SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 2-73133)
UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.
Post-Effective Amendment No. 63 [X]
and
REGISTRATION STATEMENT (No. 811-3221)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 63 [X]
Fidelity Charles Street Trust
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: 617-563-7000
Eric D. Roiter, Secretary
82 Devonshire Street
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) immediately upon filing pursuant to paragraph (b).
( X ) on ( November 24, 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 CHARLES STREET TRUST: FIDELITY ASSET MANAGER
CROSS REFERENCE SHEET
Form N-1A Item Number
Part A Prospectus Caption
1 Cover Page
2 a Expenses
b,c Contents; Who May Want to Invest
3 a,b Financial Highlights
c,d Performance
4 a(i) Charter
a(ii) Investment Principles and Risks; Securities and
Investment Practices; Fundamental Investment Policies
and Restrictions
b Securities and Investment Practices
c Who May Want to Invest; Investment Principles and
Risks; Securities and Investment Practices
5 a Charter
b(i) Cover Page; FMR and Its Affiliates
b(ii) FMR and Its Affiliates; Breakdown of Expenses
b(iii) Expenses; Breakdown of Expenses
c FMR and Its Affiliates
d Cover Page; Charter; Breakdown of Expenses; FMR and Its
Affiliates
e FMR and Its Affiliates; Breakdown of Expenses
f Expenses
g(i) Charter
g(ii) *
5A Performance
6 a(i) Charter
a(ii) How to Buy Shares; How to Sell Shares; Investor
Services; Transaction Details; Exchange Restrictions
a(iii),b *
c How to Buy Shares; Exchange Restrictions
d *
e Cover Page; Types of Accounts; How to Buy Shares; How
to Sell Shares; Investor Services; Transaction Details
f,g Dividends, Capital Gains, and Taxes
h *
7 a Cover Page; FMR and Its Affiliates
b,c How to Buy Shares; Transaction Details
d How to Buy Shares
e Breakdown of Expenses
f Expenses; Breakdown of Expenses
8 How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 *
* Not applicable
FIDELITY
ASSET MANAGERSM
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
November 24, 199 8 . The SAI has been filed with the Securities
and Exchange Commission (SEC) and is available along with other
related materials on the SEC's Internet Web site (http://www.sec.gov).
The SAI is incorporated herein by reference (legally forms a part of
the prospectus). For a free copy of either document, call
Fidelity (registered trademark) at 1-800-544-8888.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
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.
FAA-pro-1198
1.702387.101
(fund number 314, trading symbol FASMX)
This asset allocation fund seeks high total return with reduced risk
over the long term through investments in stocks, bonds and short-term
and money market instruments of all types.
PROSPECTUS
NOVEMBER 24, 1998(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET,
BOSTON, MA 02109
CONTENTS
KEY FACTS 4 THE FUND AT A GLANCE
5 WHO MAY WANT TO INVEST
6 EXPENSES The fund's yearly operating
expenses.
7 FINANCIAL HIGHLIGHTS A summary of
the fund's financial data.
9 PERFORMANCE How the fund has done
over time.
THE FUND IN DETAIL 12 CHARTER How the fund is organized.
12 INVESTMENT PRINCIPLES AND RISKS The
fund's overall approach to investing.
14 BREAKDOWN OF EXPENSES How
operating costs are calculated and what
they include.
YOUR ACCOUNT 15 DOING BUSINESS WITH FIDELITY
15 TYPES OF ACCOUNTS Different ways to
set up your account, including
tax- advantaged retirement plans.
17 HOW TO BUY SHARES Opening an
account and making additional
investments.
19 HOW TO SELL SHARES Taking money out
and closing your account.
21 INVESTOR SERVICES Services to help you
manage your account.
SHAREHOLDER AND 22 DIVIDENDS, CAPITAL GAINS,
ACCOUNT POLICIES AND TAXES
23 TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
23 EXCHANGE RESTRICTIONS
KEY FACTS
THE FUND AT A GLANCE
GOAL: High total return with reduced risk over the long term. As with
any mutual fund, there is no assurance that the fund will achieve its
goal.
STRATEGY: The fund diversifies across stocks, bonds and short-term and
money market instruments, both here and abroad, to pursue its goal.
The fund has a neutral mix which represents the way the fund's
investments will generally be allocated over the long term. This mix
will vary over short-term periods as fund management gradually adjusts
the fund's holdings - within defined ranges - based on the current
outlook for the different markets.
Neutral Mix
Stocks 50%
(can range
from 30-70%)
Row: 1, Col: 1, Value: 10.0
Row: 1, Col: 2, Value: 50.0
Row: 1, Col: 3, Value: 40.0
Bonds 40%
(can range from
20-60%)
Short-Term/Money
Market 10%
(can range from
0-50%)
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments (registered trademark) ,
which was established in 1946 and is now America's largest mutual fund
manager. Foreign affiliates of FMR may help choose investments for the
fund.
Beginning January 1, 1999, Fidelity Investments Money Management,
Inc. (FIMM), a subsidiary of FMR, will choose certain types of
investments for the fund.
SIZE: As of September 30, 199 8 , the fund had over $ 11.5
billion in assets.
WHO MAY WANT TO INVEST
The fund may be appropriate for investors who want to diversify among
stocks, bonds and short-term and money market instruments, and other
types of securities in one fund. If you are looking for a fund that
can invest in a wide range of security types within defined ranges in
pursuit of high total return with reduced risk, this fund may be
appropriate for you.
Because the fund owns different types of investments, its performance
is affected by a variety of factors. The value of the fund's
investments and the income they generate will vary from day to day,
and generally reflect interest rates, market conditions, and other
company, political, and economic news. Performance also depends on
FMR's skill in allocating assets. When you sell your fund shares, they
may be worth more or less than what you paid for them.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy
or sell 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 None
and reinvested distributions
Deferred sales charge on redemptions None
Annual account maintenance fee $12.00
(for accounts under $2,500)
ANNUAL FUND 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. The fund's expenses are
factored into its share price or dividends and are not charged
directly to shareholder accounts (see "Breakdown of Expenses" page ).
The following figures are based on historical expenses of the fund and
are calculated as a percentage of average net assets of the fund. A
portion of the brokerage commissions that the fund pays is used to
reduce the fund's expenses. In addition, the fund has entered into
arrangements with its custodian and transfer agent whereby credits
realized as a result of uninvested cash balances are used to reduce
custodian and transfer agent expenses. Including these reductions, the
total fund operating expenses presented in the table would have been
0.74 %.
Management fee 0.54 %
12b-1 fee None
Other expenses 0.22 %
Total fund operating expenses 0.76 %
EXAMPLES: Let's say, hypothetically, that the fund's annual return is
5% and that your shareholder transaction expenses and the fund's
annual operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses
if you close your account after the number of years indicated:
1 year $ 8
3 years $ 24
5 years $ 42
10 years $ 94
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected expenses or returns, all of which may vary.
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
THE FUND'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 follows has been audited by
PricewaterhouseCoopers LLP , 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Years ended 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989E
September 30
Net asset value, $19.01 $16.49 $15.47 $14.58 $14.97 $13.50 $13.02 $10.64 $11.39 $10.00
beginning of period
Income from Investment
Operations
Net investment income .61D .59D .62 .49 .34 .52 .46 .55 .58 .27
Net realized and .37 3.35 .96 .93 .21 2.01 .97 2.48 (.71) 1.12
unrealized gain (loss)
Total from investment .98 3.94 1.58 1.42 .55 2.53 1.43 3.03 (.13) 1.39
operations
Less Distributions
From net investment (.64) (.67) (.56) (.44) (.44) (.87) (.45) (.65) (.38) --
income
From net realized gain (1.11) (.75) -- -- (.45) (.19) (.50) -- (.24) --
In excess of net -- -- -- (.09) (.05) -- -- -- -- --
realized gain
Total distributions (1.75) (1.42) (.56) (.53) (.94) (1.06) (.95) (.65) (.62) --
Net asset value, $18.24 $19.01 $16.49 $15.47 $14.58 $14.97 $13.50 $13.02 $10.64 $11.39
end of period
Total returnB,C 5.34% 25.15% 10.37% 10.09% 3.60% 19.71% 11.84% 29.78% (1.27)% 13.90%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $11,576 $11,866 $10,674 $11,084 $11,792 $7,266 $2,762 $743 $346 $245
period (In millions)
Ratio of expenses to .76% .79% .95% .97% 1.04% 1.09% 1.17% 1.17% 1.17% 1.58%A
average net assets
Ratio of expenses to .74%F .78%F .93%F .97% 1.04% 1.09% 1.17% 1.17% 1.17% 1.58%A
average net assets after
expense reductions
Ratio of net investment 3.19% 3.39% 3.64% 4.27% 3.63% 4.28% 5.58% 5.74% 5.89% 5.88%A
income to average net
assets
Portfolio turnover rate 136% 79% 131% 137% 109% 98% 134% 134% 105% 167%A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD DECEMBER 28, 1988 (COMMENCEMENT OF OPERATIONS) TO
SEPTEMBER 30,1989.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S
EXPENSES.
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN. The
total returns that follow are based on historical fund results and do
not reflect the effect of taxes.
The fund's fiscal year runs from October 1 through September 30. The
tables below show the fund's performance over past fiscal years
compared to a composite index . The chart on page
presents calendar year performance.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Life of
September 30, 1998 year years fundA
Asset Manager 5.34% 10.66% 12.81%
Fidelity Asset Allocation 10.26% 12.35% n/a
Composite Index
CUMULATIVE TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Life of
September 30, 1998 year years fundA
Asset Manager 5.34% 65.94% 224.25%
Fidelity Asset Allocation 10.26% 79.01% n/a
Composite Index
A FROM DECEMBER 28, 1988 (COMMENCEMENT OF OPERATIONS)
EXAMPLE: Let's say, hypothetically, that you put $10,000 in the fund
on December 28, 1988. From that date through September 30,
199 8 , the fund's total return was 224.25%. Your $10,000
would have grown to $32,425 (the initial investment plus
224.25% of $10,000).
$10,000 OVER LIFE OF FUND
FISCAL YEARS 1988 1993 1998
ROW: 1, COL: 1, VALUE: 10000.0
ROW: 2, COL: 1, VALUE: 10378.86
ROW: 3, COL: 1, VALUE: 10219.34
ROW: 4, COL: 1, VALUE: 10309.07
ROW: 5, COL: 1, VALUE: 10578.27
ROW: 6, COL: 1, VALUE: 10887.34
ROW: 7, COL: 1, VALUE: 11006.98
ROW: 8, COL: 1, VALUE: 11326.02
ROW: 9, COL: 1, VALUE: 11355.93
ROW: 10, COL: 1, VALUE: 11355.93
ROW: 11, COL: 1, VALUE: 11405.78
ROW: 12, COL: 1, VALUE: 11485.54
ROW: 13, COL: 1, VALUE: 11527.69
ROW: 14, COL: 1, VALUE: 11158.89
ROW: 15, COL: 1, VALUE: 11243.19
ROW: 16, COL: 1, VALUE: 11359.1
ROW: 17, COL: 1, VALUE: 11169.43
ROW: 18, COL: 1, VALUE: 11759.51
ROW: 19, COL: 1, VALUE: 11854.35
ROW: 20, COL: 1, VALUE: 11843.81
ROW: 21, COL: 1, VALUE: 11443.39
ROW: 22, COL: 1, VALUE: 11211.58
ROW: 23, COL: 1, VALUE: 11243.19
ROW: 24, COL: 1, VALUE: 11780.58
ROW: 25, COL: 1, VALUE: 12147.79
ROW: 26, COL: 1, VALUE: 12795.97
ROW: 27, COL: 1, VALUE: 13354.74
ROW: 28, COL: 1, VALUE: 13578.25
ROW: 29, COL: 1, VALUE: 13790.59
ROW: 30, COL: 1, VALUE: 14137.03
ROW: 31, COL: 1, VALUE: 13835.29
ROW: 32, COL: 1, VALUE: 14204.08
ROW: 33, COL: 1, VALUE: 14528.17
ROW: 34, COL: 1, VALUE: 14550.52
ROW: 35, COL: 1, VALUE: 14662.28
ROW: 36, COL: 1, VALUE: 14405.24
ROW: 37, COL: 1, VALUE: 15019.76
ROW: 38, COL: 1, VALUE: 15236.74
ROW: 39, COL: 1, VALUE: 15526.05
ROW: 40, COL: 1, VALUE: 15526.05
ROW: 41, COL: 1, VALUE: 15743.03
ROW: 42, COL: 1, VALUE: 15899.73
ROW: 43, COL: 1, VALUE: 15899.73
ROW: 44, COL: 1, VALUE: 16225.2
ROW: 45, COL: 1, VALUE: 16152.88
ROW: 46, COL: 1, VALUE: 16273.42
ROW: 47, COL: 1, VALUE: 16249.31
ROW: 48, COL: 1, VALUE: 16610.94
ROW: 49, COL: 1, VALUE: 16934.14
ROW: 50, COL: 1, VALUE: 17225.45
ROW: 51, COL: 1, VALUE: 17402.77
ROW: 52, COL: 1, VALUE: 17975.71
ROW: 53, COL: 1, VALUE: 18052.42
ROW: 54, COL: 1, VALUE: 18435.97
ROW: 55, COL: 1, VALUE: 18668.08
ROW: 56, COL: 1, VALUE: 18951.91
ROW: 57, COL: 1, VALUE: 19493.76
ROW: 58, COL: 1, VALUE: 19481.53
ROW: 59, COL: 1, VALUE: 20054.14
ROW: 60, COL: 1, VALUE: 20015.09
ROW: 61, COL: 1, VALUE: 20877.83
ROW: 62, COL: 1, VALUE: 21555.68
ROW: 63, COL: 1, VALUE: 20877.83
ROW: 64, COL: 1, VALUE: 19867.84
ROW: 65, COL: 1, VALUE: 19854.17
ROW: 66, COL: 1, VALUE: 20018.25
ROW: 67, COL: 1, VALUE: 19577.74
ROW: 68, COL: 1, VALUE: 19962.97
ROW: 69, COL: 1, VALUE: 20430.74
ROW: 70, COL: 1, VALUE: 20182.51
ROW: 71, COL: 1, VALUE: 20279.4
ROW: 72, COL: 1, VALUE: 19974.87
ROW: 73, COL: 1, VALUE: 19499.59
ROW: 74, COL: 1, VALUE: 19344.5
ROW: 75, COL: 1, VALUE: 19640.59
ROW: 76, COL: 1, VALUE: 19953.26
ROW: 77, COL: 1, VALUE: 20364.82
ROW: 78, COL: 1, VALUE: 20847.33
ROW: 79, COL: 1, VALUE: 21133.35
ROW: 80, COL: 1, VALUE: 21718.8
ROW: 81, COL: 1, VALUE: 21861.6
ROW: 82, COL: 1, VALUE: 22219.16
ROW: 83, COL: 1, VALUE: 22147.35
ROW: 84, COL: 1, VALUE: 22563.87
ROW: 85, COL: 1, VALUE: 23039.92
ROW: 86, COL: 1, VALUE: 23534.15
ROW: 87, COL: 1, VALUE: 23417.86
ROW: 88, COL: 1, VALUE: 23419.07
ROW: 89, COL: 1, VALUE: 23623.99
ROW: 90, COL: 1, VALUE: 23872.82
ROW: 91, COL: 1, VALUE: 24006.08
ROW: 92, COL: 1, VALUE: 23548.68
ROW: 93, COL: 1, VALUE: 23696.23
ROW: 94, COL: 1, VALUE: 24523.08
ROW: 95, COL: 1, VALUE: 25147.68
ROW: 96, COL: 1, VALUE: 26337.4
ROW: 97, COL: 1, VALUE: 25972.41
ROW: 98, COL: 1, VALUE: 26760.88
ROW: 99, COL: 1, VALUE: 26981.65
ROW: 100, COL: 1, VALUE: 25961.97
ROW: 101, COL: 1, VALUE: 26852.28
ROW: 102, COL: 1, VALUE: 28171.84
ROW: 103, COL: 1, VALUE: 28891.29
ROW: 104, COL: 1, VALUE: 30541.76
ROW: 105, COL: 1, VALUE: 29724.53
ROW: 106, COL: 1, VALUE: 30689.57
ROW: 107, COL: 1, VALUE: 30302.12
ROW: 108, COL: 1, VALUE: 31077.03
ROW: 109, COL: 1, VALUE: 31757.66
ROW: 110, COL: 1, VALUE: 32017.26
ROW: 111, COL: 1, VALUE: 33436.41
ROW: 112, COL: 1, VALUE: 34150.13
ROW: 113, COL: 1, VALUE: 33888.64
ROW: 114, COL: 1, VALUE: 33540.0
ROW: 115, COL: 1, VALUE: 34328.81
ROW: 116, COL: 1, VALUE: 34434.22
ROW: 117, COL: 1, VALUE: 30990.8
ROW: 118, COL: 1, VALUE: 32328.02
$
$32,425
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.
UNDERSTANDING
PERFORMANCE
As economic conditions change,
different types of investments do
better than others. Since this
asset allocation fund invests in
domestic and foreign stocks,
bonds, and short-term
instruments, its total return will
reflect the performance of both
domestic and foreign markets
and short and long term interest
rates depending on the mix of
securities its owns.
(checkmark)
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR-BY-YEAR TOTAL RETURNS
CALENDAR YEARS 1989 1990 1991 1992 1993 1994 1995 1996 1997
ASSET MANAGER 15.28% 5.38% 23.64% 12.75% 23.29% -6.60% 18.16% 12.73% 22.27 %
FIDELITY ASSET ALLOCATION
COMPOSITE INDEX 17.74% 5.11% 17.04% 6.68% 8.96% 0.08% 23.08% 11.10% 20.81%
CONSUMER PRICE INDEX 4 .65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32% 1.70%
</TABLE>
PERCENTAGE (%)
ROW: 1, COL: 1, VALUE: 0.0
ROW: 2, COL: 1, VALUE: 15.28
ROW: 3, COL: 1, VALUE: 5.38
ROW: 4, COL: 1, VALUE: 23.64
ROW: 5, COL: 1, VALUE: 12.75
ROW: 6, COL: 1, VALUE: 23.29
ROW: 7, COL: 1, VALUE: -6.6
ROW: 8, COL: 1, VALUE: 18.16
ROW: 9, COL: 1, VALUE: 12.73
ROW: 10, COL: 1, VALUE: 22.27
(LARGE SOLID BOX) ASSET MANAGER
FIDELITY ASSET ALLOCATION COMPOSITE INDEX is a hypothetical
representation of the performance of the fund's three asset classes
according to their respective weightings in the fund's neutral mix
(50% stocks, 40% bonds and 10% short term money market). The following
indexes are used to calculate the Composite Index: stocks - the
Standard & Poor's 500 Index (S&P 500(registered trademark)), bonds -
the Lehman Brothers Aggregate Bond Index, and short term/money market
- - the Lehman Brothers 3-Month Treasury Bill Index. Prior to January 1,
1997, the Lehman Brothers Treasury Bond Index was used for the bond
class. The index weightings of the Composite Index are rebalanced
monthly.
STANDARD & POOR'S 500 INDEX (S&P 500) is a widely recognized,
unmanaged index of common stocks.
LEHMAN BROTHERS AGGREGATE BOND INDEX is a market value weighted
performance benchmark for investment-grade fixed-rate debt issues,
including government, corporate, asset-backed, and mortgage-backed
securities, with maturities of at least one year.
LEHMAN BROTHERS 3-MONTH TREASURY BILL INDEX represents the average
of Treasury Bill rates for each of the prior three months, adjusted to
a bond equivalent yield basis (short-term and money market
instruments).
Unlike the fund's returns, the total returns of the composite
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.
Other illustrations of fund performance may show moving averages over
specified periods.
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, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUND IN DETAIL
CHARTER
ASSET MANAGER 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 Charles Street Trust, an open-end
management investment company organized as a Massachusetts business
trust on July 7, 1981.
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.
FMR AND ITS AFFILIATES
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs.
Affiliates assist FMR with foreign investments:
(small solid bullet) Fidelity Management & Research (U.K.) Inc.
(FMR U.K.), in London, England, serves as a sub-adviser for the
fund.
(small solid bullet) Fidelity Management & Research Far East Inc.
(FMR Far East), in Tokyo, Japan, serves as a sub-adviser for the
fund.
Beginning January 1, 1999, FIMM, located in Merrimack, New
Hampshire, will select certain types of investments for the fund.
Dick Habermann is Vice President and lead manager of Asset Manager,
which he has managed since March 1996. O ther Fidelity investment
professionals assist Mr. Habermann in selecting investments within
each asset class for the fun ds. He also manages other Fidelity
funds. Mr. Habermann is a senior vice president of FMR Co. Previously,
he was division head for international equities and director of
international research from 1993 to 1996, and joint chief strategist
for Portfolio Advisory Services from 1996 to 1997. Mr. Habermann
joined Fidelity in 1968.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services.
Fidelity Service Company, Inc. (FSC) performs transfer agent servicing
functions for the fund.
FMR Corp. is the ultimate parent company of FMR, FMR U.K., FMR Far
East, 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.
FMR may use its broker-dealer affiliates and other firms that sell
fund shares to carry out the fund's transactions, provided that the
fund receives brokerage services and commission rates comparable to
those of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
THE FUND seeks high total return with reduced risk over the long term
by allocating its assets among stocks, bonds, short-term and money
market instruments, and other instruments of U.S. and foreign issuers.
The fund allocates its assets among the following classes, or types,
of investments. The STOCK CLASS includes equity securities of all
types. The BOND CLASS includes all varieties of fixed-income
securities maturing in more than one year. The SHORT-TERM/MONEY MARKET
CLASS includes all types of short-term and money market instruments.
FMR may use its judgment to place a security in the most appropriate
class based on its investment characteristics. Fixed-income securities
may be classified in the bond or short-term/money market class
according to interest rate sensitivity as well as maturity. The fund
may also make other investments that do not fall within these classes.
FMR has the ability to allocate the fund's assets within specified
ranges. The fund's NEUTRAL MIX represents the benchmark for its
combination of investments in each asset class over time. FMR may
change the neutral mix from time to time. The range and approximate
neutral mix for each asset class are shown below.
Range Neutral Mix
STOCK CLASS 30 - 70% 50%
BOND CLASS 20 - 60% 40%
SHORT-TERM/ 0 - 50% 10%
MONEY MARKET CLASS
Asset Manager's approach spreads the fund's assets among all three
classes, moderating both the risk and return potential of stocks,
bonds and short-term and money market instruments.
In pursuit of the fund's objective, FMR will not try to pinpoint the
precise moment when a major reallocation should be made. Instead, FMR
regularly reviews the fund's allocations and makes changes gradually
to favor investments that it believes will provide the most favorable
outlook for achieving the fund's objective. Under normal
circumstances, a single reallocation will not involve more than 10% of
the fund's total assets. Although FMR uses its expertise and resources
in allocating assets, FMR's decisions may not be advantageous to the
fund.
Because the fund is subject to the risks of each investment
type, the fund and its performance are affected by many factors. Stock
values fluctuate in response to the activities of individual companies
and general market and economic conditions. The value of bonds and
short-term instruments fluctuates based on changes in interest rates
and in the credit quality of the issuer.
FMR may use various investment techniques to hedge a portion of the
fund's risks, but there is no guarantee that these strategies will
work as FMR intends. 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. The fund also reserves the right to invest without
limitation in preferred stocks and investment-grade debt instruments
for temporary, defensive purposes.
The fund diversifies across investment types more than most mutual
funds. No one mutual fund, however, can provide an appropriate
balanced investment plan for all investors.
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.
EQUITY SECURITIES may include common stocks and warrants. Common
stocks, the most familiar type, represent an equity (ownership)
interest in a corporation. Although equity securities have a history
of long-term growth in value, their prices fluctuate based on changes
in a company's financial condition and on overall market and economic
conditions. Smaller companies are especially sensitive to these
factors.
RESTRICTIONS: With respect to 75% of its total assets, the fund
may not invest in more than 10% of the outstanding voting
securities of a single issuer.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers
to borrow money from investors. The issuer generally pays the investor
a fixed, variable, or floating rate of interest, and must repay the
amount borrowed at maturity. Some debt securities, such as zero coupon
bonds, do not pay current interest, but are sold at a discount from
their face values.
Debt securities have varying levels of sensitivity to changes in
interest rates and varying degrees of credit quality. In general, bond
prices rise when interest rates fall, and fall when interest rates
rise. Longer-term bonds and zero coupon bonds are generally more
sensitive to interest rate changes.
Lower-quality debt securities are considered to have speculative
characteristics, and involve greater risk of default or price changes
due to changes in the issuer's creditworthiness, or they may already
be in default. The market prices of these securities may fluctuate
more than higher-quality securities and may decline significantly in
periods of general or regional economic difficulty.
The following table provides a summary of ratings assigned to debt
holdings (not including money market instruments) in the fund's
portfolio. These figures are dollar-weighted averages of month-end
portfolio holdings during the fiscal year ended September 30, 1998,
and are presented as a percentage of total security investments. These
percentages are historical and do not necessarily indicate the fund's
current or future debt holdings.
FISCAL YEAR ENDED SEPTEMBER 30, 1998 DEBT HOLDINGS, BY RATING
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
MOODY'S INVESTORS
SERVICE STANDARD & POOR'S
(AS A % OF INVESTMENTS) (AS A % OF INVESTMENTS)
Average of Average of
Rating total investments Rating total investm ents
INVESTMENT GRADE
Highest quality Aaa 16.7% AAA 16.6%
High quality Aa 0.8% AA 0.5%
Upper-medium grade A 3.8% A 3.4%
Medium grade Baa 5.8% BBB 7.0%
LOWER QUALITY
Moderately speculative Ba 2.8% BB 2.0%
Speculative B 5.6% B 5.3%
Highly speculative Caa 0.6% CCC 0.8%
Poor quality Ca 0.0% CC 0.0%
Lowest quality, no interest C 0.0% C 0.0%
In default, in arrears -- D 0.0%
REFER TO THE FUND'S SAI FOR A MORE COMPLETE DISCUSSION OF THESE
RATINGS.
THE FUND DOES NOT NECESSARILY RELY ON THE RATINGS OF MOODY'S OR S&P TO
DETERMINE COMPLIANCE WITH ITS DEBT QUALITY
POLICY. SECURITIES NOT RATED BY MOODY'S OR S&P AMOUNTED TO 0.8% OF THE
FUND'S INVESTMENTS. THIS PERCENTAGE MAY
INCLUDE SECURITIES RATED BY OTHER NATIONALLY RECOGNIZED STATISTICAL
RATING ORGANIZATIONS, AS WELL AS UNRATED SECURITIES.
UNRATED LOWER-QUALITY SECURITIES AMOUNTED TO 0. 7 % OF THE FUND'S
INVESTMENTS.
FOR FOREIGN GOVERNMENT SECURITIES NOT INDIVIDUALLY RATED BY A
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION, FMR
ASSIGNS THE RATING OF THE SOVEREIGN CREDIT OF THE ISSUING GOVERNMENT.
RESTRICTIONS: Purchase of a debt security is consistent with the
fund's debt quality policy if it is rated at or above the stated level
by Moody's Investors Service (Moody's), Standard & Poor's (S&P), Duff
& Phelps Credit Rating Co., or Fitch IBCA, Inc., or is unrated
but judged to be of equivalent quality by FMR. The fund currently
intends to limit its investments in lower than Baa-quality debt
securities (sometimes called "junk bonds") to less than 35% of
its assets.
MONEY MARKET SECURITIES are high-quality, short-term instruments
issued by the U.S. Government, corporations, financial institutions,
and other entities. These securities may carry fixed, variable, or
floating interest rates.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies,
and securities issued by U.S. entities with substantial foreign
operations may involve additional risks and considerations. These
include risks relating to political, economic, or regulatory
conditions in foreign countries; fluctuations in foreign
currencies; withholding or other taxes; trading, settlement,
custodial, and other operational risks; and the potentially
less stringent investor protection and disclosure standards of
foreign markets. Additionally, governmental issuers of foreign debt
securities may be unwilling to pay interest and repay principal when
due and may require that the conditions for payment be renegotiated.
All of these factors can make foreign investments, especially those in
emerging markets , more volatile and potentially less
liquid than U.S. investments.
ASSET-BACKED SECURITIES include interests in pools of debt securities,
commercial or consumer loans, or other receivables. The value of these
securities depends on many factors, including changes in interest
rates, the availability of information concerning the pool and its
structure, the credit quality of the underlying assets, the market's
perception of the servicer of the pool, and any credit enhancement
provided. In addition, these securities may be subject to prepayment
risk.
MORTGAGE SECURITIES include interests in pools of commercial or
residential mortgages, and may include complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed
securities. Mortgage securities may be issued by agencies or
instrumentalities of the U.S. Government or by private entities.
The price of a mortgage security may be significantly affected by
changes in interest rates. Some mortgage securities may have a
structure that makes their reaction to interest rates and other
factors difficult to predict, making their price highly volatile.
Also, mortgage securities, especially stripped mortgage-backed
securities, are subject to prepayment risk. Securities subject to
prepayment risk generally offer less potential for gains during a
declining interest rate environment, and similar or greater potential
for loss in a rising interest rate environment.
STRIPPED SECURITIES are the separate income or principal components of
a debt security. The risks associated with stripped securities are
similar to those of other debt securities, although stripped
securities may be more volatile, and the value of certain types of
stripped securities may move in the same direction as interest rates.
U.S. Treasury securities that have been stripped by a Federal Reserve
Bank are obligations issued by the U.S. Treasury.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund buys a
security at one price and simultaneously agrees to sell it back at a
higher price. Delays or losses could result if the other party to the
agreement defaults or becomes insolvent.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices,
interest rates, currency exchange 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 currency exchange contracts or swap agreements, purchasing
indexed securities, and selling securities short.
FMR can use these practices to adjust the risk and return
characteristics of 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.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other
borrower. They have additional risks beyond conventional debt
securities because they may entail less legal protection for the fund,
or there may be a requirement that the fund supply additional cash to
a borrower on demand.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined
by FMR, under the supervision of the Board of Trustees, to be
illiquid, which means that they may be difficult to sell promptly at
an acceptable price. The sale of some illiquid securities, and some
other securities, may be subject to legal restrictions. Difficulty in
selling securities may result in a loss or may be costly to the fund.
RESTRICTIONS: The fund may not invest more than 10% of its
assets 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.
OTHER INSTRUMENTS may include convertible securities, preferred
stocks, and real estate-related instruments.
CASH MANAGEMENT. The fund may invest in money market securities, in
repurchase agreements, and in a money market fund available only to
funds and accounts managed by FMR or its affiliates, whose goal is to
seek a high level of current income while maintaining a stable $1.00
share price. A major change in interest rates or a default on the
money market fund's investments could cause its share price to change.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce
the risks of investing. This may include limiting the amount of money
invested in any one issuer or, on a broader scale, in any one
industry. Economic, business, or political changes can affect all
securities of a similar type.
RESTRICTIONS: With respect to 75% of its total assets, the fund may
not invest more than 5% in the securities of any one issuer.
The fund may not invest more than 25% of its total assets in any one
industry. These limitations do not apply to U.S. Government
securities.
BORROWING. The fund may borrow from banks or from other funds advised
by FMR or its affiliates , 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.
LENDING securities to broker-dealers and institutions, including
Fidelity Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a
means of earning income. This practice could result in a loss or a
delay in recovering the fund's securities. The fund may also lend
money to other funds advised by FMR or its affiliates.
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of the
fund's total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages
are fundamental, that is, subject to change only by shareholder
approval. The following paragraphs restate all those that are
fundamental. All policies stated throughout this prospectus, other
than those identified in the following paragraph, can be changed
without shareholder approval.
The fund seeks high total return with reduced risk over the long term
by allocating its assets among stocks, bonds, and short-term
instruments.
With respect to 75% of total assets, the fund may not invest
more than 5% in the securities of any one issuer and may not
invest in more than 10% of the outstanding voting securities of a
single issuer. These limitations do not apply to U.S. Government
securities.
The fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
securities.
The fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 331/3% of its total assets.
Loans, in the aggregate, may not exceed 331/3% of the fund's total
assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily
operations. Expenses paid out of the fund'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.
FMR in turn pays fees to affiliates who provide assistance with these
services. 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, dividing by twelve , and multiplying the result by the
fund's average net assets throughout the month.
UNDERSTANDING THE
MANAGEMENT FEE
The management fee FMR
receives is designed to be
responsive to changes in FMR's
total assets under
management. Building this
variable into the fee
calculation assures
shareholders that they will pay
a lower rate as FMR's assets
under management increase.
(checkmark)
The group fee rate is based on the average net assets of all the
mutual funds advised by FMR. This rate cannot rise above 0.52%, and it
drops as total assets under management increase.
For September 199 8 , the group fee rate was 0.2911%. The
individual fund fee rate is 0.25%.
The total management fee for the fiscal year ended September 30, 1998,
was 0.54% of the fund's average net assets.
FMR HAS SUB-ADVISORY AGREEMENTS with FMR U.K. and FMR Far East. These
sub-advisers provide FMR with investment research and advice on
issuers based outside the United States. Under the sub-advisory
agreements, FMR pays FMR U.K. and FMR Far East fees equal to 110% and
105%, respectively, of the costs of providing these services.
The sub-advisers may also provide investment management services. In
return, FMR pays FMR U.K. and FMR Far East a fee equal to 50% of its
management fee rate with respect to the fund's investments that the
sub-adviser manages on a discretionary basis.
Beginning January 1, 1999, FIMM will select certain investments for
the fund. FMR will pay FIMM a fee equal to 50% of its management fee
(before expense reimbursements) with respect to the fund's investments
that FIMM manages.
OTHER EXPENSES
While the management fee is a significant component of the fund's
annual operating costs, the fund has other expenses as well.
The fund contracts with FSC to perform transfer agency, dividend
disbursing, shareholder servicing, and accounting functions. These
services include processing shareholder transactions, valuing the
fund's investments, handling securities loans, and calculating the
fund's share price and dividends.
For the fiscal year ended September 30, 19 98 the fund paid
transfer agency and pricing and bookkeeping fees equal to 0.21% of its
average net assets. This amount is before expense reductions, if any.
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.
The fund 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 fund
shares. FMR directly, or through FDC, may make payments to third
parties, such as banks or broker-dealers, that engage in the sale of,
or provide shareholder support services for, the fund's shares.
Currently, the Board of Trustees has authorized such payments.
The fund's portfolio turnover rate for the fiscal year ended September
30, 1 998 was 136%. This rate varies from year to year. High
turnover rates increase transaction costs and may increase taxable
capital gains. FMR considers these effects when evaluating the
anticipated benefits of short-term investing.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of
America's first mutual funds. Today, Fidelity is the largest mutual
fund company in the country, and is known as an innovative provider of
high-quality financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, FBSI. Fidelity is also a
leader in providing tax- advantaged retirement plans for
individuals investing on their own or through their employer.
Fidelity is committed to providing investors with practical
information to make investment decisions. Based in Boston, Fidelity
provides customers with complete service 24 hours a day, 365 days a
year, through a network of telephone service centers around the
country and Fidelity's Web site.
To reach Fidelity for general information, call these numbers:
(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 75 walk-in Investor Centers across the country.
If you would prefer to access information on-line, you can visit
Fidelity's Web site at www.fidelity.com.
TYPES OF ACCOUNTS
You may set up an account directly in the fund or, if you own or
intend to purchase individual securities as part of your total
investment portfolio, you may consider investing in the fund through a
brokerage account.
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.
The different ways to set up (register) your account with Fidelity are
listed in the table that follows.
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over 220
(solid bullet) Assets in Fidelity mutual
funds: over $572 billion
(solid bullet) Number of shareholder
accounts: over 38 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 260
(checkmark)
The account guidelines that follow may not apply to certain retirement
accounts. If you are investing through a retirement account or if your
employer offers the fund through a retirement program, you may be
subject to additional fees. For more information, please refer to your
program materials, contact your employer, call your retirement
benefits number, visit Fidelity's Web site at www.fidelity.com,
or contact Fidelity directly, as appropriate.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have
two or more owners (tenants).
RETIREMENT
FOR TAX-ADVANTAGED RETIREMENT SAVINGS
Retirement plans provide individuals with tax-advantaged ways to
save for retirement, either with tax-deductible contributions or
tax-free growth. Retirement accounts require special applications and
typically have lower minimums.
(solid bullet) TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNTS
(IRAS) allow individuals under age 70 with
compensation to contribute up to $2,000 per tax year.
Married couples can contribute up to $4,000 per tax year, provided
no more than $2,000 is contributed on behalf of either spouse.
(These limits are aggregate for Traditional and Roth IRAs.)
Contributions may be tax-deductible, subject to certain income
limits.
(solid bullet) ROTH IRAS allow individuals to make non-deductible
contributions of up to $2,000 per tax year. Married couples can
contribute up to $4,000 per tax year, provided no more than $2,000 is
contributed on behalf of either spouse. (These limits are aggregate
for Traditional and Roth IRAs.) Eligibility is subject to certain
income limits. Qualified distributions are tax-free.
(solid bullet) ROTH CONVERSION IRAS allow individuals with
assets held in a Traditional IRA or Rollover IRA to convert those
assets to a Roth Conversion IRA. Eligibility is subject to certain
income limits. Qualified distributions are tax-free.
(solid bullet) ROLLOVER IRAS help retain special tax
advantages for certain eligible rollover distributions from
employer-sponsored retirement plans.
(solid bullet) 401(K) PLANS, and certain other
401(a)-qualified plans, are employer-sponsored retirement plans that
allow employer contributions and may allow employee after-tax
contributions. In addition, 401(k) plans allow employee pre-tax
(tax-deferred) contributions. Contributions to these plans may be
tax-deductible to the employer.
(solid bullet) KEOGH PLANS are generally profit sharing or
money purchase pension plans that allow self-employed individuals or
small business owners to make tax-deductible contributions for
themselves and any eligible employees.
(solid bullet) SIMPLE IRAS provide small business owners and those
with self-employment income (and their eligible employees) with many
of the advantages of a 401(k) plan, but with fewer administrative
requirements.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide
small business owners or those with self-employ ment income (and
their eligible employees) with many of the same advantages as a Keogh,
but with fewer administrative requirements.
(solid bullet) SALARY REDUCTION SEP-IRAS (SARSEPS) allow employees of
businesses with 25 or fewer employees to contribute a percentage of
their wages on a tax-deferred basis. These plans must have been
established by the employer prior to January 1, 1997.
(solid bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees
of 501(c)(3) tax-exempt institutions, including schools,
hospitals, and other charitable organizations.
(solid bullet) DEFERRED COMPENSATION PLANS (457 PLANS) are
available to employees of most state and local governments and their
agencies and to employees of tax-exempt institutions.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and
obtain tax benefits. An individual can give up to $10,000 a year per
child without paying federal gift tax. Depending on state laws, you
can set up a custodial account under the Uniform Gifts to Minors Act
(UGMA) or the Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR
OTHER GROUPS
Requires a special application.
HOW TO BUY SHARES
THE PRICE TO BUY ONE SHARE of the fund is the fund's net asset value
per share (NAV). The fund's shares are sold without a sales charge.
Your shares will be purchased at the next NAV calculated after your
investment is received in proper form . The fund'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.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application
and mail it along with your check. You may also open your account in
person or by wire as described on page . If there is no application
accompanying this prospectus, call 1-800-544-8888 or visit
Fidelity's Web site at www.fidelity.com for an application.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another
Fidelity fund.
IF YOU ARE INVESTING THROUGH A TAX-ADVANTAGED RETIREMENT PLAN, such as
an IRA, for the first time, you will need a special application.
Retirement investing also involves its own investment procedures. Call
1-800-544-8888 or visit Fidelity's Web site at www.fidelity.com
for more information and a retirement application.
If you buy 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
TO OPEN AN ACCOUNT $2,500
For certain Fidelity retirement accounts A $500
TO ADD TO AN ACCOUNT $250
Through regular investment plansB $100
MINIMUM BALANCE $2,000
For certain Fidelity retirement accounts A $500
A THESE LOWER MINIMUMS APPLY TO FIDELITY TRADITIONAL IRA, ROTH IRA,
ROTH CONVERSION IRA, ROLLOVER IRA, SEP-IRA, AND KEOGH ACCOUNTS.
B FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER TO
"INVESTOR SERVICES," PAGE .
These minimums may be lower for investments through a Fidelity
GoalPlannerSM account.
There is no minimum account balance or initial or subsequent
investment minimum for investments through Fidelity Portfolio
Advisory ServicesSM, a qualified state tuition program , certain
Fidelity retirement accounts funded through salary deduction, or
accounts opened with the proceeds of distributions from such
retirement accounts.
Refer to the program materials for details. In addition, the fund
reserves the right to waive or lower investment minimums in other
circumstances.
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TO OPEN TO ADD TO AN ACCOUNT
AN
ACCOUNT
PHONE
1-800-544-7777
(PHONE_GRAPHIC)
(SMALL SOLID BULLET) EXCHANGE FROM (SMALL SOLID BULLET) EXCHANGE FROM ANOTHER FIDELITY FUND ACCOUNT
WITH THE SAME REGISTRATION,
ANOTHER FIDELITY INCLUDING NAME, ADDRESS, AND TAXPAYER ID
NUMBER.
FUND ACCOUNT (SMALL SOLID BULLET) USE FIDELITY MONEY LINE TO TRANSFER FROM YOUR
BANK ACCOUNT. CALL BEFORE YOUR
WITH THE SAME FIRST USE TO VERIFY THAT THIS SERVICE IS IN
PLACE ON YOUR ACCOUNT. MAXIMUM
REGISTRATION, MONEY LINE: UP TO $100,000.
INCLUDING NAME,
ADDRESS, AND
TAXPAYER ID
NUMBER.
THE INTERNET
WWW.FIDELITY.COM
(COMPUTER GRAPHIC)
(SMALL SOLID BULLET) COMPLETE AND (SMALL SOLID BULLET) EXCHANGE FROM ANOTHER FIDELITY FUND ACCOUNT
WITH THE SAME REGISTRATION,
SIGN THE INCLUDING NAME, ADDRESS, AND TAXPAYER ID
NUMBER.
APPLICATION. (SMALL SOLID BULLET) USE FIDELITY MONEY LINE TO TRANSFER FROM YOUR
BANK
ACCOUNT. VISIT FIDELITY'S
MAKE YOUR CHECK WEB SITE BEFORE YOUR FIRST USE TO VERIFY THAT
THIS SERVICE IS IN PLACE ON YOUR
PAYABLE TO THE ACCOUNT. MAXIMUM MONEY LINE: UP TO $100,000.
COMPLETE NAME
OF THE FUND. MAIL
TO THE ADDRESS
INDICATED ON THE
APPLICATION.
MAIL
(MAIL_GRAPHIC)
(SMALL SOLID BULLET) COMPLETE AND (SMALL SOLID BULLET) MAKE YOUR CHECK PAYABLE TO THE COMPLETE NAME
OF THE FUND. INDICATE YOUR
SIGN THE FUND ACCOUNT NUMBER ON YOUR CHECK AND MAIL
TO THE ADDRESS PRINTED ON YOUR
APPLICATION. ACCOUNT STATEMENT.
MAKE YOUR (SMALL SOLID BULLET) EXCHANGE BY MAIL: CALL 1-800-544-6666 FOR
INSTRUCTIONS.
CHECK PAYABLE TO
THE COMPLETE
NAME OF THE
FUND. MAIL TO THE
ADDRESS INDICATED
ON THE
APPLICATION.
IN PERSON
(HAND_GRAPHIC)
(SMALL SOLID BULLET) BRING YOUR (SMALL SOLID BULLET) BRING YOUR CHECK TO A FIDELITY INVESTOR
CENTER.
CALL 1-800-544-9797 FOR THE
APPLICATION AND CENTER NEAREST YOU.
CHECK TO A
FIDELITY INVESTOR
CENTER. CALL
1-800-544-9797
FOR THE CENTER
NEAREST YOU.
WIRE
(WIRE_GRAPHIC)
(SMALL SOLID BULLET) CALL 1-800-544-7777
TO SET UP YOUR (SMALL SOLID BULLET) NOT AVAILABLE FOR RETIREMENT ACCOUNTS.
ACCOUNT AND TO
ARRANGE A WIRE (SMALL SOLID BULLET) WIRE TO:
TRANSACTION. NOT
AVAILABLE FOR RETIREMENT BANKERS TRUST COMPANY,
ACCOUNTS. BANK ROUTING #021001033,
(SMALL SOLID BULLET) WIRE WITHIN 24 HOURS TO: ACCOUNT #00163053.
BANKERS TRUST COMPANY, SPECIFY THE COMPLETE NAME OF THE FUND AND
BANK ROUTING #021001033, INCLUDE YOUR ACCOUNT NUMBER AND YOUR
ACCOUNT #00163053. NAME.
SPECIFY THE COMPLETE NAME
OF THE FUND
AND INCLUDE YOUR NEW
ACCOUNT NUMBER
AND YOUR NAME.
AUTOMATICALLY
(AUTOMATIC_GRAPHIC)
(SMALL SOLID BULLET) NOT AVAILABLE. (SMALL SOLID BULLET) USE FIDELITY AUTOMATIC ACCOUNT
BUILDER(REGISTERED TRADEMARK).
SIGN UP FOR THIS SERVICE WHEN OPENING
YOUR ACCOUNT, VISIT FIDELITY'S WEB
SITE AT WWW.FIDELITY.COM TO
OBTAIN THE FORM TO
ADD THE SERVICE , OR CALL
1-800-544-6666 TO ADD THE
SERVICE .
(TDD_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 the fund is the fund's NAV.
Your shares will be sold at the next NAV calculated after your order
is received in proper form. The fund's NAV is normally
calculated each business day at 4:00 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the
methods described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be
made in writing, except for exchanges to other Fidelity funds, which
can be requested by phone, in writing, or through Fidelity's Web
site. Call 1-800-544-6666 for a retirement distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$2,000 worth of shares in the account to keep it open ($500 for
retirement accounts).
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to
sign up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in
writing and include a signature guarantee if any of the following
situations apply:
(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) 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
table that follows.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it
to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
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ACCOUNT TYPE SPECIAL REQUIREMENTS
PHONE
1-800-544-7777
(PHONE_GRAPHIC) ALL ACCOUNT TYPES EXCEPT (SMALL SOLID BULLET) MAXIMUM CHECK REQUEST: $100,000.
RETIREMENT (SMALL SOLID BULLET) FOR MONEY LINE TRANSFERS TO YOUR BANK ACCOUNT;
MINIMUM: $10; MAXIMUM: UP TO $100,000.
ALL ACCOUNT TYPES (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.
RETIREMENT ACCOUNT (SMALL SOLID BULLET) THE ACCOUNT OWNER SHOULD COMPLETE A
RETIREMENT DISTRIBUTION FORM. CALL
1-800-544-6666 TO REQUEST ONE.
TRUST (SMALL SOLID BULLET) THE TRUSTEE MUST SIGN THE LETTER INDICATING
CAPACITY AS TRUSTEE. IF THE TRUSTEE'S NAME IS NOT
IN THE ACCOUNT REGISTRATION, PROVIDE A COPY OF THE
TRUST DOCUMENT CERTIFIED WITHIN THE LAST 60 DAYS.
BUSINESS OR ORGANIZATION (SMALL SOLID BULLET) AT LEAST ONE PERSON AUTHORIZED BY CORPORATE
RESOLUTION TO ACT ON THE ACCOUNT MUST SIGN THE
LETTER.
(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 EXCEPT (SMALL SOLID BULLET) YOU MUST SIGN UP FOR THE WIRE FEATURE BEFORE
RETIREMENT 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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(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.
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 XPRESS(REGISTERED TRADEMARK)
1-800-544-5555
WEB SITE
WWW.FIDELITY.COM
AUTOMATED SERVICE
(CHECKMARK)
FIDELITY'S WEB SITE at www.fidelity.com offers product and
servicing information, customer education, planning tools , and
the ability to make certain transactions in your account.
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your
account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more
than one account in the fund. Call 1-800-544-6666 if you need copies
of financial reports, prospectuses, or historical account information.
Electronic copies of most financial reports and prospectuses are
available at Fidelity's Web site. To participate in our electronic
delivery program, call 1-800-544-6666 or visit Fidelity's Web site at
www.fidelity.com for more information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of
other Fidelity funds by telephone, in writing, or through
Fidelity's Web site.
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 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 retirement, a home, educational expenses,
and other long-term financial goals. Certain restrictions apply for
retirement accounts. Call 1-800-544-6666 or visit Fidelity's Web
site at www.fidelity.com for more information.
REGULAR INVESTMENT PLANS
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FIDELITY AUTOMATIC ACCOUNT BUILDER
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 MONTHLY OR QUARTERLY (SMALL SOLID BULLET) FOR A NEW ACCOUNT, COMPLETE THE APPROPRIATE SECTION ON THE FUND
APPLICATION.
(SMALL SOLID BULLET) FOR EXISTING ACCOUNTS, CALL 1-800-544-6666 OR VISIT FIDELITY'S
WEB
SITE AT WWW.FIDELITY.COM 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
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 EVERY PAY PERIOD (SMALL SOLID BULLET) CHECK THE APPROPRIATE BOX ON THE FUND APPLICATION, OR CALL
1-800-544-6666 OR VISIT FIDELITY'S WEB SITE AT WWW.FIDELITY.COM
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
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. Normally, dividends are
distributed in March, June, September, and December. Capital gains are
normally distributed in December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on
the application, call 1-800-544-6666 for instructions. The fund offers
four options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions
will be automatically reinvested in additional shares of the fund. If
you do not indicate a choice on your application, you will be assigned
this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each
dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
If you select distribution option 2 or 3 and the U.S. Postal
Service does not deliver your checks, your election may be converted
to the Reinvestment Option. You will not receive interest on amounts
represented by uncashed distribution checks. To change your
distribution option, call Fidelity at 1-800-544-6666 .
When the fund deducts a distribution from its NAV, the reinvestment
price is the fund's NAV at the close of business that day. Cash
distribution checks will be mailed within seven days.
UNDERSTANDING
DISTRIBUTIONS
AS A FUND SHAREHOLDER, YOU ARE
ENTITLED TO YOUR SHARE OF THE
FUND'S NET INCOME AND GAINS
ON ITS INVESTMENTS. THE FUND
PASSES ITS EARNINGS ALONG TO ITS
INVESTORS AS DISTRIBUTIONS.
THE FUND EARNS DIVIDENDS FROM
STOCKS AND INTEREST FROM BOND,
MONEY MARKET, AND OTHER
INVESTMENTS. THESE ARE PASSED
ALONG AS DIVIDEND
DISTRIBUTIONS. THE FUND REALIZES
CAPITAL GAINS WHENEVER IT SELLS
SECURITIES FOR A HIGHER PRICE
THAN IT PAID FOR THEM. THESE
ARE PASSED ALONG AS CAPITAL
GAIN DISTRIBUTIONS.
(CHECKMARK)
TAXES
As with any investment, you should consider how your investment in the
fund will be taxed. If your account is not a tax- advantaged
retirement account, you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income
tax, and may also be subject to state or local taxes. If you live
outside the United States, your distributions could also be taxed by
the country in which you reside. Your distributions are taxable when
they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are
taxable as if they were paid on December 31.
For federal tax purposes, the fund's income and short-term capital
gains are distributed as dividends and taxed as ordinary income;
capital gain distributions are taxed as long-term capital gains. Every
January, Fidelity will send you and the IRS a statement showing the
tax characterization of distributions paid to you in the previous
year.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or
loss is the difference between the cost of your shares and the price
you receive when you sell them.
Whenever you sell shares of 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 fund 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.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on the
fund and its investments, and these taxes generally will reduce the
fund's distributions. However, if you meet certain holding period
requirements with respect to your fund shares, an offsetting tax
credit may be available to you. If you do not meet such holding period
requirements, you may still be entitled to a deduction for certain
foreign taxes. In either case, your tax statement will show more
taxable income or capital gains than were actually distributed by the
fund, but will also show the amount of the available offsetting credit
or deduction.
There are tax requirements that all funds must follow in order to
avoid federal taxation. In its effort to adhere to these requirements,
the fund may have to limit its investment activity in some types of
instruments.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. FSC normally calculates the fund's NAV as of the close
of business of the NYSE, normally 4:00 p.m. Eastern time.
THE FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the
number of shares outstanding.
The fund's assets are valued primarily on the basis of market
quotations or on the basis of information furnished by a pricing
service. Short-term securities with remaining maturities of sixty days
or less for which quotations and information furnished by a pricing
service are not readily available are valued on the basis of amortized
cost. This method minimizes the effect of changes in a security's
market value. Foreign securities are valued on the basis of quotations
from the primary market in which they are traded, and are translated
from the local currency into U.S. dollars using current exchange
rates. In addition, if quotations and information furnished by a
pricing service are not readily available, or if the values have been
materially affected by events occurring after the closing of a foreign
market, assets may be valued by another method that the Board of
Trustees believes accurately reflects fair value.
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 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
its transfer agent has incurred.
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 fund is
priced on the following business day. If payment is not received by
that time, the financial institution could be held liable for
resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at
the next NAV calculated after your order is received in proper
form . 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) 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) 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) You will not receive interest on amounts
represented by uncashed redemption checks.
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 shares of the
fund for shares of other Fidelity funds. However, you should note the
following:
(small solid bullet) The fund you are exchanging into must be
available for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification
number.
(small solid bullet) Before exchanging into a fund, read its
prospectus.
(small solid bullet) If you exchange into a fund with a sales charge,
you pay the percentage-point difference between that fund's sales
charge and any sales charge you have previously paid in connection
with the shares you are exchanging. For example, if you had already
paid a sales charge of 2% on your shares and you exchange them into a
fund with a 3% sales charge, you would pay an additional 1% sales
charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund
performance and shareholders, 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 exchange limit may be modified for accounts
in certain institutional retirement plans to conform to plan exchange
limits and Department of Labor regulations. See your plan materials
for further information.
(small solid bullet) 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
3.00% of the amount exchanged. Check each fund's prospectus for
details.
Fidelity, Fidelity Investments & (Pyramid) Design, Fidelity Money
Line, Fidelity Investments, Fidelity Automatic Account Builder,
TouchTone Xpress, and Directed Dividends are registered trademarks of
FMR Corp.
Asset Manager, Fidelity GoalPlanner, and Portfolio Advisory
Services are service marks of FMR Corp.
The third party marks appearing above are the marks of their
respective owners.
This prospectus is printed on recycled paper using soy-based inks.
FIDELITY CHARLES STREET TRUST:
FIDELITY ASSET MANAGER: GROWTH
CROSS REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ITEM NUMBER PROSPECTUS SECTION
1 .............................. COVER PAGE
2 A .............................. EXPENSES
B, C .............................. CONTENTS; THE FUND AT A GLANCE; WHO MAY WANT TO
INVEST
3 A .............................. FINANCIAL HIGHLIGHTS
B .............................. *
C, D .............................. PERFORMANCE
4 A I............................. CHARTER
II........................... THE FUND AT A GLANCE; INVESTMENT PRINCIPLES AND
RISKS
B .............................. INVESTMENT PRINCIPLES AND RISKS
C .............................. WHO MAY WANT TO INVEST; INVESTMENT PRINCIPLES
AND RISKS
5 A .............................. CHARTER
B I............................. COVER PAGE; THE FUND AT A GLANCE; CHARTER; DOING
BUSINESS WITH FIDELITY
II........................... CHARTER
III.......................... EXPENSES; BREAKDOWN OF EXPENSES
C .............................. CHARTER
D .............................. CHARTER; BREAKDOWN OF EXPENSES
E .............................. COVER PAGE; CHARTER
F .............................. EXPENSES
G I.............................. CHARTER
II.............................. *
5A .............................. PERFORMANCE
6 A I............................. CHARTER
II........................... HOW TO BUY SHARES; HOW TO SELL SHARES;
TRANSACTION DETAILS; EXCHANGE RESTRICTIONS
III.......................... CHARTER
B ............................. CHARTER
C .............................. TRANSACTIONS DETAILS; EXCHANGE RESTRICTIONS
D .............................. *
E .............................. COVER PAGE, DOING BUSINESS WITH FIDELITY; HOW TO
BUY SHARES; HOW TO SELL SHARES; INVESTOR SERVICES
F, G .............................. DIVIDENDS, CAPITAL GAINS, AND TAXES
H .............................. *
7 A .............................. COVER PAGE; CHARTER
B .............................. EXPENSES; HOW TO BUY SHARES; TRANSACTION DETAILS
C .............................. *
D .............................. HOW TO BUY SHARES
E .............................. *
F .............................. BREAKDOWN OF EXPENSES
8 .............................. HOW TO SELL SHARES; INVESTOR SERVICES; TRANSACTION
DETAILS; EXCHANGE RESTRICTIONS
9 .............................. *
</TABLE>
* Not Applicable
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
November 24, 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 eith er document, call
Fidelity(registered trademark) at 1-800-544-8888.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
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.
AMG-pro-1198
1.705165.101
(fund number 321, trading symbol FASGX)
This asset allocation fund seeks to maximize total return over the
long term through investments in stocks, bonds and short-term and
money market instruments of all types.
FIDELITY
ASSET MANAGER:
GROWTHSM
PROSPECTUS
NOVEMBER 24, 1998
(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA 02109
CONTENTS
KEY FACTS 3 THE FUND AT A GLANCE
3 WHO MAY WANT TO INVEST
4 EXPENSES THE FUND'S YEARLY OPERATING
EXPENSES.
5 FINANCIAL HIGHLIGHTS A SUMMARY OF THE
FUND'S FINANCIAL DATA.
6 PERFORMANCE HOW THE FUND HAS DONE
OVER TIME.
THE FUND IN DETAIL 8 CHARTER HOW THE FUND IS ORGANIZED.
8 INVESTMENT PRINCIPLES AND RISKS THE
FUND'S OVERALL APPROACH TO INVESTING.
11 BREAKDOWN OF EXPENSES HOW
OPERATING COSTS ARE CALCULATED AND WHAT
THEY INCLUDE.
YOUR ACCOUNT 11 DOING BUSINESS WITH FIDELITY
12 TYPES OF ACCOUNTS DIFFERENT WAYS TO
SET UP YOUR ACCOUNT, INCLUDING
TAX- ADVANTAGED RETIREMENT PLANS.
14 HOW TO BUY SHARES OPENING AN
ACCOUNT AND MAKING ADDITIONAL
INVESTMENTS.
17 HOW TO SELL SHARES TAKING MONEY OUT
AND CLOSING YOUR ACCOUNT.
19 INVESTOR SERVICES SERVICES TO HELP YOU
MANAGE YOUR ACCOUNT.
SHAREHOLDER AND 20 DIVIDENDS, CAPITAL GAINS,
ACCOUNT POLICIES AND TAXES
21 TRANSACTION DETAILS SHARE PRICE
CALCULATIONS AND THE TIMING OF PURCHASES
AND REDEMPTIONS.
21 EXCHANGE RESTRICTIONS
KEY FACTS
THE FUND AT A GLANCE
GOAL: Maximum total return over the long term. As with any mutual
fund, there is no assurance that the fund will achieve its goal.
STRATEGY: The fund diversifies across stocks, bonds and short-term and
money market instruments, both here and abroad, to pursue its goal.
The fund has a neutral mix which represents the way the fund's
investments will generally be allocated over the long term. This mix
will vary over short-term periods as fund management gradually adjusts
the fund's holdings - within defined ranges - based on the current
outlook for the different markets.
Neutral Mix
Stocks 70%
(can range from
50-100%)
Row: 1, Col: 1, Value: 5.0
Row: 1, Col: 2, Value: 70.0
Row: 1, Col: 3, Value: 25.0
Bonds 25%
(can range from
0-50%)
Short-Term/Money
Market 5%
(can range from
0-50%)
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investm ents(registered trademark),
which was established in 1946 and is now America's largest mutual fund
manager. Foreign affiliates of FMR may help choose investments for the
fund.
Beginning January 1, 1999, Fidelity Investments Money Management,
Inc. (FIMM), a subsidiary of FMR, will choose certain types of
investments for the fund.
SIZE: As of September 30, 1998, the fund had over $ 4.5
billion in assets.
WHO MAY WANT TO INVEST
The fund may be appropriate for investors who want to diversify among
stocks, bonds, short-term and money market instruments, and other
types of securities in one fund. If you are looking for a fund that
can invest in a wide range of security types within defined ranges in
pursuit of total return, this fund may be appropriate for you.
Because the fund owns different types of investments, its performance
is affected by a variety of factors. The value of the fund's
investments and the income they generate will vary from day to day,
and generally reflect interest rates, market conditions, and other
company, political, and economic news. Performance also depends on
FMR's skill in allocating assets. When you sell your fund shares, they
may be worth more or less than what you paid for them.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy
or sell 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 NONE
AND REINVESTED DISTRIBUTIONS
DEFERRED SALES CHARGE ON REDEMPTIONS NONE
ANNUAL ACCOUNT MAINTENANCE FEE (FOR ACCOUNTS UNDER $2,500) $12.00
ANNUAL FUND 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. The fund's expenses are
factored into its share price or dividends and are not charged
directly to shareholder accounts (see "Breakdown of Expenses" page ).
The following figures are based on historical expenses of the fund and
are calculated as a percentage of average net assets of the fund. A
portion of the brokerage commissions that the fund pays is used to
reduce the fund's expenses. In addition, the fund has entered into
arrangements with its custodian and transfer agent whereby credits
realized as a result of uninvested cash balances are used to reduce
custodian and transfer agent expenses. Including these reductions, the
total fund operating expenses presented in the table would have been
0.80 %.
MANAGEMENT FEE 0.59%
12B-1 FEE NONE
OTHER EXPENSES 0.25%
TOTAL FUND OPERATING EXPENSES 0.84%
EXAMPLES: Let's say, hypothetically, that the fund's annual return is
5% and that your shareholder transaction expenses and the fund's
annual operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses
if you close your account after the number of years indicated:
1 YEAR $ 9
3 YEARS $ 27
5 YEARS $ 47
10 YEARS $ 104
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected expenses or returns, all of which may vary.
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
THE FUND'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 follows has been audited by
PricewaterhouseCoopers LLP , 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
YEARS ENDED SEPTEMBER 30 1998 1997 1996 1995 1994 1993 1992E
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.97 $ 16.56 $ 14.88 $ 13.91 $ 13.77 $ 11.16 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .49D .42D .47 .26 .13 .18 .14
NET REALIZED AND UNREALIZED .49 4.49 1.44 1.07 .61 2.66 1.02
GAIN (LOSS)
TOTAL FROM INVESTMENT OPERATIONS .98 4.91 1.91 1.33 .74 2.84 1.16
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.40) (.43) (.23) (.27) (.18) (.15) --
FROM NET REALIZED GAIN (1.75) (1.07) -- -- (.37) (.08) --
IN EXCESS OF NET REALIZED GAIN -- -- -- (.09) (.05) -- --
TOTAL DISTRIBUTIONS (2.15) (1.50) (.23) (.36) (.60) (.23) --
NET ASSET VALUE, END OF PERIOD $ 18.80 $ 19.97 $ 16.56 $ 14.88 $ 13.91 $ 13.77 $ 11.16
TOTAL RETURNB,C 5.33% 31.57% 12.99% 9.95% 5.39% 25.83% 11.60%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 4,537 $ 4,457 $ 3,099 $ 2,850 $ 3,071 $ 1,243 $ 94
(IN MILLIONS)
RATIO OF EXPENSES TO .84% .87% 1.02% 1.03% 1.15% 1.19%F 1.64%A
AVERAGE NET ASSETS
RATIO OF EXPENSES TO AVERAGE NET .80%G .86%G 1.01%G 1.02%G 1.15% 1.19% 1.64%A
ASSETS AFTER EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME TO 2.49% 2.36% 2.51% 3.16% 2.64% 3.02% 3.50%A
AVERAGE NET ASSETS
PORTFOLIO TURNOVER RATE 150% 70% 138% 119% 104% 97% 693%A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD DECEMBER 30, 1991 (COMMENCEMENT OF OPERATIONS) TO
SEPTEMBER 30,1992.
F FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S
EXPENSES.
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN. The
total returns that follow are based on historical fund results and do
not reflect the effect of taxes.
The fund's fiscal year runs from October 1 through September 30. The
tables below show the fund's performance over past fiscal years
compared to a composite index . The chart on page presents
calendar year performance.
AVERAGE ANNUAL TOTAL RETURNS
FISCAL PERIODS ENDED PAST 1 PAST 5 LIFE OF
SEPTEMBER 30, 1 998 YEAR YEARS FUNDA
ASSET MANAGER: GROWTH 5.33% 12.65% 14.85%
FIDELITY AGGRESSIVE ASSET
ALLOCATION COMPOSITE INDEX 9.98% 15.48% N/A
CUMULATIVE TOTAL RETURNS
FISCAL PERIODS ENDED PAST 1 PAST 5 LIFE OF
SEPTEMBER 30, 1 998 YEAR YEARS FUNDA
ASSET MANAGER: GROWTH 5.33% 81.45% 154.80%
FIDELITY AGGRESSIVE
ASSET ALLOCATION COMPOSITE INDEX 9.98% 105.38% N/A
A FROM DECEMBER 30, 1991 (COMMENCEMENT OF OPERATIONS)
EXAMPLE: Let's say, hypothetically, that you put $10,000 in the fund
on December 30, 1991. From that date through September 30,
1998 , the fund's total return was 154.80 %. Your $10,000
would have grown to $ 25,480 (the initial investment plus
154.80 % of $10,000).
$10,000 OVER LIFE OF FUND
FISCAL YEARS 1991 1994 1998
ROW: 1, COL: 1, VALUE: 10000.0
ROW: 2, COL: 1, VALUE: 10367.06
ROW: 3, COL: 1, VALUE: 10585.32
ROW: 4, COL: 1, VALUE: 10436.51
ROW: 5, COL: 1, VALUE: 10466.27
ROW: 6, COL: 1, VALUE: 10684.52
ROW: 7, COL: 1, VALUE: 10565.48
ROW: 8, COL: 1, VALUE: 11001.98
ROW: 9, COL: 1, VALUE: 10823.41
ROW: 10, COL: 1, VALUE: 11071.43
ROW: 11, COL: 1, VALUE: 11279.76
ROW: 12, COL: 1, VALUE: 11686.51
ROW: 13, COL: 1, VALUE: 11907.91
ROW: 14, COL: 1, VALUE: 12079.9
ROW: 15, COL: 1, VALUE: 12231.66
ROW: 16, COL: 1, VALUE: 12707.16
ROW: 17, COL: 1, VALUE: 12747.63
ROW: 18, COL: 1, VALUE: 13010.68
ROW: 19, COL: 1, VALUE: 13202.9
ROW: 20, COL: 1, VALUE: 13445.72
ROW: 21, COL: 1, VALUE: 13992.04
ROW: 22, COL: 1, VALUE: 13931.34
ROW: 23, COL: 1, VALUE: 14366.38
ROW: 24, COL: 1, VALUE: 14244.97
ROW: 25, COL: 1, VALUE: 15041.53
ROW: 26, COL: 1, VALUE: 15622.08
ROW: 27, COL: 1, VALUE: 15157.64
ROW: 28, COL: 1, VALUE: 14387.09
ROW: 29, COL: 1, VALUE: 14365.98
ROW: 30, COL: 1, VALUE: 14482.09
ROW: 31, COL: 1, VALUE: 14049.31
ROW: 32, COL: 1, VALUE: 14397.64
ROW: 33, COL: 1, VALUE: 14904.3
ROW: 34, COL: 1, VALUE: 14682.64
ROW: 35, COL: 1, VALUE: 14724.86
ROW: 36, COL: 1, VALUE: 14302.64
ROW: 37, COL: 1, VALUE: 13930.27
ROW: 38, COL: 1, VALUE: 13583.09
ROW: 39, COL: 1, VALUE: 13810.93
ROW: 40, COL: 1, VALUE: 14093.0
ROW: 41, COL: 1, VALUE: 14483.57
ROW: 42, COL: 1, VALUE: 14841.59
ROW: 43, COL: 1, VALUE: 15156.22
ROW: 44, COL: 1, VALUE: 15785.47
ROW: 45, COL: 1, VALUE: 15872.26
ROW: 46, COL: 1, VALUE: 16143.49
ROW: 47, COL: 1, VALUE: 15948.2
ROW: 48, COL: 1, VALUE: 16338.77
ROW: 49, COL: 1, VALUE: 16709.46
ROW: 50, COL: 1, VALUE: 17260.2
ROW: 51, COL: 1, VALUE: 17238.17
ROW: 52, COL: 1, VALUE: 17271.22
ROW: 53, COL: 1, VALUE: 17568.62
ROW: 54, COL: 1, VALUE: 17766.88
ROW: 55, COL: 1, VALUE: 17843.99
ROW: 56, COL: 1, VALUE: 17392.38
ROW: 57, COL: 1, VALUE: 17513.54
ROW: 58, COL: 1, VALUE: 18240.52
ROW: 59, COL: 1, VALUE: 18769.23
ROW: 60, COL: 1, VALUE: 20002.89
ROW: 61, COL: 1, VALUE: 19648.4
ROW: 62, COL: 1, VALUE: 20465.58
ROW: 63, COL: 1, VALUE: 20693.91
ROW: 64, COL: 1, VALUE: 19684.45
ROW: 65, COL: 1, VALUE: 20489.61
ROW: 66, COL: 1, VALUE: 21739.42
ROW: 67, COL: 1, VALUE: 22388.36
ROW: 68, COL: 1, VALUE: 23902.55
ROW: 69, COL: 1, VALUE: 23133.43
ROW: 70, COL: 1, VALUE: 23998.69
ROW: 71, COL: 1, VALUE: 23505.97
ROW: 72, COL: 1, VALUE: 24251.05
ROW: 73, COL: 1, VALUE: 24847.53
ROW: 74, COL: 1, VALUE: 25035.77
ROW: 75, COL: 1, VALUE: 26461.01
ROW: 76, COL: 1, VALUE: 27213.97
ROW: 77, COL: 1, VALUE: 26689.59
ROW: 78, COL: 1, VALUE: 26850.93
ROW: 79, COL: 1, VALUE: 27536.66
ROW: 80, COL: 1, VALUE: 27119.85
ROW: 81, COL: 1, VALUE: 24134.92
ROW: 82, COL: 1, VALUE: 25277.79
$
$25,480
EXPLANATION OF TERMS
UNDERSTANDING
PERFORMANCE
As economic conditions
change, different types of
investments do better than
others. While Asset Manager:
Growth usually invests in
stocks, bonds, and short-term
and money market instruments,
its emphasis is in stocks. The
fund's performance tends to be
related to that of the overall
performance of both domestic
and foreign markets, but will
also reflect the performance of
the other investments in its mix
during the time period.
(checkmark)
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.
YEAR-BY-YEAR TOTAL RETURNS
CALENDAR YEARS 1992 1993 1994 1995 1996 1997
ASSET MANAGER: GROWTH 19.08% 26.32% -7.39% 19.95% 17.59% 26.46%
FIDELITY AGGRESSIVE ASSET
ALLOCATION COMPOSITE INDEX 7.34% 9.95% 0.11% 29.89% 15.74% 25.81%
CONSUMER PRICE INDEX 2.90% 2.75% 2.67% 2.54% 3.32% 1.70%
PERCENTAGE (%)
ROW: 1, COL: 1, VALUE: 0.0
ROW: 2, COL: 1, VALUE: 0.0
ROW: 3, COL: 1, VALUE: 0.0
ROW: 4, COL: 1, VALUE: 0.0
ROW: 5, COL: 1, VALUE: 19.08
ROW: 6, COL: 1, VALUE: 26.32
ROW: 7, COL: 1, VALUE: -7.39
ROW: 8, COL: 1, VALUE: 19.95
ROW: 9, COL: 1, VALUE: 17.59
ROW: 10, COL: 1, VALUE: 26.46
(LARGE SOLID BOX) ASSET MANAGER:
GROWTH
FIDELITY AGGRESSIVE ASSET ALLOCATION COMPOSITE INDEX is a
hypothetical representation of the performance of the fund's three
asset classes according to their respective weightings in the fund's
neutral mix (70% stocks, 25% bonds and 5% short term/money market).
The following indexes are used to calculate the Composite Index:
stocks - the Standard & Poor's 500 Index (S&P 500(registered
trademark)), bonds - the Lehman Brothers Aggregate Bond Index, and
short term/money market - the Lehman Brothers 3-Month Treasury Bill
Index. Prior to January 1, 1997, the Lehman Brothers Treasury Bond
Index was used for the bond class. The index weightings of the
Composite Index are rebalanced monthly.
STANDARD & POOR'S 500 INDEX (S&P 500) is a widely recognized,
unmanaged index of common stocks.
LEHMAN BROTHERS AGGREGATE BOND INDEX is a market value weighted
performance benchmark for investment-grade fixed-rate debt issues,
including government, corporate, asset-backed, and mortgage-backed
securities, with maturities of at least one year.
LEHMAN BROTHERS 3-MONTH TREASURY BILL INDEX represents the average
of Treasury Bill rates for each of the prior three months, adjusted to
a bond equivalent yield basis (short-term and money market
instruments).
Unlike the fund's returns, the total returns of the composi te
index do not include the effect of any brokerage commissions,
transactions fees, or other costs of investing.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
Other illustrations of fund performance may show moving averages over
specified periods.
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, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUND IN DETAIL
CHARTER
ASSET MANAGER: GROWTH 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 Charles Street Trust, an open-end
management investment company organized as a Massachusetts business
trust on July 7, 1981.
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.
FMR AND ITS AFFILIATES
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs.
Affiliates assist FMR with foreign investments:
(small solid bullet) Fidelity Management & Research (U.K.) Inc.
(FMR U.K.), in London, England, serves as a sub-adviser for the
fund.
(small solid bullet) Fidelity Management & Research Far East Inc.
(FMR Far East), in Tokyo, Japan, serves as a sub-adviser for the
fund.
Beginning January 1, 1999, FIMM, located in Merrimack, New
Hampshire, will select certain types of investments for the fund.
Dick Habermann is Vice President and lead manager of Asset Manager:
Growth, which he has managed since March 1996. Other Fidelity
investment professionals assist Mr. Habermann in selecting investments
within each asset class for the fund. He also manages other
Fidelity funds. Mr. Habermann is a senior vice president of FMR Co.
Previously, he was division head for international equities and
director of international research from 1993 to 1996, and joint chief
strategist for Portfolio Advisory Services from 1996 to 1997. Mr.
Habermann joined Fidelity in 1968.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services.
Fidelity Service Company, Inc. (FSC) performs transfer agent servicing
functions for the fund.
FMR Corp. is the ultimate parent company of FMR, FMR U.K., FMR Far
East and FIMM. Me mbers of the Edward C. Johnson 3d family are
the predominant owners of a class of shares of common stock
representing approximately 49% of the voting power of FMR Corp. Under
the Investment Company Act of 1940 (the 1940 Act), control of a
company is presumed where one individual or group of individuals owns
more than 25% of the voting stock of that company; therefore, the
Johnson family may be deemed under the 1940 Act to form a controlling
group with respect to FMR Corp.
FMR may use its broker-dealer affiliates and other firms that sell
fund shares to carry out the fund's transactions, provided that the
fund receives brokerage services and commission rates comparable to
those of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
THE FUND seeks to maximize total return over the long term by
allocating its assets among stocks, bonds, short-term and money market
instruments, and other instruments of U.S. and foreign issuers.
The fund allocates its assets among the following classes, or types,
of investments. The STOCK CLASS includes equity securities of all
types. The BOND CLASS includes all varieties of fixed-income
securities maturing in more than one year. The SHORT-TERM/MONEY MARKET
CLASS includes all types of short-term and money market instruments.
FMR may use its judgment to place a security in the most appropriate
class based on its investment characteristics. Fixed-income securities
may be classified in the bond or short-term/money market class
according to interest rate sensitivity as well as maturity. The fund
may also make other investments that do not fall within these classes.
FMR has the ability to allocate the fund's assets within specified
ranges. The fund's NEUTRAL MIX represents the benchmark for its
combination of investments in each asset class over time. FMR may
change the neutral mix from time to time. The range and approximate
neutral mix for each asset class are shown below.
RANGE NEUTRAL MIX
STOCK CLASS 50 -100% 70%
BOND CLASS 0-50% 25%
SHORT-TERM/ 0-50% 5%
MONEY MARKET CLASS
Asset Manager: Growth's aggressive approach focuses on stocks for high
potential returns. However, because the fund can invest in bonds and
short-term and money market instruments, its return may not be as high
as a fund that invests only in stocks.
In pursuit of the fund's objective, FMR will not try to pinpoint the
precise moment when a major reallocation should be made. Instead, FMR
regularly reviews the fund's allocations and makes changes gradually
to favor investments that it believes will provide the most favorable
outlook for achieving the fund's objective. Under normal
circumstances, a single reallocation will not involve more than 20% of
the fund's total assets. Although FMR uses its expertise and resources
in allocating assets, FMR's decisions may not be advantageous to the
fund.
Because the f und is subject to the risks of each investment
type, the fund and its performance are affected by many factors. Stock
values fluctuate in response to the activities of individual companies
and general market and economic conditions. The value of bonds and
short-term instruments fluctuates based on changes in interest rates
and in the credit quality of the issuer.
FMR may use various investment techniques to hedge a portion of the
fund's risks, but there is no guarantee that these strategies will
work as FMR intends. 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. The fund also reserves the right to invest without
limitation in preferred stocks and investment-grade debt instruments
for temporary, defensive purposes.
The fund diversifies across investment types more than most mutual
funds. No one mutual fund, however, can provide an appropriate
balanced investment plan for all investors.
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.
EQUITY SECURITIES may include common stocks and warrants. Common
stocks, the most familiar type, represent an equity (ownership)
interest in a corporation. Although equity securities have a history
of long-term growth in value, their prices fluctuate based on changes
in a company's financial condition and on overall market and economic
conditions. Smaller companies are especially sensitive to these
factors.
RESTRICTIONS: With respect to 75% of its total assets, the fund may
not invest in more than 10% of the outstanding voting
securities of a single issuer.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers
to borrow money from investors. The issuer generally pays the investor
a fixed, variable, or floating rate of interest, and must repay the
amount borrowed at maturity. Some debt securities, such as zero coupon
bonds, do not pay current interest, but are sold at a discount from
their face values.
Debt securities have varying levels of sensitivity to changes in
interest rates and varying degrees of credit quality. In general, bond
prices rise when interest rates fall, and fall when interest rates
rise. Longer-term bonds and zero coupon bonds are generally more
sensitive to interest rate changes.
Lower-quality debt securities are considered to have speculative
characteristics, and involve greater risk of default or price changes
due to changes in the issuer's creditworthiness, or they may already
be in default. The market prices of these securities may fluctuate
more than higher-quality securities and may decline significantly in
periods of general or regional economic difficulty.
The following table provides a summary of ratings assigned to debt
holdings (not including money market instruments) in the fund's
portfolio. These figures are dollar-weighted averages of month-end
portfolio holdings during the fiscal year ended Sept ember 1998,
and are presented as a percentage of total security investments. These
percentages are historical and do not necessarily indicate the fund's
current or future debt holdings.
FISCAL YEAR ENDED SEPTEMBER 30, 1998 DEBT HOLDINGS, BY RATING
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MOODY'S INVESTORS
SERVICE STANDARD & POOR'S
(AS A % OF INVESTMENTS) (AS A % OF INVESTMENTS)
Average of Average of
Rating total investments Rating total investm ents
INVESTMENT GRADE
Highest quality Aaa 5.7% AAA 5.7 %
High quality Aa 0.3 % AA 0.2 %
Upper-medium grade A 1.3 % A 1.1 %
Medium grade Baa 2.0 % BBB 2.4 %
LOWER QUALITY
Moderately speculative Ba 2.4% BB 2.5%
Speculative B 8.3 % B 7.9 %
Highly speculative Caa 0.8% CCC 1.0 %
Poor quality Ca 0.0 % CC 0.0 %
Lowest quality, no interest C 0.0 % C 0.0 %
In default, in arrears -- D 0.0%
</TABLE>
REFER TO THE FUND'S SAI FOR A MORE COMPLETE DISCUSSION OF THESE
RATINGS.
THE FUND DOES NOT NECESSARILY RELY ON THE RATINGS OF MOODY'S OR S&P TO
DETERMINE COMPLIANCE WITH ITS DEBT QUALITY
POLICY. SECURITIES NOT RATED BY MOODY'S OR S&P AMOUNTED TO 0.8% OF THE
FUND'S INVESTMENTS. THIS PERCENTAGE MAY
INCLUDE SECURITIES RATED BY OTHER NATIONALLY RECOGNIZED STATISTICAL
RATING ORGANIZATIONS, AS WELL AS UNRATED SECURITIES.
UNRATED LOWER-QUALITY SECURITIES AMOUNTED TO 0.8 % OF THE FUND'S
INVESTMENTS.
FOR FOREIGN GOVERNMENT SECURITIES NOT INDIVIDUALLY RATED BY A
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION, FMR
ASSIGNS THE RATING OF THE SOVEREIGN CREDIT OF THE ISSUING GOVERNMENT.
RESTRICTIONS: Purchase of a debt security is consistent with the
fund's debt quality policy if it is rated at or above the stated level
by Moody's Investors Service (Moody's), Standard & Poor's (S&P), Duff
& Phelps Credit Rating Co., or Fitch IBCA, Inc. , or is unrated
but judged to be of equivalent quality by FMR. The fund currently
intends to limit its investments in lower than Baa-quality debt
securities (sometimes called "junk bonds") to less than 35% of
its assets.
MONEY MARKET SECURITIES are high-quality, short-term instruments
issued by the U.S. Government, corporations, financial institutions,
and other entities. These securities may carry fixed, variable, or
floating interest rates.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies,
and securities issued by U.S. entities with substantial foreign
operations may involve additional risks and considerations. These
include risks relating to political, econ omic, or regulatory
conditions in foreign countrie s; fluctuations in foreign
currencies; withholding or other taxes; trading, settlement,
custodial , and other operational risks; and the potentially less
stringent investor protection and disclosure standards of foreign
markets. Additionally, governmental issuers of foreign debt securities
may be unwilling to pay interest and repay principal when due and may
require that the conditions for payment be renegotiated. All of these
factors can make foreign investments, especially those in emerging
markets, more volatile and potenti ally less liquid than U.S.
investments.
ASSET-BACKED SECURITIES include interests in pools of debt securities,
commercial or consumer loans, or other receivables. The value of these
securities depends on many factors, including changes in interest
rates, the availability of information concerning the pool and its
structure, the credit quality of the underlying assets, the market's
perception of the servicer of the pool, and any credit enhancement
provided. In addition, these securities may be subject to prepayment
risk.
MORTGAGE SECURITIES include interests in pools of commercial or
residential mortgages, and may include complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed
securities. Mortgage securities may be issued by agencies or
instrumentalities of the U.S. Government or by private entities.
The price of a mortgage security may be significantly affected by
changes in interest rates. Some mortgage securities may have a
structure that makes their reaction to interest rates and other
factors difficult to predict, making their price highly volatile.
Also, mortgage securities, especially stripped mortgage-backed
securities, are subject to prepayment risk. Securities subject to
prepayment risk generally offer less potential for gains during a
declining interest rate environment, and similar or greater potential
for loss in a rising interest rate environment.
STRIPPED SECURITIES are the separate income or principal components of
a debt security. The risks associated with stripped securities are
similar to those of other debt securities, although stripped
securities may be more volatile, and the value of certain types of
stripped securities may move in the same direction as interest rates.
U.S. Treasury securities that have been stripped by a Federal Reserve
Bank are obligations issued by the U.S. Treasury.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund buys a
security at one price and simultaneously agrees to sell it back at a
higher price. Delays or losses could result if the other party to the
agreement defaults or becomes insolvent.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices,
interest rates, currency exchange 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 currency exchange contracts or swap agreements, purchasing
indexed securities, and selling securities short.
FMR can use these practices to adjust the risk and return
characteristics of 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.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other
borrower. They have additional risks beyond conventional debt
securities because they may entail less legal protection for the fund,
or there may be a requirement that the fund supply additional cash to
a borrower on demand.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined
by FMR, under the supervision of the Board of Trustees, to be
illiquid, which means that they may be difficult to sell promptly at
an acceptable price. The sale of some illiquid securities, and some
other securities, may be subject to legal restrictions. Difficulty in
selling securities may result in a loss or may be costly to the fund.
RESTRICTIONS: The fund may no t invest more than 10% of its
assets 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.
OTHER INSTRUMENTS may include convertible securities, precious
metals , preferred stocks, and real estate-related instruments.
CASH MANAGEMENT. The fund may invest in money market securities, in
repurchase agreements, and in a money market fund available only to
funds and accounts managed by FMR or its affiliates, whose goal is to
seek a high level of current income while maintaining a stable $1.00
share price. A major change in interest rates or a default on the
money market fund's investments could cause its share price to change.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce
the risks of investing. This may include limiting the amount of money
invested in any one issuer or, on a broader scale, in any one
industry.
Economic, business, or political changes can affect all securities
of a similar type.
RESTRICTIONS: With respect to 75% of its total assets, the fund may
not inves t more than 5% in the securities of any one issuer.
The fund may not invest more than 25% of its total assets in any one
industry. These limitations do not apply to U.S. Government
securities.
BORROWING. The fund may borrow from banks or from other funds advised
by FMR or i ts affilia tes, 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.
LENDING securities to broker-dealers and institutions, including
Fidelity Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a
means of earning income. This practice could result in a loss or a
delay in recovering the fund's securities. The fund may also lend
money to other funds advised by FMR or its affiliates .
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of the
fund's total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages
are fundamental, that is, subject to change only by shareholder
approval. The following paragraphs restate all those that are
fundamental. All policies stated throughout this prospectus, other
than those identified in the following paragraphs, can be changed
without shareholder approval.
The fund seeks to maximize total return over the long term by
allocating its assets among stocks, bonds, short-term instruments, and
other investments.
With respect to 75% of total assets, the fund ma y not inv est
more than 5% in the securities of any one issuer and may not invest
i n more than 10% of the outstanding voting securities of a single
issuer. These limitations do not apply to U.S. Government securities.
The fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
securities.
The fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 331/3% of its total assets.
Loans, in the aggregate, may not exceed 331/3% of the fund's total
assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily
operations. Expenses paid out of the fund'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.
FMR in turn pays fees to affiliates who provide assistance with these
services. 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, dividing by twelve, and multiplying the result by the fund's
average net assets throughout the month.
The group fee rate is based on the average net assets of all the
mutual funds advised by FMR. This rate cannot rise above 0.52%, and it
drops as total assets under management increase.
For Septem ber 1998, the group fee rate was 0.2911 %. The
individual fund fee rate is 0.30%.
The total management fee for the fiscal year ended S eptember 30,
1998, was 0.59% of the f und's average net assets.
UNDERSTANDING THE
MANAGEMENT FEE
The management fee FMR
receives is designed to be
responsive to changes in FMR's
total assets under
management. Building this
variable into the fee
calculation assures
shareholders that they will pay
a lower rate as FMR's assets
under management increase.
(checkmark)
FMR HAS SUB-ADVISORY AGREEMENTS with FMR U.K. and FMR Far East. These
sub-advisers provide FMR with investment research and advice on
issuers based outside the United States. Under the sub-advisory
agreements, FMR pays FMR U.K. and FMR Far East fees equal to 110% and
105%, respectively, of the costs of providing these services.
The sub-advisers may also provide investment management services. In
return, FMR pays FMR U.K. and FMR Far East a fee equal to 50% of its
management fee rate with respect to the fund's investments that the
sub-adviser manages on a discretionary basis.
Beginning January 1, 1999, FIMM will select certain investments for
the fund. FMR will pay FIMM a fee equal to 50% of its management fee
(before expense reimbursements) with respect to the fund's investments
that FIMM manages.
OTHER EXPENSES
While the management fee is a significant component of the fund's
annual operating costs, the fund has other expenses as well.
The fund contracts with FSC to perform transfer agency, dividend
disbursing, shareholder servicing, and accounting functions. These
services include processing shareholder transactions, valuing the
fund's investments, handling securities loans, and calculating the
fund's share price and dividends.
For the fiscal year ended September 1998, the fund paid
transfer agency and pricing and bookkeeping fees equal to 0. 23 %
of its average net assets. This amount is before expense reductions,
if any.
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.
The fund 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 fund
shares. FMR directly, or through FDC, may make payments to third
parties, such as banks or broker-dealers, that engage in the sale of,
or provide shareholder support services for, the fund's shares.
Currently, the Board of Trustees has authorized such payments.
The fund's portfolio turnover rate for the fiscal year ende d
Septem ber 1998 was 150 %. This rate varies from year to
year. High turnover rates increase transaction costs and may
increase taxable capital gains. FMR considers these effects when
evaluating the anticipated benefits of short-term investing.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of
America's first mutual funds. Today, Fidelity is the largest mutual
fund company in the country, and is known as an innovative provider of
high-quality financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, FBSI. Fidelity is also a
leader in providing tax-adva ntaged 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 a nd Fidelity's Web site.
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 75 walk-in Investor Centers across the country.
If you would prefer to access information on-line, you can visit
Fidelity's Web site at www.fidelity.com.
TYPES OF ACCOUNTS
You may set up an account directly in the fund or, if you own or
intend to purchase individual securities as part of your total
investment portfolio, you may consider investing in the fund through a
brokerage account.
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 220
(solid bullet) Assets in Fidelity mutual
funds: over $ 572 billion
(solid bullet) Number of shareholder
accounts: over 38 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 260
(checkmark)
The different ways to set up (register) your account with Fidelity are
listed in the table that follows.
The account guidelines that follow may not apply to certain retirement
accounts. If you are investing through a retirement account or if your
employer offers the fund through a retirement program, you may be
subject to additional fees. For more information, please refer to your
program materials, contact your employer, call your retirement
benefits number, visit Fidelity's Web site at www.fidelity.com, or
contact Fidelity directly, as appropriate .
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have
two or more owners (tenants).
RETIREMENT
FOR TAX ADVANTAGED RETIREMENT SAVINGS
Retirement plans provide individuals with tax-advantaged ways to save
for retirement, either with tax-deductible contributions or
tax-free growth. Retirement accounts require special applications and
typically have lower minimums.
(solid bullet) TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow
individuals under age 70 with compensation to contribute up to $2,000
per tax year. Married couples can contribute up to $4,000 per tax
year, provided no more than $2,000 is contributed on behalf of either
spouse. (These limits are aggregate for Traditional and Roth IRAs.)
Contributions may be tax-deductible, subject to certain income
limits.
(solid bullet) ROTH IRAS allow individuals to make
non-deductible contributions of up to $2,000 per tax year. Married
couples can contribute up to $4,000 per tax year, provided no more
than $2,000 is contributed on behalf of either spouse. (These limits
are aggregate for Traditional and Roth IRAs.) Eligibility is subject
to certain income limits. Qualified distributions are tax-free.
(solid bullet) ROTH CONVERSION IRAS allow individuals with
assets held in a Traditional IRA or Rollover IRA to convert those
assets to a Roth Conversion IRA. Eligibility is subject to certain
income limits. Qualified distributions are tax-free.
(solid bullet) ROLLOVER IRAS help retain special tax advantages for
certain eligible rollover distributions from employer-sponsored
retirement plans.
(solid bullet) 401(K) PLANS, and certain other 401(a)-qualified plans,
are employer-sponsored retirement plans that allow employer
contributions and may allow employee after-tax contributions. In
addition, 401(k) plans allow employee pre-tax (tax-deferred)
contributions. Contributions to these plans may be tax-deductible to
the employer.
(solid bullet) KEOGH PLANS are generally profit sharing or money
purchase pension plans that allow self-employed individuals or small
business owners to make tax-deductible contributions for themselves
and any eligible employees.
(solid bullet) SIMPLE IRAS provide small business owners and those
with self-employment income (and their eligible employees) with many
of the advantages of a 401(k) plan, but with fewer administrative
requirements.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide
small business owners or those with self-employment income (and their
eligible employees) with many of the same advantages as a Keogh, but
with fewer administrative requirements.
(solid bullet) SALARY REDUCTION SEP-IRAS (SARSEPS) allow
employees of businesses with 25 or fewer employees to contribute a
percentage of their wages on a tax-deferred basis. These plans must
have been established by the employer prior to January 1, 1997.
(solid bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees
of 501(c)(3) tax-exempt institutions, including schools,
hospitals, and other charitable organizations.
(solid bullet) DEFERRED COMPENSATION PLANS (457 PLANS) are available
to employees of most state and local governments and their agencies
and to employees of tax-exempt institutions.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and
obtain tax benefits. An individual can give up to $10,000 a year per
child without paying federal gift tax. Depending on state laws, you
can set up a custodial account under the Uniform Gifts to Minors Act
(UGMA) or the Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR
OTHER GROUPS
Requires a special application.
HOW TO BUY SHARES
THE PRICE TO BUY ONE SHARE of the fund is the fund's net asset value
per share (NAV). The fund's shares are sold without a sales charge.
Your shares will be purchased at the next NAV calculated after your
investment is received in prop er form. The fund'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 th e fund.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application
and mail it along with your check. You may also open your account in
person or by wire as described on page . If there is no application
accompanying this prospectus, call 1-800-544-8888 or visit
Fidelity's Web site at www.fidelity.com for an application.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another
Fidelity fund.
IF YOU ARE INVESTING THROUGH A TAX- ADVANTAGED RETIREMENT PLAN ,
such as an IRA, for the first time, you will need a special
application. Retirement investing also involves its own investment
procedures. Call 1-800-544-8888 or visit Fidelity's Web site at
www.fidelity.com for more information and a retirement
application.
If you buy 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
TO OPEN AN ACCOUNT $2500
For certain Fidelity retirement accountsA $500
TO ADD TO AN ACCOUNT $250
Through regular investment plansB $100
MINIMUM BALANCE $2,000
For certain Fidelity retirement accountsA $500
A THESE LOWER MINIMUMS APPLY TO FIDELITY TRADITIONAL IRA, ROTH IRA,
ROTH CONVERSION IRA, ROLLOVER IRA, SEP-IRA, AND KEOGH ACCOUNTS.
B FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER TO
"INVESTOR SERVICES," PAGE .
These minimums may be lower for investments through a Fidelity
GoalPlannerSM account. There is no minimum account balance or
initial or subsequent investment minimum for investments through
Fidelity Portfolio Advisory ServiceSM, a qualified state tuition
program, certain Fidelity retirement accounts funded through
salary deduction, or accounts opened with the proceeds of
distributions from such retirement accounts. Refer to the program
materials for details. In addition, the fund reserves the right to
waive or lower investment minimums in other circumstances.
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TO OPEN TO ADD
AN TO AN
ACCOUNT ACCOUN
T
PHONE 1-800-544-7777 (PHONE_GRAPHIC) (SMALL SOLID BULLET) EXCHANGE FROM (SMALL SOLID BULLET) EXCHANGE
ANOTHER FIDELITY FROM
FUND ACCOUNT ANOTHER
WITH THE SAME FIDELITY FUND
REGISTRATION, ACCOUNT
INCLUDING NAME, WITH THE
ADDRESS, AND SAME
TAXPAYER ID REGISTRATION,
NUMBER. 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.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
THE INTERNET
WWW.FIDELITY.COM
(COMPUTER GRAPHIC)
(SMALL SOLID BULLET) COMPLETE AND (SMALL SOLID BULLET) EXCHANGE FROM ANOTHER FIDELITY
FUND ACCOUNT WITH THE SAME
REGISTRATION,
SIGN THE INCLUDING NAME, ADDRESS, AND
TAXPAYER ID NUMBER.
APPLICATION. (SMALL SOLID BULLET) USE FIDELITY MONEY LINE TO
TRANSFER FROM YOUR BANK ACCOUNT. VISIT
MAKE YOUR FIDELITY'S WEB SITE BEFORE YOUR FIRST
USE TO VERIFY THAT THIS SERVICE IS IN
CHECK PAYABLE TO PLACE ON YOUR ACCOUNT. MAXIMUM MONEY
LINE: UP TO $100,000.
THE COMPLETE
NAME OF THE
FUND. MAIL TO THE
ADDRESS
INDICATED ON THE
APPLICATION.
MAIL (MAIL_GRAPHIC)
(SMALL SOLID BULLET) COMPLETE AND (SMALL SOLID BULLET) MAKE YOUR CHECK PAYABLE TO THE COMPLETE
NAME OF THE FUND. INDICATE YOUR FUND
SIGN THE ACCOUNT NUMBER ON YOUR CHECK AND
MAIL TO THE ADDRESS PRINTED ON YOUR
ACCOUNT
APPLICATION. STATEMENT.
MAKE YOUR (SMALL SOLID BULLET) EXCHANGE BY MAIL: CALL 1-800-544-6666
FOR INSTRUCTIONS.
CHECK PAYABLE TO
THE COMPLETE
NAME OF THE
FUND. MAIL TO THE
ADDRESS INDICATED
ON THE
APPLICATION.
IN PERSON (HAND_GRAPHIC)
(SMALL SOLID BULLET) BRING YOUR (SMALL SOLID BULLET) BRING YOUR CHECK TO A FIDELITY
INVESTOR CENTER. CALL 1-800-544-9797
FOR
APPLICATION AND THE CENTER NEAREST YOU.
CHECK TO A
FIDELITY INVESTOR
CENTER. CALL
1-800-544-979
7 FOR THE CENTER
NEAREST YOU.
WIRE (WIRE_GRAPHIC)
(SMALL SOLID BULLET) CALL (SMALL SOLID BULLET) NOT AVAILABLE FOR RETIREMENT ACCOUNTS.
1-800-544-77 (SMALL SOLID BULLET) WIRE TO:
77 TO SET UP BANKERS TRUST COMPANY,
YOUR ACCOUNT BANK ROUTING #021001033,
AND TO ARRANGE ACCOUNT #00163053.
A WIRE SPECIFY THE COMPLETE NAME OF THE
FUND AND INCLUDE YOUR ACCOUNT NUMBER
TRANSACTION. NOT AND YOUR NAME.
AVAILABLE FOR
RETIREMENT
ACCOUNTS.
(SMALL SOLID BULLET) WIRE WITHIN 24
HOURS TO:
BANKERS TRUST
COMPANY,
BANK ROUTING
#021001033,
ACCOUNT
#00163053.
SPECIFY THE
COMPLETE NAME
OF THE FUND AND
INCLUDE YOUR
NEW ACCOUNT
NUMBER AND
YOUR NAME.
AUTOMATICALLY (AUTOMATIC_GRAPHIC)
(SMALL SOLID BULLET) NOT AVAILABLE. (SMALL SOLID BULLET) USE FIDELITY AUTOMATIC ACCOUNT
BUILDER(REGISTERED TRADEMARK).
SIGN UP FOR THIS SERVICE WHEN
OPENING YOUR ACCOUNT, VISIT
FIDELITY'S WEB SITE AT WWW.FIDELITY.COM
TO OBTAIN
THE FORM TO ADD THE SERVICE, OR CALL
1-800-544-6666 TO ADD THE SERVICE.
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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 the fund is the fund's NAV.
Your shares will be sold at the next NAV calculated af ter your
order is received in proper form. The fund's NAV is normally
calculated each business day at 4:00 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the
methods described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be
made in writing, except for exchanges to other Fidelity funds, which
can be requested by phone, in writing , or through Fidelity's Web
site. Call 1-800-544-6666 for a retirement distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$2,000 worth of shares in the account to keep it open ($500 for
retirement accounts).
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to
sign up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in
writing and include a signature guarantee if any of the following
situations apply:
(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) 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
table that follows.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it
to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
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ACCOUNT TYPE SPECIAL REQUIREMENTS
PHONE
1-800-544-7777
(PHONE_GRAPHIC) ALL ACCOUNT TYPES EXCEPT (SMALL SOLID BULLET) MAXIMUM CHECK REQUEST: $100,000.
RETIREMENT (SMALL SOLID BULLET) FOR MONEY LINE TRANSFERS TO YOUR BANK ACCOUNT;
MINIMUM: $10; MAXIMUM: UP TO $100,000.
ALL ACCOUNT TYPES (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.
RETIREMENT ACCOUNT (SMALL SOLID BULLET) THE ACCOUNT OWNER SHOULD COMPLETE A
RETIREMENT DISTRIBUTION FORM. CALL
1-800-544-6666 TO REQUEST ONE.
TRUST (SMALL SOLID BULLET) THE TRUSTEE MUST SIGN THE LETTER INDICATING
CAPACITY AS TRUSTEE. IF THE TRUSTEE'S NAME IS NOT
IN THE ACCOUNT REGISTRATION, PROVIDE A COPY OF THE
TRUST DOCUMENT CERTIFIED WITHIN THE LAST 60 DAYS.
BUSINESS OR ORGANIZATION (SMALL SOLID BULLET) AT LEAST ONE PERSON AUTHORIZED BY CORPORATE
RESOLUTION TO ACT ON THE ACCOUNT MUST SIGN THE
LETTER.
(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 EXCEPT (SMALL SOLID BULLET) YOU MUST SIGN UP FOR THE WIRE FEATURE BEFORE
RETIREMENT 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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(TDD_GRAPHIC) TDD - SERVICE FOR THE DEAF AND HEARING IMPAIRED: 1-800-544-0118
</TABLE>
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.
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 XPRESS(REGISTERED TRADEMARK)
1-800-544-5555
WEB SITE
WWW.FID ELITY.COM
AUTOMATED SERVICE
(CHECKMARK)
FIDELITY'S WEB SITE at www.fidelity.com offers product and
servicing information, customer education, planning tools, and the
ability to make certain transactions in your account.
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your
account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more
than one account in the fund. Call 1-800-544-6666 if you need copies
of financial reports, prospectuses, or historical account information.
Electronic copies of most financial reports and prospectuses are
available at Fidelity's Web site. To participate in our electronic
delivery program, call 1-800-544-6666 or visit Fidelity's Web site at
www.fidelity.com for more information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of
other Fidelity funds by telephone, in writ ing, or through
Fidelity's Web site.
Note that exchanges out of 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 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 retirement, a home, educational expenses,
and other long-term financial goals. Certain restrictions apply for
retirement accounts. Call 1-800-544-6666 or visit Fidelity's Web
site at www.fidelity.com for more information.
REGULAR INVESTMENT PLANS
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FIDELITY AUTOMATIC ACCOUNT BUILDER
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 MONTHLY OR QUARTERLY (SMALL SOLID BULLET) FOR A NEW ACCOUNT, COMPLETE THE APPROPRIATE SECTION ON THE FUND
APPLICATION.
(SMALL SOLID BULLET) FOR EXISTING ACCOUNTS, CALL 1-800-544-6666 OR VISIT FIDELITY'S
WEB
SITE AT WWW.FIDELITY.COM 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
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 EVERY PAY PERIOD (SMALL SOLID BULLET) CHECK THE APPROPRIATE BOX ON THE FUND APPLICATION, OR CALL
1-800-544-6666 OR VISIT FIDELITY'S WEB SITE AT WWW.FIDELITY.COM
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
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 in vestm ent
income and capital gains to shareholders each year. Normally,
dividends and capital gains are distributed in December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on
the application, call 1-800-544-6666 for instructions. The fund offers
four options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions
will be automatically reinvested in additional shares of the fund. If
you do not indicate a choice on your application, you will be assigned
this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each
dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
If you select distribution option 2 or 3 and the U.S. Postal
Service does not deliver your checks, your election may be converted
to the Reinvestment Option. You will not receive interest on amounts
represented by uncashed distribution checks. To change your
distribution option, call Fidelity at 1-800-544-6666 .
When the fund deducts a distribution from its NAV, the reinvestment
price is the fund's NAV at the close of business that day. Cash
distribution checks will be mailed within seven days.
UNDERSTANDING
DISTRIBUTIONS
AS A FUND SHAREHOLDER, YOU ARE
ENTITLED TO YOUR SHARE OF THE
FUND'S NET INCOME AND GAINS
ON ITS INVESTMENTS. THE FUND
PASSES ITS EARNINGS ALONG TO ITS
INVESTORS AS DISTRIBUTIONS.
THE FUND EARNS DIVIDENDS FROM
STOCKS AND INTEREST FROM BOND,
MONEY MARKET, AND OTHER
INVESTMENTS. THESE ARE PASSED
ALONG AS DIVIDEND
DISTRIBUTIONS. THE FUND REALIZES
CAPITAL GAINS WHENEVER IT SELLS
SECURITIES FOR A HIGHER PRICE
THAN IT PAID FOR THEM. THESE
ARE PASSED ALONG AS CAPITAL
GAIN DISTRIBUTIONS.
(CHECKMARK)
TAXES
As with any investment, you should consider how your investment in the
fund will be taxed. If your account is not a tax-a dvantage d
retirement account, you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income
tax, and may also be subject to state or local taxes. If you live
outside the United States, your distributions could also be taxed by
the country in which you reside. Your distributions are taxable when
they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are
taxable as if they were paid on December 31.
For federal tax purposes, the fund's income and short-term capital
gains are distributed as dividends and taxed as ordinary income;
capital gain distributions are taxed as long-term capital gains. Every
January, Fidelity will send you and the IRS a statement showing the
tax characterization of distributions paid to you in the previous
year.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or
loss is the difference between the cost of your shares and the price
you receive when you sell them.
Whenever you sell shares of 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 fund 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.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on the
fund and its investments, and these taxes generally will reduce the
fund's distributions. However, if you meet certain holding period
requirements with respect to your fund shares, an offsetting tax
credit may be available to you. If you do not meet such holding period
requirements, you may still be entitled to a deduction for certain
foreign taxes. In either case, your tax statement will show more
taxable income or capital gains than were actually distributed by the
fund, but will also show the amount of the available offsetting credit
or deduction.
There are tax requirements that all funds must follow in order to
avoid federal taxation. In its effort to adhere to these requirements,
the fund may have to limit its investment activity in some types of
instruments.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. FSC normally calculates the fund's NAV as of the close
of business of the NYSE, normally 4:00 p.m. Eastern time.
THE FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the
number of shares outstanding.
The fund's assets are valued primarily on the basis of market
quotations. Short-term securities with remaining maturities of sixty
days or less for which quotations are not readily available are valued
on the basis of amortized cost. This method minimizes the effect of
changes in a security's market value. Foreign securities are valued on
the basis of quotations from the primary market in which they are
traded, and are translated from the local currency into U.S. dollars
using current exchange rates. In addition, if quotations are not
readily available, or if the values have been materially affected by
events occurring after the closing of a foreign market, assets may be
valued by another method that the Board of Trustees believes
accurately reflects fair value.
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 SHARES, your shares will be purchased
at the next NAV calculated after your investment is receive d 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
its transfer agent has incurred.
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 fund is
priced on the following business day. If payment is not received by
that time, the financial institution could be held liable for
resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at
the next NAV calculated after your order is received in pr oper
form. Not e 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) 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) 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) You will not receive interest on amounts
represented by uncashed redemption checks.
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 shares of the
fund for shares of other Fidelity funds. However, you should note the
following:
(small solid bullet) The fund you are exchanging into must be
available for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification
number.
(small solid bullet) Before exchanging into a fund, read its
prospectus.
(small solid bullet) If you exchange into a fund with a sales charge,
you pay the percentage-point difference between that fund's sales
charge and any sales charge you have previously paid in connection
with the shares you are exchanging. For example, if you had already
paid a sales charge of 2% on your shares and you exchange them into a
fund with a 3% sales charge, you would pay an additional 1% sales
charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund
performance and shareholders, 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 exchange limit may be modified for accounts
in certain institutional retirement plans to conform to plan exchange
limits and Department of Labor regulations. See your plan materials
for further information.
(small solid bullet) 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 3.00% of
the amount exchanged. Check each fund's prospectus for details.
Fidelity, Fidelity Investments & (Pyramid) Design, Fidelity
Investments, Fidelity Money Line, Fidelity Automatic Account Builder,
Touch Tone Xpress, and Directed Dividends are registered trademarks of
FMR Corp.
Asse t Manager: Growth, Fidelity GoalPlanner, and Portfolio Advisory
Services are service m arks of FMR Corp.
The third party marks appearing above are the marks of their
resp ective owners.
This prospectus is printed on recycled paper using soy-based inks.
FIDELITY CHARLES STREET TRUST:
FIDELITY ASSET MANAGER: INCOME
CROSS REFERENCE SHEET
FORM N-1A
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ITEM NUMBER PROSPECTUS SECTION
1 .............................. COVER PAGE
2 A .............................. EXPENSES
B, C .............................. CONTENTS; THE FUND AT A GLANCE; WHO MAY WANT TO
INVEST
3 A .............................. FINANCIAL HIGHLIGHTS
B .............................. *
C, D .............................. PERFORMANCE
4 A I............................. CHARTER
II........................... THE FUND AT A GLANCE; INVESTMENT PRINCIPLES AND
RISKS
B .............................. INVESTMENT PRINCIPLES AND RISKS
C .............................. WHO MAY WANT TO INVEST; INVESTMENT PRINCIPLES
AND RISKS
5 A .............................. CHARTER
B I............................. COVER PAGE; THE FUND AT A GLANCE; CHARTER; DOING
BUSINESS WITH FIDELITY
II........................... CHARTER
III.......................... EXPENSES; BREAKDOWN OF EXPENSES
C .............................. CHARTER
D .............................. CHARTER; BREAKDOWN OF EXPENSES
E .............................. COVER PAGE; CHARTER
F .............................. EXPENSES
G I.............................. CHARTER
II.............................. *
5A .............................. PERFORMANCE
6 A I............................. CHARTER
II........................... HOW TO BUY SHARES; HOW TO SELL SHARES;
TRANSACTION DETAILS; EXCHANGE RESTRICTIONS
III.......................... CHARTER
B ............................. CHARTER
C .............................. TRANSACTIONS DETAILS; EXCHANGE RESTRICTIONS
D .............................. *
E .............................. COVER PAGE, DOING BUSINESS WITH FIDELITY; HOW TO
BUY SHARES; HOW TO SELL SHARES; INVESTOR SERVICES
F, G .............................. DIVIDENDS, CAPITAL GAINS, AND TAXES
H .............................. *
7 A .............................. COVER PAGE; CHARTER
B .............................. EXPENSES; HOW TO BUY SHARES; TRANSACTION DETAILS
C .............................. *
D .............................. HOW TO BUY SHARES
E .............................. *
F .............................. BREAKDOWN OF EXPENSES
8 .............................. HOW TO SELL SHARES; INVESTOR SERVICES; TRANSACTION
DETAILS; EXCHANGE RESTRICTIONS
9 .............................. *
</TABLE>
* Not Applicable
FIDELITY
ASSET MANAGER:
INCOMESM
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
November 24, 1998 . The SAI has been filed with the Securities
and Exchange Commission (SEC) and is available along with other
related materials on the SEC's Internet Web site (http://www.sec.gov).
The SAI is incorporated herein by reference (legally forms a part of
the prospectus). For a free copy of either document, call
Fidelity (registered trademark) at 1-800-544-8888.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
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.
AMI-pro-1198
1.537638.101
(fund number 328, trading symbol FASIX)
This asset allocation fund seeks high current income through
investment in stocks, bonds and short-term and money market
instruments of all types. The fund also considers the potential for
capital appreciation.
PROSPECTUS
NOVEMBER 24, 1998
(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA 02109
CONTENTS
KEY FACTS 3 THE FUND AT A GLANCE
3 WHO MAY WANT TO INVEST
4 EXPENSES THE FUND'S YEARLY OPERATING
EXPENSES.
5 FINANCIAL HIGHLIGHTS A SUMMARY OF THE
FUND'S FINANCIAL DATA.
6 PERFORMANCE HOW THE FUND HAS DONE
OVER TIME.
THE FUND IN DETAIL 8 CHARTER HOW THE FUND IS ORGANIZED.
9 INVESTMENT PRINCIPLES AND RISKS THE
FUND'S OVERALL APPROACH TO INVESTING.
10 BREAKDOWN OF EXPENSES HOW
OPERATING COSTS ARE CALCULATED AND WHAT
THEY INCLUDE.
YOUR ACCOUNT 11 DOING BUSINESS WITH FIDELITY
11 TYPES OF ACCOUNTS DIFFERENT WAYS TO
SET UP YOUR ACCOUNT, INCLUDING
TAX- ADVANTAGED RETIREMENT PLANS.
13 HOW TO BUY SHARES OPENING AN
ACCOUNT AND MAKING ADDITIONAL
INVESTMENTS.
16 HOW TO SELL SHARES TAKING MONEY OUT
AND CLOSING YOUR ACCOUNT.
18 INVESTOR SERVICES SERVICES TO HELP YOU
MANAGE YOUR ACCOUNT.
SHAREHOLDER AND 19 DIVIDENDS, CAPITAL GAINS,
ACCOUNT POLICIES AND TAXES
20 TRANSACTION DETAILS SHARE PRICE
CALCULATIONS AND THE TIMING OF
PURCHASES AND REDEMPTIONS.
20 EXCHANGE RESTRICTIONS
KEY FACTS
THE FUND AT A GLANCE
GOAL: High current income, and capital appreciation when appropriate.
As with any mutual fund, there is no assurance that the fund will
achieve its goal.
STRATEGY: The fund diversifies across stocks, bonds and short-term and
money market instruments, both here and abroad, to pursue its goal.
The fund has a neutral mix which represents the way the fund's
investments will generally be allocated over the long-term. This mix
will vary over short-term periods as fund management gradually adjusts
the fund's holdings - within defined ranges - based on the current
outlook for the different markets.
Neutral Mix
Stocks 20%
(can range from
10-30%)
Row: 1, Col: 1, Value: 30.0
Row: 1, Col: 2, Value: 20.0
Row: 1, Col: 3, Value: 50.0
Bonds 50%
(can range from
40-60%)
Short-Term/Money
Market 30%
(can range from
10-50%)
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments (registered trademark) ,
which was established in 1946 and is now America's largest mutual fund
manager. Foreign affiliates of FMR may help choose investments for the
fund.
Beginning January 1, 1999, Fidelity Investments Money Management,
Inc. (FIMM), a subsidiary of FMR, will choose certain types of
investments for the fund.
SIZE: As of September 30, 1998 , the fund had over $776
m illion in assets.
WHO MAY WANT TO INVEST
The fund may be appropriate for inves tors who want to diversify
among stocks, bonds, short-term and money market instruments, and
other types of securities in one fund. If you are looking for a fund
that can invest in a wide range of security types within defined
ranges in pursuit of current income, this fund may be appropriate for
you.
Because the fund owns different types of investments, its performance
is affected by a variety of factors. The value of the fund's
investments and the income they generate will vary from day to day,
and generally reflect interest rates, market conditions, and other
company, political, and economic news. Performance also depends on
FMR's skill in allocating assets. When you sell your fund shares, they
may be worth more or less than what you paid for them.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy
or sell 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 REINVESTED DISTRIBUTIONS NONE
DEFERRED SALES CHARGE ON REDEMPTIONS NONE
ANNUAL ACCOUNT MAINTENANCE FEE $12.00
(FOR ACCOUNTS UNDER $2,500)
ANNUAL FUND 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. The fund's expenses are
factored into its share price or dividends and are not charged
directly to shareholder accounts (see "Breakdown of Expenses" page
).
The following figures are based on historical expenses of the fund and
are calculated as a percentage of average net assets of the fund. A
portion of the brokerage commissions that the fund pays is used to
reduce the fund's expenses. In addition, the fund has entered into
arrangements with its custodian and transfer agent whereby credits
realized as a result of uninvested cash balances are used to reduce
custodian and transfer agent expenses. Including these reductions, the
total fund operating expenses presented in the table would have been
0.69 %.
MANAGEMENT FEE 0.44%
12B-1 FEE NONE
OTHER EXPENSES 0.27%
TOTAL FUND OPERATING EXPENSES 0.71%
EXAMPLES: Let's say, hypothetically, that the fund's annual return is
5% and that your shareholder transaction expenses and the fund's
annual operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses
if you close your account after the number of years indicated:
1 YEAR $ 7
3 YEARS $ 23
5 YEARS $ 40
10 YEARS $ 88
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected expenses or returns, all of which may vary.
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
THE FUND'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 follows has been audited by
PricewaterhouseCoopers LLP , 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
YEARS ENDED SEPTEMBER 30 1998 1997 1996 1995 1994 1993C
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.36 $ 11.63 $ 11.46 $ 10.69 $ 11.07 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .57B .56B .61 .56 .45 .46
NET REALIZED AND UNREALIZED GAIN .39 1.02 .20 .68 (.29) 1.04
(LOSS)
TOTAL FROM INVESTMENT OPERATIONS .96 1.58 .81 1.24 .16 1.50
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.58) (.59) (.64) (.47) (.47) (.43)
FROM NET REALIZED GAIN (.29) (.26) -- -- (.04) --
IN EXCESS OF NET REALIZED GAIN -- -- -- -- (.03) --
TOTAL DISTRIBUTIONS (.87) (.85) (.64) (.47) (.54) (.43)
NET ASSET VALUE, END OF PERIOD $ 12.45 $ 12.36 $ 11.63 $ 11.46 $ 10.69 $ 11.07
TOTAL RETURNA 8.06% 14.16% 7.28% 11.99% 1.46% 15.32%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 $ 776,116 $ 647,402 $ 566,104 $ 566,079 $ 501,349 $ 199,237
OMITTED)
RATIO OF EXPENSES TO AVERAGE NET .71% .77% .82% .79% .71% .65%
ASSETS D D
RATIO OF EXPENSES TO AVERAGE NET .69% .76% .80% .79% .71% .65%
ASSETS AFTER EXPENSE REDUCTIONS E E E
RATIO OF NET INVESTMENT INCOME TO 4.62% 4.74% 5.03% 5.15% 4.92% 5.19%
AVERAGE NET ASSETS
PORTFOLIO TURNOVER RATE 156% 112% 148% 157% 83% 47%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
C FOR THE PERIOD OCTOBER 1, 1992 (COMMENCEMENT OF OPERATIONS) TO
SEPTEMBER 30, 1993.
D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S
EXPENSES.
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN. The
total returns that follow are based on historical fund results and do
not reflect the effect of taxes.
The fund's fiscal year runs from October 1 through September 30. The
tables below show the fund's performance over past fiscal years
compared to a composite index. The chart on page
presents calendar year performance.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FISCAL PERIODS ENDED PAST 1 PAST 5 LIFE OF
SEPTEMBER 30, 1998 YEAR YEARS FUNDA
ASSET MANAGER: INCOME 8.06% 8.50% 9.61%
FIDELITY CONSERVATIVE 9.55% 9.02% N/A
ASSET ALLOCATION
COMPOSITE INDEX
CUMULATIVE TOTAL RETURNS
FISCAL PERIODS ENDED PAST 1 PAST 5 LIFE OF
SEPTEMBER 30, 1998 YEAR YEARS FUNDA
ASSET MANAGER: INCOME 8.06% 50.35% 73.38%
FIDELITY CONSERVATIVE
ASSET ALLOCATION COMPOSITE INDEX 9.55% 53.99% N/A
</TABLE>
A FROM OCTOBER 1, 1992 (COMMENCEMENT OF OPERATIONS)
EXAMPLE: Let's say, hypothetically, that you put $10,000 in the fund
on October 1, 1992. From that date through September 30, 1998 ,
the fund's total return was 73.38 %. Your $10,000 would have
grown to $ 17,338 (the initial investment plus 73.38 % of
$10,000).
$10,000 OVER LIFE OF FUND
FISCAL YEARS 1992 1995 1998
ROW: 1, COL: 1, VALUE: 10000.0
ROW: 2, COL: 1, VALUE: 10131.75
ROW: 3, COL: 1, VALUE: 10335.71
ROW: 4, COL: 1, VALUE: 10601.78
ROW: 5, COL: 1, VALUE: 10775.92
ROW: 6, COL: 1, VALUE: 11012.63
ROW: 7, COL: 1, VALUE: 11095.59
ROW: 8, COL: 1, VALUE: 11157.79
ROW: 9, COL: 1, VALUE: 11282.63
ROW: 10, COL: 1, VALUE: 11376.79
ROW: 11, COL: 1, VALUE: 11628.47
ROW: 12, COL: 1, VALUE: 11660.07
ROW: 13, COL: 1, VALUE: 11818.44
ROW: 14, COL: 1, VALUE: 11744.57
ROW: 15, COL: 1, VALUE: 11926.14
ROW: 16, COL: 1, VALUE: 12131.02
ROW: 17, COL: 1, VALUE: 11915.04
ROW: 18, COL: 1, VALUE: 11687.39
ROW: 19, COL: 1, VALUE: 11698.18
ROW: 20, COL: 1, VALUE: 11731.1
ROW: 21, COL: 1, VALUE: 11665.22
ROW: 22, COL: 1, VALUE: 11819.1
ROW: 23, COL: 1, VALUE: 11940.44
ROW: 24, COL: 1, VALUE: 11829.82
ROW: 25, COL: 1, VALUE: 11863.39
ROW: 26, COL: 1, VALUE: 11774.41
ROW: 27, COL: 1, VALUE: 11763.68
ROW: 28, COL: 1, VALUE: 11831.41
ROW: 29, COL: 1, VALUE: 12046.3
ROW: 30, COL: 1, VALUE: 12171.32
ROW: 31, COL: 1, VALUE: 12330.59
ROW: 32, COL: 1, VALUE: 12627.09
ROW: 33, COL: 1, VALUE: 12752.88
ROW: 34, COL: 1, VALUE: 12959.19
ROW: 35, COL: 1, VALUE: 13074.38
ROW: 36, COL: 1, VALUE: 13247.66
ROW: 37, COL: 1, VALUE: 13270.83
ROW: 38, COL: 1, VALUE: 13503.77
ROW: 39, COL: 1, VALUE: 13726.82
ROW: 40, COL: 1, VALUE: 13880.66
ROW: 41, COL: 1, VALUE: 13785.7
ROW: 42, COL: 1, VALUE: 13773.58
ROW: 43, COL: 1, VALUE: 13785.38
ROW: 44, COL: 1, VALUE: 13833.79
ROW: 45, COL: 1, VALUE: 13942.35
ROW: 46, COL: 1, VALUE: 13846.45
ROW: 47, COL: 1, VALUE: 13881.96
ROW: 48, COL: 1, VALUE: 14211.73
ROW: 49, COL: 1, VALUE: 14517.86
ROW: 50, COL: 1, VALUE: 14937.29
ROW: 51, COL: 1, VALUE: 14799.54
ROW: 52, COL: 1, VALUE: 15016.25
ROW: 53, COL: 1, VALUE: 15080.03
ROW: 54, COL: 1, VALUE: 14810.26
ROW: 55, COL: 1, VALUE: 15080.75
ROW: 56, COL: 1, VALUE: 15416.69
ROW: 57, COL: 1, VALUE: 15649.97
ROW: 58, COL: 1, VALUE: 16144.31
ROW: 59, COL: 1, VALUE: 15948.38
ROW: 60, COL: 1, VALUE: 16223.6
ROW: 61, COL: 1, VALUE: 16249.53
ROW: 62, COL: 1, VALUE: 16434.63
ROW: 63, COL: 1, VALUE: 16635.67
ROW: 64, COL: 1, VALUE: 16785.91
ROW: 65, COL: 1, VALUE: 17073.26
ROW: 66, COL: 1, VALUE: 17252.0
ROW: 67, COL: 1, VALUE: 17223.94
ROW: 68, COL: 1, VALUE: 17348.6
ROW: 69, COL: 1, VALUE: 17557.06
ROW: 70, COL: 1, VALUE: 17487.06
ROW: 71, COL: 1, VALUE: 17108.65
ROW: 72, COL: 1, VALUE: 17530.85
$
$17,338
EXPLANATION OF TERMS
UNDERSTANDING
PERFORMANCE
As economic conditions
change, different types of
investments do better than
others. While Asset Manager:
Income usually invests in
stocks, bonds, and short-term
and money market instruments,
its emphasis is in bonds and
short-term and money market
instruments. The fund's
performance tends to be
related to changes in short-term
interest rates, but will also
reflect the performance of the
other investments in its mix
during the time period.
(checkmark)
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.
FIDELITY CONSERVATIVE ASSET ALLOCATION COMPOSITE INDEX is a
hypothetical representation of the performance of the fund's three
asset classes according to their respective weightings in the fund's
neutral mix (20% stocks, 50% bonds and 30% short term/money market).
The following indexes are used to calculate the Composite Index:
stocks - the Standard & Poor's 500 Index (S&P 500(registered
trademark)), bonds - the Lehman Brothers Aggregate Bond Index, and
short term/money market - the Lehman Brothers 3-Month Treasury Bill
Index. Prior to January 1, 1997, the Lehman Brothers Treasury Bond
Index was used for the bond class. The index weightings of the
Composite Index are rebalanced monthly.
STANDARD & POOR'S 500 INDEX (S&P 500) is a widely
recognized, unmanaged index of common stocks.
LEHMAN BROTHERS AGGREGATE BOND INDEX is a market value weighted
performance benchmark for investment-grade fixed-rate debt issues,
including government, corporate, asset-backed, and mortgage-backed
securities, with maturities of at least one year.
LEHMAN BROTHERS 3-MONTH TREASURY BILL INDEX represents the
average of Treasury Bill rates for each of the prior three months,
adjusted to a bond equivalent yield basis (short-term and money market
instruments).
Unlike the fund's returns, the total returns of the composite
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.
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1993 1994 1995 1996 1997
ASSET MANAGER: INCOME 15.39% -1.36% 16.69% 7.81% 12.41%
Fidelity Conservative Asset
Allocation Composite Index 6.81% 1.41% 15.56% 7.96%
12.96%
Consumer Price Index 2.75% 2.67% 2.54% 3.32% 1.70%
Percentage (%)
Row: 1, Col: 1, Value: 0.0
Row: 2, Col: 1, Value: 0.0
Row: 3, Col: 1, Value: 0.0
Row: 4, Col: 1, Value: 0.0
Row: 5, Col: 1, Value: 0.0
Row: 6, Col: 1, Value: 15.39
Row: 7, Col: 1, Value: -1.36
Row: 8, Col: 1, Value: 16.69
Row: 9, Col: 1, Value: 7.81
Row: 10, Col: 1, Value: 12.41
(LARGE SOLID BOX) Asset Manager:
Income
Other illustrations of fund performance may show moving averages over
specified periods.
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, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUND IN DETAIL
CHARTER
ASSET MANAGER: INCOME 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 Charles Street Trust, an open-end
management investment company organized as a Massachusetts business
trust on July 7, 1981.
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.
FMR AND ITS AFFILIATES
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs.
Affiliates assist FMR with foreign investments:
(small solid bullet) Fidelity Management & Research (U.K.) Inc.
(FMR U.K.), in London, England, serves as a sub-adviser for the
fun d.
(small solid bullet) Fidelity Management & Research Far East Inc.
(FMR Far East), in Tokyo, Japan, serves as a sub-adviser for the
fund.
Beginning January 1, 1999, FIMM, located in Merrimack, New
Hampshire, will select certain types of investments for the fund.
Dick Habermann is Vice President and lead manager of Asset Manager:
Income, which he has managed since March 1996. Other Fidelity
investment professionals assist Mr. Habermann in selecting investments
within each asset class for the fund. He also manages other
Fidelity funds. Mr. Habermann is a senior vice president of FMR Co.
Previously, he was division head for international equities and
director of international research from 1993 to 1996, and joint chief
strategist for Portfolio Advisory Services from 1996 to 1997. Mr.
Habermann joined Fidelity in 1968.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services.
Fidelity Service Company, Inc. (FSC) performs transfer agent servicing
functions for the fund.
FMR Corp. is the ultimate parent company of FMR, FMR U.K., FMR Far
East 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.
FMR may use its broker-dealer affiliates and other firms that sell
fund shares to carry out the fund's transactions, provided that the
fund receives brokerage services and commission rates comparable to
those of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
THE FUND seeks a high level of current income by allocating its
assets among stocks, bonds, short-term and money market instruments,
and other instruments of U.S. and foreign issuers. The fund also
considers the potential for capital appreciation.
The fund allocates its assets among the following classes, or types,
of investments. The STOCK CLASS includes equity securities of all
types. The BOND CLASS includes all varieties of fixed-income
securities maturing in more than one year. The SHORT-TERM/MONEY MARKET
CLASS includes all types of short-term and money market instruments.
FMR may use its judgment to place a security in the most appropriate
class based on its investment characteristics. Fixed-income securities
may be classified in the bond or short-term/money market class
according to interest rate sensitivity as well as maturity. The fund
may also make other investments that do not fall within these classes.
FMR has the ability to allocate the fund's assets within specified
ranges. The fund's NEUTRAL MIX represents the benchmark for its
combination of investments in each asset class over time. FMR may
change the neutral mix from time to time. The range and approximate
neutral mix for each asset class are shown below.
Range Neutral mix
STOCK CLASS 10 - 30% 20%
BOND CLASS 40 - 60% 50%
SHORT-TERM/MONEY
MARKET CLASS 10 - 50% 30%
Asset Manager: Income's approach focuses on bonds and short-term and
money market instruments for current income. However, its ability to
invest a portion of its assets in stocks offers the opportunity for
capital appreciation, and potentially more volatility, than other
income-oriented funds.
In pursuit of the fund's objective, FMR will not try to pinpoint the
precise moment when a major reallocation should be made. Instead, FMR
regularly reviews the fund's allocations and makes changes gradually
to favor investments that it believes will provide the most favorable
outlook for achieving the fund's objective. Under normal
circumstances, a single reallocation will not involve more than 10% of
the fund's total assets. Although FMR uses its expertise and resources
in allocating assets, FMR's decisions may not be advantageous to the
fund.
Because the fund is subject to the risks of each investment
type, the fund and its performance are affected by many factors. Stock
values fluctuate in response to the activities of individual companies
and general market and economic conditions. The value of bonds and
short-term instruments fluctuates based on changes in interest rates
and in the credit quality of the issuer.
FMR may use various investment techniques to hedge a portion of the
fund's risks, but there is no guarantee that these strategies will
work as FMR intends. 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. The fund also reserves the right to invest without
limitation in preferred stocks and investment-grade debt instruments
for temporary, defensive purposes.
The fund diversifies across investment types more than most mutual
funds. No one mutual fund, however, can provide an appropriate
balanced investment plan for all investors.
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.
EQUITY SECURITIES may include common stocks and warrants. Common
stocks, the most familiar type, represent an equity (ownership)
interest in a corporation. Although equity securities have a history
of long-term growth in value, their prices fluctuate based on changes
in a company's financial condition and on overall market and economic
conditions. Smaller companies are especially sensitive to these
factors.
RESTRICTIONS: With respect to 75% of its total assets, the fund may
not invest in more than 10% of the outstanding voting
securities of a single issuer.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers
to borrow money from investors. The issuer 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: Purchase of a debt security is consistent with the
fund's debt quality policy if it is rated at or above the stated level
by Moody's Investors Service, Standard & Poor's, Duff & Phelps Credit
Rating Co., or Fitch IBCA, Inc. , or is unrated but judged to be
of equivalent quality by FMR. The fund currently intends to limit its
investment in corporate and foreign government debt securities (other
than convertible debt securities) to those of Baa-quality and above.
The fund currently intends to limit its investments in lower than
Baa-quality convertible debt securities (sometimes called "junk
bonds") to 5% of its assets.
MONEY MARKET SECURITIES are high-quality, short-term instruments
issued by the U.S. Government, corporations, financial institutions,
and other entities. These securities may carry fixed, variable, or
floating interest rates.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies,
and securities issued by U.S. entities with substantial foreign
operations may involve additional risks and considerations. These
include risks relating to political, economic, or regulatory
conditions in foreign countries; fluctuations in foreign
currencies; withholding or other taxes; trading, settlement,
custodial, and other operational risks; and the potentially less
stringent investor protection and disclosure standards of foreign
markets. Additionally, governmental issuers of foreign debt securities
may be unwilling to pay interest and repay principal when due and may
require that the conditions for payment be renegotiated. All of these
factors can make foreign investments, especially those in emerging
markets, more volatile and potentially less liquid than
U.S. investments.
ASSET-BACKED SECURITIES include interests in pools of debt securities,
commercial or consumer loans, or other receivables. The value of these
securities depends on many factors, including changes in interest
rates, the availability of information concerning the pool and its
structure, the credit quality of the underlying assets, the market's
perception of the servicer of the pool, and any credit enhancement
provided. In addition, these securities may be subject to prepayment
risk.
MORTGAGE SECURITIES include interests in pools of commercial or
residential mortgages, and may include complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed
securities. Mortgage securities may be issued by agencies or
instrumentalities of the U.S. Government or by private entities.
The price of a mortgage security may be significantly affected by
changes in interest rates. Some mortgage securities may have a
structure that makes their reaction to interest rates and other
factors difficult to predict, making their price highly volatile.
Also, mortgage securities, especially stripped mortgage-backed
securities, are subject to prepayment risk. Securities subject to
prepayment risk generally offer less potential for gains during a
declining interest rate environment, and similar or greater potential
for loss in a rising interest rate environment.
STRIPPED SECURITIES are the separate income or principal components of
a debt security. The risks associated with stripped securities are
similar to those of other debt securities, although stripped
securities may be more volatile, and the value of certain types of
stripped securities may move in the same direction as interest rates.
U.S. Treasury securities that have been stripped by a Federal Reserve
Bank are obligations issued by the U.S. Treasury.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund buys a
security at one price and simultaneously agrees to sell it back at a
higher price. Delays or losses could result if the other party to the
agreement defaults or becomes insolvent.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices,
interest rates, currency exchange 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 currency exchange contracts or swap agreements, purchasing
indexed securities, and selling securities short.
FMR can use these practices to adjust the risk and return
characteristics of 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 invest more than 10% of its
assets 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.
OTHER INSTRUMENTS may include convertible securities, preferred
stocks, and real estate-related instruments.
CASH MANAGEMENT. The fund may invest in money market securities, in
repurchase agreements, and in a money market fund available only to
funds and accounts managed by FMR or its affiliates, whose goal is to
seek a high level of current income while maintaining a stable $1.00
share price. A major change in interest rates or a default on the
money market fund's investments could cause its share price to change.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce
the risks of investing. This may include limiting the amount of money
invested in any one issuer or, on a broader scale, in any one
industry. Economic, business, or political changes can affect all
securities of a similar type.
RESTRICTIONS: With respect to 75% of its total assets, the fund may
not invest more than 5% in the securities of any one issuer. The
fund may not invest more than 25% of its total assets in any one
industry. These limitations do not apply to U.S. Government
securities.
BORROWING. The fund may borrow from banks or from other funds advised
by FMR or its affiliates , 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.
LENDING securities to broker-dealers and institutions, including
Fidelity Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a
means of earning income. This practice could result in a loss or a
delay in recovering the fund's securities. The fund may also lend
money to other funds advised by FMR or its affiliates .
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of the
fund's total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages
are fundamental, that is, subject to change only by shareholder
approval. The following paragraphs restate all those that are
fundamental. All policies stated throughout this prospectus, other
than those identified in the following paragraphs, can be changed
without shareholder approval.
The fund seeks a high level of current income by allocating its assets
among stocks, bonds, short-term instruments and other investments.
With respect to 75% of total assets, the fund may not invest
more than 5% in the securities of any one issuer and may not invest
in more than 10% of the outstanding voting securities of a single
issuer. These limitations do not apply to U.S. Government securities.
The fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
securities.
The fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 331/3% of its total assets.
Loans, in the aggregate, may not exceed 331/3% of the fund's total
assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily
operations. Expenses paid out of the fund'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.
FMR in turn pays fees to affiliates who provide assistance with these
services. 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
UNDERSTANDING THE
MANAGEMENT FEE
The management fee FMR
receives is designed to be
responsive to changes in FMR's
total assets under
management. Building this
variable into the fee
calculation assures
shareholders that they will pay
a lower rate as FMR's assets
under management increase.
(checkmark)
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, dividing by twelve, and multiplying the result by the fund's
average net assets throughout the month.
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 September 1998 , the group fee rate was 0.1353 %. The
individual fund fee rate is 0.30%.
The total management fee for the fiscal year ended September 30,
1998 , was 0.44 % of the fund's average net assets.
FMR HAS SUB-ADVISORY AGREEMENTS with FMR U.K. and FMR Far East. These
sub-advisers provide FMR with investment research and advice on
issuers based outside the United States. Under the sub-advisory
agreements, FMR pays FMR U.K. and FMR Far East fees equal to 110% and
105%, respectively, of the costs of providing these services.
The sub-advisers may also provide investment management services. In
return, FMR pays FMR U.K. and FMR Far East a fee equal to 50% of its
management fee rate with respect to the fund's investments that the
sub-adviser manages on a discretionary basis.
Beginning January 1, 1999, FIMM will select certain investments for
the fund. FMR will pay FIMM a fee equal to 50% of its management fee
(before expense reimbursements) with respect to the fund's investments
that FIMM manages.
OTHER EXPENSES
While the management fee is a significant component of the fund's
annual operating costs, the fund has other expenses as well.
The fund contracts with FSC to perform transfer agency, dividend
disbursing, shareholder servicing, and accounting functions. These
services include processing shareholder transactions, valuing the
fund's investments, handling securities loans, and calculating the
fund's share price and dividends.
For the fiscal year ended September 1998, the fund paid
transfer agency and pricing and bookkeeping fees equal to 0. 24 %
of its average net assets. This amount is before expense reductions,
if any.
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.
The fund 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 fund
shares. FMR directly, or through FDC, may make payments to third
parties, such as banks or broker-dealers, that engage in the sale of,
or provide shareholder support services for, the fund's shares.
Currently, the Board of Trustees has a uthorized such payments.
The fund's portfolio turnover rate for the fiscal year ended
September 1998 was 156 %. This rate varies from year to
year. High turnover rates increase transaction costs and may increase
taxable capital gains. FMR considers these effects when evaluating the
anticipated benefits of short-term investing.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of
America's first mutual funds. Today, Fidelity is the largest mutual
fund company in the country, and is known as an innovative provider of
high-quality financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, FBSI. Fidelity is also a
leader in providing tax- advantaged retirement plans for
individuals investing on their own or through their employer.
Fidelity is committed to providing investors with practical
information to make investment decisions. Based in Boston, Fidelity
provides customers with complete service 24 hours a day, 365 days a
year, through a network of telephone service centers around the
country and Fidelity's Web site.
To reach Fidelity for general information, call these numbers:
(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 75 walk-in Investor Centers across the country.
If you would prefer to access information on-line, you can visit
Fidelity's Web site at www.fidelity.com.
TYPES OF ACCOUNTS
You may set up an account directly in the fund or, if you own or
intend to purchase individual securities as part of your total
investment portfolio, you may consider investing in the fund through a
brokerage account.
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.
The different ways to set up (register) your account with Fidelity are
listed in the table that follows.
The account guidelines that follow may not apply to certain retirement
accounts. If you are investing through a retirement account or if your
employer offers the fund through a retirement program, you may be
subject to additional fees. For more information, please refer to your
program materials, contact your employer, call your retirement
benefits number, visit Fidelity's Web site at www.fidelity.com, or
contact Fidelity directly, as appropriate.
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over 220
(solid bullet) Assets in Fidelity mutual
funds: over $ 572 billion
(solid bullet) Number of shareholder
accounts: over 38 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 260
(checkmark)
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have
two or more owners (tenants).
RETIREMENT
FOR TAX-ADVANTAGED RETIREMENT SAVINGS
Retirement plans provide individuals with tax-advantaged ways to save
for retirement, either with tax-deductible contributions or tax-free
growth. Retirement accounts require special applications and typically
have lower minimums.
(solid bullet) TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow
individuals under age 70 with compensation to contribute up to $2,000
per tax year. Married couples can contribute up to $4,000 per tax
year, provided no more than $2,000 is contributed on behalf of either
spouse. (These limits are aggregate for Traditional and Roth IRAs.)
Contributions may be tax-deductible, subject to certain income
limits.
(solid bullet) ROTH IRAS allow individuals to make
non-deductible contributions of up to $2,000 per tax year. Married
couples can contribute up to $4,000 per tax year, provided no more
than $2,000 is contributed on behalf of either spouse. (These limits
are aggregate for Traditional and Roth IRAs.) Eligibility is subject
to certain income limits. Qualified distributions are tax-free.
(solid bullet) ROTH CONVERSION IRAS allow individuals with
assets held in a Traditional IRA or Rollover IRA to convert those
assets to a Roth Conversion IRA. Eligibility is subject to certain
income limits. Qualified distributions are tax-free.
(solid bullet) ROLLOVER IRAS help retain special tax
advantages for certain eligible rollover distributions from
employer -sponsored retirement plans.
(solid bullet) 401(K) PLANS, and certain other
401(a)-qualified plans, are employer-sponsored retirement plans that
allow employer contributions and may allow employee after-tax
contributions. In addition, 401(k) plans allow employee pre-tax
(tax-deferred) contributions. Contributions to these plans may be
tax-deductible to the employer.
(solid bullet) KEOGH PLANS are generally profit sharing or
money purchase pension plans that allow self-employed individuals or
small business owners to make tax-deductible contributions for
themselves and any eligible employees.
(solid bullet) SIMPLE IRAS provide small business owners and those
with self-employment income (and their eligible employees) with many
of the advantages of a 401(k) plan, but with fewer administrative
requirements.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide
small business owners or those with self-employment income (and their
eligible employees) with many of the same advantages as a Keogh, but
with fewer administrative requirements.
(solid bullet) SALARY REDUCTION SEP-IRAS (SARSEPS) allow
employees of businesses with 25 or fewer employees to contribute a
percentage of their wages on a tax-deferred basis. These plans must
have been established by the employer prior to January 1, 1997.
(solid bullet) 403(B) CUSTODIAL ACCOUNTS are available to
employees of 501(c)(3) tax-exempt institutions, including schools,
hospitals, and other charitable organizations.
(solid bullet) DEFERRED COMPENSATION PLANS (457 PLANS) are
available to employees of most state and local governments and their
agencies and to employees of tax-exempt institutions.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and
obtain tax benefits. An individual can give up to $10,000 a year per
child without paying federal gift tax. Depending on state laws, you
can set up a custodial account under the Uniform Gifts to Minors Act
(UGMA) or the Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR
OTHER GROUPS
Requires a special application.
HOW TO BUY SHARES
THE PRICE TO BUY ONE SHARE of the fund is the fund's net asset value
per share (NAV). The fund's shares are sold without a sales charge.
Your shares will be purchased at the next NAV calculated after your
investment is received in proper form . The fund'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.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application
and mail it along with your check. You may also open your account in
person or by wire as described on page . If there is no application
accompanying this prospectus, call 1-800-544-8888 or visit
Fidelity's Web site at www.fidelity.com for an application.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another
Fidelity fund.
IF YOU ARE INVESTING THROUGH A TAX- ADVANTAGED RETIREMENT PLAN,
such as an IRA, for the first time, you will need a special
application. Retirement investing also involves its own investment
procedures. Call 1-800-544-8888 or visit Fidelity's Web site at
www.fidelity.com for more information and a retirement
application.
If you buy 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
TO OPEN AN ACCOUNT $2,500
For certain Fidelity retirement accounts A $500
TO ADD TO AN ACCOUNT $250
Through regular investment plansB $100
MINIMUM BALANCE $2,000
For certain Fidelity retirement accountsA $500
A THESE LOWER MINIMUMS APPLY TO FIDELITY TRADITIONAL IRA, ROTH IRA,
ROTH CONVERSION IRA, ROLLOVER IRA, SEP-IRA, AND KEOGH ACCOUNTS.
B FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE
REFER TO "INVESTOR SERVICES," PAGE .
These minimums may be lower for investments through a Fidelity
GoalPlannerSM account. There is no minimum account balance or
initial or subsequent investment minimum for investments through
Fidelity Portfolio Advisory Services SM , a qualified state
tuition program, certain Fidelity retirement accounts funded
through salary deduction, or accounts opened with the proceeds of
distributions from such retirement accounts. Refer to the
program materials for details. In addition, the fund reserves the
right to waive or lower investment minimums in other
circumstances.
<TABLE>
<CAPTION>
<S> <C> <C>
TO OPEN TO ADD TO
AN AN
ACCOUNT ACCOUNT
PHONE 1-800-544-7777 (PHONE_GRAPHIC) (SMALL SOLID BULLET) EXCHANGE FROM (SMALL SOLID BULLET) EXCHANGE FROM
ANOTHER FIDELITY ANOTHER FIDELITY
FUND ACCOUNT FUND ACCOUNT
WITH THE SAME WITH THE SAME
REGISTRATION, REGISTRATION,
INCLUDING NAME, INCLUDING NAME,
ADDRESS, AND ADDRESS, AND
TAXPAYER ID TAXPAYER ID
NUMBER. 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.
THE INTERNET WWW.FIDELITY.COM (COMPUTER GRAPHIC) (SMALL SOLID BULLET) COMPLETE AND (SMALL SOLID BULLET) EXCHANGE FROM
SIGN THE ANOTHER FIDELITY
APPLICATION. FUND ACCOUNT
MAKE YOUR CHECK WITH THE SAME
PAYABLE TO THE REGISTRATION,
COMPLETE NAME INCLUDING NAME,
OF THE FUND. MAIL ADDRESS, AND
TO THE ADDRESS TAXPAYER ID
INDICATED ON THE NUMBER.
APPLICATION. (SMALL SOLID BULLET) USE FIDELITY
MONEY LINE TO
TRANSFER FROM
YOUR BANK
ACCOUNT. VISIT
FIDELITY'S WEB
SITE BEFORE YOUR
FIRST USE TO VERIFY
THAT THIS SERVICE
IS IN PLACE ON
YOUR ACCOUNT.
MAXIMUM
MONEY LINE: UP
TO $100,000.
MAIL (MAIL_GRAPHIC) (SMALL SOLID BULLET) COMPLETE AND (SMALL SOLID BULLET) MAKE YOUR
SIGN THE CHECK PAYABLE
APPLICATION. TO THE COMPLETE
MAKE YOUR NAME OF THE
CHECK PAYABLE TO FUND. INDICATE
THE COMPLETE YOUR FUND
NAME OF THE ACCOUNT NUMBER
FUND. MAIL TO THE ON YOUR CHECK
ADDRESS INDICATED AND MAIL TO THE
ON THE ADDRESS PRINTED
APPLICATION. ON YOUR ACCOUNT
STATEMENT.
(SMALL SOLID BULLET) EXCHANGE BY
MAIL: CALL
1-800-544-666
6 FOR INSTRUCTIONS.
IN PERSON (HAND_GRAPHIC) (SMALL SOLID BULLET) BRING YOUR (SMALL SOLID BULLET) BRING YOUR
APPLICATION AND CHECK TO A
CHECK TO A FIDELITY INVESTOR
FIDELITY INVESTOR CENTER. CALL
CENTER. CALL 1-800-544-979
1-800-544-9797 7 FOR THE CENTER
FOR THE CENTER NEAREST YOU.
NEAREST YOU.
WIRE (WIRE_GRAPHIC) (SMALL SOLID BULLET) CALL (SMALL SOLID BULLET) NOT AVAILABLE
1-800-544-777 RETIREMENT
7 TO SET UP YOUR ACCOUNTS.
ACCOUNT AND TO (SMALL SOLID BULLET) WIRE TO:
ARRANGE A WIRE BANKERS TRUST
TRANSACTION. NOT COMPANY,
AVAILABLE FOR BANK ROUTING
RETIREMENT #021001033,
ACCOUNTS. ACCOUNT
(SMALL SOLID BULLET) WIRE WITHIN 24 #00163053.
HOURS TO: SPECIFY THE
BANKERS TRUST COMPLETE NAME
COMPANY, BANK OF THE FUND AND
ROUTING INCLUDE YOUR
#021001033, ACCOUNT NUMBER
ACCOUNT AND YOUR NAME.
#00163053.
SPECIFY THE
COMPLETE NAME
OF THE FUND AND
INCLUDE YOUR
NEW ACCOUNT
NUMBER AND
YOUR NAME.
AUTOMATICALLY (AUTOMATIC_GRAPHIC) (SMALL SOLID BULLET) NOT AVAILABLE. (SMALL SOLID BULLET) USE FIDELITY
AUTOMATIC
ACCOUNT
BUILDER(REGISTERED TRADEMARK). SIGN
UP FOR THIS
SERVICE WHEN
OPENING YOUR
ACCOUNT, VISIT
FIDELITY'S WEB
SITE AT
WWW.FIDELITY.COM
TO OBTAIN THE
FORM TO ADD THE
SERVICE, OR CALL
1-800-544-666
6 TO ADD THE
SERVICE.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(TDD_GRAPHIC) TDD - SERVICE FOR THE DEAF AND HEARING IMPAIRED: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares.
THE PRICE TO SELL ONE SHARE of the fund is the fund's NAV.
Your shares will be sold at the next NAV calculated after your order
is received in proper form. The fund's NAV is normally
calculated each business day at 4:00 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the
methods described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be
made in writing, except for exchanges to other Fidelity funds, which
can be requested by phone, in writing, or through Fidelity's Web
site . Call 1-800-544-6666 for a retirement distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$2,000 worth of shares in the account to keep it open ($500 for
retirement accounts).
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to
sign up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in
writing and include a signature guarantee if any of the following
situations apply:
(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) 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
table that follows.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it
to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
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ACCOUNT TYPE SPECIAL REQUIREMENTS
PHONE
1-800-544-7777
(PHONE_GRAPHIC) ALL ACCOUNT TYPES EXCEPT (SMALL SOLID BULLET) MAXIMUM CHECK REQUEST: $100,000.
RETIREMENT (SMALL SOLID BULLET) FOR MONEY LINE TRANSFERS TO YOUR BANK ACCOUNT;
MINIMUM: $10; MAXIMUM: UP TO $100,000.
ALL ACCOUNT TYPES (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.
RETIREMENT ACCOUNT (SMALL SOLID BULLET) THE ACCOUNT OWNER SHOULD COMPLETE A
RETIREMENT DISTRIBUTION FORM. CALL
1-800-544-6666 TO REQUEST ONE.
TRUST (SMALL SOLID BULLET) THE TRUSTEE MUST SIGN THE LETTER INDICATING
CAPACITY
AS TRUSTEE. IF THE TRUSTEE'S NAME IS NOT IN THE
ACCOUNT REGISTRATION, PROVIDE A COPY OF THE TRUST
DOCUMENT CERTIFIED WITHIN THE LAST 60 DAYS.
BUSINESS OR ORGANIZATION (SMALL SOLID BULLET) AT LEAST ONE PERSON AUTHORIZED BY CORPORATE
RESOLUTION TO ACT ON THE ACCOUNT MUST SIGN THE
LETTER.
(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 EXCEPT (SMALL SOLID BULLET) YOU MUST SIGN UP FOR THE WIRE FEATURE BEFORE
RETIREMENT 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.
(TDD_GRAPHIC) TDD - SERVICE FOR THE DEAF AND HEARING IMPAIRED: 1-800-544-0118
</TABLE>
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.
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 XPRESS(REGISTERED TRADEMARK)
1-800-544-5555
WEB SITE
WWW.FIDELITY.COM
AUTOMATED SERVICE
(CHECKMARK)
FIDELITY'S WEB SITE at www.fidelity.com offers product and
servicing information, customer education, planning tools, and the
ability to make certain transactions in your account.
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your
account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more
than one account in the fund. Call 1-800-544-6666 if you need copies
of financial reports, prospectuses, or historical account information.
Electronic copies of most financial reports and prospectuses are
available at Fidelity's Web site. To participate in our electronic
delivery program, call 1-800-544-6666 or visit Fidelity's Web site at
www.fidelity.com for more information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of
other Fidelity funds by telephone, in writing, or through
Fidelity's Web site .
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 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 retirement, a home, educational expenses,
and other long-term financial goals. Certain restrictions apply for
retirement accounts. Call 1-800-544-6666 or visit Fidelity's Web
site at www.fidelity.com for more information.
REGULAR INVESTMENT PLANS
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FIDELITY AUTOMATIC ACCOUNT BUILDER
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 MONTHLY OR QUARTERLY (SMALL SOLID BULLET) FOR A NEW ACCOUNT, COMPLETE THE APPROPRIATE SECTION ON THE FUND
APPLICATION.
(SMALL SOLID BULLET) FOR EXISTING ACCOUNTS, CALL 1-800-544-6666 OR VISIT
FIDELITY'S WEB
SITE AT WWW.FIDELITY.COM 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
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 EVERY PAY PERIOD (SMALL SOLID BULLET) CHECK THE APPROPRIATE BOX ON THE FUND APPLICATION, OR CALL
1-800-544-6666 OR VISIT FIDELITY'S WEB SITE AT WWW.FIDELITY.COM
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
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.
</TABLE>
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. Normally,
dividends are distributed monthly. Capital gains are normally
distributed in December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on
the application, call 1-800-544-6666 for instructions. The fund offers
four options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions
will be automatically reinvested in additional shares of the fund. If
you do not indicate a choice on your application, you will be assigned
this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each
dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
If you select distribution option 2 or 3 and the U.S. Postal
Service does not deliver your checks, your election may be converted
to the Reinvestment Option. You will not receive interest on amounts
represented by uncashed distribution checks. To change your
distribution option, call Fidelity at 1-800-544-6666.
When the fund deducts a distribution from its NAV, the reinvestment
price is the fund's NAV at the close of business that day. Cash
distribution checks will be mailed within seven days.
UNDERSTANDING
DISTRIBUTIONS
AS A FUND SHAREHOLDER, YOU ARE
ENTITLED TO YOUR SHARE OF THE
FUND'S NET INCOME AND GAINS
ON ITS INVESTMENTS. THE FUND
PASSES ITS EARNINGS ALONG TO ITS
INVESTORS AS DISTRIBUTIONS.
THE FUND EARNS DIVIDENDS FROM
STOCKS AND INTEREST FROM BOND,
MONEY MARKET, AND OTHER
INVESTMENTS. THESE ARE PASSED
ALONG AS DIVIDEND
DISTRIBUTIONS. THE FUND REALIZES
CAPITAL GAINS WHENEVER IT SELLS
SECURITIES FOR A HIGHER PRICE
THAN IT PAID FOR THEM. THESE
ARE PASSED ALONG AS CAPITAL
GAIN DISTRIBUTIONS.
(CHECKMARK)
TAXES
As with any investment, you should consider how your investment in the
fund will be taxed. If your account is not a tax- advantaged
retirement account, you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income
tax, and may also be subject to state or local taxes. If you live
outside the United States, your distributions could also be taxed by
the country in which you reside. Your distributions are taxable when
they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are
taxable as if they were paid on December 31.
For federal tax purposes, the fund's income and short-term capital
gains are distributed as dividends and taxed as ordinary income;
capital gain distributions are taxed as long-term capital gains. Every
January, Fidelity will send you and the IRS a statement showing the
tax characterization of distributions paid to you in the previous
year.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or
loss is the difference between the cost of your shares and the price
you receive when you sell them.
Whenever you sell shares of 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 fund 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.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on the
fund and its investments, and these taxes generally will reduce the
fund's distributions. However, if you meet certain holding period
requirements with respect to your fund shares, an offsetting tax
credit may be available to you. If you do not meet such holding period
requirements, you may still be entitled to a deduction for certain
foreign taxes. In either case, your tax statement will show more
taxable income or capital gains than were actually distributed by the
fund, but will also show the amount of the available offsetting credit
or deduction.
There are tax requirements that all funds must follow in order to
avoid federal taxation. In its effort to adhere to these requirements,
the fund may have to limit its investment activity in some types of
instruments.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. FSC normally calculates the fund's NAV as of the close
of business of the NYSE, normally 4:00 p.m. Eastern time.
THE FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the
number of shares outstanding.
The fund's assets are valued primarily on the basis of market
quotations or on the basis of information furnished by a pricing
service. Short-term securities with remaining maturities of sixty days
or less for which quotations and information furnished by a pricing
service are not readily available are valued on the basis of amortized
cost. This method minimizes the effect of changes in a security's
market value. Foreign securities are valued on the basis of quotations
from the primary market in which they are traded, and are translated
from the local currency into U.S. dollars using current exchange
rates. In addition, if quotations and information furnished by a
pricing service are not readily available, or if the values have been
materially affected by events occurring after the closing of a foreign
market, assets may be valued by another method that the Board of
Trustees believes accurately reflects fair value.
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 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
its transfer agent has incurred.
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 fund is
priced on the following business day. If payment is not received by
that time, the financial institution could be held liable for
resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at
the next NAV calculated after your order is received in proper
form . 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) 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) 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) You will not receive interest on amounts
represented by uncashed redemption checks.
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 shares of the
fund for shares of other Fidelity funds. However, you should note the
following:
(small solid bullet) The fund you are exchanging into must be
available for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification
number.
(small solid bullet) Before exchanging into a fund, read its
prospectus.
(small solid bullet) If you exchange into a fund with a sales charge,
you pay the percentage-point difference between that fund's sales
charge and any sales charge you have previously paid in connection
with the shares you are exchanging. For example, if you had already
paid a sales charge of 2% on your shares and you exchange them into a
fund with a 3% sales charge, you would pay an additional 1% sales
charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund
performance and shareholders, 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 exchange limit may be modified for accounts
in certain institutional retirement plans to conform to plan exchange
limits and Department of Labor regulations. See your plan materials
for further information.
(small solid bullet) 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 3.00%
of the amount exchanged. Check each fund's prospectus for details.
Fidelity, Fidelity Investments & (Pyramid) Design, Fidelity
Investments, Fidelity Money Line, Fidelity Automatic Account Builder,
TouchTone Xpress, and Directed Dividends are registered trademarks of
FMR Corp.
Asset Manager: Income, Fidelity GoalPlanner and Portfolio Advisory
Services are service marks of FMR Corp.
The third party marks appearing above are the marks of their
respective owners.
This prospectus is printed on recycled paper using soy-based inks.
FIDELITY CHARLES STREET TRUST:
FIDELITY ASSET MANAGER FUNDS
CROSS REFERENCE SHEET
FORM N-1A
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ITEM NUMBER PROSPECTUS SECTION
1 .............................. COVER PAGE
2 A .............................. EXPENSES
B, C .............................. CONTENTS; THE FUNDS AT A GLANCE; WHO MAY WANT
TO INVEST
3 A .............................. FINANCIAL HIGHLIGHTS
B .............................. *
C,D .............................. PERFORMANCE
4 A I............................. CHARTER
II........................... THE FUNDS AT A GLANCE; INVESTMENT PRINCIPLES AND
RISKS
B .............................. INVESTMENT PRINCIPLES AND RISKS
C .............................. WHO MAY WANT TO INVEST; INVESTMENT PRINCIPLES
AND RISKS
5 A .............................. CHARTER
B I............................. COVER PAGE; THE FUNDS AT A GLANCE; CHARTER; DOING
BUSINESS WITH FIDELITY
II........................... CHARTER
III.......................... EXPENSES; BREAKDOWN OF EXPENSES
C .............................. CHARTER
D .............................. CHARTER; BREAKDOWN OF EXPENSES
E .............................. COVER PAGE; CHARTER
F .............................. EXPENSES
G I............................. CHARTER
II............................ *
5A .............................. PERFORMANCE
6 A I............................. CHARTER
II........................... HOW TO BUY SHARES; HOW TO SELL SHARES;
TRANSACTION DETAILS; EXCHANGE RESTRICTIONS
III.......................... CHARTER
B ............................. CHARTER
C .............................. TRANSACTION DETAILS; EXCHANGE RESTRICTIONS
D .............................. *
E .............................. COVER PAGE; DOING BUSINESS WITH FIDELITY; HOW TO
BUY SHARES; HOW TO SELL SHARES; INVESTOR SERVICES
F, G .............................. DIVIDENDS, CAPITAL GAINS, AND TAXES
H .............................. *
7 A .............................. COVER PAGE; CHARTER
B .............................. EXPENSES; HOW TO BUY SHARES; TRANSACTION DETAILS
C .............................. *
D .............................. HOW TO BUY SHARES
E .............................. *
F .............................. BREAKDOWN OF EXPENSES
8 .............................. HOW TO SELL SHARES; INVESTOR SERVICES; TRANSACTION
DETAILS; EXCHANGE RESTRICTIONS
9 .............................. *
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how
each fund invests and the services available to shareholders.
To learn more about each fund and its investments, you can obtain a
copy of each fund's most recent financial report and portfolio
listing, or a copy of the Statement of Additional Information (SAI)
dated November 24 , 1998. The SAI has been filed with the
Securities and Exchange Commission (SEC) and is available along with
other related materials on the SEC's Internet Web site
(http://www.sec.gov). The SAI is incorporated herein by reference
(legally forms a part of the prospectus). For a free copy of either
document, call Fidelity (registered trademark) at
1-800-544-8888.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
This family of asset allocation funds offers three approaches to
diversifying your investment. Each fund seeks to achieve its
individual goal by investing in different mixes of stocks, bonds and
short-term and money market instruments of all types.
THE FIDELITY
ASSET MANAGER
FUNDS
FIDELITY ASSET MANAGER: INCOME seeks high current income, but also
considers the potential for capital appreciation.
(fund number 328, trading symbol FASIX)
FIDELITY ASSET MANAGER(registered trademark) seeks high total return
with reduced risk over the long term.
(fund number 314, trading symbol FASMX)
FIDELITY ASSET MANAGER: GROWTH seeks to maximize total return over the
long term.
(fund number 321, trading symbol FASGX)
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.
FFM-PRO-119 8
1.703009.101
PROSPECTUS
NOVEMBER 24 , 1998
(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA 02109
CONTENTS
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KEY FACTS 3 THE FUNDS AT A GLANCE
3 WHO MAY WANT TO INVEST
5 EXPENSES EACH FUND'S YEARLY OPERATING EXPENSES.
7 FINANCIAL HIGHLIGHTS A SUMMARY OF EACH FUND'S FINANCIAL DATA.
11 PERFORMANCE HOW EACH FUND HAS DONE OVER TIME.
THE FUNDS IN DETAIL 18 CHARTER HOW EACH FUND IS ORGANIZED.
19 INVESTMENT PRINCIPLES AND RISKS EACH FUND'S OVERALL
APPROACH TO INVESTING.
22 BREAKDOWN OF EXPENSES HOW OPERATING COSTS ARE CALCULATED
AND WHAT THEY INCLUDE.
YOUR ACCOUNT 23 DOING BUSINESS WITH FIDELITY
24 TYPES OF ACCOUNTS DIFFERENT WAYS TO SET UP YOUR ACCOUNT,
INCLUDING TAX- ADVANTAGED RETIREMENT PLANS.
25 HOW TO BUY SHARES OPENING AN ACCOUNT AND MAKING
ADDITIONAL INVESTMENTS.
27 HOW TO SELL SHARES TAKING MONEY OUT AND CLOSING YOUR
ACCOUNT.
29 INVESTOR SERVICES SERVICES TO HELP YOU MANAGE YOUR ACCOUNT.
SHAREHOLDER AND ACCOUNT POLICIES 30 DIVIDENDS, CAPITAL GAINS, AND TAXES
31 TRANSACTION DETAILS SHARE PRICE CALCULATIONS AND THE TIMING
OF PURCHASES AND REDEMPTIONS.
32 EXCHANGE RESTRICTIONS
</TABLE>
KEY FACTS
THE FUNDS AT A GLANCE
STRATEGY: The funds diversify across stocks, bonds and short-term and
money market instruments, both here and abroad, to pursue specific
goals. Each fund has a neutral mix which represents the way the fund's
investments will generally be allocated over the long term. This mix
will vary over short-term periods as fund management gradually adjusts
the fund's holdings - within defined ranges - based on the current
outlook for the different markets.
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments (registered trademark) ,
which was established in 1946 and is now America's largest mutual fund
manager. Foreign affiliates of FMR may help choose investments for the
funds.
Beginning January 1, 1999, Fidelity Investments Money Management,
Inc. (FIMM), a subsidiary of FMR, will choose certain types of
investments for the funds.
As with any mutual fund, there is no assurance that a fund will
achieve its goal.
ASSET MANAGER: INCOME SM
SIZE: As of September 30, 199 8 , the fund had over $ 776
million in assets.
ASSET MANAGER SM
SIZE: As of September 30, 199 8 , the fund had over $ 11.5
billion in assets.
ASSET MANAGER: GROWTH SM
SIZE: As of September 30, 199 8 , the fund had over $ 4.5
billion in assets.
WHO MAY WANT TO INVEST
Asset allocation funds are designed for investors who want to
diversify among stocks, bonds and short-term and money market
instruments and other types of securities, in one fund. If you are
looking for a fund that can invest in a wide range of security types
within defined ranges, one of the Asset Manager funds may be
appropriate for you.
Because each fund owns different types of investments, its performance
is affected by a variety of factors. The value of each fund's
investments and the income they generate will vary from day to day,
and generally reflect interest rates, market conditions, and other
company, political, and economic news. Performance also depends on
FMR's skill in allocating assets. When you sell your fund shares, they
may be worth more or less than what you paid for them.
ASSET MANAGER: INCOME
GOAL: High current income, and capital appreciation when appropriate.
Neutral Mix
STOCKS 20%
(can range from 10-30%)
Row: 1, Col: 1, Value: 30.0
Row: 1, Col: 2, Value: 20.0
Row: 1, Col: 3, Value: 50.0
BONDS 50%
(can range from 40-60%)
SHORT-TERM/MONEY
MARKET 30%(can range
from 10-50%)
With its emphasis on bonds and short-term and money market
instruments, Asset
Manager: Income is the most conservative fund in the family.
ASSET MANAGER
GOAL: High total return with reduced risk over the long term.
Neutral Mix
STOCKS 50%
(can range from 30-70%)
Row: 1, Col: 1, Value: 10.0
Row: 1, Col: 2, Value: 50.0
Row: 1, Col: 3, Value: 40.0
BONDS 40%
(can range from 20-60%)
SHORT-TERM/MONEY
MARKET 10% (can range
from 0-50%)
With its more balanced approach, Asset Manager is the
middle-of-the-road member of the family.
ASSET MANAGER: GROWTH
GOAL: Maximum total return over the long term.
Neutral Mix
STOCKS 70%
(can range from 50-100%)
Row: 1, Col: 1, Value: 5.0
Row: 1, Col: 2, Value: 65.0
Row: 1, Col: 3, Value: 30.0
BONDS 25%
(can range from 0-50%)
SHORT-TERM/MONEY
MARKET 5%(can range
from 0-50%)
With its emphasis on stocks, Asset Manager: Growth is the most
aggressive fund in the family.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy
or sell shares of a fund. In addition, you may be charged an annual
account maintenance fee if your account balance falls below $2,500.
See "Transaction Details," page , for an explanation of how and
when these charges apply.
SALES CHARGE ON PURCHASES AND REINVESTED DISTRIBUTIONS NONE
DEFERRED SALES CHARGE ON REDEMPTIONS NONE
ANNUAL ACCOUNT MAINTENANCE FEE (FOR ACCOUNTS UNDER $2,500) $12.00
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets.
Each 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. A fund's expenses are
factored into its share price or dividends and are not charged
directly to shareholder accounts (see "Breakdown of Expenses , "
page ).
The following figures are based on historical expenses of each
fund and are calculated as a percentage of average net assets of each
fund. A portion of the brokerage commissions that a fund pays is used
to reduce that fund's expenses. In addition, each fund has entered
into arrangements with its custodian and transfer agent whereby
credits realized as a result of uninvested cash balances are used to
reduce custodian and transfer agent expenses. Including these
reductions, the total fund operating expenses presented in the table
would have been 0.69 % for Asset Manager: Income, 0.74 %
for Asset Manager, and 0.80 % for Asset Manager: Growth.
ASSET MANAGER: INCOME
MANAGEMENT FEE 0.44 %
12B-1 FEE NONE
OTHER EXPENSES 0.27 %
TOTAL FUND OPERATING EXPENSES 0.71 %
ASSET MANAGER
MANAGEMENT FEE 0.54 %
12B-1 FEE NONE
OTHER EXPENSES 0.22 %
TOTAL FUND OPERATING EXPENSES 0.76 %
ASSET MANAGER: GROWTH
MANAGEMENT FEE 0.59 %
12B-1 FEE NONE
OTHER EXPENSES 0.25 %
TOTAL FUND OPERATING EXPENSES 0.84 %
EXAMPLES: Let's say, hypothetically, that each fund's annual return is
5% and that your shareholder transaction expenses and each fund's
annual operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses
if you close your account after the number of years indicated:
ASSET MANAGER: INCOME
1 YEAR $ 7
3 YEARS $ 23
5 YEARS $ 40
10 YEARS $ 88
ASSET MANAGER
1 YEAR $ 8
3 YEARS $ 24
5 YEARS $ 42
10 YEARS $ 94
ASSET MANAGER: GROWTH
1 YEAR $ 9
3 YEARS $ 27
5 YEARS $ 47
10 YEARS $ 104
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected expenses or returns, all of which may vary.
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 each fund'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 tables that follow have been audited by
PricewaterhouseCoopers LLP , independent accountants. The funds'
financial highlights, financial statements, and reports of the auditor
are included in each fund's Annual Report, and are incorporated by
reference into (are legally a part of) the funds' SAI. Contact
Fidelity for a free copy of an Annual Report or the SAI.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
ASSET MANAGER: INCOME
SELECTED PER-SHARE DATA AND RATIOS
YEARS ENDED SEPTEMBER 30 1998 1997 1996 1995 1994 1993C
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.36 $ 11.63 $ 11.46 $ 10.69 $ 11.07 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .57B .56B .61 .56 .45 .46
NET REALIZED AND UNREALIZED GAIN (LOSS) .39 1.02 .20 .68 (.29) 1.04
TOTAL FROM INVESTMENT OPERATIONS .96 1.58 .81 1.24 .16 1.50
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.58) (.59) (.64) (.47) (.47) (.43)
FROM NET REALIZED GAIN (.29) (.26) -- -- (.04) --
IN EXCESS OF NET REALIZED GAIN -- -- -- -- (.03) --
TOTAL DISTRIBUTIONS (.87) (.85) (.64) (.47) (.54) (.43)
NET ASSET VALUE, END OF PERIOD $ 12.45 $ 12.36 $ 11.63 $ 11.46 $ 10.69 $ 11.07
TOTAL RETURNA 8.06% 14.16% 7.28% 11.99% 1.46% 15.32%
NET ASSETS, END OF PERIOD (000 OMITTED) $ 776,116 $ 647,402 $ 566,104 $ 566,079 $ 501,349 $ 199,237
RATIO OF EXPENSES TO AVERAGE NET ASSETS .71% .77% .82% .79% .71%D .65%D
RATIO OF EXPENSES TO AVERAGE NET ASSETS
AFTER EXPENSE REDUCTIONS .69%E .76%E .80%E .79% .71% .65%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.62% 4.74% 5.03% 5.15% 4.92% 5.19%
PORTFOLIO TURNOVER RATE 156% 112% 148% 157% 83% 47%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
C FOR THE PERIOD OCTOBER 1, 1992 (COMMENCEMENT OF OPERATIONS) TO
SEPTEMBER 30, 1993.
D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S
EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSET MANAGER
SELECTED PER-SHARE DATA AND RATIOS
YEARS ENDED SEPTEMBER 30 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989E
NET ASSET VALUE,
BEGINNING OF PERIOD $19.01 $16.49 $15.47 $14.58 $14.97 $13.50 $13.02 $10.64 $11.39 $10.00
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT INCOME .61D .59D .62 .49 .34 .52 .46 .55 .58 .27
NET REALIZED AND
UNREALIZED GAIN (LOSS) .37 3.35 .96 .93 .21 2.01 .97 2.48 (.71) 1.12
TOTAL FROM INVESTMENT
OPERATIONS .98 3.94 1.58 1.42 .55 2.53 1.43 3.03 (.13) 1.39
LESS DISTRIBUTIONS
FROM NET INVESTMENT
INCOME (.64) (.67) (.56) (.44) (.44) (.87) (.45) (.65) (.38) --
FROM NET REALIZED GAIN (1.11) (.75) -- -- (.45) (.19) (.50) -- (.24) --
IN EXCESS OF NET
REALIZED GAIN -- -- -- (.09) (.05) -- -- -- -- --
TOTAL DISTRIBUTIONS (1.75) (1.42) (.56) (.53) (.94) (1.06) (.95) (.65) (.62) --
NET ASSET VALUE,
END OF PERIOD $18.24 $19.01 $16.49 $15.47 $14.58 $14.97 $13.50 $13.02 $10.64 $11.39
TOTAL RETURNB,C 5.34% 25.15% 10.37% 10.09% 3.60% 19.71% 11.84% 29.78% (1.27)% 13.90%
NET ASSETS,
END OF PERIOD
(IN MILLIONS) $11,576 $11,866 $10,674 $11,084 $11,792 $7,266 $2,762 $743 $346 $245
RATIO OF EXPENSES TO
AVERAGE NET ASSETS .76% .79% .95% .97% 1.04% 1.09% 1.17% 1.17% 1.17% 1.58%A
RATIO OF EXPENSES TO
AVERAGE NET ASSETS AFTER
EXPENSE REDUCTIONS .74%F .78%F .93%F .97% 1.04% 1.09% 1.17% 1.17% 1.17% 1.58%A
RATIO OF NET INVESTMENT
INCOME TO AVERAGE NET
ASSETS 3.19% 3.39% 3.64% 4.27% 3.63% 4.28% 5.58% 5.74% 5.89% 5.88%A
PORTFOLIO TURNOVER RATE 136% 79% 131% 137% 109% 98% 134% 134% 105% 167%A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD DECEMBER 28, 1988 (COMMENCEMENT OF OPERATIONS) TO
SEPTEMBER 30,1989.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S
EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
ASSET MANAGER: GROWTH
SELECTED PER-SHARE DATA AND RATIOS
YEARS ENDED SEPTEMBER 30 1998 1997 1996 1995 1994 1993 1992E
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.97 $ 16.56 $ 14.88 $ 13.91 $ 13.77 $ 11.16 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .49D .42D .47 .26 .13 .18 .14
NET REALIZED AND UNREALIZED GAIN (LOSS) .49 4.49 1.44 1.07 .61 2.66 1.02
TOTAL FROM INVESTMENT OPERATIONS .98 4.91 1.91 1.33 .74 2.84 1.16
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.40) (.43) (.23) (.27) (.18) (.15) --
FROM NET REALIZED GAIN (1.75) (1.07) -- -- (.37) (.08) --
IN EXCESS OF NET REALIZED GAIN -- -- -- (.09) (.05) -- --
TOTAL DISTRIBUTIONS (2.15) (1.50) (.23) (.36) (.60) (.23) --
NET ASSET VALUE, END OF PERIOD $ 18.80 $ 19.97 $ 16.56 $ 14.88 $ 13.91 $ 13.77 $ 11.16
TOTAL RETURNB,C 5.33% 31.57% 12.99% 9.95% 5.39% 25.83% 11.60%
NET ASSETS, END OF PERIOD (IN MILLIONS) $ 4,537 $ 4,457 $ 3,099 $ 2,850 $ 3,071 $ 1,243 $ 94
RATIO OF EXPENSES TO AVERAGE NET ASSETS .84% .87% 1.02% 1.03% 1.15% 1.19%F 1.64%A
RATIO OF EXPENSES TO AVERAGE NET ASSETS
AFTER EXPENSE REDUCTIONS .80%G .86%G 1.01%G 1.02%G 1.15% 1.19% 1.64%A
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 2.49% 2.36% 2.51% 3.16% 2.64% 3.02% 3.50%A
PORTFOLIO TURNOVER RATE 150% 70% 138% 119% 104% 97% 693%A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD DECEMBER 30, 1991 (COMMENCEMENT OF OPERATIONS) TO
SEPTEMBER 30,1992.
F FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S
EXPENSES.
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN. The
total returns that follow are based on historical fund results and do
not reflect the effect of taxes.
Each fund's fiscal year runs from October 1 through September 30. The
tables below show each fund's performance over past fiscal years
compared to a composite index. The charts on page present
calendar year performance.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS
FISCAL PERIODS ENDED PAST 1 YEAR PAST 5 YEARS LIFE OF FUNDA
SEPTEMBER 30, 1998
ASSET MANAGER: INCOME 8.06% 8.50% 9.61%
FIDELITY CONSERVATIVE ASSET ALLOCATION COMPOSITE INDEX 9.55% 9.02% N/A
ASSET MANAGER 5.34% 10.66% 12.81%
FIDELITY ASSET ALLOCATION COMPOSITE INDEX 10.26% 12.35% N/A
ASSET MANAGER: GROWTH 5.33% 12.65% 14.85%
FIDELITY AGGRESSIVE ASSET ALLOCATION COMPOSITE INDEX 9.98% 15.48% N/A
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
FISCAL PERIODS ENDED PAST 1 YEAR PAST 5 YEARS LIFE OF FUNDA
SEPTEMBER 30, 1998
ASSET MANAGER: INCOME 8.06% 50.35% 73.38%
FIDELITY CONSERVATIVE ASSET ALLOCATION COMPOSITE INDEX 9.55% 53.99% N/A
ASSET MANAGER 5.34% 65.94% 224.25%
FIDELITY ASSET ALLOCATION COMPOSITE INDEX 10.26% 79.01% N/A
ASSET MANAGER: GROWTH 5.33% 81.45% 154.80%
FIDELITY AGGRESSIVE ASSET ALLOCATION COMPOSITE INDEX 9.98% 105.38% N/A
</TABLE>
A FROM COMMENCEMENT OF OPERATIONS: OCTOBER 1, 1992 (ASSET MANAGER:
INCOME);
DECEMBER 28, 1988 (ASSET MANAGER); DECEMBER 30, 1991 (ASSET MANAGER:
GROWTH).
EXAMPLE: Let's say, hypothetically, that you had $10,000 invested in
each fund on its start date. The charts below show the growth in value
of your $10,000 investment in each fund through September 30,
199 8 .
ASSET MANAGER: INCOME
FISCAL PERIODS 1992 1994 199 6 199 8
ROW: 1, COL: 1, VALUE: 10000.0
ROW: 2, COL: 1, VALUE: 10131.75
ROW: 3, COL: 1, VALUE: 10335.71
ROW: 4, COL: 1, VALUE: 10601.78
ROW: 5, COL: 1, VALUE: 10775.92
ROW: 6, COL: 1, VALUE: 11012.63
ROW: 7, COL: 1, VALUE: 11095.59
ROW: 8, COL: 1, VALUE: 11157.79
ROW: 9, COL: 1, VALUE: 11282.63
ROW: 10, COL: 1, VALUE: 11376.79
ROW: 11, COL: 1, VALUE: 11628.47
ROW: 12, COL: 1, VALUE: 11660.07
ROW: 13, COL: 1, VALUE: 11818.44
ROW: 14, COL: 1, VALUE: 11744.57
ROW: 15, COL: 1, VALUE: 11926.14
ROW: 16, COL: 1, VALUE: 12131.02
ROW: 17, COL: 1, VALUE: 11915.04
ROW: 18, COL: 1, VALUE: 11687.39
ROW: 19, COL: 1, VALUE: 11698.18
ROW: 20, COL: 1, VALUE: 11731.1
ROW: 21, COL: 1, VALUE: 11665.22
ROW: 22, COL: 1, VALUE: 11819.1
ROW: 23, COL: 1, VALUE: 11940.44
ROW: 24, COL: 1, VALUE: 11829.82
ROW: 25, COL: 1, VALUE: 11863.39
ROW: 26, COL: 1, VALUE: 11774.41
ROW: 27, COL: 1, VALUE: 11763.68
ROW: 28, COL: 1, VALUE: 11831.41
ROW: 29, COL: 1, VALUE: 12046.3
ROW: 30, COL: 1, VALUE: 12171.32
ROW: 31, COL: 1, VALUE: 12330.59
ROW: 32, COL: 1, VALUE: 12627.09
ROW: 33, COL: 1, VALUE: 12752.88
ROW: 34, COL: 1, VALUE: 12959.19
ROW: 35, COL: 1, VALUE: 13074.38
ROW: 36, COL: 1, VALUE: 13247.66
ROW: 37, COL: 1, VALUE: 13270.83
ROW: 38, COL: 1, VALUE: 13503.77
ROW: 39, COL: 1, VALUE: 13726.82
ROW: 40, COL: 1, VALUE: 13880.66
ROW: 41, COL: 1, VALUE: 13785.7
ROW: 42, COL: 1, VALUE: 13773.58
ROW: 43, COL: 1, VALUE: 13785.38
ROW: 44, COL: 1, VALUE: 13833.79
ROW: 45, COL: 1, VALUE: 13942.35
ROW: 46, COL: 1, VALUE: 13846.45
ROW: 47, COL: 1, VALUE: 13881.96
ROW: 48, COL: 1, VALUE: 14211.73
ROW: 49, COL: 1, VALUE: 14517.86
ROW: 50, COL: 1, VALUE: 14937.29
ROW: 51, COL: 1, VALUE: 14799.54
ROW: 52, COL: 1, VALUE: 15016.25
ROW: 53, COL: 1, VALUE: 15080.03
ROW: 54, COL: 1, VALUE: 14810.26
ROW: 55, COL: 1, VALUE: 15080.75
ROW: 56, COL: 1, VALUE: 15416.69
ROW: 57, COL: 1, VALUE: 15649.97
ROW: 58, COL: 1, VALUE: 16144.31
ROW: 59, COL: 1, VALUE: 15948.38
ROW: 60, COL: 1, VALUE: 16223.6
ROW: 61, COL: 1, VALUE: 16249.53
ROW: 62, COL: 1, VALUE: 16434.63
ROW: 63, COL: 1, VALUE: 16635.67
ROW: 64, COL: 1, VALUE: 16785.91
ROW: 65, COL: 1, VALUE: 17073.26
ROW: 66, COL: 1, VALUE: 17252.0
ROW: 67, COL: 1, VALUE: 17223.94
ROW: 68, COL: 1, VALUE: 17348.6
ROW: 69, COL: 1, VALUE: 17557.06
ROW: 70, COL: 1, VALUE: 17487.06
ROW: 71, COL: 1, VALUE: 17108.65
ROW: 72, COL: 1, VALUE: 17530.85
$
$17,338
ASSET MANAGER
FISCAL PERIODS 19 88 199 2 199 6 199 8
ROW: 1, COL: 1, VALUE: 10000.0
ROW: 2, COL: 1, VALUE: 10378.86
ROW: 3, COL: 1, VALUE: 10219.34
ROW: 4, COL: 1, VALUE: 10309.07
ROW: 5, COL: 1, VALUE: 10578.27
ROW: 6, COL: 1, VALUE: 10887.34
ROW: 7, COL: 1, VALUE: 11006.98
ROW: 8, COL: 1, VALUE: 11326.02
ROW: 9, COL: 1, VALUE: 11355.93
ROW: 10, COL: 1, VALUE: 11355.93
ROW: 11, COL: 1, VALUE: 11405.78
ROW: 12, COL: 1, VALUE: 11485.54
ROW: 13, COL: 1, VALUE: 11527.69
ROW: 14, COL: 1, VALUE: 11158.89
ROW: 15, COL: 1, VALUE: 11243.19
ROW: 16, COL: 1, VALUE: 11359.1
ROW: 17, COL: 1, VALUE: 11169.43
ROW: 18, COL: 1, VALUE: 11759.51
ROW: 19, COL: 1, VALUE: 11854.35
ROW: 20, COL: 1, VALUE: 11843.81
ROW: 21, COL: 1, VALUE: 11443.39
ROW: 22, COL: 1, VALUE: 11211.58
ROW: 23, COL: 1, VALUE: 11243.19
ROW: 24, COL: 1, VALUE: 11780.58
ROW: 25, COL: 1, VALUE: 12147.79
ROW: 26, COL: 1, VALUE: 12795.97
ROW: 27, COL: 1, VALUE: 13354.74
ROW: 28, COL: 1, VALUE: 13578.25
ROW: 29, COL: 1, VALUE: 13790.59
ROW: 30, COL: 1, VALUE: 14137.03
ROW: 31, COL: 1, VALUE: 13835.29
ROW: 32, COL: 1, VALUE: 14204.08
ROW: 33, COL: 1, VALUE: 14528.17
ROW: 34, COL: 1, VALUE: 14550.52
ROW: 35, COL: 1, VALUE: 14662.28
ROW: 36, COL: 1, VALUE: 14405.24
ROW: 37, COL: 1, VALUE: 15019.76
ROW: 38, COL: 1, VALUE: 15236.74
ROW: 39, COL: 1, VALUE: 15526.05
ROW: 40, COL: 1, VALUE: 15526.05
ROW: 41, COL: 1, VALUE: 15743.03
ROW: 42, COL: 1, VALUE: 15899.73
ROW: 43, COL: 1, VALUE: 15899.73
ROW: 44, COL: 1, VALUE: 16225.2
ROW: 45, COL: 1, VALUE: 16152.88
ROW: 46, COL: 1, VALUE: 16273.42
ROW: 47, COL: 1, VALUE: 16249.31
ROW: 48, COL: 1, VALUE: 16610.94
ROW: 49, COL: 1, VALUE: 16934.14
ROW: 50, COL: 1, VALUE: 17225.45
ROW: 51, COL: 1, VALUE: 17402.77
ROW: 52, COL: 1, VALUE: 17975.71
ROW: 53, COL: 1, VALUE: 18052.42
ROW: 54, COL: 1, VALUE: 18435.97
ROW: 55, COL: 1, VALUE: 18668.08
ROW: 56, COL: 1, VALUE: 18951.91
ROW: 57, COL: 1, VALUE: 19493.76
ROW: 58, COL: 1, VALUE: 19481.53
ROW: 59, COL: 1, VALUE: 20054.14
ROW: 60, COL: 1, VALUE: 20015.09
ROW: 61, COL: 1, VALUE: 20877.83
ROW: 62, COL: 1, VALUE: 21555.68
ROW: 63, COL: 1, VALUE: 20877.83
ROW: 64, COL: 1, VALUE: 19867.84
ROW: 65, COL: 1, VALUE: 19854.17
ROW: 66, COL: 1, VALUE: 20018.25
ROW: 67, COL: 1, VALUE: 19577.74
ROW: 68, COL: 1, VALUE: 19962.97
ROW: 69, COL: 1, VALUE: 20430.74
ROW: 70, COL: 1, VALUE: 20182.51
ROW: 71, COL: 1, VALUE: 20279.4
ROW: 72, COL: 1, VALUE: 19974.87
ROW: 73, COL: 1, VALUE: 19499.59
ROW: 74, COL: 1, VALUE: 19344.5
ROW: 75, COL: 1, VALUE: 19640.59
ROW: 76, COL: 1, VALUE: 19953.26
ROW: 77, COL: 1, VALUE: 20364.82
ROW: 78, COL: 1, VALUE: 20847.33
ROW: 79, COL: 1, VALUE: 21133.35
ROW: 80, COL: 1, VALUE: 21718.8
ROW: 81, COL: 1, VALUE: 21861.6
ROW: 82, COL: 1, VALUE: 22219.16
ROW: 83, COL: 1, VALUE: 22147.35
ROW: 84, COL: 1, VALUE: 22563.87
ROW: 85, COL: 1, VALUE: 23039.92
ROW: 86, COL: 1, VALUE: 23534.15
ROW: 87, COL: 1, VALUE: 23417.86
ROW: 88, COL: 1, VALUE: 23419.07
ROW: 89, COL: 1, VALUE: 23623.99
ROW: 90, COL: 1, VALUE: 23872.82
ROW: 91, COL: 1, VALUE: 24006.08
ROW: 92, COL: 1, VALUE: 23548.68
ROW: 93, COL: 1, VALUE: 23696.23
ROW: 94, COL: 1, VALUE: 24523.08
ROW: 95, COL: 1, VALUE: 25147.68
ROW: 96, COL: 1, VALUE: 26337.4
ROW: 97, COL: 1, VALUE: 25972.41
ROW: 98, COL: 1, VALUE: 26760.88
ROW: 99, COL: 1, VALUE: 26981.65
ROW: 100, COL: 1, VALUE: 25961.97
ROW: 101, COL: 1, VALUE: 26852.28
ROW: 102, COL: 1, VALUE: 28171.84
ROW: 103, COL: 1, VALUE: 28891.29
ROW: 104, COL: 1, VALUE: 30541.76
ROW: 105, COL: 1, VALUE: 29724.53
ROW: 106, COL: 1, VALUE: 30689.57
ROW: 107, COL: 1, VALUE: 0.0
ROW: 108, COL: 1, VALUE: 0.0
ROW: 109, COL: 1, VALUE: 0.0
ROW: 110, COL: 1, VALUE: 0.0
ROW: 111, COL: 1, VALUE: 0.0
ROW: 112, COL: 1, VALUE: 0.0
ROW: 113, COL: 1, VALUE: 0.0
ROW: 114, COL: 1, VALUE: 0.0
ROW: 115, COL: 1, VALUE: 0.0
ROW: 116, COL: 1, VALUE: 0.0
ROW: 117, COL: 1, VALUE: 0.0
ROW: 118, COL: 1, VALUE: 0.0
$
$32,425
ASSET MANAGER: GROWTH
Fiscal periods 199 1 199 3 199 5 199 8
Row: 1, Col: 1, Value: 10000.0
Row: 2, Col: 1, Value: 10367.06
Row: 3, Col: 1, Value: 10585.32
Row: 4, Col: 1, Value: 10436.51
Row: 5, Col: 1, Value: 10466.27
Row: 6, Col: 1, Value: 10684.52
Row: 7, Col: 1, Value: 10565.48
Row: 8, Col: 1, Value: 11001.98
Row: 9, Col: 1, Value: 10823.41
Row: 10, Col: 1, Value: 11071.43
Row: 11, Col: 1, Value: 11279.76
Row: 12, Col: 1, Value: 11686.51
Row: 13, Col: 1, Value: 11907.91
Row: 14, Col: 1, Value: 12079.9
Row: 15, Col: 1, Value: 12231.66
Row: 16, Col: 1, Value: 12707.16
Row: 17, Col: 1, Value: 12747.63
Row: 18, Col: 1, Value: 13010.68
Row: 19, Col: 1, Value: 13202.9
Row: 20, Col: 1, Value: 13445.72
Row: 21, Col: 1, Value: 13992.04
Row: 22, Col: 1, Value: 13931.34
Row: 23, Col: 1, Value: 14366.38
Row: 24, Col: 1, Value: 14244.97
Row: 25, Col: 1, Value: 15041.53
Row: 26, Col: 1, Value: 15622.08
Row: 27, Col: 1, Value: 15157.64
Row: 28, Col: 1, Value: 14387.09
Row: 29, Col: 1, Value: 14365.98
Row: 30, Col: 1, Value: 14482.09
Row: 31, Col: 1, Value: 14049.31
Row: 32, Col: 1, Value: 14397.64
Row: 33, Col: 1, Value: 14904.3
Row: 34, Col: 1, Value: 14682.64
Row: 35, Col: 1, Value: 14724.86
Row: 36, Col: 1, Value: 14302.64
Row: 37, Col: 1, Value: 13930.27
Row: 38, Col: 1, Value: 13583.09
Row: 39, Col: 1, Value: 13810.93
Row: 40, Col: 1, Value: 14093.0
Row: 41, Col: 1, Value: 14483.57
Row: 42, Col: 1, Value: 14841.59
Row: 43, Col: 1, Value: 15156.22
Row: 44, Col: 1, Value: 15785.47
Row: 45, Col: 1, Value: 15872.26
Row: 46, Col: 1, Value: 16143.49
Row: 47, Col: 1, Value: 15948.2
Row: 48, Col: 1, Value: 16338.77
Row: 49, Col: 1, Value: 16709.46
Row: 50, Col: 1, Value: 17260.2
Row: 51, Col: 1, Value: 17238.17
Row: 52, Col: 1, Value: 17271.22
Row: 53, Col: 1, Value: 17568.62
Row: 54, Col: 1, Value: 17766.88
Row: 55, Col: 1, Value: 17843.99
Row: 56, Col: 1, Value: 17392.38
Row: 57, Col: 1, Value: 17513.54
Row: 58, Col: 1, Value: 18240.52
Row: 59, Col: 1, Value: 18769.23
Row: 60, Col: 1, Value: 20002.89
Row: 61, Col: 1, Value: 19648.4
Row: 62, Col: 1, Value: 20465.58
Row: 63, Col: 1, Value: 20693.91
Row: 64, Col: 1, Value: 19684.45
Row: 65, Col: 1, Value: 20489.61
Row: 66, Col: 1, Value: 21739.42
Row: 67, Col: 1, Value: 22388.36
Row: 68, Col: 1, Value: 23902.55
Row: 69, Col: 1, Value: 23133.43
Row: 70, Col: 1, Value: 23998.69
Row: 71, Col: 1, Value: 23505.97
Row: 72, Col: 1, Value: 24251.05
Row: 73, Col: 1, Value: 24847.53
Row: 74, Col: 1, Value: 25035.77
Row: 75, Col: 1, Value: 26461.01
Row: 76, Col: 1, Value: 27213.97
Row: 77, Col: 1, Value: 26689.59
Row: 78, Col: 1, Value: 26850.93
Row: 79, Col: 1, Value: 27536.66
Row: 80, Col: 1, Value: 27119.85
Row: 81, Col: 1, Value: 24134.92
Row: 82, Col: 1, Value: 25277.79
$
$25,480
UNDERSTANDING
PERFORMANCE
As economic conditions change, different types of investments do
better than others. Since these asset allocation funds invest in
domestic and foreign stocks, bonds, and short-term instruments, each
fund's total return will reflect the performance of both domestic and
foreign markets and short and long term interest rates depending on
the mix of securities it owns.
(checkmark)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR-BY-YEAR TOTAL RETURNS
CALENDAR YEARS 1993 1994 1995 1996 1997
ASSET MANAGER: INCOME 15.39% -1.36% 16.69% 7.81% 12.41%
FIDELITY CONSERVATIVE ASSET ALLOCATION 6.81% 1.41% 15.56% 7.96% 12.96%
COMPOSITE INDEX
CONSUMER PRICE INDEX 2.75% 2.67% 2.54% 3.32% 1.70%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 0.0
Row: 2, Col: 1, Value: 0.0
Row: 3, Col: 1, Value: 0.0
Row: 4, Col: 1, Value: 0.0
Row: 5, Col: 1, Value: 0.0
Row: 6, Col: 1, Value: 0.0
Row: 7, Col: 1, Value: 0.0
Row: 8, Col: 1, Value: 15.39
Row: 9, Col: 1, Value: -1.36
Row: 10, Col: 1, Value: 16.69
Row: 11, Col: 1, Value: 7.81
Row: 12, Col: 1, Value: 12.41
ASSET MANAGER: INCOME
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR-BY-YEAR TOTAL RETURNS
CALENDAR YEARS 1989 1990 1991 1992 1993 1994 1995 1996 1997
ASSET MANAGER 15.28% 5.38% 23.64% 12.75% 23.29% -6.60% 18.16% 12.73% 22.27%
ASSET MANAGER: GROWTH 19.08% 26.32% -7.39% 19.95% 17.59% 26.46%
FIDELITY ASSET ALLOCATION
COMPOSITE INDEX 17.74% 5.11% 17.04% 6.68% 8.96% 0.08% 23.08% 11.10% 20.81%
FIDELITY AGGRESSIVE
ASSET ALLOCATION 7.34% 9.95% 0.11% 29.89% 15.74% 25.81%
COMPOSITE INDEX
CONSUMER PRICE INDEX 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32% 1.70%
</TABLE>
PERCENTAGE (%)
ASSET MANAGER
ASSET MANAGER: GROWTH
ROW: 1, COL: 1, VALUE: NIL
ROW: 1, COL: 2, VALUE: NIL
ROW: 2, COL: 1, VALUE: NIL
ROW: 2, COL: 2, VALUE: NIL
ROW: 3, COL: 1, VALUE: 15.28
ROW: 3, COL: 2, VALUE: 0.0
ROW: 4, COL: 1, VALUE: 5.38
ROW: 4, COL: 2, VALUE: 0.0
ROW: 5, COL: 1, VALUE: 23.64
ROW: 5, COL: 2, VALUE: 0.0
ROW: 6, COL: 1, VALUE: 12.75
ROW: 6, COL: 2, VALUE: 19.08
ROW: 7, COL: 1, VALUE: 23.29
ROW: 7, COL: 2, VALUE: 26.32
ROW: 8, COL: 1, VALUE: -6.6
ROW: 8, COL: 2, VALUE: -7.39
ROW: 9, COL: 1, VALUE: 18.16
ROW: 9, COL: 2, VALUE: 19.95
ROW: 10, COL: 1, VALUE: 12.73
ROW: 10, COL: 2, VALUE: 17.59
ROW: 11, COL: 1, VALUE: 22.27
ROW: 11, COL: 2, VALUE: 26.46
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated
period of time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate
of return that, if achieved annually, would have produced the same
cumulative total return if performance had been constant over the
entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. Yields
are calculated according to a standard that is required for all stock
and bond funds. Because this differs from other accounting methods,
the quoted yield may not equal the income actually paid to
shareholders.
FIDELITY CONSERVATIVE ASSET ALLOCATION COMPOSITE INDEX is a
hypothetical representation of the performance of Asset Manager:
Income's three asset classes according to their respective weightings
in the fund's neutral mix (20% stocks, 50% bonds and 30%
short-term/money market). The following indexes are used to calculate
the Composite Index: stocks - the Standard & Poor's 500 Index (S&P
500(registered trademark)), bonds - the Lehman Brothers Aggregate Bond
Index, and short-term/money market - the Lehman Brothers 3-Month
Treasury Bill Index. Prior to January 1, 1997, the Lehman Brothers
Treasury Bond Index was used for the bond class. The index weightings
of the Composite Index are rebalanced monthly.
FIDELITY ASSET ALLOCATION COMPOSITE INDEX is a hypothetical
representation of the performance of Asset Manager's three asset
classes according to their respective weightings in the fund's neutral
mix (50% stocks, 40% bonds and 10% short-term/money market). The
following indexes are used to calculate the Composite Index: stocks -
the S&P 500, bonds - the Lehman Brothers Aggregate Bond Index, and
short-term/money market - the Lehman Brothers 3-Month Treasury Bill
Index. Prior to January 1, 1997, the Lehman Brothers Treasury Bond
Index was used for the bond class. The index weightings of the
Composite Index are rebalanced monthly.
FIDELITY AGGRESSIVE ASSET ALLOCATION COMPOSITE INDEX is a hypothetical
representation of the performance of Asset Manager: Growth's three
asset classes according to their respective weightings in the fund's
neutral mix (70% stocks, 25% bonds and 5% short-term/money market).
The following indexes are used to calculate the Composite Index:
stocks - the S&P 500, bonds - the Lehman Brothers Aggregate Bond
Index, and short-term/money market - the Lehman Brothers 3-Month
Treasury Bill Index. Prior to January 1, 1997, the Lehman Brothers
Treasury Bond Index was used for the bond class. The index weightings
of the Composite Index are rebalanced monthly.
STANDARD & POOR'S 500 INDEX (S&P 500 ) is a widely recognized,
unmanaged index of common stocks.
LEHMAN BROTHERS AGGREGATE BOND INDEX is a market value weighted
performance benchmark for investment-grade fixed-rate debt issues,
including government, corporate, asset-backed, and mortgage-backed
securities, with maturities of at least one year.
LEHMAN BROTHERS 3-MONTH TREASURY BILL INDEX represents the average of
Treasury Bill rates for each of the prior three months, adjusted to a
bond equivalent yield basis (short-term and money market instruments).
Unlike each fund's returns, the total returns of each composite
index do not include the effect of any brokerage commissions,
transaction fees, or other costs of investing.
T HE CONSUMER PRICE INDEX is a widely recognized measure of
inflation calculated by the U.S. Government.
Other illustrations of fund performance may show moving averages over
specified periods.
The funds' recent strategies, performance, and holdings are detailed
twice a year in financial reports, which are sent to all shareholders.
For current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders'
money and invests it toward a specified goal. Each fund is a
diversified fund of Fidelity Charles Street Trust, an open-end
management investment company organized as a Massachusetts business
trust on July 7, 1981.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet periodically throughout the year to oversee the
funds' activities, review contractual arrangements with companies that
provide services to the funds, and review the funds' performance. The
trustees serve as trustees for other Fidelity funds. The majority of
trustees are not otherwise affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL SHAREHOLDER MEETINGS AND MAIL PROXY
MATERIALS. These meetings may be called to elect or remove trustees,
change fundamental policies, approve a management contract, or for
other purposes. Shareholders not attending these meetings are
encouraged to vote by proxy. Fidelity will mail proxy materials in
advance, including a voting card and information about the proposals
to be voted on. The number of votes you are entitled to is based upon
the dollar value of your investment.
FMR AND ITS AFFILIATES
The funds are managed by FMR, which chooses the funds' investments and
handles their business affairs.
Affiliates assist FMR with foreign investments:
(small solid bullet) Fidelity Management & Research (U.K.) Inc.
(FMR U.K.), in London, England, serves as a sub-adviser for each
fund.
(small solid bullet) Fidelity Management & Research Far East Inc.
(FMR Far East), in Tokyo, Japan, serves as a sub-adviser for each
fund.
Beginning January 1, 1999, FIMM, located in Merrimack, New
Hampshire, will select certain types of investments for the
funds.
Dick Habermann is Vice President and lead manager of the Asset Manager
funds, which he has managed since March 1996. Other Fidelity
investment professionals assist Mr. Habermann in selecting investments
within each asset class for the funds. He also manages other Fidelity
funds. Mr. Habermann is a senior vice president of FMR Co. Previously,
he was division head for international equities and director of
international research from 1993 to 1996 , and joint chief
strategist for Portfolio Advisory Services from 1996 to 1997. Mr.
Habermann joined Fidelity in 1968.
F idelity investment personnel may invest in securities for
their own accounts pursuant to a code of ethics that establishes
procedures for personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services.
Fidelity Service Company, Inc. (FSC) performs transfer agent servicing
functions for each fund.
FMR Corp. is the ultimate parent company of FMR, FMR U.K., FMR Far
East 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.
FMR may use its broker-dealer affiliates and other firms that sell
fund shares to carry out a fund's transactions, provided that the fund
receives brokerage services and commission rates comparable to those
of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
Each fund seeks to achieve its investment objective by allocating its
assets among stocks, bonds and short-term and money market instruments
and other instruments of U.S. and foreign issuers. Each fund ,
however, has a different objective and pursues its objective by
investing within different asset allocation ranges.
ASSET MANAGER: INCOME seeks a high level of current income. The fund
also considers the potential for capital appreciation.
ASSET MANAGER seeks high total return with reduced risk over the long
term.
ASSET MANAGER: GROWTH seeks to maximize total return over the long
term.
Each fund allocates its assets among the following classes, or types,
of investments. The STOCK CLASS includes equity securities of all
types. The BOND CLASS includes all varieties of fixed-income
securities maturing in more than one year. The SHORT-TERM/MONEY MARKET
CLASS includes all types of short-term and money market instruments.
FMR may use its judgment to place a security in the most appropriate
class based on its investment characteristics. Fixed-income securities
may be classified in the bond or short-term/money market class
according to interest rate sensitivity as well as maturity. The funds
may also make other investments that do not fall within these classes.
FMR has the ability to allocate each fund's assets within specified
ranges. Each fund's NEUTRAL MIX represents the benchmark for its
combination of investments in each asset class over time. FMR may
change the neutral mix from time to time. The range and approximate
neutral mix for each asset class are shown below.
ASSET MANAGER: INCOME
Range Neutral mix
STOCK CLASS 10 - 30% 20%
BOND CLASS 40 - 60% 50%
SHORT-TERM/MONEY MARKET CLASS 10 - 50% 30%
Asset Manager: Income's approach focuses on short-term and money
market instruments and bonds for current income. However, its ability
to invest a portion of its assets in stocks offers the opportunity for
capital appreciation, and potentially more volatility, than other
income-oriented funds.
ASSET MANAGER
Range Neutral mix
STOCK CLASS 30 - 70% 50%
BOND CLASS 20 - 60% 40%
SHORT-TERM/MONEY MARKET CLASS 0 - 50% 10%
Asset Manager's approach spreads the fund's assets among all three
classes, moderating both the risk and return potential of stocks,
bonds and short-term and money market instruments.
ASSET MANAGER: GROWTH
Range Neutral mix
STOCK CLASS 50 - 100% 70%
BOND CLASS 0 - 50% 25%
SHORT-TERM/MONEY MARKET CLASS 0 - 50% 5%
Asset Manager: Growth's more aggressive approach focuses on stocks for
high potential returns. However, because the fund can invest in bonds
and short-term and money market instruments, its returns may not be as
high as a fund that invests only in stocks.
In pursuit of each fund's objective, FMR will not try to pinpoint the
precise moment when a major reallocation should be made. Instead, FMR
regularly reviews each fund's allocation and makes changes gradually
to favor investments that it believes will provide the most favorable
outlook for achieving each fund's objective. Under normal
circumstances, a single reallocation will not involve more than 10% of
Asset Manager: Income's or Asset Manager's total assets, or 20% of
Asset Manager: Growth's total assets. Although FMR uses its expertise
and resources in allocating assets, FMR's decisions may not be
advantageous to a fund.
Because the funds are subject to the risks of each investment
type, the funds and their performance are affected by many factors.
Stock values fluctuate in response to the activities of individual
companies and general market and economic conditions. The value of
bonds and short-term instruments fluctuates based on changes in
interest rates and in the credit quality of the issuer.
FMR may use various investment techniques to hedge a portion of a
fund's risks, but there is no guarantee that these strategies will
work as FMR intends. When you sell your shares of a fund , they
may be worth more or less than what you paid for them.
FMR normally invests each fund's assets according to its investment
strategy. Each fund also reserves the right to invest without
limitation in preferred stocks and investment-grade debt instruments
for temporary, defensive purposes.
Each fund diversifies across investment types more than most mutual
funds. No one mutual fund, however, can provide an appropriate
balanced investment plan for all investors.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related
risks. Any restrictions listed supplement those discussed earlier in
this section. A complete listing of each fund's limitations and more
detailed information about each fund's investments are contained in
the funds' SAI. Policies and limitations are considered at the time of
purchase; the sale of instruments is not required in the event of a
subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these
techniques unless it believes that they are consistent with a fund's
investment objective and policies and that doing so will help the fund
achieve its goal. Fund holdings and recent investment strategies are
detailed in each fund's financial reports, which are sent to
shareholders twice a year. For a free SAI or financial report, call
1-800-544-8888.
EQUITY SECURITIES may include common stocks and warrants. Common
stocks, the most familiar type, represent an equity (ownership)
interest in a corporation. Although equity securities have a history
of long-term growth in value, their prices fluctuate based on changes
in a company's financial condition and on overall market and economic
conditions. Smaller companies are especially sensitive to these
factors.
RESTRICTIONS: With respect to 75% of its total assets, each
fund may not invest in more than 10% of the outstanding voting
securities of a single issuer.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers
to borrow money from investors. The issuer generally pays the investor
a fixed, variable, or floating rate of interest, and must repay the
amount borrowed at maturity. Some debt securities, such as zero coupon
bonds, do not pay current interest, but are sold at a discount from
their face values.
Debt securities have varying levels of sensitivity to changes in
interest rates and varying degrees of credit quality. In general, bond
prices rise when interest rates fall, and fall when interest rates
rise. Longer-term bonds and zero coupon bonds are generally more
sensitive to interest rate changes.
Lower-quality debt securities are considered to have
speculative characteristics, and involve greater risk of default or
price changes due to changes in the issuer's creditworthiness, or they
may already be in default. The market prices of these securities may
fluctuate more than higher-quality securities and may decline
significantly in periods of general or regional economic difficulty.
The following tables provide a summary of ratings assigned to debt
holdings (not including money market instruments) in the funds'
portfolios. These figures are dollar-weighted averages of month-end
portfolio holdings during the fiscal year ended September 30,
199 8 , and are presented as a percentage of total security
investments. These percentages are historical and do not necessarily
indicate a fund's current or future debt holdings.
RESTRICTIONS: Purchase of a debt security is consistent with a fund's
debt quality policy if it is rated at or above the stated level by
Moody's Investors Service ( Moody's ) , Standard & Poor's
( S&P ) , Duff & Phelps Credit Rating Co., or Fitch
IBCA, Inc. , or is unrated but judged to be of equivalent
quality by FMR. Asset Manager: Income currently intends to limit its
investment in corporate and foreign government debt securities
(other than convertible debt securities) to those of Baa-quality and
above. Asset Manager: Income currently intends to limit its
investments in lower than Baa-quality convertible debt securities
( sometimes called "junk bonds") to 5% of its assets. Each of
Asset Manager and Asset Manager: Growth currently intends to limit
its investments in lower than Baa-quality debt securities to
less than 35% of its assets.
FIDELITY ASSET MANAGER: GROWTH
Fiscal Year Ended September 199 8 Debt Holdings, by Rating
MOODY'S
INVESTORS SERVICE STANDARD & POOR'S
(AS A % OF INVESTMENTS) (AS A % OF INVESTMENTS)
Average of Average of
Rating total investments Rating total investments
INVESTMENT GRADE
Highest quality Aaa 5.7% AAA 5.7%
High quality Aa 0.3% AA 0.2%
Upper-medium grade A 1.3% A 1.1%
Medium grade Baa 2.0% BBB 2.4%
LOWER QUALITY
Moderately speculative Ba 2.4% BB 2.5%
Speculative B 8.3% B 7.9%
Highly speculative Caa 0.8% CCC 1.0%
Poor quality Ca 0.0% CC 0.0%
Lowest quality, no interest C 0.0% C 0.0%
In default, in arrears -- D 0.0%
REFER TO THE FUND'S SAI FOR A MORE COMPLETE DISCUSSION OF THESE
RATINGS.
T HE FUND DOES NOT NECESSARILY RELY ON THE RATINGS OF MOODY'S OR S&P
TO DETERMINE COMPLIANCE WITH ITS DEBT QUALITY POLICY. SECURITIES NOT
RATED BY MOODY'S OR S&P AMOUNTED TO 0.8% OF THE
FUND'S INVESTMENTS. THIS PERCENTAGE MAY INCLUDE SECURITIES RATED BY
OTHER NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS, AS WELL
AS UNRATED SECURITIES. UNRATED LOWER-QUALITY SECURITIES
AMOUNTED TO 0.8% OF THE FUND'S INVES TMENTS.
FOR FOREIGN GOVERNMENT SECURITIES NOT INDIVIDUALLY RATED BY A
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION, FMR ASSIGNS THE
RATING OF THE SOVEREIGN CREDIT OF THE ISSUING GOVERNMENT.
FIDELITY ASSET MANAGER
Fiscal Year Ended September 1998 Debt Holdings, by Rating
MOODY'S
INVESTORS SERVICE STANDARD & POOR'S
(AS A % OF INVESTMENTS) (AS A % OF INVESTMENTS)
Average of Average of
Rating total investments Rating total investments
INVESTMENT GRADE
Highest quality Aaa 16.7% AAA 16.6%
High quality Aa 0.8% AA 0.5%
Upper-medium grade A 3.8% A 3.4%
Medium grade Baa 5.8% BBB 7.0%
LOWER QUALITY
Moderately speculative Ba 2.8% BB 2.0%
Speculative B 5.6% B 5.3%
Highly speculative Caa 0.6% CCC 0.8%
Poor quality Ca 0.0% CC 0.0%
Lowest quality, no interest C 0.0% C 0.0%
In default, in arrears -- D 0.0%
REFER TO THE FUND'S SAI FOR A MORE COMPLETE DISCUSSION OF THESE
RATINGS.
T HE FUND DOES NOT NECESSARILY RELY ON THE RATINGS OF MOODY'S OR S&P
TO DETERMINE COMPLIANCE WITH ITS DEBT QUALITY POLICY. SECURITIES NOT
RATED BY MOODY'S OR S&P AMOUNTED TO 0.8% OF THE
FUND'S INVESTMENTS. THIS PERCENTAGE MAY INCLUDE SECURITIES RATED BY
OTHER NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS, AS WELL
AS UNRATED SECURITIES. UNRATED LOWER-QUALITY SECURITIES
AMOUNTED TO 0.7% OF THE FUND'S INVESTMENTS.
FOR FOREIGN GOVERNMENT SECURITIES NOT INDIVIDUALLY RATED BY A
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION, FMR ASSIGNS THE
RATING OF THE SOVEREIGN CREDIT OF THE ISSUING GOVERNMENT.
MONEY MARKET SECURITIES are high-quality, short-term instruments
issued by the U.S. Government, corporations, financial institutions,
and other entities. These securities may carry fixed, variable, or
floating interest rates.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies,
and securities issued by U.S. entities with substantial foreign
operations may involve additional risks and considerations. These
include risks relating to political, economic, or regulatory
conditions in foreign countries; fluctuations in foreign currencies;
withholding or other taxes; trading, settlement, custodial, and
other operational risks; and the potentially less stringent
investor protection and disclosure standards of foreign markets.
Additionally, governmental issuers of foreign debt securities may be
unwilling to pay interest and repay principal when due and may require
that the conditions for payment be renegotiated. All of these factors
can make foreign investments, especially those in emerging
markets, more volatile and potentially less liquid than
U.S. investments.
ASSET-BACKED SECURITIES include interests in pools of debt securities,
commercial or consumer loans, or other receivables. The value of these
securities depends on many factors, including changes in interest
rates, the availability of information concerning the pool and its
structure, the credit quality of the underlying assets, the market's
perception of the servicer of the pool, and any credit enhancement
provided. In addition, these securities may be subject to prepayment
risk.
MORTGAGE SECURITIES include interests in pools of commercial or
residential mortgages, and may include complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed
securities. Mortgage securities may be issued by agencies or
instrumentalities of the U.S. Government or by private entities.
The price of a mortgage security may be significantly affected by
changes in interest rates. Some mortgage securities may have a
structure that makes their reaction to interest rates and other
factors difficult to predict, making their price highly volatile.
Also, mortgage securities, especially stripped mortgage-backed
securities, are subject to prepayment risk. Securities subject to
prepayment risk generally offer less potential for gains during a
declining interest rate environment, and similar or greater potential
for loss in a rising interest rate environment.
STRIPPED SECURITIES are the separate income or principal components of
a debt security. The risks associated with stripped securities are
similar to those of other debt securities, although stripped
securities may be more volatile , and the value of certain types
of stripped securities may move in the same direction as interest
rates. U.S. Treasury securities that have been stripped by a Federal
Reserve Bank are obligations issued by the U.S. Treasury.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a
security at one price and simultaneously agrees to sell it back at a
higher price. Delays or losses could result if the other party to the
agreement defaults or becomes insolvent.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices,
interest rates, currency exchange 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 currency exchange contracts or swap agreements,
purchasing indexed securities, and selling securities short.
FMR can use these practices to adjust the risk and return
characteristics of a fund's portfolio of investments. If FMR judges
market conditions incorrectly or employs a strategy that does not
correlate well with a fund's investments, these techniques could
result in a loss, regardless of whether the intent was to reduce risk
or increase return. These techniques may increase the volatility of a
fund and may involve a small investment of cash relative to the
magnitude of the risk assumed. In addition, these techniques could
result in a loss if the counterparty to the transaction does not
perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other
borrower. They have additional risks beyond conventional debt
securities because they may entail less legal protection for a fund,
or there may be a requirement that the fund supply additional cash to
a borrower on demand.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined
by FMR, under the supervision of the Board of Trustees, to be
illiquid, which means that they may be difficult to sell promptly at
an acceptable price. The sale of some illiquid securities, and some
other securities, may be subject to legal restrictions. Difficulty in
selling securities may result in a loss or may be costly to a fund.
RESTRICTIONS: A fund may not invest more than 10% of its
assets 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.
OTHER INSTRUMENTS may include convertible securities, precious metals,
preferred stocks, and real estate-related instruments.
RESTRICTIONS: Asset Manager: Income and Asset Manager may not invest
in precious metals.
CASH MANAGEMENT. A fund may invest in money market securities, in
repurchase agreements, and in a money market fund available only to
funds and accounts managed by FMR or its affiliates, whose goal is to
seek a high level of current income while maintaining a stable $1.00
share price. A major change in interest rates or a default on the
money market fund's investments could cause its share price to change.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce
the risks of investing. This may include limiting the amount of money
invested in any one issuer or, on a broader scale, in any one
industry. Economic, business, or political changes can affect all
securities of a similar type.
RESTRICTIONS: With respect to 75% of its total assets, each fund may
not invest more than 5% in the securities of any one issuer.
Each fund may not invest more than 25% of its total assets in
any one industry. Th ese limitations do not apply to U.S.
Government securities.
BORROWING. Each fund may borrow from banks or from other funds advised
by FMR or its affiliates , or through reverse repurchase
agreements. If a fund borrows money, its share price may be subject to
greater fluctuation until the borrowing is paid off. If a fund makes
additional investments while borrowings are outstanding, this may be
considered a form of leverage.
RESTRICTIONS: Each fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 331/3% of its total assets.
LENDING securities to broker-dealers and institutions, including
Fidelity Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a
means of earning income. This practice could result in a loss or a
delay in recovering a fund's securities. A fund may also lend money to
other funds advised by FMR or its affiliates .
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of a
fund's total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages
are fundamental, that is, subject to change only by shareholder
approval. The following paragraphs restate all those that are
fundamental. All policies stated throughout this prospectus, other
than those identified in the following paragraphs, can be changed
without shareholder approval.
ASSET MANAGER: INCOME seeks a high level of current income by
allocating its assets among stocks, bonds, short-term instruments and
other investments.
ASSET MANAGER seeks high total return with reduced risk over the long
term by allocating its assets among stocks, bonds, and short-term
instruments.
ASSET MANAGER: GROWTH seeks to maximize total return over the long
term by allocating its assets among stocks, bonds, short-term
instruments, and other investments.
With respect to 75% of total assets, each fund may not
invest more than 5% in the securities of any one issuer
and may not invest in more than 10% of the outstanding voting
securities of a single issuer. These limitations do not apply to U.S.
Government securities.
Each fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
securities.
Each fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 331/3% of its total assets.
Loans, in the aggregate, may not exceed 331/3% of each fund's total
assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, each fund pay s fees
related to its daily operations. Expenses paid out of
each fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor
deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments
and business affairs.
FMR in turn pays fees to affiliates who provide assistance with these
services. Each fund also pays OTHER EXPENSES, which are explained at
right.
FMR may, from time to time, agree to reimburse the funds for
management fees and other expenses above a specified limit. FMR
retains the ability to be repaid by a fund if expenses fall below the
specified limit prior to the end of the fiscal year. Reimbursement
arrangements, which may be terminated at any time without notice, can
decrease a fund's expenses and boost its performance.
MANAGEMENT FEE
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, dividing by twelve , and multiplying the result by the
fund's average net assets throughout the month.
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% for
Asset Manager: Income or 0.52% for Asset Manager and Asset
Manager: Growth, and it drops as total assets under management
increase.
For September 199 8 , the group fee rate was 0.1353% for Asset
Manager: Income and 0.2911% for Asset Manager and Asset Manager:
Growth. The individual fund fee rate is 0.30% for Asset Manager:
Income, 0.25% for Asset Manager, and 0.30% for Asset Manager: Growth.
The total management fee for the fiscal year ended September 30,
199 8 was 0.44% of the fund's average net assets for
Asset Manager: Income, 0.54% of the fund's average net assets
for Asset Manager, and 0.59% of the fund's average net assets
for Asset Manager: Growth.
FMR HAS SUB-ADVISORY AGREEMENTS with FMR U.K. and FMR Far East. These
sub-advisers provide FMR with investment research and advice on
issuers based outside the United States. Under the sub-advisory
agreements, FMR pays FMR U.K. and FMR Far East fees equal to 110% and
105%, respectively, of the costs of providing these services.
The sub-advisers may also provide investment management services. In
return, FMR pays FMR U.K. and FMR Far East a fee equal to 50% of its
management fee rate with respect to a fund's investments that the
sub-adviser manages on a discretionary basis.
Beginning January 1, 1999, FIMM will select certain investments for
each fund. FMR will pay FIMM a fee equal to 50% of its management fee
(before expense reimbursements) with respect to each fund's
investments that FIMM manages .
OTHER EXPENSES
While the management fee is a significant component of the funds'
annual operating costs, the funds have other expenses as well.
The funds contract with FSC to perform transfer agency, dividend
disbursing, shareholder servicing, and accounting functions. These
services include processing shareholder transactions, valuing each
fund's investments, handling securities loans for each fund, and
calculating each fund's share price and dividends.
For the fiscal year ended September 199 8 , transfer agency and
pricing and bookkeeping fees paid (as a percentage of average net
assets) amounted to the following. These amounts are before expense
reductions, if any.
TRANSFER AGENCY AND
PRICING AND BOOKKEEPING FEES
PAID BY FUND
ASSET MANAGER: INCOME 0.24%
ASSET MANAGER 0.21%
ASSET MANAGER: GROWTH 0.23%
UNDERSTANDING THE
MANAGEMENT FEE
The management fee FMR receives is designed to be responsive to
changes in FMR's total assets under management. Building this variable
into the fee calculation assures shareholders that they
will pay a lower rate as FMR's assets under management increase.
(checkmark)
Each fund also pays other expenses, such as legal, audit, and
custodian fees; in some instances, proxy solicitation costs; and the
compensation of trustees who are not affiliated with Fidelity. A
broker-dealer may use a portion of the commissions paid by a fund to
reduce that fund's custodian or transfer agent fees.
Each fund has adopted a DISTRIBUTION AND SERVICE PLAN. Each plan
recognizes that FMR may use its management fee revenues, as well as
its past profits or its resources from any other source, to pay FDC
for expenses incurred in connection with the distribution of fund
shares. FMR directly, or through FDC, may make payments to third
parties, such as banks or broker-dealers, that engage in the sale of,
or provide shareholder support services for, the fund's shares.
Currently, the Board of Trustees of each fund has authorized
such payments.
For the fiscal year ended September 199 8 the portfolio turnover
rates for Asset Manager: Income, Asset Manager and Asset Manager:
Growth were 156%, 136%, and 150%, respectively. These rates vary from
year to year. High turnover rates increase transaction costs and may
increase taxable capital gains. FMR considers these effects when
evaluating the anticipated benefits of short-term investing.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of
America's first mutual funds. Today, Fidelity is the largest mutual
fund company in the country, and is known as an innovative provider of
high-quality financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, FBSI. Fidelity is also a
leader in providing tax- advantaged retirement plans for
individuals investing on their own or through their employer.
Fidelity is committed to providing investors with practical
information to make investment decisions. Based in Boston, Fidelity
provides customers with complete service 24 hours a day, 365 days a
year, through a network of telephone service centers around the
country and Fidelity's Web site .
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
FIDELITY FACTS
Fidelity offers the broadest selection of mutual funds in the world.
(solid bullet) Number of Fidelity mutual funds: ove r 220
(solid bullet) Assets in Fidelity mutual funds: over $ 572
billion
(solid bullet) Number of shareholder accounts: over 3 8 million
(solid bullet) Number of investment analysts and portfolio managers:
over 2 60
(checkmark)
If you would prefer to speak with a representative in person, Fidelity
has over 75 walk-in Investor Centers across the country.
If you would prefer to access information on-line, you can visit
Fidelity's Web site at www.fidelity.com.
TYPES OF ACCOUNTS
You may set up an account directly in a fund or, if you own or intend
to purchase individual securities as part of your total investment
portfolio, you may consider investing in a fund through a brokerage
account.
You may purchase or sell shares of the funds through an investment
professional, including a broker, who may charge you a transaction fee
for this service. If you invest through FBSI, another financial
institution, or an investment professional, read their program
materials for any special provisions, additional service features or
fees that may apply to your investment in a fund. Certain features of
the fund, such as the minimum initial or subsequent investment
amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed in the table that follows.
The account guidelines that follow may not apply to certain retirement
accounts. If you are investing through a retirement account or if your
employer offers the funds through a retirement program, you may be
subject to additional fees. For more information, please refer to your
program materials, contact your employer, call your retirement
benefits number, visit Fidelity's Web site at www.fidelity.com,
or contact Fidelity directly, as appropriate.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have
two or more owners (tenants).
RETIREMENT
FOR TAX-ADVANTAGED RETIREMENT SAVINGS
Retirement plans provide individuals with tax-advantaged ways to
save for retirement, either with tax-deductible contributions or
tax-free growth. Retirement accounts require special applications
and typically have lower minimums.
TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow
individuals under age 70 with compensation to contribute up to $2,000
per tax year. Married couples can contribute up to $4,000 per tax
year, provided no more than $2,000 is contributed on behalf of either
spouse. (These limits are aggregate for Traditional and Roth IRAs.)
Contributions may be tax-deductible, subject to certain income
limits.
ROTH IRAS allow individuals to make non-deductible
contributions of up to $2,000 per tax year. Married couples can
contribute up to $4,000 per tax year, provided no more than $2,000 is
contributed on behalf of either spouse. (These limits are aggregate
for Traditional and Roth IRAs.) Eligibility is subject to certain
income limits. Qualified distributions are tax-free.
ROTH CONVERSION IRAS allow individuals with assets held in
a Traditional IRA or Rollover IRA to convert those assets to a Roth
Conversion IRA. Eligibility is subject to certain income limits.
Qualified distributions are tax-free.
(solid bullet) ROLLOVER IRAS help retain special tax
advantages for certain eligible rollover distributions from
employer-sponsored retirement plans.
(solid bullet) 401(K) PLANS, and certain other
401(a)-qualified plans, are employer-sponsored retirement plans that
allow employer contributions and may allow employee after-tax
contributions. In addition, 401(k) plans allow employee pre-tax
(tax-deferred) contributions. Contributions to these plans may be
tax-deductible to the employer.
(solid bullet) KEOGH PLANS are generally profit sharing or
money purchase pension plans that allow self-employed individuals or
small business owners to make tax-deductible contributions for
themselves and any eligible employees.
(solid bullet) SIMPLE IRAS provide small business owners and those
with self-employment income (and their eligible employees) with many
of the advantages of a 401(k) plan, but with fewer administrative
requirements.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide
small business owners or those with self-employment income (and their
eligible employees) with many of the same advantages as a Keogh, but
with fewer administrative requirements.
(solid bullet) SALARY REDUCTION SEP-IRAS (SARSEPS) allow
employees of businesses with 25 or fewer employees to contribute a
percentage of their wages on a tax-deferred basis. These plans must
have been established by the employer prior to January 1, 1997.
(solid bullet) 403(B) CUSTODIAL ACCOUNTS are available to
employees of 501 (c)(3) tax-exempt institutions, including schools,
hospitals, and other charitable organizations.
(solid bullet) DEFERRED COMPENSATIONS PLANS (457 PLANS) are
available to employees of most state and local governments and their
agencies and to employees of tax-exempt institutions.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and
obtain tax benefits. An individual can give up to $10,000 a year per
child without paying federal gift tax. Depending on state laws, you
can set up a custodial account under the Uniform Gifts to Minors Act
(UGMA) or the Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR
OTHER GROUPS
Requires a special application.
HOW TO BUY SHARES
THE PRICE TO BUY ONE SHARE of each fund is the fund's net asset value
per share (NAV). Each fund's shares are sold without a sales charge.
Your shares will be purchased at the next NAV calculated after your
investment is received in proper form . Each fund's NAV is
normally calculated each business day at 4:00 p.m. Eastern time.
Each 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 a fund.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application
and mail it along with your check. You may also open your account in
person or by wire as described on page . If there is no
application accompanying this prospectus, call 1-800-544-8888 or
visit Fidelity's Web site at www.fidelity.com for an application .
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another
Fidelity fund.
IF YOU ARE INVESTING THROUGH A TAX- ADVANTAGED RETIREMENT PLAN,
such as an IRA, for the first time, you will need a special
application. Retirement investing also involves its own investment
procedures. Call 1-800-544-8888 or visit Fidelity's Web site at
www.fidelity.com for more information and a retirement
application.
If you buy 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
TO OPEN AN ACCOUNT $2,500
For certain Fidelity retirement accounts A $500
TO ADD TO AN ACCOUNT $250
Through regular investment plansB $100
MINIMUM BALANCE $2,000
For certain Fidelity retirement accountsA $500
A T HESE LOWER MINIMUMS APPLY TO FIDELITY TRADITIONAL IRA, ROTH IRA,
ROTH CONVERSION IRA, ROLLOVER IRA, SEP-IRA, AND KEOGH ACCOUNTS.
B FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER
TO "INVESTOR SERVICES," PAGE .
These minimums may be lower for investments through a Fidelity
GoalPlannerSM account in a fund. There is no minimum account balance
or initial or subsequent investment minimum for investments through
Fidelity Portfolio Advisory ServicesSM, a qualified state tuition
program, certain Fidelity retirement accounts funded through salary
deduction, or accounts opened with the proceeds of distributions from
such retirement accounts. Refer to the program materials for details.
In addition, each fund reserves the right to waive or lower investment
minimums in other circumstances.
<TABLE>
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
PHONE
1-800-544-7777
(PHONE_GRAPHIC)
(SMALL SOLID BULLET) EX CHANGE FROM ANOTHER FIDELITY
FUND ACCOUNT WITH THE (SMALL SOLID BULLET) E XCHANGE FROM ANOTHER FIDELITY
FUND ACCOUNT WITH THE SAME
SAME REGISTRATION, INCLUDING
NAME, ADDRESS, AND TAXPAYER REGISTRATION, INCLUDING NAME,
ADDRESS, AND TAXPAYER ID NUMBER.
ID NUMBER. (SMALL SOLID BULLET) U SE 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.
THE INTERNET
WWW.FIDELITY.COM
(COMPUTER GRAPHIC)
(SMALL SOLID BULLET) COMPLETE AND SIGN THE APPLICATION.
MAKE YOUR CHECK PAYABLE (SMALL SOLID BULLET) EXCHANGE FROM ANOTHER FIDELITY FUND
ACCOUNT WITH THE SAME
TO THE COMPLETE NAME OF THE FUND.
MAIL TO THE ADDRESS REGISTRATION, INCLUDING NAME,
ADDRESS, AND TAXPAYER ID NUMBER.
INDICATED ON THE APPLICATION . (SMALL SOLID BULLET) USE FIDELITY MONEY LINE TO TRANSFER
FROM YOUR BANK ACCOUNT.
VISIT FIDELITY'S WEB SITE BEFORE
YOUR FIRST USE TO VERIFY THAT
THIS SERVICE IS IN PLACE
ON YOUR ACCOUNT. MAXIMUM MONEY
LINE: UP TO $100,000.
MAIL
(MAIL_GRAPHIC)
(SMALL SOLID BULLET) C OMPLETE AND SIGN THE
APPLICATION. MAKE YOUR CHECK
PAYABLE (SMALL SOLID BULLET) M AKE YOUR CHECK PAYABLE TO THE
COMPLETE NAME OF THE
TO THE COMPLETE NAME OF THE FUND.
MAIL TO THE ADDRESS FUND. INDICATE YOUR FUND ACCOUNT
NUMBER ON YOUR CHECK AND
INDICATED ON THE APPLICATION. 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) B RING YOUR APPLICATION AND
CHECK TO A FIDELITY INVESTOR
CENTER. (SMALL SOLID BULLET) BR ING YOUR CHECK TO A FIDELITY
INVESTOR CENTER. CALL
CALL 1-800-544-9797 FOR THE
CENTER NEAREST YOU. 1-800-544-9797 FOR THE CENTER
NEAREST YOU.
WIRE
(WIRE_GRAPHIC)
(SMALL SOLID BULLET) C ALL 1-800-544-7777 TO SET UP
YOUR ACCOUNT AND TO (SMALL SOLID BULLET) NOT AVAILABLE FOR RETIREMENT ACCOUNTS.
ARRANGE A WIRE TRANSACTION. NOT
AVAILABLE FOR RETIREMENT
(SMALL SOLID BULLET) WIRE TO : ACCOUNTS.
BANKERS TRUST COMPANY,
(SMALL SOLID BULLET) WIRE WITHIN 24 HOURS TO :
BANK ROUTING #021001033, BANKERS TRUST COMPANY,
ACCOUNT #00163053. BANK ROUTING #021001033,
SPECIFY THE COMPLETE NAME OF THE
FUND AND INCLUDE YOUR ACCOUNT #00163053.
NEW ACCOUNT NUMBER AND YOUR NAME. SPECIFY THE COMPLETE NAME OF
THE FUND AND INCLUDE YOUR
ACCOUNT NUMBER AND YOUR NAME.
AUTOMATICALLY
(AUTOMATIC_GRAPHIC)
(SMALL SOLID BULLET) NOT AVAILABLE. (SMALL SOLID BULLET) USE FIDELITY AUTOMATIC ACCOUNT
BUILDER(REGISTERED TRADEMARK).
SIGN UP FOR THIS
SERVICE WHEN OPENING YOUR ACCOUNT,
VISIT FIDELITY'S WEB SITE
AT WWW.FIDELITY.COM TO OBTAIN THE
FORM TO ADD THE SERVICE , OR
CALL 1-800-544-6666 TO ADD THE
SERVICE .
(TDD_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 each fund is the fund's NAV.
Your shares will be sold at the next NAV calculated after your order
is received in proper form . Each fund's NAV is normally
calculated each business day at 4:00 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the
methods described on these two pages .
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be
made in writing, except for exchanges to other Fidelity funds, which
can be requested by phone, in writing, or through Fidelity's Web
site . Call 1-800-544-6666 for a retirement distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$2,000 worth of shares in the account to keep it open ($500 for
retirement accounts).
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to
sign up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in
writing and include a signature guarantee if any of the following
situations apply:
(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) 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
table that follows.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it
to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
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ACCOUNT TYPE SPECIAL REQUIREMENTS
PHONE
1-800-544-7777
(PHONE_GRAPHIC) ALL ACCOUNT TYPES EXCEPT RETIREMENT (SMALL SOLID BULLET) MAXIMUM CHECK REQUEST: $100,000.
(SMALL SOLID BULLET) FOR MONEY LINE TRANSFERS TO YOUR
BANK
ACCOUNT; MINIMUM: $10; MAXIMUM: UP
ALL ACCOUNT TYPES 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
SOLE PROPRIETORSHIP, UGMA, UTMA BY ALL PERSONS REQUIRED TO SIGN FOR
TRANSACTIONS, EXACTLY AS THEIR NAMES
APPEAR ON THE ACCOUNT.
RETIREMENT ACCOUNT (SMALL SOLID BULLET) THE ACCOUNT OWNER SHOULD COMPLETE A
RETIREMENT DISTRIBUTION FORM. CALL
TRUST 1-800-544-6666 TO REQUEST ONE.
(SMALL SOLID BULLET) THE TRUSTEE MUST SIGN THE LETTER
INDICATING
CAPACITY AS TRUSTEE. IF THE
TRUSTEE'S NAME
BUSINESS OR ORGANIZATION IS NOT IN THE ACCOUNT REGISTRATION,
PROVIDE
A COPY OF THE TRUST DOCUMENT
CERTIFIED
WITHIN THE LAST 60 DAYS.
(SMALL SOLID BULLET) AT LEAST ONE PERSON AUTHORIZED BY
EXECUTOR, ADMINISTRATOR, CONSERVATOR, CORPORATE RESOLUTION TO ACT ON THE
GUARDIAN ACCOUNT MUST SIGN THE LETTER.
(SMALL SOLID BULLET) INCLUDE A CORPORATE RESOLUTION WITH
CORPORATE SEAL OR A SIGNATURE
GUARANTEE.
(SMALL SOLID BULLET) CALL 1-800-544-6666 FOR
INSTRUCTIONS.
WIRE
(WIRE_GRAPHIC) ALL ACCOUNT TYPES EXCEPT RETIREMENT (SMALL SOLID BULLET) YOU MUST SIGN UP FOR THE WIRE
FEATURE BEFORE USING IT. TO
VERIFY THAT IT IS IN
PLACE, CALL 1-800-544-6666.
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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(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.
F IDELITY'S WEB SITE at www.fidelity.com offers product and
servicing information, customer education, planning tools, and the
ability to make certain transactions in your account.
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your
account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more
than one account in the fund. Call 1-800-544-6666 if you need copies
of financial reports, prospectuses, or historical account information.
Electronic copies of most financial reports and prospectuses are
available at Fidelity's Web site. To participate in our electronic
delivery program, call 1-800-544-6666 or visit Fidelity's Web site at
www.fidelity.com for more information.
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 XPRESS(REGISTERED TRADEMARK) 1-800-544-5555
WEB SITE WWW.FID ELITY.COM
AUTOMATED SERVICE
(CHECKMARK)
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of
other Fidelity funds by telephone, in writing, or through
Fidelity's Web site .
Note that exchanges out of a fund are limited to four per calendar
year, and that they may have tax consequences for you. For details on
policies and restrictions governing exchanges, including circumstances
under which a shareholder's exchange privilege may be suspended or
revoked, see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from
your account.
FIDELITY MONEY LINE enables you to transfer money by phone
between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money
regularly. Fidelity offers convenient services that let you transfer
money into your fund account, or between fund accounts, automatically.
While regular investment plans do not guarantee a profit and will not
protect you against loss in a declining market, they can be an
excellent way to invest for retirement, a home, educational expenses,
and other long-term financial goals. Certain restrictions apply for
retirement accounts. Call 1-800-544-6666 or visit Fidelity's Web
site at www.fidelity.com for more information.
REGULAR INVESTMENT PLANS
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FIDELITY AUTOMATIC ACCOUNT BUILDE R
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 MONTHLY OR QUARTERLY (SMALL SOLID BULLET) FOR A NEW ACCOUNT, COMPLETE THE APPROPRIATE SECTION ON THE
FUND APPLICATION.
(SMALL SOLID BULLET) FOR EXISTING ACCOUNTS, CALL 1-800-544-6666 OR VISIT FIDELITY'S
WEB SITE AT WWW.FIDELITY.COM 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
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 EVERY PAY PERIOD (SMALL SOLID BULLET) CHECK THE APPROPRIATE BOX ON THE FUND APPLICATION, OR CALL
1-800-544-6666 OR VISIT FIDELITY'S WEB SITE AT
WWW.FIDELITY.COM 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
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, bimonthly, quarterly, (small solid bullet) To establish, call 1-800-544-6666 after both accounts
or annually are opened.
(small solid bullet) To change the amount or frequency of your investment, call
1-800-544-6666.
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A BECAUSE THEIR SHARE PRICES FLUCTUATE, THESE FUNDS MAY NOT BE
APPROPRIATE CHOICES FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net investment
income and capital gains to shareholders each year.
DISTRIBUTION SCHEDULE
Dividends Capital gains
Asset Manager: Income Monthly (except January) December
Asset Manager March, June, September, December
and December
Asset Manager: Growth December December
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on
the application, call 1-800-544-6666 for instructions. Each fund
offers four options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions
will be automatically reinvested in additional shares of the fund. If
you do not indicate a choice on your application, you will be assigned
this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each
dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
If you select distribution option 2 or 3 and the U.S. Postal
Service does not deliver your checks, your election may be
converted to the Reinvestment Option. You will not receive interest on
amounts represented by uncashed distribution checks. To change your
distribution option, call Fidelity at 1-800-544-6666.
When a fund deducts a distribution from its NAV, the reinvestment
price is the fund's NAV at the close of business that day. Cash
distribution checks will be mailed within seven days.
TAXES
As with any investment, you should consider how your investment in a
fund will be taxed. If your account is not a tax- advantaged
retirement account, you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income
tax, and may also be subject to state or local taxes. If you live
outside the United States, your distributions could also be taxed by
the country in which you reside. Your distributions are taxable when
they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are
taxable as if they were paid on December 31.
For federal tax purposes, each fund's income and short-term capital
gains are distributed as dividends and taxed as ordinary income;
capital gain distributions are taxed as long-term capital gains. Every
January, Fidelity will send you and the IRS a statement showing the
tax characterization of distributions paid to you in the previous
year.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or
loss is the difference between the cost of your shares and the price
you receive when you sell them.
Whenever you sell shares of a fund, Fidelity will send you a
confirmation statement showing how many shares you sold and at what
price. You will also receive a consolidated transaction statement
every January. However, it is up to you or your tax preparer to
determine whether this sale resulted in a capital gain and, if so, the
amount of tax to be paid. Be sure to keep your regular account
statements; the information they contain will be essential in
calculating the amount of your capital gains.
UNDERSTANDING DISTRIBUTIONS
As a fund shareholder, you are entitled to your share of the fund's
net income and gains on its investments. The fund passes its earnings
along to its investors as DISTRIBUTIONS.
Each fund earns dividends from stocks and interest from bond, money
market, and other investments. These are passed along as DIVIDEND
DISTRIBUTIONS. The fund realizes capital gains whenever it
sells securities for a higher price than it paid for them. These are
passed along as CAPITAL GAIN DISTRIBUTIONS.
(checkmark)
"BUYING A DIVIDEND." If you buy shares when a fund 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.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on a
fund and its investments, and these taxes generally will reduce a
fund's distributions. However, if you meet certain holding period
requirements with respect to your fund shares, an offsetting tax
credit may be available to you. If you do not meet such holding period
requirements, you may still be entitled to a deduction for certain
foreign taxes. In either case, your tax statement will show more
taxable income or capital gains than were actually distributed by the
fund, but will also show the amount of the available offsetting
credit or deduction.
There are tax requirements that all funds must follow in order to
avoid federal taxation. In its effort to adhere to these requirements,
a fund may have to limit its investment activity in some types of
instruments.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. FSC normally calculates each fund's NAV as of the
close of business of the NYSE, normally 4:00 p.m. Eastern time.
EACH FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the
number of shares outstanding.
Each fund's assets are valued primarily on the basis of market
quotations or on the basis of information furnished by a pricing
service. Short-term securities with remaining maturities of sixty days
or less for which quotations and information furnished by a pricing
service are not readily available are valued on the basis of amortized
cost. This method minimizes the effect of changes in a security's
market value. Foreign securities are valued on the basis of quotations
from the primary market in which they are traded, and are translated
from the local currency into U.S. dollars using current exchange
rates. In addition, if quotations and information furnished by a
pricing service are not readily available, or if the values have been
materially affected by events occurring after the closing of a foreign
market, assets may be valued by another method that the Board of
Trustees believes accurately reflects fair value.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify
that your social security or taxpayer identification number is correct
and that you are not subject to 31% backup withholding for failing to
report income to the IRS. If you violate IRS regulations, the IRS can
require a fund to withhold 31% of your taxable distributions and
redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE OR ELECTRONICALLY.
Fidelity will not be responsible for any losses resulting from
unauthorized transactions if it follows reasonable security procedures
designed to verify the identity of the investor. Fidelity will request
personalized security codes or other information, and may also record
calls. For transactions conducted through the Internet, Fidelity
recommends the use of an Internet browser with 128-bit encryption. You
should verify the accuracy of your confirmation statements immediately
after you receive them. If you do not want the ability to redeem and
exchange by telephone, call Fidelity for instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during
periods of unusual market activity), consider placing your order by
mail or by visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT to suspend the offering of shares for a
period of time.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased
at the next NAV calculated after your investment is received i n
proper form . Note the following:
(small solid bullet) All of your purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check,
each check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number
of checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will
be canceled and you could be liable for any losses or fees a fund or
its transfer agent has incurred.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money
order, U.S. Treasury check, Federal Reserve check, or direct deposit
instead.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements
with FDC may enter confirmed purchase orders on behalf of customers by
phone, with payment to follow no later than the time when a fund is
priced on the following business day. If payment is not received by
that time, the financial institution could be held liable for
resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at
the next NAV calculated after your order is received in proper
form . Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to
you on the next business day, but if making immediate payment could
adversely affect a fund, it may take up to seven days to pay you.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day
after your phone call.
(small solid bullet) Each fund may hold payment on redemptions until
it is reasonably satisfied that investments made by check or Fidelity
Money Line have been collected, which can take up to seven business
days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays),
when trading on the NYSE is restricted, or as permitted by the SEC.
(small solid bullet) You will not receive interest on amounts
represented by uncashed redemption checks.
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 funds
without reimbursement from the funds. Qualified recipients are
securities dealers who have sold fund shares or others, including
banks and other financial institutions, under special arrangements in
connection with FDC's sales activities. In some instances, these
incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or
expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a
fund for shares of other Fidelity funds. However, you should note the
following:
(small solid bullet) The fund you are exchanging into must be
available for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification
number.
(small solid bullet) Before exchanging into a fund, read its
prospectus.
(small solid bullet) If you exchange into a fund with a sales charge,
you pay the percentage-point difference between that fund's sales
charge and any sales charge you have previously paid in connection
with the shares you are exchanging. For example, if you had already
paid a sales charge of 2% on your shares and you exchange them into a
fund with a 3% sales charge, you would pay an additional 1% sales
charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund
performance and shareholders, each fund reserves the right to
temporarily or permanently terminate the exchange privilege of any
investor who makes more than four exchanges out of the fund per
calendar year. Accounts under common ownership or control, including
accounts with the same taxpayer identification number, will be counted
together for purposes of the four exchange limit.
(small solid bullet) The exchange limit may be modified for accounts
in certain institutional retirement plans to conform to plan exchange
limits and Department of Labor regulations. See your plan materials
for further information.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would
be unable to invest the money effectively in accordance with its
investment objective and policies, or would otherwise potentially be
adversely affected.
(small solid bullet) Your exchanges may be restricted or refused if a
fund receives or anticipates simultaneous orders affecting significant
portions of the fund's assets. In particular, a pattern of exchanges
that coincides with a "market timing" strategy may be disruptive to a
fund.
Although the funds will attempt to give you prior notice whenever they
are reasonably able to do so, they may impose these restrictions at
any time. The funds reserve the right to terminate or modify the
exchange privilege in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to 1.00% and trading fees of
up to 3.00% of the amount exchange d. Check each fund's
prospectus for details.
Fidelity, Fidelity Investments & (Pyramid) Design, Fidelity Asset
Manager, Fidelity Investments, Fidelity Money Line, Fidelity Automatic
Account Builder, TouchTone Xpress, and Directed Dividends are
registered trademarks of FMR Corp.
Asset Manager: Income, Asset Manager, Asset Manager: Growth,
Fidelity GoalPlanner, and Portfolio Advisory Services are service
marks of FMR Corp.
The third party marks appearing above are the marks of their
respective owners.
This prospectus is printed on recycled paper using soy-based inks.
FIDELITY CHARLES STREET TRUST:
FIDELITY ASSET MANAGER FUNDS
CROSS REFERENCE SHEET
FORM N-1A
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ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
10, 11 ............................ Cover Page
12 ............................ Description of the Trust
13 a - c ............................ Investment Policies and Limitations
d ............................ Portfolio Transactions
14 a - c ............................ Trustees and Officers
15 a ............................ *
b, c ............................ Trustees and Officers
16 a i............................ FMR; Portfolio Transactions
ii............................ Trustees and Officers
iii........................... Management Contracts
b ............................ Management Contracts
c, d ............................ Contracts with FMR Affiliates
e ............................ *
f ............................ Distribution and Service Plans
g ............................ *
h ............................ Description of the Trust
i ............................ Contracts with FMR Affiliates
17 a - d ............................ Portfolio Transactions
e ............................ *
18 a ............................ Description of the Trust
b ............................ *
19 a ............................ Additional Purchase and Redemption Information
b ............................ Additional Purchase and Redemption Information;
Valuation
c ............................ *
20 ............................ Distributions and Taxes
21 a, b ............................ Contracts with FMR Affiliates
c ............................ *
22 a ............................ *
b ............................ Performance
23 ............................ Financial Statements
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* Not Applicable
FIDELITY ASSET MANAGER: INCOME
FIDELITY ASSET MANAGER (registered trademark)
FIDELITY ASSET MANAGER: GROWTH
FUNDS OF FIDELITY CHARLES STREET TRUST
STATEMENT OF ADDITIONAL INFORMATION
November 24, 1998
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the funds' current Prospectuses
(dated November 24, 1998 ). Please retain this document for
future reference. The funds' Annual Reports are separate documents
supplied with this SAI. To obtain a free additional copy of a
Prospectus or an Annual Report, please call Fidelity (registered
trademark) at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations 4
Portfolio Transactions 11
Valuation 14
Performance 14
Additional Purchase , Exchange and Redemption Information 18
Distributions and Taxes 19
FMR 19
Trustees and Officers 19
Management Contracts 21
Distribution and Service Plans 27
Contracts with FMR Affiliates 27
Description of the Trust 28
Financial Statements 29
Appendix 29
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc. (FMR U.K.)
Fidelity Management & Research (Far East) Inc. (FMR Far East)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Service Company, Inc. (FSC)
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.
FFM-ptb- 1198
1.463731.101
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in
the Prospectuses. Unless otherwise noted, whenever an investment
policy or limitation states a maximum percentage of a fund's assets
that may be invested in any security or other asset, or sets forth a
policy regarding quality standards, such standard or percentage
limitation will be determined immediately after and as a result of the
fund's acquisition of such security or other asset. Accordingly, any
subsequent change in values, net assets, or other circumstances will
not be considered when determining whether the investment complies
with the fund's investment policies and limitations.
A fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940 (the
1940 Act) ) of the fund. However, except for the fundamental
investment limitations listed below, the investment policies and
limitations described in this SAI are not fundamental and may be
changed without shareholder approval.
INVESTMENT LIMITATIONS OF ASSET MANAGER: INCOME SM
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 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 ASSET MANAGER SM
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) 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 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 ASSET MANAGER: GROWTH SM
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) 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 and selling precious metals, or from
purchasing or selling options and futures contracts or from investing
in securities or other instruments backed by physical commodities); or
(8) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but
this limit does not apply to purchases of debt securities or to
repurchase agreements.
(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 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 more than 5% of its
total assets in precious metals.
(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.
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 .
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related
risks. FMR may not buy all of these instruments or use all of these
techniques unless it believes that doing so will help a fund
achieve its goal.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be,
"affiliated persons" of the fund under the 1940 Act . These
transactions may involve repurchase agreements with custodian
banks; short-term obligations of, and repurchase agreements with, the
50 largest U.S. banks (measured by deposits); municipal securities;
U.S. Government securities with affiliated financial institutions that
are primary dealers in these securities; short-term currency
transactions; and short-term borrowings. In accordance with exemptive
orders issued by the Securities and Exchange Commission (SEC), the
Board of Trustees has established and periodically reviews procedures
applicable to transactions involving affiliated financial
institutions.
ASSET ALLOCATION. The stock class includes domestic and foreign equity
securities of all types (other than adjustable rate preferred stocks
which are included in the bond class). FMR seeks to maximize total
return within this asset class by actively allocating assets to
industry sectors expected to benefit from major trends, and to
individual stocks that FMR believes to have superior investment
potential. When FMR selects equity securities, it considers both
growth and anticipated dividend income. Securities in the stock class
may include common stocks, fixed-rate preferred stocks (including
convertible preferred stocks), warrants, rights, depositary receipts,
securities of closed-end investment companies, and other equity
securities issued by companies of any size, located anywhere in the
world.
The bond class includes all varieties of domestic and foreign
fixed-income securities maturing in more than one year. FMR will seek
to maximize total return within the bond class by adjusting a
fund's investments in securities with different credit qualities,
maturities, and coupon or dividend rates, and by seeking to take
advantage of yield differentials between securities. Securities in
this class may include bonds, notes, adjustable-rate preferred stocks,
convertible bonds, mortgage-related and asset-backed securities,
domestic and foreign government and government agency securities, zero
coupon bonds, and other intermediate and long-term securities. These
securities may be denominated in U.S. dollars or foreign
currency .
The short-term/money market class includes all types of domestic and
foreign short-term and money market instruments. FMR will seek to
maximize total return with respect to Asset Manager and Asset Manager:
Growth, and will seek to maximize income with respect to Asset
Manager: Income, within this asset class by taking advantage of yield
differentials between different instruments, issuers, and currencies.
Short-term and money market instruments may include corporate debt
securities, such as commercial paper and notes; government securities
issued by U.S. or foreign governments or their agencies or
instrumentalities; bank deposits and other financial institution
obligations; repurchase agreements involving any type of security; and
other similar short-term instruments. These instruments may be
denominated in U.S. dollars or foreign currency.
FMR may use its judgment to place a security in the most appropriate
class based on its investment characteristics. Fixed-income securities
may be classified in the bond or short-term/money market class
according to interest rate sensitivity as well as maturity. The funds
may also make other investments that do not fall within these classes.
In making asset allocation decisions, FMR will evaluate projections of
risk, market conditions, economic conditions, volatility, yields, and
returns. FMR's management will use database systems to help analyze
past situations and trends, research specialists in each of the asset
classes to help in securities selection, portfolio management
professionals to determine asset allocation and to select individual
securities, and its own credit analysis as well as credit analyses
provided by rating services.
ASSET-BACKED SECURITIES represent interests in pools of mortgages,
loans, receivables or other assets. Payment of interest and repayment
of principal may be largely dependent upon the cash flows generated by
the assets backing the securities and, in certain cases, supported by
letters of credit, surety bonds, or other credit enhancements.
Asset-backed security values may also be affected by the
creditworthiness of the servicing agent for the pool, the originator
of the loans or receivables, or the entities providing the credit
enhancement. In addition, these securities may be subject to
prepayment risk.
CLOSED-END INVESTMENT COMPANIES are investment companies that issue
a fixed number of shares which trade on a stock exchange or
over-the-counter. Closed-end investment companies are professionally
managed and may invest in any type of security. Shares of
closed-end investment companies may trade at a premium or a discount
to their net asset value. A fund may purchase shares of
closed-end investment companies to facilitate investment in certain
foreign countries.
CONVERTIBLE SECURITIES are bonds, debentures, notes,
preferred stocks or other securities that may be converted or
exchanged (by the holder or by the issuer) into shares of the
underlying common stock (or cash or securities of equivalent value) at
a stated exchange ratio. A convertible security may also be called for
redemption or conversion by the issuer after a particular date and
under certain circumstances (including a specified price) established
upon issue. If a convertible security held by a fund is called for
redemption or conversion, the fund could be required to tender it for
redemption, convert it into the underlying common stock, or sell it to
a third party.
Convertible securities generally have less potential for gain or
loss than common stocks. Convertible securities generally provide
yields higher than the underlying common stocks, but generally lower
than comparable non-convertible securities. Because of this higher
yield, convertible securities generally sell at prices above their
"conversion value," which is the current market value of the stock to
be received upon conversion. The difference between this conversion
value and the price of convertible securities will vary over time
depending on changes in the value of the underlying common stocks and
interest rates. When the underlying common stocks decline in value,
convertible securities will tend not to decline to the same extent
because of the interest or dividend payments and the repayment of
principal at maturity for certain types of convertible securities.
However, securities that are convertible other than at the option of
the holder generally do not limit the potential for loss to the same
extent as securities convertible at the option of the holder. When the
underlying common stocks rise in value, the value of convertible
securities may also be expected to increase. At the same time,
however, the difference between the market value of convertible
securities and their conversion value will narrow, which means that
the value of convertible securities will generally not increase to the
same extent as the value of the underlying common stocks. Because
convertible securities may also be interest-rate sensitive, their
value may increase as interest rates fall and decrease as interest
rates rise. Convertible securities are also subject to credit risk,
and are often lower-quality securities.
DELAYED-DELIVERY TRANSACTIONS. Securities may be bought and
sold on a delayed-delivery or when-issued basis. These
transactions involve a commitment to purchase or sell specific
securities at a predetermined price or yield, with payment and
delivery taking place after the customary settlement period for that
type of security. Typically, no interest accrues to the purchaser
until the security is delivered. The funds may receive fees or
price concessions for entering into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, the
purchaser assumes the rights and risks of ownership, including the
risk s of price and yield fluctuations and the risk that the
security will not be issued as anticipated . Because payment for
the securities is not required until the delivery date,
these risks are in addition to the risks associated with a
fund's investments. If a fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding,
the delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, a fund will set
aside appropriate liquid assets in a segregated custodial account to
cover the purchase obligations. When a fund has sold a security
on a delayed-delivery basis, the fund does not participate in further
gains or losses with respect to the security. If the other party to a
delayed-delivery transaction fails to deliver or pay for the
securities, a fund could miss a favorable price or yield
opportunity or suffer a loss.
A fund may renegotiate a delayed delivery transaction
and may sell the underlying securities before delivery , which
may result in capital gains or losses for the fund .
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies,
and securities issued by U.S. entities with substantial foreign
operations may involve significant risks in addition to the risks
inherent in U.S. investments.
Foreign investments involve risk s relating to local political,
economic, regulatory, or social instability, military action or
unrest, or adverse diplomatic developments, and may be affected by
actions of foreign governments adverse to the interests of U.S.
investors. Such actions may include expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency
into U.S. dollars, or other government intervention. There is no
assurance that FMR will be able to anticipate these potential events
or counter their effects. In addition, the value of securities
denominated in foreign currencies and of dividends and interest paid
with respect to such securities will fluctuate based on the relative
strength of the U.S. dollar.
I t is anticipated that in most cases the best available market
for foreign securities will be on an exchange or in over-the-counter
(OTC) markets located outside of the United States. Foreign
stock markets, while growing in volume and sophistication, are
generally not as developed as those in the United States, and
securities of some foreign issuers may be less liquid and more
volatile than securities of comparable U.S. issuers. Foreign security
trading , settlement and custodial practices (including those
involving securities settlement where fund assets may be released
prior to receipt of payment) are often less developed than those in
U.S. markets, and may result in increased risk or substantial
delays in the event of a failed trade or the insolvency of , or
breach of duty by , a foreign broker-deale r, 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 alternative s to directly purchasing
the underlying foreign securities in their national markets and
currencies. However, ADRs continue to be subject to many of the risks
associated with investing directly in foreign securities. These risks
include foreign exchange risk as well as the political and economic
risks of the underlying issuer's country.
The risks of foreign investing may be magnified for investments in
emerging markets. Security prices in emerging markets can be
significantly more volatile than those in more developed markets,
reflecting the greater uncertainties of investing in less established
markets and economies. In particular, countries with emerging markets
may have relatively unstable governments, may present the risks of
nationalization of businesses, restrictions on foreign ownership and
prohibitions on the repatriation of assets, and may have less
protection of property rights than more developed countries. The
economies of countries with emerging markets may be based on only a
few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt
burdens or inflation rates. Local securities markets may trade a small
number of securities and may be unable to respond effectively to
increases in trading volume, potentially making prompt liquidation of
holdings difficult or impossible at times.
FOREIGN CURRENCY TRANSACTIONS. A fund may conduct foreign currency
transactions on a spot (i.e., cash) or forward basis (i.e., by
entering into forward contracts to purchase or sell foreign
currencies). Although foreign exchange dealers generally do not charge
a fee for such conversions, they do realize a profit based on the
difference between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign
currency at one rate, while offering a lesser rate of exchange should
the counterparty desire to resell that currency to the dealer. Forward
contracts are customized transactions that require a specific amount
of a currency to be delivered at a specific exchange rate on a
specific date or range of dates in the future. Forward contracts are
generally traded in an interbank market directly between currency
traders (usually large commercial banks) and their customers. The
parties to a forward contract may agree to offset or terminate the
contract before its maturity, or may hold the contract to maturity and
complete the contemplated currency exchange .
The following discussion summarizes the principal currency management
strategies involving forward contracts that could be used by a fund. A
fund may also use swap agreements, indexed securities, and options and
futures contracts relating to foreign currencies for the same
purposes.
A "settlement hedge" or "transaction hedge" is designed to protect a
fund against an adverse change in foreign currency values between the
date a security is purchased or sold and the date on which payment is
made or received. Entering into a forward contract for the purchase or
sale of the amount of foreign currency involved in an underlying
security transaction for a fixed amount of U.S. dollars "locks in" the
U.S. dollar price of the security. Forward contracts to purchase or
sell a foreign currency may also be used by a fund in anticipation of
future purchases or sales of securities denominated in foreign
currency, even if the specific investments have not yet been selected
by FMR.
A fund may also use forward contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. For
example, if a fund owned securities denominated in pounds sterling, it
could enter into a forward contract to sell pounds sterling in return
for U.S. dollars to hedge against possible declines in the pound's
value. Such a hedge, sometimes referred to as a "position hedge,"
would tend to offset both positive and negative currency fluctuations,
but would not offset changes in security values caused by other
factors. A fund could also hedge the position by selling another
currency expected to perform similarly to the pound sterling. This
type of hedge, sometimes referred to as a "proxy hedge," could offer
advantages in terms of cost, yield, or efficiency, but generally would
not hedge currency exposure as effectively as a direct hedge into U.S.
dollars. Proxy hedges may result in losses if the currency used to
hedge does not perform similarly to the currency in which the hedged
securities are denominated.
A fund may enter into forward contracts to shift its investment
exposure from one currency into another. This may include shifting
exposure from U.S. dollars to a foreign currency, or from one foreign
currency to another foreign currency. This type of strategy, sometimes
known as a "cross-hedge," will tend to reduce or eliminate exposure to
the currency that is sold, and increase exposure to the currency that
is purchased, much as if a fund had sold a security denominated in one
currency and purchased an equivalent security denominated in another.
Cross-hedges protect against losses resulting from a decline in the
hedged currency, but will cause a fund to assume the risk of
fluctuations in the value of the currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to set
aside appropriate liquid assets in a segregated custodial account to
cover currency forward contracts. As required by SEC guidelines, a
fund will segregate assets to cover currency forward contracts, if
any, whose purpose is essentially speculative. A fund will not
segregate assets to cover forward contracts entered into for hedging
purposes, including settlement hedges, position hedges, and proxy
hedges.
Successful use of currency management strategies will depend on FMR's
skill in analyzing currency values. Currency management strategies may
substantially change a fund's investment exposure to changes in
currency exchange rates and could result in losses to a fund if
currencies do not perform as FMR anticipates. For example, if a
currency's value rose at a time when FMR had hedged a fund by selling
that currency in exchange for dollars, a fund would not participate in
the currency's appreciation. If FMR hedges currency exposure through
proxy hedges, a fund could realize currency losses from both the hedge
and the security position if the two currencies do not move in tandem.
Similarly, if FMR increases a fund's exposure to a foreign currency
and that currency's value declines, a fund will realize a loss. There
is no assurance that FMR's use of currency management strategies will
be advantageous to a fund or that it will hedge at appropriate times.
FUNDS' RIGHTS AS SHAREHOLDER S . The funds do not intend
to direct or administer the day-to-day operations of any company.
A fund, however, may exercise its rights as a shareholder and
may communicate its views on important matters of policy to
management, the Board of Directors, and shareholders of a company when
FMR determines that such matters could have a significant effect on
the value of the fund's investment in the company. The activities
in which a fund may engage, either individually or in
conjunction with others, may include, among others, supporting or
opposing proposed changes in a company's corporate structure or
business activities; seeking changes in a company's directors or
management; seeking changes in a company's direction or policies;
seeking the sale or reorganization of the company or a portion of its
assets; or supporting or opposing third - party takeover efforts.
This area of corporate activity is increasingly prone to litigation
and it is possible that a fund could be involved in lawsuits related
to such activities. FMR will monitor such activities with a view to
mitigating, to the extent possible, the risk of litigation against a
fund and the risk of actual liability if a fund is involved in
litigation. No guarantee can be made, however, that litigation against
a fund will not be undertaken or liabilities incurred.
FUTURES AND OPTIONS. The following paragraphs pertain to
futures and options: Asset Coverage for Futures and Options Positions,
Combined Positions, Correlation of Price Changes, Futures Contracts,
Futures Margin Payments, Limitations on Futures and Options
Transactions, Liquidity of Options and Futures Contracts, Options and
Futures Relating to Foreign Currencies, OTC Options, Purchasing Put
and Call Options, and Writing Put and Call Options.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The funds will
comply with guidelines established by the SEC with respect to
coverage of options and futures strategies by mutual funds and, if the
guidelines so require , will set aside appropriate liquid assets
in a segregated custodial account in the amount prescribed. Securities
held in a segregated account cannot be sold while the futures or
option strategy is outstanding, unless they are replaced with other
suitable assets. As a result, there is a possibility that segregation
of a large percentage of a fund's assets could impede portfolio
management or the fund's ability to meet redemption requests or other
current obligations.
COMBINED POSITIONS involve purchasing and writing options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the
overall position. For example, purchasing a put option and
writing a call option on the same underlying instrument
would construct a combined position whose risk and return
characteristics are similar to selling a futures contract. Another
possible combined position would involve writing a call option at one
strike price and buying a call option at a lower price, to
reduce the risk of the written call option in the event of a
substantial price increase. Because combined options positions involve
multiple trades, they result in higher transaction costs and may be
more difficult to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of
types of exchange-traded options and futures contracts, it is likely
that the standardized contracts available will not match a fund's
current or anticipated investments exactly. A fund may
invest in options and futures contracts based on securities with
different issuers, maturities, or other characteristics from the
securities in which the fund typically invest s , which
involves a risk that the options or futures position will not track
the performance of the fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a
fund's investments well. Options and futures prices are affected by
such factors as current and anticipated short-term interest rates,
changes in volatility of the underlying instrument, and the time
remaining until expiration of the contract, which may not affect
security prices the same way. Imperfect correlation may also result
from differing levels of demand in the options and futures markets and
the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. A fund may purchase or sell
options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to
attempt to compensate for differences in volatility between the
contract and the securities, although this may not be successful in
all cases. If price changes in a fund's options or futures positions
are poorly correlated with its other investments, the positions may
fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
FUTURES CONTRACTS. In purchasing a futures contract, the
buyer agrees to purchase a specified underlying instrument at a
specified future date. In selling a futures contract, the
seller agrees to sell a specified underlying instrument at
a specified future date. The price at which the purchase and sale will
take place is fixed when the buyer and seller enter into the
contract. Some currently available futures contracts are based on
specific securities, such as U.S. Treasury bonds or notes, and some
are based on indices of securities prices, such as the Standard &
Poor's 500 Index (S&P 500 (registered trademark) ). Futures can
be held until their delivery dates, or can be closed out before then
if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in
tandem with the value of its underlying instrument. Therefore,
purchasing futures contracts will tend to increase a fund's exposure
to positive and negative price fluctuations in the underlying
instrument, much as if it had purchased the underlying instrument
directly. When a fund sells a futures contract, by contrast, the value
of its futures position will tend to move in a direction contrary to
the market. Selling futures contracts, therefore, will tend to offset
both positive and negative market price changes, much as if the
underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract
is not required to deliver or pay for the underlying instrument unless
the contract is held until the delivery date. However, both the
purchaser and seller are required to deposit "initial margin" with a
futures broker, known as a futures commission merchant (FCM), when the
contract is entered into. Initial margin deposits are typically equal
to a percentage of the contract's value. If the value of either
party's position declines, that party will be required to make
additional "variation margin" payments to settle the change in value
on a daily basis. The party that has a gain may be entitled to receive
all or a portion of this amount. Initial and variation margin payments
do not constitute purchasing securities on margin for purposes of a
fund's investment limitations. In the event of the bankruptcy of an
FCM that holds margin on behalf of a fund, the fund may be entitled to
return of margin owed to it only in proportion to the amount received
by the FCM's other customers, potentially resulting in losses to the
fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading
Commission (CFTC) and the National Futures Association, which regulate
trading in the futures markets. The funds intend to comply with Rule
4.5 under the Commodity Exchange Act, which limits the extent to which
the funds can commit assets to initial margin deposits and option
premiums.
In addition, each fund will not: (a) sell futures contracts, purchase
put options, or write call options if, as a result, more than 25% of
the fund's total assets would be hedged with futures and options under
normal conditions; (b) purchase futures contracts or write put options
if, as a result, the fund's total obligations upon settlement or
exercise of purchased futures contracts and written put options would
exceed 25% of its total assets under normal conditions ; or (c)
purchase call options if, as a result, the current value of option
premiums for call options purchased by the fund would exceed 5% of the
fund's total assets. These limitations do not apply to options
attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on the funds' investments in futures contracts
and options, and the funds' policies regarding futures contracts and
options discussed elsewhere in this SAI, may be changed as regulatory
agencies permit.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid secondary market will exist for any particular options or
futures contract at any particular time. Options may have relatively
low trading volume and liquidity if their strike prices are not close
to the underlying instrument's current price. In addition, exchanges
may establish daily price fluctuation limits for options and futures
contracts, and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days
when the price fluctuation limit is reached or a trading halt is
imposed, it may be impossible to enter into new positions or
close out existing positions. If the secondary market for a contract
is not liquid because of price fluctuation limits or otherwise, it
could prevent prompt liquidation of unfavorable positions, and
potentially could require a fund to continue to hold a position until
delivery or expiration regardless of changes in its value. As a
result, a fund's access to other assets held to cover its options or
futures positions could also be impaired.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except
that they are traded on exchanges (and have margin requirements) and
are standardized as to contract size and delivery date. Most currency
futures contracts call for payment or delivery in U.S. dollars. The
underlying instrument of a currency option may be a foreign currency,
which generally is purchased or delivered in exchange for U.S.
dollars, or may be a futures contract. The purchaser of a currency
call obtains the right to purchase the underlying currency, and the
purchaser of a currency put obtains the right to sell the underlying
currency.
The uses and risks of currency options and futures are similar to
options and futures relating to securities or indices, as discussed
above. A fund may purchase and sell currency futures and may
purchase and write currency options to increase or decrease its
exposure to different foreign currencies. Currency options may
also be purchased or written in conjunction with each other or
with currency futures or forward contracts. Currency futures and
options values can be expected to correlate with exchange rates, but
may not reflect other factors that affect the value of a fund's
investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not
protect a fund against a price decline resulting from deterioration in
the issuer's creditworthiness. Because the value of a fund's
foreign-denominated investments changes in response to many factors
other than exchange rates, it may not be possible to match the amount
of currency options and futures to the value of the fund's investments
exactly over time.
OTC OPTIONS. Unlike exchange-traded options, which are standardized
with respect to the underlying instrument, expiration date, contract
size, and strike price, the terms of over-the-counter (OTC) options
(options not traded on exchanges) generally are established through
negotiation with the other party to the option contract. While this
type of arrangement allows the purchaser or writer greater
flexibility to tailor an option to its needs, OTC options generally
involve greater credit risk than exchange-traded options, which are
guaranteed by the clearing organization of the exchanges where they
are traded.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the
purchaser obtains the right (but not the obligation) to sell the
option's underlying instrument at a fixed strike price. In return for
this right, the purchaser pays the current market price for the
option (known as the option premium). Options have various types of
underlying instruments, including specific securities, indices of
securities prices, and futures contracts. The purchaser may
terminate its position in a put option by allowing it to expire
or by exercising the option. If the option is allowed to expire, the
purchaser will lose the entire premium . If the option
is exercised , the purchaser completes the sale of the
underlying instrument at the strike price. A purchaser may also
terminate a put option position by closing it out in the secondary
market at its current price, if a liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if
security prices fall substantially. However, if the underlying
instrument's price does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss
(limited to the amount of the premium , plus related transaction
costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right
to purchase, rather than sell, the underlying instrument at the
option's strike price. A call buyer typically attempts to participate
in potential price increases of the underlying instrument with risk
limited to the cost of the option if security prices fall. At the same
time, the buyer can expect to suffer a loss if security prices do not
rise sufficiently to offset the cost of the option.
WRITING PUT AND CALL OPTIONS. The writer of a put or call
option takes the opposite side of the transaction from the
option's purchaser. In return for receipt of the premium, the
writer assumes the obligation to pay the strike price for the
option's underlying instrument if the other party to the option
chooses to exercise it. The writer may seek to terminate
a position in a put option before exercise by closing
out the option in the secondary market at its current price. If the
secondary market is not liquid for a put option , however,
the writer must continue to be prepared to pay the strike price
while the option is outstanding, regardless of price changes, and must
continue to set aside assets to cover its position. When writing an
option on a futures contract, a fund will be required to make margin
payments to an FCM as described above for futures contracts.
If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it
is likely that the writer will also profit, because it should be able
to close out the option at a lower price. If security prices fall, the
put writer would expect to suffer a loss. This loss should be less
than the loss from purchasing the underlying instrument directly,
however, because the premium received for writing the option should
mitigate the effects of the decline.
Writing a call option obligates the writer to sell or deliver
the option's underlying instrument, in return for the strike price,
upon exercise of the option. The characteristics of writing call
options are similar to those of writing put options, except that
writing calls generally is a profitable strategy if prices remain the
same or fall. Through receipt of the option premium, a call writer
mitigates the effects of a price decline. At the same time, because a
call writer must be prepared to deliver the underlying instrument in
return for the strike price, even if its current value is greater, a
call writer gives up some ability to participate in security price
increases.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed
of in the ordinary course of business at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees,
FMR determines the liquidity of a fund's investments and, through
reports from FMR, the Board monitors investments in illiquid
instruments. In determining the liquidity of a fund's investments, FMR
may consider various factors, including (1) the frequency of trades
and quotations, (2) the number of dealers and prospective purchasers
in the marketplace, (3) dealer undertakings to make a market, (4) the
nature of the security (including any demand or tender features), and
(5) the nature of the marketplace for trades (including the ability to
assign or offset the fund's rights and obligations relating to the
investment).
Investments currently considered by FMR to be illiquid include
repurchase agreements not entitling the holder to re payment of
principal and payment of interest within seven days,
over-the-counter options, and non-government stripped fixed-rate
mortgage-backed securities. Also, FMR may determine some restricted
securities, government-stripped fixed-rate mortgage-backed securities,
loans and other direct debt instruments, 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 Trustee s.
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.
Gold-indexed securities typically provide for a maturity value
that depends on the price of gold, resulting in a security whose price
tends to rise and fall together with gold prices. Currency-indexed
securities typically are short-term to intermediate-term debt
securities whose maturity values or interest rates are determined by
reference to the values of one or more specified foreign currencies,
and may offer higher yields than U.S. dollar-denominated
securities . Currency-indexed securities may be positively or
negatively indexed; that is, their maturity value may increase when
the specified currency value increases, resulting in a security that
performs similarly to a foreign-denominated instrument, or their
maturity value may decline when foreign currencies increase, resulting
in a security whose price characteristics are similar to a put on the
underlying currency. Currency-indexed securities may also have prices
that depend on the values of a number of different foreign currencies
relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which
they are indexed, and may also be influenced by interest rate changes
in the United States and abroad. Indexed securities may be more
volatile than the underlying instruments. Indexed securities
are also subject to the credit risks associated with the issuer
of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Recent issuers of indexed
securities have included banks, corporations, and certain U.S.
Government agencies .
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive
order issued by the SEC, a fund may lend money to, and
borrow money from, other funds advised by FMR or its affiliates. A
fund will lend through the program only when the returns are higher
than those available from an investment in repurchase agreements, and
will borrow through the program only when the costs are equal to or
lower than the cost of bank loans. Interfund loans and borrowings
normally extend overnight, but can have a maximum duration of seven
days. Loans may be called on one day's notice. A fund may have to
borrow from a bank at a higher interest rate if an interfund loan is
called or not renewed. Any delay in repayment to a lending fund could
result in a lost investment opportunity or additional borrowing costs.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. Direct debt instruments are
interests in amounts owed by a corporate, governmental, or other
borrower to lenders or lending syndicates (loans and loan
participations), to suppliers of goods or services (trade claims or
other receivables), or to other parties. Direct debt instruments are
subject to a fund's policies regarding the quality of debt securities.
Purchasers of loans and other forms of direct indebtedness depend
primarily upon the creditworthiness of the borrower for payment of
interest and repayment of principal. Direct debt instruments
may not be rated by any nationally recognized statistical
rating service. If scheduled interest or principal payments
are not made , the value of the instrument may be
adversely affected. Loans that are fully secured provide more
protections than an unsecured loan in the event of failure to
make scheduled interest or principal payments . However,
there is no assurance that the liquidation of collateral from a
secured loan would satisfy the borrower's obligation, or that the
collateral could be liquidated. Indebtedness of borrowers whose
creditworthiness is poor involves substantially greater risks and may
be highly speculative. Borrowers that are in bankruptcy or
restructuring may never pay off their indebtedness, or may pay only a
small fraction of the amount owed. Direct indebtedness of developing
countries also involves a risk that the governmental entities
responsible for the repayment of the debt may be unable, or unwilling,
to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial
institution's interests with respect to a loan may involve additional
risks . For example, if a loan is foreclosed, the
purchaser could become part owner of any collateral, and would
bear the costs and liabilities associated with owning and disposing of
the collateral. In addition, it is conceivable that under emerging
legal theories of lender liability, a purchaser could be held
liable as a co-lender. Direct debt instruments may also involve a risk
of insolvency of the lending bank or other intermediary. Direct debt
instruments that are not in the form of securities may offer less
legal protection to the purchaser in the event of fraud or
misrepresentation. In the absence of definitive regulatory guidance,
FMR uses its research to attempt to avoid situations
where fraud or misrepresentation could adversely affect a fund.
A loan is often administered by a bank or other financial institution
that acts as agent for all holders. The agent administers the terms of
the loan, as specified in the loan agreement. Unless, under the terms
of the loan or other indebtedness, the purchaser has direct
recourse against the borrower, the purchaser may have to rely
on the agent to apply appropriate credit remedies against a borrower.
If assets held by the agent for the benefit of a purchaser were
determined to be subject to the claims of the agent's general
creditors, the purchaser might incur certain costs and delays
in realizing payment on the loan or loan participation and could
suffer a loss of principal or interest.
Direct indebtedness may include letters of credit, revolving
credit facilities, or other standby financing commitments that
obligate purchasers to make additional cash payments
on demand. These commitments may have the effect of requiring a
purchaser to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition
makes it unlikely that the amount will ever be repaid. A fund
will set aside appropriate liquid assets in a segregated custodial
account to cover its potential obligations under standby financing
commitments.
Each fund limits the amount of total assets that it will invest in any
one issuer or in issuers within the same industry (see each fund's
investment limitations). For purposes of these limitations,
a fund generally will treat the borrower as the "issuer" of
indebtedness held by the fund. In the case of loan participations
where a bank or other lending institution serves as financial
intermediary between a fund and the borrower, if the
participation does not shift to the fund the direct debtor-creditor
relationship with the borrower, SEC interpretations require a
fund, in appropriate circumstances, to treat both the lending bank or
other lending institution and the borrower as "issuers" for these
purposes. Treating a financial intermediary as an issuer of
indebtedness may restrict a fund's ability to invest in indebtedness
related to a single financial intermediary, or a group of
intermediaries engaged in the same industry, even if the underlying
borrowers represent many different companies and industries.
LOWER-QUALITY DEBT SECURITIES. Lower-quality debt securities have
poor protection with respect to the payment of interest and repayment
of principal, or may be in default. These securities are often
considered to be speculative and involve greater risk of loss or price
changes due to changes in the issuer's capacity to pay. The market
prices of lower-quality debt securities may fluctuate more than those
of higher-quality debt securities and may decline significantly in
periods of general economic difficulty, which may follow periods of
rising interest rates.
While the market for high-yield corporate debt securities has been in
existence for many years and has weathered previous economic
downturns, the 1980s brought a dramatic increase in the use of such
securities to fund highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication
of the future performance of the high-yield bond market, especially
during periods of economic recession.
The market for lower-quality debt securities may be thinner and less
active than that for higher-quality debt securities, which can
adversely affect the prices at which the former are sold. If market
quotations are not available, lower-quality debt securities will be
valued in accordance with procedures established by the Board of
Trustees, including the use of outside pricing services. Judgment
plays a greater role in valuing high-yield debt securities than
is the case for securities for which more external sources for
quotations and last-sale information are available. Adverse publicity
and changing investor perceptions may affect the liquidity of
lower-quality debt securities and the ability of outside pricing
services to value lower-quality debt securities.
Since the risk of default is higher for lower-quality debt securities,
FMR's research and credit analysis are an especially important part of
managing securities of this type. FMR will attempt to identify
those issuers of high-yielding securities whose financial condition is
adequate to meet future obligations, has improved, or is expected to
improve in the future. FMR's analysis focuses on relative values based
on such factors as interest or dividend coverage, asset coverage,
earnings prospects, and the experience and managerial strength of the
issuer.
A fund may choose, at its expense or in conjunction with
others, to pursue litigation or otherwise to exercise its rights as a
security holder to seek to protect the interests of security holders
if it determines this to be in the best interest of the fund's
shareholders.
MORTGAGE-BACKED SECURITIES are issued by government and
non-government entities such as banks, mortgage lenders, or other
institutions. A mortgage-backed security is an obligation of the
issuer backed by a mortgage or pool of mortgages or a direct interest
in an underlying pool of mortgages. Some mortgage-backed securities,
such as collateralized mortgage obligations (or "CMOs"), make payments
of both principal and interest at a range of specified
intervals; others make semiannual interest payments at a predetermined
rate and repay principal at maturity (like a typical bond).
Mortgage-backed securities are based on different types of mortgages,
including those on commercial real estate or residential properties.
Stripped mortgage-backed securities are created when the
interest and principal components of a mortgage-backed security are
separated and sold as individual securities. In the case of a
stripped mortgage-backed security, the holder of the "principal-only"
security (PO) receives the principal payments made by the underlying
mortgage , while the holder of the "interest-only" security (IO)
receives interest payments from the same underlying mortgage.
The value of mortgage-backed securities may change due to shifts in
the market's perception of issuers and changes in interest rates. In
addition, regulatory or tax changes may adversely affect the
mortgage -backed securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued
by government entities, but also may be subject to greater price
changes than government issues. Mortgage-backed securities are subject
to prepayment risk , which is the risk that early principal payments
made on the underlying mortgages, usually in response to a reduction
in interest rates, will result in the return of principal to the
investor, causing it to be invested subsequently at a lower current
interest rate. Alternatively, in a rising interest rate environment,
mortgage-backed security values may be adversely affected when
prepayments on underlying mortgages do not occur as anticipated,
resulting in the extension of the security's effective maturity and
the related increase in interest rate sensitivity of a longer-term
instrument. The prices of stripped mortgage-backed securities tend to
be more volatile in response to changes in interest rates than those
of non-stripped mortgage-backed securities.
PRECIOUS METALS. The prices of gold and other commodities can
change rapidly, and generally do not move in tandem with the prices of
equity and debt securities.
REAL ESTATE INVESTMENT TRUSTS. Equity real estate investment trusts
own real estate properties, while mortgage real estate investment
trusts make construction, development, and long-term mortgage loans.
Their value may be affected by changes in the value of the underlying
property of the trusts, the creditworthiness of the issuer, property
taxes, interest rates, and tax and regulatory requirements, such as
those relating to the environment. Both types of trusts are dependent
upon management skill, are not diversified, and are subject to heavy
cash flow dependency, defaults by borrowers, self-liquidation, and the
possibility of failing to qualify for tax-free status of income under
the Internal Revenue Code and failing to maintain exemption from the
1940 Act.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is
unrelated to the coupon rate or maturity of the purchased security.
As protection against the risk that the original seller will
not fulfill its obligation, the securities are held in a
separate account at a bank, marked-to-market daily, and
maintained at a value at least equal to the sale price plus the
accrued incremental amount. While it does not presently appear
possible to eliminate all risks from these transactions (particularly
the possibility that the value of the underlying security will be less
than the resale price, as well as delays and costs to a fund in
connection with bankruptcy proceedings), the funds will engage
in repurchase agreement transactions with parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part
of the registration expense and a considerable period may elapse
between the time it decides to seek registration and the time it may
be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to
develop, a fund might obtain a less favorable price than prevailed
when it decided to seek registration of the security.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
fund sells a security to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase that
security at an agreed-upon price and time. While a reverse
repurchase agreement is outstanding, a fund will maintain
appropriate liquid assets in a segregated custodial account to cover
its obligation under the agreement. The funds will enter into
reverse repurchase agreements with parties whose
creditworthiness has been reviewed and found satisfactory by
FMR. Such transactions may increase fluctuations in the market value
of fund assets and may be viewed as a form of leverage.
SECURITIES LENDING. A fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity
Brokerage Services, Inc. (FBSI). FBSI is a member of the New York
Stock Exchange and a subsidiary of FMR Corp.
Securities lending allows a fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there
may be delays in the recovery of loaned securities, or even a loss of
rights in collateral supplied should the borrower fail financially,
loans will be made only to parties deemed by FMR to be of good
standing. Furthermore, they will only be made if, in FMR's judgment,
the consideration to be earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that a
fund may engage in loan transactions only under the following
conditions: (1) the fund must receive 100% collateral in the form of
cash or cash equivalents (e.g., U.S. Treasury bills or notes) from the
borrower; (2) the borrower must increase the collateral whenever the
market value of the securities loaned (determined on a daily basis)
rises above the value of the collateral; (3) after giving notice, the
fund must be able to terminate the loan at any time; (4) the fund must
receive reasonable interest on the loan or a flat fee from the
borrower, as well as amounts equivalent to any dividends, interest, or
other distributions on the securities loaned and to any increase in
market value; (5) the fund may pay only reasonable custodian fees in
connection with the loan; and (6) the Board of Trustees must be able
to vote proxies on the securities loaned, either by terminating the
loan or by entering into an alternative arrangement with the borrower.
Cash received through loan transactions may be invested in other
eligible securities . Investing this cash subjects that investment,
as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
SHORT SALES. A fund may enter into short sales with respect to stocks
underlying its convertible security holdings. For example, if FMR
anticipates a decline in the price of the stock underlying a
convertible security a fund holds, it may sell the stock short. If the
stock price subsequently declines, the proceeds of the short sale
could be expected to offset all or a portion of the effect of the
stock's decline on the value of the convertible security. Each fund
currently intends to hedge no more than 15% of its total assets with
short sales on equity securities underlying its convertible security
holdings under normal circumstances.
When a fund enters into a short sale, it will be required to set aside
securities equivalent in kind and amount to those sold short (or
securities convertible or exchangeable into such securities) and will
be required to hold them aside while the short sale is outstanding. A
fund will incur transaction costs, including interest expenses, in
connection with opening, maintaining, and closing short sales.
SWAP AGREEMENTS can be individually negotiated and structured
to include exposure to a variety of different types of investments or
market factors. Depending on their structure, swap agreements may
increase or decrease a fund's exposure to long- or short-term interest
rates (in the United States or abroad), foreign currency values,
mortgage securities, corporate borrowing rates, or other factors such
as security prices or inflation rates. Swap agreements can take many
different forms and are known by a variety of names .
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a
fee by the other party. For example, the buyer of an interest rate cap
obtains the right to receive payments to the extent that a specified
interest rate exceeds an agreed-upon level, while the seller of an
interest rate floor is obligated to make payments to the extent that a
specified interest rate falls below an agreed-upon level. An interest
rate collar combines elements of buying a cap and selling a floor.
Swap agreements will tend to shift a fund's investment exposure from
one type of investment to another. For example, if the fund agreed to
exchange payments in dollars for payments in foreign currency, the
swap agreement would tend to decrease the fund's exposure to U.S.
interest rates and increase its exposure to foreign currency and
interest rates. Caps and floors have an effect similar to buying or
writing options. Depending on how they are used, swap agreements may
increase or decrease the overall volatility of a fund's investments
and its share price and yield.
The most significant factor in the performance of swap agreements is
the change in the specific interest rate, currency, or other factors
that determine the amounts of payments due to and from a fund. If a
swap agreement calls for payments by the fund, the fund must be
prepared to make such payments when due. In addition, if the
counterparty's creditworthiness declined, the value of a swap
agreement would be likely to decline, potentially resulting in losses.
A fund may be able to eliminate its exposure under a
swap agreement either by assignment or other disposition, or by
entering into an offsetting swap agreement with the same party or a
similarly creditworthy party.
A fund will maintain appropriate liquid assets in a segregated
custodial account to cover its current obligations under swap
agreements. If a fund enters into a swap agreement on a net basis, it
will segregate assets with a daily value at least equal to the excess,
if any, of the fund's accrued obligations under the swap agreement
over the accrued amount the fund is entitled to receive under the
agreement. If a fund enters into a swap agreement on other than a net
basis, it will segregate assets with a value equal to the full amount
of the fund's accrued obligations under the agreement.
VARIABLE AND FLOATING RATE SECURITIES provide for periodic
adjustments in the interest rate paid on the security. Variable rate
securities provide for a specified periodic adjustment in the interest
rate, while floating rate securities have interest rates that change
whenever there is a change in a designated benchmark rate. Some
variable or floating rate securities are structured with put features
that permit holders to demand payment of the unpaid principal balance
plus accrued interest from the issuers or certain financial
intermediaries.
WARRANTS. Warrants are instruments which entitle the holder
to buy an equity security 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
security, 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 security 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 its expiration date. These factors can
make warrants more speculative than other types of investments.
ZERO COUPON BONDS do not make interest payments; instead, they
are sold at a 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.
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. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for
which it or its affiliates act as investment adviser. In selecting
broker-dealers, subject to applicable limitations of the federal
securities laws, FMR considers various relevant factors, including,
but not limited to: the size and type of the transaction; the nature
and character of the markets for the security to be purchased or sold;
the execution efficiency, settlement capability, and financial
condition of the broker-dealer firm; the broker-dealer's execution
services rendered on a continuing basis; the reasonableness of any
commissions; and, if applicable, arrangements for payment of
fund expenses.
If FMR grants investment management authority to a
sub-adviser (see the section entitled "Management Contracts"),
that sub-adviser is authorized to place orders for the
purchase and sale of portfolio securities, and will do so in
accordance with the policies described above .
Generally, commissions for investments traded on foreign exchanges
will be higher than for investments traded on U.S. exchanges and may
not be subject to negotiation.
Each fund may execute portfolio transactions with
broker-dealers who provide research and execution services to the fund
or other accounts over which FMR or its affiliates exercise investment
discretion. Such services may include advice concerning the value of
securities; the advisability of investing in, purchasing, or selling
securities; and the availability of securities or the purchasers or
sellers of securities. In addition, such broker-dealers may furnish
analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and performance of
accounts; and effect securities transactions and perform
functions incidental thereto (such as clearance and settlement).
The selection of such broker-dealers for transactions in equity
securities is generally made by FMR (to the extent possible
consistent with execution considerations) in accordance with a ranking
of broker-dealers determined periodically by FMR's investment staff
based upon the quality of research and execution services provided.
For transactions in fixed-income securities, FMR's selection of
broker-dealers is generally based on the availability of a security
and its price and, to a lesser extent, on the overall quality of
execution and other services, including research, provided by the
broker-dealer.
The receipt of research from broker-dealers that execute transactions
on behalf of a fun d may be useful to FMR in rendering
investment management services to that fund or its other
clients, and conversely, such research provided by broker-dealers who
have executed transaction orders on behalf of other FMR clients may be
useful to FMR in carrying out its obligations to a fund. The
receipt of such research has not reduced FMR's normal independent
research activities; however, it enables FMR to avoid the additional
expenses that could be incurred if FMR tried to develop comparable
information through its own efforts.
Fixed-income securities are generally purchased from an issuer or
underwriter acting as principal for the securities, on a net basis
with no brokerage commission paid. However, the dealer is compensated
by a difference between the security's original purchase price and the
selling price, the so-called "bid-asked spread." Securities may also
be purchased from underwriters at prices that include underwriting
fees.
Subject to applicable limitations of the federal securities laws, a
fund may pay a broker-dealer commissions for agency
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 that
fund or its other clients. In reaching this determination, FMR
will not attempt to place a specific dollar value on the brokerage and
research services provided, or to determine what portion of the
compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided
assistance in the distribution of shares of the funds or shares of
other Fidelity funds to the extent permitted by law. FMR may use
research services provided by and place agency transactions with
National Financial Services Corporation (NFSC) and Fidelity Brokerage
Services Japan LLC (FBSJ ), indirect subsidiaries of FMR Corp.,
if the commissions are fair, reasonable, and comparable to commissions
charged by non-affiliated, qualified brokerage firms for similar
services. Prior to December 9, 1997, FMR used research services
provided by and placed agency transactions with Fidelity Brokerage
Services (FBS), an indirect subsidiary of FMR Corp.
FMR may allocate brokerage transactions to broker-dealers
(including affiliates of FMR) who have entered into
arrangements with FMR under which the broker-dealer allocates a
portion of the commissions paid by a fund toward the reduction
of that fund's expenses . The transaction quality must, however,
be comparable to those of other qualified broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members
of national securities exchanges from executing exchange transactions
for accounts which they or their affiliates manage, unless certain
requirements are satisfied. Pursuant to such requirements, the Board
of Trustees has authorized NFSC to execute portfolio transactions on
national securities exchanges in accordance with approved procedures
and applicable SEC rules.
The Trustees of each fund periodically review FMR's performance
of its responsibilities in connection with the placement of portfolio
transactions on behalf of the fund and review the commissions paid by
the fund over representative periods of time to determine if
they are reasonable in relation to the benefits to the fund.
The funds' portfolio turnover rates for the fiscal periods ended
September 30, 199 8 and 1997 are illustrated in the table 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. Variations in
turnover rate may be due to fluctuating volume of shareholder purchase
and redemption orders, market conditions, or changes in FMR's
investment outlook.
Portfolio Turnover Rates
Fiscal period ended September 30 , 1998 1997
Asset Manager: Income 156% 112%
Asset Manager 136% 79%
Asset Manager: Growth 150% 70%
The following tables show the brokerage commissions paid by the
fund s . Significant changes in brokerage commissions paid by
a fund from year to year may result from changing asset levels
throughout the year. A fund may pay both commissions and spreads
in connection with the placement of portfolio transactions.
The following table shows the total amount of brokerage commissions
paid by each fund.
Fiscal Total
Year Amount Paid
Ended
ASSET MANAGER: INCOME September 30
1998 $ 339,000
1997 $ 139,000
1996 $ 269,000
ASSET MANAGER September 30
1998 $ 11,709,000
1997 $ 5,703,000
1996 $ 11,446,000
ASSET MANAGER: GROWTH September 30
1998 $ 7,164,000
1997 $ 2,638,000
1996 $ 5,219,000
Of the following tables, the first shows the total amount of
brokerage commissions paid by each fund to NFSC and FBS as applicable,
for the past three fiscal years. The second table shows the
approximate percentage of aggregate brokerage commissions paid by a
fund to NFSC and FBS for transactions involving the approximate
percentage of the aggregate dollar amount of transactions for which
the fund paid brokerage commissions for the fiscal year ended 1998.
NFSC and FBS are paid on a commission basis.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Amount Paid
Fiscal To NFSC To FBS
Year
Ended
ASSET MANAGER: INCOME September 30
1998 $ 40,000 $ 100
1997 $ 22,000 $ 3,000
1996 $ 39,000 $ 4,000
ASSET MANAGER September 30
1998 $ 1,574,000 $ 9,000
1997 $ 802,000 $ 152,000
1996 $ 1,319,000 $ 157,000
ASSET MANAGER: GROWTH September 30
1998 $ 787,000 $ 4,000
1997 $ 372,000 $ 57,000
1996 $ 518,000 $ 71,000
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Fiscal % of % of % of % of
Year Ended Aggregate Aggregate Aggregate Aggregate
1998 Commissions Dollar Commissions Dollar
Paid to NFSC Amount of Paid to Amount of
Transactions FBS Transactions
Effected Effected
through through
FBS(dagger)
NFSC(dagger)
Asset Manager: Income September 30 11.87% 19.57% 0.03% 0.02%
Asset Manager September 30 13.44% 20.07% 0.07% 0.04%
Asset Manager: Growth September 30 10.99% 18.00% 0.06% 0.03%
</TABLE>
(dagger) The difference between the percentage of aggregate
brokerage commissions paid to, and the percentage of the aggregate
dollar amount of transactions effected through, NFSC and FBS is a
result of the low commission rates charged by NFSC and FBS.
The following table shows the dollar amount of brokerage
commissions paid to firms that provided research services and the
approximate dollar amount of the transactions involved for the fiscal
year ended 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal Year $ Amount of $ Amount of
Ended 1998 Commissions Paid to Brokerage
Firms Transactions
that Provided Involved*
Research Services*
Asset Manager: Income September 30 $ 318,000 $ 336,101,000
Asset Manager September 30 11,217,000 11,597,710,000
Asset Manager: Growth September 30 6,809,000 7,437,154,000
</TABLE>
* The provision of research services was not necessarily a factor in
the placement of all this business with such firms.
The Trustees of each fund have approved procedures in conformity
with Rule 10f-3 under the 1940 Act whereby a fund may purchase
securities that are offered in underwritings in which an affiliate of
FMR participates. These procedures prohibit the funds from directly or
indirectly benefiting an FMR affiliate in connection with such
underwritings. In addition, for underwritings where an FMR affiliate
participates as a principal underwriter, certain restrictions may
apply that could, among other things, limit the amount of securities
that the funds could purchase in the underwriting.
From time to time the Trustees will review whether the recapture for
the benefit of the funds of some portion of the brokerage commissions
or similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at
present no other recapture arrangements are in effect. The Trustees
intend to continue to review whether recapture opportunities are
available and are legally permissible and, if so, to determine in the
exercise of their business judgment whether it would be advisable for
each fund to seek such recapture.
Although the Trustees and officers of each fund are substantially the
same as those of other funds managed by FMR or its affiliates ,
investment decisions for each fund are made independently from those
of other funds managed by FMR or accounts managed by FMR affiliates.
It sometimes happens that the same security is held in the portfolio
of more than one of these funds or accounts. Simultaneous transactions
are inevitable when several funds and accounts are managed by the same
investment adviser, particularly when the same security is suitable
for the investment objective of more than one fund or account.
When two or more funds are simultaneously engaged in the purchase or
sale of the same security, the prices and amounts are allocated in
accordance with procedures believed to be appropriate and equitable
for each fund. In some cases this system could have a detrimental
effect on the price or value of the security as far as each fund is
concerned. In other cases, however, the ability of the funds to
participate in volume transactions will produce better executions and
prices for the funds. It is the current opinion of the Trustees that
the desirability of retaining FMR as investment adviser to each fund
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
VALUATION
F SC normally determines each fund's net asset value per share
(NAV) as of the close of the New York Stock Exchange (NYSE) (normally
4:00 p.m. Eastern time). The valuation of portfolio securities is
determined as of this time for the purpose of computing each fund's
NAV.
Portfolio securities are valued by various methods depending on the
primary market or exchange on which they trade. 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.
PERFORMANCE
A fund may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is
not intended to indicate future returns. Each fund's share price,
yield, if available, and total return fluctuate in response to
market conditions and other factors, and the value of fund shares when
redeemed may be more or less than their original cost.
YIELD CALCULATIONS. Yields for a fund are computed by dividing
a fund's interest and dividend income for a given 30-day or
one-month period, net of expenses, by the average number of shares
entitled to receive distributions during the period, dividing this
figure by the fund's NAV 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 then are converted to
U.S. dollars, either when they are actually converted or at the end of
the 30-day or one month period, whichever is earlier. Capital gains
and losses generally are excluded from the calculation as are gains
and losses from currency exchange rate fluctuations.
Income calculated for the purposes of calculating a fund's yield
differs from income as determined for other accounting purposes.
Because of the different accounting methods used, and because of the
compounding of income assumed in yield calculations, a fund's yield
may not equal its distribution rate, the income paid to your account,
or the income reported in the fund's financial statements.
In calculating a fund's yield, a fund may from time to time use a
portfolio security's coupon rate instead of its yield to maturity in
order to reflect the risk premium on that security. This practice will
have the effect of reducing a fund's yield.
Yield information may be useful in reviewing a fund's performance and
in providing a basis for comparison with other investment
alternatives. However, a fund's yield fluctuates, unlike
investments that pay a fixed interest rate over a stated period of
time. When comparing investment alternatives, investors should also
note the quality and maturity of the portfolio securities of
respective investment companies they have chosen to consider.
Investors should recognize that in periods of declining interest rates
a fund's yield will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates a fund's yield
will tend to be somewhat lower. Also, when interest rates are falling,
the inflow of net new money to a fund from the continuous sale of its
shares will likely be invested in instruments producing lower yields
than the balance of the fund's holdings, thereby reducing the fund's
current yield. In periods of rising interest rates, the opposite can
be expected to occur.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect
all aspects of a fund's return, including the effect of reinvesting
dividends and capital gain distributions, and any change in a
fund's NAV over a stated period. Average annual total returns are
calculated by determining the growth or decline in value of a
hypothetical historical investment in a fund over a stated period, and
then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in
value had been constant over the period. For example, a cumulative
total return of 100% over ten years would produce an average annual
total return of 7.18%, which is the steady annual rate of return that
would equal 100% growth on a compounded basis in ten years. While
average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that a fund's
performance is not constant over time, but changes from year to year,
and that average annual total returns represent averaged figures as
opposed to the actual year-to-year performance of a fund.
In addition to average annual total returns, a fund may quote
unaveraged or cumulative total returns reflecting the simple change in
value of an investment over a stated period. Average annual and
cumulative total returns may be quoted as a percentage or as a dollar
amount, and may be calculated for a single investment, a series of
investments, or a series of redemptions, over any time period. Total
returns may be broken down into their components of income and capital
(including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions
to total return. Total returns may be quoted on a before-tax or
after-tax basis. Total returns, yields, and other performance
information may be quoted numerically or in a table, graph, or similar
illustration.
NET ASSET VALUE. Charts and graphs using a fund's net asset values,
adjusted net asset values, and benchmark indices may be used to
exhibit performance. An adjusted NAV includes any distributions paid
by a fund and reflects all elements of its return. Unless otherwise
indicated, a fund's adjusted NAVs are not adjusted for sales charges,
if any.
MOVING AVERAGES. An asset allocation fund may illustrate
performance using moving averages. A long-term moving average is the
average of each week's adjusted closing NAV for a specified period. A
short-term moving average is the average of each day's adjusted
closing NAV for a specified period. Moving Average Activity Indicators
combine adjusted closing NAVs from the last business day of each week
with moving averages for a specified period to produce indicators
showing when an NAV has crossed, stayed above, or stayed below its
moving average. On September 2 5, 1998, the 13-week and 39-week
long-term moving averages were $12.41 and $12.25 , respectively,
for Asset Manager: Income, $18.93 and $18.86, respectively, for
Asset Manager, and $19.65 and $19.67 , respectively, for Asset
Manager: Growth.
CALCULATING HISTORICAL FUND RESULTS. The following tables
show performance for each fund calculated including certain fund
expenses.
HISTORICAL FUND RESULTS. The following table shows each
fund's total return for the periods ended September 30, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Returns Cumulative Total Returns
Thirty-Day One Five Life of One Five
Yield Year Years Fund Year Years Life of
Fund
Asset Manager: Income 4.77 % 8.06% 8.50% 9.61% * 8.06% 50.35% 73.38% *
Asset Manager 3.34 % 5.34% 10.66% 12.81% ** 5.34% 65.94% 224.25% **
Asset Manager: Growth 3.69 % 5.33% 12.65% 14.85% *** 5.33% 81.45% 154.80% ***
</TABLE>
* From October 1, 1992 (commencement of operations)
** From December 28, 1988 (commencement of operations)
*** From December 30, 1991 (commencement of operations)
Note: If FMR had not reimbursed certain fund expenses during these
periods, each fund's total returns would have been lower.
The following tables show the income and capital elements of each
fund's cumulative total return. The tables compare each fund's return
to the record of the S&P 500 , the Dow Jones Industrial Average
(DJIA), and the cost of living, as measured by the Consumer Price
Index (CPI), over the same period. The CPI information is as of the
month-end closest to the initial investment date for each fund. The
S&P 500 and DJIA comparisons are provided to show how each fund's
total return compared to the record of a broad unmanaged index of
common stocks and a narrower set of stocks of major industrial
companies, respectively, over the same period. Each fund has the
ability to invest in securities not included in either index, and its
investment portfolio may or may not be similar in composition to the
indexes. The S&P 500 and DJIA returns are based on the prices of
unmanaged groups of stocks and, unlike each fund's returns, do not
include the effect of brokerage commissions or other costs of
investing.
The following tables show the growth in value of a hypothetical
$10,000 investment in each fund during the life of each fund, assuming
all distributions were reinvested. Total returns are based on past
results and are not an indication of future performance. Tax
consequences of different investments have not been factored into the
figures below.
During the period from October 1, 1992 (commencement of operations) to
September 30, 199 8 , a hypothetical $10,000 investment in Asset
Manager: Income would have grown to $ 17,338 .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
A SSET MANAGER: INCOME INDICES
Period Ended Value of Value of Value of Total S&P 500 DJIA Cost of
Initial Reinvested Reinvested Value Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1998 $ 12,450 $ 4,064 $ 824 $ 17,338 $ 28,119 $ 27,698 $ 11,599
1997 $ 12,360 $ 3,254 $ 431 $ 16,045 $ 25,786 $ 27,588 $ 11,408
1996 $ 11,630 $ 2,336 $ 89 $ 14,055 $ 18,360 $ 20,045 $ 11,168
1995 $ 11,460 $ 1,555 $ 87 $ 13,102 $ 15,258 $ 15,969 $ 10,842
1994 $ 10,690 $ 928 $ 82 $ 11,700 $ 11,759 $ 12,494 $ 10,573
1993* $ 11,070 $ 462 $ 0 $ 11,532 $ 11,342 $ 11,248 $ 10,269
</TABLE>
* From October 1, 1992 (commencement of operations)
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Asset
Manager: Income on October 1, 1992, the net amount invested in fund
shares was $10,000. The cost of the initial investment ($10,000)
together with the aggregate cost of reinvested dividends and capital
gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $ 14,503 . If
distributions had not been reinvested, the amount of distributions
earned from the fund over time would have been smaller, and cash
payments for the period would have amounted to $ 3,170 for
dividends and $ 630 for capital gain distributions.
During the period from December 28, 1988 (commencement of operations)
to September 30, 199 8 , a hypothetical $10,000 investment in
Asset Manager would have grown to $ 32,425 .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
A SSET MANAGER INDICES
Period Ended Value of Value of Value of Total S&P 500 DJIA Cost of
Initial Reinvested Reinvested Value Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1998 $ 18,240 $ 8,586 $ 5,599 $ 32,425 $ 47,918 $ 47,444 $ 13,602
1997 $ 19,010 $ 7,829 $ 3,943 $ 30,782 $ 43,943 $ 47,256 $ 13,378
1996 $ 16,490 $ 5,801 $ 2,306 $ 24,597 $ 31,288 $ 34,335 $ 13,095
1995 $ 15,470 $ 4,653 $ 2,163 $ 22,286 $ 26,001 $ 27,354 $ 12,714
1994 $ 14,580 $ 3,870 $ 1,793 $ 20,243 $ 20,040 $ 21,402 $ 12,398
1993 $ 14,970 $ 3,286 $ 1,284 $ 19,540 $ 19,327 $ 19,268 $ 12,041
1992 $ 13,500 $ 1,898 $ 924 $ 16,322 $ 17,102 $ 17,219 $ 11,726
1991 $ 13,020 $ 1,287 $ 287 $ 14,594 $ 15,399 $ 15,418 $ 11,386
1990 $ 10,640 $ 371 $ 234 $ 11,245 $ 11,739 $ 12,100 $ 11,012
1989* $ 11,390 $ 0 $ 0 $ 11,390 $ 12,935 $ 12,784 $ 10,373
</TABLE>
* From December 28, 1988 (commencement of operations)
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Asset
Manager on December 28, 1988, the net amount invested in fund shares
was $10,000. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time
they were reinvested) amounted to $ 21,545 . If distributions had
not been reinvested, the amount of distributions earned from the fund
over time would have been smaller, and cash payments for the period
would have amounted to $ 5,090 for dividends and $ 3,390
for capital gain distributions.
During the period from December 30, 1991 (commencement of operations)
to September 30, 199 8 , a hypothetical $10,000 investment in
Asset Manager: Growth would have grown to $ 25,480 .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
ASSET MANAGER: GROWTH INDICES
Period Ended Value of Value of Value of Total S&P 500 DJIA Cost of
Initial Reinvested Reinvested Value Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1998 $ 18,800 $ 2,023 $ 4,657 $ 25,480 $ 28,848 $ 29,126 $ 11,885
1997 $ 19,970 $ 1,615 $ 2,606 $ 24,191 $ 26,455 $ 29,011 $ 11,690
1996 $ 16,560 $ 859 $ 967 $ 18,386 $ 18,836 $ 21,078 $ 11,443
1995 $ 14,880 $ 524 $ 869 $ 16,273 $ 15,653 $ 16,793 $ 11,1 10
1994 $ 13,910 $ 272 $ 618 $ 14,800 $ 12,064 $ 13,139 $ 10,834
1993 $ 13,770 $ 178 $ 95 $ 14,043 $ 11,636 $ 11,828 $ 10,522
1992* $ 11,160 $ 0 $ 0 $ 11,160 $ 10,296 $ 10,571 $ 10,247
</TABLE>
* From December 30, 1991 (commencement of operations)
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Asset
Manager: Growth on December 30, 1991, the net amount invested in fund
shares was $10,000. The cost of the initial investment ($10,000)
together with the aggregate cost of reinvested dividends and capital
gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $ 15,746 . If
distributions had not been reinvested, the amount of distributions
earned from the fund over time would have been smaller, and cash
payments for the period would have amounted to $ 1,490 for
dividends and $ 3,580 for capital gain distributions.
PERFORMANCE COMPARISONS. A fund's performance may be compared to
the performance of other mutual funds in general, or to the
performance of particular types of mutual funds. These comparisons may
be expressed as mutual fund rankings prepared by Lipper Analytical
Services, Inc. (Lipper), an independent service located in Summit, New
Jersey that monitors the performance of mutual funds. Generally,
Lipper rankings are based on total return, assume reinvestment of
distributions, do not take sales charges or trading fees into
consideration, and are prepared without regard to tax consequences. In
addition to the mutual fund rankings, a fund's performance may be
compared to stock, bond, and money market mutual fund performance
indices prepared by Lipper or other organizations. When comparing
these indices, it is important to remember the risk and return
characteristics of each type of investment. For example, while stock
mutual funds may offer higher potential returns, they also carry the
highest degree of share price volatility. Likewise, money market funds
may offer greater stability of principal, but generally do not offer
the higher potential returns available from stock mutual funds.
From time to time, a fund's performance may also be compared to
other mutual funds tracked by financial or business publications and
periodicals. For example, a fund may quote Morningstar, Inc. in its
advertising materials. Morningstar, Inc. is a mutual fund rating
service that rates mutual funds on the basis of risk-adjusted
performance. Rankings that compare the performance of Fidelity funds
to one another in appropriate categories over specific periods of time
may also be quoted in advertising.
A fund's performance may also be compared to that of a benchmark
index representing the universe of securities in which the fund may
invest. The total return of a benchmark index reflects reinvestment of
all dividends and capital gains paid by securities included in the
index. Unlike a fund's returns, however, the index returns do not
reflect brokerage commissions, transaction fees, or other costs of
investing directly in the securities included in the index.
The Asset Allocation Composite Indices are hypothetical
representations of the performance of the funds' three asset classes
according to their respective weighting in each fund's neutral mix.
The weightings are rebalanced monthly. For periods after
January 1, 1997, the Conservative Asset Allocation Composite Index
represents Asset Manager: Income's three asset classes according to
their respective weighting in the fund's neutral mix (30%
short-term/money market; 50% bonds; and 20% stocks), the
Asset Allocation Composite Index represents Asset Manager's three
asset classes according to their respective weighting in the fund's
neutral mix (10% short-term/money market; 40% bonds; and
50% stocks) and the Aggressive Asset Allocation Composite Index
represents Asset Manager: Growth's three asset classes according to
their respective weighting in the fund's neutral mix (5%
short-term/money market; 25% bonds; and 70% stocks). The
following indices are used to calculate the three asset allocation
composite indices: The Lehman Brothers 3-Month Treasury Bill
Index, representing the average of Treasury Bill rates for
each of the prior three months, adjusted to a bond equivalent yield
basis (short-term and money market instruments); 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 with
maturities of at least one year; and the S&P 500, a widely recognized,
unmanaged index of common stocks. For period s prior to January
1, 1997, the Conservative Asset Allocation Composite Index represented
Asset Manager: Income's three asset classes according to their
respective weighting in the fund's neutral mix (50% short-term
instruments; 30% bonds; and 20% stocks) during that period of
time; for periods between June 1, 1992 and January 1, 1997, the
Asset Allocation Composite Index represented Asset Manager's three
asset classes according to their respective weighting in the fund's
neutral mix (20% short-term instruments; 40% bonds; and
40% stocks) during that period of time; and for periods prior to
January 1, 1997, the Aggressive Asset Allocation Composite Index
represented Asset Manager: Growth's three asset classes according to
their respective weighting in the fund's neutral mix (5%
short-term instruments; 30% bonds; and 65% stocks) during
that period of time. The following indices are used to
calculate the three asset allocation composite indices during that
period of time: the Lehman Brothers 3-Month Treasury Bill
Index; the Lehman Brothers Treasury Bond Index, a widely utilized
benchmark of bond market performance that includes virtually all
long-term public obligations of the U.S. Treasury (bonds) ; and
the S&P 500. For periods prior to June 1, 1992, the Asset
Allocation Composite Index represented Asset Manager's three asset
classes according to their respective weighting in the fund's neutral
mix (30% money market instruments, 40% bonds; and 30%
stocks) during that period of time. The following indices are used to
calculate the three asset allocation composite indices during that
period of time : the L ehman Brothers 3-Month Treasury B ill
Index; the Lehman Brothers Treasury Bond Index; and the S&P 500.
Each fund has the ability to invest in securities that are not
included in any of the indices, and each fund's actual investment
portfolio may not reflect the composition or the weighting of the
indices used. T he Lehman Brothers 3-Month Treasury Bill Index, the
Lehman Brothers Treasury Bond Index, the Lehman Brothers Aggregate
Bond Index, the S&P 500, and the asset allocation composite indices
include reinvestment of income or dividends, as appropriate, and are
based on the prices of unmanaged groups of stocks, U.S. Treasury
obligations, or other fixed-income obligations or stocks, as
appropriate. Unlike each fund's returns, the indices do not
include the effect of paying brokerage commissions, spreads, or other
costs of investing. Historical results are used for illustrative
purposes only and do not reflect the past or future performance of the
funds.
The following table represents the comparative indices' calendar
year-to-year performance.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Lehman Brothers Lehman Brothers Lehman Brothers S&P 500
3-Month Treasury Aggregate Treasury
Bill Index Bond Index Bond Index
1997 5.52% 9.65% 9.57% 33.36%
1996 5.38% 3.63% 2.70% 22.96%
1995 6.09% 18.47% 18.35% 37.58%
</TABLE>
Each of Asset Manager and Asset Manager: Growth may compare its
performance to that of the Standard & Poor's 500 Index, a widely
recognized, unmanaged index of common stocks.
Asset Manager: Income may compare its performance to 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.
A fund may be compared in advertising to Certificates of Deposit (CDs)
or other investments issued by banks or other depository institutions.
Mutual funds differ from bank investments in several respects. For
example, a fund may offer greater liquidity or higher potential
returns than CDs, a fund does not guarantee your principal or your
return, and fund shares are not FDIC insured.
Fidelity may provide information designed to help individuals
understand their investment goals and explore various financial
strategies. Such information may include information about current
economic, market, and political conditions; materials that describe
general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; questionnaires
designed to help create a personal financial profile; worksheets used
to project savings needs based on assumed rates of inflation and
hypothetical rates of return; and action plans offering investment
alternatives. Materials may also include discussions of Fidelity's
asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides
historical returns of the capital markets in the United States,
including common stocks, small capitalization stocks, long-term
corporate bonds, intermediate-term government bonds, long-term
government bonds, Treasury bills, the U.S. rate of inflation (based on
the CPI), and combinations of various capital markets. The performance
of these capital markets is based on the returns of different indices.
Fidelity funds may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with
the security types in any capital market may or may not correspond
directly to those of the funds. Ibbotson calculates total returns in
the same method as the funds. The funds may also compare performance
to that of other compilations or indices that may be developed and
made available in the future.
In advertising materials, Fidelity may reference or discuss its
products and services, which may include other Fidelity funds;
retirement investing; brokerage products and services; model
portfolios or allocations; saving for college or other goals; and
charitable giving . In addition, Fidelity may quote or reprint
financial or business publications and periodicals as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the
desirability of owning a particular mutual fund, and Fidelity services
and products. Fidelity may also reprint, and use as advertising and
sales literature, articles from Fidelity Focus (registered
trademark) , a quarterly magazine provided free of charge to
Fidelity fund shareholders.
A fund may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote its current portfolio manager.
VOLATILITY. A fund may quote various measures of volatility and
benchmark correlation in advertising. In addition, the fund may
compare these measures to those of other funds. Measures of volatility
seek to compare a fund's historical share price fluctuations or
total returns to those of a benchmark. Measures of benchmark
correlation indicate how valid a comparative benchmark may be. All
measures of volatility and correlation are calculated using averages
of historical data. In advertising, a fund may also discuss or
illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate a fund's price movements over specific
periods of time. Each point on the momentum indicator represents
a fund's percentage change in price movements over that period.
A fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a
program, an investor invests a fixed dollar amount in a fund at
periodic intervals, thereby purchasing fewer shares when prices are
high and more shares when prices are low. While such a strategy does
not assure a profit or guard against loss in a declining market, the
investor's average cost per share can be lower than if fixed numbers
of shares are purchased at the same intervals. In evaluating such a
plan, investors should consider their ability to continue purchasing
shares during periods of low price levels.
A fund may be available for purchase through retirement plans or other
programs offering deferral of, or exemption from, income taxes, which
may produce superior after-tax returns over time. For example, a
$1,000 investment earning a taxable return of 10% annually would have
an after-tax value of $1,949 after ten years, assuming tax was
deducted from the return each year at a 31% rate. An equivalent
tax-deferred investment would have an after-tax value of $2,100 after
ten years, assuming tax was deducted at a 31% rate from the
tax-deferred earnings at the end of the ten-year period.
As of September 30, 199 8 , FMR advised over $ 32 billion
in municipal fund assets, $ 115 billion in money market fund
assets, $ 411 billion in equity fund assets, $ 12 billion
in international fund assets, and $ 27 billion in
Spartan (registered trademark) 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.
ADDITIONAL PURCHASE, EXCHANGE A ND REDEMPTION INFORMATION
Each fund is open for business and its NAV is calculated each day the
New York Stock Exchange (NYSE) is open for trading. The NYSE has
designated the following holiday closings for 199 8 : 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
Reserve Wire System is closed, f ederal funds wires cannot be
sent.
FSC normally determines each fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated
earlier if trading on the NYSE is restricted or as permitted by the
SEC . To the extent that portfolio securities are traded in
other markets on days when the NYSE is closed, a fund's NAV may be
affected on days when investors do not have access to the fund to
purchase or redeem shares. In addition, trading in some of a fund's
portfolio securities may not occur on days when the fund is open for
business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are
valued in computing each fund's NAV. Shareholders receiving
securities or other property on redemption may realize a gain or loss
for tax purposes, and will incur any costs of sale, as well as the
associated inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, each fund is
required to give shareholders at least 60 days' notice prior to
terminating or modifying its exchange privilege. Under the Rule, the
60-day notification requirement may be waived if (i) the only effect
of a modification would be to reduce or eliminate an administrative
fee, redemption fee, or deferred sales charge ordinarily payable at
the time of an exchange, or (ii) the fund suspends the redemption of
the shares to be exchanged as permitted under the 1940 Act or the
rules and regulations thereunder, or the fund to be acquired suspends
the sale of its shares because it is unable to invest amounts
effectively in accordance with its investment objective and policies.
In the Prospectus, each fund has notified shareholders that it
reserves the right at any time, without prior notice, to refuse
exchange purchases by any person or group if, in FMR's judgment, the
fund would be unable to invest effectively in accordance with its
investment objective and policies, or would otherwise potentially be
adversely affected.
DISTRIBUTIONS AND TAXES
D IVIDENDS. 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 fund
that qualifies for the deduction generally will be less than 100%.
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. Short-term
capital gains are distributed as dividend income. Each fund will send
each shareholder a notice in January describing the tax status of
dividends and capital gain distributions for the prior year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by each
fund on the sale of securities and distributed to shareholders are
federally taxable as long-term capital gains, regardless of the length
of time shareholders have held their shares. If a shareholder receives
a capital gain distribution on shares of a fund, and such shares are
held six months or less and are sold at a loss, the portion of the
loss equal to the amount of the capital gain distribution will be
considered a long-term loss for tax purposes. Short-term capital gains
distributed by each fund are taxable to shareholders as dividends, not
as capital gains.
As of September 30 , 1998, the funds hereby designate
approximately $23,418,000 for Asset Manager: Income, $725,618,000 for
Asset Manager, and $408,906,000 for Asset Manager: Growth,
respectively, as a capital gain dividend for the purpose of the
dividend-paid deduction.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Foreign governments
may also impose taxes on other payments or gains with respect to
foreign securities. Because each fund does not currently anticipate
that securities of foreign issuers will constitute more than 50% of
its total assets at the end of its fiscal year, shareholders should
not expect to claim a foreign tax credit or deduction on their federal
income tax returns with respect to foreign taxes withheld.
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company
and avoid being subject to federal income or excise taxes at the fund
level, each fund intends to distribute substantially all of its net
investment income and net realized capital gains within each calendar
year as well as on a fiscal year basis, and intends to comply with
other tax rules applicable to regulated investment companies.
Each fund is treated as a separate entity from the other funds, if
any , of its trust for tax purposes.
If a fund purchases shares in certain foreign investment entities,
defined as passive foreign investment companies (PFICs) in the
Internal Revenue Code, it may be subject to U.S. federal income tax on
a portion of any excess distribution or gain from the disposition of
such shares. Interest charges may also be imposed on a fund with
respect to deferred taxes arising from such distributions or gains.
Generally, a fund will elect to mark-to-market any PFIC shares.
Unrealized gains will be recognized as income for tax purposes and
must be distributed to shareholders as dividends.
OTHER TAX INFORMATION. The information above is only a summary of some
of the tax consequences generally affecting each fund and its
shareholders, and no attempt has been made to discuss individual tax
consequences. In addition to federal income taxes, shareholders may be
subject to state and local taxes on fund distributions, and shares may
be subject to state and local personal property taxes. Investors
should consult their tax advisers to determine whether a fund is
suitable to their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent organized in
1972. The voting common stock of FMR Corp. is divided into two
classes. Class B is held predominantly by members of the Edward C.
Johnson 3d family and is entitled to 49% of the vote on any matter
acted upon by the voting common stock. Class A is held predominantly
by non-Johnson family member employees of FMR Corp. and its affiliates
and is entitled to 51% of the vote on any such matter. The Johnson
family group and all other Class B shareholders have entered into a
shareholders' voting agreement under which all Class B shares will be
voted in accordance with the majority vote of Class B shares. Under
the 1940 Act, control of a company is presumed where one individual or
group of individuals owns more than 25% of the voting stock of that
company. Therefore, through their ownership of voting common stock and
the execution of the shareholders' voting agreement, members of the
Johnson family may be deemed, under the 1940 Act, to form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by its division, Fidelity Investments Retail Marketing
Company, which provides marketing services to various companies within
the Fidelity organization.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures
for personal investing and restricts certain transactions. For
example, all personal trades in most securities require pre-clearance,
and participation in initial public offerings is prohibited. In
addition, restrictions on the timing of personal investing in relation
to trades by Fidelity funds and on short-term trading have been
adopted.
TRUSTEES AND OFFICERS
The Trustees, Members of the Advisory Board, and executive officers of
the trust are listed below. Except as indicated, each individual has
held the office shown or other offices in the same company for the
last five years. All persons named as Trustees and Members of the
Advisory Board also serve in similar capacities for other funds
advised by FMR. The business address of each Trustee, Member of the
Advisory Board, and officer who is an "interested person" (as defined
in the Investment Company Act of 1940) is 82 Devonshire Street,
Boston, Massachusetts 02109, which is also the address of FMR. The
business address of all the other Trustees is Fidelity
Investments (registered trademark) , 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 ( 68 ), Trustee and President, is Chairman,
Chief Executive Officer and a Director of FMR Corp.; a Director and
Chairman of the Board and of the Executive Committee of FMR; Chairman
and a Director of Fidelity Investments Money Management, Inc.
(1998 ), Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
J. GARY BURKHEAD (5 7 ), Member of the Advisory Board (1997), is
Vice Chairman and a Member of the Board of Directors of FMR Corp.
(1997) and President of Fidelity Personal Investments and Brokerage
Group (1997). Previously, Mr. Burkhead served as President of Fidelity
Management & Research Company.
RALPH F. COX (6 6 ), Trustee, is President of RABAR Enterprises
(management consulting-engineering industry, 1994). Prior to February
1994, he was President of Greenhill Petroleum Corporation (petroleum
exploration and production). Until March 1990, Mr. Cox was President
and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of USA Waste Services,
Inc. (non-hazardous waste, 1993), CH2M Hill Companies (engineering),
Rio Grande, Inc. (oil and gas production), and Daniel Industries
(petroleum measurement equipment manufacturer). In addition, he is a
member of advisory boards of Texas A&M University and the University
of Texas at Austin.
PHYLLIS BURKE DAVIS (6 6 ), Trustee. Prior to her retirement in
September 1991, Mrs. Davis was the Senior Vice President of Corporate
Affairs of Avon Products, Inc. She is currently a Director of
BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores),
and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she is a member of
the President's Advisory Council of The University of Vermont School
of Business Administration.
ROBERT M. GATES (5 5 ), Trustee (1997), is a consultant, author,
and lecturer (1993). Mr. Gates was Director of the Central
Intelligence Agency (CIA) from 1991-1993. From 1989 to 1991, Mr. Gates
served as Assistant to the President of the United States and Deputy
National Security Advisor. Mr. Gates is a Director of LucasVarity
PLC (automotive components and diesel engines), Charles Stark
Draper Laboratory (non-profit), NACCO Industries, Inc. (mining and
manufacturing), and TRW Inc. (original equipment and replacement
products). Mr. Gates also is a Trustee of the Forum for
International Policy and of the Endowment Association of the
College of William and Mary. In addition, he is a member of the
National Executive Board of the Boy Scouts of America.
E. BRADLEY JONES (7 0 ), 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 National Arts Stabilization Inc. ,
Chairman of the Board of Trustees of the Greenwich Hospital
Association, Director of the Yale-New Haven Health Services Corp.
(1998 ), a Member of the Public Oversight Board of the American
Institute of Certified Public Accountants' SEC Practice Section
(1995), and as a Public Governor of the National Association of
Securities Dealers, Inc. (1996).
*PETER S. LYNCH (5 5 ), Trustee, is Vice Chairman and Director of
FMR . Prior to May 31, 1990, he was a Director of FMR and
Executive Vice President of FMR (a position he held until March 31,
1991); Vice President of Fidelity Magellan (registered
trademark) Fund and FMR Growth Group Leader; and Managing Director
of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments
Corporate Services (1991-1992). In addition, he serves as a Trustee of
Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield
(1989) and Society for the Preservation of New England Antiquities,
and as an Overseer of the Museum of Fine Arts of Boston.
WILLIAM O. McCOY (6 4 ), Trustee (1997), is the Vice President of
Finance for the University of North Carolina (16-school system, 1995).
Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman
of the Board of BellSouth Corporation (telecommunications, 1984) and
President of BellSouth Enterprises (1986). He is currently a Director
of Liberty Corporation (holding company, 1984), Weeks Corporation of
Atlanta (real estate, 1994), Carolina Power and Light Company
(electric utility, 1996), and the Kenan Transport Co. (1996).
Previously, he was a Director of First American Corporation (bank
holding company, 1979-1996). In addition, Mr. McCoy serves as a member
of the Board of Visitors for the University of North Carolina at
Chapel Hill (1994) and for the Kenan-Flager Business School
(University of North Carolina at Chapel Hill, 1988).
GERALD C. McDONOUGH (70 ), Trustee and Chairman of the
non-interested Trustees, is Chairman of G.M. Management Group
(strategic advisory services). Mr. McDonough is a Director of York
International Corp. (air conditioning and refrigeration), Commercial
Intertech Corp. (hydraulic systems, building systems, and metal
products, 1992), CUNO, Inc. (liquid and gas filtration products,
1996), and Associated Estates Realty Corporation (a real estate
investment trust, 1993). Mr. McDonough served as a Director of
ACME-Cleveland Corp. (metal working, telecommunications, and
electronic products) from 1987-1996 and Brush-Wellman Inc. (metal
refining) from 1983-1997.
MARVIN L. MANN (6 5 ), Trustee (1993), is Chairman of the
Board of Lexmark International, Inc. (office machines, 1991).
Prior to 1991, he held the positions of Vice President of
International Business Machines Corporation ("IBM") and President and
General Manager of various IBM divisions and subsidiaries. Mr. Mann is
a Director of M.A. Hanna Company (chemicals, 1993) and Imation
Corp. (imaging and information storage, 1997 ).
*ROBERT C. POZEN (5 2 ), Trustee (1997) and Senior Vice
President, is also President and a Director of FMR (1997); and
President and a Director of Fidelity Investments Money Management,
Inc. (1998 ), Fidelity Management & Research (U.K.) Inc. (1997),
and Fidelity Management & Research (Far East) Inc. (1997). Previously,
Mr. Pozen served as General Counsel, Managing Director, and Senior
Vice President of FMR Corp.
THOMAS R. WILLIAMS ( 70 ), 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 A. LAWRENCE (45), is Vice President of certain Equity Funds
(1997) , Vice President of Fidelity Real Estate High Income
Fund (1995) and Fidelity Real Estate High Income Fund II
(1996), and Senior Vice President of FMR (1993) .
RICHARD C. HABERMANN (5 8 ), is Vice President of Asset Manager
(1996), Asset Manager: Growth (1996), Asset Manager: Income (1996),
and other funds advised by FMR. He is also Senior Vice President of
FMR (1993) and a managing director of Fidelity Investments. Prior to
his current responsibilities, Mr. Habermann managed a variety
of Fidelity funds.
BRADFORD F. LEWIS (43), is Vice President of Asset Manager: Growth
(1998), Asset Manager: Income (1998), and other funds advised by FMR.
Prior to his current responsibilities, Mr. Lewis managed a variety of
Fidelity funds.
CHARLES S. MORRISON II (3 7 ), is Vice President of Asset Manager
(1997), Asset Manager: Growth (1997), Asset Manager: Income (1997) ,
and other funds advised by FMR. Prior to assuming his current
responsibilities, Mr. Morrison managed a variety of Fidelity
funds.
THOMAS M. SPRAGUE (41), is Vice President of Asset Manager (1998)
and other funds advised by FMR. Prior to his current responsibilities,
Mr. Sprague managed a variety of Fidelity funds.
JOHN J. TODD (49), is Vice President of Asset Manager (1996), Asset
Manager: Growth (1996), Asset Manager: Income (1996) , and other
funds advised by FMR. Prior to his current responsibilities, Mr.
Todd managed a variety of Fidelity funds.
ERIC D. ROITER (49), Secretary (1998), is Vice President (1998) and
General Counsel of FMR (1998). Mr. Roiter was an Adjunct Member,
Faculty of Law, at Columbia University Law School (1996-1997). Prior
to joining Fidelity, Mr. Roiter was a partner at Debevoise & Plimpton
(1981-1997) and served as an Assistant General Counsel of the U.S.
Securities and Exchange Commission (1979-1981).
RICHARD A. SILVER (5 1 ), Treasurer (1997), is Treasurer of the
Fidelity funds and is an employee of FMR (1997). Before joining FMR,
Mr. Silver served as Executive Vice President, Fund Accounting &
Administration at First Data Investor Services Group, Inc.
(1996-1997). Prior to 1996, Mr. Silver was Senior Vice President and
Chief Financial Officer at The Colonial Group, Inc. Mr. Silver also
served as Chairman of the Accounting/Treasurer's Committee of the
Investment Company Institute (1987-1993).
JOHN H. COSTELLO (5 2 ), Assistant Treasurer, is an employee of
FMR.
LEONARD M. RUSH (5 2 ), Assistant Treasurer (1994), is an
employee of FMR (1994). Prior to becoming Assistant Treasurer of the
Fidelity funds, Mr. Rush was Chief Compliance Officer of FMR Corp.
(1993-1994) and Chief Financial Officer of Fidelity Brokerage
Services, Inc. (1990-1993).
The following table sets forth information describing the compensation
of each Trustee and Member of the Advisory Board of each fund for his
or her services for the fiscal year ended September 30, 199 8 ,
or calendar year ended December 31, 199 7 , as applicable.
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Trustees Aggregate Aggregate Aggregate Total
and Compensation Compensation Compensation Compensation
Members of the Advisory Board from from from from the
Asset Manager: Asset ManagerB,C,E Asset Manager: Fund Complex*,A
IncomeB GrowthB, D,E
J. Gary Burkhead** $ 0 $ 0 $ 0 $ 0
Ralph F. Cox $ 251 $ 4,393 $ 1,720 $ 214,500
Phyllis Burke Davis $ 249 $ 4,363 $ 1,708 $ 210,000
Robert M. Gates $ 253 $ 4,431 $ 1,735 $ 176,000
Edward C. Johnson 3d** $ 0 $ 0 $ 0 $ 0
E. Bradley Jones $ 251 $ 4,393 $ 1,720 $ 211,500
Donald J. Kirk $ 254 $ 4,451 $ 1,743 $ 211,500
Peter S. Lynch** $ 0 $ 0 $ 0 $ 0
William O. McCoy $ 253 $ 4,431 $ 1,735 $ 214,500
Gerald C. McDonough $ 312 $ 5,470 $ 2,142 $ 264,500
Marvin L. Mann $ 249 $ 4,360 $ 1,708 $ 214,500
Robert C. Pozen** $ 0 $ 0 $ 0 $ 0
Thomas R. Williams $ 253 $ 4,422 $ 1,732 $ 214,500
</TABLE>
* Information is for the calendar year ended December 31, 1997 for
23 0 funds in the complex.
** Interested Trustees of the funds and Mr. Burkhead are compensated
by FMR.
A Compensation figures include cash, amounts required to be
deferred, and may include amounts deferred at the election of
Trustees. For the calendar year ended December 31, 1997, the Trustees
accrued required deferred compensation from the funds as follows:
Ralph F. Cox, $75,000; Phyllis Burke Davis, $75,000; Robert M. Gates,
$62,500; E. Bradley Jones, $75,000; Donald J. Kirk, $75,000; William
O. McCoy, $75,000; Gerald C. McDonough, $87,500; Marvin L. Mann,
$75,000; and Thomas R. Williams, $75,000. Certain of the
non-interested Trustees elected voluntarily to defer a portion of
their compensation as follows: Ralph F. Cox, $53,699; Marvin L. Mann,
$53,699; and Thomas R. Williams, $62,462.
B Compensation figures include cash, and may include amounts
required to be deferred and amounts deferred at the election of
Trustee s.
C The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $ 2,043; Phyllis Burke Davis,
$2,043; Robert M. Gates, $2,043; E. Bradley Jones, $2,043; Donald J.
Kirk, $2,043; William O. McCoy, $2,043; Gerald C. McDonough, $2,383;
Marvin L. Mann, $2,043; and Thomas R. Williams, $2,043.
D The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $ 800; Phyllis Burke Davis,
$800; Robert M. Gates, $800; E. Bradley Jones, $800; Donald J. Kirk,
$800; William O. McCoy, $800; Gerald C. McDonough, $933; Marvin L.
Mann, $800; and Thomas R. Williams, $800.
E Certain of the non-interested Trustees' aggregate compensation
from a fund includes accrued voluntary deferred compensation as
follows: Asset Manager: Ralph F. Cox, $1,735; Marvin L. Mann, $1,735;
William O. McCoy, $1,287; Thomas R. Williams, $1,735. Asset Manager:
Growth: Ralph F. Cox, $679; Marvin L. Mann, $679; William O. McCoy,
$510; Thomas R. Williams, $679.
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.
A s of September 30, 1998, the Trustees, Members of the Advisory
Board, and officers of each fund owned, in the aggregate, less
than 1 % of each fund's total outstanding shares.
MANAGEMENT CONTRACTS
Each fund has entered into a management contract with FMR,
pursuant to which FMR furnishes investment advisory and other
services.
MANAGEMENT SERVICES. Under the terms of its management contract
with each fund, FMR acts as investment adviser and, subject to the
supervision of the Board of Trustees, directs the investments of the
fund in accordance with its investment objective, policies, and
limitations. FMR also provides each fund with all necessary office
facilities and personnel for servicing the fund's investments,
compensates all officers of each fund and all Trustees who are
"interested persons" of the trust or of FMR, and all personnel of each
fund or FMR performing services relating to research, statistical, and
investment activities.
In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of each fund. These services include
providing facilities for maintaining each fund's organization;
supervising relations with custodians, transfer and pricing agents,
accountants, underwriters, and other persons dealing with each fund;
preparing all general shareholder communications and conducting
shareholder relations; maintaining each fund's records and the
registration of each fund's shares under federal 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 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. Other expenses paid
by each fund include interest, taxes, brokerage commissions, the
fund's proportionate share of insurance premiums and Investment
Company Institute dues, and the costs of registering shares under
federal securities laws and making necessary filings under state
securities laws. 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, each fund pays FMR a monthly management fee which has two
components: a group fee rate and an individual fund fee rate.
The group fee rate is based on the monthly average net assets of all
of the registered investment companies with which FMR has management
contracts.
The following is the fee schedule for Asset Manager: Income.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual Fee
Assets Rate Assets Rate
0 - $3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1690
24 - 30 .1800 200 .1652
30 - 36 .1750 225 .1618
36 - 42 .1700 250 .1587
42 - 48 .1650 275 .1560
48 - 66 .1600 300 .1536
66 - 84 .1550 325 .1514
84 - 120 .1500 350 .1494
120 - 156 .1450 375 .1476
156 - 192 .1400 400 .1459
192 - 228 .1350 425 .1443
228 - 264 .1300 450 .1427
264 - 300 .1275 475 .1413
300 - 336 .1250 500 .1399
336 - 372 .1225 525 .1385
372 - 408 .1200 550 .1372
408 - 444 .1175
444 - 480 .1150
480 - 516 .1125
Over 516 .1100
T he following is the fee schedule for each of Asset Manager and
Asset Manager: Growth.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual Fee
Assets Rate Assets Rate
0 - $3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3249
36 - 42 .3400 250 .3219
42 - 48 .3350 275 .3190
48 - 66 .3250 300 .3163
66 - 84 .3200 325 .3137
84 - 102 .3150 350 .3113
102 - 138 .3100 375 .3090
138 - 174 .3050 400 .3067
174 - 210 .3000 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 .2942
390 - 426 .2700
426 - 462 .2650
462 - 498 .2600
498 - 534 .2550
Over 534 .2500
T he group fee rate is calculated on a cumulative basis pursuant
to the graduated fee rate schedule s shown above on the left.
The schedule s above on the right show 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 $ 591 billion of group net
assets - the approximate level for September 1998 - was 0.1353 %
for Asset Manager: Income, and 0.2911 % for Asset Manager and
Asset Manager: Growth, which is the weighted average of the respective
fee rates for each level of group net assets up to $ 591
billion.
The individual fund fee rates for Asset Manager: Income, Asset
Manager, and Asset Manager: Growth are 0.30%, 0.25%, and 0.30 %,
respectively. Based on the average group net assets of the funds
advised by FMR for September 1998, each fund's annual management fee
rate would be calculated as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Group Fee Rate Individual Fund Fee Rate Management Fee Rate
Asset Manager: Income 0. 1353 % + 0.30% = 0. 4353 %
Asset Manager 0. 2911 % + 0.25% = 0. 5411 %
Asset Manager: Growth 0. 2911 % + 0.30% = 0. 5911 %
</TABLE>
One-twelfth of this annual management fee rate is applied to each
fund's net assets averaged for the most recent month, giving a dollar
amount, which is the fee for that month.
The following table shows the amount of management fees paid by each
fund to FMR for the past three fiscal years.
Fund Fiscal Years Ended Management Fees
September 30 Paid to FMR
Asset Manager: Income 1998 $ 3,113,000
1997 $ 2,672,000
1996 (dagger) $ 2,838,000
Asset Manager 1998 $ 66,671,000
1997 $ 61,215,000
1996 (dagger) $ 74,474,000
Asset Manager: Growth 1998 $ 28,667,000
1997 $ 22,505,000
1996 (dagger) $ 20,435,000
(dagger) On August 1, 1996, FMR reduced the individual fund fee
rates paid by Asset Manager: Income, Asset Manager, and Asset Manager:
Growth from 0.35%, 0.40%, and 0.40% to 0.30%, 0.25%, and 0.30%,
respectively.
During the reporting period, FMR voluntarily modified the
breakpoints in the group fee rate schedules on January 1, 1996 to
provide for lower management fee rates as FMR's assets under
management increase.
FMR may, from time to time, voluntarily reimburse all or a portion of
a fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses), which is subject to
revision or termination . FMR retains the ability to be repaid for
these expense reimbursements in the amount that expenses fall below
the limit prior to the end of the fiscal year.
Expense reimbursements by FMR will increase a fund's total returns and
yield, and repayment of the reimbursement by a fund will lower its
total returns and yield.
SUB-ADVISERS. On behalf of each fund , FMR has entered into
sub-advisory agreements with FMR U.K. and FMR Far East .
Pursuant to the sub-advisory agreements, FMR may receive investment
advice and research services outside the United States from the
sub-advisers.
On behalf of each fund, FMR may also grant the sub-advisers investment
management authority as well as the authority to buy and sell
securities if FMR believes it would be beneficial to the funds.
Currently, FMR U.K. and FMR Far East each focus on issuers in
countries other than the United States such as those in Europe, Asia,
and the Pacific Basin.
FMR U.K. and FMR Far East, which were organized in 1986, are wholly
owned subsidiaries of FMR. Under the sub-advisory agreements FMR pays
the fees of FMR U.K. and FMR Far East. For providing non-discretionary
investment advice and research services, FMR pays FMR U.K. and FMR Far
East fees equal to 110% and 105%, respectively, of FMR U.K.'s and FMR
Far East's costs incurred in connection with providing investment
advice and research services.
On behalf of each fund, for providing discretionary investment
management and executing portfolio transactions, FMR pays FMR U.K. and
FMR Far East a fee equal to 50 % of its monthly management fee
rate with respect to each fund's average net assets managed by the
sub-adviser on a discretionary basis.
For providing investment advice and research services, fees paid to
the sub-advisers by FMR for the past three fiscal years are shown in
the table below.
<TABLE>
<CAPTION>
<S> <C> <C>
Fiscal Year Ended FMR U.K . FMR Far East
September 30
Asset Manager: Income
1998 $ 53,000 $ 50,000
1997 $ 58, 000 $ 54, 000
1996 $ 19,000 $ 19,000
Asset Manager
1998 $ 496,000 $ 472,000
1997 $ 64 2,000 $ 59 2,000
1996 $ 888,000 $ 917,000
Asset Manager: Growth
1998 $ 145,000 $ 138,000
1997 $ 241, 000 $ 22 3,000
1996 $ 397,000 $ 413,000
</TABLE>
F or discretionary investment management and execution of portfolio
transactions, no fees were paid to the sub-advisers by FMR on
behalf of the funds for the past three fiscal years.
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved Distribution and Service Plans on behalf of
each fund (the Plans) pursuant to Rule 12b-1 under the 1940 Act
(the Rule). The Rule provides in substance that a mutual fund may not
engage directly or indirectly in financing any activity that is
primarily intended to result in the sale of shares of the fund except
pursuant to a plan approved on behalf of the fund under the Rule. The
Plans, as approved by the Trustees, allow the funds and FMR to
incur certain expenses that might be considered to constitute
indirect payment by the funds of distribution expenses.
Under each Plan, if the payment of management fees by the fund to FMR
is deemed to be indirect financing by the fund of the distribution of
its shares, such payment is authorized by the Plan. Each Plan
specifically recognizes that FMR may use its management fee revenue,
as well as its past profits or its other resources, to pay FDC for
expenses incurred in connection with the distribution of fund shares.
In addition, each Plan provides that FMR, directly or through FDC, may
make payments to third parties, such as banks or broker-dealers, that
engage in the sale of fund shares, or provide shareholder support
services. Currently, the Board of Trustees ha s a uthorized such
payments for Asset Manager: Income, Asset Manager, and Asset
Manager: Growth.
FMR made no payments either directly or through FDC to third parties
for the fiscal year ended 199 8 .
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan, and
determined that there is a reasonable likelihood that the Plan will
benefit the fund and its shareholders. In particular, the Trustees
noted that each Plan does not authorize payments by the fund other
than those made to FMR under its management contract with the fund. To
the extent that each Plan gives FMR and FDC greater flexibility in
connection with the distribution of fund shares, additional sales of
fund shares may result. Furthermore, certain shareholder support
services may be provided more effectively under the Plans by local
entities with whom shareholders have other relationships.
T he Glass-Steagall Act generally prohibits federally and state
chartered or supervised banks from engaging in the business of
underwriting, selling, or distributing securities. Although the scope
of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, FDC believes
that the Glass-Steagall Act should not preclude a bank from performing
shareholder support services, or servicing and recordkeeping
functions. FDC intends to engage banks only to perform such functions.
However, changes in federal or state statutes and regulations
pertaining to the permissible activities of banks and their affiliates
or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions,
if any, would be necessary to continue to provide efficient and
effective shareholder services. In such event, changes in the
operation of the funds might occur, including possible termination of
any automatic investment or redemption or other services then provided
by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these
occurrences. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein, and
banks and other financial institutions may be required to register as
dealers pursuant to state law.
Each fund may execute portfolio transactions with, and purchase
securities issued by, depository institutions that receive payments
under the Plans. No preference for the instruments of such depository
institutions will be shown in the selection of investments.
CONTRACTS WITH FMR AFFILIATES
Each fund has entered into a transfer agent agreement with FSC, an
affiliate of FMR. Under the terms of the agreements, FSC performs
transfer agency, dividend disbursing, and shareholder services for
each fund.
For providing transfer agency services, FSC receives an account fee
and an asset-based fee each paid monthly with respect to each
account in a fund. For retail accounts and certain institutional
accounts, these fees are based on account size and fund type. For
certain institutional retirement accounts, these fees are based on
fund type. For certain other institutional retirement accounts, these
fees are based on account type (i.e., omnibus or non-omnibus) and, for
non-omnibus accounts, fund type. The account fees are subject to
increase based on postage rate changes.
For Asset Manager and Asset Manager: Growth, 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%.
FSC also collects small account fees from certain accounts with
balances of less than $2,500.
In addition, FSC receives the pro rata portion of the transfer agency
fees applicable to shareholder accounts in a qualified state
tuition program (QSTP), as defined under the Small Business Job
Protection Act of 1996, managed by FMR or an affiliate and each
Fidelity Freedom Fund, a fund of funds managed by an FMR affiliate,
according to the percentage of the QSTP's or Freedom Fund's
assets that is invested in a fund.
FSC pays out-of-pocket expenses associated with providing transfer
agent services. In addition, FSC bears the expense of typesetting,
printing, and mailing prospectuses, statements of additional
information, and all other reports, notices, and statements to
existing shareholders, with the exception of proxy statements.
Each fund has also entered into a service agent agreement with FSC.
Under the terms of the agreements, FSC calculates the NAV and
dividends for each fund, maintains each fund's portfolio and general
accounting records, and administers each fund's securities lending
program.
For providing pricing and bookkeeping services, FSC receives a monthly
fee based on each fund's average daily net assets throughout the
month. The annual fee rates for pricing and bookkeeping services are
.0400% for Asset Manager: Income and .0600% for Asset Manager and
Asset Manager: Growth of the first $500 million of average net assets
and .0200% for Asset Manager: Income and .0300% for Asset Manager and
Asset Manager: Growth 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.
Fund 1998 1997 1996
Asset Manager: Income $ 244,000 $ 236,000 $ 219,000
Asset Manager $ 989,00 0 $ 940,000 $ 878,000
Asset Manager: Growth $ 864,000 $ 832,000 $ 805,000
For administering each fund's securities lending program, FSC receives
fees based on the number and duration of individual securities loans.
For the fiscal years ended September 30, 1998, 1997, and 1996,
Asset Manager: Income and Asset Manager: Growth paid no securities
lending fees.
For the fiscal years ended September 30, 1998, 1997, and 1996,
Asset Manager paid securities lending fees of $24,000, $23,000, and
$43,000, respectively.
Each fund has entered into a distribution agreement with FDC, an
affiliate of FMR organized as a Massachusetts corporation on July 18,
1960. FDC is a broker-dealer registered under the Securities Exchange
Act of 1934 and a member of the National Association of Securities
Dealers, Inc. The distribution agreements call for FDC to use all
reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered at
NAV. Promotional and administrative expenses in connection with the
offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Asset Manager: Income, Fidelity Asset
Manager, and Fidelity Asset Manager: Growth are funds of Fidelity
Charles Street Trust, an open-end management investment company
organized as a Massachusetts business trust on July 7, 1981.
Currently, there are six funds of the trust: Fidelity Asset Manager:
Income, Fidelity Asset Manager, Fidelity Asset Manager: Growth,
Fidelity Short-Intermediate Government Fund , Spartan Investment
Grade Bond Fund, and Spartan Short-Term Bond Fund. The Declaration of
Trust permits the Trustees to create additional funds.
In the event that FMR ceases to be the investment adviser to the trust
or a fund, the right of the trust or fund to use the identifying
name s "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 the trust received for the issue or sale of shares of
each fund 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 expenses of the trust. Expenses with
respect to the trust are to be allocated in proportion to the asset
value of the respective funds, except where allocations of direct
expense can otherwise be fairly made. The officers of the trust,
subject to the general supervision of the Board of Trustees, have the
power to determine which expenses are allocable to a given fund, or
which are general or allocable to all of the funds. In the event of
the dissolution or liquidation of the trust, shareholders of each fund
are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust is an entity of the type
commonly known as "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be
held personally liable for the obligations of the trust. The
Declaration of Trust provides that the trust shall not have any claim
against shareholders except for the payment of the purchase price of
shares and requires that each agreement, obligation, or instrument
entered into or executed by the trust or the Trustees shall include a
provision limiting the obligations created thereby to the trust and
its assets. The Declaration of Trust provides for indemnification out
of each fund's property of any shareholder held personally liable for
the obligations of the fund. The Declaration of Trust also provides
that each fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the fund and
satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to circumstances in which the fund itself would be unable to
meet its obligations. FMR believes that, in view of the above, the
risk of personal liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they
have exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their
office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar value
of net asset value you own. The shares have no preemptive or
conversion rights; the voting and dividend rights, the right of
redemption, and the privilege of exchange are described in the
Prospectus. Shares are fully paid and nonassessable, except as set
forth under the heading "Shareholder and Trustee Liability" above.
Shareholders representing 10% or more of the trust or a fund may, as
set forth in the Declaration of Trust, call meetings of the trust or a
fund for any purpose related to the trust or fund, as the case may be,
including, in the case of a meeting of the entire trust, the purpose
of voting on removal of one or more Trustees. The trust or any fund
may be terminated upon the sale of its assets to another open-end
management investment company, or upon liquidation and distribution of
its assets, if approved by vote of the holders of a majority of the
trust or fund, as determined by the current value of each
shareholder's investment in the fund or trust. If not so terminated,
the trust and the funds will continue indefinitely. Each fund may
invest all of its assets in another investment company.
CUSTODIAN. The Chase Manhattan Bank, 1 Chase Manhattan Plaza, New
York, New York, is custodian of the assets of the funds. The custodian
is responsible for the safekeeping of a fund's assets and the
appointment of any subcustodian banks and clearing agencies. The
custodian takes no part in determining the investment policies of a
fund or in deciding which securities are purchased or sold by a fund.
However, a fund may invest in obligations of its custodian and may
purchase securities from or sell securities to its custodian. The Bank
of New York, headquartered in New York, also may serve as a special
purpose custodian of certain assets in connection with repurchase
agreement transactions.
FMR, its officers and directors, its affiliated companies, and the
Board of Trustees may, from time to time, conduct transactions with
various banks, including banks serving as custodians for certain funds
advised by FMR. Transactions that have occurred to date include
mortgages and personal and general business loans. In the judgment of
FMR, the terms and conditions of those transactions were not
influenced by existing or potential custodial or other fund
relationships.
AUDITOR. PricewaterhouseCoopers LLP , 160 Federal Street,
Boston, Massachusetts serves as the trust's independent accountant.
The auditor examines financial statements for the funds and provides
other audit, tax, and related services.
FINANCIAL STATEMENTS
Each fund's financial statements and financial highlights for the
fiscal year ended September 30, 199 8 , and reports of the
auditor, are included in each fund's Annual Report, which are separate
reports supplied with this SAI. The funds' financial statements,
including the financial highlights, and reports of the auditor are
incorporated herein by reference. For a free additional copy of a
fund's Annual Report, contact Fidelity at 1-800-544-8888.
APPENDIX
The descriptions that follow are examples of eligible ratings for the
funds. A fund may, however, consider the ratings for other types of
investments and the ratings assigned by other rating organizations
when determining the eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE RATINGS OF CORPORATE BONDS
Moody's ratings for obligations with an original remaining maturity in
excess of one year fall within nine categories. They range from Aaa
(highest quality) to C (lowest quality). Moody'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 issu e
ranks on the lower end of its generic rating category.
AAA - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high-grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than the Aaa securities.
A - Bonds that are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations.
Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.
BAA - Bonds that are rated Baa are considered as medium-grade
obligations, (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
BA - Bonds that are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.
CAA - Bonds that are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect
to principal or interest.
CA - Bonds that are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked short-comings.
C - Bonds that are rated C are the lowest-rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
DESCRIPTION OF STANDARD & POOR'S RATINGS OF CORPORATE BONDS
Debt issues may be designated by Standard & Poor's as either
investment grade ("AAA" through "BBB") or speculative grade ("BB"
through "D"). While speculative grade debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major exposures to adverse conditions. Ratings from
AA to CCC may be modified by the addition of a plus sign (+) or minus
sign (-) to show relative standing within the major rating categories.
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher-rated issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher-rated categories.
BB - Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments. The BB rating category is also used
for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating.
B - Debt rated B has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair
capacity or willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and
economic conditions to meet timely payment of interest and repayment
of principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied B or
B- rating.
CC - Debt rated CC is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C
rating may be used to cover a situation where a bankruptcy petition
has been filed but debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest
is being paid.
D - Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The
D rating will also be used upon the filing of a bankruptcy petition if
debt service payments are jeopardized.
FIDELITY ASSET MANAGER, FIDELITY, FIDELITY FOCUS, SPARTAN, FIDELITY
INVESTMENTS AND MAGELLAN ARE REGISTERED TRADEMARKS OF FMR CORP.
ASSET MANAGER: INCOME, ASSET MANAGER, AND ASSET MANAGER: GROWTH ARE
SERVICE MARKS OF FMR CORP.
THE THIRD PARTY MARKS APPEARING ABOVE ARE THE MARKS OF THEIR
RESPECTIVE OWNERS.
FIDELITY CHARLES STREET TRUST:
FIDELITY SHORT-INTERMEDIATE GOVERNMENT FUND
CROSS REFERENCE SHEET
Form N-1A Item Number
Part A Prospectus Caption
1 Cover Page
2 a Expenses
b,c Contents; Who May Want to Invest
3 a,b Financial Highlights
c,d Performance
4 a(i) Charter
a(ii) Investment Principles and Risks;
Securities and Investment Practices;
Fundamental Investment Policies and Restrictions
b Securities and Investment Practices
c Who May Want to Invest; Investment Principles and
Risks; Securities and Investment Practices
5 a Charter
b(i) Cover Page; FMR and Its Affiliates
b(ii) FMR and Its Affiliates; Breakdown of Expenses
b(iii) Expenses; Breakdown of Expenses
c FMR and Its Affiliates
d Cover Page; Charter; Breakdown of Expenses;
FMR and Its Affiliates
e FMR and Its Affiliates; Breakdown of Expenses
f Expenses
g(i) Charter
g(ii) *
5A Performance
6 a(i) Charter
a(ii) How to Buy Shares; How to Sell Shares;
Investor Services; Transaction Details;
Exchange Restrictions
a(iii),b *
c How to Buy Shares; Exchange Restrictions
d *
e Cover Page; Types of Accounts; How to Buy Shares;
How to Sell Shares; Investor Services; Transaction
Details
f,g Dividends, Capital Gains, and Taxes
h *
7 a Cover Page; FMR and Its Affiliates
b,c How to Buy Shares; Transaction Details
d How to Buy Shares
e Breakdown of Expenses
f Expenses; Breakdown of Expenses
8 How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 *
* Not applicable
FIDELITY CHARLES STREET TRUST:
FIDELITY SHORT-INTERMEDIATE GOVERNMENT FUND
CROSS REFERENCE SHEET
Form N-1A Item Number
Part B Statement of Additional Information Caption
10a,b Cover Page
11 Cover Page
12 Description of the Trusts
13a,b,c Investment Policies and Limitations
d Portfolio Transactions
14a,b,c Trustees and Officers
15a,b Description of the Trusts
c Trustees and Officers
16a(i) FMR
a(ii) Trustees and Officers
a(iii),b,c Management Contracts
d,e *
f Distribution and Service Plans
g *
h Description of the Trusts
i Contracts with FMR Affiliates
17a,b,c Portfolio Transactions
d,e *
18a Description of the Trusts
b *
19a Additional Purchase and Redemption Information
b Valuation of Portfolio Securities
c *
20 Distributions and Taxes
21a(i,ii) Contracts with FMR Affiliates
a(iii),b,c *
22a,b Performance
23 Financial statements for the period ended
September 30, 1998 are incorporated herein by reference.
* Not applicable
FIDELITY
SHORT-INTERMEDIATE
GOVERNMENT
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)
dat ed November 24, 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
eithe r document, call Fidelity(registered trademark) at
1-800-544-8888.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
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.
FSG -pro- 1198
1.537651.101
(fund number 464, trading symbol FLMGX)
The fund invests in U.S. Government securities. The fund seeks high
current income with preservation of capital.
PROSPECTUS
NOVEMBER 24, 1998(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET,
BOSTON, MA 02109
CONTENTS
KEY FACTS 4 THE FUND AT A GLANCE
4 WHO MAY WANT TO INVEST
6 EXPENSES The fund's yearly operating
expenses.
7 FINANCIAL HIGHLIGHTS A summary of the
fund's financial data.
8 PERFORMANCE How the fund has done
over time.
THE FUND IN DETAIL 9 CHARTER How the fund is organized.
9 INVESTMENT PRINCIPLES AND RISKS The
fund's overall approach to investing.
11 BREAKDOWN OF EXPENSES How
operating costs are calculated and what
they include.
YOUR ACCOUNT 12 DOING BUSINESS WITH FIDELITY
12 TYPES OF ACCOUNTS Different ways to
set up your account, including
tax-advantaged retirement plans.
13 HOW TO BUY SHARES Opening an
account and making additional
investments.
15 HOW TO SELL SHARES Taking money out
and closing your account.
17 INVESTOR SERVICES Services to help you
manage your account.
SHAREHOLDER AND 18 DIVIDENDS, CAPITAL GAINS,
ACCOUNT POLICIES AND TAXES
19 TRANSACTION DETAILS Share price
calculations and the timing of purchases
and redemptions.
20 EXCHANGE RESTRICTIONS
KEY FACTS
THE FUND AT A GLANCE
GOAL: High current income with preservation of capital. As with any
mutual fund, there is no assurance that the fund will achieve its
goal.
STRATEGY: Normally invests in U.S. Government securities and
instruments related to U.S. Government securities while maintaining an
average maturity of two to five years. FMR uses the Lehman Brothers
1-5 Year U.S. Government Bond Index as a guide in structuring th e
fund and selecting its investments.
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments(registered trademark), which
was established in 1946 and is now America's largest mutual fund
manager.
Beginning January 1, 1999, Fidelity Investments Money Management,
Inc. (FIMM), a subsidiary of FMR, will choose investment s for the
fund.
SIZE: As of September 30 , 1998, the fund had over
$133 million in assets.
WHO MAY WANT TO INVEST
PROPOSED REORGANIZATION. The Board of Trustees of Fidelity
Short-Intermediate Government Fund has unanimously approved an
Agreement and Plan of Reorganization ("Agreement") between Fidelity
Short-Intermediate Government Fund and Fidelity Intermediate
Government Income Fund (formerly Spartan Limited Maturity Government
Fund), a Fund of Fidelity Income Fund.
The Agreement provides for the transfer of all of the assets and
assumption of all of the liabilities of Fidelity Short-Intermediate
Government Fund solely in exchange for the number of shares of
Fidelity Intermediate Government Income Fund equal in value to the
relative net asset value of the outstanding shares of Fidelity
Short-Intermediate Government Fund. Following such exchange, Fidelity
Short-Intermediate Government Fund will distribute to Fidelity
Intermediate Government Income Fund as provided in the Agreement (the
transactions contemplated by the Agreement referred to as the
"Reorganization"). The Reorganization can be consummated only if,
among other things, it is approved by a majority vote of shareholders.
A Special Meeting (the "Meeting") of Fidelity Short-Intermediate
Government Fund will be held on April 14, 1999, and approval of the
Agreement will be voted on at that time. In connection with the
Meeting Fidelity Short-Intermediate Government Fund will be filing
with the Securities and Exchange Commission and delivering to its
shareholders of record a Proxy Statement describing the Reorganization
and a Prospectus for Fidelity Intermediate Government Income Fund.
If the Agreement is approved at the Meeting and certain conditions
required by the Agreement are satisfied, the Reorganization is
expected to become effective on or about April 29, 1999. If
shareholder approval of the Agreement is delayed due to failure to
meet a quorum or otherwise, the Reorganization will become effective,
if approved as soon as practicable thereafter.
In the event Fidelity Short-Intermediate Government Fund
shareholders fail to approve the Agreement, Fidelity
Short-Intermediate Government Fund will continue to engage in business
as a registered investment company and the Board of Trustees will
consider other proposals for the reorganization or liquidation of
Fidelity Short-Intermediate Government Fund.
Effective the close of business on June 26, 1998, the fund's shares
will no longer be available to new accounts. Shareholders of the fund
on that date may continue to purchase shares in accounts existing on
that date. Investors who did not own shares of the fund on June 26,
1998, generally will not be allowed to purchase shares of the fund
except that new accounts may be established: 1) by participants in
most group employer retirement plans (and their successor plans) in
which the fund had been established as an investment option by June
26, 1998, and 2) for accounts managed on a discretionary basis that
have discretionary assets of at least $1 billion invested in mutual
funds and have included the fund in their discretionary account
program since June 26, 1998. These restrictions will apply to
investments made directly with Fidelity and investments made through
intermediaries. Investors may be required to demonstrate eligibility
to purchase shares of the fund before an investment is accepted.
The fund may be appropriate for investors who seek high current income
from a portfolio of U.S. Government securities. The fund's level of
risk and potential reward depend on the quality and maturity of its
investments.
The value of the fund's investments and the income they generate will
vary from day to day, and generally reflect interest rates, market
conditions, and other economic and political news. When you sell your
shares, they may be worth more or less than what you paid for them. By
itself, the fund does not constitute a bal anc ed investment
plan.
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. SHORT-INTERMEDIATE
GOVERNMENT 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)
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy
or sell 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 None
and reinvested distributions
Deferred sales charge on redemptions None
Annual account maintenance fee $12.00
(for accounts under $2,500)
ANNUAL FUND 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. The fund's expenses are
factored into its share price or dividends and are not charged
directly to shareholder accounts (see "Breakdown of Expenses" page ).
The following figures are based on historical expenses of the fund and
are calculated as a percentage of average net assets of the fund.
Management fee 0.44 %
12b-1 fee None
Other Expenses 0.34 %
Total fund operating expenses 0.78 %
EXAMPLES: Let's say, hypothetically, that the fund's annual return is
5% and that your shareholder transaction expenses and the fund's
annual operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses
if you close your account after the number of years indicated:
1 year $ 8
3 years $ 25
5 years $ 43
10 years $ 97
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected expenses or returns, all of which may vary.
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
THE FUND'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 follows has been audited by
PricewaterhouseCoopers LLP , 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Years ended September 30 1998 1997 1996 1995 1994 1993 1992 1991D
Net asset value, beginning of $ 9.370 $ 9.320 $ 9.490 $ 9.290 $ 9.960 $ 10.140 $ 10.010 $ 10.000
period
Income from Investment .591F .603F .599 .648 .533 .722 .694 .027
Operations
Net investment income
Net realized and .119 .022 (.167) .174 (.648) (.209) .096 .010
unrealized gain (loss)
Total from investment .710 .625 .432 .822 (.115) .513 .790 .037
operations
Less Distributions (.560) (.575) (.602) (.622) (.555) (.623) (.650) (.027)
From net investment income
From net realized gain -- -- -- -- -- (.070) (.010) --
Total distributions (.560) (.575) (.602) (.622) (.555) (.693) (.660) (.027)
Net asset value, end of period $ 9.520 $ 9.370 $ 9.320 $ 9.490 $ 9.290 $ 9.960 $ 10.140 $ 10.010
Total returnB,C 7.82% 6.90% 4.67% 9.15% (1.18)% 5.26% 8.13% .37%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 133,109 $ 120,138 $ 123,044 $ 140,471 $ 132,466 $ 168,292 $ 172,863 $ 1,339
(000 omitted)
Ratio of expenses to .78% .81% .79% .82% .95% .61%,E .28%,E .65%A,E
average net assets
Ratio of net investment income 6.29% 6.45% 6.54% 6.67% 6.80% 7.19% 7.91% 5.67%A
to average net assets
Portfolio turnover rate 253% 126% 188% 266% 184% 348% 419% --
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D FOR THE PERIOD SEPTEMBER 13, 1991 (COMMENCEMENT OF OPERATIONS) TO
SEPTEMBER 30, 1991.
E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
F NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The
total returns that follow are based on historical fund results and do
not reflect the effect of taxes.
The fund's fiscal year runs from October 1 through September 30. The
tables below show the fund's performance over past fiscal years
compared to different measures, including a comparative index and a
competitive funds average. The chart on page presents calendar year
performance.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Life of
September 30, 1998 year years fund A
SHORT-INTERMEDIATE 7.82% 5.41% 5.78%
GOVERNMENT
Lehman Bros.1-5 Year U.S. Govt. Bond Index 9.12% 6.14% n/a
Lipper Sht.-Int. U.S. Govt. Funds Avg. 8.25% 5.31% n/a
CUMULATIVE TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Life of
September 30, 1998 year years fund A
SHORT-INTERMEDIATE 7.82% 30.12% 48.67%
GOVERNMENT
Lehman Bros.1-5 Year U.S. Govt. Bond Index 9.12% 34.72% n/a
Lipper Sht.-Int. U.S. Govt. Funds Avg. 8.25% 29.67% n/a
A FROM SEPTEMBER 13, 1991 (COMMENCEMENT OF OPERATIONS)
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated
period of time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate
of return that, if achieved annually, would have produced the same
cumulative total return if performance had been constant over the
entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
UNDERSTANDING
PERFORMANCE
Because this fund invests in
fixed-income securities, its
performance is related to
changes in interest rates.
Funds that hold short-term
bonds are usually less
affected by changes in
interest rates than
long-term bond funds. For
that reason, long-term
bond funds typically offer
higher yields and carry
more risk than short-term
bond funds.
(checkmark)
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.
LEHMAN BROTHERS 1-5 YEAR U.S. GOVERNMENT BOND INDEX is a market
capitalization-weighted index of government and fixed-rate debt issues
with maturities between one and five years.
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.
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1992 1993 1994 1995 1996 1997
SHORT-INTERMEDIATE GOVERNMENT 4.71% 5.28% -1.38% 11.86% 4.06% 6.61%
Lehman Bros. 1-5 Year U.S. Govt. Bond Index 6.71% 6.88%
- -0.77% 12.66% 4.60% 7.11%
Lipper Sht.-Int. U.S. Govt. Funds Avg. 5.96% 6.96% -2.26% 12.46%
3.52% 6.72%
Consumer Price Index 2.90 % 2.75 % 2.67 %
2.54 % 3.32 % 1.70 %
Percentage (%)
Row: 1, Col: 1, Value: 0.0
Row: 2, Col: 1, Value: 0.0
Row: 3, Col: 1, Value: 0.0
Row: 4, Col: 1, Value: 0.0
Row: 5, Col: 1, Value: 4.71
Row: 6, Col: 1, Value: 5.28
Row: 7, Col: 1, Value: -1.38
Row: 8, Col: 1, Value: 11.86
Row: 9, Col: 1, Value: 4.06
Row: 10, Col: 1, Value: 6.61
(LARGE SOLID BOX) Short-Intermediate
Government
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
THE COMPETITIVE FUNDS AVERAGE is the Lipper Short-Intermediate U.S.
Government Funds Average. As of Sep tember 30, 199 8, the average
reflected the performance of 101 mutual funds with similar
investment objectives. This average, published by Lipper Analytical
Services, Inc., excludes the effect of sales loads.
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, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUND IN DETAIL
CHARTER
SHORT-INTERMEDIATE GOVERNMENT 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 Charles Street Trust , an
open-end management investment company organized as a Massachusetts
business trust on July 7, 1981.
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.
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, FIMM, lo cated in Merrimack, New
Hampshire, will have primary responsibility for providing investment
management services for the fund .
Curtis Hollingsworth is Vice President and manager of
Short-Intermediate Government Fund, which he has managed since
September 1991. He also manages several other Fidelity funds. Mr.
Hollingsworth joined Fidelity in 1983.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services.
Fidelity Service Company, Inc. (FSC) performs transfer agent servicing
functions for the fund.
FMR Corp. is the ultimate parent com pany 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.
FMR may use its broker-dealer affiliates and other firms that sell
fund shares to carry out the fund's transactions, provided that the
fund receives brokerage 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.
PREPAYMENT RISK. Many types of debt securities, including mortgage
securities, are subject to prepayment risk. Prepayment risk occurs
when the issuer of a security can prepay principal prior to the
security's maturity. Securities subject to prepayment risk generally
offer less potential for gains during a declining interest rate
environment, and similar or greater potential for loss in a rising
interest rate environment. In addition, the potential impact of
prepayment features on the price of a debt security may be difficult
to predict and result in greater volatility.
FIDELITY'S APPROACH TO BOND FUNDS. In managing bond funds, FMR
selects a benchmark index that 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,
U.S. Treasury or U.S. Government agency securities) 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 unive rse of securities in which the fund may
i nvest. 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.
The fund seeks high current income, consistent with preservation of
capital, by investing in U.S. Government securities and instruments
related to U.S. Government securities under normal conditions. The
benchmark index for the fund is the Lehman Brothers 1-5 Year U.S.
Government Bond Index, a market capitalization-weighted index of
government and fixed-rate debt issues with maturities between one and
five years. FMR manages the fund to have similar overall interest rate
risk to the index. As of September 30, 1998 the dollar-weighted
average maturity of the fund and the index was approximately 3.4 and
2.7 years, respectively. In addition, the fund normally maintains a
dollar-weighted average maturity between two and five years.
In determining a security's maturity for purposes of calculating the
fund's average maturity, an estimate of the average time for its
principal to be paid may be used. This can be substantially shorter
than its stated final maturity.
The fund normally invests only in U.S. Government securities,
repurchase agreements and other instruments related to U.S. Government
securities. FMR nor mally invests at least 65% of the fund's
total assets in U.S. Government securities and repurchase agreements
for U.S. Government securities. Other instruments may include futures
or options on U.S. Government securities or interests in U.S.
Government securities that have been repackaged by dealers or other
third parties. It is important to note that neither the fund's share
price nor its yield is guaranteed by the U.S. Government.
FMR may use various investment techniques to hedge a portion of the
fund's risks, but there is no guarantee that these strategies will
work as FMR in te nds. 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. The fund also reserves the right to invest without
limitation in investment-grade money market or short-term debt
instruments 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.
U.S. GOVERNMENT SECURITIES are high-quality debt instruments issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of
the U.S. Government. Not all U.S. Government securities are backed by
the full faith and credit of the United States. For example, U.S.
Government securities such as those issued by Fannie Mae are supported
by the instrumentality's right to borrow money from the U.S. Treasury
under certain circumstances. Other U.S. Government securities, such as
those issued by the Federal Farm Credit Banks Funding Corporation, are
supported only by the credit of the entity that issued them.
MORTGAGE SECURITIES include interests in pools of commercial or
residential mortgages, and may include complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed
securities. Mortgage securities may be issued by agencies or
instrumentalities of the U.S. Government or by private entities.
The price of a mortgage security may be significantly affected by
changes in interest rates. Some mortgage securities may have a
structure that makes their reaction to interest rates and other
factors difficult to predict, making their price highly volatile.
Also, mortgage securities, especially stripped mortgage-backed
securities, are subject to prepayment risk. Securities subject to
prepayment risk generally offer less potential for gains during a
declining interest rate environment, and similar or greater potential
for loss in a rising interest rate environment.
RESTR ICTION: The fund does not currently intend to invest more
than 40% of its assets in mortgage securities.
STRIPPED SECURITIES are the separate income or principal components of
a debt security. The risks associated with stripped securities are
similar to those of other debt securities, although stripped
securities may be more vola tile, and the value of certain types
of stripped securities may move in the same direction as interest
rates. U.S. Treasury securities that have been stripped by a Federal
Reserve Bank are obligations issued by the U.S. Treasury.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund buys a
security at one price and simultaneously agrees to sell it back at a
higher price. Delays or losses could result if the other party to the
agreement defaults or becomes insolvent.
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 currency exchange
con tracts or 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 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.
Difficulty in selling securities may result in a loss or may be costly
to the fund.
RESTRICTIONS: The fund may not invest more than 10% of its
assets 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.
OTHER INSTRUMENTS may include real esta te related instruments.
CASH MANAGEMENT. The fund may invest in money market securities, in
repurchase agreements, and in a money market fund available only to
funds and accounts managed by FMR or its affiliates, whose goal is to
seek a high level of current income while maintaining a stable $1.00
share price. A major change in interest rates or a default on the
money market fund's investments could cause its share price to change.
BORROWING. The fund may borrow from banks or from other funds advised
by FMR or its affilia tes, 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.
LENDING securities to broker-dealers and institutions, including
Fidelity Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a
means of earning income. This practice could result in a loss or a
delay in recovering the fund's securities. The fund may also lend
money to other funds advised by FMR or its affiliate s.
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of the
fund's total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages
are fundamental, that is, subject to change only by shareholder
approval. The following paragraphs restate all those that are
fundamental. All policies stated throughout this prospectus, other
than those identified in the following paragraphs, can be changed
without shareholder approval.
The fund seeks as high a level of current income as is consistent with
preservation of capital.
The fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 331/3% of its total assets.
Loans, in the aggregate, may not exceed 331/3% of the fund's total
assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily
operations. Expenses paid out of the fund'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, dividing by twelve, and multiplying the result by the fund's
average net assets throughout the mo nth.
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.
UNDERSTANDING THE
MANAGEMENT FEE
The management fee FMR
receives is designed to be
responsive to changes in FMR's
total assets under
management. Building this
variable into the fee
calculation assures
shareholders that they will pay
a lower rate as FMR's assets
under management increase.
(checkmark)
For Sept ember 1998, the group fee was 0.1353 %. The
individual fund fee rate is 0.30%.
Beginning January 1, 1999, FIMM will have primary
responsibility for m anaging the fund's investments. FMR will
pay FIMM 50% of its management fee (before expense reimbursements) for
FIMM's services.
The total management fee rate for the fiscal year ended September
30, 1998 was 0.44% of th e funds average net assets.
OTHER EXPENSES
While the management fee is a significant component of the fund's
annual operating costs, the fund has other expenses as well.
The fund contracts with FSC to perform transfer agency, dividend
disbursing, shareholder servicing, and accounting functions. These
services include processing shareholder transactions, valuing the
fund's investments, handling securities loans, and calculating the
fund's share price and dividends.
For the fiscal year ended September 19 98, the fund paid
transfer agency and pricing and bookkeeping fees equal to 0. 27 %
of its average net assets.
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.
The fund 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 fund
shares. FMR directly, or through FDC, may make payments to third
parties, such as banks or broker-dealers, that engage in the sale of,
or provide shareholder support services for, the fund's shares.
Currently, the Board of Trustees has authoriz ed such payments.
The fund's portfolio turnover rate for the fisc al year ended
September 1998 was 253 %. This rate varies from year to year.
High turnover rates increase transaction costs and may increase
taxable capital gains. FMR considers these effects when evaluating the
anticipated benefits of short-term investing.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of
America's first mutual funds. Today, Fidelity is the largest mutual
fund company in the country, and is known as an innovative provider of
high-quality financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, FBSI. Fidelity is also a
leader in pro viding tax-a dvantaged retirement plans for
individuals investing on their own or through their employer.
Fidelity is committed to providing investors with practical
information to make investment decisions. Based in Boston, Fidelity
provides customers with complete service 24 hours a day, 365 days a
year, through a network of telephone service centers around the
country and Fide lity's Web site.
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 75 walk-in I nvestor Centers across the country.
If you would prefer to access information on-line, you can visit
Fidelity's Web site at www.fidelity.com.
TYPES OF ACCOUNTS
You may set up an account directly in the fund or, if you own or
intend to purchase individual securities as part of your total
investment portfolio, you may consider investing in the fund through a
brokerage account.
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 223
(solid bullet) Assets in Fidelity mutual
funds: over $572 bil lion
(solid bullet) Number of shareholder
accounts: over 38 mil lion
(solid bullet) Number of investment
analysts and portfolio
managers: over 260
(checkmark)
The different ways to set up (register) your account with Fidelity are
listed in the table that follows.
The account guidelines that follow may not apply to certain retirement
accounts. If you are investing through a retirement account or if your
employer offers the fund through a retirement program, you may be
subject to additional fees. For more information, please refer to your
program materials, contact your employer, call your retire ment
benefits number, visit Fidelity's W eb site at www.fidelity.com, or
contact Fidelity directly, as appropriate.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have
two or more owners (tenants).
RETIREMENT
FOR TAX-ADVANTAGED RETIREMENT SAVINGS
Retirement plans provide individuals with tax-advantaged ways to
save for retirement, either with tax-deductible contributions or
tax-free growth. Retirement accounts require special applications and
typically have lower minimums.
(solid bullet) TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNTS
(IRAS) allow individuals under age 70 with compensation to
contribute up to $2,000 per tax year. Married couples can contribute
up to $4,000 per tax year, provided no more than $2,000 is contributed
on behalf of either spouse. (These limits are aggregate for
Traditional and Roth IRAs.) Contributions may be tax-deductible,
subject to certain income limits.
(solid bullet) ROTH IRAS allow individuals to make non-deductible
contributions of up to $2,000 per tax year. Married couples can
contribute up to $4,000 per tax year, provided no more than $2,000 is
contributed on behalf of either spouse. (These limits are aggregate
for Traditional and Roth IRAs.) Eligibility is subject to certain
income limits. Qualified distributions are tax-free.
(solid bullet) ROTH CONVERSION IRAS allow individuals with
assets held in a Traditional IRA or Rollover IRA to convert those
assets to a Roth Conversion IRA. Eligibility is subject to certain
income limits. Qualified distributions are tax-free.
(solid bullet) ROLLOVER IRAS help retain special tax advantages
for certain eligible rollover distributions from employer-sponsored
retirement plans.
(solid bullet) 401(K) PLANS, and certain other
401(a)-qualified plans, are employer-sponsored retirement plans that
allow employer contributions and may allow employee after-tax
contributions. In addition, 401(k) plans allow employee pre-tax
(tax-deferred) contributions. Contributions to these plans may be
tax-deductible to the employer.
(solid bullet) KEOGH PLANS are generally profit sharing or
money purchase pension plans that allow self-employed individuals or
small business owners to make tax-deductible contributions for
themselves and any eligible employees.
(solid bullet) SIMPLE IRAS provide small business owners and those
with self-employment income (and their eligible employees) with many
of the advantages of a 401(k) plan, but with fewer administrative
requirements.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide
small business owners or those with self-employment income (and their
eligible employees) with many of the same advantages as a Keogh, but
with fewer administrative requirements.
(solid bullet) SALARY REDUCTION SEP-IRAS (SARSEPS) allow
employees of businesses with 25 or fewer employees to contribute a
percentage of their wages on a tax-deferred basis. These plans must
have been established by the employer prior to January 1, 1997.
(solid bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees of
501(c)(3) tax-exempt institutions, including schools, hospitals, and
other charitable organizations.
(solid bullet) DEFERRED COMPENSATION PLANS (457 PLANS) are
available to employees of most state and local governments and their
agencies and to employees of tax-exempt institutions.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and
obtain tax benefits. An individual can give up to $10,000 a year per
child without paying federal gift tax. Depending on state laws, you
can set up a custodial account under the Uniform Gifts to Minors Act
(UGMA) or the Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR
OTHER GROUPS
Requires a special application.
HOW TO BUY SHARES
THE PRICE TO BUY ONE SHARE of the fund is the fund's net asset value
per share (NAV). The fund's shares are sold without a sales charge.
Your shares will be purchased at the next NAV calculated after your
invest ment is recei ved in proper form. The fund'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.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application
and mail it along with your check. You may also open your account in
person or by wire as described on page . If there is no
application accompanying this pro spectus, call 1-800-544-8888 or
visit Fidelity's Web site at www.fidelity.com for an applic ation.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another
Fidelity fund.
IF YOU ARE INVESTING THROUGH A TAX-ADVANTAGED RETIREMENT PLAN,
such as an IRA, for the first time, you will need a special
application. Retirement investing also involves its own investment
procedures. Call 1-800-544-8888 or visit Fidelity's Web site at
www.fideli ty.com for more information and a retirement
application.
If you buy shares by check or Fidelity Money 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
TO OPEN AN ACCOUNT $2,500
For cert ain Fidelity retirement accountsA $500
TO ADD TO AN ACCOUNT $250
Through regul ar investment plans B $100
MINIMUM BALANCE $2,000
For certain Fid elity retirement accountsA $500
A THESE LOWER MINIMUMS APPLY TO FIDELITY TRADITIONAL IRA, ROTH IRA,
ROTH CONVERSION IRA, ROLLOVER IRA, SEP-IRA, AND KEOGH ACCOUNT S.
B FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER TO
"INVESTOR SERVICES," PAGE .
There is no minimum account balance or initial or subsequent
investment minimum for investments through Fidelity Portfolio Advisory
ServicesSM, a qualified state tuition program, certain Fidelity
retirement accounts funded through salary deduction, or accounts
opened with the proceeds of distributions from such retirement
accounts. Refer to the program materials for details. In addition, the
fund reserves the right to waive or lower investment minimums in other
circumstances.
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TO OPEN TO ADD TO AN ACCOUNT
AN
ACCOUNT
PHONE
1-800-544-7777
(PHONE_GRAPHIC) (SMALL SOLID BULLET) EXCHANGE FROM (SMALL SOLID BULLET) EXCHANGE FROM ANOTHER FIDELITY FUND
ACCOUNT WITH THE SAME REGISTRATION,
ANOTHER FIDELITY INCLUDING NAME, ADDRESS, AND
TAXPAYER ID NUMBER.
FUND ACCOUNT (SMALL SOLID BULLET) USE FIDELITY MONEY LINE TO TRANSFER
FROM YOUR BANK ACCOUNT. CALL BEFORE
WITH THE SAME YOUR FIRST USE TO VERIFY THAT THIS
SERVICE IS IN PLACE ON YOUR ACCOUNT.
REGISTRATION, MAXIMUM MONEY LINE: UP TO $100,000.
INCLUDING NAME,
ADDRESS, AND
TAXPAYER ID
NUMBER.
THE INTERNET
WWW.FIDELITY.COM
(COMPUTER GRAPHIC) (SMALL SOLID BULLET) COMPLETE AND (SMALL SOLID BULLET) EXCHANGE FROM ANOTHER FIDELITY FUND
ACCOUNT WITH THE SAME REGISTRATION,
SIGN THE INCLUDING NAME, ADDRESS, AND TAXPAYER
ID NUMBER.
APPLICATION. (SMALL SOLID BULLET) USE FIDELITY MONEY LINE TO TRANSFER
FROM YOUR BANK ACCOUNT. VISIT
MAKE YOUR CHECK FIDELITY'S WEB SITE BEFORE YOUR
FIRST USE TO VERIFY THAT THIS
SERVICE IS IN
PAYABLE TO THE PLACE ON YOUR ACCOUNT. MAXIMUM
MONEY LINE: UP TO $100,000.
COMPLETE NAME
OF THE FUND. MAIL
TO THE ADDRESS
INDICATED ON THE
APPLICATION.
MAIL
(MAIL_GRAPHIC) (SMALL SOLID BULLET) COMPLETE AND (SMALL SOLID BULLET) MAKE YOUR CHECK PAYABLE TO THE
COMPLETE NAME OF THE FUND. INDICATE
SIGN THE YOUR FUND ACCOUNT NUMBER ON YOUR CHECK
AND MAIL TO THE ADDRESS PRINTED
APPLICATION. ON YOUR ACCOUNT STATEMENT.
MAKE YOUR (SMALL SOLID BULLET) EXCHANGE BY MAIL: CALL 1-800-544-6666
FOR INSTRUCTIONS.
CHECK PAYABLE TO
THE COMPLETE
NAME OF THE
FUND. MAIL TO THE
ADDRESS INDICATED
ON THE
APPLICATION.
IN PERSON
(HAND_GRAPHIC) (SMALL SOLID BULLET) BRING YOUR (SMALL SOLID BULLET) BRING YOUR CHECK TO A FIDELITY
INVESTOR CENTER. CALL 1-800-544-9797
FOR THE
APPLICATION AND CENTER NEAREST YOU.
CHECK TO A
FIDELITY INVESTOR
CENTER. CALL
1-800-544-97
97 FOR THE
CENTER NEAREST
YOU.
WIRE
(WIRE_GRAPHIC) (SMALL SOLID BULLET) CALL (SMALL SOLID BULLET) NOT AVAILABLE FOR RETIREMENT ACCOUNTS.
1-800-544-77 (SMALL SOLID BULLET) WIRE TO:
77 TO SET UP BANKERS TRUST COMPANY,
YOUR ACCOUNT BANK ROUTING #021001033,
AND TO ARRANGE ACCOUNT #00163053.
A WIRE SPECIFY THE COMPLETE NAME OF THE FUND
AND INCLUDE YOUR ACCOUNT NUMBER
TRANSACTION. NOT AND YOUR NAME.
AVAILABLE FOR
RETIREMENT
ACCOUNTS.
(SMALL SOLID BULLET) WIRE WITHIN 24
HOURS TO:
BANKERS TRUST
COMPANY,
BANK ROUTING
#021001033,
ACCOUNT
#00163053.
SPECIFY THE
COMPLETE NAME
OF THE FUND AND
INCLUDE YOUR
NEW ACCOUNT
NUMBER AND
YOUR NAME.
AUTOMATICALLY
(AUTOMATIC_GRAPHIC) (SMALL SOLID BULLET) NOT AVAILABLE . (SMALL SOLID BULLET) USE FIDELITY AUTOMATIC ACCOUNT
BUILDER. SIGN UP FOR THIS SERVICE
WHEN
OPENING YOUR ACCOUNT, VISIT
FIDELITY'S WEB SITE AT
WWW.FIDELITY.COM TO
OBTAIN THE FORM TO ADD THE
SERVICE, OR CALL 1-800-544-6666
TO ADD THE SERVICE.
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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 the fund is the fund's NAV.
Your shares will be sold at the next NAV calculated after your order
is received in prop er form. The fund's NAV is normally
calculated each business day at 4:00 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the
methods described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be
made in writing, except for exchanges to other Fidelity funds, which
can be requested by phone, in writing, or through F idelity's
Web site. Call 1-800-544-6666 for a retirement distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$2,000 worth of shares in the account to keep it open ($500 for
retirement accounts).
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to
sign up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in
writing and include a signature guarantee if any of the following
situations apply:
(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) 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
table that follows.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it
to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
CHECKWRITING
If you have a checkbook for your account, you may write an unlimited
number of checks. Do not, however, try to close out your account by
check.
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ACCOUNT TYPE SPECIAL REQUIREMENTS
PHONE 1-800-544-7777 (PHONE_GRAPHIC) ALL ACCOUNT TYPES (SMALL SOLID BULLET) MAXIMUM CHECK
EXCEPT RETIREMENT REQUEST: $100,000.
(SMALL SOLID BULLET) FOR MONEY LINE
ALL ACCOUNT TYPES 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 (SMALL SOLID BULLET) THE LETTER OF
TENANT, INSTRUCTION MUST BE
SOLE PROPRIETORSHI SIGNED BY ALL PERSONS
P, UGMA, UTMA REQUIRED TO SIGN FOR
RETIREMENT TRANSACTIONS, EXACTLY
ACCOUNT AS THEIR NAMES
APPEAR ON THE
ACCOUNT.
TRUST (SMALL SOLID BULLET) THE ACCOUNT OWNER
SHOULD COMPLETE A
RETIREMENT
DISTRIBUTION FORM.
BUSINESS OR CALL
ORGANIZATION 1-800-544-6666 TO
REQUEST ONE.
(SMALL SOLID BULLET) THE TRUSTEE MUST SIGN
THE LETTER INDICATING
CAPACITY AS TRUSTEE. IF
EXECUTOR, THE TRUSTEE'S NAME IS
ADMINISTRATOR, NOT IN THE ACCOUNT
CONSERVATOR, REGISTRATION, PROVIDE A
GUARDIAN COPY OF THE TRUST
DOCUMENT CERTIFIED
WITHIN THE LAST 60
DAYS.
(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.
(SMALL SOLID BULLET) CALL
1-800-544-6666 FOR
INSTRUCTIONS.
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WIRE (WIRE_GRAPHIC) ALL ACCOUNT TYPES (SMALL SOLID BULLET) YOU MUST SIGN UP FOR
EXCEPT RETIREMENT 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.
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 XPRESS(REGISTERED TRADEMARK)
1-800-544-5555
WEB SITE
WWW.FIDELITY.COM
AUTOMATED SERVICE
(CHECKMARK)
FIDELITY'S WEB SITE at www.fidelity.com offers product and
servicing information, customer education, planning tools, and the
ability to make certain transactions in your account.
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your
account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more
than one account in the fund. Call 1-800-544-6666 if you need copies
of financial reports, prospectuses, or historical account information.
Electronic copies of most financial reports and prospectuses are
available at Fidelity's Web site. To participate in our electronic
delivery program, call 1-800-544-6666 or visit Fidelity's Web site at
www.fidelity.com for more information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of
other Fidelity funds by telephone, in writ ing, or t hrough
Fidelity's Web site.
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 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 retirement, a home, educational expenses,
and other long-term financial goals. Certain restrictions apply for
retirement accounts. Call 1-800-544-6666 or visit Fidelity's Web
site at www.fidelity.com for more info rmation.
REGULAR INVESTMENT PLANS
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FIDELITY AUTOMATIC ACCOUNT BUILDER(registered trademark)
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 MONTHLY OR QUARTERLY (SMALL SOLID BULLET) FOR A NEW ACCOUNT, COMPLETE THE APPROPRIATE SECTION ON THE FUND
APPLICATION.
(SMALL SOLID BULLET) FOR EXISTING ACCOUNTS, CALL 1-800-544-6666 OR VISIT FIDELITY'S
WEB
SITE A T WWW.FIDELITY.COM 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
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 EVERY PAY PERIOD (SMALL SOLID BULLET) CHECK THE APPROPRIATE BOX ON THE
FUND APPLICATION, OR CALL
1-800-544-6666 OR VISIT FIDELITY'S WEB SITE AT
WWW.FIDELITY.CO M
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
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 December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on
the application, call 1-800-544-6666 for instructions. The fund offers
four options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions
will be automatically reinvested in additional shares of the fund. If
you do not indicate a choice on your application, you will be assigned
this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each
dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
If you select distribution option 2 or 3 and the U.S. Postal
Service does not deliver your checks, your election may be converted
to the Reinvestment Option. You will not receive interest on amounts
represented by uncashed distribution checks. To change your
distribution option, c all Fidelity at 1-800-544-6666.
Dividends will be reinvested at the fund's NAV on the last day of the
month. Capital gain distributions will be reinvested at the NAV as of
the date the fund deducts the distribution from its NAV. The mailing
of distribution checks will begin within seven days.
UNDERSTANDING
DISTRIBUTIONS
AS A FUND SHAREHOLDER, YOU ARE
ENTITLED TO YOUR SHARE OF THE
FUND'S NET INCOME AND GAINS
ON ITS INVESTMENTS. THE FUND
PASSES ITS EARNINGS ALONG TO ITS
INVESTORS AS DISTRIBUTIONS.
THE FUND EARNS INTEREST FROM ITS
INVESTMENTS. THESE ARE PASSED
ALONG AS DIVIDEND
DISTRIBUTIONS. THE FUND MAY
REALIZE CAPITAL GAINS IF IT SELLS
SECURITIES FOR A HIGHER PRICE
THAN IT PAID FOR THEM. THESE
ARE PASSED ALONG AS CAPITAL
GAIN DISTRIBUTIONS.
(CHECKMARK)
TAXES
As with any investment, you should consider how your investment in the
fund will be taxed. If your account is not a tax-advant aged
retirement account, you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income
tax, and may also be subject to state or local taxes. If you live
outside the United States, your distributions could also be taxed by
the country in which you reside. Your distributions are taxable when
they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are
taxable as if they were paid on December 31.
For federal tax purposes, the fund's income and short-term capital
gains are distributed as dividends and taxed as ordinary income;
capital gain distributions are taxed as long-term capital gains. Every
January, Fidelity will send you and the IRS a statement showing the
tax characterization of distributions paid to you in the previous
year.
Mutual fund dividends from U.S. Government securities are generally
free from state and local income taxes. However, particular states may
limit this benefit, and some types of securities, such as repurchase
agreements and some agency-backed securities, may not qualify for the
benefit. In addition, some states may impose intangible property
taxes. You should consult your own tax adviser for details and
up-to-date information on the tax laws in your state.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or
loss is the difference between the cost of your shares and the price
you receive when you sell them.
Whenever you sell shares of 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 fund has realized but
not yet distributed capital gains, you will pay the full price for the
shares and then receive a portion of the price back in the form of a
taxable distribution.
There are tax requirements that all funds must follow in order to
avoid federal taxation. In its effort to adhere to these requirements,
the fund may have to limit its investment activity in some types of
instruments.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. FSC normally calculates the fund's NAV as of the close
of business of the NYSE, normally 4:00 p.m. Eastern time.
THE FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the
number of shares outstanding.
The fund's assets are valued on the basis of information furnished by
a pricing service or market quotations, if available, or by another
method that the Board of Trustees believes accurately reflects fair
value. Short-term securities with remaining maturities of sixty days
or less for which quotations and information furnished by a pricing
service are not readily available are valued on the basis of amortized
cost. This method minimizes the effect of changes in a security's
market value.
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 SHARES, your shares will be purchased
at the next NAV calculated after your investment is received in
prope r 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 cancelled and you could be liable for any losses or fees the fund
or its transfer agent has incurred.
(small solid bullet) Shares begin to ear n dividends on the
first business day following the day of purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money
order, U.S. Treasury check, Federal Reserve check, or direct deposit
instead.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements
with FDC may enter confirmed purchase orders on behalf of customers by
phone, with payment to follow no later than the time when the fund is
priced on the following business day. If payment is not received by
that time, the financial institution could be held liable for
resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at
the next NAV calculated after your order is received i n 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 earn dividends through the day of
redemption; however, shares redeemed on a Friday or prior to a holiday
continue to ear n 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) 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.
(small solid bullet) You will not receive interest on amounts
represented by uncashed redemption checks.
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 shares of the
fund for shares of other Fidelity funds. However, you should note the
following:
(small solid bullet) The fund you are exchanging into must be
available for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification
number.
(small solid bullet) Before exchanging into a fund, read its
prospectus.
(small solid bullet) If you exchange into a fund with a sales charge,
you pay the percentage-point difference between that fund's sales
charge and any sales charge you have previously paid in connection
with the shares you are exchanging. For example, if you had already
paid a sales charge of 2% on your shares and you exchange them into a
fund with a 3% sales charge, you would pay an additional 1% sales
charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund
performance and shareholders, 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 exchange limit may be modified for accounts
in certain institutional retirement plans to conform to plan exchange
limits and Department of Labor regulations. See your plan materials
for further information.
(small solid bullet) 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 3.00% of
the amount exchanged. Check each fund's prospectus for details.
Fidelity, Fidelity Investments & (Pyramid) Design, Fidelity
Investments, Fidelity Money Line, TouchTone Xpress, Fidelity Automatic
Account Builder, and Directed Dividends are registered trademarks of
FMR Corp.
Fidelity Portfolio Advisory Services is a service mark of FMR
Corp.
The third party marks appearing above are the marks of their
respective owners.
This prospectus is printed on recycled paper using soy-based inks.
FIDELITY SHORT-INTERMEDIATE GOVERNMENT FUND
A FUND OF FIDELITY CHARLES STREET TRUST
STATEMENT OF ADDITIONAL INFORMATION
November 24, 1998
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the fund's current
Prospectus (dated November 24, 1998). Please retain this document for
future reference. The fund's Annual Report is a separate document
supplied with this SAI. To obtain a free additional cop y of the
Prospectus or an Annual Report, please call Fidelity(registered
trademark) at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations 27
Portfolio Transactions 31
Valuation 31
Performance 32
Additional Purchase, Exchange and Redemption Information 34
Distributions and Taxes 34
FMR 35
Trustees and Officers 35
Management Contract 37
Distribution and Service Plan 39
Contracts with FMR Affiliates 39
Description of the Trust 39
Financial Statements 40
Appendix 40
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Service Company, Inc. (FSC)
FSG -ptb- 1198
1.538321.101
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in
the Prospectus. Unless otherwise noted, whenever an investment policy
or limitation states a maximum percentage of the fund's assets that
may be invested in any security or other asset, or sets forth a policy
regarding quality standards, such standard or percentage limitation
will be determined immediately after and as a result of the fund's
acquisition of such security or other asset. Accordingly, any
subsequent change in values, net assets, or other circumstances will
not be considered when determining whether the investment complies
with the fund's investment policies and limitations.
The fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the out stand ing
voting securities" (as defined in the Investment Company Act of 1940
(the 1940 Act) of the fund. However, except for the fun damental
investment limitations listed below, the investment policies and
limitations described in this SAI are not fundamental and may be
changed without shareholder approval.
THE FOLLO WING 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 thereof, (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 limit 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 objectives, 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
ag reements 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 lending money (up to 7.5% of
the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser. (This
limitation does not apply to purchases of debt securities or to
repurchase agreements.)
(vi) The fund does not currently intend to 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 .
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. FMR may not buy all of these instruments or use all
of these techniques unless it believes that doing so will help the
fund achieve its goal.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions
with financial institutions that are, or may be considered to be,
"affiliated persons" of the fund under the 1940 Act. These
transactions may involve repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50
largest U.S. banks (measured by deposits); municipal securities; U.S.
Government securities with affiliated financial institutions that are
primary dealers in these securities; short-term currency transactions;
and short-term borrowings. In accordance with exemptive orders issued
by the Securities and Exchange Commission (SEC), the Board of Trustees
has established and periodically reviews procedures applicable to
transactions involving affiliated financial institutions.
DELAYED-DELIVERY TRANSACTIONS. Securities may be bought and
sold on a delayed-delivery or when-issued basis. These trans actions
invo lve a commitment to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place
after the customary settlement period for that type of security.
Typically, no interest accrues to the purchaser until the security is
delivered. The fund may receive fees or price concessions for entering
into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, the
purchaser assumes the rights and risks of ownership, including the
risks of price and yield fluctuations and the risk that the security
will not be issued as anticipated. Because payment for the securities
is n ot 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 fo rm of leverage. When delayed-delivery purchases are
outstanding, a fund will set aside appropriate liquid assets in a
segre gated 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 transac tion
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 r enegotiate a delayed delivery transaction and may sell
the underlying securities before delivery, which may result in capital
gains or los ses for the fund.
FUTURES AND OPTIONS. The follow ing 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. Th e fund will
comply with guidelines established by the SEC with respect to coverage
of options and futures strategies by mutual funds and, if the
guidelines so re quire, will set aside appropriate liquid assets in
a segregated custodial account in the amount prescribed. Securities
held in a segregated account cannot be sold while the futures or
option strategy is outstanding, unless they are replaced with other
suitable assets. As a result, there is a possibility that segregation
of a large percentage of the fund's assets could impede portfolio
management or the fund's ability to meet redemption requests or other
current obligations.
COMBINED POSITIONS inv olve purchasing and writing options in
combination with each other, or in combination with futures or forward
contracts, to adjust t he risk and return characteristics of the
overall position. For example, purchasing a put option and writing
a cal l 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 buyi ng 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
lik ely 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 secu rities
in wh ich 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
fun d'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 imp osition 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 betwee n 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 purc hase 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
secur ities prices. Futures can be held until their delivery
dates, or can be closed out before then if a liquid secondary market
is available.
The value of a futures contract tends to increase and decrease in
tandem with the value of its underlying instrument. Therefore,
purchasing futures contracts will tend to increase a fund's
exposure to positive and negative price fluctuations in the underlying
instrume nt, 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 behal f of a fund, the fund may be
entitled to return of margin owed to it only in proportion to the
amount received by the FCM's other customers, potentially resulting in
losses to the fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The 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 fund intends to comply with Rule
4.5 under the Commodity Exchange Act, which limits the extent to which
the fund can commit assets to initial margin deposits and option
premiums.
In addition, the fund will not: (a) sell futures contracts, purchase
put options, or write call options if, as a result, more than 25% of
the fund's total assets would be hedged with futures and options under
normal conditions; (b) purchase futures contracts or write put options
if, as a result, the fund's total obligations upon settlement or
exercise of purchased futures contracts and written put options
would exceed 25% of its total assets under normal conditions; or (c)
purchase call options if, as a result, the current value of option
premiums for call options purchased by the fund would exceed 5% of the
fund's total assets. These limitations do not apply to options
attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The fund further limits its options and futures investments to options
and futures contracts relating to U.S. Government securities.
The above limitations on the fund's investments in futures contracts
and options, and the fund's policies regarding futures contracts and
options discussed elsewhere in this 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 fluctua tion limits or otherwise, it could
prevent prompt liquidation of unfavorable position s, and
potentially could require a fund to continue t o hold a posi tion
until delivery or expiration regardless of changes in its value. As a
result, a fund's access to other assets held to cover its options or
futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized
with respect to the underlying instrument, expiration date, contract
size, and strike price, the terms of over-the-counter (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, in dices 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, th e 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 amou nt 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. T he 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 FC M 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 cal l 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
a t 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 curr ently considered by FMR to be illiquid include
repurchase agreements not entitling the holder to repayment of
principal and payment of interest within seven days, non-government
stripped fixed-rate mortgage-backed securities, and over-the-counter
options. Also, FMR may determine some government-stripped fixed-rate
mortgage-backed securities to be illiquid. However, with respect to
over-the-counter options a fund writes, all or a portion of the value
of the underlying instrument may be illiquid depending on the assets
held to cover the option and the nature and terms of any agreement the
fund may have to close out the option before expiration.
In the absence of market quotations, illiquid investments are priced
at fair value as determined in good faith by a committee appointed by
the Board of Trustees.
INDEXED SECURITIES ar e instruments whose prices are indexed to
the prices of other securities, securities indices, or other
fi nancial indic ators. Indexed securities typically, but not
always, are debt securities or deposits whose value at maturity or
coupon rate is determined by reference t o a specific instrument or
statistic.
Mortgage-indexed securities, for example, could be structured
to replicate the performance of mortgage securities and the
characteristics of direct owners h ip.
The performance of indexed securities depends to a great e xtent on
the performance of the security or other instrument to which they are
indexed, and may also be influenced by interest rate changes. Indexed
securities may be more volatile than the underlying instruments.
Indexed securities are also subject to the credit risks associated
with the issuer of the security, and their values may decline
substantially if the issuer's creditworthiness deteriorates. Recent
issuers of indexed securities have included banks, corporations,
and certain U.S. Govern ment agencies.
INTERF UND BORRO WING 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.
Interfund loans and borrowings normally extend overnight, but can
have a ma ximum 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.
MORTGAGE-BACKED SECURITIES are issued by government and
non-government entities such as banks, mortgage lenders, or other
institutions. A mortgage-backed security is an obligation of the
issuer backed by a mortgage or pool of mortgages or a direct interest
in an underlying pool of mortgages. Some mortgage-backed securities,
such as collateralized mortgage obligations (or "CMOs"), make payments
of both principal and interest at a range of specified intervals;
others make semiannual interest payments at a predetermined rate and
repay principal at maturity (like a typical bond). Mortgage-backed
securities are based on different types of mortgages, including those
on commercial real estate or residential properties. Stripped
mortgage-backed securities are created when the interest and principal
components of a mortgage-backed security are separated and sold as
individual securities. In the case of a stripped mortgage-backed
security, the holder of the "principal-only" security (PO) receives
the principal payments made by the underlying mortgage, while the
holder of the "interest-only" security (IO) receives interest payments
from the same underlying mortgage.
The value of mortgage-backed securities may change due to shifts in
the market's perception of issuers and changes in interest rates. In
addition, regulatory or tax changes may adversely affect the
mortgage-backed securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued
by government entities, but also may be subject to greater price
changes than government issues. Mortgage-backed securities are subject
to prepayment risk, which is the risk that early principal payments
made on the underlying mortgages, usually in response to a reduction
in interest rates, will result in the return of principal to the
investor, causing it to be invested subsequently at a lower current
interest rate. Alternatively, in a rising interest rate environment,
mortgage-backed security values may be adversely affected when
prepayments on underlying mortgages do not occur as anticipated,
resulting in the extension of the security's effective maturity and
the related increase in interest rate sensitivity of a longer-term
instrument. The prices of stripped mortgage-backed securities tend to
be more volatile in response to changes in interest rates than those
of non-stripped mortgage-backed securities.
R EPURCH ASE 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 incre mental amount
which is unrelated to the coupon rate or maturity of the purchased
security. As protection against the risk that the or iginal 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 r esale price,
as well as delays and costs to a fund in connection with bankruptcy
proceedings), the fund will engage in repurchase agreement
transactions with parties whose creditworthiness has been reviewed and
found satisfactory by FMR.
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 agr ees to repurchase that
security at an agreed-upon price and time. While a reverse repurchase
agreement is outstanding, a fund will maintain appropriate liquid
assets in a segregated custodial account to cover its obligation under
the agreement. The fund 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 allow s 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 lo an 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).
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.
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, mortgage securities, corporate borrowing rates, or other
factors such as security prices or inflation rates. Swap
ag reements can take many different forms and are known by a
variety of names.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a
fee by the other party. For example, the buyer of an interest rate cap
obtains the right to receive payments to the extent that a specified
interest rate exceeds an agreed-upon level, while the seller of an
interest rate floor is obligated to make payments to the extent that a
specified interest rate falls below an agreed-upon level. An interest
rate collar combines elements of buying a cap and selling a floor.
Swap agr eements will tend to shift a fund's investment exposure
from one type of investment to another. For example, if the fund
agreed to pay fixed rates in exchange for floating rates while holding
fixed-rate bonds, the swap would tend to decrease the fund's exposure
to long-term 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, or other factors that
deter mine 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
agr eement would be likely to decline, potentially resulting in
losses. A fund may be able to eliminate its exposure under a swap
agreement either by assignment or other disposition, or by entering
into an offsetting swap agreement with the same party or a similarly
creditworthy party.
A fund will maintain appropriate liquid assets in a segregated
custodial account to cover its current obligations under swap
agreements. If a fund enters into a swap agreement on a net basis, it
will segregate assets with a daily value at least equal to the excess,
if any, of the fund's accrued obligations under the swap agreement
over the accrued amount the fund is entitled to receive under the
agreement. If a fund enters into a swap agreement on other than a
net basis, it will segregate assets with a value equal to the full
amount of the fund's accrued obligations under the agreement.
VARIABLE AND FLOATING RATE SECURITIES provide for periodic
adjustments in the interest rate paid on the security. Variable rate
securities provide for a specified periodic adjustment in the interest
rate, while floating rate securities have interest rates that change
whenever there is a change in a designated benchmark rate. Some
variable or floating rate securities are structured with put features
that permit holders to demand payment of the unpaid principal balance
plus accrued interest from the issuers or certain financial
intermediaries.
ZERO COUPON BONDS do not make interest payments; instead,
they are sold at a discount from their face value and are redeemed at
face value when they mature. Because zero coupon bonds do not pay
current income, their prices can be more volatile 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.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of the fund by FMR pursuant to authority contained in the
management contract. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for
which it or its affiliates act as investment adviser. In selecting
broker-dealers, subject to applicable limitations of the federal
securities laws, FMR 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 ba sis; the reasonableness of
any commissions; and, if applicable, arrangements for payment of fund
expenses.
The fund may execute portfolio transactions with broker-dealers who
provide research and execution services to the fund or other accounts
over which FMR or its affiliates exercise investment discretion. Such
services may include advice concerning the value of securities; the
advisability of investing in, purchasing, or selling securities; and
the availability of securities or the purchasers or sellers of
securities. In addition, such broker-dealers may furnish analyses and
reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy, and performance of accounts;
and effect securities transactions and perform functions incidental
thereto (such as clearance and settlement).
For transactions in fixed-income securities, FMR's selection of
broker-dealers is generally based on the availability of a security
and its price and, to a lesser extent, on the overall quality of
execution and other services, including research, provided by the
broker-d ealer.
The receipt of research from broker-dealers that execute
transactions on behalf of a fund may be useful to FMR in rendering
investment management services to that fund or its other clients, and
conversely, such research provided by broker-dealers who have
executed transaction orders on behalf of other FMR clients may be
useful to FMR in carrying out its obligations to a fund. The receipt
of such research has not reduced FMR's normal independent research
activities; however, it enables FMR to avoid the additional expenses
that could be incurred if FMR tried to develop comparable information
through its own efforts.
Fixed-income securities are generally purchased from an issuer or
underwriter acting as principal for the securities, on a net basis
with no brokerage commission paid. However, the dealer is compensated
by a difference between the security's original purchase price and the
selling price, the so-called "bid-asked spread." Securities may also
be purchased from underwriters at prices that include underwriting
fees.
Subject to applicable limitations of the federal securities
laws, the fund may pay a broker-dealer commissions for agency
transactions that are in excess of the amount of commissions charged
by other broker-dealers in recognition of their research and execution
services. In order to cause the fund to pay such higher commissions,
FMR must determine in good faith that such commissions are reasonable
in relation to the value of the brokerage and research services
provided by such executing broker-dealers, viewed in terms of a
particular transaction or FMR's overall responsibilities to that fund
or its other clients. In reaching this determination, FMR will not
attempt to place a specific dollar value on the brokerage and research
services provided, or to determine what portion of the compensation
should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided
assistance in the distribution of shares of the fund or shares of
other Fidelity funds to the extent permitted by law. FMR may use
research services provided by and place agency transactions with
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 sub sidiary of FMR Corp.
FMR may allocate brokerage transactions to broker-dealers
(including affiliates of FMR) who have entered into arrangements with
FMR under which the broker-dealer allocates a portion of the
commissions paid by a fund toward the reduction of that fund's
expenses. The transaction quality must, however, be comparable to
those of other qualified broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members
of national securities exchanges from executing exchange transactions
for accounts which they or their affiliates manage, unless certain
requirements are satisfied. Pursuant to such requirements, the Board
of Trustees has authorized NFSC to execute portfolio transactions on
national securities exchanges in accordance with approved procedures
and applicable SEC rules.
The Trustees periodically review FMR's performance of its
responsibilities in connection with the placement of portfolio
transactions on behalf of the fund and review the commissions paid by
the fund over representative periods of time to determine if they are
reasonable in relation to the benefits to the fund.
For the fiscal periods ended September 30, 1998 and September 30,
1997, the fund's portfolio turnover rates were 253% and 126%,
respectively. Because a high turnover rate increases transaction costs
and may increase taxable gains, FMR carefully weighs the anticipated
benefits of short-term investing against these consequences.
Variations in turnover rate may be due to a fluctuating volume of
shareholder purchase and redemption orders, market conditions, or
changes in FMR's investment outlook.
For the fiscal y ea rs ended September 1998, 1997, and 1996, the
fund paid no brokerage commissions.
During the fiscal year ended September, 1998, the fund paid no
brokerage commissions to firms that provided research services.
The Trustees of the fund have approved procedures in conformity
with Rule 10f-3 under the 1940 Act whereby a fund may purchase
securities that are offered in underwritings in which an affiliate of
FMR participates. These procedures prohibit the fund from directly or
indirectly benefiting an FMR affiliate in connection with such
underwritings. In addition, for underwritings where an FMR affiliate
participates as a principal underwriter, certain restrictions may
apply that could, among other things, limit the amount of securities
that the fund could purchase in the underwriting.
From time to time the Trustees will review whether the recapture for
the benefit of the fund of some portion of the brokerage commissions
or similar fees paid by the fund on portfolio transactions is legally
permissible and advisable. The fund seeks to 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
the fund to seek such recapture.
Although the Trustees and officers of the fund are substantially the
same as those of other funds managed by FMR or its affili ates,
inve stment decisions for the fund are made independently from
those of other funds managed by FMR or accounts managed by FMR
affiliates. It sometimes happens that the same security is held in the
portfolio of more than one of these funds or accounts. Simultaneous
transactions are inevitable when several funds 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 the fund is
concerned. In other cases, however, the ability of the fund to
participate in volume transactions will produce better executions and
prices for the fund. It is the current opinion of the Trustees that
the desirability of retaining FMR as investment adviser to the fund
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
VALUATION
FSC normally determines the fund's net asset value per share (NAV) as
of the close of the NYSE (normally 4:00 p.m. Eastern time). The
valuation of portfolio securities is determined as of this time for
the purpose of computing the fund's NAV.
Portfolio securities are valued by various methods depending on the
primary market or exchange on which they trade. Fixed-income
securities and other assets for which market quotations are readily
available may be valued at market values determined by such
securities' most recent bid prices (sales prices if the principal
market is an exchange) in the principal market in which they normally
are traded, as furnished by recognized dealers in such securities or
assets.
Or, fixed-income securities 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 fund 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-end investment
companies are valued at their respective NAVs.
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 the 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
The fund may quote performance in various ways. All performance
information supplied by the fund in advertising is historical and is
not intended to indicate future returns. The fund's share price,
yield, and total return fluctuate in response to market conditions and
other factors, and the value of fund shares when redeemed may be more
or less than their original cost.
YIELD C ALCULATIONS Yields for the fund are computed by dividing
the fund's income for a given 30-day or one-month period, net of
expenses, by the average number of shares entitled to receive
distributions during the period, dividing this figure by the fund's
NAV 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. 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. 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 the fund's yield
differs from income as determined for other accounting purposes.
Because of the different accounting methods used, and because of the
compounding of income assumed in yield calculations, the fund's yield
may not equal its distribution rate, the income paid to your account,
or the income reported in the fund's financial statements.
Yield information may be useful in reviewing the fund's performance
and in providing a basis for comparison with other investment
alternatives. However, the fund's yield fluctuates, unlike investments
that pay a fixed interest rate over a stated period of time. When
comparing investment alternatives, investors should also note the
quality and maturity of the portfolio securities of respective
investment companies they have chosen to consider.
Investors should recognize that in periods of declining interest rates
the fund's yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates the fund's yield
will tend to be somewhat lower. Also, when interest rates are falling,
the inflow of net new money to the fund from the continuous sale of
its shares will likely be invested in instruments producing lower
yields than the balance of the fund's holdings, thereby reducing the
fund's current yield. In periods of rising interest rates, the
opposite can be expected to occur.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect
all aspects of the fund's return, including the effect of reinvesting
dividends and capital gain distributions, and any change in the fund's
NAV over a stated period. Average annual total returns are calculated
by determining the growth or decline in value of a hypothetical
historical investment in the fund over a stated period, and then
calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had
been constant over the period. For example, a cumulative total return
of 100% over ten years would produce an average annual total return of
7.18%, which is the steady annual rate of return that would equal 100%
growth on a compounded basis in ten years. While average annual total
returns are a convenient means of comparing investment alternatives,
investors should realize that the fund's performance is not constant
over time, but changes from year to year, and that average annual
total returns represent averaged figures as opposed to the actual
year-to-year performance of the fund.
In addition to average annual total returns, the fund may quote
unaveraged or cumulative total returns reflecting the simple change in
value of an investment over a stated period. Average annual and
cumulative total returns may be quoted as a percentage or as a dollar
amount, and may be calculated for a single investment, a series of
investments, or a series of redemptions, over any time period. Total
returns may be broken down into their components of income and capital
(including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions
to total return. Total returns may be quoted on a before-tax or
after-tax basis. 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 the fund's net asset values,
adjusted net asset values, and benchmark indices may be used to
exhibit performance. An adjusted NAV includes any distributions paid
by the fund and reflects all elements of its return. Unless otherwise
indicated, the fund's adjusted NAVs are not adjusted for sales
charges, if any.
CALCULATING HISTORICAL FUND RESULTS. The following table s show
performance for the fund calculated including certain fund expenses.
HISTORICAL FUND RESULTS. The following table s show the
fund's yield and total return for the period ended September 30, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Returns Cumulative Total Returns
Thirty-Day One Five Life of One Five Life of
Yield Year Years Fund* Year Years Fund*
Short Intermediate-Government 4.90 % 7.82% 5.41% 5.78% 7.82% 30.12% 48.67%
</TABLE>
* From September 13, 1991 (commencement of operations).
The following table shows the income and capital elements of the
fund's cumulative total return. The tables compare the fund's return
to the record of the Standard & Poor's 500 Index (S&P
500 (registered trademark) ), 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 the fund. The S&P
500 and DJIA comparisons are provided to show how the fund's total
return compared to the record of a broad unmanaged index of common
stocks and a narrower set of stocks of major industrial companies,
respectively, over the same period. Because the fund invests in
fixed-income securities, common stocks represent a different type of
investment from the fund. Common stocks generally offer greater growth
potential than the fund, 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 fund. The S&P 500 and DJIA returns are based on
the prices of unmanaged groups of stocks and, unlike the fund's
returns, do not include the effect of brokerage commissions or other
costs of investing.
During the period from September 13, 1991 (commencement of
operations) to September 30, 1998, a hypothetical $10,000 investment
in the fund would have grown to $14,867, assuming all distributions
were reinvested. Total returns are based on past results and are not
an indication of future performance. Tax consequences of different
investments have not been figured into the figures below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Short-Intermediate Government INDICES
Period Value of Value of Value of Total S&P 500 DJIA Cost of
Ended Initial Reinvested Reinvested Value Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1998 $ 9,520 $ 5,265 $ 82 $ 14,867 $ 31,205 $ 30,914 $ 11,999
1997 $ 9,370 $ 4,338 $ 81 $ 13,789 $ 28,617 $ 30,792 $ 11,801
1996 $ 9,320 $ 3,498 $ 81 $ 12,899 $ 20,375 $ 22,373 $ 11,552
1995 $ 9,490 $ 2,751 $ 82 $ 12,323 $ 16,933 $ 17,824 $ 11,215
1994 $ 9,290 $ 1,919 $ 81 $ 11,290 $ 13,050 $ 13,945 $ 10,937
1993 $ 9,960 $ 1,379 $ 86 $ 11,425 $ 12,587 $ 12,555 $ 10,622
1992 $ 10,140 $ 704 $ 10 $ 10,854 $ 1 1 ,137 $ 11,220 $ 10,344
1991* $ 10,010 $ 27 $ 0 $ 10,037 $ 10,028 $ 10,046 $ 10,044
</TABLE>
* From September 13, 1991 (commencement of operations)
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in the fund
on September 13, 1991, the net amount invested in fund shares was
$10,000. The cost of the initial investment ($10,000) together with
the aggregate cost of reinvested dividends and capital gain
distrib utions for the period covered (their cash value at the time
they were reinvested) amounted to $15,378. If distributions had not
been reinvested, the amount of distributions earned from the fund over
time would have been smaller, and cash payments for the period
wou ld have amounted to $4,214 for dividends and $80 for capital
gain distributions.
PERFORMANCE COMPARISONS. The fund's performance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed
as mutual fund rankings prepared by Lipper Analytical Services, Inc.
(Lipper), an independent service located in Summit, New Jersey that
monitors the performance of mutual funds. Generally, Lipper rankings
are based on total return, assume reinvestment of distributions, do
not take sales charges or trading fees into consideration, and
are prepared without regard to tax consequences. Lipper may also rank
based on yield. In addition to the mutual fund rankings, the fund's
performance may be compared to stock, bond, and money market mutual
fund performance indices prepared by Lipper or other organizations.
When comparing these indices, it is important to remember the risk and
return characteristics of each type of investment. For example, while
stock mutual funds may offer higher potential returns, they also carry
the highest degree of share price volatility. Likewise, money market
funds may offer greater stability of principal, but generally do not
offer the higher potential returns available from stock mutual funds.
From time to time, the fund's performance may also be compared to
other mutual funds tracked by financial or business publications and
periodicals. For example, the fund may quote Morningstar, Inc. in its
advertising materials. Morningstar, Inc. is a mutual fund rating
service that rates mutual funds on the basis of risk-adjusted
performance. Rankings that compare the performance of Fidelity funds
to one another in appropriate categories over specific periods of time
may also be quoted in advertising. The fund may advertise risk
ratings, including symbols or numbers, prepared by independent rating
agencies.
The fund's performance may also be compared to that of a benchmark
index representing the universe of securities in which the fund may
invest. The total return of a benchmark index reflects reinvestment of
all dividends and capital gains paid by securities included in the
index. Unlike the fund's returns, however, the index returns do not
reflect brokerage commissions, transaction fees, or other costs of
investing directly in the securities included in the index.
The fund may compare its performance to that of the Lehman Brothers
1-5 Year U.S. Government Bond Index, a market capitalization weighted
index of government and fixed-rate debt issues with maturities between
one and five years. Issues included in the index have an outstanding
par value of at least $100 million and maturities between one and five
years. Government issues include all public obligations of the U.S.
Treasury (excluding flower bonds and foreign targeted issues) and U.S.
Government agencies.
The fund may be compared in advertising to Certificates of Deposit
(CDs) or other investments issued by banks or other depository
institutions. Mutual funds differ from bank investments in several
respects. For example, the fund may offer greater liquidity or higher
potential returns than CDs, the 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 bo nds, Treasury bills, the U.S. rate of inflation
based on the CPI, and combinations of various capital markets. The
performance of these capital markets is based on the returns of
different indices.
Fidelity funds may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with
the security types in any capital market may or may not correspond
directly to those of the funds. Ibbotson calculates total returns in
the same method as the funds. The funds may also compare performance
to that of other compilations or indices that may be developed and
made available in the future.
In advertising materials, Fidelity may reference or discuss its
products and services, which may include other Fidelity funds;
retirement investing; brokerage products and services; model
portfolios or allocations; saving for college or other goals; and
char itable givin g. In addition, Fidelity may quote or reprint
financial or business publications and periodicals as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the
desirability of owning a particular mutual fund, and Fidelity services
and products. Fidelity may also reprint, and use as advertising and
sales literature, articles from Fidelity Focus(Registered trademark),
a quarterly magazine provided free of charge to Fidelity fund
shareholders.
The fund may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote its current portfolio manager.
VOLATILITY. The fund may quote various measures of volatility and
benchmark correlation in advertising. In addition, the fund may
compare these measures to those of other funds. Measures of volatility
seek to compare the fund's historical share price fluctuations or
total returns to those of a benchmark. Measures of benchmark
correlation indicate how valid a comparative benchmark may be. All
measures of volatility and correlation are calculated using averages
of historical data. In advertising, the fund may also discuss or
illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate the fund's price movements over specific
periods of time. Each point on the momentum indicator represents the
fund's percentage change in price movements over that period.
The fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a
program, an investor invests a fixed dollar amount in a fund at
periodic intervals, thereby purchasing fewer shares when prices are
high and more shares when prices are low. While such a strategy does
not assure a profit or guard against loss in a declining market, the
investor's average cost per share can be lower than if fixed numbers
of shares are purchased at the same intervals. In evaluating such a
plan, investors should consider their ability to continue purchasing
shares during periods of low price levels.
The fund may be available for purchase through retirement plans or
other programs offering deferral of, or exemption from, income taxes,
which may produce superior after-tax returns over time. For example, a
$1,000 investment earning a taxable return of 10% annually would have
an after-tax value of $1,949 after ten years, assuming tax was
deducted from the return each year at a 31% rate. An equivalent
tax-deferred investment would have an after-tax value of $2,100 after
ten years, assuming tax was deducted at a 31% rate from the
tax-deferred earnings at the end of the ten-year period.
As of September 30 , 1998, FMR advised over $ 32 billion
in municipal fund assets, $ 115 billion in money market fund
assets, $411 billion in equity fund asset s, $ 12 billion
in international fund assets, and $ 27 billion in Spartan fund
assets. The fund 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, the fund may compare its total
expense ratio to the average total expense ratio of similar funds
tracked by Lipper. The fund's total expense ratio is a significant
factor in comparing bond and money market investments because of its
effect on yield.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
The fund is open for business and its NAV is calculated each day the
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 Reserve Wire System is closed, federal
funds wires cannot be sent.
FSC normally determines the fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated
earlier if trading on the NYSE is restricted or as permitted by the
SEC. To the extent that portfolio securities are traded in other
markets on days when the NYSE is closed, the fund's NAV may be
affected on days when investors do not have access to t he 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 the 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, the fund is required to
give shareholders at least 60 days' notice prior to terminating or
modifying its exchange privilege. Under the Rule, the 60-day
notification requirement may be waived if (i) the only effect of a
modification would be to reduce or eliminate an administrative fee,
redemption fee, or deferred sales charge ordinarily payable at the
time of an exchange, or (ii) the fund suspends the redemption of the
shares to be exchanged as permitted under the 1940 Act or the rules
and regulations thereunder, or the fund to be acquired suspends the
sale of its shares because it is unable to invest amounts effectively
in accordance with its investment objective and policies.
In the Prospectus, the fund has notified shareholders that it reserves
the right at any time, without prior notice, to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would
be unable to invest effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
DISTRIBUTIONS AND TAXES
DIVIDENDS. Because the fund's income is primarily derived from
interest, dividends from the fund generally 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. A portion of the
fund's dividends derived from certain U.S. Government securities
may be exempt from state and local taxation. Mortgage security paydown
gains (losses) on mortgage securities purchased by the fund on or
prior to June 8, 1997 are generally taxable as ordinary income and,
therefore, increase (decrease) taxable di vidend distributions. The
fund will send each shareholder a notice in January describing the tax
status of dividend and capital gain distributions for the prior year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund
on the sale of securities and distributed to shareholders are
federally taxable as long-term capital gains, regardless of the length
of time shareholders have held their shares. If a shareholder receives
a capital gain distribution on shares of the 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 the fund are taxable to shareholders as dividends, not
as capital gains.
As of September 30, 1998, the fund had a capital loss carryforward
aggregating approximately $ 10,705,000 . This loss
carry forward, of which $ 40,000 , $ 1,404,000 ,
$ 5,655,000, $2,404,000 and $ 1,202,000 will expire
on September 30, 2001, 2002, 2003, 2004 and 2005 respectively,
is available to offset future capital gains.
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 earn ed on most U.S.
Government securities is exempt from state and local income taxes, the
portion of dividends from 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.
TAX STATUS OF THE FUND. The 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, the 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.
The fund is treated as a separate entity from the other funds of
Fidelity Charles Street Trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some
of the tax consequences generally affecting the fund and its
shareholders, and no attempt has been made to discuss individual tax
consequences. In addition to federal income taxes, shareholders may be
subject to state and local taxes on fund distributions, and shares may
be subject to state and local personal pro perty taxes.
Investors should consult their tax advisers to determine whether a
fund is suitable to their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent organized in
1972. The voting common stock of FMR Corp. is divided into two
classes. Class B is held predominantly by members of the Edward C.
Johnson 3d family and is entitled to 49% of the vote on any matter
acted upon by the voting common stock. Class A is held predominantly
by non-Johnson family member employees of FMR Corp. and its affiliates
and is entitled to 51% of the vote on any such matter. The Johnson
family group and all other Class B shareholders have entered into a
shareholders' voting agreement under which all Class B shares will be
voted in accordance with the majority vote of Class B shares. Under
the 1940 Act, control of a company is presumed where one individual or
group of individuals owns more than 25% of the voting stock of that
company. Therefore, through their ownership of voting common stock and
the execution of the shareholders' voting agreement, members of the
Johnson family may be deemed, under the 1940 Act, to form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by its division, Fidelity Investments Retail Marketing
Company, which provides marketing services to various companies within
the Fidelity organization.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures
for personal investing and restricts certain transactions. For
example, all personal trades in most securities require pre-clearance,
and participation in initial public offerings is prohibited. In
addition, restrictions on the timing of personal investing in relation
to trades by Fidelity funds and on short-term trading have been
adopted.
TRUSTEES AND OFFICERS
The Trustees, Members of the Advisory Board, and executive officers of
the trust are listed below. Except as indicated, each individual has
held the office shown or other offices in the same company for the
last five years. All persons named as Trustees and Members of the
Advisory Board also serve in similar capacities for other funds
advised by FMR. The business address of each Trustee, Member of the
Advisory Board, and officer who is an "interested person" (as defined
in the Investment Company Act of 1940) is 82 Devonshire Street,
Boston, Massachusetts 02109, which is also the address of FMR. The
business address of all the other Trustees is Fidelity
Investments (registered trademark) , 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 (68), Trustee and President, is Chairman,
Chief Executive Officer and a Director of FMR Corp.; a Director and
Chairman of the Board and of the Executive Committee of FMR; Chairman
and a Director of Fidelity Investments Money Management, Inc. (1998),
Fidelity Management & Research (U.K.) Inc., and Fidelity Management &
Research (Far East) Inc.
J. GARY BURKHEAD (57), 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 (66), 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 (55), 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 (55), Trustee (1997), is a consultant, author, and
lecturer (1993). Mr. Gates was Director of the Central Intelligence
Agency (CIA) from 1991-1993. From 1989 to 1991, Mr. Gates served as
Assistant to the President of the United States and Deputy National
Security Advisor. Mr. Gates is a Director of LucasVarity PLC
(automotive components and diesel engines), Charles Stark Draper
Laboratory (non-profit), NACCO Industries, Inc. (mining and
manufacturing), and TRW Inc. (original equipment and replacement
products). Mr. Gates also is a Trustee of the Forum for International
Policy and of the Endowment Association of the College of William and
Mary. In addition, he is a member of the National Executive Board of
the Boy Scouts of America.
E. BRADLEY JONES ( 70 ), Trustee. Prior to his retirement in
1984, Mr. Jones was Chairman and Chief Executive Officer of LTV Steel
Company. He is a Director of TRW Inc. (original equipment and
replacement products), Consolidated Rail Corporation, Birmingham Steel
Corporation, and RPM, Inc. (manufacturer of chemical products), and he
previously served as a Director of NACCO Industries, Inc. (mining and
manufacturing, 1985-1995), Hyster-Yale Materials Handling, Inc.
(1985-1995), and Cleveland-Cliffs Inc (mining), and as a Trustee of
First Union Real Estate Investments. In addition, he serves as a
Trustee of the Cleveland Clinic Foundation, where he has also been a
member of the Executive Committee as well as Chairman of the Board and
President, a Trustee and member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic
Florida.
DONALD J. KIRK ( 65), Tr ustee, 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 Inc., Chairman
of the Board of Trustees of the Greenwich Hospital Association,
Director of the Yale-New Haven Health Services Corp. (1998), a Member
of the Public Oversight Board of the American Institute of Certified
Public Accountants' SEC Practice Section (1995), and as a Public
Governor of the National Association of Securities Dealers, Inc.
(1996).
*PETER S. LYNCH (55) , 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 (registered trademark) 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 ( 70), 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 ( 65 ), 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 (52), Trustee (1997) and Senior Vice President, is
also President and a Director of FMR (1997); and President and a
Director of Fidelity Investments Money Management, Inc. (1998),
Fidelity Management & Research (U.K.) Inc. (1997), and Fidelity
Management & Research (Far East) Inc. (1997). Previously, Mr. Pozen
served as General Counsel, Managing Director, and Senior Vice
President of FMR Corp.
THOMAS R. WILLIAMS (70), 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).
DWIGHT D. 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.
FRED L. HENNING, JR. ( 59 ), 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.
CURTIS HOLLINGSWORTH (41) , is Vice-President and manager of
Short-Intermediate Government Fund, which he has managed since
September 1991. He also manages several other Fidelity Funds. Since
joining Fidelity in 1983, Mr. Hollingsworth has worked as a manager.
ERIC D. ROITER (49), Secretary (1998), is Vice President (1998) and
General Counsel of FMR (1998). Mr. Roiter was an Adjunct Member,
Faculty of Law, at Columbia University Law School (1996-1997). Prior
to joining Fidelity, Mr. Roiter was a partner at Debevoise & Plimpton
(1981-1997) and served as an Assistant General Counsel of the U.S.
Securities and Exchange Commission (1979-1981).
STANLEY N. GRIFFITH (52), Assistant Vice President (1998), is
Assistant Vice President of Fidelity's Fixed-Income Funds (1998) and
an employee of FMR Corp.
RICHARD A. SILVER ( 51 ), Treasurer (1997), is Treasurer of the
Fidelity funds and is an employee of FMR (1997). Before joining FMR,
Mr. Silver served as Executive Vice President, Fund Accounting &
Administration at First Data Investor Services Group, Inc.
(1996-1997). Prior to 1996, Mr. Silver was Senior Vice President and
Chief Financial Officer at The Colonial Group, Inc. Mr. Silver also
served as Chairman of the Accounting/Treasurer's Committee of the
Investment Company Institute (1987-1993).
JOHN H. COSTELLO (52), Assistant Treasurer, is an employee of
FMR.
LEONARD M. RUSH ( 52 ), 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 (40), Assistant Treasurer (1996), is
Assistant Treasurer of Fidelity's Fixed-Income Funds (1998) and an
employee of FMR (1996). Prior to joining FMR, Mr. Simspson 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 the fund for
his or her services f or the fiscal year ended September 30, 1998,
or calendar year ended December 31, 1997, as applicable.
COMPENSATION TABLE
Trustees Aggregate Total
and Compensation Compensation
Members of the Advisory Board from from the
Short-Intermediate Fund Complex*,A
GovernmentB
J. Gary Burkhead** $ 0 $ 0
Ralph F. Cox $ 45 $ 214,500
Phyllis Burke Davis $ 44 $ 210,000
Robert M. Gates $ 45 $176,000
Edward C. Johnson 3d** $ 0 $ 0
E. Bradley Jones $ 45 $ 211,500
Donald J. Kirk $ 45 $ 211,500
Peter S. Lynch** $ 0 $ 0
William O. McCoy $ 45 $ 214,500
Gerald C. McDonough $ 56 $ 264,500
Marvin L. Mann $ 44 $ 214,500
Robert C. Pozen** $ 0 $ 0
Thomas R. Williams $ 45 $214,500
* Information is for the calendar year ended December 31, 1997 for 230
funds in the complex.
** Interested Trustees of the fund and Mr. Burkhead are compensated by
FMR.
A Compensation figures include cash, amounts required to be deferred,
and may include amounts deferred at the election of Trustees. For the
calendar year ended December 31, 1997, the Trustees accrued required
deferred compensation from the funds as follows: Ralph F. Cox,
$75,000; Phyllis Burke Davis, $75,000; Robert M. Gates, $62,500; E.
Bradley Jones, $75,000; Donald J. Kirk, $75,000; William O. McCoy,
$75,000; Gerald C. McDonough, $87,500; Marvin L. Mann, $75,000; and
Thomas R. Williams, $75,000. Certain of the non-interested Trustees
elected voluntarily to defer a portion of their compensation as
follows: Ralph F. Cox, $53,699; Marvin L. Mann, $53,699; and Thomas R.
Williams, $62,462.
B Compensation figures include cash .
Under a deferred compensation plan adopted in September 1995 and
amended in November 1996 (the Plan), non-interested Trustees must
defer receipt of a portion of, and may elect to defer receipt of an
additional portion of, their annual fees. Amounts deferred under the
Plan are subject to vesting and are treated as though equivalent
dollar amounts had been invested in shares of a cross-section of
Fidelity funds including funds in each major investment discipline and
representing a majority of Fidelity's assets under management (the
Reference Funds). The amounts ultimately received by the Trustees
under the Plan will be directly linked to the investment performance
of the Reference Funds. Deferral of fees in accordance with the Plan
will have a negligible effect on a fund's assets, liabilities, and net
income per share, and will not obligate a fund to retain the services
of any Trustee or to pay any particular level of compensation to the
Trustee. A fund may invest in the Reference Funds under the Plan
without shareholder approval.
As of September 30, 1998, the Trustees, Members of the Advisory Board,
and officers of the fund owned, in the aggregate, less than 1 %
of the fund's total outstanding shares.
As of September 30, 1998, the following owned of record or
beneficially 5% or more of the fund's outstanding shares: The Bank of
New York, New York, NY (6.20%).
MANAGEMENT CONTRACT
The fund has entered into a management contract with FMR, pursuant
to which FMR furnishes investment advisory and other services.
MAN AG EMENT SERVICES. Under the terms of its management contract
with the fund, FMR acts as investment adviser and, subject to the
supervision of the Board of Trustees, directs the investments of the
fund in accordance with its investment objective, policies, and
limitations. FMR also provides the fund with all necessary office
facilities and personnel for servicing the fund's investments,
compensates all officers of the fund and all Trustees who are
"interested persons" of the trust or of FMR, and all personnel of the
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 the fund. These services include
providing facilities for maintaining the fund's organization;
supervising relations with custodians, transfer and pricing agents,
accountants, underwriters, and other persons dealing with the fund;
preparing all general shareholder communications and conducting
shareholder relations; maintaining the fund's records and the
registration of the fund's shares under federal securities laws and
making necessary filings under state securities laws; developing
management and shareholder services for the 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, the fund pays all of its
expenses that are not assumed by those parties. The fund pays for the
typesetting, printing, and mailing of its proxy materials to
shareholders, legal expenses, and the fees of the custodian, auditor
and non-interested Trustees. The fund's management contract further
provides that the fund will pay for typesetting, printing, and mailing
prospectuses, statements of additional information, notices, and
reports to shareholders; however, under the terms of the fund's
transfer agent agreement, the transfer agent bears the costs of
providing these services to existing shareholders. Other expenses paid
by the fund, include interest, taxes, brokerage commissions, the
fund's proportionate share of insurance premiums and Investment
Company Institute dues, and the costs of registering shares under
federal securities laws and making necessary filings under state
securities laws. The fund is also liable for such non-recurring
expenses as may arise, including costs of any litigation to which the
fund may be a party, and any obligation it may have to indemnify its
officers and Trustees with respect to litigation.
MANAGEMENT FEE. For the services of FMR under the management contract,
the fund pays FMR a monthly management fee which has two components: a
group fee rate and an individual fund fee rate.
The group fee rate is based on the monthly average net assets of all
of the registered investment companies with which FMR has management
contracts.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual Fee
Assets Rate Assets Rate
0 - $3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1690
24 - 30 .1800 200 .1652
30 - 36 .1750 225 .1618
36 - 42 .1700 250 .1587
42 - 48 .1650 275 .1560
48 - 66 .1600 300 .1536
66 - 84 .1550 325 .1514
84 - 120 .1500 350 .1494
120 - 156 .1450 375 .1476
156 - 192 .1400 400 .1459
192 - 228 .1350 425 .1443
228 - 264 .1300 450 .1427
264 - 300 .1275 475 .1413
300 - 336 .1250 500 .1399
336 - 372 .1225 525 .1385
372 - 408 .1200 550 .1372
408 - 444 .1175
444 - 480 .1150
480 - 516 .1125
Over 516 .1100
The group fee rate is calculated on a cumulative basis pursuant to the
graduated fee rate schedule shown above on the left. The schedule
above on the right shows the effective annual group fee rate at
various asset levels, which is the result of cumulatively applying
the annualized rates on the le ft. For example, the effective
annual fee rate at $ 591 billion of group net assets - the
approx imate level f or September 1998 - was 0.1353 %,
which is the weighted average of the respective fee rates for each
level of group net assets up to $ 591 billion.
The fund's individual fund fee rate is 0.30 %. Based on the
average group net assets of the funds advised by FMR for September
1998, th e fund's annual management fee rate would be calculated
as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Group Fee Rate Individual Fund Fee Rate Management Fee Rate
Short-Intermediate 0. 1353 % + 0.30% = 0. 4353 %
Government
</TABLE>
One-twelfth of this annual is applied to the fund's net assets
averaged for the most recent month, giving a dollar amount, which is
the fee for that month.
For the fiscal yea rs ended September 30, 1998, 1997, and 1996,
the fund paid FMR management fees of $ 549,634 , $538,951, and
$577,374 , respectively.
During the reporting period, FMR voluntarily modified the breakpoints
in the group fee rate schedule on January 1, 1996 to provide for lower
management fee rates as FMR's assets under management increase.
FMR may, from time to time, voluntarily reimburse all or a portion of
the fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses), which is subject to revision
or termination. 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 the fund's total returns
and yield, and repayment of the reimbursement by the fund will lower
its total returns and yield.
DISTRIBUTION AND SERVICE PLAN
The Tru stees have approved a Distribution and Service Plan on
behalf of the fund 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
Plan, as approved by the Trustees, allow the fund and FMR to incur
certain expenses that might be considered to constitute indirect
payment by the fund of distribution expenses.
Under the Plan, if the payment of management fees by the fund to FMR
is deemed to be indirect financing by the fund of the distribution of
its shares, such payment is authorized by the Plan. The Plan
specifically recognizes that FMR may use its management fee revenue,
as well as its past profits or its other resources, to pay FDC for
expenses incurred in connection with the distribution of fund shares.
In addition, the Plan provides that FMR, directly or through FDC, may
make payments to third parties, such as banks or broker-dealers, that
engage in the sale of fund shares, or provide shareholder support
services. Currently, the Board of Trustees has authorized such
payments for fund shares.
FMR made no payments either d irectly or through FDC to third
parties for the fiscal year ended 1998.
Prior to approving the Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan, and
determined that there is a reasonable likelihood that the Plan will
benefit the fund and its shareholders. In particular, the Trustees
noted that the Plan does not authorize payments by the fund other than
those made to FMR under its management contract with the fund. To the
extent that the Plan gives FMR and FDC greater flexibility in
connection with the distribution of fund shares, additional sales of
fund shares may result. Furthermore, certain shareholder support
services may be provided more effectively under the Plan by local
entities with whom shareholders have other relationships.
The Glass-Steagall Act generally prohibits federally and state
chartered or supervised banks from engaging in the business of
underwriting, selling, or distributing securities. Although the scope
of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, FDC believes
that the Glass-Steagall Act should not preclude a bank from performing
shareholder support services, or servicing and recordkeeping
functions. FDC intends to engage banks only to perform such functions.
However, changes in federal or state statutes and regulations
pertaining to the permissible activities of banks and their affiliates
or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions,
if any, would be necessary to continue to provide efficient and
effective shareholder services. In such event, changes in the
operation of the fund might occur, including possible termination of
any automatic investment or redemption or other services then provided
by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these
occurrences. 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.
The fund may execute portfolio transactions with, and purchase
securities issued by, depository institutions that receive payments
under the Plan. No preference for the instruments of such depository
institutions will be shown in the selection of investments.
CONTRACTS WITH FMR AFFILIATES
The fund has entered into a transfer agent agreement with FSC, an
affiliate of FMR. Under the terms of the agreement, FSC performs
transfer agency, dividend disbursing, and shareholder services for the
fund.
For providing transfer agency services, FSC receives an
account fee and an asset-based fee each paid monthly with respect to
each account in the fund. For retail accounts and certain
institutional accounts, these fees are based on account size and fund
type. For certain institutional retirement accounts, these fees are
based on fund type. For certain other institutional retirement
accounts, these fees are based on account type (i.e., omnibus or
non-omnibus) and, for non-omnibus accounts, fund type. The account
fees are subject to increase based on postage rate changes.
FSC also collects small account fees from certain accounts with
balances of less than $2,500.
In addition, FSC receives the pro rata portion of the transfer
agency fees applicable to shareholder accounts in a qualified state
tuition program (QSTP), as defined under the Small Business Job
Protection Act of 1996, managed by FMR or an affiliate and each
Fidelity Freedom Fund, a fund of funds managed by an FMR affiliate,
according to the percentage of the QSTP's or Freedom Fund's assets
that is invested in the fund.
FSC pays out-of-pocket expenses associated with providing transfer
agent services. In addition, FSC bears the expense of typesetting,
printing, and mailing prospectuses, statements of additional
information, and all other reports, notices, and statements to
existing shareholders, with the exception of proxy statements.
The fund has also entered into a service agent agreement with FSC.
Under the terms of the agreement, FSC calculates the NAV and dividends
for the fund, maintains the fund's portfolio and general accounting
records, and administers the fund's securities lending program.
For providing pricing and bookkeeping services, FSC receives a monthly
fee based on the fund's average daily net assets throughout the month.
The annual fee rates for pricing and bookkeeping services are .0400%
of the first $500 million of average net assets and .0200% 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.
For the fisca l years ended September 30 1998, 1997, and 1996,
the fund paid FSC pricing and bookkeeping fees, including
reimbursement for related ou t-of-pocket expenses, of
$ 61,038 , $ 61,689 , and $ 59,674 , respectively.
For administering the fund's securities lending program, FSC receives
fees based on the number and duration of individual securities loans.
For the fiscal years ended September 30, 1998, 199 7 and 1996,
the fund paid no securities lending fees.
The fund has entered into a distribution agreement with FDC, an
affiliate of FMR organized as a Massachusetts corporation on July 18,
1960. FDC is a broker-dealer registered under the Securities Exchange
Act of 1934 and a member of the National Association of Securities
Dealers, Inc. The distribution agreement calls for FDC to use all
reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered at
NAV. Promotional and administrative expenses in connection with the
offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Short-Intermediate Government Fund is a
fund of Fidelity Charles Street Trust, an open-end management
investment company organized as a Massachusetts business trust on July
7, 1981. Currently, there are six funds of the trust: Fidelity
Short-Intermediate Government Fund, Fidelity Asset Manager, Fidelity
Asset Manager: Growth, Fidelity Asset Manager: Income, Spartan
Investment Grade Bond Fund and Spartan Short-Term Bond Fund. The
Declaration of Trust permits the Trustees to create additional funds.
In the event that FMR ceases to be the investment adviser to the trust
or a fund, the right of the trust or fund to use the identifying names
"Fidelity" and "Spartan"may be withdrawn.
The assets of the trust received for the issue or sale of shares of
each fund 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 expenses of the trust. Expenses with
respect to the trust are to be allocated in proportion to the asset
value of the respective funds, except where allocations of direct
expense can otherwise be fairly made. The officers of the trust,
subject to the general supervision of the Board of Trustees, have the
power to determine which expenses are allocable to a given fund, or
which are general or allocable to all of the funds. In the event of
the dissolution or liquidation of the trust, shareholders of each fund
are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust is an entity of the type
commonly known as a "Massachusetts business trust." Under
Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable for the obligations of the
trust. The Declaration of Trust provides that the trust shall not have
any claim against shareholders except for the payment of the purchase
price of shares and requires that each agreement, obligation, or
instrument entered into or executed by the trust or the Trustees
include a provision limiting the obligations created thereby to the
trust and its assets. The Declaration of Trust provides for
indemnification out of each fund's property of any shareholder held
personally liable for the obligations of the fund. The Declaration of
Trust also provides that each fund shall, upon request, assume the
defense of any claim made against any shareholder for any act or
obligation of the fund and satisfy any judgment thereon. Thus, the
risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a fund
itself would be unable to meet its obligations. FMR believes that, in
view of the above, the risk of personal liability to shareholders is
remote.
The Declaration of Trust further provides that the Trustees, if they
have exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their
office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar value
of net asset value you own. The shares have no preemptive or
conversion rights; the voting and dividend rights, the right of
redemption, and the privilege of exchange are described in the
Prospectus. Shares are fully paid and nonassessable, except as set
forth under the heading "Shareholder and Trustee Liability" above.
Shareholders representing 10% or more of the trust or a fund may, as
set forth in the Declaration of Trust, call meetings of the trust or a
fund for any purpose related to the trust or fund, as the case may be,
including, in the case of a meeting of the entire trust, the purpose
of voting on removal of one or more Trustees. The trust or any fund
may be terminated upon the sale of its assets to another open-end
management investment company, or upon liquidation and distribution of
its assets, if approved by vote of the holders of a majority of the
trust or the fund, as determined by the current value of each
shareholder's investment in the fund or trust. If not so terminated,
the trust and its funds will continue indefinitely. Each fund may
invest all of its assets in another investment company.
CUSTODIAN. The Bank of New York, 110 Washington Street, New York, New
York, is custodian of the assets of the fund. The custodian is
responsible for the safekeeping of a fund's assets and the appointment
of any subcustodian banks and clearing agencies. The custodian takes
no part in determining the investment policies of a fund or in
deciding which securities are purchased or sold by a fund. However, a
fund may invest in obligations of the custodian and may purchase
securities from or sell securities to the custodian. The Chase
Manhattan Bank, headquartered in New York, also may serve as a special
purpose custodian of certain assets in connection with repurchase
agreement transactions.
FMR, its officers and directors, its affiliated companies, and the
Board of Trustees may, from time to time, conduct transactions with
various banks, including banks serving as custodians for certain funds
advised by FMR. Transactions that have occurred to date include
mortgages and personal and general business loans. In the judgment of
FMR, the terms and conditions of those transactions were not
influenced by existing or potential custodial or other fund
relationships.
AUDITOR. PricewaterhouseCoopers LLP, 160 Federal Street,
Boston, Massachusetts serves as the fund's independent accountant. The
auditor examines financial statements for the fund and provides other
audit, tax, and related services.
FINANCIAL STATEMENTS
The fund' s financial statements and financial highlights for
the fiscal year ended September 30, 1998, and report of the auditor,
are included in the fund's Annual Report, which is a separate report
supplied with this SAI. The fund's financial statements, including the
financial highlights, and report of the auditor are incorporated
herein by reference. For a free additional copy of the fund's
Annu al Report, contact Fidelity at 1-800-544-8888.
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. 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.
Fidelity, Fidelity Focus, Fidelity Investments, and Magellan are
registered trademarks of FMR Corp.
The third party marks appearing above are the marks of their
respective owners.
FIDELITY CHARLES STREET TRUST:
SPARTAN SHORT-TERM BOND FUND AND
SPARTAN INVESTMENT GRADE BOND FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER
<TABLE>
<CAPTION>
<S> <C>
PROSPECTUS PROSPECTUS SECTION
1................................................ Cover Page
2a............................................... Expenses
b,c.......................................... Contents; The Funds at a Glance; Who May Want to Invest
3a............................................... Financial Highlights
b.............................................. *
c,d........................................... Performance
4a(i) ........................................... Charter
a(ii)......................................... The Funds at a Glance; Investment Principles and Risks; Securities
and Investment Policies
b............................................. Investment Principles and Risks; Securities and Investment Policies
c............................................. Who May Want to Invest; Investment Principles and Risks;
5a .............................................. Charter
b(i)........................................... Cover Page; The Funds at a Glance; Charter; Doing Business with
Fidelity
b(ii) ......................................... Charter; Breakdown of Expenses
b(iii)........................................ Expenses; Breakdown of Expenses
c............................................... Charter
d.............................................. Charter; Breakdown of Expenses
e............................................... Cover Page; Charter; Breakdown of Expenses
f............................................... Expenses; Breakdown of Expenses
g(i)............................................ Charter
g(ii)........................................... *
5A............................................... Performance
6a(i)............................................ Charter
a(ii) .......................................... How to Buy Shares; How to Sell Shares; Investor Services;
Transaction Details; Exchange Restrictions
a(iii)......................................... Charter
b............................................... Charter
c.............................................. Transaction Details; Exchange Restrictions
d.............................................. *
e............................................... Cover Page; Doing Business with Fidelity; How to Buy Shares; How
to Sell Shares; Investor Services
f,g............................................ Dividends, Capital Gains, and Taxes
7a............................................... Cover Page; Charter
b............................................... Expenses; How to Buy Shares; Transaction Details
c.............................................. *
d............................................... How to Buy Shares
e............................................... *
f............................................... Breakdown of Expenses
8................................................ How to Sell Shares, Investor Services; Transaction Details; Exchange
Restrictions
9................................................... *
</TABLE>
* Not Applicable
Part B Statement of Additional Information Section
<TABLE>
<CAPTION>
<S> <C>
10, 11........................................ Cover Page
12.............................................. Description of the Trust
13a-c....................................... Investment Policies and Limitations
d............................................ Portfolio Transactions
14a-c........................................ Trustees and Officers
15a......................................... FMR
b............................................. Trustees and Officers
c............................................ Trustees and Officers
16a(i)......................................... FMR, Portfolio Transactions
a(ii)........................................ Trustees and Officers
a(iii), b................................... Management Contracts
c,d.......................................... Contracts with FMR Affiliates
e.......................................... *
f............................................ Distribution and Service Plans
g............................................. *
h............................................. Description of the Trust
i............................................. Contracts with FMR Affiliates
17a-c........................................ Portfolio Transactions
d,e......................................... *
18a............................................. Description of the Trust
b............................................. *
19a............................................. Additional Purchase and Redemption Information
b............................................ Valuation of Portfolio Securities; Additional Purchase and
Redemption Information
c............................................. *
20............................................... Distributions and Taxes
21a(i),(ii),(iii), b........................ Contracts with FMR Affiliates
c.................................. *
22a............................................. *
b............................................. Performance
23............................................... Financial Statements
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the
fund invests and the services available to shareholders.
To learn more about each fund and its investments, you can
obtain a copy of each fund's most recent financial report and
portfolio listing, or a copy of the Statement of Additional
Information (SAI) dated November 24, 199 8 . The SAI has been
filed with the Securities and Exchange Commission (SEC) and is
available along with other related materials on the SEC's Internet Web
site (http://www.sec.gov). The SAI is incorporated herein by reference
(legally forms a part of the prospectus). For a free copy of either
document, call Fidelity (registered trademark) at
1-800-544-8888.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
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.
SST/SIG-pro-1198
1.701517.10
Each fund invests mainly in investment-grade debt securities. Spartan
Short-Term Bond seeks high current income with preservation of
capital. Spartan Investment Grade Bond seeks high current income from
securities with longer maturities.
SPARTAN(REGISTERED TRADEMARK)
SHORT-TERM BOND
FUND
( FUND NUMBER 449, TRADING SYMBOL FTBDX)
AND
SPARTAN
INVESTMENT
GRADE BOND
FUND
( FUND NUMBER 448, TRADING SYMBOL FSIBX )
PROSPECTUS
NOVEMBER 24, 1998(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET,
BOSTON, MA 02109
CONTENTS
KEY FACTS 4 THE FUNDS AT A GLANCE
5 WHO MAY WANT TO INVEST
6 EXPENSES Each fund's yearly operating
expenses.
8 FINANCIAL HIGHLIGHTS A summary of
each fund's financial data.
10 PERFORMANCE How each fund has done
over time.
THE FUNDS IN DETAIL 12 CHARTER How each fund is organized.
12 INVESTMENT PRINCIPLES AND RISKS
Each fund's overall approach to
investing.
14 BREAKDOWN OF EXPENSES How
operating costs are calculated and what
they include.
YOUR ACCOUNT 14 DOING BUSINESS WITH FIDELITY
14 TYPES OF ACCOUNTS Different ways to
set up your account, including
tax- advantaged retirement plans.
16 HOW TO BUY SHARES Opening an
account and making additional
investments.
18 HOW TO SELL SHARES Taking money out
and closing your account.
20 INVESTOR SERVICES Services to help you
manage your account.
SHAREHOLDER AND 21 DIVIDENDS, CAPITAL GAINS,
ACCOUNT POLICIES AND TAXES
22 TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
23 EXCHANGE RESTRICTIONS
KEY FACTS
THE FUNDS AT A GLANCE
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments (registered trademark) ,
which was established in 1946 and is now America's largest mutual fund
manager. Foreign affiliates of FMR may help choose investments for the
funds.
Beginning January 1, 1999, Fidelity Investments Money Management,
Inc. (FIMM), a subsidiary of FMR, will choose investments for the
funds.
As with any mutual fund, there is no assurance that a fund will
achieve its goal.
SPARTAN SHORT-TERM BOND
GOAL: High current income with preservation of capital.
STRATEGY: Normally invests in investment-grade debt securities while
maintaining an average maturity of three years or less. FMR uses
the Lehman Brothers 1-3 Year Government/Corporate Bond Index as a
guide in structuring the fund and selecting its investments.
SIZE: As of September 30, 1998 , the fund had over $ 357
million in assets.
SPARTAN INVESTMENT GRADE BOND
GOAL: High current income.
STRATEGY: Normally invests in investment-grade debt securities. FMR
uses the Lehman Brothers Aggregate Bond Index as a guide in
structuring the fund and selecting its investments.
SIZE: As of September 30, 1998, the fund had over $ 1
billion in assets.
WHO MAY WANT TO INVEST
FMR anticipates presenting a proposal to the Board of Trustees of
Spartan Short-Term Bond Fund requesting their approval to present
shareholders of the fund a proposal to merge the fund into Fidelity
Short-Term Bond fund. Effective the close of business on June 26,
1998, the fund's shares will no longer be available to new accounts.
Shareholders of the fund on that date may continue to purchase shares
in accounts existing on that date. Investors who did not own shares of
the fund on June 26, 1998, generally will not be allowed to purchase
shares of the fund except that new accounts may be established: 1) by
participants in most group employer retirement plans (and their
successor plans) in which the fund had been established as an
investment option by June 26, 1998, and 2) for accounts managed on a
discretionary basis by certain registered investment advisors that
have discretionary assets of at least $1 billion invested in mutual
funds and have included the fund in their discretionary account
program since June 26, 1998. These restrictions generally will apply
to investments made directly with Fidelity and investments made
through intermediaries. Investors may be required to demonstrate
eligibility to purchase shares of the fund before an investment is
accepted.
These funds may be appropriate for investors who seek high current
income with a focus on investment-grade debt securities. A fund's
level of risk and potential reward depend on the quality and maturity
of its investments. Spartan Short-Term Bond is designed to offer
greater share price stability by investing in shorter-term securities.
Spartan Investment Grade Bond, because it can invest in securities
with any maturity, has the potential for higher yields, but also
carries more risk.
The value of the funds' investments and the income they generate will
vary from day to day, and generally reflect interest rates, market
conditions, and other economic and political news . The funds'
investments are also subject to prepayment risk, which can lower the
funds' yield, particularly in periods of declining interest rates.
When you sell your shares, they may be worth more or less than what
you paid for them. By themselves, the funds do not constitute a
balanced investment plan.
THE SPECTRUM OF
FIDELITY FUNDS
BROAD CATEGORIES OF FIDELITY
FUNDS ARE PRESENTED HERE IN
ORDER OF ASCENDING RISK.
GENERALLY, INVESTORS SEEKING TO
MAXIMIZE RETURN MUST ASSUME
GREATER RISK. THE FUNDS IN THIS
PROSPECTUS ARE IN THE INCOME
CATEGORY.
(SOLID BULLET) MONEY MARKET SEEKS
INCOME AND STABILITY BY
INVESTING IN HIGH-QUALITY,
SHORT-TERM INVESTMENTS.
(RIGHT ARROW) INCOME SEEKS INCOME BY
INVESTING IN BONDS.
(SOLID BULLET) GROWTH AND INCOME SEEKS
LONG-TERM GROWTH AND INCOME
BY INVESTING IN STOCKS AND
BONDS.
(SOLID BULLET) GROWTH SEEKS LONG-TERM
GROWTH BY INVESTING MAINLY IN
STOCKS.
(CHECKMARK)
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you
buy or sell shares of a fund. In addition, you may be charged an
annual account maintenance fee if your account balance falls below
$2,500. See "Transaction Details," page , for an explanation of how
and when these charges apply.
Sales charge on purchases None
and reinvested distributions
Deferred sales charge on redemptions None
Annual account maintenance fee $12.00
(for accounts under $2,500)
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets.
Each fund pays a management fee to FMR. FMR is responsible for the
payment of all other expenses for each fund with certain limited
exceptions. Expenses are factored into each fund's share price or
dividends and are not charged directly to shareholder accounts (see
"Breakdown of Expenses" page ).
The following figures are based on historical expenses, adjusted to
reflect current fees, of each fund and are calculated as a
percentage of average net assets of each fund .
SPARTAN SHORT-TERM BOND
Management fee (after reimbursement) 0.38%
12b-1 fee None
Other expenses None
Total fund operating expenses 0.38%
SPARTAN INVESTMENT GRADE BOND
Management fee (after reimbursement) 0.38%
12b-1 fee None
Other expenses None
Total fund operating expenses 0.38%
UNDERSTANDING
EXPENSES
Operating a mutual fund
involves a variety of expenses
for portfolio management,
shareholder statements, tax
reporting, and other services.
Each fund's management fee is
paid from the fund's assets,
and its effect is already
factored into any quoted share
price or return. Other expenses
are paid by FMR out of the
fund's management fee. Also,
as an investor, you may pay
certain expenses directly.
(checkmark)
EXAMPLES: Let's say, hypothetically, that each fund's annual return
is 5% and that your shareholder transaction expenses and each fund's
annual operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses
if you close your account after the number of years indicated:
SPARTAN SHORT-TERM BOND
1 year $ 4
3 years $ 12
5 years $ 21
10 years $ 48
SPARTAN INVESTMENT GRADE BOND
1 year $ 4
3 years $ 12
5 years $ 21
10 years $ 48
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected expenses or returns, all of which may vary.
Effective March 1, 1997, FMR has voluntarily agreed to reimburse each
fund to the extent that total operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses)
exceed 0.38% of its average net assets through December 31, 1998.
If these agreements were not in effect, the management fee, other
expenses and total operating expenses, as a percentage of average net
assets, would have been 0.65%, 0.00%, and 0.65%, respectively for
Spartan Short-Term Bond and 0.60%, 0.00% and 0.60%, respectively for
Spartan Investment Grade Bond.
Effective January 1, 1999, FMR has voluntarily agreed to reimburse
Spartan Investment Grade Bond to the extent that total operating
expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) exceed 0.50% of its average net assets.
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow have been audited by
PricewaterhouseCoopers LLP, independent accountants. The funds'
financial highlights, financial statements, and reports of the auditor
are included in each fund's Annual Report, and are incorporated by
reference into (are legally a part of) the funds' SAI. Contact
Fidelity for a free copy of an Annual Report or the SAI.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SPARTAN SHORT-TERM BOND
Selected Per-Share Data and Ratios
Years ended September 30 1998 1997 1996 1995 1994 1993E
Net asset value, beginning of period $ 9.050 $ 9.020 $ 9.130 $ 9.330 $ 9.990 $ 10.000
Income from Investment Operations .579B .588B .598 .584 .574 .747
Net investment income
Net realized and unrealized gain (loss) .063 .025 (.112) (.199) (.604) (.009)
Total from investment operations .642 .613 .486 .385 (.030) .738
Less Distributions (.572) (.583) (.596) (.443) (.477) (.747)
From net investment income
In excess of net investment income -- -- -- -- (.033) (.001)
In excess of net realized gain -- -- -- -- (.010) --
Return of capital -- -- -- (.142) (.110) --
Total distributions (.572) (.583) (.596) (.585) (.630) (.748)
Net asset value, end of period $ 9.120 $ 9.050 $ 9.020 $ 9.130 $ 9.330 $ 9.990
Total returnA 7.33% 7.00% 5.47% 4.35% (.32)% 7.69%
Net assets, end of period (In millions) $ 358 $ 287 $ 344 $ 522 $ 798 $ 1,471
Ratio of expenses to average net assets .38%C .50%C .65% .65% .54%C .20%C
Ratio of expenses to average net assets .38% .50% .64%D .65% .54% .20%
after expense reductions
Ratio of net investment income to 6.40% 6.50% 6.52% 6.45% 6.42% 7.32%
average net assets
Portfolio turnover rate 117% 105% 134% 159% 97% 112%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
C FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S
EXPENSES.
E FOR THE PERIOD OCTOBER 1, 1992 (COMMENCEMENT OF OPERATIONS) TO
SEPTEMBER 30, 1993.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SPARTAN INVESTMENT GRADE BOND
Selected Per-Share Data and Ratios
Years ended September 30 1998 1997 1996 1995 1994 1993D
Net asset value, beginning of period $ 10.250 $ 9.980 $ 10.170 $ 9.510 $ 10.940 $ 10.000
Income from Investment Operations .634B .640B .655 .693 .668 .799
Net investment income
Net realized and unrealized gain (loss) .453 .273 (.211) .673 (1.384) .940
Total from investment operations 1.087 .913 .444 1.366 (.716) 1.739
Less Distributions (.637) (.643) (.634) (.686) (.704) (.798)
From net investment income
In excess of net investment income -- -- -- -- -- (.001)
In excess of net realized gain -- -- -- (.020) (.010) --
Total distributions (.637) (.643) (.634) (.706) (.714) (.799)
Net asset value, end of period $ 10.700 $ 10.250 $ 9.980 $ 10.170 $ 9.510 $ 10.940
Total returnA 10.95% 9.43% 4.46% 14.94% (6.75)% 18.17%
Net assets, end of period (In millions) $ 1,220 $ 551 $ 344 $ 148 $ 106 $ 129
Ratio of expenses to average net assets .38%C .48%C .65% .65% .65% .65%
Ratio of net investment income to 6.11% 6.36% 6.35% 6.92% 6.90% 7.58%
average net assets
Portfolio turnover rate 222% 194% 169% 147% 44% 55%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
C FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
D FOR THE PERIOD OCTOBER 1, 1998 (COMMENCEMENT OF OPERATIONS) TO
SEPTEMBER 30, 1993.
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The
total returns that follow are based on historical fund results and do
not reflect the effect of taxes or any transaction fees you may have
paid. The figures would be lower if fees were taken into account.
Each fund's fiscal year runs from October 1 through September 30. The
tables below show each fund's performance over past fiscal years
compared to different measures, including a comparative index and a
competitive funds average. The charts on page present calendar
year performance.
UNDERSTANDING
PERFORMANCE
BECAUSE THESE FUNDS INVEST IN
FIXED-INCOME SECURITIES, THEIR
PERFORMANCE IS RELATED TO
CHANGES IN INTEREST RATES. FUNDS
THAT HOLD SHORT-TERM BONDS ARE
USUALLY LESS AFFECTED BY
CHANGES IN INTEREST RATES THAN
LONG-TERM BOND FUNDS. FOR THAT
REASON, LONG-TERM BOND FUNDS
TYPICALLY OFFER HIGHER YIELDS
AND CARRY MORE RISK THAN
SHORT-TERM BOND FUNDS.
(CHECKMARK)
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal periods ended Past 1 Past 5 Life of
September 30, 1998 year years fundA
Spartan Short-Term Bond 7.33% 4.73% 5.22%
Lehman Bros. 1-3 Yr. Gov't/Corp. Bond Index 7.87% 5.98% n/a
Lipper Sht. Inv. Gr. Debt Funds Avg. 6.68% 5.43% n/a
Spartan Investment Grade Bond 10.95% 6.33% 8.22%
Lehman Bros. Aggregate Bond Index 11.51% 7.21% 7.58%
Lipper Intermediate Investment Grade Debt Funds Average 10.02% 6.31% n/a
</TABLE>
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal periods ended Past 1 Past 5 Life of
September 30, 1998 year years fundA
Spartan Short-Term Bond 7.33% 25.98% 35.67%
Lehman Bros. 1-3 Yr. Gov't/Corp. Bond Index 7.87% 33.67% n/a
Lipper Sht. Inv. Gr. Debt Funds Avg. 6.68% 30.31% n/a
Spartan Investment Grade Bond 10.95% 35.94% 60.64%
Lehman Bros. Aggregate Bond Index 11.51% 41.66% 54.99%
Lipper Intermediate Investment Grade Debt Funds Average 10.02% 35.84% n/a
</TABLE>
A FROM OCTOBER 1, 1992 (COMMENCEMENT OF OPERATIONS)
If FMR had not reimbursed certain fund expenses during these
periods, total returns would have been lower.
EXPLANATION OF TERMS
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1993 1994 1995 1996 1997
SPARTAN INVESTMENT GRADE BOND 15.76% -5.17% 18.61% 3.12% 9.28%
Lehman Brothers Aggregate
Bond Index 9.75% -2.92% 18.47% 3.63% 9.65%
Lipper Intermediate Investment Grade
Debt Funds Average 13.67% -4.69% 20.24% 3.19% 8.57%
Consumer Price Index Percentage (%) 2.75% 2.67% 2.54% 3.32% 1.70%
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: 15.76
Row: 7, Col: 1, Value: -5.17
Row: 8, Col: 1, Value: 18.61
Row: 9, Col: 1, Value: 3.12
Row: 10, Col: 1, Value: 9.279999999999999
(LARGE SOLID BOX) Spartan Investment
Grade Bond
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1993 1994 1995 1996 1997
SPARTAN SHORT-TERM BOND 9.01% -4.62% 9.94% 5.03% 6.54%
Lehman Brothers 1-3 year
Government Corporate Bond Index 5.55% 0.55% 10.96% 5.14% 6.66%
Lipper Short Investment Grade Debt
Funds Average 6.45% -0.44% 9.83% 4.64% 6.19%
Consumer Price Index Percentage (%) 2.75% 2.67% 2.54% 3.32% 1.70%
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: 9.01
Row: 7, Col: 1, Value: -4.62
Row: 8, Col: 1, Value: 9.94
Row: 9, Col: 1, Value: 6.03
Row: 10, Col: 1, Value: 6.54
(LARGE SOLID BOX) Spartan Short-Term
Bond
TOTAL RETURN is the change in value of an investment over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated
period of time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate
of return that, if achieved annually, would have produced the same
cumulative total return if performance had been constant over the
entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. Yields
are calculated according to a standard that is required for all stock
and bond funds. Because this differs from other accounting methods,
the quoted yield may not equal the income actually paid to
shareholders.
LEHMAN BROTHERS 1-3 YEAR GOVERNMENT/CORPORATE BOND INDEX is a market
value weighted performance benchmark for government and corporate
fixed-rate debt issues with maturities between one and three years.
LEHMAN BROTHERS AGGREGATE BOND INDEX is a market value weighted
performance benchmark for investment-grade fixed-rate debt issues,
including government, corporate, asset-backed, and mortgage-backed
securities, with maturities of at least one year.
Unlike each fund's returns, the total returns of each comparative
index do not include the effect of any brokerage commissions,
transaction fees, or other costs of investing.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
THE COMPETITIVE FUNDS AVERAGES are the Lipper Short Investment Grade
Debt Funds Average and Lipper Intermediate Investment Grade Debt
Funds Average for Spartan Short-Term Bond and Spartan Investment
Grade Bond, respectively. As of September 30, 1998, the averages
reflected the performance of 100 and 218 mutual funds with simi lar
investment objectives, respectively. These averages, published by
Lipper Analytical Services, Inc., exclude the effect of sales loads.
The funds' recent strategies, performance, and holdings are detailed
twice a year in financial reports, which are sent to all shareholders.
For current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders'
money and invests it toward a specified goal. Each fund is a
diversified fund of Fidelity Charles Street Trust, an open-end
management investment company organized as a Massachusetts business
trust on July 7, 1981.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet periodically throughout the year to oversee the
funds' activities, review contractual arrangements with companies that
provide services to the funds, and review the funds' performance. The
trustees serve as trustees for other Fidelity funds. The majority of
trustees are not otherwise affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL SHAREHOLDER MEETINGS AND MAIL PROXY
MATERIALS. These meetings may be called to elect or remove trustees,
change fundamental policies, approve a management contract, or for
other purposes. Shareholders not attending these meetings are
encouraged to vote by proxy. Fidelity will mail proxy materials in
advance, including a voting card and information about the proposals
to be voted on. The number of votes you are entitled to is based upon
the dollar value of your investment.
FMR AND ITS AFFILIATES
The funds are managed by FMR, which chooses the funds'
investments and handles their business affairs.
Affiliates assist FMR with foreign investments:
(small solid bullet) Fidelity Management & Research (U.K.) Inc. (FMR
U.K.), in London, England, serves as a sub-adviser for each
fund .
(small solid bullet) Fidelity Management & Research Far East Inc. (FMR
Far East), in Tokyo, Japan, serves as a sub-adviser for each
fund.
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 funds.
Andrew Dudley is Vice President and manager of Spartan
Short-Term Bond, which he has managed since February 1997. He also
manages other Fidelity funds. Prior to joining Fidelity in
1996 , Mr. Dudley was a portfolio manager for Putnam Investments
from 1991 to 1996.
Kevin Grant is Vice President and manager of Spartan Investment Grade
Bond, which he has managed since February 1997. He also manages
several other Fidelity funds. Mr. Grant joined Fidelity in 1993 as a
portfolio 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.
Fidelity Service Company, Inc. (FSC) performs transfer agent
servicing functions for each fund.
FMR Corp. is the ultimate parent company of FMR, FMR U.K., FMR Far
East 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.
FMR may use its broker-dealer affiliates and other firms that sell
fund shares to carry out a fund's transactions, provided that the fund
receives brokerage services and commission rates comparable to those
of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
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.
PREPAYMENT RISK. Many types of debt securities, including mortgage
securities, are subject to prepayment risk. Prepayment risk occurs
when the issuer of a security can prepay principal prior to the
security's maturity. Securities subject to prepayment risk generally
offer less potential for gains during a declining interest rate
environment, and similar or greater potential for loss in a rising
interest rate environment. In addition, the potential impact of
prepayment features on the price of a debt security may be difficult
to predict and result in greater volatility.
FIDELITY'S APPROACH TO BOND FUNDS. In managing bond funds, FMR
selects a benchmark index that is representative of the universe of
securities in which a 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,
corporate or government securities) 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 a fund may
invest. 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.
SPARTAN SHORT-TERM BOND seeks high current income by investing in U.S.
dollar-denominated investment-grade debt securities under normal
conditions. The benchmark index for the fund is the Lehman Brothers
1-3 Year Government/Corporate Bond Index, a market value weighted
benchmark of government and investment-grade corporate fixed-rate debt
issues with maturities between one and three years. FMR manages the
fund to have similar overall interest rate risk to the index. As
of September 30, 1998 , the dollar-weighted average maturity of
the fund and the index was approximately 2.4 and 1.9 years,
respectively. In addition, the fund normally maintains a
dollar-weighted average maturity of three years or less.
SPARTAN INVESTMENT GRADE BOND seeks high current income by investing
in U.S. dollar-denominated investment-grade debt securities under
normal conditions. The benchmark index for the fund is the Lehman
Brothers Aggregate Bond Index, a market value weighted benchmark of
investment-grade fixed-rate debt issues with maturities of one year or
more. FMR manages the fund to have similar overall interest rate risk
to the index. As of September 30, 1998 , the dollar-weighted
average maturity of the fund and the index was approximately 7.8 and
8.5 years, respectively.
In determining a security's maturity for purposes of calculating a
fund's average maturity, an estimate of the average time for its
principal to be paid may be used. This can be substantially shorter
than its stated final maturity.
Each fund normally invests in U.S. dollar-denominated investment-grade
debt securities. The funds differ primarily with respect to the
maturity of their investments and therefore their sensitivity to
interest rate changes. Although each fund can invest in securities of
any maturity, Spartan Investment Grade Bond generally maintains a
longer average maturity. As a result, Spartan Investment Grade Bond
will tend to have greater share price fluctuation.
FMR may use various investment techniques to hedge a portion of
a fund's risks, but there is no guarantee that these strategies will
work as FMR intends. When you sell your shares of a fund, they
may be worth more or less than what you paid for them.
FMR normally invests each fund's assets according to its investment
strategy. Each fund also reserves the right to invest without
limitation in investment-grade money market or short-term debt
instruments for temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related
risks. Any restrictions listed supplement those discussed earlier in
this section. A complete listing of each fund's limitations and more
detailed information about each fund's investments are contained in
the funds' SAI. Policies and limitations are considered at the time of
purchase; the sale of instruments is not required in the event of a
subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these
techniques unless it believes that they are consistent with a fund's
investment objective and policies and that doing so will help the fund
achieve its goal. Fund holdings and recent investment strategies are
detailed in each fund's financial reports, which are sent to
shareholders twice a year. For a free SAI or financial report, call
1-800-544-8888.
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: Each fund normally invests in
investment-grade securities, but reserves the right to invest
up to 5% of its assets in below investment-grade securities
(sometimes called "junk bonds"). A security is considered to be
investment-grade if it is rated investment-grade by Moody's Investors
Service, Standard & Poor's, Duff & Phelps Credit Rating Co., or Fitch
IBCA, Inc., or is unrated but judged to be of equivalent
quality by FMR.
U.S. GOVERNMENT SECURITIES are high-quality debt instruments issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of
the U.S. Government. Not all U.S. Government securities are backed by
the full faith and credit of the United States. For example, U.S.
Government securities such as those issued by Fannie Mae are supported
by the instrumentality's right to borrow money from the U.S. Treasury
under certain circumstances. Other U.S. Government securities, such as
those issued by the Federal Farm Credit Banks Funding Corporation, are
supported only by the credit of the entity that issued them.
FOREIGN EXPOSURE. Securities issued by foreign entities, including
foreign governments, corporations, and banks, and securities issued by
U.S. entities with substantial foreign operations may involve
additional risks and considerations. Extensive public information
about the foreign entity may not be available, and unfavorable
political, economic, or governmental developments in the foreign
country involved could affect the repayment of principal or payment of
interest.
ASSET-BACKED SECURITIES include interests in pools of debt securities,
commercial or consumer loans, or other receivables. The value of these
securities depends on many factors, including changes in interest
rates, the availability of information concerning the pool and its
structure, the credit quality of the underlying assets, the market's
perception of the servicer of the pool, and any credit enhancement
provided. In addition, these securities may be subject to prepayment
risk.
MORTGAGE SECURITIES include interests in pools of commercial or
residential mortgages, and may include complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed
securities. Mortgage securities may be issued by agencies or
instrumentalities of the U.S. Government or by private entities.
The price of a mortgage security may be significantly affected by
changes in interest rates. Some mortgage securities may have a
structure that makes their reaction to interest rates and other
factors difficult to predict, making their price highly volatile.
Also, mortgage securities, especially stripped mortgage-backed
securities, are subject to prepayment risk. Securities subject to
prepayment risk generally offer less potential for gains during a
declining interest rate environment, and similar or greater potential
for loss in a rising interest rate environment.
STRIPPED SECURITIES are the separate income or principal components of
a debt security. The risks associated with stripped securities are
similar to those of other debt securities, although stripped
securities may be more volatile, and the value of certain types of
stripped securities may move in the same direction as interest rates.
U.S. Treasury securities that have been stripped by a Federal Reserve
Bank are obligations issued by the U.S. Treasury.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a
security at one price and simultaneously agrees to sell it back at a
higher price. Delays or losses could result if the other party to the
agreement defaults or becomes insolvent.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices,
interest rates, commodity prices, or other factors that affect
security values. These techniques may involve derivative transactions
such as buying and selling options and futures contracts, entering
into currency exchange contracts or swap agreements, purchasing
indexed securities, and selling securities short.
FMR can use these practices to adjust the risk and return
characteristics of a fund's portfolio of investments. If FMR judges
market conditions incorrectly or employs a strategy that does not
correlate well with a fund's investments, these techniques could
result in a loss, regardless of whether the intent was to reduce risk
or increase return. These techniques may increase the volatility of a
fund and may involve a small investment of cash relative to the
magnitude of the risk assumed. In addition, these techniques could
result in a loss if the counterparty to the transaction does not
perform as promised.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined
by FMR, under the supervision of the Board of Trustees, to be
illiquid, which means that they may be difficult to sell promptly at
an acceptable price. The sale of some illiquid securities, and some
other securities, may be subject to legal restrictions. Difficulty in
selling securities may result in a loss or may be costly to a fund.
RESTRICTIONS: A fund may not invest more than 10% of its assets 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.
OTHER INSTRUMENTS may include real estate-related instruments.
CASH MANAGEMENT. A fund may invest in money market securities, in
repurchase agreements, and in a money market fund available only to
funds and accounts managed by FMR or its affiliates, whose goal is to
seek a high level of current income while maintaining a stable $1.00
share price. A major change in interest rates or a default on the
money market fund's investments could cause its share price to change.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce
the risks of investing. This may include limiting the amount of money
invested in any one issuer or, on a broader scale, in any one
industry. Economic, business, or political changes can affect all
securities of a similar type.
RESTRICTIONS: With respect to 75% of its total assets, each fund may
not invest more than 5% of the securities of any one issuer. This
limitation does not apply to U.S. Government securities.
Each fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
securities.
BORROWING. Each fund may borrow from banks or from other funds advised
by FMR or its affiliates, or through reverse repurchase
agreements. If a fund borrows money, its share price may be subject to
greater fluctuation until the borrowing is paid off. If a fund makes
additional investments while borrowings are outstanding, this may be
considered a form of leverage.
RESTRICTIONS: Each fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 331/3% of its total assets.
LENDING securities to broker-dealers and institutions, including
Fidelity Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a
means of earning income. This practice could result in a loss or a
delay in recovering a fund's securities. A fund may also lend money to
other funds advised by FMR or its affiliates.
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of
a fund's total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages
are fundamental, that is, subject to change only by shareholder
approval. The following paragraphs restate all those that are
fundamental. All policies stated throughout this prospectus, other
than those identified in the following paragraphs, can be changed
without shareholder approval.
SPARTAN INVESTMENT GRADE BOND seeks a high level of current income.
SPARTAN SHORT-TERM BOND seeks a high level of current income.
With respect to 75% of total assets, each fund may not invest
more than 5% in the securities of any one issuer. This limitation does
not apply to U.S. Government securities.
Each fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
securities.
Each fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 331/3% of its total assets.
Loans, in the aggregate, may not exceed 331/3% of each fund's total
assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, each fund pays fees related to its daily
operations. Expenses paid out of each fund's assets are reflected in
its share price or dividends; they are neither billed directly to
shareholders nor deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments
and business affairs.
FMR in turn pays fees to affiliates who provide assistance with these
services.
FMR may, from time to time, agree to reimburse the funds for
management fees above a specified limit. FMR retains the ability to be
repaid by a fund if expenses fall below the specified limit prior to
the end of the fiscal year. Reimbursement arrangements can decrease a
fund's expenses and boost its performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. FMR pays
all of the other expenses of each fund with limited exceptions.
Spartan Short-Term Bond's and Spartan Investment Grade Bond's
annual management fee rate is 0.65% and 0.60% , respectively, of
its average net assets.
For the fiscal year ended September 30, 1998 , each fund paid a
management fee of 0.38% of the fund's average net assets, after
reimbursement.
On June 27, 1998, FMR reduced the management fee rate for Spartan
Investment Grade Bond from 0.65% to 0.60%.
Effective March 1, 1997, FMR has voluntarily agreed to limit each
fund's total operating expenses to an annual rate of 0.38% of average
net assets. This agreement will continue until December 31, 1998.
Effective January 1, 1999, FMR has voluntarily agreed to limit
Spartan Investment Grade Bond's total operating expenses to an annual
rate of 0.50% of average net assets.
FMR HAS SUB-ADVISORY AGREEMENTS with FMR U.K. and FMR Far East. These
sub-advisers provide FMR with investment research and advice on
issuers based outside the United States. Under the sub-advisory
agreements, FMR pays FMR U.K. and FMR Far East fees equal to 110% and
105%, respectively, of the costs of providing these services.
The sub-advisers may also provide investment management services. In
return, FMR pays FMR U.K. and FMR Far East a fee equal to 50% of its
management fee rate with respect to a fund's investments that the
sub-adviser manages on a discretionary basis.
Beginning January 1, 1999, FIMM will have primary responsibility
for managing each fund's investments. FMR will pay FIMM 50% of its
management fee (before expense reimbursements) for FIMM's
services.
FSC is the transfer and service agent for the funds. FSC performs
transfer agency, dividend disbursing, shareholder servicing, and
accounting functions for the funds. These services include processing
shareholder transactions, valuing each fund's investments, handling
securities loans for each fund, and calculating each fund's share
price and dividends. FMR, not the funds, pays for these services.
Each fund also pays other expenses, such as brokerage fees and
commissions, interest on borrowings, taxes, and the compensation of
trustees who are not affiliated with Fidelity.
Each fund has adopted a DISTRIBUTION AND SERVICE PLAN. Each plan
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 fund
shares. FMR directly, or through FDC, may make payments to third
parties, such as banks or broker-dealers, that engage in the sale of,
or provide shareholder support services for, the funds' shares.
Currently, the Board of Trustees has authorized such payments.
For the fiscal year ended September 30, 1998 the portfolio
turnover rates for Spartan Short-Term Bond and Spartan Investment
Grade Bond were 117% and 222% , respectively. These rates
vary from year to year. High turnover rates increase transaction costs
and may increase taxable capital gains. FMR considers these effects
when evaluating the anticipated benefits of short-term investing.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of
America's first mutual funds. Today, Fidelity is the largest mutual
fund company in the country, and is known as an innovative provider of
high-quality financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, FBSI. Fidelity is also a
leader in providing tax- advantaged retirement plans for
individuals investing on their own or through their employer.
Fidelity is committed to providing investors with practical
information to make investment decisions. Based in Boston, Fidelity
provides customers with complete service 24 hours a day, 365 days a
year, through a network of telephone service centers around the
country and Fidelity's Web site.
To reach Fidelity for general information, call these numbers:
(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 75 walk-in Investor Centers across the country.
If you would prefer to access information on-line, you can visit
Fidelity's Web site at www.fidelity.com.
TYPES OF ACCOUNTS
You may set up an account directly in a fund or, if you own or intend
to purchase individual securities as part of your total investment
portfolio, you may consider investing in a fund through a brokerage
account.
You may purchase or sell shares of the funds through an investment
professional, including a broker, who may charge you a transaction fee
for this service. If you invest through FBSI, another financial
institution, or an investment professional, read their program
materials for any special provisions, additional service features or
fees that may apply to your investment in a fund. Certain features of
the fund, such as the minimum initial or subsequent investment
amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed in the table that follows.
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over 223
(solid bullet) Assets in Fidelity mutual
funds: over $ 572 billion
(solid bullet) Number of shareholder
accounts: over 38 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 260
(checkmark)
The account guidelines that follow may not apply to certain retirement
accounts. If you are investing through a retirement account or if your
employer offers the funds through a retirement program, you may be
subject to additional fees. For more information, please refer to your
program materials, contact your employer, call your retirement
benefits number, visit Fidelity's Web site at www.fidelity.com, or
contact Fidelity directly, as appropriate.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have
two or more owners (tenants).
RETIREMENT
FOR TAX-ADVANTAGED RETIREMENT SAVINGS
R etirement plans provide individuals with tax-advantaged ways to
save for retirement, either with tax-deductible contributions or
tax-free growth. Retirement accounts require special applications
and typically have lower minimums.
(solid bullet) TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNTS
(IRAS) allow individuals under age 70 with compensation to
contribute up to $2,000 per tax year. Married couples can
contribute up to $4,000 per tax year, provided no more than $2,000 is
contributed on behalf of either spouse. (These limits are aggregate
for Traditional and Roth IRAs.) Contributions may be tax-deductible,
subject to certain income limits.
(solid bullet) ROTH IRAS allow individuals to make
non-deductible contributions of up to $2,000 per tax year. Married
couples can contribute up to $4,000 per tax year, provided no more
than $2,000 is contributed on behalf of either spouse. (These limits
are aggregate for Traditional and Roth IRAs.) Eligibility is subject
to certain income limits. Qualified distributions are tax-free.
(solid bullet) ROTH CONVERSION IRAS allow individuals with assets held
in a Traditional IRA or Rollover IRA to convert those assets to a Roth
Conversion IRA. Eligibility is subject to certain income limits.
Qualified distributions are tax-free.
(solid bullet) ROLLOVER IRAS help retain special tax advantages
for certain eligible rollover distributions from employer-sponsored
retirement plans.
(solid bullet) KEOGH PLANS are generally profit sharing or money
purchase pension plans that allow self-employed individuals or
small business owners to make tax-deductible contributions for
themselves and any eligible employees.
(solid bullet) SIMPLE IRAS provide small business owners and those
with self-employment income (and their eligible employees) with many
of the advantages of a 401(k) plan, but with fewer administrative
requirements.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide
small business owners or those with self-employment income (and their
eligible employees) with many of the same advantages as a Keogh, but
with fewer administrative requirements.
(solid bullet) SALARY REDUCTION SEP-IRAS (SARSEPS) allow
employees of businesses with 25 or fewer employees to contribute a
percentage of their wages on a tax-deferred basis. These plans must
have been established by the employer prior to January 1, 1997.
(solid bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees of
501(c)(3) tax-exempt institutions, including schools, hospitals, and
other charitable organizations.
(solid bullet) DEFERRED COMPENSATION PLANS (457 PLANS) are
available to employees of most state and local governments and their
agencies and to employees of tax-exempt institutions.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and
obtain tax benefits. An individual can give up to $10,000 a year per
child without paying federal gift tax. Depending on state laws, you
can set up a custodial account under the Uniform Gifts to Minors Act
(UGMA) or the Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR
OTHER GROUPS
Requires a special application.
HOW TO BUY SHARES
THE PRICE TO BUY ONE SHARE of each fund is the fund's net asset value
per share (NAV). Each fund's shares are sold without a sales charge.
Your shares will be purchased at the next NAV calculated after your
investment is received in proper form. Each fund's NAV is normally
calculated each business day at 4:00 p.m. Eastern time.
Each 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 a fund.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application
and mail it along with your check. You may also open your account in
person or by wire as described on page . If there is no application
accompanying this prospectus, call 1-800-544-8888 or visit
Fidelity's Web site at www.fidelity.com for an application.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another
Fidelity fund.
IF YOU ARE INVESTING THROUGH A TAX- ADVANTAGED RETIREMENT PLAN,
such as an IRA, for the first time, you will need a special
application. Retirement investing also involves its own investment
procedures. Call 1-800-544-8888 or visit Fidelity's Web site at
www.fidelity.com for more information and a retirement
application.
If you buy 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
TO OPEN AN ACCOUNT
For Spartan Short-Term Bond $10,000
For Spartan Investment Grade Bond $25,000
TO ADD TO AN ACCOUNT
For Spartan Short-Term Bond $1,000
Through regular investment plansB $500
For Spartan Investment Grade Bond $1,000
For certain Fidelity retirement accountsA $25,000
Through regular investment plansB $500
MINIMUM BALANCE
For Spartan Short-Term Bond $5,000
For Spartan Investment Grade Bond $10,000
A FIDELITY TRADITIONAL IRA, ROTH IRA, ROTH CONVERSION IRA, ROLLOVER
IRA, SEP-IRA, AND KEOGH ACCOUNTS.
B FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER TO
"INVESTOR SERVICES," PAGE .
There is no minimum account balance or initial or subsequent
investment minimum for investments through Fidelity Portfolio Advisory
ServicesSM, a qualified state tuition program, certain Fidelity
retirement accounts funded through salary deduction, or accounts
opened with the proceeds of distributions from such retirement
accounts. Refer to the program materials for details. In addition,
each fund reserves the right to waive or lower investment minimums in
other circumstances.
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TO OPEN TO ADD TO AN ACCOUNT
AN
ACCOUNT
PHONE
1-800-544-7777
(PHONE_GRAPHIC) (SMALL SOLID BULLET) EXCHANGE FROM (SMALL SOLID BULLET) EXCHANGE FROM ANOTHER FIDELITY FUND
ACCOUNT WITH THE SAME REGISTRATION,
ANOTHER FIDELITY INCLUDING NAME, ADDRESS, AND TAXPAYER
ID NUMBER.
FUND ACCOUNT (SMALL SOLID BULLET) USE FIDELITY MONEY LINE TO TRANSFER FROM
YOUR BANK ACCOUNT. CALL BEFORE
WITH THE SAME YOUR FIRST USE TO VERIFY THAT THIS
SERVICE IS IN PLACE ON YOUR ACCOUNT.
REGISTRATION, MAXIMUM MONEY LINE: UP TO $100,000.
INCLUDING NAME,
ADDRESS, AND
TAXPAYER ID
NUMBER.
THE INTERNET
WWW.FIDELITY.COM
(COMPUTER GRAPHIC) (SMALL SOLID BULLET) COMPLETE AND (SMALL SOLID BULLET) EXCHANGE FROM ANOTHER FIDELITY FUND
ACCOUNT WITH THE SAME REGISTRATION,
SIGN THE INCLUDING NAME, ADDRESS, AND TAXPAYER
ID NUMBER.
APPLICATION. (SMALL SOLID BULLET) USE FIDELITY MONEY LINE TO TRANSFER
FROM YOUR BANK ACCOUNT. VISIT
MAKE YOUR FIDELITY'S WEB SITE BEFORE YOUR
FIRST USE TO VERIFY THAT THIS SERVICE
IS IN
CHECK PAYABLE TO PLACE ON YOUR ACCOUNT. MAXIMUM MONEY
LINE: UP TO $100,000.
THE COMPLETE
NAME OF THE
FUND. MAIL TO THE
ADDRESS
INDICATED ON THE
APPLICATION.
MAIL
(MAIL_GRAPHIC) (SMALL SOLID BULLET) COMPLETE AND (SMALL SOLID BULLET) MAKE YOUR CHECK PAYABLE TO THE
COMPLETE NAME OF THE FUND. INDICATE
SIGN THE YOUR FUND ACCOUNT NUMBER ON YOUR
CHECK AND MAIL TO THE ADDRESS PRINTED
APPLICATION. ON YOUR ACCOUNT STATEMENT.
MAKE YOUR (SMALL SOLID BULLET) EXCHANGE BY MAIL: CALL 1-800-544-6666
FOR INSTRUCTIONS.
CHECK PAYABLE TO
THE COMPLETE
NAME OF THE
FUND. MAIL TO THE
ADDRESS INDICATED
ON THE
APPLICATION.
IN PERSON
(HAND_GRAPHIC) (SMALL SOLID BULLET) BRING YOUR (SMALL SOLID BULLET) BRING YOUR CHECK TO A FIDELITY
INVESTOR CENTER. CALL 1-800-544-9797
FOR
APPLICATION AND THE CENTER NEAREST YOU.
CHECK TO A
FIDELITY INVESTOR
CENTER. CALL
1-800-544-97
97 FOR THE
CENTER NEAREST
YOU.
WIRE
(WIRE_GRAPHIC) (SMALL SOLID BULLET) CALL (SMALL SOLID BULLET) NOT AVAILABLE FOR RETIREMENT ACCOUNTS.
1-800-544-77 (SMALL SOLID BULLET) WIRE TO:
77 TO SET UP BANKERS TRUST COMPANY,
YOUR ACCOUNT BANK ROUTING #021001033,
AND TO ARRANGE ACCOUNT #00163053.
A WIRE SPECIFY THE COMPLETE NAME OF THE
FUND AND INCLUDE YOUR ACCOUNT NUMBER
TRANSACTION. NOT AND YOUR NAME.
AVAILABLE FOR
RETIREMENT
ACCOUNTS.
(SMALL SOLID BULLET) WIRE WITHIN 24
HOURS TO:
BANKERS TRUST
COMPANY,
BANK ROUTING
#021001033,
ACCOUNT
#00163053.
SPECIFY THE
COMPLETE NAME
OF THE FUND AND
INCLUDE YOUR
NEW ACCOUNT
NUMBER AND
YOUR NAME.
AUTOMATICALLY
(AUTOMATIC_GRAPHIC) (SMALL SOLID BULLET) NOT AVAILABLE. (SMALL SOLID BULLET) USE FIDELITY AUTOMATIC ACCOUNT BUILDER.
SIGN UP FOR THIS SERVICE WHEN
OPENING YOUR ACCOUNT, VISIT
FIDELITY'S WEB SITE AT
WWW.FIDELITY.COM TO
OBTAIN THE FORM TO ADD THE SERVICE, OR
CALL 1-800-544-6666 TO ADD THE
SERVICE.
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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 each fund is the fund's NAV.
Your shares will be sold at the next NAV calculated after your order
is received in proper form. Each fund's NAV is normally
calculated each business day at 4:00 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the
methods described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be
made in writing, except for exchanges to other Fidelity funds, which
can be requested by phone, in writing, or through Fidelity's Web
site. Call 1-800-544-6666 for a retirement distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$5,000 worth of shares in the account for Spartan Short-Term Bond and
$10,000 for Spartan Investment Grade Bond 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) 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
table that follows.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it
to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
CHECKWRITING
If you have a checkbook for your account, you may write an unlimited
number of checks. Do not, however, try to close out your account by
check.
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ACCOUNT TYPE SPECIAL REQUIREMENTS
PHONE
1-800-544-7777
(PHONE_GRAPHIC) ALL ACCOUNT TYPES (SMALL SOLID BULLET) MAXIMUM CHECK REQUEST: $100,000.
EXCEPT RETIREMENT (SMALL SOLID BULLET) FOR MONEY LINE TRANSFERS TO YOUR BANK ACCOUNT;
MINIMUM: $10; MAXIMUM: UP TO $100,000.
ALL ACCOUNT TYPES (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 (SMALL SOLID BULLET) THE LETTER OF INSTRUCTION MUST BE SIGNED BY ALL
TENANT, PERSONS REQUIRED TO SIGN FOR TRANSACTIONS,
SOLE PROPRIETORSHIP EXACTLY AS THEIR NAMES APPEAR ON THE ACCOUNT.
UGMA, UTMA (SMALL SOLID BULLET) THE ACCOUNT OWNER SHOULD COMPLETE A
RETIREMENT RETIREMENT DISTRIBUTION FORM. CALL
ACCOUNT 1-800-544-6666 TO REQUEST ONE.
(SMALL SOLID BULLET) THE TRUSTEE MUST SIGN THE LETTER INDICATING
CAPACITY AS TRUSTEE. IF THE TRUSTEE'S NAME IS NOT
TRUST IN THE ACCOUNT REGISTRATION, PROVIDE A COPY OF THE
TRUST DOCUMENT CERTIFIED WITHIN THE LAST 60 DAYS.
(SMALL SOLID BULLET) AT LEAST ONE PERSON AUTHORIZED BY CORPORATE
RESOLUTION TO ACT ON THE ACCOUNT MUST SIGN THE
BUSINESS OR LETTER.
ORGANIZATION (SMALL SOLID BULLET) INCLUDE A CORPORATE RESOLUTION WITH CORPORATE
SEAL OR A SIGNATURE GUARANTEE.
(SMALL SOLID BULLET) CALL 1-800-544-6666 FOR INSTRUCTIONS.
EXECUTOR,
ADMINISTRATOR,
CONSERVATOR,
GUARDIAN
WIRE
(WIRE_GRAPHIC) ALL ACCOUNT TYPES (SMALL SOLID BULLET) YOU MUST SIGN UP FOR THE WIRE FEATURE BEFORE
EXCEPT RETIREMENT 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.
CHECK (CHECK_GRAPHIC) ALL ACCOUNT TYPES (SMALL SOLID BULLET) MINIMUM CHECK: $1,000.
(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
</TABLE>
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.
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 XPRESS(REGISTERED TRADEMARK)
1-800-544-5555
WEB SITE
WWW.FIDELITY.COM
AUTOMATED SERVICE
(CHECKMARK)
FIDELITY'S WEB SITE at www.fidelity.com offers product and
servicing information, customer education, planning tools, and the
ability to make certain transactions in your account.
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your
account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more
than one account in the fund. Call 1-800-544-6666 if you need copies
of financial reports, prospectuses, or historical account information.
Electronic copies of most financial reports and prospectuses are
available at Fidelity's Web site. To participate in our electronic
delivery program, call 1-800-544-6666 or visit Fidelity's Web site at
www.fidelity.com for more information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of
other Fidelity funds by telephone, in writing, or through
Fidelity's Web site.
Note that exchanges out of a fund are limited to four per calendar
year, and that they may have tax consequences for you. For details on
policies and restrictions governing exchanges, including circumstances
under which a shareholder's exchange privilege may be suspended or
revoked, see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from
your account.
FIDELITY MONEY LINE enables you to transfer money by phone between
your bank account and your fund account. Most transfers are complete
within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money
regularly. Fidelity offers convenient services that let you transfer
money into your fund account, or between fund accounts, automatically.
While regular investment plans do not guarantee a profit and will not
protect you against loss in a declining market, they can be an
excellent way to invest for retirement, a home, educational expenses,
and other long-term financial goals. Certain restrictions apply for
retirement accounts. Call 1-800-544-6666 or visit Fidelity's Web
site at www.fidelity.com for more information.
REGULAR INVESTMENT PLANS
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FIDELITY AUTOMATIC ACCOUNT BUILDER(registered trademark)
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 MONTHLY OR (SMALL SOLID BULLET) FOR A NEW ACCOUNT, COMPLETE THE
QUARTERLY APPROPRIATE SECTION ON THE FUND
APPLICATION.
(SMALL SOLID BULLET) FOR EXISTING ACCOUNTS, CALL
1-800-544-6666 OR VISIT FIDELITY'S WEB
SITE AT WWW.FIDELITY.COM 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
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 EVERY PAY PERIOD (SMALL SOLID BULLET) CHECK THE APPROPRIATE BOX ON THE FUND
APPLICATION, OR CALL 1-800-544-6666 OR
VISIT FIDELITY'S WEB SITE AT
WWW.FIDELITY.COM 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
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly, (small solid bullet) To establish, call 1-800-544-6666
bimonthly, after both accounts are opened.
quarterly, or (small solid bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
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A BECAUSE THEIR SHARE PRICES FLUCTUATE, THESE FUNDS MAY NOT BE
APPROPRIATE CHOICES FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net investment income
and capital gains to shareholders each year. For each fund,
income dividends are declared daily and paid monthly. Capital gains
are normally distributed in November and December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on
the application, call 1-800-544-6666 for instructions. Each fund
offers four options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions
will be automatically reinvested in additional shares of the fund. If
you do not indicate a choice on your application, you will be assigned
this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each
dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
If you select distribution option 2 or 3 and the U.S. Postal
Service does not deliver your checks, your election may be converted
to the Reinvestment Option. You will not receive interest on amounts
represented by uncashed distribution checks. To change your
distribution option, call Fidelity at 1-800-544-6666 .
Dividends will be reinvested at the fund's NAV on the last day of the
month. Capital gain distributions will be reinvested at the NAV as of
the date the fund deducts the distribution from its NAV. The mailing
of distribution checks will begin within seven days.
UNDERSTANDING
DISTRIBUTIONS
AS A FUND SHAREHOLDER, YOU ARE
ENTITLED TO YOUR SHARE OF THE
FUND'S NET INCOME AND GAINS
ON ITS INVESTMENTS. THE FUND
PASSES ITS EARNINGS ALONG TO ITS
INVESTORS AS DISTRIBUTIONS.
EACH FUND EARNS INTEREST FROM
ITS INVESTMENTS. THESE ARE
PASSED ALONG AS DIVIDEND
DISTRIBUTIONS. THE FUND MAY
REALIZE CAPITAL GAINS IF IT SELLS
SECURITIES FOR A HIGHER PRICE
THAN IT PAID FOR THEM. THESE
ARE PASSED ALONG AS CAPITAL
GAIN DISTRIBUTIONS.
(CHECKMARK)
TAXES
As with any investment, you should consider how your investment in a
fund will be taxed. If your account is not a tax- advantaged
retirement account, you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income
tax, and may also be subject to state or local taxes. If you live
outside the United States, your distributions could also be taxed by
the country in which you reside. Your distributions are taxable when
they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are
taxable as if they were paid on December 31.
For federal tax purposes, each fund's income and short-term capital
gains are distributed as dividends and taxed as ordinary income;
capital gain distributions are taxed as long-term capital gains. Every
January, Fidelity will send you and the IRS a statement showing the
tax characterization of distributions paid to you in the previous
year.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or
loss is the difference between the cost of your shares and the price
you receive when you sell them.
Whenever you sell shares of a fund, Fidelity will send you a
confirmation statement showing how many shares you sold and at what
price. You will also receive a consolidated transaction statement
every January. However, it is up to you or your tax preparer to
determine whether this sale resulted in a capital gain and, if so, the
amount of tax to be paid. Be sure to keep your regular account
statements; the information they contain will be essential in
calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares when a fund has realized but
not yet distributed capital gains, you will pay the full price for the
shares and then receive a portion of the price back in the form of a
taxable distribution.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on a
fund and its investments, and these taxes generally will reduce a
fund's distributions. However, if you meet certain holding period
requirements with respect to your fund shares, an offsetting tax
credit may be available to you. If you do not meet such holding period
requirements, you may still be entitled to a deduction for certain
foreign taxes. In either case, your tax statement will show more
taxable income or capital gains than were actually distributed by the
fund, but will also show the amount of the available offsetting credit
or deduction.
There are tax requirements that all funds must follow in order to
avoid federal taxation. In its effort to adhere to these requirements,
a fund may have to limit its investment activity in some types of
instruments.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. FSC normally calculates each fund's NAV as of the
close of business of the NYSE, normally 4:00 p.m. Eastern time.
EACH FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the
number of shares outstanding.
Each fund's assets are valued on the basis of information furnished by
a pricing service or market quotations, if available, or by another
method that the Board of Trustees believes accurately reflects fair
value. Short-term securities with remaining maturities of sixty days
or less for which quotations and information furnished by a pricing
service are not readily available are valued on the basis of amortized
cost. This method minimizes the effect of changes in a security's
market value. Foreign securities are valued on the basis of quotations
from the primary market in which they are traded, and are translated
from the local currency into U.S. dollars using current exchange
rates. If the values have been materially affected by events occurring
after the closing of a foreign market, assets may be valued by another
method that the Board of Trustees believes accurately reflects fair
value.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify
that your social security or taxpayer identification number is correct
and that you are not subject to 31% backup withholding for failing to
report income to the IRS. If you violate IRS regulations, the IRS can
require a fund to withhold 31% of your taxable distributions and
redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE OR ELECTRONICALLY.
Fidelity will not be responsible for any losses resulting from
unauthorized transactions if it follows reasonable security procedures
designed to verify the identity of the investor. Fidelity will request
personalized security codes or other information, and may also record
calls. For transactions conducted through the Internet, Fidelity
recommends the use of an Internet browser with 128-bit encryption.
You should verify the accuracy of your confirmation statements
immediately after you receive them. If you do not want the ability to
redeem and exchange by telephone, call Fidelity for instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during
periods of unusual market activity), consider placing your order by
mail or by visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT to suspend the offering of shares for a
period of time.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased
at the next NAV calculated after your investment is received in
proper form . Note the following:
(small solid bullet) All of your purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check,
each check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number
of checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will
be canceled and you could be liable for any losses or fees a fund or
its transfer agent has incurred.
(small solid bullet) Shares begin to earn dividends on the
first business day following the day of purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money
order, U.S. Treasury check, Federal Reserve check, or direct deposit
instead.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements
with FDC may enter confirmed purchase orders on behalf of customers by
phone, with payment to follow no later than the time when a fund is
priced on the following business day. If payment is not received by
that time, the financial institution could be held liable for
resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at
the next NAV calculated after your order is received in proper form.
Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to
you on the next business day, but if making immediate payment could
adversely affect a fund, it may take up to seven days to pay you.
(small solid bullet) Shares earn dividends through the day of
redemption; however, shares redeemed on a Friday or prior to a holiday
continue to earn dividends until the next business day.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day
after your phone call.
(small solid bullet) Each fund may hold payment on redemptions until
it is reasonably satisfied that investments made by check or Fidelity
Money Line have been collected, which can take up to seven business
days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays),
when trading on the NYSE is restricted, or as permitted by the SEC.
(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.
(small solid bullet) You will not receive interest on amounts
represented by uncashed redemption checks.
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 $5,000 FOR SPARTAN SHORT-TERM
BOND AND $10,000 FOR SPARTAN INVESTMENT GRADE BOND, 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 funds
without reimbursement from the funds. Qualified recipients are
securities dealers who have sold fund shares or others, including
banks and other financial institutions, under special arrangements in
connection with FDC's sales activities. In some instances, these
incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or
expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a
fund for shares of other Fidelity funds. However, you should note the
following:
(small solid bullet) The fund you are exchanging into must be
available for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification
number.
(small solid bullet) Before exchanging into a fund, read its
prospectus.
(small solid bullet) If you exchange into a fund with a sales charge,
you pay the percentage-point difference between that fund's sales
charge and any sales charge you have previously paid in connection
with the shares you are exchanging. For example, if you had already
paid a sales charge of 2% on your shares and you exchange them into a
fund with a 3% sales charge, you would pay an additional 1% sales
charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund
performance and shareholders, each fund reserves the right to
temporarily or permanently terminate the exchange privilege of any
investor who makes more than four exchanges out of the fund per
calendar year. Accounts under common ownership or control, including
accounts with the same taxpayer identification number, will be counted
together for purposes of the four exchange limit.
(small solid bullet) The exchange limit may be modified for accounts
in certain institutional retirement plans to conform to plan exchange
limits and Department of Labor regulations. See your plan materials
for further information.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would
be unable to invest the money effectively in accordance with its
investment objective and policies, or would otherwise potentially be
adversely affected.
(small solid bullet) Your exchanges may be restricted or refused if a
fund receives or anticipates simultaneous orders affecting significant
portions of the fund's assets. In particular, a pattern of exchanges
that coincides with a "market timing" strategy may be disruptive to a
fund.
Although the funds will attempt to give you prior notice whenever they
are reasonably able to do so, they may impose these restrictions at
any time. The funds reserve the right to terminate or modify the
exchange privilege in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may
impose administrative fees of up to 1.00% and trading fees of up to
3.00% of the amount exchanged. Check each fund's prospectus for
details.
Fidelity, Spartan, Fidelity Investments and (Pyramid) Design,
Fidelity Investments, Fidelity Money Line, TouchTone Xpress, Fidelity
Automatic Account Builder, and Directed Dividends are registered
trademarks of FMR Corp.
Portfolio Advisory Services is a service mark of FMR Corp.
This prospectus is printed on recycled paper using soy-based inks.
SPARTAN(registered trademark) SHORT-TERM BOND FUND
SPARTAN INVESTMENT GRADE BOND FUND
FUNDS OF FIDELITY CHARLES STREET TRUST
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 24, 1998
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the funds' current Prospectus
(dated November 24, 1998). Please retain this document for
future reference. The funds' Annual Reports are separate documents
supplied with this SAI. To obtain a free additional copy of the
Prospectus or an Annual Report, please call Fidelity(registered
trademark) at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations 30
Portfolio Transactions 35
Valuation 35
Performance 36
Additional Purchase, Exchange and Redemption Information 40
Distributions and Taxes 40
FMR 41
Trustees and Officers 41
Management Contracts 43
Distribution and Service Plans 45
Contracts with FMR Affiliates 45
Description of the Trust 45
Financial Statements 46
Appendix 46
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc. (FMR U.K.)
Fidelity Management & Research (Far East) Inc. (FMR Far East)
DISTRIBUTOR
Fidelity Distributors Corp. (FDC)
TRANSFER AGENT
Fidelity Service Company, Inc. (FSC)
SST/SIG-ptb- 1198
1.463700.101
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in
the Prospectus. Unless otherwise noted, whenever an investment policy
or limitation states a maximum percentage of a fund's assets
that may be invested in any security or other asset, or sets forth a
policy regarding quality standards, such standard or percentage
limitation will be determined immediately after and as a result of the
fund's acquisition of such security or other asset. Accordingly, any
subsequent change in values, net assets, or other circumstances will
not be considered when determining whether the investment complies
with the fund's investment policies and limitations.
A fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940 (the
1940 Act)) of the fund. However, except for the fundamental investment
limitations listed below, the investment policies and limitations
described in this SAI are not fundamental and may be changed without
shareholder approval.
INVESTMENT LIMITATIONS OF SPARTAN SHORT-TERM BOND FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed
by the U.S. Government or any of its agencies or instrumentalities)
if, as a result, (a) more than 5% of the fund's total assets would be
invested in the securities of that issuer, or (b) the fund would hold
more than 10% of the outstanding voting securities of that issuer;
(2) 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 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 SPARTAN INVESTMENT GRADE 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 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 (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"
beginning on page .
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related
risks. FMR may not buy all of these instruments or use all of these
techniques unless it believes that doing so will help a fund achieve
its goal.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be,
"affiliated persons" of the fund under the 1940 Act. These
transactions may involve repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50
largest U.S. banks (measured by deposits); municipal securities; U.S.
Government securities with affiliated financial institutions that are
primary dealers in these securities; short-term currency transactions;
and short-term borrowings. In accordance with exemptive orders issued
by the Securities and Exchange Commission (SEC), the Board of Trustees
has established and periodically reviews procedures applicable to
transactions involving affiliated financial institutions.
ASSET-BACKED SECURITIES represent interests in pools of
mortgages, loans, receivables or other assets. Payment of interest and
repayment of principal may be largely dependent upon the cash flows
generated by the assets backing the securities and, in certain cases,
supported by letters of credit, surety bonds, or other credit
enhancements. Asset-backed security values may also be affected by the
creditworthiness of the servicing agent for the pool, the originator
of the loans or receivables, or the entities providing the credit
enhancement. In addition, these securities may be subject to
prepayment risk.
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, the
purchaser assumes the rights and risks of ownership, including the
risks of price and yield fluctuations and the risk that the security
will not be issued as anticipated. Because payment for the
securities is not required until the delivery date , these risks
are in addition to the risks associated with a fund's investments. If
a fund remains substantially fully invested at a time when
delayed-delivery purchases are outstanding, the delayed-delivery
purchases may result in a form of leverage. When delayed-delivery
purchases are outstanding, a fund will set aside appropriate liquid
assets in a segregated custodial account to cover the purchase
obligations. When a fund has sold a security on a delayed-delivery
basis, the fund does not participate in further gains or losses with
respect to the security. If the other party to a delayed-delivery
transaction fails to deliver or pay for the securities, a fund could
miss a favorable price or yield opportunity or suffer a loss.
A fund may renegotiate a delayed delivery transaction and may sell the
underlying securities before delivery, which may result in capital
gains or losses for the fund.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign
currencies, and securities issued by U.S. entities with substantial
foreign operations may involve significant risks in addition to the
risks inherent in U.S. investments.
Foreign investments involve risks 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.
The risks of foreign investing may be magnified for investments in
emerging markets, which may have relatively unstable governments,
economies based on only a few industries, and securities markets that
trade a small number of securities.
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.
Successful use of currency management strategies will depend on FMR's
skill in analyzing currency values. Currency management strategies may
substantially change a fund's investment exposure to changes in
currency exchange rates and could result in losses to a fund if
currencies do not perform as FMR anticipates. For example, if a
currency's value rose at a time when FMR had hedged a fund by selling
that currency in exchange for dollars, a fund would not participate in
the currency's appreciation. If FMR hedges currency exposure through
proxy hedges, a fund could realize currency losses from both the hedge
and the security position if the two currencies do not move in tandem.
Similarly, if FMR increases a fund's exposure to a foreign currency
and that currency's value declines, a fund will realize a loss. There
is no assurance that FMR's use of currency management strategies will
be advantageous to a fund or that it will hedge at appropriate times.
FUNDS' RIGHTS AS A SHAREHOLDER. The fund s do not intend to
direct or administer the day-to-day operations of any company. A fund,
however, may exercise its rights as a shareholder and may communicate
its views on important matters of policy to management, the Board of
Directors, and shareholders of a company when FMR determines that such
matters could have a significant effect on the value of the fund's
investment in the company. The activities in which a fund may engage,
either individually or in conjunction with others, may include, among
others, supporting or opposing proposed changes in a company's
corporate structure or business activities; seeking changes in a
company's directors or management; seeking changes in a company's
direction or policies; seeking the sale or reorganization of the
company or a portion of its assets; or supporting or opposing
third-party takeover efforts. This area of corporate activity is
increasingly prone to litigation and it is possible that a fund could
be involved in lawsuits related to such activities. FMR will monitor
such activities with a view to mitigating, to the extent possible, the
risk of litigation against a fund and the risk of actual liability if
a fund is involved in litigation. No guarantee can be made, however,
that litigation against a fund will not be undertaken or liabilities
incurred.
FUTURES AND OPTIONS. The following paragraphs pertain to
futures and options: Asset Coverage for Futures and Options Positions,
Combined Positions, Correlation of Price Changes, Futures Contracts,
Futures Margin Payments, Limitations on Futures and Options
Transactions, Liquidity of Options and Futures Contracts, Options and
Futures Relating to Foreign Currencies, OTC Options, Purchasing Put
and Call Options, and Writing Put and Call Options.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The funds will
comply with guidelines established by the SEC with respect to
coverage of options and futures strategies by mutual funds and, if the
guidelines so require, will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held
in a segregated account cannot be sold while the futures or option
strategy is outstanding, unless they are replaced with other suitable
assets. As a result, there is a possibility that segregation of a
large percentage of a fund's assets could impede portfolio management
or the fund's ability to meet redemption requests or other current
obligations.
COMBINED POSITIONS involve purchasing and writing options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the
overall position. For example, purchasing a put option and writing a
call option on the same underlying instrument would construct a
combined position whose risk and return characteristics are similar to
selling a futures contract. Another possible combined position would
involve writing a call option at one strike price and buying a call
option at a lower price, to reduce the risk of the written call option
in the event of a substantial price increase. Because combined options
positions involve multiple trades, they result in higher transaction
costs and may be more difficult to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of
types of exchange-traded options and futures contracts, it is likely
that the standardized contracts available will not match a fund's
current or anticipated investments exactly. A fund may invest
in options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in
which the fund typically invests, which involves a risk that the
options or futures position will not track the performance of the
fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a
fund's investments well. Options and futures prices are affected by
such factors as current and anticipated short-term interest rates,
changes in volatility of the underlying instrument, and the time
remaining until expiration of the contract, which may not affect
security prices the same way. Imperfect correlation may also result
from differing levels of demand in the options and futures markets and
the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. A fund may purchase or sell
options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to
attempt to compensate for differences in volatility between the
contract and the securities, although this may not be successful in
all cases. If price changes in a fund's options or futures positions
are poorly correlated with its other investments, the positions may
fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
FUTURES CONTRACTS. In purchasing a futures contract, the
buyer agrees to purchase a specified underlying instrument at a
specified future date. In selling a futures contract, the
seller agrees to sell a specified underlying instrument at
a specified future date. The price at which the purchase and sale will
take place is fixed when the buyer and seller enter into the
contract. Some currently available futures contracts are based on
specific securities, such as U.S. Treasury bonds or notes, and some
are based on indices of securities prices . Futures can be held
until their delivery dates, or can be closed out before then if a
liquid secondary market is available.
The value of a futures contract tends to increase and decrease in
tandem with the value of its underlying instrument. Therefore,
purchasing futures contracts will tend to increase a fund's exposure
to positive and negative price fluctuations in the underlying
instrument, much as if it had purchased the underlying instrument
directly. When a fund sells a futures contract, by contrast, the value
of its futures position will tend to move in a direction contrary to
the market. Selling futures contracts, therefore, will tend to offset
both positive and negative market price changes, much as if the
underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract
is not required to deliver or pay for the underlying instrument unless
the contract is held until the delivery date. However, both the
purchaser and seller are required to deposit "initial margin" with a
futures broker, known as a futures commission merchant (FCM), when the
contract is entered into. Initial margin deposits are typically equal
to a percentage of the contract's value. If the value of either
party's position declines, that party will be required to make
additional "variation margin" payments to settle the change in value
on a daily basis. The party that has a gain may be entitled to receive
all or a portion of this amount. Initial and variation margin payments
do not constitute purchasing securities on margin for purposes of a
fund's investment limitations. In the event of the bankruptcy of an
FCM that holds margin on behalf of a fund, the fund may be entitled to
return of margin owed to it only in proportion to the amount received
by the FCM's other customers, potentially resulting in losses to the
fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading
Commission (CFTC) and the National Futures Association, which regulate
trading in the futures markets. The fund s 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 obligation upon settlement or
exercise of purchased futures contracts and written put options would
exceed 25% of its total assets; or (c) purchase call options if, as a
result, the current value of option premiums for call options
purchased by the fund would exceed 5% of the fund's total assets.
These limitations do not apply to options attached to or acquired or
traded together with their underlying securities, and do not apply to
securities that incorporate features similar to options.
The above limitations on the funds' investments in futures contracts
and options, and the funds' policies regarding futures contracts and
options discussed elsewhere in this SAI, may be changed as regulatory
agencies permit.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid secondary market will exist for any particular options or
futures contract at any particular time. Options may have relatively
low trading volume and liquidity if their strike prices are not close
to the underlying instrument's current price. In addition, exchanges
may establish daily price fluctuation limits for options and futures
contracts, and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days
when the price fluctuation limit is reached or a trading halt is
imposed, it may be impossible to enter into new positions or close out
existing positions. If the secondary market for a contract is not
liquid because of price fluctuation limits or otherwise, it could
prevent prompt liquidation of unfavorable positions, and potentially
could require a fund to continue to hold a position until delivery or
expiration regardless of changes in its value. As a result, a fund's
access to other assets held to cover its options or futures positions
could also be impaired.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except
that they are traded on exchanges (and have margin requirements) and
are standardized as to contract size and delivery date. Most currency
futures contracts call for payment or delivery in U.S. dollars. The
underlying instrument of a currency option may be a foreign currency,
which generally is purchased or delivered in exchange for U.S.
dollars, or may be a futures contract. The purchaser of a currency
call obtains the right to purchase the underlying currency, and the
purchaser of a currency put obtains the right to sell the underlying
currency.
The uses and risks of currency options and futures are similar to
options and futures relating to securities or indices, as discussed
above. A fund may purchase and sell currency futures
and may purchase and write currency options to increase or decrease
its exposure to different foreign currencies. Currency options may
also be purchased or written in conjunction with each other or with
currency futures or forward contracts. Currency futures and
options values can be expected to correlate with exchange rates, but
may not reflect other factors that affect the value of a fund's
investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not
protect a fund against a price decline resulting from deterioration in
the issuer's creditworthiness. Because the value of a fund's
foreign-denominated investments changes in response to many factors
other than exchange rates, it may not be possible to match the amount
of currency options and futures to the value of the fund's investments
exactly over time.
OTC OPTIONS. Unlike exchange-traded options, which are standardized
with respect to the underlying instrument, expiration date, contract
size, and strike price, the terms of over-the-counter (OTC) options
(options not traded on exchanges) generally are established through
negotiation with the other party to the option contract. While this
type of arrangement allows the purchaser or writer greater
flexibility to tailor an option to its needs, OTC options generally
involve greater credit risk than exchange-traded options, which are
guaranteed by the clearing organization of the exchanges where they
are traded.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the
purchaser obtains the right (but not the obligation) to sell the
option's underlying instrument at a fixed strike price. In return for
this right, the purchaser pays the current market price for the option
(known as the option premium). Options have various types of
underlying instruments, including specific securities, indices of
securities prices, and futures contracts. The purchaser may
terminate its position in a put option by allowing it to expire or by
exercising the option. If the option is allowed to expire, the
purchaser will lose the entire premium. If the option is
exercised, the purchaser completes the sale of the underlying
instrument at the strike price. A purchaser may also terminate
a put option position by closing it out in the secondary market at its
current price, if a liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if
security prices fall substantially. However, if the underlying
instrument's price does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss
(limited to the amount of the premium, plus related transaction
costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right
to purchase, rather than sell, the underlying instrument at the
option's strike price. A call buyer typically attempts to participate
in potential price increases of the underlying instrument with risk
limited to the cost of the option if security prices fall. At the same
time, the buyer can expect to suffer a loss if security prices do not
rise sufficiently to offset the cost of the option.
WRITING PUT AND CALL OPTIONS. The writer of a put or call
option takes the opposite side of the transaction from the
option's purchaser. In return for receipt of the premium, the
writer assumes the obligation to pay the strike price for the
option's underlying instrument if the other party to the option
chooses to exercise it. The writer may seek to terminate a position
in a put option before exercise by closing out the option in the
secondary market at its current price. If the secondary market is not
liquid for a put option, however, the writer must continue to
be prepared to pay the strike price while the option is outstanding,
regardless of price changes, and must continue to set aside assets to
cover its position. When writing an option on a futures contract, a
fund will be required to make margin payments to an FCM as described
above for futures contracts.
If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it
is likely that the writer will also profit, because it should be able
to close out the option at a lower price. If security prices fall, the
put writer would expect to suffer a loss. This loss should be less
than the loss from purchasing the underlying instrument directly,
however, because the premium received for writing the option should
mitigate the effects of the decline.
Writing a call option obligates the writer to sell or deliver the
option's underlying instrument, in return for the strike price, upon
exercise of the option. The characteristics of writing call options
are similar to those of writing put options, except that writing calls
generally is a profitable strategy if prices remain the same or fall.
Through receipt of the option premium, a call writer mitigates the
effects of a price decline. At the same time, because a call writer
must be prepared to deliver the underlying instrument in return for
the strike price, even if its current value is greater, a call writer
gives up some ability to participate in security price increases.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed
of in the ordinary course of business at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees,
FMR determines the liquidity of a fund's investments and, through
reports from FMR, the Board monitors investments in illiquid
instruments. In determining the liquidity of a fund's investments, FMR
may consider various factors, including (1) the frequency of trades
and quotations, (2) the number of dealers and prospective purchasers
in the marketplace, (3) dealer undertakings to make a market, (4) the
nature of the security (including any demand or tender features), and
(5) the nature of the marketplace for trades (including the ability to
assign or offset the fund's rights and obligations relating to the
investment).
Investments currently considered by FMR to be illiquid include
repurchase agreements not entitling the holder to repayment of
principal and payment of interest within seven days, non-government
stripped fixed-rate mortgage-backed securities, and over-the-counter
options. Also, FMR may determine some restricted securities,
government-stripped fixed-rate mortgage-backed securities, loans and
other direct debt instruments, emerging market securities, and swap
agreements to be illiquid. However, with respect to over-the-counter
options a fund writes, all or a portion of the value of the underlying
instrument may be illiquid depending on the assets held to cover the
option and the nature and terms of any agreement the fund may have to
close out the option before expiration.
In the absence of market quotations, illiquid investments are priced
at fair value as determined in good faith by a committee appointed by
the Board of Trustees.
INDEXED SECURITIES are instruments whose prices are indexed to
the prices of other securities, securities indices, currencies,
precious metals or other commodities or other financial indicators.
Indexed securities typically, but not always, are debt securities or
deposits whose value at maturity or coupon rate is determined by
reference to a specific instrument or statistic.
Mortgage-indexed securities, for example, could be structured to
replicate the performance of mortgage securities and the
characteristics of direct ownership.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which
they are indexed, and may also be influenced by interest rate changes
in the United States and abroad. Indexed securities may be more
volatile than the underlying instruments. Indexed securities are
also subject to the credit risks associated with the issuer of
the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Recent issuers of indexed
securities have included banks, corporations, and certain U.S.
Government agencies.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive
order issued by the SEC, a fund may lend money to, and
borrow money from, other funds advised by FMR or its affiliates. A
fund will lend through the program only when the returns are higher
than those available from an investment in repurchase agreements, and
will borrow through the program only when the costs are equal to or
lower than the cost of bank loans. Interfund loans and borrowings
normally extend overnight, but can have a maximum duration of seven
days. Loans may be called on one day's notice. A fund may have to
borrow from a bank at a higher interest rate if an interfund loan is
called or not renewed. Any delay in repayment to a lending fund could
result in a lost investment opportunity or additional borrowing costs.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. Direct debt instruments are
interests in amounts owed by a corporate, governmental, or other
borrower to lenders or lending syndicates (loans and loan
participations), to suppliers of goods or services (trade claims or
other receivables), or to other parties. Direct debt instruments
involve a risk of loss in case of default or insolvency of the
borrower and may offer less legal protection to the purchaser in the
event of fraud or misrepresentation. In addition, loan participations
involve a risk of insolvency of the lending bank or other financial
intermediary. Direct debt instruments may also include standby
financing commitments that obligate the purchaser to supply additional
cash to the borrower on demand.
LOWER-QUALITY DEBT SECURITIES. Lower-quality debt securities have poor
protection with respect to the payment of interest and repayment of
principal, or may be in default. These securities are often considered
to be speculative and involve greater risk of loss or price changes
due to changes in the issuer's capacity to pay. The market prices of
lower-quality debt securities may fluctuate more than those of
higher-quality debt securities and may decline significantly in
periods of general economic difficulty, which may follow periods of
rising interest rates.
While the market for high-yield corporate debt securities has been in
existence for many years and has weathered previous economic
downturns, the 1980s brought a dramatic increase in the use of such
securities to fund highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication
of the future performance of the high-yield bond market, especially
during periods of economic recession.
The market for lower-quality debt securities may be thinner and less
active than that for higher-quality debt securities, which can
adversely affect the prices at which the former are sold. If market
quotations are not available, lower-quality debt securities will be
valued in accordance with procedures established by the Board of
Trustees, including the use of outside pricing services. Judgment
plays a greater role in valuing high-yield debt securities than is the
case for securities for which more external sources for quotations and
last-sale information are available. Adverse publicity and changing
investor perceptions may affect the liquidity of lower-quality debt
securities and the ability of outside pricing services to value
lower-quality debt securities.
Since the risk of default is higher for lower-quality debt securities,
FMR's research and credit analysis are an especially important part of
managing securities of this type. FMR will attempt to identify those
issuers of high-yielding securities whose financial condition is
adequate to meet future obligations, has improved, or is expected to
improve in the future. FMR's analysis focuses on relative values based
on such factors as interest or dividend coverage, asset coverage,
earnings prospects, and the experience and managerial strength of the
issuer.
A fund may choose, at its expense or in conjunction with
others, to pursue litigation or otherwise to exercise its rights as a
security holder to seek to protect the interests of security holders
if it determines this to be in the best interest of the fund's
shareholders.
MORTGAGE-BACKED SECURITIES are issued by government and
non-government entities such as banks, mortgage lenders, or other
institutions. A mortgage-backed security is an obligation of the
issuer backed by a mortgage or pool of mortgages or a direct interest
in an underlying pool of mortgages. Some mortgage-backed securities,
such as collateralized mortgage obligations (or "CMOs"), make payments
of both principal and interest at a range of specified intervals;
others make semiannual interest payments at a predetermined rate and
repay principal at maturity (like a typical bond). Mortgage-backed
securities are based on different types of mortgages, including those
on commercial real estate or residential properties. Stripped
mortgage-backed securities are created when the interest and principal
components of a mortgage-backed security are separated and sold as
individual securities. In the case of a stripped mortgage-backed
security, the holder of the "principal-only" security (PO) receives
the principal payments made by the underlying mortgage, while the
holder of the "interest-only" security (IO) receives interest payments
from the same underlying mortgage.
The value of mortgage-backed securities may change due to shifts in
the market's perception of issuers and changes in interest
rates. In addition, regulatory or tax changes may adversely affect
the mortgage- backed securities market as a whole.
Non-government mortgage-backed securities may offer higher yields than
those issued by government entities, but also may be subject to
greater price changes than government issues. Mortgage-backed
securities are subject to prepayment risk, which is the risk that
early principal payments made on the underlying mortgages, usually in
response to a reduction in interest rates, will result in the return
of principal to the investor, causing it to be invested subsequently
at a lower current interest rate. Alternatively, in a rising interest
rate environment, mortgage-backed security values may be adversely
affected when prepayments on underlying mortgages do not occur as
anticipated, resulting in the extension of the security's effective
maturity and the related increase in interest rate sensitivity of a
longer-term instrument. The prices of stripped mortgage-backed
securities tend to be more volatile in response to changes in interest
rates than those of non-stripped mortgage-backed securities.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is
unrelated to the coupon rate or maturity of the purchased security.
As protection against the risk that the original seller will
not fulfill its obligation, the securities are held in a separate
account at a bank, marked-to-market daily, and maintained at a value
at least equal to the sale price plus the accrued incremental amount.
While it does not presently appear possible to eliminate all risks
from these transactions (particularly the possibility that the value
of the underlying security will be less than the resale price, as well
as delays and costs to a fund in connection with bankruptcy
proceedings), the funds will engage in repurchase agreement
transactions with parties whose creditworthiness has been reviewed and
found satisfactory by FMR.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part
of the registration expense and a considerable period may elapse
between the time it decides to seek registration and the time it may
be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to
develop, a fund might obtain a less favorable price than prevailed
when it decided to seek registration of the security.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
fund sells a security to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase that
security at an agreed-upon price and time. While a reverse
repurchase agreement is outstanding, a fund will maintain
appropriate liquid assets in a segregated custodial account to cover
its obligation under the agreement. The funds will enter into
reverse repurchase agreements with parties whose creditworthiness has
been reviewed and found satisfactory by FMR. Such transactions may
increase fluctuations in the market value of fund assets and may be
viewed as a form of leverage.
SECURITIES LENDING. A fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity
Brokerage Services, Inc. (FBSI). FBSI is a member of the New York
Stock Exchange and a subsidiary of FMR Corp.
Securities lending allows a fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there
may be delays in the recovery of loaned securities, or even a loss of
rights in collateral supplied should the borrower fail financially,
loans will be made only to parties deemed by FMR to be of good
standing. Furthermore, they will only be made if, in FMR's judgment,
the consideration to be earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that a
fund may engage in loan transactions only under the following
conditions: (1) the fund must receive 100% collateral in the form of
cash or cash equivalents (e.g., U.S. Treasury bills or notes) from the
borrower; (2) the borrower must increase the collateral whenever the
market value of the securities loaned (determined on a daily basis)
rises above the value of the collateral; (3) after giving notice, the
fund must be able to terminate the loan at any time; (4) the fund must
receive reasonable interest on the loan or a flat fee from the
borrower, as well as amounts equivalent to any dividends, interest, or
other distributions on the securities loaned and to any increase in
market value; (5) the fund may pay only reasonable custodian fees in
connection with the loan; and (6) the Board of Trustees must be able
to vote proxies on the securities loaned, either by terminating the
loan or by entering into an alternative arrangement with the borrower.
Cash received through loan transactions may be invested in other
eligible securities. Investing this cash subjects that investment, as
well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
SOURCES OF CREDIT OR LIQUIDITY SUPPORT. FMR may rely on its
evaluation of the credit of a bank or other entity in determining
whether to purchase a security supported by a letter of credit
guarantee, put or demand feature, insurance or other source of credit
or liquidity. In evaluating the credit of a foreign bank or other
foreign entities, FMR will consider whether adequate public
information about the entity is available and whether the entity may
be subject to unfavorable political or economic developments, currency
controls, or other government restrictions that might affect its
ability to honor its commitment.
STRIPPED GOVERNMENT SECURITIES. Stripped government
securities are created by separating the income and principal
components of a U.S. Government security and selling them separately.
STRIPS (Separate Trading of Registered Interest and Principal of
Securities) are created when the coupon payments and the principal
payment are stripped from an outstanding U.S. Treasury security by a
Federal Reserve Bank.
Privately stripped government securities are created when a dealer
deposits a U.S. Treasury security or other U.S. Government security
with a custodian for safekeeping. The custodian issues separate
receipts for the coupon payments and the principal payment, which the
dealer then sells.
SWAP AGREEMENTS can be individually negotiated and structured to
include exposure to a variety of different types of investments or
market factors. Depending on their structure, swap agreements may
increase or decrease a fund's exposure to long- or short-term interest
rates (in the United States or abroad), foreign currency values,
mortgage securities, corporate borrowing rates, or other factors such
as security prices or inflation rates. Swap agreements can take many
different forms and are known by a variety of names.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a
fee by the other party. For example, the buyer of an interest rate cap
obtains the right to receive payments to the extent that a specified
interest rate exceeds an agreed-upon level, while the seller of an
interest rate floor is obligated to make payments to the extent that a
specified interest rate falls below an agreed-upon level. An interest
rate collar combines elements of buying a cap and selling a floor.
Swap agreements will tend to shift a fund's investment exposure from
one type of investment to another. For example, if the fund agreed to
exchange payments in dollars for payments in foreign currency, the
swap agreement would tend to decrease the fund's exposure to U.S.
interest rates and increase its exposure to foreign currency and
interest rates. Caps and floors have an effect similar to buying or
writing options. Depending on how they are used, swap agreements may
increase or decrease the overall volatility of a fund's investments
and its share price and yield.
The most significant factor in the performance of swap agreements is
the change in the specific interest rate, currency, or other factors
that determine the amounts of payments due to and from a fund. If a
swap agreement calls for payments by the fund, the fund must be
prepared to make such payments when due. In addition, if the
counterparty's creditworthiness declined, the value of a swap
agreement would be likely to decline, potentially resulting in
losses. A fund may be able to eliminate its exposure
under a swap agreement either by assignment or other disposition, or
by entering into an offsetting swap agreement with the same party or a
similarly creditworthy party.
A fund will maintain appropriate liquid assets in a segregated
custodial account to cover its current obligations under swap
agreements. If a fund enters into a swap agreement on a net basis, it
will segregate assets with a daily value at least equal to the excess,
if any, of the fund's accrued obligations under the swap agreement
over the accrued amount the fund is entitled to receive under the
agreement. If a fund enters into a swap agreement on other than a net
basis, it will segregate assets with a value equal to the full amount
of the fund's accrued obligations under the agreement.
VARIABLE AND FLOATING RATE SECURITIES provide for periodic
adjustments in the interest rate paid on the security. Variable rate
securities provide for a specified periodic adjustment in the interest
rate, while floating rate securities have interest rates that
change whenever there is a change in a designated benchmark rate.
Some variable or floating rate securities are structured with put
features that permit holders to demand payment of the unpaid principal
balance plus accrued interest from the issuers or certain financial
intermediaries.
ZERO COUPON BONDS do not make interest payments; instead,
they are sold at a discount from their face value and are redeemed at
face value when they mature. Because zero coupon bonds do not pay
current income, their prices can be more volatile 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.
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. 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; and the reasonableness of any
commissions.
If FMR grants investment management authority to a sub-adviser (see
the section entitled "Management Contracts"), that sub-adviser
is authorized to place orders for the purchase and sale of
portfolio securities, and will do so in accordance with the
policies described above.
Generally, commissions for investments traded on foreign exchanges
will be higher than for investments traded on U.S. exchanges and may
not be subject to negotiation.
Each fund may execute portfolio transactions with
broker-dealers who provide research and execution services to the fund
or other accounts over which FMR or its affiliates exercise investment
discretion. Such services may include advice concerning the value of
securities; the advisability of investing in, purchasing, or selling
securities; and the availability of securities or the purchasers or
sellers of securities. In addition, such broker-dealers may furnish
analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and performance of
accounts; and effect securities transactions and perform functions
incidental thereto (such as clearance and settlement).
For transactions in fixed-income securities, FMR's selection of
broker-dealers is generally based on the availability of a security
and its price and, to a lesser extent, on the overall quality of
execution and other services, including research, provided by the
broker-dealer.
The receipt of research from broker-dealers that execute transactions
on behalf of a fund may be useful to FMR in rendering investment
management services to that fund or its other clients, and conversely,
such research provided by broker-dealers who have executed transaction
orders on behalf of other FMR clients may be useful to FMR in carrying
out its obligations to a fund. The receipt of such research has not
reduced FMR's normal independent research activities; however, it
enables FMR to avoid the additional expenses that could be incurred if
FMR tried to develop comparable information through its own efforts.
Fixed-income securities are generally purchased from an issuer or
underwriter acting as principal for the securities, on a net basis
with no brokerage commission paid. However, the dealer is compensated
by a difference between the security's original purchase price and the
selling price, the so-called "bid-asked spread." Securities may also
be purchased from underwriters at prices that include underwriting
fees.
Subject to applicable limitations of the federal securities laws, a
fund may pay a broker-dealer commissions for agency 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 that fund or its
other clients. In reaching this determination, FMR will not attempt to
place a specific dollar value on the brokerage and research services
provided, or to determine what portion of the compensation should be
related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided
assistance in the distribution of shares of the funds or shares of
other Fidelity funds to the extent permitted by law. FMR may use
research services provided by and place agency transactions with
National Financial Services Corporation (NFSC) and Fidelity Brokerage
Services Japan LLC (FBSJ), indirect subsidiaries of FMR Corp., if the
commissions are fair, reasonable, and comparable to commissions
charged by non-affiliated, qualified brokerage firms for similar
services. Prior to December 9, 1997, FMR used research services
provided by and placed agency transactions with Fidelity Brokerage
Services (FBS), an indirect subsidiary of FMR Corp.
FMR may allocate brokerage transactions to broker-dealers (including
affiliates of FMR) who have entered into arrangements with FMR under
which the broker-dealer allocates a portion of the commissions paid by
a fund toward the reduction of that fund's expenses. The transaction
quality must, however, be comparable to those of other qualified
broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members
of national securities exchanges from executing exchange transactions
for accounts which they or their affiliates manage, unless certain
requirements are satisfied. Pursuant to such requirements, the Board
of Trustees has authorized NFSC to execute portfolio transactions on
national securities exchanges in accordance with approved procedures
and applicable SEC rules.
The Trustees of each fund periodically review FMR's performance of its
responsibilities in connection with the placement of portfolio
transactions on behalf of the fund and review the commissions paid by
the fund over representative periods of time to determine if they are
reasonable in relation to the benefits to the fund.
For the fiscal periods ended September 30, 1998 and 1997 , the
portfolio turnover rates were 117 % and 105 %,
respectively, for Spartan Short-Term Bond and 222 % and
194 % for Spartan Investment Grade Bond. Because a high turnover
rate increases transaction costs and may increase taxable gains,
carefully weighs the anticipated benefits of short-term investing
against these consequences.
For the fiscal years ended September 30, 1998, 1997, and 1996
Spartan Short-Term Bond and Spartan Investment Grade Bond paid no
brokerage commissions.
For the fiscal year ended September 30, 1998 the funds paid no
brokerage commissions to firms that provided research services.
The Trustees of each fund have approved procedures in conformity
with Rule 10f-3 under the 1940 Act whereby a fund may purchase
securities that are offered in underwritings in which an affiliate of
FMR participates. These procedures prohibit the funds from directly or
indirectly benefiting an FMR affiliate in connection with such
underwritings. In addition, for underwritings where an FMR affiliate
participates as a principal underwriter, certain restrictions may
apply that could, among other things, limit the amount of securities
that the funds could purchase in the underwriting.
From time to time the Trustees will review whether the recapture for
the benefit of the funds of some portion of the brokerage commissions
or similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at
present no other recapture arrangements are in effect. The Trustees
intend to continue to review whether recapture opportunities are
available and are legally permissible and, if so, to determine in the
exercise of their business judgment whether it would be advisable for
each fund to seek such recapture.
Although the Trustees and officers of each fund are substantially the
same as those of other funds managed by FMR or its affiliates ,
investment decisions for each fund are made independently from those
of other funds managed by FMR or accounts managed by FMR affiliates.
It sometimes happens that the same security is held in the portfolio
of more than one of these funds or accounts. Simultaneous transactions
are inevitable when several funds and accounts are managed by the same
investment adviser, particularly when the same security is suitable
for the investment objective of more than one fund or account.
When two or more funds are simultaneously engaged in the purchase or
sale of the same security, the prices and amounts are allocated in
accordance with procedures believed to be appropriate and equitable
for each fund. In some cases this system could have a detrimental
effect on the price or value of the security as far as each fund is
concerned. In other cases, however, the ability of the funds to
participate in volume transactions will produce better executions and
prices for the funds. It is the current opinion of the Trustees that
the desirability of retaining as investment adviser to each fund
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
VALUATION
Fidelity Service Company, Inc. (FSC) normally determines each fund's
net asset value per share (NAV) as of the close of the New York Stock
Exchange (NYSE) (normally 4:00 p.m. Eastern time). The valuation of
portfolio securities is determined as of this time for the purpose of
computing each fund's NAV.
Portfolio securities are valued by various methods depending on the
primary market or exchange on which they trade. Fixed-income
securities and other assets for which market quotations are readily
available may be valued at market values determined by such
securities' most recent bid prices (sales prices if the principal
market is an exchange) in the principal market in which they normally
are traded, as furnished by recognized dealers in such securities or
assets.
Or, fixed-income securities and convertible securities may be valued
on the basis of information furnished by a pricing service that uses a
valuation matrix which incorporates both dealer-supplied valuations
and electronic data processing techniques. Use of pricing services has
been approved by the Board of Trustees. A number of pricing services
are available, and the funds may use various pricing services or
discontinue the use of any pricing service.
Futures contracts and options are valued on the basis of market
quotations, if available. Securities of other open-end investment
companies are valued at their respective NAVs.
Foreign securities are valued based on prices furnished by independent
brokers or quotation services which express the value of securities in
their local currency. FSC gathers all exchange rates daily at the
close of the NYSE using the last quoted price on the local currency
and then translates the value of foreign securities from their local
currencies into U.S. dollars. Any changes in the value of forward
contracts due to exchange rate fluctuations and days to maturity are
included in the calculation of NAV. If an extraordinary event that is
expected to materially affect the value of a portfolio security occurs
after the close of an exchange on which that security is traded, then
that security will be valued as determined in good faith by a
committee appointed by the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less
for which market quotations and information furnished by a pricing
service are not readily available are valued either at amortized cost
or at original cost plus accrued interest, both of which approximate
current value. In addition, securities and other assets for which
there is no readily available market value may be valued in good faith
by a committee appointed by the Board of Trustees. The procedures set
forth above need not be used to determine the value of the securities
owned by a fund if, in the opinion of a committee appointed by
the Board of Trustees, some other method would more accurately reflect
the fair market value of such securities.
PERFORMANCE
The funds may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is
not intended to indicate future returns. Each fund's share price,
yield, and total return fluctuate in response to market conditions and
other factors, and the value of fund shares when redeemed may be more
or less than their original cost.
YIELD CALCULATIONS. Yields for a fund are computed by dividing the
fund's interest and income for a given 30-day or one-month period, net
of expenses, by the average number of shares entitled to receive
distributions during the period, dividing this figure by the fund's
net asset value per share (NAV) at the end of the period, and
annualizing the result (assuming compounding of income) in order to
arrive at an annual percentage rate. Income is calculated for purposes
of yield quotations in accordance with standardized methods applicable
to all stock and bond funds. In general, interest income is reduced
with respect to bonds trading at a premium over their par value by
subtracting a portion of the premium from income on a daily basis, and
is increased with respect to bonds trading at a discount by adding a
portion of the discount to daily income. For a fund's investments
denominated in foreign currencies, income and expenses are calculated
first in their respective currencies, and then are converted to U.S.
dollars, either when they are actually converted or at the end of the
30-day or one month period, whichever is earlier. Income is
adjusted to reflect gains and losses from principal repayments
received by a fund with respect to mortgage-related securities and
other asset-backed securities. Other capital gains and losses
generally are excluded from the calculation as are gains and losses
from currency exchange rate fluctuations.
Income calculated for the purposes of calculating a fund's yield
differs from income as determined for other accounting purposes.
Because of the different accounting methods used, and because of the
compounding of income assumed in yield calculations, a fund's yield
may not equal its distribution rate, the income paid to your account,
or the income reported in the fund's financial statements.
In calculating a fund's yield, a fund may from time to time use a
portfolio security's coupon rate instead of its yield to maturity in
order to reflect the risk premium on that security. This practice will
have the effect of reducing a fund's yield.
Yield information may be useful in reviewing a fund's performance and
in providing a basis for comparison with other investment
alternatives. However, a fund's yield fluctuates, unlike investments
that pay a fixed interest rate over a stated period of time. When
comparing investment alternatives, investors should also note the
quality and maturity of the portfolio securities of respective
investment companies they have chosen to consider.
Investors should recognize that in periods of declining interest rates
a fund's yield will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates a fund's yield will
tend to be somewhat lower. Also, when interest rates are falling, the
inflow of net new money to a fund from the continuous sale of
its shares will likely be invested in instruments producing lower
yields than the balance of the fund's holdings, thereby reducing the
fund's current yield. In periods of rising interest rates, the
opposite can be expected to occur.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect
all aspects of a fund's return, including the effect of reinvesting
dividends and capital gain distributions, and any change in a fund's
NAV over a stated period. Average annual total returns are calculated
by determining the growth or decline in value of a hypothetical
historical investment in a fund over a stated period, and then
calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had
been constant over the period. For example, a cumulative total return
of 100% over ten years would produce an average annual total return of
7.18%, which is the steady annual rate of return that would equal 100%
growth on a compounded basis in ten years. Average annual total
returns covering periods of less than one year are calculated by
determining a fund'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 fund's performance is
not constant over time, but changes from year to year, and that
average annual total returns represent averaged figures as opposed to
the actual year-to-year performance of a fund.
In addition to average annual total returns, the fund may quote
unaveraged or cumulative total returns reflecting the simple change in
value of an investment over a stated period. Average annual and
cumulative total returns may be quoted as a percentage or as a dollar
amount, and may be calculated for a single investment, a series of
investments, or a series of redemptions, over any time period. Total
returns may be broken down into their components of income and capital
(including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions
to total return. Total returns may be quoted on a before-tax or
after-tax basis. Total returns, yields, and other performance
information may be quoted numerically or in a table, graph, or similar
illustration.
NET ASSET VALUE. Charts and graphs using a fund's net asset values,
adjusted net asset values, and benchmark indices may be used to
exhibit performance. An adjusted NAV includes any distributions paid
by a fund and reflects all elements of its return. Unless otherwise
indicated, a fund's adjusted NAVs are not adjusted for sales charges,
if any.
CALCULATING HISTORICA L FUND RESULTS. The following table
shows performance for each fund calculated including certain fund
expenses.
HISTORICAL FUND RESULTS. The following tables show each fund's yield
and total return for the periods ended September 30, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Returns Cumulative Total Returns
Thirty-Day One Five Life of One Five Life of
Yield Year Years Fund* Year Years Fund*
Spartan Short-Term Bond 5.42 % 7.33% 4.73% 5 .22% 7.33% 25.98% 35.67%
Spartan Investment Grade Bond 5.69 % 10.95% 6.33% 8.22% 10.95% 35.94% 60.64%
</TABLE>
* From October 1, 1992 (commencement of operations).
If FMR had not reimbursed certain fund expenses during these periods,
each fund's total returns would have been lower.
If FMR had not reimbursed certain fund expenses during these periods,
each fund's yield would have been 5.17 % and 5.50%, for
Spartan Short-Term Bond and Spartan Investment Grade Bond,
respectively.
The following table shows the income and capital elements of each
fund's cumulative total return. The table compares each fund's return
to the record of the Standard & Poor's 500 Index (S&P 500), the Dow
Jones Industrial Average (DJIA), and the cost of living, as measured
by the Consumer Price Index (CPI), over the same period. The CPI
information is as of the month-end closest to the initial investment
date for each fund. The S&P 500 and DJIA comparisons are provided to
show how each fund's total return compared to the record of a broad
unmanaged index of common stocks and a narrower set of stocks of major
industrial companies, respectively, over the same period. Because each
fund invests in fixed-income securities, common stocks represent a
different type of investment from the funds. Common stocks generally
offer greater growth potential than the funds, but generally
experience greater price volatility, which means greater potential for
loss. In addition, common stocks generally provide lower income than
fixed-income investments such as the funds. The S&P 500 and DJIA
returns are based on the prices of unmanaged groups of stocks and,
unlike each fund's returns, do not include the effect of brokerage
commissions or other costs of investing.
The following tables show the growth in value of a hypothetical
$10,000 investment in each fund during the life of each fund, assuming
all distributions were reinvested. Total returns are based on past
results and are not an indication of future performance. Tax
consequences of different investments have not been factored into the
figures below.
During the period from October 1, 1992 (commencement of operations) to
September 30, 1998 , a hypothetical $10,000 investment in
Spartan Short-Term Bond Fund would have grown to $13,567.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SPARTAN SHORT-TERM BOND FUND INDICES
Period Value of Value of Value of Total S&P 500 DJIA Cost of
Ended Initial Reinvested Reinvested Value Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1998 $ 9,120 $ 4,437 $ 10 $ 13,567 $ 28,119 $ 27,698 $ 11,599
1997 $ 9,050 $ 3,581 $ 10 $ 12,641 $ 25,786 $ 27,588 $ 11,408
1996 $ 9,020 $ 2,784 $ 10 $ 11,814 $ 18,360 $ 20,045 $ 11,168
1995 $ 9,130 $ 2,061 $ 10 $ 11,201 $ 15,258 $ 15,969 $ 10,842
1994 $ 9,330 $ 1,395 $ 10 $ 10,735 $ 11,759 $ 1 2,494 $ 10,573
1993* $ 9,990 $ 779 $ 0 $ 10,769 $ 11,342 $ 11,248 $ 10,269
</TABLE>
* From October 1, 1992 (commencement of fund operations)
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Spartan
Short-Term Bond Fund on October 1, 1992, the net amount invested in
fund shares was $10,000. The cost of the initial investment ($10,000),
together with the aggregate cost of reinvested dividends and capital
gain distributions for the period covered (their cash value at the
time they were reinvested), amounted to $14,529. If
distributions had not been reinvested, the amount of distributions
earned from the fund over time would have been smaller, and cash
payments for the period would have amounted to $3,703 for dividends
and $10 for capital gain distributions .
During the period from October 1, 1992 (commencement of operations) to
September 30, 1998 , a hypothetical $10,000 investment in
Spartan Investment Grade Bond would have grown to $16,064.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SPARTAN INVESTMENT GRADE BOND FUND INDICES
Period Value of Value of Value of Total S&P 500 DJIA Cost of
Ended Initial Reinvested Reinvested Value Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1998 $ 10,700 $ 5,31 3 $ 51 $ 16,064 $ 28,119 $ 27,698 $ 11,599
1997 $ 10,250 $ 4,180 $ 49 $ 14,479 $ 25,786 $ 27,588 $ 11,408
1996 $ 9,980 $ 3,204 $ 47 $ 13,231 $ 18,360 $ 20,045 $ 11,168
1995 $ 10,170 $ 2,448 $ 48 $ 12,666 $ 15,258 $ 15,969 $ 10,842
1994 $ 9,510 $ 1,499 $ 10 $ 11,019 $ 11,759 $ 12,494 $ 10,573
1993* $ 10,940 $ 877 $ 0 $ 11,817 $ 11,342 $ 11,248 $ 10,269
</TABLE>
* From October 1, 1992 (commencement of fund operations)
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Spartan
Investment Grade Bond Fund on October 1, 1992, the net amount invested
in fund shares was $10,000. The cost of the initial investment
($10,000), together with the aggregate cost of reinvested dividends
and capital gain distributions for the period covered (their cash
value at the time they were reinvested), amounted to $15,087.
If distributions had not been reinvested, the amount of distributions
earned from the fund over time would have been smaller, and cash
payments for the period would have amounted to $4,093 for
dividends and $40 for capital gains distributions .
PERFORMANCE COMPARISONS. The fund's performance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. 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. In addition to the mutual
fund rankings, a fund's performance may be compared to stock, bond,
and money market mutual fund performance indices prepared by Lipper or
other organizations. When comparing these indices, it is important to
remember the risk and return characteristics of each type of
investment. For example, while stock mutual funds may offer higher
potential returns, they also carry the highest degree of share price
volatility. Likewise, money market funds may offer greater stability
of principal, but generally do not offer the higher potential returns
available from stock mutual funds.
From time to time, a fund's performance may also be compared to other
mutual funds tracked by financial or business publications and
periodicals. For example, a fund may quote Morningstar, Inc. in its
advertising materials. Morningstar, Inc. is a mutual fund rating
service that rates mutual funds on the basis of risk-adjusted
performance. Rankings that compare the performance of Fidelity funds
to one another in appropriate categories over specific periods of time
may also be quoted in advertising. A fund may advertise risk
ratings, including symbols or numbers, prepared by independent rating
agencies.
A fund's performance may also be compared to that of a benchmark index
representing the universe of securities in which the fund may invest.
The total return of a benchmark index reflects reinvestment of all
dividends and capital gains paid by securities included in the index.
Unlike a fund's returns, however, the index returns do not reflect
brokerage commissions, transaction fees, or other costs of investing
directly in the securities included in the index.
Spartan Investment Grade Bond may compare its performance to 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.
Spartan Short-Term Bond 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.
A fund may be compared in advertising to Certificates of Deposit (CDs)
or other investments issued by banks or other depository institutions.
Mutual funds differ from bank investments in several respects. For
example, a fund may offer greater liquidity or higher potential
returns than CDs, a fund does not guarantee your principal or your
return, and fund shares are not FDIC insured.
Fidelity may provide information designed to help individuals
understand their investment goals and explore various financial
strategies. Such information may include information about current
economic, market, and political conditions; materials that describe
general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; questionnaires
designed to help create a personal financial profile; worksheets used
to project savings needs based on assumed rates of inflation and
hypothetical rates of return; and action plans offering investment
alternatives. Materials may also include discussions of Fidelity's
asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides
historical returns of the capital markets in the United States,
including common stocks, small capitalization stocks, long-term
corporate bonds, intermediate-term government bonds, long-term
government bonds, Treasury bills, the U.S. rate of inflation (based on
the CPI), and combinations of various capital markets. The performance
of these capital markets is based on the returns of different indices.
Fidelity funds may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with
the security types in any capital market may or may not correspond
directly to those of the funds. Ibbotson calculates total returns in
the same method as the funds. The funds may also compare performance
to that of other compilations or indices that may be developed and
made available in the future.
A fund may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote its current portfolio manager.
VOLATILITY. A fund may quote various measures of volatility and
benchmark correlation in advertising. In addition, the fund may
compare these measures to those of other funds. Measures of volatility
seek to compare a fund's historical share price fluctuations or total
returns to those of a benchmark. Measures of benchmark correlation
indicate how valid a comparative benchmark may be. All measures of
volatility and correlation are calculated using averages of historical
data. In advertising, a fund may also discuss or illustrate examples
of interest rate sensitivity.
MOMENTUM INDICATORS indicate a fund's price movements over specific
periods of time. Each point on the momentum indicator represents a
fund's percentage change in price movements over that period.
A fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a
program, an investor invests a fixed dollar amount in a fund at
periodic intervals, thereby purchasing fewer shares when prices are
high and more shares when prices are low. While such a strategy does
not assure a profit or guard against loss in a declining market, the
investor's average cost per share can be lower than if fixed numbers
of shares are purchased at the same intervals. In evaluating such a
plan, investors should consider their ability to continue purchasing
shares during periods of low price levels.
A fund may be available for purchase through retirement plans or other
programs offering deferral of, or exemption from, income taxes, which
may produce superior after-tax returns over time. For example, a
$1,000 investment earning a taxable return of 10% annually would have
an after-tax value of $1,949 after ten years, assuming tax was
deducted from the return each year at a 31% rate. An equivalent
tax-deferred investment would have an after-tax value of $2,100 after
ten years, assuming tax was deducted at a 31% rate from the
tax-deferred earnings at the end of the ten-year period.
As of September 30, 1998 , FMR advised over $ 32 billion
in municipal fund assets, $ 115 billion in money market fund
assets, $ 411 billion in equity fund assets, $ 12 billion
in international fund assets, and $ 27 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 fund may compare its total
expense ratio to the average total expense ratio of similar funds
tracked by Lipper. A fund's total expense ratio is a significant
factor in comparing bond and money market investments because of its
effect on yield.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
Each fund is open for business and its net asset value per share (NAV)
is calculated each day the New York Stock Exchange (NYSE) is open for
trading. The NYSE has designated the following holiday closings for
1998 : New Year's Day, Martin Luther King's Birthday,
Presidents' Day, Good Friday, Memorial Day, Independence Day
(observed), Labor Day, Thanksgiving Day, 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 Reserve Wire System is closed, federal funds
wires cannot be sent.
FSC normally determines each fund's NAV as of the close o the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated
earlier if trading on the NYSE is restricted or as permitted by the
SEC. To the extent that portfolio securities are traded in other
markets on days when the NYSE is closed, a fund's NAV may be affected
on days when investors do not have access to the fund to purchase or
redeem shares. In addition, trading in some of a fund's portfolio
securities may not occur on days when the fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are
valued in computing each fund's NAV. Shareholders receiving securities
or other property on redemption may realize a gain or loss for tax
purposes, and will incur any costs of sale, as well as the associated
inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, each fund is required to
give shareholders at least 60 days' notice prior to terminating or
modifying its exchange privilege. Under the Rule, the 60-day
notification requirement may be waived if (i) the only effect of a
modification would be to reduce or eliminate an administrative fee,
redemption fee, or deferred sales charge ordinarily payable at the
time of an exchange, or (ii) the fund suspends the redemption of the
shares to be exchanged as permitted under the 1940 Act or the rules
and regulations thereunder, or the fund to be acquired suspends the
sale of its shares because it is unable to invest amounts effectively
in accordance with its investment objective and policies.
In the Prospectus, each fund has notified shareholders that it
reserves the right at any time, without prior notice, to refuse
exchange purchases by any person or group if, in FMR's judgment, the
fund would be unable to invest effectively in accordance with its
investment objective and policies, or would otherwise potentially be
adversely affected.
DISTRIBUTIONS AND TAXES
DIVIDENDS. Because each fund's income is primarily derived from
interest, dividends from the fund generally will not 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. A portion of each
fund's dividends derived from certain U.S. Government securities
may be exempt from state and local taxation. If a fund's
distributions exceed its net investment company taxable income
during a taxable year, all or a portion of the distributions made in
the same taxable year would be recharacterized as a return of capital
to shareholders, thereby reducing each shareholder's cost basis in the
fund. Mortgage security paydown gains (losses) on mortgage
securities purchased by a fund on or prior to June 8, 1997 are
generally taxable as ordinary income and, therefore, increase
(decrease) taxable dividend distributions. Each fund will send
each shareholder a notice in January describing the tax status of
dividend and capital gain distributions for the prior year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by each
fund on the sale of securities and distributed to shareholders are
federally taxable as long-term capital gains, regardless of the length
of time shareholders have held their shares. If a shareholder receives
a capital gain distribution on shares of a fund, and such shares are
held six months or less and are sold at a loss, the portion of the
loss equal to the amount of the capital gain distribution will be
considered a long-term loss for tax purposes. Short-term capital gains
distributed by each fund are taxable to shareholders as dividends, not
as capital gains.
As of September 30, 1998 , Spartan Investment Grade Bond
hereby designates approximately $ 1,100,000 as a capital gain
dividend for the purpose of the dividend-paid deduction.
As of September 30, 199 8 , Spartan Short-Term Bond had a
capital loss carryforward aggregating approximately
$ 81,724,000 . This loss carryforward, of which
$ 39,973,000 , $ 35,409,000 , $4,138,000, and
$ 2,204,000 will expire on September 30, 2003 ,
2004 , 2005, and 2006 , respectively, is available
to offset future capital gains.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Foreign governments
may also impose taxes on other payments or gains with respect to
foreign securities. Because each fund does not currently anticipate
that securities of foreign issuers will constitute more than 50% of
its total assets at the end of its fiscal year, shareholders should
not expect to claim a foreign tax credit or deduction on their federal
income tax returns with respect to foreign taxes withheld.
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company
and avoid being subject to federal income or excise taxes at the fund
level, each fund intends to distribute substantially all of its net
investment income and net realized capital gains within each calendar
year as well as on a fiscal year basis, and intends to comply with
other tax rules applicable to regulated investment companies.
Each fund is treated as a separate entity from the other funds, if
any, of its trust for tax purposes .
OTHER TAX INFORMATION. The information above is only a summary of some
of the tax consequences generally affecting each fund and its
shareholders, and no attempt has been made to discuss individual tax
consequences. In addition to federal income taxes, shareholders may be
subject to state and local taxes on fund distributions, and shares may
be subject to state and local personal property taxes. Investors
should consult their tax advisers to determine whether a fund is
suitable to their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent organized in
1972. The voting common stock of FMR Corp. is divided into two
classes. Class B is held predominantly by members of the Edward C.
Johnson 3d family and is entitled to 49% of the vote on any matter
acted upon by the voting common stock. Class A is held predominantly
by non-Johnson family member employees of FMR Corp. and its affiliates
and is entitled to 51% of the vote on any such matter. The Johnson
family group and all other Class B shareholders have entered into a
shareholders' voting agreement under which all Class B shares will be
voted in accordance with the majority vote of Class B shares. Under
the Investment Company Act of 1940 (1940 Act), control of a company is
presumed where one individual or group of individuals owns more than
25% of the voting stock of that company. Therefore, through their
ownership of voting common stock and the execution of the
shareholders' voting agreement, members of the Johnson family may be
deemed, under the 1940 Act, to form a controlling group with respect
to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by its division, Fidelity Investments Retail Marketing
Company, which provides marketing services to various companies within
the Fidelity organization.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures
for personal investing and restricts certain transactions. For
example, all personal trades in most securities require pre-clearance,
and participation in initial public offerings is prohibited. In
addition, restrictions on the timing of personal investing in relation
to trades by Fidelity funds and on short-term trading have been
adopted.
TRUSTEES AND OFFICERS
The Trustees, Members of the Advisory Board, and executive officers of
the trust are listed below. Except as indicated, each individual has
held the office shown or other offices in the same company for the
last five years. All persons named as Trustees and Members of the
Advisory Board also serve in similar capacities for other funds
advised by FMR. The business address of each Trustee, Member of the
Advisory Board, and officer who is an "interested person" (as defined
in the Investment Company Act of 1940) is 82 Devonshire Street,
Boston, Massachusetts 02109, which is also the address of FMR. The
business address of all the other Trustees is Fidelity Investments,
P.O. Box 9235, Boston, Massachusetts 02205-9235. Those Trustees who
are "interested persons" by virtue of their affiliation with either
the trust or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d (68) , Trustee and President, is Chairman,
Chief Executive Officer and a Director of FMR Corp.; a Director and
Chairman of the Board and of the Executive Committee of FMR; Chairman
and a Director of Fidelity Investments Money Management, Inc. (1998),
Fidelity Management & Research (U.K.) Inc., and Fidelity Management &
Research (Far East) Inc.
J. GARY BURKHEAD (57) , 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 (66) , Trustee, is President of RABAR Enterprises
(management consulting-engineering industry, 1994). Prior to February
1994, he was President of Greenhill Petroleum Corporation (petroleum
exploration and production). Until March 1990, Mr. Cox was President
and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of USA Waste Services,
Inc. (non-hazardous waste, 1993), CH2M Hill Companies (engineering),
Rio Grande, Inc. (oil and gas production), and Daniel Industries
(petroleum measurement equipment manufacturer). In addition, he is a
member of advisory boards of Texas A&M University and the University
of Texas at Austin.
PHYLLIS BURKE DAVIS (65 ), Trustee. 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 a Director of LucasVarity
PLC (automotive components and diesel engines), Charles Stark Draper
Laboratory (non-profit), NACCO Industries, Inc. (mining and
manufacturing), and TRW Inc. (original equipment and replacement
products). Mr. Gates also is a Trustee of the Forum for
International Policy and of the Endowment Association of the
College of William and Mary. In addition, he is a member of the
National Executive Board of the Boy Scouts of America.
E. BRADLEY JONES (71), 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 National Arts Stabilization Inc., Chairman of
the Board of Trustees of the Greenwich Hospital Association,
Director of the Yale-New Haven Health Services Corp. (1998) , a
Member of the Public Oversight Board of the American Institute of
Certified Public Accountants' SEC Practice Section (1995), and as a
Public Governor of the National Association of Securities Dealers,
Inc. (1996).
*PETER S. LYNCH (55) , 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 (70 ), 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 (65) , Trustee (1993), is Chairman of the Board
of Lexmark International, Inc. (office machines, 1991). Prior to 1991,
he held the positions of Vice President of International Business
Machines Corporation ("IBM") and President and General Manager of
various IBM divisions and subsidiaries. Mr. Mann is a Director of M.A.
Hanna Company (chemicals, 1993) and Imation Corp. (imaging and
information storage, 1997).
*ROBERT C. POZEN (52), Trustee (1997) and Senior Vice
President, is also President and a Director of FMR (1997); and
President and a Director of Fidelity Investments Money Management,
Inc. (1998) , Fidelity Management & Research (U.K.) Inc. (1997),
and Fidelity Management & Research (Far East) Inc. (1997). Previously,
Mr. Pozen served as General Counsel, Managing Director, and Senior
Vice President of FMR Corp.
THOMAS R. WILLIAMS (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).
DWIGHT D. 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.
FRED L. HENNING, JR. (59) , 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.
ANDREW J. DUDLEY (34), is Vice President of Spartan Short-Term Bond
Fund (1998), and other funds advised by FMR. Prior to joining Fidelity
as a portfolio manager in 1996, Mr. Dudley worked as a quantitative
analyst and portfolio manager at Putnam Investments for five
years.
KEVIN E. GRANT (38), is Vice President of Spartan Investment Grade
Bond Fund (1997), 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 two years.
ERIC D. ROITER (50), Secretary (1998), is Vice President (1998) and
General Counsel of FMR (1998). Mr. Roiter was an Adjunct Member,
Faculty of Law, at Columbia University Law School (1996-1997). Prior
to joining Fidelity, Mr. Roiter was a partner at Debevoise & Plimpton
(1981-1997) and served as an Assistant General Counsel of the U.S.
Securities and Exchange Commission (1979-1981).
RICHARD A. SILVER (51), Treasurer (1997), is Treasurer of the Fidelity
funds and is an employee of FMR (1997). Before joining FMR, Mr. Silver
served as Executive Vice President, Fund Accounting & Administration
at First Data Investor Services Group, Inc. (1996-1997). Prior to
1996, Mr. Silver was Senior Vice President and Chief Financial Officer
at The Colonial Group, Inc. Mr. Silver also served as Chairman of the
Accounting/Treasurer's Committee of the Investment Company Institute
(1987-1993).
STANLEY N. GRIFFITH (52), Assistant Vice President (1998), is
Assistant Vice President of Fidelity's Fixed-Income Funds (1998) and
an employee of FMR Corp.
JOHN H. COSTELLO (51), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH (52) , 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 (1996), is Assistant
Treasurer of Fidelity's Fixed-Income Funds (1998) 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 September 30, 1998 ,
or calendar year ended December 31, 1997, as applicable.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMPENSATION TABLE
Trustees Aggregate Aggregate Total
and Compensation Compensation Compensation
Members of the Advisory Board from from from the
Spartan Spartan Investment Fund Complex*,A
Short-Term Bond B Grade BondB
J. Gary Burkhead** $ 0 $ 0 $ 0
Ralph F. Cox $ 110 $ 271 $ 214,500
Phyllis Burke Davis $ 109 $ 269 $ 210,000
Robert M. Gates $ 111 $ 274 $176,000
Edward C. Johnson 3d** $ 0 $ 0 $ 0
E. Bradley Jones $ 110 $ 271 $ 211,500
Donald J. Kirk $ 112 $ 275 $ 211,500
Peter S. Lynch** $ 0 $ 0 $ 0
William O. McCoy $ 111 $ 274 $ 214,500
Gerald C. McDonough $ 137 $ 337 $ 264,500
Marvin L. Mann $ 110 $ 270 $ 214,500
Robert C. Pozen** $ 0 $ 0 $ 0
Thomas R. Williams $ 111 $ 273 $214,500
</TABLE>
* Information is for the calendar year ended December 31, 1997
for 230 funds in the complex.
** Interested Trustees of the funds and Mr. Burkhead are compensated
by FMR.
A Compensation figures include cash, amounts required to be
deferred, and may include amounts deferred at the election of
Trustees. For the calendar year ended December 31, 1997, the Trustees
accrued required deferred compensation from the funds as follows:
Ralph F. Cox, $75,000; Phyllis Burke Davis, $75,000; Robert M. Gates,
$62,500; E. Bradley Jones, $75,000; Donald J. Kirk, $75,000; William
O. McCoy, $75,000; Gerald C. McDonough, $87,500; Marvin L. Mann,
$75,000; and Thomas R. Williams, $75,000. Certain of the
non-interested Trustees elected voluntarily to defer a portion of
their compensation as follows: Ralph F. Cox, $53,699; Marvin L. Mann,
$53,699; and Thomas R. Williams, $62,462.
B Compensation figures include cash .
Under a deferred compensation plan adopted in September 1995 and
amended in November 1996 (the Plan), non-interested Trustees must
defer receipt of a portion of, and may elect to defer receipt of an
additional portion of, their annual fees. Amounts deferred under the
Plan are subject to vesting and are treated as though equivalent
dollar amounts had been invested in shares of a cross-section of
Fidelity funds including funds in each major investment discipline and
representing a majority of Fidelity's assets under management (the
Reference Funds). The amounts ultimately received by the Trustees
under the Plan will be directly linked to the investment performance
of the Reference Funds. Deferral of fees in accordance with the Plan
will have a negligible effect on a fund's assets, liabilities, and net
income per share, and will not obligate a fund to retain the services
of any Trustee or to pay any particular level of compensation to the
Trustee. A fund may invest in the Reference Funds under the Plan
without shareholder approval.
As of September 30, 1998 , the Trustees, Members of the Advisory
Board, and officers of each fund owned, in the aggregate, less than
1 % of each fund total outstanding shares.
MANAGEMENT CONTRACTS
Each fund has entered into a management contract with FMR, pursuant
to which FMR furnishes investment advisory and other services.
MANAGEMENT SERVICES. Under the terms of its management contract with
each fund, FMR acts as investment adviser and, subject to the
supervision of the Board of Trustees, directs the investments of the
fund in accordance with its investment objective, policies, and
limitations. FMR also provides each fund with all necessary office
facilities and personnel for servicing the fund's investments,
compensates all officers of each fund and all Trustees who are
"interested persons" of the trust or of FMR, and all personnel of each
fund or FMR performing services relating to research, statistical, and
investment activities.
In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of each fund. These services include
providing facilities for maintaining each fund's organization;
supervising relations with custodians, transfer and pricing agents,
accountants, underwriters, and other persons dealing with each fund;
preparing all general shareholder communications and conducting
shareholder relations; maintaining each fund's records and the
registration of each fund's shares under federal 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. Under the terms of each fund's management
contract, FMR is responsible for payment of all operating expenses of
each fund with certain exceptions. Specific expenses payable by FMR
include expenses for typesetting, printing, and mailing proxy
materials to shareholders, legal expenses, fees of the custodian,
auditor and interested Trustees, each 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's management
contract further provides that FMR will pay for typesetting, printing,
and mailing prospectuses, statements of additional information,
notices, and reports to shareholders; however, under the terms of each
fund's transfer agent agreement, the transfer agent bears the costs of
providing these services to existing shareholders. FMR also pays all
fees associated with transfer agent, dividend disbursing, and
shareholder services and pricing and bookkeeping services, and
administration of each fund's securities lending program.
FMR pays all other expenses of each fund with the following
exceptions: fees and expenses of the non-interested Trustees,
interest, taxes, brokerage commissions (if any), and such nonrecurring
expenses as may arise, including costs of any litigation to which a
fund may be a party, and any obligation it may have to indemnify its
officers and Trustees with respect to litigation.
MANAGEMENT FEES. For the services of FMR under each management
contract, Spartan Short-Term Bond and Spartan Investment Grade Bond
pays FMR a monthly management fee at the annual rate of
0.65% and 0.60% , respectively, of its average net assets
throughout the month.
The management fee paid to FMR by each fund is reduced by an amount
equal to the fees and expenses paid by the fund to the non-interested
Trustees.
The following table shows the amount of management fees paid by each
fund to FMR for the past three fiscal years, and the amount of credits
reducing management fees for each fund.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fund Fiscal Years Ended Amount of Management Fees
September 30 Credits Reducing Paid to FMR
Management Fees
Spartan Short-Term Bond 1998 $ 8,000 $ 2,055,000 *
1997 $ 7,000 $ 1,991,000 *
1996 $ 62,000 $ 2,790,000 *
Spartan Investment Grade 1998(dagger) $ 11,000 $ 5,189,000 *
Bond (dagger)
1997 $ 3,000 $ 2,625,000 *
1996 $ 11,000 $ 1,988,000 *
</TABLE>
* After reduction of fees and expenses paid by the fund to the
non-interested Trustees.
(dagger) On June 27, 1998, FMR reduced the management rate paid by
Spartan Investment Grade Bond from 0.65% to 0.60%.
FMR may, from time to time, voluntarily reimburse all or a portion of
a fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to
be repaid for these expense reimbursements in the amount that expenses
fall below the limit prior to the end of the fiscal year.
Expense reimbursements by FMR will increase a fund's total returns and
yield, and repayment of the reimbursement by a fund will lower its
total returns and yield.
The reimbursemen t arrangement that is in effect for each fund will
continue through December 31, 1998, after which time FMR may elect to
discontinue it. Effective January 1, 1999, FMR has voluntarily agreed
to limit Spartan Investment Grade Bond's total operating expe nses
to an annual rate of 0.50% of average net assets.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Periods of Aggregate Fiscal Years Management Fee Amount of
Expense Limitation Operating Ended Before Management Fee
From To Expense September 30, Reimbursement Reimbursement
Limitation
Spartan 10/1/97 9/30/98 .38% 1998 $ 2,055,000* $ 854,000
Short-Term
Bond
3/1/97 9/30/97 .38% 1997 $ 1,991,000* $ 464,000
10/1/96 2/28/97 .65% -- -- --
10/1/95 9/30/96 .65% 1996 $ 2,790,000 $ 0
</TABLE>
* After reduction of fees and expenses paid by the fund to the
non-interested Trustees.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Periods of Aggregate Fiscal Years Management Fee Amount of
Expense Limitation Operating Ended Before Management Fee
From To Expense September 30, Reimbursement Reimbursement
Limitation
Spartan 10/1/97 9/30/98 .38% 1998 $ 5,189,000* $ 2,075,000
Investment
Grade Bond
3/1/97 9/30/97 .38% 1997 $ 2,625,000* $ 692,000
10/1/96 2/28/97 .65% -- -- --
10/1/95 9/30/96 .65% 1996 $ 1,988,000 $ 0
</TABLE>
* After reduction of fees and expenses paid by the fund to the
non-interested Trustees.
SUB-ADVISERS. On behalf of each fund, FMR has entered into
sub-advisory agreements with FMR U.K. and FMR Far East. Pursuant to
the sub-advisory agreements, FMR may receive investment advice and
research services outside the United States from the sub-advisers.
On behalf of each fund the sub-advisers investment management
authority as well as the authority to buy and sell securities if FMR
believes it would be beneficial to the funds.
Currently, FMR U.K. and FMR Far East each focus on issuers in
countries other than the United States such as those in Europe, Asia,
and the Pacific Basin.
FMR U.K. and FMR Far East, which were organized in 1986, are wholly
owned subsidiaries of FMR. Under the sub-advisory agreements FMR pays
the fees of FMR U.K. and FMR Far East. For providing non-discretionary
investment advice and research services, FMR pays FMR U.K. and FMR Far
East fees equal to 110% and 105%, respectively, of FMR U.K.'s and FMR
Far East's costs incurred in connection with providing investment
advice and research services.
On behalf of each fund, for providing discretionary investment
management and executing portfolio transactions, FMR pays FMR U.K. and
FMR Far East a fee equal to 50% of its monthly management fee rate
with respect to each fund's average net assets managed by the
sub-adviser on a discretionary basis.
[IF NEITHER NON-DISCRETIONARY NOR DISCRETIONARY SUB-ADVISER FEES WERE
PAID: No fees were paid to the sub-advisers by FMR on behalf of the
funds for the past three fiscal years.
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved Distribution and Service Plans on behalf of
each fund (the Plans) pursuant to Rule 12b-1 under the 1940 Act (the
Rule). The Rule provides in substance that a mutual fund may not
engage directly or indirectly in financing any activity that is
primarily intended to result in the sale of shares of the fund except
pursuant to a plan approved on behalf of the fund under the Rule. The
Plans, as approved by the Trustees, allow the funds and FMR to incur
certain expenses that might be considered to constitute indirect
payment by the funds of distribution expenses.
Under each Plan, if the payment of management fees by the fund to FMR
is deemed to be indirect financing by the fund of the fund of the
distribution of its shares, such payment is authorized by the Plan.
Each Plan specifically recognizes that FMR may use its management fee
revenue, as well as its past profits or its other resources, to pay
FDC for expenses incurred in connection with the distribution of fund
shares. In addition, the Plan provides that FMR, directly or through
FDC, may make payments to third parties, such as banks or
broker-dealers, that engage in the sale of fund shares, or provide
shareholder support services. Currently, the Board of Trustees has
authorized such payments for each funds shares.
FMR made no payments through FDC to third parties for the fiscal year
ended 19 98 .
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan, and
determined that there is a reasonable likelihood that the Plan will
benefit the fund and its shareholders. In particular, the Trustees
noted that each Plan does not authorize payments by the fund other
than those made to FMR under its management contract with the fund. To
the extent that each Plan gives FMR and FDC greater flexibility in
connection with the distribution of fund shares, additional sales of
fund shares may result. Furthermore, certain shareholder support
services may be provided more effectively under the Plans by local
entities with whom shareholders have other relationships.
The Glass-Steagall Act generally prohibits federally and state
chartered or supervised banks from engaging in the business of
underwriting, selling, or distributing securities. Although the scope
of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, FDC believes
that the Glass-Steagall Act should not preclude a bank from performing
shareholder support services, or servicing and recordkeeping
functions. FDC intends to engage banks only to perform such functions.
However, changes in federal or state statutes and regulations
pertaining to the permissible activities of banks and their affiliates
or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions,
if any, would be necessary to continue to provide efficient and
effective shareholder services. In such event, changes in the
operation of the funds might occur, including possible termination of
any automatic investment or redemption or other services then provided
by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these
occurrences. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein, and
banks and other financial institutions may be required to register as
dealers pursuant to state law.
Each fund may execute portfolio transactions with, and purchase
securities issued by, depository institutions that receive payments
under the Plans. No preference for the instruments of such depository
institutions will be shown in the selection of investments.
CONTRACTS WITH FMR AFFILIATES
Each fund has entered into a transfer agent agreement with FSC, an
affiliate of FMR. Under the terms of the agreements, FSC performs
transfer agency, dividend disbursing, and shareholder services for
each fund.
For providing transfer agency services, FSC receives an account fee
and an asset-based fee each paid monthly with respect to each
account in a fund. For retail accounts and certain institutional
accounts, these fees are based on account size and fund type. For
certain institutional retirement accounts, these fees are based on
fund type. For certain other institutional retirement accounts, these
fees are based on account type (i.e., omnibus or non-omnibus) and, for
non-omnibus accounts, fund type. The account fees are subject to
increase based on postage rate changes.
FSC also collects small account fees from certain accounts with
balances of less than $2,500.
In addition, FSC receives the pro rata portion of the transfer agency
fees applicable to shareholder accounts in a qualified state
tuition program (QSTP), as defined under the Small Business Job
Protection Act of 1996, managed by FMR or an affiliate and each
Fidelity Freedom Fund, a fund of funds managed by an FMR affiliate,
according to the percentage of the QSTP's or Freedom Fund's
assets that is invested in a fund.
FSC pays out-of-pocket expenses associated with providing transfer
agent services. In addition, FSC bears the expense of typesetting,
printing, and mailing prospectuses, statements of additional
information, and all other reports, notices, and statements to
existing shareholders, with the exception of proxy statements.
Each fund has also entered into a service agent agreement with FSC.
Under the terms of the agreements, FSC calculates the NAV and
dividends for each fund, maintains each fund's portfolio and general
accounting records, and administers each fund's securities lending
program.
For providing pricing and bookkeeping services, FSC receives a monthly
fee based on each fund's average daily net assets throughout the
month.
For administering each fund's securities lending program, FSC receives
fees based on the number and duration of individual securities loans.
For each fund, FMR bears the cost of transfer agency, dividend
disbursing, and shareholder services, pricing and bookkeeping
services, and administration of the securities lending program under
the terms of its management contract with each fund.
Each fund has entered into a distribution agreement with FDC, an
affiliate of FMR organized as a Massachusetts corporation on July 18,
1960. FDC is a broker-dealer registered under the Securities Exchange
Act of 1934 and a member of the National Association of Securities
Dealers, Inc. The distribution agreements call for FDC to use all
reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered at
NAV. Promotional and administrative expenses in connection with the
offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUST
TRUSTS' ORGANIZATION. Spartan Short-Term Bond and Spartan Investment
Grade Bond Fund are funds of Fidelity Charles Street Trust, an
open-end management investment company organized as a Massachusetts
business trust on July 7, 1981. Currently, there are six funds of the
trust: Fidelity Asset Manager, Fidelity Asset Manager: Growth,
Fidelity Asset Manager: Income, Fidelity Short-Intermediate Government
Fund, Spartan Short-Term Bond Fund, and Spartan Investment Grade Bond
Fund. The Declaration of Trust permits 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 names
"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 Boards of Trustees, have the power to determine which expenses
are allocable to a given fund, or which are general or allocable to
all of the funds of a certain trust. In the event of the dissolution
or liquidation of a trust, shareholders of each fund of that trust are
entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust is an entity of
the type commonly known as "Massachusetts business trust." Under
Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable for the obligations of the
trust. The Declaration of Trust provides that the trust shall
not have any claim against shareholders except for the payment of the
purchase price of shares and requires that each agreement, obligation,
or instrument entered into or executed by the trust or its Trustees
shall include a provision limiting the obligations created thereby to
the trust and its assets. The Declaration of Trust provides for
indemnification out of each fund's property of any shareholder held
personally liable for the obligations of the fund. The
Declaration of Trust also provides that each fund shall, upon
request, assume the defense of any claim made against any shareholder
for any act or obligation of the fund and satisfy any judgment
thereon. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which
the fund itself would be unable to meet its obligations. FMR believes
that, in view of the above, the risk of personal liability to
shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they
have exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declarations of Trust protects Trustees
against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their
office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar value
of net asset value you own. The shares have no preemptive or
conversion rights; the voting and dividend rights, the right of
redemption, and the privilege of exchange are described in the
Prospectus. Shares are fully paid and nonassessable, except as set
forth under the heading "Shareholder and Trustee Liability" above.
Shareholders representing 10% or more of the trust or a fund may, as
set forth in the Declaration of Trust, call meetings of the trust or a
fund for any purpose related to the trust or fund, as the case may be,
including, in the case of a meeting of the entire trust, the purpose
of voting on removal of one or more Trustees. The trust or any fund
may be terminated upon the sale of its assets to another open-end
management investment company, or upon liquidation and distribution of
its assets, if approved by vote of the holders of a majority of the
trust or the fund, as determined by the current value of each
shareholder's investment in the fund or trust. If not so terminated,
the trust and the funds will continue indefinitely. Each fund may
invest all of its assets in another investment company.
CUSTODIAN. The Bank of New York, 110 Washington Street, New York, New
York custodian is responsible for the safekeeping of a fund's assets
and the appointment of any subcustodian banks and clearing agencies.
The custodian takes no part in determining the investment policies of
a fund or in deciding which securities are purchased or sold by a
fund. However, a fund may invest in obligations of the custodian and
may purchase securities from or sell securities to the custodian. The
Chase Manhattan Bank, headquartered in New York, also may serve as a
special purpose custodian of certain assets in connection with
repurchase agreement transactions.
FMR, its officers and directors, its affiliated companies, and the
Board of Trustees may, from time to time, conduct transactions with
various banks, including banks serving as custodians for certain funds
advised by FMR. Transactions that have occurred to date include
mortgages and personal and general business loans. In the judgment of
FMR, the terms and conditions of those transactions were not
influenced by existing or potential custodial or other fund
relationships.
AUDITOR. PricewaterhouseCoopers LLP, 160 Federal Street,
Boston, Massachusetts serves as the trust's independent accountant.
The auditor examines financial statements for the funds and provides
other audit, tax, and related services.
FINANCIAL STATEMENTS
Each fund's financial statements and financial highlights for the
fiscal year ended September 30, 1998 and report of the auditors,
are included in each fund's Annual Report, which are separate reports
supplied with this SAI. The funds' financial statements, including the
financial highlights, and reports of the auditors are incorporated
herein by reference. For a free additional copy of a fund's Annual
Report, contact Fidelity at 1-800-544-8888.
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. Also, the maturities of mortgage-backed securities,
including collateralized mortgage obligations, and some asset-backed
securities are determined on a weighted average life basis, which is
the average time for principal to be repaid. For a mortgage security,
this average time is calculated by estimating the timing of principal
payments, including unscheduled prepayments, during the life of the
mortgage. The weighted average life of these securities is likely to
be substantially shorter than their stated final maturity.
The descriptions that follow are examples of eligible ratings for the
funds. A fund may, however, consider the ratings for other types of
investments and the ratings assigned by other rating organizations
when determining the eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE RATINGS OF CORPORATE BONDS
Moody's ratings for obligations with an original remaining maturity in
excess of one year fall within nine categories. They range from Aaa
(highest quality) to C (lowest quality). Moody'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 higher-rated issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher-rated categories.
BB - Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments. The BB rating category is also used
for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating.
B - Debt rated B has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair
capacity or willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and
economic conditions to meet timely payment of interest and repayment
of principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied B or
B- rating.
CC - Debt rated CC is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C
rating may be used to cover a situation where a bankruptcy petition
has been filed but debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest
is being paid.
D - Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The
D rating will also be used upon the filing of a bankruptcy petition if
debt service payments are jeopardized.
Spartan, Fidelity, and Fidelity Focus are registered trademarks of
FMR Corp.
The third party marks appearing above are the marks of their
respective owners.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a)(1) The Financial Statements and Financial Highlights, included in
the Annual Report, for Fidelity Asset Manager: Income for the fiscal
year ended September 30, 1997, are incorporated herein by reference
into the fund's Statement of Additional Information and were filed on
November 17, 1998, for Fidelity Charles Street Trust (File No.
811-3221) pursuant to Rule 30d-1 under the Investment Company Act of
1940 and are incorporated herein by reference.
(a)(2) The Financial Statements and Financial Highlights, included in
the Annual Report, for Fidelity Asset Manager for the fiscal year
ended September 30, 1997, are incorporated herein by reference into
the fund's Statement of Additional Information and were filed on
November 17, 1998, for Fidelity Charles Street Trust (File No.
811-3221) pursuant to Rule 30d-1 under the Investment Company Act of
1940 and are incorporated herein by reference.
(a)(3) The Financial Statements and Financial Highlights, included in
the Annual Report, for Fidelity Asset Manager: Growth for the fiscal
year ended September 30, 1997, are incorporated herein by reference
into the fund's Statement of Additional Information and were filed on
November 17, 1998, for Fidelity Charles Street Trust (File No.
811-3221) pursuant to Rule 30d-1 under the Investment Company Act of
1940 and are incorporated herein by reference.
(a)(4) The Financial Statements and Financial Highlights, included in
the Annual Report, for Fidelity Short-Intermediate Government Fund for
the fiscal year ended September 30, 1997, are incorporated herein by
reference into the fund's Statement of Additional Information and were
filed on November 17, 1998, for Fidelity Charles Street Trust (File
No. 811-3221) pursuant to Rule 30d-1 under the Investment Company Act
of 1940 and are incorporated herein by reference.
(a)(5) The Financial Statements and Financial Highlights, included in
the Annual Report, for Spartan Investment Grade Bond Fund for the
fiscal year ended September 30, 1997, are incorporated herein by
reference into the fund's Statement of Additional Information and were
filed on November 17, 1998, for Fidelity Charles Street Trust (File
No. 811-3221) pursuant to Rule 30d-1 under the Investment Company Act
of 1940 and are incorporated herein by reference.
(a)(6) The Financial Statements and Financial Highlights, included in
the Annual Report, for Spartan Short-Term Bond Fund for the fiscal
year ended September 30, 1997, are incorporated herein by reference
into the fund's Statement of Additional Information and were filed on
November 17, 1998, for Fidelity Charles Street Trust (File No.
811-3221) pursuant to Rule 30d-1 under the Investment Company Act of
1940 and are incorporated herein by reference.
(b) Exhibits:
(1) Amended and Restated Declaration of Trust, dated November 17,
1994, is incorporated herein by reference to Exhibit 1 of
Post-Effective Amendment No. 54.
(2) By-Laws of the Trust, as amended, are incorporated herein by
reference to Exhibit 2(a) to Fidelity Union Street Trust's (File No.
2-50318) Post-Effective Amendment No. 87.
(3) Not applicable.
(4) Not applicable.
(5)(a) Management Contract between Fidelity Short-Intermediate
Government Fund (formerly Fidelity Limited Maturity Government Fund)
and Fidelity Management & Research Company, dated October 1, 1994, is
incorporated herein by reference to Exhibit 5(a) of Post-Effective
Amendment No. 52.
(b) Management Contract between Fidelity Asset Manager and
Fidelity Management & Research Company, dated October 1, 1994, is
incorporated herein by reference to Exhibit 5(c) of Post-Effective
Amendment No. 52.
(c) Management Contract between Fidelity Asset Manager:
Growth and Fidelity Management & Research Company, dated October 1,
1994, is incorporated herein by reference to Exhibit 5(d) of
Post-Effective Amendment No. 52.
(d) Management Contract between Fidelity Asset Manager:
Income and Fidelity Management & Research Company, dated October 1,
1994, is incorporated herein by reference to Exhibit 5(e) of
Post-Effective Amendment No. 52.
(e) Management Contract between Spartan Investment Grade Bond
Fund and Fidelity Management & Research Company, dated September 17,
1992, is incorporated herein by reference to Exhibit 5(f) of
Post-Effective Amendment No. 46.
(f) Management Contract between Spartan Short-Term Bond Fund
(formerly Spartan Short-Term Income Fund) and Fidelity Management &
Research Company, dated September 17, 1992, is incorporated herein by
reference to Exhibit 5(g) of Post-Effective Amendment No. 46.
(g) Sub-Advisory Agreement between Fidelity Management &
Research Company and Fidelity Management & Research (U.K.) Inc., on
behalf of Fidelity Asset Manager, dated October 1, 1994, is
incorporated herein by reference to Exhibit 5(i) of Post-Effective
Amendment No. 52.
(h) Sub-Advisory Agreement between Fidelity Management &
Research Company and Fidelity Management & Research (Far East) Inc.,
on behalf of Fidelity Asset Manager, dated October 1, 1994, is
incorporated herein by reference to Exhibit 5(j) of Post-Effective
Amendment No. 52.
(i) Sub-Advisory Agreement between Fidelity Management &
Research Company and Fidelity Management & Research (U.K.) Inc., on
behalf of Fidelity Asset Manager: Growth, dated October 1, 1994, is
incorporated herein by reference to Exhibit 5(k) of Post-Effective
Amendment No. 52.
(j) Sub-Advisory Agreement between Fidelity Management &
Research Company and Fidelity Management & Research (Far East) Inc.,
on behalf of Fidelity Asset Manager: Growth, dated October 1, 1994, is
incorporated herein by reference to Exhibit 5(l) of Post-Effective
Amendment No. 52.
(k) Sub-Advisory Agreement between Fidelity Management &
Research Company and Fidelity Management & Research (U.K.) Inc., on
behalf of Fidelity Asset Manager: Income, dated October 1, 1994, is
incorporated herein by reference to Exhibit 5(m) of Post-Effective
Amendment No. 52.
(l) Sub-Advisory Agreement between Fidelity Management &
Research Company and Fidelity Management & Research (Far East) Inc.,
on behalf of Fidelity Asset Manager: Income, dated October 1, 1994, is
incorporated herein by reference to Exhibit 5(n) of Post-Effective
Amendment No. 52.
(m) Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (U.K.) Inc., on behalf of
Spartan Investment Grade Bond Fund, dated October 1, 1994, is
incorporated herein by reference to Exhibit 5(o) of Post-Effective
Amendment No. 52.
(n) Sub-Advisory Agreement between Fidelity Management &
Research Company and Fidelity Management & Research (Far East) Inc.,
on behalf of Spartan Investment Grade Bond Fund, dated October 1,
1994, is incorporated herein by reference to Exhibit 5(p) of
Post-Effective Amendment No. 52.
(o) Sub-Advisory Agreement between Fidelity Management &
Research Company and Fidelity Management & Research (U.K.) Inc., on
behalf of Spartan Short-Term Bond Fund (formerly Spartan Short-Term
Income Fund), dated October 1, 1994, is incorporated herein by
reference to Exhibit 5(q) of Post-Effective Amendment No. 52.
(p) Sub-Advisory Agreement between Fidelity Management &
Research Company and Fidelity Management & Research (Far East) Inc.,
on behalf of Spartan Short-Term Bond Fund (formerly Spartan Short-Term
Income Fund), dated October 1, 1994, is incorporated herein by
reference to Exhibit 5(r) of Post-Effective Amendment No. 52.
(6)(a) General Distribution Agreement between Fidelity Asset Manager
and Fidelity Distributors Corporation, dated December 28, 1988, is
incorporated herein by reference to Exhibit 6(b) of Post-Effective
Amendment No. 51.
(b) General Distribution Agreement between Fidelity Asset
Manager: Growth and Fidelity Distributors Corporation, dated September
21, 1990, is incorporated herein by reference to Exhibit 6(d) of
Post-Effective Amendment No. 52.
(c) General Distribution Agreement between Fidelity
Short-Intermediate Government Fund (formerly Fidelity Limited Maturity
Government Fund) and Fidelity Distributors Corporation, dated
September 5, 1991, is incorporated herein by reference to Exhibit 6(e)
of Post-Effective Amendment No. 52.
(d) General Distribution Agreement between Fidelity Asset
Manager: Income and Fidelity Distributors Corporation, dated July 16,
1992, is incorporated herein by reference to Exhibit 6(f) of
Post-Effective Amendment No. 52.
(e) General Distribution Agreement between Spartan Investment
Grade Bond Fund and Fidelity Distributors Corporation, dated September
17, 1992, is incorporated herein by reference to Exhibit 6(g) of
Post-Effective Amendment No. 46.
(f) General Distribution Agreement between Spartan Short-Term
Bond Fund (formerly Spartan Short-Term Income Fund) and Fidelity
Distributors Corporation, dated September 17, 1992, is incorporated
herein by reference to Exhibit 6(h) of Post-Effective Amendment No.
46.
(g) Amendment to General Distribution Agreement between
Fidelity Short-Intermediate Government Fund (formerly Fidelity Limited
Maturity Government Fund), Spartan Investment Grade Bond Fund, and
Spartan Short-Term Bond Fund (formerly Spartan Short-Term Income Fund)
and Fidelity Distributors Corporation, dated May 10, 1994, is
incorporated herein by reference to Exhibit 6(i) of Post-Effective
Amendment No. 52.
(h) Amendments to the General Distribution Agreement between the
Registrant and Fidelity Distributors Corporation, dated March 14, 1996
and July 15, 1996, are incorporated herein by reference to Exhibit
6(a) of Fidelity Court Street Trust's Post-Effective Amendment No. 61
(File No. 2-58774).
(7)(a) Retirement Plan for Non-Interested Person Trustees, Directors
or General Partners, as amended on November 16, 1995, is incorporated
herein by reference to Exhibit 7(a) of Fidelity Select Portfolio's
(File No. 2-69972) Post-Effective Amendment No. 54.
(b) The Fee Deferral Plan for Non-Interested Person Directors and
Trustees of the Fidelity Funds, effective as of September 14, 1995 and
amended through November 14, 1996 is incorporated herein by reference
to Exhibit 7(b) of Fidelity Aberdeen Street Trust's (File No.
33-43529) Post-Effective Amendment No. 19.
(8)(a) Custodian Agreement and Appendix C, dated August 1, 1994,
between The Chase Manhattan Bank, N.A. and Fidelity Charles Street
Trust on behalf of Fidelity Asset Manager, Fidelity Asset Manager:
Income, and Fidelity Asset Manager: Growth is incorporated herein by
reference to Exhibit 8(a) of Fidelity Investment Trust's
Post-Effective Amendment No. 59 (File No. 2-90649).
(b) Appendix A, dated February 26, 1998, to the Custodian
Agreement, dated August 1, 1994, between The Chase Manhattan Bank,
N.A. and Fidelity Charles Street Trust on behalf of Fidelity Asset
Manager, Fidelity Asset Manager: Income, and Fidelity Asset Manager:
Growth is incorporated herein by reference to Exhibit 8(b) of Fidelity
Puritan Trust's Post-Effective Amendment No. 116 (File No. 2-11884).
(c) Appendix B, dated June 18, 1998, to the Custodian Agreement,
dated August 1, 1994, between The Chase Manhattan Bank, N.A. and
Fidelity Charles Street Trust on behalf of Fidelity Asset Manager,
Fidelity Asset Manager: Income, and Fidelity Asset Manager: Growth is
incorporated herein by reference to Exhibit 8(c) of Fidelity Puritan
Trust's Post-Effective Amendment No. 116 (File No. 2-11884).
(d) Custodian Agreement and Appendix C, dated December 1, 1994,
between The Bank of New York and Fidelity Charles Street Trust on
behalf of Fidelity Short-Intermediate Government Fund, Spartan
Short-Term Bond Fund, and Spartan Investment Grade Bond Fund is
incorporated herein by reference to Exhibit 8(a) of Fidelity Hereford
Street Trust's Post-Effective Amendment No. 4 (File No. 33-52577).
(e) Appendix A, dated June 18, 1998, to the Custodian Agreement,
dated December 1, 1994, between The Bank of New York and Fidelity
Charles Street Trust on behalf of Fidelity Short-Intermediate
Government Fund, Spartan Short-Term Bond Fund, and Spartan Investment
Grade Bond Fund is incorporated herein by reference to Exhibit 8(b) of
Fidelity Boston Street Trust's Post-Effective Amendment No. 22 (File
No. 33-17704).
(f) Appendix B, dated June 18, 1998, to the Custodian Agreement,
dated December 1, 1994, between The Bank of New York and Fidelity
Charles Street Trust on behalf of Fidelity Short-Intermediate
Government Fund, Spartan Short-Term Bond Fund, and Spartan Investment
Grade Bond Fund is incorporated herein by reference to Exhibit 8(c) of
Fidelity Boston Street Trust's Post-Effective Amendment No. 22 (File
No. 33-17704).
(g) Fidelity Group Repo Custodian Agreement among The Bank of New
York, J. P. Morgan Securities, Inc., and the Registrant, dated
February 12, 1996, is incorporated herein by reference to Exhibit 8(d)
of Fidelity Institutional Cash Portfolios' (File No. 2-74808)
Post-Effective Amendment No. 31.
(h) Schedule 1 to the Fidelity Group Repo Custodian Agreement
between The Bank of New York and the Registrant, dated February 12,
1996, is incorporated herein by reference to Exhibit 8(e) of Fidelity
Institutional Cash Portfolios' (File No. 2-74808) Post-Effective
Amendment No. 31.
(i) Fidelity Group Repo Custodian Agreement among Chemical Bank,
Greenwich Capital Markets, Inc., and the Registrant, dated November
13, 1995, is incorporated herein by reference to Exhibit 8(f) of
Fidelity Institutional Cash Portfolios' (File No. 2-74808)
Post-Effective Amendment No. 31.
(j) Schedule 1 to the Fidelity Group Repo Custodian Agreement
between Chemical Bank and the Registrant, dated November 13, 1995, is
incorporated herein by reference to Exhibit 8(g) of Fidelity
Institutional Cash Portfolios' (File No. 2-74808) Post-Effective
Amendment No. 31.
(k) Joint Trading Account Custody Agreement between The Bank of
New York and the Registrant, dated May 11, 1995, is incorporated
herein by reference to Exhibit 8(h) of Fidelity Institutional Cash
Portfolios (File No. 2-74808) Post-Effective Amendment No. 31.
(l) First Amendment to Joint Trading Account Custody Agreement
between The Bank of New York and the Registrant, dated July 14, 1995,
is incorporated herein by reference to Exhibit 8(i) of Fidelity
Institutional Cash Portfolios' (File No. 2-74808) Post-Effective
Amendment No. 31.
(9) Not applicable.
(10) Not applicable.
(11) Consent of PricewaterhouseCoopers LLP 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
Fidelity Asset Manager is incorporated herein by reference to Exhibit
15(a) of Post-Effectvie Amendment No. 62.
(b) Distribution and Service Plan pursuant to Rule l2b-l for Fidelity
Asset Manager: Growth is incorporated herein by reference to Exhibit
15(b) of Post-Effective Amendment No. 62.
(c) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Short-Intermediate Government Fund is incorporated herein by reference
to Exhibit 15(c) of Post-Effective Amendment No. 62.
(d) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Asset Manager: Income is incorporated herein by reference to Exhibit
15(d) of Post-Effective Amendment No. 62.
(e) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan
Investment Grade Bond Fund is incorporated herein by reference to
Exhibit 15(e) of Post-Effective Amendment No. 62.
(f) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan
Short-Term Bond Fund is incorporated herein by reference to Exhibit
15(f) of Post-Effective Amendment No. 62.
(16) (a) A schedule for computation of 30-day yields and total return
is incorporated herein by reference to Exhibit 16(a) of Post-Effective
Amendment No. 54.
(b) A schedule for computation of moving averages for Fidelity Asset
Manager is incorporated herein by reference to Exhibit 16(b) of
Post-Effective Amendment No. 48.
(17) Financial Data Schedules are filed herein as Exhibit 27.
(18) Not applicable.
Item 25. Persons Controlled by or under Common Control with Registrant
The Board of Trustees of the Registrant is the same as the board of
other funds advised by FMR, each of which has Fidelity Management &
Research Company as its investment adviser. In addition, the officers
of these funds are substantially identical. Nonetheless, the
Registrant takes the position that it is not under common control with
these other funds since the power residing in the respective boards
and officers arises as the result of an official position with the
respective funds.
Item 26. Number of Holders of Securities
Title of Class: Shares of Beneficial Interest as of September 30,
1998
Name of Series Number of Recordholders
Fidelity Asset Manager 1,117,817
Fidelity Asset Manager: Growth 507,242
Fidelity Asset Manager: Income 110,989
Fidelity Short-Intermediate Government Fund 11,871
Spartan Investment Grade Bond Fund 25,864
Spartan Short-Term Bond Fund 9,384
Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification
shall be provided to any past or present Trustee or officer. It states
that the Registrant shall indemnify any present or past Trustee or
officer to the fullest extent permitted by law against liability and
all expenses reasonably incurred by him in connection with any claim,
action, suit, or proceeding in which he is involved by virtue of his
service as a Trustee, an officer, or both. Additionally, amounts paid
or incurred in settlement of such matters are covered by this
indemnification. Indemnification will not be provided in certain
circumstances, however. These include instances of willful
misfeasance, bad faith, gross negligence, and reckless disregard of
the duties involved in the conduct of the particular office involved.
Pursuant to Section 11 of the Distribution Agreement, the Registrant
agrees to indemnify and hold harmless the Distributor and each of its
directors and officers and each person, if any, who controls the
Distributor within the meaning of Section 15 of the 1933 Act against
any loss, liability, claim, damages or expense arising by reason of
any person acquiring any shares, based upon the ground that the
registration statement, Prospectus, Statement of Additional
Information, shareholder reports or other information filed or made
public by the Registrant included a materially misleading statement or
omission. However, the Registrant does not agree to indemnify the
Distributor or hold it harmless to the extent that the statement or
omission was made in reliance upon, and in conformity with,
information furnished to the Registrant by or on behalf of the
Distributor. The Registrant does not agree to indemnify the parties
against any liability to which they would be subject by reason of
willful misfeasance, bad faith, gross negligence, and reckless
disregard of the obligations and duties under the Distribution
Agreement.
Pursuant to the agreement by which Fidelity Service Company, Inc.
("Service") is appointed transfer agent, the Registrant agrees to
indemnify and hold Service harmless against any losses, claims,
damages, liabilities or expenses (including reasonable counsel fees
and expenses) resulting from:
(1) any claim, demand, action or suit brought by any person other
than the Registrant, including by a shareholder, which names the
Service and/or the Registrant as a party and is not based on and does
not result from Service's willful misfeasance, bad faith or negligence
or reckless disregard of duties, and arises out of or in connection
with Service's performance under the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent
contributed to by Service's willful misfeasance, bad faith or
negligence or reckless disregard of duties) which results from the
negligence of the Registrant, or from Service's acting upon any
instruction(s) reasonably believed by it to have been executed or
communicated by any person duly authorized by the Registrant, or as a
result of Service's acting in reliance upon advice reasonably believed
by Service to have been given by counsel for the Registrant, or as a
result of Service's acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine and signed,
countersigned or executed by the proper person.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY (FMR)
82 Devonshire Street, Boston, MA 02109
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held,
during the past two fiscal years, the following positions of a
substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Board and Director of FMR; President
and Chief Executive Officer of FMR Corp.; Chairman
of the Board and Director of FMR Corp., Fidelity
Investments Money Management, Inc. (FIMM), Fidelity
Management & Research (U.K.) Inc. (FMR U.K.), and
Fidelity Management & Research (Far East) Inc. (FMR
Far East); Chairman of the Executive Committee of
FMR; Director of Fidelity Investments Japan Limited
(FIJ); President and Trustee of funds advised by FMR.
Robert C. Pozen President and Director of FMR; Senior Vice President
and Trustee of funds advised by FMR; President and
Director of FIMM, FMR U.K., and FMR Far East;
Previously, General Counsel, Managing Director, and
Senior Vice President of FMR Corp.
Peter S. Lynch Vice Chairman of the Board and Director of FMR.
John H. Carlson Vice President of FMR and of funds advised by FMR.
Dwight D. Churchill Senior Vice President of FMR and Vice President of
Bond Funds advised by FMR; Vice President of FIMM.
Brian Clancy Vice President of FMR and Treasurer of FMR, FIMM,
FMR U.K., and FMR Far East.
Barry Coffman Vice President of FMR.
Arieh Coll Vice President of FMR.
Frederic G. Corneel Tax Counsel of FMR.
Stephen G. Manning Assistant Treasurer of FMR, FIMM, FMR U.K., FMR
Far East; Vice President and Treasurer of FMR Corp.;
Treasurer of Strategic Advisers, Inc.
William Danoff Senior Vice President of FMR and Vice President of a
fund advised by FMR.
Scott E. DeSano Vice President of FMR.
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
Walter C. Donovan Vice President of FMR.
Bettina Doulton Vice President of FMR and of funds advised by FMR.
Margaret L. Eagle Vice President of FMR and of funds advised by FMR.
William R. Ebsworth Vice President of FMR.
Richard B. Fentin Senior Vice President of FMR and Vice President of a
fund advised by FMR.
Gregory Fraser Vice President of FMR and of a fund advised by FMR.
Jay Freedman Assistant Clerk of FMR; Clerk of FMR Corp., FMR
U.K., FMR Far East, and Strategic Advisers, Inc.;
Secretary of FIMM; Associate General Counsel FMR
Corp.
David L. Glancy Vice President of FMR and of a fund 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; Vice President
of FIMM.
Bart A. Grenier Senior Vice President of FMR; Vice President of
High-Income Funds advised by FMR.
Robert Haber Vice President of FMR.
Richard C. Habermann Senior Vice President of FMR; Vice President of funds
advised by FMR.
Fred L. Henning Jr. Senior Vice President of FMR and Vice President of
Fixed-Income Funds advised by FMR.
Bruce T. Herring Vice President of FMR.
Robert F. Hill Vice President of FMR; Director of Technical Research.
Abigail P. Johnson Senior Vice President of FMR and Vice President of
funds advised by FMR; Director of FMR Corp.;
Associate Director and Senior Vice President of Equity
Funds advised by FMR.
David B. Jones Vice President of FMR.
Steven Kaye Vice President of FMR and of a fund advised by FMR.
Francis V. Knox Vice President of FMR; Compliance Officer of FMR
U.K.
Harris Leviton Vice President of FMR and of a fund advised by FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Richard R. Mace Jr. Vice President of FMR and of funds advised by FMR.
Charles A. Mangum Vice President of FMR and of a fund advised by FMR.
Kevin McCarey Vice President of FMR and of a fund advised by FMR.
Neal P. Miller Vice President of FMR.
Jacques Perold Vice President of FMR.
Alan Radlo Vice President of FMR.
Eric D. Roiter Senior Vice President and General Counsel of FMR and
Secretary of funds advised by 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 and of funds advised by FMR.
Thomas T. Soviero Vice President of FMR and of a fund advised by FMR.
Richard Spillane Senior Vice President of FMR; Associate Director and
Senior Vice President of Equity Funds advised by FMR;
Previously, Senior Vice President and Director of
Operations and Compliance of FMR U.K.
Thomas M. Sprague Vice President of FMR and of funds advised by FMR.
Robert E. Stansky Senior Vice President of FMR and Vice President of a
fund advised by FMR.
Scott D. Stewart Vice President of FMR.
Thomas Sweeney Vice President of FMR.
Beth F. Terrana Senior Vice President of FMR and Vice President of a
fund advised by FMR.
Yoko Tilley Vice President of FMR.
Joel C. Tillinghast Vice President of FMR and of a fund advised by FMR.
Robert Tuckett Vice President of FMR.
Jennifer Uhrig Vice President of FMR and of funds advised by FMR.
George A. Vanderheiden Senior Vice President of FMR and Vice President of
funds advised by FMR; Director of FMR Corp.
Steven S. Wymer Vice President of FMR and of a fund advised by FMR.
</TABLE>
(2) FIDELITY MANAGEMENT & RESEARCH (U.K.) INC. (FMR U.K.)
25 Lovat Lane, London, EC3R 8LL, England
FMR U.K. provides investment advisory services to Fidelity Management
& Research Company and Fidelity Management Trust Company. The
directors and officers of the Sub-Adviser have held the following
positions of a substantial nature during the past two fiscal years.
Edward C. Johnson 3d Chairman of the Board and Director of FMR U.K.,
FMR, FMR Corp., FIMM, and FMR Far East; President
and Chief Executive Officer of FMR Corp.; Chairman
of the Executive Committee of FMR; Director of
Fidelity Investments Japan Limited (FIJ); President and
Trustee of funds advised by FMR.
Robert C. Pozen President and Director of FMR; Senior Vice President
and Trustee of funds advised by FMR; President and
Director of FIMM, FMR U.K., and FMR Far East;
Previously, General Counsel, Managing Director, and
Senior Vice President of FMR Corp.
Brian Clancy Treasurer of FMR U.K., FMR Far East, FMR, and
FIMM and Vice President of FMR.
Stephen G. Manning Assistant Treasurer of FMR U.K., FMR, FMR Far East,
and FIMM; Vice President and Treasurer of FMR
Corp.; Treasurer of Strategic Advisers, Inc.
Francis V. Knox Compliance Officer of FMR U.K.; Vice President of
FMR.
Jay Freedman Clerk of FMR U.K., FMR Far East, FMR Corp. and
Strategic Advisers, Inc.; Assistant Clerk of FMR;
Secretary of FIMM; Associate General Counsel FMR
Corp.
Sarah H. Zenoble Senior Vice President and Director of Operations and
Compliance.
(3) FIDELITY MANAGEMENT & RESEARCH (Far East) INC. (FMR Far East)
Shiroyama JT Mori Bldg., 4-3-1 Toranomon Minato-ku, Tokyo 105,
Japan
FMR Far East provides investment advisory services to Fidelity
Management & Research Company and Fidelity Management Trust Company.
The directors and officers of the Sub-Adviser have held the following
positions of a substantial nature during the past two fiscal years.
Edward C. Johnson 3d Chairman of the Board and Director of FMR Far
East, FMR, FMR Corp., FIMM, and FMR U.K.;
Chairman of the Executive Committee of FMR;
President and Chief Executive Officer of FMR
Corp.; Director of Fidelity Investments Japan
Limited (FIJ); President and Trustee of funds
advised by FMR.
Robert C. Pozen President and Director of FMR; Senior Vice
President and Trustee of funds advised by FMR;
President and Director of FIMM, FMR U.K., and
FMR Far East; Previously, General Counsel,
Managing Director, and Senior Vice President of
FMR Corp.
Robert H. Auld Senior Vice President of FMR Far East.
Brian Clancy Treasurer of FMR Far East, FMR U.K., FMR,
and FIMM and Vice President of FMR.
Jay Freedman Clerk of FMR Far East, FMR U.K., FMR Corp.
and Strategic Advisers, Inc.; Assistant Clerk of
FMR; Secretary of FIMM; Associate General
Counsel FMR Corp.
Stephen G. Manning Assistant Treasurer of FMR Far East, FMR,
FMR U.K., and FIMM; Vice President and
Treasurer of FMR Corp.; Treasurer of Strategic
Advisers, Inc.
Billy Wilder Vice President of FMR Far East; President and
Representative Director of Fidelity Investments
Japan Limited.
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for
most funds advised by FMR or an affiliate.
(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' respective custodians: The Bank of New York, 110 Washington
Street, New York, NY and The Chase Manhattan Bank, 1 Chase Manhattan
Plaza, New York, NY.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The Registrant undertakes for Fidelity Asset Manager: Income,
Spartan Investment Grade Bond Fund, and Spartan Short-Term Bond Fund:
1) to call a meeting of shareholders for the purpose of voting upon
the question of removal of a trustee or trustees, when requested to do
so by record holders of not less than 10% of its outstanding shares;
and 2) to assist in communications with other shareholders pursuant to
Section 16(c)(1) and (2), whenever shareholders meeting the
qualifications set forth in Section 16(c) seek the opportunity to
communicate with other shareholders with a view toward requesting a
meeting.
(b) The Registrant on behalf of Fidelity Asset Manager: Income,
Fidelity Asset Manager, Fidelity Asset Manager: Growth, Fidelity
Short-Intermediate Government Fund, Spartan Investment Grade Bond Fund
and Spartan Short-Term Bond 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. 63 to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston, and Commonwealth of
Massachusetts, on the 20th day of November 1998.
Fidelity Charles Street Trust
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons
in the capacities and on the dates indicated.
(Signature) (Title) (Date)
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Edward C. Johnson 3d (dagger) President and Trustee November 20, 1998
Edward C. Johnson 3d (Principal Executive Officer)
/s/Richard A. Silver Treasurer November 20, 1998
Richard A. Silver
/s/Robert C. Pozen Trustee November 20, 1998
Robert C. Pozen
/s/Ralph F. Cox * Trustee November 20, 1998
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee November 20, 1998
Phyllis Burke Davis
/s/Robert M. Gates ** Trustee November 20, 1998
Robert M. Gates
/s/E. Bradley Jones * Trustee November 20, 1998
E. Bradley Jones
/s/Donald J. Kirk * Trustee November 20, 1998
Donald J. Kirk
/s/Peter S. Lynch * Trustee November 20, 1998
Peter S. Lynch
/s/Marvin L. Mann * Trustee November 20, 1998
Marvin L. Mann
/s/William O. McCoy * Trustee November 20, 1998
William O. McCoy
/s/Gerald C. McDonough * Trustee November 20, 1998
Gerald C. McDonough
/s/Thomas R. Williams * Trustee November 20, 1998
Thomas R. Williams
</TABLE>
(dagger) Signatures affixed by Robert C. Pozen pursuant to a power of
attorney dated July 17, 1997 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of
attorney dated December 19, 1996 and filed herewith.
** Signature affixed by Robert C. Hacker pursuant to a power of
attorney dated March 6, 1997 and filed herewith.
POWER OF ATTORNEY
I, the undersigned President and Director, Trustee, or General
Partner, as the case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Hereford Street Trust
Fidelity Advisor Series I Fidelity Income Fund
Fidelity Advisor Series II Fidelity Institutional Cash Portfolios
Fidelity Advisor Series III Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series IV Fidelity Investment Trust
Fidelity Advisor Series V Fidelity Magellan Fund
Fidelity Advisor Series VI Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series VII Fidelity Money Market Trust
Fidelity Advisor Series VIII Fidelity Mt. Vernon Street Trust
Fidelity Beacon Street Trust Fidelity Municipal Trust
Fidelity Boston Street Trust Fidelity Municipal Trust II
Fidelity California Municipal Trust Fidelity New York Municipal Trust
Fidelity California Municipal Trust II Fidelity New York Municipal Trust II
Fidelity Capital Trust Fidelity Phillips Street Trust
Fidelity Charles Street Trust Fidelity Puritan Trust
Fidelity Commonwealth Trust Fidelity Revere Street Trust
Fidelity Concord Street Trust Fidelity School Street Trust
Fidelity Congress Street Fund Fidelity Securities Fund
Fidelity Contrafund Fidelity Select Portfolios
Fidelity Corporate Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Court Street Trust Fidelity Summer Street Trust
Fidelity Court Street Trust II Fidelity Trend Fund
Fidelity Covington Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Daily Money Fund Fidelity U.S. Investments-Government Securities
Fidelity Destiny Portfolios Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity Union Street Trust II
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Newbury Street Trust
Fidelity Financial Trust Variable Insurance Products Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund II
Fidelity Government Securities Fund Variable Insurance Products Fund III
Fidelity Hastings Street Trust
</TABLE>
in addition to any other investment company for which Fidelity
Management & Research Company or an affiliate acts as investment
adviser and for which the undersigned individual serves as President
and Director, Trustee, or General Partner (collectively, the "Funds"),
hereby constitute and appoint Robert C. Pozen my true and lawful
attorney-in-fact, with full power of substitution, and with full power
to him to sign for me and in my name in the appropriate capacity, all
Registration Statements of the Funds on Form N-1A, Form N-8A, or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A, Form N-8A, or any successor thereto, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such
things in my name and on my behalf in connection therewith as said
attorney-in-fact deems necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and the Investment Company
Act of 1940, and all related requirements of the Securities and
Exchange Commission. I hereby ratify and confirm all that said
attorney-in-fact or his substitutes may do or cause to be done by
virtue hereof. This power of attorney is effective for all documents
filed on or after August 1, 1997.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d_ July 17, 1997
Edward C. Johnson 3d
POWER OF ATTORNEY
We, the undersigned Directors, Trustees, or General Partners, as the
case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Government Securities Fund
Fidelity Advisor Annuity Fund Fidelity Hastings Street Trust
Fidelity Advisor Series I Fidelity Hereford Street Trust
Fidelity Advisor Series II Fidelity Income Fund
Fidelity Advisor Series III Fidelity Institutional Cash Portfolios
Fidelity Advisor Series IV Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series V Fidelity Institutional Trust
Fidelity Advisor Series VI Fidelity Investment Trust
Fidelity Advisor Series VII Fidelity Magellan Fund
Fidelity Advisor Series VIII Fidelity Massachusetts Municipal Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust
Fidelity Boston Street Trust Fidelity Mt. Vernon Street Trust
Fidelity California Municipal Trust Fidelity Municipal Trust
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Capital Trust Fidelity New York Municipal Trust
Fidelity Charles Street Trust Fidelity New York Municipal Trust II
Fidelity Commonwealth Trust Fidelity Phillips Street Trust
Fidelity Congress Street Fund Fidelity Puritan Trust
Fidelity Contrafund Fidelity Revere Street Trust
Fidelity Corporate Trust Fidelity School Street Trust
Fidelity Court Street Trust Fidelity Securities Fund
Fidelity Court Street Trust II Fidelity Select Portfolios
Fidelity Covington Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Daily Money Fund Fidelity Summer Street Trust
Fidelity Daily Tax-Exempt Fund Fidelity Trend Fund
Fidelity Destiny Portfolios Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity U.S. Investments-Government Securities
Portfolio, L.P. Fund, L.P.
Fidelity Devonshire Trust Fidelity Union Street Trust
Fidelity Exchange Fund Fidelity Union Street Trust II
Fidelity Financial Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Variable Insurance Products Fund II
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company or an affiliate acts as investment adviser and for
which the undersigned individual serves as Directors, Trustees, or
General Partners (collectively, the "Funds"), hereby constitute and
appoint Arthur J. Brown, Arthur C. Delibert, Stephanie A. Djinis,
Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, and Dana L.
Platt, each of them singly, our true and lawful attorneys-in-fact,
with full power of substitution, and with full power to each of them,
to sign for us and in our names in the appropriate capacities, all
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A or any successor thereto, any Registration
Statements on Form N-14, and any supplements or other instruments in
connection therewith, and generally to do all such things in our names
and behalf in connection therewith as said attorneys-in-fact deems
necessary or appropriate, to comply with the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940, and all
related requirements of the Securities and Exchange Commission. I
hereby ratify and confirm all that said attorneys-in-fact or their
substitutes may do or cause to be done by virtue hereof. This power
of attorney is effective for all documents filed on or after January
1, 1997.
WITNESS our hands on this nineteenth day of December, 1996.
/s/Edward C. Johnson 3d___________ /s/Peter S. Lynch________________
Edward C. Johnson 3d Peter S. Lynch
/s/J. Gary Burkhead_______________ /s/William O. McCoy______________
J. Gary Burkhead William O. McCoy
/s/Ralph F. Cox __________________ /s/Gerald C. McDonough___________
Ralph F. Cox Gerald C. McDonough
/s/Phyllis Burke Davis_____________ /s/Marvin L. Mann________________
Phyllis Burke Davis Marvin L. Mann
/s/E. Bradley Jones________________ /s/Thomas R. Williams ____________
E. Bradley Jones Thomas R. Williams
/s/Donald J. Kirk __________________
Donald J. Kirk
POWER OF ATTORNEY
I, the undersigned Director, Trustee, or General Partner, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Government Securities Fund
Fidelity Advisor Annuity Fund Fidelity Hastings Street Trust
Fidelity Advisor Series I Fidelity Hereford Street Trust
Fidelity Advisor Series II Fidelity Income Fund
Fidelity Advisor Series III Fidelity Institutional Cash Portfolios
Fidelity Advisor Series IV Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series V Fidelity Institutional Trust
Fidelity Advisor Series VI Fidelity Investment Trust
Fidelity Advisor Series VII Fidelity Magellan Fund
Fidelity Advisor Series VIII Fidelity Massachusetts Municipal Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust
Fidelity Boston Street Trust Fidelity Mt. Vernon Street Trust
Fidelity California Municipal Trust Fidelity Municipal Trust
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Capital Trust Fidelity New York Municipal Trust
Fidelity Charles Street Trust Fidelity New York Municipal Trust II
Fidelity Commonwealth Trust Fidelity Phillips Street Trust
Fidelity Congress Street Fund Fidelity Puritan Trust
Fidelity Contrafund Fidelity Revere Street Trust
Fidelity Corporate Trust Fidelity School Street Trust
Fidelity Court Street Trust Fidelity Securities Fund
Fidelity Court Street Trust II Fidelity Select Portfolios
Fidelity Covington Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Daily Money Fund Fidelity Summer Street Trust
Fidelity Daily Tax-Exempt Fund Fidelity Trend Fund
Fidelity Destiny Portfolios Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity U.S. Investments-Government Securities
Portfolio, L.P. Fund, L.P.
Fidelity Devonshire Trust Fidelity Union Street Trust
Fidelity Exchange Fund Fidelity Union Street Trust II
Fidelity Financial Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Variable Insurance Products Fund II
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company or an affiliate acts as investment adviser and for
which the undersigned individual serves as Director, Trustee, or
General Partner (collectively, the "Funds"), hereby constitute and
appoint Arthur J. Brown, Arthur C. Delibert, Stephanie A. Djinis,
Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, and Dana L.
Platt, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to
sign for me and in my name in the appropriate capacities, all
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A or any successor thereto, any Registration
Statements on Form N-14, and any supplements or other instruments in
connection therewith, and generally to do all such things in my name
and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940, and all
related requirements of the Securities and Exchange Commission. I
hereby ratify and confirm all that said attorneys-in-fact or their
substitutes may do or cause to be done by virtue hereof. This power
of attorney is effective for all documents filed on or after March 1,
1997.
WITNESS my hand on the date set forth below.
/s/Robert M. Gates March 6, 1997
Robert M. Gates
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference into the
Prospectuses and Statements of Additional Information in
Post-Effective Amendment No. 63 to the Registration Statement on Form
N-1A of Fidelity Charles Street Trust: Fidelity Asset Manager,
Fidelity Asset Manager: Growth and Fidelity Asset Manager: Income of
our reports dated November 10, 1998 and our reports dated November 6,
1998 for Fidelity Short-Intermediate Government Fund, Spartan
Short-Term Bond Fund and Spartan Investment Grade Bond Fund on the
financial statements and financial highlights included in the
September 30, 1998 Annual Reports to Shareholders.
We further consent to the references to our Firm under the headings
"Financial Highlights" in the Prospectuses and "Auditor" in the
Statements of Additional Information.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 18, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000354046
<NAME> Fidelity Charles Street Trust
<SERIES>
<NUMBER> 21
<NAME> Fidelity Asset Manager
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 11,346,822
<INVESTMENTS-AT-VALUE> 11,772,672
<RECEIVABLES> 260,009
<ASSETS-OTHER> (363)
<OTHER-ITEMS-ASSETS> 0
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