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. 87 [X]
and
REGISTRATION STATEMENT (No. 811-2720)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 87 [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: 617-563-7000
Eric D. Roiter, Secretary
82 Devonshire Street
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) immediately upon filing pursuant to paragraph (b).
(x) on (February 28, 1998) pursuant to paragraph (b).
( ) 60 days after filing pursuant to paragraph (a)(1).
( ) on ( ) pursuant to paragraph (a)(1) of Rule 485.
( ) 75 days after filing pursuant to paragraph (a)(2).
( ) on ( ) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date for
a previously filed
post-effective amendment.
FIDELITY ADVISOR MUNICIPAL BOND FUND
INITIAL 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 .............................. *
3 a .............................. Financial Highlights
b .............................. *
c, d .............................. 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............................. Charter
ii........................... Charter; Doing Business with Fidelity
iii.......................... Breakdown of Expenses
c .............................. Charter
d, e .............................. Charter; Breakdown of Expenses
f .............................. Expenses
g i.............................. Charter
ii.............................. *
5A .............................. *
6 a i............................. Charter
ii........................... How to Buy Additional Shares; How to Sell Shares;
Transaction Details; Exchange Restrictions
iii.......................... Charter
b ............................. Charter
c .............................. Transaction Details; Exchange Restrictions
d .............................. Who May Want to Invest
e .............................. Cover Page; Doing Business with Fidelity; How to
Buy Additional Shares; How to Sell Shares;
Investor Services
f, g .............................. Dividends, Capital Gains, and Taxes
h .............................. Who May Want to Invest
7 a .............................. Cover Page; Charter
b .............................. How to Buy Additional Shares; Transaction Details
c .............................. *
d .............................. How to Buy Additional Shares
e .............................. Breakdown of Expenses; Transaction Details
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
*Not Applicable
FIDELITY
MUNICIPAL
BOND
FUND
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the
fund invests and the services available to shareholders.
To learn more about the fund and its investments, you can obtain a
copy of the fund's most recent financial report and portfolio listing
or a copy of the Statement of Additional Information (SAI) dated
February 28, 1998. The SAI has been filed with the Securities and
Exchange Commission (SEC) and is available along with other related
materials on the SEC's Internet Web site (http://www.sec.gov). The SAI
is incorporated herein by reference (legally forms a part of the
prospectus). For a free copy of either document, call Fidelity at
1-800-544-8888.
MUTUAL FUND SHARES ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY DEPOSITORY
INSTITUTION. SHARES ARE NOT
INSURED BY THE FDIC, FEDERAL
RESERVE BOARD, OR ANY OTHER
AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL
AMOUNT INVESTED.
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.
MUN-pro-0298
(fund number 035, trading symbol FMBDX)
Initial Class of Fidelity Advisor Municipal Bond Fund.
Municipal Bond seeks to provide as high a level of interest income
exempt from federal income tax as is consistent with preservation of
capital.
PROSPECTUS
FEBRUARY 28, 1998(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON,
MA 02109
CONTENTS
KEY FACTS THE FUND AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES INITIAL CLASS'S YEARLY OPERATING
EXPENSES.
FINANCIAL HIGHLIGHTS A SUMMARY OF
THE FUND'S FINANCIAL DATA.
PERFORMANCE HOW THE FUND HAS DONE
OVER TIME.
THE FUND IN DETAIL CHARTER HOW THE FUND IS ORGANIZED.
INVESTMENT PRINCIPLES AND RISKS THE
FUND'S OVERALL APPROACH TO INVESTING.
BREAKDOWN OF EXPENSES HOW
OPERATING COSTS ARE CALCULATED AND WHAT
THEY INCLUDE.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
HOW TO BUY ADDITIONAL SHARES
MAKING ADDITIONAL INVESTMENTS.
HOW TO SELL SHARES TAKING MONEY OUT
AND CLOSING YOUR ACCOUNT.
INVESTOR SERVICES SERVICES TO HELP YOU
MANAGE YOUR ACCOUNT.
SHAREHOLDER AND ACCOUNT DIVIDENDS, CAPITAL GAINS,
POLICIES AND TAXES
TRANSACTION DETAILS SHARE PRICE
CALCULATIONS AND THE TIMING OF PURCHASES
AND REDEMPTIONS.
EXCHANGE RESTRICTIONS
APPENDIX
KEY FACTS
THE FUND AT A GLANCE
GOAL: High current income free from federal income tax with
preservation of capital. As with any mutual fund, there is no
assurance that the fund will achieve its goal.
STRATEGY: Normally invests in investment-grade quality municipal
securities whose interest is free from federal income tax. Fidelity
Management & Research Company (FMR) uses the Lehman Brothers Municipal
Bond Index as a guide in structuring the fund and selecting its
investments.
MANAGEMENT: FMR is the management arm of Fidelity Investments, which
was established in 1946 and is now America's largest mutual fund
manager.
SIZE: As of December 31, 1997, the fund had over $ 944 million
in assets.
WHO MAY WANT TO INVEST
Initial Class shares are offered through this prospectus to current
Initial Class shareholders.
The Board of Trustees of Fidelity Municipal Trust has unanimously
approved an Agreement and Plan of Reorganization ("Agreement") between
Fidelity Municipal Bond Fund and Spartan Municipal Income Fund, a fund
of Fidelity Court Street Trust. The Agreement will be presented to
Fidelity Municipal Bond Fund shareholders for their vote of approval
or disapproval at a special meeting to be held on August 3, 1998. If
the proposal is approved by a majority of the fund's shareholders and
certain conditions required by the Agreement are satisfied, the
reorganization is expected to become effective on or about September
10, 1998.
The fund may be appropriate for investors in higher tax brackets who
seek high current income that is free from federal income tax. The
fund is designed for investors who are interested in investment-grade
quality ratings, but who are willing to forego the highest yields in
pursuit of greater share price stability.
The value of the fund's investments and the income they generate vary
from day to day, and generally reflect changes in interest rates,
market conditions, and other political and economic news.
The 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.
THE SPECTRUM OF
FIDELITY FUNDS
Broad categories of Fidelity
funds are presented here in
order of ascending risk.
Generally, investors seeking to
maximize return must assume
greater risk. Municipal Bond is
in the INCOME category.
(solid bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(right arrow) INCOME Seeks income by
investing in bonds.
(solid bullet) GROWTH AND INCOME Seeks
long-term growth and income
by investing in stocks and
bonds.
(solid bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
The fund is composed of multiple classes of shares. All classes of the
fund have a common investment objective and investment portfolio.
The performance of one class of shares of the fund may be different
from the performance of another class of shares of the fund because of
different sales charges and class expenses.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy
or sell Initial Class shares of the fund. In addition, you may be
charged an annual account maintenance fee if your account balance
falls below $2,500. See "Transaction Details," page , for an
explanation of how and when these charges apply.
SALES CHARGE ON PURCHASES AND NONE
REINVESTED DISTRIBUTIONS
DEFERRED SALES CHARGE ON REDEMPTIONS NONE
ANNUAL ACCOUNT MAINTENANCE FEE $12.00
(FOR ACCOUNTS UNDER $2,500)
ANNUAL OPERATING EXPENSES are paid out of the fund's assets. The fund
pays a management fee to FMR. It also incurs other expenses for
services such as maintaining shareholder records and furnishing
shareholder statements and financial reports.
Initial 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 following figures are based on historical expenses of Initial
Class of the fund and are calculated as a percentage of average net
assets of Initial Class of the fund.
MANAGEMENT FEE .39%
12B-1 FEE NONE
OTHER EXPENSES .16%
TOTAL OPERATING EXPENSES .55%
EXAMPLES: Let's say, hypothetically, that Initial Class's annual
return is 5% and that your shareholder transaction expenses and
Initial Class's annual operating expenses are exactly as just
described. For every $1,000 you invested, here's how much you would
pay in total expenses if you close your account after the number of
years indicated:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$ 6 $ 18 $ 31 $ 69
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED EXPENSES OR RETURNS, ALL OF WHICH MAY VARY.
FMR has voluntarily agreed to reimburse Initial Class of the fund to
the extent that total operating expenses (as a percentage of its
average net assets) exceed 0.75%. Expenses eligible for reimbursement
do not include interest, taxes, brokerage commissions, and
extraordinary expenses.
UNDERSTANDING
EXPENSES
OPERATING A MUTUAL FUND
INVOLVES A VARIETY OF EXPENSES
FOR PORTFOLIO MANAGEMENT,
SHAREHOLDER STATEMENTS, TAX
REPORTING, AND OTHER SERVICES.
THESE EXPENSES ARE PAID FROM
INITIAL CLASS'S ASSETS, AND THEIR
EFFECT IS ALREADY FACTORED INTO
ANY QUOTED SHARE PRICE OR
RETURN. ALSO, AS AN INVESTOR, YOU
MAY PAY CERTAIN EXPENSES
DIRECTLY.
(CHECKMARK)
FINANCIAL HIGHLIGHTS
The financial highlights table that fo llows has been audited by
Coopers & Lybrand L.L.P., independent accountants. The fund's
financial highlights, financial statements, and report of the auditor
are included in the fund's Annual Report, and are incorporated by
reference into (are legally a part of) the fund's SAI. Contact
Fidelity for a free copy of the Annual Report or the SAI.
SELECTED PER-SHARE DATA
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER
31 1997 1996 1995 1994 1993A 1992 1991 1990 1989 1988
NET ASSET VALUE, $ 8.190 $ 8.270 $ 7.370 $ 8.690 $ 8.500 $ 8.470 $ 8.130 $ 8.130 $ 7.950 $ 7.600
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INTEREST INCOME .402 .405 .408 .455 .487 .519 .526 .541 .556 .558
NET REALIZED AND
UNREALIZED .331 (.079) .904 (1.180) .600 .210 .410 -- .180 .350
GAIN (LOSS)
TOTAL FROM INVESTMENT .733 .326 1.312 (.725) 1.087 .729 .936 .541 .736 .908
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INTEREST (.402) (.405) (.408) (.455) (.487) (.519) (.526) (.541) (.556) (.558)
INCOME
IN EXCESS OF NET (.001)B (.001)B -- -- -- -- -- -- -- --
INTEREST INCOME
FROM NET REALIZED
GAIN -- -- -- (.010) (.410) (.180) (.070) -- -- --
IN EXCESS OF NET -- -- (.004) (.130) -- -- -- -- -- --
REALIZED GAIN
TOTAL DISTRIBUTIONS (.403) (.406) (.412) (.595) (.897) (.699) (.596) (.541) (.556) (.558)
NET ASSET VALUE, $ 8.520 $ 8.190 $ 8.270 $ 7.370 $ 8.690 $ 8.500 $ 8.470 $ 8.130 $ 8.130 $ 7.950
END OF PERIOD
TOTAL RETURN 9.20% 4.12% 18.15% (8.49)% 13.17% 8.93% 11.91% 6.91% 9.56% 12.30%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF
PERIOD $ 935 $ 948 $ 1,082 $ 1,005 $ 1,262 $ 1,192 $ 1,163 $ 1,070 $ 1,054 $ 984
(IN MILLIONS)
RATIO OF EXPENSES TO .55% .56% .57% .53% .49% .49% .50% .50% .50% .51%
AVERAGE NET ASSETS
RATIO OF NET INTEREST
INCOME 4.86% 5.00% 5.14% 5.68% 5.51% 6.11% 6.35% 6.71% 6.90% 7.11%
TO AVERAGE NET ASSETS
PORTFOLIO TURNOVER 33% 35% 72% 95% 74% 53% 33% 49% 64% 46%
</TABLE>
A EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION
93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION
OF INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY
INVESTMENT COMPANIES." AS A RESULT, NET INTEREST INCOME PER SHARE MAY
REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX
DIFFERENCES.
B THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO
BOOK TO TAX DIFFERENCES.
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The
total returns that follow are based on historical fund results.
The fund's fiscal year runs from January 1 through December 31. The
tables below show the performance of Initial Class of the fund over
past fiscal years. The chart on page presents calendar year
performance for Initial Class of the fund compared to different
measures, including a competitive funds average.
AVERAGE ANNUAL TOTAL RETURNS
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FISCAL PERIODS ENDED PAST 1 PAST 5 PAST 10
DECEMBER 31, 1997 YEAR YEARS YEARS
MUNICIPAL BOND FUND - INITIAL CLASS 9.20% 6.83% 8.35%
</TABLE>
CUMULATIVE TOTAL RETURNS
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FISCAL PERIODS ENDED PAST 1 PAST 5 PAST 10
DECEMBER 31, 1997 YEAR YEARS YEARS
MUNICIPAL BOND FUND - INITIAL CLASS 9.20% 39.12% 123.09%
</TABLE>
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated
period of time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate
of return that, if achieved annually, would have produced the same
cumulative total return if performance had been constant over the
entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
YIELD refers to the income generated by an investment in the 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.
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 the Lipper General Municipal Debt
Funds Average. As of December 31, 1997, the average reflected the
performance of 235 mutual funds with similar investment
objectives. This average, published by Lipper Analytical Services,
Inc., excludes the effect of sales loads.
LEHMAN BROTHERS MUNICIPAL BOND INDEX is a total return performance
benchmark for investment-grade municipal bonds with maturities of at
least one year.
Unlike the fund's returns, the total returns of the comparative
index do not include the effect of any brokerage commissions,
transaction fees, or other costs of investing.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
The fund's 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 call
1-800-544-8888.
YEAR-BY-YEAR TOTAL RETURNS
CALENDAR YEARS 1988 19 89 1990 1991 1992 1993 1994 1995 1996
1997
MUNICIPAL BOND FUND -
INITIAL CLASS 12.30% 9.56% 6.91% 11.91% 8.93% 13.17% -8.49% 18.15%
4.12% 9.20%
LEHMAN BROTHERS MUNI. BOND INDEX 10.16% 10.79% 7.29% 12.14% 8.81%
12.29% -5.17% 17.45% 4.43% 9.19%
LIPPER GEN. MUNI. DEBT FUNDS AVG 11.53% 9.65% 6.05% 12.09% 8.79%
12.47% -6.50% 16.84% 3.30% 9.11%
CONSUMER PRICE INDEX 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67%
2.54% 3.32% 1.70%
PERCENTAGE (%)
ROW: 1, COL: 1, VALUE: 12.3
ROW: 2, COL: 1, VALUE: 9.560000000000001
ROW: 3, COL: 1, VALUE: 6.91
ROW: 4, COL: 1, VALUE: 11.91
ROW: 5, COL: 1, VALUE: 8.93
ROW: 6, COL: 1, VALUE: 13.17
ROW: 7, COL: 1, VALUE: -8.49
ROW: 8, COL: 1, VALUE: 18.15
ROW: 9, COL: 1, VALUE: 4.119999999999999
ROW: 10, COL: 1, VALUE: 9.199999999999999
(LARGE SOLID BOX) MUNICIPAL BOND
FUND -
INITIAL CLASS
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUND IN DETAIL
CHARTER
MUNICIPAL BOND IS A MUTUAL FUND: an investment that pools
shareholders' money and invests it toward a specified goal. The fund
is a diversified fund of Fidelity Municipal Trust, an open-end
management investment company organized as a Massachusetts business
trust on June 22, 1984.
THE 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
fund's activities, review contractual arrangements with companies that
provide services to the fund, and review the fund's performance. The
trustees serve as trustees for other Fidelity funds. The majority of
trustees are not otherwise affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL SHAREHOLDER MEETINGS AND MAIL PROXY
MATERIALS. These meetings may be called to elect or remove trustees,
change fundamental policies, approve a management contract, or for
other purposes. Shareholders not attending these meetings are
encouraged to vote by proxy. Fidelity will mail proxy materials in
advance, including a voting card and information about the proposals
to be voted on. The number of votes you are entitled to is based upon
the dollar value of your investment.
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
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs. Beginning January 1, 1999, Fidelity
Investments Money Management, Inc. (FIMM), located in Merrimack, New
Hampshire, will have primary responsibility for providing investment
management services for the fund.
George Fischer is Vice President and manager of Advisor
Municipal Bond , which he has managed since October 1995. He
also manages several other Fidelity funds. Since joining Fidelity in
1989, Mr. Fischer has worked as an analyst and manager.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services.
UMB Bank, n.a. (UMB) is the fund's transfer agent, and is located at
1010 Grand Avenue, Kansas City, Missouri. UMB employs Fidelity Service
Company, Inc. (FSC) to perform transfer agent servicing functions for
Initial Class of the fund.
FMR Corp. is the ultimate parent company of FMR and FIMM .
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.
To carry out the fund's transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that the
fund receives services and commission rates comparable to those of
other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
BOND FUNDS IN GENERAL. The yield and share price of a bond fund change
daily based on changes in interest rates and market conditions, and in
response to other economic, political or financial events. The types
and maturities of the securities a bond fund purchases and the credit
quality of their issuers will impact a bond fund's reaction to these
events.
The total return from a bond includes both income and price gains
or losses. While income is 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.
INTEREST RATE RISK. In general, bond prices rise when interest rates
fall and fall when interest rates rise. Longer-term bonds are usually
more sensitive to interest rate changes. In other words, the longer
the maturity of a bond, the greater the impact a change in interest
rates is likely to have on the bond's price. In addition, short-term
interest rates and long-term interest rates do not necessarily move in
the same amount or in the same direction. A short-term bond tends to
react to changes in short-term interest rates and a long-term bond
tends to react to changes in long-term interest rates.
ISSUER RISK. The price of a bond is affected by the credit quality of
its issuer. Changes in the financial condition of an issuer, changes
in general economic conditions, and changes in specific economic
conditions that affect a particular type of issuer can impact the
credit quality of an issuer. Lower quality bonds generally tend to be
more sensitive to these changes than higher quality bonds.
MUNICIPAL MARKET RISK. Municipal securities are backed by the entity
that issued them and/or other revenue streams. Municipal security
values may be significantly affected by political changes as well as
uncertainties in the municipal market related to taxation or the
rights of municipal securities holders.
FIDELITY'S APPROACH TO BOND FUNDS. In managing bond funds, FMR selects
a benchmark index which is representative of the universe of
securities in which the fund invests. FMR uses this benchmark as a
guide in structuring the fund and selecting its investments.
FMR allocates assets among different market sectors (for example,
general obligation bonds of a state or bonds financing a specific
project) and different maturities based on its view of the relative
value of each sector or maturity.
FMR focuses on assembling a portfolio of income-producing bonds that
it believes will provide the best balance between risk and return
within the universe of securities in which the fund invests. 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.
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. The benchmark index for the fund is the Lehman Brothers
Municipal Bond Index, a benchmark of investment-grade municipal bonds
with maturities of at least one year . FMR manages the fund to
have similar overall interest rate risk to the Index. As of December
31, 1997, the dollar-weighted average maturity of the fund and the
Index was approximately 11.30 and 13.98 years,
respectively. FMR normally invests at least 80% of the fund's assets
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.
FMR may use various techniques to hedge a portion of the fund's risks,
but there is no guarantee that these strategies will work as intended.
When you sell your shares of the fund, they may be worth more or less
than what you paid for them.
FMR normally invests the fund's assets according to its investment
strategy and does not expect to invest in federally taxable
obligations. The fund also reserves the right to invest without
limitation in short-term instruments, to hold a substantial amount of
uninvested cash, or to invest more than normally permitted in
federally taxable obligations for temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, strategies FMR may employ in
pursuit of the fund's investment objective, and a summary of related
risks. Any restrictions listed supplement those discussed earlier in
this section. A complete listing of the fund's limitations and more
detailed information about the fund's investments are contained in the
fund's 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 the fund's
investment objective and policies and that doing so will help the fund
achieve its goal. Fund holdings and recent investment strategies are
detailed in the fund's financial reports, which are sent to
shareholders twice a year. For a free SAI or financial report, call
1-800-544-8888.
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. Investment-grade debt securities are medium- and
high-quality securities. Some, however, may possess speculative
characteristics, and may be more sensitive to economic changes and to
changes in the financial condition of issuers.
RESTRICTIONS: 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 Investor s Service (Moody's) or
Standard & Poor's (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.
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 the 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. In addition, in the case of foreign
providers of credit or liquidity support, extensive public information
about the provider may not be available, and unfavorable political,
economic, or governmental developments could affect its ability to
honor its commitment.
ASSET-BACKED SECURITIES include interests in pools of purchase
contracts, financing leases, or sales agreements entered into by
municipalities. 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.
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, often making the
security's market value more volatile.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire
land, equipment, or facilities. If the municipality stops making
payments or transfers its obligations to a private entity, the
obligation could lose value or become taxable.
OTHER MUNICIPAL SECURITIES may include obligations of U.S. territories
and possessions such as Guam, the Virgin Islands, and Puerto Rico, and
their political subdivisions and public corporations.
PUT FEATURES entitle the holder to put (sell back) an instrument to
the issuer or another party. In exchange for this benefit, the 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.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices,
interest rates, or other factors that affect security values. These
techniques may involve derivative transactions such as buying and
selling options and futures contracts, entering into swap agreements,
and purchasing indexed securities.
FMR can use these practices to adjust the risk and return
characteristics of the fund's portfolio of investments. If FMR judges
market conditions incorrectly or employs a strategy that does not
correlate well with the 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
the 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.
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 the fund.
RESTRICTIONS: The fund may not purchase a security if, as a result,
more than 10% 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. The fund may invest in money market securities 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 while maintaining a stable $1.00
share price. A major change in interest rates or a default on the
money market fund's investments could cause its share price to change.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce
the risks of investing. This may include limiting the amount of money
invested in any one issuer or, on a broader scale, in any one industry
or type of project. Economic, business, or political changes can
affect all securities of a similar type.
RESTRICTIONS: With respect to 75% of its total assets, the fund may
not purchase a security if, as a result, more than 5% would be
invested in the securities of any one issuer. This limitation does not
apply to U.S. Government securities. The fund may invest more than 25%
of its total assets in tax-free securities that finance similar types
of projects.
BORROWING. The fund may borrow from banks or from other funds advised
by FMR, or through reverse repurchase agreements. If the fund borrows
money, its share price may be subject to greater fluctuation until the
borrowing is paid off. If the fund makes additional investments while
borrowings are outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 331/3% of its total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages
are fundamental, that is, subject to change only by shareholder
approval. The following paragraphs restate all those that are
fundamental. All policies stated throughout this prospectus, other
than those identified in the following paragraphs, can be changed
without shareholder approval.
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.
With respect to 75% of its total assets, the fund may not purchase a
security if, as a result, more than 5% would be invested in the
securities of any one issuer. This limitation does not apply to U.S.
Government securities.
The fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 331/3% of its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily
operations. Expenses paid out of Initial Class's assets are reflected
in its share price or dividends; they are neither billed directly to
shareholders nor deducted from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. The fund also pays OTHER EXPENSES, which are
explained on page .
FMR may, from time to time, agree to reimburse the fund for management
fees and other expenses above a specified limit. FMR retains the
ability to be repaid by the 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 the
fund's expenses and boost its performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The fee
is calculated by adding a group fee rate to an individual fund fee
rate, multiplying the result by the fund's monthly average net
asset s and dividing by twelve .
The group fee rate is based on the average net assets of all the
mutual funds advised by FMR. This rate cannot rise above 0.37%, and it
drops as total assets under management increase.
For December 1997, the group fee rate was 0.1372 %. The
individual fund fee rate is 0.25%.
The total management fee for the fiscal year ended December 1997 was
0.39 % of the fund's average net assets .
Beginning January 1, 1999, FIMM will have primary responsibility
for managing the fund's investments. FMR will pay FIMM 50% of its
management fee (before expense reimbursements) for FIMM's
services.
OTHER EXPENSES
While the management fee is a significant component of the fund's
annual operating costs, the fund has other expenses as well.
UMB is the transfer and service agent for the fund. UMB has entered
into sub-agreements with FSC. FSC performs transfer agency, dividend
disbursing and shareholder servicing functions for Initial Class of
the fund. FSC also calculates the net asset value per share (NAV) and
dividends for Initial Class and maintains the fund's general
accounting records. Under the terms of the sub-agreements, FSC
receives all related fees paid to UMB by Initial Class or the fund, as
appropriate.
For the fiscal year ended December 1997, UMB paid FSC fees equal to
0. 11 % of Initial Class's average net assets for transfer agency
and related services, and UMB paid FSC fees equal to 0. 04 % of
the fund's average net assets for pricing and bookkeeping services.
The 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 the fund to
reduce the fund's custodian or transfer agent fees.
Initial Class has adopted a DISTRIBUTION AND SERVICE PLAN. This 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 Initial
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, Initial Class shares.
Currently, the Board of Trustees has authorized such payments.
The fund's portfolio turnover rate for the fiscal year ended December
1997 was 33 %. This rate varies from year to year.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of
America's first mutual funds. Today, Fidelity is the largest mutual
fund company in the country, and is known as an innovative provider of
high-quality financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage
Services, Inc. (FBSI). Fidelity is also a leader in providing
tax- advant aged retirement plans for individuals investing on
their own or through their employer.
Fidelity is committed to providing investors with practical
information to make investment decisions. Based in Boston, Fidelity
provides customers with complete service 24 hours a day, 365 days a
year, through a network of telephone service centers around the
country.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity
has over 80 walk-in Investor Centers across the country.
You may purchase or sell shares of the fund through an investment
professional, including a broker, who may charge you a transaction fee
for this service. If you invest through FBSI, another financial
institution, or an investment professional, read their program
materials for any special provisions, additional service features or
fees that may apply to your investment in the fund. Certain features
of the fund, such as the minimum initial or subsequent investment
amounts, may be modified.
FIDELITY FACTS
FIDELITY OFFERS THE BROADEST
SELECTION OF MUTUAL FUNDS
IN THE WORLD.
(SOLID BULLET) NUMBER OF FIDELITY MUTUAL
FUNDS: OVER 226
(SOLID BULLET) ASSETS IN FIDELITY MUTUAL
FUNDS: OVER $52 9 BILLION
(SOLID BULLET) NUMBER OF SHAREHOLDER
ACCOUNTS: OVER 3 4 MILLION
(SOLID BULLET) NUMBER OF INVESTMENT
ANALYSTS AND PORTFOLIO
MANAGERS: OVER 2 65
(CHECKMARK)
HOW TO BUY ADDITIONAL SHARES
THE PRICE TO BUY ONE SHARE of Initial Class is the class's NAV.
Initial Class shares are sold without a sales charge.
Your shares will be purchased at the next NAV calculated after your
order is received in proper form. Initial Class's NAV is normally
calculated each business day at 4:00 p.m. Eastern time.
The fund 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 the fund.
Share certificates are not available for Initial Class shares.
If you buy additional shares by check or Fidelity Money
Line(registered trademark), and then sell those shares by any method
other than by exchange to another Fidelity fund, the payment may be
delayed for up to seven business days to ensure that your previous
investment has cleared.
MINIMUM INVESTMENTS
AVERAGE ANNUAL TOTAL RETURNS
TO ADD TO AN ACCOUNT $250
Through regular investment plans* $100
MINIMUM BALANCE $2,000
* FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER TO
"INVESTOR SERVICES," PAGE .
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TO ADD TO AN ACCOUNT
PHONE 1-800-544-777 (PHONE_GRAPHIC) (SMALL SOLID BULLET) EXCHANGE FROM ANOTHER FIDELITY FUND ACCOUNT
WITH THE SAME REGISTRATION, INCLUDING NAME,
ADDRESS, AND TAXPAYER ID NUMBER.
(SMALL SOLID BULLET) USE FIDELITY MONEY LINE TO TRANSFER FROM YOUR
BANK ACCOUNT. CALL BEFORE YOUR FIRST USE TO
VERIFY THAT THIS SERVICE IS IN PLACE ON YOUR
ACCOUNT. MAXIMUM MONEY LINE: UP TO
$100,000.
MAIL (MAIL_GRAPHIC) (SMALL SOLID BULLET) MAKE YOUR CHECK PAYABLE TO "FIDELITY MUNICIPAL
BOND FUND - INITIAL CLASS." INDICATE YOUR FUND
ACCOUNT NUMBER ON YOUR CHECK AND MAIL TO THE
ADDRESS PRINTED ON YOUR ACCOUNT STATEMENT.
(SMALL SOLID BULLET) EXCHANGE BY MAIL: CALL 1-800-544-6666 FOR
INSTRUCTIONS.
IN PERSON (HAND_GRAPHIC) (SMALL SOLID BULLET) BRING YOUR CHECK TO A FIDELITY INVESTOR CENTER.
CALL 1-800-544-9797 FOR THE CENTER NEAREST
YOU.
WIRE (WIRE_GRAPHIC) (SMALL SOLID BULLET) WIRE TO:
BANKERS TRUST COMPANY,
BANK ROUTING # 021001033,
ACCOUNT # 00163053.
SPECIFY "FIDELITY MUNICIPAL BOND FUND - INITIAL
CLASS" AND INCLUDE YOUR ACCOUNT NUMBER AND
YOUR NAME.
AUTOMATICALLY (AUTOMATIC_GRAPHIC) (SMALL SOLID BULLET) USE FIDELITY AUTOMATIC ACCOUNT BUILDER. CALL
1-800-544-6666 TO CHANGE THE AMOUNT OF
YOUR INVESTMENT, SKIP AN INVESTMENT, OR STOP
AUTOMATIC ACCOUNT BUILDER.
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(TDD_GRAPHIC) TDD - SERVICE FOR THE DEAF AND HEARING IMPAIRED: 1-800-544-0118
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HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares.
THE PRICE TO SELL ONE SHARE of Initial Class is the class's NAV.
Your shares will be sold at the next NAV calculated after your order
is received in proper form. Initial Class's NAV is normally calculated
each business day at 4:00 p.m. Eastern time.
TO SELL SHARES IN AN ACCOUNT, you may use any of the methods described
on these two pages.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$2,000 worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to
sign up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in
writing and include a signature guarantee if any of the following
situations apply:
(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, or
(small solid bullet) The redemption proceeds are being transferred to
a Fidelity account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if
authorized under state law), securities exchange or association,
clearing agency, or savings association. A notary public cannot
provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) The applicable class name ("Initial Class"),
(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 a Fidelity Investor Center or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Unless otherwise instructed, Fidelity will send a check to the record
address.
CHECKWRITING
If you have a checkbook for your account, 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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PHONE 1-800-544-777
(PHONE_GRAPHIC) ALL ACCOUNT TYPES (SMALL SOLID BULLET) MAXIMUM CHECK REQUEST: $100,000.
(SMALL SOLID BULLET) FOR MONEY LINE TRANSFERS TO YOUR BANK ACCOUNT;
MINIMUM: $10; MAXIMUM: UP TO $100,000.
(SMALL SOLID BULLET) YOU MAY EXCHANGE TO OTHER FIDELITY FUNDS IF
BOTH ACCOUNTS ARE REGISTERED WITH THE SAME
NAME(S), ADDRESS, AND TAXPAYER ID NUMBER.
MAIL OR IN PERSON
(MAIL_GRAPHIC)
(HAND_GRAPHIC) INDIVIDUAL, JOINT TENANT, (SMALL SOLID BULLET) THE LETTER OF INSTRUCTION MUST BE SIGNED BY ALL
SOLE PROPRIETORSHIP, PERSONS REQUIRED TO SIGN FOR TRANSACTIONS,
UGMA, UTMA EXACTLY AS THEIR NAMES APPEAR ON THE ACCOUNT.
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.
(SMALL SOLID BULLET) INCLUDE A CORPORATE RESOLUTION WITH CORPORATE
SEAL OR A SIGNATURE GUARANTEE.
EXECUTOR, ADMINISTRATOR, (SMALL SOLID BULLET) CALL 1-800-544-6666 FOR INSTRUCTIONS.
CONSERVATOR, GUARDIAN
WIRE (WIRE_GRAPHIC) ALL ACCOUNT TYPES (SMALL SOLID BULLET) YOU MUST SIGN UP FOR THE WIRE FEATURE BEFORE
USING IT. TO VERIFY THAT IT IS IN PLACE, CALL
1-800-544-6666. MINIMUM WIRE: $5,000.
(SMALL SOLID BULLET) YOUR WIRE REDEMPTION REQUEST MUST BE RECEIVED
IN PROPER FORM BY FIDELITY BEFORE 4:00 P.M.
EASTERN TIME FOR MONEY TO BE WIRED ON THE
NEXT BUSINESS DAY.
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CHECK (CHECK_GRAPHIC) ALL ACCOUNT TYPES (SMALL SOLID BULLET) MINIMUM CHECK: $500.
(SMALL SOLID BULLET) ALL ACCOUNT OWNERS MUST SIGN A SIGNATURE CARD
TO RECEIVE A CHECKBOOK.
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(TDD_GRAPHIC) TDD - SERVICE FOR THE DEAF AND HEARING IMPAIRED: 1-800-544-0118
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INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your
account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365
days a year. Whenever you call, you can speak with someone equipped to
provide the information or service you need.
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements after certain
transactions
(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 to your household, even if you have more
than one account in the fund. Call Fidelity at 1-800-544-6666 if you
need additional copies of financial reports and prospectuses.
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
RETIREMENT ACCOUNT ASSISTANCE
1-800-544-4774
TOUCHTONE XPRESSSM
1-800-544-5555
AUTOMATED SERVICE
(CHECKMARK)
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your Initial Class shares and buy
Institutional Class shares of the fund or shares of other Fidelity
funds by telephone or in writing.
Note that exchanges out of the 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 .
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from
your account.
FIDELITY MONEY LINE enables you to transfer money by phone between
your bank account and your fund account. Most transfers are complete
within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money
regularly. Fidelity offers convenient services that let you transfer
money into your fund account, or between fund accounts, automatically.
While regular investment plans do not guarantee a profit and will not
protect you against loss in a declining market, they can be an
excellent way to invest for a home, educational expenses, and other
long-term financial goals.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDER (registered trademark)
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or quarterly (small solid bullet) Call 1-800-544-6666 for an application.
(small solid bullet) To change the amount or frequency of your investment, call
1-800-544-6666 at least three business days prior to your next
scheduled investment date.
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DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay period (small solid bullet) Call 1-800-544-6666 for an authorization form.
(small solid bullet) Changes require a new authorization form.
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FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, bimonthly, (small solid bullet) To establish, call 1-800-544-6666 after both accounts are
quarterly, or annually opened.
(small solid bullet) To change the amount or frequency of your investment, call
1-800-544-6666.
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A BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE AN
APPROPRIATE CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The fund distributes substantially all of its net investment income
and capital gains to shareholders each year. Income dividends are
declared daily and paid monthly. Capital gains are normally
distributed in February and December.
DISTRIBUTION OPTIONS
Initial Class offers four options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions
will be automatically reinvested in additional Initial Class shares of
the fund. If you did not indicate a choice on your application, you
were automatically assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested in additional Initial Class shares 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) OPTION. Your dividend and
capital gain distributions will be automatically invested in shares of
another identically registered Fidelity fund.
Dividends will be reinvested at Initial Class's NAV on the last day of
the month. Capital gain distributions will be reinvested at the NAV as
of the date the class deducts the distribution 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 a
tax-free fund could affect you. Below are some of the fund's tax
implications.
TAXES ON DISTRIBUTIONS. Interest income that the fund earns is
distributed to shareholders as income dividends. Interest that is
federally tax-free remains tax-free when it is distributed.
However, 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 distributed as dividends and taxed
as ordinary income. Capital gain distributions are taxed as long-term
capital gains. These 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 a statement showing the
tax status of distributions, and will report to the IRS the amount of
any taxable distributions, paid to you in the previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. The fund 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 fund's dividends 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 your fund's
income from each state to help you calculate your taxes.
During the fiscal year ended December 1997, 100 % of the fund's
income dividends was free from federal income tax. During the fiscal
year ended December 1997, 1.42 % of the fund's income dividends
was 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 the fund, Fidelity will send you a
confirmation statement showing how many shares you sold and at what
price.
You will also receive a consolidated transaction statement every
January. However, it is up to you or your tax preparer to determine
whether this sale resulted in a capital gain and, if so, the amount of
tax to be paid. BE SURE TO KEEP YOUR REGULAR ACCOUNT STATEMENTS; the
information they contain will be essential in calculating the amount
of your capital gains.
"BUYING A DIVIDEND." If you buy shares when the 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.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. FSC normally calculates Initial Class's NAV 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
fund's investments, cash, and other assets, subtracting that class's
pro rata share of the value of the 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.
The fund's assets are valued primarily on the basis of information
furnished by a pricing service or market quotations, if available, or
by another method that the Board of Trustees believes accurately
reflects fair value.
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 the fund to withhold 31% of your taxable distributions and
redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE OR ELECTRONICALLY.
Fidelity will not be responsible for any losses resulting from
unauthorized transactions if it follows reasonable security procedures
designed to verify the identity of the investor. Fidelity will request
personalized security codes or other information, and may also record
calls. For transactions conducted through the Internet, Fidelity
recommends the use of an Internet browser with 128-bit encryption. You
should verify the accuracy of your confirmation statements immediately
after you receive them. If you do not want the ability to redeem and
exchange by telephone, call Fidelity for instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during
periods of unusual market activity), consider placing your order by
mail or by visiting a Fidelity Investor Center.
THE FUND RESERVES THE RIGHT to suspend the offering of shares
for a period of time.
WHEN YOU PLACE AN ORDER TO BUY ADDITIONAL SHARES, your shares will be
purchased at the next NAV calculated after your investment is received
in proper form. Note the following:
(small solid bullet) All of your purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check,
each check must have a value of at least $50.
(small solid bullet) The 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 the fund or
Fidelity has incurred.
(small solid bullet) You begin to earn dividends as of the first
business day following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money
order, U.S. Treasury check, Federal Reserve check, or direct deposit
instead.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements
with FDC may enter confirmed purchase orders on behalf of customers by
phone, with payment to follow no later than the time when the class is
priced on the following business day. If payment is not received by
that time, the financial institution could be held liable for
resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at
the next NAV calculated after your order is received in proper form.
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 the fund, it may take up to seven days to pay you.
(small solid bullet) Shares 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) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day
after your phone call.
(small solid bullet) The fund may hold payment on redemptions until it
is reasonably satisfied that investments made by check or Fidelity
Money Line have been collected, which can take up to seven business
days.
(small solid bullet) Remember that if you redeem all of your Initial
Class shares, your account will be closed and you will not be able to
purchase new Initial Class shares of the fund.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays),
when trading on the NYSE is restricted, or as permitted by the SEC.
(small solid bullet) If you sell shares by writing a check and the
amount of the check is greater than the value of your account, your
check will be returned to you and you may be subject to additional
charges.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of
$12.00 from accounts with a value of less than $2,500, subject to an
annual maximum charge of $24.00 per shareholder. It is expected that
accounts will be valued on the second Friday in November of each year.
Accounts opened after September 30 will not be subject to the fee for
that year. The fee, which is payable to the transfer agent, is
designed to offset in part the relatively higher costs of servicing
smaller accounts. This fee will not be deducted from Fidelity
brokerage accounts, retirement accounts (except non-prototype
retirement accounts), accounts using regular investment plans, or if
total assets with Fidelity exceed $30,000. Eligibility for the $30,000
waiver is determined by aggregating Fidelity accounts maintained by
FSC or FBSI which are registered under the same social security number
or which list the same social security number for the custodian of a
Uniform Gifts/Transfers to Minors Act account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $2,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send
the proceeds to you. Your shares will be redeemed at the NAV on the
day your account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC may, at its own expense, provide promotional incentives to
qualified recipients who support the sale of shares of the fund
without reimbursement from the fund. Qualified recipients are
securities dealers who have sold fund shares or others, including
banks and other financial institutions, under special arrangements in
connection with FDC's sales activities. In some instances, these
incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or
expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging Initial Class
shares 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 percentage difference between that fund's sales charge and
any sales charge you have previously paid in connection with the
shares you are exchanging. For example, if you had already paid a
sales charge of 2% on your shares and you exchange them into a fund
with a 3% sales charge, you would pay an additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund
performance and shareholders, the fund reserves the right to
temporarily or permanently terminate the exchange privilege of any
investor who makes more than four exchanges out of the fund per
calendar year. Accounts under common ownership or control, including
accounts with the same taxpayer identification number, will be counted
together for purposes of the four exchange limit.
(small solid bullet) The 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
the 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 the fund.
Although the fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any
time. The fund reserves the right to terminate or modify the exchange
privilege in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to 1.00% and trading fees of up to
1.50% of the amount exchanged . Check each fund's prospectus for
details.
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 fund or FDC. This Prospectus and
the related SAI do not constitute an offer by the fund or by FDC to
sell or to buy shares of the fund to any person to whom it is unlawful
to make such offer.
APPENDIX
Fidelity Money Line and Directed Dividends are registered
trademark s of FMR Corp.
This prospectus is printed on recycled paper using soy-based inks.
FIDELITY ADVISOR FUNDS:
CLASS A, CLASS T, CLASS B, CLASS C, INSTITUTIONAL CLASS, AND INITIAL
CLASS
STATEMENT OF ADDITIONAL INFORMATION
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 Trusts
13 a-c.............................. Investment Policies and Limitations
d................................. Portfolio Transactions
14 a-c.............................. Trustees and Officers
15 a-c ............................. Trustees and Officers
16 a i.............................. FMR
ii............................ Trustees and Officers
iii........................... Management Contracts
b................................. Management Contracts
c................................. *
d................................. Contracts with FMR Affiliates
e................................. *
f................................. Distribution and Service Plans
g................................. *
h................................. Description of the Trusts
i................................. Contracts with FMR Affiliates
17 a-d............................. Portfolio Transactions
e................................. *
18 a................................. Description of the Trusts
b................................. *
19 a................................. Additional Purchase, Redemption, and Exchange
Information
b................................. Valuation; Additional Purchase, Redemption, and
Exchange Information
c................................. *
20.................................... Distributions and Taxes
21 a, b............................. Contracts with FMR Affiliates; Distribution and
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
FEBRUARY 28, 1998
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the funds' current Prospectuses
(dated February 28, 1998) for Class A, Class T, Class B, Class C,
Institutional Class, and Initial Class shares. 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 for the Initial
Class of Fidelity Advisor Strategic Opportunities Fund, Fidelity
Advisor Mortgage Securities Fund, and Fidelity Advisor Municipal Bond
Fund, please call Fidelity at 1-800-544-8888 . To obtain a free
additional copy of a Prospectus or an Annual Report for Class A, Class
T, Class B, Class C, and Institutional Class, please call your
investment professional.
<TABLE>
<CAPTION>
<S> <C>
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Special Considerations Regarding Africa
Special Considerations Regarding Canada
Special Considerations Regarding Europe
Special Considerations Regarding Japan, the Pacific Basin, and Southeast Asia
Special Considerations Regarding Latin America
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
</TABLE>
ACOM-ptb-0298
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 TechnoQuantSM 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 Municipal Income Fund (formerly Fidelity Advisor High
Income Municipal Fund)
Fidelity Advisor Municipal Bond Fund
Fidelity Advisor Intermediate Municipal Income Fund
Fidelity Advisor Short-Intermediate 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
(FIIA(U.K.)L)
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, Class C, and Institutional Class - Taxable
Funds)
UMB Bank, n.a. (UMB) (Class A, Class T, Class B, Class C,
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, the investment policies and limitations
described in this SAI are not fundamental and may be changed without
shareholder approval.
INVESTMENT LIMITATIONS OF TECHNOQUANTSM 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 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.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF 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 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.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 15% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF 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 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.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 15% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF 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 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.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF 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 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.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF GROWTH OPPORTUNITIES FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities, 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 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.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF 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 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.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF 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 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.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF 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 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.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF 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 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.)
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF 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 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.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
beginning on page .
INVESTMENT LIMITATIONS OF 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 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.
With respect to limitation (v), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 15% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF 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 of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of companies
whose principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments
backed by real estate or securities of companies engaged in the real
estate business);
(7) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed
by physical commodities); or
(8) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company with substantially the
same fundamental investment objective, policies, and limitations as
the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The fund 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 borrow from other funds advised by
FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
(iv) The fund does not currently intend to purchase any security if,
as a result, more than 15% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 7.5%
of the fund's net assets) to a registered investment company or
portfolio for which FMR or an affiliate serves as investment adviser
or (b) acquiring loans, loan participations, or other forms of direct
debt instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (This limitation does not apply
to purchases of debt securities or to repurchase agreements.)
(vi) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 15% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF 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 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.
With respect to limitation (v), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 15% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF 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 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.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF 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 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.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF 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 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.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF 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 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.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF 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 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 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.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF 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 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.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF 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 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.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures contracts and options, see the
section entitled "Limitations on Futures and Options Transactions" on
page .
INVESTMENT LIMITATIONS OF 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 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.
With respect to limitation (v), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
THE FOLLOWING PAGES CONTAIN MORE DETAILED INFORMATION ABOUT TYPES OF
INSTRUMENTS IN WHICH A FUND MAY INVEST, STRATEGIES FMR MAY EMPLOY IN
PURSUIT OF A FUND'S INVESTMENT OBJECTIVE, AND A SUMMARY OF RELATED
RISKS. FMR MAY NOT BUY ALL OF THESE INSTRUMENTS OR USE ALL OF THESE
TECHNIQUES UNLESS IT BELIEVES THAT DOING SO WILL HELP A FUND ACHIEVE
ITS GOAL.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be,
"affiliated persons" of the fund under the 1940 Act. These
transactions may in volve repurchase agreements with custodian
banks; short-term obligations of, and repurchase agreements with, the
50 largest U.S. banks (measured by deposits); municipal securities;
U.S. Government securities with affiliated financial institutions that
are primary dealers in these securities; short-term currency
transactions; and short-term borrowings. In accordance with exemptive
orders issued by the Securities and Exchange Commission (SEC), the
Board of Trustees has established and periodically reviews procedures
applicable to transactions involving affiliated financial
institutions.
ASSET-BACKED SECURITIES represent interests in pools of mortgages,
loans, receivables or other assets. Payment of i nterest and
re payment of principal may be largely dependent upon
the cash flows generated by the assets backing the securities and, in
certain cases, supported by letters of credit , surety
bonds, or other credit enhancements. A sset-backed
securit y values may also be affected by the
creditworthiness of the servicing agent for the pool, the originator
of the loans or receivables, or the entities providing the
credit enhancement. In addition, these securities may be subject to
prepayment risk.
CLOSED-END INVESTMENT COMPANIES are investment companies that issue
a fixed number of shares which trade on a stock exchange or
over-the-counter. Closed-end investment companies are professionally
managed and may invest in any type of security. Shares of closed-end
investment companies may trade at a premium or a discount to their net
asset value. A fund may purchase shares of closed-end investment
companies to facilitate investment in certain foreign countries.
CONVERTIBLE SECURITIES are bonds, debentures, notes, preferred
stocks or other securities that may be converted or exchanged (by the
holder or by the issuer) into shares of the underlying common stock
(or cash or securities of equivalent value) at a stated exchange
ratio. A convertible security may also be called for redemption or
conversion by the issuer after a particular date and under certain
circumstances (including a specified price) established upon issue. If
a convertible security held by a fund is called for redemption or
conversion, the fund could be required to tender it for redemption,
convert it into the underlying common stock, or sell it to a third
party.
Convertible securities generally have less potential for gain or
loss than common stocks. Convertible securities generally provide
yields higher than the underlying common stocks, but generally lower
than comparable non-convertible securities. Because of this higher
yield, convertible securities generally sell at prices above their
"conversion value," which is the current market value of the stock to
be received upon conversion. The difference between this conversion
value and the price of convertible securities will vary over time
depending on changes in the value of the underlying common stocks and
interest rates. When the underlying common stocks decline in value,
convertible securities will tend not to decline to the same extent
because of the interest or dividend payments and the repayment of
principal at maturity for certain types of convertible securities.
However, securities that are convertible other than at the option of
the holder generally do not limit the potential for loss to the same
extent as securities convertible at the option of the holder. When the
underlying common stocks rise in value, the value of convertible
securities may also be expected to increase. At the same time,
however, the difference between the market value of convertible
securities and their conversion value will narrow, which means that
the value of convertible securities will generally not increase to the
same extent as the value of the underlying common stocks. Because
convertible securities may also be interest-rate sensitive, their
value may increase as interest rates fall and decrease as interest
rates rise. Convertible securities are also subject to credit risk,
and are often lower-quality securities.
COUNTRIES NOT CONSIDERED TO HAVE EMERGING MARKETS. As of December
31, 1997, the following countries are not considered to have emerging
markets: Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Ireland, Italy, Japan, the Netherlands, New Zealand,
Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, and
the United States.
DELAYED-DELIVERY TRANSACTIONS. Securities may be bought and
sold on a delayed-delivery or when-issued basis. These
transactions involve a commitment to purchase or sell specific
securities at a predetermined price or yield, with payment and
delivery taking place after the customary settlement period for that
type of security. Typically, no interest accrues to the purchaser
until the security is delivered. The funds may receive fees or
price concessions for entering into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, a
purchaser assumes the rights and risks of ownership, including
the risk s of price and yield fluctuations and the risk that
the security will not be issued as anticipated. Because payment
for the securities is not required until the delivery
date, these risks are in addition to the risks associated with
a fund's investments. If a fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding,
the delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, a fund will set aside
appropriate liquid assets in a segregated custodial account to cover
the purchase obligations. When a fund has sold a security on a
delayed-delivery basis, the fund does not participate in further gains
or losses with respect to the security. If the other party to a
delayed-delivery transaction fails to deliver or pay for the
securities, a fund could miss a favorable price or yield opportunity
or suffer a loss.
A fund may renegotiate a delayed-delivery transaction and may
sell the underlying securities before delivery, which
may result in capital gains or losses for the fund.
DIRECT INVESTMENT IN MORTGAGES. (Mortgage Securities Fund only)
Although the fund has no current intention to invest directly in
mortgages, it may invest up to 10% of its 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 payment of 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, FMR considers such
investments to be illiquid. The fund will invest in 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 .
Foreign investments involve risk s relating to local political,
economic, regulatory, or social instability, military action or
unrest, or adverse diplomatic developments, and may be affected by
actions of foreign governments adverse to the interests of U.S.
investors. Such actions may include expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency
into U.S. dollars, or other government intervention. There is no
assurance that FMR will be able to anticipate these potential events
or counter their effects. In addition, the value of securities
denominated in foreign currencies and of dividends and interest paid
with respect to such securities will fluctuate based on the relative
strength of the U.S. dollar.
It is anticipated that in most cases the best available market for
foreign securities will be on an exchange or in over-the-counter
(OTC) markets located outside of the United States. Foreign
stock markets, while growing in volume and sophistication, are
generally not as developed as those in the United States, and
securities of some foreign issuers may be less liquid and more
volatile than securities of comparable U.S. issuers. Foreign security
trading , settlement and custodial practices ( including
those involving securities settlement where fund assets may be
released prior to receipt of payment ) are often less developed than
those in U.S. markets, and may result in increased risk or
substantial delays in the event of a failed trade or the
insolvency of , or breach of duty by, a foreign
broker-dealer , securities depository or foreign subcustodian.
In addition, the costs associated with foreign
invest ments , including withholding taxes, brokerage commissions
and custodial costs, are generally higher than with U.S.
invest ments .
Foreign markets may offer less protection to investors than U.S.
markets. Foreign issuers are generally not bound by uniform
accounting, auditing, and financial reporting requirements and
standards of practice comparable to those applicable to U.S. issuers.
Adequate public information on foreign issuers may not be available,
and it may be difficult to secure dividends and information regarding
corporate actions on a timely basis. In general, there is less overall
governmental supervision and regulation of securities exchanges,
brokers, and listed companies than in the United States. OTC markets
tend to be less regulated than stock exchange markets and, in certain
countries, may be totally unregulated. Regulatory enforcement may be
influenced by economic or political concerns, and investors may have
difficulty enforcing their legal rights in foreign countries.
Some foreign securities impose restrictions on transfer within the
United States or to U.S. persons. Although securities subject to such
transfer restrictions may be marketable abroad, they may be less
liquid than foreign securities of the same class that are not subject
to such restrictions.
American Depositary Receipts (ADRs) as well as other "hybrid" forms of
ADRs, including European Depositary Receipts (EDRs) and Global
Depositary Receipts (GDRs), are certificates evidencing ownership of
shares of a foreign issuer. These certificates are issued by
depository banks and generally trade on an established market in the
United States or elsewhere. The underlying shares are held in trust by
a custodian bank or similar financial institution in the issuer's home
country. The depository bank may not have physical custody of the
underlying securities at all times and may charge fees for various
services, including forwarding dividends and interest and corporate
actions. ADRs are alternatives to directly purchasing the underlying
foreign securities in their national markets and currencies. However,
ADRs continue to be subject to many of the risks associated with
investing directly in foreign securities. These risks include foreign
exchange risk as well as the political and economic risks of the
underlying issuer's country.
The risks of foreign investing may be magnified for investments in
emerging markets. Security prices in emerging markets can be
significantly more volatile than those in more developed markets,
reflecting the greater uncertainties of investing in less established
markets and economies. In particular, countries with emerging markets
may have relatively unstable governments, may present the risks of
nationalization of businesses, restrictions on foreign ownership and
prohibitions on the repatriation of assets, and may have less
protection of property rights than more developed countries. The
economies of countries with emerging markets may be based on only a
few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt
burdens or inflation rates. Local securities markets may trade a small
number of securities and may be unable to respond effectively to
increases in trading volume, potentially making prompt liquidation of
holdings difficult or impossible at times.
FANNIE MAES AND FREDDIE MACS are pass-through securities issued by
Fannie Mae and Freddie Mac , respectively. Fannie Mae and
Freddie Mac , which guarantee payment of interest and
repayment of principal on Fannie Maes and Freddie Macs,
respectively, are federally chartered corporations supervised by
the U.S. Government that act 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 .
FEDERALLY TAXABLE SECURITIES . Under normal conditions, a
municipal fund do es not intend to invest in securities whose
interest is federally taxable. However, from time to time on a
temporary basis, a municipal fund may invest a portion of its assets
in fixed-income securities whose interest is subject to federal
income tax.
Should a municipal fund invest in federally taxable securities ,
it would purchase securities that, in FMR's judgment, are of high
quality. These would include s ecurities issued or guaranteed by
the U.S. Government or its agencies or instrumentalities ,
obligations of domestic banks , and repurchase agreements. A
municipal bond fund ' s standards for high-quality, taxable
securities are essentially the same as those described by
Moody's Investor s 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 securities are introduced before
Congress from time to time. Proposals also may be introduced before
state legislatures that would affect the state tax treatment of
a municipal fund ' s distributions. If such proposals were
enacted, the availability of municipal securities and the value
of a municipal fund ' s holdings would be affected and the
Trustees would reevaluate the fund ' s 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 counterparty desire to resell that currency to the dealer. Forward
contracts are customized transactions that require a specific amount
of a currency to be delivered at a specific exchange rate on a
specific date or range of dates in the future. Forward contracts are
generally traded in an interbank market directly between currency
traders (usually large commercial banks) and their customers. The
parties to a forward contract may agree to offset or terminate the
contract before its maturity, or may hold the contract to maturity and
complete the contemplated currency exchange. A fund may use currency
forward contracts for any purpose consistent with its investment
objective.
The following discussion summarizes the principal currency management
strategies involving forward contracts that could be used by a fund. A
fund may also use swap agreements, indexed securities, and options and
futures contracts relating to foreign currencies for the same
purposes.
A "settlement hedge" or "transaction hedge" is designed to protect a
fund against an adverse change in foreign currency values between the
date a security is purchased or sold and the date on which payment is
made or received. Entering into a forward contract for the purchase or
sale of the amount of foreign currency involved in an underlying
security transaction for a fixed amount of U.S. dollars "locks in" the
U.S. dollar price of the security. Forward contracts to purchase or
sell a foreign currency may also be used by a fund in anticipation of
future purchases or sales of securities denominated in foreign
currency, even if the specific investments have not yet been selected
by FMR.
A fund may also use forward contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. For
example, if a fund owned securities denominated in pounds sterling, it
could enter into a forward contract to sell pounds sterling in return
for U.S. dollars to hedge against possible declines in the pound's
value. Such a hedge, sometimes referred to as a "position hedge,"
would tend to offset both positive and negative currency fluctuations,
but would not offset changes in security values caused by other
factors. A fund could also hedge the position by selling another
currency expected to perform similarly to the pound sterling. This
type of hedge, sometimes referred to as a "proxy hedge," could offer
advantages in terms of cost, yield, or efficiency, but generally would
not hedge currency exposure as effectively as a direct hedge into U.S.
dollars. Proxy hedges may result in losses if the currency used to
hedge does not perform similarly to the currency in which the hedged
securities are denominated.
A fund may enter into forward contracts to shift its investment
exposure from one currency into another. This may include shifting
exposure from U.S. dollars to a foreign currency, or from one foreign
currency to another foreign currency. This type of strategy, sometimes
known as a "cross-hedge," will tend to reduce or eliminate exposure to
the currency that is sold, and increase exposure to the currency that
is purchased, much as if a fund had sold a security denominated in one
currency and purchased an equivalent security denominated in another.
Cross-hedges protect against losses resulting from a decline in the
hedged currency, but will cause a fund to assume the risk of
fluctuations in the value of the currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to set
aside appropriate liquid assets in a segregated custodial account to
cover currency forward contracts. As required by SEC guidelines, a
fund will segregate assets to cover currency forward contracts, if
any, whose purpose is essentially speculative. A fund will not
segregate assets to cover forward contracts entered into for hedging
purposes, including settlement hedges, position hedges, and proxy
hedges.
Successful use of currency management strategies will depend on FMR's
skill in analyzing currency values. Currency management strategies may
substantially change a fund's investment exposure to changes in
currency exchange rates and could result in losses to a fund if
currencies do not perform as FMR anticipates. For example, if a
currency's value rose at a time when FMR had hedged a fund by selling
that currency in exchange for dollars, a fund would not participate in
the currency's appreciation. If FMR hedges currency exposure through
proxy hedges, a fund could realize currency losses from both the hedge
and the security position if the two currencies do not move in tandem.
Similarly, if FMR increases a fund's exposure to a foreign currency
and that currency's value declines, a fund will realize a loss. There
is no assurance that FMR's use of currency management strategies will
be advantageous to a fund or that it will hedge at appropriate times.
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 a security purchased by a 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
markets 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 in which a fund may engage,
either individually or in conjunction with others, may include, among
others, supporting or opposing proposed changes in a company's
corporate structure or business activities; seeking changes in a
company's directors or management; seeking changes in a company's
direction or policies; seeking the sale or reorganization of the
company or a portion of its assets; or supporting or opposing
third - party takeover efforts. This area of corporate activity
is increasingly prone to litigation and it is possible that a fund
could be involved in lawsuits related to such activities. FMR will
monitor such activities with a view to mitigating, to the extent
possible, the risk of litigation against a fund and the risk of actual
liability if a fund is involved in litigation. No guarantee can be
made, however, that litigation against a fund will not be undertaken
or liabilities incurred.
FUTURES AND OPTIONS. The following paragraphs pertain to futures and
options: Asset Coverage for Futures and Options Positions, Combined
Positions, Correlation of Price Changes, Futures Contracts, Futures
Margin Payments, Limitations on Futures and Options Transactions,
Liquidity of Options and Futures Contracts, Options and Futures
Relating to Foreign Currencies, OTC Options, Purchasing Put and Call
Options, and Writing Put and Call Options.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The funds will
comply with guidelines established by the SEC with respect to coverage
of options and futures strategies by mutual funds and, if the
guidelines so require, will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held
in a segregated account cannot be sold while the futures or option
strategy is outstanding, unless they are replaced with other suitable
assets. As a result, there is a possibility that segregation of a
large percentage of a fund's assets could impede portfolio management
or the fund's ability to meet redemption requests or other current
obligations.
COMBINED POSITIONS involve purchasing and writ ing
options in combination with each other, or in combination with futures
or forward contracts, to adjust the risk and return characteristics of
the overall position. For example, purchasing a put option and
writ ing a call option on the same underlying instrument
would construct a combined position whose risk and return
characteristics are similar to selling a futures contract. Another
possible combined position would involve writing a call option at one
strike price and buying a call option at a lower price, to reduce the
risk of the written call option in the event of a substantial price
increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to
open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of
types of exchange-traded options and futures contracts, it is likely
that the standardized contracts available will not match a fund's
current or anticipated investments exactly. A fund may invest in
options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in
which the fund typically invests, which involves a risk that
the options or futures position will not track the performance of
the fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a
fund's investments well. Options and futures prices are affected by
such factors as current and anticipated short-term interest rates,
changes in volatility of the underlying instrument, and the time
remaining until expiration of the contract, which may not affect
security prices the same way. Imperfect correlation may also result
from differing levels of demand in the options and futures markets and
the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. A fund may purchase or sell
options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to
attempt to compensate for differences in volatility between the
contract and the securities, although this may not be successful in
all cases. If price changes in a fund's options or futures positions
are poorly correlated with its other investments, the positions may
fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
FUTURES CONTRACTS. In purchasing a futures contract, the
buyer agrees to purchase a specified underlying instrument at a
specified future date. In selling a futures contract, the
seller agrees to sell a specified underlying instrument at
a specified future date. The price at which the purchase and sale will
take place is fixed when the buyer and seller enter into the
contract. Some currently available futures contracts are based on
specific securities, such as U.S. Treasury bonds or notes, and some
are based on indices of securities prices, such as the Standard &
Poor's 500 Index (S&P 500(registered trademark)) or the Bond Buyer
Municipal Bond Index . Futures can be held until their delivery
dates, or can be closed out before then if a liquid secondary market
is available.
The funds may invest in futures based on such indexes as the CAC 40
(France), DAX 30 (Germany), EuroTop 100 (Europe), IBEX (Spain), FTSE
100 (United Kingdom), All Ordinary (Australia), Hang Seng (Hong Kong),
and Nikkei 225, Nikkei 300 and TOPIX (Japan).
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.
Although futures exchanges generally operate similarity in the U.S.
and abroad, foreign futures exchanges may follow different trading,
settlement and margin procedures than U.S. exchanges do. Futures
contracts traded outside the United States may involve greater risk of
loss than U.S.-traded contracts, including potentially greater risks
of losses due to insolvency of a futures broker, exchange member or
other party that may owe initial or variation margin to a fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading
Commission (CFTC) and the National Futures Association, which regulate
trading in the futures markets . The Funds intend to comply with
Rule 4.5 under the Commodity Exchange Act, which limits the extent to
which the fund s 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.
Each bond fund further limits its options and futures investments
to options and futures contracts relating to U.S. Government
securities.
The above limitations on the funds ' investments in
futures contracts and options, and the funds ' policies
regarding futures contracts and options discussed elsewhere in this
SAI, may be changed as regulatory agencies permit.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid secondary market will exist for any particular options or
futures contract at any particular time. Options may have relatively
low trading volume and liquidity if their strike prices are not close
to the underlying instrument's current price. In addition, exchanges
may establish daily price fluctuation limits for options and futures
contracts, and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days
when the price fluctuation limit is reached or a trading halt is
imposed, it may be impossible to enter into new positions or close out
existing positions. If the secondary market for a contract is not
liquid because of price fluctuation limits or otherwise, it could
prevent prompt liquidation of unfavorable positions, and potentially
could require a fund to continue to hold a position until delivery or
expiration regardless of changes in its value. As a result, a fund's
access to other assets held to cover its options or futures positions
could also be impaired.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except
that they are traded on exchanges (and have margin requirements) and
are standardized as to contract size and delivery date. Most currency
futures contracts call for payment or delivery in U.S. dollars. The
underlying instrument of a currency option may be a foreign currency,
which generally is purchased or delivered in exchange for U.S.
dollars, or may be a futures contract. The purchaser of a currency
call obtains the right to purchase the underlying currency, and the
purchaser of a currency put obtains the right to sell the underlying
currency.
The uses and risks of currency options and futures are similar to
options and futures relating to securities or indices, as discussed
above. A fund may purchase and sell currency futures and may purchase
and write currency options to increase or decrease its exposure to
different foreign currencies. Currency options may also
be purchase d or written in conjunction with each other or
with currency futures or forward contracts. Currency futures and
options values can be expected to correlate with exchange rates, but
may not reflect other factors that affect the value of a fund's
investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not
protect a fund against a price decline resulting from deterioration in
the issuer's creditworthiness. Because the value of a fund's
foreign-denominated investments changes in response to many factors
other than exchange rates, it may not be possible to match the amount
of currency options and futures to the value of the fund's investments
exactly over time.
OTC OPTIONS. Unlike exchange-traded options, which are standardized
with respect to the underlying instrument, expiration date, contract
size, and strike price, the terms of over-the-counter (OTC)
options (options not traded on exchanges) generally are
established through negotiation with the other party to the option
contract. While this type of arrangement allows the purchaser or
writer greater flexibility to tailor an option to its needs, OTC
options generally involve greater credit risk than exchange-traded
options, which are guaranteed by the clearing organization of the
exchanges where they are traded.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the
purchaser obtains the right (but not the obligation) to sell the
option's underlying instrument at a fixed strike price. In return for
this right, the purchaser pays the current market price for the
option (known as the option premium). Options have various types of
underlying instruments, including specific securities, indices of
securities prices, and futures contracts. The purchaser may
terminate its position in a put option by allowing it to expire or by
exercising the option. If the option is allowed to expire, the
purchaser will lose the entire premium. If the option is
exercised, the purchaser completes the sale of the underlying
instrument at the strike price. A purchaser may also terminate
a put option position by closing it out in the secondary market at its
current price, if a liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if
security prices fall substantially. However, if the underlying
instrument's price does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss
(limited to the amount of the premium, plus related transaction
costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right
to purchase, rather than sell, the underlying instrument at the
option's strike price. A call buyer typically attempts to participate
in potential price increases of the underlying instrument with risk
limited to the cost of the option if security prices fall. At the same
time, the buyer can expect to suffer a loss if security prices do not
rise sufficiently to offset the cost of the option.
WRITING PUT AND CALL OPTIONS. The writer of a put or call
option takes the opposite side of the transaction from the
option's purchaser. In return for receipt of the premium, the
writer assumes the obligation to pay the strike price for the
option's underlying instrument if the other party to the option
chooses to exercise it. The writer may seek to terminate
a position in a put option before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option, however, the writer must
continue to be prepared to pay the strike price while the option is
outstanding, regardless of price changes, and must continue to set
aside assets to cover its position. When writing an option on a
futures contract, a fund will be required to make margin payments to
an FCM as described above for futures contracts.
If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it
is likely that the writer will also profit, because it should be able
to close out the option at a lower price. If security prices fall, the
put writer would expect to suffer a loss. This loss should be less
than the loss from purchasing the underlying instrument directly,
however, because the premium received for writing the option should
mitigate the effects of the decline.
Writing a call option obligates the writer to sell or deliver
the option's underlying instrument, in return for the strike price,
upon exercise of the option. The characteristics of writing call
options are similar to those of writing put options, except that
writing calls generally is a profitable strategy if prices remain the
same or fall. Through receipt of the option premium, a call writer
mitigates the effects of a price decline. At the same time, because a
call writer must be prepared to deliver the underlying instrument in
return for the strike price, even if its current value is greater, a
call writer gives up some ability to participate in security price
increases.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed
of in the ordinary course of business at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees,
FMR determines the liquidity of a fund's investments and, through
reports from FMR, the Board monitors investments in illiquid
instruments. In determining the liquidity of a fund's investments, FMR
may consider various factors, including (1) the frequency of trades
and quotations, (2) the number of dealers and prospective purchasers
in the marketplace, (3) dealer undertakings to make a market, (4) the
nature of the security (including any demand or tender features) and
(5) the nature of the marketplace for trades (including the ability to
assign or offset the fund's rights and obligations relating to the
investment).
Investments currently considered by FMR to be illiquid include
repurchase agreements not entitling the holder to re payment of
principal and payment of interest within seven days ,
over-the-counter options, and non-government-stripped fixed-rate
mortgage-backed securities . 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 T rustees.
INDEXED SECURITIES are instruments whose prices are indexed to
the prices of other securities, securities indices, currencies,
precious metals or other commodities, or other financial indicators.
Indexed securities typically, but not always, are debt securities or
deposits whose value at maturity or coupon rate is determined by
reference to a specific instrument or statistic.
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.
Mortgage-indexed securities, for example, could be structured to
replicate the performance of mortgage securities and the
characteristics of direct ownership.
Gold-indexed securities typically provide for a maturity value that
depends on the price of gold, resulting in a security whose price
tends to rise and fall together with gold prices. Currency-indexed
securities typically are short-term to intermediate-term debt
securities whose maturity values or interest rates are determined by
reference to the values of one or more specified foreign currencies,
and may offer higher yields than U.S. dollar-denominated securities.
Currency-indexed securities may be positively or negatively indexed;
that is, their maturity value may increase when the specified currency
value increases, resulting in a security that performs similarly to a
foreign-denominated instrument, or their maturity value may decline
when foreign currencies increase, resulting in a security whose price
characteristics are similar to a put on the underlying currency.
Currency-indexed securities may also have prices that depend on the
values of a number of different foreign currencies relative to each
other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency , or other instrument to
which they are indexed, and may also be influenced by interest rate
changes in the United States and abroad. Indexed securities may be
more volatile than the underlying instruments. I ndexed securities
are also subject to the credit risks associated with the issuer
of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Recent issuers of indexed
securities have included banks, corporations, and certain U.S.
Government agencies.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive
order issued by the SEC, a fund may lend money to, and borrow
money from, other funds advised by FMR or its affiliates. Municipal
Income, Municipal Bond, Intermediate Municipal Income, and
Short-Intermediate 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 , and will lend through the program only when the returns are
higher than those available from an investment in repurchase
agreements . Interfund loans and borrowings normally extend
overnight, but can have a maximum duration of seven days. Loans may be
called on one day's notice. A fund may have to borrow from a bank at a
higher interest rate if an interfund loan is called or not renewed.
Any delay in repayment to a lending fund could result in a lost
investment opportunity or additional borrowing costs.
INVERSE FLOATERS have variable interest rates that typically move in
the opposite direction from movements in prevailing short-term
interest rate levels - rising when prevailing short-term interest
rates fall, and vice versa. The prices of inverse floaters
can be considerably more volatile than the price of bonds
with comparable maturities.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. Direct debt instruments are
interests in amounts owed by a corporate, governmental, or other
borrower to lenders or lending syndicates (loans and loan
participations), to suppliers of goods or services (trade claims or
other receivables), or to other parties. Direct debt instruments are
subject to a fund's policies regarding the quality of debt
securities.
Purchasers of loans and other forms of direct indebtedness depend
primarily upon the creditworthiness of the borrower for payment of
interest and repayment of principal . Direct debt instruments
may not be rated by any nationally recognized statistical
rating service. If scheduled interest or principal payments are not
made , the value of the instrument may be adversely
affected. Loans that are fully secured provide more protections
than an unsecured loan in the event of failure to make
scheduled interest or principal payments . However, there is no
assurance that the liquidation of collateral from a secured loan would
satisfy the borrower's obligation, or that the collateral could be
liquidated. Indebtedness of borrowers whose creditworthiness is poor
involves substantially greater risks and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off
their indebtedness, or may pay only a small fraction of the amount
owed. Direct indebtedness of developing countries also involves a risk
that the governmental entities responsible for the repayment of the
debt may be unable, or unwilling, to pay interest and repay principal
when due.
Investments in loans through direct assignment of a financial
institution's interests with respect to a loan may involve additional
risks. For example, if a loan is foreclosed, the purchaser
could become part owner of any collateral, and would bear the costs
and liabilities associated with owning and disposing of the
collateral. In addition, it is conceivable that under emerging legal
theories of lender liability, a purchaser could be held liable
as a co-lender. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary. Direct debt
instruments that are not in the form of securities may offer less
legal protection to the purchaser in the event of fraud or
misrepresentation. In the absence of definitive regulatory guidance,
FMR uses its research to attempt to avoid situations
where fraud or misrepresentation could adversely affect a fund.
A loan is often administered by a bank or other financial institution
that acts as agent for all holders. The agent administers the terms of
the loan, as specified in the loan agreement. Unless, under the terms
of the loan or other indebtedness, the purchaser has direct
recourse against the borrower, the purchaser may have to rely
on the agent to apply appropriate credit remedies against a borrower.
If assets held by the agent for the benefit of a purchaser were
determined to be subject to the claims of the agent's general
creditors, the purchaser might incur certain costs and delays
in realizing payment on the loan or loan participation and could
suffer a loss of principal or interest.
Direct indebtedness may include letters of credit, revolving credit
facilities, or other standby financing commitments that obligate
purchasers to make additional cash payments on
demand. These commitments may have the effect of requiring a
purchaser to increase its investment in a borrower at a time when
it would not otherwise have done so, even if the borrower's condition
makes it unlikely that the amount will ever be repaid. A fund will set
aside appropriate liquid assets in a segregated custodial account to
cover its potential obligations under standby financing commitments.
Each fund limits the amount of total assets that it will invest in any
one issuer or in issuers within the same industry (see each fund's
investment limitations). For purposes of these limitations, a fund
generally will treat the borrower as the "issuer" of indebtedness held
by the fund. In the case of loan participations where a bank or other
lending institution serves as financial intermediary between a fund
and the borrower, if the participation does not shift to the fund the
direct debtor-creditor relationship with the borrower, SEC
interpretations require a fund, in appropriate circumstances,
to treat both the lending bank or other lending institution and the
borrower as "issuers" for these purposes. Treating a financial
intermediary as an issuer of indebtedness may restrict a fund's
ability to invest in indebtedness related to a single financial
intermediary, or a group of intermediaries engaged in the same
industry, even if the underlying borrowers represent many different
companies and industries.
LOWER-QUALITY DEBT SECURITIES. L ower-quality debt securities
have poor protection with respect to the payment of interest and
repayment of principal, or may be in default. These securities are
often considered to be speculative and involve greater risk of loss or
price changes due to changes in the issuer's capacity to pay. The
market prices of lower-quality debt securities may fluctuate more than
those of higher-quality debt securities and may decline significantly
in periods of general economic difficulty, which may follow periods of
rising interest rates.
While the market for high-yield corporate debt securities has been in
existence for many years and has weathered previous economic
downturns, the 1980s brought a dramatic increase in the use of such
securities to fund highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication
of the future performance of the high-yield bond market, especially
during periods of economic recession.
The market for lower-quality debt securities may be thinner and less
active than that for higher-quality debt securities, which can
adversely affect the prices at which the former are sold. If market
quotations are not available, lower-quality debt securities will be
valued in accordance with procedures established by the Board of
Trustees, including the use of outside pricing services. Judgment
plays a greater role in valuing high-yield debt securities than is the
case for securities for which more external sources for quotations and
last-sale information are available. Adverse publicity and changing
investor perceptions may affect the liquidity of
lower-quality debt securities and the ability of outside
pricing services to value lower-quality debt securities.
Since the risk of default is higher for lower-quality debt securities,
FMR's research and credit analysis are an especially important part of
managing securities of this type . FMR will attempt to identify
those issuers of high-yielding securities whose financial condition is
adequate to meet future obligations, has improved, or is expected to
improve in the future. FMR's analysis focuses on relative values based
on such factors as interest or dividend coverage, asset coverage,
earnings prospects, and the experience and managerial strength of the
issuer.
A fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as a security
holder to seek to protect the interests of security holders if it
determines this to be in the best interest of the fund's shareholders.
MORTGAGE-BACKED SECURITIES are issued by government and
non-government entities such as banks, mortgage lenders, or other
institutions. A mortgage-backed security is an obligation of the
issuer backed by a mortgage or pool of mortgages or a direct interest
in an underlying pool of mortgages. Some mortgage-backed securities,
such as collateralized mortgage obligations ( or
" CMOs "), make payments of both principal and interest at
a range of specified intervals; others make semiannual
interest payments at a predetermined rate and repay principal at
maturity (like a typical bond). Mortgage-backed securities are based
on different types of mortgages , including those on commercial
real estate or residential properties. Stripped mortgage-backed
securities are created when the interest and principal components of a
mortgage-backed security are separated and sold as individual
securities. In the case of a stripped mortgage-backed security, the
holder of the "principal-only" security (PO) receives the principal
payments made by the underlying mortgage, while the holder of the
"interest-only" security (IO) receives interest payments from the same
underlying mortgage.
The value of mortgage-backed securities may change due to shifts in
the market's perception of issuers and changes in interest
rates . In addition, regulatory or tax changes may adversely affect
the mortgage-backed securities market as a whole.
Non-government mortgage-backed securities may offer higher yields than
those issued by government entities, but also may be subject to
greater price changes than government issues. Mortgage-backed
securities are subject to prepayment risk. Prepayment occurs when
unscheduled or early payments are made on the underlying mortgages,
usually in response to a reduction in interest rates. Mortgage-backed
security values may also be adversely affected when prepayments on
underlying mortgages do not occur. The prices of stripped
mortgage-backed securities tend to be more volatile in response to
changes in interest rates than those of non-stripped mortgage-backed
securities.
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 these obligations directly as a lessor of
the property, but will purchase a participation interest in a
municipal obligation from a bank or other third party. A participation
interest gives the purchaser a specified, undivided interest in
the obligation in proportion to its purchased interest in the total
amount of the issue .
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. 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. 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
generally are secured by the revenues derived from mortgages purchased
with the proceeds of the bond issue. It is extremely difficult to
predict the supply of available mortgages to be purchased with the
proceeds of an issue or the future cash flow from the underlying
mortgages. Consequently, there are risks that proceeds will exceed
supply, resulting in early retirement of bonds, or that homeowner
repayments will create an irregular cash flow. Many factors may affect
the financing of multi-family housing projects, including acceptable
completion of construction, proper management, occupancy and rent
levels, economic conditions, and changes to current laws and
regulations.
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 who
uses the airport as a hub. Air traffic generally follows 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 INVESTMENT TRUSTS. Equity real estate investment trusts
own real estate properties, while mortgage real estate investment
trusts make construction, development, and long-term mortgage loans.
Their value may be affected by changes in the value of the underlying
property of the trusts, the creditworthiness of the issuer, property
taxes, interest rates, and tax and regulatory requirements, such as
those relating to the environment. Both types of trusts are dependent
upon management skill, are not diversified, and are subject to heavy
cash flow dependency, defaults by borrowers, self-liquidation, and the
possibility of failing to qualify for tax-free status of income under
the Internal Revenue Code and failing to maintain exemption from the
1940 Act.
REFUNDING CONTRACTS. Securities may be purchase d 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 purchaser 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 purchaser generally will not
be obligated to pay the full purchase price if the issuer 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 purchaser 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.
As protection against the risk that the original seller will
not fulfill its obligation, the securities are held in a
separate account at a bank, marked-to-market daily, and maintained
at a value at least equal to the sale price plus the accrued
incremental amount. While it does not presently appear possible to
eliminate all risks from these transactions (particularly the
possibility that the value of the underlying security will be less
than the resale price, as well as delays and costs to a fund in
connection with bankruptcy proceedings), the funds will engage
in repurchase agreement transactions with parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part
of the registration expense and a considerable period may elapse
between the time it decides to seek registration and the time it may
be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to
develop, a fund might obtain a less favorable price than prevailed
when it decided to seek registration of the security.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
fund sells a security to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase that
security at a n agreed-upon price and time. While a reverse
repurchase agreement is outstanding, a fund will maintain appropriate
liquid assets in a segregated custodial account to cover its
obligation under the agreement. The fund s will enter
into reverse repurchase agreements with parties whose creditworthiness
has been reviewed and found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of fund
assets and may be viewed as a form of leverage.
SECURITIES LENDING. A fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity
Brokerage Services, Inc. (FBSI). FBSI is a member of the New York
Stock Exchange (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 other
eligible securities. Investing this cash subjects that investment,
as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
SHORT SALES "AGAINST THE BOX." A fund may sell securities short
when it owns or has the right to obtain securities equivalent in kind
or amount to the securities sold short. Such short sales are known as
short sales "against the box." If a fund enters into a short sale
against the box, it will be required to set aside securities
equivalent in kind and amount to the securities sold short (or
securities convertible or exchangeable into such securities) and will
be required to hold such securities while the short sale is
outstanding. The fund will incur transaction costs, including interest
expenses, in connection with opening, maintaining, and closing short
sales against the box.
SHORT SALES. A fund may enter into short sales with respect to stocks
underlying its convertible security holdings. For example, if FMR
anticipates a decline in the price of the stock underlying a
convertible security a fund holds, it may sell the stock short. If the
stock price subsequently declines, the proceeds of the short sale
could be expected to offset all or a portion of the effect of the
stock's decline on the value of the convertible security. Each
fund currently intends to hedge no more than 15% of its total assets
with short sales on equity securities underlying its convertible
security holdings under normal circumstances.
When a fund enters into a short sale, it will be required to set aside
securities equivalent in kind and amount to 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
expenses, in connection with opening, maintaining, and closing short
sales.
SOVEREIGN DEBT OBLIGATIONS are 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 pay interest when due, and may require renegotiation or
rescheduling of debt payments. In addition, prospects for repayment of
principal and payment of interest may depend on political as
well as economic factors. Although some sovereign debt, such as
Brady Bonds, is collateralized by U.S. Government securities,
repayment of principal and payment of interest is not guaranteed by
the U.S. Government.
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 generally marketable ; and the possibility that
the maturities of the underlying securities may be different from
those of the commitments.
STRIPPED GOVERNMENT SECURITIES. Stripped government securities are
created by separating the income and principal components of a U.S.
Government security and selling them separately. STRIPS (Separate
Trading of Registered Interest and Principal of Securities) are
created when the coupon payments and the principal payment are
stripped from an outstanding U.S. Treasury security by a Federal
Reserve Bank.
Privately stripped government securities are created when a dealer
deposits a U.S. Treasury security or other U.S. Government security
with a custodian for safekeeping. The custodian issues separate
receipts for the coupon payments and the principal payment, which the
dealer then sells.
SWAP AGREEMENTS can be individually negotiated and structured to
include exposure to a variety of different types of investments
or market factors. Depending on their structure, swap agreements may
increase or decrease a fund's exposure to long- or short-term interest
rates (in the United States or abroad), foreign currency values,
mortgage securities, corporate borrowing rates, or other factors such
as security prices or inflation rates. Swap agreements can take many
different forms and are known by a variety of names.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a
fee by the other party. For example, the buyer of an interest rate cap
obtains the 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 the fund's exposure to
U.S. interest rates and increase its exposure to foreign currency and
interest rates. Caps and floors have an effect similar to buying or
writing options. Depending on how they are used, swap agreements may
increase or decrease the overall volatility of a fund's investments
and its share price and yield.
The most significant factor in the performance of swap agreements is
the change in the specific interest rate, currency, or other factors
that determine the amounts of payments due to and from a fund. If a
swap agreement calls for payments by the fund, the fund must be
prepared to make such payments when due. In addition, if the
counterparty's creditworthiness declined, the value of a swap
agreement would be likely to decline, potentially resulting in losses.
A fund may be able to eliminate its exposure under a
swap agreement either by assignment or other disposition, or by
entering into an offsetting swap agreement with the same party or a
similarly creditworthy party.
A fund will maintain appropriate liquid assets in a segregated
custodial account to cover its current obligations under swap
agreements. If a fund enters into a swap agreement on a net basis, it
will segregate assets with a daily value at least equal to the excess,
if any, of the fund's accrued obligations under the swap agreement
over the accrued amount the fund is entitled to receive under the
agreement. If a fund enters into a swap agreement on other than a net
basis, it will segregate assets with a value equal to the full amount
of the fund's accrued obligations under the agreement.
TENDER OPTION BONDS are created by coupling an intermediate - or
long-term, fixed-rate, municipal 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 , 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 AND FLOATING RATE SECURITIES provide for periodic
adjustments in the interest rate paid on the security. Variable rate
securities provide for a specified periodic adjustment in the interest
rate, while floating rate securities have interest rates that change
whenever there is a change in a designated benchmark rate. Some
variable or floating rate securities are structured with put features
that permit holders to demand payment of the unpaid principal balance
plus accrued interest from the issuers or certain financial
intermediaries.
In many instances bonds and participation interests have tender
options or demand features that permit the holder to tender (or
put) the bonds to an institution at periodic intervals and to receive
the principal amount thereof. V ariable rate instruments
structured in this fashion are considered to be essentially
equivalent to other variable rate securities . The IRS has not
ruled whether the interest on these instruments is tax-exempt.
F ixed-rate bonds that are subject to third party puts and
participation interests in such bonds held by a bank in trust or
otherwise may have similar features .
WARRANTS. Warrants are instruments which entitle the holder to
buy an equity securit y at a specific price for a
specific period of time. Changes in the value of a warrant
do not necessarily correspond to changes in the value of its
underlying security. The price of a warrant may be more volatile
than the price of its underlying securit y, and a
warrant 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 securit y and do not represent any
rights in the assets of the issuing company. 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 BOND S do not make interest payments; instead, they
are sold at a discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be more volatile than other types
of fixed-income securities when interest rates change. In
calculating a fund 's dividend, a portion of the difference
between a zero coupon bond's purchase price and its face value is
considered income .
SPECIAL CONSIDERATIONS REGARDING AFRICA
Africa is a highly diverse and politically unstable continent of over
50 countries and 720 million people. Much of this region has been
beset by civil wars, coups and even genocidal warfare in recent years.
Nevertheless, it is home to an abundance of natural resources,
including natural gas, aluminum, crude oil, copper, iron, bauxite,
cotton, diamonds and timber. Wealthier countries generally have strong
connections to European partners, and evidence of these relationships
is seen in the growing market capitalization and foreign investment.
Economic performance is closely tied to world commodity markets,
particularly oil, and also to agricultural conditions, such as
drought.
Five African countries are among the 20 fastest growing in the
world (Uganda, Ivory Coast, Botswana, Angola and Zimbabwe) with
1996 GDP growth rates ranging from 5. 0 % to 6. 2 %.
Several African countries in the north have substantial oil reserves
and accordingly their economies react strongly to world oil prices.
They share a regional and sometimes religious identification with the
oi l- producing nations of the Middle East and can be strongly
affected by political and economic developments in those countries. As
in the south, weather conditions also have a strong impact on many of
their natural resources, and, as was the case in 1995, severe drought
can adversely effect economic growth.
Ten African countries have active equity markets (Botswana, Egypt,
Ghana, Kenya, Morocco, Nigeria, South Africa, Tunisia, Zambia, and
Zimbabwe). The oldest market, in Egypt, was established in 1883, while
the youngest, in Zambia, was established in 1994. Four additional
markets have been established since 1989, and the mean age for all
equity markets is 40 years old. A total of 1,697 firms are listed on
the respective exchanges. Total market capitalization for these
countries in 1996 was 280 billion, an average increase of 63% over
1995 levels.
SPECIAL CONSIDERATIONS REGARDING CANADA
Canada is one of the richest nations in the world in terms of natural
resources. Within this sector particularly strong commodities are
forest products, mining and metals products, and agricultural products
such as grains. Additionally, energy related products such as oil, gas
and hydroelectricity are important components of their economy.
Accordingly, the Canadian stock market is strongly represented by such
basic materials stocks, and movements in the supply and demand of
industrial materials, agriculture, and energy, both domestically and
internationally, can have a strong effect on market performance.
Canada is a confederation of 10 provinces with a parliamentary system
of government. The area, the world's second largest nation by
landmass, is inhabited by 30.2 million people, most of whom are
dece ndants of France, the United Kingdom and indigenous
peoples. The country has a work force of over 15 million, spread out
over a variety of industries from trade, manufacturing and mining to
finance, construction and government. While the country has many
institutions which closely parallel the U . S . , such as a
transparent stock market and similar accounting practices, it differs
from the U . S . in that it has an extensive social welfare
system, much more akin to European welfare states.
The confederated structures combined with recent financial pressure on
the federal government have pushed some provinces, Quebec in
particular, to call for a reevaluation of the legal and financial
relationships between the federal government in Ottawa and the
provinces. This issue came to a head in 1995 with a referendum on
Quebec sovereignty, which was ultimately won by Ottawa
(50.56%-49.44%). The very narrow defeat of the referendum and the
return of Bloc Quebecois to parliament with a lower but still
substantial number of seats indicate that the issue is far from
resolved. Accordingly, a large amount of the government's energy is
spent considering new constitutional arrangements. In the meantime,
markets react to the periodic escalations of separatist calls with
caution.
The current government of the Liberal party was reelected in June 1997
with a clear majority of 155 of the 301 parliamentary seats. This is a
drop in majority status during their previous government, during which
they held 60% of the seats. Opposition is currently divided amongst 4
parties, none of which occupies more than 60 seats. T he
Conservatives ha ve had to fight back onto the political stage
after being marginalized in the 1993 elections. Reclaiming enough
seats in 1997 to be restored to official status, the Conservatives
currently hold 20 seats.
Economically, GDP growth in Canada was 1.5% in 1996, down from 2.3% in
1995. Driving growth was optimism in the government's stability and
fiscal health following the Quebec referendum and the achievement of a
current account surplus (which was subsequently lost, then regained in
early 1997). Particularly strong market performers were financial
services, real estate, utilities and merchandising. Consumer demand
was strong in 1996, financed by borrowing.
The Bank of Canada is fairly independent from the government and has
the latitude to manipulate interest rates to keep inflation within its
self imposed target of less than 3%. The Canadian dollar has benefited
from internal fiscal successes, specifically the balancing of the
current account. Despite the strong link to the US dollar, the Bank of
Canada won't automatically raise rates in response to
U . S . hikes.
The U . S . is Canada's biggest trading partner,
representing over 75% of total trade. Strong export industries are
energy, mining and forest products. Canada is the largest energy
supplier to the U . S . Main imports are industrial
machinery and chemicals. The U . S . is also Canada's
largest foreign investor, responsible for 71% of all FDI in Canada
(worth approximately $87 billion). Main targets for investment are
metals and mining industries, energy, and finance.
Recently the Finance Ministry has kept demands for spending on social
programs at bay in the name of eradicating the budget deficit. Once
they feel this is firmly behind them, social spending could possibly
resume.
Privatization programs, meeting gathering opposition from trade
unions, interest groups and the general public, are slowly shrinking,
with many large-scale services remaining public.
There are four primary securities exchanges in Canada: Toronto,
Montreal, Vancouver, and Alberta. The Toronto and Montreal exchanges
list the older, larger, more established firms. Combined, these two
exchanges accounted for 95.2% of the total trading value in 1996. The
Vancouver and Alberta exchanges list smaller, younger start up firms
which tend to represent the natural resource sector. In 1996 these two
exchanges accounted for 4.8% of the total value of equity trading.
SPECIAL CONSIDERATIONS REGARDING EUROPE
Europe can be divided into two categories of market
development: the developed economies of Western Europe1<F4>1, and the
transition economies of Eastern Europe2<F3>. As a whole, Europe
witnessed a slowdown in growth in 1996, down to 1.7% from its 1995
level of 2.5%. Inflation decreased to 4.6%, down from 5.1% in 1995.
The weak growth performance in Germany had an effect on the region as
a whole, largely due to the role Germany plays as a primary trading
partner to most European countries.
In the W est, GDP growth averaged 2.5%, unemployment 9.2% and
inflation 6.8%3<F2>. Twelve of the countries enjoy both positive trade
balances and positive current accounts balances, while seven do not.
Likewise, in the E ast growth averaged 3.1%, while inflation
averaged 26%4<F1>. All countries save Bulgaria saw trade and current
accounts deficits.
Stock market performance in the W estern countries was strong.
Over 9100 firms, both foreign and domestic, are listed on the
exchanges throughout the region. Total market capitalization in the
west was over $9 trillion in 1996. Market capitalization totals grew
over their 1995 levels on an average of 31%, with notable performances
by Turkey and Greece, both growing by almost 50%. Trading value
turnover increased in all countries save Austria and Ireland, and the
average increase across the region was 29%.
The European Union (EU) consists of 15 countries of W estern
Europe: Austria, Belgium, Denmark, Finland, France, Germany, Greece,
Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and
the UK. The six founding countries first formed an economic
community in the 1950's to bring down trade barriers such as taxes and
quotas, to eliminate technical restrictions such as special standards
and regulations for foreigners, and coordinate various industrial
policies, such as agriculture. The group has admitted new members in
the 1970's and most recently in 1995 when Austria, Finland and Sweden
joined. By that time the community had changed its legal status to the
EU and reaffirmed their goal of creating a single, unified
market that would, at 372.6 million people, be the largest in the
developed world. The notion is to create a union through which goods,
people, and capital could move freely. A second component of the EU is
the creation of a single currency to replace each of the member
countries' domestic currencies. In preparation for the creation of
this currency, to be called the Euro, the Exchange Rate Mechanism
(ERM) was established to keep the various national currencies with a
pre-specified value relative to each other. In 1999 there is planned
the establishment of the Economic and Monetary Union (EMU), as set
forth by the Maastricht Treaty. At this point the Euro will be
introduced and those countries which both qualify and desire to join
will join. Beyond 1999 there will be opportunities for new countries
to join the EMU.
The year 1997 is significant for members of the EU as it is the
initial reference year for evaluating debt levels and deficits within
the criteria set forth by the Maastricht treaty. Specifically, the
Maastricht criteria includes, amongst other indicators, an inflation
rate below 3.3%, a public debt below 60% of GDP, and a deficit of 3%
or less of GDP. Failure to meet the Maastricht levels could delay the
realization of EMU by 1999. Many political battles are currently being
waged over the issue of how much debt and deficit reducing policies
should be undertaken. Pressure to increase fiscal spending is strong,
particularly given the slow growth and high unemployment. Indeed,
unemployment rates, which range from 3.2% in Luxembourg to 22% in
Spain and which average 9.9%, are currently seen as the biggest
threats to EMU.
In 1996, the EU averaged a 6.85% inflation rate, a 75.98% government
debt, and a 3.62% budget deficit. Only three countries meet the
necessary debt levels, four countries meet the required deficit
levels, and only 1 meets both (Luxembourg). Broadly speaking, the
success of left of center parties in recent elections in various
countries is a signal that citizens and at least some politicians are
now more hesitant to move rapidly toward EMU.
Many foreign and domestic firms are establishing themselves or
increasing their activity in Europe in anticipation of the unified
single market. Clear, confident signals of what a diverse,
multi-industrial, unified market under a single currency could look
like have been the impetus for increases in market activity, corporate
development and mergers and acquisitions. A successful EMU could prove
be an engine for sustained growth.
Nevertheless, much discussion of liberalizing the Maastricht criteria
is coming about as 1999 approaches and the prospects of achieving a
successful implementation of the EMU is seen by many as slim. Should
this happen, the political ramifications and the strength of the EMU
would become unpredictable, as many politicians have staked their
credibility on meeting the EMU deadline.
In the meantime, the expansion of the EU to include other countries in
W estern and Eastern Europe serves as a strong political impetus
for many governments to employ tight fiscal and monetary policies.
Particularly for the E astern European countries, aspirations to
join the EU are likely to push governments to act decisively. At the
same time, there could become an increasingly obvious gap between rich
and poor both within the aspiring countries and also between those
countries who are close to meeting membership criteria and those who
are not. Realigning traditional alliances could result in altering
trading relationships and potentially provoking divisive
socio-economic splits.
The economies of the E ast are embarking on the transition from
communism at different paces with appropriately different
characteristics. War - torn Croatia's economy crossed firmly into
positive growth levels for the first time since it split from
Yugoslavia while the rapidly developing Polish and Czech economies
continued their strong advance, responded to rising levels of
investment, domestic consumption, exchange rate stability, and export
growth. To be sure, one country's recipe for success is unique from
all other countries. Inflation and unemployment levels differ widely,
and the search for a `transition strategy' remains confined to the
dictates of local conditions.
In some countries, such as Albania and Romania, political events and
policy failures severely hindered economic recovery. In others, such
as Serbia, extreme political events prevent the gathering of accurate
macroeconomic data. Politically, what separates these countries from
the rest is not that they have relied on the leadership of former
communists, but that these politicians have continued to reject the
libertarian economic principles that their counterparts in other
E astern countries have been implementing. Part of this
rejection includes the failure to establish an effective and
legitimate legal infrastructure. This position isolates these
countries from both the west and their multinational organizations.
For the more developed E astern economies, partnership with
W estern institutions such as the EU and NATO serve as
incentives to balance the demands of the citizens with fiscal
austerity. As relationships develop and confidence rises, investment
in these economies increases. In the E ast established stock
markets now exist in Bulgaria, Croatia, Czech Republic, Hungary,
Poland, Slovenia and Slovakia. Over 330 firms are listed on the
various exchanges, and in 1996 total market capitalization was $38.3
billion. This represents an average increase of 193% over 1995.
Trading value turnover in 1996 went up 287% on average.
Strong sectors for these economies are mostly industrial such as
automotives and machinery. Also strong are manufacturing sectors,
chemicals and pharmaceuticals. Service industries are not extensively
developed, but financial services are increasing. Natural resources,
particularly oil and minerals, are weak.
As this region continues to develop, it is possible that the massive
drops in output that followed the collapse of the Soviet Union are
well behind and that for many economies a significant corner has been
turned toward positive growth. Economies, which work to tie their
future to an integrated, global economy, are likely to continue to
receive the aid and investment from the west that has helped bring
them along so far. Still, the key component of a successful transition
for all of these countries is political commitment to support the
civil institutions that will ultimately replace the monolithic welfare
state. With 113 million people, diverse industry and an well-educated
work force, Eastern Europe is a promising market.
REAL GDP ANNUAL RATE OF GROWTH
(ANNUAL % CHANGE)
1996
Denmark 1.8%
France 0.9%
Germany 1.3%
Italy 0.8%
Netherlands 2.2%
Spain 2.1%
Switzerland 0.0%
United Kingdom 2.2%
Source: The Economist. The LGT Guide to World Equity Markets 1997.
<F1>4 This average inflation rate includes the exceptionally high rate
in Bulgaria (125.0%). Without this outlier, inflation across the
region averaged 17.0%.
<F2>3 This average inflation rate includes the exceptionally high rate
in Turkey (86.0%). Without this outlier, inflation across the region
averaged 2.4%.
<F3>2 Albania, Bulgaria, Croatia, Czech Republic, Estonia, Hungary,
Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia.
<F4>1 Austria, Belgium, Denmark, Finland, France, Germany, Greece,
Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal,
Spain, Sweden, Switzerland, Turkey, United Kingdom.
For national stock market index performance, please see the section on
Performance beginning on page .
SPECIAL CONSIDERATIONS REGARDING JAPAN, THE PACIFIC BASIN, AND
SOUTHEAST ASIA
Asia has undergone an impressive economic transformation in the past
decade. Many developing economies, utilizing massive foreign
investments, established themselves as inexpensive producers of
manufactured and re-manufactured consumer goods for export. As
household incomes rose, birth was given to rising middle classes,
stimulating domestic consumption. More recently, large projects in
infrastructure and energy resource development have been undertaken,
again utilizing cheap labor, foreign investment, and a business
friendly regulatory environment. During the course of development,
governments, which are democratic, at least in a formal sense, fought
to maintain the stability and control necessary to attract investment
and provide labor. Subsequently, Asian countries today are coming
under increasing, if inconsistent, pressure from W estern
governments regarding human rights practices.
GDP growth in Asia increased in 1996 to 4.9% over its 1995 level of
3.2%. It is the fastest growing region of the world, with China
leading the way at 9.1%. Of the 20 fastest growing economies in the
world, half of them are in Asia. Inflation in 1996 was reduced to
2.6%, down from 3.0% the previous year. Nevertheless it is a
significant concern given the areas high levels of domestic
consumption and capital inflows.
Manufacturing exports declined significantly in 1996, due to drops in
demand, increased competition, and also strong U.S . dollar
performance. This is particularly true of electronics, a critical
industry for several Asian economies. Declines in exports reveal how
much of the recent growth in these countries is dependent on their
trading partners. Many Asian exports are priced in dollars, while the
majority of its imports are paid for in local currencies. A stable
exchange rate between the dollar and other Asian currencies is
important to Asian trade balances.
Despite the impressive economic growth experienced by Asia's emerging
economies, currency and economic concerns have recently roiled these
markets. Over the summer of 1997, a plunge in Thailand's currency set
off a wave of currency depreciations throughout South and Southeast
Asia. The Thai crisis was brought on by the country's failure to take
steps to curb its current-account deficit, reduce short-term foreign
borrowing and strengthen its troubled banking industry, which was
burdened by speculative property loans. Most of the area's stock
markets tumbled in reaction to these events. Investors were heavy
sellers as they became increasingly concerned that other countries in
the region, faced with similar problems, would have to allow their
currencies to weaken further or take steps that would chock off
economic growth and erode company profits. For U.S. investors, the
impact of the market declines were further exacerbated by the effect
of the decline in the value of their local currencies versus the U.S.
dollar.
The same kinds of concerns that affected Thailand and other Southeast
Asian countries subsequently spread to North Asia. To widely varying
degrees, Taiwan, South Korea, and Hong Kong all faced related currency
and/or equity market declines. Of these, the South Korean situation
was the most severe. Revelations of this country's poor lending
practices and high levels of corporate indebtedness led to steep,
extended declines in the value of the won, high interest rates, and
tumbling equity markets. Due to continued weakness in the Japanese
economy combined with the reliance of Asian economies on intra-Asian
trade and capital flows, many experts believed that the entire
region's economic growth would slow in the near term.
JAPAN. A country of 126 million with a labor force of 64 million
people, Japan is renowned as the preeminent economic miracle of the
post war era. Fueled by public investment, protectionist trade
policies, and innovative management styles, the Japanese economy has
transformed itself since the war into the world's second largest
economy. An island nation with limited natural resources, Japan has
developed a strong heavy industrial sector and is highly dependent on
international trade. Strong domestic industries are automotive,
electronics, and metals. Needed imports revolve around raw materials
such as oil, forest products, and iron ore. Subsequently, Japan is
sensitive to fluctuations in commodity prices. With only 19% of its
land suitable for cultivation, the agricultural industry is small and
largely protected. While the U.S. is Japan's largest single trading
partner, close to half of Japan's trade is conducted with developing
nations, almost all of which are in S outheast Asia. Investment
patterns generally mirror these trade relationships. Japan has over
$100 billion of direct investment in the United States.
The Tokyo Stock Exchange (TSE) is the largest of eight exchanges in
Japan. The exchanges divide the market for domestic stocks into two
sections, with larger companies assigned to the first section and
newly listed or smaller companies assigned to the second. In 1996,
1,833 firms were listed on the TSE, 96% of which were domestic. Some
believe that the TSE has a tendency to be strongly influenced by the
performance of a small circle of large cap firms that dominate the
market. The two key indexes are the Tokyo Stock Price Index (TOPIX)
and the Nikkei. In 1996, TSE performance was lackluster, with the
TOPIX down about 7%.
CHINA AND HONG KONG. China is one of the world's last remaining
communist systems, and the only one that appears poised to endure due
to its measured embrace of capitalist institutions. It is the world's
most populous nation, with 1.3 billion people creating a work force of
630 million. Today's Chinese economy, roughly separated between the
largely agricultural interior provinces and the more industrialized
coastal and southern provinces, has its roots in the reforms of the
recently deceased communist leader Deng Xiaoping. Originally an
orthodox communist system, China undertook economic reforms in 1978 by
providing broad autonomy to certain industries and establishing
special economic zones (SEZ's) to attract foreign investment (FDI).
Attracted to low labor costs and favorable government policies,
investment flowed from many sources, with Hong Kong, Taiwan, and the
United States leading the way. Most of the investment, totaling $37
billion by the end of 1995, has been located in the southern
provinces, establishing manufacturing facilities to process goods for
re-export.
The result has been a steadily high level of real GDP growth,
averaging 11.35% per year so far this decade. With this growth has
come a doubling of total consumption, a tripling of real incomes for
many workers, and a reduction in the number of people living in
absolute poverty from 270 to 100 million. Today there is a market of
more that 80 million who are now able to afford middle class
W estern goods.
China has two stock exchanges that are set up to accommodate foreign
investment, in Shenzhen and in Shanghai. In both cases, foreign
trading is limited to a special class of shares (Class B) which was
created for that purpose. Only foreign investors may own Class B
shares, but the government must approve sales of Class B shares among
foreign investors. As of December 1996, there were 42 companies with
Class B shares on the two exchanges, for a total Class B market
capitalization of U.S. $4.7 billion.
AUSTRALIA. Australia is a 3 million sq. mile continent (about the size
of the 48 continental United States) with a predominantly European
ethnic population of 18.2 million people. A member of the British
Commonwealth, its government is a democratic, federal-state system.
The country has a W estern style capitalist economy with a work
force of 9.2 million that is concentrated in services, mining, and
agriculture. Australia's natural resources are bauxite, coal, iron
ore, copper, tin, silver, uranium, nickel, tungsten, mineral sands,
lead, zinc, diamonds, natural gas, and oil. Primary trading partners
are the United States , Japan, South Korea, New Zealand,
United Kingdo m , and Germany. Imports revolve around
machinery and high technology equipment, while exports are heavy in
the agricultural and mineral products, making them sensitive to world
commodity prices.
Historically, Australia's strong points were its agricultural and
mining sectors. While this is still true to a large extent, the
government managed to boost its manufacturing sector by undertaking
protective measures in the 1970's and early 1980's. These have
subsequently been liberalized in an effort to kindle growth in the
industrial sector. Today's economy is more diverse, as manufactures'
share of total exports is increasing. Part of the government's effort
to make manufacturing more competitive was a floating of the
Australian dollar in 1984, precipitating an initial depreciation, and
a campaign to reduce taxes. Such reforms have attracted foreign
investment, particularly in the transport and manufacturing sectors.
Restrictions do exist on investment in certain areas as media, mining
and some real estate. In 1995, cumulative U.S. investment in
Australia totaled more than $65 billion and accounted for 21% of total
foreign investment.
GDP growth reached 3.6% in 1996; a steady increase over the days of
the early 1990's which saw a recession. The recession was followed in
1992 by a jump in growth (from 0.4 % -2.8%), but this initial
boost seems to have leveled off. The election of a new
Liberal/National coalition government after 13 years of Labor rule has
brought with it new efforts to cut public spending and eliminate the
projected $6 billion budget deficit. This step, coupled with a steady
unemployment rate (8%), could slow down the recent ascent in growth.
Australia is fully integrated into the world economy, participating in
GATT and also more regional trade associations such as the Asia and
the Pacific Economic Cooperation (APEC) forum. Future growth could
result from their movement towards regional economic liberalization,
but a countervailing force is the reality that some export markets in
Europe could be lost to continued European economic integration.
INDONESIA. Indonesia is a country that encompasses over 17,000 islands
on which live 195 million people. It is a mixed economy that balances
free enterprise with significant government intervention. Deregulation
policies, diversification of strong domestic sectors, and investment
in infrastructure projects have all contributed to high levels of
growth since the late 1980's. Indonesia's economy grew at 7.1% in
1996, the exact average of its performance for the current
decade. Growth in the 1990's has been fairly steady, hovering between
6.5 % -7.5% for the most part, peaking at 8.1% in 1995. Moderate
growth in investment, including public investment, and also in import
growth, helped to slow down GDP growth. Growth has been
accompanied by moderately high levels of inflation, ranging from the
recent high of 9.7% in 1993 to a low of 7.1%, as witnessed last year.
Indonesia is currently undergoing a diversification of the core of its
economy. No longer strictly revolving around oil and textiles, it
is now gaining strength in high technology manufactures, such as
electronics. Indonesia consistently runs a positive trade balance.
Strong export performers are oil, gas, and textiles and apparel. Oil,
once responsible for 80% of export revenues, now accounts for only
25%, an indication of how far other (mostly manufacturing and apparel)
sectors have developed. Main imports are raw materials and capital
goods.
In 1994 the country underwent deregulation measures which further
boosted investment. By 1996, FDI levels dropped from the record high
in 1995, and the trend was away from large projects including
infrastructure to smalle r, more manageable projects. Many
consider this a reflection of a desire to avoid the notoriously
nepotism ridden bureaucracy.
The Indonesian government is strongly authoritarian. Treatment of
political opponents, workers and ethnic minorities has put Indonesia
in the world spotlight with criticism of its human rights practices.
One source of outspoken popular discontent is the glaring discrepancy
in income distribution, particularly across ethnic lines. World
attention to the problems in Indonesia has given support to the
various causes, but it does not seem to have had much impact on the
government. Efforts to impose sanctions on the country by both federal
and state level politicians in the U.S . have so far proven
unsuccessful, but are likely to continue to persist.
Politically, the ruling party, Golkar, faces frequent challenges from
unofficially sanctioned opposition parties, but these efforts are
effectively marginalized. The key political question in Indonesia is
who will replace the aging ruler, President Suharto who, at 76, has
been the county's only leader for over 30 years. His long tenure and
the country's nascent democratic institutions leave the question of
proper succession open. During his career he has amassed support from
a directly appointed insider bureaucracy of political and business
elites which features immediate members of his family. As well, he has
relied strongly upon the army to provide the force necessary to
contain social unrest. Which amongst these two institutions will
emerge to replace Suharto is far from clear, and the surrounding
intrigue could lead to some instability. As economic policies have
been crafted to benefit Suharto's supporters in the business
community, any deviation from Suharto's position would likely impact
the economy. Additionally, a key ingredient to Indonesia's success has
been its ability to contain social unrest. Maintaining this
control, especially in the face of recently escalated tensions and
political uncertainty, is an important anchor for economic
performance. Proof of this is the Jakarta Stock Exchange's volatile
reaction to riots in July 1995.
MALAYSIA. 1996 saw Malaysia's GDP growth slow to 8.3%, down from over
9% in 1994 and 1995. Inflation has been kept relatively low at 3.8%.
Performance in 1996 avoided the economy's potential overheating as
export growth, investment, and consumption all slowed. This helped to
bring the current account deficit down by $1.7 billion to settle at
approximately 6.0% of GDP.
A large part of Malaysia's recent growth is due to its manufacturing
industries, particularly electronics and especially semiconductors.
This has led to an increased reliance on imports; thus the economy is
sensitive to shifts in foreign production and demand. This is
particularly true regarding its main trading partners: the United
States, Japan, and Singapore. Such shifts were partly responsible
for the slowdown in 1996. In addition, monetary policies to stem the
threat of overheating were evident, but the country still needs
massive public and private investment to finance several large
infrastructure projects. Government industrial policy seeks investment
to create more value added high technology manufacturing and service
sectors in order to decrease the emphasis on low skilled
manufacturing. Already U.S . investors have invested over $9
billion, and most of this is in electronics and energy projects.
Unemployment remains extremely low (2.6%) and labor for completing the
various projects is becoming costly, especially as industry has to go
abroad to search for higher skilled workers. Wages have soared so high
that Malaysia no longer qualifies for the special trading benefits
that the U.S. and the EU bestow upon developing nations. This
could hurt exports. A further catch is that rapidly increasing wages
could cause inflationary pressures, yet a shortage of labor could
threaten development.
The political situation in Malaysia is stable and could possibly
remain so up to and including the next election in the year 2000.
SINGAPORE. Since achieving independence from the British in 1965,
Singapore has repeatedly elected the People's Action Party (PAP) as
their government. It is a party that is so consistent it has only
offered up two prime ministers in this 32-year period. Elections in
January 1997 returned the PAP to power, signaling satisfaction with
their policy of close coordination with the private sector to
stimulate investment. Typical policies include selective tax
incentives, subsidies for R&D, and joint ventures with private firms.
While the combination of consistent leadership and interventionist
policies is sometimes seen as impeding civil liberties and
laissez-faire economics, it has produced an attractive investment
environment.
The Singapore economy is almost devoid of agriculture and natural
resources, not surprising given the island nation's geographic size.
Its strongest sector is manufacturing, particularly of electronics,
machinery and petroleum and chemical products. They produce 45% of the
world's computer disk drives. Major trading partners are Japan,
Malaysia and the United States.
The economic situation in Singapore registered a passable year in
1996. The regional trend toward slowed electronics exports made clear
the country's strong reliance on this sector. GDP growth dropped from
8.8% to 6.5%, while inflation remained low (1.4%) and the current
account balance maintained its large surplus. Property values have
gone up recently, partially in response to uncertainty surrounding
Hong Kong. Interest rates are consistently low, and wages high,
leaving some at a loss to explain the repeatedly low inflation rate.
SOUTH ASIA. Although India's economy has grown at an average rate
of 7% over the past three years, growth has slowed to about 6% during
1997. Economic growth, which had been fueled by strong industrial and
export sectors, slowed along with growth in these sectors. It is
uncertain whether India will be able to sustain the high growth rates
it experienced through 1996. Subsidies amount to almost 15% of GDP,
while agriculture accounts for about 25%. In 1997, annual inflation
has been approximately 3.8% down from about 6.6% the previous year.
During 1997, the current account deficit has been roughly 1.2% of GDP,
down from 1.5% in 1996. The exchange rate has been gradually devalued
in the 1980's and 1990's, and could be devalued further. Beginning in
1992, industry, financial markets, and the country's trade have been
gradually liberalized. Fifty-five percent of India's population is
illiterate, roughly half live in poverty, and unemployment remains
high.
Since the dissolution of the Narasimha Rao government in early
1996, India has experienced several weak, coalition governments that
have been unable to consolidate their position for an extended period.
Partially as a result, economic reforms have proceeded slowly through
gradually. Future changes in government could weaken or set back the
reform process.
India does not enjoy trouble-free relations with its neighbors.
India and Pakistan have fought two wars since their independence in
1947 and have yet to resolve a continuing dispute over the status of
the norther Indian state of Kashmir. Various Kashmiri separatist
groups, Indian, and Pakistani military have been involved in armed
conflict within the state. Neither India nor Pakistan have signed the
Comprehensive Nuclear Test Ban Treaty, which prohibits nuclear weapons
testing. A border dispute with China and questions over the
involvement of elements within India in the internal affairs of Sri
Lanka also affect India's relations with these countries.
The other, smaller South Asian countries of Pakistan, Bangladesh,
and Sri Lanka share with India the challenges of reducing poverty and
illiteracy and improving infrastructure and economic growth. While
each of these countries has taken steps to liberalize their economies,
their economies are far from mature, as are their legal and regulatory
systems. In addition, because they have small and relatively less
diversified economies and public markets, they are susceptible to
external economic shocks, which may result in currency declines. Sri
Lanka has been plagued by internal challenges to its security, while
Pakistan has faced significant political infighting and instability.
Bangladesh's largely agricultural economy is heavily dependent on the
severity of the monsoons.
SOUTH KOREA. South Korea is one of the more spectacular economic
stories of the post war period. Coming out of a civil war in the
mid-1950's the country found itself with a destroyed economy and
boundaries that excluded most of the peninsula's mineral and
industrial resources. It proceeded over the next 40 years to create a
society that includes a highly skilled and educated labor force and an
economy that exploited the large amounts of foreign aid given to it by
the United States and other countries. Exports of labor intensive
products such as textile s initially drove the economy, to be
replaced later by heavy industries such as automobiles.
Hostile relations with North Korea dictate large expenditures on the
military, and political uncertainty and potential famine in the north
has put the south on high alert. Any kind of significant military
effort could have multiple effects, both positive and negative, on the
economy. South Korea's lack of natural resources put a premium on
imported energy products, making the economy very sensitive to oil
prices.
Since 1991, GDP growth has fluctuated widely between 5% and 9%,
settling down at 6.8% last year. Currently the labor market is in need
of restructuring, and its rigidity has hurt performance. Relations
between labor and the large conglomerates, or Chaebols, could prove to
be a significant influence on future growth. Inflation in the same
period has been consistently dropping, save a brief rise in 1994, and
finished the year at 4.5%. The country consistently runs trade
deficits, and the current account deficit widened sharply in 1996,
more than doubling to $19.3 billion. South Korea's strong domestic
sectors are electronics, textiles and industrial machinery. Exports
revolve around electronics, textil es, automobiles, steel and
footwear, while imports focus on oil, food, chemicals and metals.
The stock market (Korea Stock Exchange (KSE) ) is currently
undergoing liberalization to include more foreign participation, which
was only first allowed in 1992, but the bond market remains off limits
until 1999. Liberalization is in response to the KSE 1996 performance,
which was down 18%. While the number of listed companies increased by
39 in 1996, total market capitalization fell 24% from its 1995 level.
THAILAND. The political situation in Thailand is tenuous. Democracy
has a short history in the country, and power is alternatively
obtained by the military, a non-elected bureaucratic elite, and
democratically elected officials. The frequent transfers of power have
generally gone without divisive, bloody conflicts, but there are
bitter differences between the military and the political parties.
Free elections in 1992 and again in 1995 have produced non-military
democratic leaders from different parties, a healthy sign of party
competition. While democratic institutions are stabilizing, the
current government is under increasing pressure due to recent poor
economic performance.
The Thai economy has witnessed a fundamental transition in recent
years. Traditionally it was a strong producer of textiles, minerals
and agricultural products, but more recently it has tried to build
high-tech export industries. This proved particularly fortuitous in
the mid 1990's when flooding wiped out much of their traditional
exports, but the newer industries remained strong, keeping the growth
rate above 8%. (This level had been achieved through the 1990's,
giving the economy a name as one of the fastest growing in the
region.) The government has also taken steps toward reducing the
influence of central planning, opening its market to foreigners and
abandoning five-year plans. This restructuring is still underway, and
the change can cause difficulty at times.
GDP growth slowed a bit last year to 7.2%, down from 8.6% in 1995. The
current account deficit was 7.9% of GDP, and inflation was 5.8%, both
considered high but steady and controllable results in line with
recent years' performance. One cause for the slowdown was a decline in
export growth as its manufacturing industry faces stiff competition
from low priced competitors and its agriculture suffers drops in
production. In 1996, Thailand's currency, the baht, was linked to a
U.S . dollar dominated basket, and monetary policy had remained
tight to keep that link strong and avoid inflationary pressures.
The situation changed in early 1997, however, with the revelation of
many bad bank loans and a bubbling of property prices due to
over-investment. Many companies, faced with slowing exports, stopped
servicing their debts. Many other firms have stayed alive only with
infusions of public cash, and the government has been slow to let many
property laden financial firms fail. The stock market has reacted
strongly, dropping to new lows for the decade. Reluctant to float the
baht, indeed promising that it would not , the government
relented in early July hoping to revive export and stock market
growth. The subsequent devaluation (approximately 20% against the
dollar in the first month) led to the need for a $16 billion loan
coordinated by the IMF to shore up foreign reserves. Most of the loan
came from neighboring countries led by Japan, indicating their desire
to both protect their own investments in Thailand, and also mitigate
the effect of the devaluation on their home currencies .
The total impact of the entire situation is negative, particularly on
inflation, unemployment and foreign debt. Significant turnover and a
major gamble on the currency has put the government in a precarious
position, especially given the fact that it is a six party coalition.
Dissatisfaction amongst the military, always a political factor, is
high.
EMERGING MARKETS: ASIA
MARKET CAPITALIZATION IN U.S. DOLLARS
DECEMBER 1996
Billions:
India $ 132.97
Indonesia 91.00
Korea 138.91
Malaysia 322.00
Pakistan 11.75
Philippines 80.69
Singapore 182.00
Taiwan 274.00
Thailand 95.92
Source: The Economist. The LGT Guide to World Equity Markets 1997.
REAL GDP ANNUAL RATE OF GROWTH
(ANNUAL % CHANGE) 1996
China 9.1%
Hong Kong 4.3%
India 5.7%
Indonesia 7.1%
Japan 3.9%
Korea 6.8%
Malaysia 8.3%
Philippines 5.5%
Singapore 6.5%
Taiwan 5.8%
Thailand 7.2%
Source: The Economist. The LGT Guide to World Equity Markets 1997.
For national stock market index performance, please see the section on
Performance beginning on page .
SPECIAL CONSIDERATIONS REGARDING LATIN AMERICA
Latin America represents one of the world's more advanced emerging
markets. With a total population of 427 million and its abundant
natural resources, the area is a prime trading partner for the U.S.
and Canada. In Latin America exports represent, on average, 16.6%
of GDP. Strong export sectors are petroleum, manufactured goods,
agricultural commodities such as coffee and beef, and metals and
mining products. GDP growth in Latin America as a region was 3.4% in
1996, up from 0.1% in 1995. Recognizing the important role of
international trade as a component of GDP, the countries of Latin
America have formed strong regional trade organizations, notably
MERCOSUR. Talk of extending the North American Free Trade Agreement
(NAFTA) down through Latin America indicates some desire to tie
the economies even closer to those of the north.
Politically, Latin American countries generally have strong
presidential systems closely modeled on the U.S. Their transition
to democracy, largely complete in most countries, nevertheless
allows for a considerable military influence, reflecting the strong
authoritarian leanings of a large portion of the population. The
countries all enjoy good relations with the United States, with whom
they cooperate on a range of non-economic matters, such as
preservation of the environment and drug control. Monetarist minded
governments were responsible for the successful staving off of
contagion from the recent currency crisis in Mexico, increasing their
stature in the eyes of most capital market participants.
ARGENTINA. Prior to 1989, Argentine politics were characterized by
populist leaders, sometimes democratically elected and sometimes not,
who ruled with the overt support of the military. Coups and outright
military rule were not uncommon. Economic policies were highly
protectionist, with significant barriers and restrictions on foreign
trade and investment. Markets were highly regulated and the state
was heavily involved in many industries. Inflation was routinely high
and growth stagnant.
President Carlos Menem was first elected to office in 1989 and
undertook a program of deregulation, liberalization and macroeconomic
reform. The results have been positive. Growth in 1996 was 4.4%, up
from -4.4% in 1995. Argentina's growth, averaging over 7% from 1991 to
1994, has been driven primarily by domestic consumption. In the wake
of the Mexican currency crisis, however, banking liquidity has been
restrained. While deposits have increased in reaction to peso
stabilization, lending has not, putting downward pressure on consumer
spending. The positive effect is that inflation, well over 150% at the
beginning of the decade, was 0.4% in 1996. Still troublesome for
Argentina is unemployment, quite high at 17%. Menem's economic
liberalization policies have succeeded in attracting foreign
investment. From the U.S. alone, approximately $10 billion was
invested by 1996. Investors have been most attracted to the
telecommunications, finance, and energy sectors.
Argentina enjoys a positive trade balance. The export economy is
heavily weighted toward agriculture, which represents 60% of the total
value of all Argentine exports. Primary products are livestock,
oilseeds, and grain. Argentina's single biggest trading partner is
Brazil, and the U.S. is the second. Primary imports are machinery,
vehicles and chemicals.
The resignation of Economy Minister Domingo Cavallo in July 1996 was
initially greeted with skepticism from the markets. Cavallo was widely
recognized as the man responsible for ensuring the convertibility of
the peso by pegging it to the dollar, a move which saved Argentina
from the hyperinflation and continuous drops in output which could
have followed from the Mexican crisis in 1994. Confidence was quickly
restored, however, with the appointment of Roque Fernandez, who
promptly reaffirmed commitment to Cavallo's plan and introduced
further measures for fiscal stability.
The central bank's main priority is maintaining convertibility against
the dollar. It is very active in the foreign exchange market and even
assists local firms with liquidity problems.
Legislative elections to be held in October, 1997 could prove to be
critical for Menem, who still has an extensive economic reform agenda
which includes further privatizations, labor market reforms and a
revamped tax policy. Failure to retain a friendly majority in the
Lower House of congress could deprive Menem of the support he needs to
pass such reforms.
The next presidential election is due in 1999. In accordance with the
constitution, Menem, a member of the Peronist party, can not seek a
third consecutive term. The next election is likely to present a third
candidate to the voters beyond the traditional contestants from the
Peronist and Radical parties. Frepaso, a center-left alliance, first
emerged in the 1995 elections and by 1999 could build itself up enough
to promote a viable alternative to the older parties. It is uncertain
how policies would be a ffected by the systemic change from a
predominantly two party system to a three way game.
BRAZIL. Brazil is the largest country in South America and is home to
vast amounts of natural resources. Its 155 million people are
descendants from indigenous tribes and European immigrants. They live
in diverse socio-economic conditions, from the urban cities of Sao
Paolo to the undeveloped trading posts of the distant regions.
Industrial development has been concentrated in specific areas. The
disenfranchised population is quite large and is a source of many of
Brazil's social problems.
The Brazilian economy is currently undergoing extensive reforms,
stemming from a 1994 effort to stabilize the currency called the Real
Plan. With the aim of curbing inflation, a new currency, the Real, was
introduced and supported via a floating exchange band. The plan has
stabilized the exchange rate and controlled inflation, which was
reeling out of control in 1994 at 2,700%. Inflation in 1995 dropped to
81%, and fell even further in 1996, settling at 18.7%. At the same
time, however, the Real Plan has sent the trade and current account
balances into a deficit. The current account soared from $1 billion to
$18 billion, and increased further in 1996 to $27 billion.
Other objectives of the administration of the current President,
Fernando Henrique Cardoso, are trade liberalization and privatization,
but these efforts are sporadic and often stalled by special interests
in the legislature. Some privatization efforts are performing well,
particularly in the utilities sector. Utilities and telecommunications
have been key draws for foreign investment, and foreign direct
investment (FDI) is coming in at record levels. In 1996 the country
received over $9.5 billion, with $2.4 billion coming from the
U . S . Still, there are restrictions against investments
in certain industries, such as metals and mining.
Similarly with trade liberalization, the government increased import
restrictions in an effort to shrink the trade deficit and slow the
growth of import consumption. This consumption was a main contributor
to GDP growth in 1996, though growth was down 1% to 3.2%.
Traditionally a primarily agricultural economy, a strong industrial
sector has developed which produces metals, chemical, and manufactured
consumer goods. Agriculture still plays a significant role, however,
representing 11% of the GDP, 40% of exports and employing over 35% of
the work force. Primary agricultural products are grains, coffee, and
cattle. Regarding energy and utilities, the country is a leading
producer of hydroelectric power, but they are dependent on imports for
oil.
Presidential elections will be held in 1998. President Cardoso hopes
to stand for re-election but currently is unable to, given a
constitutional provision on term limits. Efforts to gather
congressional support for constitutional reform, allowing Cardoso to
stand, could result in a great deal of special interest concessions,
translating into more public spending and horse-trading over fiscal
reforms.
CHILE. Chile is a transition economy which has recently made great
strides toward putting its authoritarian, statist, past behind itself.
In all of Latin America, it is the country with the highest rates of
growth. Averaging 7.3% so far this decade, GDP grew at 6.7% in 1996,
down from 8.5% the previous year. Inflation has been steadily
declining and is down over 15% in the last five years. Inflation in
1996 was 7.4%, a 0.8% drop over 1995. Unemployment in 1996 was 6.6%,
particularly low for the Latin American region. Despite the fact that
market capitalization fell $8 billion in 1996 to $64 billion, Chile is
still considered to have one of the best performing stock markets in
the region.
Chile has a strong, interventionist central bank which focuses more on
the investment community than it does on the government. Active steps
are taken to control demand and inflation. One example is the practice
of restricting short-term flows of foreign capital through the
country.
Interest rate hikes in 1996 are said to have restrained growth, but
other factors include unfavorable weather conditions that hurt
agricultural and hydroelectric power production. Mining and metals
were strong performers in 1996. Of particular note was the strong
showing of the country's copper industry.
Eduardo Frei is President and is due for reelection in 1999. President
Frei has been trying to decentralize the government but encounters
stiff opposition from the powerful trade unions. Also high on Frei's
agenda is tax reform.
There is a considerable military component to political life in Chile.
In the legislature there is strong representation by parties with
authoritarian views. As part of the negotiated settlement with coup
leader General Augusto Pinochet in 1990, the army chain of command
ends with General Pinochet, not an elected official. Furthermore,
certain seats are reserved in the Senate for appointed officials from
the military. Pinochet must resign in 1998, and shortly thereafter the
reserved Senate seats will fall open to election. There are
constitutional reforms currently in progress further diminishing the
role and influence of the military, and thus the political transition
is still underway. A successful outcome requires that the military
acquiesce as it is stripped of its political powers.
MEXICO. The Mexican economy recovered fairly well in 1996 from the
currency crisis of December 1994 thanks in large part to growth in
exports, peso stabilization, and massive financial assistance from the
United States. Growth rebounded from its negative position of -6.2% in
1995 to reach 5.1% in 1996. The peso devaluation of 1994, prompted by
mounting foreign debt, was effective in reducing the current account
deficit from $30 billion to just over $1 billion, and it also pushed
Mexico into a positive trade balance. The current account deficit
increased in 1996 to $3.7 billion, but the trade surplus was
maintained. Inflation jumped from 7% to over 50% in the year after the
crisis, but was controlled in 1996, registering a drop to 28%.
Inflation is the chief concern of the central bank, which takes active
measures such as the setting of wage ceilings and manipulation of
interest rates to control it. Domestic consumption is sluggish and has
yet to return to pre-1994 levels, also contributing to the containment
inflation.
The Mexican economy is very strong in manufacturing and natural
resources, specifically oil. Manufacturing alone counts for 22% of the
Mexican GDP and 21% of all urban employment. The economy is also very
closely tied to the U . S . , which is responsible for 60%
of all foreign investment and with whom it conducts over 75% of all
trade. Trade pacts such as NAFTA further integrate the
economies, giving the U . S . strong incentives to provide
assistance in times of crisis. NAFTA also enabled the recent recovery,
given the ease with which it allows increases in exports and
investment. The Mexican stock market listed 193 companies with total
capitalization of $106 billion in 1996, a 17% rise over 1995.
Internally, the various people of the Mexican states have recently
experienced a great deal of dissatisfaction with their relationship to
the federal government. Most notably, in Chiapas there have been armed
uprisings by indigenous groups demanding further autonomy. While the
rebellions have not strongly shaken financial markets, they serve as a
reminder of the diversity of Mexico, of the vast socio-economic gaps
between various peoples, and of the potential for such groups to
demand the attention of both their government and the world.
Politically, the landscape changed fundamentally in July 1997. The
defeat of candidates from the Institutional Revolutionary Party (PRI)
in legislative elections signaled the end of decades of one party
rule. Citizens now have the confidence that their votes count and that
the PRI is no longer invincible. Winning every presidential election
since its founding in 1929, the PRI was the country's monolithic
political machine, maintaining power through rigged elections and
ruling in an environment rife with intrigue and corruption. Internal
pressures including armed rebellion from domestic interest groups,
extensive crises and scandals caused by intra-party rivalries and
corruption, and deteriorating relationships with foreign countries
over financial mismanagement and mutual social problems all
contributed to the establishment of fully free and unfettered
elections. The response from the Mexican people was clear. Though they
took the most votes (39%) for the 500-member Lower House of congress,
the PRI has lost their majority, and the President is now forced to
accommodate the interests of the opposition parties. Market reaction
to the new Mexican political world was positive. The IPC index,
consisting of 35 of the most representative stocks on the Mexican
Stock Exchange, rose 3.25% the day after the election. Further
financial implications of the new landscape are as yet uncertain.
Relevant considerations are the effect of the new configurations on
government consensus and policy making, the demands of newly empowered
groups on economic and other resources, the balance of power between
the executive and the legislature, and the ability of the government
to maintain law and order.
EMERGING MARKETS: LATIN AMERICA
MARKET CAPITALIZATION IN U.S. DOLLARS
DECEMBER 1996
Billions:
Argentina $ 44.7
Brazil 429.3
Chile 65.6
Mexico 107.0
Peru 13.8
Venezuela 10.0
Source: The Economist, The LGT Guide to World Equity Markets, 1997
For national stock market index performance, please see the section on
Performance beginning on page .
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 Contracts"),
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 (Japan), LLC (FBSJ ), indirect subsidiaries of FMR
Corp., if the commissions are fair, reasonable, and comparable to
commissions charged by non-affiliated, qualified brokerage firms for
similar services. Prior to December 9, 1997, FMR used research
services provided by and placed agency transactions with Fidelity
Brokerage Services (FBS), an indirect subsidiary of FMR Corp.
FMR may allocate brokerage transactions to broker-dealers 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 the fiscal periods ended 1996 and 1997, 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 orders, short-term
interest rate volatility, and other special market conditions.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FUND FISCAL PERIOD ENDED 1996 1997
TechnoQuant Growth November 30 N/A 213% **
International Capital Appreciation October 31 N/A <</r>200%*
Overseas October 31 82%
70%
Mid Cap November 30 101%** 208%
Equity Growth November 30 76% 108%
Growth Opportunities October 31 33% 33%**,+
Strategic Opportunities December 31 151% 61%**,++
Large Cap November 30 59%** 93%
Growth & Income November 30 N/A 82% **
Equity Income November 30 78% 55%
Balanced October 31 223% 70%
Emerging Markets Income December 31 410% 660%
High Yield October 31 121% 105%
Strategic Income December 31 119% 140%
Mortgage Securities July 31 221% 125%**,+++
Government Investment October 31 153% 136%
Intermediate Bond November 30 200% 138%
Short Fixed-Income October 31 124% 105%
Municipal Income October 31 49% 36%
Municipal Bond December 31 35% 33%
Intermediate Municipal Income November 30 35% 18%
Short-Intermediate Municipal Income November 30 62% 41%
</TABLE>
* Estimated 1998 turnover rate
** Annualized
+ For the fiscal period November 1, 1997 through November 30,
1997.
++ For the fiscal period January 1, 1997 through November 30,
1997.
+++ For the fiscal period August 1, 1997 through October 31,
1997.
For the fiscal period ended October 31, 1997 the portfolio turnover
rate for Growth Opportunities was 35%. For the fiscal period ended
July 31, 1997 the portfolio turnover rate for Mortgage Securities was
149%.
The following tables show the brokerage commissions paid by
TechnoQuant Growth, Overseas, Mid Cap, Equity Growth, Growth
Opportunities, Strategic Opportunities, Large Cap, Growth & Income,
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 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 a fund paid brokerage commissions effected
through NFSC and FBS for the fiscal year ended 1997. 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 1997.
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 1995 through 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FISCAL PERIOD TOTAL TO NFSC TO FBS
ENDED AMOUNT PAID
TECHNOQUANT GROWTH November 30
1997+ $ 91,653 $ 14,045 $ 0
OVERSEAS October 31
1997 2,761,658 5,510 198,192
1996 2,828,416 15,499 169,534
1995 1,420,464 5,926 142,450
MID CAP November 30
1997 1,076,816 184,530 0
1996++ 280,816 72,019 0
EQUITY GROWTH November 30
1997 6,180,477 1,553,180 17,274
1996 3,252,297 820,661 9,780
1995 2,185,589 862,434 2,034
GROWTH OPPORTUNITIES November 30
11/1/97-11/30/97 746,177 126,243 45,100
1997* 9,799,619 1,199,152 192,356
1996* 6,894,871 1,513,633 74,768
1995* 6,189,975 1,793,388 9,682
STRATEGIC OPPORTUNITIES November 30
1/1/97-11/30/97 698,872 170,790 0
1996** 1,107,012 257,886 0
1995** 1,138,485 217,580 0
LARGE CAP November 30
1997 93,523 10,202 0
1996++ 31,692 8,248 0
GROWTH & INCOME November 30
1997+ 214,663 26,529 69
EQUITY INCOME November 30
1997 2,827,048 473,418 0
1996 2,634,183 685,839 0
1995 1,410,440 549,549 7,528
BALANCED October 31
1997 1,691,341 251,104 7,686
1996 7,090,976 1,476,330 61,240
1995 8,952,888 2,249,157 122,777
EMERGING MARKETS INCOME December 31
1997 0 0 0
1996 0 0 0
1995 11,820 0 0
HIGH YIELD October 31
1997 269,517 12,656 0
1996 139,187 1,507 0
1995 123,145 3,958 0
STRATEGIC INCOME December 31
1997 0 0 0
1996 0 0 0
1995 152 0 0
</TABLE>
* Fiscal year ended October 31
** Fiscal year ended December 31
+ TechnoQuant Growth and Growth & Income commenced operations on
December 31, 1996
++ Large Cap and Mid Cap commenced operations on February 20,
1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FISCAL PERIOD % OF % OF % OF % OF
ENDED 1997 COMMISSIONS TRANSACTIONS COMMISSIONS TRANSACTIONS
PAID TO NFSC EFFECTED THROUGH PAID TO FBS EFFECTED THROUGH
NFSC FBS
TECHNOQUANT GROWTH November 30 15.33 % 22.63 % 0.00 % 0.00 %
OVERSEAS October 31 0.20 % 0.68 % 7.18 % 7.30 %
MID CAP November 30 17.14 % 23.08 % 0.00 % 0.00 %
EQUITY GROWTH November 30 25.13 % 34.11 % 0.28 % 0.14 %
GROWTH OPPORTUNITIES November 30* 16.92 % 24.87 % 6.04 % 2.95 %
October 31** 12.24 % 17.85 % 1.96 % 1.04 %
STRATEGIC OPPORTUNITIES November 30++ 24.44 % 34.66 % 0.00 % 0.00 %
LARGE CAP November 30 10.91 % 15.07 % 0.00 % 0.00 %
GROWTH & INCOME November 30 12.36 % 14.98 % 0.03 % 0.01 %
EQUITY INCOME November 30 16.75 % 24.59 % 0.00 % 0.00 %
BALANCED October 31 14.84 % 26.38 % 0.45 % 0.22 %
HIGH YIELD October 31 4.70 % 8.15 % 0.00 % 0.00 %
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FISCAL PERIOD AMOUNT PAID TO FIRMS TOTAL AMOUNT OF
ENDED 1997 PROVIDING RESEARCH+ TRANSACTIONS ON WHICH
COMMISSIONS WERE PAID
TECHNOQUANT GROWTH November 30 $ 75,204 $ 86,895,245
OVERSEAS October 31 2,639,259 1,336,618,897
MID CAP November 30 1,012,972 918,040,718
EQUITY GROWTH November 30 5,875,525 7,253,759,526
GROWTH OPPORTUNITIES November 30* 0 764,267,094
October 31** 9,321,410 9,694,532,390
STRATEGIC OPPORTUNITIES November 30++ 677,806 517,487,188
LARGE CAP November 30 81,815 99,679,339
GROWTH & INCOME November 30 122,531 302,006,568
EQUITY INCOME November 30 2,513,229 2,873,777,310
BALANCE D October 31 1,594,302 1,993,648,305
HIGH YIELD October 31 265,965 117,796,039
</TABLE>
+ The provision of research services was not necessarily a factor in
the placement of all this business with such firms.
++ Period of January 1, 1997 through November 30, 1997
* Period of November 1, 1997 through November 30, 1997
** Period of November 1, 1996 through October 31, 1997
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. Securities of other open-end investment companies
are valued at their respective NAVs.
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. Securities of other opened investment
companies are valued at their respective NAVs.
Foreign securities are valued based on prices furnished by independent
brokers or quotation services which express the value of securities in
their local currency. FSC gathers all exchange rates daily at the
close of the NYSE using the last quoted price on the local currency
and then translates the value of foreign securities from their local
currencies into U.S. dollars. Any changes in the value of forward
contracts due to exchange rate fluctuations and days to maturity are
included in the calculation of NAV. If an extraordinary event that is
expected to materially affect the value of a portfolio security occurs
after the close of an exchange on which that security is traded, then
that security will be valued as determined in good faith by a
committee appointed by the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less
for which market quotations and information furnished by a pricing
service are not readily available are valued either at amortized cost
or at original cost plus accrued interest, both of which approximate
current value. In addition, securities and other assets for which
there is no readily available market value may be valued in good faith
by a committee appointed by the Board of Trustees. The procedures set
forth above need not be used to determine the value of the securities
owned by a fund if, in the opinion of a committee appointed by the
Board of Trustees, some other method would more accurately reflect the
fair market value of such securities.
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 of other open-ended investment
companies valued at their respective NAVs.
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 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 table shows the effect of a shareholder's tax status on
effective yield under federal income tax laws for 1998. It shows the
approximate yield a taxable security must provide at various income
brackets to produce after-tax yields equivalent to those of
hypothetical tax-exempt obligations yielding from 2.00% to 8.00%. Of
course, no assurance can be given that a class will achieve any
specific tax-exempt yield. While the municipal funds invest
principally in obligations whose interest is exempt from federal
income tax, other income received by the funds may be taxable.
1998 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%
Taxable Income* Federal
Marginal
Single Return Joint Return Rate** Then taxable equivalent yield is:
$ 0 - $ 2 5,350 $ 0-$ 42,350 15.0% 2.35% 3.53% 4.71% 5.88% 7.06% 8.24% 9.41%
$ 2 5,351-$ 61,400 $ 42,351-$ 102,300 28.0% 2.78% 4.17% 5.56% 6.94% 8.33% 9.72% 11.11%
$ 61,401-$ 128,100 $ 155,951 - $ 278,450 31.0% 2.90% 4.35% 5.80% 7.25% 8.70% 10.14% 11.59%
$ 128,101-$ 278,450 $ 15 5,951 - $ 278,450 36.0% 3.13% 4.69% 6.25% 7.81% 9.38% 10.94% 12.50%
over + $ 278,450 over + $ 278,450 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.
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. A class's total return may be calculated
by using the performance data of a previously existing class prior to
the date that the new class commenced operations, adjusted to reflect
differences in sales charges but not 12b-1 fees. 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
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TechnoQuant Growth - Class A 1 1 / 28 /97 11.95 10.78
TechnoQuant Growth - Class T 11/28/97 11.92 10.76
TechnoQuant Growth - Class B 11/28/97 11.87 10.73
TechnoQuant Growth - Class C 11/28/97 11.93 10.78
TechnoQuant Growth - Institutional 11/28/97 11.96 10.79
Overseas - Class A 10/ 31 /97 17.70 16.96
Overseas - Class T 10/ 31 /97 17.83 17.08
Overseas - Class B 10/ 31 /97 17.50 16.79
Overseas - Class C 10/ 31 /97 17.85 17.13
Overseas - Institutional 10/ 31 /97 17.71 16.95
Mid Cap - Class A 11/ 28 /97 14.24 12.98
Mid Cap - Class T 11/ 28 /97 14.28 13.02
Mid Cap - Class B 11/ 28 /97 14.15 12.91
Mid Cap - Class C 11/ 28 /97 14.29 13.04
Mid Cap - Institutional 11/ 28 /97 14.31 13.03
Equity Growth - Class A 11/ 28 /97 51.71 48.02
Equity Growth - Class T 11/ 28 /97 52.00 48.29
Equity Growth - Class B 11/ 28 /97 51.47 47.87
Equity Growth - Class C 11/ 28 /97 52.01 48.37
Equity Growth - Institutional 11/ 28 /97 52.86 49.02
Growth Opportunities - Class A 11/ 28 /97 43.43 40.67
Growth Opportunities - Class T 11/ 28 /97 43.63 40.86
Growth Opportunities - Class B 11/ 28 /97 43.48 40.78
Growth Opportunities - Class C 11/ 28 /97 43.64 40.93
Growth Opportunities - Institutional 11/ 28 /97 43.71 40.89
Strategic Opportunities - Class A 1 1 / 28 /97 28.11 24.90
Strategic Opportunities - Class T 1 1 / 28 /97 28.39 25.12
Strategic Opportunities - Class B 1 1 / 28 /97 27.83 24.66
Strategic Opportunities - Institutional 1 1 / 28 /97 28.21 24.96
Strategic Opportunities - Initial 1 1 / 28 /97 28.78 25.44
Large Cap - Class A 11/ 28 /97 13.96 13.04
Large Cap - Class T 11/ 28 /97 13.99 13.06
Large Cap - Class B 11/ 28 /97 13.86 12.96
Large Cap - Class C 11/ 28 /97 13.99 13.08
Large Cap - Institutional 11/ 28 /97 14.05 13.10
Growth & Income - Class A 1 1 / 28 /97 12.27 11.45
Growth & Income - Class T 1 1 / 28 /97 12.25 11.43
Growth & Income - Class B 1 1 / 28 /97 12.22 11.42
Growth & Income - Class C 1 1 / 28 /97 12.26 11.46
Growth & Income - Institutional Class 1 1 / 28 /97 12.26 11.43
Equity Income - Class A 11/ 28 /97 26.67 24.98
Equity Income - Class T 11/ 28 /97 26.83 25.13
Equity Income - Class B 11/ 28 /97 26.73 25.07
Equity Income - Class C 11/ 28 /97 26.83 25.16
Equity Income - Institutional 11/ 28 /97 27.03 25.28
Balanced - Class A 10/ 31 /97 18.91 17.96
Balanced - Class T 10/ 31 /97 18.93 17.97
Balanced - Class B 10/ 31 /97 18.87 17.95
Balanced - Class C 10/ 31 /97 18.94 18.02
Balanced - Institutional 10/ 31 /97 18.98 18.00
FUND AS OF 13-WEEK 39-WEEK
Emerging Markets Income - Class A 12/ 26 /97 10.92 10.78
Emerging Markets Income - Class T 12/ 26 /97 10.91 10.78
Emerging Markets Income - Class B 12/ 26 /97 10.97 10.85
Emerging Markets Income - Class C 12/ 26 /97 10.94 10.83
Emerging Markets Income - Institutional 12/ 26 /97 10.86 10.72
High Yield - Class A 10/ 31 /97 12.84 12.20
High Yield - Class T 10/ 31 /97 12.85 12.20
High Yield - Class B 10/ 31 /97 12.82 12.20
High Yield - Class C 10/ 31 /97 12.87 12.25
High Yield - Institutional 10/ 31 /97 12.63 11.99
Strategic Income - Class A 12/ 26 /97 10.99 10.71
Strategic Income - Class T 12/ 26 /97 10.99 10.70
Strategic Income - Class B 12/ 26 /97 11.02 10.75
Strategic Income - Class C 12/ 26 /97 11.01 10.75
Strategic Income - Institutional 12/ 26 /97 11.05 10.75
</TABLE>
* Moving averages are shown for those classes that had commenced
operations prior to January 1, 1998.
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, and 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 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, and
Short-Intermediate Municipal Income). Class C shares are also subject
to a 12b-1 fee of 1.00% for all funds (except Strategic Opportunities,
Mortgage Securities, and Short-Intermediate 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 fiscal year ended October 31,
November 30, December 31, as indicated below. The tax-equivalent yield
is based on a 36% federal income tax rate for each municipal fund.
Note that each municipal fund may invest in securities whose income is
subject to the federal alternative minimum tax.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Cumulative Total
Returns1 Returns1
Fiscal Yield2 Tax One Five Ten One Five Ten Years/
Period Equiva Year Years Years/ Year Years Life of
Ended lent Life of Fund+
Yield2 Fund+
Emerging Markets 12/31 N/A N/A 10.98% N/A 15.08% 10.98% N/A 70.86%
Income - Class A
Emerging Markets 7.50% N/A 12.40% N/A 15.46% 12.40% N/A 73.02%
Income - Class T
Emerging Markets 6.85% N/A 10.95% N/A 15.31% 10.95% N/A 72.17%
Income - Class B
Emerging Markets N/A N/A 14.58% N/A 15.81% 14.58% N/A 75.03%
Income - Class C
Emerging Markets 8.04% N/A 16.84% N/A 16.62% 16.84% N/A 79.77%
Income - Institutional
High Yield - Class A 10/31 N/A N/A 9.71% 11.96% 14.63% 9.71% 75.89% 291.72%
High Yield - Class T 7.47% N/A 11.18% 12.30% 14.80% 11.18% 78.60% 297.75%
High Yield - Class B 7.26% N/A 9.34% 12.22% 14.89% 9.34% 77.96% 300.76%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Cumulative Total
Returns1 Returns1
Fiscal Yield2 Tax One Five Ten One Five Ten
Period Equiva Year Years Years/ Year Years Years/
Ended lent Life of Life of
Yield2 Fund+ Fund+
High Yield - Class C N/A N/A 13.37% 12.45% 14.89% 13.37% 79.83% 300.77%
High Yield -Institutional 8.30% N/A 15.42% 13.01% 15.17% 15.42% 84.31% 310.46%
Strategic Income - Class A 12/31 N/A N/A 4.05% N/A 12.08% 4.05% N/A 43.48%
Strategic Income - Class T 6.62% N/A 5.50% N/A 12.59% 5.50% N/A 45.58%
Strategic Income - Class B 6.18% N/A 3.67% N/A 12.38% 3.67% N/A 44.70%
Strategic Income - Class C N/A N/A 7.55% N/A 13.09% 7.55% N/A 47.61%
Strategic Income - 7.01% N/A 9.36% N/A 14.03% 9.36% N/A 51.55%
Institutional
Mortgage Securities - Class A 10/31 N/A N/A 3.57% 6.98% 8.48% 3.57% 40.13% 125.67%
Mortgage Securities - Class T N/A N/A 4.87% 7.25% 8.61% 4.87% 41.89% 128.50%
Mortgage Securities - Class B N/A N/A 3.20% 7.62% 8.95% 3.20% 44.39% 135.75%
Mortgage Securities - N/A N/A 8.75% 8.03% 9.01% 8.75% 47.15% 136.96%
Institutional
Mortgage Securities - Initial 6.40% N/A 8.86% 8.05% 9.02% 8.86% 47.29% 137.20%
Government 10/31 N/A N/A 2.95% 5.65% 7.44% 2.95% 31.66% 104.86%
Investment - Class A
Government 5.37% N/A 4.20% 5.91% 7.56% 4.20% 33.23% 107.31%
Investment - Class T
Government 4.92% N/A 2.20% 5.83% 7.68% 2.20% 32.75% 109.65%
Investment - Class B
Government N/A N/A 6.21% 6.16% 7.69% 6.21% 34.82% 109.81%
Investment - Class C
Government Investment - 5.83% N/A 8.18% 6.76% 8.00% 8.18% 38.72% 115.85%
Institutional
Intermediate Bond - Class A 11/30 5.19% N/A 1.84% 5.50% 7.68% 1.84% 30.67% 109.60%
Intermediate Bond - Class T 5.20% N/A 2.65% 5.70% 7.79% 2.65% 31.95% 111.65%
Intermediate Bond - Class B 4.65% N/A 1.85% 5.73% 7.80% 1.85% 32.13% 111.93%
Intermediate Bond - Class C N/A N/A 3.82% 5.74% 7.80% 3.82% 32.19% 112.02%
Intermediate Bond - 5.64% N/A 5.86% 6.67% 8.30% 5.86% 38.13% 121.90%
Institutional
Short Fixed-Income - Class A 10/31 5.51% N/A 4.05% 4.83% 6.75% 4.05% 26.57% 92.20%
Short Fixed-Income - Class T 5.43% N/A 4.38% 4.91% 6.80% 4.38% 27.11% 93.01%
Short Fixed-Income - Class C N/A N/A 4.97% 5.23% 6.96% 4.97% 29.04% 95.95%
Short Fixed-Income - 5.77% N/A 6.24% 5.29% 6.99% 6.24% 29.42% 96.53%
Institutional
Municipal Income - Class A 10/31 4.14% 6.47% 3.84% 5.87% 8.76% 3.84% 32.99% 131.61%
Municipal Income - Class T 4.18% 6.53% 5.08% 6.16% 8.91% 5.08% 34.84% 134.83%
Municipal Income - Class B 3.73% 5.83% 3.15% 6.04% 9.01% 3.15% 34.06% 136.95%
Municipal Income - Class C N/A N/A 7.17% 6.36% 9.01% 7.17% 36.10% 136.95%
Municipal Income - 4.49% 7.02% 9.44% 6.99% 9.34% 9.44% 40.18% 144.13%
Institutional
Municipal Bond - Initial 12/31 4.16% 6.50% 9.20% 6.83% 8.35% 9.20% 39.12% 123.09%
Intermediate Municipal 11/30 3.68% 5.75% 2.43% 4.72% 6.29% 2.43% 25.96% 84.08%
Income - Class A
Intermediate Municipal 3.63% 5.67% 3.29% 4.89% 6.38% 3.29% 26.99% 85.58%
Income - Class T
Intermediate Municipal 3.08% 4.81% 2.54% 4.97% 6.41% 2.54% 27.42% 86.22%
Income - Class B
Intermediate Municipal N/A N/A 4.54% 4.97% 6.42% 4.54% 27.44% 86.26%
Income - Class C
Intermediate Municipal 3.98% 6.22% 6.48% 5.75% 6.82% 6.48% 32.28% 93.39%
Income - Institutional
Short-Intermediate 11/30 3.47% 5.42% 2.72% N/A 4.38% 2.72% N/A 17.25%
Municipal Income - Class A
Short-Intermediate 3.46% 5.41% 2.81% N/A 4.40% 2.81% N/A 17.33%
Municipal Income - Class T
Short-Intermediate Municipal 3.67% 5.73% 4.52% N/A 4.89% 4.52% N/A 19.40%
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; March 16, 1994 for Short-Intermediate Municipal Income)
through each fund's fiscal 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) took place on September 3, 1996. Class A returns prior to
September 3, 1996 (except for Intermediate Bond and Intermediate
Municipal Income) are those of Class T which reflect a 12b-1 fee of
0. 25 % for Bond funds and 0.15% for Short-Term Bond
Funds . If Class A's 12b-1 fee had been reflected total returns
prior to September 3, 1996 for the Bond Funds would have been
higher. For Intermediate Bond and Intermediate Municipal
Income returns from September 3, 1996 through September 10, 1992 are
those of Class T which reflect a 12b-1 fee of 0.25%. Class A returns
prior to September 10, 1992 are those of Institutional Class, which
has no 12b-1 fee. If Class A's 12b-1 fee had been reflected, total
returns prior to September 3, 1996 through September 10, 1992 would
have been higher and total returns prior to September 10, 1992 would
have been lower.
Initial offering of Class A, Class T, and Class B of Mortgage
Securities took place on March 3, 1997. Class A, Class T , and
Class B returns prior to March 3, 1997 are those of Initial Class
which has no 12b-1 fee. If Class A's, Class T's , and Class B's
respective 12b-1 fees had been reflected, total returns prior to March
3, 1997 would have been lower.
Initial offering of Class T of Intermediate Bond and Intermediate
Municipal Income took place on September 10, 1992. Class T returns
prior to September 10, 1992 are those of Institutional Class which has
no 12b-1 fee. If Class T's 12b-1 fee had been reflected, total returns
prior to September 10, 1992 would have been lower.
Initial offering of Class B of Intermediate Bond and Intermediate
Municipal Income took place on June 30, 1994. Class B returns prior to
June 30, 1994 through September 10, 1992 are those of Class T which
reflect a 12b-1 fee of 0.25%. Class B returns prior to September 10,
1992 are those of Institutional Class which has no 12b-1 fee. If Class
B's 12b-1 fee had been reflected, total returns prior to June 30, 1994
would have been lower.
Initial offering of Class B of High Yield, Government Investment,
Municipal Income , and Emerging Markets Income took place on
June 30, 1994. Class B returns prior to June 30, 1994 are those of
Class T which reflect a 12b-1 fee of 0.25%. If Class B's 12b-1 fee had
been reflected, total returns prior to June 30, 1994 would have been
lower.
Class C of each fund (excep t Mortgage Securities, Municipal
Bond, and Short-Intermediate Municipal Income) commenced operations on
November 3, 1997.
Class C returns for Strategic Income prior to November 3, 1997 are
those of Class B which reflect a 12b-1 fee of 0.90% (1.00% prior to
January 1, 1996). If Class C's 12b-1 fee had been reflected, total
returns prior to November 3, 1997 through January 1, 1996 would
have been lower.
Class C returns for High Yield, Government Investment, and Municipal
Income prior to November 3, 1997 through June 30, 1994 are
those of Class B which reflect a 12b-1 fee of 0.90% (1.00% prior to
January 1, 1996). Class C returns prior to June 30, 1994 are those of
Class T which reflect a 12b-1 fee of 0.25%. If Class C's 12b-1 fee had
been reflected, total returns prior to November 3 , 1997 through
January 1, 1996 and prior to June 30, 1994 would have been lower.
Class C returns for Emerging Markets Income prior to November 3, 1997
through June 30, 1994 are those of Class B which reflect a 12b-1 fee
of 0.90% (1.00% prior to January 1, 1996). Class C returns prior to
June 30, 1994 are those of Class T which reflect a 12b-1 fee of 0.25%.
If Class C's 12b-1 fee had been reflected, total returns prior to
November 3 , 1997 through December 3 1, 199 5 and prior
to June 30, 1994 would have been lower.
Class C returns for Short Fixed-Income prior to November 3 ,
1997 are those of Class T which reflect a 12b-1 fee of 0.15%. If Class
C's 12b-1 fee had been reflected, total returns would have been lower.
Class C returns for Intermediate Bond and Intermediate Municipal
Income prior to November 3, 1997 through June 30, 1994 are those of
Class B which reflect a 12b-1 fee of 0.90% (1.00% prior to January 1,
1996). Class C returns prior to June 30, 1994 through September 10,
1992 are those of Class T which reflect a 12b-1 fee of 0.25%. Returns
prior to September 10, 1992 are those of Institutional Class which has
no 12b-1 fee. If Class C's 12b-1 fee had been reflected, total returns
prior to November 3 , 1997 through January 1, 1996 and
prior to June 30, 1994 would have been lower.
Initial offering of Institutional Class of High Yield, Strategic
Income, Government Investment, Short Fixed-Income, Municipal Income,
Emerging Markets Income, and Short-Intermediate Municipal Income took
place on July 3, 1995. Institutional Class returns prior to July 3,
1995 are those of Class T which reflect a 12b-1 fee of 0.25% for High
Yield, Strategic Income, Government Investment, Emerging Markets
Income, and Municipal Income; and 0.15% for Short Fixed-Income and
Short-Intermediate Municipal Income. I f Class T's 12b-1 fee had
not been reflected , total returns prior to July 3, 1995 for
Institutional Class would have been higher.
Initial offering of Institutional Class of Mortgage Securities took
place on March 3, 1997. Institutional Class returns prior to March 3,
1997 are those of Initial Class which has no 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
Strategic Income, Mortgage Securities, Government Investment,
Intermediate Bond, Intermediate Municipal Income, and
Short-Intermediate Municipal Income would have been lower. The
tables 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>
Class A Class T Class B Class C Institutional Class
Yield* Tax-Equi Yield* Tax-Equi Yield* Tax-Equi Yield* Tax-Equi Yield* Tax-Equi
valent valent valent valent valent
Yield Yield Yield Yield Yield
Strategic Income N/A N/A N/A N/A N/A N/A N/A N/A 7.01% N/A
Government N/A N/A 5.31% N/A 4.91% N/A N/A N/A 5.83% N/A
Investment
Intermediate Bond 3.67% N/A N/A N/A 4.56% N/A N/A N/A N/A N/A
Short Fixed-Income 5.51% N/A N/A N/A ** ** N/A N/A 5.77% N/A
Municipal Income 2.89% N/A N/A N/A N/A N/A N/A N/A 3.29% 5.14%
Municipal Bond *** *** *** *** *** *** (dagger) (dagger) *** ***
Intermediate 3.61% 5.64% 3.59% 5.61% 3.08% 4.81% N/A N/A 3.96% 6.19%
Municipal
Short-Intermediate 3.22% 5.03% 3.18% 4.97% ** ** N/A N/A 3.37% 5.27%
Municipal Income
</TABLE>
* See footnote 2 on page .
** Class B is not available for this fund.
*** All Advisor classes were closed to both new and existing
shareholders on November 1, 1997.
(dagger) Class C 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 annual period ended
October 31, November 30, or December 31 , as indicated below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Cumulative Total
Returns1 Returns1
Fiscal One Five Ten One Five Years Ten
Year Year Years Years/Life Year Years/Life
Ended of Fund+ of Fund+
TechnoQuant - Class A 11/30 N/A N/A N/A N/A N/A 7.26%
TechnoQuant - Class T N/A N/A N/A N/A N/A 9.62%
TechnoQuant - Class B N/A N/A N/A N/A N/A 8.10%
TechnoQuant - Class C N/A N/A N/A N/A N/A 12.12%
TechnoQuant - Institutional Class N/A N/A N/A N/A N/A 14.00%
Overseas - Class A 10/31 10.23% 13.81% 7.89% 10.23% 90.92% 77.18%
Overseas - Class T 12.97% 14.38% 8.26% 12.97% 95.80% 81.71%
Overseas - Class B 11.41% 14.64% 8.56% 11.41% 98.02% 85.62%
Overseas - Class C 15.41% 14.87% 8.56% 15.41% 100.02% 85.62 %
Overseas - Institutional Class 17.73% 15.38% 8.88% 17.73% 104.44% 89.73%
Mid Cap - Class A 11/30 15.21% N/A 18.29% 15.21% N/A 34.80%
Mid Cap - Class T 18.07% N/A 19.93% 18.07% N/A 38.14%
Mid Cap - Class B 16.67% N/A 19.50% 16.67% N/A 37.26%
Mid Cap - Class C 20.68% N/A 21.45% 20.68% N/A 41.27%
Mid Cap - Institutional Class 23.04% N/A 22.74% 23.04% N/A 43.96%
Equity Growth - Class A 11/30 12.84% 17.12% 23.37% 12.84% 120.38% 716.82%
Equity Growth - Class T 15.62% 17.70% 23.67% 15.62% 125.84% 737.07%
Equity Growth - Class B 14.09% 18.19% 24.04% 14.09% 130.62% 762.19%
Equity Growth - Class C 18.08% 18.39% 24.04% 18.08% 132.62% 762.17%
Equity Growth - 20.46% 19.35% 24.56% 20.46% 142.20% 799.06%
Institutional Class
Growth Opportunities - Class A 11/30 15.28% 19.00% 21.64% 15.28% 138.60% 609.28%
Growth Opportunities - Class T 17.86% 19.54% 21.92% 17.86% 144.05% 625.50%
Growth Opportunities - Class B 16.63% 20.10% 22.30% 16.63% 149.87% 648.75%
Growth Opportunities - Class C 20.68% 20.30% 22.31% 20.68% 151.98% 649.06%
Growth Opportunities - 22.75% 20.71% 22.52% 22.75% 156.32% 661.97%
Institutional Class
Strategic Opportunities -Class A 11/30 19.58% 13.79% 14.90% 19.58% 90.77% 301.11%
Strategic Opportunities - Class T 22.56% 14.36% 15.19% 22.56% 95.61% 311.27%
Strategic Opportunities - Class B 21.33% 14.57% 15.41% 21.33% 97.42% 319.29%
Strategic Opportunities - 27.07% 15.74% 16.14% 27.07% 107.66% 346.58%
Institutional Class
Strategic Opportunities - Initial 23.18% 15.03% 15.79% 23.18% 101.37% 333.05%
Large Cap - Class A 11/30 11.99% N/A 17.14% 11.99% N/A 32.49%
Large Cap - Class T 14.73% N/A 18.69% 14.73% N/A 35.61%
Large Cap - Class B 13.18% N/A 18.44% 13.18% N/A 35.10%
Large Cap - Class C 17.18% N/A 20.40% 17.18% N/A 39.10%
Large Cap - Institutional Class 19.39% N/A 21.61% 19.39% N/A 41.60%
Growth & Income - Class A 11/30 N/A N/A N/A N/A N/A 17.85%
Growth & Income - Class T N/A N/A N/A N/A N/A 20.46%
Growth & Income - Class B N/A N/A N/A N/A N/A 19.22%
Growth & Income - Class C N/A N/A N/A N/A N/A 23.21%
Growth & Income - N/A N/A N/A N/A N/A 25.26%
Institutional Class
Equity Income - Class A 11/30 15.03% 17.84% 15.67% 15.03% 127.27% 328.68%
Equity Income - Class T 17.84% 18.43% 15.96% 17.84% 133.00% 339.49%
Equity Income - Class B 16.52% 18.72% 16.19% 16.52% 135.80% 348.55%
Equity Income - Class C 20.56% 18.93% 16.20% 20.56% 137.88% 348.71%
Equity Income - Institutional 22.87% 20.13% 16.80% 22.87% 150.15% 372.57%
Balanced - Class A 10/31 14.03% 9.36% 13.02% 14.03% 56.44% 240.09%
Balanced - Class T 17.11% 9.96% 13.33% 17.11% 60.76% 249.48%
Balanced - Class B 15.54% 10.33% 13.66% 15.54% 63.46% 259.70%
Balanced - Class C 19.54% 10.60% 13.66% 19.54% 65.46% 259.70%
Balanced - Institutional 21.97% 11.07% 13.90% 21.97% 69.00% 267.41%
</TABLE>
+ Life of fund figures are from commencement of operations (April 23,
1990 for Overseas; February 20, 1996 for Mid Cap and Large Cap; and
December 31, 1996 for TechnoQuant Growth and Growth & Income) through
the fiscal 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 (except TechnoQuant
Growth and Growth & Income) took place on September 3, 1996. Class
A returns prior to September 3, 1996 (except for Equity Growth and
Equity Income) are those of Class T which reflect a 12b-1 fee of 0.50%
(0.65% prior to January 1, 1996). If Class A's 12b-1 fee had been
reflected, total returns prior to September 3, 1996 would have been
higher. For Equity Growth and Equity Income, Class A returns from
September 3, 1996 through September 10, 1992 are those of Class T
which reflect a 12b-1 fee of 0.50% (0.65% prior to January 1, 1996).
Class A returns prior to September 10, 1992 are those of Institutional
Class which has no 12b-1 fee. If Class A's 12b-1 fee had been
reflected, total returns prior to September 3, 1996 through September
10, 1992 would have been higher and total returns prior to September
10, 1992 would have been lower.
Initial offering of Class T of Equity Growth and Equity Income took
place on September 10, 1992. Class T returns prior to September 10,
1992 are those of Institutional Class which has no 12b-1 fee. If Class
T's 12b-1 fee had been reflected, total returns prior to September 10,
1992 would have been lower.
Initial offering of Class B of Equity Growth took place on December
31, 1996. Class B returns prior to December 31, 1996 through September
10, 1992 are those of Class T which reflect a 12b-1 of fee of 0.50%
(0.65% prior to January 1, 1996). Class B returns prior to
September 10, 1992 are those of Institutional Class which has no 12b-1
fee. If Class B's 12b-1 fee had been reflected, total returns prior to
December 31, 1996 would have been lower.
Initial offering of Class B of Balanced took place on December 31,
1996. Class B returns prior to December 31, 1996 are those of Class T
which reflect a 12b-1 fee of 0.50% (0.65% prior to January 1, 1996).
If Class B's 12b-1 fee had been reflected, total returns prior to
December 31, 1996 would have been lower.
Initial offering of Class B of Growth Opportunities took place on
March 3, 1997. Class B returns prior to March 3, 1997 are those of
Class T which reflect a 12b-1 fee of 0.50% (0.65% prior to January 1,
1996). If Class B's 12b-1 fee had been reflected, total returns prior
to March 3, 1997 would have been lower.
Initial offering of Class B of Equity Income took place on June 30,
1994. Class B returns prior to June 30, 1994 through September 10,
1992 are those of Class T which reflect a 12b-1 fee of 0.65%. Class B
returns prior to September 10, 1992 are those of Institutional Class
which has no 12b-1 fee. If Class B's 12b-1 fee had been reflected,
total returns prior to June 30, 1994 would have been lower.
Initial offering of Class B of Strategic Opportunities took place on
June 30, 1994. Class B returns prior to June 30, 1994 and through
August 20, 1986 are those of Class T which reflect a 12b-1 fee of
0.65%. Class B returns prior to August 20, 1986 are those of
Initial Class which has no 12b-fee. If Class B's 12b-1 fee had
been reflected, total returns prior to June 30, 1994 would have been
lower.
Initial offering of Class B of Overseas took place on July 3, 1995.
Class B returns prior to July 3, 1995, are those of Class T which
reflect a 12b-1 fee of 0.65%. If Class B's 12b-1 fee had been
reflected, total returns prior to July 3, 1995 would have been lower.
Prior to December 1, 1992, Overseas operated under a different
investment objective. Accordingly, the fund's historical performance
may not represent its current investment policies.
Class C of each fund (except Strategic Opportunities) commenced
operations on November 3, 1997.
Class C returns for TechnoQuant Growth, Mid Cap, Large Cap, and
Growth & Income prior to November 3, 1997 are those of
C lass B which reflect a 12b-1 fee of 1.00%.
Class C returns for Equity Growth prior to November 3, 1997 through
December 31, 1996 are those of Class B which reflect a 12b-1 fee of
1.00%. Class C returns prior to December 31, 1996 through September
10, 1992 are those of Class T which reflect a 12b-1 fee of 0.50%
(0.65% prior to January 1, 1996). Class C returns prior to September
10, 1992 are those of Institutional Class which has no 12b-1 fee. If
Class C's 12b-1 fee had been reflected, total returns prior to
December 31, 1996 would have been lower.
Class C returns for Growth Opportunities prior to November 3, 1997
through March 3, 1997 are those of Class B which reflect a 12b-1 fee
of 1.00%. Class C returns prior to March 3, 1997 are those of Class T
which reflect a 12b-1 fee of 0.50 (0.65% prior to January 1, 1996). If
Class C's 12b-1 fee had been reflected, total returns prior to March
3, 1997 would have been lower.
Class C returns for Balanced prior to November 3, 1997 through
December 31, 1996 are those of Class B which reflect a 12b-1 fee of
1.00%. Class C returns prior to December 31, 1996 are those of Class T
which reflect a 12b-1 fee of 0.50% (0.65% prior to January 1, 1996).
If Class C's 12b-1 fee had been reflected, total returns prior to
December 31, 1996 would have been lower.
Class C returns for Equity Income prior to November 3, 1997 through
June 30, 1994 are those of Class B which reflect a 12b-1 fee of 1.00%.
Class C returns prior to June 30, 1994 through September 10, 1992 are
those of Class T which reflect a 12b-1 fee of 0.65%. Class C returns
prior to September 10, 1992 are those of Institutional Class which has
no 12b-1 fee. If Class C's 12b-1 fee had been reflected, total returns
prior to June 30, 1994 would have been lower.
Class C returns for Overseas prior to November 3, 1997 through
July 3, 1995 are those of Class B which reflect a 12b-1 fee of 1.00%.
Class C returns prior to July 3, 1995 are those of Class T which
reflect a 12b-1 fee of 0.65%. If Class C's 12b-1 fee had been
reflected, total returns prior to July 3, 1995 would have been lower.
Prior to December 1, 1992, Overseas operated under a different
investment objective. Accordingly, the fund's historical performance
may not represent its current investment policies.
Initial offering of Institutional Class of Growth Opportunities,
Balanced, and Overseas took place on July 3, 1995. Institutional
Class returns prior to July 3, 1995 are those of Class T which reflect
a 12b-1 fee of 0.65%. If Institutional Class' 12b-fee had not been
reflected, total returns prior to July 3, 1995 would have been
higher.
Initial offering of Institutional Class of Strategic Opportunities
took place on July 3, 1995. Institutional Class returns prior to July
3, 1995 are those of Initial Class which has no 12b-fee.
Note: If FMR had not reimbursed certain class expenses during certain
of these periods, the total returns for those periods for TechnoQuant
Growth, Overseas, Mid Cap, Strategic Opportunities, Large Cap, Growth
& Income, Equity Income, and Balanced would have been lower.
The following tables show the income and capital elements of each
class's cumulative total return. The tables compare 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 CPI information is as of the
month-end closest to the initial investment date for each class. 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 International
Capital Appreciation) during the past 10 fiscal years ended 1997 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 with the exception of foreign
tax withholdings have not been factored into the figures.
During the period from December 31, 1996 (commencement of operations
of the fund) to November 30, 1997, a hypothetical $10,000 investment
in Class A of TechnoQuant Growth would have grown to $ 10,726 ,
including the effect of Class A's maximum 5.75% sales charge.
TECHNOQUANT GROWTH - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997* $ 10,726 $ 0 $ 0 $ 10,726 $ 13,111 $ 12,334 $ 10,183
</TABLE>
* From December 31, 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
TechnoQuant Growth on December 31, 1996, assuming the 5.75% maximum
sales charge had been in effect, the net amount invested in Class A
shares was $ 9,425 . 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 December 31, 1996 (commencement of operations
of the fund) to November 30, 1997, a hypothetical $10,000 investment
in Class T of TechnoQuant Growth would have grown to $ 10,962 ,
including the effect of Class T's maximum 3.50% sales charge.
TECHNOQUANT GROWTH - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997* $ 10,962 $ 0 $ 0 $ 10,962 $ 13,111 $ 12,334 $ 10,183
</TABLE>
* From December 31, 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
TechnoQuant Growth on December 31, 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 December 31, 1996 (commencement of operations
of the fund) to November 30, 1997, a hypothetical $10,000 investment
in Class B of TechnoQuant Growth would have grown to $ 10,810,
including the effect of Class B's maximum applicable CDSC.
TECHNOQUANT GROWTH - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997* $ 10,810 $ 0 $ 0 $ 10,810 $ 13,111 $ 12,334 $ 10,183
</TABLE>
* From December 31, 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
TechnoQuant Growth on December 31, 1996, 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 December 31, 1996 (commencement of operations
of the fund) to November 30, 1997, a hypothetical $10,000 investment
in Class C of TechnoQuant Growth would have grown to $ 11,212,
including the effect of Class C's maximum applicable CDSC .
TECHNOQUANT GROWTH - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 * $ 11,212 $ 0 $ 0 $ 11,212 $ 13,111 $ 12,334 $ 10,183
</TABLE>
* From December 31, 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
TechnoQuant Growth on December 31, 1996, 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 $ 0 for dividends
and $ 0 for capital gain distributions. Initial offering of
Class C of TechnoQuant Growth took place on November 3, 1997. Class C
returns prior to November 3, 1997 are those of Class B which reflect a
12b-1 fee of 1.00%
During the period from December 31, 1996 (commencement of operations
of the fund) to November 30, 1997, a hypothetical $10,000 investment
in Institutional Class of TechnoQuant Growth would have grown to
$ 11,400 .
TECHNOQUANT GROWTH - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997* $ 11,400 $ 0 $ 0 $ 11,400 $ 13,111 $ 12,334 $ 10,183
</TABLE>
* From December 31, 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 TechnoQuant Growth on December 31, 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 period from April 23, 1990 (commencement of operations of
the fund) to October 31, 1997, a hypothetical $10,000 investment in
Class A of Overseas would have grown to $ 17,718 , 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 Value of Total S&P DJIA Cost
Ended Initial Reinvested Reinvested Value 500 of
October 31 $10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 15,919 $ 959 $ 840 $ 17,718 $ 34,008 $ 34,273 $ 12,537
1996 14,411 616 123 15,150 25,742 27,259 12,281
1995 13,120 472 103 13,695 20,774 21,042 11,924
1994 13,252 478 0 13,730 16,406 16,865 11,598
1993 12,187 419 0 12,606 15,795 15,458 11,303
1992 8,548 199 0 8,747 13,741 13,162 11,001
1991 9,218 76 0 9,294 12,495 12,158 10,659
1990* 9,001 0 0 9,001 9,359 9,347 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 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
$ 9,425 . 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 $ 11,392 . 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 $ 641 for dividends and $ 697 for
capital gain distributions. Initial offering of Class A of Overseas
took place on September 3, 1996. Class A returns prior to September 3,
1996 are those of Class T, which reflect a 12b-1 fee of 0.50% (0.65%
prior to January 1, 1996). If Class A's 12b-1 fee had been reflected,
total returns prior to September 3, 1996 would have been higher. Prior
to December 1, 1992, Overseas operated under a different investment
objective. Accordingly, the fund's historical performance may not
represent its current investment policies.
During the period from April 23, 1990 (commencement of operations of
the fund) to October 31, 1997, a hypothetical $10,000 investment in
Class T of Overseas would have grown to $ 18,171 , 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 Value of Total S&P DJIA Cost
Ended Initial Reinvested Reinvested Value 500 of
October 31 $10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 16,424 $ 885 $ 862 $ 18,171 $ 34,008 $ 34,273 $ 12,537
1996 14,765 631 126 15,522 25,742 27,259 12,281
1995 13,433 484 105 14,022 20,744 21,042 11,924
1994 13,568 489 0 14,057 16,406 16,865 11,598
1993 12,477 430 0 12,907 15,795 15,458 11,303
1992 8,753 202 0 8,955 13,741 13,162 11,001
1991 9,438 77 0 9,515 12,495 12,158 10,659
1990* 9,216 0 0 9,216 9,359 9,347 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 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 $ 11,334 . 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 $ 569 for dividends and $ 714 for
capital gain distributions. Prior to December 1, 1992, Overseas
operated under a different investment objective. Accordingly, the
fund's historical performance may not represent its current investment
policies.
During the period from April 23, 1990 (commencement of operations of
the fund) to October 31, 1997, a hypothetical $10,000 investment in
Class B of Overseas would have grown to $ 18,562 .
OVERSEAS - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Value of Total S&P DJIA Cost
Ended Initial Reinvested Reinvested Value 500 of
October 31 $10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 16,690 $ 981 $ 891 $ 18,562 $ 34,008 $ 34,273 $ 12,537
1996 15,060 756 129 15,945 25,742 27,259 12,281
1995 13,920 502 109 14,531 20,744 21,042 11,924
1994 14,060 507 0 14,567 16,406 16,865 11,598
1993 12,930 445 0 13,375 15,795 15,458 11,303
1992 9,070 210 0 9,280 13,741 13,162 11,001
1991 9,780 80 0 9,860 12,495 12,158 10,659
1990* 9,550 0 0 9,550 9,359 9,347 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 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 $ 11,451 . 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 $ 650 for dividends and $ 740 for
capital gain distributions. Initial offering of Class B of Overseas
took place on July 3, 1995. Class B returns prior to July 3, 1995 are
those of Class T which reflect a 12b-1 fee of 0.65%. If Class B's
12b-1 fee had been reflected, total returns prior to July 3, 1995
would have been lower. Prior to December 1, 1992, Overseas operated
under a different investment objective. Accordingly, the fund's
historical performance may not represent its current investment
policies.
During the period from April 23, 1990 (commencement of operations of
the fund) to October 31, 1997 a hypothetical $10,000 investment in
Class C of Overseas would have grown to $ 18,562 .
OVERSEAS - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Value of Total S&P DJIA Cost
Ended Initial Reinvested Reinvested Value 500 of
October 31 $10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 16,690 $ 981 $ 891 $ 18,562 $ 34,008 $ 34,273 $ 12,537
1996 15,060 756 129 15,945 25,742 27,259 12,281
1995 13,920 502 109 14,531 20,744 21,042 11,924
1994 14,060 507 0 14,567 16,406 16,865 11,598
1993 12,930 445 0 13,375 15,795 15,458 11,303
1992 9,070 210 0 9,280 13,741 13,162 11,001
1991 9,780 80 0 9,860 12,495 12,158 10,659
1990* 9,550 0 0 9,550 9,359 9,347 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 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 $ 11,451 . 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 $ 650 for dividends and $ 740 for
capital gain distributions. Initial offering of Class C of Overseas
took place on November 3, 1997. Class C returns prior to November
3, 1997 through July 3, 1995 are those of Class B which reflect a
12b-1 fee of 1.00%. Class C returns prior to July 3, 1995 are those of
Class T which reflect a 12b-1 fee of 0.65%. If Class C's 12b-1 fee had
been reflected, total returns prior to July 3, 1995 would have been
lower. Prior to December 1, 1992, Overseas operated under a different
investment objective. Accordingly, the fund's historical performance
may not represent its current investment policies.
During the period from April 23, 1990 (commencement of operations of
the fund) to October 31, 1997, a hypothetical $10,000 investment in
Institutional Class of Overseas would have grown to $ 18,973 .
OVERSEAS - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Value of Total S&P DJIA Cost
Ended Initial Reinvested Reinvested Value 500 of
October 31 $10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 16,920 $ 1,151 $ 902 $ 18,973 $ 34,008 $ 34,273 $ 12,537
1996 15,200 785 130 16,115 25,742 27,259 12,281
1995 13,970 504 109 14,583 20,744 21,042 11,924
1994 14,060 507 0 14,567 16,406 16,865 11,598
1993 12,930 445 0 13,375 15,795 15,458 11,303
1992 9,070 210 0 9,280 13,741 13,162 11,001
1991 9,780 80 0 9,860 12,495 12,158 10,659
1990* 9,550 0 0 9,550 9,359 9,347 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 $ 11,589 . 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
$ 780 for dividends and $ 740 for capital gain
distributions. Initial offering of Institutional Class of Overseas
took place on July 3, 1995. Institutional Class returns prior to July
3, 1995 are those of Class T which reflect a 12b-1 fee of 0.65%. Total
returns for Institutional Class prior to July 3, 1995 would have been
higher if Class T's 12b-1 fee had not been reflected. Prior to
December 1, 1992, Overseas operated under a different investment
objective. Accordingly, the fund's historical performance may not
represent its current investment policies.
During the period from February 20, 1996 (commencement of operations
of the fund) to November 30, 1997, a hypothetical $10,000 investment
in Class A of Mid Cap would have grown to $ 13,480 , 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 Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 13,233 $ 12 $ 235 $ 13,480 $ 15,453 $ 14,837 $ 10,426
1996* 11,027 0 0 11,027 12,025 12,146 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 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
$ 9,425 . 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 $ 10,198 . 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 $ 9 for dividends and $ 189 for
capital gain distributions. Initial offering of Class A for Mid Cap
took place on September 3, 1996. Class A returns prior to September 3,
1996 are those of Class T which reflect a 12b-1 fee of 0.50%. If Class
A's 12b-1 fee had been reflected, total returns prior to September 3,
1996 would have been higher.
During the period from February 20, 1996 (commencement of operations
of the fund) to November 30, 1997, a hypothetical $10,000 investment
in Class T of Mid Cap would have grown to $ 13,814 , 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 Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 13,597 $ 0 $ 217 $ 13,814 $ 15,453 $ 14,837 $ 10,426
1996* 11,291 0 0 11,291 12,025 12,146 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, 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 $10,174 . 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 $ 174 for capital gain distributions.
During the period from February 20, 1996 (commencement of operations
of the fund) to November 30, 1997, a hypothetical $10,000 investment
in Class B of Mid Cap would have grown to $ 13,726 , 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 Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 13,540 $ 0 $ 186 $ 13,726 $ 15,453 $ 14,837 $ 10,426
1996* 11,610 0 0 11,610 12,025 12,146 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, 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 $ 10,150 . 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 $ 150 for capital gain distributions.
During the period from February 20, 1996 (commencement of operations
of the fund) to November 30, 1997, a hypothetical $10,000 investment
in Class C of Mid Cap would have grown to $ 14,127 .
MID CAP - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 13,941 $ 0 $ 186 $ 14,127 $ 15,453 $ 14,837 $ 10,426
1996* 11,610 0 0 11,610 12,025 12,146 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 C of
Mid Cap on February 20, 1996, 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 $ 10,150 . 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 $ 150 for capital gain distributions. Initial offering of
Class C of Mid Cap took place on November 3, 1997. Class C returns
prior to November 3, 1997 are those of C lass B which reflect a
12b-1 fee of 1.00%.
During the period from February 20, 1996 (commencement of operations
of the fund) to November 30, 1997, a hypothetical $10,000 investment
in Institutional Class of Mid Cap would have grown to $ 14,396 .
MID CAP - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 14,120 $ 25 $ 251 $ 14,396 $ 15,453 $ 14,837 $ 10,426
1996* 11,700 0 0 11,700 12,025 12,146 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 $ 10,220 . 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
$ 20 for dividends and $ 200 for capital gain
distributions.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class A of Equity Growth would have grown to
$ 81,682 , 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 Value of Total S&P DJIA Cost of
November 30 Initial Reinvested Reinvested Value 500 Living
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1997 $ 49,111 $ 2,758 $ 29,813 $ 81,682 $ 55,623 $ 57,303 $ 13,995
1996 42,565 1,808 23,849 68,222 43,282 46,910 13,744
1995 37,843 1,515 17,986 57,344 33,851 35,730 13,310
1994 27,097 969 12,572 40,638 24,712 25,688 12,990
1993 28,028 1,002 10,974 40,004 24,457 24,627 12,634
1992 25,016 789 9,128 34,933 22,213 21,471 12,305
1991 23,068 689 5,123 28,880 18,745 18,258 11,941
1990 14,774 441 3,281 18,496 15,575 15,610 11,594
1989 16,456 393 1,153 18,002 16,137 15,875 10,910
1988 11,420 11 800 12,231 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class A of
Equity Growth on December 1, 1987 assuming the 5.75% maximum sales
charge had been in effect, the net amount invested in Class A shares
was $ 9,425 . The cost of the initial investment ($10,000)
together with the aggregate cost of reinvested dividends and capital
gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $ 25,042 . 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 $ 912 for
dividends and $ 10,328 for capital gain distributions. Initial
offering of Class A of Equity Growth took place on September 3, 1996.
Class A returns prior to September 3, 1996 through September 10, 1992
are those of Class T which reflect a 12b-1 fee of 0.50% (0.65% prior
to January 1, 1996). Class A returns prior to September 10, 1992 are
those of Institutional Class which has no 12b-1 fee. If Class A's
12b-1 fee had been reflected, total returns prior to September 3, 1996
through September 10, 1992 would have been higher and total returns
prior to September 10, 1992 would have been lower.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class T of Equity Growth would have grown to
$ 83,707 , 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 Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 50,555 $ 2,474 $ 30,678 $ 83,707 $ 55,623 $ 57,303 $ 13,995
1996 43,590 1,853 24,424 69,867 43,282 46,910 13,744
1995 38,746 1,552 18,415 58,713 33,851 35,730 13,310
1994 27,744 991 12,873 41,608 24,712 25,688 12,990
1993 28,697 1,027 11,236 40,960 24,457 24,627 12,634
1992 25,613 808 9,346 35,767 22,213 21,471 12,305
1991 23,619 705 5,245 29,569 18,745 18,258 11,941
1990 15,127 452 3,359 18,938 15,575 15,610 11,594
1989 16,849 402 1,180 18,431 16,137 15,875 10,910
1988 11,693 11 819 12,523 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class T of
Equity Growth on December 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 $ 25,104 . 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 $ 749 for
dividends and $ 10,574 for capital gain distributions. Initial
offering of Class T of Equity Growth took place on September 10, 1992.
Class T returns prior to September 10, 1992 are those of Institutional
Class which has no 12b-1 fee. If Class T's 12b-1 fee had been
reflected, total returns prior to September 10, 1992 would have been
lower.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class B of Equity Growth would have grown to
$ 86,219 .
EQUITY GROWTH - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 52,073 $ 2,547 $ 31,599 $ 86,219 $ 55,623 $ 57,303 $ 13,995
1996 45,171 1,920 25,310 72,401 43,282 46,910 13,744
1995 40,151 1,609 19,083 60,843 33,851 35,730 13,310
1994 28,750 1,029 13,339 43,118 24,712 25,688 12,990
1993 29,738 1,063 11,644 42,445 24,457 24,627 12,634
1992 26,542 837 9,685 37,064 22,213 21,471 12,305
1991 24,476 731 5,435 30,642 18,745 18,258 11,941
1990 15,675 468 3,481 19,624 15,575 15,610 11,594
1989 17,460 417 1,223 19,100 16,137 15,875 10,910
1988 12,117 11 849 12,977 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class B of
Equity Growth on December 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 $ 25,653 . 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 $ 776 for
dividends and $ 10,958 for capital gain distributions. Initial
offering of Class B of Equity Growth took place on December 31, 1996.
Class B returns prior to December 31, 1996 through September 10, 1992
are those of Class T which reflect a 12b-1 of fee of 0.50% (0.65%
prior to January 1, 1996). Class B returns prior to September 10, 1992
are those of Institutional Class which has no 12b-1 fee. If Class B's
12b-1 fee had been reflected, total returns prior to December 31, 1996
would have been lower.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class C of Equity Growth would have grown to
$ 86,217 .
EQUITY GROWTH - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 52,071 $ 2,547 $ 31,599 $ 86,217 $ 55,623 $ 57,303 $ 13,995
1996 45,171 1,920 25,310 72,401 43,282 46,910 13,744
1995 40,151 1,609 19,083 60,843 33,851 35,730 13,310
1994 28,750 1,029 13,339 43,118 24,712 25,688 12,990
1993 29,738 1,063 11,644 42,445 24,457 24,627 12,634
1992 26,542 837 9,685 37,064 22,213 21,471 12,305
1991 24,476 731 5,435 30,642 18,745 18,258 11,941
1990 15,675 468 3,481 19,624 15,575 15,610 11,594
1989 17,460 417 1,223 19,100 16,137 15,875 10,910
1988 12,117 11 849 12,977 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class C of
Equity Growth on December 1, 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 $ 25,653 . 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 $ 776 for
dividends and $ 10,958 for capital gain distributions. Initial
offering of Class C of Equity Growth took place on November 3, 1997.
Class C returns prior to November 3, 1997 through December 31, 1996
are those of Class B which reflect a 12b-1 fee of 1.00%. Class C
returns prior to December 31, 1996 through September 10, 1992 are
those of Class T which reflect a 12b-1 fee of 0.50% (0.65% prior to
January 1, 1996). Class C returns prior to September 10, 1992 are
those of Institutional Class which has no 12b-1 fee. If Class C's
12b-1 fee had been reflected, total returns prior to December 31, 1996
would have been lower.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Institutional Class of Equity Growth would have
grown to $ 89,906 .
EQUITY GROWTH - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 53,286 $ 4,291 $ 32,329 $ 89,906 $ 55,623 $ 57,303 $ 13,995
1996 45,887 3,052 25,699 74,638 43,282 46,910 13,744
1995 40,716 2,311 19,337 62,364 33,851 35,730 13,310
1994 29,133 1,232 13,508 43,873 24,712 25,688 12,990
1993 29,980 1,103 11,738 42,821 24,457 24,627 12,634
1992 26,583 837 9,700 37,120 22,213 21,471 12,305
1991 24,476 731 5,435 30,642 18,745 18,258 11,941
1990 15,675 468 3,481 19,624 15,575 15,610 11,594
1989 17,460 417 1,223 19,100 16,137 15,875 10,910
1988 12,117 11 849 12,977 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in
Institutional Class of Equity Growth on December 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 $ 26,808 . 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
$ 1,482 for dividends and $ 10,958 for capital gain
distributions.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class A of Growth Opportunities would have grown
to $ 70,928 , 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 Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 44,043 $ 4,500 $ 22,385 $ 70,928 $ 55,623 $ 57,303 $ 13,995
1996 38,190 2,730 17,068 57,988 43,282 46,910 13,744
1995 31,657 1,648 13,547 46,852 33,851 35,730 13,310
1994 25,784 940 9,312 36,036 24,712 25,688 12,990
1993 25,283 826 7,970 34,079 24,457 24,627 12,634
1992 22,172 550 5,296 28,018 22,213 21,471 12,305
1991 19,370 367 2,695 22,432 18,745 18,258 11,941
1990 14,378 83 2,000 16,461 15,575 15,610 11,594
1989 16,649 37 947 17,633 16,137 15,875 10,910
1988 13,817 0 0 13,817 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class A of
Growth Opportunities on December 1, 1987, assuming the 5.75% maximum
sales charge had been in effect, the net amount invested in Class A
shares was $ 9,425 . 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 $ 23,620 . 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 $ 1,941 for
dividends and $ 8,565 for capital gain distributions. Initial
offering of Class A of Growth Opportunities took place on September 3,
1996. Class A returns prior to September 3, 1996 are those of Class T
which reflect a 12b-1 fee of 0.50% (0.65% prior to January 1, 1996).
If Class A's 12b-1 fee had been reflected, total returns prior to
September 3, 1996 would have been higher.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class T of Growth Opportunities would have grown
to $ 72,550 , 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 Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 45,279 $ 4,273 $ 22,998 $ 72,550 $ 55,623 $ 57,303 $ 13,995
1996 39,122 2,797 17,484 59,403 43,282 46,910 13,744
1995 32,413 1,686 13,871 47,970 33,851 35,730 13,310
1994 26,399 964 9,534 36,897 24,712 25,688 12,990
1993 25,887 846 8,160 34,893 24,457 24,627 12,634
1992 22,701 563 5,423 28,687 22,213 21,471 12,305
1991 19,833 375 2,759 22,967 18,745 18,258 11,941
1990 14,721 85 2,048 16,854 15,575 15,610 11,594
1989 17,046 38 970 18,054 16,137 15,875 10,910
1988 14,147 0 0 14,147 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class T of
Growth Opportunities on December 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 $ 23,665 . 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 $ 1,803 for
dividends and $ 8,769 for capital gain distributions.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class B of Growth Opportunities would have grown
to $ 74,875 .
GROWTH OPPORTUNITIES - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 46,730 $ 4,410 $ 23,735 $ 74,875 $ 55,623 $ 57,303 $ 13,995
1996 40,541 2,899 18,118 61,558 43,282 46,910 13,744
1995 33,588 1,748 14,374 49,710 33,851 35,730 13,310
1994 27,357 998 9,880 38,235 24,712 25,688 12,990
1993 26,826 876 8,456 36,158 24,457 24,627 12,634
1992 23,524 584 5,619 29,727 22,213 21,471 12,305
1991 20,552 389 2,859 23,800 18,745 18,258 11,941
1990 15,255 88 2,122 17,465 15,575 15,610 11,594
1989 17,665 39 1,005 18,709 16,137 15,875 10,910
1988 14,660 0 0 14,660 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class B of
Growth Opportunities on December 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 $ 24,161 . 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 $ 1,868 for
dividends and $ 9,087 for capital gain distributions. Initial
offering of Class B of Growth Opportunities took place on March 3,
1997. Class B returns prior to March 3, 1997 are those of Class T
which reflect a 12b-1 fee of 0.50% (0.65% prior to January 1, 1996).
If Class B's 12b-1 fee had been reflected, total returns prior to
March 3, 1997 would have been lower.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class C of Growth Opportunities would have grown
to $ 74,906 .
GROWTH OPPORTUNITIES - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 46,749 $ 4,412 $ 23,745 $ 74,906 $ 55,623 $ 57,303 $ 13,995
1996 40,541 2,898 18,118 61,558 43,282 46,910 13,744
1995 33,588 1,748 14,374 49,710 33,851 35,730 13,310
1994 27,357 998 9,880 38,235 24,712 25,688 12,990
1993 26,826 876 8,456 36,158 24,457 24,627 12,634
1992 23,524 583 5,619 29,727 22,213 21,471 12,305
1991 20,552 389 2,859 23,800 18,745 18,258 11,941
1990 15,255 88 2,122 17,465 15,575 15,610 11,594
1989 17,665 40 1,005 18,709 16,137 15,875 10,910
1988 14,660 0 0 14,660 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class C of
Growth Opportunities on December 1, 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 $ 24,161 . 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 $ 1,868 for
dividends and $ 9,087 for capital gain distributions. Initial
offering of Class C of Growth Opportunities took place on November 3,
1997. Class C returns prior to November 3, 1997 through March 3, 1997
are those of Class B which reflect a 12b-1 fee of 1.00%. Class C
returns prior to March 3, 1997 are those of Class T which reflect a
12b-1 fee of 0.50 (0.65% prior to January 1, 1996). If Class C's 12b-1
fee had been reflected, total returns prior to March 3, 1997 would
have been lower.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Institutional Class of Growth Opportunities
would have grown to $ 76,197 .
GROWTH OPPORTUNITIES - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Value of Total S&P DJIA Cost
November
30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 47,038 $ 5,240 $ 23,919 $ 76,197 $ 55,623 $ 57,303 $ 13,995
1996 40,626 3,293 18,158 62,077 43,282 46,910 13,744
1995 33,705 1,754 14,424 49,883 33,851 35,730 13,310
1994 27,357 998 9,880 38,235 24,712 25,688 12,990
1993 26,826 876 8,456 36,158 24,457 24,627 12,634
1992 23,524 584 5,619 29,727 22,213 21,471 12,305
1991 20,552 389 2,859 23,800 18,745 18,258 11,941
1990 15,255 88 2,122 17,465 15,575 15,610 11,594
1989 17,665 39 1,005 18,709 16,137 15,875 10,910
1988 14,660 0 0 14,660 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in
Institutional Class of Growth Opportunities on December 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 $ 24,771 . 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
$ 2,261 for dividends and $ 9,087 for capital gain
distributions. Initial offering of Institutional Class of Growth
Opportunities took place on July 3, 1995. Institutional Class returns
prior to July 3, 1995 are those of Class T which reflect a 12b-1 fee
of 0.65%. Total returns for Institutional Class prior to July 3, 1995
would have been higher if Class T's 12b-1 fee had not been reflected.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class A of Strategic Opportunities would have
grown to $ 40,111 , 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 Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 17,460 $ 6,503 $ 16,148 $ 40,111 $ 55,623 $ 57,303 $ 13,995
1996 15,778 5,353 10,485 31,616 43,282 46,910 13,744
1995 15,924 4,920 9,374 30,218 33,851 35,730 13,310
1994 12,148 3,336 6,841 22,325 24,712 25,688 12,990
1993 14,122 3,391 6,016 23,529 24,457 24,627 12,634
1992 13,030 2,522 4,264 19,816 22,213 21,471 12,305
1991 12,973 1,914 1,915 16,802 18,745 18,258 11,941
1990 11,399 1,080 1,683 14,162 15,575 15,610 11,594
1989 12,535 762 1,850 15,147 16,137 15,875 10,910
1988 10,091 187 1,490 11,768 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class A of
Strategic Opportunities on December 1, 1987, assuming the 5.75%
maximum sales charge had been in effect, the net amount invested in
Class A shares was $ 9,425 . The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at
the time they were reinvested) amounted to $ 25,788 . 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 $ 3,066 for
dividends and $ 7,159 for capital gain distributions. Initial
offering of Class A of Strategic Opportunities took place on September
3, 1996. Class A returns prior to September 3, 1996 are those of Class
T which reflect a 12b-1 fee of 0.50% (0.65% prior to January 1, 1996).
If Class A's 12b-1 fee had been reflected, total returns prior to
September 3, 1996 would have been higher.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class T of Strategic Opportunities would have
grown to $ 41,127 , 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 Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 18,052 $ 6,429 $ 16,646 $ 41,127 $ 55,623 $ 57,303 $ 13,995
1996 16,161 5,482 10,740 32,383 43,282 46,910 13,744
1995 16,304 5,037 9,598 30,939 33,851 35,730 13,310
1994 12,438 3,415 7,005 22,858 24,712 25,688 12,990
1993 14,459 3,472 6,159 24,090 24,457 24,627 12,634
1992 13,341 2,582 4,366 20,289 22,213 21,471 12,305
1991 13,283 1,959 1,961 17,203 18,745 18,258 11,941
1990 11,671 1,106 1,723 14,500 15,575 15,610 11,594
1989 12,834 781 1,894 15,509 16,137 15,875 10,910
1988 10,332 192 1,525 12,049 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class T of
Strategic Opportunities on December 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 $ 25,920 . 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 $ 3,022 for
dividends and $ 7,330 for capital gain distributions.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class B of Strategic Opportunities would have
grown to $ 41,929 .
STRATEGIC OPPORTUNITIES - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 18,337 $ 6,556 $ 17,036 $ 41,929 $ 55,623 $ 57,303 $ 13,995
1996 16,451 5,777 10,961 33,189 43,282 46,910 13,744
1995 16,687 5,357 9,827 31,871 33,851 35,730 13,310
1994 12,875 3,537 7,251 23,663 24,712 25,688 12,990
1993 14,983 3,598 6,383 24,964 24,457 24,627 12,634
1992 13,825 2,676 4,524 21,025 22,213 21,471 12,305
1991 13,764 2,031 2,032 17,827 18,745 18,258 11,941
1990 12,094 1,147 1,785 15,026 15,575 15,610 11,594
1989 13,300 809 1,963 16,072 16,137 15,875 10,910
1988 10,707 199 1,580 12,486 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class B of
Strategic Opportunities on December 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 $ 26,505 . 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 $ 3,125 for
dividends and $ 7,596 for capital gain distributions. Initial
offering of Class B of Strategic Opportunities took place on June 30,
1994. Class B returns prior to June 30, 1994 are those of Class T
which reflect a 12b-1 fee of 0.65%. If Class B's 12b-1 fee had been
reflected, total returns prior to June 30, 1994 would have been lower.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Institutional Class of Strategic Opportunities
would have grown to $ 44,658 .
STRATEGIC OPPORTUNITIES - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 18,676 $ 8,362 $ 17,620 $ 44,658 $ 55,623 $ 57,303 $ 13,995
1996 16,824 6,998 11,322 35,144 43,282 46,910 13,744
1995 17,006 6,321 10,100 33,427 33,851 35,730 13,310
1994 12,999 4,180 7,382 24,561 24,712 25,688 12,990
1993 15,040 4,211 6,441 25,692 24,457 24,627 12,634
1992 13,876 3,079 4,551 21,506 22,213 21,471 12,305
1991 13,809 2,319 2,024 18,152 18,745 18,258 11,941
1990 12,142 1,310 1,780 15,232 15,575 15,610 11,594
1989 13,880 858 1,961 16,199 16,137 15,875 10,910
1988 10,723 205 1,572 12,500 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in
Institutional Class of Strategic Opportunities on December 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 $ 28,050 . 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
$ 3,841 for dividends and $ 7,575 for capital gain
distributions. Initial offering of Institutional Class of Strategic
Opportunities took place on July 3, 1995. Institutional Class returns
prior to July 3, 1995 are those of Initial Class which has no 12b-1
fee.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Initial Class of Strategic Opportunities would
have grown to $ 43,305 , 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 Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 18,208 $ 8,027 $ 17,070 $ 43,305 $ 55,623 $ 57,303 $ 13,995
1996 16,284 6,700 10,941 33,925 43,282 46,910 13,744
1995 16,413 6,100 9,747 32,260 33,851 35,730 13,310
1994 12,544 4,034 7,123 23,701 24,712 25,688 12,990
1993 14,514 4,064 6,215 24,793 24,457 24,627 12,634
1992 13,390 2,972 4,391 20,753 22,213 21,471 12,305
1991 13,325 2,239 1,953 17,517 18,745 18,258 11,941
1990 11,717 1,263 1,718 14,698 15,575 15,610 11,594
1989 12,912 827 1,893 15,632 16,137 15,875 10,910
1988 10,348 198 1,517 12,063 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Initial
Class of Strategic Opportunities on December 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
$ 27,251 . 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
$ 3,656 for dividends and $ 7,286 for capital gain
distributions.
During the period from February 20, 1996 (commencement of operations
of the fund) to November 30, 1997, a hypothetical $10,000 investment
in Class A of Large Cap would have grown to $ 13,249 , 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 Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 13,157 $ 0 $ 92 $ 13,249 $ 15,453 $ 14,837 $ 10,426
1996* 11,150 0 0 11,150 12,025 12,146 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 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 $ 9,425 . 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 $ 10,076 . 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 $ 75 for capital gain distributions. Initial offering of
Class A of Large Cap took place on September 3, 1996. Class A returns
prior to September 3, 1996 are those of Class T which reflect a 12b-1
fee of 0.50% (0.65% prior to January 1, 1996). If Class A's 12b-1 fee
had been reflected, total returns prior to September 3, 1996 would
have been higher.
During the period from February 20, 1996 (commencement of operations
of the fund) to November 30, 1997, a hypothetical $10,000 investment
in Class T of Large Cap would have grown to $ 13,561 , 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
November 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1997 $ 13,491 $ 0 $ 70 $ 13,561 $ 15,453 $ 14,837 $ 10,426
1996* 11,406 0 0 11,406 12,025 12,146 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 $ 10,058 . 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 $ 58 for capital gain distributions.
During the period from February 20, 1996 (commencement of operations
of the fund) to November 30, 1997, a hypothetical $10,000 investment
in Class B of Large Cap would have grown to $ 13,510, 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 Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 13,450 $ 0 $ 60 $ 13,510 $ 15,453 $ 14,837 $ 10,426
1996* 11,770 0 0 11,770 12,025 12,146 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, 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 $ 10,050 . 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 $ 50 for capital gain distributions.
During the period from February 20, 1996 (commencement of operations
of the fund) to November 30, 1997, a hypothetical $10,000 investment
in Class C of Large Cap would have grown to $ 13,910 .
LARGE CAP - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 13,850 $ 0 $ 60 $ 13,910 $ 15,453 $ 14,837 $ 10,426
1996* 11,770 0 0 11,770 12,025 12,146 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 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 $ 10,050 . 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 $ 50 for
capital gain distributions. Initial offering of Class C of Large Cap
took place on November 3, 1997. Class C returns prior to November 3,
1997 are those of Class B which reflect a 12b-1 fee of 1.00%.
During the period from February 20, 1996 (commencement of operations
of the fund) to November 30, 1997, a hypothetical $10,000 investment
in Institutional Class of Large Cap would have grown to
$ 14,160 .
LARGE CAP - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 14,050 $ 0 $ 110 $ 14,160 $ 15,453 $ 14,837 $ 10,426
1996* 11,860 0 0 11,860 12,025 12,146 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 $ 10,090 . 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 $ 90 for capital gain distributions.
During the period from December 31, 1996 (commencement of operations
of the fund) to November 30, 1997, a hypothetical $10,000 investment
in Class A of Growth & Income would have grown to $ 11,785 ,
including the effect of Class A's maximum 5.75% sales charge.
GROWTH & INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997* $ 11,753 $ 32 $ 0 $ 11,785 $ 13,111 $ 12,334 $ 10,183
</TABLE>
* From December 31, 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
Growth & Income on December 31, 1996, assuming the 5.75% maximum sales
charge had been in effect, the net amount invested in Class A shares
was $ 9,425 . 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 $ 10,028 . 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 $ 28 for
dividends and $ 0 for capital gain distributions.
During the period from December 31, 1996 (commencement of operations
of the fund) to November 30, 1997, a hypothetical $10,000 investment
in Class T of Growth & Income would have grown to $ 12,046 ,
including the effect of Class T's maximum 3.50% sales charge.
GROWTH & INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997* $ 12,024 $ 22 $ 0 $ 12,046 $ 13,111 $ 12,334 $ 10,183
</TABLE>
* From December 31, 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
Growth & Income on December 31, 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 $ 10,019 . 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 $ 19 for
dividends and $ 0 for capital gain distributions.
During the period from December 31, 1996 (commencement of operations
of the fund) to November 30, 1997, a hypothetical $10,000 investment
in Class B of Growth & Income would have grown to $ 11,922,
including the effect of Class B's maximum applicable CDSC.
GROWTH & INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997* $ 11,910 $ 12 $ 0 $ 11,922 $ 13,111 $ 12,334 $ 10,183
</TABLE>
* From December 31, 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
Growth & Income on December 31, 1996, 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 $ 10,010 . 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 for
dividends and $ 0 for capital gain distributions.
During the period from December 31, 1996 (commencement of operations
of the fund) to November 30, 1997, a hypothetical $10,000 investment
in Class C of Growth & Income would have grown to $ 12,321,
including the effect of Class C's maximum applicable CDSC.
GROWTH & INCOME - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain
Living**
Investment Distributions Distributions
1997* $ 12,309 $ 12 $ 0 $ 12,321 $ 13,111 $ 12,334 $ 10,183
</TABLE>
* From December 31, 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
Growth & Income on December 31, 1996, 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 $ 10,010 . 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 $ 12 for
dividends and $ 0 for capital gain distributions. Initial
offering of Class C of Growth & Income took place on November 3, 1997.
Class C returns prior to November 3, 1997 are those of Class B which
reflect a 12b-1 fee of 1.00%.
During the period from December 31, 1996 (commencement of operations
of the fund) to November 30, 1997, a hypothetical $10,000 investment
in Institutional Class of Growth & Income would have grown to
$ 12,526 .
GROWTH & INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997* $ 12,470 $ 56 $ 0 $ 12,526 $ 13,111 $ 12,334 $ 10,183
</TABLE>
* From December 31, 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 Growth & Income on December 31, 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 $ 10,050 . 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
$ 50 for dividends and $ 0 for capital gain distributions.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class A of Equity Income would have grown to
$ 42,868 , 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 Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 23,015 $ 12,474 $ 7,379 $ 42,868 $ 55,623 $ 57,303 $ 13,995
1996 19,643 10,129 5,351 35,123 43,282 46,910 13,744
1995 17,203 8,368 3,995 29,566 33,851 35,730 13,310
1994 13,762 6,288 2,787 22,837 24,712 25,688 12,990
1993 12,814 5,574 2,595 20,983 24,457 24,627 12,634
1992 11,089 4,443 2,246 17,778 22,213 21,471 12,305
1991 9,554 3,237 1,935 14,726 18,745 18,258 11,941
1990 8,209 2,104 1,663 11,976 15,575 15,610 11,594
1989 10,580 1,710 1,783 14,073 16,137 15,875 10,910
1988 9,572 784 1,613 11,969 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class A of
Equity Income on December 1, 1987, assuming the 5.75% maximum sales
charge had been in effect, the net amount invested in Class A shares
was $ 9,425 . 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 $ 19,843 . 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 $ 4,113 for
dividends and $ 2,828 for capital gain distributions. Initial
offering of Class A of Equity Income took place on September 3, 1996.
Class A returns from September 3, 1996 through September 10, 1992 are
those of Class T which reflect a 12b-1 fee of 0.50% (0.65% for prior
to January 1, 1996). Class A returns prior to September 10, 1992 are
those of Institutional Class which has no 12b-1 fee. If Class A's
12b-1 fee had been reflected, total returns prior to September 3, 1996
through September 10, 1992 would have been higher and total returns
prior to September 10, 1992 would have been lower.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class T of Equity Income would have grown to
$ 43,949 , 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 Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 23,706 $ 12,649 $ 7,594 $ 43,949 $ 55,623 $ 57,303 $ 13,995
1996 20,156 10,342 5,491 35,989 43,282 46,910 13,744
1995 17,614 8,567 4,090 30,271 33,851 35,730 13,310
1994 14,091 6,437 2,854 23,382 24,712 25,688 12,990
1993 13,120 5,707 2,657 21,484 24,457 24,627 12,634
1992 11,354 4,548 2,300 18,202 22,213 21,471 12,305
1991 9,782 3,315 1,981 15,078 18,745 18,258 11,941
1990 8,405 2,154 1,702 12,261 15,575 15,610 11,594
1989 10,833 1,750 1,826 14,409 16,137 15,875 10,910
1988 9,800 802 1,652 12,254 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class T of
Equity Income on December 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 $ 19,915 . 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 $ 4,123 for
dividends and $ 2,896 for capital gain distributions. Initial
offering of Class T of Equity Income took place on September 10, 1992.
Class T returns prior to September 10, 1992 are those of Institutional
Class which has no 12b-1 fee. If Class T's 12b-1 fee had been
reflected, total returns prior to September 10, 1992 would have been
lower.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class B of Equity Income would have grown to
$ 44,855 .
EQUITY INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 24,456 $ 12,566 $ 7,833 $ 44,855 $ 55,623 $ 57,303 $ 13,995
1996 20,796 10,449 5,666 36,911 43,282 46,910 13,744
1995 18,207 8,787 4,229 31,223 33,851 35,730 13,310
1994 14,584 6,677 2,954 24,215 24,712 25,688 12,990
1993 13,596 5,913 2,754 22,263 24,457 24,627 12,634
1992 11,766 4,713 2,383 18,862 22,213 21,471 12,305
1991 10,137 3,435 2,053 15,625 18,745 18,258 11,941
1990 8,710 2,232 1,764 12,706 15,575 15,610 11,594
1989 11,226 1,814 1,892 14,932 16,137 15,875 10,910
1988 10,156 831 1,712 12,699 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class B of
Equity Income on December 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 $ 19,872 . 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 $ 4,053 for
dividends and $ 3,001 for capital gain distributions. Initial
offering of Class B of Equity Income took place on June 30, 1994.
Class B returns prior to June 30, 1994 through September 10, 1992 are
those of Class T which reflect a 12b-1 fee of 0.65%. Class B returns
prior to September 10, 1992 are those of Institutional Class which has
no 12b-1 fee. If Class B's 12b-1 fee had been reflected, total returns
prior to June 30, 1994 would have been lower.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class C of Equity Income would have grown to
$ 44,871 .
EQUITY INCOME - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 24,464 $ 12,572 $ 7,835 $ 44,871 $ 55,623 $ 57,303 $ 13,995
1996 20,796 10,449 5,666 36,911 43,282 46,910 13,744
1995 18,207 8,787 4,229 31,223 33,851 35,730 13,310
1994 14,584 6,677 2,954 24,215 24,712 25,688 12,990
1993 13,596 5,913 2,754 22,263 24,457 24,627 12,634
1992 11,766 4,713 2,383 18,862 22,213 21,471 12,305
1991 10,137 3,435 2,053 15,625 18,745 18,258 11,941
1990 8,710 2,232 1,764 12,706 15,575 15,610 11,594
1989 11,226 1,814 1,892 14,932 16,137 15,875 10,910
1988 10,156 831 1,712 12,699 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class C of
Equity Income on December 1, 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 $ 19,872 . 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 $ 4,053 for
dividends and $ 3,001 for capital gain distributions. Initial
offering of Class C of Equity Income took place on November 3, 1997.
Class C returns prior to November 3, 1997 through June 30, 1994 are
those of Class B which reflect a 12b-1 fee of 1.00%. Class C returns
prior to June 30, 1994 through September 10, 1992 are those of Class T
which reflect a 12b-1 fee of 0.65%. Class C returns prior to September
10, 1992 are those of Institutional Class which has no 12b-1 fee. If
Class C's 12b-1 fee had been reflected, total returns prior to June
30, 1994 would have been lower.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Institutional Class of Equity Income would have
grown to $ 47,257 .
EQUITY INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 24,767 $ 14,519 $ 7,971 $ 47,257 $ 55,623 $ 57,303 $ 13,995
1996 21,043 11,671 5,747 38,461 43,282 46,910 13,744
1995 18,381 9,521 4,272 32,174 33,851 35,730 13,310
1994 14,703 6,987 2,978 24,668 24,712 25,688 12,990
1993 13,660 6,036 2,767 22,463 24,457 24,627 12,634
1992 11,784 4,721 2,387 18,892 22,213 21,471 12,305
1991 10,137 3,435 2,053 15,625 18,745 18,258 11,941
1990 8,710 2,232 1,764 12,706 15,575 15,610 11,594
1989 11,226 1,814 1,892 14,932 16,137 15,875 10,910
1988 10,156 831 1,712 12,699 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in
Institutional Class of Equity Income on December 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 $ 21,228 . 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
$ 4,776 for dividends and $ 3,001 for capital gain
distributions.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Class A of Balanced would have grown to
$ 34,009 , 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 Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 18,720 $ 10,873 $ 4,416 $ 34,009 $ 48,782 $ 50,221 $ 14,016
1996 16,015 8,507 3,588 28,110 36,924 39,944 13,729
1995 15,276 7,084 3,373 25,733 29,755 30,834 13,330
1994 14,647 5,977 3,235 23,859 23,533 24,713 12,966
1993 15,885 5,901 2,732 24,518 22,657 22,651 12,637
1992 14,387 4,525 1,577 20,489 19,710 19,286 12,298
1991 14,108 3,791 683 18,582 17,923 17,816 11,917
1990 10,393 2,215 503 13,111 13,424 13,696 11,578
1989 12,750 1,370 0 14,120 14,511 14,271 10,893
1988 11,052 603 0 11,655 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class A of
Balanced on November 1, 1987, assuming the 5.75% maximum sales charge
had been in effect, the net amount invested in Class A shares was
$ 9,425 . 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 $ 21,055 . 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 $ 5,681 for dividends and $ 2,346
for capital gain distributions. Initial offering of Class A of
Balanced took place on September 3, 1996. Class A returns prior to
September 3, 1996 are those of Class T which reflect a 12b-1 fee of
0.50% (0.65% prior to January 1, 1996). If Class A's 12b-1 fee had
been reflected, total returns prior to September 3, 1996 would have
been higher.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Class T of Balanced would have grown to
$ 34,948 , 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 Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 19,208 $ 11,209 $ 4,531 $ 34,948 $ 48,782 $ 50,221 $ 14,016
1996 16,427 8,689 3,681 28,797 36,924 39,944 13,729
1995 15,640 7,253 3,454 26,347 29,755 30,834 13,330
1994 14,996 6,121 3,312 24,429 23,533 24,713 12,966
1993 16,264 6,042 2,797 25,103 22,657 22,651 12,637
1992 14,731 4,633 1,615 20,979 19,710 19,286 12,298
1991 14,444 3,882 699 19,025 17,923 17,816 11,917
1990 10,642 2,267 515 13,424 13,424 13,696 11,578
1989 13,054 1,403 0 14,457 14,511 14,271 10,893
1988 11,316 617 0 11,933 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class T of
Balanced on November 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 $ 21,374 . 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 $ 5,487 for dividends and $ 2,402
for capital gain distributions.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Class B of Balanced would have grown to
$ 35,970 .
BALANCED - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 19,844 $ 11,445 $ 4,681 $ 35,970 $ 48,782 $ 50,221 $ 14,016
1996 17,023 9,005 3,814 29,842 36,924 39,944 13,729
1995 16,208 7,515 3,579 27,302 29,755 30,834 13,330
1994 15,540 6,343 3,432 25,315 23,533 24,713 12,966
1993 16,854 6,260 2,899 26,013 22,657 22,651 12,637
1992 15,265 4,800 1,674 21,739 19,710 19,286 12,298
1991 14,968 4,023 724 19,715 17,923 17,816 11,917
1990 11,028 2,349 534 13,911 13,424 13,696 11,578
1989 13,528 1,453 0 14,981 14,511 14,271 10,893
1988 11,727 639 0 12,366 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class B of
Balanced on November 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 $ 21,653 . 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 $ 5,986 for
dividends and $ 2,489 for capital gain distributions. Initial
offering of Class B of Balanced took place on December 31, 1996. Class
B returns prior to December 31, 1996 are those of Class T which
reflect a 12b-1 fee of 0.50% (0.65% prior to January 1, 1996). If
Class B's 12b-1 fee had been reflected, total returns prior to
December 31, 1996 would have been lower.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Class C of Balanced would have grown to
$ 35,970 .
BALANCED - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 19,844 $ 11,445 $ 4,681 $ 35,970 $ 48,782 $ 50,221 $ 14,016
1996 17,023 9,005 3,814 29,842 36,924 39,944 13,729
1995 16,208 7,515 3,579 27,302 29,755 30,834 13,330
1994 15,540 6,343 3,432 25,315 23,533 24,713 12,966
1993 16,854 6,260 2,899 26,013 22,657 22,651 12,637
1992 15,265 4,800 1,674 21,739 19,710 19,286 12,298
1991 14,968 4,023 724 19,715 17,923 17,816 11,917
1990 11,028 2,349 534 13,911 13,424 13,696 11,578
1989 13,528 1,453 0 14,981 14,511 14,271 10,893
1988 11,727 639 0 12,366 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class C of
Balanced on November 1, 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 $ 21,653 . 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 $ 5,986 for
dividends and $ 2,489 for capital gain distributions. Initial
offering of Class C of Balanced took place on November 3, 1997. Class
C returns prior to November 3, 1997 through December 31, 1996
are those of Class B which reflect a 12b-1 fee of 1.00%. Class C
returns prior to December 31, 1996 are those of Class T which reflect
a 12b-1 fee of 0.50% (0.65% prior to January 1, 1996). If Class C's
12b-1 fee had been reflected, total returns prior to December 31, 1996
would have been lower.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Institutional Class of Balanced would have grown
to $ 36,741 .
BALANCED - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 19,968 $ 12,062 $ 4,711 $ 36,741 $ 48,782 $ 50,221 $ 14,016
1996 17,066 9,234 3,824 30,124 36,924 39,944 13,729
1995 16,314 7,617 3,603 27,534 29,755 30,834 13,330
1994 15,540 6,343 3,432 25,315 23,533 24,713 12,966
1993 16,854 6,260 2,899 26,013 22,657 22,651 12,637
1992 15,265 4,800 1,674 21,739 19,710 19,286 12,298
1991 14,968 4,023 724 19,715 17,923 17,816 11,917
1990 11,028 2,349 534 13,911 13,424 13,696 11,578
1989 13,528 1,453 0 14,981 14,511 14,271 10,893
1988 11,727 639 0 12,366 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in
Institutional Class of Balanced on November 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 $ 22,152 . 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
$ 6,261 for dividends and $ 2,489 for capital gain
distributions. Initial offering of Institutional Class of Balanced
took place on July 3, 1995. Institutional Class returns prior to July
3, 1995 are those of Class T which reflect a 12b-1 fee of 0.65%. Total
returns for Institutional Class prior to July 3, 1995 would have been
higher if Class T's 12b-1 fee had not been reflected.
During the period from March 10, 1994 (commencement of operations of
the fund) to December 31, 1997, a hypothetical $10,000 investment in
Class A of Emerging Markets Income would have grown to $ 17,086 ,
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 Value of Total S&P DJIA Cost
Ended Initial Reinvested Reinvested Value 500 of
December 31 $10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 10,592 $ 3,802 $ 2,692 $ 17,086 $ 22,864 $ 22,483 $ 10,995
1996 11,163 2,715 786 14,664 17,144 18,007 10,811
1995 8,839 1,374 229 10,442 13,943 13,991 10,464
1994* 9,068 457 235 9,760 10,134 10,233 10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end preceding commencement of fund operations.
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 $ 9,525 . 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 $ 16,227 . 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 $ 2,864 for
dividends and $ 2,029 for capital gain distributions. Initial
offering of Class A for Emerging Markets Income took place on
September 3, 1996. Class A returns prior to September 3, 1996 are
those of Class T which reflect a 12b-1 fee of 0.25%. If Class A's
12b-1 fee had been reflected, total returns prior to September 3, 1996
would have been higher.
During the period from March 10, 1994 (commencement of operations of
the fund) to December 31, 1997, a hypothetical $10,000 investment in
Class T of Emerging Markets Income would have grown to $ 17,302 ,
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 Value of Total S&P DJIA Cost
Ended Initial Reinvested Reinvested Value 500 of
December 31 $10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 10,721 $ 3,853 $ 2,728 $ 17,302 $ 22,864 $ 22,483 $ 10,995
1996 11,300 2,757 797 14,854 17,144 18,007 10,811
1995 8,955 1,392 232 10,579 13,943 13,991 10,464
1994* 9,187 463 238 9,888 10,134 10,233 10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end preceding commencement of fund operations.
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 $ 16,313 . 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 $ 2,903 for
dividends and $ 2,055 for capital gain distributions.
During the period from March 10, 1994 (commencement of operations of
the fund) to December 31, 1997, a hypothetical $10,000 investment in
Class B of Emerging Markets Income would have grown to $ 17,217 .
EMERGING MARKETS INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Value of Total S&P DJIA Cost
Ended Initial Reinvested Reinvested Value 500 of
December 31 $10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 10,860 $ 3,591 $ 2,766 $ 17,217 $ 22,864 $ 22,483 $ 10,995
1996 11,750 2,574 816 15,140 17,144 18,007 10,811
1995 9,300 1,304 240 10,844 13,943 13,991 10,464
1994* 9,520 428 246 10,194 10,134 10,233 10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end preceding commencement of fund operations.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Emerging Markets Income on March 10, 1994, 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 $ 16,092 . 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 $ 2,733 for
dividends and $ 2,130 for capital gain distributions. Initial
offering of Class B of Emerging Markets Income took place on June 30,
1994. Class B returns prior to June 30, 1994 are those of Class T
which reflect a 12b-1 fee of 0.25%. If Class B's 12b-1 fee had been
reflected, total returns prior to June 30, 1994 would have been lower.
During the period from March 10, 1994 (commencement of operations of
the fund) to December 31, 1997, a hypothetical $10,000 investment in
Class C of Emerging Markets Income would have grown to $ 17,503 .
EMERGING MARKETS INCOME - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Value of Total S&P DJIA Cost
Ended Initial Reinvested Reinvested Value 500 of
December 31 $10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 11,147 $ 3,585 $ 2,771 $ 17,503 $ 22,864 $ 22,483 $ 10,995
1996 11,750 2,574 816 15,140 17,144 18,007 10,811
1995 9,300 1,304 240 10,844 13,943 13,991 10,464
1994* 9,520 428 246 10,194 10,134 10,233 10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end preceding commencement of fund operations.
Explanatory Notes: With an initial investment of $10,000 in Class C of
Emerging Markets Income on March 10, 1994, 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 $ 16,098 . 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 $ 2,732 for
dividends and $2,134 for capital gain distributions. Initial
offering of Class C of Emerging Markets Income took place on November
3, 1997. Class C returns prior to November 3, 1997 through June 30,
1994 are those of Class B which reflect a 12b-1 fee of 0.90% (1.00%
prior to January 1, 1996). Class C returns prior to June 30, 1994 are
those of Class T which reflect a 12b-1 fee of 0.25%. If Class C's
12b-1 fee had been reflected, total returns prior to November
3, 1997 through prior to January 1, 1996 and prior to June 30,
1994 would have been lower.
During the period from March 10, 1994 (commencement of operations of
the fund) to December 31, 1997, a hypothetical $10,000 investment in
Institutional Class of Emerging Markets Income would have grown to
$ 17,977 .
EMERGING MARKETS INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Value of Total S&P DJIA Cost
Ended Initial Reinvested Reinvested Value 500 of
December 31 $10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 11,060 $ 4,076 $ 2,841 $ 17,977 $ 22,864 $ 22,483 $ 10,995
1996 11,650 2,909 826 15,385 17,144 18,007 10,811
1995 9,280 1,452 241 10,973 13,943 13,991 10,464
1994* 9,520 480 247 10,247 10,134 10,233 10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end preceding commencement of fund operations.
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 $ 16,648 . 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
$ 3,072 for dividends and $ 2,130 for capital gain
distributions. Initial offering of Institutional Class of Emerging
Markets Income took place on July 3, 1995. Institutional Class returns
prior to July 3, 1995 are those of Class T which reflect a 12b-1 fee
of 0.25%. Total returns for Institutional Class prior to July 3, 1995
would have been higher if Class T's 12b-1 fee had not been reflected.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Class A of High Yield would have grown to
$ 39,172 , 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 Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 13,549 $ 24,309 $ 1,314 $ 39,172 $ 48,782 $ 50,221 $ 14,016
1996 12,889 20,037 1,083 34,009 36,924 39,944 13,729
1995 12,480 16,649 1,049 30,178 29,755 30,834 13,330
1994 11,757 13,484 988 26,229 23,533 24,713 12,966
1993 12,585 12,477 492 25,554 22,657 22,651 12,637
1992 11,600 9,612 0 21,212 19,710 19,286 12,298
1991 10,604 6,789 0 17,393 17,923 17,816 11,917
1990 8,540 3,912 0 12,452 13,424 13,696 11,578
1989 9,399 2,624 0 12,023 14,511 14,271 10,893
1988 10,332 1,302 0 11,634 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class A of
High Yield on November 1, 1987, assuming the 4.75% maximum sales
charge had been in effect, the net amount invested in Class A shares
was $ 9,525 . 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 $ 31,488 . 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 $ 11,177 for
dividends and $ 576 for capital gain distributions. Initial
offering of Class A of High Yield took place on September 3, 1996.
Class A returns prior to September 3, 1996 are those of Class T which
reflect a 12b-1 fee of 0.25%. If Class A's 12b-1 fee had been
reflected, total returns prior to September 3, 1996 would have been
lower.
During the 10-year period ended from October 31, 1997, a hypothetical
$10,000 investment in Class T of High Yield would have grown to
$ 39,775 , 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 Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 13,737 $ 24,705 $ 1,333 $ 39,775 $ 48,782 $ 50,221 $ 14,016
1996 13,068 20,358 1,098 34,524 36,924 39,944 13,729
1995 12,644 16,867 1,063 30,574 29,755 30,834 13,330
1994 11,911 13,661 1,001 26,573 23,533 24,713 12,966
1993 12,750 12,641 498 25,889 22,657 22,651 12,637
1992 11,752 9,739 0 21,491 19,710 19,286 12,298
1991 10,743 6,878 0 17,621 17,923 17,816 11,917
1990 8,652 3,964 0 12,616 13,424 13,696 11,578
1989 9,523 2,657 0 12,180 14,511 14,271 10,893
1988 10,467 1,320 0 11,787 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class T of
High Yield on November 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 $ 31,827 . 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 $ 11,344 for
dividends and $ 584 for capital gain distributions.
During the 10-year period ended from October 31, 1997, a hypothetical
$10,000 investment in Class B of High Yield would have grown to
$ 40,076 .
HIGH YIELD - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 14,180 $ 24,523 $ 1,373 $ 40,076 $ 48,782 $ 50,221 $ 14,016
1996 13,509 20,405 1,135 35,049 36,924 39,944 13,729
1995 13,080 17,087 1,099 31,266 29,755 30,834 13,330
1994 12,332 14,029 1,036 27,397 23,533 24,713 12,966
1993 13,212 13,100 516 26,828 22,657 22,651 12,637
1992 12,178 10,092 0 22,270 19,710 19,286 12,298
1991 11,133 7,127 0 18,260 17,923 17,816 11,917
1990 8,966 4,107 0 13,073 13,424 13,696 11,578
1989 9,868 2,754 0 12,622 14,511 14,271 10,893
1988 10,847 1,367 0 12,214 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class B of
High Yield on November 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 $ 31,695 . 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 $ 11,432 for
dividends and $ 605 for capital gain distributions. Initial
offering of Class B of High Yield took place on June 30, 1994. Class B
returns prior to June 30, 1994 are those of Class T which reflect a
12b-1 fee of 0.25%. If Class B's 12b-1 fee had been reflected, total
returns prior to June 30, 1994 would have been lower.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Class C of High Yield would have grown to
$ 40,077 .
HIGH YIELD - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
<C>
Period Ended Value of Value of Value of Total S&P DJIA
Cost
October 31 Initial Reinvested Reinvested Value 500
of
$10,000 Dividend Capital Gain
Living**
Investment Distributions Distributions
1997 $ 14,180 $ 24,524 $ 1,373 $ 40,077 $ 48,782 $
50,221 $ 14,016
1996 13,509 20,405 1,135 35,049 36,924 39,944
13,729
1995 13,080 17,087 1,099 31,266 29,755 30,834
13,330
1994 12,332 14,029 1,036 27,397 23,533 24,713
12,966
1993 13,212 13,100 516 26,828 22,657 22,651
12,637
1992 12,178 10,092 0 22,270 19,710 19,286
12,298
1991 11,133 7,127 0 18,260 17,923 17,816
11,917
1990 8,966 4,107 0 13,073 13,424 13,696
11,578
1989 9,868 2,754 0 12,622 14,511 14,271
10,893
1988 10,847 1,367 0 12,214 11,481 11,172
10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class C of
High Yield on November 1, 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 $ 31,695 . 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 $ 11,432 for
dividends and $ 605 for capital gain distributions. Initial
offering of Class C of High Yield took place on November 3, 1997.
Class C returns prior to November 3, 1997 through June 30, 1994
are those of Class B which reflect a 12b-1 fee of 0.90% (1.00% prior
to January 1, 1996). Class C returns prior to June 30, 1994 are those
of Class T which reflect a 12b-1 fee of 0.25%. If Class C's 12b-1 fee
had been reflected, total returns prior to November 3, 1997
through January 1, 1996 and prior to June 30, 1994 would have been
lower.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Institutional Class of High Yield would have
grown to $ 41,046 .
HIGH YIELD - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 13,982 $ 25,703 $ 1,361 $ 41,046 $ 48,782 $ 50,221 $ 14,016
1996 13,333 21,111 1,120 35,564 36,924 39,944 13,729
1995 12,937 17,501 1,087 31,525 29,755 30,834 13,330
1994 12,343 14,157 1,037 27,537 23,533 24,713 12,966
1993 13,212 13,100 516 26,828 22,657 22,651 12,637
1992 12,178 10,092 0 22,270 19,710 19,286 12,298
1991 11,133 7,127 0 18,260 17,923 17,816 11,917
1990 8,966 4,107 0 13,073 13,424 13,696 11,578
1989 9,868 2,754 0 12,622 14,511 14,271 10,893
1988 10,847 1,367 0 12,214 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in
Institutional Class of High Yield on November 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 $ 33,050 . 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
$ 11,901 for dividends and $ 605 for capital gain
distributions. Initial offering of Institutional Class of High Yield
took place on July 3, 1995. Institutional Class returns prior to July
3, 1995 are those of Class T which reflect a 12b-1 fee of 0.25%. Total
returns for Institutional Class prior to July 3, 1995 would have been
higher if Class T's 12b-1 fee had not been reflected.
During the period from October 31, 1994 (commencement of operations of
the fund) to December 31, 1997, a hypothetical $10,000 investment in
Class A of Strategic Income would have grown to $ 14,348 ,
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 Value of Total S&P DJIA Cost
December 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 10,563 $ 2,761 $ 1,024 $ 14,348 $ 22,061 $ 21,656 $ 10,789
1996 10,716 1,839 579 13,134 16,542 17,344 10,609
1995 10,478 928 237 11,643 13,453 13,476 10,268
1994* 9,449 93 0 9,542 9,779 9,857 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 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 $ 9,525 . 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 $ 13,766 . 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 $ 2,372 for
dividends and $ 857 for capital gain distributions. Initial
offering of Class A of Strategic Income took place on September 3,
1996. Class A returns prior to September 3, 1996 are those of Class T
which reflect a 12b-1 fee of 0.25%. If Class A's 12b-1 fee had been
reflected, total returns prior to September 3, 1996 would have been
higher.
During the 10-year period ended from October 31, 1994 (commencement of
operations of the fund) to December 31, 1997, a hypothetical $10,000
investment in Class T of Strategic Income would have grown to
$ 14,558 , 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 EndedValue of Value of Value of Total S&P DJIA Cost
December 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 10,702 $ 2,817 $ 1,039 $ 14,558 $ 22,061 $ 21,656 $ 10,789
1996 10,856 1,874 586 13,316 16,542 17,344 10,609
1995 10,615 941 240 11,796 13,453 13,476 10,268
1994* 9,573 94 0 9,667 9,779 9,857 10,013
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end following commencement of fund operations.
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 $ 13,838 . 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 $ 2,419 for
dividends and $ 869 for capital gain distributions.
During the period from October 31, 1994 (commencement of operations of
the fund) to December 31, 1997, a hypothetical $10,000 investment in
Class B of Strategic Income would have grown to $ 14,470, 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 Value of Total S&P DJIA Cost
December 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 10,800 $ 2,610 $ 1,060 $ 14,470 $ 22,061 $ 21,656 $ 10,789
1996 11,260 1,739 601 13,600 16,542 17,344 10,609
1995 11,010 871 247 12,128 13,453 13,476 10,268
1994* 9,910 8 0 9,994 9,779 9,857 10,013
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end following commencement of fund operations.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Strategic Income on October 31, 1994, 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 $ 13,653 . 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 $ 2,266 for
dividends and $ 900 for capital gain distributions.
During the period from October 31, 1994 (commencement of operations of
the fund) to December 31, 1997, a hypothetical $10,000 investment in
Class C of Strategic Income would have grown to $ 14,761 .
STRATEGIC INCOME - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
December 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 11,099 $ 2,602 $ 1,060 $ 14,761 $ 22,061 $ 21,656 $ 10,789
1996 11,260 1,739 601 13,600 16,542 17,344 10,609
1995* 11,010 871 247 12,128 13,453 13,476 10,268
1994 9,910 84 0 9,994 9,779 9,857 10,013
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end following commencement of fund operations.
Explanatory Notes: With an initial investment of $10,000 in Class C of
Strategic Income on October 31, 1994, 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 $ 13,645 . 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 $ 2,260 for
dividends and $ 901 for capital gain distributions. Initial
offering of Class C of Strategic Income took place on November 3,
1997. Class C returns prior to November 3, 1997 are those of Class B
which reflect a 12b-1 fee of 0.90% (1.00% prior to January 1, 1996).
If Class C's 12b-1 fees had been reflected, total returns prior to
November 3, 1997 through January 3, 1996 would have been lower.
During the period from October 31, 1994 (commencement of operations of
the fund) to December 31, 1997, a hypothetical $10,000 investment in
Institutional Class of Strategic Income would have grown to
$ 15,155 .
STRATEGIC INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
December 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 11,140 $ 2,938 $ 1,077 $ 15,155 $ 22,061 $ 21,656 $ 10,789
1996 11,300 1,950 608 13,858 16,542 17,344 10,609
1995 11,030 981 249 12,260 13,453 13,476 10,268
1994* 9,920 97 0 10,017 9,779 9,857 10,013
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end following commencement of fund operations.
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 $ 13,901 . 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
$ 2,518 for dividends and $ 900 for capital gain
distributions. Initial offering of Institutional Class of Strategic
Income took place on July 3, 1995. Institutional Class returns prior
to July 3, 1995 are those of Class T which reflect a 12b-1 fee of
0.25%. Total returns for Institutional Class prior to July 3, 1995
would have been higher if Class T's 12b-1 fee had not been reflected.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Class A of Mortgage Securities would have grown
to $22,567, 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 Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 10,635 $ 11,186 $ 746 $ 22,567 $ 48,782 $ 50,221 $ 14,016
1996 10,480 9,699 575 20,754 36,924 39,944 13,729
1995 10,616 8,512 316 19,444 29,755 30,834 13,330
1994 9,959 6,742 181 16,882 23,533 24,713 12,966
1993 10,394 6,068 75 16,537 22,657 22,651 12,637
1992 10,307 5,032 0 15,339 19,710 19,286 12,298
1991 10,394 4,041 0 14,435 17,923 17,816 11,917
1990 9,776 2,761 0 12,537 13,424 13,696 11,578
1989 9,824 1,792 0 11,616 14,511 14,271 10,893
1988 9,747 851 0 10,598 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class A of
Mortgage Securities on November 1, 1987, assuming the 4.75% maximum
sales charge had been in effect, the net amount invested in Class A
shares was $ 9,525 . 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 $ 21,431 . 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 $ 7,244 for
dividends and $ 396 for capital gain distributions. Initial
offering of Class A of Mortgage Securities took place on March 3,
1997. Class A returns prior to March 3, 1997 are those of Initial
Class which has no 12b-1 fee. If Class A's 12b-1 fee had been
reflected, total returns prior to March 3, 1997 would have been lower.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Class T of Mortgage Securities would have grown
to $ 22,850 , 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 Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 10,774 $ 11,320 $ 756 $ 22,850 $ 48,782 $ 50,221 $ 14,016
1996 10,618 9,826 582 21,026 36,924 39,944 13,729
1995 10,755 8,624 320 19,699 29,755 30,834 13,330
1994 10,090 6,830 183 17,103 23,533 24,713 12,966
1993 10,530 6,148 76 16,754 22,657 22,651 12,637
1992 10,442 5,098 0 15,540 19,710 19,286 12,298
1991 10,530 4,095 0 14,625 17,923 17,816 11,917
1990 9,904 2,797 0 12,701 13,424 13,696 11,578
1989 9,953 1,815 0 11,768 14,511 14,271 10,893
1988 9,875 862 0 10,737 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class T of
Mortgage Securities on November 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 $ 21,568 . 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 $ 7,333 for
dividends and $401 for capital gain distributions. Initial
offering of Class T of Mortgage Securities took place on March 3,
1997. Class T returns prior to March 3, 1997 are those of Initial
Class which has no 12b-1 fee. If Class T's 12b-1 fee had been
reflected, total returns prior to March 3, 1997 would have been lower.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Class B of Mortgage Securities would have grown
to $ 23,575 .
MORTGAGE SECURITIES - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 11,165 $ 11,627 $ 783 $ 23,575 $ 48,782 $ 50,221 $ 14,016
1996 11,003 10,182 604 21,789 36,924 39,944 13,729
1995 11,145 8,937 331 20,413 29,755 30,834 13,330
1994 10,456 7,077 190 17,723 23,533 24,713 12,966
1993 10,912 6,370 79 17,361 22,657 22,651 12,637
1992 10,821 5,283 0 16,104 19,710 19,286 12,298
1991 10,912 4,243 0 15,155 17,923 17,816 11,917
1990 10,263 2,899 0 13,162 13,424 13,696 11,578
1989 10,314 1,881 0 12,195 14,511 14,271 10,893
1988 10,233 893 0 11,126 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,0000 in Class B
of Mortgage Securities on November 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 $21,884 . 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 $ 7,550 for
dividends and $ 415 for capital gain distributions. Initial
offering of Class B of Mortgage Securities took place on March 3,
1997. Class B returns prior to March 3, 1997 are those of Initial
Class which has no 12b-1 fee. If Class B's 12b-1 fees had been
reflected, total returns prior to March 3, 1997 would have been lower.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Institutional Class of Mortgage Securities would
have grown to $ 23,696 .
MORTGAGE SECURITIES - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 11,155 $ 11,758 $ 783 $ 23,696 $ 48,782 $ 50,221 $14,016
1996 11,003 10,182 604 21,789 36,924 39,944 13,729
1995 11,145 8,937 331 20,413 29,755 30,834 13,330
1994 10,456 7,078 190 17,723 23,533 24,713 12,966
1993 10,912 6,370 79 17,361 22,657 22,651 12,637
1992 10,821 5,283 0 16,104 19,710 19,286 12,298
1991 10,912 4,244 0 15,155 17,923 17,816 11,917
1990 10,263 2,898 0 13,162 13,424 13,696 11,578
1989 10,314 1,881 0 12,195 14,511 14,271 10,893
1988 10,233 893 0 11,126 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in
Institutional Class of Mortgage Securities on November 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 $22,026 . 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
$ 7,617 for dividends and $ 415 for capital gain
distributions. Initial offering of Institutional Class of Mortgage
Securities took place on March 3, 1997. Returns prior to March 3, 1997
are those of Initial Class which has no 12b-1 fee.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Initial Class of Mortgage Securities would have
grown to $ 23,720 .
MORTGAGE SECURITIES - INITIAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 11,165 $ 11,771 $ 784 $ 23,720 $ 48,782 $ 50,221 $ 14,016
1996 11,003 10,182 604 21,789 36,924 39,944 13,729
1995 11,145 8,937 331 20,413 29,755 30,834 13,330
1994 10,456 7,077 190 17,723 23,533 24,713 12,966
1993 10,912 6,370 79 17,361 22,657 22,651 12,637
1992 10,821 5,283 0 16,104 19,710 19,286 12,298
1991 10,912 4,243 0 15,155 17,923 17,816 11,917
1990 10,263 2,899 0 13,162 13,424 13,696 11,578
1989 10,314 1,881 0 12,195 14,511 14,271 10,893
1988 10,233 893 0 11,126 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Initial
Class of Mortgage Securities on November 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
$ 22,028 . 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
$ 7,618 for dividends and $ 415 for capital gain
distributions.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Class A of Government Investment would have
grown to $ 20,486 , 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 Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 10,012 $ 9,921 $ 553 $ 20,486 $ 48,782 $ 50,221 $ 14,016
1996 9,825 8,586 543 18,954 36,924 39,944 13,729
1995 10,012 7,591 553 18,156 29,755 30,834 13,330
1994 9,277 6,010 513 15,800 23,533 24,713 12,966
1993 10,498 5,856 324 16,678 22,657 22,651 12,637
1992 10,074 4,747 0 14,821 19,710 19,286 12,298
1991 9,929 3,733 0 13,662 17,923 17,816 11,917
1990 9,473 2,655 0 12,128 13,424 13,696 11,578
1989 9,639 1,751 0 11,390 14,511 14,271 10,893
1988 9,587 827 0 10,414 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class A of
Government Investment on November 1, 1987, assuming the 4.75% maximum
sales charge had been in effect, the net amount invested in Class A
shares was $9,525 . 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 $ 20,210 . 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 $ 6,633 for
dividends and $ 362 for capital gain distributions. Initial
offering of Class A for Government Investment took place on September
3, 1996. Class A returns prior to September 3, 1996 are those
of Class T which reflect a 12b-1 fee of 0.25%. If Class A's 12b-1 fee
had been reflected, total returns prior to September 3, 1996 would
have been higher.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Class T of Government Investment would have
grown to $ 20,731 , 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 Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 10,143 $ 10,027 $ 561 $20,731 $ 48,782 $ 50,221 $ 14,016
1996 9,954 8,696 550 19,200 36,924 39,944 13,729
1995 10,143 7,690 561 18,394 29,755 30,834 13,330
1994 9,398 6,090 519 16,007 23,533 24,713 12,966
1993 10,636 5,932 329 16,897 22,657 22,651 12,637
1992 10,206 4,810 0 15,016 19,710 19,286 12,298
1991 10,059 3,782 0 13,841 17,923 17,816 11,917
1990 9,598 2,689 0 12,287 13,424 13,696 11,578
1989 9,765 1,775 0 11,540 14,511 14,271 10,893
1988 9,713 838 0 10,551 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class T of
Government Investment on November 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 $ 20,320 . 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 $ 6,708 for
dividends and $ 367 for capital gain distributions.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Class B of Government Investment would have
grown to $ 20,965 .
GOVERNMENT INVESTMENT - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 10,500 $ 9,885 $ 580 $ 20,965 $ 48,782 $ 50,221 $ 14,016
1996 10,315 8,673 570 19,558 36,924 39,944 13,729
1995 10,511 7,770 581 18,862 29,755 30,834 13,330
1994 9,728 6,252 538 16,518 23,533 24,713 12,966
1993 11,022 6,148 340 17,510 22,657 22,651 12,637
1992 10,576 4,984 0 15,560 19,710 19,286 12,298
1991 10,424 3,919 0 14,343 17,923 17,816 11,917
1990 9,946 2,787 0 12,733 13,424 13,696 11,578
1989 10,120 1,838 0 11,958 14,511 14,271 10,893
1988 10,065 869 0 10,934 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class B of
Government Investment on November 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 $ 20,212 . 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 $ 6,711 for
dividends and $ 380 for capital gain distributions. Initial
offering of Class B of Government Investment took place on June 30,
1994. Class B returns prior to June 30, 1994 are those of Class T
which reflect a 12b-1 fee of 0.25%. If Class B's 12b-1 fee had been
reflected, total returns prior to June 30, 1994 would have been lower.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Class C of Government Investment would have
grown to $ 20,965 .
GOVERNMENT INVESTMENT - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 10,500 $ 9,885 $ 580 $ 20,965 $ 48,782 $ 50,221 $ 14,016
1996 10,315 8,673 570 19,558 36,924 39,944 13,729
1995 10,511 7,770 581 18,862 29,755 30,834 13,330
1994 9,728 6,252 538 16,518 23,533 24,713 12,966
1993 11,022 6,148 340 17,510 22,657 22,651 12,637
1992 10,576 4,984 0 15,560 19,710 19,286 12,298
1991 10,424 3,919 0 14,343 17,923 17,816 11,917
1990 9,946 2,787 0 12,733 13,424 13,696 11,578
1989 10,120 1,838 0 11,958 14,511 14,271 10,893
1988 10,065 869 0 10,934 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class C of
Government Investment on November 1, 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 $ 20,212 . 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 $ 6,711 for
dividends and $ 380 for capital gain distributions. Initial
offering of Class C of Government Investment took place on November 3,
1997. Class C returns prior to November 3, 1997 through June
30, 1994 are those of Class B which reflect a 12b-1 fee of 0.90%
(1.00% prior to January 1, 1996). Class C returns prior to June 30,
1994 are those of Class T which reflect a 12b-1 fee of 0.25%. If Class
C's 12b-1 fee had been reflected, total returns prior to
November 3, 1997 through January 1, 199 6 and
prior to June 30, 1994 would have been lower.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Institutional Class of Government Investment
would have grown to $ 21,585 .
GOVERNMENT INVESTMENT - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 10,489 $ 10,516 $ 580 $ 21,585 $ 48,782 $ 50,221 $ 14,016
1996 10,304 9,080 569 19,953 36,924 39,944 13,729
1995 10,511 7,988 581 19,080 29,755 30,834 13,330
1994 9,739 6,311 538 16,588 23,533 24,713 12,966
1993 11,022 6,148 340 17,510 22,657 22,651 12,637
1992 10,576 4,984 0 15,560 19,710 19,286 12,298
1991 10,424 3,919 0 14,343 17,923 17,816 11,917
1990 9,946 2,787 0 12,733 13,424 13,696 11,578
1989 10,120 1,838 0 11,958 14,511 14,271 10,893
1988 10,065 869 0 10,934 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in
Institutional Class of Government Investment on November 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 $ 20,836 . 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
$ 7,020 for dividends and $ 380 for capital gain
distributions. Initial offering of Institutional Class of Government
Investment took place on July 3, 1995. Institutional Class returns
prior to July 3, 1995 are those of Class T which reflect a 12b-1 fee
of 0.25%. Total Returns for Institutional Class prior to July 3, 1995
would have been higher if Class T's 12b-1 fee had not been reflected.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class A of Intermediate Bond would have grown to
$ 20,960 , 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 Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 9,916 $ 11,044 $ 0 $ 20,960 $ 55,623 $ 57,303 $ 13,995
1996 9,944 9,865 0 19,809 43,282 46,910 13,744
1995 10,104 8,776 0 18,880 33,851 35,730 13,310
1994 9,634 7,310 0 16,944 24,712 25,688 12,990
1993 10,461 6,907 0 17,368 24,457 24,627 12,634
1992 9,991 5,447 0 15,438 22,213 21,471 12,305
1991 9,907 4,250 0 14,157 18,745 18,258 11,941
1990 9,522 2,968 0 12,490 15,575 15,610 11,594
1989 9,775 1,958 0 11,733 16,137 15,875 10,910
1988 9,559 914 0 10,473 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class A of
Intermediate Bond on December 1, 1987 assuming the 3.75% maximum sales
charge had been in effect, the net amount invested in Class A shares
was $ 9,625 . 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 $ 20,961 . 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 $ 7,369 for
dividends and $ 0 for capital gain distributions. Initial
offering of Class A of Intermediate Bond took place on September 3,
1996. Class A returns from September 3, 1996 through September 10,
1992 are those of Class T which reflect a 12b-1 fee of 0.25%. Class A
returns prior to September 10, 1992 are those of Institutional Class
which has no 12b-1 fee. If Class A's 12b-1 fee had been reflected,
total returns prior to September 3, 1996 through September 10, 1992
would have been higher and total returns prior to September 10, 1992
would have been lower.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class T of Intermediate Bond would have grown to
$ 21,165 , 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 Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 10,019 $ 11,146 $ 0 $ 21,165 $ 55,623 $ 57,303 $ 13,995
1996 10,067 9,983 0 20,050 43,282 46,910 13,744
1995 10,209 8,868 0 19,077 33,851 35,730 13,310
1994 9,734 7,386 0 17,120 24,712 25,688 12,990
1993 10,569 6,979 0 17,548 24,457 24,627 12,634
1992 10,095 5,504 0 15,599 22,213 21,471 12,305
1991 10,010 4,295 0 14,305 18,745 18,258 11,941
1990 9,621 2,999 0 12,620 15,575 15,610 11,594
1989 9,877 1,978 0 11,855 16,137 15,875 10,910
1988 9,659 923 0 10,582 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class T of
Intermediate Bond on December 1, 1987 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 $ 21,064 . 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 $ 7,440 for
dividends and $ 0 for capital gain distributions. Initial
offering of Class T of Intermediate Bond took place on September 10,
1992. Class T returns prior to September 10, 1992 are those of
Institutional Class which has no 12b-1 fee. If Class T's 12b-1 fee had
been reflected, total returns prior to September 10, 1992 would have
been lower.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class B of Intermediate Bond would have grown to
$ 21,193 .
INTERMEDIATE BOND - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 10,283 $ 10,910 $ 0 $ 21,193 $ 55,623 $ 57,303 $ 13,995
1996 10,332 9,884 0 20,216 43,282 46,910 13,744
1995 10,488 8,892 0 19,380 33,851 35,730 13,310
1994 10,000 7,519 0 17,519 24,712 25,688 12,990
1993 10,868 7,176 0 18,044 24,457 24,627 12,634
1992 10,380 5,660 0 16,040 22,213 21,471 12,305
1991 10,293 4,416 0 14,709 18,745 18,258 11,941
1990 9,893 3,084 0 12,977 15,575 15,610 11,594
1989 10,156 2,034 0 12,190 16,137 15,875 10,910
1988 9,932 949 0 10,881 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class B of
Intermediate Bond on December 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 $ 20,846 . 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 $ 7,395 for
dividends and $ 0 for capital gain distributions. Initial
offering of Class B of Intermediate Bond took place on June 30, 1994.
Class B returns prior to June 30, 1994 through September 10, 1992 are
those of Class T which reflect a 12b-1 fee of 0.25%. Class B returns
prior to September 10, 1992 are those of Institutional Class which has
no 12b-1 fee. If Class B's 12b-1 fee had been reflected, total returns
prior to June 30, 1994 would have been lower.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class C of Intermediate Bond would have grown to
$ 21,202 .
INTERMEDIATE BOND - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 10,292 $ 10,910 $ 0 $ 21,202 $ 55,623 $ 57,303 $ 13,995
1996 10,332 9,884 0 20,216 43,282 46,910 13,744
1995 10,488 8,892 0 19,380 33,851 35,730 13,310
1994 10,000 7,519 0 17,519 24,712 25,688 12,990
1993 10,868 7,176 0 18,044 24,457 24,627 12,634
1992 10,380 5,660 0 16,040 22,213 21,471 12,305
1991 10,293 4,416 0 14,709 18,745 18,258 11,941
1990 9,893 3,084 0 12,977 15,575 15,610 11,594
1989 10,156 2,034 0 12,190 16,137 15,875 10,910
1988 9,932 949 0 10,881 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class B of
Intermediate Bond on December 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 $ 20,846 . 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 $ 7,395 for
dividends and $ 0 for capital gain distributions. Initial
offering of Class C of Intermediate Bond took place on November 3,
1997. Class C returns prior to November 3, 1997 through June 30, 1994
are those of Class B which reflect a 12b-1 fee of 0.90% (1.00% prior
to January 1, 1996). Class C returns prior to June 30, 1994 through
September 10, 1992 are those of Class T which reflect a 12b-1 fee of
0.25%. Class C returns prior to September 10, 1992 are those of
Institutional Class which has no 12b-1 fee. If Class C's 12b-1 fee had
been reflected, total returns prior to November 3, 1997 through
January 1, 1996, and prior to June 30, 1994 would have been
lower.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class C of Intermediate Bond would have grown to
$ 22,190 .
INTERMEDIATE BOND - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 10,312 $ 11,878 $ 0 $ 22,190 $ 55,623 $ 57,303 $ 13,995
1996 10,361 10,600 0 20,961 43,282 46,910 13,744
1995 10,507 9,380 0 19,887 33,851 35,730 13,310
1994 10,020 7,779 0 17,799 24,712 25,688 12,990
1993 10,888 7,292 0 18,180 24,457 24,627 12,634
1992 10,380 5,684 0 16,064 22,213 21,471 12,305
1991 10,293 4,416 0 14,709 18,745 18,258 11,941
1990 9,893 3,084 0 12,977 15,575 15,610 11,594
1989 10,156 2,034 0 12,190 16,137 15,875 10,910
1988 9,932 949 0 10,881 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in
Institutional Class of Intermediate Bond on December 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 $ 21,790 . 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
$ 7,847 for dividends and $ 0 for capital gain
distributions.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Class A of Short Fixed-Income would have grown
to $ 19,220 , 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 Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 9,116 $ 10,104 $ 0 $ 19,220 $ 48,782 $ 50,221 $ 14,016
1996 9,174 9,020 0 18,194 36,924 39,944 13,729
1995 9,272 7,999 0 17,271 29,755 30,834 13,330
1994 9,282 7,004 0 16,286 23,533 24,713 12,966
1993 9,879 6,443 0 16,322 22,657 22,651 12,637
1992 9,742 5,215 0 14,957 19,710 19,286 12,298
1991 9,664 4,003 0 13,667 17,923 17,816 11,917
1990 9,419 2,763 0 12,182 13,424 13,696 11,578
1989 9,742 1,794 0 11,536 14,511 14,271 10,893
1988 9,733 861 0 10,594 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class A of
Short Fixed-Income on November 1, 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 $ 20,527 . 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 $ 7,137 for
dividends and $ 0 for capital gain distributions. Initial
offering of Class A of Short Fixed-Income took place on September 3,
1996. Class A returns prior to September 3, 1996 are those of Class T
which reflect a 12b-1 fee of 0.15%.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Class T of Short Fixed-Income would have grown
to $ 19,301 , 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 Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 9,155 $ 10,146 $ 0 $ 19,301 $ 48,782 $ 50,221 $ 14,016
1996 9,184 9,029 0 18,213 36,924 39,944 13,729
1995 9,272 7,999 0 17,271 29,755 30,834 13,330
1994 9,282 7,004 0 16,286 23,533 24,713 12,966
1993 9,879 6,443 0 16,322 22,657 22,651 12,637
1992 9,742 5,215 0 14,957 19,710 19,286 12,298
1991 9,664 4,003 0 13,667 17,923 17,816 11,917
1990 9,419 2,763 0 12,182 13,424 13,696 11,578
1989 9,742 1,794 0 11,536 14,511 14,271 10,893
1988 9,733 861 0 10,594 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class T of
Short Fixed-Income on November 1, 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 $ 20,531 . 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 $ 7,138 for
dividends and $ 0 for capital gain distributions.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Class C of Short-Fixed Income would have grown
to $ 19,595 .
SHORT FIXED-INCOME - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 9,294 $ 10,301 $ 0 $ 19,595 $ 48,782 $ 50,221 $ 14,016
1996 9,324 9,167 0 18,491 36,924 39,944 13,729
1995 9,414 8,120 0 17,534 29,755 30,834 13,330
1994 9,423 7,111 0 16,534 23,533 24,713 12,966
1993 10,030 6,541 0 16,571 22,657 22,651 12,637
1992 9,891 5,294 0 15,185 19,710 19,286 12,298
1991 9,811 4,064 0 13,875 17,923 17,816 11,917
1990 9,563 2,804 0 12,367 13,424 13,696 11,578
1989 9,891 1,821 0 11,712 14,511 14,271 10,893
1988 9,881 875 0 10,756 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class
C of Short-Fixed Income on November 1, 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
$ 20,691 . 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
$ 7,247 for dividends and $ 0 for capital gain
distributions. Initial offering of Class C Short Fixed-Income took
place on November 3, 1997. Class C returns prior to November 3,
1997 are those of Class T which reflect a 12b-1 fee of 0.15%. If
Class C's 12b-1 fee had been reflected, total returns would have been
lower.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Institutional Class of Short Fixed-Income would
have grown to $19,653.
SHORT FIXED-INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 9,294 $ 10,359 $ 0 $ 19,653 $ 48,782 $ 50,221 $ 14,016
1996 9,314 9,185 0 18,499 36,924 39,944 13,729
1995 9,414 8,129 0 17,543 29,755 30,834 13,330
1994 9,423 7,111 0 16,534 23,533 24,713 12,966
1993 10,030 6,541 0 16,571 22,657 22,651 12,637
1992 9,891 5,294 0 15,185 19,710 19,286 12,298
1991 9,811 4,064 0 13,875 17,923 17,816 11,917
1990 9,563 2,804 0 12,367 13,424 13,696 11,578
1989 9,891 1,821 0 11,712 14,511 14,271 10,893
1988 9,881 875 0 10,756 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in
Institutional Class of Short Fixed-Income on November 1, 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 $ 20,749 . 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
$ 7,275 for dividends and $ 0 for capital gain
distributions. Initial offering of Institutional Class of Short
Fixed-Income took place on July 3, 1995. Institutional Class returns
prior to July 3, 1995 are those of Class T which reflect a 12b-1 fee
of 0.15%. Total returns for Institutional Class prior to July 3, 1995
would have been higher if Class T's 12b-1 fee had not been reflected.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Class A of Municipal Income would have grown to
$ 23,161 , including the effect of Class A's maximum 4.75% sales
charge.
MUNICIPAL INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 11,749 $ 10,893 $ 519 $ 23,161 $ 48,782 $ 50,221 $ 14,016
1996 11,353 9,394 498 21,245 36,924 39,944 13,729
1995 11,488 8,342 504 20,334 29,755 30,834 13,330
1994 10,850 6,748 476 18,074 23,533 24,713 12,966
1993 12,300 6,503 431 19,234 22,657 22,651 12,637
1992 11,266 4,969 353 16,588 19,710 19,286 12,298
1991 11,034 3,823 332 15,189 17,923 17,816 11,917
1990 10,511 2,641 169 13,321 13,424 13,696 11,578
1989 10,463 1,673 54 12,190 14,511 14,271 10,893
1988 10,115 764 0 10,879 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class A of
Municipal Income on November 1, 1987, assuming the 4.75% maximum sales
charge had been in effect, the net amount invested in Class A shares
was $9,525. 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 $ 20,719 . 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 $ 7,073 for dividends and $ 369 for
capital gain distributions. Initial offering of Class A of Municipal
Income took place on September 3, 1996. Class A returns prior to
September 3, 1996 are those of Class T which reflect a 12b-1 fee of
0.25%. If Class A's 12b-1 fee had been reflected, total returns prior
to September 3, 1996 would have been higher.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Class T of Municipal Income would have grown to
$ 23,483 , including the effect of Class T's maximum 3.50% sales
charge.
MUNICIPAL INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 11,913 $ 11,044 $ 526 $ 23,483 $ 48,782 $ 50,221 $ 14,016
1996 11,521 9,539 505 21,565 36,924 39,944 13,729
1995 11,639 8,451 511 20,601 29,755 30,834 13,330
1994 10,992 6,837 482 18,311 23,533 24,713 12,966
1993 12,462 6,587 437 19,486 22,657 22,651 12,637
1992 11,413 5,036 357 16,806 19,710 19,286 12,298
1991 11,178 3,875 336 15,389 17,923 17,816 11,917
1990 10,649 2,676 171 13,496 13,424 13,696 11,578
1989 10,600 1,695 55 12,350 14,511 14,271 10,893
1988 10,248 774 0 11,022 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class T of
Municipal Income on November 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 $ 20,858 . 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 $ 7,165 for dividends and $ 374 for
capital gain distributions.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Class B of Municipal Income would have grown to
$ 23,695 .
MUNICIPAL INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 12,315 $ 10,836 $ 544 $ 23,695 $ 48,782 $ 50,221 $ 14,016
1996 11,919 9,467 523 21,909 36,924 39,944 13,729
1995 12,041 8,502 528 21,071 29,755 30,834 13,330
1994 11,381 7,006 499 18,886 23,533 24,713 12,966
1993 12,914 6,826 453 20,193 22,657 22,651 12,637
1992 11,827 5,218 370 17,415 19,710 19,286 12,298
1991 11,584 4,014 349 15,947 17,923 17,816 11,917
1990 11,036 2,773 177 13,986 13,424 13,696 11,578
1989 10,985 1,756 57 12,798 14,511 14,271 10,893
1988 10,619 803 0 11,422 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class B of
Municipal Income on November 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 $ 20,687 . 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 $ 7,133 for
dividends and $ 388 for capital gain distributions. Initial
offering of Class B of Municipal Income took place on June 30, 1994.
Class B returns prior to June 30, 1994 are those of Class T which
reflect a 12b-1 fee of 0.25%. If Class B's 12b-1 fee had been
reflected, total returns prior to June 30, 1994 would have been lower.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Class C of Municipal Income would have grown to
$ 23,695 .
MUNICIPAL INCOME - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 12,315 $ 10,836 $ 544 $ 23,695 $ 48,782 $ 50,221 $ 14,016
1996 11,919 9,467 523 21,909 36,924 39,944 13,729
1995 12,041 8,502 528 21,071 29,755 30,834 13,330
1994 11,381 7,006 499 18,886 23,533 24,713 12,966
1993 12,914 6,826 453 20,193 22,657 22,651 12,637
1992 11,827 5,218 370 17,415 19,710 19,286 12,298
1991 11,584 4,014 349 15,947 17,923 17,816 11,917
1990 11,036 2,773 177 13,986 13,424 13,696 11,578
1989 10,985 1,756 57 12,798 14,511 14,271 10,893
1988 10,619 803 0 11,422 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class C of
Municipal Income on November 1, 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 $ 20,687 . 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 $ 7,133 for
dividends and $ 388 for capital gain distributions. Initial
offering of Class C of Municipal Income took place on November 3,
1997. Class C returns prior to November 3, 1997 through June
30, 1994 are those of Class B which reflect a 12b-1 fee of 0.90%
(1.00% prior to January 1, 1996). Class C returns prior to June 30,
1994 are those of Class T which reflect a 12b-1 fee of 0.25%. If Class
C's 12b-1 fee had been reflected, total returns prior to November
3, 1997 through January 1, 199 6 and prior to June
30, 1994 would have been lower.
During the 10-year period ended October 31, 1997, a hypothetical
$10,000 investment in Institutional Class of Municipal Income would
have grown to $ 24,413 .
MUNICIPAL INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
October 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 12,305 $ 11,564 $ 544 $ 24,413 $ 48,782 $ 50,221 $ 14,016
1996 11,898 9,887 522 22,307 36,924 39,944 13,729
1995 12,061 8,775 529 21,365 29,755 30,834 13,330
1994 11,391 7,084 500 18,975 23,533 24,713 12,966
1993 12,914 6,826 453 20,193 22,657 22,651 12,637
1992 11,827 5,218 370 17,415 19,710 19,286 12,298
1991 11,584 4,014 349 15,947 17,923 17,816 11,917
1990 11,036 2,773 177 13,986 13,424 13,696 11,578
1989 10,985 1,756 57 12,798 14,511 14,271 10,893
1988 10,619 803 0 11,422 11,481 11,172 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in
Institutional Class of Municipal Income on November 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 $ 21,405 . 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
$ 7,502 for dividends and $ 388 for capital gain
distributions. Initial offering of Institutional Class of Municipal
Income took place on July 3, 1995. Institutional Class returns prior
to July 3, 1995 are those of Class T which reflect a 12b-1 fee of
0.25%. Total returns for Institutional Class prior to July 3, 1995
would have been higher if Class T's 12b-1 fee had not been reflected.
During the 10-year period ended December 31, 1997, a hypothetical
$10,000 investment in Initial Class of Municipal Bond would have grown
to $ 22,309 .
MUNICIPAL BOND - INITIAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
Dec. 31 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 11,211 $ 9,471 $ 1,627 $ 22,309 $ 52,577 $ 54,688 $ 13,977
1996 10,776 8,092 1,562 20,430 39,424 43,801 13,744
1995 10,882 7,166 1,574 19,622 32,063 34,032 13,302
1994 9,697 5,515 1,395 16,607 23,305 24,891 12,972
1993 11,434 5,431 1,283 18,148 23,002 23,712 12,634
1992 11,184 4,398 454 16,036 20,896 20,268 12,296
1991 11,145 3,456 121 14,722 19,412 18,890 11,950
1990 10,697 2,458 0 13,155 14,877 15,192 , 11,594
1989 10,697 1,607 0 12,304 15,356 15,274 10,927
1988 10,461 769 0 11,230 11,661 11,592 10,442
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Initial
Class of Municipal Bond on November 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
$ 20,683 . 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
$ 6,390 for dividends and $ 1,061 for capital gain
distributions.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class A of Intermediate Municipal Income would
have grown to $ 18,408 , 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 Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 9,829 $ 7,380 $ 1,199 $ 18,408 $ 55,623 $ 57,303 $ 13,995
1996 9,653 6,469 1,176 17,298 43,282 46,910 13,744
1995 9,625 5,691 1,172 16,488 33,851 35,730 13,310
1994 8,716 4,500 1,061 14,277 24,712 25,688 12,990
1993 9,699 4,301 1,152 15,152 24,457 24,627 12,634
1992 10,274 3,792 0 14,066 22,213 21,471 12,305
1991 10,014 2,895 0 12,909 18,745 18,258 11,941
1990 9,866 2,070 0 11,936 15,575 15,610 11,594
1989 9,838 1,313 0 11,151 16,137 15,875 10,910
1988 9,755 618 0 10,373 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class A of
Intermediate Municipal Income on December 1, 1987, assuming the 3.75%
maximum sales charge had been in effect, the net amount invested in
Class A shares was $9,625. 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 $ 18,421 . 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 $ 5,280 for
dividends and $ 835 for capital gain distributions. Initial
offering of Class A of Intermediate Municipal Income took place on
September 3, 1996. Class A returns from September 3, 1996 through
September 10, 1992 are those of Class T which reflect a 12b-1 fee of
0.25%. Class A returns prior to September 10, 1992 are those of
Institutional Class which has no 12b-1 fee. If Class A's 12b-1 fee had
been reflected, total returns prior to September 3, 1996 through
September 10, 1992 would have been higher and total returns prior to
September 10, 1992 would have been lower.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class T of Intermediate Municipal Income would
have grown to $ 18,558 , 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 Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 9,922 $ 7,426 $ 1,210 $ 18,558 $ 55,623 $ 57,303 $ 13,995
1996 9,753 6,532 1,188 17,473 43,282 46,910 13,744
1995 9,725 5,750 1,184 16,659 33,851 35,730 13,310
1994 8,807 4,545 1,073 14,425 24,712 25,688 12,990
1993 9,800 4,346 1,164 15,310 24,457 24,627 12,634
1992 10,381 3,831 0 14,212 22,213 21,471 12,305
1991 10,118 2,925 0 13,043 18,745 18,258 11,941
1990 9,969 2,091 0 12,060 15,575 15,610 11,594
1989 9,940 1,327 0 11,267 16,137 15,875 10,910
1988 9,856 625 0 10,481 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class T of
Intermediate Municipal Income on December 1, 1987, 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 $ 18,486 . 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 $ 5,323 for
dividends and $ 844 for capital gain distributions. Initial
offering of Class T of Intermediate Municipal Income took place on
September 10, 1992. Class T returns prior to September 10, 1992 are
those of Institutional Class which has no 12b-1 fee. If Class T's
12b-1 fee had been reflected, total returns prior to September 10,
1992 would have been lower.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class B of Intermediate Municipal Income would
have grown to $ 18,622 .
INTERMEDIATE MUNICIPAL INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 10,202 $ 7,176 $ 1,244 $ 18,622 $ 55,623 $ 57,303 $ 13,995
1996 10,029 6,395 1,221 17,645 43,282 46,910 13,744
1995 10,000 5,714 1,218 16,932 33,851 35,730 13,310
1994 9,056 4,616 1,103 14,775 24,712 25,688 12,990
1993 10,077 4,469 1,197 15,743 24,457 24,627 12,634
1992 10,674 3,940 0 14,614 22,213 21,471 12,305
1991 10,405 3,007 0 13,412 18,745 18,258 11,941
1990 10,250 2,151 0 12,401 15,575 15,610 11,594
1989 10,222 1,363 0 11,585 16,137 15,875 10,910
1988 10,135 642 0 10,777 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class B of
Intermediate Municipal Income on December 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
$ 18,282 . 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
$ 5,232 for dividends and $ 868 for capital gain
distributions. Initial offering of Class B of Intermediate Municipal
Income took place on June 30, 1994. Class B returns prior to June 30,
1994 through September 10, 1992 are those of Class T which reflect a
12b-1 fee of 0.25%. Class B returns prior to September 10, 1992 are
those of Institutional Class which has no 12b-1 fee. If Class B's
12b-1 fee had been reflected, total returns prior to June 30, 1994
would have been lower.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Class C of Intermediate Municipal Income would
have grown to $ 18,626 .
INTERMEDIATE MUNICIPAL INCOME - CLASS C INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 10,202 $ 7,180 $ 1,244 $ 18,626 $ 55,623 $ 57,303 $ 13,995
1996 10,029 6,394 1,221 17,645 43,282 46,910 13,744
1995 10,000 5,714 1,218 16,932 33,851 35,730 13,310
1994 9,056 4,616 1,103 14,775 24,712 25,688 12,990
1993 10,077 4,469 1,197 15,743 24,457 24,627 12,634
1992 10,674 3,940 0 14,614 22,213 21,471 12,305
1991 10,405 3,007 0 13,412 18,745 18,258 11,941
1990 10,250 2,151 0 12,401 15,575 15,610 11,594
1989 10,222 1,363 0 11,585 16,137 15,875 10,910
1988 10,135 642 0 10,777 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Class C of
Intermediate Municipal Income on December 1, 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
$18,282 . 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
$ 5,232 for dividends and $ 868 for capital gain
distributions. Initial offering of Class C of Intermediate Municipal
Income took place on November 3, 1997. Class C returns prior to
November 3, 1997 through June 30, 1994 are those of Class B which
reflect a 12b-1 fee of 0.90% (1.00% prior to January 1, 1996). Class C
returns prior to June 30, 1994 through September 10, 1992 are those of
Class T which reflect a 12b-1 fee of 0.25%. Class C returns prior to
September 10, 1992 are those of Institutional Class which has no 12b-1
fee. If Class C's 12b-1 fee had been reflected, total returns prior to
November 3, 1997 through January 1, 1996 and prior to June 30,
1994 would have been lower.
During the 10-year period ended November 30, 1997, a hypothetical
$10,000 investment in Institutional Class of Intermediate Municipal
Income would have grown to $ 19,339 .
INTERMEDIATE MUNICIPAL INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living
Investment Distributions Distributions
1997 $ 10,202 $ 7,892 $ 1,245 $ 19,339 $ 55,623 $ 57,303 $ 13,995
1996 10,029 6,911 1,222 18,162 43,282 46,910 13,744
1995 9,981 6,041 1,216 17,238 33,851 35,730 13,310
1994 9,066 4,762 1,105 14,933 24,712 25,688 12,990
1993 10,077 4,516 1,198 15,791 24,457 24,627 12,634
1992 10,674 3,946 0 14,620 22,213 21,471 12,305
1991 10,405 3,007 0 13,412 18,745 18,258 11,941
1990 10,250 2,151 0 12,401 15,575 15,610 11,594
1989 10,222 1,363 0 11,585 16,137 15,875 10,910
1988 10,135 642 0 10,777 12,333 11,953 10,425
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in
Institutional Class of Intermediate Municipal Income on December 1,
1987, the net amount invested in Institutional Class shares was
$10,000. The cost of the initial in v estment ($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 $ 18,973 . 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 $ 5,605 for dividends and $ 868 for
capital gain distributions.
During the period March 16, 1994 (commencement of operations of the
fund) to November 30, 1997, a hypothetical $10,000 investment in Class
A of Short-Intermediate Municipal Income would have grown to
$ 11,725 , 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 Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 10,047 $ 1,613 $ 65 $ 11,725 $ 22,204 $ 22,099 $ 10,971
1996 10,057 1,154 32 11,243 17,277 18,090 10,774
1995 10,086 717 0 10,803 13,513 13,779 10,435
1994* 9,623 254 0 9,877 9,865 9,907 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 $ 11,660 . 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 $ 1,478 for
dividends and $ 59 for capital gain distributions. Initial
offering of Class A of Short-Intermediate Municipal Income took place
on September 3, 1996. Class A returns prior to September 3, 1996 are
those of Class T, which reflect a 12b-1 fee of 0.15%.
During the period March 16, 1994 (commencement of operations of the
fund) to November 30, 1997, a hypothetical $10,000 investment in Class
T of Short-Intermediate Municipal Income would have grown to
$ 11,733 , 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 Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 10,057 $ 1,611 $ 65 $ 11,733 $ 22,204 $ 22,099 $ 10,971
1996 10,057 1,153 32 11,242 17,277 18,090 10,774
1995 10,086 717 0 10,803 13,513 13,779 10,435
1994* 9,623 254 0 9,877 9,865 9,907 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 $ 11,658 . 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 $ 1,476 for
dividends and $ 59 for capital gain distributions.
During the period March 16, 1994 (commencement of operations of the
fund) to November 30, 1997, a hypothetical $10,000 investment in
Institutional Class of Short-Intermediate Municipal Income would have
grown to $ 11,940 .
SHORT-INTERMEDIATE MUNICIPAL INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P DJIA Cost
November 30 Initial Reinvested Reinvested Value 500 of
$10,000 Dividend Capital Gain Living**
Investment Distributions Distributions
1997 $ 10,210 $ 1,664 $ 66 $ 11,940 $ 22,204 $ 22,099 $ 10,971
1996 10,210 1,181 32 11,423 17,277 18,090 10,774
1995 10,230 734 0 10,964 13,513 13,779 10,435
1994* 9,770 257 0 10,027 9,865 9,907 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 $ 11,711 . 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 $ 1,523 for dividends and $60 for
capital gain distributions. Initial offering of Institutional Class of
Short-Intermediate Municipal Income took place on July 3, 1995.
Institutional Class returns prior to July 3, 1995 are those of Class T
which reflect a 12b-1 fee of 0.15%. Total returns for Institutional
Class prior to July 3, 1995 would have been higher if Class T's 12b-1
fee had not been reflected.
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 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 Morgan Stanley Capital International stock market indices for
the twelve months ended December 31, 1997. 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 U.S. now make up over
one-half of the world's stock market capitalization. According to
Morgan Stanley Capital International, the size of the markets as
measured in U.S. dollars grew from $5749.5 ($10078.9 including the
U.S.) billion in 1996 to to $6207.8 ($12040.3 including the U.S.)
billion in 1997.
The following table measures the total market capitalization of
certain countries according to the M organ S tanley
C apital I nternational indices database. The value of
the markets are measured in billions of U.S. dollars as of
December 31, 1997.
TOTAL MARKET CAPITALIZATION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Australia $ 164.1 Japan $ 1 ,498 . 6
Austria 23.0 Netherlands 3 37.9
Belgium 75.5 Norway 31.5
Canada 30 5.9 Singapore/Malaysia 54.5/49.0
Denmark 67.7 Spain 158.3
France 4 74.5 Sweden 154.5
Germany 584.7 Switzerland 465.6
Hong Kong 167.0 United Kingdom 1,284.8
Italy 238.9 United States 6,209.9
</TABLE>
The following table measures the total market capitalization of Latin
American countries according to the International Finance
Corporation Emerging Markets database. The value of the markets is
measured in millions of U.S. dollars as of December 31, 1997.
TOTAL MARKET CAPITALIZATION - LATIN AMERICA
Argentina $ 3 8 .1
Brazil 1 36.7
Chile 33.0
Colombia 8.2
Mexico 112.5
Venezuela 13.1
Peru 10.3
Total Latin America 351.9
NATIONAL STOCK MARKET PERFORMANCE. Certain national stock markets have
outperformed the U.S. stock market. The first table below represents
the performance of national stock markets as measured in U.S. dollars
by the Morgan Stanley Capital International stock market indices for
the twelve months ended December 31, 1997. 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
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Australia - 10.4 % Japan - 23.7 %
Austria 1.6 % Netherlands 23.8 %
Belgium 13.6 % Norway 6.2 %
Canada 12.8 % Singapore/Malaysia - 30.0 /- 68.3 %
Denmark 34.5 % Spain 25 . 4 %
France 11.9 % Sweden 12.9 %
Germany 24.6 % Switzerland 44.2 %
Hong Kong - 23.3 % United Kingdom 22.6 %
Italy 35.5 % United States 33.4 %
STOCK MARKET PERFORMANCE (CUMULATIVE TOTAL RETURNS)
MEASURED IN LOCAL CURRENCY
Australia 9.2 % Japan - 14.5 %
Austria 18.5 % Netherlands 45.1 %
Belgium 32.4 % Norway 22.7 %
Canada 17.8 % Singapore/Malaysia - 15.7 /- 51.1 %
Denmark 56.1 % Spain 46.9 %
France 29.5 % Sweden 31.2 %
Germany 45.3 % Switzerland 56.7 %
Hong Kong - 23.2 % United Kingdom 27.5 %
Italy 57.5 % United States 33.4 %
</TABLE>
The following table shows the average annualized stock market returns
measured in U.S. dollars as of December 31, 1997.
STOCK MARKET PERFORMANCE
FIVE YEARS ENDED TEN YEARS ENDED
DECEMBER 31, 1997 DECEMBER 31, 1997
Germany 1 5.32 % 39.05 %
Hong Kong 0.86 % 107.89 %
Japan -4.11 % -3.22 %
Spain 26.67 % 41.73 %
United Kingdom 17.42 % 46.60 %
United States 24.58 % 63.22 %
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 trading 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.
International Capital Appreciation may compare its performance to that
of the Morgan Stanley Capital International AC World Index ex USA
(Gross), a market capitalization weighted equity index comprising 46
counties-20 developed markets and 26 emerging markets.
Overseas may compare its performance to that of the Morgan Stanley
Capital International Europe, Australasia, Far East (EAFE)
Index, an unmanaged, market capitalization weighted
index that is designed to represent the performance of developed stock
markets outside of the United States and Canada . The index returns
for periods after January 1, 1997 are adjusted for tax withholding
rates applicable to U.S.-based mutual funds organized as Massachusetts
business trusts.
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
Lehman Brothers Mortgage Securities Index, a market value weighted
performance benchmark of 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 Federal
National Mortgage Association (FNMA). Graduated payments mortgages
(GPMs) and balloons are included in the index, buydowns, manufactured
homes, and graduated equity mortgages (GEMs) are not included in the
index.
Government Investment may compare its performance to that of the
Lehman Brothers Government Bond Index, a market value weighted index
of U.S. government and government agency securities (other than
mortgage securities) with maturities of one year or more. Issues
included in the index have a par value of at least $100 million.
Issues include all public obligations of the U.S. Treasury (excluding
flower bonds and foreign-targeted issues) and U.S. Government agencies
and quasi-federal corporations, and corporate debt guaranteed by the
U.S. Government.
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.
Strategic Income may compare its performance to that of the Fidelity
Strategic Income Composite Benchmark which is a hypothetical
representation of the performance of the fund's general investment
categories according to their respective weighting in the fund's
neutral mix. The Fidelity Strategic Income Composite Benchmark
represents Strategic Income's four general investment categories
according to their respective weighting in the fund's neutral mix (40%
high yield, 30% U.S. Government and investment-grade, 15% emerging
markets and 15% foreign developed markets). The following indices are
used to calculate the Fidelity Strategic Income Composite Benchmark:
high yield - the Merrill Lynch High Yield Master Index (40%), 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; U.S. Government and
investment - grade - the Lehman Brothers Government Bond Index
(30%) is a market value weighted index of U.S. government and
government agency securities (other than mortgage securities) with
maturities of one year or more. Issues included in the index have a
par value of at least $100 million. Issues include all public
obligations of the U.S. Treasury (excluding flower bonds and
foreign-targeted issues) and U.S. Government agencies and
quasi-federal corporations, and corporate debt guaranteed by the U.S.
Government; foreign developed markets - the Salomon Brothers
Non-U.S. Dollar World Government Bond Index (15%), is a
market-capitalization weighted index that tracks the performance of 16
world Government bond markets, excluding the United States. Issues
included in the Index have fixed-rate coupons and maturities of at
least one year; emerging markets - the J.P. Morgan Emerging Markets
Bond Index Plus (15%), a markets 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 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. I ntermediate 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. 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.
A 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.
A 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, 1997, FMR advised over $ 30 billion in
tax-free fund assets, $ 99 billion in money market fund assets,
$ 395 billion in equity fund assets, $ 71 billion in
international fund assets, and $ 24 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 on shares acquired through
reinvestment of dividends and capital gains or 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 for an insurance company separate account used
to fund annuity contracts for employee benefit plans (including 403(b)
programs, but otherwise as defined in ERISA);
2. to shares purchased by a trust institution or bank trust department
for a managed account that is charged an asset-based fee. Employee
benefit plans and accounts managed by third parties do not qualify for
this waiver;
3. to shares purchased by a broker-dealer for a managed account that
is charged an asset-based fee. Employee benefit plans do not qualify
for this waiver;
4. to shares purchased by a registered investment adviser that is not
part of an organization primarily engaged in the brokerage business
for an account that is managed on a discretionary basis and is charged
an asset-based fee. Employee benefit plan s do not qualify for
this waiver;
5. to shares purchased for an employee benefit plan having $25 million
or more in plan assets; or
6. to shares purchased prior to December 31, 1998 by shareholders who
have closed their Class A Municipal Bond, Class A California Municipal
Income, or Class A New York Municipal Income accounts prior to
December 31, 1997. This waiver is limited to purchases of up to
$10,000; shareholders are entitled to this waiver after the original
load waiver certificate is received by FIIOC .
CLASS T SHARES ONLY
Pursuant to Rule 22d-1 under the 1940 Act, FDC exercises its right to
waive Class T's front-end sales charge on shares acquired through
reinvestment of dividends and capital gains or 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 for an insurance company separate account used
to fund annuity contracts for employee benefit plans (including 403(b)
programs, but otherwise as defined in ERISA);
2. to shares purchased by a trust institution or bank trust department
for a managed account that is charged an asset-based fee. Accounts
managed by third parties do not qualify for this waiver;
3. to shares purchased by a broker-dealer for a managed account that
is charged an asset-based fee;
4. to shares purchased by a registered investment adviser that is not
part of an organization primarily engaged in the brokerage business
for an account that is managed on a discretionary basis and is charged
an asset-based fee;
5. to shares purchased for an employee benefit plan;
6. to shares purchased for a Fidelity or Fidelity Advisor account
(including purchases by exchange) with the proceeds of a distribution
from (i) an insurance company separate account used to fund annuity
contracts for employee benefit plans that are invested in Fidelity
Advisor or Fidelity funds, or (ii) an employee benefit plan that is
invested in Fidelity Advisor or Fidelity funds. (Distributions other
than those transferred to an IRA account must be transferred directly
into a Fidelity account.);
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 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 charitable organization (as defined for
purposes of Section 501(c)(3) of the Internal Revenue Code) investing
$100,000 or more;
11. 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;
12. 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);
13. to shares purchased with distributions of income, principal, and
capital gains from Fidelity Defined trusts; or
14. to shares purchased prior to December 31, 1998 by shareholders who
have closed their Class T Municipal Bond, Class T California Municipal
Income, or Class T New York Municipal Income accounts prior to
December 31, 1997. This waiver is limited to purchases of up to
$10,000; shareholders are entitled to this waiver after the original
load waiver certificate is received by FIIOC .
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
Traditional IRA, The Fidelity Roth IRA, The Fidelity Roth
Conversion IRA, T he Fidelity Rollover IRA, The Fidelity SEP-IRA
and SARSEP, The Fidelity SIMPLEIRA, 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 Initial Class'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 .
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, which are permitted without
penalty pursuant to the Internal Revenue Code; (3) in connection with
redemptions through the Fidelity Advisor Systematic Withdrawal
Program; or (4) (APPLICABLE TO CLASS C ONLY) in connection with any
redemptions from an employee benefit plan (including 403(b) programs,
but otherwise as defined by ERISA).
A sales load waiver form must accompany each transaction
available for each class .
INSTITUTIONAL CLASS SHARES ONLY
Institutional Class Shares are offered to:
1. Broker-dealer managed accounts programs that (i) charge an
asset-based fee and (ii) will have at least $1 million invested in the
Institutional Class of the Advisor funds. In addition, employee
benefit plans (including 403(b) programs, but otherwise as defined by
ERISA) must have at least $50 million in plan assets;
2. Registered investment advisor managed account programs ,
provided the registered investment advisor is not part of an
organization primarily engaged in the brokerage business and the
program (i) charges an asset-based fee, and (ii) will have at least $1
million invested in the Institutional Class of the Advisor funds. In
addition, non-employee benefit plan accounts in the programs must be
managed on a discretionary basis;
3. Trust institution and bank trust department managed accounts
programs that (i) charge an asset-based fee and (ii) will have at
least $1 million invested in the Institutional Class of the Advisor
funds. Accounts managed by third parties are not eligible to purchase
Institutional Class shares;
4. Insurance company separate accounts that will have at least $1
million invested in the Institutional Class of the Advisor funds; and
5. Current or former Trustees or officers of a Fidelity fund or
current or retired officer, directors, or regular employees of FMR
Corp. or Fidelity International Limited or their direct or indirect
subsidiaries (Fidelity Trustee or employee), spouses of Fidelity
Trustees or employees, Fidelity Trustees or employees acting as a
custodian for a minor child, or persons acting as trustee of a trust
for the sole benefit of the minor child of a Fidelity Trustee or
employee.
For purchases made by managed account programs or insurance company
separate accounts, FDC reserves the right to w a ive the
requirement that $1 million be invested in the Institutional Class of
the Advisor funds.
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 at the rate of 0.25% of the purchase amount. 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 at the rate of 0.25% of the purchase amount.
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 on which a finder's fee has been paid 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 Class A or
Class T shares, as applicable, at the initial date of purchase or the
value of the Class A or Class T shares, as applicable, at redemption,
not including any reinvested dividends or capital gains. Class A and
Class T shares acquired through distributions (dividends or capital
gains) will not be subject to a Class A or Class T CDSC. In
determining the applicability and rate of any Class A or Class T CDSC
at redemption, Class A or Class T shares representing reinvested
dividends and capital gains, if any, will be redeemed first, followed
by those Class A or Class T shares, as applicable 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.
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 its net asset value per share
(NAV) is calculated each day the New York Stock Exchange (NYSE) is
open for trading. The NYSE has designated the following holiday
closings for 1998: New Year's Day, Martin Luther King's Birthday,
Presidents ' Day, Good Friday, Memorial Day, Independence Day
(observed), Labor Day, Thanksgiving Day, 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,
on days when the Federal Reserves Wire System is closed, federal
funds wires cannot be sent until the next business day.
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 each 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. Because each fund 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. Short-term capital gains are distributed as
dividend income, but do not qualify for the dividends-received
deduction. To the extent that a municipal fund's income is designated
as federally tax-exempt interest, the daily dividends declared by the
fund are also federally tax-exempt. For any fund that invests
significantly in foreign securities, corporate shareholders should not
expect fund dividends to qualify for the dividends-received deduction.
Each fund will notify corporate shareholders annually of the
percentage of fund dividends that qualifies for the dividends-received
deduction. A portion of each fund's dividends derived from certain
U.S. Government securities may be exempt from state and local
taxation. Gains (losses) attributable to foreign currency fluctuations
are generally taxable as ordinary income and, therefore, will increase
(decrease) dividend distributions. If a fund's distributions exceed
its net investment company taxable income during a taxable year, all
or a portion of the distributions made in the same taxable year would
be recharacterized as a return of capital to shareholders, thereby
reducing each shareholder's cost basis in the fund. Mortgage security
paydown gains (losses) on mortgage securities purchased by a fund on
or prior to June 8, 1997 are generally taxable as ordinary income and,
therefore, increase (decrease) taxable dividend distributions. Each
fund will send to shareholders a notice in January describing the tax
status of dividends and capital gains distributions, if any, for the
prior year .
S hareholders 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 tax treatment of the structure.
As a result of t he Tax Reform Act of 1986, interest on certain
"private activity" securities 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 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 t axable to shareholders as dividends, not as capital gains.
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) exceeds 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.
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 capital gain distribution on shares of a fund, and such shares are
held six months or less and are sold at a loss, the portion of the
loss equal to the amount of the capital gain distribution will be
considered a long-term loss for tax purposes. Short-term capital gains
distributed by each fund are taxable to shareholders as dividends, not
as capital gains.
As of November 30, 1997, TechnoQuant Growth hereby designates
approximately $ 48,000 as a capital gain dividend for the
purpose of the dividend-paid deduction.
As of October 31, 1997, Overseas hereby designates approximately
$ 18,690,000 as a capital gain dividend for the purpose of the
dividend-paid deduction.
As of November 30, 1997, Mid Cap hereby designates approximately
$ 4,130,000 as a capital gain dividend for the purpose of the
dividend-paid deduction.
As of November 30, 1997, Equity Growth hereby designates approximately
$ 116,982,000 as a capital gain dividend for the purpose of the
dividend-paid deduction.
As of October 31, 1997, Growth Opportunities hereby designates
approximately $ 108,011,000 as a capital gain dividend for the
purpose of the dividend-paid deduction.
As of November 30, 1997, Growth Opportunities hereby designates
approximately $66,000 as a capital gain dividend for the
purpose of the dividend-paid deduction.
As of November 30, 1997, Strategic Opportunities hereby designates
approximately $ 15,640,000 as a capital gain dividend for the
purpose of the dividend-paid deduction.
As of November 30, 1997, Large Cap hereby designates approximately
$ 688,000 as a capital gain dividend for the purpose of the
dividend-paid deduction.
As of November 30, 1997, Growth & Income hereby designates
approximately $ 81,000 as a capital gain dividend for the
purpose of the dividend-paid deduction.
As of November 30, 1997, Equity Income hereby designates approximately
$ 17,867,000 as a capital gain dividend for the purpose of the
dividend-paid deduction.
As of October 31, 1997, Balanced hereby designates approximately
$ 29,059,000 as a capital gain dividend for the purpose of the
dividend-paid deduction.
As of December 31, 1997, Emerging Markets Income hereby designates
approximately $ 1,123,000 as a capital gain dividend for the
purpose of the dividend-paid deduction.
As of October 31, 1997, High Yield hereby designates approximately
$ 5,255,000 as a capital gain dividend for the purpose of the
dividend-paid deduction.
As of December 31, 1997, Strategic Income hereby designates
approximately $ 863,000 as a capital gain dividend for the
purpose of the dividend-paid deduction.
As of October 31, 1997, Government Investment had a capital loss
carryforward aggregating approximately $ 6,368,000 . This loss
carryforward, of which $3,26 1 ,000, $2, 767 ,000, and
$340,000 will expire on October 31, 200 2, 2004, and
200 5 , respectively, is available to offset future capital
gains .
A s of November 30, 1997, Intermediate Bond had a capital loss
carryforward aggregating approximately $ 15,259,000 . This loss
carryforward, of which $2,841,000, $1,035,000, $134,000, $9,840,000
and $ 1,409 ,000 will expire on November 30, 1998, 1999,
2002, 2004, and 200 5 , respectively, is available to offset
future capital gains.
As of October 31, 1997, Short Fixed-Income had a capital loss
carryforward aggregating approximately $ 42,980,000 . This loss
carryforward, of which $63,000, $286,000, $38,000, $336,000,
$17,692,000, $19,457,000 , $2,265,000 , and $2,843,000
will expire on October 31, 1998, 1999, 2000, 2001, 2002, 2003,
2004, and 200 5 , respectively, is available to offset
future capital gains.
As of October 31, 1997, Municipal Income had a capital loss
carryforward aggregating approximately $ 16,425,000 . This loss
carryforward, of which $ 2 , 646 ,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, 1997, Municipal Bond had a capital loss
carryforward aggregating approximately $8,535,000. This loss
carryforward, all of which will expire December 31, 2003, is available
to offset future capital gains.
As of November 30, 1997, Intermediate Municipal Income hereby
designates approximately $68,000 as a capital gain dividend for the
purpose of the dividend-paid deduction.
As of November 30, 1997, Short-Intermediate Municipal Income hereby
designates approximately $12,00 0 as a capital gain dividend for
the purpose of the dividend-paid deduction.
STATE AND LOCAL TAX ISSUES. 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 pass-through 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 a proportionate share of the U.S.
Government securities. Because the income earned on most U.S.
Government securities is exempt from state and local income taxes, the
portion of dividends fro m a 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 net realized capital gains within each
calendar year as well as on a fiscal year basis, and intends to
comply with other tax rules applicable to regulated investment
companies.
E ach 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 Fidelity Investments Money Management, Inc. (1998),
Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc. Abigail Johnson, Vice
President of certain Equity funds, is Mr. Johnson's daughter.
J. GARY BURKHEAD (56), Member of the Advisory Board (1997), is Vice
Chairman and a Member of the Board of Directors of FMR Corp. (1997)
and President of Fidelity Personal Investments and Brokerage Group
(1997). Previously, Mr. Burkhead served as President of Fidelity
Management & Research Company.
RALPH F. COX (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 (66), Trustee. Prior to her retirement in
September 1991, Mrs. Davis was the Senior Vice President of Corporate
Affairs of Avon Products, Inc. She is currently a Director of
BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores),
and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she is a member of
the President's Advisory Council of The University of Vermont School
of Business Administration.
ROBERT M. GATES (54), 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 (70), Trustee. Prior to his retirement in 1984, Mr.
Jones was Chairman and Chief Executive Officer of LTV Steel Company.
He is a Director of TRW Inc. (original equipment and replacement
products), Consolidated Rail Corporation, Birmingham Steel
Corporation, and RPM, Inc. (manufacturer of chemical products), and he
previously served as a Director of NACCO Industries, Inc. (mining and
manufacturing, 1985-1995), Hyster-Yale Materials Handling, Inc.
(1985-1995), and Cleveland-Cliffs Inc. (mining), and as a Trustee of
First Union Real Estate Investments. In addition, he serves as a
Trustee of the Cleveland Clinic Foundation, where he has also been a
member of the Executive Committee as well as Chairman of the Board and
President, a Trustee and member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic
Florida.
DONALD J. KIRK (65), 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. Prior to May 31, 1990, he was a Director of FMR and
Executive Vice President of FMR (a position he held until March 31,
1991); Vice President of Fidelity Magellan Fund and FMR Growth Group
Leader; and Managing Director of FMR Corp. Mr. Lynch was also Vice
President of Fidelity Investments Corporate Services (1991-1992). In
addition, he serves as a Trustee of Boston College, Massachusetts Eye
& Ear Infirmary, Historic Deerfield (1989) and Society for the
Preservation of New England Antiquities, and as an Overseer of the
Museum of Fine Arts of Boston.
WILLIAM O. McCOY (64), 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). Mr. McDonough is a Director of York International Corp.
(air conditioning and refrigeration), Commercial Intertech Corp.
(hydraulic systems, building systems, and metal products, 1992), CUNO,
Inc. (liquid and gas filtration products, 1996), and Associated
Estates Realty Corporation (a real estate investment trust, 1993). Mr.
McDonough served as a Director of ACME-Cleveland Corp. (metal working,
telecommunications, and electronic products) from 1987-1996 and
Brush-Wellman Inc. (metal refining) from 1983-1997.
MARVIN L. MANN (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) Imation Corp. (imaging and information storage, 1997) and
Infomart (marketing services, 1991), a Trammell Crow Co. In addition,
he serves as the Campaign Vice Chairman of the Tri-State United Way
(1993) and is a member of the University of Alabama President's
Cabinet.
*ROBERT C. POZEN (51), Trustee (1997) and Senior Vice President, is
President and a Director of FMR (1997); and President and a Director
of Fidelity Investments Money Management, Inc., (199 8 ),
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 (69), Trustee, is President of The Wales Group,
Inc. (management and financial advisory services). Prior to retiring
in 1987, Mr. Williams served as Chairman of the Board of First
Wachovia Corporation (bank holding company), and Chairman and Chief
Executive Officer of The First National Bank of Atlanta and First
Atlanta Corporation (bank holding company). He is currently a Director
of ConAgra, Inc. (agricultural products), Georgia Power Company
(electric utility), National Life Insurance Company of Vermont,
American Software, Inc., and AppleSouth, Inc. (restaurants, 1992).
ROBERT LAWRENCE (45), is Vice President of certain Equity Funds
(1997), Vice President of Fidelity Real Estate High Income Fund
(1995) and Fidelity Estate High Income Fund II (1996), and Senior
Vice President of FMR (1993).
FRED L. HENNING, JR. (58), is Vice President of Fidelity's
Fixed-Income Group (1995) , Senior Vice President of FMR
(1995), and Senior Vice President of FIMM (1998). Before
assuming his current responsibilities, Mr. Henning was head of
Fidelity's Money Market Division.
BART A. GRENIER, (38) is Vice President of certain High-Income Bond
Funds (1997). Mr. Grenier rejoined Fidelity in August 1997 from DDJ
Capital Management, LLC, where he had served as Managing Director
since April 1997. Mr. Grenier originally joined Fidelity in 1991 as a
senior analyst. Mr. Grenier served as Director of High-Income Group
Research and as Director of U.S. Equity Research from 1994 to March
1996. He later became Group Leader of the Income-Growth and Asset
Allocation-Income Groups in 1996 and Assistant Equity Division Head in
1997.
JOHN H. CARLSON (47), is Vice President of Fidelity Advisor Emerging
Markets Income Fund (1996) and Fidelity Advisor Strategic Income Fund
(1996), and other funds advised by FMR. Prior to joining Fidelity in
1995, Mr. Carlson spent three years with Lehman Brothers as executive
director of emerging markets and senior vice president and head trader
at Lehman's Latin American emerging markers fixed-income desk.
DWIGHT CHURCHILL (44), is Vice President of Bond funds, Group Leader
of the Bond Group, Senior Vice President of FMR (1997) , and
Vice President of FIMM (1998). Mr. Churchill joined Fidelity in
1993 as Vice President and Group Leader of Taxable Fixed-Income
Investments .
M ARGARET L. EAGLE (48), is Vice President of Fidelity Advisor
High Yield and Fidelity Advisor Strategic Income Fund (1997). Prior to
her current responsibilities, Ms. Eagle was a fixed-income analyst and
managed a variety of Fidelity funds.
GEORGE A. FISCHER (36), is Vice President of Fidelity Advisor
Municipal Bond Fund (1997) and other funds advised by FMR. Prior to
his current responsibilities, Mr. Fischer has managed a variety of
Fidelity funds.
KEVIN E. GRANT (37), is Vice President of Fidelity Advisor Balanced
Fund (1996), Fidelity Advisor Intermediate Bond Fund (1995), Fidelity
Advisor Mortgage Securities (1995), and other funds advised by FMR.
Since joining Fidelity in 1993, Mr. Grant has managed a variety of
Fidelity funds. Prior to joining Fidelity, Mr. Grant was vice
president and chief mortgage strategist at Morgan Stanley for three
years.
CURTIS HOLLINGSWORTH (40), is Vice President of Fidelity Advisor
Government Investment Fund (1996), Fidelity Advisor Strategic Income
Fund (1996), and other funds advised by FMR. Prior to his current
responsibilities, Mr. Hollingsworth has managed a variety of Fidelity
funds.
HARRIS LEVITON (36), is Vice President of Strategic Opportunities
(1996). Prior to his current responsibilities, Mr. Leviton has managed
a variety of Fidelity funds.
ABIGAIL JOHNSON (36), is Vice President of certain Equity Funds
(1997), and is a Director of FMR Corp (1994). Before assuming her
current responsibilities, Ms. Johnson managed a number of Fidelity
funds. Edward C. Johnson 3d, Trustee and President of the funds, is
Ms. Johnson's father.
NORMAN U. LIND (41), is Vice President of Fidelity Advisor
Short-Intermediate Municipal Income Fund (1995) , Fidelity Advisor
Intermediate Municipal Income Fund (1998), and other funds advised
by FMR. Prior to his current responsibilities, Mr. Lind managed a
variety of Fidelity funds.
KEVIN R. MCCAREY (37), is Vice President of Fidelity Advisor
International Capital Appreciation Fund (1997) and other funds advised
by FMR. Prior to his current responsibilities, Mr. McCarey has managed
a variety of Fidelity funds.
RICHARD R. MACE, JR. (36), is Vice President of Fidelity Advisor
Overseas Fund (1996), and other funds advised by FMR. Prior to his
current responsibilities, Mr. Mace has managed a variety of Fidelity
funds.
JONATHAN D. SHORT (34), is Vice Presi d ent of Fidelity Advisor
Municipal Income Fund (1998), and other funds advised by FMR.
P rio r to his current responsibilities, Mr. Short assisted on
Fidelity Advisor Municipal Income Fund and managed a variety of
Fidelity funds .
RICHARD A. SPILLANE, JR. (46), is Vice President of certain Equity
Funds, and Senior Vice President of FMR (1997). Since joining Fidelity
Mr. Spillane is Chief Investment Officer for Fidelity
International, Limited. Prior to that position, Mr. Spillane served as
Director of Research.
THOMAS M. SPRAGUE (40), is Vice President of Large Cap (1997), and
another fund advised by FMR. Prior to is current responsibilities, Mr.
Sprague has managed a variety of Fidelity funds.
BETH TERRANA (40), is Vice President of Fidelity Advisor Growth &
Income Fund (1996) , and other funds advised by FMR. Prior to
her current responsibilities, Ms. Terrana managed a variety of
Fidelity funds.
JENNIFER S. UHRIG (36), is Vice President of Fidelity Advisor Equity
Growth Fund (1996), and other funds advised by FMR. Prior to her
current responsibilities, Ms. Uhrig has managed a variety of Fidelity
funds.
GEORGE A. VANDERHEIDEN (52), is Vice President of Growth
Opportunities, and other funds advised by FMR. Prior to his current
responsibilities, Mr. Vanderheiden has managed a variety of Fidelity
funds.
ERIC D. ROITER (49), Secretary (1998) , is Vice President
(199 8 ) , and General Counsel of FMR (1998). Mr. Roiter
was an Adjunct Member, Faculty of Law, at Columbia University Law
School (1996-1997). Prior to joining Fidelity, Mr. Roiter was a
partner at Debevoise & Plimpton (1981-1997) and served as Assistant
General Counsel of the U.S. Securities and Exchange Commission
(1979-1981).
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).
THOMAS D. MAHER (52), Assistant Vice President, is Assistant Vice
President of Fidelity's Municipal Bond Fund s (1996) and of
Fidelity's Money Market Funds .
JOHN H. COSTELLO (51), 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 each fund for his
or her services for the fiscal year ended in 1997, or calendar year
ended December 31, 1997, as applicable.
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggregate
Compensation
from a
FundA
J. Gary Ralph Phyllis Richard Robert Edward E. Donald Peter William Gerald Edward Marvin Thomas
Burkhead F. Burke J. M. C. Bradley J. S. O. C. H. L. R.
(Double Cox Davis Flynn Gates Johnson Jones Kirk Lynch McCoy McDonough Malone Mann Williams
Dagger) (Double 3d (Double (Double (Double
Dagger) (Double Dagger) Dagger) Dagger)
(Double Dagger) (Double (Double
Dagger) Dagger) Dagger)
(Double
Dagger)
TechnoQuant
$ 0 $ 8 $ 8 $ 0 $ 5 $ 0 $ 8 $ 8 $ 0 $ 5 $ 10 $ 0 $ 8 $ 8
Growth**,B
International
0 20 20 0 17 0 20 20 0 20 25 0 20 20
Capital
AppreciationB,++
Overseas*,B,C
0 481 471 64 121 0 474 474 0 260 575 66 481 478
MidCap**,B
0 144 141 6 66 0 142 142 0 94 175 6 144 144
Equity
0 2,067 2,022 127 783 0 2,038 2,038 0 1,110 2,506 123 2,067 2,069
Growth**,B,D,N
Growth
0 7,159 7,008 860 5,170 0 7,060 7,060 0 7,213 8,573 929 7,159 7,115
Opportunities
**,B,E,N,O
Strategic
0 265 259 0 170 0 261 261 0 227 326 0 265 265
Opportunities**,B
Large Cap**,B
0 24 24 1 11 0 24 24 0 16 29 1 24 24
Growth &
0 23 23 0 16 0 23 23 0 16 29 0 23 23
Income**,B
Equity
0 1,202 1,177 66 965 0 1,186 1,186 0 1,237 1,460 64 1,202 1,203
Income**,B,F,N
Balanced*,B,G,N
0 1,236 1,209 178 839 0 1,219 1,219 0 1,232 1,470 198 1,236 1,227
Emerging
0 49 48 0 33 0 49 49 0 42 61 0 49 49
Markets
Income***,B
High Yield*,B,H,N
0 1,013 991 123 729 0 998 998 0 1,021 1,212 132 1,013 1,006
Strategic
0 67 66 0 45 0 66 66 0 57 83 0 67 67
Income***,B
Mortgage
0 204 199 82 98 0 200 200 0 202 235 68 204 204
Securities *,B,I,P
Government
0 92 90 15 57 0 91 91 0 90 105 14 92 91
Investment*,B,J
Intermediate
0 197 193 13 151 0 194 194 0 202 239 13 197 197
Bond**,B,K
Short Fixed-
0 166 161 25 109 0 164 164 0 164 197 28 166 165
Income*,B,L
Municipal
0 200 195 30 131 0 197 197 0 197 237 34 200 198
Income*,B,M
Municipal
0 395 386 0 326 0 389 389 0 404 486 0 395 395
Bond***,B
Intermediate
0 27 27 2 21 0 27 27 0 28 33 2 27 27
Municipal
Income**,B
Short-Intermediat
0 11 11 1 8 0 11 11 0 11 13 1 11 11
e Municipal
Income**,B
TOTAL
0 214,500 210,000 0 176,000 0 211,500 211,500 0 214,500 264,500 0 214,500 214,500
COMPENSATION
FROM THE FUND
COMPLEX +,A
</TABLE>
* Fiscal year ended October 31.
** Fiscal year ended November 30.
*** Fiscal year ended December 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 for the funds. Mr. McCoy was appointed
to the Board of Trustees of Advisor Series II, III, IV, V, VI, Income
Fund, and Municipal Trust effective January 1, 1997. Mr. McCoy was
elected to the Board of Trustees of Advisor Series I, VII, and VIII on
July 16, 1997, September 17, 1997, and June 18, 1997,
respectively .
+ Information is as of December 31, 1997 for 230 funds in the
complex.
++ Figures presented are estimates for the fund's first fiscal year
end October 31, 1998.
A Compensation figures include cash, amounts required to be
deferred, and may include amounts deferred at the election of
Trustees. For the calendar year ended December 31, 1997, the Trustees
accrued required deferred compensation from the funds as follows:
Ralph F. Cox, $75,000, Phyllis Burke Davis, $75,000, Robert M. Gates,
$62,500, E. Bradley Jones, $75,000, Donald J. Kirk, $75,000, William
O. McCoy, $75,000, Gerald C. McDonough, $87,500, Marvin L. Mann,
$75,000, and Thomas R. Williams, $75,000. Certain of the
non-interested Trustees elected voluntarily to defer a portion of
their compensation: Ralph F. Cox, $53,699, Marvin L. Mann, $53,699,
and Thomas R. Williams, $62,462.
B Compensation figures include cash, and may include amounts
required to be deferred and amounts deferred at the election of
Trustees.
C The following amounts are required to be deferred by each
non-interested Trustee, most of which is subject to vesting: Ralph F.
Cox, $ 12 , Phyllis Burke Davis, $ 12 , Robert M. Gates,
$0, Richard J. Flynn, $ 0 , E. Bradley Jones, $12 ,
Donald J. Kirk, $ 12 , William O. McCoy, $ 0 , Gerald C.
McDonough, $ 12 , Edward H. Malone, $ 12 , Marvin L. Mann,
$ 12 , and Thomas R. Williams, $ 12.
D The following amounts are required to be deferred by each
non-interested Trustee, most of which is subject to vesting: Ralph F.
Cox, $ 925 , Phyllis Burke Davis, $ 925 , Robert M.
Gates, $330, Richard J. Flynn, $ 0 , E. Bradley Jones,
$ 925 , Donald J. Kirk, $ 925 , William O. McCoy,
$ 330 , Gerald C. McDonough, $ 1,078 , Edward H. Malone,
$ 4 , Marvin L. Mann, $ 925 , and Thomas R. Williams,
$ 925.
E The following amounts are required to be deferred by each
non-interested Trustee, most of which is subject to vesting: Ralph F.
Cox, $ 3,130 , Phyllis Burke Davis, $ 3,130 , Richard J.
Flynn, $ 0 , Robert M. Gates, $2,446, E. Bradley Jones,
$ 3,130 , Donald J. Kirk, $ 3,130 , William O. McCoy,
$ 3,044 , Gerald C. McDonough, $ 3,624 , Edward H. Malone,
$ 165 , Marvin L. Mann, $ 3,130 , and Thomas R. Williams,
$ 3,130 .
F The following amounts are required to be deferred by each
non-interested Trustee, most of which is subject to vesting: Ralph F.
Cox, $541 , Phyllis Burke Davis, $ 541 , Richard J. Flynn,
$ 0 , Robert M. Gates, $454, E. Bradley Jones,
$ 541 , Donald J. Kirk, $ 541 , William O. McCoy,
$ 552 , Gerald C. McDonough, $ 631 , Edward H. Malone,
$ 2 , Marvin L. Mann, $ 541 , and Thomas R. Williams,
$ 541 .
G The following amounts are required to be deferred by each
non-interested Trustee, most of which is subject to vesting: Ralph F.
Cox, $ 535 , Phyllis Burke Davis, $ 535 , Richard J. Flynn,
$ 0 , Robert M. Gates, $397, E. Bradley Jones,
$ 535 , Donald J. Kirk, $ 535 , William O. McCoy,
$ 508 , Gerald C. McDonough, $ 617 , Edward H. Malone,
$ 41 , Marvin L. Mann, $ 535 , and Thomas R. Williams,
$ 535 .
H The following amounts are required to be deferred by each
non-interested Trustee, most of which is subject to vesting: Ralph F.
Cox, $ 442 , Phyllis Burke Davis, $ 442 , Richard J. Flynn,
$ 0 , Robert M. Gates, $345, E. Bradley Jones,
$ 442 , Donald J. Kirk, $ 442 , William O. McCoy,
$ 430 , Gerald C. McDonough, $ 512 , Edward H. Malone,
$ 23 , Marvin L. Mann, $ 442 , and Thomas R. Williams,
$ 442 .
I 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 , Robert M. Gates, $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 .
J 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 , Robert M. Gates, $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 .
K 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 , Robert M. Gates, $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 .
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 , Robert M. Gates, $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 , Robert M. Gates, $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 For the fiscal period ended in 1997, certain of the
non-interested trustees' aggregate compensation from certain funds
includes accrued voluntary deferred compensation as follows: Equity
Growth (Cox, $870, Malone, $119, Mann, $870, Williams, $767); Growth
Opportunities (Cox, $3,178, Malone, $764, Mann, $3,178, Williams,
$2,464); Equity Income (Cox, $502, Malone, $62, Mann, $502, Williams,
$449); Balanced (Cox, $557, Malone, $157, Mann, $557, Williams $410);
and High Yield (Cox, $450, Malone, $109, Mann, $450, Williams,
$348).
O Aggregate compensation from Growth Opportunities for the one
month period ended November 30, 1997: J. Gary Burkhead, $0, Ralph F.
Cox, $697, Phyllis Burke Davis, $697, Richard J. Flynn, $0, Robert M.
Gates, $688, Edward C. Johnson 3d, $0, E. Bradley Jones, $697, Donald
J. Kirk, $697, Peter S. Lynch, $0, William O. McCoy, $688, Gerald C.
McDonough, $851, Edward H. Malone, $14, Marvin L. Mann, $697, and
Thomas R. Williams, $697.
P Aggregate compensation from Mortgage Securities for the three
month period ended October 31, 1997: J. Gary Burkhead, $0, Ralph F.
Cox, $51, Phyllis Burke Davis, $51, Richard J. Flynn, $0, Robert M.
Gates, $51, Edward C. Johnson 3d, $0, E. Bradley Jones, $51, Donald J.
Kirk, $51, Peter S. Lynch, $0, William O. McCoy, $51, Gerald C.
McDonough, $63, Edward H. Malone, $0, Marvin L. Mann, $51, and Thomas
R. Williams, $51 .
U nder a deferred compensation plan adopted in September 1995
and amended in November 1996 (the Plan), non-interested Trustees must
defer receipt of a portion of, and may elect to defer receipt of an
additional portion of, their annual fees. Amounts deferred under the
Plan are subject to vesting and are treated as though
equivalent dollar amounts had been invested in shares of a
cross-section of Fidelity funds including funds in each major
investment discipline and representing a majority of Fidelity's assets
under management (the Reference Funds). The amounts ultimately
received by the Trustees under the Plan will be directly linked to the
investment performance of the Reference Funds. Deferral of fees in
accordance with the Plan will have a negligible effect on a fund's
assets, liabilities, and net income per share, and will not obligate a
fund to retain the services of any Trustee or to pay any particular
level of compensation to the Trustee. A fund may invest in the
Reference Funds under the Plan without shareholder approval.
As of December 31, 1997, the following owned of record or
beneficially 5% or more of the outstanding shares of the classes of
the following Fidelity Advisor funds:
ADVISOR BALANCED - CLASS A: EQ Financial Consultants, New York,
NY (16.66%).
ADVISOR BALANCED - CLASS T : CIGNA, Hartford, CT (21.29%); Smith
Barney, New York, NY (5.24%).
ADVISOR BALANCED - CLASS B: Merrill Lynch Pierce Fenner &
Smith, Jacksonville, FL (5.20%).
ADVISOR BALANCED - CLASS C: Leonard & Co., Birmingham, MI
(22.04%); Smith Barney, New York, NY (15.25%); Wheat First Butcher
Singer, Inc., Richmond, VA (11.35%); Securities America, Inc.,
Omaha, NE (6.72%).
ADVISOR BALANCED - INSTITUTIONAL CLASS: Whitney National Bank,
New Orleans, LA (27.72%); Valley National Bank, Clifton, NJ
(13.40%); Charles Schwab and Co., Inc., San Francisco, CA (9.61%);
South Holland Bancorp, South Holland, IL (6.63%); Donaldson,
Lufkin & Jenrette, New York, NY (5.18%).
ADVISOR EMERGING MARKETS INCOME - CLASS A: Linsco/Private
Ledger, San Diego, CA (17.62%); Washington Square Securi ties,
Minneapolis, MN (7.96%); FMR Corp., Boston, MA (5.92%); Dain
Rauscher, Inc., Minneapolis, MN (5.72%).
ADVISOR EMERGING MARKETS INCOME - CLASS T: FMR Corp., Boston,
MA (9.60%).
ADVISOR EMERGING MARKETS INCOME - CLASS B: Donaldson, Lufkin &
Jenrette, New York, NY (6.48%).
ADVISOR EMERGING MARKETS INCOME - CLASS C: Securities America,
Inc., Omaha, NE (50.33%); FMR Corp., Boston, MA (10.39%);
Wash ington Square Securities, Minneapolis, MN (5.28%).
ADVISOR EMERGING MARKETS INCOME - INSTITUTIONAL CLASS:
Donaldson, Lufkin & Jenrette, New York, NY (11.91%).
ADVISOR EQUITY GROWTH - CLASS A: FIS Securities, Inc.,
Providence, RI (10.26%).
ADVISOR EQUITY GROWTH - CLASS T : CIGNA, Hartford, CT (9.00%);
Smith Barney, New York, NY (5.34%).
ADVISOR EQUITY GROWTH - CLASS B: FIS Securities, Inc.,
Providence, RI (8.85%).
ADVISOR EQUITY GROWTH - CLASS C: Citicorp Investment Services,
New York, NY (14.43%); Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL (11.50%); Smith Barney, New York, NY (10.36%);
Private Brokers CLEA, Dallas, TX (7.24%); J. W. Charles Securities,
Boca Raton, FL (5.46%); Financial Designs Corporation, San
Gabriel, CA (5.26%).
ADVISOR EQUITY INCOME - CLASS A: FIS Securities, Inc.,
Providence, RI (7.57%).
ADVISOR EQUITY INCOME - CLASS T: Smith Barney, New York, NY
(5.01%).
ADVISOR EQUITY INCOME - CLASS B: Merrill Lynch Pierce Fenner &
Smith, Jacksonville, FL (7.27%); Smith Barney, New York, NY
(7.04%); Donaldson, Lufkin & Jenrette, New York, NY (5.31%).
ADVISOR EQUITY INCOME - CLASS C: Intersecurities, Inc., Largo, FL
(11.34%); Merrill Lynch Pierce Fenner & Smith, Jacksonv ille, FL
(9.54%); Private Brokers CLEA, Dallas, TX (9.29%); Securities
America, Inc., Omaha, NE (5.85%).
ADVISOR EQUITY INCOME - INSTITUTIONAL CLASS: BankBoston, Boston, MA
(34.68%); First National Bank of Ohio, Akron, OH (12.45%).
ADVISOR GOVERNMENT INVESTMENT - CLASS A: Walnut Street Securities,
Inc., Clayton, MO (31.16%); Vestax Securities, Hudson, OH (7.88%);
Wilmington Trust Company, Wilmington, DE (7.41%); FMR Corp., Boston,
MA (6.28%); EQ Financial Consultants, New York, NY (5.29%).
ADVISOR GOVERNMENT INVESTMENT - CLASS T: Smith Barney, New York, NY
(6.76%); Oriental Financial Services Corp., Hato Rey, PR (6.09%).
ADVISOR GOVERNMENT INVESTMENT - CLASS B: Royal Alliance Assoc.,
Inc., Birmingham, AL (6.11%); Donaldson, Lufkin & Jenrette, New York,
NY (5.46%); Smith Barney, New York, NY (5.22%); Merrill Lynch Pierce
Fenner & Smith, Jacksonville, FL (5.16%).
ADVISOR GOVERNMENT INVESTMENT - CLASS C: Royal Alliance Assoc.,
Inc., Birmingham, AL (38.63%); Prudential Securities, New York, NY
(37.36%); A. G. Edwards & Sons, St. Louis, MO (8.06%);
Intersecurities, Inc., Largo, FL (6.01%); ONB Investment Services,
Inc., Evansville, IA (5.02%).
ADVISOR GOVERNMENT INVESTMENT - INSTITUTIONAL CLASS: First Hawaiian
Bank, Honolulu, HI (56.08%); Alpha Capital Management, Long Beach, CA
(16.98%); First Security Trust Company, Coral Gables, FL (6.19%).
ADVISOR GROWTH & INCOME - CLASS A: PaineWebber, Inc., Weehawken, NJ
(7.55%); Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL
(6.57%); EQ Financial Consultants, New York, NY (5.18%).
ADVISOR GROWTH & INCOME - CLASS T: Commonwealth Equity Services,
Waltham, MA (15.20%); Securities America, Inc., Omaha, NE
(11.47%).
ADVISOR GROWTH & INCOME - CLASS B: Merrill Lynch Pierce Fenner &
Smith, Jacksonville, FL (15.79%); PaineWebber, Inc., Weehawken, NJ
(6.37%); A. G. Edwards & Sons, St. Louis, MO (5.17%).
ADVISOR GROWTH & INCOME - CLASS C: Allmerica Investments,
Worcester, MA (16.22%); Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL (11.42%); Royal Alliance Assoc., Inc., Birmingham, AL
(8.20%); J. W. Charles Securities, Boca Raton, FL (7.51%).
ADVISOR GROWTH & INCOME - INSTITUTIONAL CLASS: First Hawaiian Bank,
Honolulu, HI (78.60%).
ADVISOR GROWTH OPPORTUNITIES - CLASS T: CIGNA, Hartford, CT
(16.32%); Smith Barney, New York, NY (6.55%).
ADVISOR GROWTH OPPORTUNITIES - CLASS B: Merrill Lynch Pierce Fenner
& Smith, Jacksonville, FL (8.75%); A. G. Edwards & Sons, St. Louis, MO
(6.30%); Prudential Securities, New York, NY (5.60%); Smith Barney,
New York, NY (5.12%).
ADVISOR GROWTH OPPORTUNITIES - CLASS C: Merrill Lynch Pierce Fenner
& Smith, Jacksonville, FL (18.83%); Smith Barney, New York, NY
(11.34%); Prudential Securities, New York, NY (8.91%); A. G. Edwards &
Sons, St. Louis, MO (6.72%).
ADVISOR GROWTH OPPORTUNITIES - INSTITUTIONAL CLASS: Charles Schwab
and Co., Inc., San Francisco, CA (10.37%); Marshall & Ilsley Trust
Co., Milwaukee, WI (8.43%); Frost National Bank, San Antonio, TX
(8.21%); Donaldson, Lufkin & Jenrette, New York, NY (5.37%).
ADVISOR HIGH YIELD - CLASS A: FIS Securities, Inc., Providence, RI
(11.59%); CIGNA, Hartford, CT (5.79%); Wells Fargo Bank, San
Francisco, CA (5.45%).
ADVISOR HIGH YIELD - CLASS T: Manulife Financial, Canada (7.23%);
Smith Barney, New York, NY (6.09%).
ADVISOR HIGH YIELD - CLASS B: Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL (11.26%); Prudential Securities, New York, NY
(6.55%).
ADVISOR HIGH YIELD - CLASS C: Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL (33.03%); Smith Barney, New York, New York
(15.32%).
ADVISOR HIGH YIELD - INSTITUTIONAL CLASS: Charles Schwab and Co.,
Inc., San Francisco, CA (31.90%); Donaldson, Lufkin & Jenrette, New
York, NY (11.28%); Resources Trust Company, Englewood, CO (5.12%).
ADVISOR INTERMEDIATE BOND - CLASS A: FIS Securities, Inc.,
Providence, RI (31.20%); Corelink Financial, Providence, RI
(14.42%).
ADVISOR INTERMEDIATE BOND - CLASS T: PaineWebber, Inc., Weehawken,
NJ (6.36%).
ADVISOR INTERMEDIATE BOND - CLASS C: Royal Alliance Assoc., Inc.,
Birmingham, AL (43.88%); A. G. Edwards & Sons, St. Louis, MO (22.61%);
Offerman & Co., Minneapolis, MN (13.59%); Wheat First Butcher Singer,
Inc., Richmond, VA (6.21%): Smith Barney, New York, NY (5.13%).
ADVISOR INTERMEDIATE BOND - INSTITUTIONAL CLASS: Mercantile Bank,
N.A., St. Louis, MO (16.52%); Amivest Corporation, New York, NY
(6.11%); Magna Bank, Belleville, IL (5.27%); Marquis Investments Inc.,
New Orleans, LA (5.24%).
ADVISOR INTERMEDIATE MUNICIPAL INCOME - CLASS A: FMR Corp., Boston,
MA (27.74%); Summit Trust Company, Summit, NJ (26.66%); Gerson
Horowitz Green Sec. Corp., New York, NY (13.63%); Locust Street
Securities, Inc., Des Moines, IA (13.07%); FSC Securities Corp.,
Atlanta, GA (10.10%); Corelink Financial, Providence, RI (8.77%).
ADVISOR INTERMEDIATE MUNICIPAL INCOME - CLASS T: Royal Alliance
Assoc., Inc., Birmingham, AL (9.47%); Smith Barney, New York, NY
(6.59%); Commonwealth Equity Services, Waltham, MA (6.08%).
ADVISOR INTERMEDIATE MUNICIPAL INCOME - CLASS B: Merrill Lynch
Pierce Fenner & Smith, Jacksonville, FL (11.45%); Prudential
Securities, New York, NY (6.64%); Donaldson, Lufkin & Jenrette, New
York, NY (6.45%); National Financial Services Corporation, Boston, MA
(6.19%); Royal Alliance Assoc., Inc., Birmingham, AL (6.15%); A. G.
Edwards & Sons, St. Louis, MO (5.72%).
ADVISOR INTERMEDIATE MUNICIPAL INCOME - CLASS C: Walnut Street
Securities, Inc., Clayton, MO (66.96%): FMR Corp., Boston, MA
(27.25%); A. G. Edwards & Sons, St. Louis, MO (5.79%).
ADVISOR INTERMEDIATE MUNICIPAL INCOME - INSTITUTIONAL CLASS: South
Holland Bancorp, South Holland, IL (13.57%); Wells Fargo Bank, San
Francisco, CA (11.94%); Citizens National Bank of Evansville,
Evansville, IN (9.88%); Laird Norton Co., Seattle, WA (9.76%); Arvest
Trust Company, Rogers, AR (8.11%); Frost National Bank, San Antonio,
TX (7.77%); Tompkins County Trust Company, Ithaca, NY (7.69%); Liberty
National Bank & Trust, Oklahoma City, OK (5.46%).
ADVISOR INTERNATIONAL CAPITAL APPRECIATION - CLASS A: FMR Corp.,
Boston, MA (49.70%); Prudential Securities, New York, NY (16.68%);
Jackson National Financial, Inc., Lansing, MI (10.09%); PaineWebber,
Inc., Weehawken, NJ (8.85%); Investment Architects, Inc., Alamo, CA
(8.36%); United Securities Alliance, Bensalem, PA (5.10%).
ADVISOR INTERNATIONAL CAPITAL APPRECIATION - CLASS T: Cambridge
Investment Research, Fairfield, IA (27.90%); MML Investors Services,
Inc., Springfield, MA (10.30%); Donahue Securities, Cincinnati, OH
(9.63%); Investacorp, Miami Lakes, FL (6.68%).
ADVISOR INTERNATIONAL CAPITAL APPRECIATION - CLASS B: Guardian
Investor Services Corporation, New York, NY (21.38%); FMR Corp.,
Boston, MA (16.55%); Donahue Securities, Cincinnati, OH (14.20%);
Ilicob Sales Corp., Lockport, NY (6.84%); David A. Noyes & Co.,
Chicago, IL (6.80%).
ADVISOR INTERNATIONAL CAPITAL APPRECIATION - CLASS C: Merrill Lynch
Pierce Fenner & Smith, Jacksonville, FL (22.36%); FMR Corp., Boston,
MA (19.86%); Investacorp, Miami Lakes, FL (15.27%); Financial Network
Investment Corporation, Torrance, CA (6.52%); Prudential Securities,
New York, NY (6.02%); St. Bernard Financial Services, Russellville, AR
(5.09%).
ADVISOR INTERNATIONAL CAPITAL APPRECIATION - INSTITUTIONAL CLASS:
FMR Corp., Boston, MA (99.50%).
ADVISOR LARGE CAP - CLASS A: A. G. Edwards & Sons, St. Louis, MO
(10.52%); Chase Manhattan Bank, N. A., Rochester, NY (7.94%); FMR
Corp., Boston, MA (5.55%).
ADVISOR LARGE CAP - CLASS T: Dain Rauscher, Inc., Minneapolis, MN
(6.84%); Securities America, Inc., Omaha, NE (6.10%).
ADVISOR LARGE CAP -CLASS B: Dain Rauscher, Inc., Minneapolis, MN
(18.08%); Prudential Securities, New York, NY (7.89%).
ADVISOR LARGE CAP - CLASS C: A. G. Edwards & Sons, St. Louis, MO
(23.72%); PaineWebber, Inc., Weehawken, NJ (20.32%); Washington Square
Securities, Minneapolis, MN (12.22%); FMR Corp., Boston, MA (10.17%);
Securities Corporation of Iowa, Cedar Rapids, IA (5.01%).
ADVISOR LARGE CAP - INSTITUTIONAL CLASS: FMR Corp., Boston, MA
(40.50%); South Holland Bancorp, South Holland, IL (27.90%); Charles
Schwab and Co., Inc., San Francisco, CA (10.88%).
ADVISOR MID CAP - CLASS A: Securities America, Inc., Omaha, NE
(8.37%).
ADVISOR MID CAP - CLASS T: Dain Rauscher, Inc., Minneapolis, MN
(8.27%); Smith Barney, New York, NY (7.21%); Commonwealth Equity
Services, Waltham, MA (5.36%); Donaldson, Lufkin & Jenrette, New York,
NY (5.34%).
ADVISOR MID CAP - CLASS B: Dain Rauscher, Inc., Minneapolis, MN
(12.71%); Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL
(9.06%); Smith Barney, New York, NY (7.65%).
ADVISOR MID CAP - CLASS C: Washington Square Securities,
Minneapolis, MN (12.85%); Financial Network Investment Corporation,
Torrance, CA (9.61%); Robert Thomas Securities, Inc., St. Petersburg,
FL (7.96%); Intersecurities, Inc., Largo, FL (7.46%); Merrill Lynch
Pierce Fenner & Smith, Jacksonville, FL (6.30%); PaineWebber, Inc.,
Weehawken, NJ (5.74%); Prudential Securities, New York, NY
(5.06%).
ADVISOR MID CAP - INSTITUTIONAL CLASS: First Hawaiian Bank,
Honolulu, HI (53.30%); Fidelity Personal Trust Services, Boston, MA
(8.52%); First Citizens Bank & Trust Company, Raleigh, NC (6.22%).
ADVISOR MORTGAGE SECURITIES - CLASS A: FMR Corp., Boston, MA
(53.94%); Quest Capital Strategies, Inc., Santa Ana Heights, CA
(14.28%); CIGNA, Hartford, CT (7.00%).
ADVISOR MORTGAGE SECURITIES - CLASS T: Commonwealth Equity
Services, Waltham, MA (33.08%); LaSalle St. Securities, Inc., Chicago,
IL (6.09%); Compass Securities Corp., Newton, MA (6.03%).
ADVISOR MORTGAGE SECURITIES - CLASS B: Merrill Lynch Pierce Fenner
& Smith, Jacksonville, FL (10.21%); 1717 Capital Management Company,
Newark, DE (10.13%); Nathan & Lewis Securities, New York, NY (7.91%);
Walnut Street Securities, Inc., Clayton, MO (7.42%); Washington Square
Securities, Minneapolis, MN (7.08%); Commercial Federal Bank, Denver,
CO (6.59%); FMR Corp., Boston, MA (5.36%).
ADVISOR MORTGAGE SECURITIES - INSTITUTIONAL CLASS: Magna Bank,
Belleville, IL (29.50%); Reliance Financial Services, Defiance, OH
(9.76%); Drovers Bank, York, PA (7.73%); The Rock Island Bank, Rock
Island, IL (5.55%); Oak Brook Bank, Oak Brook, IL (5.17%).
ADVISOR MORTGAGE SECURITIES - INITIAL CLASS: National Financial
Services Corporation, Boston, MA (7.50%).
ADVISOR MUNICIPAL INCOME FUND - CLASS A: Northeast Securities,
Inc., Westbury, NY (28.00%); Everen Securities, Inc., Chicago, IL
(14.61%); Mutual Services Corporation, Palm Beach Garden, FL (8.00%);
1717 Capital Management Company, Newark, DE (7.48%).
ADVISOR MUNICIPAL INCOME - CLASS T: Smith Barney, New York, NY
(8.46%); A. G. Edwards & Sons, St. Louis, MO (6.05%); Royal Alliance
Assoc., Inc., Birmingham, AL (5.26%).
ADVISOR MUNICIPAL INCOME - CLASS B: Donaldson, Lufkin & Jenrette,
New York, NY (7.64%); Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL (6.74%).
ADVISOR MUNICIPAL INCOME - CLASS C: Merrill Lynch Pierce Fenner &
Smith, Jacksonville, FL (27.12%); Intersecurities, Inc., Largo, FL
(15.66%); Washington Square Securities, Minneapolis, MN (12.02%);
Smith Barney, New York, NY (7.94%); FSC Securities Corp., Atlanta, GA
(6.57%); Investment Management & Research, St. Petersburg, FL (6.11%);
Cowles, Sabol & Co., Inc., Encino, CA (5.86%); Delta Equity Services
Corp., North Easton, MA (5.03%); Walnut Street Securities, Inc.,
Clayton, MO (5.01%).
ADVISOR MUNICIPAL INCOME - INSTITUTIONAL CLASS: Peoples Bank and
Trust Co., Indianapolis, IN (23.16%); Tompkins County Trust Company,
Ithaca, NY (13.47%); FMR Corp., Boston, MA (8.07%); Century Trust,
Rochester, PA (7.66%); University Bank, Houston, TX (7.02%); Arvest
Trust Company, Rogers, AR (6.22%).
ADVISOR OVERSEAS - CLASS A: Wilmington Trust Company, Wilmington,
DE (6.48%); EQ Financial Consultants, New York, NY (6.23%).
ADVISOR OVERSEAS - CLASS T: Smith Barney, New York, NY (7.01%);
Great West Life/Benefits Corp., Englewood, CO (6.51%).
ADVISOR OVERSEAS - CLASS B: Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL (7.04%); Smith Barney, New York, NY (5.22%).
ADVISOR OVERSEAS - CLASS C: Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL (25.52%); Securities America, Inc., Omaha, NE
(18.79%); Intersecurities, Inc., Largo, FL (6.86%); A. G. Edwards &
Sons, St. Louis, MO (6.33%).
ADVISOR OVERSEAS - INSTITUTIONAL CLASS: First National Bank, Iowa
City, IA (18.70%); Charles Schwab and Co., Inc., San Francisco, CA
(11.99%); Bingham, Dana & Gould L.L.P., Boston, MA (11.32%); First
Hawaiian Bank, Honolulu, HI (7.39%); One Valley Bank, N.A.,
Charleston, WV (6.11%); First Commercial Trust Company, Little Rock,
AR (5.25%).
ADVISOR SHORT FIXED-INCOME - CLASS A: Merrill Lynch Pierce Fenner &
Smith, Jacksonville, FL (91.35%).
ADVISOR SHORT FIXED-INCOME - CLASS T: Royal Alliance Assoc., Inc.,
Birmingham, AL (6.85%); PaineWebber, Inc., Weehawken, NJ (6.02%);
Smith Barney, New York, NY (5.15%).
ADVISOR SHORT FIXED-INCOME - CLASS C: Merrill Lynch Pierce Fenner &
Smith, Jacksonville, FL (61.05%); Smith Barney, New York, NY (15.44%);
Intersecurities, Inc., Largo, FL (5.55%); Capital Analysts, Inc.,
Radnor, PA (5.01%).
ADVISOR SHORT FIXED-INCOME - INSTITUTIONAL CLASS: First Hawaiian
Bank, Honolulu, HI (39.22%); South Holland Bancorp, South Holland, IL
(17.48%); First National Bank of Springfield, Springfield, IL
(13.80%).
ADVISOR SHORT-INTERMEDIATE MUNICIPAL INCOME - CLASS A: FIS
Securities, Inc., Providence, RI (49.60%); FMR Corp., Boston, MA
(17.86%); Donaldson, Lufkin & Jenrette, New York, NY (16.10%); Metlife
Securities, Inc., Denver, CO (13.45%); Investment Advisors &
Consultants, Inc., Ocean, NJ (6.33%).
ADVISOR SHORT-INTERMEDIATE MUNICIPAL INCOME - CLASS T: Key
Investments, Cleveland, OH (17.24%); Cowles, Sabol & Co., Inc.,
Encino, CA (9.86%).
ADVISOR SHORT-INTERMEDIATE MUNICIPAL INCOME - INSTITUTIONAL CLASS:
Peoples Bank and Trust Co., Indianapolis, IN (30.37%); First American
Bank & Trust, Fort Atkinson, WI (29.53%); FMR Corp., Boston, MA
(16.17%); University Bank, Houston, TX (11.98%).
ADVISOR STRATEGIC INCOME - CLASS A: FIS Securities, Inc.,
Providence, RI (31.23%).
ADVISOR STRATEGIC INCOME - CLASS T: Royal Alliance Assoc., Inc.,
Birmingham, AL (8.56%); Donaldson, Lufkin & Jenrette, New York, NY
(6.41%); Financial Network Investment Corporation, Torrance, CA
(5.10%).
ADVISOR STRATEGIC INCOME - CLASS B: G. W. & Wade Asset Management
Co., Wellesley, MA (26.47%); FIS Securities, Inc., Providence, RI
(5.75%).
ADVISOR STRATEGIC INCOME - CLASS C: Sunpoint Securities, Inc.,
Longview, TX (34.02%); Securities America, Inc., Omaha, NE (15.86%);
Advanced Financial Planning, Brentwood, TN (8.11%); Robert Thomas
Securities, Inc., St. Petersburg, FL (6.64%); Smith Barney, New York,
NY (6.48%); Midsouth Capital, Inc., Columbia, SC (6.03%);
Intersecurities, Inc., Largo, FL (5.02%).
ADVISOR STRATEGIC INCOME - INSTITUTIONAL CLASS: Charles Schwab and
Co., Inc., San Francisco, CA (77.50%); ESOR & Co., Green Bay, WI
(8.49%); Donaldson, Lufkin & Jenrette, New York, NY (6.31%); Bingham,
Dana & Gould L.L.P., Boston, MA (5.85%).
ADVISOR STRATEGIC OPPORTUNITIES - CLASS A: Fortis Investors, St.
Paul, MN (6.64%); FMR Corp., Boston, MA (5.74%); A. G. Edwards & Sons,
St. Louis, MO (5.12%).
ADVISOR STRATEGIC OPPORTUNITIES - CLASS T: Merrill Lynch Pierce
Fenner & Smith, Jacksonville, FL (11.66%); CIGNA, Hartford, CT
(9.40%); A. G. Edwards & Sons, St. Louis, MO (6.15%).
ADVISOR STRATEGIC OPPORTUNITIES - CLASS B: Smith Barney, New York,
NY (6.52%); Donaldson, Lufkin & Jenrette, New York, NY (5.70%);
Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL (5.57%).
ADVISOR STRATEGIC OPPORTUNITIES - INSTITUTIONAL CLASS: National
Bank of Alaska, Anchorage, AK (17.72%); Calton & Assoc., Tampa, FL
(17.00%); Whitney National Bank, New Orleans, LA (11.07%); Evergreen
Bank, N.A., Glens Falls, NY (10.31%); Equitable Trust Company,
Nashville, TN (9.50%); Thumb National Bank and Trust, Pigeon, MI
(5.72%); First Tennessee Bank, Memphis, TN (5.57%); Benefit Services
Corporation, Atlanta, GA (5.04%).
ADVISOR STRATEGIC OPPORTUNITIES - INITIAL CLASS: FMR Corp., Boston,
MA (7.62%).
ADVISOR TECHNOQUANT GROWTH - CLASS A: Merrill Lynch Pierce
Fenner & Smith, Jacksonville, FL (44.28%); Piper Jaffrey & Hopwood,
Inc., Minneapolis, MN (10.80%); PaineWebber, Inc., Weehawken, NJ
(8.64%).
ADVISOR TECHNOQUANT GROWTH - CLASS T: Offerman & Co., Minneapolis,
MN (7.69%); Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL
(6.76%); A. G. Edwards & Sons, St. Louis, MO (5.94%); PaineWebber,
Inc., Weehawken, NJ (5.29%).
ADVISOR TECHNOQUANT GROWTH - CLASS B: Merrill Lynch Pierce Fenner &
Smith, Jacksonville, FL (38.63%); Piper Jaffrey & Hopwood, Inc.,
Minneapolis, MN (14.58%); Prudential Securities, New York, NY
(5.89%).
ADVISOR TECHNOQUANT GROWTH - CLASS C: Merrill Lynch Pierce Fenner &
Smith, Jacksonville, FL (24.52%); Investors Security, Inc., Suffolk,
VA (20.98%); Securities Corp. of Iowa, Cedar Rapids, IA (19.60%); FMR
Corp., Boston, MA (9.44%); Prudential Securities, New York, NY
(6.07%).
ADVISOR TECHNOQUANT GROWTH - INSTITUTIONAL CLASS: FMR Corp.,
Boston, MA (56.16%); Donaldson, Lufkin & Jenrette, New York, NY
(14.42%); Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL
(13.21%).
As of December 31, 1997, approximately 7.54% of Emerging Markets
Income's, 62.18% of International Capital Appreciation's, 3.59% of
Large Cap's, and 2.06% of TechnoQuant Growth's total outstanding
shares were held by an FMR affiliate. FMR Corp. is the ultimate parent
company of this FMR affiliate. By virtue of his ownership interest in
FMR Corp., as described in the "FMR" section on page 119, Mr. Edward
C. Johnson 3d, President and Trustee of the fund, may be deemed to be
a beneficial owner of these shares. As of the above date, with the
exception of Mr. Johnson 3d's deemed ownership of Emerging Markets
Income's, International Capital Appreciation's, Large Cap's, and
TechnoQuant Growth's shares, the Trustees, Members of the Advisory
Board, and officers of the funds owned, in the aggregate, less than 1%
of each class's total outstanding shares.
A shareholder owning of record or beneficially more than 25% of
a fund's outstanding shares may be considered a controlling person.
That shareholder's vote could have a more significant effect on
matters presented at a shareholders' meeting than votes of other
shareholders.
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 the management
contract, Equity Income pays FMR a monthly management fee at the
annual rate of 0.50% 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, Municipal Income, Municipal
Bond, Intermediate Municipal Income, and Short-Intermediate 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 the performance of
Growth Opportunities and Strategic Opportunities to that of S&P 500
and the performance of Overseas to that of the Morgan Stanley Capital
International Europe, Australasia, Far East Index (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 10/16/97 10/31/97*
Overseas 10/31/97 9/17/97
Mid Cap 1/18/96 1/18/96*
Equity Growth 8/1/97 7/16/97
Growth Opportunities 2/28/98 7/16/97
Strategic Opportunities 2/28/98 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 10/31/97 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
Municipal Income 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
</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, 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 .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, and Municipal Bond.
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 AND STRATEGIC INCOME The following fee
schedule is the current fee schedule for Emerging Markets Income and
Strategic 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 and Strategic 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 group fee rate is based on the monthly average net assets of all
of the registered investment companies with which FMR has management
contracts and is calculated on a cumulative basis pursuant to the
graduated fee rate schedule shown below on the left. The schedule
below on the right shows the effective annual group fee rate at
various asset levels, which is the result of cumulatively applying the
annualized rates on the left. For example, the effective annual fee
rate at $ 549.8 billion of group net assets - the
approximate level for December 199 7 - was . 2942 % for
equity funds and .1 372 % for fixed-income funds, which is the
weighted average of the respective fee rates for each level of group
net assets up to $ 549.8 billion.
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 1997 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 Growt h 0.2942 % + 0.30% = 0.5942%
International Capital Appreciation* 0.2942 % + 0.45% = 0.7442 %
Overseas 0.2942 % + 0.45% = 0.7442 %
Mid Cap 0.2942 % + 0.30% = 0.5942 %
Equity Growth 0.2942 % + 0.30% = 0.5942 %
Growth Opportunities 0.2942 % + 0.30% = 0.5942 %
Strategic Opportunities 0.2942 % + 0.30% = 0.5942 %
Large Cap 0.2942 % + 0.30% = 0.5942 %
Growth & Incom e 0.2942 % + 0.20% = 0.4942 %
Balanced 0.2942 % + 0.15% = 0.4442 %
Emerging Markets Income 0.1372 % + 0.55% = 0.6872 %
High Yield 0.1372 % + 0.45% = 0.5872 %
Strategic Income 0.1372 % + 0.45% = 0.5872 %
Mortgage Securities 0.1372 % + 0.30% = 0.4372 %
Government Investment 0.1372 % + 0.30% = 0.4372 %
Intermediate Bond 0.1372 % + 0.30% = 0.4372 %
Short Fixed-Income 0.1372 % + 0.30% = 0.4372 %
Municipal Income 0.1372 % + 0.25% = 0.3872 %
Intermediate Municipal Income 0.1372 % + 0.25% = 0.3872 %
Short-Intermediate Municipal Income 0.1372 % + 0.25% = 0.3872 %
</TABLE>
* Estimate d
One -twelfth of this annual basic fee rate or management fee
rate, as applicable, 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 each of
Overseas, Growth Opportunities, and Strategic Opportunities, is
subject to upward or downward adjustment, depending upon whether, and
to what extent, the fund's investment performance for the performance
period exceeds, or is exceeded by, the record of the 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, Growth Opportunities, and Strategic Opportunities (up to
a maximum difference of (plus/minus)10.00) is multiplied by a
performance adjustment rate of 0.02%.
For the purposes of calculating the performance adjustment for each of
Overseas, 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 performance comparison is made at the end of each month.
One-twelfth (1/12) of this rate is then applied to each fund's average
net assets for the entire performance period, giving the dollar amount
which will be added to (or subtracted from) the basic fee.
The maximum annualized adjustment rate is (plus/minus)0.20% of a
fund's average net assets over the performance period.
A 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 a fund's
performance compared to the investment record of the applicable Index,
the controlling factor is not whether the fund's performance is up or
down per se, but whether it is up or down more or less than the record
of the Index. Moreover, the comparative investment 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 following table shows the amount of management fees paid by each
fund (Ratios annualized for periods of less than one year) to
FMR for the past three fiscal years, and the amount of negative or
positive performance adjustments to the management fees paid by
Overseas, Growth Opportunities, and Strategic Opportunities.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FISCAL MANAGEMENT FEE+ PERFORMANCE MANAGEMENT FEE
YEAR ADJUSTMENT AS A PERCENTAGE OF
ENDED AVERAGE NET ASSETS
TECHNOQUANT GROWTH 11/30
1997# $ 135,400 N/A 0.60%
OVERSEAS 10/31
1997 9,515,372 $ 734,731 (upward) 0.81
1996 6,353,206 687,829 (downward) 0.68
1995 5,589,729 307,727 (upward) 0.81
MID CAP 11/30
1997 2,182,332 N/A 0.60
1996* 644,430 N/A 0.60
EQUITY GROWTH 11/30
1997 30,254,233 N/A 0.60
1996 23,048,140 N/A 0.61
1995 12,057,390 N/A 0.61
GROWTH OPPORTUNITIES
11/1/97 - 11/30/97++ 8,283,249 2,127,105 (downward) 0.52
10/31
1997 86,854,055 19,295,278 (downward) 0.49
1996 76,294,260 1,076,788 (upward) 0.61
1995 49,903,758 5,210,490 (upward) 0.69
STRATEGIC OPPORTUNITIES
1/1/97- 11/30/97+++ 2,293,268 1,112,763 (downward) 0.40
12/31
1996 3,621,407 962,281 (downward) 0.48
1995 3,510,812 91,269 (upward) 0.62
LARGE CAP 11/30
1997 364,913 N/A 0.60
1996* 100,564 N/A 0.60
GROWTH & INCOME 11/30
1997# 385,672 N/A 0.50
EQUITY INCOME 11/30
1997 14,927,663 N/A 0.50
1996 10,188,385 N/A 0.50
1995 4,257,045 N/A 0.50
BALANCED 10/31
1997 13,236,926 N/A 0.45
1996 16,119,225 N/A 0.50
1995 17,383,377 N/A 0.51
EMERGING MARKETS INCOME 12/31
1997 822,554 N/A 0.69
1996 488,344 N/A 0.69
1995 283,122 N/A 0.70
HIGH YIELD 10/31
1997 14,787,091 N/A 0.59
1996 10,195,539 N/A 0.60
1995 5,796,415 N/A 0.60
FISCAL MANAGEMENT FEE+ PERFORMANCE MANAGEMENT FEE AS A
YEAR ADJUSTMENT PERCENTAGE OF
ENDED AVERAGE NET ASSETS
STRATEGIC INCOME 12/31
1997 $ 967,126 N/A 0.59%
1996 641,715 N/A 0.59
1995 277,990 N/A 0.60
MORTGAGE SECURITIES
8/1/97 - 10/31/97++++ 578,471 N/A 0.44
7/31
1997 2,273,788 N/A 0.44
1996 2,104,873 N/A 0.45
1995 1,707,178 N/A 0.45
GOVERNMENT INVESTMENT 10/31
1997 930,159 N/A 0.44
1996 1,197,929 N/A 0.45
1995 766,114 N/A 0.45
INTERMEDIATE BOND 11/30
1997 2,095,786 N/A 0.44
1996 2,174,162 N/A 0.45
1995 1,703,722 N/A 0.45
SHORT FIXED-INCOME 10/31
1997 1,715,958 N/A 0.44
1996 2,203,578 N/A 0.45
1995 2,889,187 N/A 0.45
MUNICIPAL INCOME 10/31
1997 1,826,656 N/A 0.39
1996 2,266,568 N/A 0.40
1995 2,289,466 N/A 0.40
MUNICIPAL BOND 12/31
1997 3,649,000 N/A 0.39
1996 3,912,000 N/A 0.40
1995 4,282,000 N/A 0.40
INTERMEDIATE MUNICIPAL 11/30
INCOME
1997 255,140 N/A 0.39
1996 310,611 N/A 0.40
1995 292,469 N/A 0.40
SHORT-INTERMEDIATE 11/30
MUNICIPAL INCOME
1997 99,898 N/A 0.39
1996 117,532 N/A 0.40
1995 79,349 N/A 0.40
</TABLE>
# TechnoQuant Growth and Growth & Income commenced operations
on December 31, 1 996.
* Mid Cap and Large Cap commenced operations on February 20,
1996.
+ Management fee includes performance adjustments for Overseas, Growth
Opportunitie s, and Strategic Opportunities.
++ For the fiscal period November 1, 1997 through November
30, 1997.
++ + For the fiscal period January 1, 1997 through November 30,
1997.
++++ For the fiscal period A ugust 1, 1997 through October
31, 1997.
FMR may, from time to time, voluntarily reimburse all or a portion of
a class's expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to
be repaid for these expense reimbursements in the amount that expenses
fall below the limit prior to the end of the fiscal year.
Expense reimbursements by FMR will increase a class's total returns
and yield, and repayment of the reimbursement by a 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, Mortgage Securities,
Intermediate Bond, and Short Fixed-Income, FMR has entered into
sub-advisory agreements with FMR U.K. and FMR Far East. On behalf of
International Capital Appreciation, Overseas, 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, High Yield, Mortgage Securities, Intermediate Bond,
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, Overseas, Emerging
Markets Income, and Strategic Income, FMR may also grant FMR U.K.,
FMR Far East, FIJ, FIIA and FIIA(U.K.)L investment management
authority to buy and sell securities if FMR believes it would be
beneficial to the funds.
Currently, FMR U.K., FMR Far East, FIJ, FIIA, and FIIA(U.K.)L each
focus on issuers in countries other than the United States such as
those in Europe, Asia, and the Pacific Basin.
FMR U.K. and FMR Far East, which were organized in 1986, are wholly
owned subsidiaries of FMR. FIJ and FIIA are wholly owned subsidiaries
of Fidelity International Limited (FIL), a Bermuda company formed in
1968 which primarily provides investment advisory services to non-U.S.
investment companies and institutional investors investing in
securities throughout the world. Edward C. Johnson 3d, Johnson family
members, and various trusts for the benefit of the Johnson family 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 direct subsidiary of Fidelity Investment Limited and an indirect
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:
(small solid bullet) FMR pays FMR U.K. and FMR Far East fees equal to
110% and 105%, respectively, of FMR U.K.'s and FMR Far East's costs
incurred in connection with providing investment advice and research
services.
(small solid bullet) FMR pays FIIA and FIJ fees equal to 30% of FMR's
monthly management fee with respect to the average net assets held by
the fund for which the sub-adviser has provided FMR with investment
advice and research services.
(small solid bullet) FIIA pays FIIA(U.K.)L a fee equal to 110% of
FIIA(U.K.)L's costs incurred in connection with providing investment
advice and research services.
On behalf of TechnoQuant Growth, International Capital Appreciation,
Overseas, Mid Cap, Equity Growth, Growth Opportunities, Strategic
Opportunities, Large Cap, Growth & Income, Balanced, Emerging Markets
Income, High Yield, Strategic Income, Mortgage Securities,
Intermediate Bond , and Short Fixed-Income, for providing
discretionary investment management and executing portfolio
transactions, the sub-advisers are compensated as follows:
(small solid bullet) FMR pays FMR U.K., FMR Far East, FIJ, and FIIA a
fee equal to 50% of its monthly management fee (including any
performance adjustment, if applicable) with respect to the fund's
average net assets managed by the sub-adviser on a discretionary
basis.
(small solid bullet) FIIA pays FIIA(U.K.)L a fee equal to 110% of
FIIA(U.K.)L's costs incurred in connection with providing
discretionary investment management services.
The table below 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 1997, 1996, and 1995.
FEES PAID TO FOREIGN SUB-ADVISERS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Fiscal Year Ended FMR U.K. FMR Far East FIIA FIIA(U.K.)L FIJ
October 31
Overseas
1997 $ 627,390 $ 594,643 $ 0 $ 0 $ 0
1996 $ 541,988 $ 550,513 $ 0 $ 0 $ 0
1995 $ 364,803 $ 352,004 $ 0 $ 0 $ 0
Fiscal Year Ended FMR U.K. FMR Far East FIIA FIIA(U.K.)L FIJ
November 30
Equity Growth
1997 $ 139,178 $ 133,255 $ 0 $ 0 $ 0
1996 $ 51,150 $ 49,497 $ 0 $ 0 $ 0
1995 $ 31,519 $ 30,883 $ 0 $ 0 $ 0
Fiscal Year Ended FMR U.K. FMR Far East FIIA FIIA(U.K.)L FIJ
Growth Opportunities
11/1/97 - $ 87,415 $ 77,694 $ 0 $ 0 $ 0
11/30/97
11/1/96 - $ 852,607 $ 809,300 $ 0 $ 0 $ 0
10/31/97
1996 $ 642,845 $ 645,049 $ 0 $ 0 $ 0
1995 $ 212,175 $ 203,140 $ 0 $ 0 $ 0
Fiscal Year Ended FMR U.K. FMR Far East FIIA FIIA(U.K.)L FIJ
Strategic Opportunities
1/1/97 - 11/30/97 $ 28,790 $ 27,433 $ 0 $ 0 $ 0
1996 $ 24,977 $ 23,484 $ 0 $ 0 $ 0
1995 $ 5,261 $ 5,862 $ 0 $ 0 $ 0
Fiscal Year Ended FMR U.K. FMR Far East FIIA FIIA(U.K.)L FIJ
November 30
Equity Income
1997 $ 89,084 $ 85,667 $ 0 $ 0 $ 0
1996 $ 46,448 $ 46,494 $ 0 $ 0 $ 0
1995 $ 23,713 $ 23,140 $ 0 $ 0 $ 0
Fiscal Year Ended FMR U.K. FMR Far East FIIA FIIA(U.K.)L FIJ
October 31
Balanced
1997 $ 177,487 $ 166,105 $ 0 $ 0 $ 0
1996 $ 235,847 $ 251,109 $ 0 $ 0 $ 0
1995 $ 330,971 $ 304,870 $ 0 $ 0 $ 0
</TABLE>
The other funds paid no investment sub-advisory fees for the fiscal
periods ended 1997, 1996, and 1995.
No fees were paid to FIJ, FIIA, and FIIA(U.K.)L for fiscal periods
ended 1997, 1996 and 1995.
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 , and 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, Municipal Income, and Municipal Bond (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, Municipal Income, Municipal Bond,
Short-Intermediate Municipal Income, Intermediate and 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 0.75% 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 0.75% 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, 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 or 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.
The tables below show the distribution fees paid for Class A shares
for the fiscal years ended 1997 , 1996 (Class A shares were not
offered prior to September 3, 1996), for Class T shares for the fiscal
years ended 1997, 1996, and 1995, for Class B shares for the fiscal
years ended 1997, 1996, and 1995, and for Class C shares for the
fiscal year ended 1997 (Class C shares were not offered prior to
November 3, 1997).
CLASS A DISTRIBUTION FEES
1996 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FUND PAID TO RETAINED BY FDC PAID TO RETAINED BY FDC
INVESTMENT INVESTMENT
PROFESSIONALS PROFESSIONALS
TechnoQuant Growth N/A N/A $ 9,431 $ 0
Overseas $ 0 $ 0 6,000 0
Mid Cap 408 0 6,575 0
Equity Growth 1,207 0 36,000 0
Growth Opportunities 1,643 0 28,000+/154,000++ 0
Strategic Opportunities 317 0 2,516 0
Large Cap 161 0 3,619 0
Growth & Income N/A N/A 6,421 0
Equity Income 924 0 32,000 0
Balanced 232 0 11,000 0
Emerging Markets Income 147 0 1,903 0
High Yield 0 0 29,000 0
Strategic Income 152 0 2,600 0
Mortgage Securities N/A N/A 600*/530** 0
Government Investment 39 0 1,086 0
Intermediate Bond 153 0 3,177 0
Short Fixed-Income 35 0 4,666 0
Municipal Income 35 0 2,810 0
Intermediate Municipal Income 37 0 521 0
Short-Intermediate Municipal
Income 62 0 523 0
</TABLE>
+ For the fiscal period November 1, 1997 through November 30,
1997.
++ For the fiscal period November 1, 1996 through October 31,
1997.
* For the fiscal period August 1, 1997 through October 31,
1997.
** For the fiscal period March 3, 1997 through July 31, 1997.
CLASS T DISTRIBUTION FEES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1995 1996 1997
FUND PAID TO RETAINED PAID TO RETAINED PAID TO RETAINED
INVESTMENT BY FDC INVESTMENT BY FDC INVESTMENT BY FDC
PROFESSIONALS PROFESSIONALS PROFESSIONALS
TechnoQuant N/A N/A N/A N/A $ 59,373 $0
Overseas $ 3,452,001 $ 1,049,755 $ 4,560,000 $ 190,000 5,557,000 0
Mid Cap N/A N/A 460,775 0 1,333,963 0
Equity Growth 6,750,062 2,123,261 13,897,763 256,052 192,298,000 0
Growth
Opportunities 33,781,082 10,228,188 61,123,389 2,461,359 8,370,000+ 0
86,244,000++ 0
Strategic
Opportunities 2,377,409 804,604 3,004,411 0 2,266,860 0
Large Cap N/A N/A 49,326 0 179,058 0
Growth &
Income N/A N/A N/A N/A 254,429 0
Equity Income 2,339,815 710,240 6,628,000 115,000 9,636,000 0
Balanced 16,748,635 5,165,858 16,228,668 870,842 14,549,000 0
Emerging Markets
Income 71,061 12,300 138,085 0 230,572 0
High Yield 2,185,795 33,785 3,616,000 0 4,930,000 0
Strategic
Income 62,957 6,002 185,607 0 276,410 0
Mortgage
Securities N/A N/A N/A N/A 8,099* 0
2,602** 0
Government
Investment 391,918 7,088 572,796 0 427,659 0
Intermediate
Bond 463,806 0 637,019 0 655,179 0
Short Fixed-
Income 933,777 18,975 725,063 0 570,695 0
Municipal
Income 1,358,027 8,150 1,335,656 0 1,062,341 0
Intermediate
Municipal 143,424 1,599 152,707 0 127,082 0
Income
Short-Intermediate
Municipal 27,895 1,646 44,018 0 37,068 0
Income
</TABLE>
+ For the fiscal period November 1, 1997 through November 30,
1997.
++ For the fiscal period November 1, 1996 through October 31,
1997.
* For the fiscal period August 1, 1997 through October 31,
1997.
** For the fiscal period March 3, 1997 through July 31, 1997.
CLASS B DISTRIBUTION AND SERVICE FEES
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund
1995 1996 1997
Distri Distri Distri Share
buti Retain Shareh Retain bu Retaine Shareh Retaine bution Retained holder Retai
on ed by older ed by tion d by older d by Fees by FDC Service ned
Fees FDC Service FDC Fees FDC Service FDC Fee by
Fees Fees FDC
TechnoQuant
N/A N/A N/A N/A N/A N/A N/A N/A $ 44,157 $ 44,157 $ 14,718 $ 0
Growth
Overseas
$ 3,566 $ 3,566 $ 1,155 $ 0 $ 97,000 $ 97,000 $ 22,000 $ 0 216,000 216,000 72,000 0
Mid Cap
N/A N/A N/A N/A 103,330 103,330 34,445 0 325,966 325,966 108,656 0
Equity Growth
N/A N/A N/A N/A N/A N/A N/A N/A 217,000 217,000 73,000 0
Growth
Opportunities
N/A N/A N/A N/A N/A N/A N/A N/A 248,000+ 248,000+ 82,000+ 0+
844,000++ 844,000++ 282,000++ 0++
Strategic
359,793 359,793 116,312 0 744,336 744,336 248,724 0 683,989 683,989 227,996 0
Opportunities
Large Cap
N/A N/A N/A N/A 21,680 21,680 7,479 0 120,477 120,477 40,162 0
Growth &
N/A N/A N/A N/A N/A N/A N/A N/A 88,496 88,496 29,498 0
Income
Equity Income
996,566 996,566 332,413 0 3,015,000 3,015,000 993,000 0 4,396,000 4,396,000 1,465,000 0
Balanced
N/A N/A N/A N/A N/A N/A N/A N/A 47,000 47,000 16,000 0
Emerging
52,283 52,283 17,429 0 32,172 32,172 85,051 0 144,517 144,517 55,579 0
Markets Income
High Yield
537,580 537,580 179,328 0 1,647,000 1,647,000 623,000 0 2,991,000 2,991,000 1,151,000 0
Strategic
139,735 139,735 46,578 0 197,706 197,706 76,042 0 295,764 295,764 113,756 0
Income
Mortgage
Securities
N/A N/A N/A N/A N/A N/A N/A N/A 1,950* 1,950* 749* 0
994** 994** 380**
Government
48,662 48,662 16,159 0 99,118 99,118 37,314 0 112,488 112,488 43,269 0
Investment
Intermediate
65,218 65,218 21,738 0 119,626 119,626 45,490 0 127,539 127,539 49,049 0
Bond
Municipal
163,013 163,013 54,382 0 247,210 247,210 92,908 0 259,150 259,150 99,673 0
Income
Intermediate
28,714 28,714 9,498 0 47,136 47,136 17,926 0 48,596 48,596 18,691 0
Municipal
Income
</TABLE>
+ For the fiscal period November 1, 1997 through November 30,
1997.
++ For the fiscal period November 1, 1996 through October 31,
1997.
* For the fiscal period August 1, 1997 through October 31,
1997.
** For the fiscal period March 3, 1997 through July 31, 1997.
CLASS C DISTRIBUTION AND SERVICE FEES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1997
Fund Distribution Retained Shareholder Retained
Fees by FDC Service Fee by FDC
TechnoQuant Growth $ 8 $ 8 $ 2 $ 2
Mid Cap 84 84 28 28
Equity Growth 281 281 94 94
Growth Opportunities 1,500 1,500 500 500
Large Cap 12 12 2 2
Growth & Income 113 113 38 38
Equity Income 192 192 64 64
Emerging Markets Income 35 35 12 12
Strategic Income 354 354 118 118
Intermediate Bond 41 41 14 14
Intermediate Municipal Income 4 4 2 2
</TABLE>
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,
Institutional Class , and Initial Class shares.
For the calendar year ended 1997, payments made by FMR, either
directly or indirectly through FDC, to third parties a mounted
to $0 for Initial Class of Strategic Opportunities, $ 0
for Initial Class of Municipal Bond , and $ 0 for Initial
Class of Mortgage Securities and, for Class A, Class T, Class B, Class
C, and Institutional Class of each fund, amounted to the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FUND CLASS A CLASS T CLASS B CLASS C INSTITUTIONAL
TechnoQuant Growth $ 553 $ 1,279 $ 840 $ 108 $ 0
Overseas 3,133 118,512 14,258 973 0
Mid Cap 3,015 36,826 14,781 1,783 0
Equity Growth 4,745 240,014 5,940 2,216 0
Growth Opportunities 49,543 919,539 30,026 16,320 0
Strategic Opportunities 1,181 55,624 36,225 ** 0
Large Cap 1,231 4,415 4,909 270 0
Growth & Income 845 3,867 1,875 1,459 0
Equity Income 8,456 135,812 140,040 2,702 0
Balanced 2,818 187,043 1,528 811 0
Emerging Markets Income 1,393 13,689 8,907 54 0
High Yield 10,641 148,504 93,336 7,295 0
Strategic Income 1,115 10,348 8,708 486 0
Mortgage Securities 28 1,348 77 ** 0
Government Investment 443 19,294 4,504 216 0
Intermediate Bond 1,166 15,953 6,413 486 0
Short Fixed-Income 759 39,601 * 216 0
Municipal Income 364 27,103 5,853 0 0
Intermediate Municipal Income 120 3,776 1,071 0 0
Short-Intermediate Municipal Income 140 2,059 * ** 0
</TABLE>
* Class B is not available for this fund.
** Class C 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>
DATE OF SHAREHOLDER APPROVAL
FUND CLASS A CLASS T CLASS B INSTITUTIONAL
TechnoQuant Growth 12/23/96 12/23/96 12/23/96 12/23/96
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
Municipal Income 08/30/96 12/01/94 12/01/94 06/30/95
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
</TABLE>
* Not applicable.
** Class B 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
Class 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 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, Institutional Class and Initial 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.
For the Initial Class of Municipal Bond and for each class of
Municipal Income, Intermediate Municipal Income, and
Short-Intermediate Municipal Income 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 municipal 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
municipal fund and receives all related transfer agency fees paid to
UMB.
For providing transfer agency services, FSC and FIIOC receive an
account fee and an asset-based fee each paid monthly with respect
to each account in the funds. For retail accounts and certain
institutional accounts, these fees are based on account size and
fund type . For certain institutional retirement accounts,
these fees are based on fund type. For certain other
institutional retirement accounts, these fees are based on account
type (i.e., omnibus or non-omnibus) and, for non-omnibus accounts,
fund type. Th e annual account fees are subject to increase
based on post age 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 Emerging Markets, High Yield, Strategic Income, Government
Investment, Mortgage Securities, Intermediate Bond, and Short
Fixed-Income has entered into a service agent agreement with FSC.
Under the terms of the agreements, FSC calculates the NAV and
dividends for each class of each fund, maintains each fund's portfolio
and general accounting records, and administers each fund's securities
lending program.
Each of the Municipal 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>
FUND 1997 1996 1995
TechnoQuant Growth $ 55,019 N/A N/A
Overseas 629,811 $ 523,913 $ 358,827
Mid Cap 266,208 65,738* N/A
Equity Growth 813,000 804,585 680,671
Growth Opportunities 78,000 ** 821,769 764,407
836,000 ***
Strategic Opportunities 310,776 + 380,339 315,623
Large Cap 60,755 46,209 * N/A
Growth & Income 67,333 N/A N/A
Equity Income 808,212 751,619 404,628
Balanced 806,920 800,592 758,290
Emerging Markets Income 91,562 62,296 45,004
High Yield 821,882 734,437 296,724
Strategic Income 66,910 60,655 45,067
Mortgage Securities 52,896++ 189,021 151,765
208,321+++
Government Investment 87,365 109,259 68,665
Intermediate Bond 195,556 198,036 151,940
Short Fixed-Income 159,567 197,893 231,369
Municipal Income 191,896 239,476 229,551
Municipal Bond 333,000 298,000 346,000
Intermediate Municipal Income 61,883 65,230 48,976
Short-Intermediate Municipal Income 65,365 58,330 46,467
</TABLE>
* Mid Cap and Large Cap commenced operations on February 20, 1996
** From 11/1/97 - 11/30/97
*** From 11/1/96 - 10/31/97
+ From 1/1/97 - 11/30/97
++ From 8/1/97 - 10/31/97
+++ From 8/1/96 - 7/31/97
F SC 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
years ended 1997, 1996, and 1995, 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 entered into a distribution agreement with FDC, an
affiliate of FMR organized as a Massachusetts corporation on July 18,
1960. FDC is a broker-dealer registered under the Securities Exchange
Act of 1934 and 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.
Sales charge revenues collected, and retained by FDC for the past
three fiscal years are shown in the table below. Class C of
Overseas, Balanced, High Yield, Government Investment, and Municipal
Income commenced operations after the funds' fiscal year ended.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Sales CDSC
Charge Revenue
Revenue
Fiscal Year Amount Amount Amount Amount
Paid to Retained Paid to Retained
Ended FDC by FDC FDC by FDC
Techn Nov. 30, $ 54,370 $ 30,175 $ 0 $ 0
oQuan 1997*
t
Growt
h -
Class
A
Techn Nov. 30, 111,714 41,936 0 0
oQuan 1997*
t
Growt
h -
Class
T
Techn Nov. 30, N/A N/A 18,557 18,557
oQuan 1997 *
t
Growt
h -
Class
B
Techn Nov. 30, N/A N/A 0 0
oQuan 1997*
t
Growt
h -
Class
C
Techn Nov. 30, N/A N/A N/A N/A
oQuan 1997*
t
Growt
h -
Institu
tional
Class
Overs Oct. 31, 93,000 25,000 0 0
eas - 1997
Class
A
1996 12,000 1,000 0 0
1995 N/A N/A N/A N/A
Overs Oct. 31, 748,000 202,000 0 0
eas - 1997
Class
T
1996 2,313,000 375,000 0 0
1995 4,446,941 692,471 0 0
Overs Oct. 31, N/A N/A 86,000 86,000
eas - 1997
Class
B
1996 N/A N/A 24,000 24,000
1995 N/A N/A 333 333
Overs Oct. 31, N/A N/A N/A N/A
eas - 1997
Institu
tional
Class
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Mid Nov. 30, 68,624 17,485 0 0
Cap - 1997
Class
A
1996** 25,943 4,434 0 0
Mid Nov. 30, 419,798 153,727 0 0
Cap - 1997
Class
T
1996** 1,836,711 304,519 0 0
Mid Nov. 30, N/A N/A 160,918 160,918
Cap - 1997
Class
B
1996** N/A N/A 20,844 20,844
Mid Nov. 30, N/A N/A 0 0
Cap - 1997
Class
C
1996** N/A N/A N/A N/A
Mid Nov. 30, N/A N/A N/A N/A
Cap - 1997
Institu
tional
Class
1996** N/A N/A N/A N/A
Equity Nov. 30, 516,000 163,000 0 0
Growt 1997
h -
Class
A
1996 151,603 16,099 0 0
1995 N/A N/A N/A N/A
Equity Nov. 30, 2,561,000 777,000 0 0
Growt 1997
h -
Class
T
1996 11,845,527 1,998,996 0 0
1995 13,514,763 2,048,524 0 0
Equity Nov. 30, N/A N/A 53,000 53,000
Growt 1997
h -
Class
B
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Equity Nov. 30, N/A N/A 0 0
Growt 1997
h -
Class
C
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Equity Nov. 30, N/A N/A N/A N/A
Growt 1997
h -
Institu
tional
Class
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Sales CDSC
Charge Revenue
Revenue
Fiscal Year Amount Amount Amount Amount
Paid to Retained Paid to Retained
Ended FDC by FDC FDC by FDC
Growt Nov. 30, $ 189,000 $ 73,000 $ 0 $ 0
h 19 97***
Oppor
tunitie
s -
Class
A
Oct. 31, 2,096,000 618,000 0 0
19 97
1996 399,713 45,606 0 0
1995 N/A N/A N/A N/A
Growt Nov. 30, 821,000 352,000 0 0
h 1997 ***
Oppor
tunitie
s -
Class
T
Oct. 31, 13,380,000 4,538,000 0 0
1997
1996 49,538,901 7,961,248 0 0
1995 73,545,428 11,459,421 0 0
Growt Nov. 30, N/A N/A 41,000 41,000
h 1997 ***
Oppor
tunitie
s -
Class
B
Oct. 31, N/A N/A 154,000 154,000
1997
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Growt Nov. 30, N/A N/A 0 0
h 1997***
Oppor
tunitie
s -
Class
C
Oct. 31, N/A N/A N/A N/A
1997*****
1995 N/A N/A N/A N/A
Growt Nov. 30, N/A N/A N/A N/A
h 1997***
Oppor
tunitie
s -
Institu
tional
Class
Oct. 31, N/A N/A N/A N/A
1997
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Strate Nov. 30, 28,462 9,936 0 0
gic 1997****
Oppor
tunitie
s -
Class
A
Dec. 31, 15,662 2,958 0 0
1996
1995 N/A N/A N/A N/A
Strate Nov. 30, 187,128 53,056 0 0
gic 1997****
Oppor
tunitie
s -
Class
T
Dec. 31, 909,434 145,926 0 0
1996
1995 1,883,199 144,719 0 0
Strate Nov. 30, N/A N/A 304,658 304,658
gic 1997****
Oppor
tunitie
s -
Class
B
Dec. 31, N/A N/A 243,510 243,510
1996
1995 N/A N/A 40,916 40,916
Strate Nov. 30, N/A N/A N/A N/A
gic 1997****
Oppor
tunitie
s -
Institu
tional
Class
Dec. 31, N/A N/A N/A N/A
1996
1995 N/A N/A N/A N/A
Large Nov. 30, 39,475 12,656 0 0
Cap - 1997
Class
A
1996** 1,495 1,476 0 0
Large Nov. 30, 83,276 28,199 0 0
Cap - 1997
Class
T
1996** 203,839 32,342 0 0
Large Nov. 30, N/A N/A $ 27,546 $ 27,546
Cap - 1997
Class
B
1996** N/A N/A 5,900 5,900
Large Nov. 30, N/A N/A 0 0
Cap - 1997
Class
C
1996** N/A N/A N/A N/A
Large Nov. 30, N/A N/A N/A N/A
Cap - 1997
Institu
tional
Class
1996** N/A N/A N/A N/A
Sales CDSC
Charge Revenue
Revenue
Fiscal Year Amount Amount Amount Amount
Paid to Retained Paid to Retained
Ended FDC by FDC FDC by FDC
Growt Nov. 30, $ 107,155 $ 38,752 $ 0 $ 0
h & 1997*
Incom
e -
Class
A
Growt Nov. 30, 316,414 112,138 0 0
h & 1997*
Incom
e -
Class
T
Growt Nov. 30, N/A N/A 35,346 35,346
h & 1997*
Incom
e -
Class
B
Growt Nov. 30, N/A N/A 0 0
h & 1997*
Incom
e -
Class
C
Growt Nov. 30, N/A N/A N/A N/A
h & 1997*
Incom
e -
Institu
tional
Class
Equity Nov. 30, 461,000 124,000 0 0
Incom 1997
e -
Class
A
1996 108,178 10,945 0 0
1995 N/A N/A N/A N/A
Equity Nov. 30, 1,835,000 533,000 0 0
Incom 1997
e -
Class
T
1996 8,110,513 1,572,831 0 0
1995 10,583,118 1,676,479 0 0
Equity Nov. 30, N/A N/A 1,017,000 1,017,000
Incom 1997
e -
Class
B
1996 N/A N/A 651,390 651,390
1995 N/A N/A 127,493 127,493
Equity Nov. 30, N/A N/A 0 0
Incom 1997
e -
Class
C
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Equity Nov. 30, N/A N/A N/A N/A
Incom 1997
e -
Institut
ional
Class
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Balanc Oct. 31, 139,000 37,000 0 0
ed - 1997
Class
A
1996 38,444 5,070 0 0
1995 N/A N/A N/A N/A
Balanc Oct. 31, 1,052,000 275,000 0 0
ed - 1997
Class
T
1996 3,494,533 591,963 0 0
1995 10,070,941 1,674,121 0 0
Balanc Oct. 31, N/A N/A 9,000 9,000
ed - 1997
Class
B
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Balanc Oct. 31, N/A N/A N/A N/A
ed - 1997
Institu
tional
Class
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Emerg Dec. 31, 29,709 6,462 0 0
ing 1997
Marke
ts -
Class
A
1996 9,186 1,098 0 0
1995 N/A N/A N/A N/A
Emerg Dec. 31, 142,370 30,730 0 0
ing 1997
Marke
ts -
Class
T
1996 270,379 42,424 0 0
1995 465,187 245,371 0 0
Emerg Dec. 31, N/A N/A 68,657 68,657
ing 1997
Marke
ts -
Class
B
1996 N/A N/A 46,800 46,800
1995 N/A N/A 12,203 12,203
Emerg Dec. 31, N/A N/A 0 0
ing 1997
Marke
ts -
Class
C
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Emerg Dec. 31, N/A N/A N/A N/A
ing 1997
Marke
ts -
Institut
ional
Class
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Sales CDSC
Charge Revenue
Revenue
Fiscal Year Amount Amount Amount Amount
Ended Paid to Retained Paid to Retained
FDC by FDC FDC by FDC
High Oct. 31, $ 609,000 $ 162,000 $ 0 $ 0
Yield 1997
-
Class
A
1996 116,000 17,000 0 0
1995 N/A N/A N/A N/A
High Oct. 31, 2,978,000 979,000 0 0
Yield 1997
-
Class
T
1996 8,201,000 1,356,000 0 0
1995 8,787,240 1,328,830 0 0
High Oct. 31, N/A N/A 1,076,000 1,076,000
Yield 1997
-
Class
B
1996 N/A N/A 372,000 372,000
1995 N/A N/A 75,583 75,583
High Oct. 31, N/A N/A N/A N/A
Yield 1997
-
Institu
tional
Class
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Strate Dec. 31, 56,247 9,922 0 0
gic 1997
Incom
e -
Class
A
1996 13,287 1,628 0 0
1995 N/A N/A N/A N/A
Strate Dec. 31, 275,540 77,574 0 0
gic 1997
Incom
e -
Class
T
1996 558,381 94,606 0 0
1995 842,000 100,905 0 0
Strate Dec. 31, N/A N/A 89,199 89,199
gic 1997
Incom
e -
Class
B
1996 N/A N/A 56,783 56,783
1995 N/A N/A 23,689 23,689
Strate Dec. 31, N/A N/A 0 0
gic 1997
Incom
e -
Class
C
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Strate Dec. 31, N/A N/A N/A N/A
gic 1997
Incom
e -
Institu
tional
Class
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Mortga Oct. 31, 263 180 0 0
ge 19 97+
Securit
ies -
Class
A
July 31, 7,090 67 0 0
1997++
199 6 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Mortg Oct. 31, 8,746 1,749 0 0
age 1997+
Securi
ties -
Class
T
July 31, 9,662 2,170 0 0
1997++
199 6 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Mortg Oct. 31, N/A N/A 72 72
age 1997+
Securi
ties -
Class
B
July 31, N/A N/A 0 0
1997++
199 6 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Mortg Oct. 31, N/A N/A N/A N/A
age 1997+
Securi
ties -
Institu
tional
Class
July 31, N/A N/A N/A N/A
1997++
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Sales CDSC
Charge Revenue
Revenue
Fiscal Year Amount Amount Amount Amount
Ended Paid to Retained Paid to Retained
FDC by FDC FDC by FDC
Gover Oct. 31, $ 31,629 $ 6,913 $ 0 $ 0
nment 1997
Invest
ment -
Class
A
1996 5,077 1,157 0 0
1995 N/A N/A N/A N/A
Gover Oct. 31, 76,261 20,512 0 0
nment 1997
Invest
ment -
Class
T
1996 618,420 101,833 0 0
1995 954,672 144,831 0 0
Gover Oct. 31, N/A N/A 87,840 87,840
nment 1997
Invest
ment -
Class
B
1996 N/A N/A 38,738 38,738
1995 N/A N/A 10,268 10,268
Gover Oct. 31, N/A N/A N/A N/A
nment 1997
Invest
ment -
Institu
tional
Class
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Interm Nov. 30, 68,475 24,480 0 0
ediate 1997
Bond
-
Class
A
1996 10,944 1,799 0 0
1995 N/A N/A N/A N/A
Interm Nov. 30, 109,296 31,882 0 0
ediate 1997
Bond
-
Class
T
1996 604,408 100,654 0 0
1995 1,297,536 198,826 0 0
Interm Nov. 30, N/A N/A 68,602 68,602
ediate 1997
Bond
-
Class
B
1996 N/A N/A 56,925 56,925
1995 N/A N/A 20,310 20,310
Interm Nov. 30, N/A N/A 0 0
ediate 1997
Bond
-
Class
C
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Interm Nov. 30, N/A N/A N/A N/A
ediate 1997
Bond
-
Institu
tional
Class
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Short Oct. 31, 15,709 3,424 0 0
Fixed- 1997
Incom
e -
Class
A
1996 1,525 231 0 0
1995 N/A N/A N/A N/A
Short Oct. 31, 278,405 63,127 0 0
Fixed- 1997
Incom
e -
Class
T
1996 553,986 95,855 0 0
1995 786,085 167,907 N/A N/A
Short Oct. 31, N/A N/A 0 0
Fixed- 1997
Incom
e -
Class
C
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Short Oct. 31, N/A N/A N/A N/A
Fixed- 1997
Incom
e -
Institu
tional
Class
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Munic Oct. 31, 57,657 14,649 0 0
ipal 1997
Incom
e -
Class
A
1996 3,984 599 0 0
1995 N/A N/A N/A N/A
Munic Oct. 31, 173,689 52,646 0 0
ipal 1997
Incom
e -
Class
T
1996 918,111 154,356 0 0
1995 N/A N/A 0 0
Munic Oct. 31, N/A N/A 174,350 174,350
ipal 1997
Incom
e -
Class
B
1996 N/A N/A 130,817 130,817
1995 N/A N/A 0 0
Sales CDSC
Charge Revenue
Revenue
Fiscal Year Amount Amount Amount Amount
Ended Paid to Retained Paid to Retained
FDC by FDC FDC by FDC
Munic Oct. 31, N/A N/A N/A N/A
ipal 1997
Incom
e -
Class
C
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Munic Oct. 31, N/A N/A N/A N/A
ipal 1997
Incom
e -
Institu
tional
Class
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Interm Nov. 30, 5,742 1,250 0 0
ediate 1997
Munic
ipal
Incom
e -
Class
A
1996 17 2 0 0
1995 N/A N/A N/A N/A
Interm Nov. 30, $ 21,915 $ 6,612 $ 0 $ 0
ediate 1997
Munic
ipal
Incom
e -
Class
T
1996 78,940 12,934 0 0
1995 375,591 141,432 0 0
Interm Nov. 30, N/A N/A 19,218 19,218
ediate 1997
Munic
ipal
Incom
e -
Class
B
1996 N/A N/A 35,837 35,837
1995 N/A N/A 1,449 1,449
Interm Nov. 30, N/A N/A 0 0
ediate 1997
Munic
ipal
Incom
e -
Class
C
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Interm Nov. 30, N/A N/A N/A N/A
ediate 1997
Munic
ipal
Incom
e -
Institu
tional
Class
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Short- Nov. 30, 1,921 325 0 0
Interm 1997
ediate
Munic
ipal
Incom
e -
Class
A
1996 1,193 172 0 0
1995 N/A N/A N/A N/A
Short- Nov. 30, 44,628 22,934 0 0
Interm 1997
ediate
Munic
ipal
Incom
e -
Class
T
1996 67,305 10,218 0 0
1995 316,185 239,796 0 0
Short- Nov. 30, N/A N/A N/A N/A
Interm 1997
ediate
Munic
ipal
Incom
e -
Institu
tional
Class
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
</TABLE>
* TechnoQuant Growth and Growth & Income commenced operations on
December 31, 1996
** Mid Cap and Large Cap commenced operations on February 20, 1996
*** For the fiscal period November 1, 1997 through November 30,
1997.
**** For the fiscal period January 1, 1997 through November 30,
1997.
***** For the fiscal period November 1, 1996 through October 31,
1997.
+ For the fiscal period August 1, 1997 through October 31,
1997.
++ For the fiscal period August 1, 1996 through July 31, 1997.
DESCRIPTION OF THE TRUSTS
TRUSTS' ORGANIZATION. Fidelity Advisor TechnoQuant 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, 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 seven funds of the trust: Fidelity Advisor
TechnoQuant 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, and Fidelity Advisor Growth & Income Fund.
Fidelity Advisor Balanced Fund, Fidelity Advisor High Yield Fund,
Fidelity Advisor Strategic Income Fund, Fidelity Advisor Government
Investment Fund, and Fidelity Advisor Short Fixed-Income 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 23, 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 five funds of the
trust: Fidelity Advisor Balanced Fund, Fidelity Advisor High Yield
Fund, Fidelity Advisor Strategic Income Fund, Fidelity Advisor
Government Investment Fund, and Fidelity Advisor Short Fixed-Income
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 Municipal Income Fund is a fund of Fidelity Advisor
Series V, an open-end management investment company organized as a
Massachusetts business trust by a Declaration of Trust dated April 23,
1986, as amended and restated July 18, 1991, and as supplemented April
15, 1993. On July 18, 1991, the Board of Trustees voted to change the
name of the trust from Plymouth Investment Series to Fidelity
Investment Series, and on April 15, 1993, the Board voted to change
the trust's name to Fidelity Advisor Series V. 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
Municipal Income Fund, Fidelity Advisor New York Municipal Income
Fund, and Fidelity Advisor California Municipal Income Fund.
Fidelity Advisor Intermediate Municipal Income Fund and Fidelity
Advisor Short-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 October 13, 1995 and supplemented 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 Intermediate Municipal Income Fund and
Fidelity Advisor Short-Intermediate Municipal Income Fund.
Fidelity Advisor International Capital Appreciation Fund, Fidelity
Advisor Overseas 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
three funds of the trust: Fidelity Advisor International Capital
Appreciation Fund, Fidelity Advisor Overseas 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,
Spartan Aggressive Municipal 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.
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 holders of
another class of shares to certain liabilities.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar value
of net asset value you own. The shares have no preemptive 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. 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 a 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, if approved by vote of the holders of a
majority of the trust or the fund, as determined by the current value
of each shareholder's investment in the funds or trusts. If not so
terminated, each trust and fund will continue indefinitely. Each fund
(except Equity Income and Municipal Bond) 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 Municipal Income,
Municipal Bond, Intermediate 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. Coopers and Lybrand, LLP , One Post Office Square,
Boston, Massachusetts 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, Municipal Income, Municipal Bond, Intermediate
Municipal Income, and Short-Intermediate Municipal Income. The auditor
examines financial statements for the funds and provides other audit,
tax, and related services.
Price Waterhouse LLP , 160 Federal Street, Boston, Massachusetts
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
Each fund's (except International Capital Appreciation) financial
statements and financial highlights for the fiscal periods ended
October 31, November 30, and December 31, 1997, as appropriate, and
reports of the auditors are included in the funds' Annual Report,
which are separate reports supplied with this SAI. The funds'
financial statements, including the financial highlights, and reports
of the auditors are incorporated herein by reference. For a free
additional copy of a fund's Annual Report, contact Fidelity at
1-800-544-8888, 82 Devonshire Street, Boston, MA 02109, 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 MUNICIPAL
OBLIGATIONS
Moody's ratings for long-term municipal obligations fall within nine
categories. They range from Aaa (highest quality) to C (lowest
quality). Those bonds within the Aa through B categories that Moody's
believes possess the strongest credit attributes within those
categories are designated by the symbol "1."
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 MUNICIPAL DEBT
Municipal 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 through 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.
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 's 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,
1997 are included in the fund's prospectus, are incorporated by
reference into the fund's Statement of Additional Information, and
were filed pursuant to Rule 30d-1 under the Investment Company Act of
1940 and are incorporated herein by reference.
(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 March 1, 1993, between Fidelity
Aggressive Tax-Free Portfolio (currently known as Spartan 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 Spartan 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 Spartan
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 Spartan 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 Spartan 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 Spartan 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 Spartan 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 Spartan 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 Spartan 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) 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).
(j) Form of Bank Agency Agreement (most recently revised January,
1997) is filed herein as Exhibit 6(j).
(k) Form of Selling Dealer Agreement (most recently revised January,
1997) is filed herein as Exhibit 6(k).
(l) Form of Selling Dealer Agreement for Bank Related Transactions
(most recently revised January, 1997) is filed herein as Exhibit 6(l).
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 September 18, 1997, to the Custodian
Agreement, dated December 1, 1994, between UMB Bank, n.a. and the
Registrant is incorporated herein by reference to Exhibit 8(b) of
Fidelity Municipal Trust II's Post-Effective Amendment No. 17 (File
No. 33-43986).
9. Not applicable.
10. Not applicable.
11. Consent of Coopers & Lybrand, L. L. P. is filed herein as
Exhibit 11.
12. Not applicable.
13. Not applicable.
14. (a) Fidelity Individual Retirement Account Custodial Agreement
and Disclosure Statement, as currently in effect, is incorporated
herein by reference to Exhibit 14(a) of Fidelity Union Street Trust's
(File No. 2-50318) Post-Effective Amendment No. 87.
(b) Fidelity Institutional Individual Retirement Account Custodial
Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(d) of Fidelity Union
Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(c) National Financial Services Corporation Individual Retirement
Account Custodial Agreement and Disclosure Statement, as currently in
effect, is incorporated herein by reference to Exhibit 14(h) of
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(d) Fidelity Portfolio Advisory Services Individual Retirement
Account Custodial Agreement and Disclosure Statement, as currently in
effect, is incorporated herein by reference to Exhibit 14(i) of
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(e) Fidelity 403(b)(7) Custodial Account Agreement, as currently in
effect, is incorporated herein by reference to Exhibit 14(e) of
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(f) National Financial Services Corporation Defined Contribution
Retirement Plan and Trust Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(k) of Fidelity Union
Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(g) The CORPORATEplan for Retirement Profit Sharing/401K Plan, as
currently in effect, is incorporated herein by reference to Exhibit
14(l) of Fidelity Union Street Trust's (File No. 2-50318)
Post-Effective Amendment No. 87.
(h) The CORPORATEplan for Retirement Money Purchase Pension Plan, as
currently in effect, is incorporated herein by reference to Exhibit
14(m) of Fidelity Union Street Trust's (File No. 2-50318)
Post-Effective Amendment No. 87.
(i) Fidelity Investments Section 403(b)(7) Individual Custodial
Account Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(f) of Fidelity
Commonwealth Trust's (File No. 2-52322) Post-Effective Amendment No.
57.
(j) Plymouth Investments Defined Contribution Retirement Plan and
Trust Agreement, as currently in effect, is incorporated herein by
reference to Exhibit 14(o) of Fidelity Commonwealth Trust's (File No.
2-52322) Post-Effective Amendment No. 57.
(k) The Fidelity Prototype Defined Benefit Pension Plan and Trust
Basic Plan Document and Adoption Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(d) of Fidelity
Securities Fund's (File No. 2-93601) Post-Effective Amendment No. 33.
(l) The Institutional Prototype Plan Basic Plan Document,
Standardized Adoption Agreement, and Non-Standardized Adoption
Agreement, as currently in effect, is incorporated herein by reference
to Exhibit 14(o) of Fidelity Securities Fund's (File No. 2-93601)
Post-Effective Amendment No. 33.
(m) The CORPORATEplan for Retirement 100SM Profit Sharing/401(k)
Basic Plan Document, Standardized Adoption Agreement, and
Non-Standardized Adoption Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(f) of Fidelity
Securities Fund's (File No. 2-93601) Post-Effective Amendment No. 33.
(n) The Fidelity Investments 401(a) Prototype Plan for Tax-Exempt
Employers Basic Plan Document, Standardized Profit Sharing Plan
Adoption Agreement, Non-Standardized Discretionary Contribution Plan
No. 002 Adoption Agreement, and Non-Standardized Discretionary
Contribution Plan No. 003 Adoption Agreement, as currently in effect,
is incorporated herein by reference to Exhibit 14(g) of Fidelity
Securities Fund's (File No. 2-93601) Post-Effective Amendment No. 33.
(o) Fidelity Investments 403(b) Sample Plan Basic Plan Document and
Adoption Agreement, as currently in effect, is incorporated herein by
reference to Exhibit 14(p) of Fidelity Securities Fund's (File No.
2-93601) Post-Effective Amendment No. 33.
(p) Fidelity Defined Contribution Retirement Plan and Trust
Agreement, as currently in effect, is incorporated herein by reference
to Exhibit 14(c) of Fidelity Securities Fund's (File No. 2-93601)
Post-Effective Amendment No. 33.
(q) Fidelity SIMPLE-IRAPlan Adoption Agreement, Company Profile
Form, and Plan Document, as currently in effect, is incorporated
herein by reference to Exhibit 14(q) of Fidelity Aberdeen Street
Trust's (File No. 33-43529) Post-Effective Amendment No. 19.
15. (a) Distribution and Service Plan pursuant to Rule 12b-1 for
Spartan Insured Municipal Income Fund is incorporated herein by
reference to Exhibit 15(a) of Post-Effective Amendment No. 84.
(b) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan
Ohio Municipal Income Fund is incorporated herein by reference to
Exhibit 15(b) of Post-Effective Amendment No. 84.
(c) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan
Michigan Municipal Income Fund is incorporated herein by reference to
Exhibit 15(c) of Post-Effective Amendment No. 84.
(d) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan
Minnesota Municipal Income Fund is incorporated herein by reference to
Exhibit 15(d) of Post-Effective Amendment No. 84.
(e) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan
Pennsylvania Municipal Income Fund is incorporated herein by reference
to Exhibit 15(e) of Post-Effective Amendment No. 84.
(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 Municipal Fund (currently known as Spartan
Aggressive Municipal Fund) is incorporated herein by reference to
Exhibit 15(g) of Post Effective Amendment No. 84.
(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. Financial Data Schedules are electronically filed herein as
Exhibit 27.
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 December 31, 1997
Title of Class: Shares of Beneficial Interest
Name of Series: Number of Record Holders
Fidelity Advisor Municipal Bond Fund: Initial Class 17,295
Fidelity Advisor Municipal Bond Fund: Class T 434
Fidelity Advisor Municipal Bond Fund: Class A 15
Fidelity Advisor Municipal Bond Fund: Class B 80
Fidelity Advisor Municipal Bond Fund: Institutional Class 34
Spartan Aggressive Municipal Fund: 22,107
Spartan Insured Municipal Income Fund: 8,377
Spartan Ohio Municipal Income Fund: 8,623
Spartan Michigan Municipal Income Fund: 10,893
Spartan Minnesota Municipal Income Fund: 7,125
Spartan Pennsylvania Municipal Income Fund: 4,940
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 Service'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.
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., FIMM, 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; Senior Vice President
and Trustee of funds advised by FMR; President and
Director of FIMM, FMR (U.K.) Inc., and FMR (Far
East) Inc.; Previously, General Counsel, Managing
Director, and Senior Vice President of FMR Corp.
Peter S. Lynch Vice Chairman of the Board and Director of FMR.
Marta Amieva Vice President of FMR.
John H. Carlson Vice President of FMR and of funds advised by FMR.
Dwight D. Churchill Senior Vice President of FMR and Vice President of
Bond Funds advised by FMR.
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 Vice President of a
fund advised by FMR.
Scott E. DeSano Vice President of FMR.
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
George C. Domolky Vice President of FMR.
Walter C. Donovan Vice President of FMR.
Bettina Doulton Vice President of FMR and of funds advised by FMR.
Margaret L. Eagle Vice President of FMR and of funds advised by FMR.
William R. Ebsworth Vice President of FMR.
Richard B. Fentin Senior Vice President of FMR and Vice President of a
fund advised by FMR.
Gregory Fraser Vice President of FMR and of a fund advised by FMR.
Jay Freedman Assistant Clerk of FMR; Clerk of FMR Corp., FMR
(U.K.) Inc., and FMR (Far East) Inc.; Secretary of
FIMM.
Robert Gervis Vice President of FMR.
David L. Glancy Vice President of FMR and of a fund advised by FMR.
Kevin E. Grant Vice President of FMR and of funds advised by FMR.
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
Boyce I. Greer Senior Vice President of FMR and Vice President of
Money Market Funds advised by FMR.
Bart A. Grenier Vice President of High-Income Funds advised by
FMR;Vice President of FMR.
Robert Haber Vice President of FMR.
Richard C. Habermann Senior Vice President of FMR; Vice President of funds
advised by FMR.
Richard Hazelwood Vice President of FMR.
Fred L. Henning Jr. Senior Vice President of FMR and Vice President of
Fixed-Income funds advised by FMR.
Bruce T. Herring Vice President of FMR.
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 Vice President of
funds 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.
Robert A. Lawrence Senior Vice President of FMR and Vice President of
Fidelity Real Estate High Income and Fidelity Real
Estate High income II funds advised by FMR; Associate
Director and Senior Vice President of Equity funds
advised by FMR; Previously, Vice President of High
Income funds advised by FMR.
Harris Leviton Vice President of FMR and of a fund advised by FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Mark G. Lohr Vice President of FMR; Treasurer of FMR, FMR (U.K.)
Inc., FMR (Far East) Inc., and FIMM.
Richard R. Mace Jr. Vice President of FMR and of funds advised by FMR.
Charles A. Mangum Vice President of FMR and of a fund advised by FMR.
Kevin McCarey Vice President of FMR and of a fund advised by FMR.
Diane M. McLaughlin Vice President of FMR.
Neal P. Miller Vice President of FMR.
David L. Murphy Vice President of FMR and of funds advised by FMR.
Scott A. Orr Vice President of FMR and of funds advised by FMR.
Jacques Perold Vice President of FMR.
Anne Punzak Vice President of FMR.
Kennedy P. Richardson Vice President of FMR.
Eric D. Roiter Senior Vice President and General Counsel of FMR and
Secretary of funds advised by FMR.
Mark S. Rzepczynski Vice President of FMR.
Lee H. Sandwen Vice President of FMR.
Patricia A. Satterthwaite Vice President of FMR and of a fund advised by FMR.
Fergus Shiel Vice President of FMR.
Richard A. Silver Vice President of FMR.
Carol A. Smith-Fachetti Vice President of FMR.
Steven J. Snider Vice President of FMR.
Thomas T. Soviero Vice President of FMR and of a fund advised by FMR.
Richard Spillane Senior Vice President of FMR; Associate Director and
Senior Vice President of Equity funds advised by FMR;
Previously, Senior Vice President and Director of
Operations and Compliance of FMR (U.K.) Inc.
Thomas M. Sprague Vice President of FMR and of funds advised by FMR.
Robert E. Stansky Senior Vice President of FMR and Vice President of a
fund advised by FMR.
Scott D. Stewart Vice President of FMR.
Cynthia L. Strauss Vice President of FMR.
Thomas Sweeney Vice President of FMR and of a fund advised by FMR.
Beth F. Terrana Senior Vice President of FMR and Vice President of a
fund advised by FMR.
Yoko Tilley Vice President of FMR.
Joel C. Tillinghast Vice President of FMR and of a fund advised by FMR.
Robert Tuckett Vice President of FMR.
Jennifer Uhrig Vice President of FMR and of funds advised by FMR.
George A. Vanderheiden Senior Vice President of FMR and Vice President of
funds advised by FMR.
Steven S. Wymer Vice President of FMR and of a fund 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
James Curvey Director None
Martha B. Willis President None
Eric D. Roiter Senior Vice President Secretary
Caron Ketchum Treasurer and Controller None
Gary Greenstein Assistant Treasurer None
Jay Freedman Assistant Clerk None
Linda Holland Compliance Officer None
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity
Service Company, Inc., 82 Devonshire Street, Boston, MA 02109, or the
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 certifies that it meets
all of the requirements for the effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and
has duly caused this Post-Effective Amendment No. 87 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 27th day of February 1998.
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 February 27, 1998
Edward C. Johnson 3d (Principal Executive Officer)
/s/Richard A. Silver Treasurer February 27, 1998
Richard A. Silver
/s/Robert C. Pozen Trustee February 27, 1998
Robert C. Pozen
/s/Ralph F. Cox * Trustee February 27, 1998
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee February 27, 1998
Phyllis Burke Davis
/s/Robert M. Gates ** Trustee February 27, 1998
Robert M. Gates
/s/E. Bradley Jones * Trustee February 27, 1998
E. Bradley Jones
/s/Donald J. Kirk * Trustee February 27, 1998
Donald J. Kirk
/s/Peter S. Lynch * Trustee February 27, 1998
Peter S. Lynch
/s/Marvin L. Mann * Trustee February 27, 1998
Marvin L. Mann
/s/William O. McCoy * Trustee February 27, 1998
William O. McCoy
/s/Gerald C. McDonough * Trustee February 27, 1998
Gerald C. McDonough
/s/Thomas R. Williams * Trustee February 27, 1998
Thomas R. Williams
</TABLE>
(dagger) Signatures affixed by Robert C. Pozen pursuant to a power of
attorney dated July 17, 1997 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of
attorney dated December 19, 1996 and filed herewith.
** Signature affixed by Robert C. Hacker pursuant to a power of
attorney dated March 6, 1997 and filed herewith.
POWER OF ATTORNEY
I, the undersigned President and Director, Trustee, or General
Partner, as the case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Hereford Street Trust
Fidelity Advisor Series I Fidelity Income Fund
Fidelity Advisor Series II Fidelity Institutional Cash Portfolios
Fidelity Advisor Series III Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series IV Fidelity Investment Trust
Fidelity Advisor Series V Fidelity Magellan Fund
Fidelity Advisor Series VI Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series VII Fidelity Money Market Trust
Fidelity Advisor Series VIII Fidelity Mt. Vernon Street Trust
Fidelity Beacon Street Trust Fidelity Municipal Trust
Fidelity Boston Street Trust Fidelity Municipal Trust II
Fidelity California Municipal Trust Fidelity New York Municipal Trust
Fidelity California Municipal Trust II Fidelity New York Municipal Trust II
Fidelity Capital Trust Fidelity Phillips Street Trust
Fidelity Charles Street Trust Fidelity Puritan Trust
Fidelity Commonwealth Trust Fidelity Revere Street Trust
Fidelity Concord Street Trust Fidelity School Street Trust
Fidelity Congress Street Fund Fidelity Securities Fund
Fidelity Contrafund Fidelity Select Portfolios
Fidelity Corporate Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Court Street Trust Fidelity Summer Street Trust
Fidelity Court Street Trust II Fidelity Trend Fund
Fidelity Covington Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Daily Money Fund Fidelity U.S. Investments-Government Securities
Fidelity Destiny Portfolios Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity Union Street Trust II
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Newbury Street Trust
Fidelity Financial Trust Variable Insurance Products Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund II
Fidelity Government Securities Fund Variable Insurance Products Fund III
Fidelity Hastings Street Trust
</TABLE>
in addition to any other investment company for which Fidelity
Management & Research Company or an affiliate acts as investment
adviser and for which the undersigned individual serves as President
and Director, Trustee, or General Partner (collectively, the "Funds"),
hereby constitute and appoint Robert C. Pozen my true and lawful
attorney-in-fact, with full power of substitution, and with full power
to him to sign for me and in my name in the appropriate capacity, all
Registration Statements of the Funds on Form N-1A, Form N-8A, or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A, Form N-8A, or any successor thereto, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such
things in my name and on my behalf in connection therewith as said
attorney-in-fact deems necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and the Investment Company
Act of 1940, and all related requirements of the Securities and
Exchange Commission. I hereby ratify and confirm all that said
attorney-in-fact or his substitutes may do or cause to be done by
virtue hereof. This power of attorney is effective for all documents
filed on or after August 1, 1997.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d_ July 17, 1997
Edward C. Johnson 3d
POWER OF ATTORNEY
We, the undersigned Directors, Trustees, or General Partners, as the
case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Government Securities Fund
Fidelity Advisor Annuity Fund Fidelity Hastings Street Trust
Fidelity Advisor Series I Fidelity Hereford Street Trust
Fidelity Advisor Series II Fidelity Income Fund
Fidelity Advisor Series III Fidelity Institutional Cash Portfolios
Fidelity Advisor Series IV Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series V Fidelity Institutional Trust
Fidelity Advisor Series VI Fidelity Investment Trust
Fidelity Advisor Series VII Fidelity Magellan Fund
Fidelity Advisor Series VIII Fidelity Massachusetts Municipal Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust
Fidelity Boston Street Trust Fidelity Mt. Vernon Street Trust
Fidelity California Municipal Trust Fidelity Municipal Trust
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Capital Trust Fidelity New York Municipal Trust
Fidelity Charles Street Trust Fidelity New York Municipal Trust II
Fidelity Commonwealth Trust Fidelity Phillips Street Trust
Fidelity Congress Street Fund Fidelity Puritan Trust
Fidelity Contrafund Fidelity Revere Street Trust
Fidelity Corporate Trust Fidelity School Street Trust
Fidelity Court Street Trust Fidelity Securities Fund
Fidelity Court Street Trust II Fidelity Select Portfolios
Fidelity Covington Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Daily Money Fund Fidelity Summer Street Trust
Fidelity Daily Tax-Exempt Fund Fidelity Trend Fund
Fidelity Destiny Portfolios Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity U.S. Investments-Government Securities
Portfolio, L.P. Fund, L.P.
Fidelity Devonshire Trust Fidelity Union Street Trust
Fidelity Exchange Fund Fidelity Union Street Trust II
Fidelity Financial Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Variable Insurance Products Fund II
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company or an affiliate acts as investment adviser and for
which the undersigned individual serves as Directors, Trustees, or
General Partners (collectively, the "Funds"), hereby constitute and
appoint Arthur J. Brown, Arthur C. Delibert, Stephanie A. Djinis,
Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, and Dana L.
Platt, each of them singly, our true and lawful attorneys-in-fact,
with full power of substitution, and with full power to each of them,
to sign for us and in our names in the appropriate capacities, all
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A or any successor thereto, any Registration
Statements on Form N-14, and any supplements or other instruments in
connection therewith, and generally to do all such things in our names
and behalf in connection therewith as said attorneys-in-fact deems
necessary or appropriate, to comply with the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940, and all
related requirements of the Securities and Exchange Commission. I
hereby ratify and confirm all that said attorneys-in-fact or their
substitutes may do or cause to be done by virtue hereof. This power
of attorney is effective for all documents filed on or after January
1, 1997.
WITNESS our hands on this nineteenth day of December, 1996.
/s/Edward C. Johnson 3d___________ /s/Peter S. Lynch________________
Edward C. Johnson 3d Peter S. Lynch
/s/J. Gary Burkhead_______________ /s/William O. McCoy______________
J. Gary Burkhead William O. McCoy
/s/Ralph F. Cox __________________ /s/Gerald C. McDonough___________
Ralph F. Cox Gerald C. McDonough
/s/Phyllis Burke Davis_____________ /s/Marvin L. Mann________________
Phyllis Burke Davis Marvin L. Mann
/s/E. Bradley Jones________________ /s/Thomas R. Williams ____________
E. Bradley Jones Thomas R. Williams
/s/Donald J. Kirk __________________
Donald J. Kirk
POWER OF ATTORNEY
I, the undersigned Director, Trustee, or General Partner, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Government Securities Fund
Fidelity Advisor Annuity Fund Fidelity Hastings Street Trust
Fidelity Advisor Series I Fidelity Hereford Street Trust
Fidelity Advisor Series II Fidelity Income Fund
Fidelity Advisor Series III Fidelity Institutional Cash Portfolios
Fidelity Advisor Series IV Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series V Fidelity Institutional Trust
Fidelity Advisor Series VI Fidelity Investment Trust
Fidelity Advisor Series VII Fidelity Magellan Fund
Fidelity Advisor Series VIII Fidelity Massachusetts Municipal Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust
Fidelity Boston Street Trust Fidelity Mt. Vernon Street Trust
Fidelity California Municipal Trust Fidelity Municipal Trust
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Capital Trust Fidelity New York Municipal Trust
Fidelity Charles Street Trust Fidelity New York Municipal Trust II
Fidelity Commonwealth Trust Fidelity Phillips Street Trust
Fidelity Congress Street Fund Fidelity Puritan Trust
Fidelity Contrafund Fidelity Revere Street Trust
Fidelity Corporate Trust Fidelity School Street Trust
Fidelity Court Street Trust Fidelity Securities Fund
Fidelity Court Street Trust II Fidelity Select Portfolios
Fidelity Covington Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Daily Money Fund Fidelity Summer Street Trust
Fidelity Daily Tax-Exempt Fund Fidelity Trend Fund
Fidelity Destiny Portfolios Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity U.S. Investments-Government Securities
Portfolio, L.P. Fund, L.P.
Fidelity Devonshire Trust Fidelity Union Street Trust
Fidelity Exchange Fund Fidelity Union Street Trust II
Fidelity Financial Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Variable Insurance Products Fund II
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company or an affiliate acts as investment adviser and for
which the undersigned individual serves as Director, Trustee, or
General Partner (collectively, the "Funds"), hereby constitute and
appoint Arthur J. Brown, Arthur C. Delibert, Stephanie A. Djinis,
Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, and Dana L.
Platt, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to
sign for me and in my name in the appropriate capacities, all
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A or any successor thereto, any Registration
Statements on Form N-14, and any supplements or other instruments in
connection therewith, and generally to do all such things in my name
and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940, and all
related requirements of the Securities and Exchange Commission. I
hereby ratify and confirm all that said attorneys-in-fact or their
substitutes may do or cause to be done by virtue hereof. This power
of attorney is effective for all documents filed on or after March 1,
1997.
WITNESS my hand on the date set forth below.
/s/Robert M. Gates March 6, 1997
Robert M. Gates
Exhibit 6(j)
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(k)
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(l)
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]
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference, into the
Prospectuses and Statement of Additional Information in Post-Effective
Amendment No. 87 to the Registration Statement on Form N-1A of
Fidelity Municipal Trust: Fidelity Advisor Municipal Bond Fund, of our
report dated February 12, 1998 on the financial statements and
financial highlights included in the December 31, 1997 Annual Report
to Shareholders of Fidelity Advisor Municipal Bond Fund.
We further consent to the references to our Firm under the headings
"Financial Highlights" in the Prospectuses and "Auditor" in the
Statement of Additional Information.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 23, 1998
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