QDC does not elect the profit-split method for allocating
income from intangible property).
A QDC electing Section 30A of the code may compute the amount of its active
business income, eligible for the Section 30A Credit, by using either the
cost sharing formula, the profit-split formula, or the cost-plus formula,
under the same rules and guidelines prescribed for such formulas as
provided under Section 936 (see discussion below). To be eligible for the
first two formulas, the QDC must have a significant presence in Puerto
Rico.
In the case of taxable years beginning after December 31, 2001, the amount
of possession income that would qualify for the Section 30A Credit would be
subject to a cap based on the QDC's possession income for an average
adjusted base period ending before October 14, 1995.
Section 30A applies only to taxable years beginning after December 31, 1995
and before January 1, 2006.
SECTION 936. Under Section 936 of the Code, as amended by the 1996
Amendments, and as an alternative to the Section 30A Credit, United States
corporations that meet certain requirements and elect its application
("Section 936 Corporations") are entitled to credit against their United
States corporate income tax, the portion of such tax attributable to income
derived from the active conduct of a trade or business within Puerto Rico
("active business income") and from the sale or exchange of substantially
all assets used in the active conduct of such trade or business. To qualify
under Section 936 in any given taxable year, a corporation must derive for
the three-year period immediately preceding the end of such taxable year,
(i) 80% or more of its gross income from sources within Puerto Rico, and
(ii) 75% or more of its gross income from the active conduct of a trade or
business in Puerto Rico.
Under Section 936, a Section 936 Corporation may elect to compute its
active business income, eligible for the Section 936 credit, under one of
three formulas: (A) a cost-sharing formula, whereby it is allowed to claim
all profits attributable to manufacturing intangibles, and other functions
carried out in Puerto Rico, provided it contributes to the research and
development expenses of its affiliated group or pays certain royalties; (B)
a profit-split formula, whereby it is allowed to claim 50% of the net
income of its affiliated group from the sale of products manufactured in
Puerto Rico; or (C) a cost-plus formula, whereby it is allowed to claim a
reasonable profit on the manufacturing costs incurred in Puerto Rico. To be
eligible for the first two formulas, the Section 936 Corporation must have
a significant business presence in Puerto Rico for purposes of the Section
936 rules.
As a result of the 1993 Amendments and the 1996 Amendments, the Section 936
credit is only available to companies that elect the percentage of income
limitation and is limited in amount to 40% of the credit allowable prior to
the 1993 Amendments, subject to a five-year phase-in period from 1994 to
1998 during which period the percentage of the allowable credit is reduced
from 60% to 40%.
In the case of taxable years beginning on or after 1998, the possession
income subject to the 936 credit will be subject to a cap based on the
Section 936 Corporation's possession income for an average adjusted base
period ending on October 14, 1995. The 936 credit is eliminated for taxable
years beginning in 2006.
OUTLOOK. It is not possible at this time to determine the long-term effect
on the Puerto Rico economy of the enactment of the 936 Amendments. The
Government of Puerto Rico does not believe there will be short-term or
medium-term material adverse effects on Puerto Rico's economy as a result
of the enactment of the 1996 Amendments. The Government of Puerto Rico
further believes that during the phase-out period sufficient time exists to
implement additional incentive programs to safeguard Puerto Rico's
competitive position. Additionally, the Governor intends to propose a new
federal incentive program similar to what is now provided under Section
30A. Such program would provide U.S. companies a tax credit based on
qualifying wages paid, other wage related expenses such as fringe benefits,
depreciation expenses for certain tangible assets, and research and
development expenses, and would restore the credit granted to passive
income under Section 936 prior to its repeal by the 1996 Amendments. Under
the Governor's proposal, the credit granted to qualifying companies would
continue in effect until Puerto Rico shows, among other things, substantial
economic improvements in terms of certain economic parameters.
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 Contract"), 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 investments traded on
foreign exchanges will be higher than for investments traded on U.S.
exchanges 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; and the availability of
securities or the purchasers or sellers of securities. In addition, such
broker-dealers may furnish analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy,
and performance of accounts; effect securities transactions, and perform
functions incidental thereto (such as clearance and settlement). The
selection of such broker-dealers generally is made by FMR (to the extent
possible consistent with execution considerations) in accordance with a
ranking of broker-dealers determined periodically by FMR's investment staff
(for equity funds), and is 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 a
fund to pay such higher commissions, FMR must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage
and research services provided by such executing broker-dealers, viewed in
terms of a particular transaction or FMR's overall responsibilities to 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 National Financial
Services Corporation (NFSC) and Fidelity Brokerage Services (FBS),
indirect subsidiaries of FMR Corp., if the commissions are fair,
reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services. From September 1992 through
December 1994, FBS operated under the name Fidelity Brokerage Services
Limited (FBSL). As of January 1995, FBSL was converted to an unlimited
liability company and assumed the name FBS.
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 each fund toward payment of the 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 NFSC 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 Mortgage Securities, the investment activities described herein are
likely to result in the fund engaging in a considerable amount of trading
of securities held for less than one year. Accordingly, it can be expected
that the fund will have a higher turnover rate, and thus a higher incidence
of short-term capital gains taxable as ordinary income, than might be
expected from investment companies that invest substantially all of their
funds on a long-term basis.
For the fiscal period ended 1997 for Mortgage Securities the portfolio
turnover rate was ____%. For the fiscal periods ended 1995 and 1996,
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
may be due to a greater volume of shareholder purchase or redemption
orders, short-term interest rate volatility and other special market
conditions.
FUND FISCAL PERIOD ENDED 1995 1996
TechnoQuant Growth November 30 n/a >200%*
Overseas October 31 47% 82%
Mid Cap November 30 n/a 101%**
Equity Growth November 30 97% 76%
Growth Opportunities October 31 39% 33%
Strategic Opportunities December 31 142% 151%
Large Cap November 30 n/a 59%**
Growth & Income November 30 n/a <200%*
Equity Income November 30 80% 78%
Balanced October 31 297% 223%
Emerging Markets Income December 31 305% 410%
High Yield October 31 112% 121%
Strategic Income December 31 193% 119%
Mortgage Securities July 31 329% 221%
Government Investment October 31 261% 153%
Intermediate Bond November 30 189% 200%
Short Fixed-Income October 31 179% 124%
High Income Municipal October 31 37% 49%
Municipal Bond December 31 72% 35%
Intermediate Municipal Income November 30 53% 35%
Short-Intermediate Municipal Income November 30 80% 62%
New York Municipal Income October 31 0% 17%
California Municipal Income October 31 n/a 21%**
* Estimated 1997 turnover rate
** Annualized
The following tables show the brokerage commissions paid by Overseas, Mid
Cap, Equity Growth, Growth Opportunities, Strategic Opportunities, Large
Cap, Equity Income, Balanced, Emerging Markets Income, High Yield, and
Strategic Income. The first table shows the total amount of brokerage
commissions paid by each fund and the total amount of brokerage commissions
paid to NFSC and FBS (formerly FBSL) for the past three fiscal
years. The second table shows the percentage of aggregate brokerage
commissions paid to and the percentage of the aggregate dollar amount of
transactions for which the fund paid brokerage commissions effected through
NFSC and FBS for the fiscal year ended 1996. The third table shows
the amount of brokerage commissions paid to firms providing research and
the approximate dollar amount of the transactions on which brokerage
commissions were paid for the fiscal year ended 1996. Each of these funds
pays both commissions and spreads in connection with the placement of
portfolio transactions; NFSC and FBS are paid on a commission basis.
The difference between the percentage of brokerage commissions paid to and
the percentage of the dollar amount of transactions effected through NFSC
is a result of the low commission rates charged by NFSC. The other
funds paid no brokerage commissions for the fiscal years ended 1994 through
1996.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FISCAL PERIOD TOTAL TO NFSC TO FBS
ENDED AMOUNT PAID
OVERSEAS October 31
1996 $ 2,828,416 $ 15,499 $ 169,534
1995 1,420,464 5,926 142,450
1994 1,601,660 685 0
MID CAP November 30
1996 280,816 72,019 0
EQUITY GROWTH November 30
1996 3,252,297 820,661 9,780
1995 2,185,589 862,434 2,034
1994 2,086,370 729,903 0
GROWTH OPPORTUNITIES October 31
1996 6,894,871 1,513,633 74,768
1995 6,189,975 1,793,388 9,682
1994 3,589,080 1,368,574 0
STRATEGIC OPPORTUNITIES December 31
1996 1,107,012 257,886 0
1995 1,138,485 217,580 0
10/1/94-12/31/94 403,617 70,465 96
10/1/93-9/30/94 1,166,854 151,233 0
LARGE CAP November 30
1996 31,692 8,248 0
EQUITY INCOME November 30
1996 2,634,183 685,839 0
1995 1,410,440 549,549 7,528
1994 827,499 290,182 0
BALANCED October 31
1996 7,090,976 1,476,330 61,240
1995 8,952,888 2,249,157 122,777
1994 7,338,038 1,104,577 0
EMERGING MARKETS INCOME December 31
1996 0 0 0
1995 11,820 0 0
1994 0 0 0
HIGH YIELD October 31
1996 139,187 1,507 0
1995 123,145 3,958 0
1994 0 0 0
STRATEGIC INCOME December 31
1996 0 0 0
1995 152 0 0
1994 0 0 0
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FISCAL PERIOD % OF % OF % OF % OF
ENDED 1996 COMMISSIONS TRANSACTIONS COMMISSIONS TRANSACTIONS
PAID TO NFSC EFFECTED THROUGH PAID TO FBS EFFECTED THROUGH
NFSC FBS
OVERSEAS October 31 0.55% 1.96% 5.99% 7.99%
MID CAP November 30 25.68% 35.14% 0.00% 0.00%
EQUITY GROWTH November 30 25.24% 35.56% 0.30% 0.15%
GROWTH OPPORTUNITIES October 31 21.96% 32.76% 1.08% 0.62%
STRATEGIC OPPORTUNITIES December 31 23.30% 30.55% 0.00% 0.00%
LARGE CAP November 30 26.02% 37.32% 0.00% 0.00%
EQUITY INCOME November 30 26.03% 40.25% 0.00% 0.00%
BALANCED October 31 20.82% 32.90% 0.86% 0.61%
EMERGING MARKETS INCOME December 31 0.00% 0.00% 0.00% 0.00%
HIGH YIELD October 31 1.08% 1.98% 0.00% 0.00%
STRATEGIC INCOME December 31 0.00% 0.00% 0.00% 0.00%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FISCAL PERIOD AMOUNT PAID TO FIRMS TOTAL AMOUNT OF
ENDED 1996 PROVIDING RESEARCH* TRANSACTIONS ON WHICH
COMMISSIONS WERE PAID
OVERSEAS October 31 $ 2,431,734 $ 1,240,865,595
MID CAP November 30 161,428 100,269,755
EQUITY GROWTH November 30 2,246,930 2,069,366,778
GROWTH OPPORTUNITIES October 31 6,363,933 6,472,339,765
STRATEGIC OPPORTUNITIES December 31 870,328 995,680,016
LARGE CAP November 30 15,483 13,093,107
EQUITY INCOME November 30 1,654,417 1,285,537,976
BALANCED October 31 6,711,713 5,583,982,528
EMERGING MARKETS INCOME December 31 0 0
HIGH YIELD October 31 122,322 42,560,879
STRATEGIC INCOME December 31 0 0
</TABLE>
* The provision of research services was not necessarily a factor in the
placement of all this business with such firms.
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
FSC normally determines each class's net asset value per share (NAV) as of
the close of the New York Stock Exchange (NYSE) (normally 4:00 p.m. Eastern
time). The valuation of portfolio securities is determined as of this time
for the purpose of computing each class's NAV.
GROWTH AND GROWTH & INCOME FUNDS. Portfolio securities are valued by
various methods depending on the primary market or exchange on which they
trade. Most equity securities for which the primary market is the 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.
Fixed-income securities and other assets for which market quotations are
readily available may be valued at market values determined by such
securities' most recent bid prices (sales prices if the principal market is
an exchange) in the principal market in which they normally are traded, as
furnished by recognized dealers in such securities or assets. Or,
fixed-income securities and convertible securities may be valued on the
basis of information furnished by a pricing service that uses a valuation
matrix which incorporates both dealer-supplied valuations and electronic
data processing techniques. Use of pricing services has been approved by
the Board of Trustees. A number of pricing services are available, and the
funds may use various pricing services or discontinue the use of any
pricing service.
Futures contracts and options are valued on the basis of market quotations,
if available.
Foreign securities are valued based on prices furnished by independent
brokers or quotation services which express the value of securities in
their local currency. FSC gathers all exchange rates daily at the close of
the NYSE using the last quoted price on the local currency and then
translates the value of foreign securities from their local currencies into
U.S. dollars. Any changes in the value of forward contracts due to exchange
rate fluctuations and days to maturity are included in the calculation of
NAV. If an extraordinary event that is expected to materially affect the
value of a portfolio security occurs after the close of an exchange on
which that security is traded, then that security will be valued as
determined in good faith by a committee appointed by the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less for
which market quotations and information furnished by a pricing service are
not readily available are valued either at amortized cost or at original
cost plus accrued interest, both of which approximate current value. In
addition, securities and other assets for which there is no readily
available market value may be valued in good faith by a committee appointed
by the Board of Trustees. The procedures set forth above need not be used
to determine the value of the securities owned by a fund if, in the opinion
of a committee appointed by the Board of Trustees, some other method would
more accurately reflect the fair market value of such securities.
TAXABLE BOND FUNDS. Portfolio securities are valued by various methods
depending on the primary market or exchange on which they trade.
Fixed-income securities and other assets for which market quotations are
readily available may be valued at market values determined by such
securities' most recent bid prices (sales prices if the principal market is
an exchange) in the principal market in which they normally are traded, as
furnished by recognized dealers in such securities or assets.
Or, fixed-income securities and convertible securities may be valued
on the basis of information furnished by a pricing service that uses a
valuation matrix which incorporates both dealer-supplied valuations and
electronic data processing techniques. Use of pricing services has been
approved by the Board of Trustees. A number of pricing services are
available, and the funds may use various pricing services or discontinue
the use of any pricing service.
Most equity securities for which the primary market is the United States
are valued at last sale price or, if no sale has occurred, at the closing
bid price. Most equity securities for which the primary market is outside
the United States are valued using the official closing price or the last
sale price in the principal market in which they are traded. If the last
sale price (on the local exchange) is unavailable, the last evaluated quote
or last bid price normally is used.
Futures contracts and options are valued on the basis of market quotations,
if available.
Foreign securities are valued based on prices furnished by independent
brokers or quotation services which express the value of securities in
their local currency. FSC gathers all exchange rates daily at the close of
the NYSE using the last quoted price on the local currency and then
translates the value of foreign securities from their local currencies into
U.S. dollars. Any changes in the value of forward contracts due to exchange
rate fluctuations and days to maturity are included in the calculation of
NAV. If an extraordinary event that is expected to materially affect the
value of a portfolio security occurs after the close of an exchange on
which that security is traded, then that security will be valued as
determined in good faith by a committee appointed by the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less for
which market quotations and information furnished by a pricing
service are not readily available are valued either at amortized cost
or at original cost plus accrued interest, both of which approximate
current value. In addition, securities and other assets for which there is
no readily available market value may be valued in good faith by a
committee appointed by the Board of Trustees. The procedures set forth
above need not be used to determine the value of the securities owned by a
fund if, in the opinion of a committee appointed by the Board of Trustees,
some other method would more accurately reflect the fair market value of
such securities.
MUNICIPAL BOND FUNDS. Portfolio securities are valued by various methods.
If quotations are not available, fixed-income securities are usually valued
on the basis of information furnished by a pricing service that uses a
valuation matrix which incorporates both dealer-supplied valuations and
electronic data processing techniques. Use of pricing services has been
approved by the Board of Trustees. A number of pricing services are
available, and the funds may use various pricing services or discontinue
the use of any pricing service.
Futures contracts and options are valued on the basis of market quotations,
if available.
Securities and other assets for which there is no readily available market
value are valued in good faith by a committee appointed by the Board of
Trustees. The procedures set forth above need not be used to determine the
value of the securities owned by a fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method would more accurately
reflect the fair market value of such securities.
PERFORMANCE
Each class of 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 net asset value (NAV) or
offering price, as appropriate, at the end of the period, and annualizing
the result (assuming compounding of income) in order to arrive at an annual
percentage rate. 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 is adjusted to reflect
gains and losses from principal repayments received by a fund with respect
to mortgage-related securities and other asset-backed securities. Other
capital gains and losses generally are excluded from the calculation.
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.
A class's tax-equivalent yield is the rate an investor would have to earn
from a fully taxable investment before 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 and,
if applicable, city income tax rate. If only a portion of a class's yield
is tax-exempt, only that portion is adjusted in the calculation.
The following tables show the effect of a shareholder's tax status on
effective yield under federal and, where applicable, state income tax laws
for 1997. The second table 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 municipal funds invest
principally in obligations whose interest is exempt from federal or from
federal and state income tax, other income received by the funds may be
taxable. The tables do not take into account local taxes, if any, payable
on fund distributions.
1997 TAX RATES AND TAX-EQUIVALENT YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
If individual tax-exempt yield is:
2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Taxable Income* Federal
Marginal
Single Return Joint Return Rate** Then taxable equivalent yield is:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - $ 24,650 $ 0 - $ 41,200 15.0% 2.35% 3.53% 4.71% 5.88% 7.06% 8.24% 9.41%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 28.0% 2.78% 4.17% 5.56% 6.94% 8.33% 9.72% 11.11%
$ 59,751 - $ 124,650 $ 99,601 - $ 151,750 31.0% 2.90% 4.35% 5.80% 7.25% 8.70% 10.14% 11.59%
$ 124,651 - $ 271,050 $ 151,751 - $ 271,050 36.0% 3.13% 4.69% 6.25% 7.81% 9.38% 10.94% 12.50%
$ 271,051 - + $ 271,051 - + 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 federally tax-exempt fund may invest a portion of its assets in
obligations that are subject to federal income tax. When a 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.
NEW YORK MUNICIPAL INCOME ONLY
Use the first table to find your approximate effective tax bracket taking
into account federal, state, and city taxes for 1997.
1997 TAX RATES
Taxable Income*
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Single Return Joint Return Federal New York New York Combined Combined
Marginal State City Federal and State Federal, State,
Rate Marginal Marginal Effective and Local
Rate Rate Rate** Effective Rate**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 24,651 - $ 25,000 $ 41,201 - $ 45,000 28.0% 6.85% 3.76% 32.93% 36.02%
$ 25,001 - $ 50,000 $ 45,001 - $ 90,000 28.0% 6.85% 3.82% 32.93% 36.07%
$ 50,001 - $ 59,750 $ 90,001 - $ 99,600 28.0% 6.85% 3.88% 32.93% 36.12%
$ 59,751 - $ 124,650 $ 99,601 - $ 151,750 31.0% 6.85% 3.88% 35.73% 38.78%
$ 124,651 - $ 271,050 $ 151,751 - $ 271,050 36.0% 6.85% 3.88% 40.38% 43.21%
$ 271,051 - + $ 271,051 - + 39.6% 6.85% 3.88% 43.74% 46.41%
</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.
Having determined your effective tax bracket, use the appropriate table
below to determine the tax-equivalent yield for a given tax-free yield.
NEW YORK CITY RESIDENTS - TRIPLE TAXES - 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
If your combined federal, state, and local effective tax rate in 1997 is:
36.02% 36.07% 36.12% 38.78% 43.21% 46.41%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
To match these Your taxable investment would have to earn the following yield:
tax-free yields:
</TABLE>
2% 3.13% 3.13% 3.13% 3.27% 3.52% 3.73%
3% 4.69% 4.69% 4.70% 4.90% 5.28% 5.60%
4% 6.25% 6.26% 6.26% 6.53% 7.04% 7.46%
5% 7.81% 7.82% 7.83% 8.17% 8.81% 9.33%
6% 9.38% 9.38% 9.39% 9.80% 10.57% 11.20%
7% 10.94% 10.95% 10.96% 11.43% 12.33% 13.06%
8% 12.50% 12.51% 12.52% 13.07% 14.09% 14.93%
9% 14.07% 14.08% 14.09% 14.70% 15.85% 16.79%
10% 15.63% 15.64% 15.65% 16.33% 17.61% 18.66%
11% 17.19% 17.21% 17.22% 17.97% 19.37% 20.53%
NEW YORK STATE RESIDENTS (OUTSIDE NEW YORK CITY) - DOUBLE TAXES - 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
If your combined federal and state effective tax rate in 1997 is:
32.93% 35.73% 40.38% 43.74%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
To match these Your taxable investment would have to earn the following yield:
tax-free yields:
</TABLE>
2% 2.98% 3.11% 3.35% 3.55%
3% 4.47% 4.67% 5.03% 5.33%
4% 5.96% 6.22% 6.71% 7.11%
5% 7.46% 7.78% 8.39% 8.89%
6% 8.95% 9.34% 10.06% 10.66%
7% 10.44% 10.89% 11.74% 12.44%
8% 11.93% 12.45% 13.42% 14.22%
9% 13.42% 14.00% 15.10% 16.00%
10% 14.91% 15.56% 16.77% 17.77%
11% 16.40% 17.11% 18.45% 19.55%
The fund may invest a portion of its assets in obligations that are subject
to city, state or federal income taxes. When the fund invests in these
obligations, its tax-equivalent yield will be lower. In the tables above,
the tax-equivalent yields are calculated assuming investments are 100%
federally and state tax-free.
CALIFORNIA MUNICIPAL INCOME ONLY
Use the first table to find your approximate effective tax bracket taking
into account federal and state taxes for 1997.
1997 TAX RATES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Taxable Income* Federal Marginal California State Combined Federal
and State Effective
Single Return Joint Return Rate Marginal Rate Rate**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
$ 0 - $ 4,908 $ 0 - $ 9,816 15.0% 1.0% 15.85%
$ 4,909 - $ 11,632 $ 9,817 - $ 23,264 15.0% 2.0% 16.70%
$ 11,633 - $ 18,357 $ 23,265 - $ 36,714 15.0% 4.0% 18.40%
$ 18,358 - $ 24,650 $ 36,715 - $ 41,200 15.0% 6.0% 20.10%
$ 24,651 - $ 25,484 $ 41,201 - $ 50,968 28.0% 6.0% 32.32%
$ 25,485 - $ 32,207 $ 50,969 - $ 64,414 28.0% 8.0% 33.76%
$ 32,208 - $ 59,750 $ 64,415 - $ 99,600 28.0% 9.3% 34.70%
$ 59,751 - $ 124,650 $ 99,601 - $ 151,750 31.0% 9.3% 37.42%
$ 124,651 - $ 271,050 $ 151,751 - $ 271,050 36.0% 9.3% 41.95%
over $ 271,050 over $ 271,050 39.6% 9.3% 45.22%
</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.
Having determined your effective tax bracket, use the following table to
determine the tax-equivalent yield for a given tax-free yield.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
If your combined federal and state effective tax rate in 1997 is:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
15.85% 16.70% 18.40% 20.10% 32.32% 33.76% 34.70% 37.42% 41.95% 45.22%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
To match these Your taxable investment would have to earn the following yield:
tax-free yields:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2% 2.38% 2.40% 2.45% 2.50% 2.96% 3.02% 3.06% 3.20% 3.45% 3.65%
3% 3.57% 3.60% 3.68% 3.75% 4.43% 4.53% 4.59% 4.79% 5.17% 5.48%
4% 4.75% 4.80% 4.90% 5.01% 5.91% 6.04% 6.13% 6.39% 6.89% 7.30%
5% 5.94% 6.00% 6.13% 6.26% 7.39% 7.55% 7.66% 7.99% 8.61% 9.13%
6% 7.13% 7.20% 7.35% 7.51% 8.87% 9.06% 9.19% 9.59% 10.34% 10.95%
7% 8.32% 8.40% 8.58% 8.76% 10.34% 10.57% 10.72% 11.19% 12.06% 12.78%
8% 9.51% 9.60% 9.80% 10.01% 11.82% 12.08% 12.25% 12.78% 13.78% 14.60%
9% 10.70% 10.80% 11.03% 11.26% 13.30% 13.59% 13.78% 14.38% 15.50% 16.43%
10% 11.88% 12.00% 12.25% 12.52% 14.78% 15.10% 15.31% 15.98% 17.23% 18.25%
11% 13.07% 13.21% 13.48% 13.77% 16.25% 16.61% 16.84% 17.58% 18.95% 20.08%
</TABLE>
The fund may invest a portion of its assets in obligations that are subject
to state or federal income taxes. 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 and state tax-free.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of a class's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in a class's NAV over a
stated period. Average annual total returns are calculated by determining
the growth or decline in value of a hypothetical historical investment in a
class over a stated period, and then calculating the annually compounded
percentage rate that would have produced the same result if the rate of
growth or decline in value had been constant over the period. For example,
a cumulative total return of 100% over ten years would produce an average
annual total return of 7.18%, which is the steady annual rate of return
that would equal 100% growth on a compounded basis in ten years. Average
annual total 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 total returns
are a convenient means of comparing investment alternatives, investors
should realize that a class's performance is not constant over time, but
changes from year to year, and that average annual total returns represent
averaged figures as opposed to the actual year-to-year performance of the
class.
In addition to average annual total returns, a class may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted on a
before-tax or after-tax basis and may be quoted with or without taking a
class's maximum sales charge into account. Excluding a class's sales charge
from a total return calculation produces a higher total return figure.
Total returns, yields, and other performance information may be quoted
numerically or in a table, graph, or similar illustration.
NET ASSET VALUE. Charts and graphs using a class's NAVs, adjusted NAVs, 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, a class's 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 a 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 - Class A 10/25/96 $15.27 $15.10
Overseas - Class T 10/25/96 15.27 15.10
Overseas - Class B 10/25/96 15.05 14.91
Overseas - Institutional 10/25/96 15.18 15.01
Mid Cap - Class A 11/29/96 11.40 10.88
Mid Cap - Class T 11/29/96 11.39 10.88
Mid Cap - Class B 11/29/96 11.32 10.83
Mid Cap - Institutional 11/29/96 11.40 10.88
Equity Growth - Class A 11/29/96 42.74 40.94
Equity Growth - Class T 11/29/96 42.75 40.94
Equity Growth - Institutional 11/29/96 43.39 41.50
Growth Opportunities - Class A 10/25/96 33.97 32.99
Growth Opportunities - Class T 10/25/96 33.97 32.99
Growth Opportunities - Institutional 10/25/96 34.00 32.98
Strategic Opportunities - Class A 12/27/96 22.21 21.80
Strategic Opportunities - Class T 12/27/96 22.39 21.98
Strategic Opportunities - Class B 12/27/96 22.08 21.70
Strategic Opportunities - Institutional 12/27/96 22.26 21.82
Strategic Opportunities - Initial 12/27/96 22.60 22.15
Large Cap - Class A 11/29/96 11.12 10.48
Large Cap - Class T 11/29/96 11.11 10.48
Large Cap - Class B 11/29/96 11.07 10.45
Large Cap - Institutional 11/29/96 11.13 10.49
Equity Income - Class A 11/29/96 21.48 20.79
Equity Income - Class T 11/29/96 21.52 20.83
Equity Income - Class B 11/29/96 21.44 20.78
Equity Income - Institutional 11/29/96 21.67 20.94
Balanced - Class A 10/25/96 15.50 15.26
Balanced - Class T 10/25/96 15.53 15.28
Balanced - Institutional 10/25/96 15.55 15.31
High Yield - Class A 10/25/96 12.03 11.72
High Yield - Class T 10/25/96 12.02 11.70
High Yield - Class B 10/25/96 12.00 11.71
High Yield - Institutional 10/25/96 11.83 11.53
Emerging Markets Income - Class A 12/27/96 11.30 10.08
Emerging Markets Income - Class T 12/27/96 11.30 10.07
Emerging Markets Income - Class B 12/27/96 11.34 10.13
Emerging Markets Income - Institutional 12/27/96 11.24 10.03
Strategic Income - Class A 12/27/96 11.06 10.58
Strategic Income - Class T 12/27/96 11.06 10.57
Strategic Income - Class B 12/27/96 11.08 10.61
Strategic Income - Institutional 12/27/96 11.10 10.61
* Moving averages are shown for those classes that had commenced operations
prior to January 1, 1997.
The following tables and charts show performance for each class of shares
of each fund. Class A shares have a maximum front-end sales charge of
5.75 % for TechnoQuant Growth, International Capital Appreciation
Fund, Overseas, Mid Cap, Equity Growth, Growth Opportunities, Strategic
Opportunities, Large Cap, Growth & Income, Equity Income, and Balanced (the
Equity Funds); 4.75 % for Emerging Markets Income, High Yield,
Strategic Income, Mortgage Securities, Government Investment, High Income
Municipal, Municipal Bond, New York Municipal Income, and California
Municipal Income (the Bond Funds); 3.75% for Intermediate Bond and
Intermediate Municipal Income (the Intermediate-Term Bond Funds); or 1.50%
for Short Fixed-Income and Short-Intermediate Municipal Income (the
Short-Term Bond Funds). Class A shares are also subject to a 12b-1 fee of
0.25% (Equity Funds), or 0.15% (Bond Funds, Intermediate-Term Bond Funds,
and Short-Term Bond Funds). Class T shares have a maximum front-end sales
charge of 3.50% for the Equity Funds and the Bond Funds, 2.75% for the
Intermediate-Term Bond Funds, or 1.50% for the Short-Term Bond Funds. Class
T shares are also subject to a 12b-1 fee of 0.50% (the Equity Funds), 0.25%
(the Bond Funds and the Intermediate-Term Bond Funds), or 0.15% (the
Short-Term Bond Funds). Class B shares may be subject to a contingent
deferred sales charge (CDSC) upon redemption: maximum CDSC of 5.00% for the
Equity and the Bond Funds a or a maximum CDSC of 3.00% for the
Intermediate-Term Bond Funds. Class B shares are also subject to a 12b-1
fee of 1.00% (the Equity Funds) or 0.90% (the Bonds Funds and the
Intermediate-Term Bond Funds). Class C shares that are redeemed within a
year of purchase are subject to a CDSC of 1.00% for all funds (except
Strategic Opportunities, Mortgage Securities, Short Fixed-Income, Municipal
Bond, New York Municipal Income and California Municipal Income). Class C
shares are also subject to a 12b-1 fee of 1.00% for all funds (except
Strategic Opportunities, Mortgage Securities, Short Fixed-Income, Municipal
Bond, New York Municipal Income and California Municipal Income).
Institutional Class shares do not have a sales charge or a 12b-1 fee.
Initial Class shares of Strategic Opportunities have a front-end sales
charge of 3.50% and no 12b-1 fee. Initial Class shares of Mortgage
Securities and Municipal Bond do not have a sales charge or a 12b-1 fee.
HISTORICAL BOND FUND RESULTS. The following tables show yields,
tax-equivalent yields (for municipal funds), and total returns for each
class of each bond fund for the semi-annual period ended April 30, May 31,
June 30, and for the fiscal year ended July 31 for Mortgage Securities
Fund, a s indicated below. The tax-equivalent yield is based on a 36%
federal income tax rate for each municipal fund except New York Municipal
Income. The tax-equivalent yield for New York Municipal Income is based on
a combined effective federal, state, and city income tax rate of 43.41% and
reflects that, as of October 31, 1996, none of the fund's income was
subject to state taxes. Note that each municipal fund may invest in
securities whose income is subject to the federal alternative minimum tax.
Average Annual Total Cumulative Total
Returns1 Returns1
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 Yield2 Tax One Five Ten Past 6 One Five Ten
Months Equiva Year Years Years/ Months Year Years Years/
Ended lent Life of Life of
Yield2 Fund+ Fund+
Emerging Markets 6/30 % % % % % % % % %
Income - Class A
Emerging Markets % % % % % % % % %
Income - Class T
Emerging Markets % % % % % % % % %
Income - Class B
Emerging Markets % % % % % % % % %
Income - Class C
Emerging Markets % % % % % % % % %
Income -
Institutional
High Yield - Class 4/30 % % % % % % % % %
A
High Yield - Class T % % % % % % % % %
High Yield - Class % % % % % % % % %
B
High Yield - Class % % % % % % % % %
C
High Yield - % % % % % % % % %
Institutional
Strategic Income - 6/30 % % % % % % % % %
Class A
</TABLE>
Strategic Income - % % % % % % % % %
Class T
Strategic Income - % % % % % % % % %
Class B
Strategic Income - % % % % % % % % %
Class C
Strategic Income - % % % % % % % % %
Institutional
Average Annual Total Cumulative Total
Returns1 Returns1
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fiscal Yield2 Tax One Five Ten Past 6 One Five Ten
Period Equiva Year Years Years/ Months Year Years Years/
Ended lent Life of Life of
Yield2 Fund+ Fund+
Mortgage Securities 7/31 % % % % % % % % %
- - Class A
Mortgage Securities % % % % % % % % %
- - Class T
Mortgage Securities % % % % % % % % %
- - Class B
Mortgage Securities - % % % % % % % % %
Institutional
Mortgage Securities % % % % % % % % %
- - Initial
Average Annual Total Cumulative Total
Returns1 Returns1
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 Yield2 Tax One Five Ten Past 6 One Five Ten
Months Equiva Year Years Years/ Months Year Years Years/
Ended lent Life of Life of
Yield2 Fund+ Fund+
</TABLE>
Government 4/30 % % % % % % % % %
Investment -
Class A
Government % % % % % % % % %
Investment -
Class T
Government % % % % % % % % %
Investment - Class B
Government % % % % % % % % %
Investment - Class C
Government % % % % % % % % %
Investment -
Institutional
Average Annual Total Cumulative Total
Returns1 Returns1
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 Months Yield2 Tax One Five Ten Past 6 One Five Ten
Ended Equiva Year Years Years/ Months Year Years Years/
lent Life of Life of
Yield2 Fund+ Fund+
Intermediate Bond - 5/31 % % % % % % % % %
Class A
Intermediate Bond - % % % % % % % % %
Class T
Intermediate Bond - % % % % % % % % %
Class B
Intermediate Bond - % % % % % % % % %
Class C
Intermediate Bond - % % % % % % % % %
Institutional
Short Fixed-Income 4/30 % % % % % % % % %
- - Class A
Short Fixed-Income % % % % % % % % %
- - Class T
Short Fixed-Income % % % % % % % % %
- - Class C
Short Fixed-Income % % % % % % % % %
- -
Institutional
High Income 4/30 % % % % % % % % %
Municipal -
Class A
High Income % % % % % % % % %
Municipal -
Class T
High Income % % % % % % % % %
Municipal -
Class B
High Income % % % % % % % % %
Municipal -
Class C
High Income % % % % % % % % %
Municipal -
Institutional
Municipal Bond - 6/30 % % % % % % % % %
Class A
Municipal Bond - % % % % % % % % %
Class T
Municipal Bond - % % % % % % % % %
Class B
Municipal Bond - % % % % % % % % %
Institutional
Municipal Bond - % % % % % % % % %
Initial
Intermediate 5/31 % % % % % % % % %
Municipal Income -
Class A
Intermediate % % % % % % % % %
Municipal
Income - Class T
Intermediate % % % % % % % % %
Municipal
Income - Class B
Intermediate % % % % % % % % %
Municipal
Income - Class C
Intermediate % % % % % % % % %
Municipal Income -
Institutional
Short-Intermediate 5/31 % % % % % % % % %
Municipal Income -
Class A
Short-Intermediate % % % % % % % % %
Municipal Income -
Class T
Short-Intermediate % % % % % % % % %
Municipal Income -
Institutional
New York Municipal 4/30 % % % % % % % % %
Income - Class A
New York Municipal % % % % % % % % %
Income - Class T
New York Municipal % % % % % % % % %
Income - Class B
New York Municipal % % % % % % % % %
Income -
Institutional
California Municipal 4/30 % % % % % % % % %
Income - Class A
California Municipal % % % % % % % % %
Income - Class T
California Municipal % % % % % % % % %
Income - Class B
California Municipal % % % % % % % % %
Income -
Institutional
</TABLE>
+ Life of fund figures are from commencement of operations (March 10,
1994 for Emerging Markets Income; October 31, 1994 for Strategic Income;
September 16, 1987 for Short Fixed-Income and High Income Municipal; March
16, 1994 for Short-Intermediate Municipal Income; August 21, 1995 for New
York Municipal Income; and February 20, 1996 for California Municipal
Income) through the semiannual periods ended 1997.
1 Average annual and cumulative total returns for Class A include the
effect of paying Class A's maximum front-end sales charge of 4.75% for Bond
Funds, 3.75% for Intermediate-Term Bond Funds, and 1.50% for Short-Term
Bond Funds.
Average annual and cumulative total returns for Class T include the effect
of paying Class T's maximum front-end sales charge of 3.50% for Bond Funds;
2.75% for Intermediate-Term Bond Funds; and 1.50% for Short-Term Bond
Funds.
Average annual and cumulative total returns for Class B include the effect
of paying Class B's CDSC upon redemption based on the following schedule:
for Bond Funds for periods less than one year, 5%; one year to less than
two years, 4%; two years to less than four years, 3%; four years to less
than five years, 2%; five years to less than six years, 1%; six years or
greater, 0%; for Intermediate-Term Bond Funds for periods less than one
year, 3%; one year to less than two years, 2%; two years to less than three
years, 1%; three years or greater, 0%.
Average annual and cumulative total returns for Class C include the effect
of paying Class C's CDSC of 1% for shares redeemed within one year of
purchase.
Initial offering of Class A for each fund (except Mortgage Securities and
Municipal Bond) took place on September 3, 1996. Returns prior to September
3, 1996 (except for Intermediate Bond and Intermediate Municipal Income)
are those of Class T, the original class of each fund, and reflect Class
T's then applicable 12b-1 fee. For Intermediate Bond and Intermediate
Municipal Income, returns between September 10, 1992 and September 3, 1996
are those of Class T and reflect Class T's then applicable 12b-1 fee.
Returns between commencement of operations and September 10, 1992 reflect
the returns of Institutional Class, the original class of each fund which
does not have a 12b-1 fee. Class returns would have been lower if its 12b-1
fee had been reflected prior to September 10, 1992.
Initial offering of Class A, Class T, and Class B of Mortgage Securities
took place on March 3, 1997. Returns prior to March 3, 1997 are those of
Initial Class, the original class of the fund, which does not bear a 12b-1
fee. Class T and Class A returns would have been lower if their respective
12b-1 fees were reflected in returns prior to March 3, 1997. Class B
returns would have been lower if its 12b-1 fee had been reflected in
returns prior to March 3, 1997.
Initial offering of Class A of Municipal Bond took place on March 3, 1997.
Returns between July 1, 1996 and March 3, 1997 are those of Class T and
reflect Class T's 0.25% 12b-1 fee. Returns prior to July 1, 1996 are those
of Initial Class, the original class of the fund, which does not bear a
12b-1 fee. Class A returns would have been lower if its 12b-1 fee had been
reflected in returns prior to July 1, 1996.
Initial offering of Class T and Class B of Municipal Bond took place on
July 1, 1996. Returns prior to that date are those of Initial Class, the
original class of the fund, which does not have a 12b-1 fee. Class T
returns would have been lower if its 12b-1 fee had been reflected in
returns prior to July 1, 1996. Class B returns would have been lower if its
12b-1 fee had been reflected in returns prior to July 1, 1996.
Initial offering of Class T of Intermediate Bond and Intermediate
Municipal Income took place on September 10, 1992. Class T bears a 12b-1
fee (at a then currently applicable rate of 0.25% for each fund), which is
not reflected in returns prior to September 10, 1992. Returns prior to
September 10, 1992 are those of Institutional Class, the original class of
each fund, which does not bear a 12b-1 fee. Class T returns would have been
lower if its 12b-1 fee had been reflected in returns prior to September 10,
1992.
Initial offering of Class B of Intermediate Bond and Intermediate
Municipal Income took place on June 30, 1994. Class B bears a 12b-1 fee (at
a then currently applicable combined rate of 1.00% for each fund), which is
not reflected in returns prior to June 30 ,1994. Returns between September
10, 1992 and June 30, 1994 are those of Class T and reflect Class T's then
applicable 12b-1 fee of 0.25% for each fund. Returns prior to September 10,
1992 are those of Institutional Class, the original class of these funds,
which does not bear a 12b-1 fee. Class B returns would have been lower if
its 12b-1 fee had been reflected in returns prior to June 30, 1994. Class T
returns include a then currently applicable 12b-1 fee of 0.25% for each
fund. Institutional Class, the original class of these funds, does not bear
a 12b-1 fee. Class B's returns would have been lower had its 12b-1 fee
(including a shareholder servicing fee) been reflected in prior date
returns.
Initial offering of Class B of High Yield, Government Investment, High
Income Municipal, and Emerging Markets Income took place on June 30, 1994.
Class B bears a 12b-1 fee (at a then currently applicable combined rate of
1.00% for each fund), which is not reflected in returns prior to June 30,
1994. Returns prior to June 30, 1994 for each fund are those of Class T,
the original class of these funds, and include the then applicable Class T
12b-1 fee of 0.25%. Class B returns would have been lower if its 12b-1 fee
had been reflected in returns prior to June 30, 1994.
Class C of each fund (except Mortgage Securities, Municipal Bond,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income) is expected to commence operations on or about
November 1, 1997.
Class C returns for Strategic Income prior to the commencement of
operations of Class C are those of Class B, an original class of the fund,
and reflect Class B's applicable 12b-1 fee (1.00% prior to January 1,
1996). Class C returns would have been lower if its 12b-1 fee had been
reflected in returns after January 1, 1996.
Class C returns for High Yield, Government Investment, Emerging Markets
Income, and High Income Municipal between June 30, 1994 and commencement of
operations of Class C are those of Class B, and reflect Class B's
applicable 12b-1 fee (1.00% prior to January 1, 1996). Returns prior to
June 30, 1994 are those of Class T, the original class of these funds, and
include Class T's applicable 12b-1 fee of 0.25%. Class C returns would have
been lower if its 12b-1 fee had been reflect din prior date returns.
Class C returns for Short Fixed-Income prior to commencement of operations
of Class C are those of Class T, and reflect Class T's applicable 12b-1
fee. Class C returns would have been lower if its 12b-1 fee had been
reflected in prior date returns.
Class C returns for Intermediate Bond and Intermediate Municipal Income
between June 30, 1994 and commencement of operations of Class C are those
of Class B and reflect Class B's applicable 12b-1 fee (1.00% prior to
January 1, 1996). Returns between September 10, 1992 and June 30, 1994 are
those of Class T and reflect Class T's then applicable 12b-1 fee of 0.25%.
Returns prior to September 10, 1992 are those of Institutional Class, the
original class of these funds, which does not bear a 12b-1 fee. Class C
returns would have been lower if its 12b-1 fee had been reflected in prior
date returns.
Initial offering of Institutional Class of High Yield, Strategic Income,
Government Investment, Short Fixed-Income, High Income Municipal, Emerging
Markets Income, and Short-Intermediate Municipal Income took place on July
3, 1995. Institutional Class does not bear a sales load or 12b-1 fee.
Returns prior to July 3, 1995 are those of Class T shares, the original
class of these funds and include Class T's 12b-1 fee (at a then currently
applicable rate of 0.25% for High Yield, Strategic Income, Government
Investment, Emerging Markets Income, and High Income Municipal; and 0.15%
for Short Fixed-Income and Short-Intermediate Municipal Income).
Initial offering of Institutional Class of Municipal Bond took place on
July 1, 1996. Institutional Class does not bear a sales load or 12b-1 fee.
Returns prior to July 1, 1996 are those of Initial Class, the original
class of the fund, which does not bear a 12b-1 fee.
2 Yields and tax-equivalent yields shown for Class A shares include the
effect of the applicable Class A front-end sales charge and 12b-1 fee.
Yields and tax-equivalent yields shown for Class T shares include the
effect of the applicable Class T front-end sales charge and 12b-1 fee.
Yields and tax-equivalent yields shown for Class B and Class C include the
effect of the applicable Class B or Class C 12b-1 fee, but not the CDSC.
Note: If FMR had not reimbursed certain class expenses during certain of
these periods, the yields and total returns for those periods for Emerging
Markets Income, High Yield, Strategic Income, Government Investment,
Intermediate Bond, Short Fixed-Income, High Income Municipal, Municipal
Bond, Intermediate Municipal Income, and Short-Intermediate Municipal
Income would have been lower. The table below shows what yields and
tax-equivalent yields (if applicable) would have been if the class had not
been in reimbursement.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Class T Class B Institutional Class Initial Class
Fund Yield* Tax-Equiv Yield* Tax- Yield* Tax-Equiv Yield* Tax-Equiv Yield* Tax-Equiv
alent Equivalent alent alent alent
Yield* Yield* Yield* Yield* Yield*
Intermediate Bond N/A N/A N/A N/A 4.60% N/A N/A N/A + +
High Income
Municipal N/A N/A N/A N/A N/A N/A 4.87% 7.61% + +
Municipal Bond N/A N/A 1.70% 2.66% -21.16% N/A -2.23% N/A N/A N/A
Short-Intermediate N/A N/A 3.51% 5.48% N/A N/A 3.75% 5.86% + +
Municipal Income
New York Municipal N/A N/A 3.23% 5.71% 2.21% 3.91% 1.38% 2.44% + +
Income
</TABLE>
* See footnote 2 above.
+ Initial Class is not available for this fund.
HISTORICAL EQUITY FUND RESULTS. The following table shows the total returns
for each class of each equity fund for the semi-annual period ended April
30, May 31, or June 30, 1997, as indicated below.
Average Annual Total Cumulative Total
Returns1 Returns1
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 One Five Ten Past 6 One Five Years Ten
months Year Years Years/Life Months Year Years/Life
Ended of Fund+ of Fund+
TechnoQuant - Class A 5/31 % % % % % % %
TechnoQuant - Class T % % % % % % %
TechnoQuant - Class B % % % % % % %
TechnoQuant - Class C % % % % % % %
TechnoQuant - Institutional % % % % % % %
Growth & Income - Class A 5/31 % % % % % % %
Growth & Income - Class T % % % % % % %
Growth & Income - Class B % % % % % % %
Growth & Income - Class C % % % % % % %
Growth & Income - % % % % % % %
Institutional
Overseas - Class A 4/30 % % % % % % %
Overseas - Class T % % % % % % %
Overseas - Class B % % % % % % %
Overseas - Class C % % % % % % %
Overseas - Institutional % % % % % % %
Mid Cap - Class A 5/31 % % % % % % %
Mid Cap - Class T % % % % % % %
Mid Cap - Class B % % % % % % %
Mid Cap - Class C % % %
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mid Cap - Institutional % % % % % % %
Equity Growth - Class A 5/31 % % % % % % %
Equity Growth - Class T % % % % % % %
Equity Growth - Class B % % % % % % %
Equity Growth - Class C % % % % % % %
Equity Growth -
Institutional % % % % % % %
Growth Opportunities - Class4/30 % % % % % % %
A
Growth Opportunities - Class % % % % % % %
T
Growth Opportunities - Class % % % % % % %
B
Growth Opportunities - Class % % % % % % %
C
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Growth Opportunities - % % % % % % %
Institutional
Strategic Opportunities -
Class 6/30 % % % % % % %
A
Strategic Opportunities - Class % % % % % % %
T
Strategic Opportunities - Class % % % % % % %
B
Strategic Opportunities - % % % % % % %
Institutional
Strategic Opportunities - Initial % % % % % % %
Large Cap - Class A 5/31 % % % % % % %
Large Cap - Class T % % % % % % %
Large Cap - Class B % % % % % % %
Large Cap - Class C % % % % % % %
Large Cap - Institutional % % % % % % %
Equity Income - Class A 5/31 % % % % % % %
Equity Income - Class T % % % % % % %
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Income - Class B % % % % % % %
Equity Income - Class C % % % % % % %
Equity Income - Institutional % % % % % % %
Balanced - Class A 4/30 % % % % % % %
Balanced - Class T % % % % % % %
Balanced - Class B % % % % % % %
Balanced - Class C % % % % % % %
Balanced - Institutional % % % % % % %
</TABLE>
+ Life of fund figures are from commencement of operations (April 23,
1990 for Overseas; November 18, 1987 for Growth Opportunities; and February
20, 1996 for Mid Cap and Large Cap; and December 31, 1996 for TechnoQuant
Growth and Growth & Income) through the semiannual periods ended 1997.
1 Average annual and cumulative total returns for Class A shares include
the effect of paying Class A's maximum applicable front-end sales charge of
5.75% for Equity Funds.
Average annual and cumulative total returns for Class T shares include the
effect of paying Class T's maximum applicable front-end sales charge of
3.50% for Equity Funds.
Average annual and cumulative total returns for Class B shares include the
effect of paying Class B's CDSC upon redemption based on the following
schedule: for Equity Funds for periods less than one year, 5%; one year to
less than two years, 4%; two years to less than four years, 3%; four years
to less than five years, 2%; five years to less than six years, 1%; six
years or greater, 0%.
Average annual and cumulative total returns for Class C shares include the
effect of paying Class C's CDSC of 1% for shares redeemed within one year
of purchase.
Initial offering of Class A for each fund took place on September 3, 1996.
Returns prior to September 3, 1996 (except for Equity Growth and Equity
Income) are those of Class T, and reflect Class T's then applicable 12b-1
fee (0.65% for equity funds prior to January 1, 1996). For Equity Growth
and Equity Income, returns between September 10, 1992 and September 3, 1996
are those of Class T and reflect Class T's then applicable 12b-1 fee (0.65%
for equity funds prior to January 1, 1996). Returns between commencement of
operations and September 10, 1992 reflect the returns of Institutional
Class, the original class of each fund, which does not have a 12b-1 fee.
Class A returns would have been lower if its 12b-1 fee had been reflected
in returns prior to September 10, 1992.
Initial offering of Class T of Equity Growth and Equity Income took place
on September 10, 1992. Class T bears a 12b-1 fee (at a then currently
applicable rate of 0.65% for each fund), which is not reflected in returns
prior to September 10, 1992. Returns prior to September 10, 1992 are those
of Institutional Class, the original class of each fund, which does not
bear a 12b-1 fee. Class T returns would have been lower if its 12b-1 fee
had been reflected in returns prior to September 10, 1992.
Initial offering of Class B of Equity Growth took place on December 31,
1996. Class B bears a 12b-1 fee, which is not reflected in returns prior to
December 31, 1996. Returns between September 10, 1992 and December 31, 1996
are those of Class T and reflect Class T's then applicable 12b-1 fee (0.65%
prior to January 1, 1996). Returns prior to September 10, 1992 are those of
Institutional Class, the original class of the fund, which does not bear a
12b-1 fee. Class B returns would have been lower if its 12b-1 fee had been
reflected in returns prior to December 31, 1996.
Initial offering of Class B of Balanced took place on December 31, 1996.
Class B bears a 12b-1 fee which is not reflected in returns prior to
December 31, 1996. Returns prior to December 31, 1996 are those of Class T
and reflect Class T's applicable 12b-1 fee (0.65% prior to January 1,
1996). Class B returns would have been lower if its 12b-1 fee had been
reflected in returns prior to December 31, 1996.
Initial offering of Class B of Growth Opportunities took place on March 3,
1997. Returns prior to March 3, 1997 are those of Class T, the original
class of the fund, and reflect Class T's applicable 12b-1 fee (0.65% prior
to January 1, 1996). Class B returns would have been lower if its 12b-1 fee
had been reflected in returns prior to March 3, 1997.
Initial offering of Class B of Equity Income took place on June 30, 1994.
Class B bears a 12b-1 fee, which is not reflected in returns prior to June
30, 1994. Returns between September 10, 1992 and June 30, 1994 are those of
Class T and reflect Class T's then applicable 12b-1 fee of 0.65%. Returns
prior to September 10, 1992 are those of Institutional Class, the original
class of the fund, which does not bear a 12b-1 fee. Class B returns would
have been lower if its 12b-1 fee had been reflected in returns prior to
June 30, 1994.
Initial offering of Class B of Strategic Opportunities took place on June
30, 1994. Class B bears a 12b-1 fee, which is not reflected in returns
prior to June 30, 1994. Returns prior to June 30, 1994 are those of Class
T. and reflect Class T's then applicable 12b-1 fee of 0.65%. Class B
returns would have been lower if its 12b-1 fee had been reflected in
returns prior to June 30, 1994.
Initial offering of Class B of Overseas took place on July 3, 1995. Class
B bears a 12b-1 fee which is not reflected in returns prior to July 3,
1995. Returns prior to July 3, 1995, are those of Class T, the original
class of the fund, and include Class T's then applicable 12b-1 fee of
0.65%. Class B returns would have been lower if its 12b-1 fee had been
reflected in returns prior to July 3, 1995.
Class C of each fund (except Strategic Opportunities) is expected to
commence operations on or about November 1, 1997.
Class C returns for TechnoQuant Growth, Mid Cap, Growth & Income, and
Strategic Income prior to the commencement of operations of Class C are
those of Class B, an original class of these funds, and reflects Class B's
applicable 12b-1 fee.
Class C returns for Equity Growth between December 31, 1996 and
commencement of operations of Class C are those of Class B, and reflect
Class B's applicable 12b-1 fee. Returns between September 10, 1992 and
December 31, 1996 are those of Class T and reflect Class T's applicable
12b-1 fee (0.65% prior to January 1, 1996). Returns prior to September 10,
1992 are those of Institutional Class, the original class of the fund,
which does not bear a 12b-1 fee. Class C returns would have been lower if
its 12b-1 fee had been reflected in returns prior to December 31, 1996.
Class C returns for Growth Opportunities between March 3, 1997 and
commencement of operations of Class C are those of Class B, and reflect
Class B's applicable 12b-1 fee. Returns prior to March 3, 1997 are those of
Class T, the original class of the fund, and reflect Class T's applicable
12b-1 fee (0.65% prior to January 1, 1996). Class C returns would have been
lower if its 12b-1 fee had been reflected in returns prior to March 3,
1997.
Class C returns for Balanced between December 31, 1996 and commencement of
operations of Class C are those of Class B, and reflect Class B's
applicable 12b-1 fee. Returns prior to December 31, 1996 are those of Class
T and reflect Class T's applicable 12b-1 fee (0.65% prior to January 1,
1996). Class C returns would have been lower if its 12b-1 fee had been
reflected in returns prior to December 31, 1996.
Class C returns for Equity Income between June 30, 1994 and commencement
of operations of Class C are those of Class B, and reflect Class B's
applicable 12b-1 fee. Returns between September 10, 1992 and June 30, 2994
are those of Class T and reflect Class T's then applicable 12b-1 fee of
0.65%. Returns prior to September 10, 1992 are those of Institutional
Class, the original class of these funds, which does not bear a 12b-1 fee.
Class C returns would have been lower if its 12b-1 fee had been reflected
in prior date returns.
Class C returns of Overseas between July 3, 1995 and commencement of
operations of Class C are those of Class B, and reflect Class B's
applicable 12b-1 fee. Returns prior to July 3, 1995 are those of Class T,
the original class of the fund, and include Class T's then applicable 12b-1
fee of 0.65%. Class C returns would have been lower if its 12b-1 fee had
been reflected in returns prior to July 3, 1995.
Initial offering of Institutional Class of Growth Opportunities, Balanced,
and Overseas took place on July 3, 1995. Institutional Class does not bear
a sales load or 12b-1 fee. Returns prior to July 3, 1995 are those of Class
T, the original class of each fund, and include Class T's then applicable
12b-1 fee of 0.65%.
Initial offering of Institutional Class shares for Strategic Opportunities
took place on July 3, 1995. Institutional Class does not bear a sales load
or 12b-1 fee. Returns prior to July 3, 1995, are those of Class T and
include Class T's then applicable 12b-1 fee of 0.65%.
Note: If FMR had not reimbursed certain class expenses during certain of
these periods, the total returns for those periods for Overseas, Mid Cap,
Strategic Opportunities, Large Cap, Equity Income, and Income & Growth
would have been lower.
The following tables show the income and capital elements of each class's
cumulative total return. The table compares each class's return to the
record of the S&P 500, the Dow Jones Industrial Average (DJIA), and the
cost of living as measured by the Consumer Price Index (CPI), over the same
period. The S&P 500 and DJIA comparisons are provided to show how each
class's total return compared to the record of a broad unmanaged index of
common stocks and a narrower set of stocks of major industrial companies,
respectively, over the same period. Because each of the Bond Funds invest
in fixed-income securities, common stocks represent a different type of
investment from the funds. Common stocks generally offer greater growth
potential than the Bond 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 Bond Funds. Each of the Equity Funds 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. The S&P 500 and DJIA
returns are based on the prices of unmanaged groups of stocks and, unlike
each class's returns, do not include the effect of brokerage commissions or
other costs of investing.
The following tables show the growth in value of a hypothetical $10,000
investment in each class of each fund (except TechnoQuant Growth, Growth &
Income and International Capital Appreciation) during the past 10 fiscal
years ended 1996 or life of each fund, as applicable, assuming all
distributions were reinvested. The figures below reflect the fluctuating
interest rates, bond prices, and stock prices of the specified periods and
should not be considered representative of the dividend income or capital
gain or loss that could be realized from an investment in a class today.
Tax consequences of different investments have not been factored into the
figures.
During the period from April 23, 1990 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class A of
Overseas would have grown to $____, including the effect of Class A's 5.75%
maximum sales charge.
OVERSEAS - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value 500 of
Oct.31 $10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ $ $ $ $ $ $
1995
1994
1993
1992
1991
1990*
</TABLE>
* From April 23, 1990 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Overseas on April 23, 1990, assuming the 5.75% maximum sales charge had
been in effect, the net amount invested in Class A shares was $____. The
cost of the initial investment ($10,000) together with the aggregate cost
of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $___ for dividends and
$___ for capital gain distributions.
During the period from April 23, 1990 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class T of
Overseas would have grown to $15,522, including the effect of Class T's
3.50% maximum sales charge.
OVERSEAS - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value 500 of
Oct. 31 $10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
1996 $ 14,765 $ 631 $ 126 $ 15,522 $ 25,431 $ 26,966 $ 12,281
1995 13,433 484 105 14,022 20,493 20,816 11,924
1994 13,568 489 0 14,057 16,208 16,684 11,598
1993 12,477 430 0 12,907 15,604 15,291 11,303
1992 8,753 202 0 8,955 13,575 13,020 11,001
1991 9,438 77 0 9,515 12,344 12,027 10,659
1990* 9,216 0 0 9,216 9,246 9,246 10,357
* From April 23, 1990 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Overseas on April 23, 1990, assuming the 3.50% maximum sales charge had
been in effect, the net amount invested in Class T shares was $9,650. The
cost of the initial investment ($10,000) together with the aggregate cost
of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$10,533. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $415 for dividends and
$106 for capital gain distributions.
During the period from April 23, 1990 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class B of
Overseas would have grown to $15,945.
OVERSEAS - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value 500 of
Oct. 31 $10,000 Dividend Distributions Living**
Investment Distributions
1996 $ 14,765 $ 631 $ 126 $ 15,522 $ 25,431 $ 26,966 $ 12,281
</TABLE>
1995 13,433 484 105 14,022 20,493 20,816 11,924
1994 13,568 489 0 14,057 16,208 16,684 11,598
1993 12,477 430 0 12,907 15,604 15,291 11,303
1992 8,753 202 0 8,955 13,575 13,020 11,001
1991 9,438 77 0 9,515 12,344 12,027 10,659
1990* 9,216 0 0 9,216 9,246 9,246 10,357
* From April 23, 1990 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Overseas on April 23, 1990, the net amount invested in Class B shares was
$10,000. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $10,657. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $530 for dividends
and $110 for capital gain distributions.
During the period from April 23, 1990 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class C of
Overseas would have grown to $____.
OVERSEAS - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value 500 of
Oct. 31 $10,000 Dividend Distributions Living**
Investment Distributions
1996 $ $ $ $ $ $ $
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995
1994
1993
1992
1991
1990*
</TABLE>
* From April 23, 1990 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class C of
Overseas on April 23, 1990, the net amount invested in Class C shares was
$10,000. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $___ for dividends and
$___ for capital gain distributions.
During the period from April 23, 1990 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in
Institutional Class of Overseas would have grown to $16,115.
OVERSEAS - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value 500 of
Oct. 31 $10,000 Dividend Distributions Living**
Investment Distributions
1996 $ 15,200 $ 785 $ 130 $ 16,115 $ 25,431 $ 26,966 $ 12,281
1995 13,970 504 109 14,583 20,493 20,816 11,924
1994 14,060 507 0 14,567 16,208 16,684 11,598
1993 12,930 445 0 13,375 15,604 15,291 11,303
1992 9,070 210 0 9,280 13,575 13,020 11,001
1991 9,780 80 0 9,860 12,344 12,027 10,659
1990* 9,550 0 0 9,550 9,246 9,246 10,357
</TABLE>
* From April 23, 1990 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Overseas on April 23, 1990, the net amount invested in
Institutional Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $10,677. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $550 for dividends and $110 for capital gain distributions.
During the period from February 20, 1996 (commencement of operations of
the fund) to November 30, 1996, a hypothetical $10,000 investment in Class
A of Mid Cap would have grown to $____, including the effect of Class A's
maximum 5.75% sales charge.
MID CAP - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996* $ $ $ $ $ $ $
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of Mid
Cap on February 20, 1996, assuming the 5.75% maximum sales charge had been
in effect, the net amount invested in Class A shares was $____. The cost of
the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $10,000. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $____ for dividends and $____ for capital
gain distributions.
During the period from February 20, 1996 (commencement of operations of the
fund) to November 30, 1996, a hypothetical $10,000 investment in Class T of
Mid Cap would have grown to $11,291, including the effect of Class T's
maximum 3.50% sales charge.
MID CAP - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996* $ 11,291 $ 0 $ 0 $ 11,291 $ 11,890 $ 12,048 $ 10,239
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of Mid
Cap on February 20, 1996, assuming the 3.50% maximum sales charge had been
in effect, the net amount invested in Class T shares was $9,650. The cost
of the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $10,000. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $0 for dividends and $0 for capital gain
distributions.
During the period from February 20, 1996 (commencement of operations of the
fund) to November 30, 1996, a hypothetical $10,000 investment in Class B of
Mid Cap would have grown to $_____, including the effect of Class B's
maximum applicable CDSC.
MID CAP - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996* $ 11,110 $ 0 $ 0 $ 11,110 $ 11,890 $ 12,048 $ 10,239
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of Mid
Cap on February 20, 1996, assuming the maximum applicable CDSC had been in
effect, the net amount invested in Class B shares was $10,000. The cost of
the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $10,000. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $0 for dividends and $0 for capital gain
distributions.
During the period from February 20, 1996 (commencement of operations of
the fund) to November 30, 1996, a hypothetical $10,000 investment in Class
C of Mid Cap would have grown to $11,110, including the effect of Class C's
maximum applicable CDSC.
MID CAP - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996* $ $ $ $ $ $ $
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class C of Mid
Cap on February 20, 1996, assuming the maximum applicable CDSC had been in
effect, the net amount invested in Class C shares was $10,000. The cost of
the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $10,000. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $____ for dividends and $____ for capital
gain distributions.
During the period from February 20, 1996 (commencement of operations of the
fund) to November 30, 1996, a hypothetical $10,000 investment in
Institutional Class of Mid Cap would have grown to $11,700.
MID CAP - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996* $ 11,700 $ 0 $ 0 $ 11,700 $ 11,890 $ 12,048 $ 10,239
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Mid Cap on February 20, 1996, the net amount invested in
Institutional Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $10,000. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $0 for dividends and $0 for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical
$10,000 investment in Class A of Equity Growth would have grown to $____,
including the effect of Class A's maximum 5.75% sales charge.
EQUITY GROWTH - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
1996 $ $ $ $ $ $ $
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995
1994
1993
1992
1991
1990
1989
1988
1987
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class A of
Equity Growth on December 1, 1986, assuming the 5.75% maximum sales charge
had been in effect, the net amount invested in Class A shares was $ ____.
The cost of the initial investment ($10,000) together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $____ for dividends and
$____ for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Class T of Equity Growth would have grown to $57,907,
including the effect of the Class T's maximum 3.50% sales charge.
EQUITY GROWTH - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 32,809 $ 1,562 $ 23,536 $ 57,907 $ 41,022 $ 46,321 $ 14,366
1995 29,162 1,310 $ 18,191 48,663 32,084 35,282 13,913
1994 20,881 839 12,766 34,486 23,557 25,366 13,578
1993 21,599 868 11,481 33,948 23,313 24,318 13,207
1992 19,278 685 9,681 29,644 21,174 21,201 12,862
1991 17,777 599 6,132 24,508 17,766 18,029 12,482
1990 11,385 384 3,927 15,696 14,846 15,414 12,120
1989 12,681 344 2,251 15,276 15,382 15,676 11,404
1988 8,801 16 1,562 10,379 11,756 11,803 10,897
1987 7,263 6 729 7,998 9,532 9,874 10,453
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class T of
Equity Growth on December 1, 1986, assuming the 3.50% maximum sales charge
had been in effect, the net amount invested in Class T shares was $9,650.
The cost of the initial investment ($10,000) together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$21,623. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $447 for dividends and
$7,951 for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Class B of Equity Growth would have grown to $60,007,
including the effect of Class B's maximum applicable CDSC.
EQUITY GROWTH - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
1996 $ 33,998 $ 1,619 $ 24,390 $ 60,007 $ 41,022 $ 46,321 $ 14,366
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 30,220 1,358 18,850 50,428 32,084 35,282 13,913
1994 21,639 870 13,228 35,737 23,557 25,366 13,578
1993 22,382 900 11,898 35,180 23,313 24,318 13,207
1992 19,977 709 10,033 30,719 21,174 21,201 12,862
1991 18,422 621 6,354 25,397 17,766 18,029 12,482
1990 11,798 397 4,070 16,265 14,846 15,414 12,120
1989 13,141 356 2,333 15,830 15,382 15,676 11,404
1988 9,120 17 1,619 10,756 11,756 11,803 10,897
1987 7,527 5 756 8,288 9,532 9,874 10,453
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class B of
Equity Growth on December 1, 1986, the net amount invested in Class B
shares was $10,000. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $22,045. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $463 for dividends and $8,240 for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical
$10,000 investment in Class C of Equity Growth would have grown to $____.
EQUITY GROWTH - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
1996 $ $ $ $ $ $ $
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995
1994
1993
1992
1991
1990
1989
1988
1987
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class C of
Equity Growth on December 1, 1986, the net amount invested in Class C
shares was $10,000. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $___ for dividends and $____ for capital gain
distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Institutional Class of Equity Growth would have grown to
$61,861.
EQUITY GROWTH - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 34,537 $ 2,557 $ 24,767 $ 61,861 $ 41,022 $ 46,321 $ 14,366
1995 30,645 1,940 19,104 51,689 32,084 35,282 13,913
1994 21,927 1,039 13,397 36,363 23,557 25,366 13,578
1993 22,564 933 11,994 35,491 23,313 24,318 13,207
1992 20,008 710 10,048 30,766 21,174 21,201 12,862
1991 18,422 621 6,354 25,397 17,766 18,029 12,482
1990 11,798 397 4,070 16,265 14,846 15,414 12,120
1989 13,141 356 2,333 15,830 15,382 15,676 11,404
1988 9,120 17 1,619 10,756 11,756 11,803 10,897
1987 7,527 5 756 8,288 9,532 9,874 10,453
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Equity Growth on December 1, 1986, the net amount invested in
Institutional Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $22,702. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $842 for dividends and $8,240 for capital gain distributions.
During the period from November 18, 1987 (commencement of operations of
the fund) to October 31, 1996, a hypothetical $10,000 investment in Class A
of Growth Opportunities would have grown to $_____, including the effect of
Class A's maximum 5.75% sales charge.
GROWTH OPPORTUNITIES - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct.
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988*
</TABLE>
* From November 18, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Growth Opportunities on November 18, 1987, assuming the 5.75% maximum sales
charge had been in effect, the net amount invested in Class A shares was
$____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $_____ for dividends
and $____ for capital gain distributions.
During the period from November 18, 1987 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class T of
Growth Opportunities would have grown to $51,885, including the effect of
Class T's maximum 3.50% sales charge.
GROWTH OPPORTUNITIES - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 34,171 $ 2,443 $ 15,271 $ 51,885 $ 38,184 $ 41,352 $ 13,718
1995 29,809 1,552 12,756 44,117 30,770 31,921 13,319
1994 25,688 938 9,277 35,903 24,336 25,585 12,955
1993 24,501 801 7,723 33,025 23,430 23,449 12,626
1992 20,400 506 4,873 25,779 20,383 19,966 12,288
1991 19,860 375 2,763 22,998 18,534 18,444 11,906
1990 12,535 72 1,744 14,351 13,882 14,179 11,568
1989 15,951 37 907 16,895 15,006 14,775 10,884
1988* 13,771 0 0 13,771 11,872 11,566 10,416
</TABLE>
* From November 18, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Growth Opportunities on November 18, 1987, assuming the 3.50% maximum sales
charge had been in effect, the net amount invested in Class T shares was
$9,650. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $19,972. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $1,177 for
dividends and $6,871 for capital gain distributions.
During the period from November 18, 1987 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class B of
Growth Opportunities would have grown to $53,767.
GROWTH OPPORTUNITIES - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ 35,410 $ 2,532 $ 15,825 $ 53,767 $ 38,184 $ 41,352 $ 13,718
1995 30,890 1,608 13,219 45,717 30,770 31,921 13,319
1994 26,620 971 9,614 37,205 24,336 25,585 12,955
1993 25,390 830 8,003 34,223 23,430 23,449 12,626
1992 21,140 524 5,050 26,714 20,383 19,966 12,288
1991 20,580 390 2,863 23,833 18,534 18,444 11,906
1990 12,990 75 1,807 14,872 13,882 14,179 11,568
1989 16,530 37 940 17,507 15,006 14,775 10,884
1988* 14,270 0 0 14,270 11,872 11,566 10,416
</TABLE>
* From November 18, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Growth Opportunities on November 18, 1987, the net amount invested in Class
B shares was $10,000. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $20,333. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $1,220 for dividends and $7,120 for capital gain distributions.
During the period from November 18, 1987 (commencement of operations of
the fund) to October 31, 1996, a hypothetical $10,000 investment in Class C
of Growth Opportunities would have grown to $____.
GROWTH OPPORTUNITIES - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct.
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988*
</TABLE>
* From November 18, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class C of
Growth Opportunities on November 18, 1987, the net amount invested in Class
C shares was $10,000. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $____ for dividends and $____ for capital gain
distributions.
During the period from November 18, 1987 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in
Institutional Class of Growth Opportunities would have grown to $54,198.
GROWTH OPPORTUNITIES - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 35,470 $ 2,874 $ 15,854 $ 54,198 $ 38,184 $ 41,352 $ 13,718
1995 30,970 1,612 13,253 45,835 30,770 31,921 13,319
1994 26,620 971 9,614 37,205 24,336 25,585 12,955
1993 25,390 830 8,003 34,223 23,430 23,449 12,626
1992 21,140 524 5,050 26,714 20,383 19,966 12,288
1991 20,580 390 2,863 23,833 18,534 18,444 11,906
1990 12,990 75 1,807 14,872 13,882 14,179 11,568
1989 16,530 37 940 17,507 15,006 14,775 10,884
1988* 14,270 0 0 14,270 11,872 11,566 10,416
</TABLE>
* From November 18, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Growth Opportunities on November 18, 1987, the net amount invested
in Institutional Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested) amounted to $20,629. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $1,420 for dividends and $7,120 for capital
gain distributions.
During the 10-year period ended December 31, 1996, a hypothetical
$10,000 investment in Class A of Strategic Opportunities would have grown
to $____, including the effect of Class A's maximum 5.75% sales charge.
STRATEGIC OPPORTUNITIES - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec.
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ $ $ $ $ $ $
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $
1994
1993
1992
1991
1990
1989
1988
1987
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class A of
Strategic Opportunities on January 1, 1987, assuming the 5.75% maximum
sales charge had been in effect, the net amount invested in Class A shares
was $____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $____ for dividends and
$____ for capital gain distributions.
During the 10-year period ended December 31, 1996, a hypothetical $10,000
investment in Class T of Strategic Opportunities would have grown to
$29,632, including the effect of Class T's maximum 3.50% sales charge.
STRATEGIC OPPORTUNITIES - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 13,508 $ 4,811 $ 11,313 $ 29,632 $ 41,499 $ 46,181 $ 14,353
1995 14,811 5,024 9,351 29,186 33,750 35,882 $ 13,891
1994 11,132 3,439 6,554 21,125 24,531 26,244 13,548
1993 12,382 3,401 6,974 22,757 24,213 25,001 13,195
1992 11,341 2,723 4,831 18,895 21,996 21,370 12,842
1991 11,007 2,131 3,602 16,740 20,434 19,916 12,480
1990 10,501 1,550 1,550 13,601 15,660 16,018 12,109
1989 11,793 1,118 1,741 14,652 16,164 16,104 11,412
1988 9,144 556 1,350 11,050 12,275 12,222 10,905
1987 7,751 144 1,144 9,039 10,526 10,543 10,443
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class T of
Strategic Opportunities on January 1, 1987, assuming the 3.50% maximum
sales charge had been in effect, the net amount invested in Class T shares
was $9,650. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $23,448. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $2,768 for
dividends and $6,197 for capital gain distributions.
During the 10-year period ended December 31, 1996, a hypothetical $10,000
investment in Class B of Strategic Opportunities would have grown to
$30,353.
STRATEGIC OPPORTUNITIES - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
1996 $ 13,794 $ 4,931 $ 11,628 $ 30,353 $ 41,499 $ 46,181 $ 14,353
1995 15,151 5,320 9,581 30,052 33,750 35,882 $ 13,891
1994 11,456 3,678 6,746 21,880 24,531 26,244 13,548
1993 12,832 3,524 7,226 23,582 24,213 25,001 13,195
1992 11,752 2,822 5,006 19,580 21,996 21,370 12,842
1991 11,407 2,208 3,732 17,347 20,434 19,916 12,480
1990 10,882 1,606 1,607 14,095 15,660 16,018 12,109
1989 12,221 1,158 1,804 15,183 16,164 16,104 11,412
1988 9,476 576 1,399 11,451 12,275 12,222 10,905
1987 8,032 149 1,186 9,367 10,526 10,543 10,443
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class B of
Strategic Opportunities on January 1, 1987, the net amount invested in
Class B shares was $10,000. The cost of the initial investment ($10,000)
together with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $23,939. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $2,862 for dividends and $6,422 for capital gain distributions.
During the 10-year period ended December 31, 1996, a hypothetical $10,000
investment in Institutional Class of Strategic Opportunities would have
grown to $30,944.
STRATEGIC OPPORTUNITIES - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 13,924 $ 5,324 $ 11,696 $ 30,944 $ 41,499 $ 46,181 $ 14,353
1995 15,299 5,381 9,661 30,341 33,750 35,882 13,891
1994 11,536 3,564 6,791 21,891 24,531 26,244 13,548
1993 12,832 3,524 7,226 23,582 24,213 25,001 13,195
1992 11,752 2,822 5,006 19,580 21,996 21,370 12,842
1991 11,407 2,208 3,732 17,347 20,434 19,916 12,480
1990 10,882 1,606 1,606 14,095 15,660 16,018 12,109
1989 12,221 1,158 1,804 15,183 16,164 16,104 11,412
1988 9,476 576 1,399 11,451 12,275 12,222 10,905
1987 8,032 149 1,186 9,367 10,526 10,543 10,443
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Strategic Opportunities on January 1, 1987, the net amount
invested in Institutional Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested) amounted to $24,330. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $3,060 for dividends and $6,422 for capital
gain distributions.
During the 10-year period ended December 31, 1996, a hypothetical $10,000
investment in Initial Class of Strategic Opportunities would have grown to
$31,232, including the effect of Initial Class's maximum 3.50% sales
charge.
STRATEGIC OPPORTUNITIES - INITIAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 13,633 $ 6,010 $ 11,589 $ 31,232 $ 41,499 $ 46,181 $ 14,353
1995 14,942 6,149 9,528 30,619 33,750 35,882 13,891
1994 11,228 4,172 6,668 22,068 24,531 26,244 13,548
1993 12,472 4,011 7,082 23,565 24,213 25,001 13,195
1992 11,394 3,190 4,880 19,464 21,996 21,370 12,842
1991 11,067 2,457 3,629 17,153 20,434 19,916 12,480
1990 10,549 1,772 1,546 13,867 15,660 16,018 12,109
1989 11,835 1,276 1,735 14,846 16,164 16,104 11,412
1988 9,221 591 1,352 11,164 12,275 12,222 10,905
1987 7,805 149 1,144 9,098 10,526 10,543 10,443
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Initial Class
of Strategic Opportunities on January 1, 1987, assuming the 3.50% maximum
sales charge had been in effect, the net amount invested in Initial Class
shares was $9,650.The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $24,713. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $3,369 for dividends and $6,197 for capital gain distributions.
During the period from February 20, 1996 (commencement of operations of
the fund) to November 30, 1996, a hypothetical $10,000 investment in Class
A of Large Cap would have grown to $____, including the effect of Class A's
maximum 5.75% sales charge.
LARGE CAP - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov.
30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996* $ $ $ $ $ $ $
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Large Cap on February 20, 1996, assuming the 5.75% maximum sales charge had
been in effect, the net amount invested in Class A shares was $. The cost
of the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $10,000. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $ for dividends and $____ for capital gain
distributions.
During the period from February 20, 1996 (commencement of operations of the
fund) to November 30, 1996, a hypothetical $10,000 investment in Class T of
Large Cap would have grown to $11,406, including the effect of Class T's
maximum 3.50% sales charge.
LARGE CAP - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996* $ 11,406 $ 0 $ 0 $ 11,406 $ 11,890 $ 12,048 $ 10,239
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Large Cap on February 20, 1996, assuming the 3.50% maximum sales charge had
been in effect, the net amount invested in Class T shares was $9,650. The
cost of the initial investment ($10,000) together with the aggregate cost
of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$10,000. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $0 for dividends and $0
for capital gain distributions.
During the period from February 20, 1996 (commencement of operations of the
fund) to November 30, 1996, a hypothetical $10,000 investment in Class B of
Large Cap would have grown to $11,270, including the effect of Class B's
maximum applicable CDSC.
LARGE CAP - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996* $ 11,270 $ 0 $ 0 $ 11,270 $ 11,890 $ 12,048 $ 10,239
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Large Cap on February 20, 1996, assuming the maximum applicable CDSC had
been in effect, the net amount invested in Class B shares was $10,000. The
cost of the initial investment ($10,000) together with the aggregate cost
of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$10,000. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $0 for dividends and $0
for capital gain distributions.
During the period from February 20, 1996 (commencement of operations of
the fund) to November 30, 1996, a hypothetical $10,000 investment in Class
C of Large Cap would have grown to $_____, including the effect of Class
C's maximum applicable CDSC.
LARGE CAP - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov.
30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996* $ $ $ $ $ $ $
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class C of
Large Cap on February 20, 1996, assuming the maximum applicable CDSC had
been in effect, the net amount invested in Class C shares was $10,000. The
cost of the initial investment ($10,000) together with the aggregate cost
of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$10,000. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $____ for dividends and
$____ for capital gain distributions.
During the period from February 20, 1996 (commencement of operations of the
fund) to November 30, 1996, a hypothetical $10,000 investment in
Institutional Class of Large Cap would have grown to $11,860.
LARGE CAP - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996* $ 11,860 $ 0 $ 0 $ 11,860 $ 11,890 $ 12,048 $ 10,239
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Large Cap on February 20, 1996, the net amount invested in
Institutional Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $10,000. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $0 for dividends and $0 for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical
$10,000 investment in Class A of Equity Income would have grown to $____,
including the effect of Class A's maximum 5.75% sales charge.
EQUITY INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov.
30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
1987
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class A of
Equity Income on December 1, 1986, assuming the 5.75% maximum sales charge
had been in effect, the net amount invested in Class A shares was $____.
The cost of the initial investment ($10,000) together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $_____ for dividends
and $____ for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Class T of Equity Income would have grown to $33,370,
including the effect of Class T's maximum 3.50% sales charge.
EQUITY INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 16,271 $ 10,544 $ 6,555 $ 33,370 $ 41,022 $ 46,321 $ 14,366
1995 14,218 8,778 5,072 28,068 32,084 35,282 13,913
1994 11,375 6,635 3,670 21,680 23,557 25,366 13,578
1993 10,591 5,912 3,417 19,920 23,313 24,318 13,207
1992 9,165 4,755 2,957 16,877 21,174 21,201 12,862
1991 7,897 3,536 2,548 13,981 17,766 18,029 12,482
1990 6,785 2,395 2,189 11,369 14,846 15,414 12,120
1989 8,745 2,135 2,480 13,360 15,382 15,676 11,404
1988 7,911 1,209 2,243 11,363 11,756 11,803 10,897
1987 7,790 457 701 8,948 9,532 9,874 10,453
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class T of
Equity Income on December 1, 1986, assuming the 3.50% maximum sales charge
had been in effect, the net amount invested in Class T shares was $9,650.
The cost of the initial investment ($10,000) together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$19,312. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $3,635 for dividends
and $2,739 for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Class B of Equity Income would have grown to $34,225.
EQUITY INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 16,787 $ 10,673 $ 6,765 $ 34,225 $ 41,022 $ 46,321 $ 14,366
1995 14,697 9,010 5,244 28,951 32,084 35,282 13,913
1994 11,773 6,881 3,798 22,452 23,557 25,366 13,578
1993 10,975 6,127 3,541 20,643 23,313 24,318 13,207
1992 9,498 4,928 3,064 17,490 21,174 21,201 12,862
1991 8,183 3,665 2,640 14,488 17,766 18,029 12,482
1990 7,031 2,482 2,268 11,781 14,846 15,414 12,120
1989 9,062 2,213 2,570 13,845 15,382 15,676 11,404
1988 8,198 1,252 2,325 11,775 11,756 11,803 10,897
1987 8,072 474 726 9,272 9,532 9,874 10,453
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class B of
Equity Income on December 1, 1986, the net amount invested in Class B
shares was $10,000. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $19,470. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $3,678 for dividends and $2,829 for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical
$10,000 investment in Class C of Equity Income would have grown to $____.
EQUITY INCOME - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov.
30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
1987
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class C of
Equity Income on December 1, 1986, the net amount invested in Class C
shares was $10,000. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $____ for dividends and $____ for capital gain
distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Institutional Class of Equity Income would have grown to
$35,662.
EQUITY INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 16,987 $ 11,818 $ 6,857 $ 35,662 $ 41,022 $ 46,321 $ 14,366
1995 14,838 9,698 5,296 29,832 32,084 35,282 13,913
1994 11,869 7,175 3,829 22,873 23,557 25,366 13,578
1993 11,027 6,244 3,557 20,828 23,313 24,318 13,207
1992 9,513 4,935 3,069 17,517 21,174 21,201 12,862
1991 8,183 3,665 2,640 14,488 17,766 18,029 12,482
1990 7,031 2,482 2,268 11,781 14,846 15,414 12,120
1989 9,062 2,213 2,570 13,845 15,382 15,676 11,404
1988 8,198 1,252 2,325 11,775 11,756 11,803 10,897
1987 8,072 474 726 9,272 9,532 9,874 10,453
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Equity Income on December 1, 1986, the net amount invested in
Institutional Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $20,279. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $4,069 for dividends and $2,829 for capital gain distributions.
During the period from January 6, 1987 (commencement of operations of
the fund) to October 31, 1996, a hypothetical $10,000 investment in Class A
of Balanced would have grown to $____, including the effect of Class A's
maximum 5.75% sales charge.
BALANCED - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct.
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
1987*
</TABLE>
* From January 6, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Balanced on January 6, 1987, assuming the 5.75% maximum sales charge had
been in effect, the net amount invested in Class A shares was $____. The
cost of the initial investment ($10,000) together with the aggregate cost
of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $____ for dividends and
$____ for capital gain distributions.
During the period from January 6, 1987 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class T of
Balanced would have grown to $27,673, including the effect of Class T's
maximum 3.50% sales charge.
BALANCED - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ 15,508 $ 8,628 $ 3,537 $ 27,673 $ 37,782 $ 41,374 $ 14,326
1995 14,765 7,234 3,319 25,318 30,447 31,938 13,910
1994 14,157 6,136 3,182 23,475 24,080 25,598 13,529
1993 15,353 6,082 2,688 24,123 23,183 23,462 13,186
1992 13,906 4,701 1,552 20,159 20,169 19,977 12,833
1991 13,635 3,975 672 18,282 18,339 18,454 12,434
1990 10,046 2,359 495 12,900 13,736 14,187 12,081
1989 12,323 1,569 0 13,892 14,849 14,782 11,367
1988 10,683 784 0 11,467 11,747 11,572 10,878
1987* 9,110 163 0 9,273 10,232 10,358 10,434
</TABLE>
* From January 6, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Balanced on January 6, 1987, assuming the 3.50% maximum sales charge had
been in effect, the net amount invested in Class T shares was $9,650. The
cost of the initial investment ($10,000) together with the aggregate cost
of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$19,989. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $5,192 for dividends
and $2,162 for capital gain distributions.
During the period from January 6, 1987 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class B of
Balanced would have grown to $28,677.
BALANCED - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ 16,070 $ 8,941 $ 3,666 $ 28,677 $ 37,782 $ 41,374 $ 14,326
1995 15,300 7,496 3,440 26,236 30,447 31,938 13,910
1994 14,670 6,358 3,298 24,326 24,080 25,598 13,529
1993 15,910 6,302 2,786 24,998 23,183 23,462 13,186
1992 14,410 4,873 1,608 20,891 20,169 19,977 12,833
1991 14,130 4,119 696 18,945 18,339 18,454 12,434
1990 10,410 2,444 513 13,367 13,736 14,187 12,081
1989 12,770 1,626 0 14,396 14,849 14,782 11,367
1988 11,070 813 0 11,883 11,747 11,572 10,878
1987* 9,440 170 0 9,610 10,232 10,358 10,434
</TABLE>
* From January 6, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Balanced on January 6, 1987, the net amount invested in Class B shares was
$10,000. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $20,351. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $5,380 for
dividends and $2,240 for capital gain distributions.
During the period from January 6, 1987 (commencement of operations of
the fund) to October 31, 1996, a hypothetical $10,000 investment in Class C
of Balanced would have grown to $____.
BALANCED - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct.
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
1987*
</TABLE>
* From January 6, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class C of
Balanced on January 6, 1987, the net amount invested in Class C shares was
$10,000. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $____ for dividends and
$____ for capital gain distributions.
During the period from January 6, 1987 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in
Institutional Class of Balanced would have grown to $28,947.
BALANCED - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ 16,110 $ 9,162 $ 3,675 $ 28,947 $ 37,782 $ 41,374 $ 14,326
1995 15,400 7,597 3,462 26,459 30,447 31,938 13,910
1994 14,670 6,358 3,298 24,326 24,080 25,598 13,529
1993 15,910 6,302 2,786 24,998 23,183 23,462 13,186
1992 14,410 4,873 1,608 20,891 20,169 19,977 12,833
1991 14,130 4,119 696 18,945 18,339 18,454 12,434
1990 10,410 2,444 513 13,367 13,736 14,187 12,081
1989 12,770 1,626 0 14,396 14,849 14,782 11,367
1988 11,070 813 0 11,883 11,747 11,572 10,878
1987* 9,440 170 0 9,610 10,232 10,358 10,434
</TABLE>
* From January 6, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Balanced on January 6, 1987, the net amount invested in
Institutional Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $20,546. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $5,490 for dividends and $2,240 for capital gain distributions.
During the period from March 10, 1994 (commencement of operations of the
fund) to December 31, 1996, a hypothetical $10,000 investment in Class A of
Emerging Markets Income would have grown to $____, including the effect of
Class A's maximum 4.75% sales charge.
EMERGING MARKETS INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value 500 of
Dec. 31 $10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ $ $ $ $ $ $
1995
1994*
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Emerging Markets Income on March 10, 1994, assuming the 4.75% maximum sales
charge had been in effect, the net amount invested in Class A shares was
$____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $____ for dividends and
$___ for capital gain distributions.
During the period from March 10, 1994 (commencement of operations of the
fund) to December 31, 1996, a hypothetical $10,000 investment in Class T of
Emerging Markets Income would have grown to $14,854, including the effect
of Class T's maximum 3.50% sales charge.
EMERGING MARKETS INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value 500 of
Dec. 31 $10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 11,300 $ 2,757 $ 797 $ 14,854 $ 17,029 $ 17,902 $ 10,811
1995 8,955 1,392 232 10,579 13,849 13,909 $ 10,464
1994* 9,187 463 238 9,888 10,067 10,173 10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Emerging Markets Income on March 10, 1994, assuming the 3.50% maximum sales
charge had been in effect, the net amount invested in Class T shares was
$9,650. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $12,991. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $1,959 for
dividends and $647 for capital gain distributions.
During the period from March 10, 1994 (commencement of operations of the
fund) to December 31, 1996, a hypothetical $10,000 investment in Class B of
Emerging Markets Income would have grown to $14,840, including the effect
of Class B's maximum applicable CDSC.
EMERGING MARKETS INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value 500 of
Dec. 31 $10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 11,450 $ 2,575 $ 815 $ 14,840 $ 17,029 $ 17,902 $ 10,811
1995 9,300 1,304 240 10,844 13,849 13,909 10,464
1994* 9,520 428 246 10,194 10,067 10,173 10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Emerging Markets Income on March 10, 1994, assuming the maximum applicable
CDSC had been in effect, the net amount invested in Class B shares was
$10,000. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $12,852. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $1,841 for
dividends and $670 for capital gain distributions.
During the period from March 10, 1994 (commencement of operations of the
fund) to December 31, 1996, a hypothetical $10,000 investment in Class C of
Emerging Markets Income would have grown to $____, including the effect of
Class C's maximum applicable CDSC.
EMERGING MARKETS INCOME - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value 500 of
Dec.
31 $10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ $ $ $ $ $ $
1995
1994*
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class C of
Emerging Markets Income on March 10, 1994, assuming the maximum applicable
CDSC had been in effect, the net amount invested in Class C shares was
$10,000. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $____ for dividends and
$___ for capital gain distributions.
During the period from March 10, 1994 (commencement of operations of the
fund) to December 31, 1996, a hypothetical $10,000 investment in
Institutional Class of Emerging Markets Income would have grown to $15,385.
EMERGING MARKETS INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value 500 of
Dec. 31 $10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 11,650 $ 2,909 $ 826 $ 15,385 $ 17,029 $ 17,902 $ 10,811
1995 9,280 1,452 241 10,973 13,849 13,909 $ 10,464
1994* 9,520 480 247 10,247 10,067 10,173 10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Emerging Markets Income on March 10, 1994, the net amount invested
in Institutional Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested) amounted to $13,157. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $2,073 for dividends and $670 for capital
gain distributions.
During the period from January 5, 1987 (commencement of operations of
the fund) to October 31, 1996, a hypothetical $10,000 investment in Class A
of High Yield would have grown to $____, including the effect of Class A's
maximum 4.75% sales charge.
HIGH YIELD - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct.
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
1987*
</TABLE>
* From January 5, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of High
Yield on January 5, 1987, assuming the 4.75% maximum sales charge had been
in effect, the net amount invested in Class A shares was $____. The cost of
the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $____ for dividends and $___ for capital gain
distributions.
During the period from January 5, 1987 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class T of
High Yield would have grown to $34,244, including the effect of Class T's
maximum 3.50% sales charge.
HIGH YIELD - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ 11,879 $ 21,276 $ 1,089 $ 34,244 $ 38,666 $ 42,322 $ 14,326
1995 11,493 17,779 1,054 30,326 31,158 32,670 13,910
1994 10,827 14,538 993 26,358 24,643 26,185 13,529
1993 11,590 13,596 494 25,680 23,725 23,999 13,186
1992 10,683 10,634 0 21,317 20,640 20,435 12,833
1991 9,766 7,713 0 17,479 18,768 18,877 12,434
1990 7,865 4,649 0 12,514 14,057 14,512 12,081
1989 8,656 3,426 0 12,082 15,196 15,121 11,367
1988 9,515 2,177 0 11,692 12,022 11,837 10,878
1987* 8,772 800 0 9,572 10,472 10,595 10,434
</TABLE>
* From January 5, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of High
Yield on January 5, 1987, assuming the 3.50% maximum sales charge had been
in effect, the net amount invested in Class T shares was $9,650. The cost
of the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $29,219. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $10,115 for dividends and $473 for capital
gain distributions.
During the period from January 5, 1987 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class B of
High Yield would have grown to $34,765.
HIGH YIELD - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ 12,280 $ 21,359 $ 1,126 $ 34,765 $ 38,666 $ 42,322 $ 14,326
1995 11,890 18,033 1,090 31,013 31,158 32,670 13,910
1994 11,210 14,937 1,028 27,175 24,643 26,185 13,529
1993 12,010 14,089 512 26,611 23,725 23,999 13,186
1992 11,070 11,020 0 22,090 20,640 20,435 12,833
1991 10,120 7,992 0 18,112 18,768 18,877 12,434
1990 8,150 4,818 0 12,968 14,057 14,512 12,081
1989 8,970 3,550 0 12,520 15,196 15,121 11,367
1988 9,860 2,256 0 12,116 12,022 11,837 10,878
1987* 9,090 829 0 9,919 10,472 10,595 10,434
</TABLE>
* From January 5, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of High
Yield on January 5, 1987, the net amount invested in Class B shares was
$10,000. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $29,305. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $10,267 for
dividends and $490 for capital gain distributions.
During the period from January 5, 1987 (commencement of operations of
the fund) to October 31, 1996, a hypothetical $10,000 investment in Class C
of High Yield would have grown to $____.
HIGH YIELD - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct.
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
1987*
</TABLE>
* From January 5, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class C of High
Yield on January 5, 1987, the net amount invested in Class C shares was
$10,000. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $____ for dividends and
$___ for capital gain distributions.
During the period from January 5, 1987 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in
Institutional Class of High Yield would have grown to $35,276.
HIGH YIELD - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ 12,120 $ 22,045 $ 1,111 $ 35,276 $ 38,666 $ 42,322 $ 14,326
1995 11,760 18,431 1,078 31,269 31,158 32,670 13,910
1994 11,220 15,065 1,029 27,314 24,643 26,185 13,529
1993 12,010 14,089 512 26,611 23,725 23,999 13,186
1992 11,070 11,020 0 22,090 20,640 20,435 12,833
1991 10,120 7,992 0 18,112 18,768 18,877 12,434
1990 8,150 4,818 0 12,968 14,057 14,512 12,081
1989 8,970 3,550 0 12,520 15,196 15,121 11,367
1988 9,860 2,256 0 12,116 12,022 11,837 10,878
1987* 9,090 829 0 9,919 10,472 10,595 10,434
</TABLE>
* From January 5, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of High Yield on January 5, 1987, the net amount invested in
Institutional Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $30,203. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $10,581 for dividends and $490 for capital gain distributions.
During the period from October 31, 1994 (commencement of operations of
the fund) to December 31, 1996, a hypothetical $10,000 investment in Class
A of Strategic Income would have grown to $_____, including the effect of
Class A's maximum 4.75% sales charge.
STRATEGIC INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec.
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ $ $ $ $ $ $
1995 $
1994*
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Strategic Income on October 31, 1994, assuming the 4.75% maximum sales
charge had been in effect, the net amount invested in Class A shares was
$____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $____ for dividends and
$___ for capital gain distributions.
During the period from October 31, 1994 (commencement of operations of the
fund) to December 31, 1996, a hypothetical $10,000 investment in Class T of
Strategic Income would have grown to $13,316, including the effect of Class
T's maximum 3.50% sales charge.
STRATEGIC INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ 10,856 $ 1,874 $ 586 $ 13,316 $ 16,493 $ 17,246 $ 10,609
1995 10,615 941 240 11,796 13,414 13,400 $ 10,268
1994* 9,573 94 0 9,667 9,750 9,801 10,013
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Strategic Income on October 31, 1994, assuming the 3.50% maximum sales
charge had been in effect, the net amount invested in Class T shares was
$9,650. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $12,389. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $1,649 for
dividends and $511 for capital gain distributions.
During the period from October 31, 1994 (commencement of operations of the
fund) to December 31, 1996, a hypothetical $10,000 investment in Class B of
Strategic Income would have grown to $13,300, including the effect of Class
B's maximum applicable CDSC.
STRATEGIC INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ 10,960 $ 1,739 $ 601 $ 13,300 $ 16,493 $ 17,246 $ 10,609
1995 11,010 871 247 12,128 13,414 13,400 $ 10,268
1994* 9,910 84 0 9,994 9,750 9,801 10,013
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Strategic Income on October 31, 1994, assuming the maximum applicable CDSC
had been in effect, the net amount invested in Class B shares was $10,000.
The cost of the initial investment ($10,000) together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$12,274. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $1,542 for dividends
and $530 for capital gain distributions.
During the period from October 31, 1994 (commencement of operations of
the fund) to December 31, 1996, a hypothetical $10,000 investment in Class
C of Strategic Income would have grown to $_____, including the effect of
Class C's maximum applicable CDSC.
STRATEGIC INCOME - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec.
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ $ $ $ $ $ $
1995 $
1994*
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class C of
Strategic Income on October 31, 1994, assuming the maximum applicable CDSC
had been in effect, the net amount invested in Class C shares was $10,000.
The cost of the initial investment ($10,000) together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $____ for dividends and
$___ for capital gain distributions.
During the period from October 31, 1994 (commencement of operations of the
fund) to December 31, 1996, a hypothetical $10,000 investment in
Institutional Class of Strategic Income would have grown to $13,858.
STRATEGIC INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ 11,300 $ 1,950 $ 608 $ 13,858 $ 16,493 $ 17,246 $ 10,609
1995 11,030 983 249 12,262 13,414 13,400 $ 10,268
1994* 9,920 97 0 10,017 9,750 9,801 10,013
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Strategic Income on October 31, 1994, the net amount invested in
Institutional Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $12,480. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $1,712 for dividends and $530 for capital gain distributions.
During the 10-year period ended July 31, 1997, a hypothetical $10,000
investment in Class A of Mortgage Securities would have grown to $____,
including the effect of Class A's maximum 4.75% sales charge.
MORTGAGE SECURITIES - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
July
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
1997 $ $ $ $ $ $ $
1996 $ $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class A of
Mortgage Securities on August 1, 1987, assuming the 4.75% maximum sales
charge had been in effect, the net amount invested in Class A shares was
$___. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $____ for dividends and
$____ for capital gain distributions.
During the 10-year period ended July 31, 1997, a hypothetical $10,000
investment in Class T of Mortgage Securities would have grown to $____,
including the effect of Class T's maximum 3.50% sales charge.
MORTGAGE SECURITIES - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
July
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
1997 $ $ $ $ $ $ $
1996 $ $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class T of
Mortgage Securities on August 1, 1987, assuming the 3.50% maximum sales
charge had been in effect, the net amount invested in Class T shares was
$____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $____ for dividends and
$___ for capital gain distributions.
During the 10-year period ended July 31, 1997, a hypothetical $10,000
investment in Class B of Mortgage Securities would have grown to $____.
MORTGAGE SECURITIES - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
July
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
1997 $ $ $ $ $ $ $
1996 $ $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class B of
Mortgage Securities on August 1, 1987, the net amount invested in Class B
shares was $10,000. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $____ for dividends and $____ for capital gain distributions.
During the 10-year period ended July 31, 1997, a hypothetical $10,000
investment in Institutional Class of Mortgage Securities would have grown
to $____.
MORTGAGE SECURITIES - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
July
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
1997 $ $ $ $ $ $ $
1996 $ $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in
Institutional Class of Mortgage Securities on August 1, 1987, the net
amount invested in Institutional Class shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested) amounted to $____. If distributions
had not been reinvested, the amount of distributions earned from the class
over time would have been smaller, and cash payments for the period would
have amounted to $____ for dividends and $___ for capital gain
distributions.
During the 10-year period ended July 31, 1997, a hypothetical $10,000
investment in Initial Class of Mortgage Securities would have grown to
$____.
MORTGAGE SECURITIES - INITIAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
July
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
1997 $ $ $ $ $ $ $
1996 $ $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Initial
Class of Mortgage Securities on August 1, 1987, the net amount invested in
Initial Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $____ for dividends and $___ for capital gain distributions.
During the period January 7, 1987 (commencement of operations of the fund)
to October 31, 1996, a hypothetical $10,000 investment in Class A of
Government Investment would have grown to $____, including the effect of
Class A's maximum 4.75% sales charge.
GOVERNMENT INVESTMENT - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct.
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
1987*
</TABLE>
* From January 7, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Government Investment on January 7, 1987, assuming the 4.75% maximum sales
charge had been in effect, the net amount invested in Class A shares was
$____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $____ for dividends and
___ for capital gain distributions.
During the period January 7, 1987 (commencement of operations of the fund)
to October 31, 1996, a hypothetical $10,000 investment in Class T of
Government Investment would have grown to $18,847, including the effect of
Class T's maximum 3.50% sales charge.
GOVERNMENT INVESTMENT - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ 9,158 $ 9,149 $ 540 $ 18,847 $ 37,691 $ 41,297 $ 14,326
1995 9,332 8,174 550 18,056 30,373 31,879 13,910
1994 8,646 6,557 510 15,713 24,022 25,550 13,529
1993 9,785 6,480 322 16,587 23,127 23,418 13,186
1992 9,389 5,351 0 14,740 20,120 19,940 12,833
1991 9,254 4,333 0 13,587 18,295 18,419 12,434
1990 8,830 3,231 0 12,061 13,703 14,160 12,081
1989 8,984 2,344 0 11,328 14,813 14,755 11,367
1988 8,936 1,421 0 10,357 11,719 11,551 10,878
1987* 8,878 595 0 9,473 10,208 10,339 10,434
</TABLE>
* From January 7, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Government Investment on January 7, 1987, assuming the 3.50% maximum sales
charge had been in effect, the net amount invested in Class T shares was
$9,650. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $19,620. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $6,234 for
dividends and $338 for capital gain distributions.
During the period January 7, 1987 (commencement of operations of the fund)
to October 31, 1996, a hypothetical $10,000 investment in Class B of
Government Investment would have grown to $19,196.
GOVERNMENT INVESTMENT - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ 9,490 $ 9,146 $ 560 $ 19,196 $ 37,691 $ 41,297 $ 14,326
1995 9,670 8,275 570 18,515 30,373 31,879 13,910
1994 8,950 6,737 528 16,215 24,022 25,550 13,529
1993 10,140 6,715 334 17,189 23,127 23,418 13,186
1992 9,730 5,545 0 15,275 20,120 19,940 12,833
1991 9,590 4,490 0 14,080 18,295 18,419 12,434
1990 9,150 3,349 0 12,499 13,703 14,160 12,081
1989 9,310 2,429 0 11,739 14,813 14,755 11,367
1988 9,260 1,473 0 10,733 11,719 11,551 10,878
1987* 9,200 616 0 9,816 10,208 10,339 10,434
</TABLE>
* From January 7, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Government Investment on January 7, 1987, the net amount invested in Class
B shares was $10,000. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $19,638. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $6,297 for dividends and $350 for capital gain distributions.
During the period January 7, 1987 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class C of
Government Investment would have grown to $____.
GOVERNMENT INVESTMENT - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct.
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
1987*
</TABLE>
* From January 7, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class C of
Government Investment on January 7, 1987, the net amount invested in Class
C shares was $10,000. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $____ for dividends and $___ for capital gain
distributions.
During the period January 7, 1987 (commencement of operations of the fund)
to October 31, 1996, a hypothetical $10,000 investment in Institutional
Class of Government Investment would have grown to $19,584.
GOVERNMENT INVESTMENT - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ 9,480 $ 9,545 $ 559 $ 19,584 $ 37,691 $ 41,297 $ 14,326
1995 9,670 8,487 570 18,727 30,373 31,879 13,910
1994 8,960 6,795 528 16,283 24,022 25,550 13,529
1993 10,140 6,715 334 17,189 23,127 23,418 13,186
1992 9,730 5,545 0 15,275 20,120 19,940 12,833
1991 9,590 4,490 0 14,080 18,295 18,419 12,434
1990 9,150 3,349 0 12,499 13,703 14,160 12,081
1989 9,310 2,429 0 11,739 14,813 14,755 11,367
1988 9,260 1,473 0 10,733 11,719 11,551 10,878
1987* 9,200 616 0 9,816 10,208 10,339 10,434
</TABLE>
* From January 7, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Government Investment on January 7, 1987, the net amount invested
in Institutional Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested) amounted to $20,043. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $6,496 for dividends and $350 for capital
gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical
$10,000 investment in Class A of Intermediate Bond would have grown to
$_____, including the effect of Class A's maximum 3.75% sales charge.
INTERMEDIATE BOND - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov.
30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
1996 $ $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
1987
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class A of
Intermediate Bond on December 1, 1986, assuming the 3.75% maximum sales
charge had been in effect, the net amount invested in Class A shares was
$____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $____ for dividends and
$___ for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Class T of Intermediate Bond would have grown to $20,406,
including the effect of Class T's maximum 2.75% sales charge.
INTERMEDIATE BOND - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 9,180 $ 11,042 $ 184 $ 20,406 $ 41,022 $ 46,321 $ 14,366
1995 9,310 9,918 187 19,415 32,084 35,282 13,913
1994 8,877 8,369 178 17,424 23,557 25,366 13,578
1993 9,638 8,029 193 17,860 23,313 24,318 13,207
1992 9,206 6,485 185 15,876 21,174 21,201 12,862
1991 9,128 5,248 183 14,559 17,766 18,029 12,482
1990 8,773 3,895 176 12,844 14,846 15,414 12,120
1989 9,007 2,877 181 12,065 15,382 15,676 11,404
1988 8,808 1,785 177 10,770 11,756 11,803 10,897
1987 8,868 852 178 9,898 9,532 9,874 10,453
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class T of
Intermediate Bond on December 1, 1986, assuming the 2.75% maximum sales
charge had been in effect, the net amount invested in Class T shares was
$9,725. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $21,108. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $7,076 for
dividends and $190 for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Class B of Intermediate Bond would have grown to $20,573.
INTERMEDIATE BOND - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 9,422 $ 10,962 $ 189 $ 20,573 $ 41,022 $ 46,321 $ 14,366
1995 9,564 9,965 192 19,721 32,084 35,282 13,913
1994 9,119 8,526 183 17,828 23,557 25,366 13,578
1993 9,911 8,255 199 18,365 23,313 24,318 13,207
1992 9,466 6,668 190 16,324 21,174 21,201 12,862
1991 9,386 5,396 188 14,970 17,766 18,029 12,482
1990 9,021 4,006 181 13,208 14,846 15,414 12,120
1989 9,262 2,958 186 12,406 15,382 15,676 11,404
1988 9,057 1,835 182 11,074 11,756 11,803 10,897
1987 9,119 876 183 10,178 9,532 9,874 10,453
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class B of
Intermediate Bond on December 1, 1986, the net amount invested in Class B
shares was $10,000. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $21,051. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $7,107 for dividends and $196 for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical
$10,000 investment in Class C of Intermediate Bond would have grown to
$____.
INTERMEDIATE BOND - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov.
30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
1987
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class C of
Intermediate Bond on December 1, 1986, the net amount invested in Class C
shares was $10,000. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $____ for dividends and $___ for capital gain
distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Institutional Class of Intermediate Bond would have grown to
$21,333.
INTERMEDIATE BOND - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 9,448 $ 11,695 $ 190 $ 21,333 $ 41,022 $ 46,321 $ 14,366
1995 9,582 10,466 192 20,240 32,084 35,282 13,913
1994 9,137 8,795 183 18,115 23,557 25,366 13,578
1993 9,929 8,375 199 18,503 23,313 24,318 13,207
1992 9,466 6,694 190 16,350 21,174 21,201 12,862
1991 9,386 5,396 188 14,970 17,766 18,029 12,482
1990 9,021 4,006 181 13,208 14,846 15,414 12,120
1989 9,262 2,958 186 12,406 15,382 15,676 11,404
1988 9,057 1,835 182 11,074 11,756 11,803 10,897
1987 9,119 876 183 10,178 9,532 9,874 10,453
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Intermediate Bond on December 1, 1986, the net amount invested in
Institutional Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $21,758. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $7,427 for dividends and $196 for capital gain distributions.
During the period September 16, 1987 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class A of
Short Fixed-Income would have grown to $18,478, including the effect of
Class A's maximum 1.50% sales charge.
SHORT FIXED-INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct.
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 9,229 $ 9,249 $ 0 $ 18,478 $ 29,378 $ 31,156 $ 13,765
1995 9,328 8,221 0 17,549 23,674 24,051 13,365
1994 9,338 7,210 0 16,548 18,723 19,276 13,000
1993 9,939 6,646 0 16,585 18,026 17,668 12,670
1992 9,801 5,397 0 15,198 15,682 15,043 12,330
1991 9,722 4,165 0 13,887 14,260 13,896 11,948
1990 9,476 2,902 0 12,378 10,681 10,683 11,609
1989 9,801 1,921 0 11,722 11,545 11,132 10,922
1988 9,791 974 0 10,765 9,134 8,714 10,452
1987* 9,909 100 0 10,009 7,956 7,800 10,026
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Short Fixed-Income on September 16, 1987, assuming the 1.50% maximum sales
charge had been in effect, the net amount invested in Class A shares was
$9,850. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $19,628. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $6,712 for
dividends and $0 for capital gain distributions.
During the period September 16, 1987 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class T of
Short Fixed-Income would have grown to $18,507, including the effect of
Class T's maximum 1.50% sales charge.
SHORT FIXED-INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 9,239 $ 9,268 $ 0 $ 18,507 $ 29,378 $ 31,156 $ 13,765
1995 9,328 8,221 0 17,549 23,674 24,051 13,365
1994 9,338 7,210 0 16,548 18,723 19,276 13,000
1993 9,939 6,646 0 16,585 18,026 17,668 12,670
1992 9,801 5,397 0 15,198 15,682 15,043 12,330
1991 9,722 4,165 0 13,887 14,260 13,896 11,948
1990 9,476 2,902 0 12,378 10,681 10,683 11,609
1989 9,801 1,921 0 11,722 11,545 11,132 10,922
1988 9,791 974 0 10,765 9,134 8,714 10,452
1987* 9,909 100 0 10,009 7,956 7,800 10,026
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Short Fixed-Income on September 16, 1987, assuming the 1.50% maximum sales
charge had been in effect, the net amount invested in Class T shares was
$9,850. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $19,638. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $6,716 for
dividends and $0 for capital gain distributions.
During the 10-year period from September 16, 1987 (commencement of
operations of the fund) to November 30, 1996, a hypothetical $10,000
investment in Class C of Short-Fixed Income would have grown to $____.
SHORT-FIXED INCOME - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov.
30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
1987
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class C of
Short-Fixed Income on September 16, 1987, the net amount invested in Class
C shares was $10,000. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $____ for dividends and $___ for capital gain
distributions.
During the period September 16, 1987 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in
Institutional Class of Short Fixed-Income would have grown to $18,794.
SHORT FIXED-INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 9,370 $ 9,424 $ 0 $ 18,794 $ 29,378 $ 31,156 $ 13,765
1995 9,470 8,352 0 17,822 23,674 24,051 13,365
1994 9,480 7,320 0 16,800 18,723 19,276 13,000
1993 10,090 6,748 0 16,838 18,026 17,668 12,670
1992 9,950 5,479 0 15,429 15,682 15,043 12,330
1991 9,870 4,228 0 14,098 14,260 13,896 11,948
1990 9,620 2,946 0 12,566 10,681 10,683 11,609
1989 9,950 1,951 0 11,901 11,545 11,132 10,922
1988 9,940 989 0 10,929 9,134 8,714 10,452
1987* 10,060 101 0 10,161 7,956 7,800 10,026
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Short Fixed-Income on September 16, 1987, the net amount invested
Institutional Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $19,810. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $6,831 for dividends and $0 for capital gain distributions.
During the period September 16, 1987 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class A of
High Income Municipal would have grown to $____, including the effect of
Class A's maximum 4.75% sales charge.
HIGH INCOME MUNICIPAL - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct.
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
1987*
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of High
Income Municipal on September 16, 1987, assuming the 4.75% maximum sales
charge had been in effect, the net amount invested in Class A shares was
$___. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $___ for dividends and
$364 for capital gain distributions.
During the period September 16, 1987 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class T of
High Income Municipal would have grown to $21,439, including the effect of
Class T's maximum 3.50% sales charge.
HIGH INCOME MUNICIPAL - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 11,348 $ 9,589 $ 502 $ 21,439 $ 29,378 $ 31,156 $ 13,765
1995 11,464 8,509 508 20,481 23,674 24,051 13,365
1994 10,827 6,899 479 18,205 18,723 19,276 13,000
1993 12,275 6,663 435 19,373 18,026 17,668 12,670
1992 11,242 5,111 355 16,708 15,682 15,043 12,330
1991 11,011 3,954 334 15,299 14,260 13,896 11,948
1990 10,490 2,757 170 13,417 10,681 10,683 11,609
1989 10,441 1,782 55 12,278 11,545 11,132 10,922
1988 10,094 864 0 10,958 9,134 8,714 10,452
1987* 9,506 88 0 9,594 7,956 7,800 10,026
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of High
Income Municipal on September 16, 1987, assuming the 3.50% maximum sales
charge had been in effect, the net amount invested in Class T shares was
$9,650. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $19,732. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $6,553 for
dividends and $367 for capital gain distributions.
During the period September 16, 1987 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class B of
High Income Municipal would have grown to $21,777.
HIGH INCOME MUNICIPAL - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 11,740 $ 9,517 $ 520 $ 21,777 $ 29,378 $ 31,156 $ 13,765
1995 11,860 8,560 525 20,945 23,674 24,051 13,365
1994 11,210 7,066 496 18,772 18,723 19,276 13,000
1993 12,720 6,905 450 20,075 18,026 17,668 12,670
1992 11,650 5,296 368 17,314 15,682 15,043 12,330
1991 11,410 4,097 347 15,854 14,260 13,896 11,948
1990 10,870 2,858 176 13,904 10,681 10,683 11,609
1989 10,820 1,846 57 12,723 11,545 11,132 10,922
1988 10,460 895 0 11,355 9,134 8,714 10,452
1987* 9,850 92 0 9,942 7,956 7,800 10,026
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of High
Income Municipal on September 16, 1987, the net amount invested in Class B
shares was $10,000. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $19,683. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $6,575 for dividends and $380 for capital gain distributions.
During the period September 16, 1987 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class C of
High Income Municipal would have grown to $_____.
HIGH INCOME MUNICIPAL - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct.
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
1987*
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class C of High
Income Municipal on September 16, 1987, the net amount invested in Class C
shares was $10,000. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $____ for dividends and $___ for capital gain
distributions.
During the period September 16, 1987 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in
Institutional Class of High Income Municipal would have grown to $22,173.
HIGH INCOME MUNICIPAL - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 11,720 $ 9,934 $ 519 $ 22,173 $ 29,378 $ 31,156 $ 13,765
1995 11,880 8,831 526 21,237 23,674 24,051 13,365
1994 11,220 7,148 497 18,865 18,723 19,276 13,000
1993 12,720 6,905 450 20,075 18,026 17,668 12,670
1992 11,650 5,296 368 17,314 15,682 15,043 12,330
1991 11,410 4,097 347 15,854 14,260 13,896 11,948
1990 10,870 2,858 176 13,904 10,681 10,683 11,609
1989 10,820 1,846 57 12,723 11,545 11,132 10,922
1988 10,460 895 0 11,355 9,134 8,714 10,452
1987* 9,850 92 0 9,942 7,956 7,800 10,026
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of High Income Municipal on September 16, 1987, the net amount
invested in Institutional Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested) amounted to $20,116. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $6,807 for dividends and $380 for capital
gain distributions.
During the 10-year period ended December 31, 1996, a hypothetical
$10,000 investment in Class A of Municipal Bond would have grown to $____,
including the effect of Class A's maximum 4.75% sales charge.
MUNICIPAL BOND - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec.
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
1987
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class A of
Municipal Bond on January 1, 1987, assuming the 4.75% maximum sales charge
had been in effect, the net amount invested in Class A shares was $____.
The cost of the initial investment ($10,000) together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $____ for dividends and
$___ for capital gain distributions.
During the 10-year period ended December 31, 1996, a hypothetical $10,000
investment in Class T of Municipal Bond would have grown to $19,364,
including the effect of Class T's maximum 3.50% sales charge.
MUNICIPAL BOND - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 9,545 $ 8,336 $ 1,483 $ 19,364 $ 41,499 $ 46,181 $ 14,353
1995 9,638 7,506 1,496 18,640 33,750 35,882 13,891
1994 8,589 5,862 1,325 15,776 24,531 26,244 13,548
1993 10,128 5,893 1,219 17,240 24,213 25,001 13,195
1992 9,906 4,895 432 15,233 21,996 21,370 12,842
1991 9,871 3,999 115 13,985 20,434 19,916 12,480
1990 9,475 3,021 0 12,496 15,660 16,018 12,109
1989 9,475 2,214 0 11,689 16,164 16,104 11,412
1988 9,265 1,403 0 10,668 12,275 12,222 10,905
1987 8,857 642 0 9,499 10,526 10,543 10,443
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class T of
Municipal Bond on January 1, 1987, assuming the 3.50% maximum sales charge
had been in effect, the net amount invested in Class T shares was $9,650.
The cost of the initial investment ($10,000) together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$19,787. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $5,808 for dividends
and $938 for capital gain distributions.
During the 10-year period ended December 31, 1996, a hypothetical $10,000
investment in Class B of Municipal Bond would have grown to $20,005.
MUNICIPAL BOND - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 9,981 $ 8,577 $ 1,537 $20,005 $ 41,499 $ 46,181 $ 14,353
1995 9,988 7,778 1,550 19,316 33,750 35,882 13,891
1994 8,901 6,074 1,373 16,348 24,531 26,244 13,548
1993 10,495 6,107 1,263 17,865 24,213 25,001 13,195
1992 10,266 5,073 447 15,786 21,996 21,370 12,842
1991 10,229 4,144 119 14,492 20,434 19,916 12,480
1990 9,819 3,130 0 12,949 15,660 16,018 12,109
1989 9,819 2,293 0 12,112 16,164 16,104 11,412
1988 9,601 1,454 0 11,055 12,275 12,222 10,905
1987 9,179 665 0 9,844 10,526 10,543 10,443
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class B of
Municipal Bond on January 1, 1987, the net amount invested in Class B
shares was $10,000. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $20,082. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $5,989 for dividends and $972 for capital gain distributions.
During the 10-year period ended December 31, 1996, a hypothetical $10,000
investment in Institutional Class of Municipal Bond would have grown to
$20,094.
MUNICIPAL BOND - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 9,891 $ 8,666 $ 1,537 $ 20,094 $ 41,499 $ 46,181 $ 14,353
1995 9,988 7,778 1,550 19,316 33,750 35,882 13,891
1994 8,901 6,074 1,373 16,348 24,531 26,244 13,548
1993 10,495 6,107 1,263 17,865 24,213 25,001 13,195
1992 10,266 5,073 447 15,786 21,996 21,370 12,842
1991 10,229 4,144 119 14,492 20,434 19,916 12,480
1990 9,819 3,130 0 12,949 15,660 16,018 12,109
1989 9,819 2,294 0 12,113 16,164 16,104 11,412
1988 9,601 1,454 0 11,055 12,275 12,222 10,905
1987 9,179 665 0 9,844 10,526 10,543 10,443
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Municipal Bond on January 1, 1987, the net amount invested in
Institutional Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $20,170. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $6,032 for dividends and $972 for capital gain distributions.
During the 10-year period ended December 31, 1996, a hypothetical $10,000
investment in Initial Class of Municipal Bond would have grown to $20,111.
MUNICIPAL BOND - INITIAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 9,891 $ 8,683 $ 1,537 $ 20,111 $ 41,499 $ 46,181 $ 14,353
1995 9,988 7,778 1,550 19,316 33,750 35,882 13,891
1994 8,901 6,074 1,373 16,348 24,531 26,244 13,548
1993 10,495 6,107 1,263 17,865 24,213 25,001 13,195
1992 10,266 5,073 447 15,786 21,996 21,370 12,842
1991 10,229 4,144 119 14,492 20,434 19,916 12,480
1990 9,819 3,131 0 12,950 15,660 16,018 12,109
1989 9,819 2,293 0 12,112 16,164 16,104 11,412
1988 9,601 1,454 0 11,055 12,275 12,222 10,905
1987 9,179 665 0 9,844 10,526 10,543 10,443
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Initial Class
of Municipal Bond on January 1, 1987, the net amount invested in Initial
Class shares was $10,000. The cost of the initial investment ($10,000)
together with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $20,188. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $6,041 for dividends and $972 for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical
$10,000 investment in Class A of Intermediate Municipal Income would have
grown to $____, including the effect of Class A's maximum 3.75% sales
charge.
INTERMEDIATE MUNICIPAL INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov.
30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
1987
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class A of
Intermediate Municipal Income on December 1, 1986, assuming the 3.75%
maximum sales charge had been in effect, the net amount invested in Class A
shares was $____. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $____ for dividends and $___ for capital gain
distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Class T of Intermediate Municipal Income would have grown to
$17,641, including the effect of Class T's maximum 2.75% sales charge.
INTERMEDIATE MUNICIPAL INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 9,212 $ 7,171 $ 1,258 $ 17,641 $ 41,022 $ 46,321 $ 14,366
1995 9,185 6,379 1,255 16,819 32,084 35,282 13,913
1994 8,318 5,109 1,136 14,563 23,557 25,366 13,578
1993 9,256 4,966 1,235 15,457 23,313 24,318 13,207
1992 9,805 4,480 63 14,348 21,174 21,201 12,862
1991 9,557 3,552 61 13,170 17,766 18,029 12,482
1990 9,415 2,701 61 12,177 14,766 15,414 12,120
1989 9,389 1,928 60 11,377 15,382 15,676 11,404
1988 9,309 1,214 60 10,583 11,756 11,803 10,897
1987 9,185 576 59 9,820 9,532 9,874 10,453
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class T of
Intermediate Municipal Income on December 1, 1986, assuming the 2.75%
maximum sales charge had been in effect, the net amount invested in Class T
shares was $9,725. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $18,436. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $5,195 for dividends and $858 for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Class B of Intermediate Municipal Income would have grown to
$17,814.
INTERMEDIATE MUNICIPAL INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 9,472 $ 7,048 $ 1,294 $ 17,814 $ 41,022 $ 46,321 $ 14,366
1995 9,445 6,360 1,290 17,095 32,084 35,282 13,913
1994 8,553 5,195 1,169 14,917 23,557 25,366 13,578
1993 9,518 5,108 1,270 15,896 23,313 24,318 13,207
1992 10,082 4,609 65 14,756 21,174 21,201 12,862
1991 9,827 3,653 63 13,543 17,766 18,029 12,482
1990 9,682 2,778 62 12,522 14,846 15,414 12,120
1989 9,654 1,982 62 11,698 15,382 15,676 11,404
1988 9,572 1,248 62 10,882 11,756 11,803 10,897
1987 9,445 591 61 10,097 9,532 9,874 10,453
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class B of
Intermediate Municipal Income on December 1, 1986, the net amount invested
in Class B shares was $10,000. The cost of the initial investment ($10,000)
together with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $18,360. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $5,176 for dividends and $883 for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical
$10,000 investment in Class C of Intermediate Municipal Income would have
grown to $____.
INTERMEDIATE MUNICIPAL INCOME - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov.
30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ $ $ $ $ $ $
1995
1994
1993
1992
1991
1990
1989
1988
1987
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class C of
Intermediate Municipal Income on December 1, 1986, the net amount invested
in Class C shares was $10,000. The cost of the initial investment ($10,000)
together with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $_____ for dividends and $___ for capital gain
distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Institutional Class of Intermediate Municipal Income would
have grown to $18,339.
INTERMEDIATE MUNICIPAL INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 9,472 $ 7,572 $ 1,295 $ 18,339 $ 41,022 $ 46,321 $ 14,366
1995 9,427 6,691 1,288 17,406 32,084 35,282 13,913
1994 8,562 5,347 1,170 15,079 23,557 25,366 13,578
1993 9,518 5,156 1,271 15,945 23,313 24,318 13,207
1992 10,082 4,615 65 14,762 21,174 21,201 12,862
1991 9,827 3,653 63 13,543 17,766 18,029 12,482
1990 9,682 2,778 62 12,522 14,846 15,414 12,120
1989 9,654 1,982 62 11,698 15,382 15,676 11,404
1988 9,572 1,248 62 10,882 11,756 11,803 10,897
1987 9,445 591 61 10,097 9,532 9,874 10,453
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Intermediate Municipal Income on December 1, 1986, the net amount
invested in Institutional Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested) amounted to $18,870. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $5,444 for dividends and $883 for capital
gain distributions.
During the period March 16, 1994 (commencement of operations of the fund)
to November 30, 1996, a hypothetical $10,000 investment in Class A of
Short-Intermediate Municipal Income would have grown to $11,240, including
the effect of Class A's maximum 1.50% sales charge.
SHORT-INTERMEDIATE MUNICIPAL INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 10,057 $ 1,151 $ 32 $ 11,240 $ 17,368 $ 18,085 $ 10,774
1995 10,086 717 0 10,803 13,583 13,775 10,435
1994* 9,623 254 0 9,877 9,916 9,904 10,183
</TABLE>
* From March 16, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Short-Intermediate Municipal Income on March 16, 1994, assuming the 1.50%
maximum sales charge had been in effect, the net amount invested in Class A
shares was $9,850. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $11,167. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $1,075 for dividends and $30 for capital gain distributions.
During the period March 16, 1994 (commencement of operations of the fund)
to November 30, 1996, a hypothetical $10,000 investment in Class T of
Short-Intermediate Municipal Income would have grown to $11,242, including
the effect of Class T's maximum 1.50% sales charge.
SHORT-INTERMEDIATE MUNICIPAL INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 10,057 $ 1,153 $ 32 $ 11,242 $ 17,368 $ 18,085 $ 10,774
1995 10,086 717 0 10,803 13,583 13,775 10,435
1994* 9,623 254 0 9,877 9,916 9,904 10,183
</TABLE>
* From March 16, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Short-Intermediate Municipal Income on March 16, 1994, assuming the 1.50%
maximum sales charge had been in effect, the net amount invested in Class T
shares was $9,850. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $11,169. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $1,077 for dividends and $30 for capital gain distributions.
During the period March 16, 1994 (commencement of operations of the fund)
to November 30, 1996, a hypothetical $10,000 investment in Institutional
Class of Short-Intermediate Municipal Income would have grown to $11,422.
SHORT-INTERMEDIATE MUNICIPAL INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 10,210 $ 1,180 $ 32 $ 11,422 $ 17,368 $ 18,085 $ 10,774
1995 10,230 733 0 10,963 13,583 13,775 10,435
1994* 9,770 257 0 10,027 9,916 9,904 10,183
</TABLE>
* From March 16, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Short-Intermediate Municipal Income on March 16, 1994, the net
amount invested in Institutional Class shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested) amounted to $11,196. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $1,102 for dividends and $30 for capital gain
distributions.
During the period August 21, 1995 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class A of
New York Municipal Income would have grown to $____, including the effect
of Class A's maximum 4.75% sales charge.
NEW YORK MUNICIPAL INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct.
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ $ $ $ $ $ $
1995*
</TABLE>
* From August 21, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of New
York Municipal Income on August 21, 1995, assuming the 4.75% maximum sales
charge had been in effect, the net amount invested in Class A shares was
$____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $_____ for dividends
and $__ for capital gain distributions.
During the period August 21, 1995 (commencement of operations of the fund)
to October 31, 1996, a hypothetical $10,000 investment in Class T of New
York Municipal Income would have grown to $10,639, including the effect of
Class T's maximum 3.50% sales charge.
NEW YORK MUNICIPAL INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ 10,113 $ 526 $ 0 $ 10,639 $ 12,961 $ 13,403 $ 10,353
1995* 10,036 82 0 10,118 10,445 10,346 10,052
</TABLE>
* From August 21, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of New
York Municipal Income on August 21, 1995, assuming the 3.50% maximum sales
charge had been in effect, the net amount invested in Class T shares was
$9,650. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $10,522. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $510 for dividends
and $0 for capital gain distributions.
During the period August 21, 1995 (commencement of operations of the fund)
to October 31, 1996, a hypothetical $10,000 investment in Class B of New
York Municipal Income would have grown to $10,532, including the effect of
Class B's maximum applicable CDSC.
NEW YORK MUNICIPAL INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 10,070 $ 462 $ 0 $ 10,532 $ 12,961 $ 13,403 $ 10,353
1995* 10,390 75 0 10,465 10,445 10,346 10,052
</TABLE>
* From August 21, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of New
York Municipal Income on August 21, 1995, assuming the maximum applicable
CDSC had been in effect, the net amount invested in Class B shares was
$10,000. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $10,459. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $450 for dividends
and $0 for capital gain distributions.
During the period August 21, 1995 (commencement of operations of the fund)
to October 31, 1996, a hypothetical $10,000 investment in Institutional
Class of New York Municipal Income would have grown to $11,051.
NEW YORK MUNICIPAL INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $ 10,470 $ 581 $ 0 $ 11,051 $ 12,961 $ 13,403 $ 10,353
1995* 10,400 96 0 10,496 10,445 10,346 10,052
</TABLE>
* From August 21, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of New York Municipal Income on August 21, 1995, the net amount
invested in Institutional Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested) amounted to $10,577. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $563 for dividends and $0 for capital gain
distributions.
During the period February 20, 1996 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class A of
California Municipal Income would have been $____, including the effect of
Class A's maximum 4.75% sales charge.
CALIFORNIA MUNICIPAL INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct.
31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996* $ $ $ $ $ $ $
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
California Municipal Income on February 20, 1996, assuming the 4.75%
maximum sales charge had been in effect, the net amount invested in Class A
shares was $____. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $___ for dividends and $___ for capital gain distributions.
During the period February 20, 1996 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class T of
California Municipal Income would have been $9,842, including the effect of
Class T's maximum 3.50% sales charge.
CALIFORNIA MUNICIPAL INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996* $ 9,582 $ 260 $ 0 $ 9,842 $ 11,054 $ 11,119 $ 10,219
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
California Municipal Income on February 20, 1996, assuming the 3.50%
maximum sales charge had been in effect, the net amount invested in Class T
shares was $9,650. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $10,255. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $252 for dividends and $0 for capital gain distributions.
During the period February 20, 1996 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in Class B of
California Municipal Income would have been $9,635, including the effect of
Class B's maximum applicable CDSC.
CALIFORNIA MUNICIPAL INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996* $ 9,400 $ 235 $ 0 $ 9,635 $ 11,054 $ 11,119 $ 10,219
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
California Municipal Income on February 20, 1996, assuming the maximum
applicable CDSC had been in effect, the net amount invested in Class B
shares was $10,000. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $10,231. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $229 for dividends and $0 for capital gain distributions.
During the period February 20, 1996 (commencement of operations of the
fund) to October 31, 1996, a hypothetical $10,000 investment in
Institutional Class of California Municipal Income would have grown to
$10,227.
CALIFORNIA MUNICIPAL INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996* $ 9,910 $ 316 $ 0 $ 10,227 $ 11,054 $ 11,119 $ 10,219
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of California Municipal Income on February 20, 1996, the net amount
invested in Institutional Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested) amounted to $10,311. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $307 for dividends and $0 for capital gain
distributions.
The yield for the S&P 500 for the year ended December 31, 1996 was 2.01%,
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, 1996. The S&P 500 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 INDICES, MARKET CAPITALIZATION, AND NATIONAL STOCK MARKET
RETURN. The following tables show the total market capitalization of
certain countries according to the Morgan Stanley Capital International
(MSCI) Indices database, the total market capitalization of Latin American
countries according to the International Finance Corporation Emerging
Market database, and the performance of national stock markets as measured
in U.S. dollars by the MSCI stock market indices for the twelve months
ended October 31, 1996. 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
MSCI, the size of the markets as measured in U.S. dollars grew from
$5,080.3 ($8621.7 including the US) billion in 1995 to $5,749.4 ($10,078.9
including the US) billion in 1996.
The following table measures the indexed market capitalization of certain
countries according to the MSCI indices database. The value of the markets
are measured in billions of U.S. dollars as of October 31, 1996.
TOTAL MARKET CAPITALIZATION
Australia $ 163.6 Japan $ 1944.0
Austria $ 22.9 Netherlands $ 248.1
Belgium $ 66.2 Norway $ 26.2
Canada $ 250.8 Singapore/Malaysia $ 213.6
Denmark $ 47.2 Spain $ 108.4
France $ 372.2 Sweden $ 134.0
Germany $ 401.6 Switzerland $ 325.4
Hong Kong $ 200.6 United Kingdom $ 1002.8
Italy $ 147.0 United States $ 4329.4
The following table measures the total market capitalization of certain
Latin American countries according to the International Finance Corporation
Emerging Markets database. The value of the markets is measured in billions
of U.S. dollars as of October 31, 1996.
TOTAL MARKET CAPITALIZATION - LATIN AMERICA
Argentina $ 24,980.3
Brazil $ 89,501.4
Chile $ 38,528.7
Colombia $ 9,277.4
Mexico $ 72,037.8
Venezuela $ 5,384.5
Total Latin America $ 239,710.1
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
MSCI stock market indices for the twelve months ended October 31, 1996. 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 16.9% Japan -0.8%
Austria -0.5% Netherlands 26.2%
Belgium 16.3% Norway 15.4%
Canada 29.9% Singapore/Malaysia -3.1/26.8%
Denmark 16.8% Spain 32.1%
France 18.2% Sweden 28.9%
Germany 12.5% Switzerland 8.9%
Hong Kong 28.0% United Kingdom 20.3%
Italy 7.8% United States 23.8%
STOCK MARKET PERFORMANCE (CUMULATIVE TOTAL RETURNS)
MEASURED IN LOCAL CURRENCY
Australia 12.1% Japan 10.3%
Austria 6.9% Netherlands 35.5%
Belgium 25.2% Norway 18.1%
Canada 29.6% Singapore/Malaysia -3.5/26.0%
Denmark 24.2% Spain 37.8%
France 23.4% Sweden 27.4%
Germany 20.8% Switzerland 20.6%
Hong Kong 28.0% United Kingdom 16.6%
Italy 2.5% United States 23.8%
The following table shows the average annualized stock market returns
measured in U.S. dollars as of October 31, 1996.
STOCK MARKET PERFORMANCE
<TABLE>
<CAPTION>
<S> <C> <C>
FIVE YEARS ENDED OCTOBER 31, 1996 TEN YEARS ENDED OCTOBER 31, 1996
Germany 11.98% 8.73%
Hong Kong 26.94% 22.25%
Japan 0.58% 5.35%
Spain 8.15% 11.16%
United Kingdom 11.50% 15.03%
United States 14.98% 13.73%
</TABLE>
PERFORMANCE COMPARISONS. A class's performance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed as
mutual fund rankings prepared by Lipper Analytical Services, Inc. (Lipper),
an independent service located in Summit, New Jersey that monitors the
performance of mutual funds. Generally, Lipper rankings are based on total
return, assume reinvestment of distributions, do not take sales charges or
redemption fees into consideration, and are 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 available 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's performance may also be compared to that of a benchmark index
representing the universe of securities in which the fund may invest. The
total return of a benchmark index reflects reinvestment of all dividends
and capital gains paid by securities included in the index. Unlike a class
returns, however, the index returns do not reflect brokerage commissions,
transaction fees, or other costs of investing directly in the securities
included in the index.
Each of TechnoQuant Growth, Equity Growth, Growth Opportunities, Strategic
Opportunities, Large Cap, Growth & Income, Equity Income, and Balanced may
compare its performance to that of the Standard & Poor's 500 Index, a
widely recognized, unmanaged index of common stocks.
Each of International Capital Appreciation Fund and Overseas may compare
their performance to that of the Morgan Stanley Capital International
Europe, Australsia, Far East Index, a market capitalization weighted,
unmanaged index of over 1,000 foreign stocks.
Mid-Cap may compare its performance to that of the Standard & Poor's MidCap
400 Index, a widely recognized, unmanaged index of 400
medium-capitalization stocks.
Balanced may compare its performance to that of the Lehman Brothers
Aggregate Bond Index, a market value weighted performance benchmark for
investment-grade fixed-rate debt issues, including government, corporate,
asset-backed, and mortgage-backed securities. Issues included in the index
have an outstanding par value of at least $100 million and maturities of at
least one year. Government and corporate issues include all public
obligations of the U.S. Treasury (excluding flower bonds and
foreign-targeted issues) and U.S. government agencies, as well as
nonconvertible investment-grade, SEC-registered corporate debt.
Mortgage-backed securities include 15- and 30-year fixed-rate securities
backed by mortgage pools of the Government National Mortgage Association
(GNMA), Federal Home Loan Mortgage Corporation (FHLMC), and Fannie Mae.
Asset-backed securities include credit card, auto, and home equity loans.
Emerging Markets Income may compare its performance to that of the J.P.
Morgan Emerging Markets Bond Index Plus, a market capitalization weighted
total return index of U.S. dollar- and other external currency-denominated
Brady bonds, loans, Eurobonds, and local market debt instruments traded in
emerging markets.
Each of High Yield and Strategic Income may compare its performance to that
of the Merrill Lynch High Yield Master Index, a market capitalization
weighted index of all domestic and yankee high-yield bonds with an
outstanding par value of at least $50 million and maturities of at least
one year. Issues included in the index have a credit rating lower than
BBB-/Baa3 but are not in default (DDD1 or lower). Split-rated issues (i.e.,
rated investment-grade by one rating agency and high-yield by another) are
included in the index based on the issue's corresponding composite rating.
Structured-note issues, deferred interest bonds, and pay-in-kind bonds are
excluded.
Mortgage Securities may compare its performance to that of the Salomon
Brothers Mortgage Index, a market capitalization weighted index of 15- and
30-year fixed-rate securities backed by mortgage pools of the Government
National Mortgage Association (GNMA), Fannie Mae and Federal Home Loan
Mortgage Corporation (FHLMC), and Fannie Mae and FHLMC balloon mortgages
with fixed-rate coupons. For mortgage issues, the entry and exit amounts
are $1 billion public amount outstanding.
Government Investment may compare its performance to that of the Salomon
Brothers Treasury/Agency Index, a market capitalization weighted index of
U.S. Treasury and U.S. Government agency securities with fixed-rate coupons
and weighted average lives of at least one year. For U.S. Treasury issues,
the entry and exit amounts are $1 billion public amount outstanding. For
U.S. Government agency issues, the entry and exit amounts are $100 million
and $75 million, respectively.
Intermediate Bond may compare its performance to that of the Lehman
Brothers Intermediate Government/Corporate Bond Index, a market value
weighted performance benchmark for government and corporate fixed-rate debt
issues. Issues included in the index have an outstanding par value of at
least $100 million and maturities between one and 10 years. Government and
corporate issues include all public obligations of the U.S. Treasury
(excluding flower bonds and foreign-targeted issues) and U.S. government
agencies, as well as nonconvertible investment-grade, SEC-registered
corporate debt.
Short Fixed-Income may compare its performance to that of the Lehman
Brothers 1-3 Year Government/Corporate Bond Index, a market value weighted
performance benchmark for government and corporate fixed-rate debt issues.
Issues included in the index have an outstanding par value of at least $100
million and maturities between one and three years. Government and
corporate issues include all public obligations of the U.S. Treasury
(excluding flower bonds and foreign-targeted issues) and U.S. government
agencies, as well as nonconvertible investment-grade, SEC-registered
corporate debt.
Each class of the municipal funds may compare its performance to that of
the Lehman Brothers Municipal Bond Index, a total return performance
benchmark for investment-grade municipal bonds with maturities of at least
one year. In addition, High Income Municipal may compare its performance to
that of the Lehman Brothers 70% Municipal/30% Non-Investment Grade
Composite Index, a total return performance benchmark for both
investment-grade and non-investment grade municipal bonds. The Lehman
Brothers 70% Municipal/30% Non-Investment Grade Composite Index has a
Municipal Bond Index weight of 70% and a Non-Investment Grade Bond Index
weight of 30%. The Lehman Brothers Non-Investment Grade Municipal Bond
Index includes municipal bonds with maturities of at least one year that
have a maximum credit rating of BA1 or are unrated. Intermediate Municipal
Income may compare its performance to that of the Lehman Brothers 1-17 Year
Municipal Bond Index, a total return performance benchmark for
investment-grade municipal bonds with maturities between one and 17 years.
Short-Intermediate Municipal Income may compare its performance to that of
the Lehman Brothers 1-5 Year Municipal Bond Index, a total return
performance benchmark for investment-grade municipal bonds with maturities
between one and five years. New York Municipal Income may compare its
performance to that of the Lehman Brothers New York 4 Plus Year Municipal
Bond Index, a total return performance benchmark for New York
investment-grade municipal bonds with maturities of at least four years.
California Municipal Income may compare its performance to that of the
Lehman Brothers California Municipal Bond Index, a total return performance
benchmark for California investment-grade municipal bonds with maturities
of at least one year. Issues included in each index have been issued after
December 31, 1990 and have an outstanding par value of at least $50
million. Subsequent to December 31, 1995, zero coupon bonds and issues
subject to the alternative minimum tax are included in each index.
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; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the classes.
The classes may also compare performance to that of 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
Financial Data, Inc. of Ashland, Massachusetts. These averages assume
reinvestment of distributions. IBC's MONEY FUND REPORT
AVERAGES(trademark)/All Taxable (Emerging Markets Income, Strategic Income,
Mortgage Securities, Government Investment, Intermediate Bond, High Yield,
and Short-Fixed Income), which is reported in IBC's MONEY FUND
REPORT(trademark), covers over 810 taxable money market funds. IBC's MONEY
FUND REPORT AVERAGES(trademark)/Municipal (High Income Municipal, Municipal
Bond, Intermediate Municipal Income, Short-Intermediate Municipal Income,
New York Municipal Income, and California Municipal Income), which is
reported in IBC's MONEY FUND REPORT(trademark), covers over 410 municipal
money market funds. 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.
Bond funds, however, invest in longer-term instruments and their share
prices change daily in response to a variety of factors.
A municipal fund may compare and contrast in advertising the relative
advantages of investing in a mutual fund versus an individual municipal
bond. Unlike municipal 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 municipal 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.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include the following: other Fidelity funds;
retirement investing; model portfolios or allocations; and saving for
college or other goals. In addition, Fidelity may quote or reprint
financial or business publications and periodicals as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the desirability
of owning a particular mutual fund, and Fidelity services and products.
Each fund may be advertised as part of certain asset allocation programs
involving other Fidelity or non-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. An NTF program
may advertise performance results.
Each fund may present its fund number, QuotronTM number, and CUSIP number,
and discuss or quote its current portfolio manager.
VOLATILITY. A class may quote various measures of volatility and benchmark
correlation 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.
A class may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. In such a program, an
investor invests a fixed dollar amount in a 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 fund may be available for purchase through retirement plans or other
programs offering deferral of, or exemption from, income taxes, which may
produce superior after-tax returns over time. For example, a $1,000
investment earning a taxable return of 10% annually would have an after-tax
value of $1,949 after ten years, assuming tax was deducted from the return
each year at a 31% rate. An equivalent tax-deferred investment would have
an after-tax value of $2,100 after ten years, assuming tax was deducted at
a 31% rate from the tax-deferred earnings at the end of the ten-year
period.
As of December 31, 1996, FMR advised over $28 billion in tax-free fund
assets, $96 billion in money market fund assets, $303 billion in equity
fund assets, $61 billion in international fund assets, and $25 billion in
Spartan fund assets. The funds may reference the growth and variety of
money market mutual funds and the adviser's innovation and participation in
the industry. The equity funds under management figure represents the
largest amount of equity fund assets under management by a mutual fund
investment adviser in the United States, making FMR America's leading
equity (stock) fund manager. FMR, its subsidiaries, and affiliates maintain
a worldwide information and communications network for the purpose of
researching and managing investments abroad.
In addition to performance rankings, 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.
ADDITIONAL PURCHASE, EXCHANGE, AND REDEMPTION INFORMATION
CLASS A SHARES ONLY
Pursuant to Rule 22d-1 under the 1940 Act, FDC exercises its right to waive
Class A's front-end sales charge in connection with a fund's merger with or
acquisition of any investment company or trust. In addition, FDC has chosen
to waive Class A's front-end 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 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;
2. to shares purchased by a trust institution or bank trust department
(excluding employee benefit plan assets) that has executed a participation
agreement with FDC specifying certain asset minimums and qualifications,
and marketing restrictions. Assets managed by third parties do not qualify
for this waiver;
3. to shares purchased for use in a broker-dealer managed account program,
provided the broker-dealer has executed a participation agreement with FDC
specifying certain asset minimums and qualifications, and marketing,
program and trading restrictions. Employee benefit plan assets do not
qualify for this waiver;
4. to shares purchased on a discretionary basis by a registered investment
adviser which is not part of an organization primarily engaged in the
brokerage business, that has executed a participation agreement with FDC
specifying certain asset minimums and qualifications, and marketing,
program and trading restrictions. Employee benefit plan assets do not
qualify for this waiver; or
5. to shares purchased by an employee benefit plan having $25 million or
more in plan assets.
For the purpose of load waiver (3), certain broker-dealers that otherwise
meet the qualifications and asset minimums established by FDC are not
required to sign a participation agreement.
A sales load waiver form must accompany these transactions.
CLASS T SHARES ONLY
P ursuant to Rule 22d-1 under the 1940 Act, FDC exercises its right to
waive Class T's front-end sales charge in connection with a fund's merger
with or acquisition of any investment company or trust. In addition,
FDC has chosen to waive Class T's front-end 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 (or a member of one of their immediate families) of
investment professionals having agreements with FDC;
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 FIL or their 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 for
purposes of 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 for
purposes of Section 501(c)(3) of the Internal Revenue Code);
5. to shares in a Fidelity or Fidelity Advisor account purchased (including
purchases by exchange) with the proceeds of a distribution (i) from an
employee benefit plan that qualified for waiver (11) or had a minimum of $3
million in plan assets invested in Fidelity funds; or (ii) from an
insurance company separate account qualifying under (6) 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 funds.
(Distributions other than those transferred to an IRA account must be
transferred directly into a Fidelity account.)
6. 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;
7. to shares purchased for any state, county, or city, or any governmental
instrumentality, department, authority or agency;
8. 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;
9. to shares purchased by a trust institution or bank trust department
(excluding assets described in (11) and (12) below) that has executed a
participation agreement with FDC specifying certain asset minimums and
qualifications, and marketing restrictions. Assets managed by third parties
do not qualify for this waiver;
10. to shares purchased for use in a broker-dealer managed account program,
provided the broker-dealer has executed a participation agreement with FDC
specifying certain asset minimums and qualifications, and marketing,
program and trading restrictions. Employee benefit plan assets do not
qualify for this waiver;
11. to shares purchased as part of an employee benefit plan having more
than (i) 200 eligible employees or a minimum of $1,000,000 of plan assets
invested in Fidelity Advisor funds, or (ii) 25 eligible employees or
$250,000 of plan assets invested in Fidelity Advisor funds that subscribe
to the Advisor Retirement Connection or similar program sponsored by
Fidelity Investments Institutional Services Company, Inc.;
12. to shares purchased as part of an employee benefit plan through an
intermediary that has signed a participation agreement with FDC specifying
certain asset minimums and qualifications, and marketing, program and
trading restrictions;
13. to shares purchased on a discretionary basis by a registered investment
adviser which is not part of an organization primarily engaged in the
brokerage business, that has executed a participation agreement with FDC
specifying certain asset minimums and qualifications, and marketing,
program and trading restrictions. Employee benefit plan assets do not
qualify for this waiver; or
14. to shares purchased with distributions of income, principal, and
capital gains from Fidelity Defined Trusts.
Employee benefit plans that purchased Class T shares load waived prior to
June 30, 1995 but do not meet the qualifications of waiver (12) will be
permitted to make additional purchases of Class T shares on a load waived
basis.
For the purposes of qualifying for waiver (11), employee benefit plans
subscribing to the Premiere Retirement Savings Plan Program offered by
National Financial Correspondent Services may be aggregated.
A sales load waiver form must accompany these transactions.
STRATEGIC OPPORTUNITIES: INITIAL CLASS ONLY
Pursuant to Rule 22d-1 under the 1940 Act, FDC exercises its right to waive
Initial Class's front-end sales charge on shares acquired through
reinvestment of dividends and capital gain distributions or in connection
with the fund's merger with or acquisition of any investment company or
trust. In addition, FDC has chosen to waive Initial Class'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 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)
maintained by a U.S. employer and having more than 200 eligible employees,
or a minimum of $3,000,000 in plan assets invested in Fidelity mutual
funds, or as part of an employee benefit plan maintained by a U.S. employer
that is a member of a parent-subsidiary group of corporations (within the
meaning of Section 1563(a)(1) of the Internal Revenue Code, with "50%"
substituted for "80%") any member of which maintains 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 as part of an employee
benefit plan maintained by a non-U.S. employer having 200 or more eligible
employees, or a minimum of $3,000,000 in assets invested in Fidelity mutual
funds, the assets of which are held in a bona fide trust for the exclusive
benefit of employees participating therein;
2. 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 the Employee Retirement Income
Security Act), which, in the aggregate, have either more than 200 eligible
employees or a minimum of $3,000,000 in assets invested in Fidelity funds;
3. to shares in a Fidelity account purchased (including purchases by
exchange) with the proceeds of a distribution from an employee benefit plan
provided that: (i) at the time of the distribution, the employer, or an
affiliate (as described in exemption 1 above) of such employer, maintained
at least one employee benefit plan that qualified for exemption (1) and
that had at least some portion of its assets invested in one or more mutual
funds advised by FMR, or in one or more accounts or pools advised by
Fidelity Management Trust Company; and (ii) either (a) the distribution is
transferred from the plan to a Fidelity IRA account within 60 days from the
date of the distribution or (b) the distribution is transferred directly
from the plan into another Fidelity account;
4. to shares purchased by a charitable organization (as defined for
purposes of Section 501(c)(3) of the Internal Revenue Code) investing
$100,000 or more;
5. to shares purchased for a charitable remainder trust or life income pool
established for the benefit of a charitable organization (as defined for
purposes of Section 501(c)(3) of the Internal Revenue Code);
6. to shares purchased by an investor participating in the Fidelity Trust
Portfolios program (these investors must make initial investments of
$100,000 or more in the Trust Portfolios funds and must, during the initial
six-month period, reach and maintain an aggregate balance of at least
$500,000 in all accounts and subaccounts purchased through the Trust
Portfolios program);
7. to shares purchased by a mutual fund for which FMR or an affiliate
serves as investment manager;
8. to shares purchased through Portfolio Advisory Services or Fidelity
Charitable Advisory Services;
9. 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 FIL or their 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;
10. to shares purchased by a bank trust officer, registered representative,
or other employee of a qualified recipient. Qualified recipients are
securities dealers or other entities, including banks and other financial
institutions, who have sold the fund's shares under special arrangements in
connection with FDC's sales activities;
11. to shares purchased by contributions and exchanges to the following
prototype or prototype-like retirement plans sponsored by FMR Corp. or FMR
and that are marketed and distributed directly to plan sponsors or
participants without any intervention or assistance from any intermediary
distribution channel: The Fidelity IRA, the Fidelity Rollover IRA, The
Fidelity SEP-IRA and SARSEP, The Fidelity Retirement Plan, Fidelity Defined
Benefit Plan, The Fidelity Group IRA, The Fidelity 403(b) Program, The
Fidelity Investments 401(a) Prototype Plan for Tax-Exempt Employers, and
The CORPORATEplan for Retirement (Profit Sharing and Money Purchase Plan);
12. to shares purchased as part of a pension or profit-sharing plan as
defined in Section 401(a) of the Internal Revenue Code that maintains all
of its mutual fund assets in Fidelity mutual funds, provided the plan
executes a Fidelity non-prototype sales charge waiver request form
confirming its qualification;
13. to shares purchased by a registered investment adviser (RIA) for his or
her discretionary accounts, provided he or she executes a Fidelity RIA load
waiver agreement which specifies certain aggregate minimum and operating
provisions. This waiver is available only for shares purchased directly
from Fidelity, without a broker, unless purchased through a brokerage firm
which is a correspondent of National Financial Services Corporation (NFSC).
The waiver is unavailable, however, if the RIA is part of an organization
principally engaged in the brokerage business, unless the brokerage firm in
the organization is an NFSC correspondent; or
14. to shares purchased by a trust institution or bank trust department for
its non-discretionary, non-retirement fiduciary accounts, provided it
executes a Fidelity Trust load waiver agreement which specifies certain
aggregate minimum and operating provisions. This waiver is available only
for shares purchased either directly from Fidelity or through a
bank-affiliated broker, and is unavailable if the trust department or
institution is part of an organization not principally engaged in banking
or trust activities.
The fund's sales charge may be reduced to reflect sales charges previously
paid, or that would have been paid absent a reduction for some purchases
made directly with Fidelity as noted in the prospectus, in connection with
investments in other Fidelity funds. This includes reductions for
investments in prototype-like retirement plans sponsored by FMR or FMR
Corp., which are listed above.
A sales load waiver form must accompany these transactions.
CLASS B AND CLASS C SHARES ONLY
The contingent deferred sales charge (CDSC) on Class B and Class C shares
may be waived (1) in the case of disability or death, provided that the
shares are redeemed within one year following the death or the initial
determination of disability; (2) in connection with a total or partial
redemption related to certain distributions from retirement plans or
accounts at age 70 1/2, which are permitted without penalty pursuant to the
Internal Revenue Code; or (3) in connection with redemptions through the
Fidelity Advisor Systematic Withdrawal Program.
A sales load waiver form must accompany these transactions.
FOR CLASS A AND CLASS T SHARES ONLY
FINDER'S FEE. For all funds except the Short-Term Bond Funds, on
eligible purchases of (i) Class A shares in amounts of $1 million or more
that qualify for a Class A load waiver, (ii) Class A shares in amounts of
$25 million or more, or (iii) Class T shares in amounts of $1 million or
more, investment professionals will be compensated with a fee of 0.25%.
Class A eligible purchases are the following purchases made through
broker-dealers and banks: an individual trade of $25 million or more; an
individual trade of $1 million or more that is load waived; a trade which
brings the value of the accumulated account(s) of an investor (including an
employee benefit plan) past $25 million; a load waived trade that brings
the value of the accumulated account(s) of an investor (including an
employee benefit plan) past $1 million; a trade for an investor with an
accumulated account value of $25 million or more; a load waived trade for
an investor with an accumulated account value of $1 million or more; an
incremental trade toward an investor's $25 million "Letter of Intent"; and
an incremental load waived trade toward an investor's $1 million "Letter of
Intent". Class T eligible purchases are the following purchases made
through broker-dealers and banks: an individual trade of $1 million or
more; a trade which brings the value of the accumulated account(s) of an
investor (including an employee benefit plan) past $1 million; a trade for
an investor with an accumulated account value of $1 million or more; and an
incremental trade toward an investor's $1 million "Letter of Intent."
For the Short-Term Bond Funds, on eligible purchases of (i) Class A shares
in amounts of $1 million or more, or (ii) Class T shares in amounts of $1
million or more, investment professionals will be compensated with a fee of
0.25%. Class A eligible purchases are the following purchases made through
broker-dealers and banks: an individual trade of $1 million or more; a
trade which brings the value of the accumulated account(s) of an investor
(including an employee benefit plan) past $1 million; a trade for an
investor with an accumulated account value of $1 million or more; and an
incremental trade toward an investor's $1 million "Letter of Intent." Class
T eligible purchases are the following purchases made through
broker-dealers and banks: an individual trade of $1 million or more; a
trade which brings the value of the accumulated account(s) of an investor
(including an employee benefit plan) past $1 million; a trade for an
investor with an accumulated account value of $1 million or more; and an
incremental trade toward an investor's $1 million "Letter of Intent."
Any assets in relation to which an investment professional has received
such compensation will bear a contingent deferred sales charge (Class A or
Class T CDSC) if they do not remain in Class A or Class T shares of the
Fidelity Advisor Funds, or Daily Money Class shares of Treasury Fund, Prime
Fund or Tax-Exempt Fund, for a period of at least one uninterrupted year.
The Class A or Class T CDSC will be 0.25% of the lesser of the cost of the
shares at the initial date of purchase or the value of the shares at
redemption, not including any reinvested dividends or capital gains. Class
A or Class T CDSC shares representing reinvested dividends or capital
gains, if any, will be redeemed first, followed by other Class A or Class T
CDSC shares that have been held for the longest period of time.
With respect to employee benefit plans, the Class A or Class T CDSC does
not apply to the following types of redemptions: (i) plan loans or
distributions or (ii) exchanges to non-Advisor fund investment options.
With respect to Individual Retirement Accounts, the Class A or Class T CDSC
does not apply to redemptions made for disability, payment of death
benefits, or required partial distributions starting at age 70 1/2.
CLASS A, CLASS T, CLASS B, AND CLASS C SHARES ONLY
QUANTITY DISCOUNTS. To obtain a reduction of the front-end sales charge on
Class A or Class T 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 or Class T shares after you have reached a new
breakpoint in a fund's sales charge schedule. The value of currently held
(i) Fidelity Advisor fund Class A, Class T, Class B and Class C shares,
(ii) Advisor B Class and Advisor C Class shares of Treasury Fund and (iii)
Daily Money Class shares of Treasury Fund, Prime Fund and Tax-Exempt 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 or Class T shares at the same
reduced front-end sales charge by filing a non-binding Letter of Intent
(Letter) within 90 days of the start of Class A or Class T purchases. Each
Class A or Class T 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 or Class
T shares toward a $50,000 Letter would receive the same reduced sales
charge as if the $50,000 ($500,000 for the Short-Term Bond Funds) had been
invested at one time. Purchases of Class B and Class C shares during the
13-month period also will count toward the completion of the Letter. To
ensure that you receive a reduced front-end sales charge on future
purchases, you or your investment professional must inform Fidelity that
the Letter is in effect each time Class A or Class T shares are purchased.
Reinvested income and capital gain distributions do not count 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, Class A or Class T shares equal to 5%
of the dollar amount specified in the Letter will be registered in your
name and held in escrow. The Class A or Class T 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 or Class T 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 or
Class T shares at the then-current offering price applicable to the total
purchase.
If you do not complete your purchase under the Letter within the 13-month
period, 30 days' written notice will be provided for you to pay the
increased front-end sales charges due. Otherwise, sufficient escrowed Class
A or Class T shares will be redeemed to pay such charges.
CLASS A, CLASS T, CLASS B, CLASS C, AND INSTITUTIONAL CLASS SHARES ONLY
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM. You can make regular
investments in Class A, Class T, Class B, Class C or Institutional Class
shares of the funds monthly, bimonthly, quarterly, or semi-annually with
the Systematic Investment Program by completing the appropriate section of
the account application and attaching a voided personal check with your
bank's magnetic ink coding number across the front. If your bank account is
jointly owned, be sure that all owners sign.
You may cancel your participation in the Systematic Investment Program at
any time without payment of a cancellation fee. You will receive a
confirmation from the transfer agent for every transaction, and a debit
entry will appear on your bank statement.
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM. If you own Class A, Class
T, or Institutional Class shares worth $10,000 or more, you can have
monthly, quarterly or semi-annual checks sent from your account to you, to
a person named by you, or to your bank checking account. If you own Class B
or Class C shares worth $10,000 or more you can have monthly or quarterly
checks sent from your account to you, to a person named by you, or to your
bank checking account. Aggregate redemptions per 12-month period from your
Class B or Class C account may not exceed 10% of the value of the account
and are not subject to a CDSC; and you may set your withdrawal amount as a
percentage of the value of your account or a fixed dollar amount. Your
Systematic Withdrawal Program payments are drawn from Class A, Class T,
Class B, Class C, or Institutional Class share redemptions, as applicable.
If Systematic Withdrawal Plan redemptions exceed income dividends earned on
your shares, your account eventually may be exhausted.
ALL CLASSES
Each fund is open for business and the NAV and, where applicable, the
offering price, for each class is calculated each day the New York Stock
Exchange (NYSE) is open for trading. The NYSE has designated the following
holiday closings for 1997: New Year's Day, 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. In addition, Initial Class shares of Strategic Opportunities,
Mortgage Securities, and Municipal Bond will not process wire purchases and
redemptions on days when the Federal Reserve System is closed.
FSC normally determines each class's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the SEC. To the
extent that portfolio securities are traded in other markets on days when
the NYSE is closed, a class's NAV may be affected on days when investors do
not have access to a fund to purchase or redeem shares. In addition,
trading in some of a fund's portfolio securities may not occur on days when
the fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing 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, Fidelity 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 the fund's income is derived from qualifying dividends. For any
fund that invests significantly in foreign securities, corporate
shareholders should not expect fund dividends to qualify for the
dividends-received deduction. For those funds that may 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 funds that qualify for the deduction will generally be less than 100%.
For those funds whose income is primarily derived from interest, dividends
will not qualify for the dividends-received deduction available to
corporate shareholders. Each fund will notify corporate shareholders
annually of the percentage of fund dividends that qualifies 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. To the extent that a fund's income is designated as federally
tax-exempt interest, the daily dividends declared by the fund are also
federally tax-exempt. Gains (losses) attributable to foreign currency
fluctuations are generally taxable as ordinary income and, therefore, will
increase (decrease) dividend distributions. As a consequence, FMR may
adjust a fund's income distributions to reflect the effect of currency
fluctuations. However, if foreign currency losses exceed a fund's net
investment income during a taxable year, all or a portion of the
distributions made in the same taxable year would be recharacterized as a
return of capital to shareholders, thereby reducing each shareholder's cost
basis in his or her fund.
Short-term capital gains are distributed as dividend income, but do not
qualify for the dividends-received deduction. These gains will be taxed as
ordinary income.
Each fund will send each of its shareholders a notice in January describing
the tax status of dividends and capital gain distributions, if any, for the
prior year.
Shareholders are required to report tax-exempt income on their federal tax
returns. Shareholders who earn other income, such as Social Security
benefits, may be subject to federal income tax on up to 85% of such
benefits to the extent that their income, including tax-exempt income,
exceeds certain base amounts.
Each municipal fund purchases securities whose interest FMR believes is
free from federal income tax. Generally, issuers or other parties have
entered into covenants requiring continuing compliance with federal tax
requirements to preserve the tax-free status of interest payments over the
life of the security. If at any time the covenants are not complied with,
or if the IRS otherwise determines that the issuer did not comply with
relevant tax requirements, interest payments from a security could become
federally taxable retroactive to the date the security was issued. For
certain types of structured securities, the tax status of the pass-through
of tax-free income may also be based on the federal and state tax treatment
of the structure.
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 High Income Municipal's, Municipal
Bond's, Intermediate Municipal Income's, and Short-Intermediate Municipal
Income's policies of investing 80% of its net assets in securities whose
interest is free from federal income tax, and New York Municipal Income's
and California Municipal Income's policies of investing 80% of its net
assets in securities whose interest is free from federal and state income
tax. Interest from private activity securities is a tax preference item for
the purposes 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.
A portion of the gain on bonds purchased with market 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. 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 High Income Municipal's, Municipal Bond's,
Intermediate Municipal Income's, and Short-Intermediate Municipal Income's
policies of investing 80% of its net assets in securities whose interest is
free from federal income tax, and New York Municipal Income's and
California Municipal Income's policies of investing 80% of its net assets
in securities whose interest is free from federal and state personal income
tax.
Corporate investors should note that a tax preference item for purposes of
the corporate AMT is 75% of the amount by which adjusted current earnings
(which include tax-exempt interest) exceed the alternative minimum taxable
income of the corporation. If a shareholder receives an exempt-interest
dividend and sells shares at a loss after holding them for a period of six
months or less, the loss will be disallowed to the extent of the amount of
the exempt-interest dividend.
NEW YORK TAX MATTERS. It is not expected that New York Municipal Income
will incur New York income or franchise tax liability. In addition, New
York personal income tax law also provides that exempt-interest dividends
paid by a regulated investment company, or series thereof, from interest on
obligations which are exempt from tax under New York law are excludable
from gross income.
CALIFORNIA TAX MATTERS. As long as California Municipal Income continues to
qualify as a regulated investment company under the federal Internal
Revenue Code, it will incur no California income or franchise tax liability
on income and capital gains distributed to shareholders. California
personal income tax law provides that exempt-interest dividends paid by a
regulated investment company, or series thereof, from interest on
obligations that are exempt from California personal income tax are
excludable from gross income. For a fund to qualify to pay exempt-interest
dividends under California law, at least 50% of the value of its assets
must consist of such obligations at the close of each quarter of its fiscal
year. For purposes of California personal income taxation, distributions to
individual shareholders derived from interest on other types of obligations
and short-term capital gains will be taxed as dividends, and long-term
capital gain distributions will be taxed as long-term capital gains.
California has an alternative minimum tax similar to the federal AMT
described above. However, the California AMT does not include interest from
private activity municipal obligations as an item of tax preference.
Interest on indebtedness incurred or continued by a shareholder in
connection with the purchase of shares of a fund will not be deductible for
California personal income tax purposes.
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 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. Short-term capital gains distributed by each fund are
taxable to shareholders as dividends, not as capital gains.
As of October 31, 1996, Overseas hereby designates approximately $7,260,000
as a capital gain dividend for the purpose of the dividend-paid deduction.
As of November 30, 1996, Mid Cap hereby designates approximately $94,000 as
a capital gain dividend for the purpose of the dividend-paid deduction.
As of November 30, 1996, Equity Growth hereby designates approximately
$26,024,000 as a capital gain dividend for the purpose of the dividend-paid
deduction.
As of October 31, 1996, Growth Opportunities hereby designates
approximately $71,976,000 as a capital gain dividend for the purpose of the
dividend-paid deduction.
As of December 31, 1996, Strategic Opportunities hereby designates
approximately $19,489,000 as a capital gain dividend for the purpose of the
dividend-paid deduction.
As of November 30, 1996, Equity Income hereby designates approximately
$15,681,000 as a capital gain dividend for the purpose of the dividend-paid
deduction.
As of October 31, 1996, Balanced hereby designates approximately
$11,566,000 as a capital gain dividend for the purpose of the dividend-paid
deduction.
As of December 31, 1996, Emerging Markets Income hereby designates
approximately $78,000 as a capital gain dividend for the purpose of the
dividend-paid deduction.
As of December 31, 1996, Strategic Income hereby designates approximately
$369,000 as a capital gain dividend for the purpose of the dividend-paid
deduction.
As of October 31, 1996, Government Investment had a capital loss
carryforward aggregating approximately $5,958,000. This loss carryforward,
of which $3,262,000 and $2,696,000 will expire on October 31, 2002 and
2004, respectively, is available to offset future capital gains.
As of November 30, 1996, Intermediate Bond had a capital loss carryforward
aggregating approximately $13,667,000. This loss carryforward, of which
$2,841,000, $1,035,000, $134,000, and $9,657,000 will expire on November
30, 1998, 1999, 2002, and 2004, respectively, is available to offset future
capital gains.
As of July 31, 1997, Mortgage Securities hereby designates approximately
$_____ as a capital gain dividend for the purpose of the dividend-paid
deduction.
As of October 31, 1996, Short Fixed-Income had a capital loss carryforward
aggregating approximately $40,265,000. This loss carryforward, of which
$128,000, $63,000, $286,000, $38,000, $336,000, $17,692,000, $19,457,000
and $2,265,000 will expire on October 31, 1997, 1998, 1999, 2000, 2001,
2002, 2003, and 2004, respectively, is available to offset future capital
gains.
As of October 31, 1996, High Income Municipal had a capital loss
carryforward aggregating approximately $16,952,000. This loss carryforward,
of which $3,173,000, $7,511,000 and 6,268,000 will expire on October 31,
2002, 2003, and 2004, respectively, is available to offset future capital
gains.
As of December 31, 1996, Municipal Bond had a capital loss carryforward
aggregating approximately $19,626,000. This loss carryforward, all of which
will expire on December 31, 2003, is available to offset future capital
gains.
As of November 30, 1996, Intermediate Municipal Income had a capital loss
carryforward aggregating approximately $426,000. This loss carryforward,
all of which will expire on November 30, 2003, is available to offset
future capital gains.
As of November 30, 1996, Short-Intermediate Municipal Bond hereby
designates approximately $31,000 as a capital gain dividend for the purpose
of the dividend-paid deduction.
As of October 31, 1996, California Municipal Income had a capital loss
carryforward aggregating approximately $4,000. This loss carryforward, all
of which will expire on October 31, 2004, is available to offset future
capital gains.
STATE AND LOCAL TAXES. For mutual funds organized as business trusts, state
law provides for a pass-through of the state and local income tax exemption
afforded to direct owners of U.S. Government securities. Some states limit
this to mutual funds that invest a certain amount in U.S. Government
securities, and some types of securities, such as repurchase agreements and
some agency-backed securities, may not qualify for this benefit. The tax
treatment of your dividend distributions from a fund will be the same as if
you directly owned your proportionate share of the U.S. Government
securities in the fund's portfolio. Because the income earned on most U.S.
Government securities in which each fund invests is exempt from state and
local income taxes, the portion of your dividends from each fund
attributable to these securities will also be free from income taxes. The
exemption from state and local income taxation does not preclude states
from assessing other taxes on the ownership of U.S. Government securities.
In a number of states, corporate franchise (income) tax laws do not exempt
interest earned on U.S. Government securities, whether such securities are
held directly or through a fund.
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.
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a "
regulated investment company" for tax purposes, so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund level,
each fund intends to distribute substantially all of its net investment
income and 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
constitute less than 30% of the fund's gross income for each fiscal year.
Gains from some forward currency contracts, futures contracts, and options
are included in this 30% calculation, which may limit a fund's investments
in such instruments.
If a fund purchases shares in certain foreign investment entities, defined
as passive foreign investment companies (PFICs) in the Internal Revenue
Code, it may be subject to U.S. federal income tax on a portion of any
excess distribution or gain from the disposition of such shares. Interest
charges may also be imposed on the fund with respect to deferred taxes
arising from such distributions or gains. Generally, a fund will elect to
mark-to-market any PFIC shares. Unrealized gains will be recognized as
income for tax purposes and must be distributed to shareholders as
dividends.
Each fund is treated as a separate entity from the other funds, if any, in
its trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting each fund and its shareholders,
and no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders of a fund may be subject to
state and local taxes on fund distributions, and shares may also be subject
to state and local personal property taxes. Investors should consult their
tax advisers 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 organized in
1972. The voting common stock of FMR Corp. is divided into two classes.
Class B is held predominantly by members of the Edward C. Johnson 3d family
and is entitled to 49% of the vote on any matter acted upon by the voting
common stock. Class A is held predominantly by non-Johnson family member
employees of FMR Corp. and its affiliates and is entitled to 51% of the
vote on any such matter. The Johnson family group and all other Class B
shareholders have entered into a shareholders' voting agreement under which
all Class B shares will be voted in accordance with the majority vote of
Class B shares. Under the 1940 Act, control of a company is presumed where
one individual or group of individuals owns more than 25% of the voting
stock of that company. Therefore, through their ownership of voting common
stock and the execution of the shareholders' voting agreement, members of
the Johnson family may be deemed, under the 1940 Act, to form a controlling
group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by its division, Fidelity Investments Retail Marketing Company,
which provides marketing services to various companies within the Fidelity
organization.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades in most securities require pre-clearance, and participation
in initial public offerings is prohibited. In addition, restrictions on the
timing of personal investing in relation to trades by Fidelity funds and on
short-term trading have been adopted.
TRUSTEES AND OFFICERS
The Trustees, Members of the Advisory Board and executive officers of
the trust are listed below. Except as indicated, each individual has held
the office shown or other offices in the same company for the last five
years. All persons named as Trustees and Members of the Advisory Board also
serve in similar capacities for other funds advised by FMR. The business
address of each Trustee, Member of the Advisory Board and officer who is an
"interested person" (as defined in the Investment Company Act of 1940) is
82 Devonshire Street, Boston, Massachusetts 02109, which is also the
address of FMR. The business address of all the other Trustees and
Members of the Advisory Board is Fidelity Investments, P.O. Box 9235,
Boston, Massachusetts 02205-9235. Those Trustees who are "interested
persons" by virtue of their affiliation with either the trust or FMR are
indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d (67), 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 (56), Member of the Advisory Board (1997), is Vice
Chairman and a Member of the Board of Directors of FMR Corp. (1997) and
President and Chief Executive Officer of the Fidelity Institutional Group
(1997). Previously, Mr. Burkhead served as President of Fidelity Management
& Research Co.
RALPH F. COX (65), Trustee, is President of RABAR Enterprises (management
consulting-engineering industry, 1994). Prior to February 1994, he was
President of Greenhill Petroleum Corporation (petroleum exploration and
production). Until March 1990, Mr. Cox was President and Chief Operating
Officer of Union Pacific Resources Company (exploration and production). He
is a Director of USA Waste Services, Inc. (non-hazardous waste, 1993), CH2M
Hill Companies (engineering), Rio Grande, Inc. (oil and gas production),
and Daniel Industries (petroleum measurement equipment manufacturer). In
addition, he is a member of advisory boards of Texas A&M University and the
University of Texas at Austin.
PHYLLIS BURKE DAVIS (65), 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), and previously served as a
Director of Hallmark Cards, Inc. (1985-1991) and Nabisco Brands, Inc. In
addition, she is a member of the President's Advisory Council of The
University of Vermont School of Business Administration.
ROBERT M. GATES (53), Trustee (1997), is a consultant, author, and lecturer
(1993). Mr. Gates was Director of the Central Intelligence Agency (CIA)
from 1991-1993. From 1989 to 1991, Mr. Gates served as Assistant to the
President of the United States and Deputy National Security Advisor. Mr.
Gates is currently a Trustee for the Forum For International Policy, a
Board Member for the Virginia Neurological Institute, and a Senior Advisor
of the Harvard Journal of World Affairs. In addition, Mr. Gates also serves
as a member of the corporate board for LucasVarity PLC (automotive
components and diesel engines), Charles Stark Draper Laboratory
(non-profit), NACCO Industries, Inc. (mining and manufacturing), and TRW
Inc. (original equipment and replacement products).
E. BRADLEY JONES (69), Trustee. Prior to his retirement in 1984, Mr. Jones
was Chairman and Chief Executive Officer of LTV Steel Company. He is a
Director of TRW Inc. (original equipment and replacement products),
Consolidated Rail Corporation, Birmingham Steel Corporation, and RPM, Inc.
(manufacturer of chemical products), and he previously served as a Director
of NACCO Industries, Inc. (mining and manufacturing, 1985-1995),
Hyster-Yale Materials Handling, Inc. (1985-1995), and Cleveland-Cliffs Inc
(mining), and as a Trustee of First Union Real Estate Investments. In
addition, he serves as a Trustee of the Cleveland Clinic Foundation, where
he has also been a member of the Executive Committee as well as Chairman of
the Board and President, a Trustee and member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK (64), Trustee, is Executive-in-Residence (1995) at Columbia
University Graduate School of Business and a financial consultant. From
1987 to January 1995, Mr. Kirk was a Professor at Columbia University
Graduate School of Business. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance), and he previously served as a Director of
Valuation Research Corp. (appraisals and valuations, 1993-1995). In
addition, he serves as Chairman of the Board of Directors of the National
Arts Stabilization Fund, Chairman of the Board of Trustees of the Greenwich
Hospital Association, a Member of the Public Oversight Board of the
American Institute of Certified Public Accountants' SEC Practice Section
(1995), and as a Public Governor of the National Association of Securities
Dealers, Inc. (1996).
*PETER S. LYNCH (54), Trustee, 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 (1989) and Society
for the Preservation of New England Antiquities, and as an Overseer of the
Museum of Fine Arts of Boston.
WILLIAM O. McCOY (63), Trustee (1997), is the Vice President of Finance for
the University of North Carolina (16-school system, 1995). Prior to his
retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of
BellSouth Corporation (telecommunications, 1984) and President of BellSouth
Enterprises (1986). He is currently a Director of Liberty Corporation
(holding company, 1984), Weeks Corporation of Atlanta (real estate, 1994),
Carolina Power and Light Company (electric utility, 1996), and the Kenan
Transport Co. (1996). Previously, he was a Director of First American
Corporation (bank holding company, 1979-1996). In addition, Mr. McCoy
serves as a member of the Board of Visitors for the University of North
Carolina at Chapel Hill (1994) and for the Kenan-Flager Business School
(University of North Carolina at Chapel Hill, 1988).
GERALD C. McDONOUGH (68), Trustee and Chairman of the non-interested
Trustees, 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 Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration),
Commercial Intertech Corp. (hydraulic systems, building systems, and metal
products, 1992), CUNO, Inc. (liquid and gas filtration products, 1996), and
Associated Estates Realty Corporation (a real estate investment trust,
1993). Mr. McDonough served as a Director of ACME-Cleveland Corp. (metal
working, telecommunications, and electronic products) from 1987-1996.
MARVIN L. MANN (64), 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.
*ROBERT C. POZEN (51), Trustee (1997) and Senior Vice President, is
President and a Director of FMR (1997); and President and a Director of FMR
Texas Inc. (1997), Fidelity Management & Research (U.K.) Inc. (1997), and
Fidelity Management & Research (Far East) Inc. (1997). Previously, Mr.
Pozen served as General Counsel, Managing Director, and Senior Vice
President of FMR Corp.
THOMAS R. WILLIAMS (68), 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 (63), Vice President (1994), is Vice President of
Fidelity's equity funds; Senior Vice President of FMR; and Managing
Director of FMR Corp.
ROBERT LAWRENCE (44), is Vice President of TechnoQuant Growth, Emerging
Markets Income, High Yield, and Strategic Income (1997), and other funds
advised by FMR, and Senior Vice President (1993). Prior to joining FMR, Mr.
Lawrence was Managing Director of the High Yield Department for Citicorp
(1984-1991).
FRED L. HENNING, JR. (59), Vice President, is Vice President of Fidelity's
fixed-income funds (1995) and Senior Vice President of FMR (1995).
JOHN H. CARLSON (47), is Vice President of Emerging Markets Income (1996)
and Strategic Income (1996), and other funds advised by FMR, and an
employee of FMR.
DWIGHT CHURCHILL (43), is Vice President of Mortgage Securities,
Government Investment, Intermediate Bond, Short Fixed-Income, High Income
Municipal, Municipal Bond, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income (1997), and other funds advised by FMR. He joined
Fidelity in 1993.
BETTINA E. DOULTON (32), is Vice President of Balanced (1996), and other
funds advised by FMR, and an employee of FMR.
MARGARET L. EAGLE (47), is President of High Yield and Strategic Income
(1997), and an employee of FMR.
GEORGE A. FISCHER (36), is Vice President of High Income Municipal (1997)
and Municipal Bond (1997), and other funds advised by FMR, and an employee
of FMR.
KEVIN E. GRANT (36), is Vice President of Balanced (1996) and
Intermediate Bond (1996), and other funds advised by FMR, and an employee
of FMR.
CURTIS HOLLINGSWORTH (39), is Vice President of Government Investment
(1997) and Strategic Income (1997), and other fund's advised by FMR, and an
employee of FMR.
HARRIS LEVITON (35), is Vice President of Strategic Opportunities (1996)
and an employee of FMR.
ABIGAIL JOHNSON (36), is Vice President of Equity Growth, Growth
Opportunities, Large Cap, Mid Cap, and Strategic Opportunities (1997), and
other funds advised by FMR, and is a director of FMR Corp. Previously she
managed a number of Fidelity funds.
NORMAN U. LIND (40), is Vice President of New York Municipal Income (1995),
Short-Intermediate Municipal Income (1995), and other funds advised by FMR,
and an employee of FMR.
RICHARD R. MACE Jr. (34), is Vice President of Overseas (1996), and other
funds advised by FMR, and an employee of FMR.
DAVID L. MURPHY (49), is Vice President of Intermediate Municipal Income
(1996), and other funds advised by FMR, and an employee of FMR.
JONATHAN D. SHORT (34), is Vice President of California Municipal Income
(1997), and other funds advised by FMR, and an employee of FMR.
RICHARD A. SPILLANE, JR. (46), is Vice President of Balanced, Equity
Income, Growth & Income, and Overseas (1997), and other funds advised by
FMR, and is a Senior Vice President of FMR (1997).
THOMAS M. SPRAGUE (39), is Vice President of Large Cap (1997), and another
fund advised by FMR, and an employee of FMR.
BETH TERRANA (39), is Vice President of Growth & Income (1997), and other
funds advised by FMR, and an employee of FMR.
JENNIFER S. UHRIG (36), is Vice President of Equity Growth (1997), and
other funds advised by FMR, and an employee of FMR.
GEORGE A. VANDERHEIDEN (50), is Vice President of Growth Opportunities, and
other funds advised by FMR, and an employee of FMR.
ARTHUR S. LORING (49), Secretary, is Senior Vice President (1993) and
General Counsel of FMR, Vice President-Legal of FMR Corp., and Vice
President and Clerk of FDC.
RICHARD A. SILVER (50), Treasurer (1997), is Treasurer of the Fidelity
funds and is an employee of FMR (1997). Before joining FMR, Mr. Silver
served as Executive Vice President, Fund Accounting & Administration at
First Data Investor Services Group, Inc. (1996-1997). Prior to 1996, Mr.
Silver was Senior Vice President and Chief Financial Officer at The
Colonial Group, Inc. Mr. Silver also served as Chairman of the
Accounting/Treasurer's Committee of the Investment Company Institute
(1987-1993).
ROBERT H. MORRISON (57), Manager of Security Transactions of Fidelity's
equity funds is Vice President of FMR.
THOMAS D. MAHER (51), Assistant Vice President, is Assistant Vice President
of Fidelity's municipal bond funds (1996) and of Fidelity's money market
funds and Vice President and Associate General Counsel of FMR Texas Inc.
JOHN H. COSTELLO (50), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH (51), Assistant Treasurer (1994), is an employee of FMR
(1994). Prior to becoming Assistant Treasurer of the Fidelity funds, Mr.
Rush was Chief Compliance Officer of FMR Corp. (1993-1994) and Chief
Financial Officer of Fidelity Brokerage Services, Inc. (1990-1993).
THOMAS J. SIMPSON (39), Assistant Treasurer, is Assistant Treasurer of
Fidelity's municipal bond funds (1996) and of Fidelity's money market funds
(1996) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was
Vice President and Fund Controller of Liberty Investment Services
(1987-1995).
The following table sets forth information describing the compensation
of each Trustee and Member of the Advisory Board of Mortgage Securities
Fund for his or her services for the fiscal year ended in July 31, 1997, or
calendar year ended December 31, 1996, as applicable.
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggregate J. Gary Ralph Phyllis Richard Robert Edward E. Donald Peter William Gerald Edward Marvin Robeert Thomas
Compensation Burkhead F. Burke J.Flynn M. C. John- Bradley J. S. O. C. H. L. C. R.
from a FundA (double Cox Davis (double Gates son 3d Jones Kirk Lynch McCoy McDono Malone Mann Pozen Williams
dagger) dagger) (double (double (double (double ugh (double (dagger)
(double dagger) dagger) dagger) dagger) dagger)
dagger) (double (double
dagger) dagger)
(double
dagger)
Mortgage
Securities*, B
</TABLE>
* Fiscal year ended July 31.
(double dagger) Interested trustees of the fund and Mr. Burkhead are
compensated by FMR.
(double dagger)(double dagger) Richard J. Flynn and Edward H. Malone served
on the Board of Trustees through December 31, 1996.
(double dagger)(double dagger)(double dagger) During the period from May 1,
1996 through December 31, 1996, William O. McCoy served as a Member of the
Advisory Board of Fidelity Income Fund. Mr. McCoy was appointed to the
Board of Trustees of Income Fund effective January 1, 1997.
(double dagger)(double dagger)(double dagger)(double dagger)Mr. Gates was
appointed to the Board of Trustees of Income Fund effective March 1, 1997.
+ Estimated
++ Information is as of December 31, 1996 for 235 funds in the complex.
A Compensation figures include cash, a pro rata portion of benefits accrued
under the retirement program for the period ended December 30, 1996 and
required to be deferred, and may include amounts deferred at the election
of Trustees.
B The following amounts are required to be deferred by each non-interested
Trustee, most of which is subject to vesting: Ralph F. Cox, $__, Phyllis
Burke Davis, $__, Richard J. Flynn, $ __, Robert M. Gates $__, E. Bradley
Jones, $__, Donald J. Kirk, $__, William O. McCoy, $__, Gerald C.
McDonough, $__, Edward H. Malone, $__, Marvin L. Mann, $__, and Thomas R.
Williams, $__.
C For the fiscal period ended in 1996, certain of the non-interested
trustees' aggregate compensation from certain funds includes accrued
voluntary deferred compensation as follows:
The following table sets forth information describing the compensation of
each Trustee and Member of the Advisory Board of each fund for his or her
services for the fiscal year ended in 1996, or calendar year ended December
31, 1996, as applicable.
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggregate J. Gary Ralph Phyllis Richard Edward E. Donald Peter William Gerald Edward Marvin Robeert Thomas
Compensation Burkhead F. Burke J.Flynn C. John- Bradley J. S. O. C. H. L. C. R.
from a FundA (double Cox Davis (double son 3d Jones Kirk Lynch McCoy McDono Malone Mann Pozen Williams
dagger) dagger) (double (double (double ugh (double
(double dagger) dagger) dagger) dagger)
dagger) (double (double
dagger) dagger)
(double
dagger)
Techno $ 0 $ 20 $ 20 $ 0 $ 0 $ 20 $ 20 $ 0 $ 20 $ 26 $ 0 $ 20 $ $ 20
Quant
Growth
**,+
Oversea 0 322 310 394 0 313 316 0 156 314 315 315 317
s*, B
MidCap 0 44 43 57 0 43 44 0 43 45 43 43 42
**, +
Equity 0 1,269 1,220 1,554 0 1,232 1,247 0 743 1,239 1,240 1,240 1,235
Growth
**, C, P
Growth 0 4,268 4,105 5,221 0 4,147 4,197 0 2,051 4,159 4,173 4,173 4,203
Opportu
nities*,
D, P
Strategi 0 259 253 315 0 253 256 0 156 256 256 253 256
c
Opportu
nities**
*, E
Large 0 7 7 9 0 7 7 0 7 7 7 7 7
Cap**,
+
Growth 0 92 92 0 0 92 92 0 92 114 0 92 92
&
Income
**, +
Equity 0 679 650 827 0 656 664 0 396 660 664 664 658
Income
**, F, P
Balance 0 1,183 1,157 1,460 0 1,172 1,182 0 492 1,165 1,160 1,160 1,179
d*, G, P
Emergi 0 21 20 27 0 20 21 0 15 21 21 21 21
ng
Markets
Income
***
High 0 594 561 715 0 567 574 0 283 569 571 571 575
Yield*,
H, P
Strategi 0 33 32 42 0 32 33 0 23 33 33 32 32
c
Income
***
Govern 0 95 91 113 0 92 93 0 43 92 93 93 93
ment
Investm
ent*, I
Interme 0 170 165 209 0 167 168 0 91 166 167 167 167
diate
Bond**
, J
Short 0 182 178 225 0 181 182 0 74 179 178 178 182
Fixed-I
ncome*
, L
High 0 208 203 256 0 205 207 0 87 204 204 204 207
Income
Munici
pal*, M
Munici 0 343 340 422 0 340 343 0 199 343 339 336 344
pal
Bond**
*, N
Interme 0 28 27 34 0 27 28 0 14 27 27 27 27
diate
Munici
pal
Income
**, O
Short-I 0 10 10 13 0 10 10 0 6 10 10 10 10
ntermed
iate
Munici
pal
Income
**
New 0 2 2 3 0 2 2 0 1 2 2 2 2
York
Munici
pal
Income
*
Californ 0 1 1 2 0 1 1 0 1 1 1 1 1
ia
Munici
pal
Income
*
TOTAL 0 137,700 134,700 168,000 0 134,700 136,200 0 85,333 136,200 136,200 134,700 136,200
COMPE
NSATION
FROM
THE
FUND
COMPLE
X ++, A
</TABLE>
* Fiscal year ended October 31.
** Fiscal year ended November 30.
*** Fiscal year ended December 31.
**** Fiscal year ended July 31.
(double dagger) Interested trustees of each fund and Mr. Burkhead are
compensated by FMR .
(double dagger)(double dagger) Richard J. Flynn and Edward H. Malone served
on the Board of Trustees through December 31, 1996.
(double dagger)(double dagger)(double dagger) During the period from May 1,
1996 through December 31, 1996, William O. McCoy served as a Member of the
Advisory Board of Fidelity Advisor Series II, III, IV, V, and VI, Fidelity
Municipal Trust, and Fidelity Income Fund. During the period from May 1,
1996 through the present, Mr. McCoy has served as a Member of the Advisory
Board of Fidelity Advisor Series I, VII, and VIII.
+ Estimated
++ Information is as of December 31, 1996 for 235 funds in the complex.
A Compensation figures include cash, a pro rata portion of benefits accrued
under the retirement program for the period ended December 30, 1996 and
required to be deferred, and may include amounts deferred at the election
of Trustees.
B The following amounts are required to be deferred by each non-interested
Trustee, most of which is subject to vesting: Ralph F. Cox, $13, Phyllis
Burke Davis, $13, Richard J. Flynn, $0, E. Bradley Jones, $13, Donald J.
Kirk, $13, William O. McCoy, $0, Gerald C. McDonough, $13, Edward H.
Malone, $13, Marvin L. Mann, $13, and Thomas R. Williams, $13.
C The following amounts are required to be deferred by each non-interested
Trustee, most of which is subject to vesting: Ralph F. Cox, $50, Phyllis
Burke Davis, $50, Richard J. Flynn, $0, E. Bradley Jones, $50, Donald J.
Kirk, $50, William O. McCoy, $0, Gerald C. McDonough, $50, Edward H.
Malone, $50, Marvin L. Mann, $50, and Thomas R. Williams, $50.
D The following amounts are required to be deferred by each non-interested
Trustee, most of which is subject to vesting: Ralph F. Cox, $167, Phyllis
Burke Davis, $167, Richard J. Flynn, $0, E. Bradley Jones, $167, Donald J.
Kirk, $167, William O. McCoy, $0, Gerald C. McDonough, $167, Edward H.
Malone, $167, Marvin L. Mann, $167, and Thomas R. Williams, $167.
E The following amounts are required to be deferred by each non-interested
Trustee, most of which is subject to vesting: Ralph F. Cox, $10, Phyllis
Burke Davis, $10, Richard J. Flynn, $0, E. Bradley Jones, $10, Donald J.
Kirk, $10, William O. McCoy, $0, Gerald C. McDonough, $10, Edward H.
Malone, $10, Marvin L. Mann, $10, and Thomas R. Williams, $10.
F The following amounts are required to be deferred by each non-interested
Trustee, most of which is subject to vesting: Ralph F. Cox, $27, Phyllis
Burke Davis, $27, Richard J. Flynn, $0, E. Bradley Jones, $27, Donald J.
Kirk, $27, William O. McCoy, $0, Gerald C. McDonough, $27, Edward H.
Malone, $27, Marvin L. Mann, $27, and Thomas R. Williams, $27.
G The following amounts are required to be deferred by each non-interested
Trustee, most of which is subject to vesting: Ralph F. Cox, $42, Phyllis
Burke Davis, $42, Richard J. Flynn, $0, E. Bradley Jones, $42, Donald J.
Kirk, $42, William O. McCoy, $0, Gerald C. McDonough, $42, Edward H.
Malone, $42, Marvin L. Mann, $42, and Thomas R. Williams, $42.
H The following amounts are required to be deferred by each non-interested
Trustee, most of which is subject to vesting: Ralph F. Cox, $23, Phyllis
Burke Davis, $23, Richard J. Flynn, $0, E. Bradley Jones, $23, Donald J.
Kirk, $23, William O. McCoy, $0, Gerald C. McDonough, $23, Edward H.
Malone, $23, Marvin L. Mann, $23, and Thomas R. Williams, $23.
I The following amounts are required to be deferred by each non-interested
Trustee, most of which is subject to vesting: Ralph F. Cox, $4, Phyllis
Burke Davis, $4, Richard J. Flynn, $0, E. Bradley Jones, $4, Donald J.
Kirk, $4, William O. McCoy, $0, Gerald C. McDonough, $4, Edward H. Malone,
$4, Marvin L. Mann, $4, and Thomas R. Williams, $4.
J The following amounts are required to be deferred by each non-interested
Trustee, most of which is subject to vesting: Ralph F. Cox, $6, Phyllis
Burke Davis, $6, Richard J. Flynn, $0, E. Bradley Jones, $6, Donald J.
Kirk, $6, William O. McCoy, $0, Gerald C. McDonough, $6, Edward H. Malone,
$6, Marvin L. Mann, $6, and Thomas R. Williams, $6.
K The following amounts are required to be deferred by each non-interested
Trustee, most of which is subject to vesting: Ralph F. Cox, $6, Phyllis
Burke Davis, $6, Richard J. Flynn, $0, E. Bradley Jones, $6, Donald J.
Kirk, $6, William O. McCoy, $0, Gerald C. McDonough, $6, Edward H. Malone,
$6, Marvin L. Mann, $6, and Thomas R. Williams, $6.
L The following amounts are required to be deferred by each non-interested
Trustee, most of which is subject to vesting: Ralph F. Cox, $6, Phyllis
Burke Davis, $6, Richard J. Flynn, $0, E. Bradley Jones, $6, Donald J.
Kirk, $6, William O. McCoy, $0, Gerald C. McDonough, $6, Edward H. Malone,
$6, Marvin L. Mann, $6, and Thomas R. Williams, $6.
M The following amounts are required to be deferred by each non-interested
Trustee, most of which is subject to vesting: Ralph F. Cox, $7, Phyllis
Burke Davis, $7, Richard J. Flynn, $0, E. Bradley Jones, $7, Donald J.
Kirk, $7, William O. McCoy, $0, Gerald C. McDonough, $7, Edward H. Malone,
$7, Marvin L. Mann, $7, and Thomas R. Williams, $7.
N The following amounts are required to be deferred by each non-interested
Trustee, most of which is subject to vesting: Ralph F. Cox, $13, Phyllis
Burke Davis, $13, Richard J. Flynn, $0, E. Bradley Jones, $13, Donald J.
Kirk, $13, William O. McCoy, $0, Gerald C. McDonough, $13, Edward H.
Malone, $13, Marvin L. Mann, $13, and Thomas R. Williams, $13.
O The following amounts are required to be deferred by each non-interested
Trustee, most of which is subject to vesting: Ralph F. Cox, $1, Phyllis
Burke Davis, $1, Richard J. Flynn, $0, E. Bradley Jones, $1, Donald J.
Kirk, $1, William O. McCoy, $0, Gerald C. McDonough, $1, Edward H. Malone,
$1, Marvin L. Mann, $1, and Thomas R. Williams, $1.
P For the fiscal period ended in 1996, certain of the non-interested
trustees' aggregate compensation from certain funds includes accrued
voluntary deferred compensation as follows: Equity Growth (Cox, $1219,
Malone, $1,190, Mann, $1,190); Growth Opportunities (Cox, $3,791, Malone,
$3,695, Mann, $3,695); Equity Income (Cox, $653, Malone, $637, Mann, $637);
Balanced (Cox, $1,028, Malone, $1,005, Mann, $1,005); and High Yield (Cox,
$519, Malone, $506, Mann, $506).
Under a retirement program adopted in July 1988 and modified in November
1995 and November 1996, each non-interested Trustee who retired before
December 30, 1996 may receive payments from a Fidelity fund during his or
her lifetime based on his or her basic trustee fees and length of service.
The obligation of a fund to make such payments is neither secured nor
funded. A Trustee became eligible to participate in the program at the end
of the calendar year in which he or she reached age 72, provided that, at
the time of retirement, he or she had served as a Fidelity fund Trustee for
at least five years.
Under a deferred compensation plan adopted in September 1995 and amended
in November 1996 (the Plan), non-interested Trustees must defer receipt of
a portion of, and may elect to defer receipt of an additional portion of,
their annual fees. Amounts deferred under the Plan are treated as though
equivalent dollar amounts had been invested in shares of a cross-section of
Fidelity Funds including funds in each major investment discipline and
representing a majority of Fidelity's assets under management (the
Reference Funds). The amounts ultimately received by the Trustees under the
Plan will be directly linked to the investment performance of the Reference
Funds. Deferral of fees in accordance with the Plan will have a negligible
effect on a fund's assets, liabilities, and net income per share, and will
not obligate a fund to retain the services of any Trustee or to pay any
particular level of compensation to the Trustee. A fund may invest in the
Reference Funds under the Plan without shareholder approval.
As of December 30, 1996, the non-interested Trustees terminated the
retirement program for Trustees who retire after such date. In connection
with the termination of the retirement program, each existing
non-interested Trustee received a credit to his or her Plan account equal
to the present value of the estimated benefits that would have been payable
under the retirement program. The amounts credited to the non-interested
Trustees' Plan accounts are subject to vesting and are treated as though
equivalent dollar amounts had been invested in shares of the Reference
Funds. Th amounts ultimately received by the Trustees in connection with
the credits to their Plan accounts will be directly linked to the
investment performance of the Reference Funds. The termination of the
retirement program and related crediting of estimated benefits to the
Trustees' Plan accounts did not result in a material cost to the funds.
MANAGEMENT CONTRACTS
MANAGEMENT SERVICES. Each fund employs FMR to furnish investment
advisory and other services. Under the terms of its management contract
with each fund, FMR acts as investment adviser and, subject to the
supervision of the Board of Trustees, directs the investments of the fund
in accordance with its investment objective, policies, and limitations. FMR
also provides each fund with all necessary office facilities and personnel
for servicing the fund's investments, compensates all officers of each fund
and all Trustees who are "interested persons" of the trusts or of FMR, and
all personnel of each fund or FMR performing services relating to research,
statistical, and investment activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of each fund. These services include providing facilities
for maintaining each fund's organization; supervising relations with
custodians, transfer and pricing agents, accountants, underwriters, and
other persons dealing with each fund; preparing all general shareholder
communications and conducting shareholder relations; maintaining each
fund's records and the registration of each fund's shares under federal
securities laws and making necessary filings under state securities laws;
developing management and shareholder services for each fund; and
furnishing reports, evaluations, and analyses on a variety of subjects to
the Trustees.
MANAGEMENT-RELATED EXPENSES. In addition to the management fee payable to
FMR and the fees payable to the transfer, dividend disbursing, and
shareholder servicing agent, pricing and bookkeeping agent, and securities
lending agent, as applicable, each fund or each class thereof, as
applicable, pays all of its expenses 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. Each fund's management contract
further provides that the fund will pay for typesetting, printing, and
mailing prospectuses, statements of additional information, notices, and
reports to shareholders; however, under the terms of each fund's transfer
agent agreement, the transfer agent bears the costs of providing these
services to existing shareholders of the applicable classes. Other expenses
paid by each fund, or each class thereof, as applicable, include interest,
taxes, brokerage commissions, the fund's proportionate share of insurance
premiums and Investment Company Institute dues, and the costs of
registering shares under federal securities laws and making necessary
filings under state securities laws. Each fund is also liable for such
non-recurring expenses as may arise, including costs of any litigation to
which the fund may be a party, and any obligation it may have to indemnify
its officers and Trustees with respect to litigation.
MANAGEMENT FEES. For the services of FMR under each management contract,
Equity Income pays FMR a monthly management fee at the annual rate of __%,
of its average net assets throughout the month.
For the services of FMR under the management contract, TechnoQuant Growth,
International capital Appreciation, mid Cap, Equity Growth, Large Cap,
Growth & Income, Balanced, Emerging Markets Income, high Yield, Strategic
Income, Mortgage Securities, Government Investment, Intermediate bond,
Short Fixed-Income, High Income Municipal, Municipal Bond, Intermediate
Municipal income, Short-Intermediate Municipal Income, New York Municipal
Income, and California Municipal Income pays FMR a monthly management fee
which has two components: a group fee rate and an individual fund fee rate.
For the services of FMR under the management contract, Overseas, Growth
Opportunities, and Strategic Opportunities each pays FMR a monthly
management fee which has two components: a basic fee, which is the sum of a
group fee rate and an individual fund fee rate, and a performance
adjustment based on a comparison of each fund's performance to that of S&P
500, and EAFE.
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.
FMR is each fund's manager pursuant to management contracts dated and
approved by shareholders on the dates shown in the table below.
<TABLE>
<CAPTION>
<S> <C> <C>
FUND DATE OF MANAGEMENT CONTRACT DATE OF SHAREHOLDER APPROVAL
TechnoQuant Growth 12/1/96 12/23/96*
International Capital Appreciation
Overseas 10/1/97 9/17/97
Mid Cap 1/18/96 1/18/96*
Equity Growth 8/1/97 7/16/97
Growth Opportunities 8/1/97 7/16/97
Strategic Opportunities 7/1/97 6/18/97
Large Cap 1/18/96 1/18/96*
Growth & Income 12/1/96 12/23/96*
Equity Income 8/1/86 7/23/86
Balanced 1/1/95 12/14/94
Emerging Markets Income 7/1/97 6/18/97
High Yield 1/1/95 12/14/94
Strategic Income 7/1/97 6/18/97
Mortgage Securities 8/1/94 7/13/94
Government Investment 1/1/95 12/14/94
Intermediate Bond 1/1/95 12/14/94
Short Fixed-Income 1/1/95 12/14/94
High Income Municipal 12/1/94 11/16/94
Municipal Bond 1/1/94 12/15/93
Intermediate Municipal Income 7/1/95 6/14/95
Short-Intermediate Municipal Income 7/1/95 6/14/95
New York Municipal Income 11/17/94 12/8/94
California Municipal Income 12/14/95 12/14/95*
</TABLE>
* Approved by FMR, then the sole shareholder of the fund.
BOND FUNDS
The following fee schedule is the current fee schedule for all bond
funds, except Emerging Markets Income, Strategic Income, Mortgage
Securities, Municipal Bond and California Municipal Income.
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 .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 has been approved by the shareholders of each bond
fund, except Emerging Markets Income, Strategic Income, Mortgage
Securities, Municipal Bond and California Municipal Income.
MORTGAGE SECURITIES AND MUNICIPAL BOND. The following fee schedule is the
current fee schedule for Mortgage Securities and Municipal Bond.
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
On August 1, 1994, FMR voluntarily revised the group fee rate schedule for
Mortgage Securities and Municipal Bond, and added new breakpoints, pending
shareholder approval of a new management contract reflecting the additional
breakpoints. The revised group fee rate schedule is identical to the above
schedule for average group assets under $156 billion. For average group
assets in excess of $156 billion, the group fee rate schedule voluntarily
adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 120 - 156 billion .1450% $150 billion .1736%
156 - 192 .1400 175 .1690
192 - 228 .1350 200 .1652
228 - 264 .1300 225 .1618
264 - 300 .1275 250 .1587
300 - 336 .1250 275 .1560
336 - 372 .1225 300 .1536
Over 372 .1200 325 .1514
350 .1494
375 .1476
400 .1459
On January 1, 1996, FMR voluntarily added new breakpoints to the (revised,
in the case of Mortgage Securities and Municipal Bond) schedule for average
group assets in excess of $372 billion, pending shareholder approval of a
new management contract reflecting the additional breakpoints. The
(revised, in the case of Mortgage Securities and Municipal Bond) group fee
rate schedule and its extensions provide for lower management fee rates as
FMR's assets under management increase. For average group assets in excess
of $372 billion, the group fee rate schedule voluntarily adopted by FMR is
as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 372 - 408 billion .1200% $ 400 billion .1459
408 - 444 .1175 425 .1443
444 - 480 .1150 450 .1427
480 - 516 .1125 475 .1413
Over 516 .1100 500 .1399
525 .1385
550 .1372
EMERGING MARKETS INCOME, STRATEGIC INCOME, AND CALIFORNIA MUNICIPAL
INCOME. The following fee schedule is the current fee schedule for
Emerging Markets Income, Strategic Income, and California Municipal
Income.
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 .1690
24 - 30 .1800 200 .1652
30 - 36 .1750 225 .1618
36 - 42 .1700 250 .1587
42 - 48 .1650 275 .1560
48 - 66 .1600 300 .1536
66 - 84 .1550 325 .1514
84 - 120 .1500 350 .1494
120 - 156 .1450 375 .1476
156 - 192 .1400 400 .1459
192 - 228 .1350 425 .1443
228 - 264 .1300 450 .1427
264 - 300 .1275 475 .1413
300 - 336 .1250 500 .1399
336 - 372 .1225 525 .1385
372 - 408 .1200 550 .1372
408 - 444 .1175
444 - 480 .1150
480 - 516 .1125
Over 516 .1100
This fee schedule has been approved by the shareholders of Emerging Markets
Income, Strategic Income, and California Municipal Income.
EQUITY FUNDS
The following fee schedule is the current fee schedule for all equity funds
(except Equity Income).
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 .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 425 .3046
210 - 246 .2950 450 .3024
246 - 282 .2900 475 .3003
282 - 318 .2850 500 .2982
318 - 354 .2800 525 .2962
354 - 390 .2750 550 .2924
390 - 426 .2700
426 - 462 .2650
462 - 498 .2600
498 - 534 .2550
Over 534 .2500
This fee schedule has been approved by the shareholders of each equity fund
except Equity Income.
The individual fund fee rates for each fund (except Equity Income) are set
forth in the following chart. Based on the average group net assets of the
funds advised by FMR for December 1996, the annual basic fee rate would be
calculated as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Group Fee Rate Individual Fund Fee Rate Basic Fee Rate
TechnoQuant Growth .3021% + 0.30% = .6021%
International Capital Appreciation .3021% + 0.45% = .%
Overseas .3021% + 0.45% = .7521%
Mid Cap .3021% + 0.30% = .6021%
Equity Growth .3021% + 0.30% = .6021%
Growth Opportunities .3021% + 0.30% = .6021%
Strategic Opportunities .3021% + 0.30% = .6021%
Large Cap .3021% + 0.30% = .6021%
Growth & Income .3021% + 0.20% = .5021%
Balanced .3021% + 0.15%** = .4521%
Emerging Markets Income .1425% + 0.55% = .6925%
High Yield .1425% + 0.45% = .5925%
Strategic Income .1425% + 0.45% = .5925%
Mortgage Securities % + 0.30% = .%
Government Investment .1425% + 0.30% = .4425%
Intermediate Bond .1425% + 0.30% = .4425%
Short Fixed-Income .1425% + 0.30% = .4425%
High Income Municipal .1425% + 0.25% = .3925%
Municipal Bond .1425% + 0.25% = .3925%
Intermediate Municipal Income .1425% + 0.25% = .3925%
Short-Intermediate Municipal Income .1425% + 0.25% = .3925%
New York Municipal Income .1425% + 0.25% = .3925%
California Municipal Income .1425% + 0.25% = .3925%
</TABLE>
** Effective August 1, 1996, FMR voluntarily agreed to reduce the
individual fund fee rate from 0.20% to 0.15%.
One-twelfth (1/12) of this annual basic fee or management fee, as
applicable, 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 for Overseas,
Growth Opportunities, and Strategic Opportunities, is subject to upward or
downward adjustment, depending upon whether, and to what extent, the
investment performance of each applicable fund for the performance period
exceeds, or is exceeded by, the record of the S&P 500 (Growth Opportunities
and Strategic Opportunities), or the cap-weighted EAFE (Overseas) (the
Indices) over the same period. The performance period consists of the most
recent month plus the previous 35 months.
Each percentage point of difference, calculated to the nearest 0.01% for
Overseas, Strategic Opportunities and Growth Opportunities (up to a maximum
difference of (plus/minus)10.00) is multiplied by a performance adjustment
rate of 0.02%. Thus, the maximum annualized adjustment rate is
(plus/minus)0.20%.
This performance comparison is made at the end of each month. One-twelfth
of this rate is then applied to each fund's average net assets for the
entire performance period, giving the dollar amount which will be added to
(or subtracted from) the basic fee. For Overseas, Growth Opportunities and
Strategic Opportunities, investment performance will be represented by the
average performance of all classes of each fund weighted according to its
average assets for each month.
Each class's performance is calculated based on change in NAV. 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 NAV as of the record date for payment. The record of
each 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 fund's performance
compared to the investment record of the applicable Index, the controlling
factor is not whether each fund'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 fund 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 paid to FMR (including the amount
of the performance adjustment); the dollar amount of negative or positive
performance adjustments, if applicable; and the net management fee as a
percentage of each fund's average net assets for the three most recent
fiscal years.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FISCAL YEAR MANAGEMENT FEE+ PERFORMANCE ADJUSTMENT MANAGEMENT FEE
ENDED AS A PERCENTAGE OF
AVERAGE NET ASSETS
OVERSEAS 10/31
1996 $ 6,353,206 $ 687,829 (downward) 0.68%
1995 5,589,729 307,727 (upward) 0.81
1994 3,435,695 133,032 (upward) 0.80
MID CAP 11/30
1996* 644,430 N/A 0.60***
EQUITY GROWTH 11/30
1996 23,048,140 N/A 0.61
1995 12,057,390 N/A 0.61
1994 6,567,305 N/A 0.64
GROWTH OPPORTUNITIES 10/31
1996 76,294,260 1,076,788 (upward) 0.61
1995 46,903,758 5,210,490 (upward) 0.69
1994 22,087,985 2,130,192 (upward) 0.69
STRATEGIC OPPORTUNITIES+++ 12/31
1996 3,621,407 962,281 (downward) 0.48
1995 3,510,812 91,269 (upward) 0.62
10/1/94 - 12/31/94 682,856 37,843 (upward) 0.67***
10/1/93 - 9/30/94 2,582,584 359,674 (upward) 0.72
LARGE CAP 11/30
1996* 100,564 N/A 0.60***
EQUITY INCOME 11/30
1996 10,188,385 N/A 0.50
1995 4,257,045 N/A 0.50
1994 1,392,206 N/A 0.50
BALANCED 10/31
1996 16,119,225 N/A 0.50
1995 17,383,377 N/A 0.51
1994 13,325,884 N/A 0.52
EMERGING MARKETS INCOME 12/31
1996 488,344 N/A 0.69
1995 283,122 N/A 0.70
1994++ 122,088 N/A 0.70***
HIGH YIELD 10/31
1996 10,195,539 N/A 0.60
1995 5,796,415 N/A 0.60
1994 3,737,959 N/A 0.60
STRATEGIC INCOME 12/31
1996 641,715 N/A 0.59
1995 277,990 N/A 0.60
1994++ 10,348 N/A 0.60***
FISCAL YEAR MANAGEMENT FEE+ PERFORMANCE ADJUSTMENT MANAGEMENT FEE
ENDED AS A PERCENTAGE OF
AVERAGE NET ASSETS
GOVERNMENT INVESTMENT 10/31
1996 $ 1,197,929 N/A 0.45%
1995 766,114 N/A 0.45
1994 422,255 N/A 0.46
INTERMEDIATE BOND 11/30
1996 2,174,162 N/A 0.45
1995 1,703,722 N/A 0.45
1994 1,180,785 N/A 0.41
MORTGAGE SECURITIES 7/31
1997
1996
1995
SHORT FIXED-INCOME 10/31
1996 2,203,578 N/A 0.45
1995 2,889,187 N/A 0.45
1994 3,713,144 N/A 0.46
HIGH INCOME MUNICIPAL 10/31
1996 2,266,568 N/A 0.40
1995 2,289,466 N/A 0.40
1994 2,257,113 N/A 0.41
MUNICIPAL BOND 12/31
1996 3,912,000 N/A 0.40
1995 4,282,000 N/A 0.40
1994 4,605,000 N/A 0.41
INTERMEDIATE MUNICIPAL 11/30
INCOME
1996 310,611 N/A 0.40
1995 292,469 N/A 0.40
1994 286,027 N/A 0.41
SHORT-INTERMEDIATE 11/30
MUNICIPAL INCOME
1996 117,532 N/A 0.40
1995 79,349 N/A 0.40
1994++ 31,109 N/A 0.41***
NEW YORK MUNICIPAL 10/31
INCOME
1996 24,300** N/A 0.40
1995++ 2,203** N/A 0.39***
CALIFORNIA MUNICIPAL 10/31
INCOME
1996* 9,314** N/A 0.39***
</TABLE>
* Mid Cap, Large Cap, and California Municipal Income commenced operations
on February 20, 1996.
** Before reimbursement
*** Annualized
+ Management fee includes performance adjustments for Overseas, Growth
Opportunities, and Strategic Opportunities.
++ Emerging Markets Income, Strategic Income, Short-Intermediate Municipal
Income, and New York Municipal Income commenced operations on March 10,
1994, October 31, 1994, March 16, 1994, and August 21, 1995, respectively.
+++ Strategic Opportunities' fiscal year end changed from September 30 to
December 31 as of November 9, 1994.
FMR may, from time to time, voluntarily reimburse all or a portion of a
class's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to be
repaid for these expense reimbursements in the amount that expenses fall
below the limit prior to the end of the fiscal year.
Expense reimbursement by FMR will increase each class's total returns and
yield and repayment of the reimbursement by each class will lower its total
returns and yield.
SUB-ADVISERS. On behalf of TechnoQuant Growth, Mid Cap, Equity
Growth, Growth Opportunities, Strategic Opportunities, Large Cap, Growth &
Income, Equity Income, Balanced, High Yield, Intermediate Bond, Mortgage
Securities and Short Fixed-Income, FMR has entered into sub-advisory
agreements with FMR U.K. and FMR Far East. On behalf of Overseas,
International Capital Appreciation, Emerging Markets Income and Strategic
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 FIIA(U.K.)L 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 TechnoQuant Growth, Mid Cap, Equity Growth, Growth
Opportunities, Strategic Opportunities,Large Cap, Growth & Income,
Balanced, Emerging Markets Income, High Yield, Strategic Income,
Intermediate Bond, Mortgage Securities 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. On behalf of International Capital Appreciation
Fund and Overseas FMR may also grant FMR U.K., FMR Far East, FIJ, FIIA
and FIIA(U.K.)L investment management authority to buy and sell
securitie s if FMR believes it would be beneficial to the funds.
Currently, FMR U.K., FMR Far East, FIJ, FIIA, and FIIA(U.K.)L each
focuses 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 own, 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. FIIA(U.K.)L 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 FIIA(U.K.)L For
providing non-discretionary investment advice and research services the
sub-advisers are compensated as follows:
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.
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.
FIIA pays FIIA(U.K.)L a fee equal to 110% of FIIA(U.K.)L's costs
incurred in connection with providing investment advice and research
services.
On behalf of TechnoQuant Growth, International Capital Appreciation,
Overseas, Mid Cap, Growth Opportunities, Large Cap, Growth & Income,
Balanced, Emerging Markets Income, High Yield, Strategic Income,
Intermediate Bond, Mortgage Securities and Short Fixed-Income, for
providing discretionary investment management and executing portfolio
transactions, the sub-advisers are compensated as follows:
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.
FIIA pays FIIA(U.K.)L a fee equal to 110% of FIIA(U.K.)L's costs
incurred in connection with providing discretionary investment management
services.
FMR paid FMR U.K. and FMR Far East $____, and $____ respectively, for
providing investment advice and research services to Mortgage Securities
Fund for the period ended 1997.
The table on the following page shows the fees paid by FMR to FMR U.K., FMR
Far East, FIIA, and FIJ, and by FIIA to FIIA(U.K.)L for providing
investment advice and research services with respect to certain of the
funds for the fiscal periods ended 1996, 1995, and 1994.
FEES PAID TO FOREIGN SUB-ADVISERS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FUND FEES PAID BY FMR TO FMR U.K. FEES PAID BY FMR TO FMR FAR EAST
1996 1995 1994 1996 1995 1994
Overseas $ 541,988 $ 364,803 $ 153,288 $ 550,513 $ 352,004 $ 174,129
Equity Growth 51,150 31,519 13,191 49,497 30,883 15,192
Growth Opportunities 642,845 212,175 67,818 645,049 203,140 82,741
Strategic Opportunities 24,977 5,261 7,794* 23,484 5,862 7,712*
7,352** 7,701**
Equity Income 46,448 23,713 12,197 46,494 23,140 13,970
Balanced 235,847 330,971 248,936 251,109 304,870 299,094
TOTAL $ 1,543,255 $ 968,442 $ 510,576 $ 1,566,146 $ 919,899 $ 600,539
</TABLE>
* From 10/1/93 - 9/30/94.
** From 10/1/94 - 12/31/94.
The other funds paid no investment sub-advisory fees for the fiscal periods
ended 1996, 1995, and 1994.
No fees were paid to FIJ, FIIA, and FIIA(U.K.)L for fiscal periods ended
1996, 1995 and 1994.
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved Distribution and Service Plans on behalf of each
class of shares of the funds, except for Strategic Opportunities: Initial
Class, (the Plans) pursuant to Rule 12b-1 under the 1940 Act (the Rule).
The Rule provides in substance that a mutual fund may not engage directly
or indirectly in financing any activity that is primarily intended to
result in the sale of shares of the fund except pursuant to a plan approved
on behalf of the fund under the Rule. The Plans, as approved by the
Trustees, allow Class A, Class T, Class B, Class C, Institutional Class
a nd Initial Class shares 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 Class A Plans, FDC is paid a distribution fee as a
percentage of Class A's average net assets at an annual rate of up to 0.75%
for each of TechnoQuant Growth, International Capital Appreciation,
Overseas, Mid Cap, Equity Growth, Growth Opportunities, Strategic
Opportunities, Large Cap, Growth & Income, Equity Income, and Balanced (the
Equity Funds); and up to 0.40% for each of Emerging Markets Income, High
Yield, Strategic Income, Government Investment, Mortgage Securities, High
Income Municipal, Municipal Bond, New York Municipal Income, and California
Municipal Income (the Bond Funds), Intermediate Bond and Intermediate
Municipal Income (the Intermediate-Term Bond Funds), and Short-Intermediate
Municipal Income and Short Fixed-Income (the Short-Term Bond Funds).
Pursuant to the Class T Plans, FDC is paid a distribution fee as a
percentage of Class T's average net assets at an annual rate of up to 0.75%
for each of TechnoQuant Growth, International Capital Appreciation, Equity
Growth, Mid Cap, Large Cap, Growth & Income, and Equity Income; up to 0.65%
for each of Overseas, Growth Opportunities, Strategic Opportunities, and
Balanced; up to 0.40% for each of Emerging Markets Income, High Yield,
Strategic Income, Intermediate Bond, Mortgage Securities, Government
Investment, High Income Municipal, Municipal Bond, Short-Intermediate
Municipal Income, Intermediate Municipal Income, New York Municipal Income,
and California Municipal Income; and up to 0.15% for Short Fixed-Income.
Pursuant to the Class B Plans, FDC is paid a distribution fee as a
percentage of Class B's average net assets at an annual rate of up to 0.75%
for each fund with Class B shares. Pursuant to the Class C Plans, FDC is
paid a distribution fee as a percentage of Class C's average net assets at
an annual rate of up to .75% for each fund with Class C shares. For the
purpose of calculating the distribution fees, average net assets are
determined at the close of business on each day throughout the month, but
excluding assets attributable to Class T shares of Equity Income purchased
more than 144 months prior to such day and to Class B shares of Equity
Income purchased more than 144 months prior to such day.
Currently, the Trustees have approved a distribution fee for Class A at an
annual rate of 0.25% for each of the Equity Funds and 0.15% for each of the
Bond Funds, the Intermediate-Term Bond Funds, and the Short-Term Bond
Funds; a distribution fee for Class T at an annual rate of 0.50% for each
of the Equity Funds, 0.25% for each of the Bond Funds and the
Intermediate-Term Bond Funds, and 0.15% for each of the Short-Term Bond
Funds; a distribution fee for Class B at an annual rate of 0.75% for each
of the Equity Funds and 0.65% for each of the Bond Funds and the
Intermediate-Term Bond Funds; and a distribution fee for Class C at an
annual rate of .75% for each fund. Class A, Class T (for all funds except
Short-Fixed Income) and Class B (for the Bond Funds and Intermediate Term
Bond Funds) fee rates may be increased only when, in the opinion of the
Trustees, it is in the best interests of the shareholders of the applicable
class to do so. Class B and Class C of each fund also pay FDC a service fee
at an annual rate of 0.25% of Class B's or Class C's, as applicable, its
average net assets determined at the close of business on each day
throughout the month.
Currently, the full amount of distribution fees paid by Class A and Class T
is reallowed to investment professionals (including FDC) as compensation
for their services in connection with the distribution of Class A or Class
T shares, as applicable, and for providing support services to Class A of
Class T shareholders, as applicable, based upon the level of services
provided.
Currently, the full amount of distribution fees paid by Class B is retained
by FDC as compensation for its services and expenses in connection with the
distribution of Class B shares, and the full amount of service fees paid by
Class B is reallowed to investment professionals (including FDC) for
providing personal service to and/or maintenance of Class B shareholder
accounts.
Currently, for the first year of investment, the full amount of
distribution fees paid by Class C is retained by FDC as compensation for
its services and expenses in connection with the distribution of Class C
shares, and the full amount of service fees paid by Class C is retained by
FDC for providing personal service to and/or maintenance of Class C
shareholder accounts. After the first year of investment, the full amount
of distribution fees paid by Class C is reallowed to investment
professionals (including FDC) as compensation for their services in
connection with the distribution of Class C shares, and the full amount of
service fees paid by Class C is reallowed to investment professionals
(including FDC) for providing personal service to and/or maintenance of
Class C shareholder accounts.
For the fiscal period ended July 31, 1997, Mortgage Securities Class A
paid FDC distribution fees of $___, all of which was paid to investment
professionals.
For the fiscal period ended July 31, 1997, Mortgage Securities Class T paid
FDC distribution fees of $___, all of which was paid to investment
professionals.
For the fiscal period ended July 31, 1997, Mortgage Securities Class B,
paid FDC distribution fees of $ ___, all of which was retained by FDC. In
addition, for the fiscal period ended July 31, 1997, Class B paid FDC
shareholder service fees of $___, all of which was paid to investment
professionals.
The tables below show the distribution fees paid for Class A shares for the
fiscal years ended 1996 (Class A shares were not offered prior to September
3, 1996), for Class T shares for the fiscal years ended 1996, 1995, and
1994, and for Class B shares for the fiscal years ended 1996, 1995, and
1994 (Class B shares were not offered prior to June 30, 1994).
CLASS A DISTRIBUTION FEES
1996
FUND PAID TO RETAINED BY
INVESTMENT FDC
PROFESSIONALS
Overseas $ 0 $ 0
Mid Cap 408 0
Equity Growth 1,207 0
Growth Opportunities 1,643 0
Strategic Opportunities 317 0
Large Cap 161 0
Equity Income 924 0
Balanced 232 0
Emerging Markets Income 147 0
High Yield 0 0
Strategic Income 152 0
Government Investment 39 0
Intermediate Bond 153 0
Short Fixed-Income 35 0
High Income Municipal 35 0
Intermediate Municipal Income 37 0
Short-Intermediate Municipal Income 62 0
New York Municipal Income 24 0
California Municipal Income 24 0
CLASS T DISTRIBUTION FEES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1994 1995 1996
FUND PAID TO RETAINED PAID TO RETAINED PAID TO RETAINED
INVESTMENT BY FDC INVESTMENT BY FDC INVESTMENT BY FDC
PROFESSIONALS PROFESSIONALS PROFESSIONALS
Overseas $ 2,139,864 $ 641,958 $ 3,452,001 $ 1,049,755 $ 4,560,000 $ 190,000
Mid Cap N/A N/A N/A N/A 460,775 0
Equity
Growth 3,312,525 999,987 6,750,062 2,123,261 13,897,763 256,052
Growth 16,056,714 4,817,016 33,781,082 10,228,188 61,123,389 2,461,359
Opportunities
Strategic 470,225 141,067 2,377,409 804,604 3,004,411 0
Opportunities
Large Cap N/A N/A N/A N/A 49,326 0
Equity
Income 441,208 132,362 2,339,815 710,240 6,628,000 115,000
Balanced 13,406,000 3,203,000 16,748,635 5,165,858 16,228,668 870,842
Emerging 31,604 8,331 71,061 12,300 138,085 0
Markets
Income
High
Yield 1,526,214 0 2,185,795 33,785 3,616,000 0
Strategic 1,626 488 62,957 6,002 185,607 0
Income
Government 227,532 0 391,918 7,088 572,796 0
Investment
Intermediate 264,949 0 463,806 0 637,019 0
Bond
Short
Fixed- 1,212,008 0 933,777 18,975 725,063 0
Income
High
Income 1,374,438 0 1,358,027 8,150 1,335,656 0
Municipal
Municipal
Bond N/A N/A N/A N/A 3,000 0
Interme
diate 138,512 0 143,424 1,599 152,707 0
Municipal
Income
Short- 11,446 0 27,895 1,646 44,018 0
Intermediate
Municipal
Income
New York N/A N/A 368 0 8,737 0
Municipal
Income
Californ
ia N/A N/A N/A N/A 2,066 0
Municipal
Income
</TABLE>
CLASS B DISTRIBUTION AND SERVICE FEES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1996 1996
1994 1994 1994
1994 1994 1994
1995 1995 1995
1996
FUND DISTRIBU RETAINE SHAREHO RETAINE DISTRIBU RETAINE SHAREHO RETAINE DISTRIBU RETAINE SHAREHO RETAINE
TION D BY LDER D BY TION D BY LDER D BY TION D BY LDER D BY
FEES FDC SERVICE FDC FEES FDC SERVICE FDC FEES FDC SERVICE FDC
FEES FEES FEE
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Overseas
Mid Cap
Strategic
Opportunities
Large Cap
Equity
Income
Emerging
Markets
Income
High Yield
Strategic
Income
Government
Investment
Intermediate
Bond
High Income
Municipal
Municipal
Bond
Intermediate
Municipal
Income
New York
Municipal
Income
California
Municipal
Income
</TABLE>
For the fiscal year ended March 3, 1997 (commencement of operations) to
July 31, 1997, Class B of Advisor Mortgage Securities paid FDC distribution
fees of $ ___, all of which was retained by FDC. In addition, for the
fiscal year ended July 31, 1997 Class B of Advisor Mortgage Securities paid
FDC shareholder service fees of $ ____, all of which was paid to investment
professionals.
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 Class A, Class T,
Class B, and Class C Plan specifically recognizes that FMR may use
its management fee revenue, as well as its past profits or its other
resources, to pay FDC for expenses incurred in connection with the
distribution of the applicable class's shares, including payments made to
third parties that engage in the sale of the applicable class's shares or
to third parties, including banks, that render shareholder support
services. Each Institutional Class and Initial Class Plan specifically
recognizes that FMR may use its management fee revenue, as well as its past
profits or its other resources, to pay FDC for expenses incurred in
connection with the distribution of the applicable class's shares. FMR
directly, or through FDC, may make payments to third parties, such as banks
or broker-dealers, that engage in the sale of Institutional Class or
Initial Class shares or provide shareholder support services. Currently,
the Board of Trustees has authorized such payments for Class A, Class T,
Class B, Class C, and Institutional Class shares. Currently ,
the Board of Trustees has not authorized such payments for Initial Class
shares.
For the calendar year ended 1997, for Mortgage Securities, payments made
by FMR either directly or indirectly through FDC, to third parties rounded
to the nearest one thousand dollars, amounted to $___ Class A, $___ Class
T, $___ Class B and $___ for Institutional Class. For the calendar year
ended 1996, payments made by FMR, either directly or indirectly through
FDC, to third parties, rounded to the nearest one thousand dollars,
amounted to $0 for Initial Class of Municipal Bond and $1,000 for Initial
Class of Mortgage Securities and, for Class A, Class T, Class B and
Institutional Class of each fund, amounted to the following:
Fund CLASS A CLASS T CLASS B INSTITUTIONAL
TechnoQuant Growth * * * *
Overseas $ 0 $ 89,000 $ 1,000 $ 3,000
Mid Cap 0 5,000 1,000 0
Equity Growth 1,000 144,000 * 56,000
Growth Opportunities 3,000 593,000 * 8,000
Strategic Opportunities 0 9,000 9,000 3,000
Large Cap 0 1,000 0 0
Growth & Income * * * *
Equity Income 1,000 80,000 26,000 13,000
Balanced 0 169,000 * 1,000
Emerging Markets Income 0 6,000 1,000 1,000
High Yield 1,000 84,000 13,000 1,000
Strategic Income 0 4,000 1,000 0
Government Investment 0 16,000 1,000 3,000
Intermediate Bond 0 12,000 1,000 13,000
Mortgage Securities * * * *
Short Fixed-Income 0 36,000 ** 1,000
High Income Municipal 0 25,000 1,000 1,000
Municipal Bond * 0 0 0
Intermediate Municipal Income 0 3,000 0 1,000
Short-Intermediate Municipal Income 0 2,000 ** 0
New York Municipal Income 0 0 0 0
California Municipal Income 0 0 0 0
* Not applicable.
** Class B is not available for this fund.
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of each Plan, and
determined that there is a reasonable likelihood that the Plan will benefit
the applicable class of each fund and its shareholders. In particular, the
Trustees noted that the Institutional Class and Initial Class Plans do not
authorize payments by the applicable class of a fund other than those made
to FMR under its management contract with the fund. To the extent that each
Plan gives FMR and FDC greater flexibility in connection with the
distribution of 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.
The Class A, Class T, Class B, and Class C Plans do not provide for
specific payments by the applicable class of any of the expenses of FDC, or
obligate 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 the shareholders of each class on the dates
shown in the table below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
DATE OF SHAREHOLDER APPROVAL
Fund CLASS A CLASS T CLASS B CLASS C INSTITUTIONAL
TechnoQuant
Growth 12/23/96 12/23/96 12/23/96 12/23/96
International
Capital
Appreciation
Overseas 08/30/96 09/17/97 06/30/95 06/30/95
Mid Cap 08/30/96 01/18/96 01/18/96 01/18/96
Equity
Growth 08/30/96 07/16/97 * 09/26/86
Growth
Opportunities 08/30/96 01/01/95 * 06/30/95
Strategic
Opportunities 08/30/96 06/18/97 06/18/97 *** 06/30/95
Large Cap 08/30/96 01/18/96 01/18/96 01/18/96
Growth &
Income 12/23/96 12/23/96 12/23/96 12/23/96
Equity
Income 08/30/96 09/10/92 06/26/94 07/23/86
Balanced 08/30/96 01/01/95 * 06/30/95
Emerging Markets
Income 08/30/96 06/18/97 06/18/97 06/30/95
High Yield 08/30/96 01/01/95 01/01/95 06/30/95
Strategic
Income 08/30/96 10/14/94 10/14/94 06/30/95
Government
Investment 08/30/96 01/01/95 01/01/95 06/30/95
Intermediate
Bond 08/30/96 01/01/95 01/01/95 11/26/86
Mortgage
Securities * * * *** *
Short Fixed-
Income 08/30/96 01/01/95 ** 06/30/95
High Income
Municipal 08/30/96 12/01/94 12/01/94 06/30/95
Municipal
Bond * 07/01/96 07/01/96 *** 07/01/96
Intermediate
Municipal
Income 08/30/96 07/01/95 07/01/95 11/05/86
Short-Intermediate
Municipal
Income 08/30/96 07/01/95 ** *** 06/30/95
New York
Municipal
Income 08/30/96 12/08/94 12/08/94 *** 06/30/95
California
Municipal
Income 08/30/96 11/18/94 11/18/94 *** 06/30/95
</TABLE>
* Not applicable.
** Class B is not available for this fund.
*** Class C is not available for this fund.
The Plans for the Initial Class of Mortgage Securities and Municipal Bond
were approved by the shareholders of the class on January 21, 1987 and
December 31, 1986, respectively.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services, or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the funds
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed
herein, and banks and other financial institutions may be required to
register as dealers pursuant to state law.
Each fund may execute portfolio transactions with, and purchase securities
issued by, depository institutions that receive payments under the Plans.
No preference for the instruments of such depository institutions will be
shown in the selection of investments.
CONTRACTS WITH FMR AFFILIATES
Clas s A, Class T, Class B, Class C and Institutional Class of
TechnoQuant Growth, International Capital Appreciation, Overseas, Mid Cap,
Equity Growth, Growth Opportunities, Strategic Opportunities, Large Cap,
Growth & Income, Equity Income, Balanced, Emerging Markets Income, High
Yield, Strategic Income, Mortgage Securities, Government Investment,
Intermediate Bond and Short Fixed-Income (Municipal Funds) has entered into
a transfer agent agreement with FIIOC, an affiliate of FMR. Initial Class
of Strategic Opportunities and Mortgage Securities has entered into a
transfer agent agreement with FSC, an affiliate of FMR. Under the terms of
the agreements, FIIOC and FSC perform transfer agency, dividend disbursing,
and shareholder services for Class A, Class T, Class B, Class C and
Institutional Class of each fund. Under the terms of the agreements, FSC
perform transfer agency, dividend disbursing, and shareholder services for
Initial Class of each fund.
Each class of High Income Municipal, Municipal Bond, Intermediate Municipal
Income, Short-Intermediate Municipal Income, New York Municipal Income and
California Municipal Income (Tax Free Funds) has entered into a transfer
agent agreement with UMB. Under the terms of the agreements, UMB provides
transfer agency, dividend disbursing, and shareholder services for each
class of each fund. UMB in turn has entered into a sub-transfer agent
agreements with FIIOC and FSC. Under the terms of the sub-agreements, FIIOC
and FSC perform all processing activities associated with providing these
services for each class of each fund and receives all related transfer
agency fees paid to UMB.
For providing transfer agency services, FSC and FIIOC receive an annual
account fee and an asset-based fee each based on account size and fund type
for each retail account and certain institutional accounts. With respect to
certain institutional retirement accounts, FSC and FIIOC receives an annual
account fee and an asset-based fee based on account type or fund type.
These annual account fees are subject to increase based on postal rate
changes.
For each Equity Fund, the asset-based fees are subject to adjustment if the
year-to-date total return of the S&P 500 exceeds a positive or negative
15%.
FIIOC and FSC also collect small account fees from certain accounts with
balances of less than $2,500.
FSC and FIIOC pay out-of-pocket expenses associated with providing transfer
agent services. In addition, FSC and FIIOC bear the expense of typesetting,
printing, and mailing prospectuses, statements of additional information,
and all other reports, notices, and statements to existing shareholders,
with the exception of proxy statements.
Each of the Tax-Free Funds has also entered into a service agent agreement
with UMB. Under the terms of the agreements, UMB provides pricing and
bookkeeping services for each fund. UMB in turn has entered into a
sub-service agent agreements with FSC. Under the terms of the
sub-agreements, FSC performs all processing activities associated with
providing these services, including calculating the NAV and dividends for
each class of each fund and maintaining each fund's portfolio and general
accounting records, and receives all related pricing and bookkeeping fees
paid to UMB.
For providing pricing and bookkeeping services, FSC receives a monthly fee
based on each fund's average daily net assets throughout the month. The
annual fee rates for pricing and bookkeeping services are .0600% (for
equity funds) .0400% (for fixed-income funds) .0750% (for international
funds) .0750% (for high yield funds) of the first $500 million of average
net assets and .0300% (for equity funds) .0200% (for fixed-income funds)
.0375% (for international funds) .0375% (for high yield funds) of average
net assets in excess of $500 million. The fee, not including reimbursement
for out-of-pocket expenses, is limited to a minimum of $60,000 and a
maximum of $800,000 per year.
Pricing and bookkeeping fees, including reimbursement for out-of-pocket
expenses, paid by the funds to FSC for the past three fiscal years are
shown in the table below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FUND 1997 1996 1995 1994
Overseas N/A $ 523,913 $ 358,827 $ 251,241
Mid Cap N/A 65,738* N/A N/A
Equity Growth N/A 804,585 680,671 461,039
Growth Opportunities N/A 821,769 764,407 758,343
Strategic Opportunities N/A 380,339 315,623 61,356**
N/A 215,648***
Large Cap N/A 46,209* N/A N/A
Equity Income N/A 751,619 404,628 168,364
Balanced N/A 800,592 758,290 750,743
Emerging Markets Income N/A 62,296 45,004 36,412*
High Yield N/A 734,437 296,724 223,567
Strategic Income N/A 60,655 45,067 7,500*
Mortgage Securities $ 189,021 151,765 158,558
Government Investment N/A 109,259 68,665 46,218
Intermediate Bond N/A 198,036 151,940 118,125
Short Fixed-Income N/A 197,893 231,369 264,455
High Income Municipal N/A 239,476 229,551 220,222
Municipal Bond N/A 298,000 346,000 362,000
Intermediate Municipal Income N/A 65,230 48,976 48,062
Short-Intermediate Municipal Income N/A 58,330 46,467 31,953*
New York Municipal Income N/A 58,926 8,710* N/A
California Municipal Income N/A 42,183* N/A N/A
</TABLE>
* Emerging Markets Income, Strategic Income, Short-Intermediate Municipal
Income, and New York Municipal Income commenced operations on March 10,
1994, October 31, 1994, March 16, 1994, and August 21, 1995, respectively.
Mid Cap, Large Cap, and California Municipal Income commenced operations on
February 20, 1996.
** From 10/1/94 - 12/31/94.
*** From 10/1/93 - 9/30/94.
FSC also receives fees for administering each taxable fund's securities
lending program. Securities lending fees are based on the number and
duration of individual securities loans. For the fiscal year ended 1997,
Mortgage Securities incurred no securities lending fees. For the fiscal
years ended 1996, 1995, and 1994, the taxable funds incurred no securities
lending fees.
For the municipal 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 class or
the fund, as applicable, for these expenses.
Each fund has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. The distribution agreements call
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of each fund, which are continuously
offered. Promotional and administrative expenses in connection with the
offer and sale of shares are paid by FMR. For the fiscal period ended
1997, Mortgage Securities paid FDC sales charge revenues of $___ (Class T)
and $___ (Class A) and CDSC revenues of $___ , of which $___ and $ ___, of
sales charges, and $___ of CDSC's were retained by FDC. The table below
shows the sales charge revenue paid to, and retained by, FDC for each other
fund for the following fiscal periods.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SALES CHARGE REVENUE CDSC REVENUE
FISCAL YEAR AMOUNT PAID AMOUNT RETAINED AMOUNT PAID AMOUNT
ENDED TO FDC BY FDC TO FDC RETAINED BY FDC
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS T CLASS A CLASS T CLASS A
OVERSEAS Oct. 31, 1996 $ 2,313,000 $ 12,000 $ 375,000 $ 1,000 $ 24,000 $ 24,000
1995 4,446,941 N/A 692,471 N/A 333 333
1994 9,596,831 N/A 1,436,765 N/A N/A N/A
MID CAP Nov. 30, 1996***** 1,836,711 25,943 304,519 4,434 20,844 20,844
1995 N/A N/A N/A N/A N/A N/A
1994 N/A N/A N/A N/A N/A N/A
EQUITY GROWTH Nov. 30, 1996 11,845,527 151,603 1,998,996 16,099 N/A N/A
1995 13,514,763 N/A 2,048,524 N/A N/A N/A
1994 9,353,000 N/A 1,397,000 N/A N/A N/A
GROWTH Oct. 31, 1996 49,538,901 399,713 7,961,248 45,606 N/A N/A
OPPORTUNITIES
1995 73,545,428 N/A 11,459,421 N/A N/A N/A
1994 47,564,000 N/A 7,108,000 N/A N/A N/A
STRATEGIC Dec. 31, 1996 909,434 15,662 145,926 2,958 243,510 243,510
OPPORTUNITIES
1995 1,883,199 N/A 144,719 N/A 40,916 40,916
Dec. 31, 1994* 553,818 N/A 231,759 N/A 12,307 12,307
Sep. 30, 1994** 2,984,646 N/A 445,526 N/A 409 409
LARGE CAP Nov. 30, 1996***** 203,839 1,495 32,342 1,476 5,900 5,900
1995 N/A N/A N/A N/A N/A N/A
1994 N/A N/A N/A N/A N/A N/A
EQUITY INCOME Nov. 30, 1996 8,110,513 108,178 1,572,831 10,945 651,390 651,390
1995 10,583,118 N/A 1,676,479 N/A 127,493 127,493
1994 2,450,544 N/A 352,678 N/A 30,093 30,093
BALANCED Oct. 31, 1996 3,494,533 38,444 591,963 5,070 N/A N/A
1995 10,070,941 N/A 1,674,121 N/A N/A N/A
1994 37,018,000 N/A 6,291,000 N/A N/A N/A
EMERGING Dec. 31, 1996 270,379 9,186 42,424 1,098 46,800 46,800
MARKETS INCOME
1995 465,187 N/A 245,371 N/A 12,203 12,203
1994 406,046 N/A 59,134 N/A 2,877 2,877
HIGH YIELD Oct. 31, 1996 8,201,000 116,000 1,356,000 17,000 372,000 372,000
1995 8,787,240 N/A 1,328,830 N/A 75,583 75,583
1994 8,980,127 N/A 1,342,482 N/A 15,765 15,765
STRATEGIC Dec. 31, 1996 558,381 13,287 94,606 1,628 56,783 56,783
INCOME
1995 842,000 N/A 100,905 N/A 23,689 23,689
1994 197,904 N/A 0 N/A 9,542 9,542
SHORT Oct. 31, 1996 553,986 1,525 95,855 231 N/A N/A
FIXED-INCOME
1995 786,085 N/A 167,907 N/A N/A N/A
1994 4,396,909 N/A 877,639 N/A N/A N/A
GOVERNMENT Oct. 31, 1996 $ 618,420 $ 5,077 $ 101,833 $ 1,157 $ 38,738 $ 38,738
INVESTMENT
1995 954,672 N/A 144,831 N/A 10,268 10,268
1994 996,242 N/A 168,939 N/A 978 978
SALES CHARGE REVENUE CDSC REVENUE
FISCAL YEAR AMOUNT PAID AMOUNT RETAINED AMOUNT PAID AMOUNT
ENDED TO FDC BY FDC TO FDC RETAINED BY
FDC
CLASS T CLASS A CLASS T CLASS A
INTERMEDIATE Nov. 30, 1996 604,408 10,944 100,654 1,799 56,925 56,925
BOND
1995 1,297,536 N/A 198,826 N/A 20,310 20,310
1994 1,598,883 N/A 237,647 N/A 1,279 1,279
MUNICIPAL BOND Dec. 31, 1996 10,000 N/A 3,000 N/A 0 0
1995 N/A N/A N/A N/A N/A N/A
1994 N/A N/A N/A N/A N/A N/A
INTERMEDIATE Nov. 30, 1996 78,940 17 12,934 2 35,837 35,837
MUNICIPAL
INCOME
1995 375,591 N/A 141,432 N/A 1,449 1,449
1994 635,031 N/A 96,813 N/A 0 0
SHORT- Nov. 30, 1996 67,305 1,193 10,218 172 N/A N/A
INTERMEDIATE
MUNICIPAL
INCOME
1995 316,185 N/A 239,796 N/A N/A N/A
1994 122,128 N/A 13,369 N/A N/A N/A
HIGH INCOME Oct. 31, 1996 918,111 3,984 154,356 599 130,817 130,817
MUNICIPAL
NEW YORK Oct. 31, 1996 94,802 27 4,180 4 4,097 4,097
MUNICIPAL
INCOME
1995*** 0 N/A 0 N/A 0 0
1994 N/A N/A N/A N/A N/A N/A
CALIFORNIA Oct. 31, 1996**** 31,149 27 535 4 0 0
MUNICIPAL
INCOME
1995 N/A N/A N/A N/A N/A N/A
1994 N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
INITIAL CLASS INITIAL CLASS
STRATEGIC Dec. 31, 1996 725 725
OPPORTUNITIES
1995 1,989 1,989
Dec. 31, 1994* 152 152
Sep. 30, 1994** 1,485 1,485
</TABLE>
* For the fiscal period October 1, 1994 through December 31, 1994
** For the fiscal period October 1, 1993 through September 30, 1994
*** For the fiscal period August 21, 1995 through October 31, 1995
**** For the fiscal period February 20, 1996 through October 31, 1996
***** For the fiscal period February 20, 1996 through November 30, 1996
DESCRIPTION OF THE TRUSTS
TRUST ORGANIZATION. Fidelity Advisor TechnoQuant Growth Fund, Fidelity
Advisor Mid Cap Fund, Fidelity Advisor Equity Growth Fund, Fidelity Advisor
Large Cap Fund, and Fidelity Advisor Growth & Income Fund are funds 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 October 26, 1984. On January 29,
1992, the name was changed from Equity Portfolio Growth to Fidelity Broad
Street Trust by an amendment to the Declaration of Trust. On April 15,
1993, its name was changed from Fidelity Broad Street Trust to Fidelity
Advisor Series I by an amendment to the Declaration of Trust. Currently,
there are five funds of the trust: Fidelity Advisor TechnoQuant Growth
Fund, Fidelity Advisor Mid Cap Fund, Fidelity Advisor Equity Growth Fund,
Fidelity Advisor Large Cap Fund, and Fidelity Advisor Growth & Income Fund.
Fidelity Advisor Strategic Income Fund, Fidelity Advisor Short
Fixed-Income Fund, Fidelity Advisor Government Investment Fund, Fidelity
Advisor High Yield Fund, Fidelity Advisor Growth Opportunities Fund, and
Fidelity Advisor Balanced Fund are funds 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. Currently, there
are six funds of the trust: Fidelity Advisor Short Fixed-Income Fund,
Fidelity Advisor Government Investment Fund, Fidelity Advisor High Yield
Fund, Fidelity Advisor Growth Opportunities Fund, and Fidelity Advisor
Balanced Fund.
Fidelity Advisor Equity Income Fund is a fund 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 changed to
Fidelity Advisor Series III. Currently, there is one fund of the trust:
Fidelity Advisor Equity Income Fund.
Fidelity Advisor Intermediate Bond Fund is a fund 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. An
amended and restated Declaration of Trust, dated March 16, 1995, was filed
on April 12, 1995. Currently, there are three funds of the trust: Fidelity
Advisor Intermediate Bond Fund, Fidelity Institutional Short-Intermediate
Government Portfolio, and Fidelity Real Estate High Income Fund.
Fidelity Advisor High Income Municipal Fund, Fidelity Advisor New York
Municipal Income Fund, and Fidelity Advisor California Municipal Income
Fund are funds of Fidelity Advisor Series V, an open-end management
investment company organized as a Massachusetts business trust by a
Declaration of Trust dated April 24, 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. An amended
and restated Declaration of Trust dated March 16, 1995 was filed on April
12, 1995. Currently, there are four funds of the trust: Fidelity Advisor
High Income Municipal Fund, Fidelity Advisor New York Municipal Income
Fund, and Fidelity Advisor California Municipal Income Fund.
Fidelity Advisor Short-Intermediate Municipal Income Fund, and Fidelity
Advisor Intermediate Municipal Income Fund are funds 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. Currently, there are two funds of the
trust: Fidelity Advisor Short-Intermediate Municipal Income Fund and
Fidelity Advisor Intermediate Municipal Income Fund.
Fidelity Advisor International Capital Appreciation Fund, Fidelity
Overseas Fund, Fidelity Advisor Strategic Opportunities Fund, and Fidelity
Advisor Emerging Markets Income Fund are funds 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.
Currently, there are four funds of the trust: Fidelity Advisor
International Capital Appreciation Fund, Fidelity Overseas Fund, Fidelity
Advisor Strategic Opportunities Fund, and Fidelity Advisor Emerging Markets
Income Fund.
Fidelity Advisor Municipal Bond Fund is a fund of Fidelity Municipal Trust,
an open-end management investment company originally organized as a
Maryland corporation on November 22, 1976 and reorganized as a
Massachusetts business trust on June 22, 1984, at which time its name
changed to Fidelity Municipal Bond Portfolio. On March 1, 1986, the trust's
name was changed to Fidelity Municipal Trust. Currently, there are seven
funds of the trust: Fidelity Advisor Municipal Bond Fund, Fidelity
Aggressive Municipal Fund, Fidelity Insured Municipal Income Fund, Fidelity
Ohio Municipal Income Fund, Fidelity Michigan Municipal Income Fund,
Fidelity Minnesota Municipal Income Fund, and Spartan Pennsylvania
Municipal Income Fund.
Fidelity Advisor Mortgage Securities Fund is a fund of Fidelity Income
Fund, an open-end management investment company organized as a
Massachusetts business trust on August 7, 1984. On October 25, 1987, the
trust's name was changed from Fidelity Mortgage Securities Fund to Fidelity
Income Fund. Currently, there are three funds in the trust: Fidelity
Advisor Mortgage Securities Fund, Fidelity Ginnie Mae Fund, and Spartan
Limited Maturity Government Fund.
The Declarations of Trust permit the Trustees to create additional funds.
In the event that FMR ceases to be the investment adviser to a trust or a
fund, the right of the trust or fund to use the identifying name "Fidelity"
and "Spartan" may be withdrawn. There is a remote possibility that one fund
might become liable for any misstatement in its prospectus or statement of
additional information about another fund.
The assets of each trust received for the issue or sale of shares of each
of its funds and all income, earnings, profits, and proceeds thereof,
subject only to the rights of creditors, are especially allocated to such
fund, and constitute the underlying assets of such fund. The underlying
assets of each fund are segregated on the books of account, and are to be
charged with the liabilities with respect to such fund and with a share of
the general liabilities of their respective trusts. Expenses with respect
to each trust are to be allocated in proportion to the asset value of their
respective funds, except where allocations of direct expense can otherwise
be fairly made. The officers of each trust, subject to the general
supervision of the Board of Trustees, have the power to determine which
expenses are allocable to a given fund, or which are general or allocable
to all of the funds of a certain trust. In the event of the dissolution or
liquidation of a trust, shareholders of each fund of that trust are
entitled to receive as a class the underlying assets of such fund available
for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. Each trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. Each Declaration of
Trust provides that the trust shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed by the
trust or its Trustees shall include a provision limiting the obligations
created thereby to the trust and its assets. Each Declaration of Trust
provides for indemnification out of each fund's property of any shareholder
held personally liable for the obligations of the fund. Each Declaration of
Trust also provides that its funds shall, upon request, assume the defense
of any claim made against any shareholder for any act or obligation of the
fund and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
Each Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of their office. Claims asserted against
one class of shares may subject the holders of another class of shares to
certain liabilities.
VOTING RIGHTS. Each fund's capital consists of shares of
beneficial interest. The shares have no preemptive rights, and Class A,
Class T, Class C, Institutional Class, and Initial Class shares have no
conversion rights; the voting and dividend rights, the conversion rights of
Class B shares, the right of redemption, and the privilege of exchange are
described in the Prospectus. Shareholders of TechnoQuant Growth,
International Capital Appreciation, Mid Cap, Equity Growth, Growth
Opportunities, Strategic Opportunities, Large Cap, Growth & Income, Equity
Income, Emerging Markets Income, Balanced, High Yield, Strategic Income,
Mortgage Securities, Government Investment, Intermediate Bond, Short
Fixed-Income, High Income Municipal, Municipal Bond, Intermediate Municipal
Income, Short-Intermediate Municipal Income, New York Municipal Income, and
California Municipal Income receive one vote for each dollar of net asset
value owned. 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, in the case of a meeting of an entire trust,
the purpose of voting on removal of one or more Trustees. Each trust or
fund may be terminated upon the sale of its assets to another open-end
management investment company, or upon liquidation and distribution of its
assets, as determined by the current value of each shareholder's investment
in the funds or trusts. If not so terminated, each trust and fund will
continue indefinitely. Overseas, International Capital Appreciation, Growth
Opportunities, Strategic Opportunities, Balanced, Emerging Markets Income,
High Yield, Strategic Income, Government Investment, Intermediate Bond,
Short Fixed-Income, High Income Municipal, California Municipal Income, New
York Municipal Income, Mid Cap, Large Cap, Mortgage Securities, TechnoQuant
Growth, Growth & Income, Intermediate Municipal Income, Short-Intermediate
Municipal Income, and Equity Growth may invest all of their assets in
another investment company.
CUSTODIANS. Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts, is custodian of the assets of International Capital
Appreciation, Mid Cap, Growth Opportunities, Strategic Opportunities, and
Large Cap. The Chase Manhattan Bank, 4 Chase MetroTech Center, Brooklyn,
New York, is custodian of the assets of TechnoQuant Growth, Overseas,
Equity Growth, Growth & Income, Equity Income, Balanced, 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, Intermediate Bond, Mortgage Securities and Short
Fixed-Income. UMB Bank, n.a., 1010 Grand Avenue, Kansas City, Missouri, is
custodian of the assets of High Income Municipal, Municipal Bond,
Intermediate Municipal Income, California Municipal Income, New York
Municipal Income, and Short-Intermediate Municipal Income. Each custodian
is responsible for the safekeeping of the funds' assets and the appointment
of subcustodian banks and clearing agencies. A custodian takes no part in
determining the investment policies of a fund or in deciding which
securities are purchased or sold by a fund. However, a fund may invest in
obligations of its custodian and may purchase securities from or sell
securities to its custodian. The Bank of New York and The Chase Manhattan
Bank, each headquartered in New York, also may serve as special purpose
custodians of certain assets in connection with repurchase agreement
transactions.
FMR, its officers and directors, its affiliated companies, and the Board of
Trustees may, from time to time, conduct transactions with various banks,
including banks serving as custodians for certain of the funds advised by
FMR. The Boston branch of the custodian bank of Mid Cap, Growth
Opportunities, Strategic Opportunities, and Large Cap 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 include mortgages and personal and general business loans.
In the judgment of FMR, the terms and conditions of those transactions were
not influenced by existing or potential custodial or other fund
relationships.
AUDITOR. , serves as the independent accountant for Mid Cap, Equity Growth,
Growth Opportunities, Strategic Opportunities, Large Cap, Equity Income,
Balanced, Emerging Markets Income, High Yield, Strategic Income, Government
Investment, Intermediate Bond, Short Fixed-Income, High Income Municipal,
Municipal Bond, Intermediate Municipal Income, and Short-Intermediate
Municipal Income, New York Municipal Income, and California Municipal
Income. The auditor examines financial statements for the funds and
provides other audit, tax, and related services.
, serves as the independent accountant for TechnoQuant Growth,
International Capital Appreciation, Overseas, Growth & Income, and Mortgage
Securities. The auditor examines financial statements for the funds and
provides other audit, tax, and related services.
FINANCIAL STATEMENTS
Mortgage Securities fund's financial statements and financial highlights
are for the fiscal period ended July 31, 1997. Each other fund's
financial statements and financial highlights are for the fiscal periods
ended July 31, October 31, November 30, or December 31, 1996, as
appropriate, and report of the auditors, are included in the fund's Annual
Reports, which are separate reports supplied with this SAI. The funds'
financial statements, including the financial highlights, and reports of
the auditors are incorporated herein by reference. For a free additional
copy of a fund's Annual Report, contact Fidelity at 1-800-544-8888, 82
Devonshire Street, Boston, MA 02109, or your investment professional.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of
each investment by the time 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.
When a municipal bond issuer has committed to call an issue of bonds and
has established an independent escrow account that is sufficient to, and is
pledged to, refund that issue, the number of days to maturity for the
prerefunded bond is considered to be the number of days to the announced
call date of the bonds. Also, the maturities of mortgage-backed securities,
including collateralized mortgage obligations, and some asset-backed
securities, 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 timing of principal payments,
including unscheduled prepayments, during the life of the mortgage. The
weighted average life of these securities is likely to be substantially
shorter than their stated final maturity.
The descriptions that follow are examples of eligible ratings for the
funds. A fund may, however, consider the ratings for other types of
investments and the ratings assigned by other rating organizations when
determining the eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE RATINGS OF CORPORATE BONDS:
Moody's ratings for obligations with an original remaining maturity in
excess of one year fall within nine categories. They range from Aaa
(highest quality) to C (lowest quality). Moody applies numerical modifiers
of 1, 2, or 3 to each generic rating classification from Aa through B. The
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks on the lower end of its
generic rating category.
AAA - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than the Aaa securities.
A - Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
BAA - Bonds that are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
CAA - Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
CA - Bonds that are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
short-comings.
C - Bonds that are rated C are the lowest-rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
DESCRIPTION OF STANDARD & POOR'S RATINGS OF CORPORATE BONDS:
Debt issues may be designated by Standard & Poor's as either investment
grade ("AAA" through "BBB") or speculative grade ("BB" through "D"). While
speculative grade debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major
exposures to adverse conditions. Ratings from AA to CCC may be modified by
the addition of a plus sign (+) or minus sign (-) to show relative standing
within the major rating categories.
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal. The
CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed but
debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating will also
be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
FIDELITY MUNICIPAL TRUST
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) 1. Financial Statements and Financial Highlights, included in the
Annual Report for Fidelity Municipal Trust on behalf of Fidelity Advisor
Municipal Bond Fund for the fiscal year ended December 31, 1996 are
included in the fund's prospectuses, are incorporated by reference into the
fund's Statement of Additional Information, and were filed on February 14,
1997 pursuant to Rule 30d-1 under the Investment Company Act of 1940 and
are incorporated herein by reference.
2. Financial Statements and Financial Highlights included in the
Semi-Annual Report for Fidelity Municipal Trust on behalf of Fidelity
Advisor Municipal Bond Fund for the semi period ended June 30, 1997 will be
filed by subsequent amendment.
(b) Exhibits.
1. Declaration of Trust of Registrant, dated as of March 17, 1994, is
incorporated herein by reference to Exhibit 1 of Post-Effective Amendment
No. 67.
2. Bylaws of the Trust, as amended, are incorporated herein by reference
to Exhibit 2(a) of Fidelity Union Street Trust's (File No. 2-50318)
Post-Effective Amendment No. 87.
3. Not applicable.
4. Not applicable.
5. (a) Management Contract, dated January 1, 1994, between Fidelity
Aggressive Tax-Free Portfolio (currently known as Fidelity Aggressive
Municipal Fund) and Fidelity Management & Research Company is incorporated
herein by reference to Exhibit 5(a) of Post-Effective Amendment No. 67.
(b) Management Contract, dated January 1, 1994, between Fidelity
Municipal Bond Portfolio (currently known as Fidelity Advisor Municipal
Bond Fund) and Fidelity Management & Research Company is incorporated
herein by reference to Exhibit 5(b) of Post-Effective Amendment No. 67.
(c) Management Contract, dated January 1, 1994, between Fidelity Insured
Tax-Free Portfolio (currently known as Fidelity Insured Municipal Income
Fund) and Fidelity Management & Research Company is incorporated herein by
reference to Exhibit 5(c) of Post-Effective Amendment No. 69.
(d) Management Contract, dated January 1, 1994, between Fidelity Michigan
Tax-Free High Yield Portfolio (currently known as Fidelity Michigan
Municipal Income Fund) and Fidelity Management & Research Company is
incorporated herein by reference to Exhibit 5(d) of Post-Effective
Amendment No. 64.
(e) Management Contract, dated January 1, 1994, between Fidelity
Minnesota Tax-Free Portfolio (currently known as Fidelity Minnesota
Municipal Income Fund) and Fidelity Management & Research Company is
incorporated herein by reference to Exhibit 5(e) of Post-Effective
Amendment No. 64.
(f) Management Contract, dated January 1, 1994, between Fidelity Ohio
Tax-Free High Yield Portfolio (currently known as Fidelity Ohio Municipal
Income Fund) and Fidelity Management & Research Company is incorporated
herein by reference to Exhibit 5(f) of Post-Effective Amendment No. 64.
(g) Management Contract, dated August 1, 1990, between Spartan
Pennsylvania Municipal High Yield Portfolio (currently known as Spartan
Pennsylvania Municipal Income Fund) and Fidelity Management & Research
Company is incorporated herein by reference to Exhibit 5(g) of
Post-Effective Amendment No. 67.
6. (a) General Distribution Agreement between Fidelity Insured Tax-Free
Portfolio (currently known as Fidelity Insured Municipal Income Fund) and
Fidelity Distributors Corporation, dated April 1, 1987, is incorporated
herein by reference to Exhibit 6(a) of Post-Effective Amendment No. 67.
(b) General Distribution Agreement between Fidelity Aggressive Tax-Free
Portfolio (currently known as Fidelity Aggressive Municipal Fund) and
Fidelity Distributors Corporation, dated April 1, 1987, is incorporated
herein by reference to Exhibit 6(b) of Post Effective Amendment No. 70.
(c) General Distribution Agreement between Fidelity Municipal Bond
Portfolio (currently known as Fidelity Advisor Municipal Bond Fund) and
Fidelity Distributors Corporation, dated April 1, 1987, is incorporated
herein by reference to Exhibit 6(c) of Post-Effective Amendment No. 67.
(d) General Distribution Agreement between Fidelity Ohio Tax-Free High
Yield Portfolio (currently known as Fidelity Ohio Municipal Income Fund)
and Fidelity Distributors Corporation, dated April 1, 1987, is incorporated
herein by reference to Exhibit 6(d) of Post-Effective Amendment No. 67.
(e) General Distribution Agreement between Fidelity Michigan Tax-Free
Portfolio (currently known as Spartan Michigan Municipal Income Fund) and
Fidelity Distributors Corporations, dated April 1, 1987, is incorporated
herein by reference to Exhibit 6(e) of Post-Effective Amendment No. 67.
(f) General Distribution Agreement between Fidelity Minnesota Tax-Free
Portfolio (currently known as Fidelity Minnesota Municipal Income Fund) and
Fidelity Distributors Corporation, dated April 1, 1987, is incorporated
herein by reference to Exhibit 6(f) of Post-Effective Amendment No. 67.
(g) General Distribution Agreement between Fidelity Pennsylvania Tax-Free
High Yield Portfolio (currently known as Spartan Pennsylvania Municipal
Income Fund) and Fidelity Distributors Corporation, dated April 1, 1987, is
incorporated herein by reference to Exhibit 6(g) of Post-Effective
Amendment No. 67.
(h) Amendment to General Distribution Agreement, dated January 1, 1988,
between the Registrant and Fidelity Distributors Corporation is
incorporated herein by reference to Exhibit 6(h) of Post-Effective
Amendment No. 67.
(i) Form of Bank Agency Agreement (most recently revised January, 1997)
is electronically filed herein as Exhibit 6(i).
(j) Form of Selling Dealer Agreement (most recently revised January,
1997) is electronically filed herein as Exhibit 6(j).
(k) Form of Selling Dealer Agreement for Bank Related Transactions (most
recently revised January, 1997) is electronically filed herein as Exhibit
6(k).
(l) Amendments to the General Distribution Agreement between the
Registrant and Fidelity Distributors Corporation, dated March 14, 1996 and
July 15, 1996, are incorporated herein by reference to Exhibit 6(a) of
Fidelity Court Street Trust's Post-Effective Amendment No. 61 (File No.
2-58774).
7. (a) Retirement Plan for Non-Interested Person Trustees, Directors or
General Partners, as amended on November 16, 1995, is incorporated herein
by reference to Exhibit 7(a) of Fidelity Select Portfolio's (File No.
2-69972) Post-Effective Amendment No. 54.
(b) The Fee Deferral Plan for Non-Interested Person Directors and
Trustees of the Fidelity Funds, effective as of September 14, 1995 and
amended through November 14, 1996, is incorporated herein by reference to
Exhibit 7(b) of Fidelity Aberdeen Street Trust's (File No. 33-43529)
Post-Effective Amendment No. 19.
8. (a) Custodian Agreement, Appendix B, and Appendix C, dated December 1,
1994, between UMB Bank, n.a. and the Registrant is incorporated herein by
reference to Exhibit 8 of Fidelity California Municipal Trust's
Post-Effective Amendment No. 28 (File No. 2-83367).
. (b) Appendix A, dated October 17, 1996, to the Custodian Agreement,
dated December 1, 1994, between UMB Bank, n.a. and the Registrant is
incorporated herein by reference to Exhibit 8(a) of Fidelity Court Street
Trust's Post-Effective Amendment No. 61 (File No. 2-58774).
9. Not applicable.
10. Not applicable.
11. Not applicable.
12. Not applicable.
13. Not applicable.
14. (a) Fidelity Individual Retirement Account Custodial Agreement and
Disclosure Statement, as currently in effect, is incorporated herein by
reference to Exhibit 14(a) of Fidelity Union Street Trust's (File No.
2-50318) Post-Effective Amendment No. 87.
(b) Fidelity Institutional Individual Retirement Account Custodial
Agreement and Disclosure Statement, as currently in effect, is incorporated
herein by reference to Exhibit 14(d) of Fidelity Union Street Trust's (File
No. 2-50318) Post-Effective Amendment No. 87.
(c) National Financial Services Corporation Individual Retirement Account
Custodial Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(h) of Fidelity Union Street
Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(d) Fidelity Portfolio Advisory Services Individual Retirement Account
Custodial Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(i) of Fidelity Union Street
Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(e) Fidelity 403(b)(7) Custodial Account Agreement, as currently in
effect, is incorporated herein by reference to Exhibit 14(e) of Fidelity
Union Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(f) National Financial Services Corporation Defined Contribution
Retirement Plan and Trust Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(k) of Fidelity Union Street
Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(g) The CORPORATEplan for Retirement Profit Sharing/401K Plan, as
currently in effect, is incorporated herein by reference to Exhibit 14(l)
of Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(h) The CORPORATEplan for Retirement Money Purchase Pension Plan, as
currently in effect, is incorporated herein by reference to Exhibit 14(m)
of Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(i) Fidelity Investments Section 403(b)(7) Individual Custodial Account
Agreement and Disclosure Statement, as currently in effect, is incorporated
herein by reference to Exhibit 14(f) of Fidelity Commonwealth Trust's (File
No. 2-52322) Post-Effective Amendment No. 57.
(j) Plymouth Investments Defined Contribution Retirement Plan and Trust
Agreement, as currently in effect, is incorporated herein by reference to
Exhibit 14(o) of Fidelity Commonwealth Trust's (File No. 2-52322)
Post-Effective Amendment No. 57.
(k) The Fidelity Prototype Defined Benefit Pension Plan and Trust Basic
Plan Document and Adoption Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(d) of Fidelity Securities
Fund's (File No. 2-93601) Post-Effective Amendment No. 33.
(l) The Institutional Prototype Plan Basic Plan Document, Standardized
Adoption Agreement, and Non-Standardized Adoption Agreement, as currently
in effect, is incorporated herein by reference to Exhibit 14(o) of Fidelity
Securities Fund's (File No. 2-93601) Post-Effective Amendment No. 33.
(m) The CORPORATEplan for Retirement 100SM Profit Sharing/401(k) Basic
Plan Document, Standardized Adoption Agreement, and Non-Standardized
Adoption Agreement, as currently in effect, is incorporated herein by
reference to Exhibit 14(f) of Fidelity Securities Fund's (File No. 2-93601)
Post-Effective Amendment No. 33.
(n) The Fidelity Investments 401(a) Prototype Plan for Tax-Exempt
Employers Basic Plan Document, Standardized Profit Sharing Plan Adoption
Agreement, Non-Standardized Discretionary Contribution Plan No. 002
Adoption Agreement, and Non-Standardized Discretionary Contribution Plan
No. 003 Adoption Agreement, as currently in effect, is incorporated herein
by reference to Exhibit 14(g) of Fidelity Securities Fund's (File No.
2-93601) Post-Effective Amendment No. 33.
(o) Fidelity Investments 403(b) Sample Plan Basic Plan Document and
Adoption Agreement, as currently in effect, is incorporated herein by
reference to Exhibit 14(p) of Fidelity Securities Fund's (File No. 2-93601)
Post-Effective Amendment No. 33.
(p) Fidelity Defined Contribution Retirement Plan and Trust Agreement, as
currently in effect, is incorporated herein by reference to Exhibit 14(c)
of Fidelity Securities Fund's (File No. 2-93601) Post-Effective Amendment
No. 33.
(q) Fidelity SIMPLE-IRAPlan Adoption Agreement, Company Profile Form, and
Plan Document, as currently in effect, is incorporated herein by reference
to Exhibit 14(q) of Fidelity Aberdeen Street Trust's (File No. 33-43529)
Post-Effective Amendment No. 19.
15. (a) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Insured Tax-Free Portfolio (currently known as Fidelity Insured Municipal
Income Fund) is incorporated herein by reference to Exhibit 15(a) of
Post-Effective Amendment No. 67.
(b) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Ohio Tax-Free High Yield Portfolio (currently known as Fidelity Ohio
Municipal Income Fund) is incorporated herein by reference to Exhibit 15(b)
of Post-Effective Amendment No. 67.
(c) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Michigan Tax-Free Portfolio (currently known as Spartan Michigan Municipal
Income Fund) is incorporated herein by reference to Exhibit 15(c) of
Post-Effective Amendment No. 67.
(d) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Minnesota Tax-Free Portfolio (currently known as Fidelity Minnesota
Municipal Income Fund) is incorporated herein by reference to Exhibit 15(d)
of Post-Effective Amendment No. 67.
(e) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Pennsylvania Tax-Free High Yield Portfolio (currently known as Spartan
Pennsylvania Municipal Income Fund) is incorporated herein by reference to
Exhibit 15(e) of Post-Effective Amendment No. 67.
(f) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Municipal Bond Fund (currently known Fidelity Advisor Municipal Bond Fund:
Initial Class) is incorporated herein by reference to Exhibit 15(f) of
Post-Effective Amendment No. 79.
(g) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Aggressive Tax-Free Portfolio (currently known as Fidelity Aggressive
Municipal Fund) is incorporated herein by reference to Exhibit 15(g) of
Post Effective Amendment No. 70.
(h) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Municipal Bond Fund: Class T (formerly Class A) is incorporated
herein by reference to Exhibit 15(h) of Post-Effective Amendment No. 79.
(i) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Municipal Bond Fund: Class B is incorporated herein by reference to
Exhibit 15(i) of Post-Effective Amendment No. 79.
(j) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Municipal Bond Fund: Institutional Class is incorporated herein by
reference to Exhibit 15(j) of Post-Effective Amendment No. 79.
(k) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Municipal Bond Fund: Class A is incorporated herein by reference to
Exhibit 15(k) of Post-Effective Amendment No. 79.
16. (a) Schedule for computation of performance calculations for Fidelity
Municipal Bond Fund is incorporated herein by reference to Exhibit 16(a) of
Post-Effective Amendment No. 70.
(b) Schedule for computation of adjusted net asset values for Fidelity
Municipal Bond Fund is incorporated herein by reference to Exhibit 16(b) of
Post-Effective Amendment No. 70.
17. A Financial Data Schedule for Fidelity Advisor Municipal Bond Fund
will filed by subsequent amendment.
18. Rule 18f-3 Plan, dated February 1, 1997, is incorporated herein by
reference to Exhibit 18 of Post-Effective Amendment No. 79.
Item 25. Persons Controlled by or under Common Control with Registrant
The Board of Trustees of the Registrant is substantially the same as the
boards of other funds advised by FMR, each of which has Fidelity Management
& Research Company as its investment adviser. In addition, the officers of
these funds are substantially identical. Nonetheless, Registrant takes the
position that it is not under common control with these other funds since
the power residing in the respective boards and officers arises as the
result of an official position with the respective funds.
Item 26. Number of Holders of Securities
As of May 31, 1997
Title of Class: Shares of Beneficial Interest
Name of Series: Number of Record Holders
Fidelity Advisor Municipal Bond Fund: Initial Class 18,211
Fidelity Advisor Municipal Bond Fund: Class T 5
Fidelity Advisor Municipal Bond Fund: Class A 108
Fidelity Advisor Municipal Bond Fund: Class B 43
Fidelity Advisor Municipal Bond Fund: Institutional 24
Class
Fidelity Aggressive Municipal Fund: 21,510
Spartan Insured Municipal Income Fund: 8,678
Spartan Ohio Municipal Income Fund (formerly known as 9,102
Fidelity Ohio Municipal Income Fund):
Spartan Michigan Municipal Income Fund (formerly 11,485
known as Fidelity Michigan Municipal Income Fund):
Spartan Minnesota Municipal Income Fund (formerly 7,437
known as Fidelity Minnesota Municipal Income Fund):
Spartan Pennsylvania Municipal Income Fund: 5,148
Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification shall be
provided to any past or present Trustee or officer. It states that the
Registrant shall indemnify any present or past Trustee or officer to the
fullest extent permitted by law against liability and all expenses
reasonably incurred by him in connection with any claim, action, suit, or
proceeding in which he is involved by virtue of his service as a Trustee,
an officer, or both. Additionally, amounts paid or incurred in settlement
of such matters are covered by this indemnification. Indemnification will
not be provided in certain circumstances, however. These include instances
of willful misfeasance, bad faith, gross negligence, and reckless disregard
of the duties involved in the conduct of the particular office involved.
Pursuant to Section 11 of the Distribution Agreement, the Registrant
agrees to indemnify and hold harmless the Distributor and each of its
directors and officers and each person, if any, who controls the
Distributor within the meaning of Section 15 of the 1933 Act against any
loss, liability, claim, damages or expense arising by reason of any person
acquiring any shares, based upon the ground that the registration
statement, Prospectus, Statement of Additional Information, shareholder
reports or other information filed or made public by the Registrant
included a materially misleading statement or omission. However, the
Registrant does not agree to indemnify the Distributor or hold it harmless
to the extent that the statement or omission was made in reliance upon, and
in conformity with, information furnished to the Registrant by or on behalf
of the Distributor. The Registrant does not agree to indemnify the parties
against any liability to which they would be subject by reason of willful
misfeasance, bad faith, gross negligence, and reckless disregard of the
obligations and duties under the Distribution Agreement.
Pursuant to the agreement by which Fidelity Service Company, Inc.
("Service") is appointed sub-transfer agent, the Transfer Agent agrees to
indemnify Service for its losses, claims, damages, liabilities and expenses
to the extent the Transfer Agent is entitled to and receives
indemnification from the Registrant for the same events. Under the Transfer
Agency Agreement, the Registrant agrees to indemnify and hold the Transfer
Agent harmless against any losses, claims, damages, liabilities, or
expenses resulting from:
(1) any claim, demand, action or suit brought by any person other than the
Registrant, which names the Transfer Agent and/or the Registrant as a party
and is not based on and does not result from the Transfer Agent's willful
misfeasance, bad faith, negligence or reckless disregard of its duties, and
arises out of or in connection with the Transfer Agent's performance under
the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent contributed to
by the Transfer Agent's willful misfeasance, bad faith, negligence or
reckless disregard of its duties) which results from the negligence of the
Registrant, or from the Transfer Agent's acting upon any instruction(s)
reasonably believed by it to have been executed or communicated by any
person duly authorized by the Registrant, or as a result of the Transfer
Agent's acting in reliance upon advice reasonably believed by the Transfer
Agent to have been given by counsel for the Registrant, or as a result of
the Transfer Agent's acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine and signed,
countersigned or executed by the proper person.
Pursuant to the agreement by which Fidelity Investments Institutional
Operations Company, Inc. ("FIIOC") is appointed sub-transfer agent, the
Transfer Agent agrees to indemnify FIIOC for FIIOC's losses, claims,
damages, liabilities and expenses (including reasonable counsel fees and
expenses) (losses) to the extent that the Transfer Agent is entitled to and
receives indemnification from the Portfolio for the same events. Under the
Transfer Agency Agreement, the Registrant agrees to indemnify and hold the
Transfer Agent harmless against any losses, claims, damages, liabilities,
or expenses (including reasonable counsel fees and expenses) resulting
from:
(1) any claim, demand, action or suit brought by any person other than the
Registrant, including by a shareholder which names the Transfer Agent
and/or the Registrant as a party and is not based on and does not result
from the Transfer Agent's willful misfeasance, bad faith or negligence or
reckless disregard of duties, and arises out of or in connection with the
Transfer Agent's performance under the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent contributed to
by the Transfer Agent's willful misfeasance, bad faith or negligence or
reckless disregard of duties) which results from the negligence of the
Registrant, or from the Transfer Agent's acting upon any instruction(s)
reasonably believed by it to have been executed or communicated by any
person duly authorized by the Registrant, or as a result of the Transfer
Agent's acting in reliance upon advice reasonably believed by the Transfer
Agent to have been given by counsel for the Registrant, or as a result of
the Transfer Agent's acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine and signed,
countersigned or executed by the proper person.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY (FMR)
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held, during the
past two fiscal years, the following positions of a substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Board of FMR; President and Chief
Executive Officer of FMR Corp.; Chairman of the
Board and Director of FMR, FMR Corp., FMR Texas
Inc., FMR (U.K.) Inc., and FMR (Far East) Inc.;
Chairman of the Board and Representative Director of
Fidelity Investments Japan Limited; President and
Trustee of funds advised by FMR.
Robert C. Pozen President and Director of FMR; President and Director
of FMR Texas Inc., FMR (U.K.) Inc., and FMR (Far
East) Inc.; General Counsel, Managing Director, and
Senior Vice President of FMR Corp.
J. Gary Burkhead President of FIIS; President and Director of FMR,
FMR Texas Inc., FMR (U.K.) Inc., and FMR (Far
East) Inc.; Managing Director of FMR Corp.; Senior
Vice President and Trustee of funds advised by FMR.
Peter S. Lynch Vice Chairman of the Board and Director of FMR.
Marta Amieva Vice President of FMR.
John Carlson Vice President of FMR.
Dwight D. Churchill Senior Vice President of FMR.
Barry Coffman Vice President of FMR.
Arieh Coll Vice President of FMR.
Stephen G. Manning Assistant Treasurer of FMR
William Danoff Senior Vice President of FMR and of a fund advised by
FMR.
Scott E. DeSano Vice President of FMR.
Craig P. Dinsell Vice President of FMR.
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
George C. Domolky Vice President of FMR.
Bettina Doulton Vice President of FMR and of funds advised by FMR.
Margaret L. Eagle Vice President of FMR and a fund advised by FMR.
Richard B. Fentin Senior Vice President of FMR and Vice President of a
fund advised by FMR.
Gregory Fraser Vice President of FMR and of a fund advised by FMR.
Jay Freedman Assistant Clerk of FMR; Clerk of FMR Corp., FMR
(U.K.) Inc., and FMR (Far East) Inc.; Secretary of
FMR Texas Inc.
Robert Gervis Vice President of FMR.
David L. Glancy Vice President of FMR and of a fund advised by FMR.
Kevin E. Grant Vice President of FMR and of funds advised by FMR.
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
Boyce I. Greer Senior Vice President of FMR.
Robert Haber Vice President of FMR.
Richard C. Habermann Senior Vice President of FMR; Vice President of funds
advised by FMR.
William J. Hayes Senior Vice President of FMR; Vice President of
Equity funds advised by FMR.
Richard Hazlewood Vice President of FMR and of a fund advised by FMR.
Fred L. Henning Jr. Senior Vice President of FMR; Vice President of
Fixed-Income funds advised by FMR.
Bruce Herring Vice President of FMR.
John R. Hickling Vice President of FMR and of a fund advised by FMR.
Robert F. Hill Vice President of FMR; Director of Technical
Research.
Curt Hollingsworth Vice President of FMR and of funds advised by FMR.
Abigail P. Johnson Senior Vice President of FMR and of a fund advised by
FMR; Associate Director and Senior Vice President of
Equity funds advised by FMR.
David B. Jones Vice President of FMR.
Steven Kaye Vice President of FMR and of a fund advised by FMR.
Francis V. Knox Vice President of FMR; Compliance Officer of FMR
(U.K.) Inc.
David P. Kurrasch Vice President of FMR.
Robert A. Lawrence Senior Vice President of FMR; Associate Director and
Senior Vice President of Equity funds advised by
FMR; Vice President of High Income funds advised by
FMR.
Harris Leviton Vice President of FMR and of a fund advised by FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Mark G. Lohr Vice President of FMR; Treasurer of FMR, FMR
(U.K.) Inc., FMR (Far East) Inc., and FMR Texas Inc.
Arthur S. Loring Senior Vice President, Clerk, and General Counsel of
FMR; Vice President/Legal, and Assistant Clerk of
FMR Corp.; Secretary of funds advised by FMR.
Richard R. Mace Jr. Vice President of FMR and of funds advised by FMR.
Charles Mangum Vice President of FMR.
Kevin McCarey Vice President of FMR.
Diane McLaughlin Vice President of FMR.
Neal P. Miller Vice President of FMR.
Robert H. Morrison Vice President of FMR; Director of Equity Trading.
David L. Murphy Vice President of FMR and of funds advised by FMR.
Scott Orr Vice President of FMR.
Jacques Perold Vice President of FMR.
Anne Punzak Vice President of FMR.
Kenneth A. Rathgeber Vice President of FMR; Treasurer of funds advised by
FMR.
Kennedy P. Richardson Vice President of FMR.
Mark Rzepczynski Vice President of FMR.
Lee H. Sandwen Vice President of FMR.
Patricia A. Satterthwaite Vice President of FMR and of a fund advised by FMR.
Fergus Shiel Vice President of FMR.
Carol Smith-Fachetti Vice President of FMR.
Steven J. Snider Vice President of FMR.
Thomas T. Soviero Vice President of FMR and of a fund advised by FMR.
Richard Spillane Senior Vice President of FMR; Associate Director and
Senior Vice President of Equity funds advised by
FMR; Senior Vice President and Director of
Operations and Compliance of FMR (U.K.) Inc.
Thomas Sprague Vice President of FMR.
Robert E. Stansky Senior Vice President of FMR; Vice President of a
fund advised by FMR.
Scott Stewart Vice President of FMR.
Cythia Straus Vice President of FMR.
Thomas Sweeney Vice President of FMR and of a fund advised by FMR.
Beth F. Terrana Senior Vice President of FMR; Vice President of a
fund advised by FMR.
Yoko Tilley Vice President of FMR.
Joel C. Tillinghast Vice President of FMR and of a fund advised by FMR.
Robert Tuckett Vice President of FMR.
Jennifer Uhrig Vice President of FMR and of funds advised by FMR.
George A. Vanderheiden Senior Vice President of FMR; Vice President of funds
advised by FMR.
</TABLE>
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR.
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Michael Mlinac Director None
Mark Peterson Director None
Paul Hondros President None
Arthur S. Loring Vice President and Clerk Secretary
Caron Ketchum Treasurer and Controller None
Gary Greenstein Assistant Treasurer None
Jay Freedman Assistant Clerk None
Linda Holland Compliance Officer None
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity Service
Company, Inc., 82 Devonshire Street, Boston, MA 02109, or the funds'
custodian UMB Bank, n.a., 1010 Grand Avenue, Kansas City, MO.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(1) The Registrant on behalf of Spartan Aggressive Municipal Fund, Fidelity
Advisor Municipal Bond Fund, Spartan Insured Municipal Income Fund, Spartan
Ohio Municipal Income Fund, Spartan Michigan Municipal Income Fund, Spartan
Minnesota Municipal Income Fund, and Spartan Pennsylvania Municipal Income
Fund, provided the information required by Item 5A is contained in the
annual report, undertakes to furnish each person to whom a prospectus has
been delivered, upon their request and without charge, a copy of the
Registrant's latest annual report to shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 82 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Boston, and Commonwealth of Massachusetts, on the 20th day of August 1997.
FIDELITY MUNICIPAL TRUST
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
(Signature) (Title) (Date)
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Edward C. Johnson 3d (dagger) President and Trustee August 20, 1997
Edward C. Johnson 3d (Principal Executive Officer)
/s/Richard A. Silver Treasurer August 20, 1997
Richard A. Silver
/s/Robert C. Pozen Trustee August 20, 1997
Robert C. Pozen
/s/Ralph F. Cox * Trustee August 20, 1997
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee August 20, 1997
Phyllis Burke Davis
/s/Robert M. Gates ** Trustee August 20, 1997
Robert M. Gates
/s/E. Bradley Jones * Trustee August 20, 1997
E. Bradley Jones
/s/Donald J. Kirk * Trustee August 20, 1997
Donald J. Kirk
/s/Peter S. Lynch * Trustee August 20, 1997
Peter S. Lynch
/s/Marvin L. Mann * Trustee August 20, 1997
Marvin L. Mann
/s/William O. McCoy * Trustee August 20, 1997
William O. McCoy
/s/Gerald C. McDonough * Trustee August 20, 1997
Gerald C. McDonough
/s/Thomas R. Williams * Trustee August 20, 1997
Thomas R. Williams
</TABLE>
(dagger) Signatures affixed by Robert C. Pozen pursuant to a power of
attorney dated July 17, 1997 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated December 19, 1996 and filed herewith.
** Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated March 6, 1997 and filed herewith.
POWER OF ATTORNEY
I, the undersigned President and Director, Trustee, or General Partner, as
the case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Hereford Street Trust
Fidelity Advisor Series I Fidelity Income Fund
Fidelity Advisor Series II Fidelity Institutional Cash Portfolios
Fidelity Advisor Series III Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series IV Fidelity Investment Trust
Fidelity Advisor Series V Fidelity Magellan Fund
Fidelity Advisor Series VI Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series VII Fidelity Money Market Trust
Fidelity Advisor Series VIII Fidelity Mt. Vernon Street Trust
Fidelity Beacon Street Trust Fidelity Municipal Trust
Fidelity Boston Street Trust Fidelity Municipal Trust II
Fidelity California Municipal Trust Fidelity New York Municipal Trust
Fidelity California Municipal Trust II Fidelity New York Municipal Trust II
Fidelity Capital Trust Fidelity Phillips Street Trust
Fidelity Charles Street Trust Fidelity Puritan Trust
Fidelity Commonwealth Trust Fidelity Revere Street Trust
Fidelity Concord Street Trust Fidelity School Street Trust
Fidelity Congress Street Fund Fidelity Securities Fund
Fidelity Contrafund Fidelity Select Portfolios
Fidelity Corporate Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Court Street Trust Fidelity Summer Street Trust
Fidelity Court Street Trust II Fidelity Trend Fund
Fidelity Covington Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Daily Money Fund Fidelity U.S. Investments-Government Securities
Fidelity Destiny Portfolios Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity Union Street Trust II
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Newbury Street Trust
Fidelity Financial Trust Variable Insurance Products Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund II
Fidelity Government Securities Fund Variable Insurance Products Fund III
Fidelity Hastings Street Trust
</TABLE>
in addition to any other investment company for which Fidelity Management &
Research Company or an affiliate acts as investment adviser and for which
the undersigned individual serves as President and Director, Trustee, or
General Partner (collectively, the "Funds"), hereby constitute and appoint
Robert C. Pozen my true and lawful attorney-in-fact, with full power of
substitution, and with full power to him to sign for me and in my name in
the appropriate capacity, all Registration Statements of the Funds on Form
N-1A, Form N-8A, or any successor thereto, any and all subsequent
Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said
Registration Statements on Form N-1A, Form N-8A, or any successor thereto,
any Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and on my behalf in connection therewith as said attorney-in-fact
deems necessary or appropriate, to comply with the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940, and all
related requirements of the Securities and Exchange Commission. I hereby
ratify and confirm all that said attorney-in-fact or his substitutes may do
or cause to be done by virtue hereof. This power of attorney is effective
for all documents filed on or after August 1, 1997.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d_ July 17, 1997
Edward C. Johnson 3d
POWER OF ATTORNEY
We, the undersigned Directors, Trustees, or General Partners, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Government Securities Fund
Fidelity Advisor Annuity Fund Fidelity Hastings Street Trust
Fidelity Advisor Series I Fidelity Hereford Street Trust
Fidelity Advisor Series II Fidelity Income Fund
Fidelity Advisor Series III Fidelity Institutional Cash Portfolios
Fidelity Advisor Series IV Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series V Fidelity Institutional Trust
Fidelity Advisor Series VI Fidelity Investment Trust
Fidelity Advisor Series VII Fidelity Magellan Fund
Fidelity Advisor Series VIII Fidelity Massachusetts Municipal Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust
Fidelity Boston Street Trust Fidelity Mt. Vernon Street Trust
Fidelity California Municipal Trust Fidelity Municipal Trust
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Capital Trust Fidelity New York Municipal Trust
Fidelity Charles Street Trust Fidelity New York Municipal Trust II
Fidelity Commonwealth Trust Fidelity Phillips Street Trust
Fidelity Congress Street Fund Fidelity Puritan Trust
Fidelity Contrafund Fidelity Revere Street Trust
Fidelity Corporate Trust Fidelity School Street Trust
Fidelity Court Street Trust Fidelity Securities Fund
Fidelity Court Street Trust II Fidelity Select Portfolios
Fidelity Covington Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Daily Money Fund Fidelity Summer Street Trust
Fidelity Daily Tax-Exempt Fund Fidelity Trend Fund
Fidelity Destiny Portfolios Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity U.S. Investments-Government Securities
Portfolio, L.P. Fund, L.P.
Fidelity Devonshire Trust Fidelity Union Street Trust
Fidelity Exchange Fund Fidelity Union Street Trust II
Fidelity Financial Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Variable Insurance Products Fund II
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company or an affiliate acts as investment adviser and for which the
undersigned individual serves as Directors, Trustees, or General Partners
(collectively, the "Funds"), hereby constitute and appoint Arthur J. Brown,
Arthur C. Delibert, Stephanie A. Djinis, Robert C. Hacker, Thomas M.
Leahey, Richard M. Phillips, and Dana L. Platt, each of them singly, our
true and lawful attorneys-in-fact, with full power of substitution, and
with full power to each of them, to sign for us and in our names in the
appropriate capacities, all Registration Statements of the Funds on Form
N-1A, Form N-8A or any successor thereto, any and all subsequent
Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said
Registration Statements on Form N-1A or any successor thereto, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
our names and behalf in connection therewith as said attorneys-in-fact
deems necessary or appropriate, to comply with the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940, and all
related requirements of the Securities and Exchange Commission. I hereby
ratify and confirm all that said attorneys-in-fact or their substitutes may
do or cause to be done by virtue hereof. This power of attorney is
effective for all documents filed on or after January 1, 1997.
WITNESS our hands on this nineteenth day of December, 1996.
/s/Edward C. Johnson 3d___________ /s/Peter S. Lynch________________
Edward C. Johnson 3d Peter S. Lynch
/s/J. Gary Burkhead_______________ /s/William O. McCoy______________
J. Gary Burkhead William O. McCoy
/s/Ralph F. Cox __________________ /s/Gerald C. McDonough___________
Ralph F. Cox Gerald C. McDonough
/s/Phyllis Burke Davis_____________ /s/Marvin L. Mann________________
Phyllis Burke Davis Marvin L. Mann
/s/E. Bradley Jones________________ /s/Thomas R. Williams ____________
E. Bradley Jones Thomas R. Williams
/s/Donald J. Kirk __________________
Donald J. Kirk
POWER OF ATTORNEY
I, the undersigned Director, Trustee, or General Partner, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Government Securities Fund
Fidelity Advisor Annuity Fund Fidelity Hastings Street Trust
Fidelity Advisor Series I Fidelity Hereford Street Trust
Fidelity Advisor Series II Fidelity Income Fund
Fidelity Advisor Series III Fidelity Institutional Cash Portfolios
Fidelity Advisor Series IV Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series V Fidelity Institutional Trust
Fidelity Advisor Series VI Fidelity Investment Trust
Fidelity Advisor Series VII Fidelity Magellan Fund
Fidelity Advisor Series VIII Fidelity Massachusetts Municipal Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust
Fidelity Boston Street Trust Fidelity Mt. Vernon Street Trust
Fidelity California Municipal Trust Fidelity Municipal Trust
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Capital Trust Fidelity New York Municipal Trust
Fidelity Charles Street Trust Fidelity New York Municipal Trust II
Fidelity Commonwealth Trust Fidelity Phillips Street Trust
Fidelity Congress Street Fund Fidelity Puritan Trust
Fidelity Contrafund Fidelity Revere Street Trust
Fidelity Corporate Trust Fidelity School Street Trust
Fidelity Court Street Trust Fidelity Securities Fund
Fidelity Court Street Trust II Fidelity Select Portfolios
Fidelity Covington Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Daily Money Fund Fidelity Summer Street Trust
Fidelity Daily Tax-Exempt Fund Fidelity Trend Fund
Fidelity Destiny Portfolios Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity U.S. Investments-Government Securities
Portfolio, L.P. Fund, L.P.
Fidelity Devonshire Trust Fidelity Union Street Trust
Fidelity Exchange Fund Fidelity Union Street Trust II
Fidelity Financial Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Variable Insurance Products Fund II
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company or an affiliate acts as investment adviser and for which the
undersigned individual serves as Director, Trustee, or General Partner
(collectively, the "Funds"), hereby constitute and appoint Arthur J. Brown,
Arthur C. Delibert, Stephanie A. Djinis, Robert C. Hacker, Thomas M.
Leahey, Richard M. Phillips, and Dana L. Platt, each of them singly, my
true and lawful attorneys-in-fact, with full power of substitution, and
with full power to each of them, to sign for me and in my name in the
appropriate capacities, all Registration Statements of the Funds on Form
N-1A, Form N-8A or any successor thereto, any and all subsequent
Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said
Registration Statements on Form N-1A or any successor thereto, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and the Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission. I hereby ratify
and confirm all that said attorneys-in-fact or their substitutes may do or
cause to be done by virtue hereof. This power of attorney is effective for
all documents filed on or after March 1, 1997.
WITNESS my hand on the date set forth below.
/s/Robert M. Gates March 6, 1997
Robert M. Gates
Exhibit 6(i)
FORM OF
BANK AGENCY AGREEMENT
We at Fidelity Distributors Corporation offer to make available to your
customers shares of the mutual funds, or the separate series or classes of
the mutual funds, listed on Schedules A and B attached to this Agreement
(the "Portfolios"). We may periodically change the list of Portfolios by
giving you written notice of the change. We are the Portfolios' principal
underwriter and act as agent for the Portfolios. You
(____________________________________) are a division or affiliate of a
bank (____________________________________) and desire to make Portfolio
shares available to your customers on the following terms:
1. Certain Defined Terms: As used in this Agreement, the term
"Prospectus" means the applicable Portfolio's prospectus and related
statement of additional information, whether in paper format or electronic
format, included in the Portfolio's then currently effective registration
statement (or post-effective amendment thereto), and any information that
we or the Portfolio may issue to you as a supplement to such prospectus or
statement of additional information (a "sticker"), all as filed with the
Securities and Exchange Commission (the "SEC") pursuant to the Securities
Act of 1933.
2. Making Portfolio Shares Available to Your Customers: (a) In all
transactions covered by this Agreement: (i) you will act as agent for your
customers; in no transaction are you authorized to act as agent for us or
for any Portfolio; (ii) you will initiate transactions only upon your
customers' orders; (iii) we will execute transactions only upon receiving
instructions from you acting as agent for your customers; and (iv) each
transaction will be for your customer's account and not for your own
account. Each transaction will be without recourse to you, provided that
you act in accordance with the terms of this Agreement.
(b) You agree to make Portfolio shares available to your customers only
at the applicable public offering price in accordance with the Prospectus.
If your customer qualifies for a reduced sales charge pursuant to a special
purchase plan (for example, a quantity discount, letter of intent, or right
of accumulation) as described in the Prospectus, you agree to make
Portfolio shares available to your customer at the applicable reduced sales
charge. You agree to deliver or cause to be delivered to each customer, at
or prior to the time of any purchase of shares, a copy of the then current
prospectus (including any stickers thereto), unless such prospectus has
already been delivered to the customer, and to each customer who so
requests, a copy of the then current statement of additional information
(including any stickers thereto).
(c) You agree to order Portfolio shares from us only to cover purchase
orders that you have already received from your customers, or for your own
investment. You will not withhold placing customers' orders so as to
profit yourself as a result of such withholding (for example, by a change
in a Portfolio's net asset value from that used in determining the offering
price to your customers).
(d) We will accept your purchase orders only at the public offering
price applicable to each order, as determined in accordance with the
Prospectus. We will not accept from you a conditional order for Portfolio
shares. All orders are subject to acceptance or rejection by us in our
sole discretion. We may, without notice, suspend sales or withdraw the
offering of Portfolio shares, or make a limited offering of Portfolio
shares.
(e) The placing of orders with us will be governed by instructions that
we will periodically issue to you. You must pay for Portfolio shares in
New York or Boston clearing house funds or in federal funds in accordance
with such instructions, and we must receive your payment on or before the
settlement date established in accordance with Rule 15c6-1 under the
Securities Exchange Act of 1934 (the "1934 Act").
(f) You agree to comply with all applicable state and federal laws and
with the rules and regulations of authorized regulatory agencies
thereunder. You agree to make Portfolio shares available to your customers
only in states where you may legally make such Portfolio's shares
available. You will not make available shares of any Portfolio unless such
shares are registered under the applicable state and federal laws and the
rules and regulations thereunder.
(g) Certificates evidencing Portfolio shares are not available; any
transaction in Portfolio shares will be effected and evidenced by
book-entry on the records maintained by Fidelity Investments Institutional
Operations Company ("FIIOC"). A confirmation statement evidencing
transactions in Portfolio shares will be transmitted to you.
(h) You may designate FIIOC to execute your customers' transactions in
Portfolio shares in accordance with the terms of any account, program,
plan, or service established or used by your customers, and to confirm each
transaction to your customers on your behalf on a fully disclosed basis.
At the time of the transaction, you guarantee the legal capacity of your
customers and any co-owners of such shares so transacting in such shares.
3. Your Compensation: (a) Your fee, if any, for acting as agent with
respect to sales of Portfolio shares will be as provided in the Prospectus
or in the applicable schedule of agency fees issued by us and in effect at
the time of the sale. Upon written notice to you, we or any Portfolio may
change or discontinue any schedule of agency fees, or issue a new schedule.
(b) If a Portfolio has adopted a plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (a "Plan"), we may make distribution
payments or service payments to you under the Plan. If a Portfolio does
not have a currently effective Plan, we or Fidelity Management & Research
Company may make distribution payments or service payments to you from our
own funds. Any distribution payments or service payments will be made in
the amount and manner set forth in the Prospectus or in the applicable
schedule of distribution payments or service payments issued by us and then
in effect. Upon written notice to you, we or any Portfolio may change or
discontinue any schedule of distribution payments or service payments, or
issue a new schedule. A schedule of distribution payments or service
payments will be in effect with respect to a Portfolio that has a Plan only
so long as that Portfolio's Plan remains in effect.
(c) After the effective date of any change in or discontinuance of any
schedule of agency fees, distribution payments, or service payments, or the
termination of a Plan, any agency fees, distribution payments, or service
payments will be allowable or payable to you only in accordance with such
change, discontinuance, or termination. You agree that you will have no
claim against us or any Portfolio by virtue of any such change,
discontinuance, or termination. In the event of any overpayment by us of
any agency fee, distribution payment, or service payment, you will remit
such overpayment.
(d) If, within seven (7) business days after our confirmation of the
original purchase order for shares of a Portfolio, such shares are redeemed
by the issuing Portfolio or tendered for redemption by the customer, you
agree (i) to refund promptly to us the full amount of any agency fee,
distribution payment, or service payment paid to you on such shares, and
(ii) if not yet paid to you, to forfeit the right to receive any agency
fee, distribution payment, or service payment payable to you on such
shares. We will notify you of any such redemption within ten (10) days
after the date of the redemption.
4. Certain Types of Accounts: (a) You may instruct FIIOC to register
purchased shares in your name and account as nominee for your customers.
If you hold Portfolio shares as nominee for your customers, all
Prospectuses, proxy statements, periodic reports, and other printed
material will be sent to you, and all confirmations and other
communications to shareholders will be transmitted to you. You will be
responsible for forwarding such printed material, confirmations, and
communications, or the information contained therein, to all customers for
whose account you hold any Portfolio shares as nominee. However, we or
FIIOC on behalf of itself or the Portfolios will be responsible for the
costs associated with your forwarding such printed material, confirmations,
and communications. You will be responsible for complying with all
reporting and tax withholding requirements with respect to the customers
for whose account you hold any Portfolio shares as nominee.
(b) With respect to accounts other than those accounts referred to in
paragraph 4(a) above, you agree to provide us with all information
(including certification of taxpayer identification numbers and back-up
withholding instructions) necessary or appropriate for us to comply with
legal and regulatory reporting requirements.
(c) Accounts opened or maintained pursuant to the NETWORKING system of
the National Securities Clearing Corporation ("NSCC") will be governed by
applicable NSCC rules and procedures and any agreement or other arrangement
with us relating to NETWORKING.
(d) If you hold Portfolio shares in an omnibus account for two or more
customers, you will be responsible for determining, in accordance with the
Prospectus, whether, and the extent to which, a CDSC is applicable to a
purchase of Portfolio shares from such a customer, and you agree to
transmit immediately to us any CDSC to which such purchase was subject.
You hereby represent that if you hold Portfolio shares subject to a CDSC,
you have the capability to track and account for such charge, and we
reserve the right, at our discretion, to verify that capability by
inspecting your tracking and accounting system or otherwise.
5. Status as Registered Broker/Dealer or "Bank": (a) Each party to this
Agreement represents to the other party that it is either (i) a registered
broker/dealer under the 1934 Act, or (ii) a "bank" as defined in Section
3(a)(6) of the 1934 Act.
(b) If a party is a registered broker/dealer, such party represents that
it is qualified to act as a broker/dealer in the states where it transacts
business, and it is a member in good standing of the National Association
of Securities Dealers, Inc. ("NASD"). It agrees to maintain its
broker/dealer registration and qualifications and its NASD membership in
good standing throughout the term of this Agreement. It agrees to abide by
all of the NASD's rules and regulations, including the NASD's Conduct Rules
- -- in particular, Section 2830 of such Rules, which section is deemed a
part of and is incorporated by reference in this Agreement. This Agreement
will terminate automatically without notice in the event that a party's
NASD membership is terminated.
(c) If you are a "bank", you represent that you are duly authorized to
engage in the transactions to be performed under this Agreement, and you
agree to comply with all applicable federal and state laws, including the
rules and regulations of all applicable federal and state bank regulatory
agencies and authorities. This Agreement will terminate automatically
without notice in the event that you cease to be a "bank" as defined in
Section 3(a)(6) of the 1934 Act.
(d) Nothing in this Agreement shall cause you to be our partner,
employee, or agent, or give you any authority to act for us or for any
Portfolio. Neither we nor any Portfolio shall be liable for any of your
acts or obligations as a dealer under this Agreement.
6. Information Relating to the Portfolios: (a) No person is authorized
to make any representations concerning shares of a Portfolio other than
those contained in the Portfolio's Prospectus. In ordering Portfolio
shares from us under this Agreement, you will rely only on the
representations contained in the Prospectus. Upon your request, we will
furnish you with a reasonable number of copies of the Portfolios' current
prospectuses or statements of additional information or both (including any
stickers thereto).
(b) Any printed or electronic information that we furnish you (other
than the Portfolios' Prospectuses and periodic reports) is our sole
responsibility and not the responsibility of the respective Portfolios.
You agree that the Portfolios will have no liability or responsibility to
you with respect to any such printed or electronic information. We or the
respective Portfolio will bear the expense of qualifying its shares under
the state securities laws.
(c) You may not use any sales literature or advertising material
(including material disseminated through radio, television, or other
electronic media) concerning Portfolio shares, other than the printed or
electronic information referred to in paragraph 6(b) above, in connection
with making Portfolio shares available to your customers without obtaining
our prior written approval. You may not distribute or make available to
investors any information that we furnish you marked "FOR DEALER USE ONLY"
or that otherwise indicates that it is confidential or not intended to be
distributed to investors.
7. Indemnification: (a) We will indemnify and hold you harmless from any
claim, demand, loss, expense, or cause of action resulting from the
misconduct or negligence, as measured by industry standards, of us, our
agents and employees, in carrying out our obligations under this Agreement.
Such indemnification will survive the termination of this Agreement.
(b) You will indemnify and hold us harmless from any claim, demand,
loss, expense, or cause of action resulting from the misconduct or
negligence, as measured by industry standards, of you, your agents and
employees, in carrying out your obligations under this Agreement. Such
indemnification will survive the termination of this Agreement.
8. Customer Lists: We hereby agree that we shall not use any list of your
customers which may be obtained in connection with this Agreement for the
purpose of solicitation of any product or service without your express
written consent. However, nothing in this paragraph or otherwise shall be
deemed to prohibit or restrict us or our affiliates in any way from
solicitations of any product or service directed at, without limitation,
the general public, any segment thereof, or any specific individual,
provided such solicitation is not based upon such list.
9. Duration of Agreement: This Agreement, with respect to any Plan, will
continue in effect for one year from its effective date, and thereafter
will continue automatically for successive annual periods; provided,
however, that such continuance is subject to termination at any time
without penalty if a majority of a Portfolio's Trustees who are not
interested persons of the Portfolio (as defined in the Investment Company
Act of 1940 (the "1940 Act")), or a majority of the outstanding shares of
the Portfolio, vote to terminate or not to continue the Plan. This
Agreement, other than with respect to a Plan, will continue in effect from
year to year after its effective date, unless terminated as provided
herein.
10. Amendment and Termination of Agreement: (a) We may amend any
provision of this Agreement by giving you written notice of the amendment.
Either party to this Agreement may terminate the Agreement without cause by
giving the other party at least thirty (30) days' written notice of its
intention to terminate. This Agreement will terminate automatically in the
event of its assignment (as defined in the 1940 Act).
(b) In the event that (i) an application for a protective decree under
the provisions of the Securities Investor Protection Act of 1970 is file
against you; (ii) you file a petition in bankruptcy or a petition seeking
similar relief under any bankruptcy, insolvency, or similar law, or a
proceeding is commenced against you seeking such relief; or (iii) you are
found by the SEC, the NASD, or any other federal or state regulatory agency
or authority to have violated any applicable federal or state law, rule or
regulation arising out of your activities as a broker/dealer or in
connection with this Agreement, this Agreement will terminate effective
immediately upon our giving notice of termination to you. You agree to
notify us promptly and to immediately suspend making Portfolio shares
available to your customers in the event of any such filing or violation,
or in the event that you cease to be a member in good standing of the NASD
or you cease to be a "bank" as defined in Section 3(a)(6) of the 1934 Act.
(c) Your or our failure to terminate this Agreement for a particular
cause will not constitute a waiver of the right to terminate this Agreement
at a later date for the same or another cause. The termination of this
Agreement with respect to any one Portfolio will not cause its termination
with respect to any other Portfolio.
11. Arbitration: In the event of a dispute, such dispute will be settled
by arbitration before arbitrators sitting in Boston, Massachusetts in
accordance with the NASD's Code of Arbitration Procedure in effect at the
time of the dispute. The arbitrators will act by majority decision and
their award may allocate attorneys' fees and arbitration costs between us.
Their award will be final and binding between us, and such award may be
entered as a judgment in any court of competent jurisdiction.
12. Notices: All notices required or permitted to be given under this
Agreement shall be given in writing and delivered by personal delivery, by
postage prepaid mail, or by facsimile machine or a similar means of same
day delivery (with a confirming copy by mail). All notices to us shall be
given or sent to us at our offices located at 82 Devonshire Street, Mail
Zone L12A, Boston, Massachusetts 02109, Attn: Bank Wholesale Market. All
notices to you shall be given or sent to you at the address specified by
you below. Each of us may change the address to which notices shall be
sent by giving notice to the other party in accordance with this paragraph
12.
13. Miscellaneous: This Agreement, as it may be amended from time to time,
shall become effective as of the date when it is accepted and dated below
by us. This Agreement is to be construed in accordance with the laws of
the Commonwealth of Massachusetts. This Agreement supersedes and cancels
any prior agreement between us, whether oral or written, relating to the
sale of shares of the Portfolios or any other subject covered by this
Agreement. The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions of this
Agreement or otherwise affect their construction or effect.
Very truly yours,
FIDELITY DISTRIBUTORS
CORPORATION
Please return two signed copies of this Agreement to Fidelity Distributors
Corporation. Upon acceptance, one countersigned copy will be returned to
you for your files.
_____________________________________
Name of Firm
Address: _____________________________
_____________________________________
_____________________________________
By __________________________________
Authorized Representative
_____________________________________
Name and Title (please print or type)
ACCEPTED AND AGREED:
FIDELITY DISTRIBUTORS CORPORATION
By __________________________________
Dated: ________________
[ATTACH REVISED SCHEDULES A AND B ]
Exhibit 6(j)
FORM OF
SELLING DEALER AGREEMENT
We at Fidelity Distributors Corporation invite you
(______________________________) to distribute shares of the mutual funds,
or the separate series or classes of the mutual funds, listed on Schedule A
attached to this Agreement (the "Portfolios"). We may periodically change
the list of Portfolios by giving you written notice of the change. We are
the Portfolios' principal underwriter and, as agent for the Portfolios, we
offer to sell Portfolio shares to you on the following terms:
1. Certain Defined Terms: As used in this Agreement, the term
"Prospectus" means the applicable Portfolio's prospectus and related
statement of additional information, whether in paper format or electronic
format, included in the Portfolio's then currently effective registration
statement (or post-effective amendment thereto), and any information that
we or the Portfolio may issue to you as a supplement to such prospectus or
statement of additional information (a "sticker"), all as filed with the
Securities and Exchange Commission (the "SEC") pursuant to the Securities
Act of 1933.
2. Purchases of Portfolio Shares for Sale to Customers: (a) In offering
and selling Portfolio shares to your customers, you agree to act as dealer
for your own account; you are not authorized to act as agent for us or for
any Portfolio.
(b) You agree to offer and sell Portfolio shares to your customers only
at the applicable public offering price in accordance with the Prospectus.
If your customer qualifies for a reduced sales charge pursuant to a special
purchase plan (for example, a quantity discount, letter of intent, or right
of accumulation) as described in the Prospectus, you agree to offer and
sell Portfolio shares to your customer at the applicable reduced sales
charge. You agree to deliver or cause to be delivered to each customer, at
or prior to the time of any purchase of shares, a copy of the then current
prospectus (including any stickers thereto), unless such prospectus has
already been delivered to the customer, and to each customer who so
requests, a copy of the then current statement of additional information
(including any stickers thereto).
(c) You agree to purchase Portfolio shares from us only to cover
purchase orders that you have already received from your customers, or for
your own investment. You also agree not to purchase any Portfolio shares
from your customers at a price lower than the applicable redemption price,
determined in the manner described in the Prospectus. You will not
withhold placing customers' orders so as to profit yourself as a result of
such withholding (for example, by a change in a Portfolio's net asset value
from that used in determining the offering price to your customers).
(d) We will accept your purchase orders only at the public offering
price applicable to each order, as determined in accordance with the
Prospectus. We will not accept from you a conditional order for Portfolio
shares. All orders are subject to acceptance or rejection by us in our
sole discretion. We may, without notice, suspend sales or withdraw the
offering of Portfolio shares, or make a limited offering of Portfolio
shares.
(e) The placing of orders with us will be governed by instructions that
we will periodically issue to you. You must pay for Portfolio shares in
New York or Boston clearing house funds or in federal funds in accordance
with such instructions, and we must receive your payment on or before the
settlement date established in accordance with Rule 15c6-1 under the
Securities Exchange Act of 1934 (the "1934 Act"). If we do not receive
your payment on or before such settlement date, we may, without notice,
cancel the sale, or, at our option, sell the shares that you ordered back
to the issuing Portfolio, and we may hold you responsible for any loss
suffered by us or the issuing Portfolio as a result of your failure to make
payment as required.
(f) You agree to comply with all applicable state and federal laws and
with the rules and regulations of authorized regulatory agencies
thereunder. You agree to offer and sell Portfolio shares only in states
where you may legally offer and sell such Portfolio's shares. You will not
offer shares of any Portfolio for sale unless such shares are registered
for sale under the applicable state and federal laws and the rules and
regulations thereunder.
(g) Certificates evidencing Portfolio shares are not available; any
transaction in Portfolio shares will be effected and evidenced by
book-entry on the records maintained by Fidelity Investments Institutional
Operations Company ("FIIOC"). A confirmation statement evidencing
transactions in Portfolio shares will be transmitted to you.
(h) You may designate FIIOC to execute your customers' transactions in
Portfolio shares in accordance with the terms of any account, program,
plan, or service established or used by your customers, and to confirm each
transaction to your customers on your behalf. At the time of the
transaction, you guarantee the legal capacity of your customers and any
co-owners of such shares so transacting in such shares.
3. Your Compensation: (a) Your concession, if any, on your sales of
Portfolio shares will be as provided in the Prospectus or in the applicable
schedule of concessions issued by us and in effect at the time of our sale
to you. Upon written notice to you, we or any Portfolio may change or
discontinue any schedule of concessions, or issue a new schedule.
(b) If a Portfolio has adopted a plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (a "Plan"), we may make distribution
payments or service payments to you under the Plan. If a Portfolio does
not have a currently effective Plan, we or Fidelity Management & Research
Company may make distribution payments or service payments to you from our
own funds. Any distribution payments or service payments will be made in
the amount and manner set forth in the Prospectus or in the applicable
schedule of distribution payments or service payments issued by us and then
in effect. Upon written notice to you, we or any Portfolio may change or
discontinue any schedule of distribution payments or service payments, or
issue a new schedule. A schedule of distribution payments or service
payments will be in effect with respect to a Portfolio that has a Plan only
so long as that Portfolio's Plan remains in effect.
(c) After the effective date of any change in or discontinuance of any
schedule of concessions, distribution payments, or service payments, or the
termination of a Plan, any concessions, distribution payments, or service
payments will be allowable or payable to you only in accordance with such
change, discontinuance, or termination. You agree that you will have no
claim against us or any Portfolio by virtue of any such change,
discontinuance, or termination. In the event of any overpayment by us of
any concession, distribution payment, or service payment, you will remit
such overpayment.
(d) If any Portfolio shares sold to you by us under the terms of this
Agreement are redeemed by the issuing Portfolio or tendered for redemption
by the customer within seven (7) business days after the date of our
confirmation of your original purchase order for such shares, you agree (i)
to refund promptly to us the full amount of any concession, distribution
payment, or service payment allowed or paid to you on such shares, and (ii)
if not yet allowed or paid to you, to forfeit the right to receive any
concession, distribution payment, or service payment allowable or payable
to you on such shares. We will notify you of any such redemption within
ten (10) days after the date of the redemption.
4. Certain Types of Accounts: (a) You may instruct FIIOC to register
purchased shares in your name and account as nominee for your customers.
If you hold Portfolio shares as nominee for your customers, all
Prospectuses, proxy statements, periodic reports, and other printed
material will be sent to you, and all confirmations and other
communications to shareholders will be transmitted to you. You will be
responsible for forwarding such printed material, confirmations, and
communications, or the information contained therein, to all customers for
whose account you hold any Portfolio shares as nominee. However, we or
FIIOC on behalf of itself or the Portfolios will be responsible for the
costs associated with your forwarding such printed material, confirmations,
and communications. You will be responsible for complying with all
reporting and tax withholding requirements with respect to the customers
for whose account you hold any Portfolio shares as nominee.
(b) With respect to accounts other than those accounts referred to in
paragraph 4(a) above, you agree to provide us with all information
(including certification of taxpayer identification numbers and back-up
withholding instructions) necessary or appropriate for us to comply with
legal and regulatory reporting requirements.
(c) Accounts opened or maintained pursuant to the NETWORKING system of
the National Securities Clearing Corporation ("NSCC") will be governed by
applicable NSCC rules and procedures and any agreement or other arrangement
with us relating to NETWORKING.
(d) If you hold Portfolio shares in an omnibus account for two or more
customers, you will be responsible for determining, in accordance with the
Prospectus, whether, and the extent to which, a CDSC is applicable to a
purchase of Portfolio shares from such a customer, and you agree to
transmit immediately to us any CDSC to which such purchase was subject.
You hereby represent that if you hold Portfolio shares subject to a CDSC,
you have the capability to track and account for such charge, and we
reserve the right, at our discretion, to verify that capability by
inspecting your tracking and accounting system or otherwise.
5. Status as Registered Broker/Dealer: (a) Each party to this Agreement
represents to the other party that (i) it is registered as a broker/dealer
under the 1934 Act, (ii) it is qualified to act as a broker/dealer in the
states where it transacts business, and (iii) it is a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD").
Each party agrees to maintain its broker/dealer registration and
qualifications and its NASD membership in good standing throughout the term
of this Agreement. Each party agrees to abide by all of the NASD's rules
and regulations, including the NASD's Conduct Rules -- in particular,
Section 2830 of such Rules, which section is deemed a part of and is
incorporated by reference in this Agreement. This Agreement will terminate
automatically without notice in the event that either party's NASD
membership is terminated.
(b) Nothing in this Agreement shall cause you to be our partner,
employee, or agent, or give you any authority to act for us or for any
Portfolio. Neither we nor any Portfolio shall be liable for any of your
acts or obligations as a dealer under this Agreement.
6. Information Relating to the Portfolios: (a) No person is authorized
to make any representations concerning shares of a Portfolio other than
those contained in the Portfolio's Prospectus. In buying Portfolio shares
from us under this Agreement, you will rely only on the representations
contained in the Prospectus. Upon your request, we will furnish you with a
reasonable number of copies of the Portfolios' current prospectuses or
statements of additional information or both (including any stickers
thereto).
(b) Any printed or electronic information that we furnish you (other
than the Portfolios' Prospectuses and periodic reports) is our sole
responsibility and not the responsibility of the respective Portfolios.
You agree that the Portfolios will have no liability or responsibility to
you with respect to any such printed or electronic information. We or the
respective Portfolio will bear the expense of qualifying its shares under
the state securities laws.
(c) You may not use any sales literature or advertising material
(including material disseminated through radio, television, or other
electronic media) concerning Portfolio shares, other than the printed or
electronic information referred to in paragraph 6(b) above, in connection
with the offer or sale of Portfolio shares without obtaining our prior
written approval. You may not distribute or make available to investors
any information that we furnish you marked "FOR DEALER USE ONLY" or that
otherwise indicates that it is confidential or not intended to be
distributed to investors.
7. Indemnification: (a) We will indemnify and hold you harmless from any
claim, demand, loss, expense, or cause of action resulting from the
misconduct or negligence, as measured by industry standards, of us, our
agents and employees, in carrying out our obligations under this Agreement.
Such indemnification will survive the termination of this Agreement.
(b) You will indemnify and hold us harmless from any claim, demand,
loss, expense, or cause of action resulting from the misconduct or
negligence, as measured by industry standards, of you, your agents and
employees, in carrying out your obligations under this Agreement. Such
indemnification will survive the termination of this Agreement.
8. Customer Lists: We hereby agree that we shall not use any list of your
customers which may be obtained in connection with this Agreement for the
purpose of solicitation of any product or service without your express
written consent. However, nothing in this paragraph or otherwise shall be
deemed to prohibit or restrict us or our affiliates in any way from
solicitations of any product or service directed at, without limitation,
the general public, any segment thereof, or any specific individual,
provided such solicitation is not based upon such list.
9. Duration of Agreement: This Agreement, with respect to any Plan, will
continue in effect for one year from its effective date, and thereafter
will continue automatically for successive annual periods; provided,
however, that such continuance is subject to termination at any time
without penalty if a majority of a Portfolio's Trustees who are not
interested persons of the Portfolio (as defined in the Investment Company
Act of 1940 (the "1940 Act")), or a majority of the outstanding shares of
the Portfolio, vote to terminate or not to continue the Plan. This
Agreement, other than with respect to a Plan, will continue in effect from
year to year after its effective date, unless terminated as provided
herein.
10. Amendment and Termination of Agreement: (a) We may amend any
provision of this Agreement by giving you written notice of the amendment.
Either party to this Agreement may terminate the Agreement without cause by
giving the other party at least thirty (30) days' written notice of its
intention to terminate. This Agreement will terminate automatically in the
event of its assignment (as defined in the 1940 Act).
(b) In the event that (i) an application for a protective decree under
the provisions of the Securities Investor Protection Act of 1970 is filed
against you; (ii) you file a petition in bankruptcy or a petition seeking
similar relief under any bankruptcy, insolvency, or similar law, or a
proceeding is commenced against you seeking such relief; or (iii) you are
found by the SEC, the NASD, or any other federal or state regulatory agency
or authority to have violated any applicable federal or state law, rule or
regulation arising out of your activities as a broker/dealer or in
connection with this Agreement, this Agreement will terminate effective
immediately upon our giving notice of termination to you. You agree to
notify us promptly and to immediately suspend sales of Portfolio shares in
the event of any such filing or violation, or in the event that you cease
to be a member in good standing of the NASD.
(c) Your or our failure to terminate this Agreement for a particular
cause will not constitute a waiver of the right to terminate this Agreement
at a later date for the same or another cause. The termination of this
Agreement with respect to any one Portfolio will not cause its termination
with respect to any other Portfolio.
11. Arbitration: In the event of a dispute, such dispute will be settled
by arbitration before arbitrators sitting in Boston, Massachusetts in
accordance with the NASD's Code of Arbitration Procedure in effect at the
time of the dispute. The arbitrators will act by majority decision and
their award may allocate attorneys' fees and arbitration costs between us.
Their award will be final and binding between us, and such award may be
entered as a judgment in any court of competent jurisdiction.
12. Notices: All notices required or permitted to be given under this
Agreement shall be given in writing and delivered by personal delivery, by
postage prepaid mail, or by facsimile machine or a similar means of same
day delivery (with a confirming copy by mail). All notices to us shall be
given or sent to us at our offices located at 82 Devonshire Street, Mail
Zone L10A, Boston, Massachusetts 02109, Attn: Broker Dealer Services Group.
All notices to you shall be given or sent to you at the address specified
by you below. Each of us may change the address to which notices shall be
sent by giving notice to the other party in accordance with this paragraph
12.
13. Miscellaneous: This Agreement, as it may be amended from time to time,
shall become effective as of the date when it is accepted and dated below
by us. This Agreement is to be construed in accordance with the laws of
the Commonwealth of Massachusetts. This Agreement supersedes and cancels
any prior agreement between us, whether oral or written, relating to the
sale of shares of the Portfolios or any other subject covered by this
Agreement. The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions of this
Agreement or otherwise affect their construction or effect.
Very truly yours,
FIDELITY DISTRIBUTORS
CORPORATION
Please return two signed copies of this Agreement to Fidelity Distributors
Corporation. Upon acceptance, one countersigned copy will be returned to
you for your files.
_____________________________________
Name of Firm
Address: _____________________________
_____________________________________
_____________________________________
By __________________________________
Authorized Representative
_____________________________________
Name and Title (please print or type)
CRD # _______________________________
ACCEPTED AND AGREED:
FIDELITY DISTRIBUTORS CORPORATION
By __________________________________
Dated: _________________
[ATTACH REVISED SCHEDULE A]
Exhibit 6(k)
FORM OF
SELLING DEALER AGREEMENT
(FOR BANK-RELATED TRANSACTIONS)
We at Fidelity Distributors Corporation invite you to distribute shares of
the mutual funds, or the separate series or classes of the mutual funds,
listed on Schedules A and B attached to this Agreement (the "Portfolios").
We may periodically change the list of Portfolios by giving you written
notice of the change. We are the Portfolios' principal underwriter and, as
agent for the Portfolios, we offer to sell Portfolio shares to you on the
following terms:
1. Certain Defined Terms: (a) You
(_____________________________________) are registered as a broker/dealer
under the Securities Exchange Act of 1934 (the "1934 Act") and have
executed a written agreement with a bank or bank affiliate to provide
brokerage services to that bank, bank affiliate and/or their customers. As
used in this Agreement, the term "Bank" means a bank as defined in Section
3(a)(6) of the 1934 Act, or an affiliate of such a bank, with which you
have entered into a written agreement to provide brokerage services; and
the term "Bank Client" means a customer of such a Bank.
(b) As used in this Agreement, the term "Prospectus" means the
applicable Portfolio's prospectus and related statement of additional
information, whether in paper format or electronic format, included in the
Portfolio's then currently effective registration statement (or
post-effective amendment thereto), and any information that we or the
Portfolio may issue to you as a supplement to such prospectus or statement
of additional information (a "sticker"), all as filed with the Securities
and Exchange Commission (the "SEC") pursuant to the Securities Act of 1933.
2. Purchases of Portfolio Shares for Sale to Customers: (a) In offering
and selling Portfolio shares to your customers, you agree to act as dealer
for your own account; you are not authorized to act as agent for us or for
any Portfolio.
(b) You agree to offer and sell Portfolio shares to your customers only
at the applicable public offering price in accordance with the Prospectus.
If your customer qualifies for a reduced sales charge pursuant to a special
purchase plan (for example, a quantity discount, letter of intent, or right
of accumulation) as described in the Prospectus, you agree to offer and
sell Portfolio shares to your customer at the applicable reduced sales
charge. You agree to deliver or cause to be delivered to each customer, at
or prior to the time of any purchase of shares, a copy of the then current
prospectus (including any stickers thereto), unless such prospectus has
already been delivered to the customer, and to each customer who so
requests, a copy of the then current statement of additional information
(including any stickers thereto).
(c) You agree to purchase Portfolio shares from us only to cover
purchase orders that you have already received from your customers, or for
your own investment. You also agree not to purchase any Portfolio shares
from your customers at a price lower than the applicable redemption price,
determined in the manner described in the Prospectus. You will not withhold
placing customers' orders so as to profit yourself as a result of such
withholding (for example, by a change in a Portfolio's net asset value from
that used in determining the offering price to your customers).
(d) We will accept your purchase orders only at the public offering
price applicable to each order, as determined in accordance with the
Prospectus. We will not accept from you a conditional order for Portfolio
shares. All orders are subject to acceptance or rejection by us in our
sole discretion. We may, without notice, suspend sales or withdraw the
offering of Portfolio shares, or make a limited offering of Portfolio
shares.
(e) The placing of orders with us will be governed by instructions that
we will periodically issue to you. You must pay for Portfolio shares in
New York or Boston clearing house funds or in federal funds in accordance
with such instructions, and we must receive your payment on or before the
settlement date established in accordance with Rule 15c6-1 under the 1934
Act. If we do not receive your payment on or before such settlement date,
we may, without notice, cancel the sale, or, at our option, sell the shares
that you ordered back to the issuing Portfolio, and we may hold you
responsible for any loss suffered by us or the issuing Portfolio as a
result of your failure to make payment as required.
(f) You agree to comply with all applicable state and federal laws and
with the rules and regulations of authorized regulatory agencies
thereunder. You agree to offer and sell Portfolio shares only in states
where you may legally offer and sell such Portfolio's shares. You will not
offer shares of any Portfolio for sale unless such shares are registered
for sale under the applicable state and federal laws and the rules and
regulations thereunder.
(g) Certificates evidencing Portfolio shares are not available; any
transaction in Portfolio shares will be effected and evidenced by
book-entry on the records maintained by Fidelity Investments Institutional
Operations Company ("FIIOC"). A confirmation statement evidencing
transactions in Portfolio shares will be transmitted to you.
(h) You may designate FIIOC to execute your customers' transactions in
Portfolio shares in accordance with the terms of any account, program,
plan, or service established or used by your customers, and to confirm each
transaction to your customers on your behalf on a fully disclosed basis.
At the time of the transaction, you guarantee the legal capacity of your
customers and any co-owners of such shares so transacting in such shares.
3. Your Compensation: (a) Your concession, if any, on your sales of
Portfolio shares will be as provided in the Prospectus or in the applicable
schedule of concessions issued by us and in effect at the time of our sale
to you. Upon written notice to you, we or any Portfolio may change or
discontinue any schedule of concessions, or issue a new schedule.
(b) If a Portfolio has adopted a plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (a "Plan"), we may make distribution
payments or service payments to you under the Plan. If a Portfolio does
not have a currently effective Plan, we or Fidelity Management & Research
Company may make distribution payments or service payments to you from our
own funds. Any distribution payments or service payments will be made in
the amount and manner set forth in the Prospectus or in the applicable
schedule of distribution payments or service payments issued by us and then
in effect. Upon written notice to you, we or any Portfolio may change or
discontinue any schedule of distribution payments or service payments, or
issue a new schedule. A schedule of distribution payments or service
payments will be in effect with respect to a Portfolio that has a Plan only
so long as that Portfolio's Plan remains in effect.
(c) Concessions, distribution payments, and service payments apply only
with respect to (i) shares of the "Fidelity Funds" (as designated on
Schedule A attached to this Agreement) purchased or maintained for the
account of Bank Clients, and (ii) shares of the "Fidelity Advisor Funds"
(as designated on Schedule B attached to this Agreement). Anything to the
contrary notwithstanding, neither we nor any Portfolio will provide to you,
nor may you retain, concessions on your sales of shares of, or distribution
payments or service payments with respect to assets of, the Fidelity Funds
attributable to you or any of your clients, other than Bank Clients. When
you place an order in shares of the Fidelity Funds with us, you will
identify the Bank on behalf of whose Clients you are placing the order; and
you will identify as a non-Bank Client Order, any order in shares of the
Fidelity Funds placed for the account of a non-Bank Client.
(d) After the effective date of any change in or discontinuance of any
schedule of concessions, distribution payments, or service payments, or the
termination of a Plan, any concessions, distribution payments, or service
payments will be allowable or payable to you only in accordance with such
change, discontinuance, or termination. You agree that you will have no
claim against us or any Portfolio by virtue of any such change,
discontinuance, or termination. In the event of any overpayment by us of
any concession, distribution payment, or service payment, you will remit
such overpayment.
(e) If any Portfolio shares sold to you by us under the terms of this
Agreement are redeemed by the issuing Portfolio or tendered for redemption
by the customer within seven (7) business days after the date of our
confirmation of your original purchase order for such shares, you agree (i)
to refund promptly to us the full amount of any concession, distribution
payment, or service payment allowed or paid to you on such shares, and (ii)
if not yet allowed or paid to you, to forfeit the right to receive any
concession, distribution payment, or service payment allowable or payable
to you on such shares. We will notify you of any such redemption within
ten (10) days after the date of the redemption.
4. Certain Types of Accounts: (a) You may instruct FIIOC to register
purchased shares in your name and account as nominee for your customers.
If you hold Portfolio shares as nominee for your customers, all
Prospectuses, proxy statements, periodic reports, and other printed
material will be sent to you, and all confirmations and other
communications to shareholders will be transmitted to you. You will be
responsible for forwarding such printed material, confirmations, and
communications, or the information contained therein, to all customers for
whose account you hold any Portfolio shares as nominee. However, we or
FIIOC on behalf of itself or the Portfolios will be responsible for the
costs associated with your forwarding such printed material, confirmations,
and communications. You will be responsible for complying with all
reporting and tax withholding requirements with respect to the customers
for whose account you hold any Portfolio shares as nominee.
(b) With respect to accounts other than those accounts referred to in
paragraph 4(a) above, you agree to provide us with all information
(including certification of taxpayer identification numbers and back-up
withholding instructions) necessary or appropriate for us to comply with
legal and regulatory reporting requirements.
(c) Accounts opened or maintained pursuant to the NETWORKING system of
the National Securities Clearing Corporation ("NSCC") will be governed by
applicable NSCC rules and procedures and any agreement or other arrangement
with us relating to NETWORKING.
(d) If you hold Portfolio shares in an omnibus account for two or more
customers, you will be responsible for determining, in accordance with the
Prospectus, whether, and the extent to which, a CDSC is applicable to a
purchase of Portfolio shares from such a customer, and you agree to
transmit immediately to us any CDSC to which such purchase was subject.
You hereby represent that if you hold Portfolio shares subject to a CDSC,
you have the capability to track and account for such charge, and we
reserve the right, at our discretion, to verify that capability by
inspecting your tracking and accounting system or otherwise.
5. Status as Registered Broker/Dealer: (a) Each party to this Agreement
represents to the other party that (i) it is registered as a broker/dealer
under the 1934 Act, (ii) it is qualified to act as a broker/dealer in the
states where it transacts business, and (iii) it is a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD").
Each party agrees to maintain its broker/dealer registration and
qualifications and its NASD membership in good standing throughout the term
of this Agreement. Each party agrees to abide by all of the NASD's rules
and regulations, including the NASD's Conduct Rules -- in particular,
Section 2830 of such Rules, which section is deemed a part of and is
incorporated by reference in this Agreement. This Agreement will terminate
automatically without notice in the event that either party's NASD
membership is terminated.
(b) Nothing in this Agreement shall cause you to be our partner,
employee, or agent, or give you any authority to act for us or for any
Portfolio. Neither we nor any Portfolio shall be liable for any of your
acts or obligations as a dealer under this Agreement.
6. Information Relating to the Portfolios: (a) No person is authorized
to make any representations concerning shares of a Portfolio other than
those contained in the Portfolio's Prospectus. In buying Portfolio shares
from us under this Agreement, you will rely only on the representations
contained in the Prospectus. Upon your request, we will furnish you with a
reasonable number of copies of the Portfolios' current prospectuses or
statements of additional information or both (including any stickers
thereto).
(b) Any printed or electronic information that we furnish you (other
than the Portfolios' Prospectuses and periodic reports) is our sole
responsibility and not the responsibility of the respective Portfolios.
You agree that the Portfolios will have no liability or responsibility to
you with respect to any such printed or electronic information. We or the
respective Portfolio will bear the expense of qualifying its shares under
the state securities laws.
(c) You may not use any sales literature or advertising material
(including material disseminated through radio, television, or other
electronic media) concerning Portfolio shares, other than the printed or
electronic information referred to in paragraph 6(b) above, in connection
with the offer or sale of Portfolio shares without obtaining our prior
written approval. You may not distribute or make available to investors
any information that we furnish you marked "FOR DEALER USE ONLY" or that
otherwise indicates that it is confidential or not intended to be
distributed to investors.
7. Indemnification: (a) We will indemnify and hold you harmless from any
claim, demand, loss, expense, or cause of action resulting from the
misconduct or negligence, as measured by industry standards, of us, our
agents and employees, in carrying out our obligations under this Agreement.
Such indemnification will survive the termination of this Agreement.
(b) You will indemnify and hold us harmless from any claim, demand,
loss, expense, or cause of action resulting from the misconduct or
negligence, as measured by industry standards, of you, your agents and
employees, in carrying out your obligations under this Agreement. Such
indemnification will survive the termination of this Agreement.
8. Customer Lists: We hereby agree that we shall not use any list of your
customers which may be obtained in connection with this Agreement for the
purpose of solicitation of any product or service without your express
written consent. However, nothing in this paragraph or otherwise shall be
deemed to prohibit or restrict us or our affiliates in any way from
solicitations of any product or service directed at, without limitation,
the general public, any segment thereof, or any specific individual,
provided such solicitation is not based upon such list.
9. Duration of Agreement: This Agreement, with respect to any Plan, will
continue in effect for one year from its effective date, and thereafter
will continue automatically for successive annual periods; provided,
however, that such continuance is subject to termination at any time
without penalty if a majority of a Portfolio's Trustees who are not
interested persons of the Portfolio (as defined in the Investment Company
Act of 1940 (the "1940 Act")), or a majority of the outstanding shares of
the Portfolio, vote to terminate or not to continue the Plan. This
Agreement, other than with respect to a Plan, will continue in effect from
year to year after its effective date, unless terminated as provided
herein.
10. Amendment and Termination of Agreement: (a) We may amend any
provision of this Agreement by giving you written notice of the amendment.
Either party to this Agreement may terminate the Agreement without cause by
giving the other party at least thirty (30) days' written notice of its
intention to terminate. This Agreement will terminate automatically in the
event of its assignment (as defined in the 1940 Act).
(b) In the event that (i) an application for a protective decree under
the provisions of the Securities Investor Protection Act of 1970 is filed
against you; (ii) you file a petition in bankruptcy or a petition seeking
similar relief under any bankruptcy, insolvency, or similar law, or a
proceeding is commenced against you seeking such relief; or (iii) you are
found by the SEC, the NASD, or any other federal or state regulatory agency
or authority to have violated any applicable federal or state law, rule or
regulation arising out of your activities as a broker/dealer or in
connection with this Agreement, this Agreement will terminate effective
immediately upon our giving notice of termination to you. You agree to
notify us promptly and to immediately suspend sales of Portfolio shares in
the event of any such filing or violation, or in the event that you cease
to be a member in good standing of the NASD.
(c) Your or our failure to terminate this Agreement for a particular
cause will not constitute a waiver of the right to terminate this Agreement
at a later date for the same or another cause. The termination of this
Agreement with respect to any one Portfolio will not cause its termination
with respect to any other Portfolio.
11. Arbitration: In the event of a dispute, such dispute will be settled
by arbitration before arbitrators sitting in Boston, Massachusetts in
accordance with the NASD's Code of Arbitration Procedure in effect at the
time of the dispute. The arbitrators will act by majority decision and
their award may allocate attorneys' fees and arbitration costs between us.
Their award will be final and binding between us, and such award may be
entered as a judgment in any court of competent jurisdiction.
12. Notices: All notices required or permitted to be given under this
Agreement shall be given in writing and delivered by personal delivery, by
postage prepaid mail, or by facsimile machine or a similar means of same
day delivery (with a confirming copy by mail). All notices to us shall be
given or sent to us at our offices located at 82 Devonshire Street, Mail
Zone L12A, Boston, Massachusetts 02109, Attn: Bank Wholesale Market. All
notices to you shall be given or sent to you at the address specified by
you below. Each of us may change the address to which notices shall be
sent by giving notice to the other party in accordance with this paragraph
11.
13. Miscellaneous: This Agreement, as it may be amended from time to time,
shall become effective as of the date when it is accepted and dated below
by us. This Agreement is to be construed in accordance with the laws of
the Commonwealth of Massachusetts. This Agreement supersedes and cancels
any prior agreement between us, whether oral or written, relating to the
sale of shares of the Portfolios or any other subject covered by this
Agreement. The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions of this
Agreement or otherwise affect their construction or effect.
Very truly yours,
FIDELITY DISTRIBUTORS
CORPORATION
Please return two signed copies of this Agreement to Fidelity Distributors
Corporation. Upon acceptance, one countersigned copy will be returned to
you for your files.
_____________________________________
Name of Firm
Address: _____________________________
_____________________________________
_____________________________________
By __________________________________
Authorized Representative
_____________________________________
Name and Title (please print or type)
CRD # _______________________________
ACCEPTED AND AGREED:
FIDELITY DISTRIBUTORS CORPORATION
By __________________________________
Dated: ________________
[ATTACH REVISED SCHEDULES A AND B]
