SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 2-79910)
UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.
Post-Effective Amendment No. 33 [X]
and
REGISTRATION STATEMENT (No. 811-3587)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 33 [X]
Fidelity Financial 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).
( ) on ( ) pursuant to paragraph (b).
( ) 60 days after filing pursuant to paragraph (a)(1).
(X) on (January 29, 1999) 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.
Like securities of all mutual
funds, these securities have
not been approved or
disapproved by the Securities
and Exchange Commission,
and the Securities and
Exchange Commission has not
determined if this prospectus
is accurate or complete. Any
representation to the contrary
is a criminal offense.
FIDELITY
EQUITY-INCOME II
FUND
(fund number 319, trading symbol FEQTX)
PROSPECTUS
JANUARY 29,1999
(fidelity_logo_graphic)(REGISTERED TRADEMARK)
82 Devonshire Street, Boston, MA 02109
CONTENTS
FUND SUMMARY 3 INVESTMENT SUMMARY
3 PERFORMANCE
4 FEE TABLE
FUND BASICS 6 INVESTMENT DETAILS
8 VALUING SHARES
SHAREHOLDER INFORMATION 5 BUYING AND SELLING SHARES
10 EXCHANGING SHARES
10 ACCOUNT FEATURES AND POLICIES
13 DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS
13 TAX CONSEQUENCES
FUND SERVICES 13 FUND MANAGEMENT
FUND DISTRIBUTION
APPENDIX 14 FINANCIAL HIGHLIGHTS
FUND SUMMARY
INVESTMENT DETAILS
INVESTMENT SUMMARY
INVESTMENT OBJECTIVE. Equity-Income II seeks reasonable income. The
fund will also consider the potential for capital appreciation. The
fund looks for a yield that exceeds the composite yield on the
securities comprising the Standard & Poor's 500 Index (S&P
500(registered trademark)).
PRINCIPAL INVESTMENT STRATEGIES. Fidelity Management & Research
Company's (FMR)'s principal investment strategies include:
(small solid bullet) Investing at least 65% of total assets in
income-producing equity securities.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Potentially investing in other types of equity
securities and debt securities including lower-quality debt
securities.
(small solid bullet) Emphasizing stocks that have more "value"
characteristics than "growth" characteristics.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS. The fund is subject to the following
principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently than the U.S. market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently than
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.
(small solid bullet) "VALUE" INVESTING. "Value" stocks can perform
differently than the market as a whole and other types of stocks and
can continue to be undervalued by the market for long periods of time.
An investment in the fund is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
When you sell your shares of the fund, they could be worth more or
less than what you paid for them.
PERFORMANCE
The following information illustrates the changes in the fund's
performance from year to year and compares the fund's performance to
the performance of a market index and similar funds over various
periods of time. Returns are based on past results and are not an
indication of future performance.
YEAR-BY-YEAR RETURNS
EQUITY-INCOME II
CALENDAR YEARS 1991 1992 1993 1994 1995 1996 1997 1998
% % % % % % % %
PERCENTAGE (%)
ROW: 1, COL: 1, VALUE: NIL
ROW: 2, COL: 1, VALUE: NIL
ROW: 3, COL: 1, VALUE: NIL
ROW: 4, COL: 1, VALUE: NIL
ROW: 5, COL: 1, VALUE: NIL
ROW: 6, COL: 1, VALUE: NIL
ROW: 7, COL: 1, VALUE: NIL
ROW: 8, COL: 1, VALUE: NIL
ROW: 9, COL: 1, VALUE: NIL
ROW: 10, COL: 1, VALUE: NIL
DURING THE PERIODS SHOWN IN THE CHART FOR EQUITY-INCOME II, THE
HIGHEST RETURN FOR A QUARTER WAS __% (QUARTER ENDING,____)
AND THE LOWEST RETURN FOR A QUARTER WAS __% (QUARTER ENDING,____).
AVERAGE ANNUAL RETURNS
FOR THE PERIODS ENDED
DECEMBER 31, 1998 PAST 1 PAST 5 LIFE OFA
YEAR YEARS FUND
EQUITY-INCOME II % % %
S&P 500 % % %
EQUITY INCOME FUNDS AVERAGE % % %
A FROM JANUARY 1, 1991.
The S&P 500 is a market capitalization-weighted index of common
stocks.
The Lipper Equity Income Funds Average reflects the performance
(excluding sales charges) of mutual funds with similar objectives.
FEE TABLE
The following table describes the fees and expenses that are incurred
when you buy, hold or sell shares of the fund. [The annual fund
operating expenses provided below are based on historical expenses,
adjusted to reflect current fees.] [The annual fund operating expenses
provided below are higher than the expenses actually paid by the fund
as a result of the payment or reduction of certain expenses during the
period.] [The annual fund operating expenses provided below are based
on historical expenses.]
SHAREHOLDER FEES (PAID BY THE INVESTOR)
SALES CHARGE (LOAD) ON NONE
PURCHASES
AND REINVESTED DISTRIBUTIONS
DEFERRED SALES CHARGE NONE
(LOAD) ON REDEMPTIONS
ANNUAL ACCOUNT $12.00
MAINTENANCE FEE (FOR
ACCOUNTS UNDER $2,500)
FUND OPERATING EXPENSES (PAID BY THE FUND)
MANAGEMENT FEE %
DISTRIBUTION AND SERVICE NONE
(12B-1) FEE
OTHER EXPENSES %
TOTAL ANNUAL FUND %
OPERATING EXPENSES
[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 would have been __%.]
This EXAMPLE helps you compare the cost of investing in the fund with
the cost of investing in other mutual funds.
Let's say, hypothetically, that the fund's annual return is 5% and
that your shareholder fees and the fund's annual operating expenses
are exactly as described in the fee table. This example illustrates
the effect of fees and expenses, but is not meant to suggest actual or
expected fees and expenses or returns, all of which may vary. For
every $10,000 you invested, here's how much you would pay in total
expenses if you close your account after the number of years
indicated:
1 YEAR $
3 YEARS $
5 YEARS $
10 YEARS $
FUND BASICS
INVESTMENT DETAILS
INVESTMENT OBJECTIVE:
EQUITY-INCOME II seeks reasonable income. The fund will also consider
the potential for capital appreciation. The fund looks for a yield
that exceeds the composite yield on the securities comprising the S&P
500.
PRINCIPAL INVESTMENT STRATEGIES:
FMR normally invests at least 65% of the fund's total assets in
income-producing equity securities. FMR may invest the fund's assets
in securities of foreign issuers in addition to securities of domestic
issuers. FMR may also invest the fund's assets in other types of
equity securities and debt securities, including lower-quality debt
securities.
FMR's emphasis on above-average income-producing equity securities
tends to lead to investments in stocks that have more "value"
characteristics than "growth" characteristics. However, FMR is not
constrained by any particular investment style. In buying and selling
securities for the fund, FMR relies on fundamental analysis of each
issuer and its potential for success in light of its current financial
condition, its industry position, and economic and market conditions.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
DESCRIPTION OF PRINCIPAL SECURITY TYPES:
EQUITY SECURITIES represent an ownership interest, or the right to
acquire an ownership interest, in an issuer. Different types of equity
securities provide different voting and dividend rights and priority
in the event of the bankruptcy of the issuer. Equity securities
include common stocks, preferred stocks, convertible securities and
warrants.
DEBT SECURITIES are used by issuers to borrow money. The issuer
usually pays a fixed, variable or floating rate of interest, and must
repay the amount borrowed at the maturity of the security. 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
include corporate bonds, government securities, and mortgage and other
asset-backed securities.
PRINCIPAL INVESTMENT RISKS:
Many factors affect the fund's performance. The fund's share price
changes daily based on changes in market conditions and interest rates
and in response to other economic, political or financial
developments. The fund's reaction to these developments will be
affected by the financial condition, industry and economic sector, and
geographic location of an issuer, and the fund's level of investment
in the securities of that issuer. When you sell your shares of the
fund, they could be worth more or less than what you paid for them.
The following factors may significantly affect the fund's performance:
STOCK MARKET VOLATILITY. The value of equity securities fluctuates in
response to issuer, political, market and economic developments. In
the short term, equity prices can fluctuate dramatically in response
to these developments. Different parts of the market can react
differently to these developments. For example, large cap stocks can
react differently than small cap stocks, and "growth" stocks can react
differently than "value" stocks. Issuer, political or economic
developments can affect a single issuer, issuers within an industry or
economic sector or geographic region, or the market as a whole.
INTEREST RATE CHANGES. Debt securities have varying levels of
sensitivity to changes in interest rates. In general, the price of a
debt security can fall when interest rates rise and can rise when
interest rates fall. Securities with longer maturities and mortgage
securities can be more sensitive to interest rate changes.
FOREIGN EXPOSURE. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations
can involve additional risks relating to political, economic or
regulatory conditions in foreign countries. These risks include
fluctuations in foreign currencies; withholding or other taxes;
trading, settlement, custodial and other operational risks; and the
less stringent investor protection and disclosure standards of some
foreign markets. All of these factors can make foreign investments,
especially those in emerging markets, more volatile and potentially
less liquid than U.S. investments. In addition, foreign markets can
perform differently than the U.S. market.
ISSUER SPECIFIC CHANGES. Changes in the financial condition of an
issuer, changes in specific economic or political conditions that
affect a particular type of issuer, and changes in general economic or
political conditions can affect the value of an issuer's securities.
The value of securities of smaller, less well-known issuers can be
more volatile than that of larger issuers. Lower-quality debt
securities (those of less than investment-grade quality) tend to be
more sensitive to these changes than higher-quality debt securities.
Lower-quality debt securities involve greater risk of default or price
changes due to changes in the credit quality of the issuer. The value
of lower-quality debt securities often fluctuates in response to
company, political or economic developments and can decline
significantly over short periods of time or during periods of general
or regional economic difficulty.
"VALUE" INVESTING. "Value" stocks can react differently to issuer,
political, market and economic developments than the market as a whole
and other types of stocks. "Value" stocks tend to be inexpensive
relative to their earnings or assets compared to other types of
stocks. However, "value" stocks can continue to be inexpensive for
long periods of time and may not ever realize their full value.
In response to market, economic, political or other conditions, FMR
may temporarily use a different investment strategy for defensive
purposes. If FMR does so, different factors could affect the fund's
performance.
FUNDAMENTAL INVESTMENT POLICIES
The policies discussed below are fundamental, that is, subject to
change only by shareholder approval.
The fund seeks reasonable income by investing primarily in
income-producing equity securities. In choosing these securities, the
fund will also consider the potential for capital appreciation. The
fund looks for a yield that exceeds the composite yield on the
securities comprising the S&P 500.
VALUING SHARES
The fund's net asset value (NAV) is the value of a single share.
The fund is open for business each day the New York Stock Exchange
(NYSE) is open. Fidelity(Registered trademark) normally calculates the
fund's NAV as of the close of business 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. The fund's assets are
valued as of this time for the purpose of computing the fund's NAV.
To the extent that the fund's assets are traded in other markets on
days when the NYSE is closed, the value of the fund's assets may be
affected on days when the fund is not open for business. In addition,
trading in some of a fund's assets may not occur on days when the fund
is open for business.
The fund's assets are valued primarily on the basis of market
quotations. Certain short-term securities are valued on the basis of
amortized cost. If market quotations are not readily available for a
security or if a security's value has been materially affected by
events occurring after the close of the exchange or market on which
the security is principally traded (for example, a foreign exchange or
market), that security may be valued by another method that the Board
of Trustees believes accurately reflects fair value. In these
circumstances, the security's valuation may differ from the generally
expected valuation.
SHAREHOLDER INFORMATION
BUYING AND SELLING SHARES
GENERAL INFORMATION
Fidelity Investments(Registered trademark) was established in 1946 to
manage one of America's first mutual funds. Today, Fidelity is the
largest mutual fund company in the country, and is known as an
innovative provider of high-quality financial services to individuals
and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage
Services, Inc. (FBSI). Fidelity is also a leader in providing
tax-advantaged retirement plans for individuals investing on their own
or through their employer.
For account, product and service information, please use the following
Web site and phone numbers:
(small solid bullet) For information over the Internet, visit
Fidelity's Web site at www.fidelity.com.
(small solid bullet) For accessing account information automatically
by phone, use TouchTone Xpress(registered trademark), 1-800-544-5555.
(small solid bullet) For exchanges and redemptions, 1-800-544-7777.
(small solid bullet) For account assistance, 1-800-544-6666.
(small solid bullet) For mutual fund and retirement information,
1-800-544-8888.
(small solid bullet) For brokerage information, 1-800-544-7272.
(small solid bullet) TDD - Service for the Deaf and Hearing-Impaired,
1-800-544-0118 (9:00 a.m. - 9:00 p.m. Eastern time),
Please use the following addresses:
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
You may buy or sell shares of the fund through a retirement account or
an investment professional. If you invest through a retirement account
or an investment professional, the procedures for buying, selling and
exchanging shares of the fund and the account features and policies
may differ. Additional fees may also apply to your investment in the
fund, including a transaction fee if you buy or sell shares of the
fund through a broker or other investment professional.
Certain methods of contacting Fidelity, such as by telephone or
electronically, may be unavailable or delayed (for example, during
periods of unusual market activity). In addition, the level and type
of service available may be restricted based on criteria established
by Fidelity.
The different ways to set up (register) your account with Fidelity are
listed in the following table.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
RETIREMENT
FOR TAX-ADVANTAGED RETIREMENT SAVINGS
(solid bullet) TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNTS (IRAS)
(solid bullet) ROTH IRAS
(solid bullet) ROTH CONVERSION IRAS
(solid bullet) ROLLOVER IRAS
(solid bullet) 401(K) PLANS, AND CERTAIN OTHEr 401(A)-QUALIFIED PLANS
(solid bullet) KEOGH PLANS
(solid bullet) SIMPLE IRAS
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS)
(solid bullet) SALARY REDUCTION SEP-IRAS (SARSEPS)
(solid bullet) 403(B) CUSTODIAL ACCOUNTS
(solid bullet) DEFERRED COMPENSATION PLANS (457 PLANS)
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
TRUST
FOR MONEY BEING INVESTED BY A TRUST
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR
OTHER GROUPS
BUYING SHARES
The price to buy one share of the fund is the fund's NAV. The fund's
shares are sold without a sales charge.
Your shares will be bought at the next NAV calculated after your
investment is received in proper form.
Short-term or excessive trading into and out of the fund may harm
performance by disrupting portfolio management strategies and by
increasing expenses. Accordingly, the fund may reject any purchase
orders, including exchanges, particularly from market timers or
investors who, in FMR's opinion, have a pattern of short-term or
excessive trading or whose trading has been or may be disruptive to
the fund. For these purposes, FMR may consider an investor's trading
history in the fund or other Fidelity Funds, and accounts under common
ownership or control.
The fund may stop offering shares completely or may offer shares only
on a limited basis, for a period of time or permanently.
When you place an order to buy shares, 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) Fidelity reserves the right to limit the number
of checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will
be canceled and you could be liable for any losses or fees the fund or
Fidelity has incurred.
Certain financial institutions that have entered into sales agreements
with Fidelity Distributors Corporation (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 order will
be canceled and the financial institution could be held liable for
resulting fees or losses.
MINIMUMS
TO OPEN AN ACCOUNT $2,500
For certain Fidelity retirement accountsA $500
TO ADD TO AN ACCOUNT $250
Through regular investment plans $100
MINIMUM BALANCE $2,000
For certain Fidelity retirement accountsA $500
A FIDELITY TRADITIONAL IRA, ROTH IRA, ROTH CONVERSION IRA, ROLLOVER
IRA, SEP-IRA, AND KEOGH ACCOUNTS.
There is no minimum account balance or initial or subsequent purchases
minimum for purchases through Fidelity Portfolio Advisory Services, 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. In addition, the fund
may waive or lower purchase minimums in other circumstances.
SM
<TABLE>
<CAPTION>
<S> <C>
KEY
INFORMATION
PHONE TO OPEN AN ACCOUNT
1-800-544-7777 (BULLET) EXCHANGE
FROM ANOTHER FIDELITY FUND.
TO ADD TO AN ACCOUNT
(BULLET) EXCHANGE
FROM ANOTHER FIDELITY FUND.
(BULLET) USE
FIDELITY MONEY LINE(REGISTERED TRADEMARK) TO TRANSFER FROM
YOUR BANK ACCOUNT.
INTERNET TO OPEN AN ACCOUNT
WWW.FIDELITY.COM (BULLET) COMPLETE
AND SIGN THE APPLICATION. MAKE YOUR
CHECK PAYABLE TO THE COMPLETE NAME
OF THE FUND. MAIL TO THE ADDRESS UNDER
"MAIL" BELOW.
TO ADD TO AN ACCOUNT
(BULLET) EXCHANGE
FROM ANOTHER FIDELITY FUND.
(BULLET) USE
FIDELITY MONEY LINE TO TRANSFER FROM
YOUR BANK ACCOUNT.
MAIL TO OPEN AN ACCOUNT
FIDELITY INVESTMENTS (BULLET) COMPLETE
P.O. BOX 770001 AND SIGN THE APPLICATION. MAKE YOUR
CINCINNATI, OH CHECK PAYABLE TO THE COMPLETE NAME
45277-0002 OF THE FUND. MAIL TO THE ADDRESS AT
LEFT.
TO ADD TO AN ACCOUNT
(BULLET) MAKE YOUR
CHECK PAYABLE TO THE COMPLETE NAME
OF THE FUND. INDICATE YOUR FUND
ACCOUNT NUMBER ON YOUR CHECK AND
MAIL TO THE ADDRESS AT LEFT.
(BULLET) EXCHANGE
FROM ANOTHER FIDELITY FUND. SEND A
LETTER OF INSTRUCTION TO THE ADDRESS AT
LEFT, INCLUDING YOUR NAME, THE FUNDS'
NAMES, THE FUND ACCOUNT NUMBERS,
AND THE DOLLAR AMOUNT OR NUMBER OF
SHARES TO BE EXCHANGED.
IN PERSON TO OPEN AN ACCOUNT
(BULLET) BRING YOUR
APPLICATION AND CHECK TO A FIDELITY
INVESTOR CENTER. CALL 1-800-544-9797
FOR THE CENTER NEAREST YOU.
TO ADD TO AN ACCOUNT
(BULLET) BRING YOUR
CHECK TO A FIDELITY INVESTOR CENTER.
CALL 1-800-544-9797 FOR THE CENTER
NEAREST YOU.
WIRE TO OPEN AN ACCOUNT
(BULLET) CALL
1-800-544-7777 TO SET UP YOUR
ACCOUNT AND TO ARRANGE A WIRE
TRANSACTION.
(BULLET) WIRE
WITHIN 24 HOURS TO: BANKERS TRUST
COMPANY, BANK ROUTING #
021001033, ACCOUNT # 00163053.
(BULLET) SPECIFY
THE COMPLETE NAME OF THE FUND AND
INCLUDE YOUR NEW FUND ACCOUNT
NUMBER AND YOUR NAME.
TO ADD TO AN ACCOUNT
(BULLET) WIRE TO:
BANKERS TRUST COMPANY, BANK ROUTING
# 021001033, ACCOUNT #
00163053.
(BULLET) SPECIFY
THE COMPLETE NAME OF THE FUND AND
INCLUDE YOUR FUND ACCOUNT NUMBER AND
YOUR NAME.
AUTOMATICALLY TO OPEN AN ACCOUNT
(BULLET) NOT
AVAILABLE.
TO ADD TO AN ACCOUNT
(BULLET) USE
FIDELITY AUTOMATIC ACCOUNT BUILDER(REGISTERED TRADEMARK)
OR DIRECT DEPOSIT.
(BULLET) USE
FIDELITY AUTOMATIC EXCHANGE SERVICE TO
EXCHANGE FROM A FIDELITY MONEY
MARKET FUND.
</TABLE>
SELLING 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.
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 sell 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.
When you place an order to sell shares, note the following:
(small solid bullet) 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), except accounts not subject to
account minimums.
(small solid bullet) Normally, Fidelity will process redemptions by
the next business day, but Fidelity may take up to seven days to
process redemptions if making immediate payment would adversely affect
the fund.
(small solid bullet) Redemption proceeds (other than exchanges) may be
delayed until investments credited to your account have been received
and 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) Redemption proceeds may be paid in securities or
other assets rather than in cash if the Board of Trustees determines
it is in the best interests of the fund.
(small solid bullet) You will not receive interest on amounts
represented by uncashed redemption checks.
(small solid bullet) Unless otherwise instructed, Fidelity will send a
check to the record address.
KEY
INFORMATION
PHONE (BULLET) CALL THE
1-800-544-7777 PHONE NUMBER AT LEFT TO INITIATE A WIRE
TRANSACTION OR TO REQUEST A CHECK FOR
YOUR REDEMPTION.
(BULLET) USE FIDELITY
MONEY LINE TO TRANSFER TO YOUR BANK
ACCOUNT.
(BULLET) EXCHANGE
TO ANOTHER FIDELITY FUND. CALL THE PHONE
NUMBER AT LEFT.
INTERNET (BULLET) EXCHANGE
WWW.FIDELITY.COM TO ANOTHER FIDELITY FUND.
(BULLET) USE
FIDELITY MONEY LINE TO TRANSFER TO YOUR
BANK ACCOUNT.
MAIL INDIVIDUAL, JOINT TENANT,
FIDELITY INVESTMENTS SOLE PROPRIETORSHIP,
P.O. BOX 660602 UGMA, UTMA
DALLAS, TX 75266-0602 (BULLET) SEND A
LETTER OF INSTRUCTION TO THE ADDRESS AT
LEFT, INCLUDING YOUR NAME, THE FUND'S
NAME, YOUR FUND ACCOUNT NUMBER, AND
THE DOLLAR AMOUNT OR NUMBER OF SHARES
TO BE SOLD. THE LETTER OF INSTRUCTION
MUST BE SIGNED BY ALL PERSONS REQUIRED
TO SIGN FOR TRANSACTIONS, EXACTLY AS
THEIR NAMES APPEAR ON THE ACCOUNT.
RETIREMENT ACCOUNT
(BULLET) THE
ACCOUNT OWNER SHOULD COMPLETE A
RETIREMENT DISTRIBUTION FORM. CALL
1-800-544-6666 TO REQUEST ONE.
TRUST
(BULLET) SEND A
LETTER OF INSTRUCTION TO THE ADDRESS AT
LEFT, INCLUDING THE TRUST'S NAME, THE
FUND'S NAME, THE TRUST'S FUND ACCOUNT
NUMBER, AND THE DOLLAR AMOUNT OR
NUMBER OF SHARES TO BE SOLD. THE
TRUSTEE MUST SIGN THE LETTER OF INSTRUCTION
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
(BULLET) SEND A
LETTER OF INSTRUCTION TO THE ADDRESS AT
LEFT, INCLUDING THE FIRM'S NAME, THE
FUND'S NAME, THE FIRM'S FUND ACCOUNT
NUMBER, AND THE DOLLAR AMOUNT OR
NUMBER OF SHARES TO BE SOLD. AT LEAST
ONE PERSON AUTHORIZED BY CORPORATE
RESOLUTION TO ACT ON THE ACCOUNT MUST
SIGN THE LETTER OF INSTRUCTION.
(BULLET) INCLUDE A
CORPORATE RESOLUTION WITH CORPORATE
SEAL OR A SIGNATURE GUARANTEE.
EXECUTOR, ADMINISTRATOR,
CONSERVATOR, GUARDIAN
(BULLET) CALL
1-800-544-6666 FOR INSTRUCTIONS.
IN PERSON INDIVIDUAL, JOINT TENANT,
SOLE PROPRIETORSHIP,
UGMA, UTMA
(BULLET) BRING A
LETTER OF INSTRUCTION TO A FIDELITY
INVESTOR CENTER. CALL 1-800-544-9797
FOR THE CENTER NEAREST YOU. THE LETTER
OF INSTRUCTION MUST BE SIGNED BY ALL
PERSONS REQUIRED TO SIGN FOR
TRANSACTIONS, EXACTLY AS THEIR NAMES
APPEAR ON THE ACCOUNT.
RETIREMENT ACCOUNT
(BULLET) THE
ACCOUNT OWNER SHOULD COMPLETE A
RETIREMENT DISTRIBUTION FORM. VISIT A
FIDELITY INVESTOR CENTER TO REQUEST
ONE. CALL 1-800-544-9797 FOR THE
CENTER NEAREST YOU.
TRUST
(BULLET) BRING A
LETTER OF INSTRUCTION TO A FIDELITY
INVESTOR CENTER. CALL 1-800-544-9797
FOR THE CENTER NEAREST YOU. THE TRUSTEE
MUST SIGN THE LETTER OF INSTRUCTION
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
(BULLET) BRING A
LETTER OF INSTRUCTION TO A FIDELITY
INVESTOR CENTER. CALL 1-800-544-9797
FOR THE CENTER NEAREST YOU. AT LEAST
ONE PERSON AUTHORIZED BY CORPORATE
RESOLUTION TO ACT ON THE ACCOUNT MUST
SIGN THE LETTER OF INSTRUCTION.
(BULLET) INCLUDE A
CORPORATE RESOLUTION WITH CORPORATE
SEAL OR A SIGNATURE GUARANTEE.
EXECUTOR, ADMINISTRATOR,
CONSERVATOR, GUARDIAN
(BULLET) VISIT A
FIDELITY INVESTOR CENTER FOR
INSTRUCTIONS. CALL 1-800-544-9797 FOR
THE CENTER NEAREST YOU.
AUTOMATICALLY (BULLET) USE
PERSONAL WITHDRAWAL SERVICE TO SET UP
PERIODIC REDEMPTIONS FROM YOUR
ACCOUNT.
EXCHANGING SHARES
An exchange involves the redemption of all or a portion of the shares
of one fund and the purchase of shares of another fund.
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 policies and restrictions
governing exchanges:
(small solid bullet) The fund you are exchanging into must be
available for sale in your state.
(small solid bullet) You may exchange only 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) Exchanges may have tax consequences for you.
(small solid bullet) The fund may temporarily or permanently terminate
the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year.
(small solid bullet) The exchange limit may be modified for accounts
held by 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 may 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.
The fund may 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.
ACCOUNT FEATURES AND POLICIES
FEATURES
The following features are available to buy and sell shares of the
fund.
AUTOMATIC INVESTMENT AND WITHDRAWAL PROGRAMS. Fidelity offers
convenient services that let you automatically transfer money into
your account, between accounts or out of your account. While automatic
investment programs 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. Automatic withdrawal or exchange programs
can be a convenient way to provide a consistent income flow or to move
money between your investments.
FIDELITY AUTOMATIC ACCOUNT BUILDER
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY PROCEDURES
$100 MONTHLY OR QUARTERLY (BULLET) TO SET UP FOR A NEW
ACCOUNT, COMPLETE THE APPROPRIATE
SECTION ON THE FUND APPLICATION.
(BULLET) TO SET UP FOR EXISTING
ACCOUNTS, CALL 1-800-544-6666 OR
VISIT FIDELITY'S WEB SITE FOR AN
APPLICATION.
(BULLET) TO MAKE CHANGES, CALL
1-800-544-6666 AT LEAST THREE
BUSINESS DAYS PRIOR TO YOUR NEXT
SCHEDULED INVESTMENT DATE.
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A
FIDELITY FUNDA
MINIMUM FREQUENCY PROCEDURES
$100 Every pay period (bullet) To set up for a new
account, check the appropriate box
on the fund application.
(bullet) To set up for an
existing account, call
1-800-544-6666 or visit Fidelity's
Web site for an authorization form.
(bullet) To make changes you
will need a new authorization
form. Call 1-800-544-6666 or
visit Fidelity's Web site to obtain
one.
A BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE AN
APPROPRIATE CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY
FUND
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY PROCEDURES
$100 MONTHLY, BIMONTHLY, QUARTERLY, OR (BULLET) TO SET UP, CALL
ANNUALLY 1-800-544-6666 AFTER BOTH
ACCOUNTS ARE OPENED.
(BULLET) TO MAKE CHANGES, CALL
1-800-544-6666 AT LEAST THREE
BUSINESS DAYS PRIOR TO YOUR NEXT
SCHEDULED EXCHANGE DATE.
</TABLE>
PERSONAL WITHDRAWAL SERVICE
TO SET UP PERIODIC REDEMPTIONS FROM YOUR FUND ACCOUNT TO YOU OR TO
YOUR BANK ACCOUNT.
FREQUENCY PROCEDURES
MONTHLY (BULLET) TO SET UP, CALL
1-800-544-6666.
(BULLET) TO MAKE CHANGES, CALL
FIDELITY AT 1-800-544-6666 AT
LEAST THREE BUSINESS DAYS PRIOR TO
YOUR NEXT SCHEDULED WITHDRAWAL
DATE.
OTHER FEATURES. The following other features are also available to buy
and sell shares of the fund.
WIRE
TO PURCHASE AND SELL SHARES VIA THE FEDERAL RESERVE WIRE SYSTEM.
(BULLET) YOU MUST SIGN UP FOR
THE WIRE FEATURE BEFORE USING IT.
COMPLETE THE APPROPRIATE SECTION
ON THE APPLICATION WHEN OPENING
YOUR ACCOUNT, OR CALL
1-800-544-7777 TO ADD THE
FEATURE AFTER YOUR ACCOUNT IS
OPENED. CALL 1-800-544-7777
BEFORE YOUR FIRST USE TO VERIFY THAT
THIS FEATURE IS SET UP ON YOUR
ACCOUNT.
(BULLET) TO SELL SHARES BY WIRE,
YOU MUST DESIGNATE THE U.S.
COMMERCIAL BANK ACCOUNT(S) INTO
WHICH YOU WISH THE REDEMPTION
PROCEEDS DEPOSITED.
FIDELITY MONEY LINE
TO TRANSFER MONEY BY PHONE BETWEEN YOUR BANK ACCOUNT AND YOUR FUND
ACCOUNT.
(BULLET) YOU MUST SIGN UP FOR
THE MONEY LINE FEATURE BEFORE
USING IT. COMPLETE THE APPROPRIATE
SECTION ON THE APPLICATION AND THEN
CALL 1-800-544-7777 OR VISIT
FIDELITY'S WEB SITE BEFORE YOUR FIRST
USE TO VERIFY THAT THIS FEATURE IS SET
UP ON YOUR ACCOUNT.
(BULLET) MOST TRANSFERS ARE
COMPLETE WITHIN THREE BUSINESS
DAYS OF YOUR CALL.
(BULLET) MAXIMUM PURCHASE:
$100,000
FIDELITY ON-LINE XPRESS+(Registered trademark)
TO MANAGE YOUR INVESTMENTS THROUGH YOUR PC.
CALL 1-800-544-7272 OR VISIT
FIDELITY'S WEB SITE FOR MORE
INFORMATION.
(BULLET) FOR ACCOUNT BALANCES
AND HOLDINGS;
(BULLET) TO REVIEW RECENT
ACCOUNT HISTORY;
(BULLET) FOR MUTUAL FUND AND
BROKERAGE TRADING; AND
(BULLET) FOR ACCESS TO RESEARCH
AND ANALYSIS TOOLS.
FIDELITY WEB XPRESS(registered trademark)
TO ACCESS AND MANAGE YOUR ACCOUNT OVER THE INTERNET AT FIDELITY'S WEB
SITE.
(BULLET) FOR ACCOUNT BALANCES
AND HOLDINGS;
(BULLET) TO REVIEW RECENT
ACCOUNT HISTORY;
(BULLET) TO OBTAIN QUOTES;
(BULLET) FOR MUTUAL FUND AND
BROKERAGE TRADING; AND
(BULLET) TO ACCESS THIRD-PARTY
RESEARCH ON COMPANIES, STOCKS,
MUTUAL FUNDS AND THE MARKET.
TOUCHTONE XPRESS
TO ACCESS AND MANAGE YOUR ACCOUNT AUTOMATICALLY BY PHONE.
CALL 1-800-544-5555
(BULLET) FOR ACCOUNT BALANCES
AND HOLDINGS;
(BULLET) FOR MUTUAL FUND AND
BROKERAGE TRADING;
(BULLET) TO OBTAIN QUOTES;
(BULLET) TO REVIEW ORDERS AND
MUTUAL FUND ACTIVITY; AND
(BULLET) TO CHANGE YOUR
PERSONAL IDENTIFICATION NUMBER
(PIN).
POLICIES
The following policies apply to you as a shareholder.
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after transactions
affecting your account balance except reinvestment of distributions in
the fund or another fund and certain transactions through automatic
investment or withdrawal programs).
(small solid bullet) Monthly or quarterly account statements
(detailing account balances and all transactions completed during the
prior month or quarter).
(small solid bullet) Financial reports (every six months).
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more
than one account in the fund. Call Fidelity if you need additional
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 Fidelity's
electronic delivery program, call Fidelity or visit Fidelity's Web
site for more information.
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 sell and
exchange by telephone, call Fidelity for instructions.
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.
Fidelity may 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 Fidelity, 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
accounts with Fidelity maintained by Fidelity Service Company, Inc. 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 (except accounts not
subject to account minimums), you will be given 30 days' notice to
reestablish the minimum balance. If you do not increase your balance,
Fidelity may close your account and send the proceeds to you. Your
shares will be sold 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.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The fund earns dividends, interest and other income from its
investments, and distributes this income (less expenses) to
shareholders as dividends. The fund also realizes capital gains from
its investments, and distributes these gains (less any losses) to
shareholders as capital gains distributions.
The fund normally pays dividends in March, June, September, and
December. The fund normally pays capital gains distributions in
January and December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. The following options may be available for
the fund's distributions:
1. REINVESTMENT OPTION. Your dividends and capital gains 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 gains distributions will be
automatically reinvested in additional shares of the fund. Your
dividends will be paid in cash.
3. CASH OPTION. Your dividends and capital gains distributions will be
paid in cash.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividends
will be automatically invested in shares of another identically
registered Fidelity fund. Your capital gains distributions will be
automatically invested in shares of another identically registered
Fidelity fund, automatically reinvested in additional shares of the
fund, or paid in cash.
Not all distribution options are available for every account. If the
option you prefer is not listed on your account application, or if you
want to change your current option, call Fidelity .
If you elect to receive distributions paid in cash by check and the
U.S. Postal Service does not deliver your checks, your distribution
option may be converted to the Reinvestment Option. You will not
receive interest on amounts represented by uncashed distribution
checks.
TAX CONSEQUENCES
As with any investment, your investment in the fund could have tax
consequences for you. If you are not investing through a
tax-advantaged retirement account, you should consider these tax
consequences.
TAXES ON DISTRIBUTIONS. Distributions you receive from the fund are
subject to federal income tax, and may also be subject to state or
local taxes.
For federal tax purposes, the fund's dividends and distributions of
short-term capital gains are taxable to you as ordinary income. The
fund's distributions of long-term capital gains are taxable to you
generally as capital gains at a rate based on how long the securities
were held.
If you buy shares when a fund has realized but not yet distributed
income or capital gains, you will be "buying a dividend" by paying the
full price for the shares and then receiving a portion of the price
back in the form of a taxable distribution.
Any taxable distributions you receive from the fund will normally be
taxable to you when you receive them, regardless of your distribution
option.
TAXES ON TRANSACTIONS. Your redemptions, including exchanges, may
result in a capital gain or loss for federal tax purposes. A capital
gain or loss on your investment in the fund is the difference between
the cost of your shares and the price you receive when you sell them.
FUND SERVICES
FUND MANAGEMENT
Equity-Income II is a mutual fund, an investment that pools
shareholders' money and invests it toward a specified goal.
FMR is the fund's manager.
As of __, FMR had $__ billion in discretionary assets under
management.
As the manager, FMR is responsible for choosing the fund's investments
and handling 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. FMR
U.K. was organized in 1986 to provide investment research and advice
to FMR. Currently, FMR U.K. provides investment research and advice on
issuers based outside the United States and may also provide
investment advisory services 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. FMR
Far East was organized in 1986 to provide investment research and
advice to FMR. Currently, FMR Far East provides investment research
and advice on issuers based outside the United States and may also
provide investment advisory services for the fund.
The fund could be adversely affected if the computer systems used by
FMR and other service providers do not properly process and calculate
date-related information from and after January 1, 2000. FMR has
advised the fund that it is actively working on necessary changes to
its computer systems and expects that its systems, and those of other
major service providers, will be modified prior to January 1, 2000.
However, there can be no assurance that there will be no adverse
impact on the fund.
Bettina Doulton is Vice President and manager of Equity-Income II,
which she has managed since December 1996. She also manages another
Fidelity fund. Since joining Fidelity in 1986, Ms. Doulton has worked
as a research assistant, analyst and manager.
Fidelity investment personnel may invest in securities for their own
investment accounts pursuant to a code of ethics that establishes
procedures for personal investing and restricts certain transactions.
The fund pays a management fee to FMR.
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 November 1998, the group fee rate was __%. The individual fund fee
rate is __%.
The total management fee for the fiscal year ended November 30, 1998
was __% of the fund's average net assets.
FMR pays FMR U.K. and FMR Far East for providing assistance with
investment advisory services.
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 by FMR at any time, can decrease the fund's
expenses and boost its performance.
[As of November 30, 1998 approximately ____% of the fund's total
outstanding shares were held by FMR/FMR and [an] FMR affiliate[s]/[an]
FMR affiliate[s]].]
FUND DISTRIBUTION
Fidelity Distributors Corporation, Inc. (FDC) distributes the fund's
shares.
The fund has adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 that 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 providing services intended to result in
the sale of fund shares and/or shareholder support services. FMR,
directly or through FDC, may pay intermediaries, such as banks,
broker-dealers and other services-providers, that provide those
services. Currently, the Board of Trustees has authorized such
payments.
To receive payments made pursuant to a Distribution and Service Plan,
intermediaries must sign the appropriate agreement with FDC in
advance.
FMR may allocate brokerage transactions in a manner that takes into
account the sale of shares of the fund, provided that the fund
receives brokerage services and commission rates comparable to those
of other broker-dealers.
No dealer, sales representative, or any other person has been
authorized to give any information or to make any representations,
other than those contained in this Prospectus and in the related
Statement of Additional Information (SAI), in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the fund or FDC. This Prospectus and the related SAI do
not constitute an offer by the fund or by FDC to sell or to buy shares
of the fund to any person to whom it is unlawful to make such offer.
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
fund's financial history for the past 5 years. Certain information
reflects financial results for a single fund share. Total returns for
each period include the reinvestment of all dividends and
distributions. This information has been audited by [_______],
independent accountants, whose report, along with the fund's financial
highlights and financial statements, are included in the fund's Annual
Report. A free copy of the Annual Report is available upon request.
[Financial Highlights to be filed by subsequent amendment.]
You can obtain additional information about the fund. The fund's SAI
includes more detailed information about the fund and its investments.
The SAI is incorporated herein by reference (legally forms a part of
the prospectus). The fund's annual and semi-annual reports include a
discussion of recent market conditions and the fund's investment
strategies, performance and holdings.
For a free copy of any of these documents or to request other
information or ask questions about the fund, call Fidelity at
1-800-544-8888 or visit Fidelity's Web site at www.fidelity.com.
The SAI, the fund's annual and semi-annual reports and other related
materials are available on the SEC's Internet Web site
(http://www.sec.gov). You can obtain copies of this information upon
paying a duplicating fee, by writing the Public Reference Section of
the SEC, Washington, D.C. 20549-6009. You can also review and copy
information about the fund, including the fund's SAI, at the SEC's
Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for
information on the operation of the SEC's Public Reference Room.
INVESTMENT COMPANY ACT OF 1940, FILE NUMBER, 811-3587
Fidelity Investments & (Pyramid) Design, Fidelity, Fidelity
Investments, TouchTone Xpress, Fidelity Money Line, Fidelity Automatic
Account Builder, Fidelity On-Line Xpress+, Fidelity Web Xpress, and
Directed Dividends are registered trademarks of FMR Corp.
Portfolio Advisory Services is a service mark of FMR Corp.
The third party marks appearing above are the marks of their
respective owners.
1.703933.101. EII-pro- 0199
FIDELITY EQUITY-INCOME II
A FUND OF FIDELITY FINANCIAL TRUST
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 29, 1999
This Statement of Additional Information (SAI) is not a prospectus.
Portions of the fund's Annual Report are incorporated herein. The
Annual Report is supplied with this SAI.
To obtain a free additional copy of the Prospectus, dated January
29, 1999 , or an Annual Report, please call Fidelity(registered
trademark) at 1-800-544-8888 or visit Fidelity's Web site at
www.fidelity.com.
TABLE OF CONTENTS PAGE
INVESTMENT POLICIES AND 18
LIMITATIONS
PORTFOLIO TRANSACTIONS 23
VALUATION 24
PERFORMANCE 25
ADDITIONAL PURCHASE, EXCHANGE 27
AND REDEMPTION INFORMATION
DISTRIBUTIONS AND TAXES 27
TRUSTEES AND OFFICERS 27
CONTROL OF INVESTMENT ADVISER 21
MANAGEMENT CONTRACT 30
DISTRIBUTION SERVICES 32
TRANSFER AND SERVICE AGENT 32
AGREEMENTS
DESCRIPTION OF THE TRUST 33
FINANCIAL STATEMENTS 33
APPENDIX 34
EII -ptb-0199
1.539778.101
(fidelity_logo_graphic)(REGISTERED TRADEMARK)
82 Devonshire Street, Boston, MA 02109
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 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.
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the
securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities, or securities of other investment companies )
if, as a result , (a) more than 5% of the fund's total assets
would be invested in the securities of that issuer, or (b) the
fund would hold more than 10% of the outstanding voting
securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount
not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed this amoun t 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 (for
this purpose, purchasing debt securities and engaging in repurchase
agreements do not constitute lending).
(9) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company managed by Fidelity
Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (3)). The fund will not borrow from other funds advised by
FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
(iv) The fund does not currently intend to purchase any security if,
as a result, more than 10% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of
the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (This limitation does not apply
to purchases of debt securities or to repurchase agreements.)
(vi) The fund does not currently intend to invest all of its assets
in the securities of a single open-end management investment company
managed by Fidelity Management & Research Company or an affiliate or
successor with substantially the same fundamental investment
objective, policies, and limitations as the fund.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page __.
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.
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 other factors
including changes in interest rates, the availability of information
concerning the pool and its structure, 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 .
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.
CASH MANAGEMENT. A fund can hold uninvested cash or can invest it
in cash equivalents such as money market securities, repurchase
agreements or shares of money market funds. Generally, these
securities offer less potential for gains than other types of
securities.
CENTRAL CASH FUNDS are money market funds managed by FMR or its
affiliates that seek to earn a high level of current income (free from
federal income tax in the case of a municipal money market fund) while
maintaining a stable $1.00 share price. The funds comply with
industry-standard requirements for money market funds regarding the
quality, maturity and diversification of their investments.
COMMON STOCK represents an equity or ownership interest in an
issuer. In the event an issuer is liquidated or declares bankruptcy,
owners of bonds and preferred stock take precedence over the claims of
those who own common stock.
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.
DEBT SECURITIES are used by issuers to borrow money. The issuer
usually pays a fixed, variable or floating rate of interest, and must
repay the amount borrowed at the maturity of the security. Some debt
securities, such as zero coupon bonds, do not pay interest but are
sold at a deep discount from their face values. Debt securities
include corporate bonds, government securities, and mortgage and
asset-backed securities.
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. 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. There is no assurance that
FMR will be able to anticipate these potential events or counter their
effects. In addition, the value of securities denominated in foreign
currencies and of dividends and interest paid with respect to such
securities will fluctuate based on the relative strength of the U.S.
dollar.
It is anticipated that in most cases the best available market for
foreign securities will be on an exchange or in over-the-counter (OTC)
markets located outside of the United States. Foreign stock markets,
while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some
foreign issuers may be less liquid and more volatile than securities
of comparable U.S. issuers. Foreign security trading, settlement and
custodial practices (including those involving securities settlement
where fund assets may be released prior to receipt of payment) are
often less developed than those in U.S. markets, and may result in
increased risk or substantial delays in the event of a failed trade or
the insolvency of, or breach of duty by, a foreign broker-dealer,
securities depository or foreign subcustodian. In addition, the costs
associated with foreign investments, including withholding taxes,
brokerage commissions and custodial costs, are generally higher than
with U.S. investments.
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.
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.
FUND'S RIGHTS AS A SHAREHOLDER. The fund does 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: 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.
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, 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. 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 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 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 o f 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 write r 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. 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 SECURITIES cannot be sold or disposed of in the ordinary
course of business at approximately the prices at which they are
valued. Difficulty in selling securities may result in a loss or
may be costly to a fund . 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
securities. In determining the liquidity of a fund's investments, FMR
may consider various factors, including (1) the frequency and volume
of trades and quotations, (2) the number of dealers and prospective
purchasers in the marketplace, (3) dealer undertakings to make a
market and (4) the nature of the security and the market in which
it trades (including any demand, put or tender features, the mechanics
and other requirements for transfer, any letters of credit or other
credit enhancement features, any ratings, the number of holders, the
method of soliciting offers, the time required to dispose of the
security, and the ability to assign or offset the rights and
obligations of the security).
INDEXED SECURITIES are instruments whose prices are indexed
to the prices of other securities, securities indices, currencies, 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.
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.
INVESTMENT-GRADE DEBT SECURITIES. Investment-grade debt securities
are medium and high-quality securities. Some may possess speculative
characteristics and may be sensitive to economic changes and to
changes in the financial conditions of issuers. A debt 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 considered to be of
equivalent quality by FMR.
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, or there may be a requirement
that a fund supply additional cash to a borrower on demand.
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 . 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
purchase r 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 .
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 .
The fund limits the amount of total assets that it will invest in any
one issuer or in issuers within the same industry (see the 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.
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 .
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.
Because 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 SECURITIES are issued by government and
non-government entities such as banks, mortgage lenders, or other
institutions. A mortgage 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 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 securities are
based on different types of mortgages, including those on commercial
real estate or residential properties. Stripped mortgage securities
are created when the interest and principal components of a mortgage
security are separated and sold as individual securities. In the case
of a stripped mortgage 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.
Fannie Maes and Freddie Macs are pass-through securities
issued by Fannie Mae and Freddie Mac, respectively. Fannie Mae and
Freddie Mac, which guarantee payment of interest and repayment of
principal on Fannie Maes and Freddie Macs, respectively, are federally
chartered corporations supervised by the U.S. Government that act as
governmental instrumentalities under authority granted by Congress.
Fannie Mae is authorized to borrow from the U.S. Treasury to meet its
obligations. Fannie Maes and Freddie Macs are not backed by the full
faith and credit of the U.S. Government.
The value of mortgage 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
securities market as a whole. Non-government mortgage securities may
offer higher yields than those issued by government entities, but also
may be subject to greater price changes than government issues.
Mortgage 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 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 securities tend to be more volatile in response to changes in
interest rates than those of non-stripped mortgage securities.
In order to earn additional income for a fund, FMR may use a
trading strategy that involves selling mortgage securities and
simultaneously agreeing to purchase similar securities on a later date
at a set price. This trading strategy may result in an increased
portfolio turnover rate which increases costs and may increase taxable
gains.
PREFERRED STOCK is a class of equity or ownership in an
issuer that pays dividends at a specified rate and that has precedence
over common stock in the payment of dividends. In the event an issuer
is liquidated or declares bankruptcy, owners of bonds take precedence
over the claims of those who own preferred and common stock.
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 involve an agreement to purchase a security
and 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. The value of the security purchased
may be more or less than the price at which the counterparty has
agreed to purchase the security. In addition, delays or losses could
result if the other party to the agreement defaults or becomes
insolvent. The fund will engage in repurchase agreement transactions
with parties whose creditworthiness has been reviewed and found
satisfactory by FMR.
RESTRICTED SECURITIES are subject to legal restrictions on their
sale. Difficulty in selling securities may result in a loss or be
costly to a fund. Restricted securities generally can be sold in
privately negotiated transactions, pursuant to an exemption from
registration under the Securities Act of 1933, or in a registered
public offering. Where registration is required, the holder of a
registered security 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, the
holder 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. 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 OF OTHER INVESTMENT COMPANIES, including shares of
closed-end investment companies, unit investment trusts, and open-end
investment companies, represent interests in professionally managed
portfolios that may invest in any type of instrument. Investing in
other investment companies involves substantially the same risks as
investing directly in the underlying instruments, but may involve
additional expenses at the investment company-level, such as portfolio
management fees and operating expenses. Certain types of investment
companies, such as closed-end investment companies, issue a fixed
number of shares that trade on a stock exchange or over-the-counter at
a premium or a discount to their net asset value. Others are
continuously offered at net asset value, but may also be traded in the
secondary market.
The extent to which a fund can invest in securities of other
investment companies is limited by federal securities laws.
SECURITIES LENDING. A fund may lend securities to parties such
as broker-dealers or other institutions , 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.
Because 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. Stocks underlying a fund's convertible
security holdings can be sold short . For example, if FMR
anticipates a decline in the price of the stock underlying a
convertible security held by a fund , 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. The 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.
A fund 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.
TEMPORARY DEFENSIVE POLICIES. The fund reserves the right to invest
without limitation in preferred stocks and investment-grade debt
instruments for temporary, defensive purposes.
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 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
investmen t 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 Contract"), 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.
The fund may execute portfolio transactions with broker-dealers who
provide research and execution services to the fund or other
investment 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 investment 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 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.
To the extent permitted by applicable law, FMR is authorized to
allocate portfolio transactions in a manner that takes into account
assistance received in the distribution of shares of the funds or
other Fidelity funds and to use the research services of brokerage and
other firms that have provided such assistance. 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 investment 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 November 30, 1998, and 1997, the fund's
portfolio turnover rate was ___% and ___%, respectively.
[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 years ended November 1998, 1997 and 1996, the fund paid
brokerage commissions of $________, $_________ and $________,
respectively. Significant changes in brokerage commissions paid by the
fund from year to year may result from changing asset levels
throughout the year. The fund may pay both commissions and spreads in
connection with the placement of portfolio transactions.
[During the fiscal years ended November 1998, 1997 and 1996, the fund
paid brokerage commissions of $_______, $_______ and $_______,
respectively, to NFSC. NFSC is paid on a commission basis. During the
fiscal year ended November 1998, this amounted to approximately __% of
the aggregate brokerage commissions paid by the fund for transactions
involving approximately __% of the aggregate dollar amount of
transactions for which the fund paid brokerage commissions.] [The
difference between the percentage of aggregate brokerage commissions
paid to, and the percentage of the aggregate dollar amount of
transactions effected through, NFSC is a result of the low commission
rates charged by NFSC.] [NFSC has used a portion of the commissions
paid by the fund to reduce that fund's custodian or transfer agent
fees.]
[During the fiscal years ended November 1998, November 1997 and
November 1996, the fund paid brokerage commissions of $_____, $_____
and $_____, respectively, to FBS. FBS is paid on a commission basis.
During the fiscal year ended November 1998, this amounted to
approximately __% of the aggregate brokerage commissions paid by the
fund for transactions involving approximately __% of the aggregate
dollar amount of transactions for which the fund paid brokerage
commissions.] [The difference between the percentage of aggregate
brokerage commissions paid to, and the percentage of the aggregate
dollar amount of transactions effected through, FBS is a result of the
low commission rates charged by FBS.] [FBS has used a portion of the
commissions paid by the fund to reduce that fund's custodian or
transfer agent fees.]
During the fiscal year ended November, 1998, the fund paid $ __
in brokerage commissions to firms that provided research services
involving approximately $ __ of transactions. The provision of
research services was not necessarily a factor in the placement of all
this business with such firms.
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 affiliates,
investment decisions for the fund are made independently from those of
other funds managed by FMR or investment 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 investment
accounts. Simultaneous transactions are inevitable when several funds
and investment 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 investment
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
The fund's net asset value (NAV) is the value of a single share.
The NAV of the fund is computed by adding the value of the fund's
investments, cash, and other assets, subtracting its liabilities, and
dividing the result by the number of shares outstanding.
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 closing 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 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.
Independent brokers or quotation services provide prices
of foreign securities in their local currency. Fidelity
Service Company, Inc. (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 event that is
expected to materially affect the value of a portfolio security occurs
after the close of an exchange or market on which that security
is traded, then that security will be valued 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 .
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. For
example, 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. In making a good faith
determination of the value of a security, the committee may review
price movements in futures contracts and ADRs, market and trading
trends, the bid/ask quotes of brokers and off-exchange institutional
trading.
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, 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 the fund are computed by dividing the
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 the 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 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.
In calculating the 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 the fund's yield.
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. A cumulative total return reflects actual
performance over a stated period of tim e. 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 may or may not include the effect of
the fund's small account fee. Excluding the fund's small account fee
from a total return calculation produces a higher total return figure.
Total returns, yields, if applicable , 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 NAVs, adjusted
NAVs, and benchmark indexes 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.
MOVING AVERAGES. A 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
November 27, 1998, the 13-week and 39-week long-term moving averages
were $__ and $__, respectively.
CALCULATING HISTORICAL FUND RESULTS. The following table
shows performance for the fund calculated including certain fund
expenses.
HISTORICAL FUND RESULTS. The following table shows the fund's total
return for the fiscal period ended November 30, 1998 .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Average Annual Cumulative
Total Returns Total Returns
One Five Life of One Five Life of
Year Years Fund* Year Years Fund*
Equity-Inc % % % % % %
ome II
</TABLE>
* From August 21, 1990 (commencement of operations).
The following table shows the income and capital elements of the
fund's cumulative total return. The table compares the 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 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. The 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 the fund's returns, do not include the effect of brokerage
commissions or other costs of investing.
During the period from August 21, 1990 (commencement of operations) to
November 30, 1998, a hypothetical $10,000 investment in
Equity-Income II would have grown to $______, 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FIDELITY INDEXES
EQUITY-IN
COME II
FUND
Fiscal Year 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 $ $ $ $ $ $ $
1997 $ $ $ $ $ $ $
1996 $ $ $ $ $ $ $
1995 $ $ $ $ $ $ $
1994 $ $ $ $ $ $ $
1993 $ $ $ $ $ $ $
1992 $ $ $ $ $ $ $
1991 $ $ $ $ $ $ $
1990* $ $ $ $ $ $ $
</TABLE>
* From August 21, 1990 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in the fund
on August 21, 1990, 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 $ ______ . 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 $ ______ for dividends and $ _____
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. In addition to the mutual
fund rankings, the fund's performance may be compared to stock, bond,
and money market mutual fund performance indexes prepared by
Lipper or other organizations. When comparing these indexes , 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's performance may also be compared to that of the
benchmark index representing the universe of securities in which the
fund may invest. The total return of the index reflects
reinvestment of all dividends and capital gains paid by securities
included in the index. Unlike the fund's returns, however, the index's
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 S&P 500, a
market capitalization weighted index of common stocks.
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 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
indexes.
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 indexes 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.
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 November 30, 1998, FMR advised over $ __ billion in
municipal fund assets, $__ billion in taxable fixed-income fund
assets, $ __ billion in money market fund assets, $___ billion
in equity fund assets, $ __ billion in international fund
assets, and $ ___ 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.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
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.
DISTRIBUTIONS AND TAXES
DIVIDENDS. A portion of the 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 the fund may earn other types of income, such as
interest, short-term capital gains, and non-qualifying dividends ,
the percentage of dividends from the fund that qualifies for the
deduction generally will be less than 100%. A portion of the fund's
dividends derived from certain U.S. Government securities and
securities of certain other investment companies may be exempt from
state and local taxation.
CAPITAL GAINS DISTRIBUTIONS. The fund's capital gains distributions
are federally taxable to shareholders at a rate based generally on the
length of time the securities on which the gain was realized were
held, regardless of the length of time those shares on which the
distribution is received have been held.
[As of November 30, 1998, the fund had a capital loss carryforward
aggregating approximately $ ____. This loss carryforward, of
which $ ___ , $ ___ , and $ ___ will expire on November
30, 199_, ____ , and ____ , respectively, is available to
offset future capital gains.]
RETURNS OF CAPITAL. If the fund's distributions exceed its
taxable income and capital gains realized during a taxable year, all
or a portion of the distributions made in the same taxable year may be
recharacterized as a return of capital to shareholders. A return of
capital distribution will generally not be taxable, but will reduce
each shareholder's cost basis in the fund and result in a higher
reported capital gain or lower reported capital loss when those shares
on which the distribution was received are sold.
FOREIGN TAX CREDIT OR DEDUCTION . Foreign governments may
withhold taxes on dividends and interest earned by the fund with
respect to foreign securities. Foreign governments may also impose
taxes on other payments or gains with respect to foreign securities.
Because the 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 be
eligible to claim a foreign tax credit or deduction on their federal
income tax returns with respect to foreign taxes withheld.
TAX STATUS OF THE FUND. The fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal
Revenue Code 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.
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. It is up to you or your tax preparer to determine
whether the sale of shares of the fund resulted in a capital gain or
loss or other tax consequence to you . 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.
TRUSTEES AND OFFICERS
The Trustees, Members of the Advisory Board, and executive officers of
the trust are listed below. The Board of Trustees governs the fund
and 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 . 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 or its affiliates . The business
address of each Trustee, Member of the Advisory Board, and officer who
is an "interested person" (as defined in the 1940 Act) 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 (66 ), Trustee. Prior to her retirement in
September 1991, Mrs. Davis was the Senior Vice President of Corporate
Affairs of Avon Products, Inc. She is currently a Director of
BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores),
and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she is a member of
the President's Advisory Council of The University of Vermont School
of Business Administration.
ROBERT M. GATES (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 ( 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 (66), 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(registered trademark) 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 ( 65 ), 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), 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 ( 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).
RICHARD A. SPILLANE, JR. (47 ), is Vice President of certain
Equity Funds and Senior Vice President of FMR (1997). Since joining
Fidelity, Mr. Spillane is Chief Investment Officer for Fidelity
International, Limited. Prior to that position, Mr. Spillane served as
Director of Research.
BETTINA DOULTON ( 34 ), is Vice President of Fidelity
Equity-Income II (1996), and other funds advised by FMR. Since 1993,
Ms. Doulton has managed a variety of Fidelity funds. Previously, she
served as an equity analyst and research assistant.
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).
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).
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 for the fiscal year ended November 30, 1998 , or
calendar year ended December 31, 1997, as applicable.
COMPENSATION
TABLE
Trustees Aggregate Total
and Compensation Compensation
Members of the from from the
Advisory Board Equity-Income Fund Complex*
II[B,]C A
[,+]
J. Gary Burkhead ** $ 0 $ 0
Ralph F. Cox $ $ 214,500
Phyllis Burke Davis $ $ 210,000
Robert M. Gates $ $176,000
Edward C. Johnson 3d ** $ 0 $ 0
E. Bradley Jones $ $ 211,500
Donald J. Kirk $ $ 211,500
Peter S. Lynch ** $ 0 $ 0
William O. McCoy $ $ 214,500
Gerald C. McDonough $ $ 264,500
Marvin L. Mann $ $ 214,500
Robert C. Pozen** $ 0 $ 0
Thomas R. Williams $ $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, and may include amounts required
to be deferred and amounts deferred at the election of Trustees.]
[C The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $__; Phyllis Burke Davis, $__;
Robert M. Gates, $__; E. Bradley Jones, $__; Donald J. Kirk, $__;
Gerald C. McDonough, $__; Marvin L. Mann, $__; and Thomas R. Williams,
$__]
[D Certain of the non-interested Trustee's aggregate compensation from
the fund includes accrued voluntary deferred compensation as follows.]
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 November 30, 1998, approximately __% of the fund's total
outstanding shares was held by FMR [and] [an] FMR affiliate[s]]. FMR
Corp. is the ultimate parent company of [FMR] [and] [this/these] FMR
affiliate[s]. By virtue of his ownership interest in FMR Corp., as
described in the "Control of Investment Adviser[s]" section on page
___, Mr. Edward C. Johnson 3d, President and Trustee of the fund, may
be deemed to be a beneficial owner of these shares. As of the above
date, with the exception of Mr. Johnson 3d's deemed ownership of the
fund's shares, the Trustees, Members of the Advisory Board, and
officers of the fund owned, in the aggregate, less than __% of the
fund's total outstanding shares.]
[As of November 30, 1998, the Trustees, Members of the Advisory Board,
and officers of the fund owned, in the aggregate, less than __% of the
fund's total outstanding shares.]
[As of November 30, 1998, the following owned of record or
beneficially 5% or more (up to and including 25%) of the fund's
outstanding shares:]
[As of November 30, 1998, approximately ____% of the fund's total
outstanding shares were held by __________.]
[A shareholder owning of record or beneficially more than 25% of a
fund's outstanding shares may be considered a controlling person. That
shareholder's vote could have a more significant effect on matters
presented at a shareholders' meeting than votes of other
shareholders.]
CONTROL OF INVESTMENT ADVISER
FMR Corp., organized in 1972, is the ultimate parent company of
FMR, FMR U.K. and FMR Far East. 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 investment 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.
MANAGEMENT CONTRACT
The 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 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, and 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 EFFECTIVE ANNUAL FEE
SCHEDULE 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
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 left. For example, the effective annual fee
rate at $___ billion of group net assets - the approximate level for
November 1998 - was __%, which is the weighted average of the
respective fee rates for each level of group net assets up to $__
billion.
The fund's individual fund fee rate is 0.20%. Based on the average
group net assets of the funds advised by FMR for November 1998, the
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
Equity-Income II 0.___% + 0.20___% = 0.___%
</TABLE>
One-twelfth of the management fee rate, as applicable ,
is applied to the fund's average net assets for the
month, giving a dollar amount which is the fee for that month.
For the fiscal years ended November 30, 1998, 1997, and 1996, the fund
paid FMR management fees of $_________, $____________, and
$__________, 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.
SUB-ADVISERS. On behalf of Equity-Income II, 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 the 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 fund.
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 the 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 the fund's average net assets managed by the
sub-adviser on a discretionary basis.
[For investment advice and research services, no fees were paid to the
sub-advisers by FMR on behalf of the fund for the past three fiscal
years.]
[For providing investment advice and research services, fees paid to
the sub-advisers by FMR on behalf of Fidelity Equity-Income II Fund
for the past three fiscal years are shown in the table below.]
Fiscal Year Ended
November 30 FMR U.K. FMR Far East
1998_ $ $
1997_ $ $
1996_ $ $
[For discretionary investment management and execution of portfolio
transactions, no fees were paid to the sub-advisers by FMR on behalf
of the fund for the past three fiscal years.]
[For discretionary investment management and execution of portfolio
transactions, fees paid to the sub-advisers on behalf of the fund for
the past three fiscal years are shown in the table below.]
DISTRIBUTION SERVICES
The fund has entered into a distribution agreement with FDC, an
affiliate of FMR. 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.
The Trustees 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, allows 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 providing services intended to
result in the sale of fund shares and/or shareholder
support services . In addition, the Plan provides that FMR,
directly or through FDC, may pay intermediaries , such as
banks, broker-dealers and other service-providers, that
provide those services. Currently, the Board of Trustees has
authorized such payments for Equity-Income II shares .
[Payments made by FMR either directly or through FDC to intermediaries
for the fiscal year ended 1998 amounted to $____ for Equity-Income
II.]
[FMR made no payments either directly or through FDC to intermediaries
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 or stabilization of cash flows 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.
TRANSFER AND SERVICE AGENT AGREEMENTS
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.
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 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 0.0600%
of the first $500 million of average net assets and 0.0300% 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 fiscal years ended November 30, 1998, 1997, and 1996, the fund
paid FSC pricing and bookkeeping fees, including reimbursement for
related out-of-pocket expenses, of $____, $____, and $____,
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 November 30, 1998, 1997 and 1996, the fund
paid no securities lending fees.]
[For the fiscal years ended November 30, 1998, 1997 and 1996, the fund
paid securities lending fees of $__, $__, and $__, respectively.]
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Equity-Income II Fund is a fund of
Fidelity Financial Trust, an open-end management investment company
organized as a Massachusetts business trust on October 20, 1982. On
December 17, 1982, Fidelity Financial Trust changed its name
from Fidelity Tax-Qualified Equity Fund to Fidelity Freedom Fund. On
January 1, 1987, Fidelity Financial Trust changed its name from
Fidelity Freedom Trust to Fidelity Financial Trust. Currently,
there are three funds of the trust: Fidelity Convertible Securities
Fund, Fidelity Equity-Income II Fund, and Fidelity Retirement Growth
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 to the rights of creditors, are allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets
of each fund in the trust shall be charged with the liabilities and
expenses attributable to such fund. Any general expenses of the trust
shall be allocated between or among any one or more of the funds.
SHAREHOLDER LIABILITY. The trust is an entity 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 contains an express disclaimer of
shareholder liability for the debts, liabilities, obligations, and
expenses of the trust or fund. 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 relating to the trust or to a fund shall include
a provision limiting the obligations created thereby to the trust or
to one or more funds and its or their assets. The Declaration of Trust
further provides that shareholders of a fund shall not have a claim on
or right to any assets belonging to any other fund.
The Declaration of Trust provides for indemnification out of each
fund's property of any shareholder or former shareholder held
personally liable for the obligations of the fund solely by reason of
his or her being or having been a shareholder and not because of his
or her acts or omissions or for some other reason. 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.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you are entitled to one vote for
each dollar of net asset value that you own. The voting rights of
shareholders can be changed only by a shareholder vote. Shares may be
voted in the aggregate, by fund and by class.
The shares have no preemptive or conversion rights. Shares are fully
paid and nonassessable, except as set forth under the heading
"Shareholder Liability" above.
The trust or any of its funds may be terminated upon the sale of
its assets to, or merger with, another open-end management investment
company or series thereof, or upon liquidation and distribution of its
assets. Generally, the merger of the trust or a fund with another
entity or the sale of substantially all of the assets of the trust or
a fund to another entity requires approval by a vote of shareholders
of the trust or the fund. The Trustees may, however, reorganize or
terminate the trust or any of its funds without prior shareholder
approval. In the event of the dissolution or liquidation of the trust,
shareholders of each of its funds are entitled to receive the
underlying assets of such fund available for distribution. In the
event of the dissolution or liquidation of a fund, shareholders of
that fund are entitled to receive the underlying assets of the fund
available for distribution.
CUSTODIAN. The Chase Manhattan Bank, 1 Chase Manhattan Plaza, 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 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 members
of 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. _______________ , 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 November 30 , 1998, and report of the auditor,
are included in the fund's Annual Report and are incorporated herein
by reference.
APPENDIX
Fidelity, Fidelity Investments & (Pyramid) Design, Fidelity Focus,
Fidelity Investments, and Magellan are registered trademarks of FMR
Corp.
The third party marks appearing above are the marks of their
respective owner.
LIKE SECURITIES OF ALL MUTUAL
FUNDS, THESE SECURITIES HAVE
NOT BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND EXCHANGE
COMMISSION, AND THE
SECURITIES AND EXCHANGE
COMMISSION HAS NOT
DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR
COMPLETE. ANY
REPRESENTATION TO THE
CONTRARY IS A CRIMINAL
OFFENSE.
FIDELITY
RETIREMENT GROWTH
FUND
(fund number 073, trading symbol FDFFX)
PROSPECTUS
JANUARY 29, 1999
(fidelity_logo_graphic)(REGISTERED TRADEMARK)
82 Devonshire Street, Boston, MA 02109
CONTENTS
FUND SUMMARY 3 INVESTMENT SUMMARY
3 PERFORMANCE
4 FEE TABLE
FUND BASICS 4 INVESTMENT DETAILS
5 VALUING SHARES
SHAREHOLDER INFORMATION 5 BUYING AND SELLING SHARES
10 EXCHANGING SHARES
11 ACCOUNT FEATURES AND POLICIES
13 DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS
13 TAX CONSEQUENCES
FUND SERVICES 13 FUND MANAGEMENT
14 FUND DISTRIBUTION
APPENDIX 14 FINANCIAL HIGHLIGHTS
FUND SUMMARY
INVESTMENT SUMMARY
INVESTMENT OBJECTIVE. Retirement Growth Fund seeks capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES. Fidelity Management & Research
Company (FMR)'s principal investment strategies include:
(small solid bullet) Investing primarily in common stocks.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
(small solid bullet) Realizing capital gains without considering the
tax consequences to shareholders.
PRINCIPAL INVESTMENT RISKS. The fund is subject to the following
principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently than the U.S. market.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently than
the value of the market as a whole.
An investment in the fund is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
When you sell your shares of the fund, they could be worth more or
less than what you paid for them.
PERFORMANCE
The following information illustrates the changes in the fund's
performance from year to year and compares the fund's performance to
the performance of a market index and similar funds over various
periods of time. Returns are based on past results and are not an
indication of future performance.
YEAR-BY-YEAR RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RETIREMENT
GROWTH
CALENDAR YEARS 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
% % % % % % % % % %
</TABLE>
PERCENTAGE (%)
ROW: 1, COL: 1, VALUE: NIL
ROW: 2, COL: 1, VALUE: NIL
ROW: 3, COL: 1, VALUE: NIL
ROW: 4, COL: 1, VALUE: NIL
ROW: 5, COL: 1, VALUE: NIL
ROW: 6, COL: 1, VALUE: NIL
ROW: 7, COL: 1, VALUE: NIL
ROW: 8, COL: 1, VALUE: NIL
ROW: 9, COL: 1, VALUE: NIL
ROW: 10, COL: 1, VALUE: NIL
DURING THE PERIODS SHOWN IN THE CHART FOR RETIREMENT GROWTH, THE
HIGHEST RETURN FOR A QUARTER WAS __% (QUARTER ENDING [CALENDAR
QUARTER], [YEAR]) AND THE LOWEST RETURN FOR A QUARTER WAS __% (QUARTER
ENDING [CALENDAR QUARTER], [YEAR]).
AVERAGE ANNUAL RETURNS
FOR THE PAST 1 PAST 5 LIFE OF FUND
PERIODS ENDED YEAR YEARS
DECEMBER 31,
1998
RETIREMENT % % %
GROWTH
S&P 500(REGISTERED TRADEMARK) % % %
LIPPER CAP. % % %
APP.
FUNDS
AVERAGE
[If FMR had not reimbursed certain fund expenses during these periods,
the fund's total returns would have been lower.]
Standard & Poor's 500 Index (S&P 500(registered trademark)) is a
market capitalization-weighted index of common stocks.
Lipper Capital Appreciation Funds Average reflects the performance
(excluding sales charges) of mutual funds with similar objectives.
FEE TABLE
The following table describes the fees and expenses that are incurred
when you buy, hold or sell shares of the fund. [The annual fund
operating expenses provided below for Retirement Growth are based on
historical expenses, adjusted to reflect current fees./The annual fund
operating expenses provided below for Retirement Growth are higher
than the expenses actually paid by the fund as the result of expense
reimbursements] [and] the payment or reduction of certain expenses]
during the period./The annual fund operating expenses provided below
for Retirement Growth are based on historical expenses.]
SHAREHOLDER FEES (PAID BY THE INVESTOR)
SALES CHARGE (LOAD) ON NONE
PURCHASES
AND REINVESTED DISTRIBUTIONS
DEFERRED SALES CHARGE NONE
(LOAD) ON REDEMPTIONS
ANNUAL ACCOUNT $12.00
MAINTENANCE FEE (FOR
ACCOUNTS UNDER $2,500)
FUND OPERATING EXPENSES (PAID BY THE FUND)
MANAGEMENT FEE %
DISTRIBUTION AND SERVICE NONE
(12B-1) FEE
OTHER EXPENSES %
TOTAL ANNUAL FUND %
OPERATING EXPENSESB
B [Effective [month/day/year],] FMR has voluntarily agreed to
reimburse the fund to the extent that the [management fee], [other
expenses] and total operating expenses (excluding interest, taxes,
brokerage commissions and extraordinary expenses, as a percentage of
its average net assets, exceed __ %.] [These arrangements will remain
in effect through [month/day/year]/ These arrangements can be
terminated by FMR at any time.]
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 [after reimbursement], would have been
__% for Retirement Growth.
This EXAMPLE helps you compare the cost of investing in the fund with
the cost of investing in other mutual funds.
Let's say, hypothetically, that the fund's annual return is 5% and
that your shareholder fees and the fund's annual operating expenses
are exactly as described in the fee table. This example illustrates
the effect of fees and expenses, but is not meant to suggest actual or
expected fees and expenses or returns, all of which may vary. For
every $10,000 you invested, here's how much you would pay in total
expenses if you close your account after the number of years
indicated:
1 YEAR $
3 YEARS $
5 YEARS $
10 YEARS $
FUND BASICS
INVESTMENT DETAILS
INVESTMENT OBJECTIVE:
RETIREMENT GROWTH FUND seeks capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES:
FMR normally invests the fund's assets primarily in common stocks. FMR
may invest the fund's assets in securities of foreign issuers in
addition to securities of domestic issuers.
FMR is not constrained by any particular investment style. At any
given time, FMR may tend to buy "growth" stocks or "value" stocks, or
a combination of both types. In buying and selling securities for the
fund, FMR relies on fundamental analysis of each issuer and its
potential for success in light of its current financial condition, its
industry position, and economic and market conditions.
Because the fund is designed for those in tax-qualified retirement
plans and non-profit organizations, FMR's investments strategies may
result in the realization of capital gains without consideration for
the tax consequences to shareholders.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
DESCRIPTION OF PRINCIPAL SECURITY TYPES:
EQUITY SECURITIES represent an ownership interest, or the right to
acquire an ownership interest, in an issuer. Different types of equity
securities provide different voting and dividend rights and priority
in the event of the bankruptcy of the issuer. Equity securities
include common stocks, preferred stocks, convertible securities and
warrants.
PRINCIPAL INVESTMENT RISKS:
Many factors affect the fund's performance. The fund's share price
changes daily based on changes in market conditions and interest rates
and in response to other economic, political or financial
developments. The fund's reaction to these developments will be
affected by the financial condition, industry and economic sector, and
geographic location of an issuer, and the fund's level of investment
in the securities of that issuer. When you sell your shares of the
fund, they could be worth more or less than what you paid for them.
The following factors may significantly affect the fund's performance:
STOCK MARKET VOLATILITY. The value of equity securities fluctuates in
response to issuer, political, market and economic developments. In
the short term, equity prices can fluctuate dramatically in response
to these developments. Different parts of the market can react
differently to these developments. For example, large cap stocks can
react differently than small cap stocks, and "growth" stocks can react
differently than "value" stocks. Issuer, political or economic
developments can affect a single issuer, issuers within an industry or
economic sector or geographic region, or the market as a whole.
FOREIGN EXPOSURE. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations
can involve additional risks relating to political, economic or
regulatory conditions in foreign countries. These risks include
fluctuations in foreign currencies; withholding or other taxes;
trading, settlement, custodial and other operational risks; and the
less stringent investor protection and disclosure standards of some
foreign markets. All of these factors can make foreign investments,
especially those in emerging markets, more volatile and potentially
less liquid than U.S. investments. In addition, foreign markets can
perform differently than the U.S. market.
ISSUER-SPECIFIC CHANGES Changes in the financial condition of an
issuer, changes in specific economic or political conditions that
affect a particular type of issuer, and changes in general economic or
political conditions can affect the value of an issuer's securities.
The value of securities of smaller, less well-known issuers can be
more volatile than that of larger issuers.
In response to market, economic, political or other conditions, FMR
may temporarily use a different investment strategy for defensive
purposes. If FMR does so, different factors could affect the fund's
performance.
FUNDAMENTAL INVESTMENT POLICIES
The policies discussed below are fundamental, that is, subject to
change only by shareholder approval.
RETIREMENT GROWTH seeks capital appreciation.
VALUING SHARES
The fund's net asset value per share (NAV) is the value of a single
share.
The fund is OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. Fidelity normally calculates the fund's NAV as of the
close of business 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. The fund's assets are valued as
of this time for the purpose of computing the fund's NAV.
To the extent that the fund's assets are traded in other markets on
days when the NYSE is closed, the value of the fund's assets may be
affected on days when the fund is not open for business. In addition,
trading in some of the fund's assets may not occur on days when the
fund is open for business.
The fund's ASSETS ARE VALUED primarily on the basis of market
quotations. Certain short-term securities are valued on the basis of
amortized cost. If market quotations are not readily available for a
security or if a security's value has been materially affected by
events occurring after the close of the exchange or market on which
the security is principally traded (for example, a foreign exchange or
market), that security may be valued by another method that the Board
of Trustees believes accurately reflects fair value. In these
circumstances, the security's valuation may differ from the generally
expected valuation.
SHAREHOLDER INFORMATION
BUYING AND SELLING SHARES
GENERAL INFORMATION
Fidelity Investments was established in 1946 to manage one of
America's first mutual funds. Today, Fidelity is the largest mutual
fund company in the country, and is known as an innovative provider of
high-quality financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage
Services, Inc. (FBSI). Fidelity is also a leader in providing
tax-advantaged retirement plans for individuals investing on their own
or through their employer.
For account, product and service information, please use the following
WEB SITE and PHONE NUMBERS:
(small solid bullet) For information over the Internet, visit
Fidelity's Web site at www.fidelity.com
(small solid bullet) For accessing account information automatically
by phone, use TouchTone Xpress(registered trademark), 1-800-544-5555
(small solid bullet) For exchanges and redemptions, 1-800-544-7777
(small solid bullet) For account assistance, 1-800-544-6666
(small solid bullet) For mutual fund and retirement information,
1-800-544-8888
(small solid bullet) For brokerage information, 1-800-544-7272
(small solid bullet) TDD - Service for the Deaf and Hearing-Impaired,
1-800-544-0118 (9:00 a.m. - 9:00 p.m. Eastern time)
Please use the following ADDRESSES:
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
You may buy or sell shares of the fund through a retirement account or
an investment professional. If you invest through a retirement account
or an investment professional, the procedures for buying, selling and
exchanging shares of the fund and the account features and policies
may differ. Additional fees may also apply to your investment in the
fund, including a transaction fee if you buy or sell shares of the
fund through a broker or other investment professional.
Certain methods of contacting Fidelity, such as by telephone or
electronically, may be unavailable or delayed (for example, during
periods of unusual market activity). In addition, the level and type
of service available may be restricted based on criteria established
by Fidelity.
The different ways to set up (register) your account with Fidelity are
listed in the following table.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
RETIREMENT
FOR TAX-ADVANTAGED RETIREMENT SAVINGS
(solid bullet) TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNTS (IRAS)
(solid bullet) ROTH IRAS
(solid bullet) ROTH CONVERSION IRAS
(solid bullet) ROLLOVER IRAS
(solid bullet) 401(K) PLANS, and certain other
401(A)-QUALIFIED PLANS
(solid bullet) KEOGH PLANS
(solid bullet) SIMPLE IRAS
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS
(SEP-IRAS)
(solid bullet) SALARY REDUCTION SEP-IRAS (SARSEPS)
(solid bullet) 403(B) CUSTODIAL ACCOUNTS
(solid bullet) DEFERRED COMPENSATION PLANS (457 PLANS)
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
TRUST
FOR MONEY BEING INVESTED BY A TRUST
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR
OTHER GROUPS
BUYING SHARES
The price to buy one share of the fund is the fund's NAV. The fund's
shares are sold without a sales charge.
Your shares will be bought at the next NAV calculated after your
investment is received in proper form.
Short-term or excessive trading into and out of the fund may harm
performance by disrupting portfolio management strategies and by
increasing expenses. Accordingly, the fund may reject any purchase
orders, including exchanges, particularly from market timers or
investors who, in FMR's opinion, have a pattern of short-term or
excessive trading or whose trading has been or may be disruptive to
the fund. For these purposes, FMR may consider an investor's trading
history in the fund or other Fidelity Funds, and accounts under common
ownership or control.
The fund may stop offering shares completely or may offer shares only
on a limited basis, for a period of time or permanently.
When you place an order to buy shares, 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) Fidelity reserves the right to limit the number
of checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will
be canceled and you could be liable for any losses or fees the fund or
Fidelity has incurred.
Certain financial institutions that have entered into sales agreements
with Fidelity Distributors Corporation (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 order will
be canceled and the financial institution could be held liable for
resulting fees or losses.
MINIMUMS
TO OPEN AN ACCOUNT $2,500
For certain Fidelity retirement accountsA $500
[Through regular
investment plans $_______]
TO ADD TO AN ACCOUNT $250
For certain Fidelity retirement accountsA $250
Through regular investment plans $100
MINIMUM BALANCE $2,000
For certain Fidelity retirement accountsA $500
A FIDELITY TRADITIONAL IRA, ROTH IRA, ROTH CONVERSION IRA, ROLLOVER
IRA, SEP-IRA, AND KEOGH ACCOUNTS.
There is no minimum account balance or initial or subsequent purchase
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.
In addition, the fund may waive or lower purchase minimums in other
circumstances.
KEY
INFORMATION
PHONE TO OPEN AN ACCOUNT
1-800-544-7777 (BULLET) EXCHANGE
FROM ANOTHER FIDELITY FUND.
TO ADD TO AN ACCOUNT
(BULLET) EXCHANGE
FROM ANOTHER FIDELITY FUND.
(BULLET) USE
FIDELITY MONEY LINE TO TRANSFER FROM
YOUR BANK ACCOUNT.
INTERNET TO OPEN AN ACCOUNT
WWW.FIDELITY.COM (BULLET) COMPLETE
AND SIGN THE APPLICATION. MAKE YOUR
CHECK PAYABLE TO THE COMPLETE NAME
OF THE FUND. MAIL TO THE ADDRESS UNDER
"MAIL" BELOW.
TO ADD TO AN ACCOUNT
(BULLET) EXCHANGE
FROM ANOTHER FIDELITY FUND.
(BULLET) USE
FIDELITY MONEY LINE TO TRANSFER FROM
YOUR BANK ACCOUNT.
MAIL TO OPEN AN ACCOUNT
FIDELITY INVESTMENTS (BULLET) COMPLETE
P.O. BOX 770001 AND SIGN THE APPLICATION. MAKE YOUR
CINCINNATI, OH CHECK PAYABLE TO THE COMPLETE NAME
45277-0002 OF THE FUND. MAIL TO THE ADDRESS AT
LEFT.
TO ADD TO AN ACCOUNT
(BULLET) MAKE YOUR
CHECK PAYABLE TO THE COMPLETE NAME
OF THE FUND. INDICATE YOUR FUND
ACCOUNT NUMBER ON YOUR CHECK AND
MAIL TO THE ADDRESS AT LEFT.
(BULLET) EXCHANGE
FROM ANOTHER FIDELITY FUND. SEND A
LETTER OF INSTRUCTION TO THE ADDRESS AT
LEFT, INCLUDING YOUR NAME, THE FUNDS'
NAMES, THE FUND ACCOUNT NUMBERS,
AND THE DOLLAR AMOUNT OR NUMBER OF
SHARES TO BE EXCHANGED.
IN PERSON TO OPEN AN ACCOUNT
(BULLET) BRING YOUR
APPLICATION AND CHECK TO A FIDELITY
INVESTOR CENTER. CALL 1-800-544-9797
FOR THE CENTER NEAREST YOU.
TO ADD TO AN ACCOUNT
(BULLET) BRING YOUR
CHECK TO A FIDELITY INVESTOR CENTER.
CALL 1-800-544-9797 FOR THE CENTER
NEAREST YOU.
WIRE TO OPEN AN ACCOUNT
(BULLET) CALL
1-800-544-7777 TO SET UP YOUR
ACCOUNT AND TO ARRANGE A WIRE
TRANSACTION.
(BULLET) WIRE
WITHIN 24 HOURS TO: BANKERS TRUST
COMPANY, BANK ROUTING #
021001033, ACCOUNT # 00163053.
(BULLET) SPECIFY
THE COMPLETE NAME OF THE FUND AND
INCLUDE YOUR NEW FUND ACCOUNT
NUMBER AND YOUR NAME.
TO ADD TO AN ACCOUNT
(BULLET) WIRE TO:
BANKERS TRUST COMPANY, BANK ROUTING
# 021001033, ACCOUNT #
00163053.
(BULLET) SPECIFY
THE COMPLETE NAME OF THE FUND AND
INCLUDE YOUR FUND ACCOUNT NUMBER AND
YOUR NAME.
AUTOMATICALLY TO OPEN AN ACCOUNT
(BULLET) NOT
AVAILABLE.
TO ADD TO AN ACCOUNT
(BULLET) USE
FIDELITY AUTOMATIC ACCOUNT BUILDER OR
DIRECT DEPOSIT.
(BULLET) USE
FIDELITY AUTOMATIC EXCHANGE SERVICE TO
EXCHANGE FROM A FIDELITY MONEY
MARKET FUND.
SELLING 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.
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 sell 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.
When you place an order to sell shares, note the following:
(small solid bullet) 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), except accounts not subject to
account minimums.
(small solid bullet) Normally, Fidelity will process redemptions by
the next business day, but Fidelity may take up to seven days to
process redemptions if making immediate payment would adversely affect
the fund.
(small solid bullet) Redemption proceeds (other than exchanges) may be
delayed until investments credited to your account have been received
and 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) Redemption proceeds may be paid in securities or
other assets rather than in cash if the Board of Trustees determines
it is in the best interests of the fund.
(small solid bullet) You will not receive interest on amounts
represented by uncashed redemption checks.
(small solid bullet) Unless otherwise instructed, Fidelity will send a
check to the record address.
KEY
INFORMATION
PHONE (BULLET) CALL THE
1-800-544-7777 PHONE NUMBER AT LEFT TO INITIATE A WIRE
TRANSACTION OR TO REQUEST A CHECK FOR YOUR
REDEMPTION.
(BULLET) USE FIDELITY
MONEY LINE TO TRANSFER TO YOUR BANK
ACCOUNT.
(BULLET) EXCHANGE
TO ANOTHER FIDELITY FUND. CALL THE
PHONE NUMBER AT LEFT.
INTERNET (BULLET) EXCHANGE
WWW.FIDELITY.COM TO ANOTHER FIDELITY FUND.
(BULLET) USE
FIDELITY MONEY LINE TO TRANSFER TO YOUR
BANK ACCOUNT.
MAIL INDIVIDUAL, JOINT TENANT,
FIDELITY INVESTMENTS SOLE PROPRIETORSHIP,
P.O. BOX 660602 UGMA, UTMA
DALLAS, TX 75266-0602 (BULLET) SEND A
LETTER OF INSTRUCTION TO THE ADDRESS AT LEFT,
INCLUDING YOUR NAME, THE FUND'S NAME,
YOUR FUND ACCOUNT NUMBER, AND THE
DOLLAR AMOUNT OR NUMBER OF SHARES TO BE
SOLD. THE LETTER OF INSTRUCTION MUST BE
SIGNED BY ALL PERSONS REQUIRED TO SIGN FOR
TRANSACTIONS, EXACTLY AS THEIR NAMES
APPEAR ON THE ACCOUNT.
RETIREMENT ACCOUNT
(BULLET) THE
ACCOUNT OWNER SHOULD COMPLETE A
RETIREMENT DISTRIBUTION FORM. CALL
1-800-544-6666 TO REQUEST ONE.
TRUST
(BULLET) SEND A
LETTER OF INSTRUCTION TO THE ADDRESS AT
LEFT, INCLUDING THE TRUST'S NAME, THE
FUND'S NAME, THE TRUST'S FUND ACCOUNT
NUMBER, AND THE DOLLAR AMOUNT OR
NUMBER OF SHARES TO BE SOLD. THE
TRUSTEE MUST SIGN THE LETTER OF INSTRUCTION
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
(BULLET) SEND A
LETTER OF INSTRUCTION TO THE ADDRESS AT LEFT,
INCLUDING THE FIRM'S NAME, THE FUND'S
NAME, THE FIRM'S FUND ACCOUNT NUMBER,
AND THE DOLLAR AMOUNT OR NUMBER OF
SHARES TO BE SOLD. AT LEAST ONE PERSON
AUTHORIZED BY CORPORATE RESOLUTION TO ACT
ON THE ACCOUNT MUST SIGN THE LETTER OF
INSTRUCTION.
(BULLET) INCLUDE A
CORPORATE RESOLUTION WITH CORPORATE
SEAL OR A SIGNATURE GUARANTEE.
EXECUTOR, ADMINISTRATOR,
CONSERVATOR, GUARDIAN
(BULLET) CALL
1-800-544-6666 FOR INSTRUCTIONS.
IN PERSON INDIVIDUAL, JOINT TENANT,
SOLE PROPRIETORSHIP,
UGMA, UTMA
(BULLET) BRING A
LETTER OF INSTRUCTION TO A FIDELITY INVESTOR
CENTER. CALL 1-800-544-9797 FOR THE
CENTER NEAREST YOU. THE LETTER OF
INSTRUCTION MUST BE SIGNED BY ALL PERSONS
REQUIRED TO SIGN FOR TRANSACTIONS, EXACTLY
AS THEIR NAMES APPEAR ON THE ACCOUNT.
RETIREMENT ACCOUNT
(BULLET) THE
ACCOUNT OWNER SHOULD COMPLETE A
RETIREMENT DISTRIBUTION FORM. VISIT A
FIDELITY INVESTOR CENTER TO REQUEST
ONE. CALL 1-800-544-9797 FOR THE
CENTER NEAREST YOU.
TRUST
(BULLET) BRING A
LETTER OF INSTRUCTION TO A FIDELITY
INVESTOR CENTER. CALL 1-800-544-9797
FOR THE CENTER NEAREST YOU. THE TRUSTEE
MUST SIGN THE LETTER OF INSTRUCTION
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
(BULLET) BRING A
LETTER OF INSTRUCTION TO A FIDELITY
INVESTOR CENTER. CALL 1-800-544-9797
FOR THE CENTER NEAREST YOU. AT LEAST
ONE PERSON AUTHORIZED BY CORPORATE
RESOLUTION TO ACT ON THE ACCOUNT MUST
SIGN THE LETTER OF INSTRUCTION.
(BULLET) INCLUDE A
CORPORATE RESOLUTION WITH CORPORATE
SEAL OR A SIGNATURE GUARANTEE.
EXECUTOR, ADMINISTRATOR,
CONSERVATOR, GUARDIAN
(BULLET) VISIT A
FIDELITY INVESTOR CENTER FOR
INSTRUCTIONS. CALL 1-800-544-9797 FOR
THE CENTER NEAREST YOU.
AUTOMATICALLY (BULLET) USE
PERSONAL WITHDRAWAL SERVICE TO SET UP
PERIODIC REDEMPTIONS FROM YOUR
ACCOUNT.
EXCHANGING SHARES
An exchange involves the redemption of all or a portion of the shares
of one fund and the purchase of shares of another fund.
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 policies and restrictions
governing exchanges:
(small solid bullet) The fund you are exchanging into must be
available for sale in your state.
(small solid bullet) You may exchange only 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) Exchanges may have tax consequences for you.
(small solid bullet) The fund may temporarily or permanently terminate
the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year.
(small solid bullet) The exchange limit may be modified for accounts
held by 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 may 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.
The fund may 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.
ACCOUNT FEATURES AND POLICIES
FEATURES
The following features are available to buy and sell shares of the
fund.
AUTOMATIC INVESTMENT AND WITHDRAWAL PROGRAMS. Fidelity offers
convenient services that let you automatically transfer money into
your account, between accounts or out of your account. While automatic
investment programs 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. Automatic withdrawal or exchange programs
can be a convenient way to provide a consistent income flow or to move
money between your investments.
AUTOMATIC INVESTMENT AND WITHDRAWAL PROGRAMS
FIDELITY AUTOMATIC ACCOUNT BUILDER(registered trademark)
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY PROCEDURES
$100 Monthly or quarterly (BULLET) To set up for a new
account, complete the appropriate
section on the fund application.
(BULLET) To set up for existing
accounts, call 1-800-544-6666 or
visit Fidelity's Web site for an
application.
(BULLET) To make changes, call
1-800-544-6666 at least three
business days prior to your next
scheduled investment date.
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
MINIMUM FREQUENCY PROCEDURES
$100 Every pay period (BULLET) To set up for a new
account, check the appropriate box
on the fund application.
(BULLET) To set up for an
existing account, call
1-800-544-6666 or visit Fidelity's
Web site for an authorization form.
(BULLET) To make changes you
will need a new authorization
form. Call 1-800-544-6666 or
visit Fidelity's Web site to obtain
one.
A BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE AN APPROPRIATE CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE
CHECK.
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY PROCEDURES
$100 Monthly, bimonthly, quarterly, or (BULLET) To set up, call
annually 1-800-544-6666 after both
accounts are opened.
(BULLET) To make changes, call
1-800-544-6666 at least three
business days prior to your next
scheduled exchange date.
PERSONAL WITHDRAWAL SERVICE
TO SET UP PERIODIC REDEMPTIONS FROM YOUR FUND ACCOUNT TO YOU OR TO YOUR BANK ACCOUNT.
FREQUENCY PROCEDURES
Monthly (BULLET) To set up, call
1-800-544-6666.
(BULLET) To make changes, call
Fidelity at 1-800-544-6666 at
least three business days prior to
your next scheduled withdrawal
date.
</TABLE>
OTHER FEATURES. The following other features are also available to buy
and sell shares of the fund.
WIRE
TO PURCHASE AND SELL SHARES VIA THE FEDERAL RESERVE WIRE SYSTEM.
(BULLET) You must sign up for the Wire feature before using it.
Complete the appropriate section on the application when opening your
account, or call 1-800-544-7777 to add the feature after your account
is opened. Call 1-800-544-7777 before your first use to verify that
this feature is set up on your account.
(BULLET) To sell shares by wire, you must designate the U.S.
commercial bank account(s) into which you wish the redemption proceeds
deposited.
FIDELITY MONEY LINE(registered trademark)
TO TRANSFER MONEY BY PHONE BETWEEN YOUR BANK ACCOUNT AND YOUR FUND
ACCOUNT.
(BULLET) You must sign up for the Money Line feature before using it.
Complete the appropriate section on the application and then call
1-800-544-7777 or visit Fidelity's Web site before your first use to
verify that this feature is set up on your account.
(BULLET) Most transfers are complete within three business days of
your call.
(BULLET) Maximum purchase: $100,000
FIDELITY ON-LINE XPRESS+(registered trademark)
TO MANAGE YOUR INVESTMENTS THROUGH YOUR PC.
CALL 1-800-544-7272 OR VISIT FIDELITY'S WEB SITE FOR MORE INFORMATION.
(BULLET) For account balances and holdings;
(BULLET) To review recent account history;
(BULLET) For mutual fund and brokerage trading; and
(BULLET) For access to research and analysis tools.
FIDELITY WEB XPRESS(registered trademark)
TO ACCESS AND MANAGE YOUR ACCOUNT OVER THE INTERNET AT FIDELITY'S WEB
SITE.
(BULLET) For account balances and holdings;
(BULLET) To review recent account history;
(BULLET) To obtain quotes;
(BULLET) For mutual fund and brokerage trading; and
(BULLET) To access third-party research on companies, stocks, mutual
funds and the market.
TOUCHTONE XPRESS(registered trademark)
TO ACCESS AND MANAGE YOUR ACCOUNT AUTOMATICALLY BY PHONE.
CALL 1-800-544-5555.
(BULLET) For account balances and holdings;
(BULLET) For mutual fund and brokerage trading;
(BULLET) To obtain quotes;
(BULLET) To review orders and mutual fund activity; and
(BULLET) To change your personal identification number (PIN).
POLICIES
The following policies apply to you as a shareholder.
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after transactions
affecting your account balance except reinvestment of distributions in
the fund or another fund and certain transactions through automatic
investment or withdrawal programs).
(small solid bullet) Monthly or quarterly account statements
(detailing account balances and all transactions completed during the
prior month or quarter).
(small solid bullet) Financial reports (every six months).
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more
than one account in the fund. Call Fidelity if you need additional
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 Fidelity's
electronic delivery program, call Fidelity or visit Fidelity's Web
site for more information.
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.
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.
Fidelity may 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 Fidelity, 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
accounts with Fidelity maintained by Fidelity Service Company, Inc. 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 (except accounts not
subject to account minimums), you will be given 30 days' notice to
reestablish the minimum balance. If you do not increase your balance,
Fidelity may close your account and send the proceeds to you. Your
shares will be sold 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.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The fund earns dividends, interest and other income from its
investments, and distributes this income (less expenses) to
shareholders as DIVIDENDS. The fund also realizes capital gains from
its investments, and distributes these gains (less any losses) to
shareholders as CAPITAL GAINS DISTRIBUTIONS.
The fund normally pays dividends and capital gains distributions in
January and December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. The following options may be available for
the fund's distributions:
1. REINVESTMENT OPTION. Your dividends and capital gains 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 gains distributions will be
automatically reinvested in additional shares of the fund. Your
dividends will be paid in cash.
3. CASH OPTION. Your dividends and capital gains distributions will be
paid in cash.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividends
will be automatically invested in shares of another identically
registered Fidelity fund. Your capital gains distributions, if any,
will be [automatically invested in shares of another identically
registered Fidelity fund,] automatically reinvested in additional
shares of the fund[,] or paid in cash.
Not all distribution options are available for every account. If the
option you prefer is not listed on your account application, or if you
want to change your current option, call Fidelity.
If you elect to receive distributions paid in cash by check and the
U.S. Postal Service does not deliver your checks, your distribution
option may be converted to the Reinvestment Option. You will not
receive interest on amounts represented by uncashed distribution
checks.
TAX CONSEQUENCES
As with any investment, your investment in the fund could have tax
consequences for you. If you are not investing through a
tax-advantaged retirement account, you should consider these tax
consequences.
TAXES ON DISTRIBUTIONS.
Distributions you receive from the fund are subject to federal income
tax, and may also be subject to state or local taxes.
For federal tax purposes, the fund's dividends and distributions of
short-term capital gains are taxable to you as ORDINARY INCOME. The
fund's distributions of long-term capital gains are taxable to you
generally as CAPITAL GAINS at a rate based on how long the securities
were held.
If you buy shares when a fund has realized but not yet distributed
income or capital gains, you will be "BUYING A DIVIDEND" by paying the
full price for the shares and then receiving a portion of the price
back in the form of a taxable distribution.
Any taxable distributions you receive from the fund will normally be
taxable to you when you receive them, regardless of your distribution
option. [If you elect to receive distributions in cash [or to invest
distributions automatically in shares of another Fidelity fund], you
will receive certain December distributions in January, but those
distributions will be taxable as if you received them on December 31.]
TAXES ON TRANSACTIONS. Your redemptions, including exchanges, may
result in a capital gain or loss for federal tax purposes. A capital
gain or loss on your investment in the fund is the difference between
the cost of your shares and the price you receive when you sell them.
FUND SERVICES
FUND MANAGEMENT
Retirement Growth is a MUTUAL FUND, an investment that pools
shareholders' money and invests it toward a specified goal.
Fidelity Management & Research Company (FMR) is the fund's MANAGER.
As of __, [month] [day] [year]], FMR had $__ billion in discretionary
assets under management.
As the manager, FMR is responsible for choosing the fund's investments
and handling 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. FMR
U.K. was organized in 1986 to provide investment research and advice
to FMR. Currently, FMR U.K. provides investment research and advice on
issuers based outside the United States and may also provide
investment advisory services for Retirement Growth.
(small solid bullet) Fidelity Management & Research Far East Inc. (FMR
Far East), in Tokyo, Japan, serves as a sub-adviser for the fund. FMR
Far East was organized in 1986 to provide investment research and
advice to FMR. Currently, FMR Far East provides investment research
and advice on issuers based outside the United States and may also
provide investment advisory services for Retirement Growth.
The fund could be adversely affected if the computer systems used by
FMR and other service providers do not properly process and calculate
date-related information from and after January 1, 2000. FMR has
advised the fund that it is actively working on necessary changes to
its computer systems and expects that its systems, and those of other
major service providers, will be modified prior to January 1, 2000.
However, there can be no assurance that there will be no adverse
impact on the fund.
J. Fergus Shiel is Vice President and manager of Retirement Growth,
which he has managed since June 1996. Since joining Fidelity in 1989,
Mr. Shiel has worked as an analyst, portfolio assistant and manager.
Fidelity investment personnel may invest in securities for their own
investment accounts pursuant to a code of ethics that establishes
procedures for personal investing and restricts certain transactions.
The fund pays a MANAGEMENT FEE to FMR.
The management fee is calculated and paid to FMR every month. The fee
is determined by calculating a BASIC FEE and then applying a
PERFORMANCE ADJUSTMENT. The performance adjustment either increases or
decreases the management fee, depending on how well the fund has
performed relative to the S&P 500.
MANAGEMENT = BASIC +/- PERFORMANCE
FEE FEE ADJUSTMENT
The BASIC 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 [month] [year], the group fee rate was __%. The individual fund
fee rate is 0.30%.
The basic fee for the fiscal year ended November 30, 1998 was __% of
the fund's average net assets.
The PERFORMANCE ADJUSTMENT rate is calculated monthly by comparing the
fund's performance to that of the S&P 500 over the performance period.
The performance period is the most recent 36-month period.
The performance adjustment rate is divided by twelve and multiplied by
the fund's average net assets throughout the month, and the resulting
dollar amount is then added to or subtracted from the basic fee. The
maximum annualized performance adjustment rate is 0.20 %of the fund's
average net assets over the performance period.
[After reimbursement,] the total management fee for the fiscal year
ended November 30, 1998, was __% of the fund's average net assets.
On [month] [day], [year], FMR reduced the [management fee/individual
fund fee] rate for the fund from __% to __%.]
[On [month] [day], [year], FMR reduced the group fee rate.]
FMR pays FMR U.K. and FMR Far East for providing assistance with
investment advisory services.
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 by FMR at any time,] can decrease the fund's
expenses and boost its performance.
[As of [date], approximately ____% of the fund's total outstanding
shares were held by [FMR/FMR and [an] FMR affiliate[s]/[an] FMR
affiliate[s]].]
FUND DISTRIBUTION
Fidelity Distributors Corporation, Inc. (FDC) distributes the fund's
shares.
The fund has adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 that 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 providing services intended to result in
the sale of fund shares and/or shareholder support services. FMR,
directly or through FDC, may pay intermediaries, such as banks,
broker-dealers and other service-providers, that provide those
services. Currently, the Board of Trustees has authorized such
payments.
FMR may allocate brokerage transactions in a manner that takes into
account the sale of shares of the fund, provided that the fund
receives brokerage services and commission rates comparable to those
of other broker-dealers.
No dealer, sales representative, or any other person has been
authorized to give any information or to make any representations,
other than those contained in this Prospectus and in the related
Statement of Additional Information, in connection with the offer
contained in this Prospectus. If given or made, such other information
or representations must not be relied upon as having been authorized
by the fund or FDC. This Prospectus and the related SAI do not
constitute an offer by the fund or by FDC to sell or to buy shares of
the fund to any person to whom it is unlawful to make such offer.
APPENDIX
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
fund's financial history for the past 5 years. Certain information
reflects financial results for a single fund share. Total returns for
each period include the reinvestment of all dividends and
distributions. This information has been audited by ___________,
independent accountants, whose report, along with the fund's financial
highlights and financial statements, are included in the fund's Annual
Report. A free copy of the Annual Report is available upon request.
[Financial Highlights to be filed by subsequent amendment.]
You can obtain additional information about the fund. The fund's SAI
includes more detailed information about the fund and its investments.
The SAI is incorporated herein by reference (legally forms a part of
the prospectus). The fund's annual and semi-annual reports include a
discussion of recent market conditions and the fund's investment
strategies, performance and holdings.
For a free copy of any of these documents or to request other
information or ask questions about the fund, call Fidelity at
1-800-544-8888 or visit Fidelity's Web site at www.fidelity.com.
The SAI, the fund's annual and semi-annual reports and other related
materials are available on the SEC's Internet Web site
(http://www.sec.gov). You can obtain copies of this information upon
paying a duplicating fee, by writing the Public Reference Section of
the SEC, Washington, D.C. 20549-6009. You can also review and copy
information about the fund, including the fund's SAI, at the SEC's
Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for
information on the operation of the SEC's Public Reference Room.
INVESTMENT COMPANY ACT OF 1940, FILE NUMBER, 811-3587
Fidelity, Fidelity Investments, Fidelity Brokerage, TouchTone Xpress,
Fidelity Automatic Account Builder, Fidelity Money Line, Fidelity
On-Line Xpress+, Fidelity Web Xpress, and Directed Dividends are
registered trademarks of FMR Corp.
Fidelity Portfolio Advisory Services is a service Mark of FMR Corp.
Insert item code number FRE-pro-0199
FIDELITY RETIREMENT GROWTH FUND
A FUND OF FIDELITY FINANCIAL TRUST
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 29, 1999
This Statement of Additional Information (SAI) is not a prospectus.
Portions of the fund's Annual Report are incorporated herein. The
Annual Report is supplied with this SAI.
To obtain a free additional copy of the Prospectus, dated January
29, 1999, or an Annual Report, please call Fidelity(registered
trademark) at 1-800-544-8888 or visit Fidelity's Web site at
www.fidelity.com.
TABLE OF CONTENTS PAGE
INVESTMENT POLICIES AND 20
LIMITATIONS
PORTFOLIO TRANSACTIONS 24
VALUATION 26
PERFORMANCE 26
ADDITIONAL PURCHASE, EXCHANGE 29
AND REDEMPTION INFORMATION
DISTRIBUTIONS AND TAXES 29
TRUSTEES AND OFFICERS 29
CONTROL OF INVESTMENT ADVISER 31
MANAGEMENT CONTRACT 32
DISTRIBUTION SERVICES 35
TRANSFER AND SERVICE AGENT 35
AGREEMENTS
DESCRIPTION OF THE TRUST 36
FINANCIAL STATEMENTS 36
APPENDIX 36
FRE-ptb-0199
[ Insert item code number ]
(fidelity_logo_graphic)(REGISTERED TRADEMARK)
82 Devonshire Street, Boston, MA 02109
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 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.
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed
by the U.S. Government or any of its agencies or instrumentalities, or
securities of other investment companies) if, as a result, (a) more
than 5% of the fund's total assets would invested in the securities of
that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer.
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount
not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with
the 33 1/3% limitation;
(4) underwrite any issue of securities (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 managed by Fidelity
Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (3)). The fund will not borrow from other funds advised by
FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
(iv) The fund does not currently intend to purchase any security if,
as a result, more than 10% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of
the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (This limitation does not apply
to purchases of debt securities or to repurchase agreements.)
(vi) The fund does not currently intend to invest all of its assets
in the securities of a single open-end management investment company
managed by Fidelity Management & Research Company or an affiliate or
successor with substantially the same fundamental investment
objective, policies, and limitations as the fund.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
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.
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.
CASH MANAGEMENT. A fund can hold uninvested cash or can
invest it in cash equivalents such as money market securities,
repurchase agreements or shares of money market funds. Generally,
these securities offer less potential for gains than other types of
securities.
CENTRAL CASH FUNDS are money market funds managed by FMR or
its affiliates that seek to earn a high level of current income (free
from federal income tax in the case of a municipal money market fund)
while maintaining a stable $1.00 share price. The funds comply with
industry-standard requirements for money market funds regarding the
quality, maturity and diversification of their investments.
COMMON STOCK represents an equity or ownership interest in an
issuer. In the event an issuer is liquidated or declares bankruptcy,
owners of bonds and preferred stock take precedence over the claims of
those who own common stock.
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.
DEBT SECURITIES are used by issuers to borrow money. The
issuer usually pays a fixed, variable or floating rate of interest,
and must repay the amount borrowed at the maturity of the security.
Some debt securities, such as zero coupon bonds, do not pay interest
but are sold at a deep discount from their face values. Debt
securities include corporate bonds, government securities, and
mortgage and other asset-backed securities.
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. 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. There is no assurance that FMR will be able
to anticipate these potential events or counter their effects. In
addition, the value of securities denominated in foreign currencies
and of dividends and interest paid with respect to such securities
will fluctuate based on the relative strength of the U.S. dollar.
It is anticipated that in most cases the best available market for
foreign securities will be on an exchange or in over-the-counter (OTC)
markets located outside of the United States. Foreign stock markets,
while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some
foreign issuers may be less liquid and more volatile than securities
of comparable U.S. issuers. Foreign security trading, settlement and
custodial practices (including those involving securities settlement
where fund assets may be released prior to receipt of payment) are
often less developed than those in U.S. markets, and may result in
increased risk or substantial delays in the event of a failed trade or
the insolvency of, or breach of duty by, a foreign broker-dealer,
securities depository or foreign subcustodian. In addition, the costs
associated with foreign investments, including withholding taxes,
brokerage commissions and custodial costs, are generally higher than
with U.S. investments.
Foreign markets may offer less protection to investors than U.S.
markets. Foreign issuers are generally not bound by uniform
accounting, auditing, and financial reporting requirements and
standards of practice comparable to those applicable to U.S. issuers.
Adequate public information on foreign issuers may not be available,
and it may be difficult to secure dividends and information regarding
corporate actions on a timely basis. In general, there is less overall
governmental supervision and regulation of securities exchanges,
brokers, and listed companies than in the United States. OTC markets
tend to be less regulated than stock exchange markets and, in certain
countries, may be totally unregulated. Regulatory enforcement may be
influenced by economic or political concerns, and investors may have
difficulty enforcing their legal rights in foreign countries.
Some foreign securities impose restrictions on transfer within the
United States or to U.S. persons. Although securities subject to such
transfer restrictions may be marketable abroad, they may be less
liquid than foreign securities of the same class that are not subject
to such restrictions.
American Depositary Receipts (ADRs) as well as other "hybrid" forms of
ADRs , including European Depositary Receipts (EDRs) and Global
Depositary Receipts (GDRs), are certificates evidencing ownership of
shares of a foreign issuer. These certificates are issued by
depository banks and generally trade on an established market in the
United States or elsewhere. The underlying shares are held in trust by
a custodian bank or similar financial institution in the issuer's home
country. The depository bank may not have physical custody of the
underlying securities at all times and may charge fees for various
services, including forwarding dividends and interest and corporate
actions. ADRs are alternatives to directly purchasing the
underlying foreign securities in their national markets and
currencies. However, ADRs continue to be subject to many of the risks
associated with investing directly in foreign securities. These risks
include foreign exchange risk as well as the political and economic
risks of the underlying issuer's country.
The risks of foreign investing may be magnified for investments in
emerging markets. Security prices in emerging markets can be
significantly more volatile than those in more developed markets,
reflecting the greater uncertainties of investing in less established
markets and economies. In particular, countries with emerging markets
may have relatively unstable governments, may present the risks of
nationalization of businesses, restrictions on foreign ownership and
prohibitions on the repatriation of assets, and may have less
protection of property rights than more developed countries. The
economies of countries with emerging markets may be based on only a
few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt
burdens or inflation rates. Local securities markets may trade a small
number of securities and may be unable to respond effectively to
increases in trading volume, potentially making prompt liquidation of
holdings difficult or impossible at times.
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.
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.
FUND'S RIGHTS AS SHAREHOLDER . The fund does 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: 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.
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, such as the Standard &
Poor's 500 Index (S&P 500). Futures can be held until their delivery
dates, or can be closed out before then if a liquid secondary market
is available.
The value of a futures contract tends to increase and decrease in
tandem with the value of its underlying instrument. Therefore,
purchasing futures contracts will tend to increase a fund's
exposure to positive and negative price fluctuations in the underlying
instrument, much as if it had purchased the underlying instrument
directly. When a fund sells a futures contract, by contrast,
the value of its futures position will tend to move in a direction
contrary to the market. Selling futures contracts, therefore, will
tend to offset both positive and negative market price changes, much
as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract
is not required to deliver or pay for the underlying instrument unless
the contract is held until the delivery date. However, both the
purchaser and seller are required to deposit "initial margin" with a
futures broker, known as a futures commission merchant (FCM), when the
contract is entered into. Initial margin deposits are typically equal
to a percentage of the contract's value. If the value of either
party's position declines, that party will be required to make
additional "variation margin" payments to settle the change in value
on a daily basis. The party that has a gain may be entitled to receive
all or a portion of this amount. Initial and variation margin payments
do not constitute purchasing securities on margin for purposes of
a fund's investment limitations. In the event of the bankruptcy
of an FCM that holds margin on behalf of a fund, 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 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 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.
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 SECURITIES cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they
are valued. Difficulty in selling securities may result in a loss or
may be costly to a fund. 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
securities. In determining the liquidity of a fund's investments, FMR
may consider various factors, including (1) the frequency and volume
of trades and quotations, (2) the number of dealers and prospective
purchasers in the marketplace, (3) dealer undertakings to make a
market and (4) the nature of the security and the market in which it
trades (including any demand, put or tender features, the mechanics
and other requirements for transfer, any letters of credit or other
credit enhancement features, any ratings, the number of holders, the
method of soliciting offers, the time required to dispose of the
security, and the ability to assign or offset the rights and
obligations of the security).
INDEXED SECURITIES are instruments whose prices are indexed
to the prices of other securities, securities indices, currencies, 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.
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.
INVESTMENT-GRADE DEBT SECURITIES. Investment-grade debt
securities are medium and high-quality securities. Some may possess
speculative characteristics and may be sensitive to economic changes
and to changes in the financial conditions of issuers. A debt 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 considered to be of
equivalent quality by FMR.
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. Loan
participations involve a risk of insolvency of the lending bank or
other financial intermediary. 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. 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.
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. 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.
Because 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.
PREFERRED STOCK is a class of equity or ownership in an
issuer that pays dividends at a specified rate and that has precedence
over common stock in the payment of dividends. In the event an issuer
is liquidated or declares bankruptcy, owners of bonds take precedence
over the claims of those who own preferred and common stock.
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 involve an agreement to purchase a
security and 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. The value of the security purchased
may be more or less than the price at which the counterparty has
agreed to purchase the security. In addition, delays or losses could
result if the other party to the agreement defaults or becomes
insolvent. The fund will engage in repurchase agreement transactions
with parties whose creditworthiness has been reviewed and found
satisfactory by FMR.
RESTRICTED SECURITIES are subject to legal restrictions on their
sale. Difficulty in selling securities may result in a loss or be
costly to a fund. Restricted securitie s generally can be sold in
privately negotiated transactions, pursuant to an exemption from
registration under the Securities Act of 1933, or in a registered
public offering. Where registration is required, the holder of a
registered security 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, the
holder 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. 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 OF OTHER INVESTMENT COMPANIES, including shares
of closed-end investment companies, unit investment trusts, and
open-end investment companies, represent interests in professionally
managed portfolios that may invest in any type of instrument.
Investing in other investment companies involves substantially the
same risks as investing directly in the underlying instruments, but
may involve additional expenses at the investment company-level, such
as portfolio management fees and operating expenses. Certain types of
investment companies, such as closed-end investment companies, issue a
fixed number of shares that trade on a stock exchange or
over-the-counter at a premium or a discount to their net asset value.
Others are continuously offered at net asset value, but may also be
traded in the secondary market.
The extent to which a fund can invest in securities of other
investment companies is limited by federal securities laws.
SECURITIES LENDING. A fund may lend securities to parties such
as broker-dealers or other institutions , 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.
Because there may be delays in the recovery of loaned
securities, or even a loss of rights in collateral supplied should the
borrower fail financially, loans will be made only to parties deemed
by FMR to be of good standing. Furthermore, they will only be made if,
in FMR's judgment, the consideration to be earned from such loans
would justify the risk.
FMR understands that it is the current view of the SEC Staff that a
fund may engage in loan transactions only under the following
conditions: (1) the fund must receive 100% collateral in the form of
cash or cash equivalents (e.g., U.S. Treasury bills or notes) from the
borrower; (2) the borrower must increase the collateral whenever the
market value of the securities loaned (determined on a daily basis)
rises above the value of the collateral; (3) after giving notice, the
fund must be able to terminate the loan at any time; (4) the fund must
receive reasonable interest on the loan or a flat fee from the
borrower, as well as amounts equivalent to any dividends, interest, or
other distributions on the securities loaned and to any increase in
market value; (5) the fund may pay only reasonable custodian fees in
connection with the loan; and (6) the Board of Trustees must be able
to vote proxies on the securities loaned, either by terminating the
loan or by entering into an alternative arrangement with the borrower.
Cash received through loan transactions may be invested in other
eligible securities . Investing this cash subjects that investment,
as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
SHORT SALES "AGAINST THE BOX" are short sales of securities that a
fund owns or has the right to obtain (equivalent in kind or
amount to the securities sold short) . If a fund enters
into a short sale against the box, it will be required to set aside
securities equivalent in kind and amount to the securities sold short
(or securities convertible or exchangeable into such securities) and
will be required to hold such securities while the short sale is
outstanding. The fund will incur transaction costs, including interest
expenses, in connection with opening, maintaining, and closing short
sales against the box.
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 .
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.
TEMPORARY DEFENSIVE POLICIES. The fund reserves the right to
invest without limitation in preferred stocks and investment-grade
debt instruments for temporary, defensive purposes.
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.
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 investment
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 e xpenses.
If FMR grants investment management authority to a sub-adviser (see
the section entitled "Management Contract"), 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.
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).
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 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.
To the extent permitted by applicable law, FMR is authorized to
allocate portfolio transactions in a manner that takes into account
assistance received in the distribution of shares of the funds or
other Fidelity funds and to use the research services of brokerage and
other firms that have provided such assistance. 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 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 November 30 , 1998 and 1997, the
fund's portfolio turnover rates were ___% and 205% respectively.
[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 years ended November 1998, 1997 and 1996, the fund
paid brokerage commissions of $________, $11,085,000, and $13,488,000,
respectively. Significant changes in brokerage commissions paid by the
fund from year to year may result from changing asset levels
throughout the year. The fund may pay both commissions and spreads in
connection with the placement of portfolio transactions.
During the fiscal years ended November 1998, 1997 and 1996, the
fund paid brokerage commissions of $_______, $2,759,000, and
$3,072,000, respectively, to NFSC. NFSC is paid on a commission basis.
During the fiscal year ended November 1998, this amounted to
approximately __% of the aggregate brokerage commissions paid by the
fund for transactions involving approximately __% of the aggregate
dollar amount of transactions for which the fund paid brokerage
commissions. [The difference between the percentage of aggregate
brokerage commissions paid to, and the percentage of the aggregate
dollar amount of transactions effected through, NFSC is a result of
the low commission rates charged by NFSC.] [NFSC has used a portion of
the commissions paid by the fund to reduce that fund's custodian or
transfer agent fees.]
During the fiscal years ended November 1998, 1997 and 1996, the
fund paid brokerage commissions of $_____, $176,000 and $93,000,
respectively, to FBS. FBS is paid on a commission basis. During the
fiscal year ended November 1998, this amounted to approximately __% of
the aggregate brokerage commissions paid by the fund for transactions
involving approximately __% of the aggregate dollar amount of
transactions for which the fund paid brokerage commissions. [The
difference between the percentage of aggregate brokerage commissions
paid to, and the percentage of the aggregate dollar amount of
transactions effected through, FBS is a result of the low commission
rates charged by FBS.] [FBS has used a portion of the commissions paid
by the fund to reduce that fund's custodian or transfer agent
fees.]
During the fiscal years ended November 1998, 1997 and 1996, the
fund paid brokerage commissions of $_____, $0 and $0, respectively, to
FBSJ. FBSJ is paid on a commission basis. During the fiscal year ended
November 1998, this amounted to approximately __% of the aggregate
brokerage commissions paid by the fund for transactions involving
approximately __% of the aggregate dollar amount of transactions for
which the fund paid brokerage commissions. [The difference between the
percentage of aggregate brokerage commissions paid to, and the
percentage of the aggregate dollar amount of transactions effected
through, FBSJ is a result of the low commission rates charged by
FBSJ.] [FBSJ has used a portion of the commissions paid by the fund to
reduce that fund's custodian or transfer agent fees.]
During the fiscal year ended November, 1998, the fund paid $__ in
brokerage commissions to firms that provided research services
involving approximately $__ of transactions. The provision of research
services was not necessarily a factor in the placement of all this
business with such firms. [During the fiscal year ended November,
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 affiliates ,
investment decisions for the fund are made independently from those of
other funds managed by FMR or accounts managed by FMR affiliates. It
sometimes happens that the same security is held in the portfolio of
more than one of these funds or accounts. Simultaneous transactions
are inevitable when several funds 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
The fund's net asset value per share (NAV) is the value of a single
share. The NAV of the fund is computed by adding the value of the
fund's investments, cash, and other assets, subtracting its
liabilities, and dividing the result by the number of shares
outstanding.
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 closing 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 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.
Independent brokers or quotation services provide prices
of foreign 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
event that is expected to materially affect the value of a portfolio
security occurs after the close of an exchange or market on
which that security is traded, then that security will be valued 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.
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. For
example, 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. In making a good faith
determination of the value of a security, the committee may review
price movements in futures contracts and American Depositary Receipts
(ADRs), market and trading trends, the bid/ask quotes of brokers and
off-exchange institutional trading.
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, 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.
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. A cumulative total return reflects actual
performance over a stated period of time. 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 may or may not include the effect of
the fund's maximum small account fee. Excluding the fund's small
account fee from a total return calculation produces a higher total
return figure. Total returns, and other performance information
may be quoted numerically or in a table, graph, or similar
illustration.
NET ASSET VALUE. Charts and graphs using the fund's NAVs ,
adjusted NAVs , and benchmark indexes 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.
MOVING AVERAGES. A 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
November 27, 1998 , the 13-week and 39-week long-term moving
averages were $__ and $__ , respectively.
CALCULATING HISTORICAL FUND RESULTS. The following table
shows performance for the fund calculated including certain fund
expenses.
HISTORICAL FUND RESULTS. The following table shows the fund's total
return for the fiscal period ended November 30,
1998.
AVERAGE CUMULATIV
ANNUAL E TOTAL
TOTAL RETURNS
RETURNS
ONE FIVE TEN ONE FIVE TEN
YEAR YEARS YEARS YEAR YEARS YEARS
RETIREMENT % % % % % %
GROWTH
[Note: If FMR had not reimbursed certain fund expenses during these
periods, the fund's total returns would have been lower.]
The following table shows the income and capital elements of the
fund's cumulative total return. The table compares the 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 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. The 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 the fund's returns, do not include the effect of
brokerage commissions or other costs of investing.
During the 10-year period ended November 30, 1998, a hypothetical
$10,000 investment in Retirement Growth would have grown to $______,
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FIDELITY INDEXES
RETIREME
NT
GROWTH
FUND
YEAR ENDED VALUE OF VALUE OF VALUE OF TOTAL S&P 500 DJIA COST OF
NOVEMBER 30 INITIAL REINVESTED REINVESTED VALUE LIVING**
$10,000 DIVIDEND CAPITAL GAIN
INVESTMENT DISTRIBUTIONS DISTRIBUTIONS
1998 $ $ $ $ $ $ $
1997 $ 15,819 $ 3,939 $ 26,791 $ 46,549 $ 55,623 $ 57,303 $ 13,995
1996 $ 15,487 $ 3,252 $ 21,464 $ 40,203 $ 43,282 $ 46,910 $ 13,744
1995 $ 15,070 $ 2,474 $ 17,892 $ 35,436 $ 33,851 $ 35,730 $ 13,310
1994 $ 13,918 $ 1,888 $ 13,377 $ 29,183 $ 24,712 $ 25,688 $ 12,990
1993 $ 14,884 $ 1,798 $ 11,314 $ 27,996 $ 24,457 $ 24,627 $ 12,634
1992 $ 15,278 $ 1,615 $ 6,539 $ 23,432 $ 22,213 $ 21,471 $ 12,305
1991 $ 13,300 $ 1,178 $ 4,512 $ 18,990 $ 18,745 $ 18,258 $ 11,941
1990 $ 10,147 $ 781 $ 3,442 $ 14,370 $ 15,575 $ 15,610 $ 11,594
1989 $ 12,071 $ 525 $ 3,477 $ 16,073 $ 16,137 $ 15,875 $ 10,910
</TABLE>
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in the fund
on December 1, 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 $______ . 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 $______ for dividends and $_____ for capital
gain distributions. [The figures in the table do not include the
effect of the fund's __[% sales charge (which was in effect during the
period _____ through _____)] [,/or its][account closeout fee] [,] [or
its] short-term] trading fee applicable to shares held less than
days/years]].]
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, the fund's performance may be compared to stock, bond,
and money market mutual fund performance indexes prepared by
Lipper or other organizations. When comparing these indexes , 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's performance may also be compared to that of the
benchmark index representing the universe of securities in which the
fund may invest. The total return of the index reflects
reinvestment of all dividends and capital gains paid by securities
included in the index. Unlike the fund's returns, however, the
index's returns do not reflect brokerage commissions, transaction
fees, or other costs of investing directly in the securities included
in the index.
Retirement Growth may compare its performance to that of the
Standard & Poor's 500 Index, a market capitalization weighted
index of common stocks.
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 bonds, Treasury bills, the U.S. rate of inflation (based on
the Consumer Price Index , and combinations of various capital
markets. The performance of these capital markets is based on the
returns of different indexes.
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 indexes 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.
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.
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 November 30, 1998, FMR advised over $__ billion in
municipal fund assets, $__ billion in taxable fixed-income
fund assets, $__ billion in money market fund assets, $___
billion in equity fund assets, $__ billion in international
fund assets, and $___ 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.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
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.
DISTRIBUTIONS AND TAXES
DIVIDENDS. A portion of the 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 the fund may earn other types of income, such as
interest, short-term capital gains, and non-qualifying dividends, the
percentage of dividends from the fund that qualifies for the deduction
generally will be less than 100%. A portion of the fund's dividends
derived from certain U.S. Government securities and securities of
certain other investment companies may be exempt from state and local
taxation.
CAPITAL GAINS DISTRIBUTIONS. The fund's capital gains
distributions are federally taxable to shareholders at a rate based
generally on the length of time the securities on which the gain was
realized were held, regardless of the length of time those shares on
which the distribution is received have been held.
[ As of November 30, 199 8 , the fund had a capital
loss carryforward aggregating approximately $____. This loss
carryforward, of which $___, $___, and $___will expire on November 30,
199_, ____, and ____ , respectively, is available to offset future
capital gains. ]
RETURNS OF CAPITAL. If the fund's distributions exceed its
taxable income and capital gains realized during a taxable year, all
or a portion of the distributions made in the same taxable year may be
recharacterized as a return of capital to shareholders. A return of
capital distribution will generally not be taxable, but will reduce
each shareholder's cost basis in the fund and result in a higher
reported capital gain or lower reported capital loss when those shares
on which the distribution was received are sold.
FOREIGN TAX CREDIT OR DEDUCTION. Foreign governments may
withhold taxes on dividends and interest earned by the fund with
respect to foreign securities. Foreign governments may also impose
taxes on other payments or gains with respect to foreign securities.
Because the 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 be
eligible to claim a foreign tax credit or deduction on their federal
income tax returns with respect to foreign taxes withheld.
TAX STATUS OF THE FUND. The fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal
Revenue Code 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.
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. It is up to you or your tax preparer to determine
whether the sale of shares of the fund resulted in a capital gain or
loss or other tax consequence to you. 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.
TRUSTEES AND OFFICERS
The Trustees, Members of the Advisory Board, and executive officers of
the trust are listed below. The Board of Trustees governs the fund
and 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. 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 or its affiliates . The business
address of each Trustee, Member of the Advisory Board, and officer who
is an "interested person" (as defined in the 1940 Act ) 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. Abigail Johnson, Vice
President of certain Equity Funds, is Mr. Johnson's daughter.
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 ( 65 ), Trustee, is President of RABAR Enterprises
(management consulting-engineering industry, 1994). Prior to February
1994, he was President of Greenhill Petroleum Corporation (petroleum
exploration and production). Until March 1990, Mr. Cox was President
and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of USA Waste Services,
Inc. (non-hazardous waste, 1993), CH2M Hill Companies (engineering),
Rio Grande, Inc. (oil and gas production), and Daniel Industries
(petroleum measurement equipment manufacturer). In addition, he is a
member of advisory boards of Texas A&M University and the University
of Texas at Austin.
PHYLLIS BURKE DAVIS ( 65 ), Trustee. 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 ( 65 ), 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 ( 69 ), 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), 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).
ABIGAIL P. JOHNSON ( 36 ), is Vice President of certain Equity
Funds (1997), and is a Director of FMR Corp. (1994). Before
assuming her current responsibilities, Ms. Johnson managed a number of
Fidelity funds. Edward C. Johnson 3d, Trustee and President of the
Funds, is Ms. Johnson's father.
J. FERGUS SHIEL (41), is Vice President of Fidelity Retirement
Growth Fund (1996). Prior to his current position, Mr. Shiel managed a
variety of Fidelity funds.
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).
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).
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 for the fiscal year ended November 30 ,
199 8 or calendar year ended December 31, 199 8 , as
applicable.
COMPENSATION
TABLE
TRUSTEES AGGREGATE TOTAL
AND COMPENSATION COMPENSATION
MEMBERS OF THE FROM RETIREMENT FROM THE
ADVISORY BOARD GROWTH B,C ,+ FUND COMPLEX*,A
J. GARY BURKHEAD** $ 0 $ 0
RALPH F. COX $ $ 214,500
PHYLLIS BURKE DAVIS $ $ 210,000
ROBERT M. GATES*** $ $ 176,000
EDWARD C. JOHNSON 3D** $ 0 $ 0
E. BRADLEY JONES $ $ 211,500
DONALD J. KIRK $ $ 211,500
PETER S. LYNCH** $ 0 $ 0
WILLIAM O. MCCOY**** $ $ 214,500
GERALD C. MCDONOUGH $ $ 264,500
MARVIN L. MANN $ $ 214,500
ROBERT C. POZEN** $ 0 $ 0
THOMAS R. WILLIAMS $ $ 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.
*** Mr. Gates was appointed to the Board of Trustees of Fidelity
Financial Trust effective March 1, 1997. Mr. Gates was elected to
the Board of Trustees of Fidelity Financial Trust on
November 18, 1998.
**** Mr. McCoy was appointed to the Board of Trustees effective
January 1, 1997. Mr. McCoy was elected to the Board of Trustees of
Fidelity Financial Trust on November 18, 1998.
A Compensation figures include cash, amounts required to be deferred,
and may include amounts deferred at the election of Trustees. For the
calendar year ended December 31, 1997, the Trustees accrued required
deferred compensation from the funds as follows: Ralph F. Cox,
$75,000; Phyllis Burke Davis, $75,000; Robert M. Gates, $62,500; E.
Bradley Jones, $75,000; Donald J. Kirk, $75,000; William O. McCoy,
$75,000; Gerald C. McDonough, $87,500; Marvin L. Mann, $75,000; and
Thomas R. Williams, $75,000. Certain of the non-interested Trustees
elected voluntarily to defer a portion of their compensation 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
Trustees.
C The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $__; Phyllis Burke Davis, $__;
Robert M. Gates, $__; E. Bradley Jones, $__; Donald J. Kirk, $__;
William O. McCoy, $__; Gerald C. McDonough, $__; Marvin L. Mann, $__;
and Thomas R. Williams, $__.
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 compe nsation to the Trustee. A fund may invest in the
Reference Funds under the Plan without shareholder approval.
As of [date], approximately __% of the fund's total outstanding
shares was held by FMR [[and] [an] FMR affiliate[s]]. FMR Corp. is the
ultimate parent company of FMR and these FMR affiliates. By virtue of
his ownership interest in FMR Corp., as described in the "Control of
Investment Advisers" section on page ___, Mr. Edward C. Johnson 3d,
President and Trustee of the fund, may be deemed to be a beneficial
owner of these shares. As of the above date, with the exception of Mr.
Johnson 3d's deemed ownership of the fund's shares, the Trustees,
Members of the Advisory Board, and officers of the fund owned, in the
aggregate, less than __% of the fund's total outstanding shares .
As of [date], the Trustees, Members of the Advisory Board, and
officers of the fund owned, in the aggregate, less than __% of the
fund's total outstanding shares.
As of [date], the following owned of record or beneficially 5% or
more (up to and including 25%) of the fund's outstanding shares:
As of [date], approximately ____% of the fund's total outstanding
shares were held by [NAME OF SHAREHOLDER].]
A shareholder owning of record or beneficially more than 25% of a
fund's outstanding shares may be considered a controlling person. That
shareholder's vote could have a more significant effect on matters
presented at a shareholders' meeting than votes of other
shareholders.
CONTROL OF INVESTMENT ADVISERS
FMR Corp., organized in 1972, is the ultimate parent company of
FMR, FMR U.K. and FMR Far East. 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 investment 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.
MANAGEMENT CONTRACT
The 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
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
basic fee, which is the sum of a group fee rate and an individual fund
fee rate, and a performance adjustment based on a comparison of the
fund's performance to that of The S&P 500.
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
GROUP FEE RATE EFFECTIVE ANNUAL FEE
SCHEDULE 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
</TABLE>
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 left. For example, the effective annual fee
rate at $___ billion of group net assets - the approximate
level for November 1998 - was [__%] , which is the weighted
average of the respective fee rates for each level of group net assets
up to $__ 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 November
1998 , the fund's annual basic fee rate would be calculated as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
GROUP FEE RATE INDIVIDUAL FUND FEE RATE BASIC FEE RATE
RETIREMENT GROWTH 0.___% + 0.30% = 0.___%
</TABLE>
One-twelfth of the basic fee rate is applied to the fund's
average net assets for the month, giving a dollar amount
which is the fee for that month.
COMPUTING THE PERFORMANCE ADJUSTMENT. The basic fee for Retirement
Growth is subject to upward or downward adjustment, depending upon
whether, and to what extent, the fund's investment performance for the
performance period exceeds, or is exceeded by, the record of the S&P
500 (the Index) over the same period. The performance period consists
of the most recent month plus the previous 35 months.
Each percentage point of difference, calculated to the nearest
0.01% (up to a maximum difference of (plus/minus)10.00 )
is multiplied by a performance adjustment rate of 0.02%.
The performance comparison is made at the end of each month. One
twelfth (1/12) of this rate is then applied to the fund's average net
assets throughout the month , giving a dollar amount
which will be added to (or subtracted from) the basic fee.
The maximum annualized adjustment rate is (plus/minus)0.20% of the
fund's average net assets over the performance period.
The fund's performance is calculated based on change in NAV. For
purposes of calculating the performance adjustment, any dividends or
capital gain distributions paid by the fund are treated as if
reinvested in that fund's shares at the NAV as of the record
date for payment. The record of the Index is based on change in value
and is adjusted for any cash distributions from the companies whose
securities compose the Index.
Because the adjustment to the basic fee is based on the fund's
performance compared to the investment record of the Index, the
controlling factor is not whether the fund's performance is up or down
per se, but whether it is up or down more or less than the record of
the Index. Moreover, the comparative investment performance of the
fund is based solely on the relevant performance period without regard
to the cumulative performance over a longer or shorter period of time.
For the fiscal years ended November 30, 1998, 199 7 , and
199 6 , the fund paid FMR management fees of $_______,
$16,654,000 and $20,788,000, respectively. The amount of these
management fees include both the basic fee and the amount of the
performance adjustment, if any. For the fiscal years ended
November 30, 1998, 1997 and 1996 , the downward performance
adjustments amounted to $____ , $ 7,529,000 , and
$ 4,324,000 , respectively. For the fiscal years ended November
30, 1998 the upward performance adjustments amounted to
$______.
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 repayment of the reimbursement by the fund will lower its total
returns.
Effective [Date], FMR voluntarily agreed to reimburse the fund if
and to the extent that its aggregate operating expenses, including
management fees, were in excess of an annual rate of __% of its
average net assets. For the fiscal years ended November 1998, 1997,
and 1996, management fees incurred under the fund's contract prior to
reimbursement amounted to $_________, $___________, and $_________,
respectively, and management fees reimbursed by FMR amounted to
$_________, $___________, and $_________, respectively.
During the past three fiscal [years/periods], FMR voluntarily
agreed to reimburse Retirement Growth if and to the extent that its
aggregate operating expenses, including management fees, were in
excess of an annual rate of its average net assets. The table below
shows the period[s] of reimbursement and levels of expense
limitation[s]; the dollar amount of management fees incurred under the
fund's contract before reimbursement; and the dollar amount of
management fees reimbursed by FMR under the expense reimbursement for
[the/each] period.]
The reimbursement arrangement that is in effect for the fund will
continue through [month] [day], 19__, after which time FMR may elect
to discontinue it.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
PERIOD[S] OF TO AGGREGATE FISCAL YEARS MANAGEMENT AMOUNT OF
EXPENSE OPERATING ENDED FEE BEFORE MANAGEMENT
LIMITATION EXPENSE NOVEMBER 30 REIMBURSEMENT FEE
LIMITATION REIMBURSEMENT
FROM
RETIREMENT MONTH, DAY, MONTH, DAY, % 199_ $ * $
GROWTH YEAR YEAR
MONTH, DAY, MONTH, DAY, % 199_ $ * $
YEAR YEAR
MONTH, DAY, MONTH, DAY, % 199_ $ * $
YEAR YEAR
</TABLE>
SUB-ADVISERS. On behalf of Retirement Growth, 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 the 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 fund.
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 the 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
(including any performance adjustment) with respect to the 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.
FISCAL YEAR ENDED FMR U.K. FMR FAR EAST
NOVEMBER 30
199 8 $ $
199 7 $ 294,620 $ 280,051
199 6 $ 398,914 $ 434,933
For 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.
For discretionary investment management and execution of portfolio
transactions, fees paid to the sub-advisers for the past three fiscal
years are shown in the table below.
FISCAL YEAR ENDED FMR U.K. FMR FAR EAST
NOVEMBER 30
199 8 $ $
199 7 $ 0 $ 0
199 6 $ 0 $ 0
No fees were paid to the sub-advisers by FMR on behalf of the
fund for the past three fiscal years.
DISTRIBUTION SERVICES
The fund has entered into a distribution agreement with FDC, an
affiliate of FMR. 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.
The Trustees have approved a Distribution and Service Plan on behalf
of the fund (the Plan) 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, allows 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 providing services intended to
result in the sale of fund shares and/or shareholder support
services . In addition, the Plan provides that FMR, directly or
through FDC, may pay intermediaries , such as banks,
broker-dealers and other service-providers , that provide
those services. Currently, the Board of Trustees has authorized
such payments for shares.
Payments made by FMR [ either directly or ] through FDC to
intermediaries for the fiscal year ended 1998 amounted to $____
for Retirement Growth.
FMR made no payments [ either directly or ] through FDC to
intermediaries 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 or stabilization of cash flows 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.
TRANSFER AND SERVICE AGENT AGREEMENTS
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.
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 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 .0600%
of the first $500 million of average net assets and .0300% 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 fiscal years ended November 30 , 1998,
199 7 , and 199 6 , the fund paid FSC pricing and
bookkeeping fees, including reimbursement for related out-of-pocket
expenses, of $____, $811,000, and $808,000 , 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 November 30 , 1998,
199 7 , and 199 6 , the fund paid securities lending
fees of $__, $0, and $ 3,000 , respectively.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Retirement Growth Fund is a
fund of Fidelity Financial Trust, an open-end management
investment company organized as a business trust on October 20, 1982.
Currently, there are 3 funds in the trust: Fidelity Convertible
Securities Fund, Fidelity Retirement Growth Fund and Fidelity
Equity-Income II Fund. The Trustees are permitted to create additional
funds in the trust.
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 to the rights of creditors, are allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets
of each fund in the trust shall be charged with the liabilities and
expenses attributable to such fund. Any general expenses of the trust
shall be allocated between or among any one or more of the funds.
SHAREHOLDER LIABILITY. The trust is an entity 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 contains an express disclaimer of
shareholder liability for the debts, liabilities, obligations, and
expenses of the trust or fund. 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 relating to the trust or to a fund shall include
a provision limiting the obligations created thereby to the trust or
to one or more funds and its or their assets. The Declaration of Trust
further provides that shareholders of a fund shall not have a claim on
or right to any assets belonging to any other fund.
The Declaration of Trust provides for indemnification out of each
fund's property of any shareholder or former shareholder held
personally liable for the obligations of the fund solely by reason of
his or her being or having been a shareholder and not because of his
or her acts or omissions or for some other reason. 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.
VOTING RIGHTS. Each fund's capital consists of shares of
beneficial interest. As a shareholder, you are entitled to one vote
for each dollar of net asset value that you own. The voting rights of
shareholders can be changed only by a shareholder vote. Shares may be
voted in the aggregate, by fund and by class.
The shares have no preemptive or conversion rights. Shares are
fully paid and nonassessable, except as set forth under the heading
"Shareholder Liability" above.
The trust or any of its funds may be terminated upon the sale of
its assets to, or merger with, another open-end management investment
company or series thereof, or upon liquidation and distribution of its
assets. Generally, the merger of the trust or a fund with another
entity or the sale of substantially all of the assets of the trust or
a fund to another entity requires approval by a vote of shareholders
of the trust or the fund. The Trustees may, however, reorganize or
terminate the trust or any of its funds without prior shareholder
approval. In the event of the dissolution or liquidation of the trust,
shareholders of each of its funds are entitled to receive the
underlying assets of such fund available for distribution. In the
event of the dissolution or liquidation of a fund, shareholders of
that fund are entitled to receive the underlying assets of the fund
available for distribution.
CUSTODIAN. Brown Brothers Harriman & Co., 40 Water Street,
Boston, Massachusetts, 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
Bank of New York and The Chase Manhattan Bank, each headquartered in
New York, also may serve as special purpose custodian of certain
assets in connection with repurchase agreement transactions.
FMR, its officers and directors, its affiliated companies, and members
of 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. The Boston branch of the fund's custodian leases
its office space from an affiliate of FMR at a lease payment which,
when entered into, was consistent with prevailing market rates.
Transactions that have occurred to date include mortgages and personal
and general business loans. In the judgment of FMR, the terms and
conditions of those transactions were not influenced by existing or
potential custodial or other fund relationships.
AUDITOR. ________________________________________ serves as the
trust'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 November 30, 199 8 , and report of the
auditor, are included in the fund's Annual Report and are
incorporated herein by reference.
APPENDIX
Fidelity, Fidelity Brokerage, and Fidelity Focus are registered
trademarks of FMR Corp.
THE THIRD PARTY MARKS APPEARING ABOVE ARE THE MARKS OF THEIR
RESPECTIVE OWNERS.
LIKE SECURITIES OF ALL MUTUAL
FUNDS, THESE SECURITIES HAVE
NOT BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND EXCHANGE
COMMISSION, AND THE
SECURITIES AND EXCHANGE
COMMISSION HAS NOT
DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR
COMPLETE. ANY
REPRESENTATION TO THE
CONTRARY IS A CRIMINAL
OFFENSE.
FIDELITY
CONVERTIBLE SECURITIES
FUND
(fund number 308, trading symbol FCVSX)
PROSPECTUS
JANUARY 29, 1999
(fidelity_logo_graphic)(REGISTERED TRADEMARK)
82 Devonshire Street, Boston, MA 02109
CONTENTS
FUND SUMMARY 3 INVESTMENT SUMMARY
2 PERFORMANCE
3 FEE TABLE
FUND BASICS 6 INVESTMENT DETAILS
8 VALUING SHARES
SHAREHOLDER INFORMATION 5 BUYING AND SELLING SHARES
9 EXCHANGING SHARES
10 ACCOUNT FEATURES AND POLICIES
12 DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS
12 TAX CONSEQUENCES
FUND SERVICES 12 FUND MANAGEMENT
2 FUND DISTRIBUTION
3
APPENDIX 13 FINANCIAL HIGHLIGHTS
FUND SUMMARY
INVESTMENT SUMMARY
INVESTMENT OBJECTIVE. Convertible Securities Fund seeks high total
return through a combination of current income and capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES. Fidelity Management & Research
Company (FMR)'s principal investment strategies include:
(small solid bullet) Investing at least 65% of total assets in
convertible securities (a convertible security performs more like a
stock when the underlying share price is high and more like a bond
when the underlying share price is low).
(small solid bullet) Potentially investing in other types of
securities, including common stocks.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
PRINCIPAL INVESTMENT RISKS. The fund is subject to the following
principal investment risks:
(small solid bullet) STOCK MARKET VOLATILITY. Stock markets are
volatile and can decline significantly in response to adverse issuer,
political, regulatory, market or economic developments. Different
parts of the market can react differently to these developments.
(small solid bullet) FOREIGN EXPOSURE. Foreign markets can be more
volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market or economic developments and can
perform differently than the U.S. market.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently than
the value of the market as a whole. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due
to increased sensitivity to adverse issuer, political, regulatory,
market or economic developments.
An investment in the fund is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
When you sell your shares of the fund, they could be worth more or
less than what you paid for them.
PERFORMANCE
The following information illustrates the changes in the fund's
performance from year to year and compares the fund's performance to
the performance of a market index and similar funds over various
periods of time. Returns are based on past results and are not an
indication of future performance.
YEAR-BY-YEAR RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONVERTIBLE
SECURITIES
CALENDAR YEARS 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
% % % % % % % % % %
</TABLE>
PERCENTAGE (%)
ROW: 1, COL: 1, VALUE: NIL
ROW: 2, COL: 1, VALUE: NIL
ROW: 3, COL: 1, VALUE: NIL
ROW: 4, COL: 1, VALUE: NIL
ROW: 5, COL: 1, VALUE: NIL
ROW: 6, COL: 1, VALUE: NIL
ROW: 7, COL: 1, VALUE: NIL
ROW: 8, COL: 1, VALUE: NIL
ROW: 9, COL: 1, VALUE: NIL
ROW: 10, COL: 1, VALUE: NIL
DURING THE PERIODS SHOWN IN THE CHART FOR CONVERTIBLE SECURITIES, THE
HIGHEST RETURN FOR A QUARTER WAS __% (QUARTER ENDING
____, 19__) AND THE LOWEST RETURN FOR A QUARTER WAS __% (QUARTER
ENDING ____, 19__).
AVERAGE ANNUAL RETURNS
FOR THE PAST 1 PAST 5 PAST 10
PERIODS ENDED YEAR YEARS YEARS
DECEMBER 31,
1998
CONVERTIBLE % % %
SECURITIES
MERRILL LYNCH % % %
ALL
CONVERTIBLE
SECURITIES
INDEX
LIPPER % % %
CONVERTIBLE
SECURITIES
FUNDS
AVERAGE
[If FMR had not reimbursed certain fund expenses during these periods,
the fund's total returns would have been lower.]
Merrill Lynch All Convertible Securities Index is a
market-capitalization-weighted index of domestic corporate convertible
securities. To be included in the index, bonds and preferred stocks
must be convertible only to common stock and have a market value or
original par value of at least $50 million.
Lipper Convertible Securities Funds Average reflects the performance
(excluding sales charges) of mutual funds with similar objectives.
FEE TABLE
The following table describes the fees and expenses that are incurred
when you buy, hold or sell shares of the fund. [The annual fund
operating expenses provided below for Convertible Securities are
higher than the expenses actually paid by the fund as the result of
the payment or reduction of certain expenses during the period.][The
annual fund operating expenses provided below for Convertible
Securities are based on historical expenses.]
SHAREHOLDER FEES (PAID BY THE INVESTOR)
SALES CHARGE (LOAD) ON NONE
PURCHASES
AND REINVESTED DISTRIBUTIONS
DEFERRED SALES CHARGE NONE
(LOAD) ON REDEMPTIONS
ANNUAL ACCOUNT $12.00
MAINTENANCE FEE (FOR
ACCOUNTS UNDER $2,500)
FUND OPERATING EXPENSES (PAID BY THE FUND)
MANAGEMENT FEE %
DISTRIBUTION AND SERVICE NONE
(12B-1) FEE
OTHER EXPENSES %
TOTAL ANNUAL FUND %
OPERATING EXPENSES
[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 would have been __%.]
This EXAMPLE helps you compare the cost of investing in the fund with
the cost of investing in other mutual funds.
Let's say, hypothetically, that the fund's annual return is 5% and
that your shareholder fees and the fund's annual operating expenses
are exactly as described in the fee table. This example illustrates
the effect of fees and expenses, but is not meant to suggest actual or
expected fees and expenses or returns, all of which may vary. For
every $10,000 you invested, here's how much you would pay in total
expenses if you close your account after the number of years
indicated:
1 YEAR $
3 YEARS $
5 YEARS $
10 YEARS $
FUND BASICS
INVESTMENT DETAILS
INVESTMENT OBJECTIVE:
CONVERTIBLE SECURITIES seeks a high level of total return through a
combination of current income and capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES:
FMR normally invests at least 65% of the fund's total assets in
convertible securities. FMR may also invest the fund's assets in other
types of securities, including common stocks. FMR may invest the
fund's assets in securities of foreign issuers in addition to
securities of domestic issuers.
In buying and selling securities for the fund, FMR relies on
fundamental analysis of each issuer and its potential for success in
light of its current financial condition, its industry position, and
economic and market conditions.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices or other factors that affect security values. If FMR's
strategies do not work as intended, the fund may not achieve its
objective.
DESCRIPTION OF PRINCIPAL SECURITY TYPES:
CONVERTIBLE SECURITIES are bonds, preferred stocks and other
securities that pay interest or dividends and are convertible into
common stocks or its equivalent value at maturity. Convertible
securities are often lower-quality debt securities. Convertible
securities generally have less potential for gain or loss than common
stock. In general, a convertible security performs more like a stock
when the underlying stock's price is high (because it is assumed that
it will be converted into the stock) and more like a bond when the
underlying stock's price is low (because it is assumed that it will
mature without being converted). 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.
EQUITY SECURITIES represent an ownership interest, or the right to
acquire an ownership interest, in an issuer. Different types of
equity securities provide different voting and dividend rights and
priority in the event of the bankruptcy of the issuer. Equity
securities include common stocks, preferred stocks and warrants.
PRINCIPAL INVESTMENT RISKS:
Many factors affect the fund's performance. The fund's share price
changes daily based on changes in market conditions and interest rates
and in response to other economic, political or financial
developments. The fund's reaction to these developments will be
affected by the financial condition, industry and economic sector, and
geographic location of an issuer, and the fund's level of investment
in the securities of that issuer. When you sell your shares of the
fund, they could be worth more or less than what you paid for them.
The following factors may significantly affect the fund's performance:
STOCK MARKET VOLATILITY. The value of equity securities fluctuates in
response to issuer, political, market and economic developments. In
the short term, equity prices can fluctuate dramatically in response
to these developments. Different parts of the market can react
differently to these developments. For example, large cap stocks can
react differently than small cap stocks, and "growth" stocks can react
differently than "value" stocks. Issuer, political or economic
developments can affect a single issuer, issuers within an industry or
economic sector or geographic region, or the market as a whole.
FOREIGN EXPOSURE. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations
can involve additional risks relating to political, economic or
regulatory conditions in foreign countries. These risks include
fluctuations in foreign currencies; withholding or other taxes;
trading, settlement, custodial and other operational risks; and the
less stringent investor protection and disclosure standards of some
foreign markets. All of these factors can make foreign investments,
especially those in emerging markets, more volatile and potentially
less liquid than U.S. investments. In addition, foreign markets can
perform differently than the U.S. market.
INTEREST RATE CHANGES. Debt securities have varying levels of
sensitivity to changes in interest rates. In general, the price of a
debt security can fall when interest rates rise and can rise when
interest rates fall. Securities with longer maturities and mortgage
securities can be more sensitive to interest rate changes.
ISSUER-SPECIFIC CHANGES. Changes in the financial condition of an
issuer, changes in specific economic or political conditions that
affect a particular type of issuer, and changes in general economic or
political conditions can affect the value of an issuer's securities.
The value of securities of smaller, less well-known issuers can be
more volatile than that of larger issuers. Lower-quality debt
securities (those of less than investment-grade quality) tend to be
more sensitive to these changes than higher-quality debt securities.
Lower-quality debt securities involve greater risk of default or price
changes due to changes in the credit quality of the issuer. The value
of lower-quality debt securities often fluctuates in response to
company, political or economic developments and can decline
significantly over short periods of time or during periods of general
or regional economic difficulty. Lower-quality debt securities can be
thinly traded or have restrictions on resale, making them difficult to
sell at an acceptable price. The default rate for lower-quality debt
securities can be higher during economic recessions or periods of high
interest rates.
In response to market, economic, political or other conditions, FMR
may temporarily use a different investment strategy for defensive
purposes. If FMR does so, different factors could affect the fund's
performance.
FUNDAMENTAL INVESTMENT POLICIES
The policies discussed below are fundamental, that is, subject to
change only by shareholder approval.
THE FUND seeks a high level of total return through a combination of
current income and capital appreciation. The fund seeks to achieve
this objective by investing primarily in convertible securities.
VALUING SHARES
The fund's net asset value per share (NAV) is the value of a single
share.
The fund is OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. Fidelity normally calculates the fund's NAV as of the
close of business 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. The fund's assets are valued as
of this time for the purpose of computing the fund's NAV.
To the extent that the fund's assets are traded in other markets on
days when the NYSE is closed, the value of the fund's assets may be
affected on days when the fund is not open for business. In addition,
trading in some of the fund's assets may not occur on days when the
fund is open for business.
The fund's ASSETS ARE VALUED primarily on the basis of market
quotations. Certain short-term securities are valued on the basis of
amortized cost. If market quotations are not readily available for a
security or if a security's value has been materially affected by
events occurring after the close of the exchange or market on which
the security is principally traded (for example, a foreign exchange or
market), that security may be valued by another method that the Board
of Trustees believes accurately reflects fair value. In these
circumstances, the security's valuation may differ from the generally
expected valuation.
SHAREHOLDER INFORMATION
BUYING AND SELLING SHARES
GENERAL INFORMATION
Fidelity Investments was established in 1946 to manage one of
America's first mutual funds. Today, Fidelity is the largest mutual
fund company in the country, and is known as an innovative provider of
high-quality financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage
Services, Inc. (FBSI). Fidelity is also a leader in providing
tax-advantaged retirement plans for individuals investing on their own
or through their employer.
For account, product and service information, please use the following
WEB SITE and PHONE NUMBERS:
(small solid bullet) For information over the Internet, visit
Fidelity's Web site at www.fidelity.com
(small solid bullet) For accessing account information automatically
by phone, use TouchTone Xpress(registered trademark), 1-800-544-5555
(small solid bullet) For exchanges and redemptions, 1-800-544-7777
(small solid bullet) For account assistance, 1-800-544-6666
(small solid bullet) For mutual fund and retirement information,
1-800-544-8888
(small solid bullet) For brokerage information, 1-800-544-7272
(small solid bullet) TDD - Service for the Deaf and Hearing-Impaired,
1-800-544-0118 (9:00 a.m.-9:00 p.m. Eastern time)
Please use the following ADDRESSES:
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
You may buy or sell shares of the fund through a retirement account or
an investment professional. If you invest through a retirement account
or an investment professional, the procedures for buying, selling and
exchanging shares of the fund and the account features and policies
may differ. Additional fees may also apply to your investment in the
fund, including a transaction fee if you buy or sell shares of the
fund through a broker or other investment professional.
Certain methods of contacting Fidelity, such as by telephone or
electronically, may be unavailable or delayed (for example, during
periods of unusual market activity). In addition, the level and type
of service available may be restricted based on criteria established
by Fidelity.
The different ways to set up (register) your account with Fidelity are
listed in the following table.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
RETIREMENT
FOR TAX-ADVANTAGED RETIREMENT SAVINGS
(solid bullet) TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNTS (IRAS)
(solid bullet) ROTH IRAS
(solid bullet) ROTH CONVERSION IRAS
(solid bullet) ROLLOVER IRAS
(solid bullet) 401(K) PLANS, and certain other 401(A)-QUALIFIED PLANS
(solid bullet) KEOGH PLANS
(solid bullet) SIMPLE IRAS
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS)
(solid bullet) SALARY REDUCTION SEP-IRAS (SARSEPS)
(solid bullet) 403(B) CUSTODIAL ACCOUNTS
(solid bullet) DEFERRED COMPENSATION PLANS (457 PLANS)
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
TRUST
FOR MONEY BEING INVESTED BY A TRUST
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR
OTHER GROUPS
BUYING SHARES
The PRICE TO BUY one share of the fund is the fund's NAV. The fund's
shares are sold without a sales charge.
Your shares will be bought at the next NAV calculated after your
investment is received in proper form.
Short-term or excessive trading into and out of the fund may harm
performance by disrupting portfolio management strategies and by
increasing expenses. Accordingly, the fund may reject any purchase
orders, including exchanges, particularly from market timers or
investors who, in FMR's opinion, have a pattern of short-term or
excessive trading or whose trading has been or may be disruptive to
the fund. For these purposes, FMR may consider an investor's trading
history in the fund or other Fidelity Funds, and accounts under common
ownership or control.
The fund may stop offering shares completely or may offer shares only
on a limited basis, for a period of time or permanently.
When you place an order to buy shares, 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) Fidelity reserves the right to limit the number
of checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will
be canceled and you could be liable for any losses or fees the fund or
Fidelity has incurred.
Certain financial institutions that have entered into sales agreements
with Fidelity Distributors Corporation (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 order will
be canceled and the financial institution could be held liable for
resulting fees or losses.
MINIMUMS
TO OPEN AN ACCOUNT $2,500
For certain Fidelity retirement accountsA $500
TO ADD TO AN ACCOUNT $250
Through regular investment plans $100
MINIMUM BALANCE $2,000
For certain Fidelity retirement accountsA $500
A FIDELITY TRADITIONAL IRA, ROTH IRA, ROTH CONVERSION IRA, ROLLOVER
IRA, SEP-IRA, AND KEOGH ACCOUNTS.
There is no minimum account balance or initial or subsequent purchase
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.
In addition, the fund may waive or lower purchase minimums in other
circumstances.
KEY
INFORMATION
PHONE TO OPEN AN ACCOUNT
1-800-544-7777 (BULLET) EXCHANGE
FROM ANOTHER FIDELITY FUND.
TO ADD TO AN ACCOUNT
(BULLET) EXCHANGE
FROM ANOTHER FIDELITY FUND.
(BULLET) USE
FIDELITY MONEY LINE TO TRANSFER FROM
YOUR BANK ACCOUNT.
INTERNET TO OPEN AN ACCOUNT
WWW.FIDELITY.COM (BULLET) COMPLETE
AND SIGN THE APPLICATION. MAKE YOUR
CHECK PAYABLE TO THE COMPLETE NAME
OF THE FUND. MAIL TO THE ADDRESS UNDER
"MAIL" BELOW.
TO ADD TO AN ACCOUNT
(BULLET) EXCHANGE
FROM ANOTHER FIDELITY FUND.
(BULLET) USE
FIDELITY MONEY LINE TO TRANSFER FROM
YOUR BANK ACCOUNT.
MAIL TO OPEN AN ACCOUNT
FIDELITY INVESTMENTS (BULLET) COMPLETE
P.O. BOX 770001 AND SIGN THE APPLICATION. MAKE YOUR
CINCINNATI, OH CHECK PAYABLE TO THE COMPLETE NAME
45277-0002 OF THE FUND. MAIL TO THE ADDRESS AT
LEFT.
TO ADD TO AN ACCOUNT
(BULLET) MAKE YOUR
CHECK PAYABLE TO THE COMPLETE NAME
OF THE FUND. INDICATE YOUR FUND
ACCOUNT NUMBER ON YOUR CHECK AND
MAIL TO THE ADDRESS AT LEFT.
(BULLET) EXCHANGE
FROM ANOTHER FIDELITY FUND. SEND A
LETTER OF INSTRUCTION TO THE ADDRESS AT
LEFT, INCLUDING YOUR NAME, THE FUNDS'
NAMES, THE FUND ACCOUNT NUMBERS,
AND THE DOLLAR AMOUNT OR NUMBER OF
SHARES TO BE EXCHANGED.
IN PERSON TO OPEN AN ACCOUNT
(BULLET) BRING YOUR
APPLICATION AND CHECK TO A FIDELITY
INVESTOR CENTER. CALL 1-800-544-9797
FOR THE CENTER NEAREST YOU.
TO ADD TO AN ACCOUNT
(BULLET) BRING YOUR
CHECK TO A FIDELITY INVESTOR CENTER.
CALL 1-800-544-9797 FOR THE CENTER
NEAREST YOU.
WIRE TO OPEN AN ACCOUNT
(BULLET) CALL
1-800-544-7777 TO SET UP YOUR
ACCOUNT AND TO ARRANGE A WIRE
TRANSACTION.
(BULLET) WIRE
WITHIN 24 HOURS TO: BANKERS TRUST
COMPANY, BANK ROUTING #
021001033, ACCOUNT # 00163053.
(BULLET) SPECIFY
THE COMPLETE NAME OF THE FUND AND
INCLUDE YOUR NEW FUND ACCOUNT
NUMBER AND YOUR NAME.
TO ADD TO AN ACCOUNT
(BULLET) WIRE TO:
BANKERS TRUST COMPANY, BANK ROUTING
# 021001033, ACCOUNT #
00163053.
(BULLET) SPECIFY
THE COMPLETE NAME OF THE FUND AND
INCLUDE YOUR FUND ACCOUNT NUMBER AND
YOUR NAME.
AUTOMATICALLY TO OPEN AN ACCOUNT
(BULLET) NOT
AVAILABLE.
TO ADD TO AN ACCOUNT
(BULLET) USE
FIDELITY AUTOMATIC ACCOUNT BUILDER OR
DIRECT DEPOSIT.
(BULLET) USE
FIDELITY AUTOMATIC EXCHANGE SERVICE TO
EXCHANGE FROM A FIDELITY MONEY
MARKET FUND.
SELLING 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.
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 sell 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.
When you place an order to sell shares, note the following:
(small solid bullet) 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), except accounts not subject to
account minimums.
(small solid bullet) Normally, Fidelity will process redemptions by
the next business day, but Fidelity may take up to seven days to
process redemptions if making immediate payment would adversely affect
the fund.
(small solid bullet) Redemption proceeds (other than exchanges) may be
delayed until investments credited to your account have been received
and 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) Redemption proceeds may be paid in securities or
other assets rather than in cash if the Board of Trustees determines
it is in the best interests of the fund.
(small solid bullet) Redemption proceeds may be paid in securities or
other assets rather than in cash if the Board of Trustees determines
it is in the best interests of the fund.
(small solid bullet) You will not receive interest on amounts
represented by uncashed redemption checks.
(small solid bullet) Unless otherwise instructed, Fidelity will send a
check to the record address.
KEY
INFORMATION
PHONE (BULLET) CALL THE
1-800-544-7777 PHONE NUMBER AT LEFT TO INITIATE A WIRE
TRANSACTION OR TO REQUEST A CHECK FOR
YOUR REDEMPTION.
(BULLET) USE MONEY
LINE TO TRANSFER TO YOUR BANK ACCOUNT.
(BULLET) EXCHANGE
TO ANOTHER FIDELITY FUND. CALL THE PHONE
NUMBER AT LEFT.
INTERNET (BULLET) EXCHANGE
WWW.FIDELITY.COM TO ANOTHER FIDELITY FUND.
(BULLET) USE
FIDELITY MONEY LINE TO TRANSFER TO YOUR
BANK ACCOUNT.
MAIL INDIVIDUAL, JOINT TENANT,
FIDELITY INVESTMENTS SOLE PROPRIETORSHIP,
P.O. BOX 660602 UGMA, UTMA
DALLAS, TX 75266-0602 (BULLET) SEND A
LETTER OF INSTRUCTION TO THE ADDRESS AT
LEFT, INCLUDING YOUR NAME, THE FUND'S
NAME, YOUR FUND ACCOUNT NUMBER, AND
THE DOLLAR AMOUNT OR NUMBER OF SHARES
TO BE SOLD. THE LETTER OF INSTRUCTION
MUST BE SIGNED BY ALL PERSONS REQUIRED
TO SIGN FOR TRANSACTIONS, EXACTLY AS
THEIR NAMES APPEAR ON THE ACCOUNT.
RETIREMENT ACCOUNT
(BULLET) THE
ACCOUNT OWNER SHOULD COMPLETE A
RETIREMENT DISTRIBUTION FORM. CALL
1-800-544-6666 TO REQUEST ONE.
TRUST
(BULLET) SEND A
LETTER OF INSTRUCTION TO THE ADDRESS AT
LEFT, INCLUDING THE TRUST'S NAME, THE
FUND'S NAME, THE TRUST'S FUND ACCOUNT
NUMBER, AND THE DOLLAR AMOUNT OR
NUMBER OF SHARES TO BE SOLD. THE
TRUSTEE MUST SIGN THE LETTER OF INSTRUCTION
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
(BULLET) SEND A
LETTER OF INSTRUCTION TO THE ADDRESS AT
LEFT, INCLUDING THE FIRM'S NAME, THE
FUND'S NAME, THE FIRM'S FUND ACCOUNT
NUMBER, AND THE DOLLAR AMOUNT OR
NUMBER OF SHARES TO BE SOLD. AT LEAST
ONE PERSON AUTHORIZED BY CORPORATE
RESOLUTION TO ACT ON THE ACCOUNT MUST
SIGN THE LETTER OF INSTRUCTION.
(BULLET) INCLUDE A
CORPORATE RESOLUTION WITH CORPORATE
SEAL OR A SIGNATURE GUARANTEE.
EXECUTOR, ADMINISTRATOR,
CONSERVATOR, GUARDIAN
(BULLET) CALL
1-800-544-6666 FOR INSTRUCTIONS.
IN PERSON INDIVIDUAL, JOINT TENANT,
SOLE PROPRIETORSHIP,
UGMA, UTMA
(BULLET) BRING A
LETTER OF INSTRUCTION TO A FIDELITY
INVESTOR CENTER. CALL 1-800-544-9797
FOR THE CENTER NEAREST YOU. THE LETTER
OF INSTRUCTION MUST BE SIGNED BY ALL
PERSONS REQUIRED TO SIGN FOR
TRANSACTIONS, EXACTLY AS THEIR NAMES
APPEAR ON THE ACCOUNT.
RETIREMENT ACCOUNT
(BULLET) THE
ACCOUNT OWNER SHOULD COMPLETE A
RETIREMENT DISTRIBUTION FORM. VISIT A
FIDELITY INVESTOR CENTER TO REQUEST
ONE. CALL 1-800-544-9797 FOR THE
CENTER NEAREST YOU.
TRUST
(BULLET) BRING A
LETTER OF INSTRUCTION TO A FIDELITY
INVESTOR CENTER. CALL 1-800-544-9797
FOR THE CENTER NEAREST YOU. THE TRUSTEE
MUST SIGN THE LETTER OF INSTRUCTION
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
(BULLET) BRING A
LETTER OF INSTRUCTION TO A FIDELITY
INVESTOR CENTER. CALL 1-800-544-9797
FOR THE CENTER NEAREST YOU. AT LEAST
ONE PERSON AUTHORIZED BY CORPORATE
RESOLUTION TO ACT ON THE ACCOUNT MUST
SIGN THE LETTER OF INSTRUCTION.
(BULLET) INCLUDE A
CORPORATE RESOLUTION WITH CORPORATE
SEAL OR A SIGNATURE GUARANTEE.
EXECUTOR, ADMINISTRATOR,
CONSERVATOR, GUARDIAN
(BULLET) VISIT A
FIDELITY INVESTOR CENTER FOR
INSTRUCTIONS. CALL 1-800-544-9797 FOR
THE CENTER NEAREST YOU.
AUTOMATICALLY (BULLET) USE
PERSONAL WITHDRAWAL SERVICE TO SET UP
PERIODIC REDEMPTIONS FROM YOUR
ACCOUNT.
EXCHANGING SHARES
An exchange involves the redemption of all or a portion of the shares
of one fund and the purchase of shares of another fund.
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 policies and restrictions
governing exchanges.
(small solid bullet) The fund you are exchanging into must be
available for sale in your state.
(small solid bullet) You may exchange only 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) Exchanges may have tax consequences for you.
(small solid bullet) The fund may temporarily or permanently terminate
the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year.
(small solid bullet) The exchange limit may be modified for accounts
held by 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 may 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.
The fund may 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.
ACCOUNT FEATURES AND POLICIES
FEATURES
The following features are available to buy and sell shares of the
fund.
AUTOMATIC INVESTMENT AND WITHDRAWAL PROGRAMS. Fidelity offers
convenient services that let you automatically transfer money into
your account, between accounts or out of your account. While automatic
investment programs 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. Automatic withdrawal or exchange programs
can be a convenient way to provide a consistent income flow or to
move money between your investments.
AUTOMATIC INVESTMENT AND WITHDRAWAL PROGRAMS
FIDELITY AUTOMATIC ACCOUNT BUILDER(registered trademark)
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY PROCEDURES
$100 MONTHLY OR QUARTERLY (BULLET) TO SET UP FOR A NEW
ACCOUNT, COMPLETE THE APPROPRIATE
SECTION ON THE FUND APPLICATION.
(BULLET) TO SET UP FOR EXISTING
ACCOUNTS, CALL 1-800-544-6666 OR
VISIT FIDELITY'S WEB SITE FOR AN
APPLICATION.
(BULLET) TO MAKE CHANGES, CALL
1-800-544-6666 AT LEAST THREE
BUSINESS DAYS PRIOR TO YOUR NEXT
SCHEDULED INVESTMENT DATE.
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A
FIDELITY FUNDA
MINIMUM FREQUENCY PROCEDURES
$100 EVERY PAY PERIOD (BULLET) TO SET UP FOR A NEW
ACCOUNT, CHECK THE APPROPRIATE BOX
ON THE FUND APPLICATION.
(BULLET) TO SET UP FOR AN
EXISTING ACCOUNT, CALL
1-800-544-6666 OR VISIT FIDELITY'S
WEB SITE FOR AN AUTHORIZATION FORM.
(BULLET) TO MAKE CHANGES YOU
WILL NEED A NEW AUTHORIZATION
FORM. CALL 1-800-544-6666 OR
VISIT FIDELITY'S WEB SITE TO OBTAIN
ONE.
A BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE AN
APPROPRIATE CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY
FUND
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY PROCEDURES
$100 MONTHLY, BIMONTHLY, QUARTERLY, OR (BULLET) TO SET UP, CALL
ANNUALLY 1-800-544-6666 AFTER BOTH
ACCOUNTS ARE OPENED.
(BULLET) TO MAKE CHANGES, CALL
1-800-544-6666 AT LEAST THREE
BUSINESS DAYS PRIOR TO YOUR NEXT
SCHEDULED EXCHANGE DATE.
</TABLE>
PERSONAL WITHDRAWAL SERVICE
TO SET UP PERIODIC REDEMPTIONS FROM YOUR ACCOUNT TO YOU OR TO YOUR
BANK ACCOUNT.
FREQUENCY PROCEDURES
MONTHLY (BULLET) TO SET UP, CALL
1-800-544-6666.
(BULLET) TO MAKE CHANGES, CALL
FIDELITY AT 1-800-544-6666 AT
LEAST THREE BUSINESS DAYS PRIOR TO
YOUR NEXT SCHEDULED WITHDRAWAL
DATE.
OTHER FEATURES. The following other features are also available to buy
and sell shares of the fund.
WIRE
TO PURCHASE AND SELL SHARES VIA THE FEDERAL RESERVE WIRE SYSTEM.
(BULLET) YOU MUST SIGN UP FOR
THE WIRE FEATURE BEFORE USING IT.
COMPLETE THE APPROPRIATE SECTION
ON THE APPLICATION WHEN OPENING
YOUR ACCOUNT, OR CALL
1-800-544-7777 TO ADD THE
FEATURE AFTER YOUR ACCOUNT IS
OPENED. CALL 1-800-544-7777
BEFORE YOUR FIRST USE TO VERIFY THAT
THIS FEATURE IS SET UP ON YOUR
ACCOUNT.
(BULLET) TO SELL SHARES BY WIRE,
YOU MUST DESIGNATE THE U.S.
COMMERCIAL BANK ACCOUNT(S) INTO
WHICH YOU WISH THE REDEMPTION
PROCEEDS DEPOSITED.
FIDELITY MONEY LINE
TO TRANSFER MONEY BY PHONE BETWEEN YOUR BANK ACCOUNT AND YOUR FUND
ACCOUNT.
(BULLET) YOU MUST SIGN UP FOR
THE MONEY LINE FEATURE BEFORE
USING IT. COMPLETE THE APPROPRIATE
SECTION ON THE APPLICATION AND THEN
CALL 1-800-544-7777 OR VISIT
FIDELITY'S WEB SITE BEFORE YOUR FIRST
USE TO VERIFY THAT THIS FEATURE IS SET
UP ON YOUR ACCOUNT.
(BULLET) MOST TRANSFERS ARE
COMPLETE WITHIN THREE BUSINESS
DAYS OF YOUR CALL.
(BULLET) MAXIMUM PURCHASE:
$100,000
FIDELITY ON-LINE XPRESS+(Registered trademark)
TO MANAGE YOUR INVESTMENTS THROUGH YOUR PC.
CALL 1-800-544-7272 OR VISIT
FIDELITY'S WEB SITE FOR MORE
INFORMATION.
(BULLET) FOR ACCOUNT BALANCES
AND HOLDINGS;
(BULLET) TO REVIEW RECENT
ACCOUNT HISTORY;
(BULLET) FOR MUTUAL FUND AND
BROKERAGE TRADING; AND
(BULLET) FOR ACCESS TO RESEARCH
AND ANALYSIS TOOLS.
FIDELITY WEB XPRESS(registered trademark)
TO ACCESS AND MANAGE YOUR ACCOUNT OVER THE INTERNET AT FIDELITY'S WEB
SITE.
(BULLET) FOR ACCOUNT BALANCES
AND HOLDINGS;
(BULLET) TO REVIEW RECENT
ACCOUNT HISTORY;
(BULLET) TO OBTAIN QUOTES;
(BULLET) FOR MUTUAL FUND AND
BROKERAGE TRADING; AND
(BULLET) TO ACCESS THIRD-PARTY
RESEARCH ON COMPANIES, STOCKS,
MUTUAL FUNDS AND THE MARKET.
TOUCHTONE XPRESS(registered trademark)
TO ACCESS AND MANAGE YOUR ACCOUNT AUTOMATICALLY BY PHONE.
CALL 1-800-544-5555
(BULLET) FOR ACCOUNT BALANCES
AND HOLDINGS;
(BULLET) FOR MUTUAL FUND AND
BROKERAGE TRADING;
(BULLET) TO OBTAIN QUOTES;
(BULLET) TO REVIEW ORDERS AND
MUTUAL FUND ACTIVITY; AND
(BULLET) TO CHANGE YOUR
PERSONAL IDENTIFICATION NUMBER
(PIN).
POLICIES
The following policies apply to you as a shareholder.
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after transactions
affecting your account balance except reinvestment of distributions in
the fund or another Fund and certain transactions through automatic
investment or withdrawal programs).
(small solid bullet) Monthly or quarterly account statements
(detailing account balances and all transactions completed during the
prior month or quarter).
(small solid bullet) Financial reports (every six months).
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more
than one account in the fund. Call Fidelity if you need additional
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 Fidelity's
electronic delivery program, call Fidelity or visit Fidelity's Web
site for more information.
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 sell and
exchange by telephone, call Fidelity for instructions.
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.
Fidelity may 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 Fidelity, 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
accounts with Fidelity maintained by Fidelity Service Company, Inc. 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 (except accounts not
subject to account minimums), you will be given 30 days' notice to
reestablish the minimum balance. If you do not increase your balance,
Fidelity may close your account and send the proceeds to you. Your
shares will be sold 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.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The fund earns dividends, interest and other income from its
investments, and distributes this income (less expenses) to
shareholders as DIVIDENDS. The fund also realizes capital gains from
its investments, and distributes these gains (less any losses) to
shareholders as CAPITAL GAINS DISTRIBUTIONS.
The fund normally pays dividends and capital gains distributions in
January and December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. The following options may be available for
the fund's distributions:
1. REINVESTMENT OPTION. Your dividends and capital gains 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 gains distributions will be
automatically reinvested in additional shares of the fund. Your
dividends will be paid in cash.
3. CASH OPTION. Your dividends and capital gains distributions will be
paid in cash.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividends
will be automatically invested in shares of another identically
registered Fidelity fund. Your capital gains distributions will be
automatically invested in shares of another identically registered
Fidelity fund, automatically reinvested in additional shares of the
fund, or paid in cash.
Not all distribution options are available for every account. If the
option you prefer is not listed on your account application, or if you
want to change your current option, call Fidelity.
If you elect to receive distributions paid in cash by check and the
U.S. Postal Service does not deliver your checks, your distribution
option may be converted to the Reinvestment Option. You will not
receive interest on amounts represented by uncashed distribution
checks.
TAX CONSEQUENCES
As with any investment, your investment in the fund could have tax
consequences for you. If you are not investing through a
tax-advantaged retirement account, you should consider these tax
consequences.
TAXES ON DISTRIBUTIONS.
Distributions you receive from the fund are subject to federal income
tax, and may also be subject to state or local taxes.
For federal tax purposes, the fund's dividends and distributions of
short-term capital gains are taxable to you as ordinary income. The
fund's distributions of long-term capital gains are taxable to you
generally as capital gains at a rate based on how long the securities
were held.
If you buy shares when a fund has realized but not yet distributed
income or capital gains, you will be "BUYING A DIVIDEND" by paying the
full price for the shares and then receiving a portion of the price
back in the form of a taxable distribution.
Any taxable distributions you receive from the fund will normally be
taxable to you when you receive them, regardless of your distribution
option.
TAXES ON TRANSACTIONS. Your redemptions, including exchanges, may
result in a capital gain or loss for federal tax purposes. A capital
gain or loss on your investment in the fund is the difference between
the cost of your shares and the price you receive when you sell them.
FUND SERVICES
FUND MANAGEMENT
Convertible Securities is a MUTUAL FUND, an investment that pools
shareholders' money and invests it toward a specified goal.
FMR is the fund's manager.
As of ____, FMR had $__ billion in discretionary assets under
management.
As the manager, FMR is responsible for choosing the fund's investments
and handling 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. FMR
U.K. was organized in 1986 to provide investment research and advice
to FMR. Currently, FMR U.K. provides investment research and advice on
issuers based outside the United States and may also provide
investment advisory services 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. FMR
Far East was organized in 1986 to provide investment research and
advice to FMR. Currently, FMR Far East provides investment research
and advice on issuers based outside the United States and may also
provide investment advisory services for the fund.
The fund could be adversely affected if the computer systems used by
FMR and other service providers do not properly process and calculate
date-related information from and after January 1, 2000. FMR has
advised the fund that it is actively working on necessary changes to
its computer systems and expects that its systems, and those of other
major service providers, will be modified prior to January 1, 2000.
However, there can be no assurance that there will be no adverse
impact on the fund.
David Felman is Vice President and manager of Convertible Securities
Fund, which he has managed since July 1997. Mr. Felman joined Fidelity
as an analyst in 1993, after receiving a master of arts degree from
Harvard University. Previously, he received an MBA from the Stern
School of Business at New York University in 1991.
Fidelity investment personnel may invest in securities for their own
investment accounts pursuant to a code of ethics that establishes
procedures for personal investing and restricts certain transactions.
The fund pays a MANAGEMENT FEE to FMR.
The management fee is calculated and paid to FMR every month. The fee
is determined by calculating a BASIC FEE and then applying a
PERFORMANCE ADJUSTMENT. The performance adjustment either increases or
decreases the management fee, depending on how well the fund has
performed relative to a specified securities index.
MANAGEMENT = BASIC +/- PERFORMANCE
FEE FEE ADJUSTMENT
The BASIC 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 November 1998, the group fee rate was __%. The individual fund fee
rate is 0.20%.
The basic fee for the fiscal year ended November 30, 1998 was __% of
the fund's average net assets.
The PERFORMANCE ADJUSTMENT rate is calculated monthly by comparing the
fund's performance over the most recent 36-month period to a specified
securities index.
Prior to December 1, 1998, the fund compared its performance to the
Merrill Lynch Convertible Securities Ex-Mandatory Index (formerly
known as the Merrill Lynch Convertible Securities Index). Effective
December 1, 1998, following the approval of its shareholders, the fund
changed its comparative securities index to the Merrill Lynch All
Convertible Securities Index and began to prospectively compare its
performance to that index. Because performance adjustments are based
on a rolling 36 month measurement period, the change to the new index
will not be fully implemented until the expiration of a corresponding
36 month transition period. During the transition period, the fund's
performance will be compared to a blended index return that reflects
the performance of the new index for the portion of the 36 month
performance measurement period subsequent to November 30, 1998 and the
performance of the old index for the remainder of the period. At the
conclusion of the transition period, the performance of the Merrill
Lynch Convertible Ex-Mandatory Index will be eliminated from the
performance adjustment calculation, and the calculation will include
only the performance of the Merrill Lynch All Convertible Securities
Index.
The performance adjustment rate is divided by twelve and multiplied by
the fund's average net assets throughout the month, and the resulting
dollar amount is then added to or subtracted from the basic fee. The
maximum annualized performance adjustment rate is __% of the fund's
average net assets over the performance period.
The total management fee for the fiscal year ended November 30, 1998,
was ___% of the fund's average net assets.
FMR pays FMR U.K. and FMR Far East for providing assistance with
investment advisory services.
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 by FMR at any time, can decrease the fund's
expenses and boost its performance.
[As of November 30, 1998, approximately ____% of the fund's total
outstanding shares were held by FMR and FMR affiliates.]
FUND DISTRIBUTION
FDC distributes the fund's shares.
The fund has adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 that 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 providing services intended to result in
the sale of fund shares/or shareholder support services. FMR, directly
or through FDC, may pay intermediaries, such as banks, broker-dealers
and other service providers, that provide those services. Currently,
the Board of Trustees has authorized such payments.
To receive payments made pursuant to a Distribution and Service Plan,
intermediaries must sign the appropriate agreement with FDC in
advance.
FMR may allocate brokerage transactions in a manner that takes into
account the sale of shares of the fund, provided that the fund
receives brokerage services and commission rates comparable to those
of other broker-dealers.
No dealer, sales representative, or any other person has been
authorized to give any information or to make any representations,
other than those contained in this Prospectus and in the related
Statement of Additional Information (SAI), in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the fund or FDC. This Prospectus and the related SAI do
not constitute an offer by the fund or by FDC to sell or to buy shares
of the fund to any person to whom it is unlawful to make such offer.
APPENDIX
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
fund's financial history for the past 5 years. Certain information
reflects financial results for a single fund share. Total returns for
each period include the reinvestment of all dividends and
distributions. This information has been audited by _________,
independent accountants, whose report, along with the fund's financial
highlights and financial statements, are included in the fund's Annual
Report. A free copy of the Annual Report is available upon request.
[Financial Highlights to be filed by subsequent amendment.]
You can obtain additional information about the fund. The fund's SAI
includes more detailed information about the fund and its investments.
The SAI is incorporated herein by reference (legally forms a part of
the prospectus). The fund's annual and semi-annual reports include a
discussion of recent market conditions and the fund's investment
strategies, performance and holdings.
For a free copy of any of these documents or to request other
information or ask questions about the fund, call Fidelity at
1-800-544-8888 or visit Fidelity's Web site at www.fidelity.com.
The SAI, the fund's annual and semi-annual reports and other related
materials are available on the SEC's Internet Web site
(http://www.sec.gov). You can obtain copies of this information upon
paying a duplicating fee, by writing the Public Reference Section of
the SEC, Washington, D.C. 20549-6009. You can also review and copy
information about the fund, including the fund's SAI, at the SEC's
Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for
information on the operation of the SEC's Public Reference Room.
INVESTMENT COMPANY ACT OF 1940, FILE NUMBER, 811-3587.
FIDELITY, FIDELITY INVESTMENTS & (PYRAMID) DESIGN, FIDELITY
INVESTMENTS, FIDELITY MONEY LINE, FIDELITY WEB XPRESS, 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.
THE THIRD PARTY MARKS APPEARING ABOVE ARE THE MARKS OF THEIR
RESPECTIVE OWNERS.
[Item code number] CVS-pro-0199
FIDELITY CONVERTIBLE SECURITIES FUND
A FUND OF FIDELITY FINANCIAL TRUST
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 29 , 1999
This Statement of Additional Information (SAI) is not a prospectus.
Portions of the fund's Annual Report are incorporated herein.
The Annual Report is supplied with this SAI.
To obtain a free additional copy of the Prospectus , dated January
29, 1999, or an Annual Report, please call Fidelity(registered
trademark) at 1-800-544-8888 or visit Fidelity's Web site at
www.fidelity.com.
TABLE OF CONTENTS PAGE
INVESTMENT POLICIES AND 17
LIMITATIONS
PORTFOLIO TRANSACTIONS 22
VALUATION 23
PERFORMANCE 23
ADDITIONAL PURCHASE , EXCHANGE 26
AND REDEMPTION INFORMATION
DISTRIBUTIONS AND TAXES 26
TRUSTEES AND OFFICERS 26
CONTROL OF INVESTMENT ADVISERS 26
MANAGEMENT CONTRACT 29
DISTRIBUTION SERVICES 31
TRANSFER AND SERVICE AGENT 31
AGREEMENTS
DESCRIPTION OF THE TRUST 32
FINANCIAL STATEMENTS 32
APPENDIX 32
CVS-ptb-01 99
[Item code number]
(fidelity_logo_graphic)(REGISTERED TRADEMARK)
82 Devonshire Street, Boston, MA 02109
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 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.
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer (other than obligations
issued or guaranteed by the United States government or its agencies
or instrumentalities , or securities of other investment
companies ) if, as a result thereof, more than 5% of the fund's
total assets would be invested in the securities of such issuer, or it
would hold more than 10% of the voting securities of such issuer,
except that up to 25% of the value of the fund's total assets may be
invested without regard to these limitations;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount
not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with
the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that
the fund may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted
securities ;
(5) purchase any security if, as a result, more than 25% of its total
assets would be invested in the securities of companies having their
principal business activities in the same industry (this limitation
does not apply to securities issued or guaranteed by the United States
government or its agencies or instrumentalities);
(6) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments
backed by real estate or securities of companies engaged in the real
estate business);
(7) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements; or
(8) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed
by physical commodities).
(9) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company managed by Fidelity
Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) the fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (3)). The fund will not borrow from other funds advised by
FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
(iv) The fund does not currently intend to purchase any security if,
as a result, more than 10% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of
the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (This limitation does not apply
to purchases of debt securities or to repurchase agreements.)
(vi) The fund does not currently intend to invest all of its assets
in the securities of a single open-end management investment company
managed by Fidelity Management & Research Company or an affiliate or
successor with substantially the same fundamental investment
objective, policies, and limitations as the fund.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page __.
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.
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 other factors
including changes in interest rates, the availability of information
concerning the pool and its structure, 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.
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.
CASH MANAGEMENT. A fund can hold uninvested cash or can invest it
in cash equivalents such as money market securities, repurchase
agreements or shares of money market funds. Generally, these
securities offer less potential for gains than other types of
securities.
CENTRAL CASH FUNDS are money market funds managed by FMR or its
affiliates that seek to earn a high level of current income (free from
federal income tax in the case of a municipal money market fund) while
maintaining a stable $1.00 share price. The funds comply with
industry-standard requirements for money market funds regarding the
quality, maturity and diversification of their investments.
COMMON STOCK represents an equity or ownership interest in an
issuer. In the event an issuer is liquidated or declares bankruptcy,
owners of bonds and preferred stock take precedence over the claims of
those who own common stock.
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.
DEBT SECURITIES are used by issuers to borrow money. The
issuer usually pays a fixed, variable or floating rate of interest,
and must repay the amount borrowed at the maturity of the security.
Some debt securities, such as zero coupon bonds, do not pay interest
but are sold at a deep discount from their face values. Debt
securities include corporate bonds, government securities, and
mortgage and other asset-backed securities.
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. 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. There is no assurance that
FMR will be able to anticipate these potential events or counter their
effects. In addition, the value of securities denominated in
foreign currencies and of dividends and interest paid with respect to
such securities will fluctuate based on the relative strength of the
U.S. dollar.
It is anticipated that in most cases the best available market for
foreign securities will be on an exchange or in over-the-counter (OTC)
markets located outside of the United States. Foreign stock
markets, while growing in volume and sophistication, are generally not
as developed as those in the United States, and securities of some
foreign issuers may be less liquid and more volatile than securities
of comparable U.S. issuers. Foreign security trading, settlement
an d custodial practices (including those involving securities
settlement where fund assets may be released prior to receipt of
payment) are often less developed than those in U.S. markets,
and may result in increased risk or substantial delays in the event
of a failed trade or the insolvency of, or breach of duty by, a
foreign broker-dealer, securities depository or foreign subcustodian.
In addition, the costs associated with foreign investments, including
withholding taxes, brokerage commissions and custodial costs, are
generally higher than with U.S. investments.
Foreign markets may offer less protection to investors than U.S.
markets. Foreign issuers are generally not bound by uniform
accounting, auditing, and financial reporting requirements and
standards of practice comparable to those applicable to U.S. issuers.
Adequate public information on foreign issuers may not be available,
and it may be difficult to secure dividends and information regarding
corporate actions on a timely basis. In general, there is less overall
governmental supervision and regulation of securities exchanges,
brokers, and listed companies than in the United States. OTC markets
tend to be less regulated than stock exchange markets and, in certain
countries, may be totally unregulated. Regulatory enforcement may be
influenced by economic or political concerns, and investors may have
difficulty enforcing their legal rights in foreign countries.
Some foreign securities impose restrictions on transfer within the
United States or to U.S. persons. Although securities subject to such
transfer restrictions may be marketable abroad, they may be less
liquid than foreign securities of the same class that are not subject
to such restrictions.
American Depositary Receipts (ADRs) as well as other "hybrid" forms of
ADRs, including European Depositary Receipts (EDRs) and Global
Depositary Receipts (GDRs), are certificates evidencing ownership of
shares of a foreign issuer. These certificates are issued by
depository banks and generally trade on an established market in the
United States or elsewhere. The underlying shares are held in trust by
a custodian bank or similar financial institution in the issuer's home
country. The depository bank may not have physical custody of the
underlying securities at all times and may charge fees for various
services, including forwarding dividends and interest and corporate
actions. ADRs are alternatives to directly purchasing the
underlying foreign securities in their national markets and
currencies. However, ADRs continue to be subject to many of the risks
associated with investing directly in foreign securities. These risks
include foreign exchange risk as well as the political and economic
risks of the underlying issuer's country.
The risks of foreign investing may be magnified for investments in
emerging markets. Security prices in emerging markets can be
significantly more volatile than those in more developed markets,
reflecting the greater uncertainties of investing in less established
markets and economies. In particular, countries with emerging markets
may have relatively unstable governments, may present the risks of
nationalization of businesses, restrictions on foreign ownership and
prohibitions on the repatriation of assets, and may have less
protection of property rights than more developed countries. The
economies of countries with emerging markets may be based on only a
few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt
burdens or inflation rates. Local securities markets may trade a small
number of securities and may be unable to respond effectively to
increases in trading volume, potentially making prompt liquidation of
holdings difficult or impossible at times.
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.
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.
FUND'S RIGHTS AS A SHAREHOLDER. The fund does 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: 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.
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, such as the Standard &
Poor's 500 Index (S&P 500). Futures can be held until their delivery
dates, or can be closed out before then if a liquid secondary market
is available.
The value of a futures contract tends to increase and decrease in
tandem with the value of its underlying instrument. Therefore,
purchasing futures contracts will tend to increase a fund's
exposure to positive and negative price fluctuations in the underlying
instrument, much as if it had purchased the underlying instrument
directly. When a fund sells a futures contract, by contrast,
the value of its futures position will tend to move in a direction
contrary to the market. Selling futures contracts, therefore, will
tend to offset both positive and negative market price changes, much
as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract
is not required to deliver or pay for the underlying instrument unless
the contract is held until the delivery date. However, both the
purchaser and seller are required to deposit "initial margin" with a
futures broker, known as a futures commission merchant (FCM), when the
contract is entered into. Initial margin deposits are typically equal
to a percentage of the contract's value. If the value of either
party's position declines, that party will be required to make
additional "variation margin" payments to settle the change in value
on a daily basis. The party that has a gain may be entitled to receive
all or a portion of this amount. Initial and variation margin payments
do not constitute purchasing securities on margin for purposes of
a fund's investment limitations. In the event of the bankruptcy of
an FCM that holds margin on behalf of a fund, 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 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 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. 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 SECURITIES cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they
are valued. Difficulty in selling securities may result in a loss
or may be costly to a fund. 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 securities. In determining the liquidity of a
fund's investments, FMR may consider various factors, including
(1) the frequency and volume of trades and quotations, (2) the
number of dealers and prospective purchasers in the marketplace, (3)
dealer undertakings to make a market and (4) the nature of the
security and the market in which it trades (including any
demand, put or tender features, the mechanics and other requirements
for transfer, any letters of credit or other credit enhancement
features, any ratings, the number of holders, the method of soliciting
offers, the time required to dispose of the security, and the
ability to assign or offset the rights and obligations of the
security).
INDEXED SECURITIES are instruments whose prices are indexed to
the prices of other securities, securities indices, currencies, 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.
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 f und 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.
INVESTMENT-GRADE DEBT SECURITIES. Investment-grade debt securities are
medium and high-quality securities. Some may possess speculative
characteristics and may be sensitive to economic changes and to
changes in the financial conditions of issuers. A debt 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 buy considered to be of
equivalent quality by FMR.
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.
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. 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.
Because 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 SECURITIES are issued by government and non-government
entities such as banks, mortgage lenders, or other institutions. A
mortgage 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 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 securities are
based on different types of mortgages, including those on commercial
real estate or residential properties. Stripped mortgage securities
are created when the interest and principal components of a mortgage
security are separated and sold as individual securities. In the case
of a stripped mortgage 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.
Fannie Maes and Freddie Macs are pass-through securities
issued by Fannie Mae and Freddie Mac, respectively. Fannie Mae and
Freddie Mac, which guarantee payment of interest and repayment of
principal on Fannie Maes and Freddie Macs, respectively, are federally
chartered corporations supervised by the U.S. Government that act as
governmental instrumentalities under authority granted by Congress.
Fannie Mae is authorized to borrow from the U.S. Treasury to meet its
obligations. Fannie Maes and Freddie Macs are not backed by the full
faith and credit of the U.S. Government.
The value of mortgage 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
securities market as a whole. Non-government mortgage securities may
offer higher yields than those issued by government entities, but also
may be subject to greater price changes than government issues.
Mortgage 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 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 securities tend to be more volatile in response to changes in
interest rates than those of non-stripped mortgage securities.
In order to earn additional income for a fund, FMR may use a
trading strategy that involves selling mortgage securities and
simultaneously agreeing to purchase similar securities on a later date
at a set price. This trading strategy may result in an increase
portfolio turnover rate which increases costs and may increase taxable
gains.
PREFERRED STOCK is a class of equity or ownership in an
issuer that pays dividends at a specified rate and that has precedence
over common stock in the payment of dividends. In the event an issuer
is liquidated or declares bankruptcy, owners of bonds take precedence
over the claims of those who own preferred and common stock.
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 involve an agreement to purchase a
security and 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. The value of
the security purchased may be more or less than the price at which the
counterparty has agreed to purchase the security. In addition, delays
or losses could result if the other party to the agreement defaults or
becomes insolvent. The fund will engage in repurchase agreement
transactions with parties whose creditworthiness has been
reviewed and found satisfactory by FMR.
RESTRICTED SECURITIES are subject to legal restrictions on their
sale. Difficulty in selling securities may result in a loss or be
costly to a fund. Restricted securities generally can be sold in
privately negotiated transactions, pursuant to an exemption from
registration under the Securities Act of 1933, or in a registered
public offering. Where registration is required, the holder of a
registered security 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, the
holder 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. 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 OF OTHER INVESTMENT COMPANIES, including shares of
closed-end investment companies, unit investment trusts, and open-end
investment companies, represent interests in professionally managed
portfolios that may invest in any type of instrument. Investing in
other investment companies involves substantially the same risks as
investing directly in the underlying instruments, but may involve
additional expenses at the investment company-level, such as portfolio
management fees and operating expenses. Certain types of investment
companies, such as closed-end investment companies, issue a fixed
number of shares that trade on a stock exchange or over-the-counter at
a premium or a discount to their net asset value. Others are
continuously offered at net asset value, but may also be traded in the
secondary market.
The extent to which a fund can invest in securities of other
investment companies is limited by federal securities laws.
SECURITIES LENDING. A fund may lend securities to parties such
as broker-dealers or other institutions , 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.
Because 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. Stocks underlying a fund's convertible
security holdings can be sold short . For example, if FMR
anticipates a decline in the price of the stock underlying a
convertible security held by a fund, 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. The
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.
A fund 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.
TEMPORARY DEFENSIVE POLICIES. The fund reserves the right to invest
without limitation in preferred stocks and investment-grade debt
instruments for temporary, defensive purposes.
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 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
investment 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 Contract"), 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.
The fund may execute portfolio transactions with broker-dealers who
provide research and execution services to the fund or other
investment 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 investment 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 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.
To the extent permitted by applicable law, FMR is authorized to
allocate portfolio transactions in a manner that takes into account
assistance received in the distribution of shares of the funds or
other Fidelity funds and to use the research services of brokerage and
other firms that have provided such assistance. 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 investment 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 November 30, 1998 and 1997, the
fund's portfolio turnover rates were ___% and ___%, respectively.
[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 years ended November 1998, 1997 and 1996, the
fund paid brokerage commissions of $________, $_________, and
$________, respectively. Significant changes in brokerage
commissions paid by the fund from year to year may result from
changing asset levels throughout the year. The fund may pay both
commissions and spreads in connection with the placement of portfolio
transactions.
[During the fiscal years ended November 1998, 1997 and 1996,
the fund paid brokerage commissions of $_______, $_______, and
$_______, respectively, to NFSC. NFSC is paid on a commission
basis. During the fiscal year ended November 1998, this
amounted to approximately __% of the aggregate brokerage commissions
paid by the fund for transactions involving approximately __% of the
aggregate dollar amount of transactions for which the fund paid
brokerage commissions. [The difference between the percentage of
aggregate brokerage commissions paid to, and the percentage of the
aggregate dollar amount of transactions effected through, NFSC is a
result of the low commission rates charged by NFSC.] [NFSC has used a
portion of the commissions paid by the fund to reduce that fund's
custodian or transfer agent fees.]
[During the fiscal years ended November 1998, 1997 and 1996, the
fund paid brokerage commissions of $_____, $_____ and $_____,
respectively, to FBS. FBS is paid on a commission basis. During the
fiscal year ended November 1998, this amounted to approximately __% of
the aggregate brokerage commissions paid by the fund for transactions
involving approximately __% of the aggregate dollar amount of
transactions for which the fund paid brokerage commissions. [The
difference between the percentage of aggregate brokerage commissions
paid to, and the percentage of the aggregate dollar amount of
transactions effected through, FBS is a result of the low commission
rates charged by FBS.] [FBS has used a portion of the commissions paid
by the fund to reduce that fund's custodian or transfer agent fees.]
[During the fiscal years ended November 1998, 1997 and 1996, the
fund paid brokerage commissions of $_____, $_____ and $_____,
respectively, to FBSJ. FBSJ is paid on a commission basis. During the
fiscal year ended November 1998, this amounted to approximately __% of
the aggregate brokerage commissions paid by the fund for transactions
involving approximately __% of the aggregate dollar amount of
transactions for which the fund paid brokerage commissions. [The
difference between the percentage of aggregate brokerage commissions
paid to, and the percentage of the aggregate dollar amount of
transactions effected through, FBSJ is a result of the low commission
rates charged by FBSJ.][FBSJ has used a portion of the commissions
paid by the fund to reduce that fund's custodian or transfer agent
fees.]
[During the fiscal year ended November 1998, the fund paid $__
in brokerage commissions to firms that provided research
services involving approximately $__ of transactions. The provision of
research services was not necessarily a factor in the placement of all
this business with such firms.]
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 affiliates ,
investment decisions for the fund are made independently from those of
other funds managed by FMR or investment 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 investment
accounts. Simultaneous transactions are inevitable when several
funds and investment 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 investment
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
The fund's net asset value per share (NAV) is the value of a
single share. The NAV of the fund is computed by adding the value of
the fund's investments, cash, and other assets, subtracting its
liabilities, and dividing the result by the number of shares
outstanding.
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 closing 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 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.
Independent brokers or quotation services provide prices of
foreign 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
event that is expected to materially affect the value of a portfolio
security occurs after the close of an exchange or market on
which that security is traded, then that security will be valued 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.
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. For
example, 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. In making a good faith
determination of the value of a security, the committee may review
price movements in futures contracts and American Depositary Receipts
(ADRs), market and trading trends, the bid/ask quotes of brokers and
off-exchange institutional trading.
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 CALCULATIONS. Yields for the fund are computed by dividing the
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 the 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 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.
In calculating the 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 the fund's yield.
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. A cumulative total return reflects actual
performance over a stated period of time. 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 may or may not include the effect of
the fund's small account fee. Excluding the fund's small account fee
from a total return calculation produces a higher total return
figure. Total returns, yields, and other performance information
may be quoted numerically or in a table, graph, or similar
illustration.
NET ASSET VALUE. Charts and graphs using the fund's NAVs, adjusted
NAVs, and benchmark indexes 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.
MOVING AVERAGES. A 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
November 27, 1998, the 13-week and 39-week long-term moving
averages were $__ and $__, respectively, for Convertible Securities
Fund.
CALCULATING HISTORICAL FUND RESULTS. The following table
shows performance for the fund calculated including certain fund
expenses.
HISTORICAL FUND RESULTS. The following table shows the fund's total
return for the fiscal period ended November 1998 .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
AVERAGE CUMULATIVE
ANNUAL TOTAL TOTAL RETURNS
RETURNS
ONE FIVE TEN ONE FIVE TEN
YEAR YEARS YEARS YEAR YEARS YEARS
CONVERTIBLE SECURITIES FUND % % % % % %
</TABLE>
[Note: If FMR had not reimbursed certain fund expenses during these
periods, the fund's total returns would have been lower.]
The following table shows the income and capital elements of the
fund's cumulative total return. The table compares the 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 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. The
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 the fund's
returns, do not include the effect of brokerage commissions or other
costs of investing.
During the 10-year period ended November 30, 1988, a
hypothetical $10,000 investment in Convertible Securities Fund
would have grown to $______, 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FIDELITY INDEXES
CONVERTIBLE
SECURITIES FUND
FISCAL YEAR 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 $ $ $ $ $ $ $
1997 $ $ $ $ $ $ $
1996 $ $ $ $ $ $ $
1995 $ $ $ $ $ $ $
1994 $ $ $ $ $ $ $
1993 $ $ $ $ $ $ $
1992 $ $ $ $ $ $ $
1991 $ $ $ $ $ $ $
1990 $ $ $ $ $ $ $
1989 $ $ $ $ $ $ $
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in the fund
on December 1, 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 $______. 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 $______ for dividends and $_____ 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. In addition to the mutual
fund rankings, the fund's performance may be compared to stock, bond,
and money market mutual fund performance indexes prepared by
Lipper or other organizations. When comparing these indexes, 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's performance may also be compared to that of the
benchmark index representing the universe of securities in which the
fund may invest. The total return of the index reflects
reinvestment of all dividends and capital gains paid by securities
included in the index. Unlike the fund's returns, however, the index's
returns do not reflect brokerage commissions, transaction fees, or
other costs of investing directly in the securities included in the
index .
Convertible Securities may compare its performance to that of the
Merrill Lynch All Convertible Securities Index. Merrill Lynch All
Convertible Securities Index is a market capitalization-weighted index
of domestic corporate convertible securities. To be included in the
index, bonds and preferred stocks must be convertible only to common
stock and have a market value or original par value of at least $50
million.
Convertible Securities may also compare its performance to that of the
First Boston Convertible Securities Index, a market
capitalization-weighted index of over 250 convertible bonds and
preferred stocks rated B- or above. To be included in the index,
convertible bonds must have an original par value of at least $50
million and preferred stocks must have a minimum of 500,000 shares
outstanding. The index also includes U.S. dollar-denominated Eurobonds
that have been issued by U.S. domiciled companies, are rated B- or
above, and have an original par value of at least $100 million.
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 bonds, Treasury bills, the U.S. rate of inflation (based on
the CPI ( Consumer Price Index ), and combinations of various
capital markets. The performance of these capital markets is based on
the returns of different indexes.
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 indexes 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.
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 November 30, 1998, FMR advised over $__ billion in
municipal fund assets, $__ in taxable fixed-income fund assets ,
$__ billion in money market fund assets, $___ billion in equity fund
assets, $__ billion in international fund assets, and $___ 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.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
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.
DISTRIBUTIONS AND TAXES
DIVIDENDS. A portion of the 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 the fund may earn other types of income, such as
interest, short-term capital gains, and non-qualifying dividends, the
percentage of dividends from the fund that qualifies for the deduction
generally will be less than 100%. A portion of the fund's dividends
derived from certain U.S. Government securities and securities
of certain other investment companies may be exempt from state and
local taxation.
C APITAL GAINS DISTRIBUTIONS. The fund's capital gains distributions
are federally taxable to shareholders at a rate based generally on the
length of time the securities on which the gain was realized were
held, regardless of the length of time those shares on which the
distribution is received have been held.
[As of November 30, 1998, the fund had a capital loss
carryforward aggregating approximately $____. This loss carryforward,
of which $___, $___, and $___will expire on November 30, 199_, ____,
and ____ , respectively, is available to offset future capital gains.]
RETURNS OF CAPITAL. If the fund's distributions exceed its
taxable income and capital gains realized during a taxable year, all
or a portion of the distributions made in the same taxable year may be
recharacterized as a return of capital to shareholders. A return of
capital distribution will generally not be taxable, but will reduce
each shareholder's cost basis in the fund and result in a higher
reported capital gain or lower reported capital loss when those shares
on which the distribution was received are sold.
FOREIGN TAX CREDIT OR DEDUCTION. Foreign governments may
withhold taxes on dividends and interest earned by the fund
with respect to foreign securities. Foreign governments may also
impose taxes on other payments or gains with respect to foreign
securities. Because the 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 be eligible to claim a foreign tax credit or deduction on
their federal income tax returns with respect to foreign taxes
withheld.
TAX STATUS OF THE FUND. The fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal
Revenue Code 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.
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. I t is up to you or your tax preparer to determine
whether the sale of shares of the fund resulted in a capital gain or
loss or other tax consequence to you. 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.
TRUSTEES AND OFFICERS
The Trustees, Members of the Advisory Board, and executive officers of
the trust are listed below. The Board of Trustees governs the fund and
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. 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 or its affiliates. The business
address of each Trustee, Member of the Advisory Board, and officer who
is an "interested person" (as defined in the 1940 Act) 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 ( 66 ), Trustee. Prior to her retirement in
September 1991, Mrs. Davis was the Senior Vice President of Corporate
Affairs of Avon Products, Inc. She is currently a Director of
BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores),
and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she is a member of
the President's Advisory Council of The University of Vermont School
of Business Administration.
ROBERT M. GATES ( 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 (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 ( 66 ), 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 ( 65 ), 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), 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 ( 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).
RICHARD A. SPILLANE, JR. ( 47 ), is Vice President of certain
Equity Funds and Senior Vice President of FMR (1997). Since joining
Fidelity, Mr. Spillane is Chief Investment Officer for Fidelity
International, Limited. Prior to that position, Mr. Spillane served as
Director of Research.
DAVID FELMAN (33), is Vice President of Fidelity Convertible
Securities Fund (1998). Prior to his current responsibilities, Mr.
Felman served as a portfolio manager, portfolio assistant and analyst
for a variety of Fidelity funds.
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).
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).
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 for the fiscal year ended November 30, 1998, or
calendar year ended December 31, 1997, as applicable.
COMPENSATION
TABLE
TRUSTEES AGGREGATE TOTAL
AND COMPENSATION COMPENSATION
MEMBERS OF THE FROM FROM THE
ADVISORY BOARD CONVERTIBLE FUND COMPLEX*
SECURITIES [B,]C A
[,+]
J. GARY BURKHEAD ** $ 0 $ 0
RALPH F. COX $ $ 214,500
PHYLLIS BURKE DAVIS $ $ 210,000
ROBERT M. GATES *** $ $176,000
EDWARD C. JOHNSON 3D ** $ 0 $ 0
E. BRADLEY JONES $ $ 211,500
DONALD J. KIRK $ $ 211,500
PETER S. LYNCH ** $ 0 $ 0
WILLIAM O. MCCOY**** $ $ 214,500
GERALD C. MCDONOUGH $ $ 264,500
MARVIN L. MANN $ $ 214,500
ROBERT C. POZEN** $ 0 $ 0
THOMAS R. WILLIAMS $ $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.
[*** Mr. Gates was elected to the Board of Trustees on
November 18, 1998 .]
[**** Mr. McCoy was elected to the Board of Trustees on
November 18, 1998 .]
A Compensation figures include cash, amounts required to be deferred,
and may include amounts deferred at the election of Trustees. For the
calendar year ended December 31, 1997, the Trustees accrued required
deferred compensation from the funds as follows: Ralph F. Cox,
$75,000; Phyllis Burke Davis, $75,000; Robert M. Gates, $62,500; E.
Bradley Jones, $75,000; Donald J. Kirk, $75,000; William O. McCoy,
$75,000; Gerald C. McDonough, $87,500; Marvin L. Mann, $75,000; and
Thomas R. Williams, $75,000. Certain of the non-interested Trustees
elected voluntarily to defer a portion of their compensation as
follows : Ralph F. Cox, $53,699; Marvin L. Mann, $53,699; and
Thomas R. Williams, $62,462.
[B Compensation figures inc lude cash, and may include amounts
required to be deferred and amounts deferred at the election of
Trustees.]
[C The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $__; Phyllis Burke Davis, $__;
Robert M. Gates, $__; E. Bradley Jones, $__; Donald J. Kirk, $__;
William O. McCoy, $__; Gerald C. McDonough, $__; Marvin L. Mann, $__;
and Thomas R. Williams, $__.]
[F Certain of the non-interested Trustees' aggregate compensation
from the fund includes accrued voluntary deferred compensation as
follows: [____, ____, ____.]
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 November 30, 1998, approximately __% of the fund's total
outstanding shares was held by [FMR] [[and] [an] FMR affiliate[s]].
FMR Corp. is the ultimate parent company of [FMR] [[and] [this/these]
FMR affiliate[s]]. By virtue of his ownership interest in FMR Corp.,
as described in the "Control of Investment Adviser" section on page
___, Mr. Edward C. Johnson 3d, President and Trustee of the fund, may
be deemed to be a beneficial owner of these shares. As of the above
date, with the exception of Mr. Johnson 3d's deemed ownership of the
fund's shares, the Trustees, Members of the Advisory Board, and
officers of the fund owned, in the aggregate, less than __% of the
fund's total outstanding shares.]
[As of November 30, 1998, the Trustees, Members of the Advisory
Board, and officers of the fund owned, in the aggregate, less than __%
of the fund's total outstanding shares.]
[As of November 30, 1998 , the following owned of record or
beneficially 5% or more (up to and including 25%) of the fund's
outstanding shares:]
[As of November 30, 1998, approximately ____% of the fund's total
outstanding shares were held by ____.]
[A shareholder owning of record or beneficially more than 25% of a
fund's outstanding shares may be considered a controlling person. That
shareholder's vote could have a more significant effect on matters
presented at a shareholders' meeting than votes of other
shareholders.]
CONTROL OF INVESTMENT ADVISERS
FMR Corp., organized in 1972, is the ultimate parent company of
FMR, FMR U.K. and FMR Far East. 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 investment 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.
MANAGEMENT CONTRACT
The 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
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, 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
basic fee, which is the sum of a group fee rate and an individual fund
fee rate, and a performance adjustment based on a comparison of the
fund's performance to a specified securities index .
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GROUP FEE RATE EFFECTIVE ANNUAL FEE
SCHEDULE 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
</TABLE>
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 left. For example, the effective annual fee
rate at $___ billion of group net assets-the approximate level for
November 1998 -was __%, which is the weighted average of the
respective fee rates for each level of group net assets up to $__
billion.
The fund's individual fund fee rate is 0.20%. Based on the average
group net assets of the funds advised by FMR for November 1998 ,
the fund's annual basic fee rate would be calculated as follows:
GROUP FEE RATE INDIVIDUAL FUND FEE RATE BASIC FEE RATE
0.___% + 0.20% = 0.___%
One-twelfth of the basic fee rate is applied to the fund's average net
assets for the month, giving a dollar amount which is the fee for that
month.
COMPUTING THE PERFORMANCE ADJUSTMENT. As a general matter, the
basic fee for the fund is subject to upward or downward adjustment,
depending upon whether, and to what extent, the fund's investment
performance for the performance period exceeds, or is exceeded by, the
record of a specified securities index over the same period. The
performance period consists of the most recent month plus the previous
35 months.
On November 18, 1998, shareholders approved an amendment to the
fund's management contract that changed the comparative securities
index used to calculate the performance adjustment from the Merrill
Lynch Convertible Securities Ex-Mandatory Index (formerly know as the
Merrill Lynch Convertible Securities Index) (Prior Index) to the
Merrill Lynch All Convertible Securities Index (Current Index). The
amendment became effective on December 1, 1998. Under the terms of the
amended contract, the Current Index is being implemented on a
prospective basis. Because performance adjustments are based on a
rolling 36 month measurement period, the Current Index will not be
fully implemented until the expiration of a transition period that
commenced with the amendment's effectiveness. During this transition
period, the fund's performance will be compared to a 36 month blended
index return that reflects the performance of the Current Index for
the portion of the 36 month performance measurement period occurring
on and after December 1, 1998 and the performance of the Prior Index
for the remainder of the measurement period. For example, the
performance adjustment for December 1998 would be calculated by
comparing the fund's performance to a blended index return using the
Prior Index's performance for the first 35 months of the measurement
period and the Current Index's performance for the 36th month of the
measurement period. For the following 35 months, an additional month
of the Current Index's performance and one less month of the Prior
Index's performance would be used in the calculation. At the
conclusion of the transition period, the performance of the Prior
Index would be eliminated from the performance adjustment calculation,
and the calculation would include only the performance of the Current
Index.
Each percentage point of difference, calculated to the nearest 0.01%
(up to a maximum difference of (plus/minus)7.50) is multiplied by a
performance adjustment rate of 0.02%.
The performance comparison is made at the end of each month. One
twelfth (1/12) of this rate is then applied to the fund's average net
assets throughout the month , giving a dollar amount
which will be added to (or subtracted from) the basic fee.
The maximum annualized adjustment rate is (plus/minus)0.15% of the
fund's average net assets over the performance period.
The fund's performance is calculated based on change in NAV. For
purposes of calculating the performance adjustment, any dividends or
capital gain distributions paid by the fund are treated as if
reinvested in that fund' s shares at the NAV as of the record
date for payment. The records of the Prior and Current Indexes
are based on change in value and each is adjusted for any cash
distributions from the companies whose securities compose the Index.
Because the adjustment to the basic fee is based on the fund's
performance compared to the blended investment records
of the Prior and Current Indexes, the controlling factor is not
whether the fund's performance is up or down per se, but whether it is
up or down more or less than the blended records of the Indexes.
Moreover, the comparative investment performance of the fund is based
solely on the relevant performance period without regard to the
cumulative performance over a longer or shorter period of time.
For the fiscal years ended November 30, 1998, 1997, and 1996,
the fund paid FMR management fees of $_______, $___________ and
$___________, respectively. The amount of these management fees
include both the basic fee and the amount of the performance
adjustment, if any. [For the fiscal year ended November 30, 1997, the
downward performance adjustments amounted to $____ , $____, and
$_____, respectively./For the fiscal years ended November 30, 1996 the
upward performance adjustments amounted to $______ , $_______, and
$_________, 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.
SUB-ADVISERS. On behalf of the 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 the fund, FMR may also grant investment management
authority as well as the authority to buy and sell securities if FMR
believes it would be beneficial to the fund.
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 the 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
(including any performance adjustment) with respect to the fund's
average net assets managed by the sub-adviser on a discretionary
basis.
For providing discretionary investment management and executing
portfolio transactions, the sub-advisers are compensated as
follows:
(small solid bullet) FMR pays FMR U.K. and FMR Far East a fee equal
to 50% of its monthly management fee (including any performance
adjustment) with respect to the 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.
FISCAL YEAR ENDED
NOVEMBER FMR U.K. FMR FAR EAST
1998 $ $
1997 $ $
1996 $ $
[For discretionary investment management and execution of portfolio
transactions, fees paid to the sub-advisers for the past three fiscal
years are shown in the table below.]
FISCAL YEAR ENDED
NOVEMBER FMR U.K. FMR FAR EAST FIIA FIIA(U.K.)L FIJ
1998 $ $ $ $ $
1997 $ $ $ $ $
1996 $ $ $ $ $
DISTRIBUTION SERVICES
The fund has entered into a distribution agreement with FDC, an
affiliate of FMR. 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.
The Trustees have approved a Distribution and Service Plan on behalf
of the fund (the Plan) 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, allows the fund and FMR to incur
certain expenses that might be considered to constitute direct
or 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 providing services intended to
result in the sale of shares and/or shareholder support services.
In addition, the Plan provides that FMR, directly or through FDC, may
pay intermediaries, such as banks, broker-dealers and other
service-providers, that provide those services. Currently, the
Board of Trustees has authorized such payments for Fund shares.
[Payments made by FMR either directly or through FDC to
intermediaries for the fiscal year ended November 1998 amounted to
$____ for the fund.]
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 or stabilization of cash flows 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.
TRANSFER AND SERVICE AGENT AGREEMENTS
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.
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 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 .0600%
of the first $500 million of average net assets and .0300% 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 fiscal years ended November 30 1998, 1997, and 1996,
the fund paid FSC pricing and bookkeeping fees, including
reimbursement for related out-of-pocket expenses, of $____, $____, and
$____, 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 November, 1998, 1997, and 1996, the
fund paid securities lending fees of $__, $__, and $__, respectively.]
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Convertible Securities Fund is a fund of
Fidelity Financial Trust, an open-end management investment company
organized as a Massachusetts business trust on October 20, 1982.
Currently, there are three funds in the trust: Fidelity Convertible
Securities Fund, Fidelity Equity-Income II Fund, and Fidelity
Retirement Growth Fund. The Trustees are permitted to create
additional funds in the trust.
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 to the rights of creditors, are allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets
of each fund in the trust shall be charged with the
liabilities and expenses attributable to such fund. Any general
expenses of the trust shall be allocated between or among any one or
more of the funds.
SHAREHOLDER LIABILITY. The trust is an entity 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 contains an express disclaimer of
shareholder liability for the debts, liabilities, obligations, and
expenses of the trust or fund. 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 relating to the trust or to a fund shall include
a provision limiting the obligations created thereby to the trust or
to one or more funds and its or their assets. The Declaration of Trust
further provides that shareholders of a fund shall not have a claim on
or right to any assets belonging to any other fund.]
The Declaration of Trust provides for indemnification out of each
fund's property of any shareholder or former shareholder held
personally liable for the obligations of the fund solely by reason
of his or her being or having been a shareholder and not because of
his or her acts or omissions or for some other reason. 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.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you are entitled to one vote for
each dollar of net asset value that you own. The voting rights of
shareholders can be changed only by a shareholder vote. Shares may be
voted in the aggregate, by fund and by class.
The shares have no preemptive or conversion rights. Shares are fully
paid and nonassessable, except as set forth under the heading
"Shareholder Liability" above.
[The trust or any of its funds may be terminated upon the sale of
its assets to, or merger with, another open-end management investment
company or series thereof, or upon liquidation and distribution of its
assets. Generally, the merger of the trust or a fund with another
entity or the sale of substantially all of the assets of the trust or
a fund to another entity requires approval by a vote of shareholders
of the trust or the fund. The Trustees may, however, reorganize or
terminate the trust or any of its funds without prior shareholder
approval. In the event of the dissolution or liquidation of the trust,
shareholders of each of its funds are entitled to receive the
underlying assets of such fund available for distribution. In the
event of the dissolution or liquidation of a fund, shareholders of
that fund are entitled to receive the underlying assets of the fund
available for distribution.]
CUSTODIAN. Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts, 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 Bank
of New York and The Chase Manhattan Bank, each headquartered in New
York, also may serve as special purpose custodians of certain assets
in connection with repurchase agreement transactions.
FMR, its officers and directors, its affiliated companies, and members
of 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. The Boston branch of the fund's custodian leases
its office space from an affiliate of FMR at a lease payment which,
when entered into, was consistent with prevailing market rates.
Transactions that have occurred to date include mortgages and personal
and general business loans. In the judgment of FMR, the terms and
conditions of those transactions were not influenced by existing or
potential custodial or other fund relationships.
AUDITOR. ____________serves as the trust'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 November 30, 1998 , and report of the auditor,
are included in the fund's Annual Report and are incorporated herein
by reference.
APPENDIX
FIDELITY, FIDELITY INVESTMENTS & (PYRAMID) DESIGN, FIDELITY
INVESTMENTS AND FIDELITY FOCUS ARE REGISTERED TRADEMARKS OF FMR CORP.
THE THIRD PARTY MARKS APPEARING ABOVE ARE THE MARKS OF THEIR
RESPECTIVE OWNERS.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 33 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 23rd day
of November 1998.
FIDELITY FINANCIAL 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.
<TABLE>
<CAPTION>
<S> <C> <C>
(SIGNATURE) (TITLE) (DATE)
/S/EDWARD C. JOHNSON 3D (DAGGER) PRESIDENT AND TRUSTEE NOVEMBER 23, 1998
EDWARD C. JOHNSON 3D (PRINCIPAL EXECUTIVE OFFICER)
/S/RICHARD A. SILVER TREASURER NOVEMBER 23, 1998
RICHARD A. SILVER
/S/ROBERT C. POZEN TRUSTEE NOVEMBER 23, 1998
ROBERT C. POZEN
/S/RALPH F. COX * TRUSTEE NOVEMBER 23, 1998
RALPH F. COX
/S/PHYLLIS BURKE DAVIS * TRUSTEE NOVEMBER 23, 1998
PHYLLIS BURKE DAVIS
/S/ROBERT M. GATES ** TRUSTEE NOVEMBER 23, 1998
ROBERT M. GATES
/S/E. BRADLEY JONES * TRUSTEE NOVEMBER 23, 1998
E. BRADLEY JONES
/S/DONALD J. KIRK * TRUSTEE NOVEMBER 23, 1998
DONALD J. KIRK
/S/PETER S. LYNCH * TRUSTEE NOVEMBER 23, 1998
PETER S. LYNCH
/S/MARVIN L. MANN * TRUSTEE NOVEMBER 23, 1998
MARVIN L. MANN
/S/WILLIAM O. MCCOY * TRUSTEE NOVEMBER 23, 1998
WILLIAM O. MCCOY
/S/GERALD C. MCDONOUGH * TRUSTEE NOVEMBER 23, 1998
GERALD C. MCDONOUGH
/S/THOMAS R. WILLIAMS * TRUSTEE NOVEMBER 23, 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
FINANCIAL TRUST
PART C - OTHER INFORMATION
Item 23. Exhibits
(a) Form of Amended and Restated Declaration of Trust is filed
herein as Exhibit (a).
(b) Bylaws of the Trust, as amended and dated May 19, 1994, are
incorporated herein by reference to Exhibit 2(a) to Fidelity Union
Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(c) Not Applicable.
(d) (1) Form of Management Contract, between Fidelity Equity-Income
II Fund and Fidelity Management & Research Company is filed herein as
Exhibit d(1).
(2) Form of Management Contract, between Fidelity Retirement Growth
Fund and Fidelity Management & Research Company is filed herein as
Exhibit d(2).
(3) Form of Management Contract, between Fidelity Convertible
Securities Fund and Fidelity Management & Research Company is filed
herein as Exhibit d(3).
(4) Sub-Advisory Agreement, dated December 1, 1993, between Fidelity
Management & Research (Far East) Inc. and Fidelity Management &
Research Company, on behalf of Fidelity Convertible Securities Fund,
is incorporated herein by reference to Exhibit 5(d) of Post-Effective
Amendment No. 28.
(5) Sub-Advisory Agreement, dated December 1, 1993, between Fidelity
Management & Research (U.K.) Inc. and Fidelity Management & Research
Company, on behalf of Fidelity Convertible Securities Fund, is
incorporated herein by reference to Exhibit 5(e) of Post-Effective
Amendment No. 28.
(6) Sub-Advisory Agreement, dated December 1, 1993, between Fidelity
Management & Research (Far East) Inc. and Fidelity Management &
Research Company, on behalf Fidelity Retirement Growth Fund, is
incorporated herein by reference to Exhibit 5(f) of Post-Effective
Amendment No. 28.
(7) Sub-Advisory Agreement, dated December 1, 1993, between Fidelity
Management & Research (U.K.) Inc. and Fidelity Management & Research
Company, on behalf of Fidelity Retirement Growth Fund, is incorporated
herein by reference to Exhibit 5(g) of Post-Effective Amendment No.
28.
(8) Sub-Advisory Agreement, dated December 1, 1993, between
Fidelity Management & Research (Far East) Inc. and Fidelity Management
& Research Company, on behalf of Fidelity Equity-Income II Fund, is
incorporated herein by reference to Exhibit 5(h) of Post-Effective
Amendment No. 28.
(9) Sub-Advisory Agreement, dated December 1, 1993, between Fidelity
Management & Research (U.K.) Inc. and Fidelity Management & Research
Company, on behalf of Fidelity Equity-Income II Fund, is incorporated
herein by reference to Exhibit 5(i) of Post-Effective Amendment No.
28.
(e) (1) General Distribution Agreement, dated April 1, 1987, between
Fidelity Freedom Fund (currently known as Fidelity Retirement Growth
Fund) and Fidelity Distributors Corporation is incorporated herein by
reference to Exhibit 6(a) of Post-Effective Amendment No. 10.
(2) General Distribution Agreement, dated December 29, 1986, between
Fidelity Convertible Securities Fund and Fidelity Distributors
Corporation is incorporated herein by reference to Exhibit 6(b) of
Post-Effective Amendment No. 28.
(3) Amendment to the General Distribution Agreement, dated January
1, 1988, between Fidelity Freedom Fund (currently known as Fidelity
Retirement Growth Fund) and Fidelity Distributors Corporation is
incorporated herein by reference to Exhibit 6(c) of Post-Effective
Amendment No. 11.
(4) Amendment to the General Distribution Agreement, dated January
1, 1988, between Fidelity Convertible Securities Fund and Fidelity
Distributors Corporation is incorporated herein by reference to
Exhibit 6(d) of Post-Effective Amendment No. 28.
(5) General Distribution Agreement, dated August 20, 1990, between
Fidelity Equity-Income II Fund and Fidelity Distributors Corporation
is incorporated herein by reference to Exhibit 6(e) of Post-Effective
Amendment No. 28.
(6) 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-Amendment No. 61 (File No.
2-58774).
(f) (1) 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.
(2) 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.
(g) (1) Custodian Agreement and Appendix C, dated September 1, 1994,
between Brown Brothers Harriman & Company and Fidelity Financial
Trust, on behalf of Fidelity Retirement Growth Fund and Fidelity
Convertible Securities Fund, is incorporated herein by reference to
Exhibit 8(a) of Fidelity Commonwealth Trust's Post-Effective Amendment
No. 56 (File No. 2-52322).
(2) Appendix A, dated March 19, 1998, to the Custodian Agreement,
dated September 1, 1994, between Brown Brothers Harriman & Company and
Fidelity Financial Trust, on behalf of Fidelity Retirement Growth Fund
and Fidelity Convertible Securities Fund, is incorporated herein by
reference to Exhibit 8(e) of Fidelity Puritan Trust's Post-Effective
Amendment No. 116 (File No. 2-11884).
(3) Appendix B, dated June 18, 1998, to the Custodian Agreement,
dated September 1, 1994, between Brown Brothers Harriman & Company and
Fidelity Financial Trust, on behalf of Fidelity Retirement Growth Fund
and Fidelity Convertible Securities Fund, is incorporated herein by
reference to Exhibit 8(f) of Fidelity Puritan Trust's Post-Effective
Amendment No. 116 (File No. 2-11884).
(4) Custodian Agreement and Appendix C, dated August 1, 1994,
between The Chase Manhattan Bank, N.A. and Fidelity Financial Trust,
on behalf of Fidelity Equity-Income II Fund, is incorporated herein by
reference to Exhibit 8(a) of Fidelity Investment Trust's
Post-Effective Amendment No. 59 (File No. 2-90649).
(5) Appendix A, dated February 26, 1998, to the Custodian Agreement,
dated August 1, 1994, between The Chase Manhattan Bank, N.A. and
Fidelity Financial Trust, on behalf of Fidelity Equity-Income II Fund,
is incorporated herein by reference to Exhibit 8(b) of Fidelity
Puritan Trust's Post-Effective Amendment No. 116 (File No. 2-11884).
(6) Appendix B, dated June 18, 1998, to the Custodian Agreement,
dated August 1, 1994, between The Chase Manhattan Bank, N.A. and
Fidelity Financial Trust, on behalf of Fidelity Equity-Income II Fund,
is incorporated herein by reference to Exhibit 8(c) of Fidelity
Puritan Trust's Post-Effective Amendment No. 116 (File No. 2-11884).
(7) 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.
(8) 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.
(9) 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.
(10) 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.
(11) 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.
(12) 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.
(h) Not applicable.
(i) Not applicable.
(j) Not applicable.
(k) Not applicable.
(l) Not applicable.
(m) (1) Distribution and Service Plan between Fidelity Freedom Fund
(currently known as Fidelity Retirement Growth Fund) and Fidelity
Distributors Corporation is incorporated herein by reference to
Exhibit 15(a) of Post-Effective Amendment No. 31.
(2) Distribution and Service Plan between Fidelity Convertible
Securities Fund and Fidelity Distributors Corporation is incorporated
herein by reference to Exhibit 15(b) of Post-Effective Amendment No.
28.
(3) Distribution and Service Plan between Fidelity Equity-Income II
Fund and Fidelity Distributors Corporation is incorporated herein by
reference to Exhibit 15(c) of Post-Effective Amendment No. 32.
(n) Not applicable.
(o) Not applicable.
Item 24. Trusts Controlled by or under Common Control with this Trust
The Board of Trustees of the Trust is the same as the board of other
Fidelity funds, each of which has Fidelity Management & Research
Company, or an affiliate, as its investment adviser. In addition, the
officers of the Trust are substantially identical to those of the
other Fidelity funds. Nonetheless, the Trust takes the position that
it is not under common control with other Fidelity funds because the
power residing in the respective boards and officers arises as the
result of an official position with the respective trusts.
Item 25. 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 Trust 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 or her in connection with any
claim, action, suit or proceeding in which he or she is involved by
virtue of his or her service as a trustee or officer and against any
amount incurred in settlement thereof. Indemnification will not be
provided to a person adjudged by a court or other adjudicatory body to
be liable to the Trust or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of his
or her duties (collectively, "disabling conduct"), or not to have
acted in good faith in the reasonable belief that his or her action
was in the best interest of the Trust. In the event of a settlement,
no indemnification may be provided unless there has been a
determination, as specified in the Declaration of Trust, that the
officer or trustee did not engage in disabling conduct.
Pursuant to Section 11 of the Distribution Agreement, the Trust
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 (including the
reasonable cost of investigating or defending any alleged loss,
liability, claim, damages, or expense and reasonable counsel fees
incurred in connection therewith) 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
Trust (as from time to time amended) included an untrue statement of a
material fact or omitted to state a material fact required to be
stated or necessary in order to make the statements not misleading
under the 1933 Act, or any other statute or the common law. However,
the Trust 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
Trust by or on behalf of the Distributor. In no case is the indemnity
of the Trust in favor of the Distributor or any person indemnified to
be deemed to protect the Distributor or any person against any
liability to the Issuer or its security holders to which the
Distributor or such person would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
Pursuant to the agreement by which Fidelity Service Company, Inc.
("FSC") is appointed transfer agent, the Trust agrees to indemnify and
hold FSC 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 Trust, including by a shareholder, which names FSC and/or the
Trust as a party and is not based on and does not result from FSC's
willful misfeasance, bad faith or negligence or reckless disregard of
duties, and arises out of or in connection with FSC's performance
under the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent
contributed to by FSC's willful misfeasance, bad faith or negligence
or reckless disregard of its duties) which results from the negligence
of the Trust, or from FSC's acting upon any instruction(s) reasonably
believed by it to have been executed or communicated by any person
duly authorized by the Trust, or as a result of FSC's acting in
reliance upon advice reasonably believed by FSC to have been given by
counsel for the Trust, or as a result of FSC'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 26. 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 27. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for
all funds advised by FMR or an affiliate.
(B)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS* WITH UNDERWRITER WITH FUND
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 28. 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 custodian: The Chase Manhattan Bank, 1Chase
Manhattan Plaza, New York, NY or Brown Brothers Harriman & Co., 40
Water Street, Boston, MA.
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
EXHIBIT D(1)
FORM OF
MANAGEMENT CONTRACT
BETWEEN
FIDELITY FINANCIAL TRUST:
FIDELITY EQUITY-INCOME II FUND
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
AMENDMENT made this 1st day of December 1998, by and between Fidelity
Financial Trust, a Massachusetts business trust which may issue one or
more series of shares of beneficial interest (hereinafter called the
"Fund"), on behalf of Fidelity Equity-Income II Fund (hereinafter
called the "Portfolio"), and Fidelity Management & Research Company, a
Massachusetts corporation (hereinafter called the "Adviser") as set
forth in its entirety below.
Required authorization and approval by shareholders and Trustees
having been obtained, the Fund, on behalf of the Portfolio, and the
Adviser hereby consent, pursuant to Paragraph 6 of the existing
Management Contract dated December 1, 1993, to a modification of said
Contract in the manner set forth below. The Amended Management
Contract shall, when executed by duly authorized officers of the Fund
and Adviser, take effect on December 1, 1998.
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the
supervision of the Fund's Board of Trustees, direct the investments of
the Portfolio in accordance with the investment objective, policies
and limitations as provided in the Portfolio's Prospectus or other
governing instruments, as amended from time to time, the Investment
Company Act of 1940 and rules thereunder, as amended from time to time
(the "1940 Act"), and such other limitations as the Portfolio may
impose by notice in writing to the Adviser. The Adviser shall also
furnish for the use of the Portfolio office space and all necessary
office facilities, equipment and personnel for servicing the
investments of the Portfolio; and shall pay the salaries and fees of
all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all
personnel of the Fund or the Adviser performing services relating to
research, statistical and investment activities. The Adviser is
authorized, in its discretion and without prior consultation with the
Portfolio, to buy, sell, lend and otherwise trade in any stocks, bonds
and other securities and investment instruments on behalf of the
Portfolio. The investment policies and all other actions of the
Portfolio are and shall at all times be subject to the control and
direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for
the performance by its affiliates of) the management and
administrative services necessary for the operation of the Fund. The
Adviser shall, subject to the supervision of the Board of Trustees,
perform various services for the Portfolio, including but not limited
to: (i) providing the Portfolio with office space, equipment and
facilities (which may be its own) for maintaining its organization;
(ii) on behalf of the Portfolio, supervising relations with, and
monitoring the performance of, custodians, depositories, transfer and
pricing agents, accountants, attorneys, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be
necessary or desirable; (iii) preparing all general shareholder
communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered,
maintaining the registration and qualification of the Portfolio's
shares under federal and state law; and (vii) investigating the
development of and developing and implementing, if appropriate,
management and shareholder services designed to enhance the value or
convenience of the Portfolio as an investment vehicle.
The Adviser shall also furnish such reports, evaluations, information
or analyses to the Fund as the Fund's Board of Trustees may request
from time to time or as the Adviser may deem to be desirable. The
Adviser shall make recommendations to the Fund's Board of Trustees
with respect to Fund policies, and shall carry out such policies as
are adopted by the Trustees. The Adviser shall, subject to review by
the Board of Trustees, furnish such other services as the Adviser
shall from time to time determine to be necessary or useful to perform
its obligations under this Contract.
(c) The Adviser shall place all orders for the purchase and sale of
portfolio securities for the Portfolio's account with brokers or
dealers selected by the Adviser, which may include brokers or dealers
affiliated with the Adviser. The Adviser shall use its best efforts to
seek to execute portfolio transactions at prices which are
advantageous to the Portfolio and at commission rates which are
reasonable in relation to the benefits received. In selecting brokers
or dealers qualified to execute a particular transaction, brokers or
dealers may be selected who also provide brokerage and research
services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Portfolio and/or the other
accounts over which the Adviser or its affiliates exercise investment
discretion. The Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess
of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser determines in
good faith that such amount of commission is reasonable in relation to
the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either
that particular transaction or the overall responsibilities which the
Adviser and its affiliates have with respect to accounts over which
they exercise investment discretion. The Trustees of the Fund shall
periodically review the commissions paid by the Portfolio to determine
if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor.
The Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of
the Fund are or may be or become interested in the Adviser as
directors, officers or otherwise and that directors, officers and
stockholders of the Adviser are or may be or become similarly
interested in the Fund, and that the Adviser may be or become
interested in the Fund as a shareholder or otherwise.
3. The Adviser will be compensated on the following basis for the
services and facilities to be furnished hereunder. The Adviser shall
receive a monthly management fee, payable monthly as soon as
practicable after the last day of each month, composed of a Group Fee
and an Individual Fund Fee.
(a) Group Fee Rate. The Group Fee Rate shall be based upon the
monthly average of the net assets of the registered investment
companies having Advisory and Service or Management Contracts with the
Adviser (computed in the manner set forth in the Fund's Declaration of
Trust or other organizational document) determined as of the close of
business on each business day throughout the month. The Group Fee Rate
shall be determined on a cumulative basis pursuant to the following
schedule:
AVERAGE NET ASSETS ANNUALIZED FEE RATE (FOR EACH LEVEL)
0 - $ 3 BILLION .5200%
3 - 6 .4900
6 - 9 .4600
9 - 12 .4300
12 - 15 .4000
15 - 18 .3850
18 - 21 .3700
21 - 24 .3600
24 - 30 .3500
30 - 36 .3450
36 - 42 .3400
42 - 48 .3350
48 - 66 .3250
66 - 84 .3200
84 - 102 .3150
102 - 138 .3100
138 - 174 .3050
174 - 210 .3000
210 - 246 .2950
246 - 282 .2900
282 - 318 .2850
318 - 354 .2800
354 - 390 .2750
390 - 426 .2700
426 - 462 .2650
462 - 498 .2600
498 - 534 .2550
OVER - 534 .2500
(b) Individual Fund Fee Rate. The Individual Fund Fee Rate shall be
.20%.
The sum of the Group Fee Rate, calculated as described above to the
nearest millionth, and the Individual Fund Fee Rate shall constitute
the Annual Management Fee Rate. One-twelfth of the Annual Management
Fee Rate shall be applied to the average of the net assets of the
Portfolio (computed in the manner set forth in the Fund's Declaration
of Trust or other organizational document) determined as of the close
of business on each business day throughout the month.
(c) In case of termination of this Contract during any month, the
fee for that month shall be reduced proportionately on the basis of
the number of business days during which it is in effect, and the fee
computed upon the average net assets for the business days it is so in
effect for that month.
4. It is understood that the Portfolio will pay all its expenses,
which expenses payable by the Portfolio shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and
other costs in connection with the purchase or sale of securities and
other investment instruments; (iii) fees and expenses of the Fund's
Trustees other than those who are "interested persons" of the Fund or
the Adviser; (iv) legal and audit expenses; (v) custodian, registrar
and transfer agent fees and expenses; (vi) fees and expenses related
to the registration and qualification of the Fund and the Portfolio's
shares for distribution under state and federal securities laws; (vii)
expenses of printing and mailing reports and notices and proxy
material to shareholders of the Portfolio; (viii) all other expenses
incidental to holding meetings of the Portfolio's shareholders,
including proxy solicitations therefor; (ix) a pro rata share, based
on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management
Contracts with the Adviser, of 50% of insurance premiums for fidelity
and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing
Prospectuses and Statements of Additional Information and supplements
thereto; (xii) expenses of printing and mailing Prospectuses and
Statements of Additional Information and supplements thereto sent to
existing shareholders; and (xiii) such non-recurring or extraordinary
expenses as may arise, including those relating to actions, suits or
proceedings to which the Portfolio is a party and the legal obligation
which the Portfolio may have to indemnify the Fund's Trustees and
officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and
engage in other activities, provided, however, that such other
services and activities do not, during the term of this Contract,
interfere, in a material manner, with the Adviser's ability to meet
all of its obligations with respect to rendering services to the
Portfolio hereunder. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject
to liability to the Portfolio or to any shareholder of the Portfolio
for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security or other investment
instrument.
6. (a) Subject to prior termination as provided in sub-paragraph (d)
of this paragraph 6, this Contract shall continue in force until July
31, 1999 and indefinitely thereafter, but only so long as the
continuance after such date shall be specifically approved at least
annually by vote of the Trustees of the Fund or by vote of a majority
of the outstanding voting securities of the Portfolio.
(b) This Contract may be modified by mutual consent subject to the
provisions of Section 15 of the 1940 Act, as modified by or
interpreted by any applicable order or orders of the Securities and
Exchange Commission (the "Commission") or any rules or regulations
adopted by, or interpretative releases of, the Commission.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of
this paragraph 6, the terms of any continuance or modification of this
Contract must have been approved by the vote of a majority of those
Trustees of the Fund who are not parties to the Contract or interested
persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval.
(d) Either party hereto may, at any time on sixty (60) days' prior
written notice to the other, terminate this Contract, without payment
of any penalty, by action of its Trustees or Board of Directors, as
the case may be, or with respect to the Portfolio by vote of a
majority of the outstanding voting securities of the Portfolio. This
Contract shall terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Declaration of Trust
or other organizational document and agrees that the obligations
assumed by the Fund pursuant to this Contract shall be limited in all
cases to the Portfolio and its assets, and the Adviser shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Portfolio or any other Portfolios of the Fund. In
addition, the Adviser shall not seek satisfaction of any such
obligations from the Trustees or any individual Trustee. The Adviser
understands that the rights and obligations of any Portfolio under the
Declaration of Trust or other organizational document are separate and
distinct from those of any and all other Portfolios.
8. This Agreement shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Massachusetts, without giving
effect to the choice of laws provisions thereof.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, as now in effect or
as hereafter amended, and subject to such orders as may be granted by
the Commission.
IN WITNESS WHEREOF the parties have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.
[Signature lines omitted]
EXHIBIT D(1)
FORM OF
MANAGEMENT CONTRACT
BETWEEN
FIDELITY FINANCIAL TRUST:
FIDELITY RETIREMENT GROWTH FUND
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
AMENDMENT made this 1st day of December 1998, by and between Fidelity
Financial Trust, a Massachusetts business trust which may issue one or
more series of shares of beneficial interest (hereinafter called the
"Fund"), on behalf of Fidelity Retirement Growth Fund (hereinafter
called the "Portfolio"), and Fidelity Management & Research Company, a
Massachusetts corporation (hereinafter called the "Adviser") as set
forth in its entirety below.
Required authorization and approval by shareholders and Trustees
having been obtained, the Fund, on behalf of the Portfolio, and the
Adviser hereby consent, pursuant to Paragraph 6 of the existing
Management Contract dated December 1, 1993, to a modification of said
Contract in the manner set forth below. The Amended Management
Contract shall, when executed by duly authorized officers of the Fund
and Adviser, take effect on December 1, 1998.
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the
supervision of the Fund's Board of Trustees, direct the investments of
the Portfolio in accordance with the investment objective, policies
and limitations as provided in the Portfolio's Prospectus or other
governing instruments, as amended from time to time, the Investment
Company Act of 1940 and rules thereunder, as amended from time to time
(the "1940 Act"), and such other limitations as the Portfolio may
impose by notice in writing to the Adviser. The Adviser shall also
furnish for the use of the Portfolio office space and all necessary
office facilities, equipment and personnel for servicing the
investments of the Portfolio; and shall pay the salaries and fees of
all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all
personnel of the Fund or the Adviser performing services relating to
research, statistical and investment activities. The Adviser is
authorized, in its discretion and without prior consultation with the
Portfolio, to buy, sell, lend and otherwise trade in any stocks, bonds
and other securities and investment instruments on behalf of the
Portfolio. The investment policies and all other actions of the
Portfolio are and shall at all times be subject to the control and
direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for
the performance by its affiliates of) the management and
administrative services necessary for the operation of the Fund. The
Adviser shall, subject to the supervision of the Board of Trustees,
perform various services for the Portfolio, including but not limited
to: (i) providing the Portfolio with office space, equipment and
facilities (which may be its own) for maintaining its organization;
(ii) on behalf of the Portfolio, supervising relations with, and
monitoring the performance of, custodians, depositories, transfer and
pricing agents, accountants, attorneys, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be
necessary or desirable; (iii) preparing all general shareholder
communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered,
maintaining the registration and qualification of the Portfolio's
shares under federal and state law; and (vii) investigating the
development of and developing and implementing, if appropriate,
management and shareholder services designed to enhance the value or
convenience of the Portfolio as an investment vehicle.
The Adviser shall also furnish such reports, evaluations, information
or analyses to the Fund as the Fund's Board of Trustees may request
from time to time or as the Adviser may deem to be desirable. The
Adviser shall make recommendations to the Fund's Board of Trustees
with respect to Fund policies, and shall carry out such policies as
are adopted by the Trustees. The Adviser shall, subject to review by
the Board of Trustees, furnish such other services as the Adviser
shall from time to time determine to be necessary or useful to perform
its obligations under this Contract.
(c) The Adviser shall place all orders for the purchase and sale of
portfolio securities for the Portfolio's account with brokers or
dealers selected by the Adviser, which may include brokers or dealers
affiliated with the Adviser. The Adviser shall use its best efforts to
seek to execute portfolio transactions at prices which are
advantageous to the Portfolio and at commission rates which are
reasonable in relation to the benefits received. In selecting brokers
or dealers qualified to execute a particular transaction, brokers or
dealers may be selected who also provide brokerage and research
services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Portfolio and/or the other
accounts over which the Adviser or its affiliates exercise investment
discretion. The Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess
of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser determines in
good faith that such amount of commission is reasonable in relation to
the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either
that particular transaction or the overall responsibilities which the
Adviser and its affiliates have with respect to accounts over which
they exercise investment discretion. The Trustees of the Fund shall
periodically review the commissions paid by the Portfolio to determine
if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor.
The Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of
the Fund are or may be or become interested in the Adviser as
directors, officers or otherwise and that directors, officers and
stockholders of the Adviser are or may be or become similarly
interested in the Fund, and that the Adviser may be or become
interested in the Fund as a shareholder or otherwise.
3. The Adviser will be compensated on the following basis for the
services and facilities to be furnished hereunder. The Adviser shall
receive a monthly management fee, payable monthly as soon as
practicable after the last day of each month, composed of a Basic Fee
and a Performance Adjustment. The Performance Adjustment is added to
or subtracted from the Basic Fee depending on whether the Portfolio
experienced better or worse performance than the Standard & Poor's 500
Index (the "Index"). The Performance Adjustment is not cumulative. An
increased fee will result even though the performance of the Portfolio
over some period of time shorter than the performance period has been
behind that of the Index, and, conversely, a reduction in the fee will
be made for a month even though the performance of the Portfolio over
some period of time shorter than the performance period has been ahead
of that of the Index. The Basic Fee and the Performance Adjustment
will be computed as follows:
(a) Basic Fee Rate: The annual Basic Fee Rate shall be the sum of
the Group Fee Rate and the Individual Fund Fee Rate calculated to the
nearest millionth decimal place as follows:
(i) Group Fee Rate. The Group Fee Rate shall be based upon the
monthly average of the net assets of the registered investment
companies having Advisory and Service or Management Contracts with the
Adviser (computed in the manner set forth in the Fund's Declaration of
Trust or other organizational document) determined as of the close of
business on each business day throughout the month. The Group Fee Rate
shall be determined on a cumulative basis pursuant to the following
schedule:
AVERAGE NET ASSETS ANNUALIZED FEE RATE (FOR EACH LEVEL)
0 - $ 3 BILLION .5200%
3 - 6 .4900
6 - 9 .4600
9 - 12 .4300
12 - 15 .4000
15 - 18 .3850
18 - 21 .3700
21 - 24 .3600
24 - 30 .3500
30 - 36 .3450
36 - 42 .3400
42 - 48 .3350
48 - 66 .3250
66 - 84 .3200
84 - 102 .3150
102 - 138 .3100
138 - 174 .3050
174 - 210 .3000
210 - 246 .2950
246 - 282 .2900
282 - 318 .2850
318 - 354 .2800
354 - 390 .2750
390 - 426 .2700
426 - 462 .2650
462 - 498 .2600
498 - 534 .2550
OVER - 534 .2500
(ii) Individual Fund Fee Rate. The Individual Fund Fee Rate shall
be .30%.
(b) Basic Fee. One-twelfth of the Basic Fee Rate shall be applied to
the average of the net assets of the Portfolio (computed in the manner
set forth in the Fund's Declaration of Trust or other organizational
document) determined as of the close of business on each business day
throughout the month. The resulting dollar amount comprises the Basic
Fee.
(c) Performance Adjustment Rate: The Performance Adjustment Rate is
0.02% for each percentage point (the performance of the Portfolio and
the Index each being calculated to the nearest .01% that the
Portfolio's investment performance for the performance period was
better or worse than the record of the Index as then constituted. The
maximum performance adjustment rate is 0.20%.
The performance period will commence with the first day of the first
full month following the Portfolio's commencement of operations.
During the first eleven months of the performance period for the
Portfolio, there will be no performance adjustment. Starting with the
twelfth month of the performance period, the performance adjustment
will take effect. Following the twelfth month a new month will be
added to the performance period until the performance period equals 36
months. Thereafter the performance period will consist of the current
month plus the previous 35 months.
The Portfolio's investment performance will be measured by comparing
(i) the opening net asset value of one share of the Portfolio on the
first business day of the performance period with (ii) the closing net
asset value of one share of the Portfolio as of the last business day
of such period. In computing the investment performance of the
Portfolio and the investment record of the Index, distributions of
realized capital gains, the value of capital gains taxes per share
paid or payable on undistributed realized long-term capital gains
accumulated to the end of such period and dividends paid out of
investment income on the part of the Portfolio, and all cash
distributions of the securities included in the Index, will be treated
as reinvested in accordance with Rule 205-1 or any other applicable
rules under the Investment Advisers Act of 1940, as the same from time
to time may be amended.
(d) Performance Adjustment. One-twelfth of the annual Performance
Adjustment Rate will be applied to the average of the net assets of
the Portfolio (computed in the manner set forth in the Fund's
Declaration of Trust or other organizational document) determined as
of the close of business on each business day throughout the month and
the performance period.
(e) In case of termination of this Contract during any month, the
fee for that month shall be reduced proportionately on the basis of
the number of business days during which it is in effect for that
month. The Basic Fee Rate will be computed on the basis of and applied
to net assets averaged over that month ending on the last business day
on which this Contract is in effect. The amount of this Performance
Adjustment to the Basic Fee will be computed on the basis of and
applied to net assets averaged over the 36-month period ending on the
last business day on which this Contract is in effect provided that if
this Contract has been in effect less than 36 months, the computation
will be made on the basis of the period of time during which it has
been in effect.
4. It is understood that the Portfolio will pay all its expenses,
which expenses payable by the Portfolio shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and
other costs in connection with the purchase or sale of securities and
other investment instruments; (iii) fees and expenses of the Fund's
Trustees other than those who are "interested persons" of the Fund or
the Adviser; (iv) legal and audit expenses; (v) custodian, registrar
and transfer agent fees and expenses; (vi) fees and expenses related
to the registration and qualification of the Fund and the Portfolio's
shares for distribution under state and federal securities laws; (vii)
expenses of printing and mailing reports and notices and proxy
material to shareholders of the Portfolio; (viii) all other expenses
incidental to holding meetings of the Portfolio's shareholders,
including proxy solicitations therefor; (ix) a pro rata share, based
on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management
Contracts with the Adviser, of 50% of insurance premiums for fidelity
and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing
Prospectuses and Statements of Additional Information and supplements
thereto; (xii) expenses of printing and mailing Prospectuses and
Statements of Additional Information and supplements thereto sent to
existing shareholders; and (xiii) such non-recurring or extraordinary
expenses as may arise, including those relating to actions, suits or
proceedings to which the Portfolio is a party and the legal obligation
which the Portfolio may have to indemnify the Fund's Trustees and
officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and
engage in other activities, provided, however, that such other
services and activities do not, during the term of this Contract,
interfere, in a material manner, with the Adviser's ability to meet
all of its obligations with respect to rendering services to the
Portfolio hereunder. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject
to liability to the Portfolio or to any shareholder of the Portfolio
for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security or other investment
instrument.
6. (a) Subject to prior termination as provided in sub-paragraph (d)
of this paragraph 6, this Contract shall continue in force until July
31, 1999 and indefinitely thereafter, but only so long as the
continuance after such date shall be specifically approved at least
annually by vote of the Trustees of the Fund or by vote of a majority
of the outstanding voting securities of the Portfolio.
(b) This Contract may be modified by mutual consent subject to the
provisions of Section 15 of the 1940 Act, as modified by or
interpreted by any applicable order or orders of the Securities and
Exchange Commission (the "Commission") or any rules or regulations
adopted by, or interpretative releases of, the Commission.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of
this paragraph 6, the terms of any continuance or modification of this
Contract must have been approved by the vote of a majority of those
Trustees of the Fund who are not parties to the Contract or interested
persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval.
(d) Either party hereto may, at any time on sixty (60) days' prior
written notice to the other, terminate this Contract, without payment
of any penalty, by action of its Trustees or Board of Directors, as
the case may be, or with respect to the Portfolio by vote of a
majority of the outstanding voting securities of the Portfolio. This
Contract shall terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Declaration of Trust
or other organizational document and agrees that the obligations
assumed by the Fund pursuant to this Contract shall be limited in all
cases to the Portfolio and its assets, and the Adviser shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Portfolio or any other Portfolios of the Fund. In
addition, the Adviser shall not seek satisfaction of any such
obligations from the Trustees or any individual Trustee. The Adviser
understands that the rights and obligations of any Portfolio under the
Declaration of Trust or other organizational document are separate and
distinct from those of any and all other Portfolios.
8. This Agreement shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Massachusetts, without giving
effect to the choice of laws provisions thereof.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, as now in effect or
as hereafter amended, and subject to such orders as may be granted by
the Commission.
IN WITNESS WHEREOF the parties have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.
[Signature lines omitted]
EXHIBIT D(1)
FORM OF
MANAGEMENT CONTRACT
BETWEEN
FIDELITY FINANCIAL TRUST:
FIDELITY CONVERTIBLE SECURITIES FUND
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
AMENDMENT made this 1st day of December 1998, by and between Fidelity
Financial Trust, a Massachusetts business trust which may issue one or
more series of shares of beneficial interest (hereinafter called the
"Fund"), on behalf of Fidelity Convertible Securities Fund
(hereinafter called the "Portfolio"), and Fidelity Management &
Research Company, a Massachusetts corporation (hereinafter called the
"Adviser") as set forth in its entirety below.
Required authorization and approval by shareholders and Trustees
having been obtained, the Fund, on behalf of the Portfolio, and the
Adviser hereby consent, pursuant to Paragraph 6 of the existing
Management Contract dated December 1, 1993, to a modification of said
Contract in the manner set forth below. The Amended Management
Contract shall, when executed by duly authorized officers of the Fund
and Adviser, take effect on December 1, 1998.
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the
supervision of the Fund's Board of Trustees, direct the investments of
the Portfolio in accordance with the investment objective, policies
and limitations as provided in the Portfolio's Prospectus or other
governing instruments, as amended from time to time, the Investment
Company Act of 1940 and rules thereunder, as amended from time to time
(the "1940 Act"), and such other limitations as the Portfolio may
impose by notice in writing to the Adviser. The Adviser shall also
furnish for the use of the Portfolio office space and all necessary
office facilities, equipment and personnel for servicing the
investments of the Portfolio; and shall pay the salaries and fees of
all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all
personnel of the Fund or the Adviser performing services relating to
research, statistical and investment activities. The Adviser is
authorized, in its discretion and without prior consultation with the
Portfolio, to buy, sell, lend and otherwise trade in any stocks, bonds
and other securities and investment instruments on behalf of the
Portfolio. The investment policies and all other actions of the
Portfolio are and shall at all times be subject to the control and
direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for
the performance by its affiliates of) the management and
administrative services necessary for the operation of the Fund. The
Adviser shall, subject to the supervision of the Board of Trustees,
perform various services for the Portfolio, including but not limited
to: (i) providing the Portfolio with office space, equipment and
facilities (which may be its own) for maintaining its organization;
(ii) on behalf of the Portfolio, supervising relations with, and
monitoring the performance of, custodians, depositories, transfer and
pricing agents, accountants, attorneys, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be
necessary or desirable; (iii) preparing all general shareholder
communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered,
maintaining the registration and qualification of the Portfolio's
shares under federal and state law; and (vii) investigating the
development of and developing and implementing, if appropriate,
management and shareholder services designed to enhance the value or
convenience of the Portfolio as an investment vehicle.
The Adviser shall also furnish such reports, evaluations, information
or analyses to the Fund as the Fund's Board of Trustees may request
from time to time or as the Adviser may deem to be desirable. The
Adviser shall make recommendations to the Fund's Board of Trustees
with respect to Fund policies, and shall carry out such policies as
are adopted by the Trustees. The Adviser shall, subject to review by
the Board of Trustees, furnish such other services as the Adviser
shall from time to time determine to be necessary or useful to perform
its obligations under this Contract.
(c) The Adviser shall place all orders for the purchase and sale of
portfolio securities for the Portfolio's account with brokers or
dealers selected by the Adviser, which may include brokers or dealers
affiliated with the Adviser. The Adviser shall use its best efforts to
seek to execute portfolio transactions at prices which are
advantageous to the Portfolio and at commission rates which are
reasonable in relation to the benefits received. In selecting brokers
or dealers qualified to execute a particular transaction, brokers or
dealers may be selected who also provide brokerage and research
services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Portfolio and/or the other
accounts over which the Adviser or its affiliates exercise investment
discretion. The Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess
of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser determines in
good faith that such amount of commission is reasonable in relation to
the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either
that particular transaction or the overall responsibilities which the
Adviser and its affiliates have with respect to accounts over which
they exercise investment discretion. The Trustees of the Fund shall
periodically review the commissions paid by the Portfolio to determine
if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor.
The Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of
the Fund are or may be or become interested in the Adviser as
directors, officers or otherwise and that directors, officers and
stockholders of the Adviser are or may be or become similarly
interested in the Fund, and that the Adviser may be or become
interested in the Fund as a shareholder or otherwise.
3. The Adviser will be compensated on the following basis for the
services and facilities to be furnished hereunder. The Adviser shall
receive a monthly management fee, payable monthly as soon as
practicable after the last day of each month, composed of a Basic Fee
and a Performance Adjustment. Except as otherwise provided in
sub-paragraph (e) of this paragraph 3, the Performance Adjustment is
added to or subtracted from the Basic Fee depending on whether the
Portfolio experienced better or worse performance than the Merrill
Lynch All Convertible Securities Index (the "Index"). The Performance
Adjustment is not cumulative. An increased fee will result even though
the performance of the Portfolio over some period of time shorter than
the performance period has been behind that of the Index, and,
conversely, a reduction in the fee will be made for a month even
though the performance of the Portfolio over some period of time
shorter than the performance period has been ahead of that of the
Index. The Basic Fee and the Performance Adjustment will be computed
as follows:
(a) Basic Fee Rate: The annual Basic Fee Rate shall be the sum of
the Group Fee Rate and the Individual Fund Fee Rate calculated to the
nearest millionth decimal place as follows:
(i) Group Fee Rate. The Group Fee Rate shall be based upon the
monthly average of the net assets of the registered investment
companies having Advisory and Service or Management Contracts with the
Adviser (computed in the manner set forth in the Fund's Declaration of
Trust or other organizational document) determined as of the close of
business on each business day throughout the month. The Group Fee Rate
shall be determined on a cumulative basis pursuant to the following
schedule:
AVERAGE NET ASSETS ANNUALIZED FEE RATE (FOR EACH LEVEL)
0 - $ 3 BILLION .5200%
3 - 6 .4900
6 - 9 .4600
9 - 12 .4300
12 - 15 .4000
15 - 18 .3850
18 - 21 .3700
21 - 24 .3600
24 - 30 .3500
30 - 36 .3450
36 - 42 .3400
42 - 48 .3350
48 - 66 .3250
66 - 84 .3200
84 - 102 .3150
102 - 138 .3100
138 - 174 .3050
174 - 210 .3000
210 - 246 .2950
246 - 282 .2900
282 - 318 .2850
318 - 354 .2800
354 - 390 .2750
390 - 426 .2700
426 - 462 .2650
462 - 498 .2600
498 - 534 .2550
OVER - 534 .2500
(ii) Individual Fund Fee Rate. The Individual Fund Fee Rate shall
be .20%.
(b) Basic Fee. One-twelfth of the Basic Fee Rate shall be applied to
the average of the net assets of the Portfolio (computed in the manner
set forth in the Fund's Declaration of Trust or other organizational
document) determined as of the close of business on each business day
throughout the month. The resulting dollar amount comprises the Basic
Fee.
(c) Performance Adjustment Rate: Except as otherwise provided in
sub-paragraph (e) of this paragraph 3, the Performance Adjustment Rate
is 0.02% for each percentage point (the performance of the Portfolio
and the Index each being calculated to the nearest .01% that the
Portfolio's investment performance for the performance period was
better or worse than the record of the Index as then constituted. The
maximum performance adjustment rate is 0.15%.
The performance period consists of the current month plus the
previous 35 months.
The Portfolio's investment performance will be measured by comparing
(i) the opening net asset value of one share of the Portfolio on the
first business day of the performance period with (ii) the closing net
asset value of one share of the Portfolio as of the last business day
of such period. In computing the investment performance of the
Portfolio and the investment record of the Index, distributions of
realized capital gains, the value of capital gains taxes per share
paid or payable on undistributed realized long-term capital gains
accumulated to the end of such period and dividends paid out of
investment income on the part of the Portfolio, and all cash
distributions of the securities included in the Index, will be treated
as reinvested in accordance with Rule 205-1 or any other applicable
rules under the Investment Advisers Act of 1940, as the same from time
to time may be amended.
(d) Performance Adjustment. One-twelfth of the annual Performance
Adjustment Rate will be applied to the average of the net assets of
the Portfolio (computed in the manner set forth in the Fund's
Declaration of Trust or other organizational document) determined as
of the close of business on each business day throughout the month and
the performance period.
(e) For the 35 month period commencing on December 1, 1998 (the
Commencement Date) (such period hereafter referred to as the
Transition Period), the Performance Adjustment Rate shall be
calculated by comparing the Portfolio's investment performance against
the blended investment records of the Index and the Merrill Lynch
Convertible Securities Ex Mandatory Index (the index used to calculate
the Portfolio's Performance Adjustment prior to the Commencement Date
(the Prior Index)), such calculation being performed as follows:
For the first month of the Transition Period, the Performance
Adjustment Rate shall be calculated by comparing the Portfolio's
investment performance over the 36 month performance period against a
blended index investment record that reflects the investment record of
the Prior Index for the first 35 months of the performance period and
the investment record of the Index for the 36th month of the
performance period. For each subsequent month of the Transition
Period, the Performance Adjustment Rate shall be calculated by
comparing the Portfolio's investment performance over the 36 month
performance period against a blended index investment record that
reflects one additional month of the Index's performance and one less
month of the Prior Index's performance. This calculation methodology
shall continue until the expiration of the Transition Period, at which
time the investment record of the Prior Index shall be eliminated from
the Performance Adjustment calculation, and the calculation shall
include only the investment record of the Index.
(f) In case of termination of this Contract during any month, the
fee for that month shall be reduced proportionately on the basis of
the number of business days during which it is in effect for that
month. The Basic Fee Rate will be computed on the basis of and applied
to net assets averaged over that month ending on the last business day
on which this Contract is in effect. The amount of this Performance
Adjustment to the Basic Fee will be computed on the basis of and
applied to net assets averaged over the 36-month period ending on the
last business day on which this Contract is in effect provided that if
this Contract has been in effect less than 36 months, the computation
will be made on the basis of the period of time during which it has
been in effect.
4. It is understood that the Portfolio will pay all its expenses,
which expenses payable by the Portfolio shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and
other costs in connection with the purchase or sale of securities and
other investment instruments; (iii) fees and expenses of the Fund's
Trustees other than those who are "interested persons" of the Fund or
the Adviser; (iv) legal and audit expenses; (v) custodian, registrar
and transfer agent fees and expenses; (vi) fees and expenses related
to the registration and qualification of the Fund and the Portfolio's
shares for distribution under state and federal securities laws; (vii)
expenses of printing and mailing reports and notices and proxy
material to shareholders of the Portfolio; (viii) all other expenses
incidental to holding meetings of the Portfolio's shareholders,
including proxy solicitations therefor; (ix) a pro rata share, based
on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management
Contracts with the Adviser, of 50% of insurance premiums for fidelity
and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing
Prospectuses and Statements of Additional Information and supplements
thereto; (xii) expenses of printing and mailing Prospectuses and
Statements of Additional Information and supplements thereto sent to
existing shareholders; and (xiii) such non-recurring or extraordinary
expenses as may arise, including those relating to actions, suits or
proceedings to which the Portfolio is a party and the legal obligation
which the Portfolio may have to indemnify the Fund's Trustees and
officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and
engage in other activities, provided, however, that such other
services and activities do not, during the term of this Contract,
interfere, in a material manner, with the Adviser's ability to meet
all of its obligations with respect to rendering services to the
Portfolio hereunder. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject
to liability to the Portfolio or to any shareholder of the Portfolio
for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security or other investment
instrument.
6. (a) Subject to prior termination as provided in sub-paragraph (d)
of this paragraph 6, this Contract shall continue in force until July
31, 1999 and indefinitely thereafter, but only so long as the
continuance after such date shall be specifically approved at least
annually by vote of the Trustees of the Fund or by vote of a majority
of the outstanding voting securities of the Portfolio.
(b) This Contract may be modified by mutual consent subject to the
provisions of Section 15 of the 1940 Act, as modified by or
interpreted by any applicable order or orders of the Securities and
Exchange Commission (the "Commission") or any rules or regulations
adopted by, or interpretative releases of, the Commission.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of
this paragraph 6, the terms of any continuance or modification of this
Contract must have been approved by the vote of a majority of those
Trustees of the Fund who are not parties to the Contract or interested
persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval.
(d) Either party hereto may, at any time on sixty (60) days' prior
written notice to the other, terminate this Contract, without payment
of any penalty, by action of its Trustees or Board of Directors, as
the case may be, or with respect to the Portfolio by vote of a
majority of the outstanding voting securities of the Portfolio. This
Contract shall terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Declaration of Trust
or other organizational document and agrees that the obligations
assumed by the Fund pursuant to this Contract shall be limited in all
cases to the Portfolio and its assets, and the Adviser shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Portfolio or any other Portfolios of the Fund. In
addition, the Adviser shall not seek satisfaction of any such
obligations from the Trustees or any individual Trustee. The Adviser
understands that the rights and obligations of any Portfolio under the
Declaration of Trust or other organizational document are separate and
distinct from those of any and all other Portfolios.
8. This Agreement shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Massachusetts, without giving
effect to the choice of laws provisions thereof.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, as now in effect or
as hereafter amended, and subject to such orders as may be granted by
the Commission.
IN WITNESS WHEREOF the parties have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.
[Signature lines omitted]
